A Reserve Bank of India (RBI) working group’s suggestion to create an Indian Banks Base Rate (IBBR) to which all commercial banks can link their loan rates is yet another shot by the regulator to bring in transparency in loan pricing and ensure better transmission of monetary policy. Reset every month, IBBR will be an average of the prevailing base rates of top 14 public sector banks, seven private banks and three foreign banks. This needs to be done as the existing base rate system has turned into a joke.
Sahara Group, which obtained a stay from the Calcutta high court in December on the publication of Mint journalist Tamal Bandyopadhyay’s book Sahara: The Untold Story and filed a Rs.200 crore defamation suit against the author and his publisher Jaico Publishing House, has withdrawn the case following an amicable settlement. The book, which Bandyopadhyay wrote in his individual capacity, will now be released in May, a Jaico official said.
Mumbai: In August 2010, Reserve Bank of India’s (RBI’s) senior most deputy governor K.C. Chakrabarty was stripped of most of his key portfolios for reportedly making public comments that the banking regulator should be more aggressively hiking interest rates to control inflation.
The fact that India’s banking regulator is annoyed with the rising bad loans of banks is well known. In the past few years, the pile of bad assets as well as restructured loans—both through the so-called corporate debt restructuring, or CDR, platform as well as bilateral deals—has ballooned. The Reserve Bank of India has been goading banks for faster dfacetection and resolution of bad assets.
My last week’s column on differentiated licensing evoked strong response from stakeholders. A couple of entities that had applied for a bank permit but did not get it have expressed deep disappointment with the Reserve Bank of India’s (RBI) ultra-conservatism while a few analysts said opening a window for limited licences cannot justify the regulator’s reluctance to welcome not more than two applicants. Incidentally, unlike in 2001, when RBI had made it clear that “the number of licences to be issued in the next three years may be restricted to two or three of the best.
The March Wholesale Price Index (WPI) inflation at 5.7% grew at the fastest pace since December and above the consensus estimate of 5.3%.
Quite a few companies that failed to get a banking licence from the Reserve Bank of India (RBI) are going back to the drawing board to draft new applications, encouraged by governor Raghuram Rajan’s assurance that aspirants can consider applying for a differentiated permit instead of a full licence. The banking regulator plans to open a window for differentiated licences while permits for universal banks will be available on tap. Commercial banks, cooperative banks, financial institutions and non-banking finance companies (NBFCs) constitute the Indian financial system.
The new companies law has come into effect from 1 April. Section 71(4) of the law requires every company that issues debentures to create a debenture redemption reserve (DRR) account out of its profits. Such an account can only be be utilized to redeem debentures.