...... “If they could be incentivised to blend as much imported coal as possible, it would free up domestic coal that could be allocated to other domestic producers. That freed coal has a multiplier effect because it can be used to blend with more imported coal, expanding the domestic production base substantially,”.............
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.
Friday, August 30, 2013
Rajan's early and tough test on restoring confidence
.........Among the questions is whether Raghuram Rajan, the governor-in-waiting, would opt to raise policy rates, to show he means business. He faces a tough task. Within a fortnight of taking charge, he will have to announce the mid-quarter review of monetary policy, scheduled on September 18. It is to be seen if he can change the fortune of the rupee...........
Growth is key
The diagnosis of the problem by the RBI and the Finance Ministry is completely wrong and counterproductive. It not just the current account deficit. What you have playing out is that growth has collapsed and that is why investors are not finding Indian assets attractive. .......
Banks to face profitability pressure in current fiscal: Icra
........Icra analysed 26 state-run banks, and 15 banks outside government control in the quarter ended 30 June. These banks account for around 90% of the total credit portfolio and deposits of all commercial banks. “Core profitability of PSU (public-sector undertaking) banks have already dropped and last quarter they were cushioned by profits on sale of investments. But there is a clear pressure on profitability as mark-to-market losses are likely to increase because of the jump in bond yields,” Batra said..............
Rajan’s mandate
...... Sensitivity to inflation is extremely important and it requires rigorous statistical exercise, which the new RBI Governor, Raghuram Rajan, seems capable of. Non-banking financial corporations need to be given more space in the banking sector without imposing some of the norms that banks have to follow. Financial inclusion should be accorded priority........
Govt might buy gold from citizens
India is considering a radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency. A pilot project will be launched soon, a source familiar with the Reserve Bank of India (RBI) plans said.........
RBI should consider floating gold bonds - trade minister
..........."RBI (Reserve Bank of India) in the past has come up with many such schemes, there have been three gold schemes in the past," he saidm without giving details of how such a plan would work in practice............
Govt to blame for rupee woes: Subbarao
.........In probably his last public speech as RBI governor (he steps down in less than a week), Subbarao said pointing to factors outside India did not fully explain the rupee’s rapid depreciation. “Admittedly, the speed and timing of the rupee depreciation have been due to the markets factoring in ‘tapering’ by the US Fed, but we will go astray both in the diagnosis and remedy if we do not acknowledge that the root cause of the problem are domestic structural factors,” he said, delivering the Nani Palkhivala Memorial Lecture in Mumbai. The title of his lecture was ‘Five years of leading the Reserve Bank; looking ahead by looking back’.............
Subbarao defends RBI moves to stem rupee decline
.................Subbarao defended RBI’s actions, saying they were “consistent” with its policy. “Our capital account measures were aimed at encouraging inflows and discouraging outflows. Also, we tightened liquidity at the short end to raise the cost of short-term money so as to curb volatility,” he said. The outgoing governor reiterated that it is not RBI’s policy “to resort to capital controls or reverse the direction of capital account liberalization. The measures we took did not restrict inflows or outflows by non-residents”..............
‘ Our love for ‘ Phoren’ goods also responsible for rupee devaluation’
BHOPAL: A section of market analysts has alleged that the Union government was promoting ” satta” as RBI starts exchange of dollars in the evening, after the market closes. Ministers, politicians and big shots purchase the dollar and the next day they sell it, making a fast buck in the process. While another section of market analysts also blame people, who are addicted to imported items like cars and electronic gadgets. Therefore, it is the lifestyle of Indians which has devalued Indian currency and nothing else...........
Will Raghuram Rajan Do a Volcker?
...........Mr. Volcker bucked political pressure to keep rates low and instead hiked benchmark rates to record levels to curb high inflation. But while inflation came under control in the early 1980s, it also left but the U.S. economy in a recession. Some economists say that a similarly drastic step may be needed if Indian authorities are unable to arrest the rupee’s slide soon..................
RBI powerless as swaps signal deepening crunch
India’s incoming central bank governor Raghuram Rajan has little room to use borrowing costs to spur Asia’s third-largest economy as the rupee plummets, interest-rate swaps show...........
Go to the IMF, right now
It is hard to restore confidence in the rupee under the present conditions. Because for that a major perquisite is the restoration of faith in the UPA government. Since that does not seem to be happening, the rupee, and the stock markets, are set to remain volatile till a new government is in place after the next parliamentary poll. Yes, the UPA can still minimise the damage if it has the good sense to use the one option which has a very good chance of succeeding. And that is to go to the IMF to bolster its dollar kitty..........
The ageing rupee
...... "The rupee has fallen so much it has almost reached Chidambaram's age," said one commuter. Replied his companion gloomily, "And it will soon touch Manmohan Singh's age." ...........
Stabilise the rupee
.............Finally, there is an urgent need to revive manufacturing growth, which has been nearly zero for the past two years. The necessary actions have already been outlined in the National Manufacturing Policy. It would help to have a benign interest rate regime.
Rupee Seen on Slippery Path as Volatility Highest: India Credit
......Oil-price shocks triggered balance-of-payments crises in India in 1981 and 1991. During those periods of tumult, debt- servicing increased with the help of external commercial borrowings and deposits from non-resident Indians, according to a Dec. 7 speech by RBI Executive Director Deepak Mohanty. Since Aug. 20, the RBI has exempted banks accepting deposits from overseas Indians from keeping 4 percent of the money as cash and investing 23 percent in approved securities. Such deposits stood at $70.8 billion in the year ended March 31, compared with $58.6 billion in the previous year, RBI data show..........
This Janmashatmi Day – Krishna Was Missing To Save Disrobing of Indian Rupee
.........With the passage of every minute, Indian Rupee was being robbed layer by layer, and was wondering whether somebody or some news will appear suddenly, as in Mahabharata, and save our beloved Indian Rupee. However, as day progressed I realised Krishna was missing - or we may say he was yet to be born to give support to free falling of Indian Rupee. ...........
HDFC Bank to open 300 branches
Undeterred by the economic slowdown and a sluggish demand for credit, HDFC Bank Limited is planning to open 300 new branches across India, adding to its existing branch network of 3,119. The country branch head of HDFC Bank Navin Puri said the bank is waiting for the approval of the Reserve Bank of India over the new branches and is hoping to strengthen its presence in retail banking...........
HCBL Co-operative Bank organizes workshop on financial inclusion
.......The facility of 24*7 Banking E-Lobby has also been provided in remote areas so that customers can keep in touch with the Banking facilities at any point of time. This effort of the Bank to reach out its customers was well praised by the Governor of RBI - Dr. D Subbarao during his visit of the Bank's e-lobby in Lalpur Karota Village, Barabanki. As a step ahead towards its Social and Financial Inclusion, the Bank has supported and encouraged groups of Chikan and Zardoji Karigars who were originally being exploited by wholesalers.........
Online banking malware a serious and growing threat
.......“We found an online banking malware that modifies an infected computer’s hosts file to redirect a customer of certain banks to phishing sites. We also saw more Citadel variants (detected as ZBOT), targeting different financial service institutions. These malware not only target big banks, but also smaller ones, including those that exclusively cater to online banking customers. As predicted, cybercriminals carried out developments in malware distribution and refinement for existing tools,” ..........
Thursday, August 29, 2013
Use regional languages for financial inclusion: Subbarao to banks
RBI, govt should protect investors from illegal schemes: D Subbarao
........."It is the responsibility of the government and the regulators to protect people from such fraudulent schemes," said Subbarao, who demits office in a week's time. He was speaking at the Reserve Bank headquarters here ahead of the presentation of Rajbhasha shields to commercial banks and other financial institutions..............
“Driving ePayments Growth in India”
6th Financial Inclusion and Digital Payments Conference
With new license being issued by RBI, what is in store for White Label ATM business in
India? What are the opportunities and initial challenges being faced by the players?
How will big banking brands connect with White Label ATMs and co-exist in the competitive world?
Given RBI’s mandate to increase the reach to Rural and Tier II & III cities, what role can
large national banks play to grow the sector? How do they see co-existing with new players?..............
Look Beyond Textbooks to Undo the Damage
........Do you think the change of guard at RBI could hasten things?
RBI’s
policy has been steady. I have never seen sudden changes. So we need to
wait and watch what the policy stance would be, but if I were to put on
the table what probably is required today, it would be a relook at
interest rates..............Get Ready for Another Asian Financial Crisis
Make
no mistake, a second Asian Financial Crisis is on its way. This storm
will not blow over soon. It originated in the US, when the Fed proposed
to taper and end quantitative easing. The frightening thing is that this
will happen in stages over the next 12-18 months, and each turn of the
liquidity screw can cause a fresh financial storm. Nothing Chidambaram
or Raghuram Rajan say can avert the storm............
Read - ET
Read - ET
What is happening in the economy? - Dr.T.V.Gopalakrishnan
At this rate what will happen to the economy and the masses. People are losing their sleep as they are unable to understand or secure their life economically, socially and physically. As on today, a hundred rupee note can at best fetch a kg of Onion and perhaps one Kg of Potato. And there are people who have not seen or handled even hundred Rupee note. What is this Government doing for the masses. The equitable management of the economy has been given a go by and a few who are after power and money are allowed to dictate. The RBI and the Govt have no targets for rupee dollar rate but some segments of the market have a definite target and they are able to pull down the rupee the way they want. Mismanagement of the domestic economy is the root cause for all these evils and creation of wealth by a few at the cost of majority of the masses have taken the economy to such a pass. Absence of the Governance system which is the very essence of keeping the economy on track has led to this state of affairs and for this the bureaucracy and the Government in power are only answerable.Now the task is really difficult.
(This comment appeared in Business Line in response to an article " Dollar Demand sinks the rupee" in BL dated 28/8/13).
Let’s fight for economic freedom
......Why should the Government not sell its stakes in various banks and actually do its job of regulating the sector through the RBI? Why should oil companies not be allowed to buy and sell petrol and diesel freely at market-determined prices? Why should discoms not compete with each other to provide electricity to households who have the choice to buy from different entities? All this will require time, effort and substantial change in mindset..................
The India of 2013 is not the India of 1991
........Further, a more rounded food security mechanism can help insulate the poor from rising food inflation. This can free up the Reserve Bank of India to then look at the manufacturing inflation as a dominant basis for making monetary policy and help ease interest rates for industry. All this needs a dramatic improvement in governance and a return to normality in the strained relations between the bureaucracy, the political class and the judiciary. Some argue that this can only happen after the general election, whenever it is held..........
FinMin blames RBI policy, project clearance lag for economic slowdown
Blaming the economic slowdown in 2011-12 and 2012-13 to RBI's tight monetary policy as well as hindrances in clearance of projects, the Finance Ministry has said the government has taken a slew of measures to improve investor sentiment and address the fiscal situation but the global economic situation is yet to recover remarkably.......
Welcome move
Transfer of ownership of DICGC to GOI is a welcome move. Perhaps, with this move, government is admitting that risk to financial assets emanate mostly from government policies and insuring deposits and guaranteeing recovery of bank credit should be government’s responsibility. It is hoped that GOI will compensate RBI for the share transfer and the proceeds will go into RBI’s reserves and this time it will not be a ‘book adjustment’, as was on certain earlier occasions.
- M.G.Warrier
RBI’s concerns go farther
In August 2010, BS had published my following comments, when RBI released the discussion paper on new bank licenses:
“The discussion paper on new bank licences released by RBI may, in the coming days, bring to fore the problems and challenges faced by financial sector as the issues raised in the paper go much beyond the government’s intention to give a greater role for private sector in banking to promote financial inclusion and reduce government’s financial commitments for running banks. It is quite natural that as a regulatory body responsible for the health of the financial sector, RBI’s concerns go farther from just the net worth of the promoter or his professional capability to run a bank. RBI’s intention to regularize and ratify the parallel banks which can conform to regulatory norms and rehabilitate some RRBs which may have manpower and infrastructure in place but may be finding it difficult to perform for want of leadership as also the central bank’s desire to keep the business of banking trustworthy is evident from the issues raised in the discussion paper. The present scenario is partly the result of GOI and RBI keeping the banking reforms in the backburner after allowing some banks in the private sector. At this delayed hour at least, a total view of banking needs and institutional infrastructure for meeting them may have to be taken before implementing short term solutions. If this is not done corporates at the national level and small borrowers at the ground level will continue to bypass the banking system.”
The present discussion paper justifies my views.
- M.G.Warrier
Level the playing field
........in India, including banks, have become whipping boys of the government and regulators. Government officials use these organisations for carrying out their agenda. It is not that these organisations cannot compete with their private sector counterparts. They will outperform them if a level playing field in terms of skill, technology, opportunities and autonomy in management is assured.............
Maid hides 1.5kg gold in TV set
....The employer, Ananth, a resident of Jnanabharathi IX Phase and Assistant Manager with the Reserve Bank of India, on Monday lodged a police complaint saying he suspected his domestic help, Salma, of having stolen the gold ornaments he had brought from a bank locker on Sunday. Ananth said on that day, Salma left his house without informing anyone. Jnanabharathi police swooped down on Salma's house on Tuesday, and the woman protested her innocence.............
RBI looking into the issue of SBI shaming students
CHENNAI: The Reserve Bank of India (RBI) is looking into the complaint against State Bank of India (SBI) for shaming students and their parents for defaulting on their education loan. "RBI's Assistant General Manager Sharmila Sampath Kumar has sent me an email on August 28 stating that the issue is receiving the attention of the central bank," K Srinivasan, convenor,education loan task force (ELTF), said here Wednesday........
Govt sets up task force for currency swap arrangement
Rattled by the continued decline in the value of rupee, the Commerce and Industry Ministry has constituted a task force comprising representatives from the Ministry, Department of Economic Affairs, Reserve Bank of India (RBI), SBI, industry bodies FICCI, CII and Federation of Indian Exporters Organisation (FIEO) to work out currency swap arrangements with key trading partners of India...........
NPAs: Massive slippages in banks call for tough measures
...........It is hoped that Raghuram Rajan, the new governor of RBI, will usher in urgent modifications in the archaic procedures and processes. In India, when there is a banking regulator in the form of RBI for over half a century, why the MoF and not the RBI is reacting to sharp deteriorations in the quality of loan asset portfolio of banking sector as a whole. This is indeed an extremely alarming worry for all, which if not addressed on a priority basis, will lead India to the Cyprus or Greece type bank collapses...........
‘Ease curbs or release RBI gold reserves for festival season’
.........Surely enough, the Finance Ministry is already getting petitions from jewellers’ associations and States that he should help relax gold imports for pure consumption ahead of Diwali. Some jeweller associations have suggested that the Ministry keep its curbs on fresh gold import but supply for consumption during the festival season from the RBI’s existing reserves of about 600 tonnes of yellow metal...............
'Increasing gold, fuel imports reason for economic crisis'
Expressing concern about the growing Current Account Deficit of the country, Hyderabad Central University’s Department of Economics faculty member Vakulabharanam Vamsi blamed the increasing gold and fuel import of the country for the crisis. He was delivering the Ashis Sen memorial lecture on “Global economic crisis: Issues before Indian Financial Sector”, organised by RBI Employees Association Hyderabad branch here on Tuesday............
Ridiculous Instructions and the Unstable Rupee
.......In years past, RBI,
Mumbai (then, Bombay), used to buy spot pound sterling and forward up
to 12th month. RBI also used to sell pound sterling that was then
India’s intervention currency. These rates used to be quoted through the
Reuters Monitor screen and the RBI was bound by these rates to any
authorised dealer who approached the RBI with genuine merchant
transactions. As a sequel to such quotations, the Indian foreign
exchange market used to invariably settle down and trade in the band
between RBI’s buying and selling rates. Somehow, a few years after the
pound was displaced by the dollar as India’s intervention currency, this
practice was discontinued. In my view, it is worth a try again with the
dollar.............
Read - ET
Falling rupee and its counterfeit cousin!
While the rupee is touching new bottoms every day against the US dollar, the number of fake currency notes in India is increasing. Even the Security Press is printing blank notes. Can the new Governor of RBI look at polymer currency notes? Dr Raghuram G Rajan, Officer on Special Duty (OSD) at the Reserve Bank of India (RBI) Head Quarters in Mumbai, who would take over as the next Governor on 5th September, has his plate full of woes............
Bharat nirman on rupee ruins
....The domestic currency has lost alarmingly since Monday—Rs 5.64—and Rs 9.41 in the last one month not many market analysts were willing to bet on any quick recovery any time soon, without a decisive intervention of the government. “If steps are not taken to implement the reforms necessary to tackle the structural issues, the government will be left with the so-called '4D options': debt default, devaluation, deflation,” said Angelo Corbetta, head of Asia equity for Pioneer Investments in London, raising further alarm. Currency analysts now aver that an assault on the much talked about 70-level is only a matter of time..............
Fall in Indian rupee not necessarily a bad thing: Nordea AMC
Fall of rupee is not necessarily a bad thing as it will support exports which will help bridge the gap in current account deficit, Chief Executive Officer of Nordea Asset Management Company Allan Polack said. "Weakening of currency is not necessarily a bad thing. It will make exports competitive from the country," he said..........
'Irrational sentiment' impacting rupee value: FinMin
...."This is an irrational sentiment. It will correct itself. It is important to stay on the course. There is no need to panic," Economic Affairs Secretary Arvind Mayaram told reporters here. He was responding to a query on the value of the rupee, which fell to a new low of 68.75 against the dollar in intra-day trade today. The rupee has declined over 20 per cent since April on concerns about the country's widening current account deficit, slowing economic growth and capital outflows.............
Rupee torture: Between a red queen, yuvraaj and white veshti
....“Oh. But you could still do something about it?” asked the Queen. “Madam, my time is up. I am going back to Telangana. I have bought a nice house in Nizamabad. And will spend the next few years watching the mythological movies of the late NT Rama Rao garu. It’s up to the Professor now,” said Subbu as he left the room........
Will rupee rise from the ashes?
...There is anticipation that new RBI governor Raghuram G Rajan will usher in a pro-growth tilt in monetary policy, but analysts are of the view that there is little that the new central bank chief can do differently from his predecessor to steer the economy caught in a pincer attack of a falling rupee, sliding growth and high inflation. Investors would be keenly watching for forward looking cues on Rajan’s stance in the mid-quarter credit policy review on September 18, less than a fortnight after he takes over as India’s topmost monetary officer on September 5. “The most important problem that the RBI governor will have to address is that of managing the current account deficit (CAD). It’s a far deeper structural problem of which the falling rupee is a symptom,” said a senior policy maker, who did not wish to be identified.......
Travellers take shorter trips to beat rupee heat
Indian travellers are opting for shorter overseas trips to destinations such as Thailand, Singapore and Dubai and have started booking in advance to avail cheaper rates to offset the impact of the weakening rupee, according to travel operators................
Kotak Mahindra Bank to open 10 specialised branches
In line with The Reserve Bank of India’s reforms policy in banking sector, the Kotak Mahindra Bank plans to open 10 specialised branches by March 2014 end. The 10 new specialised branches would be to cater to Agriculture Sector, Small and Medium Enterprises and Wealth and NRI Accounts. These would be opened in the cities of Bangalore, Delhi and Mumbai. Ludhiana’s Miller Ganj branch already caters to these sectors............
Wednesday, August 28, 2013
FinMin makes first move on FSLRC despite Subbarao's reservations
The government has made the first move to implement the contentious recommendations of the Financial Sector Legislative Reforms Commission (FSLRC), despite the strong reservations of outgoing Reserve Bank of India (RBI) Governor D Subbarao. In the last week of July, the finance ministry wrote to RBI Deputy Governor Urjit Patel, saying the government proposed to acquire RBI’s shareholding in Deposit Insurance and Credit Guarantee Corporation (DICGC), in line with FSLRC recommendations. Urjit Patel is chairman of DICGC, while RBI Executive Director Jasbir Singh is a board member.............
RBI suggests banking sector overhaul
...........“There is a case for reviewing the current ‘stop and go’ licensing policy and consider adopting a ‘continuous authorisation’ policy, as continuous authorisation keeps the competitive pressure on existing banks and also does not strain the banking system as ‘block’ licensing may do,” RBI said. However, it says such a policy could only be adopted after ensuring the entry norms are stringent, to encourage only well-qualified entities.................
RBI calls for government to dilute ownership in PSBs
.......“As regards the reduction in fiscal burden on account of recapitalisation of the public sector banks (PSBs), Government may consider options from menu of choices available such as issue of non—voting equity shares or differential voting equity shares, adopting FHC structure or diluting stake in PSBs,” the paper said. “Going forward, there is a better pay—off in enabling PSBs to improve their performance while promoting private sector banks,” the discussion paper titled ‘Banking Structure in India — The Way Forward’ said.........
SBI group topped list of customers' complaints in FY'13 in Raj
........Out of the total 4,099 complaints received by the ombudsman in 2012-13, 1,789 complaints were filed against the SBI and its associate banks and 1,121 complaints were against nationalised banks, whereas 65 complaints were against other public sector banks, N P Topno, Banking Ombudsman-Rajasthan, RBI told reporters here Tuesday. Maximum number of per branch complaints is 16 against Standard Chartered bank, 11 against HSBC, 5 against ING Vysys bank and 2.14 against Kotak Mahindra Bank Ltd..........
'Reliance Bank' to be listed after three years: Anil Ambani
.........Hopeful of getting a banking licence for 'Reliance Bank', industrialist Anil Ambani today said this proposed venture will help lower Reliance Capital's debt to one-fourth of current levels and would be listed as a separate entity with an IPO after three years........
Subsidiarisation may not be mandatory for foreign banks
.............“The regulatory expectation would be that those foreign banks, which meet the conditions and thresholds mandated for subsidiary presence for new entrants or which become systemically important by virtue of their balance sheet size, would voluntarily opt for converting their branches into WOS,”..............
RBI’s annual report slams Punjab govt’s poor debt management
........However, the report points out that some states, such as Punjab, are using these advances a bit too often as there is a perpetual mismatch between revenue receipts and revenue expenditure. The report shows that Punjab borrowed money for as many as 232 days during the last financial year and it also availed of a special WMA for 233 days during 2012-13. While normal ways and means advances are clean advances given to state governments, the special ways and means are secured advances against Union government securities that are time-bound..............
Element of accountability
........While I fully agree with the views of Reserve Bank of India Deputy Governor K C Chakrabarty, the remedies suggested in the editorial would not prove to be of much help. Neither the tenure, the selection process, nor the pay packet per se are affecting the performance of managers in government-owned banks. But what is affecting their performance is the lack of accountability and the other ills mentioned by Chakrabarty. ...............
As Slew of Negatives Continue their Dadagiri, FM Shifts Blame on to Dada
For
the second time in less than a week, Finance Minister P Chidambaram
appeared to blame his predecessor Pranab Mukherjee, now the President of
India, for the dire state of the economy even as stock markets plunged
and the rupee fell to another record low. Shifting tack from his
usual theme of blaming the global environment, Chidambaram admitted
domestic problems had also contributed to the economy’s travails. These
domestic
problems, the minister told the Rajya Sabha, originated, at least in
part, during the tenure of his predecessor. “There are not just external
factors, there are also domestic factors.........
Read - ET
More reforms, not less
Finance minister P Chidambaram hit the nail on the head when he told Parliament that what India needed was more reforms, not less, that what the economy needed was less restrictions and not more, that it needed a more open economy and not a closed economy. This is especially important at a time when there is greater clamour, including from the ministry Chidambaram himself heads, to put higher import duties to curb imports; or to keep high export tariffs to restrict, for instance, the export of iron ore on grounds the domestic steel industry will benefit from this. The rupee has already paid a heavy price as investors felt the government and RBI were, together, going to impose capital controls—the finance minister has repeatedly pointed out that India has never imposed capital controls on repatriation of profits for instance, and ........
Exploring new avenues for revenues: Some suggestions
.........Both finance minister P Chidambaram and Reserve Bank of India (RBI) Governor D Subbarao, in separate talks to the media tried to calm down the public through their statements. The Finance Minister assured that there is no intention to introduce capital controls, including on repatriation.
Is Current Account Deficit really the culprit for India?
If you pick up any financial daily or switch on a business news channel today you will find the reason for India’s falling economic standards -- the current account deficit or the CAD. But is CAD really the culprit or are our 'sentiments' at play here?..........
Plotting the recovery- Charan Singh
......The problem of the widening current account deficit can be attributed to rising uncertainty in the economy, symbolised by large volumes of gold imports. As three-fourths of the gold in the country is purchased in rural areas, the government needs to consider providing financial instruments to address uncertainty in those areas. Illustratively, the government could consider inflation-indexed bonds to be made available through rural bank branches and post offices........
Policy dilemmas galore
........Bringing down inflation involves another dilemma. The Reserve Bank of India (RBI) has applied the conventional monetary tool to curb inflation - firming up interest rates - and has come to grief. Inflation has remained stubbornly high; it appeared to start coming down only recently. What has simultaneously happened is a fall in the growth rate - which is natural when you tighten money - which has, in turn, created fears of the onset of stagflation, a term that is being increasingly bandied about..............
Asia’s real problem is boosterism, not Fed policy
........Take India, which has been acting as though its rise to superpower status was inevitable, no matter what the government did (or, more important, didn’t do). Reforms have stalled, while unaffordable government handouts have proliferated. And with an election due in nine months, no one expects that the hard decisions needed to get the economy back on track will be taken. There’s great excitement that respected economist Raghuram Rajan will soon helm the Reserve Bank of India. But the nation’s problems—which include a government as bereft of ideas is it is flush with corruption and inefficiency—are largely beyond his control...............
FM chases runaway bride
.........Neither the RBI's knee- jerk intervention, nor the Finance Minister's repeated assertion that the government is in control of the economic situation, helped rein in the currency, one of the worst performers in Asia. The unbridled rupee ended at 66.24, a record closing low, after crashing over 3 per cent against Monday's close of 63.20. It hit all- time low of 66.30 minutes before the closing bell. Observers attributed the rupee crash to the passage of the food security bill in the Lok Sabha, which has set the alarm bells ringing about the country's fiscal health..............
How Jupiter's Vazirani is playing the Indian rupee slide
....The outgoing governor of the central bank is in the process of handing over the reins to his successor, Raghuram Rajan. Rajan does not officially take up his post until 5 September, leaving something of a power vacuum at the top of the RBI. In such an “interregnum”, it is quite easy to imagine policy paralysis, with a soon-to-be ex-governor unwilling to sanction, for instance, a major intervention in the foreign exchange markets, and a new governor not yet in a position to be able to do so.....................
The great Indian slide show
.........To manage the volatility in the exchange rate, the RBI on July 15 raised short-term interest rate. But it hampered the credit flow to productive sectors. To ensure that industry does not grind to a halt for want of funds, the RBI decided to buy government bonds from banks. The government is thinking of slapping duties on more non-essential luxury goods. But the measures are yet to make any significant improvement in the situation..............
The Rupee has Fallen Below its Fair Value
........The real effective exchange rate (REER) — a weighted
average of our currency relative to our trading partners’ currencies,
adjusted for inflation — is a common measure of the alignment of a
currency to its true value. The RBI’s measure of REER uses the wholesale
price index (WPI) for India and consumer price index (CPI) for trading
partners, we re-estimated the REER using CPI for India as well, with
2005 as the base year. Our estimate of REER was at an average of 11.4 in
July. This means that despite the recent depreciation, the rupee was
11.4% higher than its fair value in July. Based on this, observers say
the rupee needs to correct more............
A speculative attack on the rupee?
.........In sum, a series of changes that have occurred since financial liberalisation began have increased India’s exposure to the adverse effects of currency speculation. Given the nature of these changes there is little that the RBI and the government can do about such speculation, despite the claim that: “While introducing currency futures, the Reserve Bank and the Securities and Exchange Board of India (SEBI) had put in place various safeguard mechanisms to monitor positions, prices and volumes in real time so as to control excessive speculation.” In any case, there is nothing whatsoever the RBI and the SEBI can do to curb speculation in the NDF market that is outside its jurisdiction............
Banks now using your missed call to authenticate yourself
......According to new system when a customer logs into Net banking with his password, a separate screen pops up with a landline number. One has to give a missed call from their mobile to the landline number within two minutes. NetCore software receives the missed call and matches it with the customer’s mobile number registered in the bank’s database to provide access...................
SBI to merge one associate bank this fiscal: Pratip Chaudhuri
...........“Right now we are in a position to merge one of the subsidiaries.... We may merge one associate bank this year,” SBI Chairman Pratip Chaudhuri told PTI in New Delhi. Asked if the bank has identified the suitable candidate, he said a decision in this respect is not yet taken. SBI first merged its associate State Bank of Saurashtra with itself in 2008. Two years later in 2010, State Bank of Indore was merged with SBI........
Rs. 230-crore irregularities found in loan waiver scheme: Chidambaram
......He said errors of exclusion and inclusion were natural in a scheme that involved 3.73 crore beneficiary accounts spread over one lakh bank branches through which Rs. 52,259-crore debts were waived. While enquiries by the RBI and Nabard were under way, so far they had detected irregularities in respect of 3,36,156 accounts involving Rs, 230 crore. The probe was taken up in the light of the CAG report exposing irregularities in waiving debt...........
Ponzi operators to face fine worth three- times of profits
.......... Operators of illegal moneypooling schemes will soon face penalties of up to three times the profit made by them, as against the current provision of a meagre fine of Rs one crore. The capital markets regulator Sebi ( Securities and Exchange Board of India) has decided to increase the monetary penalty for those running unauthorised Collective Investment Schemes ( CIS), as the existing mechanism have not proved to be sufficient to deter such illegal mobilisation of money...........
Dhanalaxmi Bank to mobilise Rs 37.75 crore by issue of shares
............A special resolution in this regard was passed at the 86th Annual General Meeting of the bank held here today, bank sources said. Equity shares of 10.5 lakh, 12.5 lakh and 52.5 lakh would be allotted to investors B K Raveendran Pillai, Mohanachandran Nair B and and N V George respectively as per rules of the Securities and Exchange Board of India, Capital and Disclosures Requirement, Reserve Bank of India, Union Finance Ministry and other relevant statutory authorities...........
Tuesday, August 27, 2013
Anchors aweigh!
Christening by fire
............Going by his amazing credentials, there could hardly be anyone better equipped to take on this challenge; moreover, he has also authored a full-fledged report on the Indian financial sector reforms that would have given him a first-hand feel of the issues, challenges and reforms for the banking and financial sector. There are not too many people who are given the opportunity to implement what they have preached. And so the Governor should simply go for implementing his own recommendations and liberalise the banking and financial sector; introduce an arm’s length regulation with a lighter touch; make RBI a more market-friendly regulator; and consolidate fragmented capacities that presently characterise this sector. These reforms have long been in waiting and need immediate attention..............
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