What Urjit Patel’s appointment could mean for RBI rate cuts

Aug 21, 2016 0

Mumbai– The appointment of Urjit Patel, as Governor of the Reserve Bank of India (RBI), effective from September 4, has naturally raised expectation among those who were critical of outgoing Governor Raghuram Rajan for not easing enough the monetary policy by cutting rates.

It is relevant in this context to examine the backdrop to Rajan holding the RBI’s repo, or short-term lending rate, at 6.5 per cent in his last monetary policy review earlier this month.

Urjit Patel

Urjit Patel

Since January 2015, Rajan has cut lending rates by 150 basis points (bps) but banks have only cut their interest rates by about half of that. To nudge banks to transfer the benefit of rate cuts, Rajan even announced a shift to the marginal cost of lending (MCLR) regime.

Under the MCLR, banks need to consider their marginal cost of funds, or the cost incurred on incremental deposits across different maturities, to decide on interest rates.

However, three months after the MCLR was launched on April 1 this year, banks have hardly cut their lending rates.

ICICI Bank and Axis Bank recently cut rates by only 5 bps. So far, Axis Bank has cut its rates cumulatively the most — by 30 bps. State Bank of India, ICICI Bank, HDFC Bank, Bank of Baroda, IDBI Bank, Punjab National Bank and Syndicate Bank have cut their rates only in the range of 5bps — 20bps.

From the state-run banks’ point of view, their accumulation of massive non-performing assets (NPAs), or bad loans, that is impacting profitability, is keeping them from cutting rates.

When talking about this challenge for Urjit Patel as the RBI Governor, it should also be kepte in mind that his moorings are as monetarist as the outgoing Governor, and he is considered to attach the same importance to inflation control as Raghuram Rajan.

Patel is also known to be opposed to boosting government capital spending at the risk of a higher fiscal deficit.

His views on monetary policy were expressed at the time Rajan held rates in the February 2015 review after making an unexpected rate cut the previous month — the first in nearly two years.

Patel at the time elaborated on the “important backdrop” to Rajan’s move to hold rates.

“We are in the midst of the age of competitive depreciation and of a beggar-my-neighbour philosophy. It brings to mind an old African saying that when elephants fight, the grass suffers,” Patel said at the press conference to announce the policy review, on the trend of accommodative monetary policies being adopted by developed economies.

“While the ECB (European Central Bank) and the Bank of Japan are printing money and devaluing their currencies on one hand, the US economy is reviving on the other. Anyone in the middle is getting crushed,” he added.

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Mahajan meets BRICS women parliamentarians

Aug 21, 2016 0

Jaipur– The best way to predict future is to create it, Lok Sabha Speaker Sumitra Mahajan observed on Sunday while addressing the First Meeting of BRICS Women Parliamentarians’ Forum here.

The two-day event was inaugurated by Mahajan at Rajasthan Vidhan Sabha Chamber on Saturday.

The meeting ended with the adoption of the Jaipur Declaration, which calls for ‘equity’, ‘inclusivity’ and ‘sustainability’ to be factored into all development plans and asks to institutionalize the BRICS Women Parliamentarians’ Forum as an annual affair.

Addressing the delegates at the valedictory function, Mahajan said that dialogue among parliamentarians is important to achieve Sustainable Development Goals (SDGs) and exhorted them to learn and benefit from the best practices in BRICS countries.

She hoped the event would encourage women parliamentarians to meet regularly to discuss issues and exchange views in order to acquire deeper insight and develop a perspective on the problems and challenges faced by them as lawmakers.

The meeting deliberated upon three topics: ‘Perspectives on implementation of SDGs’, ‘Role of Women Parliamentarians in involving citizens’ and ‘Containing climate change: Imperatives of global cooperation’.

Delivering the valedictory address, Rajasthan Chief Minister Vasundhara Raje said that women lawmakers who are also daughters, mothers and sisters, not only represent people and guide administration but also bring to the table compassion and caring. This makes them more able guardians of processes that lead to improving the quality of life of our citizens.

The Jaipur Declaration expresses commitment to intensify mutual cooperation based on the framework and associated action plan agreed upon and reaffirmed at the First BRICS Parliamentary Forum held in Moscow in 2015.

It exhorts international financial institutions to “support and facilitate financing for development on favourable terms” for the developing and the least developed countries, and to help them gain easier access to new and affordable technologies for capacity-building.

It also underscores the need to address climate change “in all its manifestations”, and work out “integrated solutions” to preserve and protect ecological systems and forests and ensure food security.

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Indian insurance in future will be fully digitally driven

Aug 21, 2016 0

New Delhi– Insurance in India has transformed to become a digitally driven buyers’ market from being a sellers’ market, industry chamber CII said on Sunday, citing a report prepared jointly with British professional service firm Ernst and Young (EY).

“Insurance in India has moved from being a sellers’ market to that of a digitally driven buyers’ market,” said the report titled ‘Insurer of the Future’.

“Technology will power the new wave of change for the Indian insurance industry,” the Confederation of Indian Industry said in a statement here.

“The customer is at the centre of digital transformations across the value chain and the report recommends pursuing technology to improve the traditional insurance process and to re-configure the insurance business model,” it said.

Noting that Internet of Things (IoT) can play a crucial role in assessing and pricing the risk of loss, the report said Robotic Process Automation (RPA), that replicates human behaviour and executes non-judgemental sequence of activities, can help insurers to automate client servicing activities.

“Insurers, through collaboration with third party data service providers can make informed strategy and policy related decisions for insurance risk-management and fraud monitoring,” the CII said.

“Insurance bundling on e-commerce platforms has enabled greater customization in product and pricing thereby targeted marketing to customers,” it added.

The industry chamber, however, also noted that insurance in India has been slow as compared to the rest of the financial services “in adopting new technology value propositions available in the market as an enabler of business strategy”.

“The drivers of Insurance business in India are rapidly changing. Over the last decade and a half several innovations have smoothly blended into the ecosystem of insurance, be it in terms of products, distribution, technology or the basic way in which business is done,” the statement said citing Director General CII Chandrajit Banerjee.

“Technology and digitisation disruptions have brought the sector to a point of transformation,” he added.

“With the rising population and changing demographics, insurers and intermediaries will have to constantly innovate to remain relevant,” said Rohan Sachdev Partner, EY.

Commenting on the possible impact of the Goods and Services Tax (GST) in insurance, CII noted that currently, as a service industry, insurance has one single tax (service tax) with one administering authority in the central government.

“Under the dual GST structure, a significant impact on this industry would be the emergence of dual stakeholders in every taxable supply of service: the government of the state where the supply is made and the central government,” it said.

“From dealing with a central service tax for pan-India operations, insurers will potentially start dealing with 38 taxes: 35 State GSTs (SGSTs) of the states and union territories, 1 Central GST (CGST) and IGST on inter-state supplies,” it added. (IANS)

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Cash-strapped Kerala needs to pay out Rs 7,000 crore for Onam

Aug 21, 2016 0

Thiruvananthapuram–The cash-strapped Kerala is heading for a tough time as it needs to pay out more than Rs 7,000 crore around the festival season, said a top Finance Ministry official here.

The Onam festival is celebrated across the communities here and employees of the state government and private sector get either a bonus or a festival advance for celebrations.

However, this time the state government employees have not received any advance payment of salary or festival bonus.

This time Onam, celebrated according to the Hindu lunar almanac, falls in the second week of September.

The ministry official told IANS that salaries, bonus, pensions and pension arrears will have to be paid out and hence it is a tough task for the state government.

“We have already issued bonds worth Rs 2,000 crore, which is a routine affair when there is a cash crunch and the Reserve Bank of India has given the nod,” said the official.

He said the rest would be made up when various welfare fund boards take loans.

“This is also a common practice and the loans and the interest would be paid by the state government. The rest would come by way of the state’s own resources,” said the official.

He pointed out one of the reasons behind the figure to be so high is that there are pension arrears from social schemes like agriculture, old age, widows and many others to be paid out to about 37 lakh former employees and other persons.

“The previous Congress-led UDF government had left behind a few months in arrears in pensions, besides from June the new Pinarayi Vijayan government raised all pensions to a minimum of Rs 1,000 per month,” added the official. (IANS)

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India to modify standards of power plants

Aug 21, 2016 0

Kolkata– With the integration of large scale renewable energy sources, the Central Electricity Authority is planning to modify the standards of the power plants and power equipment, CEA Chairman S.D. Dubey said on Sunday.

“In view of large-scale induction of renewable energy sources, we are going to modify and revise the standards of construction, operations and maintenance of power plants, including thermal, hydro and renewable along with grid operations and others,” Dubey said.

In regard to new standardisation, the authority has completed consultations and deliberations with all stakeholders and comments from stakeholders are to be incorporated.

Citing an example of the standards of thermal power plants that the CEA is moving to change, he said, “There were sub-critical technology based plants. Now, we are going to have super-critical technology and ultra-critical technology based plants.”

In the 12th Plan period, 40 per cent of power projects were super critical, but from the 13th Plan period and beyond, most of the thermal plants will be based on super-critical technology as well as ultra-critical technology, he said.

Power plants with an aggregated capacity between 22,000 MW to 30,000 MW either have no fuel linkages or have fuel linkages but no power purchase agreements, he said.

“The central government is likely to formulate a policy to address this complexity,” he said.

With an objective to utilise domestic coal in an efficient manner, the CEA has brought a policy guideline to provide flexibility in the utilisation of domestic coal for reducing the cost of power generation.

“Suppose, one power generating company has several plants, some are efficient and some are not. Earlier, coal allocations were done by plant-wise. According to new guideline, power-generating company can divert coal from its annual contract to its efficient plants. Cost of power generation would come down,” Dubey said.

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Bengaluru top host of tech start-ups in India, US leads the word with 47,000 while India at only 4,200 tech start-ups

Aug 21, 2016 0

New Delhi–India’s information technology hub Bengaluru is host to the largest number of technology-driven start-ups, followed by the National Capital Region (NCR) and Mumbai while Hyderabad and Chennai have also become quite popular among budding entrepreneurs, a study by industry chamber Assocham said.

The study, done in association with the Thought Arbitrage Research Institute, found that in the sphere of technology-driven start-ups, India has moved up to third position after the US and Britain.

While the US has more than 47,000 tech start-ups and Britain has over 4,500, the figure for India was around 4,200 by 2015-end.

“In terms of total number of start-ups, comprising tech and non-tech areas, India again figured among the five largest hosts in the world along with China,” the Associated Chambers of Commerce and Industry of India said in a statement here on Sunday.

The number of start-ups in both India and China was 10,000 each. The US is at the No.1 position among the overall list of 83,000 budding entrepreneurs, the statement added.

In India, Bengaluru was host to 26 per cent start-ups, followed by Delhi NCR with 23 per cent and Mumbai with 17 per cent.

“In the ‘catching up’ category fell Hyderabad with eight per cent, and Chennai and Pune with six per cent each,” Assocham said.

“The disruptive innovation in technology and process is creating newer Indian start-ups and foreign investors, including some of the well-known Venture Capital Funds, are showing immense interest in these start-ups,” Assocham President Sunil Kanoria said in the statement.

According to the chamber, the awareness that a start-up is a vehicle of rapid growth through technological “disruption” and innovation needs to spread across the economy.

“Only then, there can be a true start-up revolution; otherwise if any small traditional business is treated as a start-up then the start-up eco-system will never develop properly.

“Realisation of this distinction needs to percolate to all strata of the policy-making and economy to ensure that a real support system for the start-ups, in terms of technology, hand-holding, funding and rapid growth, can develop properly in the country,” it said.

The report has suggested tax exemptions for research and experimentation to encourage fresh ideas without fear of failure.

It has also said courses on creation of small businesses should be encouraged in the learning campuses.

Meanwhile, the government on Friday announced that a team would be set up to advise on how to further improve India’s ranking in the global index of countries in the sphere of innovations.

Commerce Minister Nirmala Sitharaman made the announcement here while releasing the Global Innovation Index 2016 Report, which shows India has improved its index ranking by 15 places over last year to 66th place, following five previous years of decline in position.

In his address at the event, Niti Aayog CEO Amitabh Kant said India is becoming a centre for innovation, and in the last few years over 1,500 multinationals had relocated their R&D centres to places like Bengaluru, Hyderabad, Pune and Gurgaon.

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State Bank of India looks to add $120 billion to its asset base

Aug 20, 2016 0

Mumbai– The country’s largest lender State Bank of India on Saturday said it is looking to add $120 billion (Rs 8 lakh crore) assets following the merger of all its associates banks and Bhartiya Mahila Bank with it.

The SBI has decided to merge all its associate banks — State Bank of Bikaner and Jaipur, State bank of Travancore, State Bank of Patiala, State Bank of Hyderabad and State Bank of Maharashtra and Bhartiya Mahila Bank Ltd.

After the merger, the bank will have a network of more than 24,000 branches, 2,70,000 employees and total assets of Rs 30 lakh crore, which will increase by 36 per cent, a statement said.

The SBI with its origin in Bank of Kolkata in the early 19th century was created out of the merger of the Presidency Banks.

“The mergers will catapult the SBI into the top 50 banks globally and is in furtherance of the bank’s mission statement to be of service in the remotest parts of India,” it said.

The lender said the mergers would allow it to leverage operational synergies, reach out to new clients and improve market share by ensuring a better reach through enlarged presence.

According to the bank, increased presence in all terrains and geographies will increase the bank’s deposit raising capacity and bring down the cost of funds further. Thus, the benefit so derived will flow on to the customers in the form of improved services, borrowing costs etc.

The reduction in overheads, administrative offices and centralisation of treasury will in itself lead to substantial reduction in operating costs.

“Post the mergers, the SBI will re-deploy manpower in customer facing roles with a sharper marketing focus,” it said.

Additional capital requirement (which is not significant) arising on account of the mergers will be met through the resultant increase in efficiencies and economies of scale, the lender said.

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Swamy supports Urjit Patel’s appointment as RBI Governor

Aug 20, 2016 0

New Delhi– BJP leader Subramanian Swamy on Saturday supported the appointment of economist and banker Urjit R. Patel as the next Reserve Bank of India (RBI) Governor and said it will be “idiotic” to attack him for being born in Kenya.

Swamy has been a bitter critic of the present RBI governor Raghuram Rajan and has accused him of derailing the Indian economy by keeping the lending rates high.

Subramanian Swamy

Subramanian Swamy

Hours after the official announcement was made of Patel, Swamy conveyed his views through replies and retweets of his followers.

“Don’t be an idiot like the presstitudes,” Swamy responded to a follower when asked “Urijit Patel new #RBI governor – hawkish for sure. Will @swamy39 Attack him for being born in Kenya (outsider) ??”

“He is not Kenyan citizen but was. R3 was born Indian & chose to continue his US Green Card even though in India from 2007,” he tweeted in response to a question whether “Gujju” credentials had helped Patel.

The questioner also asked “Apparently he is a Kenyan Citizen. Wonder what @Swamy39 has to say about this!”

Swamy replied with “Rubbish”, when one of his followers said “that i’m so dead sure, @Swamy39 is not happy with this appointment.”

Urjit Patel

Urjit Patel

Swamy had alleged that Rajan has been acting as a “Congress agent” ever since the Bharatiya Janata Party came to power in May 2014.

The BJP leader had also accused Rajan of “sabotaging the country’s economy by trying to put all small, medium industries out of business”.

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India can have lower tax rate only when tax payer base increases: Jaitley

Aug 20, 2016 0

Mumbai– Union Finance Minister Arun Jaitley on Saturday said the country can have a lower tax regime only when the tax payer base increases and tax evasion comes down.

Speaking at a function here Jaitley said if all pay their taxes then the tax rates could be brought down and higher the evasion and exemptions the higher will be the tax rate.

According to him moderate tax rate and evasion cannot coexist.

Jaitley also urged the bank borrowers to repay their loans and pay their taxes without evading the same.

He said ‘Make in India’ is not just a slogan and manufacturing is where a large number of jobs are housed.

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India offers local office to UN Intellectual Property Organization

Aug 19, 2016 0

New Delhi– India has formally requested UN agency World Intellectual Property Organisation (WIPO) to open an office in the country and is ready to offer premises free of cost for this purpose, Commerce Minister Nirmala Sitharaman said on Friday.

India’s offer was conveyed by Sitharaman to WIPO Director General Francis Gurrey at a meeting here, an Indian commerce ministry statement said.

Nirmala Sitharaman-Auf-16WIPO, one of the 17 specialised agencies of the United Nations, promotes intellectual property (IP) throughout the world, and administers various multilateral treaties.

“WIPO and the Indian IP Office are cooperating with each other in training of various IP examiners and other stakeholders. To this end, an International Training Course is being organised in RGNIIPM jointly with WIPO Academy in September 2016,” the statement said.

“India has also requested WIPO to consider opening a Regional Training Academy in Nagpur. WIPO had proposed holding Global Digital Content Market Conference, 2017 in India, which has been accepted by India.

“Both parties agreed to having a high-quality conference in May 2017,” the statement added.

Earlier on Friday, Sitharaman and Gurrey attended an event here to launch the Global Innovation Index (GII) 2016.

India’s GII ranking has improved dramatically to 66, from 81 last year.

At the event, Sitharaman announced that a team would be set up to advise on how to further improve India’a ranking in the global index of countries in the sphere of innovations.

In his address, Gurrey lauded India’s efforts in innovation, particularly being a vast and diverse country, pointing out that the top ranked countries are mostly small, compact economies with much lesser complexities and issues. (IANS)

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