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Can the Coronavirus lock down the Indian economy indefinitely? It is true that stock prices are falling in the global marketplace, not just in India. In most countries, the average stock price fall is 25% to 30%. In India, the Sensex fell from 42,000 in January to less than 32,000 three months later. A few weeks back, the New York Stock exchange stopped trading on multiple occasions, and had its biggest single-day fall ever. Globally, stock exchanges are seeing a fall of 2000 to 3000 points daily. For people who put up considerable capital in stocks, they are on the verge of losing it all. For smaller investors, it’s a death, knell. When WHO declared a pandemic , stock exchanges and financial markets, along with other markets like commodities, real estate, crude oil, bullion and others saw their finances pummel. The current Covid-19 pandemic can be said to be a Black Swan event, as its impact is deeper than can be detected at the moment. The battle against Coronaviru...

Stock Market Trading Stopped 4 Times! It may be alarming to know that the S&P initiated a Level 1 market-spanning circuit breaker during the opening hours on three days of March. These were the 9th, the 12th and the 16th. The breaker was based on a big 7% drop from the previous period’s close. This fall nearly tripled on the 18th of March. How do Circuit-Breakers Work? The current guidelines on this format mandate that there should be a 15-minute pause when people are panic-buying. Circuit-breaker guidelines automatically initiate if there is a fall greater than 7% before 3:25 PM (New York Time). These breakers are there to calm the market down, and give investors time to think over their decisions. It therefore initiates when the market is becoming seemingly more volatile. There are several levels of breaks. The first two of these are initiated to halt market trading for 15 minutes. The third breaker when initiated suspends further trading for the rest of the day. ...

To help customers cope with the Covid-19 lockdown-related economic problems, the RBI advised all commercial banks, NBFCs, cooperative banks and housing finance companies are now permitted to give a 3-month moratorium on all types of term loans. SBI however, which is the largest bank in the country, has said officially that the moratorium applies not to NBFCs. In the same way, Indian Bank Association’s own circular does not contain the list of Non-Bankingfinancial Corporations as beneficiaries to the moratorium. It does not consider HFCs and MFIs to be direct beneficiaries of the working capital financing. Under the guidelines given by RBI, NBFCs can get support from banks indirectly. After all, the RBI is providing banks with liquidity support, and the banks in turn are to support NBFCs by the deployment of funds in NCDs, investment grade corporate bonds, and commercial papers. From where can one expect help? In this perilous state of affairs, NBFCs are knocking the ...

What was the Plan? Now, you may be asking whether the government had a plan to merge banks for a long time. The answer is yes, but it may surprise you. You see, the genesis of the idea to merge PSBs is from the time of M. Narshimham Committee Report of 1991. It was appointed to oversee, review and report on the functioning of commercial banks along with other financial institutions. This was done to improve their functioning through suggestion of better models. The key recommendation of the committee was to establish a 4-tiered hierarchy for the Indian Banking structure. This was to contain three or even four large banks such as SBI at the top, 10 national banks with branches around the country, local banks to cater to the various regions, and lastly the rural banks for financing agriculture. Will the Plan Work? Now, the question is whether the merger of all these banks bode well for the customers. After all, it is for them, and for the bank’s ownefficiency the merger to...

We all know that it can be costly to fight the pandemic, and even have an inkling of how long it can take. However, there is much more cause to worry: the sudden and strong pressures on income and demand, for instance. These problems are set to widen the already-wide cracks of the Indian society. The Weakest Link It may come as a shock, but the weakest link in our economy is actually the banking sector. Surprise! Who would have thought that the sector that deals with money will be the first to ask for help? However, the truth is that this has been the case for quite some time now. You see, in the recent past the banks lent heavily to the industry when the economy was booming. Then the bad debts started trickling in, after which banks were not eager to lend for new projects. Due to such reasons, banks are in an arming situation right now and need the RBI’s help. However, even though the times are tough, banks and the entire Indian economy can certainly benefit from a robust...