COVID-19: Moody’s says loan moratorium may lead to greater build-up of credit losses for banks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The loan moratorium extended by banking regulators in countries like India and China to deal with the liquidity crunch amid COVID-19 crisis will provide temporary relief to borrowers, but will constrain banks from taking proactive recovery actions and could lead to an even greater build-up of credit losses once the moratoriums are lifted, according to Moody’s.

In a report on Asia Pacific region, Moody’s on Tuesday said while policy stimulus will shore up credit quality for larger companies in sectors, including airline and oil and gas, Asia’s banking sector profitability will also decline from deteriorating asset quality and lower net interest margins.

“Financial regulators in China, Australia, Malaysia, India and some other Asian economies have enacted debt moratoriums to soften the liquidity crunch for businesses and households. While repayment delays will provide temporary relief to borrowers, these directives will also constrain banks’ abilities to take proactive restructuring and recovery actions. These measures also could lead to an even greater build-up of credit losses once the moratoriums are lifted,” Moody’s said.

Moody’s Investors Service further said this risk will increase substantially if the economic downturn, and measures to contain the spread of the coronavirus, persist for longer than expected.

“In the event of heightened banking sector distress, Asian governments will likely stand behind larger, systemically important banks. We view government support as stable in most of the banking systems that we monitor, reflecting our expectation of extraordinary support, should it be required, to avert financial contagion,” it added.

To give relief to borrowers hit by COVID-19 lockdown, the Reserve Bank of India (RBI) last month announced that EMI payments for all term loans, including retail and crop loans and working capital payments, will have the benefit of three-month moratorium.

Stating that Asia’s banking systems will face a much more difficult landscape, Moody’s said weaker economic prospects and widespread financial market upheaval will translate into a more adverse credit landscape over the coming quarters.

“While the region’s banks generally have adequate capital and liquidity buffers to weather the crisis, reduced business activity, lower (or more volatile) asset prices and higher unemployment will weigh on debt affordability and loan repayment.

“Banking sector profitability will also decline because of higher loan-loss provisions from deteriorating asset quality, lower net interest margins due to lower policy rates, and lower fee income on subdued business activity,” said Moody’s, which has a negative outlook on 16 banking systems in the Asia Pacific region.

Moody’s said although Asia’s external and fiscal buffers are generally more robust than those in other regions, equipping most Asian governments with more policy space, their policy responses to date will only cushion some of the impacts and not fully offset the economic and credit damage.

Widespread containment measures are crippling domestic consumption and production, which is spilling over to other parts of the region in the form of lower demand for commodities, imported goods and services, and supply chain disruptions, Moody’s Assistant Vice President Deborah Tan said.

The coronavirus is exposing vulnerabilities in existing systems and we expect policy space to be constrained for economies with existing fiscal challenges or elevated external vulnerabilities, she added.

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Madhya Pradesh: CM Shivraj expands cabinet with 5 ministers, 2 from Scindia camp

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Five ministers, including two from the Jyotiraditya Scindia camp, were sworn in by Governor Lalji Tandon on Tuesday noon at the Raj Bhavan in Bhopal. Social distancing was observed throughout the 20-minute ceremony.

Chief Minister Shivraj Singh Chouhan government who had called on the governor earlier in the morning was among very few persons present at the swearing-in ceremony.

Chouhan has run the ministry single-handed for almost a month since the BJP toppled the 15-month-old Kamal Nath ministry last month.

Caste and gender equations have been the significant factor in the new team. Those sworn in are Dr Narottam Mishra (Brahmin), Tulsiram Silawat (Scheduled Caste), Kamal Patel (OBC), Govind Singh Rajput (Thakur), and Meena Singh (Women’s and Scheduled Tribe quota).

Madhya Pradesh: BJP leaders Narottam Mishra, Kamal Patel, Meena Singh, Tulsi Silawat and Govind Singh Rajput took oath as ministers, at the state cabinet expansion ceremony in Bhopal today. pic.twitter.com/RBEJk449Bk

— ANI (@ANI) April 21, 2020

Narottam Mishra is from Chambal-Gwalior, while Tiulsi Silawat is from Malwa region. Govind Singh Rajput is from Bundelkhand, while Meena Singh represents Mahakaushal area.

Shivraj Singh Chouohan who was appointed as the chief minister on March 23 was acting as a one-man cabinet since then.

Those present at the swearing-in ceremony could be seen wearing masks, and chairs were kept at a distance from each other. The new ministers took off the masks while taking the oath.

Scindia was insisting on at least six persons to be included from among the 22 who joined the BJP last month. After a long haggling, the BJP leadership settled for two to be included in the first lot.

The next expansion is unlikely before the Rajya Sabha elections said the sources. Gopal Bhargava the former leader of the Opposition during the Congress rule is among the ones to have missed the bus.

The allocation of portfolios is likely to announced soon.

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Coronavirus in Rajasthan: State reports 52 fresh cases

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Rajasthan recorded 52 fresh coronavirus cases on Tuesday, taking the state’s virus tally to 1,628, an official said. The state has so far seen 25 deaths due to the virus, with Jaipur accounting for 13 deaths.

“52 fresh cases have been reported in nine districts of the state, including 34 in Jaipur,” Additional Chief Secretary (Health) Rohit Kumar Singh said.

He said test results of the backlog 4000 samples sent to a private lab in Delhi have started coming and these are being captured in the report. Hence, number of positive cases is expected to rise today and tomorrow.

Singh said of the 52 fresh cases, 34 were reported from Jaipur; five in Jodhpur; four in Bhilwara; two from Tonk, Dausa and Jaisalmer and one each in Swai Madhopur, Nagaur and Jhunjhunu A total of 1,628 cases of the virus have been reported in the state so far. He said so far 302 patients have tested negative for the infection after treatment, of which 97 have been discharged from hospitals.

The total number of COVID-19 cases in Rajasthan includes two Italian citizens and 61 people brought from Iran to Army health centres in Jodhpur and Jaisalmer.

The entire state is under lockdown since March 22 and a massive survey and screening is underway to track the people infected with the virus.

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China includes Arunachal in its updated map

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China has included parts of Arunachal Pradesh within its international boundaries, an updated version issued by Sky Map has revealed.

Sky Map, China’s authority on digital maps, is constructed and operated by a unit directly under Beijing’s National Surveying and Mapping Geographic Information Bureau. Recently, Sky Map users discovered that it has updated the country’s map with the latest national borders, including India’s Arunachal Pradesh, a DW media report said.

Arunachal Pradesh, a hill state in the Northeast bordering Tibet, was part of British India in 1913-14 and formally included in India when the McMohan Line was established as the border between India and Tibet in 1938.

China continues to consider Arunachal Pradesh a part of Tibet, which it occupied in 1951.

The map of China, until now, is based on the 1989 edition of the Sky Map of its national borders. Though since then, China has successively solved its border issues with Russia and Central Asian countries, but none of them have been reflected in the map.

However, as per a DW news report in Chinese, some users noticed that Sky Map has now updated the geographic information at the “county” level. “The county boundaries of some counties clearly transcend the red colour marked 1989 edition of the national border, especially in Tibet area bordering Bhutan and India,” the report said.

China has claimed its sovereignty over Tibet “counties bordering India and Bhutan from east to west — “Chayu county, Medog county of Linzhi city, Cuona county, Luoza county of Shannan city, Kangma county, Yadong county of Xigaze city”.

Chayu, Medog, and Cuona counties are divided by the McMahon Line with the northern parts in China and the southern parts in India. “Longzi County in Shannan City does not theoretically border India, but the McMahon Line runs through the county from southwest to northeast, with Chinese control in the west and Indian control in the east.”

However, China calls Indian area and part of Chayu county, Motuo county of Nyingchi city and Longzi county and Cuona county of Shannan City, “South Tibet”.

As per the updated Sky Map, “the southern boundary of Chayu county is roughly the same as the boundary in 1989, the southern part of Motuo county has contracted northward, and the southern boundary of Cuona county also roughly coincides with the boundary in 1989. The Longzi county does not border India at all, as Beijing advocates. Cuona county of Shannan city not only borders with India but also borders with Bhutan.”

“China-Bhutan border dispute area, Mulasading, is located in Cuona County-south of the McMahon Line. Mulasading originally belonged to Tibet and was managed by the Tawang Temple. In 1949, India and Bhutan signed the Permanent Peace and Friendship Agreement to transfer Mulasading to Bhutan. In the latest Sky Map, the border of Cuona County in the Mulasading region is south of the 1989 edition of the national border.”

“In addition to Tibet, the borders of Tashkurgan County in the Kashgar region of Xinjiang have also changed. The northwestern part of the border is more than the 1989 edition. According to the 2011 border agreement between China and Tajikistan, this extra part is 1,158 square kilometers east of the Sarekole Mountains,” the report said.

China occupies India’s Aksai Chin, around 37,000 sq km uninhabited high-altitude desert part of the former state of Jammu and Kashmir, bordering China’s Xinjiang province.

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Lockdown arbitrary, government inaction making matters worse, says Bajaj Auto MD, Rajiv Bajaj

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian auto industry has already seen significant job losses and the extended lockdown is only making matters worse, said Rajiv Bajaj, Managing Director of Bajaj Auto. On Tuesday Bajaj came out to sharply criticize the government’s lockdown strategy and described it as a “solution looking for a problem”.

“Lockdown is not the long term answer to the health crisis. The young and healthy need to go back to work. The lockdown is arbitrary and not an answer to the economic crisis either”.

“I think job losses have already happened. You just have to speak to suppliers and dealers. The government is pretending as if there are no job losses and no salary cuts”, said Bajaj.

Bajaj said the company has started taking major cost reduction measures. “Our marketing budget used to be Rs 200 crore a quarter, this time it is virtually zero. We have also frozen our capital expenditure almost entirely barring R&D”, he said. The industry veteran also predicted that investment plans would be on hold for at least one year.

The company recently announced that it would be reducing the salaries of employees for the period of the lockdown. The company had said its employees had volunteered to take pay cuts due to the unprecedented situation.  Bajaj said that the company was not just reviewing employee wages but the entire spectrum of benefits.

“Our HR has worked out a plan to save Rs 150-200 crores annually, which we will implement. We are tightening everything. We need to secure the ship”, he said.

The Society of Indian Automobile Manufacturers have requested the government for relief measures to boost demand and liquidity. The industry body has called for a temporary GST reduction and availability of working capital at concessional rates. Bajaj rejected such demands but hoped that the government would act logically and sensibly.

“Please start the front end, the ports for exports and dealership. Then work on smoothening transportation of goods and then work backwards and allow us to start our plants with all due precautions”.

Bajaj confirmed that the company had received permission to restart its Pantnagar plant but said there are difficulties in resuming production. “Production is an issue in terms of access for employees and supplies and what is the point of producing if dealerships are shut”, he said.

He added that demand will come rushing back post lockdown as there is pent up demand in the system and there would be greater demand for personal affordable transport due to COVID-19.

“KTM is expecting 30-40 percent higher demand for powered two-wheelers compared to the situation before this crisis. KTM does not want 11,000 two wheelers as they wanted earlier, they now want 16000 KTMs and Husqvarna’s but our plant is shut”.

Bajaj urged governments to scrap rules according to which a dealership or factory could be sealed for three months if an employee is infected with COVID-19. “This is a draconian move and is preposterous. We will take every precaution and you can inspect premises every day. Do not hang this sword on people. How will people open up”, he said

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Future Group in talks with lenders for debt relief, seeks more credit under COVID-19 schemes

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Kishore Biyani-led Future Group is looking at ways to manage its debt as the nationwide lockdown combined with a steep fall in its share prices are hurting its ability to repay loans.

Senior banking executives aware of the talks have told CNBC-TV18 on the condition of anonymity that Future Group is looking to avail additional credit under the COVID-19 emergency credit lines announced by various banks, which allow corporates to borrow a certain portion (usually 10 percent) of its existing working capital limit to tide over liquidity mismatches in the wake of the health crisis.

In addition, the group is also looking to avail relief under the moratorium benefit announced by the Reserve Bank on March 27, said an executive from another large lender to the company. A handful of lenders, including its key lender Bank of India, has already allowed the company three months of deferment on loan repayment under this facility, the person quoted above said.

With repayment pressure mounting, the company has also initiated talks with its lenders to restructure its debt, two people aware of the discussions confirmed to CNBC-TV18.

“Yes restructuring talks have started but they are at a very early stage now. We are looking at restructuring the debt of at least two of its operating companies, including Future Retail & Future Lifestyle,” an executive from a large public sector bank said on the condition of anonymity. He said that the only route to restructure debt is through RBI’s June 7 circular on the resolution of stressed assets. “We are looking at a mix of asset monetisation, fund infusion, and essentially a longer repayment period for the debt,” the person added.

Future Group’s listed companies had a debt of Rs 12,778 crores as of September, 2019. Bank of India, SBI, Canara Bank, Central Bank are the among key bankers to Future Group. Future Group did not comment on CNBC-TV18’s query on this story.

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Youtube witnesses 20 per cent surge in subscribers due to coronavirus lockdown

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With India under lockdown due to coronavirus (COVID-19) pandemic, Google-owned YouTube has seen a 20.5 per cent surge in subscribers” base in the country, a new report said on Tuesday.

As a primary video sharing platform, YouTube alone garnered over 300 billion views in the first quarter of this year – 13 per cent more than the fourth quarter of 2019 and 11 per cent more than Q1 2019, according to the report by Mindshare India and online video intelligence and analytics platform Vidooly.

The companies studied the video platforms of YouTube, Facebook and Instagram. The findings showcased a steep increase in content consumption as it reported the time spent by the average user to be over four hours per day as compared to previous — 1.5 hours on social media platforms.

(Also read: Whatsapp rolls new feature increasing number of participants in video calls to 8)

According to the study, COVID-related content has seen a surge of 98 per cent in terms of views and 19 per cent in terms of engagement. In order to garner better engagement, brands are indulging into thorough marketing through Facebook and Instagram and the Indian government’s efforts in spreading awareness has gained mileage over YouTube, said the report.”The worldwide lockdown has resulted in significant shifts in audience behaviour, specifically in terms of online content consumption. In such a scenario, retention rate and watch time of videos will be the key metrics to filter and identify the best performing channels,” Subrat Kar, CEO, Co-founder Vidooly, said in a statement.

The report revealed that the millennials remain the most active group on YouTube in India, with 70 per cent of viewership coming from the age group 18-34. Over 90 per cent of the views on YouTube were through mobile devices.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow