A quiet and noisy event shows the real state of economy in India

We have heard the opposition and lots of common citizen online confidently ranting that the economy of the country is in shambles. Unemployment at record high, failing economy, falling GDP numbers, and so on. The list is long. Government most of the times is unusually quiet. But this time, two events occurred which have shook many a beliefs to the core. Lets explore the IPO of SBI Cards and the fourth long-term reverse repo operation (LTROs).

Fourth Long-Term Reverse Repo Operation

Repo stands for Repurchase Operation. It is a tool used by Reserve Bank of India to pump in money in the banks in particular and market in general. More money means banks can lend money to businesses on easy terms. Repo is an agreement where banks sell securities to RBI to be purchased back at a fixed date. Reverse Repo is when the RBI borrows money from the banks and financial institutions. RBI pays interest to the banks for the money borrowed. This means is used to pull out excess money from the market. The key point to note here is that banks will only park their funds with RBI if they have excess money on their hands.

In the first week of March 2020, RBI conducted the Fourth Long-term reverse repo operation (LTROs) for Rs 25,000 crore for a three year tenure. In response, RBI received Rs 48,856 crore worth of bids. The week before that RBI conducted two repo operations for which it received Rs 1.719 lakh crore in total bids. Two more LTROs are scheduled to come up on 30 & 31 March for Rs 25,000 crore each and financial experts believe that these too will be met with the same kind of response.

RBI had tried to put up bids of this nature in the past but without success of this magnitude. For those still struggling to understand this money market instrument can just look at the quantum of money involved and the faith that the open market has put in RBI.

SBI Cards IPO

Despite the fears of Corona Virus looming large on the stock markets of the world, the IPO debut of SBI Cards was nothing short of fantastic. IPO of a plastic card provider was first of its kind in the country. SBI cards is a subsidiary of SBI Bank who owns 74% stake. Launched in 1998, it is now the second largest issuer of cards after HDFC Bank. The IPO aimed to raise Rs 10,350 crore and was over subscribed 26 times! It finally managed to collect a staggering Rs 1,98,550 crore which is more than the economy of around 80 countries.

A WhatsApp viral video shows a minister asking Corona Virus to go. Once SBI Cards debuts on the bourses, its shattering impact will push corona out for a few days. The company will also have enough capital on hands to expand operations.

The SBI Cards IPO was the noisy one and the LTROs were the silent bangs which repose our faith in this economic giant of our country.

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