............."Banking is a business and lenders take decisions which turn out to be wrong,'' Chidambaram said at the banking conference Bancon 2013 organised by Bank of India in Mumbai on Friday. "At times, some decisions are taken. But a poor or a wrong decision does not mean it is a malicious decision. But if authorities question these decisions that would be the most dangerous thing to do." The finance minister's declaration of support triggered a burst of applause from the audience...........
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.
Monday, November 18, 2013
RBI Deputy Governor Chakrabarty says PSU banks lax in credit appraisals
............“Banks always say the rise in NPAs was mainly due to the slowdown in the economy, but the truth is that banks became complacent in 2006-07 when credit growth was high. In general, banks who had credit growth in 2004 -08 ended up with high NPA growth in 2008-13. Our NPA problem started much earlier and not in 2009. Yes, the financial crisis affected us, but credit appraisal had been deteriorating,” ...........
Back to basics
Recent articulations by the finance ministry and the Reserve Bank of India suggest that the very concept of banking itself is being revisited. What has been mooted, in particular, is the idea of niche or specialised banks, whether it is with reference to geographies or sectors. Such proposals need to be viewed in the context of the basic principles of banking and, if that is done, some concerns inevitably arise. The word "bank" itself means trust and reliability, with every effort being made to keep ..........
Banks may face additional challenges
.........Put together, this could push the sector into a new orbit. It will force the existing players to be more efficient in their operations and in their allocation of capital. Given the level of interference public sector banks face, they are likely to fall even further behind their private sector competitors........
DBS Bank evaluating RBI's WOS guidelines for foreign banks
New Delhi: DBS Bank, fourth largest foreign lender present in India, is evaluating RBI's new guidelines that provide significant benefits to foreign banks adopting Wholly-Owned Subsidiary (WOS) route of running branches here. The guidelines were issued earlier this month and allow foreign banks incorporating WOS branches to acquire local private sector lenders and expand branch-network across the country without any restrictions.........
What is wrong with India’s banks?
........The point to note is that most banks, particularly in the public sector, have been showing a secular growth in bad assets, although the bad loans data, both in percentage terms as well as in absolute numbers, do not provide the correct picture. This is because banks have been restructuring many of their stressed loans, which is not reflected in their NPAs. If one-fourth of such restructured loans turn bad, gross NPAs of many more banks will cross 5%. At least for a few of them, it could inch towards double digits.............
The mirage of bank ‘bail-ins’
.......... RBI’s bias against market mechanisms is to a fault, but the then governor Y.V. Reddy and his officials understood that the reason why we regulate the financial system over and above the way we regulate other industries is that the financial system cannot insure itself. Financial crises are large, pervasive and a result of market failure. Market prices cannot easily protect us from such market failure. Bail-in investors will underestimate risks in the good times and will be shocked and ruined in the bad. In the good times, they will use optimistic valuations of these instruments as backing for other holdings. Then..........
A new deal for foreign banks
Even while the issue of granting bank licences to a few private banks is gaining traction, the Reserve Bank of India (RBI) has released important guidelines for foreign banks to participate in the Indian financial sector in a bigger way than what has been possible so far. The two developments have one common objective — they are meant to deepen the financial sector. If all goes well, a few new private sector banks will advent in early 2014........
Delhi: banks turned blind eye, buyers suffered
.....Following complaints by the buyers, inquiries were initiated by the Reserve Bank of India (RBI) and the district magistrate of Gautam Budh Nagar. The RBI asked the National Housing Bank (NHB), to look into the suspect transactions while the Gautam Budh Nagar DM appointed the Chief Development Officer to investigate the case. Both have produced reports that indict the builders and question the financiers’ role..........
Dena Bank hopes to open London rep office by Dec-end
Dena Bank is hopeful of opening its London representative office by the end of December, a top official said. This public sector lender has already received approval from the Reserve Bank of India for opening a representative office at London, Ashok Dutt, Executive Director, said here today. The bank's senior management had also met the UK regulator and the bank is hopeful of its nod soon, Dutt said........
Saturday, November 16, 2013
The five pillars of RBI's financial sector policies: Raghuram Rajan
Full text of Raghuram Rajan's speech at Bancon 2013 held in Mumbai on Nov 15
.....In the rest of this talk, I want to focus on what we at the Reserve Bank are doing to improve the financial system. We plan to build the Reserve Bank’s developmental measures over the next few quarters on five pillars. These are:...........
Clean the viewfinder
.......... Important steps have been taken but these need to be institutionalised so that Rajan's legacy is assessed not merely in terms of how well the RBI does under him, but by whether or not he leaves behind a reformed institution..................
While at BANCON 2013...
........When asked how does he feel about the state of the economy from his 23 rd floor office at the RBI headquarters. Rajan first corrected the gentleman that his office is on the 18 th floor and said his office offers the view of the Mumbai Port and he can see the good news through the glass windows. “As I stand on the 18th floor and look outside, I see the port and ships coming in and going out to a greater degree than I saw in September. That’s telling me exports are picking up", he said................
Not a Pensioner to Regulate Pensions
.......True,
the appointment of the pension regulator is the government’s
prerogative, but there has to be transparency on changes midway. Now,
the government says it will name a new pension regulator within a month.
Rather than appoint yet another serving or retired civil servant to the
job, the government would do well to let the insurance regulator, Irda,
look after the pension sector for the time being. There is considerable
overlap in the long-term asset-building activities both regulators look
after. India needs to overhaul its regulatory apparatus for the
financial sector, to bring in holistic, harmonious regulation. The
financial sector legislative reforms under the
government’s consideration, and the prime minister’s own stated
intention to make regulators accountable suggest that such overhaul is
imperative........
Phishers strike jackpot, net Rs3.65L from call centre staffer
.......The fraudsters spoke to the victim pretending to be officials from the Reserve Bank of India and customs and income tax departments. This made him believe that the e-mail was genuine.
According to the police, the victim (name withheld), a resident of Vashi Naka in Chembur, got an email from Honda UK a few months ago. The e-mail said he had won a laptop, two T-shirts and 3,55,000 British pounds (around Rs 3.58 crore)....................
Read - DNA
Read.........
Beware of fictitious emails claiming to be from RBI
.........There have been increasing instances of emails that pose as correspondence from the Reserve Bank of India (RBI). Fraudsters are using RBI’s corporate logo / name and even the photograph of the Governor of RBI in their emails to convince victims of the authenticity of the messages.........Read.........
Loan recovery becoming difficult for banks due to legal hurdles
....."There are many challenges (in recovering dues) including legal ones. Even after using the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act), defaulters are found obtaining stays from any court, including labour courts. We then have to rush to that court and get the stay vacated. This is making recovery (of dues) difficult," said Arundhati Bhattacharya, chairperson and managing director of State Bank of India.............
Inflation control still RBI's main agenda, says Chakrabarty
Deputy governor of the Reserve Bank of India (RBI) K C Chakrabarty on Friday said inflation control remained the “single agenda” of the bank in the current environment. “Cost of money is high whenever inflation is high. That is why, if you see, our single agenda is to fight inflation. If we can make inflation low, the cost of money will come down,” he said during an interactive session organised by the MCC Chamber of Commerce and Industry here..........
Companies must not rely too much on debt: Chakrabarty
.....“No project can work with bank finance only. What is the equity that has been raised (recently)? We do not see any new issue,” he said during an interactive session organised here by the MCC Chamber of Commerce and Industry. According to Chakrabarty, over-dependence on debt would lead to high cost of borrowings. Projects with high debt component are “not viable”. “Equity market is almost dead...last four to five years new projects have gone for 100 per cent debt-led finance,” he said.......
A road map for foreign banks
......The government and the RBI envisage a productive role for foreign banks in India subject to their following certain prescribed norms. It is no coincidence that the RBI has stipulated similar requirements, such as in capital adequacy, for the new private banks that are to be licensed shortly. However, while the imminent entry of new banks, especially those promoted by large corporate houses, has been highly controversial, the expansion of foreign banks’ footprint in the country is likely to be more subdued. After the road map was unveiled,.......
Postal banks to be set up soon in India
......The Post Bank of India (PBI), as it is likely to be called, is all set to receive a banking licence from the Reserve Bank of India (RBI) within a month or so when it would issue licences to the short-listed applicants. A senior official of the General Post Office here told Khaleej Times that the PBI would provide banking services, including accepting of deposits from the public for lending or investment. In addition to deposit schemes, the PBI will also provide loans to general public and corporates like any regular bank. The first such bank with an ATM will be opened at the computerised Navrangpura post-office in the city.............
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