Rituparna Das

Understanding the Relationship Between Liquidity and Inflation in the Post Crisis Period in India: from Bank Dealers’ Perspectives

The advent of liquidity as a matter of study and research in India may be traced back to the literature of the pre-crisis period on money supply which, having left its vestige until early 2010, revolved around macro-economic modeling of money, output, and prices with sporadic attention to issues such as endogeneity and multiplier. In 1998, the Third Working Group of the RBI introduced liquidity as measures of money supply. After the RBI’s first guideline on asset liability management in 1999, the issue of liquidity started gaining ground in academics and the RBI economists started modeling and forecasting liquidity followed by practitioners and academicians during the pre-crisis period. In the post crisis period, the issue of inflation gained ground. This chapter examines how the dealers in government securities and the dealers in stocks in the front offices of the treasury departments in the banks and financial institutions procure and manage liquidity for investment and other purposes amidst inflation subject to the influences of the drivers of inflation.

Why Should All the Eurobonds Issued by Indian Banks Carry Uniform Regulatory Credit Risk Charge

Credit risk charge is a major component of capital charges against investments in Eurobonds by an Indian commercial bank (henceforth “bank”): (i) market risk capital charge and (ii) credit risk capital charge. Basel II guidelines gave country regulators the freedom to decide the credit risk weights of bonds issued by banks. The Indian banking regulator Reserve Bank of India assigned a 20 per cent credit risk charge of investments in corporate bonds issued by any other bank. This was in place for quite a long time and across all banks. But credit risk varies from time to time and from issuer to issuer. This chapter seeks to sensitize the investing banks as also the regulator regarding the changing magnitudes of driver factors determining credit worthiness of a bank in terms of credit quality and credit score during the post-crisis period. A credit risk manager may assess the counterparty-default probability, looking at the credit rating of the instrument, not the issuer, as per the regulatory norm. Therefore I have chosen the two jointly largest Eurobond issuers banks in terms of outstanding amount in USD, as comparative examples. These are ICICI Bank and State Bank of India (henceforth “SBI”). Each has a liability of 1000 million USD outstanding from a single issue in the Asian offshore market. In the beginning of the financial year April 2012-March 2013 1000 USD is the largest denomination of a single issue.

Critical Analysis of the Role of the Reserve Bank of India in Managing Liquidity in the Interbank Market amidst Financial Stress

During the period 2011-12 of economic downturn characterized typically by economy wide loan defaults many banks in India are reported to have posted adequate levels of capital but experienced difficulties due to unsound liquidity management. In an attempt to examine the ease of liquidity management procedure of the Indian banking industry, this paper critically examines whether the central bank of the country facilitates liquidity management of the banks during the stress periods. The finding is that it does not.

Are the Payments System and e-Banking in India Safer than in other SAARC Members?

This paper deals with the issues in the way the banks are managing risks in payments and settlement systems using netbanking within the legal frame of information technology in India compared to other SAARC members. It compared India with the SAARC members with respect to management of credit risk, liquidity risk and operational risk in the payment system. The findings are: i India, Pakistan and Nepal are stronger in managing all of aforesaid risks in their payments systems relative to the rest and ii India is the most permissive by nature as to the crime of computer hacking.

Revisiting Interest Rate Pricing Models from an Indian Perspective: Lessons and Challenges

The chapter written by Rituparna Das and Michael C S Wong in the above book highlights the challenges in interest product valuation in the Indian context.