...Still, New Delhi has been reluctant to relinquish control. The state-run banks account for no less than three-fourths of the lending in the country. Politicians and bureaucrats sometimes try to use them to promote their causes, a benefit they do not want to give up. State-run banks have two masters – the Finance Ministry as well as the Reserve Bank of India. In addition to the regulatory orders from the RBI, they regularly receive missives from the ministry to push the social agenda of the government. In the period from October 2012 to January 2014, for example, the Finance Ministry issued 82 circulars to public sector banks, the RBI panel report said. “It is a fundamental irony that presently the government disadvantages the very banks it has invested in,” the report said......
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Friday, May 16, 2014
Lenders Should Come Under Cos Act, Says Chief Of RBI Panel On Corp Governance
..“The Bank Nationalisation Act of 1969 was necessary at that time and its enactment was for government ownership of the banks. But 45 years after the Act was promulgated, it is important for us to ask if this is the best legislative structure under which the banks should now function. For a long time, we had an unreformed Companies Act, but in 2013 we got the new Companies Act which creates good governance structure at the level of the board.” According to Nayak, one of the perspectives that guided the panel was that there should be only one kind of bank licence irrespective of ownership and all banks should come under the Companies Act. “.......
Read - TOI
Esha Media Research aims to monitor 200 channels in next 2 months
...“Private sector banks enjoy a higher multiple in terms of price to book value over their public sector cousins and thereby a better valuation on the stock market. Our monthly report for April also endorses that the private sector banks have been able to occupy more TV media space than public sector banks, deriving better perception points,” he added. The research report further found that Reserve Bank of India (RBI) occupies 22 per cent space of the total news in the banking sector on TV. And RBI’s credit policy governs the news coverage. “Reserve Bank of India governor Raghuram Rajan occupies more space than the vocal deputy governor K C Chakrabarty,” the research further added........
Investments in RIDF can be counted towards priority sector lending: RBI
............RBI has now allowed them to include the outstanding deposits in RIDF as part of indirect agriculture lending. Accordingly, the deposits as on 31 March under RIDF and a few other funds with Nabard will be treated as part of indirect agriculture loans and will count towards their overall priority lending target, RBI said in a notification. Nabard has an RIDF outstanding of about Rs.75,000 crore on 31 March..............
RBI, Finance Ministry talk contingency plan for May 16
The Reserve Bank of India (RBI) has discussed contingency plans with the finance ministry and the stock market regulator to deal with any excessive volatility from election results to be unveiled on Friday, Governor Raghuram Rajan said on Thursday. The RBI will also be ready to deal with any volatility in the rupee, Rajan said during a news briefing after the RBI's board meeting in Shimla.....
After Two Years of Firefighting, PC Logs Out of North Block
........Soon after that, he had to battle another crisis -a seemingly inexorable slide in the rupee that was triggered by Ben Bernanke's comments about the US Federal Reserve tapering its stimulus. He put in place measures to rein in the ballooning current account deficit curbs on gold imports and plans to shore up reserves. He was joined in battle by Raghuram Rajan as the new governor of the Reserve Bank of India. Rajan took over the post in September last year after serving as Chidambaram's chief economic adviser..............
Will the next FM rise to the challenge?
............As the banking system is the backbone of the economy, the government will have to recapitalise state-owned banks adequately and make sure their stressed assets come down. Their needs are assessed at Rs 5 lakh crore by 2019. As the government cannot meet the financial needs of the banks from its budgetary resources, the finance ministry is evaluating options such as a special purpose vehicle, a holding company and employee stock options. It should consider the report of an RBI panel which talks of divesting stakes in state-owned banks to less than 50 per cent. It may also look at consolidation of public sector banks which UPA could not do. To achieve economies of scale, it is imperative and bank unions should be taken into confidence..........
Modi impact on Rupee
..........If a Modi government comes to power, the belief is the R will move up to levels of 57-58. Much of this is predicated on FIIs remaining bullish on Indian markets—since mid-February, they’ve bought $8.6 billion worth of stocks and bonds. In the short run, the R could well surge to those levels, but it is likely to retreat thereafter. For one, while RBI may not explicitly express its views on where the R should be trading, the central bank’s commentary suggests it concurs with the finance ministry's view that 60-62 is reasonable...........
The inflationary pincer
.........Does this mean, then, that it should lower rates to stimulate growth? Unfortunately, tempting as this inference may be, it is not necessarily correct. While lowering inflation may be proving to be a huge challenge, provoking it to accelerate will turn out to be surprisingly easy. The first sign of the RBI having lowered its priority on inflation fighting could trigger a spiral, which, historical experience tells us, is extremely difficult to contain. Frustrating, no doubt, but this is the price that the economy must pay for ..........
RBI's best tool to control inflation is interest rate: Rajan
..."We do not use rupee as the way of managing inflation. We are not trying to rely on a particular level of rupee to help us on inflation front," he said. He said sometimes it can prove dangerous if "you become overly reliant" on certain level of rupee. Instead what RBI has focused on is creating conditions inside the country for reduction in inflation. "Thus far we feel comfortable with the pace of progress. Of course, there are blips up and down...,"
Mayaram upbeat about fall in inflation but cautions on El Nino
..."We are encouraged that the inflation numbers are coming down... On the whole at the moment, it appears that we are on track as far as inflation is concerned...(it is) something to smile about,"......
SBI opens RASMECC in Shillong
.......The RASMECCC is a is a specialized loan processing, sanctioning and maintenance hub, which deals with the Personal and SME loans of 21 city based branches, handling more than 20000 loan accounts including big branches in the state. The centralization of loan processing, sanctioning and maintenance enables the bank to give better customer service, besides.................
Why you must thank RBI for ending penalties on pre-paying home loans
......This clearly shows that pre-paying a loan benefits you tremendously. Now with no pre-payment penalty, the amount you save is even higher. For the above example, if a pre-payment penalty of, say, around 3 percent was still applicable on the sum of all pre-payments made, the prepayment fee would have added up to Rs 7,800. But, with the apex bank’s new move, you can even save this amount.
Thursday, May 15, 2014
Banking on governance
..............In the larger context of financial sector reform, which Reserve Bank of India Governor Raghuram Rajan has set so much store by, this is the third in a series of reports - following the Nachiket Mor and Urjit Patel Committee reports - blueprinting significant changes in the system. Like the previous two, its recommendations are worth serious consideration; they do offer the government a way out of an increasingly difficult situation, which does no good for anybody. However, like the other two, this report is also likely to step on a number of toes, perhaps even more so...........
The BIC bank reform
.......But irrespective of its political feasibility, the idea of a BIC — a separate state-owned holding company for PSBs similar to Singapore’s Temasek or the UK government’s UK Financial Investments Ltd (UKIL) — is worth replicating across public sector undertakings. The BIC model will firstly free PSBs from the regime of dual regulation by the Finance Ministry in addition to the RBI. It will allow the PSBs to become fully professional board-managed entities, hopefully immune from North Block directives. The appointment of CEOs, independent and whole-time directors, recruitment to senior management positions, policies pertaining to salaries and promotions, and all other strategic managerial functions would become the responsibility of bank boards..........
Sensible banking
......Without dwelling too much on the past—why public sector lenders are poorly supervised, why they have become so inefficient and financially fragile—it is more than evident that boards of banks need to be revamped, professionalised and made more accountable. But for this to happen, there needs to be a drastic overhaul of rules and regulations. Which is probably why the committe believes the way out is for banks to be incorporated under the Companies Act and for the government to transfer its holdings to a Bank Investment Company (BIC). The BIC, will over a period of time, say, three years, pass on several of its powers to the boards of banks; that way banks cam be spared the damage being caused by dual regulation—by RBI and the finance ministry...........
Withdraw RBI panel report: AIBEA
......“It is sad that the panel had recommended public sector banks to be handed over to private hands at a time when the bulk of the bad loans are attributable to the private sector. More than four lakh crore rupees of bad loans are due from the big private corporate and business enterprises. Given the bad track record of the private banks in our country, all the private banks should be nationalised and brought under public sector banking.”...........
RBI, not FinMin, should oversee PSU bank regulations: Panel
The PJ Nayak-led panel on governance of bank boards has recommended that public sector banks should be answerable only to the RBI, and not to both RBI and the Finance Ministry as is the case now. This would provide a level playing field for state-owned banks vis-Ã -vis their private sector counterparts, the panel said............
Nayak panel wants RBI to let banks decide when to go public
...In its report presented yesterday, the Nayak committee said three years is a short time to gauge whether a bank has the management skills to create a value proposition, while factors such as market interest in the stock and determining the future financial trajectory are also difficult. The committee said insistence on a three-year window for listing incentivises "poor governance" promoters to exit, while "good governance" promoters who want to grow a business slowly are disincentivised..........
PSU bank boards reasonably professional
...........In an interview to CNBC-TV18’s Latha Venkatesh and Sonia Shenoy, Chaudhuri said boards of PSU banks were reasonably professional as of now. On whether the recommendations of the PJ Nayak panel on governance of bank boards would be accepted, Chaudhuri said it would depend on the political leanings of the next government.
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