business

Budget 2015 – Failure Congress Presents Election Budget

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India announced an ‘interim budget’ for FY15, with elections due mid-2014. It included no major policy initiatives and only Vote Bank issues which has made the corrupt Congress Party stoop to a new low. We analyze the Budget impacts by sector as under.

Automobiles: The FY15 budget has reduced the excise duty on vehicles across the board. The excise duty cut is positive in the near term, but may not lead to major consensus upgrades in FY15 estimates at this stage. The reduction in duties is applicable only until 30 June 2014 and hence

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Inflation Continues to scale High – FM & PM Continue with Lip Service – Lost Control of Government

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The Indian Inflation Number continues to scale new highs and the Lip Service of Congress Govt’s Finance Minister & Prime Minister continues without any action; It appears to su that the Government has no control on the economy and continues to move with Agenda Driven Politics.

The Government’s inflation report announced last week showed that WPI inflation in India for October 2013 was recorded at 7% YoY, thus marking a 50bps sequential pick-up in headline inflation. Separately, the inflation print for August 2013 was revised upwards to 7% YoY from 6.1% YoY.

The increase in headline inflation

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India’s RBI Policy Won’t Strengthen INR against USD – Need Strong Decisions to Curb BlackMoney Economy

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India’s Central Bank, the RBI introduced two rounds of liquidity tightening measures on 15th and 23rd July, which have served to push market rates sharply higher and brought temporary stability to the rupee, only to bounce back to Rs 60.45 against USD. Subbarao’s last meeting as RBI governor ended in a whimper rather than a bang – all interest rates were left unchanged as had been almost unanimously expected. Subbarao’s most likely successor is the pragmatic Raghuram Rajan who is current the chief economic advisor to the finance ministry.

The guidance paragraph in the RBI’s statement was more dovish than one might have been expected, suggesting that if hadn’t been for the weakness of the

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New Banking License – Going Gets Tougher After RBI Clarifications

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The Reserve Bank of India (RBI) has issued clarifications on ‘new bank licenses’ after receiving 443 queries. The majority of the queries pertained to holding company structure, relaxation for non bank finance companies (NBFCs) converting into banks and having to contend with regulatory requirements (CRR, SLR, PSL). While providing eligible applicants up to 18 months for setting up the banks (v/s 12 earlier), RBI has not changed its stance on the holding company (hold co) structure norms.

The RBI reiterated that new banks would have to meet all regulatory requirements on all assets that will be transferred, including SLR, CRR, and Priority sector loans as is applicable for existing banks. They will be allowed to convert their existing branches in Tier 2-6 cities into bank branches. Tier 1 branches will be permitted to operate in Tier 1 cities with

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How Gold Loans have Become a Risk to Lenders Muthoot and Manappuram ?

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The recent sharp correction in gold price has raised concerns on the business models of gold loan NBFCs (Muthoot and Manappuram)
with stocks falling 24-33% over the last 10 days. Among banks, South Indian (22%) and Federal (9%) have high gold loan exposure.

How does Gold Loan Lending Work in India ?
Gold loans are usually personal loans with gold jewellery as collateral. The normal LTV is 60% on value of jewellery (which normally works out to ~70% of gold by weight excluding peripherals like making charges, etc.). Interest rates charged by NBFCs tend to be in the 20-25% range (banks lend lower at 12-15%), with tenure of the loan ranging from 3 months to a year. The payment is usually in the form of a lump-sum (principal+interest) at the end

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Impact of Partial Sugar De-control to Indian Economy

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The Cabinet Committee of Economic Affairs has decided to partially de-control the Indian sugar industry. 1) The cabinet has decided to remove the levy quota obligation for the next two years. Contrary to earlier expectations, the government is not going to increase the excise duty on sugar, but will now bear the increased subsidy itself, totaling roughly Rs53bn (an increase of Rs30bn). Levy price has been capped at Rs32/kg ex mill.

The cabinet has also abolished the non-levy sugar release mechanism. This provides the industry with the flexibility to manage inventory liquidation. The game-changing reform of cane pricing formula being

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