RBI likely to pause on rates next week: Deepak Parekh

Mumbai: With severe liquidity crunch continuing to persist, the central bank is unlikely to hike rates further when it undertakes the mid-quarter review on 16th December, reports PTI quoting HDFC Group chairman Deepak Parekh.

“I don't think they (Reserve Bank) will tighten (the interest regime). There is so much shortage of liquidity in the system ... I don't think they can increase interest rates further (at this juncture),” Mr Parekh told reporters after being awarded ‘Chevalier de l’ordre de Legion d Honneur’ (Knight in the order of the legion of honour) by the French government here.

Liquidity, which was in abundance has disappeared following the continuous tightening measures by the Reserve Bank of India (RBI) in its effort to contain the mounting inflationary pressures in the system, Mr Parekh said adding, “Today banks are borrowing large sums of money on a daily basis ranging from Rs70,000 crore to Rs1 lakh crore."

Since mid-October, RBI has repeated opening a second liquidity window (liquidity adjustment facility or LAF) under which it has been allowing banks to borrow twice a day from the central bank.

Since the beginning of this year, RBI had brought back the interest and key policy rates to the pre-crisis levels by six successive interventions since the beginning of this year.

That apart, the apex bank has also brought down the SLR (statutory liquidity ratio, which is the mandatory amount of funds banks have to maintain with themselves to meet prudential norms) by 100 basis points to 24% as a temporary measure to keep the system liquid.

The lower SLR facility is now open up to 15th January.


MFIs not under threat: Gokarn

Dhapdhapi (West Bengal): Reserve Bank of India (RBI) deputy governor Subir Gokarn today said though microfinance institutions (MFIs) could be under stress, there is no threat to their survival, reports PTI.

“This is a fact that the MFIs were facing shortage of funds as banks are shying away. MFIs might be under temporary stress, but not under threat,” Mr Gokarn told reporters at a financial inclusion programme here in South 24 Parganas district.

Keeping this situation in mind, the RBI has restricted the timeframe for submission of the YH Malegam Committee's report on MFIs to two months.

“It is true that a longer timeframe is needed to make the findings of the committee more comprehensive, but a balance has to be struck between timeframe and comprehensiveness,” he said.

The committee was expected to submit its report by the middle of January.

Asked whether non-banking finance companies (NBFCs) would be allowed to act as business correspondents (BC) on behalf of commercial banks, he said there was a conflict of interest inherent in this.

Since banks were engaging BCs for last mile connectivity, NBFCs were also reaching out to the unbanked areas. “There is a question in allowing NBFCs for the time-being,” he said.

According to broad principles, MFIs were important for establishing the last-mile connectivity required for financial inclusion.

But there should not be any deviation from this, which would undermine the purpose, he said.

To a query, Mr Gokarn said the fact can't be ignored that banks would have to make money out of the financial inclusion initiative. “Banks must see it as a business opportunity.”

In the early stages, it might not be easy to find the activity commercially viable.

RBI was looking at possible ways to facilitate the banks in this regard, he said.

Mr Gokarn today inaugurated a customer service point of United Bank of India (UBI) for villagers of the region. UBI CMD Bhaskar Sen was also present.


Exchanges, market regulator sleep as operators rig Shree Ashtavinayak shares with impunity

The stock has hit the lower circuit for eight days in a row. Market players blame operators close to promoter circles

It has hits like Dabangg and Golmaal 3 under its belt and it is planning a few more blockbusters. Yet, the stock price of Shree Ashtavinayak Cine Vision (SACVL), this successful movie producer, is crashing. The stock price has plunged from around Rs 50 on 5th November to Rs18.50 today. And what a crash it has been.

Since 25th November, on every single day of the last eight trading days, the stock has been locked in the lower circuit. This kind of crash happens when a company is in dire straits. We asked around but nobody had heard of any kind of trouble for the company. What then is the issue?

SACVL has been what is called an "operator-driven" stock. This means that a bunch of big players with the help of people close to the promoters effortlessly rig the prices up and down as they please, even as the stock exchanges and the market regulator

Consider this. The stock price of SACVL on 5th November touched Rs51.20 and closed at an all-time high of Rs49.65 on that day, the highest level since the previous peak in February 2010. Over the next fortnight the price slipped to Rs43.50 on November 24, then moved up again to Rs45.75 on 25th November, from which level it has been falling continuously.

There appears to have been a similar pattern in February this year, when the stock price reached around Rs33. There was a similar crash and the stock was locked in the lower circuit for days on end until it touched a low of Rs10.65 in intraday trading on 11th March.

Clearly, it's useless to correlate the stock with the company's business. Dabangg set a record by grossing around Rs 80 crore in the first week, making it the highest grossing Bollywood film in 2010. The film also did remarkable business overseas. Its  next production, Run Bhola Run, is expected to be released in February 2011.

However, investors seeking to buy the stock on the basis of the performance of these film productions could well burn their fingers. "It is a stock consistently rigged by operators," said an official with a top equity trading firm, who requested anonymity.



Shiva Krishnan

6 years ago

Thank you for updating me by sending instant mails.Such updates really helped me to tackle questions in Interview.


6 years ago

Past examples of similar scrips prompts one to consider buying such a scrip (eight lower circuits in a row!!) at these beaten down levels...albeit with the clear understanding that this is a high-risk-high-gain speculative bet...because, the operators who have slammed the stock so severely are also capable of jacking it up some day. The next hit on the box office from the company & the upper circuits may start!!

nagesh kini

6 years ago

who'll shake the regulator out of the slumber?
a case of good rules in place no one to enforce them!

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