.........By far, the greatest concern is of forecasting a price series that has yet to stabilise. This is a point noted by both current and former RBI Governors, Raghuram Rajan and D Subbarao in recent months, suggesting the CPI series is possibly still under observation by the central bank. It has also to prove robust and dependable. For example, even when prices of volatile components fluctuate sharply, they tend to return to the previous level within a relatively short span. We do not see such mean-reversion in the CPI series so far. Alternately, could there be a secular upward trend, i.e., a shifting mean? Other than that complex processes such as these need pinning down if they exist, the danger is of forecasting inflation when the price level may be deviating from its long-run behaviour............
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Wednesday, November 13, 2013
Trial by taper - Ila Patnaik
.......Reducing inflation, in what might be a short window before the tapering starts, is not easy. Inflation has been high and persistent for nearly four years now, and inflationary expectations are heavily entrenched. The RBI governor, Raghuram Rajan, is moving in the right direction by focusing on inflation. This is the sustainable path to reducing the current account deficit and India's vulnerability to a sudden stop in capital inflows. Consumer price inflation in India has been above the RBI's target levels of 5 per cent since 2006. It has been rising ever since, .........
For forex, turn to NRIs - A.Seshan
......One additional measure I would like to suggest for strengthening the rupee is adoption of the foreign exchange (immunities) scheme of 1991, announced during the Gulf crisis. The source of funds, purpose and nature of remittances were then not subject to scrutiny under the exchange control regulations and direct tax laws. The only reported misuse of the scheme was conversion of the non-convertible rupee funds, particularly with reference to the special trade arrangement with the erstwhile Soviet Union. Timely action was taken by the RBI to plug the loophole to ensure that only remittances in free foreign exchange were eligible..........
Why shift public debt management from RBI to GoI? - M.G.Warrier
..........If the finance minister (FM) is able to exert sufficient pressure fast enough, to be more specific, before Dr Raghuram Rajan, governor of the Reserve Bank of India (RBI), is able to comprehend the history and context of public debt management in India, one will not be surprised to find the present team in RBI managing public debt getting government of India (GoI) label and getting rechristened as DMO, which is part of the finance ministry...........
FM releases commemorative Coin of Rs. 20 and Circulation coin of Rs. 5
The Union Finance Minister Shri P.Chidambaram released a Commemorative Coin of Rs. 20 and a circulation coin of Rs. 5 to mark the culmination of the 125th Birth Anniversary of Maulana Abul Kalam Azad at a function held .........
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Madam Chairman
...............The mid-management thought that was the right way to go but wasn't sure whether it would pass muster in official documents since many rules apparently needed to be changed if the occupant of SBI's corner office had to be called chairperson. Bhattacharya, however, thought it's much ado about nothing and settled the matter.......
Expedite wage talks, says State Banks’ Staff Union
..........The United Forum of Bank Unions, an umbrella forum representing the nine unions, has presented its charter of demands in time. Four rounds of bilateral discussions have been held but the IBA, which represents the management, has not come out with concrete proposals. The negotiation should be settled with a higher load factor to the satisfaction of the workforce, a resolution passed by the central committee said.......
RBI’s reality check candle
..........The suave RBI Governor, Dr Raghuram G. Rajan, has given a piece of his mind by unequivocally underscoring the importance to break “the spiral of rising price pressures in order to curb the erosion of financial savings and strengthen the foundations of growth”. Instead of shooting the messenger by sidestepping the message, the ruling dispensation should do intense introspection to improve the prospects for a sustainable turnaround of the economy from its ills and travails.
Sebi gives RBI a chance to clean up mis-selling by banks
..... Given the status of the RBI in the regulatory pantheon, younger regulators have been iffy about stepping on the banking regulator’s toes. And so the story has gone on. This is the second time that Sebi has stepped visibly on the turf of another regulator. Regulator watchers remember the time almost four years ago when C.B. Bhave, the then chairman of Sebi, asked 14 insurance companies to stop selling unit-linked insurance plans (Ulips) since they were nothing but a collective investment scheme under the garb of an insurance policy. The resulting media and finance ministry attention possibly cost Bhave his second term, but..............
RBI Seeks Credit Accounts Details of Banking Licence Applicants
......“Over the past one month, the central bank has written to global
regulators, including the Monetary Authority of Singapore, seeking
details on any violation or penalty levied on the
applicants that have international operations,” said a senior official
familiar with the matter. After completion of its due diligence, the RBI
will hand over the applications to an external expert panel headed by former RBI Governor Bimal Jalan for further scrutiny. Applicants may face hurdles if RBI gets adverse report against them from any regulatory, tax or investigative authority.........
PM, Sonia to woo women with banking schemes
........Officials said the Bharatiya Mahila Bank would offer special schemes to women opening an account with it. While the bank would extend its services to men too, they won’t get any special dispensation. Details of the schemes would be announced by the Prime Minister while inaugurating the bank from Mumbai on November 19--the birth anniversary of former Prime Minister Indira Gandhi. There will be a simultaneous launch in Kolkata, Guwahati, Chennai, Bangalore, Lucknow through a video link.......
In The Big League
.........P.J. Nayak’s nine-year-long innings as Axis Bank’s chairman saw frequent run-ins with the powers that be. A year after he took over, he decided to “go on leave” until he was cleared of any role in the aborted merger of UTI Bank with Global Trust Bank. In 2007, he resigned when Mint Road said the post of the chairman and chief executive had to be split. Sharma, having learnt a few lessons from ICICI Bank’s ‘halcyon days’, has sought to strike a balance between growth and profitability. It is evidenced in the bank’s financial parameters...........................
Big Bank Theory In Practice
........“There was a gap between how others saw us and how we saw ourselves,” says Kochhar, managing director and CEO. A key challenge was to convey the bank’s strategic shift to its immediate family of stakeholders — employees — and the world. That message was successfully delivered, and imbibed by all concerned; it has since paid off handsomely................
Jammu Women stakes claim for opening first Women Cooperative Bank in J&K
.........Chairing a meeting of the general body of Jammu Women Credit Cooperative Ltd., here today Mrs Kailash Kumari claimed that their society allready possess all the required infrastructure for the same to be granted license from the RBI for opening first Jammu Women Cooperative Bank in the state . Jammu Women Credit Cooperative Ltd. has set up its network almost in all the thesils and Distts. of Jammu divisions, including in remote areas of Poonch, Rajouri and erstwhile Doda Distts...........
Gurgaon Gramin Bank moves CAG against merger
........In a letter addressed to the CAG on Monday, the associations of bank workers and officers said Gurgaon Gramin Bank is a regional rural bank (RRB) sponsored by Syndicate Bank and, according to Reserve Bank of India guidelines, all RRBs in a state have to be merged. "In this sequence, RRB having better performance under various business parameters would have an edge over others and amalgamated RRBs would be managed by the sponsored bank of better RRB," the letter said. ..............
India mulling over Euroclear Bank's settlement platform
...The Finance Ministry, the Reserve Bank of India and the Securities and Exchange Board of India are due to meet next month to see how to make rupee debt eligible for Euroclear Bank's settlement platform, the officials said, asking not to be identified as the deliberations are private............
Reserve Bank says no to ‘bond tourists’
Even as the government is exploring ways to attract foreign investment to support a weakened rupee and fund the current account deficit, the Reserve Bank of India is treading carefully on removing the limitations on debt investment for foreign institutional investors after having witnessed a sharp outflow of funds by FIIs from the Indian debt earlier this year. In a clear reflection of RBI's concerns, Governor Raghuram Rajan, talking to researchers and analysts in a conference call last week, said he would prefer real tourists but not "bond tourists".........
Govt to finalise views on FDI, FII definitions in 2 weeks
......"In the next two weeks, we will finalise our view on FDI/FII definition. It is only a question of logical consistency," Economic Affairs Secretary Arvind Mayaram told reporters here after a meeting on the matter. The meeting was attended by officials from the Reserve Bank of India, the Securities and Exchange Board of India and the Department of Industrial Policy and Promotion. A committee headed by Mayaram is looking into the definitions..................
Assocham for flexibility in borrowing via bonds, MTNs
The Reserve Bank must allow flexibility in borrowing through bonds and Medium Term Notes (MTN) for Indian banks with strong balance sheets, industry body Assocham said Tuesday. The move could help the lenders garner funds with a minimum tenure of three years from good quality institutional investors................
Banking round table: Debt recast a good concept for a growth economy
Six of the country's leading bankers say while green shoots are visible, the pace of recovery will be slow because of a whole lot of unresolved issues............
Raise Interest Rates For A Sound Economy
......As the previous Reserve Bank of India Governor Duvvuri Subbarao argued towards the later part of his governorship, interest costs did not determine investment decisions since it was less than 3% of revenues. But the interest rate, or the returns, is a deciding factor for an individual in choosing between financial savings and physical assets. However much one would preach the virtues of equity, or mutual funds investments, Indians' natural choice is a bank deposit. The mutual fund industry's two-decade wait for individual savings to flow into its coffers is a testimony to it. If the banking system pushing up deposit rates well above 10% (yet to happen, but the danger is real) is not welcome, the government should consider correcting a lopsided tax policy. ..............
High inflation, low IIP: Rajan will have to hike rates again
.............Food inflation has been keeping policymakers busy and there’s very little chance that Reserve Bank of India Governor Raghuram Rajan will keep rates unchanged when RBI meets again for its mid-quarter review of the monetary policy on 18 December. Consider some of the key figures on the consumer inflation side............
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The rupee’s continuing troubles
..........There are a couple of domestic factors too that seem to be working against the rupee. The most important of these is the partial closure of the special window that was opened by the Reserve Bank of India (RBI) for oil companies to buy their dollars directly from the central bank. With apparent stability prevailing over the last few weeks, the RBI pushed back into the market almost half ............
D-Street favourites queue up at RBI for higher FII investment cap
........The sudden sell-off was not on account of the usual set of triggers such as results disappointment or fresh earnings downgrades; the drop was sparked by a notification of the Reserve Bank of India (RBI) late last week that the foreign institutional investor (FII) investment limit had been touched. Traders dumped the stock as they felt the move would cap the stock upsides........
What saves India from a crisis?
........After the large fall in the value of the rupee in September, RBI is considering an increase in its reserves. This is not required. As earlier suggested, RBI can instead buy international credit lines that work out cheaper than foreign exchange reserves. RBI can also provide inflation-indexed bonds more meaningfully than is the case at present. This can reduce demand for gold and help in other ways. RBI can also set an example by not buying more gold, if not by selling its existing gold stock. This will give it greater moral authority to advise the public not to buy gold.
Is the Indian rupee on the brink of another violent downturn?
......"The big issue is [the] RBI is no longer supplying as many dollars to state-owned oil companies as what it was - so now they have to go back to market to source their dollars. That's a concern as the oil companies are now more visible from a market perspective," said Jonathan Cavanagh, a currency strategist at Westpac.............
Republic of CPI
...........The CPI, however, shows little correlation with other economic variables. Since the index is less than three years old, this could be passed off as a statistical quirk, a data-collection model that needs some tweaking—but with RBI putting out its first-ever CPI forecast and statement that “retail inflation is likely to remain around or even above 9 per cent in the months ahead, absent policy action”, it is apparent CPI is very much on RBI’s policy radar. This is much the same as it is in many developed economies, but the CPI there is more robust and RBI needs to look at other growth parameters as well, more so since inflation-targeting as the main policy objective was given up by most central banks a long time ago.................
The RBI's many rates
........There are, in my opinion, two things that the RBI needs to do at this stage. First, it needs to give some indication of both the levels of the two inflation rates that it wants to target and the weights that it wishes to assign to each of the two rates. It should also emphasise - and this is the important bit - that these are essentially medium- or long-term targets and in the near term the central bank is unlikely to follow a mechanical ("keep hiking rates until the target is reached") approach. Thus, it would also factor..............
Rajan urges regulators to ‘lean into the wind’
...........Addressing the Bank of Italy on lessons learned after the economic crisis of 2007 to 2009, Rajan said the key to getting the benefits of financial access was to “always be conservative, taking away the punch (bowl) when the party gets going.” Looking back at the Great Depression in the United States in the 1930s in an examination of speculative bubbles and their effect on monetary policy, Rajan said it was clear than greater credit availability tended to make the economy sensitive to shocks...........
Capital challenges mount for PSU banks as performance sinks: India Ratings
......Banks’ deteriorating performance also brings the role of hybrid debt capital in absorbing losses under focus. The market for Basel III Tier 2 instrument is fledging in India and investors will benefit if the Reserve Bank of India (RBI) articulates a framework for invoking losses on the investors.......
Jewellers in a fix over gold imports
.........“The industry is facing several issues in the domestic market and 80:20 norm of the RBI makes it very difficult for domestic players to correlate with the international market, in addition to satisfying Indian demand, which is very high.. imports have comes down drastically,”...................
Banks have to share details with the taxman
........SC has ruled that no financial institution can refuse to disclose details of their customers on the ground of confidentiality to the income tax authorities. It said that the Financial Act, 1995, has expanded the power of the revenue authorities to requisition information which will be useful for or relevant to any enquiry or proceedings under the Income Tax Act. Besides, the income tax officers can now gather general particulars of customers in the nature of a survey and store information in computers to check any tax evasion, the apex court said..........
34k bank branches at risk as MS to end Windows XP support
..........However, banks believe that the issue is being "blown out of proportion". According to the chief technology officer at a bank, all financial institutions have strong internal security systems, which would not be breached even if Microsoft stops supporting Windows XP. “Absolutely nothing will happen if banks continue to use Windows XP even after Microsoft stopped supporting it. This issue is being over-hyped. There is a process of replacing each PC every five to seven years, so when we do that, the operating system will automatically get upgraded. The threat is not high enough to pay the kind of costs involved in migrating from one operating system to another,".......
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