ET
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Saturday, November 19, 2011
RBI should intervene in forex market if volatility is high: C Rangarajan
The price of inclusion
... There has been no period in recent memory when the three key numbers (the twin deficits and inflation) were all flashing red as busily as they are doing today. All three indicators point to excess demand, and at least two of them are....
Read...........
Gujarat, UP and Bengal to raise Rs 1,000 crore each using RBI bond auction window
Gujarat, Uttar Pradesh and West Bengal plan to raise Rs 1,000 crore each on November 22 from the capital market using the Reserve Bank of India bond auction window. Overall, eleven state governments plan to enter the market next week for a cumulative Rs 5,860 crore. They will raise the sum through sale of 10-year state development loans using Reserve Bank of India's auction window. Among other states, Andhra Pradesh, Haryana, Jammu & Kashmir, Rajasthan plan to garner Rs 500 crore each while Tamil Nadu will look for Rs 490 crore. Punjab, Goa and Meghalaya will also use the RBI window for Rs 250 crore, Rs 70 crore and Rs 50 crore respectively. The state government dated stocks will bear interest at the rates determined by RBI at the auctions. Interest will be paid half yearly on May 23 and November 23 of each year till maturity, RBI said in a press statement on Friday.
ET
Corporates express concern over currency volatility
Terming the Indian foreign exchange market as “extremely shallow”, former CFO of Infosys Technologies T. V. Mohandas Pai sought intervention of the Reserve Bank of India (RBI) in the market...........
Read................
Read................
Macquarie raises red flag on economy; sees growth below 7% -
Macquarie has cited “lack of policy reforms” and political compulsions as key reasons for the downgrade of its GDP growth projection for the fiscal FY12-13, beginning April 2012, to 6.9%, from 7.9% previously............
Read.......
Read.......
Bhartiya Samruddhi Finance fears default, seeks RBI lifeline
.. "BSFL has approached the Reserve Bank of India seeking its approval to file for corporate debt restructuring,'' said one of the persons who knows the matter." The CDR cell has not received any formal application, but it is in talks with its lenders and exploring the option.''....
Read............
Will Charminar Bank survive RBI decision?
About 10 years ago Charminar Cooperative Urban Bank had become a high point in cooperative banking sector. There were businessmen and communities that wanted to emulate the 'zest and vision' of its chairman Syed Alamadar Hussain Sajjad Aga. But last week, the Reserve Bank of India (RBI) declared the bank insolvent and cancelled its licence.....
Read.....
Rules on infrastructure debt funds to be eased
...The Reserve Bank of India will come up with norms next week for banks and non-banking finance companies (NBFCs) to set up infrastructure debt funds. This will lead to release about Rs 1 lakh crore bank loans for core sector projects......
Read................
Read................
Are market-linked small savings attractive?
...One of the most significant recommendations was making the returns of small saving schemes market-linked and that is now a reality. From this financial year, the rates for small saving instruments will be benchmarked to those of government securities (G-secs) of similar maturity periods.......
Read............
Friday, November 18, 2011
Change the law to strengthen RBI- S.S.Tarapore
 |
| The panel to look into financial sector laws should work towards enhancing the autonomy of institutions. The overarching powers of the government need to be addressed |
Hostility towards RBI
A quick glance at the Reserve Bank of India (RBI) Act would convince the Commission that the RBI Act was framed in the context of the then Colonial regime which was suspicious of the RBI's loyalty, and this generated considerable hostility towards the RBI. It is unfortunate that the present legislative framework is still tilted totally against the RBI. The present Act sanctifies the RBI being a vassal state of the government. The RBI is not directly accountable to Parliament and this is the excuse for the government to be overbearing in its dealings with the RBI. The law lays down that the government has the right to dismiss the Governor and Deputy Governors without assigning any reason and there is no redressal machinery to protect the dismissed official. To say the least, this is a legislative atrocity which needs to be rectified.
Façade of autonomy
The government has the right to give directions to the RBI on almost everything, but it rarely uses these formal powers. While the government calls the shots, there is a facade of autonomy for the RBI; so that the central bank has to face the wrath of the public while, in fact, the government decides the minutiae of policy. There is a need for greater transparency regarding the role of government vis-a-vis the RBI. This is a major lacuna in the RBI Act. Surely, there should be an accord between the government and the RBI on the policy objectives which should be placed in the public domain and the RBI should, with legislative backing, be provided instrument independence. The Commission needs to avoid the temptation of taking the stance that “Give me a problem and I will produce an institution”. There is frequent talk of stripping regulation and supervision from the RBI. The RBI is the ultimate provider of liquidity and a separate regulatory body would not have the resources to provide liquidity. Internationally, the jury is still out and the Commission should avoid any hasty recommendation of separating financial regulation from the RBI.
Debt management
Again, in the area of Public Debt Management, the government is going ahead with the setting up of a Debt Management Office (DMO). The separation of debt management from monetary policy is highly desirable, but there are certain prerequisites to be met. The RBI should first have total autonomy in the area of monetary policy. Furthermore, the fiscal deficit should be within manageable limits. In the recent period, the market borrowing is expected to be very heavy and the government would want the larger borrowing placed in the market without any significant increase in interest rates. In the absence of genuine autonomy, the RBI would be muscled into purchasing large amounts of securities from the market to create room for placement for the fresh borrowing. Again, with the government directly handling the borrowing programme, it would go back to the reprehensive practice of forcing public sector banks to subscribe to fresh government borrowings. In the area of banking regulation, there are separate Acts for the State Bank of India, their associates and the nationalised banks. The Commission needs to consider recommending that all banks be incorporated under the Companies Act and regulated by the Banking Regulation Act. The government as proprietor of public sector banks could consider using its proprietal rights, but should refrain from regulatory action. There are many issues which would warrant the Commission's attention but they should be dealt with in a non-partisan manner, and it should avoid fancy recommendations that would result in the Commission's report landing in the scrap heap.
HBL
I-T counters at 145 bank branches
KANPUR: The authorities of the Reserve Bank of India had observed that in previous years, there was an increase in the number of persons depositing income tax dues at RBI counters in December. Keeping this in view, additional counters are opened in public sector banks. Rajeev Dwivedi, Deputy General Manager (Banking) informed that in order to overcome the inconvenience to tax payers, the facility for depositing income tax by cash or cheque is also available at 145 branches of public sector banks, including State Bank of India and three branches of private sector banks. The list of such branches has been displayed outside the office of RBI and also at the branches of other commercial banks, he added. Dwivedi said that the tax payers are requested to take advantage of these arrangements and deposit the taxes before the last date to avoid inconveniences.
TOI
Small businesses in Kerala plan dharna to protest RBI rate hike
The General Council meeting of the Kerala State Small Industries Association has decided to organise a march and dharna before the Reserve Bank of India, Thiruvananthapuram, to protest against the interest rate hike and other various issues on November 22. The Opposition leader Mr V.S. Achuthanandan will inaugurate the dharna. The State President of the association, Mr V.K.C. Mammed Koya, said in a statement that the intermittent hike in interest rates by the RBI has affected the profitability of several micro and small enterprises in the State, and the threat of closure looms large over various SSI units. The contributions of micro and small enterprises to the GDP, the share of this sector in the country's exports and to top it all providing employment opportunities by MSEs, is substantial. The hike in interest rate will have minimal impact on large companies as their exposure to debt is less. They have large equity base and have ample cash reserves. It is the micro and small enterprises are bearing the brunt, he said.
HBL
SBI, MoneyGram tie up to provide cash remittances facility
According to the SBI, cash remittances facility will be provided in 100 branches of the banks in Chennai and Mumbai. State Bank of India (SBI) has tied-up with money transfer agency MoneyGram to provide in-bound cash remittances facility. According to the SBI, the facility will be provided in 100 branches of the banks in Chennai and Mumbai. Under the facility, a non-resident Indian (NRI) can deposit money in any of the 0.25 million locations across the globe or online which can be availed by his relative in the 100 branches. SBI already has a tie-up with Western Union Money Transfer available across its network and is targeting to scale up MoneyGram to all of its 13,000 branches in two years. To receive a money transfer, Indian nationals simply have to show a secure passcode of the transaction, along with a valid photo-identification and proof of residency. Per RBI guidelines, Indian nationals can draw up to Rs50,000 in cash immediately. Transactions above Rs50,000 are given in the form of a cheque. Foreign nationals can withdraw cash up to the equivalent of $2,500 after producing a valid passport and visa.
Moneylife
Y.V.Reddy calls for Tobin tax again
Former RBI Governor YV Reddy said, “Since currency holders are mostly the market intermediaries, there is an element of volume play in the market. Since higher volume brings in higher fees, we need to look into this and introduce banking transaction charges or Tobin tax to curb this volatility”. Former Reserve Bank of India (RBI) governor YV Reddy on Wednesday called for taxing banks saying such a step can curb volatility in the entire financial markets, especially in the currency segment, reports PTI. “Tobin tax should be imposed to control currency volatility as there is an element of incentives behind these wild fluctuations in the forex markets,” Mr Reddy told reporters on the sidelines of a meet on the financial stability organised by the RBI set-up Centre for Advance Financial Research and Learning (Cafral) and the Bank for International Settlement (BIS) here. Explaining further, he said, “Since currency holders are mostly the market intermediaries, there is an element of volume play in the market. Since higher volume brings in higher fees, we need to look into this and introduce banking transaction charges or Tobin tax to curb this volatility.” The former central banker is credited with firmly anchoring the domestic banking system from the 2008 global financial meltdown. Speaking to reporters, former IMF deputy managing director John Lipsky also supported the view saying taxing banks can help curb the irregularities in the system. Ever since the 2008 crisis, Mr Reddy has been a vocal critic of the way banks are being run and has been calling for more prudential steps to curb mal practices in the system. He also called for simpler financial products. The last time Mr Reddy had called such a tax was way back in 2005, when he was at the helm of the RBI. His statement then had resulted in markets getting into a free-fall and was roundly criticised by all market participants. In his 2005 speech, the concept was not in acceptance in global policy circles. But he had underscored the need to constantly revisit the relevance of the objectives, desirability and the feasibility of Tobin tax. He had said the tax could be applicable not only to currency markets, but also to other markets, particularly in the aftermath of the global financial crisis. The tax on cross border transactions was named after its original proponent American economist James Tobin, who in the 1970s, had argued that a tax on short-term capital flows would make exchange rates reflect long-term fundamentals relative to short-term expectations and risks, to some extent.
Moneylife
Inflation in India - The failure to control black money
... It is important for us to note that inflation, while a function of growth, is actually caused by money supply growing faster than the rate of economic growth. In essence, Inflation is directly correlated to more cash flowing in the system than required to maintain market equilibrium. It is understood that in developing economies like ours, money supply grows faster than economic growth but the reality is that the RBI has greatly slowed down the growth of money supply in the last year.....
Read.........
Govt bank boards told to focus on policy
The Union finance ministry has asked board members of public sector banks to stop micro-managing functioning and, instead, focus on policy issues, a move seen at improving corporate governance practices in these institutions.....
Read......
RBI cancels city co-op bank's licence
The banking licence of Ahmedabad- headquartered Gujarat Industrial Cooperative Bank Ltd was cancelled by the RBI due to insolvency. The bank has 20 branches in 19 cities of the state. The co-op bank's fate became uncertain after RBI clamped restrictions on it for failing to reduce its non-performing assets (NPAs). In September 2008, the bank was placed under directions under section 35A of the Banking Regulation Act 1949 which places a ceiling on repayment of deposits per depositor. "The bank has a bagful of scandals where loans worth crores have been given without taking collateral. The bank has deposits worth Rs 535 crore and NPAs of Rs 300 crore," said Bipin Shah, who was appointed on the bank's administration board by RBI.
TOI
Forum fines bank for unlawful debit
The council, citing a Reserve Bank of India circular dated July 17, 2009, demanded a compensation of Rs 100 a day for 17 months during which Anitha underwent the agony, but the forum held that this was applicable only to failed transactions and not in this case.
Read..........
RBI to discuss Damodaran committee recommendations with IBA
The apex bank will discuss the suggestions on pre-penalty on foreclosure of home loan, Internet and mobile banking with the IBA; Out of the 230 recommendation of the Damodaran Committee around 88 have already been accepted by the RBI. The Reserve Bank of India (RBI) has accepted 88 out of the 230 recommendations made by the Damodaran committee on customer services. While some of them are already in the public domain, the apex bank would be discussing the remaining suggestions with the Indian Banks’ Association (IBA) later this month. Sources say that the 88 recommendations, where bankers had consensus, include recommendations such as banks should sell standalone financial products and not bundle it with any other product, have been accepted by the RBI. Some pending recommendations such as not imposing pre-penalty on foreclosure of home loan and suggestions made on mobile and internet banking, RBI will have a discussion with IBA by the end of this month. The Committee, headed by former SEBI chairman M Damodaran, was set up by the central bank to look into the issues of customer services and evaluate the existing system of grievance redressal mechanism prevalent in banks, its structure and efficacy and recommend measures for expeditious resolution of complaints. On housing loan foreclosure charges, the Committee had suggested that banks should not impose exorbitant penal rates towards foreclosure of home loans and a policy should be devised to ensure that a customer is not denied the opportunity to enhance his economic welfare by making choices such as switching to other banks or financial entities to enjoy the benefits conferred on by market competition. While on internet banking, the Committee said that there should be zero-liability on customers for any loss in electronic transactions. On mobile banking, the committee recommended that there should be tiered security based on different parameters such as transaction value, destination of transaction (two-level authorisation for non-routine destinations), security based on hand-sets, and the frequency of payments. All the grievances of mobile banking should be addressed by the banks only, without referring the customer to the service providers. The agreements of the banks with the telecom service providers should incorporate suitable provisions to address mobile banking grievances. According to experts, the suggestions relating to the Internet and mobile banking had put an onus on the banks by giving extra power to customers. However, this had irked many banks stating that customers would get away even after committing a mistake. Sources say that there would be a discussion with the IBA on developing a full proof environment for Internet and mobile banking. In September, RBI, in its annual conference on banking ombudsmen, had stated that “banks must not recover pre-payment charges in floating rate loans. Banks may offer long-term fixed rate housing loans to their customers and address their asset liability mismatch (ALM) issues by recourse to the interest rate swaps market.”
Moneylife
Spurt in ATMs as banks look to shore up fee-based income
..“From the point of view of banking penetration, off-site ATMs have more relevance than on-site ATMs. Out of the total net increase in ATMs last year, only 44 per cent were off-site ATMs,” the RBI report said....
Read...............
Read...............
Empowering deposit insurance entities to face challenges posed by an emerging financial landscape - global and Indian experience
Read.......
RBI instructions on withdrawal of FDs with co-op banks
"...insistence on the signatures of both the depositors has the effect of making the mandate given by the depositors redundant. This, in turn, results in unjustified delays and allegations of poor customer service",...
Read..........
India needs to focus on monetary easing
... but I think it’s very clear to the RBI that all of the tightening has achieved very little in addressing inflation and that inflation really in India needs to be addressed in a whole different manner then how it has been addressed so far......
Read.......
High fiscal deficit, govt borrowings pose challenge for RBI, says panel report
The high fiscal deficit combined with the increase in government borrowings will pose a major challenge for liquidity and monetary management for the Reserve Bank of India. This was one of the observations of the Technical Advisory Committee on Monetary Policy in its meeting held on October 19. All members of the TAC felt that the economic growth was moderating. In particular, investment activity was slowing due to tight monetary policy and other factors, including global uncertainty and delay in clearing projects. A concern was also expressed about the service sector, which was showing signs of moderation. Some members felt that exports growth will also slow down, as a result of which trade deficit may widen. All members observed that inflation was a major concern. They also felt that inflation would not ease immediately. The TAC observed that as inflation was driven by external/supply-side factors, the monetary policy tightening was impacting investment and growth and not inflation. Some members of the committee, while pitching for a pause, felt that the message of the Reserve Bank's policy should be hawkish. On monetary measures, while one external member suggested an increase in the repo rate (the rate at which banks borrow from the RBI) by 25 basis points, the other five external members were of the view that the repo rate should not be changed. One of the external members suggested an increase in the Statutory Liquidity Ratio (the percentage of deposits that banks have to invest in government securities) by 25 basis points, so that the borrowing by banks from the LAF (Liquidity Adjustment Facility) window of the RBI would be curtailed.
HBL
RBI's lost policy lever – Renu Kohli
The central bank’s hands-off exchange rate strategy has resulted in a missed opportunity to curtail inflation
The Reserve Bank of India’s (RBI’s) absence from the forex market when intervention would have come in handy to achieve a breakthrough in inflation shows how it has missed out on a dexterous policy tool owing to its hands-off exchange rate policy. The chickens have now come home to roost most dangerously: chronic and high inflation, large fiscal deficit with falling revenues, wide current account deficit overtly dependent on short-term portfolio capital that’s reversed rapidly, slowing growth with no investment recovery in sight and a flat stock market overlooking earning downgrades point to a precarious macroeconomic situation. Monetary and fiscal policies are both overstretched. Intervention would have been an adroit move to get out of this blind alley. Yet, RBI has been a mute spectator focused on increasing interest rates instead. Has it missed out on a useful policy lever by not accumulating foreign exchange reserves in recent years?
In a span of three months, end-July to October, the rupee has crashed some 13 per cent from peak to trough. This comes at a time when monetary responses have been exclusively geared to check inflation that is reigning high since 2009, is well-entrenched and till now shows no sign of abatement. Non-food core inflation, around which monetary responses are framed and much of which reflects imported input prices, including oil and commodities, has averaged 7.6 per cent for over eight months now. During the same period, the price of imported crude (Indian basket) fell from a July peak of 112.4 a barrel to 106.4 a barrel in October 2011. Commodities, another key import that contributes to core inflation, fell too: the CRB Index declined some ten per cent in this period. Yet this bounty has not been exploited to guide the economy out of the cul-de-sac of high inflation, slowing growth and an investment standstill. For the rupee tanked. And how! The rapid and sustained depreciation of the currency has not just offset the gains that a decline in crude oil prices would have had on inflation, but has added to price pressures by raising the costs of imported items. Two rounds of oil price increases have accompanied the rupee’s fall, which worsened the already-strained public finances by increasing the oil subsidy burden. And so an economy that traditionally benefits from falling oil and commodity prices – being a large importer (30 per cent of the current account reflects just oil imports)– regardless of other economic factors, has actually been pushed deeper into the spiral of inflation-low investment-slowing growth!
Meanwhile, RBI has plodded on the interest rate path in an effort to restrain inflation, raising rates in September and then again, in October! It has, thus, added further challenge to its job of inflation management apart from the adverse effects on the fiscal situation, investment and growth. Is it the hands-off exchange rate strategy or a shrunk capacity to intervene that explains such macroeconomic management?
Since 2009, RBI has largely kept its hands off the exchange rate, barely intervening in the currency markets; net purchases in this period add up to a bare $3 billion. Since capital inflows were good due to a combination of rising stock prices, growth and an appreciating currency, capital account surpluses from short-term portfolio flows generously financed a growing current account deficit as imports grew much faster than exports. Reserve accumulation came to a standstill as the rupee floated freely, whereas external debt, especially of the short-term variety, grew rapidly. According to the recently issued external debt report by the government and RBI, the total forex outgo on account of debt service payments in the immediate future, which is reflected by the indicator “short-term debt by residual maturity” stood at 44 per cent of foreign exchange reserves, or approximately $120 billion at end-June 2011; this compares with a 29 per cent ratio to foreign exchange reserves at end-June 2008. The reserves’ adequacy ratio – the extent of overall debt, long-term and short-term, backed by foreign exchange reserves – has fallen from a peak of 138 in June 2007 to 100 in June 2011. This reflects that the buffer against unanticipated external shocks has weakened relatively. One doesn’t need to, but must, mention that global risk, uncertainty and volatility following the 2008 crisis have not yet subsided; perhaps they have only increased.
Thus, even as foreign exchange reserves, excluding gold, SDR and reserve position at IMF, were a handsome $277 billion in June 2011, it would appear that the capacity to arrest a sudden and rapid slide in the currency’s value is significantly reduced.
Or is it, as RBI governor stated recently, that the exchange rate is not used to manage inflation?
If a hands-off exchange rate policy is the way for India, the question is whether the economy’s structure supports such a policy. The economy’s fundamentals remain shaky with two large deficits, one of which is heavily dependent on the fickle drip of portfolio flows. It is highly prone to inflation as a weak child to viral flu. And its financial markets are still not deep enough to disperse and dissipate the frequent shocks contracted from abroad. With these characteristics, foreign exchange reserves served as an important lever for short-term management of cyclical winds. If this tool – a critical one – is no longer at our disposal, then what are the alternate props? Scrounging for foreign institutional investments in debt market to support the rupee? Or else, take it on the chin as we are.
The author is a macroeconomist based at ICRIER, New Delhi; she is a former staff member of the International Monetary Fund and the Reserve Bank of India.(BS)
RBI Rate Hike Contradicted External Members Call For Pause
The Reserve Bank of India hiked its key rate by a quarter point in October in contrast to the recommendation of external members, minutes of the Technical Advisory Committee showed Thursday. Only one external member suggested an increase in the repo rate by 25 basis points, while other five members were of the view that the repo rate should not be changed. The advisory committee consists of twelve members. One external member called for an increase of 25 basis points in the Statutory Liquidity Ratio. The member further recommended that the provisioning for standard assets could be relooked to promote investment activity. Another member recommended a nominal exchange rate appreciation to reduce the cost pressure on the economy. The RBI has hiked rates 13 times since March 2010. Now the repo rate stands at 8.50 percent.
RBI will intervene, but only to check Re volatility: Gokarn
The Reserve Bank of India (RBI), which till date was only focusing on inflation, is now beginning to focus on growth, says Dr Subir Gokarn, Deputy Governor of the Central Bank. However, he says, significant medium-term risk to inflation remains. “Growth recovery can quickly trigger inflation pressure,”....
Read............
Watch the video..............
No intention of relaxing CRR as of now: RBI Deputy Governor
The RBI on Wednesday had announced it will buy Rs10,000 crore of government bonds from the market through open market operations (OMO) on 24th November, which is reportedly aimed at easing pressures on liquidity and interest rates. Reserve Bank of India (RBI) deputy governor Subir Gokarn today said the RBI will not relax the quantum of deposits banks have to park with the central bank, dubbed the cash reserve ratio (CRR), to ease current liquidity pressures, reports PTI. “Not at the moment. CRR is being seen by us as a part of a monetary dashboard. To use it in a sort of tactical liquidity management sense, I think we are not at that point,” Mr Gokarn told reporters on the sidelines of a conference here. The CRR stands at 6% at present and has not been changed for over a year now. The RBI had yesterday announced it will buy Rs10,000 crore of government bonds from the market through open market operations (OMO) on 24th November, which is reportedly aimed at easing pressures on liquidity and interest rates. With the busy season for credit picking up, banks are reportedly borrowing up to Rs1 lakh crore everyday from the repo window. According to reports, the move can also be aimed at easing pressures on yields, as the RBI was unable to carry out three bond sales because investors were asking for higher yields than what the RBI was offering. “... The OMO is the obvious market-based tactical move. It does not send a signal of change in the monetary policy stance, which the CRR always runs the risk of doing,” Mr Gokarn said.
Moneylife
'Need to be careful about how we use our reserves' – Dr. Subir Gokarn, Deputy Governor
Reserve Bank of India (RBI) Deputy Governor Subir Gokarn tells CNBC-TV18 the rupee depreciation is offsetting whatever little softening India has seen in commodity prices. Edited excerpts:
The finance ministry has been saying it would ask RBI to intervene at an appropriate time. What is your observation on the sharp uptrend in the rupee and how are you approaching it?
This is not a rupee-specific phenomenon, this is global. Every currency in emerging markets has been subjected to broadly the same set of forces. The magnitude of movement has differed across countries, depending on the kind of policy responses initiated. The approach is basically founded on the principle that the rupee has a market-determined exchange rate, something we have been saying for several years. There are, of course, some boundaries on this. There are restrictions on debt inflows. But within those boundaries, the exchange rate is market-determined. We saw this happen in 2008, when the rupee depreciated to 52 and below. It then rebounded sharply, and stabilised in the mid-40s for a time. Now, it is again showing this pattern, driven largely by global considerations. There are two issues here. One, is this going to be a persistent sort of pressure and is the depreciation going to continue for a long period of time, in which case, it starts to disrupt the domestic macroeconomic situation? Maybe, then, we need to think of a different approach to it. The other aspect is the argument that reserves should be used to defend the currency and that, I think, is a much more complicated issue. Our reserves are not an outcome of persistent current account surpluses, unlike in many countries, particularly in our region. There, it is the result of excess capital inflows over the current account deficit and to that extent, reflects a cushion we have against our external liabilities. So, the use of reserves to defend an exchange rate, which may not be defensible beyond a point, means we end up with the same pressures and with a lower set of defence against it. So, you have to be very careful about how we use the reserves, and I think generally, markets have to accept this is a floating currency and that there are measures to help hedge against that. Those exposures have to be hedged as much as we can. So, long-term market development strategists have to ensure these hedging instruments become more accessible and more efficient.
A lot of people have been talking about the 52-level you alluded to, and are probably hoping RBI might want to defend it. But on your point that this rupee move has been determined by global factors, a lot of people say this is also a reflection of India’s weakening macros and, therefore, even if the bank were to try and defend 52, maybe market forces would eventually lead it lower. What do you think?
We been talking about weakening domestic macro conditions for quite some time, before the recent pressure started. So, if you are looking at a pure event impact here, this process started the day the US sovereign rating was downgraded. So, there is an event contribution to this. Of course, domestic macro conditions may be reinforced at the moment, and there is no disputing that, but let's not lose sight of the fact that there is a global dynamic here. And, to try and resist, or try and do something for which we do not have the capacity, we may run out of capacity in a situation in which global forces are pushing it along, this is also a risky strategy. So, it's a question of weighing the relative risk and at this point, we feel the sort of movement, particularly if it's likely to remain in this situation for a very long period of time, is hurting. Whatever little softening we have seen in commodity prices is being offset by the depreciation. In terms of defending a particular target, I go back to my point that to defend, you have to have capacity, and you could well end up in a situation in which you lose capacity without having achieved your target, which makes it vulnerable to any kind of shock beyond that. And, it's not a hypothetical risk, it’s a very tangible risk.
Today, the finance ministry decided to enhance the limit for foreign institutional investors on both government securities and corporate bonds, and the stated objective seems to be to ensure better rupee-dollar parity. Do you think this may bring in some modicum of balance between the rupee-dollar equation? Do you agree that what we are seeing right now is abnormal?
I think on the first issue, we are part of the process of expanding limits. So, the fact that it happened is an issue of coordination between various elements of the system. The motivation, in terms of the exchange rate management, or basically using the control we currently have in place, which are ceilings on debt flows — by lowering these ceilings, are we going to attract more capital to offset the exit from other channels, and if that comes in, there would be a positive impact, at least in terms of reversing the depreciation. So, that’s the consequence I would expect and that’s been the underlying logic, in terms of arriving at a decision, apart from other issues about debts. There are, of course, risks that come with it. We should be conscious of the risk that more debt exposure means more vulnerability overall. But at the moment, the benefits seem to have outweighed the risks. On volatility, I think we have not distinguished between volatility in a very short term — intraday movements — and volatility in the longer term, the magnitude of the movement over a period of time. On the first, I have already addressed the issue in my earlier response. On the second, I would go back to the term I have been using — smoothing intervention. If there are sharp spikes in movement in a particular direction, we see intervention in that situation as a way to smoothen the transition. Defending the rate at this point is not on our radar screen.
BS
Inflation and its policy drivers
...The present battle against inflation can be won only if the government and the RBI live up to their responsibilities. In the final analysis, unless productivity in the system improves, inflation will continue to be a problem.
Read............
Read............
RBI tells banks to exercise caution on online forex trade payments -
....The Reserve Bank of India (RBI) today directed banks to exercise caution with respect to online forex trading by Indian residents where margin payments through a credit card or deposit are required in view of the risk of fraud,....
Read.....
Read.....
Thursday, November 17, 2011
Rising e-commerce leading to frauds: H R Khan
IBN Live
Third National Seminar on Microfinance: Issues and Challenges: 02 – 03 December 2011
One of the mandates of the Centre for Microfinance Research is to organize annual conference/Seminar on microfinance in order to disseminate the knowledge generated from the work done by the researchers in the field of microfinance. The first National Seminar on Microfinance was organized on 25-26 July 2009 and inaugurated by Dr.C.Rangarajan, Ex-Governor, RBI & Hon'ble Member of Parliament, Rajya Sabha. CMR has now scheduled the third seminar to be held on 02 and 03 December 2011. Shri Jairam Ramesh, Hon'ble Minister for Rural Development, Govt of India has given his kind consent to be the Chief Guest during the inaugural session (02.12.2011) of the seminar and Shri H.R. Khan, Deputy Governor, Reserve Bank of India has given his kind consent to be the Chief Guest during the valediction session of the seminar (03.12.2011). This Seminar will focus on the following themes:-
1. Regulatory challenges for client protection in microfinance.
2. Enhancing outreach of microfinance: Role of Technology.
3. Microfinance through co-operatives: Performance and Prospects
4. Revival of rural artisans, handloom and handicraft cluster bases: Potential role of microfinance
The programme would commence at 9.00 AM on 02 December 2011 at BIRD, Lucknow and will conclude at 05.30 PM on 03 December 2011.
RBI needs more powers to help banks overcome insolvency: Chakrabarty
IT exemption
About half of the Corporation's premium income, which is its main source of funds, is paid as income-tax to the Government. In this regard, Dr Chakrabarty observed that since DICGC is a non-profit organisation serving social obligations of protection of small depositors, it should be exempted from payment of tax, as is done globally. The tax exemption would enable the DICGC build up its fund base, provide higher coverage to depositors and even pass on the benefits to insured banks by reducing the rate of premium. The Deputy Governor said it is surprising that in India, there is inadequate awareness about deposit insurance. One reason for this could be that in India banks are perceived to be either too-big-to-fail or impossible to fail on account of the Government or RBI backing. While this may be true for the public sector banks, it certainly does not hold good in the case of private sector banks, foreign banks operating in India and the large number of cooperative banks, added Dr Chakrabarty.
HBL
Shell out more to use your safety lockers in banks
These are tough times for the common man: After interest rates for home loans were increased, now bank rates for safety lockers, too, have gone up. Annual charges and security deposits for safety lockers in public sector banks will see a significant hike. Syndicate Bank is the first to revise rates for all categories of lockers. Notices have been sent to its branches, directing that customers be informed to pay money as deposits to avail the locker facility. All public sector banks will follow suit. Banks have different rates for different locker dimensions and customer categories. Customers in metros will end up paying Rs3,000 to Rs10,000 for small lockers, while for large lockers, they have to pay at least Rs15,000 to Rs19,000 as deposits. Customers in semi-urban and rural areas will be charged lower rates depending on the locker size. Furthermore, even the annual rent has been hiked from Rs300 to Rs600 for small lockers; Rs500 to Rs1,110 for medium lockers; Rs900 to Rs1,900 for large lockers; and Rs1,500 to Rs2,500 for very large lockers. According to Syndicate Bank officials, the rates have been increased following a directive from the RBI with an advice to the Indian Banks Association. This means all public sector banks will increase the charges. Corporation Bank general manager BR Bhat told DNA that all bank services are reviewed once in six months and this exercise was a part of it. “The locker rates had not been revised for a long time,” he added. Expectedly, customers are not a happy lot. “There are no recurring expenses for this service. Lockers are installed and they need very little annual servicing. Strong rooms are built for maintenance-free operations for a lifetime. Why are banks hiking the security deposit and rent?” asked Kusuma Shenoy, a locker holder in Syndicate Bank, Mangalore.
Some customers have decided to appeal to the Banking Ombudsmen and to RBI Regional Director in Bangalore to seek a clarification. “But when we called Banking Ombudsman Palanisamy in Bangalore, nobody answered the line. We wanted to complain to him for over-charging for a service that did not warrant such steep hike,” said consumer activists.
DNA
Interest subsidy to farm sector not viable: RBI
The Reserve Bank of India (RBI) on Wednesday said the government should do away with subsidised farm loans, as the proposition was not viable. “If banks are able to give loans to big corporate bodies at nine per cent, why can’t they give loans for agriculture at 13 per cent? The problem is it (the government) wants credit to be available at seven per cent, when inflation is nine per cent. That is our objection,” said RBI Deputy Governor K C Chakrabarty, while addressing a banking seminar organised by YES Bank. He said banks could not provide subsidy to all farmers when the deposit rate was nine per cent. Banks extend loans of up to Rs 3 lakh to the farm sector at seven per cent, and get 1.5 per cent interest subvention from the central government. The rate of interest is fixed and not related to the base rate, or the benchmark lending rate. The interest rate has risen in the last one and half years, and has exerted an upward pressure on the banks’ cost of funds. Since the interest rate is fixed for farm sector loans, banks are unable to pass on the rise in the cost of funds to borrowers. Chakrabarty said financial inclusion could only be led by banks, and not by micro-finance institutions (MFIs) or technology providers. While financial inclusion would be brought about by regulated financial institutions, others could only facilitate it, he said. He said an entity needed to provide savings and payments systems apart from credit facility for financial inclusion. “MFIs provide only credit, hence they cannot bring about financial inclusion,” said Chakrabarty. Within the banking fold, financial inclusion initiatives have to come from private sector banks, he said. “Public sector banks would not bring financial inclusion in this country. It would be brought by private sector banks,” he said. This would be visible in the next two-three years, he said, adding banks needed to work out viable business models, since financial inclusion was not possible through charity. Under new norms, banks have been mandated to open one-fourth of their new branches in unbanked, or under-banked, areas to expand the reach of financial services. The banking regulator has also liberalised branch opening in unbanked areas. Chakrabarty said if banks wanted to grow in a planned manner, this was the time to build a customer base.
BS
Karnataka Bank opens financial literacy centre
Mangalore : Karnataka Bank Ltd, in association with the Manipal-based Jnana Jyothi Financial Literacy and Credit Counselling Trust, opened its first financial literacy and credit counselling centre at B.C. Road town in Bantwal taluk of Dakshina Kannada district on Wednesday. Speaking at the inauguration of the centre, Mr P. Jayarama Bhat, Managing Director of Karnataka Bank, highlighted the centre's functions and its use especially for the rural public. The centre is meant to serve the interest of customers of all banks, he said.
Inaugurating the centre, Mr A.K. Bhattacharyya, General Manager of Reserve Bank of India, spoke on the initiatives taken by the RBI and the need for financial literacy as well as financial inclusion. By this initiative, the level of knowledge among the general public could increase resulting in availing of more banking services. The Managing Trustee of Jnana Jyothi Financial Literacy and Credit Counselling Trust, Mr D.T. Pai, laid out the objectives of the trust and the functions of the centre. He said Karnataka Bank is the first private sector bank to sponsor the opening of such a centre at block level, and reiterated the desire of the Trust to open more such centres at taluk and block levels.
HBL
AIBEA employees oppose Kingfisher Airlines bailout; urges RBI to recover loans
MUMBAI: Opposing the bailout of Kingfisher Airlines, the All India Bank Employees Association (AIBEA) Wednesday urged the Reserve Bank of India ( RBI) to first recover loans given to the airline. "Already 13 banks have extended a total credit of more than Rs.7,000 crore. Twice these loans have been restructured in order to avoid the loan being defined as bad loans," said AIBEA general secretary Vishwas Utagi. AIBEA has also advised all its nominee workman directors on the boards of the banks to oppose any further bailout or credit facility to the airline. "Big corporates are squeezing the public deposit in (state-run) banks by frequently going for Corporate Debt Restructuring," Utagi said. "Kingfisher Airlines is one such glaring example. AIBEA has been opposing such bail-out packages.
ET
SISCO net profit boosts but fall in deposit rates
Gangtok : The 12th Annual General Body Meeting of Sikkim State Co-operative Bank (SISCO) limited was held on November, 15, 2011 to discuss and review the financial position of the bank for the financial year 2010-11 at Denzong Regency here in the capital. The meeting of the bank was graced by RBI, AGM, Anil Yadav, NABARD General Manager P.C.Choudhary and Board of Directors amongst a good strength of shareholders.
G Padmanabhan: Getting "IT" right
Read...............
RBI told to disclose top 100 loan defaulters
The Central Information Commission has directed the Reserve Bank of India to make public the names and other details of top 100 industrialists of the country who have defaulted on loans from public sector banks. The commission also directed the bankers' bank to post on its website complete information on all such industrialists as part of suo-motu disclosure mandated under section four of the RTI Act before December 31 and asked it to update it every year. The RBI had objected to making this information public saying it is held by it in fiduciary capacity and disclosing it would adversely affect economic interest of the State. Information Commissioner Shailesh Gandhi agreed that information is fiduciary in nature but said that such exemption does not stand when there is larger public interest in the disclosure. Mr Kapoor had sought to know from the RBI the details of default in loans taken from public sector banks by various industrialists besides list of defaulters, top 100 defaulters, name of the businessman, address, firm name, principal amount, interest amount, date of default and date of availing loan. During the hearing, Gandhi asked the RBI if the information about loan defaulters is held by it as part of statutory requirements. The Public Information Officer admitted that the Banks were providing the information in fulfilment of statutory requirements. Mr Gandhi, in his detailed order, said, "In fact, information about industrialists who are loan defaulters of the country may put pressure on such persons to pay their dues. This would have the impact of alerting citizens about those who are defaulting in payments and could also have some impact in shaming them." He said there is no doubt that details of top industrialists who have defaulted in repayment of loans must be brought to the citizens' knowledge and there is certainly a larger public interest that would be served on disclosure of the same, hence clause of fiduciary information does not stand. "This (disclosure) could lead to safeguarding the economic and moral interests of the nation. The commission is convinced that the benefits accruing to the economic and moral fibre of the country, far outweigh any damage to the fiduciary relationship of bankers and their customers if the details of the top defaulters are disclosed," he said. Mr Gandhi said the commission is aware that information on defaulters is being shared by Reserve Bank with an organisation called CIBIL adding that "it is difficult to understand the reluctance to share this information with citizens using RTI". The commission also rejected the contention that disclosure would adversely affect economic interest of the state saying "if it means that such borrowers would not bank with public sector banks for fear of exposure, it would in fact be in the economic interest of the nation. "It is also unlikely that the economic wellbeing of the nation could get affected adversely by disclosing the names and details of defaulters. The Indian economy is dependent on far stronger footings," he said.
NDTV
Nigerian arrested for cheating engineer
A Nigerian national has been arrested for allegedly cheating a mechanical engineer of Rs 15 lakh through a fake lottery, police said today. Evan Tony alias Franklyn (38), resident of Ubiaja in Nigeria who is presently residing in Mumbai, was arrested yesterday as soon as he arrived from Mumbai to IGI airport here last afternoon to collect more money from the victim, a senior police official said. "He had already duped Ravi Mogra of Rs 15 lakh on the pretext of giving him the lottery amount of Rs 12 crore. Mogra deposited the amount in various bank accounts provided by the accused. He even sold his house in Kondli to get the amount," Chhaya Sharma, DCP South district said. Police has recovered two passports including a fake one reportedly issued from Congo, three cell phones, several SIM cards, fake chemical coated black dollars and an iron safe containing black Pounds. The accused even provided Mogra the letters purportedly issued from RBI to convince him to make these payments, who credited Rs 5 lakh in various accounts of the accused and had paid Rs 10 lakh in cash. Mogra was once called by him in a hotel in Bangalore where he and his associates handed him over an iron safe containing black pounds worth Rs 12 crore to be encashed in Indian currency through RBI account, the official said. When the accused demanded Rs 23 lakh more, Mogra become suspicious and broke open the safe to find several bundles of black powder coated plastic feeling paper. The gang was operating at interstate level and remains most of the time in Bombay and Bangalore.
IBN Live
Hike in small savings return a sweet pill
If you had planned for your future corpus thinking that your Public Provident Fund (PPF) and other small savings options would give almost fixed returns, be ready to make fresh calculations. From December 1, the small savings returns would become market-linked, aligned with the G-Sec rates (government securities). To address the issue of asset-liability mismatch in the National Small Savings Fund (NSSF), the central government has moved towards making returns from small savings instruments benchmarked against the government securities of similar maturities. Being market linked, the rate of return would come down whenever there is a downward revision of interest rates, making it difficult for you to work towards a long term financial goal, like building retirement corpus, through instruments like PPF.
Why market linked
The Thirteenth Finance Commission in its report had recommended that all aspects of the design and administration of the NSSF be examined with the aim of bringing transparency, market linked rates and other much needed reforms to the scheme. As a follow- up to this recommendation, the central government had constituted a “Committee on Comprehensive Review of NSSF” on July 8, 2010, headed by Shyamala Gopinath, the then deputy governor, Reserve Bank of India.
IE
Countercyclical policies needed for financial stability: BIS
Countercyclical policies undertaken by monetary authorities, more capital requirements for banks and effective liquidity management are the most important measures needed for financial stability and growth, Mr Jaime Caruana, General Manager, Bank for International Settlements, said on Wednesday. He was briefing the media at the end of the first international conference conducted by CAFRAL (Centre for Advanced Financial Research and Learning) on ‘Financial sector regulation for growth, equity and stability in the post-crisis world'. In response to a question, Mr Caruana said fiscal authorities must create enough space and be ready to build buffers during good times. He said it was easy to overestimate the health of the Budget during a credit boom, and cited the example of his own country, Spain, which moved dramatically from a surplus Budget to a deficit when the credit boom ended. Mr Caruana was Governor of the Central Bank of Spain till 2006. Briefing media persons on the conference deliberations, Ms Usha Thorat, Director, CAFRAL and main organiser of the conference, said there was greater appreciation among western nations about the need for equity as one of the objectives of financial regulation. The focus was always on growth and deregulation earlier, but this had begun to change after the crisis of 2008, she said.
HBL
RBI cancels licence of Charminar Co-op Bank
The Reserve Bank of India has cancelled the licence of Hyderabad-based Charminar Co-operative Urban Bank as all efforts to turnaround it had failed. In a press release issued on Wednesday, the RBI said that depositors were being inconveniences by the continued uncertainty. The Registrar of Co-operative Societies, Andhra Pradesh State has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank, RBI said. Consequent to the cancellation of its licence, the bank is prohibited from carrying on ‘banking business' including acceptance and repayment of deposits. On liquidation, every depositor is entitled to repayment of deposits up to a ceiling of Rs 1 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). The problems with Charminar Bank started in February 2002 when the RBI discovered that the bank was not in a position to meet the demand of its depositors. To protect the interests of the depositors, the RBI restricted the bank from accepting and repaying deposits to a maximum of Rs 1,000 per depositor. With a view to restructure and revive the bank, the Government of Andhra Pradesh notified a Scheme of Reconstruction in consultation with RBI which came into force with effect from March 3, 2003. The Scheme, however, failed to yield the desired results. The subsequent inspections of the bank also revealed no improvement in its financial position, said RBI. In terms of a revised restructuring scheme, all depositors of the bank having deposits above Rs 10 lakh were to be paid the balance amount in eight equal half-yearly instalments starting from March 2009. It was observed that the last instalment (fifth) was paid not out of the cash generated from recovery of non-performing assets but by disposing of the fixed deposits maintained with other banks. The bank itself accepted that any further recovery in NPA accounts were not possible. Without any further recovery in NPA accounts, the bank can hardly make repayment of the next instalments, said the RBI. Further, the Charminar Bank is not in a position to pay its depositors in full, the affairs of the bank are being conducted in a manner detrimental to the interests of its depositors, the financial position of the bank leaves no scope for revival and public interest will be adversely affected if the bank is allowed to carry on banking business, the RBI said.
BS
Subscribe to:
Posts (Atom)