Way to Go, Guv

This refers to ‘Governor Does His Bit’ (ET, Sep 18). The RBI Governor will be praised for his persistent efforts and consistent policy stance in his recent monetary policy reviews. He hasn’t neglected the underlying growth-inflation dynamics but has been pragmatic enough to provide a complementary monetary policy action through reduction in CRR by 25 basis points. It’s time for Indian economy to have monetary and fiscal policies working in tandem so that its economic ills are ameliorated, improving the conditions for economic growth keeping the inflation at a tolerable threshold. 

- RAMAN KUMAR AGRAWALLA (ET)

RBI Governor meets Chidambaram

...... "You have to wait till October 30. I can't say on September 18, what we will do on October 30. I discussed some purely administrative issues with the Finance Minister. There was no discussion on policy".......

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RBI issues guidelines on banks' illiquid assets

......The guidelines on which comments are invited till 19th October, permit banks to follow any recognised model or method for computing the amount of valuation adjustment. RBI said that illiquid positions are generally disposed of at much lower price than the value reflected by banks in the books of accounts as per applicable accounting standards.......

Read - Moneylife

‘Liquidity should not be a constraint to economic activity’

The Reserve Bank of India does not want liquidity to be a constraint to economic activity, said Subir Gokarn, Deputy Governor, explaining the rationale for the Cash Reserve Ratio (CRR) cut announced on Monday.......

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Supporting policy needed to lower biz risks: Subir Gokarn

R

egulators need to maintain a balance between regulation and innovation as per local requirements, RBI Deputy Governor Subir Gokarn said today as he pitched for a supporting policy framework to lower business risks......

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India cbank says bond purchases remain option despite CRR cut

......"Open market operations have always been very tactical when situation has been tight. When we've felt that the pressure might persist, we've used OMOs and that option remains," ......

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'No actual monetary loss to the govt'

......This is not the first time Subbarao has defended Chidambaram. The former finance secretary had maintained his stand on the same issue before the Public Accounts Committee. Subbarao also said he disagreed with the controversial note prepared by the finance ministry for Prime Minister Manmohan Singh, which said Chidambaram should have insisted on auctioning of 2G spectrum......

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Indian economy – imperatives for second generation reforms

Address by Dr K C Chakrabarty, Deputy Governor of the Reserve Bank of India, at the inaugural session of the State level seminar, organized by the Department of Economics of the Vivekananda Education Society’s College of Arts, Science and Commerce, Mumbai, 14 September 2012

......The regulation and supervision of the financial system in India is carried out by different regulatory authorities. The Reserve Bank regulates and supervises the major part of the financial system. In the past five decades, the Indian banking system has traversed through a difficult path endeavoring to balance several competing and conflicting demands on it from large, medium, small and tiny borrowers in both the organised and unorganised sectors. The banking system’s activities were initially tightly regulated and their freedom was restricted. It also confronted several domestic stresses and external shocks. However, the regulations have changed over time to ensure that the banking system steps out ......

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Don't sit on our changes: Chakrabarty

...... “What we call operational efficiency of the banks, that is one thing that should happen,” Chakrabarty said. On the larger economy, he said unless there were institutional reforms, policy reforms would not percolate downward. “My view is that a lot of things need to be done at the government level, state government level, at RBI level. But what has been done, its full benefit has not been taken by the people. Reform is not taking place at the individual level,”......

Read - BS

Thank the SBI chairman .......... and RBI’s caution

......The empirical evidence presented by Chaudhuri seems to have convinced not only RBI, but also top experts like C Rangarajan and Montek Singh Ahluwalia who are now unequivocally endorsing the relative superiority of a CRR cut as a policy instrument for inducing lower lending rates.......

....... To put it in a nutshell, it is a cautious policy announcement that intends to strike a fine balance between growth and inflation.

Read - BS

CRR cut contraindicated

Apropos the edit on the Reserve Bank of India’s (RBI’s) announcement of a cut in the cash reserve ratio (CRR), one wonders at the rationale, if any, for the injection of Rs 170 billion into the system that will eventually become larger owing to the workings of the money multiplier (“RBI does minimum,” September 18). The RBI review admits that liquidity conditions have remained comfortable. But it expects the situation to be tight in the context of the expected pick-up in credit growth in the so-called busy season, advance tax payments and the festival-related currency demand. But there is no evidence to support these premises if one looks at the trends in the economy relating to the underlying variables. It is a moot point whether the CRR cut will lead to a reduction in lending rates without affecting deposit rates. State Bank of India’s net interest margin (NIM) was 3.85 per cent as on March 12, 2012. The domestic and foreign NIMs were 4.17 per cent and 1.70 per cent, respectively. The bank’s Indian customers are subsidising their foreign counterparts. SBI has been at the vanguard of the demand for the reduction, nay, abolition, of the CRR! Those who argue for growth over price stability should note that inflation has affected savings, especially in financial assets. It is wiser now to borrow to finance the purchase of a house rather than try to save the amount over a period. In an inflationary situation, the borrower gains at the expense of the lender.

- A Seshan Mumbai (BS)

Banks not passing benefits of rate cut to borrowers: RBI

According to RBI Deputy Governor Chakrabarty reduction in policy rates will not serve any purpose unless banks bring down their spreads and pass on the benefits to borrowers........

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Dr Chakrabarty’s concerns are shared by most bank customers. But here bankers and policy makers will say market forces are at work. If banks can accept deposits at very low rates and lend after retaining a 3 to 5 per cent Net Interest Margin why should they work harder to improve their working in favour of their clientele?

- M G WARRIER

Role of Monetary Policy in fiscal ability a global debate

......"It is not surprising, therefore, that the RBI, which is emerging as a role model for monetary stability, has decided to wait and watch till, perhaps, the second Quarter Monetary Policy review in October, for any further cut in policy rates"......

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One-Minute Guide | Cash reserve ratio

I am part of every scheduled commercial bank’s overall cash balance. I am that portion of the banks’ net demand and time liabilities or deposits which needs to be kept in a current account maintained with the Reserve Bank of India (RBI).......

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RBI Monetary Policy: Calculated pause or characteristic freeze?

......Writing a foreword to a book authored by former Governor of Reserve Bank Y V Reddy, Andrew Sheng, the former Chairman of Hong Kong Securities and Futures Commission explains why Asians instinctively "freeze" when they encounter a crisis. Has RBI made a calculated pause or sensing a crisis has it frozen? 

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RBI stands pat, but may soon have to sprint

......Yet, India Inc need not turn to the wall and sob. At least, not yet. For, the RBI’s small move on Monday may just be the trailer with big action to come the next time round. Yes, the RBI may be blinded by its concern over inflation, but it cannot be deaf to the clanging alarm bells on low industrial output growth......

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Rate cut demand, an obsession - M.Y.Khan

The Reserve Bank’s policy announcements would go a long way in silencing the hue and cry over decreasing the repo rate and the reverse repo rate in order to make available cheap bank credit. The recent increases in interest rate have been a cause of stress for the business community. But investment is not directly impacted by interest; it is affected by profit. Therefore, the clamour for lowering rates seems overstated, and the RBI, perhaps realising that, has responded appropriately by reducing only the cash reserve ratio (CRR)......

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Sceptical of reforms, will RBI cut rates in October?

......“I am very confident that between now and October 30, since the government is expected to take a number of additional policy measures and also lay out the path of fiscal correction, the response of RBI on October 30 will be far more supportive of growth,......

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Understanding RBI's move to slash cash reserve ratio

......Undoubtedly Governor Subbarao is not taking his eyes off the inflation rate, which is still not in  the comfort zone. In the latest monetary review, RBI has  kept the repo rate unchanged at eight per cent.......

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Subbarao says he could have done better

A simmering political cauldron, stoked by the recent decisions of the Finance Ministry to hike fuel prices and FDI limits in retail, is likely to now boil over, with RBI Governor D. Subbarao admitting to the Joint Parliamentary Committee (JPC) investigating the 2G scam that he could have performed better in his role as Finance Secretar......

Read - The Hindu