The G-20 summit leaders resolved to promote growth
and promised as follows:
1. Support
economic stabilization & global recovery
2. Combat
unemployment and give social protections
3. Open
trade & investments and resist protectionism
4. Strengthen
the international financial architecture
5. Reform
financial sector and foster financial inclusion
6. Enhance
food security, address commodity price volatility
7. Eradicate
poverty, meet challenges of development
8. Long
term perspective through inclusive green growth
9. Intensify
fight against corruption
According to CIBIL, most of those availing home
loans from banking sector have very high credit scores, indicating they are
least likely to default. The CIBIL TransUnion score is a three digit number
ranging between 300 and 900. Customers with scores closer to 900 are the least
risky
PSBs will limit their exposure to loss making state
electricity boards (SEBs) by sharply cutting the amount of short term loans
extended to them for meeting daily expenses and repayment of interest. As per
PMO, PSBs would be required to meet only 50% of the short term loans required
by SEBs, while the balance to be funded by Rural Electrification
Corporation(REC) and Power Finance Corporation(PFC)
For FY 2012, banks sought to restructure a record
$12 billion in corporate loans through the CDR mechanism; an RBI approved
consortium of lenders. This is an increase of 156% from the last year. Stress
in operating environment, tightening in liquidity, indifferent political will
are said to be the reasons for the same
Intelligence quotient (IQ) or emotional quotient
(EQ) is passé. What companies are looking for in their leaders now is a high
Adversity Quotient (AQ).AQ is coined to test an individual’s capacity to
respond positively & proactively in times of stress
State Bank of India, Bank of Baroda, Bank of India,
Indian Overseas Bank, Punjab National Bank, Union Bank of India and Central
Bank of India will lead/handhold the expansion drive of all the PSBs in 42
identified countries overseas as suggested by Ministry of Finance. The focus on
the 42 countries include South America, Africa, former USSR countries and South
East Asia
The Govt. has hinted to stand solidly behind PSBs to
help them tide over difficulties that may arise if and when global financial
crisis aggravated
The rupee experienced its biggest drop in nine
months on 22.06.12, when it closed at an all time low of 57.16 against the
dollar- 1.5% lower than the previous close. Despite the steep fall, there was
no panic in the market as the depreciation in rupee was partly offset by
falling oil prices
“Age is an issue of mind over matter. If you don’t
mind, it doesn’t matter.”- (Mark Twain) If we take steps not to look our age,
can we take steps not to act our age? This is an introspection for present day
forward looking bankers
The three richest persons in the world are Carlos
Slim(the 72 year old telecom tycoon with net worth of $69.1 billion), Bill
Gates(the 56 year old Microsoft founder with net worth of $61.3 billion) and
Warren Buffet( the 81 year of Berkshire Hathaway fame with net worth of $45.7
billion) respectively
Moody’s downgrade gives competitive advantage to
banks that fund themselves with stable, low cost retail customer deposits while
worsening the outlook for weaker banks that rely more on capital markets for their
funding
Over a 5 year period, while the BSE500 index gained
11%; the CPI rose by 55%
The Finance Ministry has said every rural &
urban branch of PSBs will have to generate 150 and 50 subscriptions
respectively every year to ensure that the National Pension Scheme is available
to all citizens in the unorganized sector and the economically disadvantaged
sections
The Finance Ministry has directed all PSBs to get
their turnaround strategy of loss making branches approved by their respective
boards as mandatory. It expects that the move would improve morale of employees
besides boosting financial parameters such as net profit, net interest margin
and business per employee
According to the new guidelines by IBA, vocational
or skill development courses offered by ITIs, Polytechnics etc. of duration of
2 months to 3 years, preferably leading to good employability can be funded by
banks. The loan ranges from Rs.20000 to Rs.1.5 lakh to start with, though a
bank can use its discretion to lend a higher amount on a case-to-case basis.
There will be no service charges, collateral security or third party guarantee.
The interest rate would be soft linked to the base rate of banks. IBA hopes it
would be vital as the country requires 10 to 15 million skilled workers every
year with regional short supplies imbalances
The real crucial reason of great depression of 1931
was about the dangers of policy abdication. Stronger European governments could
have helped Austria manage its problems of bailout. Central banks, notably the
Bank of France and the Federal Reserve could have done much more to limit the
damage. But nobody with the power to contain the crisis stepped up their
initiative. Everyone who could and should have acted declared that it was
someone else’s responsibility. Any lesson? That knowledge and resources do no
good if those who possess them refuse to use them.
SBI, PNB, IDBI Bank, BOI, BOB, Canara Bank, Union
Bank, IIFCL and LIC will jointly finance (being operational from July)
infrastructural projects with an outlay of Rs.1000 crore and above. The idea is
to pool resources and undertake consortium lending so that the risk is
mitigated and the collateral is jointly owned by the lending institutions
The biggest drag on the rupee as per experts has
been high oil consumption. More than two thirds of India’s crude oil
requirements are fulfilled by imported oil and subsidized pricing regime has
meant that imports have continue to fatten despite falling global prices
Without naming any entity former RBI Governor Mr. YV
Reddy said some of the leading rating agencies and accounting firms enjoy an
oligopolistic (plural monopoly) power over the markets. These along with few
leading business news agencies have continuous dealings with each other which
leads to reinforce the exercise of their oligopolistic power over markets –
most of the times unethically
Dr. Raghuram Rajan is tipped to be the new Chief
Economic Advisor in place of present incumbent Dr.Kaushik Basu retiring in July
last. Dr. Rajan has the distinction of being the youngest person to hold the
post of economic counselor & director of research at the IMF. He is also
the inaugural Fisher Black prize winner sponsored by the American Finance
Association for contribution to finance by an economist under 40. Ray of hope for
Indian economy?
RBI is likely to clamp down on gold coin sales by
banks amid rising bullion imports adding pressure to the current account
deficit and weakening of the rupee. Banks were allowed to sell gold in the pre
2008 era when dollar influx resulted in a sharp appreciation of the rupee. By
the same logic, it is being reversed now
Power sector woes might result in bad loans in the
banking system, exposure to this segment is projected to touch Rs.9 lakh crore
from Rs.5.3 lakh crore in next three years. acute shortage of coal for power
projects as well as worsening health of distribution companies remain the major
worries for default
According to the survey by KPMG consultancy, Chinese
companies & researchers are beginning to develop expertise in the fields
such as artificial intelligence and advanced software that can rival US and
lead to ‘disruptive’ changes in products & services thereby providing China
with a big economic boost and competitive advantage
PM Dr. Singh on assuming the dual charge of Finance
stressed to revive the animal spirits in the country’s economy and reverse the
climate of pessimism
The RBI Dy. Governor has lashed out at banks for
attributing higher bad loans to the automated NPA recognition system implying
that they have been misguiding investors by showing improper figures in the
past
India’s balance of payment (BoP) situation
deteriorated in the March 2012 quarter with the current A/c deficit widening to
an all time high at $21.7 billion being 4.5% of GDP. While exports faced decelerated
growth, imports increased mainly due to sustained demand for gold & crude
oil
As per experts, Britain faces another five years of
economic struggle to recover from the financial crisis as the sharp decline in
the outlook for the global economy had worsened UK’s prospects of recovery
Mutual Fund industry CEOs seem to be in a hurry to
pack their bags for a career switch over as business gets dull and
profitability under pressure
The Govt. has asked the banks to conduct electronic
auction (e-auction) of properties that are sold to recover dues from the
defaulting borrowers. This has been done to bring transparency in transactions
concerning mortgaged properties being sold to recover sticky dues
“when you see in places like Africa and parts of
Asia- abject poverty, hungry children and malnutrition around you; and you look
at yourself as being people who have well-being & comforts, I think it
takes a very insensitive & tough person not to feel they need to do
something”: Ratan Tata on receiving Rockefeller lifetime achievement award for
innovation in corporate philanthropy
With a view to resolve the Euro zone crisis, its
leaders agreed to take emergency action to bring down Italy and Spain’s
spiraling borrowing costs and to create a single supervisory body for the Euro
zone banks by the end of this year. This optimistic news made the Sensex rise
to 17429 with a bang along with appreciation in rupee
Despite global meltdown, authorities of China are
determined to forcefully push ahead financial reforms and stick to liberalize
interest rates, currency rate and cross-border use of Yuan
The UK Govt. has ordered independent review into the
workings of key lending rates between banks after Barclay’s was found guilty of
rigging with the London inter-bank rate(LIBOR), which fuelled public outrage at
the culture & practices of the banking industry
Restructured assets are bigger worry for banks as
slippages likely to continue in FY2013 in the backdrop of slow industrial
activity, high corporate leverage(debt-equity ratio) and struggling Power
sector
Dollar borrowing costs for Indian companies and
banks could soar, straining their already fragile finances portfolio if rating
agencies downgrade India’s sovereign rating, that is just a notch above junk:
RBI’s warning despite PM cum FM’s optimistic view
RBI is concerned about the scenario that wealth is
getting concentrated in big cities and towns as data reveals that 100 Indian
cities account for 69.4% of aggregate bank deposits defying the spirit of
financial inclusion
Two thousand years back, India was the world’s
biggest economy. England was an insignificant outpost of Roman Empire and the
Americas had not even made it to the map. Even, Spain and Argentina were far
richer & advanced. How things changed? Civil war, industrial revolution and
will to reform are the instrumental factors
Edition-2:1st
July 2012
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