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  Is India likely to face a financial crisis Forex Reserves: No doubt high level forex reserves has given the buffer to India to manage any external crisis arising out of maturing external liabilities/ repayment of interest/ principal   towards external debt. The following evidences that: 1. Forex reserves, which was just 7% in 1991 (and   was less than 50% till 2001) of the total external debt, now covers 97.8% of total external debt standing at USD 620.7 billion as on 31.03.2022 2. Current forex reserves is equivalent to cover 49% of total external liabilities (USD 1197.6 billion) and gives a great level of collateral comfort. 3. Forex reserves are also adequate to cover more than 10 months of imports, again a state of mental comfort. 4. High level forex reserves also played   a major role in keeping the currency of the country, with a high current account deficit, within a range. Other comforting factors: However, it should be mentioned that there...

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...

  Karur Vysya Bank's Impressive Financials ( 2021-22) Karur Vysya Bank (KVB), a reputed bank of 106 years of age and also referred to as a old generation private sector bank, released its financial results for 2021-22. The results are impressive.  Details of presentation is available in the link  https://www.kvb.co.in/docs/ investor-presentation-2022-05- 20.pdf This is the second audited annual financial results, after Shri B. Ramesh Babu assumed charge as MD & CEO of the bank in July 2019. Salient Features are: 1. 87% jump in net profit to record Rs.673 cr., which incidentally is the highest net profit in KVB history.  2. Increase in NII by 15% YoY, reduction in employee expenses by 18% YoY enabled the bank to compensate the decline of 15% YoY in other income  and still post a healthy operating profit of Rs.1630 cr. as on 31.03.2022. (26% growth YoY). But what sealed the huge growth of 87% over the FY2020-21 was that the bank could maintain the pr...

  Are PSB Staff கழிசடை ("leftovers in the filter")? Disrespectful Comment from Editor, Thuglak Magazine When the reputed Tamil magazine “Thuglak”, known for its unbiased political views (and enjoyable satires from the late Shri “Cho’ Ramasamy, the present Shri Satya and the like), celebrated its 52 nd Anniversary Celebrations in Chennai, where Hon’ble Finance Minister gave an impressive speech on current affairs, no one would have imagined that the current editor of the magazine, Shri S.Gurumurthy will make a ‘spoke in the wheel’ by his uncharitable remark about public sector bank (PSB) staff.   He said that that the staff in the PSBs are only கழிசடைகள்   (meaning ‘leftovers in the filter”) and it is with them that the country has to compete globally in the financial sector. (Annexure I). This was uncalled for and promptly Shri Venkatachalam, General Secretary, AIBEA condemned the remarks and demanded removal of Shri Gurumurthy from the board of RBI, as he is unfit to co...