Bankers Trust:

Change is in the air for Indian banking

Change is in the air for Indian banking

About five weeks after Kolkata-based Bandhan Bank Ltd started its operations, IDFC Bank Ltd had a quiet launch in Mumbai this month. They had fought it out with two dozen contenders, including a few corporate heavyweights, to get the Reserve Bank of India’s in-principle approval one-and-a-half years ago. Barring the fact that the bosses of both the new banks—Chandra Shekhar Ghosh, managing director and chief executive of Bandhan Bank, and Rajiv Lall, vice-chairman and managing director of IDFC Bank—are non-bankers, they are as different as apples and oranges.

Bankers Trust:

How real is real interest rate?

How real is real interest rate?

After Reserve Bank of India (RBI) governor Raghuram Rajan surprised the market by a half a percentage point repo rate cut and his commitment to continue with the accommodative monetary policy in Asia’s third-largest economy, 1.2 billion Indians’ collective obsession with the repo rate has been replaced with “real” interest rate. How much interest should one get from the government’s small savings schemes and how much from bank deposits? What should be the ideal lending rate for banks? And, of course, what should be the ideal repo rate? Indeed, the exact quantum of real rate depends on the state of the economy, but the confusion at this point is about the calculation of real rate.