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RBI tightens its grip over banks

Oct 23, 2009

Bankers tend to take retail customers lightly. Be it investment bankers or their cousins from the commercial banking space. Arguably, the investment bankers and their brokerage divisions prefer business from institutional investors over retail investors. But it comes as a surprise that commercial bankers are no different. And it is not merely our opinion. Even the Reserve Bank of India (RBI) has observed that banks continue to charge unduly high interest rates from retail customers. India's central bank says, "If after so much liquidity support, fiscal and monetary sops, the interest rates remain so high for retail customers, what is the meaning of the monetary policy if it is not translating into a low interest rate regime for retail customers?" As per a leading business daily, the effective rates of interest are as high as 30% for some and as low as 3% to 4% per cent for others. And guess who gets the lower band? The corporate clients, for their short term working capital loans.

The RBI is keen on making the pricing of loans more transparent so that retail borrowers know exactly what they are paying. We couldn't agree more. In our opinion, such lending practices are not only unfair to the retail customers, they also make the work of the RBI more difficult. After all, how can it formulate monetary policy if banks implement it as per their own sweet will?

India to get hybrid vehicles soon
There is little doubt that India has caught the fancy of major auto players across the world. The reasons are not hard to imagine. Not only is India emerging as a major source of demand for the auto industry, it is also making rapid strides as a supplier in terms of technological and commercial skills.

The flavor of the season is hybrid vehicles. Recently General motors India signed up with Reva Electric Car Company for developing an electric 'Spark' indigenously. Now Toyota and Nissan plan their hybrids in India. In fact, Toyota is keen on introducing the world's most successful hybrid - Prius - early next year. Tata Motors is also developing its electric 'Indica'.

However, we believe, it will be a while before such vehicles can achieve major volumes in India. After all, the pre requisite for electric vehicles is steady power supply. Given the state of power supply in most of India, consumers would rather go for traditional vehicles - after all petrol pumps are everywhere. Moreover, hybrids tend to be relatively more expensive. Given the price sensitivity of the Indian consumer, they are unlikely to find takers.

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