How, and How Not, to Analyse Bank Financial Performance - V.K.Sharma

........While on the how-and-how-not of bank financial performance analysis and evaluation, a tailpiece on banks' reporting of 'total business' will not be out of place and context. Typically, in India, it is routine for banks to report total business as the sum of deposits and loans to give analysts and investors a sense of growth in banks' business. But this is not only at variance with the international practice but also intellectually and conceptually flawed and vitiated for all ' business ' is about generating revenues and returns for shareholders and it is ' total assets' that precisely do that and it is tautological and axiomatic that there is no way revenue generating assets can exist and grow without corresponding expense contributing liabilities ! ..........

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Rupee is stable when depreciates in orderly manner: KC Chakrabarty

......"When the rupee has to depreciate, it has to depreciate orderly. That is the meaning of stability. Stability does not mean that rupee will be at this particular level. What we are saying that if rupee has to depreciate or appreciate, it has to do so in an orderly manner, which is not happening right now. It goes to Rs 70 and then it comes to Rs 61," ..........

Read | Business Standard

RBI’s Dy Gov points to agri models of Punjab, Gujarat to check food inflation

......"If we can bring the agricultural model of Punjab, Haryana in eastern Uttar Pradesh and Bihar, which have fertile soil and figure out a way to organise people, then it can increase productivity... I am told that Gujarat has 10% growth rate in agriculture, then why can't Maharashtra achieve the same GDP in agriculture?" Chakrabarty said, while delivering the keynote address at the Knowledge Summit '2013', .............

Read - IE

Do data have a context? - T C A Srinivasa-Raghavan

...........This means that the regulatory, external, technological, environmental, social or the political environments, singly or together, do influence the nature of activities. So, it is necessary to be very careful about how policy uses data. If the context is not identical we can - and do - end up getting the wrong policies. But then, all past data have some regulatory, natural, external, technological, social or the political context. Indeed, in India the problem is not confined to the contextuality of the data, which is a universal problem. Here it is exacerbated by bad data as well............

Read | Business Standard

Need to infuse professionalism

My View on  "How the RBI can be made more accountable – Part 2": 

Issues raised in this and the previous article are very relevant in the present Indian context, not only for Reserve Bank of India, but across government, statutory bodies, public sector and private sector organisations or governance in general. Accountability is an important issue. Self-regulation and independence of organisations within the mandated role are also issues needing attention. As brought out here, appointments to board and downwards and tenure of appointment are important as also are the quality of people who take key positions, adequacy and transparency in compensation packages and so on. If we look back, we got the benefit of the services of Seshan, Vinod Rai, APJ Abdul Kalam, Bimal Jalan, Dr Manmohan Singh and now Dr Raghuram Rajan (the list is illustrative), by ‘accident’ rather than by appropriate succession plans or right exercise of choices. We should, at this stage, pool talent and make succession plan, an opportunity to infuse professionalism in managing organisations. Open debates like this initiated by Moneylife will expedite moving towards this objective. Refinements in legislation or issue of guidance by ministries should be to achieve well set out objectives and not to silence dissent. 

- M.G.Warrier

A very good move

My View on  "Banking woes! ombudsman coming incognito": 

This is a very good move and can be followed by Ombudsmen attached to all regional offices of RBI. I would be extremely happy, from the point of view of customers, if this is immediately implemented by the new incumbent in Chennai, Shri Chiranjivee, who has recently taken over. The office of the Ombudsman in Chennai came out in poor light recently in one case involving a small private sector bank with its headquarters in Kerala.

- A.Chandramouliswaran

Assured deficit...............

My View on "Pension Deficit": 

The Central government employees who were in service as on December 31, 2003 have a Defined Benefit Pension Scheme. According to a 2008 estimate, the net present value of the pension liabilities of central government now being met on a Pay As You Go basis was Rs 3,35,628 crore(6th Pay Commission Report,2008). Considering this staggering liability which grows proportionately with rise in inflation rate and periodical revision in pay structure, Central Budget, 2003-04 contained a proposal to introduce the new restructured defined contribution pension system for new entrants to central government service. The New Pension Scheme (NPS) for new entrants to central government service from January 1, 2004, except to Armed Forces, in the first stage, replacing the existing system of defined benefit pension system was introduced through a notification dated December 22, 2003. Government and other organisations which have introduced NPS from various dates after 2003, have washed off their hands from the responsibility to give ‘assured’ returns on the investments made by employees. Please read my article on National Pension System published in The Global ANALYST, October 2013. 

- M.G.Warrier

Interest rates: the case for status quo

.....With the WPI and CPI inflation numbers coming in higher for September, there is a natural expectation that the central bank will increase rates on October 29. However, there are compelling reasons to believe that the RBI will adopt a neutral stance this time, given the singular conditions that we are witnessing.............

Read - HBL

The RBI’s inflation obsession

......To justify the higher interest rates — knowing well that monetary policy was being ineffective in controlling inflation that is rooted in a poor supply response — the RBI mooted the expectations theory with a tinge of the counter-factual. The RBI felt that unless interest rates were kept high, food inflation would get generalised, as people would expect higher inflation. High rates are meant to convey that the RBI is serious about inflation. The counter factual to this was that, had interest rates not been kept at a high level, inflation would have been much higher. However, it is a different matter that inflationary expectations have remained at very high levels, despite the rate hikes................

Read - HBL

Another subsidy

.....Of far more importance has been the innovative swap facility offered by the Reserve Bank of India (RBI) on non-resident deposits collected by banks. The Indian central bank said this week that $10 billion of deposits have already come in through this route. That is an impressive policy success........

Read - Mint

RBI casts long shadow on proposed Micro Finance Bill

......Deposing before the Standing Committee of Finance here today, RBI Governor Raghuram Rajan and other central bank officials made it clear that the organizational set up of the central bank is not suited for regulating and supervising such entities. “Effective regulation of such entities would only be possible by authorities who have the necessary reach and wherewithal to cover remote areas. The regulation of such entities by the RBI or any central authority, which does not have a local presence, could prove to be both ineffective and expensive”, the RBI said........

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Plastic money grew 2.1% in September

.........."During the first half of this financial year, jewellery, consumer goods and travel have not grown significantly. These are where credit card usage is high. Because of the depreciation of the rupee, many postponed or cancelled travel abroad. Also, the incremental spends on garments, mobile phones and other consumer goods have been low in the first six months. RBI came down heavily on jewellers. All these probably contributed to slow growth in the outstanding credit card book,"........

Read | Business Standard

As banks step up vigil, tech-related frauds slide

Technology-related banking frauds in India have fallen in the last four years, thanks to banks stepping up checks on online transactions. Between fiscal 2009 and 2013, they spent Rs 350 crore on manpower and machinery, and this is paying off. According to the Reserve Bank of India, the number of frauds has been going down since 2009. In FY13, 8,765 tech-related frauds were reported, a 13 per cent drop over the previous fiscal.......

Read - HBL

Distress signals in Indian economy

...According to KC Chakrabarty, Deputy Governor of the Reserve Bank of India, there has been little headway in the implementation of infrastructure projects. "Out of 576 SEZs that have received formal approval, only 172 are operational. Against a target of awarding road projects aggregating 50,621 kms during 2008-13, only 10,690 kms have been awarded," he said at an infrastructure finance conclave in Agra on August 9. Many of the projects awarded are yet to see commencement of work due to problems in achieving financial closure, delays in land acquisition and obtaining environmental clearances. "Out of 16 ultra mega power projects (UMPPs) planned, contracts for only four were awarded. Of this only one has become operational and another is nearing completion and that too much beyond the scheduled dates," Chakrabarty added...............

Read - India Today...........

Fiscal 'con'solidation

India's finance minister may fall back on a tried-and-tested accounting gimmick to create the illusion he is hitting his fiscal targets. Though Palaniappan Chidambaram's ploy won't fool savvy investors, it is nonetheless politically convenient. It will shift the deficit burden by one year, by which time it may have become another government's headache............

Read | Business Standard

Slipping on onion prices

.......High onion prices were a prime factor in pushing food inflation to 18.4 per cent in September, and going by current indications, the picture may not be very different when the October data come in. The Reserve Bank of India will be watching the trends closely. Given the inflation scenario, it is quite likely that the central bank will be forced to hike rates again, which is not good news for borrowers and the larger economy.

Read - The Hindu

RBI appoints special auditor for First Leasing; firm's MD allowed to quit

The Reserve Bank of India (RBI) has appointed an auditor for a special audit of the book of accounts and transactions of First Leasing Company of India, from the year ended March 31, 2010. A C Muthiah, the chairman of First Leasing, also said its board of directors had accepted last week's resignation of Farouk Irani as managing director (MD), though this would not absolve him of accountability to the company, stakeholders and statutory authorites........

Read | Business Standard

‘Slowdown hurts banking sector’

MANGALORE, OCT. 25:  

The asset quality of the banking sector is under stress mainly on account of subdued economy and negative sentiments of investors, according to P. Jayarama Bhat, Managing Director of Karnataka Bank Ltd. Addressing the regional heads’ conference of the bank in Mangalore on Friday, he said there was untapped potential in retail segment – especially in MSME (micro, small and medium enterprises), forex, agri and housing sectors. These sectors will drive growth in the ensuing quarters............

Read - HBL

Pvt banks take upfront MTM hit

......This is despite the one-time option provided by the Reserve Bank of India (RBI) to amortise these over three to seven quarters. Banks and analysts said not doing so was in tune with prudent accounting practices. The losses ranged from Rs 18 crore to Rs 289 crore...........

Read | Business Standard

FREEBIE FESTIVAL

.....The other reason behind the freebies is the RBI’s clamp-down on schemes such as the 20:80 payment scheme. Builders are working hard to find alternative ways to attract buyers. One of these is to monetise the waiting period. Chennai-based XS Real, for instance, is offering a ‘No pre-EMI until possession deal’. Vikas Ramanathan, Manager - Sales, explains, “We have had a lot of enquiries and closed six deals in one day. Since the RBI has abolished the 20:80 scheme, we are offering a No Pre-EMI scheme. Here, upon an upfront payment by the customer we offer cheque payments to him or her for the EMIs until the property is handed over.”.........

Read - The Hindu

ICICI Bank: Strong loan growth aids profitability

.......Most private sector banks have dealt well with the problem of rising bad loans. ICICI Bank has also maintained its slippages within guided levels. A small negative has been the lower provisioning coverage and the marginal rise in restructured loans. While the RBI had allowed banks to apportion their mark-to-market losses on their bond portfolio over three quarters, most private sector banks have turned down the offer......

Read - HBL

Banks jittery as telecom regulator gets tough on unregistered telemarketers

.......The Telecom Regulatory Authority of India (TRAI) is understood to have notified all service providers to disconnect the telecom lines of about half a dozen entities, mainly banks, as complaints pertaining to non-compliant telemarketing calls were being received from customers. According to TRAI guidelines, financial institutions (banks, insurers and non-banking finance companies), builders and other entities could face the prospect of disconnection of all their telecom resources if they are found to be engaged in telemarketing through unregistered telemarketers.............

Read - HBL