‘Fake note circulation up 300%’

New Delhi: There has been a 300% increase in fake currency transactions in India’s financial channels, a report compiled by the financial intelligence unit (FIU) under the Union finance ministry has said. The report states that during financial year 2011, the agency detected “4,23,539 incidents of fake Indian currency notes with a face value of over Rs 35 crore”. The FIU is notified about such detections, called counterfeit currency transactions (CCRs), by public and private sector banks under provisions of the Prevention of Money laundering Act and these numbered 1,27,781 in the fiscal 2010. The FIU report also revealed that notes of Rs 500 denomination bear the maximum brunt of counterfeiting in the country. “Rs 500 denomination notes constituted the bulk of CCRs at 60.74%,” the report said.

TOI

Fake notes found, man arrested

Officials of the Fort branch of the Reserve Bank of India (RBI) carrying out an audit of old and worn-out currency notes were a surprised lot when they found fake currency notes totalling over Rs3.88 lakh had been deposited with the bank between September 2010 and June 2011. Following the incident, the MRA Marg police on Sunday arrested a man, Said-ul alias Aslam Suratali Shaikh, a Jharkhand native living at Pydhonie. Another significant fact was that small denomination notes were also deposited in the bank, which is very rare, said the police. According to the police, it was during an audit of the currency notes that the RBI officials learnt of the high number of fake notes being deposited in the bank, which the vigilance department confirmed were deposited on various occasions between September 2010 and June last. Interestingly, the fake notes were deposited in the department that checks and exchanges torn and unusable notes.

DNA

Police, ED asked to take RBI help in checking terror funding

Intensifying its drive to curb terror funding, the Government has asked the Jammu and Kashmir Police as well as the Enforcement Directorate to seek help from the RBI in monitoring transfer of funds meant for separatist groups for alleged anti-national activities, including disturbing peace in the state. With Union Home Minister P Chidambaram giving a clear direction to choke the funding of terror groups, the Union Home Ministry recently convened a meeting chaired by Home Secretary RK Singh in the national capital where broad contours of terror financing were discussed, official sources said today. The sources said that during the meeting, Enforcement Directorate officials indicated that terror groups were adopting a smart approach of transferring money in small amounts to avoid suspicious transaction by the security agencies and bank authorities. The other modus operandi used by the terror groups and separatists was that of using credit cards where they had to withdraw money once they get clearance from terror groups across the border in Pakistan, the sources said, adding some funds were even transferred through authorised money transfer agents in small amounts. At the meeting, it was decided that the police as well as the ED would seek help of Reserve Bank of India which monitors gateways of credit cards and money transfer agents, the sources said. While it would be an enormous task of monitoring the transactions, the officers were asked to detect suspicious transactions through their intelligence mechanism and later verify the same with the RBI, the sources said.  The ED has in the meanwhile served summons to several people who have been booked by the police for terror financing and the process was underway to attach their properties, if any, after proving that the same was brought from the proceeds of terror funding. The ED has been talking to various security agencies and the police to gather more details about the cases and would decide as to in how many cases Prevention of Money Laundering Act could be invoked, the sources said. The Centre has been paying special attention to check illegal funding of separatists and terror groups in Kashmir and had constituted Combating of Funding of Terrorist (CFT) cell within the Union Home Ministry to monitor it. The cell works with organisations like the Department of Revenue Intelligence, Income Tax, ED, CBI and Directorate General of Customs and Central Excise Intelligence and later scrutinise information collected from central police organisations and the Financial Intelligence Unit.

DNA

Reforms far more important than cutting rates

..... I think there is a very strong case. Inflation is under control, global commodity prices are coming down, except for crude oil, all commodity prices are coming down. Inflation will be contained strongly, inflationary expectations are low and GDP growth has been affected. So this is the right time to cut rates and to cut CRR.......

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Rural banks told to shift to new system

... “There will be two advantages. The first is that RRBs will be forced to clean up their books, and second, they will look at the accounts more carefully,” said a finance ministry official, who did not want to be identified. “We know it will throw up some huge unpalatable numbers. But it is better to clean up the books in one shot.”....

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Why not a joint review of monetary, fiscal policies?

The economy needs a morale boost and this can come only if the Government and the RBI jointly initiate measures to revive the confidence of the investors. .............

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Government plans white paper on wrong export numbers soon

.... While the two sets of data may not be strictly comparable on a month-to-month basis because payment flows for exports take time, it is possible to match payments to shipments on the basis of RBI code issued to exporters.....

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Can india’s MFI industry be saved?

The government and RBI must draw an MFI survival strategy before it’s too late. We need them at least till such time the banks are ready to reach out to the masses

 .... The death of the MFI industry will push the poor into the grip of moneylenders and deal a blow to the government’s financial inclusion drive. The government and RBI must draw an MFI survival strategy before it’s too late. We need them at least till such time the banks are ready to reach out to the masses. At the same time, the industry needs to get rid of its obsession for growth and learn from the Bandhan and Janalakshmi experiments to reorient its business models......

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SBI to expand microfinance portfolio by 50% in Q4

State Bank of India plans to grow its microfinance portfolio by 50% in the fourth quarter, drawing comfort from the Reserve Bank of India's (RBI) move to frame guidelines for microfinance institutions...........

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It’s goodbye for fancy salaries in foreign banks

RBI urges those operating in India to set up remuneration panel to fix pay

In what could change the career landscape in private and foreign banks as a lucarative option, given that they lured the best banking brains with fancy paychecks, the Reserve Bank of India (RBI) has now drawn the laxman rekha on “excessive” salary their staff can get and the management can dole out. Among bankers drawing an annual salary in excess of Rs 1 crore include ICICI Bank CEO Chanda Kochhar, Axis Bank CEO Shikha Sharma, ICICI Bank top executives directors K Ramkumar, N S Kannan, Rajiv Sabharwal. The government fixes the remuneration for key executives of public sector banks RBI’s top officials, including the governor.While neither succinctly specifying what constitued “excessive remuneration” nor putting a specific ceiling on it, the RBI, has, however, made it mandatory for private and foreign banks to obtain prior permission from RBI while fixing the salaries of their staff and CEOs and wholetime directors. Stipulating the series of dos and don’ts in this regard through fresh guidelines for them to follow, the RBI has said they should strictly go as per the Banking Regulation Act, 1949, which prohibits excessive remuneration. Incidentally, according to information available from RBI under Right to Information Act, Governor D Subbarao got a gross salary of Rs 1,28,500 in the month of June 2010. This corresponds to an annual package of little over Rs 15 lakh for RBI Governor, who is a signatory to all the currency notes in the country. In RBI’s view, these banks are required to fix reasonable compensation, taking into account all relevant factors, including the industry practice and a proper balance ensured between fixed pay and variable pay. Variable pay, however, should not exceed 70 per cent of the fixed pay in a year, it noted.The guidelines would be implemented from 2012-13. The approval process, RBI said, will involve an assessment whether the compensation policies and practices are in accordance with the Financial Stability Board (FSB) Principles. The principles are intended to reduce incentives towards excessive risk taking that may arise from the structure of compensation schemes. The principles call for effective governance of compensation, alignment of compensation with prudent risk taking, effective supervisory oversight and stakeholder engagement, it said. The principles have been endorsed by the G-20 countries and the Basel Committee on Banking Supervision and are under implementation across jurisdictions, it added. Banks, the RBI guidelines stipulated, should formulate and adopt comprehensive compensation policy covering all their employees and conduct annual review. The guidelines directed private sector banks to constitute a remuneration committee (RC) of the Board to oversee the framing, review and implementation of compensation policy of the bank on behalf of the board. The RC should have a minimum of three members and should include at least one member from Risk Management Committee of the Board. The majority of members of the RC should be independent non-executive directors, it said. The RC should also ensure that the cost/income ratio of the bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio, it said. Banks are required to make disclosure on remuneration on an annual basis at the minimum, in their annual financial statements, it added. As regards salary of foreign bank executives, the RBI guideline said it is expected that Head Offices of most of these banks would align their compensation policies in line with the FSB principles. Foreign banks operating in India will, therefore, be required to submit a declaration to Reserve Bank annually from their Head Offices to the effect that their compensation structure in India, including that of CEOs’, is in conformity with the FSB principles and standards, it said. RBI would take this into account while according approval of CEOs’ compensation, it said, adding, the compensation proposals for CEOs and other staff of foreign banks operating in India which have not adopted the FSB principles in their home country are required to implement the compensation guidelines as prescribed for private sector banks in India.

DH
Watch the video.............

‘Fake notes have 11 security features’

....The fake currency notes recovered by the special cell on Thursday from southwest Delhi had 11 out of 15 security features embedded in Indian currency which would have made it “almost impossible” for a common man to discern them from the original ones...............

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ATMs may accept cash directly

If the recommendations of a government-appointed committee on automated teller machines (ATMs) are accepted, besides dispensing notes, the machines may soon start accepting cash directly. The ATMs to be deployed by the banks will come equipped with a cash acceptor, which will accept currency notes of denominations between Rs 50 and Rs 1,000. At present, ATMs accept cash in an envelope, which is manually credited into the depositor's account. Therefore, it takes a day or more for the money to appear in the bank account. The new cash deposit feature will speed up the process. Moreover, the machines will be programmed to automatically retract the notes left behind by customers. The committee, which was led by Ashok Jhunjhunwala, professor, Indian Institute of Technology Madras, has also suggested that these ATMs have solar powered back-up and a surveillance mechanism in place for better safety. The committee has suggested that ATMs must have an internal camera, which should store digital images of the users and be able to stamp the transaction information on these images. When we contacted Jhunjhunwala, he confirmed that the initiative came from the finance ministry and the recommendations are with the financial services department of the ministry.

Business Today

Mindset change necessary in Kerala, says planning panel vice-chairman

.... During economic downturn we acted in both monetary and fiscal fronts. On monetary front, we worked closely with the Reserve Bank of India (RBI), which.....

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Interest rates set for downtrend in medium term

.... The interest rates are expected to remain firm in the short term and will gradually come down in the medium term as the RBI implements monetary policy softening based on developments in various macroeconomic parameters....

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Indian economy endures after its darkest hour

India may not be out of the woods yet, but global investors are trekking back to the country, seeing value in stocks trading at multi-year lows and a glimmer of hope for a recovery in factory output.....................

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'By second quarter, rates should start coming down': J P dua

.... We are now getting the first signs that food inflation is coming down. Once it starts coming down, it would impact on interest rate. By the second quarter, rates should start coming down. Right now, costs have not come down, so there is no reason to cut rates.

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Give the middle class a break

.....Today, apart from the destructive policies of the RBI, a key factor behind the continuing fall in the value of the rupee is the slew of expensive purchases from abroad made by the Ministry of Defence, when the strongest defence is a growing economy. .........

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NRIs send more money back home in 2011

...The rupee's depreciation against many other currencies could be one reason for the higher remittances. Currencies such as the US dollar, Bahraini dinar or the Saudi riyal, for instance, all appreciated sharply against the rupee in the last six months.....

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Jaypee Wish Town flat owners to approach RBI, SEBI

.... The RBI should put a check on such malpractices where the banks and builders apparently in connivance are diverting the investors’ money somewhere else at the cost of the project over which investments were sought.....

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‘Banks must leverage tech for official language implementation'

Mangalore : There is a need for banks to leverage the use of technology in the implementation of official languages, according to Mr Ajai Kumar, Chairman and Managing Director of Corporation Bank. He was speaking at the 131st meeting of the Official Language Implementation Committee (OLIC) of the Department of Financial Services (DFS) of the Union Finance Ministry, and the 128th meeting of the Official Language Implementation of Committee of Department of Banking Operations and Development (DBOD) of the Reserve Bank of India, which were hosted by Corporation Bank here on Friday. He also emphasised the need for exchange of terminologies between Hindi and other Indian languages as envisaged in the Article 351 of the Constitution of India. Mr V.P. Bhardwaj, Joint Secretary, DFS, said that use of simple Hindi should be encouraged for official work. He also urged the delegates to discuss the issue of making available the facility to work in Hindi in core banking solution.

Mr Deepak Singhal, Chief General Manager of RBI, said that at a time when the banks are focusing on financial inclusion, the emphasis should be on reaching out to the masses in their own language. Executives in charge of Official Language Division of all public sector banks attended the meetings.

HBL

RBI to sensitise residents on fake currency

CHENNAI: Following a report published in Express about a panchayat which sought police help to sensitise the residents on fake currency, officials of the RBI have announced that they would train residents of Kovilambakkam village in Pallikaranai to create awareness on counterfeit notes. On Sunday, three labourers, Habibul Rahaman (26), Abdul Mutalik (25) and Prashant Mondal (23) from Malda, West Bengal, who were living in labour camps in Pallikaranai, were picked up by sleuths of the National Investigation Agency for circulating fake currencies. The Express report, ‘Fake Notes in Circulation has Pallikaranai Residents Worried,’ highlighted how residents of Sunnambu Kolathur were shocked over the arrest and also feared circulation of fake notes in their area as the fraudsters had circulated currency notes of higher denomination that are hard to detect.RBI officials said they would conduct the programme free of cost once the panchayat decides on a venue and date. “We will show samples of counterfeit and genuine currency to the residents. Anyone can come and be a part of our programme and we will also give them pamphlets. Why should the residents approach the local police for this? It is our job to do it and we do not want the people to be despondent,” an official said. Kovilambakkam panchayat officials, who were approached by the RBI to conduct the programme, informed that they would conduct the workshop next week after the Pongal holidays. Panchayat president A Ranganathan said, “We have decided on two venues. We will show it to the RBI officials and once the holidays are over, we will have the meeting.”

Express News

Selection on for top jobs in government banks

With nearly half a dozen chief executives of government banks set to retire in 2012-13, the finance ministry has interviewed 11 candidates to fill up the vacancies. Chairmen and managing directors of large public sector lenders such as Bank of Baroda, Bank of India, Canara Bank and midsized lenders Allahabad Bank and United Bank of India will retire in the next financial year. According to banking sources, a five-member selection panel headed by Banking Secretary D K Mittal interviewed 10 executive directors from public sector banks and one deputy managing director of the Small Industries Development Bank of India for the posts. Reserve Bank of India Deputy Governor Anand Sinha and former RBI Deputy Governor Jagdish Capoor were also on the selection panel. According to norms, executive directors who have completed a year in a bank, with two years of residual service, are eligible for promotion to chairman and managing director. However, the government has relaxed the residual period to 21 months. The government follows the process of lateral transfer for CMD appointments in large government banks, though there have been exceptions. This will mean CMDs of smaller banks will be given charge of Bank of Baroda, Bank of India and Canara Bank. In the case of Allahabad Bank and United Bank of India’s top jobs, executive directors will be promoted. Executive directors from Central Bank of India, Canara Bank, Punjab National Bank, Union Bank of India, Indian Bank, Corporation Bank, Dena Bank, Oriental Bank of Commerce and Vijaya Bank were interviewed.

BS

Maharashtra seeks more time for co-op banks to get RBI licence

The Maharashtra government has written to the Union Finance Ministry seeking an extension of the March 31 deadline set by the Reserve Bank of India for 11 District Central Co-operative Banks and the State Co-operative Bank to obtain banking licence. In an interaction with media persons at a State credit seminar organised by the National Bank for Agriculture and Rural Development (Nabard), the Chief Minister, Mr Prithviraj Chavan, said the deadline for obtaining banking licence should be extended by a few months. The Rakesh Mohan Committee recommendations, which have been accepted by the Union Finance Ministry makes it mandatory for all the cooperative banks to get a licence before the March deadline. Across the country, there are 134 banks which have not received the licences from RBI. If the banks are unable to get a licence, then they have to either become a cooperative credit society or merge with another bank.  In the State, the Maharashtra State Co-operative (MSC) Bank and 11 district central cooperative banks are functioning without banking licences. These banks either have a negative net worth or their Capital to Risk Assets Ratio (CRAR), is lower than four per cent.  Mr Pramod Karnad, Managing Director of MSC Bank, said that the bank could have a CRAR of more than 4 per cent by March 31 but it would require more time, so that it gets reflected in the balance sheet. It already has an adequate Cash Reserve Ratio and Statutory Liquidity Ratio, which are pre-conditions for getting the licence, he said.  He said that the bank has also started the process of selling assets of 18 sick sugar co-operatives, which have defaulted on loan repayments. From the sale of their assets about Rs 300 to 400 crore would be recovered. The bank has also raised a fresh demand of Rs 275 crore from Maharashtra government, so that the CRAR level reaches four per cent.

HBL

Guidelines for private, foreign banks’ CEOs’ pay

The Reserve Bank of India on Friday said CEOs and staff of private and foreign banks cannot draw "excessive" salary, but it did not impose any cap on their remuneration. Issuing guidelines on compensation of CEOs and staff of private and foreign banks, RBI said all private and foreign lender will have to  obtain prior approval from it for renumeration of CEOs and whole time directors as per the Banking Regulation Act, 1949 which prohibits excessive renumeration. However, the guideline did not specify what would constitute excessive renumeration. Banks are required to ensure that the fixed portion of compensation is reasonable, taking into account all relevant factors, including the industry practice, it said. While designing the compensation arrangements it should be ensured that there is a proper balance between fixed pay and variable pay, it said. Variable pay, however, should not exceed 70 per cent of the fixed pay in a year. The guidelines would be implemented from 2012-13. "As hitherto, private sector and foreign banks operating in India would be required to obtain regulatory approval for grant of remuneration to whole time directors or chief executive officers in terms of Section 35B of the Banking Regulation Act, 1949," RBI said in a notification. "The approval process will involve an assessment whether the compensation policies and practices are in accordance with the Financial Stability Board (FSB) Principles," it said. The principles are intended to reduce incentives towards excessive risk taking that may arise from the structure of compensation schemes. The principles call for effective governance of compensation, alignment of compensation with prudent risk taking, effective supervisory oversight and stakeholder engagement, it said. The principles have been endorsed by the G-20 countries and the Basel Committee on Banking Supervision and are under implementation across jurisdictions, it added.

Express News

Tone up multi-tasking skills, women bank employees told

Women bank officers have been asked to equip themselves to deal with any situation that might crop at the work place. ........

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The fourth branch

.... You can make a regulatory organisation as autonomous on paper as is imaginable, but will fail unless you ensure its members have incentives to stay independent, too. There’s currently much comment about former RBI deputy governor Shyamala Gopinath joining board of the National Stock Exchange. Yet Ms Gopinath’s new job is hardly unusual. Unfortunately, former regulators frequently join those they were regulating. And, similarly, many new regulators are IAS officers pronouncing on policies that they themselves had helped draft.......

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The Indian state needs more regulatory capacity. But that demands autonomy not just for institutions, but for the people in them

RBI notifies change in single brand retail FDI policy

The Reserve Bank of India (RBI) today operationalised the change in FDI policy by removing restrictions on foreign investment limit in single brand retail. "...it has now been decided that FDI up to 100% would be permitted in single brand product trading under the government route..., the RBI said in a circular. The Department of Industrial Policy and Promotion (DIPP) had earlier increased the limit of foreign direct investment (FDI) in single brand retail from 51% to 100%. "Necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000...are being notified separately," RBI added. Removal of the investment cap is likely to help global fashion brands, especially from Italy and France, to strengthen their interest in the growing Indian market. The government had said the move was aimed at enhancing competitiveness of Indian enterprises through access to global design, technologies and management practices. Though 51% FDI in single brand was allowed in February 2006, not much investment has come in the sector. During last three-and-a-half years, FDI worth only Rs 196 crore was received in the sector.

Moneycontrol

Bankrolling the banks

A fiscally challenged government would have to infuse large sums of money into PSU banks, leading inevitably to doubts about its ability to do so.

The Reserve Bank of India's (RBI) recently released draft guidelines on the proposed implementation of international norms of capital adequacy (Basel–III) would require Indian banks to mobilise huge sums of capital during the next five years. Under the existing Basel-II norms, the Indian banking industry has to maintain total capital — drawn from a combination of equity and preference shares plus long-term debt, both accorded lower priority to monies belonging to depositors — amounting to 9 per cent of their assets calibrated suitably for riskiness (‘risk-weighted assets' or RWA). While the overall ratio has been retained under the proposed new norms, a minor reshuffle has been attempted between equity/preference stock holders and long-term bond holders in the event of a bank failure, with the former having to contribute an additional one percentage point capital to their existing 6 per cent of the total 9 per cent. Further, equity/preference share holders have to come up with an additional 2.5 percentage points in capital as a buffer for any unforeseen contingencies. That takes the aggregate capital adequacy ratio (CAR) to 11.5 per cent, of which common equity alone would make up 8 per cent. The emphasis is clearly not just on meeting a broadly defined overall CAR of 8 per cent (as it was two decades ago), but also on improving the transparency and quality of the capital base. The implementation period for all these is from January 1, 2013 to March 31, 2017.  The rationale behind fashioning a tighter capital (especially core equity) regulatory regime for banks stems largely from the banking crises that followed the global recession of 2008 and also the ongoing European sovereign debt troubles. These have created renewed concerns over the banking sector's ability to withstand financial shocks and minimise risks of spill-over to the real economy. But implementation will be a huge challenge, with the estimates of fresh capital needed to be raised by all Indian banks ranging anywhere from Rs 1.4 lakh to Rs 3 lakh crore. Given the dominance of public sector banks, it would necessitate large government infusion of funds. Where this money is going to come from, if the Centre would not even be prepared to dilute its stake below 51 per cent, is a huge question mark. This issue came to the fore not too long back, when Moody's downgraded the State Bank of India's credit rating, after its Tier-1 CAR fell below the Government's own 8 per cent prescription. Related to this is the more immediate problem of rising non-performing assets (NPA) on account of loans to a host of troubled sectors from telecom and airlines to power. As these mount – under pressure from high interest rates and the general economic slowdown – banks would have to find resources to maintain even existing capital adequacy levels. The RBI, under the circumstances, cannot be totally oblivious to concerns over the proposed implementation schedule for Basel-III, which is seen to be rather frontloaded.

HBL

None yet celebrating rise in numbers

... “If IIP numbers continue to go up consistently, one could say the economy was on a recovery path. I doubt that RBI will begin reducing rate immediately,”.....

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Policies hinder realty sector

.... The Reserve Bank of India (RBI) believes that financing real estate is highly risky. Banks have to keep 1.25 times of the loan amount in bonds as security to the RBI. This gives rise to higher interest rates for the developers. Eventually, these high interest rates are pushing the costs of the property up. “The RBI has to change its perception and has to offer at reasonable interest rates,”.....

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Basel-III norms may hit banks' credit growth

.... The stringent norms by the Reserve Bank of India to implement BASEL III standards will bridge the gap between India and its Asian peers for the risk-adjusted capital criterion. But, it will also pose a challenge of constant capital infusion......

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Embracing Basel III

It is good on the part of RBI to make sure that Indian banks are ready to embrace Basel III, two years ahead, by 2017. Capital is going to become an increasingly scarce commodity in the coming times and especially for public sector banks (PSB) raising capital would be a big challenge (“Core Banking solutions”, FE, January 3). If PSBs are to need an additional capital of R5 lakh crore in the next five years to sustain the growth of 20% per annum, the government is quite unlikely to make this huge budgetary allocation. If the past experience regarding the global financial meltdown is anything to be believed, then the idea of having capital conservation buffer proposed in Basel III is a welcome move aimed at maintaining renewed stability of the financial system.

Srinivasan Umashankar, Nagpur (FE)

TEXT-S&P reports says RBI's basel III norms will benefit banks

......According to the report, the RBI's conservative approach should enhance capitalization in a country where Standard & Poor's views economic risks to be relatively high. The RBI's stringent capitalization requirements will also help improve Indian banks' risk-adjusted capital ratios, which are currently lower than those of many Asian peers....

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Why print rupee notes here when Pakistan is doing it for free?

On Thursday, the Delhi Police seized fake currency notes of the face value of over Rs 6 crore from two tempos – the largest haul in five years. That’s more than three-quarters of the Rs 8.4 crore seized in the previous five years. There are no prizes for guessing where these notes—all bundles of Rs 500 and Rs 1,000 notes—came from.....

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Counterfeit currency—the new pandemic

The “funny money” problem in India is no longer a minor bump; it is severe, it is suspected to be much more than the readiness to blame ISI of Pakistan, and requires a total overhaul of the laws pertaining to counterfeit currency...............

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Cash seized from ATM vans in UP

.... The EC has written to RBI to instruct the two large private banks, for which the ATM vans were transporting the cash, to produce bank scrolls explaining the cash movement.....

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Gopinath's appointment on the NSE board kicks off debate

Opinion divided on whether there is a conflict of interest

Seven months after she retired as Deputy Governor of the Reserve Bank of India (RBI), Shyamala Gopinath has been appointed on the board of the country’s largest bourse, the National Stock Exchange (NSE). Gopinath was practically No 2 with the central bank until June 20 last year, when she retired. Earlier, economist Vijay Kelkar joined NSE as its chairman soon after laying down office as the Chairman of the 13th Finance Commission. This latest appointment has started a debate on whether giving lucrative high-profile posts of independent directors to those who were once its watchdogs, would trigger a conflict of interest and whether such appointments raise a serious issue of “ethics”. This is because both RBI and the finance ministry are super-regulators to the exchanges. Though the finance ministry may not be a direct regulator in the strict sense, RBI is a regulator to the NSE— in both letter and spirit over its currency derivative segment operations. As Deputy Governor, Gopinath was RBI nominee on the Securities & Exchange Board of India (Sebi) board, where she was a direct regulator of NSE. There are, however, no rules to prevent her from joining the stock exchange. Many, though, dismiss such apprehensions. This camp says RBI doesn’t regulate exchanges; only Sebi does. If a policy has to be made for the currency segment, the market regular consults the central bank and makes the policy for all exchanges. They also say a uniform policy should be made in this regard for all sectors and not exchanges alone. While the debate continues, NSE is certainly not alone. MCX-SX has also appointed former regulators and bureaucrats on its board. It had appointed Ashok Jha and Vepa Kamesam on its board in 2009 and 2010 respectively. Jha was finance secretary in 2007 and Kamesam served as Deputy Fovernor of RBI between 1998 and 2003. Some others have directly regulated MCX in the past. But there was a gap between their retirement and taking up the MCX SX job. Jha, for example, superannuated in April 2007 -- and joined the MCX SX board only in August 2009. Kamesam retired as RBI Deputy Governor in 2003, and joined the MCX SX board in April 2010. Similarly, G N Bajpai, who retired as Sebi chairman in 2005, joined the advisory board of Financial Technologies in 2008. S A Dave, who headed Sebi in the late 1980s, joined the MCX board in 2009. Prior to that, Dave after retiring, worked on the board of several private companies including Housing Development and Finance Corporation. Both NSE and MCX did not want to comment on the issue. Gopinath could not be contacted. On the Bombay Stock Exchange, there are several retired government officials on the board. But, all of them joined after a cooling off period of at least a year. Being autonomous bodies, the RBI and Sebi do not have a “cooling-off” period in their respective service rules. The Forward Market Commission, the commodity market regulator, has however set a one-year cooling off period, before its members join any private firm. With the exception of G V Ramakrishna and C B Bhave, who retired only recently, all other former Sebi bosses are on boards of at least four or more listed companies, but this they did after a cooling off period of at least one year.

BS 

NSE to have 5 women on board; ropes in Gopinath, Umarjee

....“…responsible and effective decision-making at the highest levels requires representation of views from people with different backgrounds. Yet such diversity of thought is not possible if all individuals are of the same gender or from the same social grouping. The creativity and innovation that comes through diversity of thought is critical to remaining competitive in the fast changing global market in which we now operate,”......

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Monetary policy at crossroads – S.S.Tarapore

Monetary easing should always be slower than tightening; since the RBI opted for baby steps while tightening, it cannot easily relax monetary policy. A long pause makes sense at this stage.

All eyes are on the Reserve Bank of India (RBI) monetary policy announcement of January 24, 2012. Some top policy advisers in the government have explicitly stated that the RBI should reduce interest rates. Governor D. Subbarao, as part of forward guidance, has said that a decline in interest rates is on the cards, but has cautiously added that it is not possible to indicate precisely when monetary policy will be eased. Those pleading for a reduction in interest rates point to the year-on-year fall in food prices to minus 3.36 per cent. There are shrill noises that this signals deflation, and hence the case for reduction in interest rates. The expected slowdown in real growth to 7 per cent (some analysts expect it to be lower) and the sluggish industrial growth makes out the case for industry to be given a stimulus by way of an interest rate reduction. Pronab Sen, Chief Economist of the Planning Commission, in a percipient observation, says that the fall in food prices is essentially because of the base effect and in the next few months food inflation is likely to rise back to the 6-7 per cent range. When food inflation was at the higher reaches of the teens, no hearts bled asking for a sharp increase in the repo policy rate to double digits! The overall inflation rate is persistently over 9 per cent and although it may fall in the ensuing period, largely because of the decline in food prices, there are as yet no signs of a significant and enduring reduction in the overall inflation rate. Moreover, fuel inflation is still over 15 per cent. The fiscal situation is precarious and the gross fiscal deficit of the Centre, in 2011-12, could be 6 per cent of GDP or even higher. With the government's borrowing programme being raised sharply over the budgeted figure, crowding out is inevitable. To minimise the disruption in the commercial sector, as also to prevent yields on government securities rising, the RBI is undertaking substantial purchases of government securities under its Open Market Operations (OMO).  The upshot of all this is that inflation is likely to remain stubbornly high. Unlike in 2008, when the RBI rapidly brought down interest rates, the present macro indicators are not encouraging and a premature easing of monetary policy could rekindle inflationary pressures. The external payments position is a cause of some concern as the current account deficit (CAD) is likely to be around 3 per cent of GDP and there have been substantial outflows of portfolio capital. Advocates of monetary policy easing would argue that political economy imperatives warrant a reduction in policy interest rates. While baby step reductions would appease the strong commercial lobbies, such reductions would not meet political economy compulsions. In the past, monetary policy has remained unaffected by political economy constraints of impending elections. In 1977, just before the elections, the RBI undertook a sharp tightening of monetary policy with a 10 per cent incremental cash reserve ratio (CRR).  Again, during the foreign exchange crisis of 1991 and the absence of effective governance, the RBI went ahead with a massive monetary tightening of interest rates, reserve requirements and direct controls. As such, the RBI should not take account of the present political compulsions. Any easing of monetary policy should be on the merits of the case. When inflation hits double digits, there is strong support for monetary tightening, but the moment inflation falls back into single digits, the lobbies for interest rate reductions gather momentum. As monetary policy is eased, inflation raises its ugly head. Needless to say, monetary tightening should always be faster than the subsequent easing. The old central banking dictum is that interest rates should go up by ones and down by halves.  Given that in recent years the RBI has opted for baby steps while tightening, it cannot easily relax monetary policy. As such, there is great merit in a long pause before reductions are made in policy interest rates. There is a viewpoint that if policy interest rates cannot be brought down, the CRR could be reduced. The CRR is the most potent monetary policy instrument and if the situation is such that policy interest rates cannot be reduced, it would be a serious error of policy to reduce the CRR. After the easing of monetary policy in 2008, the tightening of policy interest rates has been of the order of 3.75 percentage points since March 2010, but the CRR was raised by only one percentage point. As such, a reduction in the CRR would not be an appropriate policy response. It would be best to wait till March 2012 before taking a view on monetary easing. Too early an easing could result in a resurgence of inflation. As the sage monetary economist, the late Professor P. R. Brahmananda said: “Not caring about inflation is like going into battle without caring for the wounded, the dying and the dead”.

HBL

Jnana Jyothi FLCC Trust website launched

Manipal : In terms of RBI directives and also as decided in the Karnataka State Level Bankers Committee meeting at Bangalore, Syndicate Bank and Vijaya Bank Co-sponsored Jnana Jyothi Financial Literacy and Credit Counselling Trust with its Registered Office at Manipal in October 2010 to strengthen Financial Inclusion in the Country. The Trust during the financial year 2011-12 has opened all over India 23 Centres out of which 12 in Karnataka, 5 in Andhra Pradesh, 2 in Kerala and 4 in Uttar Pradesh are functioning effectively. Financial Literacy is an integral part and a maiden step towards financial inclusion. The Trust, with an objective to spread awareness of Financial Literacy among the general public, has initiated another major step of launching its own website with domain name www.jnanajyothiflcc.com covering various financial products and services offered by the Banks. The website was inaugurated on 11.01.2012 by Sri D.T. Pai, Chairman cum Managing Trustee of JJFLCC Trust.

http://www.bellevision.com/Bv/index.php?action=news_diggest&type=1771

VITALINFO - Great work.................

Assam Gramin Vikash Bank turns 6

.... During the first six years of its operation, the bank had witnessed a compounded growth rate of 169 per cent and the number of customers of the bank has crossed 45 lakhs. During his latest visit to the state, governor of the Reserve Bank of India, D Subbarao rated the performance of the bank as outstanding.

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Can manage inflation if food prices keep declining: Pranab

“Food inflation is still negative... There is a declining trend... If this trend continues, then the overall inflation will be manageable,”

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India Central Bank's November Dollar Sales Point to Intervention

..... Last week, RBI Deputy Governor Subir Gokarn reiterated the stance that the central bank won't defend any particular rupee level, but added that it would "respond strongly to any sharp one-way moves" in the local unit.......

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RBI to consider falling food prices in monitory policy review

NEW DELHI: The Reserve Bank today said that it will take into account the declining food prices while taking a view on the monetary policy which comes up for review later in the month. "The impact of food prices on (inflationary) expectations is certainly a factor that needs to be taken into account," RBI Deputy Governor Subir Gokarn said here. Although there is no direct relation between food inflation and monetary policy decisions, he said prices of essential kitchen items do impact inflationary expectations in the economy. "The role of food inflation is essentially on expectations ... there is no direct link between monetary policy action and food prices," Gokarn said. Food inflation remained in the negative territory for two consecutive weeks and was (-) 2.90 per cent for the week ended December 31.  The overall inflation in November was 9.11 per cent and Chief Economic Advisor Kaushik Basu said he expects the WPI number to come down below 7.5 per cent in December helped by declining food inflation. Food inflation accounts for 15 per cent in the overall inflation basket. Overall inflation has been above 9 per cent mark since December 2010. Gokarn said, "Increasing affluence is driving significant demand increases ... and the fact that inflation or prices are rising quite sharply basically suggest that the supply response is relatively weak". The Reserve Bank has raised rates 13 times since March 2010 to control inflation by taming demand. It is scheduled to come out with its third quarter policy review on January 24. The industry wants the Reserve Bank to reduce interest rates with a view to arresting slowdown and boosting industrial growth. The industrial growth which turned negative in October, showed an increase of 5.9 per cent in November. Food inflation, Gokarn said, as a phenomenon "is something to be treated as a persistent source of inflation, with pressure on prices and policy response to it naturally has to be driven in that perspective".

ET

RBI may defer rate cut as industrial growth rises

..........After raising key policy rates 13 times since March 2010, RBI opted against increasing rates in December. Economists said RBI governor D Subbarao may want to watch how the situation pans out over the next couple of months and opt for a rate cut later. The government, however, seemed to suggest that the policy focus needs to change to boost investment in the economy and spur economic activity further......

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Growth will moderate in December, then rise: C Rangarajan

C Rangarajan, veteran economist who chairs the Prime Minister’s Economic Advisory Council, expects industrial growth to pick up from this month, he tells Indivjal Dhasmana. A short and edited interview:

Industrial growth bounced back in November, from contraction in October. What is your outlook for the remaining months of this financial year, particularly considering the high base effect of December?

Some moderation could be seen in December. However, industrial growth will pick up after that, which will have ramifications for overall economic growth. I expect overall economic growth to be over seven per cent this fiscal (the economy grew 7.3 per cent in the first half).

What does the November industrial growth figure tell RBI in terms of policy response?

RBI’s policy actions will depend on the headline inflation number for December. While food inflation is in the negative zone, we are not sure about the rate of price rise in manufactured products. So, this will give an important indicator to the central bank.

Many economists have suggested RBI wait a bit longer before cutting policy rates and choose the cash reserve ratio (CRR) or open market operations (OMOs) to manage liquidity. What would you suggest?

I think OMOs are a preferred tool, because you can calibrate liquidity management this way. CRR is somewhat a blunt tool. Even a quarter of a percentage point cut in CRR unleashes a great amount of liquidity in the system.

Mining continued to witness a contraction in November production , for the fourth month in a row. Do you see it as a drag?

Mining will improve from December. Coal production has picked up in December.

Capital goods also witnessed a continued fall in November. Will it affect future industrial growth?

The decline in capital goods abated somewhat in November. Their production will improve in the months to come.

BS

Account number portability

In October 2011, the RBI deregulated interest rates on savings account deposits, subject to a few conditions, following which a few private sector lenders have hiked rates to as much as 7 per cent. And now, the Finance ministry is working on savings bank account number portability, which will allow a customer to retain his account number while changing his bank, if at all he decides to do so for different reasons. The move is a step in the right direction, as it would help customers change banks without the need of following ‘Know Your Customer' norms again, and also expect higher returns on their savings in a competitive environment.

- Srinivasan Umashankar, Nagpur (HBL)

Credit card PIN

Regarding “Credit cards: RBI keen on ‘zero liability' to customer” (Business Line, January 10), before introducing the policy, the RBI should insist that banks assign PIN for all credit cards.  When all debit cards are protected by PIN-enabled transactions at point-of-sale machines, such as ATM transactions, why not credit cards? Though Verified-by-Visa or MasterCard SecureCode mandates are in place, they help to protect only online transactions. Without PIN, credit cards are vulnerable to theft and fraudulent transactions.  Moreover, ‘zero liability' policy without PIN will increase the moral hazard problem among credit card users, since they won't be accountable anymore.

- Dhinesh Rajamanickam, Bangalore (HBL)

Shop online without credit, debit card

.... A virtual card can be generated by doing a one-time registration with your bank. The virtual card number is set up using your existing physical credit card. You get a unique login and password. Just specify the amount you want to spend with your virtual card. The card generated will have a new 16-digit number, CVV2 number and expiry date. You can use it like any credit or debit card for online shopping......

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RBI cautions foreign banks on speculative FX trades: report

Mumbai: The Reserve Bank of India has cautioned some large foreign banks for encouraging local companies to participate in speculative trades in the foreign exchange market, the Business Standard reported on Thursday. The RBI, in a meeting with senior officials of foreign banks, cautioned them for taking part in these trades as it felt that the transactions were partly responsible for the sharp fall in the rupee against the dollar, the newspaper said, quoting three people familiar with the development. The rupee has depreciated nearly 16 percent in 2011 against the US dollar. “RBI was aware that many foreign banks were encouraging speculation in the market. But it could not take any action as most of these trades were done offshore outside its regulatory purview. There was a meeting last month where RBI issued oral warning to some of these banks,” a source privy to the discussions with the regulator, told the paper. Most of these trades were done taking advantage of the difference between the forward premium rate in India and the offshore non-deliverable forward market rates, the report said. The RBI, on 15 December, reduced the net overnight open position limit (NOOPL) of authorised dealers in the foreign exchange market with immediate effect, potentially reducing capacity of market participants for taking trading positions.

Firstpost

RBI playing hardball with AI debt restructuring plans

RBI seems to be playing hardball with Air India's restructuring plans. CNBC-TV18 learns that banks' refusal to provide for the restructured assets follows the RBI refusing to agree to bank request on exemption on provisions with respect to cumulative redeemable preference shares, reports Swati Khandelwal......

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The wages of policy inertia and profligacy

..............India may end with sub-7% growth in 2011-12. There is danger that slow growth may change from a cyclical to a structural problem.......

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Patchy recovery

..... The key question for next week is what message the Reserve Bank will read into these numbers. If Mint Road reads them as optimistically as Yojana Bhavan does, the central bank will be confirmed in the view that it has projected in recent weeks — that interest rates should not be raised any further, but nor should they be lowered just yet.....

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Place your bets on India

..... Crisis situations will erupt in the power, coal, rail and banking sectors. Markets will continue to de-rate, lose global relevance, and investors will write off the country till 2014. Even the RBI cutting rates will not be enough to trigger a capital expenditure cycle, as policy constraints will continue to hamper investment. Markets will continue correcting from both time and price perspectives. All this is independent of the continuing global uncertainty....

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Black money in polls: EC writes to RBI

Stepping up measures to combat the flow of black money during forthcoming polls in five states, the Election Commission has written to the Reserve Bank of India (RBI) to ensure that banks are not "misused by unscrupulous persons" for bribing voters with cash. The EC has written the letter to the Reserve Bank of India in the backdrop of an incident where the Income Tax department recently seized cash of Rs 12.38 crore belonging to ICICI bank at Delhi's border with Ghaziabad (Uttar Pradesh). The amount, suspected not to be conforming to cash movement rules stipulated by RBI, was seized by the I-T department on the directions of the Election Commission. "...Request you [RBI] to conduct a thorough enquiry of the case [seizure at Ghaziabad] and to ensure that the banking channel is not misused by the unscrupulous persons to carry cash to the constituency during election process, for the purpose of bribing the electors," a letter received by the RBI Deputy Governor in Mumbai from the poll body said. Five states -- Uttar Pradesh, Punjab, Manipur, Goa and Uttarakhand are going to Assembly polls in various phases, begining January 28. The EC, in its letter, also reminded the RBI that it has earlier written to the banking regulator after it received similar complaints during the Assembly polls in Tamil Nadu.

BS

Fake currency worth Rs six crore seized in Delhi

.... "Seized counterfeit Indian currency notes have most of the security features of genuine currency notes and for a man on the street it would be difficult to find the difference on mere looking,"......

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'Nepal-based Indian runs racket'

Investigators following the fake currency trail into North India, especially Delhi and Uttar Pradesh, have zeroed in on a Nepal-based Indian national, known.....

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Can Chaudhuri turn the tide for SBI?

.... “the credentials and quality SBI has, I don’t think it will have a problem in coming out of any issues it faces in the short term”,.....

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False dawn

The main problem today is neither growth nor inflation, but an investment freeze. And that is bad both for future growth and for fighting inflation.............

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View financial inclusion as a business model: RBI to banks

RBI has said that banks need to perceive financial inclusion, or the process of bringing all the people under the financial system, as a profitable business model and not an obligation. "Banks need to perceive financial inclusion as a profitable business model and not as an obligation. This would be possible only if banks strive towards offering more and more credit products to customers captured as part of the financial inclusion plan and lower transaction cost by leveraging technology," Deputy Governor Anand Sinha has said at the launch of the Financial Inclusion programme of Cosmos Bank at Pune earlier this month. The transcript of Sinha's speech was made available at the RBI's website. "The current policy of inclusive growth with financial stability cannot be achieved without ensuring universal financial inclusion," Sinha said. He further said: "Though the efforts for universalization of financial inclusion are already underway, there are a number of challenges in this endeavour going forward with about 4,80,000 villages yet to be provided with banking services." 

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