Hidden Cash Lures Subbarao to Rural India Worth $24 Billion

“Do you know what my job is?”

.......Following Subbarao’s visit in January, the wheat and sugarcane growers of Lalpur Karauta on the floodplain of the Ghagra river will get a branch of a state lender. The Reserve Bank of India chief takes time out from running the nation’s monetary policy twice a year to explain how the financial system works to some of the 720 million Indians who don’t have a bank account. “It’s good for the poor people, for banks, for the governments and for the economy,” Subbarao said in the village...........

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Populism to the fore again

Share markets were expecting the RBI to cut the policy rate by at least 25 basis points in its mid- quarterly review of the monetary policy. The RBI did not disappoint. On Wednesday, Governor D. Subbarao announced the cut. But if the markets were still spooked, it was no fault of the RBI. The DMK pull- out notice to the UPA bosses cancelled out whatever positive impact the minimal cut in the policy rate could have had on the markets. Bad politics, it should be noted, can always override good economics. As it is, the economy was deprived of much positive news. After the attempted fiscal consolidation in the budget, the RBI was not averse to reward the government with a small cut in the prime lending rate............

Read - FPJ

Doctors to ask RBI to make coins blind-friendly

CHENNAI: At least two ophthalmic associations will petition the finance department and the Reserve Bank of India telling them that the coins of various denominations introduced in the last two years are of the same size and lack distinct features, making them harder to identify for the visually impaired...........

Read - TOI

Why inflation needs to come down first

................The RBI explanation is that the relationship between growth and inflation is non-linear: at low levels of inflation and stable inflation expectations, there is a trade-off between growth and inflation — essentially implying that some inflation can be tolerated to stoke the growth engine. But above a certain threshold inflation level, this relationship reverses, the conventional trade-off loses context, and high inflation actually starts eating into growth...........

Read - IE

Inflation is no more rate-bound

...........As policymakers look for options to reverse a widespread deceleration in the broader economy, the UPA government and the Reserve Bank of India (RBI) are perhaps facing their biggest macroeconomic reality: the RBI's bitter medicine to keep interest rates high has not tamed prices, but crimped growth. And the reason may lie in the “new normal” of inflation..........

Read - Hindustan Times

RBI asks bank not to accept post-dated cheques

.......Another issue with the RBI's new directive is at present, there are 81 centres  or locations that offers local ECS, while there are just nine centres, which offer RECS across the country. National ECS, on the other hand is operated at Mumbai and facilitates the coverage of all core-banking enabled branches located anywhere in the country. Though our banking system is developing fast, the access to banking today is not available to one-third of our population and ramifications of a hasty decision to penalise usage of cheques will be too catastrophic for a nation like ours, which requires social up-liftment and inclusive banking before forcing technology on our people...........

Read - Moneylife

Close dormant bank accounts, lapsed insurance policies

......There are almost 20 million demat accounts in India. According to experts, around 20-30 per cent of these are dormant. There are a lot of options for someone to cheat a person. There are many who had opened demat accounts when banks offered it for free or for Re 1 and most haven't used these accounts but are maintaining them. To prevent falling prey to such traps, always complete your Know Your Customer (KYC) norms when investing or opening accounts.....

Read | Business Standard

In which the trappers get entrapped

...... It would be a waste of a great opportunity for the banks if they end the story with firing some frontline people and not look at cleansing their incentive systems. It would be a pity if the Reserve Bank of India (RBI) were to continue turning a blind eye to the decay in the bank branching system in India that has turned them into customer traps. The off-the-record view of the top people in RBI has been: this is not our problem. Well, it does look like it is your problem now, RBI...................

Read - Mint

WHAT ROLE BANKS CAN PLAY IN CURBING THE GENERATION AND GROWTH OF BLACK MONEY IN THE COUNTRY?

......I will narrate one real incident.  In a big city in Maharashtra, one Probationary Officer opened hundreds of accounts during the ‘Road Show’ conducted by the bank.  In many of the accounts opened on that occasion, serious compromises were made with regard to KYC and PML guidelines.  The management was well aware of the lapse.  The major thrust at that time was on opening as many CASA accounts as possible per day, without going into their quality.........

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RBI Starts Scrutiny of Three Banks - Will RBI Hush Up Cobrapost Disclosures Too Like It Did for Rs 32,000 crore Derivative Scam ?

...............I still remember the role of RBI in hushing up the Rs 32,000 crore derivative scam where banks were merely fined upto Rs 15 lakhs though country lost thousands of crores of rupees.   I understand that scam in Derivatives is  still pending in Court, neither any bank or the regulator is ready to bring and publish a comprehensive details of that scam.   Thus, I am afraid that this case too may meet the similar fate.    However, one fact has given me some hope i.e. the deadline of 31st March, 2013.   Usually, in such cases, politicians buy three to four months time (later on time is extended) so that evidence can be destroyed by the respective organisations and public memory fades away.    I will like to give full marks to RBI Governor for fixing a short deadline for investigation this time............

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Banks may need separate arms for insurance

.....“The insurance industry has asked for clarity on permitting banks to act as insurance brokers. The regulator will allow banks to act as insurance brokers, but they will have to form separate subsidiaries for it,” said a senior Irda official. Also, banks will cease to be agents and not be able to sell insurance products directly if they choose to be brokers.

The proposal of forming subsidiary for broking operations has been mooted by an Irda sub-committee which includes officials from Indian Banks Association and representatives from life and general insurance industries. The committee is also looking into other operational difficulties in the model.....

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India’s Economic Challenge

........India has again moved to try and shore up economic growth despite persistent inflation. After this latest shift, however, there is less room for additional measures, and investors know it............

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Standing up

..... What might disappoint captains of the commerce industry is the possibility that there can be at best one more policy rate cut, followed by a long pause. It is hard to see what else the central bank could have done. The RBI governor is to be admired for standing up to immense pressure to take stronger action, and for being guided by the courage of his convictions.........

Read - The Telegraph

Futility of a rate cut

.......The current politico-economic environment is preventing banks from lending money to corporate, which it believes is a riskier business. Banks rather prefer to deploy their cash in government bond. Till this dichotomy is not changed, RBI reducing rates is unlikely to help both the markets and the economy.

Read | Business Standard

Realty players seek more rate cuts from RBI to boost sector

............. Confederation of Real Estate Developers Associations of India (CREDAI) termed RBI's repo rate reduction by "just" 25 basis points as a "missed opportunity" and urged it to ease funding options in realty sector..............

Read - Business Today

Limited headroom

.....The budget had stressed fiscal consolidation, which the RBI has been asking for, as an essential complement to the anti-inflation stance of its monetary policy. So irrespective of whether the revised fiscal road map — which among other signposts calls for the ratio of gross fiscal deficit to GDP to decline to 4.8 per cent in 2013-14 — can in fact be reached, the RBI was forced to act. However, even without the government’s prompts, the RBI has not ignored growth concerns. Recent policy statements have, in fact, shifted the RBI’s focus away from inflation towards growth. As so often in the past, the mid-quarter review explains why monetary policy has to balance the conflicting claims of growth and inflation.......

Read - The Hindu

Faulty transmission

.....With a broken credit channel, it's harder to revive GDP growth, which was just 4.5 per cent in the December quarter. Until the banks are working properly, rate cuts from the RBI seem like throwing good money after bad.......

Read | Business Standard

Karunanidhi tsunami washes away RBI's 25 bps rate cut announcement

 Not even in his wildest dreams would the Reserve Bank of India Governor Duvvuri Subbarao have thought that the Karunanidhi tsunami would wash away in minutes his carefully crafted plan to revive the economy from the depths. There was hardly any time for investors and traders to enjoy the feel good factor, the only possible outcome of the 25 basis points reduction in key interest rate. The punchbowl was snatched away even before the party began.......

Read - ET

Tata Housing's reaction on RBI Monetary Policy

.....“We welcome RBI’s decision of a second successive cut in monetary policy rates this year. Banks and NBFCs took cue from the central bank last time around and immediately lowered their lending, and even deposit rates. Although, lenders might not take further cue this time, the thing to consider is that the rate cut, coupled with the proposed additional INR 1 lakh tax rebate for first home loan borrowers (up to INR 25 lakhs), is likely to act as a stimulus for the demand for affordable housing in India...........

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Restrict foreign access to the Bar

..... They leveraged their position by employing the kin of powerful serving and retired bureaucrats. The Indian Express was more to the point — “The first set of clearances was granted after a delegation of foreign law firms, under the leadership of the son of the Union Minister of Law, met officials of the RBI.” An NGO called ‘Lawyers Collective’ filed and succeeded in a public interest litigation (PIL) in the Bombay High Court challenging these permissions......

Read - The Hindu

Probe NBFCs' working: Speaker to govt

........The Speaker said there were several cases of NBFCs and credit cooperative societies duping innocent poor people in rural areas. He also felt that some officials of the cooperative department too connived with the NBFCs and cooperative societies and wanted them to be exposed..............

Read - TOI

Banks mop up Rs 1 lakh crore in deposits in a fortnight

Scramble to meet year end targets has begun for the banks particularly with deposits. Deposits with the bank grew 13.14% year on year (y-o-y) according to Reserve Bank of India (RBI) data.............

Read | Business Standard

Government sets up Financial Intel Units in Karnataka

..............To keep an eye on black money changing hands and to curb all financial frauds, the state government has set up Financial Intelligence Units (FIU). The units, comprising officials drafted from the Police Department, will work in all the police commissionerates and districts with an exclusive mandate to probe financial frauds and irregularities involving more than Rs. 1 crore in nationalised and private banks. “It will also act as a nodal agency with the Reserve Bank of India (RBI), besides investigating cases referred to it by the Enforcement Directorate .............

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Our bank is no longer community-based: K B Nagendra Murthy

.....TMB was founded by a particular community and it was run by them; they proved to be the best brains in trading and in enterprise skills. But in the last few years, the bank has been run by professionals, appointed as MD & CEO, and part of the community. Today, 15 per cent of new branches are being opened outside Tamil Nadu, in places like Gujarat, Maharashtra, Andhra Pradesh and others. The bank's top five customers are from outside Tamil Nadu. This shows the bank is not community-based......

Read | Business Standard

Sahara’s full-page ads against SEBI challenged in High Court

.....“The content and intent of these advertisements clearly shows that Sahara India Pariwar and Subrata Roy seem to have little respect for the law of the land and want to create financial anarchy and financial indiscipline by alleging extraneous motives to a statutory body formed for safeguarding the interests of the common investors and for regulating the financial market/securities in the country”.......

Read - Moneylife