New Banking Licenses - Only the highest quality gets in !

The Reserve Bank yesterday granted "in-principle" Banking License approvals to two institutions IDFC and micro-finance unit Bandhan Financial Services. It may also consider the application of India Post separately. 

Its a significant move as its the first time since 2004 (Yes Bank) that new banking licences have been issued.

The interesting point is that the other 20 + significant names in the fray havent got the nod !
They include IFCI, Reliance Capital, L&T Finance, LIC Housing Finance, Aditya Birla Nuvo, Bajaj Finserve, Muthoot Finance, Religare Enterprises etc.

The RBI seems to have gone ahead only with highest quality players.

I have a gut feel that the better among the others will be considered in consultations with the new government. 

I hope , only the best among these with the highest quality and integrity get the go ahead , though all these players have significant financial experience & exposure.

I have written earlier too that banking license for India Post will be the real game changer to increase banking penetration among masses, we need it asap !!

Footnote - I am sure many wise guys would have lost significant amounts betting on potential winners - RBI had the last laugh !!

Sudden Move by RBI : Marginal rate & Bank Rate reduced to 9%

The RBI with immediate effect has reduced the marginal standing facility (MSF) rate, at which banks borrow from it, to 9 percent from 9.5 percent - It will improve liquidity in the system

This is the second reduction in the rate since the 20 September mid-quarter monetary policy review, when it was lowered to 9.5 percent from 10.25 percent. 

Interestingly the same rate was jacked up 2% in mid July to 10.25 per cent, to tighten liquidity in an attempt to curb volatility in the rupee-dollar exchange rate.

With this the RBI also announced that the bank rate will be adjusted to 9 percent with immediate effect

New 7 day & 14 Day tenor auctions i/o just overnight
 
 The central bank also said it will provide additional liquidity through term repos of 7-day and 14-day tenor for a notified amount equivalent to 0.25 percent of net demand and time liabilities (NDTL) of the banking system through variable rate auctions every Friday, starting 11 October. 

Earlier only overnight or 3 days (weekends) facility was available 

Implications 
1. Why sudden 

- Either RBI Guv has a mind of his own and its showing or 
- some other issues are there for which he is preparing for at double quick speed 
- why reduce rates when inflation was the target ?
- last move was followed by Rupee depreciation , this time ??

2. It will improve liquidity & reduce borrowing costs 

3. 7 day & 14 day repo will provide some certainty to the banks in the short run on their borrowing costs

4. Positive for the markets as of now 

Foot note

The RBI injects about Rs 1.5 lakh crore into the system daily through the liquidity adjustment facility, the export credit refinance facility and the marginal standing facility.

Women head the largest Indian banks

Woman power showing ..the top Indian banks all headed by Ladies ...

latest being the behemoth State Bank of India !!!

Congrats Arudhati Bhattacharya! CEO, State Bank Of India.

Interestingly, SBI, ICICI Bank, Bank of India, United Bank of India, Allahabad Bank, Axis Bank, HSBC Bank All Are Headed By Women!

Cheers !!!!

RBI Moves - Bans 0% loans & Additional Charges on Debit Cards

Today the RBI asked the banks to stop giving zero interest loans normally offered both on high value purchases & on credit card purchases.

They want full disclosure of costs to the customers – another cheating avenue gone 

So what are 0% loans really, nothing but a camouflaged marketing gimmick where the costs are routed via inflated processing fees and other charges which are not disclosed upfront while the gullible consumer is happy that he isn’t paying any interest. 

FMCG sales before festive seasons will sure be hit. 

No Additional charges to be levied on debit card purchases
 

In another move, the RBI said no additional charges can be levied by merchants on payments for goods by debit cards. 

Businesses levy fee as a %age of the transaction value as charges on customers who are making payments for purchase of goods and services through debit cards. 

These are unjustified & not permissible as per their agreements with banks.