Why RBI is a failed doctor

..........Basic problems of the economy are bleeding of Government revenues via leakages and corruption; increased consumption by Government servants and spending for buying of votes; and using foreign investments for meeting consumption needs. The RBI is helpless. Inflation will be controlled but economic growth will suffer if it increases interest rates. On the other hand, growth will be helped but inflation will increase if it lowers interest rates. The RBI is trying to find a middle course between these twin problems. This is like a doctor trying to find a middle treatment for a patient suffering from diabetes, asthma and typhoid at the same time................

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Reserved bang

............Rajan is known to ruffle feathers with his undisguised criticism and sharp, spot-on analysis of economic situations. He correctly predicted the global financial crisis as professor at the University of Chicago Booth School of Business three years before it toppled economies in 2008. Before he was appointed the chief economic adviser to the government, Rajan had severely criticised the government's performance at a book launch in Delhi. His one-year stint as economic adviser was seen as an apprenticeship before the real job at the RBI................

Read - The Week

Battling unintended consequences

................Then there was the push to encourage more foreign borrowing by Indian companies in the run-up to the financial crisis, despite the concerns of the Reserve Bank of India (RBI). Managing the sizeable capital inflows was already a challenge, and the central bank was also raising local interest rates to check inflation. Going abroad offered a convenient and cheaper unhedged option for companies, since they expected the rupee to continue to appreciate. Former RBI Governor Y V Reddy put a stop to the borrowing binge in 2007. That action, for which he was severely criticised, singularly prevented more painful fallout from the global financial crisis. But it did not prevent the inadequate preparation for dealing with the pressure of maturing external liabilities a few years later.............

Read | Business Standard

We intend to bring inflation down

.........We talk to people at the finance ministry every day. The lines of communication are open and they were open before also. I don't think the image of the RBI and the finance ministry not communicating is a fair one. But whether we are on the same page on everything is a valid and legitimate question. There are some issues on how we will achieve the common goal of growth and controlling inflation. But the timeframe to achieve that can be different. On many issues, whether it was the RBI under Dr D. Subbarao or the RBI today, I don't think there was a lack of communication or a lack of agreement. ..........

Read - The Week

Rajan rules out rate target, inflation key concern

.......The new RBI governor has once again said inflation-busting is the key objective of the monetary policy, especially at a time consumer price inflation has resolutely stayed above 9 per cent. The subtle, nuanced shift in the recent monetary policy statement by highlighting consumer price inflation rather than that measured by the wholesale price index (WPI) has sparked speculation that the RBI may raise interest rates once again. Rajan admitted that as the RBI hunkers down and tackles inflation, “there may be more of a growth sacrifice”........

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Despite the downturn, banks preferred choice of many job aspirants

........."Indian banks have immense potential," says Priyadarshi. "Because of their global outreach and size, they are exciting to work for. They provide excellent working conditions and learning opportunities, attractive compensation packages, friendly work environment, online learning and more." .......

Read - Business Today

RBI may allow gold loan NBFCs to increase loan-to-value ratio

...........Muthoot Finance lost several loans valued Rs 1 lakh to Rs 2 lakh to banks after RBI insisted that loans above Rs 1 lakh should be disbursed only in cheques. “Such loans are largely disbursed to traders and small entrepreneurs who are in need of instant cash for emergencies,” KP Padmakumar, executive director, Muthoot Finance had said while talking about the September quarter results.

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Top 30 NPAs form one-third of total bad loans

..................Reserve Bank of India Governor Raghuram Rajan had last week sent out a clear message that willful defaulters would be dealt with strongly. Asserting that the finance ministry and RBI were on the same page when it came to recovery, he had stated that this is not being said to create an atmosphere of fear or to be vindictive.......

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India’s banks will struggle for growth as economy slows

............And things do not look like they are going to improve any time soon. With a sluggish economy and persisting policy bottlenecks, the chances of companies taking on more loans to expand business are low. If the RBI is unable to reduce rates for a protracted period, given currency declines and high inflation, Morgan Stanley predicts that bad loans will increase by more than 4 per cent to 5 per cent over the next two years, and several companies might be forced to restructure their loans. State-owned banks are running mostly with stretched balance sheets and net impaired loans at some of these banks are now almost 100 per cent of equity,..............

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Rupee to trade in 62-63 range without RBI measures: Assocham

The rupee is unlikely to fall below 63 to a dollar even if the Reserve Bank of India (RBI) withdraws temporary measures such as direct sale of dollars to oil importing companies and the foreign currency non-resident (FCNR) swap facility put in place to support the currency, as speculative activity around it has mostly ebbed in the foreign exchange market, according to a paper released by the Associated Chambers of Commerce and Industry of India (Assocham)................

Read - The Hindu

ISLAMIC BANKING: Need of the hour

.......The position of former governor of RBI D.Subbarao regarding Islamic Banking was not favourable but newly appointed governor of RBI Dr. Raghu Ram Rajan has already given green signal to Islamic Banking in India by giving affirmation to Kerala by setting the stage for starting up the first Islamic non-banking finance company (Al Barakah Financial Services Ltd) in India with the partnership of state government department (Kerala State Industrial Development Corp-KSIDC). My memory is still afresh with...........

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Rajan's two-tier coal pricing idea gets Plan panel support

The Raghuram Rajan plan for a dual pricing of coal has found support in the Planning Commission. The Commission has asked the Prime Minister's Office to introduce two-tier pricing of the fuel that could be operated within the framework of the current fuel supply agreements (FSA) India's public sector Coal India (CIL) is now signing up with thermal power companies..........

Read - IE

Monetary policy and inflation control - Dr.S.S.Tarapore

........ The statement recognises that the RBI accommodation to banks can only be a marginal support and going forward, the more durable strategy for mitigating mismatches between supply of and demand for funds, is for banks to step up efforts to mobilise deposits. With the more recent upturn of inflation, inflation expectations remain elevated. The policy statement recognises that it is important to break the spiral of rising price pressures in order to curb erosion of financial savings. The policy stance and measures are intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth. The RBI would “ closely monitor inflation risks while being mindful of the evolving growth dynamics.” The RBI has to undertake a fine tightrope balancing act between its legitimate concern for inflation control and the government’s instinctive preference for fostering a revival of growth, particularly in the industrial sector...........

Read - FPJ

An evolving multilateralism - Dr.Subir Gokarn

...........Like the previous two domains, managing global macroeconomic stability has also seen paradigm shifts. The dominant International Monetary Fund (IMF) view of the world was shaken by the obvious inappropriateness of its recommendations in response to the East Asian crisis in 1997-98. This led to the affected countries and their similarly endowed neighbours emphasising the value of self-insurance, in the form of rapid accumulation of foreign exchange reserves. This assured them some independence from the multilateral framework in the event of another crisis. But......

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RBI may have more role for Nachiket

......Mor has also been included in the four-member high-level advisory committee headed by former RBI governor Bimal Jalan to vet bank licence applications. Many believe these to be the precursor to something much bigger. If the buzz in the central bank corridors are anything to go by, a much greater role at RBI could be coming Mor’s way. He is seen as a strong contender to be a Deputy Governor. Of the four deputy governors RBI has, two are promoted from within the ranks, while the other two — usually an economist and a former commercial banker — are hired from outside. The terms of two RBI deputy governors are to end in 2014. Anand Sinha, promoted from within RBI and spearheading the process of new banking licences, retires in January. And, former banker K C Chakrabarty’s term ends in June........

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How does the monetary policy work?

....Through its monetary policy, a central bank can affect the demand in the economy, but it has no power to affect the supply. When growth falls, the central bank may reduce the repo rate. As this monetary signal works its way through the economy, the rates for all sorts of loans fall. This stimulates the demand and helps the economy return to its potential growth rate.  Sometimes the growth rate is............ 

Read - ET

Know why Kuber is placed at the entrance of Reserve Bank of India Office in Mumbai

......As per our ancient texts like Puranas, a sage by the name of Vishra is believed to be the father of Kuber. That is why Kuber has been referred as Vishraa by the ancient literature. Due to the Kuber’s association with glory, splendor, prosperity, grandeur, and affluence he was chosen to be kept at the entrance of the Mumbai office of the Reserve Bank of India to ensure the treasury of the Indian government never remains empty.............

Read - Daily Bhaskar

Four person in police custody for videography of RBI, VIdhan Bhavan

.............The youths revealed that they were given a contract to gather information about security of RBI, Vidhan Bhavan and other sensitive areas. With this information, city police and intelligence agencies have been alarmed. Cops have started investigating about the person who gave the contract about gathering the details.

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RBI, banks firm up regional focus ahead of proposed bifurcation

........The financial regulator RBI is mulling an umbrella model in this regard. The regulator’s Hyderabad centre will continue to be the financial capital for the bifurcated regions according to a highly placed source at RBI. The regions will be brought under the jurisdiction of the RBI at Hyderabad, a regulatory model that is in place in the newly created States – Uttaranchal, Chhattisgarh and Jharkhand according to him...........

Read - The Hindu

Fake money menace on the rise, cops worried

............Sources from Pune crime branch said that the counterfeit notes, which are difficult to identify without a detection machine, have flooded the city. The local traders, shopkeepers and banks are the worst hit. The state ATS had arrested an alleged operative of the Indian Mujahideen (IM) two years ago and recovered fake currency notes, which he was allegedly using to raise funds for terror activities. So far, the investigators have established a link to Bengal where fake currency notes are pumped through Bangladesh. .............

Read - DNA