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  Field Day for Defaulters and Bankers face the music This is based on a short Tamil story that appeared in ‘Dinamani Kadir’, a weekly supplement attached to the most respected Tamil Newspaper 'Dinamani', today, the 27th August 2023. Logu : “Sekar, I am telling you time and again, that I do not have Rs.1000 (Rupees Thousand only), but you keep  on torturing me to give it some how” Sekar: “ Okay Logu. At least give Rs.500 (Rupees Five hundred only) now. Very Urgent. I have some unexpected expenses. With the amount you give only, I have to manage, till I get the next month pay.” Logu: Whichever way you ask: cry, beg or whatever. My answer is simple. I don’t have even five rupees. Please go. Sekar, returning dejectedly, murmuring to himself: “It is six months, since I gave the loan to Logu. I am trying my level best to get it back. Initially, he was apologetic. Then, he was becoming tough. Not accessible. And now, even if I manage to trace him, so indifferent” When I read the abo...

RBI Governor Statement on MPC Discussions 1. Is there any invisible stress in the financial sector?  Reserve Bank of India (RBI) Governor, normally, comes out with a statement of decisions taken by the Monetary Policy Committee (MPC), after the meeting of MPC is over, reviewing the repo rate in the light of prevailing inflation rate, international and domestic developments that might influence inflation positively or negatively. On 10 th  August 2023, he announced that the repo rate  is unchanged and that the monetary policy stance continues to be  "remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth" . He mentioned “ During tranquil and good times that vulnerabilities may creep in. Hence, buffers are best built up during these periods. A stable financial system is a prerequisite for price stability and sustained growth. This is a shared responsibility in which regulated entities ...

  Why MPC should keep repo rate and stance unchanged  As we had seen in the minutes of the earlier Monetary Committee Meetings (MPC) of RBI, certain external and domestic factors influence the decision of MPC, while it reviews the policy rate and monetary policy stance. While FED fund rate, Current Account Deficit (CAD), average crude oil price, net FPI and NRI inflows/outflows are the major external factors taken up for discussion, CPI inflation, fiscal deficit, liquidity position and credit growth in the banking space and GDP are some of the domestic issues that get debated in the review meetings of CPC. 1. On the external front, though FED raised the fund rate by 25 bps, the statement from its Chairman that (i) consumer and labour market conditions are encouraging and (ii) there is no fear of recession now, even though the growth might be slower, has largely calmed down the international market. And  the fact that personal consumer expenditure (PCE) in US has declined ...

  M erger of ABs with SBI Whether shareholders of associate banks (ABs) benefitted?   A n interesting read 1. Three ABs SBBJ, SBT and SBM were listed entities. SBH and SBP were 100% owned by SBI.  2. The swap ratios for getting the shares of SBI were fixed in August 2016 as under: For  i. 10 shares of SBBJ, 28 shares of SBI  ii. 10 shares of SBT, 22 shares of SBI and  iii. 10 shares of SBM, 22 shares of SBI were allotted. 3. Share prices of the four banks 'prior to' and 'post' announcement of swap ratio in august 2016 reads as follows                          Prior         Post SBBJ                   488           673 SBT                     363           505 SBM          ...

SBI FOUNDATION DAY Today, the employees and pensioners of SBI celebrate the 68 th foundation day of the Bank. I thought I will pen a few interesting facts about the largest commercial bank in India. 1 . Origin : Three Presidency Banks commenced   banking operations in the following order: Bank of Calcutta : 1806  (Renamed Bank of Bengal in 1809) Bank of Bombay : 1840 Bank of Madras: 1843* 2 . Imperial Bank of India: The above three banks were merged to form Imperial Bank of India (IBI) in Jan 1921. IBI also acted as the Central Bank for British India prior to formation of Reserve Bank of India in 1935. 3. State Bank of India (SBI): By an act of Parliament, RBI acquired controlling interest in IBI. The bank was nationalised and renamed State Bank of India from 1st July 1955. 4. Banking Subsidiaries/ Associates Eight Princely State Banks of different regions were nationalised in 1959 and were made the banking subsidiaries of SBI. They were known as assoc...

Bail in Lenders and Depositors out? Lot of heat is generated over the proposed Section 52 of the FRDI Bill.  This section empowers the Resolution authorities to ‘cancel’, ‘modify’ or ‘change’ the form of liability of the institution or cancel the liability altogether.  In respect of Banks, the major liability is in the form of Deposits accepted from the Public, large and small.  Naturally everyone is worried whether the resolution adopted will ‘nullify’ the deposit, restrict/defer the liability to the depositor or will it convert the depositor into a shareholder in a stressed banking institution.  The government, the regulator, media and all persons keen to implement the Financial Reforms in the country join together to reassure that the depositors need not worry and they will be protected.  But when an act is passed giving powers to invoke ‘bail-in’, what is the guarantee that this will never be used? If it is used, what is the recourse available to deposi...

Kanungo CSC Report:  Some Critical Issues  The  Committee for 'Review of Customer Service Standards in RBI Regulated Entities'  (REs) headed by Shri Kanungo, former Deputy Governor, Reserve Bank of India (RBI) submitted its report to RBI on 24th April 2023. While most  of the recommendations show the way how RBI should regulate and how the REs should develop the customer service  as a enterprise-wide culture, some are reinforcing instructions already there. But there are some critical 'live' issues, that were merely outlined and left to the regulator to define and fine tune. I would like to detail, four such issues: Critical issues that need improvement: 1. Nomination : The committee has recommended that nomination in deposit accounts may be made mandatory (optional now in the hands of depositors) and nomination in all deposit accounts should be completed in 3 years. In this regard nomination in deposit accounts was brought in 1985, when banks were not comp...