RBI announced the annual policy for Fy12 on 3.5.2011
Policy actions undertaken are as follows
• Repo Rate increased by 50 bps to 7.25%
• Reverse repo to be now a derived value fixed at 100bps discount to Repo. The new rate is 6.25%
• MSF, a new programme for banks to borrow overnight from RBI, with the rate fixed at 100bps premium to repo rate (8.25%).
• Savings Rate increased by 50 bps from 3.5% to 4%.
• Provisioning requirement for certain non-standard assets increased by 10 percent.
All the measures combined would lead to margin compression for the banking space. Also, higher interest rates might lead to further NPL creation.
The tone of the policy was clearly hawkish. RBI stressed on managing inflationary expectations as its number one priority. It expects the high crude oil and commodity prices to sustain at these levels and even gain going forward. RBI has forecasted the Fy12 growth at 8%. There could be downside risks to that if infrastructure and manufacturing activity slows down further. RBI also expressed concern about the ongoing fiscal consolidation with the budgeted crude oil and fertilizer subsidies being clearly insufficient. This might lead to enhanced government borrowing programme in H2 FY12 putting further upward pressure on bond yields.
Banks have corrected almost 10% in the last one week. While most of the price correction would be over in next few days, the stocks might stay subdued for some time. We are changing our stance on the banking space from overweight to neutral with a bias towards private sector names.
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Showing posts with label banks 2011. Show all posts
Showing posts with label banks 2011. Show all posts
Friday, 6 May 2011
Friday, 11 March 2011
Demystifying Banking & Its Types!
All of us are associated with banks in some or the other way, but how well do we know the different types & functions?
Here’s an informational piece on how different types of bank play an important role in their own way:
INDUSTRIAL LOAN COMPANY:
Industrial loan companies are subsidiaries of big corporations whose initial purpose was to provide loans to low- and middle-income workers who couldn't get such loans from banks.
Industrial loan companies have been around for nearly 100 hours, and are now primarily owned by big financial companies, such as Goldman Sachs, Merrill Lynch and American Express. Companies set up by these financial giants have considerable assets and access to capital.
It also regulates the commercial banking system and lends money to other banks. While most central banks are government owned, some have mixed ownership. Sweden was the first country to establish a central bank, in 1656.
COMMERCIAL BANKS
A commercial bank offers transactional, savings, and money market accounts apart from accepting time deposits.
Although majority of banks provide both commercial and retail banking services, commercial banks can differ from retail bank as they provide financial services directly to their customers.
CREDIT UNION:
Credit unions are financial institutions formed, owned, managed by their members with the aim to offer loans at lower interest, fewer service charges and higher savings rates.
EXPORT CREDIT AGENCY:
Export credit agency facilitates trade between nations by offering financial assistance to exporters. The assistance is generally supported by the government, and its aim is to keep the private exporters financially viable.
A good part of the deal is to help those exporters who trade with developing countries that pose greater financial risk.
OFFSHORE BANK:
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages.
Generally speaking, an offshore bank can be any bank that is based outside the country. Offshore banks provide all the services the local banks provide.
Source: Rediff News
Here’s an informational piece on how different types of bank play an important role in their own way:
INDUSTRIAL LOAN COMPANY:
Industrial loan companies are subsidiaries of big corporations whose initial purpose was to provide loans to low- and middle-income workers who couldn't get such loans from banks.
Industrial loan companies have been around for nearly 100 hours, and are now primarily owned by big financial companies, such as Goldman Sachs, Merrill Lynch and American Express. Companies set up by these financial giants have considerable assets and access to capital.
It also regulates the commercial banking system and lends money to other banks. While most central banks are government owned, some have mixed ownership. Sweden was the first country to establish a central bank, in 1656.
COMMERCIAL BANKS
A commercial bank offers transactional, savings, and money market accounts apart from accepting time deposits.
Although majority of banks provide both commercial and retail banking services, commercial banks can differ from retail bank as they provide financial services directly to their customers.
CREDIT UNION:
Credit unions are financial institutions formed, owned, managed by their members with the aim to offer loans at lower interest, fewer service charges and higher savings rates.
EXPORT CREDIT AGENCY:
Export credit agency facilitates trade between nations by offering financial assistance to exporters. The assistance is generally supported by the government, and its aim is to keep the private exporters financially viable.
A good part of the deal is to help those exporters who trade with developing countries that pose greater financial risk.
OFFSHORE BANK:
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages.
Generally speaking, an offshore bank can be any bank that is based outside the country. Offshore banks provide all the services the local banks provide.
Source: Rediff News
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