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RBI Panel to Study Feasibility of Digital Currency

This is the first time that the central bank is discussing its possible use in India.  RBI has constituted an inter-departmental group to explore the feasibility of introducing a rupee-backed digital currency to battle rising costs of managing paper currency. This is RBI’s first take on the possible use of digital currency.  “In India, an inter-departmental group has been constituted by RBI to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency,” the RBI report stated.  “(Globally), the rising costs of managing fiat paper/metallic money, have led central banks …to explore the option of introducing fiat digital currencies”. For FY18, total cost of printing paper notes in India was Rs 636 crore, according to RTI response to India Today. It cited rapid changes in the payments industry and emergence of private digital tokens as the possible factors.  Digital currency, backed by an asset such as gold or fiat is known as stable coin

RBI may Soon Do Away with MCLR

The Reserve Bank of India (RBI) has said that it would review guidelines on the marginal cost of funds based lending rate (MCLR), potentially preparing to do away with the system for lending rate calculation less than three years after it was introduced.  In its 2017-18 annual report, RBI said it would review the MCLR guidelines as well subsidiarisation of foreign banks “for the purpose of fostering competition and re-orienting the banking structure in India.” It did not give more details. Bankers said a review was imminent because the MCLR system had not reflected the changes in rates. “World over, the bank rates have moved to an external benchmark which leads to uniform pricing. Currently banks in India calculate based on their internal benchmark which can be disputed and leads to a difference in rates between banks. This is likely to be changed,” said PK Gupta, managing director at SBI. The new MCLR regime was implemented in the fiscal year starting April 2016 and is closely l

Report blames Reserve Bank of India for bad loans

The committee has criticised RBI’s revised definition for recognising NPAs that saw a spike in the bad loans on the books of banks and said this could hit economic growth.  A committee of lawmakers thinks the Reserve Bank of India’s policies have accentuated the problem of non-performing assets of state-owned banks, and reduced amount at their disposal to lend; that banks do not have what it takes to fund long-gestation projects; and that it is important to remove the environment of fear in which bankers operate today, worrying that even a legitimate loan approval could engender an investigation. According to a senior lawmaker who spoke on condition of anonymity, the committee is likely to recommend in its report that India’s central bank relax some of these rules, thereby increasing the amount at the disposal of some state-owned banks to lend by around Rs5 lakh crore, and earning them additional interest income of around Rs45,000 crore.   Specifically, the committee has criticised

New RBI Unit to Track Blockchain and AI EXPLORING NEW AREAS

The new unit will research, draft rules and supervise new emerging technologies in the future.  The Reserve Bank of India (RBI) has formed a new unit within the central bank to beef up its own intellectual capital in the face of emerging technologies like cryptocurrency, blockchain and artificial intelligence.  This new unit will research and possibly draft rules and supervise new emerging technologies in the future, two people familiar with the central bank’s plans said.  “As a regulator, the RBI also has to explore new emerging areas to check what can be adopted and what cannot. A central bank has to be on top to create regulations. This new unit is on an experimental basis and will evolve as time passes,” said one of the people cited above. The unit is just about a month old as of now and though a chief general manager is identified to lead it, a formal announcement internally has not been made yet.  An RBI spokesperson did not reply to an email seeking comment. Analysts said RB

Sebi Plans ‘On Tap’ Bond Market

Market Regulator likely to let cos use stock exchanges to sell bonds directly to investors, including retail investors, any time and as many times during a financial year, after filing a single prospectus  Sugata Ghosh & Reena Zachariah  ‘Bond tap’, which gives corporates the flexibility to time the market, prune cost, and dramatically cut down on paperwork for raising money, will soon be a reality in India. Capital market regulator Sebi is preparing the ground to allow ‘on tap public issue of bonds’ — a mechanism that will let corporates use stock exchanges to sell bonds directly to investors, including retail investors, any time and as many times during a financial year, after filing a single prospectus.  “After filing the tap bond issue prospectus, a corporate can decide when to enter the market. It can be multiple times during a financial year depending on the fund need and market appetite... as the name suggests, it’s turning the tap on or off. Such issuances could be a ch

EPFO revises down payroll numbers by 12% for September-May period

The payroll data has been revised downwards for each of the nine months between September 2017 and May this year The net enrolment numbers released by the Employees’ Provident Fund Organisation (EPFO) has been revised down by 12.4 per cent for the September-May period, from an earlier estimate of 4.5 million to 3.9 million.  The payroll count in June rose by 24 per cent to 793,308. The net enrolment numbers for June were the highest since September 2017. In May, the payroll numbers had grown by 10 per cent to 638,653.  The payroll count is essentially the difference between the number of workers who joined and exited from the EPFO’s fold. All employees who work in establishment hiring at least 20 workers contribute towards provident fund and pension, managed by the EPFO. The Union government has been citing this data since past few months as an indication for job growth in the economy. During a debate on the no-confidence motion, Prime Minister Narendra Modi had claimed that over

India’s GDP rose fourfold in 1993-2012, while wages only doubled: ILO

India’s gross domestic product (GDP) rose more than fourfold between 1993-94 and 2011-12 but workers salaries only doubled, the International Labour Organization (ILO) said on Monday in the latest indication of low pay and growing wage inequality in the country.  Over the last two decades, GDP has risen at an annual average of about 7%. “Overall, this means that GDP rose more than four-fold since 1993”, but low pay and wage inequality India Wage Report.  “The India Wage Report shows that low pay and wage inequality remain a serious challenge to India’s path to achieving decent working conditions and inclusive growth,” said the report, adding that the average real wage in India has doubled between 1993-94 and 2011-12. It said though rural wage increased faster than urban wage, the cumulative wage in urban India is more than double that of rural India, indicating the wage inequality in the country and how decent work remains a constant challenge. India’s strong economic growth is not