......A reduction in the cash reserve ratio requirements for banks would have been more damaging. Again, the RBI needs to be parsimonious in undertaking open market purchases of securities. The next Mid-Quarter Monetary Policy Review on June 17 and the First Quarterly Review on July 30 should be strategically used by the RBI to resist pressures for easing monetary policy.........
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Friday, May 17, 2013
Getting RBI communication right - CHARAN SINGH
............In India, in the context of global market integration and increasing demand from media, there has been a significant progress in removing the mystique surrounding monetary policy as reasoned by YV Reddy (2008). RBI ensures a high degree of transparency about its objectives, policy formulation, and decision making as it helps to increase the effectiveness of monetary policy by promoting more informed decision making by economic agents. RBI’s communication policy involves regular publications, monetary policy documents, research studies and special speeches. In all cases, RBI’s communication has been improving over the years, especially in terms of number of speeches delivered by the top management across the world, mainly in India...............
Market and media’s Mahabharata syndrome
........The next paragraph of the report quoted Subbarao, saying at an event in Frankfurt the previous day, “We certainly will take note of the softening of inflation and the external payments situation in the next mid-quarter policy statement on 17 June.” A Bloomberg report too highlighted the inflation part in the beginning and later said he would take note of both while forming the policy in June. In other words, Subbarao made a general statement that he would take into consideration both the fall in inflation as well as trade but the media—both newspapers and websites—as well as the market chose to listen to only one part of his statement..........
Reforms’ unintended fallout
A mint-fresh working paper by the Reserve Bank of India once again trains the spotlight on a problem that, for five decades, every policy-maker has planned to snuff out, failed to, and then wished it would go away if ignored. But financial exclusion simply hasn’t, and we now have the central bank applying its forensic skills to an examination of its magnitude. The title of Working Paper Series 5/20/13 is almost admonitory: “Persistence of Informal Credit in Rural India: Regulatory Policies Need to Recognise Changing Landscape.” Authored by Narayan Chandra Pradhan, the paper is an updation of sorts; it puts together all extant surveys on indebtedness, the formal and informal channels of rural credit recorded from 1971-72 to 2002-03 by various agencies.............
VITALCATION..................
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| VITALINFO on vacation mode............... Will resume on 27th May 2013. Till then bye................. |
Obituary
I am sorry to advise you of the sad demise of Shri Madhav.D.Shinde, in Mumbai on May 13, 2013. He was 86 years old and had served in DESACS for a number of years as Assistant General Manager. He eventually joined NABARD, from where he retired. May his soul rest in peace.
- P.P.Ramachandran (via e-mail)
Mom and me contest
The results are in for The Hindu MetroPlus ‘Mom and Me’ photo contest, held to celebrate Mother’s Day. Readers were invited to send in their favourite photos of themselves with their mothers.............
ROSHAN KRISHNA AND RAJI GOWRISHANKAR
F-48, RBI Officers Quarters, Belhaven Gardens, Kowdiar, Thiruvananthapuram-695003. The best five entries have won gift coupons for..........
Read - The Hindu
RBI’s proposal a boon to SMEs
Recommendation of Reserve Bank of India’s technical committee to include export credit under the priority sector lending portfolio of all commercial banks is a boon for the predominant Small and Medium Enterprises (SMEs) in export hubs like Tirupur as the move will increase flow of finance...........
HC has wide powers to issue writs against cooperative banks
........The full bench comprising Chief Justice A M Khanwilkar, Justice R B Misra and Justice D D Sud on a question as to whether the Kangra Central Co-operative Bank and other cooperative banks are within the meaning of Article 12 of the Constitution of India, observed that in exercise of powers under Article 226 of the Constitution of India, writs or orders can be issued even against any person or authority, if facts and situation of the case so warrant..............
Banks are not providing collateral free loans to MSME sector’
.........Speaking at the 124th State Level Bankers Committee (Haryana) meeting, MSME-DI Director Vijay Kumar said, "Banks in Haryana are violating the RBI guidelines by not providing collateral free loans to MSME in the state...it is very discouraging." As per RBI guidelines, loans up to Rs 10 lakh to MSME units must be disbursed collateral free. It was pointed out in the meeting that 66 per cent of new MSME units were disbursed loans up to Rs 10 lakh while rest of them were denied loan.............
Financial exclusion
“Reforms’ unintended fallout” (Business Line, May 15) is inspiring enough to make one surf through the RBI working paper referred to by the writer. Financial exclusion is a fallout of liberalisation policies pursued for more than two decades by our original reformers......
Read - HBLFinancial Inclusion: Obligation or Opportunity
................The ultimate aim of financial inclusion shall be complete only when underprivileged are converted into micro-entrepreneurs across the country. Financial Inclusion shall always remain a journey and never a destination. RBI aspires to achieve 100% financial inclusion in India. But the duty lies not only with the government and regulators but also with the service providers and end-customers by exploring the paradigms of opportunities.
Why growth has stalled – and it’s not what the FM is telling u
........The solution is to create a separate body to develop a robust non-banking financial sector and free it from the RBI as well as the bureaucratic clutches of state governments. The RBI’s hands are full and so there is no point in complaining that it is not alert about the crores coming from non-bank sources – leading to dubious use and abuse. The developmental authority for the non-bank sector should primarily focus on helping partnership and proprietorship firms in the economy through appropriate credit mechanisms and non-strangulating regulations............
In 6 years, PM has become 8 years older
.........In his affidavit filed along with nomination papers as a Rajya Sabha candidate from Assam on Wednesday, the Prime Minister has stated that he is aged 82. However, in his affidavit as a Rajya Sabha candidate filed in 2007, Dr. Singh mentioned his age to be 74...........
The autonomy politics
........Last week, RBI governor D Subbarao, visited Kashmir. He made an important statement at Srinagar. D Subbarao said that Omar Abdullah has assured him that state government will enact SARFAESI Act in the assembly or extend it through an ordinance shortly. The act if extended or enforced, according to experts will have serious impact on state’s autonomy as it will dilute Article 370.............
Read..........
Axis Bank MD & CEO gets salary hike
.......her salary will stand revised from Rs 1.78 crore per annum to Rs 1.96 crore, while HRA will go up from Rs 59.52 lakh per annum to Rs 65.47 lakh. Leave fare concession will increase from Rs 11.15 lakh per annum to Rs 12.26 lakh. Utility bills entitlement will be Rs 3.30 lakh per annum...............
Salaried gets relief for now
...........The other point is that there has been a hue and cry over the salary class being penalised with higher taxes or increased compliance, which is probably why that has led to the salaried class being left out, feel tax experts. An easier way would have been probably to attach an annexure and ask to declare all assets all taxpayers have, opine experts...........
Swiss bank ATM in parliament compound! No wonder they are happy
In a move that practically guarantees civility in parliament and an unprecedented cooperation between the government and the opposition in the last year of the UPA II, a high level committee chaired by the finance minister has given clearance for the setting up of a Swiss bank ATM inside the parliament compound exclusively for the legislators of the lower and the upper houses. In a hush-hush ceremony, the prime minister inaugurated the single ATM and dedicated it to the nation........
PMC Bank Deploys Array's Application Delivery Controller
........."Array Networks solution has enabled our customers with high speed connectivity for internet and mobile banking transactions. The performance of the internet banking servers was noticeable. Array has helped us to enhance the business continuity for Internet & Mobile banking applications and we are able to meet the RBI compliance because of the Array Networks ADC solution.".........
Developers’ Response Is Positive But Cautious
The breather for capital starved housing sector has come in, in the form of Reserve Bank of India’s decision to ease External Commercial Borrowing norms for housing. Developers across India are indeed happy with the development. According to Rohit Poddar, Managing Director, Poddar Developer, this is a positive development which will enable Companies in the affordable housing sector to raise cheaper debt by 3%-4% p.a. “It will be important to ensure that the policy is non-cumber some to execute as many of the developers in the affordable housing sector are from the SME Sector,” he said.........
Corporate group-run banks: why now?
..... it is unclear why lending would be enhanced if companies use retained earnings or access funds from capital markets to sponsor new banks. If the argument is that Indian firms are in a better position than banks to assess local risks, corporate capital could instead be invested directly in fresh projects. Further, if the new corporate group-owned banks are expected to boost lending by unlocking additional savings because they can convince depositors of their ability to assume longer-term project risks, they could do the same as companies..........
In black and white
.........In February, the RBI issued guidelines for issuing a fresh round of banking licences. These guidelines allow big corporate houses, existing non-banking financial companies, Indian-owned private sector companies and public sector companies to apply for licences. With so many new entrants, the importance of due diligence by the regulatory authorities cannot be overemphasised. The purpose of banking as an instrument of financial inclusion and access to financial services will be wholly defeated if policy decisions and loopholes in law promote the illegal hoarding of wealth..............
Exposure at Rs 7,000 cr, banks rush to UAE over Winsome Diamonds claims
A team of bankers is visiting Dubai to find out the reasons for loan repayment default by Mumbai-based Winsome Diamonds and Jewellery after the company claimed that it could not clear dues as its Gulf customers failed to pay instalments.............
Interest in inflation
...........The problem, however, is that the bonds are being indexed to wholesale and not consumer price inflation. Since households are only bothered about the latter – currently ruling almost twice that of the former – IIBs hardly offer an alternative to gold or real estate as a hedge against inflation. Nor has the Government proposed any Section 80 deductions or other tax sops for investment in these bonds. ..........
Inflation Indexed Bonds – solution or false hope?
...........To top it RBI and the government have gone to town claiming that IIBs are a natural hedge against inflation and could help to curb gold purchase in the country. It needed to be remembers that majority of gold purchased is in jewellery form. Much of it is bought for status collection and only few venture to buy it for investment purposes and majority of the investment............
Why inflation bonds are the best thing Chidu ever did for savers
........Warts and all, IIBs are the best thing P Chidambaram has ever done for savers. So go for it – now or later. You are unlikely to regret it. But watch for an update just before the launch. We will tell you if there is a thorn embedded in the fine print.
May Gold Bless You !
.............Yellow metal is stealing headlines worldwide for the last few days. The precious metal regarded as the best bet against the inflation for not too long back is facing serious heat at the moment. A fall of around 10% in the last week spells doomsday for the gold investors. The brunt has been faced mostly by the aggressive investors who offered a sizable chunk (50%-60%) of their investment portfolio to gold. Also, gold is the only hedge against the rising inflation especially in the Indian context where Index inflation Bonds (IIB’s) are still a distant reality...........
Gold Funds may be Hit by RBI Curbs on Imports
Gold
exchange traded funds (ETF), among the hottest financial products in
recent times, may face a curious problem because of a recent RBI
circular which bars the import of gold on a consignment basis for
domestic use. Authorised participants (APs) who create and redeem
units backed by gold, and fund houses said this could crimp liquidity in
the product and prevent growth of assets under management in quantity
terms unless RBI clears the air on the issue.............
Read - ET
Read - ET
Looking beyond gold
......... The consequences of the steep gold import bill on the trade balance and hence on the current account deficit is well known and does not bear repetition. The Finance Ministry and Reserve Bank of India are only too aware of the problem but appear to have run out of meaningful options to curb the apparently insatiable demand for gold...........
Cobrapost fallout: Govt, RBI looking at hiking penalty amount
.........."The maximum penalty under the law is Rs 1 crore now and that is very less. There is active discussion now on increasing limit of penalty. So that is something which is under consideration," Rajiv Takru, secretary, department of financial services told reporters today. “As a matter of fact, this (hike of penalty) was discussed at the RBI board and a point was made that the penalty amount is probably less," he added.................
Banks Feel the Sting, Ask Staff to Go Slow with Cover Drive
ICICI
Bank and HDFC Bank, the lenders found to have violated basic
Know-Your-Customer (KYC) norms, have ordered their staff to go slow on
sale of insurance products that are seen as the main means used by
customers to avoid taxes and legitimise ill-gotten wealth. These banks
have verbally requested staff in many of their branches not to pursue
sale of insurance voluntarily till the dust settles on the cobrapost.com sting operations, said three people familiar with the instructions...................
Another Bengal scheme in Sebi net
.............The regulator said that while details of the amount that Basil raised were available from the documents submitted to the RoC, there is no information available about the number and identity of the subscribers to the issue. Sebi has directed Basil not to collect any money from investors, refrain from disposing of properties or assets of the company and diverting any funds.
Expert panel moots insurance cover to secure investments
........The committee observed that the chit foreman finds it difficult to raise money to honour his commitment to subscribers as RBI has prohibited chit companies from accepting any deposit from the public. Securitization could be a right step to enable the foreman to arrange liquidity, the panel said in its recommendations. “The chit fund association’s request to allow undertaking fee-based activity like selling insurance policies and other financial products seemed fair,”.......
‘Time has not come for CBI probe into Saradha scam’
...... The Bench also ordered that a paper-book (relating to the Saradha case) be prepared by May 23 and directed that anyone intending to implead himself do so by May 23. At least three petitions have so far been filed at the Calcutta High Court demanding a CBI probe into the scam. Other agencies such as the Reserve Bank of India (RBI), Enforcement Directorate (ED), SEBI and CBI have all been a party to the case..........
Amend Act to check chit fund frauds, says Dasgupta
..........Commenting on the chit fund scam in West Bengal, Mr. Gupta regretted that only 15 State governments had so far enacted laws for protecting the interests of depositors, at the instance of the Reserve Bank of India. The existing Act on chit funds covered only prize chits and money circulation schemes but there was no specific reference to the MLMS for goods and services. Such schemes — called pyramid or ponzi — should be regulated to prevent frauds. The Chid Fund Act should be amended to cover the MLMS, he said.............
‘Cheat’ funds thrive on lax rules
.............“Absence of a regulator to monitor the activities in the chit fund sector is a major hazard,” points out P. Rajendran, Managing Director of Kerala State Financial Enterprises.
“The entry and exit load is low in chit fund business, providing ground for fraudulent groups to enter the scene. It is high time that a regulator akin to RBI, TRAI, and IRDA is instituted in the chit fund sector,” he says............
Chit funds: Ministry of corp affairs moots new law
Ministry of corporate affairs has mooted new law to cover chit funds. The ministry has proposed that the issue of chit funds should be examined in light of RBI's definition of financial institutions..............
Fund scams target Indians beyond the reach of banks
........."We trusted them like fools because the return they assured was four times more than a nationalised bank," said Ghosh, who says she lost 100,000 rupees in the collapse of Saradha, believing it to be a government-approved fund............
Vikram Pandit to steer JM Financial bank foray
.........The other point is that there has been a hue and cry over the salary class being penalised with higher taxes or increased compliance, which is probably why that has led to the salaried class being left out, feel tax experts. An easier way would have been probably to attach an annexure and ask to declare all assets all taxpayers have, opine experts...........
Here's why HDFC is in a sweet spot compared to banks
........"HDFC is in an enviable position - funding cost is falling while loan yields are holding up (base rate driven). This is causing spreads to expand while gaining market share. Top line is expected to grow at 20 percent plus over three years, which should help multiples (at long-term average now) expand," the research report said setting a price target from Rs1,010 to Rs1,125 over a period of next one year.........
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