RBI slaps Rs 3-crore penalty on Union Bank

The Reserve Bank of India has imposed Rs 3 crore penalty on Union Bank of India for “non-compliance” with the directions on know your customer (KYC) norms in two separate cases. While the RBI has imposed a penalty of Rs 2 crore in one case, it slapped a Rs 1 crore penalty in the second case. “Based on reports related to a fraud in a bank, it conducted an examination of certain accounts in Union Bank of Union Bank, which had substantial transactions. Upon examination of the documents obtained in this regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with directions issued by RBI,” the RBI stated.

RBI, Bank notes, Rs 20 notes, Rs 20 new notes, Rs 20 notes issue, mahatma Gandhi, Urjit Patel,The second case related to a complaint regarding “huge cash withdrawals in certain accounts”. Both the penalties were imposed on July 26. As per RBI, the penalties were imposed due to deficiencies in regulatory compliance and “not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers”. “After considering the bank’s reply, oral submissions made in the personal hearing, as also the additional information and documents furnished, the RBI came to the conclusion that the charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty,” the RBI said.

Banks restructured corporate loans worth Rs 2.04 lakh crore in FY17: Arun Jailtey

The amount of corporate loans restructured by lenders has seen a decline in the last three financial years, according to the data tabled by Finance Minister Arun Jaitley in the Rajya Sabha on Tuesday. Banks restructured loans, that were sanctioned to companies, of worth Rs 3,70,279 crore in FY2014-15 and Rs 2,99,111 crore in 2015-16.

The amount of restructured corporate loans came down to Rs 2,04,884 crore in the last financial year, as per the data. The finance minister was responding to a question seeking names of companies whose loans have been restructured and at what terms.

“Any restructuring is to be carried out in accordance with detailed guidelines issued by RBI on restructuring like Joint Lenders’ Forum (JLF), Strategic Debt Restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A),” Jaitley said.

Arun Jaitley, corporate bank loans in India, Corporate banks loans restructure, Corporate bank loans in India, 2 lakh crore corporate bank loans, India news, national newsThe finance minister further said that “the names and details of borrowers are covered under section 45E of RBI Act, 1934 and banking laws.

“… which (the Act and banking laws) oblige financial institutions to maintain secrecy about the affairs of their constituents.”

On provision for restructuring of farm loans in case of natural calamities, he said banks can facilitate restructuring, including conversion of short-term debt to term loan or re-schedulement or repayment time-frame to such borrowers with benefit of retention of asset classification.

“For agricultural accounts that became impaired on account of reasons other than natural calamities, restructuring is allowed in terms of RBI guidelines on Income Recognition and Asset Classification (IRAC),” Jaitley said.

RBI cuts repo rate by 25 bps to 6 per cent pointing to sharp fall in inflation

The Reserve Bank of India’s monetary policy committee cut the repo rate by 25 basis points to 6 per cent on Wednesday pointing to the sharp fall in inflation in recent times. However, it is not sure whether this fall in inflation is durable and retained a neutral stance for monetary policy.

The panel said that some risks to inflation it had anticiapted such as from GST haven’t materialised.

“Consequently, some space has opened up for monetary policy accommodation, given the dynamics of the output gap. Accordingly, the MPC decided to reduce the policy repo rate by 25 basis points. Noting, however, that the trajectory of inflation in the baseline projection is expected to rise from current lows, the MPC decided to keep the policy stance neutral and to watch incoming data. The MPC remains focused on its commitment to keeping headline inflation close to 4 per cent on a durable basis,” the monetary policy statement said.

RBI, RBI repo rate, RBI policy rate, RBI policy, RBI interest rate, RBI policy review, urjit patel,The consumer price index inflation fell to 1.54% in June, the lowest reading since the series started in 2012. This has prompted economists, bankers and governments to call for a rate cut by RBI.

However, the MPC observed that “while inflation has fallen to a historic low, a conclusive segregation of transitory and structural factors driving the disinflation is still elusive. In respect of inflation-sensitive vegetables, prices are recording spikes. Excess supply conditions continue to push down prices of pulses and keep those of cereals in check.”

Therefore, “the MPC will continue monitoring movements in inflation to ascertain if recent soft readings are transient or if a more durable disinflation is underway,” the statement added.

GST helped inflation to fall significantly: Urjit Patel

Reducing the repo rate by 25 basis points to 6 per cent on Wednesday, Reserve Bank of India (RBI) Governor Urjit Patel said the implementation of the Goods and Services Tax (GST) has helped the inflation rate to fall significantly in the last three months. The growth forecast has been unchanged at 7.3 per cent for the current fiscal, he mentioned, adding that there is scope for banks to cut rates further, especially for those sectors which have not benefited in the past rate cuts.

The central bank was, however, not sure whether the fall in inflation is durable and retained a neutral stance for monetary policy. “Consequently, some space has opened up for monetary policy accommodation, given the dynamics of the output gap. Accordingly, the MPC decided to reduce the policy repo rate by 25 basis points. Noting, however, that the trajectory of inflation in the baseline projection is expected to rise from current lows, the MPC decided to keep the policy stance neutral and to watch incoming data. The MPC remains focused on its commitment to keeping headline inflation close to 4 per cent on a durable basis,” the monetary policy statement said.

gst, urjit patel, rbi, rbi repo rate, rbi policy rate, rbi policy, rbi interest rate, rbi policy review, business news, market news, india news, indian express, indian express newsThis June, the consumer price index inflation fell to 1.54 per cent that prompted the government to call for a cut rate by the RBI. However, the MPC observed that “while inflation has fallen to a historic low, a conclusive segregation of transitory and structural factors driving the disinflation is still elusive. In respect of inflation-sensitive vegetables, prices are recording spikes. Excess supply conditions continue to push down prices of pulses and keep those of cereals in check.”

RBI aims to keep retail inflation near 4 per cent on ‘durable basis’

The Reserve Bank on Wednesday said it will endeavour to keep retail inflation close to 4 per cent on a “durable basis” which may rise in the near term on account of pay commission payouts and price adjustments post GST rollout. “The MPC observed that while inflation has fallen to a historic low, a conclusive segregation of transitory and structural factors driving the disinflation is still elusive.

“The MPC remains focused on its commitment to keeping headline inflation close to 4 per cent on a durable basis,” the central bank said in its 3rd bi-monthly monetary policy statement, 2017-18. The RBI’s Monetary Policy Committee (MPC) today decided to reduce the repo rate — at which it lends to banks — by 0.25 per cent to 6 per cent.

Going forward, as base effects fade, the inflation momentum is to be hinged upon the impact of house rent allowance (HRA) under the Central Pay Commission (7th CPC), price revisions withheld ahead of the Goods and Services (GST) rollout as well as disentangling of structural and transitory factors shaping food inflation, the apex bank said.

Urjit Patel, RBI, retail inflation, GST, GST bill, Monetary Policy Committee, RBI inflation, repor rate, indian express news, india newsThe regulator has set a medium-term target for consumer price index (CPI) based retail inflation at 4 per cent with a +/- bias of 2 per cent. RBI Governor Urjit Patel said inflation trajectory now incorporates the first round impact of the implementation of the HRA awards of the 7th CPC by the central government.

“Excluding the HRA impact which will affect the CPI cumulatively, inflation would be a little over 4 per cent by fourth quarter as against 4.5 per cent inclusive of the HRA in the June statement (of RBI policy),” Patel said. India’s CPI-based retail inflation stood at 1.54 per cent in June this year to hit its lowest reading in the series based to 2011-12.

The MPC also noted that inflation is well below target in most of advanced and emerging market economies despite a modest rise in global demand as well as uptick in crude oil. Citing its survey on inflation, the RBI said households seem to have discounted the recent low inflation prints; their three months and one year ahead inflationary expectations polled in the RBI survey in June have “somewhat hardened”.

RBI slashes repo rate by 25 basis points; Urjit Patel says GST helped inflation to fall: Top developments

The Reserve Bank of India (RBI) on Wednesday cut the repo rate by 25 basis points to 6 per cent pointing to the sharp fall in inflation in recent times. However, the central bank wasn’t sure if this fall in inflation is durable and retained a neutral stance for monetary policy. The Finance Ministry hailed RBI’s decision to cut key policy rate by 0.25 per cent to achieve sustained growth. The RBI, in its third bi-monthly monetary policy of the fiscal, cut the repo rate after a gap of nearly 10 months. The new repo rate at 6 per cent is the lowest in six-and-a-half years. The last rate cut took place in October 2016. Commenting on the rate cut, RBI Governor Urjit Patel said the central bank has maintained the economic growth projection at 7.3 per cent for the current fiscal. Patel also attributed fall in inflation in the last three months to implementation of GST and good monsoon.

Economic Affairs Secretary Subhash Chandra Garg also welcomed the rate cut saying: “We welcome the 25 basis points cut in the repo rate as an important step necessary to converge towards the appropriate real monetary conditions for sustained growth consistent with India’s potential and for stable, moderate inflation.” Commenting on the rate of price rise, Patel said: “The MPC observed that while inflation has fallen to a historic low, a
conclusive segregation of transitory and structural factors driving the disinflation is still elusive.” Read Full story here: RBI cuts repo rate by 25 bps to 6 per cent pointing to sharp fall in inflation

RBI, repo rate cut, reverse repo rate, RBI rate cut, Urjit patel, Reserve Bank of India, RBI repo rate cut, Repo rate cut: Here are the top developments

1. Reverse repo rate cut by 0.25 per cent to 5.75 per cent.

2. The government had been pitching for a rate cut to boost economic growth amid retail inflation falling to a historic low of 1.54 per cent in June.

3. The Monetary Policy Committee (MPC) has decided to keep the policy stance neutral and to watch incoming data with a view to keeping headline inflation close to 4 per cent.

4. The RBI said it is working in close coordination with the government to resolve large stressed corporate borrowings and recapitalise public sector banks.

5. The stock market, however, didn’t react to the rate cut on expected lines. Despite factoring in the repo rate cut, it declined. While the BSE index Sensex slipped from record high to end 98.43 points lower at 32,476.74, NSE’s Nifty fell 33.15 points to 10,081.50.

6. The banking sector in India is reeling under Rs 8 lakh crore of non performing assets (NPAs) or bad loans, of which PSU banks alone account for over Rs 6 lakh crore.

7. Focus on keeping headline inflation close to 4 per cent on durable basis.

8. Some risks to inflation have reduced or not materialised.

9. Growth forecast unchanged at 7.3 per cent for the current fiscal.

10. Pushes for reinvigorating private investments, clearing infra bottlenecks and providing big thrust to Pradhan Mantri Awas Yojana (PMAY).

11. Forex reserves at USD 392.9 billion as on July 28.

12. Four members of Monetary Policy Committee voted in favour of 0.25 pc rate cut.

13. Farm loan waivers by states may result in fiscal slippages, undermine public spending quality.

14. Government, RBI working to resolve large NPAs and recapitalise public sector banks.

15. High levels of stress in twin balance sheets – banks and corporations – are likely to deter new investment.

16. Next MPC meeting on October 3 and 4, 2017.

RBI cuts repo rate by 25 basis points: Full text of the Monetary Policy Committee

The Reserve Bank of India’s Monetary Policy Committee cut (MPC) on Wednesday decided to cut the repo rate by 25 basis points to 6 per cent owing to the sharp fall in inflation in the last two quarters. However, it has state that is is not sure whether this fall in inflation is durable and retained a neutral stance for monetary policy.

The panel further stated post implementation of GST risks of increase in inflation have not materialised.

“Consequently, some space has opened up for monetary policy accommodation, given the dynamics of the output gap. Accordingly, the MPC decided to reduce the policy repo rate by 25 basis points. Noting, however, that the trajectory of inflation in the baseline projection is expected to rise from current lows, the MPC decided to keep the policy stance neutral and to watch incoming data. The MPC remains focused on its commitment to keeping headline inflation close to 4 per cent on a durable basis,” the monetary policy statement said.

In the press release issued by the RBI the panel said “MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth. The main considerations underlying the decision are set out in the statement below.”

The press release also states its reasons for revising the rate based on its assessment, given in pointers below:

Excerpts from the press release:

1. The modest firming up of global demand and stable commodity prices have supported global trade volumes, reflected in rising exports and imports in key economies. In the second half of July, crude prices have risen modestly out of bearish territory on account of inventory drawdown in the US, but the supply overhang persists. Chinese demand has fuelled a recent rally in metal prices, particularly copper. Bullion prices fell to multi-month lows on improved risk appetite but remain vulnerable to shifts in the geopolitical environment. Notwithstanding these developments, inflation is well below target in most AEs and is subdued across most EMEs.

2. On the domestic front, a normal and well-distributed south-west monsoon for the second consecutive year has brightened the prospects of agricultural and allied activities and rural demand. By August 1, rainfall was 1 per cent above the long period average (LPA) and 84 per cent of the country’s geographical area received excess to normal precipitation. Kharif sowing has progressed at a pace higher than last year’s, with full-season sowing nearly complete for sugarcane, jute and soyabean. The initial uncertainty surrounding sowing of pulses barring tur and rice in some regions has also largely dissipated. Sowing of cotton and coarse cereals has exceeded last year’s levels but for oilseeds, it is lagging. Overall, these developments should help achieve the crop production targets for 2017-18 set by the Ministry of Agriculture at a higher level than the peak attained in the previous year. Meanwhile, procurement operations in respect of rice and wheat during the rabi marketing season have been stepped up to record levels – 36.1 million tonnes in April-June 2017 – and stocks have risen to 1.5 times the buffer norm for the quarter ending September.

RBI, RBI repo rate, RBI policy rate, RBI policy, RBI interest rate, RBI policy review, urjit patel, business news, market news, india news3. Industrial performance has weakened in April-May 2017. This mainly reflected a broad-based loss of speed in manufacturing. Excess inventories of coal and near stagnant output of crude oil and refinery products combined to slow down mining activity. For electricity generation, deficiency of demand seems to remain a binding constraint. In terms of uses, the output of consumer non-durables accelerated and underlined the resilience of rural demand. It was overwhelmed, however, by contraction in consumer durables – indicative of still sluggish urban demand – and in capital goods, which points to continuing retrenchment of capital formation in the economy. The weakness in the capex cycle was also evident in the number of new investment announcements falling to a 12-year low in Q1, the lack of traction in the implementation of stalled projects, deceleration in the output of infrastructure goods, and the ongoing deleveraging in the corporate sector. The output of core industries was also dragged down by contraction in electricity, coal and fertiliser production in June, owing to excess inventory and tepid demand.

4. Excluding food and fuel, CPI inflation moderated for the third month in succession in June, falling to 4 per cent as price momentum moderated inter alia in respect of education due to delay in fee revision cycles, and also in respect of health, clothing and footwear. Inflation in transport and communication services was depressed by the pricing war in the telecommunication space. Input costs relating to both industry and farms remain benign tracking international prices. Pricing power polled in the Reserve Bank’s industrial outlook survey and in manufacturing and services PMIs is still subdued.

Unhappy with MCLR, RBI may link rates to market determined benchmarks

Stating that it’s not satisfied with the Marginal Cost of Funds Based Lending Rate (MCLR) system, the Reserve Bank of India on Wednesday said it’s reviewing the MCLR system and exploring linking of the bank lending rates directly to market determined benchmarks to ensure a better transmission of interest rates. RBI Governor Urjit Patel who unveiled the bi-monthly monetary policy statement on Wednesday said there was more scope for banks to lower lending rates in certain segments.

“The experience with the MCLR system introduced in April 2016 for improving the monetary transmission has not been entirely satisfactory, even though it has been an advance over the Base Rate system,” Patel said. An internal Study Group has been constituted by the RBI to study the various aspects of the MCLR system from the perspective of improving the monetary transmission and exploring linking of the bank lending rates directly to market determined benchmarks, it said. The group will submit the report by September 24, 2017.

RBI Deputy Governor Viral Acharya, however, said the incremental benefit from the marginal cost of funds based lending rates (MCLR), introduced in April 2016 as an alternative to the earlier system of base rate, was positive. Even after the introduction of the MCLR and several rate cuts, the RBI has been repeatedly complaining about banks not doing enough to pass on the full benefit of its rate actions to the borrowers and help revive the sagging private investment for economic growth.

Patel said banks have been selective in their rate cuts in aggressive segments like home and auto loans, but there are many other segments, especially those, where borrowers are still tied to the base rate, where they can do more. “Given the liquidity conditions prevailing and that we have reduced policy rates by substantial amount since start of easing cycle, I think there is scope for banks to reduce lending rate for those segments. So far, they have not benefited to the full extent of our policy rate cuts.”

RBI, MCLR, Reserve Bank of India, RBI lending rates, Urjit Patel, repo rate, business news, rbi news, indian expressThe RBI said a quick scrutiny of the Base Rate of some banks post the introduction of MCLR suggests that it has moved significantly less than MCLR. “While the extent of change in Base Rate may not necessarily mirror the revision in MCLR, the rigidity of Base Rate is a matter of concern for an efficient transmission of monetary policy to the real economy. Given a large part of the floating rate loan portfolio of banks is still anchored on the Base Rate, the RBI will be exploring various options in the near future to make the Base Rate more responsive to changes in cost of funds of banks,” the RBI said.

Acharya said the ongoing resolutions on the NPA front will also help in better transmission as the banks’ balance sheet stress is resolved. He also announced that the Reserve Bank will be coming out with final guidelines on tripartite repo to deepen the corporate bond market, which, by working as an alternative to the bank lending, will also force banks to tinker with the rates quickly. The RBI announced that it is forming a high level task-force to help develop a “comprehensive near real-time public credit registry,” which will evaluate the existing public and private infrastructure for credit information, assess any data gaps, study the best international practices and provide a roadmap. “The objective is to improve not just the credit assessment by financial lenders, but also of the financial lenders themselves,” Acharya said.

“A public credit registry can potentially help banks in credit assessment and pricing of credit as well as in making risk-based, dynamic and countercyclical provisioning,” the RBI said. “The PCR can also help the RBI in understanding if transmission of monetary policy is working, and if not, where are the bottlenecks. Further, it can help supervisors, regulators and banks in early intervention and effective restructuring of stressed bank credits,” it said.

RBI repo rate cut will perk up market sentiments, say bankers

The Reserve Bank decision to slash repo rate by 25 basis points to 6 per cent will perk up the market sentiments and enable a gradual recovery in credit cycle, bankers and analysts said. State Bank of India chairman Arundhati Bhattacharya said, “The RBI decision to cut repo rate was a welcome move and will perk up market sentiments. The policy commentary was nuanced and balanced indicating upside risks to inflation have waned, whereas growth impulses in industry and services are weakening. We are hopeful that this measure should enable a gradual recovery in credit cycle with a revival of demand.”

According to Chanda Kochhar, MD and CEO, ICICI Bank, the prudent approach of the central bank in reacting to incoming data in a calibrated manner will reinforce the confidence amongst global investors. “A number of regulatory and developmental measures like tri-party repo for corporate bonds and enhanced limits for foreign investors using the futures market have also been announced. The formation of a high-level committee to address the information asymmetry in the credit markets will help in enhancing transparency and information availability,” she said.

“The cut in repo rate by the RBI is pro-growth. It might lead to banks reduce their lending rates, thereby, giving an impetus to credit growth, which has been down compared to last year. If the transmission were to happen quickly, consumers are in for a good time with EMIs likely to come down, and lenders likely to come up with festive season offers on loan rates in the ensuing months. Banks could leverage this opportunity to broad-base their credit consumer base further,” said Harshala Chandorkar, COO, TransUnion CIBIL.

Rana Kapoor, MD & CEO, Yes Bank, said, “resumption of easing cycle with RBI’s calibrated 25 bps rate cut after a hiatus of 9-months is a welcome move. The reduction clearly acknowledges downside to inflation pressures. India’s inflation has undergone a structural shift, with the emergence of ‘new normal’ at lower levels.” The RBI’s decision to set up a high level task force for creating a transparent, comprehensive and near-real-time public credit registry and comprehensive credit development reports by the credit information companies will help banks in credit assessment and risk pricing and make the credit market more efficient, said Chandra Shekhar Ghosh, Founder, MD & CEO, Bandhan Bank.

RBI rate cut, rbi repo rate, reserve bank of india rate cut, urjit patel, rate cut reactions, rbi rate cut reactions, business news‘Situation warranted steeper cut’

Industry chambers have said the current situation in the country warranted a steeper rate cut of 50 basis points from the RBI to spur growth. Industry chamber CII said the move will give a fillip to growth, especially at a time of benign core inflation print and tepid private investment. “Having said so, CII feels that a steeper cut in interest rate would have been more in consonance with market realities,” it said.

Ficci said the current situation “warranted a steeper cut of 50 bps” as the private investment cycle remains weak and the reduction in the rate will be an investment sentiment booster. Assocham said that even though the 25 bps cut “may not make much of a difference” to the debt servicing burden of the borrowers, especially the over-leveraged corporates, “it certainly improves the sentiment”.

“From the perspective of the real estate industry, any rate cut by the RBI will boost the sentiment and has a positive effect on sales of residential real estate. While a cut of 50 bps would have been welcome, a cut of 25 bps after four straight reviews when rates remained constant, is a welcome step,” said Niranjan Hiranandani, president, NAREDCO West. PHDCI opined that reduction in the key lending rate will not only reduce the costs of doing business but also enhance exporters’ competitiveness in the international market.

Inflation fall, slowdown spur RBI to cut rate to 6-year low

Interest rates on loans and deposits are set to fall with the Reserve Bank of India (RBI) Wednesday slashing its key lending rate, the repo rate, by 25 basis points to 6 per cent — the lowest level since November 2010 against the backdrop of a steep fall in inflation and weak demand. The decision of the six-member Monetary Policy Committee (MPC) was not unanimous. While members Chetan Ghate, Pami Dua, RBI Deputy Governor Viral V Acharya and Governor Urjit Patel were in favour of a 25 basis points reduction, Ravindra H Dholakia voted for a reduction of 50 basis points while RBI Executive Director Michael Debabrata Patra argued for status quo.

 RBI, RBI rate cut, Urjit Patel, RBI repo rate, RBI slashes lending rates, Business news, Indian ExpressThe RBI cut is likely to put pressure on banks to lower interest rates on home, auto and personal loans further. Bankers and analysts said the cut in the policy rate was largely anticipated and the timing opportune as both the US Federal Reserve and the European Central Bank would begin their unwinding measures in the near term, making it difficult for any policy cut decisions by the RBI thereafter. On the other hand, the steep fall in inflation and the weak industrial and investment scenario put pressure for a rate cut sooner than later.

Unveiling the bi-monthly monetary policy, the MPC observed that some of the upside risks to inflation have either reduced or not materialised. “The baseline path of headline inflation excluding the HRA impact has fallen below the projection made in June to a little above 4 per cent by the fourth quarter. Inflation excluding food and fuel has fallen significantly over the past three months and the roll-out of the GST has been smooth and the monsoon normal,” MPC said in its resolution after a two-day meeting.