..............What
the FM perhaps underestimated was the power of the old boy network.
Every action of Subbarao was openly supported by former RBI Governor C
Rangarajan and tacitly backed by Prime Minister Manmohan
Singh, another former Governor. Thus, the rift between FM and the
Governor could well be an outcome of politics at a different level. It
may be a little too early to judge Subbarao, often blamed for failing to
act on time to raise rates to tame inflationary expectations or buy
dollars to shore up forex coffers.................
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Wednesday, July 31, 2013
The Man Who was Never His Master’s Voice
..............What
the FM perhaps underestimated was the power of the old boy network.
Every action of Subbarao was openly supported by former RBI Governor C
Rangarajan and tacitly backed by Prime Minister Manmohan
Singh, another former Governor. Thus, the rift between FM and the
Governor could well be an outcome of politics at a different level. It
may be a little too early to judge Subbarao, often blamed for failing to
act on time to raise rates to tame inflationary expectations or buy
dollars to shore up forex coffers.................
Subbarao doesn’t want extension: FM
..........."Dr Subbarao had met me a few weeks ago and said he would like to move on and he would not like to be considered for another term. I accepted. So now we are in search mode,"...................Need of the hour - constitutional protection to the tenure of the Governor
Finance Minister's speech in Ahmedabad is giving an impression as if the Governor had not expressed his views, in his recent meeting with the FM in Delhi, which would guide his credit policy announcement to be made later today. In fact, a wrong convention has been created by Governors (this Governor is not guilty of starting this practice created many years ago but is guilty of continuing with it) by meeting the FM a few days prior to every one of the Credit Policy announcements. While the FM has every right to ask the Governor to meet him when ever he wishes to discuss any policy issues, this practice of the Governor meeting the FM prior to the Credit Policy announcement does not augur well for the image of an independent autonomous central bank of the country. Of course, some could legitimately argue that this practice has served an useful purpose in that it has helped cement and confirm the universal impression that the RBI is totally subordinate to the Government and its autonomous character is a figment of imagination !! One or two Governors may have asserted his independence in one or two issues sometimes but this does not mean that the Bank can act independently. I wonder why the demand for a constitutional protection to the tenure of the Governor, in the manner enjoyed by the CEC, CAG, has not been voiced by anyone. This protection even when it is given should be accompanied by a total statutory prohibition on any sort of employment being taken up by the Governor after his retirement.
- A.Chandramouliswaran
Subbarao's impossible trinity
The sharp fall of the rupee against the dollar has made RBI's policy making complicated, as it now has to deal with exchange rate stability apart from addressing slowing growth and keeping a vigil on inflation, which could surge again. The weakening rupee forced RBI to tighten liquidity, which jacked up short-term rates.............
Finance ministry gives RBI a thumbs-up
New Delhi: The ministry of finance, which has disapproved Reserve Bank of India’s (RBI) move to hold on to policy rates over months, finally seems to be burying the hatchet with the banking regulator, courtesy the current account deficit (CAD) and a dwindling rupee. The ministry on Tuesday welcomed the RBI’s decision and stressed that the ministry and the RBI are on the same page as far as the key rates are concerned. Chief economic advisor Raghuram Rajan said, “RBI policy saw the main immediate macroeconomic task as that of stabilising the rupee, and once the rupee is stabilised, the policy makers will have room for more growth-friendly measures. The government welcomes the RBI policy statement..............
RBI maintains status quo; banks may raise rates in 3-4 weeks
 |
| D Subbarao, Governor, RBI, along with Urjit R Patel, Deputy Governor, address a press conference on Monetary Policy in Mumbai on Tuesday |
RBI keeps key rates unchanged; cuts India growth forecast to 5.5%
.........“The policy stance is guided by the need for continuous vigil and preparedness to proactively respond to risks to the economy from external developments, especially those stemming from global financial markets,” Governor D. Subbarao said in what would be his last policy announcement unveiled here...............
You Can Bank On It
In a year from now, at least 200 top bankers will get new business cards printed, and pocket an exponential rise in their take-home salaries. Mint Road would, at the minimum, have issued four new private banking licences; making it the single largest driver of hiring in the sector in a while. And, as money makes the mare go, it may not be much of a task to get folks in. You will see more of the same in state-run banks, but for an entirely different set of reasons. Of the 1.3 million employed by the banking sector, nearly 900,000 work for state-run banks. “They (state-run banks) will face a major talent pipeline challenge with over 80 per cent of the senior management set to retire in the next five years. There will be a shortage of skilled managers to replace middle management personnel who will be moving into these senior management roles,”................
Private banks training staff to serve rural customers
Thanks to Reserve Bank of India’s initiative to drive bankers to extend financial literacy across the large number of hitherto un-banked rural centres of the country, private sector banks are taking special initiatives to train their staff to cope with rural customers and set up branches in such hitherto un-banked centres in a big way...........
RBI says approved Srinivasan's appointment on YES Bank board for a year
................'There is an age limit of 70 years, but it is not a hard limit. When he was appointed, he was well short of 70. He has been given approval for one year. Some part of his term may go beyond 70,' Anand Sinha, Deputy Governor at RBI, told reporters in Mumbai today. Srinivasan was appointed as an additional director on YES Bank's board with effect from October 23, 2012. In the annual general meeting on June 8, 2013 Madhu Kapur had objected the appointment of Srinivasan, Nanda and Ravish Chopra on the bank's board......................
We are watching Yes Bank boardroom war carefully, says RBI
.“This boardroom battle which is going on (at Yes Bank), we are studying it and if we think that some measure needs to be taken on the issue, we will look into that,” said Deputy Governor in-Charge of Banking Supervision Anand Sinha during the customary post-policy interaction at the RBI headquarters.........
A confused, enigmatic RBI
.............If at all any lesson is to be learned from this latest episode, it is the criticality of giving the RBI a single point agenda and mandating it to attain that. The RBI titled its measures as meant to “address exchange market volatility”. Since volatility can be measured, it would help greatly if the RBI were to state its objective in quantitative terms. The market can then draw its own inferences as to whether more measures are needed or not. The scope for confusion would be greatly reduced.....................
RBI's move was on expected lines: Saumitra Chaudhuri
Saumitra Chaudhuri, member of the Planning Commission and the Prime Minister’s Economic Advisory Council, is one of the government’s troubleshooter for vexed economic problems. After Reserve Bank of India (RBI) Governor D Subbarao opposed the issuance of a sovereign bond, Chaudhuri, also one of those being considered for the top job at RBI, tells Sanjeeb Mukherjee quasi-sovereign bonds by a few public sector entities could help fund infra projects. Edited excerpts:..........
Bankers make barrage of demands to protect balance sheets
...........RBI on July 15 and 22 put severe restrictions of banks borrowings from liquidity adjustment facility and hiked rate for borrowing at standing facility. The purpose was to curb trend to use rupee resources for speculating in foreign exchange market. Bankers in interaction with RBI top brass sought a one-time permission to move securities from Available for sale (AFS) to Held to Maturity (HTM) bucket. This shifting of securities would be without marking them to market, they said. The exercise should be run on valuations that were on July 15.................
Need of the hour—India’s own version of Three Arrows
..........When RBI announced tightening measures over the last two weeks, it appeared that India had voluntarily chosen to undergo internal adjustment despite the skewed cost-benefit ratio. However, the policy statement belies this assumption and suggests that policymakers have misgivings about the cost to be paid for defending the currency. So what are the options now available? One option would be for RBI to undo part of the damage by reiterating its resolve to protect the currency and dropping its insistence that it is worried about growth. This would mean doubling down on the measures taken and if need be, carry out further tightening by hiking the marginal standing facility (MSF) rate by another 100-200 basis points. The second option would be to recognize the futility of trying to peg the exchange rate and reversing the interest rate tightening over the next few weeks. Either way, RBI actions would need to be bolstered by the government.......
Govt must take the lead; RBI alone can’t take us back on growth track
........While the merit of RBI measures is well appreciated, it is critical to focus on bolstering growth through a revival in investment climate as improved fundamentals alone would enable us to attract durable capital flows. As such, government needs to further step up its efforts to clear hurdles impeding stalled projects..........
RBI in prisoner's dilemma in FX/rupee; NRI bonds way out?
.........Sen Gupta is of the view that the RBI needs to urgently buy forex to boost its import cover (measured as the number of months of imports foreign reserves could pay for), which right now down to roughly 7 months; below the optimal range 8-10 months. The trouble is that buying dollars would strengthen the US currency and further weaken the rupee. Yet Sen Gupta feels the rupee is unlikely to stabilize till RBI bolsters its FX reserve...........
RBI Governor D Subbarao says no rollback timeframe for liquidity steps
........Explaining the rationale for the July 15 and 23 measures to tighten liquidity, the Governor said, "Forex intervention is a standard tool for defending against volatility. As much as we resorted to that instrument, we were also conscious that we should not fuel speculation or help speculators." Subbarao said the idea was to make liquidity scarcer and more costly. The RBI determined that modulating access to LAF would be the most efficient way of controlling volatility and it can be calibrated more flexibly than resorting to CRR or repo because of other implications attached to those measures, he said.........
Govt promises 'specific steps' in coming weeks to contain current account deficit
............"We welcome the RBI policy statement...the RBI and the government are on the same page and working together to achieve stability and growth," Rajan said while responding to the RBI's decision to maintain key interest rates...........
US Fed will dictate India’s monetary policy
.....But that’s no assurance for RBI. Which is why the policy stance in this review is “guided by the need for continuous vigil and preparedness to proactively respond to risks to the economy from external developments, especially those stemming from global financial markets”. In its order of priorities, what has dropped lower down the list are concern about slowing growth and inflation that could rise because of the depreciation of the local currency. Its priority No. 1 is addressing the risks to macroeconomic stability from external shocks. Risk to growth comes second and the re-emergence of inflation pressures, third. Interestingly, managing liquidity conditions to make sure that the flow of credit remains intact to the productive sectors of the economy is the central bank’s last priority........
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