No take-it-easy policy, please - S.S.Tarapore

Whoever said that the life of outgoing Governors is easy! Governor Subbarao richly deserves public support.

.............The Reserve Bank of India (RBI) Governor D. Subbarao has entered the last lap of his five-year marathon. All eyes would be on him, when he announces his last monetary policy on July 30. But every day between now and his retirement would be an ordeal by fire. While Subbarao has deservedly earned his place in the firmament of the RBI’s Pantheon, his actions in the next two months could only enhance his stature....................

Read - HBL

High reliance on short-term debt will put pressure on Rupee later: Subir Gokarn

.......... Well, there are really three ways you can address adverse currency dynamics in the short term. One is direct intervention, which clearly is an avenue down which there is a bank which chosen not to go and when you look back at the previous episodes in the last two-three years, the view has been that if it is in irresistible force, if it is too strong to effectively manage with intervention, then it is not really worth drawing down reserves to do it because as the governor himself has said failed defence is worse than no defence. That is a very legitimate position...............

Read - ET

'Surprise' new weapon for RBI to fight rupee

......The move has been widely interpreted as the central bank’s bid to calm nerves after the rupee breached the psychological barrier of 60 per dollar yesterday. So, without spending a single penny from the country’s foreign exchange reserves, Subbarao halted the rupee’s downward journey, at least for today. The move helped as the rupee recovered some ground, which closed at 60.20/$ as compared to Wednesday’s close of 60.73..............

Read | Business Standard

Slowing growth is most worrisome factor, says RBI Governor D Subbarao

......."The slowdown in growth is the most worrisome factor as industrial activity is stubbornly subdued and services remain below the trend," Subbarao said in his foreword to the seventh Financial Stability Report released by the RBI on Thursday evening..............

Read - DNA

My View on "Adviser's analysis ........... Let's institutionalise VITALINFO Dailyzine.........."

The suggestion is very good and worth implementing for the benefit of academic community in general and banking community in particular. The coverage given by Mr. Mangesh Tarambale is very exhaustive and at one stroke the update on money and banking is made available early in the morning. I enjoy my cup of coffee in the morning reading this informative blog. One can avoid searching various papers and save time to have the latest on banking from all sources including policy makers. The comments and counter comments add variety to the information and everything is available in one place thanks to the painstaking efforts put by Mr. Mangesh Tarambale. I understand even people from all walks of life go through this blog to have a glimpse of what is happening in banking and finance. The financial literacy is the need of the hour not only among the masses but also among highly educated community. I forward this blog to some professionals in IT area and they have all praise for this consolidated information on a day to day basis.  I also understand that the faculties of training establishments particularly in Banking are reported to be depending on this blog to update their own knowledge and that of the trainees as well. The Reserve Bank can very seriously think of considering implementation of this suggestion for its own benefit of transferring the knowledge of Central Banking Policies. This is becoming essential in the context of lack of appreciation of its monetary and credit policies and for seriously pursuing them by a segment of the economy. 

- Dr.T.V.Gopalakrishnan       

This is an idea worth developing further. Mangesh may have his own views which should be respected. If RBI considers it worth taking forward, on a trial basis, Mangesh could be given some internal support initially, like:

• Some free time and support or some incentive for the work

• As the work happens much before the usual office hours, freedom for Mangesh to get ‘assistance’ from willing colleagues 

As it may go the commercial way, dependence on outside revenue or entrusting the work to ‘outsiders’ may be a decision to be taken after considering all aspects. In any case, this suggestion coming from Seshan shows the esteem in which VITALINFO is placed in the minds of economists and consultants. Recent appreciation by Deepali perhaps has had a proactive role in people recognizing the efforts behind the ‘Newsletter’.

Congratulations, Mangesh!

- M G Warrier, Ex-General Manager and Freelancer

Infosys' CBS solution to power UP cooperative banks

...........“It is up to the respective DCCBs to approach us for migrating to CBS platform or decide to do it independently,” NABARD chief general manager K K Gupta said recently. CBS is networking of bank branches enabling customers to operate accounts and avail of banking services from any branch spread over any geography. In nutshell, CBS offers ‘Anywhere’ and ‘Anytime’ Banking to customers and most commercial banks have already migrated to this system as also mandated by RBI.................

Read | Business Standard

RBI red flags ‘virtual currency’

Mumbai: The Reserve Bank of India has expressed concern over the rise of “virtual currencies” which are the likes of bitcoin. The concerns have been voiced at a time when the US authorities have cracked down on a virtual currency company “Liberty Reserve” alleging that it was involved in money laundering. Virtual currencies or crypto currencies have also come under the focus of the police. D Sivanandhan, former DGP Maharashtra & CP Mumbai, and Security Adviser, Central Security Cell, RBI, recently said crypto currency are becoming major avenue for money laundering........... 

Read - TOI Pune Edition Page 25

Tata launches first white-label ATM

Tata Communications Payment Solutions (TCPS), a wholly owned subsidiary of Tata Communications, today launched first white label ATM (WLA) of the country at Chandrapada, a tier-V town near Mumbai. It has been branded 'Indicash' by the company. TCPS has got the license from Reserve Bank of India (RBI) to launch white label ATM operations last month under scheme ‘B’ of the central bank...........

Read | Business Standard

RBI clarifies gold import norms

...........The central bank advised banks to strictly ensure foreign exchange transactions by their constituents with these instructions. It said the instructions will come into force with immediate effect. Earlier, RBI had decided to restrict gold import on a consignment basis by banks, nominated agencies, and star trading houses in a bid to ensure gold is imported only to meet the genuine needs of the exporters of gold jewellery............

Read | Business Standard

HDFC Bank Not to Accept Credit Cards for Gold Sale

.........After Reliance Capital’s decision to halt sales of gold-backed funds, it’s now HDFC Bank’s turn to stop the use of credit card for gold purchases. The second largest private lender has directed its branches not to accept credit cards for gold coin purchases. On Wednesday, it issued a note to jewellery outlets to stop providing easy EMI facilities to customers to prevent speculative investment............

Read - ET Mumbai Edition page 20

YES Bank silent over board decision on Shagun Kapur

.......After a two-hour meeting, the outcome was kept in a sealed envelope with the company secretary, a person aware of the development, saying,  “As per legal advice, it will be submitted directly to the court," added the person, who did not want to be named.............

Read | Business Standard

NPA clause of public sector banks likely to be changed

The government will reconsider a clause that requires all state-run banks to treat a borrower's account as non-performing if a loan to the company by any bank has become a bad asset in the books of that bank. PSBs, which had a net NPA of 2.12% in December 2012, have already in a representation to the finance ministry, sought to delete this clause citing increase in the provisioning amount that has to be made towards such accounts...........

Read - ET

Why Vinod Kumar can’t have his heart surgery now

...........But, Canara Bank denied that the institution was in the process of taking over the beleaguered cooperative bank. A top official of the bank told The Hindu that the claim by the cooperative bank’s board that it plans to “merge” with the public sector bank “is entirely incorrect.” The senior bank official who did not wish to be identified said the cooperative bank, which has an account holder base of over two lakh, “may be in talks with other banks for a bailout.” Explaining that any merger “is a process and not an event,” the official said, “So far, such a process has not been initiated within the bank.” He also said the process would take time because Amanath bank was now under the stewardship of the Reserve Bank of India. “It will take its own course,” he said.............

Read - The Hindu

Next time you go to the Post Office, it may well turn out to be a bank

........A long-pending dream of India Post to have banking operations is now taking a final shape. The Department of Post has moved a Cabinet note with the government providing Rs 500 crore as seed capital to India Post for this purpose. This is the minimum paid up capital required under the final norms for banking licenses put up by the Reserve Bank of India. .............

Read | Business Standard

Banks told to achieve targets by July 1st week

.........He told them to enlighten both the farmers and SHG women that they will get interest-free loans if only they repay the loans in time. He warned the farmers that even a two-day delay in repaying the loans will make them ineligible to get interest-free loans. RBI Hyderabad Officer Kulakarni, NABARD AGM Krishna Murthy, DRO Hemasagar, Agriculture and Animal Husbandry JDs Narasimhulu and Venkat Rao, DRDA and DWAMA in-charge PDs Venkata Subbaiah and Tippeswamy, SBI and APGB RMs Prasad and Sivasankar Reddy and others took part in the meeting.

Read..................

RBI cautions banks against mis-selling insurance products

...............Banks are required to disclose details of customers and fees received for referring products of companies, even if they are referring products of one company. “Irda is working with RBI to ensure the disclosure made by banks acting as corporate agents, in Notes to Accounts, are enhanced to bring about transparency in the nature of payments received by them,” RBI said.

Read | Business Standard

Just half of Indians have a savings bank account

..........The study conducted on the basis of three parameters - branch, deposit and credit penetration - across the 632 districts in India shows the bottom 50 districts have just three banks per 100,000 of population, just half of the 7.6 bank branches on an all-India level. These districts have just two per cent of the total bank branches in the country. Besides, they also have just 4,068 loan accounts per 100,000 of population as compared to an all-India level of 11,680 accounts..............

Read | Business Standard

Banking on inclusion

...........The priority in banking today must be financial inclusion. On a variety of measures, India lags behind other emerging markets on financial inclusion. We need to extend banking services to underserved segments in both the urban and rural markets. We need players who can demonstrate that inclusion is compatible with financial viability. If this is accepted, the appropriate criterion for awarding new bank licences falls into place. We do not need more banks that will focus on retail lending and working capital finance, while nominally meeting the stipulation of having 25 per cent of their branches in unbanked areas. Bank licences must be issued to those who can convince the RBI that they can use innovative business models to achieve financial inclusion............

Read - IE

RBI flags heightened risks for banking sector

.......The central bank’s concerns are understandable as certain companies of late have been found raising money from people illegally and there is lack of clarity in legal provisions and roles of different agencies in this regard. It sees better information sharing and increased coordination with participation from the state governments as the answer to plug gaps in the regulatory framework.

Read - DNA Mumbai Edition Page 14

Need different approach to regulations of shadow banking entities: RBI

........“In the light of their (unincorporated non bank entities) useful economic function especially in India where financial inclusion is national priority, there is a need for different approach to regulation of such non bank entities, while pursuing the objective of consumer protection alongside of financial stability”..........

Read | Business Standard

Positive on private banks, large cap IT & pharma: P Phani Sekhar, Angel Broking

.....So to that extent it should not come as any surprise to them or to the street that RBI after initially attempting at least twice to contain the volatility did not yesterday intervene in the market and the rupee easily breached the 60 levels. So I guess beyond a point the central bank does understand that it is futile to fight the forces of the market and there is further depreciation out there in the rupee..............

Read - ET

Pvt placement norms for NBFCs tightened

...... RBI said, "It has been observed NBFCs have lately been raising resources from the retail public on a large scale, through private placement, especially by issue of debentures." The central bank has brought private placement for NBFCs at par with other financial companies under Companies Act, 1956 which was not applicable to them.......

Read | Business Standard

Money laundering: Basel panel moots strong steps

..........Earlier this month, the Reserve Bank of India (RBI) had slapped penalties on three private lenders for violating KYC and anti-money laundering norms and more entities are under the scanner. The consultative document titled ‘Sound Management of Risks Related to Money Laundering and Financing of Terrorism’ has proposed that identity of customers, beneficial owners, as well as persons acting on behalf of customers, should be properly verified. The verification should be done using reliable, independent source documents, data or information, it added. “Recent developments, including robust enforcement actions taken by regulators and the corresponding direct and indirect costs incurred by banks due to their lack of diligence in applying appropriate risk management policies, procedures and controls, have highlighted those risks,” the document said...........

Read - The Hindu

Asset quality: Is the worst over for PSBs?

.............“All banks groups, except new private sector banks, recorded higher write-off during the quarter ended March as compared to September,” said RBI. The banking regulator added the change in debt recast norms, which prescribe higher standard asset provisioning requirement, will put pressure on NPA unless banks take preventive measures...............

Read | Business Standard

Not Right Time to Talk of Capital Controls - C RANGARAJAN

.......You were the RBI governor in 1991 and 1997. Is the current episode comparable to those crises? 

I think the situation is quite different now. In 1991 or 1997, we had very little reserves and the ability to attract capital flows was limited. All this has changed. Our capacity to manage the situation now is better. The current account deficit has however risen to a level higher than what it was in 1991.Therefore, the situation needs to be handled in a different way. In the short-run, we should aim at encouraging capital flows. Over the medium term, we should look at moderating the current account deficit to levels which would be considered as reasonable. A high degree of dependence on external flows is not good.................... 

Read - ET - Mumbai Edition page 13

The economy’s fate hangs by a thread

...............The July policy review is the RBI’s last chance to bring down interest rates very sharply in order to restart investment and consumer spending, make share prices start rising again and stem the outflow of foreign exchange. But to minimise the impact upon our balance of payments, New Delhi needs to release some of the 77 million tonnes of its buffer stocks of food grains into the market to lower food prices and mop up money supply, and announce additional cuts in subsidies. If the government and the RBI do neither, then economic collapse is only months away. India’s fate therefore hangs by a thread.

Read - DNA Mumbai Edition Page 8

India's financial system resilient to shocks: RBI

The Reserve Bank of India's Financial Stability and Development Council finds the financial system resilient to shocks. In its Financial Stability Report released today, the central bank has cautioned that the deteriorating macro-economic picture can erode financial stability going forward. "Stress tests results indicate that if the current macroeconomic conditions persist, the credit quality of commercial banks could deteriorate further."....................

Read...........

RBI sets measures for state discom bonds

Bonds, which will be issued by state power distribution companies (Discoms), will be valued at their current market price, if they are traded and quoted. However, they will be valued on a yield to maturity (YTM) basis with a mark-up, if bonds are not traded and quoted, the Reserve Bank of India (RBI) said in a notification on Thursday............

Read..........

What the RBI hasn't yet done to defend the rupee

..........."The real fact is that the market has attempted to take on the RBI by adding the pressure to intervene and to identify how much resolve the RBI has to defend the 60 level. The rupee slumped once the central bank was unable to defend it,"...........

Read.................

Economic risks have increased in last 6 months: RBI

..........The report said current account deficit and its non-disruptive financing have emerged as major challenges from the perspective of macro economic stability. "The performance of Indian corporate sector has been subdued and in the emerging scenario, their increased external borrowing and unhedged foreign exchange exposure may further increase their vulnerabilities," it said. In the foreword to the report, Subbarao said the slowdown and growth is the most worrisome factor, as industrial activity is stubbornly subdued and services remain below trend.................

Read | Business Standard

Stopping rupee slide, the Subbarao way

Reserve Bank of India (RBI) Governor D Subbarao, often criticised for being “behind the curve”, today took market players and his critics by surprise. RBI issued the January–March current account deficit data, better than anticipated, before market hours and two trading sessions ahead of schedule. The move was widely interpreted as the central bank’s bid to calm nerves after the rupee breach yesterday of the psychological barrier of 60 to a dollar...........

Read | Business Standard

Falling deficit, rising debt

The Reserve Bank of India published the balance of payments data for the fourth quarter of 2012-13 (and, consequently, for the full year) a day earlier than scheduled. What clearly motivated this uncharacteristic enthusiasm was unquestionably the hope that a rather positive reading on the current account deficit would have on a rapidly declining rupee. Whether the desired impact was had or not will be difficult to gauge immediately. There clearly was no dramatic reversal in movement. But going by the principle that there's never a bad time for good news, the early announcement could not have hurt - unless, of course, it is read as a signal that the government has completely run out of options...............

Falling deficit, rising debt | Business Standard

Boost Real Growth, Get Financial Stability

The RBI’s Financial Stability Report (FSR) makes for sober reading. While things are stable right now, they could go seriously wrong, without systemic improvement. This has to do as much with real growth as with the financial system itself..............

Read - ET Editorial

RBI flags external risks to financial system

....The twice-yearly Financial Stability Report (FSR) of the Reserve Bank of India (RBI) said Thursday that risks to the banking sector are on the rise amid tight liquidity and deteriorating asset quality concerns, and the credit quality of commercial banks could deteriorate further if the current macroeconomic situation persists. It added that external sector vulnerability is emerging as a major risk to the financial system. However, even under severe stress, Indian banks’ high capital base is lending “resilience” to the financial sector, RBI said............

Read - Mint

A depressing scenario

....Given that consumer inflation is still in double digits, the slippage in the value of the rupee is bad news for the ‘ aam aadmi.’ Mercifully, the price of gold is at a three- year low. This should help pare down the foreign exchange outgo on its import. Also, the import duty on gold was revised twice in the last couple of months. How that would help reduce the current account deficit remains to be seen, but the RBI and the SEBI too have sought to come to the rescue of the government by easing norms for capital inflows. The market regulator has eased the know- your- investor norms and done away with distinction among foreign investors who acquire up to ten per cent of equity in a company. Norms have been relaxed for operating in the debt markets, as well in order to attract capital inflows. On its part, the RBI too announced a slew of measures to make it easier for foreign funds. et, cumulatively these changes by the SEBI and RBI will not add up to anything more than a mere tinkering..........

Read - FPJ Editorial

The correct value of the rupee

...........Running this very simple arithmetic gives us "today's correct with all the disclaimers" value of the rupee as 56-57, much more reasonable than some of the grotesque levels being bandied about by some analysts and economists. Judging from anecdotal straw polls, most exporters would be quite happy with this level, provided they didn't have to deal with this unmanageable volatility. On the short side, too, it appears that...........

Read | Business Standard

Rupee fever: RBI injects CAD drug a day too soon

............The RBI data revealed CAD has narrowed to 3.6 per cent of gross domestic product in January-March quarter from 6.7 per cent in the December quarter. The rupee, which has been under pressure due to high CAD, recovered 51 paise to close at 60.19 to a dollar. “We do certainly believe that the market is overreacting. And this is evident from the fact that it overreacted by anticipating a much higher CAD for the entire last year,” the ministry said in a statement to reporters.........

Read - Deccan Herald

Two held on charge of swindling Rs. 8 crore

..........Both the accused had only primary education and had the experience of handling small scale investments in share trading. They earned the confidence of investors by returning the promised money during the initial stages. Police said they have got complaints from nearly 20 people who have been cheated. The accused used to invest in currency trading through another company named Wismore Trading FZC in the United Arab Emirates. This was done to bypass the regulations on foreign currency trading by the Reserve Bank of India and the accused had no authorisation to conduct such transactions..........

Read - The Hindu

Aadhaar set to 'change the game' in financial inclusion

......Talking about how these Aadhaar-based services will be a “game changer” in India's effort to achieve better financial inclusion, Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission (under whose ambit UIDAI falls), said, “The current system of providing benefits to the people is not very efficient: it has leakages ranging from 20% to 40%. The new, Aadhaar-based system will massively improve it. I'm told that the error rate in Aadhaar is as low as 0.01%.”.......

Read - FE

HDFC Bank was probed on Cobrapost expose

.....Managing director and chief executive Aditya Puri, however, clarified that the bank had appeared before The income tax department as a witness and not as a tax assessee. “We have met the tax authorities. Please remember, we have not them as a tax assessee, we have met them as a witness,” he told reporters.............

Read - Mint

Toxic ULIPs: Less than 2% return after 8 years!

......Even though the Insurance Regulatory and Development Authority (IRDA) has banned old ULIPs since September 2010, what is the recourse for the policyholders who have been already trapped? It is time IRDA takes stock of the situation and offer relief to policyholders who are trapped in products it approved only to be banned later. It is especially true for old ULIPs which continue with atrocious premium allocation, policy administration and surrender charges even after completion of three policy years.................

Read - Moneylife