RBI likely to maintain status quo in its policy review

According to Indian Overseas Bank chairman and managing director M Narendra, the central bank is likely to keep policy rates unchanged for a while

New Delhi: Overlooking the demand of India Inc to lower interest rates, the Reserve Bank of India (RBI) in its policy review may refrain from cutting policy rate as the inflation of manufactured goods is still high, reports PTI.

“I don't see moderation in the interest rate (in the coming policy). CRR (Cash Reserve Ratio) cut I am not hopeful,” State Bank of India (SBI) chairman Pratip Chaudhuri said.

“I think there would be strong measures to indicate that RBI wants inflation to be stamped out totally,” he said.

Headline inflation fell to a two-year low of 7.47% in December, 2011. Food inflation entered the negative zone in mid-December and stood at (-)0.42% as of 7th January, as per the latest numbers released by the government.

The RBI will unveil its third quarterly review of monetary policy on 24th January.

Industry has been demanding cut in interest rate to prop up the economy. In the second quarter (July-September) of the current fiscal, the economy recorded a growth of 6.9%, the lowest level in over two years.

In its last review in December, the RBI pressed the pause button on its monetary tightening measures and said it might go for rate cuts in the future depending on moderation in inflation.

“From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth,” RBI governor Subbarao had said in the last policy review.

According to Indian Overseas Bank chairman and managing director M Narendra, the central bank is likely to keep policy rates unchanged for a while.

There is a little possibility of changing the CRR in the coming policy review, Mr Narendra added.

Presently, CRR is 6%. CRR is that portion of deposits which commercial banks keep with the central bank.

The central bank had hiked interest rates by 375 basis points between March 2010 and October 2011 to deal with the persistently high inflation, including rising prices of food items.

Canara Bank chairman and managing director S Raman said there is some possibility of the RBI slashing CRR by 25 basis points to infuse liquidity in the light of moderation in industrial activity.

The government has already revised downwards the gross domestic product (GDP) growth forecast for the current fiscal. GDP is expected to clock a growth rate of about 7% against 9% projected earlier.

Kotak Mahindra Bank managing director Uday Kotak said: “Domestic liquidity is tight as you can see at numbers ... at the most the market can hope something on CRR to correct the domestic liquidity situation”.

Banks are drawing over Rs1,00,000 crore from the repo window everyday even though RBI is carrying on Open Market Operation (OMO) on weekly basis to ease liquidity pressure.

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COMMENTS

Java

5 years ago

The RBI has badly misjudged the causes of inflation and hence has been administering the wrong remedy of higher interest rates. This has resulted in a completely needless slowdown of the economy as well as govt tax revenues, without checking the inflation at all. RBI should immediately reduce the interest rates and give a badly needed push to the economy it has wrongly, even unjustly held back.
Causes of inflation are to be found not in the growth of industry or housing or agriculture, all of which have been badly hit by the high interest rates and consequential increase in cost of production, but more likely in
1. NREGA which has suddenly pumped in high liquidity into the rural areas.
2. Sixth wage bill and related frequent inflation adjusted hikes for government employees.
3. High cost of oil and impact on downstream products and transportation costs.
RBI has hit out blindly at the wrong target and has ended up scoring self goals. It must rectify its mistake without delay and reduce the rate.

Govt mulls bringing corporates under proposed anti-graft law

The Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice is examining the Prevention of Bribery of Foreign Public Officials and Officials of Public International Organisations Act-2011 aimed at criminalising foreign bribery and offences thereof

New Delhi: In view of complaints of corruption in the private sector, the government is considering bringing corporates under a proposed anti-graft law, reports PTI.

Official sources said the chiefs of the Central Vigilance Commission (CVC), the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) have been called in by a parliamentary standing committee next week to give their views in this regard.

The Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice, headed by Congress leader Abhishek Manu Singhvi, is examining the Prevention of Bribery of Foreign Public Officials and Officials of Public International Organisations Act-2011 aimed at criminalising foreign bribery and offences thereof.

The Bill has been passed by the Lok Sabha and is awaiting nod from the upper house of Parliament.

“A letter has been sent to the CVC, CBI and ED seeking their response through an in-person presentation/submission on the matter. They have been asked to appear before the Committee on 24th January,” a source said.

“The Committee is also considering bringing corporates or private industrial houses in the ambit of the proposed bill,” he added.

The Bill prohibits accepting gratification by foreign public officials as also giving gratification to foreign public officials, while also proposing provisions for rendering assistance and co-operation among nations and making the offence punishable to a minimum of six months jail term to a maximum of seven years.

It also envisages provisions for attachment, seizure and confiscation etc., of property in a contracting state or India and extradition of accused persons.

Foreign bribery is not covered under any domestic anti-corruption laws at present.

The sources said the committee is likely to finalise its recommendations within a month, and then the Bill will be sent to the Rajya Sabha for its nod.

They said that the committee has already met with the representatives of industries bodies like the Associated Chambers of Commerce and Industry of India (ASSOCHAM), Federation of Indian Chambers of Commerce and Industry (FICCI) and PHD Chamber of Commerce and Industry, among others, to discuss various provisions under it.

“Stakeholders are understood to have favoured legal net for corporates to ensure transparency and check corruption.

The proposed amendments will be in conformity with the United Nations Convention against Corruption and the Anti Bribery Convention of Organisation of Economic Cooperation and Development (OECD),” a source said.

The head of country’s anti-corruption watchdog CVC, Pradeep Kumar has also favoured a legislation to bring corporates under the purview of another anti-graft law, Lokpal.

Currently, no government body including the CVC has powers to check corruption in private firms. Capital market regulator Securities and Exchange Board of India (SEBI) recently rejected a proposal for donning the role of an anti-corruption watchdog for private companies—similar to the role of the CVC for government entities.

 

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COMMENTS

Shibaji Dash

5 years ago

UK and US have already done it. They have gone a mile beyond that., extending the country's territorial jurisdiction over their corporate wrong doings in other countries.

FIIs shop for stocks worth $1.16 billion in first 20 days of 2012

Between 2nd and 20th January, foreign investors infused $1.16 billion, or Rs6,007 crore, into the Indian equity market, but were more bullish on the debt market, making a net investment of Rs15,933 crore during the same period, according to SEBI data

Mumbai: Foreign Institutional Investors (FIIs) stayed away from Indian equities in 2011, but have already shopped for stocks worth $1.16 billion (or Rs6,007 crore) in the first month of 2012.

Between 2nd and 20th January, foreign investors infused $1.16 billion, or Rs6,007 crore, into the Indian equity market, but were more bullish on the debt market, making a net investment of Rs15,933 crore during the same period, according to data from the Securities and Exchange Board of India (SEBI).

Market experts believe that rupee strengthening and easing concerns over inflation and economic growth have helped foreign investors step up buying in recent sessions.

Analysts said the weak earnings outlook is only a matter of concern in the short-term, as conditions may improve in line with changes in the domestic and global macro-environment.

FIIs purchased gross equities and debt securities worth Rs55,902 crore and sold shares and bonds to the tune of Rs33,962 crore during the period, translating into a net investment of Rs21,940 crore, SEBI added.

This is the third straight week of inflows into the Indian stock and debt markets by overseas investors.

Buoyed by sustained FII inflows, the stock market barometer BSE Sensex has gained around 1,284 points, or 8.30%, so far in January. In the last trading session, the key BSE index finished at 16,739.01, up 95.27 points from its previous close.

In the year 2011, FIIs purchased stocks and bonds worth Rs8 lakh crore, but sold securities worth Rs7.9 lakh crore, resulting in a net investment of Rs17,480 crore during the year.

Investors flocked toward the debt market in 2011, making an investment of Rs20,293 crore, but stayed away from the equity market, pulling out Rs2,812 crore.

 

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