Mahesh Bank launches RuPay ATM card

Hyderabad, Feb. 5: The increasing use of ATM cards will be cost-effective for banks as well as customers, according to Mr A.P. Hota, Managing Director and Chief Executive Officer of National Payment Corporation of India. Speaking after formally launching ‘Mahesh RuPay ATM card' Mr Hota said Mahesh Bank had taken a lead in the cooperative sector in south India by launching its ATM card. R. Ramesh Kumar Bung, Chairman, Mahesh Bank said his bank's business had crossed Rs 1,775 crore and the branch expansion was being spread to different states. Mr A S Rao, Regional Director, Reserve Bank of India said the number of urban cooperative banks had come down from 115 to 103 in the recent past. ATMs were a versatile instrument and an important delivery channel, he added. The National Payment Corporation of India Ltd has launched the ‘Rupay' ATM card mainly for no frills account holders in collaboration with banks. It is expected to reduce overall transaction costs for banks by introducing competition to international card schemes like Visa and Master.

HBL

Liquidity problem

February 5, 2012: In the banking and corporate world, the word ‘liquidity' is heard quite often. But how does one explain liquidity to a general audience? Former Governor of the Reserve Bank of India, Y.V. Reddy, well-known for his ready wit, had a 300-strong audience in splits when he gave liquidity a new definition at a function held in Hyderabad recently. “For a Central Bank or banks, liquidity means something related to cash reserves, while for a company, liquidity is generally linked to solvency or cash in hand. But in Hyderabad, after 6 p.m., liquidity means beer or whisky,” he quipped. He sure got the point across effectively, though the definition may have been far from accurate.

HBL

Smoking zones work

Responding to our question on ‘unofficial smoking zones' in workplaces (despite a ban), readers acknowledge that while smoking is harmful, given the law that denies ‘official' smoking zones, such unofficial areas are stress busters for habitual smokers. There are some readers like Pradeep Ghorpade from Mumbai who question the absence of official smoking zones too. Edited excerpts:

As an international traveller, I was impressed by the smoking areas provided in international airports, restaurants and public places. Should we also provide similar smoking areas in our workplaces, and in public places such as airports, railway stations, bus stands and shopping malls? Most co-workers ignore it when one of their colleagues smokes in unofficial smoke areas such as toilets, basements or parking areas. This ensures that the employee does not leave the campus and returns quickly to his work desk or factory shed. 

— Mathew Abraham, RBI, Thiruvananthapuram (HBL)

Don’t let plastic cards melt hard-earned cash

......The biggest risk in all plastic cards, debit or credit, arises when a customer loses the card and his or her signature is there on the card to be easily forged and misused at merchant shops. It may be difficult to eliminate the risk of fraud altogether but here are a few things you can do to mitigate it.......

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NPCI to launch PIN-based debit cards by March

....National Payment Council of India (NPCI), set up by the Reserve Bank of India to promote card payments system, will launch its RuPay debit card in March. RuPay is the country’s first domestic payment card network and aims to match existing payment facilitators such as Visa and MasterCard and provide debit and credit card services........

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Bank of Maharashtra convenes 114th SLBC in Mumbai

Reserve Bank of India calls for dedicated SME verticals at banks

MUMBAI: The Reserve Bank has asked banks to set up dedicated verticals to help small and medium businesses to deal with financial matters. "An SME-promoter knows the product, but he doesn't know finance," RBI Deputy Governor K C Chakrabarty said, speaking at an industry seminar organised by the SME Chamber of India here over the weekend. Banks, which have long-term association with such SMEs as lending partners, can further this relationship by providing consultancy on finance, cash-flow management, taxation and other related things for a fee, he said. "I think this is a product innovation, which needs to be done by banks and it needs to be done across the globe," Chakrabarty, whose responsibilities include customer services, said. A desk should be available centrally that will help SMEs and can handle multiple SMEs, he said. SMEs will have to pay for such service, he said. "I am not saying anything is free, you charge them for that." However, banks should eye volumes in the business and ensure that the costs are low, Chakrabarty added. He also came down hard on the high interest rates charged by banks in lending to SMEs, asking if they can be compared with rates charged to corporates. As a matter of proper governance, Chakrabarty said, "I will be happy if banks disclose this in the balance sheet.”

ET

Banks play safe, favour large firms to SMEs

Banks, saddled with rising bad debt in view of the economic slowdown, are believed to be directing a major chunk of their lending to large companies, choking credit to the small and medium enterprises (SMEs)....................

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What Basel-III norms mandate

....One of the fundamental assumptions of accounting is the concept of going concern. Basel-III norms as issued by the RBI should raise a few eyebrows when they refer to tier-2 capital as gone-concern capital in their guidelines, though it is apparent that this is only to distinguish it from tier-1 going-concern capital. ......

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RBI eases forex restrictions for select PSU and private banks

...... "The RBI wants to ensure that banks make use of the limit for client needs and not indulge in speculation. It may not be the best thing to do, but these are unusual times,"........

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Banks should ensure person offering guarantee is a close relative of borrower

....The Reserve Bank of India, in its recent Financial Stability Report, has identified deterioration of asset quality as the highest risk facing banks. The RBI has also highlighted the fact that the year-on-year growth of NPAs (non-performing assets), at 30.5 per cent, was higher than the credit growth at 19.2 per cent. .............

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Banks ask borrowers to cover their personal loans, overdraft facilities

............ According to bankers, borrowers are being sold the covers under the proposition of ‘no headache to families, in case of an untimely death or even unemployment’. “Borrowers are showing interest because if there is a default due to death, the family will not be pestered or will not be burdened with a loan,” said the retail head of a private sector bank......................

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Is audit losing its relevance?

...... A recent move by the RBI to reduce branch audits of banks has received significant attention of the media. As per media reports, banks have written to the RBI suggesting reduction in branch audit to reduce non-value added costs.It is argued that with concepts like core banking system and centralised record keeping, the relevance of the audit of branches of public sector banks (PSBs) has significantly declined. RBI will definitely decide the issue considering the pros and cons of reducing audit of branches of PSU banks........

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Budget 2012: Agenda for banking sector this year – M.S.Sriram

The government and the Reserve Bank of India (RBI) is half done on financial inclusion. More branches are being opened. Four elements of inclusion have also been articulated: a basic bank account with an overdraft facility; entrepreneurial credit on the lines of a Kisan credit card; an accumulating savings product; and a remittance facility...........

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The data divergence

....On several occasions in the recent past, important users of official data have questioned its veracity. The monthly Index of Industrial Production, which tracks industrial output, has been extremely volatile after it moved to a new series. The RBI has found it to be unreliable for framing monetary policies. The monthly WPI inflation figures have likewise been criticised but the main point of criticism is that, despite some recent improvements, it does not capture the price movements that affect the consumers directly.......

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Banking on India Post

....The Communications Minister, Mr Kapil Sibal, wants the Reserve Bank of India (RBI) to grant a banking license to India Post. The proposal makes eminent sense, especially at a time when financial inclusion has become a pervasive buzzword............

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eMudhra to certify digital signatures for e-banking transactions in Mauritius

....“The RBI in its April 2011 guidelines has given a deadline asking all the banks to comply with Information Technology act. The IT act recognises digital signatures as the only recognised form of authentication for online and electronic banking transactions”......

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RBI for change in ‘sick' nomenclature for MSMEs

Mumbai, Feb. 4: The Reserve Bank of India wants the definition that classifies industrial units in the micro, small and medium enterprise category as ‘sick' changed as barely 2 per cent of such units have got rehabilitated in the last few years. The proposal to revise the definition is aimed at detecting signs of incipient sickness among MSME units so that preventive measures could be taken by all stakeholders, including banks, to nurse them back to health. “As per the current definition, a unit is classified as sick when there is erosion in the net worth due to accumulated cash losses to the extent of 50 per cent. By the time the units reach this stage they are nearly dead. So, the definition of sick units needs to be changed,” said Mr K. C. Chakrabarty, Deputy Governor, Reserve Bank of India. A Government standing advisory committee is looking into the possibility of making this change, he said at a seminar organised by the Small & Medium Business Development Chamber of India. The Deputy Governor called upon banks to set up financial management advisory desks to help MSMEs with non-core functions such as accounting, taxation and financial management. Banks could charge a reasonable fee to provide these services to the enterprises. Underscoring the extent of financial exclusion when it comes to MSMEs, Mr Chakrabarty said about 93 per cent of the SME promoters depended on self-finance or informal sources of financing. He observed that the top management of banks should show their commitment to the MSME sector by clearly spelling out the targets for expanding the MSME portfolio at the branch level and closely monitoring them. Further, to ensure transparency, banks should disclose the interest rates they charge their borrowers segment-wise in the balance sheets. The deputy governor said banks should tighten their credit appraisal standards. They should not relax their standards just because credit guarantee institutions such as the Credit Guarantee Fund Trust for Micro and Small Enterprises and the Export Credit Guarantee Corporation of India will pick up the tab should loans turn bad. Entrepreneurs, said Mr Chakrabarty, should be encouraged to experiment with business ideas. If the entrepreneurs fail in their ventures, they should have an easy exit policy.

HBL

RBI pulls up banks for laxity in SME finance

...Reserve Bank of India Deputy Governor KC Chakrabarty on Saturday pulled up banks for showing laxity in financing small and medium enterprises (SMEs) in the country......

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And they are no more...............

Shri K.V.Balasubramanian, retired Grade C officer (DBOD) and Shri. Mahadevan, Retired Banking Assistant, DBOD, both from Mumbai reached God's abode on 25th and 26th Jan. 2012.
- As reported by Venugopalakrishnan  (via e-mail)

I regret to advise the death of Shri M.Sankarnarayanan in Trivandrum on January 28, 2012. He was 70 years old and served in RBI from 1962 to 2002. He retired as Deputy Treasurer in TVM Office.

- As reported by P.P.Ramachandran (via e-mail)

Luck at lunchtime

..... “I have been amused to see the kind of money people spend on this. It is corporate gambling,” opines an RBI employee, a regular visitor to the shop. “If they had so much money, they could very well go to the quiz shows on television and try their luck there.” He, however, does not buy tickets. He only watches others splurge on them and entertains himself....

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How any one can expect RBI can be an autonomous body?

It is not very much clear Why Shri A. Chandramouliswaran, a former Executive Director has given a small writeup about RBI autonomy - a myth (VITALINFO -1st Feb. 2012). The Central Board shall consist a Governor and not more than four Deputy Governors to be appointed by the Central Govt. Four directors to be nominated by the Central Govt one from each of the four local boards. Ten directors to be nominated by the Central govt. One Govt offiial to be nominated by the Central Govt. The Central Board is full of Govt nominees and they will toe the Central Govt policies. How any one can expect RBI can be an autonomous body. One of our friends has also commented about the delay in our pension upgradation. I put a straight question whether any of the Central Board Directors raised the upgradation of pension issue of retired employees in any of the Board Meeting. So far it has not been included as item for discussion. They will be busy framing endless rules, regulations, codes, norms and guidelines for the corporate world, banks, insurers, and every financial intermediary. India's regulators, like the political class and powerful bureaucracy, are accountable to none, because we do not have a structure of transparency, oversight and accountability. 

 - K.P.SASTRY, Retd. Asstt. Manager, RBI, Hyderabad

pskalluri@yahoo.com

India to get index to assess trends in housing sector

...A joint initiative of the Reserve Bank of India and the Housing and Urban Poverty Alleviation (HUPA) ministry, the first set of data for ten cities is expected to be released by March end. Initially, HSUI will be released on a pilot basis for just ten of the fifty Indian cities......

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Pending, a long list of bills

..... "We have proposed some amendments in the Rajasthan Protection of Interests of Depositors (in financial establishments) Act and will send it to RBI for the final consideration. By the end of this month, the process will get completed.......

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How electronic payments work

National Electronic Fund Transfer (NEFT) and Electronic Clearing Systems (ECS) are both modes of electronic payments. But that is where the similarity ends. The two terms are often mixed up or not fully understood. Here's explaining the two routes of transferring funds online.............

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RBI cannot pursue policy oblivious to growth: D Subbarao

..... "In a country like ours where fiscal deficit is high and is likely to be high, no matter what we might wish, when the government borrowing is such a large part of the total credit outflow, can the central bank realistically remain indifferent to the government borrowing?".....

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RBI's Gokarn: Open market ops not aimed at helping govt

..... The Reserve Bank of India's choice of securities to buy in open market operations is not aimed at reducing the cost of borrowing for the government but to ensure an adequate supply of liquidity in the banking system, Deputy Governor Subir Gokarn said......

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Key takeaways from RBI's research conference

The following are the concluding remarks by Deepak Mohanty, Executive Director, the Reserve Bank of India (RBI), at the Second International Research Conference 2012, at Reserve Bank of India, Mumbai on February 2, 2012.

...........We have had one and half days of intellectually stimulating discussions on a range of critical central banking issues revolving around the New Trilemma that has been defined by this Conference. While we may not have clear solutions, expectations from central banks are very high. The deliberations in this Conference, I believe, make some contributions in guiding policy and spurring further research.................

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‘Bee’ there

India’s first ever annual National Bee Day will be celebrated on February 5, 2012 at Maharashtra Nature Park, Dharavi. Under The Mango Tree, an organisation that promotes beekeeping with the indigenous bee Apis cerana indica to increase agricultural productivity, enhance income and improve livelihoods of marginal farmers in India, is organising this day with the objective of this celebration is to create awareness about bees and the role they play in the eco system, among people. According to this organisation, in the UK, it has been estimated that the economic costs due to pollination by bees and other pollinators is approximately £440 million pounds a year (Source: BBC, 2010) but similar estimates do not exist for India. In beekeeping however, the hybrid Apis mellifera has been given more importance than Apis cerana indica, our indigenous bee which is in the environment all across India and is an excellent pollinator. With this is mind, Under the Mango Tree plans to focus attention on bees on Cerana Day which is on February 5. This day would be celebrated with several activities like bee walks, cooking with honey, honeybee films for children and adults, kids crafts and games, an interactive session with Mumbai’s beekeepers, honey tasting, food stalls, face painting and bee costumes, bee photo exhibition and also a special panel discussion on bees and pollination. Also, the report of a study undertaken to assess the impact of beekeeping on local crops in Valsad, a district in South Gujarat, will be released by Usha Thorat, Former Deputy Governor, RBI, the study report. This will then be followed by a panel discussion on role of bees in pollination.

The Afternoon

How long can govt be on RBI life support?

The Reserve Bank of India has joined the ranks of central banks intent on saving the country — and the world — from collapse by printing money. The RBI is the fifth big central bank to finance fiscal deficits through bond purchases, the other four being the Fed (US Federal Reserve), ECB (European Central Bank), BOJ (Bank of Japan) and the BOE (Bank of England)........

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Low-Casa banks rake it in with savings rate hike

..... Banks with low current account savings account (Casa) balances have been on an advertising overdrive ever since the Reserve Bank of India unshackled savings account rates........

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The ‘concessional window' is off. Relatives of directors of commercial banks won't be able to avail themselves of concessional loans henceforth. The Reserve Bank of India has said that restriction as contained in Section 20 of the Banking Regulation Act, 1949, “will apply to grant of loans and advances to spouse and minor/dependent children of the directors of banks.'' “However, banks may grant loan or advance to or on behalf of spouses of their directors in cases where the spouse has his/her own independent source of income arising out of his/her employment or profession,'' the apex bank said. The facility thus granted, however, should be based on standard procedures and norms for assessing the creditworthiness of the borrower. “Such facility should be extended on commercial terms,'' the RBI asserted. As mentioned in the circular dated March 1, 1996, all credit proposals for Rs.25 lakh and above should be sanctioned by the bank's board of directors/Management Committee of the board. The proposals for less than Rs.25 lakh might be sanctioned by the appropriate authority in banks in terms of the powers delegated to them, the RBI said.

HBL

Republic Day celeberations, RBI, Nagpur

Rate-sensitive sectors bound to benefit, say fund managers

............"With the RBI initiating monetary easing by way of cutting CRR by 50 bps, which was higher than our estimates, interest rate sensitives are bound to benefit.".......

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RBI to banks: Take call on stressed sector exposure

The RBI has put the ball squarely with the banks on the question of whether to take fresh exposure to the power sector in the wake of fuel woes and mounting distribution sector losses raising serious viability concerns.............

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RBI directs banks not to overstate value of house property for loans

Stating that banks have been found overstating value of houses they finance by adopting practices like including stamp duty and other charges in the cost, the RBI today directed lenders to refrain from such practices..............

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RBI seeks details of banks' exposure

.... RBI is aiming to find out the amount of loan that is given to those companies other than acquiring licences, which are mostly for capital expenditure.......

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RBI directive on deposits with Manappuram Finance

Reserve Bank of India (RBI) has advised the general public against depositing or renewing deposits with Manappuram Finance Limited, Thrissur, as the company is registered with RBI as a non-deposit taking Non-Banking Financial Company with effect from March 22, 2011. An RBI release said the company was not permitted under the Reserve Bank of India Act, 1934, to accept/renew deposits from the members of the public. 

HBL

RBI launches industrial outlook survey for Jan-March 2012

....The RBI has been conducting the Industrial Outlook Survey on a quarterly basis since 1998. The latest will be the 57th round of the survey. It has entrusted the task of conducting the survey for the current quarter to the Centre for Research Planning and Action (CERPA).....

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Purchasing Managers’ Index: Optimism in the air

....With the PMI hinting at a revival in growth, interest rate cuts by the RBI may be just what the doctor ordered to put the economy back on track. However, the apex bank may not be in a hurry. More so, because upside risks to inflation still remain high.....

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SBI set to publish pics of defaulters to force them to pay dues

.... "The idea is to discourage the public from defaulting on loans. We will send them notices before going ahead with such measures,"......

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LIC takes the electronic route for all policy payments

....Operated by the Reserve Bank of India (RBI), NEFT is a nationwide system that facilitates transfer of funds from one account of any bank branch to another. At present, around 74,000 banks across the country are participating in this system.......

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RBI cannot be ‘indifferent’ to Govt’s borrowing plan

Dr D. Subbarao, Governor, RBI (left), along with Mr Martin Wolf, Chief Economics Commentator, ‘Financial Times’, at the Second International Research Conference organised by the RBI in Mumbai on Thursday

Mumbai, Feb 2: The Reserve Bank on Thursday said that it can not work as inflation targeter, as it will not serve the best interest of macroeconomic management. “The Reserve Bank can’t be an inflation targeter, or a core inflation targeter. That will not serve the best interest of the macroeconomic management of the country,” said Mr Duvvuri Subbarao, RBI Governor at the two—day Second International Research Conference, organised by the Bank, here. He also maintained that central bank, which hiked policy rates a record 13 times last year to tackle inflation, cannot pursue a policy completely oblivious to growth. Mr Subbarao, however, said that in the past 60 years no government was insensitive to inflation, and inflation management usually takes precedence over growth concerns. RBI had come under criticism in the last one—and—a—half years for aggressive monetary stance on inflation. “If supply side constraints affecting inflation are not managed, is it realistic to expect RBI to contain inflation?” Mr Subbarao asked, and added that the central bank too was confused as to which index of inflation should be targeted as there are many indices. About the rising government borrowing, Mr Subbarao said it may not be possible for the monetary policy to remain “indifferent” to government borrowing programmes.

HBL

Pulling every lever

India’s central bank is one of its best institutions. It is also complicit in a government-borrowing binge

..... The uncomfortable question for the RBI is whether it is partly responsible for the slowdown, albeit indirectly. If you have a central bank that always gets you home safely at the end of the night the temptation for politicians may be to go crazy. The RBI’s position is especially delicate on the fiscal deficit. The central bank oversees a financial system that is a conduit for funnelling savings into government bonds, 70% of which are owned either by the central bank or by the banking system, which remains dominated by state-owned lenders.......

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RBI can't work as inflation targeter: Duvvuri Subbarao

.... "The Reserve Bank can't be an inflation targeter, or a core inflation targeter. That will not serve the best interest of the macroeconomic management of the country," Governor Duvvuri Subbarao said at the two-day Second International Research Conference, organised by the Bank.......

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RBI: Best to be Unpredictable in Currency Management

India's central bank Governor Thursday said it is best to be unpredictable in tactical currency management, reiterating the bank's policy of not disclosing details of intervention in the foreign exchange market..........

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Private sector banks to handle government business – How about a level playing field?

.....However, this notification issued by RBI, though not very clear, hopefully will include payment of pension to employees of the central and state governments and those of the defence forces, who now get their pensions only through the PSBs. It would be of great help to these pensioners, if both the governments start disbursing of pensions through any public or private bank according to the choice of the pensioner, thereby helping the retired employees, especially the senior citizens in their old age.......

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We can’t focus only on inflation, says Subbarao

Governor says it is unrealistic for the central bank to target inflation while being oblivious to growth

The Reserve Bank of India (RBI) cannot focus only on inflation and leave growth and sovereign debt management to the government, governor D. Subbarao said on Thursday even as he insisted the banking regulator should continue to remain autonomous........

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RBI asks banks to evaluate risk of unhedged forex of companies

.... "In view of the importance of prudent management of foreign exchange risk, it has been decided that banks, while extending fund based and non-fund based credit facilities to corporates, should rigorously evaluate the risks arising out of unhedged foreign currency exposure of the corporates and price them in the credit risk premium," the Reserve Bank said in a circular on Thursday......

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Gorkan Says Visible Price Drop in India Will Trigger Cut in Interest Rate

..... “The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn, said while discussing the rupee, the budget deficit and bond repurchases in an interview in his office today. Once the central bank has confidence that the “direction will continue, that’s really going to be the trigger. The visibility of the decline, I think, is the most important indication.”.....

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Got breast milk?

....For a new mother, Smita has a tough daily grind. After taking care of the chores at home, she rushes to work at the Reserve Bank of India (RBI) dispensary from 9 a.m. to 11 a.m., after which she goes to SDMH, and around 2 p.m. returns to the RBI dispensary for an hour. She also sees patients at her home clinic between 5.30 p.m. and 6.30 p.m.......

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Broader role for Monetary Policy : K Kanagasabapathy

....Keeping these post-crisis developments in view, the Reserve Bank of India (RBI) has aptly chosen the theme of Monetary Policy, Sovereign Debt and Financial Stability: The New Trilemma for its second two-day international research conference opened on February 1. The RBI Governor Mr Duvvuri Subbarao has eloquently brought out in his keynote address at the conference the rationale for the choice of the subject and several issues associated in dealing with this new trilemma.............

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Who’s funding growth?

When the RBI Governor talks of the growth momentum decelerating in the context of the sharp deceleration in gross fixed capital formation and, barely a week later, the Chief Economic Advisor says there are reasons to believe India is on a path of cyclical upswing, it’s time to read the data carefully.............

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On buybacks of RBI

This refers to the report “Subbarao says there is need to cap public debt” (February 2). Reserve Bank of India (RBI) governor has acknowledged the undesirability of the central bank buying back old government securities to keep down yields for new bonds. The main objective of a separate public debt office being set up is to resolve the conflict of interest in the central bank functioning as a monetary authority and also as a banker to the government. In a recent interview to the press, a deputy governor of the central bank indicated that it would continue to engage in buyback operations even after it was relieved of the function of public debt management. He made the point that only the portfolio management (yield and so on) will be taken away, while the financing part will be retained. Is this how it works in western central banks? The continuance of buybacks will defeat the purpose of a stand-alone debt office. Would it not be better to go back to the old transparent arrangement under which RBI took the securities on its books in the first instance and unloaded them on the market later at favourable times?

-  A Seshan Mumbai (BS)

Banks not sure of meeting priority sector lending target

..... The RBI also said total credit disbursement to the agriculture and allied areas grew by only 5.6 percent to Rs 4.60 lakh crore in December, which was as high as 25.4 percent in the same period last year, indicating a sluggish growth in priority sector lending. However, some of the bankers also said though they are hopeful of meeting the target.......

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Govt scraps release of weekly inflation data

.... “People used to react to numbers which the data generators had no confidence in,” Sen said. “The finance ministry and RBI wanted the weekly numbers, as these had their analytical models tied to the weekly data. The finance ministry and RBI had argued strongly for holding up the numbers, as otherwise, they would have to alter the whole model,”.....

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Court wants special law to protect SHGs from usury

The State government can enact a special law to protect self help groups (SHGs) from falling victim to “unfair and illegal” practices of microfinance institutions (MFIs), which collect “usurious” rate of interest under threat and coercion, the Madras High Court Bench here has suggested. A Division Bench of Justices Chitra Venkataraman and R. Karuppiah was disposing of a public interest litigation petition filed by All India Democratic Women's Association (AIDWA) State General Secretary U. Vasuki, levelling various charges against MFIs. The judges said that the proposed special law for the SHGs could be modelled on the lines of the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act 1997, which was enacted to protect people who had invested huge sums of money in financial institutions that turned out to be dubious. Petitioner's counsel U. Nirmala Rani had sought a direction to the Reserve Bank of India (RBI) to take appropriate action against MFIs in the State under Banking Regulations Act 1949 and evolve a mechanism to redress the grievances of affected members of SHGs. However, RBI counsel K.R. Laxman submitted a copy of the Micro Finance Institutions (Development and Regulation) Bill 2011 in the court and said that it was now in Parliament for discussion. Once passed, it would help in regulating the MFIs. After recording his submission, the judges said: “It is no doubt that with all the provisions in the Tamil Nadu Protection of Interests of Depositors Act, we still have NBFCs (Non-Banking Financial Companies) cheating unwary public, a fact which cannot be denied by the petitioner herein too.”

HBL

More cities, cheaper land needed for affordable housing

....“The policymaker's dilemma is to whether make affordable housing or enable all to afford houses. In India, affordable housing is difficult. Rural to urban migration puts further pressure,” Mr H.R. Khan, Deputy Governor, Reserve Bank of India, said.......

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Open market operations can hurt price stability: Subbarao

Dr D. Subbarao, Governor, RBI (right), along with Mr Benjamin Friedman, William Josep Maier Professor of Political Economy, Harvard University, at the Second Internaional Research Conference organised by the RBI in Mumbai on Wednesday

Mumbai, Feb.1: The Reserve Bank of India Governor, Dr D. Subbarao, on Wednesday cautioned that conducting open market operations — buying and selling of government paper — for liquidity management could end up hurting price stability. If the motivation for central banks to conduct OMOs is to help out a fiscally vulnerable sovereign or reduce the cost of borrowing for the sovereign, then they could end up holding price stability hostage to sovereign debt concerns, said the Governor at the Second International Research Conference. In financial year 2012 so far, the RBI has conducted OMOs aggregating Rs 71,878 crore.  The OMOs are timed just a day before the auction of government securities, thereby ensuring that banks have adequate liquidity to subscribe to these securities. Out of the expanded borrowing programme of Rs 6-lakh crore (including 364-day treasury bills), the Government has completed 87 per cent of its borrowing programme in the financial year so far. The Governor observed that at times, OMOs could be motivated by the objective of providing liquidity to support government borrowing or of reducing the yield on treasury bonds and, thereby, enhance debt sustainability. It then becomes a case of acquiescence in fiscal dominance. “There is often only a thin line, and the interpretation of the motivation for outright OMOs could vary depending on the circumstances,” said the Governor. In the presence of large sovereign borrowing that makes the Government's fiscal stance unsustainable, central banks typically have little choice, explained the Governor. “If they (central banks) do not conduct OMOs to bring systemic liquidity within reasonable limits, they risk losing control over financial stability. If they do conduct OMOs, they risk losing control over price stability. “What this really says is that fiscal responsibility is much more than a question of whether monetary policy is independent or not. It is a question of sustaining macroeconomic stability,” said the Governor. Dr Subbarao said that in India, the question has been whether the OMOs conducted by the Reserve Bank to manage systemic liquidity are acting as a disincentive for fiscal discipline. The Governor underscored that there is a need to cap total public debt as a proportion of GDP even as he cautioned that excessive borrowing is bad. Emphasising that the quality of public expenditure is important, Dr Subbarao explained that if the Government borrows and squanders that money away on unproductive current expenditure, both fiscal sustainability and growth would be jeopardised. Governments need to spend on merit goods and public goods, in particular on improving human and social capital and on physical infrastructure, he emphasised.

HBL 

Talking heads

Stability mandate

Financial stability will be made an explicit mandate for the central bank by amending the Reserve Bank of India Act, said Mr Harun Rashid Khan, Deputy Governor.  The Financial Sector Legislative Reforms Commission (FSLRC) is considering proposing an amendment to this effect, he added. The RBI is already committed to price and monetary policy stability, Mr Khan explained. To secure the health of the country's financial sector, the term “financial stability” could be incorporated in the RBI”s Preamble. Currently, the Preamble describes the basic functions of the Reserve Bank as: “...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage."

NPA provisioning

The RBI is not considering any proposal to give special dispensation for banks regarding provisioning, despite the rise in non-performing assets. The NPA situation, according to Dr K. C. Chakrabarty, is not a cause for concern. As announced by the Governor, Dr D. Subbarao, in the third quarter review of the Monetary Policy for 2011-12, Deputy Governors Dr Chakravarty and Mr Anand Sinha will have a meeting with about 10 large banks later this month to discuss the NPA situation. The meeting will also look into the measures that need to be taken by the banks, the Reserve Bank, the State governments, and the Central Government to ensure that the profitability and the viability of the banking system is intact as it is now. On the widening trade deficit, Dr Chakrabarty quipped that the rupee has appreciated by 6 per cent and the media should not focus only on the negative news.

Role reversal?

Referring to a meeting with the Finance Ministry, Dr Subir Gokarn, in a lighter vein, spoke about the role reversal between the Finance Ministry and the RBI. At the meeting, while Dr Gokarn spoke on food inflation, Dr Kaushik Basu, Chief Economic Advisor, Finance Ministry, held forth on monetary policy.

HBL

Rs 1,000 denomination banknotes to be issued non-sequentially: RBI

New Delhi: The Reserve Bank today said it will soon start issuing banknotes of Rs 1,000 denomination in non-sequential numbering. The packets of banknotes in non-sequential number will have hundred notes, the apex bank said in a statement. In June last year, RBI had started issuing Rs 500 denomination notes in non-sequential numbering.  "It has now been decided to issue banknotes of Rs 1000 denomination also on similar lines," the statement said. The bands of the packets containing the banknotes in non-sequential number will be superscribed with the words 'the packet contains 100 notes not numbered sequentially'.

FE

Business correspondent model to be changed to aid inclusion

The Reserve Bank of India (RBI) has in principle agreed to permit interoperability of business correspondents (BCs), aimed at helping customers in rural areas access banking services such as cash deposits, withdrawals, remittances and balance enquiries from anywhere in the country on the lines of ATM facilities available to customers in urban areas..............

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Rein in public debt, Subbarao tells Centre

With the Union Budget in the horizon, the Reserve Bank of India on Wednesday cautioned the government against “excessive borrowing” and called for a cap on total public debt as a proportion of GDP. “Like with the other two legs (price stability and financial stability) of the new trilemma, even in the case of sovereign debt, there is an inflexion point beyond which fiscal deficits militate against growth. Government borrowing is not bad per se, but excessive borrowing is,” RBI Governor D Subbarao said. The Thirteenth Finance Commission had recommended that the total debt of Centre and states as a percentage of GDP should be cut to 68 per cent in 2014-15 compared with 81.9 per cent in 2008-09. “What is equally important in respect of fiscal management is the quality of public expenditure. If the government borrows and squanders that money away on unproductive current expenditure, both fiscal sustainability and growth would be jeopardised. Governments need to spend on merit goods and public goods, in particular on improving human and social capital and on physical infrastructure,” he said at the International Research Conference of the RBI in Mumbai. This is the second time in the last two weeks the RBI voiced concern against fiscal slippages. “In the absence of credible fiscal consolidation, the Reserve Bank will be constrained from lowering the policy rate in response to decelerating private consumption and investment spending,” Subbarao said after announcing the policy review last week. The fiscal deficit in 2011-12 is expected to exceed the budget estimate of 4.6 per cent of the GDP on account of subdued receipts and overshooting of the subsidy bill by at least Rs 1 lakh crore. To bridge the receipt-expenditure gap, the government plans to exceed its borrowing target for the current fiscal by Rs 92,000 crore over budget estimate of Rs 4.20 lakh crore.

IE

'Thin line' in motive for open market operations, says Reserve Bank of India Governor Duvvuri Subbarao

MUMBAI: When central banks conduct open market operations (OMOs) driven by a need to provide liquidity to support government borrowing or reduce yields rather than for liquidity management, it "becomes a case of acquiescence in fiscal dominance," RBI chief said on Wednesday.  "There is often only a thin line, and the interpretation of the motivation for outright OMOs could vary depending on the circumstances," Reserve Bank of India Governor Duvvuri Subbarao told a conference.  On Tuesday, the RBI said it will buy up to 100 billion rupees ($2 billion) of government bonds via open market operations on Friday. "In the presence of large sovereign borrowing that makes the government's fiscal stance unsustainable, central banks typically have little choice. If they do not conduct OMOs to bring systemic liquidity within reasonable limits, they risk losing control over financial stability," he said. 

ET

RBI urges Govt to cap public deficit

Mumbai, Feb 1: Cautioning the Government that excessive borrowing is bad, the Reserve Bank of India Governor, Dr D. Subbarao, has urged the Government to put a cap on public debt as it would hurt growth. “There is an inflexion point beyond which fiscal deficits militate against growth. Government borrowing is not bad per se, but excessive borrowing is. There is therefore a need to cap total public debt as a proportion of GDP,” Dr Subbarao said in an address at the International Research Conference here today. The Government’s fiscal deficit in 2011-12 is expected to exceed the budget estimate of 4.6 per cent of the GDP on account of subdued receipts and overshooting of the subsidy bill by at least Rs 1 lakh crore over and above the original projection. In order to bridge the receipt-expenditure gap, the Government plans to exceed its borrowing target for the current fiscal by Rs 92,000 crore over the budget estimate of Rs 4.20 lakh crore. The RBI had also flagged the issue of rising fiscal deficit at several occasions earlier, including in its third quarter monetary policy review in the last week of January. The Government, as indicated by the Finance Minister, Mr Pranab Mukherjee, is expected to announce steps to contain fiscal deficit in the budget for 2012-13 to be unveiled sometime in March.

HBL

RBI may not give one-time leeway on NPAs' provisioning

The Reserve Bank of India is not looking at giving banks a one-time leeway on provisioning towards non-performing assets at the moment, Deputy Governor K C Chakrabarty said on Wednesday. “At present, no,” Chakrabarty said, when queried if RBI would dole out the special dispensation, given the trend of rising non-performing assets and loan recast for banks. In the aftermath of the global financial crises in 2008, RBI had given some leeway to banks on provisioning for loans, which were advanced to companies that had been restructured once. It provided the one-time leeway to relieve companies from repayment pressure.

BS

India’s new impossible trinity

.....RBI will continue to seek what can clearly be called an ‘impossible trinity’ of three ‘expected outcomes’ – easing liquidity conditions, mitigating downside risks to growth and continuing to anchor medium-term inflation expectations on the basis of a credible commitment to low and stable inflation. And yet, as RBI Governor Duvvuri Subbarao has loudly decried for several years now, most recently in his quarterly monetary policy statement last month, fiscal expansion is inflationary and further complicating its monetary stance. Mr. Mukherjee, are you listening?

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Freeing up of savings A/c rates: No unhealthy competition, says RBI

... After interest rates on savings bank accounts were freed, the early signs are that there are no major shifts in preference on the part of account holders towards those offering higher rates or any big product innovations. None of the top banks has raised interest rates on savings bank accounts beyond the mandatory levels, but none seems to have been impacted either......

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Going Bottom Fishing

.... While the rupee has seen a rapid reversal to 51, the RBI’s intervention, however, is showing up in depleting foreign exchange reserves, which have fallen by $27 billion since October 2011 to $293 billion at present — the lowest in more than a year. This depletion of reserves might just play on the RBI’s mind and stifle an aggressive lowering stance if there is no visible resolution to the European debt problem......

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Platinum Jubilee Function - IOB Exclusive Interview

Indian Overseas Bank, ITC Kakatiya, Begumpet, Hyderabad, Andhra Pradesh. Indian Overseas Bank grandly celebrated its Platinum Jubilee Function. Dr. Y.V Reddy, Former Governor, Reserve Bank of India-RBI was the Chief Guest. Platinum Jubilee Commemorative Oration on “Development and Regulation of Financial Sector” By Dr. Y.V Reddy, Former Governor, RBI. Outstanding personalities, eminent speakers, legendaries & dignitaries attended the function. Felicitation was done by IOB staff to Dr. Y.V Reddy on this auspicious occasion. The inaugural lamp was lighted by the guests and the hall was crowded with good number of people’s gracious presence

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Lending rates may fall before RBI's rate cut, says SBI

.... “Rates are high and obviously it is hurting the industry. We are all hoping for that (lending rates to fall). In the long term, one of the things that will make industry viable and investment come back is to have lower lending rates,” Diwakar Gupta, managing director and chief financial officer of SBI, said on Wednesday....

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Chit Fund frauds on rise, RBI cautions public

KOCHI: The rising number of chit fund fraud cases reported in the past few months have become a cause of serious concern for the state Police. The Reserve Bank of India, which has come across numerous complaints with respect to chit fund frauds, has alerted the cyber police. The RBI has received complaints that some of the chit fund companies are operating using SMS and emails for propagation of their business, especially in the central part of the state. According to cyber cell officials, complaints have been pouring in day by day. “More than 30 complaints have come within two months from Ernakulam district alone. These companies generally make offers through letters, e-mails and SMSs. In addition to their usual practices, the fraudsters have now resorted to issuing certificates, letters and circulars on letterhead that look similar to that of RBI with forged signatures of its executives or senior officials,” an official added. Elaborating upon their modus operandi, the official stated that the fraudsters even resort to posing as senior officials of the central bank and lure the public into depositing money in their accounts which they have in branches of certain Indian banks. “Once the funds enter the account, they withdraw the money and vanish,” he said. Reserve Bank senior officials in Mumbai said that it has come to their notice that certain overseas organisations have been advising individual companies and trusts in India that huge sums of money for disbursal of loans in India at cheap rates has been kept in an account with the central bank and the funds, to be released after the RBI’s approval. To substantiate the claims, even copies of certificates and deposit receipts purportedly issued by the Reserve Bank are being produced by such operators, they said.“The RBI had cautioned the public against such fly-by-night operators. The losses that we have reported amount to lakhs of rupees. The RBI has never authorised any foreign lottery or chit funds that work through SMS and emails. People must ensure that the institutions where they invest money are authorised and they can seek assistance from the RBI officials to ensure safety of their deposits,” said a senior RBI official in the Thiruvananthapuram unit.

IBN Live

Social enterprises in microfinance

... All the big players who are in the microfinance space and who are in trouble are the ones who followed the route of starting charitable organisations; started by being social, but ended up becoming crassly commercial or tilted more towards enterprises. These are the ones which did above the line skimming by taking fancy compensation for the MFI employees, and below the line skimming through special purpose vehicles that invested in for-profit operations. Clearly they have lesser credibility and a poorer image than those who started as pure for-profit enterprises. The change of stripes has eroded their credibility and brought their intent into question. ......

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How “the crisis” changed microfinance and where we go from here…

.... The Reserve Bank of India implemented an interest rate cap and limits on margins. The subsequent proposed Microfinance Law brings microlenders under RBI control, and empowers it to set margin caps, repayment schedules and maximum interest rates. The world has been watching closely......

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Ombudsman at SKS Microfinance

SKS Microfinance, the country's only listed mirofinance entity, announced on Wednesday that it has appointed Verghese Jacob as its ombudsman, making SKS arguably the only Indian NBFC-MFI (non banking microfinance company- microfinance institution) to have such a structure in place for customer protection and grievance redressal............

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