In June, the Reserve Bank of India (RBI) raised its repo rate by a quarter percentage point to 6.25%, endorsed by all six members of the Indian central bank’s rate setting body, the monetary policy committee (MPC). The rate hike and a marginal increase in its inflation projection notwithstanding, the stance of the monetary policy was left unchanged—neutral.
On 17 July, the traded volume of the 10-year benchmark government paper rose to ₹32,450 crore, something last seen in October 2016. The volume in the bond market has started rising slowly and volatility is ebbing. It’s the return of the public sector banks in the market that has made the difference.
Till recently, there were animated discussions on privatization of India’s bad debt-laden public sector banks. As we approach the 49th anniversary of bank nationalization, the analysts’ community is divided; the proponents of privatization are on the back foot looking at the state of affairs at a couple of large private banks. Before dissecting what nationalization has done to Indian banks or should they be privatized, let’s recount first the behind-the-scenes story of bank nationalization.
This is a joke. In September 2008, just after the collapse of Lehman Brothers Holdings Inc., at a parent-teacher meeting at a Brooklyn middle school, a teacher asked the students to talk about their fathers.
Five years back, LIC Housing Finance Ltd, the mortgage subsidiary of Life Insurance Corporation of India (LIC), had applied to the Reserve Bank of India (RBI) seeking a banking licence, but did not get it. Now LIC will get a bank. Is this the transformation of IDBI Bank Ltd ,which finance minister Arun Jaitley had hinted at his February 2016 budget speech (“The process of transformation of IDBI Bank has already started.