Just a few days earlier we did an entry during Bank results season at INDIA.ADVANTAGES.US while tracking the banking biggies pointing out the large unutilised capital with behemoth SBI as results came below par. Well the bank did work in the mean time on getting up to speed on the new bank rate regime, so that borrowers and the bank itself can now use that as benchmark to estimate the approved rate for the loan contract. Apart from increasing the transparency of the lending regime for the bank, this measure also makes it mandatory for the bank rate to become the minimum rate, below which the bank may not be allowed to lend.
Coupled with the Basel II regime and along with the new updated capital norms, this defined pricing will count towards a uniform practice for the industry and propagate safe and adequate capital standards from the indian point of view, when the world looks to it (at least the intellectuals) for safer regulation that works
The State Bank of India has proposed a low 8% as the bank rate, predicated on an amazing 5.4% cost of deposits and a negative 0.25% for CRR and SLR costs per the unutilized funds as mentioned earlier. The bank had no prior history of such detailed pricing mechanisms and that this may not leave them much room across the 7 credit buckets or more required under credit norms(basel). It can hold loan assets of nearly a trillion rupees or $50bn and based on avl capital after this year's capital raising can easily challenge state biggies from China and the global banks working under the new regime.
Posted via email from The investment blog on Post
India
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