............This move to appoint Rajan as an OSD in the RBI has come as a surprise to many in the banking circles. It is the first time ever that an RBI Governor-designate will serve as an OSD in the central bank ahead of assuming charge, say RBI watchers. Some RBI observers welcomed the move and said it could help in a smooth transition for Rajan....................
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, August 8, 2013
Journey to Mint Road
........... In his youthful looks, Raghuram Rajan, the RBI governor-designate, is comparable to C D Deshmukh, who was appointed the RBI governor in 1943 (under whom I had worked). Rajan will be the first engineer (holding a BTech degree) ever to be the Governor.............
Sakha Awards
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| Bhim R Garg, Ex-AGM, RBI, Chandigarh |
Sakha Awards 2013 were bestowed by Padmashree singer Shanti Hiranand to distinguished personalities for their respective contributions in various fields. The Function was organized jointly by The Socio-Cultural Societies PECOBA and Sakha in collaboration with Epicentre, Gurgaon. Those honoured with Sakha Awards included film music researcher Bhim Raj Garg of Chandigarh (whose encyclopedia of Punjabi Film songs is under print), Durga Shakti Nagpal (IAS), Dr DR Saini, Saraswati Music College, Delhi (originally established in 1924 in Lahore where singer Mohd Rafi and music director OP Nayyar were the students), music composers Mohinder Sarin and Chhote Lal, Satpal Narang (radio and TV programs producer), lead singer Simrat Chhabra and Mamta Vani.
- Madan Gauria, EXRBITES Group
No substitute for Mahatma image on currency notes: RBI Committee
Vital initiative
Dear Mangesh,
I am Dr. S. L. Shetty of the erstwhile DEAP. I have liked your initiative on Vital information on RBI-related issues. I have one suggestion which is that the RBI Newsletter and RBI Monetary and Credit Review do provide some information of general use. Please pick up some of them, if you think they are of general interest.
Many thanks and regards,
- S. L. Shetty
Subbarao faced hostile political environment: AK Bhattacharya
......... Reddy faced a different set of challenges, arising out of a strengthening rupee, growing economy and rising foreign exchange reserves. And he handled those challenges very competently. He also had to deal with a more favourable political environment. In contrast, Subbarao's challenges were more difficult as a result of the economic downturn, falling reserves and a depreciating rupee. You could say that Subbarao made a valiant attempt to minimise the damage, but he also faced a much more hostile political environment, I think..............
A silver lining - A.Seshan
............Now that a non-IAS gentleman is the governor-designate, the IAS lobby will start working to claim its share in the DG's posts. Neither the Bhagvad Gita nor the Bible stipulates that an IAS babu should have a finger in every pie. The RBI unions at all levels should be alert and do the needful sufficiently in advance before the interviews for the appointment of a DG. The list of interviewees should contain only the names of executive directors of the RBI.
Let autonomy of the RBI be guarded - A.Chandramouliswaran
I am happy that Dr Raghuram Rajan whom I desired to see as the Governor has been appointed to take over from Dr Subbarao when the latter's tenure ends on September 4, 2013. His academic achievements are incredible with a Gold medal both in IIT and IIM, Ahmedabad thus matching those of Dr Subba Rao. Dr Rajan has also got his PhD. from MIT, USA. It is said that that he had secured at a very young age tenure post of Professor of Finance in the Chicago University. He can be expected to be innovative and bold in regard to the financial sector in India and not be conditioned by the past thinking. It is a pity that the recommendations of the Committee on Financial sector reforms headed by him were completely ignored. One can expect that he would take up some of those recommendations. One also hopes that RBI sheds, under his initiative, some of the less important functions in regard to supervision of banks so that it can concentrate on more important matters. One also expects that he would totally disapprove of issue of directives by the Banking Division directly to the banks. He should send a clear signal to banks that it is to the RBI that they would have to look to for guidance. Shri Yeshwant Sinha, while wishing Dr.Raghuram Rajan all the best as the Governor, has expressed a hope that the latter would be willing to jealously guard the autonomy of the RBI. The support to the Governor from the leading opposition party should be helpful to him in preserving the autonomy of the Bank. We wish him all the best in his new assignment.
- A.Chandramouliswaran
RBI’s independence
This refers to the report “Rajan tasked to fix faultlines” (Business Line, August 07). RBI governors in the past have not been able to reduce the influence of the Finance Ministry over the role of the central bank. The independence of the RBI governor has been limited to monetary policy changes. The fact is that the Finance Minister is intelligent to project its disappointment over such changes as if it is helpless, and the media is quick to point out the overriding role of the central bank. To that extent, the media is also responsible for misleading readers about the independence of the central bank. The growth-inflation challenges have kept central bank governors busy in the past and the new governor is no exception to this.
- K.V.Rao, Bangalore (HBL)
For RBI Guv, it’s Kissa Kursi Ka
Kudos
to the new RBI Governor, Raghuram Rajan — one of the youngest. At his
age, most government officers would be joint secretaries. But I am
amused and curious to know how and why the babu lobby “lost” the race.
Of the 23 governors, 14 were babus. The reason why the babu lobby may
not have been so interested is the state of the economy and the fall in
the rupee. None of them are possibly capable, and even if so, not
willing to sit in the hot seat. The government may want to take some
undesirable measures that the RBI may not want. So, let someone else
step in and face the music. If he fails, they will smirk. If he does
well, then the song will be, “we could have also done so”. Witness how
non-babu Sebi chairmen were hardly allowed to function. It will not be
surprising if they make life miserable for the new incumbent. Some say
that he is an IMF plant. So, Mr Rajan, whatever you are, best of luck
and watch out for the plantain skins placed by the ministry of finance.
- T R RAMASWAMI , Mumbai (ET)
- T R RAMASWAMI , Mumbai (ET)
Islamic banking proposal may get a push under Rajan
New Delhi: With appointment of government's Chief Economic Adviser Raghuram Rajan as the next RBI Governor, Union Minority Affairs Minister K Rahman Khan Tuesday hoped that his ministry's plan to establish Islamic banking in India will get a boost. Khan said Rajan was positive when he met him recently to push the proposal..............
Govt and RBI: Good cop, bad cop
...........If you repeatedly say something at variance with the truth, that something sometimes becomes the truth itself. This “principle” — if we can call it that — as everybody knows, has been used repeatedly in the political sphere; not only in India, but globally for devious ends (Joseph Goebbels comes to one’s mind immediately). That principle now seems to be playing itself out in the economic sphere in India. The reference is to the so-called disconnect between the Government of India and the Reserve Bank of India as regards their goals and strategies. In the economic sphere, though, the supposed “disconnect” should actually become the truth for the overall common good!................
Pragmatist in RBI
.............The government has a major role in getting the economy back on track, but expects the RBI to do the same. While the finance minister may not find a "yes man" in Rajan, the new RBI Governor will find many obstructions and road blocks to implement his "pragmatic" views.
Is Raghuram Rajan UPA's answer to all economic issues created by itself?
..........It may be too much to expect Rajan, who also serves as Eric J. Gleacher Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago, to wield a magic wand to mitigate the crisis, considering that much of the current problems have their roots in a wasteful second term of the UPA government, riddled by corruption, policy inaction and neglect of the industry. But many hail him as the right choice in the present circumstances. C Rangarajan, Chairman of the Prime Minister's Economic Advisory Council, said Rajan was an 'excellent choice', since he was now familiar with the Indian economy, and would handle all issues in a "mature" manner..............
Both finmin and RBI may be wary of Raghuram Rajan
..........On the downside, he has never made policy. Unlike D Subbarao, YV Reddy and Bimal Jalan – his three immediate predecessors at RBI – Rajan has not had the experience of taking large macroeconomic policy decisions before being crowned king of Mint Street. Administering macroeconomic policy, with its huge overall impact, is an art in itself. This means he won’t have an old-boy network of IAS officers to lean on. If anything, they may already be looking at him as an adversary, having usurped their job. Heading the RBI comes with another challenge. It is an institution with vast and deep experience and often has a mind of its own. Its arch adversaries in the finance ministry accuse the institution – in private, of course – of stubbornness and of fighting turf wars in the guise of public interest. I don’t think these are entirely fair accusations to be made of the RBI, but the perception is important..............
Back to encounter with ‘starved lions’
........North Block and Subbarao had not seen eye to eye for quite a long time. Subbarao refused to toe the finance ministry line that economic growth should be the RBI’s top priority. Instead, he argued, that inflation remained his primary concern, prompting him to delay rate cuts and soak up liquidity from the financial markets to check the wobble in the rupee. If Rajan and the finance ministry see eye to eye, the government may not need to accept the recommendation of the Justice B.N. Srikrishna report on financial sector legislative reforms which had said that a monetary policy committee ought to be formed to take policy decisions as in the West. The recommendation seeks to dump the current practice where the governor — and the governor alone — takes the final call.............
The promise of change
...........What is needed is a combination of monetary loosening and fiscal tightening, in the form of redirecting government expenditure towards investment in railways, roads and other infrastructure, to revive the stalling growth engine. This requires coordinated action from the RBI and the Finance Ministry and a change from the virtual breakdown in communication between Mint Street and North Block over the past couple of years. The Government couldn’t have chosen anyone better than Rajan as RBI Governor; but its responsibility does not stop just there.
Raghuram Rajan on central banking—in his own words
...........Well, with a plunging GDP, the plummeting rupee, a yawning current account deficit, deteriorating asset quality in banks and stubbornly high retail inflation, Raghuram Rajan couldn’t have wished for a bigger crisis. We wish him the best of luck in coming out of it.
Rajan has tough job in hand, warn IIM-A faculty
.......An IIM-A alumnus, Barua has been taught by former RBI governor C Rangarajan at the campus. In turn, Barua went on to teach Rajan during the latter's stint at IIM-A campus as part of the 1985-87 batch. "While Prof. Rangarajan taught me, I got to teach Raghuram Rajan years later. I remember him as an outstanding student who could combine rigorous analysis with ability to interpret the results of such analysis for effective implementation. He is an excellent choice as RBI governor," says Barua...............
The promise of change
................ What is needed is a combination of monetary loosening and fiscal tightening, in the form of redirecting government expenditure towards investment in railways, roads and other infrastructure, to revive the stalling growth engine. This requires coordinated action from the RBI and the Finance Ministry and a change from the virtual breakdown in communication between Mint Street and North Block over the past couple of years. The Government couldn’t have chosen anyone better than Rajan as RBI Governor; but its responsibility does not stop just there.
Raghuram Rajan as RBI chief may have some surprises up his sleeve
.....Rajan comes to the RBI governor post with a lot of expectations thrust on him by both the government and the markets. The government will want him to wave a magic wand to bring down deficits, strengthen INR and help the economy grow. The markets will want from him a calm, well thought out approach to handling both the economy and the government. A tough task by any means, as will be vouched by both Dr YV Reddy and Dr Subbarao, the former RBI Governors............
New Indian Central Banker Needs 'Shock and Awe Tactics'
.... “Rajan will face a baptism of fire as he confronts the mounting difficulties facing the Indian economy,” IHS chief Asia economist Rajiv Biswas wrote in a note published today. “However he does still have weapons in his toolkit, although he needs to deploy them rapidly to avert a deepening rupee crisis.” Biswas argues Rajan should embrace “shock and awe tactics” to stabilize the currency..............
Raghuram Rajan is India’s new central banker. God help him
..........By law, India’s central bank doesn’t have much political independence, as Rajan serves at the pleasure of the government and can be sacked at any time. That could deter him from making tough moves against inflation that could have unpopular implications for growth. But Subramanian thinks he’ll have a great deal of flexibility in practice, even if the opposition Bharatiya Janata Party comes to power again. “In practice over time a central bank governor has wielded a measure of independence because people think it’s a very important job and previous incumbents have been reasonably good,” he explains...........
Rajan’s Crown of Thorns
......That’s
a long list of woes. But it is a direct consequence of ignoring
inflation and the RBI’s inability to make government read the writing on
the wall. No wonder the present PM once described his stint as RBI
governor the “loneliest job in India”. Possibly. But as long as
Rajan and all future RBI governors remember that their duty is to the
country, not to a particular government, they will not be alone. They
will have the silent support of a billion-plus people.
Governor's challenge
............The biggest challenge for Rajan — an economist trained in modern finance, who has worked on policy problems of the Indian financial sector — will be macroeconomic management. Monetary policy and its trade-offs will continue to present intractable challenges in the next three years. There is, as Rajan says, no magic wand to spur growth, push inflation and the CAD down, shore up investment or strengthen the rupee. There will be difficult choices and, undoubtedly, Rajan will face political pressures. On the one hand, .............
Five things Raghuram Rajan should not do as RBI Governor
.......... I am tempted to reproduce a text message that has been doing rounds this morning: “Raghuram Rajan’s appointment will usher in Ram Rajya at RBI.”
He must solve a tough 'trilemma'
........Mr Subbarao withstood mounting pressure from the government and industry bodies to cut interest rates. This sometimes evoked unusually firm comments from the government's fiscal managers, who hit out at the central bank's hawkish policy stance perhaps mirroring the growing difference between India's two topmost financial administrators on the optimal way to reverse a sharp economic slowdown. Mr Rajan has a tough balancing act to implement: arrest the rupee's slide, cool inflation and spur growth. Economic theory describes this as the central banks' impossible trilemma. Let's examine each of these.........
Correcting the fault lines
.....The next question is more speculative in nature on how he sees the economy going and the kind of measures that would be taken. On the face of it, so far, the CEA has been in consonance with the moves made by RBI and hence there has never been any overt disagreement on the approach taken by RBI. Therefore, one may expect continuity in approach in general. So far, RBI has a priority list of currency, inflation and growth in the pecking order. Will this change?...........
The Timing Was Right, This Time
.....all of whom spoke on condition of anonymity, said that Rajan’s appointment was all but finalised last week. Last Friday, the finance minister met the prime minister to discuss his selection and soon after discussions with a few top advisors such as C Rangarajan and Planning Commission Deputy Chairman Montek Singh Ahluwalia, the appointment was sealed on Monday. So much so that it just took a few hours for the file forwarded by the finance ministry to be cleared by the PMO. Rajan was sounded about it last week itself and he traveled to Mumbai to meet Subbarao at the weekend, said one persons familiar with the matter. The appointment has, rather unusually, been announced one month in advance, almost reminiscent of Yashwant Sinha’s tenure as finance minister when an extension for Bimal Jalan was granted almost three months before the expiry of his term by the government to stymie attempts at lobbying for the job by some influential bureaucrats............. Can the new RBI chief survive India's 'poisoned chalice'?
....The former chief economist at the International Monetary Fund inherits an economy struggling with the slowest growth in a decade, rising inflation, a hefty deficit and a battered down currency, together with long-standing issues like India's much needed deregulation of its industry. "Rajan can't exactly be said to be facing the easiest of tasks. The words poisoned and chalice spring to mind," said Robert Prior-Wandesforde, head of Southeast Asia and India economics at Credit Suisse bank. "Rajan was wise to point out that he doesn't have a magic wand that will fix the economy's considerable woes," added Prior-Wandesforde.............
Options for India’s New Central Bank Chief
....... “The RBI needs to be more flexible on intervention and use its reserves when the situation calls for it,” says Ashima Goyal, who is a member of an external panel that advises the RBI on monetary policy.
Govt panel reviews potential risks to financial system: RBI
A government-appointed panel on financial stability, including incoming Reserve Bank of India (RBI) chief Raghuram Rajan, assessed risks to the financial system at a meeting on Wednesday, the central bank said, without elaborating on any possible measures. Financial markets have been awaiting word from policymakers on steps to boost inflows and prop up the battered rupee, which touched a record low of 61.80 to the dollar on Tuesday, and stayed within striking distance of that in Wednesday's trade.........
Super regulator panel raises concern on bank credit quality
The Finance Stability and Development Council (FSDC), or the super regulator as it is popularly known in the market parlance, expressed concern on the deteriorating credit quality of public sector banks while deliberating corrective measures to fix the problem..........
RBI needs to come out clean on NPAs
........The RBI Panel under its executive director, B Mahapatra, in its report, observes that restructuring amounts to an ‘event of impairment’ irrespective of whether it is asset classification or not, undergoes a downgrade. It has rightly recommended that all loans that are subjected to restructuring should be classified as NPAs, since they are already Sub-standard. This is particularly true when............
.........If NPAs are not curbed effectively, it will not be long before India heads the Greek route. The Ministry of Finance has to necessarily leave the micromanagement of the banking sector to the RBI. This oversight task is best assigned to Dr YV Reddy, the tough acting former RBI Governor!
Savings Banks can Help Serve the Bottom of Pyramid: Nabard Chief
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Nabard chairman Prakash Bakshi calls for the creation of exclusive “savings banks” to cater to the deposit needs of the bottom of the pyramid that could bring millions of unbanked in the country into the formal financial world. Edited excepts:..............
Montek pegs economic growth at 5.5% this fiscal in line with RBI
.........With no signs of industrial turnaround visible, Planning Commission Deputy Chairman Montek Singh Ahluwalia today projected India's economy to grow by 5.5% for 2013-14, against the Budget assumption of 6.4%. India's economy grew by a decade low rate of 5% in 2012-13..................
RBI wants PF money in rate swaps
.........The working group headed by RBI Executive director R Gandhi had advocated participation of financially sound entities in IRS market so that it may enhance the much-needed liquidity in the market. It had also recommended several measures to improve the interest rate derivatives market. The measures included Electronic swap execution facility (electronic trading platform) for the IRS market, standardization of IRS contracts etc............
Housing finance firms will now have more funds to lend
.........By lowering the risk weights, NHB is signalling that assets (loans) in the housing sector are in good health and the risk perception on the sector has come down. Risk weights for home loans extended by HFCs are now in alignment with those for commercial banks, R.V. Verma, Chairman and Managing Director, NHB, told Business Line. To give a boost to the economy, Reserve Bank of India had in June announced two steps to increase the flow of bank credit to builders/developers and individual buyers. It created a special category-commercial real estate-residential housing (CRE-RH) that attracted lower risk weight and lower standard asset provisioning...........
Food security and empty coffers - Charan Singh
...............The Food Security Bill, 2013 (FSB) has the approval of the Central government and will soon be discussed in Parliament. If press reports are to be believed, irrespective of the fate of the Bill in Parliament, FSB will be implemented in the States in which the Congress is in power. This, indeed, is a unique stance, for in a vibrant democracy such as India, batons change regularly between parties and there are no permanent jagirs.....
Consumers gaining from use of credit scores: Cibil’s Chandorkar
.........“In India, the infrastructure is still in the nascent stages of evolving. But many banks have already started using credit scores. We’ve already heard about instances where consumers have gained from speedier processing and faster approvals, among a host of other non-financial benefits,” ...............
Soon, those paying up in time could get cheaper repeat loan
Here's good news for those who pay their loan instalments on time: the banking industry is mulling cheaper repeat loans for such borrowers, a Credit Information Bureau (India) Limited (CIBIL) official said Wednesday. "With the Reserve Bank of India in its report mentioning the possible introduction of risk-based pricing, its implementation in our country is not going to be far away," CIBIL senior vice president Harshala Chandorkar told reporters here............
Macroeconomic shocks: A Window of Opportunity
While the current situation and the RBI's reaction of raising rates has impacted the bond market all along the yield curve and dampened investor sentiment, a look at the past reveals that there is a big window of opportunity that can be tapped. Staying invested and increasing allocation in duration products at this juncture will likely result in gains once the situation stabilizes.............
NABARD ready to fund ICT solutions
The National Bank for Agriculture and Rural Development (NABARD) is willing to take up with the Reserve Bank of India (RBI) the issue of relaxing the time frame set for the 1,603 Primary Cooperative Banks to move over to the new payment regime, and also fund the development of an Information and Communication Technology (ICT) solution that could address their concerns. Kerala chief regional manager of NABARD R. Amalorpavanathan told....................
RBI imposes Rs 5.6 lakh fine on SBI for violation of norms
......."The Reserve Bank of India has imposed a penalty of Rs 5,62,555 on July 12, 2013 on SBI for violation of the terms of agreement with RBI for opening and maintaining currency chests," the central bank said in a statement...............
Why Reliance Industries, Tata Capital are buying rupee debt
Blue-chip companies have begun buying their own debt, taking advantage of steep price drops since the Reserve Bank of India's cash-draining steps last month and offering a glimpse of hope to battered credit markets as more firms look to follow suit...........
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