Financial Awareness-November(11-20) 2016

  1. Bad loan troubles continue at banks (Source:Mint)
  • Bad loan woes for banks continued on Wednesday, with three of the five banks that reported quarterly earnings on the day mentioning a deterioration in asset quality.
  • Uco Bank, the biggest of the three, reported a dismal performance in the fiscal second quarter although accumulation of its gross non-performing assets (NPAs) saw a slight drop. Its gross NPA stood at 16.51% at the end of the September quarter, compared with 17.19% a quarter ago.
  • Three banks reported a worsening of asset quality: Oriental Bank of Commerce’s gross NPA increased to 12.36% at the end of fiscal second quarter, compared with 11.45% a quarter ago. Indian Bank saw its gross NPA jumping to 7.28%, compared with 6.97% in the June quarter, while Punjab and Sind Bank’s gross NPA increased to 8.63% for the second quarter against 7.23% in June. Karnataka Bank’s gross NPA decreased to 3.64% at the end of September quarter compared to 3.92% a quarter ago.
  • Provisions for all the five banks increased by a substantial amount from last year. Oriental Bank’s provision increased to Rs774.54 crore for the second quarter, compared with Rs569.42 crore a year ago. Indian Bank’s provision more than doubled to Rs478.27 crore. Punjab and Sind Bank’s provision almost doubled to Rs225.46 crore for the September quarter. Karnataka Bank’s provision increased to Rs130.55 crore in the second quarter, compared with Rs35.07 crore in the year earlier. Uco Bank saw its provision increase by close to 40% to Rs1,488.34 crore for the September quarter.
  • Provision coverage ratio for Oriental Bank of Commerce, Indian bank, Punjab and Sind Bank and Uco Bank stood at 48.47%, 55.11%, 46.01% and 58.29%, respectively, at the end of the September quarter.

2. RBI tweaks rules for reverse repo operations (Source:MINT)

  • India’s central bank said on Thursday it would allow market participants to “re-repo”, or to lend out, securities received under its reverse repo operations starting 26 November, the latest in a push to deepen fixed income markets.
  • The Reserve Bank of India also said it would allow participants to reflect the market value of collateral securities when utilising the central bank’s repo and reverse repo operations.
  • The central bank has announced a series of measures to develop fixed income markets, including moving to enable banks to pledge corporate bonds as collateral when borrowing funds from its overnight repo window

3. RBI sets up task force for expeditious reactivation of all ATMs (Source:BL)

  • The Reserve Bank of India (RBI) has set up a task force for expeditious reactivation of all ATMs in a planned manner in view of the fact that re-calibration of these machines for dispensing Rs. 500 and Rs. 2,000 denomination banknotes in Mahatma Gandhi (New) Series involves multiple agencies and is a complex operation requiring immense coordination among them.
  • This move follows the government demonetising Rs. 500 and Rs. 1,000 bank notes with effect from November 9. Despite all remaining shuttered for two days, November 9th and 10th, for re-calibration, not many are up and running due to technical problems.
    · The task force has been set up under the Chairmanship of S. S. Mundra, Deputy Governor, Reserve Bank of India. The RBI said ATMs play a vital role in meeting the currency requirements of the public and have become a major channel for disbursement of cash. Re-activation of ATMs extends the availability and disbursal of notes for the customers of banks at convenient time and location in judicious mix of higher and lower denominations.
  • Re-calibration of ATMs involves multiple agencies – banks, ATM manufacturers, National Payment Corporation of India (NPCI), Switch Operators, etc., and multiple activities making it a complex operation requiring immense coordination among these agencies.

4. Reserve Bank of India may revise REPO rates following currency infusion (Source:FE)

  • The banking sector may be flushed with liquidity within the next two months, for which they may have to resort to aggressive lending, felt a top official of the Reserve Bank of India. The official on the condition of anonymity said’ “with the step of demonetisation it is expected that the country’s banking system will get fresh currency infusion worth Rs 17 lakh crore, which will call for aggressive lending for circulating the money within the system.
  • The RBI in the coming months in expected to reduce REPO rates by at least 2%, which will make loans cheaper. There are high probabilities that home loans come down to sub 7% and demand for housing goes up, the RBI official said.
  • According to Getambar Anand, national president CREDAI, the real estate industry has been mainly catering to the primary market, which aggressively avail home loans. India has a documented shortage of housing and if loans become cheaper the demand will grow. Besides, demonetisation will suck excess liquidity from the system, which means inflationary pressure on real estate will come down, which down the line will bring stability on the prices.
  • Meanwhile, traders have started suffering with 80% of the cash transaction getting affected for shortage of currency.

5. Ujjivan becomes fourth entity to receive small finance bank licence (Source:MINT)

  • Ujjivan Financial Services Ltd’s subsidiary Ujjivan Small Finance Bank Ltd has received the final licence from Reserve Bank of India (RBI) to start operations, the company said in a statement to the BSE.
  • It is the fourth entity to receive the final licence after Capital Small Finance Bank, Equitas Small Finance Bank and Suryoday Microfinance Pvt. Ltd. So far only Capital and Equitas have started operations.
  • Ujjivan plans to start operationsin the first quarter of the next calendar year. All small finance bank licence holders need to start operations by March next year before the in-principle approval lapses.

6. NPCI waives switching fee for RuPay PoS transactions (Source:ET)

  • National Payments Corporation of India (NPCI said it has waived till year-end the switching fee for all RuPay issuing and acquiring member banks for point of sales (PoS) and e-commerce transactions. · The switching fee is waived effective November 11 till December 31, 2016, NPCI said
  • The charges were at Rs 0.60 to card issuing bank (issuer) and Rs 0.30 to card accepting bank (acquirer) for PoS and ecommerce transactions.
  • “The objective is to support banks in the activation of existing RuPay cards, issuance of new cards to un-carded customers and to widen the acceptance points,” NPCI managing director and CEO A P Hota said.
  • The country has about 14 lakh PoS terminals and the acceptance points are growing. With right push, 755 million debit cards customers can generate about 50 million card transactions a day from the current level of hardly 5 million transactions, NPCI said.

7. RBI allows foreign investors to buy securitised debt (Source:MINT)

  • The Reserve Bank of India on Thursday allowed foreign investors to buy securitised debt, which refers to securities such as mortgages structured by issuers, as part of efforts to attract more flows into debt markets.
  • The securitised debt can include any securities issued by special purpose vehicles in which banks or certain financial firms are the originators, the RBI said.
  • For securitised debt investments, the RBI also waived a rule that requires foreign investors to invest only in debt with at least three years in remaining maturity. The central also allowed foreign investors to invest in unlisted corporate bonds, though it forms only a small segment of the debt market.
  • In a separate statement, the RBI also allowed insurance companies to invest abroad, while allowing residents outside India to pay for premiums with foreign currency, among measures targeting foreign exchange activities in the insurance sector.

8. India’s crackdown on black money will help financial system: European Union (Source:FE)

  • Welcoming India’s decision to withdraw high-value banknotes as part of its fight to root out black money, the European Union has said ridding the financial system of “black component” and bringing transparency will strengthen Indian economy and spur growth. Calling India one of the most attractive investment destinations globally, Vice-President of European Commission Jyrki Katainen also complimented the government for its resolve to roll out the Goods and Services Tax (GST) soon, besides many other reform measures.
  • On a visit here to push for resumption of stalled negotiations on EU-India Broad-based Trade and Investment Agreement (BTIA), he said fight against tax dodgers and those having ill-gotten wealth will pay dividends and strengthen the financial system.
  • Referring to GST, he said it is a “very ambitious” and “very necessary” move to reform the tax structure in India that will further boost confidence of investors in India.
  • The top EU official said investors from European countries are bringing “white clean money” to India and there was a need to resume the talks on BTIA, popularly known as free trade agreement.
  • EU is one of India’s leading trade partner and the two-way commerce in goods between India and the EU was USD 98.5 billion in 2014-15.
  • Katainen said flow of European investments into India is set to increase manifold if both sides were able to finalise the BTIA as it will protect the investments.






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