Page 12 - Banking Finance October 017

RBI CORNER

RESERVE BANK

NEWS
NEWS
NEWS
NEWS
NEWS

Stock Market needs to be careful: RBI DBS to operate through
RBI in its Annual Report said that there are evidences of a bubble building up in WOS in India
Indian stock prices based on an econometric model, but
there is no bubble yet since the current stock rally is The Singapore-headquartered DBS
driven by strong fundamentals. Bank has re-
ceived an in-
An econometric "test statistic was greater than the principle ap-
critical value at 1% level, possibly indicating evidence
proval from
of bubbles in the market,'' the annual report said. "No the Reserve
bubble is detected currently when stock prices have reached historical highs. The Bank of India
current rally in stock prices seems to reflect the strong macro fundamentals of (RBI) to con-
the Indian economy, easy liquidity conditions prevailing in the system and buoy- vert its Indian branch into a wholly
ancy in global markets.''
owned subsidiary, enabling the bank
The central bank's warning comes at a time when analysts are debating whether to freely expand across the country
Indian stocks at record high are overvalued and that liquidity is pushing stocks to like other private banks, and it will
artificially high levels. Reserve Bank had conducted the analysis of benchmark also require the multinational lender
Sensex data between April 1994 and April 2017 in which there were bubbles. to provide loans to farmers and small
"The first two bubble periods (June 2005 to May 2006, and August 2006 to Feb- businesses.
ruary 2008), coincided with the booming phase of FPI inflows and bust after the DBS group CEO Piyush Gupta said, "In-
global financial crisis in 2007-08, said RBI. " Another bubble is identified during dia is seen as a bright spot on the glo-
August 2014 to February 2015 in the aftermath of the general election results, bal horizon for portfolio investors as
which ended on concerns over retrospective taxes on FPIs, high valuations and well as FDI investors who showcase
weak earnings growth." India as a country of immense possibili-
Although the central bank doesn't declare a bubble, it warns of need for cau- ties. As an Asia-centric bank, we focus
tion. "Nonetheless, a constant vigil of stock prices may be warranted at this junc- on regional opportunities and India,
ture, keeping in view the ramifications for financial and price stability," it said. China and Indonesia are the three big
opportunities and we continue to make
Swachh Bharat Logo on Rs. 50 notes investments in all three."
RBI recently launched new fluorescent blue Rs 50 banknotes bearing the motif He said that the bank, which had
of 'Hampi with Chariot' on the reverse that depicts India's cultural heritage, also 1,200 employees in India and an ad-
featuring a Swachh Bharat logo with slogan and language panel. "The new de-
nomination has motif of Hampi with Chariot on the reverse, depicting the ditional 800 in a technology centre,
country's cultural heritage. The base colour of the note is fluorescent blue," RBI expected the bank staff headcount to
double in a few years.
said in a release.

BANKING FINANCE | OCTOBER | 2017 | 11

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