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Saturday, September 21, 2013
Raghuram Rajan needs to transform RBI into a multitasking innovator
Rate helmsman
RBI clarifies on gold re-export norms
..........The RBI norm left many confused, leading to imports being held up at customs. The matter was discussed and resolved in the meeting in New Delhi on Friday, chaired by Commerce Secretary S R Rao. Officials of RBI, banks, MMTC and industry representatives were present in the meeting............
Inflation hawk
................Rajan can hardly take the success of his risky strategy for granted. The currency has stabilised for now but another rupee slump will push inflation even higher, by increasing the domestic cost of imported oil. And, how much higher can Indian interest rates go before Rajan's political masters stop him in his tracks? After all, they have to face an election next year. Rajan doesn't.
RBI may offer two consumer price inflation linked savings products
.......The Reserve Bank is working on two savings products where returns will be linked to consumer price inflation, a move aimed at weaning retail investors away from gold and real estate. One of the products will pay a lump sum amount at the end of the maturity period based on annual consumer prices, similar to fixed deposits that have always been attractive to retail investors............
Jammu youths ask FM, RBI to launch 'onion deposits'
Making a jibe over the failure of the union government to keep a check on the rising inflation of essential commodities especially the onions, a Jammu youth has sent a representation to Union Finance Minister, P Chidambaram and Raghuram Rajan, Governor of Reserve Bank of India (RBI) to launch a new loan scheme so that common masses of the country can buy onions and other vegetables........
Dr Subbarao proved right by Dr Rajan, the new Governor - Dr.T.V.Gopalakrishnan
Once in RBI chair as Governor, one cannot erase the footsteps of all predecessors, as RBI has no political agenda and it has only the mandate to maintain the value of rupee, monetary and financial stability, contain inflation and provide adequate support to growth in the overall interest of the economy. This is what Dr Rajan also did ..................
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Rural demand for credit is pretty strong: Pratip Chaudhuri, SBI
You almost pre-empted the RBI Governor by hiking your rates just yesterday. So how much more? Do you think you need to raise your rates again now?............
Analysts, economists divided over Rajan measures
......."While effective interest rates have not been tempered for banks, short-term liquidity has not been hampered. So in sum, the Governor took a measured effort to balance inflation containment measures and stoke growth supported by a good monsoon and expected results of measures to moderate import dependent demand,.........
Negative on banking sector: Pramod Gubbi
...."We have been negative on banks generally for the best part of the last two years. It is not so much dependent on what the Reserve Bank of India (RBI) did today. In fact if one looks closer to what Raghuram Rajan said on the day of his appointment in terms of increasing the bank licenses and making it a lot more frequent, the way we look at it is, Indian banks particularly some of the private sector banks enjoy significantly higher margins than what we see some of their peers in similar emerging markets too. That is largely because of the sector being protected for quite so long..............
RBI policy review: India Inc disappointed by hike in repo rate
........"High interest rate has been identified as a major barrier to boosting growth. The increase in the repo rate has come as a surprise to us. While industry is disappointed, reduction of interest rates charged and availability of credit remain a plea and we are confident RBI will keep this in their sights going forward," ...........
RBI adopted balanced approach in policy review, says Montek
...."I think it is a quite balanced statement actually. He (RBI Governor) has done something which will ease liquidity and at the same time try to send the signal that RBI is concerned about bringing inflation down. You need to give both those signals. It is right thing to do," Ahluwalia told reporters here.............
'NDF sucking out liquidity, need to deepen local forex market'
....."To some extent it (NDF) draws away liquidity from our market. We have to make sure we provide deep and functioning market so that there is no need to establish a parallel market outside," Rajan told analysts and researchers at his maiden post-policy conference call this afternoon. "There is certainly competition for the Indian market and competition generally is a good thing. We should try and deepen our markets to draw in more activity here," the newly appointed Governor said.........
Fed helps Rupee out of ICU
..........In the wake of the “no tapering now’’ decision of Fed, the concern over the rupee has somewhat subsided. It was indeed “Fed Sent’ for the new RBI Governor Raghuram Rajan. Seizing the moment, he promptly rolled back all emergency measures introduced by his predecessor-led team. That should ease somewhat the liquidity situation. If Dr. Subbarao were to be there, he, perhaps, would also have done this..........
Raghuram Rajan tracking rupee 'minute-by-minute'; says its not stable yet
Mumbai: Reserve Bank Governor Raghuram Rajan on Friday said the recent rally in the rupee is comforting but said the currency has not yet achieved stability which will only be reached when he stops keeping a "minute-by- minute" track of the unit. "Absolutely, I am more comfortable where we are now than where we were a couple of weeks back," he told reporters in an interaction after the release of the mid-quarter review of the monetary policy here.........
Delay in Fed’s tapering of stimulus has created uncertainty: Rajan
Raghuram Rajan, Governor, Reserve Bank of India, fielded a series of questions from the media during the post policy conference at the Mint Street office. He spoke at length about the correct yardstick to measure inflation, the breather on quantitative easing provided by the US Federal Reserve and the growth-inflation dynamic of the central bank. Edited excerpts...........
So, does the Guv deserve full marks? - YES
Strongly reinforcing the RBI’s inflation fighting credentials:
The new governor clearly wants to reinforce the central bank’s inflation fighting credentials in an attempt to better anchor inflation expectations. At the moment, headline (WPI) inflation is running at 6.1 per cent -- above the RBI’s desired level of around 5.5 per cent for the year. Retail (CPI) inflation remains stubborn at about 9.5 per cent. Interestingly, while core inflation (sub-2 per cent) is considerably softer and the recent uptick in WPI and CPI has been more due to supply-side issues such as food inflation, the central bank remains worried about the potential adverse impact on medium-term inflation expectations.............
So, does the Guv deserve full marks? - NO
..............As for the RBI, it must recognise that the high cost and the poor availability of funds is hampering growth, especially for the small and medium sectors. In this context, the central bank’s renewed focus on improving the country’s financial infrastructure and working towards greater financial inclusion is heartening.
Different strokes: All banks may not cut lending rates because costs are down
.......Banks may react differently to RBI’s rate tweaks on Friday because they aren’t all affected in the same way. This is because base rates, to which all lending rates are linked, are more a function of deposit rates than policy rates. How banks will react depends on three factors. One, there are the savings they make on their incremental funds. Banks such as YES Bank and IndusInd Bank, which rely a lot on short-term deposits, may reap the most savings in cost from RBI’s tweaks........
Raghuram Rajan's maiden policy: top 10 takeaways
New Delhi: The new poster boy of India's otherwise boring banking system, Reserve Bank of India Governor Raghuram Rajan who's been dubbed as "The Guv" on Friday surprised one and all with his maiden monetary policy by hiking short term lending rates............
Full marks to policy; banks may up base rates: HDFC Bank
.....I am very happy with the policy for two reasons. One, it clearly sets out the basis on which policy will be decided and what is the end result. So inflation is important, growth is important and the rupee stability is important. It also says that whatever measures were taken in July to stem the movement of the rupee based on favourable trends continuing will be unwound. The disruption came with the July measures............
Repo Rate hike will have cascading effect on economy: BJP
NEW DELHI: BJP today said the RBI decision to increase Repo Rate will lead to higher housing and car loan rates thus affecting the common man and sought to know from the government what steps it was taking to control inflation. "Government was today again left to walk alone to face challenges to growth. RBI has taken its own call and increased the Repo Rate...........
Rajan’s India Inflation Battle Pressures Singh as Election Nears
Indian central bank chief Raghuram Rajan’s surprise move to raise the policy interest rate adds pressure on Prime Minister Manmohan Singh to take politically challenging steps to boost economic growth as elections near. The Reserve Bank of India unexpectedly raised the benchmark repurchase rate yesterday to contain price increases that have hit roughly 825 million citizens who earn less than $2 per day. In doing so, Rajan made it more urgent for Singh’s government to allow greater foreign investment and reduce food and fuel subsidies to bolster the economy.......
Phata Poster Nikla Zero: Why Raghuram Rajan hasn’t joined the party
..........What Rajan has done needs to be analysed in line with the economic philosophy he believes in. A major reason for increasing the interest rate is high inflation. As the Monetary Policy Review points out “What is equally worrisome is that inflation at the retail level, measured by the CPI (consumer price inflation), has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence..................
Rajan for "bullet-proof" shield to deal with US Fed tapering
Mumbai: Reserve Bank Governor Raghuram Rajan on Friday said India needs to build a "bullet-proof national balance sheet" to deal with the fallout on the economy from US Fed Reserve's tapering of stimulus that has been only been postponed not done away with........
How would you rate Raghuram Rajan's first policy announcement?
Economists had widely expected him to leave the repo rate untouched. Raghuram Rajan thought otherwise, and implemented a 25 basis point hike. The RBI Governor, however, reduced the Marginal Standing Facility (MSF) rate by 75 basis points to 9.5% and reduced the daily maintenance of CRR from 99% to 95%, effective September 21. Will these moves meet the twin objectives of controlling inflation and strengthening the rupee? How would you rate Rajan's first policy announcement?
Is India Ready for Rajan’s Shock Treatment?
......“Further actions need not be announced only on policy dates,” the RBI said in a statement Friday, indicating the central bank won’t hesitate to take steps in-between scheduled policy reviews, a practice Mr. Rajan’s predecessor Duvvuri Subbarao had avoided. As India struggles with a deterioration in its economy, Mr. Rajan appears to be using the element of surprise to boost the effectiveness of monetary policy. But are these surprises what India’s economy really needs?.........
Fed's decision provides breathing room for India: Subir Gokarn
.........Do you have any advice for the new RBI governor Raghuram Rajan?
No, I don't give advice to anybody in the public domain. But if people like to ask they will.
But what would you like to see him do?
The problems are well known, (such as) the limitations of (our) monetary policy and its ability to influence things. They are all very well aware of what they need to do and I wouldn't presume to give any advice at this moment.
Raghuram Rajan resists government pressure on rates
......His predecessor, Duvvuri Subbarao had articulated the problem of stubborn inflation in several of his policy statements. He had also resisted strong pressure from North Block to reduce rates, highlighting price pressure threats. On Friday, Rajan might have disappointed his former colleagues in North Block — by raising the repo rate...........
FinMin tight-lipped on RBI's stance
......About a year ago, when then RBI governor D Subbarao didn't cut the policy rate, Finance Minister P Chidambaram had said he would walk the growth path alone. On Friday, Rajan announced a rise of 25 basis points in the repo rate. Though the move spooked markets, Chidambaram remained tight-lipped........
Rajan’s message to FM: Fight inflation with me, or walk alone
....The reference to “absence of an appropriate policy response”, when translated, means it is the finance ministry that needs to take action to reduce the fiscal deficit and reduce inflation. P Chidambaram will have to walk alone for some more time before Rajan chooses to join him in reviving growth............
RBI wastes Fed moment
.....Indeed, while Rajan said the MSF would do more of the walking as it went back to being 100 bps over the repo, his statement eschewed the usual RBI talk of core WPI which continues to fall, to December 2009 levels now. Instead, Rajan spoke of CPI that remains much higher. But since there is 125 bps of the MSF hike to still unwind, Rajan can hike repo rates for another policy or two while appearing to be cutting rates. Like his predecessor, Rajan underscored the government’s role in getting growth on track by talking of the expected diesel hike and clearances by the CCI. He did it more elegantly though, perhaps helped by gushing TV anchors at his press conference who, impressed with his plans to attract forex flows, asked whether he was prepared to be buying dollars when the rupee started to appreciate.
Rajan responds to the need of the hour
......In this context, RBI seems to take comfort from the improving global growth (and hence opportunity of higher exports) and easing geopolitical tensions (that helped lower crude prices) as positives for the current account deficit. Further, the expectation remains strong on the type of inflows that could be expected under the FCNR(B) and banks’ borrowing abroad. This is expected to boost foreign exchange reserves, thus increasing the firepower for RBI to manage currency volatility by direct interventions than by interest rate measures...........
Rate increase was tough decision, but appropriate
...........“It’s an appropriate decision. It’s a difficult decision, but in my view it is the right one because the rate on the MSF measure had to be brought down — that was an emergency measure.”..............
NSEL crisis may have 'minor systemic' implications: Report
........The Mayaram panel on Friday took up reports of the two sub-groups—one headed by Chakrabarty and another by the Enforcement Directorate (ED). On Wednesday as well, the ministry deliberated on two reports. While a sub-committee headed by the RBI deputy governor was to give recommendations on systemic impact of the NSEL crisis, the other one was to see whether there was any violation of laws. While the Chakrabraty sub-committee did not find broader systemic repercussions of the crisis, the enforcement directorate alleged violations of the Prevention of Money Laundering Act and Foreign Exchange Maintenance Act. Now, the Mayaram panel, constituted by the Prime Minister’s Office, will finalise its report based on these two reports and is likely to suggest various actions. These be taken by the ED and RBI........
Can you trust banks with your sale deed, title deed?
.......If you thought this is an imaginary situation, it is not. The above example comes from the Reserve Bank of India’s banking ombudsman office. In this case, the aggrieved customer finally approached the banking ombudsman. The bank told her that the original sale deed of her property was not traceable, and it would create new documents at its own cost. “The loss of original deeds of the property by the bank was serious deficiency and that even after coming to know that the original documents were lost at their end, they had not taken necessary action on their own and instead waited for initiating the process, only after the complainant approached the BO after following up with the bank for three years,” the banking ombudsman observed settling the dispute...........
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