The deficits facing the Indian Financial sector are of Trust and Faith on –
1. #rbi to manage NOT liquidity , but credit !
2. #government to manage the #psubanks ( corollary public money ) prudently by both protecting profitability and at the same time resolving bad debt. By selling assets at large haircuts , the #government has put itself in a fix .
3. #sebi by sucking away liquidity from the futures and options market
4. Election related populist spending , which is not abating inspite of razors edge fiscal management , huge taxes on fuel ( ad valorem at state level )
5. Rupee in tailspin for all the above more , than oil and global prices.
6. Financial distress cannot be kept isolated by a circular or in a sector , more so if the numbers are large .
Markets have got a feeling that the present management has a disregard for timing – demonetisation, followed by an ill prepared implementation of GST , a large scam followed by a circular removing key restructuring schemes , sebi coming out with circulars on futures and options and curtailing liquidity .And for the fear of a repeat of the incredible India election defeat , uncurtailed populist spending .
The #rbi has been quite adept at liquidity management , it’s the other banking aspects which bear greater strategic weightage on a country .
Which is why we may need another regulator to manage banking .