RBI Boss Raghuram Rajan speaks out again!Central Banks playing with Fire!
Now it is the turn of the RBI Boss Raghuram Rajan!Who is best known for his uneasy quotes beside rate cuts to sustain the Bull Run as India Incs barring Reliance,Adani and some Gujarati companies got BABAJI KAA THULLU for the Business friendly RSS Almighty.
The government is pushing the banks very hard to clean up the balance sheet and to improve the governance structure of the banks, including separate chairman and Managing Director positions. Banks are also being encouraged to elect new people as chairman, may be from outside the system, he complained.
Palash Biswas
The present period of slow economic growth is dangerous for the world and central banks are engaged in a risky competition to divert growth from other nations through monetary easing, rather than acting in unison to create new growth opportunities ...RBI Boss Raghuram Rajan speaks out again.Quite loud!
Raising concern over central banks globally being pushed into "competitive monetary easing", RBI GovernorRaghuram Rajan today said lower interest rates and tax incentives can boost investments, but it is consumer demand that holds the key …
Wherefrom does spring the consumer demand Mr.Rajan while the economic management deprives the ninetynine percent of the mandatory purchasing power,employment and livelihood just to sustain the Bull Run in the greatest Emerging Market?
The government is pushing the banks very hard to clean up the balance sheet and to improve the governance structure of the banks, including separate chairman and Managing Director positions. Banks are also being encouraged to elect new people as chairman, may be from outside the system, he complained.
Rajan says central banks are engaged in a risky competition to divert growth from other nations by monetary easing!
Economist Bhagwati who had been aspiring to become principal economic adviser of Modi Management of Jute Mill Economy as we are habitual to be a part of it right in the corporate media,devoid of rule of law or labour laws whatsoever,came out only last day to bat for Modi as he completed one full year in his office touring the world in Honeymoon mode.
Now it is the turn of the RBI Boss Raghuram Rajan!Who is best known for his uneasy quotes beside rate cuts to sustain the Bull Run as India Incs barring Reliance,Adani and some Gujarati companies got BABAJI KAA THULLU for the Business friendly RSS Almighty.
Mind you,beefore Raghuram Rajan became the governor of the Reserve Bank of India, he was the former chief economist of the International Monetary Fund (IMF) who famously predicted the source of the global financial meltdown in 2005. It's another matter that few listened.
Multilateral institutions like the IMF need to re-examine "rules of the game" but central banks should not ignore international responsibilities despite their domestic mandates, RBI Governor Raghuram Rajan has said.
Rajan, in his address to the Economic Club of New York here yesterday, made a strong case for the IMF to analyse each new unconventional monetary policy, including sustained unidirectional exchange rate intervention.
meanwhile media reports:Four major banks pleaded guilty on Wednesday to trying to manipulate foreign exchange rates and, with two others, were fined nearly $6 billion in another settlement in a global probe into the $5 trillion-a-day market.
Citigroup Inc (C.N), JPMorgan Chase & Co (JPM.N), Barclays Plc (BARC.L), UBS AG (UBSG.VX)(UBS.N) and Royal Bank of Scotland Plc (RBS.L) were accused by U.S. and UK officials of brazenly cheating clients to boost their own profits using invitation-only chat rooms and coded language to coordinate their trades.
All but UBS pleaded guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the FX spot market. UBS pleaded guilty to a different charge. Bank of America Corp (BAC.N) was fined but avoided a guilty plea over the actions of its traders in chatrooms.
"The penalty all these banks will now pay is fitting, considering the long-running and egregious nature of their anticompetitive conduct," said U.S. Attorney General Loretta Lynch at a news conference in Washington.
The misconduct occurred until 2013, after regulators started punishing banks for rigging the London interbank offered rate (Libor), a global benchmark, and banks had pledged to overhaul their corporate culture and bolster compliance.
PM Modi is a Reagan for Indians: Raghuram Rajan
RBI governor Raghuram Rajan addreses media in Panaji, Goa on Thursday after the RBI Central Board meeting. (Photo: PTI)
Thus,Rajn Says things are happening in India!
The expectations from the Narendra Modi government when it came to power in 2014 were "probably unrealistic" but it has taken steps to create an environment for investment and is "sensitive" to concerns of investors, RBI governor Raghuram Rajan has said.
"This government came in with tremendous expectations and I think the kind of expectations were probably unrealistic for any government," Dr Rajan said responding to questions after his address to the Economic Club of New York on Tuesday.
He said in the minds of the people, PM Modi's im-age was that of "Ronald Reagan on a white horse" coming to slay anti-market forces and such comparison was "probably not appropriate."
Dr Rajan, however, said the government has "taken steps to create the environment for investment, which I think is important."
The government is "sensitive" to the concerns of investors and is looking into addressing economic issues, he said.
"My sense is that things are happening," Dr Rajan said.
The RBI governor said a "big part" of the business environment is taxes and the government has said it will not bring retrospective taxation again.
"However once the tax authority levies a demand on you, there is a quasi-judicial nature of that proceeding and therefore it has to go through the courts before it is resolved. The government cannot intervene," Dr Rajan said.
At domestic level Modi's government claims to have started many pro-people schemes like Jan Dhan Yojana with an aim to provide banking access to all and bring in more public money into the banking system, which can be availed for various developmental purposes.
With an aim to speed up infrastructure development in the country to woo domestic as well as foreign investors the government has proposed amendments in the existing land acquisition act. But so far it has failed to get it passed inRajya Sabhawhere the opposition has majority.
Let's see how some eminent economists are analysing Narendra Modi's one year term in the office.
Dr.BB Bhattacharya,ex-Vice Chancellor, JNU and an eminent economist:"I will say that their performance was good in International diplomacy, leadership ability, enthusiasm. Good causes likeSwachh Bharatand all. Coming to economic front - not yet action, some intentions. So, this is my sum up for one year."
DHPai Panandiker, anotedeconomistand president of the RPG Foundation think-tank:As far as the results are concerned, they are looking at the rate of growth, employment, inflation and all those. There is not much one can sort of say, that has been achieved. Because the rate of growth remains almost stagnant and employment is actually going down, and coming to inflation, of course there is some satisfaction that inflation has come down, or it has reached a level which is almost half over the year. So I think that is one plus point, otherwise I don't see much happening on the ground. But, there is an effort made to change both policies as well as governance. Policy changes have taken place, like private sector investment, in Railways, defence, mining, insurance sector etc. There are changes, but two main things that have not changed, and which were expected to happen are GST and other is the land acquisition bill."
Anjan Roy, former economic advisor atindustry bodyFICCI:"There could not be many sparkling achievements, but they are making an effort and trying to bring improvement, no doubt. But the point is that they are caught in a very difficult political situation. They cannot move on some very critical and major measures because of the parliamentary strength, so that is the limiting factor for the government. So, within that limit they are trying to make the best of it. But of course the expectations were very high and compared to that expectation it might not look very substantive. But nonetheless in these circumstances the government has made some efforts and it is making some difference. The biggest of it is at least the feeling that the government is not functional, it is no longer there. Taken the last government, second UPA almost was completely stigmatized by large scale corruption. Everyone was making money and the corruption charges were flying all over that has virtually brought the government to a stand still. Now, we have got over that situation, this is a very major achievement. And then in some critical areas there are some movements which will bear fruits over a period. So, on the whole it is not bad, not too disappointing, but one can say that it is not outstanding."
DevinderSharma,a noted agriculturepolicyexpert:"I think the performance of the Modi government has been quite satisfactory when it comes to economic parameters, but only the broad and macro economic parameters like physical deficit, current account deficit and the GDP. But the nation is looking forward to, whether they are giving more jobs or not. I think that would be the biggest challenge for the government."
Mumbai: The present period of slow economic growth is dangerous for the world and central banks are engaged in a risky competition to divert growth from other nations through monetary easing, rather than acting in unison to create new growth opportunities, Reserve Bank of India (RBI) governorRaghuram Rajan said on Tuesday.Financial Express reports.
Multilateral agencies such as International Monetary Fund, Rajan suggested, should develop a consensus on new rules for policy making and should be able to hold the rules inviolable.
"This period of slow growth is particularly dangerous because both industrial countries and emerging markets need high growth to quell rising domestic political tensions," Rajan said in a speech at the Economic Club of New York.
"Policies that attempt to divert growth from others rather than create new growth are more likely under these circumstances. Even as we create conditions for sustainable growth, we need new rules of the game, enforced impartially by multilateral organizations, to ensure countries adhere to international responsibilities," Rajan said.
The prevalent international monetary policy practice is a source of substantial risk, both to sustainable growth as well as to the financial sector, Rajan said. He emphasised that growth is not a problem for industrial or emerging markets, but it is a problem of collective action.
Countries should not compete with each other to corner whatever global growth and demand they can manage, but should create new growth, he said. The ideal solution is to fund emerging markets so that a new segment of global growth is created.
"We are being pushed towards competitive monetary easing," Rajan said in his speech, titled Going Bust for Growth.
New York: The expectations from the new government when it came to power last year were "probably unrealistic" but it has taken steps to create an environment for investment and is "sensitive" to concerns of investors, RBI Governor Raghuram Rajan said.
"This government came in with tremendous expectations and I think the kind of expectations were probably unrealistic for any government," Dr Rajan said responding to questions after his address to the Economic Club of New York yesterday.
He said in the minds of the people, Prime Minister Narendra Modi's image was that of "Ronald Reagan on a white horse" coming to slay anti-market forces and such comparison was "probably not appropriate."
Dr Rajan, however, said the government has "taken steps to create the environment for investment, which I think is important."
The government is "sensitive" to the concerns of investors and is looking into addressing economic issues, he said.
Dr Rajan's remarks come as the Modi-led government completes one year in office this month, having received a commanding majority from an electorate that wanted jobs, economic development and respite from rising prices and corruption.
The Reserve Bank of India Governor said a "big part" of the business environment is taxes and the government has said it will not bring retrospective taxation again.
"However once the tax authority levies a demand on you, there is a quasi-judicial nature of that proceeding and therefore it has to go through the courts before it is resolved. The government cannot intervene," Dr Rajan said.
"Legacy issues are winding their way through the courts, including issues based on laws that existed before they were changed," he said.
The corporate tax rate will also come down one per cent every year going forward, he added.
The former International Monetary Fund chief economist said "perhaps" India could have done a "better job" in handling these issues but "going forward the government says no more of this kind of stuff we will do."
Dr Rajan said there are several areas where the government has taken more "serious and significant" advances to improve investor confidence and propel growth.
On the issue of subsidies, he said petrol and diesel subsidies have gone.
"Going forward these subsidies will be transferred directly into bank accounts," he said, adding that already the cooking gas subsidy is being transferred directly to bank accounts.
Dr Rajan said there is a "broad consensus" for the Goods and Services Tax (GST) and while he had hoped for the GST Bill to have passed in the just concluded session of Parliament, he feels there is "enough momentum" that "it will be done well in time and roll out by March 31 or April 1 next year."
"In fact (the government) is going ahead with the apparatus to ensure that it is actually done," Dr Rajan said.
Another key legislation that the government is focussing on is the Land Acquisition Bill, which is important from the perspective of certain public works, Dr Rajan said.
He said that since different states have their own land acquisition bills, some commentators have suggested the possibility that the states should decide for themselves as to how to implement their respective land acquisition provisions.
There are tremendous plans for investment, particularly in the Mumbai-Delhi industrial corridor and freight corridors, the RBI Governor said.
"My sense is that things are happening," he said.
Dr Rajan also called the government's spending cuts "significant," and said "there has been some amount of fiscal consolidation over and above what the government is owning up to."
He said inflation "has come down tremendously in India" and rupee has basically stayed relatively flat since the beginning of the year."
"...if you look at rupee's volatility relative to other currencies, you'd have to argue that the rupee has been one of the most stable currencies (against) the dollar," Dr Rajan said.
"It's been much stronger than other currencies," he said.
With the Current Account Deficit also projected to come down from more than four per cent to 1.5 per cent this year, Dr Rajan said "the big deficit numbers have come down" and the focus is on growth.
He, however, said while investment intention and investment is picking up, the pace can be faster.
Dr Rajan noted that the problem to some extent lies in the week balance sheet of banks and there is no supply problem as banks are willing to lend.
The government is pushing the banks very hard to clean up the balance sheet and to improve the governance structure of the banks, including separate chairman and Managing Director positions. Banks are also being encouraged to elect new people as chairman, may be from outside the system, he said.
Now, India's central banker has some advice for his counterparts elsewhere in the world: Aggressive and competitive monetary policies are a risk.
In a speech at the Economic Club of New York on May 19, Rajan argued that the "spectre of deflation" is spurring major central banks around the world into a dangerous struggle for stronger domestic growth. This struggle, he added, is risky for financial markets and also ignores the needs of developing nations.
"I fear that in a world with weak aggregate demand, we may be engaged in a risky competition for a greater share of it," Rajan said. "We are thereby also creating financial sector risks for when unconventional policies end."
In recent years, central banks in major economies have held interest rates to near zero and embarked on asset-purchasing programmes in a bid to lower the cost of borrowing. But now, with the end of the bond-buying programme, and a possibility of an interest rate hike in the US, equity markets—especially in India—have been extremely volatile.Rajan also made a case for better coordination among central banks on the monetary policy. "It is not an industrial country problem, nor an emerging market problem, it is a problem of collective action," he said. "We are being pushed towards competitive monetary easing."
"We need much clearer rules of the game on what's allowed and what's not allowed," Rajan added.
In a question-and-answer session after his speech, Rajan also spoke on the performance of Indian prime minister Narendra Modi's first year in power.
The new Indian government, he said, came in with huge expectations, which were probably unrealistic. The perception of Modi as some sort of "Ronald Reagan on a white horse" coming to slay anti-market forces was "probably not appropriate," Rajan explained.
The Modi government, he added, is sensitive towards investors and has taken steps to create an environment for investment, although in recent weeks the issue over unpaid minimum alternate tax on foreign investors has flared up. The total tax bill for international funds and banks could be as much as $8 billion, according to estimates.
Modi's one year: Investor confidence in India is waning and Jaitley is to be blamed
As Narendra Modi completes one year in office, the palpable mood in the financial markets is that of disappointment. The government's ability to push forward the growth agenda is being viewed with some amount of skepticism by foreign investors in the backdrop of slow-paced reforms and faltering growth in core sectors.
The disappointment is logical. Expectations were sky-high when Modi took over and projected himself as an agent of quick change everywhere -- be it reviving a battered economy, improving governance or pushing the reform agenda to attract large investments.
But the danger in keeping expectations high is that if you fail to live up, the setback will be severe and even the good things done is overlooked.
Indian stock markets rallied like there was no tomorrow ever since Modi was named as the Prime Minister candidate of the BJP. Between September 2013 and 28 February 2015, when the union budget for 2015-16 was announced, India's bellwether index, Sensex on the BSE, jumped 48.8 percent, while the Nifty jumped 52.2 percent. Everyone joined the party.
But the market euphoria somewhat ended post the budget when the government failed to give a convincing roadmap on how it intends to reboot the economy — especially on bank recapitalisation — something vital to the economic revival in the absence of the government's willingness to spend. Since then, both the Sensex and Nifty lost around 7 percent. The bankex, the index of major bank stocks, plunged 7.3 percent (as of 15 May 2015).
Arun Jaitley
The good things in Modi's one year include passage of some of the reform bills (insurance, coal, mining and black money), easing the process of doing business by fast-tracking clearances and initiating a massive financial inclusion push using banking channels. That said, many high-priority items such as land acquisition reforms and bringing clarity on tax-front are still in the to-do list.
Modi has indeed managed to inject the much-needed positive momentum in the economy and, more importantly, has restored the faith of common man in the government, which was absent in most part of the UPA rule, marred by series of corruption cases and lack of political will. For him, Modi was an agent of change.
To be sure, the former Gujarat chief minister had lot of luck too on his side. For instance, Modi's much hyped victory on inflation wasn't really his battle but more due to a sharp decline in global crude prices and the timely use of monetary policy byRaghuram Rajan at the Mint road.
But despite all the positive economic factors the falling inflation and a marginal improvement in the growth compared with the UPA years (factory out improved to an average 2.8 percent in fiscal year 2015 as against a contraction of 0.1 percent in the year before partly due to the base effect) — foreign investors seem to be losing patience.
Foreigners have begun pulling out money from local bourses and no fresh investments are made beyond plain promises. The stock markets seem to have lost the steam and global agencies have begun raising eyebrows on the timing of the potential pick up of growth in the economy.
Clearly, the government couldn't sell investors the brand new image of the economy depicted by the re-based GDP numbers that pushed India to the fastest growing economy in the world, matching China. Experts, both within and outside the country, questioned the lack of correlation between the GDP numbers and high frequency macro numbers that told a different tale.
The government's statisticians were, and still are, struggling to offer an explanation to the sudden twist in the story.
What acted as a major turn off to investors, despite the slow-progress made by the Modi government, was the absence of strong growth drivers. By passing legislations and improving the operational environment to do business, Modi prepared a conducive environment for the growth to happen, but the question of who would fund the growth remained unanswered.
After a period of dormant economic activities, three factors can typically reboot the economy: 1) Higher government spending; 2) private sector funding; 3) Bank lending. Unfortunately, all three are absent in the current context. When the government didn't put money on the table and private investors logically preferred to stay on the sidelines.
Perhaps, investors were more curious to know what precise plan the government had to revive economy using the third — the banking sector. The moment of distrust between the investor community and the government began when finance minister Arun Jaitley chose to mess up with the banking sector by cutting down bank recapitalisation in the February budget. This paralysed state-run banks from any further credit expansion and posed a question mark on revival.
Wrong strategy
The banking sector strategy of the government was flawed from the beginning. Jaitely announced a capital infusion of Rs 7,940 crore in the budget, much less than what state-run banks actually required and lower than what the government committed for fiscal year 2015.
Even for the previous year, the government has so far infused only about Rs 6,990 crore, out of the promised capital Rs 11,200 crore, that too based on performance. This further deepened the crisis in banks, which were already neck deep in bad loans.
Jaitley's message was clear: Small government banks, especially which rank lower in terms of performance, will have to go to the market to raise funds or get merged with other banks. They needn't expect any capital from the government from now on.
But Jaitley forgot that raising money from the market wouldn't be an easy task for smaller banks, since there is very less investor appetite in these banks, burdened with high bad loans and poor growth. Except the large lenders, like State Bank of India, not many lenders have been successful in tapping private funds.
State-run banks, which control 70 percent of the banking sector, faced a deeper crisis with the government's new approach. Instead, the government could have offered a phased approach for cutting down capital support from the government. But, Jaitely chose to give a shock treatment to banks, whose lending capacity was already constrained with high bad loans.
The impact was visible. Even with some revival on the ground, state-run banks, which control 70 percent of the banking industry, aren't in a position to lend. Besides lack of capital, high bad loans too limited their ability, in turn, hurting revival in economy.
"On the one hand, they expect us to further the cause of growth, on the other, there is no capital support," the chairman of a state-run bank told Firstpost on condition of anonymity.
With loan growth to industries remaining stagnant, mid-sized companies were caught in a crisis. Only a few top-rated large corporate managed to tap the corporate bond market. Others were constrained to shrink their business.
Had Jaitley handled the issue in a different way — by infusing a sizeable chunk of capital in state-run banks — it would have aided banks significantly to resume lending to good projects.
At this point, the business, investor confidence has surely taken a beating. Rebooting the economy would require two things:
One, put more money in the hands of state-run banks so that they can resume lending. This can be done by paring government holding in these banks.
Second, forget fiscal deficit and increase government spending on capital expenditure. There is no point in keeping the balance sheet of a corporation clean, when business is stagnant. Even if higher spending can push up fiscal deficit in the short term, this can eventually contribute to economic growth in medium-to-long-term.
The growth would remain a mirage unless funding channels are opened. This would continue to repel foreign investors, who are well past the Modi-wave. The signs of this happening are already visible.
(Data support from Kishor Kadam)
May 21 2015 : The Economic Times (Kolkata)
RAJAN'S FEARS COME TRUE - Bad Loans Turning Rotten Now
Anita Bhoir |
Mumbai: |
Borrowers defaulting on restructured loans
The worst fears of Reserve Bank of India Governor Raghuram Rajan on the restructuring of bad loans look to be coming true. Banks had sought to recast dodgy loans over the past few years -taking haircuts and extending repayment periods -in order to make their books look better. They have only managed to kick the can down the road.
Defaults by borrowers given such a helping hand are soaring.The failure of these loans jumped 90% in the fourth quarter of the last fiscal year amid a sluggish economic environment and what look like poor business practices.
Restructured loans worth Rs 56,995 crore were classified as having failed at the end of the March quarter, almost twice the Rs 29,980 crore in the year-earlier period, according to data from the RBI's corporate debt restructuring cell.
"We had expected 30-35% of the loans restructured to go bad, but the prolonged slowdown has tak en a toll on companies," said a banker involved with the restructuring programme. "The packages were drafted on certain assumptions which have not paid off. Many of these cases should not have been restructured at all as we were sure of no turnaround, but to protect the bank balance sheets some excesses were done."
When faced with mounting bad loans in 2011-14, Indian banks resorted to restructuring, which helped them avoid having to report these as non-performing assets (NPAs). That reduced the funds they had to set aside for potential defaults.
http://epaperbeta.timesofindia.com/index.aspx?eid=31817&dt=20150521
RBI Dy Guv warns LIC may feel pain of banking NPA woes: BS LIC has been buying stakes in PSU banks through private placements to help then raise capital as few other investors were willing to put money given asset quality concerns.
Modi's comparison with Ronald Reagan not appropriate: Raghuram Rajan
News Nation - May 19, 2015
Ahead of the completion of Modi government's one year in office, RBI Governor Raghuram Rajan said that the expectations from the new government when it came to power last year were 'probably unrealistic' but it has taken steps to create an environment ...
Central banks playing with fire in growth push, says Rajan
Hindu Business Line - May 19, 2015
Reserve Bank of India Governor Raghuram Rajan, making a familiar argument for better global coordination on monetary policy, said central bankers in developed economies should bear in mind their international responsibilities. "The current non-system in ...
Emerging markets need high growth to quell rising domestic political tensions ...
Indiainfoline - May 19, 2015
Dr. Raghuram Rajan, Governor of the Reserve Bank of India, while speaking at the Economic Club of New York has stressed upon the fact that emerging markets need high growth to quell rising domestic political tensions. He said that there is an imminent ...
We are pushed to competitive monetary easing: Rajan
The Hindu - May 19, 2015
Raghuram Rajan, Governor of the Reserve Bank of India (RBI), has asserted that the current non-system in international monetary policy is a source of substantial risk, both to sustainable growth and to the financial sector. Addressing the Economic Club of ...
Reducing vulnerabilities crucial for emerging economies: Rajan
Business Standard - May 19, 2015
"Emerging economies have to work to reduce vulnerabilities in their economies, to get to the point where, like Australia or Canada, they can allow exchange rate flexibility to do much of the adjustment for them to capital inflows," said Rajan in his speech to the ...
Government's taken steps to propel growth: RBI Governor Raghuran Rajan
Economic Times - 5 hours ago
"This government came in with tremendous expectations and I think the kind of expectations were probably unrealistic for any government," the Press Trust of India reported Rajan as saying. The government has "taken steps to create the environment for ...
Non-system in international policy a source of substantial risk: Raghuram Rajan
Myiris.com - 21 hours ago
Even as we create conditions for sustainable growth, we need new rules of the game, enforced impartially by multilateral organizations, to ensure countries adhere to international responsibilities," said the RBI Governor Raghuram Rajan in his opening ...
Bad loans jumped 90 per cent in the Q4 as borrowers defaulting on restructured ...
Economic Times - 6 hours ago
MUMBAI: The worst fears of RBI Governor Raghuram Rajan on the restructuring of bad loans look to becoming true. Banks had sought to recast dodgy loans over the past few years — taking haircuts and extending repayment periods — in order to make their ...
India's 'Anti-Central Bank' Central Banker Has This One Thing Wrong
Forbes - 12 hours ago
India's beloved central bank governor Raghuram Rajan has one thing wrong: central bank intervention is what drives markets these days whether he likes it or not. Like every emerging market investor, Nikhil Bhatnagar, VP of Asian equities at Auerbach ...
Despite dip, rupee relatively stable - RBI's Rajan
Reuters - 21 hours ago
NEW YORK The depreciation of the rupee is due in part to the U.S. dollar's strength and it has fallen less, and in a less volatile fashion, than other currencies, Reserve Bank of India (RBI) Governor Raghuram Rajan said on Tuesday. While the rupee has slid ...
Low rates no substitute for productivity losses: Rajan
domain-B - 13 hours ago
Reserve Bank of India governor Raghuram Rajan Low interest rates or cheap money cannot be a substitute for falling productivity growth and the plateauing of education levels and labour participation rates as well as a shrinking labour force in some ...
Despite dip, Indian rupee relatively stable: Rajan
Hindu Business Line - May 19, 2015
The depreciation of the Indian rupee is due in part to the U.S. dollar's strength and it has fallen less, and in a less volatile fashion, than other currencies, Reserve Bank of India Governor Raghuram Rajan said on Tuesday. While the rupee has slid against the ...
India's Interest-Rate Swaps Drop to Six-Week Low on Easing Bets
Bloomberg - 16 hours ago
India's one-year swaps slipped to a six-week low as comments by Reserve Bank of India Governor Raghuram Rajan boosted the odds of an interest-rate cut at a June 2 meeting. Inflation in India has come down "tremendously," Rajan, who has reduced the ...
World expected too much from Modi govt, says Rajan
domain-B - 12 hours ago
Although those expectations were "probably unrealistic" the government has taken steps to create an environment for investment and is "sensitive" to concerns of investors, RBI governor Raghuram Rajan has said. "This government came in with tremendous ...
Expectations from new govt were unrealistic: Rajan
mydigitalfc.com - 21 hours ago
"probably unrealistic" but it has taken steps to create an environment for investment and is "sensitive" to concerns of investors, RBI governor Raghuram Rajan has said. "This government came in with tremendous expectations and I think the kind of ...
RBI Governor defends Modi Government, says expectations were 'probably ...
Businessinsider India - 15 hours ago
RBI Governor Raghuram Rajan has said the Modi government has taken effective steps to create a favorable situation for investment in India. He added the current Prime Minister's image was like "Ronald Reagan on a white horse", who can butcher all market ...
India's Central Bank Chief Wants More Central-Bank Coordination
Wall Street Journal (blog) - May 19, 2015
NEW YORK–Reserve Bank of India governor Raghuram Rajan said Tuesday that global financial institutions like the International Monetary Fund need to do a better job at mediating between the policies pursued by the world's major central banks. Gov.
Expectations from Modi government were probably unrealistic Rajan
Jagran Post - 21 hours ago
... May 2015, 12:21Jagran Post News Desk Jagran Post Editorial | Last Updated: 20 May 2015, 14:02. New York: The expectations from the new government when it came to power last year were "probably unrealistic", RBI Governor Raghuram Rajan has said.
Banks put brakes on investor lending
ANZ has joined Bankwest in tightening lending conditions for investors. Photo: Bloomberg
It comes after Commonwealth Bank of Australia subsidiary Bankwest has also imposed a loan-to-valuation ratio cap on investor mortgages of 80 per cent.
An ANZ spokesman said the change in discounting, effective immediately, meant the bank would no longer offer discounts off its advertised rate, which is currently 5.38 per cent.
"For customers with Investor only lending, ANZ will only offer advertised rates with no discretionary pricing available," the spokesman said. "For customers with existing owner occupier lending, ANZ will continue to offer discretionary pricing on their investor loans."
ANZ had not changed its loan to valuation ratio for investor loans, he said, but the bank was " keeping a close eye on how the market develops," he said.
Bankwest's LVR limit will mean that property investors will need to provide 20 per cent of the purchase price as equity in order to receive the loan.
The changes are in response to a demand from the Australian Prudential Regulation Authority for banks to slow the pace of housing investor credit growth below 10 per cent.
Despite the cap being announced in December, investor credit has since accelerated year to 10.4 per cent in the year to March, the quickest pace since early 2008.
Latest numbers show ANZ, NAB, and Westpac were all growing faster than the threshold, and the lenders are under pressure to be under the cap by the second half of this year.
The pace of growth prompted APRA chairman Wayne Byres to last week say he expected slower growth in the second half of year, adding that banks had had "long enough to revise their ambitions".
Other banks are also cutting back on lucrative discounts and other special offers to property investors in response to fears about an over-heating property market and lending standards, with The Australian Financial Review revealing that each of the big four banks have contacted mortgage brokers in confidential letters advising them of more restrictive pricing.
In one of the letters, NAB warns "investment loans will not be eligible for any pricing discretion".
A NAB spokesman said: "As we have said previously, NAB is supportive of APRA's approach and we have been working closely with the regulator to ensure our practices are aligned to its best practice guidelines."
Westpac has not changed its LVR rules, but earlier this month it said it would apply tougher tests to new property investor borrowers when assessing how they would cope with higher interest rates. It is also changing its criteria for "non-resident" home lending.
Other banks are also likely to be looking closely at their LVR policies and interest rate offers to investor borrowers.
In the letters to the brokers, Bankwest said it will apply a maximum loan-to-value ratio of 80 per cent and has cut back on other special pricing deals for property investors.
The bank claimed the moves were aimed to "ensure sustainable growth in the home loan investment sector to protect both investors and the home loan market".
Bankwest said in a statement reported in Banking Day on Thursday that its LVR cap would not affect existing investment mortgage customers or customers with an application already formally submitted.
"As a responsible lender, Bankwest has reviewed the acceptable loan-to-valuation ratios for investment purposes to ensure sustainable growth in the home loan investment sector and to protect both investors and the home loan market," Bankwest said.
The Reserve Bank of New Zealand has introduced LVR caps to lending in Auckland to attempt to cool hot property markets across the Tasman.
APRA has indicated it will soon require the big banks to carry more capital against their mortgage books, in response to a recommendation from the financial system inquiry.
Bankwest said more than three-quarters of its investor loan book is currently below a LVR of 80 per cent.