No RBI Word yet on KR Pradeep’s Appointment at Lakshmi Vilas

Professional links to cos he audits seen as a hindrance to his appointment as bank’s chairman

RBI is holding back the approval to appoint chartered accountant KR Pradeep as the chairman of Lakshmi Vilas Bank as the regulator believes his professional relationships may come in the way of decision making at the helm of the private sector lender. “KR Pradeep runs an accounting firm under his name out of Bangalore and handles the accounts of various corporates which is one of the concerns raised by RBI,” said a person familiar with the regulator’s view. “RBI has also asked the bank to suggest two new names for the post,” said the person not wanting to be identified. The Karur-based bank has been without a chairman for more than a year now after S Narayan retired in January 2011. PM Somasundaram, MD and CEO at the bank, could not be reached for comments. But Pradeep said in a text message: “RBI is actively considering my name for approval.” The central bank’s hesitation in the approval is also due to the fact that Pradeep falls under the promoter category, which owns about 11.5% stake in the bank, said the person. RBI is paranoid about people with corporate links at the top of a bank as there are chances of prudence in lending getting compromised. This is one of the reasons why it has been imposing conditions even in case of proposed new banking licences. The central bank has called the bank’s senior management for a discussion on the appointment this week. “They had asked us to submit two additional names but the question of doing that does not arise since Pradeep’s name has been cleared at the AGM,” said another person who knows the bank’s stance. “We are not pursuing the matter actively as there is an MD and CEO running the bank.” Somasundaram, an alumnus of Standard Chartered, joined Lakshmi Vilas Bank in 2010 to transform the sleepy community lender into a full-fledged bank that could prepare it to compete with the giants such as ICICI and HDFC Bank which have begun encroaching into its territory. While he managed to reduce the bad loans, it has a long way to go in terms of products and services.  “We are working hard to shed the image of an old private sector bank,” Somasundaram said in an interview with ET last year. “We want to play the role of a new generation bank by offering services on par with leading private sector banks. For this, we need to focus on retail and improve our services.”

ET

Will appointment of auditors by regulators enhance independence?

.... Until 2005, the RBI was directly involved in the appointment of auditors in public sector banks. Currently, public sector banks appoint auditors under the supervision of RBI. The accounting profession generally believes that auditors enjoy a higher level of independence when regulators appoint auditors. In October 2011, the then President of the Institute of Chartered Accountants of India, Mr. Ramaswamy, argued in favour of appointment of auditors of public sector banks directly by the RBI.......

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White-label ATMs have hurdles of cost and competition to overcome

The Reserve Bank of India (RBI) may have come out with its draft guidelines last week allowing private operators to set up white-label ATMs (WLA) or stand-alone ATMs. But it is never going to be an easy task for the operators considering the costs involved in setting up private ATMs and in competing with the bank ATMs in attracting crowds.............

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Bank rate lives to die another day

............Being the discount rate, the bank rate should technically be higher than the policy repo rate but it took nine years for RBI to realize this. One wonders what prevents the Indian central bank from killing the bank rate as it has become irrelevant.................

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Too early for comfort

...Will the lower inflation figures prompt the RBI to commence the long awaited phase of interest rate reductions? A monetary policy review is due in March and on the face of it, the January inflation figures do improve the odds for a round of monetary easing.....

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IBA seeks tax relief for foreign banks to incorporate locally

….According to the RBI paper, all new overseas banks in India will have to locally incorporate themselves, and existing players, particularly the systemically important ones, will be encouraged to opt for local incorporation and act as subsidiaries of foreign parents. But the apex bank is yet to announce its guidelines. According to tax experts and bankers, foreign banks are unlikely to convert their branches in to subsidiaries unless the huge tax burden is removed…..

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Cheque transaction value down 6.4% in Dec: RBI

Total value of transactions through cheques across the country amounted to Rs 8.17 lakh crore in December 2011, down 6.4 per cent compared to the same month last year. Banks cleared cheques worth Rs 8.74 lakh crore in December 2010, according to the Reserve Bank of India (RBI). ............

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Govt to provide adequate capital to PSU banks: Pranab

.... To strengthen risk management mechanism, RBI has issued issued draft guidelines, envisaging that the equity capital of a bank should not be less than 5.5 per cent of risk-weighted loans. These guidelines envisaged more stringent norms on capital adequacy, Mukherjee said, adding, "on our part, the government has committed to maintain the minimum 8 per cent Tier I (equity capital) in all public sector banks which is over and above the regulatory requirement of 6 per cent.".....

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Ben Bernanke, the great innovator

There are several central bankers one could admire, especially those who held steadfast against widespread political opposition because the measures took time to take effect. Notable in this regard is of course Paul Volcker, who slew the dragon of inflation. In India, there was C Rangarajan, who did much the same thing, and Y V Reddy who explicitly targeted asset prices when it was unfashionable, indeed heretical, to do so............

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Banks seek RBI guidelines on shifting procedure

NOIDA: Banks that have been displaced by the Supreme Court order have written to the lead district bank asking %it to forward a request to the RBI to issue standard guidelines on the shifting process. Banks have expressed %their inability to shift out by March 5, considering that some are yet to find alternate commercial locations.  Meanwhile, those banks that have opted for the Noida Authority's new land scheme may have to approach the court too seeking an extension of the March 5 deadline. Noida Authority has said that it will seal all banks operating from residential plots even if they have opted for the scheme.

TOI

Bosses take stock of policy steps

.....“This is a pre-budget FSDC meeting. The finance minister heard all the regulators. Of course the RBI has responsibility both for macro-economic management and for banking regulation. The outcome of today’s meeting will be reflected in the budget,” RBI governor D. Subbarao told reporters here. Apart from the RBI governor, the meeting was attended by Sebi chairman U.K. Sinha and PFRDA chairman Yogesh Agarwal and secretaries in the finance ministry....

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Pranab Mukherjee to skip G-20 Ministerial meeting in Mexico

NEW DELHI: Finance minister Pranab Mukherjee will skip the meeting of G-20 Ministers and governors of central banks in Mexico between February 24-26 as he is pre-occupied with his next Budget, sources said. "Finance Minister will not be attending the G-20 Ministerial," a source said, adding that RBI Governor D Subbarao will be participating in the three-day deliberations. Mexico is holding the Presidency of the G-20 this year and the Ministerial deliberations will culminate in the Summit of leaders to be held at Los Cabos later in the year.

TOI

Provide incentives for investment in financial assets to discourage gold imports: C Rangarajan

.... India's massive gold imports that are fuelling an already bloated current account deficit have drawn concern from the country's top policy advisory body. The C Rangarajan-headed prime minister's economic advisory council (PMEAC), in its review of the economy, has suggested more incentives for investments in financial assets to discourage gold purchases in the country.......

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Govt to cover exempt sectors in second phase of XBRL roll-out

.... The regulators, including the Reserve Bank of India and the Securities and Exchange Board of India, have also started implementing XBRL..........

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RBI may cut interest rate by 100 bps this year: Citi

....“Given that the RBI has said that the quantum and timing of rate cuts would be dependent on fiscal consolidation, we expect the repo rate to be cut post the Budget (due on March 16), that is, RBI’s April 17 annual policy review,”.......

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Cards to make Metro travel easy

......The cards will be issued by the bank to its customers but it is up to the bank to charge its customers for it. However the travel fare for a passenger will be the same whether he uses a Metro Card or a Combo card. In future, if Reserve Bank of India (RBI) rules permit, the card can be extended to retail etc., said sources..........

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P C George to hold 'Satyagraha' on Feb 27

KANNUR: Government Chief Whip P C George Sunday said he would organise a Satyagraha in front of Reserve Bank of India (RBI) on February 27 to protest ..............

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JNNURM, farmers’ loan waiver scheme under CAG lens

.... In the farmers' debt waiver scheme, the CAG has received banking data from RBI and has also examined the books of state-owned banks and regional rural banks. CAG has scanned the disbursement of debt waiver made by public sector banks across the country with sample field visits......

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Workshop on foreign exchange held

Interactive sessions dispel myths surrounding overseas transactions

RBI uses the workshop to familiarise the public on its niche products

Event targeted mainly at students, small-scale industries aiming at opportunities abroad

To dispel the myths and unfounded fears on foreign exchange and for motivating the public to make use of the overseas banking services, Reserve Bank of India is conducting an interactive session for all the stakeholders in Tirupati. The two-day event began at Shilparamam (Urban Haat) on Saturday morning with an exhibition by the RBI along with various lead banks in the State such as Indian Bank, State Bank of Hyderabad, State Bank of India, Andhra Bank and Syndicate Bank. As part of its financial inclusion plan, RBI is holding the event to familiarise the niche products as well as to caution the public on the pitfalls ahead. After Hyderabad, Nizamabad, Visakhapatnam and Guntur, this one at Tirupati is the fifth in the series of meetings.

Exhibition

The exhibition titled ‘Foreign exchange and you' aimed at spreading awareness on FE showcased the options available for residents and non-residents, the rules for foreign direct investment in India, overseas direct investment, external commercial borrowings etc. The event is targeted mainly at students aiming at higher education or employment abroad and small-scale industrialists with an export-oriented venture. While information will be disseminated to students on foreign university remittances, account operation procedures, NRI accounts etc., the industrialists will be explained the features of export finance, formalities for import, Letter of Credit, FEMA regulations among other things. T. Prasad, Commissioner, Municipal Corporation of Tirupati (MCT) inaugurated the event, while A.S. Rao, Regional Director of RBI, Hyderabad, interacted with the visitors and clarified their doubts on various issues. The expo will be open till 6.30 p.m. on Sunday. 

HBL

Failure of governance reason for Eurozone debt crisis: RBI

MUMBAI: The ongoing sovereign debt crisis in countries of eurozone owes its origins to governance failures, according to a senior Reserve Bank official. Speaking at a conference of Kerala Management Association at Kochi yesterday, RBI Executive Director G Padmanabhan said the 2008 global crisis and the current debt problem in eurozone suggests that merely having a strong regulatory and supervisory framework is not enough, without proper enforcement of the rules and regulations. "If we take a careful look at the present sovereign debt crisis roiling the eurozone, it should not take us too long to realise that this crisis also owes its origins to governance failures. "The only point of difference between this and the 2008 crisis is that the entities which are at the root of the present crisis are sovereign governments and not the usual suspects which are 'profit-seeking' corporations," Padmanabhan said. The text of his speech was uploaded in the central bank's website. According to Padmanabhan, there was a clear element of acquiescence on the part of core euro members to enlarge the circle of Euro zone at the cost of non-compliance with the tenets of Maastricht Treaty. "How did the crisis surface? By admission of the Greek Government that the fiscal statistics it had earlier presented may not be true and the true position could be significantly worse," he said. Padmanabhan said the European debt crisis has prompted a discussion on governance and sovereign debt. "There seems to be interplay between governance performance and the debt level. Better governed countries can afford higher levels of debt. Conversely, badly governed countries can tolerate only lower levels of debt," he said. According to him, mere financial and economic measures, in absence of reform in governance, may not be sufficient to address the problems countries like Greece face. "This is also why even after the Greek parliament passed the austerity measures as a precondition for further assistance, the market is reluctant to accept it as a watershed and displays a great deal of skepticism," he said. 

ET