Samachar lehar feb2012

Samacher Lehar- February 2013 Issue
Sl. No Topic/Sub-Topic Page No.
1. Our Bank in News 02
Third Quarter Review of Monetary Policy 2012-13 Statement by Dr. D.
2. 7
Subbarao, Governor, Reserve Bank of India
3. KHAS BAAT 13
4. Agriculture & Other Priority 21
5. BASEL 23
6. Bonds & Money Market 25
7. Credit Growth 25
8. CARD 27
9. Deposits 28
10. Liquidity 30
11. Minsitry of Finance 30
12. Forex Inflows 33
13. Housing Worries 33
14. Human Resources 34
15. Inflation 36
16. Infrastructure 36
17. Insurance 37
18. Mutual Funds & Capital Market 37
19. NPA 40
20. Other Banking News 44
21. 49
22. RBI Directives & Guidelines 50
23. ` Movement 53
24. Technology 53
25. Random Payment System Issues of Systemic Relevance for the New Year 55
A Revolution in Monetary Policy Lessons in the Wake of the Global
26. 63
Financial Crisis
27. Consultative Paper on Review of Corporate Governance Norms in India 87
28. FAQs on RBI as Banker to Government 122
29. Promoting Retail Investor Participation in Government Bonds 125
30. FAQs on Central Depository Services (India) Limited 134
The Magical World of Mathematics - The Charm, Challenges and Career
31. 145
Prospects
32. Financial Inclusion of Urban Poor in India 154
33. RBI to issue norms for companies merging with overseas firms via IDRs 163
34. RBI cautions banks charging high prices on products 164
35. RBI to address long-pending grievance of MSME sector 164
Foreign investments should be allowed into Alternative Investment Funds
36. 165
: approval seeked by Sebi
Existing rules on insider trading to be synced with the guidelines of
37. 166
Companies Bill : Sebi
38. Post Bank of India to be established soon 168
39. RBI likely to finalise norms for NBFCs this month 168
Listed Companies should Disclose data as per clause 36 of the Listing
40. Agreement : Sebi 169

Canara Bank
Samachar Lehar February 2013

41. SEBI proposes tougher norms for corporate governance 170
42. Working group set up to resolve consumer complaints : RBI 171
43. New rules expected for taking foreign tax credit from 2013-14 171
44. RBI relaxes overseas borrowing limit for NBFC- IFCs 172
45. Tax recovery norms get stricter from 01-01-2013 173
FinMin likely to discuss the controversial tax rules in parliament next
46. 174
month
47. Sebi is likely to propose stringent public shareholding norms 175
48. RBI might consider bringing down G-Secs to be held under HTM 176
49. Sebi notifies regulations for setting up a SRO to monitor MF distributors 177
50. New set of guidelines for consent order mechanism : Sebi 178
51. Investors should not fall for fraud regulatory calls : Sebi 178
52. Banking Ombudsman Scheme to be reviewed, updated and revised : RBI 179
53. Irda board approves the new product guidelines 180
54. Irda releases exposure draft on 'Standardization in Health Insurance' 181
55. Sebi eyes 24/7 monitoring through IMSS 183
Comments on final norms for new banking licenses submitted to RBI :
56. 184
FinMin
57. Implementation of GAAR postponed to 01-04-2016 185
58. Swap Facility for Expansion of Export Credit in Foreign Currency 186
59. Banking facilities in small towns soon 186
60. Budget might include the constitutional amendments on GST : FM 187
61. Capital adequacy norms should be relaxed : FinMin to Rbi 188
62. No registration fee for registrations of new distributors : Amfi 188
63. Govt. to consider proposal for setting up holding company for PSU banks 189
64. CCEA authorises NIF to buy public cos' shares 190
65. CBDT clarifies onsite software development not taxable 192
66. Debt segment on bourses : Sebi 193
67. Sebi relaxes IDF regulations, margin requirement under offer for sale 194
68. Real estate, broking firms should be allowed to set up banks : FinMin to RBI 195
69. PSUs may not be allowed to issue tax-free bonds in FY14 : FinMin 196
70. Sebi notifies Investment Advisers Regulation, 2013 197
71. Funds used for IPO should be scrutinized by monitoring agency : Sebi 198
72. FinMin to approach cabinet for creation of debt management office 199
73. Govt. likely to increase the annual agricultural lending target 200
74. Banks should offer 30-year fixed rate home loan : RBI panel 201
75. Insurance regulator releases framework for monitoring insurance frauds 202
76. Budget 2013-2014 aims at providing Investor-friendly India : FM 202
77. Aadhaar must for new EPFO accounts 203
78. RBI committee lays down their recommendations for PACS 204
79. EPFO is likely to roll back the mandate of furnishing Aadhaar number 205
80. Investment ceiling for insurers should be 5% in group companies : IRDA 206
81. RGESS to be launched on February 9, 2013 : FinMin 206
82. MCX-SX will commence live trading in equities from February 11 207
83. Govt may agree with Shome committee on retro tax 208
84. RBI to issue inflation-indexed bonds to wean investors off gold 209
85. Centre refuses the proposal of uniform GST rates 210
86. Key Banking Indicators 211
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Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon
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Canara Bank

OUR BANK IN NEWS

Our New C&MD:
Sri Rajiv Kishore Dubey, has taken over as Chairman & Managing Director of Canara
Bank on 11th January 2013. A professional banker par excellence, Sri Dubey carries with
him vast knowledge and multi-dimensional banking experience, spanning over three
decades. His key areas of expertise include planning and budgeting, resource mobilization,
credit, risk management, HR, IT and marketing. A post graduate in English, Sri Dubey
academic credentials also include LLB, MBA in HR and a Certified Associate of the Indian
Institute of Bankers. Born on 10.09.1954, he joined Punjab National Bank in the year 1977
as a Management Trainee and moved up to the ranks of a General Manager in 2008 and
was appointed as an Executive Director of Central Bank of India in 2010. Amongst the
many awards, he Best Bankers Award
contributions in SME Sector by the SME Chamber of India. Sri R K Dubey is certain to bring
to bear his rich fund of experience to his new assignment as Chairman & Managing
Director of our bank. Canara Bank Welcomes our new C&MD & wishes him the very
best in his tenure at our bank. (HM&L Section, HR Wing, HO)

CAM Training to Vijaya Bank Staff:
A weeklong prestigious Credit Training Programme
to the Officers and Managers of Vijaya Bank was launched at Staff
Training College, Bangalore by Smt. Mythili Krishnamurthy, GM and Sri Lalit Vaid, GM &
Principal. The programme was inaugurated by Sri H Upendra Kamath, C&MD, Vijaya
Bank. He profusely appreciated and thanked Canara Bank for its generosity and co-
operation in extending this Credit Training Programme to the staff of Vijaya Bank.
Secretariat, STC, Bangalore)

Cash Subsidy Transfer Scheme:
To launch the services under the Cash Subsidy Transfer Scheme, Smt Archna S Bhargava,
ED, met the Hon'ble Finance Minister of Kerala, Sri. K M Mani on 02.01.2013 and apprised
him of the progress made in Wayanad and Pathanamthitta Districts of Kerala under the
scheme. She also conveyed the Sanction for Rs. 500 Cr Paddy Crop Loan to farmers
registered with SUPPLYCO at a concessional rate of interest at 4 % for loans up to Rs 3

to Unemployed Youth under Kerala State Self Entrepreneurship Development Mission.

reduced substantially to help the students and the MSME loan rate has also been lowered.
In this regard, she attended a programme along with Kum. P K Jayalakshmi
Minister for welfare of ST, Youth Affairs, Museum and Zoos, Govt of Kerala at Kalpetta,
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Wayanad Dist. of Kerala to launch Direct Cash Transfer Scheme. Further, she distributed
Pass Books and ATM Cards to the beneficiary ST students under Post-Matric scholarship.
Sri S S Bhat, GM, PC&FI Wing, HO also participated in the event. (CC&PR Section, CC&BP
Wing, HO)

Canara Utsav:
CED Cell for women, HO is organizing Canara Utsav, an exhibition-cum-sale of products
manufactured by women entrepreneurs at Vidyaranya Prarthana Mandira, Sri Avani
Sringeri Shankar Mutt, Mahalakshmipuram, Bangalore. Smt Jija Madhavan Harisingh,
IPS, Director General of Police (Retd), Home guards & Fire Force, Government of Karnataka
will inaugurate the utsav. The function will be presided over by Sri K S Prabhakara Rao,
GM, PC&FI Wing, HO. (CED Cell for Women, RD Section, HO)

In a function organized by our bank at Sira, Tumkur Dist, Sri K H Muniyappa
Minister of State for MSME, Govt of India launched Direct Cash Transfer scheme under
Post Matric Scholarship for SC Students of the district. Sri Sogadu Shivanna
Minister of Planning, Statistics & Environment, Govt of Karnataka presided over the
function. Sri G S Basavaraj, MP, Sri T B Jayachandra, MLA and other dignitaries were
present. Smt Archna S Bhargava, ED, along with Sri S S Bhat, GM, PC&FI Wing, HO, Sri
Ravindra Bhandary, GM, Bangalore Metro, and Sri G S Hoolikatti, DGM, Bangalore Rural
represented our Bank. (CC&PR Section, CC&BP Wing, HO)
Sri A K Gupta, ED inaugurated the renovated premises of Call Centre operating from
Naveen Complex, on 04.01.2013. Smt Shantha Rangaswamy, GM, Retail Banking
Division, while explaining about the development, she said the renovated premises can
now accommodate 84 agents at a time. (Retail banking Wing, HO)

Canara Utsav:
CED Cell for Women, HO has organized a Canara Utsav, an exhibition-cum-sale of
products manufactured by women entrepreneurs. After having been inaugurated on
04/01/2013, the Canara Utsav willl continue for 2 more days up to 06.01.2013 at
Vidyaranya Prarthana Mandira, Sri Avani Sringeri Shankar Mutt, Mahalakshmipuram,
Bangalore. (CED Cell for Women, RD Section, HO)

Canbank VC to deploy big part of Rs 500 cr corpus in 2013:
Canbank Venture Capital Fund Ltd, the wholly-owned subsidiary of Canara Bank, is set to
deploy a major portion of the present fund -- Emerging India Growth Fund (EIGF) during
2013. While Canara Bank is the anchor investor in EIGF with Rs 100 crore, other main
investors include the Oriental Bank of Commerce, IFCI, SIDBI among 18 public sector banks
and institutions. Canbank Venture Capital is at present investing from its fifth fund, EIGF,
with an existing corpus of Rs 455 crore and plans to raise the remaining from institutional
investors so as to take the total corpus of the fund to the targeted level of Rs 500 crore.
Depending on the pace of the investments, which will pan out during 2013, the fund
managers may also seek in extension of the fund life by a year. (BS dt. 05.01.2013 p5)
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At IIT Bombay, tech takes the cash out of shopping:
A cashless world is no longer a theory at the Indian Institute of Technology-Bombay (IIT-B).
Thanks to a novel initiative, shopping here is all about a tap on their mobile phones. The
Canara Bank

av S. Joshi, Head,
Government Business, ItzCash. About 2,000 students are using this cashless card initiative

system in an educational institution. We aim to extend it to 4,000 students in the next
(BL dt 07.01.2013 p.1)

Canara Utsav:
Canara Utsav, an Exhibition - cum sale, organized by CED for Women, HO, at Bangalore
for 3 days from 04.01.2013 to 06.01.2013 was a grand success. Sale to the tune of Rs 5
lakh was achived by the women entrepreneurs from around 52 stalls they had put up.
GMs from HO Sri K S Prabhakar Rao, and Smt Lalitha Lakshmanan, visited the stalls. Smt
K Suseela, AGM, PC & FI Wing, HO distributed the certificates to the participants. (CED for
Women, PC &FI Wing, HO)

Vigilance Study Circle:
Vigilance Study Circle, Bangalore, as a part of Vigilance Awareness Week 2012, organized
a Quiz competition for students of various Schools in Bangalore on 8th January 2013 at
Head Office Auditorium. About 45 students from 15 Schools in and around Bangalore
participated. Sri A K Gupta, ED distributed the prizes and also spoke on the occasion. Ms.
Bhanu Raman, GM & CVO, Canara Bank, Sri M N Krishnamurthy, CVO, BEL, Ms. Kavitha
Kestur, CVO, BEML, and CVOs of Public Sector Undertakings and executives of our bank
were present. (Vigilance Wing, HO)

Our bank launched the Direct Cash Transfer in Mysore District on 09.01.2013 at T
Narasipura, for students. Smt. Archna S. Bhargava, ED launched the program at
Government Girls High School, T Narasipura and distributed Passbooks to beneficiary
students and also distributed School bags & notebooks to poor students. She explained
the initiatives taken by our bank under the Direct Cash Transfer programme. The program
was attended by Shri S.S. Bhat, GM, PC & FI Wing, HO. He explained about the scheme
and benefits available to the beneficiaries with the implementation of Direct Cash
Transfer scheme. Various scholarship schemes are handled by Social Welfare Department
of the State Government which has about 25000 beneficiaries in Mysore Dist. As per the
requirement of Ministry of Finance, accounts of all the 25000 beneficiaries have already
been opened with Bank branches. Shri. K Mahadeva, Head Master, Government Girls High
School, T Narasipura applauded Canara Bank's efforts in implementing Central

way for others. He also requested other Banks to follow Canara Bank to reach the benefit
to the last Mile Customers. All Banks in the District have been actively opening accounts
to ensure that each household has a Bank account and also that each beneficiary of the
schemes too have a Bank account. Mysore District has 6.88 lac households and Banks have
opened over 24.30 lac saving bank accounts. In the 16 schemes selected for
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implementation in the District, about 34039 beneficiaries are covered. About 29476
accounts of beneficiaries have been opened . In Karnataka, our bank has more than 700
branches and Pragathi Gramin Bank, our bank sponsored RRB has got 410 branches. In
Mysore District, Canara Bank has 29 branches with 79 service area villages and 12 wards.
During the campaign period, more than 10000 accounts have been opened taking the
tally of accounts to more than 43000. (CC&PR Section, CC&BP Wing, HO)

Canara Bank revises deposit rates:
Canara Bank has revised interest rates on deposits of less than Rs 15 lakh, with effect from
January 18, 2013. The revised rates for deposits held for 180 to 269 days is 7.50 per cent
for domestic and NROs, 9% for deposits held from 270 days to less than 1 year. For 1 to 10
years, it is 9.05%. For NRE deposits, the revised rate is 9.05% for 1 to 10 years. Additional
0.50% is applicable to senior citizens on domestic deposits. Further, Canara Tax Saver
Deposit, a tax saving instrument under section 80 C, fetches interest of 9.05% with a
maturity period of five years. (DH dt. 18.01.2013 p.17) (News item also appears in p.4 of
Business Standard)

Skill training:

Help Group members supported by the Vishalakshi Mahila Vividhyodesha Co-operative
Society, Bengaluru. The three days long programme concluded on Saturday. Sri
Venkataswamy Naidu, Corporator, Chief Guest for the valedictory programme, applauded
the efforts of the Bank. Sri Sunil S Kurtkoti, DGM, PC&FI Wing and Smt K Suseela, AGM
were present on the occasion. (CC&PR Sec, CC&BP Wing, HO)

Republic Day celebrations:
Republic Day was celebrated with traditional fervor and patriotic flavor on 26th at HO. Sri
R K Dubey, C&MD unfurled the national tricolor. While addressing the gathering he
emphasized that the bank would live up to its founding principles of removing illiteracy,
spreading education to all with special care for women and poor. On this occasion Sri R K
Dubey, honored eminent personalities like Padmshree Chittani Ramachandra Hegde, a
Yakshagana Doyen, Dr Narayan Sawanth, Homeopath healer, Sri M G Kivadasannavar,
Founder of Samarthanam Trust for disabled and Padmashree Anitha Reddy, Founder
trustee of AVAS. Along with the above persons, Master Karan Prasad and Sri C Veeranna
were honoured for bravery. Few other achievers in the field of arts, sports and culture and
meritorious students from lower strata of society were also felicitated. Bank donated
medical kits to Rangadore Memorial Hospital and Shri Shanakara Eye Hospital and Rs
25,000 to Master Ranganath, a blind boy aged 11 years for his medical treatment. Sri P V
Maiya, Director also graced the occasion. (CC&PR Sec, CCBP Wing, HO)
e-Lounge:
Our C&MD Sri R K Dubey -
do most of the basic transactions without any manual intervention on 26th January 2013
at Koramangala Branch, Bangalore. (CC&PR Sec, CCBP Wing, HO)

Canara Bank to open 2,000 ATMs:
Canara Bank said it would open 2,000 ATMs by March 2014, taking the total number of
cash dispensing machines to over 5,000 by the end of next fiscal. (BS dt.29.01.2013 p.4)
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-
Sri A K Gupta, -
Delhi on 28.01.2013. Also as a part of our CSR activity he donated wheel chairs/Tricycles to
poor and physically challenged persons on this occasion. Sri T Sreekanthan, GM, CO Delhi
and Sri S Jayakumar, AGM of the branch along with many staff were present for the event.
(CCPR Sec, CCBP Wing, HO)

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Third Quarter Review of Monetary Policy 2012-13
Statement by Dr. D. Subbarao, Governor, Reserve Bank of India
"First of all, on behalf of the Reserve Bank, a warm welcome to you all to this Third Quarter
Review of Monetary Policy for 2012-13.
2. Earlier this morning, we put out the Policy Review document. Based on an
assessment of the current macroeconomic situation, we have decided to reduce the policy
repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent
to 7.75 per cent.
3. Consequent to this, the reverse repo rate under the LAF, determined with a spread
of 100 basis points below the repo rate, gets calibrated to 6.75 per cent. Similarly, the
marginal standing facility (MSF) rate, determined with a spread of 100 basis points above
the repo rate, and also the Bank Rate stand adjusted to 8.75 per cent.
4. These changes have since come into effect immediately after the announcement.
5. We have also decided to reduce the cash reserve ratio (CRR) of scheduled banks by
25 basis points from 4.25 per cent to 4.0 per cent of their net demand and time liabilities
(NDTL) effective the fortnight beginning February 9, 2013.
6. This reduction in the CRR will inject primary liquidity of around 180 billion into the
banking system.
Considerations Behind the Policy Move
7. Today's decision to further ease the monetary policy stance was informed by three
considerations.
8. First, both headline wholesale price inflation and its core component, non-food
manufactured products inflation, have softened through the third quarter. This provided
some relief from the persistence that dominated the first half of the year. Several
indicators such as the weaker pricing power of corporates, excess capacity in some
sectors, the possibility of international commodity prices stabilising as well as inflation
momentum measures suggest that inflationary pressures have peaked. However, further
moderation in inflation going into the next fiscal year is likely to be muted as the
correction of under-pricing of administered items is still incomplete and food inflation
remains elevated. Accordingly, the setting of monetary policy has to remain sensitive to
these conflicting pressures and attendant risks.
9. Second, growth has decelerated significantly below trend through the last fiscal
year and through this year so far, and overall economic activity remains subdued. On the
demand side, investment activity has been way below desired levels and consumption
demand too has started to decelerate. External demand has also weakened due to languid
global growth. On the supply side, constraints in the availability of key raw materials and
intermediates are becoming binding. While the series of policy measures announced by
the Government has boosted market sentiment, the investment outlook is still lacklustre,
especially in terms of demand for new projects.
10. The third consideration that informed our decision is that liquidity conditions have
remained tight. Although the Reserve Bank lowered the cash reserve ratio, CRR,
successively in September and October 2012, and carried out open market operations
(OMO) injecting systemic liquidity of 470 billion during December and January to
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augment liquidity, the average net LAF borrowings at 910 billion in January have been
above the Reserve Bank's comfort level. This tightness could potentially hurt credit flow to
productive sectors of the economy. The structural deficit in the system provided a strong
case for injecting permanent primary liquidity into the system.
Monetary Policy Stance
11. The policy document also spells out the three broad contours of our monetary
policy stance. These are :
* first, to provide an appropriate interest rate environment to support growth as
inflation risks moderate;
* second, to contain inflation and anchor inflation expectations; and
* third, to continue to manage liquidity to ensure adequate flow of credit to the
productive sectors of the economy.
Guidance
12. As has become standard practice by now, we have also given the following
guidance for the period forward :
13. With headline inflation likely to have peaked and non-food manufactured
products inflation declining steadily over the last few months, there is an increasing
likelihood that going into 2013-14, inflation will remain range-bound around the current
levels. This provides space, albeit limited, for monetary policy to give greater emphasis to
growth risks. This policy guidance will, however, be conditioned by the evolving growth-
inflation dynamic and the management of risks from the twin deficits.
Expected Outcomes
14. We expect that today's policy actions, and the guidance that we have given, will
result in the following three outcomes :
* first, investment will be encouraged, thereby supporting growth;
* second, medium-term inflation expectations will remain anchored on the basis of a
credible commitment to low and stable inflation;
* and, finally, there will be an improvement in liquidity conditions to support credit flow.
Global and Domestic Developments
15. Our policy decisions have been based on a detailed assessment of the global and
domestic macroeconomic situation. Let me comment first on the global outlook.
Global Economy
16. Since the Reserve Bank's last Quarterly Policy Review in October 2012, headwinds
holding back the global economy have begun to abate gradually, although sluggish
conditions prevail. In the US, activity gathered momentum in the third quarter of 2012 but
this is unlikely to have been sustained in the fourth quarter. While a political consensus to
avert the 'fiscal cliff' has calmed financial markets, how the debt ceiling is managed will
be crucial in shaping the market sentiment on the way forward. The euro area economy is
threatened by continuing contraction, notwithstanding the liquidity firewall of the
European Central Bank (ECB) and the EU's commitment to act collectively to backstop the
union. Overall, however, apprehensions that the sovereign debt crisis will disrupt the
global financial system have ebbed.
17. A pick-up in the pace of growth of China is likely. But growth in other emerging
and developing economies has slowed owing to a combination of a slump in external
demand and domestic structural bottlenecks. Furthermore, inflationary pressures persist
in some of them. Overall, global economic prospects have improved modestly since the
Reserve Bank's last review in October 2012 even as significant risks remain.
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Indian Economy
18. Moving on to the domestic economy, GDP growth slowed significantly this year,
dropping to 5.5 per cent in the first quarter, and dropping even further to 5.3 per cent in
the second quarter. The decline in the GDP growth rate became more broad based, with
consumption demand also slowing alongside stalling investment and declining exports.
19. In July 2012, the Reserve Bank projected GDP growth for the current year, 2012-13,
of 6.5 per cent. In the October Review, we revised this downwards to 5.8 per cent,
signalling increasing global risks as well as accentuated domestic risks. As part of this
review, we revisited this growth projection taking into account developments over the last
three months. During this period, industrial activity has remained subdued. Sluggish
external demand continues to inhibit improvement in services. While the coverage of rabi
sowing has picked up, severe winter in certain parts of the country could affect crop
prospects. New investment demand, which should be the key driver of an upturn,
continues to be weak. While the series of recent policy initiatives by the Government has
boosted market sentiment, it will take some time to reverse the investment slowdown
and reinvigorate growth.
20. Accordingly, we have revised downwards our baseline projection of GDP growth
for the current year from 5.8 per cent to 5.5 per cent.
Inflation
21. Let me now turn to inflation. Headline WPI inflation eased significantly from 8.1
per cent in September 2012 to 7.2 per cent by December. Notably, inflation on account of
non-food manufactured products, which have a weight of 55 per cent in the WPI, fell
sharply in November-December as input price pressures eased. The momentum indicators
too suggest a moderation in headline as well as non-food manufactured products
inflation. The Reserve Bank's industrial outlook survey also points to a softening of the
rate of increase of output prices, suggesting that the pricing power of corporates has
weakened. Fuel group inflation moderated in December, mainly reflecting the tempering
of inflation of non-administered petroleum products as well as the range-bound
exchange rate of the rupee.
22. Food inflation, on the other hand, showed a contrarian behaviour, moving into
double digits in December, reflecting both cyclical and structural factors.
23. In contrast to WPI inflation, CPI inflation as measured by the new consumer price
index, rose to 10.6 per cent in December, largely reflecting the surge in food inflation.
Excluding food and fuel groups, CPI inflation remained unchanged at 8.4 per cent during
the third quarter.
24. In the October Review, the Reserve Bank made a baseline projection of inflation for
March 2013 of 7.5 per cent. An environment of slower growth and excess capacity in some
sectors suggests that inflation has come off its peak. However, it is expected to be range-
bound around the current levels due to persisting food inflation, the pass-through of
diesel price adjustments over the next several months and the possibility of adjustment in
other administered prices. If international commodity prices, including the price of crude,
further decline, they should cushion the phased increase in diesel prices, to the extent
they are not offset by exchange rate movements. A sustained reduction in inflation
pressure is, however, contingent upon alleviation of supply constraints and progress on
fiscal consolidation. This will also help mitigate the cost-push pressures stemming from
the surge in wages.
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25. Keeping in view the expected moderation in non-food manufactured products
inflation, domestic supply-demand balances and global trends in commodity prices, we
revised downwards the baseline WPI inflation projection for March 2013 from 7.5 per cent
to 6.8 per cent.
Monetary and Liquidity Conditions
26. Let me now turn to monetary and liquidity conditions. Money supply remained
below the indicative trajectory of the Reserve Bank. This essentially reflected the
deceleration of growth in aggregate deposits and moderation in economic activity. On the
other hand, the overall non-food credit growth was around the indicative trajectory.
However, bank credit to industry showed a significant deceleration while credit to
agriculture registered an increase.
27. Keeping in view the seasonal pattern for the last quarter, M3 growth projection for
the current year has been scaled down to 13.0 per cent while non-food credit growth
projection is retained at 16.0 per cent.
28. Liquidity conditions tightened from the second week of November on account of a
build-up in the Centre's cash balances, festival-related lumpy increase in currency
demand, and structural pressures brought on by the widening wedge between deposit
growth and credit growth. Anticipating liquidity pressures, the Reserve Bank lowered the
CRR and conducted open market operations. Despite these measures, the liquidity deficit
in the system remained above the Reserve Bank's comfort level.
Risk Factors
29. Macroeconomic management going forward is subject to a number of risks. Let
me briefly address them.
* First, the widening of the current account deficit (CAD) to historically high levels,
especially in the context of a large fiscal deficit and slowing growth, exposes the economy
to the twin deficit risk. Financing the CAD with increasingly risky and volatile flows
increases the economy's vulnerability to sudden shifts in risk appetite and liquidity
preference, potentially threatening macroeconomic and exchange rate stability. Large
fiscal deficits will accentuate the CAD risk, further crowd out private investment and stunt
growth impulses.
* Second, despite the recent calm, global risks remain elevated, with the potential for
spillover into the Indian economy through trade, finance and confidence channels. In the
US, the risk of political inaction to manage the debt ceiling or even a sudden onset of fiscal
austerity can lead to a turmoil in financial markets, followed by a downturn in economic
activity. Escalation of the euro area sovereign debt stress in view of the continuing
absence of credible and comprehensive policy responses remains a contingent global risk.
Risks also stem from geopolitical tensions that can adversely impact supplies and prices of
key commodities, particularly of crude oil. Furthermore, these forces can potentially
increase global risk aversion with implications for financing of our CAD.
* Third, inflation over the last three years has been a result of demand pressures as well
as supply constraints. With demand pressures now on the ebb, the supply constraints
need to be urgently addressed. In the absence of an effective supply response, inflationary
pressures may return and persist with adverse implications for macroeconomic stability.
* Fourth, the key to stimulating growth is a vigorous and sustained revival in investment.
Achieving this will, however, depend on a number of factors such as bridging the
infrastructure gaps, and resolute pursuit of structural and governance reforms.
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* Finally, risk aversion in the banking system stemming from concerns relating to
growing non-performing assets (NPAs) is constraining credit flow. Notwithstanding the
importance of repairing asset quality, banks should be discerning in their loan decisions
and ensure adequate credit flow to productive sectors of the economy.
30. Let me conclude by summarising our macroeconomic concerns. Inflation has come
off from its peak, but its further downward movement is going to be slow and gradual. On
the other hand, economic activity has slowed, trailing well below its potential and
opening up a negative output gap. What the economy needs most of all and most
urgently is new investment. This will step up currently flagging aggregate demand and
also ease the supply constraints so that existing capacity is fully utilised and new capacity
is built up. A strong and effective supply response is particularly important for bridging
the infrastructure gaps and correcting structural imbalances in other segments of the
economy, including key food articles. Critical to this effort are a credible and
comprehensive fiscal adjustment by the Government, implementation of structural
reforms, hastening the approval process, and improving governance to inspire the trust
and confidence of potential investors. The Reserve Bank, on its part, will have to calibrate
monetary policy to the evolving growth-inflation dynamic and the management of the
twin deficits risks.

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*****

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KHAS BAAT…..
Lenders ask Kingfisher to bring at least Rs.800 cr:
A core group of lenders asked grounded Kingfisher Airlines Ltd to infuse at least Rs.800
crore into the carrier before the banks considered any further loan recast and the
extension of a no-objection certificate (NOC) that would enable the airline to resume

will meet again by the end of this month to take a final call. Until and unless we give a no-
objection certificate, DGCA (Directorate General of Civil Aviation, the regulator) will not
(Mint dt. 19.01.2013 p.12)

Norms for issue of commercial paper eased:
In a bid to make Commercial Papers (CPs) attractive, the RBI has allowed issuers to
buyback these instruments before maturity. The central bank, in its directions on CP, has
also diluted by a notch the minimum credit rating requirement for CPs so that more
companies can tap this route to meet their short-term funding requirements for their
operations. A CP is an unsecured money market instrument issued in the form of a
promissory note. (BL dt. 03.01.2013 p.11)

RBI panel suggests gold-backed products:
To curb gold imports and bring down trade deficit, a RBI panel has suggested a host of
demand reduction, supply management and gold monetisation measures. The panel
wants higher import duty on gold imports. However, it also cautioned that beyond a level,
raising the import duty may lead to buyers turning to unauthorised sources.
Documentation of gold sales and purchases has been emphasised. The panel has
suggested that carrying of gold and jewellery by Indians coming from abroad could be
made a less attractive option. (BL dt. 03.01.2013 p.1)

Stiglitz not in favour of biz houses owning banks:
Nobel laureate economist Joseph Stiglitz has expressed discomfort at the idea of allowing
corporate houses to own banks, saying this amounted to confli
statement comes at a time when the corporate sector is gearing up to foray into the
banking sector, with the RBI set to release the final guidelines in this regard. Earlier, the
government had said the central bank would consider giving banking licences to non-
banking financial companies and industry houses. (BS dt. 04.01.2013 p.5)

Draft norms on lending against gold seen easing investors' fears:
The draft norms on lending against the yellow metal appear to have placated investo
concerns, as shares of gold loan companies surged by 10-20 per cent in Thursday's trade. A
working group of the RBI, under the chairmanship of Mr KUB Rao, admitted there is a need
to increase monetisation of idle gold stocks in the economy for productive purposes. It
suggested a higher loan-to-value ratio for gold loan companies (75% versus 60%) that will
allow NBFC to lend more money against gold securities. (BS dt. 04.01.2013 p.4)

Regulations to restrict size of banks needed, says Stiglitz:
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Strong regulations are needed to restrict the size and interconnectedness of banks, Mr
Joseph Stiglitz, the 2001 Nobel Prize winner in economics said. It was believed that banks
that are too big or too interconnected cannot fail. However, the financial crisis of 2007-08
has taught us different lessons, Stiglitz said in the 15th C.D Deshmukh Memorial lecture
organized by RBI to honour the memory of the first Indian governor of the central bank.
o fail or too correlated
to fail have an incentive to gamble. If they win, they walk off with the profits, if they lose,
(BL dt 05.01.2013 p.11)

Govt has no loan dues from RBI:
The Government had no loan dues from the central bank as of December 28, the RBI said
in its weekly statistical supplement on Friday. State Governments had borrowed Rs710
Crore from the central bank in the week ended December 28. (BS dt 05.01.2013 p.3)

Banking ombudsman: Customer complaints up marginally in FY12:
Customer complaints in Banking Ombudsman offices of the Reserve Bank of India
increased marginally to 72,889 in 2011-12. The numbers of complaints in the previous
year were 71,274. According to RBI, Kanpur and Delhi continued to receive the highest
number of complaints followed by Chennai and Bhopal in 2011-12. While the number of
complaints rose marginally, the rate of disposal of complaints was same at 94 per cent
like in the previous year. About 25 per cent of total complaints received pertained to the
banks failure to meet commitments and non-observance of fair practices code, while 21
per cent were card-related (credit/debit/ ATM) complaints. (BS dt. 05.01.2013 p3)

RBI sets up panel to review grievance redress mechanism:
The RBI has set-up a working group to review and make improvements in the grievance

Reserve Bank of India to review, update, and revise the Banking Ombudsman Scheme,
-12, the banking

customer complaints in the same year, RBI said in its annual report of the Banking
Ombudsman Scheme 2011-12. (BL dt. 06.01.2013 p.3)

Give preference to non-corporate sector for new banking licences: Rangarajan:
The RBI, while allotting new banking licences, should give preference to the non-corporate
sector, said Mr C Rangarajan, chairm
is possible for the Reserve Bank to initially start with non-corporate business and find out
whether there are suitable applicants and thereafter proceed to look at the other
interview to PTI. RBI is in the process of finalising the guidelines
for giving new bank licences. Parliament approved the Banking Laws (Amendment) Bill
last month. (BS dt. 07.01.2013 p.16)

Gold loans-RBI favours banks over NBFCs:
A paper on gold loans by a RBI working group favours banks over NBFCs. Currently, NBFCs
devise lending formulae after taking into account the overall value of gold jewellery,
which includes making charges, manufacturing loss, tax, etc. According to the paper,
current RBI guidelines allow NBFCs to tweak the calculating method according to their
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convenience, without the overall lending exceeding 60 per cent of the loan-to-value (LTV).
(BS dt. 06.01.2013 p.6)

Cut lock-in period for tax saving deposits to 3 years: Bankers:
Bankers on Monday urged the Finance Minister Mr P Chidambaram to reduce the lock-in
period for tax-saving deposits to three years from the current five years and allow them to
issue tax-free bonds like other financial institutions to finance infrastructure projects.
Citing rising NPAs due to the overall economic slowdown, bankers wanted tax incentives
on some categories of provisioning. Bankers also demanded tax concessions for issuing
perpetual bond, which is counted as Tier I or equity capital for meeting Basel III norms. (FE
dt. 08.01.2013 p.8)

PSBs to lag behind private banks in Q3 earnings:
Stable margins, stronger loan growth and better asset quality will help private sector
banks outperform public sector banks (PSBs) yet again in the third quarter, according to
analysts. For public sector banks, an additional provisioning of 0.75 per cent, as directed by
the RBI, is likely to impact the earnings this quarter, say analysts. As far as interest income
is concerned, public sector banks will lag behind private sector banks by about 7-8 per
cent with a marginal com- pression carried forward from the second quarter,said Mr
Vaibhav Agrawal, Senior Analyst with Angel Broking. (BL dt. 09.01.2013 p.6)

SBI for 2% interest on current account:
r, State Bank of India, has recommended the Reserve Bank of
India that banks pay an interest of up to 2% on current accounts. SBI Chairman Mr Pratip
Chaudhuri, said non-payment of interest on current accounts is an oppressive market
hown boldness in opening up the saving bank interest market,
(FE dt.
09.01.2013 p.8)

SBI not merging its associate banks this fiscal:
State Bank of India is not looking to consolidate any of its associates with itself during the

Saurashtra and State Bank of Indore with itself during the recent years. (BL dt. 09.01.2013
p.6)

Draft norms on bank CCP exposure out:

central counter-parties (CCP) such as Clearing Corp of India. RBI has said banks will have to
maintain adequate capital with regards to their exposure to CCPs to protect potential

derivatives, exchange traded derivatives transactions and SFTs will be subject to the

buffer to the risk that a institution faces through exposure to the capital markets. (FE dt.
11.01.2013 p.8)

Financial Technologies, SBI, ICICI Bank sign MoUs:
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SBI, ICICI Bank and Financial Technologies were among those that signed MoU with
Gujarat International Financial Tec-City (GIFT City) for setting up operations in the city.
While Financial Technologies signed a MoU to set up a financial services training centre,
SBI, ICICI BoB, HDFC and Dena Bank signed MoUs for setting up banking operations in the
city. GIFT City had launched a 29-storey tower and is set to launch a second tower in a few
months. These towers involve a construction cost of Rs 700 crore and are likely to house
banks such Bank of Baroda, Dena Bank and Syndicate Bank, said Mr R K Jha, director, GIFT
City. (BS dt. 13.01.2013 p.14)

Bankers seek 50 bps cut in policy rates:
Bankers requested the RBI for a sharp cut in its policy rate along with a cut in the cash
reserve ratio, or the portion of deposits that lenders need to keep with the central bank.
The RBI will review its monetary policy on 29 January. In the customary pre-policy
meeting, chaired by RBI Deputy Governor Dr K.C. Chakrabarty, the lenders requested a 50
bps cut in the RBI policy rate, presently at 8%. One bps is one-hundredth of a percentage
point. HDFC Bank Ltd MD Mr Aditya Puri, talking to reporters after the meeting, said
bankers had demanded a 50 bps cut in policy rates. Banks do understand that a high rate
of inflation in the economy has warranted high interest rates. Punjab National Bank

help banks in lending more. (Mint dt. 16.01.2013 p.11)

An ombudsman by a name that appeals to the common man:

to something that the simple and appeals to the common man. In a recent meeting on
customer service, some banks in a suggestion to the RBI, pitched for Customer Care
officers as a replacement. Hopefully, a change in the name would also lead to better
service. (ET dt. 16.01.2013 p.19)

IMF sounds warning on bank licence:
The IMF has warned India against licensing corporate entities to step into the business of
commercial banking, saying the risks associated with such a move potentially outweigh
pdate
said it would be prudent for India to first put in place and gain sufficient experience in
implementing a comprehensive framework for the purpose before considering the entry
work for
consolidated supervision of both bank-led groups and financial conglomerates is still

total independence for the RBI from government influence. (Mint dt. 17.01.2013 p.1)

Banks bank on consumers with highest credit rating:
In a major indicator of the growing risk aversion among banks in a slowing economy, data

on lending to consumers with the highest credit rating and that too against secured

score of over 800. Around three years back, most banks were lending to consumers even
with a score of 500-600. Post 2008, banks have started tightening their credit policies and
reducing exposures primarily to unsecured debt like credit card and personal loans. There
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is a shift towards secured products such as two- Mr Arun
Thukral, Managing Director of CIBIL said. (FE dt. 17.01.2013 p.2)

The Finance Ministry has sought the opinion of the law ministry on a proposal to set up a
holding company for all 24 PSBs. Such a move will need amendments to a number of
existing acts, including the bank nationalization acts of 1969 and 1980 and the SBI Act

The setting up of a holding company, with an aim to recapitalise public sector banks, was

aim was to devise a mechanism to handle the growing capital requirements of PSBs
without straining the finances
approved. Setting up one holding company for all the PSBs will require amendments to a

go to the cabinet in three- (Mint dt.
17.01.2013 p.1)

Reduce SLR in line with global standards-IMF:
Excessive government control of public sector banks poses a risk of capital misallocation
that may constrain economic growth, a financial system stability assessment update

in the financial sector contributes to a build-up of fiscal contingent liabilities and creates a
risk of capital misa

debt manager may have led it to require banks to hold larger holdings of government debt
than might be needed on prudential grounds. The IMF has recommended that the
Statutory Liquidity Ratio, the money that banks keep aside as liquid assets or invest in
government securities, be reduced in line with international standards. (BL dt. 18.01.2013
p.6)

State Bank of India plans 'by-invitation-only' branches in 20 cities:
-
invitation- -rich clients
and non-resident Indians. These branches will remain open 24X7 and have facilities like
lounges, conference rooms, personal business centres and cafeterias. The branches will
offer all the banking products and services of SBI and its subsidiaries. In 2010, SBI had
opened the first by-invitation-only branch - Kohinoor Banjara in Hyderabad. Its subsidiary,
State Bank of Bikaner and Jaipur has recently opened a similar branch - Kohinoor Royale in
Jaipur. (BS dt. 18.01.2013 p.4)

Gold Investment is not a hedge against inflation, says Chakrabarty: Terming
investment in gold as speculative activity and not hedge against inflation, Reserve Bank of
India Deputy Governor Mr K C Chakrabaty said high returns the precious metal offers only
reflects high risks associated with it. Discounting the argument that gold is a hedge
against inflation, the Deputy Governor wondered how a hedge instrument can offer as

years, how can it be a hedge against inflation? The second logic is that gold is a safe
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Education Society. (BL dt 19.01.2013 p.6)

Swiss govt to accept group requests for banking info from Feb:
Switzerland will be able to provide banking and other details sought by other countries,

identification,

senior official in the Swiss Finance Ministry said. The development follows intensified
global pressure on Swiss authorities in the past couple of years to act against the secrecy
walls of Swiss banks, which have been often accused of providing a safe haven to illicit
wealth from abroad and not sharing the account details citing their client confidentiality
provisions. (BL dt. 22.01.2013 p.6)

Speed up settlement claims of nominees:
The RBI has directed urban co-operative banks not to insist upon succession certificates
from the nominees while settling claims in cases of deceased depositors to make the
procedure fast. (ET dt. 22.01.2013 p.7)

-12, show RBI data:
concern for the Reserve Bank of India, had worsened in 2011-12 and bankers say the
situation has not improved in the current financial year. Data from the RBI show the gap
between deposits garnered and loans disbursed was the highest in the 1-3 year and 3-5
year segments in 2011-12. In that year, banks garnered around Rs 16 lakh crore of
deposits in 1-3 year tenures and they disbursed loans of around Rs 18 lakh crore. In the 3-5
year tenures, deposits garnered were just around Rs 5 lakh crore and loans disbursed were
about Rs 6 lakh crore. The worsening of ALM position of banks was stark in 2011-12 as in
the previous financial year, banks had garnered more deposits than they had disbursed
loans in the 1-3 year segment. (FE dt.24.01.2013 p.10)

Banking licences-Corporate honchos rule out conflict of interest:
Chief Executives of leading corporate houses, led by Bajaj Auto Chairman Mr Rahul Bajaj,
have come out in favour of granting banking licences to conglomerates, saying the RBI
should instead ensure Chinese walls between group companies and bank applicants, so
that banks avoid lending funds to group companies. However, Mr Deepak Parekh,
Chairman of HDFC, the promoter of HDFC Bank, has asked corporates to stay out of the
banking business, citing past experiences. Many economists have cautioned against
giving a banking licence to a conglomerate, saying it would lead to a conflict of interest
between the bank and group companies. (BS dt. 24.01.2013 p.3)

Panel suggests steps to strengthen coop credit:
An internal committee of the RBI has highlighted the weaknesses in cooperative banks
and recommended a slew of measures to strengthen the cooperative credit system in the
country in a bid to push through financial inclusion. The committee observed that out of
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370 central cooperative banks, 209 would require additional capital totaling Rs 6,500 crore
over the next four years to reach 9% mandated capital ratio. (FE dt. 25.01.2013 p.10)

Wait for banking licence norms set to get longer:
The final guidelines for new banking licences could take a while, contrary to expectations
that the RBI would announce those by month-end. Banking aspirants have been keenly
awaiting the norms since the draft guidelines were issued about a year and a half back.
The process has hit a roadblock, mainly on two counts. First, the Finance Ministry has
suggested that real estate and brokerage companies be considered eligible for setting up

entities in the banking space. According to RBI sources, this has delayed the process as the
central bank now has to reinforce its earlier logic on why these companies should not be
allowed. Second, some recent comments of entities like the International Monetary Fund
that industrial houses should not be allowed in banking have made RBI rethink the issue.
(BS dt. 25.01.2013 p.1)

Cautious RBI signals just a 25 bps rate cut:
Although core inflation pressures have eased dramatically, and the Reserve Bank of India
-emerge qui -widening current
account deficit might prompt the central bank to limit a cut in policy rates to 25 basis

approach is highlighted when it say

of commitment to the revise (FE dt.29.01.2013 p.1)

RBI wants to issue new licenses as soon as possible:
"Issuing of new banking licenses is in the final stage. We had consulted the government.
They have made certain points to which we have r

that. Both the government and RBI will want to launch this as soon as possible." said Dr D
Subbarao, Governor, RBI. (Mint dt. 30.01.2013 p. 5)

RBI does its bit, cuts repo & CRR:
Lending rates are set to fall after the RBI trimmed both the repo rate and the CRR by 25
basis points each to 7.75% and 4%, respectively. The central bank last cut the policy rate by
50 basis points in April 2012 and has injected Rs 1 lakh crore into the system since mid-
September through a combination of open market operations and CRR cuts. Bankers

the latest cut in the CRR. (FE dt. 30.01.2013 p.1)

Borrowers to be end beneficiaries:
Bankers have said they will soon cut lending rates but not deposit rates-offering cheer to
both borrowers after the RBI announced a cut in key policy rates. SBI Chairman Mr Pratip
Chaudhuri said the benefits of lower rates will be passed on to the borrowers, adding that
the deposits rates may not be lowered immediately. He pointed out that SBI has
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lender to lower deposit rates. Mr K R Kamath, C&MD of Punjab National Bank and C&MD
of Indian Bank Association said cutting lending rates without reducing deposit rates will
rs

Net Interest Margins. (ET dt 30.01.2013 p.15)

Ultra small bank branches in AP:
As part of the financial inclusion plan, the Andhra Pradesh Grameena Vikas Bank (APGVB),
a regional rural bank sponsored by the State Bank of India, has opened 105 ultra small
branches (USBs) across the state as per the guidelines issued by RBI. These USBs are being
facility targeting
small villages having population of 2,000 and above. (FE dt. 03.01.2013 p.8)

Yes bank eyes acquisition:
Looking to expand its business and grow its financial metrics going forward, the new-
generation private sector banking firm Yes Bank Ltd has said it is open to possible
acquisitions in banking, broking and asset management businesses, even as its organic
growth plans are sufficient to meet its near-

banking, broking and asset management businesses, its founder and CEO Mr Rana Kapoor
said. (BL dt. 31.01.2013 p.6)

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Agriculture & Other Priority…..
Govt may hike annual agricultural lending target for Banks:
The government may increase the annual target of the banks for lending to the
agriculture sector by 22%, in the upcoming union budget, to 7 lakh crore, in view of the

achieve their direct lending targets and focus on the new improved Kisan Credit Card
scheme," said a Finance Ministry official. The banks will be able to meet the new targets
easily, the official said, since the revised classification includes companies of individual
farmers and partnership firms directly engaged in agriculture and allied activities. (ET dt.
23.01.2013 p.10)

Bank lending limit to small units for plant, machinery raised:
The RBI has upped the existing investment limits in plant and machinery/equipment for
lending by banks to micro enterprises. The revision, which is within the overall ceiling of
Rs 25 lakh for micro enterprises as defined in the Micro, Small and Medium Enterprises
Act, is in view of the increase in price index and cost inputs. As per the revised sub-targets
for lending to the micro and small enterprises sector, 40 per cent of total advances to the
sector should go to micro (manufacturing) enterprises having investment in plant and
machinery up to Rs 10 lakh (existing limit: Rs 5 lakh). (BL dt. 01.01.2013 p.6)

Banks wary of using a risk-based system to give education loans:
-based pricing
regime for education loans could prove a non-starter, say bankers. The proposed system is
based on assigning ratings to universities, institutes and colleges as well as students. In
the six interactive meetings that banks and Finance Ministry officials had with education

concept was mixed. While some reputed institutions welcomed such a rating model,
many others (most South-based institutions opposed the idea) did not want college
ratings to be taken up by banks or other external agencies. The fear among many privately
run professional colleges is that an adverse rating may lead to students shunning them.
(BL dt. 11.01.2013 p.5)

CAG asks banks to recover money from ineligible beneficiaries:
The Comptroller and Auditor General (CAG) has asked banks to recover money from
ineligible beneficiaries under the Agricultural Debt Waiver and Debt Relief Scheme
(ADWDRS) of 2008. The performance of audit of the ADWDRS by CAG has revealed that

body wants banks to fix responsibility of bank officials as well as auditors for the lapses.
Further, banks should consider lodging first information reports in cases of tampering of
records. (BL dt. 15.01.2013 p.5)

Lenders want to recast SME loans without NPA tag:
When some of the lenders urged RBI to permit them to restructure SME loans without

said that banks are free to restructure the loans as many times as they want, provided
they classif
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improve lending to SMEs. On whether there could be some special dispensation given to

credibility to (ET dt.
23.01.2013 p.13)

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BASEL…..
Punjab & Sind Bank to raise Rs.1,000 cr:
Punjab & Sind Bank on Tuesday said it will raise about Rs.1,000 crore by issue of
preference shares. The board has approved raising of capital through preferential issue of
equity shares up to Rs.1,000 crore at a rate to be decided later, Punjab & Sind Bank said.
(FE dt. 02.01.2013 p.8)

12 banks may get Rs 12,000-cr capital infusion next week:
The Government may soon consider a proposal for capital infusion of Rs 12,000 crore in
various state-owned banks, a top Finance Ministry official has said. The formal approval of
the Cabinet has been sought and this may be taken up next week, D. K. Mittal, Secretary,
Department of Financial Services (DFS), said. Also, the DFS is seeking nod for not coming
back to the Cabinet up to 2018 for all the capital infusions to be made PSBs for Basel III
rules purposes. Besides SBI, the banks that may get the capital support include BoM, UBI,
and IOB. (BL dt. 04.01.2013 p.1)

Basel-III: RBI mulls liquidity buffer from SLR portfolio:
Following the Basel committee of banking supervision easing implementation of liquidity
coverage ratio, the Reserve Bank of India ( RBI) on Monday said Indian banks might be
asked to carve out usable liquidity from their existing statutory liquidity portfolio. Under
liquidity coverage ratio, banks are expected to hold a minimum level of highly liquid
assets that can be sold in the open market to tide over a liquidity crisis. In normal
conditions, these assets must at least be equal to the total net cash flows of the bank on a
regular basis. (BS dt. 08.01.2013 p.5)

Govt may infuse Rs 3000 Cr into SBI:
The Government has indicated a capital infusion of Rs 3,000 crore ($544.32 million) into

a preferential allotment of shares, Mr Pratip Chaudhuri said. Capital infusion plans for the
next fiscal have not been finalized yet he added. (Mint dt 08.01.2013 p.11)

Govt set to infuse Rs. 12,517 cr in PSBs:
The Union cabinet approved infusion of Rs 12,517 crore in around 10 state- owned banks
over the next three months. The Cabinet has also given in-principle nod for providing need
based re-capitalisation of banks till 2018-19 for ensuring compliance with the Basel III
capital adequacy norms. "Pursuant to the Budget announcement made on March 16,
2012, we are infusing additional capital into the public sector banks. We will infuse before
the end of this fiscal year a sum of Rs 12,517 crore," FM Mr P Chidambaram said. (ET dt.
11.01.2013 p.9)

Govt may use stake sale proceeds to fund banks:
The Government is set to change the usage of earnings from disinvestment from the next

new usage pattern of disinvestment proceeds from fiscal 2013-
official told. Disinvestment proceeds are deposited in the National Investment Fund,
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the Government proposes to use the disinvestment proceeds for subscribing to shares in
rights issues by Central Public Sector Undertakings, including banks and insurance
companies. (BL dt. 17.01.2013 p.1)

Finmin requests RBI for relaxing capital adequacy norms:
The Finance Ministry has requested the RBI to relax capital adequacy norms for banks in
line with the recommendations made earlier this month by the Basel Committee on
Banking Supervision. "RBI is fully seized of the matter and we have also requested it to
look into the issue. We are in conversation with them," said an official source. RBI deferred
the implementation of Basel III, the global capital norms for banks, by three months to
April 1. The deadline for the full implementation of the stiff liquidity norms or Liquidity
Coverage Ratio (LCR) for banks, which were to kick in from 2015, has been extended till
2019. Earlier this month, oversight panel Group of Governors and Heads of Supervision,
which includes representation from India, of the Basel Committee on Banking Supervision
decided to ease the LCR regulations. (ET dt. 17.01.2013 p.9)

SBI board nod to Rs 3,004-cr capital infusion:
The SBI board has approved a capital infusion of Rs 3,004 crore by the government
through preferential allotment of shares. The infusion would help the bank shore up its
tier-I capital. As of September-
including tier-I cap
bank's capital base under Basel-III norms, effective April 1. On January 10, the government
had cleared first tranche of the Rs 12,517-crore capital an infusion into public sector
banks. The Cabinet had approved infusion of Rs 3,004 crore for SBI. (BS dt. 20.01.2013 p.6)

Syndicate bank to raise Rs 3500 Crore more:
Mid sized state run Syndicate Bank, which raised Rs 1,000 crore of Tier II bonds and $500
million (about Rs 2,680 crore) of overseas bonds in October 2012, obtained board
approvals to raise Rs 1,500 crore of tier-I capital and Rs 2,000 crore of tier-II subordinated
debt C&MD Mr Sanghvi said. Syndicate Bank expects its credit portfolio to grow by about
18% this fiscal and by at least 20% in the next fiscal, driving the need to further
strengthen CAR, which currently is at 10.29% as per Basel-I and 11.38% as per Basel-II. The
bank expects the CAR to improve by about 80 bps with every Rs 1000 crore of additional
capital, said Mr sanghvi. (ET dt 24.01.2013 p.10)

RBI asks banks to issue Tier-II bonds to retail investors:
The Reserve Bank asked banks to issue bonds to retail investors, as to deepen the
India
through enhanced retail participation, banks, while issuing subordinated debt for raising
Tier-II capital, are encouraged to consider the option of raising such funds through public
(BS dt. 25.01.2013 p.5)
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Bonds… Money Market….
Exim Bank raises $750 million:
The Export-Import Bank of India has raised $750 million by issuing 10 year Reg S bonds to
funds it operations including extending lines of credit to the Governments of other
countries, export finance and support Indian companies overseas investments, said Mr

(BL dt.
09.01.2013 p.6)

Plan to cut banks' govt bond holding:
To increase liquidity, the Reserve Bank may reduce the quantum of government securities
to be held by banks under the 'held to maturity' (HTM) category, Deputy Governor Mr H R
Khan said. "We will consider reducing the G-secs under the HTM category to increase
liquidity in non-disruptive manner," Khan told. (Mint dt. 10.01.2013 p11)

Call, bond rates down:
The inter-
8.15 percent. It had opened at 8.10 percent. The 8.15 percent government security, which
matures in 2022, ended lower at Rs 101.87 (Yield: 7.86 percent) from the previous close of
Rs 102.04 (Yield: 7.84 percent) (BL dt 19.01.2013 p.6)

Credit Growth…..
Festive demand sees spurt in retail loans, but worst far from over:
Retail loans kept the momentum of credit growth going for banks in November, thanks to
a late pick-up in the festive demand, according to the monthly data put out by the Reserve
Bank of India on Monday. Total retail loans for the month grew 16.3% from a year ago to
Rs 8,58,000 crore against a growth of 13.3% in November last year. In October, retail loans
had increased 14.1% to Rs 8,33,734 crore compared with the increase of 14.3% last year.
Overall, bank credit during November grew almost 18% annually, to Rs 46,61,000 crore
compared with a 17.16% growth in the same period last year. (FE dt. 01.01.2013 p.8)

Small private banks in wait mode:
Small and mid-size private banks are not in a hurry to pare their lending rates, even as
HDFC Bank, the second largest private sector lender, said it was reducing its minimum

Deposit rates continue to remain high and unless there is

Dhanlaxmi Bank, told. (BS dt. 02.01.2013 p.5)

Credit growth surge in last fortnight of Dec:
Banks credit growth showed a sharp rise at the end of December, with loans worth Rs
65,000 crore disbursed in last fortnight, compared with Rs 3,500 crore during the first
fortnight of the same month. According to bankers, the quarter-end pressure to meet
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targets has resulted in the surge of credit off take. Similarly, deposit growth, which fell in
the previous fortnight, rebounded to Rs 43,000, the latest data release from the RBI
showed. (BS dt. 11.01.2013 p.5)

-Dec, show RBI data:
Hit by slowdown, ba
lower compared with the same period last year, according to the latest data by Reserve
Bank of India. For April-December 2012, incremental credit at Rs 3, 89,110 crore was lower
than Rs 4,04,530 crore in the corresponding period of 2011. Credit growth for April-
December slackened to 9 per cent compared with 10.8 per cent last year. In October,
Reserve Bank of India, recognizing the weak demand for credit, lowered its FY13 growth
projection for non-food credit to 16 per cent from 17 per cent. (FE 19.01.2013 p.12)

Car loans may get cheaper:
Consumers can soon get cheaper car loans from banks. Bankers expect these rates to dip
by at least 25 basis points (BPS). Kotak Mahindra Bank has already cut car loan rates by 25-
50 basis points to 11.5-
people are spending. More people are opting for small Cars. Hence, there are no major
concerns in the loan growth. Big players like SBI, HDFC Bank, Kotak and IndusInd are

Securities Ltd. (BL dt. 20.01.2013 p.1)

Banks ease debt collection norms to support cash-strapped firms:
Banks are relaxing collection norms on working capital loans to companies, whose
working capital cycles have lengthened, straining their cash flows. In cases of genuine
cash-flow constraints, banks are giving companies more-time to collect their accounts
receivable than earlier stipulated in their loan agreements. A senior State Bank of India
official said that in the case of working capital loans, previously, if the company did not
collect a certain portion of its receivables within 90 days, these were removed for the
purpose of calculati
need of the company, we have increased their period to 120-150 days and in some cases,
(FE dt
29.01.2013 p.10)

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CARD…..

Credit card spending on the rise, signalling consumer confidence:
A sharp jump in the credit card spending in the past one year indicates consumers have
s
third-largest economy. Credit card outstanding of Indian borrowers grew 26% to Rs.24,700
crore in the 12 months to November, marking a significant rise over the previous year, the
RBI data show. Credit card spending expanded 3.7% in the year ended November 2011.
Before that, for two years credit card portfolios of banks had shrunk. (Mint dt. 03.01.2013
p.7)

Corp Bank launches RuPay Aadhar card:
Corporation Bank has launched Corp RuPay Aadhaar card. A bank release said that this
product is primarily aimed at providing easy and hassle-free banking services to the
financially excluded and underprivileged sections of the society having Aadhaar number.
The card can be used at the conventional ATMs, micro ATMs or at the handheld machines
used by business correspondents and at point-of-sale terminals at merchant
establishments. The fascia of the card contains the Aadhaar number and this card can be
a photo card or a non-photo card, it said. Corporation Bank is a partner in the direct
cash/benefit transfer scheme launched by the Government. (BL dt. 06.01.2013 p.3)

Citi bank goes paperless:
Citibank India on Monday announced a new paperless mobile payment system for its
credit and debit card customers that would do away with the charge slips and would be
implemented for the entire global network of its US-based parent Citigroup. (FE dt.
22.01.2013 p.10)

IndusInd Bank eyeing Rs 1,000-cr credit card biz:
IndusInd Bank aims to touch Rs 1,000 crore in its credit card business by March 2014,
according to Mr Romesh Sobti, MD and CEO, IndusInd Bank. That would be two per cent of
their loan book then. At present the credit card portfolio is about Rs 380 crore. Mr Sobti

fees, for -
(BL dt. 22.01.2013 p.6)
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Deposits…...
Oriental Bank waives penalty on premature withdrawal of FDs:
Oriental Bank of Commerce (OBC) has waived penalty on premature withdrawal of fixed

OBC.
withdraw these prematurely (say from the second day up to the 10th year, depending on
maturity profile) without having to fork out any penalty. (BL dt. 02.01.2013 p.8)

Axis joins state lenders in raising deposit rates:
Axis Bank joined state-run lenders such as Dena Bank and Corporation Bank in raising
interest rates for deposits in select tenor, sending contrary signal to the market, which is
expecting lower interest rates. Axis Bank, the country's third-largest private sector bank,
on Tuesday raised rates from 9% to 9.25% for deposits of size Rs 1 crore to less than Rs 5
crore and for maturity of 18 months to less than five years. "We have raised rates for ALM
(asset liability management) reasons," said a senior treasury official. (ET dt. 09.01.2013
p.10)

Bankers want RBI to allow interest on current accounts:
Banks will ask the Reserve Bank of India to allow them to pay interest on current account
deposits, in the run up to th

flow into the system which otherwise stays with the establishments. Current accounts are
now 9.85 per cent of total deposits with banks. RBI will announce its third quarter review
of the monetary policy on January 29. (BS dt. 14.01.2013 p.10)

Banks want PAN rule relaxed for non-deduction of tax at source:
Banks want the revenue authorities to do their depositors, who are economically weak,
aged and infirm, a good turn. They have moved the authorities to allow them to act upon
self-declarations made in Form 15G and Form 15H (for non-deduction of tax at source) by
the above mentioned category of people even if they do not have a permanent account

upon the Finance Ministry that such a move will alleviate the hardship caused to the
economically weaker sections, the aged and the infirm. (BL dt. 14.01.2013 p.5)

-year low:
The growth in bank deposits continues to be sluggish and is at a nine-year low, according
to the latest data from RBI. In the fortnight ended December 28, 2012, deposits grew just
11% year-on-year, RBI data showed. The last time deposit growth dipped below 13% was
in December 2003. The RBI has projected a deposit growth of 15% for banks for FY13.
Outstanding deposits of banks stood at Rs 64,77,246 crore as on December 28, 2012, a
growth of just 6% for the first nine months of FY13. Credit growth in the first nine months
of the financial year was 7.1% compared with 10.5% last year. (FE dt. 16.01.2013 p.8)
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The drive to bring down high-cost and bulk deposits resulted in 1.88% decline in total
deposits as on December 31, 2012 on a sequential basis for public sector lender IOB.
Besides, the bank has also reported a growth of just 2.82% in gross advances for the
quarter ended December 31, 2012. C
deposits from 34% (as a percentage of total deposits) as on September 30, 2012 to 22% as
DH dt. 21.01.2013
p.15)

Banks must popularize long-term deposits, says RBI working group:
A working group of the RBI has suggested that banks must popularize long-term deposit
schemes having tenure of over 5-year and raise funds through long-term bonds. The
group recommended that large institutional investors such as provident funds and
insurance companies must be encouraged to invest in long-term bonds issued by banks.
Further, banks must also invest in long-term government bonds having a tenure of 30-
years as well. Banks can also explore the option of take-out financing and securitization to
garner long-term funds. (FE dt. 23.01.2013 p.10)

Deposit growth outpaces that of credit so far this quarter:
Bank deposit growth, which lagged credit growth in the October-December quarter of the
current financial year, appears to be gathering momentum in the fourth quarter. As per

the January-March quarter, bank deposits grew by a robust Rs 62,750 crore while credit
growth was relatively moderate at Rs 17,380 crore. In the October-December quarter, the

2,23,238 crore, deposit growth was relatively muted at Rs 68,470 crore. (BL dt.24.01.2013
p.6)

ICICI, Axis Bank raise deposit rate ahead of RBI policy:

have raised deposit rates by 25-30 bps on longer tenure maturities, raising doubts on
whether banks will cut lending rates even if the central bank eases its monetary policy in
review. While ICICI Bank has revised the deposit rate by 25 bps in the two to five years

rate hike came into effect from 26 January, while for Axis Bank, the rate hike was effective
January 24. (BS dt.29.01.2013 p.5)
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Liquidity…..
Banks pin hopes on RBI to overcome liquidity crunch:
Banks facing liquidity deficit are hoping that the Reserve Bank of India will conduct open
market operations (OMO) to help them tide over the crunch. While CRR is a more
permanent measure which carries with it the risk of boosting inflation, OMO is considered
a more targeted measure, as it injects liquidity when really needed, according to bankers.

growth has been slowing due to investments
Eswar said. (BL dt. 12.01.2013 p.5)

Minsitry of Finance
Banks should review non-core- operations:
The Finance Ministry has asked PSBs to review their exposure to non-core operations such
as insurance ventures
banks to look at their non-
should look at non-core areas of investment when big global banks are exiting from their
non-core are (Mint dt 07.01.2013 p.11)

New licence norms likely in 4-6 weeks:
The RBI is likely to issue final guidelines for grant of banking licences to new players
within the next 4-6 weeks. According to people with knowledge of the matter in the
Finance Ministry, the RBI may release its final guidelines for new bank licences by January
end or early next month. The Finance Ministry is currently in the process of sending its
final comments to the RBI on the draft guidelines issued by the RBI on the matter, after
which the final guidelines would be announced. (Mint 07.01.2013 p.11)

FM on banking benefits:
Finance Minsiter Mr P Chidambaram said the government was making all-out efforts to
ensure benefits of banking facilities are made available to common people. While
speaking on the occasion of inauguration of Central Madhya Pradesh Rural Bank
headquarters in Chhindwara he said the processes for disbursing loans in education,
home and agriculture sectors had been simplified so anyone could avail these credit
facilities. (BS dt 10.01.2013 p.5)

Finmin notifies merger of 3 Orissa rural banks:
The Union Finance Minister has notified the merger of three Orissa-based Regional Rural
Banks (RRBs) - Kalinga Gramya Bank, Nilachal Gramya Bank and Baitarini Gramya Bank to
create a new RRB, Gramya Bank. The new bank will be based in Bhubaneswar. After the
merger, the bank will have 8,000 employees and is expected to do a business of Rs. 10,000
crore per annum. The new bank will be sponsored by Indian Overseas Bank. Prior to the
merger, Kalinga Gramya Bank was sponsored by UCO Bank, Nilachal Gramya Bank was
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sponsored by Indian Overseas Bank and Baitarini Gramya Bank was sponsored by Bank of
India. (FE dt. 12.01.2013 p.8)

Financial holding co to infuse equity into PSBs likely:
The Finance Ministry will soon send a note to the Cabinet for setting up a Financial
Holding Company (FHC), which will leverage its capital base to infuse funds into public
sector banks, a senior ministry official said. The proposal, based on the recommendations
of the Shyamala Gopinath committee, has the backing of the RBI. The Ministry will also
send its views on bank licence norms to RBI next week. Officials said corporate with
exposure to real estate would not be allowed to apply for bank licences. In the first round,
the government may prefer existing NBFCs including micro-finance NBFCs such as SKS
Microfinance as candidates, the official said. The FHC is being set up mainly to leverage its
balance sheet in s
contribution from the exchequer. (FE dt. 13.01.2013 p.1)

FinMin sends views on banking permits to Reserve Bank:
With the Finance Ministry sending its comments to the RBI, the final norms on fresh
banking licences may soon be announced. According to sources, the Ministry wants a key

estate and stock broking firms from applying, said those in know of the development.
Sources added the clause was not needed as RBI has already talked of ring-fencing banks.
The Ministry has also asked the central bank to define the terms promoter and promoter
groups more clearly. The comments also included permitting non-operative financial
holding companies (NOFHC) to apply for bank licences rather than non-operative holding
companies and the capital adequacy norms for and NOFHC. (BS dt. 16.01.2013 p.6)

Finmin in favour of realty, banking firms setting up banks:
The Finance Ministry has expressed the view that the Reserve Bank should allow real
estate companies and broking firms to set up banks as adequate safeguards will be there
to prevent exposure of promoters to related entities. In its comments to RBI on the giving
out new bank licences, the Ministry has said that such entities can be allowed, but there
should be a complete ban on taking exposure in the group companies or entities related
to promoters, sources said. Even the vendor and large customers of such promoters can't
get loan from the new bank, sources said, adding that this move will minimise
accumulation of risk. (FE dt. 21.01.2013 p.13)

8% growth will return Finance Minister:
ts of

confidence it would again achieve 8 per cent yearly growth. (BS dt 21.01.2013 p.6)

al guidelines on new bank licences in two weeks: FM
The Reserve Bank of India (RBI) will announce new bank licensing guidelines within a
fortnight under which four-five licences are likely to be given to private sector entities,
Finance Minister Mr P. Chi
of India will announce the final guidelines for licensing more private sector banks. We
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number of large corporate houses, including Anil Ambani-led Reliance Group, financial
conglomerates Religare and Shriram groups, engineering-to-technology major L&T group
and Aditya Birla group, are said to be interested in entering the banking business,
depending on the regulatory framework. (Mint dt. 31.01.2013 p.26)

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Samachar lehar feb2012

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