NEW DELHI: Bank of Baroda chairman and managing director S S Mundra is set to take over as the fourth deputy governor of the Reserve bank of India after Prime Minister Narendra Modi cleared his appointment days before he is due to superannuate. Sources said formal orders will be issued within a couple of days.............
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.
Tuesday, July 29, 2014
Towards a better monetary policy - Dr.S.S.Tarapore
..........It is essential to get away from the asymmetry of a strong clamour for policy rate reductions but strong resistance to policy rate increases. Under such a system, it would be possible to have well calibrated discrete changes in policy interest rates. As Rakesh Mohan, India’s Executive Director on the IMF Board recently said “ With inflation raging at 7- 10 per cent lending rates cannot be less than 12- 14 per cent.” Reserve requirements Policy interest rate movements will need to be sharper if the monetary transmission process is exclusively dependent on policy interest rates. At least for some time in the foreseeable future, it would be necessary to also use reserve requirements as an instrument of monetary policy.......
Read - FPJ
Why RBI is unable to bring down inflation expectations – its roots lie in rural areas
...........The problem, as former RBI Deputy Governor Subir Gokarn acknowledges in an article in Business Standardtoday (28 July), is that inflationary expectations continue to remain high despite a fall in the indices. The only time in the last few years when inflationary expectations dipped was in 2008 – thanks to the global financial crisis and the sharp drop in commodity prices. But that was a fluke. Policy – fiscal nor monetary - did not impact inflation at all. Quoting from the RBI’s household inflation expectations survey, Gokarn says that urban inflationary expectations “rose steeply as the (2008) crisis appeared to abate and then remained in the 12-14 percent range for a long period before rising further to the 14-16 percent range over the last couple of quarters until March 2014. During this period, monetary policy was contractionary, going by the increase in the repo rate….except for the first three quarters of 2013, which coincided with the rise in expectations.” Put simply, Gokarn is saying that monetary policy has not been able to douse........
Unconventional monetary policy and the Indian Economy - Deepak Mohanty
Paper presented by Mr Deepak Mohanty, Executive Director of the Reserve Bank of India, in the SAARCFINANCE Governors’ Symposium, Colombo, 24 July 2014
............It is widely perceived that in absence of unconventional monetary policy measures, financial sector meltdown and recession, particularly in advanced economies, would have been more severe, which in turn could have significantly impacted the global economy. However, opinion remains divided on the efficacy of prolonged recourse to unconventional monetary policy. It is argued that greater risk taking behaviour as an outcome of unconventional measures could undermine financial stability. Furthermore, there is the risk of...........
Inter-generational equity
My View on "Fiscal correction not to be trifled with - Dr.S.S....":
How fast the finance minister Arun Jaitley and RBI Governor Dr Raghuram Rajan imbibe the content of four small paragraphs under the sub-heading ‘Inter-generational equity’ will decide the time that will be needed for India Growth Story to fall back on track. This portion of the article (highlighting the words like ‘inter-generational burden of excessive government borrowing’, ‘internal debt explosion’, ‘consolidated sinking fund (CSF)’, ‘sale of family silver’ and ‘created money’) should be widely circulated among policy makers and the beneficiaries of the opening up of the economy, who, so far, belong to the higher strata of Indian society. CSF is an idea which should be pursued vigorously. Actually, cooperatives in states like Kerala had factored in this idea in their debenture(long term borrowing) programmes.
The recent tendency on the part of government to suck out created profits/surpluses from balance sheets of statutory bodies and PSUs (including banks) will soon affect the health of the financial sector. The suggestion that transfer of surplus ‘income’ by RBI to GOI should be allocated to the CSF should be seen in this perspective. Last year, I had concluded an article in The Global ANALYST with the following observations:
“To ensure that temptations of government emanating from external compulsions do not dilute the strength of RBI’s balance sheet, GOI should take measures to augment the share capital and reserves of RBI after carrying out appropriate amendments to RBI Act. Till such time RBI should be allowed to retain surplus income by transfer to reserves. Considering the size of its balance sheet and the internal and external pressures on its income generating capabilities, as also the nature of shocks the Bank has to absorb from time to time, the central bank’s reserves need to be augmented on an ongoing basis.”
- M G Warrier, Mumbai
Taxmen to focus on pay and perks of corporate bosses
.........At a meeting of chief commissioners last week, it was decided to focus on top companies, including public sector entities. The move is part of an exercise to bolster revenue from tax deducted at source (TDS), which has emerged as a major source of collections and information flow for the income tax department. Typically, TDS accounts for over one-third of the gross income tax collections. As a result, the compensation structure of top executives will be scrutinized “with a view to examine the nature of allowances/perks and reimbursements“, said tax department sources........
Mysterious cylinder near Parliament causes scare
..............The cylinder was found around 20 metres away from the Reserve Bank of India and 100 metres away from Parliament before 10.30 pm. The guards called the Police Control Room number twice, only to find it engaged, following which the Delhi Fire Service was informed. ..............
Quizzing young minds
..............Talking about the objective of the event, Regional Director of RBI K.R. Das said: “The quiz hopes to create awareness on the functions of the banking sector, covering economics, finance and current affairs among the young minds.” Vice-Chancellor of GITAM University G. Subrahmanyam lauded the efforts of the RBI for bringing inclusive growth and strengthening the Indian economy........
Moody’s backs RBI measures
The rating agency said the RBI move would increase foreign investment in government securities over the next several months, adding that this will improve India’s “incipient growth by helping to stabilise the domestic market interest and currency rates”. Moody’s pointed out that the revised investment limit was not large enough for foreign ownership in government debt to cross 10 per cent, limiting the country’s exposure to global fluctuations............
NABARD to play pivotal role in all-round development: Jaitley
........Chaired by Dr Deepali Pant Joshi, Executive Director, Reserve Bank of India, the second session on Rural Finance: State of the Sector dwelled upon the fact that the number of small and marginal farmers’ accounts were minuscule among the new accounts opened highlighting the fact that there is an urgent necessity to bridge this financial exclusion..........
Read...........
Payments Bank
How would it be if your neighbourhood supermarket or even your mobile phone doubled up as a bank? Well, that is precisely what the Reserve Bank of India (RBI) is pushing for, in its efforts to get more people into the banking system. Last week, the RBI issued guidelines for a new category of ‘payment banks’ which can provide payment services to migrant workers, low-income households and small businesses, among others...........
India Post can start payment bank, but must apply afresh
India Post, the world’s largest postal network, can qualify for a new category of banks called “payment banks”, but will have to apply afresh to obtain a licence. Guidelines for payment banks were recently released by the Reserve Bank of India..............
Growing in the Indian soil
My View on "Differentiated banks: has their time come?":
The need of the hour is a comprehensive overhaul of the structure supporting financial services including those coming under ‘banking’. Where possible existing weak arms like cooperatives and remaining Regional Rural Banks should be helped out by redefining their roles and strengthening their capabilities. Going on borrowing new ideas from developed world will look attractive initially, but their possibility of ‘growing in the Indian soil’ should be studied first. These thoughts seem to have been factored in in the recent RBI initiatives, if one considers the anxieties about big banks, talk about increasing banking network in rural areas and the concern for financial inclusion together. What is missing is the will to use the existing structure and to look at financial services in entirety in the Indian context.
- M.G.Warrier
The NDA’s ambitious financial inclusion plan
Bank accounts for every Indian and banking services within 5km of every town and village, and all by March 2016—that’s the ambitious financial inclusion plan Prime Minister Narendra Modi will likely detail in his Independence Day speech. Named Sampoorn Vittiyea Samaveshan (SVS), the scheme has been sketched out in a paper prepared by the department of financial services.
Read more at: Mint
Taking financial inclusion beyond bank accounts
............ Financial inclusion, predominantly, has been more or less limited to opening bank accounts. Banks are not interested in these accounts as there is not much of a business here, and account holders are not enthusiastic about it in the absence of a workable payment system. Here lies the clincher which also answers the second question. The underlying message of the new financial inclusion plan, therefore, has to be much more than opening bank accounts.........
Autonomy, Not Mergers, a Cure for PSU Banks' Ills
............The State Bank of India and its associates may justify a call for amalgamation of the associates with the parent because of overlap. But can that logic be extended to public sector banks in general forcing the merger of smaller ones with the big to create a bigger entity? Reserve Bank of India governor Raghuram Rajan plans to give bank licences on tap. There is a plan to have differentiated bank licences which will help take financial services to nearly two-thirds of the population which does not have access to it. But the government is, in principle, comfortable with merging some staterun banks, though it has not spelt out how it plans to go about it. Is it not a contradictory argument by the two most powerful arms of administration for more banks to achieve financial inclusion and, at the same time, talk about a reduction in the number of banks?...........
Read - ET
Can the elephants dance?
The government has put consolidation of public sector banks back on the table, and if the grapevine is to be believed, one of the criteria would be to identify banks that complement each other on geographical reach. For example, ..........
No proposal for merger of United Bank with IDBI Bank
............"We confirm that so far no proposal for merger of United Bank of India with IDBI Bank has been discussed at IDBI Bank's board meeting and also no communication from Government of India in respect of the above has been received by the bank," IDBI Bank said in a statement........
Mallya good boy, says UCO
................... “First, we have to notify him. Then, he will respond. He has to be given a chance to appear before the grievance redressal committee. Thereafter, the issue can be taken to a court,” a UCO Bank official said. “We have asked for details of SBI’s forensic audit of Kingfisher to take a call,” he said. SBI has classified the bank as a defaulter, not a wilful one. A wilful default is a bigger criminal charge than a simple default. Once declared a wilful defaulter it is impossible to get any loans in future. So a downgrade in this case helps Mallya because he has a lesser crime to fight. Mallya is now involved in various cases against banks which are closing in to recover the huge loans..........
Loan Waiver: Raghuram Rajan's RBI puts spanner in Andhra Pradesh CM Chandrababu Naidu's agri loan plan
In a major shock to the Andhra Pradesh government, the Governor Raghuram Rajan-led Reserve Bank of India (RBI) has said that it did not see any reason to concede the former's request for rescheduling of agricultural loans as a precursor to the proposed loan waiver. The RBI's fresh missive sent to Chief Secretary I Y R Krishna Rao on July 26, in response to the state government's July 17 letter, will push Chief Minister N Chandrababu Naidu into an awkward position as he went to town claiming credit for "achieving" the loan rescheduling as a first step in implementing his promise of total loan waiver.............
Central bank unlikely to ease key rates
...................Easing of inflation was not contributed solely by a base effect, as its sequential build up was also modest. So far, the retail inflation trajectory has been consistent with the path anticipated by Reserve Bank of India (RBI). Thanks to the RBI's sustained tightening, the real deposit rates have turned positive since January, 2014. The question is whether this comfort could be sustained, given the downside risks posed by a deficient monsoon and geopolitical risks in Ukraine and West Asia. So far, ...........
Reserve Bank reverts to multiple price bids for bond auctions
...........RBI adopted the uniform price method in June last year, when bond yields were volatile, with foreign institutional investors pulling out from the domestic markets amid a weakening currency. However, the macro fundamentals have improved since last September, with the rupee stabilising after recouping most of the losses. A new government at the Centre has renewed hope among foreign investors. It is expected to hasten the opening to foreign investment and control the fiscal deficit.........
What’s Plan B, SBI plans to ask its borrowers
............... “These are the learnings from the last cycle and the due diligence will be greater in future,” she said, pointing out that some of the models that were put in place had not worked. The SBI chairman feels, however, that the early warning system put in place by the regulator would help alert banks about potential non-performing assets. Bhattacharya said that banks have asked the government to ensure that..........
Finmin rejects proposal to set up SAARC bank
The finance ministry has rejected a proposal by the commerce ministry to set up a development bank for South Asian Association for Regional Cooperation on the lines of the proposed BRICS bank, a finance ministry official said. The ministry rejected the proposal as there is already an institutional mechanism-- South Asian Development Fund-- to take care of the development needs of the region, the official said.......
ICICI likely to place infra bonds up to Rs 3,000 cr with LIC
............ICICI Bank is the sole arranger of the issue. The bank declined to comment on the matter. LIC officials were not reachable. Following the Reserve Bank of India (RBI)’s move to exempt the cash reserve ratio and statutory liquidity ratio rules on funds raised via long-term infra bonds, ICICI Bank will be the first lender to issue these...........
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