Divide to rule

My View on "CURSE OF ’13 OFFERS A FEW LESSONS": 

Institutional reforms are not easy come by in a world ruled by hypocrisy. Banking sector is in dire need of governance reforms. It is time to see whether the CMD posts in PSBs need separation of Chairperson. Time to see how the SBI and other private sector banks with non-executive chairmen are performing with division of functions between the Chairman and Managing Director and draw lessons. It is also time to see the effectiveness of the various committees of Board in Banks are functioning in terms of their roles and responsibilities. 

- Yerram Raju

Making NPAs perform

......... Though some part of this exists even today—such as the provision to transfer part of the borrowers’ equity to the banks or to put it in an escrow account to allow for change in management control—RBI is strengthening the provisions by, in some cases, codifying them. Wilful defaulters—and it is up to the banks to classify lenders in this fashion—will not be eligible for restructuring and, if an exception is to be made, each and every bank in the consortium has to approve this. Here’s the added twist......

Read - FE

RBI should have given spl push to engineering exports: EEPC

........“RBI should have given a special dispensation of interest rates to exports, which are key to maintaining stability on the external sector parameters like current account deficit,” EEPC India chairman Anupam Shah said...........

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Bilateral Currency Swap Arrangement Between Reserve Bank of India and Bank of Japan

......The terms of the Agreement have been agreed between the Indian and the Japanese side in this regard. The Government of India has authorized Reserve Bank of India (RBI) to sign the agreement..........

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Government to conduct debt switch mostly with insurers

..........RBI Deputy Governor H. R. Khan said the central bank was considering dealing directly with insurance companies, which are traditionally buy-and-hold investors and would not be as much affected by falls in bond prices. "A large number of long-tenure bonds are held by insurance companies," Khan told analysts in a conference call on Wednesday. "So they will be the ones who will be switching, and not the banks so much.".......

Read | Business Standard

RBI surveys households in Bhopal on impact of inflation

....... "We have been provided with a questionnaire by the RBI for the door-to-door survey in Bhopal". Also, RBI wants to know impact of existing inflation and how it would affect all in three months from now. A few of the questions asked by the surveyors were how much your expenditure has gone up? and what is the difference in your foodbill and expenditure?...........

Read - TOI

Tightening rules

....Asset deterioration of banks has been perceptible for some time now and by specifying the formation of a lenders committee, the RBI is clearly requiring a timeline from borrowers to settle their outstanding debt. While it would be officially acceptable to call the situation stable for now, the RBI has been pre-emptive in tackling any inherent instability in the banking system by changing the solution for ..........

Read - Deccan Herald

‘Please tell me your ATM PIN’

........Retailers to restaurateurs, traders to merchants and most importantly customers are finding it difficult to incorporate the change. The most glaring problem is that of debit card holders being asked to share their PIN at merchant outlets where the cashier’s counter is not easily accessible..........

Read - Pune Mirror

The GenNext currency

..........Bitcoins got visibility in India when bitfilm used it for the voting process and as prize money in its 13th International Digital Film Competition in Bengaluru. Reports talk of 30000-strong Indian BTC and e-wallet owners participating in TOR forums on BTC. CoinMonk organised India's first bitcoin conference in Bengaluru (December 15) where investors/enthusiasts/bankers gathered to convince the government and regulators that the bitcoin ecosystem would be a valuable economic innovation for unbanked India and for remittances. They talked of India's laxmicoin, the Rs.1.20-crore bitcoin transactions, and hoped RBI would form policies about it......

Read - The Hindu

Shunted out of top 10 banks list, 'displeased' HDFC Bank wants rankings overhauled

..........HDFC Bank also sought to differentiate large or commercial banks with cooperative or small banks while working out rank for any bank as later normally have less presence or branch strength. "Cooperative banks should be put in separate category (for ranking purpose),"........

Read - FE

Bitcoin’s challenge

......Bitcoins can be mined by anyone who owns a computer and devotes machine time to running an algorithm which computes data blocks representing value. Like conventional currencies, it is built on the notion of scarcity. In this case, the difficulty of computation and the physical limitations of computer hardware create scarcity. ..........

Read - FE

Over 6,000 financial frauds in 2013: RBI

The Reserve Bank of India has reported 6,034 cases of frauds involving credit cards and debit cards in 2013, Milind Deora, minister of state for communications and information technology said Wednesday while answering questions on cyber crimes in Lok Sabha.......

Read - ET .......

CURSE OF ’13 OFFERS A FEW LESSONS

..............Although Rajan’s regime had just four months this year, it has delivered on some of the promises made on September 4 when he took charge, including a repackaged interest rate futures. Silencing experts from airing their opinion on interest rates, inflation, yields and the currency movement may yet turn out to be his best achievement this year since their unstoppable opinions harmed the markets more than helping it. Will he be tested once a new administration comes in after general elections?

Read - ET

Should the RBI powers be diluted?

The government has to get its priority right. It has to take immediate steps to tackle issues related to supply chain bottlenecks, inflation, subsidies and the deficits. Blaming the RBI and trying to clip its powers is not the solution to solving India's economic problems. Should the RBI powers be diluted? Let us know your comments or post them on our Facebook page / Google+ page. 

Read.......

RBI Guv Rajan May Want Mor

Mor returned from an active social service to add his might to RBI Governor Raghuram Rajan’s efforts to hasten banking licence process and look at ways of having financial inclusion. The chances of Mor becoming an active banker is ruled out, but he may remain in the regulatory circles for a long period.
ET

When Modern Payment Systems Are the Problem

..............The report is of interest to India for three main reasons: the Reserve Bank of India’s emphasis on financial inclusion when granting new bank licenses; Indian banks expanding their use of electronic payments and non-branch interaction with customers; the Indian government’s focus on promoting direct electronic transfer of social benefits. The five European nations of the study are smaller than India in size and population, but they’re ahead technologically and in financial services market development. Nonetheless...........

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Bank account holders pay attention to the new RBI mandate over cheque books

Reserve Bank of India governor is on a mandate spree. First, guv introduced the regulation that mandated ATM pin to be entered while one is shopping with her/his debit card. Second, Rajan launched another policy, which shall be effective by 1 January, which prohibits one from scribbling over currency notes. Now comes another regulation at the behest of customers. Effective from 1 January 2014, all banks are required to abide by new cheque book system. These new cheque books shall have ..........

Read - Daily Bhaskar

Finance Minister P Chidambaram battles RBI governor Raghuram Rajan

The tussle between the incumbent RBI governor Raghuram Rajan and Finance Minister is out in the public now with both sides criticising each other openly in front of national media. Just days ago Governor Rajan had criticised government of delaying key reform bills in the winter session of the parliament. Rajan held that any further delay would jeopardise the economy irreparably. Finance Minister P Chidambaram on Saturday pitched for limiting the Reserve Bank's mandate to monetary policy formulation and banking regulation, and for delegating its other functions to government or other regulators........

Read - Daily Bhaskar

When RBI Made FM Walk Alone

How often does a nation get to see its Finance Minister and the central bank chief express their differences in public? Differences at that level is nothing new, but the manner in which the exchange between the P Chidambaram and former Reserve Bank of India Governor Duvvuri Subbarao took place was strange. On that count, 2013 was quite historic................ 

Read - ET

Moody's thumbs-up for Rajan; calls Subbarao monetary policy ineffective

A day before the Reserve Bank of India’s mid-quarter review, central bank Governor Raghuram Rajan drew kudos from Moody’s Analytics for  his monetary stance. The research arm of New York-headquartered Moody’s was critical of RBI’s monetary policies in the past three years, though it did not directly take the name of previous Governor D Subbarao. “Indian monetary policy over the past three years has been at best ineffective and at worst counterproductive, but this is changing under the new central bank head,” said Moody’s.......

Read | Business Standard

‘Application-oriented research needed to stoke innovation’

......Even currency paper and printing machines were imported at enormous cost, a situation he had tried to correct during his stint as director on the RBI Board a few years ago. The Department of Space, he recalled, achieved some success with indigenous technologies and gained from the embargoes placed by the West in the 1980s and the nineties. “There were many machines that we needed but couldn’t buy because of various embargoes. ..........

Read - The Hindu

RBI's thumbs-down for exporters

...........A committee on this issue was set up last year, headed by G Padmanabhan, executive director, RBI, which gave its report in May with recommendations. In addition to inclusion of exports in priority sector lending, the panel recommended an extension of the swap facility, setting up a nodal agency for borrowing in foreign currency from abroad on a pool basis and further lending to these companies in India at competitive rates. “RBI found these recommendations too lenient towards the exporting community and have decided to scrap it,” a senior commerce department official told Business Standard.........

Read | Business Standard

Bank unions to go on strike today

..........Ashwini Rana, general secretary of National Organisation of Bank Workers, said IBA held discussions with UFBU on December 14 on wage revision. After a lot of discussions, IBA stated that they would be able to offer an increase of five per cent over the wage expenses. "Since their offer was too low and not acceptable to the unions, it has been decided to go ahead with strike as per the schedule," Rana said. The wage revision of bank employees was due from November 2012.........

Read | Business Standard

IBA Snubs Senior Leaders of UFBU by Offering 5% Hike - Is it High Time to Pass the Baton to Younger Generation ?

.......GoI feels that paying reasonable salaries to bankers will lead them empowered to raise their voices on other matters like corruption, NPA etc. and thus pay them low so that poor talent is attracted to banks and they can enjoy the fruits of public money.  This is on similar premises wherein politicians love to keep large population below poverty line so that they keep on struggling for day to day requirements and find no time to raise voice against the corrupt political class. The future does not seem to be rosy for bankers, as in the given circumstances, it is unlikely that bankers can expect increase of over 12% or so inspite of strikes for few days.  There is a need for drastic steps (even beyond strike) - may be throwing of the old unions.   Young Bankers have to start a new movement as old bankers have already resigned to their fate.  Like AAP of Kejriwal, new innovative methods have to be adopted and the free fund flow of crores of rupees to existing unions has to be cut by starting a movement for change.  Till new leaders emerge with self-less interest, bankers need to suffer as our poor population is suffering.........

Read......

‘Cash management services of banks need a relook’

The Reserve Bank of India (RBI) has asked the Indian Banks' Association (IBA) to set up a working group to look into all aspects relating to outsourcing of cash management services following the rise in instances of looting of ATM cash vans. In a letter to the IBA, the central bank said that the issue of outsourcing of cash management services needs to be examined in greater detail, especially with the risks involved with such activity............ 

Read - ET

Taking stock

Private sector banks have more than doubled their office count in the country since 2007. In comparison, the number of offices of public sector banks increased by 45.5 per cent during this period. Foreign banks, with restrictions on their branch expansion, widened their office network in India by 22.8 per cent in the last six years. However, public sector banks continue to have the largest share, 69 per cent, in the total number of offices of commercial banks in India..........

Read | Business Standard

RBI kicks off reform process to curb bad loans

........The apex bank has sought comment from the public on the discussion paper in next fortnight, after which the final guidelines will be issued, a central banker said, requesting anonymity. “Our intend is to speed up the process of resolution of bad assets,” the bank official said in an informal briefing ahead of releasing the paper. “If you delay dealing with it, the problems will magnify.”...........

Read - Mint

Give incentives to banks for timely taming of NPAs: RBI paper

.......In a discussion paper on non-performing assets management, the RBI proposed "early formation of a lenders' committee with timelines to agree to a plan for resolution", among other aspects. Lenders coming together to salvage an account timely and collectively shall be incentivised through "better regulatory treatment of stressed assets", while in cases where a resolution agreement cannot be reached, there shall be accelerated provisioning, the discussion paper said..........

Read - IE

India's Rajan in tough spot as stagflation risk emerges

.........."The data pose the now familiar dilemma for the central bank. While the direct effect of interest rate hikes on inflation is debatable, particularly when food prices are such an important driver, we very much doubt Dr. Rajan can be seen to be sitting on his hands at this stage," Robert Prior-Wandesforde, director of Asian economics research at Credit Suisse wrote in a recent note............

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The central bank will walk the talk: Radhika Rao

.........Further, an RBI committee's report on the monetary policy framework is the other big factor to watch. In the past, the central bank has faced criticism for trying to do too many things, often with conflicting objectives. In contrast, Governor Rajan has shown a preference for a single objective, that is, 'low and stable inflation'. Nor does he see a long-term trade-off between inflation and growth. Hence, the likelihood of a calibrated and gradual shift to some form of an inflation-targeting regime is high. An immediate move, however, is hamstrung by significant fiscal deficits. Despite the fiscal responsibility Act, adherence to targets has not been taken seriously, with the exception of the last financial year..........

Read | Business Standard

India Inc gloomily set for Rajan rate rise

.........."The thinking is the rate hike will be limited to 0.25 per cent, as India Inc is already complaining about high rates," says Prabal Banerjee, president, international finance, of the Essar group. Chief financial officers (CFOs) say the RBI governor had already indicated, on December 11 in Delhi, that the priority was to find a balance between control of inflation and economic prices. Many industrial corporations are already complaining about high interest rates because ............

Read | Business Standard

Getting Volcker’s Rule to India

.......Volcker’s Rule, though not very tight in scope, should be taken in the right spirit and structures built to ensure that banking should be free from high risk-taking. Trading activity is within the preserve of fund managers, investment banks, hedge funds and the like and should not be mingled with core banking where savers put their money based on an assumed safety of principal and interest. This should never be compromised ..........

Read - FE

Time to hold nerve, and rates

.........While we agree completely on the importance of anchoring inflation expectations, we think it is difficult for RBI to achieve this in the near term when higher inflation is being driven by food prices and not by demand overheating. The role of the government and administrative policies (e.g., ensuring smooth logistics, curbing hoarding, breaking cartels of traders and middlemen, ensuring strategic imports) will have far greater influence.........

Read - FE

Rajan Comes to the Mountain of Bad Loans with Carrot & Stick

Reserve Bank of India governor Raghuram Rajan is adopting a carrot-and-stick approach in draft proposals aimed at cracking down on rising bad loans that have crippled the financial system and blighted the chances of an economic recovery. Among the extensive measures the central bank is contemplating...........

Read - ET

RBI draft norms for bad loans require a mindset change:SBI

.........There is going to be a total change of culture, there will be strict discipline. This is something that we really require in the banking system today.\\\\\\\\\\\"  She added that this move will not only require a mindset change but also technology changes. The existing personnel will need to be trained more to recognise the accounts (NPAs) at the stress stage itself. She is confident that the bank if capable of handling the changes needed with the help of existing staff.  However, she emphasises more clarity is required on time line front............... 

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Jaya tells Finance Commission not to fall into political trap

.....“The state urgently needs fiscal support at this crucial stage of development. Any tapering of transfers at this stage would adversely affect long term growth prospects,” she said at a meeting with the 14th Finance Commission headed by former RBI Governor Y V Reddy, which is on a two-day visit to Chennai. Referring to the report submitted by the Expert Committee headed by present RBI Governor Rag­huram Rajan to evolve criteria for identifying backward States and for devolution of funds from the Cen­tre to such states, CM told the Commission to “reject outright” the report..........

Read | The Asian Age

Kotak Mahindra launches financial inclusion programme

......."We are taking concerted efforts to bridge the barriers to formal banking system across the country through financial inclusion. Kotak Samridhi takes us a step closer towards inclusive banking as it introduces farmers of village dairy societies in West Bengal to the formal banking channel,"...........

Read | Business Standard

Kotak Mahindra Bank plans to open 600 new branches

.........Out of the 600 odd branches, 45 percent of them would be in the rural and semi-urban areas, he told reporters here today at the launch of `Kotak Samridhi' scheme for milk producers in West Bengal. He said that the bank's CASA ratio was 29 per cent and the year-on-year growth was 25 percent..........

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Tax-free bonds vs Bank fixed deposits

A number of companies are coming up with tax-free bond issuances. These companies are planning to tap investors who put their money in bank fixed deposits. Below is a comparison of tax-free bonds and bank fixed deposits..........

Read | Business Standard

India needs a Paul Volcker

.......So, if I were you, I would go ahead and do a 50 bps rate increase in the monetary policy meeting next week and in the January meeting. That does not sound that radical, I think. I was tempted to recommend a 75 bps increase next week but even I am brave enough only to be a “practical (arm-chair) revolutionary”. India needs a Raghuram Rajan-Paul Volcker, to force genuine structural reforms on India’s public and private sectors. With politicians distracted and powerless for now, you have a unique opportunity to hasten reforms with monetary policy. ..........

Read - Mint

How Rajan asserts his autonomy

............The inflation we are experiencing is not amenable to monetary policy instruments, let us recognise that. It is primarily the responsibility of the government to contain price rise. It might be difficult to have quick fix on that. But let there be a beginning for a reasonable solution. Raghuram Rajan is of course aware of this.........

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Change for the RBI regime?

............Greater transparency and communication policies: As recommended by the Committee on Financial Sector Reforms (2009), the RBI could develop and make public its inflation model to give some guidance to market participants on monetary policy decisions. As price stability becomes the RBI‟s primary mandate, it could produce its own version of the inflation report, which provides detailed economic analysis and inflation projections, on the basis of which interest rate decisions are made. Detailed minutes of the RBI‟s monetary policy committee may also be publicly released. That said, it doesn’t seem unreasonable for the RBI to move and then let everyone else catch up............

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Banks have national responsibility to extend liberal credit to J&K: Rather

.......Speaking at the 91st meeting of the State Level Bankers Committee (SLBC) at Jammu today the Finance Minister impressed upon the Financial Institutions to remove the persisting impression that banks in J&K are interested only in deposits least concerned about advances. He asked the Banks to improve Credit Deposit Ratio (CDR) which is yet for below the National Bench Mark adding that there should be no flight of capital from the poor state like J&K. Chief Secretary, IqbalKhandey, Chairman J&K Bank, Mushtaq Ahmed, Principal Secretary Planning and Development, B.R. Sharma, Principal Secretary Finance, B.B. Vyas, Regional Director RBI, K.K. Saraf, Chief General Manager NABARD, DR. B.G. Mukhopadhay, Representatives of various National Banking Institutions, Administrative Secretaries and heads of various departments were present in the meeting...........

Read - Scoop News Jammu Kashmir

Obituary

Mr.N.Ramaswamy, (Ex.RBI/NABARD) Passed away peacefully on 12.12.2013.Deeply mourned by Wife: Lakshmi Ramaswamy Son: Narayan ­ Rukmani ­ Kartik Daughter: Saroja ­ Ravichandran ­ Rahul Brothers, Relatives & Friends   

TOI

'Gold'en will

My View on  "All that glitters... Dr.Subir Gokarn": 

The inherent fear to touch or talk about the huge domestic stock of gold in India gets interwoven even in such a well-articulated and well-researched article by a person like Subir Gokarn. The fear of gold was captured by K U B Rao in his report on Gold Management repeased in January, 2013 in the following words:

“Indians’ obsession for large investment in physical gold is the outcome of the confluence of numerous and divergent factors. Given the complexities involved in the lure for gold in India, a holistic strategy that deploys a combination of demand reduction measures, supply management measures and measures to increase monetisation of idle gold stocks needs to be put in place. Creation of an alternative asset class that may provide returns comparable to return on investment in physical gold with similar flexibility is important. A necessary pre-condition for reducing the excessive demand for the precious metal is to ensure benign inflationary environment along with achieving and maintaining macroeconomic stability.”

If there is a will, there should be some way, to exploit productively at least a small portion of the domestic stock of gold which will minimize the need for gold import. There is no escape from standardizing a major portion of non-jewellery surface gold and making it available for productive purposes. When every other asset can be accounted, government cannot be apologetic only about gold. 

Establishment of the Bullion Corporation of India proposed by the Working Group can play a major role in recycling and pooling of domestic scrap gold. In this context, the Committee’s following observation is relevant:

“ Temples in India holds large quantities of gold jewellery offered by devotees to the deities. There is also significant amount of scrap gold in the country. Some estimates say that scrap gold that comes into the system is nearly 300 tonnes per annum. It would be worth trying to channel the existing supplies of scrap gold in the country into the financial system, so that the unproductive nature of the gold asset is turned into a financially-productive medium.” 

- M G WARRIER, Thiruvananthapuram 

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ICSI conference with NISM

The Institute of Company Secretaries of India (ICSI) in association with the National Institute of Securities Markets (NISM) organized a conference on ‘Ethics and Corporate Governance’ on December 11, 2013 in Kolkata. The Conference was inaugurated by Anand Sinha, Deputy Governor, Reserve Bank of India.......

Read - FPJ

Forensic audit of ministries, too?

.......If RBI wanted to convey the message it means business, it has gone home. Last week this correspondent met the chairmen of two public sector banks where the discussion was just about this audit. RBI has followed it up barring lending of above Rs 10 crore by the bank to a single entity and also blocked it from restructuring stressed loans............

Read - FE

Promotions in Public Sector Banks

Government of India has published a new policy for the promotion of employees & officers in public sector banks. Detailed notification is attached below. Pls have a look if you are aspiring to get a bank job...........

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Jalan panel holds 2nd meet to shortlist bank licence awardees

The advisory committee headed by former Reserve Bank of India (RBI) Governor Bimal Jalan for vetting applications to establish new banks held its second meeting on Monday. The committee is to eliminate applicants which do not meet the ‘fit and proper’ criteria for getting a licence. It is expected to complete the entire process in three months.........

Read | Business Standard

Banks may not accept scribbled notes

......Indian currency notes, arguably, the dirtiest, most soiled and most perforated ones in the world. The Reserve Bank of India (RBI) is reversing the trend by pursuing aggressively its 'clean note policy.' The Central bank has asked all the banks that in the present system of mechanized processing of banknotes, 'inscriptions or scribbling on any part of the banknote would render it to be classified as unfit for reissue from January 1...............

Read - TOI

Insurance plan of seven banks hits hurdle

 Seven commercial banks are in danger of being tripped up by a tough Reserve Bank of India guideline that stipulates only those lenders with net bad loans below 3 per cent will be eligible to become insurance brokers. The central bank had recently come out with its draft guidelines relating to banks looking to enter the lucrative insurance broking business..........

Read - The Telegraph

A mission to secure currency for bitcoin

.......“In India, bitcoin can help solve the problems of the unbanked rural population. It is also a potential remittance tool. We are working with lawyers to draft possible policies that we could present to the RBI and other government agencies by next month,” said Sunny Ray, Director of Business Development at Buttercoin, a free bitcoin exchange that is backed by investors including Google Ventures..........

Read - The Hindu

Fait accompli

..............Coming to policy decisions - the next of which is due on Wednesday - Reserve Bank of India Governor Raghuram Rajan has already made it clear that inflation control will be his priority and that he will attach significant weight to the CPI. These numbers do not seem to make enough of a case to deviate from the path that he started going down with a repo rate increase in September. Thus, .........

Read | Business Standard

Despite high inflation, India Inc for 'accommodative' stance from Raghuram Rajan's RBI

.........Voicing similar concerns, Assocham Secretary General D S Rawat said the increase in WPI inflation released today before RBI's monetary policy review on Wednesday is certainly a big dampener for India¿s macro picture. "Still, the RBI should take a contrarian call this time around and hold the interest rates, if not drop them, since the data suggests that inflation has largely come about riding on a steep rise in prices of food articles, particularly fruits and vegetables," Rawat said..........

Read - FE

Cereal offenders - Ila Patnaik

The RBI governor, Raghuram Rajan, has a difficult task this week. He has to decide whether to keep interest rates constant or raise them — bearing in mind the possible taper of the US Fed's bond buying programme, a decline in industrial production and a rise in inflation. The sharp increase in consumer price-based inflation, to more than 11 per cent, has significantly added to the RBI's headache. The increase in inflation is mainly due to the nearly ................

Read - FE

Curbing inflationary expectations to take precedence

........Taking into consideration the evolving growth and inflation dynamics, RBI may be constrained to raise the repo rate by at least 25 basis points in the next policy review, to anchor inflationary expectations. Agriculture sector growth and increased clearances to infrastructure projects may result in better second-half growth numbers. With concern about the external sector............

Read | Business Standard

RBI has little choice but to raise rates after inflation data

.....Note also that Rajan has said several times that the source of inflation is not important, it’s their effect on inflationary expectations that counts. He has also consistently stressed the need to provide positive real returns to savers and bank deposit rates are still lower than retail inflation. With both ..........

Read - Mint

Year 2013: Unexpected reversal of interest rate cycle

.......What wasn’t foreseen was a plunge in the rupee; it fell to an all-time low of 68.85/dollar on August 28. “Despite growth being a concern, with inflation remaining significantly stubborn for most of the year, the policy stance had to shift and calibrate, in terms of addressing inflationary expectations. A large part of this inflation came from supply constraints. In addition, RBI mounted an interest rate defence to impart stability to the highly-volatile currency. A hint of taper from the US Fed...........

Read | Business Standard

Taper not a worry as RBI better prepared

....As far as RBI is concerned, looking at all the inflation data and all the facts, it needs to act to control the inflation but interest rate hike may not be something which will have the desired effect. This is because if you look into the banking system you will find that the deposit growth rates are higher than the credit growth rate. Also, the FCNR deposit that has come into the country has resulted in huge amount of liquidity with the banks and so, the rate hike may not be transmitted...........

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The Phailin effect

..... As with any policy that is not reactive, RBI needs to look at what future sources of inflation will be. While private consumption expenditure grew a faster 2.2% in Q2 versus 1.6% in Q1, this is dramatically lower than the 9% levels just six quarters ago; government expenditure, given that 84% of the fiscal deficit target has been used up by October, is going to slow dramatically, indeed this is already visible with government expenditure contracting..........

Read - FE

Time to signal monetary easing

.....Under the circumstances, monetary policy must combat rather than exacerbate the effects of fiscal consolidation. A reversal in its tight stances at this point will relieve both producers and consumers somewhat and contain the spreading fragility. This may sound ludicrous to inflation hawks, but surely monetary policy must be anticipatory and move ahead of the economic cycle? Indications are that the depreciation-caused inflation pressures, which appeared in the past two-three months, have subsided. ........

Read - FE

India’s latest political problem: inflation

....The Reserve Bank of India (RBI) appeared to be the lone voice warning about the perils of inflation even as it faced tremendous pressure from both the finance ministry and industry lobbies to maintain an accommodative pro-inflationary bias. To its credit, RBI did not entirely give in to such pressures but it remained behind the curve for quite a while. In his last public speech as the RBI governor, D. Subbarao pointed out that the economy would have been better served if the fight against inflation “had started sooner and had been faster and stronger”. Now that the tide of public opinion seems to have turned sharply .....

Read - Mint

High CAD just Might Return

This refers to ‘Gold Import Curbs may Go as CAD Falls Dramatically’ (ET, Dec 16). As long as there’s demand, it will be difficult to restrict import through illegal channels. People will invest in gold as long as high inflation is seen and easy liquidity is available for the commodity. Though inflation cannot be controlled in the near term, the RBI may ban loan against gold jewellery by banks. If import curb is removed without bringing down inflation or reducing the appetite for gold, we may see uncomfortable CAD again.
- S KALYANASUNDARAM, Chennai (ET) 

RBI Alone Can’t Curb Inflation

This refers to ‘RBI Likely to Increase Repo Rate by 25 bps’ (ET, Dec 16). RBI alone cannot control inflation since it is an indivisible economic phenomenon affected by growth and governance. Inflation is bound to rise because of 2014 general elections and repolling in Delhi. Elections mean exorbitant expenditure and use of black money. The RBI’s quantitative controls cannot control such resources. Also, inflation should be seen not only in terms of price rise but also in terms of decrease in quality and size of products and services.
- A L AGARWAL, New Delhi (ET) 

Moneylenders come under police scanner

............City Police Commissioner P. Vijayan said the intelligence wing had conducted a preliminary audit of the functioning of these institutions following a spate of complaints from the public, mostly the urban poor and also aged and indigent persons. Most of the errant institutions operated on licences obtained from the Commercial Taxes Department. They charged an usurious rate of interest from their customers, often up to 20 times more than that set by the Reserve Bank of India (RBI), he said..........

Read - The Hindu

RBI's new PIN rule boosts sales of payment solution companies

......The new PIN mandate would affect more than 350 million debit card holders in the country. A recent study by industry body ASSOCHAM showed that the debit card users, growing at an annual rate of 18 per cent, were clocking sales of 69 billion rupees using POS terminals every month. The number of POS terminals in the market has grown significantly in the recent years. As of the end of September, there were 965,000 terminals in use across the country, 46 per cent higher than the 661,000 devices in March 2012, according to data provided by e-payment services provider Worldline India..........

Read - Business Today

ATM density still low in India

Do you often find yourself standing in queue at the ATM (automated teller machine)? Well, the reason could be there are just 25.4 machines in every 1,000 sq. km in India. This translates into 8.9 ATMs for every one lakh population, one of the lowest densities in the world, according to RBI data outlining global financial inclusion indicators for 2011. In contrast, bank customers in China have access to 2,975 machines in the same geographical expanse, with 49.6 ATMs per one lakh population...............

Read - HBL

PIN at your own risk...

....“Though it’s a good rule, it’s not totally fool-proof,” he feels. “Some of my customers actually send their cards, along with the PINs, with their servants,” he exclaims. Ask him if it’s safe to use the PIN in a crowded store and he replies, “It’s difficult to notice it. Most people hide the keyboard and press the number.”...................

Read - Deccan Herald

What RBI’s NPA move really mean: Govt control on banks should go

..........The report says the RBI will force banks to profile a borrower at the very first instance of a default. Further, a panel of lenders’ consortium will vet decisions taken on loans of Rs 100 crore or more. This move is expected to curb restructuring. Another step being considered is giving incentives to banks which identify potential NPAs early on. The norms being mulled are pre-emptive in nature. They are aimed at encouraging banks to spot an NPA early on and taking necessary measures. But that is not all. They also have pointers to the government..........

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

Public sector banks may have to set up insurance broking arms by February

.....What this means is that banks cannot push products of their own group insurance companies beyond 25 per cent of the total annual sales. Most major public sector and private sector banks, such as State Bank of India, Union Bank of India, Bank of Baroda, Canara Bank, Bank of India, Punjab National Bank, Andhra Bank, ICICI Bank and IDBI Bank, have promoted insurance companies. The Reserve Bank of India has also released stringent draft guidelines on banks becoming brokers. It stipulated that their net non-performing assets (NPA) should be below 3 per cent......

Read - HBL

How 'wilful defaults', write-offs cost banks Rs 1.6 lakh cr last decade

.........RBI numbers showed that the banks added Rs 494,836 crore to their bad loans between 2007 and 2013. During the same period, they reduced NPAs to the extent of Rs 350,332 crore. This was possible because loans worth Rs 141,295 crore were written off; another Rs 90,887 crore were upgraded to repaying loans; and a small part — Rs 118,149 crore — was recovered from defaulters. As Chakrabarty explained, after a technical write-off there is no incentive to pursue recovery...........

Read - DNA

Beware of Insurance Agent’s ‘Triple Benefit’ Sales Pitch

This life insurance product is available for a limited period. It won’t be available after December 31. Don’t miss the opportunity to get triple benefits of savings, insurance and tax-saving.” Recognise the sales pitch? No? Well, you are most likely to hear those lines from an insurance advisor before the end of the year. The advisor is right: the three-in-one policy that he tries to sell won’t be available after December 31, since that is the deadline set by insurance regulator IRDA to withdraw the existing traditional endowment products. What he doesn’t tell you is that there will be better ‘customerfriendly’ products available from the New Year.........

Read - ET

Pitching for limiting Reserve Bank of India functions

..............“It (RBI) is the monetary authority and it will be a regulator of banks, but all other functions I think should be revisited and we should ask ourselves whether RBI is the best authority to discharge those functions or is there any other authority in the system which can take over those functions or is it necessary to create a separate authority,”..............

Read - The Hindu