Note ban hit microfinance loans in Q3 by 26 percent

Feb 16, 2017 0

New Delhi–The Indian microfinance industry recorded a drop of 26 per cent in the number of loans disbursed and a 16 per cent decline in loan amounts disbursed during the third quarter ended December, as compared to the corresponding quarter of the last fiscal, the Microfinance Institutions Network (MFIN) said on Thursday.

“The pulling out of the High-Value Currency Notes (HCVNs) from circulation significantly impacted the microfinance sector, which is 99 per cent cash-driven,” MFIN — the self-regulatory body of the Reserve Bank-regulated non-banking finance companies (NBFCs) and microfinance institutions (MFIs) — said in a release here.

“The decrease on both disbursement and collection is due to the impact on industry post discontinuance of Rs 500 and Rs 1,000 notes,” it said.

“Post the discontinuation of HCVNs with effect from midnight of 8th November, the industry was thrown out of gear initially,” said MFIN Chief Executive Ratna Vishwanathan.

“During the whole two months post discontinuing of High-Value Currency Notes, MFIN has had to engage with state governments, at both the ministerial level as well as the bureaucracy, the RBI and extensively with the press, to quell the surge of disinformation with reference to microfinance practices,” she added.

According to the body, loans disbursed during the third quarter ended December amounted to Rs 12,424 crore, as compared to Rs 14,707 crore disbursed during the same quarter last year.

However, the microfinance industry grew by 53 per cent year-on-year during the quarter in consideration, the statement said.

The aggregate gross loan portfolio of microfinance institutions stood at Rs 56,634 crore in the quarter ended December 2016, as compared to Rs 36,912 crore in the same quarter of the previous year.

The MFIN also said that 56 per cent of total disbursements during the quarter came from five states — Karnataka, Tamil Nadu, Maharashtra, Odisha and Bihar. (IANS)

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RBI chief asks centre to drastically cut borrowings

Jan 11, 2017 0

Gandhinagar– Reserve Bank of India Governor Urjit Patel on Wednesday warned that the government’s debt to GDP ratio was constraining the country’s sovereign ratings and called upon the central government to work towards reducing high central and state borrowings.

Urjit Patel

In his address at the biennial Vibrant Gujarat Global Investors Summit here, Patel said the country’s cumulative fiscal deficit of the states and the centre was among the highest in G20 countries, at 6.4 per cent of the GDP for financial year 2016-17.

Citing data from the International Monetary Fund (IMF), he said: “We have to take cognisance of these comparisons and facts as we go forward to make progress. Specifically, this will help us to better manage risks for ourselves and thereby mitigate financial volatility.”

The RBI chief said that low and stable inflation was indeed important but at the same time, India must ensure its medium-term consumer-prices based inflation target of four per cent is “secured on a durable basis.”

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Indian mutual fund industry may touch Rs 20 lakh crore sooner than expected

Jan 4, 2017 0

Chennai– With lower bank interest rates and demonetisation, the assets under management (AUM) of the Indian mutual fund industry are expected to touch Rs 20 lakh crore sooner than expected, said industry experts.

The AUM of the mutual fund industry touched Rs 16.93 lakh crore at the end of quarter October-December 2016, up from Rs 16.10 lakh crore at the end of the previous quarter July-September 2016.

The industry added Rs 82,610 crore to its kitty during the third quarter of the current fiscal, as per industry numbers.

However the next two months would be crucial as the central government would present its annual budget.

“As more and more money enters the banking system, we see a clear surge in investments within capital markets, especially MF (mutual funds) and debt instruments. We are quite confident of the MF industry touching Rs 20 lakh crore sooner than expected,” said Sundeep Sikka, Executive Director and CEO, Reliance Nippon Life Asset Management Ltd (Reliance Mutual Fund).

Agreeing with him, Parag Parikh Financial Advisory Services Pvt Ltd-sponsored Mutual Funds’ CEO Neil Parag Parikh told IANS: “We are seeing people excited in putting money into mutual fund. The uptrend will happen next year as people generally invest in mutual funds when the markets come down.”

“While it is difficult to hazard a guess as to when the industry would touch the milestone of Rs.20 lakh crore, it may happen sooner than expected. May be in two or three year’s time,” he added.

According to Parikh, the next two months would be crucial as the full impact of the demonetisation would be experienced since till December 2016, the old high value currencies were allowed to be used.

“One has to wait and see as to how the demonetisation would affect the economy and its different sectors. One should also wait to see the US policies under Trump,” he added.

Meanwhile, last quarter ICICI Prudential Mutual Fund continued to be at the top spot with an AUM of Rs 227,989 crore and is followed by HDFC Mutual Fund with Rs 221,825 crore and Reliance Mutual Fund with Rs 195,845 crore.

Going by the industry numbers, Reliance Mutual Fund logged the highest sum in terms of accretion to its AUM during the third quarter at Rs.12,717 crore followed by ICICI Prudential with Rs 12,003 crore.

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India’s wholesale inflation eases to 3.15% in November

Dec 14, 2016 0

New Delhi– India’s annual rate of inflation based on wholesale prices eased to 3.15 per cent for November from 3.39 per cent in the previous month, official data showed on Wednesday.

According to data on the wholesale price index (WPI) released by the Commerce and Industry Ministry, the annual inflation rate was (-)2.04 per cent in November last year.

A day earlier, the Central Statistics Office (CSO) reported that India’s annual retail inflation eased last month to 3.63 per cent from 4.20 per cent in October.

The decline in WPI was mainly due to a drop in the food articles prices to 1.54 per cent in November from 4.34 per cent in October.

The annual wholesale inflation rate for onion on a year-on-year (YoY) basis was lower by (-)51.51 per cent. Overall, vegetable prices came down by (-)24.10 per cent.

In contrast, the inflation rate for potatoes on November-on-November basis stood at a 36.97 per cent, while that for pulses stood at 21.73 per cent.

Meanwhile, wheat became expensive by 10.71 per cent, and protein-based food items such as eggs, meat and fish became dearer by 5.82 per cent.

The expenses on primary articles, which constitute 20.12 per cent of the WPI’s total weight, rose by 1.25 per cent during November.

Prices of manufactured products, which comprise nearly 65 per cent of the index, continued to rise for the eighth straight month, rising by 3.20 per cent last month. The prices in this category had risen by 2.67 per cent in October.

The sub-category of manufactured food products, which includes sugar and edible oils, registered a rise of 10.73 per cent.

This was mainly caused by a spurt in sugar prices, which rose by 31.76 per cent as a result of production shortages. Edible oils rose by 3.98 per cent.

Similarly, fuel and power price inflation accelerated in November. It edged up by 7.07 per cent, as compared to a 6.18 per cent rise in October and 5.64 per cent in September.

Segment-wise, price of high-speed diesel rose by 19.26 per cent last month, while that for gasoline or petrol climbed by 5.54 per cent and LPG inched up by 1.80 per cent. (IANS)

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Apollo Health receives Rs 450 crore investment from IFC

Dec 1, 2016 0

Hyderabad– Apollo Health and Lifestyle Ltd (AHLL), a wholly-owned subsidiary of Apollo Hospitals, Thursday announced receiving investments of Rs 450 crore from International Finance Corporation (IFC) and IFC Asset Management Company.

This investment will fuel AHLL’s expansion plans and fulfill its vision of bringing healthcare of international standards within the reach of 20 million patients each year by 2020, the company said.

Sangita Reddy, Joint Managing Director, Apollo Hospitals said AHLL will use IFC’s equity investment to expand its network of clinics, cradle and diagnostics centres across India. The investment will create multiple job opportunities across India for healthcare professionals, including doctors, nurses, and technicians.

“Given the immense potential and the need for quality healthcare delivery at affordable prices, AHLL will continue to expand through both organic and in-organic means and is committed to enhancing the patient experience and medical care offered by the current network,” she said.

AHLL operates a range of formats that fill the space between home care and tertiary care hospitals. It currently operates multi-specialty clinics (Apollo Clinics), Diabetes Clinics (Apollo Sugar), Diagnostics (Apollo Diagnostics), Dental centres (Apollo White), Dialysis, Women & Children hospitals (Apollo Cradle), Fertility centres (Apollo Fertility) and Surgical Centres (Apollo Spectra) across India, with a presence in 17 states and having over 400 customer touch points.

“AHLL operates across 7 verticals and we have multiplied our network and revenues over the past 3 years. In the next five years, we are looking at growing our revenues significantly and expanding our network,” said CEO Neeraj Garg.

“This investment is probably the largest-ever private equity growth capital investment in the primary healthcare segment in India. It reflects the strength of the team that AHLL has built and the leadership position of its formats.

“We currently serve over 10,000 customers daily, and with this next round of expansion, we shall be able to extend the Apollo brand of clinical expertise and ‘tender loving care’ to many more people in the cities we serve and also extend to new cities,” he added. (IANS)

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Bad loans, not interest rates impeded lending to industries

Oct 26, 2016 0

Chennai–It is the non-performing loans built by government banks that has impeded lending to industries and not the high interest rates charged by the bankers, marketing research and analysis consultancy Frost & Sullivan said on Wednesday.

In a statement, Frost & Sullivan said the steady fall in non-food credit from 20.7 per cent in fiscal year (FY) 11 to 9.1 per cent in FY16 and a still-lower 8.3 per cent till July of FY17 is indicative of a disparity in lending to different sectors.

“The credit to agriculture bottomed out to 7.9 per cent in FY13 but recovered to 15.3 per cent in FY16, which is the same level as in FY11. Similarly, the non-food credit to services bottomed out in FY15 at 5.7 per cent and rebounded to 9.1 per cent in FY16 and has already touched 10.8 per cent for this fiscal,” the statement said.

“In contrast, non-food credit to industry, which started at an impressive 22.4 per cent in FY11, progressively declined to 2.7 per cent in FY16 and a negligible 0.6 per cent so far in FY17, dampening the overall credit growth score.

“A closer analysis of the non-food credit landscape reveals that high interest rates have often been wrongly blamed for the slowdown in bank lending, putting the real issue in the shade,” remarked Innovation and Knowledge Center Economic Research Manager Aparajita Basak.

“Frost & Sullivan’s analysis reveals that the accumulation of stressed assets within the banking sector, especially with the public sector banks, is a much more plausible explanation for the weakening credit growth in the country,” she added.

The interest rate theory is easily debunked by the rising lending to industry by the private sector banks, despite the borrowing rates of these banks being greater than their public sector counterparts.

Similarly, personal loans from the public sector are increasing even as those from the private sector banks are plateauing or falling.

Evidently, the public sector banks are limiting their exposure to industry due to the past performance of high credit exposure areas, Frost & Sullivan said.

A slew of measures rolled out by India’s central bank since 2014 aimed at revitalising stressed assets have finally begun to bear fruit. In FY16 alone, six companies with an aggregate debt of Rs 2,613 crore succeeded in exiting corporate debt restructurings, which rose to eight firms exiting with Rs 6,000 crore debt in June 2016, the statement said.

“There need to be more such initiatives with clear short-term and long-term objectives,” noted Basak.

“Additionally, engaging private equity firms and enabling distressed debt funds will help speed up the cleaning of the banking sector and aid credit growth in the country,” she added.

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Bankers voice concern about financing large infra projects

Aug 27, 2016 0

Kolkata–There could be some concern about financing large infrastructure projects as the Reserve Bank of India’s new framework related to ‘large exposures’ proposes to reduce bank exposure to large corporate entities.

“There could be some concern for financing large infrastructure projects particularly greenfield projects. New framework from RBI suggests that from April 2019, for any entities with borrowing of Rs 10, 000 crore from banking industry, banks can only finance 50 per cent of the additional financing requirements. The rest (of requirements) has to be raised from either equity or market borrowing,” said State Bank of India’s Managing Director (Compliance & Risk) P.K. Gupta.

In a discussion with RBI on Friday, bankers suggested that India’s apex bank should look at it, he said on the sidelines of a Banking Summit organised by Indian Chamber of Commerce and Industry.

“As per the new regulations, for large exposures of above Rs 25,000 crore, banks will only finance 50 per cent of the additional financing requirements in 2017-18,” Gupta said. The rest may be raised from the capital market or equity. The new regulations also suggest, to bring down the limit to Rs 15,000 crore in 2018-19.

The objective of the RBI is that banking sector’s exposure to large borrowers should come down and corporate entities should go to markets to raise more funds so that there will be better price discovery in the market, he added.

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Masala bonds can spice up banks’ access to capital

Aug 26, 2016 0

Chennai– The Reserve Bank of India’s (RBI) proposal to allow banks to raise additional tier-1 and -2 capital by issuing masala bonds would ease access to capital, global credit rating agencies Fitch Ratings and Moody’s Investor Service said on Friday.

Masala bonds are rupee-denominated bonds issued in offshore capital markets.

According to Fitch Ratings, the masala bonds would widen the investor pool as the domestic investor pool is limited in size given the scale of capital needed by the banks.

“Fitch estimates a capital shortfall of $90 billion over the next several years as Basel-III regulatory requirements build from the financial year 2017 (FY17) to FY19,” the rating agency said in a statement.

Moody’s said the rupee-denominated bonds overseas was a credit-positive measure for the Indian banks as it will help create an alternative funding source.

Moody’s expected only well-rated and well-managed banks will be able to tap the international market for such issuance while relatively weaker banks will have to depend on the Indian government for their capital needs.

The RBI’s proposal came as part of a series of measures pertaining to India’s fixed-income and currency markets announced on Thursday.

According to Fitch, Indian banks would find it challenging to raise sufficient additional tier-1 capital through the domestic markets.

This is the case even as most of the capital needed will be required to be denominated in rupee owing to the currency structure of most banks’ balance sheets, the rating agency said.

“As such, enabling banks to issue masala bonds opens a window to a much larger investment pool while simultaneously addressing the problem of currency mismatches which had existed with previous international bond issues,” Fitch said.

According to the rating agency, the masala bonds market remains in its infancy and corporates like HDFC and NTPC raised funds issuing such bonds this year.

“As such, the extent to which banks will be able to use the masala bonds channel to raise capital remains to be seen, and will depend to a large extent on the foreign investors’ risk appetite and pricing,” Fitch added.

According to Moody’s, the Indian central bank’s new guidelines on corporate bond issuance will enhance liquidity in the bond market though at present corporate bond market amounts to around 31 per cent of total corporate credit.

“Based on the financial performance of these banks for the year ended March 31, 2016, our analysis suggests that the external capital requirements for the 11 public sector banks that Moody’s rates totals about Rs 1.2 trillion — a figure which far exceeds the remaining Rs 450 billion included in the government’s budget for capital distribution to the banks until 2020,” Moody’s said.

Moody’s expected RBI to announce measures that would develop the bond market addressing issues like bank-dominated financial system — investment mandates of institutional investors do not permit large investments in corporate bonds — and the lack of functional trading systems for bonds. (IANS)

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Overseas borrowings by Indian companies down by 44 percent to $1.2 billion

Aug 26, 2016 0

Mumbai– Overseas borrowings by Indian companies in July this year fell by 44 per cent to $1.2 billion as against $2.14 billion in the same month last year, Reserve Bank of India (RBI) data here showed on Friday.

The central bank said that while $1.02 billion was raised through the automatic route, the remaining $183.7 million came through the approval route.

Among major Indian borrowers using the automatic route were Housing Development Finance Corporation ($446.38 million) for “on-lending/sub-lending”, Glenmark Pharmaceuticals ($200 million) for overseas acquisition and Adani Transmission ($74.40) million for refinancing of rupee loans.

Under the same automatic route category, Birla Corporation raised $40 million for refinancing of earlier external commercial borrowings, Siemens Financial Services raised $37.20 million for on-lending and Continental Warehousing Corp. in Nhava Sheva raised close to $35 million for refinancing of rupee loans.

Under the approval route, Tikona Digital Networks raised $171 million for import of capital goods, Vijayawada Tollway raised $11.07 million for road related works and Ionbond Coatings raised $1.63 million for “general corporate purpose”.

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Unchanged interest rates in India not surprising

Aug 9, 2016 0

Chennai– The Reserve Bank of India’s (RBI) decision to leave the policy interest rates untouched was in line with the predictable and transparent monetary policy, said global credit rating agency Moody’s Investors Service.

The central bank’s decision to leave policy interest rates unchanged on Tuesday was no surprise to market participants.

Marie Diron

Marie Diron

“In the next few months, we expect continuity in the RBI’s policymaking. In particular, the government’s notification of the inflation target at 4 per cent +/- 2 percent through to 2021 denotes ongoing commitment to keeping inflation at moderate levels,” Marie Diron, senior vice president, Sovereign Risk Group was quoted as saying in a statement issued by Moody’s.

“Meanwhile, the formation of a monetary policy committee is in line with common practice in many central banks around the world. We do not expect the RBI’s shift to such a structure to have any significant implications for the conduct of monetary policy,” Diron added.

According to Diron, the larger than average monsoon rainfall will help maintain moderate food price inflation to keep the headline inflation rate within or close to target this year. In the medium-term, the inflation will remain moderate.

“There are upside risks related to the implications of the rise in public sector wages with the implementation of some of the Pay Commission’s recommendations. Should higher wages boost consumption significantly, inflationary pressures could rise,” Diron said.

According to Diron, inflationary pressure could arise when the full recommendations are implemented due to increase in housing allowances.

“However, the less accommodative monetary policy stance at present than in 2009-13, when the RBI’s policy interest rates were well below inflation, mitigates these risks,” Diron said.

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