.......Leeladhar, who was honoured yesterday with a lifetime achievement award of the State Bankers’ Club for his commitment to banking, noted: “We have the best of the people in public sector banks, but we need to give a little more motivation to them.”........
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Monday, August 18, 2014
Conversation with Reserve Bank of India boss
........I ask Rajan how he has found returning to India. “The hierarchies took some getting used to,” he admits with a smile. India’s antiquated bureaucracy still operates by passing physical files between departments, while rank is established via protocols such as who arrives last on a conference call. “Of course, you don’t make your own phone calls,” he says. “And the personal assistants will fight very hard, when there is any ambiguity, to establish their superiority over the person they’re calling.”.........
Crony capitalism threatens growth
The Reserve Bank of India Governor Raghuram Rajan has forcefully underscored the danger that crony capitalism poses to India’s growth story. While delivering the Lalit Doshi memorial lecture, he argued that it creates oligarchies that slow down growth. This is not the first time that he has held forth on this topic. India has the ‘ dubious distinction’ of the largest number of billionaires per trillion dollars of GDP; that many of them have amassed wealth from land, real estate and natural resources due to proximity to government. This eliminates competition, widens disparities and slows growth. The dark side of crony capitalism is reflected in the sharp rise in big- ticket corruption after reforms were implemented since 1991, a fact that upsets even the ardent advocates of liberalisation. The late economist I G Patel admitted that one of his greatest disappointments was that reforms have not “ made much impression on corruption.” This was par for the course in the earlier license- permit raj -- in which vast discretionary powers encouraged rent- seeking or garnering of huge benefits by manipulating the environment in which economic activities take place by those in authority.
The concern is that .......
For inclusion, banish cash - Janmejaya Sinha
............According to the Reserve Bank of India's data, cash still accounts for 90 per cent of all monetary transactions in India. Even as growing numbers in cities are using electronic payment systems, such as the National Electronic Funds Transfer (NEFT), these made up a paltry 3.2 per cent of total payments across the country in 2012-13. In fact, even old-fashioned cheques account for less than 10 per cent of total payments. A medium-term vision to bring down cash from 90 per cent to even 50 per cent of payments would dramatically spur inclusion..................
Making ATM transactions expensive: Is RBI contradicting its own stance?
.......In other words, by suddenly making ATM transactions expensive, the RBI has broken the process of gradual transition to paperless banking and is sending people back to the congested bank branches to withdraw money. While there is a rationale behind limiting ATM transactions in other bank-ATMs (ATM networks of most banks have improved in metros over years), there is no logic in limiting on bank-ATM transactions. The government has also been pushing state-owned banks and financial institutions to make payments only through electronic transfers and not through cheques from 1 September 2011. The larger idea is part of its e-governance initiative to move towards a paperless funds transfer system. The rationale, according to RBI deputy governor, H R Khan, is that for the banks, this approach would be economical proposition as it would reduce paper handling costs.........
KYC for Subbarao
.......... "Dr Subbarao, excuse me for using your example," Rajan said, adding, "So most recently we did away with the requirement that you should have proof of current address. Proof of any address will do and the bank will determine the proof of current address over time.".........
The five P's of financial inclusion
............Financial inclusion is about getting five things right: product, place, price, protection, and profit. If we are to draw in the poor, we need products that address their needs; a safe place to save, a reliable way to send and receive money, a quick way to borrow in times of need or to escape the clutches of the moneylender, easy-to-understand accident, life and health insurance, and an avenue to engage in saving for old age. Simplicity and reliability are key - what one thinks one is paying for is what one should get, without hidden clauses or opt-outs to trip one up. The transactions costs of obtaining the product, including the price and the intermediary charges, should be low. Furthermore, any regulatory burden should be minimal. New and inexperienced customers will require protection. The RBI is beefing up the consumer protection code, emphasising the need for suitable products that are simple and easy to understand. Financial inclusion cannot be achieved without it being profitable. So the last 'P' is that there should be profits at the bottom of the pyramid............
NREGA increased rural wages only 10%, rest from other sources: Raghuram Rajan
.........."Women instead of working in fields or working as agricultural labourers at the younger end have gone to schools and at the older end moved back into households. That is not an entirely bad development; in fact that reflects the greater wealth in rural areas," Rajan.........
Myopia of the elite: Raghuram Rajan’s take on the PDS versus DBT debate
......Being the incumbent Governor of India’s central bank which last checked is yet to abandon its commitment to social justice and development, the basis of his prescription should ideally be a number of field-surveys of the actual Kirana stores of the cities, towns and villages of our country. However, he didn’t make it clear during his speech. It seems he probably distilled this recommendation, supported by equal vigour by other supply-side economists too, during his years of residency in the USA, where even local groceries look like elite departmental stores of India.........
FM hints at sops to increase savings
........."Low domestic growth and high inflation continue to have an adverse effect on saving-investment dynamics. While households' financial savings (which include bank deposits) as per cent of Gross Domestic Product (GDP) have been falling, expenditure on valuables (which includes gold) has risen over the past few years though it declined in 2013-14. This trend reflects financial disintermediation with households switching away from financial savings to valuables mainly gold," the Reserve Bank of India (RBI) has said in its financial stability report released in June. RBI believes that the consistent high inflation and the consequent low real rate of return on financial assets are the reasons that people have been reducing their exposure to financial savings........
PSU banks may decide staff housing loan policy on their own
...........The Department of Financial Services of the Ministry of Finance had earlier advised that housing loan to bank employees be negotiated strictly as part of the bipartite wage settlement. But responding to an IBA communication, banks have now been given the option to either decide on their own or suggest if they feel this to be a part of wage negotiations. The IBA has been advised "to take appropriate action to convey the same to all public sector banks for deciding the matter…''
Defensive story will continue for some time
.......Overall, the picture is somewhat reassuring. The economy seems to be pulling itself out of a two-year period of stagnation. However, this is unlikely to be a "V-shaped" recovery with a sharp rebound. It seems we'll see gradual improvement quarter-by-quarter................
IDBI Bank to declare KFA wilful defaulter
.......IDBI Bank Chairman & Managing Director M S Raghavan said the bankers' consortium was taking steps against Kingfisher Airlines. "We will declare (Kingfisher Airlines as a wilful defaulter) very, very soon. We have already taken it (the proposal) to the (bank's) board," he said and clarified IDBI Bank's exposure to the airline was Rs 750 crore, and not Rs 950 crore as reported in media reports. IDBI Bank was the first bank to declare Kingfisher Airlines' default and it went to court to recall its loan. The bank is now taking the next step to recover its dues......
Planning decommissioned
.......It is not that the panel's demise came instantly. In fact, the downfall started in the 1990s when the government clipped the powers the Planning Commission exercised on the states. It tried to remain relevant by exercising its authority through other avenues, but could not ever reach its old glory. Modi has been able to mothball the Planning Commission because it is not a Constitutional body, unlike the Finance Commission.......
Experts throw light on India’s tax structure, foreign exchange reserves
......G. Padmanabhan stated that the Indian government is improving foreign exchange reserves through non-borrowing methods by increasing capital account inflows and reducing current account outflows. India's central bank has also shown increased efficiency in its monitoring mechanism. The emphasis is now more on the flow of Foreign Direct Investment (FDI) than the Foreign Institutional Investors (FII) inflows. The RBI has also formed a special committee on keeping a daily watch on foreign exchange market for better control, he added...............
Foreign Exchange Management Manual - Book Review by P.P.Ramachandran
.........The author D. Khilnani is a veteran in the field of Exchange control having served in the Reserve Bank for 33 years and was associated with every facet of exchange control. For a long time, foreign exchange was treated as a controlled commodity because of its limited availability. The early stages of foreign exchange management in the country focused on control of foreign exchange by regulating the demand due to limited supply. Exchange control was introduced in India under the Defence of India Rules on a purely temporary basis. The statutory power for exchange control was provided by the Foreign Exchange Regulation Act ( FERA) of 1947 which was subsequently replaced by a more comprehensive Foreign Exchange Regulation Act, 1973. This Act empowered the Reserve Bank to control .........
How to regulate shadow banks
............Many economists argue that the forms of shadow banking are so diverse that the current literature on its regulation (that tends to be largely US-centric) has little relevance. It is difficult to disagree with this entirely but a couple of things need to be borne in mind. First, financial instruments and structures similar to the US are slowly evolving in India. I would take the case of money market mutual funds and their increasing role in disintermediation - companies issuing short-term debt (commercial paper) instead of borrowing from banks. Let me make a quick qualification. We are ...................
RBI forms committee to monitor shadow banking; realty in focus
.......Confirming the development, RBI spokesperson Alpana Killawalla told HT: "An inter-regulatory group has been set up to monitor developments in the area of shadow banking under the chairmanship of RBI executive director P Vijaya Bhaskar." Shadow banking refers to banking-like activity by non-banking finance companies (NBFCs) that remain outside the regulatory net. They generally operate as intermediaries between investors and borrowers.......
RBI bars 6 ISIS men from holding accounts
........An RBI notification dated August 14 says: "…it should be ensured that the name/s of the proposed customer does not appear in the list. Further, banks should scan all existing accounts to ensure that no account is held by or linked to any of the entities or individuals included in the list." "As far as freezing of funds, financial assets or economic resources or related services held in the form of bank accounts of the designated individuals/entities are concerned, action should be taken as detailed…"
Life's tough for bank treasury officials
.........Ashish Joshi (name changed) is desperate for some divine intervention these days. For, he believes the “temple” on Mint Road (headquarters of the Reserve Bank), guiding his destiny so far, has turned him away. Joshi, a senior executive in the treasury department of one of the largest foreign banks present in India, says he isn’t alone. Peers in other banks share his angst. “The uncertainties in global and domestic markets are a way of life for us. But what hurts is RBI’s apathy,” says Joshi, who has added a few creases on his forehead in recent days..........
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