RBI’s Mahapatra seeks greater surveillance of corporate governance

Reserve Bank of India Executive Director Shri Mahapatra calls for greater vigilance in corporate governance at financial institutions to avoid further crises. Shri Mahapatra, the executive director at the Reserve Bank of India, on January 21 said the recurring corporate governance crises in both the developed and developing economies suggests "eternal vigilance" must be exercised at all times. At the Convocation Ceremony of Chetana's Institute of Management & Research in Mumbai, India, Mahapatra said: "Although our banking sector has emerged largely unscathed from the crisis, there is definitely a need to do some introspection as there have been some issues of corporate governance failure here too. The incidents of banks misselling forex derivatives to clients have been well publicised and are one such example. There is therefore a need on the part of banks and financial institutions to be more responsive to their obligations towards the larger public interest." Mahapatra said a study of the governance failures in various institutions during the crisis helps in understanding that the measures and reforms to address the governance failures in one context may not be as effective in another, and that the timing and focus of reforms should reflect the economic and institutional realities of the country concerned.  
http://www.centralbanking.com/central-banking/speech/2140568/rbi-s-mahapatra-seeks-surveillance-corporate-governance

Remove restrictions on farm trade: Y.V.Reddy

Hyderabad, Jan. 23:  Removal of all restrictions on domestic trade in agricultural produce should be done prior to any debate on allowing foreign investment in the farm sector, according to Dr Y. V. Reddy, former governor, Reserve Bank of India. Delivering the Seventh J. Raghotham Reddy Memorial Lecture on ‘Agriculture: Problems and Opportunities' here on Monday, Dr Reddy said the connectivity between rural produce and rising urban consumer demand for food items could be ensured by freeing restrictions. This move would be better than constant rebalancing of interests of farm producers and consumers through a process of ‘continuous political bargaining', he said. As there were no policy reforms in agriculture since 1991, there was a need to empower the States. “Perhaps, the Government of India should vacate its role in agriculture and rural development, except in regard to international trade and research,” he said. In such a scenario, the States would compete for performance, and adopt innovative measures and diversity in approaches. “Such a decentralised approach has been adopted by China recently to manage its agricultural problems,” Dr Reddy said. Going forward, there might be opportunities to export food items to other countries, if advanced countries find it fiscally unsustainable to subsidise agriculture. “The opportunities will be in far more diversified form than now. They can be exploited only if our farmers and the Government are agile and equip themselves to changing composition of demand,” he said. Dr Raghotham Reddy was former vice-chancellor of Acharya N.G. Ranga Agricultural University, Hyderabad.

HBL

RBI Chennai, Kanpur units shredding more soiled currencies

Chennai, Jan 23 : The Reserve Bank of India branches in Chennai and Kanpur were shredding more number of soiled and torn currency notes than the new ones they pump into Tamil Nadu and Uttar Pradesh respectively. "The RBI office in Chennai and Kanpur are shredding more soiled and torn currency notes than anywhere else in the country. The amount of soiled notes shredded in these two places were more than the number of new currency notes issued every year (for the two states)," RBI sources here said today. The trend in Chennai was due to the increasing number of students, industrialists and medical tourists visiting Tamil Nadu. "If you observe, there are over 400 plus engineering colleges in the state and most of them do not accept money through bank channels for admission fee and tuition fees. Especially, colleges which accept donation, decline to accept money through any bank channel, since the details of such transactions would be on record," the sources said. The hosiery hub of Tirupur too witnessed heavy cash transactions among the traders visiting the town for their business. "Many businessmen from Tirupur, Coimbatore come here and exchange soiled currency notes which they get from across the country," they said. Chennai emerging as a much sought-after health care destination too is cited as another reason for the heavy inflow of currency notes. "You can see many people from Assam, West Bengal and other eastern states coming here for medical treatment and use currency and not cards," they said. Similar was the case with Kanpur as the city and surrounding areas housed hundreds of industries, the sources said. RBI was in the process of conducting awareness campaigns about fake currency in areas around the IT Corridor on the city outskirts where migrants labourers were concentrated in view of the recent busting of counterfeit currency racket in the city and union territory of Puducherry. The National Investigation Agency along with the CBCID of Tamil Nadu and Puducherry nabbed three persons in Chennai and Puducherry last week for circulating fake currencies into the market. Technical experts from RBI Chennai will be conducting a similar campaign and awareness meet in Puducherry tomorrow.

MSN News 

Regulators: Holier than thou

........Less then a month after RBI’s board was reconstituted, it issued another press release on 18 October 2011. It announced the appointment of two more directors on RBI’s central board. YH Malegam was reappointed from 7 October 2011 for four years ‘vice Shri H.P. Ranina’ and another director in place of Lakshmi Chand. No explanations. Why does the government believe that RBI cannot function without Mr Malegam as a director? .............

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RBI plan to protect investors

Bhubaneswar : The Reserve Bank of India (RBI) is planning to send its representatives to the districts to create awareness and help potential investors choose the right organisations to invest. The move comes in the wake of a number of fraud cases across the state. In the recent past, the state has seen seven cases, the Balasore chit fund case being the prime example, where money taken from the public has been invested elsewhere, causing huge loss to people. “The RBI has already asked companies doing investment business with the public’s money in the state to register themselves with the national banker. However, the investor should also be clear about the portfolio of such companies and before putting in money, must check the details and ensure that the company is registered with the RBI. The state government, too, has issued orders to this effect at the administrative level,” said Biplab Chakraborty, General Manager of the RBI, Bhubaneswar. Addressing a students’ meet on banking at the Kushagra Institute of Information and Management Science in Bhubaneswar, Chakraborty said there were two types of companies — those that collect investment for their own growth and those that collect investment for investing it with others. The second one needs the RBI’s permission and the investors should demand that the companies show them a copy of the permission letter payment. “We have already started a campaign on the media to make people aware on this, but now we plan to reach out to people at the grassroots,” he said. Sources said the crime branch had registered cases against seven chit fund companies across the state for cheating people of crores of rupees. In the Balasore case, not only civilians, but also police officials were listed as the victims. The kingpin used the money to make a Bollywood film. Speaking at the meet, Samson Moharana, a teacher at the postgraduate department of commerce, Utkal University, said: “Many companies are registering as limited entities under the Companies Act. Making use of loopholes in the law, some of these companies also include collection of money and related business in their activity list. This is also a glaring violation and the local district administration and the police must act to stop such activities to safeguard the investment. In many places, the people are not able to take advantage of the awareness drives and these companies are targeting gullible people.” The state has lately seen more than 20 cheating cases related to ATMs and most of them belonged to a particular public sector bank. Last week, two customers from Paralakhemundi in Gajapati district complained that unauthorised withdrawals of more than Rs 40,000 were made in Haryana. Moharana also said bankers should be aware of the current development scenario, so that the respective banks do not suffer from non-performing assets (NPA). “The permissible NPA level is around 3 per cent around the world. In India, though NPA is shown within 2.5 per cent, in practice, it remains as high as 10 to 15 per cent in many banks,” he said. Chief General Manager of the National Bank for Agriculture and Rural Development K.K. Gupta said that even today, the banking sector was only considering a small fraction of our population, but the professionals should implement innovative ideas for an inclusive growth.

The Telegraph

RBI: Upside risks to inflation warrants careful calibration

" While the expected gradual softening of inflation could suggest the need for easing monetary policy, medium- term inflation risks warrant careful calibration" ..............

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Need to encourage equity flows, widening CAD a worry: RBI

.... "As expectations of quick and robust resolutions to the European sovereign debt crisis diminish, it is all the more important for India to maintain adequate capacity to withstand further external shocks,"....

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BANKING ON GROWTH

BUSINESS HOTSHOTS AWAIT RBI NOD TO LAUNCH BANKS IN BENGAL

CHANDRA Shekhar Ghosh and Purnendu Chatterjee have a common dream. Both want to float a bank and are now eagerly waiting for Reserve Bank of India (RBI) to release the final guidelines on new bank licences. Ghosh is founder and chairman-cummanaging director of the country's leading microfinance company, Bandhan Financial Services. Chatterjee, in turn, is an NRI businessman and chairman of The Chatterjee Group (TCG). Bandhan has been doing the spadework to apply for a banking licence for quite awhile. It plans to reinforce its board by inducting one or two retired bank chief executives, whose banking experience would help the MFI in its preparation for the banking licence. Bandhan's outstanding loan portfolio crossed 3,000 crore in November, 2011. TCG's plans to also establish a bank comes at a time when the new government has promised all support to existing banks in the state for expanding business and improving credit delivery. Bengal has a glorious banking history. State Bank of India (SBI) started its journey here more than two centuries ago. State-run Allahabad Bank, UCO Bank and United Bank of India are headquartered in Kolkata and are important players in the country's banking sphere. Yet, the state suffers from lack of credit delivery in the absence of private capital. Banks' credit-deposit ratio, an indicator to a bank's efficiency in credit delivery, is 62% here, significantly lower than the national average of 74%. Of the state's 9 crore population, about 70% resides in the rural areas.  The number of accounts per branch in the state has risen to 9,866 in 2009-10 from 5,046 in 1980-81 while the number of accounts per 100 adult people has risen to 77 from 40 during the same period. However, a study conducted by RBI said moneylenders were a dominant source of rural lending with about 66.5% cases being financed by village moneylenders at exorbitantly high rates of interest of around 10-20% a month. It also said nearly 40% of the rural population do not have sufficient income to open a bank account even as banks have improved their reach in rural Bengal.

ET

RBI for balancing between risks to growth and inflation

........ However, RBI stated, inflation and expectations of inflation remain high and upside risks emanate from exchange rate pass-through, revisions in administered prices and higher-than-expected government revenue spending. Consequently, it said that monetary actions will need to strike a balance between risks to growth and inflation..........

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Rate cut today? RBI adds riders after hopes raised

... “While in the short run, moderating inflation will provide some space for monetary policy to address growth concerns, in the absence of structural measures to address a range of supply bottlenecks, this will be, at best, temporary respite,”....

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Economic picture as assessed by RBI

 

Govt adding to inflationary pressure: RBI

Mumbai: The Reserve Bank of India has blamed the government for adding to inflationary pressures by living beyond its means and has urged the centre to push for reforms to achieve a turnaround in 2012-13. The central bank’s warning on government’s financial indiscipline comes ahead of polls in five states. Although the government has failed to meet its revenue targets through taxes and disinvestment of public sector undertakings, expenses have got out of hand forcing the centre to twice increase its borrowing. This will force the central bank to strike a balance between risks to growth and inflation, RBI said. Given the central bank’s reiteration of the pressures on inflation it is widely expected that RBI will not cut rates. However,there is a significant section which feels that governor D Subbarao may go for a cut in the cash reserve ratio to release liquidity. The continuing liquidity crunch is evident from daily bank borrowings from RBI. On Monday, the overnight borrowing by banks touched Rs 1,41,000 crore—much higher than RBI’s comfort level of around Rs 60,000 crore. “Expansionary fiscal policy is likely to impact price stability by affecting aggregate demand. Since the fiscal expansion is largely on revenue account and capital spending remains low, it can adversely affect the supply responses needed to lower long-run inflation,” RBI said in its quarterly report on macroeconomic and monetary developments which is released on the eve of its policy review. In its report, RBI said that economists and other forecasters have lowered growth projections for 2011-12 to 7% from 7.6% three months ago. But forecasts for inflation remain unchanged at 8.8% even as the rupee-dollar exchange rate is expected to end the year at 52, sharply lower than 47 projected earlier. Agreeing with the forecasters, RBI said that growth in 2011-12 is moderating more than was expected earlier. “The business climate has weakened. The slack in investment and net external demand may keep the pace of recovery slow in 2012-13,” it said.  RBI has significantly tightened monetary policy since February 2010 with an effective increase of 525 bps in policy rates and a 100 bps increase in CRR. Experts feels that RBI governor D Subbarao may go for a cut in cash reserve ratio to increase liquidity. On Monday, the overnight borrowing by banks touched Rs 1,41,000 crore—much higher than RBI’s comfort level. “The business climate has weakened. The slack in investment and net external demand may keep the pace of recovery slow in 2012-13,” central bank said in its quarterly report.

TOI

Inflation risks persist, says RBI

Monetary actions will need to balance growth risks and inflation'

The Reserve Bank of India (RBI) on Monday warned that inflation risks persisted while growth outlook and business climate had weakened. “The growth outlook has weakened........Inflation and expectations of inflation remain high. Upside risks emanate from exchange rate pass-through, revisions in administered prices and higher-than-expected government revenue spending,” said RBI on the eve of its third quarter monetary policy review on Tuesday. The RBI left interest rates unchanged in its mid-quarter review in December after raising them 13 times between March 2010 and October 2011. While some market participants argued for a rate cut in its third quarter review, others said the central bank is likely to keep policy rates on hold. “Monetary actions will need to strike a balance between risks to growth and inflation,” said RBI. Growth in 2011-12 is moderating more than was expected earlier. The business climate has weakened. The slack in investment and net external demand may keep the pace of recovery slow in 2012-13. However, the RBI hopes that in the short-run, moderating inflation will provide some space for monetary policy to address growth concerns. “This will be, at best, a temporary respite.” The RBI said that agricultural prospects remained encouraging but moderation was visible in industrial activity and some services. “Industrial slackness has emerged as export and domestic demand has decelerated.” Growth in 2011-12 is likely to moderate to below trend, given the external conditions, dampened investment demand and prevailing high level of inflation. The central bank felt that fiscal reforms, including the Direct Taxes Code (DTC) and the Goods and Services Tax (GST) were needed to contain deficits in 2012-13.  “The Central Government's deficit indicators are under duress due to higher subsidies and lower tax collections. Fiscal slippages during 2011-12 may complicate the task of aggregate demand management,” it added. The apex bank said that current account deficit (CAD) risks had amplified as capital flows moderated. Early indicators suggest that the current account came under increased pressure during the third quarter of current financial year. Notwithstanding rupee depreciation, exports decelerated but import demand remained strong, with inelastic demand for oil and rising gold imports. “Upward risks to CAD have become more pronounced with likely moderation of software earnings,” said RBI, adding, “As capital flows also moderated since August 2011, financing pressure on the CAD translated into exchange rate pressures.” Indian rupee had witnessed a sharp fall against the U.S. dollar in this period.

HBL

RBI pitches for reforms to contain fiscal deficit

..... "Prospectively, improvement in fiscal situation in 2012-13 is not only contingent upon the growth performance but also on the progress in implementation of tax and expenditure reforms," RBI said in a macroeconomic review of the economy ahead of third quarter review of monetary policy......

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Subbarao’s hint: Don’t expect the moon when govt is messing up

.... “While in the short run, moderating inflation will provide some space for monetary policy to address growth concerns, in the absence of structural measures to address supply bottlenecks, this will be, at best, a temporary respite. In addition, the expansionary fiscal stance has emerged as an upside risk to inflation.”...........

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IIM Lucknow Manfest 2012 hosts Mahindra Leadership summit

The Mahindra Leadership summit held during IIM Lucknow’s Manfest 2012 featured some of the biggest names from the Indian corporate diaspora. The summit was attended by Mrs. Anita Arjundas, CEO Real Estate and MD Mahindra Lifespace Developers, Mr. R. B. Barman, former Executive Director RBI, Mr. B. Kartik, Sr, Executive with Mahindra Corporate brand management and the man behind Mahindra Rise as well as Mr. Anand Bhatia, Sr. Executive with Ormax and an alumnus of IIM Lucknow..........

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Growth, euro zone fears weigh on RBI

.............The report did not offer any clear indication on what action RBI would take on Tuesday, but its emphasis on keeping the liquidity deficit “within acceptable limits” as a “policy priority” has led a section of analysts to believe that the central bank could go for a cut in banks’ cash reserve ratio (CRR). CRR refers to the proportion of deposits banks need to keep with the central bank. ............

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Restore priority sector status for bank loans to NBFC’s

Industry body ASSOCHAM today called for restoring priority sector status for bank loans to non-banking finance companies (NBFCs) and said core investment companies (CICs) should be permitted to invest ten per cent of the corpus in any scheme, including mutual funds. The Reserve Bank of India’s move to disallowed banks from classifying loans given to NBFCs as priority sector loans will significantly curtail credit flow and in turn curtail growth, it said. A fine line needs to be drawn between genuine NBFCs involved in asset financing business and those specialising in other high-risk segments, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).  “A substantial part of incremental NBFC lending has flowed to entities like IDFC, PFC, REC, IRFC and IIFCL which are also classified as NBFCs, while the balance has gone to other NBFCs which has perhaps weighed in favour of such a move by the RBI,” said secretary general D.S. Rawat. All asset finance companies in the country have a wider reach and are best placed to lend to unorganised sectors, he said in communication to the Reserve Bank of India. Under existing norms, NBFC-CICs are required to invest at least ten per cent of their investments in money market instruments. However, such CICs which do not have any deposits from the public or loans from banks may be permitted to invest in any scheme of mutual fund, including money market instruments. ASSOCHAM also called for clarity on definition of public funds and sought exemption from registration of their group CIC with the RBI where the group lending as well as borrowing companies have not raised or hold public funds.

India Microfinance

RBI mulls norms for bankers' dealings with loan arrangers

The Reserve Bank of India is believed to be examining the possibility of laying down guidelines for banks when dealing with loan arrangers. This move has to be seen in the context of the Central Bureau of Investigation busting a bribe-for-loans scam in November 2010...............

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Tedious TDS

“Banks pitch for higher tax breaks on bad debt provisioning” (Business Line, January 20) brings up some good ideas. The suggestion of removing TDS at banks, given by the bank chiefs to the Finance Minister during the pre-budget meeting, is a welcome step. If considered, it will bring relief to the lakhs of depositors who had put their hard-earned money in banks for safe returns. Thanks to the changes made to key parameters by the RBI to curb inflation, banks have had to raise the interest rates to maintain their net interest margins. Hence, for the sake of depositors, doing away with TDS can probably keep them happy. Also, in the coming monetary policies to be announced by the RBI, there are indications that some key parameters will be reduced, which will, in turn, affect the interest rate structure of banks. Hence, the Finance Minister should take the suggestion of the bankers and relieve the depositors of the burden of TDS.

- T. N. Rao, Andhra Pradesh (HBL)

Anand Sharma for lowering interest rates

........“We are of the considered view that interest rates for investment for industry should be lowered. We have taken up the issue with the Finance Minister who is receptive and positive, particularly for small and medium enterprises,” ..........

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Savings account not mobile number: RBI

The finance ministry’s ambitious plan to implement portability in savings accounts has not found favour with the Reserve Bank of India (RBI). The central bank has told the ministry there is no advantage to customers nore to banks from such a plan. “Savings bank accounts cannot be equated with a mobile number,” said a source in RBI. Adding: “The view has already been communicated to the government”. Savings bank account number portability would allow a customer to switch to another bank while keeping the existing account number. Last year, the government had allowed mobile number portability. According to central bankers, if a customer wants to shift to other banks, he or she can simply open an account. Having the same account number will have no specific significance. Neither would it give any benefit to the customer, unlike a telephone number. In addition, RBI says a bank account number is confidential and is not made public, unlike a cell phone number. “There are also security implications also,” added another source. The finance ministry recently announced that it was working to implement savings account portability, which would enable customers to change banks if they were not satisfied with the service and charges of a particular bank. The ministry also hinted at addressing some ‘technical’ issues on the same. The banking regulator has made it clear that if banks want to implement portability they can do so, but savings account portability is not on RBI’s priority list. However, the ministry earlier said once the necessary regulations are in place, banks will have to follow it. To offer portability of a savings account, banks have to work on identification code, know your customer (KYC) norms and core banking solution (CBS) — which could be an uphill task. The banking regulator also said a bank builds its resources on a savings account. A person’s savings account is customised according to the customer’s need. “A number can be transferred to another bank but the associated characteristics and charges cannot be transferred,” the source added. In October, RBI deregulated the savings bank interest rate, one of the few, still administered to promote competition among banks and also to improve monetary transmission.

BS

Will Subbarao check or boost market rally?

………..Although not many are expecting a rate cut from the credit policy to be announced on Tuesday, a lot of bets are riding on the central bank signalling a change in its stance in favour of growth. Hence, the policy announcement and the accompanying guidance will be closely watched by market participants, some expecting a cut in the stipulated Cash Reserve Ratio………..

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Agnelites on financial awareness drive…………….

The XI Commerce students of Fr. Agnel Multipurpose School & Junior College, Vashi (Navi Mumbai) were taken on a ride of fake v/s genuine currency notes on their study tour to the College of Agricultural Banking on January 21, 2012.  The batch of 97 students led by Kulvinder Kaur and Surekha Duche alongwith Fr. Almeida appreciated Shri Manas Ranjan Mohanty, DGM/MOF for the session handled by him on the security features of the currency notes. The everyday used currency notes looked afresh provided them the much needed awareness on how to detect the fake notes. Shri Simanchala Sahu, DGM/MOF made successful attempt to motivate the students to aspire in life. Citing the example of simple calculation of compound interest, he diverted their attention to the financial literacy and then facilitated their visit to the Financial Literacy Centre. Dr. While Shri Ashok Kapoor updated Fr. Almeida, S/Shri R.L.Sahoo and Ravi Kiran Pala guided the students on the evolution of RBI when they visited RBI Archival Museum. Shri Mangesh Tarambale, AGM/PS, CAB welcomed the batch. Kulvinder Kaur of the Agnel Jr. College in her concluding speech profusely thanked the Reserve Bank and the College of Agricultural Banking for facilitating visit of the students to the great institution and providing them valuable inputs.       

Bye-bye cheques, hello electronic payments

Electronic transactions are making rapid strides, with more and more of us abandoning cheques and cash in favour of Internet banking and cards. Reserve Bank of India data for retail electronic payments show that in 2010-11, the total value of electronic transactions almost doubled that of the previous year. Again, between April and November 2011 the value transacted was 72 per cent more than in the same period the year before.

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RBI in a tizzy over Pak’s precision in faking notes

…The seized notes have all the six basic security features of Indian currency notes: a) micro-printing, which is used by RBI to combat counterfeiting; b) Gandhi watermark; c) security thread; d) 100% cotton paper; e) embossing by insertion of Intaglio images; and f) electro-yet watermark…..

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RBI sees red over bank loans to aid sell-offs

The Reserve Bank of India (RBI) has opposed a government plan under which public sector banks will lend money to a new asset management company (AMC), which, in turn, will buy stakes in state-owned enterprises to support the faltering disinvestment programme. According to sources, the central bank has rejected this proposal as it would expose banks to undue market risk and violate capital market exposure limits on banks set by the central bank.................

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Finance ministry clears proposed national microfinance law

Ministry will soon seek cabinet nod; law will take away microlending from purview of state-level laws

…According to the draft legislation, for MFIs operating as non-governmental organizations, trusts or cooperative societies, RBI will have the power to delegate any other supervisory and regulatory entities such as the National Bank for Agriculture and Rural Development (Nabard). “RBI will be the sole regulator under this Act. The draft Bill doesn’t say anybody else as regulator. RBI may delegate other entities it finds fit for this rule,”…..

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Fresh direction to monetary policy?

...Global cues are hardly encouraging and it is certain that the RBI, like many others, will revise downwards its growth forecasts. In short, while inflation concerns have not gone away, the accent of monetary policy will be on growth, specifically in arresting the slowdown.

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Good news at last

...........Lower inflation has been possible partly because of the base effect: in December 2010 inflation had touched 9.45 per cent. Manufactured goods inflation remains elevated. All these will no doubt weigh with the RBI when it unveils the next instalment of the credit policy early next week. After hiking the rates more than a dozen times over a period of 18 months, it paused in December amidst slowing industrial production. It is doubtful that the recent good news, by themselves, will help the RBI resolve its dilemma, whether the interest rates should be cut or left untouched.

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RBI likely to remain in pause mode on rates

..........."The RBI will take a dovish stand on growth and the economic scenario by revising the growth target to 7 per cent from the present 7.6 per cent. Instead to cutting reserve requirements, RBI would prefer to undertake open market operations to raise money for the government.”

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Ministry prods RBI to cut rates, bankers not hopeful

The finance ministry wants the Reserve Bank of India (RBI) to switch its policy stance, with growth concerns occupying centre stage and inflation showing signs of moderating. A ministry official said monetary tightening had hurt growth and the central bank should have paused earlier than December 2011. The RBI should cut policy rates to give a push to rate-sensitive sectors, the official added. While bankers are not expecting a repo rate cut at the policy meet on January 24, the ministry thinks it would be needed to spur investment and growth……..

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RBI may go for rate cut in February: Moody's

Global ratings agency Moody's has said inflation in India is likely to moderate to around 6.5% by the middle of this year and the Reserve Bank may go for interest rate cuts by February…………. 

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Time to cut rates

Market wisdom is that RBI won’t do much in its policy tomorrow as, the continuous fall in food inflation notwithstanding, the back of inflation still hasn’t been broken. Though WPI inflation fell to a two-year low of 7.5% in December, largely due to a fall in food inflation to 2.6% (the base effect was a big factor), it is argued that core inflation remains high though it has eased to a 5-month low.......

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Will RBI go for a CRR cut?

…..It’s fairly certain that the Reserve Bank of India (RBI) will pare its growth forecast for the Indian economy when it announces its quarterly review of monetary policy on Tuesday…….

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Watch the video..........

‘We plan to become leading pan-India bank with stable growth'

.....While it is true that the RBI may take the decreasing inflation numbers into account while deciding on the rate change, the fact that food inflation has a weight of 14 per cent leaves the other 86 per cent quite important and to be watched. The RBI may take a cue from the monthly inflation numbers before taking a call on the interest rates.

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THE BANKER-TURNED-AUTHOR

This former CMD of Bank of Baroda has books stacked from floor to ceiling in his ‘home office’, in keeping with his post-retirement avatar

Office workers usually daydream about the future as a utopia where they are unshackled from their workstations. Anil Khandelwal, a former chairman and managing director of Bank of Baroda, is precisely the opposite. Retirement can be “professional widowhood, especially in the public sector”, Khandelwal professes, joking that “no one calls you any more”…..

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RBI gears up for fake-currency awareness drive

CHENNAI: Two weeks after three labourers from West Bengal were arrested for circulating counterfeit currency, officials of the Reserve Bank of India on Friday announced that they would visit Kovilambakkam panchayat in Pallikaranai on Monday to conduct an awareness drive on fake notes for the benefit of the residents. The arrest of the trio had triggered fear among the residents that counterfeit notes could be in circulation in their area. After they approached the local police in this regard, the RBI stepped in and offered to conduct an awareness drive. RBI officials said that apart from the pamphlets and posters in English and Tamil, they were also printing them in Hindi for the benefit of a large number of North Indian labourers staying there. “We are getting them printed in Hindi. The panchayat is trying to bring the residents and traders to the programme by distributing these handouts. We will explain to the people how to differentiate between genuine and counterfeit notes,” said an RBI official. Apart from the residents, over 200 traders are expected to take part in the programme that would take place at the panchayat union office. According to sources, most of the counterfeit currency comes from Pakistan. The suspected hand of the Inter-Services Intelligence (ISI) behind the fake currency racket could explain the high quality of the fake notes, sources added. Further, it is suspected that high-end equipment used to manufacture genuine currency could have been used to make the fake ones. Fake currency is manufactured in denominations of Rs 500 and Rs 1,000 as they fetch high profits for those involved. “They have stopped making fake Rs 100 notes as it is no more profitable and Rs 500 is the most-printed denomination,” the sources said. There are five basic features that could help a common man identify a genuine note, including the ‘Optically Variable Ink (OVI),’ the officials said. “The words ‘Reserve Bank of India’ that appears on the notes are made with the help of intaglio printing, meaning raised level printing, which is a superior technology that only a few countries have. This feature cannot be replicated on a fake note.” “Similarly, the security thread on a Rs 500 note also contains shifting colours now, after it was reviewed and updated in 2005. The earlier notes had silver threads. The review and update is done constantly by a committee to keep ourselves a step ahead of the fake currency technology,” an official explained. The ‘cotton rag’ used to print Indian currency, which is manufactured abroad, is also a unique feature. A paper-making unit has been opened in Mysore this year to make the RBI self-sufficient, the officials added.

IBN Live

Financial Inclusion & it's Implementation in India

...The first-ever Index of Financial Inclusion to find out the extent of reach of banking services among 100 countries, India has been ranked 50. Only 34% of Indian individuals have access to or receive banking services. In order to increase this number the Reserve Bank of India and the Government of India take innovative steps.....

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Goodbye Financial Inclusion, Hello Financial Identity

For those who did not know (but want to) the term ‘financial inclusion’ was coined by former Reserve Bank of India (RBI) Governor Y.V.Reddy in 2005. It is over a chance conversation with him a few months ago that I discovered RBI’s original description for this effort was actually ‘financial exclusion’……………

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Worried at the top

Every now and then the government moans about the brain drain, what with a steady stream of senior IAS, IPS and IFS officers departing for jobs in the private sector. The government has now begun to consider the matter seriously. Cabinet secretary Ajit Kumar Seth has apparently raised it with the Cabinet. Sources say that the present mood stems from the recent departure of three top finance experts who all took up lucrative assignments almost immediately after retirement. Clearly, the exit of Shyamla Gopinath, former Deputy Governor of the RBI, Vijay Kelkar, former chairman of the 13th Finance Commission and Shushma Nath, former expenditure secretary, has touched a raw nerve. Officials are muttering about “conflict of interest” and leakage of confidential information as a reason for the disquiet.

DC

What’s The Ado About?

The Reserve Bank of India’s (RBI) new compensation guidelines for private and foreign banks are politically correct, nothing more. According to the new guidelines, which are based on the recommendations of the International Financial Stability Board, bonuses or variable pay are to be capped at 70 per cent of fixed pay, and stock options have been kept out of it. And where variable pay component is a substantial part of fixed pay — 50 per cent or more, a large portion of it is to be deferred for over a period. It has been left to banks to define ‘substantial’ in their compensation policy. Analysts say the norms which will kick in from the next financial year will not impact at least the few large private sector banks materially. No top executive at any private bank has a variable pay over 40 per cent of fixed pay. In the aftermath of the global financial meltdown, it is fashionable to berate bankers as a class.  Indian banking is highly regulated; western financial fashion is banned. And pay in private banks is lower when compared to what you earn at top non-banks. The RBI should make a pitch to New Delhi to pay state-run bankers market salaries. These banks are finding it tough to attract talent in an ever-evolving and complex banking market. It will also give a fillip to lateral recruitment in these banks.  And lastly, Mint Road should also be bothered about the pay of its own officers who are the most poorly paid in Asia. The demands of RBI officers’ union have gone unheeded for years now. 

India Today

Major monetary policy easing not yet on cards, say analysts

…some analysts believe easing of the monetary policy is still not on the cards. The situation on inflation front is getting better as it is following a downward path. Yet, it is still ruling at high levels. The other factors such as moderation in growth and slowdown in industrial output have not yet reached alarming levels. Therefore, there are good chances of the RBI not making any changes to its current policy and postponing the decision on key interest rates easing till the next review meeting….

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RBI policy: Experts discuss whether time ripe for rate cut

….Unless it is reasonably convinced, there is a very strong trend towards decline in the inflation rate, especially the core inflation rate. It will be unwise on the part of the RBI now to cut the reference rate…..

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How NEFT saves time and effort for both parties to transfer funds

The National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this scheme, individuals, firms and corporates can transfer funds from any bank to an individual, firm or corporate having an account with any other bank in the country. NEFT is still not being used on a large scale. Increased use of NEFT is expected to bring down the chances of fraud too………………

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Is world's largest meal coupon company Sodexo losing its business?

…Customers went to stores, bought groceries, paid via coupons and felt happy about the tax-free perk. Until on New Year's, in a seemingly coordinated decision, major retailers like Food Bazaar and Spencer's Foodworld, put up posters declaring they won't accept Sodexo coupons anymore. Suddenly, a company few talked about became the subject of polarised online debate. One agitated customer wrote: "I for one welcome this. I am sick of standing behind someone who counts 100s of coupons at the checkout counter."…..

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Banks drag feet on sick industrial units’ revival

…The committee, which also includes representatives of the RBI, Bihar Industries Association (BIA), CII and other industrialists' associations, would on January 24 discuss threadbare the measures, if any, taken by banks to give loans for revival of viable sick industries…..

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Rupee on winning spree

......The many steps taken by the RBI at the close of 2011 to support the beleaguered rupee seem to be showing results now. Also aiding the currency in recent weeks are positive tidings on the economic front. ......

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Cyber criminals on prowl: RBI official

RBI Chief General Manager, Hyderabad, Rose Mary Sebastian with Telangana University Vice-Chancellor Mohd. Akbar Ali Khan in Nizamabad on Friday

Reserve Bank of India (RBI), Hyderabad, Chief General Manager, Ms. Rosy Mary Sebastian, has advised students and people at large to be wary of SMSes and emails informing that they have won millions of British pounds or American dollars. “They are false and deceptive tactics being adopted by some cyber criminals to deceive the people. Therefore, the RBI by roping in other nationalised banks, is trying to create awareness among the people on such offences and also on the guidelines for using foreign exchange”, she said while inaugurating the two-day awareness camp, at Rajiv Gandhi Auditorium premises, here on Friday. She said the camp would help students and parents gain knowledge over sending money to their children studying overseas and receiving money in foreign exchange from the Non-Resident Indians. The bankers also explained the present values of different foreign currencies in terms of Indian currency and modes of money transfer. Attending as the chief guest, Telangana University Vice-Chancellor Mohemmed. Akbar Ali Khan appreciated the RBI's gesture and described it as very useful to students. He also suggested to the apex bank to conduct such awareness camps across Telangana region and at universities. The SBI, the SBH, the ICICI bank, the Andhra Bank and the Deccan Grameena Bank opened stalls and explained the aim of the camp with the help of charts and power point presentation. A number of students from the TU and different colleges attended.

HBL

New-age moms struggle to breast feed



Dr Smita Dashora, (BMO, RBI, Jaipur) with her daughter Shinjini



Dr Smita Dashora, 36, was back to work just five weeks after she delivered a girl in November 2011. She runs an antenatal clinic at Jaipur’s Santokhba Durlabji Memorial Hospital (SDMH) where she offers holistic care to pregnant women. Being a gynaecologist, Dashora knows that a new mother needs to be at home for at least six months to ensure that the baby is exclusively breastfed. But under immense pressure to return to work, she admits that she “couldn’t practice what I preach.” When Dashora had had her first child six years earlier she had managed to take off for the full six months, but since then work pressures have mounted. “This time around, I couldn’t enjoy that luxury since I had a lot of patients counting on me,” she reveals. For a new mother, Dashora has a tough daily grind. After taking care of the morning chores at home, she rushes off to the Reserve Bank of India (RBI) dispensary where she sits from 9 a.m. to 11 a.m. Then she is off to SDMH. At around 2 p.m., she goes back to the RBI dispensary for an hour and she also has patients waiting for her at her home clinic between 5.30 p.m. to 6.30 p.m. To take care of baby Shinjini’s nutritional needs, Dashora manually expresses two feeds before she leaves for work at around 8.30 am and one feed is given at night. “But I don’t think I can continue doing this for long. After four months, I’ll have to add at least one formula feed. There’s so much work pressure and my diet is also not what it should be,” she says. Although awareness of the six-month rule has increased, busy city women like Dr Dashora find it hard not to add a formula feed after four months

Nagaland Post

Subbarao Meets FM Ahead of Monetary Policy Review

Ahead of monetary policy review on January 24, Reserve Bank Governor D Subbarao today met Finance Minister Pranab Mukherjee and discussed the prevailing macro-economic situation, including inflation. "I came to review the macro-economic situation with the Finance Minister...," Subbarao told reporters after his meeting with Mukherjee. He said this was a standard practice for RBI Governor to discuss the state of economy with the Finance Minister before review of the monetary policy. After the meeting, Finance Minister Pranab Mukherjee said, "RBI will announce the policy at the appropriate time. I had a discussion with RBI Governor (on the issue)." The central bank had hiked interest rates by 375 basis points between March 2010 and October 2011 to deal with the persistent high inflation, including rising prices of food items. In its last review in December, the RBI pressed the pause button on its monetary tightening measures and said that it might go for rate cuts in the future as inflation moderates. Headline inflation fell to a two-year low of 7.47 per cent in December, 2011. Food inflation entered the negative zone in mid-December and stood at (-)0.42 per cent as of January 7, as per the latest numbers released by the government. At the same time, RBI is also confronted with moderation in economic growth. The government has cut its growth projection from 9 per cent to about 7 per cent for the current fiscal.

The Outlook

Five-rupee note still valid: RBI

Hyderabad  : Allaying fears that the five-rupee note will be withdrawn, the Reserve Bank of India (RBI) has said that the five rupee note is not being withdrawn and will continue to be a legal tender. This clarification is being issued in the wake of certain reports in the media that the note will not be used by the Reserve Bank of India for exchange, a press release said. The RBI has also advised the general public to use the five rupee note like any other bank note for all necessary transactions.

HBL

Realtors seek RBI nod for loan rollover

Developers across the country have sought Reserve Bank of India's permission for a rollover of real estate loans due for repayment by March 31, 2012. They have also appealed for a reduction in risk weightage for real estate loans to help reduce the cost of loans............

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Reversing the monetary policy stance

As we head into RBI’s third quarter review of the 2011-12 monetary policy, the question foremost on our minds is the seeming reluctance to reverse the policy stance right away. In particular, given the persisting deficit system liquidity, why not cut CRR by 50-odd points and infuse liquidity through a more stable process than open market operations (OMOs)? How should we read RBI’s thinking on this?...........

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India trying to find solution to pay for Iran oil: RBI

MUMBAI: Reserve Bank of India Deputy Governor K C Chakrabarty today said that efforts were being made to explore ways to pay for oil imported from Iran which has been subjected to international sanctions. Chakrabarty termed the issue as one arising purely out of international sanctions on Iran and not a financial one. "We are finding...something is happening," he said when asked about the way ahead to pay Iran for the crude which the country imports. When asked about the recent visit by an Indian team to the Gulf nation for settling the issue, he said, "they have to find a way out."  "It is very difficult. It is international diplomacy. It has nothing to do with finance," Chakrabarty said, speaking on the sidelines of an event here this evening.  "The problem is we are not able to route the transactions through some banks because of international sanctions," he added. Iran is the country's second largest supplier of crude after Saudi Arabia. Earlier, payments for the crude were made through multilateral settlement mechanisms which stopped about a year ago due to UN-imposed sanctions. Later, a novel way of payment was worked out wherein the Iranian Central Bank opened rupee accounts with Indian commercial banks, but that is also reportedly not working out well due to some issues.  A report earlier this week said Iran was exploring the idea of increasing imports from India to compensate for its export of oil.

ET

Basel III Guidelines—Will our banks prove equal to the challenge posed by the RBI?

....While it is not known what prompted the RBI to take a ‘holier than thou’ attitude in stipulating stricter norms a and shorter time-frame than those prescribed under the Basel III guidelines, more so when our country’s economy is in a state of flux, it will, no doubt, result in developing a strong and stable banking system in India, that can stand the test of times and the country can feel proud, if what is stipulated by RBI is achieved without any mid-term course correction. As nearly 70% of the banking business in our country is in the public sector, this requires concerted efforts on the part of the banks, RBI and the government to source this large capital requirement of the banks and the regulatory authorities should provide the necessary wherewithal for the banks to comply with these requirements in good time, without any hiccups. .....

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Time to soften interest rates

The RBI's objective to decelerate aggregate demand to enable the soft landing of the economy has been achieved. It can now afford to loosen up its policy, once again taking baby steps.

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Short-term rates up, as banks raise funds

Interest rates on short-term debt instruments touched double digits on Thursday, as banks raised funds to meet credit growth targets in the last quarter of the current financial year. According to market participants, rates on certificates of deposit (CDs) issued by banks crossed 10 per cent on Thursday........

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Small savings scheme interest rates not floating: RBI

Mumbai: The Reserve Bank on Friday said interest rates on small savings schemes, except the PPF, will remain fixed throughout the term of schemes. It clarified that interest rate for small savings, barring PPF, will be declared on April 1 every year and will remain valid till the maturity of the scheme. "As per the rules of small savings schemes, the rate of interest on an investment made in all schemes, except PPF, 1968 on a particular date, remains unchanged for the entire duration of the investment, till maturity, irrespective of the revisions in subsequent years," the apex bank said in a circular. It said the circular has been released as a clarification after it observed that news items are appearing in media which conveying an impression that the interest rates on small savings schemes linked to government securities (G-Sec rates) "are floating in nature and will undergo change depending on the yields on G-Sec during the currency of an instrument". RBI's clarification comes a few days after a similar one was issued by the Finance Ministry. "... the rate of interest on small savings schemes will be aligned with G-Sec rates of similar maturity with a spread of 25 basis points, with two exceptions. The spread on 10 year National Savings Certificate will be 50 basis points and on Senior Citizens Savings Scheme, 2004, (it will be) 100 basis points," RBI said. In December last year, the government had increased interest rates on PPF to 8.6 percent from 8 percent earlier, and also raised ceiling on annual contributions to the fund to Rs 1 lakh from Rs 70,000. Interest rates on savings account in post offices also rose to 4 per cent from 3.5 percent. Similarly, interest rates on deposits of other maturities too was raised from December. The sale of 'Kisan Vikas Patras' (KVP) was discontinued from November 30, 2011. In addition, the maturity period of monthly investment schemes (MIS) and national savings certificates was reduced from six years to five years. MIS earns an interest of 8.2 percent, but accounts opened on after December 1, 2011, would not be entitled for bonus. Besides, loans taken from PPFs would attract an interest of two per cent per annum from December 1, 2011. The government did away with commission paid to the agents for opening PPF accounts and Senior Citizens Savings Schemes, while the agents commission for Mahila Pradhan Kshetriya Bachat Yojana (MPKBY) was fixed at four per cent.

Zee News 

For the entire notification, see:

http://rbidocs.rbi.org.in/rdocs/notification/PDFs/359C200112A.pdf

Bankers demand tax break on interest earned from FDs

...Bankers on Thursday pitched for removal of tax deducted at source (TDS) levied on interest accrued from fixed deposits, to promote savings,.....

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Retail Banking: Not in your interest

....RBI also needs to worry about several other customer-unfriendly and questionable practices of banks. It needs to be concerned about what is going on in the banking industry in the name of relationship banking....

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Credit Flow To Mfis Will Now Improve: Malegam

Credit flow to micro-finance institutions will be adequate in future as the regulations relating to MFIs have been issued, Member of Financial Sector Legislative Reforms Commission (FSLRC), Y H Malegam have said. "Credit flows, perhaps, were waiting for the regulations to be issued. And now that the regulations have been issued, I think there should be adequate credit flow to the sector," Malegam told reporters on the sidelines of Financial Planning Congress' 11 organised by Financial Planning Standards Board of India. The microfinance sector was thrown into a tizzy last October when Andhra Pradesh issued an Ordinance that sought stringent regulation of the industry, following reports of a spate of suicides by harried borrowers. Andhra is the largest MFI market in the country. Following this, loan recovery slowed to a trickle and banks also refused to offer fresh funds to MFIs.  RBI then set up a committee under the chairmanship of Malegam, who submitted his report early this year. The Malegam Committee came up with its report on MFIs prescribing a interest cap of 24 percent on lending, creation of NBFC-MFIs along with host of other guidelines. Referring to overall health of MFI industry, Malegam said, "So far as other state governments (except Andhra Pradesh) are concerned, there is an improvement. Definitely, interest rates have come down. Well run and efficient MFIs are able to operate under the guidelines issued." He, however, conceded that the proposals given by his committee will have less impact in Andhra Pradesh.

http://www.legalera.in/Highlights/credit-flow-to-mfis-will-now-improve-malegam.html

Govt likely to overhaul financial inclusion model, look at viability

Financial inclusion, a pet theme of finance minister Pranab Mukherjee and the Reserve Bank of India (RBI), is set to get a fillip with a major overhaul of the entire business correspondent model currently practised by the financial institutions. Within next few weeks, government is likely to allow business facilitators to work as business correspondents, which is expected to consolidate banking in the hitherto unbanked areas. Despite more than five years elapsing after the RBI allowed banks to employ business correspondents (BC) and business facilitators (BF) to expand their outreach, the model is yet to become an economically viable for most stakeholders. Experts say that it takes several years for a bank to break even in an unbanked area and therefore BC option enables banks to reach out much faster at a much lower cost. Around 85,000 of the one lakh villages are covered by banks through the BC channel. To make the model economically viable the government is planning to allow BF too to transact on behalf of banks. “Allowing a BF to handle the work of a BC would help increase viability of the business”, said a senior finance ministry official.

IE

Cooperative banks lose Rs 235 cr to bad loans

Srinagar, Jan 19: The Cooperative Department is seeking bailout from the State Government and the Government of India for three cooperative banks which have turned bankrupt and are presently under notice from the National Bank for Agriculture and Rural Development (NABARD) and the Reserve Bank of India (RBI). The banks in red include Jammu Central Cooperative Bank (JCCB), Anantnag Cooperative Bank (ACB) and Baramulla Cooperative Bank (BCB). Together, the three banks have a cumulative default of around Rs 235 crore. Official sources said mismanagement in the banks and extra-managerial costs pushed the banks towards the default. They said the management of these banks never tried to streamline the system and provided loans to even unscrupulous persons and allowed a lot of political interference. “A commission should be set up to fix responsibility. After all depositors’ money cannot go down the drain this way,” said an official pleading anonymity. Commissioner Secretary Cooperatives, Abdul Hamid Wani, is the chairman of the Cooperative Bank Anantnag and the Cooperative Bank Baramulla. “The Reserve Bank of India has issued guidelines after the State Government signed MoU with it. These three banks have not been issued the licenses. The RBI and NABARD are arguing that the banks should clear the debt,” the Minister of State for Cooperatives with independent charge, Dr Manohar Lal, said. He said Jammu Central Cooperative Bank has losses of around Rs 100 crores, Anantnag Cooperative Bank around Rs 80 crores and Baramulla Cooperative Bank around Rs 55 crores. “We have taken up the issue with the RBI and NABARD in a meeting held at Bangalore last month. We have explained them that people and societies over the years have taken loans from the banks and didn’t return. And there is need to bailout the banks,” the Minister argued. He said his Ministry will take up the issue in the State Cabinet and seek bailout for the banks. “We expect the State Government and the Government of India will bail out the banks,” he said. The Minister described losses of the banks as cumulative loss and attributed it to various factors including the packages announced by the Government from time to time. “The Government during Prime Minister Devi Gowda’s time announced debt relief package to farmers and subsequently similar packages were announced. That also affected the banks apart from poor recovery mechanism,” he said. However, the Minister said that Baramulla Cooperative Bank is on the path of recovery and it needs slight push. “The bank has improved a lot during last year and we expect it would overcome the default,” he said.

Greater Kashmir 

Rs 65,000 cr missing money: RBI needs to explain liquidity drop

... The RBI has a lot of work to do on liquidity management given the current liquidity tightness, which is becoming alarming. It has to communicate its analysis on liquidity to the market, as a market that is befuddled by liquidity will push up money market rates.....

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Short-term rates up, as banks raise funds

Interest rates on short-term debt instruments touched double digits on Thursday, as banks raised funds to meet credit growth targets in the last quarter of the current financial year. According to market participants, rates on certificates of deposit (CDs) issued by banks crossed 10 per cent on Thursday................

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State finances: More disclosure please - K Kanagasabapathy

................A transparent and periodic information flow about fiscal position of State governments, preferably State-wise, would considerably add to market stability and better assessment of fiscal performance of Centre vis-a-vis states and also inter-se states, There must be a coordinated effort from the RBI, Centre and the State governments towards this end.

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