The Reserve Bank of India's (RBI's) in-house rule for setting interest rates is a secret sauce in desperate need of a new recipe. The ingredients for the rate-setting formula are not known. But a Breakingviews examination of India's call-money rates, inflation and gross domestic product (GDP) over the past 13 years shows that the central bank has historically placed a rather low emphasis on taming inflation, while fretting more about output slumps and currency swings.............
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Tuesday, October 15, 2013
Tears from onions
.........These patterns exacerbate the dilemma that the RBI will have to resolve. Given that it hiked the repo rate in September, it is very unlikely to reverse course so soon. At best, it can use the relatively muted core inflation reading to justify status quo on the repo rate, while continuing to roll back on the marginal standing facility (MSF) rate, thereby effecting some short-term loosening. On the other hand, with RBI Governor Raghuram Rajan's perceived preference for the CPI as the policy benchmark, the patterns from that index suggest that ...........
Onion prices push up inflation RBI’s rate cut hope fades, Rajan running out of options
As expected, inflation hit a seven month- high of 6.46 in September. This may make it difficult for the Reserve Bank to cut key interest rate on October 29 to spur industrial growth. Newly appointed RBI Governor, Raghuram Rajan had last month hiked interest rates to control the economy. While he did try and inject some liquidity into the system by lowering the Marginal Standing Facility for banks twice since he took over, his hands are clearly tied on the repo rate front. This time, with food inflation creating serious problems, the RBI will be hard press to ease repo rate...............
Have onions tied Superman’s hands?
......However, Rajan has also said that the focus of the central bank would remain on growth too, with the emphasis shifting depending on the situation. All in all, there has not been a significant change in the RBI’s stance on growth - inflation dynamics after D.Subbarao vacated the governor’s office...........
India must focus on growth as markets stabilize: Chanda Kochhar
........“The steps taken by the Reserve Bank of India (RBI), including those to roll back some of the previous liquidity tightening and measures to lure inflows from overseas Indians have had a cooling effect,” she said in an interview in Washington D.C. “The economic slowdown is weighing on banks’ asset quality though it isn’t bad enough to create a big kind of havoc,” she said. “Finally what we need to focus on is growth in the country,” she said. “It’s the investment story that has fallen off currently. What we really need is a much more conducive environment.”...........
The Game’s Bond, Gold Bond
..... Once
the scheme stabilises, expect steady inflows to counter the redemption
outflows. Should there be a serious mismatch, inflows can be stimulated
by recalibrating interest rates. Finally, Reserve Bank of India itself
sits on over 550 tonnes of gold that could be used for redemptions in
the worst-case scenario.
Centre returns moneylending Bill 7th time
...... The government is understood to have asked the state to reconsider the Bill because it overlapped with several provisions of various central laws including the Reserve Bank of India Act, Companies Act and Banking Regulation Act.........
Alarming slide in Re’s value
........... The remedial steps need to be taken at the earliest with the intervention of the central bank in the country. This has been long ignored by the RBI during the past few years as a result of which the Rupee slide against US dollar has continued. Since money flow in the market is continuing at a high speed that is a new phenomenon in........
Bank ATM goof-ups and how to handle them
......If you thought this is an imaginary situation, it is not. This happened for real and is cited in an RBI document. The acquiring bank (other bank) approached the banking ombudsman (BO), and informed them that the disputed amount was remitted to the issuing bank (own bank) through NEFT. The BO advised the issuing bank to credit the amount into the customer’s account, along with a penalty of Rs 100 per day for delay, as per the apex bank’s rules. On further investigation, the BO found that............
Low pay forcing techies to seek alternative careers
......There are lakhs of technical graduates who have joined or are trying to find jobs as police constables, bank clerks/officers and civil servants. According to bankers, all new recruitments are dominated by the B.Techs. The data speaks for itself: State Bank of India, the top recruiter among banks, recently hired 1,500 probationary officers. “About 80-85 per cent of them are graduate engineers,’’ said C.R. Sasikumar, Chief General Manager, SBI........
Monday, October 14, 2013
USA, Mother Of Economic Ills - Dr. Duvvuri Subbarao
....Dr. Duvvuri Subbarao, former Reserve Bank of India (RBI) Governor, speaking at the Association of Professional Bankers-Sri Lanka’s silver jubilee anniversary celebrations on Tuesday (October 8) said that the global financial crisis of 2008 showed that the world was not decoupled. But globalisation and its effects world over from an economic perspective is not a 21st century phenomenon. The effects of globalisation and its economic ramifications thereof may have had been first felt as far back as 84 years ago, in 1929, ie the year in which the world saw the onset of the Great Depression, beginning with the collapse of the New York Stock Exchange..........
Financial inclusion and the rate of interest - Dr.N.A.Mujumdar
..In its zeal to implement the Basel norms with its attendant risk weightages, the RBI ended up in evolving a highly inequitable interest rate structure – a structure in which small income borrowers subsidised high income borrowers. A small farmer was required to pay 12 per cent interest, while a high rated corporate entity could raise money from banks at 6 per cent. It took the RBI more than a decade to realise this mistake and in the meanwhile, small borrowers suffered. The road to financial inclusion is not always paved with good intentions..............
Financial literacy among urban working young people low: Study
.........The working paper suggests any intervention strategy to enhance financial literacy among the working young must take into account sociological and behavioural aspects. "The influence of the contextual variables suggests the focus of any strategy for improving the financial well-being of youngsters in India would have to be broader than just the individual," it said...........
RBI employee hangs self
Nagpur News : A 50-year-old junior engineer of Reserve Bank of India hanged himself at his Ganguly layout residence in Sonegaon on Friday evening. Kaushalyedra Singh Brij Bihari Singh took the extreme step after he returned home from office on Friday. His son Malka Singh told police that Singh had locked himself in the room since after he came from office around 5.30 pm. “We called him for dinner but he didn’t respond. Thinking that he is tired and want to rest, we didn’t disturb him. The incident came to light next morning when he didn’t open the door in the morning and his body was found hanging after breaking the door,” said Malka Singh in his police statement. Police informed that no suicide note was found. Cops suspect that he was disturbed over his family issues. A police source told that he was depressed over his wife’s illness.
UFBU CIRCULAR - Another Failure Stares Top Union Leaders
....... since there is no satisfactory progress towards revision of wages and it is unduly delayed, the Constituents of UFBU decided to exhibit their dissatisfaction. UFBU has, accordingly, decided to express its dissatisfaction by conducting demonstrations throughout the country in all State Capitals and other Major Centres on 22nd October 2013 demanding expeditious wage settlement. We request all our units/members to conduct massive demonstrations at all these Centre and make it a thunderous success...........
Why are there so few women bankers?
........In the Reserve Bank of India (RBI), it was a 68-year wait for a woman to reach the deputy governor’s post. The central bank traditionally has one governor and three to four deputy governors to formulate monetary policy and run the banking system. RBI’s first woman deputy governor, Kishori J. Udeshi, took over in June 2003. Subsequently, two more women reached this tier—Usha Thorat and Shyamala Gopinath. Against this backdrop, the State Bank of India’s wait of 206 years to get its first woman chairperson has been a bit longer. With Arundhati Bhattacharya, 57, moving into the corner office at the nation’s largest lender, women chief executive officers (CEOs) now control close to 40% of India’s banking industry assets. This is an interesting piece of information as..........
A conspiracy of silence
......Regulators need to first ensure that the basic structures of a financial system are intact. It is because of its no-nonsense approach to core regulation that the Reserve Bank of India is respected worldwide. ..........
RBI term repos - A.Seshan
......... For increasing liquidity, the RBI should raise the ceiling on the amount of repos and/or MSF by 25 basis points of net demand and time liabilities. It will have a greater effect on liquidity than term repos that should be revisited for its effectiveness...............
Smaller better than larger
My View on "Achieving financial inclusion":
Lot has changed from 1975 to now in banking sector from the way it works to the way it perceives the future. Small private banks have proved their proximity to the customer much better than the larger banks. Large public and private sector banks had huge HR problems in deploying their personnel to the rural areas and many branches in such places in the upswing of profit motive were closed down. Even later given preference they would stay off these areas. It is the small banks and the cooperatives that the author talked of that came to the rescue of the small and marginal farmers and tenant farmers, several small businesses, artisans and micro enterprises. It became a herculean task initially in the mid-1990s to take the SHGs to the commercial banks and NABARD struggled a lot. Instead of strengthening the existing rural cooperative infrastructure which the Nabard ceremoniously neglected, without even introducing a common accounting system until Vaidyanathan Committee insisted and with a vast contributory negligence, to plead today for large banks in the name of capital would tantamount to ignoring financial inclusion. Further, to say that small banks would suffer from capital is also not correct. Once they have build trust capital would flow. The size of Capital we are seeking today as buffer is to insure the interests of the depositors on one side and on the other larger side, failings of the banks in risk management. There are also more number of UCBs that outperformed their peers than those that failed. This is one of the reasons to permit the UCBs also as prospective clients in the new bank licensing policy regime.
- Yerram Raju
Future Roadmap
........he foresight and timely action of the RBI and Government of India ensured its merger with Punjab National Bank. Few other problem resolutions and strategic consolidations have taken place in the banking sector amongst about 35 mergers and acquisitions in India, post 1990 economic reforms. However few failures of Cooperative banks could not escape the ultimate closure. This brings into focus well-timed discussions within the Reserve Bank of India, drawing lessons from the causes and factors of domestic and international failures and the complexities of globalisation. A view is gaining ground that the RBI needs to strictly control certain risky tendencies of few banks in the country to minimise shocking surprises as happened in USA,UK and elsewhere. ........
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