by admin | May 25, 2021 | Banking, Corporate, Corporate finance, Corporate Governance, Economy, News
Mumbai : The Reserve Bank of India is widely expected to keep its key lending rate for commercial banks unchanged at 6.5 per cent for the third time in succession when it makes the fiscal’s final bimonthly monetary policy review announcement on Thursday, but could change its stance from ‘calibrated tightening’ to ‘neutral’.
The RBI’s monetary policy committee’s (MPC) three-day meeting got under way here on Tuesday, presided for the first time by new Governor Shaktikanta Das, the former Economic Affairs Secretary, who was appointed to the post in December after the abrupt resignation of Urjit Patel following a prolonged period of tension between the government and the central bank.
State-run State Bank of India (SBI) Chairman Rajnish Kumar said on Monday that he does not expect the RBI to cut interest rates.
“I think the Committee may maintain its stance to neutral but I’m not expecting a rate cut,” Kumar told reporters on the margins of a bank event in Bengaluru.
With the domestic inflation situation within the targets, the RBI could be “accommodative”, he said.
“The liquidity support required will be given by the RBI as it has indicated before. As of now, the domestic inflation situation is within the targets. In such scenario, I think RBI will be more accommodative,” Kumar added.
According to Edelweiss Securities, with headline inflation remaining below the central bank’s projections, domestic growth momentum slowing and the global rate cycle peaking, the MPC may get enough room to change its stance and possibly go for a rate cut.
However, the Edelweiss note also said that “what could hold RBI’s hand this time is its desire to avoid a knee-jerk change in stance from ‘calibrated tightening’ to a rate cut. Also, and more importantly, it may want to tread cautiously for now as core inflation remains elevated.”
“The US Fed has taken a decisively dovish turn in the past two months, indicating that global rates have peaked out. Finally, domestic growth momentum has also moderated. All this calls for easier monetary policy,” it added.
At its last MPC meeting in December, the committee had unanimously voted to hold the RBI’s repo, or repurchase, rate and keep the central bank stance unchanged, citing risks to inflation.
India’s retail inflation in December eased to 2.19 per cent from a rise of 2.33 per cent in November.
The December monetary policy said that even as inflation projections have been revised downwards significantly and some of the risks pointed out in the last resolution have been mitigated, especially of crude oil prices, several uncertainties still cloud the inflation outlook.
“The MPC noted that the benign outlook for headline inflation is driven mainly by the unexpected softening of food inflation and collapse in oil prices in a relatively short period of time. Excluding food items, inflation has remained sticky and elevated, and the output gap remains virtually closed,” the then Governor Patel had said at the post-meeting press conference.
Adding to inflationary pressures would be the fact that following a prolonged period of fall, global crude prices have been rising sharply since the implementation of output cuts by OPEC and non-OPEC producers from January 1.
Besides, official data showed on Monday that India’s budgetary fiscal deficit for the April-December period stood at Rs 7.01 lakh crore, having crossed 112 per cent of the budgeted target of Rs 6.24 lakh crore.
The upcoming policy review comes in the backdrop of an interim Budget presented on February 1 by the government in an election year with massive doles to farmers and major tax cuts to be financed by larger government borrowing and with implications for the fiscal deficit.
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate finance, Corporate Governance, Finance, News
SBM Bank (India) Ltd
Mumbai : Mauritius Prime Minister P.K. Jugnauth inaugurated the SBM Bank (India) Ltd, which becomes the first foreign bank in India that was granted the Reserve Bank of India (RBI) licence to operate as a wholly owned subsidiary, an official said on Friday.
Previously known as SBM Bank (Mauritius) Ltd, it started Indian operations in 1994 and has branches in Mumbai, Chennai, Hyderabad and Ramachandrapuram in Andhra Pradesh.
Now, these will be renamed as ‘SBM Bank (India) Ltd’ and shall operate as a full-fledged universal bank, headed by Managing Director and CEO Sidharth Rath.
Present at the event on Thursday evening along with Jugnauth were Commerce Minister Suresh Prabhu, Maharashtra Governor C.V. Rao, Mauritian cabinet ministers, SBM Holdings Ltd Group Chairman K.C. Li Kwong Wing, Rath and other dignitaries.
Terming it a ‘historic event’, Rath said the SBM Bank would offer all retail, corporate, trade finance services, capital markets, trading and stockbroking, asset management and custody services for the Indian customers.
Wing said the group now has a bigger presence in Kenya after acquiring two local banks and the Indian banking licence to operate as a full-fledged universal bank would complement its ‘internationalisation strategy’.
An official said that as a new entity, the SBM Bank (India) Ltd will expand its Indian network by end-March 2020 with four more branches focusing on the mid-market segment comprising mid-corporate and higher-end SMEs, besides building its retail banking footprint in this country.
Targeting a business of Rs 5,000 crore over the next two years, the bank will support Indian companies investing in eastern Africa, given its strong presence in Kenya to facilitate India-Africa trade.
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate finance, Corporate Governance, Economy, News
By Biswajit Choudhury,
New Delhi : The year leading up to the 2019 general elections was defined by a slowdown in investment, slackening growth, falling GST revenues, the biggest bank fraud and a credit crunch that provoked the most significant crisis in government-RBI relations.
It was topped up by the abrupt resignation of Urjit Patel as the RBI Governor, a rare phenomenon in the banking world. He was immediately replaced by former Economic Affairs Secretary Shaktikanta Das the man who was the vocal face during demonetisation and seen as a ‘yes’ man of the government.
India, meanwhile, continued to be the fastest growing big economy during 2018 with its gross domestic product (GDP) rising at above 7 per cent, after having slipped to 6.7 per cent in the previous financial year, mainly on account of the impact of demonetisation.
Even as it is projected to overtake China by GDP in the coming year, India jumped 23 spots in the World Bank’s Ease of Doing Business rankings to 77th place, continuing its impressive climb on this score for the third year running.
The pace of the country’s GDP growth slowed substantially during the second quarter of the current fiscal to 7.1 per cent, from 8.2 per cent in the previous quarter, mainly on the back of a drop in manufacturing, agriculture and mining. By criteria of gross value added (GVA), which includes taxes and excludes subsidies, growth fell to 6.9 per cent from 8 per cent during the April-June period.
On the inflation front, lower food prices kept headline inflation down, which touched a 13-month low of 3.3 per cent in October, and fell further to 2.3 per cent last month. Core inflation, however, continued to remain elevated.
Following the release of the GDP numbers, US agency Fitch Ratings lowered India’s growth forecast for the fiscal to 7.2 per cent, from an earlier projection of 7.8 per cent rise, “on weaker-than-expected momentum in the data, higher financing costs and reduced credit availability.”
The year witnessed the biggest fraud in Indian banking history with the Rs 14,000 crore scam on state-run Punjab National Bank (PNB) committed over a number of years and reported in February. The fraud was committed from 2011 till 2017 by illegally issuing letters of undertaking and rolling over foreign letters of credit to diamantaire Nirav Modi and his uncle Mehul Choksi from PNB’s Brady House branch in Mumbai.
Both are currently absconding and Interpol has issued red corner notices against them.
Twin storms hit the country in September — rising fuel prices that climbed new highs daily and a falling rupee that spiralled down to new lows against the US dollar before recovering somewhat towards the end of the month.
The year’s global protectionist measures unfolding through the US-China trade war, along with high crude oil prices, put the rupee on a downward spiral, dragging it down to a record low of 72.98 against the US dollar on September 18.
According to analysts, concerns over a rise in inflation rate, growing protectionism in global trade and an outflow of foreign funds from the country’s equity markets have had an adverse impact on the Indian currency. It fell nearly 15 per cent since the start of the year to become Asia’s worst-performing currency.
On the other hand, transport fuel prices in the country began going up almost daily since August 1, incessantly recording new highs across the country, even as the UK Brent crude oil climbed to $86 per barrel. A weak rupee and high excise duty added to the heady mix that made for high petrol and diesel prices in the country before beginning to fall from late October in tandem with global crude prices.
“The widening of the current account deficit amidst tighter global financing conditions should put downward pressure on the currency, and we forecast the rupee to weaken to 75 against the dollar by end-2019,” Fitch said.
The defining moment, however, came in December with the resignation of the RBI Governor nine months prematurely and the first such instance since Independence, which prompted Patel’s predecessor Raghuram Rajan to say that it should be a cause of concern for all Indians.
The historic tensions in government-central bank relations were re-ignited in October when, in a public lecture, RBI Deputy Governor Viral Acharya talked about the independence of the Reserve Bank, arguing that any compromise could be “potentially catastrophic” for the economy.
The government responded with the Finance Ministry seeking discussions with the central bank under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor, who then summoned a meeting of the bank board.
Central to the issue was the government’s demand that the RBI hand over its surplus reserves by making changes to the “economic capital framework”. Analysts noted that the government’s demand came in the face of a huge fiscal deficit and the need to boost the economy in an election year.
Prime Minister Narendra Modi met with Governor Patel before the board meeting and what emerged on November 19 was seen as settling the debate on the central bank’s autonomy and clearly establishing the government as a stakeholder in policy making.
The current liquidity crunch, particularly among non-banking finance companies, follows a series of defaults in late October by the privately-run IL&FS.
In hindsight, the words of Sudipto Mundle on the Board of Governors of the National Institute of Public Finance and Policy, after the November board meeting proved prophetic.
“The RBI-government fight has been pushed down, abated for now and postponed, but the NPAs issue continues to remain,” he said.
(Biswajit Choudhury can be reached at biswajit.c@ians.in)
—IANS
by admin | May 25, 2021 | Banking, Economy, Markets, News
Mumbai : Hopes of lower interest rates and more liquidity on the back of easing retail inflation and the Reserve Bank’s outreach efforts and foreign fund inflows aided the barometer S&P BSE Sensex to gain over 150 points while NSE Nifty50 ended the session just short of 10,800 points.
On a sector specific basis, the rise was supported by healthy buying in the state-owned banking stocks after Reserve Bank of India Governor Shaktikanta Das on Thursday held a meeting with heads of Mumbai-based public sector banks.
However, three days of upward movement gave investors a chance to book profits, capping the session’s gains.
Apart from banking stocks, most sectoral indices, especially interest-sensitive — auto and capital goods — shares on the BSE and NSE ended in the green.
Globally, major Asian markets closed on a positive note. European indices like FTSE 100, DAX and CAC 40 also traded in the green.
“In anticipation of some firm measures by the new RBI Governor to ease the credit squeeze, the markets rallied in the morning but cooled off in the 2nd half on some profit booking,” said Essel Mutual Fund CIO, Viral Berawala.
“Stocks with rural focus also gained momentum on expectations of some pro-rural announcements by the central government.”
Said Geojit Financial Services’ Head of Research Vinod Nair: “Benign CPI inflation at 2.3 per cent supported an improvement in RBI’s current stance of ‘calibrated tightening’.
“Additionally, pick up in industrial production at 8.1 per cent supported the continuation of the rally. Ease in US-China tensions and the UK PM wining the vote of confidence brought stability in the global market.”
The Nifty PSU Bank index gained 1.03 per cent. Banking stocks also rose as RBI is scheduled to purchase government securities and infuse liquidity worth Rs 10,000 crore on Thursday.
Index-wise, the Sensex settled 150.57 points up at 35,929.64 points, touching an intra-day high of 36,095.56 and a low of 35,794.51. The Nifty50 gained 53.95 points or 0.50 per cent to closed at 10,791.55.
In terms of broader markets, the BSE Mid-cap rose 0.82 per cent while the BSE Small-cap was down 0.65 per cent. The BSE market breadth was positive with 1,493 advances against 1,058 declines during the day.
On the currency front, V.K. Sharma, Head PCG and Capital Markets Strategy, HDFC Securities, said: “Rupee started on a stronger note following better than expected economic data. The inflation for November came at 2.33 per cent from previous months’ 3.38 per cent, the slowest pace in 17 months.
“The sentiment got a boost on stronger domestic equity markets and weakening of the US dollar against G-10 currencies.”
The rupee settled at 70.68-69 per US dollar from Thursday’s close of 70.86.
“Technically, with the Nifty rallying higher for the third consecutive session, the bulls remain in control. Further upsides are likely once the immediate resistances of 10,839 are taken out,” said HDFC Securities’ Retail Research Head Deepak Jasani.
“Crucial supports to watch for any weakness are at 10,750.”
Foreign Institutional Investors (FII) bought shares worth Rs 675.14 crore on Thursday while Domestic Institutional Investors (DII) sold stocks worth Rs 51.86 crore, provisional data from the BSE showed.
Stock wise, Yes Bank shares fell by 6.48 per cent, the most among the 30 shares on Sensex. Shares of the private lender declined steeply after its Board on Thursday could only finalise the Non-Executive Part-Time Chairman position.
Stock-wise, Wipro, Infosys, Kotak Mahindra Bank and Maruti Suzuki gained over 2 per cent. In contrast, Sun Pharma lost 2.12 per cent and TCS, Tata Steel and Adani Ports declined in the range of 1 to 2 per cent.
—IANS
by admin | May 25, 2021 | Corporate, Corporate finance, Corporate Governance, Economy, Finance, News, Politics
Mumbai : Admitting to differences with Urjit Patel, who quit as RBI Governor, Finance Minister Arun Jaitley on Thursday said the government is the sovereign body for managing the economy and RBI Governors have exited if differences were not settled.
“If you look at the history of the RBI, you had several incidents in the past where governments have had a different view from what the RBI has had and then those differences either get settled or the Governors have made way,” he said at a conclave here.
Addressing the India Economic Conclave 2018 via satellite link, Jaitley said the government had a particular opinion on two or three major issues relating to credit and liquidity in the market but was failing to communicate with the RBI and getting them addressed.
“Every person involved in some kind of a business activity, whether its financial, manufacturing or services sector or the MSME sector or even in agriculture, will tell you that they were facing difficulties as far as credit and liquidity is concerned,” the Minister said.
Jaitley said the RBI has the responsibility as far as credit and liquidity is concerned and it is not an issue of confrontation if the “sovereign accountable government” forces the issue for a discussion and redressal by the RBI. Else, the government would fail in its responsibility.
“We are the sovereign government and most important stakeholder as far as management of the economy is concerned and therefore a discussion with an important institution… to tell it that it’s a part of your functions which you must seriously look at, how is it destruction of the institution,” he said replying to a query on the charge that the government was destroying institutions.
Quoting India’s first Prime Minister Pandit Jawaharlal Nehru’s letter to the then RBI Governor, he said, “The economic policy of the country is determined by the elected government. The RBI monetary policy functions are autonomous and independent but other policies of the RBI certainly must be in tandem with the economic policy of the country.”
He said if the government policy is to encourage the MSME sector, the credit policy of India cannot be, “No, we will not give credit to the MSMEs”. In live democracies, concerns of the market and the economy have to be communicated and addressed , he added.
Taking a dig at former RBI Governor Raghuram Rajan, who wrote the book “I Do What I Do”, Jaitley said, “It will be a dialogue of the deaf because you won’t be then giving the concerns to each other and not listening to each other.”
—IANS
