Financial Awareness for RBI Grade B-2 August 2017

Financial Awareness for RBI Grade B-2 August 2017

  1. Banks restructured Rs 2 trillion worth corporate loans last fiscal: Arun Jaitley (Source: MINT/ BS/ ET)

  • A number of corporate loans restructured by lenders have seen a decline in the last three financial years, according to the data tabled by finance minister Arun Jaitley in the Rajya Sabha.
  • Banks restructured loans, that were sanctioned to companies, of worth Rs 3,70,279 crore in FY2014-15 and Rs 2,99,111 crore in 2015-16. The amount of restructured corporate loans came down to Rs 2,04,884 crore in the last financial year, as per the data.
  • On provision for restructuring of farm loans in case of natural calamities, he said banks can facilitate restructuring, including conversion of short-term debt to term loan or re-schedulement or repayment time-frame to such borrowers with the benefit of retention of asset classification.

2. SBI debit cards now on Samsung Pay (Source: MINT)

  • State Bank of India’s (SBI) debit cards has now been integrated with Samsung Pay, which allows payments by waving a Samsung smartphone near a cash register at merchants instead of swiping a card. SBI’s credit cards are already on this platform since March 2017.
  • Samsung Pay works on around 2.5 million point-of-sale (PoS) terminals through its magnetic secure transmission (MST) technology. MST creates a dynamic magnetic field between the smart phone and the payment terminal’s card reader. The application also works on near-field communications that build a high-frequency wireless network between the phone and the payment terminal. Apart from cards, Samsung Pay also supports Unified Payments Interface as well as mobile wallets through a single app.

3. Savings rate cut: Decline in govt banks’ deposit share may accelerate (Source: ET/ BS)

  • The interest rate cut on savings deposits by State Bank of India (SBI) would have a positive implication on its margins in the short-term. State Bank’s saving account deposit rate cut will lead more lenders to follow suit and help widen the net interest margin by up to 0.05- 0.15 per cent, a Morgan Stanley report said.
  • The American brokerage, however, said it will revisit its earning estimates after the June quarter results are reported. The brokerage said it has assumed that all the state-run banks’ share of deposits under Rs 1 crore is at 90 per cent (at par with SBI) and the same for private sector banks is 80 per cent.
  • Public sector banks’ (PSBs’) liability franchise, which has proved to be more resilient over the years than their lending business, is likely to see a decline, as depositors move their savings to banks and instruments offering higher interest rates. Other PSBs are also likely to cut rates on savings accounts, which, analysts say, will not be a bad thing for them.

4. States fiscal deficits: Arun Jaitley red flags on agricultural loan waivers (Source: FE)

  • With states likely to tap the markets to raise funds to finance farm debt waivers, finance minister Arun Jaitley has cautioned the fiscal deficit of states may rise this year.
  • The gross market borrowings of the state governments could rise by 22% from Rs 3.7 lakh crore in FY17 to Rs 4.5 lakh crore in FY18, which would exert an upward pressure on state development loans yields, Icra said in a report.
  • Following reports of farm distress, several states including Maharashtra and Uttar Pradesh have announced loan waivers. Maharashtra has announced farm loan waivers of about Rs 35,000 crore or 1.38% of its GDP, taking the fiscal deficit of the state to 2.91% as against the Budget estimate of 1.53% for FY18. Uttar Pradesh has proposed to write off loans of about Rs 36,000 crore or 2% of its GDP.
  • The concerns about rising fiscal deficit of states may have been a tad exaggerated as the deficit in most years has been below the budgeted target, according to a Credit Suisse report. States’ combined fiscal deficit (excluding UDAY bonds) has been budgeted at 2.5% of their GDP for the current fiscal, against 2.7% (RE) in 2016-17, it said.
  • Farm loan waivers likely adding just another 20 basis points to the deficit in 2017-18, considering that the entire waiver process takes a few years to complete, so the impact is staggered.

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