...The RBI Governor has, however, created a difficult choice for the Centre to solve. In about a year the 14th Finance Commission under YV Reddy is expected to publish the results of a similar exercise. The Commission has a similar remit, viz on what basis should states get a share of the tax revenue pool. One part of the pool is assigned on the basis of share of tax receipts but the rest is assigned on a set of indicators which measure how far the states are located from the national mean on fiscal performance, poverty and pressure of population..........
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.
Tuesday, October 1, 2013
Decoding Governor Rajan
.......The confusion is understandable, given that the RBI revised two policy interest rates in opposite directions. To be fair, the policy statement and RBI Governor Raghuram Rajan's post-policy comments made it clear what the central bank was attempting. But any conclusion limited to a single word - such as "eased" or "tightened" - that would normally be associated with the decision of any central bank was elusive...........
Raghuram Rajan needs to walk a long way before he can pare interest rates
On his first day in office on September 4, Raghuram Rajan, the new governor of the Reserve Bank of India, pointedly underlined the likelihood of his surprising the financial markets with his actions. "A central bank should never say 'Never'," said the 50-year-old Rajan. Two weeks later Rajan showed he had meant what he said. ................
Now pay your wife rent and claim HRA
........On appeal, however, the Tribunal ruled that since the house was owned by the wife and rent was paid, which was proven via bank transfers, Ramdharani is entitled to exemption under section 10(13A), which pertains to HRA under Income tax Laws, 1961. Since the appellant fulfilled the twin requirement of occupying the property and paying rent, he is liable to get rent exemptions, the Tribunal held. The ruling is likely to set the benchmark in similar cases, said chartered accountants, pointing out that the practice has so far been frowned upon by the authorities concerned..............
Govt yet to name new State Bank of India chief
.........Sources said in a late evening communication, the government told the SBI management till a new chairman was appointed, all the four managing directors should hold charge of their respective areas of operation. None of the managing directors was given interim charge of the chairman's post, which has led to speculation a new chairman would be appointed soon........
An appeal to the Hon'ble Members of the Central Board of RBI
........Despite these clear articulations in the RBI Act itself, why the Government is so keen to take RBI Staff Regulation under its wings is utterly incomprehensible, excepting, most probably, to evade "consultation with the Governor of the Bank". This is perceived by the staff of the Bank and their representative trade unions as an affront to the august office of the RBI Governor,...........
National Pension System - Not an Effective Option ! - M.G.Warrier
........As things stand now and the way in which NPS is being marketed today, no one can find fault with the general feeling that let alone NPS being a shelter for the worker not covered by any formal retirement benefit schemes now, but it is posing a threat to existing established retirement plans in the organized sector. NPS has already dismantled defined benefit pension scheme in the organized sector............
Next monetary policy review on Oct 29
The Reserve Bank of India will announce the Second Quarter Review of Monetary Policy 2013-14 on October 29, 2013. In the mid-quarter monetary policy review on September 20, the RBI, recognising that inflationary pressures are mounting, had raised the repo rate by 25 basis points to 7.50 per cent......
Police clueless after fake notes crop up from Trichy banks
.....It was on September 27 that RBI officer KS Joshi registered a case at the Trichy city police commissionerate. However, CCB assistant commissioner, Trichy Pugalendhi, termed the complaint as nothing unusual. "The complaint from RBI regarding fake notes in banks is a routine one. It is too late for them to complain about the counterfeit notes because the police could not fix the person who deposited the money in the bank. If the bank officials catch the person who deposited the fake notes red-handed, we can investigate the case. Otherwise, it is tough to pursue the case. Hence, the bank officials should be more cautious in receiving cash from customers because such carelessness ruins our economy." .........
Transparency is not a bad word!
My View on "The story behind 0% interest EMI schemes":
The observation “The RBI has raised an alarm once again to protect consumers but one needs to be careful on occasions when retailers dangle schemes which may look attractive but may ultimately prove to be a bad financial decision.” need to be seen in the wider context of government’s and regulators’ concern to protect public (read consumer’s, in this context) interest. If the approach is broadly understood, there will be more awareness about the need for vigil on the part of consumers and a better understanding of the concept of ‘self regulation’ by organisations handling public funds and those doing ‘business’. Transparency is not a bad word!
- M.G.Warrier
Halal Street
.........However, it encountered one hurdle after another. First, getting RBI and Securities and Exchange Board of India (SEBI) approval proved hard. Later, BJP politician and former Union Minister Subramanian Swamy filed writ petitions against the Kerala Government, alleging that its support for sharia finance went against the secular principles that guide a government. The case was dismissed in 2011, and this August, the NBFC received its RBI licence to operate as a non-deposit taking NBFC.................
SBI Cards wants RBI to rethink ban on zero per cent EMI schemes
SBI Cards will soon approach the Reserve Bank of India seeking a review of the latter’s decision to ban ‘zero per cent’ EMI (equated monthly instalment) schemes for purchase of consumer goods through credit cards. The standalone card issuer will pitch for a rethink on the decision with a promise of better communication with customers in the coming days, Pallav Mohapatra, Chief Executive Officer, SBI Cards, told Business Line. SBI Cards will soon write to the RBI in this regard, he added. However, Mohapatra said the RBI move would “not be a very big blow” to SBI Cards, but admitted it could impact turnover........
Goodbye to Gadgil’s formula on state funding?
...If it is going to replace the good old Gadgil formula—named after the economic historian D.R. Gadgil who devised it for providing plan assistance to states—as it appears, then it needs to be far more rigorous. The index also needs to have a deeper connection with the history and politics of the fiscal federal system and the transfers that emanate from it. There are five problems with the report. First, its recommendations don’t address the basic issue of the aggregate pool of plan transfers available for distribution among the states. ...........
Alteration of bank licence norms unfair: EY
Ashvin Parekh, senior advisor, EY says it is unfair on the government's part to change the rules after the whole process of applying for a banking licence is over. The Standing Committee on Friday recommended that industry and banking be kept separate, as it is not sure whether the safeguards put in place by the RBI including the fit and proper criteria, and group exposure norms would be effective enough to prevent banks promoted by industrial houses from cozying up to their industrial owners..
Why business groups should not own banks
......Our objection to corporate ownership of banks is based on the very idea of efficient financial intermediation. A bank is a financial intermediary that raises money from depositors to lend to borrowers. In a country such as India, households are a major source of deposits while companies are large borrowers. A bank should ideally be a neutral intermediary, with no interest in the game other than intermediation. In other words, it should neither own a business group nor be owned by one. Else, it has strong incentives to abandon its unbiased position as an intermediary. The new Indian banking rules undermine this fundamental assumption........
Bank on facts
........The Reserve Bank of India’s (RBI) guidelines for issuing new licences require promoters to ring fence their banks’ operations from activities of other group concerns. The new banks will be barred from extending credit or investing in equity/debt instruments of any promoter group entities or associated individuals. This effectively rules out the possibility of corporates promoting banks mainly with a view to mobilise public deposits, which they can then lend out on favourable terms to their own companies............
A glass half full
............Be that as it may, looking ahead, there are indications that the current account deficit may be plateauing. While exports declined during the quarter by about 1.5 per cent, trade data for the first couple of months of the second quarter do suggest something of an exports revival. Given the extent of rupee depreciation over the past three months, this is not surprising and is most welcome...........
Watch out for the CPI rate-shock - Renu Kohli
...Importantly, it is a bit naïve to think that the “monetary policy framework” committee will overlook the new-CPI’s limitations pointed out by the former RBI Governor as these are very specific: lack of robustness, dominance of supply side factors and inadequate data coverage for services’ price indices. Neither do these become irrelevant with change of guard at Mint Street, nor do they change colour to align with a new policy frame work! These are purely data limitations that must be addressed, without which a robust policy framework would lack credibility...........
CPI’s core problem
.....Renu Kohli has, both today as well as earlier, raised some important questions about the quality of data. Why should the CPI series for rural and urban inflation converge when both the rates of inflation as well as the weights of various commodity baskets are so completely different in rural and urban areas? Intriguingly, this convergence in inflation trends applies to the sub-components of CPI inflation as well; it is difficult to understand, similarly, why ‘bedding and clothing’ inflation in core-CPI should be rising on average 15% since January 2012..........
Consumer interests hurt as ambitious Aadhaar-linked e-KYC burdens the consumers
...In an interactive session of two and a half hours the representatives of the NGOs, activists and citizens brainstormed and finalised on a memorandum. The foremost issue discussed was the very fact that implementing Aadhaar contradicts the very objective with which it was introduced. It aimed to pioneer the financial inclusion but the entire system of transaction charges negate the objective. The whole process in expensive and results in deposits burdened with the charges.........
A practical agenda in financial inclusion: What RBI Governor Dr Rajan needs to do?
.........Given the above, Dr Rajan’s first task would be to ensure that the RBI puts out a proper working definition of “financial inclusion” and ensures that all stakeholders promoting and/or looking at financial inclusion use the same consistent definition. Otherwise, outreach figures on financial inclusion would be meaningless and cannot be evaluated or compared in a serious manner...............
Empowering the masses through Financial Inclusion
.In realising the objective of achieving “financially inclusive growth”, the biggest challenge is improving financial literacy so that borrowers could take informed decisions. Bank’s extensive financial literacy programmes overcome this problem by reaching thousands of customers and small entrepreneurs. As per the RBI guidelines, each Lead Bank is expected to open a Financial Literacy and Credit Counselling Centre (FLCCCs) in every district where it has lead responsibility. We have opened FLCCCs in many districts for providing financial education/credit counselling free of charge. In addition to this, ............
Read...........
Expedite Financial Inclusion, Takru Tells Banks
...The
bureaucrat, who was to discuss bad loans with bank chairmen in the
financial capital, put it on the backburner asking them to aid the
efforts of Reserve Bank of India Governor Raghuram Rajan for financial
inclusion. “He suggested us to expand the network in business
correspondents, micro ATMs, filling Adhaar-linked savings account for
subsidised LPG cylinders,” a bank chief told ET requesting anonymity. “He enquired about the current scenario on NPAs and cases for restructured loans.”...............
Cooperative banks put Madhavpura Bank behind, head for Gujarat
AHMEDABAD: Eight cooperative banks have expanded into Gujarat, a state scarred by the 2001 Madhavpura Bank scam that saw a collapse of cooperative banks in the state. Most of the new entrants have taken the mergers and acquisitions (M&A) route, the preferred option in the wake of a Reserve Bank of India ban on issue of new cooperative bank licences following the scam,.........
UCBs asked to provide audit certificates of farm debt waiver
....."Considering that there is a wide divergence between the percentage of errors found in the sample audit carried out by CAG and the percentage of errors found by banks while conducting their own verification exercise, the government has desired that all the banks should submit their auditors' certificates with regard to accuracy of the re-verification exercise," RBI said in a notification. .........
At AGM, Rupee Bank shareholders accuse admin of inaction
......The decision of the administrators to start talks about the merger of the bank with Saraswat cooperative banks had irked the shareholders, who strongly objected to the move as they feared it would lead to them losing their money. On Friday, the administrators, while speaking to the media, had stated that one of the financial instruments being discussed is that depositors with more than Rs 1 lakh investments, would have to keep a portion of their savings locked for a period of three years........
Takeover process by CanBank in progress, says Amanath Bank
......n a press release on Monday, Naseer Ahmed, MLC and president of Amanath Co-Op Bank, said that in response to the Amanath Bank board’s request, Canara Bank has agreed in principle to take over the co-op bank in a letter dated September 27. The same has been communicated to the Reserve Bank of India and Registrar of Co-operative Societies (RCS), Ahmed stated.........
Indian Bank gets new ED
Mahesh Kumar Jain has joined Indian Bank as Executive Director.Prior to this, he was General Manager at Syndicate Bank’s largest Regional Office, Mumbai...........
Protection against credit card frauds: Should we adopt provisions of Regulation E?
..........Regulation E provides protection to the card holders by defining the maximum liability of a card holder. As per the regulation, “A consumer shall be liable for any unauthorised electronic fund transfer involving the account of such consumer only if the card or other means of access utilised for such transfer was an accepted card or other means of access and if the issuer of such card, code, or other means of access has provided a means whereby the user of such card, code, or other means of access can be identified as the person authorized to use it, such as by signature, photograph, or fingerprint or by electronic or mechanical confirmation.” ........
RBI must ban ICICI Bank Credit Cards and others who tap phones
.........A more serious offense committed by some private Banks, including ICICI Bank is tapping of phones of customers for getting details of friends and relatives to harass for payments even if the mistake is of the Bank. ICICI Bank Credit Card Department that operates from Rohini New Delhi regularly indulges in such practices. On the 2nd of June 2013 a mail to MD and CEO Chanda Kochhar with a copy to Sandeep Batra Company Secretary and Chief Compliance officer highlighted the malpractices by the Bank as under:................
Read - ET
Tech Wreck: A disaster waiting to happen?
......India urgently needs a clear and unambiguous IT usage policy which has a transparent system of audit, accountability, redress and penalties, which cover all technology networks in the country. But that, too, is not enough. We need it to be managed by truly qualified technology experts, who have the ability to stay ahead of sophisticated hackers, in order to ensure the security of systems. Unfortunately, ......
Oh My God! Don’t eye our gold
......Of the three major temple boards in Kerala, which administer more than 2,800 temples, Cochin board has also decided against providing details of its gold, while another has yet to decide and a third says it has not yet received a letter from the RBI, reports Reuters. Many devotees believe that whatever has been given to the temple is out of devotion and should stay within the sacred boundaries of the temple. While a certain section of the society feels it is high time that the temples reveal their network including gold holdings so that the devotees know everything about the temple that they so longing visit.......
Kerala is ahead of most of the Indian states...........
My View on "Is Kerala's development a chimera?":
The observation “Experts point out that the industrial sector has been the driving force behind liberalized India's amazing growth story, and are worried at the potentially dangerous implications of low investment for Kerala's progress.” is intriguing. If India’s ‘amazing growth story’ can take care of the development parameters like literacy, healthcare, housing, overall poverty alleviation and general lifestyle of the majority of the population where Kerala has gone ahead of most of the Indian states, with the level of investment in Kerala, people may welcome that. There cannot be any uniform criteria for development in the present economic and political atmosphere in India. India is a country which has still 7,50,000 families working as manual scavengers and talking about AADHAAR for all.
- M.G.Warrier
Banks unlikely to rush to raise foreign currency deposits
....No doubt, India needs every dollar it can garner, but analysts say banks are not dying to do this. While the incentives may bring down cost of funds by 125-200 bps compared to the prevailing domestic rates, banks are unlikely to rush to raise these deposits. Analysts say currently, such deposits are at merely 15 per cent of tier-I capital of banks............
The shine is off FMPs
...........Post the RBI policy, yields on certificates of deposits have come off to around 10.5 per cent against 11 per cent and above before the RBI policy. As a result, FMPs that invest in a host of fixed-income papers such as certificates of deposits and government paper are likely to make marginally lower yields from their fixed income investments going forward, as compared to August...........
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