RBI: Growth slowdown not commensurate with inflation control

............ “While monetary policy action addresses the risk of unhinging of inflation expectations, attending to the structural supply constraints becomes important to ensure that these do not become a binding constraint in the long-run, making the task of inflation management more difficult. By ensuring a low and stable inflation, RBI could best contribute to social welfare,”.................

Read - BS

Indian Inflation Puzzle

Acceptance Speech by Shri Deepak Mohanty, Executive Director, Reserve Bank of India, in the function of Late Dr. Ramchandra Parnerkar Outstanding Economist Award at Mumbai on January 31, 2013

..............I take this opportunity to share my thoughts on the topic of inflation which affects one and all. Over the last three years the persistence of inflation in an environment of falling economic growth has come out as a “puzzle”. In my presentation I propose to address the following questions: What do I mean by a “puzzle”? Why do we need to worry about inflation? What is the nature of the current inflation process? How did monetary policy respond to the recent bout of inflation? I conclude with some thoughts on the way forward to achieve price stability.............

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Forex: 20 years of pride & prejudice

.....Then, from 1991 to 1997 the forex market was stewarded through a process of LERMS, unified exchange rate and managed float (old timers would remember the famous 31.37 rate) and trade account convertibility into a floating rate regime by stalwarts such as O. P. Sodhani, S. S. Tarapore, Shyamala Gopinath, Usha Thorat, G. Padmanabhan and Y. V. Reddy. It was a period of pride (and some prejudice) as the RBI won plaudits the world over for piloting India’s external sector through turbulences.......

Read - HBL

RBI wants special force to guard banks’ currency chests in state

In the wake of shortage of security personnel to guard currency chests in Gujarat, the Reserve Bank of India said Friday it is examining a proposal to set up a dedicated security force for the purpose. "We are examining a proposal to set up a dedicated security force for guarding currency chests of banks in Gujarat. The proposal is at a very preliminary stage," Regional Director of RBI Sudarshan Sen said........

Read - IE

Handle with care

...... The government will have to continue to do what it has to mitigate the twin deficits. To paraphrase the late Milton Friedman, economist and Nobel laureate, monetary policy is a string: one can pull it to rein in inflation, but one cannot push it to revive economic growth by itself.

Read - The Telegraph

RBI asks banks to beef up wage hike, pension provisioning

The central bank's move comes as the next wage revision kicks in from November

The decision on increase in wages and pensions in public sector banks is more than a year away, but the Reserve Bank of India (RBI) has already asked banks to start making adequate provisioning. That’s because banks will have to pay arrears from November 2012, even though the Indian Banks Association has informed banks that an agreement with unions on wage revision will be reached by March 2014.............

Read - BS

US Exim Bank's plea for recovery powers with RBI

The Export-Import Bank of the United States has sought powers from the Reserve Bank of India (RBI) for recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act. Its application is pending with RBI. Fred P Hochberg, chairman and president of US Exim Bank, said the bank had held discussions on the issue with RBI and the finance ministry. Hochberg, however, didn’t specify when the bank had approached RBI and what RBI’s response was..........

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Economy would be stronger when more people have jobs: KC Chakrabarty

.......... I would share my perspective on the necessity for promoting financial literacy as a policy tool, its centrality to ensuring inclusive growth and the initiatives we have taken in India for promoting financial literacy. But before I venture any further, let me quickly state what is meant by ‘Financial Literacy’. I quite like the definition given by the INFE researchers, Atkinson and Messy, who describe it as “a combination of financial awareness, knowledge, skills, attitude and behaviours necessary to make sound financial decisions and ultimately achieve individual financial wellbeing.” Thus, an absence of financial literacy can lead individuals to make poor financial decisions that can have adverse effects on their financial well being..............

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About time RBI acted

............It's not clear why it was necessary for RBI to make the point that bankers shouldn't 'artificially' reduce the net present value of cash flows by resorting to any sort of 'financial engineering' while calculating the diminution in the fair value of the exposure. The comment reflects poorly on banks suggesting that they haven't always played by the book. They will from now on, since..............

Read - IE

‘This rate cut will also be discounted due to inflation’

.....The significant point is, we will not be able to sustain consumerism because interest rates will stay elevated. The focus of the RBI should remain inflation. Can anyone tell me now that the rate has been cut by 25bps, will India grow its balance sheet (GDP)? There is no linkage between interest rate and growth rate in the short term. Had the RBI cut the rate six months down the line instead of now, the impact on the yield curve would have been substantially bet en you would be convinced a sustained rate cut cycle is upon us. Not now. After the repo rate was cut by 50 bps last April, inflation went up and in the end, that rate cut got completely discounted........

Read - DNA

FM will get a bigger bank recap bill, courtesy RBI

The finance minister is not going to get his free lunch from Duvvuri Subbaro, despite the fact that the latter cut both repo and cash reserve ratio on 29 January to please him. The obverse side of easier money and credit is always a higher complement of bad loans. And more bad loans means more capital. What P Chidambaram gained by way of cheaper loans will have to be repaid to banks as higher capital infusion from the government..........

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India to take baby steps towards gold-linked products

The RBI plans to introduce three to four gold-linked products in the next few months, in an effort to bring 20,000 tonnes of gold held in households into the banking system, but the measure is unlikely to cut bullion imports sharply, a senior official said..................

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NABARD has turned anti-poor, says Dasgupta

............The “evidence shows that Nabard’s shift in priorities is directly linked to the leadership of its chairman, Mr. Prakash Bakshi, who, in a significant deviation of policy, included private entities as eligible institutions without consulting the RBI, via a circular of September 27, 2011,”...............

Read - The Hindu

Why Mr C’s finmin should not rob Grandma to boost growth

The finance minister wants interest rates to be reduced steadily in order to push up growth and investment. The Reserve Bank of India, despite being unconvinced on inflation and the current account deficit (CAD), has obliged recently by cutting repo rates. But the story, it seems, is going to get worse. Today’s Business Standard reports that the finance ministry wants banks to cut the differential rates offered on fixed deposits (FDs) held by senior citizens. Banks currently offer senior citizens rates that are higher by 0.5-0.75 percent depending on tenure and their own need for longer term stability on funds. But P Chidambaram’s ministry is trying to rob grandpa and grandma in its quest for lower interest rates so that the investment climate gets better...........

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Does RBI know whether it’s coming or going

..........Almost everyone has welcomed the easing. After all, something is better than nothing. However, much less appreciated is that in its policy statement the RBI has been consistent in being inconsistent. There seems to be a pattern of inconsistency in the RBI’s actions and the related analysis/guidance. Thus, for example, when it wants to communicate a hawkish tone, it’ll often hide behind the uncomfortably high Consumer Price Index (CPI) inflation. In contrast, when it wants to ease or sound dovish, it barely even bothers to extract any message from the CPI inflation...........

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Using cheques to settle transactions may be a thing of past; RBI wants to disincentivise cheque usage

.......In an attempt to discourage paper based transactions and promote electronic settlements, the Reserve Bank of India has made sweeping suggestions in a discussion paper placed on its website on Friday. These include a charge on cheque books and even a fee for settling certain kinds of transactions..........

Read - ET

RBI's new policy to give fillip to development with customer as focus

Nashik, Jan 30 : Reserve Bank of India (RBI) new economic policy has created a positive flutter in the market and will give boost to economic development, stated RBI economic consultant Dr Ashutosh Raravikar. He was speaking after inauguration of Nashik Industries Manufacturers'Association (NIMA) bank summit 2013 in Nashik today...............

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RBI comes up with comprehensive financial literacy guide

To create financial awareness, educate common people on management of money

In order to cater to the need of financial literacy the Reserve Bank of India (RBI) has prepared a comprehensive financial literacy guide. This guide contains operational guidelines which clearly spell out the manner in which financial literacy camps should be conducted so as to synchronise it with providing financial access and thus linking the financially excluded section with the banking system...........

Read - BS

RBI confident of infrastructure investment target

London: India is on course to meet its infrastructure investment needs of an estimated USD 1 trillion over the next five years, according to Reserve Bank of India (RBI) Executive Director G Padmanabhan. "The funding process is working in a seamless manner and things have taken off in a very exciting way," he said at a conference here on Wednesday.............

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FinMin: Cut FD rates for senior citizens

The finance ministry has asked government banks to reduce the fixed deposit (FD) rate offered to senior citizens to reduce cost of funds. At present, most public sector banks offer 50 basis points more to senior citizens than what they offer to others. Some private sector banks, like ICICI Bank, offer 75 basis points more to seniors. The finance ministry has demanded an action-taken report from banks on how they have progressed on this front..............

Read - BS