Typically developing countries are either struggling or just unwilling to distinguish their finances and politics. Due to insufficient control systems, central banks are prone to becoming used by governments for their own agenda. The Economist has published an interesting article on the history of the Reserve Bank of India and summarized the challenges it has faced as a regulator. The RBI grappled with its sense of purpose and became an almost subservient accomplice of political corruption. In 1997 and 2006 agreements were enacted to stop it being used as an ATM for the state. The magazine touted the RBI thereafter for its transformation into a normal central bank which readily addressed macroeconomic issues and even help India weathered relatively unscathed the 2008 financial crisis. Even though RBI’s independence is not enshrined in law, regulating officers expressed little concern about its independence in the latter part of the last decade. However, the magazine pointed to emerging fears that the RBI has again fallen into the trap of becoming a lever of the state, this time for protecting India’s conservative political agenda. Banks today are still forced to invest 24% of their core assets into government bonds thereby pushing down the yield rate. As the Eurozone worries spread, the RBI has initiated a R14 billion bond-purchase program to guarantee low yields for state agencies. India shares similar traits to pre crisis Greece. Both countries have pushed down public borrowing cost. Public credit in pre-crisis Greece was too cheap and government agencies were not carefully screened and assessed before they received a loan from the state; a state of affairs that exists in India today.
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Tuesday, February 21, 2012
Robbery brings to fore the gaps in security of most banks
..........Indian Bank has defined a list of security measures across its 800 branches in the state. "Our 90 currency chest (to facilitate distribution of bank notes and coins, RBI has authorized select branches of scheduled banks to establish currency chests where bank notes and rupee coins are stocked on behalf of RBI ) branches are equipped with CCTV cameras and burglar alarms," says chairman and managing director TM Bhasin............
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Government may ease harsh rules for NBFCs suggested by RBI panel
……While the RBI panel, headed by former deputy governor Usha Thorat, has given its recommendations for quite some months now, the regulator is yet to come out with the guidelines. Meanwhile, the key advisory group formed by the government and comprising senior bureaucrats, industry representatives, professionals and even central bank officials, has finalised a parallel set of recommendations which were submitted to the ministry less than a fortnight ago….
Read................Surely, the RBI is being too cussed about not cutting rates - Rajrishi Singhal
........... In short, the RBI is playing truant: unless inflation comes down and “credible” fiscal consolidation begins, no rate cuts. The fact is that in the past 30 years, not a single year has passed without a fiscal deficit. And, “credible” fiscal consolidation has seldom been a feature of the annual budget making process, save two or three years in the interim..................
Read............Bring farmers to the bourses
........ Merely having programmes will not work, as there should be appointed nodal officers who take it forward. Hence, it has to be an initiative taken by the commodity market along with RBI and Nabard.......
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Banks’ outreach poor in Odisha, say officials
While both Odisha Government and Reserve Bank of India (RBI) harping on increasing the outreach of banking services in the State, coverage of banks in this regard continues to be abysmally low, feel top officials in the State’s Department of Finance (DoF). The DoF has come out with a detailed outreach of banks, which reveals that 24 out of 30 districts of the State have been identified as “Under-banked.” In fact, RBI Governor D Subbarao had stumbled upon the stark realities during his visit to the State recently. According to the latest analysis of the DoF, seven blocks of Malkangiri and Nabarangpur districts do not have a single branch of any public or private sector bank. And 83 villages with population above 5,000 are identified as “Under-banked” centres. Though time and again, the State Government has been harping on opening of bank branches in these “Under-banked” areas, both public and private sector banks have been showing lukewarm response to the issue, rued a senior DoF officer. Out of the total number of 3,335 bank branches in the State, rural branches are 1,878, though there is a large requirement of opening branches in the “Under-banked” areas, he said. Under this backdrop, the RBI’s asking for 100 per cent financial inclusion taking one-family-one-account as the parameter would remain a far cry, said a senior official of the State Cooperative Bank. For example, while most of the blocks of Malkangiri district have no banks either from public or private sector, the deadline for cent percent financial inclusion was stipulated by March, 2011. And recently the State Bank of India has taken the alibi of law and order problem in the district, for which banks are facing lot of difficulties in achieving 100 per cent financial inclusion. Malkangiri is the worst Maoist-affected district, and this alibi appeals to all. But hard fact remains that miles and miles one covers in Malkangiri, he will hardly find any branch of any bank. For instance, Government employees working in the Motu area of the district cover 100 kilometres to get their pay cheque deposited and cleared at the SBI’s Malkangiri branch, pointed out an employee of the tehsil office at Motu.
The Pioneer
Govt to report first annual retail inflation Tuesday
..... Unlike most central banks, which mainly use the CPI to monitor inflation and set monetary policy, the Reserve Bank of India (RBI) focuses on the WPI to keep tabs on prices........
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Uncertainty is a public good
.... Bare Talk recalls a remark by Y.V. Reddy, the former governor of the Reserve Bank of India that policy certainty is a public good and that it cannot be provided for free. If I may extend it further, policy certainty is a public good and, hence, it should only be deployed where there is unambiguous public benefit or where public benefits exceed public costs.....
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RBI’s approval in place, but insurance regulator uncomfortable with valuation
Punjab National Bank, the country’s second largest lender, wanted to buy 30 per cent stake in MetLife Insurance for Rs 1, but the deal has run into a regulatory hurdle. The Insurance Regulatory and Development Authority (Irda) is scanning the contours of the deal as it is not comfortable with the valuation, though the Reserve Bank of India (RBI) has given its approval to PNB.....
Read...........Fiscal deficit key issue to watch out for in budget
..... This time around, the budget actually holds a slightly higher significance because the fiscal policy that is outlined in the budget could influence the monetary policy that the RBI (Reserve Bank of India) is thinking about. So until and unless we have some degree of fiscal discipline or at least an intent to have certain degree of fiscal discipline in the budget, it would be difficult for RBI to pursue a sustained loose monetary policy for sometime, which could lead to an upturn in the investment cycle over the long term. So in that sense the budget is important and that is why the budget would be looked at quite keenly this time around.......
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SC breather to banks on tax dispute
........ In other words, the scheduled commercial banks would continue to get the full benefit of the write-off of the irrecoverable debt under Section 36(1)(vii), in addition to the benefit of deduction for the provision made for bad and doubtful debt under Section 36(1)(viia). This order has a nation-wide impact, as all the commercial banks can now claim a refund of tax.
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Weak rupee plays spoil sport to companies in Q3
….."The Reserve Bank of India (RBI) had tightened monetary policy in India to control high inflation. This made domestic funding costly and caused many companies to source funds through sources like external commercial borrowings (ECB) and Foreign Currency Convertible Bonds (FCCB). Such instruments, for which interest payments have to be made in rupee, became costly due to fall in rupee rates,"……
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At a glance
....Manthan 2012, the first edition of the finance summit of IIM Kashipur, held Manthan 2012, the first edition of the finance summit of IIM Kashipur, witnessed a mix of eminent industry personalities from the field of finance, academia and students on a platform to put forward their view on ‘Global financial crisis and impact on Indian businesses’. Anand Sinha, Deputy Governor, RBI, delivered the keynote address.......
At a glance
At a glance
UBI plans to fill up 2,000 vacancies
….to comply with the Reserve Bank of India’s (RBI) prescription, the UBI has covered 406 villages under the Financial Inclusion Programme………
Read.............Mobile banking seeks boost
While many banks have mobile banking for retail customers, some are vying for corporate clientele
.... To boost mobile banking in India, the Reserve Bank of India lifted the cap of Rs 50,000 on daily transactions in December. However, the banking regulator empowered banks to set limits based on their own risk perception and with approval of their respective boards.....
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Phone bills-credit score: a fair link-up?
.... The banking ombudsman scheme is working well and has successfully brought down the level of consumer grievances in the retail lending sector. RBI also monitors “consumer unfriendly practices” and makes sure that the banks are “persuaded” to give up such practices. A case in point is the manner in which most major banks have agreed to waive prepayment charges on existing floating rate loans (even where the contracts with the consumer provided for such a charge).....
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Loans get cheaper as rivalry squeezes rates
Interest rates on bank loans are finally heading south. Even before the Reserve Bank of India (RBI) signals a reversal in the interest rate cycle, banks are embarking on cutting lending rates, at least on select loans, bowing to the need for expanding business in the face of competition............
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Investor of last resort
....With what it is being asked to do now in terms of bailouts, LIC will be second only to the Reserve Bank of India (RBI) in its financial relationship: if RBI is the lender of last resort for the government, LIC is fast becoming its investor of last resort.The enabling change—removing the 10% cap on LIC’s investment in government-owned companies—has been made recently so that LIC can bail the government out of its divestment disaster.The systemic implication of this change and how LIC is being used are dangerous. If at any time RBI acts tough with the government, LIC is well positioned to become an on-tap lender to the government. This is a systemic danger.........
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Monday, February 20, 2012
RBI creates awareness about fake currency
Tirupati: How to find out whether a foreign currency is fake or genuine? How to transfer money from one country to another? These doubts can be clarified at the Reserve Bank of India’s exhibition and interaction programme. RBI inaugurated a two-day exhibition and interaction programme here on Saturday to spread awareness among the public about fake currency and fraud activities. It is the ninth exhibition in the state. It was earlier conducted at places including Hyderabad, Nizamabad, Guntur and Vizag. Speaking to The Hans India, Basheer, Deputy General Manager of RBI, said that the programme’s aim was to create awareness among students, children, public and educated youth about fake currencies, bogus lotteries, fraudsters false promises and to know about the NRI banking activities and money transfer from one country to another. He advised the public not to fall prey for fraudsters’ promises, whether they are lotteries or multi-level marketing schemes. “That is the reason, we invited principals, faculty, academicians and industrial associations’ representatives,” he added. The same exhibition will be organised at Nellore town from February 21, for two days, he said.
Workshop on " Managing Global Turbulence"
The Bombay Chamber of Commerce & Industrys Banking, Finance & Economics Committee is organising a Workshop on " Managing Global Turbulence" with special reference to SMEs on February 21 at Rangeshwar Hall, Y. B. Chavan Centre, Mumbai. The keynote address will be delivered by Dr. Subir Gokarn, Deputy Governor, RBI, other speakers include Jamal Mecklai- Chair, Economic Policy & Affairs Group, Bombay Chamber & CEO, Mecklai Financial, Samiran Chakraborty- Regional Head of Research India, Standard Chartered Bank, Sajjid Chinoy- India Economist, JP Morgan & others.
FPJ
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