RBI Monetary Policy: Here is the trailer wait for the movie to hit the screens

On most of the significant policy issues—implementation of Basle III, NBFC regulation, gold loan companies, securitisation guidelines, etc, all that we have in the policy are datelines for policies to be announced by the RBI. There is more in the offing than we have in the policy, reducing the much-awaited policy to be trailer for a movie to hit the screens............

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RBI brings cheer to common man

...........At a time when personal banking has gone mostly impersonal, thanks to the invasion of technology, the RBI has asked banks to offer a “basic savings deposit account” with certain minimum common facilities. This should be done to all customers without insisting on the need for a minimum balance. The RBI has also advised banks to initiate steps to allot unique customer identification code number to all customers. These three indeed are direct-impact initiatives and go a long way in beefing up customer confidence in the banking system...........

Read - The Hindu

We are not ruling out a rate increase - D.Subbarao

.....Textbook economics says central banks take policy decisions based on inflation expectations and not the prevailing level of inflation. You seem to be very hawkish when it comes to inflation expectations and yet you have gone for a deep rate cut. Is there a disconnect?

I don’t believe so. We have looked at inflation numbers and how much they have traversed from their highs. You must remember that we had done our last rate hike in October 2011, when headline inflation was 10% and core inflation was above 8%. We have to recognize that there has been a significant drop both in headline and core inflation numbers, and we also have said that over the last one-and-a-half years, our bias has shifted from inflation towards growth.......

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‘As a central bank, we don't micro manage'

....As a central bank, we do not micro manage. We give a policy rate signal. We increase or reduce CRR and expect banks to response. We are not telling banks that they should behave one way or the other. But it is our expectation that monetary transmission has been effective and will be effective. It may take time but it will translate into lower lending rates......

Read - The Hindu

Limits to efficacy of monetary policy

...What is required is the use of supply management policies such as investments in building suitable infrastructure, focusing on new technology to improve agricultural productivity, better water management to reduce volatility of agricultural output, and, more importantly, policy coordination between the Ministry of Finance and the RBI. ....

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RBI's annual monetary policy review: Proposals & guidelines

.... RBI says the working group chaired by Usha Thorat on regulatory framework for NBFCs to release draft guidelines by end-June, 2012. The group had submitted its report in August, 2011.

RBI says the working group chaired by B Mahapatra to study guidelines on restructuring of advances by banks and financial institutions and is expected to submit report by end-July, 2012. The group, formed in January 2012, will suggest revisions taking into account the best international practices and accounting standards……

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Central bank playing with fire

....The central bank’s other goal in changing monetary policy is to make rates “consistent with the current growth moderation”. But where is the moderation? Not in RBI’s projection. It expects growth to average 7.3% in fiscal 2013. At present (the last data point we have), growth is running at 6.1%. Moving from 6.1% in the fourth quarter of 2011 to an average of 7.3% in fiscal 2013 implies a pretty strong expansion.......

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One- time wonder or more to come?

....." The RBI was clearly itchier to cut policy rates than expected, but the 50 bp cut may have been a bit too premature and aggressive, in our view. If that turns out to be the case, it could hurt RBI's credibility while doing little to raise growth on a sustained basis," .........

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Reactions to RBI policy.........

Behind the positive surprise :A.K.Bhattacharya

 ........ If the government does not reciprocate with necessary policy initiatives to fix the fisc and remove bottlenecks in fresh investments, the monetary policy is not likely to see any further easing. Finance Minister Pranab Mukherjee could not have missed that signal, even though the RBI governor may have been a little guarded about his comments on the fiscal policy authority. Who knows, Duvvuri Subbarao may have been inspired by an old Sanskrit saying that goes like this: speak what is true, speak what is pleasant, but speak not what is unpleasant even though it might be true.

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Subbu’s subtext: Don’t believe in FM or rate cut, but what to do?

......... But the makeover is unconvincing. Reading between the lines of Tuesday’s policy statement, and the previous day’s macroeconomic review by the Reserve Bank, it seems that Governor Subbarao is unconvinced about the possibility of a genuine moderation in inflation, but has instead persuaded himself to believe that his real problem is to prevent an unwholesome crash in growth......

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RBI cutting rates to boost growth: Montek Singh Ahluwalia

........I read the RBI lowering repo rate as a balanced judgement that yes inflation is matter of concern, but the time has come to change signals ... You cannot wait until it comes down to a very low level. "Policies should be adjusted as things move and that's what I think they (RBI) have done,"...............

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RBI repo rate cut surprising: Fitch

......"The governor also announced that the draft guidelines pursuant to Usha Thorat committee report on regulatory framework for NBFCs would be issued by end June 2012 while the final guidelines on securitisation would be issued by end April, 2012……………

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RBI dons activist hat for consumer cause

...... According to sources, RBI deputy governor Chakrabarty is behind the moves to get banks to be more customer friendly. Earlier in the day, a banker defended differential rates, stating that it was similar to a situation where someone who bought a television two years ago cannot complain if current rates are lower. Chakrabarty, however, refuted this argument in the press conference, stating capital costs cannot be compared with current expenditure. "If you are running a restaurant, you don't charge more for a daily customer and less for a newcomer."............

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Upside risks to inflation, downside to growth persist: RBI

RBI Deputy Governor Subir Gokarn is worried that upside risks to inflation and downside risks to growth persist. The RBI will act proactively on the tricky issue, he said in an interview to CNBC-TV18................

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Growth moderation behind cut

.............The other instruments also have to be flexible. We cannot have a financial system where part of the system responds to RBI’s policy rates and the other is rigid. I don’t know if interest rates will come down on all these products, but I think they should come down. In fact that is one of the recommendations of the Shyamala Gopinath committee on small savings that the interest rates must be calibrated to the 10-year government security.

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Sebi in talks with RBI, Irda for common KYC norms

Aiming to ease procedural hurdles that investors face, market regulator the Securities and Exchange Board of India (Sebi) today said it was in talks with other regulators, including RBI and Irda, for common know-your-customer norms for the financial sector……

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How RBI Governor D Subbarao moved in withdrawing expansionary policies

Reserve Bank of India Governor Duvvuri Subbarao has come a full circle - probably beginning the second round of easing after taking the tightening cycle to a peak. His policy pronouncement gives little hope that he will be in a hurry to declare the beginning of a loosening cycle. ET tracks how he moved in withdrawing the expansionary policies……………..  

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Remembering R.H. Patil

.....As an economist who worked in the research department of the Reserve Bank of India before going into development banking, he also provided valuable advice to the government on how to deepen the bond market in India, an issue that still demands policy attention. Any modern economy needs an efficient financial sector to ensure that national savings are used in the most efficient enterprises. What Patil did to help improve the Indian capital market should be understood against this background..........

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Use your PAN card carefully

....Waving a PAN (Permanent Account Number) card as a form of identity, when such a document is required with a photograph, has become second nature to many of us. Keeping a laminated copy as a spare, and placing the original in safe-keeping, is the strategy adopted by many. But now, with more and more transactions requiring a copy of a PAN card, or at the very least the number, it appears that the role of this essential piece of plastic, and its consequences, are rapidly changing, in a way and manner not anticipated by the authorities........

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Man held for debit card fraud

.....In the past few months, cases of ATM thefts have increased with fraudulent persons peaking into details of ATM cards while a transaction is being swiped. The RBI has come out with repeated warnings to ensure that secrecy is maintained during ATM transactions.......

Read - Indian Express