............Rajan is known to ruffle feathers with his undisguised criticism and sharp, spot-on analysis of economic situations. He correctly predicted the global financial crisis as professor at the University of Chicago Booth School of Business three years before it toppled economies in 2008. Before he was appointed the chief economic adviser to the government, Rajan had severely criticised the government's performance at a book launch in Delhi. His one-year stint as economic adviser was seen as an apprenticeship before the real job at the RBI................
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Tuesday, November 5, 2013
Battling unintended consequences
................Then there was the push to encourage more foreign borrowing by Indian companies in the run-up to the financial crisis, despite the concerns of the Reserve Bank of India (RBI). Managing the sizeable capital inflows was already a challenge, and the central bank was also raising local interest rates to check inflation. Going abroad offered a convenient and cheaper unhedged option for companies, since they expected the rupee to continue to appreciate. Former RBI Governor Y V Reddy put a stop to the borrowing binge in 2007. That action, for which he was severely criticised, singularly prevented more painful fallout from the global financial crisis. But it did not prevent the inadequate preparation for dealing with the pressure of maturing external liabilities a few years later.............
We intend to bring inflation down
.........We talk to people at the finance ministry every day. The lines of communication are open and they were open before also. I don't think the image of the RBI and the finance ministry not communicating is a fair one. But whether we are on the same page on everything is a valid and legitimate question. There are some issues on how we will achieve the common goal of growth and controlling inflation. But the timeframe to achieve that can be different. On many issues, whether it was the RBI under Dr D. Subbarao or the RBI today, I don't think there was a lack of communication or a lack of agreement. ..........
Rajan rules out rate target, inflation key concern
.......The new RBI governor has once again said inflation-busting is the key objective of the monetary policy, especially at a time consumer price inflation has resolutely stayed above 9 per cent. The subtle, nuanced shift in the recent monetary policy statement by highlighting consumer price inflation rather than that measured by the wholesale price index (WPI) has sparked speculation that the RBI may raise interest rates once again. Rajan admitted that as the RBI hunkers down and tackles inflation, “there may be more of a growth sacrifice”........
Despite the downturn, banks preferred choice of many job aspirants
........."Indian banks have immense potential," says Priyadarshi. "Because of their global outreach and size, they are exciting to work for. They provide excellent working conditions and learning opportunities, attractive compensation packages, friendly work environment, online learning and more." .......
RBI may allow gold loan NBFCs to increase loan-to-value ratio
...........Muthoot Finance lost several loans valued Rs 1 lakh to Rs 2 lakh to banks after RBI insisted that loans above Rs 1 lakh should be disbursed only in cheques. “Such loans are largely disbursed to traders and small entrepreneurs who are in need of instant cash for emergencies,” KP Padmakumar, executive director, Muthoot Finance had said while talking about the September quarter results.
Top 30 NPAs form one-third of total bad loans
..................Reserve Bank of India Governor Raghuram Rajan had last week sent out a clear message that willful defaulters would be dealt with strongly. Asserting that the finance ministry and RBI were on the same page when it came to recovery, he had stated that this is not being said to create an atmosphere of fear or to be vindictive.......
India’s banks will struggle for growth as economy slows
............And things do not look like they are going to improve any time soon. With a sluggish economy and persisting policy bottlenecks, the chances of companies taking on more loans to expand business are low. If the RBI is unable to reduce rates for a protracted period, given currency declines and high inflation, Morgan Stanley predicts that bad loans will increase by more than 4 per cent to 5 per cent over the next two years, and several companies might be forced to restructure their loans. State-owned banks are running mostly with stretched balance sheets and net impaired loans at some of these banks are now almost 100 per cent of equity,..............
Rupee to trade in 62-63 range without RBI measures: Assocham
The rupee is unlikely to fall below 63 to a dollar even if the Reserve Bank of India (RBI) withdraws temporary measures such as direct sale of dollars to oil importing companies and the foreign currency non-resident (FCNR) swap facility put in place to support the currency, as speculative activity around it has mostly ebbed in the foreign exchange market, according to a paper released by the Associated Chambers of Commerce and Industry of India (Assocham)................
ISLAMIC BANKING: Need of the hour
.......The position of former governor of RBI D.Subbarao regarding Islamic Banking was not favourable but newly appointed governor of RBI Dr. Raghu Ram Rajan has already given green signal to Islamic Banking in India by giving affirmation to Kerala by setting the stage for starting up the first Islamic non-banking finance company (Al Barakah Financial Services Ltd) in India with the partnership of state government department (Kerala State Industrial Development Corp-KSIDC). My memory is still afresh with...........
Rajan's two-tier coal pricing idea gets Plan panel support
The Raghuram Rajan plan for a dual pricing of coal has found support in the Planning Commission. The Commission has asked the Prime Minister's Office to introduce two-tier pricing of the fuel that could be operated within the framework of the current fuel supply agreements (FSA) India's public sector Coal India (CIL) is now signing up with thermal power companies..........
Monday, November 4, 2013
Monetary policy and inflation control - Dr.S.S.Tarapore
........ The statement recognises that the RBI accommodation to banks can only be a marginal support and going forward, the more durable strategy for mitigating mismatches between supply of and demand for funds, is for banks to step up efforts to mobilise deposits. With the more recent upturn of inflation, inflation expectations remain elevated. The policy statement recognises that it is important to break the spiral of rising price pressures in order to curb erosion of financial savings. The policy stance and measures are intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth. The RBI would “ closely monitor inflation risks while being mindful of the evolving growth dynamics.” The RBI has to undertake a fine tightrope balancing act between its legitimate concern for inflation control and the government’s instinctive preference for fostering a revival of growth, particularly in the industrial sector...........
An evolving multilateralism - Dr.Subir Gokarn
...........Like the previous two domains, managing global macroeconomic stability has also seen paradigm shifts. The dominant International Monetary Fund (IMF) view of the world was shaken by the obvious inappropriateness of its recommendations in response to the East Asian crisis in 1997-98. This led to the affected countries and their similarly endowed neighbours emphasising the value of self-insurance, in the form of rapid accumulation of foreign exchange reserves. This assured them some independence from the multilateral framework in the event of another crisis. But......
RBI may have more role for Nachiket
How does the monetary policy work?
....Through
its monetary policy, a central bank can affect the demand in the
economy, but it has no power to affect the supply. When growth falls,
the central bank may reduce the repo rate. As this monetary signal works
its way through the economy, the rates for all sorts of loans fall.
This stimulates the demand and helps the economy return to its potential
growth rate. Sometimes the growth rate is............
Know why Kuber is placed at the entrance of Reserve Bank of India Office in Mumbai
......As per our ancient texts like Puranas, a sage by the name of Vishra is believed to be the father of Kuber. That is why Kuber has been referred as Vishraa by the ancient literature. Due to the Kuber’s association with glory, splendor, prosperity, grandeur, and affluence he was chosen to be kept at the entrance of the Mumbai office of the Reserve Bank of India to ensure the treasury of the Indian government never remains empty.............
Four person in police custody for videography of RBI, VIdhan Bhavan
.............The youths revealed that they were given a contract to gather information about security of RBI, Vidhan Bhavan and other sensitive areas. With this information, city police and intelligence agencies have been alarmed. Cops have started investigating about the person who gave the contract about gathering the details.
RBI, banks firm up regional focus ahead of proposed bifurcation
........The financial regulator RBI is mulling an umbrella model in this regard. The regulator’s Hyderabad centre will continue to be the financial capital for the bifurcated regions according to a highly placed source at RBI. The regions will be brought under the jurisdiction of the RBI at Hyderabad, a regulatory model that is in place in the newly created States – Uttaranchal, Chhattisgarh and Jharkhand according to him...........
Fake money menace on the rise, cops worried
............Sources from Pune crime branch said that the counterfeit notes, which are difficult to identify without a detection machine, have flooded the city. The local traders, shopkeepers and banks are the worst hit. The state ATS had arrested an alleged operative of the Indian Mujahideen (IM) two years ago and recovered fake currency notes, which he was allegedly using to raise funds for terror activities. So far, the investigators have established a link to Bengal where fake currency notes are pumped through Bangladesh. .............
Cash in Hand
........... "The RBI expressly forbids people from writing anything on a note. But cashiers write on the uppermost note of a pile routinely, this is something which happens every single day." To complicate matters further, the FICN seized of late in the capital has been of a superior quality, fooling even experts (The micro-lettering used by the RBI has been mimicked, in certain cases)................
Different strokes
Gone are the days when the Finance Ministry used to react to monetary policy changes by the Reserve Bank of India. Often, the Finance Minister himself would make a brief statement, which would be followed by an official release. But when Raghuram Rajan raised the key policy rate by 25 basis points at the policy review on October 29, the minister and his ministry kept mum. Quite a change from the days when Finance Minister P. Chidambaram used to react rather sharply after rates were raised.
- HBL
Pencil in another rate hike
...........So, predicting what a central banker would do when he looks at the heat-map is easy. Policy rates will be raised to tame prices. And if inflation is accompanied by high growth, the decision is a no-brainer. But that’s not the case in India at the moment. GDP growth has slipped sharply to 5% in the last fiscal and prospects for the current one are worse. CRISIL expects growth to slow further to 4%. This creates a dilemma: should RBI focus on growth or high inflation? This is hotly debated every single time before the announcement of the monetary policy. We argue that a sluggish economy does not mean RBI should become tolerant of high and rising inflation. Therefore, the decision to raise interest rates on October 29—which implies that risks from high inflation outweigh risks from low growth—was appropriate...........
Inflation busting outplays growth angst
.....Further, RBI has pushed its case for sustained growth by enabling banks to draw money from the central bank if necessary for financing projects affected by liquidity shortfalls. Under the circumstances, it is investor confidence and debottlenecking of infrastructure projects which can push growth further. A semblance of normality has returned to the broader economic outlook with the current account deficit becoming manageable and rupee not facing imminent danger. Yet, RBI’s persistent anti-inflationary stance suggests anticipations of below par or nominal growth in the current fiscal.........
Salutary messages from the RBI
..........Normalisation of monetary policy rates indicates that the repo rate will be restored to its pre-July position of being the policy rate. Under normal circumstances that would be a signal to banks to raise their interest rates. But the MSF has been brought down, and the short-term repos will now provide more liquidity. Understandably, many banks have reacted cautiously, waiting to study the full implications............
The Montek school of thought
..........Ten years is a long time for any tenure. It is, therefore, logical to ask what imprint Ahluwalia has left on the working style of the Planning Commission. Or, for that matter, what difference he has made in the Planning Commission's role in governance and overall approach to policy-making. For such an assessment, it is important to understand the context in which the Planning Commission was set up...................
Green shoots?
.....What accounts for this small but possibly significant turnaround? Management of the external economy, particularly after Raghuram Rajan took over as Reserve Bank of India (RBI) Governor, is certainly a reason. Whether or not pure coincidence, India’s foreign exchange reserves have risen by $8.1 billion since September 6 (two days after Rajan assumed charge). This is despite.......
A vision of sustainable growth
Is India doing as well as it wants to? We were proud of our GDP growth when it was high; now we are dismayed. Even in those years of high growth not so long ago, we were not happy with the progress of inclusion in growth, and the pace at which social and economic inequalities were being reduced. Nor could we be happy with the deterioration of our natural environment in our hunger for material and GDP growth........
Options Get Legit, Now RBI should Act
.....Sebi’s change of heart may prove to be a game changer for equity
investors and is certain to aid investor sentiment. However, it is now
hoped that the RBI too would be changing its antithetical stance towards
options. RBI has been known to take a “view” that any optionality in
securities in favour of foreign investors makes the investment take the
colour of a debt and, therefore, non-FDI compliant. This view has been
causing practical roadblocks in the way of ........
Tale Of The Tumbling Rupee
.....One of the capital control measures adopted by the Reserve Bank of India is the reduction of the cap on outward flow of remittances from $200,000 to $75,000 per year, which could slow down investments in Dubai’s real estate sector........
Below-the-line is the best bet in rural India
In the late nineties of the last century, the Reserve Bank of India introduced new norms setting limits based on the ratings of individual businesses; whereby NBFCs (Non-Banking Finance Companies) were restricted from taking deposits from the public. Though these norms were well meant, yet they adversely affected well managed NBFCs like the Shriram Transport Finance Co (STFC).........
Rising inflation: Have food prices delinked from agricultural production?
.......But here's the problem. Few observers, including the RBI, seem to expect any substantial moderation in inflation, or in the actual level of prices. "The price level is expected to remain high," says Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices (CACP), a government body which advises the government on agricultural price policies such as the minimum prices offered to farmers for grain.............
Are banks wrongly branding people as defaulters?
.........That brings us to the subject of this article. The pendulum has perhaps swung away to the other extreme from the time when banks were helpless spectators to a borrower defaulting, to the current scenario where a bank has the power to deny credit to the borrower if he defaults with them. While it is not my intention to bat for defaulters, people being wrongly branded as defaulters is a very serious issue, especially where banks have this power completely in their hands..........
High interest riddle in state savings scheme
............According to analysts, despite the low fund costs, it will be a tight ropewalk for the state-run corporation as it will have to depend on a large number of depositors to make the scheme viable. Moreover, change in interest rates by the Reserve Bank of India and the macroeconomic condition will also affect the scheme's performance.
Insurance cover no big deal for company deposits
.........The Act also bars companies from promising huge returns and hefty commissions to agents, in excess of the prevailing rates prescribed by the Reserve Bank of India (RBI) for such deposits. The premium paid cannot be recovered from the depositor and the money has to be paid by the company alone. Also, the mandate to maintain a balance in a reserve account would push up costs for companies. It isn't clear whether companies would earn any interest on the reserve account, but it wouldn't be much, even if they do. Simply put, these proposals will make deposits an expensive source of raising funds. This means ...........
Banks told to set up ATMs in all gram panchayats in Karnataka
..........In the first six months of the current fiscal year, the RDPR spent Rs. 850 crore and deposited Rs. 500 crore in banks for payment of wages to beneficiaries. Following the poor performance of business correspondents, delay in the payment of wages by banks, and also to reduce travelling time and expenses, the RDPR has asked to conduct mapping of all GPs to set up ATMs. Sudhir Kumar Jain, chairman of State-level Bankers’ Committee, and Managing Director of SyndicateBank, also suggested that banks explore the option of setting up ATMs in GPs.......
Give Civil Servants Cash, not LTC
.....State-owned banks are thinking of changing the rules that govern the LTC regime, but that will not help. What could, is to scrap the allowance altogether and pay the
money as a part of bureaucrats’ salaries. There is no point, apart from
ducking a little bit of tax, in distributing travel or other allowances separately from the pay cheque..........
Shobhan Sarkar writes to PM seeking transparency in excavation
.....Sarkar sent the letters yesterday, demanding amendment to the Indian Treasure Trove Act so that the recovered gold could be handed over to the Reserve Bank of India. He also sought complete transparency in the ongoing excavation and asked the government to allow common people to the site and live media coverage of the excavation. .........
Saturday, November 2, 2013
RBI: Monetising the Tale of Two Governors
......Subbarao too had hiked REPO rate several times to moderate inflationary pressures. However, the same action from two RBI governors received quite separate reception from Markets, Analysts, Industry and Columnists. Subbarao was faulted time and again for not paying required attention to the anaemic growth of the Indian economy; and for being unduly and narrowly fixated on inflationary pressures. Critics said that inflationary pressures were on account of supply side constraints -falling production, and not due to rising demand expectations. Partly this carried some weight in view of the negative growth posted by automobile industry and manufacturing sector. However, the sticky food and non-food inflation as measured by Consumer Price Index (CPI) worried Subbrao as it has Rajan. However, while Subbarao was skewered for his alleged hawkish anti-inflationary posture, Rajan received for same action a very indulgent reception............
Read.......
OBC inaugurates new branch in city
Oriental Bank of Commerce (OBC) has opened its 49th branch in the state at Cuttack-Puri Road, Bhubaneswar along with an ATM counter. P K Jena, Regional Director, Reserve Bank of India (RBI) inaugurated the branch in the presence of Gautam Sinha Ray, deputy general Manager, OBC.............
Women bank to be launched on Indira's birth anniversary
The government has drawn up plans to launch country's first all women bank - Bharatiya Mahila Bank - on November 19, the birth anniversary of former Prime Minister Indira Gandhi. “We have asked the Election Commission for permission. The bank might be as well inaugurated on November 19. All work has been completed. But......
New Chairman for National Payments Corp
Rural banks asked to promote Rupay cards
A team of NPCI, the Central organisation mandated by RBI and Indian Banks Association (IBA) to build central infrastructure for payment systems like ATM switching, mobile payments, 24x7 remittance and financial inclusion transactions, visited Nuapada district and advised Utkal Gramin Bank to issue RuPay cards to their customers on a priority basis..................
Usha Sangwan to be first woman MD at LIC
MUMBAI: Usha Sangwan will be the first woman managing director at the Life Insurance Corporation of India in its near six decades of existence. She may well be a trendsetter at LIC, like Kishori Udeshi at the RBI, who started a glorious tradition of women rising to higher positions that for decades have been male bastions.
ET
Bomb scare leads cops to 'dollar scam'
........When someone falls for their scam, the Nigerians give them the black papers, claiming that these are defaced US dollars which can be restored through the use of a special chemical. They charge the victim for cleaning the 'dollars'." Police inspector (crime) R Devare said that the suitcase also contained some foreign currency. "The currency and black paper bundles have been sent to RBI for analysis."
Jalan panel to finish vetting bank licence bids in 3 months
....The panel held its first meeting in New Delhi on Friday, to discuss the process. All the panel members — Jalan, Usha Thorat, former RBI Deputy Governor; C B Bhave, former chairman of the Securities and Exchange Board of India, and Nachiket Mor, board member of RBI, attended. RBI Deputy Governor Anand Sinha, who prepared the licence norms, also participated. “We discussed everything. The focus was on how to go about the processes and the parameters for the screening,” said a person privy to the discussion.............
Raghuram Rajan fuels best BRIC rally as Barclays bullish
Indian bonds were the best performers among the four largest emerging markets last month and Barclays Plc recommends buying as central bank governor Raghuram Rajan boosts cash supply and steps up his fight against inflation...........
Dr Rajan, will RBI look after consumer protection finally?
........To turn these stories into evidence, RBI needs to first stop being in denial. All attempts to alert RBI in the last seven years have run into the “it-is-not-my-problem” wall. It has been RBI’s considered view that mis-selling by bank staff is the problem of the product regulators and not of RBI. This is like a hospital blaming the pharma company for the medicine when it is the doctor who prescribed the wrong drug and harmed the patient. The medicine was not harmful, but was “unsuitable” for the disease the patient had. Much like an artist with irregular income wanting a fixed deposit for a lump sum she had, being sold a 15-year annual premium life policy by a bank that is always awake..............
The Udhna Citizen Co-operative Bank Ltd., Surat, (Gujarat) now under RBI Directions till May 1, 2014
The Reserve Bank of India has extended the period of directions imposed on The Udhna Citizen Co-operative Bank Ltd., Surat for further six months. The Bank will thus continue to be under directions from November 2, 2013 to May 1, 2014. The modified directive has been displayed on the bank premises for interested members of public to peruse............
Gold coins just a click away
......However, with the market practically running out of gold coins, residents have opted for a smarter, easier and a handier way of digging the gleaming yellow metal, by simply going online.
...........
Hedging interest risk
..............It is good that the RBI under its new Governor is convinced about allowing cash-settled IRF trading. A change in the underlying asset for these contracts, from notional to market-traded bonds, would equally help. The regulator should further permit this segment to function in the same manner as equity derivatives, without too many trading restrictions. It will enable efficient hedging and...............
All is not well with the Indian economy
.....India’s economic growth crashed to a four-year-low of 4.4% during April-June this year from 4.8% in the previous quarter, proving fears of a widespread slowdown as factories are producing less, companies are offering fewer jobs and prices continue to remain high. The estimates of India’s gross domestic product (GDP) — the broadest measure of value of all goods and services produced in the country — demonstrate a deeply hurt economy hit by a toxic mix of a free-falling rupee, dipping investment, high borrowing costs and rising prices. From a foreign investors’ darling to an economy characterised by policy flip-flops, the Indian economy’s turnabout has been as rapid as the heady 9%-plus growth it had once clocked during 2004-2008. Many analysts reckon it could get worse.............
Bittersweet news on interest rates
........Should it be considered as good news on lending rates? No, not yet. Borrowers will have to wait for the banks to size the situation — whether it is conducive to pass on the reduction. As of now the home loan rates have neither been increased nor decreased and remain at last month’s level. The festive offers continue, which should be a good opportunity for home loan seekers to enjoy the benefits such as lowered interest rates and reduction in processing fee. Since the RBI is concerned that deposit mobilisation is not happening aggressively banks will have to borrow from other sources to meet the credit demand...........
Step taken by RBI to help combat inflation: Chidambaram
.........He said that export figures have been good for the last few months and the recent steps taken by the Reserve Bank will help in combating inflation. Momentum in export growth will continue in remaining part of current fiscal, Chidambaram said............
Chidambaram defends Rajan’s rate hikes
........Rajan has hiked the repo rate twice by 25 basis points each since he took over as RBI Governor. But, unlike in the tenure of the previous Governor, D. Subbarao, this time neither the Finance Minister nor his Ministry reacted on the day the policy was revised. However on Friday, Chidambaram broke his silence and said that the monetary policy had to be understood in the context in which it had been presented..........
Supreme Court upholds U K Sinha's appointment as SEBI chief
The Supreme Court on Friday upheld the appointment of U K Sinha as SEBI chairman, saying it was done by the government fairly and in accordance with the procedure of the law. A bench of justices S S Nijjar and P C Ghose dismissed a PIL challenging the appointment of Sinha, observing that the petition was not maintainable on various grounds but it had decided to hear it as the appointment to a very senior position was challenged..........
Friday, November 1, 2013
Duvvuri Subbarao: On India, technology and the importance of authority
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