Venture capital (also known as VC or Venture) is provided as seed funding to early-stage,

high-potential, growth companies and more often after the seed funding round as growth funding
round (also referred as series A round) in the interest of generating a return through an eventual
realization event such as an IPO or trade sale of the company. To put it simply, an investment
firm will give money to a growing company. The growing company will then use this money to
advertise, do research, build infrastructure, develop products etc. The investment firm is called a
venture capital firm, and the money that it gives is called venture capital. The venture capital
firm makes money by owning a stake in the firm it invests in. The firms that a venture capital
firm will invest in usually have a novel technology or business model. Venture capital
investments are generally made in cash in exchange for shares in the invested company. It is
typical for venture capital investors to identify and back companies in high technology
industries, such as biotechnology and IT (Information Technology).

Venture capital typically comes from institutional investors and high net worth individuals, and
is pooled together by dedicated investment firms.

Venture capital firms typically comprise small teams with technology backgrounds (scientists,
researchers) or those with business training or deep industry experience.

A core skill within VC is the ability to identify novel technologies that have the potential to
generate high commercial returns at an early stage. By definition, VCs also take a role in
managing entrepreneurial companies at an early stage, thus adding skills as well as capital
(thereby differentiating VC from buy-out private equity, which typically invest in companies
with proven revenue), and thereby potentially realizing much higher rates of returns. Inherent in
realizing abnormally high rates of returns is the risk of losing all of one's investment in a given
startup company. As a consequence, most venture capital investments are done in a pool format,
where several investors combine their investments into one large fund that invests in many
different startup companies. By investing in the pool format, the investors are spreading out their
risk to many different investments versus taking the chance of putting all of their money in one
start up firm.

A venture capitalist (also known as a VC) is a person or investment firm that makes venture
investments, and these venture capitalists are expected to bring managerial and technical
expertise as well as capital to their investments. A venture capital fund refers to a pooled
investment vehicle (often an LP or LLC) that primarily invests the financial capital of third-party
investors in enterprises that are too risky for the standard capital markets or bank loans.

Venture capital is also associated with job creation, the knowledge economy, and used as a proxy
measure of innovation within an economic sector or geography.

In addition to angel investing and other seed funding options, venture capital is attractive for new
companies with limited operating history that are too small to raise capital in the public markets
and have not reached the point where they are able to secure a bank loan or complete a debt
offering. In exchange for the high risk that venture capitalists assume by investing in smaller and
less mature companies, venture capitalists usually get significant control over company
decisions, in addition to a significant portion of the company's ownership (and consequently
value).

Young companies wishing to raise venture capital require a combination of extremely rare, yet
sought after, qualities, such as innovative technology, potential for rapid growth, a well-
developed business model, and an impressive management team. VCs typically reject 98% of
opportunities presented to them[citation needed], reflecting the rarity of this combination.

The venture capital boom and the Internet Bubble (1995 to 2000)

By the end of the 1980s, venture capital returns were relatively low, particularly in comparison
with their emerging leveraged buyout cousins, due in part to the competition for hot startups,
excess supply of IPOs and the inexperience of many venture capital fund managers. Growth in
the venture capital industry remained limited throughout the 1980s and the first half of the 1990s
increasing from $3 billion in 1983 to just over $4 billion more than a decade later in 1994.

After a shakeout of venture capital managers, the more successful firms retrenched, focusing
increasingly on improving operations at their portfolio companies rather than continuously
making new investments. Results would begin to turn very attractive, successful and would
ultimately generate the venture capital boom of the 1990s. Former Wharton Professor Andrew
Metrick refers to these first 15 years of the modern venture capital industry beginning in 1980 as
the "pre-boom period" in anticipation of the boom that would begin in 1995 and last through the
bursting of the Internet bubble in 2000.[15]

The late 1990s were a boom time for venture capital, as firms on Sand Hill Road in Menlo Park
and Silicon Valley benefited from a huge surge of interest in the nascent Internet and other
computer technologies. Initial public offerings of stock for technology and other growth
companies were in abundance and venture firms were reaping large returns.

[edit] The bursting of the Internet Bubble and the private equity crash (2000 to
2003)
The technology-heavy NASDAQ Composite index peaked at 5,048 in March 2000, reflecting the
high point of the dot-com bubble.

The Nasdaq crash and technology slump that started in March 2000 shook virtually the entire
venture capital industry as valuations for startup technology companies collapsed. Over the next
two years, many venture firms had been forced to write-off large proportions of their investments
and many funds were significantly "under water" (the values of the fund's investments were
below the amount of capital invested). Venture capital investors sought to reduce size of
commitments they had made to venture capital funds and in numerous instances, investors
sought to unload existing commitments for cents on the dollar in the secondary market. By mid-
2003, the venture capital industry had shriveled to about half its 2001 capacity. Nevertheless,
PricewaterhouseCoopers' MoneyTree Survey shows that total venture capital investments held
steady at 2003 levels through the second quarter of 2005.

Although the post-boom years represent just a small fraction of the peak levels of venture
investment reached in 2000, they still represent an increase over the levels of investment from
1980 through 1995. As a percentage of GDP, venture investment was 0.058% percent in 1994,
peaked at 1.087% (nearly 19 times the 1994 level) in 2000 and ranged from 0.164% to 0.182 %
in 2003 and 2004. The revival of an Internet-driven environment in 2004 through 2007 helped to
revive the venture capital environment. However, as a percentage of the overall private equity
market, venture capital has still not reached its mid-1990s level, let alone its peak in 2000.

Venture capital funds, which were responsible for much of the fundraising volume in 2000 (the
height of the dot-com bubble), raised only $25.1 billion in 2006, a 2% percent decline from 2005
and a significant decline from its peak.[16]

[edit] Venture capital firms and funds

Diagram of the structure of a generic venture capital fund
Main articles: Private equity firm and Private equity fund

[edit] Structure of Venture Capital Firms

Venture capital firms are typically structured as partnerships, the general partners of which serve
as the managers of the firm and will serve as investment advisors to the venture capital funds
raised. Venture capital firms in the United States may also be structured as limited liability
companies, in which case the firm's managers are known as managing members. Investors in
venture capital funds are known as limited partners. This constituency comprises both high net
worth individuals and institutions with large amounts of available capital, such as state and
private pension funds, university financial endowments, foundations, insurance companies, and
pooled investment vehicles, called fund of funds or mutual funds.

[edit] Types of Venture Capital Firms

Depending on your business type, the venture capital firm you approach will differ.[17] For
instance, if you're a startup internet company, funding requests from a more manufacturing-
focused firm will not be effective. Doing some initial research on which firms to approach will
save time and effort. When approaching a VC firm, consider their portfolio:

 Business Cycle: Do they invest in budding or established businesses?

 Industry: What is their industry focus?
 Investment: Is their typical investment sufficient for your needs?
 Location: Are they regional, national or international?
 Return: What is their expected return on investment?
 Involvement: What is their involvement level?

Targeting specific types of firms will yield the best results when seeking VC financing.
Wikipedia has a list of venture capital firms that can help you in your initial exploration. The
National Venture Capital Association segments dozens of VC firms into ways that might assist
you in your search.[18] It is important to note that many VC firms have diverse portfolios with a
range of clients. If this is the case, finding gaps in their portfolio is one strategy that might
succeed.

[edit] Roles within Venture Capital Firms

Within the venture capital industry, the general partners and other investment professionals of
the venture capital firm are often referred to as "venture capitalists" or "VCs". Typical career
backgrounds vary, but broadly speaking venture capitalists come from either an operational or a
finance background. Venture capitalists with an operational background tend to be former
founders or executives of companies similar to those which the partnership finances or will have
served as management consultants. Venture capitalists with finance backgrounds tend to have
investment banking or other corporate finance experience.
Although the titles are not entirely uniform from firm to firm, other positions at venture capital
firms include:

 Venture partners - Venture partners are expected to source potential investment

opportunities ("bring in deals") and typically are compensated only for those deals with
which they are involved.

 Entrepreneur-in-residence (EIR) - EIRs are experts in a particular domain and perform

due diligence on potential deals. EIRs are engaged by venture capital firms temporarily
(six to 18 months) and are expected to develop and pitch startup ideas to their host firm
(although neither party is bound to work with each other). Some EIR's move on to
executive positions within a portfolio company.

 Principal - This is a mid-level investment professional position, and often considered a

"partner-track" position. Principals will have been promoted from a senior associate
position or who have commensurate experience in another field such as investment
banking or management consulting.

 Associate - This is typically the most junior apprentice position within a venture capital
firm. After a few successful years, an associate may move up to the "senior associate"
position and potentially principal and beyond. Associates will often have worked for 1–2
years in another field such as investment banking or management consulting.

[edit] Structure of the funds

Most venture capital funds have a fixed life of 10 years, with the possibility of a few years of
extensions to allow for private companies still seeking liquidity. The investing cycle for most
funds is generally three to five years, after which the focus is managing and making follow-on
investments in an existing portfolio. This model was pioneered by successful funds in Silicon
Valley through the 1980s to invest in technological trends broadly but only during their period of
ascendance, and to cut exposure to management and marketing risks of any individual firm or its
product.

In such a fund, the investors have a fixed commitment to the fund that is initially unfunded and
subsequently "called down" by the venture capital fund over time as the fund makes its
investments. There are substantial penalties for a Limited Partner (or investor) that fails to
participate in a capital call.

It can take anywhere from a month or so to several years for venture capitalists to raise money
from limited partners for their fund. At the time when all of the money has been raised, the fund
is said to be closed and the 10 year lifetime begins. Some funds have partial closes when one half
(or some other amount) of the fund has been raised. "Vintage year" generally refers to the year in
which the fund was closed and may serve as a means to stratify VC funds for comparison. This
free database of venture capital funds shows the difference between a venture capital fund
management company and the venture capital funds managed by them.
[edit] Compensation

Main article: Carried interest

Venture capitalists are compensated through a combination of management fees and carried
interest (often referred to as a "two and 20" arrangement):

 Management fees – an annual payment made by the investors in the fund to the fund's
manager to pay for the private equity firm's investment operations.[19] In a typical venture
capital fund, the general partners receive an annual management fee equal to up to 2% of
the committed capital.

 Carried interest - a share of the profits of the fund (typically 20%), paid to the private
equity fund’s management company as a performance incentive. The remaining 80% of
the profits are paid to the fund's investors[19] Strong Limited Partner interest in top-tier
venture firms has led to a general trend toward terms more favorable to the venture
partnership, and certain groups are able to command carried interest of 25-30% on their
funds.

Because a fund may run out of capital prior to the end of its life, larger venture capital firms
usually have several overlapping funds at the same time; this lets the larger firm keep specialists
in all stages of the development of firms almost constantly engaged. Smaller firms tend to thrive
or fail with their initial industry contacts; by the time the fund cashes out, an entirely-new
generation of technologies and people is ascending, whom the general partners may not know
well, and so it is prudent to reassess and shift industries or personnel rather than attempt to
simply invest more in the industry or people the partners already know.

Angel investor
From Wikipedia, the free encyclopedia

Jump to: navigation, search

An angel investor or angel (also known as a business angel or informal investor) is an affluent
individual who provides capital for a business start-up, usually in exchange for convertible debt
or ownership equity. A small but increasing number of angel investors organize themselves into
angel groups or angel networks to share research and pool their investment capital.

Contents
[hide]
Description
[edit] Source and extent of funding

Angels typically invest their own funds, unlike venture capitalists, who manage the pooled
money of others in a professionally-managed fund.[1][2] Although typically reflecting the
investment judgment of an individual, the actual entity that provides the funding may be a trust,
business, limited liability company, investment fund, etc. The Harvard report[3] by William R.
Kerr, Josh Lerner, and Antoinette Schoar tables evidence that angel-funded startup companies
are less likely to fail than companies that rely on other forms of initial financing.

Angel capital fills the gap in start-up financing between "friends and family" (sometimes
humorously given the acronym FFF, which stands for "friends, family and fools") who provide
seed funding, and venture capital. Although it is usually difficult to raise more than a few
hundred thousand dollars from friends and family, most traditional venture capital funds are
usually not able to consider investments under US$1–2 million.[4] Thus, angel investment is a
common second round of financing for high-growth start-ups, and accounts in total for almost as
much money invested annually as all venture capital funds combined, but into more than ten
times as many companies (US$26 billion vs. $30.69 billion in the US in 2007, into 57,000
companies vs. 3,918 companies).[5][6]

Of the US companies that received angel funding in 2007, the average capital raised was about
US$450,000. However, there is no “set amount” per se for angel investors, and the range can go
anywhere from a few thousand, to a few million dollars. Software accounted for the largest share
of angel investments, with 27 percent of total angel investments in 2007, followed by healthcare
services, and medical devices and equipment (19 percent) and biotech (12 percent). The
remaining investments were approximately equally weighted across high-tech sectors.[5] Angel
financing, while more readily available than venture financing,[6] is still extremely difficult to
raise.[7] However some new models are developing that are trying to make this easier.[8] Many
companies who receive angel funding are required to file a Form D with the Securities and
Exchange Commission.

[edit] Investment profile

Angel investments bear extremely high risk and are usually subject to dilution from future
investment rounds. As such, they require a very high return on investment.[9] Because a large
percentage of angel investments are lost completely when early stage companies fail,
professional angel investors seek investments that have the potential to return at least 10 or more
times their original investment within 5 years, through a defined exit strategy, such as plans for
an initial public offering or an acquisition. Current 'best practices' suggest that angels might do
better setting their sights even higher, looking for companies that will have at least the potential
to provide a 20x-30x return over a five- to seven-year holding period.[10] After taking into
account the need to cover failed investments and the multi-year holding time for even the
successful ones, however, the actual effective internal rate of return for a typical successful
portfolio of angel investments is, in reality, typically as 'low' as 20-30%.[11] While the investor's
need for high rates of return on any given investment can thus make angel financing an
expensive source of funds, cheaper sources of capital, such as bank financing, are usually not
available for most early-stage ventures, which may be too small or young to qualify for
traditional loans.

Microfinance

Microfinance is the provision of financial services to low-income clients, including consumers

and the self-employed, who traditionally lack access to banking and related services.

More broadly, it is a movement whose object is "a world in which as many poor and near-poor
households as possible have permanent access to an appropriate range of high quality financial
services, including not just credit but also savings, insurance, and fund transfers."[1] Those who
promote microfinance generally believe that such access will help poor people out of poverty.

The challenge
Traditionally, banks have not provided financial services, such as loans, to clients with little or
no cash income. Banks incur substantial costs to manage a client account, regardless of how
small the sums of money involved. For example, although the total gross revenue from
delivering one hundred loans worth $1,000 each will not differ greatly from the revenue that
results from delivering one loan of $100,000, it takes nearly a hundred times as much work and
cost to manage a hundred loans as it does to manage one. The fixed cost of processing loans of
any size is considerable as assessment of potential borrowers, their repayment prospects and
security; administration of outstanding loans, collecting from delinquent borrowers, etc., has to
be done in all cases. There is a break-even point in providing loans or deposits below which
banks lose money on each transaction they make. Poor people usually fall below that breakeven
point. A similar equation resists efforts to deliver other financial services to poor people.

In addition, most poor people have few assets that can be secured by a bank as collateral. As
documented extensively by Hernando de Soto and others, even if they happen to own land in the
developing world, they may not have effective title to it.[2] This means that the bank will have
little recourse against defaulting borrowersSome principles that summarize a century and a half
of development practice were encapsulated in 2004 by Consultative Group to Assist the Poor
(CGAP) and endorsed by the Group of Eight leaders at the G8 Summit on June 10, 2004:[5]

1. Poor people need not just loans but also savings, insurance and money transfer services.
2. Microfinance must be useful to poor households: helping them raise income, build up
assets and/or cushion themselves against external shocks.
3. "Microfinance can pay for itself."[8] Subsidies from donors and government are scarce
and uncertain, and so to reach large numbers of poor people, microfinance must pay for
itself.
4. Microfinance means building permanent local institutions.
5. Microfinance also means integrating the financial needs of poor people into a country's
mainstream financial system.
 6. "The job of government is to enable financial services, not to provide them."[9]
7. "Donor funds should complement private capital, not compete with it."[9]
8. "The key bottleneck is the shortage of strong institutions and managers."[9] Donors should
focus on capacity building.
9. Interest rate ceilings hurt poor people by preventing microfinance institutions from
covering their costs, which chokes off the supply of credit.
10. Microfinance institutions should measure and disclose their performance – both
financially and sociallY.

CORPORATE MARKET BENCHMARKING

NEW DELHI: The stock market benchmark Sensex may soar past the 18,000-points level by the end of
the year, propelled by stocks belonging to the financial, capital goods, energy and auto sectors, Citigroup
said here on Monday.

"The country's rising dependence on global capital flows, and global volatility, will raise the market beta,
but looking through, we raise our Sensex target index to 18,100," Citi said in a research note.

The Bombay Stock Exchange's 30 share benchmark Sensex is trading 5.69 per cent lower so far this
year. The index ended today's trade flat at 16,469.55 points up 24 points, while its level on December 31,
2009 was 17,464.81.

"India is trading below its long-term PE and PBV averages (and) is no longer expensive in absolute terms,
and returns are looking up too. We see the environment supporting average multiples, which suggests 8-
10 per cent upside from here," the report authored by Aditya Narain said.

According to Citigroup, corporate earnings should rise 24 per cent in the current financial year (15 per
cent over next fiscal). "We get more constructive as domestic macro headwinds could well have peaked,
worst on inflation, rates and the fiscal deficit possibly over," Narain said.

The country's top brokerage and investment banking firm ICICI Securities had said Sensex may scale
past the 19,000-mark level this year, propelled by domestic factors like robust economic expansion and
decent corporate earnings.

The only negative headwind the market can witness could be due to negative cues from global markets,
but investors willing to stay invested for at least 15-18 months will not be disappointed with their returns

LONDON: Europe, long unloved and underowned, is becoming a new lure for investors desperate to
boost returns in a low-yielding environment.

It is all down to exposure to robust demand growth in developing economies.

Investing in Europe -- a region saddled with public debt problems -- is no longer just about European
fundamentals. Given that a fifth of European corporate revenues come from developing markets, it offers
a cheaper alternative to the dynamic emerging markets that have already rallied on huge capital inflows.
This is creating a curious phenomenon where Europe is becoming a "high beta" market, increasingly
influenced by changes in global demand and the business cycle.

This means the market is moving in a more volatile manner than others, outperforming benchmarks in a
rising market while falling more when markets are going down.

"It's becoming a high-beta market because a lot of corporate earnings in Europe are dictated by what's
happening in Asia. Germany, Switzerland and Nordic countries are the biggest beneficiaries of growth in
emerging markets," said Alister Hibbert, managing director at BlackRock.

"Europe now offers some of the world's best businesses at low valuations, benefiting from exposure to the
most attractive trends within emerging markets."

That trend can be seen from this year's performance. The pan-European FTSEurofirst 300 is up 4.0
percent year-to-date.

Not much for nine months, it is true but it does compare quite well with the 4.5 percent gain that MSCI's
emerging market benchmark has put in.

By contrast, U.S. stocks are up no more than 1 percent, if that.

Thomson Reuters data show that beta -- the measure of volatility relative to the broader market -- of
European stocks outside Britain hit its highest level in more than 10 years earlier this year.

PROXY TRADE

Busy German exporters, in particular, have been offering opportunities to investors seeking indirect
exposure to booming emerging markets such as China.

But there is also a growing spillover from German companies into Dutch, British, Swedish and other
regional firms that have become proxies for German growth.

BlackRock's Hibbert says Denmark's Novo Nordisk, the world's insulin maker, is an example.

China's healthcare spending has more than doubled to nearly 400 billion yuan ($58.94 billion) in the past
few years, standing at more than 5 percent of total fiscal spending. Novo Nordisk has a 60 percent market
share in the Chinese insulin market.

A broader sign that the investor perception of Europe is improving, can be seen in fund manager polls.
Bank of America Merrill Lynch showed investors becoming overweight European equities in August for
the first time since November and staying that way through September.

Reuters Asset Allocation polls also show exposure to European equities was higher at the end of August
than in January and vice versa for U.S. equities.

"Europe is now a cyclical story," said Patrick Schowitz, European equity strategist at BofA Merrill.

EUROPE-BOUND Not all of Europe is picking up this fair wind, however. French equities in the CAC 40
have fared poorly, down 4.7 percent year to date.
LIQUIDITY ADJUSTMENT FACILITY

MUMBAI: RBI on Monday said its committee on monetary policy will review the operating procedure with
respect to repo, reverse repo auctions; width of the interest rate corridor; and frequency and timing of
reverse repo and repo auctions.

In its quarterly policy review in July, the Reserve Bank of India (RBI) had announced its plan to set up a
panel to monitor the operating procedure of the monetary policy, including liquidity adjustment facility.

Rate corridor is the spread between repo rate -- the rate at which the RBI infuses liquidity -- and reverse
repo rate -- the rate at which liquidity is drained out.

The panel will look at monetary policy in the light of global practices and domestic experience.

The terms of reference include: * whether there is a need for a rate corridor at all * whether its width
should be fixed or variable * what are the tools necessary to enable the corridor to function efficiently.

The committee will be headed by Deepak Mohanty, executive director, RBI.

The panel will also compare its monetary policy with operating methods of other central banks, the RBI
said.

The RBI had introduced repo and reverse repo rates in June 2000 when it had started the liquidity
adjustment facility.

Besides interest rates, other tools such as cash reserve ratio (CRR), open market operations (OMO) and
market stabilisation scheme (MSS), have served the monetary policy management well, the RBI said.

"However, India's increasing integration with the global economy, large volatility in capital flows and sharp
fluctuations in government cash balances have posed several challenges to liquidity management by the
Reserve Bank, particularly in effectively signalling the monetary policy stance," the RBI said, explaining
the rationale behind forming the panel.

The committee will also the assess the role of Bank Rate, which has been unchanged since April 2003
and is considered defunct now as no real interest rates are linked to this rate.

Bank Rate was used to signal change in interest rates over medium to long term, while repo and reverse
repo rates are short-term rate tools.

MUMBAI: Prices of government securities moved up moderately on mild demand from banks while call
money rate declined marginally on lack of enquiries.

The 7.80 per cent government security maturing in 2020 recovered to Rs 98.8375 from the last
weekend's level of 98.80 while its yield eased to 7.97 per cent from 7.98 per cent.

The 7.17 per cent government security maturing in 2015 also moved up to Rs 97.76 from Rs 97.6250,
while its yield eased to 7.74 per cent from 7.78 per cent.
The 8.08 per cent government security maturing in 2022 too firmed up to Rs 99.90 from Rs 99.82, while
its yield edged down to 8.09 per cent from 8.10 per cent.

The 7.46 per cent government security maturing in 2017 moved up to Rs 97.15 from Rs 97.07 previously.

However, the 8.26 per cent government security maturing in 2027 moved down to Rs 98.85 from Rs
98.92 previously while its yield eased to 8.38 per cent from 8.39 per cent.

The call money rate closed slightly lower at 6.00 per cent, as against the last weekend's level of 6.05 per
cent after moving in a range of 5.90 per cent and 6.25 per ent.

The Reserve Bank of India (RBI) under the Liquidity Adjustment Facility (LAF) purchased securities worth
Rs 45

CREDIT CONTROL

The Reserve Bank of India (RBI) will review the credit policy on September 16. This time, the RBI will
review the credit policy in the middle of the quarter (almost six weeks after its last quarterly review on July
29. Usually, the RBI reviews the credit policy every quarter.

This time it has planned the policy review in the middle of the quarter to track the macroeconomic
developments in the domestic as well as global markets, and act in a timely manner.

The RBI will review the macroeconomic situation and various other shortterm and long-term factors, and
decide on making any changes in its monetary policy parameters.

These are some of the significant factors that will be considered in the coming monetary policy
review:

Inflation

The Wholesale Price Index (WPI) based inflation is showing signs of easing as the July inflation reported
at 9.97 percent. The food pricesbased inflation also continued to ease in the last few weeks, and has
come down drastically as the concerns on the supply side faded after a good monsoon.

However, going forward, the important factor to track is the demand side push to the inflation numbers.
Demand has picked up over the last few months due to a pick-up in the economic activities. Policymakers
are cautiously tracking the signals contributing to inflationary pressures due to the demand side push.

Analysts expect the RBI to maintain its strong stance, and say it may further tighten the policy rates in the
coming policy review.

Growth in economy

This is another important factor that the RBI is keeping a track of. Usually, policymakers prefer to control
the growth rate as well to prevent a situation of over-heating . A healthy GDP growth of 8.8 percent is
another factor that may warrant some action from the RBI in the coming policy review.
Global conditions

Global cues are leading to some nervousness in the domestic markets. The global economic conditions
are not stable yet. On the other hand, the inflows from foreign institutional investors (FII) are good in
emerging markets as the performances of emerging markets are far better than their developed peers.
Policymakers will have to track the situation of funds inflows.

Small steps expected

The RBI will be reviewing these parameters along with a detailed look at the various parameters involved
in the GDP numbers. The recent GDP growth numbers are quite impressive. However, on the other hand,
policymakers will check the growth and demand push inflation rate to prevent over-heating .

The RBI is expected to take small steps with any credit policy changes as it has done many times this
year. The changes in the monetary policy take effect with a time lag of a couple of quarters. Therefore, it
is important to make policy changes after due consideration .

Expected action

The RBI has already hiked the repo rate by 25 basis points and reverse repo rate by 50 basis points
during its policy review in July. Analysts believe it is likely to further increase the rates to maintain a tough
stand in dealing with inflation and keep a check on excessive borrowing. A situation of excessive
borrowing leads to unrealistic demand in the economy.

Analysts believe the RBI will implement a further hike in its key policy rates in small steps as it has done
in the recent past.

MERCHANT BANKING
[Print Page]

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• FCNR loans
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• Financing of Imports.
We are internationally the most Preferred Bank by Export Credit Agencies for Guarantees
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No need to write cheques or make demand drafts.
Convenient and transparent management of funds.
Instant release / unblocking of funds after allotment / non-allotment of shares.