Mumbai, A Reserve Bank Bulletin on Thursday said retail inflation has moderated due to monetary policy action and supply side interventions, but "we are not out of the woods yet and have miles to go". An article on the state of the economy in the November Bulletin also noted that the global economy is showing signs of slowing down in the ongoing quarter as manufacturing languishes while services sector activity appears to have reached the end of its post-pandemic expansion. Going forward, it said tightening financial conditions is a significant risk to the global outlook. "In India, the momentum of the change in GDP is sequentially expected to be higher in Q3, 2023-24, with festival demand remaining ebullient," the article authored by a team lead by RBI Deputy Governor <keyword id="4207560" type="General" weightage="50" keywordseo="michael-debabrata-patra" source="Orion">Michael Debabrata Patra</keyword> said. The authors said investment demand appears to be resilient with the government's infrastructure spending, an uptick in private capex, automation, digitalisation, and indigenisation providing a boost. Referring to the headline inflation based on Consumer Price Index (CPI), the article said a combination of monetary policy action and supply side interventions guided inflation down from the high reaches to which it had climbed through the first seven months of 2022-23. In fact, November 2022 was the first month when headline inflation dropped back into the RBI's tolerance band of 2-6 per cent in the whole calendar year. "We are not out of the woods yet and have miles to go, but readings of around 5 per cent and 4.9 per cent in September and October, respectively, are a welcome relief from the average of 6.7 per cent in 2022-23 and 7.1 per cent in July-August 2023," it said. The RBI, however, said the views expressed in the article are of the authors and do not represent the views of the central bank. The article further said India's external sector has remained viable, with a modest Current Account Deficit (CAD) financed by resilient capital flows, one of the least volatile currencies in the world and a healthy level of foreign exchange reserves. The momentum of growth has picked up, taking GDP well above pre-pandemic levels to becoming the fifth largest economy in the world at market exchange rates, it added. "Steadfast policy initiatives are showing results, with the financial sector exhibiting soundness and supporting the credit needs of a resurgent economy," it said. The 37th edition of the <keyword id="19517645" type="General" weightage="50" keywordseo="state-of-the-economy-article-marks" source="Orion">State of the Economy article marks</keyword> the third year of its revival after a long hiatus of 25 years.

Not out of the woods yet and have miles to go: RBI on inflation

Mumbai, The <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> on Friday announced doubling the lending limits for <keyword id="185013" type="General" weightage="20" keywordseo="gold-loans" source="Orion">gold loans</keyword> under the bullet repayment scheme for <keyword id="117575" type="General" weightage="50" keywordseo="urban-cooperative-banks" source="Orion">urban cooperative banks</keyword> to Rs 4 lakh. "It has been decided to increase the existing limit for gold loans under the bullet repayment scheme from Rs 2 lakh to Rs 4 lakh in respect of Urban Cooperative Banks (UCBs) who have met the overall target and sub-targets under the Priority Sector Lending (PSL) as on March 31, 2023," <keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> Governor <keyword id="6359111" type="General" weightage="50" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> said. A bullet repayment scheme is one where a borrower repays interest and the principal amount at the end of a loan tenure without worrying about repayment during the loan tenure. Das, who had a meeting with top brass of UCBs recently, said the measure is in line with the RBI's earlier announcement of providing "suitable incentives" to UCBs that have met the prescribed PSL targets, wherein a lender is mandated to devote a certain part of its overall lending for the marginalised sector. Speaking after announcing the bi-monthly policy review, Das also announced that the RBI will be issuing a comprehensive regulatory framework on project finance. "With a view to strengthen the extant regulatory framework governing project finance and to harmonise the instructions across all regulated entities, the extant prudential norms for projects under implementation have been reviewed," he said, adding that detailed draft guidelines will be released for public comments. He also announced that non-bank lenders in the 'middle and base layers' will be permitted to use Credit Risk Mitigation instruments for reducing their counter party exposure under the credit concentration norms, just like their peers classified in the 'upper layer' are allowed to right now. The RBI is also mulling introducing Card-on-File Tokenisation (CoFT) creation facilities directly at the issuer bank level, given the growing acceptance and benefits of tokenisation of card data, Das said, adding that this will help make e-commerce transactions more convenient.

RBI doubles bullet repayment gold loan limits for urban co-op banks to Rs 4 lakh

<ul><li>The Reserve Bank of India hit pause on all loan repayments last week, which includes payment of credit card bills.</li><li>However, there are a lot of unanswered questions about how banks will implement these measures on the ground.</li><li>The Indian <keyword id="3845750" type="PERSON" weightage="20" keywordseo="banks-association">Banks Association</keyword> answers all of these questions like what do if the banks calls you to ask for payments or if your loan is included in the relief package offerered by the RBI.</li></ul> The Reserve Bank of India (RBI) announced a <a href="https://www.businessinsider.in/finance/news/home-loans-education-loans-and-business-loan-interest-payments-deferred-for-three-months-by-rbi/articleshow/74841767.cms">three-month moratorium</a> on all term loans which had payments due as on March 1. This includes education loans, housing loans and even credit card bills. However, there are a lot of questions around how banks will implement these measures on the ground. A statement by the Indian Banks Association, answers all the frequently asked questions that you may have about RBI’s new measures. QUESTION 1 Why has RBI announced the relief package? ANSWER: Reserve Bank of India has announced certain regulatory measures to reduce the burden of debt and make sure that businesses survive the impact of Coronavirus on India’s economy. It was felt that there may be a temporary disruption in the cash flows, and in some cases loss of income, for the businesses and individuals. QUESTION 2 Which are the facilities eligible for availing benefits under the RBI COVID-19 regulatory package and whether the facility is extended across the board to all borrowers? ANSWER: All term loans (including agricultural term loans, retail, crop loans and loans under Pool Purchases) and cash credit/overdraft are eligible to avail the benefits under the package. This is available to all such accounts, which are standard assets as on 1st March 2020. Further, to avoid unnecessary paperwork the facility has been extended across the board to all the borrowers by extending repayment of term loan installments (includes interest) by 90 days. The original repayment period for term loans will get extended by 90 days e.g. a loan repayable in 60 installments maturing on 1st March 2025 will mature on 1st June 2025. QUESTION 3 Is rescheduling of payments applicable for all kinds of term loans? ANSWER: It is applicable for all term loans in all the segments, irrespective of the segment and the tenor of the term loans. QUESTION 4 Is rescheduling of term loans only for principal amount or it also includes interest? ANSWER: Rescheduling of principal can be done for a period of three months falling due between March 1, 2020 and May 31, 2020. For example, where the last installment of a term loan falls due for payment on say 1st March 2020, it will become payable on 1st June 2020. For EMI based term loans, there will be three EMIs falling due between 1st March 2020 and May 31st, 2020 and the tenor will be extended by three months and have to be repaid during the extended period, as per the example under (2) above. For other term loans, it will be all the installments and Interest falling due during the same period, irrespective of the tenor of payment i.e. monthly, quarterly, half yearly, annually, bullet payment etc. For term loans, where the repayment has not commenced, the interest portion for three months alone needs to be reckoned. QUESTION 5 What happens if the extended tenor of term loan goes beyond the maximum period stipulated for a product or as stipulated in the loan policy? ANSWER: This can be extended for all such term loans without the need for seeking deviations or approvals. QUESTION 6 What will be the treatment of interest on the working capital facilities? ANSWER: The recovery of Interest applied to cash credit/overdraft on 31st March, 30th April and 31st May 2020 is being ‘deferred’. However, the entire interest must be recovered along with the interest being applied on 30th June 2020 and in cases, where monthly interest is not being applied, along with the next interest date. QUESTION 7 What will be the impact of this relief by RBI on borrowers as far as reporting of default is concerned? ANSWER: Any delay in payment leads to default and gets reported to Credit Bureaus. For business loans of ₹5 crore and above, the banks report the overdue position to RBI also through CRILC. As a result of this relief package, the overdue payments post 1st March 2020 will not be reported to Credit Bureaus/ CRILC for three months. No penal interest or charges will be payable to the banks. Similarly, SEBI has allowed that Credit Rating Agencies (CRAs) may not consider the delay as default by listed companies if the same is owing to lockdown conditions arising due to COVID-19. QUESTION 8 That means businesses/ Individuals should necessarily take the benefit? ANSWER: You may take the benefits under this package if there is a disruption in your cash flows or there is loss of income. However, you must take into account that the interest on the loans, though not mandatorily payable immediately and gets postponed by 3 months, continues to accrue on your account and results in higher cost. To give you a perspective, suppose your loan outstanding is ₹100,000 and you are charged 12 percent rate of interest on your loans, then every month you are liable to pay ₹1,000 as interest. In case you opt not to service the interest every month, you are liable to pay interest at 12 percent per annum and accordingly you will pay ₹3,030.10 at the end of 3rd month. Similarly, in case the interest rate is 10 percent, you are required to pay ₹ 833 per month or ₹2,521 after three months. QUESTION 9 Should I get upset if any bank staff or its collection agent approach me for repayment? ANSWER You should not get upset. Tell bank staff/ collection agent that you want to avail the benefit being extended under the regulatory package. QUESTION 10 What about my credit card dues? ANSWER: The relief is available for credit card payments also. In case of credit card dues, there is a requirement to pay a minimum amount and if it is not paid the same gets reported to Credit Bureaus. In view of the RBI circular, the overdues in the credit card account do not get reported to the credit bureaus for a period of three months. However, interest will be charged by the credit card issuer on an unpaid amount. You should check from your card provider to arrive at interest payable. Although no penal interest will be charged during this period, but you must remember that the interest rate on credit card dues are normally much higher compared to normal bank credit and you should take a decision accordingly. QUESTION 11 What about interchangeability being permitted from non-fund based to fund based or FB to NFB for businesses? ANSWER: The interest applied on the fund based portion of interchangeability availed during the said period of 1st March to 31st May 2020 will be eligible for moratorium. In respect of new sanctions accorded from 1st March and availed during the period, the interest applied on the Fund based portion would be eligible. QUESTION 12 In what other ways, businesses have been given relief? ANSWER: The businesses may request the bank to reassess their working capital requirements on account of disruption of their cash flows or elongation of working capital cycle. They may also request for reduction in margin on NFB facilities (LCs/ BGs etc) or also relief in Security. Decisions will be taken by the bank branches on a case-to-case basis based on the genuineness of the request. QUESTION 13 Are NBFCs/MFIs/HFCs eligible under the “easing of working capital financing”? ANSWER: At present, they are not being considered under the scheme. However, RBI has made provision for sufficient liquidity support to these financial intermediaries under recently introduced Targeted Longer-term Refinancing Operations i.e. TLTRO. Liquidity availed under the scheme by Banks has to be deployed in investment grade corporate bonds, commercial paper, and non-convertible debentures over and above the outstanding level of their investments in these bonds as on March 27, 2020. Banks shall be required to acquire up to fifty per cent of their incremental holdings of eligible instruments from primary market issuances and the remaining fifty per cent from the secondary market, including from mutual funds and non-banking finance companies. Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25% of total investment permitted to be included in the HTM portfolio. Exposures under this facility will also not be reckoned under the large exposure framework. Banks will be able to support NBFCs/ MFIs/ HFCs etc. under this window and we do not foresee liquidity squeeze for these Financial Intermediaries. QUESTION 14 Will all these measures of RBI be treated as “restructuring”? What about the provisions applicable? ANSWER: The measures stipulated by RBI under the March 27, 2020 circular on COVID-19 Regulatory Package will not be treated as “restructuring” and hence will not result in asset classification downgrade. Accordingly, the enhanced provisions for Restructured Accounts will not apply. QUESTION 15 What about installments/EMIs being recovered through SI/ECS/NACH? What will be the procedure for refund of the installment/EMIs, if demanded by the borrower? ANSWER: Please get in touch with your bank for the revised mandate. See also: <a href="https://www.businessinsider.in/finance/news/home-loans-education-loans-and-business-loan-interest-payments-deferred-for-three-months-by-rbi/articleshow/74841767.cms">No EMI payments for home, car, and corporate and other loans for 3 months says RBI</a> <a href="https://www.businessinsider.in/business/news/covid-19-banks-sensitise-branches-on-emi-moratorium-other-rbi-relief-measures/articleshow/74912484.cms">Covid-19: Banks sensitise branches on EMI moratorium, other RBI relief measures</a> <a href="https://www.businessinsider.in/business/news/retailers-seek-rbi-intervention-as-banks-unwilling-to-extend-debt-moratorium-to-borrowers/articleshow/74917194.cms">Retailers seek RBI intervention as banks unwilling to extend debt moratorium to borrowers</a>

FAQs about RBI’s three-month deferment on EMIs answered by the Indian Banks Association

<ul><li><keyword id="11320380" type="UNKNOWN" weightage="20" keywordseo="central-banks-in-europe">Central banks in Europe</keyword>, US, China, India and more have been working on Central Bank <keyword id="3144636" type="PERSON" weightage="20" keywordseo="digital-currencies">Digital Currencies</keyword> (CBDCs).</li><li>Facebook’s Diem moved to the US recently, to issue a Stablecoin backed by the US Dollar.</li><li>China is already testing a digital version of the Yuan.</li></ul>A lot has been said about <a href="https://wazirx.com/signup?invite=2kpah6gr&amp;utm_source=business-insider&amp;utm_medium=referral&amp;utm_campaign=microsite">cryptocurrency</a> prices recently, especially with regulations in China stirring up prices over the past week. While governments around the world have been resistant to accepting cryptocurrencies as legitimate payment systems, they aren’t opposed to the underlying blockchain technologies that run all of these currencies. Enter Central Bank Digital Currencies (CBDCs). What are CBDCs? Simply put, CBDCs are digital versions of the currencies you use right now. In the US, a CBDC would be a digital dollar, in India it’s a digital rupee, China has already started testing a digital Yuan, and so on. As the end-user, using a CBDC won't be the same as making digital payments right now, because the real change lies in the background. Essentially, a CBDC is a digital version of a fiat currency that’s run using a private blockchain system. That’s the first big difference between CBDCs and <a href="https://wazirx.com/signup?invite=2kpah6gr&amp;utm_source=business-insider&amp;utm_medium=referral&amp;utm_campaign=microsite">cryptocurrencies</a> — the private blockchain. Almost every cryptocurrency you see today runs on a public blockchain, meaning they’re maintained by users and miners worldwide. Private blockchains are controlled by one organisation, which in this case will be central banks. In the case of a CBDC, a central bank can issue and track the whole lifecycle of a country’s currency digitally. It essentially eliminates the need for printing paper money. If you’re thinking of the game Watch Dogs right now, you’re on the right track. CBDCs can be issued digitally by the central bank, and since they are essentially just pieces of code, their flow will be trackable right from their creation. CBDCs have great importance in the future, with respect to environmental concerns, <a href="https://www.livemint.com/news/india/digital-rupee-rollout-may-help-curb-bank-frauds-11615559728445.html">curbing bank frauds</a> and more. They are also Stablecoins, meaning their value remains stable and doesn’t fluctuate the way cryptocurrencies do. They are backed by federal banks, instead of consumer sentiments. They also give the government great powers of surveillance. CBDCs are not cryptocurrencies Despite the brouhaha around CBDCs though, what many industry experts say is that CBDCs aren’t cryptocurrencies. This is because they are designed to be trackable and do not allow anonymity. This is against some of the fundamental principles of cryptocurrencies. Even more importantly, the fact that a central bank controls them means there’s no public control on these currencies, another central element of almost every cryptocurrency. Unlike Bitcoin or Ethereum, you can’t create a CBDC by mining. Only the concerned bank can issue it. Which countries have been considering CBDCs? The US Federal Bank has been considering a digital dollar for quite a few years now. In fact, according to a <a href="https://edition.cnn.com/2021/05/24/economy/fed-digital-dollar-lael-brainard/index.html">report</a> by CNN, Lael Brainard, a member of the Federal Reserve Board of Governors, even argued a case for the digital dollar yesterday. The US Fed was amongst the first to consider the creation of a CBDC. Industry watchers have also said that Facebook’s Diem, which was originally called Libra, will become the blueprint for the US CBDC. The company <a href="https://www.businessinsider.in/cryptocurrency/news/what-you-need-to-know-about-facebooks-diem-cryptocurrency/articleshow/82629281.cms">recently gave up</a> its Swiss Bank license in order to shift operations to the US. But if there’s a leader in the CBDC space right now, that’s China. As mentioned before, the country has already started testing a digital Yuan. “In order to protect our currency sovereignty and legal currency status, we have to plan ahead,” said Mu Changchun, deputy director of the People’s Bank of China <a href="https://www.wsj.com/articles/china-creates-its-own-digital-currency-a-first-for-major-economy-11617634118">told</a> the Wall Street Journal in April. US and China aside, the European Central Bank (ECB) had also published a report on the issuance of a digital Euro in October last year. “A digital euro would be an electronic form of central bank money accessible to all citizens and firms – like banknotes, but in a digital form – to make their daily payments in a fast, easy and secure way. It would complement cash, not replace it. The Eurosystem will continue to issue cash in any case,” the ECB <a href="https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr201002~f90bfc94a8.en.html">noted</a>. The Reserve Bank of India <a href="https://www.livemint.com/news/india/here-s-how-rbi-is-thinking-about-its-own-blockchain-platform-11616957018547.html">has been considering</a> CBDCs since as early as 2017 as well. The bank mentioned the creation of a digital rupee early this year, and the same was also expected to be taken up in the Budget session of the Parliament this year. The RBI-issued digital currency is expected to reduce the job of intermediaries when it comes to settling payments, and give the central bank tighter control over the country’s growing concern around bank frauds. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/cryptocurrency/news/chia-network-the-company-behind-chiacoin-raises-61-million-at-a-500-million-valuation/articleshow/82943173.cms">Chia Network, the company behind Chiacoin, raises $61 million at a $500 million valuation</a> <a href="https://www.businessinsider.in/tech/apps/news/whatsapp-says-it-will-wait-for-the-indian-government-to-pass-the-personal-data-protection-law-before-limiting-features/articleshow/82931362.cms">WhatsApp says it will wait for the Indian government to pass the Personal Data Protection law before limiting features</a> <a href="https://www.businessinsider.in/science/health/news/what-is-black-white-and-yellow-fungus-symptoms-and-prevention/articleshow/82938920.cms">Black, white and yellow fungi — all you need to know about symptoms and prevention</a>

US, China, Europe and India — all are mulling the possibility of a digital currency, but no one is ready to bite the bullet, yet

New Delhi, Mar 31 () Banks have started sensitising their branches about three months' moratorium on all term loans, including home, auto and crop loans, to help customers in overcoming financial difficulties due to the coronavirus outbreak and subsequent nation-wide lockdown.Several banks on Tuesday said they have informed and provided their branches with the detailed guidelines on various schemes announced by the RBI recently and customers are being sent messages individually on their registered mobile number about the EMI payment.Union Bank of India Managing Director Rajkiran Rai G told that branches have been informed about with respect to moratorium on all term loans."In case of those who have opted for ECS route for EMI deduction, customers are given the option of availing the facility by informing the branch concerned through mail or other digital medium," he said.Banks on its own unilaterally cannot stop ECS payment due to legal issue but the customer has the option of requesting bank to stop it, Rai said.He further said the customers whose income has not been impacted are encouraged to continue payment as per the scheduled."As per COVID 19 regulatory package of RBI, Indian Bank allows a moratorium by deferring payment of EMI/ Term Loan Instalments &amp; Interest/ Interest on Working Capital for 3 months w.e.f 1st March 2020," a tweet issued by the banks said.Another public sector lender PNB said it presents relief scheme for its customers. "In view of COVID-19, it has been decided to defer payment of all installments on term loan and recovery of interest on cash credit facilities falling due between March 01,2020 and May 31 2020."Canara Bank tweeted, "In terms of Covid 19 - RBI package, borrowers are eligible for moratorium/ deferment of installments/EMI for Term loans falling due from 01.03.2020 to 31.05.2020 &amp; repayment period gets extended accordingly. SMS also has been sent to customers to avail the same." With banks clarifying their positions on EMI moratorium, it will help clear doubts of customers who were confused after getting payment reminders from lenders.Last Friday, the RBI had announced that all term loans, including retail and crop loans and working capital payments, will be covered by the three-month moratorium. Banks will now have discretion in deciding the limits on working capital, with RBI saying that no payment miss should be considered a default and reported to credit information companies."The repayment schedule for such loans as also the residual tenor, will be shifted across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period," the RBI said.Deferred instalments under the moratorium will include principal and/or interest components, bullet repayments, EMIs, credit card dues, it said."Lending institutions shall frame board-approved policies for providing the above mentioned reliefs to all eligible borrowers. Wherever the exposure of a lending institution to a borrower is Rs 5 crore or above as on March 1, 2020, the bank shall develop an MIS on the reliefs provided to its borrowers which shall inter alia include borrower-wise and credit-facility wise information regarding the nature and amount of relief granted," it said.Following the announcement, the banks just had one working day to finalise the details and issue instructions to branches, a senior official of another public sector bank said.As soon as finer points on implementation of moratorium came from the Reserve Bank, the official said, board approval was sought as per the direction of the central bank and necessary instructions have been issued to staff regarding their implementation.Yesterday, the Agriculture Ministry said that farmers will continue to get short-term loan of up to Rs 3 lakh at a subsidised interest rate of 7 per cent, and prompt repayers will get it at four per cent as the government extended the subsidy to banks till May 31.The decision, which are implemented through banks, comes as many farmers are not being able to go to banks for payment of their loan dues on account of restrictions imposed due to the lockdown.Besides, FAQ are expected to be issued by Indian Banks Association on the various measures announced by the Reserve Bank to the benefit of customers. DP MKJ

Covid-19: Banks sensitise branches on EMI moratorium, other RBI relief measures

<img class="gwt-Image" src="/photo/49149090.cms" />It was unexpected that <a href="http://www.businessinsider.in/searchresult.cms?query=raghuram+rajan">RBI Governor Raghugam Rajan</a> would cut <a href="http://www.businessinsider.in/searchresult.cms?query=repo+rates">repo rates</a> by 50 basis points. 
 
This move shows that the focus is now to be more accommodative and front load policy actions. 
 
So, here’s what Rajan had to say on <a href="http://www.businessinsider.in/BREAKING-NEWS-RBI-cuts-repo-rates-by-50-basis-points-CRR-unchanged/articleshow/49148486.cms">rate cuts</a> and what prompted him to cut rates to 6.75% 
 1. <keyword id="22195" type="COMPANY" weightage="20" keywordseo="Inflation">Inflation</keyword> target: Rajan said that the target of 6% <a href="http://www.businessinsider.in/searchresult.cms?query=inflation">inflation</a> by January 2016 will be achieved and the focus was now on to lower it to 5%. 
 
2. CPI: The <a href="http://www.businessinsider.in/searchresult.cms?query=consumer+price+index">Consumer Price Index</a> was at 3.66% in August and Rajan said the commodity prices will remain contained for a while. So it will be required to create more domestic demand to substitute the weak global demands. 
 
3. Reforms: There have been many structural reforms, corporate actions happening lately that were the primary reasons for rate cuts. The plan is to front load the policy action. 
 
4. Cuts by banks: Rajan said that the impediments for banks to pass on rate cuts of 125 bps are removed but not much was transmitted by the banks. Rajan said, “There are various impediments to transmission. They add to the lag, even when transmitted monetary policy takes time to work. It could take a long time when not active. Ask the government about what it wants to do about transmission. We intend to have enough liquidity in the market, to supply what is needed in the markets right now.” 
 
5. The global markets are also looking weak in a variety of reasons. Undoubtedly, it is bad news for India. Economy has legacy problems to deal with and there are no silver bullets. “The government is turning around economy through hard work and policy goals will have to be steady and predictable so that goals can be achieved in a longer term,” said Rajan. 
 
He also said that the RBI was paying attention to Fed Reserve. 
 
(Image: Indiatimes)

Raghuram Rajan’s reasons for the huge, unexpected rate cuts

<img class="gwt-Image" src="/photo/52105081.cms" /> 
 It was in November 2014 that <keyword id="64190" type="POSITION" weightage="100" keywordseo="RBI-Governor">RBI Governor</keyword> <keyword id="6358908" type="PERSON" weightage="100" keywordseo="Raghuram-Rajan">Raghuram Rajan</keyword> had angered Indian banks that by saying that 'NPA by any other name <a href="http://www.businessinsider.in/Banks-are-in-deep-trouble/articleshow/51152503.cms" target="_BLANK￿￿￿￿">smells as bad</a>.' However, 18 months later, they have finally understood the importance of being honest and upfront. 
 
Last week, <a href="http://www.businessinsider.in/Axis-Group-ties-up-with-Coursera/articleshow/51026601.cms" target="_BLANK￿￿￿￿">Axis Bank</a> defied the age-old industry practice by disclosing the potential bad loans rather than dressing them up, meanwhile gaining more confidence from investors. 
 
Soon<a href="http://www.businessinsider.in/ICICI-Bank-quarterly-profits/articleshow/52041238.cms" target="_BLANK￿￿￿￿">, ICICI Bank</a> followed suit and declared that because of a miserable performance, its top management would let go of their bonus. 
 
Also read: <a href="http://www.businessinsider.in/This-is-how-much-Raghuram-Rajan-earns-as-the-RBI-Governor/articleshow/51597325.cms" target="_BLANK￿￿￿￿">This is how much Raghuram Rajan earns as the RBI Governor</a> 
 
This happened despite the fact that both banks went several layers down with their net profit, as they had to set aside a huge amount as provisions for NPAs, seeing RBI’s demand of an asset-quality review, which imposed standard norms for recognition of <a href="http://www.businessinsider.in/RBI-relaxes-regulations-on-bad-loans-for-banks-to-attract-investors/articleshow/50833770.cms" target="_BLANK￿￿￿￿">bad loans</a> in the industry. Even with the huge fall in profits, the banks gave a detailed disclosure about the amount of <a href="http://www.businessinsider.in/Distressed-debt-buyers-are-sensing-an-opportunity-in-India-as-bad-loans-pile-up/articleshow/51694980.cms" target="_BLANK￿￿￿￿">potential bad loans</a>. 
 
"By making greater disclosures, banks are hoping that investors and analysts can ascertain the size of the problem, which can give us a fair idea of the downside risk," Anoop Bhaskar, head of equities, IDFC Mutual Fund, told ET. 
 
Also read: <a href="http://www.businessinsider.in/Huge-challenge-lies-in-front-of-Raghuram-Rajan-as-banks-can-still-mask-bad-debts/articleshow/50103314.cms" target="_BLANK￿￿￿￿">Huge challenge lies in front of Raghuram Rajan as banks can still mask bad debts</a> 
 
On April 26, Axis Bank announced putting corporate loans worth Rs 22,600 crore on its 'watch list', since they could turn out to be wicked in the future. These loans have been spread across various sectors and projects, which could have downgraded ratings, inconsistent payment records and restructured accounts. As per Axis Bank, 60% of these loans can be expected to <a href="http://www.businessinsider.in/State-run-banks-turning-to-consultancies-to-take-help-in-identifying-NPAs/articleshow/51257179.cms" target="_BLANK￿￿￿￿">become NPAs</a> in two years, with a majority in the first half of this fiscal year itself. 
 
<a href="http://www.businessinsider.in/How-ICICI-became-the-leader-of-mobile-banking-in-India/articleshow/49657186.cms" target="_BLANK￿￿￿￿">ICICI</a>, on the other hand, has declared Rs 44,000 crore of risky loans, given to various sectors like power, mining, iron and steel, cement, and rigs. However, it did not give an estimate of the amount that it expects to slip into NPAs. 
 
These disclosures look like an attempt to prevent even good loans from being painted with the same brush. 
 
"We want to make sure that people get comfortable that this growth is healthy. We want to compartmentalise and give people comfort that what we are doing now... is extremely healthy. Because, in any environment, the best credits are ultimately made in a bad environment," said V Srinivasan, executive director, Axis Bank. 
 
This move has been welcomed with open arms by both investors and analysts, since it enhances transparency in dealings. "Before these disclosures, there was always a doubt on whether banks like Axis and ICICI were revealing the full amount of damage while public sector banks were biting the bullet. Those doubts will slowly be put to rest," said Purvesh Shelatkar, head of research at BoB Capital Markets. 
 
This new practice of transparency in the Indian banking industry could pave the path of a new chapter to fuel the economic growth and earn investors' goodwill. 
 
<a href="https://timedotcom.files.wordpress.com/2016/01/time-100-2016-raghuram-rajan.jpg?quality=75&amp;strip=color&amp;w=1100">Image source</a>

Axis and ICICI are finally doing what Raghuram Rajan wanted them to do about their NPAs

<img class="gwt-Image" src="/photo/49149992.cms" style="width: 800px; height: 600px;" /> <keyword id="6358908" type="PERSON" weightage="100" keywordseo="Raghuram-Rajan">Raghuram Rajan</keyword> surprised everyone again with another aggressive measure, cut repo rates by 50 bps. He is also one of the very few who does it in style. And at <keyword id="824043" type="COMPANY" weightage="100" keywordseo="Business-Insider">Business Insider</keyword>, therefore we call him the <keyword id="17991" type="PERSON" weightage="100" keywordseo="James-Bond">James Bond</keyword> of <keyword id="6355178" type="UNKNOWN" weightage="100" keywordseo="Dalal-Street">Dalal Street</keyword>! Here are top 5 quotes that prove our point: 

	1. “I don’t know what you want to call me- Santa Claus or Hawk... My name is Raghuram Rajan and I do what I do.” Period.
 

	2. “Today’s 0.5 per cent rate cut based on progress on the ground; It’s not any Diwali bonus.” 
 

	Though James Bond was never known to be humble, Rajan is always the epitome of humility, another trait that makes him such a venerable personality.
 

	3. “The <keyword id="34412" type="ORGANIZATION" weightage="100" keywordseo="economy">economy</keyword> has legacy problems and there are no silver bullets.” 

	This reminds us of his previous stances with the Government too. Remember the time when the Central Govt, behaving like a Hawk, would swoop down on him every now and then pressuring him to cut rates further.
 

	4. "Govt has a right and there is a clause in the <keyword id="30067" type="ORGANIZATION" weightage="100" keywordseo="RBI">RBI</keyword> act where they can give directions to the RBI. But that has never been invoked. That shows that we have de facto independence." Now, there cannot be a more polite way to tell the Government not to interfere. 

	5. "There has been a healthy respect between the govt and the central bank. Central Bank ultimately decides the course of monetary policy." Subtle reminder to the Government that RBI knows what they are doing.

	 
	 
	(Image credits: Indiatimes)

5 reasons
which prove Raghuram Rajan is the James Bond of Dalal Street!

Days after RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword> sought to bring greater efficiency to trans-border transactions, a senior US Fed official on Wednesday said that frictionless <keyword id="20151783" type="General" weightage="20" keywordseo="cross-border-payments" source="keywords">cross-border payments</keyword> will make it difficult to check <keyword id="19899231" type="General" weightage="20" keywordseo="money-laundering" source="keywords">money laundering</keyword> and <keyword id="20699037" type="General" weightage="100" keywordseo="terror-funding" source="keywords">terror funding</keyword>. Speaking at the Global Fintech Fest 2024 here, Christopher J Waller, a member of the Board of Governors of the <keyword id="22948479" type="General" weightage="20" keywordseo="Federal-Reserve-System" source="keywords" meta.keywordsubtype="org" meta.entityname="Federal Reserve System" meta.hostid="261" meta.entityid="Federal Reserve System">Federal Reserve System</keyword>, made it clear that "not all frictions that slow payments down are bad". The US Fed official overseeing payment systems said slowing down the speed at which payments are cleared and settled helps <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> prevent money laundering and counter the financing of terrorism, detect fraud, and recover fraudulent or misdirected cross-border payments. He said unless new solutions are found, interlinking fast payment systems "might increase" the <keyword id="22950159" type="General" weightage="20" keywordseo="risk-management" source="keywords">risk-management</keyword> burden for banks that participate in them. Acknowledging that consumers and businesses want cheaper and faster cross-border payments, Waller expressed his reservations. "I am not entirely convinced that interlinking arrangements will necessarily deliver," he said. Delivering a lecture in India's tech capital Bengaluru on Monday, Das advocated a faster interlinking of domestic payment systems to overcome the concerns of high costs and delays. "With the emergence of Fast Payment Systems across countries and experimentation around CBDC, new possibilities are opening up to bring in greater efficiency to cross-border payments. Maximum efficiency gains in such initiatives would come from ensuring inter-operability as a key design element," Das had said. Waller, however, said that it may not be easier. "There is no silver bullet that increases speed and efficiency without tradeoffs," he added. He said certain frictions are built "purposely" into the <keyword id="22950160" type="General" weightage="20" keywordseo="global-payment-system" source="keywords">global payment system</keyword> for compliance and risk-management reasons. The professor of economics said legal, compliance and operational considerations will have to be looked at, along with governance, oversight, data privacy and settlement arrangements when thinking about interlinking. He said the right incentives for the sender in a cross-border payment is essential, and also conceded that it exists in remittances. However, these are very small value transactions, he said, wondering whether the senders need to be incentivised at all. "We need to ask ourselves whether banks would find a central bank interlinking service more effective than their existing arrangements for cross-border payments, and if they would actually use it," Waller said. He also made it clear that having strong domestic networks is a necessity before one can embark on interlinking and added that the US Fed's system will take two years to be ready. The senior US Fed official also said the Silicon Valley Bank episode is behind, and the banking system in the world's largest economy is "fine" now. "We had a banking crisis in March 2023, Fed reserve stepped in to set up a landing facility, and that has calmed down, and we were able to close that facility in March of this year. That's our confidence that everything in the banking system is fine," he told reporters.

Fast cross-border payments to make it difficult to check money laundering, terror funding: Fed official

The <keyword id="6355520" type="General" weightage="100" keywordseo="interpol" source="Orion">Interpol</keyword> has issued a Red Corner Notice against Satinderjeet Singh alias <keyword id="12998921" type="General" weightage="50" keywordseo="goldy-brar" source="Orion">Goldy Brar</keyword> who claimed responsibility for the killing of singer <keyword id="6408469" type="General" weightage="50" keywordseo="sidhu-moosewala" source="Orion">Sidhu Moosewala</keyword>, within eight days after the CBI forwarded a request, officials said Thursday. Brar is currently living in Canada. The <keyword id="95863" type="General" weightage="80" keywordseo="punjab-police" source="Orion">Punjab Police</keyword> had sought the Red Corner Notice against Brar on May 30 in connection with two old cases, officials said. Brar, a native of Sri Muktsar Sahib, had gone to Canada on a student visa in 2017 and he is an active member of the Lawrence Bishnoi gang, according to <keyword id="6354953" type="General" weightage="80" keywordseo="punjab" source="Orion">Punjab</keyword> Police. Moosewala's murder was allegedly in retaliation to Akali youth leader Vicky Middukhera's killing that took place last year. The Punjab Police on Tuesday had said it had arrested eight people so far in connection with the 27-year-old singer's brutal murder. The CBI, which is the liaison agency of the country with the Interpol, had earlier in the day said that the Punjab Police had sought the Red Corner Notice against Brar on May 30, a day after the singer was killed, as against the claims of the state police that it had sent the request on May 19. The CBI said a communication was received from the Bureau of Investigation, Punjab Police, through an email at 12.25 pm on May 30 with a letter dated May 19 attached in it seeking issuance of a Red Corner Notice against Brar in two FIRs registered by the Punjab Police -- FIR No. 409 dated November 12, 2020 and FIR No. 44 dated February 18, 2021 -- at City Police Station, Faridkot. Moosewala, who had fought the recent assembly elections in Punjab on a Congress ticket, was shot dead by unidentified assailants in Punjab's Mansa district, a day after the state government curtailed his security cover. Over 30 empty cases of bullets were found near his SUV in which he was killed. "In the present matter, the proposal for issuance of Red Notice (RCN) against Satinderjeet Singh alias Goldy...a hard copy of the same proposal was received from Punjab police in IPCU, CBI, New Delhi on May 30, 2022," it said. The communication was sent nearly six months after a court had issued warrants against Brar in both cases probed by the state police, sources said. The CBI said Red Corner Notice is neither mandatory nor a pre-requisite for sending extradition request, more so when the location of the subject is known. The Red Corner Notice alerts enforcement agencies of 195 Interpol member countries to locate and detain a fugitive wanted by a requesting member country. FIR number 409 pertains to a shootout near the Kataria petrol pump in Faridkot on November 11, 2020, in which a charge sheet was filed in November, 2021, and warrants were issued in October, 1, 2021, they said. The second FIR pertains to the murder of Gurlal Singh in Faridkot on February 18, 2021, in which a chargesheet was also filed in November 2021. The warrants were opened on September 13, 2021, they said. "After processing for confirmation of pre-requisite requirements, the Red Corner Notice proposal was forwarded expeditiously to INTERPOL (Headquarters), Lyon on 02-06-2022," the CBI's spokesperson said. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="http://www.businessinsider.in/finance/news/1-in-2-micro-loans-are-being-rejected-since-april-thanks-to-rbis-new-microfinance-framework/articleshow/92106939.cms">1 in 2 micro loans are being rejected since April, thanks to RBI's new microfinance framework</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="http://www.businessinsider.in/business/news/indian-central-banks-rate-hikes-leaves-the-real-estate-sector-jittery/articleshow/92113997.cms">Indian central bank’s rate hikes leaves the real estate sector jittery</a>

Moosewala case: Interpol issues notice to Canadian resident Goldy Brar

Mumbai, Mar 11 () Amidst calls for the Reserve Bank to cut policy rates to boost growth in the wake of the coronavirus outbreak, SBI economists doubted the efficacy of rate cuts in invigorating demand, saying a better tool can be reducing indirect taxes which can automatically lift consumer sentiment. "Though the RBI is likely to bite the bullet to cut the rates to stimulate demand at next policy review, it is unlikely to result in any material impact on invigorating demand... but a combination of a larger rate cut and/or indirect tax rate cut can be better policy options," SBI Research said in a note on Wednesday. Their view was based on the analysis of credit data of top six banks, constituting three public sector banks and three private sector banks which constitute 52 per cent of total bank credit as of March 2019. Both private and public sector banks are seeing robust growth in retail segment at 15.7 per cent and 12.8 per cent, respectively. In case of top eight state-run banks, corporate credit declined by Rs 81,535 crore between December 2018 and December 2019, while during the same period the top three private banks' corporate pie grew by Rs 1.04 lakh crore. It said a rate cut is unlikely to work in isolation as bank transmission of RBI's rate cut has been slow. While RBI cut the rates by 135 bps to 5.15 per cent between February and October 2019, the transmission in the 1-year median MCLR till February 20 was only 59 bps. But for corporates, fresh rupee loan rates came down by 45 bps till January, while the same on outstanding rupee loans decreased by 11 bps. With the pace of deposit rate cuts picking pace (SBI cut rates again on Wednesday), transmission can be faster. Most banks, including private are now cutting aggressively. The spread between the term deposit rates and savings rate limits the scope, however, of increased cuts in term deposits rate. Had the government followed the formulas strictly, rates on different small savings instruments would now have been lower by 80-160 bps. In FY19, the incremental small saving deposits were 24 per cent of incremental bank deposits. If deposit rates are cut further, this can lead to clamour for withdrawals and exacerbate the situation, it warned. With the financial savings rate already not very high and the negativity around deposits, the tax concessions that the budget has proposed to eliminate might also add fuel to the fire. Already retail investors have gone searching for better returns and have burnt their fingers, the report added. BEN ABMABM

SBI says tax cuts, and not rate cuts, can lift consumption

<img class="gwt-Image" src="/photo/48712221.cms" /> 
Yes, you are reading it correct! As per the experts, <a href="http://www.businessinsider.in/searchresult.cms?query=Reserve+Bank+of+India+%28RBI%29+Governor+Raghuram+Rajan+">Reserve Bank of India (RBI) Governor Raghuram Rajan</a> is one of the best central bankers across the world as he has a good grip on monetary policies. 
 
After Marc Faber, <a href="http://www.businessinsider.in/searchresult.cms?query=Jim+Rogers+of+Rogers+Holdings+">Jim Rogers of Rogers Holdings</a> has joined the bandwagon of experts who have appreciated recent decisions taken by the RBI chief. 
 Not only this, India has been among the best-performing emerging markets amid a global currency rout against the dollar in a capital flight not seen since the collapse of <keyword id="50209" type="CITY" weightage="80" keywordseo="Lehman-Brothers">Lehman Brothers</keyword> in 2008. 
 
Investors across the world praised India as it avoided the mistakes of other central banks that kept interest rates low to stimulate growth. 
 "One of the advantages that India has other than having the lot of smarter people is that your central banker (<keyword id="6358908" type="PERSON" weightage="100" keywordseo="Raghuram-Rajan">Raghuram Rajan</keyword>) is probably the best central banker in the world, or at least, the least bad central banker in the world," said <keyword id="45367" type="PERSON" weightage="80" keywordseo="Jim-Rogers">Jim Rogers</keyword> of <keyword id="128692" type="COMPANY" weightage="100" keywordseo="Rogers-Holdings">Rogers Holdings</keyword> in an interview with ET Now on Friday. 
 
Rogers said that he had always admired what the RBI chief did. “Unfortunately, he is not the <a href="http://www.businessinsider.in/searchresult.cms?query=Indian+government">Indian government</a>. He cannot save India, but you certainly have the least bad central banker in the world and I hope he continues being like that," he added. 
 Rogers added that he is delighted to see, and even though he does not own the <keyword id="6355302" type="ORGANIZATION" weightage="60" keywordseo="Rupee">rupee</keyword>, he is certainly watching what he does and what he says. Even at a time of global rout in world <keyword id="45369" type="CITY" weightage="40" keywordseo="equities">equities</keyword>, Rajan said in an exclusive interview with ET on Wednesday that global financial markets may be in turmoil, but Indian investors shouldn't worry too much. 
 
Earlier in August, <a href="http://www.businessinsider.in/searchresult.cms?query=Marc+Faber+">Marc Faber</a> said he did not trust central bankers except that of India's, since he has a solid grip on monetary policies, while the other monetary authorities around the world were basically money printers. 
 
"Mr Raghuram Rajan is an outstanding man who understands central banking. He is probably only one in the world among the crowds of professors at central banks that actually has a good grip on monetary policies and what you can or cannot achieve with them. He should get the Noble Prize in economics, but others are all money printers at heart, all of them," Faber said. 
 
There is no doubt that Rajan, who took over the job two years back at a time when the rupee had suffered a precipitous drop, worked hard to nurse the currency back to health. 
 
Rajan earlier said that "we want growth to be faster than what it is today. Obviously, there are pockets that are hurting, absolutely. But I think you would be hard pressed to argue that this is the kind of emergency we saw in 2008 ourselves or the kind of emergency that some other countries are facing across the world today." 
 
"And you have to be a little careful about disrupting the narrative at a time when the narrative is India is picking up, India has a lot of opportunity, India has a lot of optimism to react as if it is in a deep emergency - the two do not go together," he added. 
 
An all-round improvement in <a href="http://www.businessinsider.in/searchresult.cms?query=macroeconomic+fundamentals+">macroeconomic fundamentals</a> since then has made India almost bullet-proof against the vagaries of financial markets and the biggest differentiator from two years ago is the confidence this had engendered. 
 
(Image: Reuters)

Is PM Modi reading this? Global managers think Raghuram Rajan is one of the best bankers in the world

<img class="gwt-Image" src="/photo/48682472.cms" /> 
The Indian currency was in a bad shape when <a href="http://www.businessinsider.in/searchresult.cms?query=Raghuram+Rajan+">Raghuram Rajan</a> had assumed office as the <a href="http://www.businessinsider.in/searchresult.cms?query=rbi">Resrve Bank of India (RBI</a>) governor two years ago. However, with extreme determination and key reforms, he nursed the currency back to health. And now, when the global economy is once again in a mess, Rajan is still assuring investors in the country that there is no need to panic yet. 
 
The macroeconomic fundamentals having gone an all-round improvement, rupee is now bullet-proof against the tension of weak financial markets. 
 
Ahead of his departure for the Annual Global Economists Conclave at Jackson Hole in the US, Rajan told the press, "There is confidence that we are actually quite healthy. Last time you did not have the confidence that is the big difference this time. We know this will pass and at some point the market will wake up and at that point start differentiating." 
 
India has ranked among the best-performing markets, even when Lehman Brothers collapsed in 2008 creating a bad state for economy across the world. Investors favour India since it has avoided the mistakes of other central banks that kept interest rates low to stimulate growth, and a government that is more <a href="http://www.businessinsider.in/searchresult.cms?query=crisis">prudent with its finances</a>. 
 
“I don't think we are in panic mode by any stretch of imagination. We are in vigilant mode. But I think there is a general sense that we are in a much better situation than we were in 2013," said Rajan. 
 
India's current account deficit, which peaked at 4.7% of gross domestic product (GDP) in FY13, narrowed to 1.3% of GDP in FY15. 
 
Inflation as measured by <a href="http://www.businessinsider.in/searchresult.cms?query=consumer+price+index">the consumer price index</a>, which was running at an average of more than 9%, slowed to 3.8% in July. Foreign exchange reserves are at a record high of $354.4 billion. 
 
But Rajan, who had warned of an impending financial crisis in 2005, said the panic should soon subside. "Markets turn panicky only for limited periods of time," said Rajan. "Even in the worst environment of the last 50-60 years, during the 2008 crisis, it was a few months after which it turned normal. I have no doubt that we have enough ammunition, reserves, good policies to withstand that," he added.

​Raghuram Rajan assures that rupee is bulletproof and there is nothing to worry about

<img class="gwt-Image" src="/photo/46198333.cms" /> 
It is quite natural for expectations to be high, given the fact that the NDA government had been voted to power with an overwhelming majority. During the eight months in power, Prime Minister Narendra Modi and his key ministers have displayed a clear intent to take forward reforms, and they have also sent out the right signals to the investor community. 
 The ‘India story’ is again under global spotlight. The <keyword id="6358021" type="PERSON" weightage="20" keywordseo="budget">Budget</keyword> now has to set the right vision for the economy and lay out a plan with clear, time-bound milestones. I am quite confident that Finance Minister Arun Jaitley will be able to lay out such a roadmap. Of late, the PM’s assurance towards removing tax uncertainties seems to have been successful to some extent in soothing investors’ nerves. I expect more announcements on the direct tax front in the forthcoming Budget which will put to rest issues on the ill-famed ‘tax terrorism.’ 
 
Tax collections have been slow, but going by the media interactions of the finance minister and his key team members, it seems they are quite confident that they would be able to adhere to the fiscal deficit targets that they have set for themselves. The fall in crude prices has definitely helped. I guess the finance minister and his team are also banking on the revenue that would be generated from the proposed disinvestments and the spectrum auction in order to get their fiscal arithmetic correct. 
 
Tax-related issues 
 
The government needs to remove the hurdles in implementation and simplify tax laws. It will also help to increase tax revenue if the tax base is expanded, coupled with reduction in tax administration expenses. The infrastructure sector, undoubtedly, needs the requisite boost, which will meet the expectations of both the industry as well as people. The interest rate needs to come down by about 200 basis points this year, and both direct and indirect taxes need streamlining and rationalisation. 
 
Till the private investment sentiment revives, I think it would be good if the government can set the ball rolling by raising public investments, especially in infrastructure projects. I stress on infrastructure projects because of the multiplier impact they have on the economy in terms of creating jobs, generating domestic demand and enhancing the competitiveness in the economy. 
 
The government has to explore avenues regarding how to mobilise the requisite resources. Apart from foreign funds, the government must now seriously work out a mechanism on how to channelise the long-term funds lying with insurance and pension funds into infrastructure financing. Infrastructure projects have long gestation periods and these long-term funds ideally suit the asset-liability profile of infrastructure projects. 
 First and foremost, direct taxes need to be rationalised and the tax net needs to be spread. Compared to our peers, the effective tax rates, both income and corporate taxes continue to remain high – in fact, the tax rates in India are among the highest in Asia. On the indirect tax front, we have been already told that <keyword id="6354679" type="ORGANIZATION" weightage="20" keywordseo="GST">GST</keyword> will be rolled out from 1st April 2016. Its roll-out has got deferred on multiple occasions earlier, let us hope it does not get delayed any further, and let us hope that the Centre and the states are able to arrive at a consensus on implementing a unified GST rate. That would go a long way in creating a seamless unified market and bring in certainty in terms of tax incidence. 
 
Infrastructure financing and refinancing must be put in place to fast-track infrastructure creation. In the last budget, Infrastructure Investment Trusts (InvITs) were announced on the lines of Real Estate Investment Trusts. However, the tax incidence needs to be fine-tuned in order to make the InvITs more effective. Also, mobilising resources from abroad should be eased for all the infrastructure financing vehicles. Recently, RBI has permitted resident entities/companies in India, authorised by the government, to issue tax-free, secured, redeemable, non-convertible bonds in rupees to persons residing outside India to use such borrowed funds for on lending/re-lending to the infrastructure sector and for keeping in fixed deposits with banks in India, pending utilisation by them for permissible end-uses. This implies that eligible entities will be only the companies controlled and owned by the Government of India, such as Power Finance Corporation, Rural Electrification Corporation, National Housing Bank, etc. Ideally, government should expand the list of such eligible entities beyond PSUs and include Public Financial Institutions (PFIs) also for issuing overseas bonds. 
 
Keeping in mind the lending constraints of the banks, the government should ensure that the infrastructure financing NBFCs, namely the asset financing companies (NBFC-AFCs) and the infrastructure finance companies (NBFC-IFCs) are given the maximum policy support so that they are able to carry out their functions seamlessly. 
 
It is imperative to design long tenure financial instruments with attractive returns so that domestic savings can be channelised into infrastructure creation, instead of being invested in unproductive assets like gold. Inflation-linked bonds need to be tried out as well. Ideally any financial institution which has been accorded public financial institution (PFI) status should be allowed to mobilise resource by using these instruments. 
 
Infrastructure sector 
 
In Indian infrastructure, some of the major problems faced by infrastructure project developers (especially roads, power and mining) relate to green clearances, land acquisition or absence of fuel linkages. These pertain to the quality of governance and the pace of official decision-making processes, rather than financing per se. Indeed, it is the inability to secure statutory approvals in time that has led to many infrastructure projects ending up as stressed loans for banks. To make our PPP model successful, it is essential that the government plays its part in the partnership by getting all the necessary approvals within some time frame. If the responsibility of getting all these clearances is also left to the private player, time and cost overruns are bound to make many a project commercially unviable. I do not think it will be possible for the finance minister to address problems like these in a single Budget, but ideally on matters related to land and environment, I feel state governments should get greater say in deciding which norms need to be adhered to and which clearances are compulsory. State governments have better knowledge of ground realities, and thus, should have a greater say in deciding what is good and not good for their states. State autonomy in such matters will ultimately usher in a healthy inter-state competition that will augur well for the economy as a whole. The finance minister must address this aspect outside the Budget exercise. 
 
In the infrastructure space, I feel the major focus areas should be the power and road sectors. Let me briefly share my thoughts on how to improve the scenario in these two sectors. 
 
100% fuel linkage to all power plants must be ensured. This calls for reforms on the coal-mining front by allowing the entry of private sector for mining development. Inducting state-of-the-art technology through private sector participation will augment production and control pollution levels. The government has to ensure that the right quality of coal is available to the user from the nearest possible source in order to keep transportation costs under control. This has to be supplemented with distribution sector reforms by revisiting tariff-setting norms, which should adopt a principle of not passing through the aggregate technical and commercial (AT&amp;C) losses beyond a certain percentage. The concept of different feeder lines for different user groups will also help in arresting leakage. Reforms across the entire value chain can help in keeping the cost of power production under control, and thus, help in making power available to user groups at reasonable tariffs while maintaining the commercial viability of investments in power sector. 
 
On the road front, government is now inclining towards engineering, procurement and construction (EPC) rather than build-operate-transfer (BOT). I feel both EPC and BOT must co-exist. EPC approach will limit the government’s ability to spend on more number of projects. Also, the government needs to explore new financing techniques which can address the mismatch between loan tenure and concession period (the former much shorter than the latter, thus leading to problems in servicing loans). For BOT projects, a financing structure can be thought of where the repayment schedule is such that 50% of the total debt is repaid during the loan period and balance 50% is to be repaid by way of bullet payment at the end of the loan period. The bullet payment shall be made by arranging refinancing of the balance 50% debt, repayable over the remaining concession period. This would enable practically spreading out the repayment of the debt over the entire concession period. Steps like these can help in improving the investment sentiment quickly. 
Image: Thinkstock

You Searched For "rbi bullet" and got 15 results

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BI India Bureau

5 reasons which prove Raghuram Rajan is the James Bond of Dalal Street!

Usha Rani Das

Fast cross-border payments to make it difficult to check money laundering, terror funding: Fed official

PTI

Moosewala case: Interpol issues notice to Canadian resident Goldy Brar

PTI

SBI says tax cuts, and not rate cuts, can lift consumption

PTI

Is PM Modi reading this? Global managers think Raghuram Rajan is one of the best bankers in the world

BI India Bureau

​Raghuram Rajan assures that rupee is bulletproof and there is nothing to worry about

BI India Bureau

Pre-budget expectations: Script India’s growth story with clear, time-bound milestones

Guest Author

The new CEO behind Burger King, Popeyes, and Tim Hortons reveals his plans for the future of the chains

Kate Taylor

Raghuram Rajan assures that rupee is bulletproof and there is nothing to worry about