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Wednesday, September 3, 2014
Raghuram Rajan: The One-Handed Economist
Five pillars, one man
..... So far, Rajan has also hit a blank with his innovative idea of a holding company to insulate banks from political pressure, and his attempts to hire Nachiket Mor—his pointsperson for work on inclusive banking—are also facing resistance from the finance ministry. Rajan still needs to do a lot more to complete ‘missing markets’—this includes not just corporate bonds but also converting trade receivables to an electronic and tradeable format to improve credit to MSMEs—but such is the nature of the job, most attention will remain focussed on the rupee and inflation levels, both of which are more determined by how the government behaves. By all accounts, it has been a great first year for Rajan.
One year on, RBI Governor Rajan going strong
51-year old Rajan has two more years to go as RBI Governor, going by the tenure given to him last year. It is expected that the under his leadership, the central bank will become more dynamic, responding quickly to meet the needs of the emerging economy, which is seeing green shoots of recovery under the new Government.
What Rajan needs to do to cement his legacy
......A hypothetical question, though one relevant from the perspective of central banking, is, would Dr Rajan -- the top-notch academic who has often warned about the shortcomings of an excessive reliance by developed economies on central banks and monetary policy to fix their problems, and not enough on structural reforms -- have recommended such swap windows if he were not a central-bank governor? In other words, did Governor Rajan, the practitioner, lower the bar for policy options, from doing what is primarily right but painful in the short-term to doing what should be a no-no even if it is effective in the near term? The above is not a new dilemma for central bankers........
Since his appointment as RBI governor Raghuram Rajan has delivered on most counts with courage of conviction
.....It was a perfect storm when Rajan, the former professor of finance at the Chicago University's Booth School of Business, landed in RBI — currency at a record low, inflation was stubbornly high, current account deficit maligning the economic reputation, untrustworthy fiscal numbers, and above all, the taper tantrums of the Federal Reserve. In such a situation, Day One in office should have been limited to pleasantries and thanking everyone under the sun 'for giving him an opportunity to.......
'Insiders' vs 'outsiders' at RBI - A.Seshan
.........External recruitment should be resorted to only, say, when expertise like knowledge of quantitative techniques in economics is not available within the RBI. Except for those in specialised departments like economic research, there is now common seniority for the staff that levels opportunities for promotion. The RBI should re-examine the question of common seniority for all so that the economic researcher or statistician or the legal expert can migrate to other departments if he or she is found unsuitable for promotion within the current department.
RBI has hived off much of its work areas - George Aedayod
My View on "RBI Aapkee Hain Kaun? - Surendra Khot":
On the rising numbers at the top, and the dwindling work men coupled with high speed promotions to DRs the institution is certain to have a short supply of high caliber humans with vision and leadership. One wonders how the exponential growth in higher posts augers well with the harnessing of technology since what many men did yesterday is today automated, and supervisory staff should have declined even if the human capability had remained the same or increased over the decades. The fact remains RBI has hived off much of its work areas too.
- George Aedayod
Outside view for an Outsider - R.G.Nakhate
My View on "RBI Aapkee Hain Kaun? - Surendra Khot":
RBI Apkee Kaun Hai by Shri Surendra Khot is singularly revealing some vital facets of HR in RBI family show in a balanced reporting. It is informative and a right sequel to bashing a few days ago by former ED Shri. V.S.Das. All India RBI staff strength was 34000 plus ( 6000 + Class I, 19500+ Class III and 8600+ Class IV ) in 1984. After thirty years, it is minus 20000 in 2014. Much of reduction in staff strength is in Class III and Class IV. The leaders are aware for sure. They know considerable growth of bank branches, many new players in banking industry during last few decades, and large scale recruitment of staff during last five years. They know the need and urgency to strengthen the RBI.
RBI Apkee Kaun Hai by Shri Surendra Khot is singularly revealing some vital facets of HR in RBI family show in a balanced reporting. It is informative and a right sequel to bashing a few days ago by former ED Shri. V.S.Das. All India RBI staff strength was 34000 plus ( 6000 + Class I, 19500+ Class III and 8600+ Class IV ) in 1984. After thirty years, it is minus 20000 in 2014. Much of reduction in staff strength is in Class III and Class IV. The leaders are aware for sure. They know considerable growth of bank branches, many new players in banking industry during last few decades, and large scale recruitment of staff during last five years. They know the need and urgency to strengthen the RBI.
There was large scale direct placement of Officers in Grade B in RBI in early 1980. They rose in their position very fast compared to their seniors. Many reached the position of GMs/CGMs in short span of fifteen/ twenty years and by virtue of that are forced to stagnate ( without the benefit of stagnation increment unlike ABC grades nor running 'Pay Band' scale upto ED unlike GOI)
There are a few reasons justifiable for dwindling manpower in RBI - no one can deny.There were few scams in 1980s and there are scams in every sphere of life, a new scam coming to light every next day. Has the RBI failed in carrying out certain important functions/ duties? Slowly relinquishing responsibility of regulator? There is urgency to go into shortcomings ,if any, in the Banks overall functioning, man power shortage etc. in the recent years etc . There is imperative need to entrust the job to HR -expert committee - headed by one of the Top Brasses /Bosses in the Bank or an outsider (to get independent unbiased views ) to identify HR problems, work areas, staff requirement/ deployment etc. and recommend long term solution / remedy for implementation.
In a lighter vein,
RBI may not have: AGM/DGM/GM (Inward/Outward).
- R.G.Nakhate.
Vigilance Commission questions top-level appointments in PSBs
.........The names were shortlisted during the tenure of the last UPA government. The Commission has denied vigilance clearance to these recommended persons, the sources said. The Commission has, prima facie, claimed to have found instances where more marks were given to some of the candidates in their interview allegedly without any basis to secure their entry into the banks, they said. The CVC, in its communique to the Ministry, has cited recent media reports about alleged irregularities in top level appointments in the public sector banks. RBI Governor is the head of the board that selects state-run bank chiefs........
Go slow on overenthusiasm - Dr.Yerram Raju
My View on "The great Indian financial inclusion circus":
The Mission, at the outset, is highly laudable. But questions deep remain.
Trend and Progress Report of the RBI (p.84) says it all regarding the progress of Financial Inclusion: the number of accounts opened 73mn basic savings bank accounts since 2005 (the year of introduction) through all institutional arrangements and hold Rs.55bn in the accounts but had only transactions worth Rs.7bn or near one eighth. Post 2010 an average of 10mn SB accounts per annum were opened in an accelerated mode. But on a single day 1.3mn accounts were opened!!
Like all other target oriented schemes that went through the public sector banks' windows, this new Financial Inclusion Mission had surpassed the ten million accounts in single day by 3million. Whenever and whatever the Government of India ordains to the PSBs it shall be done and it shall be done with enthusiasm publicly displayed. What is the planning that has gone in for achieving this and how perfect it is, is not much of a bother now as much as impressing the FM and PM.
The issues that need attention are:
Politicians right from the village level, and some institutional and individual brokers should not lay seize of the opportunity. The way some well intentioned schemes went awry in the past was that such persons would introduce a group; have the accounts opened; and for each credit account get a commission from the bank; pay a balance out of credit generated in cash to the account holder and trade with the rest of the money. When the repayment is due, he would pay into the borrower's account the amount he has actually used out of the loan leaving the original balance utilized by the borrower unpaid. Since this would constitute only 15-20 percent banks would gloss over and permit a roll over of the credit. The money circulation goes on till it reaches NPA level in the actual borrower's account. Dispute resolution mechanism commences and the lucky would resolve. The same mechanism got repeated between the BCs and their agents vis-Ã -vis the account holders. The disputes between the BCs and Agents and the related Banks are still on, on such scores.
We have a knack of potential misuse, if not abuse of facilities that are well intentioned. Only when systemic initiatives right from the beginning are put in place such eventualities can be avoided. After all Rs.5000x1.3mn and even half of it is big money for pursuing Ponzi schemes by the financial brokers.
The best solution would be not to release cash by way of overdraft but only allow merchant outlets to liberally act on the Rupay and Kisan Credit Cards for all the consumption requirements as these cards are biometric. However, going by the credit card frauds in the country, which have only been on the rise, the banks have to be continuously on guard.
ATMs should dispense only up to Rs.1000 in cash of Rs.100 denomination in a credit cycle covering Rs.5000 per month and the rest should be only through merchant outlets.
We have a responsibility to ensure that the system does not derail due to overenthusiasm among the main stakeholders. half-yearly special audit and evaluation by independent agencies, specifically directed at financial inclusion efforts would go a long way.
- Dr.Yerram Raju
State approves of central help to revive district central cooperative banks
............The finance ministry's package, worth over Rs 2,000 crore, will help 23 crisis-ridden DCCBs in UP, Jammu & Kashmir, West Bengal and Maharashtra. Under the plan, the centre will infuse as much as 40% of the funds required by these banks to meet the financial parameters to get approval from the Reserve Bank of India (RBI). DCCBs, which form a part of the three-tier farm loan lending structure, also serve as political turfs in Maharashtra...........
NetApp partners Nabard on data centres for cooperative banks
..........To drive faster transactions and comply with regulatory requirements stipulated by the Reserve Bank of India, Nabard said it was imperative to bring all the cooperatives onto a technology platform, which would be cost effective and efficient. The move will also enable the government to transfer subsidy and other payments to account holders based on their Aadhaar numbers...........
Why RBI shouldn’t worry only about online payment security
...........In other words, RBI should stop imposing a one-size fits all approach to payment security. Two-factor authentication should apply to transactions beyond a certain size, which could either be a percentage of the credit limit or an amount set by the customer. The limits can be for each transaction and also include a daily limit, as fraudsters can circumvent the per transaction limit to make a large number of low-value transactions. Schneier calls this approach authenticating the transaction, rather than authenticating the user. It will be a tragedy if.........
More curbs in offing for wilful defaulters
The finance ministry is in talks with the Reserve Bank of India (RBI) to ensure defaulting companies are not able to open accounts in banks that are not part of the lending consortium to divert their cash flows........
Reserve Bank Cancels Licences of Five NBFCs
.......The companies, all of which belong to Kolkata, cannot transact the business of non-banking financial institution, the apex bank said in a statement..........
Read.............
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Private non-financial firms' sales contracted in 2013-14: RBI
.......Releasing the data on the performance of the private corporate sector (non-financial), the RBI Tuesday said the information technology (IT) sector recovered in 2013-14 showing higher sales growth. According to the RBI, the data is compiled on the basis of abridged financial results of 2,854 listed non-government, non-financial companies............
Jan Dhan Yojna feasible, but unsure of costing: Ex-Bankers
.......Speaking about the scheme, which seeks to provide two accounts to 7.5 crore identified households by August 2018, two eminent bankers sought to figure out if its implementation will be a drain on the banking system.. While former MD and CFO at State Bank of India Diwakar Gupta, in an interview to CNBC-TV18's Latha Venkatesh, said it is difficult to give an exact cost of the operation, former deputy governor KC Chakraborty said he sees no problem in banks spending Rs 18,000 crore on Jan-Dhan Yojana.............
India needs more banks before more bank accounts
..The trouble, of course, is that financial “inclusion” means more than simply owning a bank account, or a little life insurance. The success of any banking and financial system ought to be judged on how easily and cheaply it provides access to credit. By this measure, the State-dominated Indian banking system has largely failed. For one, credit is too expensive. Bank prime lending rates tend to be several percentage points higher than the Reserve Bank of India’s benchmark lending rate (if the benchmark rate is 8 percent, the prime lending rate can be as high as 14 percent). At the same time, the biggest banks function as near-oligopolies. They have little incentive to expand coverage and lend to the poor or to small entrepreneurs. At the root of these two problems of cost and access is a debilitating lack of competition........
The politics of banking sector distress
.......The colonial Acts carefully classed defaults and debt and helped farmers selectively. At that time, the banking system did not lend to farmers extensively and most of the lending was done by moneylenders. These laws ensured that while farmers received some relief, the overall system of agricultural lending was not destroyed. In contrast, in independent India, both lending and waiving off money to the farm sector has been reckless. First, banks are pressured into lending to so-called priority sectors without any risk evaluation and then loans are waived off at the mere hint of distress among borrowers. The dangerous periods for banks are just before.........
Electronic payments spike
While the Reserve Bank of India mulls over a plan to introduce plastic currency notes, more and more Indians are using electronic methods for their transactions. Electronic methods — computerised transfer of money and use of credit/debit cards — now make up nearly two-thirds of all retail payments............
Withdrawal a Pain as Banks Brace for ATM Fee Switch
........Retail bank customers using the automated teller machines (ATMs) of banks where they do not have accounts are facing hardships as software glitches in banks' migration towards payment for ATM transactions have led to many machines rejecting the demand for withdrawal, or dispensing less than half of what is sought, increasing the number of transactions..........
Read - ET
Know What's `Right' for Better Banking
....... “The banks' code of commitment to customers had persuasive powers. Now the RBI will have legislative powers to act against the banks if they fail to adhere to the charter. Customers can approach the central bank's customer service department to resolve grievances,“ says a retired head of a large public sector bank. Here's a look at the proposed rights and the likely benefits for customers:...........
Limited Liability, Wilful Defaulters
.....Banking must change from wink-and-nod games in patronage to serious assessment of business viability, risk and credit need, swift identification of bad loans and their immediate resolution to recover whatever can be recovered. Throwing good money after bad because someone higher up in the food chain told the banker to do that must stop. The banker's poor judgement must be tolerated if honest, penalised if mala fide; and display of good judgement rewarded handsomely.........
Banks' capital adequacy ratio at 6-year low
......The situation is worrisome, as bad loans continue to mount amid a slowing economy, where interest rates have stayed elevated. Gross non-performing assets (NPAs) of public-sector banks increased to 4.1 per cent as of the end of March from 3.6 per cent a year ago. Their net NPA as a proportion of net advances were 2.2 per cent, compared with 1.7 per during the same period a year earlier..........
Paying utility bills on time may boost your credit score
The Reserve Bank of India (RBI) has formed a working group to examine how customer transaction data in areas such as utility bill payments can be used for signaling credit worthiness. Credit information companies currently rate borrowers by assigning scores using information provided by members such as banks and non-banking finance companies (NBFCs). .............
Axis Bank launches Shopaholics Online Festival
......The bank has tied up with 52 reputed online merchants across 8 different categories, to offer online flash sale exclusively for Axis Bank Credit & Debit Cardholders,” the bank said in a statement. Offers will be available on categories such as travel, bill payments & recharge, mobiles & electronics, entertainment, apparel & accessories, books stationery & gifts, food & groceries and homes & lifestyle......
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