RBI wants investment inducement from govt

RBI wants investment inducement from govt

RBI asked the government to provide investment inducement and take aggressive steps, like increasing petroleum prices, to curtail subsidies. "Corporate sales decelerated along with continued decline in profits and could adversely impact investments ahead.

"In this situation, crowding-in of private investment demand by public investment spending inducement while aggressively cutting expenditure on subsidies hold the key to growth revival," the RBI said in Macroeconomic and Monetary Developments report. Citing that low investments cannot be attributed to high interest rates only, the RBI said in the pre-crisis period investments were high even as interest rates remained at elevated level. It said sustained fall in investment has impacted India's growth potential and there is a need to improve the investment climate by "moving quickly" to address bottlenecks in infrastructure space and removing constraints on foreign direct investment (FDI). Pointing out that high deficit could further impact weak private investment demand, RBI said, "it is critical to return to a credible and durable fiscal consolidation path. "As such, fiscal space would need to be created by controlling revenue expenditure to provide more resources for capital expenditure which could crowd-in private investment," the apex bank said.

It said there was a need for curtailing subsidies and the government should take "steps to allow pass-through of international crude oil prices to domestic prices, failing which it would be difficult to achieve the deficit target". Fiscal deficit, which is the gap between the revenue and expenditure, had ballooned to 5.76 per cent in 2011-12, from 4.9 per cent a year ago. The government targets to bring it down to 5.1 per cent in the current fiscal. RBI said the budgeted petroleum subsidy of Rs 43,500 crore for the current fiscal "appears inadequate".

Rate cut unlikely as RBI sees more risks on inflation front "Monetary policy space needs to be created through fiscal adjustment and structural measures to improve supply conditions ..." the Reserve Bank said in its report on Macroeconomic and Monetary Developments, released on the eve of the policy announcement. The near-term outlook on inflation is marked by a swing of upside risks despite significant slowdown in growth, the RBI said, adding that poor supply responses and a weaker monsoon are risks to price-situation.

"Persistence of inflation, even as growth is slowing has emerged as major challenge for monetary policy," it said.

For the month of June, the headline or WPI inflation stood at 7.25 per cent while the consumer price index was at double-digit level of 10.02 per cent. The pro-growth lobby, which is alarmed over quarterly growth slipping to a nine-year low of 5.3 per cent for the March quarter, wants the RBI to slash interest rate to prop-up growth.

RBI also said that the growth in the current fiscal is likely to be below the reduced potential of 7.5 per cent because of "global headwinds, inflation and policy uncertainty".

RBI noted that monetary and liquidity conditions have eased and are not significantly impinging on growth.

"A 0.50 per cent repo rate cut, following a 1.25 per cent CRR (Cash Reserve Ratio) reduction, coupled with active open market operation purchases have significantly eased monetary and liquidity conditions during 2012-13 so far," it said. "Revival of investor confidence would need to be supported by addressing concerns over policy stasis, while putting in place complimentary actions that address macro-economic weaknesses," the RBI report said.

A study of professional forecasters done by RBI revealed that growth will slip to 6.5 per cent for the fiscal against RBI's projection of 7.3 per cent. For inflation, forecasters upped their expectations to 7.3 per cent from the earlier 6.9 per cent by fiscal-end.

RBI said high prices of protein items, which it cites as the main factor of driving inflation in the last two years of high growth, are unlikely to wear-off even if the growth slips.

For the Centre, RBI said there is an urgent need to control expenditure. "Removing constraints on FDI and improving the investment climate by moving quickly to address bottlenecks in infrastructure space are important," it said. RBI said the deficiencies can have an adverse impact on food inflation, On the movement of monsoon.

BANKING POLICIES

BANKING POLICIES

RBI for more Tier-1 capital adequacy then Basel III norms : To help sustain the healthy financial profiles of Indian Banks, RBI is expected to prescribe higher capital adequacy norms vis-a-vis those proposed under the Basel-II framework. RBI had proposed that the common equity Tier-I capital should be at least 5.5% of Risk Weighted Assets (RWAs) vis-a-vis 4.5% prescribed by Basel-III norms. Now, RBI has proposed Tier-I capital of at least 7% and wants total capital to be kept at least 9%. It has also proposed a capital conservation buffer viz. Common equity of 2.5% of RWAs.

New supervisory action structure for UCB's unveiled 

RBI has unveiled a revised supervisory Action Framework for Urban Co-operative Banks (UCBs) whereby in the initial stage of deterioration in their financial position, self-corrective action by banks' management is envisaged. Despite that, if their financials still do no improve, RBI will step in and initiate supervisory action as it deems necessary. Under RBI supervision, the UCBs would be required to submit an action plan to RBI for improving their performance in the specific areas where there is a deterioration or concern. The next stage would include pre-emptive action aimed at arresting any further deterioration.

RBI to monitor banks' global books 


RBI will now inspect the overseas operations of Indian Banks as it does for the local business; to ensure that events outside the nation do not rock the domestic business. The inspection will review whether a bank is following all the regulator's norms in letter and spirit. It will also point out where the bank has faltered and how those issues can be rectified. It will also ensure that Indian banks elsewhere follow local rules to prevent any slips in compliance.

FVCIs can dabble in securities via secondary market 

RBI has allowed Foreign Venture Capital Investors (FCVI) to invest in securities through the secondary market and also through private arrangements or purchase from a third party. The move is expected to bring several VC investors to India's debt and equities market. The eligible securities include equity, equity-linked instruments, debt and debt instruments, debentures of a domestic venture capital undertaking or VC funds, units of Schemes/funds set up by a VC fund.

Government to pump additional Rs.12,000 crore into 7 PSBs

Government to pump additional Rs.12,000 crore into 7 PSBs

The Finance Ministry has formally notified recapitalization of seven banks for 2011-12 viz. SBI, Indian Overseas Bank, IDBI Bank, PNB, Central Bank of India, UCO Bank and Bank of Maharashtra. These Bank will get a total of Rs.12,000 crore (from the Government) to help them maintain a capital to risk asset ratio (CRAR) of 8% now with the fresh allocation, Bank may go for preferential allotment of equity shares to the extent of amount allocated to them.

Banks Worried as farm loan defaults loom large

Banks Worried as farm loan defaults loom large...

Highlights: 
Rs.575,000cr Agriculture Credit target for banks in the current fiscal year. 
40% Proportion of farm credit disbursed for kharif crops. 
Rs.301,908cr Farm credit disbursed by bank in 2008-09. Rs.400,000cr Credit disbursal in 2011-12. 

With the goverment issuing drought alert, banks are worried that farm loan repayments could be hit, pushing up their non-performing assets (NPA) or bad loans. the centre has set a Rs.575,000cr Agriculture Credit target for banks in the current fiscal year. About 40% of farm credit disbursed is for kharif crops.

 Domestic banks are under the scanner of global rating agencies and several - including State Bank of India (SBI)-have been downgraded.

While the goverment is worried about the health of its banking system, it has little room to manoeuvre in providing any financial assistance to banks as it did in 2008-09 in case of mass defaults in repayment. However, the Reserve Bank of India allows deferment in repayments in case of drought so that loan accounts are not treated as bad assets after 90 days.

Home minister P Chidambaram, finance minister in 2008-09, announced a Rs.60,000-crore relief package to wipe off NPAs. 

"Non-repayment of farm loan accounts arising due to drought does not become non-performing immediately", said TM Bhasin, CMD Inadian Bank. "Banks can wait till the next crop session before showing those as bad assets, so there is no need to press the panic button."

"Around 40% of agriculture credit flow goes to farmers with less than 2hectares and any relief package by the goverment would widen fiscal deficit," said Soumya Kanti Ghosh, director and head, Economics & Research, Federation of Indian Chambers of Commerce and Industry.

Corporate Social Responsibility, Sustainable Development & Non-Financial Repoting

Corporate Social Responsibility, Sustainable Development & Non-Financial Repoting - Role of Banks

At present, the world over, there is an increasing awareness about Corporate Social Responsibility(CSR), Sustainable Development (SD) and Non-Financial Reporting (NFR). Consequently, there is a concerted effort among all types of organizations, to ensure that sustainable development is not lost sight of, in the pursuit of their respective goals - profit making, social service, philanthropy, etc. CSR entails the integration of social and environmental concerns by companies in their business operations as also interactions with their stakeholders. SD essentially refers to the process of maintenance of the quality of environmental and social systems in the pursuit of economic development. NFR is basically a system of reporting by organizations on their activities in this context, especially as regards the triple bottom line, that is, the environmental, social and economic accounting.

 The contribution of financial institutions including banks to sustainable development is paramount, considering the crucial role they play in financing the economic and developmental activities of the world. In this context, the urgency for banks to act as responsible corporate citizens in the society, especially in a developing country like ours, need be hardly overemphasized. Their activities should reflect their concern for human rights and environment.

 Global warming and climate change are particularly important in the context of sustainable development, especially for developing countries, which tend to be ill-equipped for such changes. According to recent studies on climate change, the majority of Asian companies are “largely oblivious” to the risks posed by climate change issues to their business models and the environment. Nearly two-thirds of the respondent companies were given a zero score for their approach to climate change. The findings suggest that, generally, Asian businesses are far behind their US and European rivals on this issue. Another joint study by Asian Development Bank (ADB), UNDP and ESCAP on the 'Millennium Development Goals (MDG): Progress in Asia & the Pacific 2007' shows that on environmental sustainability, which is one of the eight goals of the MDG, India has regressed in the matter of carbon dioxide emission and consumption of ozone-depleting CFCs.

 Reserve Bank of India feels that, there is general lack of adequate awareness on the issue in India. In this context, the need for sustainable developmental efforts by financial institutions in India assumes urgency and banks, in particular, can help contribute to this effort by playing a meaningful role. RBI in its notification dated 20th November 2007 has advised banks to take note of the issues raised and consider using the same to put in place a suitable and appropriate plan of action towards helping the cause of sustainable development, with the approval of their Boards.

 RBI has referred to the IFC Principles on project finance (the Equator Principles) and carbon trading and advised banks/Financial Institutions to keep themselves abreast of the developments on an on-going basis and dovetail/modify their strategies/plans, etc. in the light of such developments. The progress made thereunder could be placed in the public domain along with the annual accounts of banks.

Monetary Policy Review

Monetary Policy Review

June 2012 

Monetary and Liquidity Measures On the basis of an assessment of the current macroeconomic situation, it has been decided to:

 > keep the cash reserve ratio (CRR) of the scheduled banks unchanged at 4.75 per cent of their net demand and time liabilities; and 

 > keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent. consequently, the reverse repo rate under the LAF will remain unchanged at 7.0per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent. 2. Since the Reserve Bank's Annual Policy statement in April, global macroeconomic and financial conditions have deterioted. At the same time, the domestic macroeconomic situation too raises several deepening concerns. While growth in 2011-2012 has moderated significantly, headline inflation remains above levels consistent wit h sutainable growth. Importantly retail inflation is also on an uptrend. 3. The Reserve Bank had frontloaded the policy rate reduction in April with a cut of 50 basis points. This decision was based on the premise that the process of fiscal consolidation critical for inflation management would get under way, along with other supply-side initiatives. Our assessment of the current growth inflation dynamic is that there are several factors responsible for the slowdown in activity, particularly in investment, with the role of interest rates being relatively small. Consequently, further reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate infationary pressures.

Global Economy

4. The euro area soveriegn debt problem has continued to wiegh on the global recovery. After a brief phase of relative calm reflecting the large liquidity injection by the European Central Bank (ECB), renewed concerns have arisen about a sustainable solution to the sovereign debt problem and the increasing vulnerability of the banking sector. Consequently, risk aversion has increased. Recent data suggest that US economic recovery is weakening. Growth in major emerging and developing economies (EDEs)is also moderating.

Co-Operative Banking in India

"Co-operative Banking in India" Cooperative banking begins in India in the ninteenth century when, inspired by the success of the experiments connected to the cooperative movement in Britain and the cooperative credit movement in Germany. Cooperative Banking pattern is an integral part of Indian Financial System. First Asian Cooperative Bank - Anyonya Co-operative Bank was in India.

CITIZEN CO-OPERATIVE BANK LTD., NOIDA

Branches of CITIZEN CO-OPERATIVE BANK LTD., NOIDA, are coming soon in ALIGARH and MORADABAD.

COOPERATIVE BANKS IN INDIA

BEGINNING OF COOPERATIVE BANKS IN INDIA

The first known mutual aid society in India was the 'Anyonya Sahakari Mandali"organised in state of Gujrat in the year 1889 under the guidance of vithal laxman also know as bhausaheb kaythekar .Previously it came in the sape of co-operative credit society where a group of people frame a society for specific purpose to fulfill the needs of a community.From

BEGINNING OF COOPERATIVE BANKS IN INDIA

till today, the thrust of cooperative banks, historically, has been to mobilise savings from the middle and low income groups and purvey credit to their members.

Cooperative Credit Societies Act

The Act came into force in the year 1904, however, gave the real impetus to the movement. The first credit society got registered in Canjeevaram (Kanjivaram) in the Madras province in the month of October, 1904.

Amendments in Cooperative Credit Societies Act

It was amended in the year 1912, with a view to broad basing it to enable organisation of non-credit societies.

HSBC Exposed US, Possibly INDIA to TERROR Funds (HT news)

Global Banking giant HSBC has been found to have exposed the US financial system and some other countries - possibly including India - to terrorist financing and drug trafficking because of poor anti-money laundering controls.

HDFC:

HDFC Group has become india's Second
biggest Corporate House.

 DECLARATION OF DIVIDEND:
Reserve Bank of India made it very clear for the UCB's those are running in
profit for giving diviend to their members .
The Bank should follow the guide lines and norms laid down in their recent
circular dated 05/07/2012.

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