Money Banao

26/10/2018

Ramayana and the Life of a Financial Advisor There is a very popular story associated with the epic Ramayan. Ram, Seeta, and Lakshman w...

05/08/2015

http://www.studybuzz.co.in/economics/how-should-you-explain-why-a-us-dollar-costs-60-inr-to-a-10-year-old-kid/

Something in line with the following conversation should help in explaining the concept to him. Y: You, C: Child Ask the 10 year old: “If you had only 10 rupee notes, and wanted to buy a chocolate of Rs. 20 what would you do?” Child will say – “Give the shopkeeper 2 notes” Y: “Let’s …

05/08/2015

Why real estate firms may be forced to cut housing prices
The funding source of real estate companies in India is drying out and they now have few options left.
It is very difficult to get hold of numbers when it concerns the real estate sector in India. The numbers usually put out are by organisations and institutions close to the real estate companies.
The one genuine set of numbers that are put out every month is related to the total amount of lending carried out by scheduled commercial banks to the real estate sector in India. These numbers are put out by the Reserve Bank of India as a part of the sectoral deployment of credit data, which is released once every month.
The latest set of numbers were released by the RBI on July 31, 2015, and make for very interesting reading, especially if you have had a long (and perhaps lost) dream of buying a home to live in.
Why do I say that? Allow me to explain.
As on June 26, 2015, the total amount of lending carried out by banks to the commercial real estate sector stood at Rs 1,66,900 crore. As on March 20, 2015, three months earlier, the number had stood at Rs 1,68,000 crore. Hence, the total amount of lending by banks to real estate companies has actually come down by around 0.7%.
What can safely be said is that in the current financial year (which started on April 1, 2015) on an aggregate basis, the banks haven’t lent a single rupee to real estate companies.
What did the scene look like last year? As on March 21, 2014, the total amount of lending by banks to real estate companies had stood at Rs 1,54,400 crore. By June 27, 2014, the total lending had gone up by 1.7% to Rs 1,57,000 crore. This year the total lending has fallen by 0.7% during a similar period.
How do the numbers look over a longer horizon of one year? The lending to commercial real estate by banks has slowed down considerably. As mentioned earlier, as on June 26, 2015, the total amount of lending to commercial real estate by banks stood at Rs 1,66,900 crore. Over a period of one year, it has grown by just 6.3%.
The overall lending by banks grew by 7.3% during the same period.
This is the third month in a row when the lending to real estate by banks has grown at a much slower pace than the overall lending. In fact, we need to look at numbers in June 2014 to realise how much the situation has changed over the last one year.
As on June 27, 2014, the total lending by banks to real estate companies had stood at Rs 1,57,000 crore. It had grown by 17.2% over a one-year period. The overall lending by banks had grown 12.8%. Hence, the lending to real estate companies by banks had grown at a much faster rate than overall lending.
Further, lending to real estate companies by banks had grown by 17.2% last year. This year it has grown by only 6.3%. Also, as mentioned earlier, since the beginning of this financial year, the lending to real estate companies by banks has actually fallen.
And all this should be good news for buyers.
Why? For the simple reason that the funding source of real estate companies is drying out. Real estate companies have to repay the interest on the loans they had taken on previously. They also need to pay interest on it.
Over and above this, there are projects that are still being built and need to be delivered by a certain date. Money will be needed for all these things.
All these reasons will ensure that the companies will have to get around to selling the unsold apartments that they have built and have been unable to sell. The number of unsold homes in cities across the country is huge.
As per an estimate made by the real estate consultant Knight Frank the number of unsold homes in National Capital Region stands at around 1.89 lakh. In Mumbai Metropolitan Region it stands at 1.94 lakh. In Ahmedabad the number is at 42,000. In Bangalore the number is at 1.05 lakh. And similar is the situation across the country.
The only way these unsold homes can be sold is by cutting prices. While the real estate companies have resisted this so far, with the funding from banks almost coming to a standstill, they really have no more options left in the days to come.
Finally, acche din should be on their way for those looking to buy homes to live in.

07/04/2015

Monetary Policy – April 2015 In its maiden policy announcement of FY16, the Reserve Bank of India kept the key policy rate i.e. the repo rate unchanged at 7.5% putting a pause to the two rate cuts earlier in 2015 (both were out of the policy cycle). . In the policy announcement, the RBI has seemingly put forward further preconditions before taking action on easing its stance any further. Highlights
Policy repo rate under the Liquidity Adjustment Facility (LAF) is held constant at 7.5%.
Therefore, reverse repo stands unmoved 100 bps lower than the repo rate at 6.5% while the Marginal Standing Facility (MSF) rate remains 100 bps higher than the repo rate at 8.5%.
Cash Reserve Ratio (CRR) of scheduled banks is also unchanged at 4% of NDTL

06/04/2015

Expectations from Credit Policy –April ‘15
The RBI will be announcing its first bi-monthly monthly policy for FY16 on Tuesday the 7th of April ‘15. This will be against a background of stronger economic fundamentals relative to a year ago levels. More particularly, market sentiments are improved with a higher GDP growth expectation in FY15 of 7.4% relative to 6.9% in FY14 juxtaposed with a lower CPI inflation of 5.4% as of February ’15 which is well within RBI’s targeted range of 6% by January ‘16. This report brings out our expectations from the ensuing credit policy announcement tomorrow.
Liquidity Scenario
The overall liquidity conditions have been relatively easy during FY15 with a low pick up in credit. Growth in credit was very low at 9.5% compared with 13.9% in FY14. Growth in deposits was also muted at 11.4% compared with 14.1% last year. The RBI would be looking at both these numbers closely because if growth has to be met at levels of a little over 8% on a sustained basis, there has to be a significant recovery in both these variables.
The table below captures the incremental credit and deposit growth in FY15 relative to FY14.
Incremental in FY 14 (Rs Lakhs)
Incremental in FY 15 (Rs Lakhs) Growth in
FY 14 (%) Growth in
FY 15(%)
Deposits 9.55 8.80 14.1 11.4
Credit 7.34 5.7 13.9 9.5
Investments 2.06 2.92 10.3 13.2
Source RBI
Options for RBI
1. To lower the repo rate to make it easier to borrow:
The RBI has lowered the interest rate by 50 bps on the policy side since January. However, RBI data
shows that while the range of interest rates on deposits of above 1 year has come down from 8-9.25%
to 8-8.75%, the base rate remains unchanged at 10-10.25%. The transmission to lending rates has
been sluggish even in the past. However, given that the unseasonal rains have destroyed a significant
proportion of the rabi crop – especially wheat, mustard and pulses, the impact on inflation could be
negative. The RBI will probably wait for some more data points before lowering rates. Besides, the
last two changes in interest rates were made outside the policy. Hence, there is reason to believe that
the repo rate will not be cut this time.
2. CRR cut:
The CRR is presently at 4% and the justification for a reduction is that it will add liquidity to the system
and enable banks to lower rates. Half percent cut in CRR can add Rs 40-45,000 Cr. to the banking
system. However, with demand for credit not likely to pick up immediately any such cut will mean
deployment of these resources into G Secs auctions and will hence not really add to the credit process.
Additionally, the first half of the year is also typically the slack season when there is less demand for
credit. Therefore, reducing the CRR at this time, though useful for banks may not lead to an increase
in credit. At best it may support growth in bank credit to the extent of the demand that may emanate
from corporates with respect to the telecom and coal auctions.
3. SLR cut:
The reason for having a SLR cut could be to increase liquidity in the system. But given that the SLR
held today is 27%, any reduction from 21.5% will only help those banks at the margin in the LAF
market who are on the borderline. We do not expect a cut in the SLR this time and if done, could be
interpreted more in terms of moving towards the long term goal of 20%.
The RBI last year had moved away from the tradition of targeting growth in money supply, deposits and credit and hence there may be no indication on these variables. GDP growth target is likely to be in the range of 8% for the year.
The government’s borrowing programme of Rs 6 lkh Cr. is to have 60% in the first half which is again along the trend path. Hence, there would be no major pressure on the system on this score. In FY15, the gross borrowings were Rs 5.92 lkh Cr. as against Rs 5.635 lkh Cr. in FY14

08/03/2015

07/03/2015

Forex reserves rise to $338.08 billion as of February 27: RBI

Read more at:
http://economictimes.indiatimes.com/articleshow/46477202.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

The country's foreign exchange reserves rose to $338.08 billion as of Feb. 27, compared with $334.19 billion a week earlier, the RBI said on Friday.