Interim Budgets and the business sentiments

The interim budget failed to uplift the business sentiments and positivity in the market, particularly the IT industry and banking sector IT Industry:IT industry had big expectations with Interim budget. Prior to the budget presentation the IT industry was pointing at the need for extensions of Software Technology Parks of India (STPI), Export Oriented Units(EOU) schemes, Employee Stock Ownership Plans (ESOPs) and some more Standard Operating Procedures (SOPs) with tax benefits

Banking Sector:The Government did not give any benefits to the banking sector in this year’s interim budget rather the Government indicated that the cost of borrowing might go up.

Impact on Indian stock market: Indian stock market opened on a weak note and dipped further as the Interim budget was not able to meet expectations. Bank stocks were among the worst performers on the Bombay Stock Exchange. Banking index opened weak and saw further downtrend to about 4-5%. The market closed with:

Sensex: 9305.45 (down -329.29 points)

Nifty: 2848.50 ( down -99.85 points)

3-6-3 Rule - An unofficial banking rule !!

3-6-3 is an "unofficial rule" under which the banking industry once operated and which alludes to it being noncompetitive and simplistic. The banking industry of the 1950s, 1960s, and 1970s is often described as operating according to a 3-6-3 rule .The rule basically explains how bankers would give 3% interest on depositors' accounts, lend the depositors money at 6% interest and then be playing golf at 3pm. This alludes to how a bank's only form of business is lending out money at a higher rate than what it is paying out to its depositors.

In the past when the government implemented tighter banking regulations, the growth of the banking industry became stagnant as the regulations controlled tightly the rates at which banks can lend & borrow money. The regulations also included limits on the formation of new banks and their location However, these regulations loosened in 1980s and the widespread adoption of information technology such as the internet, banks now operate in a much more competitive and complex manner. The world of banking is never the same again! The banks are now providing insurance, brokerage and other forms of financial services.

S0, we can conclude this as :
3-6-3: The ‘unofficial’ banking rule - take deposits at 3%, lend at 6%, go play golf by 3 O’ clock; NINJA : No Income No Job Assets.