........... "The RBI expressly forbids people from writing anything on a note. But cashiers write on the uppermost note of a pile routinely, this is something which happens every single day." To complicate matters further, the FICN seized of late in the capital has been of a superior quality, fooling even experts (The micro-lettering used by the RBI has been mimicked, in certain cases)................
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Monday, November 4, 2013
Different strokes
Gone are the days when the Finance Ministry used to react to monetary policy changes by the Reserve Bank of India. Often, the Finance Minister himself would make a brief statement, which would be followed by an official release. But when Raghuram Rajan raised the key policy rate by 25 basis points at the policy review on October 29, the minister and his ministry kept mum. Quite a change from the days when Finance Minister P. Chidambaram used to react rather sharply after rates were raised.
- HBL
Pencil in another rate hike
...........So, predicting what a central banker would do when he looks at the heat-map is easy. Policy rates will be raised to tame prices. And if inflation is accompanied by high growth, the decision is a no-brainer. But that’s not the case in India at the moment. GDP growth has slipped sharply to 5% in the last fiscal and prospects for the current one are worse. CRISIL expects growth to slow further to 4%. This creates a dilemma: should RBI focus on growth or high inflation? This is hotly debated every single time before the announcement of the monetary policy. We argue that a sluggish economy does not mean RBI should become tolerant of high and rising inflation. Therefore, the decision to raise interest rates on October 29—which implies that risks from high inflation outweigh risks from low growth—was appropriate...........
Inflation busting outplays growth angst
.....Further, RBI has pushed its case for sustained growth by enabling banks to draw money from the central bank if necessary for financing projects affected by liquidity shortfalls. Under the circumstances, it is investor confidence and debottlenecking of infrastructure projects which can push growth further. A semblance of normality has returned to the broader economic outlook with the current account deficit becoming manageable and rupee not facing imminent danger. Yet, RBI’s persistent anti-inflationary stance suggests anticipations of below par or nominal growth in the current fiscal.........
Salutary messages from the RBI
..........Normalisation of monetary policy rates indicates that the repo rate will be restored to its pre-July position of being the policy rate. Under normal circumstances that would be a signal to banks to raise their interest rates. But the MSF has been brought down, and the short-term repos will now provide more liquidity. Understandably, many banks have reacted cautiously, waiting to study the full implications............
The Montek school of thought
..........Ten years is a long time for any tenure. It is, therefore, logical to ask what imprint Ahluwalia has left on the working style of the Planning Commission. Or, for that matter, what difference he has made in the Planning Commission's role in governance and overall approach to policy-making. For such an assessment, it is important to understand the context in which the Planning Commission was set up...................
Green shoots?
.....What accounts for this small but possibly significant turnaround? Management of the external economy, particularly after Raghuram Rajan took over as Reserve Bank of India (RBI) Governor, is certainly a reason. Whether or not pure coincidence, India’s foreign exchange reserves have risen by $8.1 billion since September 6 (two days after Rajan assumed charge). This is despite.......
A vision of sustainable growth
Is India doing as well as it wants to? We were proud of our GDP growth when it was high; now we are dismayed. Even in those years of high growth not so long ago, we were not happy with the progress of inclusion in growth, and the pace at which social and economic inequalities were being reduced. Nor could we be happy with the deterioration of our natural environment in our hunger for material and GDP growth........
Options Get Legit, Now RBI should Act
.....Sebi’s change of heart may prove to be a game changer for equity
investors and is certain to aid investor sentiment. However, it is now
hoped that the RBI too would be changing its antithetical stance towards
options. RBI has been known to take a “view” that any optionality in
securities in favour of foreign investors makes the investment take the
colour of a debt and, therefore, non-FDI compliant. This view has been
causing practical roadblocks in the way of ........
Tale Of The Tumbling Rupee
.....One of the capital control measures adopted by the Reserve Bank of India is the reduction of the cap on outward flow of remittances from $200,000 to $75,000 per year, which could slow down investments in Dubai’s real estate sector........
Below-the-line is the best bet in rural India
In the late nineties of the last century, the Reserve Bank of India introduced new norms setting limits based on the ratings of individual businesses; whereby NBFCs (Non-Banking Finance Companies) were restricted from taking deposits from the public. Though these norms were well meant, yet they adversely affected well managed NBFCs like the Shriram Transport Finance Co (STFC).........
Rising inflation: Have food prices delinked from agricultural production?
.......But here's the problem. Few observers, including the RBI, seem to expect any substantial moderation in inflation, or in the actual level of prices. "The price level is expected to remain high," says Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices (CACP), a government body which advises the government on agricultural price policies such as the minimum prices offered to farmers for grain.............
Are banks wrongly branding people as defaulters?
.........That brings us to the subject of this article. The pendulum has perhaps swung away to the other extreme from the time when banks were helpless spectators to a borrower defaulting, to the current scenario where a bank has the power to deny credit to the borrower if he defaults with them. While it is not my intention to bat for defaulters, people being wrongly branded as defaulters is a very serious issue, especially where banks have this power completely in their hands..........
High interest riddle in state savings scheme
............According to analysts, despite the low fund costs, it will be a tight ropewalk for the state-run corporation as it will have to depend on a large number of depositors to make the scheme viable. Moreover, change in interest rates by the Reserve Bank of India and the macroeconomic condition will also affect the scheme's performance.
Insurance cover no big deal for company deposits
.........The Act also bars companies from promising huge returns and hefty commissions to agents, in excess of the prevailing rates prescribed by the Reserve Bank of India (RBI) for such deposits. The premium paid cannot be recovered from the depositor and the money has to be paid by the company alone. Also, the mandate to maintain a balance in a reserve account would push up costs for companies. It isn't clear whether companies would earn any interest on the reserve account, but it wouldn't be much, even if they do. Simply put, these proposals will make deposits an expensive source of raising funds. This means ...........
Banks told to set up ATMs in all gram panchayats in Karnataka
..........In the first six months of the current fiscal year, the RDPR spent Rs. 850 crore and deposited Rs. 500 crore in banks for payment of wages to beneficiaries. Following the poor performance of business correspondents, delay in the payment of wages by banks, and also to reduce travelling time and expenses, the RDPR has asked to conduct mapping of all GPs to set up ATMs. Sudhir Kumar Jain, chairman of State-level Bankers’ Committee, and Managing Director of SyndicateBank, also suggested that banks explore the option of setting up ATMs in GPs.......
Give Civil Servants Cash, not LTC
.....State-owned banks are thinking of changing the rules that govern the LTC regime, but that will not help. What could, is to scrap the allowance altogether and pay the
money as a part of bureaucrats’ salaries. There is no point, apart from
ducking a little bit of tax, in distributing travel or other allowances separately from the pay cheque..........
Shobhan Sarkar writes to PM seeking transparency in excavation
.....Sarkar sent the letters yesterday, demanding amendment to the Indian Treasure Trove Act so that the recovered gold could be handed over to the Reserve Bank of India. He also sought complete transparency in the ongoing excavation and asked the government to allow common people to the site and live media coverage of the excavation. .........
Saturday, November 2, 2013
RBI: Monetising the Tale of Two Governors
......Subbarao too had hiked REPO rate several times to moderate inflationary pressures. However, the same action from two RBI governors received quite separate reception from Markets, Analysts, Industry and Columnists. Subbarao was faulted time and again for not paying required attention to the anaemic growth of the Indian economy; and for being unduly and narrowly fixated on inflationary pressures. Critics said that inflationary pressures were on account of supply side constraints -falling production, and not due to rising demand expectations. Partly this carried some weight in view of the negative growth posted by automobile industry and manufacturing sector. However, the sticky food and non-food inflation as measured by Consumer Price Index (CPI) worried Subbrao as it has Rajan. However, while Subbarao was skewered for his alleged hawkish anti-inflationary posture, Rajan received for same action a very indulgent reception............
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