.......We face twin challenges as an economy. First, our growth rates are slowing down and the investment cycle has more or less broken down. Secondly, domestic consumption has led to inflation sustaining at over six per cent, which has led to RBI keeping interest rates high. Thus, the government needs to contain consumption and boost investments. Fiscal consolidation is imperative from the government to move the needle on the inflation front, to nudge RBI to start cutting interest rates. On the other hand, to kick-start the investment cycle, it would be critical to bring clarity on policy measures, especially for sectors like power, telecom and mining. This would make investors feel comfortable that after having invested/or committing significant capital, policies are stable enough for them to earn reasonable returns.......
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Monday, July 30, 2012
Coping with the unknowns
The central bank is likely to wait for an end to policy paralysis - just like everyone else
......In the circumstances, does the RBI hike rates (and/or CRR), stay put, or cut? A hike is very unlikely. Cuts, if they happen, are likely to be nominal. Though the RBI can do nothing about food prices, it could be arm-twisted to keep rates high due to monsoon failure.......
RBI’s choices in an inflationary vortex
.....On its part, the Reserve Bank of India (RBI) has made it clear that administered prices of petroleum products must be increased to reflect their international prices. Even if it results in higher overall inflation, such increases are imperative to lower the demand side inflationary pressures created by excessive fiscal expansion. In reality, it is most likely that fuel price revision, especially for diesel, will take place in the coming weeks and WPI inflation will, consequently, rise. How should the monetary policy react then? ........
The great RBI dilemma: To cut key rates or not
The Reserve Bank of India will make known whether it has opted for monetary easing and benchmark rate cut tomorrow when it announces the quarterly review of its monetary policy. A complex macroeconomic scene and contradictory signals from economic parameters that the RBI monitors regularly have made the rate cut decision tricky..............
Expect the unexpected from the RBI
......The market is looking at the wrong set of figures in not expecting rate cuts. The central bank is likely to look at the broad macro environment on the domestic and global front and cut the repo rate by 50 bps even as it lowers the GDP growth forecast to 6.5% levels from initial April forecasts of 7.5%. A repo rate cut of 50 bps will bring it down to 7.5% from 8% and at this level, it will be around average inflation expectations of 7% to 7.5% for full year 2012-13. An economy that is slowing considerably from growth rates of 8.4% seen in 2010-11 to 6.5% for 2011-12 and 2012-13 can live with negative real interest rates......
Guessing game on RBI rates
Mixed views abound on whether RBI governor Duvvuri Subbarao will spring a pleasant surprise in the form of a rate cut during Tuesday’s first-quarter monetary policy review. Many feel that the Reserve Bank will maintain a status quo on key monetary policy rates because there has been no significant moderation in inflation. However, a few believe that the RBI may bring down the cash reserve ratio (CRR) to address the economic slowdown, which is continuing to weigh on corporate performance. The optimists also believe that the apex bank’s guidance will be much less hawkish..........
All eyes on RBI guv: will he cut rates tomorrow?
Home loan borrowers, business leaders, economists and policy makers: all seem to have one question in common: Will the Reserve Bank of India (RBI) governor D Subbarao announce a cut in interest rates on Tuesday?..............
Mobile banking deals treble to Rs 286 cr in May
........"Even though the value and volume are increasing on month on month basis, the growth rate is low when compared with the number of bank accounts and the vast mobile subscriber base of more than 900 million," said Harun R Khan, Deputy Governor, RBI in a speech on Financial Inclusion recently. This indicates that banks are yet to fully exploit this technology even for their existing customers, he said adding that RBI has provided policy framework for a collaborative relationship between banks and mobile network operators...........
Over Rs 2,400 crore lying in inoperative bank accounts: RBI
........According to RBI, there should not be any charge for activation of an inoperative account and the bank's interest on savings accounts should be credited on regular basis whether the account is operative or not. If a fixed deposit receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest, the RBI told activist Subhash Agrawal in response to his RTI query...........
RBI submits affidavit on Andhra MFI act
....."NBFCs being regulated simultaneously by RBI and State Government will result in dual regulation thereby adversely affecting the functioning of the NBFC-MFIs and the interest of the public," RBI said in an affidavit filed in the court. This was in response to a writ petition filed by some MFIs questioning the legal validity of AP MFI Act. "In case of NBFCs the RBI has exclusive power to regulate and supervise them. The provisions of the impugned Act are ultra virus the constitution of India so far as it deals with NBFCs," it added.......
Read - BS
.......In its first formal submission on the controversial issue last week, the RBI has told the Andhra Pradesh High Court that "any overlap or conflict is not in the interest of effective regulation, both from the point of view of the regulators and the regulated entities".........
Read - ET
.......In its first formal submission on the controversial issue last week, the RBI has told the Andhra Pradesh High Court that "any overlap or conflict is not in the interest of effective regulation, both from the point of view of the regulators and the regulated entities".........
Read - ET
Extending RTI Act to public sector banks involves systemic risk - M.R.Umarji
.....Public sector banks established under an Act of Parliament are owned and controlled by the central government, but carry on this business of banking by raising deposits from the public. They are not dependent on any budgetary allocations for their businesses. Although these banks collect public deposits, they are accountable to the RBI and not to the public for prudent use of such deposits. Ordinary citizens seeking any information from these public sector banks are incapable of making any assessment on whether the banks are utilising the public deposits prudently and hence the basic objective of the RTI Act to make public authorities accountable to the public for use of public funds is not applicable to public sector banks. .......
ATM transaction charges may be lowered soon
........... in a meeting on 26 July of all banks and representatives from the National Payments Corporation of India and the Reserve Bank of India, it was decided to bring down the transaction charges gradually. “For the time being, it has been decided to bring down the rates in phases. First bring it down to Rs15 for withdrawal and Rs. 5 for balance enquiry from 1 August. And then reduce rates gradually in a 5-6 months horizon instead of drastically bringing it down in one shot,”..........
How much of the capex slowdown is due to RBI tightening?
“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.” This defensiveness is a bit odd—isn’t slowing growth and demand in the economy the whole point of raising rates? And if there are other factors holding back growth, shouldn’t the central bank take account of them and adjust its monetary stance accordingly?.........
If not as IIMA chief, Barua ok being a faculty
Ahmedabad: As Prof Samir Barua’s term of directorship at one of the world’s best B-school comes to an end in October, speculations are rife about his plans to settle down for a bigger role in Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi). However, putting a lid over all rumours, Barua said that he intends to return to IIMA’s classrooms as a faculty member. This possibility is likely, if he doesn’t get a second term as the director of IIMA, he added.
The Daily Bhaskar
'CCI will not intervene in functioning of sectoral regulators'
Competition watchdog CCI will not put road blocks in the functioning of other regulators like TRAI and the RBI, but will only intervene if the policy decisions hamper competition in the market...........
Norms on anvil for proper use of for CPSEs' surplus cash
........The Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), UTI Mutual Funds and SBI Mutual Funds have made presentations to the committee in regard to investment of surplus funds by CPSEs. The RBI has suggested to the panel various investment options such as mutual funds and government securities wherein these PSUs can invest their money, the official said..........
Sunday, July 29, 2012
Reviving investment is key to boost growth: Bimal Jalan
Rebuilding a Stronger Microfinance Sector in India
The central government has now stepped in. The Microfinance Institutions (Development and Regulation) Bill, 2012 puts the Reserve Bank of India firmly in control of the sector. Vijay Mahajan, the president of the Microfinance Institutions Network of India and also the founder and chairman of the Basix social enterprise group talked to India Knowledge@Wharton about the implications of the new bill and the way ahead for the sector.........................
FinMin asks PSU banks to reform board meetings
.....“Issues relating to business strategy and operations should be discussed at the board once a quarter. What is happening now is a lot of time goes into reporting items prescribed by the Reserve Bank of India (RBI),” ...........
My View on "Yaga Venugopal Reddy set to head 14th Finance Commission...":
These days, when every move of the government and political leadership is justifiably viewed with suspicion, may be because of the presence of people like Manmohan Singh and Dr C Rangarajan and several other right-thinking veterans in Delhi (who survive there as others are not interested in hard work!), some decisions stand out giving hope that all is not lost yet. The choice of Dr Y V Reddy for this job is one such instance. He will have a tough time balancing pulls and pushes of a multi-dimensional nature. But he will face all those with his disarming smile and quickly do the right thing at the appropriate time. This Finance Commission will have the responsibility of giving a direction not only about ensuring distributive justice in allocation of resources but also making the economy move forward from the present stalemate. Congratulations to Dr Reddy !
- M G Warrier
‘Kidnap’ complaint hits efforts to weed out loan recovery evils in West Bengal
.....Another agency owner argues: "The last major such incident in Kolkata was in 2007. Since then, prodded by the RBI and the banks, a rigid system has been put in place to weed out such incidents. To be fair, in the five years since, nothing happened."........
Read - TOI
Read - TOI
The colour of money
It may not take a century for villages in India to get banks, and villagers to own accounts. Madhya Pradesh is paving the way for financial inclusion. The state is suddenly full of excitement about what it considers is a feat. Its rural development department has hired publicity agents to spread the word that every villager in the state would have an account by August 15. This is the result of a change in strategy, according to the officials of the state government...........
Unpractical ‘short-changed’ advertisement by union ministry of consumer affairs
.... It refers to advertisements entitled ‘short changed’ in all the newspapers on 27.07.2012 by helpline-website ‘jago grahak jago’ launched by union ministry of consumer affairs awakening people to insist on change instead of unwanted items like candies usually given by shopkeepers due to usual shortage of coins. Instead of wasting public-money on such unpractical advertisements, various concerned wings of union government namely department of consumer affairs and security printing & minting corporation of india limited (spmcil) should first co-ordinate amongst themselves to ensure sufficient supply of coins especially in denominations of rupees one and five which are presently ‘sold’ at high premium in ‘coin-markets’........
UP asks banks to be especially alert on fake Indian 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.........
Fake Indian currency a threat to country
Lucknow, Jul 25: Cirulation of fake Indian Currency Notes (FICN) and other counterfeit items is a major problem in Uttar Pradesh which could be a terrorist and economic threat for the country, several speakers at a FICCI- CASCADE seminar maintained here today. Speaking at the seminar titled ‘Curbing Counterfeiting and Smuggling – An Imperative for Indian Economy’ as the chief guest, Uttar Pradesh Commissioner Customs Ajay Dixit maintained that the smuggling of counterfeit currency was widely prevalent in the country due to its porous international borders with Nepal and Bangladesh. Dixit quoting RBI statistics, said...............
Where have all the coins gone?
......An examination of the scarcity of coins in various parts of the country might offer a bigger picture. Earlier this year, the RBI had decided to back out from retail operations and hence halted their distribution of coins from its offices. But there are allegations of procedural inexperience of the present distributors, which has further resulted in the rising price of coin and an uneven demand-supply ratio. Inadvertently this is affecting the economy very badly. Let’s do a simple math. Suppose in Manipur, a one person loses Rs 3 a day while shopping; then the state loses Rs 81,65,268 daily, if we take into account the present population of 27,21,756 as per the 2011 census. Needless to say, some economists measure the shortage of coins is adding to 3% to 5% inflation in the national economy.........
State opts for e-payment from August 1
BHUBANESWAR: The state government will launch the new system of electronic disbursement of government payments from August 1. The new system, which is being launched in collaboration with the Reserve Bank of India (RBI), aims to benefit government employees, vendors, suppliers and other payees and ensure transparency in all financial transactions and accelerating the pace of payment.......
Foreign banks expand presence outside large cities
.........The Reserve Bank of India (RBI) has not allowed large foreign banks to open branches in metropolitan cities in the past five years. This has resulted in places such as Proddatur, Nandyal and Nanded getting foreign bank branches. “RBI does not appreciate the idea of large foreign banks having more branches in metro cities,” said a top executive of a large foreign bank who did not wish to be named. “There are no guidelines or written communication. But they have made it very clear that they want foreign banks to expand into deeper geographies.”...............
Private banks' value two times PSUs'
India’s banking system has its pockets of excellence and pockets of incompetence, and everything in-between. The regulator, RBI, does a reasonable job but there is also a fair amount of political interference. Commercial interest rates are set by banks themselves, and policy rates, cash reserve ratios (CRR), sector lending limits and sectoral risk-weights are set by the RBI..................
Regulation and supervision of MIVs: An urgent task for central banks and regulators globally
......In fact, during the Indian microfinance crisis, I realized that India’s central bank (Reserve Bank of India) perhaps did not have (in one place) all the requisite information with regard to foreign equity and debt flow into the Indian microfinance sector. And as I have previously mentioned, (and as Mix Market has so eloquently put it), it is the unique combination of significant equity flows (and debt funds) from abroad with local banking funds and their subsequent and continuous investment as “microfinance loan assets” that created the perfect storm for the Indian microfinance crisis. It is precisely this that regulators have to guard against globally.........
Indian central bank in focus again
.....The RBI, which believes monetary tinkering is not the prescription to deal with the gloom hanging over the nearly $2 trillion economy, is unlikely to stray from its stated policy. It is more concerned with price pressures that are bursting at the seams, especially for food items that are driven by supply-side bottlenecks. Fuel prices, kept artificially low by unsustainable government subsidies, are another time-bomb the RBI is worried about...........
India's mid-summer nightmare
........Eventually, high food inflation hits the overall economy and prompts the Reserve Bank of India to raise interest rates to suppress prices. Currently, high interest rates have made borrowing costlier for firms, which do much of their business on short-term loans. "There are blunt instruments which can bring down inflation but also dampen growth. But we don't have a consensus on how much of dampening of growth is acceptable to bring down inflation," Kaushik Basu, India's chief economic advisor, said.......
SBI's Chaudhuri says liquidity situation still tight, ICICI's Kochhar differs
New Delhi: State Bank of India Chairman Pratip Chaudhuri has said that there is a strong case for the central bank to cut the cash reserve ratio in the forthcoming monetary policy review as the liquidity situation is still tight, contrasting the state-run bank's top private sector rival ICICI Bank's view that cash flow in the banking system is comfortable............
Saturday, July 28, 2012
Yaga Venugopal Reddy set to head 14th Finance Commission; Parthasarathy Shome, R Gopalan too in panel
NEW DELHI: The former Governor of the Reserve Bank of India, Yaga Venugopal Reddy, is set to head the Finance Commission, the constitutional body which has the mandate to finalise the distribution of tax proceeds between the central government and states..................
“The First Mile Walk into the Financial System”
Financial Inclusion has been a priority area for the Government in propelling inclusive growth. Plans, policies and programs are undertaken to drive the agenda of financial inclusion and integrate every common citizen of India in the fold of formal financial system of the Country. The Reserve Bank of India approach is driven by a bank led model supported with ICT and BCs. RBI has also taken steps in opening No-frills accounts, relaxing KYC norms, deregulation of pricing, promoting SHG bank linkage model and many more................
Theme Address:
Dr K C Chakrabarty, Deputy Governor, Reserve Bank of India on August 7, 2012
Dr K C Chakrabarty, Deputy Governor, Reserve Bank of India on August 7, 2012
Microfinance Regulation: The Emerging Landscape
Mr Anand Sinha, Deputy Governor, RBI
HDFC Bank conducted a ‘Coin Mela’ in Lucknow
What ails the New Pension Scheme?
- M.G.Warrier (former General Manager of the Reserve Bank of India)
RBI, bank officials depose in Paazee forex scam
........On Thursday, Savithri Ramani, Assistant General Manager of RBI — Chennai (Foreign Exchange Division) appeared before the judge and in her deposition, the official said that any firm operating as non-banking finance company or involved in foreign exchange trading should register their names and obtain a licence..................
Govt's overspending restraining effectiveness of monetary policy: RBI
....."Prudent anti-inflation policy includes containment of the deficit. It is insufficient to announce and maintain restrictive monetary policies unless accompanied by a coordinated reduction in the budget deficits," a RBI working paper titled, "Fiscal Stance, Credibility and Inflation Persistence in India", said Thursday..................
RBI paper finds monetary policy undermined by unsustainable deficits
A working paper, published by the Reserve Bank of India (RBI) on July 26, studies the reasons behind high inflation in India despite tightening of monetary policy, suggesting the presence of a large government debt burden undermines the central bank's credibility...........
Sensex gains private banks lead
....Europe, government action, and The Reserve Bank of India (RBI) Policy are important, and in that order for the market,” he added. “Everybody is waiting for animal spirits to come in, but nothing has happened so far on that front”........
Public sector banks - Loans turning bad
.....Until 2001, these restructured accounts were considered NPAs, but to provide reprieve to banks and borrowers, the Reserve Bank of India (RBI) magnanimously took a decision to permit these loans to be treated as standard so long as they were rescheduled before becoming NPAs. Banks were allowed to do this if they considered the projects to be viable and believed that the cash flow problems faced by these borrowers were temporary. This amounted to the regulator’s nod to ‘ever-greening’ of loans and officially postpone the problem. More often than not, a sizeable chunk of these loans becomes non-performing—RBI officials themselves concede that 15% of restructured assets become bad debts........
A clean-up act
......if the panel appointed by the RBI recommends to banks to make all restructured accounts into NPAs immediately, the entire banking industry will be in the doldrums. ............
RBI may refrain from rate cuts
.....From a central bank’s perspective, it is unfortunate that slowing growth is being accompanied by stubborn inflation. However, this unpleasant outcome and the prevalent macro pressures should be traced to the high fiscal deficit being run by the government. Thus, we are following a sub-optimal policy mix, which cannot be corrected unless the government decisively cuts the fiscal deficit and puts the country back on the path of fiscal consolidation. Till that time, RBI may have no choice but to refrain from cutting rates. The central bank can, perhaps, point to the fact that it has already done its bit for the economy with the April rate cut and a proactive liquidity management strategy.........
Time to hike rates?
......Though the usual lot of finance professionals have made a case for keeping rates unchanged, so far none have suggested RBI raise policy rates to deal with the likely surge in food prices. Perhaps they should take their advice to its logical conclusion!
Global economy to determine RBI stance
....A tough stance by RBI on the rate front can be justified on a number of counts: suppressed inflation in view of the possible decontrol of diesel prices, the need to anchor real rates in view of the high inflation numbers so that depositors are not discouraged to save, depreciation of the rupee which amounts to monetary easing, and lack of resolve on part of the Government in reducing subsidies on fuel and fertiliser.........
Why Subbarao may not be willing to surprise just yet
.....Having made it clear that the slowdown wasn’t linked to rates, the central bank will now have to be convinced by clear steps from New Delhi before the central bank is expected to do its bit again. It’s not a happy mix for Subbarao just now. The much-required diesel price hike is uncertain, big-ticket reform items are still stuck in political muscle-flexing and confusion and globally, there are chances that stimulus packages may drive up commodity prices again. Reason enough for the RBI to keep the finger on that pause button.........
Inflation clouds loom large
Just a few days before the monetary policy announcement for the first quarter of 2012-2013, the Reserve Bank of India Governor D. Subbarao chose to talk about the centrality of inflation. The occasion was the launch of the collected writings of one of his illustrious predecessors, the late I.G. Patel. He quoted Patel, saying that the supreme test of monetary policy was its ability to check inflation without hurting growth. Notice the sequence. Implicit in this formulation (Patel’s, not Subbarao’s) is that inflation control is the objective, and not hurting growth is the constraint. You can’t switch the objective and the constraint. Of course, there is no such single objective mandate given to the RBI. But the RBI watchers would be deluding themselves if they don’t attach a higher weight to inflation control in the RBI’s current priorities............
Pratip Chaudhuri, SBI chief makes case for a 50 bps cut in rates
Chairman of State Bank of India, Pratip Chaudhuri, said that the bank will pass on the benefits of lower rates only if the Reserve Bank of India cut cash reserve ratio (CRR) in the forthcoming policy. "There is a case for a 50 basis points in CRR," said Mr Chaudhuri. "If CRR is not cut there is no benefit for the banks and no benefits means nothing can be passed on to the borrowers,".....
Friday, July 27, 2012
Navigating choppy waters - Suman Bery
......If Dr Reddy is indeed appointed chair of the Fourteenth Finance Commission, as has been recently trailed in this newspaper, it is likely that these rather severe views will find expression in the work of that body. In contrast to this forceful expression of the normative framework for fiscal policy, I do not recall his articulating any equally emphatic doctrine for monetary policy. His main lament was that in recent years Indian inflation had moved from being on average below that of other emerging markets to on average being at the top of the heap. Unkind observers might argue that this is what happens when a central bank is given unlimited discretion and is not bound by a formal commitment to the government or to Parliament. We know that both Dr Reddy and his successor have spurned inflation targeting as inappropriate for India, including its less formal version, the “low inflation goal” proposed by the Raghuram Rajan committee’s report on the financial sector. The lack of an explicit nominal anchor may also have complicated the Reserve Bank’s efforts to guide the exchange rate in an orderly way in recent weeks...........
A gold medal for Subbarao - S S Tarapore
The RBI Governor has done well to pick up 200 tonnes of gold in 2009. It would be prudent for the RBI to step up the gold proportion to 33 per cent of total reserves, from 9 per cent
.......Dr Subbarao has already earned his place in the firmament of the RBI by his percipient picking up of 200 tonnes of gold in 2009. If he leads India into the Golden Age, he would rightfully become Zeus in the RBI’s Pantheon of Governors. With the 2012 London Olympics, Dr Subbarao, a reputed marathon runner, should “go for gold”!.......
Read............
RBI’s sovereign debt management can help monetary policy
There is no conflict of interest in the Reserve Bank of India managing government borrowings and it does not lead to rate manipulation in favour of the Centre, a research paper by the RBI has said. "We feel there might be a confluence of interest between sovereign debt management and monetary policy, both helping each other, especially in extraordinary circumstances such as the recent global crisis ," said the research paper, jointly authored by Sunil Kumar and NRVVMK Rajendra Kumar of RBI's Internal Debt Management Department...................
Kolkata historians want India to claim 48 tons of silver recovered from World War II shipwreck
......The assets recovered were being taken from the British-ruled city Calcutta, now Kolkata, which was an Indian territory. I think the Indians should have a say to find out whether it was public capital or private capital. If it was public capital then the state must play a role," historian CR Panda, a former director of Calcutta's Indian museum, told MAIL TODAY. Panda said the finance ministry, Reserve Bank of India (RBI), ministry of external affairs and law must step in to look into the international legal parameters of the recovered items if they want to lay any claims...........
Why RBI’s Chakrabarty is Wrong About Indians
.......The increasing demand for gold reflects the public’s lack of faith in the Indian economy. The current account deficit that Chakrabarty worries about would not have been so wide had the government taken a single decision of letting fuel suppliers charge customers at least what it costs them to buy oil. Chakrabarty has unfairly blamed the public for India’s economic woes.The root cause of India’s precarious finances, both internal and external, is the government’s inept and callous management of the economy. Not the average Indian’s instinct for self-preservation.
RBI to get FSA support in supervision of UK banks
| New Delhi British financial sector regulator FSA has entered into a fresh agreement with the RBI for mutual assistance and information exchange in supervision of banks operating in both the countries...... |
Co-op bank staff to get a salary hike
.....Recommendations have been forwarded to all the co-operative banks and 95 per cent of them have agreed ,” Patil said. On July 27, a delegation will meet the Reserve Bank of India governor to urge him to implement the Malegaon Committee report,........
Coming clean on NPAs
......There is little to be gained from making fine distinctions between NPAs and ‘restructured loans’ that merely obfuscate the underlying problem of bad debts. The panel under the RBI Executive Director, Mr B. Mahapatra, has correctly observed that restructuring of a bank account amounts to an “event of impairment”, whether or not its asset classification undergoes a downgrade. Since international accounting standards and regulations followed in advanced economies treat any restructured bank account as impaired, there is no reason for India not aligning its prudential guidelines with the global best practices.........
Regulator for cement industry sought
......The Builders’ Association of India (BAI) has called for an independent regulator for the cement industry in view of the recent developments in the sector. The body should be a quasi-judicial authority and modelled along the lines of Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA),.........
High interest rates adding to inflation: Assocham
NEW DELHI: High interest rates are adding to the headline inflation and are "defeating" the Reserve Bank's objective of checking rising prices through a tight monetary policy, a study by Assocham said ........
It's not the RBI
After pointing out that “the primary responsibility for changing the mood belongs to the Union government...”, your editorial suggests that the Reserve Bank of India (RBI) lower interest rates to spur growth (“Worries over growth”, July 26). Not only is this view one-sided in that it ignores the government’s role, but it also assumes that high interest rates are the chief cause of declining growth. As Sajjid Chinoy pointed out in Business Standard (“Don’t put the cart before the horse”, July 25), our declining growth trajectory is the result of low investments caused by government policy (or lack thereof) and supply-side bottlenecks, for which the RBI is not responsible, nor does it control them. Tellingly, this view was endorsed by Indian businesses in a recent Crisil survey.
- R Sankar Delhi
A glass half full ... or half empty?
In the annual policy meet on April 17, the Reserve Bank of India surprised the market with a 50-basis point cut in the repo rate. However, in the next policy meeting on June 18, the central bank governor, D Subbarao, delivered a shocker by not only holding rates but also with his hawkish statement - that inflation was too high to cut rate. Ahead of the first quarter policy review on July 31, Business Standard takes a look at how the parameters that decide monetary policy actions changed in the last three months.......
Redefining inflation
.....The RBI Governor has spoken about inflation as a regressive tax that hits the poor. Nowhere is the impact felt more than in the case of food prices. He would do the economy a service if he administered a bold and healthy shock to the system and its expectations by saying that core inflation would be redefined to refer to only food and fuel prices. Of course, that does not mean that the rest of the prices will be ignored.
July policy a close call rate cuts to follow
........While the timing of further monetary easing remains uncertain, I expect cumulatively 150-basis points (bps) of rate cuts during 2012-13 (including 50 basis points delivered in April). RBI action next week remains a very close call; I maintain a bias for a 25-bp cut in the repo rate. Importantly, the government’s ability to marshal a fuel price rise in the near term remains a key event, as that would be seen as the first initiative (even if token) to tighten the fiscal belt.......
No reason for RBI to cut rates next week: HSBC
......."With below-normal monsoon and little policy action from Delhi, the Reserve Bank is likely to keep rates unchanged next week. The fiscal stance remains to loose for comfort and elevated inflation expectations are a concern,".........
Great steps for banks to check money-launderers
..... Post India's membership to the Financial Action Task Force (FATF), the focus on anti-money-laundering (AML) initiatives has increased. Further, the RBI has issued various guidelines to banks on reporting fraud and on the implementation of robust fraud detection and prevention systems. In particular, as Web banking expands from Web and file transfer to mobile/smartphone and social media channels, the RBI recommends taking an integrated multi-channel approach to information, transactions and fraud, in order to lower costs and increase effectiveness. It is imperative for financial institutions to deploy a comprehensive, cost-effective solution that is able to identify, detect and prevent attacks across multiple channels in real time............
Banks brace for high borrowings, as spectre of drought looms large
.....The Reserve Bank of India has already notified that states would be raising Rs 40,000 crore by way of borrowings till September end. State government borrowings or state development loans are sovereign guaranteed borrowings in a clear indication that borrowing requirements would be large. During the corresponding period of last year when monsoon rainfall was favourable borrowing in the second quarter of the year was Rs 29,000 crore.......
Revised RBI norms: Banks may find it tough to meet indirect agriculture lending target
Achieving the indirect agriculture lending target under the revised Reserve Bank of India guidelines on priority sector lending may prove to be an uphill task for banks.......
RBI to amend norms governing NBFC-MFIs
.........Following feedback received from stakeholders, the RBI will amend some directions governing MFIs, said Mr P. Vijaya Bhaskar, Executive Director, RBI, at a seminar organised by the Microfinance Institutions Network (MFIN). The directions were issued last December. Mr Vijaya Bhaskar assured the MFI representatives that their institutions were an integral part of the RBI’s financial inclusion programme.......
Guidelines on investments of surplus funds by CPSE's soon
.....The Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), UTI Mutual Funds and SBI Mutual Funds have made presentations to the committee in regard to investment of surplus funds by CPSEs. The RBI has suggested to the panel various investment options such as mutual funds and government securities wherein these PSUs can invest their money, the official said......
Yet another blow for Indian banks?
......In order to prudently recognise the inherent risks in existing assets classified as standard on restructuring, an RBI working group has called for additional provisioning on these assets. It states that the provision requirement on such existing accounts should be increased from the present 2% to 5% in a phased manner over a two-year period. Thus provision will be increased to 3.5% in the first year and 5% in the second year. However, in cases of new restructuring of standard asset, the working group recommends that a 5% provision should be made with immediate effect. If this move is implemented, state run banks will see a strain in profits, while private sector banks will be relatively sheltered.......
Mobile security for Andriod users
.......It further added that there has been an increase in mobile banking. According to the Reserve Bank of India (RBI), banking through mobiles increased five-fold to Rs 1,140.6 crore between January and May compared with the same period a year ago. These trends are driving the need for mobile security measures to protect information for enterprises, businesses and small and medium businesses (SMB)..........
Why treat big defaulters with kid gloves?
..........The RBI has done well to call upon the banks to insist upon promoters coughing up 15 per cent in the diminution in the value of the undertaking, or 2 per cent or the loan, whichever is higher, as a price for the rescue act. But banks should opt for coercive proceedings under the securitisation law, rather than yield to the mirage of CDR.
Ebbing fortunes for Indian banks
.........Policy uncertainty and high rates also mean that investment is on hold – how many projects can be so lucrative as to return a reasonable margin after paying between 14 per cent and 16 per cent for money borrowed from the banks? The Reserve Bank of India keeps interest rates high to support the rupee and attempt to keep inflation in check. But many Indians feel the policy is misguided and serves to discourage badly needed investment.......
Read.........
Read.........
Thursday, July 26, 2012
Financial Services Secretary DK Mittal defends repeated directives to banks
Chidambaram: An easy person to categorise - Y.S.P.Thorat
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| Y S P Thorat Chief Executive Officer, Rajiv Gandhi Charitable Trust, Former Executive Director, RBI and former Chairman, NABARD |
.....The first time I met him, which despite his prodigious memory I am sure he won’t remember, was when during his first tenure as Finance Minister, I was asked to brief him from the Reserve Bank of India (RBI) side on a Parliamentary question together with the concerned Joint Secretary. On the earlier day both of us met, went through the background papers, tied up our briefing notes and went off to the Delhi Gymkhana for the evening. Early next morning we were shown into the FM’s office together with a colleague from NABARD.........
Pranab Mukherjee likely to be interactive and not an aloof president
......Pranab Mukherjee has also demonstrated a rare ability to read the writing on the wall. This was evident in his agreeing to work under Prime Minister Manmohan Singh, which, given his seniority and experience, could not have been easy. As finance minister in the early eighties , Mukherjee had signed the order appointing Manmohan Singh as the RBI Governor. Yet he stood solidly behind the PM as Singh increasingly resorted to running the government through GOMs and EGOMs, most of them headed by Mukherjee . He showed this realism once again in 2010 accepting that he wouldn't be able to become prime minister, and turning his attention to Raisina Hills......
RBI not keen on banking licences for corporates
.........Although the RBI has not officially said it is against corporates getting banking licence, a major factor that has come in the way could be the stipulation that RBI will give weightage to “sound credentials and integrity” of the applicants. The RBI had earlier said that promoters and promoter groups with diversified ownership, sound credentials and integrity that have a successful track record for at least 10 years in running their businesses should be eligible to promote banks. The catch, however, is that the RBI’s decision will also be guided by feedback from other regulators and agencies like Income Tax Department, CBI and Enforcement Directorate........
25 villages to come under financial inclusion programme
........Speaking at the quarterly meeting of the district-level review committee for banking in Udupi district here, Mr. Subramani said the financial inclusion programme was being monitored closely by the Union Government and the Reserve Bank of India (RBI). The 25 villages had been identified based on service area approach and the banks concerned had been informed about it........
My View on "RBI to hire up 6 companies to overhaul HR practices"
This is a step in the right direction. Recent years saw several flaws in HR Management in the central bank. Adhoc recruitment of Executive Interns without planning their future deployment or absorption, succumbing to pressure on promotion policies, not being able to convince GOI on need to implement competitive remuneration packages for recruiting and retaining efficient officers, failure to decide on updation of retirement benefits at least on par with GOi are just some examples. When it comes to infusing professionalism in specialised areas like supervision and forex and debt management RBI is facing several constraints, many of them emanating from its failure to argue with North Block as Finance Ministry shows an attitude akin to master-servant relationshp. In all these, as is normal for Indians, if an 'external' consultant tells in a language common man won't understand, RBI Governor will be able to convince his bosses just by quoting from consultant's reports.
- M G Warrier
Obituary
Mr. K. Venkatarama Ayyar (K.V. Ayyar), Former Jt. Chief Officer, RBI passed away on 21.07.2012 in Mumbai. Phone: 022-2506 5242
- The Hindu
Mrs. Srinivasan d/o late K.V.Ayyar told that he joined RBI in 1946-47. He held the post of Joint Chief Officer in DBOD. Thereafter he was on deputation with Indian Bank and retired from there in 1980.
RBI raises red flag on Aphro Trust
.......A release by the RBI Department of Non-banking Supervision, Chennai Regional Office, stated that it had came to their notice that the Trust and its associates functioning from 27/49, 5th Main road, 3rd layout, Teachers Colony, Kolathur, Chennai 600 099, was unauthorisedly using its name to claim that loans were extended under RBI guidelines.........
‘Many coop. banks have accepted pay panel report’
...........Mr. Patil said that urban cooperative banks in Karnataka had achieved 95 to 96 per cent loan recovery.Ophthalmic surgeon M.M. Joshi said that with the advancement of technology, cooperative banks too had registered progress through proper use of technology. Officials of the Reserve Bank of India, Bangalore, R. Sequeira and Usha, and the former Minister A.M. Hindasgeri were present.
Consumer forums can award damages more than what is sought
........The ICICI Bank had filed three separate appeals in the State Commission challenging the total compensation awarded by the district forum in the separate complaints filed by Ramesh Sharma, saying he had sought only Rs 1,00,000 as damages but the forum had granted him Rs 1.64 lakh on the basis of RBI guidelines. "We need not therefore reduce the amount of compensation because the said amount is in accordance with the directions of the Reserve Bank of India (RBI)," the bench presided by Justice Barkat Ali Zaidi said..........
Cut-rate commissions quoted for rural banking
......“Financial inclusion programmes should be implemented on commercial lines and not on a charity basis,” said K C Chakraborty, Reserve Bank of India deputy governor, at a recent panel discussion in Washington. “It is important that banking with the poor is perceived and pursued as a sustainable and viable business model,” he added........
RBI loan recast plans will increase transparency: Fitch
Global rating agency Fitch today said RBI proposals on treatment of restructured loans would increase transparency and be positive for the Indian banking system amid economic slowdown. Among others, a RBI working group recently recommended increased loan-loss provisions and ultimately ending forbearance on asset classification, and instead recognising these stressed assets as non-performing in line with internationally practices......
India needs to do away with regulatory forbearance on restructured assets
......The recommendation that the RBI may (must?) do away with regulatory forbearance regarding asset classification, provisioning and capital adequacy on restructuring of loans does both. It brings our norms on asset classification on par with developed market standards. And it ensures that powerful promoters are not able to arm-twist banks into throwing good money after bad.........
RBI likely to relax provisioning guidelines for microlenders
......Offering the MFIs a possible reprieve, the RBI is considering allowing them to make provisions against their bad loans in Andhra Pradesh over a period of three to four years, said one of the two persons quoted above. Industry officials said that such a move will only be a temporary solution.............
To loosen or not to loosen policy - A Seshan
.........The central bank’s dilemma is whether or not to loosen its policy. Commercial banks and the corporates look at monetary policy from their sectoral angles whereas the RBI has to take a macroview. In this context, the statement of Aditya Puri of HDFC Bank is refreshing. He said: “'I don't think with this inflation rate you can expect a rate cut, ….. The monetary policy cannot be the basic panacea for all ills.”...........
RBI can’t deny rate cuts for long
.....The Reserve Bank of India’s (RBI) strong anti-inflation rhetoric, after it decided to hold policy rates steady in June, has led to a toning down of expectations from the monetary policy review in July. To an extent, the markets have moderated their expectations of monetary easing over the remaining months of FY2013 as well. I, however, feel that given the widespread weakness in the economy, internally RBI must be in a far bigger dilemma than what recent public statements suggest. As such, the upcoming policy decision remains in fine balance and........
Income versus inflation
Most analysts, including in RBI, will tell you inflation is India’s biggest problem right now; indeed, RBI Governor Duvvuri Subbarao was on record recently as saying inflation was at a level where it was hurting economic growth. If inflation is allowed to go unchecked, the argument goes, inflationary expectations get embedded into every economic player’s actions, and runaway inflation is the result. No economy, the experts will tell you, has grown in the long run without having inflation under control.......
Worries over growth
...... Perhaps the RBI needs to revisit some of its assumptions and adopt a stance that prevents further deterioration in growth. Concerns over growth are becoming serious and the RBI should be seen to be addressing them as well.
Read - BS
Read - BS
India’s growth and inflation in the time of drought
......If, on the other hand, the government does try and reduce the deficit, it will lower consumption, thus reducing growth. On the positive side, though, the hope is that it might prompt the Reserve Bank of India to reduce rates, supporting growth in the interest rate-sensitive sectors.
Read - Mint
Read - Mint
Bonds yields rise as rate cut hopes fade further
......Traders had already started pricing in the prospect the Reserve Bank of India will fight inflation over boosting growth in its July 31 decision. However, those expectations were further cemented after Pronab Sen, principal adviser to India's Planning Commission, told newswire Dow Jones the RBI was likely to hold rates steady next week, adding the government needed to cut subsidies to improve confidence about its fiscal health. The RBI is independent of the government, and Sen does not have a direct influence on monetary policy, but the views nonetheless hit already fragile market sentiment........
Wednesday, July 25, 2012
RBI to hire up to 6 companies to overhaul HR practices
Private firms to help RBI frame, implement and deliver integrated HR solutions in the areas of policies, processes and systems
The Reserve Bank plans to rope in outside consultants to overhaul its human resource practices, a move that would affect its nearly 18,000 employees. The central bank will form a panel of up to six independent professional firms to help RBI in framing, implementing and delivering integrated HR solutions in the areas of HR policies, processes and systems, among others..........
Growth rate slowing down faster than expected: Saugata Bhattacharya, Axis Bank
RBI chief rues corporate governance deficit in public sector banks. Is there no remedy?
.....There is, therefore, a need for change in the present composition of the boards by splitting the post of chairman and managing director in nationalised banks as well. The RBI should have the unfettered authority to appoint a thorough professional as the non-executive chairman of every PSB. The central bank should, however, ensure that this is not meant to be a back-door entry for politicians to enter the banks, but an opportunity to cleanse the system and create an independent professional board for every bank. This could substantially improve corporate governance at the board level, thus helping to prevent unethical practices and unwarranted interferences in the operations of the PSBs.......
Markets bet on Subbarao surprise
Reserve Bank of India (RBI) Governor Duvvuri Subbarao has made a series of hawkish statements since the mid-quarter review on June 18, but market participants are still betting on the governor’s inclination to surprise the market. While the overall feeling still is that the central bank will hold the rate during the first quarter review of the monetary policy, scheduled on July 31, many feel there is still the chance of a rate cut...........
Don't put the cart before the horse
.....In cricket, they say you are judged as much by the deliveries you let go as you are by the deliveries you play at. In that spirit, RBI needs to sit this one out. That will add to the pressure on the government to act first. Anything else will be tantamount to putting the cart before the horse.
One eye on Delhi, one on the skies
.....The implication of all of this, in our view, is that the RBI will remain cautious about cutting rates. Cutting rates at this stage would, at best, tease up demand, but do little to improve the supply side. In turn, this could lift inflation pressures. It may also be worth keeping the powder dry to have firepower in the event global conditions take another leg down.....
Instead of customers, banks may bear fake notes loss
The common man who unknowingly comes in possession of fake currency is left a harried soul. It's only when fake notes are detected in the money withdrawn from a bank's counter that one gets compensated. But, in cases where a customer fails to detect a fake note at the bank's counter, the bank not only refuses to compensate the fake currency but may also take legal action against such gullible customer. To save customers from the ordeal, the Reserve Bank of India (RBI) has asked banks to put strict provisions in place to check the menace of fake notes. "The recommendations have been made to address the entire gamut of issues concerning the counterfeit currency," said an official of RBI, Mumbai..........
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