The Banking and Strategy Initiative

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India Budget: The Banking Fillip | Advantage Research

Blatant Borrowing of Global idea banks

A long-standing complaint of the Banking Industry in the last 2 years, that had indeed been a cornerstone for the next reform we unleashed on the local industry had been the blind and unseeing transplantation of global ideas in their new form into the Indian system, leaving only trails of paper and no further action reports on such. The last such reform is the Financial Stability and Development Council, probably enunciated just to let Obama and European Governments ‘eat from Indian hands’ as it were. In bad taste, this measure announced in the budget looks like a supplication from an expat that just lost all Indian currency in an overnight storm.

The FSDC will be the inter regulatory oversight coordinator, or defacto disallow all forms of governance from commenting on the next crisis if allowed to function with a pet civil services officer appointment making it a civil services junket and an expat appointment or retirement lozenges for the retiring bankers of cabals and political connections a heresy in practice for the next Satyam design

I would give this measure 2 red stars -2 on a scale of 0 to 5 (Golden stars recognise good value )

Banking Licences

In a realization that the current diaspora is a lifeless being without teeth just two steps from the erstwhile wasted public sector economy of the 80s, the government has decided to create new banks by giving away new licenses.

In an apparent bid to rationalize and set a new opening value for the Capital requirement for these new licensees, the MoF has posted its first clarifications requiring new banking licenses to show value in rural distribution and also non commitment to new capital values. I would recommend a value 2.5 times that of the first private banking licenses in the country, in fact probably 5 X but the regulators may not be able to get agreement on that. A value of $6m would still be peanuts and be ineffective of the scale required to be a bank, but it has to be recognized that such an enterprise has to prove itself n the ground and earn revenues in a limited time frame.

Rural Distribution should not be a limiting factor as a religare also is in 400 towns as an NBFC, and it would be a shame if such regions around the NCR and other cities cannot be tapped . Unfortunately, Barclays has already left a bad taste in the mouth by trying that for its loans nbfc and disappointing the regulators and the citizens of this country.

I would give this measure 3 Golden stars, 3.5 on a scale of 0 to 5 (Golden stars recognise good value )

Recapitalization of RRBs

Regional rural banks had a market share of 4% in India behind the MNC banks’ 7% share of business thus probably carry assets of INR 5T or $ 125bn The committed $4bn in capitalization coupled with a similar $3 T allocation for farm waivers in PSBs would probably mean enough has been done by the government.

Low yields and preceived higher defaults make new bank candidates possibly cagey according to the long established traditions in Indian Banking analysis. It seems unlikely that given the consumption patterns that show rural strengths in good light and the spread of DTH and aiutomobiles in mofussil towns as we build the next lifestylle economy.

The candidates would have good leeway in creating the rural franchise. The MNC model and the Kotak model, lasting only in metros and bigger cities is definitely not a happy occasion for them and the new candidates.

I would give this measure 3 Golden stars, 3.0 on a scale of 0 to 5 (Golden stars recognise good value )

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This entry was posted on March 3, 2010 by in Emerging Markets, Financial Markets, India, India Infrastructure, Uncategorized and tagged , , .

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