Rupees run dry

Bhutan : With rupee borrowings to pay for imports from India having reached a staggering INR 10B, and its demand by the Bhutanese economy showing no signs of slowing down, the central bank is doing what it can to address the problem – borrowing more rupees. Central bank officials are negotiating with India’s central bank, the Reserve Bank of India, to borrow from them. The interest rates would be relatively cheaper than the State Bank of India line of credit. According to an official, it is expected to be around 6.2 percent. SBI charges an interest of 10 percent. It is five percent from a credit facility extended by the government of India (GoI), which has a limit of INR 3B. “The initial plan was that RBI will lend in dollars but, due to the rising demand for rupee, we requested them to lend us in rupee, which they’ve agreed to,” the official said.  This will be the third line of credit for Bhutan to borrow rupee. Other option to meet the demand for rupee is to enhance the limit from the SBI line of credit by INR 2 to 3B.  The official from RMA said the limit has already been exhausted at INR 7B. While no more can be borrowed, there is a rising demand for rupee within the economy. Domestic banks have not been able to meet the demand with its reserve exhausted.  RMA will be sending a letter to the State Bank of India today, requesting them to enhance the limit. All the local banks have been requesting the central bank for rupees, which RMA has not been able to provide. The Bhutan National Bank’s chief executive officer, Kipchu Tshering, said their accounts in India have exhausted and reached almost negative now. “We have to send back most of our customers, who come to the bank looking to exchange ngultrums with rupees,” he said. While there is a 400,000 limit an individual on exchanging ngultrum with rupee, there is no restriction on drafts and letters of credit.  The rupee, which the banks get from RMA, is maintained with Indian banks by the local banks.“The situation is getting worse and there seems to be no solution,” he said. The situation is similar with the rest of the banks. T-bank’s balance in their accounts in Indian Axis bank has reached only INR 10M, while Druk PNB’s balance has reached around INR 2 to 3M.  Bank of Bhutan’s chief executive officer, Passang Tshering, said that they were in a slightly better position but, in recent times, it has received complaints of rupee shortages from its customers.  While there has been increasing rupee deficit, the economy’s foreign exchange reserve has been growing. Although figures were not available, central bank officials said, forex reserve (dollar) has been increasing as of now.  In the 2009-10 fiscal year, convertible currency reserves increased to 838M from 759M in the previous fiscal, according to the RMA annual report.  Against the backdrop of rupee crisis and increasing foreign exchange reserve, Bhutanese economists suggests selling dollars in the Indian market for rupee. An economist said since rupee is more important than dollar, given the volume of trade with India, selling USD in the Indian market could address the issue for some time. “Moreover, the dollar has gone up to INR 49 to 50 a dollar, which would mean higher returns,” he said. For example selling USD 200M in the Indian market could fetch Nu 9.8B, which is almost equivalent to the rupee deficit of INR 10B. But then the constitution mandates 12 months of import expenditure from the foreign exchange reserves, and RMA officials said selling dollars in the Indian market would provide only temporary relief.  In most developing economies, the constitution mandates only five to six months of import expenditure from foreign exchange reserves, according to another economists. 

http://www.kuenselonline.com/2010/modules.php?name=News&file=article&sid=20973

What drove, and who wins from, rupee's fall

...Yes, it is the season where the rupee has developed slippery feet and has ‘depreciated' against the dollar. In other words, while the exchange rate of the dollar vis-à-vis the rupee was at 44-45 levels just a little while back, it is now at over 49 levels. This has caught many investors off-guard....

Read..............

Patients' charter of rights in the offing

Read....... 

The NHRDA will be linked to the ministry of health and family welfare. It will be an autonomous body - similar to the office of RBI Governor - and will have statutory powers to regulate the healthcare sector.....

Poor Muslims can’t bank on APSMFC

Moreover, the banks have been reluctant to step up sanction and disbursement of loans to the minorities, virtually ignoring the RBI's repeated directives to them to ensure 15 percent credit flow of all the priority sector lending (PSL) to these sections......

Read...... 

Doctor shoots down burglar

....Residents of the colony caught Murali’s associate, Shiva, after a chase. Investigation revealed that the two had struck at the residence of former RBI Governor, Y.V. Reddy, four days ago, in Jubilee Hills.....

Read.............

RBI meet on currency management held

PATNA: The 19th high-powered meeting of the standing committee on currency management for Bihar was held at the Reserve Bank of India, Patna, on Thursday to discuss issues relating to implementation of clean note policy, customer services, and availability and retail distribution of notes and coins. The meeting also deliberated on detection-impounding-reporting of fake Indian currency notes, security arrangement at the currency chests and movement of treasure among the banks across the state. RBI Regional Director for Bihar and Jharkhand Mohit Kumar Singh chaired the meeting attended by IG, CID, Praveen Vashishtha, other police officials and senior railway officials, BSNL and department of posts and controlling heads of major banks, an RBI release said.
TOI

Credit, debit card complaints dip 26% in AP

Credit card and debit card-related complaints in Andhra Pradesh have come down to 26 per cent this year, from 38 per cent last year, according to a report on the working of the Banking Ombudsman Scheme in AP for the year 2010-11. “The claims were related to the charges, finances and disputed transactions,” M Sebastian, Banking Ombudsman (AP), Reserve Bank of India, told mediapersons here on Friday. The Reserve Bank of India (RBI)’s ombudsman scheme (2006) provides a forum to bank customers for expeditious and inexpensive resolution of complaints relating to deficiency in specified banking services. The state has received a total of 5,012 complaints this year through the banking ombudsman, as against 5,622 complaints received last year. The inflow of the complaints moderated during the year after persistent surge during the previous two years, he said. Of the total, complaints relating to loans and advances accounted for 15.22 per cent, while complaints relating to delay in disbursement of railways and defence services pension formed 11.41 per cent. The number of complaints from metropolitan areas constituted 44.03 per cent of the total complaints, followed by urban areas at 26.12 per cent, semi-urban areas at 18.6 per cent and rural areas at 11.79 per cent. “More than 30 per cent of the complaints are from rural and semi-urban areas, whereas the volume of bank transactions was more in metropolitan cities. We are putting our efforts in taking the ombudsman scheme to the remotest of villages to reach the customers,” he said. The RBI has a CTS system to help the customers in filing online complaints. The banks have taken initiatives and made arrangements to reduce the grievances. Of the total complaints, around 61.25 per cent of them had been settled, Sebastian said.

BS

Over 95% home loans are floating: RBI

With floating interest rates encompassing over 95 per cent of home loans, the Reserve Bank appointed banking ombudsman has been receiving a number of complaints from borrowers on the mounting credit risks as a result of increasing interest rates. The Reserve Bank of India, taking cognisance of the situation, is likely to instruct banks to not recover pre-payment charges on floating rate home loans and has asked the Indian Banks Association (IBA) to suggest measures that can be taken to address the issue. “Only 2-3 per cent of the loans are fixed rate loans today. Even though interest risk is managed by banks, the risk is ultimately forced on the customer in a rising interest rate scenario,” Rajeshwar Rao, Chief General Manager, RBI and Banking Ombudsman New Delhi area said on Tuesday. Floating rate loans pass on the interest rate risk from banks which are much better placed to manage it to borrowers and thus banks only substitute interest rate risk with potential credit risk.  If a decision on this comes through it will be for both own source funds and borrowed source funds of banks.  The IBA has sought time to respond and is expected to give its view by month end.  Towards providing relief to customers facing problems with credit card transactions, the RBI has asked the ombudsman to place the onus of proving customer negligence on the banks and also to compensate the customers for losses arising out of unauthorised transactions. Some of the other measures being taken under the banking ombudsman scheme of the RBI include providing compensation of up to Rs 1 lakh for mental harassment due to inflated or wrongly computed credit card bills by banks. However, clear guidelines on this are yet to emerge on account of the subjectivity of the matter and the RBI and IBA are both working on it. According to data released by the RBI for the Delhi region (including New Delhi, Ghaziabad, Noida, Jammu & Kashmir and Haryana), over 10,500 complaints have been registered between July 2010 and July 2011. Maximum number of complaints in the region relate to the State Bank of India followed by ICICI Bank and HDFC Bank that are the three major banks operating in this region, said Rao. “Majority of the complaints (32 per cent) were credit card related issues. Deposit account were 18 per cent and remittance glitches 9 per cent,” said Rao.

ExpressIndia

MFIN's initiative in reviving microfinance sector

The micro finance sector has started witnessing some positive developments after the Reserve Bank of India (RBI) allowed the continuance of priority sector lending (PSL) status for bank loans to micro finance institutions in May this year providing a clear sense of direction to the sector. The regulatory framework outlined in the draft micro finance bill released to the public in July, which is likely to be introduced during the winter session of Parliament, would help faster recovery of the sector, according to Alok Prasad, Chief Executive, Micro Finance Institutions Network (MFIN). In an interaction with this correspondent, Mr. Alok Prasad said only in Andhra Pradesh there was no activity in lending and repayment and in other States there was significant recovery, following a number of measures announced by the Malegam Committee. He said MFIN was the premier industry association engaged in an intensive process of dialogue with the RBI for providing additional inputs and clarifications from time to time. After the crisis in Andhra Pradesh, several measures have been announced to improve the condition of the microfinance industry and the only new regulation in place since the Andhra Pradesh Government's ordinance in October last year was the circular issued by the RBI in May this year. Mr. Alok Prasad said many microfinance organisations especially in Andhra Pradesh have adopted corporate debt restructuring (CDR) to restructure their bank loans. MFIN was in discussion with the state government and was hopeful of reviving the microfinance activity in the state, he said. According to him there would be consolidation in the industry through mergers as smaller microfinance institutions were finding it difficult to go alone due to regulatory caps on margins and the prevailing high interest rates. As for the initiatives taken by MFIN, Mr. Alok Prasad said the organisation would work closely with the regulators and other key stakeholders to achieve larger financial inclusion goals through microfinance. MFIN has formulated and implemented a well-defined code of conduct for its members numbering 49 through an intensive process of consultation with them and other stake holders.

HBL

Kerala becomes first ‘total banking State'

Kerala was declared the first State in the country to achieve total financial inclusion. The achievement means that each household in the State has at least one bank account and the facility for need-based credit. At a meeting of bankers here on Friday, Chief Minister Oommen Chandy distributed certificates to the banks that had participated in a drive to take banking services to every corner of the State. Mr. Chandy said banks had a lot more to do for the State and its people. Lending to the agriculture sector should go up from the present 22 per cent of the total lending to priority sector (Reserve Bank of India's norm is 18 per cent).  The lending classified as lending to agriculture included the loans to the plantation sector that absorbed large credit. The other areas of farm sector could do with more credit support than at present. The Chief Minister drew the banks' attention to the need for extending credit support to the Clean Kerala Mission, a programme to make the State live up to its nickname of ‘God's Own Country.' Growth in sectors such as tourism and healthcare could be further accelerated with the help of banks. Banks could also think of schemes to encourage institutions of excellence in education.  He said there was no reason why Kerala could not achieve a double-digit growth rate. S. Raman, Chairman and Managing Director of Canara Bank, in his capacity as the convener of the State Level Bankers' Committee (SLBC), said at the meeting that Palakkad district had become the first district in the country to achieve total financial inclusion four years ago. Among others, Minister for Rural Development K.C. Joseph; Regional Director of RBI Suma Varma; Chief Secretary P. Prabhakaran; Executive Director of Canara Bank Archna S. Bhargava also addressed the function.

HBL

'Suit'able suggestion................

U.S. Banks Listen Up, India Has Something To Say

An amazing New York Times story on the State Bank of India’s outreach efforts to India’s poor offers insight into what it looks like when a bank serves its least likely customers. Perhaps American banks could learn a thing or two.The story follows Swati Yashwant, a sort of freelance banker who helps India’s rural poor set up bank accounts with the State Bank of India, which is India’s biggest bank, and which is owned by the government. She is not an employee of the State Bank of India, but she works for commission based on the number of transactions she completes for her client bank. This system was actually set up by India’s central bank, the Reserve Bank of India, to deal with the severe lack of bank branches in the developing nation. The New York Times explains “about 70 percent of India’s population is dispersed among more than 600,000 villages [but] the entire country has only 33,500 bank branches.” Because of this, only half of all of India’s households have bank accounts. And presumably because so few people have accounts in rural villages, and little money to save anyway, banks are hesitant to open branches. The Reserve Bank, according to the Times, assigns certain villages to certain banks, and ordered banks to serve them. So their low-cost solution to this mandate is to hire “business correspondents,” armed only with laptops, fingerprint scanners, and wireless modems, to expand their banking services to the country’s poor. As a result of the poverty in rural India, the account balances are minuscule by our standards: on average 160 rupees, or about $3.30. That’s paltry, but keep in mind that the going rate for a savings account in India is 4%. In five years that account will be worth $4. Can you imagine savings rates like that in the States?  The article closes on an interesting note. State Bank claims they lose money on most of the accounts people like Swati open, but that they see it as a “social obligation,” which might become profitable in the coming years. Now the United States is nowhere near as poor as India. And only 7% of our population — or 21 million — are unbanked, compared to 500 billion in India. Poverty and banking are quite different here and in India. But just as striking are the differences between bankers’ attitudes towards the poor, and towards their social mission. Namely, Indian bankers who work at big banks think they have a social mission, and can think in the long term to make their social mission profitable. Big American bankers, save for their low- or no-interest lending to CDFIs, don’t seem to feel similarly compelled. 

http://www.mybanktracker.com/bank-news/2011/09/30/state-bank-of-india-reaches-out-to-an-unlikely-demographic/

Cooperative leaders should introspect

While the whole world is complaining against Urban Cooperative banks style of functioning, NAFCUB Chairman H K Patil has words of encouragement for them and compares them better than commercial bank in terms of financial inclusion. Talking on the eve of Federation’s 35^th Annual General Meeting in New Delhi Mr Patil said that in the year 2010-2011 the deposits of urban cooperative banks increased at the rate of 14.8% while the advances grew at 22.4%. These figures compare well with the corresponding figures of commercial banks at 15.4% and 20.1% respectively. He said that CRAR of 91% of the Urban Cooperative Banks is more than 9%, making the sector well capitalized by and large. Mr Patil observed that NAFCUB’ s interactions with the Reserve Bank of India during the year under report had been very fruitful. As a result, RBI had issued a number of circulars, particularly to augment urban banks’ role in financial inclusion and had also made favourable policy announcements. The Report of the Malegam Committee on licensing of new Urban Cooperative Banks, constituted on the demand of NAFCUB, Shri Patil informed has been put in the public domain for comments. The Report, he said, has also made very important recommendations on the issue of Umbrella Organization for providing financial and other support to small urban cooperative banks. The Government’s approach to the sector, however, he said has remained at best indifferent. Despite repeated memorandums on the adverse impact of Direct Tax Code on Urban Cooperative Banks and even small urban cooperative credit societies, the Government has not taken cognizance of the problem that the new Tax Code would create for the sector. The sector, he said, was also worried on account of the sweeping powers proposed to be given to the Registrar of Cooperative Societies under Multi State Cooperative Societies Act Amendment Bill, without due consultation with the sector. He said that RBI has recognized the fact that urban cooperative banks have been the earliest purveyors of financial inclusion as the very foundation of cooperative credit movement was based on the concept of support to less privileged sections of society. In this context, NAFCUB, in December last, had launched a nationwide scheme for providing CBS on ASP model to small urban cooperative banks at affordable cost so that these banks are able to provide the same services to their clients as large commercial banks are providing and are able to increase their thrust towards financial inclusion. NAFCUB has also launched a Research Scheme for promoting research on Urban Cooperative Banks and to involve youth in the movement. Under this scheme Research Scholars enrolled for Ph.D/M.Phil with UGC recognized Universities are provided scholarship for their research work. He termed cooperative credit societies as very important financial intermediaries that were doing important work of providing financial services to unorganized sector and they had great potential to do more given proper support from the authorities.

http://indiancooperative.com/ncui/cooperative-leaders-should-introspect-nabard-chairman/

Kumar Mangalam Birla latest victim of credit card fraud

Whoever thought credit card scams were only limited to the regular citizens should think again. The latest to join the list of credit card fraud victims is none other than Mr. Kumar Mangalam Birla, the Chairman of the multi-billion-dollar Aditya Birla group. The leading industrialist’s card was reportedly cloned and used to make purchases worth Rs. 286,000 in Bangalore while Birla was in Mumbai. He learned of the fraudulent transactions when he received his monthly account statement. An FIR filed with the Mumbai police says that Birla's credit card was used to buy electronics items. The Mumbai Police is reportedly investigating the matter in coordination with the Bangalore Police. They are also taking help of cyber experts. Card cloning is a practice wherein all the card details are fraudulently obtained through a pager sized scanner and copied on to a counterfeit card.  In order to minimise fraud cases and ensure security of transactions, the RBI had earlier this month asked banks to implement various safety measures related to credit card and debit card usage over the next two years. The central bank directed banks to strengthen the existing payment infrastructure and future proofing system along with adoption of fraud risk management practices within a period of next 12-24 months, RBI said. 

IIFL

Remove entry bar for new banks: PMEAC

New Delhi: Even as Reserve Bank of India (RBI) is planning to issue just a couple of licences after it finalises the norms for the entry of new banks, C Rangarajan, chairman, economic advisory council to the Prime Minister, has suggested that there should be no bar on entry of new banks. “If the banking system is to remain competitive, there should be no bar on entry of new banks .” 

FE

RBI to Take Second Quarter Monetary Policy Review

Reserve Bank of India (RBI), the apex banking regulator of India, has announced that it will meet to take call on second quarter review of monetary policy on October 25. RBI has scheduled the meeting with the chief executives of major scheduled commercial banks at 11.00 a.m. on October 25, 2011 at the Central Office, Reserve Bank of India, Mumbai.  After the meeting Dr. D. Subbarao, Governor, Reserve Bank of India will announce the Second Quarter Review of Monetary Policy 2011-12 on same day. RBI has announced the first quarter review of monetary policy on July. Amid spiraling inflation, the central Bank of India has hiked key policy rates by 25 basis points while announcing the mid-quarter monetary policy review, September 2011. According to this report, RBI had hiked the repo rate by 25 bps to 8.25% from 8%, and reverse-repo rate stands adjusted to 100 bps below the repo rate at 7.25% and the marginal standing facility (MSF) rate to 9.25%. Despite the strong monetary policy stance it failed to tame inflation. In last 18 months RBI has increased the key policy rate 12 times. RBI has raised the key policy rates by 350 percentage points to control inflation, which is sharpest upper movement in interest rate around the world. Even though, India is facing sharpest inflation rate amongst the emerging economies. Till now rain is normal within the country, although flood is affecting the production of wheat in Bihar. The production of food grain is expected to increase this year. RBI is alert and watchful on the problem of inflation and depreciating currency. Upcoming month is crucial for the RBI to intact the momentum of growth in adverse condition.

http://goindocal.com/rbi-to-take-second-quarter-monetary-policy-review--go-2662.htm

A Conversation With Ela R. Bhatt

Ela Bhatt, a Gandhian and a lawyer who founded the Self Employed Women’s Association in Gujarat, is sometimes referred to as the mother of microfinance. She helped start Mahila Sewa Co-operative Bank in 1974, two years before Muhammad Yunus began the project that would later become Grameen Bank. Ms. Bhatt, who is also a member of The Elders, was recently appointed to the board of the Reserve Bank of India, the country’s central bank....

Read...........

Rate hike seen

The Reserve Bank of India is seen hiking key rates by a further 25 basis points next month as food prices continue to be at elevated levels despite a decent monsoon and good agricultural performance. The apex bank is scheduled to meet on October 25 for the second quarter review of monetary policy. inflation bias,” said Pan. In a report on Thursday, Hemindra Hazari and Manuj Oberoi of Nirmal Bang Institutional Equities noted the key takeaways from a meeting with RBI’s deputy governor K C Chakrabarty: “RBI to maintain its hawkish stance on inflation and is willing to sacrifice economic growth in the short term for its broader objective of sustained  development in the long run.” The RBI has already hiked interest rates 12 times since March 2010 to control inflation.  “Unless we see the global situation worsening, we are expecting a rate hike by the RBI by 25 basis points,” said Chakrabarty.

DNA

Higher gold loan rates will affect customers, says Muthoot Finance MD

... RBI has recently appointed a committee to study whether banks should be permitted to buy out from NBFCs, based on which there could be a re-think on the earlier directive, he said. The committee will be headed by Mr M.V. Nair, Chairman, Indian Banks' Association. ....

Read...........

Onus of job creation on industry

...Good physical infrastructure, a progressive exit policy, structures to support clean and green technologies, appropriate investment incentives, and business friendly approval mechanisms will be the cornerstones of this new initiative.........

Read...............

Banks may incur MTM losses as yields shoot on higher borrowing

A surge in the yields on government securities in the last two working days of the current quarter will mean that the banks will now face the possibility of incurring mark-to-market losses on their investment, experts said on Friday. The government had yesterday announced a higher-than-planned borrowing programme for the second half of the current financial year. As a result, the yield on the 10-year benchmark government bond shot up 10 bps to close at 8.4 per cent, while yields on the second-most liquid security, the 11-year paper, went up by 8 bps. The market was not anticipating Rs 53,000 crore of extra borrowing by the government, which pulled the bond prices down. According to dealers, the most hit will be the banks that bought papers in the expectation that yields will cool off. This is because the government has been maintaining that it would stick to the budgeted borrowing target of Rs 4.17 lakh-crore this financial year. According to the issuance calendar, government borrowings will be at Rs 4.7 lakh crore this financial year. "There may be an MTM hit, as yields have hardened over the last quarter," says T S Srinivasan, general manager, Indian Overseas Bank. This is the third quarter in line when hardening yields will hurt banks' treasury. "Yields may cross 8.5 per cent unless RBI opts for a buyback in coming months. The yield curve will steepen now, as there are more issuances in 10-14 years' category than smaller durations," he adds. As mandated by the RBI, banks cannot hold more than 25 per cent worth of demand and time liabilities in held-to-maturity category. Banks need to provide mark-to-market for securities held in available-for-sale and held-for-trade categories and not for HTM category.

On Wednesday, RBI Deputy Governor Subir Gokarn issued a hawkish statement, pushing the yields go up, as the country's central bank declined to indicate any signal of pause in the rate hikes. RBI has hiked the key policy rate 12 times in the last 18 months – a total of 350 bps in the repo rate though effective tightening was 550 bps – to tackle inflation that hovered around the double digit mark for nearly 18 months. RBI will meet again on 25 October to review the monetary policy. According to treasury officials, banks that had recently acquired government bonds will feel the pinch more. "The extent of the mark-to-market loss will depend on the composition of the available for sale portfolio. The bank that had recently acquired government securities will be impacted more,&" notes a senior official from a public sector bank. However, banks tend to reduce the holding in AFS and held for trade categories in rising interest rate scenario. In such case, the extent of depreciation will be limited. "Depreciation," Pawan Bajaj, general manager, Bank of India, "may not be significant as most banks are not holding many securities in AFS category. The average tenor in AFS category is around 2.25 years." Going ahead, some of the bankers expect yields to come down, as the present level of yield will make government borrowing expensive.

BS

National Housing Bank to seek nod for raising funds thru ECBs

..NHB will soon approach the Finance Ministry and the Reserve Bank of India (RBI) to allow it to raise ECBs, Mr R.V. Verma, Chairman and Managing Director, NHB, told Business Line in an interview here....

Read...........

Sasan Power gets RBI nod to raise $2.2 billion

Reliance Power said it has received approval from the Reserve Bank of India to raise about $2.2 billion from the US Exim and Chinese banks for its 3,960-MW Sasan ultra-mega power project in Madhya Pradesh. The estimated cost of the project is about Rs 19,500 crore. RPower had signed memorandums of understanding with the US Exim for $5 billion in October last year and the Chinese banks for $12 billion in November. The interest rate for the US Exim loan is about 3.5 per cent and from the Chinese banks close to 5.5 per cent, with tenures of 12 years with a moratorium of four to five years during the construction period.

HBL

Whose ID is it anyway? Chidu’s or Nilekani’s? And RBI says no

....It seems as if Nandan Nilekani’s grandiose Aadhaar Unique ID project will not be all that it is cracked up to be: a simple 12-digit number that will serve as both identity and authentication for all 1.2 billion-and-odd resident Indians......

Read......... 

RBI chief isolated in battle against inflation

For months, the hawkish, inflation-fighting RBI has been in a shrinking minority of its emerging market peers. Now the recently re-appointed central bank governor is facing stiff opposition to his crusade at home. As recently as last week, the RBI made clear it will stick to its anti-inflationary stance despite censure from the Congress-led government that is signalling 12 rate rises within 18 months are hurting growth and its electoral prospects. India's inflation is near 10%, one of the highest among major economies in the world. It is among a handful of countries such as Kenya and Nigeria still raising rates while the world frets over headwinds from a European debt crisis and a sputtering US economy. Neighbours in Asia have turned dovish, some such as Brazil and Turkey have already cut interest rates. Subbarao appears undeterred by the criticism. RBI sources say he is determined to keep policy tight, maybe even tighten it further. "Growth has a floor, but inflation has no ceiling," said a senior RBI official with direct knowledge of monetary policy making. "If we don't do anything, inflation expectations will rise." Until now, the government and the RBI have largely been on the same page when it comes to monetary policy, with near double digit inflation not only an economic 'worry but a political headache as prices of foods and fuel jump. But over the past few weeks, criticism and advice for the RBI chief have been more blunt than usual. "I have had hesitation on a rate hike this time which in the past I did not", Kaushik Basu, chief economic advisor to the finance ministry, said after the RBI raised the repo rate by 25 basis points on Friday. "I would personally, yes, vote for pause", he told reporters when asked what the RBI should do at its October policy review. Basu is a top adviser in the finance ministry and is known to be not only close to finance minister Pranab Mukherjee but also a key strategist on economic policy, one who often echoes Mukherjee's thinking on key issues. The top adviser, who was widely believed to be in the race for the RBI top job, has asked the central bank "to think out of the box" and consider the examples of Brazil and Turkey that cut rates to protect growth. Montek Singh Ahluwalia, the deputy chairman of Planning Commission and Prime Minister Manmohan Singh's close advisor, also questioned Subbarao's monetary action. 

The Sunday Guardian

Teller-A.T.M. Hybrid Takes Banking to Rural India

Time was, banks employed armies of human tellers. Later, they replaced many of them with automated teller machines. Now, India is using a hybrid of the two — the human A.T.M. — to expand banking to its vast rural population......

Read........ 

Central Bank Of India : 144th SLBC Meeting

State Level Bankers’ Committee, Madhya Pradesh held its 144th meeting today at the Zonal Office of Central Bank of India, Bhopal. The meeting was chaired by Shri Avani Vaish, IAS, Chief Secretary to Govt. of M.P. and attended, amongst others, by Shri R. Parasuram, IAS, Additional Chief Secretary, Shri R.K. Dubey, Executive Director, Central Bank of India, Shri P.K. Panda, Regional Director, Reserve Bank of India, Shri A. Krishna Kumar, Managing Director, State Bank of India, Shri Ashok Shah, Commissioner-Institutional Finance and Shri Pravin Rawal, Deputy Secretary, Ministry of Finance, Govt. of India. Shri B. Mondal, General Manager, Central Bank of India and Convenor, State Level Bankers’ Committee, Madhya Pradesh, conducted the meeting and welcomed the dignitaries and other participants. The meeting reviewed the performance of banks during the first quarter ended June, 2011, 

Zee News

Govt officials, bourses to discuss Jalan panel proposals

Senior government officials and top stock exchange executives will discuss tomorrow the long-pending proposals made by a Sebi-appointed panel for sweeping changes on how the bourses should be owned and run. The recommendations of the committee, headed by former RBI governor Bimal Jalan and submitted to market regulator Sebi in November last year, would be discussed at a workshop organised by the industry chamber Ficci here. Those expected to participate in the discussions include R Gopalan, Economic Affairs Secretary R Gopalan, Joint Secretary (Capital Markets) Thomas Mathew, and Jalan himself. Besides, top executives of three national stock exchanges -- NSE, BSE and MCX-SX -- as also representatives from a host of smaller bourses and other market entities are expected to be present alongside other industry experts. The implementation of the recommendations made by the Jalan committee has been pending for almost a year now. Among other proposals, it has strongly recommended capping the profitability of bourses and barring them from getting listed to safeguard their front-line regulatory role. The committee, set up in January 2010 for review of ownership and governance norms for market infrastructure institutions, submitted its report to Sebi in November last year. Sebi then invited comments on it till December 31. The proposals generated intense debate and opposition was raised to proposals like non-listing of bourses and cap on profitability, terming them as anti-investor measures. In the wake of stiff opposition to the proposals, Sebi later put the ball in the government's court. Thereafter, a committee was set up by the Ministry of Corporate Affairs (MCA) to discuss the proposed rules, which held its consultations in May. In its meeting with the representatives from the bourses, industry bodies, accounting bodies and other market entities, the MCA sought suggestions a roadmap for segregation of regulatory and commercial roles of the exchanges. It was proposed that steps need to be taken to keep the front-line regulatory role of the bourses unaffected by their profit-making and other business interests after they become publicly held companies following their listing. On its part, the Sebi board has not been even discussing the matter in its last few board meetings, as it was waiting for suggestions from the government on the contentious issues emanating from the Jalan committee proposals. It is expected that the matter could come up for the Sebi board's consideration in its next meeting, once the government takes a final view after consultations with various parties.

BS

Being sensible

“Time running out to find solutions for global crisis, warns RBI chief” (Business Line, September 24) brings up an interesting fact. India has crossed many mile stones — $1 = Rs 21 in 1991 to $1= Rs 50. This is even after the US dollar is in doldrums (by printing more dollars). Dr Subbarao, Governor, RBI, the Finance Minister and the economist Prime Minister always talk about the US and the global economy and don't seem very concerned about the state of the Indian economy. When they could reduce the interest rates for the benefit of unscrupulous real estate and crony politicians in one step, why are they taking 13 steps to come to the old level of interest rates? The RBI is intervening when the rupee is going up and watching tamasha when the rupee is going down. What happened to the shareholders of the erstwhile GTB merged into OBC? 

Murthy (HBL)

Operation inflation

This refers to Subir Roy’s column “Old remains gold in fighting inflation” (Value for Money, September 28). The author, while elaborating on former Reserve Bank of India governor I G Patel’s views on inflation, has underlined the importance of balancing monetary tools with fiscal instruments to control inflation. While RBI’s initiatives in controlling inflation can be commended, its approach is flawed on several counts. First, RBI’s stance of treating inflation purely as a monetary phenomenon is completely incorrect in the Indian context. Second, the Bank has been merely been raising repo and reverse repo rates at periodical intervals. What about other instruments of monetary policy? During the seventies and the eighties, RBI controlled inflation through other instruments of monetary policy — selective credit control (SCC) measures, open-market operations and moral suasion, to name a few. Of these, SCC directives to commercial banks have had the desirable effect in monetary expansion by way of bank credit. Finally, RBI should have apprised the finance ministry of the futility of a monetary policy without the back-up of a prudent fiscal policy. IG’s prescription to combine fiscal discipline with monetary policy, thus, is quite right.

K V Rao, Bangalore

Subir Roy wrote succinctly about I G Patel’s views on how to tackle inflation. IG was not dogmatic about any economic ideology but was a believer in Karl Popper’s Open Society principles. His experience as director of London School of Economics is important to analyse again in the present context of volatility in the world economy. Policy-makers need to be flexible in the allocation of resources at margin. When an economic downturn is expected because of the downturn in the global market, policy-makers should be flexible to shift resources towards the “less tradable” rural sector in which growth is likely to be more equitable. This will also help in dampening inflation.

Chandrashekhar G Ranade, Washington DC (BS)

Profiting from inflation

RBI Governor D Subbarao recently commented in New York that “inflation has been fairly stubborn”. Over the last few months, there has been growing pessimism on the efficacy of monetary policy to tame inflation. Reasons proffered range from supply-side constraints, increasing rural income and changes in dietary habits, to conspiracy theorists proffering that developed countries with unmanageable debt burdens are inflating their way out of trouble and passing the contagion to their less developed brethren. Whatever be the reason, the fact remains that the last 20 months have seen the highest inflation in the last 20 years in India. Many businesses may believe that inflation may not be a bad thing as long as they can pass on the cost increases to their customers as price increases. And these businesses are not wrong as inflation does have beneficial effects. Company revenues increase not only in nominal terms but also in real terms. This can result in a positive effect on wages and employment, which can lead to further demand and more economic growth. For governments with unsustainable debt overhang, it can lower the real burden of servicing debt. However, any benefit from persistent high inflation is an illusion, and, in fact, has serious negative impact on businesses. It retards productivity growth as managerial decisions fall prey to the so called ‘money illusion’ (for a more detailed discussion of the topic, please read the Boston Consulting Group white paper, Why Companies Should Prepare for Inflation, November 2010) or the tendency to mistake price increase for real gains. Because managers believe they are doing better than they actually are, they become complacent and do not take a hard look at their businesses. Inflation also encourages underinvestment and distorts allocation of resources as depreciation allowances, based on historical costs, prove inadequate. BCG research shows that despite initial positive economic effects of inflation, total shareholder returns (TSRs), which combine share price appreciation and dividends, are typically disappointing, particularly when measured in real terms. Also, companies that destroy more value relative to their peers during inflationary period are much less likely to catch up and compensate their shareholders when inflation falls. Thus, inflation creates losers—and winners of those who manage its risks well. Inflation can change the rules of the game by establishing new sources of competitive advantage—from advanced pricing and sourcing strategies to superior asset productivity. When hit by inflation, companies with the highest capital can end up as big losers as they are unable to generate additional ‘inflationary’ cash for their high asset-intensity businesses or to replace old assets and end up making sub-optimal capital allocation and investment decisions. The sure winners are those companies that increase price faster than rate of inflation to provide for not just cost increases, but also increased valuation of assets and thus protect gross margins from erosion by inflation. It was just a little over 24 months ago that the country was patting itself on the back, having come out strongly from the economic crisis of 2008 that had severely crippled the economies of many developed countries. Inflation was negligible and the country was looking forward to accelerating GDP growth towards double digits. Within 6 months, the economy hit the inflation bump, with the headline (WPI) inflation rate going over the 9% mark. Twenty months later, despite several rate hikes by RBI, we see no respite. No wonder Subbarao was forced to make his comment. For Indian businesses, this raises a fundamental strategic question: When will the inflation moderate, and how aggressively should they react to it? Many experts believe that we are in for a period of sustained inflation due to an unprecedented combination of global and local conditions. Clearly, India faces major supply-side issues that are driving inflation, particularly non-food manufacturing inflation, which has remained high even as food inflation has  moderated somewhat in recent weeks. This is unlikely to change in the near term, unless the slowing investment cycle reverses itself and global commodity prices fall significantly. Crude oil prices are, of course, a fly in the ointment, and can have a dramatic effect up or down on headline inflation. This only strengthens the case for Indian companies to make their business models ‘inflation proof’. To do so, they have to adopt a four-step programme. The first step is to assess the risks, and develop a detailed understanding of potential exposure to different inflation scenarios and identify the specific areas of weakness, which may vary from business to business or one product to another. The second step is to know the real costs and prices—and avoid money illusion mentioned earlier. Companies should closely track inflation-adjusted financial indicators that track the real performance of their businesses. The third step is to protect gross margins. The key to this is superior pricing strategies and processes, which could range from creative contract design to pass inflation risks to customers, eliminating price leakages, reacting quickly and frequently to raw material price increases and reducing price sensitivity of customers by unbundling products and services, etc. The fourth and final step to become an inflation winner is to safeguard investments, which is particularly relevant for high capex companies. This calls for adopting a conservative financial policy of low leverage, increase asset productivity and carefully prioritise planned investments. The last time Indian companies faced inflation rates close to current levels for a prolonged period of time was 20 years ago. Very few of the leaders who had navigated through that period remain at the helm of their companies. If inflation is going to become a ‘given’ in the medium term in India, today’s business leaders have to learn not just to live with it, but how to win in the market place. As Bruce Henderson, the founder of BCG, said in one of his essays, while the negative impact of inflation is quite clear with real profits being squeezed despite higher profitability, it also offers unique opportunity to differentiate one’s performance. The winners are those who will find the way to profit from inflation! 

FE

RBI pulls up Islamic bank

The Reserve Bank of India has asked the country’s first and only Shariat-based NBFC, the Kozhikode-based Alternative Investments and Credit Limited (AICL), to commit sacrilege. The NBFC, for which charging interest is ‘haraam’ or forbidden, has now been asked to publish an interest rate structure just like any other conventional banks. The charge is that the AICL, which has been operational for over a decade, has flouted RBI’s fair practices code under which a financier has to specify the interest structure. The AICL has been given two weeks to respond to the RBI’s directive. “We have met RBI officials in Mumbai last week and put our points across,” said the AICL managing director, Mr K.M. Abdul Salam. “Shariat teaches us to abide by the law of the land. But we also have our spiritual commitments,” Mr Abdul added. The AICL’s immediate challenge is to find a middle-path between Shariat principles and existing banking regulations, which does not recognise interest-free transactions as a banking activity. Instead of interest, an Islamic bank like AICL takes funding charges, which is the share of profits the borrower has to pay to the lender. Banks based on Shariat principles function on the basis of a participative finance model. The borrower needs to pay only if he had earned a profit. In case there are unavoidable losses any year, the borrower need not pay any funding charges. 

DC

The Economic Experts Who Advise our PM



Duvvuri Subbarao, Governor, Reserve Bank of India



Subbarao is a 1972 batch Indian Administrative Service (IAS) officer of Andhra Pradesh cadre. He is the 22nd and current Governor of Reserve Bank of India, serving under Prime Minister Manmohan Singh. He did his schooling from the Sainik School in Korukonda, Andhra Pradesh. He graduated in Physics B.Sc Hons. from Indian Institute of Technology Kharagpur (class of 1969) where he was the recipient of Director's Gold Medal. He received a M.Sc degree also in Physics from Indian Institute of Technology Kanpur. Subbarao topped the IAS examination in 1972 and was assigned the Andhra Pradesh cadre. He later did a Masters degree (MS) in economics from Ohio State University, United States and was a Humphrey Fellow at Massachusetts Institute of Technology. Although the RBI governor works autonomously, his role in shaping the country's economic policies cannot be overstated. Subbarao has earned more critics in recent months for supposedly killing growth, but a few admirers too for his conviction. "Subbarao is a pragmatic and astute central banker who has taken independent decisions based on his well-researched conviction," says Madan Sabnavis, chief economist at rating company Care. "He has recognised inflation as being the single most important malaise afflicting the economy and pursued the goal of increasing rates, notwithstanding the pressures being exercised from different quarters, displaying a lot of character."

C. Rangarajan, Chairman, Prime Minister's Economic Advisory Council

He is an Indian economist and a distinguished former Member of Parliament and Governor of the Reserve Bank of India. Currently, he is the Chairman of the Prime Minister's Economic Advisory Council. He is also the Chairman of the Madras School of Economics, and the Founding Chairman of the CR Rao Advanced Institute of Mathematics, Statistics and Computer Science. Rangarajan graduated from the prestigious Loyola College of the University of Madras in the commerce stream (where he was a contemporary of the Yale University economics professor T N Srinivasan). He later took Ph.D. in economics from the University of Pennsylvania in 1964. Rangarajan taught at several institutions including the University of Pennsylvania and the IIM-A where he also served as the Director. Commenting on the rate hike, Dr. C. Rangarajan, said, "This is the right decision... in the background of rising inflation...Inflation has been above 9 percent since January this year and taming inflation is the most important concern of the central bank." 

http://www.siliconindia.com/shownews/The_10_Economic_Experts_Who_Advise_our_PM-nid-93260.html

'Aadhaar valid to open bank a/c'

NEW DELHI: Contrary to the Reserve Bank of India's notification, an  Aadhaar card is a valid residence proof for opening a bank account. "Aadhaar is a valid "Know Your Customer" (KYC) document for opening a bank account," Unique Identification Development Authority of India (UIDAI) chairman Nandan Nilekani said. "The Aadhaar letter has two parts - identity and address. If the address that a person shows to the bank is the same as on the (Aadhaar) letter, it is also a proof of residence," he said. The Reserve Bank of India's (RBI) notification issued on Wednesday stated that Aadhaar is not a valid residence proof. However, the central bank reportedly accepted its validity as identity of a person. Nilekani said, "In a few days, we will be starting online authentication of address and identity. If the address matches through online authentication, it will be treated as current address (of the person applied for a bank account or a service)." He clarified, "As of now, the banking system has declared Aadhaar as a valid KYC norm for all bank accounts as per the RBI notification issued on Wednesday." The telecom and petroleum ministry also consider Aadhaar as a valid KYC norm for issue of SIM cards and cooking gas connections. He said about 37 million people across the country have been given unique identity cards and another 1.2 million people will get it daily by October. "New people are getting enrolled across the country at the rate of 6 lakh a day, by October the figure will be one million people per day," he said. Nilekani pointed out that there is little possibility of duplicates arising out of the system because only one ID is issued to a person taking his biometric signature. Asked whether the UIDAI was on a collision course with the Planning Commission, the UIDAI boss asserted that the Authority - set up for issuing national identity cards - was working under the powers delegated by the Prime Minister. "My powers have been delegated by the PM," Nilekani said, adding that UIDAI is an attached office of the Planning Commission. The issue came up after the Plan panel reportedly expressed concerns that the UIDAI is departing from set government procedures and suggested a re-look into its structures.

TOI

'Wage hike creates new challenges'

MUMBAI: The RBI has said that India's per capita income is likely to double between 2006 and 2017-18. While the increase is a positive development, it creates new challenges to the central bank in managing demand.  Speaking at the Harvard Business School, Boston, on Tuesday, Deepak Mohanty, Executive Director, RBI, said that India's per capita income, which had taken four decades to double by 1991, doubled thereafter in 15 years. "If India could maintain the current pace of growth, it will lift millions out of poverty and enrich the global economy. While India has come a long way, maintaining the current pace would itself be challenging and require continued reform efforts," he said.  Mohanty said that India will have to raise agricultural productivity. "Demand for protein-based products like meat, egg, milk and fish as well as fruits and vegetables have increased substantially with rise in income. The demand-supply mismatches in the case of these items have resulted in rise in their prices There is, therefore, a need for another technological breakthrough to give fresh impetus to agriculture," he said.  He said that increase in farm productivity will require a substantial part of labour force to be `ejected from agriculture' not only to improve the productivity in agriculture but also in the overall economy. "It is unconceivable that they can all be absorbed gainfully in the services sector. Hence, industrial employment will have to expand so also the relative contribution of industry" he said.  To support industrialization, he said it was necessary to to step up investment in infrastructure. "The Planning Commission suggests an investment of Rs 45 trillion (US $ 1 trillion) over the Twelfth Plan (2012-17). Given the large requirement of long-term funds, financing infrastructure would be a big challenge. Besides budgetary support, the bulk of the funds has emanated from banks" said Mohanty.

TOI

Infrastructure loans: Banks ‘averse’ to RBI counsel on ‘risk’ from nature

During these edgy times when ‘risk aversion’ is the marauding theme across the financial world, banks in India have only accreted risk, though of a different ‘nature.’..............

Read............ 

RBI's PTC ruling to impact NBFCs' capital adequacy

MUMBAI: The capital adequacy and net interest margins (NIMs) of non-banking finance companies (NBFCs) could be under pressure following the Reserve Bank of India issuing fresh guidelines on securitisation, according to the latest report of Standard Chartered Bank. The RBI on Tuesday disallowed credit enhancements in transactions where banks buy loans from NBFCs. The regulator has proposed that banks follow the pass-through certificate (PTC) route instead. Currently, most priority sector portfolio sales by NBFCs to banks are done through the credit enhancement route. "For NBFCs, if the buyouts happen through PTCs rather than assignments, capital requirements will rise. For Shriram, tier-I capital adequacy will fall from 18% to 14.3%," said the Stanchart report. "This will have some mark-to-market implications for banks and will also impact their loan growth as PTCs are treated as investments while portfolios bought out by loan assignments are treated as loans," added the report. Unlike a credit enhancement transaction, there is an underlying asset to fall back upon in a PTC transaction.

ET

Police Commissioner release book titled “Reaching Out to the Unreached: the Corp Bank Way”

Read......

Mangalore, Sep 29: City police commissioner, Seemanth Kumar Singh released a book titled “Reaching Out to the Unreached: the Corp Bank Way” based on Corporation Bank’s financial inclusion model and written by Dr. N. K. Thingalaya, Dr. M. S. Moodithaya and Dr. N. S. Shetty in the conference hall of Corporation Bank’s Corporate Office on September 29, Thursday. Dr. K. C. Chakrabarty, the deputy governor of Reserve Bank of India, wrote the foreword for this book, which also carries a message by Mr. D. K. Mittal, the secretary for the department of financial services, Ministry of Finance, Government of India.

Banks see huge fall in requests for demand drafts

The Demand Draft (DD), a popular financial instrument for transfer of funds or payment till recently, is losing its sheen. Banks are seeing a significant dip in the requests for issue of DDs, thanks to use of electronic mode of transfer and net-banking facilities. “The issue of DDs in banks is showing a 50 per cent decrease of late. I think, it is going the legendary Indian postcard way in terms of decreasing patronage from customers,'' Mr Anil Girotra, Executive Director, Andhra Bank, told Business Line. The use of DDs were inevitable till three-four years ago for payment of fees for recruitment tests, academic exams and Government transactions. “On an average, a bank branch used to issue 300-500 DDs a day earlier. But now we don't find the number of DDs crossing even a hundred in some branches,'' said a senior official of Punjab National Bank. Almost all major recruiters such as Public Service Commissions, banks and some academic institutions have now switched over to online payments making the DDs almost obsolete. The expanded use of National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS) also made DDs less popular. “Many businessmen are using the electronic mode now as it is faster. There is no blocking of funds. Clearance of DDs may take up to 10 days in some cases,'' Mr K.T. Ajit, a senior executive of State Bank of India, said.  Then, there is also a cost factor. The RBI had advised banks to reduce commission on DDs as early as 2007 though commission/service charges continue to be on the ‘higher' side, according to experts. As of now, commission for issue of DD up to Rs 10,000 is around Rs 50. For Rs 1 lakh it is upwards of Rs 400.  Banks are not forthcoming to share exact numbers on the dip in overall revenue due to decreased demand for DDs. 

HBL

Banks make U-turn on prepayment

The Indian Banks’ Association (IBA) lobby group has written to the Reserve Bank of India (RBI) arguing against the move, fearing mismatches in liquidity owing to early payment.....

Read...... 

RBI penalises MNSBL for violating anti-money laundering rules

Ahmedabad : The Reserve Bank of India has penalised Gujarat-based cooperative lender Mansa Nagarik Sahakari Bank Ltd (MNSBL) for violation of Anti-Money Laundering (AML) guidelines. A penalty of Rs 1 lakh was imposed on Gandhinagar- headquartered MNSBL for violating the RBI''s instructions for submission of reports on cash transactions above Rs 10 lakh to the Financial Intelligence Unit-India (FIU-IND) under the AML guidelines. The RBI had issued a show-cause notice to the bank, in response to which the bank had submitted a written reply. "After considering the facts of case and the bank''s reply, as also personal submissions in the matter, the Reserve Bank of India came to the conclusion that the violation was substantiated and warranted imposition of the penalty," an official statement said. Over a dozen cooperative banks from Gujarat have been fined by the RBI in the recent past for violation of AML and KYC norms.

MSN News 

RBI stall at exhibition to create awareness on use of currency

RBI, Chennai, has put up a stall at the on-going Government Exhibition at Bose Maidan here to create awareness among the public on proper use of currency, identification of counterfeit notes etc. Indian Bank has been entrusted with the work in the stall at present. The stall, according to a press release, can be used for the purpose of exchange of cut and soiled notes, issue of fresh currency of Rs. 5, 10, 20, 50 and 100 denominations, issue of new coins of Rs. 1, 2, 5, & 10 denominations and issue of Rs. 5 commemorative coins (marking 1000^th  year of Thanjavur Brigadeeswarar Temple). On the first day of inauguration on Saturday, coins to the tune of Rs. 5 lakh were distributed to the public. Indian Overseas Bank and Axis Bank will join the stall management after September 25. The stall was inaugurated by G.P. Borah, General Manager, Issue Department, RBI, Chennai.

HBL  

Fiscal consolidation crucial for 9% growth: RBI

The Reserve Bank of India (RBI) has said the growth target of nine per cent envisaged for the 12th Five-Year Plan can be achieved only if inflation is brought down, and supply-side issues in agriculture are resolved. "Without bringing inflation down from the current level, it would be difficult to sustain a high level of growth. This would require greater monetary-fiscal coordination and the alleviation of supply constraints, particularly in agriculture," said RBI Executive Director Deepak Mohanty. Mohanty said achieving nine per cent growth between 2012 and 2017 would be a challenging task, since local factors would also play a key role in deciding GDP (gross domestic product) growth. "Hence, growth would have to be raised by an additional percentage point per annum, which is challenging because it would require a conducive global environment and policy reforms at home," he said. Aiming to bring inflation down, the central bank has raised the repo rate by 350 basis points in the last one and a half years, and this has led to moderation in growth. Inflation has remained much above the central bank’s comfort zone. The wholesale price index rose 9.7 per cent in August on an annual basis, compared with 9.22 per cent in July. "Empirical evidence suggests the threshold level of inflation is in the range of 4-6 per cent," Mohanty said in Boston. Emphasising on increasing agricultural productivity, Mohanty said there was a need to beef up rural infrastructure to remove bottlenecks in the supply chain. "There is, therefore, a need for another technological breakthrough to give fresh impetus to agriculture. At the same time, greater emphasis would have to be placed on the management of the supply chain, with investment in rural infrastructure," he said. The central bank also called for an increase in agricultural growth to four per cent, compared with the current three per cent right. The regulator also said workforce needed to be removed from agriculture, and absorbed by the manufacturing sector. "A substantial part of this labour force would have to be ejected from agriculture not only to improve productivity in agriculture, but also in the overall economy," Mohanty said. It is inconceivable that they can all be absorbed in the services sector. Hence, industrial employment would have to expand, as also the relative contribution of industry, Mohanty said.

BS