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Banking sector on “course to recovery” as NPAs recede: RBI

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Mumbai: The banking sector is on “course to recovery” as the afflicting non-performing assets recede, but state-run lenders need reforms in governance, Governor Shaktikanta Das said.

The weaker ones among the public sector banks need to be supported through recapitalisation, the Governor said in his foreword to RBI’s half-yearly financial stability report (FSR).

“After a prolonged period of stress, the banking sector appears to be on course to recovery as the load of impaired assets recedes,” Das, who took charge earlier this month after the sudden exit of Urjit Patel, said.

 

He pointed out that the period till September has seen a decline in gross NPA ratios — the first such dip in three years — and also pointed out at improving provision coverage ratio, which is the ability of a bank to withstand stress, as a positive.

According to the FSR, gross NPAs ratio declined to 10.8 per cent in September 2018 from 11.5 per cent in March 2018, while for the state-run lenders, the same improved to 14.8 per cent in September 2018 from close to 15.2 per cent in March 2018.

Under the baseline scenario, the GNPA ratio of all banks may come down to 10.3 per cent by March 2019 from 10.8 per cent in September 2018, the report said.

The Governor said even though the current NPA levels are high, stress tests done by the RBI have pointed to an improvement in the ratio in future. Having done a lot of work on the NPA front, which started with the accelerated recognition through the asset quality review, Das said there is a need for operational improvements at the state-run lenders which account for a bulk of the dud assets.

“The immense effort put in by the stakeholders so far is required to be buttressed with substantive reforms in governance and oversight regime, supported by recapitalisation of weak PSBs,” he said in the comments, which come days after the Centre committed an additional Rs 41,000 crore in FY19 for the recapitalisation.

Eleven of the 20 state-run lenders are under the prompt corrective action (PCA) framework, which restricts their normal lending and is a bone of contention between the conservative regulator and a government that will be facing elections in a few months.

Das, a career bureaucrat who steered the Government’s note ban move from the Finance Ministry, said despite its high costs, the NPA recognition has led to improvements in the operational risk assessment at state-run lenders.

“…it appears to have led to a greater discipline in credit assessment, higher sensitivity to market risk and better appreciation of operational risks,” he said.

Das acknowledged that some of the cases referred for resolution under the two-year-old bankruptcy framework have lagged time-lines, but said the Insolvency and Bankruptcy Code (IBC) will strengthen credit discipline.

“A time-bound resolution of impaired assets will go a long way in unclogging the credit pipeline thus improving the allocative efficiency in the economy,” he said.

Das also touched on the troubled non-bank lending sector, saying the non banking finance companies (NBFCs) need to be more prudent on risk-taking and also underlined the need to rebalance excessive credit growth, especially the one funded by short term liabilities.

The high credit growth is “not stability enhancing”, Das said.

Both the banks as well as non-banks need to be diligent, prudent and follow sound risk management practices as they support the growth needs of the economy, he said.

Das said the slowdown in GDP growth to 7.1 per cent is slower than expected, but pointed out to an uptick in gross fixed capital formation along with the dip in crude oil prices as a positive for a sustained growth going forward.

Globally, the threat of trade war which would have weakened growth prospects has softened, he said. A stricter enforcement of global trade and investment rules could potentially lead to market stability and win-win bargains in trade, Das said.


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Indian billionaires’ wealth rose by Rs 2,200 crore a day in 2018: report

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New Delhi: Indian billionaires saw their fortunes swell by Rs 2,200 crore a day last year, with the top 1 per cent of the country’s richest getting richer by 39 per cent as against just 3 per cent increase in wealth for the bottom-half of the population, an Oxfam study said .Globally, billionaires’ fortunes rose by 12 per cent or USD 2.5 billion a day in 2018, whereas the poorest half of the world’s population saw their wealth decline by 11 per cent, the international rights group said in its annual study released before the start of the five-day World Economic Forum (WEF) Annual Meeting in this Swiss ski resort town.

Oxfam further said that 13.6 crore Indians, who make up the poorest 10 per cent of the country, continued to remain in debt since 2004.

Asking the political and business leaders who have gathered in Davos for the annual gathering of the rich and powerful of the world to take urgent steps to tackle the growing rich-poor divide, Oxfam said this increasing inequality is undermining the fight against poverty, damaging economies and fuelling public anger across the globe.

 

Oxfam International Executive Director Winnie Byanyima, one of the key participants at the WEF summit, said it is “morally outrageous” that a few wealthy individuals are amassing a growing share of India’s wealth, while the poor are struggling to eat their next meal or pay for their child’s medicines.

“If this obscene inequality between the top 1 per cent and the rest of India continues then it will lead to a complete collapse of the social and democratic structure of this country,” she added.

Noting that wealth is becoming even more concentrated, Oxfam said 26 people now own the same as the 3.8 billion people who make up the poorest half of humanity, down from 44 people last year.

The world’s richest man Jeff Bezos, founder of Amazon, saw his fortune increase to USD 112 billion and just 1 per cent of his fortune is equivalent to the whole health budget for Ethiopia, a country of 115 million people.

“India’s top 10 per cent of the population holds 77.4 per cent of the total national wealth. The contrast is even sharper for the top 1 per cent that holds 51.53 per cent of the national wealth. The bottom 60 per cent, the majority of the population, own merely 4.8 per cent of the national wealth. Wealth of top 9 billionaires is equivalent to the wealth of the bottom 50 per cent of the population,” Oxfam said while noting that high level of wealth disparity subverts democracy.

Between 2018 and 2022, India is estimated to produce 70 new dollar millionaires every day, Oxfam said.

“It (the survey) reveals how governments are exacerbating inequality by underfunding public services, such as healthcare and education, on the one hand, while under taxing corporations and the wealthy, and failing to clamp down on tax dodging on the other,” Oxfam India CEO Amitabh Behar said.
The survey also shows that women and girls are hardest hit by rising economic inequality, he added.

“The size of one’s bank account should not dictate how many years your children spend in school, or how long you live — yet this is the reality in too many countries across the globe. While corporations and the super-rich enjoy low tax bills, millions of girls are denied a decent education and women are dying for lack of maternity care,” Byanyima said.

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Fugitive Choksi surrenders Indian passport in Antigua to ‘avoid extradition’

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Chandigarh:Fugitive tycoon Mehul Choksi has given up his Indian citizenship and surrendered his passport to Antigua, as per media reports.

This move by Choksi’s is being seen as an attempt to avoid his extradition to India. Antigua and India do not have an extradition treaty.

India had earlier handed over a request to Antigua for extradition of Mehul Choksi who is charged in connection with India’s biggest banking fraud, and now living in the Caribbean nation after taking its citizenship.

 

Official sources said a team comprising officials from the Ministry of External Affairs (MEA) and other agencies was sent to Antigua a couple of days ago to request the Antiguan authorities to extradite Choksi, wanted in India in the US$ 2 billion Punjab National bank scam.

As per reports, Antiguan authorities cleared Choksi’s citizenship in November 2017 after India did not give any adverse report to stall his application for it.

Choksi had fled India on January 4 this year and took oath of allegiance in Antigua on January 15. His citizenship was cleared in November 2017.

Choksi’s application for citizenship in Antigua in May 2017 was accompanied with clearance from the local police as required by norms, Antiguan newspaper the Daily Observer reported, citing a statement from the Citizenship by Investment Unit of Antigua and Barbuda (CIU).

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FPI outflow crosses Rs 4,000 crore in Jan so far

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New Delhi: Foreign investors have pulled out more than Rs 4,000 crore from the Indian capital markets so far in January, highlighting their cautious stance towards the country.

This comes following a collective net inflow of over Rs 17,000 crore in the capital markets both equity and debt by Foreign Portfolio Investors (FPIs) during November and December.

Prior to that, they had pulled out a massive Rs 38,905 crore in October.

 

According to data available with the depositories, FPIs withdrew a net amount of Rs 3,987 crore from equities and a net sum of Rs 53 crore from the debt market, taking the total outflow to Rs 4,040 crore during January 1-18.

Market experts believe that FPIs are continuing with their ‘wait and watch’ approach towards India.

Going ahead, the focus would be on the budget, progress on the economic growth front and general elections, they added.

Other factors such as movement in crude prices and currency as well as US-China trade relations will also play a role in FPI flows, they added.

Harsh Jain, COO at Groww, an online MF investment platform, said 2019 is likely to see a lot of volatility because of the rate hikes and dollar instability, but the Indian markets may be able to weather the storm.

“India offers better investment opportunities due to consistent growth, supportive global factors and attract valuations. We should expect positive inflow in coming months,” he added.

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