As RBI talks of the shift to base rate for retail lending, Banks not too surprisingly look for Sunset** until next year.
The Base Rate regime is a noble and internationally used interest regime introduced by RBI for retail lending for banks w.e.f. July 1, 2010… the base rate is arrived vide a set formula that takes into account the cost of lending and cost of operations of the banks vis-à-vis the arbit [so believed] erstwhile BPLR [Benchmark Prime Lending Rate].
BPLR is supposed to be arrived at in a non transparent manner as a lot of determinants were in the unknown to the outsiders, the determinants of the base rate are pseudo public and moreover competitive amongst banking sector players.
Another reason why banks wouldn’t like the base rate is quite a chunk of lending happens at sub-PLR [to an elite group of people/ mostly body corps- ‘aam aadmi’ excluded], but now with the base rate regime, only priority sector lending per monetary policy can borrow at sub-base.
How this affects us: Most of us borrow at BPLR, that would change to base rate, generalizing the outcome, we hope to pay lesser interests that will be more competitive and you’d [almost] know why that’s the number you’re asked to pay.
Downside may be if you’re a part of the ‘sub- PLR’ club or ‘the terms of my loan are too complicated’ club.
Why the sunset….. the banks will have to convince existing @ BPLR borrowers [reality check sub-PLR] to change terms to base rate = loosing/ reshuffling of business for banks. This shift for existing contacts might not come easy and banks’d need time. Plus the rate becomes transparent and cost linked with a capped profit element [Come on…banking is a business and just like any business they are here to make money…. think from the other side of the fence].
Looks like borrowers will continue to borrow [marginally a little less may be to begin with grace à teething issues sunset or not], but all in all, credit will continue to be needed- the predicted growth numbers suggest, that in turn means, need for more deposits i.e. savers in demand…
** P.S:
1. JIC info…. Sunset clauses are restraining/ conditional/ limiting clauses inserted to temporarily alter the applicability of a stat.
2. Exactly when it is thought I’d write about travel this is what i come up with [is why this is called random thots]
Tuesday, July 13, 2010
Wednesday, June 2, 2010
May I know your good ‘Number’ Please……. [huh??!]
Here’s new on ‘personnel’ related infra, its called ‘Aadhaar’- a project by UIDAI [Unique Identification Authority of India], UIDAI is a office setup under the planning commission.
‘Aadhaar’ is a project to allot a 12 digit Unique Identification Numbers to all citizens in India. Here’s more on it:
Why the Numbers:
We are a very unique nation in more than many ways, including our problems. There are two major themes leading to why there is a dire need for a clear, precise and transparent identification system:
1. To be able to identify the actual people for whom the Govt. designs socialistic schemes [be it education, public distribution system, commercial subsidies or any of the likes] vis-à-vis who and how much of dissemination actually reaches.
• Actual identification of the poor [Below Poverty Line- BPL] for any Government initiatives i.e. identification of TA [Target Audience - for non savvy folks].
• Identity of this kinds helps TA in many ways, most of these people lack proper identity documents refraining to be able to avail basics like cell phone connections, access to banking network, back ground checks for employment, rationing entitlements to name a few.
• To check ‘pilferage’ from the socialist schemes [these very obviously happen] you see the tax payers pay for such schemes and hence it becomes necessary to identify who actually reaps those benefits [actual TA or the distribution machinery itself or someone who’s managed to ‘con’ the distribution machinery – thanks to invention of under table processes for procuring identity documents ]
2. To restrict entry in/ access to country’s stream for people with illegitimate backdrops/ purposes
• Irony of the situation here is at the time when people BPL find it agonizing to obtain and produce proof on their genuine identity [read existence] we have a whole lot of people with convenient access to procure identity documents [a lot of ‘media sting operations’ have proven this]. So your native domestic help might struggle but a sleeping cell doesn’t.
Commerce behind this:
• Budget Allocation for the project is a whooping INR 19 Billion
• Though the projects seems in ‘bidding’ stages, this means serious business to IT and Connectivity service providers- once the bids open a lot of ‘order books’ will call your attention.
• Completion [though phased] will optimistically mean more savings flowing back into the economy increasing retail banking base and hopefully tax payers base as well.
Time-lines:
Project completion target is August 2015 for all 600 mn IDs to be issued, dissemination of the first set starts somewhere between August 2010 and Feb 2011.
Kudos, How this would do us good:
• A lot of developed countries entitle ‘social security’ based on this model
• People BPL don’t such face lack of infrastructure but also a double whammy of relatively expensive access to basic amenities/ distribution, this is far fletched effect of ‘pilferage’, so subsidized infra is moved out of the public distribution and moves into the blacks and is sold higher than market prices, this is not just ration, it holds good for reserved quotas for education/ travel, industrial/ agricultural subsidies and Credits.
• Since we check pilferage, we check corruption and to top it up we identify people we can not track as non-citizens.
Lows:
Well the thought is noble and some noble thoughts do really sail through to reality…..
Referring to the other groups of the likes of: the MAPIN fiasco years ago, PAN holders [i.e. identified tax paying population] vis-à-vis people who actually make money in the land, KYCs and how far they get, Ration cards issued pitched against rationing proceeds or against the grey/ black market.
Coming from a country that survives on crisis management and crisis managers being looked upto, there’s little too early to talk about the virtues of planning and courage to plot plans vis-à-vis execution on the same plane. Despite that India’s growth and potential is recognized globe over and there seems no stopping the Asian giant where it comes to Infra development either.
Moreover, Govt’s initiative increased spending towards infrastructure development shows commitment. Hoping ‘Aadhaar’ lives up on the execution front as well, we’ll soon see ourselves quoting our numbers.
‘Aadhaar’ is a project to allot a 12 digit Unique Identification Numbers to all citizens in India. Here’s more on it:
Why the Numbers:
We are a very unique nation in more than many ways, including our problems. There are two major themes leading to why there is a dire need for a clear, precise and transparent identification system:
1. To be able to identify the actual people for whom the Govt. designs socialistic schemes [be it education, public distribution system, commercial subsidies or any of the likes] vis-à-vis who and how much of dissemination actually reaches.
• Actual identification of the poor [Below Poverty Line- BPL] for any Government initiatives i.e. identification of TA [Target Audience - for non savvy folks].
• Identity of this kinds helps TA in many ways, most of these people lack proper identity documents refraining to be able to avail basics like cell phone connections, access to banking network, back ground checks for employment, rationing entitlements to name a few.
• To check ‘pilferage’ from the socialist schemes [these very obviously happen] you see the tax payers pay for such schemes and hence it becomes necessary to identify who actually reaps those benefits [actual TA or the distribution machinery itself or someone who’s managed to ‘con’ the distribution machinery – thanks to invention of under table processes for procuring identity documents ]
2. To restrict entry in/ access to country’s stream for people with illegitimate backdrops/ purposes
• Irony of the situation here is at the time when people BPL find it agonizing to obtain and produce proof on their genuine identity [read existence] we have a whole lot of people with convenient access to procure identity documents [a lot of ‘media sting operations’ have proven this]. So your native domestic help might struggle but a sleeping cell doesn’t.
Commerce behind this:
• Budget Allocation for the project is a whooping INR 19 Billion
• Though the projects seems in ‘bidding’ stages, this means serious business to IT and Connectivity service providers- once the bids open a lot of ‘order books’ will call your attention.
• Completion [though phased] will optimistically mean more savings flowing back into the economy increasing retail banking base and hopefully tax payers base as well.
Time-lines:
Project completion target is August 2015 for all 600 mn IDs to be issued, dissemination of the first set starts somewhere between August 2010 and Feb 2011.
Kudos, How this would do us good:
• A lot of developed countries entitle ‘social security’ based on this model
• People BPL don’t such face lack of infrastructure but also a double whammy of relatively expensive access to basic amenities/ distribution, this is far fletched effect of ‘pilferage’, so subsidized infra is moved out of the public distribution and moves into the blacks and is sold higher than market prices, this is not just ration, it holds good for reserved quotas for education/ travel, industrial/ agricultural subsidies and Credits.
• Since we check pilferage, we check corruption and to top it up we identify people we can not track as non-citizens.
Lows:
Well the thought is noble and some noble thoughts do really sail through to reality…..
Referring to the other groups of the likes of: the MAPIN fiasco years ago, PAN holders [i.e. identified tax paying population] vis-à-vis people who actually make money in the land, KYCs and how far they get, Ration cards issued pitched against rationing proceeds or against the grey/ black market.
Coming from a country that survives on crisis management and crisis managers being looked upto, there’s little too early to talk about the virtues of planning and courage to plot plans vis-à-vis execution on the same plane. Despite that India’s growth and potential is recognized globe over and there seems no stopping the Asian giant where it comes to Infra development either.
Moreover, Govt’s initiative increased spending towards infrastructure development shows commitment. Hoping ‘Aadhaar’ lives up on the execution front as well, we’ll soon see ourselves quoting our numbers.
Wednesday, April 21, 2010
Catch 22
RBI has not been much appraised off late by all and sundry about its role in capping inflation [let’s leave curbing it alone for a while], making yesterday a little cautious.
A 25 bps hike each in the short-term lending and borrowing rates and CRR [now 6%] to suck out about $ 2.5 Bn liquidity but cautiously not enough to corner borrowing assuring growth impetus for the industry. This seemed in line with street’s expectation showing a rather flatish response [most were happy going by flat is higher than a dip]. Further, 25 bps hike also made for repo [now 5.25%] and rev. repo [3.75%] and bank rate remains the same 6%.
As for prospects, the Central Bank foresees growth projections at an optimistic 8% for the f.y. and 2010 GDP growth per expectation shows between 7.2 to 7.5% and inflation expectations reach 5.5% for the yr and medium term at 3%.
All said and done, though conservative the policy looks good per dilemma between RBI’s inflationary expectations vis-à-vis those of the MoF. With demand building up and supply’s under pressure the 25 bps hike looks welcomed but against the inflation story a conservative 50 bps looked in the making- catch 22 indeed......now you know where from Hamlet got the "to be or not to be is the question".
A 25 bps hike each in the short-term lending and borrowing rates and CRR [now 6%] to suck out about $ 2.5 Bn liquidity but cautiously not enough to corner borrowing assuring growth impetus for the industry. This seemed in line with street’s expectation showing a rather flatish response [most were happy going by flat is higher than a dip]. Further, 25 bps hike also made for repo [now 5.25%] and rev. repo [3.75%] and bank rate remains the same 6%.
As for prospects, the Central Bank foresees growth projections at an optimistic 8% for the f.y. and 2010 GDP growth per expectation shows between 7.2 to 7.5% and inflation expectations reach 5.5% for the yr and medium term at 3%.
All said and done, though conservative the policy looks good per dilemma between RBI’s inflationary expectations vis-à-vis those of the MoF. With demand building up and supply’s under pressure the 25 bps hike looks welcomed but against the inflation story a conservative 50 bps looked in the making- catch 22 indeed......now you know where from Hamlet got the "to be or not to be is the question".
Monday, April 19, 2010
When SEBI gets Savvy
Not just the investors but the markets at large appreciate SEBI as it came up with a few most rational reg moves on the disclosures and time-lines front....
Listed Companies now need to disclose Quarterly results within 45 days of end of a quarter as against anything upto 60 days or even for- ever that a lot of Companies took to come up with Quarterly numbers.
Further, 45 days for as at Half year end B/S and bi-annual Cash flows to be out for the benefit of investors' judgements alongwith annual audited financials to be out within 60 days of yr end.
The regime only gets better with IPOs to be listed with in 12 days as against the earlier 22 from the date of close of the offer to mitigate market fluctuations risks for bidders.
So also for MFs, NFO duration reduced to half and only for 15 days for Schemes to re-open for on- going transactions.
Issures [Cos and Fund Houses] have to provide ASBA facility compulsorily to QIBs as well.
While the new improved time-lines for disclosures would keep investors best informed to take better risks adjusted calls, the offerings related eager moves suit the liquidity of investors better.
SEBI off-late seems to gotten v. savvy [ read ever more sensitive] towards investors' interests.... for good, so far.
Listed Companies now need to disclose Quarterly results within 45 days of end of a quarter as against anything upto 60 days or even for- ever that a lot of Companies took to come up with Quarterly numbers.
Further, 45 days for as at Half year end B/S and bi-annual Cash flows to be out for the benefit of investors' judgements alongwith annual audited financials to be out within 60 days of yr end.
The regime only gets better with IPOs to be listed with in 12 days as against the earlier 22 from the date of close of the offer to mitigate market fluctuations risks for bidders.
So also for MFs, NFO duration reduced to half and only for 15 days for Schemes to re-open for on- going transactions.
Issures [Cos and Fund Houses] have to provide ASBA facility compulsorily to QIBs as well.
While the new improved time-lines for disclosures would keep investors best informed to take better risks adjusted calls, the offerings related eager moves suit the liquidity of investors better.
SEBI off-late seems to gotten v. savvy [ read ever more sensitive] towards investors' interests.... for good, so far.
Monday, April 5, 2010
As Q4 Ends…..
Extending the story QoQ, positivity of people towards Q4 numbers and 2010 projections marginal sees an increase and all seem ears hopeful of a good earnings cycle despite a slow run upwards globally and inflationary pressures.
Indicators look green with global recovery and rising sales…. Hopes are too see a clearer picture vis-à-vis past few quarters where numbers carried a taint of miser expenditures.
These views show consensus across onlookers for commodities and consumer durables, specially the auto space. As for services except IT that recovers demand and sees newer/ smaller players, the picture looks bleak with telecom getting competitive and volatile by the day in spite of consistent growth in sales. Rising infra and realty activities boosts construction space to encourage cements to see increasing demand alongwith base metals.
The ambit that still worries could be banking with rising NPAs and low credit take-off despite recovery and FMCGs getting competitive amidst inflation steeps.
All in all an optimistic quarter end with hopfully even more optimistic numbers...
Indicators look green with global recovery and rising sales…. Hopes are too see a clearer picture vis-à-vis past few quarters where numbers carried a taint of miser expenditures.
These views show consensus across onlookers for commodities and consumer durables, specially the auto space. As for services except IT that recovers demand and sees newer/ smaller players, the picture looks bleak with telecom getting competitive and volatile by the day in spite of consistent growth in sales. Rising infra and realty activities boosts construction space to encourage cements to see increasing demand alongwith base metals.
The ambit that still worries could be banking with rising NPAs and low credit take-off despite recovery and FMCGs getting competitive amidst inflation steeps.
All in all an optimistic quarter end with hopfully even more optimistic numbers...
Monday, March 22, 2010
Dramatic Antonyms
When Going gets tough, the Fed Gets going …It been over a year and a half since all have been looking out for [some are watching out for] the Fed Res to bring in the new regulatory regime looking to rescue the US economy and the lot of others that the US effects, from major collapses extending the ‘too big to fail’ notion.
Senator Dodd’s new proposal got to the table a bill to empower Fed Res over all major FIs vis-à-vis just banks, against which oversight assets of about $50 billion will be delegated from Fed Res to other federal agencies. And the US President’s office would name the Fed Res President…. [think jazz like Independence of a regulating agency or Non politicizing them?.... too bad, American law makers think otherwise, under the pretext that tax payers don’t end up funding bail outs]. FYI… the Dodd Bill is widely opposed by both the Treasury and Industry for obvious reasons.
While this happens in the Yankee land, in India just a few years ago oversight of a lot of businesses for FI which rested in the Central Bank moved to the Market Regulator. Down stream flow to the Dodd bill.
Instance 2, another proposed bill to curb Prop trading by FHCs, thank fully yet a bill and so far not feasible was last heard about this. This one again, wasn’t too welcomed by the Industry and was seen as a defensive move.
About the same time, our side of the globe, a lot of firms evaluate more active prop trading that has a financially lucrative taint and authorities don’t mind.
Moral of the story, the minds at opposite sides of the globe think opposite, owing to either fundamental differences in the kind of economies that the two of these are…. or is it basic difference in their standing on the growth/ development curve. It continues to be you go north I go south story.
Senator Dodd’s new proposal got to the table a bill to empower Fed Res over all major FIs vis-à-vis just banks, against which oversight assets of about $50 billion will be delegated from Fed Res to other federal agencies. And the US President’s office would name the Fed Res President…. [think jazz like Independence of a regulating agency or Non politicizing them?.... too bad, American law makers think otherwise, under the pretext that tax payers don’t end up funding bail outs]. FYI… the Dodd Bill is widely opposed by both the Treasury and Industry for obvious reasons.
While this happens in the Yankee land, in India just a few years ago oversight of a lot of businesses for FI which rested in the Central Bank moved to the Market Regulator. Down stream flow to the Dodd bill.
Instance 2, another proposed bill to curb Prop trading by FHCs, thank fully yet a bill and so far not feasible was last heard about this. This one again, wasn’t too welcomed by the Industry and was seen as a defensive move.
About the same time, our side of the globe, a lot of firms evaluate more active prop trading that has a financially lucrative taint and authorities don’t mind.
Moral of the story, the minds at opposite sides of the globe think opposite, owing to either fundamental differences in the kind of economies that the two of these are…. or is it basic difference in their standing on the growth/ development curve. It continues to be you go north I go south story.
Sunday, March 14, 2010
High on Speed.... Higher on Drama
Last evening marked a more eventful than expected beginning to this Formula 1 season.
The Bahrain Grand Prix being the onset of this year's World Championship turned out to mark numerous must watch moments.... for the ones who lacked time... Thank me...
The drama on the track begin as soon as turn 1 of Lap 1 when Webber’s [Red Bull] engine emitted clouds spinning Kubica [Renault] and Sutil [Force India] out of the points spots.
If that was not enough, Lap 2: Chandhok [HRT] crashed out of the race. Followed by BMW Sauber not making it to the end alongwith Debutants Glock and Di Grassi [Virgin] grace a` mechanical failures. The list continued with Petrov [Renault] facing a suspension problem which was detected during tyre stop at Lap 13.
Vettel starting at pole maintained an unbeatable lead till lap 34 going to dust that late owing to a spark plug failure ,this was when the face of the race changed with F. Alonso [started 2nd on the grid] finally overtaking Red Bull with fastest lap record ~ 1 min 58 secs followed by team mate Massa [started 3rd on the grid] following suit and finally Hamilton [started 4th] making a third place finish for Mc Lauren.
Vettle till lap 49 despite machine’s give up maintained his position 4 against Roseburg [Merc] finishing 5th [started 5] and Schumi finishing 6 [started 7th].
The final score Board showed:
Ferrari with 43 points
McLaren with 21,
Mercedes GP with 18
Red Bull with 16.
As for Racers: Alonso: 25 points, Massa: 18, Hamilton: 15, Vettel: 12, Rosberg: 10 and Schumacher: 8.
After the dramatic Bahrain GP, eyes are set already southwards for the Aussie GP [March 26-28].
- The God of F1, Schumacher made a come back from his 3 year old semi-retirement with Mercedes Benz GP Petronas.
- The Track was more complex with 8 new corners added reducing the laps to 49 [circuit length ~ 6.29 km and race distance ~ 308.41 km].
- And the Much talked about new points system….
Ferrari with 43 points
McLaren with 21,
Mercedes GP with 18
Red Bull with 16.
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