Mumbai: Amid all the noise about an increasingly hawkish US Federal Reserve, a trade war and higher oil prices, the Reserve Bank of India’s silence is deafening, say investors piling out of the country’s bonds.
India has seen the largest bond outflows in Asia this year, and investors say the RBI’s laconic communication has added uncertainty in an already challenging environment for emerging markets, especially those countries running current account deficits.
The Indian rupee hit a record low of $69.13 on Friday and has fallen 7 per cent so far in 2018, the most in Asia. Bond outflows totalled around $6 billion this year, the heaviest in the region, although foreign investment in the debt market is capped at 5.5 per cent of India’s roughly $760 billion of issued debt in the fiscal year ending March 2019.
During emerging market weakness in the last three months, RBI Governor Urjit Patel made only one passing reference to the rupee. Prompted by a question in a 15-minute news conference following the bank’s decision to raise rates in June, he said the bank was watching the currency’s impact on inflation.
By contrast, many central banks in Asia, from China to the Philippines, have publicly reassured investors that foreign exchange stability was an important policy objective.
The Reserve Bank of India did not respond to a request for comment.
But Subhash Chandra Garg, chief economic affairs secretary of the government, praised the RBI’s efforts to control foreign exchange volatility in comments last month.
“The central bank has enough firepower in the form of forex reserves to deal with the rupee volatility,” Garg said.
“The role of RBI is to ensure that there was no disorder.”
Investors say a central bank’s signals give them a sense of how uncomfortable they are with market pressure and offer valuable context about policymakers’ thinking and decisions.
When there are few explanations and guidance is scarce, investors price in an uncertainty premium, investors said.
“If you have confusing communication, that only results in increased volatility,” said Rohit Garg, an emerging markets fixed-income and foreign exchange strategist at Bank of America Merrill Lynch in Singapore.
“It could result in the currency underperforming and weakening much more than expected.”
More than a half-dozen Indian investors, who asked not to be named due to the sensitivity of the issue, told Reuters a tight-lipped RBI was a key reason for ditching bonds in recent months.
Total returns on Indian bonds this year are negative 4 percent, one of the worst in Asia after outperforming last year.
“We have sold off most Indian assets and will prefer not to enter into India in the short term until the macro-picture on pressure on the rupee, fiscal slippage and current account deficit becomes clear,” said Johnny Chen, a portfolio manager at NN Investment Partners in Singapore, who said he preferred Indonesia to India because of a stable rupiah.
Chen, however, said he did not take issue with the Indian central bank’s communication strategy, noting that its primary focus was the inflation target.
RBI needs to ensure stability: Shaktikanta Das
New Delhi: The head of the Reserve Bank of India (RBI) said he would take the steps necessary to maintain financial stability in the country and help create favourable conditions for growth.
India’s economy has grown because of measures such as the nationwide goods and services tax and the insolvency and bankruptcy code that prevents wilful defaulters from bidding for stressed assets, Shaktikanta Das said in his address to an investor roundtable.
The country’s growth story is backed by its strong domestic fundamentals, he said, citing lower inflation.
Annual retail inflation rate dropped to an 18-month low of 2.19 per cent in December, strengthening the views of some economists that the central bank could ease monetary policy next month.
India’s top business groups on Thursday urged the central bank to cut its benchmark interest rate by at least half a percentage point and lower the cash reserve ratio it imposes on banks.
The country also needs to watch out for any sudden turbulence in the gloal financial market, Das said.
Centre removes two PNB executive directors for lapses in Rs 13,500-cr fraud
Chennai:The Central government has removed two Punjab National Bank (PNB) Executive Directors — Sanjiv Sharan and K.Veera Brahmaji Rao — for the lapses in the Rs 13,500 crore fraud allegedly perpetrated by absconding diamantaire Nirav Modi.
The PNB has intimated the action to the stock exchanges.
“We welcome the Central government’s action to dismiss the two Executive Directors. The scam of such proportions could not have happened without the knowledge of the top management,” C.H. Venkatachalam, General Secretary, All India Bank Employees’ Association (AIBEA), told IANS.
“Perhaps for the first time, the Centra has removed the Executive Directors of a nationalised bank under the Nationalised Banks (Management and Miscellaneous Provision) Scheme, 1970. All these days it was said the top management of government-owned banks — Chairman, Managing Director, Executive Directors — are governed only by the contract of appointment.
“It is also good that the central government has followed the due process of giving the two PNB Executive Directors opportunity to put forth their views before dismissing them,” Venkatachalam added.
According to the Central government’s notification, on July 3, 2018, Sharan and Rao were issued a show cause notice as to why they could not be removed from office for having failed to exercise proper control over the functioning of PNB, thus enabling the fraud through the misuse of SWIFT at the bank’s Brady House branch in Mumbai.
After considering Sharan and Rao’s replies and the comments of the bank’s Board, the Centre removed them from office as it found it was expedient in the interests of PNB.
According to the notification, the dismissal of Rao is subject to the outcome of a plea in the Delhi High Court.
“We are happy to see some action being taken. Whether it is only the two Executive Directors and other officials are also involved in the scam has to be probed in full,” Venkatachalam said.
According to him, in the past, low-level officers would have been the scapegoats for such massive scams.
“With the action taken on the top management, people will be satisfied that public sector bank officials are answerable for their lapses,” Venkatachalam added.
In this new world, data is the new wealth: Ambani
Mumbai: Reliance Industries chairman and managing director Mukesh Ambani urged Prime Minister Narendra Modi to take steps against ‘data colonisation’, specially by global corporations, stating that Indian data must be owned by Indians.
Invoking Mahatma Gandhi’s movement against political colonisation, Ambani said India now needs a new movement against data colonisation.
“Gandhiji led India’s movement against political colonisation. Today, we have to collectively launch a new movement against data colonisation,” he said Gandhinagar at the Vibrant Gujarat Global Summit.
Stressing that, in this new world, data is the new wealth, Ambani said, “India’s data must be controlled and owned by Indian people and not by corporate, especially global corporations.”
He further said, “For India to succeed in this data driven revolution, we will have to migrate the control and ownership of Indian data back to India. In other words, give Indian wealth back to every Indian.”
Stating that the “entire world has come to recognise” Modi “as a man of action”, Ambani said, “Honorable Prime Minister, am sure you will make this one of the principal goals of your digital India mission.”
Later in the day, countering Ambani’s call, Governor – Commonwealth of Kentucky, Matthew Griswold, asked Modi “to think in the opposite” in order to realise the tremendous opportunity that lies in Indo-US partnership.
“Honorable prime minister you have been asked from this stage to think about limiting the amount of competition, limiting the exchange of ideas, information and goods. I would encourage you to think in the opposite,” he said.
While stating that it is important to put the people of India first, Griswold said, “It is also important to put their opportunity and our opportunity as citizens of the world to trade with one another and exchange ideas because iron sharpens iron.”
The greatest possibility comes from the exchange of these idea, he added.
“If we can cut the regulations, cut the bureaucracy, cut the red tape, the opportunity is enormous between our nations,” he added that India is now the 10th largest trading partner for the US and “climbing quickly”.
“The opportunity before us between India and the United States is incredible, but responsibility falls on each of one us, those of us in elected positions, those of you in the industry, those of you who represent various constituencies, we have much work to do…we must do this, ” Griswold said.