Dwindling demand for loans, shrinking margins and higher provisioning requirements are likely to drag the earnings of banks in the coming quarters, industry analysts said, giving more credence to concerns of a slowdown.........
Read more..........
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.
Sunday, June 26, 2011
‘Growth can wait, not inflation’
Bimal Jalan is a former Governor of the Reserve Bank of India (RBI), a former member of the Rajya Sabha and a well-known author on policy regimes. In this interview with Olga Tellis, he urges that inflation be tackled on a priority basis through a coordinated approach in the whole of the government and believes that drop in investment is a cyclical issue that can be dealt with as we have sufficient resilience.
Q. There is a lot of concern about dwindling investments, both domestic and foreign. How do you see these things?
A. Any dip in investment, or in buoyancy in the market is a concern. But the greater concern is that of inflation, and the perception of lack of governance in the wake of the 2G spectrum and other scams. There is a feeling that the government is not as effective as it should be and that there is lack of co-ordination between different parts of the government. These are more fundamental issues. Issues like drop in investment are cyclical issues and can be dealt with. India has the resources with a 35 per cent domestic savings rate and investment at 37 per cent of the gross domestic product (GDP) that is one of the highest in the world. This short-term dip doesn’t mean much. The growth in quarter on quarter terms is not so worrying as the medium-term worries about corruption and non-governance. These are very fundamental issues that are affecting the country and the economy.
Q. What about fall in portfolio and foreign direct investment?
A. I am not worried about fall in portfolio investment as that concerns the stock markets. If the markets go down, it will affect some people. But it is not a priority as we already had excess inflows and added them to our reserves. Direct investment is more important, as also is the climate in the country and whether we will generate a unified voice on issues that affect governance.
Q. There is also concern that government is not going ahead with reforms like the Land Acquisition Act.
A. Land acquisition has been a problem since our Independence. And despite all this India has been recognised as an emerging global power. So, these are not immediate issues. The real question is the confidence, ability and political will of the government to tackle rising corruption at the political level. Now the Supreme Court has entered in the picture with the 2G scam.
Q. Do you feel that the RBI and the government are playing a losing game in tackling inflation? Despite all the rate hikes, inflation is still at over nine per cent.
A. It cannot be a losing game unless you make it so. Inflation should be tackled effectively as it affects people at large. What is worse is “inflationary expectations”. If people expect inflation to go up, they will automatically buy more than they need if they have the liquidity. The problem is that there are too many voices saying things like “after the monsoon, food prices will come down”, or “after the harvest, prices will come down”, and then non-food prices go up. If RBI measures do not lead to a fall in food inflation, we have the resources to do what we want. We can import.
Q. So far, it is growth that has been going down and inflation has been rising. What does this indicate?
A. How do digits matter — 8.7 or 8.5 per cent etc? We are still a country with high growth rate. If there is a conflict between growth and inflation, there should be a concerted approach to tackling inflation and there should be definitive action, no matter what happens to growth in the short run. India’s resources are much greater than ever. We are adding to our reserves but not using them. There are tradeoffs in the economy. It is not so simple as people think and there must be a concerted effort to tackle what we consider to be the priorities. These are certainly inflation and corruption at the moment. Oil prices are high but we have controls, and we have not raised domestic prices as much as the rest of the world. They should be raised so that there is a one-time effect. There has to be a coordinated approach and action rather than just relying on rain clouds.
Q. Would you say that there is limitation to monetary policy tackling inflation?
A. There has to be a unified view that inflation needs to be tackled and that whatever needs to be done in monetary, fiscal and trade areas will be done. Some dip in growth may be the cost, that if tackling inflation means taking unpopular actions we are willing, we are willing to do whatever is necessary even if it displeases specific interests.
Q. Does this mean that the government is not doing its bit on the fiscal front?
A. I don’t want to blame anyone. In a political system there are multiple centres of power and different ministries have their own focus points. But if there is a national problem, say inflation, we need a consolidated effort and policy overriding the specific interests of different ministries.
Q. So, are you optimistic about the future, or pessimistic? Do you see government taking action where necessary?
A. I am optimistic, but not about the immediate future. I am sort of disappointed with the drift in policy and decision-making. But we have the ability and the capability. Responses are coming in as people are fed up with corruption and inaction on priority issues such as inflation and corruption and priority governance issues. To take a longer-term perspective, we have passed through various crises in the ’70s, ’80s, ’90s and I have no doubt we will overcome the present problems.
Deccan Chronicle
Markets can digest only one more RBI rate hike: Analysts
The stock markets indicate the collective opinion of investors, and they are now indicating nervousness. The markets are reflecting the investor's nervousness on the growth story, and on the inability to control the macroeconomic environment. The markets are ringing alarm bells that inflation continues to be higher than expected despite a hefty cumulative increase of 325 basis percentage points in the policy rates since early 2010. Also, there are increasing indications of a moderation in growth. The Reserve Bank of India (RBI) embarked on a rate hike programme to control the inflation rate and maintain growth. Interest rates systematically went up throughout 2010 and 2011 but inflation too continued to rise unabatedly . The rates have been hiked to such an extent that now the interest rates are beginning to hurt growth, but the inflation rate is still showing no signs of slowing down. This is a double whammy, as the stock markets, the basic fabric of the growth story, is being threatened. On the one hand, the RBI is increasing rates but this is not supported by fiscal measures. The government, through its various guarantee schemes, is indirectly introducing a stimulus in the economy which is supporting the demand for goods and services.
ET
RBI fines co-op bank in Bengal
The Reserve Bank of India (RBI) has imposed a penalty of Rs 2 lakh on the Suri Friends' Union Co-operative Bank Ltd located in the Birbhum district of West Bengal for violation of provisions relating to sanctioning of loans. According to a release by the RBI, the co-operative bank was penalised following a show-cause notice issued by the central bank.
Business Line
India's long-term equity story good: Analysts
Analysts believe the long-term market fundamentals are intact, based on the strong prospects of economic growth here. However, investors should remain cautious.......
Read more................
Saturday, June 25, 2011
Top French honour for Maharashtra economist
 |
| VITALINFO extends best wishes to Dr. Narendra Jadhav, former Principal Adviser & Chief Economist, RBI |
Mumbai, June 24 (IANS) Renowned economist and Planning Commission member Narendra Jadhav has been honoured with the “Commander dans l’Ordre des Palmes Academiques” (Commander of the Order of Academic Palms) award — one of the oldest French civil distinctions, a statement said Friday. The honour will be formally conferred on Jadhav July 14, the French National Day. A former vice chancellor of Pune University, Jadhav is also a member of the National Advisory Council, an academician and a writer. He is the first Indian to be accorded the honour originally founded by Napoleon Bonaparte in 1808 to honour members of the University of France. In 1955, it was established as an order and awarded to eminent acdemicians, authors, artists, scientists and professionals for their contribution in various fields like social movement, culture and education. The Ordre des Palmes Academiques comprises three grades and commander is the highest among them, the statement said. The honour recognises Jadhav’s fight against prevalent discriminations and inequalities in India. In the past few years, he has been actively involved in democratic struggles against caste-based discriminations and socio-economic inequalities in India.
Inflation expectations
...........It is highly significant that even when the RBI lowered the growth estimates and increased those of inflation thereby differing sharply from the official position, the government has backed the central bank. More realistic growth and inflation estimates, and greater cohesion between the government and the RBI are all vital ingredients in a well thought ....................
Continue reading..................
India to tell Pak to stop fake currency
The Finance Ministry has created a separate directorate of currency ( DoC) to deal with the problem. The directorate is examining incorporation of additional security features in the currency notes to make counterfeiting very difficult.Sources said the new security features will be incorporated in the new series of the bank notes to be issued in 2012........
Details
BANKING FOR THE MASSES
RBI has mandated that 40 percent loans must be to preferential sectors sector out of total loans. However, our bank distributes more than this i.e. 45 percent loans are to the preferential and weaker sectors. This consists of loans taken by customers from the low income group for starting small businesses....
Read more.............
Read more.............
India's Growth- Inflation Dynamics
The so- called growth inflation dynamics is a reflection of our policy maker's sensitiveness to corporate sector concerns. The same RBI had no qualms about endorsing an interest rate of 26 per cent for micro finance institutions ( MFIs). The gensis of this growth- inflation dilemma may be traced to the accommodative monetary policy pursued by the Reserve Bank of India ( RBI) beginning September 2008. This policy, as the RBI.......
Read..................
Aadhar will reach target: Nilekani
Bangalore: One of independent India's most ambitious endeavours, Aadhar, (the Unique Identification Number-UID), seems to be on course in achieving its target as Aadhar cards have been issued to over one crore people. Speaking at a seminar organised by NASSCOM on Aadhar and its functioning, Chairman of the Unique Identification Authority of India (UIDAI) Nandan Nilekani said they were in talks with NASSCOM on whether they could provide a platform for their services. He stated that they are working closely with the Finance Ministry and the Reserve Bank of India (RBI) to ensure that they facilitate financial inclusion. "This ID would reduce entry barriers for people," he said and added that many had enrolled in UID but were yet to be issued the numbers. "This process would leap frog from an environment of no identity to one of online identity," he said. Pointing out that there were many people in the country with no government documented proof of their existence, he said that the transition from "no identification to online identification" would be achieved. Confident of reaching their set target of issuing Aadhar cards to 600 million people within five years, Nilekani said that the IDs would also provide for a National Portable Identity. He said that the facility (UID) could also be used for procuring LPG connection, mobile sim cards and opening bank accounts among others. He said UID is being used as a proof of address and identity in Sikkim and Tripura states.
IBN Live
Banks Deputy Manager held for cheating
BHUBANESWAR: A deputy manager of a private bank was arrested by police for allegedly bungling a whopping Rs 1.3 crore from the bank over the last several years. Purna Sarkar, Deputy Manager (Clearance) with Kotak Mahindra Bank, located at Kharavel Nagar, was arrested on charges of cheating and forgery after the bank lodged a complaint with the police. Sarkar, who was in charge of cheque clearance at the bank, used to bungle with the instruments since 2009, bank sources said. Instead of getting the cheques passed through the RBI clearing house, he would cleverly park the instruments in Kotak Mahindra Security Ltd, another arm of the company which dealt with shares and equities. Most of the investments were made in the names of his family members. Since he was head of the clearance, he knew of methods to evade attention of the bank. Sources informed that the matter came to light once RBI sent details of the cheque clearances electronically to the bank’s corporate offices in Delhi and Mumbai. Earlier, soft copies were being sent and Sarkar used to manipulate them. Once the matter caught the attention of bank’s big wigs, an internal investigation started and the North Eastern head of the bank Sanjiv Upal was given the charge of the probe. He apparently found huge discrepancies and the responsibility was fixed on Sarkar, who confessed to the bungling of Rs 1.3 crore. However, instead of cooperating he tried to evade action and a complaint was lodged with the police. He has been booked under Sections 420, 467, 468 and 471 of the IPC.
IBN Live
The Prerana Co-operative Bank Ltd., Pune – Penalised
The Reserve Bank of India has imposed a monetary penalty of ` 1.00 lakh (Rupees one lakh only) on The Prerana Co-operative Bank Ltd., Pune, Maharashtra in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS) for violation of Reserve Bank of India's directives on unsecured advances. The Reserve Bank of India had issued a show cause notice to the bank, in response to which the bank submitted a written reply. The bank was also called for a personal hearing. Based on the reply and submissions made by the bank during the personal hearing, the Reserve Bank came to the conclusion that the violations were substantiated and warranted imposition of the penalty.
India relaxes banking norms for foreign nationals
BANGALORE: Authorities have decided to allow foreign nationals employed in India, holding valid visas, to maintain resident accounts with authorized banks here even after they leave the country. The new regulation, announced by the Reserve Bank of India (RBI), would benefit scores of foreign nationals in India — working in areas such as IT, banking and multinational firms. Earlier, their resident accounts were closed immediately once they left the Indian shores and their assets were transferred to their accounts maintained abroad. According to Dr. Sujatha Elizabeth Prasad, Chief General Manager-in-Charge of RBI, when such people leave India for a country other than Nepal or Bhutan for employment, business or for any other reasons for an uncertain period, their existing account would now be designated as a Non-Resident Ordinary (NRO) account. This is being introduced to facilitate the foreign nationals to collect their pending dues in India, she adds. The account would be closed immediately after all the dues are received and repatriated as per the declaration made by the account holder. The banks have been directed to repatriate the funds credited to the NRO account immediately to the foreign national after verifying whether the account holder has paid applicable income and other taxes in India. However, the amount repatriated abroad cannot exceed $1 million in a financial year.
http://arabnews.com/economy/article461028.eceBhutan Central Bank Governor visits BoM
Governor of Royal Monetary Authority of Bhutan H.E. Daw Tenzin visited the Bank of Maharashtra (BoM) head office in Pune on Friday. M G Sanghvi, executive director, BoM, received him at Lokmangal, the bank’s headquarters in Shivajinagar. Addressing the senior management of the bank, Tenzin expressed happiness over the Indian economy’s growth, on which Bhutan’s economy is also fully dependent. He pointed out the Indian Rupee only used in Bhutan also for more than 80 percent of its monetary transactions. He acknowledged the Indian banking system had shown its resilience in the recent economic slowdown. India has the potential to grow further as it has huge human capital and the younger generation constitutes most of it. "In terms of fundamentals, Indian banks are strong and Bhutan is able to make its domestic payment systems more efficient with the help of RBI," the Governor said, maintaining the growth while containing the inflation is the present challenge to any economy and RBI has been ably doing so. He desired that as India is contributing to world economy, though as a large importer, a day should come for the Rupee to earn its place in global economic system. Tenzin later visited the bank’s Rural Development Centre in Hadapsar and Mahabank Self Employment Training Institute , Hadapsar and interacted with its staff.
IE
A Study the Strategies Issue in Indian Banking Sector
Functioning of a Bank is among the more complicated of corporate operations. Since Banking involves dealing directly with money, governments in most countries regulate this sector rather stringently. In India, the regulation traditionally has been very strict and in the opinion of certain quarters, responsible for the present condition of banks, where NPAs are of a very high order. The process of financial reforms, which started in 1991, has cleared the cobwebs somewhat but a lot remains…………..
Read...........The emerging new monetarism: gold convertibility to save the Euro
Many economists are already considering restoring the classical gold standard. From the rising economies known as the BRICS, S.S. Tarapore, former deputy governor of the Reserve Bank of India, has publicly articulated the virtues of the gold standard……………………….
Click to read............
Get set for higher inflation
The government just increased the headache for households, itself and the Reserve Bank of India by increasing fuel prices as inflation is set to cross the double digit mark.........
Read more..........
Subscribe to:
Posts (Atom)