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Posts Tagged ‘Reserve Bank of India’

No impact of rupee slide on banks: SBI chief

Posted by Admin on May 30, 2012

IMG_9746_pcs_1 Same same but different. 500 In...

IMG_9746_pcs_1 Same same but different. 500 Indian Rupee (Photo credit: artist in doing nothing)

http://in.finance.yahoo.com/news/no-impact-rupee-slide-banks-145252120.html

IANS – Mon 28 May, 2012 8:22 PM IST

Bangalore, May 28 (IANS) The rupee’s slide against the dollar had no impact on Indian banking operations though profitability of importers would be affected, State Bank of India (SBI) chairman and managing director Pratip Chaudhary said Monday.

“There is no impact of a falling rupee on banks but it (slide) would strain the profitability of our importing customers, while exporting customers will have an advantage,” Chaudhary told reporters on the margins of a bank function here.

At the same time, despite currency volatility, the bank has seen higher remittances from non-resident Indians (NRIs) in their accounts to benefit from the conversion from dollar to rupee.

Owing to external and internal factors, the Indian rupee has weakened by 23 percent during the last five months, hitting a record low of Rs.56.40 May 23 but recovered slightly to trade in the Rs.54.80-Rs.55.50 range subsequently. It was trading at Rs.55.26 Monday.

Noting that further cut in interest rate would depend on government borrowings this fiscal (2012-13), the chairman said banks were borrowing at 8.5 percent (from the RBI) and lending (primary rate) to the corporate sector at nine percent and above as the government borrowings was at eight percent currently.

“Lowering of interest rate is largely determined by the rate at which the government borrows from the central bank. If the RBI cuts rates further, banks will be in a position to lower lending rate,” Chaudhury said after donating a Rs.8.40-lakh school bus to Angavikalara Ashakirana Trustat Davangere, about 260km from here, as a gift from the bank’s regional office.

The Reserve Bank of India (RBI) April 17 reduced key rates such as repo (repurchase) rate 50 basis points (0.5 percent) to 8 percent from 8.5 percent, resulting in the reverse repurchase rate decreasing to 7 percent from 7.5 percent for this fiscal (FY 2013).

The repo rate is the interest the central bank levies on short-term borrowings by commercial banks. The reverse repo rate is the interest on short-term lending. A cut in these rates rate reduces the cost of accessing funds for lending institutions.

As the SBI’s base lending rate was at 10 percent, lowest among state-run banks, it did not lower it further after the RBI’s rate cut.

“We have, however, reduced interest rates on loans for education and purchase of cars and to small and medium enterprises (SMEs),” Chaudhury added.

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Basel III norms will kick-start from January 1, 2013

Posted by Admin on January 1, 2012

http://www.thehindu.com/business/Economy/article2761226.ece?css=print

By

K. T. Jagannathan

The Reserve Bank of India draft guidelines prescribe minimum capital requirements and also capital conservation buffer. Photo: Paul Norionha
Photo: Paul Norionha
The Reserve Bank of India draft guidelines prescribe minimum capital requirements and also capital conservation buffer.

Reserve Bank of India prescribes Tier I capital at 7 per cent of risk-weighted assets

The implementation of Basel III capital regulation will kick-start from January 1, 2013. It will be fully implemented by March 31, 2017. The Reserve Bank of India indicated this while releasing the draft guidelines outlining the proposed implementation of Basel III capital regulation in India.

These guidelines are in response to the comprehensive reform package entitled ‘Basel III: A global regulatory framework for more resilient banks and banking systems’ of the Basel Committee on Banking Supervision (BCBS), issued in December, 2010.

The draft guidelines prescribe minimum capital requirements and also capital conservation buffer.

The apex bank has said that the common equity Tier-1 (CET1) capital must be at least 5.5 per cent of the risk-weighted assets (RWAs). While stating that the Tier-1 capital must be at least 7 per cent of RWAs, it has proposed the total capital to be at least 9 per cent of RWAs. The implementation period of minimum capital requirements and deductions from common equity will begin from January 1, 2013, and be fully implemented as on March 31, 2017. Under the Basel III norms, Tier-I capital should predominantly consist of common equity.

The objective is to improve the quality of capital.

The draft guidelines have also proposed a capital conservation buffer in the form of common equity of 2.5 per cent of RWAs.

The capital conservation buffer is designed to ensure that banks build up capital buffers during normal times (that is, outside periods of stress), which can be drawn down as losses incurred during the stressed period. The requirement is based on simple capital conservation rules designed to avoid breaches of minimum capital requirements. The capital conservation buffer in the form of a common equity will be phased in over four years in a uniform manner. The capital conservation buffer requirement is proposed to be implemented between March 31, 2014, and March 31, 2017.

The draft guidelines have also indicated that a counter-cyclical buffer within a range of 0-2.5 per cent of common equity or other fully loss absorbing capital will be implemented according to national circumstances.

“The purpose of counter-cyclical buffer is to achieve the broader macro-prudential goal of protecting the banking sector from periods of excessive aggregate credit growth,” the Reserve Bank says. The counter-cyclical capital buffer would be introduced as an extension of the capital conservation buffer range.

The implementation schedule indicated above, however, will be finalised taking into account the feedback received on these guidelines.

According to the guidelines, instruments, which no longer qualify as regulatory capital instruments, will be phased out during the period beginning from January 1, 2013, to March 31, 2022.

For OTC derivatives, in addition to the capital charge for counterparty default risk under current exposure method, banks will be required to compute an additional credit value adjustments (CVA) risk capital charge.

The parallel run for the leverage ratio will be from January 1, 2013, to January 1, 2017, during which banks are expected to strive to operate at a minimum Tier-1 leverage ratio of five per cent.

The leverage ratio requirement will be finalised taking into account the final proposal of the Basel Committee.

The apex bank has said comments/feedback on the draft guidelines, including implementation schedule, should be sent by February 15, 2012.

Keywords: Basel III capital regulationRBI

Also go to

http://www.moodysanalytics.com//basel3implementation2011

to download the Implementing Basel III: The Challenges, Options & Opportunities Whitepaper

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Rising inflation cost Indian households Rs 5.8 lakh crore

Posted by Admin on July 2, 2011

http://in.finance.yahoo.com/news/Rising-inflation-cost-Indian-yahoofinancein-811909637.html

Yahoo! India Finance, On Wednesday 29 June 2011, 10:20 AM

Bangalore: Inflation has knocked the bottom out of household budgets. Now, someone has come along and actually measured how big the hole in the collective household budget really is. Rising prices of food items, besides petroleum products and commodities, have burnt a hole in the pocket of the Indian consumer during the last three years.

Surging inflation cost Indian households an additional Rs 580,000 crore (around $129 billion) during the three-year period from 2008-09 to 2010-11, a Crisil Research study said.

The study concluded that price trends of commodities in the wholesale price index favour the middle and higher income classes, rather than poor and vulnerable Indian households who spend a large part of their income on food.

The study shows that growth of private consumption expenditure in nominal terms increased to nearly 17 per cent per year during this period from 14 per cent in the preceding 3 years mainly due to the rise in food inflation. “The rise in inflation to 8 per cent per year during 2008-09 to 2010-11 from 5 per cent in the preceding 3 years eroded the purchasing power of money and inflated the consumption expenditure bill of Indian households by Rs 5.8 trillion,” said Dharmakirti Joshi, Chief Economist at CRISIL.

Crisil said contrary to the general perception, prices of several commodities declined even during periods of high inflation. “Prices of many consumer durables have declined in the last few years. If adjusted for improvement in the quality of goods, the decline would be even sharper.”

Consumers immediately feel the impact of rising inflation in food articles because these items are purchased on a daily basis. Durables are not purchased frequently and hence, a fall in their prices tends to be overlooked while forming inflation expectations, said Vidya Mahambare, a senior economist at Crisil.

Price trends of commodities in the Wholesale Price Index favour the middle- and high-income classes, rather than the poor and vulnerable Indian households, who spend a large part of their income on food.

The middle- and high-income groups benefit more from falling prices of non-food manufactured items, particularly durable goods, as they have higher disposable income to spend on other goods and services, including consumer durables and for savings.

“The poor, with limited discretionary income to spend on consumer durables, do not benefit much from the lower prices. In contrast, rising prices of food items strain their discretionary spending,” the report said.

Higher food prices should be an incentive to enhance the production of food items, but this has not happened so far. In addition to price signals, productivity improvement in food/agriculture categories would require better technology and improved investments in irrigation. In the absence of these measures, high food inflation is here to stay, the report added.

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India services PMI up modestly, input prices at 30-mth high

Posted by Admin on February 4, 2011

http://in.finance.yahoo.com/news/India-services-PMI-modestly-reuters-3999984247.html

A waiter serves coffee to college students surfing the internet at a cafe in Bangalore in this April 6, 2000 file photo. REUTERS/Stringer/Files

 

On Thursday 3 February 2011, 10:31 AM

BANGALORE (Reuters) – Business activity in India’s services sector grew at a faster clip in January than in the previous month, boosted by new orders and expectations of solid growth, but costs also soared, a survey showed on Thursday.

The HSBC Markit Business Activity Index, based on a survey of around 400 firms, rose to 58.1 in January after falling to 57.7 in December from November’s four-month high.

It was the 21st consecutive month the key index of the service sector in Asia’s third largest economy has been above the 50 mark that separates growth from contraction.

“India’s service sector saw a slight acceleration in the momentum in January, with activities, orders, and employment growing a bit faster and readings staying firmly in expansionary territory,” said Leif Eskesen, chief economist for India & ASEAN at HSBC.

The PMI’s employment index and the business expectations index climbed to their highest in seven months, indicating Indian firms were more optimistic about the year ahead.

However, the input price index hit a 30-month high of 61.99 in January and prices charged were at a nine-month high, underscoring the threat that higher raw material prices are rapidly filtering into the broader economy, fueling inflationary pressures.

“As we saw for the manufacturing sector, however, the supply side is struggling to keep pace with the strong momentum in domestic demand, which is manifesting itself in accelerating input prices and is spilling over to prices charged,” Eskesen said.

India’s manufacturing sector expanded at a slightly faster pace in January but input prices jumped, adding to pressure from food inflation that the government and central bank are already struggling to contain.

“The current strong pace of activity is clearly not compatible with comfortable and stable levels of inflation, underscoring the urgency of continued monetary policy tightening and the need to prepare a budget for the next fiscal year, which is consistent with an appropriately contractionary fiscal policy stance,” Eskesen said.

India’s central bank raised interest rates on Jan. 25 by a quarter of a percentage point, bringing the repo rate to 6.5 percent, in an attempt to suppress stubborn inflation. The increase was its seventh rate rise over the past year and more hikes are expected to follow later in 2011.

The Reserve Bank of India has lifted inflation projections for March 2011 to 7 percent.

(Reporting by Ruby Cherian; Editing by Kim Coghill)

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