JP Morgan Economist: RBI Should Relook Currency Strategy

India's central bank needs to have another look at the way in which it intervenes in the currency markets because its recent dollar sales haven't been able to stop the rupee's slide, a senior economist said Wednesday. "Intervention is a legitimate instrument, but the Reserve Bank of India didn't do it the right way," said Jahangir Aziz, J.P. Morgan senior Asia economist. "The RBI could have intervened in a more strategic manner when the market was willing to accept it as a signal that the RBI is coming out and defending the currency."...................

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Cabinet approves Rs632 crore capital infusion in regional rural banks

....Following recommendations of Reserve Bank of India (RBI) deputy governor Dr KC Chakrabarty, the government had initiated recapitalisation process in 2009-10 for 40 financially weak RRBs, which mainly provide credit to rural and agriculture sectors......

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All rural branches of banks to impart financial literacy: RBI

The Reserve Bank Wednesday said all rural branches of banks will have to impart financial literacy. This move comes after the central bank found Financial Literacy and Credit Counselling Centres (FLCC) were located in the urban and semi-urban areas. "Banks may consider setting up need based FLCs in other locations as well. Financial literacy activities will also be undertaken by all the rural branches of Scheduled Commercial Banks including RRBs," the RBI said in its guidelines on Financial Literacy Centres (FLCs)...........

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Aviation ministry seeks ATMs, forex counters for transit passengers in international airports

NEW DELHI: To make life easier for transit travellers and those who apply for visa on arrival, the aviation ministry has requested the Reserve Bank of India to allow ATMs and currency exchange counters before immigration areas in international airports. "Transferring passengers (who spend anywhere between two hours and 24 hours at airport) are required to spend substantially on food and beverages and use other facilities in the transfer area, and spending in foreign currency is not feasible," the ministry has said in a consultation paper on developing India as an aviation hub. Existing Reserve Bank of India guidelines does not allow foreign exchange counters before the immigration in airports' arrival terminals..............

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Union Bank ATM for differently-abled

.....An ATM for the differently abled had been specified in the Reserve Bank of India circulars in 2008 and 2009. The central bank had stated that all banking services including ATM cards need to be offered to all customers without any discrimination........

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Staff costs higher at public sector banks

....In a speech delivered recently at a conference of public sector HR managers, the RBI Deputy Governor, Dr K. C. Chakraborty, said, “One thing is, thus, loud and clear — the competitive advantage in terms of staff costs that we always thought the public sector banks had is no longer there. ......

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Will we get another rate cut from RBI on 18 June?

The Reserve Bank of India will review its monetary policy on 18 June. Will it announce another interest rate cut? The chances seem brighter after central bank Deputy Governor Subir Gokarn said on Monday there is scope to cut interest rates to boost the country’s flagging growth. Gokarn said that the slowdown in growth and a fall in oil prices provided room for a possible interest rate cut.............

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RBI Jaipur Receives Fake Notes from Udaipur, case registered

Twenty Three notes in denominations of Rs. 500 and Rs. 1000 were branded as fake by a Manager at Reserve Bank of India, Jaipur while he was in the process of receiving cash from the ‘Chest’ Branches of Udaipur. The Manager has registered a written complaint with the Superintendent of Police, Udaipur against an unidentified person..................

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Real import of rupee fall

...........The Government is clearly unwilling to do much about the rapid decline in the value of the rupee. Despite the rupee losing around a quarter of its value against the dollar over the last year, the RBI has not been pushed into making any dramatic interventions in the realm of exchange rates. Instead, the Government has focused on coming to terms with a devalued rupee, even accepting the political dynamite of a sharp increase in petrol prices. The official thinking is clearly on the side of devaluation as an essential step in macroeconomic correction...........

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Freedom from prepayment fee

Taking an aggressive stance, the Reserve Bank of India (RBI) has decided that banks cannot levy foreclosure charges or prepayment penalty on home loans on floating rate. The order is to be implemented with immediate effect. In a circular issued on 5 June, RBI warned banks to strictly follow the instructions brought out in its monetary policy statement for 2012-13. The apex bank thinks that removal of foreclosure charges and prepayment penalty on home loans would reduce rate discrimination between existing and new borrowers and competition among banks and hence result in finer pricing of floating rate home loans...........

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No penalty on home loan prepayments; but why this half-hearted measure?

RBI says the waiver of pre-payment penalty is applicable only for home loans carrying floating rate of interest. Why are borrowers who had obtained home loans on fixed interest basis being left out?..........

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RBI told banks to be serious while dealing with unclaimed deposits

Reserve Bank of India told banks to spruce up their act in dealing with unclaimed deposits. It has advised to them to put in place a board approved policy on classification of unclaimed deposits, grievance redressal mechanism for quick resolution of complaints, record keeping and periodic review of such accounts. It has also directed banks to conduct the first periodic review of unclaimed deposits by September 30, 2012................

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Exploring the challenge of financial education across emerging economies : K C Chakrabarty

Keynote address by Dr.K.C.Chakrabarty, Deputy Governor of the Reserve Bank of India at the Visa-FT Financial Literacy Forum Series, Mumbai 5 June 2012

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Economic Harakiri

........... If we are to believe the Reserve Bank of India it is the global recession, the financial turmoil in Europe, the stubborn high inflation and the swollen fiscal deficit, everything in short, except its own monetary policies. It has taken the collapse of industrial growth, a panic withdrawal of money from India by foreign institutional investors and a collapse of the rupee to force Pranab Mukherjee to break the code of Omerta and put the blame squarely on the Reserve Bank’s ‘tight monetary policies.’ But when it came to the steps Mukherjee was as much at sea as RBI governor D Subbarao and his advisers. His panacea is to ‘address the imbalance on the fiscal front’, i.e. cut the budget deficit by spending less. The prime minister is obviously of the same opinion...............

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India’s economic policy set to undermine RBI’s ‘good’ work

The Reserve Bank of India (RBI) is in danger of losing its vaunted reputation as one of India most trusted institutions as it attempts to maintain its role in promoting price and financial stability against a backdrop of government policies that do not necessarily enhance the RBI's medium-term goals, according to an article published in the latest edition of the Central Banking Journal. The article says the RBI has gained a strong reputation for its commitment to support growth as well as maintaining price stability. Moreover, its detailed intervention in the regulation of banks, financial products and capital flows has also drawn extensive praise during the past five years. The RBI has shown what report author Hugh Sandeman, a financial advisor and journalist, refers to as a "lack of intellectual inhibition in the exercise of old-fashioned common sense"...............

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India’s economic growth closely tied to global risk appetite

.....The hopes that the Reserve Bank of India would quickly reduce interest rates, thereby imparting a much-needed boost to investment, have been dashed. Growth has fallen much more than expected, while mastering inflation is proving to be more difficult than envisaged. Add erratic government policies, a large current account deficit, a drying up of capital inflows, a political logjam and a world economy in imminent danger of slipping into a double dip, and you start to wonder how things could possibly get worse. Oh wait, that list seems to have left out El Nino.........

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PSU banks dial IT helpline

After a successful stint with IT in financial inclusion, the RBI is now pushing for better reforms in the IT infrastructure of banks, with a special emphasis on PSU banks.

......According to the RBI, one of the objectives of IT initiatives is to lower operating costs, whereby it turns financial inclusion into a profitable business. This, in turn, will help create a huge upside for banks in the form of stable deposits. Also, given how important mobile phones have become as a means for communication, using this technology for funds transfer as well as retail payments holds huge potential. As such, mobile banking is the most happening area of development in the banking sector and is expected to complement, and to an extent replace, the credit/debit card system in the future. “While it has the potential to overcome issues relating to cost, infrastructure and resources; it does pose some new issues of its own,” said Sinha of RBI. RBI has established the National Payment Corporation of India for focused attention on the development and implementation of requisite technologies for enabling new modes of delivery....................

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How to attract non-banks to financial services

..... India’s formal financial services sector is yet to meet the growing needs of a large part of the population. When it comes to domestic remittances, 57% of migrant workers in India use hawala couriers and other informal channels to remit money, according to a recent study. Another perspective is India’s informal lending economy. Analysts estimate that almost 40% of the participants in India’s informal economy resort to chit funds, barter and moneylenders for financing.It’s logical that an informal sector thrives in the absence of convenient, reliable, speedy and regulated financial services..........

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Growth, India's highest priority

.....Mismatches between growing demand and constrained supply, leading to persistent inflation. The Reserve Bank of India’s (RBI’s) raising interest rates to tackle this has only compounded the problem of reduced profits and investments, made worse by central and state government failures to augment supply...........

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Akhilesh asks Nabard to allocate Rs 2,250 cr for Uttar Pradesh

..Referring to RBI ban on 25 non-licenced district cooperative banks, Akhilesh requested Nabard to lift the ban immediately and allow the bank to do banking business......................

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Prashant Bhushan intervenes in Sahara-Sebi case, files petition in SC

.....Further, the companies do not follow prudential norms laid down by the Reserve Bank of India (RBI) for banks and non-banking finance companies handling similar or even lesser amounts of public money, the petition alleged. These norms include cash reserve ratio (4.75 per cent), statutory liquidity ratio (25 per cent) and capital adequacy ratio (10 per cent). “The omissions on account of investor protection stipulated in the Sebi Act on the issue of debentures have been detailed in the Sebi order,” the petition said. It also argued the manner in which these unsecured funds have been invested also make them extremely risky.....................

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MMCB has Rs320 crore cash & Rs1,625 crore in liabilities

After virtually freeing Ketan Parekh from the obligation of paying all of the Rs1,100 crore he owes to Madhavpura Mercantile Co-operative Bank (MMCB), the Reserve Bank of India (RBI) has left MMCB with a liability of Rs1,625 crore. This is against just Rs320 crore cash that the cooperative bank has in hand.......................

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Justice not in sight for MMCB depositors trial yet to begin

.......Now, with RBI cancelling the banking licence of MMCB, the fate of over 10,000 depositors, remain uncertain, while the key conspirators have managed to get relief from the courts. "The trial had been delayed following various kinds of applications by the accused. It was only after the Gujarat High Court directions on our petition to expedite criminal proceeding against the scam accused in 2011 that the things have now got moving,"..............

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RBI for overhaul of banks' HR practices

The Reserve Bank of India (RBI) has called for a complete overhaul of human resource practices at banks, especially public sector ones where several staffers are due to retire in seven to eight years. Dr. K C Chakrabarty, one of the central bank’s Deputy Governors, says this sort of increasing intervention in the affairs of public sector banks was needed due to lack of management capacities at the latter........

......Indicating there was no proper mechanism of performance management in PSBs, Chakrabarty said the results of not having one could be disastrous. “We are all having to deal with the problem of people who are ‘promotable’ but not ‘postable’ and people who are ‘postable’ but not getting promoted. This is because we have failed to discriminate between performers and non-performers,” Chakrabarty said........

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RBI committed to encouraging exports: RBI Executive Director G Padmanabhan

VARANASI: The Reserve Bank is committed to encouraging the country's exports and is organising seminars to address the concerns of exporters, a senior official today said.  In order to boost India's exports, seminars have been organised in different cities, RBI Executive Director G Padmanabhan today told reporters on the sidelines of a function here.......

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BANKS CAN BE FINANCIALLY ILLITERATE’

“Even banks can be financially illiterate”. The speaker was none other than RBI Deputy Governor K.C. Chakrabarty, thundering in his customary style. When a member of a women’s NGO asked why banks were hesitant to lend to women from her NGO, he said: “Opening a bank account will not give you money. Giving them a smart card will not give you money. Appointing a BC will not give you money. Even if they deposit money, it will not give you money, since you will pay interest on that. What they don’t understand is that they will make money only when they lend. If they don’t, they are financially illiterate.” 

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'Andhra microfin firms failed to assess loan need'

Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty on Tuesday blamed the failure of microfinance institutions in Andhra Pradesh to their inability to provide loans in sync with customers’ capacity to repay. Microfinance institutions in Andhra Pradesh failed because they had not assessed the credit needs of the people properly, Chakrabarty said in a speech at the Visa-Financial Times conference on financial literacy on Tuesday. Chakrabarty said financial institutions that did not assess clients’ credit requirements, and also their ability to repay loans within the required time frame, were only working to digging your own grave. The deputy governor’s comments added another dimension to the role played by microfinance institutions in the failure of their business in Andhra Pradesh,along with the pressure of laws enacted by the state............

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PSBs unamortised pension bill pegged at Rs 14,000 cr

....To avoid a dent in ROE, most banks would seek approval from the Reserve Bank of India to directly write off from the reserves account. RBI had permitted State Bank of India to write-off pension liability worth Rs 7,900 crore from reserves in financial year 2011. If RBI refuses to allow banks to directly adjust the unamortised amount with the balance sheet (reserves), then ROEs of public sector lenders may be hit severely in the current fiscal......

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State-run banks’ average salary overtakes that of private peers

The average cost per employee for public sector banks has overtaken that of their private sector peers since FY11—a development that has emerged from data released by RBI on Tuesday. This has prompted RBI to raise issues of productivity. The central bank has warned that public sector banks are losing their cost advantages with per-employee expense of public sector banks today being 150% of their peers in the private sector. The central bank has said that an HR transformation is required to address the issue of lower productivity as there is competition for talented manpower. "The per-employee expenses of public sector banks have gone above that of private sector banks and today, is more than 150% than that of private sector banks. This is despite the fact that pension expenses of PSU banks are not fully reflected in their staff expenses," said K C Chakrabarty, RBI Deputy Governor, while addressing public sector bank chiefs at an HR conference last week. The Deputy Governor came up with numbers which showed that the staff strength of public sector banks had gone down between 1998-99 and 2010-11 due to retirements and voluntary retirement schemes, but that of private sector banks has gone up significantly. Also, PSU banks expanded their employee base to grow operations pan-India in the '80s and a big chunk of their employees are in their 50s and set to retire in the present decade. As against this, private banks have expanded in the last four years and their lower-end staff are in their 20s and middle managers are in mid-30s.........

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Stop home loan prepayment penalty: RBI

......."It has...been decided that banks will not be permitted to charge foreclosure chargesprepayment penalties on home loans on floating interest rate basis, with immediate effect," the Reserve Bank said in a communication to banks. The RBI noted that the Damodaran Committee had observed that foreclosure charges levied by banks on prepayment of home loans were resented by home loan borrowers........

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Has RBI move sunk Madhavpura Mercantile Co-operative Bank revival plan?

....We had already sent proposals to various foreign banks who had in principle agreed to extend support to our plan. As we were given time we were preparing all the documents but suddenly RBI decides to shut the bank," said Mehta. RBI in its order cancelling the licence mentions that 'MMCB was neither aware of the antecedents of the NRI investor nor genuineness of the sources of funds'. The order says that co-operative bank couldn't furnish any evidence suggesting in-principle approval from any foreign bank or Indian government for such a scheme........

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MMCB: Govt bodies to get dues first

The future of the deposits of about 10,000 account-holders of scam-tainted Madhavpura Mercantile Cooperative Bank (MMCB) looks bleak. Institutional stakeholders like Deposit Insurance & Credit Guarantee Corporation and Bank of India may get priority for dues recovery. The RBI yesterday cancelled the banking licence of the bank, on the Rs 1,200-crore scam that had surfaced in March 2001, involving sharebroker Ketan Parekh and his associates. According to senior officials of MMCB, the bank has a total liability of Rs 1,459 crore — Rs 792 crore deposit liabilities and Rs 667 crore other liabilities.

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Bangalore police get tough on slipshod bank security

Police in the R.T. Nagar district of Bangalor have instructed insurance companies not to pay out claims to banks unless the bank presents a certificate from the police. The action is in response to an ongoing problem in which robberies are carried out against banks and armoured cars, and are later found to have been the result of the bank's failure to follow RBI guidelines for security while transporting cash, said an article at DNA India................

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Banks continue to treat customers shabbily!

.....I then got a call from loan department saying that I will have to pay 3% pre-payment charges on the amount that I wished to pre-pay. I protested saying RBI had asked banks to do away with these charges. I was told, "We have no such information and your request for waiver has been forwarded to higher authorities." A couple of days back I got a mail saying that for making the pre-payment I would have to travel to their "loan branch" and I couldn't make the payment at the branch where my account was! .....

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Now, lounge banking for the rich

Lounge or private waiting area has so far been a forte of airports and luxury hotels. But this is changing with most private sector banks now introducing lounges in select branches to service private banking and wealth management clients.  Earlier, banks had set up dedicated branches for high networth customers. With the number of affluent individuals in India on the rise, several private banks are now setting up lounges in many branches across cities.................

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Ensure premature termination of term deposits in case of demise of a joint holder

......Economist SS Tarapore, a distinguished economist and a former deputy governor of the Reserve Bank of India (RBI), in his column Maverick View in the Hindu Business Line – When death visits a bank deposit raises certain vital concerns that call for immediate action on the parts of RBI/DBOD, BCSBI and IBA..................

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Ins and outs of a growth slump

....Why is the manufacturing sector slowing down?

The sector’s contraction during January-March quarter confirms what most analysts had feared: The Reserve Bank of India’s (RBI’s) bitter medicine to raise interest rates to cure inflation has not tamed prices, but cast side effects on growth. Moreover, firms are also holding back planned capacity expansions, leading to slow growth.

Read - Hindustan Times

CII moots 10-point agenda for reviving Indian economy

......The CII expressed concern that low economic growth will affect job creation, inclusive growth and social uplift of people. Addressing a news conference after the council meeting, CII President Adi B. Godrej called for a monetary stimulus by the Reserve Bank of India (RBI) over the next six to nine months to help revive growth. "Fortunately, inflationary expectations are coming down. Global commodity prices particularly of crude oil have started falling. This is the right time to create the monetary stimulus that can help revive the economy," he said......

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Moily calls for strengthening economic, financial institutions

........The main objective of this meeting was to formulate capacity building programmes for senior management functionaries of the banking sector and related regulators. The meeting focused on imperative issues and developments in the field of CSR, IFRS, Corporate Governance and BASEL III

A Memorandum of Understanding (MoU) between the Indian Institute of Corporate Affairs (IICA) and Institute of Chartered Accountants of India (ICAI) was also signed on this occasion. This will mean that the IICA will be used as the hub for the training programmes conducted by the ICAI in their 14-acre state of the art campus in Manesar and will ensure a close working partnership on several fronts between the two institutes.The participants in the meeting included Manoj Kumar, Joint Secretary, Ministry of Corporate Affairs, J N Shah, President, The Institute of Chartered Accountants of India, Dr. Bhaskar Chatterjee, DG and CEO, IICA and CMDs or top management from 29 banks such as the Reserve Bank of India, State Bank of India, Punjab National Bank, Overseas Bank of India, etc.

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Stability matters, not just inflation

...Let me get to the point. It is about time the Reserve Bank of India (RBI) started giving financial stability top priority yet again and building levees against the bore tide of another global financial crisis. While it certainly cannot be complacent about inflation at this stage, it has to get concerns about the health of the financial system ....................

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Gold is not a wasteful investment

....There is only one way for the runaway inflation to come down — by reducing the credit growth in the economy. This can be achieved without compromising growth if the government is able to reduce its penchant to spend taxpayers' money without any improvement on the fiscal side. On the monetary front, this can be achieved by the Central bank pushing the interest rates even higher. There is a third way by which the credit in the system can be reduced; as the forex reserves move out of the country, the corresponding liabilities against them, i.e. the rupee liquidity, has to reduce sans any RBI intervention through OMOs or CRR cuts, and this is exactly what is happening through the gold imports.......

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Views turn dovish, RBI seen cutting rates: Reuters Poll

Most economists polled now expect the Reserve Bank of India (RBI) to cut interest rates at its policy review later this month, driven by dismal economic data, falling oil prices and recent comments by a central bank official.......................

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Rate cuts not the solution in India: JPMorgan

....The bank added that easing monetary policy would not necessarily lead to faster growth, saying the "elevated" macro-economic and regulatory uncertainty, as well as supply constraints, are "far more" responsible for the investment slowdown.  "Policymakers may be well served to focus on these areas rather than undertake substantial monetary easing in light of the events of the last 3 months,"................

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Sharma urges RBI to cut interest rates to boost economy

......“I would urge them (RBI) to look at the present depressed investment climate and the disturbing numbers of fall in manufacturing core sectors and IIP (Index of Industrial Production) numbers............

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When RBI revises rates, and what it means at the bank

......Normally, a rate cut is a signal to banks to lower interest rates. However, several factors at play complicate decision-making by the RBI, especially in trying to balance the twin objectives of keeping inflation anchored and boosting economic growth. Rate hikes increase the cost of capital; reductions have the opposite effect. It therefore becomes very easy for everyone to associate a tight monetary policy stance with growth suffocation...........

Read - Indian Express

RBI hints at rate cuts ahead of policy review

MUMBAI, 4 JUNE: With the economic growth slipping to nine-year low levels, Reserve Bank Deputy Governor Subir Gokarn today said below trend growth and falling crude oil prices offer the central bank a window to ease policy stance. “(For one,) the growth is somewhat lower than expectations and that may have positive, moderating impact on core inflation. Two, oil prices have come off somewhat more than expected. Those are the two factors that suggest more room (for monetary policy),” Mr Gokarn told reporters on the sidelines of an event here...............

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RBI unlikely to act on CRR, repo; may look at SLR: BoI

With the upcoming Reserve Bank policy right around the corner, expectations have started building up for some action on cash reserve ratio front from the central bank. Executive Director of Bank of India , N Seshadri, however feels that the RBI is unlikely to move on either CRR or repo rates.............

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No, Subbarao won’t be able to clean UPA’s garbage dump

........The predicament of the RBI was best explained in a recent column titled Seeking Divine Intervention, written by Rajeev Malik, an economist at CLSA. He said: “There are three institutions that keep India running: the Supreme Court, the Election Commission and the Reserve Bank of India (RBI). To be sure, most of the economic mess in India has the government behind it. And often the RBI is called in as a vacuum cleaner. But even the world’s best vacuum cleaner cannot be successfully used to clean up a garbage dump.”

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Lower Rates? No Way

The conventional wisdom was that monetary easing was in the offing. With inflation expected to ease and a stimulus required to revive flagging growth, the pundits predicted that the Reserve Bank of India (RBI) would cut interest rates. Sure enough, on April 17 the RBI cut the repo and reverse repo rates by 50 basis points (bps). But there’s a fly in the ointment............

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RBI drops hint about rate cut

Mumbai: A fortnight before the mid-quarter policy review, Reserve Bank of India (RBI) Deputy Governor Subir Gokarn hinted at a possible rate cut, prompting a rise in bond and share prices as the markets responded positively to the signal. Adding to optimism was the prospect of a normal monsoon, with the first rains of the season expected to make landfall in Kerala by 6 June. “Growth is somewhat lower than expectations and that may have (a) positive, moderating impact on core inflation. Two, oil prices have come off somewhat more than expected. Those are the two factors that suggest more room (for monetary policy),” PTI reported Gokarn as saying on the sidelines of an event in the city................

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Is RBI using wrong tools to fix economy’s problems?

.....RBI’s moves go in the wrong direction. How do we ensure that the price on a financial market is driven by fundamentals? The answer: We must have a deep and liquid market, and a broad array of sophisticated speculators. RBI’s actions are going in the exact opposite direction. They are trying to make the market illiquid. But it is in an illiquid market that we will get market inefficiencies and weird behaviour of the price. They are increasing the chance that something nutty happens on the rupee. This circular is also a reminder about poor legal process at RBI. Every action by a regulator must articulate a rationale. Financial regulations are motivated by exactly two possibilities – consumer protection or micro-prudential regulation. The government agency that wields the power of financial regulation must show the clear rationale, describing what is the market failure that this regulation is seeking to address. The government agency must show the cost-benefit analysis, explaining why the costs of this action outweigh the benefits. As is typical of financial regulators in India today, RBI’s documents show no rationale.........

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Facts about official figures : Sujan Hajra

......the public in general and financial market participants in particular are more sensitive to the first data release rather than the subsequent revisions. Keeping such psychological factors in mind, there seems to be an attempt by official agencies to scale down the real extent of economic deterioration during periods of major economic slowdown at the time of the first release of major macro data. Official agencies are entrusted with the responsibility to accurately report the underlying economic conditions. Deliberate attempts to conceal the real picture can lead to wrong decisions and turn a bad situation worse. It also discredits official statistical agencies. 

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The author is chief economist at AnandRathi Group and has served as Director of Economic Research and Policy in the Reserve Bank of India

PM to review infrastructure development tomorrow

....Another key concern is funding. Almost all the industries have complained that the cost of domestic funds is too high and external assistance hard to get. Keeping this in mind, the Government is likely to advise the Reserve Bank of India (RBI) to take the necessary steps to reduce the cost of funds. The RBI is slated to review monetary policy on June 18.........

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Indian banks need huge capital infusion in next 4-5 years

......Though RBI didn’t quote an estimate, it did guide that capital requirements for growth as well as transitioning towards Basel-III are very high. RBI is mindful of the pressure that is likely to put on government finances, especially when it is walking a tightrope with respect to its fiscal state. RBI was categorical that capital requirements are unlikely to be relaxed and the government either has to pare down its stake in government-owned banks (considering that it has 58%-plus stake now in many government-owned banks) or think of a holding-company structure to manage the banks’ capital needs.....

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No FII debt threat

A Reserve Bank of India (RBI)-appointed panel has quite rightly called for creating conditions that enable greater participation by foreign institutional investors (FII) in the Government securities or G-Sec market. True, there has been an enormous expansion in the domestic G-Sec market, with annual trade volumes more than doubling to about Rs 31 lakh crore in the last eight years. But much of this is only courtesy a rise in the stock of G-Secs issued.............

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'RRBs should not be ignored'

.... As per the directions of RBI and NABARD and Syndicate Bank, the bank plans to provide banking facilities to habitations having a population of less than 1,000 using appropriate technologies under Ultra small Branch Concept along with 50 additional regular branches in different areas said Reddy........

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NPAs of Urban Coop Banks more than double in Gujarat

....."We expect this to be a step in right direction for the UCBs in Gujarat. Management of NPAs is a major concern for banks and such facility would provide ample room to select investor, thereby yielding better value for the asset. This is a new concept and banks should adopt it," said Jyotindra Mehta, chairman, GUCBF. According to RBI guidelines, a credit account will be classified as NPA if it is out of order for more than 90 days. After the introduction of grading methodology, UCBs have been asked to keep their net NPAs below 10 per cent. Nationally, the gross NPAs of UCBs stood at 10.1 per cent in 2009-10, while it fell in 2010-11 to 8.5 per cent. The loan amounts have increased over the years and the profitability of UCBs too have improved. This resulted in increased provisioning for bad loans over the years.

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First posting in rural area may become mandatory at public sector banks

First posting at rural branches or offices after recruitment may become mandatory at public sector banks (PSBs). Banks might rework the compensation structure to make rural postings attractive. At present, the pay package has a definite tilt in favour of city and metropolitan areas. These emerged from a brainstorming top managers – chairman and managing directors and executive directors – had over the weekend to position PSBs for today’s highly competitive business environment. They also dwelt on expectation profile, talent building, succession planning, compensation packages, and information technology infrastructure. The two-day conclave was organised by Bank of India. With a thrust on financial inclusion and huge funding for villages under various programme, business opportunities will grow manifold in the rural sector. The ground work for it has to be done now, said the CMD of Mumbai-based bank..................

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Mumbai's Zoroastrian Cooperative Bank acquires Surat-based City Coop Bank

Mumbai-based urban cooperative bank, Zoroastrian Co-operative Bank Limited (ZCBL) has acquired Surat-based City Co-operative Bank Limited making the former a multi-state scheduled urban cooperative bank. The ZCBL has been authorised by the statutory authorities to acquire the Surat-based City Co-operative Bank. The acquisition brings six branches of City Cooperative Bank under ZCBL, which currently has 12 branches located in parts of Mumbai and Pune. Currently, ZCBL has about 45,000 to 50,000 accounts with a total business of Rs 1,100 crore as on March 31, 2012 and its net worth is nearing Rs 100 crore. The bank maintains the Capital Adequacy Ratio (CAR) in excess of 14 per cent, as against the requirement of 9 per cent set by the Reserve Bank of India (RBI)...........

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RBI cancels Madhavpura Mercantile's banking licence

.....“RBI has cancelled the licence of MMCB on Monday evening as we were not able to make recovery.” Total recovery pending is over Rs 1,100 crore and NPAs have touched 99.9 per cent of total deposits," .....

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PNB reworks deal with MetLife to fit regulatory bill

....According to the deal, all PNB branches (more than 5,600) will sell MetLife’s insurance products. The bank will earn a fee for selling those products. The new proposal has been submitted to the regulator for approval. Interestingly, the former proposal was approved by the Reserve Bank of India but hit a roadblock with the Insurance Regulatory and Development Authority (Irda) over the valuation......

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Bank Business Correspondents: Miles before the idea works

.....Other major problems encountered are non-operation of accounts; making manual payments using the department's E pay-order to banks, multiple accounts to the same person, not carrying out biometrics based de-duplication, Non establishment of customer complaint centers and non supply of transaction data for monitoring by the department.” All of these and similar issues need the attention of the Reserve Bank of India (RBI) and other regulators, especially when the bid is extremely low cost!..................

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Bank branches go high-tech

....The revolution in mobile technology will do a lot for banks. It enables customers to carry out transactions via cellphones or tablets. The Reserve Bank of India is revising a few norms around mobile banking, and this is expected to give a fillip to the category..............

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Sri Lanka to have India trade show in August

......In South Asia, economic nationalism and trade barriers were partly triggered by global currency weakness of the post World War II failed Bretton Woods unstable peg system, though global trade barriers also rose during the Great Depression. Until the middle of the last century exchange rates between the two countries were fixed one-for-one through a currency board in Sri Lanka. Even after the creation of the Reserve Bank of India in the 1930s the Indian rupee remained strong and stable as the RBI was restrained by a gold standard. But after independence from British rule, the central banks of the two countries raced with each other to weaken their currencies by printing money to finance budget deficits, a battle which was eventually won by Sri Lanka............

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Bad loans will not be a large systemic issue: Anand Sinha, RBI Deputy Governer

Anand Sinha, the custodian of the India banking system as Deputy Governor at the Reserve Bank of India, has just laid out the road map to make Indian banks safer with the so-called Basel III norms.

But, there is a lot more happening at the central bank. In an interview with ET, Sinha reveals what the central bank is doing on soaring bad loans, private ownership of banks and preparedness for a European crisis. 

Edited excerpts:.............

Rangarajan is PM’s choice for Finance Minister after Pranab

..............It is no secret that Rangarajan is the Manmohan Singh's go-to man on all matters economic. The former RBI Governor heads numerous committees formed by the PM ranging from those that look into decontrol of sugar to management of public expenditure. Most recently he was appointed chairman of a committee to review oil and gas product sharing agreements with private sector companies............

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Customers can now apply online in RBI's foreign exchange dept

..........The application tracking system (ATS) is one of the major e-governance initiatives, the Reserve Bank of India (RBI) said in a notification. "Foreign Exchange Department, Central Office and its 17 Regional offices have since adopted the ATS, to facilitate the customers to apply and track the status of the applications online," RBI said. The ATS facilitates the customers to submit their applications online and also track the status of an already filed or submitted application.............

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Rs 32,000 crore forex scam forgotten!

.........The story begins in 2008, when 19 banks violated RBI and Foreign Exchange Management Act (FEMA) guidelines and sold 'engineered' forex derivatives to Indian corporates, which resulted in huge losses to Indian investors and alleged gains to foreign-based banks. After almost three years, the RBI imposed a meagre total penalty of Rs 1.9 crore on the banks. Documents accessed by Express reveal a deliberate delay by the government in launching a probe into this scam. ...........

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Expectations of rate cuts rise on weak growth numbers

............“The policy action would be guided by the yet to be released IIP for April 2012 and inflation numbers for May 2012. We are not going to see major improvements in the IIP numbers though they should get some benefit from the base effect............

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Rupee should be allowed to find its own path: survey

The Reserve Bank of India (RBI) should let the rupee find its level rather than try to force it to strengthen by selling dollars, economists and currency dealers told a survey..............

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Interest rates will dip, the question is how soon: Kidwai

..... “There had some demand-led price hike last year which has already been curtailed by the Reserve Bank of India after the interest rate hikes... the central bank can now reverse the trend,"........

Read - Hindustan Times

The slowdown is here

.....The government's failure to revive the reform agenda has been one of the principal reasons behind the weakening investor sentiment. With policy paralysis gripping many organs of policy making, it has been left to the RBI to wage an almost single-handed fight to preserve the sanctity of monetary policy. Its principal objective has always been to maintain price stability while endeavouring to meet the genuine credit needs of the real economy....

Read - The Hindu

Minority commission backs Islamic banking

......Following a proposal from NCM to permit interest-free banking—a variant of Islamic banking—the finance ministry has asked the Reserve Bank of India (RBI) to take a fresh look at the matter. Until now, the central bank has maintained Islamic banking is not feasible in India as existing regulations do not permit interest-free transactions.......

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UCO Bank programme on outreach activities - Financial Inclusion

Bank of Maharashtra convened 115th SLBC in Pune

Task forces on Maoists, fake notes

.....Official sources said task force on FICN will study the problem of the fake Indian currency notes (FINC) in the state and devise an effective strategy to combat the menace. This task force will comprisJyotirmoy Chakravarty, additional DGP (BIEO) as chairman and Anurag Agarwal, deputy IGP (CID), Surendra Kumar, deputy IGP (western range) and one representative from Reserve Bank of India/State Bank of India as members.........

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India looks at the US to check fake currency notes

India is planning to seek technological cooperation of the US to check the flow of fake Indian currency notes the way Washington does to put a stop of circulation of counterfeit USD. Impressed by the American technology, which has a database of each counterfeit US dollar -- photograph, from where it originated, its route of travel and people behind its circulation -- India is all set to ask the US to help it curb the menace, mostly originating from Pakistan. ...........

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‘SPMCIL is debt-free now’

.... The Security Printing Presses at Hyderabad and Nashik are engaged in printing of passport, visa stickers, postal stationery, non-judicial stamp papers, and other security products. Thus, SPMCIL caters to the requirement of high security products viz., coins, currency notes, passport, etc. of the country. Keeping in view the future demand of indents for currency and coins by the RBI, investments are done in the Mints and Currency presses. Similarly, investments are also being made on passport papers based on future indent..............

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Chinatrust Commercial Bank to open branch at Sriperumbudur

Chinatrust Commercial Bank is set to open its second branch in the country at Sriperumbudur, near Chennai, on June 6. Chinatrust, the only Taiwanese bank operating in India, at present, has a branch at Connaught Place in New Delhi. The bank recently secured permission from the RBI to open its second branch in India, says a release from the bank.........

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L&T Finance Holdings: NBFC today, bank tomorrow

.....That is not hard to believe given that L&T Finance's larger game-plan is to throw its hat into the ring when the RBI begins to hand out new banking licences. Having a presence across the entire chain of “lending, saving and investing” may sound pretty ambitious for a NBFC. But it is quite realistic for a bank. So, even as the RBI readies its norms for new banking licences, L&T Finance seems to be well ahead in the race to become a bank........

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Govt backs banks' entry into commodity futures trading

Amendment Bill may be tabled in Monsoon session despite RBI's reservations

.....The RBI has been against allowing banks to enter this sensitive area, as there is no “autonomous and independent” commodity regulator in the country. The Forward Markets Commission, which regulates commodity players, comes under the administrative control of the food and consumer affairs ministry. A Bill to provide autonomy to the commodities market regulator will be tabled in the next session of Parliament after Cabinet approval.......

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Corporate worry lines

...Corporate India's scorecard for the latest March-ended quarter has little to offer by way of cheer, with profits after tax for the 3000-odd companies to have declared results so far falling more than 13 per cent over the previous year. That shouldn't really surprise, given a weak rupee, which has pushed up costs of imported inputs, and very little moderation in interest payouts, despite the Reserve Bank of India (RBI) initiating a cut in its policy rates. In any case, the latest decline is only a continuation of a trend of declining profits that began two quarters ago. What is truly disturbing about the March quarter results is the weakening sales momentum. Annual sales growth, which was holding up at over 20 per cent in the past many quarters, has dropped to below 13 per cent......

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We have reached the bottom: C Rangarajan

Would you accept that inflation has become the Achilles' heel of this government?

Inflation is a phenomenon that affects a large section of the country. So, a high level of inflation is not conducive to economic growth and prosperity of the country.

Has the government failed to tackle it?

Earlier, as governor of the Reserve Bank of India, I had taken a very strong position on that and I have always regarded that the primary objective of the central bank is to tame inflation. In the last two years, we have been confronted with a situation in which the strong action to contain inflation was also viewed by some as coming in the way of faster economic growth. The first year of inflation was really food inflation. That is a totally different kind. Come the second year, the food inflation got generalised. In addition to that, there was some food inflation because of the rise in the price of vegetables. Now, any strong action on the monetary authority was viewed by some people as coming in the way of faster economic growth.

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RT Nagar heist: Police turn screws on careless banks

.....While investigating recent robberies of banks in the city, the police have found that all such incidents happened due to the negligence of banks and security agencies who are not following Reserve bank of India’s (RBI) guidelines regarding security arrangements while transporting cash. “Banks and security agencies are not following RBI guidelines because they are insured against losses. If money is stolen or robbed, banks are not bothered because they will get it reimbursed by insurance agencies,” a senior police officer said on the condition of anonymity.........

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Trams go classless as government allows quiet fare hike

..........According to transport minister Madan Mitra, the change finally came out not because of political ideology but for the sake of simple, everyday convenience. CTC was facing a lot of trouble returning change to passengers as there are very few 50 paise coins in circulation, he said. The minister has been harping on this problem for the last two months, and even asked the chief minister to write to RBI about the lack of small change. He reiterated the issue during a press conference on Friday, soon after his meeting with the chief minister, and suddenly announced a fare revision for trams and CSTC buses................ 

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Tour the rare history of currency

Misprinted notes, Satvahan century coins, rare items, old postcards and various other things that would take you on a tour to history are on display at Chatuhshrungi Seva Samiti Cultural auditorium. The exhibition organised by the Numismatic Society of Maharashtra was inaugurated on Saturday and is open till Monday............

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'Textile debt recast will not pressure banks' profitability'

.......The finance ministry will consult Reserve Bank of India for giving a two-year moratorium repayment and convert working capital eroded into term into term loans with three-five year repayment period. The government is also mulling a special provision in non-performing assets norms to avoid asset reclassification for these loans.

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Dhanlaxmi Bank Q4 operating loss widens; union demand RBI enquiry

Dhanlaxmi Bank has posted operating loss of Rs76.71 crore for the quarter ending March 2012, an increase of 110% as compared to a quarter earlier. While the results are clear indication of the poor strength of the bank, there has been no action from the regulator, the Reserve Bank of India (RBI). The bank’s union which has been raising the alarm from long time has demanded an enquiry by the RBI..................

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SBT launches month-long KYC campaign

State Bank of Travancore has launched a month-long campaign highlighting the need for updating of Know Your Customer documents. This is being done with a view to creating awareness among customers about the need to update KYC details, an SBT spokesman said here. Directives of the Reserve Bank of India and the Centre require that all bank accounts be KYC-compliant by June 30...................

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Complain to branch manager first

.....Give the bank 30 days to respond, if no solution is forthcoming you can then approach the banking ombudsman in your area. The contact details are available on the Reserve Bank of India's Web site. The banking ombudsman is a regulatory body that evaluates any complaint from a neutral standpoint and ensures that a customer's concern is addressed..........

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My View on "Are PSU banks trustworthy?":

While the concern is appreciated,let us also remember PSBs have a transparent reporting system. Beyond frauds, financial institutions both inprivate and public sector are forfeiting account-holders' money in the name of 'inoperative accounts', unclaimed deposits and so on where the amounts involved are much larger.There is no public sector-private sector or government divide in appropriating small depositors' funds.The numbers and amounts mentioned here will make sense only if comparative figures of private sector banks as also the types of clientele these banks are handling are also discussed.

- M G Warrier, Thiruvananthapuram

Widespread weakness in GDP components

The Indian elephant is limping. Which means this elephant can't dance — at least not for a while. While the poor industrial production numbers all along hinted at lacklustre economic growth, the services sector that still held the show thus far is now showing initial signs of giving in. If this trepidation is proved right in the next couple of quarters, then urgent measures may have to be taken to shake the economy out of lethargy. And such measures would have to come from the government and not just the RBI............

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India GDP shock: A gasping elephant? Or tortoise?

.......Robert Prior-Wandesforde, a senior economist at Credit Suisse, probably sums up best what all of us feel right now: “It is hard to describe India’s March quarter GDP release as anything other than shocking,” he said in an investor note. He was confident the figures will “send shivers down the spines” of senior politicians, who in turn will pressure the RBI to further slash key lending rates. (We would tend to agree, although it’s unclear whether any of those senior politicians have a spine in the first place.).......

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Falling GDP: Who’s to blame?

.......Finance minister Pranab Mukherjee has blamed the Reserve Bank for high interest rates, and while it is true the RBI has raised interest rates 13 times since October 2010, each time it has been compelled to do so with the government failing to take fiscal steps needed to meet supply side constraints. These constraints fuelled food inflation, which then spilled over to manufacturing. High interest rates of 10-13 per cent for creditworthy corporates has certainly stifled growth: margins are not large enough to absorb such high rates. Demand has also slowed, and many companies can’t utilise even 70 per cent of their capacity. The RBI needs to cut interest rates immediately by at least one per cent, if not more, for growth is as important as inflation concerns. And the RBI must remember it is not the sole guardian of inflation..............

Read - Deccan Chronicle

India must capitalise on the G20 opportunity

......Terms of lending, such as the need for collateral to obtain a loan, has excluded many households from gaining access to funds. The microfinance finance segment routed through the private sector has been mired in controversy, after severe setbacks in Andhra Pradesh. Ideally, the vital components of inclusion stressed by the Reserve Bank of India in a recent speech, would consist of ease of access to funds, particularly to vulnerable population, affordable cost of obtaining funds, and transparency in the process of fund disbursement. These objectives have not been met to a large extent by the above initiatives. In fact, India ranks 50 among 100 nations, according to a world-wide survey that measures financial inclusion with respect to the extent of bank penetration............................

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Outages, limited workforce bruise manufacturing PMI

.............As demand outpaced supply, both input and output prices rose, prompting HSBC Chief Economist for India Leif Eskesen to caution the Reserve Bank of India (RBI) against any monetary easing. RBI is slated to come up with its monetary review next month............................

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Petrol price hike impact on inflation is 10-15 bps: Gokarn

............Petrol price hike, however, may have had an impact on inflation by 10-15 basis points, he adds. Gokarn also believes that fall in oil prices has provided some relief on inflation. The rupee has been losing value against all the major currencies, especially the American dollar, since April and hit an all-time low of 56.52 yesterday. It has shed nearly 24% year-to-date...........

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Subsidies need to be cut: RBI Deputy Governor

.......Mr.Gokarn said that in a situation of increasing demand and falling supply, the depreciation of rupee was inevitable. The rupee-dollar rate had fluctuated in a non-linear fashion, as had happened in the case of several international currencies. Certain currencies were able to resist depreciation.........

Read - The Hindu

Fiscal consolidation critical for high growth

The fiscal consolidation is a critical area in India’s economy and controlling it requires abolition of subsidies, which remains a key factor, Dr Subir Gokarn, Deputy Governor, RBI has said..........

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Gokarn-speak raises rate cut hopes

The prospects of monetary easing in the mid-quarter policy review on June 18 brightened on Friday. Apart from falling commodity prices and an economic slowdown (on Friday’s Brent crude price fall and yesterday’s GDP growth figures were the most immediate reasons), the market took comfort from Reserve Bank of India (RBI) Deputy Governor Subir Gokarn’s comments in Kochi on Friday. Gokarn said though the slowdown had been in line with the RBI’s expectations, slowing GDP growth and the oil price fall provided more room on rates. He also said the growth slowdown was accompanied by a fall in core inflation and reiterated the need for a rate reversal to support growth.......

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