........Those small borrowers who were thrown out of the formal financial sector, sought refuge in the arms of the moneylenders and have stayed there. All this went on, till say 2008, when financial inclusion became fashionable. There are limits to the PSBs’ ability to reach out. First, physical access and second resource constraint. The credit deposit ratio was 78 per cent in August 2013 and the incremental credit- deposit ratio 70 per cent. Thus the PSBs are already over- stretched. But the solution is not new, small private sector banks, which may take time to grow roots in the rural economy. The cooperative sector holds out great potential in this context. Look at the reach of cooperatives. Cooperatives account for a relatively small share in the bank– dominated Indian financial system. However, given their geographic and demographic outreach, they hold a key position in the financial system. Geographically, cooperatives have been instrumental in extending formal financial services to villages and small towns in India...........
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.
Monday, October 28, 2013
Walk alone but don’t dance alone: Chidambaram to Subbarao
The Independent...............
At the launch function of his book, Barons of Banking: Glimpses of Indian Banking History, author Bakhtiar Dadabhoy delivered a short speech, apparently under instruction from his publishers. He said he was keeping the speech short to compensate for his “bulky tome”, and delivered the perfect punch line: “Even if you don’t plan to read it, buy it!”........
..........Y. V. Reddy, who was chief guest at the launch, took a crack at the debate about central bank independence. A former RBI governor himself, Reddy was often asked about this and this is how he responded: “The RBI is independent. The Governor is very independent. And I have taken the permission of the Finance Minister to say so.”
On Central Banking
......There was a belief or an unwritten law in the past that the central bankers should neither be seen nor heard in the public. It was the late H V R Iyengar, an exceptionally brilliant civil officer and the sixth governor of the RBI (4th Indian governor, 1957-62), who broke this convention and started periodically making public speeches expounding on central banking practices and policies to the benefit of laypersons. From then on it was a quantum jump to the days of Duvvuri Subbarao who effectively brought the concept of central banking to the doorsteps of even the villagers in India, apart from ...............
Vaastu differences
Why is it that every finance ministry official who moves to the Reserve Bank of India as governor turns against the finance minister who is the most responsible person for appointing him? Y V Reddy,D Subbarao and now Raghuram Rajan - all stop seeing merit in many of the things the finance ministry suggests. Subbarao, who had ........
ICAI to point out financial health of WB
.....Kishore Periyar, Deputy General Manager, DNBS, Reserve Bank of India, said, “Over the last two years RBI has undertaken grassroots level sensitization programme in the mother tongue where police officers, consumer welfare officers, district level officials of directorate of small savings are being educated on how the common people should be educated about investment. After all one rupee saved is one rupee earned.” Periyar went on to add that the Reserve Bank of India (RBI) Rural Planning Department has started a new programme called 'Raju and Money' which is run in all village gathering like fairs and weekly bazaar. "Besides this RBI is continuously in touch with Urban Bank Department and advise people not to invest in companies about which they don’t understand," he said.............
Bridge ideas & execution, says RBI deputy governor KC Chakrabarty
At a time when there is no dearth of innovative ideas, Deputy Governor of Reserve Bank of India (RBI) KC Chakrabarty emphasised that it was time to bridge the gap between innovative ideas and its effective implementation...........
Sequencing monetary policy moves
............The menu of monetary policy instruments is quite wide in the October meeting, keeping markets guessing about the details. However, more clarity on financial reforms and the new RBI Governor’s market-development agenda might overshadow the importance of the monetary policy actions
RBI’s just tinkering around
.....You cannot get a stronger repudiation of the extreme short-termism in market reactions to developments in the macro-economy than the former SBI Chairman’s statement. Indeed, if the latest WPI number had come in a shade lower, the “Street” would have sounded the all-clear for a reduction in the repo rate. Such is the fixation on the short-term. The policy recommendation is data release to data release. A perspective on how central bank interest rate moves impact banks’ deposit and lending rates is not obtained in the process; and, in turn, how they influence consumption, savings and investment behaviour in the economy over a period of time. With his hard-hitting comments, therefore, the ex-SBI Chairman may have done a signal service in highlighting the RBI’s challenges................
Radical change in policy approach
......Monetary policy is not just about financial market reactions; it is about fostering stability, something which all investors cherish. Reducing volatility in this environment requires sound macroeconomic fundamentals. Whatever the individual measures now, India’s financial sector will be transformed. This is important not just for meeting India’s voracious need for capital to finance growth, but also to move the country towards emerging as a major international financial centre to.........
RBI and the fight against inflation
.....One criticism of RBI’s monetary stance is that it can only control core inflation (as measured by WPI). That has remained below 3% for a while now and, hence; there is a case to loosen interest rates. Once again, this way of looking at inflation is illusory. Take a look at core inflation, but as measured by CPI, and you see a different picture: for the last four months, from June onwards, core CPI has been consistently above 8% and was the highest at 8.39% in September. One can quibble about what index RBI should track, WPI or CPI. But the fact remains that..........
Raghuram Rajan is likely to uphold tradition
.......So, if opinion is unanimous that the RBI will play with a straight bat - to use new governor Raghuram Rajan's fondness for cricketing analogies - tomorrow, the reasons are not far to seek. They are steeped in history. The RBI, despite its legal infirmities, is an inflation fighter. In all likelihood, therefore, the RBI will raise the repo rate by 25 basis points to 7.75% and, possibly, cut the interest rate on its marginal standing facility at which banks borrow from the RBI by a like amount. .........
Food for monetary thought
A central bank's role doesn't stop with controlling inflation; it also extends to anchoring inflationary expectations. For the Reserve Bank of India (RBI), the latter has been rendered especially difficult, thanks to soaring food prices, against which the standard monetary policy tools are largely ineffective..........
Infusing fresh thought into Monetary Policy
My View on "The RBI’s inflation obsession":
The author has captured the deficiencies in RBI’s monetary policy stance which has been obsessed with a lingering worry about taming inflation. When RBI’s rates announcements or guidance on the direction of interest rates do not influence prices or deposit rates which are the major concerns of common man, why not RBI listen more carefully what the political bosses and industrial houses say and act accordingly?
The new Governor Dr Raghuram Rajan is infusing fresh thought into Monetary Policy. Let us hop his announcement on October 29 will factor in, among others, the following:
i) To the FM’s embarrassment, last week’s review revealed that one-third of all NPAs of PSBs were contributed by top 30 NPA accounts in each bank.
ii) While much ado is there about base rates, deregulation of savings bank interest rates did not add to the interest income of real SB account holders.
iii) The Net Interest Margins enjoyed by banks in India are among the highest in the world.
iv) The theory that ‘interest cost is not the major ingredient in project cost’ is interpreted to mean that small borrowers can afford to pay higher rates of interest.
v) Big depositors get preferential rates of interest and big borrowers get attractive terms for borrowing including special attention when their loans become NPAs.
vi) The impact of changes in base rates on interest rates(both deposit and credit) administered by banks during the last 3 years.
vii) The finance ministry’s linking of interest rates on festival season consumption loans to release of additional share capital to PSBs.
- M G Warrier, Mumbai
Justice black and white
........ I salute Chief Justice N V Ramanna for his strictures against the Sanskriti School. He said, "What is the necessity for various state governments and ministries including the Defence Ministry and the Reserve Bank of India to fund the school run by officers' wives?" These 'wives' are all married to bureaucrats and the Chief Justice made it clear that he disapproved of them trying to 'create a separate island for children of these bureaucrats'.........
Finmin rushes with bank appointments
.......While
it is unclear what has prompted the rush to conduct interviews, sources
suggested that the ministry is keen to finalize the appointments before
the next general elections. Bankers, however, fear that the exercise
may go waste if the next government decides to review the decisions of
UPA-II. The interviews are technically irrelevant as the Central
Vigilance Commission has in the past frowned upon the idea of giving a
blanket clearance several months in advance. But, that is not the only
reason for controversy..........
Will India align with IFRS?
........A major issue for Indian regulators is the lack of IFRS knowledge and experience in the accounting and auditing profession here. There is a need to align the industry-specific accounting guidances issued by various regulators. For example, the Reserve Bank of India issues guidance for banking companies, the Insurance Regulatory and Development Authority issues guidance for insurance companies, the Central Electricity Regulatory Commission issues guidance for electricity companies, SEBI issues guidance for listed companies, and the Ministry of Corporate Affairs too issues certain guidance.............
Fourteenth finance commission on Gujarat visit
......The Commission was set up by Government of India early in 2013 and is expected to submit its report by October, 2014. The period for which the Commission will recommend share of States in the Central taxes will be from 1.4.2015 to 31.03.2020. The Chairman of the Commission is Dr.Y.V. Reddy who was the Governor of Reserve Bank of India for five years till 2008. The other members of the Commission are ..........
The tortuous road to new bank licences
.........In any case, the process of awarding a new bank licence was never expected to be smooth. Among the several controversial issues, allowing large industrial houses to start a bank has been the most contentious. A very large number of respondents to RBI’s discussion paper were not in favour of awarding licences to big business houses. However, such policy issues have been decided. A few large industrial houses will be given permission to start banks. Amidst the riveting interest on the subject, two related developments merit attention..........
Takeover by foreign banks will be delayed
.............. "To allow takeovers by foreign banks means that a change in policy is needed, which can happen only if the Cabinet approves the increase in the cap in the banking sector,"..............
RBI queries applicants, regulators on new bank licences
.......As part of this process, RBI has asked many applicants to provide further details about their promoters, equity structure, financial inclusion programme, proposed banking model, among others, sources said. RBI is also seeking details from other regulators, including capital markets watchdog Sebi and insurance regulator IRDA, about the businesses of the applicant entities under their respective jurisdictions, they added. With regard to some applicants, RBI has also sought to know details about source of funds and compliance to the structural norms proposed for new banking players............
How new banks can win biz
.........It is not merely the right kind of leadership but also the right size at the start which is critical to deliver optimal execution. Banks need to maintain a balance between creativity and control of risk. The ability to use information and not just technology effectively is an imperative. Banking is information business and as such good quality data is central to any business. Banks are still in love with their management information system, which is essentially backward looking. They can gain immensely by deploying predictive analysis and not just stick to descriptive analysis. Technology and information are two distinct disciplines. New aspects such as data mining can make a huge difference. No business model will succeed without customer focus..........
Banker’s Guide to Building a Robust Institution
......But
leaders of new banks need to question what their strategy will be. Many
believe that a mix of an underpenetrated banking system combined with
an industry where 75% of the players are inefficient (PSU banks) makes
the Indian banking industry an attractive investment opportunity. They
are right. Can this really be their principal strategy? Do other leaders
think they have the same self belief and crushing work ethics that the
promoter of the bank they cite has? I doubt it...........
Taking Women on Board a Tough Act for Cos
...The rush is likely to intensify as companies
have a limited pool to searchfrom,said SureshRaina,senior partner at
Hunt Partners, an executivesearch andboard advisory firm. It doesn’t
help that top women bankers such as Chanda Kochhar and Shikha Sharma
can’t be tapped — Reserve Bank of India doesn’t allow bank CEOs to be on
boards of other companies except by rare special permission. Of India’s top 100 listed companies, 34 don’t have any women directors, according to data........
Agricultural Education & Knowledge Management
......The opening essay argues how sustainable agriculture requires the utilisation of both the codified knowledge of the researchers and tacit knowledge of the farmers for its development and adoption. Organisers need to access and apply new knowledge keeping in view the rich practical experience of farmers. The chapter on Agricultural Education emphasizes that it should reflect a right mix of scientific technology and orientation with an international dimension. Academic institutions should include representatives of industry and other employers on visiting committees, on advisory boards and in strategic planning. An analysis of the various phases of agricultural development in India after 1947 has shown that the focus has altered from human resource management to technical management to extension management.........
Read - FPJ - Book review by P.P.Ramachandran
Fed, RBI to drive stocks this week
.......For the week ahead, two central banks will play a key role in deciding the direction of Indian markets. The US Federal Reserve, in its two-day meeting ending Wednesday, will mull over the future of its massive bond purchase programme known as quantitative easing (QE)3. On Tuesday, the Reserve Bank of India (RBI) will decide whether to increase its key policy rate..........
Capital infusion in PSBs rests on December review
Rajeev Takru, secretary in the Department of Financial Services, said banks weren’t finding it difficult in carrying out their lending operations. In December, the Centre would review the performance of public sector banks in lending to the retail segment — consumer, automobile and home loans — before deciding on infusing additional capital in these.............
UPA's infinite wisdom: Minister seeks 2 more digs, ‘airlift’ of 4,000 tonnes of gold
....In a letter dated October 18, the minister of state for agriculture wrote to Culture Minister Chandresh Kumari Katoch referring to "two more treasures which need to be acted upon without any time loss". He asked Katoch to "consider sending a joint team" with representatives of the Ministry of Finance, Reserve Bank of India, ASI and the Geological Survey of India...........
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