Worrying disconnect

North Block-RBI relations need to get better

.....Of late, the relationship between the government in New Delhi and the RBI has degenerated into a public spat about priorities, which has destabilised the development of this institutional arrangement. Certainly, divergent views can and should be expressed. But they should not be seen as being pushy. In addition, the disconnect seemed to be spreading worryingly into other fields. Consider the government’s reappointment of Deputy Governor Subir Gokarn for an additional two-year term — generally automatic but, according to a report in this newspaper last week, now subject to a search committee and an interview. Mr Gokarn’s three-year tenure is due to end this week and that a decision on the matter is yet to be finalised is a reflection of poor advance planning. Also, at a time when Chief Economic Advisor Raghuram Rajan has been away from New Delhi to fulfil his prior teaching commitments in Chicago and the RBI governor himself is due to move on in less than a year, many would imagine the reappointment of the deputy governor in charge of the monetary policy department would be automatic, given the macro crisis India faces......

Read - BS

Don't lend for buying gold in any form, RBI tells banks

The Reserve Bank today directed banks not to give loans for purchase of gold in any form, including primary gold, bullion and jewellery, to dissuade people from indulging in speculative activity..........

Read - BS

To pump up savings, FinMin wants banks to offer ‘gold plan’

The Finance Ministry has sounded out the Reserve Bank of India (RBI) and commercial banks on the possibility of introducing a gold accumulation plan (GAP). The GAP is likely to be pitched as an alternative to direct investment in the yellow metal by gold-obsessed Indian consumers.........

Read - HBL

Finmin urges corporate affairs ministry to notify to keep ailing banks, insurers out of CCI

The finance ministry has urged the corporate affairs ministry to notify that ailing banks and insurance companies will not come under the purview of the Competition Commission, a step that can help speed up issuance of new banking licences. In a letter to the corporate affairs ministry, financial services secretary DK Mittal has requested immediate notification to this effect since banking regulation amendment bill and competition bill are yet to be passed by Parliament.......

Read - ET

Two more lean years

....the Reserve Bank of India (RBI), which hasn’t issued any new banking licences in 10 years, is holding up the finance ministry’s plan, and for good reasons. Before it allows new deposit-taking institutions to be set up, including by non-financial corporate groups, the RBI, which is also the country’s banking supervisor, wants the legal authority to sack rogue bank boards. Amendments to the country’s banking laws that would have accorded the monetary authority such wide-ranging powers were introduced in Parliament seven years ago. They were never passed. The central bank is quite right to be circumspect, even at the cost of annoying the finance minister.......

Read - BS

FinMin relaxes norms for top jobs in govt banks

With nine public sector bank chiefs set to retire in 2013-14, the finance ministry has relaxed the eligibility criteria for the selection of chairman and managing director’s (CMD) post in these banks. According to bankers, a candidate who has served as an executive director (ED) for six months in public sector banks can now aspire to be a CMD. Earlier, only officials who served two years as ED were considered for the CMD’s post. However, the criterion for residual service — the number of years left for a candidate to serve the bank — has been kept unchanged at two years.............

Read - BS

The nature and grounds of political obligation in the Hindu State

This is a revised edition of a classic work published in 1935. The author Dr. J. J. Anjaria was a well- known economist who was a student in Bombay University and the London School of Economics. He was Chief Economic Adviser in the Ministry of Finance and Executive Director in I M F and later held the post of Deputy Governor of the Reserve Bank of India.......... 

Click to read book review by P.P.Ramachandran

RBI justified in asking for amendment before final guidelines on new licences: E&Y

The govt continues to push the Reserve Bank of India (RBI) to issue final guidelines on new bank licences and move ahead with the process. At the same time, the RBI continues to seek the passage of the Banking Laws Amendment Bill before it moves forward on the issue. According to Ashvin Parekh of E&Y, the RBI is justified in asking for the amendments to be passed before the guidelines are finalised......

Watch the video.......

RBI action improved credit availability in 2012-13

There has been a marked improvement in credit availability in 2012-13 on the back of steps taken by the RBI to put more money into circulation. This can be illustrated in terms of the funds locked up within the RBI and scheduled commercial banks vis-à-vis the total currency in circulation among the public........

Read - HBL

The future of Non Banking Financial Companies in the economy

......However, considering the reluctance and restrictions that RBI has observed in giving banking licences, the feasibility and smoothness of conversion still remains a question mark. In continuation to the Government’s proposal of encouraging penetration in the banking industry, RBI has released a set of norms to ensure stability and growth in the sector. It had observed that non-banking finance companies (NBFCs) who wished to convert into banks should have a minimum net worth of Rs. 200 crores. However, RBI has decided to provide some relief to NBFCs if their net owned funds fall below the below the stipulated Rs 200 crores...........

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Need to monitor 'shadow banking' in India: Financial Stability Board

 An international body of financial authorities today highlighted the urgent need to monitor the "shadow banking" activities in India, given a sharp annual growth of over 20 per cent in such businesses over the recent years. The "shadow banking system" refers to credit intermediation involving entities and activities (fully or partially) outside the regular banking system and is estimated to have reached a size of nearly Rs 37 lakh crore in India. ......

Read - ET

No target or band has been set for rupee: Gokarn

Reserve Bank will intervene in the forex market only to curb excessive volatility in exchange rate but stated there is no target set for rupee, deputy governor Subir Gokarn said here today. "Our approach has been that the exchange rate of the rupee should be market determined and the Reserve Bank should be intervening only to manage excessive volatility... Without targeting any particular level or band," Gokarn told an RBI-ADB conference on 'Managing capital flows' ............

Read - BS

RBI will intervene to check any excess rupee volatility: Gokarn

....“Therefore, the intervention policy not only aims at quelling the excessive volatility, but also attempts to moderate speculative one-way downward movement of the India rupee,”....

Read - HBL

Corporate Bonds May Soon be Part of SLR

........The ministry has initiated talks with the RBI and the corporate affairs ministry to facilitate these changes that could ignite bank interest in corporate bonds and encourage companies to raise funds through debentures, which accounted for lowly 3.9 per cent of their funds needs in 2010-11.........

Read - ET

RBI concerned about FII debt flows

The Reserve Bank of India (RBI) has raised concern on debt flows by foreign institutional investors (FIIs) in the capital market. RBI Deputy Governor H R Khan said there was a need to reduce debt inflows, which, due to interest rate differentials, had have come at a very quick pace.......

Read - BS

All efforts to be made to rein in fiscal deficit at 5.3%: C Rangarajan, PMEAC

....On key policy rates cut by the Reserve Bank, Rangarajan said: "We need to watch the behaviour of prices for some more time. Of course, the Reserve Bank will take all factors into account, but there is still some time for Reserve Bank to take a decision." The RBI will come out with the mid-quarter review of monetary policy on December 18. The third quarter will be announced on January 29. .....

Read - ET

Ernakulam to soon be first to achieve 100% banking

.......The press meet was addressed by S Jayamohan Nair, Deputy General Manager, Union Bank of India, C V George, General Manager, RBI, Kochi, K D Joseph, Assistant General Manager, RBI, Thiruvananthapuram and K R Jayaprakash, Lead District Manager.

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SBI to send new cheque books by Dec 15, update your address

After announcing the implementation of cheque truncation system (CTS), the State Bank of India (SBI) has asked its customers to update their mailing address. The lender is preparing to send the new series of CTS compliant cheque books by December 15, 2012.....

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FYI: Banks pay you Rs 100 per day as fine when

Fees and fines are part of our life, especially when it comes to banks. You are slapped with a fee, if you don’t maintain the minimum balance in your savings account. You pay a credit card bill late; there is a late payment fine. If a cheque is bounced for financial or non-financial reasons (forgot to write the date on a cheque) and you have to pay up for that. There are hundreds of reasons as to why you could land up paying a fee to a bank. But, did you know, as per the Reserve Bank of India, banks too have to pay you a fee?...........

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Fixing home loans

.........The Reserve Bank of India (RBI), worried about systemic risks from this skew, constituted a working group to discuss how banks can be made to offer more fixed rate loans to retail borrowers. The committee has suggested that banks flag off this transition with 7-10 year fixed rate loans that carry a reset clause, while augmenting their long-term funds to facilitate such products.........

Read - HBL

2G case: RBI Governor D Subbarao deposes in court

New Delhi: RBI Governor D Subbarao Monday deposed in a Delhi court as a prosecution witness in the 2G case, saying he had questioned in 2007 the spectrum fee of around Rs 1600 crore for pan India licence.....

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Finance Minister P Chidambaram to meet chief ministers of southern states today

......The high-profile meeting with the chief ministers will be held against the backdrop of the half-yearly review of monetary policy by the RBI last month, wherein the key policy rates were left unchanged.

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RBI cancels licence of Ghaziabad Urban Cooperative bank

T

he Reserve Bank has cancelled the licence of Ghaziabad Urban Cooperative Bank as it had become insolvent. "In view of the fact that Ghaziabad Urban Cooperative Bank, Ghaziabad (UP), had ceased to be solvent and with all efforts to revive it having failed the Reserve Bank of India delivered the order cancelling its licence to the bank on November 16, 2012," RBI said in a notification today.......

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Financial reforms: Relevance to the Common Person - S.S.Tarapore

.....Witness the Approach Paper's slant of cutting down the Reserve Bank of India (RBI) to size by taking away a large part of the domain of its operations, ostensibly, on the ground that the RBI should exclusively focus on monetary policy. The Bond- Currency- Derivatives markets will be totally out of the purview of the RBI. A glaring feature of the Commission's recommendation is to take away capital controls from the RBI and to lodge this in the Ministry of Finance- all in the name of Full Capital Account Convertibility! Consistent with the stance of the Approach Paper it can be inferred that the RBI would have no say in exchange rate management and forex markets, and therefore, forex reserve management. The RBI's handling of the 1991 forex crisis is internationally recognised, as is its gradualist approach to capital account convertibility. This whole issue is not only whether India abolishes capital controls altogether but an issue of managing the entire external sector. It would be a monumental blunder to go along with the FSLRC recommendation to strip the RBI of its role.......

Details

RBI-FinMin conflict of views is old hat in India

......Chidambaram needs to understand the RBI’s role in the country’s economy and gracefully acknowledge it. The key area where things began to clash is when the government seemed to go public on some of its preferences but without being prepared for the consequences. When Subbarao took over as RBI Governor, the initial perception was that since he is from North Block, the Government (read: MoF) could manoeuvre him, especially on the (interest) rate front. However, Subbarao turned out to be a part of that disappearing breed of civil servants who not only know what they are doing but are also willing to make timely decisions – without any fear or favour – and accept responsibility for them. It’s too bad for his critics, as he knows macroeconomics well.

Read - Deccan Herald

RBI, govt not antagonistic to each other: Chidambaram

.......Even as the government makes out a case for the central bank to support growth, it doesn’t mean “they (the Finance Ministry and the RBI) are antagonistic to each other”, he said. “What we are trying to do is to argue our case, argue the case for growth, argue the case for taming inflation and then of course whatever the judgement is arrived at…,” 

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Why RBI and FM must both do their own things

The perceived difference of opinion between the Finance Minister and the Reserve Bank of India (RBI) Governor appears to be out in the open. If true, it is an indication of the frustration both sides feel since we do not appear to have made progress either on growth or tackling inflation. The ministry and the central bank have been tossing the ball into each other’s courts—and both have been taking some actions—but interest rates do not look like coming down fast enough to lift growth sentiments. How exactly do we deal with this situation?..........

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No end to central bank’s woes

.........I hear that the constitution of a search committee does not automatically disqualify Gokarn for another term. If the committee is convinced, he can get another stint at RBI, or someone else could replace him. There is nothing wrong in forming a search committee to identify a suitable Deputy Governor, but why does the government have to wake up so late for such a critical appointment? .............

Read - Mint

A panchayat sans ATMs in 100% banking district

.....Under the prevailing banking norms stipulated by the RBI, service cooperative banks are among the several entities which are not eligible to be called a bank, despite doing business in the financial sector. Though the RBI had brought the issue to the notice of the authorities in the State, the opposition by the cooperative sector had forced the apex bank to withhold the move in the State, according to sources in the banking industry. Such banks could face the axe of the apex bank, as and when the existing waiver on nomenclature is reversed........

Read - The Hindu

Nabard mandate will be safeguarded: Namo Narain

The Centre remains committed to safeguarding the mandate with which National Bank for Agriculture and Rural Development (Nabard) has been set up. This clarification has come from Union Minister of State for Finance Namo Narain Meena in a letter to Tapan Sen, Member of Parliament, dated November 5. Nabard has been formed by an Act of Parliament, the Minister recalled...........

Read - HBL

Courage Under Fire

......Perhaps her grounding in turning around a ‘weak’ operation started in her role as the CEO of Bank of India’s New York operations way back in 1995. That stint also helped her understand the importance of close engagement with bank regulators, which stood her in good stead while dealing with the Reserve Bank of India (RBI), both in establishing institutional credibility and in securing RBI’s and the government’s  support for a number of vital matters.........

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Fraud e-mail on internet banking

.........“The mail has referred to provisions of Banking Regulation Act, 1949 and Prevention of Money Laundering Rules, 2005 and informs bank account holders about RBI setting up a new 24x7 Centralised monitoring centre to monitor financial transaction flow from internet banking accounts. The e-mail then gives a link asking account-holders to update their account information,” a statement issued by RBI said here. “RBI clarifies that it has not sent any such mail and.........

Read - The Hindu

Effect of central bank independence in a graphic

.....This alone should be reminder to those at the North Block when they appoint the successor to Dr Subba Rao next year. The hard won credibility of the RBI can be squandered in one moment of madness.

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Ethical principles that banks need to follow

....Until July 1, 2010, banks had got into the unfair practice of sub-PLR lending to certain borrowers. Fortunately, the RBI constituted a Working Group on BPLR (Chairman: Shri Deepak Mohanty) and Base Rate system came into being. Since then the administration of lending rates has become transparent, an essential quality expected from entities like banks at all levels. Ethics should dominate customer service rendered by banks. Business etiquette should be an integral part of ethical customer service. Bankers need to be trained in this line. Fundamentally, banks should not differentiate customer service rendered to a small customer and a large customer........

Read - HBL

State govt sore with SBI, other banks; complains to RBI

BHOPAL: Commissioner Institutional finance Ashok Shah, in a letter to RBI Deputy Governor Dr K.C.Chakrabarty has complained that the State Bank of India ( SBI) and its associates and some of the Regional Rural Banks were not doing what was expected of them. He also referred to the decisions taken in the last state- level Bankers’ committee (SLBC) meeting. Shah said, ” Dr Chakrabarty had expressed a deep concern over lack of network of bank branches in villages. RBI has relaxed licensing rules for opening bank branches in rural areas.........

Read - FPJ

We have a banking licence: MSC Bank

PUNE: In response to the recent statement of RBI Governor D Subbarao, the Maharashtra State Co-operative Bank Limited has stated that it has a banking licence which the Reserve Bank of India had issued earlier this year. Subbarao had said in the city on Friday that the bank was still not eligible to get a banking licence and was under RBI's 'directions.' The bank's general manager, Vijay Bhagat, said in a communication that the MSC Bank had complied with all norms and conditions prescribed by the RBI which has issued a banking licence to it on April 19, 2012........

Read - TOI

Both CCI and RBI To Vet M&As In Banking

While CCI will see competition part of such deals, the RBI will see prudential aspects

....."For M&A activities, they (banks) will have to seek Reserve Bank approval from prudential point of view. RBI is the sectoral regulator so the health of banks is the concern of the RBI, health of banks is not CCI’s concern, CCI’s concern is their behavior in the market and the consumer in the market," ......

Read - BS

Economy looks at govt for help, govt at its shoestring coffers

.....It is a chain of inaction on all fronts. Investment-led growth seems out of question as a vicious cycle emerges here- high inflation is reducing purchasing power of households, private sector not investing due to lack of demand plus high interest rates, RBI not cutting rates as it expects government to take action on fiscal front as inflation is high, government unable to spend due to widening fiscal deficit, and so on. “There is a sqeeze from all ends”, said Sabnavis. Somebody will have to break this cycle, be it RBI by cutting rates or public sector units sitting on cash pile up of over Rs 2 lakh crore. But RBI measures will have a lag effect, while investments by public sector units will not come immediately........

Read - BS

Why more Banks?

Kudos to Duvvuri Subbarao, Governor, RBI who has said that no new banking licence will be given without legal backing ('FM proposes, RBI disposes on licences') The Governor’s assertion that the Apex bank is not in a hurry to issue banking licences to new private banks despite pressure from the Finance Minister is really laudable. We already have umpteen number of banks — both government and private — in our country and a careful study of the functioning of these banks would reveal an inadequacy in expected achievements despite the absolute freedom given to them by both the Finance ministry and the Apex bank.Political interference has crippled the growth of government banks. Also, by virtue of their inherent lethargy, the public sector banks never extend good service to their deserving customers, while the private sector banks earn their cake by making the middle income group pay heavy interest and penal interest through their nose.

—Tharcius S Fernando, Chennai (DNA)

Govt pressures RBI on bank licence

...........In a letter addressed to RBI Deputy Governor Anand Sinha, financial services secretary D K Mittal said the government hopes to get the Banking Regulation Bill 2011 passed during the winter session. The letter pointed out that RBI doesn't need to wait till the bill is passed as under certain existing laws the banking regulator has the powers to govern these entities. "In any case, if RBI issues the final guidelines, the process of granting a licence to a new private sector bank would take six months to a year, and in the meanwhile, the bill would be passed. Even before the bill is passed, RBI would have adequate powers ... " says the letter. The letter , a copy of which is with TOI, was sent just days before finance minister P Chidambaram asked RBI to issue final guidelines for new bank licences earlier this week........ 

Read - TOI

Triple whammy

It is fairly common nowadays to receive unflattering reports on the economy. After all, the slowdown in the economy is all too evident. Periodic reports, both official and unofficial, have recently tended to focus on the negative aspects. However, receiving three sets of worrisome economic data on the same day is something unusual..........

Read - The Hindu

A case of misreading risks

.....The 2012-13 budget had no provisions for taking stock of, and overcoming, uncertainties. In a very different context, Y.V. Reddy, former Governor of the Reserve Bank of India (RBI), pointed out the dangers of not appreciating risks in formulating and implementing the 12th Five-Year Plan. While the time horizon for the two—the Plan and the budget—are different, the principles of appreciating risks and uncertainties (ignoring the difference between the two) are not divergent.........

Read - Mint

Is there a method to the ‘flop show’?

......Like CAG, the Reserve Bank of India, too, has come under intense pressure. When the apex bank, much to the chagrin of the fiscal mandarins, did not reduce the policy rate, the Finance Minister P. Chidambaram said, “The government will walk alone”. By saying so, he sort of revealed his upset mind. There have been not-so-subtle suggestions to the Governor to rethink on the RBI stand on the policy rate. The recent spate of avoidable public interludes between the Government and the heads of Constitution-backed institutions show up the entire system somewhat negatively. This is not doing well either to the country, in general, or to the economy, in particular. What is required is co-operative co-existence and not demonstration of one-upmanship.

Read - The Hindu

Nirmal shines for RBI

Nirmal S smashed an unbeaten century to power Reserve Bank of India to a facile nine-wicket win over BDSA South Western Railway, Bangalore, in the KSCA Group II, Division II league match.....

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A new direction for financial inclusion?

It is crucial for RBI to realize the value of banking for the poor and refocus its efforts accordingly

....... it is crucial for RBI to realize the value of banking for the poor and refocus its efforts accordingly. But the solution won’t solely come from RBI’s efforts. Banks will need to envision long-term profitability as a possibility, and low-income customers will need to experience tangible benefits from the services offered. However, most importantly right now, the newly constituted committee will need to show that it has the guts and foresight to move past stagnation and onto a sustainable way forward.

Read - Mint

J&K Bank convenes DLRC, conduct fin lit camps

J&K Bank organized District Level Review Committee meeting in Shopian for the quarter ended September, 2012. District Development Commissioner Shopian Mohammad Javeed Khan presided over the meeting that reviewed the progress for the second quarter of current fiscal year. The meeting was attended by District Level Officers of government departments, representatives from all banks, NABARD and RBI........

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RBI Needs to Evaluate Principles of Islamic Monetary System

.........It is advisable that RBI should evaluate principles of Islamic monetary system and see whether those principles can guide India have better monetary policy to safeguard our banks, financial institutions, agriculture, industries, manufacturing industries, exports, currency value and more importantly with anti-inflationary but inclusive high growth rate. Hope RBI will genuinely review the matter seeing it as a national matter to resolve the country’s financial and economic issues instead of counting it as a religious issue related to minority community wherein scholars can have any say. RBI can hold Shariah Advisory Board as well as other technical boards to supervise and regulate Islamic Banking in India.........

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Speed of reforms will determine market direction

.....If the government addresses the fiscal deficit issue and global commodity prices remain soft, then inflation should move southward as we head into CY13. This should help RBI to focus more on spurring growth by reducing rates and this would be positive for long-duration funds.......

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Is economy out of rut as inflation eases? Experts discuss

 The inflation number is easing but the Governor of the Reserve Bank of India (RBI) says he is not impressed. How do you see the trajectory of inflation going forward? Do you think that atleast the momentum of inflation is behind us and the pace will decline further?.......

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Clear And Present Danger

.......Over the last five years, Indian banks, particularly the PSBs, have become more proactive in handling risk and compliance functions. However, asset quality continues to pose a serious challenge. Thus, the ‘capital’ (requirement of higher CAR) challenge will continue to occupy centre stage.

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Bankers’ Achilles Heel

Legendary investor Warren Buffet once said that you never know who is swimming naked until the tide goes out. As GDP growth in India declined in the last two years, banks suddenly found themselves saddled with more non-performing loans (NPLs) than they had bargained for. The Reserve Bank of India’s (RBI) report on Trends and Progress of Banking in India 2012 puts NPLs in the banking system at a rather high Rs 1.43 lakh crore (or Rs 1.4 trillion) at the end of 31 March 2012, the balance sheet date taken into consideration for banks............

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The year ahead: expectations and apprehensions

..........The winter session of parliament is important. While the government is keen to introduce new legislation, the opposition has a different agenda. The danger is that the upcoming parliament session may be a repeat of the monsoon session in spite of the persuasive efforts by the prime minister. Proposed reforms will most likely not go through, leaving the canvas as blank as it was before. But if reforms do go through, the economy will bounce back. As it is, the economy has to recover without much assistance from the government. That is possible if inflation comes down in the first quarter of 2013, as expected by the RBI. That will prompt it to reduce the rate of interest. If inflation drops to 6 per cent and the RBI cuts the repo by 200 bps over three-four months, there would be a qualitative change in the economy.........

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A Case For Prepaid

.....Electronic prepaid technology can potentially transform the provision of basic banking services to such individuals. ‘Know your Customer’ (KYC) requirements are much lower for prepaid instruments in most developed nations. Another key consideration is that the technology and operational cost of offering prepaid accounts is much lower than that of ‘no frills’ bank accounts, making it commercially more viable for banks and governments trying to extend banking services to these segments. The Reserve Bank of India’s Payment System Vision Document (2012-15) has, in this context, rightly identified use of e-prepaid instruments as one of the primary approaches to enable financial inclusion........

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Thriving In Adversity

....Most economists are not very optimistic about growth improving sharply in the near future. The central bank, which started raising rates from October 2011, has steadfastly refused to reduce them even by a token 25 basis points, despite suggestions by the finance ministry. Reserve Bank of India Governor D. Subbarao has said several times that his primary focus is to control inflation — and unless that comes down, it will be difficult for him to justify reducing the rates. But the flip side is that unless rates come down, many bankers do not expect the economy to pick up, or the credit offtake to improve.......

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‘Aadhaar only an identity proof, not address proof’

.....There has been confusion among banks over accepting Aadhaar as the sole “know-your-customer” (KYC) proof. The Reserve Bank of India (RBI), in a notification, had also insisted that the banks satisfy themselves that the address contained in Aadhaar is correct. “As per RBI guidelines, Aadhaar is enough for meeting know-your-customer requirements for no-frill accounts. But for large accounts, an address proof is also required along with Aadhaar,” Mittal told reporters after a meeting between finance minister P.Chidambaram and the chief ministers of six northern states.......

Read - Mint

Ganeshaspeaks: Rupee may continue to fluctuate heavily

Right from the beginning of the year 2013 till 31st May 2013, Jupiter will transit through the ascendant of India's country chart. This indicates that India's growth will remain gradual yet it will be persistent. As the transiting Jupiter will be aspecting the 7th House, India's continual exercise to maintain good terms with its enemy countries will continue (it may still remain futile, though). From 1st June 2013 till the end of the year 2013, Jupiter will be transiting through the 2nd House of India's country chart, where Natal Mars is posited. As a result of this transit, the Reserve Bank of India (RBI) may take necessary steps to boost the Indian economy.......

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RBI must enter forex market to support Rupee, curb inflation: BoA-ML

Leading US brokerage Bank of America-Merrill Lynch (BofA-ML) has called upon the Reserve Bank to enter the forex market and buy dollars to recoup the rupee and thus arrest the imported inflation, which is the main reason for the continued price spiral..........

Read - ET

Public-sector 'wives' better placed?

...........RBI had introduced the base-rate mechanism with effect from July 1, 2010, to take care of this problem, but it has clearly failed to address the issue. There has been a small positive step taken by RBI. Earlier, if an aware “wife” decided to switch “husbands” (pre-pay her loan and shift to another lender), she had to pay pre-payment charges to her current “husband”. This was adding insult to injury. At least RBI has ensured that the existing “husbands” will no longer be able to charge pre-payment charges. Hence, at least the more aware “wives” can be assured of a better deal. But, the regulator cannot wash his hands off the issue by just making the divorce cost less. They must ensure all “wives” get treated equally, whether or not the “wives” are aware of this. Meanwhile, the only thing that you can do if you are a “wife” (i.e. you have a floating-rate home loan) is to take a divorce from your lender and move to another as soon as he starts treating you like an old “wife”...........

Read - BS

The Strategist Quiz (#280)

........What is common between the Hong Kong Bank, Standard Chartered Bank and Reserve Bank of India buildings in Mumbai and the richest man in Ireland of the year 2011...........

One lucky winner will receive a cheque for Rs 2,000. Send your entries to strategist@bsmail.in. All entries must carry the postal address of the contestant. Last date for receiving entries: November 20, till 8 pm. Previous winners and employees of Business Standard and their families are not eligible to participate.

Read - BS

Bank for the buck

....‘After Times Bank was set up, the RBI observed that there were certain regulatory issues pertaining to its promoters. We were not very comfortable with them. It was informally discussed with the chairman of the bank who volunteered to step down from the board of directors. In course of time, the bank was persuaded to voluntarily merge with some other bank.’........

Read - Mint

Forfait trade gets new global rules

.....In India, forfaiting as an export financing option has been approved by the Reserve Bank of India. The facility is to be provided by an international forfaiting agency through an authorised dealer (see RBI Circular 42 A. D.(M.A.) series dated October 27, 1997). Forfaiting proceeds, on a without recourse basis, are to be received in India as soon as possible after shipment but within the period specified by RBI for realisation of export proceeds........

Read - BS

Gujjars file petition against two J&K banks over non-representation

......."We have filed petition against two J&K banks before National Commission for Schedule Tribes (NCST) and Reserve Bank of India (RBI), accusing both for not implementing reservation in recruitments and promotions for schedule tribes of the state at various levels," ..........

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City urban bank’s merger with COSMOS soon

Merger of the Bhubaneswar Urban Cooperative Bank (BUCB) with the COSMOS Bank has reached a final stage with the State Government issuing a clear-cut direction to the State’s Registrar of Cooperative Societies (RCS) to go ahead with the amalgamation process.........

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Cooperatives are model for inclusive growth: D Subbarao

.....Commenting on several infirmities of the Indian cooperative sector, he said, “Weak finances, growing NPAs and poor resource base are factors contributing to the declining performance of the cooperatives at the bottom level. These grass root institutions mostly depend on the higher agencies.The cooperative structure is biased in favour of borrowers, and depositors get an unequal treatment. Only borrowers can become members of the cooperative. Depositors are either non-members or ‘nominal’ members with no voting rights. Yet, it is possible to cure these infirmities and revive the cooperative structure into health and vibrancy.”.........

Read - BS

Fall in share of co-ops in farm credit a concern: Subbarao

The declining share of co-operatives in agriculture credit is a cause for concern, RBI Governor D. Subbarao has said. “Until the early 1990s, cooperatives provided almost 62 per cent of the agriculture credit in the country. But over the years, their share has declined, going down to 16 per cent by 2009-10,” Subbarao said at a conference on co-operatives in Pune. Co-operatives are institutional set-ups where people come together and pool their resources to attain mutually profitable outcomes..........

Read - HBL

Mr FM, managing banks is best left to bankers

.....After failing to push the RBI to toe his line on cutting rates, Chidambaram now seems to be resorting to different tactics. After all, his ultimate aim is to see a fall in interest rates. But this is sure to have disastrous consequences on the business of banks, which are already reeling under the adverse impact of government interventions.......

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RBI, finance ministry split wide open

A day after finance minister P.Chidambaram prodded the Reserve Bank of India (RBI) to speed up the process of licensing new banks, governor D.Subbarao said on Friday that the central bank would do so only after making sure that the groundwork is in place and all “enabling conditions” are met. The RBI chief’s remarks seemed to indicate a widening divide on policy between the finance ministry and the central bank, which have also differed over the timing of interest rate cuts to prop up sagging economic growth...........

Read - Mint

No new banking licences without legal backing: RBI Governor D Subbarao

PUNE: A day after Finance Minister P Chidambaram asked the Reserve Bank to speed up the process of issuing new bank licences, Governor D Subbarao today said it would be not possible without fulfilling the enabling conditions for the same. "We have been preparing for launching this process (of issuing new bank licences) but all the ground work, all the enabling conditions for launching this work have to be fulfilled," he told reporters on the sidelines of a function here........

Read - ET

In reverse order

......... The RBI has all through been maintaining that it needs to be empowered suitably before licensing new banks, especially those promoted by large corporates who should not be allowed to view them as captive fund pools. If the Government was really keen that new banking players be allowed – which it still is – there was nothing stopping it from amending the banking regulations as desired by the RBI. It can still do so, rather than try and browbeat the banking sector regulator.

Read - HBL

Bancon 2012 in Pune on November 24-25

.....BANCON 2012 will be inaugurated by Finance Minister P. Chidambaram RBI Deputy Governor Subir Gokarn is expected to give a special address on India’s gold import problems and suggest solutions........

Read - HBL

Inflation dip will be gradual, says RBI’s Chakrabarty

Inflation may have hit a nine-month low of 7.45 per cent in October, but concerns over price rise have not ended. K.C. Chakrabarty, Deputy Governor of the Reserve Bank of India, said that inflation cannot come down all at once. “It (inflation) is today at (around) eight per cent. It will not come down at one go. It will go down gradually,” he said on Friday after meeting the Chief Ministers of the northern States..............

Read - HBL

Subbarao warns against non-inclusive growth, casino banking

.....Inaugurating two-day international conference on 'Leveraging cooperative advantage', organised by the RBI-run College of Agricultural Banking as a part of International Year of Cooperatives of the UN in Pune, Subbarao said, "The recent financial crisis has taught us some very important lessons. "The general disenchantment with 'casino banking' in certain developed economies underscored the dangers of over-financialisation of the real economy," Subbarao said. Casino banking is the practice whereby a commercial bank engages in unduly speculative or risky financial activities with the aim of achieving high profits.......

Read - ET

FM proposes, RBI disposes on licences

....The finance minister reasoned on Thursday that “the power or the authority” which the RBI wants is already available in the other provisions of the law and with the central bank’s own regulations and guidelines for new banking licences. “We are only formalising them by amending the Banking Regulation Act. And I have assured RBI that the Act will indeed be amended, hopefully in the Winter Session of Parliament, and if not in the Winter session, then in the Budget session.” The minister also said that even if the RBI proceeded to receive applications and process them, the first banking licence was not likely to be issued in the next 6-8 months. “So by the time the licence is issued and the banks come into existence, the Act would have been amended.” Subbarao proffered a correction, saying it will take at least 8-9 months to issue the first new bank licence if the Act is amended in the Winter Session which begins on November 22..........

Read - DNA

'MSC bank not yet eligible for licence'

PUNE: Reserve Bank of India (RBI) Governor D Subbarao said on Friday that the apex bank was still working on measures to make the Maharashtra State Cooperative (MSC) Bank eligible to apply for a banking license. "There are some issues regarding the credit and debt recovery and the bank is working on it," he said while speaking to reporters after delivering the keynote address on leveraging cooperative advantage at the two-day international conference on cooperation. It was organised at the city-based College of Agricultural Banking.............

Learning from the HSBC mess - G Sreekumar & L Prakash Sai

.....While “tailoring banking solutions to suit individual needs” and “personalising services”, banks need to ensure that they do not tread on legal and regulatory requirements. It may be “one world”, but jurisdictions are many, and being present in several at the same time entails having to tailor ones processes and compliance to meet stringent requirements across the world........

Sreekumar is General Manager of the Reserve Bank of India, currently on sabbatical at the Indian Institute of Technology, Madras. Sai is Professor at the Department of Management Studies at IIT Madras.

Read - BS

RBI officials skip meet on mining issue

PANJIM: The Reserve Bank of India, which earlier had agreed to visit the state and talk to the banks about the restructuring of loans of truckers who are suffering due to the mining recession, did not visit the state, and have apparently withdrawn their resolve for the moment. The news comes close on the heels of the State Government committee, which was tasked with the job of collecting information of aggrieved truckers itself admitted that most of the trucks were either owned by mining companies or illegally owned by government servants, policemen, politicians with less than one-fourth of them being genuine sufferers. The Regional Director of the Reserve Bank of India did not visit the state as scheduled indicating that the RBI had withdrawn its gracious hand........

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Problems in opening bank accounts are being addressed: FinMin

NEW DELHI, NOV 16: 

In the backdrop of complaints from states that people are facing difficulties in opening bank accounts using Aadhaar card, the Finance Ministry on Friday said the issue is being addressed through organising mass camps for the purpose. “States’ concerns were very valid that account opening is difficult, which we admit that there is difficultly. So the idea would be to admit the problem and then find a solution. We are going ahead with that,” Financial Services Secretary D K Mittal said here...........

Read - HBL

A deluge of offers

Almost everyday we wake up to the news that RBI has begun easing liquidity in the financial system. Over the last few weeks, it has reduced the CRR by 50 basis points or 0.50 per cent, thereby infusing liquidity to the tune of Rs.35,000 crores into the banking system. As we all know, CRR is Cash Reserve Ratio, a percentage of amount that all banks will have to deposit with RBI as per the rates prescribed by the central bank from time to time.........

Read - The Hindu

India Inc wakes up to Indian Ink

....Sectoral regulators such as Sebi, Reserve Bank of India, oil and gas regulator Directorate general of Hydrocarbons and telecom regulator TRAI, pharma regulator etc are covered by the Act and have designated chief public information officers to address RTI queries.  Many of these regulators including RBI and Sebi are putting in constant efforts to put up a significant portion of their dealings in public domain through their respective websites......

Read - BS

A tax formula to beat inflation

.....If the RBI Governor D. Subbarao had studied engineering and not physics in the IITs, he would have known that engineers often use a three-term control system — the first to control the function, the second to control the integral of the function and the third to control the differential of the function. In economics, that would have been taxing incomes, wealth and change in incomes. For some reason or other, economists are interested only in taxing incomes and wealth and not changes in income. That is a pity because inflation is directly related to increases in (money) incomes. Theoretically, if changes in incomes are taxed, inflation should tend to become zero........

Read - HBL

FDI in banking

It is evident that the RBI, which is the regulator of the banking sector, had a strong case for issuing elaborate guidelines on bank ownership to ensure diversification. Those reasons retain their relevance even today. So there is no case for altering them, especially if the evidence suggests that accessing foreign equity, if needed, to enhance the capital of banks is possible within the current regulatory framework..........

Read - The Hindu

RBI Governor to inaugurate International Conference on Cooperatives in Pune on November 16, 2012

Dr. D. Subbarao, Governor, Reserve Bank of India will inaugurate and deliver a key-note address at a two-day International Conference on Cooperatives on November 16, 2012 in Pune. The conference is being hosted by the Reserve Bank’s College of Agricultural  Banking, Pune on November 16 and 17, 2012 to commemorate the International Year of the Cooperatives.........

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Not the right time to abolish CRR - S.S.Tarapore

....The Government, in desperation, is turning to scrutiny of the RBI balance-sheet. A central bank’s balance-sheet cannot be examined on the lines of a corporate balance-sheet. When the central bank shows high profits, it often indicates that the economy is precariously placed. Per contra, when the central bank shows low profits as its foreign assets form a larger proportion of its assets, it reflects strength of the economy. The Government is welcome to study the RBI balance-sheet and, in fact, should do so to better understand the central bank’s imperatives........

Read - HBL