Yes Bank raises
savings rate
by 200 basis
points
MUMBAI: Within hours of Re-
serve Bank of India (RBI) de-
regulating savings rate,
private lender Yes Bank on
Tuesday hiked its savings rate
by a hefty 200 basis points
even as some leading bankers
said they were not in a hurry
to take a call as the liquidity
position was comfortable.
“We are not in a hurry. We
will see how it (the rate hike)
pans out. We don’t see any
pressure now (on liquidity).
Banks are comfortable with
the liquidity now. Banks will
not be desperate to raise
rates,” SBI Chairman Pratip
Chaudhuri said after RBI
hiked policy rates by 25 basis
points.
Yes Bank, however, was
quick to react and raised sav-
ings rate by 200 basis points
to 6 per cent. Further, the
bank increased its base rate
or minimum lending rate by
25 basis points to 10.50 per
cent with immediate effect.
As for SBI, Mr. Chaudhuri
said, “Right now there is so
much liquidity that we are
thinking of downsizing on the
liquidity”.
The largest private sector
lender ICICI Bank said it
would watch the situation for
sometime before taking a de-
cision on rate revision.
“The rates would not go up
immediately. Everybody is
going to watch before taking
any decision on rate hikes,”
ICICI Bank Managing Direc-
tor and Chief Executive
Chanda Kochhar said.
HDFC Bank MD and Chief
Executive Aditya Puri said,
“Lending rates will not go up
till the deposit rates do so. At
the moment it is in a comfort-
able situation”.
Oriental Bank of Com-
merce Executive Director S.
C. Sinha, however, said,
“Banks are likely to increase
both lending and deposit
rates” — PTI
Prepayment penalty on
home loans to go: RBI
‘Controlling inflation is imperative for sustaining growth’
Special Correspondent
MUMBAI: In a move to intro-
duce more customer-friendly
norms, the Reserve Bank In-
dia (RBI) on Tuesday pro-
posed to notify banning
prepayment penalty on float-
ing rate home loans, as rec-
ommended by the Banking
Ombudsman recently, while
hiking the short-term indica-
tive rate (repo rate) by 25 ba-
sis points to tame inflationary
pressures.
However, the RBI is of the
opinion that by December,
2011, the price rise is likely to
come down and another hike
may not be warranted.
The RBI is firmly of the
view that controlling infla-
tion is imperative for sustain-
ing growth over the
medium-term and for in-
creasing the potential growth
rate. “The potential growth
rate is not a long-term con-
stant; nor is it exogenously
determined,” said RBI Gover-
nor D. Subbarao while an-
nouncing the half-year
Monetary Policy Review of
2011-12. “It is critically de-
pendent on policies that cre-
ate a congenial investment
climate and encourage in-
vestment activity,”
y, he added.
The challengeg for the ggov-
ernment and the RBI is to en-
sure that demand is
constrained in the short-term
to bringg inflation down,, but at
the same time to encourage g RBI has given
supply
pp y response
p so as to im-
prove
p productivity
p y and ex-
pand
p the potential
p output of
the economy in the
medium-term.
While maintaining the in-
flation rate at 7 per cent for
2011-12, the RBI revised the
growth rate projection from 8
to 7.6 per cent. “Elevated in-
flationary pressures are ex-
pected to ease from
December, 2011, though un-
certainties about sudden ad-
verse developments remain.”
The policy document fur-
ther said that the RBI will is-
sue the final guidelines on
credit default swaps by No-
vember-end.
As the bankingg system
y p
pre-
pares to go
p g on to the Basel-III
framework requiring
q higher
capital adequacy, the RBI said
the draft guidelines for its im-
plementation will be issued
byy December-end. As regards
g to take permission from the
the micro finance sector,, the
g the go-ahead
g subject
for creatingg a new categoryg y
called NBFC-MFIs (NBFC- (
institutions).
micro finance institutions)
Further, a separate set of gui-
delines for overseas invest-
ment by core investment
companies (CICs) in financial
and non-financial sector
companies
p will be issued.
The RBI said liberalisation
had led to increased pace
p in
the number of branches
opened
p in Tier 3 to Tier 6
centres.
However, it is observed
that branch expansion in Tier
2 centres has not taken place
at the desired pace. To pro-
vide enhanced banking ser-
vices in Tier 2 centres, it is
now proposed to permit do-
mestic scheduled commercial
banks (other than RRBs) to
open branches in Tier 2 cen-
tres (with population 50,000
to 99,999) without the need
Reserve Bank in each case,
j to reporting.
p g
In the area of financial
markets, four important
p ini-
tiatives have been an-
nounced. First, the RBI will
issue the final guidelines on
the cash settled 5-year and 2-
year interest rate futures
(IRFs), including the final
settlement price by end-De-
cember 2011. Second, guide-
lines on credit default swaps
(CDS) will be made effective
by end-November 2011.
Third, guidelines on short-
sale in government securities
will be issued by end-Decem-
ber 2011.
Fourth, a Working Group
will be constituted to exam-
ine and suggest ways for en-
hancing secondary market
liquidity in the G-Sec and in-
terest rate derivatives
markets.
Further the RBI will issue
the final guidelines on inter-
nal rating-based (IRB) ap-
proach for credit risk by
end-December 2011. A dis-
cussion paper will be issued
by end-March 2012 on the dy-
namic provisioning approach
for comments.
The RBI said the customer
service had always been on
top of the central bank’s pol-
icy agenda.
Recognising the need for
revisiting the issues of cus-
tomer service in banks, the
RBI constituted the Damod-
aran Committee to make rec-
ommendations for improving
customer service. The com-
mittee has made several rec-
ommendations to improve
the customer service.
“We have decided to imple-
ment the recommendations
of the committee, on which a
broad consensus has
emerged, as also the action
points which were identified
by the Indian Banks’ Associ-
ation (IBA) and Banking
Codes and Standards Board
of India in the last Banking
Ombudsmen conference ”
Manufacturing to contribute
25 % of GDP within a decade
Special Correspondent
NEW DELHI: The Union Cabinet
on Tuesdayy ggave its approval
pp
to the long-awaited
g ambi-
tious National Manufactur-
ingg Policyy ((NMP), ), which
seeks to set up p mega
g industri-
al zones,, create 100 million
jjobs byy 2022 and pput India on
a p par with manufacturingg
powers such as China and
p
Japan.
“The NMP seeks to en-
hance the share of manufac-
turingg in the GDP to 25 per
cent within a decade aand cre-
ate 100 million jjobs in manu-
facturingg as p part of the
inclusive growth agenda of
the UPA Government,’’ Com-
merce and Industry Minister
Anand Sharma said after the
Cabinet meeting chaired by
Prime Minister Manmohan
Singh.
g To create
Rulingg out anyy kind of sub-
sidies for units operating
p g in
these manufacturing zones,
the newly approved
pp policyy
p of business regulations. Be-
states that the government
g Cabinet clears
will pprovide fiscal incentives
to industry, y, p
particularlyy to
small and medium enterpris- p
es (SMEs)
( ) to encourage the
manufacturing sector.
The NMP had faced hic-
cups in the Cabinet on Sep-
tember 15 when Labour and
Environment ministries had
raised objections to certain
clauses being waived pertain-
ing to their ministries. The
Prime Minister later referred
the matter to the Group of
Ministers (GoM), headed by
Agriculture Minister Sharad
Pawar.
Mr. Sharma said the NMP
would ensure compliance
p of
labour and environmental
laws while introducingg pproce-
dural simplifications
p and ra-
tionalisation so that the
regulatory
g y burden on indus-
try was reduced. He said the
interventions proposed were
generally sector neutral, loca-
tion neutral and technology
neutral except the attempt to
SUSTAINABLE DEVELOPMENT: Commerce and
Industry Minister Anand Sharma (left) and Rural
Development Minister Jairam Ramesh, coming out
after attending the Cabinet meeting at South Block
in New Delhi on Tuesday. — PHOTO: V. SUDERSHAN
tructure development and
100 million jobs improvement of the business
environment through ratio-
by 2022 nalisation and simplification
sides, development of appro-
Manufacturing priate technologies,
Policy especially green technologies,
for sustainable development
incentivise green
g technology
gy and skill development of the
for sustainable development.
p younger population are
“No subsidyy is proposed
p p for envisaged.
individual units or areas. The The NMP P aims at creatingg
basic thrust is to provide an g integrated
large g industrial
enablingg environment for townshipsp — National Invest-
pp g the potential
tapping p of the ment and Manufacturingg
private sector and the entre-
p Zones (NIMZs).
( ) “The land for
preneurial skills of the young-
p these zones will preferably
p y be
er population,’’
population,’ the waste infertile land which is
Commerce and Industryy not suitable for cultivation;;
Minister said. The major j ob- not in the vicinityy of anyy ec-
jjectives of the NMP are to in- ologically
g y fragile
g area and
crease the sectoral share of with reasonable access to ba-
manufacturingg in GDP to at sic resources,’’ Mr. Sharma
least 25 perp cent,, create 100 said. At present,
p , the contribu-
million jobs
j byy 2022 and en- tion of the manufacturingg
hance global
g competitiveness sector is just
j over 16 per cent
of the sector. Besides, it fo- of India’s GDP. W With a view to
cusses on domestic value ad- accelerating the growth of the
dition, technological depth manufacturing sector, Mr.
and environmental sustaina- Sharma said the manufactur-
bility of growth. ing policy proposed to create
The policy envisages spe- an enabling environment
cific interventions broadly in suitable for the sector to
the areas of industrial infras- flourish