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Shadow banking crisis starting to hit consumer spending: Report

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Mumbai : Karan Dua, an electronics shop owner in south-central Mumbai, placed his hope of crackling sales on Diwali — the festival of lights when people splurge on everything from clothes to cars and jewelry to houses.

. Businesses like Dua’s are seeing sluggish sales this festive season in part because India’s shadow lending industry, which accounted for nearly 4 out of every 10 consumer loans in the last three years, has grown more more cautious about extending new credit amid a funding crunch of its own.

Loan volumes for some of these lenders dropped to 10 per cent of the levels seen before defaults by a troubled financier from August onward made it costlier for all non-bank financial companies to raise funds, according to Indostar Capital Finance Pvt. which makes loans to companies, and individuals for home and vehicle purchases. The cash crunch for the industry came at the start of the peak shopping season in India, threatening consumption, which is the backbone of the economy, say economists.

 

“The amount the non-bank finance companies are lending has come down considerably,” said R. Sridhar, an industry veteran and chief executive officer at Indostar Capital. “Particularly lenders which give loans for buying consumer durables, vehicles and gold.”

NBFCs and lenders to the housing sector have become increasingly important in supporting consumer spending as the nation’s formal banking sector is weighed down by bad loans. Nomura Inc. estimates that the loan books of NBFCs and housing lenders have grown at a compounded annual rate of 17 percent in the past two years, compared with 8 percent for banks.

Such growth looks difficult to sustain as liquidity dries up, with the Bloomberg Economics India Banking Liquidity Index showing a nearly 1 trillion rupee shortfall of cash in the banking system. That, along with a 50 basis-point interest rate increase by Reserve Bank of India this year and the recent rise in borrowing costs in the credit market, is likely to have a ripple effect.

“With banks tightening credit to NBFCs and they in turn to retailers, transporters, and builders, there will likely be lower credit growth for the rest of the financial year and beyond,” said Anjali Verma and Raag Haria, analysts at PhillipCapital India Pvt. “Urban and semi-urban demand may be dented due to limited NBFC lending.”

Madan Sabnavis, chief economist at rating company Care Ratings Ltd, has penciled in an expansion based on robust consumption. But should demand falter because of tighter liquidity conditions, then growth would take a hit, he cautions.

The worst-case scenario is a 0.1-0.2 percentage point hit to growth, according to Sabnavis, who sees expansion dipping to 7.3 percent from 7.5 percent in the financial year ending March 2019.

Some disagree with the suggestion that lending will slow down for all. Those with a strong pedigree will be able to weather this phase, according to Tata Capital Financial Services Ltd., a non-bank lender.

“We are witnessing liquidity tightness and we believe this is a temporary phase,” said Kusal Roy, managing director of Tata Capital. “Surely, there will be a sharper and more select focus on customer profiles.”


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Business

WPI inflation at 8-month low of 3.80 pc in Dec on softening fuel, food prices

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New Delhi: Inflation based on wholesale prices fell to a 8-month low of 3.80 per cent in December, 2018, on softening prices of fuel and some food items.

The Wholesale Price Index (WPI)-based inflation stood at 4.64 per cent in November, 2018, and 3.58 per cent in December 2017. According to the government data released on Monday, deflation in food articles stood at 0.07 per cent in December, against 3.31 per cent in November.

Vegetables, too, saw deflation at 17.55 per cent in December, compared to 26.98 per cent in the previous month. Inflation in the ‘fuel and power’ basket in December slumped to 8.38 per cent, nearly half of 16.28 per cent in November.

 

This was on account of lowering of prices of petrol and diesel through December. Individually, in petrol and diesel inflation was 1.57 per cent and 8.61 per cent, respectively, and for liquified petroleum gas (LPG) it was 6.87 per cent during December.

Among food articles, potato prices became cheaper substantially with inflation at 48.68 per cent in December, as against 86.45 per cent in November.

Inflation in pulses stood at 2.11 per cent, while in ‘egg, meat and fish’ it was 4.55 per cent. Onion witnessed deflation of 63.83 per cent in December, compared to 47.60 per cent in November.

The 3.80 per cent inflation is the lowest in 8 months, and a lower inflation than this was last seen in April at 3.62 per cent. Data for retail or consumer price index-based inflation would be released later in the day.

The Reserve Bank of India (RBI) mainly takes into account retail inflation data while formulating monetary policy. In its fifth monetary policy review for the fiscal, last month, the Reserve Bank kept interest rates unchanged, but held out a promise to cut them if the upside risks to inflation do not materialise.

The central bank lowered retail inflation projection to 2.7-3.2 per cent for the second half of the current fiscal, citing normal monsoon and moderate food prices.

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Air tickets, identity cards to become redundant; flyers can use facial recognition to enter airport

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New Delhi: The hassle to show air tickets and identity cards at Airport will be over as air travellers can soon enter airport with facial recognition biometric facility.

GMR Hyderabad International Airport Ltd (GHIAL) that operates the Rajiv Gandhi International Airport (RGIA), has successfully conducted the trial of facial recognition technology. During the first phase of the trial, employees of GHIAL were included. The second phase of the trial is expected to be launched by the end of this month, in which GHIAL will include common air fliers. And if the second phase of the trial is successful, GHIAL will implement facial recognition technology in Hyderabad airport from March onwards.

Three phases of facial recognition technology

 

First phase: GHIAL has installed facial recognition cameras in the Hyderabad. In the first phase, the imaging of passengers will be done through these cameras which will recognise the faces of the flyers.

Second phase: There would be a centralised registration system for passengers. Each passenger’s face will be attached with his/her photo identity like passport, Aadhaar, voting id, driving licence etc. The details of passengers along with his facial mapping will be scanned and stored by GHIAL through the centralised registration system at the Airport.

Third phase: The ID proof of the passengers along with their facial mapping will be stored at the e-boarding gate of the Airport.The data centres at Airlines will also have similar information. Whenever such passengers book tickets, the data system will alert the Hyderabad Airport authorities.

The moment you book a flight ticket originating from Hyderabad airport, your details will be shared by the data centre and the information will be given to all the concerned authorities.

When you reach the Hyderabad terminal gate, face recognition technology will identify you and all your details will be shared on the screen. The security personnel at the gate will access all your information via the system.

Similarly, your details can be accessed by the security personnel at the check-in counter, security check-in. Once the formalities are done, passengers will get an online boarding pass on their mobile phone.

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Maruti all-new WagonR 2019 available for booking at Rs 11,000

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New Delhi: Country’s largest car manufacturer Maruti Suzuki India on Monday said that its all-new WagonR is available for booking starting.

Customers can book the 3rd generation WagonR at authorized dealer network across the country by paying Rs 11,000. They can also book the car online.

The New WagonR is powered by the advanced K-series engine offering high fuel efficiency and an unmatched driving experience, Maruti said. The car now comes with a new 1.2 L engine option that delivers powerful and impressive performance coupled with great fuel economy. Customers will also have the choice of 1.0 L engine for the all-new WagonR.

 

Maruti Suzuki’s acclaimed two pedal technology will also be offered in the new WagonR. The Auto Gear Shift (AGS) offers. Maruti said that for the first it is going to offer the most innovative SmartPlay Studio infotainment experience in the Big New WagonR.

The car will be available in Pearl Poolside Blue, Pearl Nutmeg Brown, Magma Grey, Pearl Autumn Orange, Silky Silver and Superior White Range of variants. The Petrol: 1.0 L engine will be available in Lxi, Vxi / Vxi AGS variants while the Petrol: 1.2 L will be available in Vxi, Vxi AGS, Zxi / Zxi AGS variants.

“The new WagonR gets bigger with enhanced comfort. The car’s sturdy and masculine look with true tall boy design makes for a strong road presence. The Big New WagonR not only embodies strong looks but is also stronger inside out,” Maruti said in a release.

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