Banking Reforms: Centre to infuse Rs 88,000 cr in PSU

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Finance Minister Arun Jaitley said the government has moved proposal to infuse additional grant of Rs 88,139 crore.

New Delhi, January 25: On January 24th, the government unveiled its reform plan of infusing over Rs 88, 000 crore through recapitalization to public sector banks. These bonds are going to be allotted to 20 state-run banks during the present financial year. A sum of Rs 52,311 crore is going to be allocated to 11 weak banks to help them maintain a minimum capital. And Rs 35, 828 will be kept aside for 9 strong banks, as reported by Indian Express. This project by the government is linked to the six-point reform agenda that is aimed at aiding the growth and restoring the potential of banks.

PSU banks will now be required to alter their lending systems in terms of advancing loans to big business organizations. They must also monetize non-crore assets, streamline overseas branches, utilize advanced technology and plan to recover loans that have failed. According to reports from The Times of India, Finance Minister, Arun Jaitley stated that the reforms will address the regulatory capital requirement of PSB’s. Banks will have to adopt the measures laid down by the Finance Ministry. They mostly surround six concerns – customer responsiveness, responsible banking, digitalization, credit offtake, PSBs as Udyami Mitra and development of the brand.

Among the various PSB’s, highest capital of Rs 10,610 crore will be given to IDBI. Following it is Bank of India with Rs 9,232 crore, Rs 8,800 crore to State Bank of India and UCO Bank will get Rs. 6,507 crore.

By the end of March, a total of Rs 1 lakh crore will be guided towards PSBs.  For this, Rs 80,000 crore will be generated from recapitalisation bonds, Rs 8,139 crore via gross budgetary support and Rs 10,312 crore of funds will be derived from the market.

Sources: The Times of India , The Indian Express

All 14 types of 10 rupee coins legal for transactions, say RBI

The Times of India report on Wednesday, January 17, 2018 mentioned that all the 14 designs of the 10 rupee coin are a valid tender for all banking and buying purposes. The Reserve Bank of India (RBI) stated that these coins have been introduced on timely basis, and have a unique significance to various cultural, economic and social aspects of the country.

“The citizens of the country, which include producers and customers, would not accept the 10 rupee coins. They were sceptical about the authenticity of these coins. We have 14 designs of the same. All coins are valid for transaction in the country,” the RBI further added.

The Indian Express informed that all banks in the country have been told to accept these coins during business and transaction time across all their branches.  The RBI is scheduled to issue brand new 10 rupee notes. They are chocolate brown in colour and will be 63mm wide- similar to the width of the present notes. The length however is lesser than the current 137mm and will be 123mm long.

These new notes will have the Konark sun temple symbol. It will also be part of the series of Mahatma Gandhi notes. The current notes of Rs 10 will continue to be in circulation and a legal tender for trade.

Sources: Indian Express, TOI

The right way to progress, stay put

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During early trade on 2nd December, this year, the BSE opened with a low profile. But as the time neared for RBI’s monetary policy review, the Sensex rose to 28,576.39 points on the much anticipated key policy rate reduction by the Central Bank.

The Indian market faced disappointment as the forecast of the 41 journalists polled by Reuters came true. The RBI maintained its key policy rate at 8.0 percent. The interest rates have been left unaltered for the fifth time in a row.

The repo and the reverse repo rates have been maintained at 8 and 7 percent respectively, while the growth target for the fiscal year remains at 5.5 per cent. The Cash Reserve Ratio (CRR), the Statutory Liquidity Ratio (SLR) and the bank rates have also been untouched.

Most of the economists, according to the Economic Times, firmly felt that the rates shall remain unchanged, well before the policy review. This was done to stimulate moderate inflation rather than a drastic lowering of inflation and the prices returning back to square one, a few days after the rate cuts.

The RBI Governor, in a press release, said that “A change in the monetary policy stance at the current juncture is premature.” He also said that the Central Bank was not looking for disinflation for just a quarter or two but on a long-term basis.

A few economists are also hopeful about the rates after the decision of the Oil and Petroleum Exporting Countries’ (OPEC) decision to maintain constant supply ripped down the prices of crude oil to a four-year low.

The decision of the RBI has come as a welcome change as the inflation based on the Wholesale Price Index (WPI) has plummeted to a 5-year low 1.77 percent in October and the Consumer Price Index (CPI) measured a low to 5.52 per cent on October end. It is observed that the loan demand in scheduled banks have dipped to 11 per cent whereas bank deposits have attracted more attention.

Surprisingly, the ‘Acche Din’ government’s decisions on a low progress in minimum support prices and releasing more food stock into the market have also triggered hopes of disinflation.

The RBI Governer also informed that “However, if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle.” Thus, he indicated probable rate cuts in the forthcoming monetary policy review of the RBI in February, 2015.

Minutes after RBI’s decision was announced, the Sensex dipped down by 115.61 per cent to 28,444.01. The shares of the IT sector went down due to the strengthening of INR while shares of gas, oil and auto were high preceding a hike on excise duty.
Source: Economic Times and Zee Business