1. The Reserve Bank of India on Tuesday cut key policy rates – repo and reverse repo – by 25 basis points each in order to push banks to lend more at viable rates and prop up the sagging economy.The underlying message from the banking regulator’s rate action was clear – banks should follow suit by reducing their lending and deposit rates in order ‘to support the return of the economy to a higher growth path’.The RBI, in its Annual Policy for 2009-10, reduced the reverse repo rate – the interest rate RBI pays to banks on the funds deployed with it – to 3.25 per cent (lower than the savings bank rate of 3.50 per cent) and the repo rate – the interest rate that banks pay on funds borrowed from RBI – to 4.75 per cent.
2. You can take a horse to water but can you make it drink? This is the question that the Reserve Bank of India has failed to answer in its Annual Policy Statement for 2009-10. In order to force banks to lend to entities other than itself, the RBI has reduced the reverse repo rate by 25 basis points to 3.25 per cent from 3.75 per cent. This will make it less profitable for banks to lend to the RBI. This, in turn, the RBI hopes, will force them to lend to private sector customers. The credit-deposit ratio has declined sharply from 74 to 71 per cent in four months. Says Prof Suresh Tendulkar, Chairman of the Prime Minister’s Economic Advisory Council, “How will they stay in business if they don’t lend?”
3. In a move that would allow banks to expand their ATM networks more easily, the Reserve Bank of India has done away with the requirement of prior regulatory approval for setting up offsite ATMs. These are standalone ATMs outside branch premises. RBI had earlier dispensed with the requirement of obtaining regulator permission for onsite ATMs (ATMs at branch premises). Currently, banks approach RBI for approval for setting up offsite ATMs. After making a medium-term plan about their requirements of branches and ATMs, banks approach the central bank for permission and proceed with setting them up after receiving the approval.
4. If you have a salary account/savings bank account in a bank, it is better if you withdraw money as per your requirements instead of at one go. From next April, the balance in your savings account will earn interest on a daily basis, following the Reserve Bank of India’s decision to implement new interest calculation methods on such accounts. The payment of interest on SB accounts (3.5 per cent at present) would be calculated on a daily product basis with effect from April 1, 2010. For Rs 1,000, you will get an annual interest of Rs 35 which will be divided into per day interest to be credited to one’s account.
5. All commercial banks were Basel-II compliant as on March 31, 2009, the Reserve Bank of India said. Initially the base approach of the Basel II framework had been adopted, the central bank said. As for the advanced approach to the Basel-II framework, the RBI said it had placed on its Web site a draft circular giving an indicative timeframe for implementation. The enhancement to current Basel-II framework by the international standard setting bodies will be considered for im plementation as appropriate, according to the RBI. These have been mentioned in an annexure, forming part of the annual policy statement, that spells out the Reserve Bank’s status on the recommendations of the G 20 working group on “Enhancing Sound Regulation and strengthening transparency”.
6. The Reserve Bank of India on Tuesday further eased norms for Indian companies to use their internal accruals for buy-back of their foreign currency convertible bonds, as corporate houses continue to queue up to buy back their foreign loans at a deep discount.In its Annual Statement of Monetary Policy, the central bank has proposed to increase the total amount of permissible buyback of FCCBs, out of internal accruals, from $50 million of the redemption value per company to $100 million. The central bank has linked the higher amount of buyback to larger discount.The RBI had begun to liberalise the buyback policy in December 2008. On March 13, 2009, RBI further liberalised the norms by extending the deadline for companies to complete the buyback by nine months from March 31, 2009 to December 31, 2009.
7. The Reserve Bank of India has decided to constitute a Working Group to review the present benchmark prime lending rate (BPLR) system and suggest changes to make credit pricing more transparent. The Working Group would consult all the stakeholders and submit its report by end-August 2009, the RBI said in its Annual Policy Statement 2009-10.Explaining the rationale behind the move, the RBI said that over time, the system of BPLR has lost its relevance as a meaningful reference rate as majority of loans sanctioned by banks are at rates below the BPLR.
8. ICICI Bank on Tuesday announced a 50 basis points cut in its corporate and retail lending rates with immediate effect. The bank also said it is cutting fixed deposit rates across various tenors by 25 to 50 basis points, with effect from April 24. ICICI Bank cut its Floating Reference Rate (FRR) for consumer loans, including home loans to 13.25 per cent from 13.75 per cent. All existing floating rate customers will be benefited by the reduction in the FRR.The bank also cut its Benchmark Advanced Rate, for its corporate customers, to 16.25 per cent from 16.75%.
2. You can take a horse to water but can you make it drink? This is the question that the Reserve Bank of India has failed to answer in its Annual Policy Statement for 2009-10. In order to force banks to lend to entities other than itself, the RBI has reduced the reverse repo rate by 25 basis points to 3.25 per cent from 3.75 per cent. This will make it less profitable for banks to lend to the RBI. This, in turn, the RBI hopes, will force them to lend to private sector customers. The credit-deposit ratio has declined sharply from 74 to 71 per cent in four months. Says Prof Suresh Tendulkar, Chairman of the Prime Minister’s Economic Advisory Council, “How will they stay in business if they don’t lend?”
3. In a move that would allow banks to expand their ATM networks more easily, the Reserve Bank of India has done away with the requirement of prior regulatory approval for setting up offsite ATMs. These are standalone ATMs outside branch premises. RBI had earlier dispensed with the requirement of obtaining regulator permission for onsite ATMs (ATMs at branch premises). Currently, banks approach RBI for approval for setting up offsite ATMs. After making a medium-term plan about their requirements of branches and ATMs, banks approach the central bank for permission and proceed with setting them up after receiving the approval.
4. If you have a salary account/savings bank account in a bank, it is better if you withdraw money as per your requirements instead of at one go. From next April, the balance in your savings account will earn interest on a daily basis, following the Reserve Bank of India’s decision to implement new interest calculation methods on such accounts. The payment of interest on SB accounts (3.5 per cent at present) would be calculated on a daily product basis with effect from April 1, 2010. For Rs 1,000, you will get an annual interest of Rs 35 which will be divided into per day interest to be credited to one’s account.
5. All commercial banks were Basel-II compliant as on March 31, 2009, the Reserve Bank of India said. Initially the base approach of the Basel II framework had been adopted, the central bank said. As for the advanced approach to the Basel-II framework, the RBI said it had placed on its Web site a draft circular giving an indicative timeframe for implementation. The enhancement to current Basel-II framework by the international standard setting bodies will be considered for im plementation as appropriate, according to the RBI. These have been mentioned in an annexure, forming part of the annual policy statement, that spells out the Reserve Bank’s status on the recommendations of the G 20 working group on “Enhancing Sound Regulation and strengthening transparency”.
6. The Reserve Bank of India on Tuesday further eased norms for Indian companies to use their internal accruals for buy-back of their foreign currency convertible bonds, as corporate houses continue to queue up to buy back their foreign loans at a deep discount.In its Annual Statement of Monetary Policy, the central bank has proposed to increase the total amount of permissible buyback of FCCBs, out of internal accruals, from $50 million of the redemption value per company to $100 million. The central bank has linked the higher amount of buyback to larger discount.The RBI had begun to liberalise the buyback policy in December 2008. On March 13, 2009, RBI further liberalised the norms by extending the deadline for companies to complete the buyback by nine months from March 31, 2009 to December 31, 2009.
7. The Reserve Bank of India has decided to constitute a Working Group to review the present benchmark prime lending rate (BPLR) system and suggest changes to make credit pricing more transparent. The Working Group would consult all the stakeholders and submit its report by end-August 2009, the RBI said in its Annual Policy Statement 2009-10.Explaining the rationale behind the move, the RBI said that over time, the system of BPLR has lost its relevance as a meaningful reference rate as majority of loans sanctioned by banks are at rates below the BPLR.
8. ICICI Bank on Tuesday announced a 50 basis points cut in its corporate and retail lending rates with immediate effect. The bank also said it is cutting fixed deposit rates across various tenors by 25 to 50 basis points, with effect from April 24. ICICI Bank cut its Floating Reference Rate (FRR) for consumer loans, including home loans to 13.25 per cent from 13.75 per cent. All existing floating rate customers will be benefited by the reduction in the FRR.The bank also cut its Benchmark Advanced Rate, for its corporate customers, to 16.25 per cent from 16.75%.
