Riding out the storm

Following the 11.4 per cent decline in the dollar value of the rupee over barely a quarter, the sharp slump of last week has further complicated an already tricky situation for the Reserve Bank of India (RBI). Not surprisingly, RBI Deputy Governor Subir Gokarn has expressed “concern” about the sharp depreciation within “such a short period of time”. It is hard to predict what the ramifications will be, given that the depreciation has varying implications for different economic actors. While RBI has been slow to intervene in the foreign exchange market, and it had reasons for being slow, it may have no option but to act with greater alacrity in days to come. The depreciation in the dollar value of the rupee is evidently owing to foreign capital seeking a safe haven in the US dollar, in response to the volatility currently roiling global financial markets, especially the euro area. The immediate concern is whether delayed intervention by RBI would lead to a surge in “imported” inflation. If so, how would RBI respond? Raising interest rates has not proved effective so far and another round of interest rate hike will dampen business sentiment further. Since RBI has the required foreign exchange reserves, should it intervene more forcefully to pull the rupee up a bit? The jury is out on that question. On a positive note, it is likely that capital flows would reverse direction once volatility settles resulting in investors returning to emerging markets such as India, to leverage interest rate differentials between developed and emerging markets, in a replay of what happened two years ago. The rupee’s depreciation is, ceteris paribus, likely to benefit domestic exports, currently enjoying an unprecedented boom. It could potentially provide a shot in the arm to the software sector, which is currently languishing owing to deflated demand in the West. However, this optimism needs to be tempered given that economic conditions in India’s leading export markets – the United States, the euro zone and Japan – are unlikely to improve anytime soon! On the other hand, importers across the board will be adversely impacted. It is unfortunate that developments on the foreign exchange front have not enabled India to fully leverage the fall in commodity prices, particularly oil. Thus, any gains from a fall in commodity prices will be largely neutralised because India will have to pay more for the dollar at least in the short run. The same applies to imports of copper, nickel and other non-ferrous metals that India has been importing in significant amounts. In the case of coal, India is faced with the double whammy of escalating prices and a falling rupee. All things considered, India’s trade deficit is likely to widen, at least in the short term. India may be able to absorb these outflows into its current account deficit, which has been declining in recent quarters as a result of higher export earnings and remittances. However, alarm bells would start ringing as the current account-to-GDP ratio moves towards four per cent. It is difficult to hedge one’s bets on the duration of the current situation. If the previous episode of global volatility in 2008-09 is any indicator, the reversal of capital flows could take place just as suddenly. RBI would then be faced with the unedifying prospect of handling unbridled capital flows, which comes with its own set of problems. The dominant policy challenge for India remains finding the most efficient way to regain a high growth trajectory at the earliest. While it is impossible to remain impervious to external influences, the key to sustained growth lies in unleashing domestic productive capacities.

BS

Plea for panel to study impact of forex rates volatility

The Kerala Chamber of Commerce and Industry has urged the RBI to constitute a high level committee to study the impact of the frequent volatile fluctuation in the foreign exchange rates and to come out with suitable relief packages to entrepreneurs who has suffered considerable losses.

HBL

Aadhaar alone isn’t enough for a full-fledged bank account

... Aadhaar is one of the additional means we are giving people to open bank accounts; however, in itself not sufficient for large bank accounts,” said a finance ministry official who did not want to be identified.....

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Policy on ECBs needs to change

...The current RBI-mandated all-in-cost ceilings, in a sense, makes any proposed raising of the annual $ 30 billion ECB cap or the go-ahead for corporates to use ECB proceeds for redemption of foreign currency convertible bonds (said to aggregate $ 4.5 billion) practically redundant. ....

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Overseas borrowing window for India Inc. opened further

......“When the horse is not running, you have to show it the carrot. This is what the RBI has done by liberalising the ECB window. By allowing more players to access the ECB route, the central bank appears to be banking on the pull factor to attract foreign exchange inflows....

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Rupee Decline in ‘So Short a Time’ a Concern, Gokarn Says

The decline in the Indian rupee in “so short a time” is a concern and is a result of global financial-market conditions, Reserve Bank of India Deputy Governor Subir Gokarn said. Sharp movements in the currency can be disruptive and tend to trigger panic, he said in a speech in Washington today. India has not intervened with an exchange-rate target in mind for a long time and there are no plans to change the policy, he said. “It is a matter of some concern that we depreciate so much in so short a time but we have to put that into perspective,” Gokarn said. “This is a global phenomenon. There is nothing specific in the country that is driving this process.” Asian currencies had their biggest weekly drop since 1998 as concern the global economy is headed for a recession dimmed the outlook for exports and prompted investors to favor safer bets than emerging-market assets. India’s rupee ended its worst week in 18 years, losing 4.6 percent. The currency closed at 49.43 per dollar in Mumbai on Sept. 23. This month, the rupee has fallen 6.8 percent even as the Group of 20 Nations sought to quell the turmoil in financial markets. “We do see that very sharp movements intra-hour or intra- day can be disruptive,” Gokarn said. “They tend to trigger panic, entry or exit. In that situation, we feel that there is some merit in smoothing, infusing dollars to ensure that movement is moderated. That is something we would consider.” Inflation in India “remains high” and will probably remain in a range of 9 percent to 10 percent until November, Gokarn said. The Reserve Bank boosted India’s repurchase rate for the sixth time this year on Sept. 16, raising benchmark borrowing costs 25 basis points to 8.25 percent as policy makers seek to tame the fastest inflation among the biggest emerging markets. Indian wholesale prices rose 9.78 percent from a year earlier in August. Economic indicators are signaling a slowdown in growth, Gokarn said. India’s $1.7 trillion economy expanded 7.7 percent in the three months ended June 30 from a year earlier, the slowest pace of growth since the last quarter of 2009. “All of the momentum indicators are showing signs of moderation,” the deputy governor said. “Tax collections are starting to ease off. When we track growth, it’s clearly come down to below 8 percent.”

http://www.businessweek.com/news/2011-09-25/rupee-decline-in-so-short-a-time-a-concern-gokarn-says.html

Banking Laws bill flayed

Hundreds of bankers, who have gathered in Patiala for a conference, on Sunday criticized the Banking Laws (amendment) Bill, 2011, which seeks to strengthen the regulatory powers of the RBI. General sectary of All India Bank Employee Association (AIBEA) C H Venkatachalam said, "The new bill aims at privatization of banks. Recently even the Planning Commission had suggested that government's capital in nationalized banks can be reduced to less than 51% which means privatization of the banks."

TOI

Move to reduce commission of post offices' women agents slammed

MUMBAI: Women agents who sell post office saving schemes have sought finance minister Pranab Mukherjee's intervention after the RBI suggested their commission be reduced from 4% to 1%. A delegation of Mahila Pradhan Kshetriya Bachat Yorja (MPKBY) led by Congress MP Sanjay Nirupam recently met Mukherjee and urged him not to proceed with the RBI's recommendations made by the RBI. "Shyamala Gopinath – the former Deputy Governor of the RBI - in her report suggested reducing agents' commission from the existing 4% to 1%. The food prices have gone up. Inflation has made poor peoples' lives hard. There are nearly one lakh women agents working for the post office. If the commission is reduced by 75%, it will make the lives of many families miserable," Nirupam said. "In fact, the delegation told Mukherjee that the cost of living has gone up and instead of decreasing the agent commission, the finance department should consider revising the perks and increasing it to 6%," Nirupam said. The MPKBY agents, by persuading citizens to invest in the post office recurring deposit account (RDA) and other saving schemes offered by the post offices, annually make over hundreds of crores for the Government of India. Only women can become agents for these bank services. offered by all post offices in the country. The idea to appoint agents was to persuade an investor especially low income groups for a long terms savings in order to get a lump sum amount after five years or on the maturity of the scheme. Only females can become agent for these banking service offered by all the post office counters in the country. A senior government official attached to the state employment guarantee scheme and self-employment department said, "If the commission is reduced drastically, it will not only affect the families of the agents, but even the government. The collection made by these women adds to the Union government's kitty, which is redistributed by the Centre to states for carrying out the development work." The official added that taking into consideration the efforts made by the women agents, the Union government should introduce some special scheme to reward these women rather punishing them by slashing their income.

TOI

SME Exchange: A success story?

...SME Exchanges, in collaboration with SEBI, the Reserve Bank of India and some other institutions, should take significant efforts to build a good class of investors ...

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Inflation to moderate only in early 2012: BNP Paribas

NEW DELHI: Global banking major BNP Paribas has said inflationary pressure in India will moderate early next year, but will stay above the Reserve Bank's comfort level of around 5-6 per cent.  "It is not until early 2012 when favourable base effect kicks in that spot inflation should genuinely fall back, but remain well above the RBI's comfort zone," BNP Paribas said in its latest issue of 'Asian Instant Insight'.  The banking major's projection is at variance with the forecasts made by the government and RBI. Both the government and the central bank expect inflation to start cooling by the third quarter of this fiscal (October-December). While RBI has said that overall inflation will moderate to around 7 per cent by March, the government expects it to be around 6.5 per cent by then.  Inflation soared to 13-month high of 9.78 per cent in August. It has been above 9 per cent since December 2010.  "Despite signs of a cooling economy, elevated inflation expectations and upward pressure on administered electricity prices are...likely to retard the desired disinflation process," BNP Paribas said.  It added, "Despite building downside risks to growth, it is not until early 2012 when base effect from onion and cotton prices kicks in that WPI inflation should realistically fall back towards more comfortable levels but remain well above the RBI's comfort zone of 5-5.5 per cent."  RBI has hiked key-policy rates 12 times since March 2010 to drain out excess demand, which many consider could be stoking the inflation. Corporate India has said that frequent rate hikes, which have led to an increase in the cost of borrowings, are hindering fresh investments and affecting economic growth.  The country's economic growth was 7.7 per cent in the April-June period, the slowest in six quarters. Growth in industrial production also fell to 21-month low of 3.3 per cent in July.  In the mid-quarterly policy review earlier this month, RBI said that the Rs 3.14 per litre hike in petrol price, announced recently, will further fuel inflation.  It said the current level of high inflation makes it imperative to continue with the anti-inflationary stance and tight monetary policy. 

ET

Re fall may inflate India Inc's foreign loan bill by $2 bn

The falling value of rupee may impact hard the profitability of Indian companies, which have tapped overseas loans, and the bottom lines this year are likely to take a hit of over USD two billion this year. The corporates have been increasingly tapping overseas loans -- mostly in the US currency -- to save costs arising out of higher interest rates and liquidity constraints in the domestic market in the recent months, but the falling value of rupee seems to have negated the benefits, experts believe. Rupee has depreciated by over 12% to close to 50-per-dollar mark currently from its near 44-level against the US currency at the beginning of August. It was the worst performer among major Asian currencies with a decline of 5% in the past week alone and this downtrend has added to the woes of the companies having gone abroad for their borrowing needs. Indian companies have borrowed close to USD 21 billion in foreign currencies through ECB (External Commercial Borrowing) window between January and July this year, as against a total amount of USD 18 billion in entire 2010.

Moneycontrol

SHOULD RBI INTERVENE IN CURRENCY MARKET?

Reserve Bank of India (RBI) Deputy Governor Subir Gokarn has hinted that the Indian central bank is close to the end of its monetary tightening cycle as inflation is likely to slow next year. If indeed inflation slows and RBI ends its record rate raising series, it will be good news for the world’s 10th largest economy......

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How to protect yourself against credit card fraud

There is some good news in your inbox. Your wait for a tax refund is finally over. At least that is what the mail says: "The Reserve Bank of India will take full responsibility of your tax refund to your bank account. Please select your bank and complete the refund request carefully." All you have to do is to open the link, key in your name, credit card number and code number at the back of the card and you will get the refund immediately, it says. Wait a minute... Tax refund from the RBI? Credit card details for a refund? If these questions didn't crop up in your mind, you may have fallen victim to Net fraud. The RBI or the Income Tax Department never ask for your PIN, passwords or credit card details. So, the next time you see such a mail, press the delete button. Apart from such fake mails from the RBI and IT Department, Netizens regularly receive mails that tell them about jackpot prizes they have won and ask for bank or credit card details to transfer millions. There are also mails from people stranded abroad while on a holiday and in urgent need of money. "In the faceless, new era of banking, a customer's identification is done through his user ID and password. This has brought new vulnerabilities as anybody who possesses these can transact on his behalf," says RVS Sridhar, president, IT & RBO, Axis Bank.

Frauds in India

The most common Net attacks are phishing (fraudulent e-mails) and vishing (fake voice messages and phone calls), data leaks while a card is inserted or swiped on a machine and copying of the personal identification number (PIN). "In India, data loss through cyber attacks decreased sharply in 2010, but the total number of breaches was higher than ever. Fraudsters are not attacking a single individual and getting data, but are spreading the attacks. They are using the same attack message and getting multiple data without a lot of effort," says Jelle Niemantsverdrie, principal consultant, forensics and investigative response, EMEA Verizon Business Security Solutions. Stealing information through counterfiet cards is also rampant. The data on the magnetic strip is electronically copied on to another card and used without the cardholder's knowledge. The modus operandi is very sophisticated. "A magnetic card reader is installed over the card slot, while a surveillance camera observes the user's PIN," says Rakesh Aulaya, PR manager, South Asia Pacific, NCR, an ATM manufacturer. Though this is common while travelling overseas, it can also happen at domestic ATMs.

ET

Monetary Policy, Inflation and Financial Inclusion – S.S.Tarapore

The Reserve Bank of India (RBI) released its Mid- Quarter Monetary Policy Review on September 16, 2011. Inflation on a year- on- year basis is close to 10 per cent and the official indices grossly underestimate the actual rate of inflation. There is a need for concerted measures-- monetary, fiscal and supply side. Inflation hurts the weakest segments the most and the interests of the Common Person are best served by a strong, unswerving antiinflationary policy. Inflation militates against the objectives of financial inclusion and hence inflation control, as an objective, has to override all other objectives of economic policy. Policymakers and opinion makers often refer to the trade- off between growth and inflation. Medium/ longterm growth cannot be achieved in a milieu of high inflation. It is only in an environment of price stability that it is possible to sustain growth. Personally, I am of the view that a real rate of growth of 7 per cent with 3- 4 per cent inflation would be preferable to a 9 per cent growth rate with a 10 per cent inflation. Taken to its logical extremity, my viewpoint would be that if a zero inflation rate results in a zero rate of growth, so be it. I am fully aware that the powerful lobbies would not countenance such a situation. From a pragmatic viewpoint it would be best to target to achieve the lowest possible inflation.

The problem is that the government is not able to drastically cut the fiscal deficit in the interest of controlling inflation and it won't let other wings of policy to work in that direction. This is a clear case of precept ( intent of policy) and practice ( actual operations) being at total variance. Witness the overt warnings by top government honchos just before the September 16, 2011 monetary policy review that the RBI should change tack and pause on any further hikes in the RBI policy interest rate as it would be counter- productive. The RBI deserves full credit for interest rate tightening, albeit by a baby step of a 0.25 percentage point increase. The damaging outcome of the government's pressure on the RBI could be to either pause or undertake a token increase in interest rates in the RBI's October 25,2011 Mid- ear Policy Review. It almost appears certain that after October 25, 2011 the RBI would not be allowed to undertake any further monetary tightening. Here is an instance of the powerful lobbies effectively working against the interest of the Common Person. Now what are the ground realities? The pronouncements that inflation would come down in the ensuing few months is nothing but a statistical gimmick. All that this implies is that over the previous high level of inflation, the rate of increase in inflation would be lower than in the past. But to the Common Person, what is relevant is the level of inflation and no policymaker or opinion maker is of the view that the level of inflation will fall in the ensuing few months. On the contrary, there is still considerable suppression of inflation in the system. Either the government would allow administered prices to rise or the fiscal deficit would widen-- either way the Common Person's woes would increase. There would be increases in prices of LPG diesel and possibly kerosene. Increases in electricity and milk prices are also on the anvil. Given the method of fixing procurement prices of food grains ( based on input costs), despite record harvests, food grain prices will rise impacting on the weaker segments of society.

There is a myth that for successful financial inclusion interest rates should be kept low. If deposit rates for No Frills accounts are artificially kept low, the disadvantaged would be pushed out of the financial sector which would be the negation of the avowed objective of financial inclusion. It is erroneous to argue that to provide credit at reasonable rates of interest to the disadvantaged requires that deposit rates be kept low. In actual fact, what is important to the weaker segments is the availability rather than the cost of credit. In the absence of adequate availability of credit, the weaker segments are thrown in to the clutches of money lenders who charge rates of the order of 60 per cent per annum; even pawn shops charge as high as 36 per cent per annum. If financial inclusion is to be successful, interest rates on deposits and borrowing should not be kept artificially low.

The Savings Bank interest rate is a clear illustration of how the system thwarts the integration of the disadvantaged into the financial sector. The RBI in its Discussion Paper had mooted the issue of deregulation of the Savings Bank interest rate. The banks have raised a furore that there would be a major deposit interest rate war. Some banks have openly voiced their plan to offer higher interest rates to larger depositors and lower rates to smaller depositors. Some banks have mooted a threat that in the event of deregulation they would impose heavy charges on No Frills accounts, effectively bidding good bye to financial inclusion. Now how should small depositors respond? First, to the extent small depositors put their funds in term deposits, they should go in for longer maturities as deposit rates are likely to fall in the ensuing year. Secondly, Savings Bank holders should start withdrawing their funds and storm the State Bank of India ( SBI) counters as the SBI offers 7,5 per cent for deposits as short as 7 days without any penalty for early withdrawal; in effect, these short term deposits are akin to Savings Bank Accounts. Once Savings Bank account holders move funds to SBI, other banks will offer competitive rates for short term deposits. Thirdly Savings Bank account holders should rally behind the All India Bank Depositors Association ( AIBDA) by making small voluntary contributions to the Association's corpus so as to make the Association an effective voice for the small depositors. Inherent in the RBI's functions is to bear the burden of criticism for undertaking right policies and the Common Person should be fully supportive of the RBI. 

FPJ

RBI annual report imparts ‘downward bias' to India's growth rate

The Annual Report for 2010-11, a statutory publication of the Reserve Bank of India's central board, covers two broad areas — assessment of macroeconomy in 2010-11 as well as prospects for 2011-12 and working and operations of the RBI and its financial accounts.......

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Brics struggle again to act together

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India’s Reserve Bank of India (RBI) Governor D. Subbarao poured cold water on Brazil’s grand plans, noting the huge demand on his government’s resources for poverty reduction at home.....

Sebi to hire 'Chief Economist' for research, policy inputs

Capital markets regulator Sebi, which is facing a staff crunch in its top ranks, will hire a 'Chief Economist' to strengthen its research capabilities in the area of overall economic policy and the securities market....

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Taxing the rich

This refers to “Beyond Plan panel's Rs 32 / day poverty line” (Business Line, September 23). Lopsided priorities followed with regard to costs, prices, wages and income by mimicking developed countries have affected the efforts to tackle problems arising from income disparities so far. The Government should take responsibility for providing minimum satisfactory living conditions, including food security, healthcare and shelter to all. For this purpose, the Government should consider creation of a fund for poverty alleviation by transfer of substantial shares from windfall gains, such as from taxing unaccounted wealth, auction of natural resources and disinvestment of equity in public sector companies. Additionally, taxing those who need extra security, and those whose wealth grows faster than the rate at which Gross Domestic Product (GDP) grows, could be another alternative. These two categories of people have a vested interest in keeping the majority of the people poor.

M. G. Warrier, Mumbai (HBL)

Different approach

“Wrong approach to inflation” (Business Line, September 24) indicates the failure of the RBI in taming inflation. For the past two years, the RBI has been changing the interest rates and repo rates to curb inflation but there has been no significant impact on inflation.  It is high time we realize that the concept of interest rates is slowly losing its hold on inflation.  Now, many market forces such as the black market, future trading, artificial demand, increase in income levels etc., will have a direct impact on inflation. Hence, the RBI should reinvent new measures to curb inflation.

Srinivas Vissapragada, Andhra Pradesh (HBL)

Islamic Financing: Kerala NBFC gets Notice

Regulator asks Kerala’s AICL to explain the basis of its financing deals; outcome will decide the future of Islamic banking here

In the quaint world of Islamic finance, something is brewing between the regulator and one of the active players. RBI has show-caused Alternative Investments and Credits (AICL), a Kerala-based firm, asking it to explain the basis of its ‘participative financing’ deals. The development is being closely tracked by the proponents of Islamic finance as the outcome could determine how such activities may be pursued in India. According to the regulator, AICL, a registered NBFC, is not complying with the fair practices code under which the financier has to lay down the terms and conditions of funding. As a genre of financial services, Islamic finance forbids the use of interest rates and rests on principles of sharing the surplus or profit. It abhors the idea of making money out of money and upholds the belief that wealth is generated through actual trade and investment. “There has been some exchange of communication between AICL and RBI, which is asking AICL to review its financing model. Last week, directors of the company met the central bank which earlier carried out an inspection of the company,” said a source.  While one of the AICL directors told ET that the company hopes to sort out the issue with RBI, some in the industry are interpreting the development as the regulator’s discomfort with an activity that is not fully understood. They said RBI’s reactions could be driven by the turn of events following a petition moved by Janata Party president Subramanian Swamy last year, challenging the Kerala government’s decision to support another state-based group carrying out Islamic finance.  “In the course of the hearing, it was mentioned that RBI had permitted registration of a few NBFCs carrying out Islamic finance. So, it’s possible that RBI, keen to distance itself from any controversy, wants to ensure that NBFCs such as AICL function within prescribed regulations,” said another source. “Otherwise, why should RBI raise the issue a decade after the company was formed?” said the person.  The challenge before AICL — and also other NBFCs in similar space — is to make their funding structure compliant with Sharia’h, the sacred law of Islam, as well as RBI regulations. “We have asked them to explain certain issues,” said an RBI official. “We are trying to narrow down the differences. RBI is asking that in the absence of a fixed return what happens if there are losses in investments. We told them that we hardly suffered any loss, and have been declaring dividends regularly,” said the AICL director. With a paid-up capital of . 7.5 crore, AICL’s liability is comprised of shareholder funds while the assets are various non-loan funding in the form of participative finance. As per this, the ‘borrower’ shares the profits of the business with AICL in proportion to the equity capital of the borrower’s and the amount provided by AICL; and the profits are shared only if the borrower has earned them. In case of losses in any year, no outstanding is fixed for future recovery. RBI has always maintained a certain silence on Islamic finance. According to an RBI report prepared some years ago, but not put on the official website, neither banks in India nor overseas offices of local banks can offer Islamic banking under the current legal framework. But according to studies undertaken by the Delhi-based Indian Center for Islamic Finance, conventional banking products such as savings bank account, term deposits, credit cards and consumer and farm loans can be structured in a way that fulfil the requirements of local banking laws as well as the Sharia’h. Indeed some of the legal experts think that under the Bombay Stamp Act ’58, it’s possible to carry out transactions to avoid ‘double stamp duty’, often perceived as a deterrent to Islamic banking, where the deals can have two legs of buy and sell. 

ET

Dangerous new phase

........Dr Subbarao made the interesting point that while in 2008 the world was better placed to respond to the crisis and did, in fact, respond with greater determination and co-ordination, in 2011 such reassurance was lacking. In 2008 governments were better placed to deal with a problem emanating from the private sector, while in .......

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Time running out to find solutions for global crisis, warns RBI chief

...Unresolved quickly, global problems can slam the brakes on emerging market economies (EMEs), said Dr D. Subbarao, Governor, Reserve Bank of India.....

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RBI wary of selling dollars on market volatility, deficit

The Reserve Bank of India has not intervened in a big way in the currency markets, unlike most of its emerging Asian peers, because it can ill-afford to expend a limited and fragile holding of foreign exchange reserves, RBI sources say. That reluctance to intervene is just one of the factors that sets the RBI apart. It also is currently the most hawkish in the region, waging an expensive and tough war against inflation, while most of the world frets about slowing US growth and a European debt crisis......

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Pranab takes up rupee depreciation with RBI chief

Washington, Sept 24: The Finance Minister, Mr Pranab Mukherjee, has said that intervention in the currency market would be considered at an appropriate stage and he has discussed with the Reserve Bank of India Governor, Dr D. Subbarao, the situation created by the depreciating rupee in the past few days. “I had a discussion with the RBI Governor as he is here,” Mr Mukherjee told a group of Indian reporters here. The Finance Minister and RBI Governor are here to attend the annual meetings of the Indian Monetary Fund and the World Bank. Mr Mukherjee said the Government was closely monitoring the situation and intervention in the currency market would be considered whenever necessary. “We will watch the situation for some time and as and when intervention would be required that will be considered at that stage,” Mr Mukherjee said in response to a question. To check high volatility in local currency value, central banks worldover intervene in markets through buying or selling of foreign currencies, as required. This week alone, the rupee lost 231 paise, or 4.89 per cent, against the US dollar. On Friday, rupee closed at 49.43 per dollar after falling to 49.90 per dollar. The sharp depreciation in the rupee has been mainly attributed to rising demand for dollars from foreign institutional investors (FIIs) and oil companies. Meanwhile, responding to questions on price rise, Mr Mukherjee said substantial inflationary pressure was there because of demand. “There is a demand side pressure. There is no doubt about it, because we had to resort to huge fiscal expansion from December 2008 to first quarter of 2009... stimulus package (to deal with the global financial crisis was) almost three per cent of GDP”, he said. The fiscal expansion had its impact on fiscal deficit which went as high as 6.6 per cent of the GDP from 2.5 per cent, he said. As regards food inflation, he said, it was substantial due to the constraints on the supply side. “Therefore, we have to remove those supply side constraints. We have taken some short and medium term steps,” he added. The headline inflation is nearing 10 per cent despite the Reserve Bank of India raising key policy rates 12 times since March 2010 to contain price rise.

HBL 

MODERATING DEMAND - India's rate-increase cycle nearing its end, says Gokarn

The country's central bank is close to the end of its record series of interest-rate increases as inflation will probably slow next year, Deputy Governor Subir Gokarn said. “You could say that the cycle is nearing its end,“ he said, “given the projection that inflation will start coming down and will continue to move down from December onwards.“ He declined to specify when the Reserve Bank of India (RBI) may stop raising rates. The inflation rate will drop because “oil prices do not ap- pear to be going higher“, and “we are seeing some deceleration in domestic growth because demand is being moderated“, Gokarn said in an interview in New York on Thursday. Rising interest rates have helped slow consumer demand, he said. RBI boosted India's repurchase rate for the sixth time this year on 16 September, in- creasing benchmark borrowing costs by a quarter of a percentage point to 8.25% as policy makers seek to tame the fastest inflation among the big- gest emerging markets. Indian wholesale prices rose 9.78% in August from a year earlier. “Inflation will slow in the coming months due to a combination of past rate increases and the slowdown in the global economy,“ said Dharmakirti Joshi, a Mumbai-based economist at ratings company Crisil Ltd. “The global slowdown will cool inflation but the fall in the rupee could offset the effect.“ The central bank's move last week contrasted with other central banks in the so-called Bric (Brazil, Russia, India, China) nations. Brazil unexpectedly cut its target Selic rate last month to shield the Latin American economy from a global slowdown, and Russia reduced the rate charged on repurchase loans on 14 September in a bid to bolster the amount of cash on the market amid sliding oil prices. Reserve Bank governor D. Subbarao has raised borrowing costs by a total 350 basis points since mid-March 2010, the fastest run of rate increases since the central bank was established in 1935, Bloomberg data show. “Our inflation pressures stem from a bunch of factors that are unique to our economy,“ Gokarn said. “Unlike many countries, whose growth comes significantly from export contributions, we are slightly more skewed to our domestic environment. The global downturn may “help us to manage inflation“, as commodity prices drop and demand for exports weakens, Gokarn said. India's $1.7 trillion economy expanded 7.7% in the three months ended 30 June from a year earlier, the slowest pace of growth since the last quarter of 2009. Inflation still remains a “key risk“ for India and there is a “likelihood of inflation re- maining high for the next few months“, the central bank said in a statement after announcing the last rate increase on 16 September.

Mint

We are rapidly running out of time: Subbarao

The Reserve Bank of India (RBI) Governor Duvvuri Subbarao said there is a bigger risk that the recession in the US and the sovereign debt crisis in European nations may materialise simultaneously, which can hit emerging market economies through several channels like exports, capital flows and confidence. “The messages that we heard are sharp, specific and candid. If I were asked to pick the headline message of the presentation, it is that we are rapidly running out of time, and may, therefore, be running out of solutions,” Subbarao said during his intervention in a meeting at the International Monetary Fund, ahead of the Fund-Bank meeting in Washington this weekend. He said the main impediment to an effective resolution common to both flashpoints, the US recession and Europe debt crisis, “appears to be political”. In the US, the tension is between fiscal stimulus in the immediate term and credible fiscal consolidation over the medium to long term. But in the euro area, there is a shared monetary framework, but without a shared fiscal framework. “What is standing in the way of a credible and confidence inspiring resolution of the fiscal-financial imbroglio are political compulsions,” he said. The World Bank said yesterday the euro zone debt crisis threatens the mild recovery underway in emerging European and Central Asian nations, adding main risks for parts of the region come from their exposure to banks in cash-strapped Greece and Italy. At the IMF meeting, Subbarao said the present crisis has demolished the decoupling theory that assumed emerging market economies would continue to be resilient despite downturn in advanced countries. “In an age of globalisation, the decoupling theory was never persuasive. The 2008 crisis dented its credibility and the 2011 crisis has completely demolished it.” According to the RBI governor, stability of EMEs has been hit by the crisis in advanced economies through several channels like trade, capital flows, and commodity prices, but it is the confidence channel which is the most important one. “By far, the most important channel of transmission is the confidence channel which could hurt investment and growth prospects in EMEs — when confidence is hit, even strong fundamentals do not matter,” he said. He warned the probability that all these channels become active and feed on each other is quite high. Though the crisis could affect different EMEs differently, but what is common across EMEs is that their growth momentum will be interrupted if the current global problems are not resolved quickly, according to him. Comparing the crisis of 2011 with that of 2008, Subbarao said the policy space for stimulus is much less now, as fundamentals of both advances and EMEs are different. In the years just before the 2008 crisis unfolded, advanced economies experienced steady growth and emerging economies saw accelerated growth with all round price stability, which is not the case now. “In 2008, the world responded to the crisis in coordination. There were differences, but these differences were resolved, and governments and central banks acted firmly, decisively and where required creatively. A similar perception of coordination is lacking today,” he said. Subbarao said the crisis of 2008 originated in the financial sector and transmitted to the real sector, but the rescue was by the public sector. “In 2011, it is the other way round. The crisis is originating in the public sector and hitting the financial sector, and undermining the confidence of the private sector.” In addition, in 2008, both advanced economies and emerging economies were at the same phase of the business cycle and now, they are at different phases. Subbarao concluded by saying as the world is waiting with great anxiety about the outcome of the weekend’s Fund-Bank annual meetings and the G-20 meetings, countries once again have to show the resolve of 2008 to meet those expectations.

BS

RBI Q2 policy review on 25 October

Mumbai: India's central bank on Friday said Governor D. Subbarao will announce the second quarter (Q2) review of the monetary policy for 201112 on 25 October. It will be done in a meeting with chief executives of major banks at 11 a.m in Mumbai, the Reserve Bank of India (RBI) said in a statement.

Mint

Disciplined disciple passed away......

Shri.S.K.Datta passed away on July 26, 2011 in Kolkata. He was 77 years old. He was “Core Faculty” in the Bankers Training College in the area of Industrial Relations and Personnel Management. His book “A Guide To Disciplinary Action” published by B.T.C is the Bible for all those in RBI who handled disciplinary matters. He worked for over fifteen years in the field of personnel administration in both private and public sector organizations. As a Faculty member he impressed all with his profound knowledge, great communication skills and a bubbling sense of humour. He had a rich collection of actual disciplinary cases and he used to keep the trainees spellbound. He retired as Principal of the Bankers Training College.  May his soul rest in peace. 

As reported by P.P.Ramachandran (via e-mail)

MSCB accounts: Nabard, statutory auditors differ

.......The Supreme Court has already ruled in MSCB's favour, saying it was entitled to the entire Rs 1,800 crore from the state government for the guarantee. The government would have to do it fast, as it would pave the way for the bank to get a licence from RBI by March next year.”

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‘RBI hails JK Bank for taking banking services to remotest corners’

Srinagar, Sep 23: A Khidmat centre was inaugurated at Tilwani, a remote village in Islamabad (Anantnag). The village has been ‘adopted’ for financial inclusion by the Reserve Bank of India. The centre was inaugurated on Thursday by K.K.Saraf, Regional Director, RBI in presence of Rajeshwar Rao, Banking Ombudsman and G M Sahibzada, J&K Bank Executive President.  Others present on the occasion included M S Wani, Vice President J&K Bank and D.P.Sharma, Officer-in-charge RBI’s local office, DGMs of RBI G.C.Talukdar, Ramesh and Kiran Sharma.

Saraf on the occasion hailed J&K Bank for its “support and cooperation” in taking banking services to the remotest corners of the state.  “With such an exemplary cooperation from both the J&K Bank and the people of J&K, I believe we can achieve the target of hundred per cent financial inclusion in the state,” he said. Sahibzada said, “J&K Bank is committed to take banking facilities to everyone in the state, irrespective of their economic standing, educational status and geographical location.” “Our products and technology-enabled services shall follow them wherever they are, both directly, through our network of branches and ATMs and indirectly through the innovative model of massive Khidmat Centre network.” Emphasizing on the role of Khidmat Centres towards taking financial inclusion programme further, Sahibzada said, “The centres have the potential to become centres of positive economic change. They are close to rural population and can change the state’s economic landscape”. “The latest in the basket of services of Khidmat Services is a small but wonderful Point-of-Transaction (PoT) machine. People living in remote villages like Tailwani will have to just visit the branch once – to open the account. Later, Khidmat Centres, which are easily accessible to them, being one for every six villages, will provide them all the requisite banking facilities like cash deposits, withdrawals and even loans through swiping of smart Cards through these high-tech PoT machines,” he added.

Greater Kashmir

Usha Thorat on MRPL board

Mangalore Refinery and Petrochemicals Ltd has informed the BSE that Mrs Usha Thorat, former Deputy Governor of Reserve Bank of India, has been nominated by Oil and Natural Gas Corporation, the holding company, on the board of MRPL as an independent director with immediate effect. After a service of nearly four decades with the RBI, Mrs Thorat retired in November 2010 as its Deputy Governor. She was the Deputy Governor of RBI for five years. She is serving as Director of the Centre for Advanced Financial Research and Learning.

HBL

Mazumdar-Shaw, GM Rao feature on RBI board list

Mumbai: The Reserve Bank of India (RBI) will reconstitute its board of directors soon by appointing new industrialists, two people familiar with the development said. G Mallikarjuna Rao, GMR Group chairman, Kiran Mazumdar-Shaw, chairman of India’s largest biotechnology company Biocon Ltd, Anil Kakodkar, former chairman of the Atomic Energy Commission and Sunil Mittal, chairman of Bharti Airtel, India’s largest mobile telephony company by subscribers, are some of those the central bank has zeroed in on and recommended to the finance ministry, the final authority to vet the proposal. The finance ministry has cleared the appointment of Rao, a person in the finance ministry with direct knowledge of the development said, but, surprisingly, did not confirm Mittal’s appointment. A Bharti Airtel spokesperson did not respond to an email query. Mittal, known as the poster boy of Indian mobile telephony, was on the board of Standard Chartered as a non-executive director from August 2007 to July 2009. “There is nothing confirmed yet, so it would not be possible to comment on this,” a GMR spokesperson said in an email. According to the RBI Act, 1934, the tenure of the RBI board is either for four years or till the new board is appointed. “The board has completed its four-year term,” said Alpana Kilawala, RBI’s head, corporate communications. The board has 16 members, chaired by governor D Subbarao and his four deputies along with finance ministry officials and industrialists. The board now has industrialists Kumar Mangalam Birla, chairman of aluminium to cement maker Aditya Birla Group, Azim Premji, chairman of Wipro, India’s fourth largest software company by revenues, and Sanjay Labroo, managing director and chief executive, Asahi India Glass. The finance ministry is represented by R Gopalan, secretary, department of economic affairs. The RBI, being a regulator, needs to keep its finger on the market’s pulse, said Ashwin Parekh, national leader, global financial services, Ernst & Young India Private Ltd, the Indian arm of the global consulting firm. “It invites large industrialists on its board because they are large borrowers and they have their credit experiences to share, which helps in policymaking.” “Also, corporates are the first ones to know about the liquidity issues in the market,” Parekh added. The Aditya Birla Group, with interests in financial services from mutual funds to non-banking finance, is keen to start a bank. On August 29, 2011, the RBI had announced draft guidelines for fresh bank licences, stipulating a minimum capital of Rs 500 crore. Moreover, industrialists will have to create a holding company without any interest in their operating companies to start a bank. None of the other industrialists recommended by the RBI have any interest to start a bank. The board members’ appointment process starts with the apex bank recommending names selected from diverse industries to the finance ministry for its perusal. GMR Group’s chairman Rao, who held a 5% stake in the erstwhile Vysya Bank Ltd, sold his entire stake in 2006, and has no plans to enter financial services. The group, which built India’s largest greenfield airport in Hyderabad, is now reconstructing the airport in New Delhi and has interests in power generation and roads. “It is important to have people from different fields on the RBI board,” an industrialist, whose name is under consideration, said. “Until the board has representation from the industry, it is difficult to address the sector issues.” The person cannot be identified as his name is not yet confirmed. “Inviting an industrial conglomerate on the board will help the RBI understand the regulators’ actions in foreign countries,” said Parekh of E&Y. Bharti Airtel has a wide presence not just in India but also outside India and being the largest telecom service provider in the country, understands the country’s pulse, Parekh said of Mittal being considered for the board seat. “It is said that financial inclusion in the country will be driven by mobile services,” he pointed out.

FE

Nerkar no more...........

Shri Arvind Nerkar passed away on 17th September, 2011 in Mumbai. He was 71 years old at the time of his death. He was in a train bound for Goa. Shri.Nerkar had worked in DBOD and was also Faculty member in B T C. He was for a number of years Adviser to the Central Bank of Oman--to which he was initially sent by R B I on deputation. He was Dean Academic Excellence, M E T, Mumbai. He is survived by his wife and three children. We pray that his soul rests in peace.

As reported by - P.P.Ramachandran (via e-mail)

Banks in Dharwad told to set up financial literacy centres

The Reserve Bank of India (RBI) has suggested to banks in Dharwad district to have a Financial Literacy and Credit Counselling Centres (FLCC) at each Blocks. Mr R. Ramachandran, Manager, RBI- Bangalore, while reviewing the performance of banks in the district under Financial Inclusion Plan (FIP), advised the banks that just designating business correspondents (BCs) does not serve the purpose of FIP. “There should be full-fledged implementation of FIP by operation of biometric cards,” Mr Ramachandran said.

HBL

Subbarao: India is ready to help IMF to fight global crisis

Reserve Bank of India (RBI) Governor Duvvuri Subbarao said on Thursday that India is ready to extend support to the International Monetary Fund ( IMF) to overcome the global economic crisis. In his statement during the meeting of finance ministers and central bank chiefs of the BRICS ( Brazil, Russia, India, China and South Africa) nations that met at Washington, Subbarao said that all the nations of the group are ready help IMF. " BRICS countries are prepared to support the IMF in augmenting its resources, of course subject to their individual country circumstances," he said. The BRICS countries have unanimously considered providing money to the International Monetary Fund or other global financial bodies to increase their firepower for fighting financial crisis. " It is natural that when rich countries get into problems, the demand for IMF support, in terms of quantum of support, is bound to be higher, than when poorer countries or emerging economy get into problems. So, it is possible that IMF resources are starched and they might need additional support," said Subbarao. The leaders on Thursday also called the G20 nations to act swiftly and decisively to ease the euro zone debt crisis, the same way they fought the global financial crisis in 2008.

FPJ

Should for-profit companies be permitted to act as business correspondents for banks?

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.....Within the past one year, the Reserve Bank of India (RBI) has brought forth many initiatives with regard to financial inclusion and one of the most important changes is "permitting for-profit companies (corporates) to act as business correspondents for banks" with a view to enhance the cause of financial inclusioni . There are several lessons for the RBI and other stakeholders from the 2010 Indian microfinance crisis on this aspect. It is hoped that the RBI would look at these lessons and revise its decisions accordingly. .....

Wrong approach to inflation

...In accordance with widely accepted economic theory, the Reserve Bank of India has been trying to cure inflation by raising interest rates. It has done so virtually every month; unfortunately, even after nearly a dozen such exercises, inflation still persists. As Sir Francis Bacon pointed out over four hundred years ago, a theory is merely a theory; it cannot be taken as fact unless it is confirmed by experiment. In the present case, the theory that inflation can be cured by making money costlier has not worked. It is not a fact.....

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Rupee decline fails to cheer many NRKs

KOCHI: Even as the depreciation of rupee is good news for Kerala, which is largely dependent on remittances and exports, not many of the migrants from the state are able to make use of the windfall. With two major festivals, Onam and Eid, just over, most of them had already sent their savings to their relatives back home before the current slide of the rupee began. Remittances to Kerala are estimated to be equivalent of one-fifth of the state's GDP, and its migrant population is said to be around 2.1 million. The Indian currency hit a fresh two-year low of Rs 50 against the dollar on Friday, and it gained marginally after reports of RBI intervention. Nearly 80 per cent of the remittances to Kerala are described as distress remittances, which the migrants send home every month to support their families. Only those who had the capacity to hold back their savings are able to leverage on the rupee slide, and they constitute the remaining 20 per cent. Migrants from Kerala in other countries are also expected to reap harvest of the current hike in dollar value.

TOI

Rupee posts biggest weekly fall in 15 years

"Right now, the market is hungry for dollars and till the time there is significant dilution in the demand, intervention from the central bank will only cushion the rupee's fall, not reverse the trend,"...

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Volatility in financial markets likely to remain; pressures on euro seem inevitable: Barclays Capital

... But RBI Deputy Governor Subir Gokarn told a news channel that if the RBI intervenes, it would be with a "very narrow objective of smoothening what might be a very volatile market situation, nothing beyond that"......

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India warns world of 'currency war'

Indian Finance Minister Pranab Mukherjee on Thursday warned the international community that there is danger of a currency war if the ongoing economic crisis deepens........

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Will intervene in forex market only to smoothen volatility: Gokarn

The Reserve Bank of India (RBI) will maintain its stance of intervening in the foreign exchange market only to smoothen volatility, Deputy Governor Subir Gokarn told CNBC TV-18 on Friday, after the rupee touched its weakest level in more than 28 months. “We at this point do not see any intervention from a rate targeting view point. That is something that would reflect a change in policy stance, which we are not doing at this point,” Gokarn told the television channel in an interview from New York. “If we do intervene at all, it will be with a very narrow objective of smoothening what might be a very volatile market situation, nothing beyond that,” he said. Several analysts have called for the RBI to intervene in the forex market in order to prevent the recent sharp depreciation in the rupee from fuelling imported inflation, which could add to already high domestic price pressures. The RBI has always maintained that it does not use the rupee as a tool for inflation management. However, in its latest policy, it said a falling rupee may have adverse effects on inflation. “One should not look at our exchange rate policy within the narrow boundaries of inflation management,” Gokarn said. “There is larger logic and context to our exchange rate policy and we have over the last few years allowed the rupee to float within the broader structural boundaries of debt limitations or debt restrictions, so that policy remains,” he added. His comments come on a day when the rupee hit 49.90, its lowest since 14 May, 2009, and a day after it shed 2.5 percent to post its biggest single-day loss in nearly three years. The local unit has declined nearly 12 percent from its 2011 high of 43.8550 against the dollar reached in late July. “It is important for people to recognise that volatility in the exchange rate is a part of the game now and your investment or return calculations have to take that into account and you have to decide how you are going to hedge that risk,” Gokarn said. The RBI has refrained from intervening in the foreign exchange market for eight straight months until July, latest central bank data showed earlier this month. However, there has been speculation in the forex market over the last few days that the RBI may have stepped in to support the local unit. Several traders had said the RBI likely sold dollars on Thursday. However, this can only be confirmed when the central bank releases the intervention data for this month in November.

Firstpost

Rupee depreciation expected: Rangarajan

The depreciation in the value of rupee was expected to an extend and could be temporary, said Prime Minister’s Economic Advisory Council Chairman C Rangarajan. He added the entities, which have a foreign exchange commitment must always hedge themselves from against the trends in the value of rupee. Speaking to reporters on the sidelines of the Annual Day celebrations of the Madras School of Economics, where he serves as chairman, Rangarajan said, “There is some panic regarding the direction in which the advanced economies will move and all of this is contributing to a situation in which the currencies are taking some beating.” The rupee has fallen at a time when currencies in many other emerging economies also took a beating. This is a reflection of what is happening not in India, but in the rest of the world, he said. But it must also be noted the rupee had stayed very strong for quite a number of years and therefore some decline in its value was also expected, he said. We would have to wait and see for some more time before coming to a conclusion where the rupee would settle, he added. Any entity, which has a foreign exchange commitment must always hedge itself and I do hope most of them would have hedged themselves against the trends in rupee value, he said. Commenting on the possible global economic slowdown, Rangarajan said the United States is taking efforts towards reviving the economy and the European debt crisis might also be resolved in some way. He said things might be more clear in a month’s time. Allaying possibilities for recession, he said the negative growth might not happen while the growth rate of developed economies would be slowed down and if it continued to remain so, would have some impact on India both in terms of trade flows and capital flows.

BS

Don’t defend the rupee, RBI

... If RBI were to successfully defend the rupee, many more firms would find dollar borrowing more attractive. Indeed, firms and households, anyone who can have access to low-cost foreign borrowing, would borrow in dollars (even if they did not need the money themselves) and lend in rupees, keeping the margin as profit. Since few would expect the central bank to be able to defend its currency in the long term, this is likely to be short-term borrowing. The consequence of a successful defence by RBI is thus likely to be an increase in short-term dollar-denominated foreign debt. This would make the Indian economy even more vulnerable to a currency crisis.

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RBI wary of selling dollars on market volatility, deficit

The Reserve Bank of India has not intervened in a big way in the currency markets, unlike most of its emerging Asian peers, because it can ill-afford to expend a limited and fragile holding of foreign exchange reserves, RBI sources say......

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Interest rate vs buyer interest

Let us have a critical analysis of this interest rate tool vested with the RBI as a part of various monetary control measures and the effect of such action on the economy at the macro level, as it is the man in the street who faces the music ultimately.............

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Subbarao kept PC in loop



Several consultations with then FM on 2G, former Finance Secretary told PAC



The UPA Government and the Congress may be defending Home Minister P Chidambaram against charges of complicity in the 2G scam, but former Finance Secretary D Subbarao’s deposition before the Public Accounts Committee (PAC) on February 3, 2011, clearly shows that he had “fairly and regularly” appraised the then Finance Minister about former Telecom Minister A Raja’s move to allot spectrum at seven-year-old price without auction. Details available with The Pioneer show that on being grilled by the MPs on his communication and meeting with Chidambaram during the scam period, Subbarao told the PAC: “There were several consultations with the Finance Minister (Chidambaram) at several stages. So, I cannot recall exactly whether this particular letter (November 29, 2007 from DoT) was discussed on a stand-alone basis or together with other developments in the telecom sector, but I do recall that in that period (October 2007 onwards), I was discussing with the Finance Minister, fairly regularly on telecom sector issues.” Meanwhile, Finance Minister Pranab Mukherjee is expected to meet Prime Minister Manmohan Singh on Sunday to thrash out the issues related to Ministry note on Chidambaram’s role in 2G spectrum allocation. In order to accommodate his unscheduled meeting with the PM, Mukherjee’s departure from Washington has been advanced by a few hours. Now he is expected to leave Washington early Sunday morning instead of afternoon.  Subbarao was responding to the volley of questions from several members of the PAC, on how his directive of November 22, 2007 — to stay the allotment of spectrum and GSM licences to Reliance Communication and Tata Teleservices at 2001 price — was not adhered to. The directive had also sought to find new market-based price for spectrum, and suggested auction. But on November 29, 2007, DoT wrote to Subbarao that they were going by the 2003 Cabinet approval for the spectrum allotment policy. After the DoT reply, the Finance Ministry kept quiet. To the questions, whether he had consulted Chidambaram, the former Finance Secretary, who is currently the Reserve Bank Governor, reiterated: “On this letter of November 29 from the Telecom Secretary, I cannot specifically say that I had taken this particular letter to the FM, but I certainly was discussing with him on a regular basis.” The recent note by the Finance Ministry to the PMO, and minutes of Raja and Chidambaram’s meeting, clearly show how Subbarao was overruled by Chidambaram to favour Raja’s controversial 2G spectrum allotment. These documents also substantiate Subbarao’s deposition before the PAC that Chidambaram was in the loop. When Subbarao was pressed by MPs, to provide evidence about his communication and meeting with Chidambaram, he told the members and PAC Chairman Murli Manohar Joshi, “Sir, there may not be a paper trail, but there was certainly discussion going on. Sir, as you know — you have been a Minister yourself in the Government — not everything is on paper or reduced to writing. Maybe there were some file endorsements, but I cannot recall them because the note file is not here.” To a question, whether he brought the violations and difference of opinion to the notice of the Cabinet Secretary or Chidambaram, Subbarao deposed, “I do not recall having said specifically that we should go back to the Cabinet. That I cannot really say without seeing the file. But I should have briefed the Finance Minister about the ongoing discussions.” Indicating pressure from Chidambaram and Raja, why no auction of spectrum took place, even after he specifically suggested auction, Subbarao said: “…We (Government) were always arguing on the basis of level playing field rather than on the basis of any growth dimensions that might have subsidised. And if they (Ministers) have chosen so, then as a civil servant, I could not contest that.” 

The Pioneer

Six Sigma can give customers value for money

...By adopting global best practices like Six Sigma, financial institutions can reduce their operating costs and bring in the much-needed customer satisfaction to grow their business.

Read more..........

RBI allows banks, NBFCs to set up infra debt funds

...The Reserve Bank of India (RBI) will allow banks and non banking financial companies (NBFCs) to set up Infrastructure Debt Funds (IDFs) to accelerate and broaden the funding sources for the country’s huge infrastructure spend plans.....

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RBI takes ‘outreach programme’ to south Kashmir village

Srinagar, Sep 22: As part of its financial inclusion and awareness drive, the Reserve Bank of India (RBI), Jammu office today organized an outreach programme at village Tailwani, Islamabad (Anantnag). The programme was presided over by K K Saraf, Regional Director, RBI, Jammu and among others attended by DDC, Islamabad (Anantnag), Kifayat Hussain Rizvi, Banking Ombudsman, New Delhi and J&K M Rajeshwar Rao and others. Saraf said during the Platinum Jubilee Year (2009-10) of establishment of RBI, it was decided to reach out to the remotest villages of the country for extending banking services so that the common man is linked to the banks without actually visiting a bank branch through Information and Communication Technology (ICT) initiatives. Saraf said that Tailwani village was one of the villages chosen by RBI for outreach activities in J&K for 100 per cent Financial Inclusion during 2010-11 by using ICT for issuance of smart cards through the Business Correspondent (BC) model.  The main aim was to achieve the objective of financial inclusion and providing doorstep banking services to the rural poor, small and marginal farmers, people of small means, women, etc.  He also explained to the gathering that the biometric smart cards have inbuilt security features and are therefore very safe for conducting transactions. The card holders would also get receipt for each transaction. 

Greater Kashmir

RBI asks banks to implement safety measures for card usage

MUMBAI: In order to minimise fraud cases and ensure security of transactions, the Reserve Bank of India (RBI) on Thursday asked banks to implement various safety measures related to credit card and debit card usage over a period of next two years.  The central bank directed banks to strengthen the existing payment infrastructure and future proofing system along with adoption of fraud risk management practices within a period of next 12-24 months, RBI said in a notification.  "The increased usage of credit/debit cards at various delivery channels also witnessed the increase of frauds taking place due to the cards being lost/stolen, data being compromised and cards skimmed/counterfeited. There is, therefore, an imperative need to secure such card based transactions...," it said. It also emphasised on the need to migrate to Euro pay MasterCard Visa (EMV) chip and PIN based cards from the present magnetic strip cards as the later is vulnerable to skimming and cloning.  "The need for a complete migration to EMV chip and PIN based cards could be considered based on the progress of 'Aadhar' (Unique Identification Card) in about 18 months," it noted.  As per the circular, the central bank has directed banks to implement improved fraud risk management practices by September 30, 2012. The banks have also been directed to strengthen merchant sourcing and monitoring process by September 30, 2012. The central bank also given a timeframe till September 30, 2013, to banks for securing the technology infrastructure.  To strengthen infrastructure for accepting these cards, RBI has said that commercial readiness of acquiring infrastructure to support PIN at POS (points of sale) should be ready by June 30, 2013.  Similarly, the enablement of all POS terminals to accept debit card transactions with PIN should be completed by June 30, 2013.  The apex bank also directed banks to be ready from technical perspective to issue EVM cards by June 30, 2013.

ET