.....Mr. Parrikar said he met Dy. Governor of RBI in Mumbai and convened with the SLBC twice, where bankers were advised to rephrase and restructure the loans/borrowings as was done in 2011-12. He claimed that the request for another restructuring of loans has been positively addressed by most banks.........
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, October 18, 2013
Welcome to India – state of the Indian economy, banking sector and factoring services - Dr.K C Chakrabarty
Opening address by Dr K C Chakrabarty, Deputy Governor of the Reserve Bank of India, at the International Factors Group’s Annual Conference, New Delhi, 7 October 2013
......India also has a number of foreign owned banks, many of whom have been with us a long time and helped fuel our growth. They have been in the forefront of innovation, both in terms of improving productivity, as well as in terms of creating new products. We would like them to participate more in our growth, but in exchange we would like more regulatory and supervisory control over local operations so that we are not blindsided by international developments. The RBI will encourage qualifying foreign banks to move to a wholly owned subsidiary structure, where they will enjoy near national treatment. We are in the process of sorting out a few remaining issues so that this move can be made..........
Read.....
‘Cornered’ columns keep the torch of hope burning
My View on "Where are our economists? - Charan Singh":
Straight answer is many economists have infiltrated into bureaucracy for survival and a lucky few have migrated into the affluent and powerful BPL (Businessmen-Politicians-
- M.G.Warrier
Indian economy: Beyond the numbers
....The bright spot is that the pressure on the rupee has abated, exports have done well and the trade deficit has come down dramatically. The Reserve Bank of India (RBI) has also partially rolled back some of the liquidity tightening introduced to defend the rupee, which has led to short-term interest rates coming down. The panic in the foreign exchange markets and the central bank’s response to it are now over.......
Swap window for FCNR-dollar deposits! Festival bonanza for NRIs?
........Obviously, these high rates of interest offered to NRIs cannot last long and the RBI has already indicated that the swap facility offered to banks will be available only till 30 November 2013, and could be closed earlier with prior notice. Also, Dr SS Tarapore, former deputy governor of the RBI, has written in a local media that the swap facility offered by RBI on FCNR deposits to banks “exposes RBI to losses of an estimated Rs60,000 crore which would be self-immolation”. If this estimate is right, RBI may not continue with this facility for long and may even reduce the interest rates permitted on FCNR deposits if .........
Nabard brings big relief to farm credit societies
.........The decision of the National Bank for Agriculture and Rural Development (Nabard) against steadfast implementation of the Prakash Bakshi report for streamlining the short-term cooperative credit structure has come as a major relief to thousands of primary agricultural credit societies (PACS) in the State. A major recommendation of the report was that PACS should work only as business correspondents on behalf of the Central Cooperative Bank. This was to ensure safety of deposits and efficient credit delivery to farmers............
What saved the rupee?
.............The popular view is that leadership change at the Reserve Bank of India (RBI) changed the fortunes of the rupee. And there is truth to this. As graph 1 shows, there was a big upward move in the rupee the day after Raghuram Rajan formally took charge as governor of the RBI. ..........
Honey, it’s not just onions!
...To be sure, onion inflation (not for the first time) has hit the roof, printing at 200%-plus in August, and 300%-plus in September. However, we need to be aware of at least two phenomena. First, onions have a weight of 0.17% (yes!) in the index, so even disproportionally large swings have a relatively limited impact on headline WPI. Second, there are all kinds of base effects at play, so the right measure is to.....
Gold: Economists need to change
............Here is an interesting (but unpublished) study which shows that there is no difference between illiterate villagers and educated savers in how they view gold or stocks. P. Kanagasabapathi, an academic with Indian perspective, conducted three studies in Coimbatore regarding the saving/investment preferences of (i) teachers and doctors (ii) businessmen, professionals and bank officials (iii) women academicians specialised in and teaching finance related courses in reputed colleges for the commerce and management students. The studies show that, ............
A sadhu & the temple of boom?
The
Archaelogical Survey of India starts its excavation today in search of a
treasure of gold supposedly buried in an obscure village in Unnao. The
village’s story as it unfolded over the last few days could well be an
anecdote from the Panchtantra. A sage, Shoban Sarkar, dreams of a king
who introduces himself as Raja Ram Baksh of Unnao. The king points the
sadhu to a treasure of gold buried near the Shiva temple where the king
worshipped the deity.............
Read - TOI
Read - TOI
Will will find a way...........
My View on "India needs a national gold policy":
There cannot be a crisper way to describe the need for a Gold Policy than the concluding observation:
“Thus, the present treatment of gold under national income, balance of payment and its links to CAC all need careful harmonization. At present there is no policy that tries to reconcile these divergent aspects. Perhaps a gold regulator or a gold policy is an idea whose time has arrived.”
Gold which no doubt is the villain in the Indian economy can be reformed into a saviour, if there is a political will to seriously go ahead with the following initiatives (the list is illustrative) which have already seen some beginning during the last one year:
• Make a realistic estimate of surface gold stock in India. Individuals and institutions holding gold stock above a threshold level should report the quantum of gold held to a designated authority.
• Insist on standardisation of a reasonable portion of gold held by institutions. Infrastructure for such standardisation should precede.
• Encourage financial institutions to increase their gold portfolio. Organisations including religious institutions should be provided incentives to deposit gold with banks.
• Establish a National Registry to keep track of inflow, stock and outflow of gold in various forms.
• Encourage introduction of gold-backed investment instruments.
- M.G.Warrier
Kerala temples' gold-inventory plan dropped: RBI
.... In an RTI reply to advocate D.B. Binu of Kochi-based Human Rights Defence Forum, the RBI’s central public information officer S.K. Bal said the plan was no more in existence. According to Mr. Bal, the bank has no plans to issue similar letters to other rich temples in or outside Kerala. Its earlier letters to Travancore, Kochi and Guruvayur devaswoms and the managing trust of the Attukal Bhagavathy Temple in Thiruvananthapuram have invited angry reactions and each of them decided to ignore the letter.............
RBI’s re-export norm continues to impede gold imports
.........“The problem has been compounded because Customs authorities want us to meet the stipulation for each consignment,” said Arora. The RBI notification said that fresh imports would be allowed only after an importer re-exports 20 per cent of the shipments brought into the country earlier. Banks also have to keep the gold meant for re-export in separate Customs bonded warehouses. “It takes between 60 and 90 days for exports to take place. Until then, you can’t bring gold into the country,” said Kothari. Currently, only gold that is meant to be re-exported is finding its way through the ports..............
Microfin industry close to being 100% insured sector
.....The Reserve Bank of India (RBI) does not allow the MFIs to collect any commission from clients. However, Irda allows MFIs to receive administrative fees, capped at two per cent, for distribution of products from insurance companies, according to Samit Ghosh, president of MFIN. “We are contemplating writing to Irda to increase the limit of administrative fee, as the cost of operations is quite high,” said Ghosh...........
Rs 1.46 crore in fake currency deposited in HDFC
........Sharma said a majority of these currency notes had been deposited by account holders who were probably unaware of the same. The bank said the notes were made to such perfection that even the bank employees could not decipher them. Only when the notes were checked using a technically superior method, it was detected. As per the complaint, total Rs 1,46,44,000 had been deposited by the account holders in the different branches of HDFC bank in Delhi-NCR including Delhi, Gurgaon, Noida, Ghaziabad and Faridabad.............
PayUPaisa launches automated payment settlement solution for marketplaces & online aggregators
Gurgaon-based online payment solution firm PayU India Internet Pvt Ltd has launched a new offering called ‘All-in-One’ payment settlement solution, which it claims will reduce the payment settlement headaches of marketplaces (like Snapdeal and eBay) and online aggregators (who cumulates different items and services for selling or payment collection purposes) in the country.........
Thursday, October 17, 2013
A thoughtful governor
National Housing Bank’s, Regional Representative Office inaugurated with a aim for “Housing for All”
..........NHB’s 11th Regional Representative office was inaugurated by the
Chief Guest, R V Verma, Chairman & Managing Director, NHB in the presence
of A.K. Sarangi, General Manager, Reserve Bank of India and Ajay
Ramteke, Secretary, Slum Rehabilitation Authority, Nagpur, Government of
Maharashtra on October 15,2013 at Hotel Tuli Imperial, Nagpur...........
Death of Two Friends - R.P.Donde
In a span of just a month, I lost two of
my best colleagues, P. Laxminarayan (Laxmi for me) from Nagpur and Ramphal
Sharma from Delhi. Both deaths were totally sudden and unexpected. Laxmi died after a brief illness on 6
September and Ramphal of dengue on 8 October 2013, sickness not lasting for
more than 2/3 days! Both were younger to me, may be by 8 to 10 years. Although I had not spoken to Laxmi for long, it
did not matter. We were friends and comrades forever. (I think I met him last
when I visited Nagpur for attending a
meeting of the local Retired Employees Association a year and half or two
earlier.) Ramphal, I had not met for
over two decades. He left All India Association work after I retired from the
General Secretaryship of the AIRBSO Association in 1992, telling me that he had
no interest left after my exit. I do not remember to have met him thereafter. On
a visit to Delhi in 2010, I could not visit his house for some reasons although
I had gone to his colony. He was obviously hurt and, justifiably, very angry and
even refused to take my calls thereafter. Whenever I phoned to his residence, his
wife took phone; I could hear him telling her to say he was not at home. And
suddenly one day last year, I heard his voice on my mobile, calling me as
usual, as, ‘Bade Bhai’, so familiarly as if he had spoken to me a day earlier.
I was very thrilled; we talked for long, not mentioning the sad
misunderstanding that had occurred earlier. We were in contact thereafter off
and on. His last phone call was just 10 days prior to his demise. He
congratulated me for the Association’s letter to Governor, Dr. R.G. Rajan on
our visit to him. He told me that he had taken copies of the letter and
distributed among retirees. Laxmi, huge bodily, although a South
Indian by birth, was a pucca Nagpurian in his demeanour, with pan in his mouth
and carrying a ‘pan dabba’ in his hand for all time. His faultless Hindi had
Nagpurian accents. He had received a Doctorate from Nagpur University and was
close to academicians in the city. Ramphal
was 100 percent Harianvi, in his behavior and Hindi, which many times a Mumbaikar
like me found it difficult to understand fully. However, I had noticed that during
our discussions with Governors and Deputy Governors, they used to enjoy and
listen carefully his Harianvi Hindi and even his Harianvi English. My both these
friends till their last remained loyal to me. Laxmi was very happy when I was
transferred to Nagpur in 1995. He saw to it that our stay at that centre was
comfortable. He was Secretary of the city’s Bankers Club. He arranged many
functions of the Club and invited me, so that I could get myself well
acquainted with the local bankers. He was, in fact, very partial as far as my
wife and my self were concerned. Many a time, on visit to Delhi, I preferred to
stay at Ramphal’s home. His household considered me as ‘Tau’ (elder uncle in
the house). Ramphal was then influential person in political circles of Delhi. He
was as good as a member of the household of Kumarmangalams. Because of him we
could get Late Shri P.R. Kamarmangalam as our Patron, who used his influence to
get 60 years as age of retirement for the officers of Reserve Bank. Ramphal
steadfastly supported me on the issue of introduction of pension scheme in the
Bank. If my soul happens
to meet my friends’ souls after my death, I shall certainly question them,
‘While living you never thought of overtaking me, then why in death?’
- R.P.Donde
Agents of change ridicule RBI, sell coins for 20% cut
.......Leave it or take it. I can give you coins for Rs 10,000 to Rs 5 lakh. If you are willing to purchase it, I am ready to negotiate my commission.” Mukesh finally gave Rs 100 to him and was handed over a bag of coins for Rs 500. “If you want to get coins from RBI, you will have to wait in a long queue. But traders don’t have the time to wait for so long. Moreover, RBI gives out coins depending on the stock they have. And they have been vocal about shortage of coins. So, we are compelled to buy coins from agents,” ........
PIECING OUR CURRENCY TOGETHER – OUR VERY OWN RBI JIGSAW PUZZLE
...It’s so interesting to know that our apex bank is making an effort to try and simplify the complex world of banking and finance for the future generation. What one needs to do now, is to spread the word and make people aware that such a thing actually exists. I don’t think many of us know that the RBI actually started this site for children on Children’s Day in 2007. We also didn’t know about the effort involved by them in trying to educate children in such a simplistic manner...........
Cash down
Spam can be really annoying but there are a few that are hard to ignore. One such purportedly sent from the Reserve Bank of India under the subject line "official payment notification" says, "Attention beneficiary! £500,000 GREAT BRITISH POUNDS will be released to you in your name". The attached document says ............
Reality of financial inclusion is eluding - M.G.Warrier
Excerpts from my article "Surmounting the Unsurmountable" published in The Global ANALYST, December 2012:
"Post-independence and perhaps till the emergence of the LPG (Liberalisation- Privatisation- Globalisation) dimension in policy thrust at national level, circa 1991, agricultural and rural credit and financial inclusion received undivided attention from Reserve Bank of India (RBI) with support from Government of India(GOI). The period also saw extensive surveys and studies like All India Rural Credit Survey, All India Rural Credit Review, Committee to Review the Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) and the study by Agricultural Credit Review Committee (Khusro Committee, 1991). Initiatives taken by RBI and GOI in improving the institutional framework in the financial sector saw the emergence of State Bank of India, setting up of institutions like National Bank for Agriculture and Rural Development (NABARD), Industrial Development Bank of India (IDBI), Small Industries Development Bank of India (SIDBI) and Unit Trust of India. Measures like reviving cooperatives, Lead Bank Scheme which THE GLOBAL ANALYST significantly improved the outreach of commercial banks in rural and semi-urban areas and coordinated supports from different agencies involved in rural development, establishment of Regional Rural Banks, NABARD and SIDBI have all contributed to improved credit flow to small and medium borrowers in rural and semi-urban areas. Increasing the outreach of banks to cover the rural borrower with low credit needs has been one objective the nation has been pursuing religiously since 1950’s (when State Bank of India was established), till date (now SBI has come out with facility to open account with one rupee!). But the reality of financial inclusion is eluding. Banking system has done a commendable job in this direction through the network of rural branches, rural financial institutions (RFIs) including cooperatives, Regional Rural Banks (RRBs) and rural branches of commercial banks. The focus shifted midway, somewhere during 1990’s to urban and metropolitan lending."
This article was covered by VITALINFO.
Indian banking scenario and RBI’s new avatar
.........In the good old days the RBI played the role of a somber silent ‘Big Daddy’, as a supervisor maintaining monetary oversight by acting as ‘Banker to the Banks’. It is rightly now said: “If collecting deposits and loaning it to the credit-worthy has become a tricky endeavour, the RBI as regulator has not been making bankers’ lives easier either, it has co-opted the banking system as its unwilling partner in trying to fix everything that is wrong with the Indian economy.”..............
About turn
....... So, whatever it recommends, it will result in a very small number of licences, mostly to the big boys from industry and finance. No doubt the RBI will impose upon them conditions that would require them to open a certain number of branches in villages; but they are unlikely to revolutionize the moribund Indian banking industry. This is very different from what the earlier Mr Rajan envisaged. Power brings responsibility and makes people conservative; but did Mr Rajan have to do such an about-turn?
No cause for alarm on foreign bank entry
There is a view, particularly among the bank unions, that the foreign banks in existence in India have never fulfilled the requirements of the RBI, particularly regarding inclusive banking
Read - The Asian Age
Know your bankers, the real ones
.......Stuck between the short-termism of a patronage-fuelled polity and the utopianism of economic liberalism, our system lurched towards a solution: pair the nationalised banking system with the balance sheets of the oligarchs to do heavy-lifting of development. Commercial banks were drafted in to do the work of long-term funding for large projects in infrastructure. When these banks inevitably proved too small, foreign debt filled the gap. It might well have come off, but the odds were heavily against it.........
Only Rs 85 crore recovered in farm loan waiver scheme
.......The CAG, in a damning report released in March 2013, had noted that big farmers had tampered records, and banks had forged documents and manipulated figures to milk the scheme. Subsequently, the Reserve Bank of India and NABARD asked banks to verify all the claims of 3.5 crore farmers covered under the scheme, and recover money from ineligible beneficiaries by June 2013........
Keep the Focus on Growth
The central bank should stay focused on growth, and not be sidetracked by inflation, which remains stubbornly untamed. It is the government that has to act to contain inflation , and some of the requisite action involves greater, rather than curtailed, investment, calling for accommodative monetary policy. Inflation in September has turned out to be marginally higher than in the previous month. Most people conclude from this that the RBI has now no room to lower its policy rates. The conclusion is gross, pun intended . A disaggregated view of prices would lead to a different conclusion........
A solution for inflation
.......The government - not the Reserve Bank of India (RBI) - is responsible for raging inflation on two counts: its inability to remove the supply constraints and the continuing fiscal deficit. Andy Mukherjee's article "Towards inflation targeting" (October 15) has targeted the monetary policy of the RBI for the continuing inflationary trends in the economy. This is quite a wrong diagnosis ..........
Smooth operator Raghuram Rajan in America: top 10 quotes
Raghuram Rajan dubbed "The Guv" has lived up to his "rockstar" image by waxing eloquent on his maiden visit to the US as the Reserve Bank of India (RBI) Governor, saying he's no "superman" and there's "euphoria" surrounding him in India.......
Regaining the growth momentum – issues and imperatives - Dr. K C Chakrabarty
Address by Dr K C Chakrabarty, Deputy Governor of the Reserve Bank of India, at the Sixth Annual Banking Conference “Bank on it, 2013”, organised by the Narsee Monjee Institute of Management Studies, Mumbai, 5 October 2013
....The first part of the topic, “Sustaining Growth”, raises the question “what growth do we need to achieve and sustain”? This leads us to the issue of “potential growth”. “What is the potential growth rate of the Indian Economy?” This question has been a subject of active debate in the academic and policy research circles. There are several methodological issues surrounding the estimation of potential output. Broadly speaking,.........
Where are our economists? - Charan Singh
.......India needs a centralised research institution like the National Bureau of Economic Research, Cambridge, Boston, which encourages research and disseminates it across the country. There is a need to have close interaction between the Centre and the States, as well as the RBI, to build synergy between academic economists and policy makers. The authorities could advertise grant to undertake research in specific areas of economic research. The Indian Economic Association (IEA) could be strengthened with more regional and city chapters to encourage young and budding economists to start contributing to research efforts............
Inflation pointers for monetary policy - Renu Kohli
... Given that this is the first time in India’s macroeconomic history that monetary policy is being guided by retail price trends that also capture services, in addition to the usual WPI inflation, there is need for careful treading at a point when demand destruction is evidently very significant..........
Can ‘Yellen effect’ attract women to economics?
..........Many young women don’t seem to understand that economics is also for those who have broad intellectual interests and for those with research and policy interests in health, education, poverty, inequality, crime, obesity, the environment, terrorism or infectious disease. All students should be aware of the broad applications of economics when considering an undergraduate major.............
‘If Push Comes to Shove, We Can Pay the World in Gold’: Rajan
......."Out of total short-term external debt that we have to pay for is ten percent of GDP. So, we have enough reserve to take care of that," he said speaking on the sidelines of the IMF meeting in Washington. "We bought over $60 billion gold last year. Sixty billion accounts for three-fourths of our current account deficit. If push comes to shove, we can pay the world in gold," Rajan added.
India needs a national gold policy
.....Hence, neither the popular perception that the household purchase of gold constitutes physical savings nor the perception that it constitutes consumption by household is reflected in national income accounting. A 2011 working paper by the Reserve Bank of India highlighted this anomaly. Hence, it may be incorrect to treat valuables and, hence, gold purchases by households as GCF in the economy from technical as well as behavioural point of view (consumption, investment and social security motives)...............
Villain in the Indian economy
Why the Govt. is digging the empires of Kings who ruled India centuries ago. It will be better if Govt. digs the basements and farm houses of present rulers....I feel there will be lot more gold and black money in their custody.......
We must encourage more such
dreams. I am sure, there will be more and more digging for gold wherever the
yellow metal is hoarded. A mad mad dream could draw attention and put
government into action than the following comments published online:
“Gold which no doubt is the
villain in the Indian economy can be reformed into a saviour, if there is a
political will to seriously go ahead with the following initiatives (the list is
illustrative) which have already seen some beginning during the last one year:
• Make a realistic estimate
of surface gold stock in India. Individuals and institutions holding gold stock
above a threshold level should report the quantum of gold held to a designated
authority.
• Insist on standardisation
of a reasonable portion of gold held by institutions. Infrastructure for such
standardisation should precede.
• Encourage financial
institutions to increase their gold portfolio. Organisations including
religious institutions should be provided incentives to deposit gold with banks.
• Establish a National
Registry to keep track of inflow, stock and outflow of gold in various forms.
• Encourage introduction of
gold-backed investment instruments.”
M G Warrier, Mumbai
Montek & Team yet to take view on Rajan report
....." We have not taken a view ( on the report). There has been a misleading commentary in some newspapers that some officials in the Planning Commission have commented on it," he said. There were reports that some Commission officials were against the Rajan panel's suggestion to replace Gadgil- Mukherjee formula with Rajan Committee's Multi Dimensial Index ( MDI) for allocation funds to states...........
Bajaj Finserv seeks RBI nod to float credit card biz
Bajaj Finserv has sought RBI's permission to float a credit card business on its own. The company has also abandoned its proposal to float a mutual fund and has drawn plans to have an intermediate non-operating holding company, should the group get a banking licence from RBI. Bajaj Finserv is one of the 26 applicants seeking a bank licence from RBI. ......
Banks' loans, deposits grow slower so far Vs RBI's FY14 estimate
Mumbai: Banks' loan and deposit growth has been slower so far in the current fiscal year than the Reserve Bank of India's full-year projection, according to data released by the central bank...........
Canara Bank launches a host of facilities
.........The bank, which has already extended e-sewa facility to Chamundeshwari temple for the benefit of devotees, installed an ATM, which was inaugurated by Mr. Dubey. He later launched the e-lounge facility, which was described as a step towards accelerating the bank’s initiatives to harness technology. The e-lounge is at the Jayalakshmipuram branch of the bank and offers all banking facilities, including cash withdrawal, cash deposit, passbook printing, fund transfer and online trading without any manual intervention, 24x7..........
Wednesday, October 16, 2013
Financial inclusion: Banking the unbanked. A relook
......However, these initiatives for strengthening financial inclusion are yet to have a substantial impact on the lives of the excluded population. Over half the Indian population is unbanked. Only about 55% of the population in the country has a deposit account and around 9% has credit accounts with banks. According to data from Reserve Bank of India (RBI), India is the home to largest number of unbanked families (more than 145 million). There is only one bank branch per 14,000 people. The total number of villages in the country is estimated to be more than around 6 Lakh, but the number of scheduled commercial banks (SCBs) and Regional Rural Banks (RRBs) stand at only 33,495........
Vinoop keen to make an impact
.....After his father’s (an RBI employee) transfer brought him to Kerala, Vinoop, in his maiden appearance for the State in the Cooch Behar Trophy in the 2010-11 season, scored 545 runs and took 26 wickets. Kerala qualified for the elite group for the first time in the history of the tournament. Based on that performance Vinoop was chosen for Kerala Cricket Association’s S.K. Nair award for Cricketer of the Year for the 2010-11 season. Vinoop was also called up to the Kerala Ranji Trophy squad for the last match against Himachal Pradesh at Thalassery in 2011 though he didn’t play........
Obituary - God's Good Man passed away
I deeply regret to advise you of the sad demise of Shri.R.S.Kadkol on October 15th in Mumbai. He was recently in hospital for three weeks for breathlessness. He was 77 years old and retired as A G M in DEAP almost twenty years ago. He had sought voluntary retirement in view of his wife's sickness. She pre-deceased him. Kadkol, who had joined RBI in the Economic Department, went on to become in charge of the Lucknow Office of the DEAP for a number of years. He had a stint in Credit Planning Cell. A true gentleman to his finger tips, Kadkol was always in smiles--ever helpful and he had totally abjured anger. He had a very wide circle of friends who benefited from his anecdotal talents. Travel bug had bit him and we are fortunate to have his travel memoirs--journeys to Char Dham, Nagaland, Mizoram , Badrinath and Kedarnath. He wrote for "Hitguj" regularly. We pray that his soul rests in peace. He was truly "God's Good Man".
- P.P.Ramachandran
‘Second time’ unlucky?
My View on "Is the Raghuram Rajan-Chidambaram bonhomie too goo...":
From what we get to read in the media, Dr Rajan has quickly (as compared to his predecessors) learnt the art of reframing his arguments to convince North Block that RBI is an institution with an identity which needs to be protected in national interest and the central bank needs the fiscal policy and real sector reforms support from GOI. His IMF background has not uprooted him from the Indian context and he is not hiding his anxiety to protect the interests of the majority of the country’s population which lives below the internationally accepted poverty line (per day expenditure of $2). RBI since at least the dawn of independence, has taken on itself the responsibilities relating to institution building and credit deployment for various purposes depending on priorities of the governments of the day, in addition to the central bank’s core functions. The Indian central bank’s focus on financial inclusion and taming inflation which are in tune with the vision expressed by Dr Rajan before taking over as Governor. By now, he has got a feel of the constraints with which RBI has been having a tight rope walk in harmonizing the monetary policy in recent times with the unbridled fiscal policy guided by pulls and pushes of a coalition government at the Centre. Finance Ministry has been asserting ownership rights over RBI almost in the same way it has been handling PSUs by interfering even in RBI’s internal HR matters. The FM who put his Secretary Dr D Subbarao as the Governor of RBI hoping to have a submissive Governor found a different person in Subbarao soon after he started functioning from Mint Road. In that context, perhaps, it will need some introspection, a willingness for give and take and lot of luck only can save the FM from being ‘second time’ unlucky.
- M.G.Warrier
Sadhu dreams of buried gold, government starts digging
.....Yogi Swami Shobhan Sarkar says the gold he dreamt of belonged to a nineteenth-century ruler, Rao Ram Bux Singh. He says he wants it in government hands to help India recover from an economic crisis. Not everyone is so keen to put bullion into the Reserve Bank of India's vaults. Temples sitting on about half as much gold as in Fort Knox are resisting efforts by the central Reserve Bank of India to audit their holdings...........
FM's tough decisions?
...The question is when will he take tough decisions? What are those tough decisions to keep a check on the CAD? It is a matter of fact that he does not listen to others. He is an unchallenged leader. He is just like a freestyle wrestler who nobody wants to challenge out of respect..........
Growth vs inflation
This is with regard to “Inflation hits 7-month high as food prices soar” (Business Line, October 15). ( Trends in inflation over the last two years show that the monetary policy measures are not acting as an effective antidote. . Various supply side constraints keep fuelling inflation from time to time. Onion price hike is one example. Similarly, international crude oil prices continue to add to inflation woes in India. The headline inflation hardly gets impacted and hence the RBI approach of containing inflation though monetary policy measures may not work in India. When minimum wages are hiked every year and minimum support price for foodgrain is upped periodically, how we can expect inflation to go down? With Government setting the 7th Pay Commission, more people, including in the private sector, will have greater purchasing power, which is a sure-shot recipe for inflation. In view of all this, we must learn to live with neo-normal inflation. Inflation will continue to be high in the country and we need to move beyond the text book approach of inflation control. We need to look at high growth rate which will increase revenue sources for the government, helping it start welfare measures for poor people. Food security can be supported by high growth resulting in high collection of direct and indirect taxes. Shouldn’t the RBI look at growth more than inflation? It is now time to think like a contrarian.
- Vivek Sharma, Mumbai (HBL)
India in depth: Changing recipe of monetary sauce
........The central bank needn't become a completely open book. But a more robust response to inflation is a welcome break from the past. A monetary policy rule that targets several variables risks falling between stools. That's the case now. Inflation is almost at double-digit levels but the economy, which grew just 4.4 percent in the June quarter, is operating below capacity. The paradox is partly explained by the RBI's actions..........
The global economic situation and India - Charan Singh
.....According to the IMF, India’s growth potential has been impacted because of infrastructure and supply bottlenecks arising from problems in mining, energy, telecommunications; slowdown in permits and project approvals; and over-stretched corporate balance sheets. Also, given that current account deficit (CAD) is large and inflation is high, monetary policy options are limited in the face of decelerating growth.........
India's banking sector is inefficient and customers pay the cost, making reforms imperative
.......Presently, Indian banking packs a lot of inefficiency, which is passed to consumers in terms of higher costs. Enhanced competition in any business will result in declining profitability as the opportunity to make easy money disappears. Banks here however have largely maintained their profitability over the last decade, suggesting that the 154 commercial banks hardly push each other. Compare Indian banks' profitability with the UK and what comes through is that customers here are paying the price for inadequate competition.....
Beyond finance reform
......Dr Rajan's liberal views on foreign banks, for example, may not find favour with whichever political configuration forms the next government. But, on the other hand, measures that increase transparency will help all players make more informed and, consequently, efficient decisions on both resource allocation and pricing. The banks themselves should be fully behind this. Overall, while the merits of individual components of the strategy can be debated, the pursuit of the broad objectives of penetration, efficiency and safety will certainly contribute to better economic performance..........
Don't forget co-ops and pri-secs
My View on t "India Needs More Banks, Foreign or Not":
Surprisingly, except for some occasional mention about ‘financial inclusion’ reforms in India seems to be an urban, if not metropolitan affair. When we talk about penetration of banks in rural areas by importing ‘foreign banks’ or via Banking Correspondents or earlier through Self Help Groups financed by commercial banks, we are forgetting the existence of cooperatives and private sector organisations which are already there doing a lot of service. Just as we do not want rural people to become literate for selfish reasons, we do not want rural institutions rural institutions to upskill for fear of their eating into urban business. Reforms need to spread to rural areas. For this, literacy need to be improved, rural institutions including rural financial institutions need to be allowed to survive and become viable.
- M.G.Warrier
No to foreign banks
RBI Governor Raghuram Rajan has talked of bank reforms that will allow foreign banks to enter India ‘in a big way.’ “Once you have a fully owned subsidiary, we’ll allow you ‘a lot of’ freedom.” This will be a ‘near national’ treatment to the foreign banks, he has said, speaking in Washington. But why do we need this? Indians have already tasted the bitter fruits of the pro-US economic reforms introduced by Manmohan Singh in the form of daily tumbling rupee, anti-aam aadmi large-scale scams worth trillions of rupees, and US dollars deposited in foreign banks not brought back to India till date. India doesn’t need any bank reform but governance reforms in totality at the earliest in the all-round interest of the Indians, and not in the interest of any neta, babu, foreigners or foreign banks.
- Hansraj Bhat, Mumbai (HBL)
Foreign Banks: The Long Wait To Continue
The fact remains that no other country allows foreign banks to set up shop like we do
.......Speaking in Washington, Reserve Bank of India (RBI) governor, Raghuram Rajan, said more freedoms for foreign banks “is going to be a big, big opening because — one could even contemplate (them) taking over Indian banks, small Indian banks and so on”. He added: “if you (foreign banks) adopt a wholly-owned subsidiaries (WoS) structure, we will allow you near national treatment”. But it’s the use of the words “near national treatment”, and the caveat he added “reciprocity: your country should allow the same to our own banks”, that matters..........
Foreign lenders won't buy local banks sans clarity
............"Foreign banks buying smaller ones could be one way but just foreign banks becoming larger by becoming subsidiaries or whatever other form which gives them the ability to expand physically, bring in more capital and also bring in technology which is what they are good at and risk management is really the key need for India,"...........
Inflation to ease; RBI likely to cut MSF rate: Assocham
..."The recent stability in rupee coupled with kharif output will ease sequential inflationary pressures going forward. This should prompt the RBI to continue on the path of monetary policy normalisation by reducing the MSF rate further," Assocham President Rana Kapoor said..........
Rupee revived by Raghuram Rajan as carry trade favourite
Reserve Bank of India (RBI) governor Raghuram Rajan has turned the rupee from a pariah to the world’s favourite currency after just a month in office as he intensifies efforts to quell inflation and lure capital. Investors selling dollars to buy rupees earned 10% since Rajan took over on 4 September, the most among 44 currencies tracked by Bloomberg and a turnaround from a 2.8% third- quarter loss......
Rising inflation ensures Rajan can’t do much on repo rate
.......However, the latest inflation figures have put paid to all such hopes, at least for now. While Rajan did try and inject some liquidity into the system by lowering the Marginal Standing Facility for banks twice since he took over, his hands are clearly tied on the repo rate front. The repo rate—the rate at which RBI lends short-term funds to banks—is the benchmark RBI uses as the key monetary policy tool. The last time around—on 20 September—RBI actually had to increase the repo rate by 25 bps to signal its resolve in tackling rising prices........
25 mn small borrowers' data now a click away
......However, there are a number of challenges in collating data from small borrowers. While several MFIs submit data to the credit bureaus on a weekly basis, only a few provide data on a monthly basis, which limits the scope of the database, according to Ghosh. Again, lack of uniformity in data structure poses a challenge in the process. Yet, the biggest challenge in having a coherent database of small borrowers comes from non-government organisations, credit co-operative societies and self-help groups (SHGs), which do not furnish data to the credit bureaus.........
'One-fourth of MSMEs do not have access to banks for credit'
As high as three-fourth of India's Micro, Small and Medium Enterprises (MSMEs) do not have any access to banks or institutional financing channels making their businesses vulnerable, according to a study. Only about 33% of the country's MSMEs have access to banks or institutional financing channels, said a study jointly done by financial advisory firm ResurgentIndia and industry chamber Assocham.........
RBI rejects takeout finance plan of IIFCL’s London arm
........The RBI’s move is a setback of sorts for the state-owned infrastructure lender, IIFCL, which was betting big on takeout finance to speed up disbursements from its London subsidiary. Takeout financing at London was envisaged to be similar to IIFCL’s takeout scheme in India. Under takeout financing, loans made by banks to infrastructure firms are sold to IIFCL so that banks recover their funds ahead of the payment schedule under the loan agreement...........
HDFC Bank: Cheques and imbalances
HDFC Bank managed to beat Street expectations once again. During the quarter ended September, it reported a net profit of Rs 1,982 crore ahead of Street's consensus estimates of Rs 1,964 crore. This would come as a positive surprise to investors prepared for worse, given several headwinds the bank faces: Low credit growth, tight liquidity, rising interest rate, falling GDP growth and pressure on assets. .........
Corporation Bank's new CMD sets clear agenda
.........The current business environment was highly dynamic and changes were occurring at a rapid pace, Bansal said, adding new bank licences were being considered, which would increase competition further. Regulatory pressures were increasing and credit offtake continued to be challenging, he said in a communication to employees................
Postal Life Insurance day celebrated
....Postal life insurance was started with effect from 01 February 1884 for central government/ state government officials, defence personnel, officials of govt institutions, municipal corporation and boards, government universities, employees of nationalized banks, additional bodies of State Banks of India and Reserve Bank, operational units under central/state government, UTI, IDBI and employees of state insurance corporation...........
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