CURSE OF ’13 OFFERS A FEW LESSONS

..............Although Rajan’s regime had just four months this year, it has delivered on some of the promises made on September 4 when he took charge, including a repackaged interest rate futures. Silencing experts from airing their opinion on interest rates, inflation, yields and the currency movement may yet turn out to be his best achievement this year since their unstoppable opinions harmed the markets more than helping it. Will he be tested once a new administration comes in after general elections?

Read - ET

Should the RBI powers be diluted?

The government has to get its priority right. It has to take immediate steps to tackle issues related to supply chain bottlenecks, inflation, subsidies and the deficits. Blaming the RBI and trying to clip its powers is not the solution to solving India's economic problems. Should the RBI powers be diluted? Let us know your comments or post them on our Facebook page / Google+ page. 

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RBI Guv Rajan May Want Mor

Mor returned from an active social service to add his might to RBI Governor Raghuram Rajan’s efforts to hasten banking licence process and look at ways of having financial inclusion. The chances of Mor becoming an active banker is ruled out, but he may remain in the regulatory circles for a long period.
ET

When Modern Payment Systems Are the Problem

..............The report is of interest to India for three main reasons: the Reserve Bank of India’s emphasis on financial inclusion when granting new bank licenses; Indian banks expanding their use of electronic payments and non-branch interaction with customers; the Indian government’s focus on promoting direct electronic transfer of social benefits. The five European nations of the study are smaller than India in size and population, but they’re ahead technologically and in financial services market development. Nonetheless...........

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Bank account holders pay attention to the new RBI mandate over cheque books

Reserve Bank of India governor is on a mandate spree. First, guv introduced the regulation that mandated ATM pin to be entered while one is shopping with her/his debit card. Second, Rajan launched another policy, which shall be effective by 1 January, which prohibits one from scribbling over currency notes. Now comes another regulation at the behest of customers. Effective from 1 January 2014, all banks are required to abide by new cheque book system. These new cheque books shall have ..........

Read - Daily Bhaskar

Finance Minister P Chidambaram battles RBI governor Raghuram Rajan

The tussle between the incumbent RBI governor Raghuram Rajan and Finance Minister is out in the public now with both sides criticising each other openly in front of national media. Just days ago Governor Rajan had criticised government of delaying key reform bills in the winter session of the parliament. Rajan held that any further delay would jeopardise the economy irreparably. Finance Minister P Chidambaram on Saturday pitched for limiting the Reserve Bank's mandate to monetary policy formulation and banking regulation, and for delegating its other functions to government or other regulators........

Read - Daily Bhaskar

When RBI Made FM Walk Alone

How often does a nation get to see its Finance Minister and the central bank chief express their differences in public? Differences at that level is nothing new, but the manner in which the exchange between the P Chidambaram and former Reserve Bank of India Governor Duvvuri Subbarao took place was strange. On that count, 2013 was quite historic................ 

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Moody's thumbs-up for Rajan; calls Subbarao monetary policy ineffective

A day before the Reserve Bank of India’s mid-quarter review, central bank Governor Raghuram Rajan drew kudos from Moody’s Analytics for  his monetary stance. The research arm of New York-headquartered Moody’s was critical of RBI’s monetary policies in the past three years, though it did not directly take the name of previous Governor D Subbarao. “Indian monetary policy over the past three years has been at best ineffective and at worst counterproductive, but this is changing under the new central bank head,” said Moody’s.......

Read | Business Standard

‘Application-oriented research needed to stoke innovation’

......Even currency paper and printing machines were imported at enormous cost, a situation he had tried to correct during his stint as director on the RBI Board a few years ago. The Department of Space, he recalled, achieved some success with indigenous technologies and gained from the embargoes placed by the West in the 1980s and the nineties. “There were many machines that we needed but couldn’t buy because of various embargoes. ..........

Read - The Hindu

RBI's thumbs-down for exporters

...........A committee on this issue was set up last year, headed by G Padmanabhan, executive director, RBI, which gave its report in May with recommendations. In addition to inclusion of exports in priority sector lending, the panel recommended an extension of the swap facility, setting up a nodal agency for borrowing in foreign currency from abroad on a pool basis and further lending to these companies in India at competitive rates. “RBI found these recommendations too lenient towards the exporting community and have decided to scrap it,” a senior commerce department official told Business Standard.........

Read | Business Standard

Bank unions to go on strike today

..........Ashwini Rana, general secretary of National Organisation of Bank Workers, said IBA held discussions with UFBU on December 14 on wage revision. After a lot of discussions, IBA stated that they would be able to offer an increase of five per cent over the wage expenses. "Since their offer was too low and not acceptable to the unions, it has been decided to go ahead with strike as per the schedule," Rana said. The wage revision of bank employees was due from November 2012.........

Read | Business Standard

IBA Snubs Senior Leaders of UFBU by Offering 5% Hike - Is it High Time to Pass the Baton to Younger Generation ?

.......GoI feels that paying reasonable salaries to bankers will lead them empowered to raise their voices on other matters like corruption, NPA etc. and thus pay them low so that poor talent is attracted to banks and they can enjoy the fruits of public money.  This is on similar premises wherein politicians love to keep large population below poverty line so that they keep on struggling for day to day requirements and find no time to raise voice against the corrupt political class. The future does not seem to be rosy for bankers, as in the given circumstances, it is unlikely that bankers can expect increase of over 12% or so inspite of strikes for few days.  There is a need for drastic steps (even beyond strike) - may be throwing of the old unions.   Young Bankers have to start a new movement as old bankers have already resigned to their fate.  Like AAP of Kejriwal, new innovative methods have to be adopted and the free fund flow of crores of rupees to existing unions has to be cut by starting a movement for change.  Till new leaders emerge with self-less interest, bankers need to suffer as our poor population is suffering.........

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‘Cash management services of banks need a relook’

The Reserve Bank of India (RBI) has asked the Indian Banks' Association (IBA) to set up a working group to look into all aspects relating to outsourcing of cash management services following the rise in instances of looting of ATM cash vans. In a letter to the IBA, the central bank said that the issue of outsourcing of cash management services needs to be examined in greater detail, especially with the risks involved with such activity............ 

Read - ET

Taking stock

Private sector banks have more than doubled their office count in the country since 2007. In comparison, the number of offices of public sector banks increased by 45.5 per cent during this period. Foreign banks, with restrictions on their branch expansion, widened their office network in India by 22.8 per cent in the last six years. However, public sector banks continue to have the largest share, 69 per cent, in the total number of offices of commercial banks in India..........

Read | Business Standard

RBI kicks off reform process to curb bad loans

........The apex bank has sought comment from the public on the discussion paper in next fortnight, after which the final guidelines will be issued, a central banker said, requesting anonymity. “Our intend is to speed up the process of resolution of bad assets,” the bank official said in an informal briefing ahead of releasing the paper. “If you delay dealing with it, the problems will magnify.”...........

Read - Mint

Give incentives to banks for timely taming of NPAs: RBI paper

.......In a discussion paper on non-performing assets management, the RBI proposed "early formation of a lenders' committee with timelines to agree to a plan for resolution", among other aspects. Lenders coming together to salvage an account timely and collectively shall be incentivised through "better regulatory treatment of stressed assets", while in cases where a resolution agreement cannot be reached, there shall be accelerated provisioning, the discussion paper said..........

Read - IE

India's Rajan in tough spot as stagflation risk emerges

.........."The data pose the now familiar dilemma for the central bank. While the direct effect of interest rate hikes on inflation is debatable, particularly when food prices are such an important driver, we very much doubt Dr. Rajan can be seen to be sitting on his hands at this stage," Robert Prior-Wandesforde, director of Asian economics research at Credit Suisse wrote in a recent note............

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The central bank will walk the talk: Radhika Rao

.........Further, an RBI committee's report on the monetary policy framework is the other big factor to watch. In the past, the central bank has faced criticism for trying to do too many things, often with conflicting objectives. In contrast, Governor Rajan has shown a preference for a single objective, that is, 'low and stable inflation'. Nor does he see a long-term trade-off between inflation and growth. Hence, the likelihood of a calibrated and gradual shift to some form of an inflation-targeting regime is high. An immediate move, however, is hamstrung by significant fiscal deficits. Despite the fiscal responsibility Act, adherence to targets has not been taken seriously, with the exception of the last financial year..........

Read | Business Standard

India Inc gloomily set for Rajan rate rise

.........."The thinking is the rate hike will be limited to 0.25 per cent, as India Inc is already complaining about high rates," says Prabal Banerjee, president, international finance, of the Essar group. Chief financial officers (CFOs) say the RBI governor had already indicated, on December 11 in Delhi, that the priority was to find a balance between control of inflation and economic prices. Many industrial corporations are already complaining about high interest rates because ............

Read | Business Standard

Getting Volcker’s Rule to India

.......Volcker’s Rule, though not very tight in scope, should be taken in the right spirit and structures built to ensure that banking should be free from high risk-taking. Trading activity is within the preserve of fund managers, investment banks, hedge funds and the like and should not be mingled with core banking where savers put their money based on an assumed safety of principal and interest. This should never be compromised ..........

Read - FE

Time to hold nerve, and rates

.........While we agree completely on the importance of anchoring inflation expectations, we think it is difficult for RBI to achieve this in the near term when higher inflation is being driven by food prices and not by demand overheating. The role of the government and administrative policies (e.g., ensuring smooth logistics, curbing hoarding, breaking cartels of traders and middlemen, ensuring strategic imports) will have far greater influence.........

Read - FE

Rajan Comes to the Mountain of Bad Loans with Carrot & Stick

Reserve Bank of India governor Raghuram Rajan is adopting a carrot-and-stick approach in draft proposals aimed at cracking down on rising bad loans that have crippled the financial system and blighted the chances of an economic recovery. Among the extensive measures the central bank is contemplating...........

Read - ET

RBI draft norms for bad loans require a mindset change:SBI

.........There is going to be a total change of culture, there will be strict discipline. This is something that we really require in the banking system today.\\\\\\\\\\\"  She added that this move will not only require a mindset change but also technology changes. The existing personnel will need to be trained more to recognise the accounts (NPAs) at the stress stage itself. She is confident that the bank if capable of handling the changes needed with the help of existing staff.  However, she emphasises more clarity is required on time line front............... 

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Jaya tells Finance Commission not to fall into political trap

.....“The state urgently needs fiscal support at this crucial stage of development. Any tapering of transfers at this stage would adversely affect long term growth prospects,” she said at a meeting with the 14th Finance Commission headed by former RBI Governor Y V Reddy, which is on a two-day visit to Chennai. Referring to the report submitted by the Expert Committee headed by present RBI Governor Rag­huram Rajan to evolve criteria for identifying backward States and for devolution of funds from the Cen­tre to such states, CM told the Commission to “reject outright” the report..........

Read | The Asian Age

Kotak Mahindra launches financial inclusion programme

......."We are taking concerted efforts to bridge the barriers to formal banking system across the country through financial inclusion. Kotak Samridhi takes us a step closer towards inclusive banking as it introduces farmers of village dairy societies in West Bengal to the formal banking channel,"...........

Read | Business Standard

Kotak Mahindra Bank plans to open 600 new branches

.........Out of the 600 odd branches, 45 percent of them would be in the rural and semi-urban areas, he told reporters here today at the launch of `Kotak Samridhi' scheme for milk producers in West Bengal. He said that the bank's CASA ratio was 29 per cent and the year-on-year growth was 25 percent..........

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Tax-free bonds vs Bank fixed deposits

A number of companies are coming up with tax-free bond issuances. These companies are planning to tap investors who put their money in bank fixed deposits. Below is a comparison of tax-free bonds and bank fixed deposits..........

Read | Business Standard