Financial Awareness for RBI Grade B-12 July 2017

Financial Awareness for RBI Grade B-12 July 2017

  1. Ecosystem not ready for insolvency law: SBI chief Arundhati Bhattacharya (Source: MINT)

  • The “ecosystem” for rapid dispute resolution under the Insolvency and Bankruptcy Code is not ready yet, State Bank of India chairperson Arundhati Bhattacharya said, adding that the country’s biggest lender is not “rushing” to settle its stressed accounts under the new law.
  • Banks have been asking for a judicial framework for the “orderly resolution” of stressed assets. The sector has got the law it wanted but implementation of the new code will take time.
  • By ecosystem, Bhattacharya said she meant benches have to be created by the National Company Law Tribunal (NCLT) to deal with dispute resolution. “Next, you have to create information utility, which has still not come,” she said. Also, the country needs more resolution professionals.

2. Top corporates are moving away from banks as MFs & insurers throw cheaper funds (Source: ET)

  • What Reserve Bank of India could not achieve for nearly two decades despite many policy initiatives taken with hesitation and commitment – the development of bond markets – the billionaire defaulters may have helped in achieving just that.
  • While there is a growing anxiety about the collapse of bank credit to industry, the financial markets are evolving as a viable alternative to the struggling banks. The shift in the nature of savings from real assets to financial assets has seen a tremendous flow of funds into the mutual fund industry and the insurance companies, leaving banks at a disadvantage.
  • For the first time in living memory, banks’ credit to the commercial sector has fallen below the 50% mark.

3. Banks need to take greater role in assisting programs like SHGs: Arun Jaitley (Source: MINT)

  • Finance Minister Arun Jaitley said banks need to play a greater role in assisting programs like self- help group (SHGs) which boost employment in the unorganized sector.
  • According to Jaitley, the number of people who find work on their own in the country is huge compared to the formal sector. Linkage through National Bank for Agriculture and Rural Development (NABARD) will expand more going forward.

4. IndusInd Bank Q1 profit rises 26% to Rs 836 crore (Source: MINT)

  • IndusInd Bank Ltd said its net profit for the June quarter rose 26.49% from Rs 661.38 crore to Rs 836.55 crore, from the same period a year earlier due to higher net interest and other income.

5. Foreign banks said to seek relief from SEBI’s derivatives rule (Source: MINT)

  • The Securities and Exchange Board of India issued a circular that said the derivatives must be liquidated by the end of 2020 or by the instrument’s date of maturity, whichever is earliest.
  • Foreign banks met with SEBI to ask for a three-month extension to roll over their July positions. Liquidating all the contracts at once will create huge volatility in stocks, the banks said.

6. Initiative for merger should come from banks: Former RBI Governor C Rangarajan (Source: MINT)

  • Former RBI Governor C Rangarajan said bank merger should be need-based and the initiative should come from the lenders themselves. Therefore, the world over, the larger banks are coming into cooperation.

7. India’s banks to raise $23 b of loss-absorbing capital by end-2018: Fitch (Source: BL)

  • Fitch Ratings said it expects Indian banks to issue new loss-absorbing capital and debt instruments aggregating $23 billion by end-2018.
  • In its report on ‘Regulatory Trends in APAC – July 2017’, the credit rating agency observed that new and evolving regulations could put more pressure on banks, but will ultimately strengthen the financial systems.

8. Q1 FY18 results: What to expect from the banking sector (Source: BS)

  • Insolvency proceedings may turn out to be positive in the long run, it would entail heavy provisioning burden on banks as RBI has asked for 50% provision on secured and 100% provision on exposures referred to NCLT.
  • The impact of NCLT provisions may be seen marginally in Q1 and may largely flow to next few quarters. NPA accretion is expected to moderate in Q1 FY18 compared to the previous quarter

9. UP budget: Yogi Adityanath government sets aside Rs 36,000 cr for farm loan waiver (Source: FE)

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