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  Loan Frauds in Banks Bankers: Protect yourselves; Bank interest safeguarded Some of the newspaper headlines last week:  "Former ICICI Bank MD&CEO and her spouse were arrested by CBI in connection with alleged irregularities in loans sanctioned by the bank to the Videocon Group in the period 2005-2012." "CBI has booked the Abhijeet Group promoted company Corporate Power Ltd and its directors for cheating a consortium of banks to the tune of Rs.4,000 cr." "Fifty major wilful defaulters have defrauded the banking system of Rs.92.000 cr., the Minister of State for Finance informed Lok Sabha." Greedy Pulls down everyone: It is not that the above headlines appear now only. Every now and then, we do hear frauds of huge magnitude, hitting the banking system in India. While the fraudsters, internal or external, will have to suffer for their sins, quite a innocent lot within the banks also suffer, as they were part of the appraisal, sanction and disbursing pr...

CBDC eR-R and eR-W:  Do they transform ‘physical cash carry’ concept? Introduction:   Only recently, I went through the 'Concept note on Central Bank Digital Currency (CBDC)' published by RBI. That was the time, when the regulator announced its pilot-launch of Digital Rupee retail, "eR-R". (The pilot-launch of Digital Rupee-Wholesale - "eR-W" commenced earlier, on 1st November 2022). In a nutshell, RBI conveys that CBDC is a replica of physical currency in a digital format, with denomination-wise-split currency balances available in an e-wallet on users’ mobiles(eR-R) /CBDC accounts with RBI (eR-W). The currencies in the wallet/ account continue to retain their character as a legal tender, even though they are digitalised, and the value is equivalent to the physical value of the currency they represent. There is no fluctuation to their value, unlike a crypto currency. Since the balances in the wallet (eR-R), is deemed a legal liability from the issuer ...

Repo rate and the bank borrower RBI accommodation policy ran like a test match and was overrun by at least two quarters. But the policy rate runs like a T20 match, when it comes to tightening, with only power play in action. In just over 2 quarters, the repo rate went up from 4 to 6.25% (56% growth in 7 months)😊 Economists and experts are busy in analyzing RBI repo rate. The bank borrower, listens carefully, applauds and is convinced that what RBI does is right. He comes home and it dawns on him that he need to fill his packet more to pay higher interest to tame country's inflation! An example, how the increase in the repo rate affects the borrower in reality. Example: Home loan of Rs.30 lacs.  In May 22,  interest rate was 7%. ,  Repayment period was fixed at 20 years Repayment Obligation: EMI Rs.23,259 Interest component works out to 75% of EMI Total Repayment Rs.55.82 lacs.  Interest to be paid for the full period of 20 years: Rs.25.82 lacs In December 22,...

Repo Rate: Will it be a ' Pause' this time?  Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) starts its three day meeting to-day. The governor of RBI will announce its decision along with his statement on 7th December 2022.  Experts in the financial field and otherwise are expecting an increase this time also, with slight variations in their projections..  However, I find near unanimity in their expectations that this time RBI may not frontload the increase by 50 bps, as had been the outcome in the last three MPC meetings. They expect the increase to be in the range of  25-35 basis points (bps). (No one knows whether RBI may bring a surprise to them on this score!) As a layman, I put forth my view that as inflation is tampering down from its peak level, (but still above the upper band of +2% over 4%, targeted by RBI), the impact of repo rate increase on the economy is likely to be felt in the coming months, the MPC may very well decide to...