Readings: Promoter loans, M2M time for banks, Food chain
- Hindu Business Line: Financial firms cash in on bear market
. . . financial firms are looking to convert this bearish market into an opportunity by focusing on products such as ‘promoter funding’. Promoter funding, a part of the wholesale financing business for these firms, involves offering loans to company promoters who are keen to capitalise on rock-bottom stock prices, to shore up their stakes in companies.
Many new entrants have entered this business, where loans are offered at interest rates between 14 per cent and 18 per cent, with shares or property taken as collateral. “Loan against shares (LAS) is a product offered by most of the banks and NBFCs. Brokerage houses are not allowed by SEBI to indulge themselves into funding activities. We are offering this product from our NBFC . . .
. . . most banks have shifted a major part of their portfolio to held-to-maturity (HTM) in the last two years. These securities are reported at historical costs plus increase in bond prices minus amortisation. Only securities that are under the available-for-sale (AFS) category need to be marked to their current market value.
. . . banks that have a higher share in AFS will take a bigger hit as compared to those with a relatively lower share in AFS . . . banks might try to adjust for the provisions from other reserves.
Watch out for more accounting gimmicks - remember those forex derivatives headaches?
- NY Times: India’s Growth Outstrips Crops
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