RBI awaits govt move on fiscal deficit

Reserve Bank of India (RBI) Governor D Subbarao said that the central bank will watch the steps being taken by the government to curtail fiscal deficit before taking a decision on rate cut. “The (fiscal deficit) number as a proportion of GDP has to come down, that is very important as you recognise but within that we will look for the quality of fiscal adjustment that is being made,” he told analysts. Subbarao said “First, we have depended, I believe, quite heavily on the tax side and neglected the expenditure compression element of this over the years”. He said efforts to reduce fiscal deficit should be as much on the tax increase as on expenditure compression.

DH

CRR cut a balancing act, will fix liquidity issue: Experts

............From that perspective we cannot differentiate between a CRR and a OMO. Where the differentiation can come is CRR is kind of free money for the banks, whereas OMO has a cost attached to it, but on the other hand if you do too much of OMO you will always be criticized that you are funding your fiscal deficit and lets not forget that at least in this policy statement RBI has been very clear about fiscal consolidation............

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THE SMART RURAL WOMEN BANKERS OF SATARA

........While some micro- finance institutions in India have run into scandal for mismanagement and fraud, Sinha says the bank is scrupulous about accountability,with internal audits every three months, a yearly audit by the government's co-operative department and an inspection by the central bank every four years...........

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

NBFCs Have Greater Ability To Take Quicker Decisions - RBI

...... A recent RBI paper looks at NBFCs in India and offers suggestions. As the paper points out, NBFCs fulfil a need that banks are unable to meet. They have the ability and flexibility to take quicker decisions, assume greater risks and customise services and charges according to the needs of the clients. At the same time, the strong and growing links between banks and NBFCs means that NBFCs could pose a threat to the safety and stability of the financial system.......

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Actuarial science professionals can play vital role in financial inclusion

....The key focus for the government is financial inclusion and public sector banks have been increasing their head count. A report of Icra Management Consulting says the banking and financial services sector is likely to employ 8.4 million people between 2008 and 2020.....

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How does inflation affect common man’s palate?

Amidst all the hoopla surrounding the ‘ever-so-important’ inflation numbers, what do they signify for the ‘aam admi’ of India? If you thought lower inflation numbers would bring some respite for your ever-depleting pockets, think again.....

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Postal dept works towards bank permit

.........The department will apply for a banking licence from the Reserve Bank of India. Post Bank of India may be set up with the required authorised capital of Rs 700 crore, the official added. “The plan is to offer banking services in rural and semi-urban areas by converting our post offices into banks. The department has about 1.5 lakh post offices across the country, which is mainly located in rural areas,” a source said......

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RBI moves lift market sentiments indices

.... The answer lies in the ability of the government to push through more reforms. The acid test will be the Union Budget. The RBI's actions need a follow through from the finance ministry. The ministry needs to produce some cash flows to reduce the fiscal deficit. The RBI will not be able to start its rate cut programme if the budget document shows no control over government spending.....

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The Last Mile

..... “Have you ever seen an advertisement or even a leaflet from banks saying that they now offer 6 per cent on a savings account? SBI says it is a banker to every Indian. What about the people in the remote parts of India? They are bonafide customers of the bank.” He is categorical that BC is just a channel; the principal is the bank, it is its responsibility to offer products and services suited to the catchment area. Khera’s view echoes in the RBI review: “The BC model is largely perceived as a channel for undertaking only liability side business (deposits)... If BCs are used merely for this purpose, the income generated by BCs will not be sustainable over a period”.......


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It Is All About Money

.............Six years ago, the Reserve Bank of India came up with the business correspondent model to tackle this problem. Business correspondents were people or firms who would act as agents of a bank. They would be allowed to offer some basic services, and paid on a per transaction basis.Just over half a decade of operations, the results are mixed. On the success side, many banks have managed to provide no-frills accounts to people in many previously unbanked areas. At the same time, most banks still find the operation economically unviable. Most end up subsidising costs. Also, most business correspondents find that acting as an agent for the bank does not even offer them enough money to survive. And many villages still remain without any banking facilities...............

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There’s credit card insurance, too

India has around two crore credit card holders. However, there are only a select few who are aware of an insurance cover which is available with the plastic........

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Additional safety in online transactions

Another choice to ‘extra protect' your online transactions is to create virtual cards. Banks such as HDFC and Kotak Mahindra currently provide this option.

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Making card transactions more secure

....thanks to the Reserve Bank. Based on the report of a working group on ‘Securing Card Present Transactions' (i.e. transactions at POS/ATMs), the regulator has recommended that all card issuers (banks) must be ready to issue EMV chip cards by June 30, 2013. The apex bank has also said that the POS infrastructure must be equipped to support chip cards and PIN-based authentication by the same date. ..........

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He sacrificed his today for their tomorrow

.... The last of his pupils to be selected were Apoorva Nandekar and Ketki Tol. The former's father P.R.Nandekar, an RBI employee, recalled Chafekar of having kept his word of felicitating the girls. "He did this after being discharged from hospital,".....

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Is it time to buy or invest in housing? Yes, say bankers

.... Bankers estimate that the Reserve Bank of India (RBI) is likely to reduce its repo rate, which will further bring down rate of interest on housing loans. It will give a fillip to the economy and will fuel demand for housing in next six months.....

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Noida banks want better relocation deal

....“What usually happens is that banks rent space in plots owned by other individuals or organisations. Very rarely does a bank make a capital investment of its own, and there are strict norms by the Reserve Bank of India (RBI) in this regard,”........

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RBI to test plastic currency plan with Rs 10 note

ROHTAK: If the proposal of the Reserve Bank of India (RBI) gets through, plastic currency notes of Rs 10 denomination would be in the market soon. The RBI is in the process of testing the effects of different climatic conditions on the plastic note, after which it could be a reality, subject to approval by the Centre. RBI's Assistant General Manager (AGM) at Chandigarh, J B Mangla, told TOI on Friday that this would ensure longer life of currency notes. "RBI has proposed to print Rs 10 denomination currency notes in plastic as a pilot project. These are being tested for different climatic conditions like extreme hot, cold and moist areas along the seashore". The official said there was no timeframe for introducing the notes and if found successful, it would be replicated for other denominations also. "There is too much tampering and misuse of currency notes in our country like using it in garlands, throwing the notes in the air on occasions like wedding, stapling or writing on it. We don't have any penal provisions to check this misuse. It shortens the life of a note. The plastic note will have longer life", he added. Mangla was in Rohtak to attend a coin distribution programme organised by the Oriental Bank of Commerce here. He said the programme was organised in view of the feedback from the town about shortage of coins. "There is no shortage of coins with RBI but it seems to have been created by people who has a habit of storing coins, instead of keeping it in circulation,'' said Mangla.  

TOI

CRR cut not a decisive stance reversal: Subir Gokarn

The Reserve Bank of India cut the CRR or the cash reserve ratio to 5.5 per cent in its credit policy review on Tuesday, injecting Rs 32,000 crore into the system. However, the central bank has kept the short-term lending rate (repo) unchanged. "CRR is not a substitute for open market operations (OMOs)," said RBI Deputy Governor Subir Gokarn in an exclusive interview to NDTV

RBI to act against banks not beefing up cyber security

.... "The banking regulator expects reasonable compliance. RBI will take a serious action against banks that do not implement the recommendations of the committee. By October 2012, banks will have to implement the recommendations,"....

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Banks to be held responsible for fake notes in ATMs

CHENNAI: Banks are responsible for any fake notes dispensed by their automatic teller machines (ATMs) and should compensate customers for the loss when fraudsters withdraw money from their accounts using stolen data. This was the view that emerged at a seminar on security of banking operations held here Friday. "Banks cannot wash off their hands on the issue of fake notes dispensed by their ATMs and they are liable to compensate their customers. The customers should lodge a police complaint immediately on coming to know about the fake notes from an ATM," S.N. Ravichandran, joint secretary, Cyber Society of India, said. While it is common to hear complaints of bank customers getting fake notes from ATMs, banks conveniently wash their hands off, saying that the cash is filled in the machines by third party agencies. "The police should book the chief executive of the bank as well as that of the third party agency that refills the machine with cash. If that happens, fake currency in ATMs would vanish," Ravichandran said, adding that banks should not issue ATM cards indiscriminately. Reserve Bank of India Executive Director G. Gopalakrishna said the central bank had told the banks not to circulate notes obtained from the currency chest immediately.

ET

New Rs.5 coin soon

The Reserve Bank of India (RBI) will shortly put into circulation coins of Rs. 5 denomination to mark the centenary year of Indian Council of Medical Research (ICMR). In a press release, RBI said that one side of the coin would have the image of Lion Capital of Ashoka Pillar, while the other side would have the emblem of ICMR. There will be three growing lines on the left and right side of the emblem and the year ‘1911-2011' will be shown below the logo, press release from RBI added.

HBL

RBI to conduct financial outreach camp at Changki

Mokokchung, January 27 (DIPR): Reserve Bank of India (RBI) has embarked on organizing Financial Outreach camps in various villages of the North East States as a part of its Platinum Jubilee celebration since 2009-2010. The outreach camp aims at bringing awareness among people in remote villages about RBI and banking system. Encouraged by the response received, RBI has launched second phase of financial outreach camps in the North East States. In its series RBI has selected Changki village in Mokokchung district of Nagaland State to hold the outreach camp on February 8. Besides RBI, other financial institutions such SBI, NABARD, NEDFI, KVIC, NSIC, SIDBI, Nagaland Rural Bank, Nagaland State Co-operative Bank etc. will be involved in the proposed outreach camp for sharing information on various financial products and services with the public. In addition, agriculture, horticulture and other allied departments of State government will open stalls during the camp for the benefit of villagers. According to RBI official sources, Executive Director, RBI, V.S. Das will attend the camp as guest of honour. To facilitate the proposed camp, Deputy Commissioner, Mokokchung Lithrongla G. Chishi had a meeting with officers of concerned departments at her office chamber on January 27 and discussed with the officers to make the camp beneficial for the villagers.

Morung Express

RBI may intervene in forward market: source

.... RBI Deputy Governor H.R. Khan said that any central bank intervention, as and when it happens, will be a combination of both cash as well as forward basis. “But there is a limit upto which you can do forward because then the premiums will disturb other rates,” he said, adding the amount is decided based on the market condition.....

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Banking licences: Ministry, RBI step up shadow-boxing

Regulator wants all eligible applicants to get licences, finance ministry says not a good idea

The central bank seems to be in an unusually generous mood on new banking licences. In a sharp departure from its earlier cautious stance, the Reserve Bank of India (RBI) is now in favour of giving banking licences to all the applicants that meet the eligibility criteria mentioned in the guidelines issued for this purpose. But, the finance ministry is not in sync with RBI’s generosity on the ground that it would be difficult to regulate and supervise a large number of banks. This new round of difference of opinion would extend the long wait for the banking hopefuls.

LICENSING NORMS IN THE WORKS 1993: First guidelines since the financial sector reforms of the early 1990s released for new banks 2001: Revised norms released, two banks given permission in 2003-04 Feb 2009: Finance Minister says in Budget speech RBI to consider giving licences to new entities Aug 2010: Discussion paper on new bank licences released Aug 2011: Draft guidelines on new bank licences out

RBI’s approach so far has been to restrict licences to only a few entities. According to central bank sources, the banking regulator has written to the finance ministry that banking licences should be given to all those entities that meet the ‘fit and proper criteria’ mentioned in the guidelines. More importantly, the view in Mint Road is some of these banks can be allowed to fail. This is significant, as no banks have been allowed to fail in the country since the guidelines of 1993. “If some banks are allowed to fail, others will be more cautious and prudent in their operations,” said a person close to the developments. RBI has always followed an ultra-cautious approach on private bank licences. Since the financial sector reform in the early 1990s, the first set of guidelines was issued in 1993 and then revised in 2001. The 2001 guidelines were cautious and large industrial houses were not permitted to set up banks. Ten new banks were set up in the private sector after the 1993 guidelines and two after the 2001 guidelines. Sources said the ghost of the 2G scam played a big role in the central bank’s decision, as RBI wanted to minimise the role of subjectivity. The central bank is now open to the idea to allowing large business houses in banking. Almost all the big industrial houses, including the Tata Group, the Aditya Birla and RADAG groups, are keen to set up banks. Nearly 18 months after the government announced RBI would consider issuing fresh banking licences, in August last year, draft norms were issued. Among the criteria suggested in the draft norms was diversified ownership of promoters with a minimum 10 years of experience in business and a minimum Rs 500-crore capital. It was also said firms having 10 per cent of their income from real estate and broking activity would not be considered. RBI has also made a case to the government to amend the Banking Laws (Amendment) Bill, introduced in Parliament in March last year, which will give more power to it before fresh banking licences are issued. At present, RBI does not have certain powers, such as supersession of bank boards.

BS

RBI guidelines on bank CEOs’ compensation—Are they missing the woods for the trees?

..... the RBI appears to have missed the woods for the trees as a few areas of executive compensation, which have a great relevance in the Indian context, are conspicuous by their absence. More so because, the compensation structure of CEOs of public sector banks is not even being attempted to be covered under the new dispensation without any rhyme or reason. .......

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TNEB mulls bill payment through mobile phones

.... “The RBI is studying certain (accounting) modules for fund transfer. Since the amount involved will be huge, we want a robust system (software and technicalities) in place,”....

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Budget should provide roadmap to contain deficit: Rangarajan

............"It (rate cut) all depends on how the inflation behaves in the coming months. The reduction in the policy rate will come about only when the there are definite signs of decline in the non-food manufacturing inflation,".......

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Non-bank finance cos are a boon if they don't fall through regulatory cracks

.... A recent RBI paper looks at NBFCs in India and offers suggestions. As the paper points out, NBFCs fulfil a need that banks are unable to meet. They have the ability and flexibility to take quicker decisions, assume greater risks and customise services and charges according to the needs of the clients. At the same time, the strong and growing links between banks and NBFCs means that NBFCs could pose a threat to the safety and stability of the financial system........
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Cash reserve ratio

This is regarding the latest policy announcement of the RBI reducing the cash reserve ratio by 50 bps. The intention appears to be to make lendable cash available with the banks. But keeping the loan interest rates as they are, the reduction in CRR may not yield much improvement in boosting lending. With the lending rates untouched, the industries may not be able to perform in a profitable way, and hence credit outgo may not be boosted. The interest rates need to be re-examined to raise credit outgo and, thus, create a rise in industrial production. This may also help in improving the GDP.

- T. R. Anandan, Coimbatore (HBL)

A good balancing act

Apropos of the editorial “RBI lobs ball to Pranab” (FE, January 25), in the kind of situation that we are in and the growing uncertainties faced with monetary policy actions alone cannot achieve the desired purpose unless the central government, on its part, comes out with credible policy initiatives and steps up fiscal consolidation programme. In the context, a cut in the CRR by 50 bps is an intelligent move to infuse liquidity into the system and make banks comfortable to operate so that the growth aspect is equally taken care of without diluting the key policy rates and not letting the inflation go out of control again. Rightly so, the question the RBI Governor has posed—is investment being held back by unfriendly government policy or by high interest rates—doesn’t need answering.

- Srinivasan Umashankar, Nagpur (FE)

Monetary policy

Apropos the editorial “Beyond a baby step” (Business Line, January 25), the reduction in cash reserve ratio doesn't signal changes in the monetary stance of the central bank. It only alleviates strained inter-bank liquidity. In the past, CRR was used to convey changes in the monetary stance. Continuing the policy rates at the existing level (repo and reverse repo rates) implies that the central bank still isn't comfortable with the patterns in inflation. Credit demand won't change during 2012 due to a complex business environment prevailing at present, and so changes in CRR wouldn't improve the investment sentiment. At best, the RBI has taken care of the supply side of funds. Has the RBI utilised the opportunity to merely infuse liquidity into the banking system? As monetary easing isn't desirable due to continuing inflation on the manufacturing front, the central bank is in an unenviable place.

- K. V. Rao,  Bangalore (HBL)

We don't want flip-flop on policy till inflation subsides: Subir Gokarn, Deputy Governor, RBI

......... Basically, our objective was to address the liquidity constraints in the system. We have been doing OMOs for about seven weeks now and the liquidity pressures still persist. The CRR is essentially a liquidity tool, but it has strong monetary signalling in it. When we looked at the liquidity situation, we realised that a CRR cut would address it without compromising , or conflicting with, our monetary stance. We addressed the liquidity problem with an instrument that has monetary implication but does not compromise our monetary stance............

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Subbarao sets homework

At the end of the post-policy conference call between the Reserve Bank of India (RBI) and researchers and analysts, most participants found themselves left with a lot of homework — given by the Governor himself. During the call, participants made suggestions to RBI to improve the quality and speed of data analysis and dissemination. D Subbarao’s reply was to ask them to undertake research on how to achieve this and send in a copy of their findings to the central bank!

BS

Five principles of financial regulation for stability in 2012

..... The focus of his presentation the creation of a stable financial market in 2012 got me thinking about the kind of regulation that will be required to achieve that objective.  It also reminded me of insights I recently came across from one Usha Thorat, director of the Centre for Advanced Financial Research and Learning in Mumbai and a former Deputy Governor of the Reserve Bank of India.....

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Govt may introduce Micro-finance Bill in Budget Session

The government is likely to introduce a Bill that seeks to make it mandatory for all micro-finance institutions to be registered with the Reserve Bank of India in the Budget Session of Parliament. The Finance Ministry has sent the draft Bill to the Law Ministry for approval and will subsequently seek Cabinet's nod, official sources said............

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RBI seeks power to regulate all subsidiaries of banks

.... "Banks have forayed into insurance, broking, mutual funds, private equity, and have become complex and large financial conglomerates. If the subsidiary fails, it can dent banks' profitability and erode capital. To avoid such a situation, RBI wants to have supervisory powers,".....

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India can leapfrog cheques to move straight into electronic banking

..... Electronic payments would spell major gains. For banks trying to lower branch-banking costs, by encouraging customers to avail of internet banking; for trade and commerce, for whom instantaneous funds transfer means a huge saving in costs; for tax authorities, who will get a handle on transactions that otherwise are off their radar, and for ordinary citizens who will get speedier service. Replacing cheques with electronic payments will also be environmentally friendly. All the more reason for the RBI and government to join together and publicise the advantages !

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Public sector banks set to 'swipe' in new sale order

...........The government has decided to form a company in which top state-run banks, including State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank and Union Bank of India, along with National Payments Corporation of India (NPCI), would be stakeholders. This company would buy PoS terminals and deploy these on behalf of the lenders across merchant outlets in the country.................

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Electronic payments

Electronic transactions are making rapid strides as reported in “Bye-bye cheques, hello electronic payments” (Business Line, January 23), thanks to the efforts of our banks and the RBI, who are encouraging Internet transactions and introducing technology to do banking transactions from home.  Internet banking is very popular among retail customers, but unfortunately, the RBI and banks aren't able to persuade most firms and the corporate sector to take up regular transactions online. Banks are equipped with technology, safety mechanisms and security to safeguard transactions and facilitate easy recognition. The only way to move towards paperless transaction is to encourage online transactions by providing incentives and discouraging branch-level transactions. 

- Srinivasa Sarma, Hyderabad (HBL)

Bankers to discuss cyber security

The seminar 'Banking on e-Security - RBI's Gopalakrishna Working Group' is being organised jointly by city-based Cyber Society of India and Indian Overseas Bank (IOB).

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Banking on derivatives

....If hedging price risks expands their scope for financing of agriculture, it is definitely worth relaxing the existing restrictions, subject to the overall capital market exposure limits permitted by the Reserve Bank of India........

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Inflation? Don’t tell us. Govt to stop publishing weekly data

Call it coincidence. But a day after the Reserve Bank of India (RBI) mentioned the ‘i’ word 79 times in its third quarter monetary policy review, the UPA government has decided that it is hearing the word “inflation” a bit too often. Among other things, the Reserve Bank Governor said that the current fall in food inflation is seasonal, and things could worsen later this year. The ‘i’ word was packaged with dollops of advice on reining in subsidies and improving supply to deal with inflation on a long-term basis............

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Has Subbarao put out the welcome mat to inflation?

...... The RBI’s agument that CRR will merely replace the liquidity now being created by lending through repo auctions doesn’t quite hold, since CRR multiplies money exponentially compared to repos auctioned through the liquidity adjustment facility.......

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RBI deploys the wrong instrument : S S Tarapore

One wonders why the RBI decided to relax the cash reserve ratio. Given that the central bank's stance is to increase liquidity, forex purchases would have been the ideal instrument to use...................

As the saying goes, the heart has its reasons. One only fervently hopes that the RBI does not have to rue its decision.

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In defence of the Reserve Bank of India - Mythili Bhusnurmath

..... Today if the RBI has lobbed the ball into the government’s court it is because monetary policy has reached its limits. It is now for the government to do its bit. Going by the number of fiscally irresponsible actions, there is little sign as yet that it has realised the gravity of the situation. It is only appropriate therefore that the RBI has finally stopped mincing words and done some plain speaking, even if it is accused in the process of shirking responsibility and ‘lobbing’ the ball back into the government’s court.

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Has RBI taken the wrong path by letting short-term volatile debt rescue rupee?

.... "RBI is basically signalling Indian banks to learn to manage their profitability by setting their rates on commercial considerations," ......

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TEA not happy with RBI decision

The Tirupur Exporters Association (TEA) has expressed disappointment over the Reserve Bank of India's third quarter review of Monetary Policy, released on Tuesday, which retained the short-term bank rates (repo and reverse repo) at 8.5 per cent and 7.5 per cent, respectively. “With repo and reverse repo maintained at the same level, the interest rates levied by banks on loans are not going to come down. Moreover, the policy did not have any announcement for export sector,” TEA president A. Sakthivel has said. Technocrats like S. Dhananjayan, a senior member of Institute of Chartered Accountants of India, feel that the RBI's decision to reduce the CRR from 6 per cent to 5.5 without bringing down the Repo and Reverse Repo rates would only ease the liquidity problems but not likely to scale down the interest rates. The apex bank's contention was that cut in the CRR, the amount of deposits the banks were required to keep with RBI in cash, could possibly prompt the banks to reduce the interest rate to attract borrowers. Mr. Sakthivel said the expectations of exporters for extension of the 2 per cent interest subvention to knitwear and garment sectors across the board too were not addressed by the RBI.
HBL

RBI empowers banks on end-use of ECB funds

Banks say move streamlines foreign fund-raising, removes administrative flaws

.... “The step shows RBI is now more comfortable in delegating powers to the authorised dealers (banks). The action by the regulator will help in fine-tuning the operational procedure for ECBs,".....

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Balance growth with equity, inclusiveness, says Speaker

The Lok Sabha Speaker, Ms Meira Kumar; flanked by the Chief Economic Advisor, Mr Kaushik Basu, and the Director, Centre for Advanced Financial Research and Learning, Ms Usha Thorat, releasing a book during the Golden Jubilee celebrations of the Indian Economic Service, in the Capital on Tuesday.

HBL

SB accounts to get interest on end-of-day balance

The Reserve Bank of India (RBI) on Wednesday said that interest rates applicable on the domestic savings bank deposits will be determined on the basis of end-of-day balance in the account. While calculating interest on domestic savings bank deposits, banks are required to apply the uniform rate set by them on end-of-day balance up to Rs.1 lakh.  For any end-of-day balance exceeding Rs.1 lakh, banks could apply the differential rates as fixed by them. “Banks may ensure that interest rate is applied on the end-of-day balances of all domestic savings deposit accounts and no discrimination is made at any of its offices. Prior approval of the Board/Asset Liability Management Committee (if powers are delegated by the Board) may be obtained by a bank while fixing interest rates on such deposits,” the Reserve Bank added.

HBL

RBI monetary policy: It's time to change three gears

We welcome the Reserve Bank of India's growing focus on protecting growth from fighting inflation. Monetary policy should change in three ways. First , policy rates need to cycle down to support growth. Second, RBI needs to reduce the money market liquidity deficit to ease pressure on lending rates instead of adding to it.............. 

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NSMs must for banks with over 50 L transactions

PUDUCHERRY: The Reserve Bank of India (RBI) has made the desktop note sorting machines (NSM) compulsory in all banks, where the average daily receipts exceed Rs 50 lakh, to filter fake notes at the entry point, said S Nandhakumar, Assistant Manager,............

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Govt banks to have more EDs in FY13

Starting next financial year, six large public sector banks, with business of more than Rs 3 lakh crore, are set to get a third executive director each. The finance ministry wants the new executive directors to focus exclusively on human resources and information technology. The government would also appoint a second executive director in small public sector banks that have just one executive director. Currently, except for four government banks, all others have two executive directors. As a result, two dozen executive directors’ posts need to be filled up in the next financial year. The finance ministry has shortlisted around 48 general managers for interviews. General managers who have completed two years at the post and have three years of residual service are eligible for these posts. While the finance ministry had relaxed the eligibility criteria while selecting chairmen and managing directors in public sector banks, the eligibility criteria for the post of executive directors has not been relaxed. The interview panel includes banking secretary in the finance ministry, D K Mittal, Reserve Bank of India (RBI) Deputy Governor Anand Sinha, and former RBI Deputy Governor J Capoor. The interviews would be conducted by the end of this month. Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India, Union Bank of India and Central Bank of India that would get a third executive director each, while smaller banks like United Bank of India, Dena Bank, Bank of Maharashtra and Punjab and Sind Bank are likely to get a second executive director. The finance ministry had recently finalised the candidates for the top posts of public sector banks. Banks that would get new chiefs in the next financial year are Canara Bank, Bank of Baroda, Bank of India, United Bank of India, Dena Bank and Allahabad Bank. The finance ministry has done away with the system of lateral transfers while appointing chiefs of large public sector banks. Earlier, for large banks like Bank of Baroda and Bank of India, a chairman of a smaller bank was given charge. However, this time, executive directors have been promoted and are set to take up the roles of chiefs.

BS

Bulk deposit rates near 10% despite cut in CRR

With banks fearing another cash shortage bank bulk deposit rates moved close to 10 per cent, despite the Reserve Bank of India’s (RBI) half per cent cut in the cash reserve ratio (CRR)...........

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RBI advises govt to stick to fiscal consolidation road-map

RBI Governor D Subbarao said, “If the government goes beyond the (targeted) number and gives details about how the number is going to rollout next year and beyond, I think that would be very credible not only for the RBI but also for all those people who are planning investments in India”..........

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Obtaining Coop Bank Licence won’t be tough: Abhyankar

...... Umbrella Organisation shall be a co-operative society registered under the Multi-State Co-operative Societies Act, 2002 of the Government of India. Even though the Malegam Committee recommendations regarding the Umbrella Organisation if accepted by the RBI, suitable amendments in the Banking Regulation Act 1948 will have to be made, which shall be the duty of the RBI and the Government of India.............

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'Investor-friendly' Sebi to launch ad campaign next month

... In the past, the banking regulator Reserve Bank of India (RBI) has regularly used the print and the electronic media to alert the public about various fictitious schemes and fake currencies......

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RBI lists ways to identify fake notes

CHENNAI: In order to sensitise residents of Kovilambakkam village panchayat in Pallikaranai on counterfeit currency, officials of the Reserve Bank of India visited the area on Monday and conducted a workshop at the panchayat office. Residents, panchayat officials and councillors learnt many basic and simple methods of differentiating genuine and fake currency notes. RBI officials, in co-ordination with the village pan­chayat president A Ranganathan, decided to conduct the workshop after Express reported that Pallikaranai locals feared the inflow of fake currency into their area after three labourers from West Bengal were held by the National Investigation Agency. RBI officials emphasised the importance of knowing the features of genuine currency notes to help identify fake notes as they said that possession and passing on of fake notes not only brings economic loss to both the individual and the country, but also could land a person in prison for three to seven years, with fine. Besides explaining the six basic features of a genuine note that can help differentiate it from a fake note, pamphlets were also distributed. RBI officials said they would be imparting more detailed training to bank officials as well as conducting workshops for staff of petrol bunks and TASMAC outlets.  Several residents who enthusiastically participated in the workshop, said it was the first time they knew that a currency note had such special features. “We never knew or checked notes for all these features. This is the first time we are hearing that genuine and fake notes have so many differences,” said Saraswati, a resident of the area. “Even when we go to banks, we never had the patience to read posters,” another resident, Vikramasimhan, said.

IBN Live

Economic prospects improve

…Daring to smile at challenges ahead .....

The RBI Governor, Dr D. Subbarao and his team

Inflationary pressures in the domestic economy have abated for now

The RBI eased the CRR a little beyond market expectations, cutting it by 50 basis points. The liquidity deficit in the banking system has reached approximately 2 per cent of the net demand and time deposits, to an average of Rs1,27,853 crore for January 2012, compared with Rs 42,000 crore in the first fortnight of October 2011, and Rs 84,000 crore in the first fortnight of December 2011. Though the headline IIP index recovered in November to 5.9 per cent, the GDP growth for the fiscal is expected to moderate. The RBI revised its fiscal year projection downwards from 7.6 per cent to 7.0 per cent. The good news, however, is the downward trend in inflation, which fell to 7.47 per cent for the month of December from 9.11 per cent in November. This is the first time since April '11 that the overall inflation has dipped below 9 per cent. All the major components of primary, food and non-food inflation also showed a marked decline and were 3.07 per cent, 0.74 per cent and 1.48 per cent, respectively for the month of December. Manufactured products inflation, however, was still at 7.41 per cent, declining marginally from 7.70 per cent for the month of November. It seems the inflationary pressures in the domestic economy have abated for now. However, for the long term, the government needs to take policy action to improve agricultural productivity and efficient supply chain of agricultural produce so that sufficient capacity is created and the system is not overburdened. The growing consumption demand will keep exerting increasing pressure on food production and inflation spikes and high inflation periods will become more common. Inflationary pressures in the form of high global crude and commodities prices will continue to remain. The credit and deposit growth rates have moderated and banks will be impacted, facing the effects of a slowing down economy and rising NPAs as well as moderating credit offtake and shrinking margins. These might remain muted for another quarter before the regulatory stance shifts to an expansionary monetary policy. We might still have to wait for a quarter before the monetary policy shifts towards stimulating growth but there are increasing signs that things will improve hereafter. Fiscal tightening is, however, in order.

HBL

Subbarao speaks

RBI Governor D. Subbarao lays out the reasons for RBI's monetary stance, and addresses the issues of bad loans and currency hedging.

Mallya meets RBI Deputy Governor

Faced with a severe financial crunch, Kingfisher Airlines' Chairman, Mr Vijay Mallya, met with Dr K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, in Mumbai on Tuesday, sources told Business Line. Bankers, belonging to the lending consortium, said that the meeting could have taken place to request the RBI for its intervention with regard to the airline's account with the banks. One of them said that the company could be “requesting the Central Bank for a special dispensation with regard to classification of the airline's account into a non-performing asset”. The 13-bank consortium, led by State Bank of India, have an exposure of about Rs 7,000 crore to Kingfisher Airlines, of which about Rs 4,000 crore are in the form of term loans. Kingfisher Airlines' account has turned an NPA for most banks of the lending consortium.  “If the account turns NPA, then the process of corporate debt restructure (CDR) comes to a nought, and banks can start taking action on the securities offered, which could have a huge impact for the airline,” said a top official of another lending bank. He also pointed out that since there is a broad consensus in the Union Government on allowing foreign airlines to pick up to 49 per cent equity in domestic carriers, the company could require certain clearances from the RBI. “The company could use the funds from the foreign equity participation to regularise its accounts, in which case all banks' accounts become standard.” In such a scenario, the company could also be requesting the RBI for further restructuring, considering the current turbulence in the aviation sector. Kingfisher Airlines officials were not available for comment.

HBL

Service price index soon

...... The proposed index will not be comprehensive to start with but will include the most important services like insurance, banking, health, telecommunications and aviation, a source privy to the matter said. A senior department of industrial policy and promotion (DIPP) official told FE that an expert committee under the chairmanship of Sriram Taranikanti, Financial Adviser, Insurance Regulatory and Development Authority (IRDA) has been formed. The committee includes senior officials from DIPP, finance ministry, RBI, academicians from Indian Institutes of Management, etc. ......

Service price index soon

RBI could have done more

....The Governor's press statement has clearly brought out why not much comfort can be drawn from the decline in inflation numbers. The stubbornness of core inflation, suppressed inflation in fuel products and the structural nature of the protein component of food inflation have prevented RBI from lowering policy rates. ......

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RBI interest rate unchanged; Rs 32,000 cr infused into economy

The Reserve Bank of India (RBI) today injected Rs 32,000 crore into the system by lowering the Cash Reserve Ratio (CRR) by half-a-percentage point but kept the short-term lending rate unchanged in view of persisting inflationary concerns. “Based on the current inflation trajectory, including consideration of suppressed inflation, it is premature to begin reducing the policy rate,” RBI governor Mr D Subbarao said while unveiling the third quarterly monetary policy review............

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CRR cut will have multiplier effect - K. Kanagasabapathy

......It is heartening to note that the present Governor has taken a similar position as his predecessors and in unmistakable terms has highlighted the similar risks prevailing currently. While normally, after policy interest rate is taken to a peak, RBI allows a pause before reducing the rate, this time around such a pause has to be longer than usual and even if the rate is reduced it should be in baby steps at longer intervals.......

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Is CRR a liquidity or a monetary tool?

.... Milton Friedman famously said, “Money is far too serious to be left to central bankers.” If he had his way, monetary policy would be run through a simple rule with limited intervention from central bankers. However, reality is just the opposite, with the world being increasingly reliant on the wisdom of central bankers to help ride the economic cycles..........

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CRR cut is liquidity action with anti-inflation stance: Subir Gokarn

MUMBAI: Reserve Bank of India Deputy Governor Subir Gokarn said the cash reserve ratio (CRR) cut is a liquidity action while maintaining the anti-inflationary stance.  The RBI cut CRR, the share of deposits banks must hold with the central bank, for banks by 50 basis points to 5.50 per cent on Tuesday to ease tight liquidity, signalling a policy shift towards reviving growth after nearly two years of fighting inflation. With core inflation still stubbornly high, the Reserve Bank of India, as expected, left its policy repo rate unchanged at 8.50 per cent for the second consecutive review.

ET 

Contradictions in policy statement - A.Seshan

.................I have argued over the last decade on the need for a new RBI Act, reflecting all the developments in the financial and monetary sectors since 1934, including the amendment of the Preamble to tag on growth to monetary or price stability. Many other central banks, both in the developed and developing worlds, have done this.............

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CRR cut isn't a govt versus RBI case: Bimal Jalan

...... I think that it's not Reserve Bank versus government. That's not the issue. You take a collective view. One is essentially saying that if the fiscal deficit is higher than what can be tolerated in terms of both inflation and financial stability. Then we have a problem and that needs to be tackled. We should take a view not sort of posing it as two opposite camps......

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Should it have been a CRR cut? – S.S.Tarapore

In a reaction to the monetary policy, economist SS Tarapore said, “ the RBI Policy Statement is an excellent document setting out with elan and style, the risks and opportunities. The relaxation of the CRR is a powerful instrument and one wonders whether the initial step of relaxation should have been the CRR. A better option would have been to undertake gradual forex purchases to prevent an appreciation of the rupee and augment the forex reserves; These operations would have also augmented domestic liquidity.

FPJ

Needed: Bold moves, not baby steps

Corporate India was left wanting for more, following the announcement of a 50-basis-point cut in the cash reserve ratio (CRR) by the Reserve Bank of India (RBI) on Tuesday. At a time when headline inflation has been moderating, most were expecting the central bank to take a firmer stance on growth. What they got instead was what some privately describe as mere “tokenism”.......

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'RBI move to restore growth momentum'

Bangalore, Jan 24: The Bangalore Chamber of Industry and Commerce (BCIC) welcomed the Reserve Bank of India’s monetary policy to cut 50 basis points in CRR, which is expected to infuse Rs 32,000 crore into the system easing the tight liquidity situation in the country.  Welcoming the change, Mr H.V. Harish, Vice-President, BCIC, said, "This CRR cut should bring liquidity back into the system and also bring down costs for industry and hopefully restore the growth momentum which has been lost." He also expected the policy to drive down inflation with lower cost of interest. "We also expect industry to look at capital investment again and that should provide a boost to the capex equipment makers and to the investment climate,” he said in a press release.  Mr N. Venkatakrishnan, Chairman of the Banking and Finance Expert Committee of the Chamber, said: “The RBI has taken a timely step to respond to economic realities and help kick-start activities. The monies released into the banking system will help cool interest rates which is pro-industry measure”.

HBL

RBI to meet bankers to discuss NPA, says no concern for now

MUMBAI: The Reserve Bank on Tuesday said there is no concern about the level of non-performing assets (NPAs) in the banking system and it would soon meet 10 large banks to take stock of the situation. "Whatever (NPA) figure is being reported, we don't find anything to worry. We have done a stress test in the Financial Stability Report and we don't have anything to worry about," deputy governor of RBI K C Chakrabarty said. He added, however, that the central bank would soon meet 10 large banks to ascertain the situation. "Just now, we have no concern. But, we are concerned about how the message is going from the media and analysts (to the public). So, we will discuss with the banks about the NPA issue," Chakrabarty said. Referring to sector specific stress points, he said the central bank is not uncomfortable about lending to any particular sector. "We don't have, as of now, any sector specific concerns. If you analyse, the gross NPA which is 2.66 percent now was 2.8 percent in 2007," he said, adding that the NPA numbers reported in sectors like telecom and power distribution companies (Discom) are minimal compared to total portfolio. "In case of power, the reported NPA is Rs 768 crore out of Rs 2,60,000 crore (of portfolio). So, we don't have any concerns. Even the restructured standard asset is not substantial. That (NPA) has happened not only because of credit squeeze, but due to various other factors related to project implementation," he said. The central bank also clarified that it would not intervene in banks' decision to stop lending to power discoms. "Whether banks (will) continue to lend, or stop lending to discoms and on what basis, it is between state government, banks and discoms. We will not intervene in this matter," RBI Governor D Subbarao said. He quoted instances of letters received from state governments asking for intervention to restart lines of credit discontinued by banks. A recent Crisil report said losses of Discoms (power distribution companies) rose 24 per cent to Rs 27,500 crore between 2006-07 and 2009-10, which could rise to about Rs 35,000 crore in 2010-11 as power tariffs were not revised by state governments along with various other issues. Subbarao also said that he is not comfortable with the idea of converting public carrier Air India's debt into SLR (Statutory Liquidity Ratio) bonds. Banks are struggling to recover Rs 19,000 crore from the ailing national carrier and one of the three proposals floated to restructure includes converting the outstanding debt into Government bonds which could be transfered to the banks' SLR portfolio.

TOI

Policy review, but no word on interest

For the first time the common man has nothing to look forward to in the credit policy though the RBI released Rs. 32,000 crore into the banking system through a half per cent cut in the cash reserve ratio (the cash that banks have to keep as a percentage of their deposits with the RBI) in the 3Q Monetary Policy Review announced by the RBI Governor, Dr D. Subbarao, on Tuesday. All other policy rates were kept unchanged. People were expecting a rate cut so that they would get relief in their home loans and EMIs. But on Tuesday no banker was willing to talk about where interest rates would go. Ms Chanda Kochhar, managing director and CEO of ICICI Bank and India’s most powerful private sector banker, said “the lending rates would depend upon the demand for credit”. Mr K.R. Kamath, chairman and managing director of Punjab National bank, said that they would have to wait and watch how liquidity, credit offtake and deposit growth pan out before deciding on interest rates.

Asian Age

Excessive risk aversion a worry

According to the central bank, lenders were exaggerating company-specific issues and using these as excuses to not lend to particular sectors, sources familiar with the development told Business Standard. RBI Deputy Governors KC Chakrabarty and Anand Sinha would meet officials of 10 large banks to examine the issues related to non-performing assets (NPA).

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RBI to come up with hedging policy for banks in 7-10 days

The Reserve Bank of India (RBI) today said that it would come up with guidelines for banks relating to hedging policy in the next seven to 10 days in order to reduce the impact of volatility in currency on banks. "RBI will come up with policy guidelines relating to hedging in next seven to 10 days, which will ask banks to have a board determined policy on their foreign currency exposure," RBI Governor D Subbarao told reporters after the policy announcement. He, however, said the central bank doesn't want to mandate hedging for all kinds of foreign currency exposure as it doesn't want to micro-manage the banks. "If the banks lend corporates in foreign currency, they shouldn't have any unhedged exposure except natural hedge," Deputy Governor of RBI, Anand Sinha said adding that RBI wants to protect the balance sheets of banks due to any volatility from currency movement. Recently, many corporate houses have reported a huge amount of mark to market losses due to rupee depreciation, which has fallen around 16 percent in the last one year. As per reports, the rupee's depreciation of 9.72 percent against dollar in the third quarter of current financial year is likely to increase Indian Inc's mark to market losses by Rs 15,000 crore in this period.

IBN Live

RBI: It’s up to the Budget now

.... Of course, the RBI has justified the CRR cut by saying it’s a measure to infuse liquidity. But here’s what Deputy Governor Subir Gokarn said in a speech in early December 2011, referring to cuts in CRR and SLR, ‘But, in thinking about these instruments, we must keep in mind that they straddle the divide between liquidity and monetary management, which, at the current juncture, we are intent on maintaining.’....

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India Unexpectedly Cuts Reserve Ratio as BRICs Act on Growth

... While India's inflation, stoked by rupee weakness, is the fastest in the group, it eased to a two-year low last month, giving Governor Duvvuri Subbarao more room to inject cash into a slowing economy.......
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Pranab Mukherjee laudsthe balancing measure

.....“[The Reserve Bank's] announcement should help address the money market liquidity, which had tightened in the past two to three months, while balancing the downside risk on growth and deceleration in moderation of inflation”.....

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RBI asks government to free diesel prices

....“Particularly, as the food subsidy bill is expected to rise, it will be prudent to fully deregulate diesel prices to contain both aggregate demand and the trade deficit,” the RBI said in its third quarterly monetary policy review........

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No better time to invest in bank deposits than now

....“It is advisable for depositors to lock their funds in deposits of one-two-year tenures now. Even if deposits of a five-year tenure fetch similar interest rates, banks typically follow a one-two-year investment bucket and it is a better way to reap higher benefits since five years is too long a period to predict interest rate patterns,”.....

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Cloud in golden lining: Few checks, high risks

....The Reserve Bank of India has raised red flags. In a recent working paper calling for tighter norms for NBFCs, it said: “The higher borrowings of NBFCs, especially from the banking system, raise some concerns about their liquidity position. More so, if such reliance happens to increase further... These concerns will be further accentuated in case the banks’ own liquidity position becomes tight at the time of a crisis or even in a crisis-like situation... More than 68 per cent of the consolidated balance sheets (of NBFCs) constitute borrowings.”......

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Banks ignore RBI security norms

With Reserve Bank of India outlining security norms for bank branches in 2009, Monday’s daylight robbery at Perungudi branch of Bank of Baroda on OMR highlights the lackadaisical attitude of bank officials in adhering to procedures.............

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