........But Bhattacharya will probably find solace in the fact that her predecessor, Pratip Chaudhuri, had a more harrowing experience when he took charge in April 2011. In his first quarter as SBI chairman, Chaudhuri saw the bank reporting its lowest quarterly profit in over a decade. The net profit had plunged 99 per cent on an year-on-year basis. O P Bhatt who was the chairman of SBI immediately before Chaudhuri, had a similar experience. The bank's profit had declined 35 per cent from a year earlier in Bhatt's first quarter as its chief.
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Friday, November 22, 2013
Accountability diffused
My View on "Bleeding with mounting NPAs":
I am not sure what purpose Dr K.C. Chakraborthy wanted to serve with his anguish at the writing off of lakh and odd crores of NPAs arising out of corporate lending as opposed to a mere INR70000cr for agricultural lending by the Government. It is the government that helped write off and not the banks. In the case of the former, all such write offs are reported quarterly to the RBI with full details. If the decisions were wrong why did not the RBI pull them up and shape up things? Why should a Dy. Governor vent out his anger at the malaise in public? This is a sad commentary on the regulator more than the erring banks. I have mentioned in these columns sometime back that the due diligence processes of banks has been bartered away with outside credit rating institutions. Banks turning to group approach to credit sanctions as ordained by the Government of India, most corporate credit decisions stand at the doorstep of management and not of the supervisory Board, if there is any. The accountability for credit decision has got diffused. Credit risk management has been on continuous dilution when it came to big loans to corporates while it became stringent for the Micro, small and medium enterprises where recourse to guarantee is available. Even at the CGTMSE thresholds the banks insist on collaterals and make the productive sector suffer. Debt restructuring even under very well deserving cases for the MSME sector rarely takes place while for the corporate CDR is scrupulously followed. The CDR devolves on the Bank as full blown bad debt warranting write off as during the CDR the little available collateral gets eroded as several banks slept over their collateral.
- Yerram Raju
RBI raises concerns about bank loans, debt recovery
........Banks need to strengthen their recovery processes, and it should be focused on “efficiency and fairness—preserving the value of underlying assets and jobs where possible, even while redeploying unviable assets to new uses and compensating employees fairly”, the RBI report said. To do this, there is “urgent need for accelerating the working of debt recovery tribunals and asset reconstruction companies”. If economic growth picks up, the bad debt position “may improve”, the report said.............
Amend laws to speed up recovery of bad bank loans: Association
......All India Bank Employees Association (AIBEA) has described increasing bad loans of public sector banks as a "serious menace" and asked the government to make necessary changes in recovery laws to deal with the issue. "Increasing bad loans of banks is a serious menace. These loans are eating into the very vitals of our banks," C H Venkatchalam, Secretary General of AIBEA, said in a statement here today. AIBEA represents more than 7 lakh employees............
Irish firm to make fund transfers for students cheaper
..........Instead of making a wire transfer, students will now have the option of depositing the university tuition fee at a local bank account courtesy ‘PaytoStudy’, an online payment system from Ireland-based Taxback Group, its Chief Executive Officer Terry Clune, told Business Line. The Reserve Bank of India had recently approved of the company’s proposal and has given it a licence to transfer funds for Indian students paying for their overseas studies, Clune said on the sidelines of a media interaction.....
Rethinking on ATM
My View on "Missing ATM guard aids attack":
The ATMs are technically mini branches of a given bank which may not necessarily allow deposits of cash and negotiable instruments like those in developed countries,but carry operational risks and involve cost.The cost of providing security to each and every ATM may not be necessarily cost effective in India as most of them are for cash withdrawal purposes.To provide security even if outsourced,for a given ATM atleast the bank has to pay for 3 guards and make arrangements for substitutes, leave reserves and costs like Provident fund/health cards/liveries and some others.Technically while ATMs are customer friendly facilities,for banks these are not so friendly.The cash that they load into the ATMs do not earn them anything but have a cost of insurance, transferring between currency-chests/storage centres,cost of transporting and additional security,etc. etc. Taking into account customer complaints regarding break-downs, forged/defective notes/failures of terminals, etc. they have their own impact on the banks's cost and efficiencies.The solution may perhaps lie in locating ATMs of group of banks in clusters on main roads/residential colonies of areas with more traffic and asking them to provide for common security by sharing cost and responsibility for operational arrangements. In case of more than 3 banks operating ATMs in the same premises,set of two guards may be thought of for round the clock security. RBI may have to come forward to approve such an arrangement.
Horror at the ATM
..........Here, I wish to mention an interesting meeting we had with the Reserve Bank of India on the “Clean Note Policy” introduced nearly a decade ago. The RBI wanted my bank to install note-counting machines, to which our answer was that the machines were expensive. The top RBI official said that rather than remitting our bank’s dividend of more than Rs.1,000 crore to the government, we could do so after ensuring our needs, such as this, first. .........
Police write to RBI on cash van security
NEW DELHI: Delhi Police on Thursday wrote a letter to the security manager of Reserve Bank of India seeking steps to ensure that banks are made responsible for security of vans carrying cash. They had earlier written to cash management agencies to ensure such measures or face action..........
Banks wary of meeting extra steps at ATMs
.....The order specifically enlisted three measures: One, directing the banks to station security guards at ATM kiosks at all times; two, instal suitable CCTV cameras in all kiosks that is placed in such a way to ensure that it records the happenings both inside and outside the kiosk; and three, instal burglar alarm at all kiosks. The police commissioner’s written order has made it clear that if the banks fail to comply with these requirements by 4 pm on Sunday they will be restrained from providing ATM service to their customers.........
‘Security lax at ATM kiosks’
...... Some
said there was lack of clear guidelines from the RBI about security
arrangements in ATM kiosks, most confirm provision of closed circuit
television cameras (CCTV) and “caretakers” at all their ATM kiosks. Yet
others said they would comply with enhanced security-related guidelines
that the RBI mandates in view of the Bangalore case. Bharat Kumar, general manager (planning) of Bank of Maharashtra says there
are “watch-guards” present at all their 117 ATMs in Pune district, but
ruled out the need to arm them as long as there was round-the-clock
monitoring of the kiosks............
Double digit growth in ATMs driven primarily by private sector banks
............The report said that the penetration of ATMs across the country increased in 2012-13 with the total number of ATMs crossing 1,00,000, clocking a double digit growth during the year. However, RBI said that this growth was driven primarily by private sector banks, with their share in total ATMs picking up rapidly to about 38%. With While Label ATMs expected to take off, RBI said that there would be more spurt expected. The central bank also said that there has been the faster rise in off-site ATMs. ..............
Centre decides to leave Chief Economic Advisor post vacant
.......“Even though an Economic Survey will not be tabled by the government, it has decided it does not require the services of a CEA at a time when the economy is going through a painful economic slowdown,” ............
Thursday, November 21, 2013
Impressed by dedication of RBItes - Dr.Raghuram Rajan
Our Governor Dr. Raghuram G. Rajan inaugurated the renovated
Class IV Union Office in Amar Building, Mumbai at 4.00 p.m. today and while delivering
his speech stated that wherever he goes, people say that RBI is a very honest
and intelligent organization. He further stated that he is impressed by the
dedication to work by all the employees of the Bank. He also observed that in
many institutions, although the work culture/ dedication to work deteriorate by
passage of time, in RBI, the same are very good even after around 80 years of
constitution of RBI. He also acknowledged the fact that the dialogue/
constructive dialogue between the union/ associations with management should
continue and with the co-operation of all concerned, RBI can achieve great
success. Let us uphold the belief reposed on us by our Governor.
- C. Subash, Secretary, RBIOA
Should RBI prefer CPI over WPI?
.............In this light, the WPI-CPI debate must be more nuanced and cautious than a simple binary choice. It’s also important to not lose sight of its genesis too, one of which is RBI’s failure to bring inflation under control over 2009-11. Something new was needed to cover the loss of credibility and the new CPI happened to come along at the right time. First, there was talk of a ‘new normal’ for inflation, implying a higher target. If I am not mistaken, it was the IMF that first suggested shifting to the CPI for better inflation control; several analysts then took this up............
- Renu Kohli
.....For an economy like India, the role of inflation expectations which are driven largely by non-core inflation as expenditure on food and fuel inflation constitutes a significant part (59.2%) of household income cannot be ignored as they have important ramifications for saving-investment behaviour. As such, headline inflation (WPI and CPI) should continue to guide monetary policy in the near term........
- Shubhada Rao
Will central banks remain supreme?
.........Over the last few years, the central banks of the largest advanced economies have assumed a quasi-dominant policymaking position. In 2008, they were called upon to fix financial-market dysfunction before it tipped the world into Great Depression II. In the five years since then, they have taken on greater responsibility for delivering a growing list of economic and financial outcomes.........
Cheque clearance in banks to be made easy and fast
.........As a sequel to the decision which has been taken following the direction of the Reserve Bank of India, the Pondicherry Banker’s Clearing House (PBCH), which is functioning from No:15, Rue Suffren, Puducherry, will close its operation on Saturday. The PBCH has so far been receiving post-dated cheques or equated monthly instalment cheques from networking bank branches for processing them. They were personally handed over by staffers of the banks concerned. Hereafter, branches of banks, upon receiving cheques from customers, will scan and forward them to the Cheque Truncation System at Chennai (southern grid) after following all mandatory procedures........
Tendulkar and the taper talk
.............Unless inflation and government expenditure is brought under control, which looks difficult at this stage, Indian markets will remain like a cricket team which scores well only when the conditions are favorable but fails whenever there is even little bit of juice on the wicket. And you don’t need Tendulkar to be telling you that this is not a great sign for a side that aspires to rise and shine.
Montek Singh Tendulkar?
....... It was unclear, though, whether he was referring to Ahluwalia's longevity in the economic policymaking establishment or his achievements within it.
RBI asks NBFCs to take part in Lok Adalat on Nov 23
..........."RBI has appealed to all Non-Bank Finance Companies (NBFCs) to participate in the Lok Adalat being organised by the National Legal Services Authority (NALSA) on November 23, 2013," the central bank said in a release..........
Bleeding with mounting NPAs
My View on "Calling the bluff":
If clients like King Fisher Airlines continue to stall the efforts of banks in recovering their dues - recent one is getting a stay on banks from taking over the corporate office of KFA at Mumbai- it is no wonder, the banks will also continue to bleed with mounting NPAs. The RBI never wanted to investigate whether banks had violated basic tenets of banking while sanctioning loans to KFA and such big ticket clients. If media reports are to be believed, most of the banks have extended the loans without adequate collateral security to KFA. Is it not malafide and it is not clear why bank managements have been allowed to go free by the RBI. The sermons of the Deputy Governor Mr Chakrabarty will remain just sermons as he does not want to offer solutions to take action against such bankers who violated basic norms of lending. Again as media reports mention that those senior bankers who secured very low marks in the interview for the post of EDs of PSBs, and when they become CMDs later, what better banking will one have in our country? -
- S.Santhanam
Rich lists
This refers to the report "Banks wrote off Rs 1 lakh crore in 13 years: Chakrabarty" (November 19). It is heartening to find that a debate on who favours whom has started at the highest level. This is good for the health of the economy...........
RBI must focus on fair deal for savers and desist from OMOs to prevent inflation spiral
Hidden in page 40 of the Macroeconomic and Monetary Developments Q2 review, released by the Reserve Bank of India a day before the policy, is a link to a vital piece of information — the household inflation expectations survey. The RBI publishes three-month and one-year forward inflation expectations each quarter in the survey..........
Read - ET........
A(ny) T(ime) M(enace)
Delhi cops write to RBI for safety steps
......The officers discussed various measures to make ATMs safer. One of the suggestions was to install a self-locking mechanism on the rolling shutters of ATM booths so that only the authorized personnel can lower them.......
......The officers discussed various measures to make ATMs safer. One of the suggestions was to install a self-locking mechanism on the rolling shutters of ATM booths so that only the authorized personnel can lower them.......
Read - TOI
........... "It would add huge financial burden and banking will become costlier. Round-the-clock security would mean having three security guards, each on an eight-hour shift, for every ATM. That defeats the whole purpose of having machines for 24x7 banking,".........
Guard must or ATMs will be shut: Top cop
Banks' best bet is an armed guard
...... The Reserve Bank of India, the country's apex banking authority, has no written rule asking banks to employ guards to man ATMs. The regulator has only asked banks to beef up security in areas considered 'high-risk'. But in light of the growing number of incidents of urban violence and theft, banks have put in place certain security measures to curb such incidents...........
Home Minister lauds Jyothi’s courage
State Home Minister K.G. George lauded the courage of Jyothi Uday, the 38-year-old woman who was attacked on Tuesday while she was withdrawing money from an ATM near Corporation Circle. He said that the very fact that she had tried to fight back showed her courage, Mr. George said, wishing her a speedy recovery.........
Read - The Hindu
Secure the ATMs
....What is required therefore is a comprehensive, multi-level security arrangement, one that uses computer technology, surveillance cameras, automatic alarms, guards and police patrols. The Reserve Bank of India must make comprehensive security at ATMs mandatory............Shocker! This R 1000 note is to be sold at R 3.5 lakh online
..........There are many such websites that offer sale and purchase of special currency coins and notes with striking errors. These currency notes and coins have special numbers, errors, misprints, signatures or are vintage coins or notes................
Bharatiya Mahila Bank: Let this not be another UID or NREG
..........There does appear to be some hurry in inaugurating this enterprise as normally, the website of any new outfit is designed to near completion before it becomes operational. The present website could be an unofficial one. However, in this case, it may be inferred that the actual operations would be only after other prerequisites are in place including a formal website. One may expect business details such as interest rates being charged and products being offered to follow soon............
Ringing in the new
Challenges that awardees of new banking licences face
....The new banks cannot survive by being mirror images of existing banks. They have to harness their knowledge based on products they are familiar with. The applicants are a diverse bunch including non-banking financial companies (NBFCs) engaged in asset or commodity-based financing, industrial houses (engineering, infrastructure, telecom, media, technology companies), services companies (transporters, distributors, exporters, importers), all of them scattered across geographies. The successful transition from an NBFC to a bank, for instance, will depend on strong management, as it would be moving into new businesses with uncharted risk areas............
India's Best Banks 2013
.......In a recent interview with Business Today, RBI Governor Raghuram Rajan emphasised on speeding up the loan recovery process through debt recovery tribunals and asset reconstruction companies. "Our institutions dealing with distress are under-developed. That will make it hard for banks to take risks if they have no hope for recovery. We have to improve them," he said..........
Reciprocity sword hangs over big foreign banks
........The reciprocity principle in the RBI norms on subsidiarisation for foreign banks in the country meant that overseas lenders would be given near-national treatment here only if their home countries allowed Indian lenders to open branches without much restriction, people familiar with the development said. The chief of an Indian private bank said the reciprocity clause should be strictly followed in the interest of fairness. “We face immense hurdles in opening branches abroad, despite giving a lot of elbow room to banks of those countries when they operate in India. A level playing field is a must,” the banker said............
RBI may issue bank licences in phases
The Reserve Bank of India (RBI) is likely to give out the much-awaited bank licenses in a phased manner, with public sector or quasi public sector enterprises getting the nod within January next year, given the fact that their track records are open and in public domain. This would mean a relatively less stringent due diligence process, a source familiar with the development said on the condition of anonymity. RBI may issue the rest of the licenses by the middle of next year...........
From a wannabe MF, the NPS should go back to basics
...... The NPS needs to be at par with the other pension products in the market in terms of tax breaks. And the compulsory annuity of 40% of the corpus at retirement needs better options than are available today.
5 reasons why inflation will moderate
.........In an Op-Ed in The Hindu, IGIDR Professor of Economics Ashima Goyal concurs with this position, saying ‘hopeful signals’ are emerging on the many nominal variables that have persistently contributed to high inflation in the past couple of years. ............
Nitish asks banks to increase CD ratio
......Kumar made the appeal at the State Level Bankers Committee meet here and stressed on increasing the disbursement of education and agriculture loans, which was low in the state. He rued the slow progress in opening of bank branches in the state and said no panchayat should remain without a bank branch.......
RBI steps will lower yields: Finance minster
....."Interest rates in government bonds have risen temporarily, but we hope that some measures the RBI will take, and when the next set of inflation figures come, if food inflation moderates, it's possible that the G-sec rates will go down,"...........
HC admits winding up plea against UBHL
....UBHL had claimed that the plea of winding up deserves rejection as it had given corporate guarantee only in favour of KF Aero, a special purpose vehicle through which KAL acquired three aircrafts, and assignment of such a guarantee in favour of the bank by KF Aero discharged UBHL from any liability towards the bank. UBHL also claimed that Reserve Bank of India, which permitted it to give corporate guarantee to acquire aircraft, did not permit assignment of such guarantees............
Is it appropriate to mention in commercial communications, “it is computer generated letter / report / statement / advice and therefore does not require any signature”.
.............Most of Foreign banks had since long started issue of term deposit advices with no signature of bank official. It bears the legend above. Some PSU banks too joined the bandwagon. Actually as per RBI directives on deposits banks are required to issue term deposit receipts and not advices and by receipt it is implied that it should be properly signed by competent official of the bank............
Wednesday, November 20, 2013
India's first all-women bank: ‘Good experiment, but let’s wait and watch’
......I should say the Bharatiya Mahila Bank is a very good initiative. The
announcement made 8-9 months ago, in the Union Budget was certainly a
welcome step. The focus in in this case is that the Board would be
predominantly a women's board, and it's expected that the women on the
board would be able to tailor-make schemes for the women to implement
them on the ground. So maybe there will be synergy between those who are
designing products and those who are using those products at the
grass-root level - be it deposit schemes, credit facilities, or timings
and days of operations............
Bharatiya Mahila Bank starts operations with seven branches
........"The setting up of the Bharatiya Mahila Bank is a small step towards the economic empowerment of women. It is also a reflection of our commitment to this cause. I am sure that the bank will fulfill the objective with which it is being established, namely financial inclusion of women and providing them equal and easy access of financial services," Prime Minister Manmohan Singh said while inaugurating the bank's first branch in Mumbai's Nariman Point. But not many appear convinced.........
Read | Business Standard
All-women bank born, aims for financial inclusion
Watch the video.............
All-women bank born, aims for financial inclusion
Watch the video.............
New bank salutes girl power
Bharatiya Mahila Bank targets break-even in 3-5 years
Bharatiya Mahila Bank Ltd (BMB), India’s newest public sector bank, is likely to break-even in the next “three to five years” and total business will rise to Rs.60,000 crore by 2020, finance minister P. Chidambaram said after inauguration of the bank on Tuesday. For Indian banks, total business is combination of deposits and advances. “In due course, the bank will be listed,” he said............
Women bank starts with Kitchen loans
..........On day one, the bank introduced “kitchen loans” and assured higher interest rate on savings bank accounts to lure women customers. Women can borrow loans to redo their kitchen space, the place where most women spend most of their time, according to the bank’s chairman and managing director, Usha Ananthasubramanian. The loan can be availed for `50,000-700,000 at 2.5% above the bank’s base rate. The bank is yet to announce its base rate or the minimum lending rate. Other special products include loans for setting up catering services and hygienic day-care centres for children of working women. BMB also announced savings bank account interest rate of 4.5% for deposits up to `1 lakh and 5% for balances above `1 lakh. Most public sector banks offer 4% while a number of private sector banks are providing 5-6% on the savings bank account........
RBI orders loans for women at 7 pct
................."This subvention will be available to all the PSBs on the condition that they make SHG (self help group) credit available at 7 per cent in the 150 districts," the RBI said in a notification. Likewise, the regional rural banks (RRBs) will be subvented to the extent of difference between the lending rates and 7 per cent for the FY-2014 on the condition they make SHG credit available at 7 per cent, it added.................
India's first women-only bank hires 1/3rd men for entry-level position
......The Institute of Banking Personnel Selection (IBPS), an assessment organization that conducts tests for financial institutions, has published a "provisional" list of 103 successful candidates for the post of probationary officers for the Bharatiya Mahila Bank, which had announced 115 vacancies for the entry-level post in September.........
Good response to coin exchange mela
..............According to Prakash Gangur, Senior Manager of the bank, coins worth Rs. 6.2 lakh, bundles of fresh notes to the tune of Rs. 7.3 lakh and soiled notes worth Rs. 4.75 lakh were exchanged at the mela; such was the response that the mela was over as early as 3 p.m. Banks normally offer coins as change to customers, but this exercise followed instructions from the Reserve Bank of India to distribute them to general public as well.This time, the mela was only a daylong event.........
Missing ATM guard aids attack
Read - TOI
Will seek RBI help to make banks deploy guards: police
“We have decided to bring this lacuna to the notice of the Reserve Bank of India through the Home Department seeking necessary directions in this regard.”
Should Government look at introducing a currency note of 200 denomination?
...... For several reasons mentioned below I think Govt and RBI can closely examine the suggestion of introduction of currency of Rs 200 denomination.............
Read.......
Read.......
Privileged and under-privileged banking customers
......Most of the so-called extra/special benefits that are sought to be extended by private banks to this handful lot of super-rich so-called ‘privileged customers’, who hardly ever seen to set foot into private bank branch portals, more often than not they are seen to leave bank visits to the secretary or chauffer. Consequently, the benefits remain a mere eye-wash, as they are seen to be hardly availed of by many as they matter little to them.......
Why public sector banks underperform
...........Things have gone worse in the current financial year, setting alarm bells ringing for the banking regulator, the Reserve Bank of India (RBI), which has promised new guidelines for recognition, resolution and recovery of loans in trouble. The easing of asset classification norms after the 2008 global financial crisis has "killed credit quality," says one central banker. "Things are quite out of control," says another, pointing to the volume of restructured loans...........
Forget leaky PDS, it's the banking system that needs a fix
Large numbers are generally used to grab attention to a crisis.RBI Deputy Governor K.C. Chakrabarty, known for his outspoken views, did exactly that when he said that Indian banks have written off a whopping Rs 1 lakh crore over a period of 13 years...............
RBI checks with banks on prospective entrants
.....RBI, which is now screening the applications to confirm if the candidates are complying with the fit and proper criteria, before sending it to the high level advisory committee headed by former central bank governor Bimal Jalan. For the initial screening, the banking regulator has sought additional information from the aspirants which includes additional balance sheet, source of funding, possible investors and their source of funding, among others...........
Competition act to cover forced bank mergers: MCA
.......MUMBAI: The corporate affairs ministry has turned down the Reserve Bank of India's request for a blanket exemption from the Competition Act for forced mergers of distressed banks initiated by RBI. The central bank had sought exemption under Sections 5 and 6 of the Competition Act, which requires prior approval from the government before a merger..........
Chit funds regulation: SC notice to Centre, RBI
The Supreme Court on Tuesday issued a notice to the Centre, the Reserve Bank of India (RBI) and Securities Exchange Board of India (SEBI) seeking their response on a PIL for putting in place a proper mechanism to regulate functioning of chit funds in the country. A bench headed by Chief Justice P. Sathasivam asked the government and the institutions to file their response within four weeks..........
FinMin, RBI panel discuss 49% cap on FII investment
........The Budget had put forth the proposal saying that FII and FDI definition should be clarified, below 10 percent would be FII and above that would be FDI. The panel which includes the Economic Affairs (EA) Secretary Arvind Mayaram, Reserve Bank of India (RBI) Deputy Governor HR Khan as well as Securities and Exchange Board of India (Sebi) EDs is looking at building this transition mechanism.............
Onions Bring Tears to RBI’s Rajan as Prices Surge: India Credit
........“Structural weaknesses and seasonal volatility are being combined and that’s why we’re seeing gains in double digits,” Rao said. The RBI “will be closely monitoring food and fuel inflation over the next couple of months when food prices are broadly expected to decrease. If that doesn’t happen then the RBI would be forced to raise rates at a faster pace.”
Policy enigma
......The measures proposed in the RBI’s monetary policy are hardly intelligible to the lay people for whose benefit they are supposed to work. But they have every right to understand them. After all the patient should know what medicine is being given to her/him. Unless the jargon is understood it would be difficult to judge the efficacy of the twin goals -- arresting inflation and accelerating growth -- announced in the recent review of the monetary policy for this year.............
RBI should and will keep inflation under control: Andrew Michael Spence
Andrew Michael Spence, recipient of the 2001 Nobel Prize for economics (along with George A Akerlof and Joseph E Stiglitz), favours the Reserve Bank of India (RBI)’s stance on containing inflation, despite some sections seeking polices to boost growth. Spence is also on the same page as RBI Governor Raghuram Rajan as far as monetary stance is concerned........
Bad loan lessons
.......... PSU banks are to blame for not being alert to warning signs—for 10 corporate groups, Chakrabarty points out, while bank credit more than doubled between 2007 and 2013, their overall debt rose 6 times. But there are larger lessons to be learned for all concerned.
RBI - Lessons from the past? - R.C.Mody
This refers to the report "RBI asks banks to increase bad loan provisions" (November 17). When faced with a similar situation the Reserve Bank of India (RBI) had appointed, in July 1974, a study group to frame guidelines on bank credit (known as the Tandon committee). The group, inter alia, examined whether norms could be evolved for the debt-equity ratio to ensure minimal dependence on bank finance. And as a result of its deliberations,..........
Trouble at the bank
.....More worryingly, banks are able to recover fewer bad loans with each passing year. While nearly half of the reduction in NPAs in March 2001 was due to higher recoveries, this ratio is down to around 29 per cent today. While PSU banks clearly need to answer for this, it is something the RBI and the government also need to worry about. It is clear the debt recovery tribunals and the Sarfaesi mechanism are not working.............
Calling the bluff
The RBI Deputy Governor must be appreciated for finally calling the bluff of PSBs. While a host of relevant issues such as need for stringent appraisal, lax credit risk management and regulatory control draw a holistic picture of the NPA scenario, K. C. Chakrabarty missed out on some critical issues at the grassroots level. The principal issue is the poor skill level of decision makers, who take credit decisions out of crisis rather than conviction. The rush by PSBs to increase the size of their balance sheets ahead of perceived mergers further aggravated matters. Finally the important role of internal audit as an extended arm of the regulatory process and its efficacy as an early warning system should have found a place in his discourse.
- D. Prem Nath, Thiruvananthapuram (HBL)
PSBs’ burden
Reserve Bank of India officials are quite right in flagging the risks to public sector banks from mounting bad loans. Gross non-performing assets (NPAs) of these banks have doubled as a percentage of their advances over the last three years. At over 4 per cent, this number is twice that of private banks. Worse, PSB books don’t fully reflect the real magnitude of the problem. Restructured assets (loans rescheduled at the behest of the borrower) make up another 8 per cent of PSB portfolios..............
Kinks in the non-performing assets of banks
.......However, given the tricky bye-laws and categories of credit management in the Indian banking system, headline numbers can be misleading. As a presentation made by Reserve Bank of India deputy governor K.C. Chakrabarty at a recent conference shows, Indian lenders have resorted to devices such as technical write-offs and restructuring loans to show a reduction in their non-performing assets.........
The NPA conundrum
........RBI, on its part, must address the broader issue of compelling banks to get into inclusive lending, where such risks may be high and will ultimately impinge on the quality of bank assets. Evidently, at some stage, we must be practical when it comes to lending and let this sense override emotion.
Automatic stabiliser
In textbook macroeconomic models, a floating exchange rate is viewed as an automatic stabiliser. When the balance of payments of an economy is under stress because of a large current account deficit or a drop in capital inflows, the currency depreciates, causing exports to increase and imports to decline, thus easing the stress. In the other direction, when there is a surplus situation, the currency appreciates, causing the current account deficit to widen, which eases the pressure. Of course, textbook models are oversimplifications, but that does not make them.....
Bond yield spike should ease on RBI action: Chidambaram
Finance Minister P Chidambaram on Tuesday said the sharp rise in yield on government bonds, driven by high inflation, was temporary and would come down on the Reserve Bank of India (RBI) taking some steps. "We hope that with some measures the RBI will take, and when the next set of inflation figures come, if food inflation moderates, it's possible that G-sec rates will go down,"......
Tea growers explore bitcoin option to expand global biz
.........However, the lack of domestic bitcoin exchange is now holding up plans to formalise the process. According to Ms. Peterson, Tealet is now approaching established exchanges that “we can integrate our growers’ business with”. While bitcoins are not illegal in India, the Reserve Bank of India is “watching and learning about the developments in bitcoin” even though it has no intention of regulating it right now.
Post Offices Can’t Sell Gold Coins
The
finance ministry has cancelled India Post’s tender for sale of gold
coins through its post office network through out the country. India
Post had sought to sell gold coins at a time when the government is
discouraging commercial banks to sell gold coins. The finance ministry
has cancelled the demand. “The tender is cancelled” said finance
minister P Chidambaram at a media briefing following the launch of the
Mahila Bank on Tuesday.............
Read - ET
Read - ET
Yet another PIL filed against Aadhar
Another public interest litigation has been filed has in a Kerala High Court questioning the government's move to link various welfare payments such as cooking gas subsidy with the unique identity or Aadhaar number. The petition, which has been accepted by the Supreme Court today, has also made the Reserve Bank of India and Election Commission a party. Court, has reportedly, asked the government and the central bank and election commission to respond to it........
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