The profitability of NBFCs is derived by charging higher rate of interest (up to a ceiling governed by RBI) which customers agree to pay since they have to meet less stringent norms and do not have access to any other source of capital. Further, NBFCs are not governed by regulatory requirement such as maintaining Statutory Liquidity Ratio (SLR) … Continue reading Understanding NBFCs (Part II)
The default by IL&FS and its group companies has brought NBFCs (Non Banking Finance Companies) into focus again. These companies do not deal with public money (probably the reason why they did not receive much attention so far) but play an important role in financial intermediation, both in terms of fund sourcing and deployment. NBFCs … Continue reading Understanding NBFCs (Non Banking Finance Companies) – I
The default by IL&FS and group companies in their debt obligation signals the spread of NPA mess beyond the banking space to aggregate financial services sector. Even though the default is a result of continued stress in the infrastructure sector, a highly leveraged balance sheet with consolidated liabilities of over Rs 1 lakh crore (FY18) … Continue reading IL&FS Default – Analysing the Crisis
The amalgamation of Bank of Baroda, Vijaya Bank and Dena Bank announced yesterday comes more than a year after the last successful merger in the PSB space. The amalgamation involves merger of two PSBs having less than 2% market share with another mid-sized bank to create the country’s second largest public sector bank. However, there … Continue reading Analyzing Amalgamation of BoB, Vijaya Bank & Dena Bank
Bank’s NPA which remains at over Rs 10 lakh crore for the quarter ended June 18 continues to haunt the sector. The problem is even more severe for Public Sector Banks which account for over 80% of these NPAs. So, how bad is the problem and what are the core factors leading to this mess? A … Continue reading Understanding Banks’ NPA (Part I)
The promulgation of the Ordinance yesterday for resolution of Non Performing Assets (NPAs) is another measure to tackle the crisis gripping the banking sector. Yet, the ordinance could be another dead ball and nothing that one can hope would work wonders due to lack of market participants. A look at the implication of the ordinance… An Ordinance is … Continue reading Ordinance on NPAs – The Fight Continues…
Belying the expectations of a rate cut, the monetary policy committee (MPC) has not only decided to keep the rates unchanged in its meeting today but more importantly, has shifted its stance from “accommodative” to “neutral’. This is “to assess the transitory effects of demonetization on inflation and the output gap”. The shift marks a significant … Continue reading Monetary Policy – From “Accommodative” to “Neutral” stance..
The interconnectedness of banking and financial sector is not widely understood or discussed, yet a high risk issue. The rapid spread of contagion during financial crisis in 2008 was primarily due to the fact the global financial market has become highly interconnected and the distress in initial few entities led to their failure in meeting … Continue reading Banking Sector Interconnectedness in India…
After growing at over 18% CAGR during FY08-12, bank credit growth came down sharply to 11% during FY12-16 and may fall to single digit in FY17. Although the decline is largely due to economic slowdown, a significant part is also due to shifting priorities with increase in NPAs of specific sectors. Here is a look … Continue reading Banks Loan Composition – An Overview..
Demonetisation has brought focus on currency in circulation and different types of money supply. Even though currency in circulation has come down, other forms of money supply do not show similar decrease. How is that so and what are the characteristics and significance of different types of money supply. A look at the same.. The first … Continue reading Money Supply – Understanding the Different Forms..