ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Primary MarketSubscribe to Primary Market

Exchange Rate Management:Sense of Drift

The many challenges thrown up by the large inflow of foreign currency assets and the rapid build-up of foreign exchange reserves are not being faced frontally. Decisive actions on the exchange rate front will have major beneficial effects for the economy.

Secondary Market to the Fore

The growth of the financial market in 2002-03 was much more marked in the secondary market than in the primary segment. Turnover in all three components of the secondary market - equity, debt and forex - continued to grow apace.

All-Round Financial Slackening

All major indicators of financial sector activity - commercial bank credit, capital market equity and bond issues, sanctions and disbursements of development finance institutions and foreign capital inflow - confirm an economic slow down in 2000-2001.

Productive Deployment of Excess Liquidity

The reduction in government borrowing, as the government continues its efforts to bring down the fiscal deficit, is sure to result in excess liquidity in the financial system. Optimal use of funds in this situation will rest on the quality of the banking system's credit delivery and recovery mechanisms.

Fiscal Turnaround

Moderate market borrowing relative to the budgetary target and consistently modest use of ways and means advances from the RBI point to an impressive turnaround in the central government's fiscal position in the current year.

Little Scope for Lower Lending Rates

While commercial bank lending rates were undoubtedly high till March 1999, the scope for any significant reduction in them below their current levels is small as banks' margins have been squeezed by their cost of funds, transaction costs and burden of nonperforming assets as also by non-bank competition.
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