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. 
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