There is legroom for rate cut

New Delhi, Jun 15: The Finance Ministry sees scope for a policy rate cut by the Reserve Bank of India at the monetary policy review meeting on Monday. With core inflation holding where it was, there is a legroom indeed for a rate cut, Dr Kaushik Basu, Chief Economic Advisor in the Finance Ministry, told reporters here. He highlighted that although inflation had gone up quite a bit, core inflation had in fact gone down only a tiny bit. “Usually monetary policy is directed towards core inflation,” Dr Basu pointed out. He said that RBI had a very tough act to undertake three days from now. This is because inflation had not gone down quite as much, while growth has gone down a lot.

HBL

May drop lending rates further if RBI cuts 50bps: SBI

Pratip Chaudhuri, Chairman, State Bank of India said that the latest round of cuts are different from the cuts undertaken in May. If the RBI announces a 50 bps rate cut, then the bank is willing to drop lending rates first, informed Chaudhuri. He further added that lending rates are conditional on CRR cut and therefore, he is not committing a base rate cut at this point......

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

SBI cuts SME, agri loan rates by 50-350 bps

..........“The cost of deposits have not come down as deposit rates are still at higher levels. We would take a call on both the base rate and deposit rate after the monetary policy review (by RBI) on Monday.”.........

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'Banks to see moderate growth in FY13'

....We maintain our view that FY13 will be another tough year for the banking sector. The macro environment is likely to remain difficult, particularly in contrast to the sharp recovery of FY10,” it said.

Overall credit and deposit growth will remain sluggish, with deposits at 16 per cent and credit at 17 per cent. It will be on account of low investment activity as well as tight interest rates, the report said, adding RBI will continue to fight inflation which is heading north........

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Emerging Entrepreneurs

Bangalore, June 15: Polaris Financial Technology Ltd has announced that it has won the HP AllianceONE Partner of the Year Award in the Converged Infrastructure Solutions category. The company in a release said that this was in recognition for the Central Bank Core Banking Solution implemented at the Reserve Bank of India. Mr K. Srinivasan, Executive Vice-President, Polaris, said: “Intellect CBS for central banks is the first integrated money and securities solution that comes with depository and security settlement with DVP-3 (delivery versus payment) capability.’’

HBL

ICICI Bank has evolved from corporate to day-to-day bank: Chanda Kochhar

....."There have been two big changes on the corporate side of our business. In the past, we were mainly focused on large-ticket deals, whereas today we are in the day-to-day banking business and a lot of this is executed through branches," Kochhar said. "On the retail side, our focus was through the outside structure but now business is done through the branches. Over and above that deposit taking and regular servicing is conducted through branches. Basically, we have transitioned," Kochhar said in an interview published by global investment banking major Morgan Stanley......

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NABARD offers more funds to Rajasthan

.......The NABARD chief found the godown facilities in Rajasthan weak and offered Rs.250-350 crore for construction of storage spaces. “We are willing to provide loans at a reduced rate of 9 per cent and an additional incentive of 2.5 per cent for timely repayment,” Dr. Bakshi said. He offered a separate line of credit to the Rajasthan State Cooperative Bank for financing the primary agriculture cooperative societies in Tonk district in the wake of RBI taking control of the bank. He advised the cooperative banks in the State to adopt core banking maximum by March 31, 2013.

Read - The Hindu

RBI, the favourite whipping boy : S S Tarapore

........Thirty years ago, the RBI undertook an unprecedented monetary tightening. For the first time, there was a Calling Attention Motion in the Rajya Sabha, in January-March 1982, on monetary policy, and the Opposition unleashed a savage attack on the RBI and, in particular, the then Governor, Dr I. G.Patel. The Finance Minister undertook a brilliant defence of the RBI and its Governor and also made it clear that anything the Opposition wished to say should be directed to the government and not the RBI Governor. It is imperative that today's policymakers and others participating in the debate read the Rajya Sabha proceedings. The then Finance Minister was none other than Mr Pranab Mukherjee..........

.......What would be the appropriate monetary policy response on June 18. Given the current inflation rate and the wide CAD and further likely depreciation of the rupee and the hesitation of investors to move funds to India, the ideal policy would be to raise policy interest rates and increase the cash reserve ratio. Given the diktat from North Block to ease monetary policy, the RBI would be performing its duty if it engages in a battle of attrition as Dr Chakrabarty has competently done. At the least, the RBI should strongly resist any policy easing on June 18. The RBI Governor, Dr Subbarao's task is not enviable and the RBI needs public support and understanding so that it is not made the favourite whipping boy of the government.

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Pranab-da is busy; it’s back to Subbarao to steer the economy

......India’s political leadership is currently preoccupied with the jockeying over the Presidential elections and politics has once again taken centrestage ahead of economics. Even as confusion reigns over who will go to Raisina Hill – the finance minister, Pranab Mukherjee being a key contender – Subbarao and his colleagues at Mint Road would have other things on their mind. .....

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and he went to Hari Dwar............

Shri.P.A.Kumarji died of a stroke on June 11,2012. He had gone to Haridwar with a group on a religious tour to Badrinath. He was 65 years old. Kumarji was a Grade C Officer in Ahmedabad Office and had opted for voluntary retirement. He is survived by his wife and two sons. May his soul rest in peace.

 

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

HC admits NBFC's plea against RBI

.................In the Writ Petition, AICL also has challenged the legality and validity of the circulars of RBI dated September 28, 2006, May 24, 2007 and January 2, 2009 as the circulars are ultra vires the provisions of the Reserve Bank of India Act. Reserve Bank of India under Section 45-L has powers to issue directions but shall have due regard to the condition in which and the objects for which the institution has been established, its statutory responsibilities, if any, and the effect of the business of such financial institution is likely to have on the trends in the money and capital markets.

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RBI broadens scope of prepaid payment instruments

.....The central bank has asked issuers of the instruments to ensure that under no circumstances is more than one active instrument issued to the same holder by the same issuer. The scope of the prepaid payment instruments has been broadened after a review of the way the issuance and acceptance market has developed, the RBI said........

Read - HBL

Credit societies to act as BCs for farm credit in Maharashtra

.....The decision was taken at the state-level banking committee meeting here today which was attended by representatives from the RBI, top officials of nationalised banks and the chief minister himself. A total of Rs 750 crore has been disbursed to four lakh farmers in the affected districts while Rs 500 crore more is yet to be disbursed, the press note said. At the meeting, Chavan asked the Maharashtra State Co-operative Bank to take lead in facilitating flow of these funds by helping the nationalised banks and RRBs, the statement said.......

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Public sector banks must not be burdened with social costs

......As far as the finance ministry is concerned, India, it would appear, is back to the days of bank nationalisation in 1969! The clock has virtually been turned back on the post-reform period after implementation of the Narasimham Committee Report, when banks came to be seen as commercial entities rather than as vehicles of government's social agenda.....................

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RBI move on remittance to help strengthen rupee

....K. P. Padmakumar, Executive Director of Muthoot Finance Limited, and former chairman of Federal Bank, told The Hindu that the RBI move was a positive measure for the non-resident Keralites. “It is bound to boost the remittances and contribute to the improvement of the value of rupee. The measure will enhance dollar inflow as the transaction involves dollar purchase by the banks or the designated dealer involved in the deal,” he said. “Ever since the value of the rupee started declining, rupee remittance has become an attractive proposition. The RBI has been under pressure to raise the remittance limit,” he said.......

Read - The Hindu

Record NRI deposits not enough to stem rupee fall

 Non-resident Indians' bank deposits have risen to record highs in April as they sought to benefit from higher interest rates here, more than double the yields offered in developed countries. However, being just a drop in the ocean, it couldn't do much to shore up the rupee's value.............

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The rupee's good news : Jamal Mecklai

I received a congratulatory email a couple of weeks ago from someone who reads my columns and with whom I occasionally correspond. He reminded me that in an article published in January, I had forecast that the rupee would range between 47 and 57 against the dollar this year, and that, with the year nearly half done, my forecast was still holding. His big question was: will this range hold for the rest of the year?...........

Read - BS

Fresh setbacks set the stage for RBI action

.....While many economists said that the current high inflationary scenario did not warrant a rate cut by RBI, they maintain that the absence of credible fiscal and policy measures could still force the hand of the central bank. Finance minister Pranab Mukherjee said he is confident that the range of inflation will be 6.5-7.5% throughout the year. “I hope if (the) monsoon is quite good, then it would be possible that this type of pressures would be sorted out,” he added.....

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Pundits prune RBI rate cut forecasts

.....“We believe an independent central bank should not signal policy easing immediately as risks to inflation are strong. Core inflation (non-food manufactured products) is unlikely to come off significantly in the near-term and slower growth is essential to keep a lid on inflationary expectations in the economy given the loose fiscal stance,”.....

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Inflation can't be curbed without sacrificing growth: RBI Governor

........."You cannot control inflation without sacrificing some growth. After all, you have to contain demand. When you contain demand, growth comes down. So there is no way of bringing down inflation without sacrificing some growth," ..........

Read - Hindustan Times

Cut in policy rate likely, CRR may not change

......The Reserve Bank of India (RBI) is expected to cut the policy rate by 25-50 basis points in its mid-quarter monetary policy review on Monday, a poll of 25 respondents conducted by Business Standard showed. However, views were fairly divided on whether the central bank would opt for a reduction in banks’ cash reserve ratio (CRR) as well. Almost 90 per cent of those polled — economists and market participants from banks, brokerages and primary dealers — expect RBI to draw comfort from stable core inflation and give preference to supporting growth........

Read - BS

Rate cuts won't help

Apropos “Monetary policy isn’t a popularity contest” (June 13), rate cuts alone are not a remedy for slowing growth. Growth is a function of an effective and a proactive policy mix — monetary as well as fiscal. It is erroneous to hold high interest rates responsible for the slowing growth rate. In the absence of investments and productivity-led fiscal initiatives by the Centre, monetary manoeuvres of the Reserve Bank of India (RBI) will remain ineffective. We need to boost investor sentiments and focus on productivity growth.

- Venkatesh N Hubli (BS)

RBI: ready to support India’s economy?

.........If New Delhi could only turn its attention away from national elections in 2014 – and, in the short term, from the all-absorbing matter of this month’s election for the ceremonial position of president – the RBI might be able to hold a consistent line. But that, clearly, would be asking too much.

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Inflation woes not over yet

.....The current mess in the Indian economy—especially the toxic combination of slowing growth and persistent inflation—has its roots in bad economic management by the government in New Delhi. Fiscal profligacy, combined with a complete lack of commitment to economic reforms, has brought the economy down to its knees with global shocks adding to the pain. It will take more than a hasty rate cut by RBI to correct matters. There will be a long slog ahead, and while the Indian central bank could be asked to take a risk in case of a total economic collapse, the time is not right now. Despite the pressure, governor D. Subbarao should hold fire on Monday.........

Read - MINT

Rise in Indian inflation fails to quell rate cut view

....A Reuters poll after the GDP figures predicted the RBI will cut its repo rate by 25 bps to 7.75 percent on Monday to support growth. “There is no room left for any fiscal stimulus, so to trigger growth, the RBI has to lower policy rates,” said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai. Still, India’s central bankers face tough choices with inflation at relatively high levels.

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Indian economy is in stagflation: Moody's

....."Yet with the inflation numbers now being driven by supply-side factors, and with the currency being pushed downwards...and India's weaker growth prospects, we think that the RBI could cut rates without it putting too much upward pressure on inflation," said Moody's Analytics. However, it said the Reserve Bank of India (RBI) cannot be "too aggressive" while inflation remains a problem.......

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What is core – inflation or expectation? Ask RBI

Inflation numbers for May are out, and as expected it is higher. A disappointed market declined, fearing the Reserve Bank of India may hold its policy rate when it reviews its monetary policy on 18 June. Select economists are not in favour of a rate cut, but the markets and industry honchos desperately seek one. So what will be the RBI’s consideration while taking a decision on the rate?.......... 

Read / watch the video.......

Financial stability panel takes up Eurozone contingency plan

.....The sub-committee meeting, chaired by Reserve Bank of India (RBI) Governor D. Subbarao, also discussed concerns on slowing growth, persistent inflationary pressures, growing twin deficits and negative market perceptions, said a statement issued by the RBI after the meeting. RBI Deputy Governor K.C. Chakrabarthy told reporters that a contingency plan on Eurozone was being worked. "A separate committee is working on that," he said......................

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We are doing our best: RBI

....Mr. Chakrabarty said the apex bank had taken whatever measures were necessary and possible within its purview. “The RBI is doing whatever best that can be done. All are doing their jobs and the rupee is stable now,” he said. Mr. Chakrabarty was addressing reporters on the sidelines of a meeting of the Financial Stability Development Council (FSDC), convened to review the development in global economy, with specific focus on the eurozone and the U.S., and their consequences for India. The RBI Deputy Governor said, in reply to a query that the RBI had taken necessary measures to stabilise the currency. RBI Governor D. Subbarao, IRDA Chairman J. Harinarayan, SEBI Chairman U. K. Sinha, PFRDA Chairman Yogesh Agrawal in addition to RBI Deputy Governors Subir Gokarn, Anand Sinha and Executive Director V. S. Das were among those attended the meeting.......

Read - The Hindu

FSDC forms working group to look into issues related to financial institutions

The Sub-Committee of the Financial Stability Development Council or FSDC has decided to form a working group to examine issues involved in framing a proposal for a comprehensive resolution regime in the country for all types of financial institutions. The decision was taken at an FSDC meeting, chaired by Reserve Bank of India Governor D Subbarao...............

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Maharashtra CM Prithviraj Chavan requests banks to help DCCBs

.....CM Chavan said that RBI should categorize the loans given by Commercial Banks to PACS as direct finance to agriculture instead of present practice of treating them as indirect finance. CM Chavan said that in 7 districts of Maharashtra the RBI has imposed certain restrictions on the District Central Co-operative Banks over accepting deposits. This is creating problems in these districts as these DCCBs are not able to fulfill their crop lending targets. He said that since such type of advance is treated as indirect finance to agriculture, commercial banks are not in a position to get interest subvention and also not in a position to lend at 7% to PACS. Mr.Chavan appealed to RBI for speedy disposal of this issue would go a long way in increasing finance to farmers in these districts. .........

Read - ET

Farmers to get loans from commercial banks directly

RURAL FOCUS

Farmers who are yet to receive funds from cooperative banks can now expect them to come from commercial banks There are plans to help regional rural banks use the infrastructure of primary agriculture cooperative societies that would disburse crop loans from commercial banks District central cooperative banks would function as business correspondents of the Maharashtra State Cooperative Bank to ensure availability of crop loans from commercial banks Commercial banks called for review of the recovery of stamp duty on loan for amounts exceeding ~ 1 lakh granted for agriculture-allied activities

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Sea change in commodity futures market

.......On the user side, a lot more is to be done. A policy push requiring big size actual users who could hedge price on futures market to mandatorily hedge at least a part on Indian markets. The Reserve Bank of India (RBI) may permit banks which actively lend for post-harvest funding requirements against commodity collaterals to directly hedge for price risk on commodity markets. These regulatory initiatives will enable the NCFMs to help ‘commercialisation’ of Indian agriculture, and in creating efficient linkages between agricultural marketing, lending and price risk management. Law makers, instead of doubting the usefulness of these markets, should empower the regulator to ensure that these markets to discharge their expected economic function by passing the amendment bill to the FCR Act.

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Hotels' apex body asks government to remove infrastructure riders

............."Infrastructure status to hospitality industry under the RBI's infrastructure lending list would mean bank loan repayment periods will be extended to 10 -15 years and the interest rate would settle around 3-4% which would translate into lower input costs. If the interest burdens are reduced, tariffs may come down by 2-3%," .......................

Read - TOI

Banks offer cheaper second loans to existing borrowers

...."Customers with a good track record and a long relationship with the bank are offered a preferential rate of interest," said an HDFC spokesperson. The Reserve Bank of India (RBI) has asked banks to be cautious as a higher-than-expected hike in interest rates could have an adverse impact on the asset quality of banks. However, 80% of borrowers in India have a good credit history, according to records available with the Credit Information Bureau (India) Ltd (CIBIL) - the agency that tracks the credit history of borrowers and assesses their credit worthiness.......

Read - Hindustan Times

Dr.K.C.Chakraborty reappointed

In exercise of the powers conferred by clause (a) of sub-sectin (10 read with sub-section (4) of section 8 of the Reserve Bank of India Act, 1934, the Central Government hereby re-appoints Dr.K.C.Chakraborty (DoB: 27.06.1952), as Deputy Governor, Reserve Bank of India for a further period of three months beyond 14^th June 2012 or until further orders, whichever is earlier.

KCC in media.........

Read Economic Times........
Read Times of India...........
Read Indian Express............
Read The Hindu..........
Read Moneycontrol..........
Read FirstPost..........
Read NDTV.........
Read Business Standard..........

चिट्ठियों से ऑनलाइन फ्रॉड रोकेगी RBI

.........आरबीआई के क्षेत्रीय निदेशक के आर दास ने बताया कि बैंक ने यूपी-उत्तराखंड के 2600 डाकघरों से करार किया है। इन डाकघरों को लॉटरी स्कैम से बचाने संबंधी संदेश लिखी मुहरें दी जाएंगी। इन्हें वे प्रत्येक चिट्ठी पर लगाएंगे। जिससे घर-घर में जागरूकता फैलेगी। इसी प्रकार रेलवे स्टेशन के डिस्प्ले बोर्ड के जरिए भी संदेश का प्रचार-प्रसार किया जाएगा। वहीं रेडियो पर भी लॉटरी स्कैम से बचने और फौरन किन विभागों को सूचित किया जाए, इसके बारे में बताया जाएगा। 

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Counterfeit currency: Threat to internal security

The World is observing ‘Anti-Counterfeiting Day’ on 13th June 2012; however India is still struggling to come out of the clutches of fake currency issue. The latest report by Home Affairs Ministry notifies that large quantities of ‘Fake Indian Currency Note’ (FICN) are pumped into India from countries like Pakistan, Nepal, Bangladesh, Sri Lanka, Malaysia, Thailand, and the UAE. Shocking but true, reports by the Reserve Bank of India (RBI) reveal that the practice of counterfeit currency is almost as old as the printing of currency. At some period in history, it was considered treasonous enough to warrant punishment by death. It was in 1650 AD that paper money was developed and counterfeiting flourished, especially within America where counterfeit money was more common than genuine money.............

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MFI sector upbeat as banks open fists, Bill

........Separately, the MFIN is also in dialogue with the Reserve Bank of India to extend the deadline for meeting the new provisioning and capital adequacy norms beyond April 2013. If the central government also obliges with the new MFI Act, hopefully a new chapter could be opened in the microfinance sector.

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Financial services regulation: Is there a future for NBFCs?

....... Usha Thorat committee’s recommendations and PSL (Priority Sector Lending) guidelines are still to come and are likely to reduce leverage and ROEs for NBFCs, given that capital requirements are expected to increase with Tier- 1 increasing from 10% to 12%. ....................

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RBI asks banks to improve IT governance

......"It is expected that all banks adopt appropriate frameworks for both IT and IS governance and put in place the proper structure and systems," RBI said in a notification. The RBI has also requested banks to take suitable steps in this regard and ensure that the issues relating to governance, information security and business continuity get adequate attention at the Board level.........

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Coordination or control?

The edit “Competing exemptions” (June 12) rightly questions the need for bringing telecommunications and banking within the ambit of the Competition Commission of India (CII). The need for coordination between organisations arises from the degree of interdependence of their functions. Such a situation does not seem to exist here. If one of the regulators falters in its responsibility, the remedy is to improve its working rather than a check by another entity. Moreover, regulators in these two sectors – the Telecom Regulatory Authority of India and the Reserve bank of India (RBI) – have very able people running them. So, the idea of putting these sectors under CCI seems to be a camouflage to monitor and control them rather than coordinate their activities. Moreover, the assignment of resolving conflicts between sector regulators and CCI to a Cabinet committee would add layers to the decision-making process that is already fraught with delays.

Y G Chouksey Pune (BS)

RBI directive on erosion of loan collaterals to hit companies

.......A Reserve Bank directive that seeks to protect banks from erosion of loan collaterals is threatening to worsen credit flow to slowdown-hit companies that are lagging in payment of salaries and statutory dues. The RBI has recently instructed banks to ensure that borrowers have no outstanding statutory dues, such as Employees' Provident Fund (EPF) contributions, by seeking an auditor's certificate for such compliance in their credit appraisal process............

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RBI asks RRBs, cooperative banks to frame policy on unclaimed accounts

.........On a review, with a view to further strengthen the regulatory framework for inoperative accounts and unclaimed deposits, state and central cooperative banks or regional rural banks are advised 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," RBI said in a circular..................

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My View on "Finance ministry preparing new policy road map for banking sector "

This is the right approach. We must use the existing banking infrastructure simultaneously with creating new ones. The human resources and physical infrastructure in cooperatives and RRBs and to some extent in rural branches of commercial banks were ignored while promoting sophisticated borrowed ideas like SHGs and Banking Correspondents. Cooperatives and RRBs were trained to cater to the rural areas and handle small accounts. When technology invaded from above, they were left in the lurch. The present approach of Centre will give RBI an opportunity to revive a neglected sector.

M G Warrier

Will one more regulator help matters?

With the Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), Insurance Regulatory and Development Agency (IRDA), Pension Fund Regulatory & Development Authority (PFRDA), Telecom Regulatory Authority of India (TRAI) and Forward Markets Commission (FMC), India already has a plethora of regulators trying to set things right in the economic flux. It seems there is one more on its way...........

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RBI to issue Rs 20 denomination notes with rupee symbol

Reserve Bank Wednesday said it will soon issue banknotes of Rs 20 denomination with the rupee symbol and inset letter R in the Mahatma Gandhi Series-2005 notes........

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Corporate india vs Government: Full circle

.......The group flaunts an endless supply of cash while wrapping its lack of financial transparency into a strange corporate philosophy called ‘corporate materialism’ which proclaims that “in the last 33 years not even a single rupee of dividend has been declared by the group and not even a single rupee has been shared from the profit by anybody.” Will anyone explain how the RBI or the ministry of corporate affairs have allowed a group with this weird financial claim to collect over Rs70,000 crore of public money (according to its own newspaper advertisements)? Or how the group has the funds to sponsor the Indian cricket team for so many years? Sahara claims to have spent an astounding Rs1,085 crore on sports and social activities until the end of June 2010..................

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Reading RBI’s tea leaves

.....One way of reading the tea leaves is to look at what RBI has done in the past when growth slowed down dramatically. You don’t have to go too far back—in the third quarter of FY09, at the time of the Lehman crisis, GDP growth fell to 5.8%, better than the Jan-March 2012 GDP growth rate of 5.3%. What did RBI do at the time? .......

Read - Mint

Corporation Bank expects 1% cut in CRR

 Mangalore-headquartered Corporation Bank expects Reserve Bank to cut CRR (cash reserve ratio) by 100 basis points in its next week's mid-quarter policy review to facilitate liquidity flow into the system. "We would welcome the rate (CRR) cut at least by 100 basis points. That would send a right message also. We feel the worst (on financial front) is over. If they cut the CRR by one per cent, the system will get Rs 65,000 crore," said Ajai Kumar, Chairman and Managing Director, Corporation Bank. ...........

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Revive Growth with Focus

......In tandem, the RBI would do well to ease liquidity, so as to incentivise heightened economic activity. It needs to mandate a lower cash reserve ratio for commercial banks, given the easier trend in crude prices and the reduction in the core inflation rate. Additionally , the monetary authority needs to indicate lower cost of funds by further reducing its repo rate..............

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Dear money policy compromises growth

.....The RBI's approach from mid-2010 to keep interest rates high in order to control inflation only set growth expectations back and de-energised the economy. It rested on a simplistic assumption that money supply is all that mattered. By raising interest rates, the liquidity in the system would dry up as borrowers opted out of fund-raising to complete projects. This would also reduce overall demand in the economy, as households would save, attracted by higher interest rates, and reduce consumption expenditures.........

Read - HBL

Why we need a large CRR slash, not a rate cut

.....A rate cut without comfortable liquidity conditions is unlikely to lead to significant reduction in lending rates. Therefore, even if the RBI chooses to cut the repo rate on June 18, it may not be very effective without easier liquidity conditions than what exist now. A lower CRR will also increase RBI’s ability to intervene in the forex market without putting too much strain on inter-bank liquidity. A large CRR cut would allow banks to cut their lending rates immediately, while only a 25 bps cut may only have a salutary impact on lending rates.......

Read - DNA

Why a rate cut on 18 June will aggravate India’s problems

Even though Dalal Street is eagerly awaiting an interest rate cut after the weak April industry output, Chetan Ahya, Managing Director, Morgan Stanley has warned that premature easing by RBI may aggravate the economy’s current problems...............

Read and watch the video........

ATM companies top small banks in valuation

............ What has set the market on fire is RBI's two-year-old decision to allow accountholders free access to any ATM across the country. Although access is free for customers, banks pay each other a transaction fee every time their depositors access ATMs of other banks. This has turned ATMs into profit centres for banks and the number of machines has grown from 60,000 in March 2010 to 75,000 last year and is now a few hundred short of the one-lakh milestone.......................

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India ranks 23rd in financial literacy among 28 countries says Visa

....India is the third-largest growing economy of the world apart from being one of the highly preferred investment destinations. However, when it comes to financial literacy among Indians, results are quite dismal. A survey revealed that more than 70% of Indian respondents cannot manage their personal economic emergence for more than three months. Of course, poor financial planning is the key reason.......

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Could This Be India's Golden Moment?

The first quarter of this year saw India’s economy grow a mere 5.3 percent, the slowest rate in nine years. The single biggest factor has been the hefty increase in benchmark interest rates by the Reserve Bank of India over the past two years—from 4.25 percent in January 2010 to 8.5 percent in January 2012. While the central bank’s motivation has been to keep inflation in check, a direct side effect of the interest rate hikes has been a rapid cool-down of the pace of investments in infrastructure and the manufacturing sector................

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Monetary policy isn't a popularity contest

If the RBI cuts interest rates now, it will prolong the much-needed macro adjustment

 

......The RBI’s approach of not being wedded to a particular rupee level and sensibly avoiding its senseless defence by running down foreign exchange reserves has saved us so far from a bigger disaster. I know it is difficult for people, including some economists, to think of massive exchange rate depreciation as being positive, but in the kind of the macro cross-currents India finds itself, currency weakness is part of the solution, not part of the problem......

.......Frankly, the RBI should not be in the business of doctoring financial markets’ mood to make up for the government’s inaction and incompetence by ignoring the over 10 per cent consumer inflation just before an uncertain monsoon. If it attempts to do that by responding under political pressure, or as if in a popularity contest, or as a prisoner of market expectations, it’ll only be contributing to the very macro instability due to entrenched inflation it is trying to address.

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Ashok Lahiri to get another extension?

Grapevine has it that Executive Director in the ADB Manila Ashok Lahiri is getting one year extension. Extended tenure of Lahiri was to end in July. Earlier the name of Deputy Governor of the RBI K C Chakraborty was in circulation for the post.  

http://www.whispersinthecorridors.in/ReadArticle.php?id=14107&table=whispers

PRERANA SHIVIR for Reserve Bank of India (RBI) – Kolkata

Friday, 01st June, Mystic Managers was invited to conduct a workshop on Stress Management at RBI premises for RBI employees at Kolkata. Mystic Coach Abhishek conducted Yoga and Pranayam based theoretical and practical session for more than 25 participants. The most common reported ailments were Joint Pain, Indigestion, High Blood Pressure, Acidity and Obesity. Most of the participants were struck by the precise and scientific approach with which Abhishek explained & demonstrated Yoga postures. RBI has requested Mystic Managers to conduct another session in June itself for those who could not attend that day. Abhishek was ably assisted by Mystic Trainer Shibnath Basak. 

http://mysticmanagers.com/mysticpages/?p=35

Padmanabhaswamy temple-model security for RBI

The Regional Office of the Reserve Bank of India at Kochi could soon be provided a five layer security cover like the Padmanabhaswamy temple in Thiruvananthapuram in view of the increasing risk to its currency crest.  The Kochi police is understood to have worked out a detailed action plan for carrying out evaluation of the security measures necessary. RBI General Manager, C.V. George had at a security review meeting in Kochi last week asked for more security and also urged the police to put an end to unauthorised parking in front of the bank. He made it clear he did not want private buses halting near it either, fearing this could provide a cover for intruders. ...........

 

Read - The Asian Age

Rs 4 crore shredded notes seized in Bellary

.....Bellary superintendent of police Dr Chandragupta told HT the RBI’s normal practice was to shred old notes or those with some wrong prints and dump them in its yards. Such notes were used for paper making, which Sreenivasa did, he added. “However, a team has been to Indore to verify the facts given by him. We have been in touch with the RBI and they have the same opinion of the factory owner.....

Read - Hindustan Times

15 of 21 bankers take fake bill for real

It happened at a recent training programme attended by managers of urban co-operative banks in the state 

Bangalore : If you think counterfeit notes can't easily make it to our banks, then here's a shocker for you. A test conducted during a recent training programme for bank managers saw 15 out of the 21 participants approving a fake note of Rs 500 denomination. The programme was organised at the Regional Institute of Cooperative Management to train managers of urban co-operative banks from different places in the state and to update them on banking-related issues, especially identification of forgery. The test was done in two rounds. In the first round a genuine Rs 500 note was shown to all 21 participants, and all of them approved it as original. In the second round, a counterfeit bill of the same denomination was shown, but 15 of them said it was original. “We were surprised by the outcome of the test,” said Phaneendar B N, a forensic expert on documents and handwriting who was one of the trainers at the programme. “We gave each of them two notes to examine as they deal with such situations everyday. Only six of them managed to identify the counterfeit.” The officials failed to detect the fake water-mark, a fake embossing of the number 500 behind Mahatma Gandhi's image below the number 500, fake silver stick, and a fake superimposing image of number 500 above the national emblem. “If this is the situation in urban cooperative banks, how will it be in rural banks and cooperative societies,”.................

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Financial studies set to become part of school curriculum

......Mr Sukumaran added that the capital market regulator is taking the lead in co-ordinating with other regulators, such as the Reserve Bank of India, the Insurance Regulatory and Development Authority and others. “The biggest challenge is that the school syllabus has so many different subjects. We are trying to examine if financial education can be embedded into the existing school curriculum. If you are looking at comprehensive financial literacy then we need separate text-books,”.......

 

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Financial inclusion progresses amid viability challenges

.....Financial inclusion is the process of ensuring access to appropriate financial products and services needed by weaker sections and low-income groups at an affordable cost by mainstream institutional players. The number of no-frills savings account with an overdraft facility has increased from 13,000 in 2010 to 15.20 lakh in 2012, according to a presentation made by Dr K. C. Chakrabarty, Deputy Governor, Reserve Bank of India, at a recent summit. As part of the financial inclusion process, banks have opened 3,171 rural branches in the last two years. To encourage banks to open branches in the rural areas, they are permitted to freely open branches in tier III to tier VI centres, subject to reporting to the RBI......

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My Mobile Payments launches mobile wallet service in India

.......“In a country like India where mobile phones are more widespread than the financial systems, mobile payment is the next big alternative payment method. MOM does all paperless transactions and it is in line with RBI’s vision of making 70 per cent of the financial transactions paperless by end of 2012.”.......

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India output growth flat, adds to BRIC straggler's gloom

.....That has spurred expectations the central bank will cut its repo rate by 25 basis points (bps) to 7.75 percent next Monday, adding to a 50 bps cut in April. But the RBI faces tough choices. Several economists warned that a rate cut without policy measures to reduce supply bottlenecks will drive inflation higher. "Monetary easing to boost aggregate demand without a supply response will prolong the fight against inflation," said Rajeev Malik, senior economist at CLSA Singapore.........

 

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In another breather for telcos, spectrum mortgage gets RBI nod

........Other conditions put down by RBI include a robust methodology to discover the market price of spectrum and a margin to take care of downward fluctuations in prices and a credible valuation methodology to value spectrum reflecting the true realisable value of the airwaves. Further, in case of default by a borrower, the bank should have the unfettered right to sell, transfer, assign exchange or dispose of the spectrum, without any restraining condition, the ministry has said. Also, in case of cancellation or revocation or voluntary surrender of telecom licence before the realisation of full dues, the right on spectrum should be with the lenders, it has added.................

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Finance ministry preparing new policy road map for banking sector

......The North Block has already begun discussion with the central bank on the framework that will prescribe profit, capital adequacy, size and any other condition it deems fit for such banks to graduate into full-fledged banks. "We have written to the RBI asking for a clear roadmap for the smaller banks that want to expand," a senior finance minister official told ET...............

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Free all e-banking transactions from charges

.....Addressing the chief executives of public sector banks and financial institutions here on Tuesday, the Finance Minister appreciated the recent decision taken by Oriental Bank of Commerce to waive all charges for Net-based real time gross settlement (RTGS) /national electronic fund transfer (NEFT) transactions up to Rs 1 lakh. He said, “I am confident that all the public sector banks would follow this excellent initiative. I would also urge upon the Reserve Bank of India to proactively work on this front and to see that all electronic banking transactions are possible without any charges being levied.”......

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Banks told to cut NPAs

..............“I urge you to deploy various tools at your command for containing and rolling back NPAs in accordance with the guidelines of the Reserve Bank of India,” .................

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Public sector banks - 2: Brazen quixotic and thoughtless directives from Delhi

....Notwithstanding the fact of substantial private shareholding in PSBs and the managerial autonomy  granted to them in 2005, the central government’s power to give direction to banks in regard to matters of public interest, after consultation with the RBI derived from the Banking Companies (Acquisition and Transfer of undertaking) Act 1970—in short Bank Nationalisation Act 1970—remains intact.The nature of consultation with the RBI is not clear nor is it clear whether the government could overrule RBI’s advice in matters where the RBI is professionally competent. Be that as it may, in the recent past, the ministry of finance, Department of Financial Services (DFS) has issued a number of directions, advisories and directives to PSBs........

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The RBI needs to act

............There is also a strong case that the RBI should be ready to act in anticipation of a possible catastrophic event emerging from Europe. The implications of a disorderly exit by Greece from the euro for the banking and credit system are far from clear. If credit were to dry up across the international financial system, as it did following the collapse of Lehman Brothers in 2008, the RBI should be ready to cut rates sharply. After Greece’s next round of national elections, the future path of the euro will become clearer; but they are scheduled for Sunday, and the results may not be known in time for Monday’s credit policy. The RBI is, thus, faced with a dilemma.............

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FE View: Up to poor RBI now

..........They are stuck because of what, in short hand, is called 'policy paralysis' – the government's inability to give corporates land, to get coal allocation, environment clearance, and so on. How an interest rate cut by RBI can fix this is anybody's guess. Don't hold your breath

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RBI cutting rates not the right solution now: HSBC

.....In my view, it wouldn’t be the right solution to the growth problem because that has to come from supply side reforms, from broader structural reforms. But you could argue that there is somewhat more pressure on the RBI to deliver a rate cut. So, I would say that the possibilities of a rate cut are quite high this time around......................

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Banks' CRR cut demand gets government support

...........Interestingly, SBI’s demand for CRR cut was also supported by the government, owner of the public sector banks. “Banks are saying the best way is to cut CRR. This is also appropriate from the point of view of Basel-III. Banks can pass on the benefits to customers. As owner of public sector banks we can say banks would welcome a one percentage point cut in CRR, but ultimately the decision will be taken by the Reserve Bank of India. Unless interest rates are lower, there is difficulty in having higher growth rate. Today higher interest rate is feeding into inflation,” Financial Services Secretary D K Mittal said.................

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Why RBI should lower policy rates

.....The data tell us that while the economy has slowed down, prices continue to be sticky. The RBI did say in the past that it would not mind sacrificing a bit of growth to bring inflation under control. But the growth numbers for 2011-12 would surely have been a source of discomfort to RBI. In a recent interview, the RBI Governor, Dr D. Subbarao, pointed out that given the inflation dynamics in the economy, 7 per cent may be the potential growth rate. The implicit argument is that 7 per cent growth would bring down inflation to more acceptable levels. This approach, of effectively curbing growth, delayed the rate-easing cycle by almost two quarters, before its fallacy became evident......

 

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Cut lending rates for recovery

......We hope the Reserve Bank of India (RBI) will continue to ease to support growth on June 18. Given April 17’s 50-basis point cut, it may be too much to expect another repo rate reduction, especially as RBI had warned that the room for further easing was limited. No matter. It is just as critical that RBI Governor D Subbarao cut the cash reserve ratio to normalise money growth. After all, until liquidity improves, banks will find it difficult to cut lending rates even if the RBI cuts policy rates. Unless lending rates come down, growth will surely fall short of our modest 6.5 per cent this year, forget the RBI’s 7.3 per cent. What about inflation? We do expect it to pierce.................

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S&P's unfair comparison

This refers to the report “India may be the first fallen BRIC angel: S&P” (June 12). There may be some substance to the warning signals contained in the rating agency’s report. But the agency has done a disservice to players in financial markets – who still factor in the views of Standard & Poor’s (S&P) in their decision-making process – by openly airing partisan political considerations of its rich masters in a report that should have been a professional assessment of financial stability aspects. In terms of country representation or share in world GDP, Bric (Brazil, Russia, India and China) economies form a small group and India should not be too bothered about the kind of comparisons S&P has made. The rating agency could do well to infuse some standard in its assessments that should apply uniformly to similarly placed nations. It is better to compare comparables. Finally, India should have its own rating agency of international repute. Finance ministry releases alone will not be enough to counter “judgments” like the one being passed by the extended arms of external interests.

M G Warrier Mumbai

...and dubious timing

The timing of S&P’s report makes one doubt the rating agency’s “objective”. The issues of dual power centres in the government and political roadblocks to “so-called” reforms are not new — we have been facing these for almost eight years. There is no apparent or immediate trigger for the rating agency to come out with such a report.

N Ramamurthy Chennai  (BS)

The story of India’s falling forex reserves

Echoing former Reserve Bank of India (RBI) governor C. Rangarajan, Ashima Goyal, a member of the central bank’s technical advisory committee, has called upon RBI to use foreign currency reserves to support the rupee................

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No-frills accounts rise over two-fold in last two years

.........The RBI has launched the financial inclusion programme to provide financial services to people in unbanked areas. RBI's approach to financial inclusion is aimed at connecting people with the mainstream financial institutions like banks, the apex bank said. "Goal of financial inclusion is better served through mainstream banking institutions as only they have the ability to offer the suite of products required to bring in effective or meaningful financial inclusion," RBI said..................

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Credit cards need better regulation

....Who will come to the rescue of the aam aadmi? A bank cannot be allowed to suck the blood of the common man in the form of interest. It will not be out of place to mention here the RBI directive on interest rates. It stipulates as follows: “Though interest rates have been deregulated, charging of interest beyond a certain level is seen to be usurious and can neither be sustainable nor be conforming to normal banking practice. Boards of banks have, therefore, been advised to lay out appropriate internal principles and procedures so that usurious interest, including processing and other charges are not levied by them on loans and advances.”.....

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RBI asks banks to allot unique customer IDs

............The RBI said that increasing complexity and volume of financial transactions require that customers do not have multiple identities within a bank, across the banking system and across the financial system. To overcome this, it is important to pool information pertaining to different account holders in a centralised database.

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Gold loan firms to form self-regulatory body

Gold loan companies, which have been under the regulatory scanner for alleged malpractices, are coming together to form a self-regulatory organisation (SRO) to adopt fair-trade practices, and also to represent their case better with the Reserve Bank of India (RBI).......

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JK Bank surpasses target in priority sector lending

.........The meeting under the chairmanship of DDC, Kupwara, reviewed achievements under Annual District Credit Plan 2011-12. MLA Lolab, Abdul Haq Khan, MLA Langate, S A Rashid and representatives of Reserve Bank of India and NABARD were present in the meeting.........

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RBI's holding of gilts rising

.......Ever wondered how the government borrowing programme sails through so easily? Well, the RBI lends a helping hand. The RBI's holdings in gilts, or government bonds, have risen by almost two percentage points to 14.4 per cent in the six months ended March 31, 2012. The holdings have trebled from lows of 4.8 per cent as of March 2008......

 

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CBI court permits Ketan Parekh to go abroad again

A special CBI court in Ahmedabad on Tuesday granted tainted stock market trader Ketan Parekh, prime accused in multi-crore securities scam, permission to visit United Kingdom (UK) for two months. The permission was granted by additional chief judicial magistrate H S Khutwad based on a application by Parekh who is also main accused in the Rs 1,200 crore scam in the Madhavpura Mercentile Cooperative Bank (MMCB) here, which has led to closure of the bank. The RBI had recently canceled the banking licence of the MMCB, nearly 11 years after the multi-crore scam came to light.........

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Job alert: SBI to hire 9,500 employees

The country's largest bank SBI has said it plans to hire 9,500 employees this fiscal and its main thrust will be on retail banking in the coming years.....

 

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Broad view of small pictures

REGIONAL ECONOMY OF INDIA — Growth and Finance: Edited by Deepak Mohanty

.....The Reserve Bank of India (RBI) may be proud of its achievements in establishing the Department of Statistics and Information Management (DSIM). In a speech delivered at the Annual Statistics Conference at Chandigarh in March this year, Dr. Mohanty explained the role of the DSIM within the RBI and how “The statistician in the Reserve Bank performs a multifarious role.” It encompasses collection, compilation, analysis and dissemination of information relating to monetary, banking, corporate and external sectors. The RBI's web-enabled Database on Indian Economy (DBIE) is a gold mine for researchers both within the country and abroad. While the research undertaken in the departments of the RBI located in Mint Street are well known through publications, Reports, Occasional Papers, etc., not much is known about the work done in the regional branches. This book is an attempt to disseminate research done by some of them......

Read - The Hindu

Firms take business correspondent route to gain banking expertise

......Back in August 2010, RBI had first mooted the idea of allowing corporates to act as BCs in a discussion paper, counting on their ability to employ “larger resources, higher organizational strength and financial backing” as a boost for the bank agent model. Moreover, big companies would be wary of reputational risk and hence efficiently monitor their agents, the regulator had noted. A month later, on 28 September 2010, RBI allowed their entry. Both experts and stakeholders caution that the challenges are substantial..........

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UP directs banks to be alert on fake currency

.....The minister also accepted that cases of fake notes from bank ATMs have also come to the light and added that suggestions have been given to the RBI for not allowing money into ATMs manually and deploy guards there after their character verification..............

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Govt agenda to dictate PSU banks' board meets

Finmin asks nominee directors to highlight key issues of financial inclusion, rationalisation of branches and priority sector lending

Government nominees on the boards of public sector banks, financial institutions and insurance companies might now dominate the agenda at their meets. Concerned that the boards give a slip to the government’s areas of interests, the finance ministry has instructed all its nominees to prepare a list of key issues that should be discussed before moving on to the agenda set by the company.................

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Rising NPAs

This refers to “Rising bank bad loans, slowing credit growth” (Business Line, June 10). Recently, the RBI Deputy Governor, Mr K.C. Chakrabarty, said that the interest rates are “not too high” to affect “corporate” growth. He was more concerned with the rising bank bad debts. Even the new private sector banks had relatively high gross NPAs at 2.18 per cent in March. The SBI and nationalised banks still have higher NPAs as a percentage of gross advances. Good credit appraisal, not lowering policy rates, helps reduce NPAs. There is considerable scope for tightening appraisals and intensifying due diligence. NPAs rise when big loans extended to large industries remain in arrears. There is near unanimity that liquidity in the system is not an operational hitch in “transmission mechanism”. The banking system suffers from its loans to sectors such as aviation and infrastructure, and their return will be a long-term story. With slowing growth, the RBI believes that despite inflationary pressures, there is “room to lower rates” to induce growth, when actually the lending and recovery mechanisms need strengthening.

- K. U. Mada Mumbai

Sail through common exam for public sector banks

.....Banks are one of the biggest recruiting agencies in the country and there is a great response for the managerial jobs for the fact that they are open to candidates from almost all the streams. Instead of attending the tests of all the banks individually earlier, the aspirants now have to take the Common Written Examination conducted by the Institute of Banking Personnel Selection (IBPS) for entry into 19 public sector banks. The next IBPS exam is just a few days away, and will be conducted on June 17.........

Read - The Hindu

Obituary

KOSHY GEORGE (80) Retired Officer RBI, Chennai. Expired on 9-6-2012. Phone: 26472376

Hindu

Bank loans for vocational courses soon

In a landmark of sorts, the Indian Banking Association (IBA) has decided to extend the ambit of its Model Educational Loan Scheme to include vocational education and training. This means that all banks, which are associated with IBA, as well as a other banks that RBI may include, will now also offer education loans for students in the vocational sector..................

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Microsoft helps BoI meet RBI compliance directives

Bangalore, June 11: Bank of India (BoI) has partnered Microsoft to deploy Microsoft Active Directory Rights Management Services (AD RMS). The company in a release said that the project will help it to safeguard corporate digital information and enables safe and secure banking operations. Microsoft AD RMS is currently available for 100 users of BoI and will be extended to about 15,000 users in the next phase of deployment. “By being in-line with the RBI data security guidelines, it ensures safety and security of corporate data,’’ said Mr Sameer Ratolikar, Chief Information Security Officer, Bank of India. 

HBL

Timothy Geithner to visit India later this month for economic talks

 Aiming to further expand the bilateral economic engagement, US Treasury Secretary Timothy Geithner would travel to New Delhi and Mumbai later this month for the third annual meet of the US-India Economic and Financial Partnership. Geithner would be in New Delhi on June 27 and would travel to Mumbai on June 28. In Mumbai, he would meet the Reserve Bank of India (RBI) Governor, Duvvuri Subbarao, and the business leaders from a variety of industries.......................

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No credit for small farmers

The M.V. Nair Committee has defined agriculture too broadly, making it easier for banks to avoid riskier lending to the small and marginal farmers.

Despite having only a 15 per cent share in GDP, agriculture still employs more than 60 per cent of India's rural population. The Centre continuously boasts of doubling credit to this sector and providing interest relief of two per cent for prompt payments, and the like. But a look at the Reserve Bank of India statistics on direct credit for farmers during the past five years reveals that there is a fall in actual money going to farmers..................

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"My View on "RBI's KC Chakrabarty counters Gokarn ...":

The comments of  Mr.Warrier are excellent. Deputy Governors should be clearly told by the Governor that they should express views in public only on matters pertaining to the departments handled by them. This would avoid contrary views being expressed by the Bank through their Deputy Governors. Government officials like Economic Affairs Secretary and Economic Adviser to the Finance Minister have also been expressing views on interest rates which is the domain of the RBI. Finance Minister should advise them to stop expressing their views on matters which should come from the Governor. It is no use in Government saying that RBI is an autonomous institution and then allowing its officials to cause embarrassment to the Governor. Of course, Governor has been pursuing policy as he considers best and has least been affected by the views of the Government officials.
Kudos to the Governor.

A. Chandramouliswaran, Former Executive Director