Posts Tagged ‘banking sector’

RBI to Assess Affairs of Foreign Banks Operating in India

RBI to Assess Affairs of Foreign Banks Operating in India

RBI to Assess Affairs of Foreign Banks Operating in India

The Reserve Bank of India (RBI) decided to run a detailed assessment of the risk-management capabilities and evaluate the transparency in financial affairs of all foreign banks operating in India with an aim to ensure that they do not pose any systemic risk to the banking sector.

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However, until this process is finished, foreign banks are doubtful to be permitted to open more branches in India while India has committed to allowing 12 new branches to foreign banks in a year, but has been more liberal.


Moreover, this has resulted in a high presence of foreign banks in India as their WTO commitment allows them to deny licenses to foreign banks once their share in the total assets of the banking system exceeds 15%.


Additionally, as it comes in the aftermath of the financial crisis, the audit reflects concerns over an unduly large presence of foreign banks creating risks for Indian financial markets.


Meanwhile, the finance ministry and the central bank had always supported allowing foreign banks to operate in India as they thought that increased presence of foreign banks boosts the efficiency of the domestic banking sector.

Banks Pushes for Short Term Credit :)

banks-pushes-short-term-credit

Banks have started pushing short-term credit to shore-up loan books before the end of the lean season.

Bank’s move is attributed to abundant liquidity.

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According to highly placed bank officials, credit off take continue to be lacklustre.

Credit growth this year was hardly a third of the level for the corresponding period of the previous year.

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This financial year, non-food credit was only Rs 29,133 crore as against Rs 98,840 crore during the corresponding year-ago period.

This translated into an incremental credit-deposit ratio of just 12 per cent as against 53 per cent for the same period of the last financial year.

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Meanwhile, the majority of corporate loan off-take (especially by large corporates) was in the form of short-term loans.

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Most of the loans are for short durations like of the 30 days.

These loans are refinanced with commercial paper (CP) issues.

Further, the loans were priced low, as between 7 and 8 per cent.

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Such short-terms advances were then repaid when corporate made their CP placements.

Last week alone, public sector corporates, including SAIL, had raised at least Rs 2,000 crore through six-month CP issues priced as low as 5 per cent.

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Bankers feel short-term credit push would help them beef-up loan books for the second quarter of the financial year.

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India Moved Up in World’s Most Competitive Economies Ranking :)

Indian Economy Moves Up

On the strength of its energetic financial markets and a sound banking sector, India moved up one mark to the 49th spot in the World Economic Forum’s annual ranking of the world’s most competitive economies.

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However, according to ‘‘The Global Competitiveness Report 2009-10’‘, Switzerland took the top slot to topple the U.S. to the second position while the next 3 ranks were accounted for by Singapore, Sweden and Denmark to make up the top five among the 133 countries.

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However, the BRIC nations like, India, China and Brazil improved upon their position in the competitiveness index while Russia experienced a sharp drop.

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On the other hand, while India moved up one slot to 49 from 50 last year, China also upped its rank to 29 from 30 earlier while Brazil also moved up 8 places to 56 in the last ranking.

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However, Russia, lost ground and declined to the 63rd position from 51 last year.

Moreover, it is said that India”s cut throat performance continues to showcase a rather upturned development pattern and it precedes many advanced economies in terms of business sophistication and innovation capacity.

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Additionally, India also boasts active financial markets and a sound banking sector, supported by well-functioning institutions.

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However, taking the various parameters separately, India is ranked 16th in terms of its bustling financial markets, 25th in terms of a sound banking sector and has the 54th position for its well-functioning institutions.

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But on the other hand,as well, the country under performs on some of the basic determinants of competitiveness, namely health and primary education (101st), macroeconomic stability (96th)—though improving—and infrastructure (76th), the Global Competitiveness Report said.

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