Thursday, March 28, 2013

You read it first here - great Indian bank crisis

If the indications are true and if my assumptions hold good, we are in for our worst nightmarish scenario with Indian Banking system.

For the past few days(rather weeks) the news we read about Indian banks are not at all good. Most of the banks in spite of reduction in repo rate. There are serious mismatches in the ALM books which is not surprising given the fact that the bank chiefs are trying and fighting over one another to keep the Real Estate Broker community happy. Instead of moving and make things happen, almost all the Indian bankers are expecting divine intervention to continue to real estate bull run. But sadly, the story from the ground level is very pathetic.

1.  http://www.business-standard.com/article/finance/banks-stare-at-mtm-losses-as-bond-yields-surge-113032700090_1.html

2. http://economictimes.indiatimes.com/opinion/guest-writer/indian-banks-caught-in-liquidity-squeeze-or-is-it-a-liquidity-trap/articleshow/19230219.cms

The very fact that the tumbling car sales caught these people unaware shows it all. I see this is not an one off incident and we are going to see many more. In my opinion it is only a trailer shown to us. The main picture is yet to begin.

You can extract the rate cut from RBI by hook or crook, but the real economy may not oblige you which is evident from the fact that there are mismatches in ALM  and some banks had to raise interest rates.


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