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Greece issue not greasy for India: RBI governor

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Chennai: India’s exposure to cash-strapped Greece was very limited and the central government was in talks with the central bank on providing additional capital to public sector banks, a top Reserve Bank of India (RBI) official said on Thursday.

RBI Governor Raghuram Rajan said capital investments in the Indian economy were picking up while reforms were needed for stronger growth.

Speaking to reporters after attending RBI’s board meeting here, Rajan said the country has very limited exposure to Greece that was facing a crisis after defaulting on payments to the International Monetary Fund and would not be impacted much directly. However, the develop ments may have a slight indirect effect, he conceded.

He said the Greece issue may impact the exchange rates. Untoward developments in that country could also place at risk global investments, he warned.

Rajan said global investors after analysis would find the India story to be very good. India’s macro policies were good while the growth prospects and foreign exchange reserves were healthy, he pointed out.

Rajan said India was attractive for foreign investors given the opportunities while the global economy is on the road to recovery.

According to Rajan, the Indian economy was picking up as there were signs of capital investment picking up while the government has to address some issues to put on track the stalled infrastructure projects.

However, he cautioned against relying on foreign investors to fund government or corporate banks market.

Queried about inflation, the RBI governor said it was being watched as well as the progress of the monsoon.

On the issue of non-performing assets of banks, Rajan said RBI was working with the banks so that they recognise the issue early.

He said additional capital infusion by the government into public sector banks will also provide the necessary buffer for the latter.

Rajan said the process of appointing new heads for public sector banks will be completed soon.

According to him, exports was an area of relative weakness which was true across different Asian economies.

Rajan also announced that RBI will put in place a regulatory framework to allow a new kind of Non-Banking Finance Company (NBFC), which could act as an account aggregator to enable the common man to see all his accounts across financial institutions in a common format.

The idea of such an NBFC had emanated from the Financial Stability and Development Council (FSDC).

RBI deputy governor S.S. Mundra said the central bank proposes to recommence the Financial Inclusion Advisory Committee (FIAC) to take the financial inclusion agenda forward.

Mundra said the work on financial inclusion was far from complete and a road map needed to be laid out to take the agenda forward, as Prime Minister Narendra Modi indicated at RBI’s 80th Anniversary celebrations.

This has also assumed critical importance following the massive efforts made for opening of bank accounts under the Prime Minister’s Jan Dhan Yojana with focus on Jan Dhan accounts, Aadhar identity and Mobile phones.

According to Mundra, RBI would request all financial sector regulators as also the government, self-regulatory organisations, research organisations, Unique Identification Authority of India (UIDAI), National Payments Corporation of India (NPCI) and such other stake holders for nomination to FIAC.

He said that as an input to the FIAC, RBI will set up an internal group with the concerned departments to prepare a blue print for financial inclusion for the next five to 10 years identifying ways to integrate resources available with all financial institutions in achieving the goals for financial inclusion.

Harun R. Khan, another RBI deputy governor, highlighted the measures being taken to move towards less-cash less-paper-based payment system, with focus on creating more acceptance infrastructure for the huge number of plastic cards issued by banks and upscaling mobile banking.

The RBI’s board meeting also discussed the draft Annual Report for 2014-15.

The Annual Report of RBI gives an account of what was planned in the past year, what was achieved and what was not, as also what the central bank proposed to do in the coming year.

(IANS)

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RBI Working With Regulators For Better Security Lending Products, Says DG

The Reserve Bank of India (RBI) is currently working with other financial sector regulators like Sebi, PFRDA and Irda to develop an interest rate market

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RBI, security, finance, market
This is broken as Rs 1,23,414 crore as surplus for year 2018-19 and another Rs 52,637 crore of excess provisions identified by the committee as per the revised Economic Capital Framework. Pixabay

The Reserve Bank of India (RBI) is currently working with other financial sector regulators like Sebi, PFRDA and Irda to develop an interest rate market where mutual funds, pension and insurance funds could participate in securities lending to deepen market based finance and develop an alternate to bank finance.

“IRDA, SEBI and PFRDA too could help development of interest rate markets. For instance, short selling activity could benefit if a wider pool of securities lenders can be developed.

“Insurance and pension funds, mutual funds have significant holdings of Government securities that could be used to lent to short sellers. This would avoid short-squeeze incident we saw a couple of years back, apart from generating income for these entities.

“We are working with regulators to develop a securities lending product that could enable these entities to participate in securities lending,” B.P. Kanungo, Deputy Governor, Reserve Bank of India recently said at FIMMDA meeting in Moscow.

RBI, finance, security, market
Reserve Bank of India’s regional office at South Gandhi Maidan Marg, Patna. Wikimedia Commons

FIMMDA is a representative body of participants in the fixed income market in India.

He said the Indian financial sector which mostly has been a bank-based one needs to develop a robust fixed income market to bring in market discipline, to augment bank finance and indeed free up bank finance for uses that cannot access the market directly.

Development of the fixed income market has been an important objective of the Reserve Bank, the Government, the SEBI and other regulators these many years. Significant progress has been made, yet a lot remains to be achieved.

The Banking regulator is also currently looking at refurbishing some regulations on treatment of cash margins as deposits, payment of interest on such margins, posting of collateral abroad to enable participants to move to global margining standards.

“The risk management at market level is pretty robust, with central counterparty settlement, exchange traded products, trade repositories, legal entity identifier.

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But there is scope of improvement at entity-level as far as financial institutions are concerned, which will be tested with introduction of new accounting standards. Some other aspects of regulation – treatment of cash margins as deposits, payment of interest on such margins, posting of collateral abroad – are all under examination to enable participants to move to global margining standards.

Kanungo further said in the next five years the demand for bonds will significantly outstrip the supply.

“It is estimated that five years down the line, the demand for bonds will significantly outstrip the supply,” he said. (IANS)