Biz correspondents help extend banking service to over 2 lakh villages: RBI

MOODBIDRI (DAKSHINA KANNADA):  

More than 2.11 lakh villages which did not have banking facilities three years back, are now being served by 1.52 lakh business correspondents. Inaugurating a seminar on ‘Indian banking sector: Big challenges and the road ahead’, organised by the Mangalore Institute of Technology and Engineering at Moodbidri in Dakshina Kannada district, Deepali Pant Joshi, Executive Director, Reserve Bank of India, said that the financial inclusion plan (FIP) 2010-13, which was introduced by various banks in April 2010, has so far provided banking services to 2.11 lakh villages......

Read - HBL

Reforms panel moots better consumer cover - S.S.Tarapore

.....While the FSLRC gives extensive acknowledgement to many previous reports, by committees/ working groups, it uses selective institutional memory. The FSLRC fails to take cognisance of the Jagdish Capoor RBI Working Group on Deposit Insurance ( 2000), which made many pathbreaking recommendations. This Report advocated differential deposit premia for banks, according to their risk profile, and more importantly, advocated the granting of regulatory and supervisory powers for the Deposit Insurance Agency akin to the US FDIC. The US FDIC has sweeping powers of regulation and supervision over banks in the area of deposits. The reference to Prompt Corrective Action, correctly emphasised by the FSLRC, is not new to India, but in this area, as in other areas, there is considerable pussy- footing when it comes to effective action- this is essentially because the polity does not support strong, timely and effective corrective action. The FSLRC would have gained credibility if it were to acknowledge the lineage of its ideas to the Jagdish Capoor Working Group........

Read - FPJ

VITALINFO - Fine despatches..........

Dear Shri Tarambale,

I retired as Executive Director in 2000 and was in charge of Economic Research as well as MPD at that time. I did write a column thereafter for the Business Line upto 2007 and then went abroad on an assignment.  I have recently returned and am trying to settle down to the evolving conditions here.  I have not had the pleasure of meeting with you so far and I have got your address from my friend Mr A Seshan who spoke highly of your fine despatches. He asked me to get in touch with you for getting the VITALINFO despatches on free mailing basis.  It is indeed good to see you doing such a good service to people like us. I would be much thankful if you could kindly place me on your free mailing list.

With affectionate regards,

- A.Vasudevan

Inflation indexed bonds in a month: RBI

The Reserve Bank of India (RBI) today said inflation index bonds, which will hedge investors’ savings against rising prices, are likely to be launched in a month. “(It will be launched) probably in a month’s time. We are in the advanced stages of discussion with the government,” RBI Deputy Governor HR Khan said on the sidelines of an event organised by CII at the ADB annual meet here..............

Read | Business Standard

Taking away capital mgmt from RBI not advisable: Subbarao

Reserve Bank of India Governor Duvvuri Subbarao, who is known to have mind of his own, and has many times been at odds with the Finance Minister today voiced his discontent about the Financial Sector Legislative Reform Commission(FSLRC’s) recommendations regarding capital inflows. In an interview with CNBC-TV18’s Latha Venkatesh, he stressed that taking away capital management from Reserve Bank of India is not advisable and that the central bank had made this suggestion to FSRLC when it was consulted..........

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Why RBI should give up govt debt management

...........Various expert committees have all along been insisting on fiscal consolidation as a essential precondition to such an arrangement. While there is merit in what they have been saying, the RBI should stop managing the government’s debt if it wants to keep its credibility intact. Once the government is forced to pay the real market price for debt, it will start acting responsibly in managing the fiscal deficit.

Read - Mint

RBI to incentivise banks for reporting counterfeit notes

............."In view of the recommendation of the DPSC for addressing the menace of counterfeit notes, it has now been decided that in order to encourage banks to report counterfeit notes, detected by them, a scheme of incentives for banks will be introduced," RBI Governor D Subbarao has said in the Monetary Policy Statement for 2013-14.............

Read | Business Standard

Obituary

Shri Hyacinth Nazareth, 62 passed away on May 4, 2013 in Mumbai. He retired as  Assistant Manager from  DEAP in August 2011. He was a talented Hockey player and was Captain of the University of Mumbai team, which won the All India University championship. Even after his retirement he took part in a big way in Sports activities. A very popular colleague, Shri Nazareth leaves behind a large circle of friends and admirers.

May his soul rest in peace.

- P.P.Ramachandran

REWARD – RISK TRADE OFF IN LEVERAGING BANKING TECHNOLOGY - V.K.Sharma, Former Executive Director

The Keynote Address delivered by Mr. V. K. Sharma, Advisor, Edelweiss Financial Services Ltd  and former Executive Director, Reserve Bank of India, at the Banking Technology Summit 2013, organized by Ernst & Young,  at Mumbai

........Having seen the imperative and inevitability of this seminally critical role of leveraging technology in banking, it would only be instructive and value-adding to consider the business model of a typical safe, and sound, bank. A bank is typically characterized by relatively high financial leverage, which, in turn, is measured by what is known as Equity Multiplier (EM), which, in turn, is nothing but total assets of a bank divided by its common equity/ shareholder funds. Multiplying this leverage (EM) by what is called Return on Assets (ROA) gives Return on Equity (ROE) for a bank.........

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RBI allows banks to front-load rural foray

........"Banks are advised to front-load the opening of branches in unbanked rural centres over a three-year cycle co-terminus with the financial inclusion plan."Credit will be given for branches opened in unbanked rural centres in excess of the mandated 25 % in a year which will be carried forward to the subsequent year of the inclusion plan," RBI Governor D Subbarao said..........

Read | Business Standard

Ping-pong economics - TCA SRINIVASA-RAGHAVAN

................It could only happen in India. The Reserve Bank of India (RBI), whose job it is to tend to the monetary system, says the price of money (interest rate) is not the only thing that matters for reviving the economy. The government, whose job is to tend to everything else, says that’s what holds the key............

Read (or decipher) what they have to say: - The Hindu

RBI slaps fine of Rs 100,000 on Financial Cooperative Bank for violating norms

...The regulator had previously issued a show cause notice to the bank, in response to which the bank had submitted its reply. After considering the findings of the case and the bank's response to the show cause notice, RBI decided the violations were substantiated and warranted imposition of the penalty........

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The price of regulators' ignorance

........They are paying the price of the system of dual regulation, under which both the Registrar of Co-operative Societies (RoCS) and the RBI are supposed to be regulating co-operative banks. RoCS officials say the RBI does not regulate these banks, while the RBI says it waits for government recommendations to act. Most co-operative banks are set up and controlled by powerful politicians. What is common between these two areas I have highlighted? Regulations cover products and entities instead of the broader definition of service offered to the savers. Regulators have stuck to the narrowest possible definition of their role, instead of focusing on what really helps savers. Savers pay the price for both............

Read | Business Standard

Government moots consumer awareness

................."We are looking into the Saradha scam from a consumer's perspective and have directed our officials to prepare a report and suggest what more can be done to make consumers aware of such practices,"...........

Read | Business Standard

Cobra’s new sting on banks in 2 days

.........“This second part of our expose is 20 times bigger than part one and covers the who’s who of the Indian Banking and Financial Industry," ..........................

Don’t blame RBI for government inaction

...........By underlining the limited role of monetary growth, the RBI has sent a clear signal to the government. Finance minister P Chidambaram must deliver on the promises he made during his recent roadshow in America. Without initiating long-pending structural reforms the government cannot expect the RBI alone to ensure growth. That’s the message Subbarao has passed on.........

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Banks stem rot in loans, gross NPAs down

........The Reserve Bank of India governor D Subbarao confirmed that gross non-performing assets have declined and the growth in restructured assets over the previous year have been flat, but he refused to commit a figure to the consolidated bad debt, suggesting that the estimates were provisional and would be revised once the final results of all the banks were announced......

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Sunny future

..........Another hurdle faced by solar power developers is the lack of financing for companies, and difficulties in priority sector lending for household solar appliances, despite approval from the Reserve Bank of India. “Compulsory solar installation must be mandated in new buildings without which water and electricity connections should not be given; The States should offer additional subsidy as in Kerala, Tamil Nadu and Chhattisgarh for widespread adoption by all income groups,”..............

Read - The Hindu

My View on "A plot to destroy RBI"

Not much research is needed to conclude that finance ministry and FSLRC, in a hurry to resolve certain minor issues, ignored the evolution of the role of RBI and the care with which RBI has nurtured the financial sector. Fed Reserve and RBI function in two different worlds. To say that time is not right for dismantling or truncating the RBI which is doing creditably well as is being admitted in several international forums, would be telling the obvious. The dissenting notes recorded by 4 out of 7 members who signed the final report are well-argued documents, which inter alia plead the case for maintaining the basic features of RBI and assert the need for allowing the central bank to carry on with its present mandates. One wonders what motivated the FSLRC Chairman to finalize the report ignoring the difference of views expressed especially by K J Udeshi, P J Nayak and Y H Malegam. It would appear that the Commission did not get opportunity to understand the present relationship between the RBI and GOI. The regulatory apparatus plus legislations in financial sector in India are in working condition. The FSLRC’s effort to re-invent them has pushed the present regulators and supervisors to a confused state, making the possibility of an intelligent debate on the issue remote. The idea of creating a Unified Financial Agency for all financial regulators except RBI, truncating RBI by separating Public debt Management and keeping the agency doing that work (presumably with the same work force) in RBI premises, later UFA subsuming even RBI, all give a feeling that the FSLRC was not allowed to ‘apply its intelligent mind’ and in the eagerness to satisfy all, and so fast, it has forgotten its own brief. Perhaps, the purpose would be served better, if RBI is allowed to function with its present mandate, a coordination committee sorts out issues among the remaining regulators. If GOI aim is to reduce the number of regulators, after necessary groundwork, merger of the regulatory agencies outside RBI one by one, as work stabilizes could be thought of. The twin goals of one Unified Financial Agency and managing the man-power-related issues that may arise with merger here could be better handled this way.

- M G Warrier, Thiruvananthapuram

Confidence and Governance

This refers to ‘Why be so Glum, Guv Subbarao?’ (ET, May 4). The RBI’s stance on a growth forecast of 5.7% is quite pragmatic against the estimate of 6.5% put forth by PM’s Economic Advisory Council. Foreign investors’ confidence, as observed from deals in the airline sector and Unilever’s and Ikea’s investment, can best be described as localised. To enable this confidence to sustain and permeate to all sectors, the government needs to implement reforms in diesel, coal and gas pricing and getting Bills on land acquisition, etc, passed. But given the continued logjam in Parliament, this appears to be a distant dream. The government should, therefore, come clean on charges levelled against it and initiate steps against its erring members, as a mark of good governance. The Opposition, on the other hand, should prefer meaningful debate on the floor of the House instead of resorting to disruptive tactics. 

- V SRIDHAR, Kolkata (ET)

Only Reform is Salvation

After the repo rate cut by 25 basis points — from 7.50% to 7.25% — under the Liquidity Adjustment Facility (LAF), the question remains as to what will be the driver of growth. It is stated in the policy itself that “recent monetary policy action, by itself, cannot revive growth. It needs to be supplemented by efforts towards easing the supply bottlenecks, improving governance and stepping up public investment, alongside continuing commitment to fiscal consolidation.” Pressure on the current account deficit (CAD) will not allow the Reserve Bank to move forward in the direction of further liberalisation of policy. Again, according to recent reports, there is a continuous decline in the number of farmers, having gone down by nine million in a decade. So, it is now an established fact that for further growth, reforms in labour laws are quite essential to absorb more workers in formal occupations. 

- SHISHIR SINDEKAR, Nasik  (ET)

Down to the politics now

....Subbarao, perhaps presenting his last full-year monetary policy before he demits office in September, have spared no punches in making it clear that the real reasons for the crippling slowdown are brewing somewhere else. The RBI reckons that India's GDP - or the aggregate value of all goods and services produced in the country - will likely grow by 5.7% in 2013-14, by no means a V-shaped boom that would help the economy regain its status.........

Read - Hindustan Times

PSU banks stop hiring from B-Schools after court order

........Public sector banks are now planning to appeal in the Supreme Court against the restriction imposed on hiring from business schools. A recent ruling by the Bombay High Court had said restrained campus recruitment for appointment of officers by Central Bank of India............

Read | Business Standard

Human Resources, the Greatest Risk the Banking system faces

......As it is, the absence of the Bankers Training College of the Reserve Bank of India  is very much visible in the working of banks these days and general ignorance of banking at operational and customer service delivery level has been very much felt. Monetary policy transmission mechanism through banking has been not as effective as the Reserve Bank desires and this has been perhaps due to the disconnect observed in understanding of the Reserve Bank's policy expectations at all levels of banking  as was the case earlier when the Banker's training College was functioning. ............

Read.......

Economic Policies and India’s Reform Agenda

.....This is Dr. Reddy’s latest book and comprises lectures he delivered at different fora. It tackles the Reforms agenda India has adopted which could possibly ignore the current debates on the latest crisis, the broader policy lessons and the burgeoning uncertainties that envelope the world economy. Reddy’s lectures herald new thoughts on economic policies with particular reference to the management of money, finance and external sector. The volume attempts to generate a discussion on the strategies that deserve to be adopted for development and the revised programme for reforming the economy......

Read - Book Review by P.P.Ramachandran

Lead bank scheme to enter metros soon

Forty-four years after it was conceived by the Gadgil Study Group in October 1969, and its consequent implementation by the Reserve Bank of India (RBI) the same year, the ‘Lead Bank Scheme’ (LBS) will finally be introduced in metropolitan cities, with the intention of addressing a much neglected constituency -- the urban poor. “The scheme emphasises making specific banks in each of the cities key instruments of local development by entrusting them with the responsibility of locating growth centres, assessing deposit potential, identifying credit gaps and evolving a co-ordinated approach to credit deployment, in concert with other banks and credit agencies,” an RBI official said on Saturday........

Link - DH

Issue unique ID code to customers, RBI to NBFCs

To enable non-banking finance companies (NBFCs) build a centralised know-your-customer (KYC) registry and thereby eliminate the scope for multiple identities, the Reserve Bank of India has proposed that such companies should allot unique identity code for each customer. In a release issued on Friday, it said that the advice follows the proposal made by the Working Group constituted by the Central government. .........

Read - DH

What’s Next, Mr Subbarao?

One of these days, the Reserve Bank of India (RBI) will come out with its history through the eventful days of liberalisation and the decade preceding it. With several protagonists of this fascinating period still around and kicking, chances are the hardbound may read more like an RBI annual report than a Ramchandra Guha. The tome, unfortunately, will not capture the Subbarao era that comes to an end in September — unless New Delhi and the governor have a change of heart. But years later, when a generous historian puts her mind to the subject, when Mr Subbarao's mistakes appear less glaring, she could end up describing the governor as an inflation warrior. No one senses it better than the man himself.............

Read - ET

Rewriting the Indian growth story

........The RBI issued a fairly gloomy forecast in its monetary policy statement last Friday. But it did cut the repurchase rate by 25 basis points. In fact, the central bank started cutting rates as long ago as May 2012. Despite the hawkish language it continues to employ, the actions indicate that it could loosen through this entire fiscal. That has useful implications if it is true........

Read | Business Standard

Why Chidu and Subbu still can't see eye-to-eye

......The policy makes it clear that the distance between North Block and Mint Street is greater than the known distance between Delhi and Mumbai.................

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RBI unlikely to cut interest rate on June 17: Experts

...... "Going forward, we expect the RBI to ease by a further 50 bps (0.5 per cent) in FY14", but added that from a timing perspective, "we think the rate cuts could be spread out for the rest of the fiscal year and are data dependent"..............

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A policy with many dimensions

............In a statement that is bound to catch popular imagination, the RBI says that both borrowers and lenders have become risk averse, the former because of governance concerns, delays in approvals and tight liquidity and the latter due to rising non-performing assets and heightened risk premia. Finally, the RBI once again renews its call for easing supply side constraints, notably in food and infrastructure without which the effectiveness of monetary policy to contain inflation and anchor inflation expectations will be undermined.

Read - The Hindu

RBI & inflation - A.Seshan

The Reserve Bank of India (RBI) has said it would try to contain the annual inflation rate to five per cent by March 2014, using all the instruments at its command. It's not clear how it can accomplish this. It has itself pointed out on several occasions in the past how it is in a bind in matters of inflation when supportive action from government is required.....

Read | Business Standard

Along predictable lines

........There is simply no getting round the fact that drastic actions by the government, particularly with respect to supply constraints, are now critical to any prospect of a growth revival. The RBI's policy statements have been saying this for several quarters and this one is even more emphatic on the issue. Unfortunately, this imperative is only matched by the dwindling ability of the government to do anything significant............

Read | Business Standard

Why repo rate cuts cut little ice

...................The repo rate, at the end of the day, is only the tip in the iceberg of the financial market. This is not to deny the potent symbolism and signals on the RBI’s ‘policy stance’ that it can convey. But to assume that a rate cut on about Rs 1,00,000 crore (the average sums borrowed daily through the RBI’s repo window) to pass through immediately to the banks’ total loans and advances portfolio aggregating to some Rs 53,00,000 crore is a vaulting expectation, which, to quote Shakespeare, “overleaps itself and falls on the other”.

Read - HBL

‘Expect Baby Steps Towards Softer Rates’

.......The markets were more optimistic, given that there were many positives such as falling gold and commodity prices and the slowing growth rate in India. However, RBI has been a bit more cautious — too cautious some feel — in its action as well as guidance. Besides, RBI appears to be much less optimistic on the inflation and current account fronts. So, it seems to be holding back its policy reserves rather than using these up in a hurry............

Read - ET

RBI wants to spread the Aadhaar menace to card transactions when bankers are evading KYC norms

........Reserve Bank of India (RBI), the country’s banking regulator, seems to be keen on pressing the ‘unregulated’ and illegitimate (as it is yet to be sanctioned by Parliament), the Aadhaar or unique identification (UID) to authenticate card present transactions and other related issues. This is when bankers are still not strictly complying with the RBI’s know your customer (KYC) norms. Some lenders, especially co-operative banks are even using ‘gold route’ to facilitate money laundering for builders and developers...........

Read - Moneylife

RBI to ask banks to hold Aadhaar 'melas'

....."With a view to facilitate the DBT it is proposed to advise banks to open accounts for all eligible individuals in camp mode with the support of local government authorities." The banks would be asked to seed the existing accounts or the new accounts with Aadhaar numbers and also put in place an effective mechanism to monitor and review the progress in the implementation of DBT.......

Read | Business Standard

Raising capital made easy

If you are not overly scrupulous and are willing to exploit loopholes in the law, here is a ‘business model’ to raise thousands of crores of rupees from retail investors...........

Read - HBL

Curbing bank funds will spike prices,help grey mrkts:Jewellers

The Reserve Bank's decision to restrict bank finance to gold imports meant only for jewellery exports will jeopardise the supply system and increase prices apart from boosting grey market, an industry body has said."The RBI's restriction on the import of gold on consignment basis by banks only to meet the genuine needs of exporters of gold jewellery, will have repercussions on the industry...........

Read | Business Standard

RBI cracks down on banks selling insurance products

............. "It has been observed that in some cases, banks did not have clear segregation of duties of marketing personnel from other branch functions, and bank employees were directly receiving incentives from third parties such as insurance, mutual fund and other entities for selling their products. Such practices may lead to mis-selling and distortion of the staff incentive structure." Experts feel that RBI's step may not have the desired effect............

Read - Hindustan Times

eMudhra launches security solution for online financial services

........The launch of Trustfactor is in alignment with the RBI's mandate for banks to implement digital signature certificate based authentication for electronic banking, a statement from the company said. The solution is supported by robust technology, domain-experienced implementation and secured processes including verification and issuance of digital signature certificates (DSC). DSC is legally valid under Information Technology Act and recommended by the Reserve Bank of India specifically for high value transactions, the statement said. .........

Read - TOI

Dear KC Chakrabarty, here’s the real reason why people invest in Ponzi shemes

.........A Ponzi scheme is a fraudulent investment scheme in which the illusion of high returns is created by taking money being brought in by new investors and passing it on to old investors whose investments are falling due and need to be redeemed. K C Chakrabarty, the Deputy Governor, is the latest individual who has jumped onto the more banks equals fewer Ponzi schemes, bandwagon.........

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'RBI was in loop on Saradha, others'

.........Under section 45-IA of the RBI Act, 1934, it is mandatory for NBFCs to obtain a certificate of registration from the central bank and have a minimum net owned funds to be able to commence or carry on business of an NBFC. According to the official, any company failing to do so can be heavily penalised by the RBI.............

Read | Business Standard