India's financial regulators and the government are caught in a cleft stick over monitoring and regulation of a credit co-operative society backed by members of the Sahara Group. The entity, over which RBI and Sebi have no oversight powers, has substantial deposits...........
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.
Wednesday, September 5, 2012
J&K Grameen Bank launches new services
Mumbai, Sept 4 (IBNS): J&K Grameen Bank, with the help of IDBI Intech’s i@Connect software, on Tuesday announced it has launched National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) services. "RBI Circular dated 09th April 2012 (Access criteria for payment systems – sub-membership to centralized payment systems) had mooted this innovative concept of rural banks to become a sub-member to their sponsor bank," said on official spokesperson on Tuesday......
Tuesday, September 4, 2012
Economic and financial developments in Uttarakhand - Deepak Mohanty
.....Against this background, let me now turn to the financial inclusion strategy of the Reserve Bank and what are the specific steps taken for Uttarakhand? It is important to bring the poor and under-privileged sections of the society within the banking fold for inclusive growth. In this context, our recent financial inclusion drive has four key elements......
EDB holds Kissan mela
Srinagar, Sep 2: E D Bank organized a Kissan Mela at Sugain, a remote village in Khag block of district Budgam. Chief Guest Ravinder Koul, AGM Reserve Bank of India on the occasion urged the farmers to come forward to avail KCC from the Bank for development of Agriculture in the area. “The area has a lot of scope and potential for Agri credit absorption,” he said. He suggested productive use of the credit and timely repayment of dues so that Banks can recycle the funds.
Greater Kashmir
RBI asks banks to issue cheques with uniform features by Sep 30
Mumbai: The Reserve Bank today directed all banks to issue cheques with uniform features conforming to Cheque Truncation System (CTS) 2010 standard by end of this month. The homogeneity in security features act as deterrent against frauds, and the fixed field placement specifications facilitate straight-through-processing at drawee banks' end through the use of optical or image character recognition technology, RBI said in a notification......
State B Bikaner - Appointment of RBI Nominee Director on the Board
State Bank of Bikaner and Jaipur has informed BSE that Reserve Bank of India, vide its letter dated August 22, 2012 has appointed, in terms of powers vested with RBI vide section 25(1)(b) of State Bank of India (Subsidiary Banks) Act, 1959, Smt. Malvika Sinha, Chief General Manager, Reserve Bank of India, New Delhi as RBI Nominee Director on the Board of State Bank of Bikaner & Jaipur with immediate effect, vice. Shri Rajesh Verma.
Lateral hiring frustrates staff: Pratip Chaudhuri
............Chaudhuri suggested that banks change the way they compensate people. He explained that the compensation structure of any employee was biased in favour of metros. “I think we need to have a reverse compensation. There should be a compensation to work in rural, semi-urban areas. In the next wage revision with the Indian Banks’ Association, this would one of the things (that would be addressed),” he added.
SBI chief for a national debate on CRR
State Bank of India (SBI) Chairman Pratip Chaudhuri, on Monday, reiterated his stance on Cash Reserve Ratio (CRR) that it should be phased out completely and wanted a debate on the subject.........
My View on "CRR - Breaking self imposed silence.........."
If in India the effect of CRR, as argued by Dr. Nagarajan, is neutral or even perverse, it is not clear as to why this instrument is used to block not only the statutory minimum ratio but also much in excess of it. Banks being commmercial entities and expected to make profits (fortunately, the earlier view that public sector banks are not expected to make profit is no longer stated) have a certain cost of funds and if interest is not paid even on the excess balance required to be maintained,how is this justified? Dr. Nagarajan should touch on this point.
- A. Chandramouliswaran
- A. Chandramouliswaran
Dear all,
This is an interesting debate. The point raised by Mr.Chandramouliswaran (if the effect of CRR is neutral or perverse, why it is used?) remains unanswered. Dr.Nagarajan has left it to RBI younger generation. Let it be. I do recall that myself and Dr.Nagarajan debated this issue in mid 1980s when both of us were faculty in the BTC. The debate was endless-- and now also I leave at that. Here is a link which in technical sense explains how CRR operates in a lay man's language http://www.tatamutualfund.com/Knowledge-Center/Cash%20Reserve%20Ratio.pps.
I have also attached an article (first part only is relevant) on the issue of future of CRR written in 2010
(http://xa.yimg.com/kq/groups/31273828/1757422588/name/about). Both Dr.Nagarajan and Mr.Chandramouliswaran are my best friends--no offence to any of them. I am personally somewhat sympathetic to SBI Chairman's view in the current context of the banking system being sqeezed from every corner--high policy rate, CRR with not interest, Basel III, etc., but the way in which he put forth his views invited rightly the wrath of the Reserve Bank. He was also erroneous in some part of his statement as pointed out by Dr.Nagarajan (particularly relating to CRR application to non-banks).
KSabapathy (via email)
Debating cash reserve ratio
....CRR is a time-honoured instrument in the hands of a central bank to administer and calibrate monetary policy. The reason why Mr Chaudhuri may have felt emboldened to go public is that a distinction can be drawn between monetary policy and managing liquidity...........
RBI can't abdicate its role
This refers to the Q&A with Reserve Bank of India (RBI) Deputy Governor K C Chakravarty (“It is not our job to help banks achieve targets,” September 3). His assertion that it is not the central bank’s job to help banks achieve targets ignores some fundamental issues. Who lays down the targets in the first place? Who sets limits on various activities of banks? Moreover, who owns these banks? The limits of credit provisioning to specified sectors of the economy and inter-sectoral allocations are devised by the Centre and RBI. Having laid down these parameters, it is improper to say no help needs to be extended to banks to reach these targets. Banks are severely handicapped by umpteen regulatory requirements. They do not enjoy the independence to do business on purely commercial considerations, prudential norms notwithstanding. They are not only ring-fenced by RBI regulations, but the international benchmarks laid down by the Basel requirements also create roadblocks on their strategic planning. It is also pertinent to point out that the strengths and weaknesses of all banks are not the same. Therefore, some space for individual manoeuvring is necessary.
- G R Saha Kolkata (BS)
Look beyond the repo rate
As the mid-quarter monetary policy review due on September 17 draws near, the usual speculation about the Reserve Bank of India’s (RBI’s) action is building up. There is a minority that hopes that the combination of sub-six per cent growth in the last two quarters and somewhat lower-than-expected inflation rates will persuade the RBI to drop the policy rate. The majority in the markets, however, expects no change — particularly in the absence of any visible efforts by the government to pare the fiscal deficit or improve the food-supply situation..............
Will the liquidity dry up again?
................Of course, RBI can restart bond purchases, which have been stalled for the past two months. But it is clear that without concrete policy action, there is little chance of the liquidity deficit in the system moving to surplus. Thus, a proxy rate cut may just be wishful thinking.
Bank employees welcome Central Government’s move
Tamil Nadu Bank Employees Federation (TNEF) state general secretary E. Arunachalam has welcomed the Union Government’s decision, following the recent bank employees’ strike, to withdraw the proposed amendment in Banking Regulation Act to keep bank mergers out of the ambit of Competition Commission of India........
Blame self-goals, not global crisis
........RBI starts by saying that the deceleration in growth seen in Indian economy is due to a combination of international and domestic factors. While this is correct, blaming the global environment only helps the government to pass on the buck, provides an alibi for inaction and an opportunity to attribute our own sins to ‘global factors’.........
Mamata likely at bankers’ meet for development
..........According to sources from the state finance department, the possibility of the chief minister attending the meeting of SLBC, West Bengal has become bright after a recent communication from the Reserve Bank of India (RBI) to the chief minister’s office, where the apex bank requested Banerjee to interact with the banking circle more intimately to achieve the desirable economic development of the state............
Banks may get more time to shed bulk deposits
...According to RBI’s definition, however, bulk deposits are corporate deposits that are generally Rs 1 crore and above with maturity of up to one year. “We are re-computing the share of our bulk deposits after we received the clarification from the ministry. According to the ministry’s definition, the proportion of our bulk deposit base will be lower than what we had earlier estimated. This will help us to meet the 15 per cent cap within the given timeline,” said another banker............
PSU banks make home loans a little sweeter
.....Earlier, in July, the Reserve Bank of India (RBI) announced a cut of one percentage point in the Statutory Liquidity Ratio (SLR) - the proportion of deposits that banks must invest in government bonds. PSU banks have taken advantage of the increased cash flow to make loans cheaper.......
There isn't much time left for kick-starting the economy: Chanda Kochhar
.............. don’t want to guess what the central bank would do. My theory is simpler. While lower interest rates would be an enabling factor for investments to take place and for people to buy more homes or invest more in homes and cars, that alone won’t be enough. It is important now to kick-start the economy through executive decisions to restore confidence in the investment climate. The process of decision-making has to improve for projects that have been either completed or are nearing completion...................
Yes Bank to install ATMs at Kolkata metro stations soon
Yes Bank, India's fourth largest private sector Bank has won the bids to install and operate 19 ATMs across 16 Kolkata Metro stations. The roll-out of the network has been initiated with two locations at Mahanayak Uttam Kumar station and one at Kalighat station already being operational..........
RBI wants banks to install system to alert police
Worried over the rise in crime at banks’ automatic teller machines (ATMs), the Reserve Bank of India (RBI) has asked banks to install remote mechanisms that would automatically trigger alarm at the nearest police stations. This is expected to help the police reach the site of incident without delay...............
Starting today, you need to be doubly careful at an ATM
Going forward you need to be doubly careful while you are at an Automated Teller Machine (ATM). Reason: the Reserve Bank of India (RBI) has asked banks to disable their cash retraction facility at ATMs........
Need cash? Visit nearest police station
JAIPUR: Next time when you urgently need some money, you can visit the nearest police station! This may sound a bit odd as people go to police station when they lose their money and not vice versa. However, various banks, both nationalized and private, have entered into an agreement with the police commissionerate here to install ATMs at police station premises in an effort to curb robberies and thefts.........
RoC: The dog that did not bark when Sahara came in
...... it is little coordination between the three regulators -, RBI, Sebi and RoC. After the RBI ordered Sahara India Financial Corporation to stop taking deposits from the public in 2008, two Sahara companies – SIREC and SHIC – started raising OFCDs by avoiding both RBI and Sebi. This could not have been a mere coincidence. Did the RBI not inform the minister of company affairs and Sebi to warn them against Sahara?...........
Monday, September 3, 2012
Cricket with tennis balls? - K.Sivaraman
‘Can the Reserve Bank of India stand up to the Finance Minister,’ was the question raised recently in the media. This is a misleading question. The RBI is expected to provide expert advice to the Government, in compliance with the provisions of the RBI Act, 1934. Acceptance or rejection of such advice is the latter’s prerogative.......
- K.Sivaraman, Retired Chief General Manager of Reserve Bank of India
Read - HBL
Bank customers must remain cautious, says ombudsman
PUNE: Increased use of technology in banking transactions has made it imperative for users to exercise greater caution in the way they handle their operations, the country's Banking Ombudsman R Sebastian said at a press conference on Friday. Sebastian said alternate banking channels such as internet banking or mobile banking have made operations complex and the smallest negligence can cause a big loss. "Misplacing debit or credit cards, sharing passwords, losing mobile phones are all events that hold the potential of a fraud taking place and customers should immediately report the banks or mobile service operators," she said.......
Banks shying away from education loans: RBI
Banks are shying away from giving education loans and the Reserve Bank of India’s Office of the Banking Ombudsman (OBO) in Chennai says more than 50 per cent of complaints regarding loans and advances pertains to banks’ denial of education loans. Addressing reporters here on Friday about OBO’s annual report, RBI Deputy General Manager Suman Nath and Banking Ombudsman S Ganesh said their office received 6,877 complaints relating to loan and advances. Of these, over 50 per cent pertained to denial of education loans. It is only after the intervention of the OBO that banks started processing the loans, said Nath.....
Growth crisis is worse than it seems
....The RBI had frontloaded the rate reduction in April in the hope that the Government would do its bit in pushing pending reform measures and take some serious steps towards fiscal consolidation. The central bank’s decision to press the pause button on interest rates on July 31 drives home the point that the onus lies with the Government to revive momentum in the economy.........
Public sector banks, including Punjab National Bank, IDBI, SBI and Bank of India set out on a talent drive
Public sector banks (PSBs) including Punjab National Bank, IDBI, State Bank of India and Bank of India are altering their talent strategies to focus on performance and employee engagement. The banks are also lining up incentives such as paid holidays abroad, leadership and training programmes at top b-schools............
Read - ET
Jayalalithaa suspends officer for allowing Sri Lankan football team to play friendly match
....The team had come after the Royal College of Colombo evinced interest in playing friendly matches. The college contacted a Reserve Bank of India official, who made the arrangement. The team arrived on August 30 and played a match with the Customs team on August 31. Ms. Jayalalithaa said, “When I inquired into the matter, I was told that the Reserve Bank official had sought permission from the stadium officer, who had orally granted permission. The officer has no power to allow matches in the indoor stadium and only the Sports Development Authority of Tamil Nadu (SDAT) has been vested with the power to do so.”.....
Growth v price stability
....This explanation will naturally not go down well with the several advocates of a softer interest rate regime. However, for all its unequivocal statement, the RBI is most probably not revealing its monetary policy stance. In other words, whether there will be an interest-rate cut or not, the ensuing credit policy review will continue to be a matter for debate, with both sides marshalling their facts and figures. But the RBI’s assertion that high interest rates are not the only, or even the main cause for the slowdown, gives a new twist to the traditional monetary policy debate of growth versus inflation.......
Priority sectors and banking policy
....RBI proposal should be viewed as part of the " learning process" of RBI and as part of the macro banking policy. Public memory may be short but not the researchers'. In the first flush of enthusiasm of implementing banking reforms in the early 1990s, RBI policy- makers were intoxicated with market theology and were keen on mimicking British or American banking models. Directed credit symbolised by the priority sector credit target of 40% was a " dirty phrase". At the same time the policy- makers were not bold enough to openly do away with such credit targets. They adopted a more subtle way of de- emphasising priority sectors. Many PSBs defaulted on the 40% target and RBI winked at the default. Not only that, in a bid to boost their profits, following British or American models, PSBs got rid of a large number of small borrowal accounts. In effect, small borrowers including small farmers were disenfranchised. All this has been well documented. A more concrete evidence of RBI's policy of financial " exclusion" during this phase was that RBI ceased to discuss credit allocation to priority sectors......
Read - FPJ
Financial untouchables
.....Migrant workers with no local proof of address don’t figure anywhere in the Reserve Bank of India’s (RBI’s) ‘know-your-customer’ guidelines. There is a separate set of guidelines for NRIs, even for migrants from Nepal, but none for migrant labourers. The only privilege RBI has belatedly granted them is that of a bank account. Here is an example of how PPF treats the poor. Though it is called the Public Provident Fund, the word public, according to State Bank of India, does not include poor and migrants who don’t have their own house in the locality.......
A Question Of Timing
....Chaudhuri may have raised a fair question — whether the current level of CRR is too high — but his logic (and timing) may be flawed. The statutory minimum for CRR is 3 per cent, and the RBI Act does not have any provisions for paying interest on balances, though in a December 2003 report on another policy instrument, the liquidity adjustment facility, the RBI discussed the need for a change in the statute to lower it below 3 per cent, or pay interest on balances......
EMPEROR, LOOK AT YOUR OWN CLOTHES
....why shouldn’t be RBI subjected to Comptroller and Auditor General of India’s (CAG) audit? I am in no way suggesting the central bank is doing things that it should not do. In fact, as an institution it is known for its impeccable integrity and intellectual honesty even as it continuously fights with the finance ministry for its independence, but there is no harm in being scrutinized by CAG and the public accounts committee.
With the changing times, the emperor should look at his own clothes. Otherwise, it loses the right to point fingers at its naked subjects........
Power abuse
Shyamal Majumdar’s column “Time for self-regulation?” (Human Factor, August 31) was well written. There are also a number of such CMDs and executive directors in banks who believe they deserve to be in top positions and look down on their colleagues. It isn’t unusual to hear them pass sarcastic and unacceptable remarks at functionaries at meetings. The behaviour of these top executives is only encouraged by yes-men who aim to get coveted transfers, including postings abroad. Unfortunately, the system has tolerated and supported such officials.
- S Mohan Ram, Mumbai (BS)
The banking system and CRR
..............Therefore, till the time necessary conditions are not created, the banking system will have to live with CRR.
Read - Mint
Banking is not a charitable business: Chakrabarty
Reserve Bank of India’s Deputy Governor K. C. Chakrabarty is someone who speaks his mind. That obviously doesn’t endear him to many. Often times he has ruffled feathers with his forthright views
RBI is never satisfied with anything because our expectation level is much higher. More than RBI, I am concerned if the customer is satisfied. I am satisfied if the customer is satisfied. We are telling the banks to improve.Read - The Hindu
It is not our job to help banks achieve targets: K C Chakrabarty
Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty, in an interview with Rutam Vora, says banks should not complain about the stiff priority-sector targets.,,,,,
Interest rates will come down when inflation softens: RBI
 |
| On the global economic situation “This is a crisis, absolutely no doubt, it comes once in a lifetime... I can say we shall not be alive when this type of crisis comes next...” |
Read - Mint
On rate cut, St’s split down the middle
Economic growth data for the quarter ended June has left economists and analysts divided on the issue of a reduction in key policy rates by the Reserve bank of India (RBI)..........
Read - DNA
Data Rupture
....In his inaugural address at RBI’s Statistics Day Conference last year, Governor Duvvuri Subbarao went into the need for more data and better data in some detail. He highlighted the lacunae in unemployment, wages and inflation data, but drew special attention to the “analytically bewildering” volatility of IIP data. .....
What role can the banking sector play in getting India back on the path of 10% GDP growth?
..... One, let’s have the FRBM Act and delink monetary policy. Second, free the RBI board and public sector bank boards from irrelevant and unnecessary government interventions. And three, please do not undermine existing institutions. I am specifically referring to the CAG and EC.
My View on "RBI doubles contingency reserve, surplus transfer to Centre falls"
 |
| M.G.Warrier |
Transfer of RBI's surplus profit to GOI in 2011-12 was Rs 16010 crore which as percentage to gross income is lower by around 10.4 per cent as compared to 2010-11. Obviously, the transfer of ‘surplus income’ to government in a routine manner when the reserves position of the central bank shows a declining trend needs a review. Considering the size of RBI’s balance sheet recouping the reserves position to healthier levels will be a Herculean task.Considering the size of its balance sheet and the internal and external pressures on its income generating capabilities, as also the nature of shocks RBI has to absorb from time to time, GOI should support the central bank’s efforts to augment its reserves at least on par with the 12 per cent norm of capital adequacy RBI expects from banks it supervises. But despite a transfer of `2348 crore in 2011-12, from income to ADR raising its level to `18214 crore as on June 30, 2012, the CR and the ADR together constituted only 9.7 per cent of the total assets of the Reserve Bank as on June 30, 2012 showing a fall of 0.6 per cent from the level of 10.3 per cent during the previous year, taking the original target of 12 per cent further away. It may be recalled that in 2009 the target was almost in sight when the level reached 11.9 per cent. To ensure that temptations of government emanating from external compulsions do not dilute the strength of RBI’s balance sheet, GOI should take measures to augment the share capital of RBI after carrying out appropriate amendments to RBI Act. Till such time RBI should be allowed to retain surplus income by transfer to reserves. Considering the size of its balance sheet and the internal and external pressures on its income generating capabilities, as also the nature of shocks the Bank has to absorb from time to time, the central bank’s reserves need to be augmented on an ongoing basis.
FinMin looking at further consolidation of RRBs to 55
The Finance Ministry is considering a proposal to further consolidate the number of Regional Rural Banks (RRBs) to 55 for improving their efficiency and to better serve the rural economy. There are 82 RRBs sponsored by various public sector banks across the country..........
Speaking At Cornell, India’s Central Bank Governor Endorses Austerity for Growth
.......Subbarao traced the story of India’s growth from the early decades after independence when the country experienced what he called the “Hindu rate of growth”. The phrase suggests that the Hindu philosophy of fatalism is detrimental to economic development. However, it would have been much more appropriate to term India’s modest growth rate under Prime Minister Nehru as the “Communist rate of growth” as India’s early policy makers were enamored by the socialist model of the Soviet Union. But due to a series of economic reforms after the Balance of Payments crisis of 1991, India experienced rapid economic growth driven by a high savings rate, increased productive capacity, and an unprecedented demographic dividend.............
Bank credit to consumer durables down
Bank credit to such categories as professional services, consumer durables, and advances to individuals against shares and bonds declined more sharply between March-end and July 27, 2012, compared with the year-ago period....
CM mulls stringent action against unauthorized NBFCs
GUWAHATI, Sep 1: Chief Minister Tarun Gogoi said stringent action would be taken against the non-banking financial companies (NBFCs) and other such institutions which are raising money from the market without following the Reserve Bank of India (RBI) guidelines. The Chief Minister has also instructed the Finance Department to take action against such unauthorized NBFCs functioning in the State and make a list of such unauthorized NBFCs in the State. It may be mentioned that several NBFCs are functioning in Assam without the RBI’s nod and the Bureau of Investigation of Economic Offences (BIEO) had already started its investigation in this regard.
The Sentinel Assam
SC issues notices to Centre, RBI on PACL’s petition, No Ex parte stay
The Supreme Court has issued notices to the central government, Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI) and others on a petition filed by PACL India Ltd. seeking stay of an order of the Madhya Pradesh High Court. The High Court had on the basis of a preliminary CBI enquiry report noted in its order that the allegations made are “prima facie found to be true” and directed its order to be circulated to different government agencies by way of information.......
Bolder Measures for a Cashless Economy
.....By swiping a debit card, a customer can pay for purchases at a shop directly from her bank account. Consumer convenience is obvious. Merchants do not have to manage cash (for those not evading taxes). But banks benefit in three different ways. Had the customer withdrawn cash a few days earlier from an ATM to spend at the shop, the bank would have incurred cost of ATM withdrawal, lost out on float in the bank account for the few days, and lost out on the fee it earns every time purchase is made on debit card. Government is pleased with debit card-based spending because electronic transactions are traceable for tax purposes. The regulator is happy because the efficiency of banking system goes up. So why is debit card penetration so low?.......
How technology is changing banking
New media and the use of the Internet will make banking easier, cheaper and create new opportunities to tap the already saturated urban market, panellists at Mint’s “IT in Banking Conclave” said. Despite security issues and user reluctance to adopt new media, this form of banking is here to stay..........
Hit by dubious claims, RBI junks ATM cash retraction
CHENNAI: The banks have done away with the cash retraction system in ATMs. The system, which enabled the machine to take back the currency if it is not removed within a certain time, was withdrawn last week after the Reserve Bank of India (RBI) agreed to National Payments Corporation of India's proposal for removing the feature from all ATMs to deal with the increasing number of fraudulent claims about non-receipt of cash.......
Staff Federation slams Dhanlaxmi Bank Management
......Alleging manipulations in the balance sheet, the Bank Employees Federation of India (BEFI) has sent a letter to the Reserve Bank of India on August 26 seeking its intervention in the bank’s activities.........
Inclusion, Sahara style
......The Finance Ministry has offered tax breaks on equities and discounted prized public sector stock. The Reserve Bank of India (RBI) has pushed banks to serve up no-frills bank accounts. The Securities and Exchange Board of India (SEBI) tried everything from minimum public shareholding to electronic IPOs to woo small investors. But they have ignored all this and poured money into gold and property instead. ......
Is your bank locker secure?
.......The Reserve Bank of India says, ‘Banks should exercise due care and necessary precaution for the protection of the lockers provided to the customer.’ Banks may claim to have this in place, but this isn’t true in many cases. For instance, after a robbery at an Indian Overseas Bank branch in Chennai this year, police discovered that most bank branches in the city were yet to install basic safety devices such as security alarms and closed-circuit television (CCTV) cameras..........
Saturday, September 1, 2012
Perspectives on risk and governance - Anand Sinha
Address by Mr Anand Sinha, Deputy Governor of the Reserve Bank of India, at the Risk & Governance Summit, organized by the Indian School of Business, Hyderabad and Deloitte, Mumbai, 23 August 2012
....Before concluding let me briefly touch upon the Reserve Bank’s approach towards risk management. Even at the height of belief in the self correcting nature of free markets, which has now been debunked in the aftermath of crisis, Reserve Bank maintained a stance of conscious gradualism in fostering innovation and permitting sophisticated products in the markets. Reserve Bank’s approach is more guided by the imperatives of ensuring that finance remains linked to the real sector and does not derive dynamics of its own. Given the nature of our economy with wide disparities in the income levels, education and sophistication and the pressing need for ensuring inclusive growth, the market development strategy has been carefully calibrated so as to avert any excesses which could lead to market failures......
Meeting between business correspondents and RBI
Thanjavur : An interactive meeting of business correspondents of various banks with Reserve Bank of India officials was held here recently. Indian Overseas Bank, the lead bank of the district, organised the meeting. C.D.Srinivasan, Chief General Manger, Reserve Bank of India, Mumbai, presided over and interacted with more than 50 business correspondents, service providers, government officials, and bank officials, said a press release issued here by Indian Overseas Bank on Tuesday...
RBI asks people not to invest in illegal finance companies
....."People should not deposit their hard earned capitals in unauthorised and illegal NBFCs and institutions expecting of getting heavy returns. The people should also inform the RBI and the appropriate authorities on these NBFCs' acts and lodge complaints against the banking services," B.B.Sangma, Banking Ombudsman for northeastern states, told reporters......
Visa’s new fraud detection system set to make e-payments more bankable
....“Building customer confidence in the security around electronic payments is important. With the RBI guidelines around securing card transactions in the country, we too have implemented the real-time fraud solution to further strengthen our transaction monitoring capabilities.”.......
RBI: Lowest numbers of ATMs and PoS terminals
Since we Indians do not believe much in making non-cash transactions, the RBI is taking measures to facilitate customers for doing so. With low penetrations of ATMs and POS, the question is-How soon is it possible?.......
Read - Moneylife
Jaipur facing coin crisis, citizens short-changed
........Meanwhile, V.G.Sekar, General Manager (issuance, regional office of RBI) informed DNA that no complaints related to the shortage of coins have been registered so far. “But, if a crisis is being experienced, the RBI will take the required steps to ensure ample availability of coins in the city,” he said.
Read - Daily Bhaskar
Public sector banks: Troubles continue
The Mahapatra Committee recommendations could erode a large portion of public sector banks' net worth
....No wonder, banks are rejecting RBI’s suggestion as providing for NPAs would not only reduce their profit but the provisioning would also hit their balance sheets. If the banks post losses they will have to transfer it to the net worth in the balance sheet which would then be eroded to the extent of these losses. In other words Tier-1 capital of the banks will get affected, thus impacting their ratings and their ability to borrow and lend......
Read - BS
RBI is fighting the right battle
.......RBI’s battle today is to bring down inflationary expectations. Higher inflation does not create a conducive environment for growth. The emphasis to push growth and control inflation has to be on controlling the fiscal deficit and improving the policy environment.
RBI Review
This refers to the article, “Why not have variable CRR rates” ( Business Line, August 30). We should concede that those complying with legal requirements or regulatory stipulations can have personal perceptions at variance from policies which they are implementing as part of their job. RBI Deputy Governor Chakrabarty’s response rejects this principle. Relating CRR to banks’ capital-to-risk-asset ratios, besides being impractical from a timeline angle (assessment of the ratio and prescription of CRR), may have problems in monitoring and compliance. Banks’ financial health-related issues can best be managed by prescribing higher capital adequacy requirements. The RBI should use this opportunity to do a comprehensive review of capital adequacy, SLR and CRR stipulations and margins enjoyed by banks considering the capital needs of public sector and private sector banks, need to include new instruments in the basket of eligible assets under SLR, introduction of disincentives for maintaining excess SLR, and need to make government securities market-friendly so that their share in the SLR can come down, the impact of higher CRR on banks’ profitability, etc.
- M.G. Warrier, Mumbai (HBL)
CRR should not be diluted
....The Reserve Bank of India (Amendment) Act, 2006, gives discretion to the RBI to decide the percentage of scheduled banks’ demand and time liabilities to be maintained as CRR without any ceiling or floor. Consequent to the amendment, the Reserve Bank was also not required to make interest payment on CRR balances. Consequent to the amendment in June 2006, the RBI announced the removal of the floor of 3 per cent and ceiling of 20 per cent in respect of CRR. Thus, in an operational sense, there is no prescribed limit of CRR as in the past......
Read - HBL
CRR - Breaking self imposed silence..........
The widely reported sordid and ugly exchange between the Chairman of SBI and a Deputy Governor of RBI on the Cash Reserve Ratio has forced me to break my self-imposed strict silence on anything economics or finance in India for three reasons: first is the status that the RBI has given me in the Society. During my tenure as Chief Economic Advisor at the Indian Banks’ Association, as one of the Managing Directors of the Asia-Pacific Rural And Agricultural Credit Association, and as Consultant at the National Stock Exchange, I was often called as “the RBI man’ rather than by name or designation. Second, the exchanges are fiercely (and disgustingly) hot but not bright and hence missed the core points. Finally, nobody, not even in this august group, has commented on this.
Now, on the issue (mainly from basic text books): (i) Banks are special financial institutions in the sense that they alone can create money—not mutual funds, or insurance companies or non-banking financial institutions can do this (Not even the Chairman of SBI could deny this). (ii) The Central Bank of a country (in the present context the RBI) has the responsibility of ensuring a sound banking system. For this purpose, it even plays the role of lender of last resort to banks—and not to other types of financial institutions mentioned above. (Again, not even the Chairman of SBI could deny this). (iii) The point noted in (ii) could also be interpreted to denote the Central Bank as an insurer for the banks. Viewed in this perspective, the cash reserves with it are in the nature of “premium” (I used within quotes because it is only a form and strictly NOT; the quantum does not depend upon the risk—the insurer ensures that there is no risk). Almost nobody recognises this point but jump to the next; (iv) CRR is the most effective monetary policy tool: an increase in CRR, by blocking lendable funds, drastically reduces the banks’ ability to lend. (Any undergraduate economics text book will explain this proposition in detail). The fact is, however, different. The exact effect depends upon the structure of the economy and the balance sheet of the Central Bank. When Lord Keynes stated that ‘with a stroke of pen’ the Central Bank could affect the liquidity in the economy, he was referring mainly of the USA of 1930s and that country’s Federal Reserve System. The Indian conditions and the RBI are vastly different. In India, the stated result is possible only under very restrictive conditions. Usually, in India, the effect of a change in CRR is, at best, neutral and, more often, perverse—an increase in CRR adds to the prime money, mainly currency with the public which, in turn, augment bank deposits. This could be proved with the balance sheet of the RBI. It is strange that the Chairman of SBI is not aware of this because, in mid-1980s, the officer in charge of Treasury at SBI had explained the mechanism to me. From this perspective, the Chairman cannot have any grievance.
- Dr. N. Nagarajan, Former Adviser, DEAP (via e-mail)
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