Impact of new ECB Norms on Indian Banks
Wednesday, August 08, 2007Indian companies can now borrow only $20m offshore for use onshore; overall company cap at $500m remains but only for expenditure offshore. The RBI/government's objective - stem $s into the market.
Higher loan demand, lesser liquidity, stable rates - 1] there should be some shift of loan demand from offshore to the domestic market; and 2] deposit growth should slow - we believe some offshore borrowing was being arbitraged into deposits. Both these developments should translate into 3] lesser surplus liquidity in the system, and a bias toward firmer rates - do not see them going up, but should arrest falling deposit rates and segment-specific lending rates.
This is probably a positive in the near term - higher loan growth, better liquidity balance and lesser offshore competition. Structurally however, it probably is a negative that the market is getting closed rather than opened up. Bank specific - the domestic-only banks - both private sector and Government, as relative beneficiaries. Banks with relatively large offshore operations - which are likely large investors in offshore Indian corporate players - ICICI, SBI and BOI, relatively disadvantaged in their international operations.
Dalal Street Business Reports
- Wipro's acquisition of Infocrossing - Insight
- Amtek Auto Results - Insight
- Indian Markets Down Again
- Purvankara Lowers IPO Price- Extends Closing Date
- Reduce - Unitech, Parsvnath and Ansal Properties
- RBI Hikes CRR Again by 0.5%
- Goldman Sachs Ups Aban Offshore
- Bears Hug Dalal Street
- Citi Upgrades Kotak Mahindra Bank
- Indian Hotels + Leela Venture - BUY
