India Inc expects RBI to cut interest rates to boost demand

India Inc expects the Reserve Bank of India to shift direction and throw its bias in favour of reviving growth, sharing concerns not only of the industry but also of the Finance Ministry over the slowdown, an ASSOCHAM survey indicated. Ahead of the credit policy review by the central bank on October 30, the ASSOCHAM did a survey among 210 CEOs and CFOs among different segments of the industry and the service sectors including real estate, banking, automobile, consumer durables and non-durables and the export houses. A vast majority (72%) of the CEOs and CFOs said that it is wrong on the part of the RBI to be obsessed with always using monetary tools to control inflation, as they have a limited use. ''The price rise cannot and should not always be controlled by choking demand, that will be suicidal for growth…In the name of sustainable and long-term growth, we cannot afford to kill the growth which is the only answer to our social and economic problems,'' said the respondents to the survey. The India Inc, the survey indicated, wants RBI to give weightage to Finance Minister P Chidambaram's recent advice stating the central bank should should take ''calibrated risks'' to support the economy. The Finance Minister is quite right when he says that it is now upto the RBI to respond to a credible plan and measures which the government has begun taking to rein in fiscal deficit. Even if the fiscal deficit for the fiscal 2012-13 may not strictly follow the Budget estimates, it is expected to remain much less than 5.5% of the GDP, which is credible given the challenges that are before the economy. It is not going be anywhere near 6%, as is being projected in some quarters. As many 88% of the CEOs and CFOs surveyed cautioned that let RBI not be solely guided by the headline inflation of 7.8% in September. A detailed examination of the disaggregate data shows that the price spiral has got more to do with seasonal issues like potato prices shooting up by over 50%. What must be realized that this 50% hike in potato prices has come about on a low base. Potatoes are selling at the retail level at still Rs 20 a kg. But then, onion prices are ruling at 24% less than September 2011. It is not only money supply which determines the prices of tomatoes and potatoes. On the other hand, a very high cost of finance is choking not only the consumer demand but also making it difficult for the over-leveraged corporate to service debt. ''Corporate debt has mounted. Some of this debt is pretty old and was raised when the economy was growing at 8-9%, the corporate bottomlines were growing. But with the global and domestic economy facing headwinds, servicing debt on high interest coupon rates remains a key challenge for the companies. At this rate, our worst fear is that several of the over-leveraged companies may fall by the wayside making the workforce the worst sufferers,'' the study pointed out. The ASSOCHAM president said it is a paradox that among all the economies of the Asia and Pacific, as indicated by the recent IMF study, the Indian central bank is following the least accommodative monetary policy. For instance, China has managed its inflation related problem with boosting supplies and the rate of inflation has seen drastic drop. ''It will again drive the global economy. However, India may be out of the 'China-India’ growth bracket if we continue to choke our growth for controlling prices of vegetables which in any case are not driven by the banking system,'' the study observed. It said RBI should read signals emerging from the US as well where the consumer confidence is re-building . If India does not take this advantage by easing the interest rates and boosting exports, the Chinese exporters will laugh their way to the American market which appears to be picking up.

Fake currency notes from ATMs: What needs to be done

The issue of fake currency notes coming out of ATMs is very real. What can be done? Here are some suggestions Most ATMs (Automatic Teller Machines) in India simply dispense cash, but increasingly are being readied for a host of other functions and capabilities, so the risk increases. According to the Reserve Bank of India (RBI) the ATM Machines should: •check the authenticity and fitness of notes, i.e. note processing machines/note sorting machines, and machines which check only the authenticity of notes, i.e. note authentication machines. All these machines shall classify the individual notes as either genuine or suspect. •perform authenticity check with reference to the features of genuine notes as disclosed by the Reserve Bank of India from time to time. Any note which is not found to be having all the features of a genuine note shall be classified by the machine as suspect. Is this objective met? Not really. There are two broad ways in which currency notes are stuffed into ATMs in India. One, by the bank staff themselves, usually for the 'onsite' machines. Two, by specific agencies which do the stuffing- often as common carriers for multiple banks. I have worked in many aspects of the ATM industry and my sources tell me: 1) None of the bank in India, currency chests or agencies have facilities for 100% verification at all stages of currency notes headed for ATMs-except for some very specific marked ATMs which are located in VVIP locations. Yes, this is being corrected, but the speed of growth of ATMs is also high. 2) The chances of genuine cash sent by the banks directly from the cash chest/teller being swapped for counterfeit notes is not so high for onsite ATMs. However, it does exist as a higher risk for off-site ATMs, as well as for ATMs stuffed by agencies. The arrival of 'white' ATMs will further muddy the waters. 3) The global concept and practice of sending only pre-stuffed and sealed 'cassettes' for insertion into the larger 'cartridges' for the dispensers and then to be placed inside the 'vault' of ATMs is being resisted by banks and agencies in India. These pre-sealed 'cassettes' provide physical security by 'neutralising' currency notes in case of physical attacks and also provide note-by-note accountability in case of transactional lacunae. What would we, as consumers of currency notes, really want and deserve? After all, the issue of FICN/counterfeit currency notes is very real, and at the very least, some steps have to be taken to protect us, assuming that almost all ATM transactions are for consumers who not in the fake money business. Here are some simple steps which need to be taken, and which we should demand: 1) All ATMs in India need to be provided with a centralised RBI reference number, and this must be displayed prominently at the location, as well as on the ATM and also on the paper trail. 2) All ATMs must indicate whether they are "sealed cassette stuffed" or "loose stuffed". 3) Performance of ATMs-failed transactions, disputed transactions, down-times, frequency of FICN and similar data must be available online. 4) ATMs can then be provided either 'star' rating or percentile performance rating, which needs to also be displayed on the ATM. 5) Most importantly, the ATM must indicate whether it is providing 100% authentic currency notes or not, and by what method. 6) Certain other safeguards, like silent alarm provision as well as provision of a 'cover' on the key-pad, need to be incorporated too. 7) Disabled access is another issue which needs to be resolved. There are more too, but these are the least we can expect. After all, we are customers worth Rs4 lakh a day-a fairly heavy turnover under any circumstances for 9 square metres of real estate . A bank is not doing a customer a big favour by providing an ATM; it is actually doing itself a favour primarily by reducing the cost and effort of human interaction. In exchange, a customer must know what level of service to expect, and RBI needs to enforce this. Today's customer is very aware of what is going on and is willing to pay a premium for better and more reliable service. The earlier this is done, and certainly before the introduction of "white ATMs", the better. Source : ML Foundation website