For apex bank, it’s inflation all the way

RBI (Reserve Bank of India) continues to fight its lone battle against inflation by raising the policy rates yet again for the 12th time in this cycle. You must have got used to that by now and if you are looking for some indication of when RBI will pause, I am afraid there is not much good news. The only comfort seems to be that inflation in FY12 has been mostly in line with RBI’s expectation and it has not flagged any significant upside risks to the inflation forecast in this policy. Apart from that, the focus on inflation continues. The features of inflation mentioned in the statement—“much above” comfort, generalized, sustained sequential momentum, suppressed nature of inflation for some commodities, possible effect of depreciating currency and that demand-side factors are responsible for food prices as well—clearly point towards more monetary tightening ahead. Also, it was interesting to note that in contrast with earlier monetary policy statements, the “expected outcome” section only refers to containing inflation and inflationary expectations. In earlier statements, maintaining growth and financial stability were also mentioned in this section. There is a reluctance to change the anti-inflationary policy stance “prematurely”, given that in 2010 such a move led to the re-emergence of inflationary pressures. The slowdown in growth due to tightened monetary policy is more or less in line with RBI’s broad hypothesis that inflation can be brought down only by moderating near-term growth. So, it seems that the tolerance of RBI for a growth slowdown is higher and reversing the monetary stance might not be an option which will be considered any time soon. Even the global uncertainties, which some thought would be an excuse for a pause in September, do not seem to preoccupy RBI too much. This could be interpreted as a somewhat different stance from the other Asian central bankers, who have preferred to “wait and watch”. Although, to be fair, the statement’s forward-looking section on monetary policy stance does mention that implications of global developments will be closely watched. The more difficult question now is whether interest rate hikes are at all making any dent on inflation or inflationary expectations. There is no doubt that India is suffering from an inflation problem, which has multiple sources. Unfortunately, at this point, the only policy lever being used to counter inflationary pressures is the interest rate. So, it is not unusual that we will have to use that instrument harder to generate the desired effect. Also, we do not know the counterfactual of what would have happened to inflation if RBI had not hiked so aggressively. We expect RBI to hike the policy rates by 25 basis points in October as well. If anything, the tone of the policy statement keeps the door open for further rate hikes after October.

Mint

It was interesting to note that in contrast with earlier monetary policy statements, the “expected outcome” section only refers to containing inflation and inflationary expectations

A recurring dilemma called rate hike

One set of data suggests hike while another discourages it

Mumbai:  Economic data, in the best of times, tend to throw up a number of contradictory trends. For the decision maker, who looks at this data and weighs the pros and cons of various courses of action, it often boils down to a judgement call. For the RBI Governor, this is a dilemma he has to confront every 45 days. There is one set of data that would point to a hike in interest rates. And another set militates against this course of action. So, in the first category, you have factors such as a high inflation rate which is above the comfort level of 5 per cent, a fairly high credit growth rate that is again beyond the targeted growth rate, higher money supply, et cetera — all of which would probably suggest the prescription of a higher rate. In the second category of factors that would argue for a pause in rates, you have weak global economic outlook, the volatility in industrial production numbers, the slowing down of economy as reflected by lower growth in GDP numbers over the last two quarters as well as the advance tax numbers that are below targets. To add to the confusion, consider that the integrity of the data itself is often suspect and the fact that inflation is greatly influenced by supply shortages in food sector, and that monetary policy action can do little about it. Besides, monetary policy has a safe-harbour clause that it works only with a lag — anywhere between 12 months and 18 months — according to experts. So, you can't really say whether a variable is reacting to your latest hike or the hike that you effected one year ago.  In this pull of various factors in an environment of continuous uncertainty, the RBI Governor has to take a call on interest rates — and even then, with no guarantee of getting it right.  You can almost compare it to adjusting your bathroom shower to give you the right bit of warm water. Turn the hot water tap a little more and you get scalded. Turn the cold tap a little more and you freeze in the chill. Finally, after a lot of trial and error, you get it almost right — and it is time to step out of the bath — with either burns or chills, or both. Substitute the economy here — and so you have some parts that get scalded and some parts that manage to survive. The RBI had the option of delivering a 50 basis point rate hike, as some experts suggested, and delivering a strong anti-inflationary signal to the economy. Or it could have chosen to pause and wait for the next quarter. It has chosen to stay on the tightening course and go for its usual ‘baby step' increase. This, however, runs the risk of leaving the door open for further hikes; and the market will factor this uncertainty. Banks have so far transmitted the policy signals by effecting their own round of hikes. This time, however, one wonders if they will be able to pass on the hikes to customers who are already groaning at an almost 500 basis point hike in effective rates over the past two years. May be it is the banks who will pause now. 

HBL

Another RBI rate hike coming: Analysts

Experts do not rule out another rate hike by RBI after today's 25 basis points increase, on the back of recent hike in petrol prices and the possibility of food inflation not declining in the coming months..........

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Hopes of pause dim as RBI maintains hawkish tone

The interest rate hike season is set to get longer, with the Reserve Bank of India (RBI) on Friday maintaining its strong anti-inflationary stance. While Friday’s 25 basis points increase in the repo rate that took the policy rate to 8.25 per cent was widely expected, what disappointed industry and markets was the central bank’s continued hawkish tone. The general expectation is the RBI is far from the pause button as it is concerned about the still elevated level of global commodity prices. The central bank pointed out there was still an element of suppressed inflation in the economy despite the recent adjustment in domestic fuel prices. 

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Double whammy

RBI's repo rate hike cycle may continue: Exim Bank

KOLKATA: Raising key lending rates by 25 basis points by the Reserve Bank of India  RBI) Friday may not be the last rate-hike by the apex bank as the trend may continue due to high inflation, Exim Bank CMD T.C.A. Ranganathan said. "This may not be the last time that we are seeing a rate hike, the cycle may continue because of the rising inflation. Industry must also adjust to this high tide level," Ranganathan told reporters on the sidelines of a programme, organised by the Indian Chamber of Commerce (ICC) here.  "RBI could start examining other selective credit control mechanisms to ensure growth in some sectors," he said. The apex bank has raised repo rate by 0.25 basis points to 8.25 per cent and increased the reverse repo to 7.25 per cent.  Stating that raising interest rate regime was acting as a dampener for the industrial growth, Ranganathan said: "The reflection of a stressed economy can be seen in bank NPAs." "NPAs are reflections of a company turning sick and it is directly related to increase in interest rates. Economic stress is much bigger a factor for increase in NPAs," he said.  Informing that the bank had already urged its clients to look for newer geographies, Ranganathan said: "We have urged our exporter clients to diversify to other markets like Latin America and Africa because growth prospect in traditional markets like Europe and the US is limited."

ET

If RBI goes too far it can kill economic growth: Jim Walker

“Even though the central bank has put too much weight on the WPI number, it will start watching the growth numbers much more carefully now.”...........

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Chasing elusive targets

...How nimble should the governor get to arrest the inflation that is now galloping away? Each time the central bank makes a prediction it only takes a month for it to revise it higher as inflation gets far ahead of the tools used to control it. Leading economist say the rate hikes have to continue to arrest it.....

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NBFCs Report: Convergence with banking and Tighter Norms – S.S.Tarapore

The Non- Banking Finance Companies ( NBFCs) sector has been one of the most difficult areas of regulation and supervision for the past fifty years. While heroic efforts have been made to bring about a semblance of order, the problems continue to remain intractable.

The Report of the Working Group on Issues and Concerns in the NBFCs Sector ( Chairman Ms. Usha Thorat) was released on August 29,2011 and the Reserve Bank of India (RBI) has called for comments by the end of September 2011.

The Report provides an excellent blueprint for chalking out the future course of the evolution of the NBFCs sector. It would be useful to recapitulate the history of the NBFCs. In the late 1950s there was a proliferation of commercial banks, many of which were not viable. Hence the RBI was empowered, through legislative amendments, to undertake a process of moratorium and amalgamation to weed out the unviable banks and accordingly there was a drastic reduction in the number of commercial banks. While this process was on, there was a mushrooming of a very large number of NBFCs which were beyond the pale of financial regulation. In 1964, the RBI Act was amended to give the RBI some limited powers to regulate the NBFCs and the legislative framework was amended from time to time to put in place a comprehensive regulatory and supervisory framework to protect the interests of the depositors, and to ensure sound functioning of the NBFCs. The NBFC sector has been litigation prone and for years the RBI has had to devote its attention to litigation which at times was fractious. In the late 1980s there were judicial pronouncements which changed the course of history of this sector. There was one segment of the NBFCs which was well run and subject to effective regulation and supervision and another which just could not meet the regulatory framework. The Court directive to the RBI was that for companies which could not meet the regulatory framework, an alternative regulatory framework should be developed. Accordingly, in the late 1980s, a new category of ` Residuary Non- Banking Finance Companies ( RNBCs)’ was introduced. These companies had a soft regulatory regime under which the companies were not subject to any regulation on the liabilities side but the asset side was tightly controlled by investments only in prescribed ` safe’ instruments. The upshot of this was that the well run NBFCs shrunk in number as well as volume of deposits while the deposits of RNBCs , which were loosely regulated, zoomed. A determined effort was made by the RBI, in 2004, to phase out the deposit taking activity of the RNBCs and they were required to develop a new business model which would not depend on resources by way of deposits. The number of NBFCs ( including RNBCs) came down from 1,429 in March 1998 to 311 in March 2010. During the same period, the deposits of all NBFCs ( including RNBCs) declined from Rs 23,770 crore, equivalent to 52.3 per cent of the total assets, to Rs 17,273 crore, equivalent to only 15.7 per cent of total assets. The Usha Thorat Report provides a viable roadmap for the future development of the NBFCs sector and the authorities would be well advised to implement most of the recommendations in the Report.

Some select recommendations are discussed below.

The Report rightly points out that the present RBI Act stipulates a a cap on the minimum entry point capital of Rs 2 crore which is totally inadequate in the current context. Prescribing a specific figure in the Act on the entry norm is not feasible as inflation and the size of overall activity soon makes a specific figure to be totally inadequate. The Usha Thorat Working Group recommends that this should be amended to prescribe a floor and the RBI should have the discretion to prescribe whatever level it deems appropriate.

While this is the ideal situation the RBI is unlikely to be given unfettered powers to prescribe a higher NOF. If there are legal constraints, the RBI can be empowered to determine the prescription of the NOF within a stipulated range; this would require that the range would need to be very wide. In any case, the legislative amendments proposed by the Working Group would need to be examined by the Financial Sector Legislative Reforms Commission ( FSLRC).

The Working Group recommends a process of ` deregistering’ with the RBI for NBFCs below a certain size. This would be fraught with problems as the process of deregistering would put a large number of NBFCs outside the pale of regulation which would be detrimental to the overall stability of the financial system. It would be best to undertake a system of ` moratorium’ and amalgamation or gradually close down NBFCs which cannot meet the stipulated NOF size. The existing limit for acceptance of deposits by Asset Finance Companies ( AFCs) is 4 times the NOF. The Working Group recommends that this limit should be reduced to 2.5 times the NOF. The AFCs are, in many ways, very different from the loan and investment companies as their lending is backed by real assets. Thus, rated AFCs should, as at present, continue to be allowed to accept public deposits up to 4 times the NOF. The Working Group provides signal service by focusing attention on regulatory arbitrage and the need for convergence in regulation. The Working Group recognizes that the NBFCs have a niche area where banks do not operate and hence it has refrained from recommending exact bank- like policies for NBFCs The Working Group, however, recommends that regulatory arbitrage between banks and NBFCs is best addressed through calibrated use of prudential measures. The Working Group rightly suggests that whenever RBI takes macro-prudential measures for banks, such measures should also be applicable to the NBFCs. There is also the wider issue whether, over time, deposit taking by NBFCs should be totally phased out. Deposit taking should be the exclusive prerogative of banks. The Working Group does well to stress that government owned NBFCs should be required to follow the regulatory framework applicable to other NBFCs and that supervision should be ownership neutral.

The Usha Thorat Working Group has provided a veritable lexicon on the NBFCs sector and the RBI and government should give pride of place to the Report when formulating policies and operations relating to the NBFC sector.

FPJ

Private banks, then and now : K Kanagasabapathy

...Given the curbs placed on new entrants, not more than a few applications are likely to be considered for new licenses. But it will open a new chapter in Indian banking after 40 years of bank nationalisation in India. .....

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‘Taming inflation is India's bigger problem, not boosting growth' - Kalpana Kochhar, Chief Economist-South Asia, World Bank

Inflation is awfully close to 10 per cent, double digits. The main concern is that it has persisted at that level for a long time. The RBI would have to take that persistence into account, suggesting that it is still a problem and vigilance is still required on inflation.......

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Light at the End of the Tunnel.....

LIGHT AT THE END OF THE TUNNEL ·       Friday's anticipated hike may be the last in the current rate hike cycle, on the hope that prices of fuel and metals would come down due to slowdown in developed economies ·       However, floating rate borrowers would have to wait for at least nine months before borrowing costs start coming down ·       WPI inflation for August turned out to be 9.78%, much above expectations of 9.6% ·       Inflation remains the main concern for RBI, which has hiked policy rates 11 times since March 2010 ·       There are some signs of demand moderating in the recent months along with growth moderation ·       Economists predict that the economy would moderate to below 8% in this fiscal

Business Today

RBI to stay focused on inflation, not growth: CLSA's Malik

The RBI probably does not rely significantly on the industrial production data given the recent high volatility. Its main focus will remain on checking inflation and hence another rate hike is justified. No central bank can deliver low inflation with high growth when the government is unable to push ahead with meaningful actions to check the supply-side factors to lower food inflation and eliminate structural rigidities..........

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Logic calls for rate hike, but can RBI bowl from both ends?

...The RBI Governor’s problem is compounded because there is strong justification for both increasing interest rates further and not doing anything. How will the coin spin?....

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Time to press the pause button

... there is a strong case for the RBI to refrain from raising rates now and allow the transmission mechanism of past hikes to work through the system. Simultaneously, it must closely track both domestic as well as global developments, especially in the light of a worsening European sovereign debt crisis. If conventional monetary tools have not really helped tame inflation, they shouldn't risk choking growth either. ....

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RBI may Raise Rates One More Time to Check Inflation

Reserve Bank of India Governor Duvvuri Subbarao is between a rock and a hard place. Slowing demand for goods and economic growth rate calls for a pause in interest rate increases. Soaring prices demand that the cost of money rise to cool demand further. His priority is to curb price rise in the larger interests of the population that is seeing more of its income eaten away by higher prices, rather than please investors whose wealth erode due to higher rates. Subbarao may choose to increase rates, for the 12th time since March last year, by 25 basis points in the mid-quarter monetary policy review on Friday for sustained long-term growth.

ET 

RBI in dilemma over rate hike; may take a pause this time

...A majority of economists and brokerages believe that over the past several months, the central bank has focused on controlling inflation, albeit unsuccessfully, and with inflation still above the acceptable levels, the RBI could yet hike rates by 25 bps. However, there are others who feel that....

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Fiscal deficit

This has reference to the feature “Real truths about interest rates” (Business Line, September 15). The writers, by quoting various rules and theories, have researched well the influence of monetary policy, particularly the interest factor, on inflation.  But treating inflation purely as a monetary phenomenon seems to be incorrect, if we are to go by the explanations of non-monetarists on inflation. That has also been the problem with the monetary authority (read Reserve Bank of India) that has been obsessed with increasing policy rates and showcasing to the Indian people that it has been doing its best to control inflation.  It is time for the RBI to have a dialogue with the mandarins of the Finance Ministry on the need to control fiscal deficit. Fiscal deficit has still not been reigned in despite the one-time bonanza (read Telecom auction deposits) received by the Government. Further, the Food Ministry's neglect of supply side has aggravated the inflationary situation.  The persisting inflation in India has already undermined the role of the RBI and it is time for the Government to tackle it through non-monetary instruments. Why don't the writers of the monetary phenomenon of inflation take an integrated view and treat the subject in its totality?

K. V. Rao, Bangalore (BS)

RBI relaxes forex norms for individuals

To further liberalise norms on foreign exchange transactions, the Reserve Bank of India (RBI) on Thursday announced a number of relaxations pertaining to individuals. The central bank raised the limit of the value of securities to be transferred as gift to a non-resident Indian (NRI) to the rupee equivalent of $50,000 per financial year from $25,000 per calendar year earlier. The other changes include allowing individual residents in India to include a non-resident close relative as a joint holder in their resident bank accounts on the ‘former or survivor’ basis. However, such joint holders will not be eligible to operate the account during the lifetime of the Indian resident account holder, said RBI in a notification. NRIs have also been permitted to open accounts with their resident close relative on the ‘former or survivor’ basis where the close relative will be eligible to operate the account as a Power of Attorney holder during the life time of the NRI/PIO account holder. The above norms will be applicable in exchange earners’ foreign currency account, resident foreign currency account, non-resident (external) rupee account, foreign currency (non-resident) account (banks) and savings bank account.

BS

I do not think RBI will go for a CRR cut: Manoj Rane, BNP Paribas

I doubt whether RBI will pause. In fact, I am part of the majority which believes that there will be a 25 basis point hike. Of course there was a phase of uncertainty when people felt.......

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Big Moment: RBI rescues rupee, but for how long?

...The rupee’s fall was so steep the Reserve Bank of India reportedly intervened in the currency markets and sold dollars to stem the currency’s slide. That is something the central bank has not done since the Lehman crisis of 2008.......

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Assets priced in gold see no inflation

The key advantage of gold and silver as money is that these can't be printed like paper currencies. Hence, it's very difficult to erode their value. In case of fiat currencies, the government waves a wand and the printing press begins operations.....
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RBI doubles overseas gift transfer limit

The Reserve Bank of India has doubled the amount a resident in India can transfer to a person resident outside India as gift, to $50,000, a financial year. The gift can be any security, including shares or convertible debentures.  The transferor is, however, required to obtain approval from the RBI for the gift. “The value of security to be transferred together with any security transferred by the transferor, as gift, to any person residing outside India which was not to exceed the rupee equivalent of $25,000 during a calendar year has been enhanced to $50,000 for a financial year,” the RBI said in a notification. In the first quarter of 2011-12, persons resident in India transferred $84.6 million by way of gift to persons resident outside India, against $57.6 million in the corresponding period last year. The amount transferred by persons resident in India to persons resident outside India by way of gift has been steadily rising over the last few years.

HBL

RBI relaxes NRI bank account guidelines

Mumbai: The Reserve Bank of India (RBI) has relaxed foreign exchange regulations to make it possible for Indian residents to hold joint accounts with relatives holding foreign currency accounts. Under revised guidelines, non-resident Indians (NRIs) can open either a non-resident external or a foreign currency non-resident (B) account with their resident close relative on a “former or survivor” basis. The resident close relative shall be eligible to operate the account as a power of attorney holder in accordance with existing instructions during the lifetime of the non-resident relative. At the same time, NRIs have been allowed to include non-resident close relative(s) as a joint holder (s) in their resident bank accounts on ‘former or survivor’ basis. However, such non-resident Indian close relatives shall not be eligible to operate the account during the lifetime of the resident account holder. For the purpose of this regulation close relative would be as the definition of relative in Section 6 of the Companies Act, 1956.  Similarly, changes have been made in the case of exchange earner’s foreign currency account and resident foreign currency accounts (which are held by resident Indians who own foreign exchange). In both cases, joint accounts are allowed with residents who will not be allowed to operate the account during the life time of the account holder. The easing of norms follows suggestions made by a panel to review the facilities for individuals under the Foreign Exchange Management Act, 1999.

TOI

Coop Bank depositors may get CAMEL ride

NAGPUR: Depositors in cooperative banks may now get an opportunity to take a well-informed decision before parking their funds in these institutions. Amidst cases of cooperative banks going bust leaving the depositors in the lurch, Reserve Banks of India is planning to put their ratings in public domain. Termed CAMEL- short for Capital Audit Management Earning and Liquidity- the ratings system was applicable to the commercial banks. Following report of Narsimham Committee, it was adopted for the cooperatives from 2009 onwards. It is now being planned to disclose the CAMEL ratings of the banks to public so that depositors can take an informed decision. This was disclosed during a meeting convened by task force on cooperative urban banks (TAFCUB) held in Nagpur on Friday. Sources said there were plans to make information about the banks' financial status more accessible to the public. This would include making CAMEL ratings or the grades, which is a parallel system to categorize the banks, public. The general view is that grades may continue to be an internal matter but ratings may be made public, said a source. Gradings, which are denoted in numbers 1 to 4, are given on the basis of parameters like capital adequacy, consistency in profits and quantum of non-performing assets. CAMEL ratings on the other hand are denoted in alphabets, said the source. Even auditors have been asked to follow the CAMEL system while auditing the books of accounts. It was also decided to elevate the Shikshak Sahakari Bank to Grade 3. The second biggest cooperative bank of the city has finally come out of red with its networth entering positive zone, which is a major sign of improvement, a member of the TAFCUB said. The move brings the bank out of the danger of facing RBI action in the near future.

TOI

Chinese bank opens in Mumbai

Industrial and Commercial Bank of China (ICBC), the world's largest banks in terms of profit, market capitalisation and customer deposits, on Thursday opened its first branch in Mumbai.........

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Women's bank to extend Rs 1100 cr micro loans

Sri Nidhi, the cooperative bank being launched tomorrow exclusively for women self-help groups (SHGs) and as an alternative to microfinance institutions in Andhra Pradesh, will be extending Rs 1,100 crore micro loans to its members in the first year. This is in addition to Rs 900 crore microcredit budgeted for the current financial year by commercial banks under the SHG-bank linkage programme in the state. Over 1.4 million SHG groups with close to 10 million women members, federated into mandal (MMS) and district samakhyas, are now members of this new bank. Interestingly, these organised women groups had been the primary target of MFIs prior to state government's intervention that brought MFI operations to a standstill resulting in Rs 7,000 crore of unrecovered loans since last year. The launch of the new bank for and by these SHGs under the aegis of the state rural development department is likely to make things more difficult for MFIs as Sri Nidhi will take only 48 hours to grant loan, which will effectively carry just 3 per cent rate of interest. It will also collect deposits from the members. Sri Nidhi has been created with a Rs 300 crore share capital — Rs 100 crore from the state government and Rs 200 crore from the members. The bank is mobilising the remaining funds largely by way of debt from banks and also through deposits, according to Reddy Subrahmanyam, principal secretary, department of rural development. The target of Rs 1,100 crore loan disbursement in the first year itself would mean a minimum of Rs 1 crore to be made available to each of the 1,100 mandal samakyas for sanctioning loans to individual SHGs under their jurisdiction. “We have categorised the existing mandal samakyas into four groups based on their previous performance and the credit limit available to them would be determined accordingly,” Subrahmanyam, the brain behind Sri Nidhi, told Business Standard. Many of these samakhyas are eligible for a credit limit of up to Rs 3 crore, he said. The organisation and the functioning of this bank is also unique. For, all the transactions will be made through regular mobile phones of these women groups. The technology platform used by the bank completely minimises human interface in the sanctioning process. “This is going to be the most efficient organisation functioning in the micro lending space,” he said, adding it would have minimal staff for running its day-to-day operations. While the state government will extend the interest subvention scheme under the existing Pavala Vaddi programme (3 per cent effective interest) to Sri Nidhi loans, the mandal samakhyas (MMS), the lending arms of the bank, is expected to earn income on these transactions from loan charges. 

BS

Monetary policy review: Dissent between government & RBI on further rate hike to curb inflation?

NEW DELHI: The central bank's monetary tightening has harmed growth instead of taming inflation, the country's chief economic advisor has said, sending an unequivocal signal three days before a crucial RBI rate-setting meeting that the government wants no more hikes......

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You can reject the final compensation that the banking ombudsman awards you

You can approach the ombudsman within a year of receiving a reply from the bank. In case your bank doesn’t bother to reply to you at all, you have 13 months to approach the ombudsman from the date of filing the complaint

If you take your complaint to the banking ombudsman and are not happy with the final compensation settlement it decrees on your complaint, you can reject it. If you accept the settlement, the ombudsman will pass an order. Once you accept the order, you and the bank are bound by it.

When do you go to an ombudsman?

If you complain to your bank about any dispute and the bank rejects it or doesn’t respond within a month, or you are not satisfied with its reply, you can take your complaint to the banking ombudsman. You can approach the ombudsman within a year of receiving a reply from the bank. In case your bank doesn’t bother to reply to you at all, you have 13 months to approach the ombudsman from the date of filing the complaint.

What does the ombudsman do?

The ombudsman will give an opportunity to you as well as the bank to present the case. The ombudsman will look into the case and try and bring about a settlement by agreement between you and the bank. If there is no settlement by agreement within a month, the ombudsman may fix an award. The compensation amount varies from case to case. For credit card issues, the maximum awards can go up to Rs. 1 lakh, depending on the case.

What happens if you reject ombudsman’s compensation?

If you are not happy with the compensation amount, you as well as the bank can approach the appellate authority. You will have to approach the authority within 30 days of the date of receipt of the award. You may get another 30 days, but that depends on the appellate authority. The authority can either dismiss or allow the appeal and set an award.

Things to keep in mind

Ombudsman can reject complaint: Don’t assume that the ombudsman will accept your compliant without a thought. The ombudsman can reject the complaint if it thinks there is no loss or damage or inconvenience caused to you.

Supporting documents a must: You must attach all relevant documents with the complaint you send to the ombudsman. For instance, if you are consistently getting your credit card bill after the due date and the bank is charging you a late payment fee, support your compliant with a copy of your credit card statement, the courier delivery receipt and other relevant documents.

Others: In case you have incurred a loss, mention the nature and extent of the loss in the application. You can also mention the kind of relief you are seeking. You must give a declaration that you will comply with the required conditions. 

Find the address for the ombudsman in your area at the Reserve Bank of India’s website, www.rbi.org.in

Mint 

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

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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