Posts Tagged ‘loans’

RBI, Monetary Projections And Indian Economy

Hello Friends,

Just an extension of our previous blog ”RBI And Its Policies – Part 1β€³.

RBI, Monetary Projections And Indian Economy

RBI, Monetary Projections And Indian Economy

In this Blog we would touch upon the aspects as that of Monetary projection from RBI, assessment of economy scenario at present and relevance of RBI policy on economy.

Monetary projection:

For policy purposes, money supply (M3) growth for 2009-10 is placed at 17.0 per cent, down from 18.0 per cent projected in the Annual Policy Statement.

Consistent with this, aggregate deposits of scheduled commercial banks are projected to grow by 18.0 per cent.

The growth in adjusted nonfood credit, including investment in bonds/debentures/shares of public sector undertakings and private corporate sector and Commercial Papers (CPs), has been revised downwards at 18.0 per cent as in the Annual Policy Statement.

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Economy:

Since the last review in July 2009, there has been a discernable improvement in the global economy.

The recovery is underpinned by output expansion in emerging market economies, particularly in Asia.

World output has improved in the second quarter, manufacturing activity has picked up, trade is recovering, financial market conditions are improving, and risk appetite is returning.

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A sharp recovery in equity markets has enabled banks to raise capital to repair their balance sheets.

If we talk about the home country then there are definitive indications of the economy attaining the ‘escape velocity‘ and reverting to the growth track.

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The performance of the industrial sector has improved markedly in recent months.

Domestic and external financing conditions are on the upturn.

Capital inflows have revived.

Moreover activity in the primary capital market has picked up and funding from non-bank domestic sources has eased.

Liquidity conditions have remained easy and interest rates have softened in the money and credit markets.

Growth projection for GDP for 2009-10 on current assessment is placed at 6.0% with an upward bias, the same as the previous policy review.

But some darker parts also persist.

There are clear signs of rising inflation stemming largely from the supply side, particularly from food prices.

Private consumption demand is yet to pick up.

Agricultural production is expected to decline.

Services sector growth remains below trend.

Bank credit growth continues to be sluggish.

The central bank has warned of possible asset price bubbles, raised banks’ provisioning requirements for commercial real estate loans and lifted inflation forecast.

WPI inflation for end-March 2010 is projected at 6.5 per cent with an upward bias.

This is once again higher than the projection of 5.0 per cent made in the Annual Policy Statement in July 2009.

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Stay Tuned for more on the topic.

We would look into Monetary Policy stance, more facts about economic indicators and Analysis from the Analyst from monetary point of view.

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IMF Sells 200 Tonnes of Gold to RBI

Gold-surges-alltime-high

IMF Sells 200 Tonnes of Gold to RBI

The International Monetary Fund has sold 200 tonnes of gold to the Reserve Bank of India (RBI) for $6.7 billion in order to shore up the Fund’s finances to enable it to boost the concessional lending to the world’s poorest countries.

This sale of gold to India represents almost half of 403.3 tonnes of total sales volume, which was approved by the IMF Executive Board September 18.

IMF said that the transaction involved daily sales, which were phased over a period of two-week during October 19-30.

The price at which the each daily sale was conducted was set on the basis of market prices prevailing that day, it said.

This deal will increase India’s gold holdings to the tenth largest among the Central banks.

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“I strongly welcome this transaction with the Reserve Bank of India,” Managing Director Dominique Strauss-Kahn stated.

“This transaction is an important step toward achieving the objectives of the IMF”s limited gold sales programme, which are to help put the Fund”s finances on a sound long-term footing and enable us to step up much-needed concessional lending to the poorest countries.”

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The IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal after the US and Germany.


The IMF has made gold sales a key element of its new income model aimed at lowering its dependence on lending revenue to cover expenses.


Under the Fund’s Articles of Agreement, all gold sales must be conducted at prices based on market prices, including direct sales to official holders as in the case of this transaction with India, the IMF said.


The Group of 20 key developed and developing countries, at their April summit in London, agreed the gold sales should allow the IMF to offer favourable conditions on loans to the poorest countries.


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income model

India’s United Spirits to Sell New Shares to Cut its Debt :)

India's United Spirits set to sell new shares to institutions to help cut its debt

India's United Spirits set to sell new shares to institutions to help cut its debt

India’s United Spirits is set to sell new shares worth about $300-350 million to institutions to help cut its debt, after efforts to sell a stake to private equity firms and Diageo failed.

The world’s third-largest spirits maker by volume is set to place the shares with institutions (QIPs) as early as this week, three sources with direct knowledge of the deal said.

“The market is good enough for a share sale. Why opt for a PE firm that buys at the same price and adds little value otherwise,” one source said.

United Spirits has debt of 65 billion rupees ($1.4 billion), which it took partly to fund the acquisition of scotch whisky maker Whyte & Mackay, and has said it aims to cut this to 40 billion rupees by the end of March 2010.

Chairman Mallya said in early September he planned to cut the firm’s debt by end October.

KINGFISHER FACTOR

In June, United Spirits sold treasury stock, carried on its books from past mergers and acquisitions, at an average 900 rupees a share to raise about $186 million, which it used to repay some of its loans.

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It still has over 8 million shares of treasury stock which it can sell or issue fresh ones.

Sources said United Spirits would opt for the latter. It got shareholders approval last month to raise up to $350 million.

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“Private equity investments through preferential allotment have a lock-in of one year, there’s more due-diligence involved and they also look for board seats,” said Jagannadham Thunuguntla, equity head of investment bank SMC Capitals.

“Institutional investors coming through the QIP route have no such hassles, it is also faster,” he added.

United Spirits’ loss-making group firm and airline operator Kingfisher Airlines which is also looking to raise funds, could be a possible factor in PE firms being hesitant to invest in the company.

United Spirits has pledged shares to secure loans for Kingfisher Airlines.

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Valuation, a major reason for the break-down of talks between it and Diageo is another factor to watch out for as its margins come under pressure from a rise in molasses prices due to the poor sugarcane crop, analysts said.

Shares of United Spirits, valued at $2.1 billion, have risen just 3.3 percent so far this year compared to a 76 percent rise in the main index.

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Banks Appease Home Loans with Festival Offers :)

Banks appease home loans with festival offers

Banks appease home loans with festival offers

Banks are coming out with festival schemes on home loans ahead of Diwali.

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The move is aimed to increase credit demand.

Meanwhile, deals include teaser rates for initial years, amid some lenders providing alternative to shift to either fixed or floating rates in following years.

Lenders like Canara Bank, Bank of Maharashtra (BoM) and Dena Bank are offering fixed-rate loans for the first five years, and afterward, linking the loans to their prime lending rates.

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However, others like Bank of India are offering fixed-rate loans for the first two years.

Besides, SBI is offering fixed rates for the first three years.

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Moreover, the competition to gain market share has resulted in a small price war.

Development Bank of Credit introduced a fixed rate of 7.95 per cent for the first year, which is the lowest for the first year, in any case. From the second year onwards, the home rates will be linked to floating rate loans.

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BoM and Dena Bank offer a fixed rate of 8 per cent for loans up to Rs 30 lakh in the first two years.

Canara Bank offers 8 per cent in the first year for Rs 30 lakh and SBI offers 8 per cent for the first five years for loans up to Rs 5 lakh.

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Summer sales during the existing year were flat due to uncertainties.

Now, builders and lenders are making a fresh pitch to push sales during Diwali through limited period offers.

Most banks have also waived off the processing fee during the festival season.

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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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Know how to make money in shares!!!

Make Money By shares

Everyone wants a piece of the stock market. And why not?

But do you know how shares reward an investor?

If you are a shareholder, there are two ways you can benefit from the profits of a company: capital appreciation or dividend.

Read on to understand how shares reward you. πŸ™‚

Dividends, dividends!

Usually, a company distributes part of the profit it earns as dividend.

Say a company earned a profit of Rs 1 crore (Rs 10 million) in 2004-05.

It keeps half that amount within the company.

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This is used for a variety of purposes β€” buying more machinery, land or raw materials, building a new factory or setting up a new office. It could even be used to repay loans.

The other half is to be distributed as dividend. πŸ™‚

Assume the company has 10,000 shares.

This would mean half the profit β€” ie Rs 50 lakh (Rs 5 million) β€” would be divided by 10,000 shares.

So each share would earn Rs 500. The dividend would then be Rs 500 per share.

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If you own 100 shares of the company, you get a cheque of Rs 50,000 (100 shares x Rs 500) from the company.

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Everyone wants a piece of the stock market. And why not?

But do you know how shares reward an investor?

If you are a shareholder, there are two ways you can benefit from the profits of a company: capital appreciation or dividend.

Read on to understand how shares reward you.

Dividends, dividends!

Usually, a company distributes part of the profit it earns as dividend.

Say a company earned a profit of Rs 1 crore (Rs 10 million) in 2004-05.

It keeps half that amount within the company. This is used for a variety of purposes β€” buying more machinery, land or raw materials, building a new factory or setting up a new office. It could even be used to repay loans.

The other half is to be distributed as dividend.

Assume the company has 10,000 shares. This would mean half the profit β€” ie Rs 50 lakh (Rs 5 million) β€” would be divided by 10,000 shares.

So each share would earn Rs 500. The dividend would then be Rs 500 per share.

If you own 100 shares of the company, you get a cheque of Rs 50,000 (100 shares x Rs 500) from the company.