...............In a statement here, Dr. Rajan maintained that the government would announce “specific measures in the next few weeks” to contain the widening current account deficit (CAD) which has put pressure on the Indian currency and once the rupee is stabilised, the policy-makers will have room for more growth-friendly measures. “We have already taken some steps on liberalising FDI [foreign direct investment]. We are also exploring some other options for stably and sustainably funding the CAD. We will announce specific measures in the next few weeks,” he said.................
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, July 31, 2013
Rapid rupee depreciation has put us in vicious spiral: Subbarao
Reserve Bank of India’s Governor D Subbarao explains the reasons for the recent liquidity tightening measures at the post policy press conference and explains the central bank’s strategy on the exchange rate: Excerpts:...............
RBI’s foot is still on brake pedal
..........Further, the guidance provided by the RBI — that monetary policy focus would revert to supporting growth only after calibrated rollback of the recent liquidity measures as stability is restored in the foreign exchange market — is likely to keep interest rates sticky at elevated levels, which would weigh upon consumption and investment decisions. Accordingly, we anticipate that the RBI will ease its stance in the second half of the fiscal.............
Insulating the economy
.........But the lack of quantifiable objectives is only one part. Curbing exchange rate volatility should not by itself be the central focus of the RBI’s policy, considering the real structural reasons underpinning such volatility. These have to do with unsustainably large current account deficits (CAD) and slowing growth making it difficult to attract the capital flows necessary to finance these. Without CAD levels coming down and growth recovering, the Indian economy will continue to be vulnerable to external shocks. .........
Predictable, but challenging
............While not being in a hurry to loosen its policy, the RBI has given an assurance that with the right conditions prevailing, monetary policy will revert to supporting growth while maintaining a vigil on inflation. That, unfortunately, seems far away as the rupee quite unexpectedly tanked again on Tuesday. The authorities have been quick to blame speculation but only the next weeks will show whether it is a one-off development or the beginning of a new period of stress for the rupee..........
Read - The Hindu
Moderating growth outlook by RBI worries India Inc
......“We understand the decision of the RBI on the rates. We draw heart from the statement of the RBI saying that had it not been for the volatility, the rates could have been reduced, since inflation has started to moderate. We see this as a softening of stance by the RBI,” Confederation of Indian Industry (CII) President Kris Gopalakrishnan said................
No need for IMF loan: RBI Guv Subbarao
Reserve Bank Governor D Subbarao today said India's current economic situation does not warrant any move to seek loans from the International Monetary Fund. "The answer is no! I don't believe that we are in a situation where we have to go to the IMF. We are fairly resilient," Subbarao told reporters at the customary post-policy media briefing............
Read........
A feeling of helplessness
.......The problem, for Mr Subbarao and India’s fiscal managers in New Delhi’s North Block, is to attract more foreign direct investment (FDI), which is always more welcome than portfolio investment. Yet, don’t expect a flood of dollars to gush in immediately despite the recent policy overhaul.............
Waiting for Godot: Will RBI’s wait for a stable rupee be endless?
............India’s structural issues are not going to be addressed overnight. Global markets will move to the Fed’s tunes. RBI will be waiting for the INR to stabilize before acting to support growth. How long for the INR to stabilize? Hopefully it is not Godot!!
RBI shoulders arms: Sajjid Chinoy
.........If the game plan is to induce behavioural changes in the market, an element of constructive ambiguity is critical. If RBI were to set a date for withdrawal or lay out a specific criterion, the economic agents it is trying to influence will simply wait it out in anticipation. But RBI's inability to provide a timeline for exit has further fuelled the debate on the efficacy of the tightening measures. 'Are there measures working?' runs the exasperated refrain........
Painted into a corner
........In the RBI's thinking, as reflected in its policy review statement, the recent rupee depreciation significantly exacerbates inflation risks, thus shifting the policy priority back to inflation containment and away from growth, which had been the direction taken over the past few months. In this sense, even though the measures taken were rationalised as being aimed at controlling the slide in the rupee, they can also be seen as conventional monetary tightening, justified by the inflationary consequences of depreciation..............
India sputtering
The latest monetary policy statements by the Reserve Bank of India (RBI) clearly show that its biggest concern right now is whether there will be adequate capital flows to finance the current account deficit, at a time when global financial markets are rattled by the prospect of the US rolling back its extraordinary monetary stimulus..........
Why RBI governor is right in keeping a tight leash on interest rates
..........Interest rates are a loaded pack and needs careful handling and deliberation. Importantly, it would be a positive step forward if the Reserve Bank of India and the ministry of finance begin to make greater disclosures about their policies and actions and, more importantly, reasons underpinning the policies. The cloak of secrecy that surrounds the financial system is opposed to the values of transparency and accountability that are essential to democracy. The need for openness has never been greater.
Anyone here for the Rs?
................More curious is the reply given in the Governor’s press conference—not by the Governor though—on a question on the overseas NDF markets. If NDF markets feel the rupee needs to fall further given the fundamentals, the question was, how will curtailing local currency trading help? It is difficult to go along with RBI’s view that the local market determines what happens in the NDF markets since the latter are several times larger. In any case,...........
Mint Road’s white flag in war for Rs seen as sign of weakness
..........“One thing we are trying to do in the currency futures market, there is a lot of position-taking which we have curtailed and by month-end, this would reduce hopefully. If not, further measures would be taken. There is a connect between NDF market and the futures market,” said H R Khan, Deputy Governor, RBI. The Governor, however reiterated that the central bank was not trying to defend any level on the rupee which remains vulnerable due to the high current account deficit and the possibility of a reversal in capital flows due to the possible tapering of the US Federal Reserve’s quantitative easing programme...............
Rakhi losing its golden sheen
LUDHIANA: While the bond between siblings does not really depend on material tokens, one cannot help the excitement of receiving Raksha Bandhan gifts. For decades, gold coins in a velvety backdrop have dazzled sisters and warmed their hearts. The yellow metal has assured them of security in turbulent times. But now that the Reserve Bank of India has banned the sale of gold coins, people would need to make slight adjustments in the customs............
Do’s & Don’ts before you print and submit ITR V
You must be aware of the fact that return filing process gets completed only when you send ITR-V copy to CPC office. Let’s understand the last and the most important process to complete your tax filing:..............
Haj funds illegally deposited in Karnataka's bank
............... Despite committee deciding to transfer the Rs 2.29 crore to Union bank of India on March 1, 2012, the executive officer went ahead keeping the amount in Amanath Bank as savings in May 2012. However, Rs 2 crore was converted as fixed deposit for a period of three months in December 2012," the minister said. Islam said of late Amanath Bank has come under Reserve Bank of India, therefore deposits cannot be withdrawn immediately. The minister also assured the House that he would write to department of personal and administrative reforms ( DPAR) to initiate action against an officer for illegally depositing money..........
Tuesday, July 30, 2013
Evaluating Subbarao
.........And when the current account deficit (CAD) was looking problematic, Subbarao even gave a speech at the London School of Economics’ IG Patel lecture in March arguing that those advocating interest rate hikes to fix the CAD were wrong since lower interest rates would actually encourage equity investors even while dissuading investors in debt. That is clearly a view the Governor jettisoned very soon. It is never possible to answer a debate in the absence of counterfactuals—would lower interest rates have spurred investments while various government clearances continued to dog them?................
RBI’s Russian Roulette
...........So, what has RBI achieved? At best a temporary reprieve for the besieged rupee? Engineering a liquidity crunch is hardly the advisable remedy to break out of this siege. The costs can be just too high in terms of lost growth, severe dampening of investment sentiments, killing off the animal spirits and making our exports less competitive.............
Bankers, officials hail financial inclusion work in Madhya Pradesh
.........“Madhya Pradesh is the only State in the country where there is perfect coordination between the Reserve Bank of India, the State Government and other agencies concerned,”..................
RTI Judgement Series: Bank PIO fined Rs 17,000 for not complying with CIC order
...........Since no reasonable cause has been offered for the delay of 68 days in providing the information to the Appellant as per the order of the CIC, the Bench is imposing the penalty on Mrs Mugdha Satarkar, PIO & AGM (Vig) under Section 20(1) of the RTI Act at the rate of Rs250 per day of delay of 68 days that comes to Rs17,000," ..............
Check before you express
RE: WHITHER R B I 'S CULTURE ?
| Subramaniam, Uma |
| Sent: | Monday, July 29, 2013 5:30 PM |
| To: |
Ramachandran P.P
[pprchandru@gmail.com]
|
Dear
Sir
The
College is dismayed by your remarks on the blog. We wish you had checked the
facts with us before sending them into the blogging space. It is not correct to
state that the College did not issue an invite to Ms Thyagarajan. Not only was
the invitation mailed to her, one of our Jubilee co-ordinators Shri M
Subramaniam who is also Member of Faculty rang her up a day before the event for
making the necessary logistical arrangements for car pick up etc. which was
politely declined by her on health grounds. Further, she
was personally delivered a copy of the Souvenir at residence. We trust our
clarification will also be published in the blog.
Regards
Uma
Subramaniam
Chief General Manager and Principal
Chief General Manager and Principal
RBSC, Chennai
This is the factual feedback received from the Principal, RBSC in response to info item given by P.P.Ramachandran, DGM (Retired) titled 'Tired' on appraoch towards 'Retired'...............
An insider’s view of reforms
.........The RBI Governor Subbarao (chapter 10) raises what he terms “policy challenges from the New Trilemma.” He has often emphasised the need for the RBI and the government to share responsibility, especially in relation to the impact of fiscal deficits and to ensure fiscal stability. He feels that unless the respective roles are defined, these could impact adversely the independence and accountability of the RBI. The situation could get worse if debt market operations are shifted from the RBI to the Finance Ministry. It is a retrograde step and puts the clock back.................
Obituary
Shri P.A.SIVALINGAM, former Personal Secretary to RD, RBI, Chennai passed away at 3.00 a.m. on 29-7-2013. He was one
of the members who were honoured by the Forum of Retd. Employees of RBI last Saturday
on their attaining the age of 70 years. We pray for his soul to be rest in
peace and convey our heartfelt condolences to the bereaved family.
-
SMALL COINS DISTRIBUTED
Officials of the State Bank of India, main branch, distributed small coins to the tune of Rs. 2 lakh to about 300 people at Poorna Market on Sunday. Following RBI guidelines to help the common customer overcome shortage of small coins the bank had taken up such activity on a regular basis,...........
RBI eases curbs on payment gateways
........The rationale for its initial strict regulations, according to the RBI, was that several service providers had allowed exporters to retain the export proceeds abroad without repatriation, resulting in violation of the provisions of the Foreign Exchange Management Act (FEMA) 1999. “Online payment gateway service providers have been finding it easier over the last few years, with the RBI easing up on some of its earlier regulations. If all goes well, PayPal may soon be allowed to resume its Indian operations as well,”...........
RBI warns NBFC on unsolicited calls
............This is the second time that a notice has been issued to the NBFCs by the RBI on the same subject. The entities were advised to employ only those sales agencies or call centres which have been registered as telemarketers with the department of telecommunication (DoT), as per the regulations of the telecom regulatory authority of India (TRAI) issued 2007 for the job of soliciting or promoting any commercial transactions.............
Card volume expands in India despite significant unbanked population
.........“As India continues to expand and upgrade its telecommunications infrastructure to rural areas, more Indian consumers will have access to secure and reliable electronic payments and financial services via a mobile phone– a critical step in the migration from cash to more convenient, secure forms of payment,” ............
UIDAI, banks disagree on use of biometric authentication at ATMs
..........It's learnt that the UIDAI nominee on the panel is likely to issue a dissent note on the estimates the agency believes is significantly higher than what banks' migration to Aadhaar would cost. About a fortnight ago, the findings of the report were shared by Pulak Kumar Sinha, the SBI general manager who heads the panel, at a luncheon meeting with RBI Deputy Governor H R Khan. Other members of the working group were also present at the meeting..........
Will chip-based credit cards really work?
.....Banks will have to convert all credit card customers on the new system. The best part is that since the regulator has made it mandatory for banks to issue chip-based cards, most banks will not charge you a fee for the same. Since chip-based cards are more expensive than the magnetic strip-based cards, some banks may pass a nominal fee to the customers............
Graduation day
...........The financial inclusion trend from the Reserve Bank of India and the present decade witnessing superannuation in banking sector have given rise to six lakh vacancies in banking sector from now till 2020, Mr. Sundara Rajan added................
Unruly rally disrupts road traffic
............s per permission granted by city police's special branch, Swabhimani Republican Party was allowed to take the rally from Janata Chowk to RBI Square at 12 noon. However, sources in city's traffic police said the police had expected about 500 people in the rally but over 5,000 turned up. Things became worse when the rally lost order and its participants spread to both sides of the road from Janata Chowk to RBI square..............
The Taylor Rule and interest rates in India
In the run up to 30 July monetary policy review by the Reserve Bank of India (RBI), opinions regarding the stance of the central bank have tended to focus on benchmarks based on the Taylor Rule—an interest rate feedback rule of how central banks should set short-term interest rates as economic conditions change to meet the goals of economic stability together with desired inflation rate. The rule states that............
SBI chief predicts RBI would raise repo rate
.........Chaudhuri's views contradicts 31 of 32 analysts in a Bloomberg News survey who predicted no change to the benchmark rate, while 29 of 30 expects the CRR to remain unchanged at four per cent. The decision is due at 11 am on Tuesday..............
Not My Baby, Says the RBI; It is Right
The
Reserve Bank of India (RBI) has given clear indication that monetary
policy has to remain cautious in the face of financial risk, unbridled
consumer price inflation and a still-high current account deficit (CAD).
While the RBI might stoop to administer emergency CPR to the economy
gasping for breath, it would prefer to leave treatment for sustained
recovery to the government. In its review of macroeconomic and monetary
developments, the RBI makes it very clear that structural reforms to
contain the CAD and fiscal adjustment to prune subsidies and step up
investment are what the economy requires, and these depend on government
action.................
Read - ET
Read - ET
Recent liquidity steps 'at best' breathing time: RBI
The Reserve Bank of India (RBI) has sounded a hawkish note on the eve of the monetary policy review by saying the recent currency depreciation has posed upside risked to both wholesale and consumer price inflation. In the Macroeconomic and Monetary Development report released today the central bank said it will actively manage liquidity to reinforce monetary transmission that is consistent with growth-inflation balance.....................
RBI's emergency medicine: What does history tell us?
There are differences between now and 1997-98, but sufficient similarities too for us to draw lessons from the past, about the recent RBI’s policies to strengthen the rupee. RBI's goal could be to reduce volatility, and not set a level for the rupee; it would provide the time needed for the economy to adjust to the weaker rupee,...........
Subbarao's win against inflation is growth's loss
.............Subbarao will surely say achieving any result from a monetary policy in an integrated global world today is easier said than done..................
Chidambaram says price stability cannot be the only mandate of RBI
............."All over the world thinking in changing. The mandate of a central bank must not only be price stability. The mandate of central bank must be seen as part of larger mandate which includes price stability, growth and maximising employment,"............
Measures to stabilise rupee must not hit growth: Rajan
Hours after the Reserve Bank of India said that stabilising the battered rupee is its priority, Chief Economic Adviser to Finance Ministry Raghuram Rajan said the RBI’s action in this regard must not hurt growth too much....................
Ab tak 56 & return of decoupling
...........This bolstered the minister's vocal push for a hand of support for growth from the Reserve Bank of India (RBI) by cutting rates. Though RBI resisted initially, it finally had to give way. The minister also took steps to attack speculative investments in gold and real estate, often targets of the Street for its own woes. Empowering Sebi to attack ponzis was another key move............
Right about the rupee
......What the RBI needs to understand is that without correcting the unprecedented galloping inflation, it cannot successfully correct depreciation of the rupee.................
Focus On Re, Growth A Liability
.........."The priority for monetary policy now is to restore stability in the currency market so that macro-financial conditions remain supportive of growth. (However) this strategy will succeed only if reinforced by structural reforms to reduce the CAD and step up savings and investment,"..............
Only Reforms Can Put Economy on Track: RBI
The
effect of the Reserve Bank’s recent interest rate increase and
liquidity tightening to bolster the rupee will fizzle out if the
government does not move to reduce external trade imbalances, a central
bank policy review says. It will be a hard road to economic recovery
as business confidence is low, and rising global interest rates may
throw the financial markets out of gear, says the June quarter
Macroeconomic and Monetary Developments review by RBI...........
Central Bank Can’t Afford to Frighten Equity Investors
......Those
were also the days when the government could privately place bonds with
RBI and keep its borrowing cost well below market rates. Not any more;
today, the market will demand a competitive rate from the government
similar to what it would charge any other borrower..........
Read - ET
Silver linings amid economic gloom: JP Morgan’s Morparia
....... In an interview on Thursday, she said the recent reforms initiated by the government will continue till the elections because policymakers have shown a rare resolve to address growth and investments. Morparia also touched on issues ranging from the Reserve Bank of India’s recent policy measures to support the rupee, to J.P. Morgan’s plans for India. Edited excerpts:................
Empowering SEBI the right way
..........The Centre’s expectation is that a suitably empowered regulator would nip such financial misadventures in the bud. That might still be a tall order given that most recent scams have thrived by exploiting differences in the regulatory jurisdictions of SEBI and the RBI. The Indian financial code which has been drafted to address inter-regulatory issues has not found universal acceptance and will take time before it is adopted...........
Burden of gold
In recent times, especially in the light of a widening current account deficit, Indians' obsession for gold has come under fire from various quarters. The government and the Reserve Bank of India have taken measures to clamp on this. A look at the frustration of earlier policy makers in this regard:............
Rana Kapoor wants rates unchanged
It could well be one of the most critical monetary review policies by the Reserve Bank of India (RBI) on Tuesday as companies and industry bodies wait anxiously for the apex bank’s directives. Rana Kapoor, managing director and chief executive officer Yes Bank and president of Assocham, said a status quo on policy rates would be a positive message by the RBI indicating that lending rates would ease in the near future and the recent measures undertaken by it were only aimed at the currency market.............
YES Bank can’t be family business: Rana Kapoor
YES Bank chairman and co-founder Rana Kapoor recently saw the denial of board seat to his niece snowball into a controversy. But Kapoor, who has donned the hat of industry chamber Assocham’s president, tells TOI that the bank he cofounded with his brother-in-law Ashok Kapur can’t be run as a family business and his children will stay away. Excerpts: ........
Read - TOI
Read - TOI
Monday, July 29, 2013
We are paying dearly for ignoring savers - Dr.S.S.Tarapore
........The government should give ‘ closed door’ guidance to the RBI to use all its instruments, without constraints, to ensure that the Consumer Price Index ( CPI) inflation comes down from 10 per cent to 5 per cent by early 2014. Again, the RBI needs to be assured that it need not expend its forex reserves in defence of a particular exchange rate. Furthermore, it should not shore up the rupee on the pretext that it is controlling volatility. It needs to be recognised that a massive outflow of capital from the EMEs is inevitable in the next 9- 12 months and India should conserve its forex reserves. What is important is that the topmost policy decision- takers should silence their guns attacking RBI policies. When the RBI took measures on July 15, 2013, the government immediately said that this did not portend monetary tightening!................
From where did poverty go? - Dr.Subir Gokarn
.......Before getting into the numbers, I want to address two misconceptions that have made their appearance in the public debate. First, many people seem to believe that the reason why the poverty rate is what is because the bar - the poverty line - has been set so low. Of course, the level of the poverty line is subjective and a country can decide for itself where to set it. Different lines would obviously generate different poverty rates. However, in measuring the change in poverty over time,...........
Poor in US, rich in India
The media is accused of creating a controversy out of nothing by asking tough questions to policymakers and then quoting them selectively. A similar attempt was made with RBI Deputy Governor KC Chakrabarty. Asked whether the new poverty line was fair when inflation was running high, Chakrabarty cleverly dodged the question saying it was a relative measure. “Someone can be poor in the US but rich in India,” he said knowing full well that few journalists would understand the concept of purchasing power parity and its relevance in poverty measurement.
Usha Sangwan to Become LIC’s First Woman MD
Usha
Sangwan, the 54-year old insurer, will be the first woman managing
director at the Life Insurance Corporation of India in its near six
decades of existence. She may well be a trendsetter at LIC, like Kishori
Udeshi at the RBI, who started a glorious tradition of women rising to
higher positions that for decades have been male bastions. The
government is set to name Sangwan as the fourth managing director at the
country’s largest financial institution. She is currently executive
director, communications............
Read - ET
'Banks have deployed 1.95 lakh biz correspondents till Mar 13'
.........."The BC model allows banks to do cash in-cash out transactions at a location much closer to the rural population, thus addressing the last mile problem. "As on March 31 2013, banks have reported deploying 1,95,380 BCs which covered 2,21,341 villages," Reserve Bank Executive Director Deepali Pant Joshi said recently in a seminar.................
4 reasons why Governor Subbarao must be given an extension
........It's clear that an experienced hand at RBI is need of the hour as India is passing through tumultuous times on the economic front. Perhaps, Governor Subbarao's extension would be the right decision to make.
Read.......
Meaningless comparison among the RBI Governors since 1990 - Dr.T.V.Gopalakrishnan
The comparison among Governors’ is meaningless as the performance is linked to the political climate and support in the Governance system, sound economic policies and conducive external sector environment. All these are found missing during the last five years when Dr Subbarao took over in the year 2008.The present RBI Governor's period is something unique in the history of RBI...................
RELIEF ON FAKE NOTES
..........The government of India is in the process of introducing one billion pieces of the Rs 10 polymer notes on a trial basis. If the trial process is smooth sailing, then the government will introduce plastic or polymer notes in higher denominations. It has been found that the fake polymer notes could be easily detected. The visible difference would be the thickness of the notes. There would be crude embossing in the clear window. Even the sound on flicking the note would be different. Will this plastic currency be able to fight the menace of counterfeit notes? For an appropriate answer to this question, we have to wait at least for.............
The Gay Abandon - PACS
NABARD pays tribute to its founder Chairman in a novel fashion. It
issued directives to SCBs and through them to the DCCBs on the 22nd
July to let the PACS remain in the rural cooperative credit structure only as
their Business Correspondents. Those that are not, can function as PACS, only
if they have own resources.NABARD decided to abandon the recommendations of all
the Expert Committees at one go: the recent RBI Expert committee of which the
present Chairman, NABARD ironically is the Chairman, Vaidyanathan Committee and
its predecessor Vyas Committee.
The main contents of the latest circular instruction of NABARD
circulated by NAFSCOB once and for all gave a go-by to the age old untiring
repetition of ‘Cooperative have failed but must succeed.’.
The SCBs/DCCBs have been instructed now:
1. To transfer assets and liabilities of PACS to DCCBs/SCBs
2. The assets of PACS arising out of all lending operations will
stand transferred to the books of DCCBs /SCBs along with the related
liabilities.
3. All deposits collected by the PACS would also be transferred
to the DCCBs/SCBs.
4. PACS will not accept deposits on its account and will not do
lending operation of any kind on its behalf henceforth under the arrangement.
5. However, they will carry out the services both in respect of
lending operations and collection of deposits on behalf of DCCBs on pre-decided
commission or fee basis.
6. PACS would, however, do other businesses as an independent
entity out of its own fund and earn income.
7. The share capital mobilised by the PACS from its members by
way of share linked capital of the loans provided will now stand transferred to
the books of DCCBs/SCBs and form part of share capital of DCCBs.
8. The borrowing members and the depositors will have to become
the members of DCCBs/SCBs.
9. DCCBs/SCBs will make arrangements to ensure transfer of
relevant securities /documents executed in the name of PACS on its name.
10. Necessary arrangements be entered into between the PACS and
DCCBs/SCBs to ensure implementation of the above directives.
These do not form part of the recommendations of the RBI Expert
Committee.
NABARD’s ostensible intention to separate the core from non-core
business of PACS has been pushed with these instructions without equipping the
system to handle them.
Second, it has failed to implement business development plans in
PACS for three decades of its supervision and now it wants to drive them to a
corner.
Third, it tolerated indiscipline in accounting standards and
State audits of the PACS, DCCBs and even SCBs to a large degree until
Vaidyanathan Committee designed the relief package conditioned by the
introduction of proper accounting, audit, professional management and
technology as also appropriate legal amendments to the State Cooperative laws. Under
its supervision, none of the DCCBs have the history of closing the books of
accounts at the end of the year on the 31st March.
Even after the relief package has been handed down NABARD has
not been able to monitor these changes systematically and systemically
resulting in misuse and even abuse of the relief package.
The compromises led the RBI to re-examine the structural
weaknesses of the Short Term Rural Cooperative Credit Structure (RCCS) through
the constitution of an Expert Committee just an year back under the
Chairmanship of Dr Prakash Bakshi and he is also the Chairman of NABARD, a
point to be noted.
The Expert Committee was unequivocal in its recommendation that
PACS are the foundation of the RCCS and but for them credit to small and
marginal farmers would have been a severe casualty as the commercial banks and
the reformed RRBs are interested in commercially viable medium and large
farmers and not the economically weak and socially desirable clientele, the
small and marginal farmers. This would mean that PACS as lending institutions
for agriculture have a distinct place and needs to be preserved.
In Cooperatives of all hues, credit access is available only for
members while deposits can be placed at the depositors’ own risk. Members while
taking credit also contribute to the share capital in certain agreed
proportion. States are conveniently barred from providing capital to the RCCS
beyond 25% and have been granted autonomy.
In the meantime, following the recommendations of the first
Financial Stability Report (Dr Rakesh Mohan), the DCCBs have all been licensed
under liberal capital adequacy norms by April 2013, just a year off the
scheduled date and have been brought into mainstream banking, with some of them
adopting even core banking solutions.
Deposits can be secured by the PACS but without the Deposit
Insurance Credit Guarantee Corporation of India cover. Therefore, even for
doing non-core business capital cannot be accessed by them. Once the DCCBs
seize all the assets of PACS, the later would not have any collateral to raise
the resources from other lending institutions.
The latest instruction that the Societies shall do their
non-core business only with their own capital and their core lending business
for farm and non-farm activities can be done only for and on behalf of the
DCCBs/SCBs cuts at the root of PACS on one hand, and negates the financial
inclusion agenda of the government on the other.
In the absence of PACS, the DCCBs/SCBs have to go in for
restructuring. The States have to amend
their regulations to permit the DCCBs to do direct lending to farmers by taking
them as members and shareholders simultaneously. Elections to the Boards of
DCCBs have to be held from this larger constituency and representative General
Body has to be defined in the Amended Cooperative Acts.
Depositors cannot be members as of now.
PACS today serve at best as political platform thanks to the
willful neglect of NABARD for decades to bring about financial discipline and to
protect equity among them. The States and Centre are too busy at the moment
carving out strategies for 2014 General Elections. Legal remedies also seem to
be at distance with the annulment of 97th Constitution Amendment Act
2011 except for Article 19 Section 4 (C) that only gives the fundamental right
for formation of cooperative society and the definition of such society.
Therefore, NABARD chose this time with gay abandon to dump the PACS into economic
garbage.
- Yerram Raju
*The Author is Member, RBI Expert Committee on STCCS.
NABARD circular on PACS rings alarm bells in Gujarat co-operative sector
.......An expert committee on the short-term CCS, set up by Reserve Bank of India under NABARD Chairman Prakash Bakshi, had proposed that PACS may function as business correspondents (BC's) of CCBs among other recommendations. The NABARD's circular comes in line of the apex bank's advice to it on the issue. As per the committee report, with commercial banks stepping up their agri-financing from 2001 onwards, and especially from 2003-04 onwards when 'doubling the agricultural credit' campaign started, commercial banks today provide almost three-fourths of the total agricultural credit in the country with RRBs providing another 10 per cent or so..........
Murphy's law at work in India
Murphy's law states: "Anything that can go wrong will go wrong". This seems especially true in the context of Indian economy and Indian equity markets in the past year. Last year this time, India was grappling with an imminent sovereign downgrade, with an uncontrolled fiscal deficit, policy paralysis of the highest order with no economic reforms for eight long years and a weakening rupee............
Who wants to run a bank
.....If collecting deposits and loaning it to the credit-worthy has become a tricky endeavour, the regulators have not been making bankers’ lives easier either. In recent times, the Reserve Bank of India has co-opted the banking system as its unwilling partner in fixing everything that is wrong with the Indian economy. Faced with the problem of a depreciating rupee, it jumped to the conclusion that it is bank money which is fuelling all that currency speculation. It promptly moved to squeeze every drop of excess liquidity from the banks. No matter if the sudden increase in overnight rates has sharply escalated the banks’ costs or aggravated the bad loan problem.....
Bankers urge RBI to be cautious in granting new licences
NEW DELHI: India Inc has doubts about new bank licences being issued during the tenure of this government, with Reserve Bank of India Governor D Subbarao's term expiring in September and Deputy Governor Anand Sinha, who handles the licensing process, due to retire in February 2014. Two top bankers leading separate industry chambers have also urged RBI to exercise extremely high due diligence before short listing possible contenders from the 26 entities that have applied for a licence and ensure that the banking business is the main bread-earner for the entities involved and not one of their many business interests..............
Sivaganga, Jangipur, Sivaganga….. where will banks rush in next?
What’s the best way to achieve financial inclusion in the country? Give new bank licences? Not quite! After all, new private sector banks have a poor track record of delivering on financial inclusion. So what is the answer? Elementary, my dear Watson! Rotate the finance portfolio among cabinet ministers! Consider! During the time Pranab Mukherjee was Finance Minister, there was a mad scramble among banks, both state-owned as well as private sector ones, to open branches in the minister’s constituency Jangipur and its vicinity. This despite the fact that Jangipur, a fairly backward area whose population is dependent on wages from bidi-rolling, can barely offer enough business for two or three bank branches. Yet even private sector banks like ICICI Bank and HDFC Bank, that are otherwise loath to open branches in rural unbanked centres, made a beeline for Jangipur..............
Time for India Inc to go on a diet
The monetary tightening by the Reserve Bank of India and spike in the short-term interest rate have closed many options for India's most indebted companies. As credit gets scarce and expensive, many companies will be left with no option but to go on a diet to survive the current economic slowdown............
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