RBI employees demand national consensus on DMO

Kolkata, May 17 (PTI) The Reserve Bank Employees Association has demanded a national consensus on the proposal of setting up a Debt Management Office. "We strongly urge for a national discussion and consensus before taking a hasty decision by the Finance Ministry for DMO," Association''s General secretary Samir Ghosh today said. He said the RBI Governor had also opposed the plan to set up the independent debt management office. Ghosh said if the debt management is taken out of RBI, then weak states would find difficulty in raising resources.

JK Govt rules out ''compromise'' on state''s fiscal autonomy

Jammu, Mar 15 (PTI) Dispelling assertions that state''s fiscal autonomy has been compromised by signing Ways and Means Advance (WMA) agreement with RBI, the J&K government today said due to non-payment, the overdraft (OD) of Rs 2300 crore from J&K Bank had become a structured deficit.  "We dispel assertions made by various sections that state''s fiscal autonomy has been compromised by signing WMA agreement with RBI," Minister for Finance Abdul Rahim Rather said while
winding up discussion on motion of thanks on J&K budget 2011-12 in Legislative ouncil here today. Due to non-payment, the OD of Rs 2300 crore from Jammu & Kashmir Bank had become a structured deficit and government was left without any option to arrange over draft in case of emergencies, Rather said. Rather said OD is temporary arrangement to overcome mismatch between receipts and expenditures "I also dispel apprehensions that the government has severed its ties with J&K Bank. Bank would continue to be the Banker of the state government", he said.  In fact, the agreement with RBI is a bold step to get rid of chronic outstanding of Rs 2300 crores overdraft from J&K and to make the J&K a clean state to begin with, he said. He said the state government''s WMA arrangement with the RBI is in the interest of the state government, J&K Bank and people of J&K.

British Trade Minister to visit India

London, Mar 12 (PTI) To strenghthen trade and investment relationship between both the countries, Britain''s Minister of State for Trade and Investment Lord Stephen Green will be visiting India on a five-day tour from March 14.The Minister will call on the Governor of the Reserve Bank of India D.Subbarao and meet a range of business leaders such as Mahindra Group chief Anand Mahindra, Tata group chairman Ratan Tata and ICICI Bank chief executive Chanda Kochhar.

RBI sets up panel to examine regulation of NBFC sector

Mumbai, Mar 7 (PTI) The Reserve Bank today announced setting up of a working group to examine issues pertaining to regulation of the NBFCs (Non-banking Finance Companies) sector, including their governance and supervision.  The Group to be headed by former Deputy Governor Usha Thorat, who is presently Director of Centre for Advanced Financial Research and Learning (CAFRAL), will focus on the definition and classification of NBFCs, addressing regulatory gaps and regulatory arbitrage.  It has also been asked to focus on maintaining standards of governance in the sector and appropriate approach to NBFC supervision, the RBI said in a statement.  "The NBFC sector in India has undergone a significant transformation in the past few years and has come to be recognised as a systemically important element of the financial system," it said.  The recent global financial crisis also highlighted the regulatory imperatives concerning the non-banking financial sector and the risks arising from regulatory gaps, arbitrage and systemic inter-connectedness.  "A need was, therefore, felt to reflect on the broad principles that underpin the regulatory architecture for NBFCs, keeping in view the economic role and heterogeneity of this sector and the recent international experience," the apex bank said.  The scope of examination by the Group will, however, be within the current legislative framework, it added.  Other members of the Group include Sanjay Labroo, Director, Central Board, Reserve Bank of India, Bharat Doshi, Executive Director, Mahindra & Mahindra and Pratip Kar, Director, Globsyn Business School.  Uma Subramaniam, Chief General Manager-in-Charge, Department of Non-Banking Supervision will be the Member-Secretary.

Loans under JNNSM at 5% not violation of base rate norms: RBI

The Reserve Bank today said banks financing power generation equipment under the Jawaharlal Nehru National Solar Mission (JNNSM) at a concessional 5 per cent interest rate is not violation of norms. This financing below the base rate would not be considered violation of guidelines, RBI said in  a statement. "We advise that such lending at interest rates not exceeding five per cent per annum where refinance of Government of India is available, would not be considered to be a violation of our Base Rate guidelines," it said. In the new lending rate mechanism, no loans except few exceptions can be offered below the base rate of a bank. Base rates of most of the banks are 9 per cent. Other category of loans exempt from the guideline include loans to banks'' own employees and loans to banks'' depositors against their own deposits. The Ministry of New and Renewable Energy (MNRE) has formulated a scheme on financing of off-grid and decentralised solar (Photovoltaic and Thermal) applications as part of the JNNSM, it said. Under the scheme, banks may extend subsidised loans to entrepreneurs at interest rates not exceeding five per cent where refinance of two per cent from Government of India is available, it added.

Don't malign the MFIs

The controversy over the role of microfinance institutions (MFIs) refuses to die down. While one side believes MFIs are ripping off customers and adding to indebtedness of households, which has resulted in higher suicide levels, the other side presents equally compelling arguments. It points to how MFIs are saving rural folk from moneylenders, how their interest rates are lower than moneylenders, how they're more convenient for borrowers, and so on. While the political class, especially in Andhra Pradesh where MFIs have their largest business, have come down against MFIs, even the Malegam Committee of RBI has seen some merit in the arguments—yet it has put many curbs on how MFIs are to function, on the interest rates they can charge, and so on. While the importance of microfinance in consumption-smoothening should not be underestimated, it has a larger impact when the loans are given for productive assets. Evidence from Bangladesh and Indonesia indicates that high-quality, dependable, receptive and long-term oriented MFIs for the poor can go a long way in improving access to finance (Morduch and Rutherford, 2003). Recent studies have also pointed to the crucial role that can be played by MFIs by providing composite services; given the wide array of financial transactions that typify the financial life of the poor.      

RBI to open sub-offices in NE capitals – Surekha Marandi, Regional Director

Reserve Bank of India will open sub-offices in all the capital states of North-East, starting with Agartala.  RBI Regional Director Surekha Marandi told PTI today the process of setting up the first sub-office in Tripura capital of Agartala is on. "We are waiting for Tripura government''s offer. As soon as the state government allots a building, we will start the process," she said. The RBI official said the sub-office at Agartala should be ready by the end of this year. Sub-offices will be set up in other capitals as well in a phased manner, Marandi said, adding that RBI was trying to increase the outreach of banks in the region.