Understanding the Dynamics of “Money Market”

Money market is witnessing lot of turmoil after the default by IL&FS with increased nervousness among the participants. This has resulted in higher redemption, even distress sales and so on leading to liquidity crisis further aggravating the situation. With average turnover of over Rs 6 Lakh crore daily, any uncertainly in the market is a … Continue reading Understanding the Dynamics of “Money Market”
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Monetary Policy – Beginning of Another Rate Cycle..

The decision of Monetary Policy Committee to hold back rates while changing stance from “Neutral” to “Calibrated Tightening” looks a little complex. However, more complex and interesting is the reaction of the market which was expecting a rate hike. Instead of welcoming the pause decision, Sensex went down by almost 800 points! So, what explains this? How would markets have reacted if the policy rate was hiked? A bigger fall or could it have been a thumbs up?! A brief attempt to read today’s monetary policy..

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Banking Sector Interconnectedness in India..

The latest Financial Stability Report for March ’18 released by RBI shows that interconnectedness of Indian Banking industry has come down considerably over last year. That is important to note since the rapid spread of contagion during financial crisis in 2008 was primarily due to the fact that the financial institutions in US had become highly … Continue reading Banking Sector Interconnectedness in India..
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Ordinance on NPAs – The Fight Continues…

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…
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Resolving NPAs – Understanding Asset Rehabilitation Agency..

NPAs of the banking sector, especially the public sector continue to remain high, estimated at about 12% for PSBs. While various measures have been taken to resolve the issue, none seems to have worked so far. This has led to the proposal of creating a public sector asset rehabilitation agency (PARA) by the Economic Survey, … Continue reading Resolving NPAs – Understanding Asset Rehabilitation Agency..

Monetary Policy – From "Accommodative" to "Neutral" stance..

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..

India’s Financial Sector.. (Part II)

NBFI comprises of All India financial institutions (AIFIs), Non-banking finance companies (NBFCs) and primary dealers (PDs). AIFI, currently only four in operations, largely provide long term sector specific financing. NBFCs specialize in meeting the financing needs of niche areas such as hire/purchase, commercial vehicles etc. NBFCs are categorized into two types – deposit-taking NBFCs (NBFCs-D), which are allowed … Continue reading India’s Financial Sector.. (Part II)

India's Financial Sector – Understanding the structure.. (Part I)

The role of financial sector in the development of any economy is undebatable. This is even more critical in socialistic economies like India where sector functions with multiple objectives including financial inclusion, that being the reason for nationalisation of banks in 1970s. However, the structure of the sector has become complex over last few decades … Continue reading India's Financial Sector – Understanding the structure.. (Part I)

Corporate & Financial Sector Performance – RBI Report..

Corporate sector have improved its financial position substantially during first half of 2016-17 as per the Financial Stability Report published by RBI last week. However, the impact of this on bank NPAs is still not visible. Gross NPAs of the banks has increased during the last six months and may take some more time before … Continue reading Corporate & Financial Sector Performance – RBI Report..

Demonetisation Impact – Understanding Co-operative Banks..

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..