Governor Raghuram Rajan on Thursday (05 November) said the government and the central bank have agreed on composition of the interest rate-setting monetary policy committee (MPC).“MPC agreement has been largely done. Only fine-tuning is left. The government and RBI are broadly on the same page on composition of MPC,” Rajan said. The government has proposed to set up MPC, which will consist of representatives from the Finance Ministry and RBI, to decide on interest rate. Rajan said the final call on the timing of implementing MPC will be taken by the Finance Ministry. The revised draft of the Indian Financial Code (IFC), released by the ministry in July, had suggested doing away with RBI Governor’s veto power and proposed a 7-member MPC to take rate decisions by a majority vote. Of the seven members, four are proposed to be government nominees and the rest from RBI. Under the current set-up, the government appoints RBI Governor, who controls the monetary policy and has veto power over the existing advisory committee of RBI members and outside appointees that sets rates.(PTI)
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Yes Bank has launched the Gold Sovereign Bond soon after Prime Minister Naredra Modi launched three gold schemes on Thursday (05 November).Rana Kapoor, MD & CEO, Yes Bank said, “I applaud this much needed, far-sighted initiative that is timed very well to coincide with the Gold buying festive season of Dhanteras and Diwali. The Gold Schemes will have important ramifications for the economy. The consumer will benefit from market expansion as financial substitutes for physical gold would be made available with simplified access. At a macro level, it will unlock savings in unproductive physical assets and thereby help channelize financial savings towards more productive investments. It will also develop expertise in local hallmarking which would drive demand for Made in India Gold both locally and internationally.”Through its Yes Institute had floated multiple concept and implementation papers on the Gold Monetization Schemes to build an industry level consensus thereby augment the government’s stellar effortsWhile the Gold Schemes operationalized by the Government are indeed innovative structural policy initiatives, the following recommendations will help in fine tuning the scheme, while also improvising on certain aspects:1. Create More CPTCs (Collection & Purity Testing Centres): The Western and Southern states of India have the highest concentration of household gold & gold buying propensity. Hence, while the initial CPTCs are concentrated in these states, in due course of time, the balance six states and UTs which currently don’t have a certified hall marking center may also be covered, which will make it convenient for depositors to transact with banks.2. Tweak Disclosure Patterns: The Government could introduce a suitable slab-based disclosure basis the amount deposited, keeping in mind the sensitivities involved. For high net worth religious trusts, the Government could make participation mandatory without declaration of sources of procurement.3. The Government could also suitable suitably communicate the applicability and implications of various regulatory commercial levies (i.e. treatment of excise duty/ VAT/ Custom duty etc.) to all stakeholders; this will ensure seamless implementation of GMS by participating players."The Gold Monetization Scheme is a breakthrough step towards financialization of gold and will also significantly strengthen our economy and help easing pressure on CAD. The Gold Monetization Scheme (GMS) aims to tap household gold stocks of around 22,000 tonnes, while the Sovereign Bond Scheme will help shift part of the estimated 300 tonnes of physical gold bars and coins purchased every year in the country for investment into Demat Gold Bonds.” Kapoor added.(BW Online Bureau)
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The Indian operations of Standard Chartered Bank (StanChart) will see "rationalisation" as part of the bank's global lay-off of 15,000 staffers. The move is part of the bank's chief executive officer Bill Winters' larger plan to restore profitability hit by emerging market's economic woes. While the exact staffing to be cut in India is not known as this point in time -- it employs close to 20,000 in India -- the bank may redeploy key local human resources across its global franchise. A key reason for this is on a standalone basis, the largest foreign lender in India in terms of branch network (100) saw its net profit rise 93 per cent in 2014-15 to Rs 3,051.4 crore (Rs 1,584 crore). For the times we live in, that's not bad for a foreign bank in India. The result is seen as a vote of confidence in the ability of the bank's top brass in India; and to that extent pink slips may not be issued left, right and centre. Local incorporation of the bank is also on the cards - as on date no foreign bank in India is locally incorporated; they are branch operations of their parents. Local incorporation will offer them "near national treatment" on a par with Indian private banks even as it means that they will have meet regulatory requirements on priority sector lending like local banks. The churn at the bank started from the time former global CEO Peter Sands and Asia chief Jaspal Bindra left the scene. Sand's deputy CEO Mike Rees saw his wings being clipped; he had joined the bank in 1990 and had regional chiefs reporting into him was the best paid board member last year and has been awarded about $72 million in the six years after the financial crisis. Another biggie who quit was V Shankar -- head of Middle East & Africa -- to set up a private equity fund which will invest in the region. Winters rationalised the bank's eight regions into four new regional businesses: ASEAN & south-Asia, (including India), led by Ajay Kanwal; Africa & middle-East (Sunil Kaushal, India CEO of the bank till then); Greater China & north-Asia (Ben Hung); and Europe & Americas (Tracy Clarke). India now resides in the new ASEAN & south-Asia region under Ajay Kanwal; he assumed his new role on 1st October 2015 based out of Singapore. Kaushal moved over to take charge as regional CEO for the combined Africa & middle-East regions (1st October 2015). A new CEO for India is be appointed (the grapevine says it is Manisha Girotra, boss at Moelis & Company Holdings; and a former India head of UBS) soon and this role will report to Kanwal; both Kaushal and Kanwal do so to Winters, and the Group's management team. StanChart is to cut 17 per cent of its workforce to reduce costs by $2.9 billion by 2018, and sell or restructure $100 billion of loans, on a risk-adjusted basis - or a third of its total. Winters, a former JPMorgan investment bank boss who took the helm of StanChart in June, described this as an "aggressive and decisive set of actions" to shore up the company. The news of the rights issue and restructuring came as Asia-focused bank posted a third-quarter operating loss of $139 million, weighed down by growing global regulatory costs and rising loan impairments in India.
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Fitch Ratings on Tuesday (03 November) said the growth in non-performing loans (NPLs) of the Indian banking system will slow down in the current fiscal and some green shoots are visible with regard to their asset quality. “Fitch Ratings expects Indian banks’ stressed asset ratio to improve marginally to 10.9 per cent in the current fiscal from 11.1 per cent in FY 2014-15,” it said in a report on Indian banks’ asset quality. It said the growth in new non performing loans would slow down further with cyclical recovery, and a moderate pick-up in loan growth will also provide a support. “The stress in structurally weak sectors has not entirely subsided, though we believe that banks will use the available recourse to restructure and reschedule sector-specific loans,” it said. Fitch also highlighted the need to clear stalled projects, saying speedier resolution can have a huge impact in reviving the sector, stimulate capital formation and allow greater flexibility to banks to pass on interest cuts. Fitch said asset quality is likely to remain an issue for the sector for some time despite some evidence of ‘green shoots’. The infrastructure and steel sectors could yet see greater asset-quality stress if structural and policy-related issues are not addressed more urgently. Infrastructure and steel together account for 20 per cent of total system loans, and are reported to account for up to 40 per cent of stressed assets. “Despite some green shoots in certain sectors (road), there will be potential challenges in structurally weak sectors like infrastructure (including state electricity distribution companies), steel, construction, although NPL additions might be moderate,” it added. It said with a recovery in GDP growth, the NPL formation would be held back. Fitch projected the economy to grow 7.8 per cent in the current fiscal and 8 per cent in FY 2016-17, up from 7.3 per cent in FY 2014-15. Further, the RBI’s more accommodative monetary policy stance since January 2015 should also help to boost credit demand and aid the recovery in banks’ asset quality. “Slower-than-expected economic growth and weak ability of banks for monetary transmission are likely to make the asset-recovery process prolonged,” it said. State banks account for more than 90 per cent of the total stressed assets and are increasingly resorting to write-offs and NPL sales as a preferred recourse for reducing NPL stock. “We expect this trend will continue until recoveries and upgradations outrun incremental NPLs by a meaningful margin,” it said. Fitch said the retail sector would remain the primary loan growth driver in the near term, until private-sector capex sees some revival. It expects the policy initiatives to bring the investment climate in India closer into line with that of its peers, though whether reforms would translate into higher real GDP growth would hinge on actual implementation. Indian banks’ loans grew by 9.7 per cent in last fiscal from 15 per cent in FY 2013-14, the slowest in a decade. The retail and farm sectors were key contributors, while industry and services witnessed a sharp reduction. Loan growth was weak in the first quarter of the current fiscal, but a moderate pick-up is likely if the central bank’s more flexible monetary stance finds equal transmission by banks. “The state banks will find it difficult to pursue aggressive growth, given their weak capital buffers and high share of stressed assets,” Fitch added. (PTI)
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The government has appointed MDs of four public lenders, including UCO Bank, Corporation Bank and Andhra Bank.Suresh N Patel, Executive Director of Oriental Bank of Commerce, has been appointed managing director of the Hyderabad-based Andhra Bank.R K Takkar, ED, Dena Bank, will now head the Kolkata-based UCO Bank while J K Garg has been named as the MD of Corporation Bank.The incumbent CMD of Corporation Bank retires in January.Mahesh Kumar Jain, ED, Indian Bank, has been elevated as the MD and CEO for three years from the date of taking charge or till the date of his superannuation or till further orders, whichever is earliest, the bank said in a statement.Jain assumed charge as MD of Indian Bank on 2 November, it added.(PTI)
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Australia's central bank kept its cash rate steady at a record low of 2.0 per cent on Tuesday (03 November), but said subdued inflation meant there might be room for a further easing if needed to support the economy.The Reserve Bank of Australia (RBA) disappointed some by not cutting straight away at its monthly policy meeting, though the shift to an explicit easing bias kept alive the prospect of a move at some stage.In a brief statement, RBA Governor Glenn Stevens said the outlook for the economy had actually "firmed a little" in recent months with business conditions improving and employment stronger than expected."(Board) Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand," he added.That was a change from the October statement when no guidance on policy was offered."They've obviously left the door open to cut rates but something needs to happen to get that rate cut over the line," said Michael Blythe, chief economist at CBA."It's probably the mix you want to make sure you don't see the Aussie dollar charging up."The central bank has long argued that a softer local currency was needed to help offset weak prices for Australia's major resource exports. The dollar was a shade firmer at $0.7188 after the RBA statement.Debt markets seemed to suggest investors were not counting on the RBA cutting by year end. Interbank futures for December slid to imply around a 36 percent chance of an easing, from above 70 percent earlier in the day.A drop to 1.75 per cent is fully priced in by April.Since last easing in May, RBA officials have sounded reluctant to cut even further in part for fear of inflating a debt-driven bubble in home prices.There have also been hopeful signs of a pick up in non-mining investment with business conditions, confidence and borrowing all improving.Yet, speculation about a cut had mounted after Australia's major banks last month decided to lift mortgage rates in an effort to shield profits from rising regulatory costs.A surprisingly low reading on price pressures out last week had added to the talk. Underlying inflation slowed to an annual 2.15 per cent in the third quarter, near the floor of the RBA's long-term target band of 2 to 3 per cent.With the broader economy still weighed by falling mining investment and weak commodity prices, some analysts had argued an easing would be warranted in the next few months.(Reuters)
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Standard Chartered Plc announced plans on Tuesday (03 November) to raise $5.1 billion in new capital via a rights issue, as well as new goals for cost cutting and core capital ratio as new Chief Executive Bill Winters set out his strategy for the lender.The announcement came as Asia-focused Standard Chartered (StanChart) posted a third-quarter operating loss of $139 million due to growing regulatory costs and rising loan impairments in India.The capital-raising plan came as part of a completed strategic review, that will also see the bank restructure businesses that together consume $100 billion in risk weighted assets, one-third of the group's total.Those include exiting low returning client relationships worth $50 billion and trimming $30 billion of risk weighted assets in some unnamed underperforming countries.StanChart shares fell 4 per cent in Hong Kong after the announcement, while the benchmark Hang Seng Index was up 1.3 percent.The capital raise and restructuring will together push the bank towards a new common equity tier-1 capital (CET1) ratio goal of 12-13 percent, the bank said.The bank's current CET1 ratio - a core measure of financial strength - fell slightly in the third quarter to 11.4 percent, StanChart said in its results filing to the Hong Kong Stock Exchange.The loss for the July-September quarter compares with a $1.5 billion profit in the same period a year ago.StanChart formally reports earnings every half-year, but since 2013 began giving more details of quarterly progress in its 'interim management statement'.StanChart also said it will not pay any final dividend for the financial year ending 31 December, 2015.(Reuters)
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UBS, Switzerland's biggest bank, on Tuesday (03 November) posted a bigger than expected year-on-year rise in third-quarter net profit.Net profit for the three months to end-September was 2.1 billion Swiss francs ($2.13 billion), up from 762 million francs a year earlier and ahead of a forecast for 1.758 million francs in a Reuters poll of four analysts.Earnings for the same period last year were hit by the bank setting aside 1.8 billion francs in legal reserves.($1 = 0.9870 Swiss francs)(Reuters)
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Claiming that millions of dollars in illicit funds are flowing out of India, HSBC whistleblower Herve Falciani has said he is willing to "cooperate" with the Indian investigative agencies in their black money probe but would need "protection". Falciani is facing charges in Switzerland of leaking details of bank account holders in Geneva branch of HSBC -- a list which later reached French government that later shared with India the information relating to Indian clients of the bank. Addressing mediapersons through Skype link, Falciani claimed that millions of crores worth illicit funds are flowing out of India. "It is not about money. I don't intend to become rich," Falciani said on Monday when asked whether he is looking for money to share information with India. "We are not here to talk about merely figures but about possible solutions," Falciani said. He stressed that governments should ensure that whistleblowers are protected. "We need just simple protection," he added. "We are not protected... If I am coming to India, I will be arrested," he said, adding that people need to understand that there is no offer of new kind to fight black money. The 43-year-old lives in Divonne, France, a short distance from the Swiss border. As a French national, he cannot be extradited to Switzerland and has said that he would not travel to Switzerland. Falciani has been described as the 'Edward Snowden of tax evasion' after his leaks uncovered the massive tax evasion scandal at HSBC. (Agencies)
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At long last, we have something to cheer about, but there’s still have a long wait ahead before we are out of the woods. The good news first. Moody's Investors Service on Monday upgraded its outlook for our banking system to 'stable' from 'negative' – there’s to be a gradual improvement in the operating environment (for banks) will lead to lesser growth in bad loans in future. The not-so-good bit is while the stock of non-performing loans (NPA) may continue to rise, the pace of new impaired loan formation in the current financial year ending March 2016 will be lower than the levels seen in the past four years – or in effect the run-rate of NPAs will taper off. Moody’s stance today is a reversal of the negative outlook assigned to the Indian banking system four year ago (November 2011). Said the rating agency: “The stable outlook on India's banking system over the next 12-18 months reflects our expectation that the banks' gradually improving operating environment will result in a slower pace of additions to loans problem, leading to more stable impaired loan ratios," Moody's VP & Senior Credit Officer Srikanth Vadlamani said. Moody's, however, said the capital levels of state-run banks are low and the government's announcement to inject Rs 70,000 crore into these banks over the next four years is a "clear positive". It added “But this amount is still short of the banks' overall capital requirements. Ability to access equity capital markets remains key if these banks have to address their capital shortfall," it said, adding high capital levels are a credit strength of private-sector banks. Moody’s expect India's real GDP to grow at 7.5 per cent in the fiscal end-March 2016 and at 7.6 per cent in the next fiscal. “These growth rates would be slightly faster than the 7.4 per cent recorded in fiscal 2015 and substantially better than from fiscal 2013 to fiscal 2014. The Reserve Bank of India will likely maintain its accommodative stance over the outlook horizon, supporting the operating environment for banks”, it noted. What’s the big worry? Indian banks have significantly tightened their underwriting standards, as seen in the sharp slowdown in corporate loan growth to 9.3 per cent over the past three years from 23.1 per cent during 2009-12. That’s a reference to the fact that banks decided to slam the brakes on credit growth as the dud-loan mountain ballooned. Consequently, corporate loans originated since 2013 mostly do not represent a material risk to asset quality, says Moody’s. For loans originated in 2009-12 that are currently under duress, the key issue from an asset-quality perspective is mostly one of recognition of already existing problems, rather than incremental stress in the underlying operating environment. While there has already been a significant recognition of impaired loans, the steel and power sectors in particular will likely see higher levels of new impaired loans. Steelmakers are facing sharp price declines and increased competition from higher imports from China. And here is what has not been taken on board by banks. For the power sector, while 22 per cent of loans were recognised as stressed as of end-December 2014, this percentage largely represented exposures to state distribution companies. “We expect that significant underlying stress in the power generation segment that is not yet reflected in the banks' impaired loan ratios will start to be recognised”. You will come to know of that quantum over the next fortnight!
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