Reserve Bank of India (RBI) Deputy Governor R. Gandhi said on Tuesday there was an "urgent" need for banks to reduce their stressed assets, given the impact on liquidity and capital in the sector. The RBI had received a proposal to limit the number of banks in a lending consortium as a way to improve recovery of loans, Gandhi said in a speech at an industry event in Mumbai. He, however, said such a move would have also drawbacks. His comments come as the central bank has been pushing banks to reduce the amount of their non-performing assets and start lending again. The government said in July it plans to inject $11 billion of capital into lenders over the next four years in a bid to help them clean up their balance sheets.
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Bringing to closure a seven-year-old case, the Reserve Bank of India has cancelled Sahara India Financial Corporation's certificate of registration as a non-banking financial company (NBFC). "Following the cancellation of registration certificate, the above company cannot transact business of a non-banking financial institution..." the RBI said in a statement on Monday. The registration of the Lucknow-headquartered NBFC stands cancelled with effect from September 3, it added. The NBFC was registered in December 1998. Earlier, markets regulator Sebi had cancelled mutual fund and portfolio management licenses of other firms of the group, which is engaged in a long-running battle with the regulator in a case related to refunds totalling thousands of crores of rupees. Its chief Subrata Roy is in jail since March 4, 2014. Back in September 2008, a group company Sahara India Investment Corporation Limited had informed the RBI that it has "voluntarily exited non-banking financial business". In another order on June 4, 2008, the RBI had prohibited Sahara India Financial Corporation Ltd (SIFCL) from accepting deposits from the public and had directed SIFCL to repay the depositors on maturity and comply with the directions of the central bank. Later it approached the courts and the Supreme Court asked the RBI to provide a personal hearing to SIFCL and pass a fresh order. After taking into consideration submissions made by the group, the RBI passed another order directing the company not to accept any new deposit which matures beyond June 30, 2011 and to stop accepting instalments of existing deposit accounts also with effect from that date. A staggered timeline was also given to the company to reduce its Aggregate Liability to Depositors (ALD) and it was asked to repay the deposits as and when they mature and bring the ALD to zero on or before June 30, 2015. The RBI incorporated in its order the offer made during the personal hearing by the group, which offered to reconstitute the Board of Directors of SIFCL within a period of 30 days from June 16, 2008 with half of the members as independent directors and to continue that arrangement till the time of entire repayment to all depositors. (PTI)
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Bankers Chanda Kochhar and Arundhati Bhattacharya have been ranked as top two in a list of most powerful women in Asia-Pacific prepared by the global magazine Fortune. Kochhar, 53, who heads the country’s largest private sector lender ICICI Bank, has been ranked at the top, up from the second position last year, the magazine said on its website. It has credited Kochhar with reshaping banking in the country, and for building ICICI Bank into the “nation’s largest and most profitable private sector lender’’. She is followed by Arundhati Bhattacharya, Chairman of the country’s largest lender State Bank of India, whose ranking has also moved up from the fourth spot where she was last year, the magazine added. State-run oil marketing company Hindustan Petroleum Corporation’s Chairman and Managing Director, Nishi Vasudeva, has also made it to the list at fifth rank, same as the previous, it said. The country’s third largest private sector lender Axis Bank’s Managing Director and chief executive, Shikha Sharma, came in at the ninth spot in the list. Singapore-based chief executive of International Goldman Sachs Asset Management, Sheila Patel, has also made it to the list at the 23rd position. The list includes key executives from over six countries in the region. With 11 names, Chinese women lead the list.(PTI)
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The PolicyBazaar subsidiary is open to both financial or strategic investors and is in talks with a host of private equity and e-commerce companies, writes Paramita ChatterjeeLoan comparison website PaisaBazaar, a wholly-owned subsidiary of insurance comparison site PolicyBazaar, is in talks to raise up to $50 million ahead of its plans to foray into a whole new space of financial advisory, said a person familiar with the matter. The online portal which currently helps compare diverse range of loans including home, auto, education, business and even personal, and other credit cards products is looking to expand into more categories in the financial sector like mutual funds. Going forward, the startup has plans to become a financial destination for both lending and investment products. So far, it has tie ups with over 35 financial institutions across different categories and reportedly gets around 20,000 visits per day. The capital will be used to fuel PaisaBazaar’s expansion plans, said the person, a senior executive within the insurance industry, privy to the matter. PaisaBazaar is open to both financial or strategic investors and is in talks with a host of private equity and e-commerce companies. However, Yashish Dahiya, CEO & Co-Founder at PolicyBazaar, declined to divulge any details on PaisaBazaar's fund raising plans. “We are in talks to induct a partner but nothing is finalised yet,” he told Businessworld. It is understood that investment banking firm Avendus Capital has been given the mandate to facilitate the transaction. PolicyBazaar incubated PaisaBazaar in February last year and in less than two years, it has disbursed loans worth Rs 1,200 crore annually and is aiming to reach Rs 1,800 crore annual loan disbursal by March 2016. This does not include credit card transactions. Currently, it has around 1.5 lakh credit card applications going through its platform on an annualised basis. In today’s day and age when the consumers are increasingly taking steps to integrate the digital experience in their daily lives, e-commerce finance firms are trying to replicate the model of Flipkart and Snapdeal in order to help consumers find the best deals. Further, they are also facilitating transactions online to tap the growing digital market. PaisaBazaar, for instance, is working to move the entire loan process from offline in the past to online in future with respect to categories like e-application, online credit bureau approval, working with banks to have features like e-kyc and e-income verification. In fact, sensing the growth opportunity in this sector, investors – both financial and strategic – are also evincing interest to fund startups operating in this area. Earlier this year, BankBazaar, a startup that aggregates information about online loans, credit cards, and fixed deposits, raised around $60 million from Amazon, Fidelity Growth Partners, Mousse Partners, and its existing investors Sequoia Capital and Walden International. There is growing chatter in the insurance industry if PasiaBazaar is actually talking to Flipkart but this could not independently be verified.
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India's inflation probably cooled further in August, data on Monday is expected to show, adding pressure on the cautious Reserve Bank of India (RBI) to cut interest rates again as soon as this month to spur economic growth. With price pressures at record lows, expectations are building that the RBI will lower borrowing costs by at least 25 basis points (bps) at its next policy review on Sept. 29, after three cuts earlier this year. Calls for a rate cut have grown louder after annual economic growth slowed to 7 percent in the April-June quarter from 7.5 percent in the previous quarter. And some economists fear real growth is more sluggish than official figures suggest. Arvind Panagariya, a top policy adviser to the government, said last week said the economy needed 50-100 bps of rate cuts. Similar calls were made by Indian business leaders at a meeting with Prime Minister Narendra Modi last Tuesday. Annual consumer price inflation, which the central bank tracks to set rates, likely eased to 3.6 percent in August due to lower fuel prices, from a record low of 3.78 percent in July, according to analysts polled by Reuters. Wholesale prices, another inflation gauge, are expected to have fallen for a 10th straight month, tumbling 4.40 percent on-year compared with a 4.05 percent fall in July. Indeed, the rapid deceleration in prices has ignited a debate in New Delhi whether Asia's third-largest economy is heading towards deflation. Arvind Subramanian, Modi's chief economic adviser, early this month warned of looming deflation and called for measures to boost consumer demand and step up investment. RBI Governor Raghuram Rajan, however, is worried about a resurgence in price pressures in a country where inflation has been notoriously volatile. While food inflation has remained in check despite below average summer monsoon rains, prices of some staples such as onions and lentils are racing up. Entrenched expectations of high inflation also are feeding into higher wages. "Yes, there has been moderation in some prices, but that's not signalling deflation," said N. Bhanumurthy, senior economist at the NIPFP policy think-tank in New Delhi. "In fact, we are not anywhere near that." But for the RBI, as for many other central banks around the world facing sluggish growth, much will depend on whether the US Federal Reserve raises interest rates this week for the first time since 2006. Easing policy at the same time as the Fed is tightening, however modestly, could spur further capital outflows from emerging markets. While some analysts believe the chances of a September hike have eased amid fears of a China-led global slowdown, any fresh burst of financial market volatility following the Fed's decision on Sept. 17 could force the RBI to stand pat. "If there is a (US) hike, then market reaction will need to be monitored," said A. Prasanna, an economist with ICICI Securities Primary Dealership Ltd. "I still expect markets to calm down by the time of RBI policy date." "Indian industry continues to be under the grip of deflation. With the WPI falling by 4.9 per cent compared to its level a year ago, price pressures are at a record low. The index has declined for the tenth consecutive month indicating slackness in economic activity across sectors. Given that CPI inflation has also been declining, the RBI needs to reduce interest rates sharply to drive a recovery in demand," said Chandrajit Banerjee, director general, CII.The RBI has lowered rates by a total of 75 bps since January. However, it left the policy repo rate on hold at 7.25 per cent at its last meeting, tying future cuts to the inflation outlook. Rajan has criticised banks for not passing on the entire benefit of its 75 basis points. The lenders have reduced their base rates only by about 30 basis points in two to three installments, citing higher cost of funds for them. At the last policy announcement on August 4, Rajan had even linked next easing to banks cutting their rates more aggressively. (Agencies)
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Continuing its declining trend, the foreign exchange reserves declined by $2.889 billion to $349.037 billion in the week through September 4 due to the continuing fall in foreign currency assets. In the previous reporting week, the reserves had fallen sharply by $3.433 billion to $351.920 billion. In the last two reporting weeks, the reserves had come down by a whopping $6.322 billion. Reserves had touched an all-time high of $355.46 billion in the week to June 19. Foreign currency assets, which are a major component of the overall reserves, were down by $2.650 billion to $325.656 billion in the week, according to the latest Reserve Bank of India data. Foreign currency assets, expressed in dollar terms, include the effect of appreciation and depreciation of non-US currencies such as the euro, pound and the yen, held in the reserves. After remaining unchanged for many weeks, the gold reserves slightly declined by $214.8 million to $18.035 billion. The country's special drawing rights with the International Monetary Fund fell by $18.6 million to touch $4.049 billion in the week under review, while the nation's reserve position with the Fund declined by $5.9 million to $1.289 billion. (PTI)
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The Asian Development Bank (ADB) signed two agreements for $500 million loans with the government for the management of urban services in the state of Rajasthan. "ADB and the Government of India today signed two loans worth $500 million to help the Government of Rajasthan better manage essential urban services and finance water supply and wastewater upgrades," ADB said in a release on Friday. The signing of Rajasthan Urban Sector Development programme marks the first occasion for ADB to couple a policy loan to support urban sector reforms with a project loan to improve urban services over the long term, it said. "Rajasthan is urbanising rapidly. The programme aims to strengthen urban institutions in Rajasthan to improve their governance, and better manage urban services. It also aims at boosting the water supply in five cities from 2 hours per day to 24-hour supply, and increasing collection and treatment of sewage and septage waste," said M. Teresa Kho, Country Director for ADB in India. ADB said $250 million policy loan will be used to help Rajasthan to finance creation of a corporate-style state body to promote urban services development and an independent utility in Jaipur to oversee water and wastewater operations in the state capital. Rest of $250 million project loan will support water system improvements in five cities - Hanumangarh, Jhunjhunu, Pali, Sri Ganganagar, and Tonk - which currently have low piped water coverage and high water losses. These upgrades will include nearly 200,000 new house connections with proper metering to cut water losses, ADB said. (PTI)
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Reserve Bank is likely to cut interest rate as the wholesale price-based inflation is expected to decline further to 4.3 per cent in August, Moody's Analytics said on Friday (11 September). "India's wholesale prices likely fell 4.3 per cent on year-on-year in August, a further decrease from last month's surprise 4.1 per cent decline. Energy and manufactured-good costs are expected to continue their decline, while food prices will likely fall steeply as a result of base effects," it said. At the same time, retail inflation also slipped to a record low of 3.78 per cent in July. It further said "the Reserve Bank of India paused its monetary easing cycle, but we expect there will be further cuts in 2015 as inflation continues to fall." RBI mostly tracks the consumer price inflation for its policy decisions and its bi-monthly monetary policy review is due on September 29. India Inc has been pitching for a rate cut by the RBI to spur growth and investment. In a recent meeting with Prime Minister Narendra Modi industry made a pitch for cut in interest rate by RBI citing record low inflation. Even the government is in favour of interest cut as inflation is low. Finance Minister Arun Jaitley had expressed hope that RBI will consider factors like low inflation and commodity prices. In a scenario where inflation is under control, the quantum of interest rate cut is "the prerogative of the RBI", the minister had said.
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