RBI asks banks not to lend for purchase of gold in any form

PTI : Nov 19,2012

The Reserve Bank on Monday directed banks not to give loans for purchase of gold in any form , including primary gold, bullion and jewellery, to dissuade people from indulging in speculative activity.

"...it is advised that no advances should be granted by banks for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds (ETF) and units of gold mutual funds," RBI said in a notification.

No advances should be granted by banks against gold bullion to dealers or traders in gold if, in their assessment, such advances are likely to be utilised for purposes of financing gold purchase at auctions or speculative holding of stocks and bullion, it said.

However, it said banks can provide finance for genuine working capital requirements of jewellers.

The decision was taken in view of significant rise in imports of gold in recent years putting pressure on current account deficit.

In the 2011-12 fiscal, India's gold imports stood at $60 billion and the quantum of import was 1,067 tonnes.

In the April-June quarter of the current fiscal, however, gold imports had contracted by 18.4 percent year-on-year to Rs 71,912 crore ($13 billion).

The Monetary Policy Statement of April 2012 announced the constitution of a Working Group to study issues relating to gold imports and gold loans by Non-Banking Financial Companies (NBFCs) in India.

The Working Group, submitted its draft report in August 2012, suggested that other than working capital finance, banks are not permitted to finance purchase of gold in any form.

India's Banks Best 2012

Business Today :Edition Dec 9,2012

Business Today-KPMG Study of India's Best Banks in 2012

Four years after the global financial crisis began, India's $1,508 billion (Rs 82.6 trillion; a trillion is 100,000 crore) banking sector still grapples daily with heightened risk. Banks and borrowers, both retail and corporate, are under financial stress.

Indian banks have shown resilience, as they have a buffer well over the required capital adequacy ratio of nine per cent. This will help them absorb nearterm shocks, but deteriorating asset quality and slow economic growth are hurting their profitability.

"The risk will keep emerging as the environment keeps changing," warns Chanda Kochhar, Managing Director and CEO, ICICI Bank Ltd. "You have to constantly be in monitoring mode." A veteran banker, she gained substantial fire-fighting experience as she took over from K.V. Kamath in May 2009.

The industry's performance parameters are sobering: the growth rate for deposits has crashed from 23 per cent in 2007/08 to 15 per cent in 2011/12. Loans and advances growth has fallen from 25 to 18 per cent. Net non-performing assets (NPAs) have risen from one per cent to 1.28 per cent. 

Return on assets, a measure of profitability, is down from 1.12 per cent to 1.08 per cent. As if all that isn't pressure enough, regulations increasingly require banks to set aside more capital. The Basel III norms, to be implemented beginning January 2013, will require massive capital infusion by Indian banks in a phased manner. 

The high incidence of corporate debt restructuring in the last couple of years may add to the NPAs in the system. Provisioning for NPAs has risen from Rs 54,000 crore in 2010/11 to Rs 74,700 crore in 2011/12.

All these developments will increase pressure on profitability, although Basel III will go a long way in building a strong foundation for the Indian banking sector. All in all, the negatives far outweigh the positives.

Even as pinstripe-clad bankers tighten their belts, Business Todayand KPMG together raise the annual toast to the best in the industry. For the second year running, the stateowned Bank of Baroda is the best among large banks.

A large bank is one with a balance sheet of more than Rs 1 trillion. In other words, the bank's assets - investments as well as loans and advances - exceed Rs 1 trillion. On the liabilities side are capital, deposits and borrowings.

In the BT-KPMG study, the country's largest bank, the State Bank of India, has risen from the 21st to the seventh spot thanks to improved operating profits. The second largest, ICICI Bank, has jumped to fifth place from the 13th spot last year.

The Indian banking sector has been insulated from the global banking crisis of 2008, but the industry regulator is concerned about important large institutions whose failure could put the entire sector at risk. When this happened globally, governments had to infuse vast amounts of capital to save large institutions. 

The Reserve Bank of India (RBI) is in the process of classifying some domestic banks as systemically important institutions that would get special regulatory attention.

Banking institutions worldwide are yet to recover from the shocks of 2008. The net gainers are Chinese banks, which advanced in the top 100 global bank ratings.

In India, bankers say the challenge is to improve operational efficiency and risk management. "Banks that are agile and proactive will be able to mitigate risk," says Rana Kapoor, CEO of YES Bank Ltd. 

In eight years, this new private-sector bank has built up a balance sheet of over Rs 73,000 crore. It is the best bank in the mid-sized category. Midsized banks are those with a balance sheet of less than Rs 1 trillion.

Both Bank of Baroda and YES Bank have among the lowest cost-to-income ratios at below 0.38. Banks are increasingly focusing on cost-to-income to protect margins. Branches today are a cost centre, and front-end technology such as ATMs and Internet banking are transforming banking in urban and semi-urban areas. "Branches are evolving to do more value-added business," says ICICI Bank's Kochhar.

As for risk management, the 2008 crisis highlighted the prudence of banks in India, which remained unscathed. Over the last two decades, net NPAs have fallen. The sudden increase after 2008, while not alarming, is best nipped in the bud by both banks and regulators. The corporate debt restructuring mechanism is full of loopholes, though.

In this environment of gloom, there is still cause for hope. Finance Minister P. Chidambaram has asked the RBI to speed up the process of issuing fresh banking licences.

Close to a dozen foreign banks have entered India in the last two to three years, including the Industrial & Commercial Bank of China and the Australia & New Zealand Banking Group.

Shikha Sharma, Managing Director at Axis Bank, says the momentum for capital investment will recover as the reforms recently initiated by the UPA government kick in. "We should see corporate lending also pick up," she says. 

The industry has big challenges before it, including financial inclusion, and funding for sectors such as agriculture and infrastructure. So even if the years ahead are not hard, there's hard work to be done.

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**THE WINNERS**

• BEST LARGE BANK: Bank of Baroda
• BEST MID-SIZED BANK: YES Bank
• BEST SMALL BANK: JPMorgan Chase
• CONSISTENT PERFORMERS: Axis Bank & Bank of Baroda
• PRODUCTIVITY & EFFICIENCY (LARGE BANK): Bank of Baroda
• PRODUCTIVITY & EFFICIENCY (MID-SIZED BANK): DBS Bank
• PRODUCTIVITY & EFFICIENCY (SMALL BANK): Bank of Nova Scotia
• ASSET QUALITY (LARGE BANK): HDFC Bank
• ASSET QUALITY (MID-SIZED BANK): Deutsche Bank
• ASSET QUALITY (SMALL BANK): JPMorgan Chase
• GROWTH (LARGE BANK): Bank of Baroda
• GROWTH (MID-SIZED BANK): Ratnakar Bank
• GROWTH (SMALL BANK): Bank of Tokyo

India to get record $70 bn remittances

Financial Express :AGENCIES:Nov 21, 2012 at 1003 hrs IST

Washington: India will receive record $70 billion remittances in the year 2012, topping the list of developing countries which are expected to receive a total of USD 406 billion this year, the World Bank (WB) has said.

After India, China will stand second with USD 66 billion, followed by Mexico and the Philippines with USD 24 billion each, a latest report by the bank said yesterday.


In all, worldwide remittances -- including those to high-income countries -- will reach USD 534 billion in 2012, according to a newly updated World Bank brief on global migration and remittances.

Other large recipients are Nigeria (USD 21 billion), Egypt (USD 18 billion), USD 14 billion each for Pakistan and Bangladesh, followed by Vietnam (USD 9 billion) and Lebanon (USD 7 billion).

Officially recorded remittance flows to developing countries are estimated to grow by 6.5 per cent over USD 351 billion in 2011, with India again topping the chart with USD 58 billion, followed by China (USD 57 billion), Mexico (USD 24 billion) and the Philippines (USD 23 billion).

Worldwide remittances, including those to high-income countries, are projected to grow to USD 685 billion in 2015.

According to the World Bank, remittances to developing countries are expected to rise eight per cent in 2013 and 10 per cent in 2014 to reach USD 534 billion in 2015.

In its report, the World Bank notes that the true size of remittance flows, including unrecorded flows through formal and informal channels, is believed to be significantly larger.

"Compared to private capital flows, remittance flows have shown remarkable resilience since the global financial crisis, registering only a modest fall in 2009, followed by a rapid recovery. The size of remittance flows to developing countriesis now more than three times that of official development assistance," the Bank said

Among the developing country regions, South Asia and Middle East and North African (MENA) saw the strongest growth, driven primarily by strong economic activity in the Gulf Cooperation Council (GCC) countries.

For South Asia, remittances in 2012 are expected to total USD 109 billion, an increase of 12.5 per cent over 2011. East Asia and Pacific region, is estimated to attract USD114 billion, an increase of 7.2 per cent over 2011; while MENA is expected to receive USD 47 billion, an increase of 8.4 per cent over the previous year. Remittances to Egypt have surged since 2010, perhaps driven by increased support by migrants to their families in the face of political uncertainty or savings brought by returning migrants.
Remittances to Latin America and Caribbean (LAC) were supported by a recovering economy and moderately improving labour market in the US, but were moderated by a weak European economy.
As a percentage of GDP, the top recipients of remittances in 2011 were Tajikistan (47 per cent), Liberia (31 per cent), Kyrgyz Republic (29 per cent), Lesotho (27 per cent), Moldova (23 per cent), Nepal (22 per cent), and Samoa (21 per cent).

Remittances are expected to remain flat to Europe and Central Asia and Sub-Saharan Africa regions, mainly because of the economic contractions in high-income European countries.
Remittance flows to Europe and Central Asia are estimated at a virtually unchanged USD 41 billion and USD 31 billion to Sub-Saharan Africa this year, although both regions are projected to make a robust recovery in remittance flows in 2013.

Quote Gems - Thanks Giving

 "For each new morning with its light,
   For rest and shelter of the night,
   For health and food, for love and friends,
   For everything Thy goodness sends. "


Ralph Waldo Emerson
Ralph Waldo Emerson (May 25, 1803 – April 27, 1882) was an American essayist, lecturer, and poet, who led the Transcendentalist movement of the mid-19th century. He was seen as a champion of individualism and a prescient critic of the countervailing pressures of society, and he disseminated his thoughts through dozens of published essays and more than 1,500 public lectures across the United States.

Export of Goods and Software – Realisation and Repatriation of export proceeds – Liberalisation

RBI/2012-13/298
A.P. (DIR Series) Circular No. 52

November 20, 2012

To,

All Category - I Authorised Dealer Banks

Madam / Sir,

Export of Goods and Software – Realisation and
Repatriation of export proceeds – Liberalisation

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 40 dated November 01, 2011 enhancing the period of realization and repatriation to India of the amount representing the full export value of goods or software exported, from six months to twelve months from the date of export. This relaxation was available up to September 30, 2012.

2. The issue has since been reviewed and it has been decided, in consultation with the Government of India, to extend the above relaxation w.e.f. October 01, 2012 till March 31, 2013.

3. The provisions in regard to period of realization and repatriation to India of the full export value of goods or software exported by a unit situated in a Special Economic Zone (SEZ) as well as exports made to warehouses established outside India remain unchanged.

4. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

5. The directions contained in this circular have been issued under sections 10 (4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Rashmi Fauzdar)
Chief General Manager