Has the global financial crisis dented central bank independence? - Grace Koshie

Grace Koshie looks at the post-crisis role of central banks, examining issues of fiscal dominance and weaker policy freedom in an increasingly inter-connected world demanding ever-greater transparency

...................The debate about the central bank’s mandate and its independence is an old one. The relationship between central bank autonomy (the words ‘independence’ and ‘autonomy are used interchangeably in this paper though these words could have slightly different connotations) and the inflation rate has been extensively investigated by the empirical economic literature. There is a fair degree of consensus that a single mandate such as inflation targeting is best for central bank credibility and for its independence. Today, there are 28 countries that use inflation targeting as a sole mandate, fixing the consumer price index as their monetary policy goal over a timeframe of two to three years................

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The Reserve Bank's mission impossible?

............In the past, the job of the Reserve Bank of India (RBI) Governor tended to be relatively easy because delivering on RBI's mandate of low inflation commanded political and social support. The interests of North Block and Mint Road were broadly aligned. But the growth boom of the 2000s changed all that. Pursuing growth was privileged over slaying high inflation. In August last year, when growth began to fall below 5 to 6 per cent and, critically, when this deceleration began to seem more permanent, panic galvanised policymakers into reform action. But high and sustained inflation has never elicited a comparably robust policy response..........

Read | Business Standard

Election Commission allows launch of first all-woman Bharatiya Mahila Bank

.....The Election Commission has allowed the launch of the first all-woman Bharatiya Mahila Bank in the country tomorrow but asked government not to open its branches in Delhi and Madhya Pradesh and neither do publicity of the bank in these poll-bound states. In a letter to the Finance Ministry, the Commission has said government should ensure that no publicity of the bank opening be done in poll-bound states.............

Read - DNA

Emphasis on funding for women's skills development: Usha Ananthasubramanian

................While bank will do business with women across economic strata – high networth, middle class to low income group, there will be emphasis on funding for skills developments to help in economic activity. We are looking at assistance (credit) to set up well managed day care centres and also to start organised catering services..............

Read | Business Standard

Women’s bank learns from elder sibling in Maharashtra

For the Bharatiya Mahila Bank, the country’s first pan-India national women’s bank, it is a humble rural cooperative women’s venture in Maharashtra that has provided the critical input to succeed: How to lend to women who do not have collateral to back their loans. Chetna V Sinha, founder and chairperson of Mann Deshi Mahila Sahakari Bank, explained that this is the prime weakness in giving loans to women. The cooperative bank got around the problem by asking the woman’s husband to give an undertaking that his wife is a partner in the property and that she is taking the loan to develop her household. This is the same technique the Bharatiya Mahila Bank plans to adopt. In fact, it is Sinha who advised the new bank to do so. To become a part of the financial inclusion story, it is essential.............

Read - FE

Documentation of the history sought for

My View on "The kings of finance - Dr.S.S.Tarapore": 

The effort taken by several individuals and institutions like Reserve Bank of India with which they were associated has not been documented and placed in public domain adequately. Books like Barons of Banking and the 4 volumes of RBI History so far brought out attempt to make up for this gap. RBI should consider supporting meaningful documentation of the history of Indian Financial Sector bringing out the role of institutions and individuals, so that the present and future generation need not depend on ‘cut and paste’ solutions borrowed from nations with different history while solving India-specific problems in economic development. 

- M.G.Warrier

Need to read between the lines

My View on  "RBI Governor: Wizard of Communication - Dr.S.S.Tar...": 

Transparency in communication has received a boost in RBI during this decade. Dr Subbarao also believed in transparency in policy decisions and their implementation. Dr Rajan has the added advantage of being known for being fearless and fair while taking positions which he considered right. Some indications are available in the cover story featuring him in current Business Today (November 24 : His Own Man), for those who have not read his book Fault Lines. But his being transparent or forthright alone cannot save Indian Financial Sector. The clear messages RBI Governor gives have to be received in right spirit and acted upon in Delhi. Unfortunately, there are no positive signals yet. The initiative taken by RBI to create a rough inventory of domestic gold stock did not get the needed support. Exploiting domestic gold stock, making part of it ‘standard’ and creating a buffer stock of tradable gold will go a long way in resolving India’s present forex and CAD-related problems.  

- M.G.Warrier

Not CBI: FM needs to free the real ‘caged parrots’ — PSU banks

...........Many ideas are possible, but innovative thinking must start at the finance ministry – which has been unwilling to let go of its control of banks. Chidambaram himself may be happy to privatise a few public sector banks, but his government is a dyed-in-the-wool believer in public ownership. Like the CBI, our public sector banks are “caged parrots” answerable to different masters – politicians, the RBI, investors, and North Block, among others. Little wonder, there is little innovation.

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Will ‘new-economy’ Rajan turn RBI on its head with Twitter and all?

...........It seems Governor Raghuram Rajan wants to throw all old school thoughts into the dustbin and bring in some new changes at the strictly conservative Reserve Bank of India (RBI). Rajan is a governor who comes without any bureaucratic baggage. His new steps, rather than beating the traditional safety drum, are likely to make the institution relevant in the decades ahead with financial sophistication........

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Raghuram Rajan urges `dramatic remaking` of India`s banking system

........."I see over the next few years a dramatic remaking of the banking landscape," he told the Financial Times. "Both from the . . . new banks which are going to come on board, and the foreign banks which are going to be allowed to expand more freely. It will be a multiplier in terms of competition." International outfits such as Standard Chartered and HSBC account for only about 6 per cent of assets, but Mr Rajan says the RBI's new rules provide a "huge" opportunity to grow by expanding into areas such as trade finance, and even to "take over Indian banks at some point".............

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KVB opens 1st ultra small branch

COIMBATORE, NOV 18:  

Karur Vysya bank has launched its first ultra small branch at Balarajapuram village in Karur district. J. Sadakkadulla, Regional Director, RBI, Chennai, inaugurated the branch. The bank has appointed a business correspondent to man this branch and provide basic services such as opening of savings account, recurring deposit account, payment and receipt of cash etc.............

Read - HBL

SBT counters for senior citizens

......An official spokesman claimed that State Bank of Travancore is the first bank in the State to open special counters for senior citizens. The bank intends to open more such counters at selected branches, he added.

Read - HBL

Banks wrote off Rs 1 lakh cr in 13 years: Chakrabarty

........In his over hour-long interaction with the bankers, Chakrabarty used hard data to support his observation and blamed complacency on credit appraisal and credit management for the present situation of high non-performing assets and high incidence of loan recasts. Chakrabarty, who joined RBI after a long career as a commercial banker, was particularly critical of the system of a “technical write-off” by the lenders, saying he does not understand the system...............

Read | Business Standard

Banking on basics

..........The new lenders who will be licensed soon will not choose to become niche banks. If the finance ministry and the Reserve Bank of India want to start niche banks, they will pile up another set of sick lenders. ..........

Read | Business Standard

Kotak Bank gears up for competition from new banks and foreign players

.....Mumbai-based Kotak Mahindra Bank, which has the nation’s highest net interest margins, will open 500 new branches at locations including small towns and villages to shelter itself from the local subsidiaries of foreign banks and new domestic rivals, chief financial officer Jaimin Mukund Bhatt said in a November 12 interview. Competition for the 65 per cent of Indians that don’t have a bank account is set to intensify after central bank governor Raghuram Rajan introduced rules on November 6 removing branch restrictions on overseas lenders that form local units........

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Banks struggle to expand in unbanked, rural areas

......As per RBI instructions, at least five per cent of these villages should have brick and mortar branches. According to latest SLBC data, banking services have been provided in all 1,877 unbanked villages in the state with population exceeding 2,000 through brick and mortar branches, ultra small branches, BCs and mobile van banking by June 30, 2012. However the SLBC has stressed on looking beyond basic banking facilities like a pure savings account, a savings cum overdraft account, recurring or variable deposit account, a remittance product to facilitate electronic benefit transfer and other remittances and entrepreneurial credit at the door step of the customers...........

Read | Business Standard

'Banks' bookkeeping leaves investors in dark'

......Banks' accounting practices have come under regulatory scrutiny following the financial crisis when a number of banks, whose accounts showed they were healthy, had to be rescued by taxpayers. Policymakers are now trying to restore confidence in banks after the crisis so they can obtain more funding from investors rather than having to rely on central bank money.............

Read' | Business Standard

RBI to offer Rs.5,000 crore to SIDBI

..........“The liquidity support comes in the wake of slowdown in the economy which has resulted in liquidity tightness in a large number of Micro and Small Enterprises (MSEs) in the manufacturing and services sector, particularly due to delayed settlement of receivables from large corporate, public sector undertakings and government departments,..............

Read - Mint

Co-op bank fraud: Deccan Gymkhana cops seek RBI probe

......."All eight accounts were fake with one common 'introducer', who is a peon (in an educational institute in Kolhapur). We have written to the RBI requesting them to probe the issue at their level. It must be pointed out that this was not just one account but eight. So we believe that there is negligence, which needs to be probed by the RBI."..............

Read - IE

Are inflation numbers reliable? You be the judge!

....As early as in July 2011, the then Reserve Bank of India (RBI) Governor, D Subbarao had questioned the reliability and frequent revisions of some of these basic data which are vital for all policy decisions of the central bank and the government. “The RBI’s policy formulation is handicapped by frequent revisions to data. We make policies in real time and if the provisional data that these are based on are inaccurate, the resultant policies can turn out to be sub-optimal choices,” Subbarao had said......

Read - Moneylife

De-jargoned: Disinflation

.........A slowing rate of inflation is termed as disinflation. Inflation means the general rise in the price level in an economy. Disinflation is the deceleration in the pace of inflation or price rise. It is important to note that disinflation is different from deflation. Deflation is a state of continuous fall in the level of prices. So when policymakers talk about disinflation, it does not mean that the prices will fall. It simply means that prices will rise at slower pace. There is a difference...................

Read - Mint

Reserve Bank of India Recruiting 34 Assistant Manager Security Posts

.....Reserve Bank of India is inviting applications for the recruitment of Assistant Manager Security posts. Only 34 posts are available to fill up the gaps at various branches of Reserve Bank of India. Interested candidates...........

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When it comes to financial sector, India is way ahead of China

......India is fifteen years ahead of China in economic and financial market reforms. Interest rates in India are market determined with the RBI doing away with ad hoc government funding in the late 1990s. Government borrowing costs are market determined with the government bond yield curve being the benchmark that determines the borrowing costs for state governments, municipal corporations, banks and corporates. Indian government bond market, one of the most liquid in Asia, is well regulated by the RBI and is also fully electronic. The banking system in India is well regulated and......... 

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Indian Central Bank Puts Limits on Low-Cost Cash

.........Two people close to the central bank, who were not authorized to speak on the record, say it will deliberately go slowly in removing the cap on funds that banks can borrow via the facility, even as it unwinds other emergency measures imposed to prop up the rupee. Having a money-market yield curve would help investors and companies better price risk across a range of maturities and should make markets more liquid..........

Read - The New York Times

Exim matters

................However, in the absence of specific instructions from RBI, the practices were not uniform and there were circumstances when some authorised dealers preferred to refer the matter to the central bank, get approval and then proceed. The latest AP (DIR) Circular no 70, dated November 8, now prescribes a uniform procedure and, to that extent, is welcome................

Read | Business Standard

RBI designates 29 bank branches to collect advance income tax

.....“Pay IT dues in advance at RBI or at authorised bank branches. It is observed that the rush for remitting income tax dues through the RBI has been far too heavy towards the end of March every year and it becomes difficult for the RBI to cope with the pressure of issuing receipts although additional counters to the maximum extent possible are provided for the purpose,”...........

Read - Mint

Pocket to wallet money for tiny tots

..........Before beginning the journey of financial education for your kids, you need to make sure that you are patient with them. As their financial acumen is minuscule when compared to yours, don’t expect them to become financial experts in one day. Set practical examples for them, which will make them easily get the concepts and value your financial decisions. In the end, you need to teach your kids to understand the value of money..................

Read | The Asian Age

For tax payers, there' more to I-T Act than exemption on income

..............Earlier, only taxpayers paying Rs 1.80 lakh or more annually as rent had to mention the PAN number of the house owner. This year, the limit has been revised to Rs 1 lakh bringing Nidhi under the provision. The change is a part of the many amendments incorporated by the Central Board of Direct taxes (CBDT) through Budget 2013-14 announcement, notifications and circulars in the current financial year.........

Red - IE

Gold smuggling into India rising. Who are the new 'Dons'?

........Reserve Bank of India (RBI) governor Raghuram Rajan has admitted that there is increase in gold smuggling. However, he said it has been on a very low base and the shrinking of current account deficit (CAD) had largely to do with the restrictions places on gold imports. Demand for gold jewellery among Indian consumers remains strong, but reduced supply has prevented this demand from being fully realised during the third quarter........

Read - Moneylife