RBI’s Dec 16 policy review to take note of forex volatility

Bhubaneswar: The Reserve Bank of India (RBI) is hopeful that there would be some improvement in the foreign exchange volatility in coming days. “In view of the European Union Summit we are expecting that there would be some corrections in the value of rupee,” said RBI Deputy Governor Harun Rashid Khan. He said that the outcome of the summit would bring some comfort to the world economy.  “RBI policy review on December 16 would take note of the foreign exchange volatility besides the problem of inflation and the NPAs of banks,” Khan said on the sidelines of a regional seminar on securities market, organised by Bhubaneswar Stock Exchange, on Saturday. The deputy governor said that the euro zone crisis has its impact on the Indian economy. India used to get funds from European banks, he said and added, “Now that the European banks are in trouble, the funds flow to the country would be dried up.” The country's commerce is going to be affected as India's export to European countries is about 20 to 30% of its total exports.  There would flight of capital as the Foreign Financial Institutions (FIIs) would withdraw from the stock market. Commodity prices is going to be affected as the country is importing about 70 to 80% of its fuel requirements. The nation also is going to face the problem of contamination as India's global integration index has gone up over the years.  The seminar was addressed by Sebi executive director J Ranganayakulu, CSE MD & CEO Madhab Reddy, Nalco company secretary KN Ravindra, Bhubaneswar Stock Exchange chairman Vivek Pattanayak, and CEO Debraj Biswal. 

FE

As growth stalls, RBI will start cutting rates in early 2012

........ While the 6.9 percent figure was largely on expected lines given the signs of slowdown, all eyes are on Reserve Bank Governor Duvvuri Subbarao and Mint Road mandarins once again. The expectations are that, with investment slowing down, an unwinding of the interest rate cycle has now become an imperative. The Reserve Bank of India is to unveil its Mid-quarter Review of Monetary Policy on 16 December.........

Read.......... 

Noteworthy: Rs 500 minting up 17 fold in 10 yrs

There has been a fundamental change in what is sitting in an Indian's wallet: it's got more peach-pink and moss-green than ever before. The appetite for the big bills - Rs 1,000 and Rs 500 - is growing furiously. The figures tell the story. The number of Rs 500 notes minted across the country has grown almost 17 fold in the last decade, from 213 million pieces in 2000-2001 to 3,543 million pieces in 2009-10. The number of Rs 1,000 notes minted annually has grown nearly nine times, from 115 million in 2000-01 to 1,008 million in 2009-10. Today, there are fewer notes of Rs 20 and Rs 50, whether individually or collectively, than the total number of Rs 500 notes out there. These notes have quietly disappeared from automated teller machines with the value of every cash withdrawal rising. "Growth in the value of banknotes outpaced that of volume, reflecting the continuing compositional shift towards higher denomination banknotes, particularly 1,000 and 500," the RBI said in its annual report. RTI activist Manoranjan Roy, who sought information on the number of notes printed by the RBI, found that the big denomination notes are in huge demand. Economist Ajit Ranade tried to explain the demand pointing at the near double-digit inflation for the last two years. "The same lifestyle today requires 10-20% more money." he said. K Gayathri from the Institute of Social and Economic Change, Bangalore, added that the growing economy had put more money in people's hands, especially those from the manufacturing and service sectors. Consequently, spending too had gone up. Companies that run ATMs too say they are stocking more money in the machine trays as the "average ticket size" (simply put, the one time withdrawal) has ballooned from Rs 5,000 to Rs 7,000 approximately in the last three years. "Cost of living has gone up, the rise in our aspirations and desires push up demand for cash," said Mani Mamallan, chief marketing officer of C-H Technologies that manages ATMs for the State Bank of India. Currency in circulation is the largest component of reserve money and is primarily determined by demand. "There was acceleration in currency in circulation in 2010-11 due to increased demand due to economic growth, high inflation and low yield on deposits," said RBI officials. 

TOI

Obituary

Shri.Babul Sukumar passed away on 29-11-2011. He was Deputy General Manager in Central Pension Cell in B K C, Mumbai. He was born on 12-9-1953 and had served in several Offices of the Bank and in several centres. He was a truly genial and helpful Officer - especially at the time of getting the P J Gold Coins he was very helpful. He leaves behind hundreds of good friends in the Bank.

Shri.M.O.Jacob passed away in Trivandrum on December 5,2011. He was 85 years old. He retired on 31-12-1985. He held the post of the Secretary of the R B I Employees Association, Trivandrum for several decades.

As reported by P.P.Ramachandran (via e-mail)

At CMs’ meet, Munda flays delay in setting up of State Cooperative Bank

During a conference of the Union Finance Minister and Chief Ministers of eastern States in Kolkata on Saturday, Jharkhand Chief Minister Arjun Munda expressed concerns over the delay in establishing a State Cooperative Bank in the last 11 years. He complained that the two nodal agencies, RBI and NABARD, have not taken any step in this direction. Munda made two specific demands - the State Bank of India and Bank Of India must open a branch in Ranchi and these must be headed by a Chief General Manager and General Manager so that they can effectively coordinate with banks in Jharkhand for better financial inclusion. Munda said that due to absence of a State Cooperative Bank around 39 lakh farmers have been facing problems obtaining easy loans. “Only nine lakh farmers have a credit card while the rest are forced to approach moneylenders,” he said.  Munda requested Finance Minister Pranab Mukherjee to instruct public sector banks to provide loans to farmers assuring all support from the State Government. Stating that only 9,562 non-farmers in Jharkhand have been given loans, he said urgent steps must be taken by the Central Government in this regard.  Criticising the functioning of public sector banks in Jharkhand, Munda said that the banks are supposed to reserve at least one per cent of the total amount of loan to be given to poor under a differential rate of interest whereas it is merely 0.44 percent. He said that the percentage of loans given to weaker sections of society and the SC and ST has fallen from 8.7 per cent to 5.25 per cent during this fiscal year. He said most of the villages of Jharkhand having a minimum population of 2,000 should have been provided with banking facility under the financial inclusion scheme. “There are 1,541 such villages against which only 904 villages have been covered under the banking correspondence scheme. Even these are not working properly,” Munda said. 

The Pioneer

Bring banking services under Right to Service Act: Modi

PATNA: Bihar deputy chief minister Sushil Kumar Modi on Saturday urged the RBI to bring the banking service procedure under the provision of Right to Services Act so as to maintain transparency in disbursal of loans. Addressing a meeting of chief ministers of eastern states convened by Union finance minister in Kolkata, Modi said the banks keep loan applications pending for long and then reject them. The banks do not maintain a register about approval and non-approval of loans, he said and suggested computerization of loan application processing to reflect the delays on the part of the banks in disposing of the applications. According to Modi, the banks provided only 53% of the 15 lakh Kisan Credit Cards which they were asked by the central government to provide to farmers in Bihar in 2010-11. In the current financial year too, the rate of disbursal of KCCs is not satisfactory, Modi said and added the farmers should be provided ATM cards along with KCCs and the loan amount through the KCC should be increased from Rs35,000 to Rs50,000. The Centre has so far made available only Rs265.06 crore out of Rs595.64 crore required for revival of primary agriculture credit societies and cooperative institutions in Bihar, Modi said and complained to the Union finance minister about slow pace of computerization of district cooperative banks by the Nabard. Modi also suggested creation of Education Credit Guarantee Fund for providing education loans.

TOI

Pranab pleads for rural banks in east

... Earlier this week, the RBI Governor D. Subbarao at a meeting with Bengal chief minister Mamata Banerjee and finance minister Amit Mitra had also urged the state government to recapitalise the three RRBs...........

Read.............

ASSOCHAM emphasises need for overall review of definition of ‘priority sector’ lending

...... In a communication to the Nair Committee constituted by The Reserve Bank of India (RBI), the chamber said that there is a high degree of necessity to include sectors like infrastructure, logistics, health and services in the definition of ‘priority sector.’.........

Read.... 

RBI wants stay on CIC order on Panipat resident's RTI plea

PANIPAT: Reluctant to reveal the names of top 100 bank loan defaulter businessmen of the country, the Reserve Bank of India (RBI) has filed a petition in the Delhi High Court, seeking a stay on the orders passed by the Central Information Commission (CIC). On November 15, CIC, while deciding a petition filed by local RTI activist P P Kapoor, had directed the RBI to provide him the names of defaulters by December 10 and upload these on the bank's website by December 31. In the petition, Kapoor had challenged the denial of information by the bank. Kapoor had sought the details from the bank in August last year, but was denied on the grounds that RBI held these in 'judiciary capacity'. However, the CIC directed the bank to post on its website complete information on all such industrialists as part of suo-motu disclosure mandated under Section 4 of the RTI Act before December 31 and asked it to update it every year. The RBI had objected to making the information public, saying "it is held by it in fiduciary capacity and disclosing it will adversely affect economic interest of the state". Information commissioner Shailesh Gandhi agreed that information was 'fiduciary in nature', but said that such exemption did not stand when there was larger public interest in the disclosure. After his RTI query was dismissed by the RBI, Kapoor filed the petition with the Central Information Commission, which on October 12 summoned the public information officer of the RBI to appear before it on November 8 with all relevant documents. The commission held a hearing on the said date, but the verdict was withheld. Kapoor said the information was sought by him in the larger public interest as revealing the names of the defaulters could force them to return the money of the public sector banks. 

TOI

How to get your Banking Problems Solved by Ombudsman

....Banking Ombudsmen participate in various awareness campaigns under Financial Inclusion and Literacy Programme and visit a number of villages in various Districts under respective territorial jurisdiction of the BOs. Participation in various important fairs and festivals in the State, face to face interaction with members of public at various places at block level, participating in seminars organised by Government of India in association with RBI are some of the other initiatives undertaken by the Officers of BOs.....

Read..........

Rs 2,150,000,000,000: that’s our gold import bill this year

............ In fact, the doughty Indian is stocking up on gold for the same reason the Reserve Bank of India (RBI) did in November 2009, when it bought 200 tonnes from the IMF – to preserve the value of wealth. With the future of the euro and the dollar uncertain, it made sense for the RBI to diversify. In its forex kitty, the best returns have come from gold..............

Read..........

Toss between safety & return

............ Interest rates seem to have peaked and going ahead, yields should stabilise. The Reserve Bank of India is not expected to carry out further rate hikes, as it can adversely affect growth. Therefore, if you’re looking to diversify your portfolio by adding a dollop of debt investments, ultra short-term income funds could be a wise choice.

Read........ 

Banks lure gold buyers with plastic

.......Banks seem to be cashing in on the craze for gold by promoting credit and debit cards with such offers such as iPads. The strategy is paying off as buyers are happy swiping plastic cards at jewellery outlets...........

Read.....

Islamic Banking: Developed by Indians, flourishing in other countries

......... "The non-availability of an interest-free banking option has distanced many Muslims from banking products and services. The Reserve Bank of India (RBI) data report for March 2010 indicates that banking participation in Muslim- concentrated districts is below the national average. They lack in banking access, infrastructure availability and low credit-deposit (CD) ratio",..........

Read........... 

Persistent food inflation warrants monetary policy responses: RBI

PUNE: Reserve Bank of India Deputy Governor Subir Gokarn said that the drivers of food inflation has changed from the pair of sugar and cereals during the last four decades of the previous century to proteins and fruits and vegetables during last four years. He also asserted that the situation of persistent high food inflation warrants monetary policy responses to keep the overall inflation in check.  Mr Gokarn was delivering the Kale Memorial lecture at the Gokhale Institute of Politics and Economics (GIPE) today on 'Food Inflation: This Time It's Different.'' "The more worrying attribute of food inflation is persistence. In the four decades in 1960's, the drivers of food inflation were cereals and sugar with a supporting role being played by proteins and fruits and vegetables in the second half of the period,"said Mr Gokarn, adding, "While contribution from proteins has gone down somewhat in 2011-12, which is the basis of the declines we have seen in food inflation in the msot recent date releases, the pressure from fruits and vegetables have sustained."  Mr Gokarn said on the demand side that people eat better as they get richer is a simple assertion. But on the supply side, we have problems. The productivity of pulses has oscillated around 600 kg/hectare for the last decade and a half. "There are several states, in which pulses may constitute an important part of the typical diet, whose productivity is significantly below the national average. If overall productivity is to be improved, a strategy which focuses on the specific bottlenecks in these states is probably the best way to go about it,"he said. Mr Gokarn pointed out the rising wages of agricultural labour and the stocks of agricultural commodities as two important factors exerting influence on their prices. "Wages rising faster than productivity can only result in rising prices, if producers cannot substitute other inputs for labour. There is important relationship between price dynamics and stocks. Periods in which stocks have been high, show relatively low rates of price increase," he said. Lastly, he pointed out the declining trend in the long period average (LPA) of monsoon rainfall. "This means that normal monsoons are delivering less water than in the past. He said that the implication of persistent supply pressures on the economy are not very good for maintaining balance between fast growth and low inflation. "While transitory episodes of food inflation do not warrant a monetary policy response, there are strong justifications for acting in the face of more persistent ones, if the objective is to keep overall inflation in check. 

ET 

Financial leadership of the west has caused global crisis: Duvvuri Subbarao, RBI Governor

KOLKATA: RBI Governor Duvvuri Subbarao blamed the financial leaders of the West for letting the so-called innovations cause the second global crisis in less than three years even as European leaders scramble to fix the two-year-old sovereign troubles. "There is a vacuum in financial leadership globally," Subbarao said on Friday in Kolkata at a CII leadership summit. "They lacked foresight to see problems of financial innovations. We have gone through one crisis, and I am scared of saying we are going through another." Nearly two years after Euro leaders started to contain the debt turmoil, their fifth effort led to the creation of $267-billion warchest and evolved rules to curb recurrence of the fiscal mess. They advanced the beginning of an 500-billion euros rescue fund to next year and scrapped the demand that bondholders share losses in sovereign rescues.  These troubles in the global financial markets pose challenges to local financial stability. But despite the pressures of financial meltdown, he may stick to taming the inflation priority, over slowing economic growth.  "I am sensitive to difficulties faced by the corporate sector, because of high interest rate and unfavourable exchange rate. I am also sensitive to poor people who are hurt by inflation," he said at the inaugural session of the two-day event, organised jointly by CII and Suresh Neotia Centre of Excellence for Leadership.  The rupee has depreciated over 14% since early August due to global destabilising factors and the governor said the fall in local currency has put additional pressure on inflation, which still remained high despite RBI's policy of monetary squeezing.

ET

Inflation would have been higher if not for monetary tightening: RBI chief

...Defending the RBI's aggressive monetary tightening, which has drawn criticism for its impact on growth, Dr Subbarao said, “It is a legitimate concern that inflation has not come down appreciably despite hikes in interest rate 13 times since March 2010, but it has to be noted that the rate of price rise would have been even higher had monetary tightening steps not been taken......

Read............

Subbarao acknowledges cash crunch facing banks

.........Reserve Bank of India governor Duvvuri Subbarao on Thursday said there are liquidity constraints across the system. His comments came amid growing concerns that domestic liquidity condition will remain stretched for some time more.Interestingly, Subbarao’s comments came close on the heels of RBI deputy governor Subir Gokarn on Wednesday reportedly indicating that the apex bank will refrain from cutting the amount the banks need to set aside as reserves...............

Read........

Probability of global recession low: D Subbarao, RBI Governor

KOLKATA: The probability of a global recession is low, even though the US is growing slowly and Europe is experiencing negative growth, RBI Governor D.Subbarao said today. "The probability of a global recession, I think, is low," he said at a CII event here, adding that even though India's growth rate is falling, this cannot be termed as recessionary. "The US is not growing remarkably, but slowly. Europe is experiencing negative growth and Japan is also recovering," he added. On the challenges currently facing the country, he said the RBI's job is to strike the right balance between growth and price sensitivity. "I am sensitive to 80 per cent of the people of the country who are affected by price rise. We will have to balance the concerns of the corporate leaders crying against interest rate hikes and the poor." Subbarao said it is a legitimate concern that inflation did not come down appreciably despite hikes in the interest rate 13 times since March, 2010, but maintained that the rate of price rise would have been even higher had monetary tightening steps not been taken. "It is a valid criticism. Had the RBI not acted, inflation rate now would have been 12 per cent or 13 per cent and not 9.7 per cent at the moment," he said. On capital account convertibility of the rupee, he said it would not take place unless there was fiscal stability, more developed financial markets, stable growth and steady inflation.

ET

India Inc: Don’t blame govt, blame yourselves for current mess

.................The most telling incident of all was in January 2005, when then RBI governor, Dr YV Reddy, mentioned some kind of tax on FII flows. The same evening, Finance Minister P Chidambaram announced on television that no tax was being considered. The sensitivity of FII flows to the government’s actions was driven by corporate India, which was the beneficiary of those flows at that point of time........

Read............