RBI's promises, nuke hopes & more... - Views on News from Equitymaster

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RBI's promises, nuke hopes & more...

Sep 12, 2008

Will RBI walk the talk?
In 2005, Reserve Bank of India (RBI) had laid out a road map for the presence of foreign banks in India. The first phase of the same envisages a review in 2009, of the experience gained during the implementation of the same and the scope of the second and more important phase. While the second phase perpetuated to allow foreign banks to have majority ownership stakes in Indian entities, repercussions of the same need to be examined. The central bank, interestingly has discussed this issue in length in the latest publication of 'Report on Currency and Finance'. The same, however, gives very mixed feelings of the central bank with regard to following its own diktat.

The report states, "It has been a public policy concern that the foreign banks enter a country but do not deliver the benefits to the wider community on account of their largely urban-centric presence and also they tend to ignore the local factors due to a decision making structure, particularly in the area of credit, centralised at the overseas head office." One can fathom from these words that the central bank is wary of the foreign entities bringing their aggressive strategies and unhedged exposures to the domestic markets. While the report champions the cause for consolidation of Indian banking entities due to their lack of global competitiveness, it seems to be buying more time for the same.

Meanwhile, Indian bank unions have called for a two-day nationwide strike starting 24th September to protest against the proposals for bank mergers and more voting rights for foreign entities in private banks. Looks like the RBI has a tough balancing act ahead!

  • Also read - A change in guard

    India's nuclear hopes - a solution to global warming?
    The NSG waiver for India is not just being seen as a solution to the impending energy crisis for the economy but also as a solution to global environmental woes. The world's top economic powers have declared that the world is entering a new era of nuclear energy amid rising concerns over high oil prices and global warming. The US, Canada and Italy have all re-launched construction of nuclear power plants while France and Japan are longstanding advocators of nuclear energy.

    Nuclear power, however, has faced major criticism throughout the industrial world, with some environmentalists arguing that it poses too much of a safety risk. The 1986 Chernobyl disaster that killed thousands of people is one of the oft-cited examples. Meanwhile, propagators of carbon-free environment see it as a welcome relief. The International Energy Agency has stated in a recent report that halving greenhouse gas emissions by 2050 would require building an additional 32 new nuclear power plants every year along with 17,500 wind turbines. Indian corporates are losing no time in latching on to this opportunity and expect 18 to 20 new nuclear power plants to be set up in the country in next 15 years costing Rs 1.2 trillion.

    The government on its part has revised its target of power capacity addition during the 11th five-year plan (2007-12) to 90,000 MW from the earlier estimate of 78,577 MW, despite lingering concerns over coal shortage.

    ...and solar energy to follow
    Besides the strides in nuclear energy, India will have one more feather on her cap once Asia's biggest solar power plant is set up in Nagpur (Maharashtra) to generate 10 MW electricity for the national grid. Although the quantum of electricity to be generated is relatively small, the Indian Ministry for New and Renewable Energy believes that it will be a big leap for solar energy generation in the continent. Also, besides being environment friendly and pollution free, the plant load factor in the solar power plant will be in the range of 80% to 90% of the installed capacity, which is nearly double than in the case of wind power.

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