.......Although
Reserve Bank of India Governor Raghuram Rajan did not directly comment
on the government’s fiscal numbers, or the quality of it, there was a
hidden message on curbing payments to vendors. The RBI’s ‘Macroeconomic
and Monetary Developments’ report shows professionals have upped their
fiscal deficit target to 5% from 4.8%............
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.
Wednesday, November 6, 2013
QE tapering will not be disruptive, but gradual: Subir Gokarn
........... I have always been of the view that you cannot look at reserve accumulation as a policy in isolation. It is part of a larger macro stability agenda. The role of exchange rate in that overall strategy is very important. Typically reserve accumulation is an expansionary stance because you are pumping in domestic liquidity when you buy dollars. If you are in an anti-inflationary stance, which is what the Reserve Bank is in, the accumulation of reserves is inconsistent of that stance. It is not that it cannot be done, but it has to be carefully thought through both in terms of.......
What drives private banks’ interest in rural areas? - Renu Kohli
The coincidence of the drive for “financial inclusion” and rural India’s brisk growth offer interesting insights into the finance-growth nexus. The rapid increase of rural incomes and consumption with a shift in expenditure patterns has altered the business perceptions of private banks about this segment of the economy. Rural businesses do not seem so risky any more. Their untapped potential is a growth driver for many private banks..........
Bring the Fund down to earth - Charan Singh
......Given that the global economy is still in a precarious position, the IMF's limited resources have to be utilised effectively. In this context, since most country data is available on the internet and video conferencing is always an option, the IMF could consider effective alternatives to substantial travel expenditure. Actually, to inspire confidence, it could benefit from a larger presence in the region under scrutiny. At present, the IMF, unlike the World Bank, mainly operates from its Washington DC headquarters and its staff pays brief visits to collect interview-based information from officials in a country. These short visits may not realistically capture the ground realities, which reflects in the superficiality of the recommendations. To effectively understand the local economy, more IMF economists could be either located in or closer to the countries they advise. ........
How RBI Governor Raghuram Rajan has quietly asserted his autonomy
........Expectations are high that Rajan will bridge the chasm between North Block, the seat of the finance ministry in New Delhi, and Mint Road, which houses the RBI in Mumbai. Rajan dismisses these chasm theories. He says the fact that Subbarao disagreed with his political masters shows the autonomy the central bank enjoys. Does that mean the RBI never listens to the finance ministry? "Of course not. You listen and accommodate [the government's views] where necessary. Where you think you are on a different path, you try and distance yourself or you try and convince the other," he says........
Is the economy ready for a turnaround?
......RBI's twin moves of increasing the LAF repo rate by 25 basis points and decreasing the MSF rate by an equal amount was widely expected, after the Macroeconomic Review put out by the RBI a day before, said the Federation of Indian Export Organisations (FIEO). Industry body CII welcomed the 25 bps reduction in MSF rate as it would help banks to reduce short term interest rates and enhance their lending operations during the busy season especially at a time when there is a significant reduction in the flow of funds to productive sectors of the economy. However, the commensurate rise in repo rate has come as a disappointment to industry especially..........
What if Dr Subbarao wakes up from sleep post-RBI retirement?
Let us for a moment assume (can’t help not assuming given am an economics student), Dr Subbarao just slept post his RBI retirement. The doctors advised him to make up for many lost hours of sleep as RBI head. And let’s further assume he wakes up due to noise of crackers in his neighborhood. On waking up he immediately tunes to the Indian economy.........
The men we could bank on
...........As a director of the RBI’s central board Purshotamdas was a philosopher and guide of the bank from the start, and his advice was heeded by all governors. One of his most important contributions concerns his role in canvassing along with BM Birla, C D Deshmukh’s elevation for the top job at the RBI. Deshmukh became the first Indian governor of the RBI after Taylor’s demise, a promotion he owed both to Purshotamdas and the impartial attitude the then Secretary of State, LS Amery, displayed...............
Salaam to Salim's HR vision
Shri
Salim Gangadharan, Regional Director, Reserve Bank of India, Kerala retired from the Bank's service as at the c.o.b. on 31st October 2013, bringing to end an illustrious career of over 36 years. I had
the fortune of being his Private Secretary in FED during 2008 - 2011 till he took over as Regional Director, Kolkata. Salim Sir, a thorough gentleman is
bestowed with both intellect and compassion in abundant measures. He used to be very
approachable, down to earth and helpful in nature. It was a great learning
experience working with him. In fact, the guidance and motivation given to me
from time to time made me more confident and helped me to excel in my work. His
radiant ever smiling face was infectious which made me as well as the other
staff at ease during our interaction with him. For him 'Reserve Bank' is not
the top management or the various cadres but all the people –‘RBItes’ who made
RBI. “Human resource is the greatest asset of the organization” he used to
say and left no stone unturned in optimally utilising these resources for the
benefit of the organisation. He believed in sincerity, honesty and hard work
and he himself has set an example with his passion for work. As his innings with RBI has come to an
end, I wish him happy, peaceful and a healthy retired life ahead.
- Beena Nair, PS, DEBC
Pensioners Meet at CAB Pune
.......While welcoming the retirees O-in-C Shri Panigrahi mentioned that such meetings are opportunity to the administration of the College to interact with the senior retired colleagues and to invitee suggestions from them for improving the customers’ service. A lecture cum presentation from Dr. H.S.Deshmukh a renowned Uro-surgeon was also arranged .........
Read - ReTyred Express
Read - ReTyred Express
Short term problems are easier to solve - Letter to Governor by P.R.R.Nayar
....That age is one of the decisive determinants for
monetary relief – need for financial security increasing with each passing day
– is clear from the Government’s benign treatment of its “very senior" pensioners. A similar approach is both logical and
possible in the RBI too even as things stand..........
SCORING WITH CRICKET
What
do bankers turn to if they have to make a succinct point? Cricket. RBI
Governor Raghuram Rajan said the diverse analyst assessments of the
Indian economy are akin to the oft-shifting stance of the fans towards
the cricket team. Indian cricket fans are manic-depressive, he said in
Boston. They elevate players to god-like status when the team performs
well, ignoring weaknesses; but when it loses... every weakness is
dissected. Last week, Bank of Baroda chairperson SS Mundra, commenting
on its Q2 performance, said the bank had tried to play with a straight
bat on a bouncy wicket, as he tried to explain the difficult market
conditions.
ET
ET
Wrong signals
My View on "Top 30 NPAs form one-third of total bad loans":
The following issues need study in a wider context:
i) To the FM’s embarassment, October review revealed that one-third of all NPAs of PSBs were contributed by top 30 NPA accounts in each bank. There is still no indication that any action is under way, beyond 'monitoring'.
ii) While much ado is there about base rates, deregulation of savings bank interest rates did not add to the interest income of real SB account holders.
iii) The Net Interest Margins enjoyed by banks in India are among the highest in the world.
iv) The theory that ‘interest cost is not the major ingredient in project cost’ is interpreted to mean that small borrowers can afford to pay higher rates of interest.
v) Big depositors get preferential rates of interest and big borrowers get attractive terms for borrowing including special attention when their loans become NPAs.
vi) The impact of changes in base rates on ground level interest rates(both deposit and credit) administered by banks during the last 3 years needs a closer examination.
vii) The finance ministry’s recent linking of interest rates on festival season consumption loans to release of additional share capital to PSBs (Secretary Rajiv Takru made an open statement on the issue during 3rd week of October) has sent wrong signals to stakeholders in the banking sector.
- M G Warrier, Mumbai
FAIR-WEATHER FRIENDS
When
Duvvuri Subbarao described foreign banks as “fair-weather friends”, it
was not clear what was the trigger. Nearly two years later, his
successor Raghuram Rajan has provided the answer. During the peak of the
credit crisis, the CEO of a foreign bank from New York called up its
India head to transfer all funds to headquarters. Thankfully, when the
local head consulted the RBI, he was told not to do so. They may just
remain fair-weather friends.
ET
ET
Countdown begins for new bank licenses
........ However, we are to recall that, the Raghuram Rajan Committee, in 2008 pointed out that "the Indian banking sector is fragmented and there are too many small uncompetitive players in the system". This thought will take us to look at the prospect of RBI giving "conditional" licenses in 2014 to some of the applicants; in fact, we feel that this may be done in a phased manner! We do not know what the applicants have stated in their "Mission Statement"! It is possible that there may be some who may have proposed, (or indicated) their plans to take over or buy out some of the smaller banks in existence; or even have had 'secret' talks for mergers! Who knows, there may be someone, who wants to buy out the several cooperative banks in the country, who are scattered all over the place!.........
Banks set up 24x7 self-service branches
............Customers can do real-time cash deposits, withdraw money, deposit cheques and get instant receipts, transfer funds, open fixed deposits and generate bank statements at these branches. These also offer account-related information through internet banking and video conference............
Banking reforms
......Other weak sectors are non-banking financial companies and co-operative banks. Rajan will need strong political support to bring about the reforms that he wants to. Alongside, we require strong commercial banks to compete with multinational banks for which the amalgamation of PSBs is necessary......
Indian Banks Better than Foreign Peers on Basel
............Though
RBI is yet to provide any guidelines for liquidity risk management, the
guidelines as per the Basel document require banks to maintain greater
liquidity and improve their ability to withstand liquidity stress. We believe
that Indian banks are positioned fairly well to adapt to the new
liquidity requirements, when they become applicable, given that the
banks maintain an aggregate CRR and SLR level of around 30% of their
deposit base..........
Read - ET
RBI and FII debt
The
RBI top brass has been quite curious about why FIIs are still not
buying Indian government debt despite yield difference. Some of those
who met RBI in pre-policy meetings said the answer lies in the
governor's CPI leaning. If CPI is going to be the yardstick for interest
rates, then the central bank may not be done with rate hikes as yet.
Investors would rather wait than invest knowing capital loss is for
sure.
ET
ET
Experts doubt CPI-based Inflation Indexed National Savings Certificates success amid surging prices
.........“RBI Governor Raghuram Rajan has mentioned the need for a product that offers a real rate of return several times. He believes that such a product will divert investments from gold as a medium of saving. If IINSCs don’t succeed, there will be others that will follow suit,”...........
Every anna counts
......One day, my uncle proudly displayed his ‘anna’ collection to his father’s friend. But when the friend broke the news that all those coins were worthless, my uncle was shattered; he began crying piteously. All the money he had saved by virtually starving became junk. When I see images on television of wailing people who have lost money at the hands of unscrupulous operators, I am reminded of my broken-hearted uncle, and of the need to exercise care with money..........
Are cryptocurrencies the way of the future?
.....India is a potential hotspot for growth of cryptocurrencies and the community. It seems the cryptocurrencies user community in India has quite a strong base, exceeding 50K in number. But the regulatory body such as RBI seems far from regulating or accepting it. However, this has given an opportunity for the cryptocurrency community in India to expand, develop cryptocurrencies-related businesses in the space, and educate people on the opportunities for economic growth associated with cryptocurrencies.......
NGO demands review of SKDRDP
.........Mr. Nayak said the SKDRDP received a sum of Rs. 2,600 crore at an interest rate of 8.5 per cent from NABARD (National Bank for Agricultural and Rural Development) and other banks while lending the same to self-help groups at a higher rate of 16 per cent. Money charged in excess of 12 per cent interest charged by nationalised banks should be returned the beneficiaries, he said. Dharmadhikari of Sri Kshetra Dharmasthala Veerendra Heggade recently defended the 16 per cent interest. Mr. Heggade said the SKDRDP has been permitted by the Reserve Bank of India to charge interest at 24 per cent........
How pilgrims, and banks, progressed
.........What the Knights Templar got right was creating a monetary authority that people could trust. Essentially, this is what a central bank in a country, like the Reserve Bank of India (RBI), also does. But these days, besides just backing a currency and acting as the government’s official banker, central banks also control the total amount of money that is in circulation in a country. One such target is controlling inflation. One way to easily increase money supply is by just printing new currency notes. But printing notes at will is a risky business and too much too soon can suddenly spike the inflation rate. So central banks choose to control the interest rate instead..........
Taxability of expatriate benefits: Some key issues
...........The ruling upheld that the tax paid by the employer on behalf of the employee constitutes a non-monetary perquisite in the hands of the employee, making it eligible for exemption under Section 10(10CC) of Indian Income Tax Act. As a result, the employer can pay tax on behalf of the employee on non-monetary perquisites with a single gross up instead of multiple gross up. The court further clarified that tax paid by the employer is also excluded from the definition of salary for the purpose of valuing accommodation benefit provided by the employer to the employee...........
Using Mobile Banking for New Microfinance Business Models
........BanKO is starting to blur the lines between microfinance and mobile banking. It is still very early days in our own business and for similar business models in general. But we have already begun to see good results from our work and we have learned a lot along the way. Exciting innovation can happen when elements of these two worlds begin to merge.
Educated persons found lacking financial literacy, often!
............While there are various other aspects of financial literacy, it is important to equip oneself with bare minimum skills and knowledge necessary to become financially literate. Many investors end up losing their hard-earned wealth in the absence of financial literacy, so it is better that one equips oneself with financial literacy.
Commercial paper issuances set to get boost as short-term rates ease
Issuances of Commercial Papers (CP) are set to get a get a boost as the Reserve Bank of India (RBI) has eased the system liquidity further due to which short-term rates are trading between the repo rate and the Marginal Standing Facility (MSF) rate. As per estimates of issue arrangers, CP coupon rates dropped by about 20 basis points since RBI's second quarter review of monetary policy on October 29.........
REAL ESTATE SECTOR AGHAST OVER RBI’S HIKE IN REPO RATE
..........." Considering the overall economic situation and challenges being faced by the industry, we were looking forward to the reduction in repo rates, to ease the burden on the buyers and developers. The continuation of the policy to increase in repo rates in the monetary policy, to control the inflation, will further increase the problems of the developers who are grappling with high interest rates. We were hopeful that besides easing the liquidity, RBI will start addressing the industry concerns for growth and give the necessary impetus.” ...
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