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Posts Tagged ‘Banking in India’

No impact of rupee slide on banks: SBI chief

Posted by Admin on May 30, 2012

IMG_9746_pcs_1 Same same but different. 500 In...

IMG_9746_pcs_1 Same same but different. 500 Indian Rupee (Photo credit: artist in doing nothing)

http://in.finance.yahoo.com/news/no-impact-rupee-slide-banks-145252120.html

IANS – Mon 28 May, 2012 8:22 PM IST

Bangalore, May 28 (IANS) The rupee’s slide against the dollar had no impact on Indian banking operations though profitability of importers would be affected, State Bank of India (SBI) chairman and managing director Pratip Chaudhary said Monday.

“There is no impact of a falling rupee on banks but it (slide) would strain the profitability of our importing customers, while exporting customers will have an advantage,” Chaudhary told reporters on the margins of a bank function here.

At the same time, despite currency volatility, the bank has seen higher remittances from non-resident Indians (NRIs) in their accounts to benefit from the conversion from dollar to rupee.

Owing to external and internal factors, the Indian rupee has weakened by 23 percent during the last five months, hitting a record low of Rs.56.40 May 23 but recovered slightly to trade in the Rs.54.80-Rs.55.50 range subsequently. It was trading at Rs.55.26 Monday.

Noting that further cut in interest rate would depend on government borrowings this fiscal (2012-13), the chairman said banks were borrowing at 8.5 percent (from the RBI) and lending (primary rate) to the corporate sector at nine percent and above as the government borrowings was at eight percent currently.

“Lowering of interest rate is largely determined by the rate at which the government borrows from the central bank. If the RBI cuts rates further, banks will be in a position to lower lending rate,” Chaudhury said after donating a Rs.8.40-lakh school bus to Angavikalara Ashakirana Trustat Davangere, about 260km from here, as a gift from the bank’s regional office.

The Reserve Bank of India (RBI) April 17 reduced key rates such as repo (repurchase) rate 50 basis points (0.5 percent) to 8 percent from 8.5 percent, resulting in the reverse repurchase rate decreasing to 7 percent from 7.5 percent for this fiscal (FY 2013).

The repo rate is the interest the central bank levies on short-term borrowings by commercial banks. The reverse repo rate is the interest on short-term lending. A cut in these rates rate reduces the cost of accessing funds for lending institutions.

As the SBI’s base lending rate was at 10 percent, lowest among state-run banks, it did not lower it further after the RBI’s rate cut.

“We have, however, reduced interest rates on loans for education and purchase of cars and to small and medium enterprises (SMEs),” Chaudhury added.

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How resilient is Indian economy?

Posted by Admin on May 30, 2012

Structure of the organised banking sector in I...

Structure of the organised banking sector in India. Number of banks are in brackets. (Photo credit: Wikipedia)

http://in.finance.yahoo.com/news/resilient-indian-economy-030000550.html

Equitymaster – 18 hours ago

The growth forecasts for Indian economy have recently been revised downwards. Reeling under gross mismanagement, the Indian economy seems to be in a state of mess. However, the Finance Minister feels otherwise. He believes that India is in a better position than other economies to deal with it on account of high savings rate and domestic demand along with regulatory mechanisms.

Given the current circumstances, the picture portrayed by Finance Minister is too rosy to be real. He draws support from a huge young population and hence a robust domestic demand, a strong Indian banking system and diversified exports base. However, with disturbances in the global economy, it is only logical to expect that demand of exported goods will slow down.

The role of major Asian economies, especially India and China, in running the global growth engine can’t be undermined. These economies have the advantage of a huge chunk of young population that will keep the demand vibrant and add to the productivity. However, while China is making the right moves by shifting focus to tap the domestic demand, India seems to have landed itself in a very precarious situation.

With twin deficits gaping us wide in our face and rupee in a free fall, an optimistic tone for Indian economy looks so out of place. Our regulatory mechanisms might have worked in the past; however, the country seems to be falling too short on action in policy front. This is keeping foreign investors at bay. The absence of domestic funds and lack of foreign investment will lead to infrastructural deficit thus wasting the potential of youngsters. It is said that tough times can teach a lot. Looks like our time to learn has come. Hope the Government stops fiddling while the country is burning and wakes up to the need of reforms before it is too late.

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