State to have at least 40 new UCBs after changed norms

The Malegam Committee's report published by the Reserve Bank of India on Monday, seems to have opened doors for Gujarat's cooperative credit societies, which had been waiting for long to get a status of cooperative banks. Experts anticipate about 40-50 cooperative credit societies from Gujarat may opt for becoming an urban cooperative bank (UCB) after the newly issued norms recommended by the Committee. The recommendations of the committee, appointed by the RBI on licensing of new UCBs under the chairmanship of Y H Malegam said, 'the existing well managed cooperative credit societies, which would meet financial criteria like profits, capital adequacy and NPAs' proportion should be given priority for granting licenses as UCBs mainly in the unbanked or inadequately banked districts of the country. Experts from the cooperative banking circles in Gujarat informed that the state's credit societies are likely to get a boost from this recommendation. "This will restore confidence in the cooperative banking sector. Of the 5200 credit cooperative societies in Gujarat, over 100 are capable to meet entry point norms set up by the panel for becoming a UCB. But at least 40-50 credit societies are likely to become UCBs after the enforcement of the recommendations," said Ghanshyambhai Amin, chairman, Cooperative Credit Societies' Federation. He further added, "The deposits with credit societies are not insured, while those with UCBs are insured up to Rs 1 lakh. So more credit societies would try to get a status of UCB to improve their trust-worthiness and bring more customers." Gujarat has about 5,200 cooperative credit societies with a total estimated advances of over Rs 700 crore. Gujarat has witnessed one of the worst cooperative banking crisis in the past. Industry insiders maintained that it was mainly after the serious scams unearthed from Madhavpura Mercantile Co-operative Bank (MMCB) that the confidence on the UCBs started shaking. Industry estimates suggest that about ten years back the state had over 350 UCBs operating in different parts of the state, But over 100 UCBs downed their shutters after the MMCB scam. Currently, the state has 249 UCBs, which recorded a total business in excess to Rs 31,000 crore during financial year 2010. The apex body of state's UCBs. Gujarat Urban Co-operative Banks Federation (GUCBF) has welcomed the recommendations. "Some of the districts like the Dangs, Valsad and Surendranagar in Gujarat are either don't have a cooperative society or have inadequate infrastructure of UCBs. Even in the Ahmedabad district, some talukas are still unbanked. The new norms for UCBs would definitely help for the financial inclusion and strengthen cooperative banking sector," said Jyotindra Mehta, chairman, GUCBF. Uttar Pradesh, Bihar and Uttaranchal are some of the state which may see a large number of credit societies becoming UCBs. "UP has only 70 UCBs, while Uttaranchal has five. Even Bihar has poor UCB penetration. The new norms would help increase number of UCBs in these states," said Subhash Gupta, chief executive, National Federation of Urban Cooperative Banks and Credit Societies Ltd (NAFCUB). He further said that Maharashtra, which has a cooperative societies act similar to the UCBs, would see a large number of credit societies becoming UCBs in due course of time.

BS

RBI panel for turning well-run credit societies into UCBs

A panel set up by the Reserve Bank of India has proposed that the existing well managed co-operative credit societies meeting certain financial criteria like profits, capital adequacy and NPA proportion should be given priority for granting licences as urban co-operative banks (UCBs) particularly in unbanked or inadequately banked centres. Acknowledging the importance of urban co-operative banks for financial inclusion, the RBI panel suggested that new entrants should be encouraged to open banks and branches in unbanked or inadequately banked area. UCBs play a useful role and there is need for a greater presence of UCBs in unbanked districts and in centres having population less than 5 lakh, the RBI panel headed by YH Malegam said in the report.  “It is necessary to encourage new entrants to open banks and branches in states and districts which are unbanked or inadequately banked,” it said. It is equally necessary to discourage new entrants from opening branches in districts and population centres which are already adequately banked, it said. As far as capital requirement is concerned, the panel suggested minimum paid up capital of from Rs 50 lakh to Rs 5 crore depending on the area of operation.

IE

Dwindling faith in RBI

This refers to the edit “Tougher choices for RBI” (September 13). The statement “...RBI is not the only agency that is tasked with controlling inflation…” has not come a day too soon but what can be done when the Reserve Bank of India itself does not think so? Ever since inflation has reared its ugly head the Indian economic environment has only worsened, despite frequent interventions by RBI through several policy rate hikes. With all the wisdom at its command, RBI could have at least counselled the mandarins at the finance ministry on the need for fiscal discipline. Since it is not evident that RBI did so, even monetarists who firmly believed in the Bank’s strength to control inflation have been disappointed. They, too, have joined the group that believes that inflation is a non-monetary phenomenon. Supply bottlenecks and fiscal indiscipline (despite the one-time bonanza the Centre got through telecom licence auctions) are at the root of inflation in India. There is a general consensus among all experts (monetary and non-monetary) on this point, but who will bell the cat?

K V Rao, Bangalore (BS)

CISF Man Killed in Road Mishap

A CISF jawan, accompanying currency-laden trucks bound for the RBI office in Chennai, died in a road mishap in the wee hours of Tuesday. The cash from Mysore was being transported in two container lorries to the RBI in Chennai. CISF personnel accompanied the lorries in two cars. When the crew reached near Vellore at around 2.45 am, a car that was behind the lorries lost track of the vehicles due to heavy traffic. When the car reached near Vellore new bus stand, it collided with an unidentified lorry. CISF jawan Amaladoss (50) died on the spot.

IBN Live

Monitor loans to SMEs, states told

At time when growth in loans is showing signs of moderating, the Union government has asked states to closely track the flow of bank credit to micro, small and medium enterprises (MSMEs). In a communication to banks and state governments in the western region, the finance ministry said governments should closely monitor the progress of credit flow to the MSME sector. Finance minister Pranab Mukherjee would review the state-wise flow of bank credit to agriculture, housing and the MSME sector with chief ministers of western states, including Maharashtra and Gujarat, in Mumbai on Saturday. According to Reserve Bank of India (RBI) data, bank credit to the MSME sector rose 33.7 per cent, touching Rs 484,473 crore at the end of March. At Rs 362,291 crore, it had grown 41.4 per cent in 2009-10. The ministry said states should be actively involved in securing more MSME loans under the Credit Guarantee Fund Trust for Micro and Small Enterprises' credit guarantee scheme. They, together with banks, should also devise schemes for cluster/location specific industry groups to ensure greater credit flow, it said. 

BS

Capex fall seen as pvt sector ceases investing

Needless to mention that the RBI has been tightening domestic liquidity since February 2010, resulting in rising loan rates. While a slowdown in spending was to be expected, a decline in investment spends is so far not visible in related indicators.

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REC opposes NBFC norms

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Rural Electrification Corporation (REC), a government-controlled non-banking finance company (NBFC) for the power sector, has opposed the central bank’s new discussion paper on draft guidelines for NBFCs. Seeking that the status quo on NBFC norms be maintained, the lender has asked the ministry of power to intervene on its behalf on the crucial issues of higher capital adequacy ratio for Tier-I capital and on tightening the exposure limit......

Why another rate hike is needed

We believe that Subbarao should go ahead with one more rate hike of 25 basis points this week, and then watch three parameters before making his next move: whether the European sovereign debt crisis worsens, whether a global recession takes pressure off commodity prices and whether corporate margins shrink in the current fiscal year. The domestic growth slowdown right now is still a mild one......

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Another rate hike is required

... The pressure is already building up on RBI to hold its fire on Friday. Finance minister Pranab Mukherjee, his chief economic adviser Kaushik Basu and Planning Commission deputy chairman Montek Singh Ahluwalia have all separately indicated that Subbarao should not increase the policy rate on Friday.....

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High cost of holding forex reserves

...The broad conclusion (reflected even in RBI's reports) suggests that India has accumulated more excess reserves than necessary to avoid any unforeseen financial calamity in the near future. The opportunity cost of reserves holding is high for the Indian central bank, as returns from the foreign currency asset (FCA) deposits are too low, whereas the domestic interest rate is comparatively very high. This poses a couple of relevant questions: what is the adequate level of international reserves for India, and what is the opportunity cost of excess reserves?.....

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FM to review banks’ capacity to meet region-specific needs

Finance Minister Pranab Mukherjee, on September 17, will take stock of the performance of select banks and this exercise will not just be limited to financial indicators.  Re-instituting a practice he initiated during his first stint as finance minister some 25 years ago, Mukherjee will also review the banks’ capacity towards meeting region-specific needs. In the first out of a series of zone-wise meetings to be held this fiscal, the ministry has invited only the banks based in the western zone. This meeting will be attended by the chief ministers and finance ministers of six states and the administrators of two union territories located in the western part of the country.  “The idea is to assess whether region-specific credit needs are being met by the banks in these states and we have invited the states to come up with what they specifically need from the banking sector. The FM had taken a review of the overall banking sector about two months ago but this time round the agenda will be focused more on state-wise issues,” a senior financial ministry official told The Indian Express.

IE

Best Banks gear up to put best foot forward

If there’s one trophy that banks in India would give anything for, it’s an FE Best Banks Award. Over the years, FE Best Banks Awards have recognised the achievements of banks, not simply by the profits they have turned in.  Speaking about the awards, Shikha Sharma, CEO & MD, Axis Bank, whose bank has frequently been on the podium, said: “I would like to congratulate FE...for the ‘Best Banks Awards’ which has grown in reputation and stature.” In a year when new banks are around the corner waiting for an RBI nod, the FE Best Banks awards evening creates even more of a buzz among the informed. It also gives an indication of which ones will be the toughest in their pack that the new banks will have to watch out for. Banks are recognised for the quality of their balance sheets, how fast they have grown, how efficient they have been with their funds and how robust their business model is.  

IE

Rally in sight if RBI takes a breather: PN Vijay

Watch the video.......... 

Real truths about interest rates

...The natural rate of interest is an important benchmark for monetary policy. It helps the central bank to understand the impact of monetary policy on economic activity. For example, if the actual real rate is equal to the natural rate of interest, the monetary policy is more or less neutral. An upward deviation of the real rate of interest from the natural rate tends to have contractionary effect on economic activity and will have downward pressure on inflation. ...

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No black and white answers in economics: Kaushik Basu

NEW DELHI: Terming near double-digit inflation as "uncomfortable", Chief Economic Adviser Kaushik Basu today said there is no black and white answer in economics and RBI will have to balance containing price rise and promoting growth at its review of credit policy on Friday. "There is no black and white answer... RBI will have to balance out these two -- controlling inflation and not dampening growth too much," Base who is Chief Economic Adviser to the finance ministry said. He said inflation is likely to remain elevated till end of the calender year and only start moderating after December.  "I do expect December inflation to be a fairly reasonable decline. But till then it will remain choppy," he said. His comments came after inflation climbed to 13-month high of 9.78 per cent in August, from 9.22 per cent in July, on the back of expensive food and manufactured items.  The Reserve Bank of India (RBI) has already hiked its key-policy rates 11 times since March, 2010 to curb demand side inflation. It is scheduled to announce its mid-quarterly review of credit policy on September 16. Department of Economic Affairs Secretary R Gopalan said the RBI's monetary tightening had had only a limited success. The central bank has to "change from being accommodative to one of aggressively combating inflation", he added.  "The benchmark short-term policy rate was raised in quick succession from March, 2010. While this tightening has been able to anchor inflationary expectation up to a point it has had limited success in lowering inflation rates to acceptable levels," Gopalan said.  This is also the ninth consecutive month when inflation has remained above the 9 per cent mark.  While the sustained inflation is likely to put pressure on the central bank to continue with its tight monetary policy, there is concern on the growth front.  Industrial production fell to a 21-month low of 3.3 per cent in July. Besides, GDP growth also moderated to 7.7 per cent in April-June period, the lowest in six quarters.  India Inc and experts have blamed the high interest rates for increasing the cost of borrowing and said this has put pressure on fresh investments and hindered growth.  Most economists, however, said that as inflation remain at an elevated level the central bank is likely to go for another rate hike at its mid-quarterly review of credit policy on September 16. "No doubt the RBI is in a dilemma but inflation control remain its prime agenda and so we expect it to go for another hike of 25 basis points on September 16," Crisil Chief Economist D K Joshi said.

ET

RBI has had limited success in lowering inflation

The finance ministry today said the Reserve Bank's monetary tightening has had only a limited success in lowering inflation, which is hovering near the doubledigit mark by moving up to 13- month high of 9.78 % in August. " In India, the policy stance has had to change from being accommodative to one of aggressively combating inflation. The benchmark short- term policy rate was raised in quick succession from March, 2010," Department of Economic Affairs Secretary R Gopalan said." While this tightening has been able to anchor inflationary expectation up to a point, it has had limited success in lowering inflation rates to acceptable levels," he added. RBI has raised interest rates 11 times in the last 18 months to tame inflation. In July, it raised the shortterm lending ( repo) rate by 50 basis points to 8 % and the short- term borrowing ( reverse repo) rate by a same margin to 7 % to anchor inflationary expectations. Subsequently, the interest rate under the Marginal Standing Facility, an additional borrowing window, has gone up to 9 % from the earlier level of 8.5 %. There is no doubt that there are supply side constraints within the Indian economy, Gopalan said, adding that the issue of development -- particularly in the area of infrastructure and in poverty alleviation, health and education -- remain critical challenges. 

FPJ

Major Misread: Kaushik Basu, India is not Brazil

...While Basu does acknowledge that other fiscal and monetary measures must also be used, he has to know that fiscal measures from the Indian government cannot be depended on. At most, the government is likely to cut down capital spending (spending on creating viable economic assets) while keeping up revenue spending (spending on salaries and interest payments). That certainly won’t help. Trust the government to always throw the onus of growth on the RBI, while trying to escape from its own responsibility.....

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Centre, RBI to tackle rising inflation: Pranab

...Just a couple of days ahead of the Reserve Bank's monetary policy, Finance Minister Pranab Mukherjee on Wednesday said the government and the RBI together will be able to tackle soaring inflation, which he attributed to global price pressures. “It (inflation) is perilously close to double digit...RBI is also watching the situation like the government and collectively it would be possible for us to tackle the problem,” Mr. Mukherjee told reporters....

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With 9.78% inflation, RBI is boxed in; over to Pranab

...This is why Subbarao should tell the finance ministry boys to take a walk. In recent days, the ministry has been mounting pressure on Subbarao to either pause the rate hikes or even cut them. The ministry’s Chief Economic Advisor, Kaushik Basu – who has repeatedly got his inflation numbers wrong in the past – asked Subbarao to “think out of the box”......

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Inflation ‘perilously’ close to double digits, puts RBI in dilemma

Putting the Reserve Bank of India in a dilemma and adding to the worries of the government caught between a dampening growth rate and spiralling prices, headline inflation has soared to 9.78 per cent in August as against 9.22 per cent during the last month. The RBI which is scheduled to announce its mid-quarter monetary policy review on September 16, is caught in a bind as to whether it should raise interest rates further — that has hurt the growth rate — or adopt a wait-and-watch policy for tackling inflation. In the last 18 months, the RBI has raised rates 11 times. Analysts who were expecting a pause in rate hikes after the index for industrial production (IIP) dipped to 3.3 per cent in July from 9.9 per cent previously are now talking about a 25 basis points hike in the repo rate on Friday. With rising prices of food, fuel and manufactured items fuelling the headline inflation, the wholesale price index (WPI) for the month of August is at a 13-month high since July 2010, when it stood at 9.97 per cent. A worried government said that the headline inflation is “perilously close to double digit”. “The RBI is also watching the situation like the government, and collectively it would be possible for us to tackle the problem,” Finance Minister Pranab Mukherjee said. While Chief Economic Advisor in the finance ministry Kaushik Basu cautioned that “there is no black and white answer... and the RBI will have to balance between controlling inflation and dampening growth.”

IE

August inflation at 13-month high of 9.78 per cent

Inflation soared to its highest level in more than a year at 9.78 per cent. The Reserve Bank of India (RBI) is now grappling with the twin issues of controlling inflation as well as reviving falling industrial growth.  However, RBI’s balancing act between inflation and growth received a further setback this week, with industrial growth in July slipping to 3.3 per cent, a 21-month low.  Bankers expect the RBI to raise interest rates again by 25 basis points in its monetary policy review on Friday.  The Federation of Indian Chambers of Commerce and Industry (FICCI) said that the latest inflation data released by the government hides more than it reveals. Inflation has begun to taper, it said and called for the RBI to pause rate hikes.  Associated Chambers of Commerce and Industry (ASSOCHAM) said that any rate hike by RBI at this juncture will impact growth. 

The Tribune

IHC asks RBI to stop World Cup payment to FIH

...MUMBAI: Alleging breach of contract and an intended violation of the Foreign Exchange Act, the Indian Hockey Confederation (IHC) has requested Reserve Bank of India to stop payment of $500,000 by the 2010 World Hockey Cup organisers to the International Hockey Federation (FIH).IHC, claiming they had signed the original MOU for the World Cup to be held as a joint venture with FIH on November 6, 2007 before the mega event was organised in New Delhi by the Hero Honda World Cup Society, said that releasing the amount would also amount to violation of the provisions of the Foreign Exchange Act 1973......

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RBI not to intervene in forex market: Dy Governor Sinha

New Delhi: Reserve Bank today said that it will not intervene in the foreign exchange market unless the situation is grave, though the Rupee touched 16-month low of 47.59 against the US dollar.  "It is clear policy of RBI that we address volatility and not the level unless it is grave and adverse situation," RBI Deputy Governor Anand Sinha told reporters when asked if the RBI would intervene to check volatility in the currency market. Rupee closed at 47.59/60 to a US dollar today, lowest since May, 2010. As the stock markets fell around the world and capital flows reversed from the emerging markets, including India, rupee lost by more than two per cent against $in the last one week. Agreeing with Sinha, Planning Commission Deputy Chairman Montek Singh Ahluwalia too said that the central bank should intervene in forex market only in extreme circumstances. "The policy that we have followed for long time (is) that rupee should move according to market conditions. We allow Rupee to fluctuate depending on market situation. RBI would only intervene when there is excessive instability," he said. Meanwhile, replying to a query related with entry of corporates in the banking sector, Sinha said the business houses have shown that they have the managerial capacity.  "at the same time we are acutely aware of self-dealing and therefore the draft guideline talks in terms of stringent eligibility criteria and a host of surrounding control to ensure that self-dealing is not allowed or it is checked in time," he said. The RBI recently released draft guidelines for entry of new private banks in the country. However, central bank would issue the final guidelines for granting bank licences to corporates only after Parliament approves the Banking Laws (Amendment) Bill, 2011.

FE

Rural customers must understand products: RBI

To attract the rural masses and meet financial inclusion targets, banks are offering no-frills accounts with in-built features like remittance, micro-credit and micro-insurance. However, the regulator is concerned about the risks that banks may be exposed to, in case customers do not understand the product. Once a no-frills account is opened, customers can receive payments from government schemes like MNREGA directly, make or receive remittances and borrow a sum from the bank without any balance in the account. They are also provided life and general insurance covers. “There should not be a double negative. This means even if I don't want a product, I'm saddled with it. For instance, I need to tell I don't need an insurance policy or I automatically get an insurance policy,” said Deepali Pant Joshi, Chief General Manager, Reserve Bank of India (RBI). “This is what we are uncomfortable with. Because we are dealing with vulnerable and poor clientele, we don't want products to be pushed through to them,” she said, while addressing a seminar on financial inclusion in Mumbai on Tuesday. A senior official with a large Mumbai-based public sector bank said the bank provided an accident cover with the no-frills account. “The bank is taking the initiative and the premium is paid by the bank itself. Each no-frills customer is covered for Rs 50,000. In case there is a claim, the insurance company settles it on verification,” he said. Currently, apart from the zero-balance norm, there are no standard products mandated by the apex bank for financial inclusion. Banks are free to innovate, according to their business strategy. “The range of the products depends on the requirement of the particular area. These are simpler products, but they require financial literacy,” said another Mumbai-based public sector banker. Over the last two years, banks have embarked on the financial inclusion drive to cover under-banked and un-banked villages in India. No-frills, or zero balance, accounts are opened at doorsteps on the submission of basic know-your-customer norms. Banks have appointed business correspondents that enable them to reach out to areas which lack basic technology and infrastructure. On interoperability, Joshi said there was still time. Business correspondents cannot operate for two banks at the point of interaction. This means the agent cannot sell the products of two banks at the same time. “It (the business correspondent model) is a new model. Let it stabilise. Agents should be clear and there should be no confusion at the bottom of the pyramid. Going forward, we may look at it,” said Joshi. She also said banks needed to insure financial literacy while meeting their inclusion targets. “They (customers) must understand the products they are getting, and from the demand side, financial literacy becomes all the more important,” she said.

BS

The "missing" VITALINFO

Due to technical difficulties, VITALINFO could not be updated well before 7.30 a.m. yesterday, i.e. on September 13, 2011.  Thereafter also, only few posts could be uploaded.   I received many phone calls, mails enquiring about this.  I appreciate all of you for the interest shown in VITALINFO.  A "representataive" feedback ---------

Penny pinching: Coins' shortage puts RBI in a fix

NAGPUR: Government mints have been tight-fisted this year as far as supplying coins to the Reserve Bank of India (RBI) is concerned. For the first time in the recent past, mints run by the ministry of finance have supplied just around half of the quantum demanded by the apex bank this year. The RBI, through its various offices in the country, also acts as an agency for supplying coins and currency notes to the public. However, due to a short supply from the mints, RBI's regional offices, including the one at Nagpur, are rationing coin supply. This has left traders unhappy as they have been depending on the RBI counters for coins' supply on an almost daily basis. The unions too had taken up the issue with the management, saying that the rationing has led to inconvenience to the general public. Officials at RBI's central office in Mumbai said the supply has been substantially low. Although not divulging the exact figures on the mismatch between the indented quantity and actual supply, the official, citing the RBI's annual report, said that over 6,000 million pieces of coins are indented each year. However, RBI has got around half of the quantity sought in the current year. In the normal course, the difference is marginal.  The fall in supply is being attributed to reasons like lack of capacity coupled with the aging machinery at the mints which are situated Kolkata, Nashik, Mumbai, New Delhi and Hyderabad. An RBI spokesperson said that the coin distribution at the regional offices have been according to the supplies received from the mints. The RBI office at Nagpur, in the meantime, has limited the supply of coins to 100 pieces per person. This has left the traders as well as their agents complaining that they are not getting enough coins. Coin exchange also provides employment to several persons who earn a living by queuing up at the RBI counters to get loose change on behalf of the traders. In turn, they get around Rs 10-15 per 100 coins, earning around Rs 200 a day. Many of them are housewives. The new rule has cut down their earnings now. The union, on the other hand, has alleged that the RBI here has failed to manage the situation. The president of All India RBI Employees Association's local unit Bidyut Chakraborty said, "The management here is diverting the public to commercial banks from where they are being turned away too. If there is a shortage, the RBI's role becomes much more important as it should ensure that the supply is streamlined." A management representative said that if the RBI starts does not adopt the quota system, it may soon run out of the stock of coins.

TOI

Panel suggests support system for urban co-operative banks

Experts say organisation can insulate mainstream payments and settlement system

A Reserve Bank of India expert committee has recommended the establishment of a separate national umbrella organisation to provide payments and settlement services and other liquidity support, which are normally provided by a central bank, to member urban co-operative banks. Market experts say this move could be aimed at insulating the mainstream payments and settlement system from any fallout due to failure of urban co-operative banks (UCBs). The RBI's committee on licensing of new UCBs has suggested that the umbrella organisation be preferably in the form of a multi-state UCB with membership restricted to and mandatory for urban co-operative banks other than scheduled ones. “There is no need for an umbrella organisation for payments and settlement now as UCBs are becoming robust when it comes to financial strength,” said Mr Satish Marathe, General Secretary, Sahakar Bharati, an umbrella body for promoting co-operatives in various fields. Member urban co-operative banks should be required to maintain their cash reserve ratio (a portion of deposits) in the form deposits with the umbrella organisation. The organisation should invest its funds only in the form of balances with the RBI, deposits with commercial banks or in statutory liquidity ratio (SLR) securities such as government securities.  The committee, headed by Mr Y.H. Malegam, Director, Central Board, RBI, said, the umbrella organisation should offer repo (liquidity injection) and reverse repo (deployment of surplus liquidity) facilities to UCBs in the same manner as RBI offers to commercial banks and at the same rates of interest. In turn, the umbrella organisation should enjoy repos and reverse repo facilities with the apex bank.  Urban co-operative banks can avail of repos facilities only to the extent of their excess SLR holdings. Until the payments and settlements facilities are provided directly to UCBs, the proposed organisation will act as a gateway to provide these services for a fee to the banks. In turn, the organisation will be a member of the payments and settlement system.  Being an urban co-operative bank, the umbrella organisation would have a board of management and will be subject to the regulation, supervision and inspection of the RBI.

HBL

Tarapore berates banks for poor customer service

Noted economist and an ex-Deputy Governor of the Reserve Bank S S Tarapore today criticised the functioning of the country's mainstream banks when it comes to customer service. "It is unfortunate that despite all the efforts made by the government, the RBI, and the banks themselves, the quality of customer service is abominably poor. The perception of the common man is that the quality of banking service is dependent on who you are and who you know," Tarapore said. Addressing the fourth Financial inclusion & digital payment conference organised by the Internet & Mobile and Association of India here, Tarapore said, "incognito visits to bank branches have conclusively shown that the quality of services are sub-standard or even non-existent. "The recent Damodaran committee report on customer service has expressed concern about the rudeness of the bank staff in dealing with customers. One does not expect out-of-the-world quality of service, but it is incumbent on banks to provide quality service, at least equivalent to that provided by other service providers such as airlines, Railways and telecom companies," he said. Stating that banks cannot get away from the fact that the system has an attitudinal problem of hostility towards the common man, Tarapore said this is "all pervasive" in the banking hierarchy from top to bottom. For better customer service, he said, it is necessary to first motivate the top management and this would trickle down to the lower levels. The recent uproar when RBI put out a discussion paper on deregulation of savings bank deposit rates reflects the callous approach to customer service, he said.

IBN Live

Time for RBI to press pause?

All eyes are now on the Reserve Bank of India (RBI) as the mandarins of Mint Road get down to deciding on the next course of action on the monetary policy front on September 16. The jury is clearly out on whether the central bank will raise rates once again, after the aggressive 50 basis point (bps) hike in July, or whether it will finally press the pause button, choosing not to disrupt the growth momentum any more....

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State apex co-op bank unlikely to get elected board soon

...“The bank will have to get a valid license from the RBI and that may not happen even by March next year. There is no question of holding elections for a new board any time soon,” ....

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Saraswat co-op set to turn into private bank

Mumbai: Saraswat Cooperative Bank—the largest lender in the segment—plans to convert itself into a private bank and has sounded off the Reserve Bank of India (RBI) of its intentions. The move is driven by a need to grow its business as there are restrictions on cooperative entities growing their balance sheet.  The 93-year-old Saraswat is the largest and among the better-managed lenders of the 1,750 urban cooperative banks that are doing business in India. The bank has been paying dividends to its shareholders continuously since its inception.  According to sources, the bank has been told by RBI that it cannot continue to grow its balance sheet unfettered as a cooperative. Also, the cooperative structure places restrictions on the size of the loans that the bank can extend to each client even if it has the resources to provide very large loans. Commercial banks, however, face no such restriction and their growth is only restricted by the amount of capital they can raise. Cooperative banks can raise capital only by selling shares to customers. Also because of the cap on dividend their shares are not very attractive to investors as they do not provide the same upside as that of companies that are registered under the Companies Act. The bank’s MD SK Banerji and chairman Eknath Thakur could not be reached for comments. In many ways the bank already provides all the services of a big bank. For instance, the bank’s operations are out of a core banking platform and it is therefore in a position to offer anywhere anytime banking offered by private banks. It also offers Visa cards and internet banking services and has for a long time been offering forex services to its customers. Central banking sources however said that the bank may have to wait until the guidelines for new private banks are finalized before it can expect an approval.

TOI

Reforms: the unfinished agenda

... It is a comforting thought that Rangarajan, who is aptly described as the “philosopher king', would be guiding the reforms in this crucial phase of reaching the benefits of reform to those sections who are desperately in need of them and, having waited so long, are on the verge of losing their patience.......

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Inflation could edge out growth concerns at RBI review

...The latest industrial output reading may have been well below forecasts, but Wednesday's inflation data could well be the deciding factor on whether the RBI chooses to pause, or continue with its monetary tightening. ....

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Where interest rates are headed and why

It’s so tempting to believe that if the Reserve Bank of India’s Governor, D Subbarao, decided to call time on his cycle of raising interest rates on 16 September, everyone’s life would be so much better. At least that’s what a lot of people seem to be thinking...................

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Making NBFCs Bankable!

From a systemic risk perspective, stringent capital regulations coupled with other recommended regulatory measures would help improve the functioning of the NBFC sector in the long-term, but the what needs to be reconsidered is the level of risk that NBFC bring into the financial system vis-à-vis the risk generated by banks and accordingly, implement the prudential and liquidity norms in a phased manner..........

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Redeeming the Indian microfinance industry requires MFIs to put their clients first

Low-income people want appropriate products and quality service and MFIs which focus on meeting client needs in an ethical manner will be the most successful in the long-term ....

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Digital Payment Industry Needs Multiple Models To Push Financial Inclusion

Economist S.S.Tarapore added that the absence of banking technology, reach and coverage, absence of a satisfactory delivery model and absence of a business model were the reasons behind India not achieving financial inclusion…..

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Wanted: ‘Out of the box thinking’ from RBI

New Delhi: The Reserve Bank of India, which reviews monetary policy on Friday, should “think outside the box”, the chief economic advisor to the finance ministry told CNBC TV18 on Tuesday. “We live in a very unusual world where some countries have very, very low interest rates whereas other countries have high interest rates so we must think outside the box in terms of monetary policy and that is what I would stress to the Reserve Bank of India,” Kaushik Basu said. Despite industrial output growth slumping to a near 2-year low in July, inflation data for August to be released on Wednesday is expected to sway the RBI to raise rates this week for a 12th time since March 2010. The wholesale price index in August probably was rose 9.6 percent, a Reuters poll showed, well above the central bank’s comfort zone of 4 to 4.5 percent.

Firstpost

Paying the price

This is with reference to the editorial “Unfair penalty” (Business Line, September 13).  Certainly, floating rates are impacting home-loan borrowers due to frequent changes in interest rates, and have hit their shoestring budgets. Bankers, in order to protect their margins, have almost completely done away with charging of fixed rates and invoking reset clauses, which is difficult to digest. We are aware that banks are enjoying more income by levying high commission on all instruments they deal with, and for issuing statements from time to time. This is nothing but daylight robbery. On top of this, imposing penalties for pre-payment of loans is adding to the customers' misery.  Banks should find out innovative ways to avoid this unpleasant situation. I daresay account-holders are entitled to this privilege?

K. N. V. S. Subrahmanyam (BS)

Analysts divided over RBI move on Friday

Conflicting macroeconomic data on inflation and factory output have made the analysts and economists a divided house on the direction that the Reserve Bank will take on Friday at its mid-quarter policy review........

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RBI justified

“Why we still need a rate hike” (Business Line, September 13) raises some valid points. The RBI's efforts in controlling inflation are commendable. It has been merciless in hiking interest rates and the impact of industrial growth is now becoming evident.  The Government, which has more tools to combat inflation has been in slumber mode. Unless concerted action is taken by the Government on various fronts — preventing logistics delays due to bad roads, rationalising State levies, better supply chain management, and helping farmers improve yields — the RBI has no choice but to raise rates again.

Vivek (BS)

IIP blues

The Reserve Bank of India is in an unenviable position ahead of its monetary policy review meeting scheduled on Friday. It has to take a call on interest rates — whether to raise them further in the face of continuing inflationary pressures or pause temporarily based on the latest disappointing factory output data. To its credit, the central bank has been much more realistic in turning the spotlight on the Indian economy's blind-spots than North Block. In its successive policy reviews, the RBI has not simply focused on inflation's stubborn persistence, but even warned of business mood dips impacting investment and consumption growth declining as interest rate-sensitive sectors face increasingly reluctant buyers. In fact, while New Delhi has tended to exhibit a misplaced optimism about growth prospects with its eyes shut, the RBI was ahead in scaling down its GDP growth forecast for 2011-12 by a full percentage point to below eight per cent.  The latest industrial growth figures for July suggest that the slowdown that many experts and most policymakers thought would be temporary and narrow is, indeed, broad-based. The overall index of industrial production (IIP) registered a year-on-year expansion of only 3.3 per cent, the lowest in 21 months. Manufacturing and mining grew by 2.3 per cent and 2.8 per cent respectively, while the 13.1 per cent increase in electricity was mainly a result of the good monsoon, which has helped boost generation from hydel stations. More disturbing has been the 15.2 per cent dip in production of capital goods, a proxy for investment activity. Even if one discounts for the unreliability of data for this sector — leading to extreme growth volatility — the fact that investment sentiment has been vitiated by recent political developments and concerns over ambiguous laws and tangled procedures among foreign investors cannot be missed. If industrial growth is slowing, there is the possibility of weakening demand on account of high interest rates further dampening it. Persistent increases in its key policy rates over the past 20 months may have somewhat dented non-food ‘core' inflation resulting from excessive demand. But the problem is that while demand in the manufacturing segment may have dipped, general inflation has not. For once the Finance Ministry may be right when its Chief Economic Adviser, Prof Kaushik Basu, says inflation will stay high till December. So the RBI, in a way a victim of its own success, will now have to battle high inflation and the prospect of falling output driven by weakening demand.  For policymakers it would be tempting to pass off the slowdown as partly the outcome of global woes just as earlier they claimed that inflation was also stoked by global commodity prices. But unlike the US and the European Union, India did recover from 2008 with a smart pick-up in 2009. The current slide actually began in the past six months or so. And that has been the result of very successful monetary and very slothful public policies. 

HBL

Unfair penalty

Doing away with the pre-payment penalty may help reduce the distortions arising from new loans being cross-subsidised by existing ones...........

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Customer is king !

The Reserve Bank of India has initiated a series of measures to make banking a customer-friendly experience. While, earlier, it was the M Damodaran Committee that had come out with a report on customer services in banks, now, the Banking Ombudsman Conference has made a host of recommendations to protect the interests of small investors and bank customers........

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Two problems, one strategy for both RBI and the Fed

The Reserve Bank of India and the U.S. Federal Reserve were confronted with two different problems but used the same monetary strategy for solution. Neither succeeded…..

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Basu: RBI has to balance high inflation, slowing growth

The Reserve Bank of India (RBI) will have to balance high inflation and slowing growth, the chief economic adviser to the finance ministry, Kaushik Basu, said on Monday after a sharp drop in industrial output growth. Growth in industrial output in July slumped to its lowest in nearly two years as high interest rates cooled Asia's third largest economy and put pressure on the central bank to pause its monetary tightening despite stubbornly high inflation. Industrial output rose just 3.3 percent in July, dragged down by a huge fall in capital goods production.

Reuters

RBI hawks may prevail ahead of policy review: Economists

The Reserve Bank of India (RBI) is widely seen delivering the last rate increase in its 18-month-long tightening cycle on Friday as inflation pressures continue to remain strong, a Reuters poll of 18 economists showed. Of those polled, 15 expect a 25-basis point increase in the repo rate, one expects a 50 basis point hike, and two expect no change. An increase would be the 12th in the current cycle and would take the repo rate, the central bank’s key lending rate, to 8.25 percent, where most economists see it staying until at least the end of the fiscal year in March. The median expectation for the rate at the end of March has been lowered by 25 basis points from the previous poll conducted in July, largely due to deteriorating global economic conditions. “We are expecting a 25-basis point hike. The RBI has been pretty clear about the fact that given the extent of the inflation pressures, more needs to be done,” said Abheek Barua, chief economist with HDFC Bank. “In this policy review, if they talk about the changing international situation, then they might as well build a case for halting with this rate hike,” he added. The European Central Bank, Bank of England, and Swedish Central Bank among others continued to hold rates steady at reviews last week amid easing inflationary pressures in the euro zone and concerns over weakening growth prospects. The RBI has been one of the most hawkish central banks globally. However, economists said the July industrial output data released on Monday and August inflation data due on Wednesday would be key determinants for the RBI’s actions on Friday. “If the core inflation number is still in the range of 7-7.5 percent, my sense is that the RBI will persist with a interest hike,” said Madan Sabnavis, chief economist at CARE Ratings. “So it’s only in case it comes substantially down, if it comes around 6 percent, will it take a pause. That number will be very critical.” Of the polled economists, 11 said the RBI’s tightening was appropriate, while 5 said less aggressive tightening was needed.  

Firstpost

Unconventional mechanism needed to reduce debt: YV Reddy

Former Reserve Bank of India Governor YV Reddy said the government should adopt unconventional mechanism in both real and financial sectors to reduce debt. “Quality fiscal policy and primary distribution of income are the two major factors the government should focus on,” Reddy said at a seminar here on Friday. He said globally it had been a major concern for the government to maintain the equal distribution level. Over the last two decades, the gap between rich and poor was getting immensely wider and that was creating economic uncertainty. The middle class segment is not much impacted, whereas the upper class is getting richer and the lower strata of society is getting poorer. “To solve this problem, the government should improve the quality of fiscal adjustment,” he added. Household savings have come down in India, whereas corporate savings have gone up. When the micro economic weakens, it makes the structural problem even worse. So, quality fiscal policy is an answer to that, Reddy said. Former United Nations Development Programme (UNDP) director Kemal Dervis said this was a major global problem. Citing the US, he said, “During 1970s-1980s, the top 1 per cent of the upper top US population received 8 per cent of the countries GDP, whereas now it has increased three-fold to 24 per cent.”

BS

Depositor of failed bank questions premium charged by DICGC

Nagpur : A petitioner here has alleged through a public interest litigation that the Reserve Bank of India (RBI) and Deposit Insurance & Credit Guarantee Corporation Ltd. (DICGC) have "extorted" crores of rupees from about 200 "failed" banks including the Nagpur Mahila Nagari Sahakari Bank Ltd. Justice Sharad Bobde and Justice MN Gilani have granted further time of four weeks to the respondents to make their submissions through affidavits in reply to the allegations and prayers made in the PIL. One Sunil Prabhat Khare had filed the PIL and earlier on June 22 last, Justice Bhushan Dharmadhikari and Justice PD Kode had issued notice to the respondents. Khare alleged that DICGC has recovered premium up to the year 2009 from the Mahila Bank, though its license was suspended and the Mahila Bank was placed under restrictions issued by RBI from 2004.  The petitioner has also alleged that both the respondents have violated the provisions of sections 15(1) and 13C of the DICGC Act, 1961 and forced the Mahila Bank to part with about Rs 50 lakhs during the years 2004 to 2009 from the funds/ assets belonging to the petitioner-depositors in the name of "insurance premium". Khare also claimed that DICGC has retained such amounts though it is not entitled to do so.  The petitioner appeared in person. Advocates SN Kumar and Swapnil Lautewar represented the RBI. Advocate Sumant Deopujari also appeared in the matter. 

http://www.lawetalnews.com/NewsDetail.asp?newsid=4701

Finance ministry rejects bank ESOPs, okay with rural stint for newcomers

"At a time when attrition is high and is expected to grow further as private banks expand, letting remuneration be decided by trade unions is not a positive approach," said the chairman of a state-run bank. RBI governor D Subbarao, too, had said the compensation structure of public sector banks has to change if they have to compete with private banks..........

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Expand rural ATM network to enable subsidy, entitlement transfers: Govt tells public sector banks

With financial inclusion being one of the top social agendas of the UPA Government, the ATM procurement process by public sector banks is likely to undergo a sea change. The Finance Ministry has asked public sector banks to work out the modalities of joint sourcing of ATMs, State/district wise.......

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Pak-India quest for Asian supremacy

In conclusion it can be said that while both the countries continue to face similar problems India has collectively turned their weaknesses into their strengths……….

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Another rate hike cannot be ruled out

It will be a close call for RBI on 16 September. I would like to believe it’s slightly tilted in favour of a rate hike, possibly the last before it presses the pause button as inflation continues to be a bigger problem in the Indian context than an economic slowdown. But one won’t be surprised if the Indian central bank takes a breather and allows the impact of four rate hikes in the past five months to be felt before going for another hike. A pause doesn’t mean the end of the tightening cycle, but RBI will have to communicate that message well to the market, if indeed it decides to do so.....

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Final norms on new bank licences after Banking Bill amendment

The Reserve Bank is likely to issue the final guidelines for granting bank licences to corporates only after Parliament approves the Banking Laws (Amendment) Bill, 2011. The final guidelines on new banking licences would be released only after the necessary amendments to the Banking Laws (Amendment) Bill, which seeks to give more power to the regulatory powers of the RBI, sources said. The central bank had last month issued the draft guidelines which pegged the minimum capital needed to set up a commercial bank by a corporate house having successful track record of 10 years at Rs 500 crore. It is to be noted that the Banking Laws (Amendment) Bill was introduced in Parliament in March this year. Sources added that empowering the RBI is essential for obtaining information about the other businesses of the corporate houses seeking banking licences in order to protect depositors' interests. Banking companies are engaged in multifarious activities through the medium of associate enterprises. It has, therefore, become necessary for the Reserve Bank, as the regulator of the banking companies, to be aware of the financial impact of the business of such enterprises on the financial position of the banking companies, sources said. It is, therefore, proposed to confer power upon the RBI to call for information and returns from the associate enterprises of banking companies also and to inspect the same, sources added. The amendment seeks to allow the RBI to supersede the board of a banking company for a total period not exceeding 12 months. The proposed amendment moved by the government also exempts mergers and acquisitions in the banking sector from the scrutiny of the Competition Commission of India. According to the draft guidelines, companies which are primarily engaged in the real estate or stock broking will not be eligible for promoting bank. "Entities or groups having significant [10 per cent or more] income or assets or both from real estate, construction and broking activities individually or taken together in the last three years will not be eligible to set up new banks," the draft said. On foreign holding, it said the aggregate non-resident shareholding in the new bank should not exceed 49% for the first five years. At present, the foreign shareholding in private sector banks is allowed up to 74% of the paid-up capital.

BS

NBFC policy: Devil in the detail? - Somasekhar Sundaresan

A working group set up by the Reserve Bank of India (RBI) on non-banking financial companies has recommended a very progressive framework to regulate non-banking financial companies (NBFCs) but the path ahead can be treacherous and needs to be treaded upon carefully. The working group on issues and concerns of the NBFC sector has recommended a strong focus on the big picture and refraining from regulating for the sake of it. The group has recommended that the RBI should exempt every NBFC with an asset size of below Rs 50 crores from registration with the RBI. Such an exemption would mean that such tiny NBFCs need not be bothered with having to comply with various statutory and regulatory requirements imposed by the RBI on NBFCs. The working group has also recommended that NBFCs with an asset size of below Rs 1,000 crores that do not access “public funds” (a term different and much wider than public deposits, and essentially meaning exposure to debt) also need not be registered with the RBI. The central theme of the recommendations of the report is to focus on the big picture in regulating the NBFC sector, which is a segment in the financial system, which can do quite much of what banks can do. The approach also seems to be take away as many NBFC licences as possible, since once a licence is issued, an entity would pretty much be able to do everything that the licence entitles it to do. Towards this end, the working group says that NBFCs that do not accept public deposits and have an asset size of below Rs 50 crores should be “encouraged to de-register” with the RBI. If such an NBFC were to not de-register, the NBFC would have to apply afresh for a registration as and when its asset size exceeds Rs 50 crores. Having narrowed down the scope of who would be regulated, the working group has also tightened the screws on change of control of NBFCs. Any change of ownership in excess of 25 per cent in an NBFC would now need RBI approval. So would any change of control and any restructuring such as a merger or a de-merger of an NBFC. Current requirements of the RBI bring an extremely wide range of companies within the scope of the definition of the term “NBFC”. So long as more than 50 per cent of the assets of a company were financial assets, and more than 50 per cent of the income of any company were income from financial assets, such a company would be regarded as an NBFC. The working group has now proposed to enhance this threshold to 75 per cent - again a move that would ensure that only entities that really have the profile of a financial sector player would need to be within the remit of the RBI’s jurisdiction over NBFCs. The active disinclination to have many NBFCs in the system is also writ large in a recommendation to give existing NBFCs three years to meet these requirements of a minimum 75 per cent of financial assets and minimum 75 per cent of income from financial assets. If a company registered as an NBFC that does not accept public deposits, fails to meet these criteria in three years, it would be de-registered as an NBFC. The report also says deposit-taking NBFCs that do not reach the standard of having more than 75 per cent in financial assets and income from financial assets should stop taking further deposits and should prepay existing deposits. However, the zeal to throw companies out of the NBFC space should be tempered with caution. Not having to register with the RBI is great. However, a company that is not required to register could legitimately require that it should be permitted to continue its existing operations, which avowedly fall outside the scope of regulation. In other words, if the operations are such that income is materially not financial income, and assets are not materially financial assets, they should be capable of being continued without registering with the RBI. Of course, such an approach may pose systemic risks and the RBI should be tempted to intervene. Therefore, a reporting requirement without any compliance obligation should be conceived. The devil will indeed be in the detail. In implementing the transition to the proposed policy, the RBI should work in close co-ordination with market players to understand the implications of each move. It need not accept all it gets to hear, but it will profit from openly listening to everything that has to be said. 

(The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own. – BS)

Running out of steam

The advisories indicate that caution will spread and if banks get wary about lending, the economy could wind down even faster...........

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Limited benefits

This refers to the report “No prepayment penalty on floating home, auto loans” (September 7). The Reserve Bank of India’s (RBI’s) move to ask banks to charge no pre-payment penalties on floating rates loan will provide relief to customers who have been burdened with extra payment liabilities as a result of the steep increase in the interest rates. However, I am surprised that RBI has restricted this move to only floating rate loans. It should have been made applicable to cases of fixed rate loans too, where interest rates have gone up after borrowing by a customer. Banks should not charge pre-payment penalty to customers who had availed of fixed rate loans around two years ago and want to pre-pay the loan now since the rates have increased steeply in the last two years. Also, the upper ceiling of pre-payment penalty should be defined by RBI for all types of loans. RBI should allow banks to charge a maximum pre-payment penalty of 2.5 per cent and it should also be slab-based. This means if the loan amount is high, pre-payment penalty should be low, which will be less burdensome for a borrower. I feel that RBI’s current suggestion can only help customers in a limited way.

Vivek Sharma, Navi Mumbai (BS)

Bank loans may dry up for truant discoms

Power distribution companies using bank loans to fund their recurring losses might find this door shut soon, with the Reserve Bank of India (RBI) agreeing to the Union power ministry’s proposal to tighten lending norms for discoms.......

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Economy in for a double whammy

Making sense of the latest official numbers on economic growth throws up the old question: Is the glass half empty or half full? Do the numbers confirm an expected slowdown or reveal unexpected resilience? While economists and observers take their pick, the economy is likely to get a double whammy in the form of another interest rate hike in the face of sluggish investment. To state the facts baldly, India’s economy grew by 7.7 per cent in the first quarter (April-June 2011) of the financial year 2011-12, compared with 8.8 per cent growth in the same quarter last fiscal. Growth in the manufacturing sector dipped to 7.2 per cent from 10.6 per cent, and that in the mining and quarrying sector to 1.8 per cent as against 7.4 per cent. Farm output expanded by 3.9 per cent, much higher than 2.4 per cent in the same quarter last year. The services sector, which contributes almost 55 per cent of India’s GDP, offered a mixed bag. This is the fifth quarter in a row that the economy has reported a lower year-on-year growth. It is much lower than official estimates of eight to 8.5 per cent.The data comes at a time when India is vulnerable to global economic developments, especially in the United States and the eurozone. The Reserve Bank of India, or RBI, is unlikely to be impressed by these arguments. It has warned last week against accepting high inflation (9.22 per cent for July) as the new normal. There is a consensus among professional economists that the central bank will put up key policy rates by at least 25 basis points (0.25 per cent), if not 50, in the next policy review due on September 16. According to them, the performance of the economy in the June 2011 quarter has to be seen against the several domestic and global headwinds it has been facing. Although growth is slowing down, it is not collapsing as feared by some. Also, with full-year growth number still above seven per cent, it allows the central bank to keep focus on fighting inflation. Therefore, a 25 basis point rate increase on September 16 is very likely. The decline in GDP growth may turn into a sustained trend — unless the RBI realises its hawkish policy has served its purpose. Given the fragile state of the global economy with both the US and the eurozone on the brink of a recession, China slowing down and the home economy losing pace, corporate India’s confidence levels are fairly low. A recent survey by Morgan Stanley revealed that for a second successive year, corporate India is unlikely to up capital spending by more than a tepid 10 per cent. Moreover, while 15 per cent of those polled are unlikely to spend at all, about a third of those who do invest would do so more with a view to improving productivity rather than adding greenfield capacity. So we are unlikely to see companies rushing to set up too many new plants or build more roads. Having exhausted the fiscal stimulus, the government can no longer spend its way back to higher growth. However, fiscal reform, consensus on land acquisition policy, labour reform, facilitating private investment in food processing, logistics and supply chains, and liberalisation of investment policy in the strategic and defence industries could once again help stimulate the “animal spirits” of entrepreneurs. If the government could convince industry that it will push through legislation and be less bureaucratic, that in itself would go a long way in boosting industry’s morale.

Khaleej Times

India Struggles to Tame Inflation, Spare Economy

The Reserve Bank has gotten more aggressive in recent months, surprising markets with a series of half-percentage-point rate increases. In a Sept. 3 speech, the RBI's Executive Director, Deepak Mohanty, acknowledged that inflation has become "generalized" in the economy, but predicted the rate increases would begin to bring down inflation later this year and in early 2012...........

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Asia offers rate status quo hope

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The central bankers at four Asian countries — South Korea, the Philippines, Indonesia and Malaysia — have hit the pause button on rate increases even though they have been battling the spectre of rising inflation just as India. Is there a cue here that Reserve Bank of India governor Duvvuri Subbarao and his bunch of policymakers will take when they hunker down for the mid-quarter review of the monetary policy on September 16?

Key indices likely to retreat at opening

...When the RBI board members meet this week for a policy review, they will, perhaps, have an inflation figure close to 10 per cent, and a weakening fiscal position. Against this backdrop, Deutsche Bank thinks that the RBI will be inclined to deliver one more 25 basis points rate hike. It also predicts that there may be scope for a prolonged pause after this policy measure. ....

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Much ado over DCM van carrying scrap

Andhra Pradesh : A DCM van hired by a contractor of the Reserve Bank of India to dispose of soiled currency notes created flutter on Saturday at Trimulgherry with some passers-by believing that it contained huge unaccounted cash. Some persons rang up the Trimulgherry police in the morning stating that they found a vehicle on roadside and suspected that large amounts of cash were illegally being transported using it. The police rushed there only to realise that it was a vehicle used to transport scrap.  It was revealed that one of the RBI contractors used the vehicle to shift shredded pieces of soiled and mutilated currency notes, the Inspector, P. Sreedhar, said. The RBI disposes of the vast volumes of soiled currency notes by getting them shredded and assigns the work of dumping them to contractors, he explained.  “Somehow, shredded pieces of currency notes of rupees five and ten denominations slipped from the van and fell on the road prompting passers-by to suspect that something was fishy,” he said. The RBI contractor and the van owner, who rented it out, too were called to the police station for clarifications. 

HBL