VITALINFO

Sunday, July 22, 2012

Goodbye To Diplomacy

A Reserve Banker in retirement has given an unusually frank and alarming picture of policy errors and their dire consequences. But his main point is cloaked in government-speak

There was a time when Rakesh Mohan held interesting views and expressed them in a forthright manner. That got him into some trouble. His short stint in the finance ministry was not a success. But eventually, the masters of bureaucracy found a way of taming him: they made him Deputy Governor of the Reserve Bank. He was in charge of monetary policy, but also spent much time chairing meetings, posing with visiting functionaries and giving sermons to bank trainees. It was difficult to be rash in the funereal environment of the Reserve Bank; but just in case he might break out, Mohan was given a strong staff of a secretary and two research assistants to keep him on the straight and narrow path. The precautions worked; it is difficult to think of a memorable speech from Mohan in his deputy gubernatorial role........

Read - Businessworld

‘Be helpful and courteous to others’

.......“Keeping your ears open is the best way to gain knowledge. We should always be helpful and courteous to others,” he said. Five toppers in Standard X CBSE Board Examinations at the RBI Staff Quarters School, Besant Nagar, — Sahla Fathima Thalappil, B.Aparna, P. Nishitha, A.R. Aiswarya and Yasmin Aphrose — were honoured on the occasion. K. Krishnamurthy, secretary, RBI Residents Welfare Association delivered the vote of thanks.

Read - The Hindu

My View on ‘Govt and banks — a con game at some level’

One wishes, those responsible for policy formulation in Delhi listen to the sane and balanced observations loaded with common sense the veteran central banker Dr Y V Reddy has made in this interview. Reinforcing his own views drawing from the experiences of I G Patel, he has conveyed the message that solutions to India’s economic problems need to be country-specific. Having accepted the model of ‘mixed economy’, India had gone a long way developing several industries and institutions in public sector by the time the private-sector-oriented reforms were introduced in 1991. It was a genuine slip that policy-makers at the helm failed to take advantage of the opportunity to smoothly blend the initiatives in public and private sectors in the initial stages. An impression was given that private sector was to compete with public sector and not to complement its efforts. In the process, private sector managed to corner areas where quick results were possible and left all ‘dirty’ work for public sector. We have come a long way without looking back and the present pulls and pushes do not allow us to sit back and think dispassionately. In such situations, listening to veterans like Dr Reddy will do well. We have to concede that whether in public sector or in private sector, for ensuring overall progress, the country’s resources have to be managed judiciously and that is the context in which Dr Reddy bats for ‘adequate regulatory mechanisms’.

- M G Warrier, Mumbai

My View on "If I was RBI Governor, I would cut rates: Kaushik ...":

Luckily for the economy he was not. The whole problem in the economy is with the Government and it has miserably failed to contain inflation, fiscal deficit, current account deficit, subsdies, corruption, black money, and mal administration in the area of production,procurement,storage,transportation and marketing of particularly food products. It is easy to blame RBI as it does not enjoy full autonomy to give it back in the same tone. Had he been RBI Governor he also would have faced the same embarassment as the presnt Governor is facing beacuse of Government's apathy, mismanagement and interference where it is not expected or required.

- Dr. T.V. Gopalakrishnan

Economy leaps, but the old limp - K Kanagasabapathy

................The legislation is pending for several years. Within the organised government sector itself, and between private and public sectors and between small and medium and large sectors, no uniformity of approach in policy is lacking. For example, the Reserve Bank of India, an organisation attempting to protect people from the evil of inflation, is struggling to gain parity in pension matters vis-à-vis its owner, the Government. The plight of the organised sector is bad enough; there is no need to talk about the plight of the old in the unorganised sector and in rural areas................

Curb offering gold to God, or as dowry: RBI’s Chakrabarty

........“Gold has no intrinsic value and yet the demand for it keeps rising. We must remember that offering gold as dowry or to God must be reduced. Indians must offer 2 karat gold instead of 24 karat for religious purposes,” Dr Chakrabarty said at a regional banking summit. Emphasising the need for a social revolution in India, the Deputy Governor said “the culture of wearing gold ornaments was when we were a rich country but now that we are poor, we cannot continue the same.” He observed that the yellow metal cannot fetch returns without selling it. Usually, selling gold is the last resort for Indians.........

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Chakrabarty defends higher priority sector target for foreign banks

Mumbai: Defending the decision to put foreign lenders with a substantial presence at par with their domestic counterparts on priority sector lending, Reserve Bank Deputy Governor KC Chakrabarty Saturday said the MNC banks must play their role in the nation's development. "You must participate in the development process of the country if you want to think big," Chakrabarty told reporters on the sidelines of an ICAI event here....................

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We look into all aspects of entities regulated by us: RBI

The Reserve Bank today said it is looking into all aspects of the entities it regulates, a comment that comes in the wake of HSBC being pulled up by the US Senate for failing to prevent money laundering activities. In response to a query on the money laundering issues involving HSBC, Reserve Bank of India Deputy Governor K C Chakrabarty said that as a regulator, RBI looks into all the aspects of the entities it regulates...........

Read - ET

Meeting RBI panel recommendations won’t be a challenge: S.L. Bansal

S.L. Bansal, CMD, Oriental Bank of Commerce, speaks to NDTV Profit on the RBI panel’s recommendations on the new potential regulations for restructures loans.....

RBI's additional provisioning norm quite steep, says BoB

Q: The Mahapatra Committee on corporate debt restructuring, the working group has put out its report and one of the recommendations is that the provisioning for standard assets after they are restructured should be 5% up from the current 2% in two stages, 3.5% in the first year and 5% in the second year. What would be your reactions to this? Would it be a lot of pain?

A: It looks to be quite steep at a time when there is a lot of restructuring happening in the present economic scenario amidst the slowdown that has happened in various sectors and the policy logjam or whatever is happening. So 5% will be quite a burden when there is a lot of pressure on profits and the capability of the banker. But from the RBI's angle, they perhaps feel that the present economic slowdown and the likelihood of the account slipping into NPAs at some point of time maybe a required cushion to be built into the restructured accounts, into the asset. But we must not ........

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Corporates, small units may flock to banks to restructure loans

......Once the RBI disallows regulatory forbearance, banks may balk at restructuring loans as they will not have the benefit of relaxed asset classification and provisioning norms, say bankers. The RBI working group, which is working at aligning prudential guidelines on restructuring of loans in India with international prudential measures, has said that in view of the current domestic and global economic situation, the RBI may get banks to adopt the global best practices on loan restructuring after two years.......

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Now, forgers shift focus to Rs 1,000 notes

Counterfeiters are increasingly pushing fake notes of higher denominations into the market, with a 54% rise in detection of fake Rs 1,000 notes in the banking sector, the Reserve Bank of India (RBI) has said. The total value of fake currency seized by banks in 2011-12 amounted to Rs 24.7 crore...........

Read - TOI

Indian national held with banned Indian notes

BHADRAPUR: An Indian national has been arrested for carrying banned Indian currency notes. Police held the Indian national for carrying 540 notes of Rs 500 denominations. Use of Indian currency notes of Rs 1,000 and Rs 500 is banned in Nepal. Rama Kolti of Siligudhi, India, was arrested from Bhadrapur Aiport while he was all set to fly to Kathmandu on Thursday. He has been sent to Kathmandu for necessary actions, said police.

The Himalayan Times

India’S Journey on the Road to Financial Inclusion - Alxa Robert

.....A recent directive from Reserve Bank of India has acknowledged the need of stepping up opening of branches in rural areas so as to improve banking penetration and financial inclusion. Banks have been advised as part of risk management to adopt ICT solutions including biometric identification of the customer. The domestic Scheduled Commercial Banks (SCBs) have been directed to allocate at least 25 percent of the total number of branches to be opened during a year to unbanked rural centres (Tier 5 & Tier 6 centres). When it comes to insurance, we have financial exclusion on an even larger scale. Less than 20 percent of the population has any kind of life insurance...........

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Women engaged in MFI biz have higher income: Study

Kochi : .........The main aim of the study was to understand the key issues in micro-finance through various models, among others, SCMS Group Director Radha Thevannor said, while releasing the study here. "Women households engaged in micro enterprise activities were found to have higher income in India and Ghana on account of certain favourable policy directions from government agencies like RBI and organised institutions like SEWA and Kudumbasree," T Arun, Director, Institute of Global Finance and Development, Lancashire Business School told reporters..........

Read - Manorama

When to prepay home loan

....With the Reserve Bank of India changing the loan-to-value ratio from to 80 per cent, buyers have to cough up at least 20 per cent of the property price. In addition, the apex bank has also said that banks should not include registration and stamp duty fees in the loan-to-value, thereby increasing the demand for cash substantially. And then, there is the loan repayment aspect as well which one has to provide for a number of years..........

Read - BS

Saturday, July 21, 2012

If I was RBI Governor, I would cut rates: Kaushik Basu

Gautam Chikermane: If you were RBI governor, would you cut rates today?

Kaushik Basu: If that happened, I would have far more access to research than I have now. So answering this question in advance is a hazard, like cutting interest rates in the middle of an inflation. But, on balance, my answer is yes. I would risk the hazard and cut rates.

Read - Hindustan Times

RBI officials depose before court

Coimbatore, July 20 (PTI) Two senior RBI officials today deposed before a Court here, which is trying the Rs 839 crore Pazee Forex Trading Scam, in which thousands of investors were cheated. H C Rathi, AGM, RBI, Mumbai and Chandini, DGM, RBI,Chennai told the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) (TNPID) Court that RBI had not filed any complaints or cases, including under Foreign Exchange, against the firm.....................

Read.........

Inflation due to govt, industry — not RBI - M.Y.Khan

...........We have to realise that inflation is a baby of multiple factors such as: GDP growth, excess money supply, short supply of goods in the market, manipulation in the market, misconceived expectations, exchange rate movement, depreciation of the Indian currency due to large current account deficit, cost-push factor, rise in per capita income and increase in demand due to shifting of population to higher income bracket, and decline in poverty ratio.The Reserve Bank does not have multiple instruments to control all these variables. It is the government which has to grapple with the complexities of inflation, rather than hold the Reserve Bank responsible for the rise in inflation rate.

Read............

‘Govt and banks — a con game at some level’

Dr Y.V. Reddy makes a public appearance whenever he is delivering a lecture or writing/releasing a book. When he was in Mumbai earlier this week, to release a compilation of I.G. Patel’s essays, it was a good opportunity to get his views on some current issues. Retirement from the Reserve Bank of India has not dimmed his memory, his quick thinking or his gift of picking the right phrase to articulate his thoughts. He continues a busy career as a globe-trotting advisor even as he holds an emeritus professor’s chair at the University of Hyderabad. Most recently he flagged a number of important issues in his landmark lecture a month ago (Per Jacobsson Foundation Lecture at Basel). He makes reference to some of those issues in this interview...........

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Golden escape route

.....Although it is true that a third of the global demand for gold is from India, the extraordinary penchant for gold (in preference to other forms of savings) wasn’t always there. In 2001-02, for instance, the fresh money that went into small savings avenues was more than three times the value of gold imports; now gold pips small savings. Shares and mutual funds too have been preferred options in some past years. The dramatic increase in the preference for gold is therefore new. And the former Reserve Bank governor, Y V Reddy, put his finger on the problem last week when he said at a lecture in New Delhi that the system has simply not given savers a fair deal.........

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RBI unlikey to ease monetary policy soon

...."In the likely absence of any meaningful fiscal consolidation, RBI will be reluctant to cut interest rates, as without effective fiscal/structural measures growth may not be helped by lower rates while inflation could shoot up."........

Read - ET

Reserve Bank of India plans to tighten the debt restructuring norms

.....RBI working group headed by Deputy Governor Anand Sinha has said that RBI could do away with the regulatory forbearance regarding asset classification, provisioning and capital adequacy on restructuring of loan and advances in line with the norms followed internationally. This would means that banks will have to classify an asset as substandard and make provisions on it the moment it is restructured........

Read........

RBI to issue Rs5 coins bearing ICMR emblem

The Reserve Bank of India (RBI) will shortly put into circulation rupee five denomination coins bearing the emblem of Indian Council Medical Research (ICMR)........

Read..........

Fake notes with face value over Rs 101 cr detected: RTI reply

.....The RBI said it has instructed all scheduled banks that bank notes in denominations of Rs 100 and above should be reissued by the banks over their counters or through ATMs only if these banknotes are duly checked for authenticity/ genuineness and fitness by machines........

Read - BS

Printing that small note costs big money

....In response to the RTI query on the average life of currency notes, the RBI said, “No study has been done so far in this regard. However, conventional wisdom indicates that smaller denomination notes have a lower average life than banknotes of higher denomination (100, 500, 1,000).” ........

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Eulogising mediocrity – from cricketers to RBI governors

...........Anyway, I always listen to central bankers’ interviews with a sense of humour. How the greatest price manipulators in the history of commerce (which is what setting “interest rates” really does) can sit and talk with a straight face about reforms, markets and liberalisation is a great mystery. But the probable answer is that, with the exception of Alan Greenspan, most central bankers are Keynesian in their beliefs and so they are probably just lip-synching. But there is hope! As Reddy showed, once can always learn.

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Personal guarantee must before loan restructuring: RBI panel

.....The RBI had in January set up the panel to review the existing prudential guidelines on restructuring of advances by banks and financial institutions and suggest modifications taking into account the best international practices and accounting standards. The panel, which is headed by RBI Executive Director B Mahapatra, said corporate guarantee should not be considered as a substitute for the promoters' personal guarantee...........

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FII investment in MindTree hits trigger limit: RBI

....The Reserve Bank today said FII investment in MindTree has reached the trigger limit under portfolio investment scheme and purchase of further equity shares of company will require its approval. "...The aggregate net purchases of equity shares in Mindtree Ltd by Foreign Institutional Investors (FIIs) in the primary/secondary markets under Portfolio Investment Scheme (PIS) have reached the trigger limit," the RBI said in a notification today. Therefore, "further purchases of equity shares of this company would be allowed only after obtaining prior approval of the RBI," it said.........

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Priority sector credit rules for large foreign banks, too

....In the draft norms, the banking regulator had said these loans would be classified under the priority sector up to a maximum of five per cent of adjusted net bank credit or credit equivalent of off-balance sheet exposure, whichever was higher. In today’s revised guidelines, RBI removed this cap and said “investments by banks in securitised assets, outright purchases of loans and assignments to be eligible for classification under priority sector, provided the underlying assets qualify for priority sector treatment and the interest rate charged to the ultimate borrower by the originating entity does not exceed the base rate of such bank plus eight per cent per annum.”.

Read......

Divert 40% loans to priority sector: RBI to some foreign banks

Foreign banks with more than 20 branches in India will have to channel 40% of their lending to the priority sector, which includes agriculture and small and medium businesses, in five years, the Reserve Bank of India (RBI) said on Friday...............

Read - Mint

Where are the farmers in the great economy debate?

.........When the RBI Governor refuses to cut rates citing inflation, there’s a collective sigh of disappointment from the business class. The reaction follows the similar pattern when political parties stall bills that certain sections believe could usher in progress..........

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Friday, July 20, 2012

Pushing the RBI

The word “balancing” seems to be a favourite of Reserve Bank of India Governor D Subbarao. Consider the number of times he has used the expression “balancing” growth with inflation management in his monetary policy speeches. So it wasn’t a surprise when, last week, he sought to once again “balance” his views about the finance ministry’s equations with the central bank. A day after advising the ministry to demonstrate exemplary corporate governance by exercising its ownership rights through bank boards, Dr Subbarao said the RBI and the government were not adversaries, that disagreements were natural, and that he would worry if there was complete agreement. Such nuancing of views may be a compulsion of the high office he holds, but the message underlying them comes through loud and clear: North Block has no business being in the business of micro-managing banks................

Read - BS

I wish I was born 15 years later...........

It is indeed remarkable that Dr Subbarao with all his academic achievements (Director, IIT's Gold Medal, First rank in his batch in IAS, later a Ph.d) and then excelling in his career in many positions which he had come to occupy, nay, adorn (proving that he is not merely a theoretician), he is extremely modest. His modesty is genuine unlike that of some of his predecessors. His integrity is another remarkable thing as we have now come to know his file notings/letter on the pricing of 2G Spectrum. The only fault in him as I see is that he is too gentle and too good for this workaday world. He has to be like a Rajarishi when it comes to punishing, as a part of his duty, those who deserve it without feeling happy about it. How I wish I was born 15 years later than I did so that I would have had the privilege of working with him.

- A. Chandramouliswaran, Former Executive Director

RBI to soon launch e-learning package to address ECB queries

The Reserve Bank will soon launch an e-learning package as well as establish nodal offices for banks to address issues related to external commercial borrowings. "The RBI will create nodal offices for dealers. The authorised dealer must get their clarification with nodal offices (in their region) before approaching it," said P K Raut, General Manager, Foreign Exchange Department, RBI in an event organised by industry body Assocham here today.............

Read - BS

RBI to issue Rs 10 and Rs 50 bank notes with rupee symbol

....The new banknotes bearing the signature of RBI Governor D Subbarao will have rupee symbol with inset letter ‘L’, in the Mahatma Gandhi Series-2005. The year of printing 2012 will be printed on the reverse of the bank note.......

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PNB cheque truncation system in Kerala

....As per the cheque truncation system, there will be only one clearing in South India based at Chennai. All the clearing houses in Kerala and other southern States will be connected to RBI clearing cell at Chennai. Thus the cheque clearing process will be quicker and more effective, ........

Read......

No loan growth target for PSBs

......Now, the finance ministry wants banks to focus on increasing their profitability and improving the asset quality. As a result, some new parameters would come in. The finance ministry is holding meetings with each PSB bank chairman to finalise the targets. “The focus this time is on increasing the profitability,” said a PSB chairman and managing director. “We have to emphasise on parameters such as return on asset, net profit per employee, cost-to-income ratio, and staff ratio in branches, among others.”..........

Read - BS

PIL asks if Parliament can enact co-op bank norms

AHMEDABAD: Can the Reserve Bank of India (RBI) regulate banking businesses of co-operative banks? A PIL filed in the Gujarat high court raised this question and claimed that Parliament could not legally enact such laws, which interfere with a state subject. This PIL has been filed in the aftermath of RBI's decision to close down the Madhavpura Mercantile Co-operative Bank Ltd. ............

Read - TOI

Pragati Sahkari Bank penalized

....Pragati Sahkari bank was faulted on the counts of director related advances.The UCB was also found to grant of unsecured loans beyond the stipulated ceiling.Last but not the least the bank was found not reporting frauds to Reserve Bank of India......

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When banks slip

...........In India, anti-money laundering charges are supposed to be investigated by the Enforcement Directorate with inputs from agencies like the Intelligence Bureau and the Financial Intelligence Unit. Yet there are no institutional mechanisms for the sharing of data between these units and even less with those outside, like the RBI...............

Read - Indian Express

Make money on debt

Mirror, Mirror on the wall....... Will interest rates rise or will they fall?

Would it not be fabulous if we could gaze into a crystal ball and decipher what the central bank`s next move would be? Unfortunately, or probably fortunately, such wishful thinking comes alive only in fairy tales. In reality, ambiguity is more the norm than the exception. .......

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RBI directive

THIRUVANANTHAPURAM : The Reserve Bank of India (RBI) has directed the Pathanamthitta-based Popular Finance to not collect deposits from the public. An official press note said here on Thursday that the institution could not collect deposits from the public under Section 45 of the RBI Act. Collection of deposits in violation of the section would invite punishment including imprisonment. People who deposited money with such institutions would be doing so at their risk.

The Hindu

RBI looking into HSBC issues raised by US Senate

The Reserve Bank of India is looking into the issue of non-compliance of anti-money laundering norms by the Indian staff of HSBC raised by a US Senate Committee, a senior finance ministry official said on Thursday. "I am confident that RBI is looking at it (HSBC issue). I am aware of it. They are very conscious of the issue," department of financial services secretary DK Mittal told reporters in New Delhi.

He said the finance ministry would assist the RBI with the required inputs......

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Banks should not be micromanaged by finance ministry

.......So, what about the autonomy of RBI itself? It was not so long back that former finance minister Pranab Mukherjee almost announced the monetary policy a good half an hour before it was unveiled, while speaking at a public event. That says it all. The government must not micromanage banks for the sake of good spirit of an evolving financial system. By doing so, it is also undermining the efficiency of managements in state-run banks, who are professionals with no less ability and conviction than any of their private-sector counterparts to execute business decisions. Finally, India has a central bank. It has time-tested skills sufficient enough to know when and how to do its job. Let’s not spoil the broth with many cooks.

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Indian eco to grow at slowest pace in 10 years

....Economists still believe it will have to reduce rates in coming months, though many have postponed the timing of the next move. They now expect the central bank to keep the repo rate unchanged at 8.00 percent this quarter, before cutting it to 7.50 percent between October and December. The RBI’s hawkish stance on inflation could mean further delays in rate cuts, especially after it indicated at the June meeting that the burden is on the government to revive growth........

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RBI shuns foreign investors and derivatives in favour of structural ALM, says former Deputy Governor

Shyamala Gopinath believes market structure and regulation can be used to create ‘natural’ asset and liability management; approach is superior to managing risks with financial hedges. Central banks need to identify risk items related to the interaction of sovereign debt management, reserves management and monetary policy, and study their vulnerabilities in stress situations on a broad macro-economic basis, if they want to perform successful asset and liability management (ALM) on a national basis, according to Shyamala Gopinath, a former Deputy Governor of the Reserve Bank of India (RBI)..............

RBI shuns foreign investors and derivatives in favour of structural ALM, says former deputy governor - Central Banking

RBI take note: US ‘fiscal cliff’ will affect India too, especially bonds

....The RBI will have to watch out for the progress on the US economy in framing its own policy stance. If the US is likely to go into a mild recession in 2013, India will face its after effects. Revenues from IT service exports to merchandise trade will be hit, impacting the domestic economy. The Indian economy is in one of its worst phases with fourth quarter GDP growth at a nine-year low of 5.3 percent......

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Monetary easing needed to deal with global eco woes: ADB

"Policymakers (in Asia) may need to deploy another round of fiscal and monetary measures to safeguard economic growth and ensure that growth is inclusive," the ADB said in its Asian Economic Integration Monitor report. The report further said that with the weakening of the global economic conditions and uncertain prospects of recovery, the external environment for developing Asia is expected to remain difficult. It is widely expected that Reserve Bank of India (RBI) might slash key rates by 0.25% in its monetary policy review to be unveiled on July 31...............

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Decision on export proceeds only after talks with RBI: Mittal

The Finance Ministry will initiate talks with the Reserve Bank of India on exporters’ plea for continuation of the flexible regime on repatriation of export proceeds. This was stated by the Financial Services Secretary, Mr D.K. Mittal, at an interactive meeting on export credit organised by the Federation of Indian Export Organisations (FIEO) here on Thursday.........

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RBI may cut policy rates by 0.25 percent: Barclays

...........“While the uncertainties regarding the RBI’s near-term policy decisions remains considerable, we remain comfortable with our expectation of a further 100bp of cuts in the repo rate in FY 12-13 (including a possible cut in July),” ...................

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Growth below 7% acceptable; must focus on productivity: YV Reddy

High inflation and high interest rates could mean that growth may remain below 7 per cent for the second year running. But Dr. YV Reddy former Governor of the RBI told NDTV Profit that 6-7 per cent growth does not worry him and what we need to focus on is improving productivity in the economy

Telcos want RBI to relax external borrowing norms

....However, an RBI circular in June limited the scope of telecom companies to raise ECBs by including a clause on export earnings, which gives benefits in raising ECBs to firms with foreign exchange earnings. “Telecom companies don’t have substantial earnings in foreign exchange. This clause would limit their ability to raise ECBs,”........

Read - BS

RBI, gripped by doubts, revisits classic inflation theory

.......At best, monetary policy may have a salutary impact on core inflation – that is, price changes in commodities, chiefly manufactures that are free from volatile elements, food and fuel groups. But, if the headline inflation stays at an elevated level over an extended period of time, as is now the case, monetary measures alone may not be enough. Both the government and the central bank may have to work in tandem to quell the price fever. At home, prudent budgetary policy and growth-promoting strategies can go a long way in lowering the inflation rate. As Chester Bowles, the famous American politician who had served as ambassador to India, observed, “Production is the only answer to inflation”. This is the role of government and then monetary policy can play a contributory role. But, as of now, the RBI is left holding the fort while the Centre dithers. No wonder then that inflation appears to be well entrenched in the economy.

Read - DNA

How to restore trust in banks?

....As former RBI Governor YV Reddy points out in his recent Per Jacobsson Foundation lecture delivered in Basel, we have to rethink the entire relationship of finance to society. We need stability, limits on financialisation and inclusion. Why is public trust in bankers shaken? Ordinary people feel that they are being made to bear the costs of the follies of bankers. In the very banks at the centre of the crisis, bankers still enjoy outsized pay packages. No banker or bank has been prosecuted for any of the lapses connected with the crisis; instead, regulators have been content to impose penalties without even disclosing the details of the malfeasance.......

Read - ET

Home Min bars three Iranian banks from opening India branches

....India, which plans to import 15.5 million tonnes of crude oil from Iran this year, has faced difficulty in finding banks to transfer payments to Iran ever since the Reserve Bank of India in December 2010 dismantled the 1974 Asian Clearing Union mechanism......

Read - Indian Express

PayPal India to play a larger regional role

.....Currently domestic trade operations are not allowed, pending licencing issues with the Reserve Bank of India. "Right now, we are in talks with the RBI, and what we are looking at is that hopefully within a year we should be able to resume domestic trade operations,"..........

Read - The Hindu

Govt plans group for cost-effective credit to exporters

.....The group will have officials of finance ministry, RBI, exim bank, export credit guarantee corporation (ECGC) and public sector banks apart from exporters from federation of Indian exports organisation (Fieo). First meeting of the group will be held next month.......

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79 SME units fall sick a day

....The Reserve Bank of India (RBI) declares a small scale industry (SSI) unit sick if any of the borrowal accounts of the unit remains substandard for more than six months or there is erosion in the net worth due to accumulated losses to the extent of 50% of its net worth in the previous accounting year......

Read - TOI

Thursday, July 19, 2012

Leadership, performance and transformation through personnel management : V.S.Das

Inaugural address by Mr V S Das, Executive Director of the Reserve Bank of India, at the seminar on “Leadership, performance and transformation through personnel management” held at the Jamnalal Bajaj Institute of Management Studies, Mumbai, 15 July 2012

.......In conclusion, let me leave you, with four types of knowledge that I feel are imperative for weaving together the ideas subsumed in the theme of today’s Seminar: (i) Self-knowledge or personal values and goals; (ii) Social Network Knowledge that involves those who surround you daily; (iii) Organizational Knowledge that extends to knowing and understanding people at all levels at the work-place; and (iv) Contextual Knowledge which engages myriad other stakeholders that your organization directly or indirectly works with......

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Statistics in the Reserve Bank of India - Deepak Mohanty

Welcome remarks by Mr Deepak Mohanty, Executive Director of the Reserve Bank of India, on the occasion of 6th Statistics Day Conference, Reserve Bank of India, Mumbai, 17 July 2012

........The Reserve Bank’s policy canvas is large and goes beyond the rubric of a traditional central bank. We have the primary responsibility of compilation of banking and financial statistics as well as balance of payments statistics. We have also been compiling corporate finance statistics. We have been keenly aware of the need to constantly improve the statistics in terms of coverage, quality, frequency and level of dissemination.......

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Will 90% NBFCs lose RBI registration due to new norms

India's majority of non-banking finance companies (NBFCs) may be freed from the regulatory clutches provided RBI implements one of the recommendations made by Usha Thorat Committee, which suggested maintaining a minimum asset size of more than Rs 50 crore along with a net owned fund of Rs 2 crore; for registering any new NBFC...................

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RBI holds outreach program

Vows 100% financial inclusion with JK Bank support

Srinagar, July 18: As part of its financial inclusion, Reserve Bank of India, Jammu office, today organized an outreach programme at village Theeru in Ganderbal. The programme was presided over by K K Saraf, Regional Director, RBI, Jammu. Showkat Ahmad Mir, DDC, Ganderbal, was the chief guest and Rajeshwar Rao, Banking Ombudsman, RBI, New Delhi was the Guest of Honour on the occasion.................

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Bank employees stage dharna

....“Core jobs should not be outsourced. The word ‘core jobs’ is not well defined by the Reserve Bank of India. Without permanent jobs, there will be no sense of belonging or security for the employees,”....

Read - The Hindu

Financial SMS provider SWIFT to expand footprint in India

....."We are working with RBI and eight banks to offer a range of services including transaction networks covering local banks, securities clearances and settlement as well as other electronics mode of transactions," .......

Read - BS

Understanding safety of bank deposits

....Deposit Insurance and Credit Guarantee Corporation (DICGC) a wholly owned subsidiary of Reserve Bank of India (RBI) is the institution which has the responsibility of insuring deposits of customers made in banks. Deposits made by a customer in a bank upto Rs. 100000 is insured by DICGC provided the bank has availed deposit insurance from DICGC......

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Talking money

The phrase “paisa bolta hai" (money talks) is common in India as a euphemism for the bribe people pay to get any work done, especially among the public service providers. Now, the Reserve Bank of India has co-opted the phrase as part of a wider education effort on counterfeit currency. “Pehchano paise ki boli, kyunki paisa bolta hai“ (understand the language of money, because it talks), the central bank says on the website paisaboltahai.rbi.org.in. The site gives the specifics of all currency notes that the central bank prints and is aimed at dealing with counterfeit currency

Control with care

Apropos the report “Govt and RBI are not adversaries: Subbarao” (July 17), the RBI Governor has rightly suggested that the government should refrain from micromanaging public sector banks. At the same time, one should also consider that in these times of economic turbulence, when any crisis in the banking sector could prove a disaster for the country’s economy, the government would prefer to keep a close watch on the sector’s performance. However, this does not call for interference in the day-to-day operations of public sector banks since that will only stymie their performance. Operational decisions can be left to individual banks, since there is sufficient competition in the market to enforce the necessary discipline. The present situation, however, calls for the RBI to review individual/group credit exposures and prescribe ceiling norms for credit to major sectors, so as to avoid fallouts from concentration risk. The RBI or the government may step in with directives for those banks in which they notice a continued deterioration in key parameters such as asset quality, profitability and so on.

- V Sridhar Kolkata (BS)

Bite the bullet

.....The government must also use its influence with the Reserve Bank of India in order to introduce some much-needed monetary expansion. The RBI has been excessively cautious — or biased — in its policies. It seems to have given undue weight to the need to control prices, and done very little to take steps to ensure availability of credit. The pronounced slowdown in the economy cries out for a fair bit of monetary expansion......

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Decoding the supply puzzle

This refers to the news report about the RBI governor recommending a producer price index to measure the selling price of goods and services as a more effective policy tool. Such an index will help check at what prices the products and services are being sold to the end consumer. This move will help check the economy’s supply side, which I think is the main reason for inflation. This index will also help identify the role of middlemen in the supply chain.

Anand Wadadekar Pune (BS)

Tools of change - M G Warrier

This refers to the report “RBI wants a producer price index for inflation” (July 18). Earlier, too, the RBI governor had expressed concern over multiple tools being used by the government and various agencies to gauge price rise, with specific reference to the incoherence in the movement of wholesale price index (WPI) and consumer price index (CPI). Now RBI Governor D Subbarao has proposed a producer price index (PPI). The government and the authorities concerned should take this forward to enhance credibility and transparency in statistical tools. These statistical tools affect the common man’s daily life since they play an integral role in defining the cash flow of the poorest man’s household budget to the country’s current account deficit. Efforts should be made to use indices for understanding the movement of costs, prices and margins, industry- and sector-wise, and even in the country’s different geographical areas. This could be made possible by evolving PPI, CPI and margin index (tracking margins available at various levels in financial products, pharmaceuticals, real estate, services and so on) with dedicated purposes. Like the Tata Nano brought about some change in the automobile manufacturers’ mindset, the various indices, if scientifically evolved with transparency and speed, may bring about a change in our approach to rent, costs, profits and margins.

My View on ''Counterfeit note makes senior citizen run from pillar to post''

''What Shri Kardar has said is that i) he got the note from BOI. ii)banks should have a mechanism to verify notes at the counter itself. iii)how can a lay man identify a fake note. A 80 years old person would certainly not lie. It is many a times common man would not be able to identify fake notes as he has no acumen to this effect. It is bank that is suppose to have expertise in the matter. Bank is also suppose to have required machinery / mechanism to detect fake notes which common man can not afford. Everybody, including President of AIRBEA Nagpur knows that RBI has virtually done away with responsibilty of examination of currency notes by closing its note examination counters and entrusted it to banks which have currency chests. Unfortunately,these banks-psu,private and highflier MNCs-are profit motivated and they do not resort to examination of notes which they receive as it is a costly affair of deploying note examiners. Whereas, once upon a time,in RBI every note was subjected to examination by Note Examiners. Now RBI is also thinking interms of profit as it has reduced its Note Examiners drastically and absolved itself from statutory responsibilty entrusted to it by the Government. Now, neither RBI nor above stated banks are interested in protecting common man. This is from where suffering of common man starts. What Shri Kardar suffers is an example. Whole nation is suffering on this account..This issue is supposed to be taken care of by the Parliament of India. Or else common man has to put to legal test. Can Shri Kedar, who is retired person, afford to take legal course?. ''

- L.R.Parab

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Dr Subbarao’s haircuts - TCA Srinivasa Raghavan

....Therein lies an economic question of Marshallian proportions: what determines the price of haircuts — the amount of work that the barber must do or something else? Like Dr Subbarao who is a late comer to the puzzle, I have always been fascinated by the economics of haircutting, not least because quality is invariant to price.....

Read - HBL

My View on "Subbarao compares spiralling haircut costs and inflation"

It was refreshing to read the Governor's comment on increasing hair cut costs over the years. Very few persons of his stature have the rare ability to laugh at themselves which speaks of him as modesty personified. In early seventies, in a similar situation, when asked the reason for hiking hair cut charges, the barber had this to say. "Sahib, don't you think we mortals have to strain our eyes to find hairs on your plate to give customers like you a semblance of a hair cut?" He had a point = I was dumb struck looking at my receding hair line in the polished mirror.

- K.D.Savkur

Banks seen to cut lending rates

......“In the mad rush for deposit mobilisation, banks waged a rate war. It has been there for a long time. But the worst is now over. The RBI and the finance ministry have taken corrective measures to prevent banks from unnecessarily expanding their balance sheets. As a result, cost of funds for banks has also started coming down,” .......

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Which inflation concept is right for RBI?

.....There are basically two ways of looking at monetary policy targeting. The first is to look at a particular inflation number and work towards bringing it down. The other is to look at it from a theoretical or ideological standpoint and then use this basis for targeting inflation. This becomes important because, on its own, the inflation number we are targeting may not be influenced by monetary policy—which appears to be the case today......

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Falling Rupee: RBI cries, Government smiles

.....The government has taken some bold step to control CAD & would be taking a sigh of relief as trade deficit has narrowed down. Falling rupee might have left RBI crying but it has indeed given a reason for government to cheer.

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State-owned banks in the government-RBI crossfire

It is not new ---- the RBI-government tussle is not only on policy rates; in matters related to PSU banks, the state has been treading on RBI’s toes for years. But there are important differences between earlier and now. During the Chidambaram-YV Reddy period, the RBI had to fight bigger fires, like reining in the runaway growth of some private banks, and hence did not raise too much stink over this issue.......

Read - Mint

New govt rules will weaken public sector banks

The valuation gap between public sector and private sector banks is expected to increase, if the government has its way. Recent news flow indicates a rift between the finance ministry and the Reserve Bank of India with public sector banks being at the receiving end. After opposing the government’s legislation of setting up a Debt Management Office (DMO), RBI Governor Duvvuri Subbarao has objected to the ministry issuing orders to public sector bank directly and bypassing the board........

Read - BS

RBI rate cut unlikely as inflation to remain sticky: Killol Pandya, Daiwa Mutual Fund

.....There is a lot of talk regarding the soft inflation number prompting the RBI to take some steps on the rate front, especially in the context of the action some international central banks have taken. But the RBI continues to be worried about fuel and food inflation.......

Read - ET

Data gaps in NBFCs, co-op banks, inflation calculation: RBI

....“While the RBI’s coverage of the banking sector is quite robust, its coverage of NBFCs is much less so... This is a gap we must fill as the role of NBFCs in the financial intermediation process has been growing rapidly,”......

Read - Indian Express

Does India Still Have a Growth Story to Tell?

......Like the U.S. Federal Reserve, the Reserve Bank of India (RBI) plays a key role in promoting economic growth. But the RBI is dealing with a classic Catch-22 scenario; on the one hand, they have low growth rates to contend with, while on the other there’s surging inflation to consider. The RBI lowered its benchmark interest rate by 50 basis points a few months ago, and has since May it has been left unchanged at 8%. Accelerating inflation coupled with a greatly devalued Rupee make another rate cut a near impossibility, and despite extreme political and social pressure to do so, the RBI has been able to resist lowering it..........

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Banks told to take a closer look at crop loans

......whether banks were ensuring that the amounts given were being utilised for the intended use. He said that subvention amounts must reach the beneficiary and asked whether banks followed norms of Reserve Bank of India (RBI) and NABARD while giving crop loans. “Is credit for agriculture going in the right direction?,”.............

Read - The Hindu

Individuals can retain earnings in forex accounts: RBI

Individual residents who receive foreign currency will not be required to convert the funds into rupees, while exporters and corporates are mandated to do so, RBI said............

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Maharashtra’s co-op banks to lose Rs 900 cr zilla parishad deposits

.....Earlier this year, RBI had put 42 co-operative banks across India on a revival programme that involved a thorough scrutiny of them, besides barring them from accepting fresh deposits. RBI has given the banks until 30 September to draw up a revival plan. The programme, known as the monitorable action plan (MAP), was a last-ditch effort by RBI to revive the distressed banks. If the co-operative banks under watch are unable to improve their positions by September, they may be asked to either shut down or merge with other banks. During this period, the operations of the banks and their business decisions will be scrutinised by special panels comprising top officials of RBI and the National Bank for Agriculture and Rural Development (Nabard)............

Read - Mint

QFIs can invest $1 b in MF debt schemes

......“In consultation with the Government of India (GoI) and the Reserve Bank of India (RBI), it has now been decided to allow Qualified Foreign Investors (QFIs) to invest in Indian corporate debt securities and debt schemes of Indian mutual funds,”..........

Read - The Hindu

RBI asks banks not to give additional rate to NRI staff member

...."Accordingly, the discretion given to banks to allow the benefit of additional interest rate of one per cent per annum as available to bank's own staff on deposits under NRE/NRO accounts stands withdrawn," RBI said in a separate notification......

Read - TOI

Lack of required approval held back CBDT action on HSBC

......RBI sources said the banking regulator was looking into the matter. There is a process which the central bank has to follow in such matters. The role of RBI will be relevant only if it is found that Indian operations of foreign banks facilitated movement of funds from India, another official said.

Read - BS

RBI fiat on forward bookings upsets cashew exporters

Cashew exporters want Director-General of Foreign Trade (DGFT) to take up with the Finance Ministry the issue of a Reserve Bank of India circular on foreign currency forward bookings. The RBI circular to banks providing export credit said that all forward currency bookings by exporters and importers should fully be on deliverable basis. Any exchange gain from the forward booking, in case of cancellation of an export order, should not be passed on to the exporter.........

Read - The Hindu

Cheque fraud now comes at a higher price

....Taking a tough stand on those who issue cheques without sufficient balance in the bank, the Supreme Court said that the accused will have to undergo further imprisonment if compensation was not paid. The apex court in the case of R Mohan vs AK Vijay Kumar said that “deterrence can be infused into the order only by providing for a default sentence. If merely an order directing compensation is passed, it would be totally ineffective. It could be an order without any deterrence or apprehension of immediate adverse consequences in case of its non-observance,” .....

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Wednesday, July 18, 2012

Shaking Up the Citadels

.....Many years ago, the government had contemplated abolishing the banking division in the ministry. YV Reddy — who was secretary of that division in the mid 90s — says, what is relevant is to make a distinction between ownership and sovereign functions. According to him, the banking division should be divided in a way that there should be a financial sector regulation division, which is entirely a sovereign function. “It is a political decision, but it should not erode the autonomy,” he says adding that this was something even the UK government went through. Perhaps, a review by Prime Minister Manmohan Singh, who is now in charge of the finance ministry, is in order now.......

Read - ET - Page 17

RBI needs to talk to GoI

.....it’s high time RBI and the finance ministry had a candid discussion instead of talking at each other through the media. If RBI isn’t going to cut rates in a meaningful manner till the government does its bit on easing supply constraints and on cutting expenditure, and the government isn’t going to do anything to ease supply constraints in a hurry, this seems to be the surest recipe for stagflation even if, as some argue, we’re not in stagflation at the moment.

Read - FE Editorial

DCB Bank inaugurates new Corporate Office

DCB Bank (Development Credit Bank Limited) new Corporate Office was inaugurated by Mr. P Vijaya Bhaskar, Executive Director, Reserve Bank of India at a ceremony graced by Prince Rahim Aga Khan from Aga Khan Fund for Economic Development (AKFED), Mr. Sultan Allana, Director AKFED, Mr. Nasser Munjee, Chairman DCB Bank and Board of Directors DCB Bank. The new Corporate Office is located on the 6th floor of Peninsula Business Park in Lower Parel.......

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Counterfeit note makes senior citizen run from pillar to post

Nagpur : ........."There is hardly any chance of a fake note being given away from the bank's counter. Moreover, under any situation the customer should check all notes before leaving the counter," said the manager. Kardar is sticking to his claim that he got the note from BOI. "Banks should have a mechanism to verify notes at the counter itself. How can a lay man identify a fake note," he asks. President of the Nagpur branch of All India RBI Employees Association (AIRBEA), Bidyut Charaborty, said that if Kardar is to be believed then getting a fake note from a bank counter is indeed a matter of concern. Banks are supposed to thoroughly check the notes before keeping them at the counter. Banks must have verifying machines at counters though many do not install one, said a source in RBI.

Read - TOI

Private banking licences: Bank employees to go on all-India strike

Public sector bank employees will go on a two-day nation-wide strike from July 25 to protest against government's moves to grant banking licences to private business houses and closing down of rural branches......

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Policy rate alone not responsible for slow growth: Subbarao

....."The Reserve Bank maintains that interest cost is only one of the several factors that have dampened growth, and the increase in policy rate by the Reserve Bank alone cannot explain the investment slow down," ............

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RBI takes first steps to save consumers from exploitative investment schemes

The Reserve Bank of India has taken its first step to protect consumers from exploitative investment schemes by releasing a draft National Strategy for Financial Education on Monday.............

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Here’s what Subbarao has to say about inflation

........“I must hasten to add that sacrificing growth is only in the short-term. In the medium-term, there is no trade-off between growth and inflation,” the RBI Governor said. “There is a threshold level of inflation. Below the threshold, may be, there is a trade-off between growth and inflation. But above the threshold, there is definitely no trade-off between growth and inflation,” he said. However, the RBI governor said his views on inflation should not be read as a preview to the decisions to be taken in the quarterly monetary policy review on July 31.............

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Subbarao compares spiralling haircut costs and inflation

(The Telegraph)

Reserve Bank Governor Duvuuri Subbarao today cited his receding hairline and the high rates for his hair cut to make a point on inflation. He said he used to pay Rs 25 for a haircut 20 years ago which went up to Rs 50 even as his hair thinned. However, in recent times, though the hair growth has been almost nil, he is paying Rs 150 for a haircut. "Now when I have virtually no hair left, I pay Rs 150 for a haircut," the career bureaucrat-turned-central banker said to a laughter ................

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