Whole world is reeling under economic crisis. Growth rate of countries is slowing down. While some sectors have lost heavily, other sectors have revised their targets. Amidst all this turmoil, there is one industry that is making profits and guess what this could be?

It’s the epicenter of the financial tsunami-It’s the banking industry… The very cause of the turmoil in the world is now making money in India.

Is it the strict regulation of RBI or the traditional way of running the business that has helped the banks to be in profit ? Or is it the foresight of Indian banking system that has ensured that domestic banks are not heavily exposed to the credit derivatives like US banks ? The fact is that the Indian banks have not incurred huge losses unlike their counterparts in the US and rest of the world.

Banks which faced pressure on their margins till a couple of months back are now on their way to making money. With the RBI’s initiative to increase liquidity in the system, banks got huge amounts at their disposal for lending. Even the money that was lying with RBI and yielded very little profit is now available for banks for lending at higher rates. Banks are lending at higher than PLR to corporates due to the changes in circumstances and all these are helping banks to boost their bottom line.

Quite a few factors have contributed to the profit margin of banks:

1. Reserve Bank of India has cut CRR by 3.5 % and brought it down to 5.5%
2. It has cut the repo rate by 1.5 % and got it to 7.5%
3. RBI cut the SLR by 1% and got it to 24%.
4. Banks used to lend to companies at below BPLR but now they are lending at higher than BPLR as the risk profile has increased due to the hit on the margins of the companies.
5. Banks used to shell higher deposit rates. But with the markets falling, people are finding deposits as a safe place to park their money and banks have cut down the deposit rate.

All these have increased the profit margin of the banks by 3%.

While all sectors of the economy are facing the heat of economic meltdown, it is surprising to see that our domestic banks are really making money.

Banking in India has been indeed a blessing in disguise. What do you think ?

Popularity: 20%

I often wonder when I read about the bailout packages dished out by Governments all around the world to aid banks and other financial institutions that are on the verge of bankruptcy especially the amount of money spent in bailouts in last couple of months is staggering. I am even surprised that there was not a single protest from anywhere and these financial criminals go unpunished. It is the common man who is going to bear the burden of additional tax and increased debt.

Why should tax payer’s money be used for bailing out greedy banks and corporations that have done business only with profit as motive and no concern for morals or ethics and absolutely no concern for the consequences for their acts. Putting public money in corporate coffers is just not acceptable. Financial crisis that has happened is a man made crisis done through substandard policies, deregulation and greed. I can understand putting in public money for natural disasters like earthquakes or folds. Governments all over the world have spent trillions of dollars on bailouts already

This kind of bailout is ABSURD!

We must collectively protest this .This is real money, my money, your money, our money which is hard earned paid in the form of tax.

Why should banks and financial institutions which never cared about the creditworthiness of people who lined up for loans or the soundness of derivatives business be rewarded. We should not allow government to write checks on tax payers’ account. This measure will increase the budget deficit by a significant amount, with no guarantee of recovering the amount and not holding anyone accountable for the misdeeds they have done.

What is the signal you are sending to the corporate world and investors through these bail outs? Do your businesses as you like and we will reward you for the blind errors you might commit. Is this the right way?

As far as I am concerned, there should be a thorough probe into the events that have led to this disaster and every CEO, Executive or Government who were part of this financial carnage should be jailed, their assets sold and put in a bailout fund.

It is time to wake up and realize that greed is the basis for all the financial disasters and find a way, may be strict disclosure norms, increasing the transparency in strategic decision making, making one responsible for his actions and

Few weeks back Finance Ministers of several Asian, Europe and Americas countries met and decided to act rapidly on the financial crisis

And now stock markets are being artificially manipulated by bailouts by governments.

When corporations see that the demand is coming down , it is natural for the stock to take a beating. But every other day we see CRR, SLR rate cuts which means our money is loaned back to us and the market stages a rally of any significance. FIIs and Badla traders slowly and routinely remove their money from our markets to invest elsewhere leaving the retail investor in a fix.

It is certainly not a good thing for a responsible, saving, taxpaying citizen, with no defaulted loans or credit card debt to compensate for the that Wall Street gamblers will go bust on their stupid and greedy bets, over-leveraged and poorly managed businesses with huge losses.

Let me tell you some interesting fact. Lehman has set aside $2.5 billion as bonus for their employees even as they went bankrupt for the great performance they showed in pushing the bank to bankruptcy.

What do you call this?

Popularity: 31%

Image Credit: Cardhouse

Everyday we hear Finance minister or RBI sources saying we are taking measures to increase liquidity in the market. But in reality not all banks are getting the cash using RBI directives as they are not able to fulfill the conditions of RBI and those banks that are getting cash are using it to quench the credit needs of their own customers rather than using it for secondary market purposes.

Market is experiencing liquidity pressure. Several corporates are not able to get overdrafts or loans from banks in current situation and are withdrawing the money the have invested in different debt schemes. Because of this fund houses are seeing lot of redemptions in Money and Liquid schemes. With no other alternative in place, MF houses are being forced to sell securities.

Sensing this Reserve bank on last Tuesday, through special repo has made 20,000 crores available to banks and asked them to make this money available for Mutual Funds.

If any commercial bank has securities more than SLR limit, they can show these to RBI and avail money on it. But not many banks have securities in excess of SLR and only 4 commercial banks could take Rs.3,500 crores.

RBI has asked Mutual Funds to sell or keep certificate of deposits with banks and avail money on them to return it to customers who are redeeming. If funds are able to get cash this way, they can avoid distress selling the securities in their portfolios at throw away price.

But in reality what has happened is not many banks availed of this facility from RBI and though few banks availed this facility from RBI, they are using this money for meeting the credit requirements of their customers.

Popularity: 7%