“If you think inflation will go down in the coming times, then you are under a misconception. Get ready for a fresh onslaught from the Modi government in the coming days,” he said.
Tag: RBI
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Colour-shifting ink, security fibres: New features to make fresh banknotes counterfeit-proof
Express News Service
NEW DELHI: A host of new security features are expected to be added when the RBI goes about printing fresh banknotes.
For example, instead of one, four different types of security threads (24,70,000 km in length) for the Rs 100, Rs 200, Rs 500 and Rs 2,000 currency notes will be introduced whenever new suppliers are awarded contracts.
The other security features – colour-shifting ink for high and middle denomination notes (24,000 kg and 4,600 kg), foil patch (8,000 million pieces), three types of security fibres (47,000 kg), micro-perforations (one-time technology transfer), paper and ink-based taggants (25,130 kg, microscopic physical and chemical markers) will also be “reinforced” to make the currency notes counterfeit-proof.
Some of the foreign companies who have sent in their bids for the security thread feature are Optaglio Ltd (Czech Republic), Fedrigoni SpA (Italy), Papierfabrik Louisenthal GmBH (Germany), Hueck Foilen GmbH (Austria) and Crane & Co Inc (United States). GleitsMann Security Inks (Germany) and SICPA SA (Switzerland) are among the foreign companies that have bid for the color-shifting ink feature.
Leonhard Kurz Stiftung & Co KG (Germany), Honeywell International Inc, De La Rue, Bundes Druckerei, Komsco (South Korea), Landqart AG, Oberthar Fiduciaire SAS, Goznak, Keit Ltd (Bulgaria), Stardust Materials LLC (US) and Woollard & Henry Ltd (UK) are the other foreign companies who have taken part in the Global Prequalification Tender.
The bids were opened on September 1, 2017. But physical inspections of the foreign suppliers could not happen due to various reasons.
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RBI permits trade transactions with Sri Lanka in INR
By Express News Service
NEW DELHI: Keeping in view the difficulties being experienced by exporters in receiving proceeds from Sri Lanka, the Reserve Bank of India (RBI) has allowed trade transactions with the island country to be settled in Indian Rupees (INR), outside the Asian Clearing Union (ACU) mechanism.
The settlement of transactions in INR is under an arrangement whereby the Indian government guaranteed a term loan of $1 billion extended by the State Bank of India to Sri Lanka (via a credit facility agreement dated March 17, 2022) for financing purchase of essential goods and services, such as food, medicines, fuel and industrial raw material.
Under the arrangement, financing of export of eligible goods and services from India, as defined under the agreement, would be allowed subject to their being eligible for export under the Indian Foreign Trade Policy and whose purchase may be agreed to be financed by SBI under this agreement.RBI said these instructions come into force with immediate effect. The credit facility under the agreement is available for draw-down up to 12 months from the signing date of agreement, that is, March 16, 2023.
The ACU was established, with its headquarters at Tehran, Iran, on Dec. 9, 1974 at the initiative of the United Nations Economic and Social Commission for Asia and Pacific for promoting regional co-operation. The main objective of the agency is to facilitate payments among member countries for eligible transactions on a multilateral basis, thereby economising on the use of foreign exchange reserves and transfer costs, as well as promoting trade among the participating countries.
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Cryptocurrencies can lead to dollarisation of economy: RBI officials to parliamentary panel
By PTI
NEW DELHI: Cryptocurrencies can lead to “dollarisation” of a part of the economy which would be against India’s sovereign interest, top officials of the RBI have told a parliamentary panel, according to sources.
Briefing the Parliamentary Standing Committee on Finance chaired by former minister of state for finance Jayant Sinha, top officials of the RBI, including its governor Shaktikanta Das, clearly expressed their apprehensions about cryptocurrencies and said these pose challenges to the stability of the financial system, sources told PTI.
“It will seriously undermine the RBI’s capacity to determine monetary policy and regulate the monetary system of the country,” a member of the panel quoted RBI officials as saying.
Pointing out that cryptocurrencies have the potential to be a medium of exchange and replace the rupee in financial transactions both domestic and cross border, central bank officials said these currencies “can replace a part of monetary system it will also undermine the RBI’s capacity to regulate the flow of money in the system”.
Cautioning that besides being used for terror financing, money laundering and drug trafficking, cryptos pose a bigger threat to the stability of the financial system of the country, the central bank officials said.
“Almost all cryptocurrencies are dollar-denominated and issued by foreign private entities, it may eventually lead to dollarization of a part of our economy which will be against the country’s sovereign interest,” the officials told the members.
Discussing the impacts of cryptocurrency, the RBI officials said it will also have a negative impact on the banking system as these being attractive assets people may invest their hard-earned savings in these currencies which may result in banks having lesser resources to lend.
In Union Budget presented earlier this year, Finance Minister Nirmala Sitharaman introduced a tax on trading in cryptocurrencies and related assets like non-fungible tokens (NFTs) at a flat 30 per cent and one per cent of tax will be deducted at source (TDS) when any such transaction takes place.
There are an estimated 15 million to 20 million crypto investors in India, with total crypto holdings of around USD 5.34 billion.
No official data is available on the size of the Indian crypto market.
The Sinha-led panel which has former GST council head Sushil Modi, former Union Ministers Manish Tewari and Saugata Roy as its members have been holding comprehensive deliberations with financial regulators.
As statutory bodies, both RBI and SEBI report to Parliament and the panel has the parliamentary responsibility to call upon the officials of these regulators over the financial and economic issues of the country.
Sinha, a pass out of IIT Delhi and MBA from Harvard Business School, was the Minister of State for Finance during the previous Modi government.
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Food prices push retail inflation to 17-month high
By Express News Service
NEW DELHI: Retail inflation soared to a 17-month high of 6.95% in March with the prices of most commodities soaring, data published by the National Statistical Office showed on Tuesday. It is the third straight month when the inflation remained above the Reserve Bank of India’s comfort zone of 6%. Retail inflation, measured by Consumer Price Index (CPI), was 6.07% in February and 6.01% in January. The CPI inflation was 5.52% in March 2021.
The surge in March retail inflation was driven mainly by costly food items, which registered a 7.7% growth compared to 5.9% in February. Vegetables prices rose 11.6%, edible oils 18.8%, meat and fish by 9.6% and cereals by 4.9% during the month under review.
Inflation in the ‘fuel and light’ category, however, grew at a slower pace of 7.5% in March (compared to 8.7% in February) as most of the price hikes in petrol, diesel and LPG happened in the later part of the month.
According to the latest data, the prices of most commodity groups touched multi-month highs — cereals and products (19 months), milk and products (16 months), vegetable (16 months), clothing (100 months), footwear (111 months), household goods and services (102 months), personal care (13 months) and food index (16 months).
Core inflation, or non-food non-fuel inflation, was at 6.4% in March compared to 5.8% in February. Core inflation is likely to see a broad-based rise as producers pass on cost pressures across segments, says rating agency Crisil. The poor are bearing the burden of inflation the most, given that food recorded the sharpest rise, Crisil adds.
Meanwhile, rural inflation showed a higher jump of 7.7% than urban inflation (6.12%). RBI in its recent monetary policy had said that its primary focus would be to contain inflation. The central bank also revised the 2022-23 inflation estimates to 5.7% from its earlier forecast of 4.5%.
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Learning loss a tragedy, but no mention in Union Budget: Raghuram Rajan
Express News Service
Former Governor of Reserve Bank of India, Raghuram Rajan has expressed concern over lack of focus on the learning loss caused due to Covid-19 among school children in the Union Budget, while a significant amount of money was allocated for production linked incentive (PLI) schemes meant for industries.
Delivering a lecture on ‘Democracy and Indian Economic Development’ at an event organised by the Madras Institute of Development Studies on Thursday, Rajan said, “The Budget barely mentions the tragedy that is overtaking our school children, especially the poor ones. That very few extra resources are being devoted to rescue a potentially lost generation of children is a serious omission. Devoting money to physical infrastructure while neglecting human infrastructure is absolutely a serious problem.”
He added that it revealed a serious failure to realise that human capital is as important as industrial capital. Lashing out at the Centre for neglecting the education sector in the Budget, Rajan said the government is not short of money as the Budget further increased production subsidies to industries under various PLI schemes. Rajan is of the view that India has a fixation with building physical infrastructure and becoming a manufacturing hub when its strength is human capital.
He said that instead of spending on the PLI schemes, the Centre should invest in filling the gaps in our education system, strengthening higher education, skilling and research and development.
“If we focus on the development of human capital, it will automatically lead to our growth,” said Rajan. He also urged that the PLI schemes be studied in a detailed manner to understand if these subsidies are actually helping industries.
He noted that India is rebounding today with strong growth numbers despite the impact of war in Ukraine. However, he said, even with strong growth in the fiscal year 2022-23, India’s growth will still be significantly below the pre-pandemic trend line.
“Our slow growth is not all the fault of the pandemic. Our underperformance predates the pandemic. In fact, we have been underperforming for over a decade, probably since the onset of the global financial crisis,” said Rajan, adding the under-performance is mainly due to the government’s inability to create jobs.
Taking a dig at the Atma Nirbhar programme, Rajan said that instead of focusing on becoming a manufacturing superpower and trying to manufacture everything here, India needs to work on the service sector, which is its biggest strength.
He said it would require huge subsidies for India to build an ecosystem from scratch for the manufacturing sector. Instead, this money could have been better invested in education and producing quality engineers and doctors who can provide services globally, thereby creating more jobs and tapping the global demand, he said.
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Loans to ABG Shipyard turned NPAs prior to 2014: Finance Minister
By PTI
NEW DELHI: Finance Minister Nirmala Sitharaman on Monday said the ABG Shipyard account turned NPA during the erstwhile UPA regime and the banks took lesser than normal time to detect the fraud perpetrated by the shipping firm.
“In this particular case with that kind of a measurement, actually, I should say to the credit to the banks, they’ve taken lesser than what is normally an average time to detect these kinds of frauds,” Finance Minister Nirmala Sitharaman said at a press conference after addressing the members of the RBI board.
The minister said normally banks take 52-56 months of time to detect such cases and initiate follow-up actions.
The Central Bureau of Investigation (CBI) recently booked ABG Shipyard Limited, its former chairman and managing director Rishi Kamlesh Agarwal and others for allegedly cheating a consortium of two dozen lenders led by ICICI Bank.
ABG Shipyard fraud is much higher than the one perpetrated by Nirav Modi and his uncle Mehul Choksi, who allegedly cheated the Punjab National Bank (PNB) of around Rs 14,000 crore through issuance of fraudulent Letters of Undertaking (LoUs).
Sitharaman also said that during the NDA regime, health of banks has improved and they are in position to raise funds from the market.
Addressing the press conference, the RBI Governor Shaktikanta Das asserted that RBI’s inflation projections are quite robust. He further said the momentum of inflation, from October 2021 onwards, is on a downward slope.
“It’s primarily the statistical reasons the base effect which is leading to higher inflation especially in third quarter, and the same base effect will play in different ways in the coming months,” Das said.
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PM chairs meet on cryptocurrency; concerns raised over money laundering, terror financing risks
By PTI
NEW DELHI: Amid concerns over misleading claims of huge returns on cryptocurrency investment, Prime Minister Narendra Modi on Saturday chaired a meeting on the way forward on the issue, with government sources asserting that such unregulated markets cannot be allowed to become avenues for “money laundering and terror financing”.
It was strongly felt in the meeting that attempts to mislead the youth through over-promising and non-transparent advertising should be stopped, the sources said, signalling that strong regulatory steps are in the offing.
“The government is cognisant of the fact that this is an evolving technology, it will keep a close watch and take proactive steps. There was consensus also that the steps taken in this field by the government will be progressive and forward-looking,” a source said.
The government will continue to proactively engage with experts and other stakeholders, sources added, noting that since the issue cuts across geographical borders, it was felt that it will also require global partnerships and collective strategies.
The meeting on the way forward for cryptocurrency and related issues was a very comprehensive one.
“It was also an outcome of a consultative process as RBI, Finance Ministry, Home Ministry had done an elaborate exercise on it as well as consulted experts from across the country and the world. Global examples and best practices were also looked at,” the source said.
The RBI has repeatedly reiterated its strong views against cryptocurrencies saying they pose serious threats to the macroeconomic and financial stability of the country and also doubted the number of investors trading on them as well their claimed market value.
RBI Governor Shaktikanta Das on Wednesday had reiterated his views against allowing cryptocurrencies saying they are a serious threat to any financial system since they are unregulated by central banks.
His comments come ahead of the RBI’s internal panel report on the contentious topic which is expected next month.
The Supreme Court in early March 2020 had nullified the RBI circular banning cryptocurrencies.
Following this on February 5, 2021, the central bank had instituted an internal panel to suggest a model of central bank’s digital currency.
The RBI had announced its intent to come out with an official digital currency, in the face of the proliferation of cryptocurrencies like Bitcoin about which the central bank has had many concerns.
Private digital currencies/virtual currencies/cryptocurrencies have gained popularity in the past decade or so.
Here, regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks.
It can be noted that on March 4, 2021, the Supreme Court had set aside an RBI circular of April 6, 2018, prohibiting banks and entities regulated by it from providing services in relation to virtual currencies.
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Restrictions put on Laxmi Coop Bank, Solapur; Rs 1,000 cap on withdrawals
By PTI
MUMBAI: The Reserve Bank of India (RBI) on Friday imposed several restrictions on Laxmi Cooperative Bank Ltd, Solapur, including Rs 1,000 cap on withdrawals for customers, due to deterioration in its financial position.
The restrictions imposed under the Banking Regulation Act, 1949, shall remain in force for six months from the close of business on November 12, 2021, and are subject to review, the RBI said in a statement.
As per the directions, the bank shall not, without the prior approval of the RBI, grant or renew any loans and advances, make any investment, incur any liability, and disburse or agree to disburse any payment.
“In particular, a sum not exceeding Rs 1,000 of the total balance across all savings bank or current accounts or any other account of a depositor, may be allowed to be withdrawn,” the RBI said.
It further said the issue of the directions by the RBI should not per se be construed as cancellation of the banking licence.
“The bank will continue to undertake banking business with restrictions till its financial position improves,” the Reserve Bank of India said.
On Monday also, the RBI had imposed similar restrictions on Babaji Date Mahila Sahakari Bank, Yavatmal, Maharashtra.
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RBI issues revised Prompt Corrective Action framework for banks
By PTI
MUMBAI: The RBI on Tuesday issued a revised Prompt Corrective Action (PCA) framework for banks to enable supervisory intervention at “appropriate time” and also act as a tool for effective market discipline.
Capital, asset quality and leverage will be the key areas for monitoring in the revised framework, the RBI said. The revised PCA framework will be effective from January 1, 2022.
“The objective of the PCA Framework is to enable Supervisory intervention at an appropriate time and require the Supervised Entity to initiate and implement remedial measures in a timely manner, so as to restore its financial health,” the central bank said.
The PCA framework is also intended to act as a tool for effective market discipline. The central bank also stressed that the PCA Framework does not preclude the Reserve Bank of India from taking any other action as it deems fit at any time, in addition to the corrective actions prescribed in the framework.
“Indicators to be tracked for capital, asset quality and leverage would be CRAR/Common Equity Tier I Ratio, Net NPA Ratio and Tier I Leverage Ratio, respectively,” according to the revised framework.
Breach of any risk threshold may result in invocation of the PCA. The framework will apply to all banks operating in India, including foreign banks operating through branches or subsidiaries based on breach of risk thresholds of identified indicators.
“A bank will generally be placed under PCA framework based on the Audited Annual Financial Results and the ongoing Supervisory Assessment made by RBI.
“RBI may impose PCA on any bank during the course of a year (including migration from one threshold to another) in case the circumstances so warrant,” it said. The framework also details conditions for exit from PCA and withdrawal of restrictions. If a bank is put under the PCA, several restrictions are placed on it.
The restrictions are imposed on dividend distribution and remittance of profits, bringing in the capital (in the case of foreign banks), branch expansion, and capital expenditure. The framework was last revised in April 2017.