VisVoice

Deposit rate revision needs more transparency Repo rate hiked: Monetary Policy Committee (MPC) increased the policy repo rate from 4.0% to  4.90% since May 2022. (increase of 40 bps in May 2022 and 50 bps in June 2022). (In fact, RBI Deputy Governor and MPC member, Dr. Michael Debabrata Patra  says MPC has effectively tightened the  market by130 bps, if one takes into account the increase of 40 bps paid to banks, when they place their surplus funds with RBI under reverse repo (now christened Standing Deposit facility - SDF)). Increased Earnings for banks:  With the revision in repo rates, majority of the public and private sector banks have revised their EBLR (external benchmark linked lending rate) linked to repo rates by 90 bps. MCLR, an internal bench mark rate linked to marginal cost of funds, have also been revised by almost all the banks, though the upward revision varies from 30 to 50 bps among individual banks.  Considering the fact that EBLR loans acco...

International Rupee Settlement in indian Rupees (INR) NEWS : On 6th July 2022, Reserve Bank of India (RBI) announced measures to attract forex inflows into NRE/FCNR accounts of NRIs,   as fresh ECB for Indian corporates and FPI investments in short term instruments like CPs/Bonds having original maturity of 1 year. Now, the regulator has issued new guidelines permitting banks to open Special Rupee Vostro accounts for correspondent banks of the partner trading country. The purpose of the guidelines is seen as another attempt to preserve the precious dollar reserves, in attack in recent months, due to hike in Fed rates and jump in crude oil prices, etc.   Brief : The fresh guidelines   include invoicing of exports/imports in INR, market determined exchange rate with the relevant currency of the trading partner country   and opening of special Rupee Vostro accounts of correspondent banks with designated AD Bank in India for settlement of trade transactions   i...

Comparing Commercial and Eternal Banks I am a regular subscriber to "Sanathana Sarathy" (Tamil) published by Sri Satya Sai Books and Publications Trust, Tamil Nadu. Recently I came across a speech by Shri Sathya Sai Baba on the occasion of opening of a bank branch of State Bank of India in Puttaparthi way back in July 1966. He takes us to the spiritual world by making an interesting comparison between a "Commercial" Bank and “Eternal” Bank with examples taken from the day to day banking terms. He defines and describes the purpose of a bank deposit in this world. From there, he takes you to the permanent bliss you will earn through ‘spiritual’ deposits. Then he beautifully describes how a borrower is chosen by a bank and how the bank securitises itself for the loan. He even defines a temporary unsecured ‘overdraft’ , which is given based on credentials established by a customer. The qualities needed for a borrower for a loan from a bank and   the essential requi...