The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Bank rate cut Saturday

RBI is expected to announce a 50 basis point cut in rates tomorrow and no one expects them to go beyond the 50 basis points in repo rate for supporting liquidity enhancement in the markets. However, I expect that in the next one year there will be regular rate cuts in repo and reverse repo rates and to ensure that we are in a better condition next time to effectively compete in size in the global markets and take our share of the responsibility, we will also have SLR cuts of upto 400-500 basis points in this coming year. I hope we do that starting tomorrow itself – never a better time.

In the other battles coming up for end 2008, the two remaining banking stalwarts of the previously state owned ICICI Bank are going to cause much trouble at the bank, with no credentials to lead. The onus of Indian banking’s stab at global leadership is now likely to shift to the state owned SBI for its size. Of course the new look JP Morgan leadership of India is also likely to make suitable comments on this turn at appropriate forums.

And the last battle of all, the general elections of 2009, I still root for the battle bruised and much better coiffured Congressman than the Orange blokes and the other half baked concoctions that dot the landscape. (No wonder Obama got elected so easy in the US, no one seems to have time to build parties anymore, there aren’t any Republicans or Tories left either in the US or the UK)

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Note of Saturday, Dec 6: Finally a “large-ish” repo rate cut of 100 BP with a corresponding reverse repo rate cut of 100 BP was announced today, setting the stage for further cuts in January 2009 and more. However, some commentators continue to focus on additional CRR cuts.

Saturday Dec. 20: Another large rate cut expect as call rates trace the exact amount of the last rate cut and then refused to provide any respite from liquidity. This year will be big for bond funds and even money market options. but don’t be too sure of the diustressed debt available in the market yet.

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