The Reserve Bank of India is likely to continue as the government's debt manager. Finance Ministry is internally firming up its view on not giving any statutory status to the much debated public debt management agency and instead allowing RBI to continue managing Centre's borrowing programme. The issue remains that the RBI will continue to be the chief manager of the central government’s borrowing program....................
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Tuesday, July 22, 2014
Tweaking guidelines won’t do; RBI needs to re-think the idea of niche banks ab initio
............Despite the underwhelming performance of both regional rural banks (RRBs) and local area banks (LABs) set up with the same well-meaning intent of financial inclusion, the RBI is determined to try again! Hence its recent draft guidelines on payments banks and small banks based on the well-meaning, but naïve and theoretical recommendations of the Nachiket Mor committee. Clearly the Bank (governor?) seems keen to give to a second life to an idea that many have (rightly) written off. Only time will tell whether it’s a case of flogging a dead horse or whether this time it’s going to be different, even if it comes after a number of false and costly starts. Remember, restructuring of RRBs did not come cheap!............
Justice out of context
My View on "Justice Srikrishna defends FSLRC recommendations":
The present defence of FSLRC stance on RBI confirms the fear expressed by some including this writer that the Commission did not take into account the Indian context and the evolution and present position of Reserve bank of India. To oppose Dr Rajan’s view expressed in June 2014, Justice Srikrishna is quoting from 2009 documents. After that Dr Raghuram Rajan had opportunity to learn much more about India and RBI. The position RBI Governor takes now is that of India’s central bank and old ‘circumstantial’ evidences should not be relied upon to oppose it. Professional views based on hard facts will get precedence over ‘old academic’ views. As Dr Rajan is used to being subjected to personal attacks, the FSLRC Chairman will have to do lot of elaboration to defend the FSLRC recommendations in the Indian context.
- M.G.Warrier
Narendra Modi joining Raghuram Rajan to boost banks fuels confidence
............ncreased policy support may help shore up profitability now at a 12-year low, according to CARE Ratings, at a time when the Reserve Bank of India (RBI) governor Raghuram Rajan’s efforts to rein in bad loans are starting to show results. Non-performing debt as a proportion of total advances fell to 4% as of 31 March from 4.2% in September, which was the highest since 2005-2006, RBI reported in June........
Mendacity is a system of lies
...............This is a point not dwelt upon by academics today, and we should all be concerned that proponents of big government like Alan Blinder, Jennet Yellen.............
Scam e-mail messages in the name of RBI
.......The RBI also spends money on warning advertisements. However, in our experience of meeting people over hundreds of seminars and workshops conducted by Moneylife Foundation (a not-for-profit sister entity) is, that financial literacy cannot work with sporadic advertisements from regulators. It has far more impact if financial literacy is imparted in a serious and systematic manner with an explanation of how scams work and their financial consequences. Making the nation financially literate or even more careful is a herculean task, but a little nudge from the RBI to corporate CEOs would go a long way in ensuring that this becomes a part of the awareness training for all employees.......
Financial Products Tailor-Made For Women
.........According to the latest data available with the Reserve Bank of India the share of women deposit holders has also witnessed a rise from 26 per cent in 2012 to 30 per cent in 2013. Thankfully, financial service providers have been quick to ride this wave and there are a number of women-centric products that offer special advantages. Here is a closer look at some such benefits........
Retirement Is Not End Of Taxes, Inflation
..........People who are in their 70s and 80s had retired at a time when inflation was not a big menace and most banks paid a rate of interest which was either close to or around the doubledigit mark. But times have changed. The rate of interest paid by banks in fixed deposits is now very much linked to the rate of inflation and, more often than not, they are lower than the inflation rate. This naturally leaves FD customers in a slightly disadvantageous position as they are usually left with a negative real rate of interest (rate of interest rate of inflation). Added to this is the incidence of income tax on some of the retired people. The two combine to force retired people to either dip into their savings corpus to meet their standards of liv ing, or cut down on expenses to manage with whatever income they generate on their retirement corpus...........
PAN’s the way to ‘cheque’ refund status
............. To check the refund status online, one must log into https://tin.tin.nsdl.com/oltas/refundstatuslogin.html and enter your PAN and assessment year. One can even check through the toll free number of SBI help desk at 18004259760 or even via email to itro@sbi.co.in or refunds@incometaxindia.gov.in. One can see the status messages depending on the actual state of processing or if there are any disparities noticed by the department. The assessee can ........
State Bank of Hyderabad Donates Bus to School
State Bank of Hyderabad MD & GE P Pradeep Kumar handing over the bus key to Sriram Charitable Trust managing trustee Uma Ghurka at Ghattuppal in Nalgonda district on Sunday. Others in the picture are State Bank of Bikaner & Jaipur MD B Sriram, SBH MD Santanu Mukherjee and CGM (commercial banking) Jyoti Ghosh, RBI CGM Vijay Chugh and Oriental Bank of Commerce former CMD KN Prithviraj.......
Read - The New Indian Express
Reserve bank of India organizing RBI quiz
......The preliminary and quarter final rounds will be held in Hyderabad on July 25 and in Visakhapatnam it is slated at Mother Teresa Dental Auditorium, GITAM University on July 28. Governor of RBI Raghuram Rajan is expected to distribute prizes to the top winners.........
Man held for allegedly duping a Mumbai Coin Society member of Rs1.16 lakh
..................In August last year, while going through an online shopping portal, the victim found that a rare ten rupee note dated 1960, signed by the then RBI governor LK Jha, was up for sale. He then contacted the mobile number of the seller and got the deal done for Rs45,000 for the note. Later, a person by the name of Anand Mehta got into a deal with the victim for a Persian Gulf note and a pre-independence five rupee Indian note containing the photograph of King George. In order to get these notes, the victim had deposited Rs1.16 lakh in the bank account referred by Mehta............
A commendable move
........... There are also other indicators on bank notes — various shapes displayed in raised print — to represent particular denominations. These can be felt by touch only on new bank notes. But it can still be hard to decipher the values they connote. Similarly, there are in circulation today coins of the same denomination in different sizes (two rupees), as also coins of different denominations in the same size (50 paise and one rupee). Besides, there are three types of five-rupee coins, all of which can cause confusion to the blind. Standardisation and consistency in coin design could ensure the distinctness of each value. Wavy edges and hexagonal shapes were present in coins that have been withdrawn...........
Forum tells RBI to take steps to save consumers
......................The forum urged Reserve Bank of India to take strict action against firms indulging in malpractices. "We have been witnessing this kind of malpractices in different cases. We have also pointed out in our earlier orders that Government of India and RBI should take strict action against such organizations which is necessary for the protection of the right of the customers," said East District Consumer Disputes Redressal Forum..............
Can't bank on service
.........If you visit a bank with small denomination currency notes or to exchange a damaged currency note, the experience is not encouraging. Banks are even reluctant to dispense small denomination notes and coins. For traders, handling a large volume of small denominations received during the course of their business continues to be a problem. Thus, a large pool of small sums of money remains outside the banking system, leading to .........
Small banks, big risks
..........Financial inclusion as an asset category is full of risks and even the new small banks cannot de-risk their business model. Payment banks would, of course, be up for grabs. Had the Reserve Bank of India (RBI) announced small banks first, there would have been more applicants for this category. RBI has been focusing only on .............
Bank Told to Refund Pre-closure Charges
...............The Forum observed that a circular issued by the RBI say that levying of pre-closure charges on home loans amounts deficiency in service and unfair trade practice. The Forum stated that in the case under consideration, the bank was liable to refund the pre-closure charges, with interest, from the date of complaint until realisation...........
This is no way to tame inflation: economist
...........The monetary policy of RBI is far removed from them in terms of price rise. That apart, the monetary policy is creating purchasing power asymmetry among different social classes. Consumers who are benefited by monetary reforms are not large enough to reduce the price of essential commodities. The market, which the monetary reforms could not influence normally, pushes the price higher; such markets exist beyond the RBI’s monetary measures. It is interesting to note that ........
Gradually build countercyclical buffers: RBI panel to banks
...........The report was prepared by an internal working group on implementing CCCB in India, headed by RBI Executive Director B Mahapatra. The report said the credit-to-gross domestic product (GDP) ratio would be used to take decisions related to the CCCB. Factors such as growth in gross non-performing assets, incremental credit-deposit ratio for three years, interest coverage ratio and house price index also be considered..........
Need to bolster our reserves
...............Besides short-term debt, sharp swings in capital flows are also a contingency that must be kept in mind in judging whether or not our reserves are adequate. This was highlighted by the SS Tarapore committee on capital account convertibility way back in 1997. One precondition was that cumulative portfolio investment inflows and short-term debt must not be more than 60 per cent of our foreign exchange reserves. In other words, our forex reserves must be plentiful – in fact, with a margin to spare — to take care of heightened volatility in capital flows in and out of the Indian economy and to meet our most pressing debt obligations without defaulting!............
Read - FPJ
Infra bond norms a plus for Indian banks: Moodys
.................The new regulations are also expected to foster an improvement of banks' competitive positioning vis-à-vis housing finance and infrastructure finance companies. Moody's said banks' lower cost of funding allows them to be much more competitive on pricing. This is especially relevant for basic mortgages, where............
Needed: A modern bankruptcy law for India’s financial markets
........Banks and NBFCs recovered loans through muscle men who even resorted to physical assault. Small borrowers faced hard times as they had borrowed to go with the tide of consumerism without being able to predict the disaster. Reports of suicides by defaulters surfaced. The Reserve Bank of India was forced to intervene and court orders were passed to stop banks from using muscle men. During this period voices for review of the personal insolvency laws surfaced. The terms insolvency and bankruptcy are not synonymous, though both deal with liabilities exceeding assets — insolvency refers to a ‘financial state’ and bankruptcy to the distinct legal ‘private state’. The laws regulating insolvency are the Presidency Town Insolvency Act of 1909 covering Kolkata, Chennai and Mumbai and the Provincial Insolvency Act, 1920 for the rest of India.......
Fixing NPA problem of banking sector, step by step:
..According to Kotak, potential economic recovery and lower interest rates over the next two-three years will improve banks’ and borrowers’ financial condition. Creation of a bad bank and transfer of impaired assets to the bad bank is a possible solution to this. Asset reconstruction companies can play a similar role in the Indian context. Lower interest rates can result in lower interest expenses for borrowers and investment gains for banks that can offset NPLs. A 100 bps decline in interest rates can add 1-3 percent to the net worth of certain PSU banks, the report adds. Apart from these generic solutions.........
Reserve Bank study finds Gujarat has to spend huge funds from coffers to pay up for interest taken on loan
A new study, “Debt Sustainability at the State Level in India”, by Balbir Kaur, Atri Mukherjee, Neeraj Kumar and Anand Prakash Ekka of the Department of Economic and Policy Research of the Reserve Bank of India (RBI), has found that, as of March-end 2013, a huge 17 per cent of the revenue expenditure of the Gujarat government goes into paying up interests on loan taken by it over the years, which is higher than most states. Suggesting that this is ........
KBS Local Area Bank may become a small bank
...........“The concept of small bank is interesting. From a strategic point of view it offers a lot of opportunity. But we will take a final decision after discussing the matter at the board level, and with our shareholders and investors,” Manmath Dalai, managing director and chief executive of KBS Local Area Bank, told......
Crop loan waiver: new twist to loan waiver
The waiver of crop loans in Telangana took a new turn with the RBI seeking a fresh report on the damage caused to crops on account of heavy rains/hailstorms due to the Phailin cyclone in October last year. The government had declared over 300 mandals as cyclone-affected to seek reschedulement of loans amounting to Rs 7,000 crore. However, the RBI wants to examine the cyclone effects on its own............
If merged, HDFC-HDFC Bank to be 2nd largest after SBI: IDFC
........According to Chowdhary, this merger will lessen the cost of merger entity and the cost of transition will also decline as cost of regulation reduces. Also, this merged entity would be the country’s second largest financial services player post State Bank of India (SBI). Chowdhary expects the merged entity to benefit HDFC Bank particularly. IDFC has an outperform rating on HDFC Bank as it expects the lender to continue posting healthy earnings going ahead..........
Why the HDFC Bank merger with HDFC does not make great economic sense
............ Their combined market valuation could top Rs 3,50,000 crore, leaving both State Bank of India (Rs 1,93,000 crore) and ICICI Bank (Rs 1,67,000 crore) far behind. However, beyond size and scale, the merger might not make too much economic sense to the combined entity, at least in the initial two or three years. This is because it will take the combined entity that much time to fully utilise the leeway provided by the central bank to raise long-term funds and generate cheaper current and savings liabilities matching its assets.............
HDFC, HDFC Bank say merger idea still premature
..........."The board of directors of both companies have met, but the merger proposal hasn't been considered yet. As a result, it will be too premature to say anything." Since HDFC is a non-banking finance company, CRR, SLR and PSL targets are applicable to it. However, if it goes for a merger, the merged entity will have to adhere to regulatory requirements on these fronts. Though RBI has granted forbearance to banks, the norms are applicable to future funds, not to existing books. This is seen as a hurdle to a merger........
Bank of Maharashtra to float infra bonds
.......“We hope to build up the infrastructure portfolio and go for infra bonds soon… maybe, earlier than six months,” Bank of Maharashtra CMD S Muhnot told media persons on the sidelines of a banking conclave, organized by Ficci. Muhnot said the funds raised would help the bank increase its exposure to the sector to about 17% of its loan portfolio by this fiscal-end from the current 14%.........
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