Global meltdown affects banks in Bric nations

Banks globally have found their bottoms ripped off by the global meltdown Bank in emerging economies have have also suffered. It has, in fact, been an eye-opener for these countries’ banking fraternity.

ICICI whose market capitalisation fell by8.6% and HDFC Bank,which fell by 6%, were among those Indian firms listed on American bourses that incurred loss to the tune of $10 billion during the past one week alone. Now the most important lesson to be learnt for the Bric countries’ banking community is be conservative in that follow strict rules while disbursing sub-prime loans and have thorough due diligence before finalising the loans. Another message for these countries from the US credit crunch may be to go aggressively for mutual cooperation.

Yet another major positive development for highly populous countries like India and China can be focus more attention to the domestic consumerism and generate more employment to their skilled youth which is coming up in the form of demographic dividend.

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Price rise tactics shift

Slashing interest rates on NRI deposits and splitting the commodity market into priority and non-priority segments form, inter alia, the government's latest blueprint to tame inflation. Moving away from the sledgehammer tactics of price control, the Centre is now planning to adopt a more nuanced approach.

It is, therefore, considering paring interest rates on Foreign Currency Non-Resident (B) Accounts from the current 5.5-6.5%.

The rates were originally aligned to Libor (the London inter-bank overnight rate), which has since eroded to 2.5%, as of Wednesday. Government officials said there was fresh room to narrow the differential, especially after interest rate cuts by the US Federal Reserve.

Speaking about the possible change, HDFC Bank chief economist Abheek Barua said though the interest rate differential did matter, currently arbitrage possibilities were limited. "However, if the government sees an excess inflow of money through private remittances or NRI deposits, especially since NRI deposits are arbitrage driven, they can tweak the rates by closing the margin to control this inflow," he said.

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Indian Overseas Bank, Axis among FE Best Banks

It's that time of the year again when The Financial Express honours the best of Indian banking. At a time when the global financial turbulence is taking its toll on even the biggest and most resilient banks around the world, the FE Best Banks 2007 rankings tell you which are the ones among those doing business in India that have performed well in FY07. As the Indian banking environment gets more challenging and competitive, FE brings you the lenders to watch out for.

This year, there are at least two ties in different categories, which reflect the keen tussle for excellence.

Like every year, FE Best Banks rankings have been put out in conjunction with knowledge partner Ernst & Young. Broadly, banks have been categorised as nationalised, new private sector, old private sector and foreign. The rankings are also based on parameters like strength and soundness, growth, profitability, efficiency and credit quality, none of which can be over emphasised in today's banking environment.

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