A mixed legacy of India's 22 governors so far, few have had multiple challenges like the departing central bank chief Duvvuri Subbarao. Yet he showed a dignified approach to policy-making at a time when the quality and credibility of institutions are being eroded, says ET...............
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Wednesday, August 21, 2013
India does not look as pessimistic in Washington as in New Delhi: Kaushik Basu
...........Referring to the tenure of Dr D Subbarao as Governor, Dr Basu was all praise for the outgoing RBI chief. He said the position of RBI Governor deserves “dignity, honour & autonomy, which Dr Subbarao upheld”. “Dignity of RBI, autonomy is extremely important. During the tenure of Dr Subbarao it was upheld.” ...................
RBI takes U-turn on tight money policy
In a dramatic U –turn, the Reserve Bank of India (RBI) on Tuesday relaxed its tight money policy adopted a month ago. In a move to comfort the government bond market after a sharp spike in long-end yields, the central bank has decided to infuse liquidity in the market. RBI said it will buy long-dated government bonds worth Rs 8,000 crore through an open market operation on August 23 and thereafter decide on the amount and frequency as warranted........
Be cautious while borrowing overseas, RBI tells infra firms
.............“First and foremost, as finance professionals, we must realise that in efficient markets, cost of borrowing in any currency, when adjusted for exchange rate differential, should be the same. Therefore, if one finds an arbitrage opportunity, it can only be for a short term. “Adjusted for hedge cost, the external borrowing cannot be cheaper. The only way a firm can potentially benefit from borrowing in overseas markets is by gambling on the exchange rate and retaining an un-hedged forex exposure,” said Chakrabarty...........
Fraud reporting is often a matter of perception
In a recent lecture, the RBI Deputy Governor, K. C. Chakrabarty, said over 83 per cent of the cumulative losses of Rs 29,910 crore due to frauds occurred at public sector banks. The data given by the Deputy Governor also show that over 94 frauds involving a sum of over Rs 50 crore each were reported by nationalised banks, including SBI, in the 2009-10 to 2012-13 period. Private sector banks, on the other hand, reported only six such cases and foreign banks, three. Chakraborty attributed this to deficient appraisal system, poor post disbursement supervision and inadequate follow-up. The implication is that private and foreign banks are far ahead in these aspects. The statistics have to be viewed in the context of the environment in which the banks operate..........
Poor project appraisal leading to bad loans
More than 50 per cent of the infrastructure projects are stuck at various stages of implementation due to regulatory hurdles and sector-specific bottlenecks, leading to significant time and cost overruns, said K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, on Tuesday. There has been no dearth of policy pronouncements and re-engineering of processes aimed at improving the investment climate for infrastructural projects, he claimed. However, there seems to be little headway in achievement on the ground, he said. The Deputy Governor said of the 576 Special Economic Zones that have received formal approval, only 172 are operational........
Right to pension cannot be taken away pending proceedings: SC
Observing that gratuity and pension are hard earned benefits of an employee and right to receive pension is in the nature of "property", the Supreme Court has held that this right cannot be taken away from a government employee pending departmental or criminal proceedings. "It is an accepted position that gratuity and pension are not the bounties. An employee earns these benefits by dint of his long, continuous, faithful and un-blemished service. It is thus hard earned benefit which accrues to an employee and is in the nature of "property".........
Baby's day out...........
This report shows the high expectations from Dr Rajan. Otherwise, his arrival at Mint Road a few days earlier (Once the appointment was announced, naturally he would not be in a position to concentrate in his earlier job and it was graceful on the part of GOI and RBI to provide him opportunity to familiarize with the goings on in RBI) would not have made a news. Media ignores vacant top positions in several organizations. This ‘scoop’ reminds one of the camera following the baby in ‘BABY’S DAY OUT’.
- M.G.Warrier
NPS - Time for a review
.........Though the government and the media have been marketing the National Pension Scheme (NPS) as a solution for the social security problems of senior citizens, it is common knowledge that the scheme was introduced through the back door to get over the impossible task of making provisions for an estimated pension liability of Rs 4 lakh crore, when the Sixth Pay Commission was finalising its report in 2006............
‘Fake’ notes declared genuine; migrants let off
...... The inability of the labourers to produce relevant documents for identification raised doubts. However, experts confirmed on Monday that the notes were genuine. The notes were examined by officials of the State Bank of India in Kottayam and later by officials of the Reserve Bank of India in Kochi..........
Coin confusion
The Reserve Bank of India has dispensed with printing and circulation of lower denomination currencies and instead has introduced coins. But the coins of various values are similar and cannot be differentiated. They resemble each other creating a lot of confusion. The RBI may consider minting of coins of different colours, shape and design depending on its value, so that they could be distinguished.
- G. Pichai, Tiruvaiyaru Hindu
Rajan panel mulls doing away with ‘special’ tags for states
NEW DELHI: Putting a spoke in Bihar's ambition to get special status, some members of the committee headed by RBI governor-designate Raghuram Rajan have suggested that the Centre should do away with special and backward category tags, while backing devolution based on the proposed Composite Development Index............
Financial Inclusion in India: An Update
...........The Reserve Bank of India (RBI), which regulates banking and payment services, needs to encourage multiple providers, including telecoms, using fair and competitive regulatory structure to make financial access truly inclusive. Raghuram Rajan, the newly appointed governor of RBI is well aware of challenges and opportunities of financial inclusion in India and is likely to push for reforms that will make financial inclusion a reality in India in the near future.
New Bank Licences - Background and Impact
.......Last year public sector banks recruited 65k staff. This year it may reach more than a lakh with the addition of new banks. The non availability of experienced staff will be a big headache for the newcomers. The banking field will become more competitive. Banks will be forced to come out with innovative ideas suiting the requirements of the general public. Non branch banking will be one of the expected innovations in this field. On line services and door step services will be the order of the day. ..........
RBI's in-principle nod for new banks seen by Q1 of 2014: FM
Reserve Bank of India (RBI) is expected to give 'in-principle' approvals for new banks during the first quarter of the next year, Finance Minister P Chidambaram said. "At the first stage, the applications will be screened by RBI to ensure prima facie eligibility of applicants, including the assessment of 'fit and proper' status of applicants," he said in a written reply to the Lok Sabha on Tuesday.............
Read.............
Read.............
Raise rate of interest
At present the low rate of four per cent interest is being given to the savings bank accounts in the post offices and nationalised banks. The Central government may consider enhancing it the rate of interest to five per cent to the above savings, taking into consideration the welfare of the senior citizens and the public.
- S. Rajamani, Kilvelur Hindu
Service is key, assert customers
When there is a ‘you’ or ‘your’ in the slogan of a bank, you may tend to get carried away. Such words are used to convey a feeling of bonding between the bank and ‘you’, the customer. But the ground realities are often far from this. “It is unfortunate that many banks in India use slogans such as “always with you”, “your bank”, “you in our thoughts” and so on, but never practise the same,” ...........
Take-two of the BC Model
.......Recently, we met with a team of high level banking officials to discuss the workings of the business correspondent model with regards to their bank. Though they admitted that there was previously a very low presence of formal banking in rural areas, a vast improvement in coverage had been observed in the past 2-3 years, backed by a strong push from the Reserve Bank of India (RBI) At the inception of the BC model in 2006, only 6% or 40,000 of India’s 642,000 villages had access to formal banking services. Due to the RBI’s persistent push to increase coverage, today approximately 37.4% or 240,000 villages now have access to formal banking services. In fact, banks are expected to cover all villages with formal banking services in the state of Andhra Pradesh within the next year ...........
Costly Kiddy Bank Accounts
Pester-power may lure you to open an account for your child, but it is expensive and there are hidden risk...........
Tax-efficient fixed maturity plans a good investment option now
In the past few weeks, the fixed income landscape in the country has changed drastically. Following the unprecedented liquidity tightening measures by the RBI in response to the sliding rupee, short-term rates have jumped up sharply. This has increased the attraction for investments in short-term debt instruments, such as the one-year certificates of deposit and commercial paper............
Canara Bank to enter health cover products
........"Presently, our fee-based income from the sales of insurance policies is to the tune of Rs 15 crore. With our new tie up with United India, we are looking at an additional fee-based income of Rs 50 crore during the current year. This is possible as we have a large network of branches and we are also exp-anding our branch network in the next two years. We have also launched an exclusive portal jointly with the United India to help our customers to buy insurance products online,"............
Farmers oppose Bakshi panel report
.........The expert committee on the short-term Credit Cooperative Structure constituted by Reserve Bank of India under NABARD Chairman Prakash Bakshi had recommended, among other things, the functioning of PACS as business correspondents of Central Cooperative Banks on commission basis. The farmers associated with the Primary Agricultural Credit Societies (PACS), the elected representatives and the personnel of over 250 PACS laid siege to the District Central Cooperative Bank (DCCB) here on Monday, seeking the government to revisit the recommendations of the Prakash Bakshi Expert Committee for a slew of structural reforms in the cooperative banking credit system. A large number of protesters blocked the entry gates of the DCCB for quite some time, leading to paralyse its functioning...............
RBI to educate investors on identifying fraudsters
...........RBI Regional Director J. Sadakkadulla said that the central bank lacked the policing powers required to curb the operations of dubious financial institutions. Therefore, it had decided to equip investors with the means to identify fraudsters. Referring to the latest survey conducted by the RBI in 65 villages of Erode district, he said the findings revealed that even educated people fell victim to attractive but far-fetched interest schemes offered by rogue institutions. “Interest at the rate of 12.5 per cent per annum is the maximum that any good institution would be able to offer,” he said....................
‘Many banks refuse to open ‘no frills’ accounts’
.......J. Sadakkadulla, Regional Director, Reserve Bank of India, Chennai, said the ‘no-frills’ account was primarily aimed at people living in rural areas. Such accounts had many limitations with respect to permitted financial transactions in a year. “It is not meant for regular bank customers because depositing Rs. 500 would not be a big issue for urban dwellers. But I think ‘no-frills’ accounts should be opened for purposes such as receipt of scholarship. We shall look into the issue,” he added.
YES Bank not professionally managed, says Madhu Kapur's counsel
Madhu Kapur’s counsel on Tuesday alleged YES Bank's claim of being a “professionally managed bank” was untenable. Darius Khambata, counsel of Madhu Kapur said YES Bank was behaving in a partisan matter to protect interests of its co-founder, managing director and chief executive Rana Kapoor.............
Current account shock: Customers slapped with charges all the time
......During a recent meeting, officials from the Banking Ombudsman Office, Chennai, said that after deregulation of services charges by the RBI, such charges are normally fixed and approved by the respective boards of each bank. "Before levying of such charges, it should be disclosed to customers. If the customer is not made aware of the charges it can amount to deficiency in banking services," officials said. ........
Canara Bank board to decide on takeover of Amanath Coop Bank
.........Dubey said Canara Bank has not taken any decision as of now and is waiting for the due diligence report. "We don’t need government of India approval to take over the troubled cooperative bank. Our board has powers to take a call on this issue because we are planning to take over only the assets and liabilities,” he said...............
Bank of India plans to open 50 all-women branches
.............“The idea, of course, behind opening such branches, is to put women at ease and encourage them to transact with the bank. These branches will function like all other branches, but with more emphasis on financing schemes beneficial to women and encouraging entrepreneurship among them. Micro finance is a very important area and self-help groups of women (SHGs) are doing well in Andhra Pradesh. These branches will focus on such areas,”...........
Sebi busts SMS scam offering investment tips
Mumbai:
Using its newly granted powers to access call data records and conduct
surprise visits, capital markets watchdog Sebi has unearthed an SMS scam
where fraudsters were luring gullible investors with promise of daily
returns of up to Rs 75,000 through mobile messages..............
Read - TOI
Read - TOI
Banks' fee income growth shows signs of recovery
.............. The revival in fee income growth assumes significance as the banks’ treasury earnings are expected to dwindle in the coming quarters due to hardening of bond yields. Both fee income and treasury earnings form part of banks’ non-interest income.The Reserve Bank of India’s (RBI) recent measures to tighten liquidity and curb volatility in foreign exchange rates have led to a rise in bond yields. On Monday, the yield on India’s 10-year benchmark government bond climbed to 9.17 per cent, its highest level since the collapse of Lehman Brothers in late 2008...............
Government may delay Rs 14, 000-cr capital infusion plan for PSU banks
NEW DELHI: The government may delay Rs 14,000 crore fund infusion in the public sector banks in view of volatile market conditions. As per the plan, the government wanted to infuse funds by the end of September but it may wait for market to stabilise...........
RBI can no longer be blamed by finance minister
...........The Reserve Bank under Dr Subbarao, which gallantly took the inflation fight from unwilling hands in Government but nevertheless upbraided for “ignoring” growth, has now dutifully put through a host of toughening measures on outflows and remittances mainly of corporates, with a marked preference to invest in assets abroad than in a besieged economy at home. A Finance Minister, who has pampered the corporate sector all along, is hardly able to get them into investing here, concerned as they are with the inflation and resulting costs for enterprises, policy inadequacies and action failures, factors that have thwarted investment revival. A quarter or a half percentage cut in repo rate such as would please Mr Chidambaram cannot do the trick with unresolved supply constraints...........
What North Block Needs
......In the last 20 years, we have a sea change. Agriculture is now small enough to be irrelevant in macroeconomics.
We have business cycles of the kind seen in market economies, rooted in
fluctuations of inventory and investment of private firms. Financial
markets have become important, and the capital account is mostly open. Despite
these changes, the role, organisation structure and staffing of MoF and
RBI have not budged. How are good decisions obtained in public policy? A
checklist of policy choices is drawn up. High quality staff work takes
place, where the costs and benefits of each alternative are worked out. A
debate takes place, based on this work. The people in this debate have
deep roots in understanding how macro and finance works in market
economies, and in the gritty details of India. In most cases, tentative
thinking goes to the public, for feedback, before decisions are made..........
Resist bailouts
............What would cause real trouble is if banks are asked to do the politically expedient thing and help defaulting corporations meet overseas obligations. The central bank will have to resist such pressures and shield the commercial banking system as far as possible. Corporate bankruptcies and defaults, whether in rupees or in dollars, are liable to be less damaging than the alternative scenario of bailing out sick banks. The RBI needs to deploy all its skills and assert its independence to stem the rot in what is fast turning into an "annus horribilis" for the banking system.
India’s Economy Needs an Early Election
..........Yet it’s hard to see how anything other than early elections will break the gridlock in New Delhi. Investors can’t be certain that any new government will push forward with difficult reforms. They know for sure, however, that the current government cannot. Singh is a spent force. Few expect the 80-year-old prime minister to retain his office even if the Congress leads the next government. He is by all accounts an honest, humble man. His most honorable decision might be to hasten his own exit.
Bonds give banks a bad headache
Banks are awaiting signals from the Reserve Bank of India to check the losses owing to a surge in the bond yields, Union Bank of India chairman Debabrata Sarkar today said. Banks invest in government securities both for treasury operations and to fulfil their statutory liquidity requirement mandated by the central bank. Yields on bonds are inversely related to their prices, which imply that lower prices will result in a reduction in the value of bond holdings. Sarkar expressed hope that the RBI might come up with some solution...........
Bailing out banks, the RBI way
..........With the central bank taking a call on this, state-owned banks will come back to the market. Till the first half of Tuesday, there weren’t too many buyers in the market and even a small deal had an exaggerated impact on yields. RBI’s action will bring volume back, which is critical for stability, but it has sent a wrong signal to the punters in the bond market.
Raghuram Rajan stares at the Rupee fault lines
......."The problem was not that no one warned about the dangers; the problem is that those who benefitted from an overheated economy - which included a lot of people- had little incentive to listen" explained Rajan. India's Rupee crisis is perhaps asking the same question from Raghuram Rajan. It has been brewing for several years .........
Caught between RBI-rupee crossfire, banks bleed
............Typically, when interest rates are expected to soften, more securities are kept for sale/trading. It’s the opposite when interest rates are expected to go up. Banks need to make their investments mark-to-market for their trading portfolio. But banks were obviously not prepared for a googly from the central bank. Interest rate took a U-turn in mid-July when the central bank started tightening liquidity to arrest the fall in rupee by curbing speculation...............
Rupee bleeds: Good politics, bad economics?
It took three days for the rupee to touch 63; 24 hours to slide below 64. The Reserve Bank of India or RBI duly sold dollars for relief and brought the rupee down to 63.25 at closing. Temporary relief again. All eyes are on the Manmohan Singh government now, waiting for it to pull a rabbit out of its hat. But with elections round the corner.............
Let the rupee sink
A country that decides to defend its exchange rate has only two options: impose capital controls or surrender independence over monetary policy. The Indian authorities have tried a bit of both. They have put restrictions on resident individuals and companies looking to invest overseas and in gold. The central bank has also raised short-term interest rates, thereby giving up its ability to use monetary policy to lift GDP growth from its 10-year low......
Govt & RBI causing greater collateral damage to the economy
............."The reality is that the current account deficit (CAD) is high for various fundamental reasons, but nothing much is being done to address that. The risk is that policymakers will need more pressure from a weaker currency to come out with stronger policy responses. In this toing and froing between the government and the Reserve Bank of India (RBI), we see greater collateral damage to the economy due to rising bank asset quality concerns, greater stress on corporate balance sheets because of higher leveraging and increased margin pressures, and therefore, much slower economic growth," said Nomura Financial Advisory and Securities...........
Govt, RBI, Sebi scramble to save rupee
.........Finance Ministry sources said the rupee will have to find its “sensible level”, without indicating what that level could be.To restrict the outflow of foreign currency, the RBI had on August 14 announced stern measures, including curbs on Indian firms investing abroad and on outward remittances by resident Indians Mint Street observers noted that RBI has been cautious in selling dollars as the forex reserves (at about $280 billion) could only cover six-and-a-half months of exports. Bankers also said the rupee has not yet reached its fair value and further pressure will be there on the currency. ...............
Rupee Fall: As we sow so must we reap. Or in this case, weep.
.......To be sure, interest rates on all loans will rise. But even as borrowers feel the pain, savers will at last get their due. For more than three years now they have lived with negative real rates of return on bank deposits as the government and the RBI failed to act in time to check inflation. As a result, households have turned away from bank deposits to gold, with serious consequences, not only as regards the availability of deposits for banks but also for the country’s balance of payments.........
Remittances go up as rupee plunges
The rupee’s fall poses problems to the economy, but the non-resident Indians are benefited from the depreciation because they get a higher amount of money at home whenever an overseas money transfer takes place. The banks and money transfer agencies have recorded higher volumes of transaction ever since the rupee weakened in the money market...........
RBI drops oxygen masks on banks as Re breaches 64/$ mark
............The RBI said banks can spread the net depreciation on AFS securities over the rest of the financial year, saving them from a massive hit to their treasury incomes this quarter. “These relaxations would bring down the treasury loss by at least 25% for our bank,” said a senior official of a large public sector bank. Lenders had asked for these relaxations from RBI provided rupee failed to stabilise after liquidity tightening measures. .........
Govt must attract NRI money to rescue rupee: Experts
R
upee’s unprecedented fall against dollar could be curtailed by attracting Non Residential Indian money, experts believe. Subir Gokarn former RBI Deputy Governor and Director Research Brookings India told CNBC-TV18 that rupee’s slide against dollar highlights the fundamental issue of huge current account deficit. Reduced iron exports and growing coal imports were contributing to higher CAD, Gokarn noted......
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