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Monday, September 1, 2014
‘I’m no Bond. I’m a banker on the move’
One year of Raghuram Rajan: A spring in his step
...................Rajan's other key task will be to deal with the far-reaching recommendations of the P J Nayak committee, which was set up to review governance issues. While the government has ruled out dilution of its stake below 51 per cent in public sector banks, RBI is confident that some of the other recommendations like splitting the chairman and managing directors' post and revamping the boards would bring transparency in functioning of these banks. Over to Dr Rajan..........
Raghuram Rajan’s year at the wicket
..............Central bankers are usually judged in two ways—their track record in maintaining the value of the currency as well as the systemic reforms they undertake during their tenure. Rajan has done well on the first count while his early statements on the second indicate that he is on the right track. The annual report released in August provides a succinct overview of the task Rajan has set himself. There are five pillars in the strategy to transform the Indian financial sector: a new monetary policy framework, a more competitive banking sector with differentiated licenses, deepening liquidity in the financial markets, financial inclusion and improving the ability of banks to cope with stress..............
Well Begun is Half Done
.............What about Rajan' performance in areas that are exclusively the RBI's domain? Here the record is mixed. The two broad areas of the RBI's responsibility -apart from monetary policy formulation and being banker to government -are financial sector stability development and bank supervision. On the first, there has been a flurry of activity. From is suing new bank licences and establishing guidelines for small and payments banks, to setting up commit tees to revise and strengthen the monetary policy framework (Urjit Patel committee), to look at financial ser vices for small business and low-income households (Nachiket More committee) and to review the governance of bank boards (Nayak commit tee), it's been a busy 12 months. What of action on the ground? The verdict will have to wait........
RBI shouldn't see things the same way as govt: Rajan
.....Reserve Bank of India governor Raghuram Rajan has dismissed talk of a growing wedge between him and the NDA government, saying, “The press always wants to find something interesting. Small things...are blown up.“ At the same time, he added, “I don't think it's good for RBI to see everything in the same way as the government does. We are the keepers of stability and therefore the government actually relies on us to stop them sometimes.“..........
Read - TOI
Raghuram Rajan is the best hope for UPA
..........Raghuram Rajan, who seems to be looking at the Managing Directorship of the IMF as his next job, claims that inflation hurts the poor. Indeed it does, but not as harshly as unemployment. As economists less wedded to Chicago School monetarist dogma than the RBI Governor have pointed out, a somewhat higher rate of inflation is more than bearable if there is double digit growth, whereas to a person who is lacking work, even constant prices are unbearable. Although the textbooks that he is following so blindly may not agree, in the real world, food inflation is the result of supply and distribution, hence higher interest rates are ineffective in curbing them. And in a context where inflation ........
Very interesting, open interaction
My View on "We cannot be seen as a paper tiger: Raghuram Rajan...":
Very interesting, open interaction. Just on one point let me think aloud. If you leave structural and legal issues, why at all public and private sector banks should have different approaches to conduct of business and responsibility to stakeholders? After all the major resources, namely deposits, come from the same source. Once I raised this issue, and was told I was talking 'communism'. I do not know. Intuitively, I feel, when organisations are dependent on public for their 'capital and resources', they should have level playing field and parity in responsibility to society.
- M G Warrier
Principled pragmatism
India prepared to face Fed rate hike: Rajan
.......RBI Governor Raghuram Rajan's comments to a newspaper came on the heels of US jobs data which has heated up speculation over when the Federal Reserve is likely to raise interest rates. Any decision by the Fed to raise rates, which have been held near zero since December 2008, will have implications for economies like India, as it could lead to capital outflows from emerging markets. That could put pressure on emerging market currencies, particularly .............
Indian banks' bad loan levels not 'scary' - RBI chief
.............The bulk of these bad loans are related to infrastructure projects, which have made banks circumspect over lending. "Is it of concern? Yes. Is it scary? No," Rajan told the Times of India, adding "...the point is there are two or three silver linings in the cloud of distressed assets." He said many delayed infrastructure projects were "getting back on stream" as the economy improved, and booming equity markets will also help banks raise the required capital........
A new banking structure - Janmejaya Sinha
...........Do not create a Bank Investment Company (BIC) or a Banks Board Bureau. It will be the banking division that will populate the BIC. It is better to trust the board of the reconstituted public sector bank - in fact, the Axis Bank model works. If you need a special purpose vehicle for investment, create it for central public sector enterprises and take these enterprises out of the ministries that control them..........
LOCAL AREA BANKS - Can Small be Beautiful? - M.G.Warrier
.........Writing in the Hindu Business Line (August 8, 2014) S S Tarapore made the following crisp observations about small banks and payment banks:
“The issue of a payments bank needs discussion...Small banks are vulnerable because of their limited geographical spread; a single natural disaster can wipe out the bank. Again, historically the Indian experience with small banks has not been encouraging.” If RBI is serious about the proposal to open small banks, the banking regulator should carry out a country-wide survey to assess the potential for opening small banks in different geographic areas, as the spread and growth of similarly placed institutions in commercial and cooperative sectors differ in different areas depending..........
What is shadow banking?
Edited excerpts of Deputy Governor of Reserve Bank of India R Gandhi's address at ICRIER's International Conference - Governance and Development: Views from G20 Countries
...........The type of entities which are called shadow banks elsewhere are known in India as the non-banking finance companies (NBFCs). Are they in fact shadow banks? No, because these institutions have been under the regulatory structure of the Reserve Bank of India, right from 1963 i.e. 50 full years before many in the world are thinking of doing so. In the wake of failure of several banks in the late 1950s and early 1960s in India, large number of ordinary depositors lost their money. This led to the formation of the Deposit Insurance Corporation by the Reserve Bank, to provide the necessary safety net for the bank depositors. The Reserve Bank did then note that .........More Banks may Soon be Headless as a Wary Govt's Slow on Clearance
At least half a dozen state-owned banks, which account for about a fifth of the industry, will be without chiefs by the end of September, potentially hurting their growth prospects and restricting their ability to take advantage of an economic recovery if the government does not hurry the selection process.................
Read - ET
Read - ET
Small change, big signal
.........“There is no shortage of change from the supply side. The problem is with the distribution at the local level,” says Charanjiv Singh, president, Chandigarh Beopar Mandal. A delegation of traders had recently met RBI officials in this regard. They were told that the SBI would be organising regular coin fairs and events to fulfil the business needs and at a recent event, change worth around than Rs. 2 crore was distributed. What is the amount needed in small change for the tricity to be comfortably able to settle all transactions? There are no easy answers, a refined guess would be more than Rs. 15 crore a month is needed in denominations of coins of one, two and five and in notes of Rs. 10 and Rs. 50. However, even as there are strenuous efforts to ensure that there is no shortage of change, there are positives per force that can actually result from the situation, some economists reckon........
Counterfeiters lapping up Rs 100, 1,000 bills: RBI
....."To instill confidence of the public in banknotes in circulation and with a view to controlling and mitigating the risk of financial loss as also loss of reputation, banks have been advised to re-align their cash management in such a manner so as to ensure that cash receipts in denominations of Rs 100 and above are not put into re-circulation without the bank notes being machine processed for authenticity," ..........
Unlock cell phone potential
..........Mobile banking has also revolutionized the e-commerce opportunities. It has introduced customers to virtual banking, allowing customers to virtually access all the services a bank provides. By downloading the Mobile Banking app provided by your bank, you can carry out all your banking transactions and more. Choose to access your personal accounts, view account statements, transfer or transact funds between multiple accounts, pay for utility services, shop, make purchases and do much more on your mobile..........
Dish TV discount on RuPay cards
Aimed at promoting government’s ambitious Pradhan Mantri Jan Dhan Yojana, DTH services provider Dish TV will offer 10% discount to subscribers paying their bill through the RuPay-enabled cards. The discounted subscription offer for the Direct-to-Home (DTH) television service will be launched early next week all across India for those covered under Jan Dhan yojana, Dish TV India Ltd chief operating officer Salil Kapoor said. “We want to give a special offer under the Jan Dhan Yojana. We will offer 10% discount of every recharge. We feel that this yojana is very crucial. It will enable everybody in the country to have a bank account,”.......
8.5 lakh bank account opened in Bihar
.......Regional director, Reserve Bank of India (RBI), Patna, M K Verma described it as a "laudable move" and said banking inclusion of the underprivileged has been the RBI's priority and several programmes had been held by it to achieve the same. Verma said on Friday the scheme will not only help the marginalized sections but also the government in ?capital formation'. The country had a very shallow (capital) market, hence the government had to opt for foreign direct investments and foreign institutional investments. Bringing more people under the ?banking umbrella' might help in increasing the depth of the Indian (capital) market..........
Jan Dhan imbibes all 5 Ps of financial inclusion - A.P.Hota
..........Aadhaar linkage will be taken up at the time of account opening itself. RuPay cards will be provided to all the account-holders, making the task of cash withdrawal from ATMs and micro-ATMs with the business correspondents easier. Mobile technology will be used for basic services. The RuPay card scheme built by the National Payments Corporation of India (NPCI) has an inbuilt feature of accident insurance of up to Rs 1 lakh. Other forms of micro-insurance like term/endowment insurance and ..
Allahabad Bank holds camp
Allahabad Bank organised a camp under Prime Minister Jan Dhan Yojana at its Mount Road branch. R.L.K. Rao, General Manager, Reserve Bank of India, was the chief guest. K.H. Venkateswaran, assistant general manager, Mount Road branch, said the Chennai region has mobilised about 15,000 BSBD accounts during the camp. More than 100 people attended the camp and received financial inclusion kits.
The Hindu
From literacy to numeracy
...........The number of new accounts is the wrong metric, perhaps, for a government to target. It should instead target continuing transactions, or the number of active accounts. Only when the target of PMJDY, the average "unbanked" man and woman, sees a benefit to being a part of the banking system, will inclusion actually take off. That's why, in fact, another piece of news from last week may hold the key to the success of financial inclusion. .........
The great Indian financial inclusion circus
..............One cannot find fault with Modi’s earnestness. People in remote villages drink American fizzy drinks like Coke and Pepsi and carry mobile telephones in their pockets but they are pariahs when it comes to banking; India’s banks do not find doing business with them profitable. According to a 2012 working paper of the World Bank, only 35% of India’s adult population has access to formal banking.............
......................Should we blame Modi for the great Indian financial inclusion circus? To be fair to him, he has resorted to inclusion at gunpoint out of sheer frustration. Lazy bankers have been refusing to expand their services, citing high transaction and technology cost for going rural, while they are sanguine about thousands of crores in loans, given to corporate borrowers, turning bad. For the first time, in January 2006, the Reserve Bank of India had allowed banks to appoint business correspondents and address the so-called last mile problem in providing banking services to the masses, but nothing much has happened except for opening millions of so-called no-frills accounts. .........
Financial inclusion, at last
...............But what might really motivate the poor to have a Jan Dhan Yojna account is what is called a RuPay debit card. Under the latter, a clean overdraft facility is to be extended to every account holder. Imagine the relief a poor villager would get should he be able to use this facility to meet his emergency needs. Informal money- lenders charge usurious interest rates and hold the borrowers to ransom. The important thing to note is that the interest rate to be charged for the overdraft facility would be even lower than that ..........
Fake Accounts may Cloud `Jan Dhan' Plan
............Bankers aren't sure whether existing account holders would get Rs. 1 lakh acci dental insurance cover. It's also not clear as to who is going to foot the bills for the insurance premium and other costs to keep accounts running. “The government needs to spell out clearly who are the targeted people for this scheme,“ said HK Pradhan, professor of finance and economics at XLRI, Jamshedpur. “If banks try to merely achieve the target without proper screening, the entire purpose of the new drive will be defeated.“.............
Narendra Modi's Jan Dhan: what's new?
.........The Reserve Bank of India (RBI), ministry of finance and public-sector banks have been trying to do forcible financial inclusion for years now, on which many bright minds and hundreds of crores have been spent. Meanwhile, the government allowed a whole new business segment to come up - microfinance. Microfinance companies have tried to replace the moneylender with an only slightly less usurious business model, funded by venture capital and even the stock market. The PMJDY has no truck with the learnings from any of this. .........
Economic recovery on the horizon
......Drawing optimism from the greater political stability at the centre coupled with the government's supportive policy framework, the Reserve Bank, in its latest Annual report, said that the Indian economy would soon shift to the higher growth trajectory. RBI had said that the economy may grow faster than in the previous year, with acceleration in mining, manufacturing, construction and trade, hotels, transport and communication sectors. The apex bank expects economic growth to be 5.5% in the current financial year. While .....
Food inflation still bites
India's persistently high inflation is a major cause for worry for the Reserve Bank of India (RBI). Among the Asian peers, India's headline inflation is the highest so far. Headline inflation is driven by inordinately high levels of food prices. While the El Nino effect has receded, slow monsoon continues to be a threat. India may not yet face a drought but the situation remains worrisome.............
Image management, the missing art at PSBs
............There are reports that some PSB chairmen are going the extra mile to deflect any possible criticism by installing closed-circuit TVs to presumably record the proceedings of their investment committees. If true, these steps can only be termed outlandish. If any one wants to cheat, they can do so in a thousand other ways and still not be caught by television cameras. Which brings us to the cardinal point: there is no substitute for trust. The best of selection procedures cannot prevent a delinquent bank chairman. .....
Fin Inclusion: SBI Aims to Create Savings Habit
Public sector banks are always at the receiving end when it comes to their adaptability to latest developments. But the State Bank of India is moving aggressively to remain relevant in a market which is set to witness a revolution with differentiated banks, says B Sriram, managing director, in an interview with Sangita Mehta and MC Govardhana Rangan. Edited excerpts:..........
Read - ET
Read - ET
Bank of Baroda told to pay Rs.1L relief over home loan bungle
.......... Accordingly the complainant produced the papers following which the bank gave clearance for the loan. It promised to transfer the money directly to the bank account of the seller. However, the bank didn’t release the payment. After sometime, Kushwaha was told that the file had been misplaced. In the consumer court, the bank cited forged documents as reasons for not releasing the loan amount. The forum said if the bank had any doubt, it should have informed Kushwaha before issuing the approval letter...........
Sebi, RBI mull fund-raising restraint on wilful defaulters
.......To facilitate such restrictions on entities found to have 'wilfully' defaulted on bank loans, the Reserve Bank is exploring ways to share details of these defaulters with Sebi on a real time basis. "My own feeling is that we should go along with RBI on this, but the process will take some time," Sinha told PTI. "There is a difference between NPA and wilful defaulter. Wilful defaulter means that the bank has already come to a finding and the process has gone to a certain level ..... ..
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