......Though the RBI claims that its inquiries did not reveal any prima facie evidence of money laundering, it has not given them a clean chit on this account and added that “any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies”. This is too serious a matter to be foreclosed with mere imposition of fines. The RBI should make its findings public so that people know what is happening in the banks to which they entrust their hard-earned money..............
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.
Thursday, July 18, 2013
Banking in hot waters
.............What this episode highlights is that the bond market, in today’s fluid scenario, offers no more certainty than that for ‘risky’ equities. It reinforces the need for banks to set prudential internal limits on their treasury activities, in terms of the extent of their bond portfolios exposed to yield and price swings. For now, signals from the US Fed, rather than the needs of domestic banks or their borrowers, is what is going to influence RBI policy.
Obituary
Shri.N.Venkateswaran passed away in Mumbai on July 13, 2013. He
retired as DCO from DBOD, Bombay and had worked in Calcutta. He
was also a Faculty member of Bankers Training College. He had worked in Thomas Cook ( India
) and Mercury Travels. He was 82 years old at the time of his death. We pray that his soul rests in peace.
- P.P.Ramachandran
My View on "Post Bank of India is Risky"
India Post has, in recent years, taken seriously the idea of infusing professionalism and modern technology into its large banking business (let us accept the fact, though in a restricted way). No one can find fault with them for grabbing the present opportunity to express their wish. Some of the 26 applicants (there could be many who could not make it before the D-day) give a rough idea as to the kind of organisations which are serious about ‘converting’ the ‘money business’ they are already doing, into banking. In some cases, as in the case of India Post, it is not easy to gauge the capacity to do credit business competing with established banks. At least in India, banks have more credibility and now there is a thinking that banking regulation will go into a ‘confusion state’, as some of the applicants would like to get promoted as banks and practically do what they have been doing, to have ‘best of both the worlds’. Every organisation dealing with money need not be a bank. Organizational structure of banks in India needs a re-look in the context of various pending recommendations on financial sector reforms including those made by FSLRC. Bringing new players even before the rules of the game are settled may add to the confusion.
- M.G.Warrier
My View on "How did a former RBI man end up on Yes Bank board?...."
Ideally, appointments beyond certain level should be made with a pre-condition that the incumbent will not accept paid regular jobs in subordinate or associate organisations. Such level could be that of Joint Secretary in central government and Executive Director or position a step or two below that of CEO in large PSUs/statutory bodies and companies. Allow them to grow within the organisation or ‘retire’ with full last drawn salary for life. Just as judiciary has a system of judges not practicing as lawyers in courts up to the level from which they retire, there is need to have some code of conduct for officials at higher levels in government, statutory bodies etc.
- M.G.Warrier
My View on "Contenders for the post of Governor" - A. Chandramouliswaran
There are many reports on who might succeed Dr Subbarao. Some reports are inspired and some are by independent observers giving their views as to who in their opinion are most suitable for the post. In some of the reports, it is mentioned that Government might even be thinking of giving another short extension,say, for an year, to Dr Subba Rao. I remember to have read some reports, at the time of extension of his tenure for a period of 2 years, that Dr Subbarao had made known to his masters in the Government that he would not be interested in any further extension. If his continuance in the post is ruled out on this score, it would be a good idea, as I had mentioned earlier in this Newsletter, to appoint Dr. Raghuram Rajan to the post for some fresh thinking. Economists and bureaucrats groomed in the Indian scenario would find it difficult to escape from the groove to which they are fixed. Anyone who has read Rajan's book "Saving Capitalism from Capitalists" would find ample evidence of his brilliance and we need not, therefore, have any doubt that he would excel in his job. He had differed from Alan Greenspan and had anticipated the adverse fall out of Greenspan's policies on the American economy. As he is young, he should be given a full tenure of 5 years if not a tenure of 6 years as it is in the case of the Chairman, Federal Reserve Board.
I know that I am a small fry and that my views may not count and be heard in any quarter. Nevertheless, one derives some satisfaction in expressing one's views.
- A. Chandramouliswaran
EXcellent info - VITALINFO
Dear Tarambale,
I am a regular reader of your VITALINFO site, which provides me with lots of valuable information and insights into the current banking and financial scenario in the country. You are indeed doing a wonderful job for the benefit of a very large number of ring side viewers (read retired RBI-ites) of the financial arena.
- Prabal Sen
Former Principal Chief General Manager (DAPM, Central Office)
Radkar assumes charge at SPMCIL
P N Radkar has assumed charge of the post of Director ( Technical) in Security Printing & Minting Corporation of India Ltd ( SPMCIL), New Delhi, after having been selected through Public Enterprises Selection Board (PESB). Earlier, he has served as Director (Technical) in Bharatiya Reserve Bank Note Mudran Pvt Ltd (BRBNMPL), Bangalore, a subsidiary of Reserve Bank of India.
FPJ
New banks might queer the pitch for state -owned ones
........“PSBs are already staring at shrinking margins and rising bad loans due to economic downturn and they fear worse when a new breed of private sector banks mushrooms. Small state-run lenders are worried that new bank licences may make their survival difficult, forcing them to fulfil the government’s wish of consolidating with bigger banks.”.............
Banks that depend on bulk deposits to be hit
..........India's largest lender, State Bank of India (SBI), feels that these measures do not warrant any change in the lending rates, since they are designed by RBI to curb speculation in the market and are not seen as indicative of any systemic problem or deeper malaise. In a statement on Tuesday, the bank stated that it expects the position in the market to stabilise shortly..............
IDBI Bank to draw up 5-year business road map
Noting the missed opportunities in lending to rural and small and medium enterprises, M S Raghavan, new chairman and managing director of IDBI Bank, wants the bank to shed the "arithmetic growth" mindset. He wants the bank to scale up activity in retail and rural lending and financial inclusion, building on its corporate business, once the mainstay of the erstwhile development finance institution. In his address to bank employees, Raghavan, who took charge last week, said the bank had to take a leap and work with a "geometric growth" approach. The bank would soon begin work on a five-year plan........
SBI New Pension Scheme: Kerala High Court reserves judgment
....Staff union’s Counsels, however, submitted that Sections 43 and 50 of the SBI Act cannot run parallel. Any pension scheme formed, amended or altered had got to be in terms of the Industrial Disputes Act 1947. The bank, counsels for the union argued, had given appointment orders to new recruits stating that they were governed by various awards of tribunals and settlements modified from time to time...........
How to easily file I-T returns online, free of cost
........Every year July not only brings heavy downpour but also makes every salaried taxpayer rush to file income tax (I-T) returns. Filing returns before 31st July has now become quite easy, especially with the electronic filing; one can file it online without taking any help from accountants or a chartered accountants (CAs)..............
Reaching insurance to rural areas ‘is most viable through bank branches’
.........The penetration in any branch, which has insurance-authorised personnel is less than 5 per cent today. So, it is impossible for me to find an argument against open architecture as the consumer gets more choices. And if insurance companies have to get into semi-urban and rural areas, bank branches are the most viable way. On banks becoming insurance brokers, there needs to be an alignment between the views of the RBI and the IRDA and there will be several rounds of discussions. However, my view is some progress is better than no progress. It can be a prelude to full open architecture. I am comfortable in any way the regulation comes because it will be a game-changer for insurance distribution in this country........
Speeding financial inclusion in India
.........The Reserve Bank of India (RBI) does this as well in a limited way, so the principle is understood here—this model of letting non-banks lead is not quite anathema to RBI. So what holds RBI back from wholeheartedly accepting non-banks in the payments system? It has to be the concern of the risk of fraud and money laundering, especially given the propensity of market players to bend rules, lax supervision of know your customer norms, etc. The recent guidelines on the risk-based approach to new products and payments services issued by the FATF makes the point that AML/CFT safeguards can end up deterring legitimate consumers from the financial system, pushing them into the informal sector that is not subject to regulatory and supervisory oversight...............
Financial inclusion through the lens of CRISIL Inclusix
..............Till now, most of the measures of financial inclusion have focused on an analysis of either the aggregate amount of deposits or loans in a particular region. Whereas, CRISIL Inclusix uses parameters that focus only on the ‘number of people’ whose lives have been touched by various financial services, rather than on the ‘amounts’ deposited or loaned. This helps negate the disproportionate impact of a few high-value figures on the overall picture. CRISIL has developed this index with support from the Reserve Bank of India (RBI) and the Ministry of Finance. The index is an outcome of nearly two years’ effort in developing the methodology and rigorous analysis spanning over 2,00,000 data points across 165 banks. Data for computing the index was provided by RBI............
Reserve Bank of India penalizes The Nasik Merchants' Co-operative Bank Ltd., Nasik, Maharashtra
....Inspection of the bank with reference to its position as on March 31, 2012 revealed that the bank had persistently violated section 6(1) (j) of the banking Regulation Act 1949 (AACS) as it had set up a trust in the name and style of NAMCO Charitable Trust and the trust had seven Trustees who were also Directors of the bank and the purpose of the trust was to run a medical college cum hospital for general public. Thus there was evidence of recurrence of violation of section 6(1) (j) of the Banking Regulation Act 1949 (AACS).....
Is RBI's navigation system for monetary policy faulty?
Medical science says that poor diagnosis leads to poor treatment. If the data based on which an inference is to be made is either wrongly collected or the sample size is poor, then the inference and recommendation made on it will not have the desired effect. In some cases it can also be counter-effective. India’s inflation data and RBI’s policy based on it also runs on the same logic....................
Banks, corporates rush to withdraw from MFs
The Reserve Bank of India’s (RBI) liquidity tightening is already beginning to show its impact on the mutual fund industry. On Tuesday, the mutual fund industry faced redemption orders of as much as Rs 50,000 crore from banks and corporate, said officials in the mutual fund industry.............
RBI's MF lifeline bit early; rate hike possible: IDFC MF
......Everything that RBI is doing so far is to suggest that after implementing the 75,000 crore on the liquidity adjustment facility (LAF) window, they will progressively squeeze liquidity. Possibly some action on CRR could come about if this doesn’t work. But the thought seems to be to engineer higher call rates.......
RBI to help mutual funds facing surge in redemptions
........The temporary, three-day repo borrowing window for mutual funds will make up to Rs 25000 crore available to asset management companies at 10.25 percent interest, according to a notification issued on Wednesday. Further details will be provided at a later date, the Reserve bank of India (RBI) said. "It seems like a pro-active move on part of RBI, which should help settle some nerves. This move would help mutual funds meet their redemptions and this would also help stabilise the yields in the market," said Ganti N. Murthy, head of fixed income at Peerless Fund Management Co. Ltd..........
RBI shock erases best BRIC gain on $8 billion exit
........“The measures shocked the rates market,” analysts including Mumbai-based Samiran Chakraborty wrote in the report. “The liquidity deficit will likely persist, implying elevated overnight rates and funding costs for government bond investors.”
Could the RBI have waited till Ben Bernanke’s testimony?
..............Did the RBI jump the gun with its tightening measure announced on Monday night or could it have waited for Ben Bernanke do its job? In trying to deal with a crashing rupee caused by poor economic efficiency of the United Progressive Alliance (UPA) government led by Dr Manmohan Singh, a trained economist, the Reserve Bank of India (RBI) was forced to squeeze liquidity. But could it have waited and let Ben Bernanke, chairman of US Federal Reserve (Fed) do its work for it......
Read - Moneylife
RBI’s moves worsen market’s macro ecosystem
......Therefore, were CAD to continue to normalise and inflation continue its downward journey, will the RBI move back to a more accommodative stance? The RBI’s measures are meant to address a pressing need triggered by external and largely exogenous factors, but in the process market conviction stands broken, says Nomura............
RBI tightening move aimed at quelling Re speculation: Raghuram Rajan
........"I think the Reserve Bank decided to intervene earlier this week, basically to convey to the market a very strong sense that it did not like the undue volatility in the rupee. "They are trying to send a signal... This is a measure intended to quell speculation about what the level of the rupee would be and instead make the rupee more stable,".......
India's RBI Engineers a Currency Crunch
Sometimes it seems India is trying too hard to emulate neighbor China. China's central bank recently engineered a cash crunch by tightening its monetary stance, and now the Reserve Bank of India has followed by pulling liquidity from its financial sector. Of course, there are big differences. Where the People's Bank of China aimed to rein in surging credit, the RBI wants to prop up the weak rupee by raising domestic interest rates..........
RBI steps to delay banks' NPA recovery process: BofA ML
... This was our view even before the RBI moves had come in. Basically, my thing is market for the whole year is range bound - that’s what we have been reiterating right through the beginning of this year. As we move to the top end of the range, you need earnings and you need the economy to start supporting that sort of level at the index. Our view is over the next .........
Liquidity problem
...........The RBI needs to have a strategy for meeting the financial problems of both the central and state governments. Just raising the levels of its ways and means advances to them could only be a temporary solution.
False defence for the rupee
.......How will the curbing of liquidity help reduce volatility? Simply put, if the cost of money is low in the system, market participants will borrow to buy dollars and gain from rupee depreciation. By increasing the cost of money in the system, RBI has made this bet expensive. But will the idea work?...........
Ordinance to empower Sebi cleared
...........After the ordinance, the government is planning to bring the Sebi Laws (Amendment) Bill before Parliament, incorporating the changes. The regulator has been pressing for an overhaul of the legal framework to enable the catching of companies taking gullible investors into a ride. The ordinance was formulated after detailed discussions with Sebi by the government. This is the second occasion when the government has opted for an ordinance route before commencement of the monsoon session of Parliament on August 12.........
NSCB Ltd: marked improvement during past few years
....The RBI also warned, that in the event NSCB Ltd failed to achieve the 4% CRAR target, it risked having its banking license cancelled. CRAR is a standard metric to measure balance sheet strength of banks. NABARD and RBI had asked state cooperative banks of Bihar, Goa,Haryana,Jammu & Kashmir, Kerala, Maharashtra, Nagaland, Odisha, Punjab, Tamil Nadu, UP and W.Bengal to raise their respective CRAR to at least 4%..........
Karnataka may order CBI probe into Rs 10 crore scam involving nationalized banks
.........Opposition leader H D Kumaraswamy in assembly and C Puttanna (JDS) in legislative council, who raised the issue, said the authority had kept funds of Rs 9.5 crore in a public sector bank and Rs 40 lakh in a private bank but transferred the amount to another public sector bank which offered a better interest rate but now says it has no such deposits. Since the alleged embezzlement is to the tune of more than Rs two crore, a probe into it should be handed over to the CBI as per RBI norms, the JD(S) leaders argued..........
Inorbit Malls seeks industry status
Inorbit Malls managing director and CEO Kishore Bhatija has sought 'industry status' to malls as this would help them raise capital to fund new projects and cope with challenges. Apart from this, any effort towards earmarking land exclusively for malls would help arrest the rise in land prices thereby aiding sustainable growth in the business. "We have been making representations to the Reserve Bank of India and commerce ministry on according the industry status. Also, we're approaching the respective states on the regulatory delays in the project approvals to avoid cost overruns," ..........
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