.......... Duvvuri Subbarao, the Governor of the Reserve Bank of India (RBI) is facing a Catch 22 situation currently and some catch it is. He needs to decide whether to encourage economic growth or to control inflation. Theoretically Subbarao can encourage economic growth by cutting the interest rates. But that is likely to fuel inflation as people and companies will borrow and spend more, leading to a rise in prices. He can control inflation by keeping the interest rates high. But that kills economic growth as businesses don’t borrow money to expand and people go slow on taking loans for purchasing cars, motorcycles, homes and consumer durables. This hurts businesses and slows down economic growth............
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Saturday, August 4, 2012
Flush with funds, banks set to rain frills on loans
Banks may not be in a hurry to slash your loan rates yet, as the Reserve Bank of India is yet unyielding on policy rates, but they are set to launch new schemes that will offer discounts on retails products such as home and auto loans.......
Counter-cyclicality and income smoothing in Indian banks
......Consistency in earnings growth may not necessarily be an outcome of smoothing. Unfortunately, the term income smoothing has an unduly negative connotation. Perhaps this feeling was bolstered by the only and fleeting reference to it that the Reserve Bank of India (RBI) made when they effectively banned the use of floating (”unallocated”) provisions in 2005, suggesting that banks were using them to manage earnings. But it need not be that way.........
'India faces crisis of values, institutions and policies'
.......Former Governor of Reserve Bank of India (RBI) and emeritus professor at the Univesity of Hyderabad Dr Y Venugopal Reddy, who as chief guest delivered a talk on "Indian Economy: Strengths and Challenges", opined that growth with inequality is of no use.Talking about the book which he has edited along with Deena Khatkhate, Reddy said that Dr I G Patel had a unique distinction. "Academically, he was well recognized. He was part of the highest policy making body and after retirement, for 20 long years, he was able to say things that he felt. It is time now that the country knows this," he said.
Hoping for positive effects
.....The argument for-and-against reduction of interest, especially to pushing up the housing sector growth, continues even now. What are the requirements of a possible reduction in interest rates? What stops the RBI from cutting down the benchmark rates? What will be the essentials of a positive growth of the housing sector? These and related issues need some in depth examination........
In defence of RBI
........In recent years, the RBI has done just the opposite of what both theory and empirical evidence would suggest. It has consistently devalued from a position of weakness rather than from a position of strength. Former RBI deputy governor, Rakesh Mohan, has forcefully made the same point in a recent interview. So don’t believe me, but at least believe a distinguished former RBI official. Though former governors Bimal Jalan and Y.V. Reddy have not yet opined on the issue, my guess is that they would agree with Mohan. And if you don’t believe all of these distinguished economists and policymakers, just look at what China has done for the last 30 years..........
Inflation ignored
In the recent quarterly review of the monetary policy, the reasons cited by the RBI for the one per cent reduction in the SLR are not convincing. So far, nothing has been done by the policy-makers to tackle the widening supply-demand balance. In fact, most of the banks are comfortable as far as liquidity is concerned. The reasons for decrease in credit growth vis-a-vis investment growth are entirely different. It is not true that banks are holding back on credit expansion; rather, prospective borrowers are not interested in availing of credit at the present high interest rates. Though the interest rates on deposits are high now, it is felt that investment in gold and real estate is far more profitable than depositing in banks. One is unable to understand why the Government is playing a subdued role in containing inflation by not releasing the supply-side bottlenecks.
- T .S. N. Rao (HBL)
RBI sets new norms for non-banking financial companies
The Reserve Bank of India said on Friday registered non-banking financial companies (NBFCs) intending to convert to non-banking financial company-micro finance institutions (NBFC-MFI) will have to maintain net owned funds at 30 million rupees ($537,200)by March 31, 2013 and 50 million rupees by end-March 2014........
Norms for AP microlenders eased
....“...the provisioning made towards AP portfolio shall be notionally reckoned as part of NOF (net owned funds) and there shall be progressive reduction in such recognition of the provisions for AP portfolio equally over a period of five years,”.......
Pak welcomes India's decision on FDI
....."It would be a landmark development if the Reserve Bank of India removes Pakistan-specific clauses and allows Indian businessmen to invest in Pakistan,"................
Pak central bank allows 2 lenders to open branches in India
Following India's move to allow investments from the neighbouring country, Pakistan's central bank has allowed two banks to open branches in India as part of efforts to normalise economic and trade relations between the two countries. State Bank of Pakistan (SBP) Governor Yasin Anwar told the media that the National Bank of Pakistan and the United Bank Ltd had been given the "green signal" to operate in India....
‘RBI will act if growth slips rapidly’
....“We will look at both inflation and growth. Certainly, if the growth slips as rapidly... we would take that into account but I do not think we want to lock ourselves into specific numbers or specific corridors in which we will act,” ..............
RBI can’t be expected to take up the govt’s slack
Expecting the Reserve Bank of India (RBI) to pick up the slack created by the government’s policy paralysis, on the one hand, and fiscal profligacy, on the other, is quite naïve. To understand this argument, consider the following scenario. A boat is being rowed on a river by a team of two rowers—one on each side. The boat moves ahead smoothly at a brisk pace when the two rowers act in tandem ..........
Friday, August 3, 2012
Rangarajan sees growth topping RBI’s 6.5% projection
A cover for action
........Whether it is commodity price volatility or exchange rate movements, they have preferred a policy of frozen inaction to a proactive one of hedging against such risks. As the Reserve Bank of India (RBI) Executive Director, G Padmanabhan noted only the other day, higher volatility in the rupee’s exchange rate is the ‘new normal’ in the current uncertain global environment.....
RBI asks banks to assist clients in gaining financial literacy
Bank branches need to have a more proactive role in the affairs of their micro and small enterprise (MSE) clients by providing them with financial literacy and consultancy support, according to the Reserve Bank of India. Towards this end, banks could either separately set up special cells at their branches, or vertically integrate this function in the Financial Literacy Centres (FLCs) set up by them, as per their comparative advantage. The RBI said banks should submit an Action Taken report by August 24 on financial literacy and consultancy support...........
Do’s and don’ts on plastic cards likely for banks
Thiruvananthapuram, Aug 1: Office of the banking ombudsman for Kerala and Lakshadweep may suggest a do’s and don’ts list to banks issuing credit/debit/ATM cards to customers. But this office has no right to put out a circular in this regard, Joseph F. R., Banking Ombudsman for Kerala, Lakshadweep and Mahe, told newspersons here............
Ease and convenience but at a cost
Cashless transactions are catching up fast in India. The total number of debit and credit cards in the country has increased roughly at a compounded annual growth rate of 20% in the last two fiscals, according to data compiled by Visa from data released by the Reserve Bank of India (RBI)................
SBI announces 7440 vacancies for clerical posts in associate banks
There is a good news for the aspiring candidates who have missed the State Bank of India clerk exam held in May-June 2012 as the bank had announced recruitment notification for clerical jobs in its associate banks. The eligible candidates can apply for 7400 vacancies in the five associate banks of SBI, the largest public sector bank of the country.............
Par Panel to summon RBI Governor over poor growth
.....Significantly while it is the first time that the panel has decided to summon the RBI Governor to discuss the state of the Indian economy, the move seems to be in line with international practices where central bank heads are answerable to Government panels.The panel which is headed by senior BJP leader and former Finance Minister Yashwant Sinha, sources said, has been quite concerned about the poor economic growth over the last few months and in order to get behind the actual reasons for the disappointing performance, has decided to summon Subbarao for a discussion on the matter on August 6............
RBI Governor summoned
.....If Subbarao agrees to appear before the committee, it will be for the first time that the RBI becomes answerable to the Parliament. Finance ministry officials feel it would have been better if the committee invited the governor for consultations instead of summoning him like a bureaucrat in the government..........
‘Indian regulatory norms insulate it from crisis situations’
While countries across the world, as well as India, are all undergoing a downturn, India is immune from the side effects because of good banking and regulatory norms drawn up by the RBI, said V. Gopalan, Director, Janhar Management Consultancy Pvt Ltd........
On FinMin push, govt banks eye gold loan business
.....PSBs’ thrust in this segment also comes after the finance ministry nudged them to enter this lucrative segment and at a time when the central bank has been expressing some discomfort over NBFCs becoming aggressive here. The Reserve Bank of India (RBI) has taken away priority sector status given to banks for their loans to NBFCs for on-lending against gold jewellery.......
Kaushik Basu farewell note: More woes
On a day when the Reserve Bank of India left policy rates unchanged due to persistent inflationary pressures and failure of the government to rein in fiscal deficit, the outgoing chief economic advisor, Kaushik Basu, said Indian economic woes are far from over with growth likely falling below 6 per cent in the first two quarters of current year...........
SC declines US firm’s plea on RBI norms
In a tax dispute arising out of global business transactions, the Supreme Court has declined to entertain a petition of US company Columbia Sportswear raising various questions on the RBI guidelines for assessment of tax liabilities of foreign entities on their business operations in India......
Regional rural banks allowed to start branches in Tier 2 cities without RBI nod
....."In order to enhance the penetration of banking services in Tier 2 centres, it has been decided to allow RRBs to open branches without having the need to take permission from Reserve Bank of India in each case," the apex bank said in a notification......
Unclaimed deposits in 85 banks account for Rs. 2,481 crore
....Replying to a query made by the RTI applicant Subhash Chandra Agrawal of Delhi as to whether any steps were being taken to transfer such unclaimed deposits to Central funds, the Central Public Information Officer (CPIO) of the RBI said the Banking Laws (Amendment) Bill, 2011, had been introduced in the Parliament and a new Section 26A regarding establishment of Depositor Education and Awareness Fund was proposed.......
RBI penalizes Ernakulam District Co-op Bank
The Reserve Bank of India (RBI) has imposed a penalty of Rs. 5 lakh on Ernakulam District Co-operative Bank Ltd, Ernakulam (Kerala) for violation of rules.............
RBI, foreign banks clash on priority lending norm
.....Foreign banks are not willing to accept the new norm, which will only come into effect in August 2018, as they say profitability will be eroded. Under RBI rules, any bank that fails to fulfil the priority loan norm is required to keep money with the National Bank for Agriculture and Rural Development (Nabard) for rural infrastructure development. Earnings on this are much lower than what a bank will get from giving loans.......
IOB needs Rs 1,500-cr capital infusion to meet Basel-III norms
.....The government has asked public sector banks (PSBs) to send their capital requirements under the recently notified Basel-III norms of the Reserve Bank of India. Most PSBs have done so........
Most consumers feel bank loan rates are high
The Reserve Bank of India’s decision to leave key policy rates unchanged in its latest quarterly review is likely to leave not just industry but also consumers disappointed. The RBI’s latest Consumer Confidence Survey for the June quarter indicates that nearly three-fourths (74.8 per cent) of Indian consumers feel that current interest rates on bank loans are high, while 77.2 per cent say their deposits do not attract enough interest............
Losing the battle
.....The central bank does not seem to be focusing on its main aim of “controlled expansion”; it has instead maintained its avowed focus on “controlling inflation”. Unfortunately, things are not happening the way the RBI desires. One is not sure whether the policy stand the RBI governor has taken in the recent monetary policy review will help control inflation. But it will certainly dampen sentiment. If addressing the causes of inflation is beyond the scope of monetary policy, as argued by the RBI governor, why isn’t anything being done to induce the sources of economic growth — the primary being the cheapening of the investment cost for productive economic activities?......
RBI Plays Cruel To Be Kind
...........The RBI has raised concerns about the global economic factors, categorically stating that despite a slowing economy, the outlook for commodity prices is uncertain. The bank has also raised concerns about increased subsidy burdens on account of a truant monsoon. ..........
Why the RBI preferred an SLR cut
........The RBI did not have to wait for two and a half years to realise that repo is not really the solution to inflation. The RBI had targeted repo because the interest rate that the banks charge remains above the inflation rate. The real rate of interest — as the difference between the two is called — has to be positive to ensure that people do not give up their savings habit and debtors are not subsidised by creditors. There was a more relevant reason why the RBI did not cut the repo rate.............
Why small could be big for Chidambaram
.....The RBI, currently headed by Duvvuri Subbarao who has had a distinguished stint in the finance ministry before taking charge at the central bank, has already made it clear that its hands are largely tied as far as reducing interest rates to spur growth is concerned. It has reduced rates 50 bps in April and cut the statutory liquidity ratio (SLR) by 100 basis points (one percentage point) on 31 July to allow some banks to lend to productive sectors. But beyond that, monetary policy can achieve precious little. The ball is now clearly in New Delhi’s court. And Chidambaram will have to be the principal player.......
Thursday, August 2, 2012
Shyamala Gopinath appointed CCIL chief
Mumbai, Aug 1: Shyamala Gopinath, former RBI Deputy Governor, has been appointed as the chairperson of Clearing Corporation of India Ltd (CCIL). And R. Sridharan, former Managing Director of SBI, has been appointed as the Managing Director of CCIL. The Corporation provides exclusive clearing and settlement for transactions in the money, government securities and foreign exchange markets.
HBL
Portfolios of Executive Directors
Shri V.K.Sharma
1. Customer Service Department
2. Department of Currency Management
3. Financial Markets Department
4. Rural Planning & Credit Department
Shri G.Gopalakrishna
1. Department of Communication
2. Secretary's Department
3. Department of Banking Supervision
4. Financial Stability Unit
Shri D.K.Mohanty
1. Department of Economic & Policy Research
2. Department of Statistics & Information Management
3. Monetary Policy Department
Shri S.Karuppasamy
1.Legal Department
2. Premises Department
3. Urban Banks Department
4. Right to Information Act (also First Appellate Authority)
Shri R.Gandhi
1. Human Resource Management Department (including Rajbhasha)
2. Department of External Investments & Operations
3. Internal Debt Management Department
4. Central Security Cell
Shri P.Vijaya Bhaskar
1. Department of Non-Banking Supervision
2. Risk Management Department
3. Department of Expenditure & Budgetary Control
4. Alternate Appellate Authority (Under RIA)
1. Department of Banking Operations & Development
2. Department of Government & Bank Accounts
3. Inspection Department
Shri G. Padmanabhan
1. Department of Information Technology
2. Department of Payment & Settlement Systems
3. Foreign Exchange Department
1.Deposit Insurance and Credit Guarantee Corporation
Shri V.S.Das retired........
'Das'bodh we learnt from him.............
I had the wonderful opportunity of working with Shri Das in DGBA for about a year. I got good exposure in various activities in the Bank being with him even though it was for a short period. His rich knowledge, cool composure at any time of crisis, value for human relationship are all the great qualities in him. I have never seen him raising his voice even under utmost pressure. He always carried his team with enthusiasm and it is a great pleasure working with him. I wish him all good health and success for all the future assignment he takes up. My best wishes to his family also. We will definitely miss Mr. Das’s professional expertise and his friendship in the Bank.
- Pushkala Ranganathan, PPS to the Governor
A Man with Vision, Sweet Tongued & Cool Headed as he can be described, Shri Das is always happy and will Keep others also happy. Very Sharp in judging and handling the people tactfully, he knows how to get work done from all cadres of people in the bank. With a human touch, he always cares for others’ problems/difficulties/health.
- Shailendra Naravane, PS to ED (K)
बैंकिंग डिपो बनेगा आरबीआई कार्यालय !
कानपुर, नगर संवाददाता : माल रोड स्थित भारतीय रिजर्व बैंक (आरबीआई) कार्यालय अब बैंकिंग डिपो की तरह कार्य करेगा। यहां से शहर और आसपास की सरकारी और गैर सरकारी बैंकों को कैश लेनदेन का कार्य होता रहेगा। जनता से जुड़े अन्य कार्य लखनऊ और उत्तराखंड कार्यालय स्थानांतरित करने की तैयारी है। हालांकि क्षेत्रीय निदेशक ने अभी ऐसे किसी आदेश से इंकार किया है। ...................
Continue reading.................
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Govt didn't do its bit after April, says Subbarao
RBI sets up panel for strengthening rural credit structure
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India's ATM industry is banking on the unbanked
....."Although there has been nearly 23 percent to 25 percent year-on-year growth in the number of ATMs, their deployment has been predominantly in Tier I & II centres," said an RBI statement. "There is a need to expand the reach of ATMs in Tier III to VI centres. In spite of the banks' pioneering efforts in this direction, much needs to be done." This statement was made in connection with a new program just implemented by the RBI. In order to speed up the achievement of its financial inclusion objectives, the central bank announced in April that it would allow, for the first time, the white-labelling of ATMs in India. .....
Govt needs to act on subsidies: RBI
The Reserve Bank on Wednesday listed subsidies and bottlenecks in food supply as issues, among others that need to be addressed by the government for prudent inflation management and sustainable growth............
No implicit message to govt via SLR cut, says Subbarao
RBI Governor Duvvuri Subbarao on Tuesday dismissed the view that the central bank was trying to send a message of intolerance towards higher fiscal deficit and government borrowings through the cut in SLR. “The move was not driven by the need to shift the banks’ portfolio from the government to the private sector,” Subbarao said.......
SLR cut will provide a cushion for banks: Gokarn
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Balancing act
This refers to the editorial “A textbook response” (Business Line, August 1). The RBI has once again done a balancing act by reducing the SLR. This move is bound to increase the flow of liquidity, which will lead to a substantial leap in growth. By not touching policy rates and the cash reserve ratio, the central bank had done well, in view of the existing economic situation. It is now for the Finance Ministry, under a new incumbent, to take steps to control the fiscal deficit (according to the warnings given by the RBI during its previous reviews), expedite reforms and woo prospective investors to revive the economy. Inflation needs to be reined in to mitigate the sufferings of the aam aadmi. The RBI’s directive to relax the norms in forex earnings will help exporters. The poor, especially the senior citizens, will feel encouraged to keep their hard-earned money in banks as the interest rates have been left unchanged.
- Jayant Mukherjee, Kolkata (HBL)
Lack of direction
In its latest latest policy review, the RBI has kept all key rates unchanged except for SLR, which has been brought down to 23 per cent from 24 per cent, infusing additional liquidity of about Rs 62,000 crore. This is expected to help banks channel credit to productive sectors. With global demand receding and capacity utilisation being low, one has to be on guard on the effects of such a measure. With gloom all around, both at the global and local levels, and poor monsoon adding to the woes, there is a lack of direction from all concerned to bring the economy back on the rails. The new Finance Minister should take some bold steps to ensure forex inflows into a sagging economy.
- Srinivasan V Chennai (HBL)
Public sector banks in a complex world
Recent press reports have quoted a spate of instructions of an operational nature from the Union ministry of finance to public sector banks. (The Reserve Bank of India and a previous governor have protested against the interference.) Before coming to the issues,.........
E-payment facility to cover entire state by January 2013
....The launching of the new payment would increase staff productivity, enhance the customer’s satisfaction and minimise the transaction costs for the state government and the bankers, thereby compressing the time and avoid embezzlement of funds,” said J K Mohapatra, principal secretary (finance) at the launching ceremony. V Ramachandra Rao, Regional Director-RBI, Gargi Kaul, Principal Accountant General and P P Nath, Director of Treasuries and Inspection were present at the launching ceremony........
HC restrains sale of benami property in Rs 600 cr bank scam
Hearing a petition alleging siphoning of Rs 600 crore by Board of Directors in Pen Urban Cooperative Bank in Raigad district of Maharashtra, the Bombay High Court today restrained owners of 39 properties held in benami names from selling or creating third party rights. Justice D D Sinha and Justice Vijaya Kapse-Tahilramani also asked Reserve Bank of India to make its stand clear on September 26, the next date of hearing...........
Police freeze 'fake' bank accounts
....Bhandge said that he will be approaching the Reserve Bank of India (RBI) to show the negligence approach that the banks take while opening a new account. "The arrested accused said the bank use to handover the bank passbook, cheque book and debit card immediately after opening account instead of sending the documents on the address mentioned in the account. If the banks has followed this procedure then they could have easily identified the fraud," he said.......
Time to junk the status quo
......Only two days ago, Reserve Bank of India governor Duvvuri Subbarao withstood mounting pressure to cut interest rates from local businesses who had been arguing that the steep cost of raising loans had upset their capacity expansion plans. A status quo on interest rates, however, isn't good news for millions of families caught in a pincer attack of rising prices and high borrowing costs. Surging food costs have shrunk household incomes, as consumers have to pay more for the same goods.........
Muted demand for credit growth going ahead: Bankers
....While RBI’s assessment that interest rate cut is not likely to drive GDP growth but might push up inflation, Samiran Chakrabarty of Standard Chartered Bank questions what will make this assumption change. “Unless we get a clear answer to that regardless of how much GDP falls, the argument could easily be that interest rates are not the primary drivers of growth today, so why even cut them? To me, we are going by 5.6% GDP growth for the next release but I do not think even that will be big enough for RBI to shift their bias more towards growth.”........
‘Best’ practices: West and the rest
......Together with the deft monetary management that the Reserve Bank of India under Y. V. Reddy displayed in 2008-09, the ethical practices of banks like SBI, for those times, provide instances that the Indian financial sector can justifiably be proud of. And it also evidence that our own practices are sometimes as or much superior to those deemed as best of the West.
India to continue facing stagflation-type situation: Report
....Stagflation is a situation when economic growth of a country stagnates while inflation is rising. Considering inflation would persist above the Reserve Bank's comfort zone for longer, it said, "We are reducing our expectation of further monetary policy easing to 50 basis points (0.5 percent) by December, 2012 from our earlier expectation of 75 bps (0.75 percent)".......
Few hopes from Chidambaram
.....Chidambaram slashed taxes while believing that a Laffer Curve (which suggests that tax cuts can generate additional revenue) would ensure that total tax collections would rise. He also reduced import duties, took the first steps of opening up the insurance sector, launched a controversial tax amnesty scheme and increased FII (foreign institutional investor) investment limits. Few pay attention these days to a landmark agreement with the RBI that ended the malignant practice of compulsorily monetizing the fiscal deficit through the issue of ad hoc Treasury Bills.......
Wednesday, August 1, 2012
Empanelment for promotion to the post of Executive Director
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Message from Mint Road: Inflation still enemy number one
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| Reserve Bank of India (RBI) Governor D Subbarao (C) along with Deputy Governors, left to right, Anand Sinha, K C Chakrabarty, Subir Gokarn and H R Khan during RBI’s 1st Quarter monetary policy review meeting in Mumbai on Tuesday |
.....................“The primary focus of monetary policy remains inflation control in order to secure a sustainable growth path over the medium-term. While monetary actions over the past two years may have contributed to the growth slowdown – an unavoidable consequence – several other factors have played a significant role. In the current circumstances, lowering policy rates will only aggravate inflationary impulses without necessarily stimulating growth.”........................
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RBI's stance on low growth will weigh in inflation: Gokarn
Why Subbarao is the last man standing in a world gone mad
Subbarao’s credibility rises with firm policy stance
.....“Nail-biting global economic conditions have compelled central banks in advanced and emerging economies to cut rates, and moderate domestic economic growth has drummed up pressures on the RBI to act. However, the RBI kept cool and stayed focused on its objective, which helps cement its credibility.”........
RBI policy reflects cautious stance: Montek
......."As far as looking ahead is concerned, the RBI has taken a slightly cautious stance because of its concerns that inflation is sticky. I have no difficulty with that," ............
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RBI decision to retain interest rates 'right move': Kaushik Basu
Describing the RBI decision of not cutting key interest rates to check price rise as the "right move", outgoing Chief Economic Advisor Kaushik Basu on Tuesday expressed hope that inflation would come down to below 7% in September. "My expectation is that inflation in the month of September will go below 7 per cent," he said while commenting on the RBI decision to keep interest rates unchanged for the second time in a row.............
Read - DNA
RBI POLICY: Rangarajan says right balance struck by holding repo steady, cutting SLR
"The reduction in SLR will provide additional liquidity to the banking system and it will also prevent to some extent the crowding out,"..........
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If I G Patel had been finance minister...
What sort of finance minister would the distinguished policy-oriented economist Dr I G Patel have made? This is an interesting counterfactual proposition worth pondering in this review, since he was the first choice of Prime Minister P V Narasimha Rao for this position in 1991. If he hadn’t declined the offer, Dr Patel would have been the architect of India’s reforms............
RBI takes a balanced view
.....The central bank has taken a balanced view of the existing situation and refrained from making changes in the policy rates and the Cash Reserve Ratio. It has correctly articulated its stance by saying that the management of inflation is its primary focus in the formulation of monetary policy........
No move to ban banks from selling gold coins: RBI
Contrary to speculation that the Reserve Bank may ban banks from selling gold coins, Governor D Subbarao today said there was no such proposal at present as the proportion of gold coin sale by banks was very small. “The answer is no! because gold coins themselves are a very small proportion of the total import of gold,” Subbarao told reporters at the customary post-policy interaction, when asked if the RBI is contemplating such a ban.............
RBI has made a very prudent move: Sajjid Chinoy, JP Morgan
..... It was very prudent. The risk to inflation has been on the upside and that is never an environment where you want to stoke inflationary expectations even further by cutting rates. We have to accept the fact that growth is going to slow a below trend, but this is not fundamentally a monetary problem. This is now a real sector problem over which the RBI has very limited leg room...........
Why RBI’s fears about India’s growing current account deficit are misplaced
.... exposition of the risk-averse view came recently from YV Reddy, former RBI Governor, at the annual NCAER-Brookings India Policy Forum. He said the government viewed a CAD of 2.5% of GDP as a safe average. Obviously the CAD could fluctuate around this. Reddy said the international climate had deteriorated greatly in the last year, necessitating a new look at safety limits. The world economy was in turmoil, with the eurozone in dire straits and slowdowns across the globe. Financial flows and currency rates seemed far more volatile than earlier. Many Indian companies had difficulties raising foreign loans......
RBI worried about growth, inflation, ‘twin’ deficits: Ten facts
The Reserve Bank of India’s statement on the first quarter monetary policy highlights concerns on growth, inflation and deficits in that order. The statement issued on Tuesday has words like ‘growth’ 67 times, ‘inflation’ 58 times and ‘deficit’ 16 times............
A textbook response
......banks can lower lending rates only if their cost of deposits comes down (difficult when the public has alternative savings avenues in gold or real estate) or they are able to borrow cheaper from the RBI. By turning down the latter option, and also keeping the CRR unchanged, the RBI has basically made it impossible for banks to cut rates........
SLR cut expands repertoire of policy tools
RBI has developed a knack in bowling googlies at market analysts, using “gotcha” manoeuvres to confound. And, ex post, these measures are the sort that make you go “I should have thought of that and seen that coming”................
Read - FE
DON’T READ TOO MUCH INTO SLR CUT
.........Why did the Reserve Bank of India (RBI) cut banks’ statutory liquidity ratio (SLR), or the percentage of deposits that banks are required to invest in government bonds? One explanation could be that RBI governor D. Subbarao is extremely serious about the central bank’s fight against the government’s fiscal profligacy. RBI has been repeatedly stressing the limitations of monetary policy and wants the government to get its act together to fight a persistently high inflation and ensure sustainable growth. Cutting down SLR is another salvo as it will .........
On hold for all the right reasons
Reserve Bank of India’s (RBI) policy review on Tuesday continued from where it had left off in June: holding rates on inflation concerns. This time it wasn’t as dramatic a decision as in June when the market had completely convinced itself that a rate cut was cast in stone. Rather with fears of inflation turning rabid on higher food prices given the weak monsoon, the market had resigned itself to no rate cuts this time............
Monetary policy options becoming limited
Expectations of economists from the July monetary policy of the Reserve Bank of India (RBI) had been minimal. The message in the June policy and in the speeches of the RBI governor that followed was clear and forceful: inflation is well above RBI’s comfort level, at this juncture interest rate cuts are unlikely to propel growth and fiscal consolidation is a pre-condition for monetary policy easing. The RBI statement on Tuesday reiterates these three messages and this consistency, to us, is one of the key takeaways from the July policy.............
Of growth, inflation, rates and internal security
......So, the economic question narrows down to a choice between which is worse: high inflation rate or low economic growth. By and large economists are arguing for keeping interest rates high until the government fixes its fiscal backyard in a wider context of global uncertainty. Why should RBI do the government’s job, they ask. Besides, if the inflation rate is allowed to skyrocket, it will have repercussions on internal security, as food prices get out of the hands of the poor. There will be food riots, they argue. The good news here: no government likes a high inflation rate, so the issue will get political backing......
A let-down for industry, say chambers
........Reacting to the monetary policy review by the Reserve Bank of India on Tuesday, Assocham said here that industry was disappointed with the key policy rates being unchanged..........
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Real estate industry unhappy over RBI's policy
Real estate firms and property consultants today expressed disappointment over RBI's decision to keep rates unchanged and said the sector urgently needs cut in interest rates to boost housing demand. "There is once again disappointment from RBI. There was no change in the rates in previous policy announcement and the real estate sector was expecting a rate cut this time," said Lalit Jain, President of the apex realtors' body CREDAI. "We don't see any positive policies from government which will boost the real estate sector and economy as well," he added..........
CBDT extends I-T returns filing date to 31st August
The Central Board of Direct Taxes (CBDT) has extended the due date for filing income tax (I-T) returns for assessment year 2012-13 to 31st August from 31st July. This means, you can file your I-T returns for FY2011-12 till 31st August....................
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RBI to review new rules for priority sector lending
.......“Evidently, there are still some open issues on priority sector lending.... I think some of the suggestions were quite reasonable. We decided that in the next 15 days, there will be a meeting at the operational level and (another) meeting at the bank chairmen level. It is not clear what we will change but, certainly, we will have an open mind,” Subbarao told reporters after the first quarter review of monetary policy for 2012-13........
RBI inks MoUs with UK, Norway regulators
....The Reserve Bank has signed memoranda of understanding with regulators of UK and Norway among others to promote greater co-operation and sharing of supervisory information. The MoU with the Financial Services Authority (FSA), UK was signed by RBI executive director P Vijaya Bhaskar and Andrew Bailey, Director of FSA .......
Now, exporters to retain 100% forex earnings
...... its quarterly monetary policy review on Tuesday, RBI has henceforth allowed credit of 100 per cent foreign exchange earnings to be kept in the EEFC accounts subject to the condition that the sum total of the accruals in the account during a calendar month should be converted into rupees on or before the last day of the succeeding calendar month after adjusting for utilisation of the balances. Presently, exporters can retain only 50 per cent of the export proceeds in EEFC accounts......
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