While the nation adjusts to the new normal arising out of the historic demonetization and debates its merit/demerit, it also has another important fall-out. The move can lead to huge bonanza for government in the form of sharp increase in the transfer from RBI. This would be equivalent to the amount of Rs 500 and Rs 1,000 notes that does not come up for replacement. Let’s see how..
Reports of Co-operative banks (CBs) being misused to turn black money into white has led RBI to restrict their transaction in old currencies. While these banks play an important role in meeting the needs of smaller section of society, particularly rural area, they certainly pose significant risk, many of them still running without computerisation. A … Continue reading Demonetisation Impact – Understanding Co-operative Banks..
The announcement by honourable Prime Minister to demonetise 500 and 1,000 rupee currency notes is truly unprecedented, probably beyond anything that the nation has witnessed since the imposition of emergency. While demonetisation has happened earlier too in 1978, the scale at which it is being done now is much higher. What is even more amazing … Continue reading The "Surgical Strike" on Black Money..!
The trigger for busting of the housing bubble can be traced to increase in inventory of unsold homes with increasing construction to cash-in on the boom. The unsold inventory was up almost 40% in Sept’06 over previous year. This was accompanied by transition of loans from ‘interest only’ and teaser rates applicable for 12-24 months to higher rates … Continue reading Revisiting Subprime Crisis – Part II..
Government’s notification last week to set up a public debt management cell (PDMC), to be converted into PDMA in two years, is one more step ahead in financial sector reforms. Contrary to perception, the idea had been floating around for more than a decade with a committee submitting its report in 2008. The only difference … Continue reading Understanding Public Debt Management Agency..
Global economy continues to remain under firm grip of debt as per an IMF report published earlier this week. As per the report, global non-financial debt has risen to an all time high of $152 trillion whereas Debt/ GDP ratio stands at 225%. And the culprit, it says, continues to be private sector debt in advanced … Continue reading How bad is Global debt overhang – IMF Report.
The MPC (Monetary Policy Committee) decision to cut rate by 25 basis points in its first ever meeting today, also the first under the new governor Dr Urjit Patel, appears not entirely convincing from inflation control perspective. Yet this would bring cheers to both corporate and retail borrowers and hopefully, the clamour for rate cut would … Continue reading RBI rate cut – Is it justified.??
Dr Raghuram Rajan, who demitted office on Saturday leaves behind a rich legacy apart from the huge popularity he enjoyed. Even though he may be remembered as an inflation fighter – something for which he also received maximum flak – his contribution lies equally in financial sector reforms that he pushed through in most of the areas. … Continue reading The Legacy of Raghuram Rajan..
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 may 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 NBFCs – An Overview.. (Part II)
RBI issued master guidelines on functioning of NBFCs (Non Banking Finance Companies) last week. While the guidelines are voluminous and beyond the scope of this piece, it does bring light to a sector which is not very big but plays an important economic role, yet, somewhat shrouded in mystery due to inadequate understanding of their … Continue reading NBFCs – An Overview.. (Part I)