A Smoother Road for Banks or Borrowers?

........ In fact, the RBI’s March 18 notification is a major departure from its earlier stand on infrastructure lending. The RBI in April 2009 said that the rights, licences, authorisation and the like charged to banks as collateral for projects, including core sector ones, should not be reckoned as tangible security. So what changed? With the RBI’s apparently huge concession to the infrastructure sector becoming a reality now, the question that arises is who in the corridors succeeded in convincing central bank governor Duvvuri Subbarao to ease its earlier stringent norms. Despite being a former Union finance secretary, Subbarao has a reputation of not coming under pressure from anyone including his ex-boss and finance minister P Chidambaram. During the reviews of monetary policies, he had earlier surprised the government when he refused to budge an inch on lowering of interest rates despite North Block openly appealing the central bank to be a party on India’s growth story. Who then had convinced the man on Mint Street?....... 

Read - ET

Fraud costs ICICI Prudential Rs 90 lakh, police probe on

......"... We received several complaints from our customers complaining about the phone calls being received from people posing employees of the company and as officials of IRDA (Insurance Regulatory and Development Authority) making various promises inducing them to do certain acts which were prejudicial for the interests of the customers.........

Read | Business Standard

PNB needs to overhaul branch banking model for rural scale-up

......While the Delhi-based public sector lender's deep branch network could give it an edge, it will need to change its traditional branch banking to apprise risks and monitor activity. This will help in operating cost efficiency, India Ratings said in its rating review........

Read | Business Standard

HDFC Bank to charge customers for InstaAlert SMSes

......"Effective April 1, 2013, customers registered for InstaAlerts through 'SMS' will be charged," the bank said in a notification. However, InstaAlerts delivered through Emails would remain free. Customers registered for InstaAlert service with 'SMS' as the delivery channel will be charged Rs 15 per quarter in case of salary or savings accounts, while the charge would be Rs 25 per quarter for Current Account customers...............

Read - FE

Thane Dist Central Co-op bank duped Rs 1.30 crore

...........As the trio failed to pay loan instalments, the bank on March 28 auctioned the gold deposited with it. During the auction, the bank officials of the bank came to know that the gold deposited with them was fake..........

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MLAs call for action against 'guilty' officials

......"It is apparent that the financial crisis has been caused by some of the members of the board of directors, but no action has been initiated against them. We want to create pressure on the authorities to take action." Bapat also alleged that the Reserve Bank of India (RBI) on February 23 put the bank under moratorium but between February 21 and 23, Rs 4 crore was withdrawn from the Bank. This act is suspicious and should be investigated thoroughly, he said.......

Read - TOI

SBH waives FD pre-closure penalty

...... SBH is also launching a new term deposit scheme from April 1 with a maturity period of seven days to 14 days at 5 per cent interest for single deposit of Rs 25 lakh and above,...

Read - HBL

Passing rate cut benefits: Banks face ALM hurdle

The RBI, over the last 12 months, has reduced interest rates by 75 basis points. The transmission of the cut by the banking system, in terms of lowering consumer level rates on loans, has been limited, largely due to the asset-liability mismatches (ALM) building up in the Indian banking system that has restricted the ability of the banks to transmit monetary easing.............

Read - FE

RBI chief Subbarao to attend IMF conference next month

......The conference on ‘Rethinking Macro Policy II: First Steps and Early Lessons’, will take place at the IMF’s Headquarters in Washington, DC on April 16-17. Subbarao will chair the session on April 17 on Capital Account Management that would focus on controls, reserves, international provision of liquidity. Prior to his appointment as RBI Governor in 2008, Subbarao served as Finance Secretary to the Government of India and as Secretary to the Prime Minister’s Economic Advisory Council.......

Read - HBL

Financial inclusion likely to be part of banking code: Chakrabarty

The Reserve Bank of India is exploring the possibility of enshrining financial inclusion in the Code of Bank’s Commitments to Customers, according to K.C. Chakrabarty, Deputy Governor. The Code, which is voluntary, sets minimum standards of banking practices for banks to follow when they are dealing with individual customers. It provides protection to customers and explains how banks are expected to deal with them......

Read - HBL

‘Use e-court fee instead of stamp papers’

The Madras High Court has suggested to the Registry and all civil courts and Motor Accident Claim Tribunals to follow e-court fee payment system instead of judicial stamp papers. Justice R Sudhakar gave the suggestion while passing orders on a civil suit from United India Insurance Company praying for permission to pay the court fee of `48 lakh in the form of RBI challan instead of filing a big bundle of judicial stamp papers..................

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AIRREA stir put off

.........."The proposed strike was deferred after conciliation with the government", said Dilip Kumar Mukherjee, secretary general of the association. AIRRBEA had called a strike on March 30 in support of its six point charter of demands. These included implementation of pension scheme for the rural bank employees at par with their counterparts in nationalized banks, amalgamation of all RRBs in the country and formation of the National Rural Bank (NRB) etc........

Read | Business Standard

Modern central banking

Monetary committee needs to be handled carefully

.............Since the MPC in itself is a good idea as it brings a greater number of experts on board, it is important to ensure the baby doesn’t get thrown out with the bathwater. Ways have to be found to ensure the selection process is more independent and transparent, perhaps the number of persons to be appointed solely by the government can be reduced—let’s not forget regulators like the Chief Election Commissioner who have fixed tenures have tended to do a decent job. The onus of making it work lies with the government.

Read - FE Editorial

My View on "FSLRC report: RBI's authority in question"

No point in doing an MRI of FSLRC report or the dissenting notes. Application of ‘collective wisdom’ is conspicuous by absence in the whole affair. Some vested interests are itching for a truncated central bank with diminished role with no say in the non-bank financial sector, the government securities market and the foreign exchange market. Logically implying that RBI would have no say in the management of the exchange rate and thereby in the forex reserves. Add to this the Commission’s view on government debt management. The Commission opts for a separate Debt Management Office (DMO), totally separated from the RBI, which is the dispensation North Block has been trying to push and RBI has been resisting for valid reasons for a long time now. Our finance ministry and FSLRC, ignore the evolution of the role of Reserve Bank of India and the care with which RBI has nurtured the financial sector concurrently successfully safeguarding GOI interests even in several areas which do not come under traditional central banking functions. When found necessary, at the appropriate time, new institutions were built by RBI in association with GOI to transfer responsibilities which either conflicted with its core functions or became unwieldy or unmanageably heavy. Time is not opportune for dismantling or truncating RBI which is doing creditably well as is being admitted in several international forums. Any regulatory changes should be to consolidate and restate the roles so far evolved and should not be a tool for Finance Ministry or any government department to usurp powers or responsibilities now with statutory regulators.

- M.G.Warrier

FSLRC members dissent about regulatory overreach and controls

FSLRC members like KJ Udeshi, PJ Nayak, JR Varma and YH Malegam have pointed out several issues with the recommendations of the Commission, especially about regulatory overreach and controls. The transfer of powers from RBI may even make the Finance Ministry a dominant regulator feared the members..........

............“The regulations governing capital controls on inward flows should be framed by the Government, in consultation with the RBI. The regulations governing capital controls on outward flows should be framed by the RBI, in consultation with the Government.”...........

Read - Moneylife

Is a unified financial regulator a good idea? - YES

The Financial Sector Legislative Reforms Commission (FSLRC) is right in opting for a single or super regulator to replace those in equity, commodities, pensions and insurance sectors. The idea is to move from sectoral regulation to a broader framework of rules and principles...........

Read - HBL

Is a unified financial regulator a good idea? - NO

.......Before we address the FSLRC’s suggestions for a regulatory model, it might be useful to ask if we would like to replicate the models followed in the West: the conglomerate financial institution, the “too-big, too correlated too interconnected to fail” enterprise that stymied both the UK and US regulators. If we decide to stay with diversified institutions, “with different ownership, incentives and objectives”, as Joseph Stiglitz put it in his recent lecture at the RBI, then, well-trained multiple regulators could be the best bet.

Read - HBL

Debate over rate right

.....the Srikrishna committee has wormed in some insidious elements in its recommendation that should set alarm bells ringing. These elements raise questions about the independence of the RBI going forward, and whether or not monetary policy should be conducted at an arm’s length from the government of the day. Neither the federal open market committee of the Federal Reserve nor the monetary policy committee of the Bank of the England — the policy-framing bodies in the two countries — has a representative of the government sitting in on the deliberations........

Read - The Telegraph

The FSLRC Report is flawed in its approach

The best thing to do is to moth-ball it!

What is the prognosis for the report of a 10-member Commission, signed only by seven members, four of who append notes of dissent? Not very bright, perhaps! And when the Commission in question is also headed by retired Justice BN Srikrishna whose reports, he rued in an interview to The Economic Times, are either not acted upon (Mumbai riots) or are selectively acted upon (Sixth pay Commission), the future of the report must necessarily be a bit bleak...........

Read - ET

Sting’ in the air

The 2007-08 nightmare of the US financial system collapse and its universal effect on regulators and the central banks will not go away in a hurry, and the RBI is no exception. That the RBI has put in place a number of riders for permitting more private players in Indian banking is understandable. After all, allowing higher foreign stakes in aviation or retail is different from opening up insurance and banking.The RBI has been averse to private bank conglomerates, as it would need to arm itself with greater insight into their workings, which have spread unease across the globe.

R. Narayanan (HBL)