In Defence of D. Subbarao

Damned if you do, damned if you don't. That's the lesson RBI Governor Duvvuri Subbarao will take away when his five-year tenure comes to an end in September this year...........

........... In recent times, inflation has reached double digits only in the early and mid 1990s. Since then it has remained a single-digit figure. One must give credit to Subbarao for bringing down inflation to 4.7 per cent in May this year. Also, Subbarao assumed office a month before the Lehman crisis broke. The world has seen worse since then. The crisis is still lingering.

Read - Business Today

Is Subbarao really one of the worst RBI Governors?

..........So, calling Subbarao one of the worst RBI Governors may not be fair. After all, he was utilising the limited monetary policy tools in his kitty. Measures to bring about fiscal correction and to resolve supply-side issues are to be taken by the government...........

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No to another Guv from MoF - Sitendra Kumar

My View on  "Subbarao's tenure 'worst era of performance by RBI...":

According to Arvind Panagariya, professor of economics at Columbia University, performance of D Subbarao has been worst in RBI history. Allowing unlimited forex borrowing, not building enough forex reserves when Re appreciated in 2009-10, increasing rates and not putting enough emphasis on growth are some of his failures. How are we going to pay for this? 

MORAL OF THIS ARTICLE 

Never buy the horses from the same place. Don't bring another GUV from Min of Finance. The story will replicate like uncontrollable chain reaction. 

- Sitendra Kumar

Subbarao's tenure - More transparency in Monetary Policy - M.G.Warrier

My View on "Subbarao's tenure 'worst era of performance by RBI...":

Let me pick up two observations made by the esteemed economist:

"In a way, this new policy started with the current RBI Governor. I am sorry to say, but the timing connects to his tenure. His public pronouncements suggest to me that he really stands behind this policy," 

My view:

Definitely, there has been a shift for the better. More transparency and an effort to force fiscal policy support for Monetary Policy initiatives moving out from an eagerness to comply with signals from North Block to mention two things that separated Dr Subbarao’s tenure so far from the earlier Governors.

Panagaria said,

"We finally provoked him... we said we will question you and you have to answer" instead of just pronouncing on ideas and positions. "Ten years ago. nobody questioned Amartya Sen. Not today. The whole debate has been unleashed," he said.

My view:

An open debate on all issues covered in the latest book ‘An Uncertain Glory’ co-authored by Amartya Sen will do good to India, if the purpose is not to prove X or Y wrong, but to enable Planning Commission and those in charge of development efforts in New Delhi understand the ground level position better and move forward. 

- M.G.Warrier

Subbarao's tenure - A journey of challenges - DR. T.V.GOPALAKRISHNAN

(My View on "Subbarao's tenure 'worst era of performance by RBI...":)

The present RBI Governor's period is some thing unique in the history of RBI. He took charge when there was global financial turmoil and he had to ensure that Indian Financial system and the economy escaped unhurt because of the crisis. Subsequently, he had the misfortune of fighting both inflation and growth without the support of the Govt and the fiscal policy measures. Not only he failed to get the support but also had to face the displeasure of the Govt in not yielding to its pressures to dance to its tunes. He had to face the humiliation when the Govt set up the FSDC and made the RBI as any other institution like SEBI and IRDA without having any supremacy which as a Central bank of the Country it is entitled to. Adding insult to injury, the Government started giving directions to banks directly bypassing RBI. This gave the banks an upper hand and they gave the impression that they cared for more the Govt than the RBI. The SBI the biggest commercial bank instead of giving full support to RBI to ensure success of its monetary policies opposed RBI's every move to curry favour from the Government.The banking system failed both RBI and the Govt leading to such a pathetic condition of the economy.The banks tried to undercut both and landed themselves in liquidity crisis bringing down deposits, adding to NPAs and creating unprecedented mismatch between assets and liabilities. SBI chief has been against RBI policies and has been some sort of indirect support to other banks in challenging RBI measures. The result is the Govt suffers, the economy suffers, the banking system suffers and RBI has to tackle everything together. But the Governor will prove to be right in his thinking and actions if the Govt and the banks dare to introspect as to what they have done to RBI during the last three years in particular and realise their follies. Governor can keep his head high for his boldness and the challenges he faced to maintain the Reserve Bank's importance and supremacy without yielding to the pressures of the Govt and without having the normal cooperation and support of the banking system. Subbarao's era will have some special place in RBI and Indian Economy's history for the challenges he faced both from the Govt and the banks. The economists will reailse the important role played by RBI during the most inactive performance of the Govt when they introspect in leisure. 

- DR. T.V.GOPALAKRISHNAN

Our Indian Adventure – time to explore

Two weeks into our internship and our group have firmly got into the swing of working in India. The big economic news in India at the moment is the devaluation of the rupee and the RBI’s attempts to rectify this matter, which has made our perspective from within the bank particularly interesting, especially for Alex and Cameron who are focusing on Foreign Exchange for their project. No two days have been the same at the RBI, whilst working on our projects we frequently talk to members of staff about the Indian Economy, its future prospects and the cultural shift that is taking place within Indian society. Each pair has a mentor for their project, with mentors coming from a variety backgrounds ranging from Mr Mugunthan, a Harvard graduate, to Mr Murthi who spearheads projects introducing banking to India’s rural areas. Our projects cover a variety of topics; Phil and Jess are focusing on Microfinance and its effects on India’s banking sector, Jennifer and I are researching Poverty Alleviation and Harriet and Ben are studying the RBI’s schemes to improve Financial Inclusion......................

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(A team of students from Newcastle University are currently doing internship at the College of Agricultural Banking, Pune)

Setting up of RBI office opposed

Imphal, July 25 2013: Muslim Council Manipur (MCM) has opposed the Government's move to set up a branch office of Reserve Bank of India (RBI) at Mantripukhri. The Council has urged the Government to look for another locality for the said purpose in view of the presence of mosques and temples at the area where the Government is planning to acquire land..............

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Police break up protest by women in Imphal

The police fired teargas canisters to break up a protest by women on Wednesday against a government plan to acquire land for building a Reserve Bank of India complex at Mantri Pukhri here. The women, who had been protesting since Monday, torched a police jeep.................

Read - The Hindu

RBI directs rural banks to become member of credit info companies

"..............it has come to our notice that a large number of RRBs are not members of any Credit Information Company as required under the Act. Therefore, immediate steps may be taken by RRBs to become members of at least any one CIC," RBI said in a notification. Credit Information Companies (Regulation) Act, 2005 became operationalised in 2006. As per the Act, every credit institution has to become member of at least one credit information company within a period of three months from commencement of the Act or any extended time allowed by the Reserve Bank on application......

Read - ET

Consumer protection – agenda for inclusive growth - Dr.Deepali Pant Joshi

Address by Dr Deepali Pant Joshi, Executive Director of the Reserve Bank of India, at the National Seminar on “Consumer protection – agenda for inclusive growth”, New Delhi, 24 July 2013

........Consumer empowerment is a central goal. Education of consumers through information disclosure or through consumer literacy is utilized as a means to even out asymmetries of bargaining power between consumers and financial services providers. In the area of consumer credit and financial literacy, investment empowerment relies on the consumers’ ability to understand complex financial products and their knowledge and experience of using such products and services..............

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A Poverty Lens on Financial Inclusion – Report

The report looks at the poverty profile of microfinance clients in the state of Karnataka and finds that while microfinance providers in Karnataka are reaching out to the poor, there remains ample room to improve outreach to the poor and this improvement can come about if the practitioners, regulator and other stakeholder create an enabling environment for outreach to the poor. The report also discusses the factors that can influence outreach to the poor including regulations promulgated by the government and the RBI..........

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The poverty question

.........The fact is this that India has a reservoir of economists who are experts at speaking English. I do not know what useful purpose is being served in discussing Bhagwati versus Sen. All the economists are respectable, well educated but have no idea of how to remove poverty................

Read | Business Standard

My View on "Indian Microfinance reputation still hurting from the Andhra Pradesh crisis"

The article is at best a reflection of what has happened. First of all Andhra Pradesh is not part of Central India but of South India. Be that apart, the author started with 82% high indebtedness of farming sector but failed to relate the micro finance to the farm sector because microfinance did not reach the farm sector in reducing or enhancing that debt burden. Interest burden reaching usurious levels in the name of easy access axed affordability on one hand and extortion practices on the other. In fact, Banks like ICICI, Citi etc also resorted to worse extortionary practices prior to the AP stepping into the shoes of regulator. What one should realise is that in the case of AP the player has become a regulator creating conflicting interest up front. This was preserved by the RBI's acceptance of Malegam Committee recommendations and accentuated by categorising MFI lendings under the priority sector category. The MFIs are either NBFCs or Companies registered under the Companies Act and therefore they are actually corporate borrowers. Therefore, whatever due diligence is to be done by Banks in lending to the corporates should have been done by them. Instead in their anxiety to achieve priority sector lending through arm chair lending with this window of micro finance opportunity available they went in for competitive populistic lending. This has set the micro finance sector to go for a toss. 

- Yerram Raju

India studying all options to fund current account gap: Rajan

........Rajan called for a clear distinction between the need to steady the rupee and the way forward for the Reserve Bank of India's monetary policy, in an interview to television channel CNBC-TV18....................

Read | Business Standard

Circular reasoning

I was having tea with Reserve Bank of India Governor D Subbarao a couple of weeks ago and one of the points, among many, he made was that it was getting treacherous for him to comment even on what he had for breakfast. The media and know-it-all analysts, like me, dissect even such innocent comments to fathom his thoughts on (these days) the rupee.............

Read | Business Standard

The ball is in RBI’s court - S.S.Tarapore

........In the ensuing few months, political economy constraints would prevent the Government from taking strong rectification measures. Hence, the Government should give the RBI a free hand to crush inflation with unequivocal monetary tightening. The Government must recognise that when there are political economy constraints, it is only monetary policy which can hold up the rear.

Read - HBL

Constrained by the impossible trinity

.......As to independent monetary policy, the recent focus on stabilizing the currency and more generally on mitigating external vulnerability has diluted the debate on using interest rates (and liquidity) to primarily address the growth-inflation trade-off. This shift, seemingly endorses the view that it might be necessary to sacrifice some more growth (over what might be required to control inflationary expectations) in the interest of stabilizing the rupee..........

Read - Mint

If something attached to the past is not very savory then don't be surprised: Takru

Banking aspirants with an inglorious past are unlikely to get a licence from the Reserve Bank of India for a foray into the sector. Past business record will be factored in for banking aspirants as scrutiny will be strict, financial services secretary Rajiv Takru told Business Standard. Internal scrutiny of RBI is underway and the next phase of external scrutiny is expected to begin soon. The statement from Takru comes at a time when the scrutiny is underway and this can give a major jolt to some of the aspirants who have applied for a licence...........

Read | Business Standard

Pratip Chaudhuri ko gussa kyoon aata hai?

Incidentally, both Subbarao and Chaudhuri are set to leave their respective offices in September

.......Chaudhuri’s latest outburst against RBI also stems from his concerns about liquidity. He has said RBI should have hiked the interest rates to raise money market rates instead of tightening liquidity. By tightening liquidity, RBI has been non-transparent in its approach. Globally, central banks only raise interest rates if they want to jack up money market rates. He said this as SBI chairman and not on behalf of the banker’s lobby—the Indian Banks’ Association—of which he is the honorary secretary. RBI has many tools it can use to raise rates and the kind of transparency that Chaudhuri expects may not necessarily be a virtue for any central bank. I wonder why Chaudhuri gets so upset with RBI measures and why he is so openly critical of them. Should a commercial banker be so open about criticizing RBI? What will happen if all other bankers take a leaf out of Chauduri’s book and start screaming from the rooftops?.............

Read - Mint

Rajan defends apex bank’s move to manage Re volatility

......Significantly, the chief economic adviser's comments come a day after State Bank of India chairman Pratip Chaudhuri had said the RBI should not choke liquidity but consider more transparent measures such as hiking interest rates in order to stabilise the domestic currency.............

Read - IE

Banks are hoping the RBI measures are temporary: Rajiv Takru

......One thing is clear. Banks will be able to lend only after taking into account the cost of finance. Every bank has to follow its own path. Some banks are lending banks, some are borrowing banks. That depends on their balance sheet position. Obviously this measure of RBI will tighten liquidity and to that extent make it a little more constrictive as far as the functioning of the financial institutions is concerned. It reduces the scope for banks to exercise too much discretion. The general impression I am getting from public sector banks, and we are not leaning on them at all in this matter... almost everybody thinks this is a temporary measure.............

Read - Mint

Monetary Problem, Real Solutions

The Reserve Bank of India (RBI) is trying to prop up a battered rupee by curtailing the funds that banks can lend one another. The chairman of India’s largest bank, the State Bank of India, Pratip Chaudhuri, feels this is a roundabout way to choke liquidity: the RBI, he says, could simply have hiked the repo rate, at which the central bank lends to banks. He is correct................

Read - ET

RBI’s solution for every problem

...................In order to be successful in managing current account by attracting foreign inflows when the industrial sector is far from buoyant and capital markets are faltering, it requires high degree of dexterity in managing growth and risk perception of investors. Will RBI’s recent move coupled with the announcements to be made in the monetary policy strengthen foreign investors’ confidence in the economy is a key question.........

Read - Mint

Manmohan Singh's 1991 Rupee brahma astra may boomerang to a junk rating

.....Manmohan Singh as a finance minister in the PV Narasimha Rao Cabinet depreciated the rupee by a quarter and set the stage for an economic recovery after a balance of payments crisis in 1991. But as the head of the state, he could hardly afford that now. Government policies and finances are caught in such a web that his brahma astra of 1991 may probably boomerang this time with a sovereign downgrade to junk...............

Read - ET

Small, medium diamantaires hope to get bank finance soon

......A state-level banking committee meeting was organised in the city in the presence of the leaders of diamond industry and the office-bearers of the Surat Diamond Association (SDA) to discuss the ways and means to increase credit flow in the small and medium enterprise (SME) sector in the diamond city on Wednesday...............

Read - TOI

Inmacs’ banking drive shows a rural tint

Mumbai: Inmacs Management Services, the little-known banking aspirant, seems to be laying its groundwork for banking pretty seriously. In its application to the Reserve Bank of India (RBI) earlier this month, the consultancy firm has proposed to open half of the proposed Arihant Bank’s branches in rural areas, a senior company official told dna. A surprise entry, this Gurgaon-based company, headed by chartered account Vinod Jain, is up against the likes of the Tatas, the Birlas and the Ambanis, and there are 26 aspirants jostling for this once-a-decade lottery............

Read - DNA

An enhanced banking experience for techies

A branch-less and staff-less technology-based Self Service Centre has come up at the Technopark here to provide techies round-the-clock access to banking without stepping out of the premises. Set up by Federal Bank, the modern hi-tech centre has been set up on a 200 sq ft area at the entry lobby of the Thejaswini building at the Technopark. With the new initiative, the techies can access all technology-enabled services of the bank without the physical presence of any staff. The centre, the first of its kind in the State, has become an instant hit, with the bank receiving 650 new accounts on the first day itself,..........

Read - The Hindu

Treading up Himalayas to avail of bank facility

People in Himachal Pradesh still have to trudge around five km in rugged, cold and inhospitable Himalayan terrain before they can avail of banking facility. This fact came to light in a charter of demands submitted by Mandi MP Pratibha Singh to union Minister of State for Finance Namo Narain Meena in New Delhi............

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Check your ‘26AS’ before filing tax returns this year!

Many taxpayers are receiving income tax notices asking them to pay tax in spite of the same being already paid, so please check your 26AS now and set your tax figures right before you file your tax returns..................

Read - DNA

RBI's gold imports restrictions: Back to 'Once upon a time in Mumbai

..............Within a month of introducing curbs, RBI withdrew the circular banning consignment imports for domestic use and 100% cash margin.These measures were considered too harsh which led to a sharp drop in imports.Gold imports fell by 80% of their May imports after imposition of these measures. After virtually crippling the industry, government has removed these norms but introduced new ones.Though not as bad as the earlier one, new norms will create a new set of problem both for the industry and government. ............

Read | Business Standard

Click & Save: Using Net Banking can Help You Avoid Many Fees

............When you can make payments within minutes through the net banking channel; spending time, effort and additional money to get a DD issued just does not make sense. Similarly, online fund transfer can also help you save on cheque leaves. Most banks levy a charge for issuing additional cheque books.................

Read - ET