CENTRAL BOARD RBI

tarun-bajaj-appointed-director-on-central-board-of-rbi

Tarun Bajaj appointed director on central board of RBI

The Centre has appointed Economic Affairs Secretary Tarun Bajaj (IAS:1988:HY) as a director on the central board of RBI replacing Atanu Chakraborty. The nomination of Bajaj becomes effective from May 5 and until further orders.

He was Additional Secretary in Prime Minister’s Office before taking over as Economic Affairs Secretary. He joined Prime Minister’s Office in 2015 with his earlier stint as Joint Secretary in the Economic Affairs Department, looking after multilateral funding agencies division.

05 May 2020
rbi-advised-to-ease-capital-requirements

RBI advised to ease capital requirements

The Parliamentary committee on finance has advised the RBI to ease its rules on capital requirements for banks so that they can increase lending.

 

“Such stringent norms stipulated by the RBI (Reserve Bank of India) for our banks ... are unrealistic and unwarranted,” said the committee's report tabled in Parliament.


Last Friday, the RBI, in a report, opposed the call to relax current risk-weighting rules which are used to calculate capital requirements, saying they fortified banks against the risk of failure. However, it did announce its intention to review capital regulations. However, the RBI stands isolated on its stand.

 

The Parliamentary committee report comes after the government, and some of the board members of the RBI, put pressure on the central bank to relax capital requirements for banks as they seek to boost credit and economic growth.

 

Former RBI Governor Urjit Patel, who quit last month, opposed the government’s demand for lowering capital requirements and warned about the need for a cushion to offset unexpected risks.

 

Indian banks are required to maintain a minimum capital to risk-weighted asset ratio (CRAR) at 9 percent, against the global Basel-III requirement of 8 percent. On top of that, they have to keep a capital conservation buffer that is supposed to climb to 2.5 percent by March 2019.

 

The roll-back of additional capital requirements could release about $76 billion into the economy by releasing capital for lending.

 

Rating agencies have warned against dilution of capital norms for banks. Saswata Guha, Country Director, Financial Institutions, Fitch Ratings, said capital ratios for many banks were well below global standards, and any relaxation could prove detrimental to banks and their ability to absorb unexpected losses.

 

In India, the recovery on loans that go into default was historically only about a quarter of the outstanding loan amount, he said. “Given such low recovery ratio, any kind of dilution of capital norms will be credit negative for Indian banks,” said Guha.

 

According to Fitch’s previous estimates, Indian banks need nearly $65 billion in new bank capital by March 2019 to meet current regulatory requirements. In 2017, the government announced a plan for an infusion of $30.06 billion into 20 state banks by March 2019 to meet Basel-III global demands.

04 Jan 2019
tarun-bajaj-appointed-director-on-central-board-of-rbi

Tarun Bajaj appointed director on central board of RBI

By IndianMandarins 05 May 2020

The Centre has appointed Economic Affairs Secretary Tarun Bajaj (IAS:1988:HY) as a director on the central board of RBI replacing Atanu Chakraborty. The nomination of Bajaj becomes effective from May 5 and until further orders.

He was Additional Secretary in Prime Minister’s Office before taking over as Economic Affairs Secretary. He joined Prime Minister’s Office in 2015 with his earlier stint as Joint Secretary in the Economic Affairs Department, looking after multilateral funding agencies division.

rbi-advised-to-ease-capital-requirements

RBI advised to ease capital requirements

By IndianMandarins 04 Jan 2019

The Parliamentary committee on finance has advised the RBI to ease its rules on capital requirements for banks so that they can increase lending.

 

“Such stringent norms stipulated by the RBI (Reserve Bank of India) for our banks ... are unrealistic and unwarranted,” said the committee's report tabled in Parliament.


Last Friday, the RBI, in a report, opposed the call to relax current risk-weighting rules which are used to calculate capital requirements, saying they fortified banks against the risk of failure. However, it did announce its intention to review capital regulations. However, the RBI stands isolated on its stand.

 

The Parliamentary committee report comes after the government, and some of the board members of the RBI, put pressure on the central bank to relax capital requirements for banks as they seek to boost credit and economic growth.

 

Former RBI Governor Urjit Patel, who quit last month, opposed the government’s demand for lowering capital requirements and warned about the need for a cushion to offset unexpected risks.

 

Indian banks are required to maintain a minimum capital to risk-weighted asset ratio (CRAR) at 9 percent, against the global Basel-III requirement of 8 percent. On top of that, they have to keep a capital conservation buffer that is supposed to climb to 2.5 percent by March 2019.

 

The roll-back of additional capital requirements could release about $76 billion into the economy by releasing capital for lending.

 

Rating agencies have warned against dilution of capital norms for banks. Saswata Guha, Country Director, Financial Institutions, Fitch Ratings, said capital ratios for many banks were well below global standards, and any relaxation could prove detrimental to banks and their ability to absorb unexpected losses.

 

In India, the recovery on loans that go into default was historically only about a quarter of the outstanding loan amount, he said. “Given such low recovery ratio, any kind of dilution of capital norms will be credit negative for Indian banks,” said Guha.

 

According to Fitch’s previous estimates, Indian banks need nearly $65 billion in new bank capital by March 2019 to meet current regulatory requirements. In 2017, the government announced a plan for an infusion of $30.06 billion into 20 state banks by March 2019 to meet Basel-III global demands.

printing-of-rs-2000-banknotes-decline

Printing of Rs 2000 banknotes decline

By IndianMandarins 04 Jan 2019

The RBI has reportedly scaled down the printing of Rs 2000 banknotes. According to the RBI data, there were 3,285 million pieces of Rs 2000 notes in circulation at end-March 2017. A year after (on March 31, 2018), there was only a marginal increase in the number at 3,363 million pieces.

 

Of the total currency in circulation amounting to Rs 18,037 billion at end-March 2018, Rs 2000 notes accounted for 37.3 percent, down from 50.2 percent at end-March 2017. The old 500/1000 bank notes that were scrapped in November 2016 accounted for around 86 percent of the total currency in circulation at that time.

adhia-as-rbi-guv:-likely-or-unlikely?

Adhia as RBI Guv: Likely or unlikely?

By IndianMandarins 11 Dec 2018

Ever since Urjit Patel announced his resignation as RBI Governor the power corridors were abuzz of Hasmukh Adhia (IAS:1981:GJ) as the first and foremost choice of PM as next RBI Governor.


But those in the helm of affairs indicated Indianmandarins that the way Adhia had been maintaining his future-plans and insisting not to accept any post-retirement posts it would be unlikely that Adhia would accept the offer. But some top sources maintained that in all likelihood Adhia would accept the offer. 

fsrasc-begins-process-for-selection-of-new-rbi-guv

FSRASC begins process for selection of new RBI Guv

By IndianMandarins 11 Dec 2018

The Financial Sector Regulatory Appointment Search Committee (FSRASC) which is headed by Cabinet Secretary P K Sinha has started the process to select a new RBI governor following the resignation of Urjit Patel.

 

Apart from Sinha, the panel includes Additional Principal Secretary to the Prime Minister Dr P K Mishra, who is a permanent government nominee, and three other experts, among others.

 

As per the process, the panel will invite applications from eligible candidates and based on interactions with them will select the candidates for a final decision by the government.

 

The appointment would be made by the central government on the recommendation of the FSRASC. It is noted that the FSRASC is free to identify and recommend any other person also, on the basis of merit, who has not applied for the post.

 

This process was followed for the selection of SEBI Chairman Ajay Tyagi and IRDAI chairman S C Khuntia as well.

 

As per the RBI Act, the central bank should have one Governor and four Deputy Governors - two from within the ranks and one commercial banker and another an economist to head the monetary policy department. 

urjit-patel:-first-rbi-guv-since-1990-to-quit

Urjit Patel: First RBI Guv since 1990 to quit

By IndianMandarins 10 Dec 2018

RBI Governor Urjit Patel stepped down on Monday (with immediate effect) from his post citing personal reasons; a day before the results of Assembly elections in the five states. A board meeting of the central bank was slated for 14 December.

 

He is the first RBI governor since 1990 to have quit while serving his term.

 

The development is seen in the backdrop of months long standoff between the Central Bank and the Govt at Centre. 

novel-rbi-way-to-buy-peace-with-finmin

Novel RBI way to buy peace with FinMin

By IndianMandarins 21 Nov 2018

The RBI is said to have bought peace with the desperately hawkish FinMin by relieving the pressure on the Centre government finances by way of capital infusion.

 

If it had continued with the capital conservation buffer (CCB) mandate of 2.5 percent by March 2019, the Centre would have had to provide an additional Rs 36,000-odd crore for banks' capital infusion (based on Common Equity Tier CET levels as of September 2018).

 

This burden is now reduced by about Rs14,000 crore by the RBI board's decision to tinker only with the CCB and not the much-debated higher capital requirement of 9 percent for banks.

 

It is argued that CCB relief will only benefit very few banks that currently maintain the CCB higher than the mandated requirement of 1.875 percent. One rudimentary calculation shows that the move has relieved the pressure on the Centre’s fiscal by about Rs14,000 crore, it is unlikely to boost lending by freeing up capital for PSU banks.

rbi-guv-met-pm-on-friday-seeking-solution-to-controversy

RBI Guv met PM on Friday seeking solution to controversy

By IndianMandarins 12 Nov 2018

RBI Governor Urjit Patel is believed to have met PM Modi last week in a bid to work out a solution on contentious issues that have been flash point between RBI and the Govt during the last few weeks. Reportedly, Patel met senior officials in the PMO.

 

The meetings came amid a face-off between the RBI and the FinMin over issues ranging from appropriate size of reserves that RBI must maintain to ease of lending norms to step up growth in an election year. Reportedly, RBI may create a special dispensation for lending to small and medium enterprises, but it was not clear if an agreement has been worked out to ease liquidity situation for NBFCs and the RBI parting with its substantial part of its surplus.

 

Rift had escalated recently, with the FinMin initiating discussion under the never-used-before Section 07 of the RBI Act which empowers the government to issue directions to the RBI Governor.

 

RBI Deputy Governor Viral Acharya had in a speech last month talked about the independence of the central bank, arguing that any compromise could be “potentially catastrophic” for the economy.

 

Last week, DEA Secretary SC Garg had said the govt was not in any dire need of funds and that there was no proposal to ask the RBI to transfer Rs 3.6 lakh crore. He further said the only proposal “under discussion is to fix appropriate economic capital framework of RBI”. Economic capital framework refers to the risk capital required by the central bank while taking into account different risks. The RBI has a massive Rs 9.59 lakh crore reserves.

 

Patel’s meetings at the PMO came days before the RBI’s crucial board meeting on November 19 during which contentious issues are likely to come up for discussion. Sources said the government nominee directors and a few independent directors could raise the issue of interim dividend along with the capital framework of RBI.

 

However, any change in the central bank’s economic capital framework can be carried out only after making amendments to the RBI Act, 1934.

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