Wednesday, November 01, 2006

Mid term review of the monetary policy by RBI

Measures and their impact:

  1. Inclusion of export finance in bank’s overall foreign borrowing: will cut down resources for exporters, force many banks to unwind.
  2. Fair practice in home loans: Floating rate loans cannot be hiked arbitrarily.
  3. Self-certification of address, photograph for small a/cs: Less hassles in opening bank accounts up to Rs. 50,000
  4. Conversion of extension counters of coop banks into branches: More business for banks, push states to reform the sector
  5. Basel II norms postponed to 2009: Positive for the banking sector, which gets more breathing space.
  6. Short-selling in bonds; when issued trading in new gilts: Help banks, bond houses to hedge interest risk, better price discovery
  7. Individuals can remit up to $50,000 a year overseas: Will take off only if RBI allows banks to offer special products
  8. FIIs can invest more in government securities: FIIs invest if there is arbitrage scope; broaden bond market over time
  9. Mutual funds allowed to invest up to $3bn from $2bn currently: No big deal since not many are investing abroad
  10. EEFC a/c for all exporters, investment in overseas bonds: More flexibility to small exporters, better use of idle cash by big players
  11. Prepayment of ECBs up to $300 mn (from $200 mln currently): Corporates can take advantage of market to retire old loans.
  12. Banks can give up to 20% of capital as loans and guarantees to cos.: More resources for Indian firms going on overseas acquisition, expansion
  13. One-time loan settlement for distressed farmers: Help debt-ridden farmers, check rural discontent
  14. NBFCs can offer co-branded cards with banks: Help brand building by finance cos in personal finance
  15. Flexibility in NRO a/c, remit up to $ 1mln a year: NRIs can immediately take out money from property sale, inheritance.