Entrusted with the responsibility of tightening regulation and supervision in global banks that suffered huge losses - now estimated at over $1 trillion -- during the last one year, the Basel Committee on Banking Supervision has embarked on a series of measures to ensure proper regulation within banks. It has suggested forward-looking risk assessment by banks to avoid financial crises in future.
RBI moves to restrict bank exposure to corporate loans.
'The approach today is, instead of giving loans to 100 MSMEs, let us give one loan to a big-ticket corporate.' 'And so many of these big fish deceived the banks and the banks are in the doldrums now with high NPAs.'
Two straight years of less than 5 percent economic expansion have led to a surge in bad loans for Indian lenders.
'The CEO will neither be able to guide the senior team in operational matters nor decide on their appointment, compensation or removal.' 'Yet, the CEO is responsible for the profit and loss of the bank!' 'Why would the senior executives listen to him?' 'Which self-respecting professional would want to be a CEO with these constraints?' asks Tamal Bandyopadhyay.
PS banks need to pull up their socks to improve cash flows.
The Reserve Bank of India (RBI) plans to impose stricter limits on how much a bank can lend to a single corporate group, a move aimed at curbing risk in the banking sector at a time when bad loans are on the rise.
'The new ceiling will cover around 93 per cent of all deposit accounts, up from 90 per cent earlier,' notes Tamal Bandyopadhyay.
Large urban co-operative banks may come to be solely under the provisions of the Banking Regulation Act, even as the smaller among them are to remain within the exclusive fold of the Registrar of Co-operative Societies. The upcoming changes will bring the curtains down on the vexed issue of dual control of UCBs, which has been in vogue for 54 years. The new framework will affect 1,551 UCBs in the country, which had a total business of Rs 7.36 trillion.
The RBI now brings in important and contentious changes directly through voluminous Master Directions, or Master Circulars
Is the RBI unable to accept with grace that beyond 55, one can have the ability to head the compliance functions in a bank, asks Tamal Bandyopadhyay.
Says licensing of new banks should be a continuous process instead of the current stop-go system
If the new governor can think out of the box even as he signals that he can bat for the RBI cadre and respect its institutional memory, that will go a long way in getting out of the current impasse.
'China's investment destination image the world over has taken a beating, therefore investors feel India is a safe haven for investments.' 'FDI is at an all-time high in India.' 'Now after such poor ratings, this FDI amount will fall.' 'Therefore, I am saying these things are happening at China's behest.'
'The Reserve Bank's independence has remained a work in progress, an enduring challenge that the nation has been grappling with on an ongoing basis,' says RBI Deputy Governor Dr Viral Acharya.
'The day-to-day control of banks is in the hands of political bosses and bureaucrats who are not answerable.' 'The political system uses the banks as a helicopter to throw money to the sector they want to patronise in order to win the next election.'
'The PCA framework was revised and tightened in April 2017, but there was no discussion in any board meeting. The government does not know the rationale behind revising the framework and how the RBI arrived at it. Similarly, there was no discussion in the board meeting on the revised NPA framework,' said an official.
'We feel there is definitely something murky in the system.' 'Will anyone believe that Nirav Modi will go to a branch and bribe a low-level officer?' 'Just look at the people with whom he had moved around.'
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