Posts Tagged ‘Banks’

Banks Pushes for Short Term Credit :)

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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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Banking To Turn More Customer Friendly ;)

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The Banking Code and Standards Board of India (BCSBI) revised the Code of Banks’ Commitment to customers, in consultation with the Reserve Bank of India (RBI) and IBA.

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The move will make banking more customer-friendly, as it promises more transparency in banksโ€™ functions and dealing with the consumers.

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The reviewed code leads banks to disclose complete information on interest rates, including reference rates to which floating rates of interest are linked.

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In addition, banks are also required to display customer centric policies on cheque collection, compensation and grievance redressal on their website.

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Besides, they need to provide Most Important Terms & Conditions (MITC) to customers who have applied for credit facilities by way of loan or credit card and also update immediately on website, any changes in terms and conditions of products and services offered.

The banks are also required to compensate customer, apart from these, for delayed collection of cheques and also reimburse erroneous debit from ATM transactions.

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RBI‘s active interest in raising standards of banking services is in line with the need to improve the customer banking experience and iron out anomalies that impede with customers’ rights.

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However, the concerned revisions in the banking code have come after sustained complaints from customers over lack of transparency in certain banking issues.

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44,000 Crores to be Raised by Indian Firms :)

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Indian corporates raised Rs 21,691 crore through the qualified institutional placement (QIP) route during the first half of this fiscal and the funds raised through this route are expected to double in the second half.

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Mr Jagannadham Thunuguntla, the equity head of SMC Capital, said: “As of now, about 48 companies have received requisite resolutions from either shareholders or their boards to raise the funds through QIP route. The total amount proposed to be raised by these companies is about Rs 44,000 crore.”

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He further said: “As there is no requirement for the approval of the Securities and Exchange Board of India (Sebi) for the QIP issuance. These companies are ready to offer their QIP whenever they are confident about the market conditions.”

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“Some of the prominent names of the corporates that would be raising funds through this route include Tech Mahindra, Essar Oil, Hindalco, RCom, Omaxe, Pantaloon Retail, Jet Airways, Ansal, JSW Steel and L&T,” he said.

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It seems that the Indian promoters have regained their confidence and enthusiasm for fund raising, he added.

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It is turning out that corporates are raising funds through QIP route as a last alternative and not as a preference.

Most of the IPOs launched in the last seven to eight months had put up a flop show.

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The bank funds that are another source of funding are not available for most of the corporates.

Depending upon the sector and profile, banks are asking for premium over interest rates and for smaller companies, banks are not offering loans.

So the corporates that are looking for the expansions would opt for the QIP route to raise the funds, Mr Thunuguntla added.

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Let’s Talk About Mutual Funds ;)

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Friends we will discuss now as to what are mutual funds before going on to seeing why to invest in mutual funds instead of stock ๐Ÿ™‚

What is a Mutual Fund?

A mutual fund is an investment that pools money from many investors, and that money is used to invest in stocks, bonds and other securities.

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One mutual fund share includes a portion of a share of each stock held in the fundโ€™s portfolio.

The stocks these mutual funds have are very fluid and are used for buying or redeeming and/or selling shares at a net asset value.

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Mutual funds posses shares of several companies and receive dividends in lieu of them and the earnings are distributed among the share holders.

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Who Decides What a Mutual Fund Invests In?

Mutual fund managers decide what securities to buy or sell guided by the mutual fundโ€™s objectives.

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If a mutual fundโ€™s objective is to invest in the energy sector, the manager cannot buy shares in technology stocks.

Fund objectives let you know what to expect now and in the future.

Mutual funds can be either or both of open ended and closed ended investment companies depending on their fund management pattern.

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An open-end fund offers to sell its shares (units) continuously to investors either in retail or in bulk without a limit on the number as opposed to a closed-end fund.

Closed end funds have limited number of shares.

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Why Invest in Mutual Funds Instead of Stock?

You can invest in both mutual funds and individual stocks, but mutual funds are particularly useful in some cases.

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*Diversification: If you do not have a lot of money to invest, creating your own diversified portfolio to spread risk will be difficult.

Diversification is automatic in mutual funds.

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*Time : Successful investors take hours every week to analyze their holdings, stock market conditions and to educate themselves further on investing.

Mutual funds are a wise choice for those who lack the time to follow stocks so closely.

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* Experience: Consistently investing well takes a few years of experience and learning from mistakes and successes.
If you are not experienced with trading stocks but want returns over and above what a savings account offers, investing in mutual funds is a good way to grow your personal assets.

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Interest Rate Futures Trading Re-Launched in India after 6 years :)

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Trading in interest rate futures (IRF) kicked off in India after about six years on the National Stock Exchange (NSE)โ€™s platform on Monday.

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The exchange traded financial instrument will give banks and corporates an avenue to hedge their interest rate risks.

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IRFs are contracts traded on the bourses with an agreement to buy or sell an underlying instrument with the date and the price pre-specified.

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The launch of IRF came a year after trading started in currency futures, which gives participants an avenue to hedge against currency risks.

With the launch of IRF, market participants now have the option to hedge foreign currency risks as well as interest rate risk.

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The launch of interest rate derivatives means a lot to the NSE, its constituency of brokers and all economic entities who face interest rate risk,experts quoted on the recent development.

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SBI, Union Bank of India, Central Bank of India, Axis Bank, ICICI Bank, and Standard Chartered Bank actively traded in the IRF market.

Itโ€™s the second birth for IRF as the product was launched in 2003 but did not succeed.

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All resident Indians and financial institutions, including

banks and FIIs, can trade in IRF in its new format. ๐Ÿ™‚

Banks push for more attractive FDs.

Banks push for more attractive FDs

Banks push for more attractive FDs

The banks are lobbying with the finance ministry to get their share of the pie. According to the sources, Indian Banks Association (IBA) wants some incentives in order to keep the fixed deposits attractive.

On one side the Finance Minister wants bankers to charge less for their loans while on the other hand, the bankers also want their share from him, including a proposal to make fixed deposits more attractive.

According to sources, the IBA is suggesting to treat the fixed deposits at par with sec 80 C instruments like Employees Provident Fund (EPF) as well as Public Provident Fund (PPF) and National Savings Scheme (NSS). Besides this, it also wants the minimum lock in period for long term Fixed Deposits (FD) to 3 years from 5 years currently.

Banks that witnessed funds flying in during the stock market meltdown are worried that the reverse could be happening right now with competition from equity driven investments like mutual funds.

However, the debate to bring down the interest rate on small saving schemes is still going on, the banks are gearing up for the competition from the equity market instruments as and when the market sentiment improves. To make FDs more attractive is critical to ensure the lone term availability of long term funds for banks.

Small savings in demand again !!

NEW OPTION TO PARK FUNDS

NEW OPTION TO PARK FUNDS

Schemes Like NSC, Bonds Attract Investors As Deposit Rates Of Banks, Cos Fall

With bank and corporate deposit rates falling, investors are โ€˜โ€˜rediscoveringโ€™โ€™ an alternative avenue to park their funds.:)

According to investment consultants, people are once again showing interest in government backed small saving schemes like National Savings Certificate, Kisan Vikas Patra and Government of India bonds, among other things.

There is also a clamour among retired people to invest in the government-sponsored Senior Citizen Saving Scheme.


Investors are also forced to look into these schemes as corporate deposits, which paid better than bank deposits, have either had their interest rates slashed or companies have stopped accepting deposits altogether.

Banks paid interest rates as high as 10.5% till recently. However, they have begun reducing rates after liquidity improved dramatically in the banking system.

Most banks offer around 7-8% interest on fixed deposit these days. Some companies too used to offer higher rates of around 11-12%.


Some experts also points out that the โ€˜โ€˜newfound favourโ€™โ€™ for safer or preferably government-backed returns also could be the reason for the renewed investor demand for small saving schemes.

There was some kind of anxiety about the safety of oneโ€™s money till recently because of the uncertainties in the global economy. The sentiment has improved marginally after the stock market started showing signs of revival.

However, some people, especially retirees, are still concerned about the safety of their money. That is why they prefer government schemes like government of India bonds and Senior Citizenโ€™s Savings Scheme.


The Senior Citizenโ€™s Savings Scheme particularly appeals to retirees as it offers a higher interest of 9%.

The scheme was launched by the government in 2004 because retirees were complaining about lower rates on bank fixed deposits. It is now once again in favour because it offers 9% interest.

And it seems investors will have to be happy with these small saving schemes for some time, as experts donโ€™t think banks or companies are likely to up rates anytime soon. ๐Ÿ™‚
Source : TNN