India’s Central Bank RBI had proposed to deregulate the savings rate on Bank Deposits as part of the Financial Reforms.Note Savings Rate is the only regulated interest rate in the Banking Sector.This has led to a huge windfall for Indian Banks.With a savings rate of around 3.5% and lending rates of 12%,Banks manage to reap profits from this huge spread in the rates which is commonly known as the “Net Interest Margin” or NIM.Indian NIMs are very high compared to that of other countries because of this discrepancy.Indian consumers are known to deposit most of their savings in Banks as Stocks and other Assets are considered untrustworthy.Banks with high proportion of their deposits in the form of these savings deposits have much higher profitability.Note RBI has increased the returns on the savings deposits recently by shortening the length of the cumulative returns.

Indian Banks don’t want competition in this space as they will lose the supernormal profits that they make because of this regulation.Private Banks are at the forefront of this opposition which is ironical as they should are the first in welcoming deregulation and competition

While their growth and margins are comparable to the private and foreign owned banks in India,the P/E multiple is much lower despite lower risks.The cause of this discount become apparent when you consider some of the loans these banks make.LIC had come under a cloud in nineties for making investments and loans to favored companies

India’s Rising Inflation crosses into Double Digit territory India has seen inflation increase at a rapid pace in the recent months with the Wholesale Price Infalation (WPI) crossing into the double digits in the most recent reading.While Food Inflation in India has been on the higher side for the last 6 months due to insufficient […]

Exchange Traded Funds or ETFs have revolutionized the Investment Industry in recent times due to their simplicity,low costs and ease of use.The US Market has seen a massive growth in the usage of thisĀ  Financial Instrument with a mind boggling variety of ETFs catering to almost every asset class ranging from equities,bonds,currencies,commodities and even derivatives.The […]

Introduction India’s Central Bank RBI is proposing to free up the Savings Deposit Rate which is currently fixed at 3.5% . All banks whether they be private or public, have to offer 3.5% to savings account customers.This is the only rate which is administered by the Central Bank,fixed deposit rates and lending rates are decided […]

Standard Chartered IDR closed below its listing price of Rs 104 in the Indian Market.A Review of Standard Chartered IDR had revealed severe disadvantages for retail investors.In Seven Reasons Why StanChart IDR was not a good buy, I had listed out the shortcomings of the IDR instrument and Standard Chartered as a stock.It seems that […]