Why RBI Governor D Subbarao won't cut rates anytime soon

........"Structural inflation, and the middle class' demand for food, limits the RBI's ability to pursue easy monetary policy," said Chin Loo Thio, the Singapore-based regional strategist for BNP Paribas. "There is a limit to which the monetary policy can be effective." Deputy Governor Subir Gokarn himself poured cold water on any hopes of a sharp reduction in interest rates last week. "We started that process [of reducing interest rates] in April," Gokarn said in Hyderabad recently. "But if you look at our inflation projections in relation to what we consider as long-term or medium objective there are inflationary pressures. That in a sense limits the room that we have to reduce rates."..............

 

Read ET

Little chance of further rate cuts, says Indian Overseas Bank chief

NAGPUR: There is little chance of further rate cuts by the Reserve Bank of India (RBI), feels chairman of Chennai-based Indian Overseas Bank (IOB), M Narendra..............


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

Inflation control should not eat away growth

.............Subba Rao, RBI Governor feels that rate hike is necessary to curb inflation. If inflation is due to excess money supply, then RBI Governor’s prescription is correct. But in the present context, food price hike is due to demand supply mismatch which in turn is due to wastage of food produced. Under the circumstances, an interest rate hike will not bring in the desired results. Only fiscal measures can bring the desired solution to the problem. Rate hike will only help the fixed deposit investors to enjoy more returns. But here again, the fixed deposit return can be eroded by high inflation and the investor is a net loser. But he has no choice.......................

Read.......

A silver lining in India's slowdown?

.........The RBI has continued to implement financial reforms to facilitate infrastructure financing, improve the transmission of monetary policy, and promote financial inclusion. If these positive signs are quickly followed by bolder government action, the recent slowdown would have a silver lining.

Read - BS

The postman will bring loans, besides moneyorders!

The Department of Posts could give the yesteryear Hindi film song Daakiya Daak Laayaa (Postman has brought a letter) a new twist. The lyrics of the1970s song could well change to ‘Daakiya Loan Laayaa, Daakiya Kisht Leney Aayaa' (Postman has brought a loan, Postman has come to collect an instalment) if the Department's plans to set up a bank pan out. So, the postman will give you money, that is loan, even if you do not get a money order from your dear and near ones! ..........

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

RBI to close down coin, currency counters

.........“If the RBI totally withdraws from the scene this will send a signal to the racketeers and the common people will be the worst victims. This will throw the entire currency management into a state of anarchy,” feared Thomas Joseph, convener, United Forum of Reserve Bank Officers and Employees and secretary, Reserve Bank Employees Association (RBEA). While the Central Bank will be shorn of one of its core functions, the move will also deprive the public of a valuable service enjoyed by them for decades.............

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

My Views on "Plea not to close down RBI counters":

Sections 38 and 39 of the RBI Act make it obligatory on the part of GOI to put rupee coins into circulation through RBI and on RBI to supply different forms of currency to the public. It is intriguing that within a short period after heralding its intention to be part of GOI’s outreach programmes to ensure financial inclusion to every village, RBI is being persuaded by Centre to withdraw from one of its core functions. RBI withdrawing from the scene will immediately put banks under pressure and short-supply of currency and coins in cities will result in several unethical practices. No big research is needed to see that already under-staffed banks will not be in a position to fill the vacuum created by RBI’s withdrawal. Already there are pockets like bus depots and religious centres where coins are piling up waiting for bank staff to accept. In such a situation, banks will scare away customers approaching for exchange of notes and coins.

M G WARRIER, Thiruvananthapuram

My Views on "RBI not to interfere in bank service charges"

- A.Chandramouliswaran, Former Executive Director

While in a deregulated environment, it is oaky that RBI should not interfere in Bank charges. Nevertheless, they have to see, especially in new private sector banks, whether the charges are reasonable and they should counsel the banks when they find that the charges and the minimum balance required to be maintained,especially of the new private sector banks, are unreasonable. It is not so easy to change bank accounts when several transactions of the customer including online payments are linked to the bank.

Fake currencies found from ATM

MALDA (WB): Fake currencies, with the face value of over Rs one lakh, were found from two ATMs of a state-run bank in English bazar town of Malda district in the past two days.............

Read......... 

India’s Mobile Banking Ekosystem

...........Agent networks are the main issue that mobile operators and banks need to get right if they are to turn branchless banking into a sustainable business. The Reserve Bank of India recently removed restrictions on agent exclusivity, so customers can now transact at customer service points of one bank even if their accounts are held at another bank. Such interoperability should mean greater efficiency and lower costs across the system............................

Read......

Bharti Airtel and Axis bank collaborate on mobile money and banking services

.............The venture marks Airtel's second attempt to extend its mobile money capabilities into the banking market. The telco announced a joint venture with the country's largest bank, State Bank of India, last year, to a offer a complete suite of banking services via both the mobile platform and a state-wide network of branches and retail distribution outlets. However, the plans were scuppered by the Reserve Bank of India over the equity arrangements for the venture, which would have given the telco a stake in the banking business without recourse to a banking license.

Read.......

RBI stall at Govt. exhibition

An official of the Reserve Bank of India explaining to the public at the RBI stall at Government Exhibition in Coimbatore on Thursday the features that help identify counterfeit currency notes

COIMBATORE : The public can exchange soiled currency notes at the Reserve Bank of India (RBI) stall at the Government exhibition here. The RBI had a stall at the exhibition last year too. Every day, currency was exchanged for about Rs. 25,000 and nearly 200 people walked in. A special coin was also released last year, said District Lead Bank Manager J. Vanangamudi.The stall this year had details about identifying fake currency notes, coins released by the RBI so far and also about banking services. Soiled currency notes would be exchanged and coins would be distributed at the stall. With shortage in availability of coins, the demand was high for coins and a large number of visitors were expected to come to the stall for it, he said. Apart from currency exchange, clarifications would be available on the banking services too. Kaya Tripathi, Deputy General Manager of RBI, and District Collector M. Karunagaran participated at the inaugural of the stall on Thursday

Stagflation: Over to FM now; Subbarao can take a vacation

..............“The RBI is like a goalkeeper trying to prevent self-goals by the government. It cannot fix all the problems, many of which have been caused by fiscal policy and worsened by government’s inaction.”......................

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

Nothing more than normative wisdom

.......A senior colleague was recently trying to persuade one of the grey eminences of the monetary policy world to work on a ‘tell all' memoir. It was firmly refused on the grounds that he did not want to fall into the trap of most such books — of portraying events as happening around oneself. Or, that one had played a central role in the way things unfolded. All the persuasion didn't work. Thankfully, there are others who make up for the modest reticence of some. Bimal Jalan is one of them. He can claim to have been at the centre of many developments, having travelled the corridors of power in his career. As an economist, as Chief Economic Advisor, as a Member of the Planning Commission, as Reserve Bank of India Governor between 1997 and 2003 and as a Rajya Sabha member for six years thereafter, Jalan certainly played a pivotal role in the shaping of policy in India. Yet, this book is not in the tell-all genre. It is full of prescriptions and, one may add, even some sound advice............

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

RBI to continue defending the rupee: Subir Gokarn

..."The approach over the last few months have been a combination of intervention at times when we have felt it will help us stabilise, and some administrative action. This is the approach that will work now," Deputy Governor Subir Gokarn said...................

Read..........

Plea not to close down RBI counters

Kochi, May 18 (PTI): Syndicate Bank Staff Association today strongly opposed the move to close down RBI counters delivering coins and currency notes in metro centres and state capitals in a phased manner. This move is 'disastrous and anti public' and would inconvenience the business community, .............

Read........... 

Warmhearted succumbs to heart attack...............

I regret to advise the sad demise of Shri.S.Srinivasan on May 16, 2012. He retired as  D.G.M  from  R P C D, Mumbai , after a long service of over 38 years. He was 77 years old. For over two decades Srinivasan worked in the Department of Statistics. He had served in Madras and Hyderabad Offices. He was not well for quite some time and passed away due to cardiac arrest. He leaves behind his wife, son, daughter and grandchildren , A warmhearted and genial person he had a wide circle of friends and admirers both within and outside R B I. 

- P.P.Ramachandran (via e-mail)

India in the European mirror

.......A collapsing currency is a sure negative signal for international investors, and can accelerate their exit. A downward spiral is a possibility that therefore needs to be pre-empted. However, there appears to be no convincing response from the government thus far. The RBI is wary about stoking inflation by reducing rates to spur growth. The deficit on the government's budget and India's relatively high public debt to GDP ratio are preventing the government from raising expenditures (as it did in response to the global crisis of 2008). This is partly because of the government's own fiscal conservatism. But the more important reason is the fear that larger fiscal deficits or higher taxation would upset foreign investors and hasten their exit.....................

Read - The Hindu

Reduce exposure to NBFCs giving gold loans: RBI to banks

......."Banks are advised to reduce their regulatory exposure ceiling on a single NBFC, having gold loans to the extent of 50% or more of its total financial assets (loans), from the existing 10% to 7.5% of banks' capital funds (tier I + tier II capital)," RBI said in a circular. ..........

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

Plateful of Inflation

Practically every trick that the government with the Reserve Bank of India on tag has tried to control food price inflation has failed. And that’s inflation at the mandi level. No one is talking of inflation of consumer level prices, where it actually hurts the consumer the most. Both RBI and the government have periodically trotted out excuses for the failure to control inflation.............

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