Lousy results by HDFC Bank. Ignore the 38% growth (they conveniently forgot that they merged with HDFC in July last year) - the real profit growth is just 3%. Even that is probably because of Credila (they got a pretax profit of some 7000 cr. because of it) Discl: Small pos. Credila was sold off in 2024 March, which pretty much made their bottomline. They also had an extra floating provision of 10,900 cr. (which would have brought down the profit) and that's likely because they see more issues in retail.

If you wonder why RBI's all antsy about growth of the credit ecosystem, it's because things are looking really hot here:

The credit/deposit ratio is at the highest it's ever been. Banks have to put about 18% of Deposits in GSecs and 4.5% in CRR.

This means of every 100 rs. Deposit they can only lend out Rs. 77.5. Banks will have their own capital - between Rs. 10 and Rs. 15 for every Rs. 100 in lending so they can lend out as much as 88 also. It appears that banks are lending as much as they can and some more.

This is a little bit of a problem because the areas you see where the C/D ratio is above SLR/CRR limits? Those periods correspond to high inflation; and it appears we are back.

I should write a more detailed piece on this, but I'll start this way: it should not surprise us that banks aren't doing that well. And given that Indian government bonds will have more demand from foreigners, expect this ratio to stay high at least this year. Oh, and deposit growth is only around 13%, versus credit growth of 19%.

Deposit rates - for relatively shorter terms like a month or two - are better with money market/liquid funds. Corporates have slowly figured this out, at least the large ones. Individuals will.

Inflation goes up mildly to 5.55% as food inflation shows its ugly head again. Last year though, there was a dip at this time, so that's a bit of a base effect also. As you can see, closer, here:

RBI increases risk weights for banks and NBFCs. This is pretty big!

1) All consumer credit (other than housing, vehicle, gold, edu and MFI loans) see an increase in risk weight to 125% from 100%

What this means is: In effect, if a bank has 20% CAR for personal loans (unsecured) or loan against fd/stocks, then it's lent Rs. 100 for Rs. 20 in capital. Now that Rs. 100 will be counted as Rs. 125 (125% risk weight) so the CAR falls to 16%.

Banks and NBFCs will now see much lower CARs.

India's Current Account Deficit fell by half, to $9bn from $18bn in Q1 last year. More charts follow. Net of gold, India's current account is actually positive! Gold is more a financial account item, since it's more used as a financial instrument. Think of it as reverse FPI or such. If we did that, our current account would be marginally positive:

This is HUGE! RBI says banks and NBFCs have to release documents of properties and collateral mandatorily within 30 days!
* Have to remove encumberance within 30 days, and return docs
* Docs can be returned from any branch, not just home branch of customer
* Loan docs must mention where the borrower can get them back once he repays
* If the bank/NBFC doesn't return docs or release the encumberance charge within 30 days - they pay 5000 rs. per day of delay
* If bank/NBFC loses the docs - they will pay and assist owner in getting docs back or attested copies (but they get another 30 days i.e 60 days before the 5K per day penalty, only if they lose the docs)
* If the loan taker dies, Banks/NBFCs need to have a detailed procedure on how heirs can get original docs.

Applies for even past loans where full repayment happens after December 1, 2023.

This is awesome for homeowners who borrow, but also for collateral based lending like for cars, securities and all the other stuff. And applies to NBFCs also, so housing finance companies can't escape.
Link: rbi.org.in/Scripts/Notifi…

My goodness. The CRR requirement for banks has jumped up by over 100,000 crores! From 890,000 cr to more than 10 lakh crore, on Monday.

I know half of this won't make sense to anyone. Damn, I should write about this. Or tweet thread it out RBI recently raised the CRR (cash reserve ratio) requirement for banks - 10% of all incremental demand and time liabilities after May 19 to July 28. That means all new deposits in the banking system would have 10% given to the RBI for no interest.

The reason people understood was: oh, the RBI has told people to deposit their Rs.2000 notes as they will not be legal tender after September.

This is not a useful reason. Because the notes, even when they were "demonetized" were only 3.62 lakh crores in value on May 19, 2023. And that's fallen to 0.42 lakh crore on Aug 1, which means only 3.4 lakh crore was deposited.

Total cash in circulation was around 3.45 lakh crore on May 19

On July 28, it was 3.29 lakh crore. That's only 16,000 cr. that's net out of cash - that means people deposited and took out cash again. No, this incremental CRR can't be because of Rs. 2000 notes. So why?

Interesting tidbits from the SEBI consultation paper on TER: they're paying so much brokerage and transaction costs that it sometimes is higher than the TER itself (and then, they might be routing brokerage through "high" brokerage entities) For investments Beyond the Top 30 cities (called B30) funds can charge a higher fee than the minimum TERs, but hey:

What is the "Total Expense Ratio" or TER of a mutual fund? To understand this better, we go through the basics and some really advanced material such as: why are funds charging 0.05% more just because they have an exit load?

Such things and more, in this thread and post. Of course, we don't ever do things half ways at @capitalmind_in so it's going to be a bit of a nuanced article: We cover why it's not "Total" expense ratio, but it's more like *conditions apply.

Lic turned out a 36,000 cr profits for the year on a market cap of 390k cr. Own it in the pms.

13000 cr profit in the last quarter and lowered npas to 2.6% for policy holders. There's a continued 4-5000cr from the non par account that comes to shareholders. The one timers are
Loss of 11000 cr due to a employee liabs on wage revision
Hit of 2200 cr till fy 24 for pension liabs
Tax benefit of around 7000 cr
One other 5000 cr one time hit for npas i think

Very interesting, and fairly cheap at 60% of embedded value

RBI is slowly withdrawing the Rs. 2000 note from circulation. This is not demonetization - the notes will continue to be legal tender. You have till September 30, 2023 to deposit Rs. 2000 notes and either exchange them to other notes, or just keep the money in your account. Banks will no longer issue 2000 rupee notes going forward.

Why? Notes get soiled over time. They are usually withdrawn quietly by telling banks and new notes issued to the banks. Now, no new notes will be issued. A 2000 note given to RBI will be returned with 4x500 or such.

Just went through the SEBI MSM REIT regulation draft - that's a mouthful - here: sebi.gov.in/reports-and-st…

It's a funda that says
* Oh, you want to own real estate and get rent but not enough money?
* Come pool with a bunch of people like you and buy a place together ... This is "Fractional ownership". Sites like Asset Monk, Prop share etc. offer this. They create an LLP which buys the real estate. From the rent collected, they keep a bit and send the rest to investors.

SEBI wants to regulate this, as it's a collective investment scheme.

The swiggy/blinkit worker strike is a very interesting thing. They converted what was supposedly a "gig", a part-time job, to a full time occupation. They were complicit in that - ask anyone what it cost to get a "delivery person" before and after these portals came about. The offer was simple: Get yourself a bike and a phone. You'll get orders from us. You collect stuff, and deliver it. We pay per order. Do it all day, and you get like Rs. 1000 with the "incentives".

Much as I love debt, I now know exactly why some investors absolutely hate companies that take debt.

The balance sheet is where companies die, even if their P&L statements live. Debt is a weapon. Once you take it, you can use the money for anything. For example if a company has debt and it acquires another company, is the debt being used for that acquisition? You can't say but money is fungible so what they could have used to pay the debt => acquisition

If you had a loan of 1 crore for 20 years at 6.5% (a couple years back)

Now rates rise to 9.5%

The bank does not want to raise the EMI but increase tenure of loan

What is your effective new tenure of loan? (Assume you paid back only 5% of loan principal so far) Correct answer:

https://twitter.com/sacsubr/status/1636342144251338752

Since everyone's making a thread about SVB, here's my contribution. Silicon Valley Bank is an old boring conservative bank. It is in trouble not because of bad lending practices, but because of a combination of
- strange way to invest short term money
- announcing a capital raise… twitter.com/i/web/status/1… And with $169 bn in deposits, SVB is as big as....HDFC Bank, the second largest bank in India.

The Capitalmind Podcast just crossed 500,000 downloads! Thanks for listening, and for all the awesome feedback. Lots more to come!

Listen in at Spotify: open.spotify.com/show/7KRnGSkSG…

and we've got archives at @capitalmind_in too: capitalmind.in/tag/podcast/

Now, a 🧵thread: The day it all started - first episode - Valentines day 2019!

Debt mutual funds and the issues that involved the IL&FS, Zee and other such complexities:
open.spotify.com/episode/0DykHw…

#Budget2023 thread starts here. Follow this and @capitalmind_in for more. We'll live tweet it, and we'll have some fun! Note:

https://twitter.com/deepakshenoy/status/1620639776717307904

Tomorrow, we live tweet the budget. And then a discussion around what happened, on youtube live and a twitter spaces later to find out what REALLY happened. The devil is always in the details.

Budgets, though, are no longer mega events that they used to be. Under-expect. A few things here: the government is seeing tax collections grow at way higher than nominal GDP (which is about 15%): Personal tax collections are up 30%, and corporate taxes are up 20%.

Even net of refunds they're up substantially.

In 2016 or 2017, I learnt that AT1 bonds - which should be called WMD bonds - were being sold to retired people. I had n idea what AT1 bonds were, so I went to look.

This is going to be a primer. AT1 bonds are a strange beast. Mostly because they aren't bonds. What AT1 is, if I'm a bank:
- you give me money, I can choose to never return it back. ('perpetual')
- I pay interest every year at some 10% or so. Look high? Wait till you find the real cost.
- I can choose NOT to pay you interest, or worse
Huh?

Chauhan sells Bisleri to Tata for 7000 cr. It's an iconic brand indeed. He first sold Thums up to Coke in the early 90s, and even after 30 years, Thums up is still the leader even beating cokes own cola in India. What an iconic guy. Bisleri is an awesome brand. Chauhan is 82. Sells this too now. Incredible entrepreneur. Is there a book on this guy?