Jan 23, 2009
Bank rate cut saturday -III
Another simple lesson of 2001 adopted by India, and as we mentioned here last month, more rate cuts are coming up. This time Banks going far to recommend and predict the exact amounts (Credit Suisse or some offshoot from France) and others trying to use their footing to stampede the bus with prescriptions ( J P Morgan) while the desi banks continue to look aside flabbergasted that they were asked to speak on the Financial system in India. No Comment! ( I am still looking for a job with a bank)
Apart from these all being incredibly anachronistic without a place for themselves, these were also among those who may not see much success on Indian soil with these being their first struggles and they being banks have a habit of not trying to learn from any event past or present. This is not to say that there is anything wrong with them, they are great institutions and have to maintain stoicism because they mean a lot to the bulwarks of the economy, but I would aver that these are costly mistakes when they happen. Deutsche Bank is a glaring example of how mistakes are made in India and how getting on their feet is a tough exercise, and we remain the most pliable of all BRIC markets. But HSBC and Citi have shown the advantage of being nimbler earlier and I just hope we can keep our heads in this melee (For one thing, I need a good job quickly, I am at the end of my reserves)
To come back to the rate cut topic, we need these SLR cuts to start happening and we have a lot going for more rate cuts now that inflation has come down to something almost below 5%. But probably, they should just stop now for a few months and wait for Credit to actually ease. The Tightwads and the SMB businesses are both not helping along and this night is going to be a long one, infact this was the first “frozen” winter Bangalore is seeing with consistently cold nights, while Delhi and Mumbai continue to fight gaps in public conscious and polity which have long been habituated to the government in state and center and district and some more. It’s sloth all the way and RBI is not the sole bread earner for this family. Lo!
Note: There has been some confusion in the global and indian financial press on this but the statistic for CRR is now 5.5% and when i last checked, banks were still maintaining cash at closer to 7% ( which was the rate in August/September 2007) and SLR at 24% before the RBI action started in August 2008.
zyakaira notes: unfortunately SLR continues to hold at a argish 24% and banks are quite happy keeping cash and govt securities on account rather than extending credit. the answers now are beyond rate cuts
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