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, September 26, 2013
Raghuram Rajan brings Wall Street flavour to Mint Street
In the hot seat, Raghuram Rajan sticks to the path of independence
.......This was a reference to Chidambaram’s exasperated remark that if the RBI refused to walk in step with the finance ministry, he would rather walk alone. But then, Subbarao hoped that the minister would at the same time add “Thank God, there was Reserve Bank”. Against this backdrop, Rajan had walked into the RBI. The expectation was that he would walk in step with the North Block and comply by lowering interest rates as a gesture to encourage growth. But Rajan did not follow that route. He chose his own path. It appears he had chosen, as if, to sit before a big size control panel for the Indian economy, fine tuning various knobs and levers to set the pace of the flow of finances and, thereby, activity in various channels. Why this imagery?.........
India needs an inflation-targeting RBI
.......It has also been pointed out that the lack of clarity in the Reserve Bank of India (RBI) on the monetary policy framework—which enunciates the goals, strategies and operational tactics for this framework—coupled with large fiscal deficits have contributed to the prevalence of high and persistent inflation in India in recent years. Before blaming RBI, in particular, for failing to control inflation, however, it is important to examine a few conceptual issues involved from first principles............
What Rajan did that Subbarao couldn't
Raghuram Rajan did what D Subbarao tried and failed- to prop up the rupee. What was the clincher for Dr Rajan then, that in a matter of days he helped stem the massive rupee fall? According to ICICI Bank non-executive chairman KV Kamath, the Reserve Bank of India or RBI earlier made the mistake of saying it did not have the tools to defend the rupee, but Dr Rajan's strong policy stance helped the currency recover................
Financial and real economies
......One wonders whether our policymakers still retain faith in the rational expectations of financial market participants, of financial markets being efficient in producing prices which reflect all fundamentals, etc. The hollowness of the argument struck me recently in the sharp contrast between the behaviour of the domestic and external values of the rupee. The latter has changed by 10% or more in a matter of days (and in opposite directions), twice in recent months, in reaction to monetary policy statements. In contrast, it took the former governor three years, 13 interest rate hikes, and umpteen statements, to reduce the rate of fall of the rupee’s domestic value from 9.6% to a little under 6% in terms of the Wholesale Price Index. ............
Trophy consultants?
........Of course, SKS and the RBI are well within their rights to take advice from whoever they choose. But the choice of consultants in relation to the businesses in question makes you wonder whether there's a real talent shortage in India or whether the foreign credentials of the advisors are an end in themselves.
Well done Gov............
Through the medium of your daily VITALINFO, let me say well done Gov. In a small time span of three weeks he has boosted the confidence of all players in the market. I am sure in the coming days he will address the supply side of our economy by using all tools at his command. All the very best to RBI family.
- B.K.Katyal, Ex-CGM
It's never too late to turn over a new leaf
There are many bank branches in every city,
as there is ample power in the form of electricity,
this is really a pity,
however,let's now hope banks will move with alacrity,
to open new branches wherever required with utmost rapidity,
it's never too late to turn over a new leaf,
this will undoubtedly provide to our folk in the rural areas much needed relief.
- F R Misquith
More may Get a Ticket to Ride on Bank Street
......The intention is to allow a greater number of players qualify, a senior official involved with the process of issuing new bank licences said. Any final decision to tweak the guidelines would be taken by RBI, but the external screening committee headed by Bimal Jalan, former RBI Governor, is expected to play a crucial role in recommending suitable changes. ...........
Rs 3,800-cr bank credit to State MSME sector
........Speaking to The Assam Tribune on the sidelines of the NE MSME Conclave 2013 organized by the Indian Chamber of Commerce here, RBI General Manager (Rural Planning and Credit Department) D Sethy said, “Last fiscal, total credit allocation in the NorthEast stood at Rs 3,300 crore, of which Assam’s share was Rs 2,600 crore. This fiscal the disbursement target for Assam alone is Rs 3,800 crore and the process has started well.”........
Go beyond salaries
....In the event, at a macro level it may be possible to say the government is compensating employees adequately, but the 7th Pay Commission needs to, like its predecessors, look at the head-to-tail ratio—the government has too few secretaries and too many peons, the former is still under-paid and the latter highly over-paid. Government data shows the government spends around 13% of its salary bill on gazetted officers and the rest on the non-gazetted ones. Apart from correcting this, perhaps with a VRS and certainly by freezing salaries at this level, there is little point in hiking salaries unless attention is paid to the work done by bureaucrats. ..........
7th Pay panel formed, retirement age may go up 62 yrs
.......Meanwhile, CNBC TV18 learns that the proposal to extend the retirement age of central government employees by two years has received fresh impetus. A decision on this could be taken within a week or two, and would be the second major populist decision by the UPA to woo the urban middle class and the powerful government employee mass in Indian society..........
7th Pay Commission for central govt employees announced
Prime Minister Dr. Manmohan Singh today approved the constitution of the 7th Pay Commission, which is likely to impact at least 85 lakh central government employees and pensioners. "Its (7th Pay Commission's) recommendations are likely to be implemented with effect from January 1, 2016," Finance Minister P.Chidambaram said in a statement.............
RBI says fee on debit card usage not permissible
The Reserve Bank of India has directed banks to terminate relationship with merchants who charge customers a certain percentage of debit card transaction value as processing fee. "Such fees are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants and therefore calls for termination of the relationship of the bank with such establishments," the RBI said in its circular.........
RBI's Jaago Grahak Jaago moment
........Do this simple test to calculate the extra payout: Ask the dealer for the cash discount you will get if you were to purchase the same good. The discount will most likely be around five per cent. So, for a product of Rs 48,000, it will translate into savings of Rs 2,400. Two, the processing fees, say, Rs 1,000. For a 12-month loan, if three instalments are being paid in advance, the actual loan is Rs 36,000 for only nine months. Your loss: Rs 3,400 (processing fee plus cash discount loss). The rate of interest is 12.6 per cent..............
Further season blues: RBI bans zero interest EMIs for consumer goods
......”...in principle, banks should not resort to any practice that would distort the interest rate structure of a product as this vitiates the transparency in pricing mechanism which is very important for the customer to take informed decision,” RBI said in a notification. The very concept of zero per cent interest is non-existent and fair practice demands that the processing charge and interest charged should be kept uniform product or segment wise, irrespective of the sourcing channel, such schemes only serve the purpose of alluring and exploiting the vulnerable customers, it said........
Banks told to end zero interest EMI schemes
With the festival season fast approaching and banks and merchant establishments falling head over heals to woo clients, the Reserve Bank of India dealt a severe blow to them on Wednesday. The Central Bank has instructed banks to stop offering zero interest EMI (equated monthly instalment) schemes for the purchase of consumer goods in a move to discourage them from offering such schemes or products..........
RBI steps in to tame runaway bond yields, attract dollars
...In its “assurance on liquidity management” released on Wednesday, the central bank said it was monitoring liquidity conditions closely and continuously. The central bank said it would take actions as appropriate, including OMOs, to ensure that adequate liquidity is available to support the flow of credit to productive sectors of the economy...........
RBI asks banks to regularly review export credit limit
......"We have examined the issue and banks are advised that they may compute the overall export credit limits of the borrowers on an on-going basis say monthly based on the prevalent position of current assets, current liabilities and exchange rates and re-allocate limit towards export credit in foreign currency, as per the bank’s own policy," RBI said in a notification...........
FCNR golden goose: Great returns on borrowed capital
Foreign banks are scrambling to raise dollar deposits from non-resident Indians -- even tempting them with loans -- to open their foreign currency non-resident (bank), or FCNR (B), deposit accounts in India. The move comes after the Reserve Bank of India (RBI) opened a special window for swapping FCNR (B) dollar funds of three years or more at a concessional rate, and offered various other incentives, including cheap dollar/rupee swap rates, as part of its efforts to stem the rupee depreciation...........
We are banking champions, Moody’s concerns overblown: SBI
..“What Moody’s feels is their view and we don’t subscribe to that. SBI is and will remain the banking champion of the nation. We have no difficulty in raising deposits with our nationwide presence nor do we have any means in raising funds. “We still have the highest rating amongst the public sector banks when it comes to bank?s financial stability rating (BFSR) from Moody’s.”............
Why all is not well with the State Bank of India
............In layman language, SBI does not have money to fund its losses in order to keep its capital in line with the RBI guidelines. Normally the bank would run to the government when its capital adequacy ratio came down, either due to strong growth or rising losses. But now the government financials are in such a mess that it would find it difficult to raise the capital needed.............
Less bank for the buck
...Chaudhuri needed to have concentrated on the quality of the loan portfolio rather than on profit margins or on growing the loan book. Indeed for a chairman who started out mending fences with the regulator, Chaudhuri appeared, once too often to be spoiling for a fight with the RBI on issues like the Cash Reserve Ratio (CRR).......
Why KV Kamath thinks RBI went wrong on rupee
.........."In the past, the mistake we have done is to say we have no tools (to defend the rupee). I think the main difference what I've seen in the approach is that Raghuram Rajan has taken is to say that we have tools, that single statement made by a central bank Governor can make the markets take watch,"............
Rising cyber crime cases: Poor coordination between cellphone operators, banks blamed
....."It has been observed that after the SIM is blocked, the money is siphoned off from the account via multiple transactions that take place one after the other over a short time period. The banks have systems to detect that the transactions are taking place at this pace one after the other. In such a scenario, an alternative verification mechanism, such as the one using a secondary cellphone, can be employed."
Capital ratios of public sector banks under pressure
The joke doing the rounds in banking circles these days is that investors are better off putting their money in bank deposits than in bank stocks. The absence of any bank stock from several model portfolios of leading brokerages indicates the analysts are not just making light of a “stressful situation.” The sharp run up in bad loans is not just a cause because stressed assets are eroding capital ratios of state-owned banks. The markets had hoped that RBI’s new boss Raghuram Rajan would start easing rates to boost growth but.............
Aadhaar's role is diminishing
........It was only in December 2012, over two years after the first card was issued, that the Reserve Bank of India (RBI) allowed banks to accept Aadhaar as valid proof to open bank accounts. And this Tuesday, the Supreme Court ruled that Aadhaar is not mandatory for essential services such as salary, PF disbursals and marriage and property registrations. Obviously, the question is that whether one should really go for Aadhaar anymore? .................
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