..............In other words, there's nothing substantive the government or the Reserve Bank of India (RBI) can do about the rupee. It is currently (July 8) resting on a pivotal support and may take a breather, perhaps even recovering a (very) little bit of ground. But with global markets seemingly stuck in perma-hurricane season, any respite would likely be short-lived. What they can - and should - do is infuse some strong vitamins into the country's economy. Vitamin S (for sentiment) is critical but, with credibility extremely low, stocks are near zero - the good news is that Vitamin S quickly regenerates itself once it finds the right trigger. The only other treatment - the silver bullet - is Vitamin G (for growth). The RBI should immediately cut interest rates by one per cent, with perhaps a booster dose in a few weeks.
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Friday, July 12, 2013
Making bankers pay for failed gambles
........Several commissions have gone into the financial crisis and proposed reforms. These relate mostly to issues of capital, scope and size in banking. It has taken a parliamentary commission to look into the inner workings of banks and focus resolutely on the accountability of bankers and bank boards. The Commission’s report goes to show that banking reform is too important to be left to regulators and bankers and that parliament, as the representative of the wider interests of society at large, has a great deal to contribute. The RBI should consider taking many of these proposals on board. Indian banking has been dominated thus far by public sector banks, which are intrinsically risk averse and more amenable to direction by government and the regulator. This has made for a certain stability in Indian banking.............
Bankers demand interest on CRR
Indian Banks Association (IBA) today demanded a cut in cash reserve ratio (CRR) and repo rate in pre monetary policy consultations with Deputy Governors of Reserve Bank of India. K R Kamath, chairman, IBA and chairman and managing director, Punjab National Bank said, “we have requested that if RBI can give some interest on CRR, it will be most welcome.” RBI will announce its first quarter monetary policy review on 30 July...........
Banks seek lower tenure for non-resident deposits
...............“We have requested that if the minimum investment period on FCNR and NRE deposits can be reduced to at least six months, it will help us bring some more dollars into the country,”.......
Difficult to predict rupee fall reversal: Subbarao
......."The rupee depreciation over the last six weeks has been because of global factors .... It is difficult to say how long that effect will persist because it is factors beyond our control,"............
A rate surprise?
The Reserve Bank of India is to announce its monetary policy on 30 July, a good cue to look at what other central banks in the developing world are up to.........
RBI's cosmetic measures fail to stem rupee fall
..........What these moves suggests is that RBI is running out of options in controlling the currency. Its tightening of controls are seen as signs of the central bank trying to hold the reigns tightly. An economy that has managed to control its current account deficit by inflow of ‘hot money’ in equity and debt market is now paying the price when the reverse flow has started. .........
The taming of the rupee...
......While the RBI notification states “risk management” as the subject of the regulation, the Sebi circular mentions no reason for carrying out the measures. Apart from these formal notifications, there have been some other eclectic interventions in the markets by RBI. State-run oil companies have been asked to meet their dollar requirements from a single bank (July 9). It seems banks were asked not to make predictions about the rupee in their forecasts to the public. The harsh reality is that these actions will not help stem the fall of the rupee; in all probability, they make things worse................
Small steps
........... The rupee’s vulnerability to a range of market and generic fiscal imbalances need tougher policy measures. Currency and markets cannot be kept buoyant solely on RBI and SEBI support.
The rupee tempest scuttles fiscal math
It was going well for the government to keep the fiscal math in order. Inflation levels were easing to less than 5 per cent and tax collections were expected to rise. But the near 12 per cent depreciation in rupee against the dollar since the end of April has spoiled the party..........
Another sorry quarter for public sector banks
.......As has been the norm in the past few quarters, public sector banks, struggling with their legacy non-performing assets, burdened under political compulsions to lend to the priority sector and pressured by the diktats of the finance ministry to cut lending rates, are left holding the wooden spoon...........
Food Bill — not what the stomach ordered - Charan Singh
.........So, there may be a need to evaluate the segments of the incremental population to be covered by the Food Security Bill and undertake a survey of tax payers whose money will be used for providing such food security. This exercise is feasible given the Internet penetration, and support of on-line voting services available with most media channels. Once the mood of the general public is gauged, such schemes in a democracy can be justified and successfully pursued........
Are Banks Responsive to Credit Demand Shocks in Rural Economies?
......... Undoubtedly, poor rainfall causes idiosyncratic shocks to income and consumption of the households in the rural sector of India and in other emerging economies, which in turn creates shocks to credit demand. It results in a high cost of credit and pervasive rural indebtedness, notes Rakesh Mohan, an erstwhile Deputy Governor of the Reserve Bank of India (RBI), in an RBI paper in 2006. His observation suggests lack of responsiveness of the commercial banking system to credit demand shocks. However, it is a commonsense observation based perhaps on his experience, but not on an empirical analysis of extensive rainfall and farm credit data. From time to time, the financial press and other media outlets in India have also reported isolated instances of the effect of poor rainfall on bank credit availability. But so far there has been no systematic study................
No room for rate cut on Jul 30 due to Re plunge: Crisil
The rupee depreciation is likely to hurt the inflation fight and restrict the Reserve Bank from cutting its policy rates at the forthcoming monetary policy review by month end, says ratings agency Crisil. "If the rupee averages at 58 to the dollar this fiscal, average headline inflation could rise to 6% compared to our baseline call of 5.3%. This leaves little room for monetary easing despite the sharp slowdown in GDP growth," Crisil said in a report today..............
Dealers can exploit holes in trading curbs
The Reserve Bank of India (RBI) and Sebi's moves to curb speculation in the currency derivatives market have left several loopholes that traders can still exploit, raising demands for further checks. To begin with, exchanges are interpreting the rules differently even when the norms are applicable................
RBI may revise WPI inflation estimate upwards: Economists
..........But according to economists the RBI's projection for WPI may be revised upwards soon. “Upward revision of WPI numbers from RBI is on cards. Whether they will do it immediately or after monsoon assessment, that depends,” said Rupa Rege Nitsure, chief economist, Bank of Baroda. Nitsure's projection for WPI inflation for 2013-14 is a tad above 6%. Earlier she was expecting it to be 5.3%............
RBI may ask banks to classify floating provisions as NDTL
.....Sources from the banking circle said that RBI is likely to ask banks to treat floating provisions as a part of net demand and time liability - on which banks are mandated to maintain cash reserve ratio and statutory liquidity ratio.............
NBFCs want status quo over private placement norms
........NBFCs are lobbying with RBI to lift maximum investor cap as well as minimum investment amount. They say if someone has done something wrong, why should someone who is doing business genuinely should suffer? The reference was towards Sahara Group and Saradha Group. While Sahara has been ordered to refund the depositors money, Saradha investors’ money is as good as lost and there is bleak possibility of recovery...............
Rajan may meet global banks on possible foreign debt sale
The government plans to meet as many as eight banks as it weighs selling debt abroad to raise dollars and help steady the rupee, according to finance ministry officials. The meeting, which could be held as soon as Friday, is a brainstorming session to assess the feasibility of such sales, the officials said, asking not to be identified as the move is confidential...........
Why you shouldn’t position portfolios based on central bank policies
................RBI has time and again acted against market expectations. India’s central bank has either raised rates sharply or cut rates sharply even as markets were expecting moderation. RBI’s focus has shifted continuously with the Rupee (INR) being the primary focus now while growth and inflation have taken a back seat. The INR trading at all time lows has prompted the RBI to curb speculation and put on hold monetary easing that is necessary for the country’s growth. RBI’s focus could change suddenly if the threat to growth is high. Bond markets in India have always lost when trying to double guess RBI’s policy moves.............
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