Tag: Indianomics

RBI’s proposed bad loan provisioning regime may not impact PSU banks significantly, says SBI chairman

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

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Dinesh Kumar Khara, Chairman of State Bank of India, is confident that the Reserve Bank of India’s discussion paper on bad loans provisioning regime won’t be a shock for banks.

“The provision coverage ratio of PSU banks have improved significantly in past couple of years. Also with the fact that there will be a 5-year period available for recalibrating the provisions, I think PSU banks will be in a position to handle it fairly well. If at all it gets implemented, then FY25 would be the first year but then additional provisioning would be required to be made in a five year time over that. So whatever additional provisioning is now being seen on our calculation, we feel that it is not going to have any impact on banks like us,” Khara told CNBC-TV18.

India’s banking P&Ls are about to undergo a dramatic change. The RBI wants banks to provide for bad loans before they actually default. Currently, when a borrower fails to pay 90 days past due date, the loan is marked as non-performing asset (NPA) and has to be provided for.

RBI has now put out a discussion paper which requires banks to provide for loans before default: that is
1. When stress begins to show
2. On the basis of historical bad loans in certain categories
3. On the basis of interest rate cycle and macro causes

These higher provisions are not happening immediately. The discussion paper is out, and based on reactions to it, RBI will put out draft guidelines and then the final guidelines.

Then banks will get one year to develop models and then probably five years to smoothen the provision shock and the capital shock. But it is going to be a shock and for investors buying bank stocks need to know that the low credit cost-high profit period is about to be replaced by higher credit costs, but for strengthening the balance sheet. However it could affect EPS and hence valuations.

Meanwhile, Krishnan Sitaraman of CRISIL Ratings also expects provisioning levels to go up in the new dispensation. He added that the impact of the move would have been higher if it had been introduced 5 years back.

“The provisioning levels definitely will go up with this path breaking kind of new dispensation. However if these guidelines were introduced 5-years back then the impact on the banking system would have been far higher. Today the banking system has a higher degree of provisioning coverage and so the incremental impact would be less today as compared to what it would have been 5-years back,” Sitaraman said.

Also Read: India’s economic growth appears to be ‘very fragile’, says RBI MPC member Jayanth Varma

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

3 Mins Read

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

National Financial Information Registry implementation will require many legislative changes, says expert

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

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The Union Budget presented on February 1 stated that the government will create a National Financial Information Registry (NFIR). Now this can be as revolutionary as the creation of Aadhaar.

So, what is NFIR? One can think of NFIR as a 10x version of, say a CIBIL.

CIBIL, or any credit information company, has all the credit information of an individual borrower or a company based on which banks can give more loans to the borrower. However CIBIL doesn’t have information on bonds, inter-corporate deposits, cash balances etc.

The Reserve Bank of India (RBI) in 2018 had mooted the idea of a Public Credit Registry (PCR), which will be a state-owned entity with all the credit information of a borrower and these include loans, repayment history, bonds, ECBs, bank balances etc. However this registry is still in the draft stage.

Meanwhile the government has proposed the NFIR which can contain credit and non-credit information, ie, all financial information of any company or borrower. RBI, banks, NBFCs, insurance companies can give data on credit or loans, the Ministry of Corporate Affairs (MCA) can provide data on corporate balancesheet, SEBI can provide promoter and shareholding data, the GSTN can give GST data, tax departments like CBIC and CBDT can give tax history, the CERSAI or the Central Registry Of Securitisation Asset Reconstruction And Security Interest can give data on securitised assets.

In short the government and lenders can get a 360-degree perspective of a borrower. This also helps the government make good macro policies. Also the data will not be given without the permission of the borrowing company or person.

Sudarshan Sen, Former ED of RBI, in an interview to CNBC-TV18, said that a lot of legislative changes are required for data integration in NFIR.

“A lot of legislative changes will be needed to enable some of these agencies to give data and mesh with the proposed database of the NFIR because the scope of information in NFIR goes beyond just credit and includes other kind of financial information,” Sen said.

Sen added that this is a mega project and will have to be implemented in stages.

Watch video for entire discussion.

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

3 Mins Read

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

Optimistic that India will hit 8% growth in FY23, says Former VC of NITI Aayog

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

Listen to the Article (6 Minutes)

Last month the International Monetary Fund (IMF) cut global growth for this year to 3.2 percent and next year’s growth to 2.7 percent, which is the slowest in 20 years if you exclude the COVID and Lehman crisis years.

IMF has also cut India’s Gross domestic product (GDP) forecast to 6.8 percent for FY23 and to 6.1 percent for FY24. But India still stands as a refreshing growth story compared with most other large economies.

So, can India reach a 7 percent growth in a slowing world with fragmenting trade?

Speaking to CNBC-TV18, Arvind Panagariya, Former VC of NITI Aayog and Professor of Economics said that he is optimistic that India will hit 8 percent growth in the current financial year.

“I am quite optimistic about India. My own take is that in the current year (FY23) we would very likely hit 8 percent. Indian growth between 7-8 percent in the decade to come is well within our reach.”

Also Read: Top factors working for the Indian economy and what’s needed to give it a further push

He added that India should allow rupee to depreciate as much as other countries’ currencies.

“The currencies of the other countries have depreciated more than India’s currency. I think we should allow rupee to depreciate at least as much as the competing countries have let it depreciate,” Panagariya added.

According to Panagariya, a lot more needs to be done on manufacturing and labour intensive industries than just production linked incentives (PLIs).

Also Read: Investment is the driver of economy growth, reduction in rate is worrisome, says C Rangarajan

“I am optimistic that perhaps we are in for a renewed investment cycle but I think much more needs to be done on manufacturing. We also need to pay much greater attention to the labour intensive industries,” Panagariya said.

“There has been no foreign investment coming into India in these labour intensive sectors but competing countries like Vietnam and Bangladesh are showing fairly robust foreign investments in these sectors. One of the key things which is very important is the labour laws – we have not notified the new labour codes. So the manufacturing problem has to be solved in order to solve the good jobs problem,” he added.

Watch video for more.

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

3 Mins Read

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

Investment is the driver of economy growth, reduction in rate is worrisome, says C Rangarajan

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

Listen to the Article (6 Minutes)

Former RBI Governor C Rangarajan told CNBC-TV18 on Friday that India needs to quickly address the issue of declining investment rate as it is the key for economic growth.

“One significant thing that has happened is, post 2011-2012, the investment rate has been coming down and that is really the key for economic growth. Investment is the driver of economy growth and so we need to address the investment rate issue quite strongly. The investment rate or the gross fixed capital formation rate is only about 28.8 percent now but we were at one time well beyond 33 percent. So it is a significant decline from there,” Rangarajan said.

Rangarajan has made or influenced India’s economic policies in various capacities from 1982 till 2014. He has also noted down his key takeaways from his 32 years of service in his book ‘Forks In The Road – My Days at RBI and Beyond’.

The former RBI Governor added that the downturn in economy post-2012 could have been managed better. He said reforms should create a climate for investments and accelerated growth.

“Post 2011-2012 the growth rate of the economy has been sliding. Initially one could understand it because there is always a cyclical phenomenon in every economy. When an economy reaches the peak, then for a time the economy also slides but the slide has continued for a longer time. Perhaps the downturn could have been managed better.”

Watch video for entire discussion.

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

3 Mins Read

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