.....Subba Rao’s stand on interest rates has brought to focus the larger question of giving RBI greater autonomy. The old boys’ club that includes C Rangarajan, a former RBI governor, has endorsed the line taken by Subba Rao. The latest instance of Subba Rao taking a stand different from the minister’s reinforces the RBI chief’s image as a no-nonsense man which he acquired earlier during stints in the prime minister’s economic advisory council, as a middle-order bureaucrat in the economic affairs department and as finance secretary in his home state, Andhra Pradesh, where he is credited with pulling out the state government from an acute debt crisis.......
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, November 5, 2012
Gokarn may not get extension as RBI Deputy Governor
.....“The Government has constituted a search panel. Technically speaking, Gokarn’s name can also be considered by the panel,” the source said. Gokarn, who turned 53 last month, took over as the Deputy Governor on November 24, 2009. However, a senior Government official said that normally formation of search panel implies selection of new person. “When the present one has to be given extension or reappointment, where is the need for a panel?” he asked. This can be done just by an administrative order, he informed. This whole episode is taking place at a time when strong differences between the Finance Ministry and the RBI have emerged over rate cuts.........
The Monetary Policy Dilemma
........Governor Subbarao has earned the ire of the FM but won the blessings of the multitude of depositors. Governor Subbarao can take solace in the words of Tony Blair, the former UK Prime Minister who said " The art of leadership is saying no, not saying yes. It is so easy to say yes"
Read - FPJ
Read - FPJ
RBI mulls to bring co-op banks under Banking Ombudsman Scheme
The Reserve Bank of India (RBI) is at present examining the possibility of bringing co-op banks under the Banking Ombudsman Scheme (BOS), an RTI query has revealed.........
In an uncertain situation, giving guidance is challenging, but all the more necessary: Subbarao
.....First of all, I want to say that all the criticism that we face is legitimate criticism, it is par for the course. Criticism is value adding, so I have sympathy for it. But there are different points of view. Also it is not correct to say that inflation has not come under control. It has not come down as much as we want, but certainly it has come down from the high of 10.9 per cent in 2010 to 7.5 per cent, averaging over the last several months. We believe that w
e can bring it down further and we need to bring it down - this is a poor country and inflation is a regressive tax on the poor........
Finance ministry decides to scan RBI's balance sheet
........A government official downplayed it as a routine review of the reporting structure and disclosure requirements of the RBI, but it comes at a time when there is already obvious tension between the finance ministry and the central bank over the conduct of monetary policy. "It is the government which tables the annual report of RBI in Parliament, so there is nothing wrong if it (government) wants to know how RBI prepares its balance sheet. We are not questioning them or raising objections," a ministry official said. However, another finance ministry official admitted that the review started after the RBI had indicated that it would run into losses if asked to pay interest on mandatory percentage of deposits banks have to park with the central bank, called the cash reserve ratio (CRR). The RBI had stopped paying interest on such mandatory reserves since 2007........
Obituary
We are very sad to inform that SRI. CHANDRAMOWLEESWARAN (Aged 68 years) Retd. General Manager, RBI, Chennai passed away on 1st November 2012. Sri Chandramowleeswaran along with his wife went to Puttaparthy for rendering seva. Affected by lung congestion he was admitted in the hospital there for treatment. The body is likely to be brought to Chennai tomorrow morning. We will inform the further details of the funeral timings etc. once decided by the family. We pray for his soul to be rest in peace and
convey our deep sympathies and heartfelt condolences to the bereaved family.
As reported by Chandraiah B (via e-mail)
As reported by Chandraiah B (via e-mail)
Ghastly car accident
I am sorry to inform you that our good friend Shri.S.K.Thipse, Ex-Manager and
his wife (residing in Snehadhara, Vile Parle) were involved in a ghastly car accident
on tuesday morning. Thipse, his wife another RBI colleague and one more person
were travelling by car to Mahableshwar. As they reached Wai there was a head-on
collision and all four were injured seriously. They were promptly hospitalised
there. Yesterday all were brought to Nanavati Hospital in Santacruz -- by Thipse's
son and Parab's son. Thipse has an
injury in the neck. Smt Thipse has a hip fracture. All four are in ICU.
Please pray for their speedy recovery.
- P.P.Ramachandran (via e-mail)
Govt benefits most from CRR cut
......Apart from the cut in CRR and SLR, RBI has also infused Rs.82,000 crore into the system by buying bonds from the market through its so-called open market operation (OMO). As a result of all these, the government so far has been able to borrow Rs.3.96 trillion rather smoothly out of its annual gross borrowing programme of Rs.5.69 trillion in fiscal 2013, the highest in history. Net of old bond redemptions, the government has borrowed Rs.3.1 trillion. It has also borrowed Rs.3.6 trillion through short-term treasury bills. Such bills are continuously being redeemed and hence the net treasury bill issuance by RBI at this point has been only Rs.28,700 crore. It’s a small amount, but typically the government’s net borrowing through treasury bills is even less than this...........
'Government to take a view on bank holding co structure after RBI comments'
The Finance Ministry will take a final view on the structure of proposed holding company for public sector banks only after receiving RBI's comments which are expected by November 10, officials said. "RBI has some concerns. They are examining it. Once we get the comments of RBI, then a final decision will be taken," official sources said. "RBI's comments should come by the 10th (of November), let's see. Once RBI clears it, it should not take much time," sources said. ......
RBI deserves Minister’s kudos, not disapproval
.....If the Government’s displeasure is related to the RBI increasing the provisions for restructured standard accounts by 75 basis points, it should understand that genuine financial stability concerns prompted such a move. It should respect the RBI’s judgment on this issue.........
RBI—the Lone Ranger syndrome
......Now, from the near-plausible to the ridiculous explanation for RBI staying pat at 8%. I must confess that I hadn’t heard this line of reasoning in at least the last few decades. I apologise for my deficiency. But the ancient regime, and equally Lone Rangerish, argument for high if not higher repo rates is that such rates affect real deposit rates, which affect the rates of household savings. Now, there are precious few, if any, empirical studies worldwide showing any relationship between savings rates and real deposit rates. But there are several studies.......
RBI’s emphasis on inflation control cannot be faulted - T.V.Gopalakrishnan
....The objectives of the monetary policy have always been and continue to be economic growth and price stability, and the Finance Minister cannot forget the fact that RBI has been doing its best to enhance credit to the agriculture, manufacturing and retail segments.........
Growth-inflation dynamics: RBI leans towards inflation control again
.....So when a disappointed Chidambaram said (after the RBI policy announcement) that he was prepared to walk alone, if need be, to revive the challenges of growth, everyone took notice. For any signs of disagreement between the Government and the RBI on any policy action is not a happy situation. It is the surest recipe for disaster......
Interest rate tussle good for everybody
.....the RBI has shown that the role of the central bank is not to be a pro-active player in the economy but a more conservative one of calibrating money flow in the economy and protecting it from going into a spiral of inflation. This defines the RBI’s role as that of a benign and independent gatekeeper. There was a time when the RBI was the handmaiden of the finance ministry; it responded to the expenditure of the central and state governments and printed the money the government needed. Of course, that did not solve the government’s problems. When money is printed to suit one’s needs, it loses its value. With the onset of economic reforms, it became necessary that the RBI was not seen as the government’s bank, and that it would ensure a level playing field for all money changers.........
Facing up to fiscal karma
.....Ignore what RBI wants for the moment. Instead the focus should be on the problem at hand. There is no quick-fix solution (as some commentators seem to suggest) to the problem......
Growth, a common concern
.......Looking at the monetary policy and beyond, it is good to realise that growth is everyone’s concern, not just that of the government. Acting on its own priorities, the RBI has conveyed that message quite effectively.
RBI will not be able to kick start the economy: Deosthalee
....... Reserve Bank of India’s policy is enabling kind of policy. So, they will not be able to kick start the economy. I think the interest rate environment is, to a considerable extent, sentimental. It is important, but it is not necessarily the only thing that can ignite the economy. So, under the circumstances, it was probably too much to expect rate cut because the inflation continues to be very high. Reserve Bank of India is concerned about the inflationary pressures both domestic inflation as well as imported inflation. Therefore, till inflation comes under some control, they are not likely to do anything............
GCCI to take mining dependents' team to RBI
Panaji: Goa chamber of commerce and industry (President Manguirish Pai Raikar will lead a delegation of stakeholders from the mining industry involved in extraction and transportation business, to Reserve Bank of India, Mumbai, next week........
RBI urgings on trade policy
.........there had been an increase in the number of unmatched export transactions between Customs and bank reports, impacting export realisation follow-up. Based on the recommendation of a working group set up to identify lacunae in export reporting and follow-up procedures, RBI decided to put in place by September 2013 a structure to implement an information technology-based solution, using a secured website of the RBI to update the export database on a real time basis. Hopefully, this will facilitate quicker follow-up/data generation/policy formulation...........
Hedging habit
.....The central bank has opined that the forex rates are determined by the demand and supply of that particular currency. Why should a corporate hedge its forex future exposure, be it a purchase or sale? Hedging is a cover to limit the loss on forex exposure. Intra day rate fluctuations at times move up to one rupee per dollar. The RBI directive highlighted in the editorial pertains to charging of higher risk premiums on loans made to corporates which have not hedged their forex exposure. But the compulsion to hedge may not be justified under regular rate fluctuations.......
Retail customer is king
........They were once ignored, but retail customers are now the darlings of banks and financial institutions. The slowdown in the global and domestic economies and high interest rates have prompted corporate clients to tap into other channels including foreign sources, like External Commercial Borrowing (ECB), to raise funds..............
Friday, November 2, 2012
RBI walks the tightrope - S.S.Tarapore
....It has unequivocally advised the RBI to ease monetary policy as part of an overall package to stimulate growth. The dilemma faced by the RBI was to formulate its monetary policy in the context of falling growth and rising inflation. Given this tricky situation, the RBI has deftly gone in for what could be called a damage-containment monetary policy.......
Finance ministry begins search for Gokarn’s successor
The finance ministry has constituted a search committee to identify a successor for Reserve Bank of India (RBI) Deputy Governor Subir Gokarn, whose three-year term comes to an end on 23 November, according to two people familiar with the development..........
RBI organises national quiz competition
....The preliminary and pre-quarter rounds for Goa were conducted on Wednesday at Don Bosco High School, Panaji. Students from 18 schools participated in the quiz. The Zonal Finals and National Finals would be held at Kolkata on December 3 and 5. The winners of the quarter final round of RBIQ in Goa were Rajanala Samyak and B Raghavendra of Kendriya Vidyalaya, INS Mandovi, Verem, Goa, who will compete with other teams from the Western Zone.
No sectoral concessions under CDR: RBI
The Reserve Bank of India (RBI) has no plans to introduce sectoral packages for extending relaxations in corporate debts restructuring (CDR) as demanded by the industry in view of the current and global economic conditions, said Chief General Manager Deepak Singhal at an ASSOCHAM event. While addressing a 'Seminar on Restructuring of Corporate Debts' organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM), Singhal, chief general manager, DBOD-CO, RBI, informed that RBI has constituted a high power committee of two Dy. Governors, K C Chakrabarty and Anand Sinha to speak to the CMDs of all the banks to know the problems faced by SMEs and suggest to arrest the rising sickness in the SME sector. The committee is likely to submit its report by end of the November...........
RBI takes no position on exchange rate movement: D Subbarao
..... I want to say for the record that the RBI does not take a position on the exchange rate or on exchange rate movement. We manage volatility and exchange rate should be largely market determined. Coming to your specific question, current account deficit last year, at 4.2%, was historically the highest, the first quarter deficit, at 3.9%, is quite high, we should bring it down. Reserve Bank's estimates show that if the economy grows at 6-8%, a sustainable current account deficit is between 2.4% and 2.6%. That’s where we should be headed........
Relying on RBI survey could be misleading
The Reserve Bank of India (RBI) often mentions its OBICUS survey (order books, inventories and capacity utilization survey), which it carries out quarterly in its monetary policy statements. Capacity utilization, in particular, is an important gauge of the state of the industry, and it helps determine whether firms have pricing power. The latest OBICUS survey (18th round) says capacity utilization during the first quarter of FY13 is the lowest in 13 quarters. ........
RBI finds ally in Prime Minister's Economic Advisory Council chairman
The Reserve Bank of India has found an ally in C Rangarajan, the chairman of Prime Minister's Economic Advisory Council (PMEAC), who has sided with the central bank in the growth versus inflation debate. Rangarajan has said that to achieve its potential growth inflation has to come down and the government has to take "unpopular" decisions in curbing expenditure.......
Govt thought it had sealed a rate cut
.......Several officials that TOI spoke to said the finance ministry had been working to ready the plan for at least a fortnight. But the pace picked on Friday, the day RBI Governor D Subbarao and Chidambaram held the customary pre-policy meeting. Senior officials said they were suddenly asked to speed up the fiscal consolidation plan. Although, three to four options on the fiscal deficit targets had been discussed, the finance minister himself drafted a final note which he discussed with the Prime Minister............
RBI differs with government on 4 issues
Differences between the Reserve Bank of India and government are out in the open with RBI governor D Subbarao on Tuesday spelling out four where it doesn't see eye to eye with the finance ministry. ...........
What’s CRR?
This
refers to ‘Do RBI Rate Cuts Matter?’ (ET, Nov 1). Clearly, in India,
the unorganised lending system is more popular than the organised
system, i.e., the banking system, especially in rural areas. With a lack
of basic banking facilities, poor farmers and illiterate people fall
prey to moneylenders. The cut/ increase in rates of interest, increase
or decrease in CRR or base rates hardly matters to these people. Our
banks are more interested in lending to the likes of Vijay Mallya and
restructuring loans given to Kingfisher Airlines.
- VEENA SHENOY, Thane (ET)
- VEENA SHENOY, Thane (ET)
RBI modifies definition of sickness for assessing viability of MSEs
The Reserve Bank of India (RBI) has modified the definition of sickness and a procedure for assessing the viability of sick Micro and Small Enterprises (MSEs). According to a notification issued by the RBI on Thursday “a MSE is considered sick when any of the borrowal account of the enterprise remains NPA for three months or more or there is erosion in the net worth due to accumulated losses to the extent of 50% of its net worth.”..........
Hedging habit
....The Reserve Bank of India’s (RBI) latest directive, asking banks to charge a higher risk premium on loans made to corporates who haven’t hedged their exposures to forex fluctuations should be seen in the above light. More than half of Indian companies’ foreign currency exposures today are totally un-hedged. It is difficult to see how corporates can price their products correctly, so as to ensure a desired level of profitability, if they face uncertainties on their forex-related costs. .....
Balanced policy
......There is, however, a sense of differences in perception between the RBI and the Government over the rate cut. The RBI’s action suggests that it would not like to risk cutting the repo rate for now and allow inflation to go out of control again for the sake of growth, even though growth concerns have picked up. In that context, the RBI definitely deserves a pat on the back......
Playing Safe
For the governor of the Reserve Bank of India, Duvvuri Subbarao, the name of the game is consistency, and he stuck to his guns in the second quarter review of monetary policy for 2012-13 by not cutting policy interest rates as many had hoped. Inflation is still too high and too sticky to warrant a cut. The RBI’s policy stance has been consistent since January this year: maintain an interest rate environment that contains inflation and anchor expectations, maintain a modest liquidity deficit for the banking system, and respond to downside risks to growth..........
PNB to launch remittance card in Kochi today
Punjab National Bank (PNB) is launching India’s first co-branded remittance card — PNB Remit Card — in association with UAE Exchange and Financial Services Limited in Kochi on Friday. The prepaid card will be beneficial to NRIs and their kin for transferring funds from abroad and for using in merchandise establishments......
India’s Roadmap to Nowhere
........Timing it perfectly — just a day before the Reserve Bank of India was to unveil its monetary policy – the release seemed to be a desperate effort to nudge the RBI into action. The RBI in the past has called for the government to contain the deficit before it can aggressively reduce interest rates. This seemed to be a bid to show that the government is on the case, so the central bank can act. Not surprisingly, the RBI didn't act. It clearly prefers to await the evidence than pay heed to over-optimistic statements......
Understanding the Potential for Financial Services Innovation in India
.....The research objectives of the study were as follows:
- To identify innovative products and delivery channels and understand what features make a product accessible and attractive to low-income households;
- To understand the savings landscape in India in the context of the diversity of financial institutions serving the poor;
- To draw lessons from the financial inclusion campaign of the Reserve Bank of India (RBI) and the Indian government and the impact that this has had on access to savings. To identify gaps for future research on savings product demand, usage, and evaluation........
Please enter your passwords
.....As online transactions keep increasing by the day, you cannot escape the reality of multiple user-ids and passwords. So, you now have to live with a plethora of user-ids and passwords, and try to perfect the art of remembering these. You may try eating almonds and greens to boost your memory. Just as the “one nation, one entrance test” is being debated hotly in India, is there a possibility of one user, one password? Or, is it too risky? Is there a better solution to this problem? Let us ponder the possible solutions to tackle this ever-growing problem of memorising a large set of user-ids and passwords......
Thomas Cook joins hands with MasterCard to launch “borderless prepaid card”
.....The “borderless prepaid card” enables travellers with the option of loading eight currencieson a single card—US Dollars, British Pounds, Euro, Australian Dollars, Canadian Dollars,Swiss Francs, Singapore Dollars and Japanese Yen. “It is a multi-currency card with a validity of five years, within which the cardholder can get the visiting country’s currency loaded on the card, thereby, saving money and time. An embedded chip and PIN ensures security and increased protection against counterfeiting and skimming card frauds,” ......
Thursday, November 1, 2012
Two-day seminar at Bhopal School of Social Sciences
BHOPAL: A two-day UGC sponsored national seminar on Impact of multinationals on trade and commerce was inaugurated by P R Ravi Mohan, Regional Director RBI, Madhya Pradesh and Chattisgarh at the Bhopal School of Social Sciences on Tuesday. Dr S.K Khatik, dean of Barkatullah university, was the key speaker on the first day of the seminar..........
RBI eases way for plastic money
......The banking sector regulator on Tuesday accorded a general permission to banks for the issue of co-branded debit card and prepaid card, which till now had to be cleared by the RBI.......
Read - HT
RBIQ in Pune
Reserve Bank of India (RBI), CAB, Pune conducted an Inter-School Quiz (RBIQ) on October 31, 2012 from 09.00 am to 12.30 pm at MES Auditorium, Maharashtra Education Society, Bal Shikshan Mandir Campus, 131, Mayur Colony, Near HDFC Bank, Kothrud, Pune-411038. The Quiz was conducted with a view to create awareness and interest about the history and role of RBI, other banking and financial institutions, economics, current affairs, personalities and events that have contributed to the growth and progress of India over the years.
2.
RBIQ was informative and educational and helped build a connect
between RBI and the young student community to achieve dissemination of
financial literacy.
3.
The Quiz was conducted by popular quizmaster Mr Ryan Shaw. This
Quiz was for students studying in IX, X, XI & XII standards of schools
located in Pune City. 51 schools participated from across the city. The
following school team emerged as winner team from Pune Centre and will
participate in Zonal Final round of RBIQ:
Winning
team name: Kendriya Vidyalaya No. 1, Lohegaon,
Pune
Student
Name: 1. Ankit Kumar, Class XI
2. Avinash Parte, Class XI
Inaugural
Address was given by Shri B S Awari, District Education
Officer
Prizes to
the winning teams were given by Lieutenant Colonel Shashikant Jadhav, Commanding
Officer, 3 Mah Armd Sqn NCC Pune.
RBI acted wisely
Reserve Bank of India ( RBI) acted wisely by not cutting repo- rate. Repo- rate cut is advantageous for general public only if RBI ensures that banks pass on benefit to loan- takers, which is not the case in present ' free' economy where banks are at liberty to swallow benefits of repo- rate cut by not lowering interest- rates for old loan- takers. RBI should devise and revive policy of having uniform interest rates decided by RBI itself both for deposits and loans for all banks. Banks can compete through better service rather than through interest- rates. RBI can devise different types of interest- rates for different types of loans and deposits at least for public- sector banks. Presently different public- sector banks have different rates of interest even for deposits which keeps senior citizens confused which have only source of income as interest- earning from bank deposits. There are huge bargains in case of loan takers by banks. Such bargains can and should be stopped by formulating same rates of interest on loans which may be different for different types of loans both for existing and new loans. Presently banks lure new loan- takers through lower rates of interests, while old customers have to pay higher rates of interests. Free economy must not mean that people may be taken for ride by multinational banks which are acting just like ' East India Company' to make Indian citizens their financial slaves.
- Madhu Agrawal Delhi (FPJ)
Why are global PE firms bullish on corporate lending in India
.....According to an RBI-appointed committee headed by former Deputy Governor Usha Thorat, India has about 12,500 NBFCs. More than 70 per cent of NBFC assets are with those the RBI classifies as systemically important - NBFCs that do not take deposits and have more than Rs 100 crore capital. The number of such NBFCs jumped from 151 in March 2006 to 295 in March 2010, and their assets more than doubled to Rs 5.67 trillion from Rs 2.51 trillion. In its report submitted in August 2011, the panel says borrowing by NBFCs from banks has risen in the last few years. "That means transferring the risk to NBFCs, which have the freedom to lend to any sector," it says.
‘Interests’ of the growth brigade
.....In an interview to this paper, D Subbarao, when asked if the status quo on interest rates would not hurt the common man, simply and correctly identified low and stable inflation as a better condition for the common man. Interest rates do not affect the “common man” as much as inflation as any housewife will tell you. But it’s also clear that the RBI has to do something for growth, and there lies the problem.......
Tough stand
According to reports, RBI Governor Subbarao has not agreed for interest rate cut despite " prodding" by PC disappointing the industry. Well, it is the prerogative of the RBI also not to go by PC's views, just as it was earlier the prerogative of PC not to have gone by Subbarao's [as Finance secretary] recommendation on 2G pricing and stuck to his own views.
- V N Ramachandran Vadodara (FPJ)
Cut and thrust
To say that Finance Minister P. Chidambaram made a combative statement after RBI Governor D. Subbarao refused to cut rates on Tuesday will be to miss the wood for the trees. India’s economy is at a stage where the slide in growth is as compelling a concern as inflation..........
Read - Indian Express
Read - Indian Express
10 reasons why Chidu’s petulance is uncalled for
Granted, there can be two views on whether the Reserve Bank Governor should have cut repo rates or not. Finance Minister P Chidambaram is free to hold his view, and so is D Subbarao. What is entirely regrettable is the finance minister’s petulant statement that growth is as big a challenge as inflation, and “if the government has to walk alone to face the challenge of growth, then we will walk alone.”.......
An eloquent policy that falls short
....Conclusion In the light of the above discussion it emerges that the RBI is in search for a monetary policy space through fiscal consolidation as a precondition. Going by the track record of the government, (particularly in a democracy with a deficit bias), prudent fiscal management is a misnomer. In this milieu, RBI has to create its own space to respond to growth. One way is to keep the rate constant, as it has been doing, but unfortunately this has not yielded the desired result. On the contrary this has resulted in a massive slowdown in growth and continued elevated inflation........
RBI does what a central bank should do
RBI does what a central bank should do. The RBI balanced its anti-inflationary stance against the need to support growth with its tactical policy easing through only a CRR cut of 25 bps. The RBI’s decision also takes into cognizance the growth-inflation dynamics as also the Government’s policy measures........
Read.......
Why India's Central Bank Resisted Pressure to Ease
......Gokarn says while he recognizes that the government is an important “stakeholder” in its monetary policy, the central bank will not lose sight of its prime objective to keep inflation under control. “The government is obviously an important stakeholder in the policy, and the RBI is quite sensitive to it, but we cannot ignore the fact that inflation is still high, and is likely to go up over the next three months,” Gokarn told CNBC on Wednesday............
Has Subbarao lost the opportunity to be a statesman?
..... I believe a symbolic cut in the policy rate by RBI would have strengthened his arm and also boosted business sentiment (to be sure, again, it wouldn’t have changed the environment much). I am also convinced it wouldn’t have taken us any closer or any farther from economic ruin than we already are. I am, therefore, inclined to consider the lack of any substantive action by RBI on Tuesday as a lost opportunity........
Will we see a rate cut in January?
.... So, a cautious Subbarao doesn’t want to take any more chances. This time around, he is convinced that the ministry is serious about fiscal consolidation, but he wants to see the results before acting. That’s fine, but if he sees inflation as a greater evil than slowing growth, what was the need to cut CRR? More money in the system can stoke inflation. One explanation could be that RBI considers CRR a liquidity tool and not a monetary tool. Which is why it has continuously been slashing CRR and infusing money into the system on top of its bond buying programme, the so-called open market operations. It has also slashed banks’ statutory liquidity ratio, or the percentage of deposits banks have to invest in government securities, to ensure banks have more money to support credit growth..........
Can Chidambaram walk the talk on fiscal consolidation?
When the Reserve Bank of India did not read any thing substantial in the two-page statement on fiscal consolidation, Finance Minister P. Chidambaram thought it was time for silence. But the silence after announcement of much hyped five-year road map for fiscal consolidation can speak volumes. The reason is simple. Everybody wants to know, first, how credible this road map is, second, what is the action plan for this fiscal consolidation and third, does history support Chidambaram’s optimism?........
Reserve Bank stirs, but isn’t shaken
...........It needs much greater coordination between fiscal and monetary policy. Indeed, past RBI statements have almost thrown the gauntlet to North Block, promising reciprocal action, in case of progress on the fiscal deficit. The September reform announcements from Delhi should have been taken as an early signal of commitment to reverse the fiscal slide...........
Read - Mint
Not much help from RBI even in 2013?
....Given the central bank’s guidance for monetary policy stance, Morgan Stanley in its research report said “We believe that policy rates would be on hold until the end of 2012 with easing to begin from 1Q2013.” It believes that even as inflation starts to ease from Q12013, it may remain above the RBI’s (Reserve Bank of India) comfort zone for longer. Hence, it expects policy easing to be limited to about 50-75 (basis points) bps in 2013......
CRR unlikely to be tweaked further
The cash reserve ratio (CRR) cannot be presumed to be the preferred tool to address liquidity tightness in December, Reserve Bank of India (RBI) Governor D Subbarao said on Wednesday........
By calling CRR a waste, SBI chief questions banking history
.....The, State Bank of India (SBI) Chairman Pradip Chaudhuri said: “I still hold that CRR is a waste for the economy.” For anyone who understands the basics of banking, and presuming that the chief of the largest bank in the country does, this is a statement that should not have been made. Let’s try and understand why.......
Read......
No CRR cut impact
One wonders whether the cut in the cash reserve ratio (CRR) by the Reserve Bank of India is going to make any material change in the existing credit situation. In the quarterly review of developments, the central bank stated that the current credit slowdown largely indicates tepid demand conditions and distinctively lower credit expansion by public sector and foreign banks, partly reflecting their risk-aversion. Are the tepid demand conditions due to high interest rates, in which case a reduction thereof would have helped? The agriculture and export sectors are protected from interest rate changes due to subventions provided to banks by government. It is the industrial and service sectors that are mainly affected by changes. The big companies have been able to tap the commercial paper market on a large scale recently due to a fall in interest rates, besides accessing bank credit. It is the small and medium industries that have problems of credit, if one goes by anecdotal evidence. The increase in liquidity through the injection of Rs 175 billion is not a big deal for them. There are no detailed data available on credit conditions in the service sector.
- A Seshan Mumbai (BS)
Mint Road sees liquidity tight for a few more months
The Reserve Bank of India (RBI) Governor Duvvuri Subbarao and Deputy Governors Subir Gokarn and Anand Sinha had an interaction with analysts on Wednesday following the RBI’s move to cut the cash reserve ratio (CRR) by 25 basis points on Tuesday. Excerpts:........
Pragmatic stance
The second quarter monetary policy review has further reinforced the Reserve Bank of India’s credentials as a pragmatic inflation fighter, not swayed by either market expectations or overt signals from the Finance Minister favouring a cut in policy rates............
Read - The Hindu
Read - The Hindu
Do RBI Rate Cuts Matter?
To debate the relevance of the country's central
bank might seem facetious or plain dumb. But too much is being made of
the central bank's failure to cut policy rates. It is being accused of
being dogmatic on inflation, of not seeing the parlous state of growth.
All such passion stems from assuming that the RBI's policy rates matter
the way central bank action matters in the US or Europe. This assumption
is fatally flawed. The RBI is largely irrelevant to large swathes of
the economy............
Read - ET
Govt must cut spending: RBI Governor
........"All of us - not just RBI, but all stakeholders in the macroeconomic management - are concerned about the quantum of fiscal adjustment and also the quality of fiscal adjustment. International experience shows that fiscal adjustment that comes from expenditure compression is more sustainable than one that comes from tax increases," ......
Walk the talk, Mr. Finance Minister
.....So what are we talking here about the RBI not supporting the government in driving growth? If anything, the central bank has been extremely understanding of the government’s constraints and did its bit by “frontloading” a 50 basis point rate cut in April based on assurances by the government of reining in the fisc. It has also been regularly pruning the cash reserve ratio in order to free up liquidity, which in itself is a measure that can lead to a fall in interest rates. Remember, despite the tight leash on the policy rate by the RBI, inflation has remained sticky. Given its core mandate of inflation targeting, the RBI could certainly not be expected to loosen its policy. Dr. Subbarao deserves a round of applause for standing up to the government and remaining focused on the important job of reining in inflation. Cynics may say that given that he has only another year to go, he does not have to please anyone and could therefore afford not to bend. Yet, he has proved himself to be a worthy successor to Dr. Y.V. Reddy who in his time also staved off tremendous pressure from the government on the issue of cutting rates. Though reviled then for his hawkish stance, Dr. Reddy is today acknowledged as the man who kept the global financial turbulence from washing onto Indian shores. It is the karma of central bankers, not just in India, to suffer pressure from their governments but few have managed to hold their own as Dr. Reddy did then and Dr. Subbarao is doing now.......
P Chidambaram ko gussa kyon aata hai?
..........Why, then, did Chidambaram make his displeasure public? Viewed from the minister’s perspective, time is clearly running out for the UPA government. With very few days left before the 2014 Union Budget (which will bring its own set of compulsions for the FM) and the elections in Gujarat and Himachal Pradesh before that, the FM is, perhaps, keen to step on the accelerator in terms of whatever arsenal he has at his disposal to try and get the economy back on track and send out the right signals. Besides, by outlining his fiscal consolidation plan a day before the RBI policy, Chidambaram seemed keen to send out the message that the government was now doing its bit in spurring growth and was hoping RBI would chip in with a rate cut to complete the picture. But Subbarao’s reading was clearly different.......
It is RBI who is walking alone, not govt
........The RBI too is concerned about the poor. It thinks a rate cut will only help the industry. The poor will further get squeezed because of an inflation spiral, which a rate cut may give rise to. So let the critics of the RBI policy understand that it is not all text book economics. And let Chidambaram acknowledge that it is not the government who is walking alone, it is the RBI.
Ekla chalo
........This is where what the finance minister said about walking alone comes in, though it is not surprising that RBI Governor Subbarao didn’t take his deficit reduction promises seriously—as compared to a fiscal deficit target of 3.6% of GDP in FY07 as part of the original FRBM plan, the FM has now promised this in FY16...........
SHCIL-IDBI Bank merger
......SHCIL set up in 1986, promoted by IDBI and six other public financial and investment institutions. Besides custodial services to mutual funds and foreign institutional investors, it provides depository services to retail investors. It also has e-stamping facilities. Document management and insurance repository services are provided by subsidiary SHCIL Projects Ltd..
Wednesday, October 31, 2012
Defying govt, RBI leaves interest rates unchanged at 8%
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