Is it Indian PSU banks, who will bleed the streets? Just a thought!

 #Banking in India will be the next Boom n Bust story??

#Stock market fall is an effect and not a cause! What happens when there is too much of excitement and attention to one sector/industry/company/ business idea? everybody starts appreciating, following, taking extra effort to get into the scheme of things etc.. untill there is a there is a peak and BOOM! And a sharp slope slides down n BUST! and a parallel line leveling the fields and world moves on towards a new exciting subject. In financial market or the larger context of economy, it is extremely evident.

Strangely we all keep looking back at history all the time, yet fail to gauge the impending risks. Time and again it repeats itself, we all educated investors close our eyes and follow whatever the markets leads us to.

In the world history of economic crisis, since 13th century, 2/3rd of the crisis started at bank failures or debt crisis, barring a few which were due to trade deficits, industrial revolutions and a few wars. The amazing fact remains that though there were so many debt driven crisis in last 8 centuries, we just don’t stop repeating ourselves.

Yes we do try. By creating central banks, but, sovereign debts fail too. We have credit rating agencies, then happens the SUBPRIME CRISIS.

Then come more regulations, more tightening by the central banks! Banks seem to become victims of these regulations and the business targets and margins as well. Then the greed takes over bankers race to aggresive lending to stretch the balance sheets.

The recent developments in the Indian Banking sector is alarming, a little better than what it was two years back though. Two important parameters of performance is leaving the especially the PSU banks high and dry! would they survive?

1. The Basel III norms – a very difficult set of guidelines set by the central bank on capital adequacy to brace for crisis, is an extreme stressful for banks. Banks of India have been issuing the Perpetual Bonds to meet tier I capitalas per Basel norms. coupon rrates of few bonds have been as high as 11%. With no maturity dates ateacher on thad a bones,  could easily become a excess burden of interest payout as interest rate continues to fall.

2. Greed of bankers to inflate the balance sheets – Mounting NPAs caused by disbursing loans to less credit worthy entities is showing signs of failures, unending restructure and failure to get adequate risk cover through collateral.

Thanks to the watchdogs of Indian financial sector, it may not just do a Boom n bust and averted a crisis just in time! but an area to trade carefully. just a thought!

TOP NRI Investments in India – FCNR deposits

Dear NRI and PIO investors, get more tax free return from fixed income options in India
TOP NRI Investments in India – FCNR deposits

With dwindling interest rates globally, it has become impossible to earn any interest in the fixed income category, however, #NRI investors have various options available back in their own country for earning a good fixed return on their investments. There are options of NRE, NRO accounts for savings, fixed deposits and recurring deposits, which are in the indian currency, #FCNR is one more option available which offers lower interest compared to #NRE, #NRO accounts, however, protects the investor from currency fluctuation risk.    

What is an #FCNR Deposit?
FCNR stands or Foreign currency Non-resident bank account. Currently it is available in USD, British Pound, Euro, Japanese Yen, AUD and CAD. This account is actually a short term fixed deposit with tenure 1-5 years. The major booster for this is, apart from NRIs, Persons of Indian Origins as well can avail this facility. The interest earned in this account is not taxable in India.

Documents required for FCNR account
Copy of passport and visa, overseas bank statement, overseas electricity/telephone bill

Premature Withdrawal
There could be a penalty charge of 1%, withdrawal within 1 year would lead to non-payment of interest.  


Opportunity

Interest Rates for FCNR Deposits
With many countries including US, keeping interest rate near zero, FCNR acts like a bonus element. The chart for FCNR deposits is as below –  

FCNR interest rate chart
Negative bond yield in countires – Japan, Italy, France, Germany piling on bonds with negative yield, shrinking the investors’ funds. Major countries also have kept the interest rate near zero, making it impossible to earn any interest income.

There is been news of negative yield for last three months in many major countries worldwide, Negative-Yielding Bonds Jump to Almost $12 Trillion – Bloomberg,


Dollar rupee movement doesn’t bear any consequence to the investor

FCNR accountholders doesn’t have the risk of currency fluctuation as the account remains in the original currency of deposit and the accountholder earns at fixed rate of interest.  So, if dollar appreciate or depreciate against rupee in the said tenure, doesn’t hold any bearing to the investors. 

NRI investment patterns become realistic – source – moneycontrol

As compared to ultra-luxury properties or saturated locations, mid-segment apartments in relatively affordable markets, seem to be witnessing high demand.
According to data available with Track2Realty, Malayalees and other south Indian NRIs are now investing in Kochi and Coimbatore, rather than Bengaluru or Chennai. Similarly, Gujarati NRIs are investing in Ahmedabad and Vadodara, rather than Mumbai, while Mumbai-born NRIs are investing in Pune and Nashik. North Indian NRIs are investing in properties in Noida and Ghaziabad, instead of Gurgaon.

What NRIs want
Kaizad Hateria, brand custodian and chief customer delight officer, Rustomjee Group, says that nowadays, in a majority of the cases, the clients who buy luxury and super-luxury properties are end-users. However, every end-user, may not have the budget to invest in luxury or super-luxury developments.
The self-employed segment of NRIs, prefer to have an investment portfolio of different projects, instead of putting their money in large developments. They divide their money among various small projects, which enables them to sell easily if they want to, or earn good rental from their various investments, Hateria elaborates.
Manju Yagnik, vice-chairperson of the Nahar Group, points out that in the prevalent market conditions, NRIs are avoiding big-ticket projects. NRIs are investing in properties worth Rs 60 lakhs to Rs 2 crores, depending on their social strata, as this is an attractive and safe option. Most of the affordable luxury housing projects, fall in this price bracket in the metro cities.
NRIs also like to keep the option of exiting open, based on the movement of the global economy. A project with a large ticket size, takes longer time to liquidate. Over the years, NRIs have largely invested in properties across metropolitan cities, as it provides them with the lifestyle that they are used, in addition to appreciation and healthy returns, says Yagnik.

Ground realities
Does it mean that the luxury and ultra-luxury properties, will no longer attract the NRIs? While the analysts opinions remain divided, everyone agrees that the days of speculative investments, may be over.
See also: Dos and donts for NRIs investing in Indian realty
A survey conducted by Pravasi Bandhu Welfare Trust, a Dubai-based non-governmental organisation, working to improve the lives of Indian workers in Gulf Cooperation Council (GCC) countries, finds that a whopping 95% of NRIs in the Gulf do not save anything and return empty handed to India, even after working for a decade. A majority of them fail to save sufficient money, due to low wages and high cost of living. The study also found that only 10% of Indian workers in GCC nations, live with families. Consequently, the demand for housing from NRIs, now reflects ground realities.
This augurs well for the housing market, as it may indicate the end of speculative buying and the evolution of an end-user-driven market.

NRI preferences in home buying 95% NRIs are employees and wage earners and cannot afford luxury property in India. Rich NRIs have burnt their fingers or have learnt from the bitter experiences of theirpeers and hence, avoid luxury properties. Small-ticket investments, provide easier options for exit and better rental returns. Insecurity in the global job market, is forcing NRIs to be realistic in their housing investments, back home.
(The writer is CEO, Track2Realty) 
http://m.moneycontrol.com/news/real-estate/nri-investment-patterns-become-realistic_7531501.html

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