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The size of <keyword id="102024" type="General" weightage="20" keywordseo="the-reserve-bank-of-india" source="Orion">the Reserve Bank of India</keyword>'s (<keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword>) balance sheet increased by 8.46 per cent as on March 31, 2022, mainly reflecting its liquidity and foreign exchange operations during the entire fiscal year. While income for the year increased by 20.14 per cent, expenditure increased by 280.13 per cent, according to the RBI's Annual Report for 2021-22 released on Friday. The increase on the asset side was due to increase in foreign investments, domestic investments, gold, and loans and advances and on the liability side due to the increase in deposits and notes by it. FY22 was the first full year of the April-March accounting cycle after transition from July-June. It shifted to a new accounting year in FY21 which was for nine months ended March 2021. The year 2021-22 ended with an overall surplus of Rs 30,307.45 crore as against Rs 99,122 crore in the previous year, resulting in its decrease of 69.42 per cent, the report cited. Earlier this month, the RBI said its Board approved the transfer of Rs 30,307 crore surplus as dividend to the Centre for the accounting year FY22, besides deciding to maintain the contingency risk buffer at 5.50 per cent. As per a framework, the RBI has to maintain a contingency risk buffer of 5.5-6.5 per cent of its balance sheet. Further, the report said the supply of notes during the year 2021-22 was at 222,505 lakh pieces, 0.36 per cent lower than that of the year 2020-21. The expenditure incurred on printing of bank notes increased from Rs 4,012.09 crore in 2020-21 to Rs 4,984.80 crore in 2021-22. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/environment/news/why-assam-gets-flooded-every-year/articleshow/91828506.cms">Explained: Why Assam gets flooded every year</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/thelife/personalities/news/gautam-adani-a-story-on-how-to-generate-wealth-via-hope-fomo-and-of-course-debt/articleshow/91829090.cms">Understanding Gautam Adani’s rise: a story on how to generate wealth via hope, equity and of course debt</a>

RBI's income grew 20% while expenses shot up by 280% in FY22

New Delhi, Nov 18 () Finance Minister Nirmala Sitharaman on Monday said transfer of surplus reserves from the Reserve Bank of India (RBI) to the government in future will depend on net income and other financial parameters of the central bank besides the recommendations of the expert committee on excess capital.
 The surplus distribution policy of RBI is determined in accordance with section 47 of the RBI Act, 1934, Sitharaman said in a written reply to Lok Sabha.
 "The quantum of surplus transfer to the government in the coming years would depend on RBI's net income, 'required realized equity' as a per cent of RBI's balance sheet and 'available realized equity' as a per cent of RBI's balance sheet in the coming years, and shall be governed by the legal provisions of the RBI Act, 1934 read with the recommendations of the committee as accepted by RBI," Sitharaman said.
 The central board of the RBI, in its meeting in November 2018, in consultation with the government had decided to constitute an expert committee under the chairmanship of former RBI governor Bimal Jalan to suggest an adequate level of risk provisioning that RBI needs to maintain.
 The committee, formed on December 26, 2018, was tasked to propose a suitable surplus distribution policy taking into account all the likely situations of the RBI.
 The finance minister was replying to a question asked by Gopal Chinnaya Shetty if the issue of surplus reserves of RBI was resolved as per the suggestions of the Jalan committee and whether in future the government was likely to get additional dividend from RBI as per the recommendations of the said committee.
 The Bimal Jalan expert committee had submitted its report to RBI on August 14, 2019.
 The central board of RBI, in its meeting on August 26, 2019, had accepted all the recommendations of the committee and finalised RBI's accounts for 2018-19 using the revised framework to determine risk provisioning and surplus transfer.
 "The transfer of surplus to the government for the year 2018-19, ended June 30, 2019 was made in accordance with the recommendations of the committee and accordingly a sum of Rs 1,75,987 crore was transferred by RBI to the government," the minister said in the lower house.
 The transfer of reserves comprised Rs 1,23,350 crore of surplus for 2018-19, of which Rs 28,000 crore was already paid as interim dividend on March 28, 2019, and Rs 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF), Sitharaman said. KPM RVK

Transfer of surplus money from RBI in future to depend on income, expert panel suggestions: FM

The Reserve Bank of India (<keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword>) is likely to transfer approximately Rs 1000 billion to the <keyword id="19900449" type="General" weightage="20" keywordseo="government" source="keywords">government</keyword> IN <keyword id="19965933" type="General" weightage="20" keywordseo="FY25" source="keywords">FY25</keyword> according to a report by Union Bank of India. The report highlights that RBI is anticipated to maintain a robust <keyword id="20047030" type="General" weightage="20" keywordseo="dividend" source="keywords">dividend</keyword> payout for the <keyword id="20093202" type="General" weightage="20" keywordseo="fiscal-year" source="keywords">fiscal year</keyword> 2025 (FY25). This projection represents a slight increase from Rs 874 billion transferred in the previous fiscal year. "The government has budgeted the FY25 dividend for RBI and PSU banks &amp; financial institutions at INR 1020bn, vis-a-vis INR 1044bn in FY24. In our view, a positive surprise is likely, similar to last year when initial budget estimate for overall dividend was only INR 480bn" said the report. Analysts in the report predict a potential positive surprise, akin to the previous fiscal year, when the initial budget estimate for dividends was significantly lower at INR 480 billion. Despite several factors influencing RBI's dividend calculation, such as <keyword id="21195402" type="General" weightage="20" keywordseo="interest-earnings" source="keywords">interest earnings</keyword> and foreign exchange (FX) gains, analysts predict a continuation of strong dividend figures. The majority of RBI's balance sheet, approximately 70 percent, consists of foreign currency assets, with another 20 per cent in domestic government bonds. Interest earnings from these securities are expected to range from Rs 1.5-1.7 trillion. Additionally, interest from liquidity operations has increased RBI's earnings, particularly as the banking system returned to a deficit mode from September 2023. While income gains of RBI from FX (Forex) sales decreased slightly due to lower sales volumes, they are expected to remain substantial despite a rise in the weighted average cost of <keyword id="20102143" type="General" weightage="20" keywordseo="reserves" source="keywords">reserves</keyword>. Moreover, a decline in provisions likely contributed to boosting RBI's dividend. Provisions for reserves, as per the Economic Capital Framework outlined by the Jalan committee, saw a rise in the contingency fund provision due to increased balance sheet growth. The impact of the RBI dividend announcement on markets may be limited in the near term, especially with ongoing elections potentially delaying government spending. However, if the surplus balance is utilized for activities like G-Sec buybacks, it could support the shorter end of the G-Sec curve. Overall, analysts maintain a positive outlook on longer-duration G-Secs due to favorable demand-supply dynamics. SEE ALSO:<a href="https://www.businessinsider.in/tech/mobile/news/indian-smartphone-market-up-8-5g-smartphones-account-for-over-70-of-shipments/articleshow/110002512.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/news/indian-smartphone-market-up-8-5g-smartphones-account-for-over-70-of-shipments/articleshow/110002512.cms" target="_blank">Indian smartphone market up 8%, 5G smartphones account for over 70% of shipments</a><a href="https://www.businessinsider.in/sports/webstories/ipl-decoded-highest-individual-scores-in-ipl-2024-so-far-from-stoinis-to-kohli/slidelist/110008351.cms" target="_blank"></a> <a href="https://www.businessinsider.in/sports/webstories/ipl-decoded-highest-individual-scores-in-ipl-2024-so-far-from-stoinis-to-kohli/slidelist/110008351.cms" target="_blank">IPL Decoded: Highest individual scores in IPL 2024 so far, from Stoinis to Kohli</a><a href="https://www.businessinsider.in/tech/mobile/news/apple-and-samsung-dominate-the-top-selling-smartphones-in-q1-2024/slidelist/109977094.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/news/apple-and-samsung-dominate-the-top-selling-smartphones-in-q1-2024/slidelist/109977094.cms" target="_blank">Apple and Samsung dominate the top-selling smartphones in Q1 2024</a>

RBI likely to transfer ₹1 trillion to government in FY25

Reserve Bank deputy governor B P Kanungo on Thursday said the five-fold <keyword id="8731822" type="UNKNOWN" weightage="20" keywordseo="hike-in-deposit-insurance">hike in deposit insurance</keyword> to Rs 5 lakh will not have much impact on bank balance sheets. Following the failure of a number of cooperative banks, with the city-based PMC Bank being the latest and the largest last year, the budget had permitted the Deposit Insurance and Credit Guarantee Corporation (<keyword id="75345" type="ORGANIZATION" weightage="20" keywordseo="DICGC">DICGC</keyword>) to raise deposit insurance coverage to Rs 5 lakh from Rs 1 lakh. "The revision in deposit insurance will not impact banks' balance sheets much," Kanungo told reporters during the post policy conference. The crisis at the Punjab &amp; Maharashtra Cooperative (PMC) Bank has brought to the fore the need to increase deposit insurance coverage. The DICGC, a wholly-owned subsidiary of the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword>, provides insurance cover on bank deposits. At present, the DICGC provides Rs 1 lakh insurance to a depositor regardless of the deposit amount, in case the lender fails or gets liquidated. The corporation insured each bank depositor up to a maximum of Rs 1 lakh for both principal and interest amount held by them as on the date of liquidation/cancellation of a bank's licence or the date on which the scheme of amalgamation/merger comes into force. See also: <a href="https://www.businessinsider.in/business/news/deposit-insurance-corporation-sees-rs-14100-cr-claims-amid-pmc-crisis/articleshow/73016977.cms">Deposit Insurance Corporation sees Rs 14,100-cr claims amid PMC crisis</a> <a href="https://www.businessinsider.in/business/news/dicgc-collected-rs-88523-cr-premium-from-banks-payout-towards-claim-totalled-rs-296-cr/articleshow/72457314.cms">DICGC collected Rs 88,523 cr premium from banks, payout towards claim totalled Rs 296 cr</a> <a href="https://www.businessinsider.in/business/news/govt-permits-five-fold-increase-in-deposit-insurance-cover-to-rs-5-lakh-per-depositor/articleshow/73835231.cms">Govt permits five-fold increase in deposit insurance cover to Rs 5 lakh per depositor</a>

Hike in deposit insurance won't hit bank balance sheets: RBI

Scheduled commercial banks have written off loans amounting to Rs 10,09,511 crore in the last five financial years and the process of recovery of dues from the borrowers continues, <keyword id="309842" type="General" weightage="50" keywordseo="union-finance" source="Orion">Union Finance</keyword> Minister <keyword id="129243" type="General" weightage="50" keywordseo="nirmala-sitharaman" source="Orion">Nirmala Sitharaman</keyword> informed the <keyword id="6355187" type="General" weightage="50" keywordseo="lok-sabha" source="Orion">Lok Sabha</keyword> on Monday. <keyword id="679937" type="General" weightage="100" keywordseo="sitharaman" source="Orion">Sitharaman</keyword> said recovery in NPA (non-performing asset) accounts, including written-off loans, was an ongoing process. According to <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="80" keywordseo="rbi" source="Orion">RBI</keyword>) data, public sector banks have recovered Rs 4,80,111 crore, including Rs 1,03,045 crore from written-off loans, during the last five financial years, she said. "As per inputs received from the RBI, scheduled commercial banks have written off an amount of Rs 10,09,511 crore during the last five financial years," Sitharaman said during Question Hour. The borrowers of written-off loans continue to be liable for repayment and the process of recovery of dues from the borrower in written-off loan accounts continues, she added. Banks continue to pursue recovery actions initiated in written-off accounts through various recovery mechanisms available, Sitharaman added. The actions include filing a suit in civil courts or in Debts Recovery Tribunals, action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, filing of cases in the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, through negotiated settlement and compromise and sale of NPAs. "Therefore, write-off does not benefit the borrowers," she said. The minister said according to RBI guidelines and policy approved by banks' boards, NPAs, including those in respect of which full provisioning had been made on completion of four years, were removed from the balance sheet of the bank concerned by way of the write-off. Banks evaluate and consider the impact of write-offs as part of their regular exercise to clean up their balance sheet, avail of tax benefits and optimise capital, in accordance with RBI guidelines and policies approved by their boards, she said. Replying to a question, Sitharaman said the process of retrieving money of small depositors and investors from loan defaulters was very complicated as the legal process was lengthy and there were multiple claimants to the seized assets that included banks and other financial institutions. The minister said she was aware of the depositors undergoing extreme difficulties and there was a need to look into the issue and how to simplify the process. Earlier, Minister of State for Finance Bhagwat <keyword id="12139871" type="General" weightage="50" keywordseo="kishanrao-karad" source="Orion">Kishanrao Karad</keyword> said the names of loan defaulters were not disclosed due to RBI guidelines but their names could be disclosed once their assets were put up for auction. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/ipos-pick-up-steam-in-last-three-months-of-2022-strong-pipeline-likely-to-propel-listings-in-2023/articleshow/96325621.cms">IPOs pick up steam in last three months of 2022 – Strong pipeline likely to propel listings in 2023</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/banks/news/idfc-first-bank-announces-zero-free-banking-on-savings-accounts/articleshow/96334786.cms">IDFC First Bank announces zero-free banking on savings accounts</a>

Loans worth ₹10,09,511 crores written off in last five financial years: Sitharaman

Mumbai, Mar 16 () Reserve Bank on Monday asked all banks and financial institutions to assess the impact on their balance sheet, asset quality, liquidity, among others, in the wake of the potential threat arising out of the spread of coronavirus disease in India. Several confirmed cases have also been detected in India, which highlight the need of a co-ordinated strategy for handling the emerging situations for protecting the resilience of the Indian financial system, RBI said in a notification addressed to banks, urban cooperative banks, NBFCs, payment and small finance banks. RBI has asked financial entities to encourage their customers to use digital banking facilities as far as possible. "Besides taking steps...for ensuring business process resilience, supervised entities should also assess the impact on their balance sheet, asset quality, liquidity, etc. arising out of potential scenarios such as further spread of COVID-19 in India and its effect on the economy, contagion from wider disruption in the global economy and the global financial system, etc," RBI said. Based on these, they should take immediate contingency measures to manage the risks under intimation to us, it added. As the situation requires to be monitored closely, both from business and social perspective, a Quick Response Team (QRT) may be constituted for the purpose, RBI said. The QRT shall provide regular updates to the top management on significant developments and act as a single point of contact with regulators/outside institutions/agencies, it said. While the Government of India, in co-ordination with the state machineries, is already taking steps for preventing and controlling the local transmission of disease, further steps are required to be taken by the respective banks/financial institutions as a part of their existing operational and business continuity plans, the central bank said. The regulator, among others, asked them to devise strategy and monitoring mechanism concerning the spread of the disease within the organisation, making timely interventions for preventing further spread in case of detection of infected employees including travel plans and quarantine requirements as well as avoiding spread of panic among staff and members of the public. The banks and financial institutions should also take stock of critical processes and revisit business continuity plan "in the emerging situations/scenarios with the aim of continuity in critical interfaces and preventing any disruption of services, due to absenteeism either driven by the individual cases of infections or preventive measures," RBI said. It also advised on taking steps for sharing important instructions/strategy with staff members at all levels, for soliciting better response and participation and sensitizing the staff members about preventive measures to be taken in suspected cases. The World Health Organization (WHO) has declared the outbreak of the novel coronavirus disease (COVID-19) a pandemic. RBI said the WHO declaration indicates significant and ongoing person-to-person spread in multiple countries, with the uncertainty about the extent of spread and the likely impact on the global economy. KPM RVK

RBI directs banks/FIs to assess impact on balance sheet, asset quality due to coronavirus outbreak

New Delhi, <keyword id="19955699" type="General" weightage="20" keywordseo="crisil-ratings" source="keywords">Crisil Ratings</keyword> on Monday said the credit quality outlook for Indian corporates remains positive for the April-September period of the 2024-25 fiscal year with upgrades continuing to outpace downgrades. In the last fiscal year, <keyword id="19898320" type="General" weightage="20" keywordseo="crisil" source="keywords">Crisil</keyword> gave 409 rating upgrades and 228 downgrades. Some export-linked sectors, such as textile and seafood, saw a higher downgrade rate due to subdued global demand or high-cost inventory that impacted profitability. "India Inc's credit quality outlook is positive for the first half of fiscal 2025 with upgrades expected to outnumber downgrades. Multiplier effect of government capex will continue to drive infrastructure and linked sectors. Healthy balance sheets will continue to support the credit quality outlook, with capex funding seen prudent," <keyword id="21152659" type="General" weightage="20" keywordseo="crisil-rating" source="keywords">Crisil Rating</keyword> said. It said the outstanding bank credit is expected to cross Rs 200 lakh crore by March 2025, from Rs 172 lakh crore a year ago, even though there would be moderation in the rate of credit growth. The Indian economy with a GDP growth of 6.8 per cent is expected to remain the fastest-growing large economy in the current fiscal. The growth will, however, moderate from 7.6 per cent expected in 2023-24 as high interest rates and lower fiscal impulse to growth will temper demand, according to Crisil. Crisil Ratings Managing Director <keyword id="20983741" type="General" weightage="20" keywordseo="gurpreet-chhatwal" source="keywords">Gurpreet Chhatwal</keyword> said the three key pillars of India Inc's credit quality -- deleveraged balance sheets, sustained domestic demand and government-led capex -- kept the upgrade rate elevated in the second half of FY24. "With balance sheets in most sectors at their healthiest, capacity utilisation around peak levels and expected interest rate cuts, a broad-based pick-up in private capex is finally in sight," Chhatwal said, adding that sectors with export linkages could have some uncertainties around them. Stating that bank credit outstanding could cross Rs 200 lakh crore by March 2025, credit growth will remain healthy, albeit a tad lower at 14 per cent this fiscal year. Credit growth was 16 per cent in the last fiscal year that ended on March 31. Overall gross non-performing assets (NPAs) will continue to trend down and touch fresh decadal lows, it said. Crisil Ratings Senior Director and Chief Ratings Officer <keyword id="21152658" type="General" weightage="20" keywordseo="krishnan-sitaraman" source="keywords">Krishnan Sitaraman</keyword> said there is a likelihood of interest rate cuts globally in 2024. "We expect the RBI to cut interest rates in the second half of the current fiscal," Sitaraman said, adding that credit quality is likely to remain positive. The RBI is scheduled to announce its first monetary policy review for the current fiscal on April 5. For FY25, as many as 21 of 26 corporate sectors have strong to favourable credit quality outlook, marked by robust balance sheets and healthy operating cash flows -- expected to be as much, or higher, than in fiscal 2024. These include auto-component manufacturers, companies in the hospitality and education sectors where the credit quality is supported by healthy domestic demand. It also includes sectors benefiting from the government's infrastructure spending, such as construction companies, and steel, cement and capital goods manufacturers. Four corporate sectors -- specialty chemicals, agrochemicals, textile cotton spinning and diamond polishers -- are facing headwinds given their fortunes are aligned with global macroeconomic conditions, which are subdued at present.

Credit quality outlook of India Inc positive in first half of FY25: Crisil Ratings

<ul><li>The <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> has halved the minimum holding period for loans with a maturity of more than five years. NBFCs will now be able to sell off these loans after six months. </li><li>The one-year restriction was in place to ensure that the loan was being serviced regularly prior to sale by the <keyword id="6355260" type="UNKNOWN" weightage="20" keywordseo="NBFC">NBFC</keyword> to another financial institution. </li><li>The move will provide a much needed dose of <keyword id="6355375" type="DEFINITION" weightage="20" keywordseo="Liquidity">liquidity</keyword> to the balance sheets of these lenders, which have faced a significant cash crunch in the wake of the <keyword id="6357293" type="UNKNOWN" weightage="20" keywordseo="ILFS">IL&amp;FS</keyword> bankruptcy scare. </li></ul>As part of its ongoing attempts to prevent a liquidity crisis and <a href="https://www.businessinsider.in/after-weeks-of-tension-the-reserve-bank-of-india-gives-in-to-some-of-the-central-governments-demands-while-retaining-its-independence/articleshow/66705908.cms">placate the central government</a>, the Reserve Bank of India (RBI) has made it easier for the country’s non-banking financial companies (NBFC), or shadow lenders, to securitise their loans. The move will provide a much needed dose of liquidity to the balance sheets of these lenders. They have faced a significant cash crunch in the wake of the IL&amp;FS bankruptcy scare as commercial banks, which are already dealing with an unprecedented level of <keyword id="142154" type="PERSON" weightage="20" keywordseo="bad-loans">bad loans</keyword>, have been reluctant to lend to them. As per an official <a href="https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11422&amp;Mode=0">notification</a>, the RBI has halved the minimum holding period for loans with a maturity of more than five years to six months. NBFCs will now be able to sell off these loans after the six-month period which entails the receipt of two quarterly repayments or six monthly instalments. Prior to the ruling, NBFCs were only allowed to securitise these loans after receiving payments, be it on a monthly or a quarterly basis, after one year. The restriction was put in place to ensure that the loan was being serviced regularly prior to sale by the NBFC to another financial institution. Otherwise, it would increase the risk of the loan turning non-performing and could be used as a ploy by an NBFC to get rid of a bad asset without sufficient liability. However, the reduction in the minimum holding period may have an adverse effect as the purchaser will bear a greater level of risk of the asset turning bad. Hence, to reduce, or more aptly, split the level of risk, the RBI has imposed a condition to the easing of the minimum holding period. NBFCs will have to retain 20% of the book value of the loans. In the immediate term, it is predicted that NBFCs will sell off loans that have low default rates, such as mortgages and home loans. The influx of funds will help them sustain their core lending operations, which will provide some respite to India’s small-and-medium-enterprises, which rely heavily on NBFCs for their working capital needs. The easing of restrictions is slated to last for only six months, after which it may or may not be extended. Meanwhile, the RBI is expected to propose some additional measures to boost liquidity at NBFCs after the next meeting of its board on 14 December. SEE ALSO: <a href="https://www.businessinsider.in/indias-central-bank-has-scrapped-the-licenses-of-nearly-400-nbfcs-so-far-this-year/articleshow/65698193.cms">India’s central bank has scrapped the licenses of nearly 400 NBFCs so far this year</a> <a href="https://www.businessinsider.in/the-reserve-bank-of-india-is-trying-to-prevent-a-liquidity-crisis-at-banks-by-relaxing-an-important-risk-requirement/articleshow/65978953.cms">The Reserve Bank of India is trying to prevent a liquidity crisis at banks by relaxing an important risk requirement</a> <a href="https://www.businessinsider.in/after-weeks-of-tension-the-reserve-bank-of-india-gives-in-to-some-of-the-central-governments-demands-while-retaining-its-independence/articleshow/66705908.cms">After weeks of tension, the Reserve Bank of India gives in to some of the central government's demands while retaining its independence</a>

The Reserve Bank of India just made it a lot easier for the country’s shadow banks to sell off their loans

The Reserve Bank on Wednesday asked non-bank finance companies to broad-base their <keyword id="60356" type="General" weightage="20" keywordseo="fundraising" source="Orion">fundraising</keyword> to limit reliance on <keyword id="6368751" type="General" weightage="20" keywordseo="banks" source="Orion">banks</keyword> as it called for strengthening balance sheets and guarding against frauds and data breaches. According to the report 'Trend and Progress of Banking in India 2022-23' released by the <keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword>, the <keyword id="183986" type="General" weightage="20" keywordseo="indian-banking-system" source="Orion">Indian banking system</keyword> and <keyword id="6354598" type="General" weightage="20" keywordseo="nbfcs" source="Orion">NBFCs</keyword> remain sound and resilient, backed by high capital ratios, strengthening asset quality and robust earnings growth. The consolidated balance sheet of scheduled commercial banks (SCBs) in 2022-23 expanded by 12.2 per cent, driven by credit to retail and services sectors. Deposit growth also picked up, although it trailed credit growth, it said. Looking ahead, it said, "Given the increasing interconnectedness between banks and NBFCs, the latter should focus on broadbasing their funding sources and reduce overdependence on bank funding. Banks and non-banks both, need to bring in greater empathy in their customer services". The concerted efforts are needed by all stakeholders to protect the banking and payments system from the risks of fraud and data breaches emanating from cyber threats, the report added. "Overall, banks and NBFCs need to further strengthen their balance sheets through robust governance and risk management practices to meet the growing aspirations of the Indian economy," it said. As per the report, the improvement in asset quality of banks that began in 2018-19 continued during 2022-23, and even in the first half (April-September) of 2023-24, the gross non-performing assets (GNPA) ratio stood at 3.2 per cent. Higher net interest income and lower provisioning boosted net interest margin (NIM) and profitability in 2022-23, it said.

RBI asks NBFCs to broad-base fundraising, reduce dependence on banks

<keyword id="6354335" type="COMPANY" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI) on Wednesday said it is putting in place a secondary market <keyword id="122724" type="ORGANIZATION" weightage="20" keywordseo="government-securities">government securities</keyword> acquisition programme or G-SAP 1.0 for this financial to enable an orderly evolution of the yield curve. RBI said the endeavour through the programme will be to ensure congenial financial conditions for the recovery to gain traction. Under the programme, which will be for 2021-22, RBI will commit "upfront to a specific amount of open market purchases of government securities with a view to enabling a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions," Governor Shaktikanta Das said while announcing the monetary policy. For the first quarter of the financial year 2021-22, RBI will conduct a G-SAP of Rs 1 lakh crore, and the first purchase of government securities for an aggregate amount of Rs 25,000 crore will be conducted on April 15, Das said. The benchmark 10-year bond, which traded at 5.93 per cent (on an average) during April 2020-January 2021, spiked to 6.25 per cent on March 10, 2021 before coming down again. In sync with <keyword id="6375573" type="COMPANY" weightage="20" keywordseo="G-sec">G-Sec</keyword> yields, corporate bond yields also hardened across issuers and rating categories in the recent period. During the post policy conference, Das told reporters that G-SAP is different from the regular <keyword id="475574" type="COMPANY" weightage="20" keywordseo="open-market-operations">Open Market Operations</keyword> (OMOs) that RBI conducts. "It has a distinct character, in the sense that for the first time we are giving out a particular quantum of bond purchase in the secondary market. Within this particular quarter, we will be suitably depending on the evolving situation and will be announcing auctions from time to time," he said. Deputy Governor Michael <keyword id="49966" type="COMPANY" weightage="20" keywordseo="Patra">Patra</keyword> said that with this, RBI, for the first time, is committing its balance sheet to the conduct of monetary policy. "When we are unchanged on the policy rate, we need an instrument to run monetary policy. In the past, all our actions were to move the interest rates up and down and ensure that proper transmission happens across the market spectrum. This time we are being more explicit. "We are not waiting for the indirect channel of interest rates and prices to operate. We are directly committing an expansion in our balance sheet of a certain specified amount which is known to the public with the hope of ensuring orderly conditions in the market," Patra added. Giving up an amount upfront also helps market participants to plan their engagement with the borrowing programme, he noted. G-SAP will run alongside RBI's regular operations including Liquidity Adjustment Facility (LAF), OMOs and operation twist, Patra said, adding that the programme is built into the central bank's liquidity planning framework for 2021-22 as a whole. Das said the positive externalities of G-SAP 1.0 operations need to be seen in the context of those segments of the financial markets that rely on the G-Sec yield curve as a pricing benchmark. When asked whether RBI will announce the amount every quarter under G-SAP, the Governor said it is not a one-off kind of thing and the effort will be to continue with G-SAP. The central bank also announced that it will conduct 14-day Variable Rate Reverse Repo (VRRR) auctions of longer maturity as indicated in the Revised Liquidity Management Framework announced on February 6, 2020. The amount and tenor of these auctions will be decided based on the evolving liquidity and financial conditions, RBI said. "This is a part of RBI's liquidity management operations and should not be read as liquidity tightening. In fact, by paying a higher rate of interest on liquidity absorptions through the VRRR auctions, the RBI is indirectly expanding liquidity," Das emphasised. While laying out the liquidity management strategy for 2021-22, Das said RBI's endeavour is to ensure orderly evolution of the yield curve, governed by fundamentals as distinct from any specific level thereof. "Our objective is to eschew volatility in the G-Sec market in view of its central role in the pricing of other financial market instruments across the term structure and issuers, both in the public and private sectors," he said. This is a necessary pre-requisite for the nascent and hesitant recovery to firm up and become durable. Das also urged market participants to pay heed to RBI's actions, communication and signals in a balanced manner. "Together, we can overcome the challenges and lay the foundations for a durable recovery beyond the pandemic. Let us prepare for our tryst with our potential firmly," he added. Further, RBI extended on-tap targeted Long Term Repo Operations (<keyword id="2636226" type="COMPANY" weightage="20" keywordseo="TLTRO">TLTRO</keyword>) by six months to September 30. The scheme was announced in October last year and was available till March 31, 2021. To ensure continued flow of credit to the real economy, RBI also extended fresh support of Rs 50,000 crore to All India Financial Institutions (AIFIs) for new lending in the current financial year. Accordingly, Rs 25,000 crore will be provided to NABARD; Rs 10,000 crore to National Housing Bank (NHB) and Rs 15,000 crore to Small Industries Development Bank of India (SIDBI). Further, the timeline for banks to on-lend through non-banking finance companies has been extended by six months to September 30.

RBI initiates G-SAP 1.0 to keep the balance between yield curves and liquidity

New Delhi, Dec 8 () India's real GDP growth in 2019-20 fiscal is expected to be slightly below 5 per cent as the impact of stimulus measures will take time to filter through to the economy, IHS Markit has said.
Latest GDP data for July-September quarter showed a significant further moderation in the pace of economic growth to 4.5 per cent, the weakest in six years with a key contributory factor being a slump in manufacturing output. This compared with the 5 per cent growth rate registered in the previous quarter and 7 per cent rate recorded a year ago in September quarter of 2018.
For the first half of 2019-20 fiscal, GDP growth slowed to a pace of 4.8 per cent compared to the 7.5 per cent a year back.
"Financial sector fragilities continue to weigh on India's economic growth momentum, with the high level of non-performing loans on the balance sheets of the public sector banks, constraining their new lending," IHS said in a report.
Furthermore, there are also risks from potential contagion effects from troubled non-bank financial companies (NBFCs) to the balance sheets of some commercial banks, which could further weigh on the overall pace of credit expansion.
In response to the growth slowdown, the Reserve Bank of India (RBI) has eased policy rates significantly during 2019, with a series of rate cuts since February, while the government announced a large reduction in corporate tax rates in September to help boost new investment spending.
"Following the weak GDP outturn for the September quarter, Indian real GDP growth in FY 2019-20 is expected to be slightly below 5 per cent, as it is anticipated that the impact of stimulus measures will take time to filter through to the real economy," IHS said.
The RBI also lowered its GDP growth forecast for 2019-20 from 6.1 per cent to 5 per cent on December 5.
"Confronted with the sharp slowdown in economic growth momentum, the Indian government will face increasing pressure to roll out additional fiscal measures to bolster manufacturing output and kick-start an upturn in the investment cycle. Such measures could include accelerated government spending on infrastructure projects such as roads, railways, and ports, as well as urban infrastructure such as affordable housing and hospitals," it said.
IHS said given that the process of strengthening bank balance sheets has been slow, taking a number of years already, India's financial sector problems are likely to remain a drag on the pace of economic growth over the medium-term outlook.
"Furthermore, any turnaround in the investment cycle could also be relatively protracted, depending on the ability of the government to accelerate its own infrastructure spending program," it said.
IHS said the weakest sector has been auto manufacturing, with output down by 24.8 per cent in September. "The Indian auto sector has slumped into a crisis, with hundreds of thousands of auto sector workers in the production and distribution segments having been laid off over the past 12 months".
A key concern is also the sharp contraction in capital goods output, which was down 20.7 per cent in September 2019.
"This indicates that India's investment cycle is experiencing a severe cyclical slowdown, as reflected in the further slowing of fixed investment growth during the September quarter," it said. "The construction sector growth also slowed to a pace of 3.3 per cent in the September quarter, compared with growth of 5.7 per cent in the June quarter".
Measuring GDP from the expenditure side, an important factor supporting the growth was public consumption, which rose by 15.6 per cent in the September quarter. Private consumption growth also picked up modestly versus the previous quarter, although it continues to expand at a much slower pace than in the past two financial years, IHS said.
"Although the RBI has also provided monetary policy stimulus through its monetary policy easing measures, the impact is likely to be more protracted, since monetary policy stimulus effects on the real economy generally act with long lags. Furthermore, the impaired balance sheets of many public sector banks and NBFCs also will dilute the flow-through of monetary policy easing to the economy," it added. ANZ DP BAL
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