The Reserve Bank of India has cut the Cash Reserve Ratio (CRR) for banks, as a percentage of deposits, to 5.5% from the earlier 6%. This is, they say, to manage the liquidity situation, where banks have been borrowing a lot (1.2 lakh cr. last) from the repo window; this is much more than the [...]

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In an attempt to unravel what’s happening with liquidity in India, let me explain a new concept called the Marginal Standing Facility (MSF). When you deposit money in a bank, it has to keep 6% of that money as a reserve called Cash Reserve Ratio (CRR) against withdrawals by depositors as a whole. It also [...]

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RBI has deregulated the interest rate on NRI deposits of one year or more. There are some ridiculous definitions for NRIs – they have to deal with “NRE”, “NRO”, “FCNR” and such crap. What you need to remember is that some of the deposits can be taken back, or “repatriated”, in dollars – the others [...]

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The Reserve Bank of India (RBI) today changed nothing, which nowadays is a big event in the markets. In the mid-quarter policy review, RBI has said a lot of things.To simplify: The Global Economic Situation is horrible. The outlook is bad, and other countries in Asia have seen both currency depreciation and policy rate cuts. [...]

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It’s nickel-and-dime time again, folks. HDFC Bank will now charge for anything if you snoop around their branches, so don’t step in to say hi to that friendly branch manager any more. New charges have been introduced on inactive accounts (no “customer initiated transaction in one year”). And IPIN or TPIN changes at the branch [...]

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Today’s Chart includes the volumes in NEFT (National Electronic Fund Transfer) – Credits and Debits. Turns out that the highest outward debitter isn’t the mammoth SBI, but HDFC Bank. That could be because it’s the bank of choice of brokers and exchanges. Citi was another surprise there. On the Credit side, SBI takes the top [...]

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The Reserve Bank of India will buy 10,000 cr. of bonds in an OMO auction on Nov 24 (an Open Market Operations auction between RBI and Banks/PDs who offer bonds to RBI, in return for money). RBI prints the money to pay for the bonds, so in effect it is an “increase” in reserve money [...]

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…and the bank index fell nearly 3% yesterday. Moody’s, which is a rating agency and therefore likely to be completely clueless, took the Indian banking system down from “stable” to “negative”, because they believe loan quality will suffer in the near future. This doesn’t matter much, despite the one day reaction, because no one cares [...]

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(From my post at Yahoo) In a new notification, the RBI has provided for a complete savings bank rate deregulation, in which banks are allowed to set their own rates for savings bank deposits. A savings bank (SB) deposit is what is called a checking account abroad, which you can write cheques against, and where [...]

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RBI has raised interest rates by 0.25%, taking the repo rate to 8.5% and the reverse repo to 7.5%. The repo rate is what banks pay to borrow overnight from the RBI (against the collateral of government securities) and the reverse repo rate is what banks receive from the RBI for depositing money. This is [...]

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