Indian Banks & Financial System
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Levying of user charges by SBI
RAJYA SABHA
State Bank of India (SBI) has reported that no charges have been levied for cheque book, minimum balance etc. at other branches. A minor charge for deposit of cash at non-home branch and updation of passbook at non-home branch are levied by the bank as deposit of cash at non- home branch amounts to remittance which the customer would have paid for anyway by way of a draft. Updation of passbook would also fall in the same category.
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Prolific underground banker, Naresh Jain arrested in Delhi
http://www.timesonline.co.uk/tol/news/w ... 949339.ece
A man suspected of being one of the world’s most prolific underground financiers has been arrested in Delhi after a year-long international manhunt.
Naresh Jain, 50, who denies any illegal activity, was arrested on Sunday on suspicion of laundering millions of pounds a day through the hawala system for criminals, including members of al-Qaeda and British drug traffickers, according to Indian and British police.
Mr Jain, a Dubai-based Indian national also known as Naresh Patel, was being tracked by detectives in London, the US, the Netherlands, Italy, Spain and the United Arab Emirates when he was seized by the Indian Narcotics Control Bureau.
http://www.timesonline.co.uk/tol/news/w ... 949339.ece
A man suspected of being one of the world’s most prolific underground financiers has been arrested in Delhi after a year-long international manhunt.
Naresh Jain, 50, who denies any illegal activity, was arrested on Sunday on suspicion of laundering millions of pounds a day through the hawala system for criminals, including members of al-Qaeda and British drug traffickers, according to Indian and British police.
Mr Jain, a Dubai-based Indian national also known as Naresh Patel, was being tracked by detectives in London, the US, the Netherlands, Italy, Spain and the United Arab Emirates when he was seized by the Indian Narcotics Control Bureau.
Re: Indian Banks & Financial System
Desi guy starts High-Frequency Trading company:
http://www.technologyreview.com/computing/24167/
Will companies like these drive high-speed computing and high-speed telecom to new heights?
They always need cutting-edge tech to stay ahead of their game.
http://www.technologyreview.com/computing/24167/
Will companies like these drive high-speed computing and high-speed telecom to new heights?
They always need cutting-edge tech to stay ahead of their game.
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Banks reject RBI move to dump BPLR-based loans
A committee led by RBI official Deepak Mohanty to review the BPLR — the rate at which banks lend to its most creditworthy customers — system had suggested its replacement with a base rate in its recommendations submitted in October. The base rate, the rate below which it will not be viable for banks to lend, takes into account the interest rate on one-year retail deposits below Rs 15 lakh, the statutory liquidity ratio, cash reserve ratio and the average return on networth. The committee had invited suggestions from all stake holders before finalising the norms.
The illustrative base rate for the financial year ended March 2009 calculated by the RBI was 8.55%. Bankers said the base rate system would have increased the cost of funds availed by corporates by close to 3 percentage points and led to discontinuation of special offers on home and auto loans. The banks have been lending to cooperates for as low as 6% and teaser rates of 8% for home loan buyers for the first year.
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RBI puts banks on notice again over MF exposure
The Reserve Bank of India (RBI) has, for the second time in a fortnight, sought details from banks about their investments in mutual funds, treasury officials at several banks said. The banking regulator has yet again made it clear in its communication that it is against banks handing over their surplus money to fund houses, officials told ET.
RBI’s concern stems from the fact that banks’ investments in mutual funds have risen even after it first made its displeasure known about these in the October mid-term policy review. This number rose by Rs 8,753 crore to Rs 1,69,236 crore in the month that ended on December 4, data from RBI show.
In the latest letter, the RBI has asked banks to give data on the average, lowest and the peak level exposure to mutual funds at various points of time. The regulator specifically sought data about their quarterly exposure since March 2009 and the third quarter (September to December) exposure to mutual funds, said treasury officials who requested they not be quoted.
The RBI also wants data on certificate of deposits (CD) issued by banks which are directly subscribed by mutual funds. CDs are money market instruments sold by banks to raise short-term funds. This money, too, is often routed back to mutual funds through investments in their liquid funds.
The regulator has also sought specific details about the money lent by mutual funds to banks through market repo or Collateralised Borrowing & Lending Obligations (CBLO) route. Both are markets where money is lent and borrowed on an overnight basis.
In mid-December, the RBI had officially asked banks about their aggregate exposure in mutual funds schemes and the steps that they have taken to curtail this figure although it was in the mid-term policy review in October 2009 that RBI governor D Subbarao had first expressed concern about banks parking surplus money in mutual funds.
The Reserve Bank of India (RBI) has, for the second time in a fortnight, sought details from banks about their investments in mutual funds, treasury officials at several banks said. The banking regulator has yet again made it clear in its communication that it is against banks handing over their surplus money to fund houses, officials told ET.
RBI’s concern stems from the fact that banks’ investments in mutual funds have risen even after it first made its displeasure known about these in the October mid-term policy review. This number rose by Rs 8,753 crore to Rs 1,69,236 crore in the month that ended on December 4, data from RBI show.
In the latest letter, the RBI has asked banks to give data on the average, lowest and the peak level exposure to mutual funds at various points of time. The regulator specifically sought data about their quarterly exposure since March 2009 and the third quarter (September to December) exposure to mutual funds, said treasury officials who requested they not be quoted.
The RBI also wants data on certificate of deposits (CD) issued by banks which are directly subscribed by mutual funds. CDs are money market instruments sold by banks to raise short-term funds. This money, too, is often routed back to mutual funds through investments in their liquid funds.
The regulator has also sought specific details about the money lent by mutual funds to banks through market repo or Collateralised Borrowing & Lending Obligations (CBLO) route. Both are markets where money is lent and borrowed on an overnight basis.
In mid-December, the RBI had officially asked banks about their aggregate exposure in mutual funds schemes and the steps that they have taken to curtail this figure although it was in the mid-term policy review in October 2009 that RBI governor D Subbarao had first expressed concern about banks parking surplus money in mutual funds.
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"No Go" for Islamic Bank: Kerala High Court
In a devastating blow to the Socialist Republic Govt. of Kerala, currently managed by the truely secular CPI(M) and CPI combine faced a set back in their attempt to make the socialist republic more "secular"
. The goverment was planning to start an "Islamic bank" whose operating principles would be based on Sharia laws.
IIRC the court has also asked for the opinion of Reserve Bank of India, on forming of such banks. It took Subramaniam Swamy the ex-law minister to put a case in court and get this idea stopped.
Aside: I am waiting for some new theory to be propped up by communists that Islamic banks, all said and done are also based on the communist/marxist thought processes, and hence it is truely "secular".![Razz :P](./images/smilies/tongue.gif)
In a devastating blow to the Socialist Republic Govt. of Kerala, currently managed by the truely secular CPI(M) and CPI combine faced a set back in their attempt to make the socialist republic more "secular"
![Rolling Eyes :roll:](./images/smilies/icon_rolleyes.gif)
IIRC the court has also asked for the opinion of Reserve Bank of India, on forming of such banks. It took Subramaniam Swamy the ex-law minister to put a case in court and get this idea stopped.
Aside: I am waiting for some new theory to be propped up by communists that Islamic banks, all said and done are also based on the communist/marxist thought processes, and hence it is truely "secular".
![Razz :P](./images/smilies/tongue.gif)
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what exactly is an Islamic bank and how does it differ from a regular bank ?The goverment was planning to start an "Islamic bank" whose operating principles would be based on Sharia laws.
Re: Indian Banks & Financial System
^^^^
http://en.wikipedia.org/wiki/Islamic_banking
Basically, Islamic Banks can't charge or pay interest per Sharia Law, so they find creative ways to get around this restriction. For instance, when you deposit money, you're officially registered as an owner of some part of the bank (say the building that the bank is operating in) and they pay you "rent" for the building you "own" instead of interest. Or they may give you a "gift" every few months for putting your money in their bank. This "gift" is put into your savings account, but since it is a voluntary gift and it is not guaranteed by the bank that you'll get a "gift" every N months officially, this is not interest.
Similarly when you get a loan to buy something, the bank will officially buy the item from the seller and then re-sell it to you for a profit, allowing you to pay in installments. They retain the ownership until the loan is fully paid and then transfer it to you. Since they can't officially charge interest, they don't charge for late payments either.
http://en.wikipedia.org/wiki/Islamic_banking
Basically, Islamic Banks can't charge or pay interest per Sharia Law, so they find creative ways to get around this restriction. For instance, when you deposit money, you're officially registered as an owner of some part of the bank (say the building that the bank is operating in) and they pay you "rent" for the building you "own" instead of interest. Or they may give you a "gift" every few months for putting your money in their bank. This "gift" is put into your savings account, but since it is a voluntary gift and it is not guaranteed by the bank that you'll get a "gift" every N months officially, this is not interest.
Similarly when you get a loan to buy something, the bank will officially buy the item from the seller and then re-sell it to you for a profit, allowing you to pay in installments. They retain the ownership until the loan is fully paid and then transfer it to you. Since they can't officially charge interest, they don't charge for late payments either.
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I will anyday prefer an Islamic Bank over these parasitic western banks such as Citibank, HSBC,Barclays etc . Islamic banks are good for credit cards and loans.
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How do they manage to provide "credit" cards, when the whole concept of Islamic banking is against charging interests etc.? Do they charge some amount in advance which covers the interest as well? (in another name).durgesh wrote:Islamic banks are good for credit cards and loans.
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A paki general's enlightened son had actually explained me whole concept a few years back during university days. I dont remember it though. I think there is heavy penalty for failing to keep up your agreed terms and conditions. This is how it works, generally the profit of these bank is minimal !
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They call it "profit rate".Sachin wrote:How do they manage to provide "credit" cards, when the whole concept of Islamic banking is against charging interests etc.? Do they charge some amount in advance which covers the interest as well? (in another name).durgesh wrote:Islamic banks are good for credit cards and loans.
![Laughing :lol:](./images/smilies/icon_lol.gif)
Regarding loans,i had a loan from the Islamic bank as well. It has six instalments insured against jobloss. If you lose your job, six instalments will be waived . I don't know any western bank that has such kind of scheme. While other banks were charging 10-12% annual interest rate, the Islamic bank lent me at 5% annual "profit rate" .
![Razz :P](./images/smilies/tongue.gif)
So, my experience is go with Islamic banks. No rip-offs, no hidden fees, no dancing midstream and no pre-payment penalty. If you prepay your loan , they will deduct the "profit" of the remaining tenure as opposed to prepayment penalty.
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Beware! Bank frauds are on the rise
If you are one of those who like playing it safe with hard-earned money and would rather stick to bank deposits, watch out. No lesser authority than the Reserve Bank of India says that bank frauds are on the rise. What's more, public sector banks, perceived to be safer bets than private banks, beat the latter in the swindling game.![]()
Crores of rupees are disappearing from bank accounts or are being used deceitfully everyday. Recently, a bank branch manager recklessly sanctioned housing loans for the purpose of flats. On spot verification by the Central Bureau of Investigation (CBI), on the behest of the bank's chief vigilance officer, it transpired that the three storeyed building was constructed as a hotel.
Further investigation revealed that the branch manager had sanctioned many other housing loans against fabricated agreements of sale in fictitious names. By the time, the investigation was completed the bank had been duped of Rs 25 cr.
"This is an alarming scenario. Afterall, it is people's hard earned money. Banks the worldover keep a tight vigil as any slip will bring them down and even impact the economy," says Mayur Joshi, chair-man of Indiaforensic Research Foundation, a Pune-based consultancy which conducts fraud examination and forensic accounting in India.
Information collated by the CBI which SundayET is in possession of, bank frauds—the central investigation body tracks frauds valuing only a crore or above—amount doubled in 2008-09 from Rs 659 cr in 2007-08 to Rs 1,404 cr.
The number of such frauds also rose from 177 to 212. "The focus is on expeditious completion of investigation, close follow up of under-trial cases to conclude them without delay," says a CBI spokesperson. The CBI conducts its investigations through differ-ent wings--the Anti-Corruption Bureau, Bank Securities & Fraud Cell and the Economic Offences Wing.
The rising number of frauds has also got the central bank concerned. "It's high time banks strengthen their fraud management practices. In their bid to quickly expand and grow, they are losing focus on risk control," a senior official of the bank, who did not want to be named, says.
Not that the RBI isn't aware of the rising trend. In September last year, it had blamed senior management at banks for their failure to have proper risk management mechanism. It had then advised the banks to form a special committee chaired by their CEOs, who could oversee fraud investigation and make monitoring centralised rather than leaving it to the regional centres.
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Union Bank to raise upto $500 million in Feb
State-owned, Union Bank of India plans to raise $300-500 million through a bond issue next month to support its business expansion plans, a top official said on Wednesday.
The money will be raised under its Medium Term Notes programme and the bonds will have a maturity of five years, Union Bank of India's chairman and managing director, MV Nair told reporters in Mumbai today.
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The only difference between the Islamic banks and other banks being, Islamic banks charge and pay interest in an indirect form, which increases the cost and complexity. It is hypocracy, like the rest of sharia. Stupidity from start to end.durgesh wrote:I will anyday prefer an Islamic Bank over these parasitic western banks such as Citibank, HSBC,Barclays etc . Islamic banks are good for credit cards and loans.
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RBI doesn't have info on heavy penalty on credit-card defaults
In reply to a question "Is RBI aware that banks are charging heavy penalties also in addition to extra-ordinary interest rate on credit card default payments? Statements are deliberately not mailed to earn abnormal interest rates and penalties on payment default" sent through RTI, the bank said it does not have any information.
"We do not have the information,"
Thomas Mathew, Deputy General Manager, Reserve Bank of India, said in his reply.
RTI activist S C Agrawal also sought to know,
"Is RBI aware that banks impose overlimit charges instead of blocking payment by credit cards beyond their sanctioned limit?" to which the RBI again said it did not have any information.
The RBI, however, said that banks have been advised through a circular dated May 7, 2007 to prescribe a maximum ceiling rate of interest, including processing and other charges, in respect of small value personal loans and loans similar in nature.
"The above instructions are applicable to credit card dues also," it said while replying on the steps taken by it to have uniform rules regarding penalties and interest rates in regard to credit cards issued by different banks.
The bank, quoting the circular, said, "In case, banks/Non Banking Finance Companies charge interest rates which vary based on the payment/default history of the card holder, there should be transparency in levying of such differential interest rates."
The RBI said banks should inform the cardholder about the higher interest charged on account of payment or default history.
"For this purpose, the banks should publicise through their web site and other means, the interest rates charges to various categories of customers. Banks/NBFCs should upfront indicate to the credit card holder, the methodology of calculation of finance charges with illustrative examples," the reply said.
The RBI, however, said as such the maximum interest rate to be charged by banks is left to the discretion of individual banks which is to be fixed with the prior approval of their respective Boards.
{RBI is a pssive promoter of looting and harassing of the poor creditcard holders , these abduls have no idea how the interest is calculated on the credit cards , it's worse than cmpounding
}
In reply to a question "Is RBI aware that banks are charging heavy penalties also in addition to extra-ordinary interest rate on credit card default payments? Statements are deliberately not mailed to earn abnormal interest rates and penalties on payment default" sent through RTI, the bank said it does not have any information.
"We do not have the information,"
![Laughing :lol:](./images/smilies/icon_lol.gif)
RTI activist S C Agrawal also sought to know,
![Laughing :lol:](./images/smilies/icon_lol.gif)
![Cool 8)](./images/smilies/cool.gif)
The RBI, however, said that banks have been advised through a circular dated May 7, 2007 to prescribe a maximum ceiling rate of interest, including processing and other charges, in respect of small value personal loans and loans similar in nature.
"The above instructions are applicable to credit card dues also," it said while replying on the steps taken by it to have uniform rules regarding penalties and interest rates in regard to credit cards issued by different banks.
The bank, quoting the circular, said, "In case, banks/Non Banking Finance Companies charge interest rates which vary based on the payment/default history of the card holder, there should be transparency in levying of such differential interest rates."
The RBI said banks should inform the cardholder about the higher interest charged on account of payment or default history.
"For this purpose, the banks should publicise through their web site and other means, the interest rates charges to various categories of customers. Banks/NBFCs should upfront indicate to the credit card holder, the methodology of calculation of finance charges with illustrative examples," the reply said.
The RBI, however, said as such the maximum interest rate to be charged by banks is left to the discretion of individual banks which is to be fixed with the prior approval of their respective Boards.
{RBI is a pssive promoter of looting and harassing of the poor creditcard holders , these abduls have no idea how the interest is calculated on the credit cards , it's worse than cmpounding
![Evil or Very Mad :evil:](./images/smilies/icon_evil.gif)
![Twisted Evil :twisted:](./images/smilies/icon_twisted.gif)
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Summary of Economic Survey 2009-10
The Economic Survey presented to Parliament today says that the economy has bounced back from the global economic slowdown and is on its way to the growth path of 9 per cent. The CSO estimate of 7.2 per cent GDP growth for 2009-10 reflects the fast paced recovery given the Index of Industrial Production (IIP) posting a record 16.8 per cent year-on-year growth during the month of December 2009. The Survey says that the economy has responded well to the policy measures undertaken in the wake of global financial crisis. It says, the adverse impact due to the delayed and sub-normal monsoon has been contained to a large extent and a better than average rabi agricultural season is expected. The Survey says that the recovery is well founded with pick up in merchandise exports, capital flows and non-bank food credit.
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Infant deaths to fall significantly in 3yrs: Survey
New Delhi, Feb 25 (PTI) India's infant mortality rate is expected to witness a significant drop in three year's time with National Rural Health Mission taking roots, the Economic Survey said.
According to the survey tabled in Parliament today, the infant mortality rate will fall below 30 in every 1,000 by 2012, from 53 per 1,000 currently.
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Rs 400-crore fraud by Citibank employee
What has come as a surprise to banking circles is the blatant nature of the fraud that began with Puri forging a Sebi document that named a Citibank account as the custodian account for a scheme that indicated lucrative returns. In the first leg of the transaction, investors put money in the scheme favouring the custodian account. In the second leg, the money moved to accounts of friends and relatives of Puri. Subsequently, the money trail leads to brokerages like Religare, Bonanza and IIFL that executed stock trades and ran the demat accounts.
A few firms belonging to Munjal-controlled Hero group are learnt to have invested close to Rs 200 crore in the sham investment scheme that promised a high rate of return. There is no evidence at this stage to suggest the Hero group official was acting in connivance with Shivaraj Puri, the disgraced Citibanker who devised the fraudulent scheme. The police has issued a ‘lookout’ notice alerting airports to track Puri, who is currently absconding, and other suspects involved in the fraud.
What has come as a surprise to banking circles is the blatant nature of the fraud that began with Puri forging a Sebi document that named a Citibank account as the custodian account for a scheme that indicated lucrative returns. In the first leg of the transaction, investors put money in the scheme favouring the custodian account. In the second leg, the money moved to accounts of friends and relatives of Puri. Subsequently, the money trail leads to brokerages like Religare, Bonanza and IIFL that executed stock trades and ran the demat accounts.
A few firms belonging to Munjal-controlled Hero group are learnt to have invested close to Rs 200 crore in the sham investment scheme that promised a high rate of return. There is no evidence at this stage to suggest the Hero group official was acting in connivance with Shivaraj Puri, the disgraced Citibanker who devised the fraudulent scheme. The police has issued a ‘lookout’ notice alerting airports to track Puri, who is currently absconding, and other suspects involved in the fraud.
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RBI wants banks to shift to chip-based ATMs to check fraud
However, I am not so sure about PIN based swiping for Credit Cards. That seems to be an additional hassle
chip based cards should be safer, and they are cheaper too these days. some banks in US are already issuing chip based credit cards....
"It is recommended that RBI may consider moving over to chip-based cards along with requiring upgradation of necessary infrastructure like ATMs/ POS terminals in this regard in a phased manner," said the report of the working group headed by RBI Executive Director G Gopalakrishna.
While pitching for chip-based cards, the report said, it is difficult to copy and make their duplicates as compared to the existing magnet strips ones, which are currently used.
...
...
It has also suggested that for debit or credit card transactions at the POS (point of sale) terminals, PIN-based authorisation should be put in place instead of the signature-based system.
The non-PIN based POS terminals, it added, should be withdrawn in a phased manner.
...
On cloud computing, the report said security and legal issues on it are still evolving and "a bank needs to be cautious and carry out due diligence to assess the risks comprehensively before considering cloud computing."
Cloud computing, which is internet-based, facilitates software applications and other technological resources to be shared online.
...
...
However, I am not so sure about PIN based swiping for Credit Cards. That seems to be an additional hassle
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Pay Income Tax at the ATM
HDFC Bank, a leading private sector banks in the country, on Tuesday launched a service for its customers whereby they can pay their income tax through an ATM. The service was flagged off by C R Sundaramurti, Controller General of Accounts, Union Ministry of Finance, at the Bank’s Deer Park branch in New Delhi.
With this facility, the Bank has given its vast customer base the freedom from waiting in long queues at counters or logging into the internet to pay their taxes. The service can now be accessed by the Bank’s 115 lakh debit card holders at 5998 HDFC Bank ATMs in 1111 cities across the country. All they need to do is to register with the Bank for this service and the ATM payment option will be activated immediately. After the registration, a customer can visit an HDFC Bank ATM and complete his transaction in a few easy steps. An account holder can register at least two PANs against a single debit card.
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RBI Issues Draft Guidelines For New Banking Licence
New banks will be set up only through a wholly owned Non-Operative Holding Company (NOHC) to be registered with the Reserve Bank as a non-banking finance company (NBFC) which will hold the bank as well as all the other financial companies in the promoter group.
The aggregate non-resident shareholding in the new bank shall not exceed 49% for the first 5 years after which it will be as per the extant policy.
The bank shall get its shares listed on the stock exchanges within two years of licensing.
The bank shall open at least 25% of its branches in unbanked rural centres (population upto 9,999 as per 2001 census)
Re: Indian Banks & Financial System
More details....
Real estate firms and brokerage houses are out of the equation.COMPANIES WELCOME, BUT WITH CAVEATS
Promoters with diversified ownership, track record of 10 years
Clearance needed from regulatory, investigative agencies
Minimum paid-up capital of Rs 500 crore
FINANCIAL INCLUSION
25 per cent of branches in unbanked areas
CHECKS AND BALANCES
Exposure to single promoter group entity under 10 per cent
Exposure to all promoter group entities under 20 per cent
HOLDING COMPANY
Non-operative holding company to be set up, registered with the RBI
Holding company to hold 40 per cent for 5 years, excess of 40 per cent to be brought down in 2 years
Holding to be brought down to 20 per cent in 10 years, 15 per cent in 12 years
THE ONES LEFT OUT
More than 10 per cent of income or assets from broking and real estate
DIFFERENTIAL TREATMENT
Foreign shareholding cap 49 per cent for 5 years versus 74 per cent now
IPO in 2 years versus no such mandate currently
Minimum capital adequacy at 12 per cent for at least 3 years versus
9 per cent now
Banking aspirants such as the Aditya Birla Group, the Mahindra Group and Larsen & Toubro were generally happy with the guidelines — something reflected in the sharp rise in the shares of some non-banking finance companies expected to seek banking licences.
While Bajaj Finance ended 15 per cent higher, Reliance Capital, IFCI, SREI Infrastructure, Shriram Transport Finance and Mahindra & Mahindra Financial Services ended 2.5 to 11 per cent higher.
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Moody's downgrades SBI rating to D+
SBI downgrade increases risk of FII outflowMoody's has downgraded SBI's financial strength rating (BFSR), or stand-alone rating, to D+ from C-. "The rating action considers SBI's capital situation and deteriorating asset quality. Our expectations that non-performing assets (NPA) are likely to continue rising in the near term— due to higher interest rates and a slower economy— have caused us to adopt a negative view on SBI's creditworthiness," says Beatrice Woo, vice president and senior credit officer.
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Re: Indian Banks & Financial System
I am sure some financial guru can throw some light on the following hypothetical situation.
A hypothetical person takes a house loan from an Indian bank, term period 20 years. The initial "low" interest rate is supposed to reset after 5 years, whereupon a one-time option to shift to floating, or to fixed (fixed rate based on prevailing conditions then) will be given. Prepayment, from own resources, is penalty free.
AFAIK:
(1) prepayment allows for option of either choosing reduction in term period, or reduction of EMI (is part-this part-that possible?).
(2) the EMI breakup is always such that the interest on the loan is paid up to the bank earlier, and the principal later. This is to the bank's advantage for overall earnings.
(3) prepayment goes towards reduction of the principal.
Here now is the issue:
(1) On prepayment, which is best -- reducing the EMI, or the time period? IMO, it is much beneficial from the borrower's POV to reduce the period under normal circumstances.
(2) However, considering the fact that the rupee is devaluing against the dollar (and assuming it will continue to do so as the western economies collapse), and it has indirect effect on the domestic loan relation with the bank as the ensuing inflation reduces the purchasing power of rupee, does it make sense to pay more of the "more valuable" rupee now to the bank with current EMI and reduced time period, or go for reduction of the EMI (instead of the term period) so that less of the "more valuable" rupee is paid up?
This hypothetical borrower has his mental knickers in a twist!
Thanks in advance!
A hypothetical person takes a house loan from an Indian bank, term period 20 years. The initial "low" interest rate is supposed to reset after 5 years, whereupon a one-time option to shift to floating, or to fixed (fixed rate based on prevailing conditions then) will be given. Prepayment, from own resources, is penalty free.
AFAIK:
(1) prepayment allows for option of either choosing reduction in term period, or reduction of EMI (is part-this part-that possible?).
(2) the EMI breakup is always such that the interest on the loan is paid up to the bank earlier, and the principal later. This is to the bank's advantage for overall earnings.
(3) prepayment goes towards reduction of the principal.
Here now is the issue:
(1) On prepayment, which is best -- reducing the EMI, or the time period? IMO, it is much beneficial from the borrower's POV to reduce the period under normal circumstances.
(2) However, considering the fact that the rupee is devaluing against the dollar (and assuming it will continue to do so as the western economies collapse), and it has indirect effect on the domestic loan relation with the bank as the ensuing inflation reduces the purchasing power of rupee, does it make sense to pay more of the "more valuable" rupee now to the bank with current EMI and reduced time period, or go for reduction of the EMI (instead of the term period) so that less of the "more valuable" rupee is paid up?
This hypothetical borrower has his mental knickers in a twist!
![Mr. Green :mrgreen:](./images/smilies/icon_mrgreen.gif)
Thanks in advance!
Re: Indian Banks & Financial System
Banks might switch to '5 days a week' system from April 2012 if news about some FIN ministry Order No:2333/14447F/FIN/2011-12 are to believed.Is there any way to verify about authenticity of this order ?
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Re: Indian Banks & Financial System
not finalized yet , full plan is to increase working day by 1 hour to compensate for loss of working hours if 5 days week proposal is acceptedvipins wrote:Banks might switch to '5 days a week' system from April 2012 if news about some FIN ministry Order No:2333/14447F/FIN/2011-12 are to believed.Is there any way to verify about authenticity of this order ?
Re: Indian Banks & Financial System
Is there any way to confirm contents of this govt order?vikramd wrote:not finalized yet , full plan is to increase working day by 1 hour to compensate for loss of working hours if 5 days week proposal is acceptedvipins wrote:Banks might switch to '5 days a week' system from April 2012 if news about some FIN ministry Order No:2333/14447F/FIN/2011-12 are to believed.Is there any way to verify about authenticity of this order ?
Re: Indian Banks & Financial System
Chances are that the public sector banks would go for a 5 day week starting from April 1st. The demand of unions seems to have been accepted.vipins wrote:Is there any way to confirm contents of this govt order?
* The source who gave me this input have no reasons to lie. The unions have also sent circulars indicating the same.
Re: Indian Banks & Financial System
Apologies if already posted.
SBI sets sights on absorbing State Bank of Mysore
Certain excerpts
Though as per article, branch's will be rationalised, would this not lead to SBI becoming a very big behemoth which may lead to quality of service suffering. Rather than having a single SBI across country would it not be better having SBI in top 2/3 towns of the state and letting respective state banks function for rest of state?
SBI sets sights on absorbing State Bank of Mysore
Certain excerpts
After taking over two associate banks — State Bank of Saurashtra in 2008 and State Bank of Indore in 2010 — State Bank of India has set its sights on assimilating the nearly century old State Bank of Mysore (SBM) this year.
As part of its consolidation strategy, India's largest bank wants to first merge the smaller associate banks before attempting to take over relatively bigger associates such as State Bank of Hyderabad (SBH) and State Bank of Travancore (SBT).
So as per the consolidation stratergy, will SBI absorb all state banks one by one? Is this similar to the disinvestment policy i.e. allowing cash rich LIC and/or other PSU's to cross invest in various other PSU's.In the case of SBM, which is listed on the bourses, a swap ratio (whereby SBI will offer its own shares in exchange for SBM's shares to conclude the acquisition) will have to be arrived at for the minority shareholders.
Though as per article, branch's will be rationalised, would this not lead to SBI becoming a very big behemoth which may lead to quality of service suffering. Rather than having a single SBI across country would it not be better having SBI in top 2/3 towns of the state and letting respective state banks function for rest of state?