MUMBAI: The Reserve Bank has signed cooperation agreement with central banks of Australia and New Zealand for exchange of information. The MoUs provide a formal, yet legally non-binding, channel for information exchange between the supervisors, RBI said in a statement. ..........
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, November 8, 2013
That seventies feeling
It is no secret that the Indian economy has been in a fair bit of trouble in recent quarters. The latest economic review published by the Reserve Bank of India (RBI) in October shows why there is no easy way out of the current muddle............
No, this isn’t a pre-NaMo bull run
.......The planned reduction in the quantum of asset purchase by the US Federal Reserve has been postponed for a few months, at least. This has resulted in resumption of foreign portfolio inflows which has pushed stock prices and has also provided the much needed stability to the currency market. The Reserve Bank of India is also doing its bit in the meantime to shore up its firepower by bumping up the foreign exchange reserve. However, there is another argument that is beginning to gain ground. It is now being said that the stock markets have started factoring in a change of guard in New Delhi...........
IMF economist Siddharth Tiwari likely be next CEA
Eminent International Monetary Fund (IMF) economist Siddharth Tiwari, with about 25 years of experience at the multilateral agency, is likely to succeed Raghuram Rajan as the next chief economic advisor (CEA) in the finance ministry. Tiwari, an Indian national, is the director of strategy, policy, and review at the IMF and has got vast experience of Asia & the Pacific, as well as Africa and Europe. Though there is no official confirmation, officials said he was being considered after some other candidates did not show much interest, fearing a political change after next year’s elections, while some names were struck down by the finance minister............
How much India should care for S&P’s views
...................But a low rating for the country sounds warning signal to the investor that the country is at risk. Now, given that the government and the RBI are doing their best to encourage borrowers to tap the euro markets for funds to shore up our forex reserves, a downgrade would men bad news for these companies as enhanced perceived risk will automatically push up the cost of borrowing. Also, when there was a currency crisis a couple of months back, the concept of a sovereign bond was also spoken of, in which case the rating would matter. ...........
A slick ahead
............RBI’s dilemma is that it cannot meet such massive requirements of these firms from its dollar kitty. Sooner or later, these firms have to return to the market or some demand management has to be effected. The onus of doing that, however, lies with the Union government.
Read - Mint
Read - Mint
India Post to set up ATMs at 4 branches in Chennai
CHENNAI: India Post may be fighting to remain relevant in a digital world, but don't write a requiem for it just yet. After emerging as a contender for a banking licence when the Reserve Bank of India issued final guidelines for new permits earlier this year, India Post drew up a plan it is now ready to implement. India Post, Chennai city, will offer core banking solutions in four head post offices in the region as part of a pilot project. As part of its trial run before making a full-fledged foray into banking, India Post will also set up ATMs at the head post offices in Mylapore, T Nagar and Tambaram and on Anna Salai. .............
Public Sector Banks Need Urgent and Bold Reform
.......For the first time, in case of SBI, Indian government has adopted the
idea of fixed tenure for CEO. This has to be embraced more broadly.
Finally, openness to lateral induction of talent at all levels and HR
processes and policies aligned to the private sector. Government HR
policies on recruitment, promotion and performance management are not
suited to create a high-performance
culture required to compete with the private sector. Those who argue
the public sector will stay dominant in Indian banking take heart from
the fact that it still controls 73% market share in assets after almost
two decades of competition from the private sector. To their dismay,
that number is lower in...........
How banks can use HUL’s sachet strategy to crack rural market
.......Recently the Reserve Bank of India appointed a technical committee, comprising senior executives predominantly from the banking and mobile sectors, to examine the feasibility of implementing an SMS-based funds transfer service using an app that can support any type of mobile handset, including feature phones. The technical committee will also consider the advantages/challenges of having a single app across all handsets in an SMS encrypted environment. It will submit its report by the end of this year. This new initiative is a welcome move as it will help promote mobile-based fund transfers even in rural areas..........
Read..........
Dipan Mehta positive on banking space
........."The private sector banks came out with very decent set of numbers for the September quarter despite various challenges which were there in the quarter with all the various measures which the Reserve Bank of India (RBI) took to curtail currency volatility. There was a spike in the debt markets also and wholesale debt funding costs also went up. Despite all these issues by and large private sector banks continued their secular growth as we have seen.".........
The more the merrier
.......It has been a long-standing position of the central bank that the wholly owned subsidiary mode is preferable, since it induces the foreign bank to maintain a domestic balance sheet and, importantly, a governance framework. In the absence of clear incentives for subsidiaries, foreign banks logically prefer the branch mode; but now, those who see India as a long-term growth opportunity have the basis for deciding between the two modes. The two main operational advantages that a wholly owned subsidiary will now have are the......
Open question
.........How effective the incentives for subsidiarisation are going to be is an open question. WOS will be treated like domestic banks as far as the RBI's branch guidelines are concerned. However, this will only prove to be tempting if foreign banks aim to expand in the retail segment. Currently, foreign banks like HSBC and Citibank seem more invested in trade and corporate finance. It is unlikely that liberal branch expansion rules will be a game changer for them. Additionally..........
Foreign Banks India Ltd
.....The above carrot-and-stick approach policy makes sense, when major foreign banks are themselves keen on grabbing a bigger slice of the market for financial products in a $2 trillion (and growing) economy. Indian consumers stand to gain from their expanded operations and greater competition. But consumer interest will also be served by ring-fencing or making a clear delineation of their assets and liabilities from those of the foreign parents; especially important in the aftermath of the 2008 global financial crisis........
NO RUSH HOUR SEEN AT MINT STREET
.......“For
banks that have been here for a long time, it would be in a sense
retrospective legislation for us to say now you will have to change the
form,’’ governor Raghuram Rajan had said. “They have come in with some
ground rules and we can’t overnight
change the rules on them. So we have to give them some incentive and
the incentive we are giving them is near national treatment on a
reciprocal basis.’.................
Read - ET
Foreign banks respond with caution to RBI’s proposal for local incorporation
..........The RBI statement on the new norms for foreign banks is silent on the tax or stamp duty implications. However, former RBI governor D. Subbarao in an address to bankers in June had said “major issues with regards to capital gains tax and payment of stamp duty have been resolved”. “There are still some legal issues which we hope to resolve in the next few months,” he had said, without specifying what these issues were............
Bigger play for foreign banks may mean better deal for you and me
..........Allowing foreign banks greater operational ground may both help protect the interests of depositors and fund capital projects in India. It may even bring about cost-effective banking backed by technology, thus increasing banking penetration. While mergers and acquisitions may be some time away, smaller banks like IndusInd Bank, ING Vysya, Yes Bank, Dhanalakshmi Bank, Karnataka Bank and Ratnakar Bank — which are looking for capital to expand their footprint or scouting for investors — will see their valuations rise dramatically........
Foreign lenders wait for better clarity
.....RBI does not have the authority to offer tax incentives to foreign banks for creating subsidiaries. A year ago, the finance ministry had agreed to offer tax neutrality for subsidiarisation of foreign banks, but lenders had also demanded tax deduction for the cost incurred on conversion, as well as relief from payment of stamp duty. So far, there is no clarity on whether the government will agree to these demands........
Madhya Pradesh police bust dabba trading racket
.........“Since they were operating the fake exchange through mobile phones, it has become a multi-locational crime. We are looking to find if there is any violation of the rules on foreign exchange, Sebi rules, RBI rules, tax law and other rules and Acts, besides cyber crime. We will have to also see from where they got the software. So, it has become necessary to seek support of various investigation agencies. The CBI has multi-locational presence and can investigate the case better,”......
First women's bond from World Bank raises USD 165 mn
...........Bonds tied to social or environmental targets are part of a new trend of social finance, as a growing class of investors seek to bridge the gap between philanthropy and pure financial returns. Besides helping businesswomen, women's bonds can help raise awareness about the importance of gender issues in development, said Jingdong Hua, vice president and treasurer at the International Finance Corporation. "The gender issue ... weaves so tightly into every social and development issue we're facing today," he told Reuters...................
Thursday, November 7, 2013
Precautionary Margin Fund - - Dr.T.V.Gopalakrishnan
My View on Borrowers are not criminals
The author being a banker himself should know better how NPAs are formed and get sudsidised by the other stake holders Viz; the depositors, share holders and good borrowers. No doubt economic slow down does affect the borrowers business and all defaulters cannot take shelter under this and avoid payment of bank"s dues. Even the NPAs disclosed by banks do not reflect the correct position and there are different categories of hidden NPAs. The trade off between banks and Auditors do hide actual NPAs and banks have their own ways of hiding and creating NPAs. Unless and until the banks and the potential defaulting borrowers are disciplined, this problem of NPAs would be perennial and innocent depositors and shareholders who include the Government using tax payers money to rescue the banks would be bearing the brunt. The only way to minimise formation of NPAs in banks is to have a self correcting mechanism which can discipline the borrowers and banks simultaneously through creation of a Precautionary Margin Fund which should be sufficient enough to liquidate the NPAs without squeezing the depositors, share holders and bad borrowers. This would act as a deterrent to discipline both the bad borrowers and the banks for their casual and callousness in managing the funds which basically belong to the public. The banks balance sheets would also emerge strong over a period and corporate borrowers in particular would have a better rating in the market. Is there any takers of this solution?
- Dr.T.V.Gopalakrishnan
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