........The Reserve Bank of India (RBI) Governor, D Subbarao in his mid quarter credit policy review clearly emphasised the governmental role to revive our flagging economy. At the same time, he praised certain government measures gradually yielding results...............
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Tuesday, June 18, 2013
Rate illusions
..............There was hope that RBI’s ‘inflation governor’ would accomplish a 20-25 basis point cut in cash reserve ratio, or the amount of cash which banks maintain with RBI, as this would have unlocked over Rs 10,000 crore of credit into the market. But part of the apex bank’s hawkish stance stems from high retail inflation which has prevented earlier rate cuts from being transmitted to borrowers. The rupee has not seen much upside either, which RBI justifiably fears will push up inflation – and make it difficult to lower repo rates in the July policy review......................
RBI opts for a strategic timeout on rate cuts
.............. Till the rupee and global liquidity conditions stabilise, RBI may not budge. Siddhartha Sanyal of Barclays believes the developments in the global economy and the trend in the rupee in the next few weeks will have a strong bearing on RBI's action. The road ahead looks tough as RBI's actions will largely depend on how soon the government eases policy bottlenecks, and takes measures to attract stickier foreign direct investment. The only positive is that the central bank's commentary has not been very hawkish..............
Relevant policy in turbulent times: S S Mundra
.....While the tone of the policy continues to remain hawkish, according to RBI, monetary policy would be determined by how the growth and inflation trajectories, as well as the BOP situation, evolve in the months ahead. In specific terms, RBI is waiting to see a durable decline in inflation and this alone would enable it to address risks to growth.......
Don't depend on the diaspora
......Even so, it's in the RBI's own interest to find a solution to what could become a big obstacle to the transmission of monetary policy. With deposit growth at a 10-year low, banks are simply not inclined to cut lending rates in response to reductions in the central bank's policy rate. The much-delayed recovery in output will become more elusive if monetary stimulus does not reach corporate and individual borrowers........
End of the cycle?
.....The question that obviously arises is: what next? Over the past three years, the monetary policy cycle has witnessed pauses on two occasions. In December 2010, the RBI paused before resuming its tightening cycle in January 2011. Subsequently, after having surprised observers with a reduction of 50 basis points in the repo rate in April 2012, there was a relatively long pause until January 2013, when the rate reductions resumed. Going by these two precedents, yesterday's pause does not in and of itself signal that the rate cutting cycle has ended; .............
Seven out of 10 see rate cut coming in July 30 review
The Reserve Bank of India’s policy review which stayed away from even a mention of a “reversal in policy stance” has led to a rise in hopes that the central bank may cut the repo rate by at least 25 basis points at its next policy review on July 30. Out of the 10 respondents in a Cogencis poll, seven expect the RBI to cut the repo rate on July 30, with six of these pining for a 25 basis point cut and one respondent expects a sharper 50 bps rate reduction. Just three respondents expect the RBI to maintain status quo on rates at its next policy review.............
RBI's so-called 'hawkish' tone not holding eco back: Tandon
...... I have heard a lot of commentary since the morning saying that it has been a hawkish policy. I don’t see where the hawk is, I can see a big large dove. The way I look at it is today if you look at the policies that are likely to come through, for example, increase in coal prices and increase in gas prices, which are something that the finance minister has already promised, inflation will go up...............
Subbarao has hit the nail on its head, says Ambit's Wadhwa
I personally believe that the Governor has hit the nail on the head. We have had a rate cut in the past and it is not as if that rate cut has translated into a significantly larger amount of investment, particularly in the infrastructure and the capital goods sector. We have seen that lack of government decision-making and clarity on what it needs to do on critical elements related to infrastructure are all serious roadblocks at this point in time.............
Let the Reserve Bank Do What it Must
..........But it is possible for the RBI to grant more people access to formal
credit. It has to abandon the belief that financial inclusion can be
achieved only through physical expansion of branch networks and,
instead, permit innovative forms of banking and use of technology on a
large scale to expand access at low cost. The RBI should shun
conservatism in new bank licences. There is no reason why, say, mobile
phone companies or their joint ventures with established banks should
not be given licences. The ability of these companies to make money from
low-value transactions should be leveraged to achieve financial
inclusion. This is fully within the RBI’s control.
What the RBI can do
......... But this does not mean that there is nothing the RBI can do to improve matters. Financial inclusion is one area where the RBI can and must make a difference. Going by the conditions it has set for new banking licences, the old lady of Mint Street is still hung up on the brick and mortar model of branches in rural areas for banking expansion. This is ridiculous.............
Monitoring politically exposed persons: Need for a new approach by RBI
...........What is it that is preventing the RBI to issue guidelines to banks and financial institutions regulated by it from monitoring domestic PEPs? Are there regulatory hurdles? Or is it that the otherwise self-proclaimed independent body on repo and reverse repo rate determination i.e. RBI is scared to take an independent view on determination of domestic PEPs because of the fact that a big list of who is who is involved in the list. It is important to note here that the PEP list does not alone cover politicians and includes other prominent officials as mentioned in the definition above........
Currency Watch: Why the rupee fell after RBI kept rates on hold
.....The Reserve Bank of India kept its repo rate steady, warning of upwards risks to inflation and global economic uncertainty, in a decision that had been widely expected. A rate cut benefits the rupee by increasing confidence on the economic outlook and sparks hopes of more foreign inflows..........
SBI does not bank on Aadhaar as KYC proof
The central bank may have declared in December that the Unique Identification Authority if India’s Aadhaar numbers can be used by banks as valid know your customer (KYC) proof, but the country’s biggest bank is having nothing of it. As a result, the law ministry has been asked to opine on the matter, and an opinion is expected later this week..............
Maha govt to decide fate of land development banks by next year
......The options under consideration of the Maharashtra government are - to merge these banks with the district banks, ask the employees to take VRS, and to sell the properties of these banks to disburse the salaries of the employees who would be asked to take VRS. A final decision on the issue will have to be taken by March 31, 2014,...........
Reserve Bank of India boosts FDI efforts, to notify Press Notes 2 and 3 soon
...With the RBI moving to notify the press notes and the DIPP putting changes in definition of 'control', the government's FDI reform has been put on the fast track. ....
Read - ET
Read - ET
Create Conducive Investment Environment To Boost Growth: India's Reserve Bank
......"Key to reinvigorating growth is accelerating investment by creating a conducive environment for private investment, improving project clearance and implementation and leveraging on the crowding-in role of public investment," ..........
SBI training institute coming at Rajarhat
...........Christened the State Bank Institute of Management, the institute would be set up on a 10-acre plot acquired commercially from the West Bengal Housing Infrastructure Development Corporation Ltd, a release said. According to the release, Pratip Chaudhuri, Chairman, SBI, said one of priorities of the bank would be to train the 5,500 officers and approximately 20,000 clerks recruited in the last couple of years.......
Crisis looms large in agriculture sector
......Overlooking the significance of the cooperative sector, if a decision was made for routing all payments, including loans, through the commercial banks which continued to be an unfamiliar terrain for the small and marginal farmers, the farmers may not be able to continue their banking operations at ease.............
Dena Bank plans to spread wings overseas
....“We have already got the approval from the Reserve Bank of India for opening a representative office in the UK. The permission of the Finance Ministry is awaited”..........
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