http://www.ciel.co.in Latest Blogs on www.ciel.co.in en-us Sat, 25 May 13 10:22:16 +0000 http://ciel.co.in/blog.php?blog_view=135 http://ciel.co.in/blog.php?blog_view=135 Thu, 23 May 2013 11:58:02 +0000 Interpreting the News: Fed Speak on Asset Purchases Moves Markets ; Asset purchases are in news due to two recent events. ; Federal Reserve Chairman Ben Bernanke testified before a Congressional Committee on 22 May 2013, stating that the asset purchase policy would continue until unemployment reduces. This led to a rally in stock markets around the world. But he also suggested that the policy was flexible: a sustained improvement in the labour ;market could slow down purchases. Minutes of a recent Fed Policy meeting released on the same afternoon showed that some members were ready to begin reductions in ... http://ciel.co.in/blog.php?blog_view=134 http://ciel.co.in/blog.php?blog_view=134 Mon, 20 May 2013 06:48:42 +0000 The Economic Times reported a story on regulatory arbitrage today. The SBI chairman suggested that home loans by non-banks should come under RBI, instead of remaining with the National Housing Bank (NHB). He pointed out that having two sets of regulators for the same product can create regulatory arbitrage. The CEO of HDFC made a case for continuing with the NHB. The arbitrage arises when RBI asks banks making home loans to follow a set of rules, while NHB may ask non-banking home loan companies to follow another set of rules. ; Regulatory arbitrage refers to the practice where an ... http://ciel.co.in/blog.php?blog_view=133 http://ciel.co.in/blog.php?blog_view=133 Mon, 20 May 2013 06:36:16 +0000 PFRDA released the returns on its schemes for the year ended March 31, 2012 today. ; The returns are as follows: ; Central Government ; ; ; ; ; ; ; ; ; ; ; ;12.39 % State Government ; ; ; ; ; ; ; ; ; ; ; ; ; ;13.00 % Swavalamban ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ... http://ciel.co.in/blog.php?blog_view=132 http://ciel.co.in/blog.php?blog_view=132 Mon, 29 Apr 2013 07:40:21 +0000 On the eve of the May monetary review, a view has emerged that the RBI will definitely ease monetary policy by cutting the repo rate, with or without a reduction in CRR. Polls of market experts predict anything between 25 to 50 basis points reduction in rates next week. ; The near-consensus on a rate cut is based on the present growth-inflation dynamics of the Indian economy. Since the start of 2013, growth has slowed down sharply, and inflation has come off the double-digit levels seen in the last two years (Pic 1). ; ; ; Pic 1: Declining IIP, ... http://ciel.co.in/blog.php?blog_view=131 http://ciel.co.in/blog.php?blog_view=131 Fri, 17 May 2013 11:03:55 +0000 CURRENT ACCOUNT DEFICIT ; The Good News Current account deficit is being comfortably financed by inflows on the capital account ; The Bad News Current Account Deficit was at 4.2% of GDP in 2011-12 and 5.4% of GDP in Jul-Sept 2012, higher even than during the BoP crisis of 1990-91. ; The Worry…. Capital inflows are dominated by FII inflows, NRI deposits and corporate loans. These are volatile and can quickly reverse in case of any external or domestic crisis ; INFLATION ; The Good News WPI inflation for January 2013 at 6.6% was the ... http://ciel.co.in/blog.php?blog_view=130 http://ciel.co.in/blog.php?blog_view=130 Thu, 31 Jan 2013 09:11:56 +0000 The Current Account Deficit India has a history of running trade deficits, and managing a surplus on invisibles (through worker remittances in the pre-reform period, and net exports of services post-reform). This combination has ensured that its Current Account Deficit (CAD) stayed within 1%-3% of GDP in the past, a level that is perceived to be sustainable by policy makers and overseas investors[1]. ; The last six quarters have shown a different and dangerous trend. In 2011-12, CAD at $ 78.2 billion or 4.2% of GDP, was the highest attained in the last thirty years. By Jul-Sept 2012, it had gone ... http://ciel.co.in/blog.php?blog_view=128 http://ciel.co.in/blog.php?blog_view=128 Wed, 19 Dec 2012 09:51:19 +0000 What are State Development Loans (SDLs)? SDLs are debt securities issued by state governments, to fund their deficits. RBI issues these securities on their behalf, through auctions. ; SDLs are eligible securities for SLR and LAF purposes, and are bought by banks, insurance companies, mutual funds, provident funds and other institutional investors. ; Why is there a sudden increase in interest in SDLs? State governments primarily used the amounts they mobilised through small saving schemes (NSSF) and loans from the centre to fund their deficits. SDLs were limited to not over 3.5% of their GDP. But the terms of using the NSSF ... http://ciel.co.in/blog.php?blog_view=127 http://ciel.co.in/blog.php?blog_view=127 Wed, 14 Nov 2012 06:14:48 +0000 The Widening Credit-Deposit Wedge The RBI has repeatedly pointed to the “widening wedge” between credit growth and deposit growth as one of the reasons for the liquidity deficit in the system. This phrase and its history need some explanation. ; Banks take deposits and on-lend them to households, corporate, and other economic entities. ; A part of bank funds are impounded by the government through CRR and the SLR. The remaining is available for direct lending or investment. Pic 1 shows the difference between total deposits (source of funds) and the sum of total bank credit and investment (uses of funds) ... http://ciel.co.in/blog.php?blog_view=126 http://ciel.co.in/blog.php?blog_view=126 Fri, 02 Nov 2012 06:24:04 +0000 The Inflation Growth Balance The RBI released the Q2 FY13 review of monetary policy on Oct 30. Interest rates were not changed, but the Cash Reserve Ratio (CRR) was cut by 25 basis points. The stated purpose was to enhance liquidity and credit flow without creating further inflationary pressures. But financial markets, which had been desperately hoping for an interest rate cut, responded negatively. Bond and stock prices fell, and even the Finance Minister publicly expressed disappointment. ; Two divergent points of view are being expressed in post-policy discussions. ; (i) Interest rates should have been reduced to spur growth. If repo ... http://ciel.co.in/blog.php?blog_view=125 http://ciel.co.in/blog.php?blog_view=125 Mon, 01 Oct 2012 11:25:01 +0000 We wrote soon after the Sebi Board meeting in August 2012 (see link to article in Economic Times here) that fungibility in mutual fund expenses will provide a lifeline to AMCs, who can now take the investment management expenses to the maximum limit as permitted by regulations. The SEBI circular of September 13, did not include fungibility of the expense ratio and charging of additional total expense ratio (TER) upto 20 bps to compensate for exit load to be fully credited to the scheme. ; The amendment to SEBI (Mutual Funds) Regulations, 1996 posted as a gazette notification on September ...