Rates will rise slowly, and late : Abheek Barua

A close reading of the credit policy shows the RBI sees monetary policy as an offset to structural imbalances

...........The key message in the policy is that the RBI is not satisfied with playing the textbook role of a central bank that is concerned only with the dips and spurts in inflation drive by the business cycle. It views monetary policy as an offset to the myriad structural imbalances in the economy which ultimately manifest in rising prices. The persistence of these structural kinks is likely to mean that even if core inflation were to moderate in the near term, the pace of rate-cutting by the RBI is likely to be extremely slow. I do not see the benchmark repo rate coming down by more than a percentage point over the next 12 to 15 months. Thus, while the rate increases have been sharp, the winding down is likely to be far more sedate..............

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Time to go easy on monetary, tighten fiscal policy: Kotak

........"I see a 100-200 basis points cut in the policy rate of the RBI in this calendar year," .......

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Is the economy at an inflection point?

...Bhanumurthy felt mixed signals from some lead indicators and Reserve Bank of India's apprehension about inflation meant it was too early to confidently to conclude that the cycle has begun to reverse.....

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Rising NRI deposits add to RBI worries

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

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Urgent Need For Fiscal Consolidation - Deepak Sahijwala

“Considering the egregious implications of large fiscal deficits, which are well-known, there is an urgent need for decisive fiscal consolidation, which will shift the balance of aggregate demand from public to private and from consumption to capital formation. This is critical to yielding the space required for lowering rates without the imminent risk of resurgent inflation. The forthcoming Union Budget must exploit the opportunity to begin this process in a credible and sustainable way." This advice comes from Dr. D. Subbarao, Governor of the Reserve Bank of India.  So what does it mean? Reading between the lines it clearly hints that the forthcoming Budget is crucial in the sense that it would be directing the economic path of the nation and therefore policy choices could either hinder or help the nation’s progress. In fact, although the RBI believes that the economy will exhibit a modest recovery next year, with growth being slightly higher than during this year, it clearly understands that the economic risks have not mitigated totally. So what are the risks staring the economy in its face? In the Third Quarter Review of Monetary Policy 2011-12 presented last week, the RBI spelt out the risks factors that could affect its projections of growth and inflation for 2011-12 and listed seven of these. First, sovereign debt concerns in the euro area pose a major downside risk to the overall growth outlook. The second major risk emanates from the slowdown of capital flows in the face of a widening current account deficit. Third, global energy prices continue to pose a risk to growth and inflation due to geo-political factors and the global macroeconomic situation. Fourth on our list of risks is that there are signals of increasing risk aversion by banks, which could adversely affect credit flow to productive sectors of the economy. Fifth, inflation in respect of protein-based items remains high due to structural imbalances. In the absence of appropriate supply responses, risk to food inflation will continue to be on the upside. Next, there is a large element of suppressed inflation as domestic prices of some administered products do not reflect the underlying market conditions. Revision in domestic administered prices will add to inflationary pressures, although I should note that such revisions are necessary to maintain the balance between supply and demand.  And finally, the fiscal deficit of the government could potentially crowd out credit to the private sector. Moreover, slippage in the fiscal deficit has been adding to inflationary pressures and it continues to be a risk for inflation. The bottom line is that while the situation seems to be improving, we are not out of the woods… not yet. 

Afternoon

Karma is cruel, and Pranab-da has nowhere to hide

......... When inflation raged at close to double digits for much of last year, despite the muscular exertions of the RBI, which had the effect of slowing down growth, UPA-2’s All-Star Team of economic managers offered nothing more than pious platitudes that things will get better. With the result that even today, thanks to a rupee that went into free fall in the last quarter of 2011 and widening deficits all around, inflation hasn’t been well and truly vanquished. This constrains the RBI from undertaking any easing of interest rates – for fear of stoking inflation and undoing all the work it single-handedly did.......

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Creating a post office bank

.... It can be said that the post office savings bank does not get depositors out of its own effort. They walk in because of better (administered) returns and tax advantages. That is why collections fluctuate according to whether banks’ deposit rates appear more or less attractive at a given moment. This happens because, while banks and the entire financial sector have moved to market-determined rates which fluctuate according to the signals of monetary policy, small savings rates have been kept stable so as to encourage steady savings by common folks....

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In the name of the Governor

This article is not about the cut in the cash reserve ratio. It is not about the several thousands of crores of rupees unleashed in the system. This is about a much smaller sum. In fact, it is minuscule, relatively speaking — Rs 12,500 to be precise. On Friday, a mail from the ‘Reserve Bank of India’ asked me to remit this sum. It said, “The Reserve Bank of India (RBI) New Governor, (Dr D Subbarao), met with the Senate Tax Committee …and at the end of the meeting RBI Governor, (Dr D Subbarao) mandate the unclaimed funds to be release back to the beneficiary stating that it’s an unfair practice to withhold funds for government basket for one reason or the other for tax accumulations.” The mail went on to say: “Therefore, we are writing to inform you that your award (85 LAKHS INR) will be released to you as it was committed. (RBI) Governor said that Beneficiary will have to pay crediting fees only. So you are therefore required to pay 12,500 INR ONLY.” The shaky language, the reference to the Senate Tax committee, which does not exist in India, and a request for bank account details, will make it obvious for many of us that the mail is what the geeks have christened ‘phishing’ and is more popularly known as ‘the Nigerian scam’ after the country it originated from. Without going into the mechanics of the scam, it is best to press the delete button. The Reserve Bank of India will not send you any mail. Period. But, it may not be that obvious for the real targets of this email. And, the brands — RBI and Subbarao — are too powerful to create a doubt in the minds of even the level headed. That short, weak moment is what crooks bet their life on. A couple of years before, media reports had talked about how a senior central bank official herself was fooled by an imposter, who posed like the then governor. My friends say this mail is doing the round for months now and I got it again on Sunday morning. The persistence means either they believe I am a fool whose money needs to be parted or are confident from success elsewhere. Also, there is a site called www.rbi.org (The official RBI site is www.rbi.org.in), which says “Welcome to RBI Financial Services. Find sponsored goods and services on Option Trading, Financial Planning, Banks, Rates and more.” God knows what this site is up to. Are the Mint Road mandarins being possessive enough about their governor and their brand? It is easy to put up warning scrolls on the website and pass the buck to the police. Arup Patnaik, the Mumbai Police commissioner, had this to say at his annual press conference when asked about increasing banking-related frauds in Mumbai: “Bade bade bank... RBI, SBI... sab idhar (Mumbai) hi hai na. Phir fraud kya Chhattisgarh mein hoga?” His philosophy seems to be that as long as there are banks, there will be bank frauds, too. Does Mr Subbarao agree?

BS

RBI provides more leeway to banks for rupee vostro accounts

...... "With a view to give more operational leeway to the AD Category-I banks, it has been decided to dispense with the requirement of prior approval of the RBI for opening and maintaining each Rupee Vostro account in India of non-resident Exchange Houses in connection with the Rupee Drawing Arrangements (RDAs) that banks enter into with them,".......

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Housing finance may come under priority lending: RBI

New Delhi: The Reserve Bank Monday said it is considering categorising housing finance for weaker sections as priority sector lending by early next month to ensure adequate flow of credit. "We are trying to put housing finance for weaker section as a part of priority sector. There is a committee which is looking into it. Hopefully, by the first week of February this report will come," RBI Deputy Governor H R Khan told reporters here. The committee is headed by Union Bank of India Chairman and Managing Director M V Nair, was constituted by the RBI to look into various issues related to priority sector lending, including review of loan limits under the segment. The committee has sought to address issues like desirability of simplifying the approach to direct lending, inconsistencies or ambiguities in the existing guidelines, nature of activities presently classified as priority sector that need relook and new areas which should be incorporated. The terms of reference of the Nair committee is to revisit the current eligibility criteria for classification of bank loans as priority sector with reference to nature of activities and types of borrowers (individuals versus institutions, corporate and partnership firms) of loans. It will review nature of activities and types of borrowers (individuals versus institutions, corporate and partnership firms) of loans which can be brought under priority sector segment. The terms of reference of the panel include review of limits on loan amounts. It will also review appropriate documentation and due diligence thresholds to ensure that loans extended by banks are for the eligible categories of purposes and borrowers, which need special attention and treatment, the terms of the report state. Besides, the panel will consider the desirability, or otherwise, of capping interest rate on priority loans. The panel will also review the current allocation mechanism for Rural Infrastructure Development Fund (RIDF) and other funds. The RBI Deputy Governor further said the apex bank is also trying to coordinate with the government and market regulator SEBI for developing and broadening the corporate bond market. As much as 40 percent of the total bank lendings is for priority sector including agriculture and small sector industry.

Zee News

RBI Exploring Iran Payment Options

NEW DELHI – India is considering several options to settle its oil import bills with Iran, including paying in rupees, a top central bank official said Monday, as the South Asian nation maintained its stance of continuing oil trade with Tehran. "There are different [payment] options which are being evaluated," Reserve Bank of India Deputy Governor H.R. Khan told reporters in New Delhi, without disclosing the other possible options.  "Oil imports are continuing," he added. The Indian central bank in December 2010 disbanded a payment mechanism that the U.S. had said could be used by Tehran to finance its alleged nuclear weapons program. Since July last year, refiners such as Mangalore Refinery & Petrochemicals Ltd. and Indian Oil Corp. have been routing their payments through Turkey's Halkbank for supplies from Iran, which is the second-largest supplier of crude oil to India. The payments through Turkey could also now get disrupted as the U.S. and Europe have imposed sanctions on Iran to block its oil trade and deprive it of a key revenue source. New Delhi however says it will continue with oil imports from Iran as the terms of trade are favorable. India's oil minister said this month that the country will only abide by United Nations sanctions and not those imposed by any individual country.

WSJ

Cyber Society wants RBI to empanel info security auditors

In what is termed a significant suggestion, Cyber Society of India has asked the Reserve Bank of India (RBI) to raise a pool of ‘empanelled information security auditors' across the country. They could then be deployed or allotted to different banks like the RBI allots statutory auditors. “All the banks do not have a proper information security policy and audit system. They have their own internal audit. Or, they get audited through their own known auditors,” according K. Srinivasan, President of the Cyber Society of India. Mr. Srinivasan said the Cyber Society had asked the apex bank to empanel information security auditors based on specified minimum qualification and experience. “After auditing the banks, they could submit the report to the RBI and banks. This will improve the quality of information security audit,” he felt. From this year onwards, that is, March 2012, all banks are required to declare their information security status (IS) in their annual reports as per the Gopalakrishna Committee report. This is for the first time that the banking industry is going to declare such IS status. “Hence, an audit by competent RBI-nominated IS auditors may improve the quality of information security in banks,” he said. The Cyber Society of India also wanted RBI to issue a fiat to all banks, making it mandatory for them to send out mobile alerts to their clients on withdrawals. At present, mobile alerts are given by banks only on request. “Even educated customers are not aware of this facility. Many cyber crime police cases could have been avoided, if the customers had a mobile alert,” Mr. Srinivasan said. Customers should get mobile alerts by default. “Only if they do not want, they have to request the bank, like ‘do not disturb' model,” he pointed out. “We are in the initial stage. Customer awareness is very low. Even a remote rural person is having credit and debit cards. All these justify the importance of information security to protect the interest of the customers," he added.

HBL

“RBI looking at alternative methods to assess inflation”

The Reserve Bank of India is looking at alternative methodologies for a better assessment of inflation and inflation expectations that are the cornerstones of monetary policy formulation for the economy, RBI Deputy Governor Subir Gokarn said on Monday.................

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The RBI’s self-serving bid?

.....While there is a strong case for a unified regulator, the task of financial regulation should be separated from the job of conducting monetary policy. This would give an independent central bank doing monetary policy (and nothing else), and a unified second agency doing all financial regulation and supervision.......

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Inflation persistence: NREGA not the culprit, says Gokarn

The National Rural Employment Guarantee scheme is not quite the cause of inflation 

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Reserve Bank of India says open to more debt buybacks through OMOs

CHENNAI: India's central bank is open to more debt buybacks through open market operations to address the strain on liquidity, Reserve Bank of India Deputy Governor Subir Gokarn said on Monday. The RBI has bought back about 719 billion rupees ($14.44 billion) of government bonds from the secondary market since late November to reduce pressure on yields and ease a cash crunch after New Delhi's increased its borrowing plan for 2011/12. Bond yields fell on Monday, as traders picked up bonds on hopes of more debt buybacks from the RBI to infuse liquidity, as the cut in banks' cash reserve ratio had only a marginal impact at easing the cash shortage. The RBI had cut CRR, or the share of deposits banks hold with the central bank, by 50 basis points to 5.5 percent to infuse liquidity. The CRR cut is expected to have released about 320 billion rupees ($6.43 billion) into the banking system on Saturday.

ET

Rate cut by RBI is a matter of when, not if

.... Ambiguity still prevails on the timing and amount of repo rate cuts, but RBI is in no hurry and has conditioned a reversal to achieving a sustainable fall in inflation and fiscal consolidation......

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How microfinance creates poverty

....The beauty of microfinance is that it sucks out the income of the poor without causing much pain. Rather the poor thanks the lender for impoverishing him. Just as the drunkard thanks one who lends him money for buying a bottle of liquor or just as the bonded labour thanks the moneylender for giving him a loan, similarly the members of Self- Help Groups thank the microfinance institutions for providing loans. They forget that the same institution is also taking away their incomes......



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A push for women in backward districts

....“The NGOs will encourage women to form SHGsand start banking operations by opening a savings account. The financial transaction would also meet the objective of Reserve Bank of India (RBI) to have financial inclusion of every citizen,”.....

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Budget to focus on fiscal consolidation: Montek

....The job of reserve banks around the world is to be striking notes of caution. So what the RBI has done in the last policy is giving a clear signal that the period of monetary tightening is over and that is a genuine reflection on their part that the warning signals on inflation are certainly no longer red; they may even be changing from amber to green. "But obviously the RBI wants to hold back until it's absolutely sure,"....

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WILL BANKS BE ABLE TO CONTAIN BAD ASSETS?

.... Is there a disconnect between how RBI Governor D. Subbarao and his deputy Subir Gokarn perceive things? For instance, Gokarn gives the impression that the recent cut in CRR is to manage liquidity and there is no change in RBI’s anti-inflation stance, but Subbarao hints at a shift in stance. Similarly, while the governor is ready to wait and watch how the CRR cut—that released Rs.32,000 crore into the financial system—impacts liquidity before resuming RBI’s bond buying programme, Gokarn gives the impression that the central bank will continue to buy bonds to infuse liquidity.

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When they don't act in concert …

........In essence, the RBI has put the onus on the government. “Strong signs of fiscal consolidation are critical to create the space for lowering the policy rate,” it said in its third quarter review of monetary policy 2011-12. It had even gone a step further. It advised the government to “exploit the forthcoming Union Budget” to “begin this process in a credible and sustainable way.”......

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RBI policy review a step in right direction

RBI's 50 bps CRR cut a small step towards liberal monetary policy

.... In his first three years at Mint Road in Mumbai, RBI Governor Duvvuri Subbarao had his hands full. He oversaw a series of interest rate cuts while combating crisis after the Lehman Brothers collapsed in September 2008 and the global financial meltdown set in. Subsequently, Subbarao turned the tide of accommodative monetary policy by raising rates to tame inflation.....

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RBI has done it. Now, it is the turn of the Govt : T.V.Gopalakrishnan

.................On the fiscal front, the Reserve Bank has made its message explicitly clear to the Government by saying that “considering the egregious implications of large fiscal deficits, which are well known , there is an urgent need for decisive fiscal consolidation, which will shift the balance of aggregate demand from public to private, and from consumption to capital formation.................

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RBI's ED Gopalakrishna speaks on e-banking security

Cyber Society of India (CySI) and Indian Overseas Bank (IOB) jointly organised a National Seminar on Banking on e-Security: RBI's Gopalakrishna Working Group. This Working Group has given recommendations to all the banks in India. Mr G Gopalakrishna, Chairman of the Working Group talks about his report and the recommendations, which has been accepted by RBI for implementation.

A well deserved recognition for the creator of VITALINFO.........

Under the Reward & Motivation Scheme of HRMD, Central Office, Shri Mangesh Tarambale was felicitated in recognition and appreciation of exceptional & exemplary service to the Bank and conferred the award for the year 2011-12 at the hands of Dr. Subir Gokarn, Deputy Governor on the occasion of Republic Day Celebrations on January 26, 2012. The key points fetching the award include:-

(i)       making constant efforts to motivate the Typists/Stenographers/Private Secretaries  and imparting them free shorthand coaching since 1981

(ii)      successfully conducting Conference of Private Secretaries for the last five years with a view to upliftment of the cadre

(iii)     creating and updating regularly a website dedicated for the PS Fraternity since 2007

(iv)     making various suggestions, e.g. use of solar energy, introduction of commission free remittance facility for the staff attached to non-DAD centres of the Bank

(v)      modification of existing EPABX telephone system without spending a single rupee for facilitating greater and easier communication which saved the Bank approx. Rs. 50 – 60,000/-

(vi)     the project VITALINFO started on November 28, 2010 with the very purpose to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI. VITALINFO which is updated well before 7 a.m. 365 days a year has been widely appreciated by the executives, staff and retirees of RBI besides the senior officers from NABARD, NHB etc. 

- Pradnya Dhawde, PS    

VITALINFO - Ma Phaleshu Kadachan..............................

Liquidity management integral to central bank role: Subir Gokarn

............We should not confuse the short-term objective of inflation management with the long-term objective of fundamentally addressing supply bottlenecks — whether in transport, power, water or food. We need to spend on these issues, but we need to see where else we can compress expenditure. In that context we have been emphatic on fiscal consolidation, which is to reduce subsidies and expenses contributing to consumption................

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Signalling confusion?

.....According to the RBI, the CRR is a policy instrument with liquidity dimension. Its reduction will bring down the cost of money for banks and have a bearing on their ability to lend at lower rates. It may well be so but, for most market participants, a repo rate reduction would be the more authentic signal. Soon after the policy announcement on Tuesday, attention has immediately shifted to how soon the RBI will act in that direction........

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The basics of monetary policy – S.S.Tarapore

It may appear cynical to say the independence of the RBI is a mere fig leaf which is used conveniently to the advantage of the government. While the government nominally claims that the RBI has total independence, in practice the government reins in the RBI. The government expects the RBI to be concerned about the growth of the economy and restrains the RBI from taking corrective measures to prevent unsustainable growth; once unsustainable growth results in inflation, it becomes the primary task of the RBI to control inflation and it is expected to do so without adversely affecting growth -- an impossible juggler's act.

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Signals emanating from RBI’s monetary policy

.....What are the signals emanating from RBI's latest monetary policy? It is clear that RBI's policy has shifted from controlling inflation to fostering economic growth. However this shift is only slight as RBI is not entirely sure that inflation fears have completely subsided. It is still worried that inflation will rear its ugly head again. At the same time RBI is signalling that the Govt of India needs to control its expenditure......

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Coin mela to contain shortage of coins

SHILLONG: In view of the acute shortage of coins faced by Shillongites, the Reserve Bank of India (RBI) organized a coin Mela at MTC Building, Jail Road on Saturday. The Mela was supervised by Deputy General Manager, RBI, Guwahati Jatin Rawal. The implementing agency is SBI Main Branch. A source from the SBI Main Branch said that the idea behind this Mela is to spread the awareness that there is no shortage of coins in the city. “Today the RBI has taken the initiative in association with SBI and it can be another bank in the next Mela since the issue related to coin is not the sole responsibility of SBI. The Mela was organized for the first time in the city with the sole aim to take out the fear psychosis that is there in the people’s mind regarding the crisis of coin,” said the source requesting anonymity. The source further said that the Mela could have been organized inside the bank premises but the authorities went outside and conducted it in a public place so that they can reach out to the public to distribute the coins. On Saturday, Re1, Rs2, Rs5 and Rs10 coins were distributed to the general public. “It will continue in the near future too and will be implemented by another bank. This maiden Mela was a successful one,” he said. The source also said that with the opening success they would like to see it taking place at least 3/4 times in a year. He also requested the public to rotate the coins and should not deposit them in their piggy banks. Meanwhile, large number of customers thronged the stall which was erected at the parking lot of MTC Headquarters, Jail Road. There were separate queues in place for customers wishing to take certain denomination which was assisted by SBI officials. A pan shop owner said that he has not seen such a Mela in the past where coins were distributed in such large numbers. “I would request the RBI authorities to organize such Mela on a quarterly basis so that there remains no crisis of coins in the city,” he said. Another customer said that she is satisfied with the coin Mela since coin crisis is a major thing in the city. “If you go to any shop you can’t expect any return less than Rs10. This is the sad reality in this city,” she said adding that such Mela will reduce the availability of change in the market. She is also echoed by another customer who said that the coin crisis is more or less created by the business establishment, small or big, and no matter how many such Melas are conducted if the unfair trade practices of these establishments are not checked nothing can be done. “The bank is doing its duty but to me the coin crisis here is a created one as public here doesn’t have any voice,” he said.

The Shillong Times

Banks may get to hedge in commodity futures

.... In what could be a game-changing move, banks may be allowed to hedge their risks in the commodity futures market. According to government sources, the finance ministry has written to the Reserve Bank of India (RBI) to explore ways to allow entry of banks in commodity hedging. RBI is actively considering the matter...........

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As interest rates peak, you get an edge in loan bargain

.... “Chances of RBI hiking interest rates further are remote. Inflation is coming down, so RBI may cut rates. Interest should start declining by April,” .......

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मुंबई में नकली सिक्के

मुंबई में इन दिनों धड़ल्ले से चल रहे है नकली सिक्के. यहां के एक व्यापारी संगठन ने अपना सिक्का जारी कर लिया है. आरबीआई को खबर लगी है और अब इसकी जांच के आदेश दे दिए गए हैं................

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

World Bank to help banks capitalise

...........The World Bank will offer financial sector assistance to the Reserve Bank of India (RBI) to help Indian banks to invest in risk mitigation programmes and capitalise as they migrate to Basel III, a global regulatory standard for banks agreed by the Basel Committee on Banking Supervision in 2010-11............

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RBI blocks withholding tax-evasion route for FIIs

The RBI recently made a small change to how FIIs can trade in the government securities market. The central bank said that an FII holding a particular government bond cannot sell the security more than two times a year. Since withholding tax in India is very high, a large number of FIIs usually sold a G-sec just before the day of interest payment and then bought it back after the payment of interest. Since bond prices incorporate interest payments, FIIs used to make profits using this route but hardly paid any tax. Since the government pays interest on G-secs on a half-yearly basis, by changing the rules of FII trading in the bond market, it expects to see some extra revenue inflows into the exchequer through this route.

TOI

RBI rejects TexMin proposal to recast Rs 1 lakh cr loans

The Reserve Bank of India (RBI) is learnt to have turned down the government proposal to restructure textiles sector loans worth Rs 1 lakh crore, mostly from the PSU lenders, stating it would not be "the best international practice". It was the proposal of the Textiles Ministry, which is under the additional charge of Commerce and Industry Minister Anand Sharma, to rework the loans for the industry which has been facing difficult times owing to adverse global scenario and demand slowdown in the domestic market. A moratorium on repayment of loans was also suggested by the ministry, but the central bank did not find it desirable, an official said. The industry has been clamouring for relief from the government on the plea that high interest rates have hit hard the silk, spinning and power-loom units. As per the Confederation of Indian Textile Industry, out of 287 companies listed on the Bombay Stock Exchange, 122 firms had reported net loss in the first quarter of 2011-12.

BS

Double home loan repayment exemption limit to Rs 3 lakh: ICAI

..."...it is suggested that the deduction in respect of interest on housing loan in case of self occupied property should be increased from Rs 1.5 lakh to Rs 3 lakh", ICAI said in a pre-Budget memorandum to Finance Minister Pranab Mukherjee......

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Turnaround plan for NPAs

.....Unfortunately the data could potentially be misleading as banks have been mandated by the RBI to provide for Non Performing Assets based on system generated reports! The past errors, attributed conveniently to “human errors” are biting the banks when the situation is already bad! There increase in the NPAs too must be attributed to the macro economic situation where the economy has been experiencing a serious slowdown.This brings the discussion to what this means to the banks. The problem of the NPAs has to be dealt with in from preventive as well as a curative perspective......

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Oration By Dr.Y.V. Reddy (Former Governor of Reserve Bank of India)

Date & Time :
Tuesday, 31st Jan 2012 at 4.00 pm to 5.30 pm

Speaker          :
Dr.Y.V. Reddy (Former Governor of RBI)

Topic              :
"Development and Regualation of Financial Sector"

Venue             :
ITC Kakatiya,Begumpet

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