"Must Reserve Bank Pay Interest On CRR Balances ?" - V.K.Sharma

.........It is not that RBI cannot, and should not, pay interest on CRR as demanded in some quarters. Only that to have the desired extent of impounding to influence aggregate demand in the real economy, M3 will still need to be contracted by a certain amount. What will happen if interest is paid is that the effective/ substantive contraction/withdrawal of money will be less to the extent of interest - reserve/ primary/base money - paid by RBI and so CRR will have to be so much higher than, say 4% at present, to achieve the required contraction in M3 (Money Supply) to achieve the required compression in aggregate demand in the real economy !.........

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RBI's Financial Literacy Quiz Guwahati Team wins in National Finals

.........Dr. Raghuram Rajan, Governor, Reserve Bank of India presided over the event and gave away the prizes to the winners of RBIQ 2013. While giving away the prizes to the winners, Dr. Rajan said that he was “humbled at the amazing range of information and knowledge that the participants displayed in answering the questions related to banking, finance and India.” He added that “I am delighted to see the excitement and enthusiasm that the RBIQ generated all over the country and hope that in the years to come this initiative of the Reserve Bank would play a major role in the central bank’s efforts in disseminating financial literacy across the country.”...........

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Kochhar, most powerful Indian businesswoman

ICICI Bank MD and CEO Chanda Kochhar has been named as the most powerful businesswoman in India for the third consecutive year by Fortune Magazine. Shikha Sharma of Axis Bank and Aruna Jayanthi of Capgemini India have taken the second and third place in the Fortune list of 50 most powerful businesswomen ranking for 2013................

Read - FPJ

New CMD of Bank of Maharashtra

Sushil Muhnot has taken over as Chairman & Managing Director of Bank of Maharashtra. Prior to joining Bank of Maharashtra he was working as CMD of Small Industries Development Bank of India ( SIDBI). Muhnot is a B Text (Tech), MBA with CAIIB and Masters in Ecology and Environment. He has wide experience in banking and financing...........

Read - FPJ

The cycles of history

..........My third and final observation has been about the curious lack of interest on this matter in India. Scanning the Indian press from afar, I saw little comment - positive or negative - on the reorganisation from either editors or government officials. The general attitude appears to be that the Bank is an irrelevant organisation, so why bother. Personally, I feel this is a mistake. Throughout its history, the Bank has been shaped by its interaction with India and this will continue for the foreseeable future. It behoves India to take an equivalent interest in the reshaping of the World Bank.......

Read | Business Standard

Proven failure of NABARD

My View on  "Finmin wants RBI as sole regulator for MFIs": 

I would add one more to the list that it has passed on to NABARD a part. Even for the Cooperative sector, it should resume the supervisory and regulatory responsibility because of the proven failure of NABARD to handle it. Secondly, at the time when such function was entrusted NABARD was owned partly by RBI whereas now it is fully owned by the State Government. Both structurally and functionally, the regulatory function of financial entities should rest with the RBI. 

- Yerram Raju

Sound advice

My View on  "Precautionary Margin Fund - - Dr.T.V.Gopalakrishna...": 

A sound advice from a regulator banker who made extensive research on the NPAs. NPAs have reached Himalayan heights due to three factors:

banks dependence on external agencies for due diligence; excessive emphasis on rating agency ratings that has become a prerequisite under Basel regulations; and failure in credit risk assessment. These have been accentuated by the falling growth of the economy under global influence partly and policy paralysis domestically. 

- Yerram Raju

Better late than never.............

My View on  "Public Sector Banks Need Urgent and Bold Reform": 

The short and crisp article puts forth an agenda for reforms PSBs should have seen taking off at least a decade earlier. Post-independence, India developed its public sector with a vision which was unique and nationalisation of first group of private sector banks was the culmination of a well-planned economic development initiative starting with the first Five Year Plan. Unfortunately, the decades that followed saw a planned effort from vested interests to undermine the value and efficiency of Indian public sector. This resulted in stifling of institutions like UTI and stagnation of several public sector organisations. Private sector flourished by sucking the creamy layer of indusries and services sectors, with government support in various forms including tax relief amounting to lakhs of crores. The neglect of public sector banks in the matter of infrastructure and HR issues from recruitment of clerks to board appointments has to be seen in this wider context. This article is a timely reminder for initiating appropriate reforms in public sector in general, as private sector has only modest share in economic development initiatives affecting the majority of Indians. 

- M G WARRIER, Mumbai 

Role of Regional Rural Banks in Rural Development

.......... The regulations governing rural development are also covered in detail. Real-World Data gives the use of data from sources such as NABARD, RBI, GoI,and APGVB helps the reader apply the concepts and theories discussed in the book to systems and events in the World.

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CREDAI concerned over rise in repo rate

........“Keeping in view the demand-supply gap in the affordable housing segment, the government needs to support the sector by focusing on development initiatives such as recognising affordable housing as a priority sector for funding and providing added incentives to the lenders and developers. The RBI should consider increasing the exposure to Commercial Real Estate (CRE) segment from three per cent to at least 12 per cent and encourage the funding of SME projects in tier-I, tier-II and tier-III towns and cities to boost the segment. Such initiatives will facilitate the flow of formal credit to the sector and encourage the developers to take up more projects in the affordable housing segment,” he added...........

Read - The Hindu

Bittersweet news on interest rates

........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. While inflation is still not at durable levels, banks and financial institutions are not sure if the central bank will cut the rates in the coming months. It is too early for them to consider any upfront rate reduction on lending rates. In their quest to attract higher deposit mobilisation, if they increase the rates the lending rates would automatically go up which will not help resolve the issue. .......

Read - The Hindu

Introduce differential interest rate system

.......“If the key short-term bank rates are raised by RBI in this manner to suck out the excess liquidity from the system to contain inflation, the industrial growth will get stunted. The RBI has to come forward with a ‘sector-specific differential interest rate’ methodology if the existence of capital intensive and SME (small and medium enterprises)-dominated segments like garment industry need to be protected,” ........

Read - The Hindu

A one-point agenda for RBI

........Deep institutional reform of the RBI is called for, if India is to avoid the trap of volatile investments, economic/financial instability and recurring boom/bust scenarios. The RBI must have a narrow mandate on price stability and it must deliver on that mandate. It is no longer economically defensible to say that the RBI can be the jack of so many trades — monetary authority, exchange rate manager, debt manager (which compels money-financing of budget deficits), regulator and supervisor of banks and NBFCs...........

Read - HBL

Election Commission did not permit Finance Ministry to inaugurate Bhartiya Mahila Bank from Delhi headquarters

............The Election Commission owing to the code of conduct for poll-bound Delhi, Rajasthan and Madhya Pradesh has not granted the permission to the government. Thus, the Bank shall now be launched from Mumbai on the due date............

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Plus ça Change

..........There seems to have been as much rivalry between peers as there is today; when Central Bank faced a run in 1913, Bank of India tried to stop the wealthy Cowasji Jehangir from helping the bank. And the constant spats between Osborne Smith, the first RBI governor, and civil servants Sir James Grigg and Sir James Taylor, are reminiscent of the recent cold war between North Block and Mint Road. Dadabhoy's book is more than a mere glimpse — it's a detailed account of the evolution of India's financial sector...........

Read - IE

Banking on India

.......The new policy on foreign banks is hence progressive considering our own tryst with deeper financial liberalisation, though the individual banks will have to take a call on whether they would really like to get their fingers wet. It would depend on the time horizon that they are working with, and plain vanilla entry, prima facie, does not really look appealing. It is unlikely that more than a couple of the large banks would find the terms attractive as the latter stand at the moment. .........

Read - FE

Better bank for the buck

......It’s possible, therefore, that the larger and more entrenched banks will opt for the WoS route; though a couple of the smaller players have said they will give it a shot, some might prefer to stay with their existing models based primarily on fee-based incomes. RBI has been generous enough to give foreign banks a choice even though it would prefer they operate through a WoS since that would lower systemic risk. The rest is up to them.

Read - FE

US business body welcomes Indian banking sector reform

WASHINGTON: The US business body has welcomed the new RBI rules governing access for foreign banks operating in India, describing the move as a positive step and called for opening up of other areas in particular the insurance sector. ..............

Read - ET

Reaction Is Cautiously Positive to India’s Bank Rules

..........“We are positively inclined toward growing our presence in India under the new regulations, though the size and manner of expansion are details that are yet to be determined,” said Sanjiv Bhasin, chief executive of the Indian arm of DBS, a Singaporean bank. “At this time, any sizable global banking institution cannot ignore markets like India, China and Indonesia. It is question of the priorities of each respective bank and when it is a suitable to enter the market for that institution.”..........

Red - The New York Times

Fewer, Bigger Banks Needed

This refers to ‘Public Sector Banks Need Urgent and Bold Reform’ (ET, Nov 8). Consolidation in the PSB space requires political will, which is missing. Agreed, even the smallest PSB now has total business of around . 2 lakh crore and a fairly large network, and merger with other banks is not an easy proposition. But for a sound and vibrant banking system, we need to have fewer strong banks instead of many smaller banks. A beginning can be made by merging identified small banks with their bigger cousins so the merged entity gains reach to acquire pan-India presence. 
- SRINIVASAN UMASHANKAR, Nagpur (ET)