Markets waiting to exhale

….The shift in monetary policy creates a potential trading opportunity. It could lead to a rally in the debt market, if RBI dares to follow through with further cuts. Funds dealing in medium- and long-term debt could see a jump in net asset values, or NAVs, through Q1 and Q2, 2012-13. Bond yields in the treasury market are straightening out though still tight and inverted at some tenures……

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Fuelling concern

.....The Reserve Bank of India's annual monetary policy (2012-13), unveiled on April 17, came as a shot in the arm for the three companies — IOC, BPCL and HPCL. “Fuel inflation moderated from over 15 per cent in November-December, 2011, to 10.4 per cent in March, 2012, even as global crude oil prices rose sharply, reflecting the absence of commensurate pass-through to domestic consumers. It is imperative for macroeconomic stability that administered prices of petroleum prices are increased to reflect their true costs of production,” the apex bank said.......

Read - The Hindu

Rate cut must be backed by simplification of the system

........ The RBI has virtually admitted that it has not succeeded in controlling inflation through the lone monetary policy measure. Had the good sense prevailed earlier, at least the contribution RBI has made towards the inflationary situation by making investments and business expenses dearer could have been avoided. The silver line is that RBI itself now realises its mistake. It even takes a part of the responsibility for slowdown in industrial and manufacturing growth. It also admits that fall in credit offtake was also the result of its 13-time rise in interest rates. The RBI analysis states that fall in Indian banks’ liquidity resulted because of its tight monetary policy.............

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Making sense of RBI’s ‘ gamble’ on growth

....RBI has decreased repo rates as it wants to kickstart the growth in the Indian economy, which as the numbers reveals is clearly slowing down. For example the growth numbers for the Indian economy has slipped from 7.7% in the first quarter, to 6.9% in the second quarter and further to 6.1% in the third quarter. Many believe that one of the reasons for this slowdown is the high interest rates prevailing in the economy. By reducing the repo rate by 50 basis points, RBI has indicated that it is tackling this issue of high interest rates..............

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Externalities of rate cut

The article ‘‘RBI has jumped the gun'' (Business Line, April 20) finds fault with the RBI for slashing interest rates by 50 basis points and points to the ‘real threat' of a resurgent inflation. The ground realities do not reflect the possibilities of such a situation. If banks concentrate on raising deposits and lending in March, it need not be interpreted as ‘window-dressing' but as an attempt to raise the performance level to present a better balance-sheet for the year. Being the financial year end, the efforts may also relate to reducing income-tax liabilities by some.

- T. R. Anandan (HBL)

Onus on Centre now

......the RBI has decided to send out a strong signal for monetary transmission. This, the Governor is convinced, can happen only through a decisive action — a 50 basis point cut in this instance. For another, the apex bank has discovered that liquidity tightening has been stronger than it had bargained for. Deepak Mohanty, Executive Director, admitted that the “liquidity has been much tighter” through the second-half of 2011-12................

Read - The Hindu

The debate about growth and deficits

It might be a little late in the day to write about the monetary policy announcement of April 17, but I am going to do it anyway. My defence is that it deserves a broader assessment than the standard “hawkish-versus-dovish” template affords……………

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Economy stares at an avalanche

…..However, with no clarity on fiscal consolidation and dormant inflation in the prices of fuel, electricity, coal, fertilisers and indirect taxes, RBI does see the risk of inflation spiking again, and hence limited the rates cuts. Which means lending rates would come down but only gradually, as and when the cost of funds for banks comes down……………..

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'India 2nd most confident country'

......."India has overtaken Japan to become the third-largest economy in terms of purchasing power parity (as per IMF report) and is heading for accelerated growth, following RBI cutting repo rate by 50 bps and inflation moderating to acceptable level," Ipsos India CEO Mick Gordon said. "This should provide some confidence to the overall sentiments and help in stimulating investment. If the inflation momentum eases in near future, it will give RBI more room to cut rates further to boost investments and growth," he added............

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We are also helping Europe to some extent

Do you think RBI’s inflation concerns are legitimate and another inflationary flare-up could lead to a reversal in its monetary policy stance?

Of course, from the demand side, the monetary policy is to be addressed keeping in view the inflationary situation in the system. There is inflationary pressure. Fortunately, manufacturing inflation has come down to 4.5%, core inflation has been reduced. That is why RBI could take the decision. But pressure is still there..............

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Can central bankers & other technocrats rule the world?

When Duvvuri Subbarao sprang a 50 basis point rate cut on an unexpected market this week, investors were delighted, as they always are by cheaper money, but a few pundits read into the announcement a veiled threat that this was the last help the government could expect from the Governor of the Reserve Bank of India, until it put its fiscal house in better order..................

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New Delhi faces need to cut deficit for higher growth

India's government must do more to narrow its budget deficit to promote long-term growth and tame inflation, Reserve Bank of India Governor Duvvuri Subbarao said. "In India, it's not growth versus austerity, but austerity for growth," Subbarao said yesterday in a panel discussion moderated by Charlie Rose in Washington, where the central bank chief is attending meetings of the International Monetary Fund and Group of 20 nations...........

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Watch the video...............

6 co-op banks have 15-20pc NPAs: NABARD report

..............As per the NABARD’s assessment note the non compliance of norms in the appraisal for disbursal of loans is one of the main reasons for default. During the assessment it was also found that the co-operative banks lended to the sugar co-operatives even when they were in losses and this was done without any guarantee from the state government on repayment before the loans were released. Chief General Manager of NABARD, M V Ashok, said “Six of the unlicenced district co-operative banks were poorly managed and lack of compliance of the credit appraisal system norms led to the financing of undeserving units leading to the heavy NPAs.”................

Read - Indian Express

India to offer microloans for people living with HIV

..... Providing loans to HIV positive people isn’t a great financial risk, says Thotngam Jamang, Deputy General Manager of the Reserve Bank of India, which oversees commercial operation of banks in India. “Many of them have skilled knowledge and are well versed in traditional economic activities such as crafts, et cetera. But there are few employment opportunities. These loans will support entrepreneurship.” Jamang adds that the banks will arrange regular health check-ups for loan recipients......

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Central banker’s reformist vision

........... Jalan covers a lot of ground in this compendium of various papers, speeches and essays and is consistently in favour of liberalisation and reform. He rejects, quite unequivocally, the old and failed “command and control” policies copied from the Soviets. He also questions the efficacy of the elaborate five-year plans in the absence of a dynamic “public delivery system” at the “Centre, State and district” levels. Jalan plainly states: “Without strengthening the ability of the Government to do what it alone an do, and narrowing the focus of its activities to what matters most for the future development of the country — education, health, clean environment and a functioning infrastructure — India cannot adequately seize the opportunities that lie ahead.” He goes on to say, “No amount of macro-policy reforms by themselves will be sustainable or yield permanent results.”........

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MICR, IFSC code must on passbook, a/c statement: RBI

The Reserve Bank has made it mandatory for all banks to print the MICR and IFSE code on the passbook and statement of account of the customers...................

Read - Hindustan Times

ATM fraudsters auction data abroad: SBI

.....The authorities had detected 29 Canara Bank ATMs fitted with skimmers in Chennai and eight in Bangalore recently. The fraudsters had stolen in 1.5 lakh data and sold them off to Russia...........

Read - Indian Express

Fake currency notes came via LoC trade route: Cops

.............Police said the currency notes had been neatly packed in 33 bundles of ladies fabric suits, and had been sent from Pakistan through the LoC trade route. The LoC trade is conducted between businessmen from Pakistan Occupied Kashmir (PoK) and those from Jammu and Kashmir along two routes...................

Read - Express India

Your inflation woes worsen

........our tryst with inflation is far from over. The Reserve Bank of India (RBI), last week, cut interest rates on signs of moderation in inflation. But here's why it may be too soon to conclude that inflation has been reined in as far as you — the consumer — are concerned...............

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Govt's 7-7.5% growth target over ambitious: Deepak Parekh

…………"The RBI has swallowed the bitter pill despite no decline in inflation , but it’s about time that we give a little bit of growth to the economy. I'm not satisfied over the recent policy flip-flops by the government."……………..

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