MUMBAI: In a rare move, the RBI and Sebi said they are “closely monitoring” activities in the financial markets and ready to take appropriate actions, if required, following a sharp meltdown on Friday in equity and debt markets.
The regulators came out with separate but identical statements amid apprehensions about steep volatility in markets on Monday.
Against the backdrop of debt defaults by diversified IL&FS group, there are also worries about non-banking financial companies even though the country’s largest lender SBI assured lending support to the NBFC sector.
In a statement, SBI Chairman Rajnish Kumar said there was no concern on liquidity of NBFCs in view of their liquid cash position and availability of committed lines.
“The Reserve Bank of India and the Securities and Exchange Board of India are closely monitoring recent developments in financial markets and are ready to take appropriate actions, if necessary,” said the regulators.
Sebi has also sought details from stock exchanges about large trades done on Friday and would be stepping up the vigil to prevent steep volatility, sources said.
On Friday the 30-share BSE Sensex suddenly tanked 1,127.58 points, or 3.03 per cent, to hit a low of 35,993.64 in afternoon trade before staging an equally sharp recovery within minutes.
The markets had opened on a strong note. After an intra-day swing of 1,495.60 points, the Sensex closed at 36,841.60, down 279.62 points.
The broader NSE Nifty shed 91.25 points to finish at 11,143.10 on Friday.
Meanwhile, some reports also suggested that some unscrupulous elements are trying to destabilise markets to malign the image of the government.
Shares of housing finance firms slumped Friday, with DHFL tumbling up to 42 per cent on fears of a liquidity crisis.
Reports of debt defaults by IL&FS also sparked concerns, which spilled over into other NBFC counters.
Yes Bank was the worst performer in the Sensex pack, losing a whopping 28.71 percent, after the RBI curtailed the term of its founding CEO Rana Kapoor.
The Indian currency has also witnessed a massive plunge in the recent past due to rising trade and current account deficits in the wake of rising crude oil prices.
However, the rupee was bullish on Friday for the second day, rising 17 paise to end at 72.20 against the US dollar.
On Friday, market regulator Sebi had issued revised KYC norms for foreign portfolio investors, wherein resident as well as non-resident Indians have been permitted to hold non-controlling stake in such entities.
Overseas investors have pulled out a massive Rs 15,365 crore (USD 2.1 billion) from the capital markets so far in September, after putting in funds during the previous two months.
Earlier in the day, DHFL Sunday said it proposes to reduce exposure to commercial paper (CP) as part of overall borrowing plan and increase hedging activity, days after the shares of the company tumbled up to 42 per cent on massive selling over fears of a liquidity crisis.
Besides, the company said it will raise resources and focus on borrowings from banks and international markets and through direct assignment, said a DHFL note on ‘approach to liquidity management’ filed with stock exchanges.
ADB cuts India’s FY20 GDP growth forecast to 7% on fiscal shortfall worries
New Delhi: Asian Development Bank on Thursday lowered India’s GDP growth forecast to 7 per cent for the current year on the back of fiscal shortfall concerns.
“India is expected to grow by 7 per cent in 2019 (FY20) and 7.2 per cent in 2020 (FY21), slightly slower than projected in April because the fiscal 2018 outturn fell short,” ADB said in its supplement to the Asian Development Outlook 2019.
For the south Asian region, ADB said the outlook remains robust, with growth projected at 6.6 per cent in 2019 and 6.7 per cent in 2020.
Earlier in April this year too, the Manila-based multi-lateral funding agency had lowered India’s growth forecast for FY20 to 7.2 per cent from 7.6 per cent estimated previously due to moderation in global demand and likely shortfall in revenue on the domestic front.
Jalan panel proposes ‘nominal’ transfer of RBI funds to govt over 3-5 years
New Delhi: The Union government may not get the windfall gain it was expecting from the Reserve Bank of India (RBI) reserves as the Bimal Jalan committee, tasked with reviewing the central bank’s economic capital framework, has proposed a “nominal” transfer of surplus to the central government in a phased manner, according to a source in the know.
“The report has proposed a formula for a nominal transfer of a portion of the RBI’s reserves to the central government in a period of three-five years. This is in line with the current practice being followed by the RBI for transferring dividend annually,” a person close to the development said.
The person said the panel members might “not be unanimous” on the suggestions the committee made. These will be submitted to RBI Governor Shaktikanta Das “in a few days”. The RBI’s central board, headed by Das, will take up the matter.
The report would likely include a dissent note by Finance Secretary Subhash Chandra Garg, who is the government’s representative on the panel.
The committee has recommended a periodic review of the RBI’s economic capital framework, according to the source.
Initially, the finance ministry had expected around Rs 3 trillion from the RBI’s reserve funds, which were at the heart of a conflict between the regulator and the government last year.
On the insistence of the finance ministry, the central board of the RBI formed a six-member committee — headed by Jalan and co-chaired by former RBI deputy governor Rakesh Mohan — in December to review the central bank’s economic capital framework.
The main difference of opinion within the panel was over transferring the RBI’s “excess” capital reserves. While most panel members are in favour of a phased transfer of the RBI’s capital reserves to the government over the years, the government’s view, voiced by Garg, was for a one-time transfer.
For this financial year, the government had accounted for around Rs 20,000 crore as “additional dividend” from the RBI, a finance ministry official said. This, the official said, is unlikely to happen.
In the Receipts Budget, allocation towards the “dividend or surplus of RBI, nationalised banks and financial institutions” was increased by Rs 23,130 crore to Rs 1.06 trillion in 2019-20, compared to the Interim Budget.
Nod to bankruptcy code changes, will help home buyers
New Delhi: The government today gave its approval to seven amendments to the Insolvency and Bankruptcy Code (IBC), a move that will benefit unsecured creditors like home buyers in a big way.
Minister for Information and Broadcasting Prakash Javadekar said, the IBC (Amendment) Bill, 2019, would be introduced in Parliament during this session and will have retrospective effect. An official statement read: “The amendments aim to fill critical gaps in the corporate insolvency resolution framework as enshrined in the Code.”
of all financial creditors, including unsecured ones (home buyers) covered under Section 21 (6A) “shall be cast in accordance with the decision approved by the highest voting share (more than 50 per cent) of financial creditors on present and voting basis”, it said. It also said greater emphasis had been given “on the need for time-bound disposal at application stage and a deadline for completion of CSRP within an overall limit of 330 days, including litigation and other judicial processes”. Experts say this provision will help unsecured creditors (mostly home buyers) in a big way.