.......The question then is upon the RBI’s reading of these trends and whether monetary policy is accordingly synchronized. Are demand conditions misread? When the demand for loans at banks’ prevailing interest rates — the price that equilibrates the demand and supply of credit or loans and deposits — is falling below supply, it is no surprise that the central bank’s signal to raise rates even more is not being picked up by the banks. The cue is for the RBI to go back to the drawing board and reexamine monetary policy settings. Moral suasion cannot do that job.
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.
Friday, December 6, 2013
Economies beyond economics
Mass Flourishing is a deceptive title for a remarkable book. It covers several centuries of thought; has a range that moves from economics into politics, literature and philosophy; places short-term events on a long timeline; helps understand the implications of patchwork policies over the fabric of economies. The book engages with the concept of a "modern economy". How do we achieve happiness and a just and equitable society? ......
RBI Chakrabarty says banks wrong in terming loans to SMEs risky
.....The general perception amongst banks that the credit risk in lending to small and medium enterprises is “very high” is a wrong notion, Reserve Bank of India Deputy Governor K.C. Chakrabarty said. He said that while the headline numbers of non-performing assets are higher in this segment, if the extent of loan restructuring and write-offs that are resorted to in the medium and large borrower segments......
Credit scoring - an effective way to ensure availability of timely and adequate credit to Micro and Small Enterprises (MSEs)
Keynote address by Dr K C Chakrabarty, Deputy Governor of the Reserve Bank of India, at the Training Workshop on Credit Scoring Model with support from IFC for MSE Lending, Mumbai, 29 November 2013
With a view to expediting the flow of credit to the MSE firms, RBI, as a proactive measure, issued guidelines in May 2009, advising banks to start using scoring models for making lending decisions in case of all advances up to Rs.2 crore. However, despite, our instructions having been issued nearly five years back, we find that use of credit scoring model in the real sense has not really taken off in India. Our assessment is that perhaps the lack of conceptual clarity on the subject could be one of the reasons for banks’ reluctance in using the credit scoring model for making MSE lending decisions. In fact,.....
Assistance provided by Ms. Lily Vadera is gratefully acknowledged
Mahila Bank in each State capital by end-March: Chidambaram
.......“We ought not to believe that growth for this bank will come only from branch expansion. “The board has to develop its own innovative model for growth,” Chidambaram suggested, adding that it should look to outsource its activities to other organisations, especially those run by women. BMB’s board of directors, he said, should also consider whether customers who are based 10-20 km from the branch can be reached through the use of technology.........
Banks' bad loans grew to Rs 1.94 lakh cr in Mar 2013: AIBEA
......Giving out statistics on the list of bad loans in banks, the Association General Secretary C H Venkataachalam said the bad loans or the non-performing assets in public and private sector banks end of March 2008 was Rs 39,030 crore. "But it has increased to Rs 1,94,000 crore as on March 31, 2013," he told reporters here, adding that the total deposits in banks crossed Rs 75 lakh crore in the country.......
RBI asks UCBs to provide TDS certificate to customers on time
........"With a view to protecting the interests of depositors and for rendering better customer service, urban co-operative banks (UCBs) are advised to provide to their customers from whose deposit accounts income tax has been deducted at source, TDS Certificate in Form 16A," RBI said in a notification...........
SOCARE - so thoughtful...............
Dear Friends,
We must feel very proud that one of the retired officers of RBI, Shri.V.Mani (AGM RBI BLR) established a wonderful organisation called Socare Ind (Society's care for Indigent ) to give comprehensive care to the children of life time convicts in the jails of Karnataka. The organisation set up by him in July,1999 dedicating his house for the cause just with four children in the first year now gives comprehensive care to 171 children . He roped in his wife and many senior citizens to help him running the Organisation. Shri. Mani passed away on 1st November, 2012. Apart from me another RBI officer Shri. M. S. Srihari, a retired General Manager is also actively associated with the organisation. Two years back we opened a branch in Gulbarga plan to build a hostel there to take care of more children. We have recently, completed construction of a new hostel building adjacent to our boys' hostel in Laggare, Peenya, Bangalore.
I take this opportunity to invite you to visit our organisation whenever you happen to visit Bangalore and share your joy with our children.
Kind Regards,
- R.Venkatanathan
Secretary, SOCARE IND.
Rupee gives Rajan legroom to ease cash crunch for growth
.........Credit Suisse predicts the RBI will increase its benchmark rate one more time by 25 basis points to 8 percent after raising by 50 basis points since September. The central bank next reviews policy on December 18. The rupee’s rebound from an unprecedented 68.8450 per dollar on August 28 has allowed Rajan, a former International Monetary Fund chief economist, to reverse some measures taken by his predecessor Duvvuri Subbarao. He lowered the rate at which lenders access emergency funds under the central bank’s marginal standing facility, or MSF, and the bank rate, at which they are penalised for failing to meet reserve requirements. Both were cut by 150 basis points to 8.75 percent each.........
Persisting challenges
....... The RBI’s unconventional measures to shore up the rupee, such as through opening a separate window for oil companies, have also helped. Exports have received a major fillip in the wake of the rupee’s depreciation. But the narrowing of the CAD is also due to continued weakness in non-gold, non-oil imports. Any acceleration in growth will push up the import bill of these items. Finally, government policies might have......
Buy biscuits with bitcoins in India
............Bitcoin is a crypto currency whose creation and transfer is based on an opensource cryptographic protocol independent of any central authority. Th-ough the adigital currency is making waves across the globe, it is still at its infancy in India. The value of the bitcoin varies daily akin to share trading and ...................
China bars banks from handling bitcoins
.....Bitcoins suffered a new setback after China’s central bank said Thursday its banks and payment systems are barred from handling the virtual currency. The central bank said bitcoins did not qualify as a currency but private individuals still are allowed to trade them at their own risk. Bitcoins are created, distributed, and authenticated independently of any bank or government. Their relative anonymity holds out the promise of being able to spend money across the Internet without scrutiny.....
Prediction: Bitcoin is doomed to fail
......Bitcoin exemplifies some of the problems of private money: Its value is uncertain, its legal status is unclear, and it could easily become valueless if users lose faith. Besides, if bitcoin ever really started to take off, governments would either ban it or take over the system. The authorities might be motivated by a genuine concern about the stability of a shadow monetary system or they might act out of self-preservation. Tax evasion would be too easy in a right-money parallel economy.......
French central bank warns of risks
France's central bank, on Thursday, warned against the use of the virtual currency bitcoin, noting that it is not only highly volatile but also unregulated by authorities. Launched in 2009 as the invention of a mysterious computer guru who goes by the pseudonym Satoshi Nakamoto, bitcoins can be exchanged online for real money or used to buy goods and services on the Internet........
Educate on bitcoin
This has reference to the story on bitcoins. It is high time RBI educated the general public on all aspects of this new payment system , which is not in the ambit of any regulatory mechanism, lest they fall a prey and than find that it is too late.
- B K katyal, Ex Chief General Manager
New Cos Act to bring clarity on tax-free salary
.......For companies registered under the Companies Act, 1956 (Cos Act), Section 200 prohibits payment of tax-free remuneration to employees/officers. Despite this prohibition in the Cos Act, the scheme for taxation of perquisites acknowledges tax-free salary payment as a permissible arrangement. Section 10(10CC) of the Income-Tax Act, 1961 (IT Act) overrides Section 200 of the Cos Act and provides the employer an option to pay tax on behalf of employees on non-monetary perquisites and exempts such tax actually paid by the employer in employee’s hands, thus subjecting it only to a single level gross-up..........
RBI is losing $1.2 bn a year on deposit swap window
.....RBI by swapping USD with banks is holding USD 30 billion and earning 3.5% swap rate. RBI requires to invest the 30 billion in USD assets and as the central bank does not take credit risk, it invests USD 15 billion each in three and five year US treasuries that are yielding 0.6% and 1.4% respectively. RBI is earning a total of 4.1% and 4.9% on its USD 15 billion each of three and five year swaps that it carried out with the banks............
Read............
Coimbatore Co-op Bank fined
The Reserve Bank of India has imposed a monetary penalty of Rs 5 lakh on The Coimbatore District Central Co-operative Bank Ltd for non-adherence to Know-Your-Customers norms and Anti Money Laundering guidelines. ...
RBI approach on banks and financial institutions that are too big to fail
.......While cross-jurisdictional activity is considered as a key factor for determining the risks posed by globally systemically important banks, for domestic banks size has been given a higher weightage by RBI. Cross jurisdictional activity has been given a weightage by RBI in sub-indicators and it has replaced level 3 assets by cross jurisdictional factors. RBI prescribes additional capital requirements for too big to fail to banks as follows:............
SBI welcomes RBI move to identify systemically important banks
The SBI today welcomed the Reserve Bank of India’s move to identify domestic systemically important banks (D-SIBs) — large and highly interconnected financial institutions — whose failure can impact the functioning of the financial system and harm the economy. According to P.K. Malhotra, Dy GM (Operations), SBI, the step is likely to make the financial world more secure...........
SBI asks officers to meet loan-seekers only at branch
......According to instructions given to field-level functionaries, an officer should hold meetings with the borrower only in the presence of other officers. One-on-one meetings and meetings at the residence of either the officer or the borrower should be avoided. Further, talks between the bank staff and the borrower, who may come for a loan/enhancement of loan limit/ one-time compromise settlement of a loan that has gone sour, should ideally be video recorded. The emphasis on transparency in officers’ dealings with borrowers comes in the wake of the Central Bureau of Investigation recently registering a case against SBI Deputy Managing Director Shyamal Acharya, Chairman of a New Delhi-based private company and others in an alleged bribery case.......
SBI planning automated system to cut zero balance account cost
........Malhotra said a lot of initiatives are being taken to bring down costs. “We are trying to put in automated technology platform with focus on financial inclusion accounts mobilised by business correspondents ... We are trying to take out the manual intervention to slash cost.” The bank’s CASA ratio is under pressure since the last three quarters of the current fiscal. CASA ratio in September quarter was 43.58 per cent against 44.95 per cent in the same quarter FY 2013........
Unique Identification Authority of India issues 51 crore Aadhaar numbers
.....Enrolment for Aadhaar is entirely voluntary and the Aadhaar number is already used as a Proof of Identify or Proof of Address or both by several programmes and schemes run by Central and State Governments. A number of regulatory authorities such as Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDA), Securities and Exchange Board of India (SEBI) and Pension Fund Regulatory and Development Authority (PFRDA) have declared Aadhaar number as a valid ‘know your customer’ (KYC) and ‘electronically know your customer’ (eKYC) for purposes under their respective domains. This has led to
Hit by the gold bug
.....Data released by Reserve Bank of India last week show gold imports have dropped sharply, after the government imposed strict measures to break the growing gold obsession. It’s likely smugglers have replaced official importers to meet demand, even as there are some complaints about old-style harassment by customs officials at airports. It’s the same old story: economic incentives overpower controls........
Ratnakar Bank launches financial literacy programme in Ahmedabad
.....In addition to provision of banking services through the business correspondent model, the bank has engaged Swadhaar FinAccess, to implement financial literacy programme in the same geographies. As part of the arrangement, Swadhaar FinAccess (SFA) will deliver a classroom based financial literacy course for women from low income communities........
Crop loan interest subvention scheme notified
....The benefits of interest subvention will also be available to small and marginal farmers having Kisan Credit Card for a period of up to six months post-harvest on the same rate as crop loans, against a negotiable warehouse receipt for keeping their produce, the RBI notification said.
Brace for bumpy ride in emerging markets
....But while the Reserve Bank of India can relax - a touch - right now, the big question is just how many other emerging market currencies will now enjoy similar calm? For as investors look back over the events of 2013, it is clear that one of the most bruising developments in the global financial system was a dramatic return of emerging market volatility........
'Regulator should derecognise banks as corporate agents'
Banks should be allowed only as insurance brokers and not as agents of insurers in order to protect customer's interest, said a top official of Reliance Life Insurance Company. "The IRDA (Insurance Regulatory and Development Authority) should derecognise banks as corporate agents. Banks are to be allowed only as insurance brokers and not as agents," Anup Rau, chief executive officer told reporters here Thursday. The IRDA and the Reserve Bank of India have come out with guidelines for banks to act as brokers of insurance companies...........
Finance Ministry gives roadmap to regulators on global best practices
........Officials said, the proposal has been sent to the Reserve Bank of India (IRDA), Securities and Exchange board of India (SEBI), Insurance regulatory and Development Authority (IRDA) and Pension Fund regulatory and Development Authority (PFRDA) and Forward Markets Commission (FMC). The ministry has urged these proposals to be vetted by the individual board of the respective regulators and be implemented at the earliest, said official sources.........
Winsome becomes a headache for banks & investors
....Cases such as these that are giving bankers sleepless nights. Statistics by the Reserve Bank of India show government banks added Rs 4,94,836 crore to their bad loans or non-performing assets (NPAs) in banking parlance between 2007 and 2013. During the period, they reduced non-performing assets to the extent of Rs 3,50,332 crore. This was mainly because loans worth Rs 1,41,295 crore were written off, another Rs 90,887 crore were upgraded to repaying loans and Rs 1,18,149 crore was recovered.....
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