Banking News

Financial/Banking news 15.09.2020:

(To read same information directly from the newspaper site, links are provided in the pdf version)

Govt seeks parliamentary approval for additional Rs 1.67 trn expenditure:

The central government on Monday sought Parliament nod to incur additional expenditure of Rs 1.67 trillion for 2020-21 (FY21) to recapitalise banks, fight Covid-19, and fund various welfare schemes announced for vulnerable sections. The first batch of supplementary demand for grants, tabled in the Lok Sabha by Finance Minister Nirmala Sitharaman, entails additional expenditure of Rs 2.36 trillion, but around Rs 68,868 crore will be met through savings in other schemes, showed the paper tabled in the House.  (BUSINESS STANDARD)

High food prices keep India's retail inflation above 6% in August:

The consumer price index(CPI)- based inflation came in at 6.7 per cent for August, from 6.73% in July, courtesy food inflation refusing to soften below 9 per cent. India’s economy now struggles to cope with low growth and high inflation five months into the Covid-19 pandemic. The retail inflation has now remained above the upper band set by the Reserve Bank of India of 6 per cent for nine consecutive months, though not successively for three financial quarters yet. Core inflation, too, has been inching up in the pandemic era, approaching 6 per cent now, from 4 per cent earlier this year.  (BUSINESS STANDARD)

Govt may launch mobile app to record off-mandi transactions under new Bill:

The central government might create a mobile application to record all off-mandi transactions done under the new Bill on agricultural trade, a senior official said. The Bill, called the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, which was tabled in the Lok Sabha by Agriculture Minister Narendra Singh Tomar on Monday, contains a provision that the Centre may prescribe a system for electronic registration for a trader, modalities of trade transactions and mode of payment of the schedule farmers’ produce in a trade area. A trade area has been defined as an area that is outside regular mandis.(BUSINESS STANDARD)

Debt monetisation by RBI could undermine investor confidence: S&P

Sovereign bond buying by central banks in emerging markets, including India, is seen as an emergency action related to the Covid 19 pandemic. However, if the central banks including the Reserve Bank of India, progress to debt monetisation, it could undermine investor confidence, warned Standard and Poor's (S&P). The global rating agency said sovereign-bond purchases by central banks in emerging markets have not spooked the markets because investors accept these operations as emergency actions related to the Covid-19 pandemic. (BUSINESS STANDARD)

RBI pulls up banks over delay in automating NPA recognition process:

The Reserve Bank of India (RBI) has pulled up banks for delay in automating the process of identifying non-performing assets (NPA), provisioning, and filing returns with banking regulator. It has asked the banks to comply with the guidelines by June 30, 2021. Banks were advised in August 2011 to have an appropriate IT system for identification of NPAs and generation of related data/returns, both for regulatory reporting and banks' own MIS requirements. In a communication to bank chief executives, the RBI said it was observed that process in many banks is not yet fully automated. Banks are still found to be resorting to manual identification of NPAs and over-riding the system-generated asset classification by manual intervention in a routine manner. (BUSINESS STANDARD)

RBI asks banks to fully automate NPA recognition process: (ECONOMIC TIMES)

RBI mandates automated recognition of NPAs, provisioning by June 2021: (FINANCIAL EXPRESS)

Banks' NPAs in large industry, services dip 31% in over 2 yrs to Rs 4.3 trn:

Banks' non-performing assets in large industry and services declined 31 per cent in over two years to about Rs 4.36 lakh crore in June this year, Parliament was informed on Monday. On whether the non-performing assets (NPAs) of big industries and corporate houses have increased sharply as compared to small businesses due to non-repayment of loans to banks during the last three years, Minister of State for Finance Anurag Singh Thakur replied in negative. "As per Reserve Bank of India (RBI) data on domestic operations, NPAs of scheduled commercial banks pertaining to large industry and services have come down to Rs 4,36,492 crore as on June 30, 2020 (provisional) from Rs 6,35,971 crore as on March 31, 2018, registering a decline of 31 per cent," Thakur said in a written reply to the Lok Sabha. He said a number of steps have been taken for recovery of loans from the corporate houses, which enabled the banks to recover Rs 5,48,749 crore during the last five financial years. This included a record recovery of Rs 1,56,692 crore during 2018-19, the largest proportion of which was on account of recoveries made in NPAs of large industry and services. (BUSINESS STANDARD)

Banks' NPAs in large industry, services fall 31% in over two years to Rs 4.36 lakh crore: (ECONOMIC TIMES)

Banks’ NPAs in large industry, services fall 31 pc in over two years to Rs 4.36 lakh cr: (FINANCIAL EXPRESS)

Govt to infuse Rs 20,000 cr in public sector banks; seeks parliamentary nod:

The Union government may infuse Rs 20,000 crore through recapitalisation of bonds into state-owned banks in the fourth quarter of the fiscal year. On Monday, the government sought Parliament nod for “meeting additional expenditure of Rs 20,000 crore towards recapitalisation of public sector banks (PSBs) through issue of government securities”. (BUSINESS STANDARD)

Govt seeks Parliament nod for Rs 20,000 crore capital infusion in public sector banks: (FINANCIAL EXPRESS)

Shadow of ITeS contraction over small, medium units: CRISIL SME Tracker:

CRISIL Research expects India’s information technology-enabled services (ITeS) exports to contract for the first time in over a decade this fiscal year, shrinking 1-5 per cent year-on-year in constant currency dollar terms to about $36 billion. Exports constitute more than 85 per cent of the industry’s revenue. And given the Covid-19-induced economic slowdown across the world — especially in the US and EU, which account for about 80 per cent of total export revenue — exports are at risk. The impact of the pandemic on high-value knowledge services, especially in the cloud and analytics sub-segment, is expected to be lower, which will cushion the overall decline. However, the traditional voice segment — where small and medium enterprises (SMEs) accounting for over 40 per cent of industry revenue are concentrated — is set to witness a severe volume contraction. (BUSINESS STANDARD)

Central Bank of India reduces MCLR by 5 bps:

Central Bank of India has reduced its marginal cost of funds-based lending rates (MCLR) by 5 basis points (bps) across all tenors, effective from Tuesday. The city-based lender has cut the one-year MCLR to 7.10 per cent from 7.15 per cent, a release said. Overnight and one-month MCLRs have been reduced to 6.55 per cent from 6.60 per cent earlier. The new three-month and six month MCLR will stand at 6.85 per cent and 7 per cent, respectively.(ECONOMIC TIMES)

Central Bank of India reduces MCLR by 5 basis points across all tenors: (FINANCIAL EXPRESS)

No proposal for raising FII limit in PSBs to 49 per cent: Anurag Thakur 

There is no proposal for raising Foreign Institutional Investment (FII) ceiling in public sector banks to 49 per cent from 20 per cent for capital mobilisation, Minister of State for Finance Anurag Singh Thakur informed the Lok Sabha on Monday. No amount has been raised by the government in the current financial year for recapitalisation of public sector banks (PSBs) through issuance of recapitalisation bonds, he said in a written reply. (ECONOMIC TIMES)

FDI inflow from China declines to USD 163.77 million in FY20: Anurag Thakur

There has been decline in foreign direct inflow from China in the last three years with FDI coming down to USD 163.77 million in 2019-20, Minister of State for Finance Anurag Singh Thakur informed Lok Sabha on Monday. Giving details of the total foreign direct investment (FDI) inflow from Chinese companies in India, he said, it was USD 350.22 million in 2017-18, while it declined to USD 229 million in the following year. During 2019-20, FDI further came down to USD 163.77 million, he  he said in a written reply on the first day of the monsoon session. With regard to outflow from India, he said, it was USD 20.63 million in calendar year 2020 as against USD 27.57 million in the corresponding period last year. (ECONOMIC TIMES)

Government asks private sector to clear payments due to MSMEs:

The Ministry of micro, small and medium enterprises has asked private sector enterprises in the country to clear dues of small businesses on priority. The Ministry has directly taken up the issue with the top 500 corporate groups of the country, a statement issued by the MSME ministry on Monday said. Going further, the ministry will be taking up the matter with other corporates through social media as well, it has indicated in its communication. When the AtmaNirbhar Bharat package was announced in June this year, the government had asked for all dues of MSMEs to be cleared within 45 days. The MSME ministry has taken up the matter aggressively with Central Ministries, their departments and Central Public Sector Enterprises (CPSEs), the statement said. (ECONOMIC TIMES)

Banking Regulation (Amendment) Bill 2020 introduced in Lok Sabha:

Finance minister Nirmala Sitharaman introduced the Banking Regulation (Amendment) Bill Ordinance, 2020, during the first day of the monsoon session of Parliament on Monday. The amendments, which were part of the Banking Regulation (Amendment) Ordinance, promulgated on June 26, was aimed at bringing urban and multi-state cooperative banks under the ambit of the Reserve Bank of India (RBI) regulation. The decision was taken in light of the deteriorating financial position of such cooperatives and to protect deposit holders for any fallout of the impact of the pandemic. It gave the central bank the power to supersede the board of directors of multi-state cooperative banks in situations where it would be in public interest and that of depositors for the RBI to take over. (ECONOMIC TIMES)

Govt introduces Banking Regulation (Amendment) Bill in Lok Sabha: (FINANCIAL EXPRESS)

Banking regulation Bill: Revival of banks sans moratorium on withdrawal of deposits:

Finance minister Nirmala Sitharaman on Monday introduced a Bill that seeks to enable the Reserve Bank of India (RBI) to make a scheme for restructuring a stressed bank without imposing a moratorium on the withdrawal of deposits. The Banking Regulation (Amendment ) Bill also aims to bring urban and multi-state co-operative banks under the RBI regulation and make it easier for them to access capital. The idea is to protect the interests of depositors and better scrutinise the affairs of these co-operative banks following the Punjab Maharashtra Co-operative (PMC) Bank crisis.The minister also introduced the Factoring Regulation (Amendment) Bill, 2020. The Bill aims to offer relief to the cash-strapped MSMEs, whose payments against supplies are stuck for more than 90 days, by allowing all non-banking financial companies to participate in the trade receivables discounting system, instead of limiting it to only select shadow lenders. (FINANCIAL EXPRESS)

Bank credit grows by 5.49%, deposits by 10.92%: RBI data

Bank credit grew 5.49 per cent to Rs 102.11 lakh crore, while deposits increased 10.92 per cent to Rs 141.76 lakh crore in the fortnight ended August 28, according to RBI data. In the fortnight ended August 30, 2019, banks’ advances were at Rs 96.80 lakh crore and deposits stood at Rs 127.80 lakh crore. In the previous fortnight ended August 14, 2020, bank credit and deposits had grown by 5.52 per cent and 11.04 per cent to Rs 102.19 lakh crore and Rs 140.80 lakh crore, respectively. On a year-on-year (y-o-y) basis, non-food bank credit grew at 6.7 per cent in July as against a growth of 11.4 per cent in the same month last year, according to the data on sectoral deployment of bank credit for July 2020, released recently by RBI. (FINANCIAL EXPRESS).