Easy option for RBI

Government (Financial Services Sector Ministry) is reported to be now writing to the Nominee Directors of banks ( this would include Nominee directors from RBI) with a copy to the Chairmen of banks to ensure that their directives are carried out by the banks since RBI had objected to such directives issued to banks as micromanaging the banks. RBI have been pressing the Government for a long time to remove their nominees from public sector banks as there is a conflict of interest because of its regulatory function over banks. Government had not agreed to the request but found a solution by asking RBI to nominate their retired executives to the boards of banks. This practice was introduced but has since been given up. The latest directive from the Government would place the nominee directors from RBI on the horns of a dilemma- whether they have to follow the RBI directives or the ones from the Government especially when the directives from the Government are not in accordance with the RBI stand. In the circumstances, RBI would either have to firmly insist on their representatives being removed form the boards or instruct their officers to follow the RBI stand. The former seems to be an easier option.

A.Chandramouliswaran (via e-mail)

A heady decoction

.....“Why a bank executive sells you insurance or puts a retired person’s savings into mutual fund, which could prove disastrous? There are 100 articles about it but if you are told in what is the motivation of the person and what are the long term consequences of it, it creates an impact. It is fiction with a purpose. I was pleasantly surprised when a senior RBI official in his address to bankers asked how many of them had read The Incredible Banker. Can they take solace from the fact that what Ravi says is fiction or can it happen in real life?” Having said that, Ravi finds Indian banking more stable than global banking. “It is largely because our regulators are stronger and are not swayed by commercial interests.”......

Read - The Hindu n

As banks get busy replacing the cheques, people have a tough time

Come 01 January, 2013 and your all existing bank cheques will become invalid. The reason being that the banking regulator, Reserve Bank of India (RBI) has implemented cheque truncation system (CTS) effective from 01 October and hence it has asked all the banks to replace the existing bank cheques, which have already been issued by them to their customers, to new standard cheques that comply the new system. The new generation private sector banks have already complied with the RBI norm. However, the same was not the case with the state-owned banks and hence the rush among them to inform their customers through notices which have been pasted at branches and ATM kiosks........

Read - TOI

The sources of growth

Not for a decade has growth in gross domestic product been as low as it is likely to be this financial year. Finance MinisterP Chidambaram now says that it may be in the 5.5-6.0 per cent range; the Reserve Bank’s figure is midway, at 5.7 per cent. More worryingly, while the slowdown has been caused very substantially by a shortfall in investment , there seem to be few sources of recovery on this front. As a series of reports in this newspaper over the last week has shown, the much-needed rebound of investment cannot be financed by big private sector firms, because many of them are heavily laden with debt and in no shape to undertake fresh investment.......

Read - BS

Soiled Currency Menace

Melas for fighting the soiled notes (currency including) fail to yield satisfactory results, despite RBI's claim of providing enough currency for circulation in the market........

Read - TOI 

Branch banking unlikely to go out of fashion in India

.....Banking is also changing due to the efforts of the Reserve Bank of India (RBI) to inculcate the habit of paperless payments through credit and debit cards, electronic fund transfers and mobile banking. While cheque is still the dominant mode of payment, the value of such transactions has been on a gradual decline between 2007/08 and 2011/12. Paper-based payments accounted for 52.4 per cent of non-cash transactions in terms of volume, but only 8.4 per cent in terms of value.......

Read - Business Today

RBI to issue Rs 500, Rs 10 banknotes with rupee symbol soon

....."The Reserve Bank of India will shortly issue Rs 500 denomination banknotes with rupee symbol on the obverse and the reverse, inset letter 'E' in both the numbering panels,"......

Read - FE

Click, and your taxes are paid from home

KOLKATA: Imagine paying all your taxes - from stamp duties to motor vehicle tax - through netbanking or a debit card from the comfort of your home or at the nearest bank counter. It could well be a reality next year. This is the final piece in an ambitious proposal by the Mamata Banerjee government to replace the fault-ridden online payment system introduced by the Left Front regime in April 2008 with a single-window, seamless interface between public and private banks, the 'e-Treasury' and the RBI.........

Read - TOI

Dhanlaxmi appoints new auditor, says not up for sale

Old generation private-sector lender Dhanlaxmi Bank Ltd has appointed a new auditor after the controversial exit of its previous auditor even as the market is abuzz with speculation about a likely merger of the Thrissur-based bank with a large new private bank. Hyderabad-based Sagar and Associates is the new auditor. The Reserve Bank of India (RBI) approved the appointment of the new auditor after rejecting the names of three audit firms submitted by the lender........

Read - Mint

Lakshmi Vilas Bank CEO & MD Somasundaram resigns

......In 2010-11 AFI report, RBI observed that the chairman's post remains vacant since January 2011 following which the bank recommended the name of a director, K R Pradeep, with shareholding of 4.99% for the post. RBI, however, advised the bank to suggest two more names. Very recent, sources say that LVB has recommend other two names for the post and the RBI had to get back to the bank.......

Read - ET

RBI governor once again displays autonomy

 The Reserve Bank of India Governor, D Subbarao has once again displayed his autonomy by defying going against the market economists'advise of rate cut during the recent monetary policy review, with only one of the six economists supporting a policy status quo.......

........The meeting was chaired by Governor D Subbarao. Other members present for the meeting include Subir Gokarn, Deputy Governors, K.C. Chakrabarty and Anand Sinha. External members present in the meeting include Y H Malegam, Indira Rajaraman, Sudipto Mundle, Errol D'Souza and Ashima Goyal. Rakesh Mohan. Shankar Acharya a member who was not present at the meeting submitted his written views. RBI officials, Deepak Mohanty, Michael D. Patra, B.K. Bhoi, B.M. Misra and Pardeep Maria were also present in the meeting.  

Read - ET

RBI Chief urge Government to spend more on productive purposes

Highlighting the need for government spending on productive purposes, Reserve Bank Governor D Subbarao said future generations should not pay the price for the high borrowing of today. Government borrowing is not necessarily bad, but if the government borrows and consumes, that is bad," .......

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

Gokarn to continue as RBI Deputy Governor till December 31

The Finance Ministry has asked the Reserve Bank of India’s Deputy Governor Subir Gokarn to continue till December 31. His three-year term was scheduled to end on November 23. The Financial Services Secretary D. K. Mittal announced his extension saying that there should not be vacancy. A search committee has been constituted to advise whether Gokarn will get another two-year term or there will be a new Deputy Governor.............

Read - HBL

Special Exhibition on Glimpses of Cooperative Movement in India, 1904-1982

A special exhibition on the Glimpses of Cooperative Movement in India, 1904-1982 has been organized by the Reserve Bank of India Archives in its Archives Museum as a part of the celebration of the year 2012 as the International Year of Cooperatives. Dr. D. Subbarao, Governor, Reserve Bank of India visited the special exhibition after inaugurating the International Conference on Cooperatives at the College of Agricultural Banking, Pune on November 16, 2012. Smt. Meena Hemchandra, Chief General Manager and Principal, CAB and Shri R.L.Sharma, Vice Principal, CAB accompanied the Governor to the Archives Museum. Dr. R.L.Sahoo, Chief Archivist explained about the exhibits to the Governor. 

The exhibition sheds light on the history of cooperative movement in India from the enactment of the Cooperative Credit Societies Act, 1904, which is the first legislation on the cooperatives, till the year 1982 when the National Bank for Agriculture and Rural Development (NABARD) was established. The exhibition on the cooperative movement in India is based on the rare archival documents that include office notes, Memorandum to the Committee of the Central Board of RBI, correspondence with the Government of India, various Committee Reports and RBI publications preserved in the Reserve Bank of India Archives. This special exhibition depicts the journey of the cooperative movement and brings alive its glorious history. The exhibition is open to visitors and general public on all working days (Monday-Friday) between 2 PM to 5 pm at the RBI Archives Museum, College of Agricultural Banking, Reserve Bank of India, University Road, Pune.

G 20 and India: Dr. D. Subbarao

.....The Reserve Bank recognized Shroff’s expertise and innovative thinking early on when, in 1953, it set up a committee under his chairmanship to examine how the flow of finance to the private sector could be enlarged. The Shroff Committee recommendations played a key role in defining the basis for institution building in the financial sector - ICICI and at a later date IDBI, were set up as development financial institutions, a deposit insurance corporation in the shape of DICGC came in the early sixties and the Committee’s suggestion of setting up unit trusts as vehicles to channelize small savings into investments provided the basis for the later day UTI.........

Read........

Liquidity is comfortable at the moment: K C Chakrabarty

...."I think liquidity is okay...whatever is the liquidity, that is adequate and comfortable. This is always monitored," Reserve Bank of India Deputy Governor K C Chakrabarty said on the sidelines of an event organised by Assocham......

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Banks can cut rates in current policy framework: RBI

New Delhi: Banks can further reduce interest rates within the current monetary policy framework, but are penalizing good borrowers because of rising bad debts, said K.C. Chakrabarty, Deputy Governor at Reserve Bank of India (RBI)..........

Read - Mint

Liquidity is comfortable at the moment: Chakrabarty

The Reserve Bank on Wednesday said there is enough liquidity to take care of the lending activities of the banking system. “I think liquidity is okay...whatever is the liquidity, that is adequate and comfortable. This is always monitored,” Reserve Bank of India Deputy Governor K.C. Chakrabarty said on the sidelines of an event organised by Assocham in New Delhi........

Read - The Hindu

The Game Changers: 20 Extraordinary Success Stories of Entrepreneurs from IIT Kharagpur

Many IITians after graduation tend to head for MNC jobs and seven figure salaries – but several have chosen the different path of entrepreneurship. This book traces the story of 20 such entrepreneurs from IIT Kharagpur. The introduction is written by Damodar Acharya, director, IIT Kharagpur, and the foreword by alum D. Subbarao, Governor, Reserve Bank of India. This book joins a range of others about entrepreneurs from Indian institutes (such as IIM-Ahmedabad). 

Read........

RBI overplaying inflation, says Jagdish Bhagwati

.....There will be pressure on RBI from the Government to cut rates and prop up growth, especially with general elections not very far away, where it will have to establish its credentials before the voters, Bhagwati argued. The professor of economics and law at the Columbia University, however, applauded Subbarao for standing up and preserving the independence of the central bank by not giving in to Government's wishes in the recent times. "It is a very good thing and that is a plus factor."

Read - BS

RBI signs MoU with the State Bank of Vietnam

.....The MoU was signed on November 16, 2012 at SBV Headquarters, Hanoi, Vietnam, by G Jaganmohan Rao, Chief General Manager-In-Charge, Department of Banking Supervision, Reserve Bank of India and Nguyen Huu Nghia, Chief Inspector, Banking Supervision Agency, SBV. .....

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Legal liability of a stolen cheque

As all nationalized banks are working under the control of the Reserve Bank of India (RBI) they are expected to follow rules and regulations codified by the same regulatory authority. But if something unforeseen incident happens and if there is no co-ordination or understanding of co-operation between the banks,  they are susceptible to legal confrontation. This has happened in case of a stolen cheque which was deposited in one bank and was en-cashed by the person who stole it by producing it in the bank which had issued the cheque........

Read - Moneylife

Banks to face penalty for violating info sharing norms

The Reserve Bank of India today said banks may face penal action if they fail to adhere to the norms regarding sharing of information relating to credit, derivatives and unhedged foreign currency exposures among themselves.Banks have been asked to put in place an effective mechanism for information sharing by end-December 2012..........

Read - BS

RBI asks banks to monitor unhedged forex exposures of companies

.....In February 2012 banks were directed to rigorously evaluate the risks arising out of unhedged foreign currency exposure of the corporates and price them in the credit risk premium while extending fund-based and non fund-based credit facilities. It had also asked banks to consider stipulating a limit on the unhedged position of corporates on the basis of banks board-approved policy. However, the central bank is not convinced with the banks actions. Hence, the RBI reiterating its directive has asked banks to implement the norms and submit a compliance or action taken reports to the Reserve Bank before end-December 2012 after obtaining the approval of their board of directors. The central bank is planning to put in place a detailed guideline to ensure forex exposures of corporates are covered. 

Read - ET

Sudha Krishnan appointed nominee director on Canara Bank

“...the central government, nominated Sudha Krishnan, Joint Secretary, Department of Expenditure, as government nominee director on the board of directors of Canara Bank with immediate effect and until further orders,” Canara Bank said in a filing to the BSE.........

Read - HBL

Transforming the way banking is done

.......What impact have the new banks had? Today, they have a market share of 20 per cent in deposits and advances. This has been achieved in a growing market, indicating that private sector banks have successfully capitalised on the growth of the Indian economy. But more than acquiring market share, the real contribution of private sector banks has been to transform the way banking is done in India. ......

Read - Business Today

KPMG Study of India's Best Banks in 2012

.....The Reserve Bank of India (RBI) is in the process of classifying some domestic banks as systemically important institutions that would get special regulatory attention. Banking institutions worldwide are yet to recover from the shocks of 2008. The net gainers are Chinese banks, which advanced in the top 100 global bank ratings.........

Read - Business Today

The gold effect on inflation

..........In conclusion, if gold prices stay elevated or increase going forward, and wealth effects emanating from this externally generated feature are quantitatively important, then monetary policy has that much more work to do to tame inflation.

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Gold gains with dollar flat

NEW YORK, Nov. 21 (UPI) -- Gold prices rose Wednesday as the Reserve Bank of India banned banks from loans earmarked for gold purchases. The bank said the ban was meant to discourage speculative gold purchases. Borrowing could continue for gold purchases for jewelers, however, the banks said..........

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Govt wants to wean you off gold: You should say ‘no, thanks’

.....In fact, both the finance ministry and the Reserve Bank are being hypocritical in trying to de-emphasise gold here. In 2009, they themselves bought 200 tonnes of gold in order to bolster official reserves – indicating that they have less trust in paper reserves (even US dollars) than gold. What is sauce for the RBI is not sauce for us ordinary folks? The RBI’s accounts for 2011-12 show that while foreign currency assets went up by 14.2 percent, the value of gold holdings went up by 31.5 percent......

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RBI and the chicken game

........of all the “strategies” in this game of chicken—chickening being slowing in face of a speeding automobile—one vehicle speeding away and the other slowing is the most frequent solution. A similar game has been played for a while between the finance ministry and the Reserve Bank of India (RBI). It is, of course, rash to try and understand monetary and fiscal policy coordination failures by looking at vehicular aggression on Delhi roads. But the behaviour of India’s fiscal authority—its finance ministry—is not very different from that of speeding drivers. Consider two recent episodes—useful for analysing the repeated play of the chicken game........

Read - Mint

Differences with RBI governor is media creation: Chidambaram

......"I have already explained about the....media created differences between Government and RBI (Governor)", he said when asked if "his problem with RBI Governor is because he did not oblige with rate cut".......

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The unsavoury hurry over new bank licences

.......By now it has been established that the ostensible reason for more bank licences as expressed two budgets ago—more financial inclusion—is arrant nonsense. This author had, in 2006, done an exercise in banking market concentration around the world, which showed that India was the third-most fragmented market. Some water has flowed under Mint Street since then—with the disappearance of the likes of Centurion and Bank of Rajasthan—but the essential point remains the same: if such levels of competition have not helped the cause of financial inclusion, a few more licences will not accomplish that.......

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Coincidence

When he moved to Mumbai as RBI Deputy Governor, Subir Gokarn retained his Delhi mobile number. Those who called him on it yesterday heard this recorded message from the mobile phone company: “The number you are calling is temporarily out of service.” Hopefully the number, and Gokarn, will be back in service soon—Gokarn’s term comes to an end on November 23 and there is, as yet, no clarity on whether he will get an extension. He is, however, slated to speak at a banking conference on November 25—immediately after his term comes to an end—suggesting he may have been given an extension.

Read - FE

RBI prefers a law

...........North Block seems to have ignored the message in Subbarao’s remark: the central bank would prefer the powers came through a legislative amendment. The powers given outside the Act could come with stings and be taken back similarly — without a legislative process. Statutory bodies such as the RBI should not be made subservient to the whims and fancies of officials in ministries. The central bank has faced problems on such issues relating to banks earlier due to lack of clarity of law. 

M.G. Warrier, Thiruvananthapuram

Read - HBL

Banks can open admistrative office in large cities sans RBI permission

MUMBAI, NOV 20: 

Banks need not seek permission of the Reserve Bank to open administrative offices in large cities (Tier-I), the central bank said today. “With a view to further increasing operational flexibility of banks, it has been decided to permit domestic scheduled commercial banks (other than RRBs) to open offices exclusively performing administrative and controlling functions in Tier-I centres without the need to obtain prior permission,” it said in notification today....

Read - HBL

HDFC Bank launches mobile banking in Hindi

Indore: Targeting 560-million Hindi-speaking population, the second largest private sector lender HDFC Bank today launched a mobile banking application in the national language. Mobile banking services is part of the bank's overall strategy to use convergent communication platform to engage with customers, ...........

Read - FE

Bank to start scheme to help girls’ education

 The Mann Deshi Foundation of Satara, working for the empowerment of rural women, has come up with a scheme for girls to pursue education beyond Std VIII. Under the scheme, a girl can open a bank account on which the bank will add 5% interest as well as deposit 5% of the cumulative savings and interest earnings as its contribution..........

Read........

Corporates, banks taking undue advantage of CDR mechanism

....."If the reason for the recent increase in restructured accounts is indeed the economic downturn, it should have been reflected across all bank groups and not just public sector banks," said K.C. Chakrabarty, Deputy Governor, Reserve Bank of India (RBI) at a seminar last August. If a company is unable to meet the new demands it has agreed to under CDR, or wriggles out of them, the restructured assets turn into non-performing ones. This is precisely what is happening. ....

Read - Business Today

No move to give SLR status to corporate bonds: RBI

Reserve Bank Deputy Governor HR Khan today indicated there was no move at present to give SLR status to corporate bonds. "We had a meeting with the Finance Minister (P Chidambaram) recently. But, I think, nobody is serious about giving SLR status to corporate bonds," Khan told reporters on the sidelines of an RBI-ADB summit........

Read - BS

RBI Governor D Subbarao on the state of banking industry and challenges it faces

......We believe more banks should come in but some necessary conditions (such as amendments to the Banking Act) have to be fulfilled. I don't think it is possible to issue new licences without changing the Act. The old guidelines did not contemplate the entry of corporate houses into banking. If we allow corporate houses, it's important we have the amendment or the authority we have sought......

Read - Business Today

US has issue with dollar swaps as Re not fully convertible

Reserve Bank of India Governor D Subbarao believes a central bank should intervene in the forex market "only to manage economic stability disruptions". Analysts had called upon the RBI to enter the forex market and buy dollars to recoup the rupee and thus arrest the imported inflation, which is the main reason for the continued price spiral......

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RBI seeks alternative to $

Even as China tries to promote the Yuan as an international currency, Reserve Bank of India (RBI) has joined the effort of chipping away at the dollar's pre-eminent position as the world's currency. The central bank on Monday called for inclusion of emerging market currencies as alternative reserve currencies to the dollar.  Delivering the 46th A D Shroff Memorial Lecture in Mumbai on Tuesday, RBI Governor D Subbarao said that the dollar's monopoly as a reserve currency had resulted in many countries facing a liquidity problem as foreign creditors and foreign investors turned risk averse. "Paradoxically, even as the US economy was in a downturn, and its central bank resorted to extraordinary quantitative easing, the dollar strengthened as a result of flight to safety," Subbarao said. ......

Read - TOI

Spend more on productive purposes, Subbarao tells government

Highlighting the need for government spending on productive purposes, Reserve Bank Governor D Subbarao today said future generations should not pay the price for the high borrowing of today. "Government borrowing is not necessarily bad, but if the government borrows and consumes, that is bad," ........

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No-flub account

...... In the middle of her passionate plea for financial inclusion, she paused to ask the official sitting next to her, “What do you call them, free-fly...?” It took the Delhi chief minister a little while to understand the term. Only with a bit of effort could she finally pronounce the phrase “no-frills accounts”.

Read - BS

RBI harmonies definition for Infrastructure lending

Reserve Bank of India has harmonised the definition of infrastructure lending for financing by banks and financial institutions to avoid confusion. The definition has been aligned with the master list of Infrastructure sub-sectors’ notified by the Government on March 27, 2012....

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SLBC forms sub-committees to improve service

.....In a bid to boost export activities in the state, the SLBC also set up a sub-committee to give inputs for improvement of untapped export potential of the state. The sub-committee on export is formed as per suggestion of Khan and will have representatives from RBI, NABARD, SLBC, Odisha Export Promotion Council, financing bankers and exporters' Association.......

Read - BS

Alvi coop bank board of directors dissolved

VADODARA: In a significant move, following orders of Reserve Bank of India, the Registrar of Cooperative Societies has dissolved the board of directors of Alvi Cooperative Bank and appointed an administrator with immediate effect..........

Read - TOI

MINISTRY TO START SELECTION PROCESS FOR NEW BANK CMDs, EDs IN DECEMBER

The finance ministry will begin the process to select new CMDs and executive directors of PSU banks in December itself. Usually, this selection process takes place in January and February every year. The move to advance this is not an indicator of the ministry’s efficiency. Rather, insiders say, DK Mittal, secretary, for financial services, wants to complete the process before he retires in January 2013.

ET

Finmin Keeps an Eye on PSU Banks through Nominees

The finance ministry has devised a method to give directions to chiefs of state-run banks without appearing to be intrusive. Of late, the ministry has been issuing instructions to its nominee directors on issues that they should take up at board meetings, and marking a copy of the same to the chairman and managing director (CMD). Since these nominees represent the government, the ministry is well within its right to convey the concerns of the dominant shareholders through them. Earlier, the communications were addressed to CMDs which invited criticism from RBI for micro-management by the government.

ET

Keeping A check

.....The CTS is an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically. The RBI, in a circular last year, emphasised that homogeneity in security features will act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straight-through-processing, both under CTS and MICR clearing.......

Read - Indian Express

Stocks of gold financing firms fall after RBI bans loans for buying gold

Shares in gold finance companies Manappuram Finance and Muthoot Finance fell on Tuesday after the Reserve Bank of India banned loans for buying gold in a bid to dissuade people from indulging in speculative activity.........

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Banks ready, but borrowers missing

.....“Inflation is a key reason for the high interest rate. Credit flow is muted as investments are not happening. While interest rate will fall as inflation comes down, what is key is speeding up investments in infrastructure sectors like power and road. The supply side bottleneck needs to be addressed, like fuel linkages in the power sector. Road projects also need speedy environmental clearances. If infrastructure investment is boosted, it will also have a favourable impact on sectors like steel and cement,”.....

Read - BS

Crisis of confidence hits banks, borrowers

......RBI has also noted that increasing risk aversion has hampered the flow of credit and as a result, banks parked their excess funds in government securities. “In contrast with the overall slowdown observed in the major balance sheet items of banks, growth in investments accelerated during 2011-12, compared with the previous year. This trend partly reflected increase in risk aversion by banks, with a growing preference to park funds in safer instruments, against the backdrop of weak macro-economic outlook as well as rising NPAs,” the central bank said.......

Read - BS

Is Dhanlaxmi Bank up for sale?

......Jittery investors pressed the panic button anticipating that the Reserve Bank of India (RBI) might now proceed for a forced merger of the private sector lender (with a bigger bank), which had gone through a management change in February, 2012. Markets were agog with names likeAxis Bank and HDFC Bank as potential acquirers......

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Dhanlaxmi Bank continues to see senior-level exits

....The All India Bank Officers' Confederation had accused the bank of window dressing its accounts to show inflated profits. The bank's management had dismissed these allegations and claimed that it was a motivated attempt to de-recognise the bank's performance.......

Read - BS

'Indian economy unmoved by reforms'

......Pending an infusion of new capital into the banking system, the government is seeking to counter the cyclical downturn by cajoling cash-rich state-owned firms to speed up investments. A better strategy would be for the government to curtail its own consumption expenditure and reduce its borrowings. More household savings would then be freed up for corporate investments, and not just by state-controlled companies. But fiscal consolidation in a slowing economy has to be gradual, lest it makes the short-term growth challenge worse........

Read - Express India

Bank to pay Rs 1L for refusing fresh cheques

A district consumer forum has asked the American Express Bank to cough up Rs 1lakh (Rs 50,000 each) as collective compensation to a couple for "causing harassment and more loss by unnecessary correspondence". The order was passed by the Consumer Disputes Redressal Forum after Ved Prakash and his wife Raj Pawar filed a complaint saying the bank had refused to refund or issue fresh cheques in place of the ones that were reported missing in Australia. .......

Read - TOI

Worrying disconnect

North Block-RBI relations need to get better

.....Of late, the relationship between the government in New Delhi and the RBI has degenerated into a public spat about priorities, which has destabilised the development of this institutional arrangement. Certainly, divergent views can and should be expressed. But they should not be seen as being pushy. In addition, the disconnect seemed to be spreading worryingly into other fields. Consider the government’s reappointment of Deputy Governor Subir Gokarn for an additional two-year term — generally automatic but, according to a report in this newspaper last week, now subject to a search committee and an interview. Mr Gokarn’s three-year tenure is due to end this week and that a decision on the matter is yet to be finalised is a reflection of poor advance planning. Also, at a time when Chief Economic Advisor Raghuram Rajan has been away from New Delhi to fulfil his prior teaching commitments in Chicago and the RBI governor himself is due to move on in less than a year, many would imagine the reappointment of the deputy governor in charge of the monetary policy department would be automatic, given the macro crisis India faces......

Read - BS

Don't lend for buying gold in any form, RBI tells banks

The Reserve Bank today directed banks not to give loans for purchase of gold in any form, including primary gold, bullion and jewellery, to dissuade people from indulging in speculative activity..........

Read - BS

To pump up savings, FinMin wants banks to offer ‘gold plan’

The Finance Ministry has sounded out the Reserve Bank of India (RBI) and commercial banks on the possibility of introducing a gold accumulation plan (GAP). The GAP is likely to be pitched as an alternative to direct investment in the yellow metal by gold-obsessed Indian consumers.........

Read - HBL

Finmin urges corporate affairs ministry to notify to keep ailing banks, insurers out of CCI

The finance ministry has urged the corporate affairs ministry to notify that ailing banks and insurance companies will not come under the purview of the Competition Commission, a step that can help speed up issuance of new banking licences. In a letter to the corporate affairs ministry, financial services secretary DK Mittal has requested immediate notification to this effect since banking regulation amendment bill and competition bill are yet to be passed by Parliament.......

Read - ET

Two more lean years

....the Reserve Bank of India (RBI), which hasn’t issued any new banking licences in 10 years, is holding up the finance ministry’s plan, and for good reasons. Before it allows new deposit-taking institutions to be set up, including by non-financial corporate groups, the RBI, which is also the country’s banking supervisor, wants the legal authority to sack rogue bank boards. Amendments to the country’s banking laws that would have accorded the monetary authority such wide-ranging powers were introduced in Parliament seven years ago. They were never passed. The central bank is quite right to be circumspect, even at the cost of annoying the finance minister.......

Read - BS

FinMin relaxes norms for top jobs in govt banks

With nine public sector bank chiefs set to retire in 2013-14, the finance ministry has relaxed the eligibility criteria for the selection of chairman and managing director’s (CMD) post in these banks. According to bankers, a candidate who has served as an executive director (ED) for six months in public sector banks can now aspire to be a CMD. Earlier, only officials who served two years as ED were considered for the CMD’s post. However, the criterion for residual service — the number of years left for a candidate to serve the bank — has been kept unchanged at two years.............

Read - BS

The nature and grounds of political obligation in the Hindu State

This is a revised edition of a classic work published in 1935. The author Dr. J. J. Anjaria was a well- known economist who was a student in Bombay University and the London School of Economics. He was Chief Economic Adviser in the Ministry of Finance and Executive Director in I M F and later held the post of Deputy Governor of the Reserve Bank of India.......... 

Click to read book review by P.P.Ramachandran

RBI justified in asking for amendment before final guidelines on new licences: E&Y

The govt continues to push the Reserve Bank of India (RBI) to issue final guidelines on new bank licences and move ahead with the process. At the same time, the RBI continues to seek the passage of the Banking Laws Amendment Bill before it moves forward on the issue. According to Ashvin Parekh of E&Y, the RBI is justified in asking for the amendments to be passed before the guidelines are finalised......

Watch the video.......

RBI action improved credit availability in 2012-13

There has been a marked improvement in credit availability in 2012-13 on the back of steps taken by the RBI to put more money into circulation. This can be illustrated in terms of the funds locked up within the RBI and scheduled commercial banks vis-à-vis the total currency in circulation among the public........

Read - HBL

The future of Non Banking Financial Companies in the economy

......However, considering the reluctance and restrictions that RBI has observed in giving banking licences, the feasibility and smoothness of conversion still remains a question mark. In continuation to the Government’s proposal of encouraging penetration in the banking industry, RBI has released a set of norms to ensure stability and growth in the sector. It had observed that non-banking finance companies (NBFCs) who wished to convert into banks should have a minimum net worth of Rs. 200 crores. However, RBI has decided to provide some relief to NBFCs if their net owned funds fall below the below the stipulated Rs 200 crores...........

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Need to monitor 'shadow banking' in India: Financial Stability Board

 An international body of financial authorities today highlighted the urgent need to monitor the "shadow banking" activities in India, given a sharp annual growth of over 20 per cent in such businesses over the recent years. The "shadow banking system" refers to credit intermediation involving entities and activities (fully or partially) outside the regular banking system and is estimated to have reached a size of nearly Rs 37 lakh crore in India. ......

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No target or band has been set for rupee: Gokarn

Reserve Bank will intervene in the forex market only to curb excessive volatility in exchange rate but stated there is no target set for rupee, deputy governor Subir Gokarn said here today. "Our approach has been that the exchange rate of the rupee should be market determined and the Reserve Bank should be intervening only to manage excessive volatility... Without targeting any particular level or band," Gokarn told an RBI-ADB conference on 'Managing capital flows' ............

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RBI will intervene to check any excess rupee volatility: Gokarn

....“Therefore, the intervention policy not only aims at quelling the excessive volatility, but also attempts to moderate speculative one-way downward movement of the India rupee,”....

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Corporate Bonds May Soon be Part of SLR

........The ministry has initiated talks with the RBI and the corporate affairs ministry to facilitate these changes that could ignite bank interest in corporate bonds and encourage companies to raise funds through debentures, which accounted for lowly 3.9 per cent of their funds needs in 2010-11.........

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RBI concerned about FII debt flows

The Reserve Bank of India (RBI) has raised concern on debt flows by foreign institutional investors (FIIs) in the capital market. RBI Deputy Governor H R Khan said there was a need to reduce debt inflows, which, due to interest rate differentials, had have come at a very quick pace.......

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All efforts to be made to rein in fiscal deficit at 5.3%: C Rangarajan, PMEAC

....On key policy rates cut by the Reserve Bank, Rangarajan said: "We need to watch the behaviour of prices for some more time. Of course, the Reserve Bank will take all factors into account, but there is still some time for Reserve Bank to take a decision." The RBI will come out with the mid-quarter review of monetary policy on December 18. The third quarter will be announced on January 29. .....

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Ernakulam to soon be first to achieve 100% banking

.......The press meet was addressed by S Jayamohan Nair, Deputy General Manager, Union Bank of India, C V George, General Manager, RBI, Kochi, K D Joseph, Assistant General Manager, RBI, Thiruvananthapuram and K R Jayaprakash, Lead District Manager.

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SBI to send new cheque books by Dec 15, update your address

After announcing the implementation of cheque truncation system (CTS), the State Bank of India (SBI) has asked its customers to update their mailing address. The lender is preparing to send the new series of CTS compliant cheque books by December 15, 2012.....

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FYI: Banks pay you Rs 100 per day as fine when

Fees and fines are part of our life, especially when it comes to banks. You are slapped with a fee, if you don’t maintain the minimum balance in your savings account. You pay a credit card bill late; there is a late payment fine. If a cheque is bounced for financial or non-financial reasons (forgot to write the date on a cheque) and you have to pay up for that. There are hundreds of reasons as to why you could land up paying a fee to a bank. But, did you know, as per the Reserve Bank of India, banks too have to pay you a fee?...........

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Fixing home loans

.........The Reserve Bank of India (RBI), worried about systemic risks from this skew, constituted a working group to discuss how banks can be made to offer more fixed rate loans to retail borrowers. The committee has suggested that banks flag off this transition with 7-10 year fixed rate loans that carry a reset clause, while augmenting their long-term funds to facilitate such products.........

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2G case: RBI Governor D Subbarao deposes in court

New Delhi: RBI Governor D Subbarao Monday deposed in a Delhi court as a prosecution witness in the 2G case, saying he had questioned in 2007 the spectrum fee of around Rs 1600 crore for pan India licence.....

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Finance Minister P Chidambaram to meet chief ministers of southern states today

......The high-profile meeting with the chief ministers will be held against the backdrop of the half-yearly review of monetary policy by the RBI last month, wherein the key policy rates were left unchanged.

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RBI cancels licence of Ghaziabad Urban Cooperative bank

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he Reserve Bank has cancelled the licence of Ghaziabad Urban Cooperative Bank as it had become insolvent. "In view of the fact that Ghaziabad Urban Cooperative Bank, Ghaziabad (UP), had ceased to be solvent and with all efforts to revive it having failed the Reserve Bank of India delivered the order cancelling its licence to the bank on November 16, 2012," RBI said in a notification today.......

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Financial reforms: Relevance to the Common Person - S.S.Tarapore

.....Witness the Approach Paper's slant of cutting down the Reserve Bank of India (RBI) to size by taking away a large part of the domain of its operations, ostensibly, on the ground that the RBI should exclusively focus on monetary policy. The Bond- Currency- Derivatives markets will be totally out of the purview of the RBI. A glaring feature of the Commission's recommendation is to take away capital controls from the RBI and to lodge this in the Ministry of Finance- all in the name of Full Capital Account Convertibility! Consistent with the stance of the Approach Paper it can be inferred that the RBI would have no say in exchange rate management and forex markets, and therefore, forex reserve management. The RBI's handling of the 1991 forex crisis is internationally recognised, as is its gradualist approach to capital account convertibility. This whole issue is not only whether India abolishes capital controls altogether but an issue of managing the entire external sector. It would be a monumental blunder to go along with the FSLRC recommendation to strip the RBI of its role.......

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RBI-FinMin conflict of views is old hat in India

......Chidambaram needs to understand the RBI’s role in the country’s economy and gracefully acknowledge it. The key area where things began to clash is when the government seemed to go public on some of its preferences but without being prepared for the consequences. When Subbarao took over as RBI Governor, the initial perception was that since he is from North Block, the Government (read: MoF) could manoeuvre him, especially on the (interest) rate front. However, Subbarao turned out to be a part of that disappearing breed of civil servants who not only know what they are doing but are also willing to make timely decisions – without any fear or favour – and accept responsibility for them. It’s too bad for his critics, as he knows macroeconomics well.

Read - Deccan Herald