Reserve Bank of India will allow banks to unlock their corporate bonds for cash

To ease the liquidity crunch, the Reserve Bank of India and the Finance Ministry will soon allow banks to avail of a refinance facility by depositing their corporate bond holdings as collateral.

The proposal, pushed by some state-owned and private sector banks, was discussed recently by the government and the RBI. A favourable view has been taken,a government official told The Indian Express.

As on March 31, 2008, total bank investment in corporate bonds is estimated to be about Rs 80,000 crore. State-owned and private sector companies issue interest-bear ing bonds to raise funds and these are subscribed by banks, mutual funds, insurance companies, NBFCs, etc.

To read the full article, click here..
To read the ePaper, visit:
http://epaper.indianexpress.com/IE/IEH/2008/11/07/index.shtml

Why falling crude oil is hope rising

It may be gloom, doom and bust on Dalal Street this Diwali as the economy braces itself for a “cloudy” growth outlook and the Finance Ministry admits that fiscal deficit targets for this year won’t be met. But if there is one silver lining and for India, Asia’s third largest economy, a bold one at that it is the dramatic fall in global crude oil prices from nearly $150 a barrel this June to $56 now.

This slide in crude oil presents Prime Minister Manmohan Singh and his lieutenants a significant fiscal headroom to pump-prime the economy and risk some adventure in big-ticket infrastructure spending, both social and physical. Besides, it also helps the rupee hold on to its own because of lesser demand for dollars by oil refiners. Last, but not the least, it douses inflationary expectations, giving the government and the Reserve Bank of India more leeway in lowering lending rates and infusing more liquidity into the system to spur growth.

India imports almost 70 per cent of its fuel needs, and oil is the biggest item. In 2007-08, it imported 121.672 million tones of crude oil and the bill was a staggering $68 billion.

To read the full article, click here..
To read the ePaper, visit:
http://epaper.indianexpress.com/IE/IEH/2008/10/28/INDEX.SHTML

Reserve Bank of India scotches ICICI Bank rumours, Government says don’t panic, we are watching

Finance Minister P Chidambaram and regulators, SEBI and the RBI stepped in to soothe financial markets today after the benchmark Sensex plunged 442 points or 3.5 per cent to its lowest levels in two years and panic gripped ICICI Bank customers who queued up outside ATMs in certain cities to withdraw deposits. Their assurances helped and the market closed 2.1 per cent up at 12,860 points.

Barely minutes after the market opened sharply lower, SEBI chairman CB Bhave who was in Delhi allayed fears of the impact of the global credit crisis on the Indian markets. “There is no panic... we are monitoring the situation closely. We will take the severest action against any institution circumventing our short-selling rules,” he told reporters before his meeting with the Finance Minister and other officials in North Block.

After a meeting with Bhave and economic affairs secretary Ashok Chawla, Chidambaram said, “We are suffering the consequences of turbulence around the world. Basically, the Indian market is a sound, attractive and well-regulated market.”

To read the full article, click here..
To read the ePaper, visit: http://epaper.indianexpress.com

State Bank of India hikes lending rates 0.5%, others waiting to follow

Banks have started hiking lending rates following the Reserve Bank move to raise the cash reserve ratio (CRR) and repo rate by 0.50 per cent each in a bid to rein in inflation. State Bank of India, India’s largest commercial bank, announced a hike in its benchmark prime lending rate by 0.50 per cent to 12.75 per cent with effect from Friday.

Union Bank of India (UBI) has raised its benchmark prime lending rate by 50 basis points to 13.25 per cent. The new rate will be effective from July 1. Other banks have already indicated that they would be raising the rates in the next few days.

According to SBI, the revision will be applicable to all PLR-related lendings and the bank was only restoring its benchmark rates. This means loans (including home, auto and personal) which are linked to PLR would move up. Usually, floating rates on home loans are linked to the benchmark prime lending rate (BPLR). ICICI Bank and HDFC — two leading players in the home loan segment — are expected to take a decision within one or two days.

To read the full article, click here...
To read the ePaper, visit: http://epaper.indianexpress.com

Wake up to Equated Monthly Installment nightmare

The stage is now set for an across-the-board rise in interest rates with the Reserve Bank of India hiking both the cash reserve ratio (CRR) and repo rate by a steep 50 basis points to rein in prices and keep inflationary expectations at bay.

While new borrowers — be it for car, home or personal loans — will find it more expensive, existing borrowers of home loans at floating rates will have to live with extended tenures or higher monthly installments.

Commercial banks are expected to hike interest rates in the coming days to adjust the RBI move that has come four days after inflation hit double digits and touched 11.05 per cent last Friday, most of the rise coming due to higher fuel prices.

Repo rate — the rate at which the RBI lends funds to banks — has gone up from 8 per cent to 8.50 per cent, the highest in six years. CRR — the portion of deposits to be maintained by banks with the RBI — is being increased from 8.25 per cent to 8.75 per cent in two stages, sucking out another Rs 20,000 crore from the banking system.

The RBI steps are aimed at bringing down inflationary expectations by cutting down liquidity and increasing the cost of funds to all — banks and borrowers. The objective clearly is to curb credit and stem money supply that have grown more than the central bank’s indicative projections.

To read the full article, click here...
To read the ePaper, visit: http://epaper.indianexpress.com

Reserve Bank of India drains out money, Financial Markets guards food

There are short term relief, possibility of medium term pain and two big questions in RBI's keenly anticipated monetary policy review which was marked by a 0.25 percentage point hike in the cash reserve ratio (CRR) to 8.25%.

CRR determines the amount of money banks have to keep in deposit with RBI and higher CRR means less funds for banks to lend. RBI is arguing there's too much cash sloshing around in the system fuelling inflationary expectations. Inflation as measured by the wholesale price index has been 7% plus in recent weeks, a three year high.

CRR was increased earlier this month and has climbed from 7.5 to 8.25% in a few weeks. The CRR hikes will take around Rs 27,000 crore out of the banking system, forcing banks to rethink lending strategies but it needn't immediately make them raise rates, including those on home loans. That's the short term relief

To read the full article, click here...
To read the ePaper, visit: http://epaper.indianexpress.com