Unrealistic policy prescription

..........For India, a Reserve Bank of India study assessed that “productivity differential, foreign assets, terms of trade and openness are main determinants of real exchange rate.” One OECD study done in 2011 did not find any support for B-S-H based on current trade data. It is odd that contrary to available evidence based on a plethora of research on exchange rates, Bhalla takes the line that real exchange rate can be influenced by nominal (policy) exchange rate. It is difficult to categorise this book. It is not an investment analyst’s guide to recent trends in currency rates and their impact on trade and growth. It is not an economist’s study of linkages between them. Its statistical base is questionable even as its theoretical base is weak.........

Read - The Hindu

Money breeds problems

RBI has issued guidelines/conditions for new private sector banks. The conditions are very stiff. All news papers and channels have hailed the move. The existing private banks cater to the needs of the upper middle class and above category while public sector banks serve poor Indians. RBI should also stipulate one more condition that these new private sector banks shall maintain a separate banking entity for at least 10 years from the date of business commencement. From the list of old private sector banks, many names—Times Bank, Centurian Bank, Bank of Punjab—are missing. Because of irregularities, Global Trust Bank was merged with a public sector bank to protect depositors' interest. This shows that private banks do not necessarily mean efficiency. Efficiency in service is different from efficiency in banking operations, particularly advances/loans recovery. Money means problems, whether it is shortage or excess.

- Sudhir K Bhave, Mumbai (FE)

Bankers' banquet: Follow up on the liberal guidelines with a few dozen new banking licenses

........Providing bank licenses to all deserving applicants is important because the RBI had so far placed a tight leash on new banks. This has ensured that India remains a relatively underbanked economy with about only 80 odd banks, of which around a third are foreign banks with a few branches each, serving a population of 1.2 billion people. Consequently .........

Read - TOI

Making India more bankable

......The RBI had made new bank licences conditional on being given a bigger regulatory stick. The Centre has been seeding much of the banking sector’s growth through taxpayer money, but a generation of private banks has established deep roots in the system through technological advances, modern management and a vastly improved customer experience. With an oversight mechanism in place, banking can now draw in fresh capital.......

Read - Hindustan Times

After the hype, analysts say RBI may offer just 5 new bank licences to India Inc

The Reserve Bank of India (RBI) may not issue more than five new bank licences as the central bank wants to be very selective initially, analysts said. "We do not expect the RBI to issue more than five licences. We believe the probability of a public sector entity obtaining a banking licence is low," ........

Read - FE

On your marks, get set ...

...... Three years ago, the then finance minister Pranab Mukherjee, had first announced the government's intention to bring new banks into the fold. Since then, RBI not only kept alive an engaging debate on the topic but also ensured that the government put in place an enabling legislation for the apex bank to issue new bank licences.......

Read | Business Standard

NBFCs may not benefit by becoming banks

....Since the main lending business of an NBFC has to be converted into a bank, it will attract regulatory requirements such as cash reserve ratio (CRR), statutory liquidity ratio (SLR), and priority sector requirements from day one, “which will be substantially return dilutive”,...........

Read - Mint

Non-banking financial companies to decide later on bank licences

Kerala-based non-banking financial companies (NBFCs) are taking a 'wait-and-see' stand towards the Reserve Bank of India's (RBI) guidelines for applying for new bank licences............

Read - TOI

SKS to decide on banking foray in May

............SKS Microfinance, once the largest micro lender in the country, will decide on applying for a banking licence in its board meeting in May. The Hyderabad-based microfinance institution, which emerged out of the crisis relatively better than its rivals, is currently evaluating the pros and cons of entering the banking business. “We are yet to take a call. The board will discuss whether we should apply for a banking licence,” ............

Read | Business Standard

New entrants may face hurdle to man branches in unbanked areas

....."While private banks may be able to retain their rural talent with better salary, public sector banks, including the large ones, may be constrained by their inability to pay exorbitant salaries to retain people," ..........

Read | Business Standard

Don’t see any danger of wrong cos getting into banking sector: Rajiv Takru, Banking Secretary

............It is very difficult for me to answer as to what made the RBI change its mind. The draft guidelines were put out by the RBI sometime back. There was a lot of feedback after that. The Indian Banks Association also gave their comments. We were in continues discussion with the RBI. There were all kinds of other stakeholders who are talking to them and the pros and cons were evaluated over a period of time. There was no history decision making and ultimately what has come out is perhaps the fairest configuration which they could have worked out............

Read - ET

Shriram Group to enter the fray

........At present the group has two NBFCs -" Shriram Transport Finance Corporation (STFC) and Shriram City Union Finance (SCUF) -" which have assets under management (AUM) to the tune of around Rs 50,000 crore and Rs 15,000 crore respectively. These two companies fund businesses, which provides livelihood to the borrowers. Group Director of Shriram Group G S Sundararajan, who was identified by the Group to head the Banking initiative, said that the new guideline was not different and it was largely in line with what the preliminary guidelines were............

Read | Business Standard

Making India more bankable

......The bank licence rules reinforce a form of universal banking that India may have outgrown. Fresh thinking on the spread of banks in the country has stopped short of segmenting the market for credit. Financial inclusion could be better served by sector-specific bank licences, where every new bank does not need to become a supermarket for financial products. State-controlled focused banking, like that for agriculture, has delivered mixed results. Private banks could bring in innovative new solution.

Read - Hindustan Times

Not a good idea

Back in 1969, the controversial nationalization of fourteen private banks was a political move clothed in socialist mumbo- jumbo. Apologists of Indira Gandhi argued that these banks serviced big business while failing to meet the needs of the ~ aam aadmi~. Her Congress rival at the time, Morarji Desai, had opposed nationalization, saying the above objective could be well served through the RBI- monitored ` social control' of the same banks. Mrs Gandhi had her way. Fourteen large private sector banks were taken over. If nearly forty- four years later, the state of the banking in the country continues to be rather poor, you know whom to blame. Playing partisan politics with financial institutions does not pay.........

Read - FPJ

Sucidal

Opening up the banking sector to conglomerates will not do any good for the Indian economy (“Don’t lower your guard,” Feb. 25). We saw many private sector banks which sprouted perish in the face of stiff competition. The trauma of their customers and employees till they were rescued by public sector banks cannot be explained in words. The government’s latest move is suicidal.

C. Petson Peter, Kochi (The Hindu)

The government’s undue haste in pushing through licences for new banks, in spite of resistance from the RBI and the IMF, makes the common man curious. With the general elections round the corner, speculative sectors which finance the elections are at an advantage. Of all the sectors, the financial sector is the fulcrum of the economy. It is not only money but also trust that matters. The government’s stand of welcoming big global banks, on the one hand, and making financial inclusion a priority, on the other, is indeed strange. Our banking system is robust enough to take care of the needs of our economy.

S. Veeraraghavan, Madurai (The Hindu)

NEW RBI RULES FOR INTERNATIONAL BANKS

..........“Branch banking licences to some Australian and Chinese banks in the recent past have a clause that states the bank would have to migrate to the wholly owned subsidiary model as and when the Reserve Bank finalises the guidelines,” said one of the persons, who did not want to be identified. The action, coming more than two years after the RBI first signalled its intention to ask foreign banks to incorporate local units to ring-fence them from global risks, may well be a significant step in the banking regulator’s key unfinished task of ensuring financial sector stability......... 

Read - ET

Poor on Banks

This refers to ‘Broad and Welcome’ (ET, Feb 25). Technology and expansion of the banking sector is only applicable to cities and urban areas. Our banking industry has failed to cater to the needs of rural and poor people and they continue to depend on moneylenders. Even if branches are opened in rural areas, they are mainly opened in prosperous villages, neglecting the backward areas. Financial inclusion does not mean opening branches in villages and unbanked areas but educating the rural people on the benefits of modern banking and bringing them into the banking arena. Secondly, fresh recruitment of staff is needed given the vast retirements that are due in the public sector banks. It is no use opening new branches when there just isn’t adequate staff to man them.


- VEENA SHENOY, Thane (ET)

For a social cause

Cosmos Co-operative Bank is committed to extending financial assistance to women's self help groups to help them to become self-sustainable.", stated Krishnakumar Goyal, chairman-in-charge, Cosmos Bank, at women's gathering. Magsaysay Award winner Nilima Mishra visited the banks head office on and was felicitated by the bank on her achievement of Padmashree Award, also for her substantial contribution to women's empowerment through self help groups.

TOI 

Provident fund to earn 8.5% interest in FY'13

Provident fund deposits are set to earn 8.5 per cent interest in 2012-13, slightly higher than the 8.25 per cent returns declared in the last fiscal. The decision was taken at the meeting of the Employees' Provident Fund Organisation's (EPFO) Central Board of Trustees (CBT) on Monday........

Read - IE

RBI, CA institute likely to discuss IFRS roadmap today

.....For banks, the CA institute had left it to their regulator, RBI, to decide on a suitable IFRS roadmap. There are indications that the Tuesday meeting will revolve around crucial issues such as accounting standards on financial instruments. The meeting could also discuss other important issues such as audit of banks, it is learnt. RBI Deputy Governor Anand Sinha will chair the meeting.......

Read - HBL