Two Economists clash over the state of ecomony

C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, is a highly respected economist in the country and what he says is taken as a last word. But the government’s new chief economic adviser, Raghuram Rajan, has chosen to disagree with him publicly. If Rangarajan is venerated in the country, Rajan is well regarded in present-day global economists pantheon. He is credited with having sounded the warning note at a meet of US Federal Reserve at Jackson Hole just before the financial meltdown struck. The public disagreement was therefore a battle royale of sorts.

But then, what was the difference?........

Read - The Shillong Times

RBI may oblige with rate cuts, but it’s government that is killing economy

..........RBI is not truly independent. A truly-independent RBI might have left rates unchanged. But, in all probability, January IIP figures (2.4% increase) and continuous badgering will persuade RBI to provide a growth stimulus. Hence, perhaps a 25-basis-point cut in repo rate. Does this help growth?...........

Read - ET

What does RBI really think?

......We do not fully understand the compulsions that determine RBI’s monetary policy decisions. It is entirely possible that Subbarao was merely defending the January monetary policy decision and not giving us clues for the rate decision to come today. ..............

Read - Mint

My View on "Lend a big hand, RBI"

This comment is not directed to RBI (RBI knows its job), but to RBI-watchers who get carried away by observations like this from rating agencies and analysts. The continuous pressure on RBI to ‘cut rates’ and the assurance that a rate cut will do wonders in economic growth and the threat of downgrade are tactics being played by vested interests which do not care about the impact of inflation on more than 60 per cent of India’s population who contribute most to the country’s growth and have no voice in deciding the wages they should get or the price they should be paying for their survival needs. RBI should (and will) continue to have a total view of the impact of its policy measures on the common man. The fiscal policy which is caged by the rich and the powerful as also external pressures need a makeover factoring in the concerns expressed by RBI expressed through Monetary Policy statements, almost bi-monthly, these days.

-  M.G.Warrier

CRR cut critical

Though RBI has boxed itself in by conveniently referring to elevated levels of CPI and the current account deficit (CAD) as being the reason for not cutting policy rates from time to time, and then ignoring them when it has felt the need to cut rates, it is clear that if a rate cut is to help, this has to be accompanied by a CRR cut. Right now, with low deposit growth, banks have no option but to hike deposit rates across different tenure—so the only way to break this cycle and lower lending rates is to cut CRR or find other ways to infuse liquidity........

Read - FE Editorial

Why Subbarao should not reduce interest rates as yet

......So the signals are mixed, but on balance the structural nature of the slowdown, mixed inflation trends, fragility of the fiscal path and a persistent current account deficit are, in this newspaper’s opinion, ample reason for Subbarao to resist cutting rates.........

Read - Mint

Chidambaram expects RBI to address liquidity concerns

“RBI Governor is also aware of the issue of liquidity. Let’s see what steps the governor takes,”

Read - Mint

RBI may cut rates, but your loan rates may not fall

....... Every time the top brass of the RBI is supposed to meet, calls for interest rate cuts are deafening. In fact, there seems to be a formula that has evolved to create pressure on the RBI to cut the repo rate. The repo rate is the interest rate at which RBI lends to banks and sets the tone for other interest rates. The formula includes Finance Minister P Chidambaram giving statements in the media about there being enough room for the RBI to cut interest rates........

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SBI wants softer interest rate regime: Diwakar Gupta

........ The Reserve Bank has traded a very careful path in the growth inflation dynamics. Consensus is building around the fact there will be a 25 bps cut and that is what all of us are expecting..........

Read - ET

Repo rate cut given; CRR change doubtful: CNBC-TV18 Poll

Consumer Price Inflation has been in double digits for 3 months in a row, but core inflation has fallen sharply and this has sparked hopes that the RBI may find it possible to ease up on its it’s monetary stance..........

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Finance ministry withdraws its controversial diktat to levy processing fees on payment of credit card dues by cheque or cash

..............In a letter dated 12^th March, the finance ministry has quietly withdrawn its ‘fatwa’ to “consider charging a processing fee from customers paying credit card card dues either in cash or through cheque”.  In fact, this letter too is written by the same DD Maheshwari, Under Secretary at the Department of Financial Services, who sent out a fatwa marked “most immediate” to all chief executives of public sector banks on 25 October 2012. This time he writes that the letter “stands withdrawn with immediate effect.............

Read - Moneylife

An eye for the short term

.....One argument, no doubt, against lowering the minimum tenure of FDs or permitting banks to offer interest on current accounts is that it would aggravate a growing asset-liability mismatch confronting the industry. As it is, well over two-thirds of bank deposits are of below two years, making it difficult to fund longer tenure assets such as home loans. Rather than encouraging banks to do more to mobilise FDs with tenors of five years or more, and also raising resources through long-term bonds, Chaudhuri’s suggestion would imply doing just the reverse. But this is a wrong inference. No sensible banker, after all, will extend a 15-year home loan based on funds borrowed for three days........

Read - HBL

RBI expected to cut policy rates till 2013 end

..."The expectation is that the RBI to cut the policy rates by 50-75 basis points through the calendar year 2013 and then take stock when the inflation is expected to pick up around the year end.".......

Read - Sakal Times

Pay income tax dues well in advance: RBI

....In an appeal through a circular, RBI has asked income tax assessees to remit their income dues sufficiently in advance of the due date. It said the rush for remitting income tax dues through RBI has been far too heavy towards the end of March every year and it becomes difficult for it to cope with the pressure of issuing receipts, although additional counters to the maximum extent possible are provided for the purpose..........

Read - Deccan Herald

RBI extends deadline for issuance of new cheques

The Reserve Bank of India (RBI) on Monday asked banks to issue new cheque books only under the new format and gave them time till July-end to withdraw the old format cheques. All cheques at present with customers in the old format (non-cheque truncation system) will continue to be valid for another four months (the earlier deadline was March 31), the apex bank said................

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Don't accept PDCs for EMI payments where ECS is available: RBI

In a effort to give electronics payments a push Reserve Bank of India (RBI) today asked banks not to accept post dated cheques (PDCs) and EMI payment cheques even if it conforms to new CTS -2010 (Cheque Truncation System) format  on the locations electronic clearing system (ECS) debit is available. This means all the new borrowers where ECS facility is available will have to compulsorily shift to electronic payments systems and they can’t sign post dated cheques and give them to banks to encashment.............

Read | Business Standard

FM goes after wilful defaulters

..........“We cannot have an affluent promoter and a sick company. Promoters have to bring in additional money and companies have the duty to pay back loans. Banks have got the message. Without doing anything that will kill the business of the industry, they will have to take steps to recover their NPAs,”..............

Read - The Telegraph

Reserve Bank widens its money laundering probe

Report by March 31; banks' gold coin sales, wealth management biz also under scanner

.....Its final report on the three banks would be completed by March 31 and further course of action, as necessary, would be initiated thereafter, RBI said, adding the branches and the head offices of these banks were being scrutinised.......

Read | Business Standard

UP to rescue 16 ailing district co-operative banks

......BJP legislator from Gorakhpur Radha Mohan Das Agarwal had raised the issue in the state assembly today. He informed the House that RBI had served notices on these 16 banks giving them 15 days’ notice, which would expire by the end of this month. These banks employ about 8,000 heads and provide credit to small farmers and enterprises. He urged the state to inject funds in these banks to keep them afloat........

Read | Business Standard

Banks must take firm steps to recover NPAs: FM

...... “While we understand why NPAs have risen and the restructured accounts have risen, we also wish the banks to take strong steps to recover their dues, I think the promoters have a duty to bring in additional money and the companies have a duty to pay their dues to banks. We cannot have an affluent promoter and a sick company,” Chidambaram told reporters after meeting heads of PSU banks and financial institutions..........

Read - Deccan Herald

Panel may seek 'limited role' bank licence for telecos to push inclusion

.......The Nayak panel has said that 'regulatory bias' to nudge payment systems towards banks must be resisted and entities like the National Payments Corporation of India must not end up being a 'monopoly by-design.' On RBI's role, the panel has said that RBI cannot be a payment regulator while running payment systems like real time gross settlement (RTGS) and National Electronic Fund Transfer (NEFT) which must be spun out of the central bank's domain. Moreover, it has suggested amendments to the Payment and Settlement Systems law of 2007 so that the board within RBI for regulation and supervision of payments can also include representatives from technology firms and banks that are familiar with the latest technologies. ........

Read - ET

Banking loopholes

.....................a cheque book couriered to me was returned undelivered wrongly by the courier company with a remark "consignee shifted". This should have put the bank on guard and it should have taken steps to revisit my KYC and re-verify my address. But that did not happen. The ongoing investigations may as well exonerate the banks of any fault in the present revelations. But the way their systems are organised, it may not be too long before another one puts them in a tight spot.

Read | Business Standard

Private banks may lose premium edge

.......A former banking industry official with three decades of experience suggested that a definite impact could be felt if there are strong indications of misconduct at the banks. “The RBI could pass a lot of strictures which will make it difficult for business development. The focus of the business may shift from growth to an in-house clean-up. This could lead to a corresponding fall in growth,” he said, preferring anonymity due to the sensitive nature of the issue............

Read | Business Standard

This bank has no place for gyan

...........It is the story of HDFC Bank, India’s most valuable bank — how the idea of a bank took shape, how it was staffed, how it took its first steps and how it subsequently rose rapidly over the last two decades to the top of the banking charts. The book has many colourful vignettes that come alive in the engaging style used by Tamal...........

Read - The Hindu

Lessons from Sebi-Sahara

......... As if it hasn’t been audacious enough, the group has, through an advertisement, challenged the regulator to a television debate and complained that the Sebi chief hasn’t given it an audience. Such histrionics should be ignored. Meanwhile, Sebi needs to be further empowered so that it has the right to recover funds, much like the CCI or the Income Tax authorties...........

Read - FE

Gold is not the villain

Gold is not the villain the Indian government portrays it to be. Rather, it's the low public acceptance of the state's right to tax people that pushes Indians towards the perceived safety of the "barbaric metal", as economist John Maynard Keynes called it...............

Read | Business Standard

RBI launches study on banks active in selling gold coins

......"RBI has undertaken a thematic study in respect of banks that are active in selling gold coins or wealth management products to examine whether there are systemic issues and to plug deficiencies and legal loop-holes, if any,"........

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Black methods

...........The staff of three top private banks across the country were shown as too willing to accommodate the demand to sanitise black money and to proactively facilitate it. It shows that the practice is not limited to the rare rogue manager but has come to be part of normal banking operations. It is not difficult to infer that other banks may be equally involved, though private banks may be in it to a much greater extent than others...............

Read - Deccan Herald (Second Edit)

India Infoline to apply for banking license

........"As an NBFC one cant grow beyond a point. So the growth path is to convert into a bank. It will give us access to low cost resources and improve our ability to tap the tier five and six cities,"......

Read - ET

New Banks Bring Big Biz for Headhunters

Read - ET

Insurance sales by banks to come under RBI lens

 Reserve Bank of India may review the sales strategy employed by banks to encourage employees sell life insurance policies. Incentives for sales has come centre stage with the Cobrapost sting highlighting how front office staff takes extreme risks to sell a life policy..........

Read - TOI

Tax-saving and more

Tax-saving products play an important part in financial planning. While some products deliver fixed returns, equity-linked saving schemes (ELSS) have twin benefits. Besides providing tax-shelter, they offer reasonable returns (of course with risk). Since a major portion of the corpus is invested in equity and equity-related products, there is a risk element...............

Read - The Hindu

Capital raising woes may make small Indian banks takeover targets: S&P

...........Some smaller banks could also become takeover targets, which could result in consolidation of a fragmented sector, said Deepali Seth, S&P’s credit analyst. The biggest challenge for the sector is the state of Indian public finances. “The government’s large fiscal deficit will limit its ability to inject capital into government-owned banks, which currently have less capital adequacy than the private and foreign banks operating in India,”........

Read | Business Standard

Banks may need Rs 2.6 lakh cr more capital for Basel III: S&P

....."We estimate Indian banks will require minimum additional capital of about Rs 69,100 crore to meet the Reserve Bank of India's 8 percent requirement for the common equity tier 1 and capital conservation buffer ratio," it said. "The additional requirement would go up to Rs 2.6 lakh crore given a tendency for banks to hold higher-than-minimum capital and the limited market for hybrid instruments in India," the rating agency added.....

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Why an SBI PO Job is a Bankable Asset

..........“Job security is naturally a big factor. Also, despite being a government organisation, SBI operates in a professional manner. Probationary officer positions are not just empowered but very well-paid as well,” added Rao. In the ongoing economic slowdown, with even IIM placements affected and the finance sector hit hard, jobs in public sector banks (PSBs), and particularly in SBI, are looking more attractive than ever before..........

Read - ET 

Farmers' loan-waiver plans to be reviewed

PUNE: The regional office of the National Bank for Agriculture and Rural Development (Nabard), on Monday, asked all district central cooperative (DCC) banks in the state to re-audit the proposal documents of beneficiaries of the Rs 52,000 crore agricultural relief and debt waiver scheme of 2008. The decision was taken following directives from the Union finance ministry and the Reserve Bank of India..........

Read - TOI

Jamshedpur MP pitches for exclusive bank for tribals

...."I believe that a dedicated bank (with predominantly tribal employees) for people of the tribal community will play a significant role in their speedy growth,.........

Read - TOI

Islamic banking could become available in India

.........Earlier, the Reserve Bank of India (RBI) had come out against the introduction of Islamic banking, saying that current legislation did not provide for a twin structure. RBI Governor D. Subbarao told reporters in November that "other options" may be considered to bring Muslims into the banking system. The bank has since rethought its position, according to Khan, the minority affairs minister. "There are a host of mechanisms available for channelising the savings of Muslims. Sharia-based banking is very scientific and the RBI has modified its earlier stand," he told...........

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