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RBI-Centre clash, govt reportedly upset with bank for making rift public

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New Delhi: Indian government officials are very upset with the Reserve Bank of India (RBI) for publicly talking about a rift with the government, fearing it could tarnish the country’s image among investors, senior officials said.

The RBI Deputy Governor Viral Acharya warned that undermining a central bank’s independence could be “potentially catastrophic”, in an indication that it is pushing back hard against government pressure to relax its policies and reduce its powers.

In a speech to top industrialists, Acharya cited the Argentine government’s meddling in its central bank’s affairs in 2010 as an example of what can go wrong. That led to a surge in bond yields that badly hurt the South American economy.

 

“Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite an economic fire, and come to rue the day they undermined an important regulatory institution,” Acharya said.

The government officials Reuters spoke to on Monday declined to be identified because of the sensitivity of the subject.

One said that it was vital that what happened between the government in New Delhi and the RBI in Mumbai was kept confidential. “The government respects the autonomy and independence of the RBI but they must understand their responsibility,” the official said.

A second official, based in Prime Minister Narendra Modi’s office, said it was “very unfortunate” that the RBI took the matters public. “The government is very upset. It was not expected from the RBI,” the official added.

An RBI spokesman was not immediately available for comments after business hours.

Government officials have recently called for the RBI to relax its lending restrictions on some banks, and New Delhi has also been trying to trim the RBI’s regulatory powers by setting up a new regulator for the country’s payments system.

The Modi administration has also been pushing the central bank to part with some of its 3.6 trillion rupees ($49 billion)surplus to help bridge the fiscal deficit and finance its welfare programmes.

The officials in New Delhi were particularly angry that Acharya launched the attack while Modi was about to head to Japan for talks with Prime Minister Shinzo Abe, the first source said.

Finance ministry officials remained largely silent in response to the speech at the weekend, as they didn’t want to aggravate the issue when Modi and top officials were in Japan, this official said.

Government officials believe that RBI Governor Urjit Patel has some responsibility for the controversy, and he cannot expect an extension of his current three-year term – which ends next September – “as his right”, one of the officials added.

Acharya had three of his fellow deputy governors in the audience and also thanked Governor Patel for his “suggestion to explore this theme for a speech”, in a show of unity from an institution typically known for its restraint.

The official in the prime minister’s office said Patel could face a tough time when he appears before a parliamentary standing committee on Nov. 12.

Top government officials said they were surprised that Patel, who was appointed by the Modi administration in 2016 and initially cooperated with New Delhi, is creating tensions when the government is facing criticism over handling of the economy before a national election, due by next May.

On Monday, a third government source said the finance ministry was worried how markets would respond to Acharya’s public comments but felt more relaxed after they rose. The gains were largely a result of a separate announcement by the RBI about an injection of liquidity through government bond buying.

Modi’s government is pushing the RBI to relax lending norms for small businesses and pump more liquidity into the market to bolster economic growth before key state elections due in the next few weeks and the general election.

It is worried that the central bank’s hawkish monetary stance and stringent regulations on lending by state banks could push economic growth below 7 per cent in the October-December quarter – the last quarter for which data would be available ahead of the general election.

“When we are facing problems on the external front like high crude oil prices, trade tensions putting pressure on our current account balance, can we afford another domestic crisis?” the third government source said.


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India’s trade deficit narrows by 7.98% to $15.28 billion in June, exports falls by 9.71%

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New Delhi: India’s trade deficit for June 2019 narrowed by 7.98 percent to USD 15.28 billion as against the deficit of USD 16.60 billion in June 2018, government data showed.

The country’s exports registered a negative growth of 9.71 percent during June 2019 to USD 25.01 billion as compared to USD 27.70 billion in June 2018. Non-POL exports for June 2019 declined by 5.73 percent; non-POL and non-gems and jewelry exports declined by 4.86 percent.

India’s imports in June 2019 too fell 9.06 percent to USD 40.29 billion in June 2019 as compared to USD 44.30 billion in June 2018, data further showed.

 

The major commodities which contributed towards decline exports in June 2019 have been Petroleum products (-32.85 percent), Rice (-28.05 percent), Cotton yarn/Fabrics/made-ups (-19.73 percent), Gems and Jewellery (-10.67 percent), Readymade garments (-9.18 percent), Organic & inorganic chemicals (-8.17 percent), and Engineering goods (-2.65 percent), data showed.

Import of petroleum crude & products in June 2019 (USD 11.03billion) has recorded a negative growth of 13.33 percent as compared to June 2018 (USD 12.73billion). In this connection it is mentioned that the global Brent price ($/bbl) has decreased by 15.81 percent in June 2019 vis-à-vis June 2018 as per data available from World Bank, official data said.

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It will take 2-3 days for scheduling to use Pakistani airspace: AI

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New Delhi: Hours after the Pakistan Civil Aviation Authority ordered its airspace to be opened to all civilian traffic for flights between India and Pakistan, Air India official said that it will take 2 to 3 days for scheduling to use Pakistani airspace.

Indian airlines resumed flight operations over the Pakistan airspace, after the latter removed access restrictions, following Balakot airstrikes by the Indian Air Force in February. Air India was saddled with heavy financial losses following this.

The Ministry of Civil Aviation wrote on Twitter, “After cancellation of NOTAMS by Pakistan and India in the early hours of Tuesday, there are no restrictions on airspaces of both countries, flights have started using the closed air routes, bringing a significant relief for airlines”.

 

In March, Pakistan partially opened its airspace but did not allow Indian flight to fly over its airspace.

Since then, foreign carriers had been using Indian airspace have been forced to take costly detours because they cannot fly over Pakistan. The closure mainly affects flights from Europe to Southeast Asia.

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RBI slaps Rs 7 cr penalty on SBI for violating various norms

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Mumbai: The Reserve Bank of India said it has slapped a penalty of Rs 7 crore on the country’s largest bank SBI for non-compliance with norms related to NPA identification and fraud risk management, among others.

The penalty has been imposed on the bank for non-compliance of income recognition and asset classification (IRAC) norms, code of conduct for opening and operating current accounts and reporting of data on Central Repository of Information on Large Credits (CRILC), and fraud risk management and classification and reporting of frauds.

Giving details of the case, it said the statutory inspection of SBI with reference to its financial position as on March 31, 2017, revealed, non-compliance with IRAC norms, sharing of information about customers with other banks, reporting of data on CRILC, fraud risk management, and classification and reporting of frauds.

 

Based on the inspection report and other relevant documents, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for non-compliance with directions issued by the RBI.

“After considering the bank’s reply and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty,” the RBI said.

The penalty, RBI said, is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

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