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Friday, August 16, 2013
Raghuram Rajan can lift India's corporate torpor
Will relationships change with 'change of guard'?
- M G Warrier, Mumbai
What Rajan should do
.......... A right person at the right slot and at the most appropriate time. Hopefully, he should be able to guide the economy through these difficult times................
Bank Wage Settlement: IBA and UFBU agree on 401 Slab DA merger
..........As per banking industry sources the SBI is always giving 10% additional benefit to their employees than other PSU banks and RBI employees getting 20% additional benefits by way of facilities. But after 6th pay commission the salary of SBI and RBI employees are also less than central govt employees. It is learnt that in 10th wage revision all sector of industry is in mood of getting salary at par to central govt employees which is also indicated in this talk. Banking Industry experts are hopeful of bank wage revision before 2014 election with minimum 35% total increase...........
RBI out of sync with times
.......What should the role of the RBI be in the new Indian economy? What should its relationship with Government be? What should the economic objective of the RBI be? Should it have an independent objective at all – or should it be just the “financing” arm of Government as in the good, old days of deficit financing in the 1950s, 1960s, 1970s and 1980s? Should the objective be laid down by Government? If so, should the RBI be given operational autonomy to attain that objective? How shall the RBI be held accountable in the exercise of its powers?...........
Past imperfect, future tense for India Inc
.........“We don’t expect any cut in interest rate before March 2014; and, this might derail investment plans. We are looking at dollarising our debt, as we have a natural hedge of export earnings. The environment will remain challenging through this and next financial year, as interest costs for companies will remain high. Though RBI has cut rates since last year, the reduction has not been passed on to borrowers.”..........
What’s really holding back growth in India
..........."Really what's going on in India, I think, is a combination of weak governance, bad politics, and bad macro imbalances. They are not going to turn around any time soon and what really needs to be done is a really serious burst of reform," Arnab Das, managing director of marketing research and strategy at Roubini Global Economics, told CNBC. He said the government has sent the "right signals" that it is serious about reform by appointing Raghuram Rajan as head of the Reserve Bank of India (RBI), but that the message has yet to be received by investors.......
Gold illogic
......... In tackling the symptom (demand for gold) instead of the underlying cause (inflation), the Government is administering the wrong medicine (duty hikes) that has bad side-effects (smuggling). The surprising thing is that both Manmohan Singh and the current Finance Minister are fully aware of this. While the former delivered the first blow to gold smugglers, it was the latter, as Finance Minister in October 1997, who dug their grave by permitting a host of banks to freely import gold by paying a nominal duty without any re-export obligations.
Banks' rush unlikely for insurer licence
..........Banks which are promoters or part of the promoter group of an insurance company would not be in a position to become insurance brokers. If part of a life insurance joint venture, they would likely become brokers offering products of non-life companies, and vice-versa. However, in cases where they have both, life and general insurance in the group, it is not viable to become a broker,” ....................
The case for differentiated bank licenses
......RBI recognises only one type of bank. So, the moment an entity becomes a bank, it is subject to the same rules and regulations as every other bank. All large Indian banks look like each other, and they all look like mere enlarged versions of what they were 10 years ago. Bank regulation is a giant homogenising force that kicks in when a banking license is granted. If any of the currently specialist players get a license, they will undergo this transformation and begin to look like the 90-odd scheduled commercial banks.........
Scepticism abounds, but hope floats too
.......“New banks will tend to cater to the already banked urban and metropolitan centres and high net worth individuals (HNIs).” “There is also a contradiction in the Finance Minister’s policy approach. He wants consolidation of banks on the one hand while permitting entry to newer players on the other,” observes Bhat. “If SBI is able to operate around 15,000 branches, why can’t other banks grow in size? There are 25 public sector banks. Even if each of these has 10,000 branches, there will be over 2.5 lakh branches in the country,”....
Do Indian banks, RBI have freedom?
........The so-called independent directors on banks’ boards are selected by the government in consultation with the Reserve Bank of India (RBI), but they are often neither independent nor competent enough to make any meaningful contribution to board proceedings. Even the appointment process of the chief executive officer is opaque. The government has dismantled the Banking Service Recruitment Board to hire employees, but the chairman is still appointed by the government. Should an executive first head a small bank and then migrate to a big bank? Or, should one straightaway head a big bank? Should the executive have at least two years of residual service to head a bank? There are no firm rules. It all depends on the whims and fancies of the government...........
Birla to pump Rs 750 cr more to brace for banking foray
.........Analysts say if the choice is between financial inclusion and creating mega global banks, the RBI will see strong case for new banks with mandate to reach out to unbanked areas and people. Besides, the customer has more reasons to cheer as demand-supply dynamics will work in their favour leading to better reach, high service efficiency and discounted product pricing.
Rural banking set to expand as direct cash transfer plan gathers pace
...........This situation, however, is likely to change as the Government is planning to route payments for most social security schemes, such as pensions, scholarships and subsidies, through the banking channel. The Reserve Bank of India has mandated that all new banks will have to open 25 per cent of their branches in un-banked rural areas. The central bank is also pushing existing banks to open more branches in rural centres. Rural India has only 36 branches for every 10 lakh people, compared with over 100 branches in urban areas...........
MFI Bandhan bets on bank licence to improve efficiency
.............. “The main task of these new banks would be to create the clients and ensure their protection. For us, this work is already done – we have a huge client base and appropriate mechanism built into the system to ensure client protection. We are catering to the not so easy unbanked segment. In fact, for existing banks or other companies to reach out to this populace is going to stand as a challenge.”..................
Creating a panic
..........These measures - which the RBI's notification insisted were "rationalisations" of foreign-exchange regulation - are likely to be as counter-productive as all the bank's recent efforts to prop up a currency that is inexorably moving downwards. In the first place, while India Inc is indeed bearish on domestic investment and many big names seek to invest elsewhere in the world, the overall trend recently should not have caused any panic on Mint Road. In fact, ...........
New guidance note on preparing diligence reports for banks on anvil: ICSI
.........The revised version of the guidance note will factor in changes in laws, including the new Companies Act, it is learnt. Rather than ensuring implementation of existing RBI prescriptions, the Finance Ministry is now asking public sector banks to do their own due diligence on loan proposals instead of relying excessively on the appraisals done by lead banks. Banks have been told to independently monitor the end use of funds to prevent misuse of funds..............
Limit on investing in overseas property to dampen sentiment
The Reserve Bank of India's curbs on Indians investing in international real estate under the liberalised remittance scheme will dampen investor sentiment, property consultancy firm Jones Lang LaSalle said. The RBI, seeking to support the battered rupee, yesterday announced measures to reduce foreign exchange outflows. The steps included disallowing the use of remittances by resident Indians to buy property overseas........
RBI’s rupee defence: the fallout
A month has passed since the Reserve Bank of India (RBI) unleashed a barrage of liquidity-tightening measures to rescue the rupee. Despite those measures, the local currency plunged to a historic low of 61.81 against the dollar on 6 August.............
New accounting norms: Core committee to meet on Aug 23
The suspense on when the newly drafted Indian Accounting Standards, known as Ind-AS, will come into force may soon be over. A high-level core committee, comprising representatives of various regulators — Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority and the Corporate Affairs Ministry — will meet on August 23 to decide the roadmap for Ind-AS implementation, said Renuka Kumar, Joint Secretary in the Ministry of Corporate Affairs........
CA Institute sets out IFRS roadmap for banks, NBFCs
The CA Institute is keen that banks adopt International Financial Reporting Standards (IFRS) — a set of globally recognised accounting standards — to prepare their financial statements. The accounting regulator has now recommended what it terms as a roadmap for IFRS implementation by banks. The recommendation follows a request from the banking regulator, Reserve Bank of India...........
The volatile journey of Indian rupee since Independence
..........Managing volatility in the currency markets has become a big challenge for the economic policy markers in the country. The central bank as well as the government has taken a series of measures to curb the volatility in the markets............
India Turns Back the Clock on Reforms
......Analysts believe that if all these moves fail, the government may be pushed further down the road of controls. In September, a new RBI governor – Raghuram Rajan – will be taking over. Rajan has a PhD in management from the Massachusetts Institute of Technology and has served as chief economist to the international Monetary Fund. But for all his free-market thinking, he may be forced to support controls now..............
Liberalisation in reverse
The new restrictions imposed by the Reserve Bank of India (RBI) on companies and individuals making overseas investments and remittances, apart from a blanket ban on gold coin imports, suggest a hint of desperation among the country’s policymakers. The measures announced on Wednesday, together with those over the past month, are not insignificant.........
PSB Heads May Get More Sops For Debt Recovery
.......The
performance of a PSU bank and its executives is evaluated through a
statement of intent, which the lender signs with the government. A SoI
lists annual goals for the bank and its executives and sets parameters
such as credit growth, net profit, priority sector lending and NPA
reduction. The performance evaluation is done by a sub-committee of
the bank’s board of directors and comprises nominees of the government
and the Reserve Bank, and two other directors. A bank chairman or
executive director could lose his performance incentive if he scores less than 80% on the appraisal matrix...........
Publishing photos of loan defaulters, guarantors legally impermissible
.......A letter (adverted to by both Madras and Calcutta high courts) of the Deputy General Manager, Reserve Bank of India, dated July 12, 2007 addressed to the Chairman, State Bank of India, on the subject of “Wilful Defaulters – Publication of Photographs” makes clear the stand of RBI. It says that the Sarfaesi Act, 2002, has no mention of publishing photographs of defaulters. The possession notice under the act provides for description of the immovable property more as a caution.........
CBI opens probe into firms defaulting on public sector bank loans
......The increasing cases of defaults and delayed debt recoveries have even attracted the attention of the Finance Ministry, which, a few days ago, asked the banks to carry out viability assessment of proposed projects, independent of the appraisals by leading banks, before granting loan approvals. The Minister had also recently said if the promoters were unable to pay back loans, they should be made to give up the management of the company. Sometime ago, in a paper on corporate debt restructuring, Reserve Bank of India Deputy Governor K.C. Chakrabarty quoted statistics that revealed that the restructured advances ratio to gross advances had gone up from 4.87 per cent in March 2009 (a year after the financial crisis peaked) to 8.24 per cent in March 2012. By the 2012-13 financial year-end, it shot up to 10 per cent..........
ATM cos see scope for more growth
....RBI
data shows that in June 2012, public sector banks had deployed 56,801
ATMs with average transactions of 183 per day and average daily
withdrawals worth of Rs 4.9 lakh per machine. A year later, the number
of ATMs has jumped to 75,707 machines and the average number of
transactions continues to be close at 167 with average daily withdrawal
of Rs 4.8 lakh.........
Read - TOI
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