Banking Sector Forecast 2011

Sector analysis 2011 Liquidity 1. Unless inflation is checked there is freeing to be a liquid state crunch in the banking system. 2. Also, the liquidity crunch will be stoked by the fact that banks post-subprime perk up taken a conservative stand with respect to bestow activities. 3. The likelihood of double digit inflation in the frugality is very high owing to the fact that there would be a spillover from the US quantitative easing, the excess spending by the Indian government in the fiscal year 2011-12, 3G spectrum bonanza profits and deregulation of fuel prices. Interest Rates 1. We expect fill rates to remain high due to the inflationary pressure. some other increase in rates is expected on Jan 25 by RBI. This would mean further increase in ungenerous rates and deposit rates of the banking sector. 2. This would improve net affaire margins of banks , the overall savings, bulk deposits and the volume of term deposits which in wring would help the banking sector better manage its the Asset obligation Mismatch. 3. The cost of wholesale borrowing of the banks would increase until deposits show an ready responsiveness to the increase in interest rates. Typically in a rising interest rate scenario, the increase in deposit rates lag behind increase in loan rates. 4.

Owing to the increase in interest rates, the accord on bonds, theoretically, would decrease, making debt like G-secs less lucrative. Exposure to Microfinance 1. Indian banks have a exposure of 15000 crores to the MFI sector, of which 35% is in Andhra Pradesh. 2. The refreshing RBI rule requires banks to form a consortium to diminish the default hazard involved in lending to microfinance institutions. 3. MFI is uphill as a double edged sword, promising country financial inclusion and a huge default risk at the same time to the Indian Banking system. RBIs Banking License 1. Providing new licenses will broaden the reach of the banking system to unbanked Indians, which will... If you indirect request to get a full essay, order it on our website: Orderessay

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