Two Economists clash over the state of ecomony

C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, is a highly respected economist in the country and what he says is taken as a last word. But the government’s new chief economic adviser, Raghuram Rajan, has chosen to disagree with him publicly. If Rangarajan is venerated in the country, Rajan is well regarded in present-day global economists pantheon. He is credited with having sounded the warning note at a meet of US Federal Reserve at Jackson Hole just before the financial meltdown struck. The public disagreement was therefore a battle royale of sorts.

But then, what was the difference?........

Read - The Shillong Times

RBI may oblige with rate cuts, but it’s government that is killing economy

..........RBI is not truly independent. A truly-independent RBI might have left rates unchanged. But, in all probability, January IIP figures (2.4% increase) and continuous badgering will persuade RBI to provide a growth stimulus. Hence, perhaps a 25-basis-point cut in repo rate. Does this help growth?...........

Read - ET

What does RBI really think?

......We do not fully understand the compulsions that determine RBI’s monetary policy decisions. It is entirely possible that Subbarao was merely defending the January monetary policy decision and not giving us clues for the rate decision to come today. ..............

Read - Mint

My View on "Lend a big hand, RBI"

This comment is not directed to RBI (RBI knows its job), but to RBI-watchers who get carried away by observations like this from rating agencies and analysts. The continuous pressure on RBI to ‘cut rates’ and the assurance that a rate cut will do wonders in economic growth and the threat of downgrade are tactics being played by vested interests which do not care about the impact of inflation on more than 60 per cent of India’s population who contribute most to the country’s growth and have no voice in deciding the wages they should get or the price they should be paying for their survival needs. RBI should (and will) continue to have a total view of the impact of its policy measures on the common man. The fiscal policy which is caged by the rich and the powerful as also external pressures need a makeover factoring in the concerns expressed by RBI expressed through Monetary Policy statements, almost bi-monthly, these days.

-  M.G.Warrier

CRR cut critical

Though RBI has boxed itself in by conveniently referring to elevated levels of CPI and the current account deficit (CAD) as being the reason for not cutting policy rates from time to time, and then ignoring them when it has felt the need to cut rates, it is clear that if a rate cut is to help, this has to be accompanied by a CRR cut. Right now, with low deposit growth, banks have no option but to hike deposit rates across different tenure—so the only way to break this cycle and lower lending rates is to cut CRR or find other ways to infuse liquidity........

Read - FE Editorial

Why Subbarao should not reduce interest rates as yet

......So the signals are mixed, but on balance the structural nature of the slowdown, mixed inflation trends, fragility of the fiscal path and a persistent current account deficit are, in this newspaper’s opinion, ample reason for Subbarao to resist cutting rates.........

Read - Mint

Chidambaram expects RBI to address liquidity concerns

“RBI Governor is also aware of the issue of liquidity. Let’s see what steps the governor takes,”

Read - Mint

RBI may cut rates, but your loan rates may not fall

....... Every time the top brass of the RBI is supposed to meet, calls for interest rate cuts are deafening. In fact, there seems to be a formula that has evolved to create pressure on the RBI to cut the repo rate. The repo rate is the interest rate at which RBI lends to banks and sets the tone for other interest rates. The formula includes Finance Minister P Chidambaram giving statements in the media about there being enough room for the RBI to cut interest rates........

Read........

SBI wants softer interest rate regime: Diwakar Gupta

........ The Reserve Bank has traded a very careful path in the growth inflation dynamics. Consensus is building around the fact there will be a 25 bps cut and that is what all of us are expecting..........

Read - ET

Repo rate cut given; CRR change doubtful: CNBC-TV18 Poll

Consumer Price Inflation has been in double digits for 3 months in a row, but core inflation has fallen sharply and this has sparked hopes that the RBI may find it possible to ease up on its it’s monetary stance..........

Read........

Finance ministry withdraws its controversial diktat to levy processing fees on payment of credit card dues by cheque or cash

..............In a letter dated 12^th March, the finance ministry has quietly withdrawn its ‘fatwa’ to “consider charging a processing fee from customers paying credit card card dues either in cash or through cheque”.  In fact, this letter too is written by the same DD Maheshwari, Under Secretary at the Department of Financial Services, who sent out a fatwa marked “most immediate” to all chief executives of public sector banks on 25 October 2012. This time he writes that the letter “stands withdrawn with immediate effect.............

Read - Moneylife

An eye for the short term

.....One argument, no doubt, against lowering the minimum tenure of FDs or permitting banks to offer interest on current accounts is that it would aggravate a growing asset-liability mismatch confronting the industry. As it is, well over two-thirds of bank deposits are of below two years, making it difficult to fund longer tenure assets such as home loans. Rather than encouraging banks to do more to mobilise FDs with tenors of five years or more, and also raising resources through long-term bonds, Chaudhuri’s suggestion would imply doing just the reverse. But this is a wrong inference. No sensible banker, after all, will extend a 15-year home loan based on funds borrowed for three days........

Read - HBL

RBI expected to cut policy rates till 2013 end

..."The expectation is that the RBI to cut the policy rates by 50-75 basis points through the calendar year 2013 and then take stock when the inflation is expected to pick up around the year end.".......

Read - Sakal Times

Pay income tax dues well in advance: RBI

....In an appeal through a circular, RBI has asked income tax assessees to remit their income dues sufficiently in advance of the due date. It said the rush for remitting income tax dues through RBI has been far too heavy towards the end of March every year and it becomes difficult for it to cope with the pressure of issuing receipts, although additional counters to the maximum extent possible are provided for the purpose..........

Read - Deccan Herald

RBI extends deadline for issuance of new cheques

The Reserve Bank of India (RBI) on Monday asked banks to issue new cheque books only under the new format and gave them time till July-end to withdraw the old format cheques. All cheques at present with customers in the old format (non-cheque truncation system) will continue to be valid for another four months (the earlier deadline was March 31), the apex bank said................

Read..........

Don't accept PDCs for EMI payments where ECS is available: RBI

In a effort to give electronics payments a push Reserve Bank of India (RBI) today asked banks not to accept post dated cheques (PDCs) and EMI payment cheques even if it conforms to new CTS -2010 (Cheque Truncation System) format  on the locations electronic clearing system (ECS) debit is available. This means all the new borrowers where ECS facility is available will have to compulsorily shift to electronic payments systems and they can’t sign post dated cheques and give them to banks to encashment.............

Read | Business Standard

FM goes after wilful defaulters

..........“We cannot have an affluent promoter and a sick company. Promoters have to bring in additional money and companies have the duty to pay back loans. Banks have got the message. Without doing anything that will kill the business of the industry, they will have to take steps to recover their NPAs,”..............

Read - The Telegraph

Reserve Bank widens its money laundering probe

Report by March 31; banks' gold coin sales, wealth management biz also under scanner

.....Its final report on the three banks would be completed by March 31 and further course of action, as necessary, would be initiated thereafter, RBI said, adding the branches and the head offices of these banks were being scrutinised.......

Read | Business Standard

UP to rescue 16 ailing district co-operative banks

......BJP legislator from Gorakhpur Radha Mohan Das Agarwal had raised the issue in the state assembly today. He informed the House that RBI had served notices on these 16 banks giving them 15 days’ notice, which would expire by the end of this month. These banks employ about 8,000 heads and provide credit to small farmers and enterprises. He urged the state to inject funds in these banks to keep them afloat........

Read | Business Standard

Banks must take firm steps to recover NPAs: FM

...... “While we understand why NPAs have risen and the restructured accounts have risen, we also wish the banks to take strong steps to recover their dues, I think the promoters have a duty to bring in additional money and the companies have a duty to pay their dues to banks. We cannot have an affluent promoter and a sick company,” Chidambaram told reporters after meeting heads of PSU banks and financial institutions..........

Read - Deccan Herald