............Indian politicians are hypersensitive to inflation in election years so, the RBI could actually get tacit support from the government. Hiking rates probably won't work since food inflation is driving the indices up. Food is near 15 per cent despite a good monsoon and excellent agro performance. Rate hikes won't do much to pull food prices down in the absence of structural reforms in the distribution and procurement structure. But Rajan might pull out the sledgehammer anyhow. Higher treasury yields and the recent rate hikes by the State Bank of India and other banks indicate market expectations............
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Monday, November 18, 2013
Uncanny parallels between Sachin and Indian economy
As Sachin Tendulkar retires after 24 years in international cricket, Business Today discovers some uncanny parallels between the maestro's career and the country's economy...................
Read - Business Today
RBI frowns on loan recast efforts
.......“We’ll tolerate a bit of restructuring, we will give the regulatory forbearance, offer more time — that is the loss or the sacrifice that we as regulators are willing to make. But you as bankers should also be willing to make more provisions...and the borrowers should also sacrifice, he should bring in more equity,” ....................
Chakrabarty lambasts ARCs for killing their own business
Mumbai: Senior-most Reserve Bank Deputy Governor K C Chakrabarty has blasted asset reconstruction companies (ARCs) for being "non-transparent" and squarely blamed them for the failure of the mechanism. "ARCs have failed in our country because their pricing is the most non-transparent. Bring more transparency in the pricing," he said while speaking at the annual Bancon over the weekend here........
Blunt instruments
......But RBI Governor Raghuram Rajan who talked of how the central bank had to ‘focus the laser light on inflation’ is also right since, once inflationary expectations run high, this gets factored into all contracts including wage agreements. Given that Rajan said monetary policy was a blunt instrument and had to be used carefully, the question is how inflationary expectations can be tempered. To some extent, Chidambaram answered the question when he said supplies had to be augmented and this required changes in the supply chain, the distribution logistics, the entire production chain......
Should we gradually open the doors for FIIs in debt mkts?
CNBC-TV18's Latha Venkatesh chats with Dr Bimal Jalan, former RBI Governor, Dr Subir Gokarn, former Deputy Governor of RBI, Dr. Samiran Chakrabarty of Standard Chartered Bank to get their view on whether India should gradually open the doors for FIIs in debt mkts?. Below is an edited transcript of the discussion..............
India and the slowing economy: Chidambaram squares off RBI, again!
...........The Reserve Bank, under Mr Raghuram Rajan, continues to maintain the aggressive stance that was seen when D Subbarao was at the helm. The widely criticised monetary belt-tightening, experts say, is here to stay, flying in the face of a desperately growth-seeking Finance Minister P Chidambaram as well as the corporate India.............
Read - ET
......Finance Minister P Chidambaram and Reserve Bank of India Governor Raghuram Rajan didn't seem on quite the same page at a BANCON 2013, a bankers' conference held in Mumbai this week. Mr Chidambaram and Mr Rajan's discord was provoked by numbers released by the union ministry of statistics earlier in the week that revealed headline inflation for October had hit 7 per cent.
RBI's sensible eye on inflation
P Chidambaram backs bankers over bad loans
............."Banking is a business and lenders take decisions which turn out to be wrong,'' Chidambaram said at the banking conference Bancon 2013 organised by Bank of India in Mumbai on Friday. "At times, some decisions are taken. But a poor or a wrong decision does not mean it is a malicious decision. But if authorities question these decisions that would be the most dangerous thing to do." The finance minister's declaration of support triggered a burst of applause from the audience...........
RBI Deputy Governor Chakrabarty says PSU banks lax in credit appraisals
............“Banks always say the rise in NPAs was mainly due to the slowdown in the economy, but the truth is that banks became complacent in 2006-07 when credit growth was high. In general, banks who had credit growth in 2004 -08 ended up with high NPA growth in 2008-13. Our NPA problem started much earlier and not in 2009. Yes, the financial crisis affected us, but credit appraisal had been deteriorating,” ...........
Back to basics
Recent articulations by the finance ministry and the Reserve Bank of India suggest that the very concept of banking itself is being revisited. What has been mooted, in particular, is the idea of niche or specialised banks, whether it is with reference to geographies or sectors. Such proposals need to be viewed in the context of the basic principles of banking and, if that is done, some concerns inevitably arise. The word "bank" itself means trust and reliability, with every effort being made to keep ..........
Banks may face additional challenges
.........Put together, this could push the sector into a new orbit. It will force the existing players to be more efficient in their operations and in their allocation of capital. Given the level of interference public sector banks face, they are likely to fall even further behind their private sector competitors........
DBS Bank evaluating RBI's WOS guidelines for foreign banks
New Delhi: DBS Bank, fourth largest foreign lender present in India, is evaluating RBI's new guidelines that provide significant benefits to foreign banks adopting Wholly-Owned Subsidiary (WOS) route of running branches here. The guidelines were issued earlier this month and allow foreign banks incorporating WOS branches to acquire local private sector lenders and expand branch-network across the country without any restrictions.........
What is wrong with India’s banks?
........The point to note is that most banks, particularly in the public sector, have been showing a secular growth in bad assets, although the bad loans data, both in percentage terms as well as in absolute numbers, do not provide the correct picture. This is because banks have been restructuring many of their stressed loans, which is not reflected in their NPAs. If one-fourth of such restructured loans turn bad, gross NPAs of many more banks will cross 5%. At least for a few of them, it could inch towards double digits.............
The mirage of bank ‘bail-ins’
.......... RBI’s bias against market mechanisms is to a fault, but the then governor Y.V. Reddy and his officials understood that the reason why we regulate the financial system over and above the way we regulate other industries is that the financial system cannot insure itself. Financial crises are large, pervasive and a result of market failure. Market prices cannot easily protect us from such market failure. Bail-in investors will underestimate risks in the good times and will be shocked and ruined in the bad. In the good times, they will use optimistic valuations of these instruments as backing for other holdings. Then..........
A new deal for foreign banks
Even while the issue of granting bank licences to a few private banks is gaining traction, the Reserve Bank of India (RBI) has released important guidelines for foreign banks to participate in the Indian financial sector in a bigger way than what has been possible so far. The two developments have one common objective — they are meant to deepen the financial sector. If all goes well, a few new private sector banks will advent in early 2014........
Delhi: banks turned blind eye, buyers suffered
.....Following complaints by the buyers, inquiries were initiated by the Reserve Bank of India (RBI) and the district magistrate of Gautam Budh Nagar. The RBI asked the National Housing Bank (NHB), to look into the suspect transactions while the Gautam Budh Nagar DM appointed the Chief Development Officer to investigate the case. Both have produced reports that indict the builders and question the financiers’ role..........
Dena Bank hopes to open London rep office by Dec-end
Dena Bank is hopeful of opening its London representative office by the end of December, a top official said. This public sector lender has already received approval from the Reserve Bank of India for opening a representative office at London, Ashok Dutt, Executive Director, said here today. The bank's senior management had also met the UK regulator and the bank is hopeful of its nod soon, Dutt said........
Saturday, November 16, 2013
The five pillars of RBI's financial sector policies: Raghuram Rajan
Full text of Raghuram Rajan's speech at Bancon 2013 held in Mumbai on Nov 15
.....In the rest of this talk, I want to focus on what we at the Reserve Bank are doing to improve the financial system. We plan to build the Reserve Bank’s developmental measures over the next few quarters on five pillars. These are:...........
Clean the viewfinder
.......... Important steps have been taken but these need to be institutionalised so that Rajan's legacy is assessed not merely in terms of how well the RBI does under him, but by whether or not he leaves behind a reformed institution..................
While at BANCON 2013...
........When asked how does he feel about the state of the economy from his 23 rd floor office at the RBI headquarters. Rajan first corrected the gentleman that his office is on the 18 th floor and said his office offers the view of the Mumbai Port and he can see the good news through the glass windows. “As I stand on the 18th floor and look outside, I see the port and ships coming in and going out to a greater degree than I saw in September. That’s telling me exports are picking up", he said................
Not a Pensioner to Regulate Pensions
.......True,
the appointment of the pension regulator is the government’s
prerogative, but there has to be transparency on changes midway. Now,
the government says it will name a new pension regulator within a month.
Rather than appoint yet another serving or retired civil servant to the
job, the government would do well to let the insurance regulator, Irda,
look after the pension sector for the time being. There is considerable
overlap in the long-term asset-building activities both regulators look
after. India needs to overhaul its regulatory apparatus for the
financial sector, to bring in holistic, harmonious regulation. The
financial sector legislative reforms under the
government’s consideration, and the prime minister’s own stated
intention to make regulators accountable suggest that such overhaul is
imperative........
Phishers strike jackpot, net Rs3.65L from call centre staffer
.......The fraudsters spoke to the victim pretending to be officials from the Reserve Bank of India and customs and income tax departments. This made him believe that the e-mail was genuine.
According to the police, the victim (name withheld), a resident of Vashi Naka in Chembur, got an email from Honda UK a few months ago. The e-mail said he had won a laptop, two T-shirts and 3,55,000 British pounds (around Rs 3.58 crore)....................
Read - DNA
Read.........
Beware of fictitious emails claiming to be from RBI
.........There have been increasing instances of emails that pose as correspondence from the Reserve Bank of India (RBI). Fraudsters are using RBI’s corporate logo / name and even the photograph of the Governor of RBI in their emails to convince victims of the authenticity of the messages.........Read.........
Loan recovery becoming difficult for banks due to legal hurdles
....."There are many challenges (in recovering dues) including legal ones. Even after using the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act), defaulters are found obtaining stays from any court, including labour courts. We then have to rush to that court and get the stay vacated. This is making recovery (of dues) difficult," said Arundhati Bhattacharya, chairperson and managing director of State Bank of India.............
Inflation control still RBI's main agenda, says Chakrabarty
Deputy governor of the Reserve Bank of India (RBI) K C Chakrabarty on Friday said inflation control remained the “single agenda” of the bank in the current environment. “Cost of money is high whenever inflation is high. That is why, if you see, our single agenda is to fight inflation. If we can make inflation low, the cost of money will come down,” he said during an interactive session organised by the MCC Chamber of Commerce and Industry here..........
Companies must not rely too much on debt: Chakrabarty
.....“No project can work with bank finance only. What is the equity that has been raised (recently)? We do not see any new issue,” he said during an interactive session organised here by the MCC Chamber of Commerce and Industry. According to Chakrabarty, over-dependence on debt would lead to high cost of borrowings. Projects with high debt component are “not viable”. “Equity market is almost dead...last four to five years new projects have gone for 100 per cent debt-led finance,” he said.......
A road map for foreign banks
......The government and the RBI envisage a productive role for foreign banks in India subject to their following certain prescribed norms. It is no coincidence that the RBI has stipulated similar requirements, such as in capital adequacy, for the new private banks that are to be licensed shortly. However, while the imminent entry of new banks, especially those promoted by large corporate houses, has been highly controversial, the expansion of foreign banks’ footprint in the country is likely to be more subdued. After the road map was unveiled,.......
Postal banks to be set up soon in India
......The Post Bank of India (PBI), as it is likely to be called, is all set to receive a banking licence from the Reserve Bank of India (RBI) within a month or so when it would issue licences to the short-listed applicants. A senior official of the General Post Office here told Khaleej Times that the PBI would provide banking services, including accepting of deposits from the public for lending or investment. In addition to deposit schemes, the PBI will also provide loans to general public and corporates like any regular bank. The first such bank with an ATM will be opened at the computerised Navrangpura post-office in the city.............
While banking is a big challenge, it will be easier for us: Sanjiv Bajaj
.....In the last few years, especially after the financial crisis, there has been so much tightening in regulation and lending practices that we are not seeing significant amount of innovation in the banking space. If you don’t keep pushing, we will get into a situation in which you will perform according to averages. We do have a significant business that can be transferred into a bank. But for those that start from scratch, my thinking is they will need a differentiated strategy; otherwise, they will only act to drive down prices. The Reserve Bank of India has talked about niche licences; there are opportunities. ......
RBI should rein in inflation, says BNP Paribas
.........Commenting on RBI (Reserve Bank of India) policy, the research note argues that RBI governor Dr Rajan is showing welcome signs of a hard-line approach to inflation control by prioritising CPI, rather than WPI. With CPI inflation in low teen territory, today’s WPI data, if anything, just cements the case that Dr Rajan will deliver his third repo rate hike in as many as meetings as governor at the December meeting. The research note concludes by saying, “the tacit agenda of the Rajan-led RBI remains to normalise real deposit rates and boost financial saving.” It is important that RBI ensures its monetary policy is sufficiently tight to re-anchor inflation expectations.
Centre relaxes visa norms for MICE travellers
The Indian government has liberalised visas required for conferences and meetings. ffectively, visas for conferences organised by public institutions, public sector undertakings, central educational institutions, Reserve Bank of India, UN and affiliated organisations can be approved by Indian missions and posts, and do not have to be referred to the Ministry of Home Affairs, Government of India for security clearance, Himanshi Dhawan reported in The Times of India. The move is expected to give a much required boost to MICE Tourism.........
Read......
Read......
Will rental bonds work out?
.........It is also reported that, private real estate developers are readying themselves to put up rental income backed bonds for sale. At the same time, another report states that, the Infrastructure Development Finance Corporation ( IDFC) will be selling similar bonds backed by lease rentals from Special Economic Zones and infotech parks developed by them. What are these bonds? Has this idea come up from the Reserve Bank of India’s restrictions on bank finance to the sector like the 80: 20 order? Again, are these bonds mooted on the Singapore pattern?.........
FM, Rajan on Same Growth Station, but Sing Different Tunes
Finance
minister P Chidambaram and Reserve Bank of India governor Raghuram
Rajan spoke in one voice on the need to revive economic growth but
differed on the efficacy of higher interest rates in tackling inflation.
While the minister suggested that monetary policy doesn’t really
work as a method of taming prices in the current context, where costlier
food is the main cause, the governor said there were few other options
available. “You have to focus the laser light on inflation,’’ Rajan
told the annual bankers’ conference, Bancon 2013, on Friday. “That’s the
only tool we have. That’s the blunt tool. (That’s why) across the world
central bankers use it carefully.’’ The central bank’s relentless focus
on using interest rates to quell prices had been a sore point between
the minister and Rajan’s predecessor Duvvuri Subbarao.......
Read - ET
Read - ET
New banking licences should not go to ‘clones’: Chidambaram
..........“Most banks are clones to each other. I am inclined to think that there is more cloning than differentiation… It will be sad if licences will go to entities which clone the present banks,” said Mr. Chidambaram, while inaugurating the IBA’s (Indian Banks’ Association) annual banking conference, BANCON, hosted by Bank of India, here. “We need banks which cater to communities, we need banks which cater to people living in tribal areas, we need a different bank to cater to North East, we need banks to cater to the urban poor, we need banks that cater to farmer families and we need banks that cater to women,” he added. RBI Governor Raghuram Rajan had earlier said that the central bank would issue licences to new banks in January next...............
Nail wilful defaulters, not victims of slowdown, FM tells bankers
............ “This is the period for bankers and customers to work together to keep faith in each other because when we come out of the trough... when upturn begins and when we see growth quarter after quarter that (would be the) time when most banks would be healthy, balance sheets would become healthy,” he said. The finance minister suggested the Reserve Bank of India (RBI) give preference to those applicants for new bank licences who want to set up specialised banks, rather those keen to establish clones of existing lenders........
Slow decision making hurting economy, says RBI Governor
......“The Reserve Bank of India intends to play its part in making this happen,” he assured. Addressing a gathering of bankers at the annual banking conference Bancon 2013 here, Rajan warned against the rising noise of protection and subsidies for domestic manufacturers in policy corridors. “Our industrial sector is no longer an infant that needs to be molly-coddled,” he added. He said India should not enter into free-trade agreements that give foreign manufacturers undue advantage and that is no reason for the Government to give domestic manufacturers protection. “Our measure of success should be the jobs that are created...,” he said.......
‘Interest rate is a blunt tool to tackle inflation’
Interest rate is only a blunt tool to tackle inflation and must be used occasionally, though carefully, RBI Governor Raghuram Rajan said “That is the only tool we have — and across the world central bankers recognise it… so they are careful about using it. But it has to be occasionally used,” Rajan said answering a question on why interest rate was being used to address inflation. CPI inflation, measured by the movement in the retail prices of food items, soared to a seven-month high of 10.09 per cent in October. The wholesale price-based inflation too, shot up to an 8-month high of 7 per cent in the same month...............
Steps soon to deepen G-Secs market: Rajan
....“In the coming weeks, we will roll out more recommendations of the Gandhi Committee report to improve the liquidity and depth of the G-Sec market. We will then turn to the money and corporate debt markets. We will introduce new variants of interest rate futures and products like inflation indexed certificates, and work to improve liquidity in derivative markets,”......
Rajan gives away little
.....According to Rajan, the RBI will discuss with public sector banks about what needs to be done to improve their stability, efficiency and productivity. The RBI is also planning to release more recommendations of the R. Gandhi committee to improve the liquidity and depth of the government securities market. Subsequently, the central bank will turn to money markets and corporate debt markets, he added.
Rajan warns against return of licence-permit raj
........According to Rajan, instead of targeting specific industries for governmental attention, which risks bringing back all the baggage of the 'licence-permit raj' the country has left behind, the focus should be on improving the conditions for growth for all.
Raghuram Rajan warns bankers on 'ever-greening' of bad loans
..."You can put lipstick on a pig but it doesn't become a princess. So dressing up a loan and showing it as restructured and not provisioning for it when it stops paying, is an issue. Anything which postpones a problem than recognising it is to be avoided,"..............
Volatile living: Bold monetary experiments of Raghuram Rajan's RBI
The bold monetary experiment that the Indian and Chinese central banks engaged in this year might one day be hailed as a success. So far, the result has been unprecedented market volatility and little else. Both central banks targeted interbank rates to control the supply of money, aiming for a more surgical monetary tool than orthodox bank reserves or policy interest rates..........
No single data point to determine next RBI move: Rajan
.......This is a balancing act, which requires the Reserve Bank to act firmly so that the economy is disinflating, even while allowing the weak economy more time than one would normally allow for it to reach a comfortable level of inflation," he said in a speech..............
LIC reviews Basel III investments
Life Insurance Corp of India (LIC), the country’s largest insurer, is reviewing its investment in Basel III-compliant bank capital after a series of downgrades in the sector. LIC is by far the biggest investor in the new-style capital securities, buying Rs25bn (US$395m) of the Rs40bn of Tier 2 bonds issued since India began to phase in Basel III rules on April 1..............
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