Money & Banking
SBI chairman for abolition of CRR

RBI should either do away with CRR or compensate the banks for the losses incurred as the banking system was not earning any interest on it, SBI chairman Chaudhuri told reporters on the sidelines of the Ficci Banking Conclave

Kolkata: State Bank of India (SBI) chairman Pratip Chaudhuri today made a strong pitch for the abolition of cash reserve ratio (CRR), saying that keeping required funds with the RBI without any interest was costing the banking system about Rs21,000 crore, reports PTI.
RBI should either do away with CRR or compensate the banks for the losses incurred as the banking system was not earning any interest on it, Mr Chaudhuri told reporters on the sidelines of the FICCI Banking Conclave here.
“CRR does not help anybody and it is unfairly put on the banks. Why is CRR not applied to insurance and other companies who are mobilising deposits from the public?” he asked.
CRR, he said, should be phased out within a reasonable time-frame. “Phasing out of CRR would release scarce capital resources which will help the banks in reducing rates for the industry.”
Banks are required to keep 4.75% of their deposits with RBI.
Mr Chaudhuri said the other option was to increase the SLR, on lines of CRR percentage. Banks earn interest on SLR deposits.
About losses incurred by the banking system for keeping interest-free CRR deposits, Mr Chaudhuri said it was around Rs21,000 crore for the entire industry and Rs3,500 crore for SBI. 
Mr Chaudhuri said SLR deposits were sufficient to address the issues of solvency and liquidity in case of a failure and maintaining an additional CRR was superfluous.
When pointed out that RBI was using the CRR instrument to tackle inflation, Mr Chaudhuri said to some extent it was true.
“But present day inflation is not due to demand pressures, it is a result of inadequate supply in the system,” he added.
To a query, Mr Chaudhuri said many other banks and the finance ministry had put forward this view to RBI. “RBI has to take a call on it.”
Referring to SBI, he said the bank would attempt to reduce NPAs in the coming quarters.


RBI to conduct field trials of Rs10 polymer notes

“It has been decided by the Government of India and Reserve Bank of India to introduce Rs10 notes in polymer/plastics on a field trial basis,” minister of state for finance Namo Narain Meena informed Parliament

New Delhi: The Reserve Bank of India (RBI) has proposed to conduct field trials of Rs10 polymer banknotes in five cities including Shimla and Cochin, reports PTI quoting minister of state for finance Namo Narain Meena.
“It has been decided by the Government of India and Reserve Bank of India to introduce Rs10 notes in polymer/plastics on a field trial basis,” Mr Meena said in a written reply to Rajya Sabha.
He said the RBI has informed that field trial is proposed to be conducted at five places—Jaipur, Shimla, Bhubaneshwar, Mysore and Cochin, keeping in view of “the varied geographical locations and climatic conditions.”
The expenditure proposed to be incurred on the field trial would be finalised as per the guidelines, he added.
Polymer notes have relatively longer life compared to the prevailing paper banknotes and may help in checking counterfeiting.
Polymer notes were first introduced in Australia to safeguard against counterfeiting of currency.
Besides Australia, other countries which have introduced plastic notes include New Zealand, Papua New Guinea, Romania, Bermuda, Brunei and Vietnam.


NTPC offers to help Railways transport coal: Who will clear the roadblocks?

NTPC’s offer to help the Railways fund projects for transporting coal is a good move. But issues like acquiring land for laying new tracks need to be addressed first

In an interesting move, NTPC, India’s single largest power generator, has made a proposal to finance the Indian Railways to build or lay the track lines required for the coal movement, according to the Mint.
Cash rich NTPC with Rs17,000 crore in the kitty has reported a net profit of Rs 9224 for the year ending 31st March 2012.
The power producer has proposed that this capital outlay may be set off against the freight charges to the Railways when the coal movement begins.
The modalities of this proposal will have to be worked out in greater detail and the matter is already in the hands of an inter-ministerial group which will make its final recommendations to the Cabinet for clearance.
Presently, the Indian Railways moves 52% of the coal mined in the country, which could possibly increase to 58% or more by 2016-17. This excludes imported coal, which also utilizes other modes of transportation to the required sites. Even where the river transportation may be available, another source could be dumb barges.
Out of the total 205,340 MW of power generated, about 56.7% amounting to 166,333.38 MW is coal based and for years to come the dependence on fossil fuel is imperative.  At present NTPC requires 160 million tonnes (MT) of coal and a little more than 10% of which (17 MT) is imported at a much higher cost than its indigenous counterpart.
It is essential therefore, for NTPC to modernize both its excavation and evacuation methods, including the use of dedicated freight corridors to ensure uninterrupted local supplies. However, the Dedicated Freight Corridor Corporation of India, a subsidiary of Indian Railways, established in 2006 with the urgent task of constructing 3278 km long corridor has not made much progress, though work is on hand in two sectors.
The Railways have a conflict of interest with its own subsidiary that the DFC (dedicated freight corridor) may secure business from others, resulting in the loss of business for Railways, which they are currently procuring. This is actually a baseless fear, as there is enough business to go around.
In this new proposal, NTPC will have to ‘acquire’ the land for the purpose of laying the tracks.  It is a little too early to comment until we have some clear cut announcement from the inter-ministerial group.
The most important factors are the need to investigate the issues relating to: (a) laying additional lines with existing tracks, to overcome the land acquirement problem, and to expedite the work; and (b) reworking the freight movement timings vis-a-vis other train passages so that track capacity is judiciously used to the optimum extent possible.  The issue of acquiring land will then become applicable where there are no lines and new tracks will have to be laid to the pitheads and from where, currently road transport may be used.
These issues should be handled by an independent competent body so that there is no conflict of interests with a clear time frame within which their recommendations should be submitted.
Too many committees spoil the broth and we have no time to lose. 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)



Ashok Hallur

5 years ago

TO MD NTPC, sirji this is fantastic move, which will definitely improve the prospect of fast coal movement to thermal projects. Recently NTPC is constructing a super thermal plant at Kudagi near Bijapur in Karnataka for which doubling of existing BG line between Solapur and Gadag is absolutely essential so that coal can be easily transported to the Thermal plant . Pl go ahaed & do it(If the railways red tape allows it)

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