........ The statement recognises that the RBI accommodation to banks can only be a marginal support and going forward, the more durable strategy for mitigating mismatches between supply of and demand for funds, is for banks to step up efforts to mobilise deposits. With the more recent upturn of inflation, inflation expectations remain elevated. The policy statement recognises that it is important to break the spiral of rising price pressures in order to curb erosion of financial savings. The policy stance and measures are intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth. The RBI would “ closely monitor inflation risks while being mindful of the evolving growth dynamics.” The RBI has to undertake a fine tightrope balancing act between its legitimate concern for inflation control and the government’s instinctive preference for fostering a revival of growth, particularly in the industrial sector...........
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, November 4, 2013
An evolving multilateralism - Dr.Subir Gokarn
...........Like the previous two domains, managing global macroeconomic stability has also seen paradigm shifts. The dominant International Monetary Fund (IMF) view of the world was shaken by the obvious inappropriateness of its recommendations in response to the East Asian crisis in 1997-98. This led to the affected countries and their similarly endowed neighbours emphasising the value of self-insurance, in the form of rapid accumulation of foreign exchange reserves. This assured them some independence from the multilateral framework in the event of another crisis. But......
RBI may have more role for Nachiket
How does the monetary policy work?
....Through
its monetary policy, a central bank can affect the demand in the
economy, but it has no power to affect the supply. When growth falls,
the central bank may reduce the repo rate. As this monetary signal works
its way through the economy, the rates for all sorts of loans fall.
This stimulates the demand and helps the economy return to its potential
growth rate. Sometimes the growth rate is............
Know why Kuber is placed at the entrance of Reserve Bank of India Office in Mumbai
......As per our ancient texts like Puranas, a sage by the name of Vishra is believed to be the father of Kuber. That is why Kuber has been referred as Vishraa by the ancient literature. Due to the Kuber’s association with glory, splendor, prosperity, grandeur, and affluence he was chosen to be kept at the entrance of the Mumbai office of the Reserve Bank of India to ensure the treasury of the Indian government never remains empty.............
Four person in police custody for videography of RBI, VIdhan Bhavan
.............The youths revealed that they were given a contract to gather information about security of RBI, Vidhan Bhavan and other sensitive areas. With this information, city police and intelligence agencies have been alarmed. Cops have started investigating about the person who gave the contract about gathering the details.
RBI, banks firm up regional focus ahead of proposed bifurcation
........The financial regulator RBI is mulling an umbrella model in this regard. The regulator’s Hyderabad centre will continue to be the financial capital for the bifurcated regions according to a highly placed source at RBI. The regions will be brought under the jurisdiction of the RBI at Hyderabad, a regulatory model that is in place in the newly created States – Uttaranchal, Chhattisgarh and Jharkhand according to him...........
Fake money menace on the rise, cops worried
............Sources from Pune crime branch said that the counterfeit notes, which are difficult to identify without a detection machine, have flooded the city. The local traders, shopkeepers and banks are the worst hit. The state ATS had arrested an alleged operative of the Indian Mujahideen (IM) two years ago and recovered fake currency notes, which he was allegedly using to raise funds for terror activities. So far, the investigators have established a link to Bengal where fake currency notes are pumped through Bangladesh. .............
Cash in Hand
........... "The RBI expressly forbids people from writing anything on a note. But cashiers write on the uppermost note of a pile routinely, this is something which happens every single day." To complicate matters further, the FICN seized of late in the capital has been of a superior quality, fooling even experts (The micro-lettering used by the RBI has been mimicked, in certain cases)................
Different strokes
Gone are the days when the Finance Ministry used to react to monetary policy changes by the Reserve Bank of India. Often, the Finance Minister himself would make a brief statement, which would be followed by an official release. But when Raghuram Rajan raised the key policy rate by 25 basis points at the policy review on October 29, the minister and his ministry kept mum. Quite a change from the days when Finance Minister P. Chidambaram used to react rather sharply after rates were raised.
- HBL
Pencil in another rate hike
...........So, predicting what a central banker would do when he looks at the heat-map is easy. Policy rates will be raised to tame prices. And if inflation is accompanied by high growth, the decision is a no-brainer. But that’s not the case in India at the moment. GDP growth has slipped sharply to 5% in the last fiscal and prospects for the current one are worse. CRISIL expects growth to slow further to 4%. This creates a dilemma: should RBI focus on growth or high inflation? This is hotly debated every single time before the announcement of the monetary policy. We argue that a sluggish economy does not mean RBI should become tolerant of high and rising inflation. Therefore, the decision to raise interest rates on October 29—which implies that risks from high inflation outweigh risks from low growth—was appropriate...........
Inflation busting outplays growth angst
.....Further, RBI has pushed its case for sustained growth by enabling banks to draw money from the central bank if necessary for financing projects affected by liquidity shortfalls. Under the circumstances, it is investor confidence and debottlenecking of infrastructure projects which can push growth further. A semblance of normality has returned to the broader economic outlook with the current account deficit becoming manageable and rupee not facing imminent danger. Yet, RBI’s persistent anti-inflationary stance suggests anticipations of below par or nominal growth in the current fiscal.........
Salutary messages from the RBI
..........Normalisation of monetary policy rates indicates that the repo rate will be restored to its pre-July position of being the policy rate. Under normal circumstances that would be a signal to banks to raise their interest rates. But the MSF has been brought down, and the short-term repos will now provide more liquidity. Understandably, many banks have reacted cautiously, waiting to study the full implications............
The Montek school of thought
..........Ten years is a long time for any tenure. It is, therefore, logical to ask what imprint Ahluwalia has left on the working style of the Planning Commission. Or, for that matter, what difference he has made in the Planning Commission's role in governance and overall approach to policy-making. For such an assessment, it is important to understand the context in which the Planning Commission was set up...................
Green shoots?
.....What accounts for this small but possibly significant turnaround? Management of the external economy, particularly after Raghuram Rajan took over as Reserve Bank of India (RBI) Governor, is certainly a reason. Whether or not pure coincidence, India’s foreign exchange reserves have risen by $8.1 billion since September 6 (two days after Rajan assumed charge). This is despite.......
A vision of sustainable growth
Is India doing as well as it wants to? We were proud of our GDP growth when it was high; now we are dismayed. Even in those years of high growth not so long ago, we were not happy with the progress of inclusion in growth, and the pace at which social and economic inequalities were being reduced. Nor could we be happy with the deterioration of our natural environment in our hunger for material and GDP growth........
Options Get Legit, Now RBI should Act
.....Sebi’s change of heart may prove to be a game changer for equity
investors and is certain to aid investor sentiment. However, it is now
hoped that the RBI too would be changing its antithetical stance towards
options. RBI has been known to take a “view” that any optionality in
securities in favour of foreign investors makes the investment take the
colour of a debt and, therefore, non-FDI compliant. This view has been
causing practical roadblocks in the way of ........
Tale Of The Tumbling Rupee
.....One of the capital control measures adopted by the Reserve Bank of India is the reduction of the cap on outward flow of remittances from $200,000 to $75,000 per year, which could slow down investments in Dubai’s real estate sector........
Below-the-line is the best bet in rural India
In the late nineties of the last century, the Reserve Bank of India introduced new norms setting limits based on the ratings of individual businesses; whereby NBFCs (Non-Banking Finance Companies) were restricted from taking deposits from the public. Though these norms were well meant, yet they adversely affected well managed NBFCs like the Shriram Transport Finance Co (STFC).........
Rising inflation: Have food prices delinked from agricultural production?
.......But here's the problem. Few observers, including the RBI, seem to expect any substantial moderation in inflation, or in the actual level of prices. "The price level is expected to remain high," says Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices (CACP), a government body which advises the government on agricultural price policies such as the minimum prices offered to farmers for grain.............
Are banks wrongly branding people as defaulters?
.........That brings us to the subject of this article. The pendulum has perhaps swung away to the other extreme from the time when banks were helpless spectators to a borrower defaulting, to the current scenario where a bank has the power to deny credit to the borrower if he defaults with them. While it is not my intention to bat for defaulters, people being wrongly branded as defaulters is a very serious issue, especially where banks have this power completely in their hands..........
High interest riddle in state savings scheme
............According to analysts, despite the low fund costs, it will be a tight ropewalk for the state-run corporation as it will have to depend on a large number of depositors to make the scheme viable. Moreover, change in interest rates by the Reserve Bank of India and the macroeconomic condition will also affect the scheme's performance.
Insurance cover no big deal for company deposits
.........The Act also bars companies from promising huge returns and hefty commissions to agents, in excess of the prevailing rates prescribed by the Reserve Bank of India (RBI) for such deposits. The premium paid cannot be recovered from the depositor and the money has to be paid by the company alone. Also, the mandate to maintain a balance in a reserve account would push up costs for companies. It isn't clear whether companies would earn any interest on the reserve account, but it wouldn't be much, even if they do. Simply put, these proposals will make deposits an expensive source of raising funds. This means ...........
Banks told to set up ATMs in all gram panchayats in Karnataka
..........In the first six months of the current fiscal year, the RDPR spent Rs. 850 crore and deposited Rs. 500 crore in banks for payment of wages to beneficiaries. Following the poor performance of business correspondents, delay in the payment of wages by banks, and also to reduce travelling time and expenses, the RDPR has asked to conduct mapping of all GPs to set up ATMs. Sudhir Kumar Jain, chairman of State-level Bankers’ Committee, and Managing Director of SyndicateBank, also suggested that banks explore the option of setting up ATMs in GPs.......
Give Civil Servants Cash, not LTC
.....State-owned banks are thinking of changing the rules that govern the LTC regime, but that will not help. What could, is to scrap the allowance altogether and pay the
money as a part of bureaucrats’ salaries. There is no point, apart from
ducking a little bit of tax, in distributing travel or other allowances separately from the pay cheque..........
Shobhan Sarkar writes to PM seeking transparency in excavation
.....Sarkar sent the letters yesterday, demanding amendment to the Indian Treasure Trove Act so that the recovered gold could be handed over to the Reserve Bank of India. He also sought complete transparency in the ongoing excavation and asked the government to allow common people to the site and live media coverage of the excavation. .........
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