The monsoon outlook is going to be an important factor in determining Reserve Bank of India’s policy in the next three months, RBI Governor D. Subbarao said in Hyderabad on Friday. Delivering Institute of Public Enterprise’s Golden Jubilee Lecture on ‘India’s Macroeconomic Challenges: Reserve bank Perspectives’ he said the RBI was keeping track of growth, inflation and balance of payments. And importantly it was chasing the monsoon............
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Saturday, June 8, 2013
Follow austerity for high growth: Subbarao tells govt
........"The austerity versus growth being debated in Europe is irrelevant to India. Our concern is austerity for growth. I believe that fiscal consolidation is very necessary to put the economy on a high growth trajectory. And, the fiscal consolidation largely is a political problem,"..................
My View on "FSDC should not encroach autonomy of exisiting regulators.........."
To those who were following the relationship issues between Finance Ministry on the one side and all financial sector regulators on the other side, it was evident from the very beginning that setting up FSDC was the formalization of the continuing efforts by Finance Ministry to act as a super regulator over all regulatory bodies in the financial sector. Experts in the field had minced no words to point out that this will destabilize the equilibrium deftly built up by eminent persons who headed Finance Ministry and RBI in the formative years of financial regulation in India and consciously maintained by their successors till the recent past. Viewed in this context, the concern expressed by Dr Subbarao on June 5 at the 7th International Banking and Financial Conference 2013 should get the attention it deserves from all stakeholders.
- M.G.Warrier
RBI and CAG audit
..The only area perhaps there is scope at all for audit by CAG is on expenditure side which is kept to the barest minimum because of Conservativeness the RBI has been pursuing since its inception.Here also, RBI has well laid down system and procedures and they are all transparent. RBI runs its show with minimum staff and efforts are continuously on to reduce the staff further Expenditure is seen as an allergy and staff have been well trained to be so economical that even genuine needs are often overlooked.................
My View on "Who Would Audit the Central Bank?"
GOI is reported to have appointed this year two private auditors to audit the accounts of the RBI with out the usual consultation process. In this context, views have been expressed by a columnist ( K.P.Krishnan) in ET that the accounts of the RBI should be audited by CAG as already recommended in the Srikrishna Commission Report. I recall that when a similar demand was made in the Parliament quite some time ago, the then Finance Minister ( Shri Y.B. Chavan) had in his forceful reply in the Parliament argued against it and the suggestion was not accepted. It would be worthwhile for the RBI to dig into the Parliamentary debate records and quote them to the Government if it does not consider it necessary for the CAG to audit its accounts. The Bank's argument against the audit of its accounts by the CAG would be strengthened if its expenses (Establishment and other expenses) are properly regulated and there is no laxity in their control. RBI used to be extremely conservative in the past so much so that even the rooms and the furniture of the officer-in -charge (especially of its small regional offices located in rented places) and other senior officials were so ordinary that commercial bank executives were embarrassed when they called on the RBI officials. But, in the recent past, one gets an impression that the pendulum seems to have swung to the other extreme not only in the physical facilities offered to its staff but also in the 'perquisites' granted. Even while granting better facilities to its staff in terms of emoluments and perquisites (this has to be done in order to attract good talent), the Bank would be able to regulate the expenditure by keeping an eye on staff productivity and staff strength and being very firm in this area.
- A.Chandramouliswaran
My View on "Penalties on banks in India 'peanuts', says RBI Governor"
The question of the quantum of penalties to be imposed on banks which are found to have flouted KYC Norms. While Governor, RBI, says that the penalties which can be imposed as per law are "peanuts" compared to European countries and the Financial Services Sector Secretary says that the law/rules would be amended to enhance the quantum of penalties, one of the Deputy Governors says that fines are intended to name and shame the concerned banks and any increase in the quantum of penalties would be passed on to the customers and hence by inference he would not be in favour of any increase in the quantum. Many of my colleagues (especially who had retired more than a decade ago) would never have come across Governor and his Deputy voicing different opinions in public. While on the subject, it is doubtful whether any bank in the present milieu would at all be "shamed" when it is named !! If the RBI means business, it has to insist on a senior official of the concerned bank being removed from the bank.Of course, it goes with out saying that this has to be done only after the bank has been found guilty after a due process and the punishment is removal of the official instead of levying of fine. Such deterrent action alone can put some fear in the banks and result in the enforcement of the regulations laid down by the RBI. I have consistently been arguing, even while in service, that the RBI should not be seen as a paper tiger if it wishes to see that its regulations are scrupulously followed. I had seen, while on an official tour, how banks in Thailand (one generally gets the impression that consistent with the nature of its society, the authorities would be relaxed in their approach) were so scared of the Bank of Thailand (BOT) that an official of a commercial bank phones the concerned senior official of the BOT and secures the permission for sending a weekly return with half an hour delay !! This call was naturally made well before the appointed time for receipt of the return !
- A.Chandramouliswaran
'Heavy' metal or light notes?
.........Although, the Parliament of India approved a bill in 1975 to mint coins up to denominations of Rs 1000, the government never issued coins worth more than Rs. 150. The 1000 rupee coin was issued to mark a very significant aspect of Indian history. Incidentally, it is the first time that the Mumbai Mint issued the silver coin of Rs. 1000. The coin, weighing 35 gm, contains 80 per cent silver and 20 per cent copper. But coins pose some practical difficulties. They are heavy and hence harder to carry than paper money.........
Reserve Bank should focus on growth now, says SBI
................. "In my opinion, this is the time to focus on growth because a lot of ... has been done for inflation control and the level of inflation is not that high now," .....................
SBI chief says merger of associate banks can start by September
State Bank of India (SBI) has said that the proposed merger of its five associate banks with itself could start by September after a high-powered committee submits its report on the same. The high-powered committee, headed by SBI managing director S Vishwanathan, would furnish its report by July-August, and later based on the report the merger process could start by September, SBI chairman Pratip Choudhuri told reporters in Jaipur on Friday............
Motivate yourself to save for retirement
..............And if the above two reasons do not motivate you to save for retirement, try this: Live on two-thirds of your current income for the next 6 months. Why? You will experience the pain from cutting consumption, a situation you will face in your retired years if you do not save enough today. This experience should drive you to contribute enough to your retirement account ! Saving for your retirement is an important step that you should take to secure your lifestyle when your active income stops. We suggest that you talk with individuals who have retired in the recent past to gather their new experience as retirees. Motivate yourself to save...........
Bank customers need to be wary of concentration risks
.....Bank customers, particularly individual depositors and individual borrowers, have, in each of the two previous occasions of new banks, been affected through enhanced competition leading to better product offerings in banking. However, they need to be watchful of the effects just like how RBI is being wary of going overboard by issuing a spate of new bank licenses. The stringency RBI’s recent revision of new bank norms clearly points to that..............
RBI Norms Must Not Stifle Enterprise
......So, the RBI’s move to dispense with it, as recommended by the Mahapatra panel, after two years makes sense. What
is not welcome is the norm that promoters should furnish personal
guarantees for a loan to be recast. This militates against the principle
of limited liability: shareholder liability is limited to what they
have invested by way of fullypaid-up shares. But it is fair to ask the promoter to bring in additional funds as a condition for restructuring the loan...........
Nabard red alert to cooperatives on capital adequacy norm
........Capital adequacy norm prescribed by the Reserve Bank of India, the banking regulator, requires them to maintain capital at the level or Rs 4 for every Rs 100 lent. R. Amalorpavanathan, chief regional manager, Nabard Kerala office, told newspersons here that it was high time stakeholders and the State Government sat together to find a way out. June 30 is the deadline for meeting the first milestone of four per cent in the capital adequacy roadmap, he said..........
Banks to do periodic legal audit of loans above Rs5 crore: RBI
........The RBI’s circular comes in the wake of rising non-performing loans even as economic growth languishes near a decade low.
Ponzi schemes: IMG mulls quasi-judicial powers for RBI, SEBI
An inter-ministerial group today deliberated on ways, including grant of quasi-judicial powers to RBI and SEBI, to protect gullible investors from fraudulent money pooling schemes. The discussions of the panel, which was formed in the wake of Saradha scam, come against the backdrop of many entities exploiting legal loopholes to cheat the public with ponzi schemes...............
Are your deposits safe?
........Before investing in schemes that promise high rates of return, you must first ensure that the company is registered with one of the financial sector regulators and authorized to accept funds. RBI regulates all companies that are engaged in financial activities as their principal business. But does that mean all financial companies come under the purview of RBI?..................
Pedestrians not permitted
.........Turn onto August Kranti Marg. This road has Shahpur Jat (fast turning into a boutique village like the forever distorted Hauz Khas), Siri Fort, Anand Lok and the Ansal Mall on one side and RBI Colony, Mayfair Gardens, many institutional buildings, Gulmohar Park, Niti Bagh and Uday Park on the other. Try walking down this road and you will find huge piles of building material on the footpath........
Buildings to fit the ‘bill’
.............“The RBI’s negative perception of lending to the housing projects as being risky will also be dispelled, making it easy for accessing formal funding,” adds Dutt. “Basically, the bill will change the way in which funding is being approached, as it will require the developers to invest their own capital and launch only those projects that are well-funded, along with time-bound construction plans in place. Of course this is a quantum shift which may take time to settle in as a process.”...........
Financial activities of SHGs destroying amity in rural areas
...........At present there were around 5,20,000 WSHGs in the State. The AIDWA leaders alleged that several of them find it hard to get loans from banks. Due to it they approach microfinance organisations and dubious finance organisations registered as cooperative bodies. Loans taken from these institutions have to be returned with hefty interest which most of the time exceeds the Reserve Bank of India directive that interest should not exceed 26 per cent, they said..........
‘VCB emerges largest coop bank in South India’
........ the bank has 28 branches in nine districts in the State and seven more would be opened during the present financial year as the approval for the same was already received from the Reserve Bank of India.........
RBI extends restriction on co-operative banks for loan against gold coins
The Reserve Bank of India has extended the restriction on advance against gold on co-operative banks as well, a move aimed at curbing demand for gold.In a notification, the RBI said while granting advance against the security of specially minted gold coins sold by banks, state/central co-operative banks “should ensure that the weight of the coin(s) does not exceed 50 grams per customer’.........
Will the RBI now listen to the FM and ask banks not to sell gold?
“I think the RBI has told banks not to sell gold coins,” the finance minister P Chidambaram told a news agency. Well, gold sales from banks are small and will not help in reducing gold imports or lowering CAD. However, consumers will benefit from not buying gold from banks..........
Govt and Gold
The Govt is solely responsible for the mad craze for gold in India.The reasons can be found in Govt's wrong policies and inaction in respect of vital economic policies badly needed by the economy................
Welcome return for Indian linkers
........The auction of the first batch of Rs10bn 10-year linkers from the Reserve Bank of India on June 4 will boost India’s ambitions to draw demand for up to Rs150bn of linkers in the fiscal year ending March 2014. Around Rs1.4bn of the new notes were already traded in the secondary by June 6, with the first trades struck around 1.41% levels, said bankers............
Inflation indexed bonds: How they work
....These bonds are an enhanced version of capital indexed bonds issued during 1997. Capital indexed bonds provided inflation protection only for the principal while inflation indexed bonds provide inflation protection for interest payments as well. Theoretically, inflation indexed bonds could indicate the willingness of the government to maintain optimal Inflation numbers............
Why FM is hemming and hawing on rupee, gold and rates?
.........So what is Chidambaram saying? That he has no worries about the rupee, but many worries about gold, which will dent the CAD and impact the rupee. The higher the CAD, the greater the pressure on the rupee to decline. But there are more contradictions in Chidambaram’s various statements yesterday...............
Slip slidin’ away
Though not occurring for the first time, the rupee’s sudden and sharp depreciation in relation to the dollar has caused all round concern. A major reason has been the sheer unpredictability of the currency movements at this juncture. Not long ago, the problem seemed to be centred on rupee appreciation. There were many who had advocated Reserve Bank of India intervention to preserve export competitiveness........
RBI to intervene in forex mkt only to curb volatility: Subbarao
........"The important point is that we have to be internally sure that when we enter market we are credible because for a central bank failed defence of exchange rate can be quite detrimental. "When you have downward pressure on the rupee as I said you have to shell your dollars. And a fair defence of the exchange rate can be worse than no defence."...................
57-a-dollar is the new normal for rupee
.........According to currency dealers the RBI interventions are falling flat. “RBI has limitations in defending rupee when system liquidity in deficit mode and not enough dollars in the reserves. RBI continue to highlight inflation as risk to growth denting the hope of further rate cut in the near future,”.............
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