PM knows best

Ths refers to the report “Time magazine dubs Manmohan ‘underachiever’” (July 8). It is Dr Manmohan Singh’s achievement that developed countries have started taking note of India, and are now getting panicky about India not following the LPG (liberalisation, privatisation and globalisation) prescription with the implicit obedience that they are used to from “pockets” like oil-rich countries or, for that matter, Singapore. No one knows better than Dr Singh that India cannot cut and paste policy initiatives tested in countries like Singapore or Switzerland (with less than 10 million population) or even the UK that has a developed infrastructure and 100 per cent literacy. The prime minister knows the problems of 1.2 billion people and if he is going slow on certain measures that will help the commercial interests of business and industry, but will make the poor poorer and the rich richer, you cannot put the entire blame on coalition compulsions. Incidentally, India’s GDP growth today is at a comfortable rate compared to the “developed” world.

 - M G Warrier Thiruvananthapuram (BS)

A middle path to nowhere

...It is a complete paradox that today we are made to wonder about financial inclusion. The Singh legacy is particularly evident when it comes to policy (non-) response to the continuing saga of inflation. The response is one of ping-pong between Finance Ministry and the Reserve Bank of India (RBI). The Ministry thinks inflation control is primarily in the domain of RBI, by way of monetary tightening, while the RBI suggests that nothing can be done until the Ministry reins in fiscal deficit numbers......

Read - The Hindu

No service tax on foreign remittances :Finmin

The government on Tuesday clarified that service tax cannot be levied on foreign currency remittances into India as the transaction is actually executed outside the country..........

Read - Express India

RBI shatters Lavasa's debt recast hopes

Troubled real estate firm Lavasa's efforts to escape the stigma of bad debt suffered a jolt with the Reserve Bank of India rejecting a request to confer infrastructure status on its loans............

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Irda opens the door to getting banks to focus on mis-selling

.....One reason for that has been the grand old man status of the Reserve Bank of India (RBI) that prevents younger and less powerful regulators from leaning on banks for violations linked to products that they regulate. The insurance regulator, it seems, has decided to bite the bullet. If the IndusInd case is a precursor, we should see the corporate agents named in the HDFC Standard Life case get penalized too.

But here is where the story gets interesting. Long-time RBI watchers say that banks will get help soon. Some quiet arm-twisting will happen and the Irda threat could melt away. It would be another lost opportunity if that were to happen. RBI should use the door that Irda has opened to push through more accountability at banks. Banks have emerged as large sellers of retail financial products........

Read - Mint

Indian online travel agencies confident about customer security

.....The Reserve Bank of India (RBI) mandated an extra layer of authentication for online payment by credit and debit cards, 3D secure authentication, which requires a password provided by banks for online transactions, in August 2009.......

Read - Mint

RBI's focus on inflation makes easing difficult: StanChart

.......Given the focus of inflation, which has clearly come out since the last policy, our expectations are reasonably well pared down now. The fact is liquidity has improved over the last few days. So it doesn't look therefore as if RBI will oblige us with either a rate cut or a CRR cut,".......

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Banks not to witness shocks on account of bad loans: Chanda Kochhar

Dismissing concerns of rising bad loans, ICICI Bank Managing Director and CEO Chanda Kochhar today said that banking sector unlikely to witness any substantial shocks on account of NPAs and the focus in the current fiscal will be on restructuring of loans of mid-size companies.............

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Bankers agree rate cut by RBI can't lower inflation, but still want it

Bankers agreed that inflationary conditions offered little room for lowering interest rates, but stuck to their demand for a rate cut, saying it was the only tool available to revive the "animal spirits" in the economy in the absence of policy action.  In their customary pre-monetary policy meeting with Reserve Bank of India (RBI) Deputy Governor Subir Gokarn, bank chiefs also acknowledged that rate cut was not a panacea for the nation's economic ills...............

Read - ET

RBI, banks push each other to reduce rates

The Reserve Bank of India (RBI) on Monday asked banks to explain why across-the-board reductions in interest rates had not taken place despite the April 17 cut of 50 basis points in the key policy rate. On their part, banks asked RBI to cut both cash reserve ratio (CRR) and the repo rate by 25 basis points each so that liquidity can ease and lending rates can come down.............

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Why bankers still harp on rate cut

.....after the last policy review, prior to which the clamour for a rate action got louder due to the dismal factory output data, RBI Governor reiterated his resolve to fight inflation, even at the cost of growth. Nothing much has happened to change the RBI’s stance since. On the contrary, there are indications that things are going to get more difficult towards the year-end due to scanty monsoon........

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Rising interlinkage in financial system under RBI scanner

.....the failure of a bank with large borrowings from insurance and mutual funds segments may have significant implications for the entire system, the RBI says, hinting at a possible tightening of norms, especially on short-term borrowings. ........

Read - Indian Express

No relaxation for textile debt recast

The Reserve Bank of India (RBI) will not allow any special dispensation for loans to be restructured by banks for the textile industry, as only 20 per cent of units in the sector are under stress. Industry representatives are to meet finance ministry officials on Friday to discuss the debt recast issue. In a recent meeting with bankers, top RBI officials said banks had to undertake a debt recast according to the norms that specify higher provisioning after restructuring of debt............

Read - BS

Bank licences: Focus on realty link

For corporates seeking bank licences, there is one key concern: how would the Reserve Bank of India interpret exposure to real estate activity? This was the highlight of corporate responses to draft guidelines announced by RBI earlier. The central bank on Tuesday published the responses to its draft guidelines stating that it would keep the suggestions and reactions in mind while framing the final guidelines.................

Read - TOI

Redefining money guardians: Who should set up new banks

Bank aspirants in India Inc have asked for greater clarity on the central bank’s definition of promoters. In feedback to the Reserve Bank of India (RBI) in response to the draft norms on new banks, companies have also sought more clarity on various issues thereon, from corporate structure to priority sector targets. The draft norms were made public in August last year. These proposed several measures for considering applications to be issued a banking licence. Among these were the eligibility of promoters, the corporate structure, minimum capital requirement, corporate governance norms and business model, among others...........

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New banking license: RBI gets feedback on draft guidelines

The Reserve Bank of India (RBI) on Tuesday put up comments/suggestions received from the related parties on the draft guidelines for new banking license in private sector, released on August, 2011. Those comments were received from general public, consultants, analysts, industrial / business houses, NBFCs and others. The regulator will consider the feedback before finalizing the guidelines............

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Banking aspirants want to do away with holding co norm

.... The Reserve Bank Tuesday said many corporates interested in entering banking have called for doing away with the requirement of promoters wholly owning the proposed non-operative holding company (NOHC).  "Doing so will diversify the shareholding structure of the NOHC and will improve corporate governance and avoid regulatory overlap," the RBI said in a release attributing the view to business houses, NBFCs and a federation.........

Read - Zee News

Post office bank proposal awaits RBI nod

The central government is awaiting the Reserve Bank of India (RBI)’s reply to the department’s proposal to float post office banks, according to Union minister of state for communication and information technology Sachin Pilot..........

Read - BS

North shouldn’t block

A former Reserve Bank of India Governor, while still in office, confided that he would never keep the government in the loop on most decisions of the central bank. But the then mandarins in the finance ministry never made it easy for him. They put pressure on him on a variety of issues since he invariably needed the ministry’s concurrence on policy matters. This particular governor got his way on most issues and, much to the chagrin of the officials, earned the reputation of preparing India for the financial crisis of 2008. In fact, he felt it was not necessary to meet even the finance secretary, the most senior official in the ministry, during his North Block visits. On some occasions, he would visit the capital just to meet the prime minister and would not even call on the finance minister. There were many critics who had a healthy disrespect for his domineering style, but nobody took him head on regarding his regulatory decisions. He overruled ministry interventions, backed by the quality of his decisions. Another capital market regulator or chairman of the Securities and Exchange Board of India (Sebi) would frustrate the finance secretary of the time by not answering calls or responding to text messages. Here again was a regulator who had turned around financial institutions, knew his domain well and refused to budge from decisions despite the government’s reservations. These are just two examples to show that regulators never had an easy relationship with the government ...........

Read - Indian Express

Reddy`s Libor reckoner

The Libor rate-fixing scandal erupted on June 27, when the UK's Financial Services Authority (FSA) imposed the equivalent of a $450-million fine on Barclays Bank. There's someone in India who knew about the scandal at least three days earlier. Y Venugopal Reddy, former Reserve Bank of India Governor, was delivering the Per Jacobsson Foundation Lecture at the Bank of International Settlements in Basel, Switzerland.......

Read - BS