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Banking Newsletter - October 29 to November 02, 2012

India Infoline News Service | Mumbai |

Though the intentions of the RBI were more or less clear for a while, expectations had built up about a possible rate cut following the action plan announced by Finance Minister P Chidambaram on the eve of the RBI policy.

Top Stories     


RBI cuts CRR by 25 bps


On the basis of an assessment of the current macroeconomic situation, the RBI has decided to: Reduce the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.75% to 4.50% of their net demand and time liabilities (NDTL) effective the fortnight beginning September 22, 2012. Consequently, around Rs170 billion of primary liquidity will be injected into the banking system.


Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0%. Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0%, and the marginal standing facility (MSF) rate and the Bank Rate at 9%... Read more


Second Quarter Review of Monetary Policy 2012-13: RBI


Over the last quarter, policymakers around the world have confronted increasingly difficult challenges. Globally, even as the growth momentum has slowed, governments have had to manage the balance between fiscal consolidation and growth stimulus amidst visible signs that the two objectives are in conflict with each other. As the advanced economies (AEs) deal with these tensions and global demand conditions weaken, emerging and developing economies (EDEs) are also slowing down… Read more


Highlights of the RBI Policy


Statement of Dr D Subbarao on Second Quarter Review of Monetary Policy 2012-13


Missing the opportunity to pleasantly surprise: Nirmal Jain


Growth is as much a challenge as inflation: FM


Though the intentions of the RBI were more or less clear for a while, expectations had built up about a possible rate cut following the action plan announced by Finance Minister P Chidambaram on the eve of the RBI policy.


The RBI decided to walk its own path and cut CRR on expected lines. However, the much needed rate cut was nowhere in sight. For a while, Chidambaram has been hinting at the need for the RBI ‘to do its part’ especially after the government announced a slew of measures in September… Read more


Why did RBI cut CRR?


Quote, Unquote


“Investors need to understand not only the magic of compounding long-term returns, but the tyranny of compounding costs”


Jack Bogle, founder & retired CEO, The Vanguard Group


“The world over, equity market has developed on the back of pension reforms and that is missing in India... It is not only about PFRDA, even the EPFO should permit the funds to invest in the securities market. Large pension funds from across the world are coming to invest in India, but our own funds are not investing”


UK Sinha, chairman, SEBI to PTI

Special Stories


Temporary relief to corporate sector from rupee depreciation: India Ratings


India Ratings believes industrial sectors such as cement, chemicals, paper, capital goods, steel and trading, which are the worst impacted by rupee depreciation, may have enjoyed a temporary reprieve from September to mid-October 2012 when the Indian rupee (INR) gained strength.


However, the rupee strength is waning to the extent that in the second half of October 2012, it was one of the most depreciated currencies against the USD. Additionally, global event risks in the next 12 to 15 months may potentially push the rupee to depreciate well past its historically observed levels… Read more


Results this Week


Union Bank Q2 net profit at Rs. 5,545 mn


Union Bank of India has posted a net profit of Rs. 5,545.60 mn for the quarter ended September 30, 2012 as compared to Rs. 3,525.20 mn for the quarter ended September 30, 2011.


Total Income has increased from Rs. 56,113.70 mn for the quarter ended September 30, 2011 to Rs. 66,556.60 mn for the quarter ended September 30, 2012.


Jammu & Kashmir Bank Q2 net profit at Rs. 2,695.30 mn


Jammu & Kashmir Bank Ltd has posted a net profit of Rs. 2695.30 mn for the quarter ended September 30, 2012 as compared to Rs. 1996.50 mn for the quarter ended September 30, 2011.


Total Income has increased from Rs. 12268.20 mn for the quarter ended September 30, 2011 to Rs. 15915.10 mn for the quarter ended September 30, 2012.


IDBI Bank Q2 net profit at Rs. 4.84 bn


IDBI Bank reported a net profit of Rs. 911 crore for the six months ended September 30, 2012 against a net profit of Rs. 851 Crore in the corresponding period of previous year. IDBI reported a net profit of Rs.484 Crore for the quarter ended September 2012 as against Rs.427 Crore for the quarter ended June 2012 and Rs.516 Crore in the corresponding quarter ended September 2011 of previous year… Read more


Comments on RBI Policy


IndoStar Capital on RBI Q2 Monetary Policy


Given the high inflation regime, RBI continues to remain cautious in finding the right balance between growth and inflation. Liquidity concerns in the system have been addressed through a cut in the CRR by 25 bps.         


The NBFC sector which plays a very substantial role in providing debt capital to the Indian industry, would keenly await the draft guidelines for NBFCs, based on the Thorat committee report… Read more


CRR cut of 25 bps would release Rs. 17,500 crore in the system: Federal Bank


CRR cut of 25 bps would release Rs 17,500 crores in the system. Even if deployed at average 10% or so, would add Rs 1,750 crores annual to the bottom line of the banking system. Being festival season, the currency with public will increase and this cut may not be sufficient to meet the deficit. One can expect OMO buying of G-Secs also in the near future… Read more


RBI may infuse Rs. 175 bn into our banking system: Cushman & Wakefield


“Given the stressed liquidity scenario in the economy, RBI has announced a cut in Cash Reserve Ratio (CRR) by 25 basis point from 4.5% to 4.25%.


This step by RBI is expected to infuse INR 175 billion into our banking system, which is expected to have a positive impact on the real estate sector as some part of it will flow into the industry, which is already facing a liquidity crunch… Read more  


RBI to reduce repo rate by 50 bps in Q4 FY13: DSP Blackrock MF


While the Reserve Bank of India has taken note of the recent steps taken by the government to address the fiscal deficit and to foster economic growth, it has decided to keep the Repo Rate unchanged primarily to anchor inflationary expectations. This possibly highlights the RBI’s continued focus on inflationary pressures, which are likely to remain around 7.5% to 8% till December 2012.


Significantly, RBI has provided a forward looking assessment in the form of reasonable likelihood of further easing in Q4 of FY2013. Market participants interpret this as a possible timeframe for repo rate cuts as this period will likely coincide with declining headline inflation and further clarity on the fiscal front… Read more


Possibility of interest rates moving down is higher: Franklin Templeton Investments


At the last policy review, the central bank made it clear that it was concerned about inflation and twin deficits, and the lack of progress on subsidies and fiscal consolidation.


The government had over the last few months addressed some of these concerns through new reforms, hike in diesel prices, relief to the power sector and more importantly, a fiscal consolidation roadmap. As a result, there were increased expectations of an interest rate cut.


However, RBI appears to have felt that these measures, while positive, will take some time to come into effect and focused on inflation/deficits… Read more


Monetary policy lacks aggressive action: ASSOCHAM


Reacting to the Monitory Policy announcement, ASSOCHAM President, Mr Rajkumar Dhoot, said “the industry is disappointed that the key policy rate, the repo rate, has not been reduced and rather all through, the focus continues to be on managing inflation with the growth continues to suffer.”… Read more


RBI hints at rate cut in early 2013: CRISIL


The Reserve Bank of India (RBI), in its monetary policy review on October 30th, reduced the cash reserve ratio (CRR) by 25 basis points (bps) to 4.25 per cent while keeping the repo rate unchanged at 8 per cent. Despite revising its 2012-13 gross domestic product (GDP) growth forecast sharply downwards to 5.8 per cent from 6.5 per cent projected in July 2012, the central bank refrained from reducing the repo rate… Read more


Cut repo-rate to boost investments, industry sentiments: PHD Chamber


With escalation in downside risks to growth emanating from the global macroeconomic environment and rise in domestic risks due to halted investment demand, moderation in consumer spending, continuing erosion in export competitiveness accompanied by weakening business and consumer confidence, the economy seems to be caught in a downward spiral… Read more


To enhance liquidity, RBI is expected to do more: Tata MF


RBI has cut the CRR by 25 basis points releasing Rs. 17,500 crore in the system. This was lower than the market expectations of 50 basis points. To enhance liquidity in the system, the RBI is expected to do more. This should keep G-Sec yields in a range… Read more


Increase in provisions for restructured assets to add burden on banks: ICRA


While the guidance provided by the Central bank is more dovish than in the recent past, we expect further cuts in the Repo Rate to be limited to 50 bps in the remainder of 2012-13, with growth-inflation dynamics influencing the timing of the commencement of the same… Read more


Missed opportunity from the growth perspective: Motilal Oswal


RBI eased CRR to help the liquidity situation that has shown first signs of stress at the beginning of the busy season. However, it missed another occasion to ease policy rates and build momentum around the slew of measures announced by government that included a fiscal consolidation roadmap for the 12th Plan period… Read more

Repo rate has not been touched; CRR has been lowered: CARE Ratings


Broadly, repo rate has not been touched while CRR has been lowered. Given the lower GDP growth projection of 5.8% and higher inflation projection of 7.5%, rate cuts can be expected only in the fourth quarter when inflation would probably come down. The CRR cut is more of a signaling tool which banks may choose to take, and by itself will not really change things significantly. In short, no real surprises for the markets.


Improvement in bank margins would be offset by requirement on restructured loans: Bharti AXA Life


As expected RBI cut CRR by 25 bps while the decision to keep policy rates unchanged seems to have disappointed markets given recent government actions. The CRR cut was more to preempt liquidity tightness due to the festival related currency demand… Read more


Equity markets can be seen as a buying opportunity: Kotak Life


Both the equity and debt markets over the last couple of weeks, had built in expectations of a repo rate and CRR cut, based on some initiation of policy action from the government… Read more


Repo rate cut has disappointed the market


RBI slashed the CRR by 25 bps to 4.25%, but left the repo rate unchanged. This deferment of the repo rate cut has disappointed the market to certain extent… Read more


New Appointments


BNP Paribas Wealth appoints Samir Bimal as CEO for India onshore business


BNP Paribas Wealth Management announced that Samir Bimal has joined BNP Paribas Wealth Management India as Managing Director and Chief Executive Officer of BNP Paribas Investment Services India Private Limited, which is the BNP Paribas Wealth Management entity in India… Read more  


HDFC Bank hires Ajay Gupta, Akshay Dixit & Abhishek Sharma in investment banking


HDFC Bank has made senior level appointments in its investment banking division. Ajay Gupta, Akshay Dixit and Dr Abhishek Sharma have been hired to lead the infrastructure finance, financial services, healthcare and pharmaceutical verticals respectively. The infusion of senior talent is aimed at further developing the investment banking operations at HDFC Bank by adding strategic depth across these key business verticals… Read more


Dr Surjit Bhalla joins BluFin as senior advisor


BluFin, the Financial Information and Content Company, announced the appointment of Dr. Surjit S. Bhalla as Senior Advisor. In this role, Dr. Bhalla will provide advice to BluFin on product refinements, marketing and eco-system development efforts that the company is engaged in… Read more


New Launches


ICICI Bank launches Home Loan product with Cashback offer


ICICI Bank Ltd, India's largest private sector bank, announced the launch of a new Home Loan product with “Cashback” offer for new customers. This offer in the home loan industry allows a customer to get 1% cashback on every EMI for the entire tenure of the loan. As a part of this offer, customers will be provided the option of renewable fixed interest rate for the entire tenure, again making it a very unique proposition in home loan industry… Read more


BSFL, Royal Sundaram launch online sale of health insurance product


Bhartiya Samruddhi Finance Ltd (BSFL), the flagship company of the BASIX Social Enterprise Group and Royal Sundaram Alliance Insurance Company Limited, pioneered in launching a web enabled solution at the Common Service Centres (CSCs) of BSFL that will enable the rural customers to receive the policy document of health insurance product instantly… Read more


Ace Commodity Exchange launches future trading in RBD Palmolein


Ace Derivatives and Commodity Exchange Ltd (ACE) announced that it will commence futures trading in RBD Palmolein from November 5, 2012. ACE is currently launching 3 contracts expiring in the months of November, December and January… Read more


Thomas Cook collaborates with MasterCard


Thomas Cook (India) Ltd, India’s largest integrated travel and travel-related financial services company, reaffirms its position as an undisputed market leader in the Foreign Exchange business with the launch of its ‘Borderless Prepaid Card’ in collaboration with MasterCard Worldwide, a global payments and technology company. This makes Thomas Cook (India) Ltd the first non-banking entity in India to launch a Prepaid Foreign Exchange Travel Card… Read more


ICICI Bank opens second branch in Hong Kong

ICICI Bank, India's largest private sector bank, has launched its second branch in Hong Kong. The new branch is located at Shop 102-103, Level 1, Chuang’s Tower, 30-32 Connaught Road, Central - the heart of the financial centre in Hong Kong… Read more


IDBI Bank reduces floating Interest rates on home loans


IDBI Bank has decided to reduce its interest rates on new floating rate Home Loans above Rs. 30 lakh by a further 25 basis points (bps). Loans up to Rs. 75 lacs would now be available at Base Rate (BR) - currently at 10.50% p.a- while on such loans above Rs. 75 lakh, the pricing would be Base Rate (BR) plus 25 bps… Read more


Yatra.com, Standard Chartered launch Platinum Credit Card


Standard Chartered launched the ‘Standard Chartered Yatra Platinum Credit Card’, in collaboration with Yatra.com, one of the leading travel portals in India. The card offers a suite of benefits to credit-card customers when they make travel reservations on Yatra.com besides their regular shopping and other spends… Read more


Domestic News


RBI to intervene if growth falls below 5.5%      


The Reserve Bank of India (RBI) on Thursday said it will intervene if economic expansion falls below the current levels of 5.5%. The central bank on Tuesday lowered its projection for the India’s economic growth to 5.8% from its earlier estimate of 6.5% due to rising uncertainty in global economy and sluggish investment and consumption.


RBI Governor D Subbarao also expects that the economy will move up from the current quarter. Mr Subbarao was responding to questions during the customary post-policy conference call with economists and analysts… Read more


Repo cut unlikely in December also; but significant easing in Q4 probable


With RBI’s unwavering focus on managing inflation and inflation expectations; we assign a low probability to repo rate cut in December mid-quarter review. However, implementation of recent policy initiative, progress towards fiscal consolidation and a likely retracement of inflation are expected to provide significant room for monetary easing in Q4 FY13.


RBI may cut interest rate in January: PMEAC


The PMEAC (Prime Minister's Economic Advisory Council) on Tuesday said that RBI (Reserve Bank of India) is likely to cut interest rate in January as inflation is unlikely to decline soon, the media reports said.


According to PMEAC Chairman C Rangarajan, RBI has taken a cautious stand in its monetary policy as inflation continues to remain high, the media reports added…

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