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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India General Elections 2014 – Opinion Polls project Massive Defeat of Congress and Rise of BJP / Third Front

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Breaking NewsThe Opinion Polls of 2014 General Elections in India are out and they predict a Massive Defeat for the Congress Party led by Sonia and Rahul Gandhi.

Congress will lose 93 Seats in the Forthcoming 2014 General Elections and its allies will lose another 35 seats thus bringing them to a minority in the 545 seats of Lok Sabha. We believe that Congress will be routed out due to massive Corruption in the rank and file from Smallest to the Highest Level in Central Government. [ There is Potentially only one Clean Man. Dr. Singh, but he is Weak in Governance]

BJP and strong allies like Shiva Sena are expected to touch 184 Seats still way short of the Simple Majority – 272 mark.

The biggest gainers in the 2014 Elections are the Regional Parties – AIADMK to get 27 Seats, Mulayam Singh led SP 35 Seats from UP, Mamta’s TMC to garner 8 more

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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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Congress led UPA Govt – Bottleneck for India’s Growth Story

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The Reforms momentum by Central Government continues despite the massive 2G Spectrum and CWG Scam, growth momentum has weakened. The sticky inflation – particularly food prices – is crimping the RBI’s scope to support growth by easing policy. Withdrawal of support by the DMK, a key ally of the ruling DMK coalition, has raised the spectre of political uncertainty and early national elections.

Today the Finance Panel in the Parliament of India has directed the RBI not to Issue any new banking license as their is scope for massive corruption. With the Congress Government not having majority in the Parliament, RBI is likely to

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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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UIDAI’s Direct Cash Subsidy Transfer Not Panacea – Massive Corruption Still Exists

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During our field trips, at least in the MNNREGA programme, we could not find evidence of Aadhaar-based cash transfers having the ability to plug leakages completely. Although identity-based transfers would weed out ghost recipients, the cash transfer scheme had no way of dealing with inflated muster rolls in the first place. Hence, leakages may still happen with collusion between the beneficiaries and the contractors and government Officials.

The other systemic weakness we construed was dependence on the integrity of the Business Correspondents [BCs] for the system to work effectively. Given the evidence of banks’ preference for

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