Archive for September 20th, 2013

Does RBI ease or complicate the bank branch policy?

September 20, 2013

One of the many items of Dr Rajan’s speech was to ease the bank branch regime in India. he said:

The Indian public would benefit from more competition between banks, and banks would benefit from more freedom in decision making. The RBI will shortly issue the necessary circular to completely free bank branching for domestic scheduled commercial banks in every part of the country. No longer will a well-run scheduled domestic commercial bank have to approach the RBI for permission to open a branch. We will, of course, require banks to fulfil certain inclusion criteria in underserved areas in proportion to their expansion in urban areas, and we will restrain improperly managed banks from expanding until they convince supervisors of their stability. But branching will be free for all scheduled domestic commercial banks except the poorly managed.

On reading this, some experts said that is how one should do reform – uncluttered and simple.But this was said without really reading the final guidelines and that is where the so called masala is.

So RBI released a circular on Sep 19, 2013 giving these guidelines. They allow banks to open branches freely in Tier A cities given certain restrictions. Spot the differences between earlier policy and recent policy (like those you get in magazines etc:

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Assessing the costs of the 2007–09 financial crisis…

September 20, 2013

Dallas Fed econs  David Luttrell, Tyler Atkinson and Harvey Rosenblum summarise the costs of the 2007-09 financial crisis (did it end in 2009??).

The 2007–09 meltdown produced a huge downshift in the path of economic output, consumption and financial wealth. The nation has borne additional costs arising from psychological consequences, skill atrophy from extended unemployment, a reduced set of economic opportunities and increased government intervention in the economy. Assuming the financial crisis is the root cause of all that dislocation, an estimate of the crisis’ overall cost must be weighed against the potential costs of policies intended to prevent similar episodes in the future.

We conservatively estimate the loss of national output as a result of the financial crisis and its aftermath at between $6 trillion and $14 trillion. The high end of this range is equal to nearly one year of U.S. output. Including broader and more-difficult-to-quantify measures that reflect the lingering trauma experienced by millions of Americans pushes these costs still higher—possibly to as much as two years’ worth of forgone consumption.

Given this range of estimates, the tepid economic recovery and the collateral damage sustained, it is crucial to implement effective policies that avoid future episodes whose magnitude could exceed even the staggering costs and consequences of the most recent financial crisis.

Hmmm…A really high range of costs..nearly one year of GDP at the higher end of the range..

Khar residents find worms, insects in BMC water..(People in Bangalore will say big deal!!)

September 20, 2013

Indian express has this story:

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Dr Rajan plays a bogey with markets…

September 20, 2013

What a surprise from Dr. Rajan in his first policy. There were so many expectations not from the policy per se but from the person. Well he did say he is not here for FB likes..

Post-Fed breather, most expected that not only will the liquidity measures be eased but signalling of future rate cuts will also be mentioned in the policy.  However, only one of the wishes was granted (eas eof liquidity) and in other there was a complete surprise (higher repo):

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