RBI treads where Government fears - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

RBI treads where Government fears

Oct 28, 2009

While the government of India could only pay lip service to the issue of CEO salaries , RBI, India's central bank and also the banking sector watchdog has decided to do a lot more to ensure sound employee pay policies for the banking sector. For starters, it is already working on Financial Stability Board (FSB) principles to formulate guidelines for the same. It is believed that highly unreasonable pay packets for CEOs of large financial institutions in the western world were one of the main reasons for the global financial crisis. Apparently, the focus while arriving on the variable compensation was too much on factors like trading profits that led to these firms taking risks that were detrimental to the long-term health of the institution and ultimately, led to their downfall. The FSB report, which has also been approved by the G-20 nations, aims to correct this very anomaly and has proposed linking total variable compensation to the overall performance of the firm and maintaining a sound capital base. However, India's central bank will have to be also wary of market realities while putting into place employee payment guidelines. Otherwise, the banking sector might lose talent to other industries.

Moment of truth for telecom companies
Can a soap company remain profitable by giving out the soap for free and charging for the bath? Highly unlikely, isn't it? However, a few months from now and the telecom companies in India may perhaps have to do exactly the same thing and still remain profitable. Of course in this case, the soap would mean voice calls and the bath would mean value added services like roaming, messaging, song downloading etc. As per a leading daily, local calls on mobile phones cost 40 paise per minute and they are likely to go still lower. Infact, low enough for the country to may be become the pioneer in the world of a concept that is known free voice calls.

It would be na´ve to assume that the CEOs of telcos in India were not aware of this fact. They indeed were and this explains their move towards trying to reduce their dependence on voice calls. It should be noted that more than 30% of the revenues and 50% of profits of companies that have existed in India for quite some time now already accrue to them by way of value added services. The others that have fallen behind will have to quickly play catch up. Otherwise, with the kind of capital intensity the sector demands, it will not be long before they start bleeding. While such a scenario will be good eventually as it will lead to the much needed consolidation in the sector, we will have to go through a lot more uncertain times in the interim. Little wonder, telecom stocks are being taken to the cleaners these days.


Equitymaster requests your view! Post a comment on "RBI treads where Government fears". Click here!

  

More Views on News

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

Sundaram Bluechip Fund: Will Hold the Stable Horses (Outside View)

Sep 18, 2020

PersonalFn briefly outlines the newly launched NFO note HSBC Corporate Bond Fund.

Wait! Don't Chase Smallcaps Now (Profit Hunter)

Sep 18, 2020

Let the markets take a breather before you jump in.

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...

A Contrarian View on Whether You Should Load Up on Small Caps podcast (Views On News)

Sep 17, 2020

Rahul Shah discusses whether the SEBI circular is the perfect time to start investing in good quality small caps

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Sep 18, 2020 (Close)

MARKET STATS