Archive for the ‘Indian Economy/Financial Markets’ Category

RBI sets up Regulations Review Authority to review its regulations

April 15, 2021

RBI to review its regulatory role:

The Reserve Bank of India had set up a Regulations Review Authority (RRA) initially for a period of one year from April 1, 1999 for reviewing the regulations, circulars, reporting systems, based on the feedback from public, banks and financial institutions. The recommendations of the RRA enabled streamlining and increasing the effectiveness of several procedures, simplifying regulatory prescriptions, paved the way for issuance of master circular and reduced reporting burden on regulated entities.

2. Considering the developments in regulatory functions of the Reserve Bank over the past two decades and evolution of the regulatory perimeter, it is proposed to undertake a similar review of the Reserve Bank’s regulations and compliance procedures with a view to streamlining/ rationalising them and making them more effective. Accordingly, it has been decided to set up a new Regulations Review Authority (RRA 2.0) for a period of one year from the date of its establishment to review the regulatory prescriptions internally as well as by seeking suggestions from the RBI regulated entities and other stakeholders on their simplification and ease of implementation.

3. The RRA 2.0 will focus on streamlining regulatory instructions, reduce compliance burden of the regulated entities by simplifying procedures and reduce reporting requirements, wherever possible. The terms of reference of RRA 2.0 would be as under:

    1. To make regulatory and supervisory instructions more effective by removing redundancies and duplications, if any;
    2. To reduce compliance burden on regulated entities by streamlining the reporting mechanism; revoking obsolete instructions if necessary and obviating paper-based submission of returns wherever possible;
    3. To obtain feedback from regulated entities on simplification of procedures and enhancement of ease of compliance;
    4. Examine and suggest the changes required in dissemination process of RBI circulars/ instructions (this would entail suggestions on the areas where the manner of issuing circulars, their updation and website linkages); and
    5. Identify any other issue germane to the subject matter.

4. Shri M. Rajeshwar Rao, Deputy Governor has been appointed as the Regulations Review Authority. The Authority would be set up for a period of one year from May 01, 2021, unless its tenure is extended by the Reserve Bank.

5. The RRA will engage internally as well as externally with all regulated entities and other stakeholders to facilitate the process.

What happened in RRA 1.0?

The Reserve Bank had set up a Regulations Review Authority (RRA) (with Deputy Governor Dr. Y.V. Reddy as RRA) on April 1, 1999 for one year for reviewing the Reserve Bank’s rules, regulations, reporting systems, etc., in the light of suggestions received from general public, market participants and users of services of the Reserve Bank. However, as the scope of the work for RRA has been found to be large, the term of RRA has been extended by one more year from April 1, 2000. During 1999-2000 and the first half of 2000-01, the Authority received 235 applications, which contained more than 400 suggestions, pertaining to various functional areas of the Reserve Bank. Implementation of the accepted suggestions has paved way for streamlining several existing procedures in the Reserve Bank, particularly in its departments which deal with the public.

The suggestions also compelled a review of the Reserve Bank’s reporting systems and contributed to rationalisation of a number of statistical returns and reports. The RRA initiated the work relating to compilation of subject-wise master circulars by merging circulars issued over the years on select subjects. One circular on Exposure Norms has already been issued and others are at various stages of finalisation. Further, it is proposed to issue an updated Master Circular on select subjects at the beginning of each year.

RBI releases names of applicants for ‘on tap’ licensing of Universal Banks and Small Finance Banks

April 15, 2021

Interesting list of applicants released by RBI:

The Reserve Bank of India today released the names of applicants under the Guidelines for ‘on tap’ Licensing of Universal Banks and Small Finance Banks. As on date, applications for Universal Banks and Small Finance Banks, under the aforementioned guidelines, have been received by the Reserve Bank from the following applicants:

Applicants under Guidelines for ‘on tap’ Licensing of Universal Banks

    1. UAE Exchange and Financial Services Limited
    2. The Repatriates Cooperative Finance and Development Bank Limited (REPCO Bank)
    3. Chaitanya India Fin Credit Private Limited
    4. Shri Pankaj Vaish and others

Applicants under Guidelines for ‘on tap’ Licensing of Small Finance Banks

    1. VSoft Technologies Private Limited
    2. Calicut City Service Co-operative Bank Limited
    3. Shri Akhil Kumar Gupta
    4. Dvara Kshetriya Gramin Financial Services Private Limited

Will RBI’s new inflation forecasting model help?

April 9, 2021

New piece in Moneycontrol (Behind the paywall):

The tighter-than-required monetary policy during 2016-18 is often criticized for derailing Indian growth story; that’s why the new forecasting model assumes importance..

How effective is e-NAM in integrating food commodity prices in India? Evidence from Onion Market

April 7, 2021

Rudrani Bhattacharya and Sabarni Chowdhury in this NIPFP paper:


RBI’s Financial Inclusion Index

April 7, 2021

RBI in Apr-21 policy:

Financial Inclusion has been viewed as a key enabler for achieving inclusive and sustainable development worldwide. This has been a thrust area for Government, Reserve Bank and other regulators, with a number of steps having been taken and significant progress made over the years. To measure the extent of financial inclusion in the country, the Reserve Bank will construct and periodically publish a “Financial Inclusion Index” (FI Index). The FI Index would be based on multiple parameters and shall reflect the broadening and deepening of financial inclusion in the country. To begin with, the FI Index will be published annually in July for the financial year ending previous March.

This follows RBI’s announcement of digital payments index in Feb-20 policy which started publishing in Jan-21.


RBI rejigs Deputy Governors’ portfolio yet again..

April 6, 2021

RBI rejigs the Deputy Governors’ (DG) Portfolio yet again. Shri BP Kanungo retired and his portfolio was allocated to the three DGs.

Since July 23, 2019, when Viral Acharya left the RBI, the central bank has reshuffled the DG portfolio four times with three of these reshuffles in 2020 alone.  The reshuffling happens as Government is unable to appoint a replacement for a retiring/resigning DG.

In an earlier piece, I had written about this constant rejigging and even suggested ways to avoid this…

100 years of Imperial Bank of India

April 2, 2021

On 27 Jan 1921, the three Presidency Banks were merged into one bank and named the bank as Imperial Bank of India. The Imperial bank of India was nationalised and renamed as State Bank of India in 1955.

The Imperial Bank of India had a very interesting history of its own.


160 years of paper money in India

March 30, 2021

In 1861, the British enacted Paper Currency Act unifying the paper currency business.

Rachel Lopez narrates this history of paper money in two articles in Hindustan Times:

One could also read my three part series on evolution of money globally and nationally featured in Moneycontrol:

How should RBI regulate NBFCs?

March 30, 2021

New position paper from Dvara Reserach team: Deepti George, Dwijaraj Bhattacharya, Madhu Srinivas and Sowmini Prasad.

First what ails NBFC regulation:

At the heart of the current regulatory approach for NBFCs, is a view that they are competitors to banks rather than complements. This is, in our view, a flawed approach that creates a false equivalence between NBFCs and banks. It needs to be recognised that NBFCs are specialised intermediaries with a deep understanding of the real sector risks pertaining to the niche sectors that they serve.  In contrast, banks have to service all sectors of the economy and thus have limited abilities to specialise. More importantly, NBFCs are not money creators, unlike banks. To that extent, NBFCs cannot be seen as posing the same level of risk as a bank or be considered as credit intermediaries similar to banks. This false equivalence has led to a scenario where NBFCs are subject to prudential regulations, which are, in some cases, more stringent than those in place for banks and disproportionate to the risks posed by them. Even among NBFCs, the current regulatory framework has significant inconsistencies which create regulatory arbitrage between different types of NBFCs. Finally, for regulation to be effective, it needs to be complemented by a robust supervisory mechanism and a quick resolution process; both are presently lacking.

We need to look at NBFCs in terms of scale and impact:


The Splendoured Gardens Of C.D. Deshmukh

March 29, 2021

Superb profile piece of CD Deshmukh by Shri G. Sreekumar, former RBI official.

C.D. Deshmukh, who served as India’s Central Banker and Finance Minister, had an illustrious career. A polymath, he was adept at managing the affairs of the economy. He was also a passionate gardener, who planted trees and gardens wherever he went. His interest in botany saw him plant the most elaborate gardens with some of the rarest plant species.

At a time when the nation is going through a process of divestment, selling off some of the country’s most lucrative assets, the life of a man, now almost hidden in the annals of history, needs to be revisited. For C.D.Deshmukh is the man who nationalised the Life Insurance Corporation.

One is also touched by how these people went through so much in their personal life, yet managed to put country first and excel in most tasks given to them. This generation was something else.

Lots to learn. Thanks Mr Sreekumar for this timely piece.

Listed corporates are required to put video/radio recording of their meetings with analysts/institutional investors

March 26, 2021

In the SEBI Board Meeting held yesterday on 25-Mar-21 several decisions were taken.

One of them should go a long way in improving transparency in stock markets:

Presently, a listed entity is required to disclose the schedule of analyst/institutional investors meet and presentations made in such meetings,
to the stock exchanges and on its website. The Board has decided to amend the regulation to introduce the requirement of disclosing:
    • Audio/video recordings of such meetings on the website of the listed entity and exchanges promptly, before next trading day or within 24 hours,  whichever is earlier.
    • Written transcripts of such meetings within five working days


Upcoming birth centenary of Mr. P.V. Narasimha Rao: 28 June 1921-28 June 2021

March 26, 2021

The year 2021 marks 100th birthday of Mr. PV Narasimha Rao (PVN), India’s ninth Prime Minister.  PVN was born on 28 June 1921 in a village in then Nizam run State of Hyderabad. The man knew ten languages including three foreign ones and could even run computer programmes in Basic, Cobol and Unix. Apart from being the PM, he held most of the important political portfolios in his career: Foreign Minister, Home Minister, Defense Minister, Chief Minister of Andhra Pradesh and so on.


Rest in Peace Mr GV Ramakrishna, former chairperson of SEBI

March 23, 2021

Sad to hear about the demise of Mr GV Ramakrishna, Chairperson of SEBI from 24-Aug-1990 to 17-Jan-1994. He was one of the key officials who laid the path for capital market reforms in India. His work was carried forward by Dr. D.R. Mehta.

This blog had reviewed GVR’s autobiography:   Two Score and  Ten: My Experiences in Government.

GVR was appointed SEBI chair in 1990. On seeing his IAS background, a journalist thought of making a point by asking whether he knew anything about share markets. GVR’s response: Do you go to a cardiac surgeon only if has undergone a cardiac transplant? The journalist was obviously taken back by the response of GVR and relation with the media changed.

Many more details in the autobiography. Hope a cheaper version is released. On Amazon, it is showing a price of Rs 4380!

Rest in Peace Sir..



Importance of Public Sector Banks

March 19, 2021

Durgananda Swamy, Retired official of RBI in TheIndiaForum:

All said and done, we have a good banking structure, a mix of both public and private sector ones, covering all corners of the country and serving clientele of a varied nature. What is needed is more efficient management of these institutions, with less interference by powers that be, and more prudential regulation to ensure that banks go for neither ‘lazy banking’ nor ‘crazy banking’.

More importantly, we need to develop better financial conduct and discipline by all the stake holders. If the money lent does not come back for genuine reasons, the system may be able to take this in its stride, but not when huge money is pocketed by dishonest borrowers and willful defaulters as a matter of routine.

When criminality begets crime: The role of elected politicians

March 19, 2021

Nishith Prakash, Soham SahooDeepak Saraswat and Reetika Sindhi in this Ideas4India article:

The criminalisation of politics has become a massive threat to society. While the impact of criminally accused leaders on economic outcomes has been studied in the literature, little is known about their effect on the crime environment of the jurisdiction. Analysing data from India for 2009-2018, this article shows that in districts with weak rule of law, an additional criminally accused leader leads to 64 more criminal cases.

How Indian Bank-Allahabad Bank amalgamation proved an unlikely success

March 17, 2021

In 2019, the Government announced the great bank merger by merging 10 public sector banks as 4 Public Sector Banks.

  • Group 1: PNB (Anchor Bank) merged Oriental Bank of Commerce and United Bank of India
  • Group 2: Canara Bank (Anchor Bank) merged Syndicate Bank
  • Group 3: Union Bank of India (Anchor Bank) merged Andhra Bank and Corporation Bank
  • Group 4: Indian Bank (Anchor Bank) merged Allahabad Bank

T E Narasimhan of Business Standard reports of the 4 groups, it was Group 4 which was more tricky. Unlike the first three groups where a large Anchor bank merged smaller banks, here it was a merger of equals. Moreover cultural clashes were expected as Indian Bank is based out of Chennai whereas Allahabad Bank is based out of Kolkata.

Padmaja Chunduru, MD and CEO of Indian Bank, converted the challenge into an opportunity.


A high growth plan for Indian agriculture

March 15, 2021

Ashok Gulati, Ranjana Roy and Shweta Saini have written a book on Indian Agriculture which one can download for free.  

The authors summarise the book findin

In a recent publication from Springer Nature, Revitalising Indian Agriculture and Boosting Farmer Incomes, which we have co-edited with Ranjana Roy, strategies for six Indian states — Punjab, Madhya Pradesh, Gujarat, Uttar Pradesh, Bihar and Odisha —have been proposed. We studied each of these states to identify factors that contributed to their growth and issues which constrained it. In addition to suggesting customised solutions, we also identify best-practices for replication in other Indian states.


As a part of the roadmap, the book makes a case for states to move beyond production-centric approach to a value-chain approach with FPOs at its centre. It highlights importance and requirement of growing public investments in basic infrastructure, like roads, markets, power supplies, and agri-R&D. And finally, in the longer run, rationalising subsidies (both input and output) via direct income transfer is suggested, as that will not only empower farmer but will also give them right signals for efficient use of these resources (fertilisers, power, water). This will help put agriculture on a higher growth trajectory, augment farmers’ incomes, and promote sustainable development of agriculture.

If the Narendra Modi government follows this path of investing in infrastructure, ensuring a more diversified agriculture and linking small-holder FPOs with markets, it will pay rich dividends not only to the farming community but also the entire economy.

The Elusive Idea: Impressions of Social Justice in Hindi Cinema, 1940s-70s

March 15, 2021

Nilosree Biswas in this CASI article reflects on the role of Hindi Cinema on portraying social justice:

In the decades since the release of these films, the popularity of hard-hitting, violent Hindi cinema, devoid of much realism, grew manifold. Concurrently, labor movements have been crushed, small farmers have lost their land holdings, and gender violence and discriminations have been on the rise. Stifling social repression offscreen has only heightened bullish violence onscreen. By the 1990s, mainstream Hindi cinema only churned out films where heroes single-handedly delivered justice by way of bloodbath, reaffirming the breakdown of India’s social fabric.

With 2012’s releases of Anurag Kashyap (Gangs of Wasseypur), Vasan Bala (Peddlers), and Asim Ahluwalia (Miss Lovely), Hindi cinema’s storytelling took some gritty turns. The following years saw Rajit Kapoor’s Ankhon Dekhi (Through My Own Eyes) in 2014 and Neeraj Ghaywan’s Masaan (The Crematorium) in 2015—movies that raised incisive questions about India’s complex caste system and rampant corruption. Netflix soon brought forth content infused with spurts of social justice, such as the 2018 premiere of Sacred Games, India’s first Netflix original series. Web series like 2019’s Delhi Crime, based on rising violence against women, emerged from this notion, breaking away from the nomenclature of New Wave Cinema’s 80s and 90s films. As entertainment trends continue to move toward streaming services, it would seem that present day India is no longer interested in big screen films rooted in social justice, but are content watching the justice-seekers from the convenience of their smartphones.

Dam Safety in India

March 15, 2021

Devendra Damle in this new NIPFP paper:

India has 5334 large dams; the largest number of dams in the world after USA and China. This number is set to increase in the coming years as India constructs more dams to meet the rising demand for electricity and water. Constructing dams exposes downstream areas to the risk of catastrophic flooding — in the event the dam fails or water has to be released in an emergency. Adopting risk-based decision-making systems for making policy, implementation
and management decisions regarding dams are crucial for mitigating this risk.

Conducting  dam break analyses is a basic requirement for creating such a system. In the existing regulatory system, clearance for constructing new dams requires the builder to conduct a dam break analysis. However, there is no standardisation in how the dam break analyses are conducted and reported.

It is also unclear how many projects actually comply with this requirement. There is no statutory requirement for conducting a consequence analysis to estimate the likely loss of life and property, and economic damage in the event of dam failure. Existing design standards for dams are not based on the risk created by the dam, but rather on their heights and storage capacities. Further, there is no centralised system for documenting and reporting actual
dam failures, which is another crucial component of dam risk mitigation.

Putting in place systems for regularly conducting dam break analyses, regular reporting of dam failure events, and ready public availability of such data is a necessary precondition for the development of risk-based decision-making systems to mitigate risk from dams.

This is an important issue which is often ignored. The climate change matters make the issue of dam management and risk assessment even more crucial.

Sustaining India’s growth miracle requires increased attention to inequality of opportunity

March 12, 2021

Sriram Balasubramanian, Rishabh Kumar and Prakash Loungani in this voxeu research:

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