- RBI has said that the top ten corporates, including Infosys, TCS, BHEL, Sun Pharma, are the major financial players as they outdo the top ten banks in treasury income and this necessitates surveillance.
- Treasury income refers to the earnings generated by deploying surplus cash in bonds and other money market instruments in order to maximize returns from idle funds.
- In addition to sales income, for the top corporate a large portion of profits comes from treasury profits. For banks, the key earning is net interest income — the spread between loans and deposits. In the case of a cash-rich corporate like Reliance Industries, the treasury income at over Rs 8,000 crore is more than a third of the total profit.
- An increasing share of other incomes of non-financial companies (NFCs) are observed in various sectors including IT and heavy machinery, and use the huge cash balances to improve their return on assets. The interest on these exceeds the overall profit of some banks.
- Bankers said that multinational corporations can deploy funds not only across different asset classes and move money to different countries.
- RBI is also worried about peer-to-peer financing and crowd funding and believe it requires regulatory attention as multinationals are investing lump sum amount into websites.
- Alibaba, China’s largest ecommerce compay is reportedly entering into the peer-to peer financing space.
- Read at: http://epaperbeta.timesofindia.com/Article.aspx?eid=31806&articlexml=RBI-sees-risk-in-rich-cos-fund-play-27062014021003