Friday, October 18, 2013

பணம் - 1 என்றால் என்ன?




தி இந்து வெள்ளி, அக்டோபர் 18, 2013

நாணயங்களும், கரன்ஸிகளும்தான் பணம், இவற்றைக் கொண்டுதான் பரிவர்த்தனை நடைபெறுகிறது என்று பலரும் எண்ணுகின்றனர்.
 ஆனால், காசோலை, கிரெடிட் கார்டு, டெபிட் கார்டு, கணினி மின் தொகை மாற்றம் எனப் பல வழிகளில் நாம் பணம் செலுத்துகிறோம் என்பது பலருக்கு இன்றும் புதிது.
நாணயங்கள் கிறிஸ்து பிறப்பதற்கு முன் 5 ஆம் 6 ஆம் நூற்றாண்டுகளில் தோன்றியதாக வரலாற்று அறிஞர்கள் கூறுகின்றனர்.
 இந்தியா சுதந்திரம் அடைந்தபோது ஆங்கிலேயே அரசு வெளியிட்டிருந்த இந்தியப் பணத்தை பயன்படுத்தினோம், அதன் பிறகு 1950-லிருந்து புதிய சுதந்திர இந்தியாவின் கரன்சிகளை வெளியிட்டோம்.

நாணயங்களை வெளியிடுவதற்கு The Coinage Act 1906 என்று ஒரு சட்டம் உள்ளது. இச்சட்டத்தின்படி நாம் ஒரு ரூபாய்க்கு கீழே இருக்கும் நாணயங்களை வெளியிடுகிறோம். இப்போது ஒன்று, இரண்டு ரூபாய்களையும் நாணயங்களையும் வெளியிடுகிறோம்.

The Paper Currency Act 1861 படி ரூபாய் தாள்களில் கரன்சிகள் வெளியிடப்படுகின்றன. 

1935 இல் RBI துவங்கப்பட்டு, 1938இல் முதலில் ஐந்து ரூபாய் தாள்களும் அதன் பிறகு அதிக மதிப்புடைய ரூபாய் தாள்களும் வெளியிடப்பட்டன. பிரிட்டிஷ் இந்தியாவில் வெளியிடப்பட்ட ரூபாய் தாள்கள் மன்னர் ஜார்ஜ் IV படத்தை கொண்டிருந்தன, சுதந்திர இந்தியாவில் வெளிடப்பட்ட ரூபாய் தாள்கள் முதலில் அசோக ஸ்தூபியையும், பின்னர் மகாத்மா காந்தி படத்தையும் கொண்டு வெளிடப்பட்டன. தற்போது 10, 20, 50, 100, 500, 1000 ரூபாய் தாள்கள் வெளிடப்படுகின்றன. RBI வெளியிடும் ரூபாய் தாள்களுக்கு வங்கிதாள்கள் ( banknotes) என்றும் குறிப்பிடுவர்.

ஒவ்வொரு நாட்டு கரன்ஸிக்கும் ஒரு குறியீடு உண்டு. உதரணமாக அமெரிக்க டாலர்க்கு $ என்றும் பிரிட்டிஷ் பவுண்ட் ஸ்டெர்லிங்கிற்கு £ என்றும் குறிப்பிடுவது போல் இந்திய ரூபாயை INR என்று குறித்து வந்தோம், இப்போது அதற்கு ஒரு புதிய குறியீடு கொடுத்துள்ளோம்.

Case closed: ED gives Wal-Mart clean chit, says there’s no FDI violation

AFP
FP ;PTI : 18 ct 2013
New Delhi: The Enforcement Directorate, which probed the alleged contravention of foreign exchange laws by Walmart in its investments in domestic supermarket chain Bharti Enterprises, has found no violation of FDI guidelines by the U.S. multinational retail giant.
“The Enforcement Directorate (ED) has found no contravention of foreign exchange laws as the government has recently amended the Foreign Exchange Management Act (FEMA) and the guidelines regulating FDI in multi-brand retail sector. There is no concrete basis for the agency to take forward the probe, unless otherwise there are some new directions from the RBI,” sources privy to the probe said on Thursday. 

The ED probe was ordered after CPI Rajya Sabha member MP Achuthan wrote to Prime Minister Manmohan Singh alleging that a unit of Walmart in 2010 bought $100 million worth of compulsorily convertible debentures in Cedar Support Services Ltd, the holding company through which Bharti controls ’Easyday’, a multi-brand retail chain. Following this, the Reserve Bank of India (RBI) in November last year asked the ED, a central investigative agency, to probe the allegations.
“The ED has investigated the matter and intimated its findings to the RBI. As far as the FDI component is concerned, investment by Cedar in Bharti Retail is as per provisions of the circular and notification issued recently by the RBI,” the sources said. The sources, however, said the RBI may initiate the process of slapping a fine or issuing a warning to Walmart as well as Bharti Enterprises for not converting the $100 million worth of debentures into 49 per cent equity in time.
Achuthan claimed the investment was illegal as the amount was used by Bharti to fund investments in its supermarkets. Until changes made by government in September 2012, foreign retailers were barred from investing in multi-brand retail sector. In July 2013, the RBI issued a few notifications, which have given legal sanctity to the definition of words ‘owned or controlled’, terms which are essential to determine whether a company is a foreign firm or a domestic entity.
The implication of RBI’s formal notification of Press Note 2, 3 and 4 of the DIPP was that if a foreign investment was invested downstream through an Indian-owned and controlled company, the investment would not be treated as an indirect FDI. This rule was made retroactive from February 2009 when the policy was first approved, but not formally notified for want of clarity on words ‘owned and controlled’.
In 2007, Walmart entered into a joint venture with Bharti Enterprises to open wholesale stores, a sector which was open to foreign investors. Last week, the two retail conglomerates announced end of their partnership amid continued difficulties navigating regulations on foreign investment in India. In September last year, the government permitted FDI up to 51 percent in local supermarket ventures.
Meanwhile, Wal-Mart’s Asia chief Scott Price has said that he will meet Commerce and Industry Minister Anand Sharma on November 1 following the break-up of the US retail giant’s partnership with Bharti Enterprises. “They have sought a meeting with me. He is meeting on November 1,” Sharma told reporters on Thursday.















Who did Wal-Mart in?

Some analysts see the Enforcement Directorate’s move to clear Wal-Mart as something that will reassure not just the American retailer but also other foreign investors. Photo: AFP
Some analysts see the Enforcement Directorate’s move to clear Wal-Mart as something that will reassure not just the American retailer but also other foreign investors. Photo: AFP

Mint : Sukumar :FRI, OCT 18 2013. 12 02 PM IST


Enforcement Directorate says there was no violation 

of India’s FDI rules by Wal-Mart when it invested in Cedar


It is interesting that India’s Enforcement Directorate, the agency that looks into foreign exchange violations, has said Wal-Mart Stores Inc. and its erstwhile Indian partner Bharti Enterprises Ltd didn’t break any laws when the former invested (through convertible debentures) in Cedar Support Services Ltd, the latter’s subsidiary that was also the holding company forBharti Retail Ltd, which ran a chain of supermarkets.
The disclosure, which was made, not through an official announcement but through leaks to the media, comes just around 10 days after the two companies announced they were breaking their partnership, Bharti Wal-Mart, that runs a chain of wholesale or cash-and-carry stores in India, and that Bharti Enterprises was buying back the debentures Wal-Mart held in Cedar.
Bharti Retail has said it will expand its retail presence, as Mint reported on 10 October.
Wal-Mart has said it will expand the wholesale business and also work with the Indian government on creating what it terms a more “conducive” investment for multi-brand retail (or supermarkets and the like).
As the Mint story pointed out, there is buzz that Wal-Mart could either be looking for a new partner or downsizing its India presence.
Some analysts see the Enforcement Directorate’s move to clear Wal-Mart as something that will reassure not just the American retailer but also other foreign investors.
Still, a post-mortem of the breach in rules that never was is warranted—if only to understand how things work (or don’t) in India.
The Wal-Mart, Bharti joint venture was formed in 2007.
Soon after, Wal-Mart also started running EasyDay supermarkets and stores, although, at the time, Indian law didn’t allow foreign investment in multi-brand retail.
Around the same time, Wal-Mart invested $100 million in Cedar.
Indian law, at the time, wasn’t explicit on whether such investments in holding companies, especially if made through convertible debentures, amounted to foreign direct investment in their subsidiaries (if it did, it would have meant that Wal-Mart had an investment in Bharti Retail, which wasn’t allowed).
To be sure, India’s commerce ministry did, through a press note, seek to clarify that such investments were not tantamount to foreign direct investment (FDI), but, strangely, this press note was not notified, which meant that its status was unclear.
Meanwhile, some politicians and reporters, likely fed the report by Bharti’s corporate rivals (Mint too received the papers), raised the issue.
The commerce ministry couldn’t do anything because of the press note that wasn’t yet a rule. Nor could the Reserve Bank of India.
The two bounced around the issue before passing it on to the Enforcement Directorate. Both Bharti and Wal-Mart have always maintained that their investments were legal at the time they were made.
Meanwhile, in September 2012, India allowed FDI of up to 51% in supermarkets.
By then, Wal-Mart’s Indian operations had other problems and the company’s joint venture with Bharti was also fraying, partly because the Mittals who run Bharti were not happy with Wal-Mart’s bureaucratic methods, especially given the pace at which they had scaled up their telecom business, Bharti Airtel Ltd.
Now, it emerges that the Enforcement Directorate believes there was no violation of India’s foreign investment rules by Wal-Mart when it invested in Cedar.
So, in many ways, the story that was ended up being a story that wasn’t.
Then, as any good reporter will maintain, that’s a story in itself.

Mighty October :: Hardships often prepare....

CS-Lewis-Inspiration-Picture-Quotes


Hardships often prepare....

e-KYC set to benefit banking, financial services sectors






Neelasri Barman & M Saraswathy  |  Mumbai  
 Last Updated at 00:41 IST

The soon-to-be-launched electronic know-your-customer (e-) process, based on  or unique identification number, would be a boon for the banking and financial services sector.

Pilot studies on e-KYC are underway. Based on the results of these studies, a launch is expected by December, say facilitators such as National Payments Corporation of India, Visa and MasterCard.

These organisations would act as a bridge between banks and financial service companies and the Unique Identification Authority of India.

“With e-KYC, you can actually do an online account opening in a bank, which will be much simpler. A lot of people in rural areas do not have the documents which we require for KYC. This will be a good instrument to get new accounts opened, especially in rural and un-banked areas,” said Sumant Kathpalia, head (consumer banking), IndusInd Bank. “This initiative will help banks like us to expand in rural and un-banked areas, along with our expansion in metros,” he added.
ADVANTAGE E-KYC
  • Under the electronic know-your-customer (e-KYC) process, customers can open a bank account online based on just their Aadhar card
  • While the physical KYC process takes five-seven working days, the time would be reduced to three days in the case of e-KYC
  • Using this process will also mean less documentation for insurance companies and customers

In its physical form, the KYC process is completed by banks in five-seven working days. “Through e-KYC, the time taken would be reduced to three days and this way, a bank can save the time, money and manpower required for the verification process. Adoption of e-KYC is very important by banks, as well as insurance companies and fund houses. e-KYC will be a very cost-effective move for us,” said a senior Central Bank of India official.

The insurance industry would also stand to gain. K G Krishnamoorthy Rao, managing director and chief executive of Future Generali India Insurance, said, “This will lead to less documentation for insurance companies and customers. Further, all verifications can be done online, which will ease the overall processing.”

Should the RBI be made more accountable? —Part1




Money life :RAMESH S ARUNACHALAM 17/10/2013 07:44 PM


The time is now ripe to make the RBI more accountable to the people of India. With its wide ranging powers and greater impact on all aspects of the economy, the accountability of RBI assumes even greater importance and should not be ignored.

When I was growing up in the 1960s/1970s, the RBI governor could perhaps walk down the main street of any Indian metropolis unnoticed. That is not the case today. In India as well as many other countries, these unelected officials are so much in the media glare. In fact, their actions and words are the subject of much heated debate in newspapers, TV channels and the like. Thus, there is no escaping the fact that from being ‘behind the scene actors’, central banks have now been forced to assume very public (multi-faceted) roles —ranging from setting monetary policy to supervision of financial institutions and the like. Through their participation in the Basel framework, many central banks are involved in establishing global standards for the regulation of the banking sector as well. Thus, they are therefore legitimately seen as the primary guardians of the integrity of the global financial system in a general sense, especially at this time of global economic crisis.

Indeed, the continuing global economic and financial crises has pushed central bank further to the forefront simultaneously as originators of the crisis and as well as potential saviours (of their countries) from these. Many central banks have in fact admitted at least partially, if not completely, responsibility for the circumstances resulting in the current set of international economic and financial problems. They have also promised to do better. As Ben Bernanke, chairman of the Board of Governors of the Federal Reserve, is said to have told Congress in 2009, “There were mistakes made all around. … We should have done more [in banking supervision]. We should have required more capital, more liquidity. We should have required tougher risk management controls.”i

Thus, without any doubt, the world over, central banks have engaged a greater variety of tasks than what they were originally established for. They are also handling very large sums of public money. While the increased role for central banks is perhaps here to stay, this added responsibility has naturally fuelled the demand for enhanced transparency and greater accountability on their part. That being the case, several legitimate questions arise regarding the accountability of central banks and transparency of their operations:
a) To whom should central banks be accountable?
b) What is expected of central banks in the name of this accountability and transparency?
c) How transparent should that accountability be to the media and to the larger public?

These questions are equally relevant to India’s central bank —Reserve Bank of India (RBI). We specifically explore, in a series of articles, how accountable and transparent the RBI has beenHowever, before looking into the above questions, let us first look at RBI’s mandate, which is rarely well understood!

A reading of the preamble to the RBI Act, 1934 describes its main functions as follows:
"...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage."ii
Likewise, other Acts provide additional mandates and the various core and additional functionsiii performed by the RBI are summarised in Table 1 below

Table 1: Functions and Mandates of The Reserve Bank of India
Functions of RBI
Legal Basis for
Performing Function
Classification of Function
Issuing of currency
RBI Act
Core Function
Acting as Monetary Authority
RBI Act
Core Function
Regulation of NBFCs
RBI Act
Additional Function
Management of Foreign Exchange Reserves
RBI Act
Additional Function
Management of Sovereign Debt (Central government)
By Statute
Additional Function
Management of Sovereign Debt (State governments)
By Agreement
Additional Function
Regulation of forex, money and government securities markets and their derivatives
Mandates from Various Sources
Additional Function
Regulation and Supervision of Commercial Banks and Cooperative Banks
The Banking Regulation Act, 1949
Additional Function
Regulating the Foreign Exchange Market   
The Foreign Exchange Management Act, 1999
Additional Function
Regulation and supervision of the payment and settlement systems
The Payment & Settlement Systems Act, 2007
Additional Function
           
As can be seen from the above, the RBI is therefore, what one would call as a “complete full service” central bank as it:
a) Is the issuer of currency;
b) Is the monetary authority;
c) Regulates and supervises banks, non-bank financial companies and other critical segments of financial markets in India;
d) Is the banker and debt manager to the government;
e) Acts as the gate keeper of the external sector; and
f) It regulates and supervises the payment and settlement system among other things.

Further, because the RBI is the monetary authority and it is also empowered to act as the banking sector regulator, the primary responsibility for financial stability also lies with RBI.

This is not all.

In reality, RBI’s statutory mandate is, perhaps, much broader compared to many of the other full service central banks because, historically, the RBI has played a key role in the overall development agenda of India. Innovations like credit to the agriculture sector and MSMEs (micro, small and medium enterprises), the lead bank scheme, the various priority sector categories, targets and associated lending, the fairly recent emphasis on financial inclusion and financial literacy have all flowed from this development role of RBI. In fact, the huge development finance institutions (DFIs) that exist (in India) today—such as, NABARD and IDBI—are, strictly speaking, offshoots of the RBI. The RBI has done much more than a typical full service central bank. And with the advent of the global financial crisis, RBI’s role has only increased further!

Given the above discussion, one is tempted to ask: how accountable has the RBI been and how transparent are its operations?

Indeed, I was surprised to find that there is no formal mechanism of accountability enshrined in the RBI Act and I quote Dr Subbarao, former governor, RBI who argued that:

“Neither the RBI Act nor any rules lay down a formal accountability mechanism. In the absence of a specific formulation, the fallback is on the general principle underlying a democracy—which is to render accountability to the parliament through the Finance Minister. The Reserve Bank assists the Finance Minister in answering parliament questions that pertain to its domain. Besides, the Standing Committee on Finance of Parliament summons the Governor for testimony on specific issues including legislations under consideration.”iv

And surely, this lack of this accountability and transparency seems to be showing on the ground as highlighted by the spate of recent (not-so-transparent) incidents involving the RBI:

First, was the case of Mr KM Birla, who initially did not resign from the RBI board despite his group company having applied for a banking license. In fact, RBI’s handling of this conflict of interest matter was very indecisive (referring it to the Union Government) until Mr Birla was forced to resign because apparently a member of the Parliamentary Standing Committee on Finance (PSCF) objected. It is entirely another matter that Mr Birla has recently been named in the CBI first information report (FIR) in the coal scam. A person like Mr KM Birla, whose companies had a strong commercial interest in financial services through the Aditya Birla group companies, was allowed to serve on the RBI board (uninterrupted) for many years suggests that he could have perhaps even lobbied for the entry of large business industrial houses into banking. The results are there for everyone to see as when the RBI called for banking licenses in 2013, they strangely permitted the entry of large industrial business groups into banking, a practice hitherto avoided in several countries globally. This, in fact, vitiates the entire bank licensing process in a significant manner.

Second, as the Mint writes and I quote, “Two months after the deadline for applications for new banks expired, there have been two changes in the list of applicants. One, Value Industries Ltd, a unit of Videocon Industries Ltd, has withdrawn its application for a banking permit, and two, Chandigarh-based real estate and hospitality company KC Land and Finance Ltd has sought a banking licence. The original list of 26 permit seekers, released by RBI on 1 July, did not have this name. Many are finding the sudden appearance of a new applicant and withdrawal of the Videocon group mysterious.”Whatever be the reasons, I am not sure that the above represents the procedural transparency required of institutions like the RBI.

Third, when the Hon Parliamentary Standing Committee on Finance (PSCF) was seized of the bank licensing matter, RBI’s hurried decision to grant banking licenses cannot be rationalised at all. In my humble opinion, irrespective of whatever the RBI says, this action by the RBI (alone) carries huge implications because it shows utter disrespect for parliamentary democracy. 

Fourth, the banking selection advisory panel has significant conflicts of interests and many weaknesses as enumerated in Moneylife articles. It should also be noted that the Banking Selection Advisory Panel includes several past regulators, who, in my humble opinion, will not be able to dispassionately and objectively analyse past regulatory and supervisory failures at RBI —an aspect so critical for making decisions with regard to providing bank licenses to large industrial corporate groups and NBFCs MFIs. Further, it also needs to be emphasised that many panel members have had (and some continue to have) strong associations with institutions that were at the heart of the 2010 AP micro-finance crisis. Finally, the panel also includes regulators whose questionable approach (and actions) during the years preceding the October 2010 AP micro-finance crisis had serious consequences in the ground. These certainly, resulted in some form of regulatory/supervisory failure which, in turn, exacerbated the 2010 AP micro-finance crisis. Therefore, I am not sure that due thought and procedure has been applied to deciding on the composition of the Dr Bimal Jalan Banking Selection Advisory Panel.

Fifth, the suddenness with which a new committee on financial inclusion (FI) was appointed by the RBI really surprised everyone because a live committee on the same subject has already been functioning at the RBI under senior deputy governor, Dr KC Chakravarthy, since 2012. That is not all. As noted in previous Moneylife articles, the composition of this new financial inclusion (FI) committee has left a lot to be desired as many members of this (FI) committee have significant conflicts of interests. Apart from being closely related to each other in a professional sense, a couple of the members of the FI committee represent institutions that have directly applied for the banking license. Also, there are many members of the committee who represent (and/or serve on the boards of) institutions that have significant relationships with various banking license applicants.

Further, many of the institutions — that the new financial inclusion committee members represent (directly or indirectly) — also have very significant commercial interests in the area of financial inclusion. And what is really shocking is that this insider (industry) committee with the above characteristics is to draft the overall vision and recommend the regulatory architecture for the broad area of financial inclusion. This is surely, a recipe for big time disaster as past global crises have clearly demonstrated. And the icing on the cake is the fact that this financial inclusion committee runs parallel to the banking selection advisory panel (in terms of its time frame) and the chair of the financial inclusion committee is also a member of the banking selection advisory panel. As noted above, recall that two banking applicants are themselves part of the financial inclusion committee and also that several members of this FI committee represent institutions (directly or indirectly) that have provided (or are providing) debt, equity and other support (in a commercial manner) to the banking applicants and other micro-finance industry players —in other words have significant professional interest in these banking applicants as well as other micro-finance institutions, some of whom were also involved in the 2010 AP micro-finance crisis. As a reputed professor of finance at IIM so aptly put it, the new RBI financial inclusion committee, has no CONFLICTS but ONLY interests.

Sixth, when the Hon PSCF, is looking at the broad subject matter of financial inclusion through the prism of the Micro-Finance Institution Development and Regulation (MFIDR) Bill, RBI’s action of appointing a new financial inclusion committee smacks of total disregard for the Indian Parliament. I simply do not understand the need for pre-empting Parliament!

In summary, given the above, I strongly feel that the time is now absolutely ripe to make the RBI, India’s central bank, more accountable, to the people of India. With its wide ranging powers and greater impact on all aspects of the economy, the accountability of RBI assumes even greater importance and should not be ignored. Indeed, as Mr Surjit Bhalla and others have long argued, The time has come for accountability at the RBI. This institution makes decisions that affect the fortunes (lately misfortunes) of many Indians, rich and poor.”v And this accountability will have to come in several transparent ways and these are discussed extensively in a sequential article.

i Source: Senate hearing, December 2009. (and as cited from other web documents)
ii Source: RBI Act of 1934, 2 of 1934, page 12 of pdf file from RBI site -http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIA1934170510.pdf
iii Compiled from various Acts and documents available on RBI site, www.rbi.org.inincluding speeches of past RBI governors. When I say additional function, I am strictly interpreting what has been said by past Governors like Dr Subbarao and also the documents available on the RBI site. I am not implying any hierarchy in functions, as far as the RBI is concerned

(Ramesh S Arunachalam has over two decades of strong grass-roots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural and urban development and urban poverty alleviation across Asia, Africa, North America and Europe. He has worked with national and state governments and multilateral agencies. His book—Indian Microfinance, The Way Forward—is the first authentic compendium on the history of microfinance in India and its possible future.)