3G Funding – Borrow from RBI as liquidity condition worsens
Liquidity condition in the system has tightened with banks borrowing heavily from the Reserve Bank of India (RBI) through its repo window. The dry up of liquidity from the system was mainly triggered by the Rs 68,000 crore payments made by telecom companies to government to acquire bandwidth for third generation (3G) mobile telecom licenses. Liquidity conditions are likely to improve as government starts spending money that it has received from the telecom companies.
Banks borrowed slightly over Rs 13,000 crore on Tuesday from the apex bank, more than double the amount borrowed on Monday. Banks borrowed Rs 5,840 crore through the repo window in the morning and Rs 7,325 crore in the second half on Tuesday. Read more
How is Indian Sovereign Debt Different ?
Unlike the West, most of Indian Government Fiscal Deficit is financed by internal holdings. India is the only one emerging market amongst the high-government deficit countries in 2009 – India. And India, with a gross general government debt to GDP ratio of over 80 percent during 2009 (see IMF(2010)), is much better able to manage a more than 10 percent of GDP general government deficit, Read more
Top 10 Frauds in Indian Banking Sector
The Reserve Bank of India – RBI Maintains Data on Frauds on the basis of area of operation under which the frauds have been perpetrated. According to such data pertaining to the calendar year 2009, Top 10 Categories under which Frauds have been reported by banks (number wise and amount wise) are as follows,
Top 10 Categories of Fraud in the Indian Banking Sector [ Based on Number of Complaints]
- Credit Cards
- Deposits – Savings A/C
Banks may raise rates after April RBI review
Ever since the Reserve Bank of India (RBI) hiked policy rates in a mid-cycle move in second half of April 2010, expectations of increase in pace of normalisation of the monetary policy stance have picked up. In case the RBI continues to tighten things aggressively in the forthcoming policy review scheduled for April 20, there is strong possibility that market rates too will start inching upwards.
India’s central bank, in line with most of its global counterparts, cut down policy and reserve rates sharply in a series of moves Read more
India Pre-Policy Rate action – Impact Analysis
Reserve Bank of India’s surprise Rate hike (25bps each for repo and reverse repo) caught the market off-guard, even as the past week’s buying in government bonds indicated a distinct comfort on the part of market participants most of whom anticipated the action at the time of the April policy – scheduled on April 20, 2010. We would expect the impact on the respective fixed income segments as below.
Sovereign bonds – with most of the action concentrated in the 2016 and the benchmark 2020 bonds, we would expect the belly of the curve to steepen and the 2s10s spread to harden as market prices in the distinctly emerging hawkishness on interest rates from the central bank. Read more
Rural Rollout Oblgation for New Banks – RBI
Taking a leaf from the Indian Telecom Success story and to emphasize more on inclusive growth story, the RBI is considering a rural and semi-urban stint for the new banks in order to strengthen its prospects of financial inclusion for the unbanked people of India.
A finance ministry official has quoted of saying
new entrants may only be allowed to open branches in rural areas for the first two years and the subsequent period will depend on the basis of their direct lending to the agriculture sector, opening of no-frill accounts and other financial inclusion criteria
India Term – Fixed Deposit Rates Rising
HDFC Bank, over the weekend, raised deposit rates by a sharp 50-150 bp, which follows the 25-50 bp rate hike by ICICI Bank and IDBI earlier this month. Notably, this deposit rate action has come, even as system liquidity currently appears adequate (reverse repo outstanding at about USD 15 bn). As the loan growth (14.8% currently) accelerates and central bank tightens, this liquidity will also dry up soon.
As deposit growth (17%YoY) has fallen to a four-year low, with real deposit rates negative, banks need to raise rates. Read more
Punjab National + Union Bank Asset Quality Concerns Surface
PNB’s profits were up 0.5% yoy (+9% qoq, in-line with estimates) and were supported by its high NIMs (expands further), robust loan growth (well above industry), strong deposit franchise and some trading gains in 3Q. However, delinquencies increased substantially (mainly in the agricultural segment) and coverage levels dropped meaningfully – suggests caution given its large (16% of book) agri portfolio.
PNB’s margins expanded more than estimated to 384bps, driven by liability repricing. NPL uptick, lower coverage raises concerns on sustainability of earnings. Expect an EPS of Rs 108 and Rs 124.5 for FY10 and FY11 respectively. Read more
ICICI Bank – Image makeover – Learning from Mistakes
In a recent meeting, the management highlighted its initiatives to change the general perception about the bank. Some of these aspects are very important and quite commendable as well, in our view.
ICICI Bank is trying to build personal relations with its customers and has been increasing its branch banking focus, compared to its earlier strategy of pushing customers towards ATMs and internet, which never allowed any relationship to be built between the customer and the bank. The management is trying to project a very soft image of itself across all customers and different from its earlier “know all” approach. Read more
How Indians Can Settle Credit Cards + Loan EMIs – A Relief Package
Indian Banks in a bid to expand their market share in Housing Loans, Auto Loans and Credit Cards, lent recklessly over 2004 to 2007 to any consumer without even verifying the credentials. Now, they are facing rapid defaults and are causing a misery to the Indian borrower. The RBI aware of this situation, has instructed BCSBI an independent body [it is as good as Government as it was formed by the RBI, so your data is safe with them] that looks into the functioning of Banks and Financial Institutions has started a separate counseling wing to identify genuine cases and negotiate a relief package. Read more