........According to RBI, if a foreign currency denominated deposit with a fixed maturity date remains inoperative for a period of three years from the date of maturity of the deposit, at the end of the third year, the bank shall convert the balances lying in the foreign currency denominated deposit into rupee keeping in mind the exchange rate prevailing as on that date...........
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.
Thursday, May 29, 2014
RBI asks urban co-operative banks not to lend to government entities
........RBI defined UCBS as needing to provide loans to lower and middle income groups, as well as agriculture and small businesses, instead of government-owned companies, which are called public sector undertakings (PSUs) in India. "Grant of high value loans to PSUs is not consistent with the co-operative principles and dilutes the cooperative character of UCBs," the RBI said.
Set up national asset management co to take over bank NPAs: Ficci
........"It is imperative that the Government and RBI should help establish NAMCO to address the challenge posed by stressed assets in the banking system. A pro-active and preventive approach is much desirable if we have to ensure speedy revival of the economy," Ficci President Sidharth Birla said............
Sticky inflation may slow down pace of dollar buying
......“Excessive dollar buying by RBI to curtail rupee gains may come at a cost to RBI. Though RBI hasn’t resorted to sterilisation of rupee liquidity that has so far been created, it may become inevitable for RBI to do so given that inflation continues to be sticky and the risks of inflation in an environment where growth is expected to pick-up cannot be ignored,”............
State Bank of Hyderabad to be SLBC convener for Telangana
......"It has been decided to assign the SLBC convenership of Telangana State to State Bank of Hyderabad. The SLBC responsibility for the State of Andhra Pradesh (after carving out Telangana) has been retained with Andhra Bank," RBI said in a notification. ...........
An open letter to the new Finance Minister
.....Cleaning the PSU banking system which is saddled with rising NPAs is the third point on our wish list. Bad assets have plagued the banking system and confidence to lend for longer duration projects is at an all-time low. As a result, there is a dearth of liquidity and growth is suffering. We expect some constructive steps in these regards..........
Want to set up an NBFC? – Think again
........While the RBI said in the notification that these directions would help them to ensure that the management of the NBFCs are of “fit and proper” character, but the with the nature of restriction brought in by the directions, only one question arises – Are those holding the NBFCs are more fit and more proper than those who wanting to acquire?.........
More glitter than gold
.......Thanks to the Modi wave, RBI restored imports through select trading houses and jewellery manufacturers on May 21, 2014. The import/export ratio of 80:20 still remains. Even this irritant may be lifted soon. With likely re-liberalisation in the near future and higher GDP growth, these three organisations are likely to push imports to R65,000-75,000 crore or more in FY15 from R25,000 crore in FY14, at nominal service charge of maximum 0.1% versus an operating cost of 0.5%-1%. This also amounts to subsidisation for bullion traders. The same may be the case for banks as well for service charges............
Too early to ease the leash
.......The Reserve Bank is now facing a happy problem of how to prevent rapid appreciation of the currency, as against the firefighting it had to do last July. The rupee to dollar rate had crashed from 54 in early May to 69 by late August, causing the RBI to resort to an almost panic reaction. The then government too had sharply increased curbs on gold imports in a bid to save the rupee. Almost ..........
Why G-Sec yields are stubbornly high?
....There are two factors keeping yields high. Until Rajan took over, market participants and analysts always looked at WPI inflation to predict RBI’s monetary policy move. Earlier, the comfort zone for the RBI was headline WPI inflation of 4-5 per cent. Markets are now adjusting themselves to the new target variable — CPI inflation — and this has led to the upward bias in rates. “It may be recalled that the former RBI Governor D Subbarao cut rates even when CPI inflation was close to 10.5 per cent. Now when CPI has come down by 150 basis points, we are hiking rates. This shift .........
Bankers expect status quo on rates
..........“We note that the RBI is unlikely to cut policy rates in FY 2015, given high CPI inflation through FY15,” a recent report by Kotak Institutional Securities said. However, in April, RBI had kept the rates on hold and indicated that RBI will keep rates steady in the near term if inflation eases towards its targeted level. “I do not expect change in rates from RBI as inflation is still not at its comfort level,”..........
Insurers in bind over mandatory customer bank account details
.........The new norms, prescribed by insurance sector regulator Irda, came into affect from April 1, 2014, and make it mandatory for insurers to seek bank details of customers buying new policies. Top officials at various insurers, including LIC, said they will make representations before Irda and the government for easing of these norms, or at least giving more time for compliance. Insurers also collect a significant amount of insurance premiums in cash in smaller towns where banking channels are either not widely available or used. “This is especially true for smaller-ticket businesses and rural locations as the cash economy is large in these places,” a senior LIC official said.......
Work of NBFCs termed transparent
......Referring to comments on interest rates, he said the RBI had given the freedom to the boards of NBFCs to fix the rates, considering the cost of funds and margin and risk premium. The business being market driven, there was no scope for charging high rates, especially as the NBFCs were functioning in a very competitive space, Mr. Muthoot said. NBFCs had certificates of registration obtained from the RBI and registered NBFCs do not accept blank cheques, stamp papers, signed white papers, and title deeds. RBI norms on Know Your Customer and corporate governance were being strictly adhered to. The apex bank’s guidelines on transferring 20 per cent of the net profit to the reserve fund were being complied with...........
Banks in Odisha fail to achieve annual credit target
......Credit to the education sector is dismal with only 23.03 per cent achievement of the target (Rs 829.88 crore) till March 2014. The data compiled by SLBC reveals that credit to agriculture and allied sector was 64.46 per cent of the target. Similarly, achievement in Micro and Small Enterprises (MSEs) sector was 101.90 per cent of the target and housing sector, 66.88 per cent of the target pegged at Rs 1,822.84 crore in 2013-14........
Nabard microfin arm in expansion mode nationally
.......Harsh Bhanwala, chairman, Nabard, said, “Nabfins would become an all-India organisation. It has identified areas in Odisha, Jharkhand, Rajasthan and Madhya Pradesh for starting operations”. Nabfins lends money to self-help groups and works on thin margins, with lending rates in the range of 15-16.75 per cent against the RBI cap of 26 per cent............
Nabard FY14 Net marginally up at Rs 1,860 crore
Nabard today reported a marginal 3 per cent growth in its annual net profit at Rs 1,860.25 crore in FY2013-14 ended March 31, even though its income rose 20 per cent to Rs 15,442.33 crore. Announcing the annual results, National Bank for Agriculture and Rural Development (Nabard) Chairman Harsh Kumar Bhanwala told reporters here the lender refinanced 21.7 per cent more projects in the reporting period at Rs 1,28,522 crore, which included crop loans and long-term loans........
Wednesday, May 28, 2014
FM Tune in Sync with Rajan Stand on Taming Inflation, Reviving Growth
...........While the nature of ties between North Block and Mint Road have tended to fluctuate, the statements by Jaitley and Rajan signal a relationship that may be cordial rather than frosty as had been speculated...............
Read - ET
Rajan meets Jaitley; discusses inflation, economy
.....The meeting, which comes just days before the next bi-monthly monetary policy review on June 3, lasted for about 50 minutes. “It (curbing inflation) is absolutely a task that the government and the RBI are engaged with,” Mr. Rajan told reporters after the meeting.........
RBI’s goal is to balance growth, inflation: Rajan
.............“It’s absolutely a task that the government and the RBI are engaged with,” Rajan said when asked if curbing inflation was going to be one of the biggest tasks for the government and the RBI. But Rajan also added: “RBI has always maintained the balance between growth and inflation.”.............
Arun Jaitley's job: Unleash animal spirits
...He has consistently raised doubts about the health of the economy during his stint in the opposition. A shrewd lawyer, he is at home with numbers as well as the policy maze. "He is a first-rate choice. The challenges are multiple. In a country like India, the finance minister's job has several challenges. Preparatory work for the next Budget will be a difficult task," said former RBI governor Bimal Jalan.........
Workshop on Audit of Urban Cooperative Banks
Technical Session I-9:45 a.m. to 11:15 a.m
What RBI expects from Auditors/CAs of UCBs in their Audits?
By: Mr.A.K. Bera, Principal CGM, UBD-RBI
CHANGE IS POSSIBLE…
My View on "India needs Many More Raghuram Rajans":
We need to follow ‘WE THE PEOPLE’ Ref: Preamble of India’s CONSTITUTION) AND BE PRACTICAL AND PRAGMATIC. We should, as a beginning has been made in this article, think beyond sectoral and ‘political’ interests. Let us understand the INCLUSIVE SECTOR comprising public sector, privat sector and the one billion Indians who were given denominations and classifications so far. Modi, Raghuram Rajan, Kejriwal, Medha Patkar, APJ Abdul Kalam, Bimal Jalan, Nehru, Gandhi, Lal Bahadur Shastri, Bajpayee, Sreedharan…the list can go on and on…all have/had dreams about INDIA…The recent awakening has shown that CHANGE IS POSSIBLE…
- M.G.Warrier
N(on)R(esident)I(nterest).....
My View on "Why bank depositors deserve tax-free interest":
A sound well analysed commentary on the wrong policy of GOI. While an ordinary Resident Indian is taxed on his hard earned savings post tax on his gross income minus rebates allowed, a Non Resident Indian is enjoying tax free interest of 9% and plus! The NRE deposits have more than trebled since the NRE deposits started earning tax free interest at or more than domestic rate of interest. What an irony of fate of not being an NRI! All investments in bank deposits, stock market etc. should get the same equal treatment in regard to taxation. The article deserves due consideration by the new Government by the new FM, the MOF while presenting this year's budget proposals.The middle class and the lower middle class Resident Indians would always like to put their money in banks as majority lost money invested in the market or MFs during last 4-5 years.
- R.G.Nakhate
Sketching the Genetic Code of A Good Bank Is Tough
..... All this can originate from a robust “genetic structure“
based on the strands of DNA that combine together. The most recent
guidelines on bank licences did touch upon this. So, can we sketch the
genetic code of a “good bank“ ?
The genome of a commercial bank should start with the lineage. We are
talking here of lineage of ideas. Ideas flow from experience,
environment and understanding of the changing face of consumer..............
Expect CAD to be in control in FY15 as well: C Rangarajan
............The next key cue for the market would be Reserve Bank of India (RBI) bi-monthly monetary policy review on June 3. In an interview to CNBC-TV18, Rangarajan said that interest rate actions will largely depend on inflation trajectory. “Only when inflation cools down, monetary authorties take a call on rates,”
Run up to monetary policy: Hawkish stance to weaken rupee
...Today RBI governor Raghuram Rajan said in New Delhi that fighting inflation would continue to be a top priority for the central bank. However, he is also added RBI will aim to strike a balance between growth and inflation......
Reserve Bank of India asks banks to remit unclaimed deposits to DEAF by June 30
.............Banks should calculate the cumulative balances in all such accounts with unclaimed deposits, along with interest accrued till May 23, 2014, and transfer them to the newly created fund, the Reserve Bank of India (RBI) said in a communication to bank chiefs. After the first transfer of amounts, banks should transfer amounts becoming due in each calendar month on the last working day of the subsequent month.
A new deal for public sector banks?
.....It is difficult to guess just how the new government will receive the Nayak recommendations on how PSBs and private banks should be run. The committee finds considerable faults and weaknesses in bank board governance -- faults and constraints that impede the functioning of banks in an era of fierce competition, premium on profitability and high risk. The starting point for the committee is to identify those constraints on public sector banks which their private counterparts don’t have. “These constraints encompass dual regulation (by the finance ministry, and by the RBI, which goes substantially beyond the discharge of a principal shareholder function)…”
Open ‘small accounts’ sans required documents, RBI tells banks
............In a bid to increase access to banking services, the RBI has advised banks to open ‘small accounts’ even without asking for the mandatory documents. RBI Deputy Governor R Gandhi said recently that a small account can be opened by merely filling up a form, signing it before a bank officer, and submitting a self-attested photograph certified by the bank officer. At present, over 50 per cent of Indians have no access to formal banking channels...............
When Minting Rs 1 Coins Was Cheaper
..........RBI deputy governor RK Seshadri took up the matter with the government,
and later governor S Jagannathan followed it up with finance minister YB
Chavan and advocated a change-over from one-rupee notes to one-rupee
coins. RBI had decided to do this shift in a phased manner because of two reasons. One,
RBI was not too sure how the general public would take the change and,
second, it was worried about the cost of destroying the spoiled notes.
At a result,...........
Fake currency racket linkman arrested
...."The seizures also showed that currently the highest number of counterfeit notes was found in Rs 100 notes, followed by Rs 500. According to RBI norms, if 15 fake currency notes are found in every 10 lakh notes of of Rs 100 denomination, the situation is alarming," ........
P J Nayak report implementation can improve ratings of public sector banks, says Fitch Ratings
....."Should the (PJ Nayak report) recommendation lead to a greater separation between the state and bank, it could necessitate a reassessment of our current assumptions on the propensity for extraordinary support for these banks. This has been an important factor underpinning the capitalisation of many PSUs, as this reassessment could have a potential impact on their issuer default ratings," Fitch said in a note.
RBI cancels registration certificate of 3 Kolkata based NBFCs
The Reserve Bank of India has cancelled certificate of registration of three Kolkata based non-banking financial companies (NBFCs) as they were carrying on business of non-banking financial institution (NBFIs)..............
Read more at: ET
Rate cut: RBI may not oblige
........ the support of the Reserve Bank of India (RBI) will be sought to complement its growth agenda by relaxing the tight policy stance. The central bank is unlikely to oblige. We expect RBI will keep the benchmark repo rate unchanged at 8% at the early-June review. Not for nothing will RBI Governor Raghuram Rajan stand his ground and assert institutional independence............
SIT to go after black money
...........“The SIT will have high-profile government officials like Revenue Secretary, Deputy Governor of Reserve Bank of India, Director of Intelligence Bureau, Director of Enforcement Directorate, Director, Central Bureau of Investigation, Research and Analysis Wing chief, Director-General of Revenue Intelligence, Chairman of the Central Board of Direct Taxes and Director of Financial Intelligence.” He said the constitution of the SIT indicated the commitment of the government to pursue the issue of black money in right earnest.............
Banks, ATMs Yet to be Disabled Friendly despite RBI Direction
...Total 70 ATMs and cash deposit machines and kiosks of 18 commercial banks are functioning in the district. While the ‘normal’ customers take benefit of the services, the customers with physical disabilities continue to suffer.........
Debit card transactions recover after brief slump
............But transactions recovered to Rs 3,835 crore in January 2014 and Rs 7,435 crore in February. But this was still below the November 2013 figure. The data of March and April is yet to come out. Bankers say there are indications that it would have surely grown beyond the November level. Many say the bigger issue is of increasing usage of debit card at the ATMs where the transactions are negligible at merchant outlets. Today, the value of debit card transactions at merchant outlets is less than five per cent of the total transactions that takes place every year. People use debit card more often for cash withdrwal through ATMs................
Smaller private banks to opt for white-label ATM to reduce cost
.....Despite the fact that the Reserve Bank of India had given an in-principle approval to WLAs in mid-2013, the roll out of these ATMs have been in the slow lane so far. Bankers explain that even though it brings down the cost of setting up the ATM, the banks haven’t taken up the option as ATMs are also a vehicle to rebrand and increase visibility which gets lost with these independent ATMs......
FIMBank plans to infuse $100 mn in India Factoring
...... "Now, there is much more we can think of doing in India, such as pre-export finance and financing for commodities. Being in trade finance, we will look at a specialised banking licence in India. The Reserve Bank of India has spoken about a differentiated licensing regime in India," Emmenegger said. For FIMBank, a specialised banking license (for trade) would be viable, as it would allow acceptance of deposits, make funding attractive and offer cheaper rates to small and medium enterprises (SMEs), she added. If all went according to plan, IFFSL will need $100 million of equity in the next five years, she said.......
Now, get your money rounded off to the nearest rupee
....."In order to obviate unnecessary discomfort to the public and also to align with the prevalent practice as applicable to banks, NBFCs are advised that all transactions, including payment of interest on deposits/ charging of interest on advances, should be rounded off to the nearest rupee," RBI said in a notification................
SEBI finds large-scale violations of norms in some MF schemes
........SEBI found that many schemes have been repeatedly breaching these norms, especially during the course of a quarter. Some investors put large amount of money in a scheme and withdraw the same at a later stage to meet quarter-end norms, while many schemes were non-compliant on full quarter basis as well. ..........
Read - Deccan Chronicle
RBI asks Kotak Bank to reduce promoter stake to 40% by Sept
....“The bank has received a communication from the RBI to bring down its promoter shareholding to 40% by September 30, 2014 as per estimates provided by the Bank. The next estimate is 30% by December 31, 2016,” the bank said. At present, promoter shareholding is 43.58%.......
Exports should be an engine to create jobs: Exim Bank
.....Institutions such as Exim Bank, National Housing Bank, SIDBI and Nabard are DFIs. So, they have to be dealt with in a way that they deliver on developmental banking. Without accessing the financial markets they cannot operate. The policy must be aligned suitably for DFIs to raise capital. Currently, we are able to raise 10-11 times of our net owned funds. If we need to deliver on a larger mandate, then the Government and the RBI should make suitable adjustments either in our leverage ratio or in equity infusions. If there is suitable relaxation in the leverage ratio, then we can support more project exports from the country...........
RBI Okays Rana Kapoor's Reappointment at Yes Bank
.......“The members of the bank take on record the approval accorded by the Reserve Bank of India, and approve the appointment of Mr Rana Kapoor as the managing director and chief executive officer of the bank for a period of up to August 31, 2015,“ said a resolution sent in a letter to the shareholders for the tenth annual general meeting. For Kapoor and the bank, it must be a relief that the regulator has approved the proposal despite Madhu Kapur, the second largest promoter of the bank, requesting the regulator not to okay such a plan............
Read - ET
Tuesday, May 27, 2014
India needs Many More Raghuram Rajans
Read - ET
Raghuram Rajan loses his 'comfort' factor
....."The RBI is an autonomous body with full freedom to set interest rates in consultation with the government," say experts. But not much is not about the new economist who will be part of the Modi's team in the Planning Commission and Economic Advisory committees. Two names often doing the rounds are economists Jagdish Bhagwati and Arvind Panagariya , who have hailed the Gujarat model in the past. In fact , there was no dearth of advice for Subbarao during his stressful years in the RBI. Economists like C Rangarajan , Montek Singh Ahluwalia and Kaushik Basu publicly aired their views on the inflation and interest rates. That upset Subbarao. Rajan is no novice. He understands the mandate of the RBI and also the......
Is there any professionalism in Banks Boards? - Dr.T.V.Gopalakrishnan
.......When many of the Board members introduce NPAs in banks how can they discuss about the recoveries seriously. Their interests are also on tours, enjoying VIP status, hospitality and Gifts. When no accountability is fixed at Board level and when strict procedures are not adhered to for appointment of Board Members, how can there be professional approach in running the banks? ..........
Read..........
Replacing the old guard
.......Recently, PSBs were stuck in infrastructure finances, whereas private banks exited such projects well in time. In the current situation, where most of the old employees carrying the legacies of the pre-1991 era are retiring and being replaced by young tech-savvy executives, it is the right time for the government to take a call on reducing its stake in PSBs below 51 per cent since resistance from employee unions is bound to be lower. These newly-recruited PSB employees, who are all under the new pension scheme, are more interested in higher salaries and perks rather than secure jobs. ..........
How is the risk perception of customers linked to KYC: RBI
..............RBI deputy governor R Gandhi said that KYC was always there in banking! The focus, earlier, was more on the asset side and not on the liability side as no banker could risk parting with his funds to an unknown person.Speaking at the Federation of Andhra Pradesh Chambers of Commerce and Industry, Hyderabad, on Friday, Gandhi said, “The thorough appraisal process to screen the potential borrowers is a good example of KYC process.” The theme of the session was, "KYC: Compliance vs Convenience". Below are the excerpts of R Gandhi's speech:............
Read.........
Read the full speech.............
Read.........
Read the full speech.............
Man who could have been king
......In 2006, the then RBI governor YV Reddy had warned about the possibility of an overheating economy, but others including many in the government at the time, did not agree. He was famously quoted as saying, “I cannot certainly see the god, but see the devil.” In other words, he may not have had the solutions, but he certainly saw the danger signals. Subsequently, Reddy said at a book release function last year that India should not attempt double-digit growth like China, which was an exception. “One swallow does not mean summer,” Reddy said, emphasising no country in the world, including .............
Reserve Bank of India cautions public against fake website
It has come to the notice of the Reserve Bank of India today that a fake website has been created at http://www.rbi-inonline.org/savings.html by some unknown persons offering various banking facilities and asking members of public to apply on-line for opening "RBI Savings Account".....
The fake website was brought to the notice on 26-5-2014 - Read.........
RBITES - Change in name - Exchange of views
Dear Colleagues,
We had started the group of RBIOA so that we can interact with each other on a mail other than our corporate mail. But somehow it could not be clicked in a large way as every member of the RBIOA had easy access to corporate mail and could interact with more no. of members as all the members are available there. Then it was becoming difficult for me also to handle on day to day basis because of time constraint. Now, it has been decided to change the name of group to RBITES and Shri Madan Gauria, ex-AGM of our bank has been entrusted to liaison with all the members on behalf of the RBITES. Shri Gauria was an excellent officer of the Bank while during service and is also excellent co-ordinator for all of us. He really devotes a lot of time towards this and keeps apprised of the latest happening in the Bank and around.
So he will be the co-ordinator for the new Group - RBITES. You are all requested to switch over to the new group. You may also advise your other colleagues to be a part of it. Website of the group, which is open to all serving employees of RBI, can be accessed by clicking at following link or by pasting it in your browser:
( R N Vatsa)
General Secretary
Reserve Bank of India Officers' Association
Mumbai
Restaurants fume over lack of Rs five coins
......The Indian Hotel and Restaurant Association (AHAR) has written to the Reserve Bank of India (RBI) about the increased shortage of coins in the market. AHAR has written that the RBI's plan to channelise the distribution of these coins only through bank branches is not working in the industry's favour, sources said. "The problem is that banks are not keen on providing this se rvice. We have been frequently turned away from banks, which claim that coins are not available. The RBI should implement such policies only after assuring that banks will make coins available for everyone. .............
Why bank depositors deserve tax-free interest
.......The worst part of banking is the negative return they provide to the depositors, who in the interest of safety of their hard earned savings place implicit faith in the banks and silently suffer erosion in their savings without realizing the loss they incur year after year. The high rate of inflation and the rising cost of living have created a deep dent on their savings. This is made worse by tax laws, which are regressive on account of the failure of the government to bring inflation under control..........
Ombudsman for ombudsman
My View on "Awareness welcome, but Redressal sought for":
I have also come across a case where the performance of the office of the Ombudsman was, to say the least, pathetic. I only hope that persons who are not wanted in the mainstream or who wish to get posted to places of their domicile are not posted as Ombudsman. I headed an organisation just before retirement where employees in various grades who were inconvenient for various reasons,who are sick (some of them even terminally sick) were posted. As far as the head of this organisation is concerned, we are even now perhaps sticking to this policy with a degree of consistency which one wonders whether to be praised or condemned! It is high time some central audit is done of cases disposed off by the various regional offices of Ombudsman.
- A.Chandramouliswaran
One more held in banking job fraud
The MRA Marg police have arrested one more person in the job racket case wherein the racketeers allegedly claimed to provide jobs to aspirants in reputed Union Bank of India and Reserve Bank of India. The accused have alleged to have duped five people on the pretext of providing them jobs.............
Read - DNA
Read - DNA
Giving your teenager a bank account? Start small
......... If parents are worried about the safety of the deposits in the hands of children, there are safeguards that can be built into the entire process. It would be better to start with small amounts and seeing how they handle them. This would ensure that there is no big loss involved even if there is a goofup or impulsive spending. Let them make their own mistakes.........
Cutting expenditure to aid inflation control
.........While the Reserve Bank of India (RBI) has been fighting its war against inflation by keeping monetary policy on a tight leash, the higher governmental spending on subsidies and administered prices of nearly 30 per cent of agricultural commodities kept on fuelling retail inflation during 2009-2014. Furthermore, the government's higher revenue deficit has raised the cost of credit and crowded out private investment, which, in turn, has worsened............
RBI report on credit information to benefit customers, industry: Experian MD
......."The recommendations around the consumer-centric points are to make things a little more transparent and processes a little easier for the consumer," Jayaraman, also the country manager at Experian India, told Business Today. "Ones that are around the banking side are more focused to try and see if they can bring a greater level of usage and uniformity for the (credit information) bureaus. And, the third is around the bureaus to bring some uniformity in the way they're approaching the market place."..............
Tackling inflation politically
......There are people in the BJP who believe that Raghuram Rajan is choking off investment by using the rate of interest as an anti-inflation weapon. But a central banker has no other weapon; he has to play golf with one club. His predecessor RBI Governor had made it clear that he sees the inflation as a result of excess demand as indicated by the budget deficit. Bring down the deficit, he more or less explicitly said, and I will cut interest rates. The budget deficit has not been brought down whatever P Chidambaram’s window-dressing may say. The incoming FM will have to seize the bull by the horn, reveal the true numbers and make drastic cuts in expenditure for the remainder of FY15...........
RBI to maintain status quo next week: BS Poll
....“Inflation has not gone down due to which there is no reason for RBI start cutting rates. However, the expectation is that inflation will come down. In that case why will RBI hike rates? RBI should be maintaining firepower in a case if inflation starts inching up due to below normal monsoon. An immediate rate hike in that case will not help,”......
All eyes on finance
Though the finance ministry and the central bank have traditionally been on opposite sides of the interest rate debate, there can be little doubt fiscal policy needs to create more space for monetary policy to operate. If government expenditure keeps on rising unchecked, as it did till P Chidambaram returned to North Block, this will fuel inflation. And if corporate investments are to grow as expected, higher fiscal deficits will keep interest rates high............
The fourth challenge for the finance minister
.........Nor should the finance minister consider hiving off banking regulation from the remit of RBI. After the 2008 crisis, many Western governments have given their respective central banks more and not less powers over the banking sector. India has no reason to be more loyal to financial deregulation than Anglo-Saxon nations. Hence, the fourth challenge for the new finance minister is to resist the temptation to accumulate more power than what his ministry already has. Thanks to RBI, India has avoided “death by finance”, so far. The new finance minister should ensure that he does nothing to damage that history.
Helping Modi Get His Priorities Right
......Then, there is the inflation bugbear that the RBI has valiantly tried to tame through monetary policy — raising interest rates regularly. Both current RBI governor Raghuram Rajan and his predecessor D. Subbarao have used interest rate hikes to combat inflation — in the process drawing flak for dampening growth. The monetary policy has had some effect on WPI — which has come down over the past two years. Currently, the WPI is just over 5 per cent, a far cry from the 7.5 per cent-plus it was at in November 2013. But the other big inflation problem — food price inflation — has fluctuated between 11 per cent and 8 per cent over the past 18 months despite all efforts.............
Read............
BJP govt inherits historic low CAD, handsome BoP
The BJP-led government may inherit an economy which has logged a decade-low growth rate, but on the external front, there is a gift to the new government from the outgoing UPA regime. As per the data released by the the Reserve Bank of India(RBI) on Monday, the current account deficit (CAD) is merely $1.2 billion, or 0.2 per cent of gross domestic product (GDP) in the January-March quarter............
RBI nod mandatory to takeover, acquire control of NBFCs
....The RBI further said any merger or amalgamation of an NBFC with another entity or any merger or amalgamation of an entity with an NBFC which would result in acquisition/transfer of shareholding in excess of 10 per cent of the paid up capital of the NBFC, would also need its approval.
RBI proposes new bank insolvency law to increase yields
.........Analysts warned that giving depositors the upper hand over other creditors will have serious implications for bondholders, potentially leading to higher wholesale funding costs for the banks. "Now that RBI's stand on depositor preference is very clear, we will have to review our support assumptions on debt instruments once the resolution regime comes into force," said Saswata Guha, a director at Fitch Ratings, India.
No debt recast requests so far in FY15
With the Reserve Bank of India’s (RBI’s) new guidelines on the management of stressed assets in place, banks have not been knocking the door of the Corporate Debt Restructuring (CDR) cell. The cell has not received a single new case for a loan recast from member banks so far this fiscal. The guidelines are aimed at helping banks spot trouble early and take speedy action to prevent assets from turning bad............
Banks unlikely to heed Kerala State directive on loans
... Considering the growing rate of non-performing assets (NPAs), the Reserve Bank of India (RBI) has instructed banks against disbursing unproductive loans. Primary Cooperative Banks (PCBs) without own funds have to avail themselves of loans from the district cooperative banks for their lending operations. On clearing unproductive loans, the PCBs will have to bear........
Banks can wait to trade in commodity futures
........Way back in 2006, the Gupta Committee report released by Reserve Bank of India argued in favour of allowing banks, MFs and FIIs to trade commodity futures. The policymakers kept the recommendation on hold, and for good reasons. India was not ready then for rabid financialisation of commodity markets whose activities touch the lives of almost everyone in some way or the other. This is especially true of sensitive agricultural commodities – food articles – that have a high weightage in consumer price index. The situation is no different even today.............
Frame new policy for coops.: Sudheeran
....The sector needed to be streamlined to arrest unhealthy practices, Mr. Sudheeran said. The government should take steps to see that the NABARD directly disbursed funds to the primary banks, he said. The cooperative institutions should also be freed from the clutches of political parties to ensure transparency in their administration, he said. With the cooperative banking sector facing additional tax burden in the wake of the Reserve Bank of India (RBI) enforcing a fresh tax slab on its business turnover, the government should evolve new policies to streamline the cooperative institutions, he said..........
RBI authorises three more companies to open white label ATMs
Reserve Bank of India (RBI) on Monday authorised three more non-banking finance companies (NBFCs) to open and operate so-called white label automated tellers machines (ATMs) in addition to the four companies allowed earlier.........
Monday, May 26, 2014
Govt, RBI shadow boxing must end - DR R. K. PATTNAIK
.........In essence, the approach of RBI to increase interest rates to control aggregate demand and thereby anchor inflation expectations has been at the center of the discord. There are also media reports that the RBI’s policy stance to control inflation may not be appreciated by the new government and there could be leadership change in the RBI. In this context it may be recalled that the election manifesto of BJP has specific action points on inflation management. The resolutions in the manifesto are well deserved steps in handling the supply side of inflation management. To ensure that inflation management becomes credible and sustainable the NDA government may also consider supporting the demand management policy stance of RBI. In the fitness of things, the new government should listen to the RBI and give its due...........
Read - FPJ
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