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<ul><li>The Reserve Bank of India (RBI) Governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> was doling out optimism to the market at today’s Monetary Policy Committee (<keyword id="6369693" type="UNKNOWN" weightage="20" keywordseo="MPC">MPC</keyword>) briefing. </li><li>The MPC will be expanding the limit of open market operations (OMOs), providing on-tap TLTRO of ₹1 lakh crore, and introducing State Development Loan (SDL) OMOs.</li><li>While these measures may ease some tensions in the short run, the markets still seek predictability and interest rate cuts. </li><li>Das said that both the apex bank and markets can operate in the same space in competition without necessarily being combative. </li></ul>The Reserve Bank of India (RBI) Governor Shaktikanta Das delivered a <a href="https://www.businessinsider.in/policy/economy/news/rbis-mpc-keeps-the-policy-rates-unchanged-to-maintain-accommodative-stance-for-inflation/articleshow/78566955.cms">chipper note</a> on India’s recovery today. According to him, even though there’s some disconnect between the RBI and the markets, all will be well — soon. However, what the market participants want is for the RBI to acknowledge that the economy is in deep trouble and, therefore, cut interest rates further, boost money supply, and ease credit. <div type="Article" hostid="261" msid="78566955" title="RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged" mstype="2" mssubtype="0"></div> The deep contraction of economic growth witnessed in the first quarter is behind us, he said, while emphasising that some silver linings are already visible. However, not all that glitters is gold. “We remain circumspect about generalising these early greenshoots, as they have benefitted from base effects and one-off shifts in some sectors,” said ratings agency ICRA. Despite Governor Das’ attempt to ease those tense nerves in the market, the argument seems far from over. “The <keyword id="64190" type="POSITION" weightage="20" keywordseo="RBI-Governor">RBI governor</keyword>'s push for optimism is bordering on the edge of hope,” said Sushil Kedia, the founder of KEDIANOMICS. “What's going to happen over the next one month or three is anybody’s guess.” <div type="image" title="India gdp by quarter" msid="78574635" hostid="261" caption="&amp;lt;p&amp;gt;India&amp;#39;s GDP numbers over the last two years and RBI&amp;#39;s expectations for the second half of the fiscal year&amp;lt;/p&amp;gt;"></div> The question to ask here is not who is right and who is wrong, but what happens if any one of them is wrong. If the markets are wrong and the economy recovers by March 2021, they will be in for a surprise. However, if the RBI is wrong and the economy is worse off than the picture painted by the Governor, the implication may be more dire for everyone in the country. Not just growth, RBI hopes the inflation wave will also ebb on its own “MPC has decided to look through the current inflation as a transient hump,” Governor Das explained, adding that inflation will ease between January and March next year. However, Kedia is less sanguine than the RBI Governor. “The interest rate cycle has been so overstretched and soft for so long, that I do see signals in long term data analysis, that at any point far sooner than one would expect, some global events will start reversal of the interest rate cycle,” he said. <div type="image" title="INflation india (1)" msid="78574672" hostid="261" caption="&amp;lt;p&amp;gt;Inflation in India since the outbreak of the coronavirus pandemic in the country&amp;lt;/p&amp;gt;"></div> “The relative economic growth differential between China and the rest of the world is almost 13-14%,” he added. The point Kedia is making is that if inflation rises in the rest of the world, even India will have to raise interest rates to tackle the prices, and the RBI is not preparing for it. While not the most obvious possibility, only time will tell if Kedia’s fear is proven right. RBI’s efforts have been lauded but in parts While the RBI has opened the liquidity taps time and again, a big concern in the market is that both central and state governments need to borrow more and more to meet the rising expenses due to the pandemic. The RBI said that it would buy long-term bonds — issued by both states and the centre — on tap worth ₹20,000 crore, up to ₹1 lakh crore in the coming days. <div type="image" title="india govt debt" msid="78574919" hostid="261" caption="&amp;lt;p&amp;gt;Indian government owes lenders more than &amp;#8377;101 trillion&amp;lt;/p&amp;gt;"></div> That would provide the money states need, but it will also mop up the funds that would have otherwise been available for private borrowers. In these challenging times, it is believed that lenders would rather give money to a government than risky private parties. And that would mean that the borrowing rates for private companies will remain higher than what it should have been. “It also remains to be seen if the commitment to facilitate state and central government borrowing, as well as the explicit signals aimed at softening yields, are adequate for bond markets to shrug off concerns regarding the fiscal health of the central and state governments,” ICRA pointed out. Back to the demand for another rate cut Essentially, private borrowers are back to seeking interest rate cuts, which the RBI seems reluctant to execute at this point. “These (measures announced today) should be beneficial for banks who are comfortable with the credits of corporates to lend as banks' borrowing rates are fixed. In case the repo rates are cut again, banks can refinance at lower rates also,” said Murthy Nagarajan, the head of fixed income at Tata Mutual Fund. <div type="image" title="Copy of TCS share price 2" msid="78575065" hostid="261" caption="&amp;lt;p&amp;gt;Nifty 50 closes above 11,900 points after RBI&amp;#39;s announcement today&amp;lt;/p&amp;gt;"></div> Instead of directly cutting rates, the RBI has offered up open market operations (OMOs), which — according to Abhishek Goenka, the founder and CEO of India Forex Advisors (IFA) — will help bring borrowing rates down in the commercial paper market. OMOs are conducted by the central bank to give or take currency from a bank or group of banks by buying or selling government bonds on the open market. It’s an instrument banks can use to increase or shrink liquidity in the market. “RBI was doing OMOs on an ad hoc basis,” explained Goenka, essentially saying that while RBI may be taking necessary steps, they haven’t been very predictable. And markets hate surprises. <div type="image" title="Copy of nifty50" msid="78575238" hostid="261" caption="&amp;lt;p&amp;gt;India&amp;#39;s 10-year bond yeilds over the last one month&amp;lt;/p&amp;gt;"></div> Until September 30, it wasn’t clear how cash-strapped state governments would find the money to meet the additional expenses in the wake of the pandemic. The markets are glad that RBI has opened up the emergency borrowing window — called ways and means advances or WMA — <a href="https://www.businessinsider.in/policy/economy/news/india-leaves-borrowing-calendar-unchanged-target-remains-at-12-lakh-crore/articleshow/78407506.cms">until the end of the fiscal year by 60%</a>. WMA essentially means that governments can borrow directly from the RBI to meet their emergency needs. That leaves more money in the market for private borrowers. While the decision came just in time, there was enough fear and chaos in the run-up to it. What the markets want are predictability and interest rate cuts. Meanwhile, the Governor has asked the market to keep the faith. “We look forward to cooperative solutions for the borrowing program for the second half of the year… These views can be competitive without being combative,” he said. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/rbis-mpc-keeps-the-policy-rates-unchanged-to-maintain-accommodative-stance-for-inflation/articleshow/78566955.cms">RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged</a> <a href="https://www.businessinsider.in/business/corporates/news/tcs-beats-accenture-to-become-the-worlds-most-valuable-it-services-company/articleshow/78566487.cms">TCS beats Accenture to become the world’s most valuable IT services company — but this not the first time it has raced ahead</a> <a href="https://www.businessinsider.in/india/news/union-minister-ram-vilas-paswan-dies-at-74/articleshow/78558640.cms">India's consumer affairs minister Ram Vilas Paswan passes way at 74</a> <a href="https://www.businessinsider.in/science/space/news/mars-will-appear-bigger-redder-and-brighter-on-october-13-and-wont-get-this-close-to-earth-again-until-2035/articleshow/78556539.cms">Mars will appear bigger, redder, and brighter on October 13 — and won’t get this close to Earth again until 2035</a>

RBI Governor wants markets to keep the faith but traders want something more

The rupee declined by 76 paise to close at 82.61 against the <keyword id="6368584" type="General" weightage="20" keywordseo="us-dollar" source="Orion">US dollar</keyword> on Tuesday due to heavy selling pressure in domestic equities and rising crude prices in the overseas markets. In addition, investors remained concerned over continued foreign capital outflows ahead of the <keyword id="15713845" type="General" weightage="20" keywordseo="RBIs-policy-announcement" source="Orion">RBI's policy announcement</keyword> on Wednesday, forex dealers said. At the interbank foreign exchange market, the local unit opened weak at 81.94, then slipped further to end at 82.61, registering a fall of 76 paise. During the day, the local unit witnessed an intraday high of 81.94 and a low of 82.63. In the previous session on Monday, the rupee had settled down by 52 paise at 81.85 against the dollar. The dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.05 per cent to 105.24. Global oil benchmark Brent crude futures rose 0.64 per cent to USD 83.22 per barrel. On the domestic equity market front, the 30-share BSE Sensex fell 208.24 points or 0.33 per cent to end at 62,626.36, while the broader NSE Nifty 58.30 declined points or 0.31 per cent to 18,642.75. Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday as they sold shares worth Rs 1,139.07 crore, according to exchange data. The World Bank on Tuesday revised upwards its GDP growth forecast for India to 6.9 per cent for 2022-23, saying the economy was showing higher resilience to global shocks. In its India Development Update, the World Bank said the revision was due to the higher resilience of the Indian economy to global shocks and better-than-expected second-quarter numbers. The Reserve Bank's rate-setting panel on Monday started brainstorming for the next round of monetary policy amid expectations of a moderate interest rate hike of 25-35 basis points as inflation has started showing signs of easing and economic growth tapering. The RBI has hiked key benchmark lending rate by 50 basis points (bps) thrice since June over and above an off-cycle 40 bps increase in the repo in May. RBI Governor Shaktikanta Das would be announcing the bi-monthly monetary policy on Wednesday (December 7) at the conclusion of the three-day Monetary Policy Committee (MPC) meeting. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/rupee-has-fared-relatively-well-in-2022-versus-other-emerging-market-peers-world-bank/articleshow/96028636.cms" style="">Rupee has fared relatively well in 2022 versus other emerging market peers: World Bank</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/world-bank-revises-indias-gdp-growth-forecast-upwards-to-6-9-for-fy23/articleshow/96023459.cms">World Bank revises India's GDP growth forecast upwards to 6.9% for FY23</a>

Rupee slumps 76 paise to close at 82.61 against US dollar

Chennai, With the <keyword id="19899810" type="General" weightage="20" keywordseo="reserve-bank-of-india" source="keywords">Reserve Bank of India</keyword>'s (<keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword>) Monetary Policy Committee (MPC) deciding to retain the repo rate at 6.5 per cent, economists are of the view that a rate cut may not happen any time soon or at least for next six months, said senior economists. In a 5:1 decision, the MPC which met on February 6-8, decided to hold the repo rate -- the rate at which the RBI lends to banks -- at 6.5 per cent. The RBI MPC also decided not to change its stance to 'neutral' from 'withdrawal of accommodation'. "It was no surprise that RBI MPC decided to keep the status quo on the interest rates for the sixth consecutive time. However, RBI continued to sound hawkish as against the market expectations and has not provided any indication of the timing of the change in monetary stance from withdrawal of accommodation," said <keyword id="20504468" type="General" weightage="20" keywordseo="suman-chowdhury" source="keywords">Suman Chowdhury</keyword>, Chief Economist and Head - Research, Acuite Ratings &amp; Research. "Given the tone of the MPC statement and the expectation of growth buoyancy, we believe that the likelihood of any rate cut by RBI has significantly reduced over the next six months," Chowdhury added. The RBI MPC will not cut the repo rate ahead of the US Federal Reserve, said Madhavi Arora, Lead Economist, Emkay Global Financial Services. "We understand that shifting debates on global narratives requires the RBI to be flexible as well. We have long maintained that the RBI's policy has been somewhat pegged to the Fed, specifically in the last two years, even as it formally targeted inflation. The swift turn of tone and action pivots of the RBI in the last two years have been influenced purely by global narrative. We do not see RBI preceding the Fed in rate cuts," Arora said. Predicting that RBI will remain cautious owing to high food inflation, CARE Ratings's Chief Economist Rajani Sinha said: "Healthy economic growth gives room to the Central Bank to maintain status quo for some more time." "However, in the second half of the year, as domestic inflationary concerns recede and the US Fed starts cutting rates, we can expect a shallow rate cut by RBI. On the liquidity front, RBI will continue to intervene through appropriate tools as required," Sinha said. <keyword id="20504469" type="General" weightage="20" keywordseo="sujan-hajra" source="keywords">Sujan Hajra</keyword>, Chief Economist &amp; Executive Director, Anand Rathi Shares and Stock Brokers, was also of view that rate cut may not happen any soon and RBI will be on wait and watch mode. "With RBI's inflation projection of 4.5% for FY25, any expectations of cuts coming in the current year become unlikely. We think the progress in food prices will be the key monitorable for RBI's tone in the upcoming policy. Like other central banks, higher growth for the current and next year gives RBI more headroom to be on a wait-and-watch mode," Hajra said. As to the 7% economic growth rate for FY25 stated by RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword>, Chowdhury said: "They have significantly upgraded their growth prospects for the next fiscal to 7.0%, reflecting that there are minimal concerns on economic growth at this time." "RBI's assessment on global growth also appears to be positive versus last year and it also believes that central banks are unlikely to resort to a pivot within a short period. Our outlook on the domestic growth prospects are moderate with a base forecast of 6.3% for FY25, given the visible weakness in the private consumption growth which is estimated at 4.4% in FY24 in the NSO estimates," Chowdhury said. "On the inflation front, the base forecast for headline CPI in FY25 is set at 4.5% which in our opinion has significant upside risks if the growth really maintains such a high level of momentum and if there are even moderate risks in the monsoon behavior," Chowdhury added.

RBI may not cut repo rate any soon or for six months: Economists

<ul><li><keyword id="46717" type="CITY" weightage="20" keywordseo="IndusInd-Bank">IndusInd Bank</keyword>, <keyword id="6986952" type="UNKNOWN" weightage="20" keywordseo="IDFC-First-Bank">IDFC First Bank</keyword>, and <keyword id="97186" type="CITY" weightage="20" keywordseo="JK-Bank">J&amp;K Bank</keyword> stocks are soaring in trade today, led by the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI) committee’s recommendation to increase the cap on promoters’ stake from 15% to 26%.</li><li>The proposed change comes at a time when banks need the infusion of funds to deal with the outcome of the COVID-19 pandemic on borrowers.</li><li>Billionaire Uday Kotak, promoter of <keyword id="46013" type="CITY" weightage="20" keywordseo="Kotak-Mahindra-Bank">Kotak Mahindra Bank</keyword>, may now also be able to cement his position in courts where he was arguing to retain 26% of his shareholding.</li></ul>IndusInd Bank’s shares are up over 4% after the Reserve Bank of India’s (RBI) Internal Working Group (IWG) recommended that the cap on promoters’ stake, in the long run, should be raised from the current level of 15% to 26%. <div type="image" title="indusind bank share price" msid="79363913" hostid="261" caption="&amp;lt;p&amp;gt;IndusInd Bank share price over the last one month&amp;lt;/p&amp;gt;"></div> This brings grand tidings for the bank as its promoter, the Hinduja Group, has indicated its interest to increase shareholding. “We further estimate that, at the current market price, promoters could infuse up to ₹10,000 crore to increase their stake to 26% at the bank versus 14.85% currently,” said Motilal Oswal Financial Services in its report. Other banks are also gaining ground, with Jammu &amp; Kashmir Bank leading the pack, up by 13.3%, and IDFC First Bank also soaring by 6.4%. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">% change in share price </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Jammu &amp; Kashmir Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">13.30 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">IDFC First Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.4% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">IndusInd Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">4.15% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">RBL Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1.77% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Kotak Mahindra Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-0.14% </td></tr></tbody></table>Source: Nifty/BSE, share prices as of 11:20am Kotak Mahindra Bank’s share price continues to trade flat While Kotak Mahindra Bank’s shares continue to trade flat, the increase in the cap on promoter stake is favourable for its promoter Uday Kotak as well. If accepted, this recommendation may cement the case he’s making to be allowed to retain a 26% stake in Kotak Mahindra Bank. <div type="image" title="kotak mahindra bank share price" msid="79363928" hostid="261" caption="&amp;lt;p&amp;gt;Kotak Mahindra Bank share price over the past one month&amp;lt;/p&amp;gt;"></div> “We view this as a positive development across the banking sector, especially for the promoter-driven banks. This would help promoters have more ‘skin in the game’,” noted Nirmal Bang Securities. According to analysts, increasing the cap on promoters’ sharing holding in banks also levels the playing field for other stakeholders that may have already reduced their shareholder as per RBI’s existing guidelines. The recommendation is also coming at a crucial time when banks need more capital to deal with the outcome of the COVID-19 pandemic after the stay on moratorium is lifted by the Supreme Court. SEE ALSO: <a href="https://www.businessinsider.in/tech/apps/news/how-to-earn-money-at-home-from-googles-task-mate/articleshow/79362215.cms">Google is testing ‘Task Mate’ in India, which lets users earn money for doing tasks on their smartphones</a> <a href="https://www.businessinsider.in/tech/apps/news/hdfc-banks-net-banking-upi-services-and-atms-down-due-to-data-centre-outage/articleshow/79344484.cms">HDFC Bank’s net banking, UPI service and ATMs were down due to a 'data centre outage' but RBI demands more detailed information</a> <a href="https://www.businessinsider.in/science/environment/news/mount-everest-home-to-microplastics-and-melting-glaciers/articleshow/79324609.cms">Microplastics found at the highest point on Earth as the glaciers around Mount Everest’s death zone melt</a>

IndusInd Bank surges over 4% after RBI committee proposes to increase the cap on promoter stake in private sector banks

New Delhi, Mar 8 () Allaying concerns over banking sector health in the wake of Yes Bank fiasco, Chief Economic Adviser Krishnamurthy Subramanian on Sunday said Indian banks are well capitalised and there is no reason to worry.He further said that it is a wrong method to assess a lender's health based on the ratio of deposit to m-cap (market capitalisation)."What I want to emphatically state that the m-cap ratio is a totally incorrect metric for assessing the safety of the banks. No banking sector expert or banking regulator uses this measure," Subramanian said while addressing a select mediapersons at his office here.After what all unfolded about the crisis-hit Yes Bank recently, top government functionaries including Finance Minister Sitharaman, RBI Governor Shaktikanta Das and the chief economic advisor have been trying to assuage panicked investors.The CEA said that no banking sector experts or regulators use deposit/m-cap ratio as a measure to gauge resilience of banks rather it is the capital to risk weighted assets ratio (CRAR) and other such metrics that can rightly gauge the health of banks."What banking sector experts and regulators use is what is called the CRAR. It is important to keep this in mind that the international norms for CRAR is 8 per cent and Indian banks on an average have a CRAR of 14.3 per cent. "So, 8 per cent is the mandated minimum norm and our banks on the average have 14.3 per cent (CRAR). Now 14.3 per cent versus 8 per cent almost translates into 80 per cent greater capital than the international norms," he said.He further said that the Reserve Bank of India (RBI) mandates the Indian banks to keep CRAR at 9 per cent. "Even compared to that our banks have 60 per cent more capital. So this is something that is very important."Giving reasons as to why the deposit/m-cap ratio is an incorrect measure to assess the health of the banks, he said the m-cap ratio is essentially the ratio of the deposits that a bank has to its market capitalisation."Now if you compare for instance any bank lets say a private sector bank with the State Bank of India, State Bank of India would have an order of magnitude of higher m-cap ratio. "But the State Bank of India is as safe as the any other bank in the world. In fact it is the only Indian bank to be the part of the top 100 banks internationally."So this ratio does not really capture the safety of a bank because it is actually affected by the market capitalisation. "As you all know the stock price of a bank can change minute to minute, as a result the m-cap ratio will also change minute to minute but the solvency cannot change minute to minute," Subramanian said.He also emphasised that the Indian banks on an average have a CRAR of 14.3 per cent, which is way more higher -- about 80 per cent greater than the global measures."So our banks on an average are very-very well capitalised, so there is absolutely no reason to worry. Also, the government has increased the limit for deposits that are insured to up to Rs 5 lakh, which covers a large majority of the deposits."Together with the fact that our banks are well capitalised and the fact that the deposits are well taken care of, there is absolutely no reason for anyone to worry," he said. A day after imposing a 30-day moratorium on Yes Bank and capping withdrawal limit at Rs 50,000, the RBI on Friday evening had issued a draft reconstruction scheme for the private sector lender. As per the RBI's draft reconstruction scheme, State Bank of India will pick up 49 per cent stake in the crisis-ridden Yes Bank under a government-approved bailout plan. KPM MKJ

Indian banks well capitalised, no reason to worry: CEA

Earlier this week, the Indian <keyword id="6355302" type="General" weightage="100" keywordseo="rupee" source="Orion">rupee</keyword> nosedived 51 paise, <a href="https://www.businessinsider.in/finance/news/rupee-hits-all-time-low-of-77-42-against-us-dollar/articleshow/91439581.cms">hitting an all-time low</a> of ₹77.41 against the US dollar. <div type="image" title="Rupee hit a lifetime low of 77.41 earlier this week" msid="91525914" hostid="261" caption="&amp;lt;p&amp;gt;Rupee hit a lifetime low of 77.41 earlier this week&amp;lt;/p&amp;gt;"></div> Earlier last week, the Indian rupee had appreciated eight paise after India’s central bank, the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword>, <a href="https://www.businessinsider.in/finance/banks/news/rbi-hikes-repo-rate-by-40-basis-points-to-4-4-as-it-seeks-to-reign-in-inflation/articleshow/91311941.cms">increased interest rates</a> by 40 basis points on May 04, only to tumble further below this week. 100 basis points make one percent. The rupee has been staggering since the beginning of the year. <div type="image" title="Rupee depreciation in last one month" msid="91525962" hostid="261" caption="&amp;lt;p&amp;gt;Rupee depreciation in last one month&amp;lt;/p&amp;gt;"></div> This depreciating rupee, which is a fall in the value of a currency in terms of its exchange rate versus other currencies, is likely to have a direct impact on your daily expenditure. Imports now more expensive, while exports are cheaper With a small dip in the <keyword id="50739" type="General" weightage="20" keywordseo="indian-currency" source="Orion">Indian currency</keyword>, the Indian government has to pay a little extra for the same goods it was importing earlier. So, importing items get more expensive. Oil imports will get costlier, which has a direct impact on prices of many other things – anything that needs to be transported will (if it hasn’t, already) now see an increase in its prices. India currently imports <a href="https://www.businessinsider.in/finance/news/crude-oil-surges-significantly-to-109-per-barrel-as-countries-look-for-options-other-than-russia/articleshow/89936843.cms">85% of its oil demand </a>and the rise in crude oil prices directly increases import bill and expenses. Your investment portfolio is likely to be affected If foreign investors pull out of Indian equities, Indian currency depreciates, leading to a sharp decline in equity markets. Foreign investors have already <a href="https://www.businessinsider.in/stock-market/news/foreign-investors-have-pulled-out-1-5-lakh-crore-from-the-indian-markets-in-2022-so-far-heres-why/articleshow/91485411.cms">pulled out over ₹6,400 crore</a> from the Indian equity markets in the first four trading sessions of May when the Reserve Bank of India (RBI) and <a href="https://www.theguardian.com/business/federal-reserve">US Federal Reserve</a> raised interest rates. Given the headwinds in terms of elevated crude oil prices, inflation, and monetary tightening (also known as Quantitative Tightening), market volatility is expected to remain high as foreign investors could continue to withdraw funds. Foreign education could get more expensive If you are planning to study abroad, you might have to restructure your budget. You will have to shell out more rupees for every dollar you spend. Simply put, you will have to spend over 21% more in terms of rupee to buy the same number of dollars. If you budgeted ₹20 lakh for your education abroad, you will now have to increase it to ₹24.2 lakh. <div type="image" title="Foreign education will get more expensive" msid="91525979" hostid="261" caption="&amp;lt;p&amp;gt;Foreign education will get more expensive&amp;lt;/p&amp;gt;"></div> International travel now more expensive During summer, the travel sentiment is high among consumers. As the rupee loses value against the US dollar, your plans to travel abroad will burn a deeper hole in your pocket – like everything, paying for your purchases in foreign currency, moreso the US dollar, is now more expensive than ever before. A weaker rupee results in expensive imports, and contributes to inflation <a href="https://www.livemint.com/economy/indias-inflation-likely-accelerated-to-18-month-high-in-april-poll-11652181052993.html">India's retail inflation</a> surged to an 18-month high in April, largely driven by rising fuel and food prices and staying well above the RBI's upper tolerance limit for a fourth consecutive month, a Reuters poll found. As the rupee weakens against the dollar and import prices hike, companies may not be able to absorb this increase in cost and may pass it on to consumers. Increase in your home loan EMIs and more To keep inflation in check, RBI resorts to increasing its interest rates. If the RBI expects that inflation will rise beyond its tolerance limit, it hikes the rate at which banks borrow money from the RBI, which is also known as the repo rate. When repo rate increases, the cost of borrowing for banks also increases, which is passed to their account holders by increasing the interest rate on loans and deposit rates. Some banks have already announced an increase in interest rates on home loans – HDFC has <a href="https://economictimes.indiatimes.com/wealth/borrow/hdfc-hikes-home-loan-interest-rates-this-is-how-much-your-emi-will-go-up-by/articleshow/91434723.cms">increased</a> its interest rates for retail home loans by 30 basis points, with the new rates now in the range of 7-7.45%. But what has caused the decline of the Indian rupee? The value of any currency depends on its demand in the market. If the demand increases, its value goes up, which is known as appreciation. And if the demand for a currency declines, its value depreciates. If more foreign investors invest in Indian businesses and projects, the demand for Indian currency goes up. To be able to invest in India, foreign companies have to first convert their currency into Indian rupees. This increase in demand for the rupee strengthens its value against the US dollar. Recently, more and more overseas investors have pulled out a big chunk of their money from the Indian market, consequently <a href="https://www.businessinsider.in/stock-market/news/the-stock-markets-are-going-through-a-short-term-correction-and-now-might-be-a-good-time-to-invest-in-valued-stocks-say-analysts/articleshow/91369077.cms">affecting market sentiment</a> and currency’s decline. <div type="image" title="Foreign investors have pulled out `1.5 lk cr in 2022 so far" msid="91526033" hostid="261" caption="&amp;lt;p&amp;gt;Foreign investors have pulled out `1.5 lk cr in 2022 so far&amp;lt;/p&amp;gt;"></div> The <a href="https://www.theguardian.com/business/federal-reserve">Federal Reserve</a> has raised interest rates for the first time since 2018, as the US central bank struggles with soaring inflation, the impact of the war in Ukraine and the COVID crisis. As interest rates soar, investors start pulling money out of riskier investments like equities, commodities and foreign markets. The annual <a href="https://www.businessinsider.in/policy/economy/news/inflation-slowed-in-april-for-the-first-time-in-8-months/articleshow/91496347.cms">inflation rate in the US</a> is now at 8.3%, which also affects market sentiment. Here’s an <a href="https://youtu.be/eADkfR1PUeU">explainer by Stocktwits India </a>on how the global inflation rate affects India and what the government is doing to combat it. Therefore, foreign investors are exiting their investments in India, and shoring up their investments in the relatively safer markets in the US. On the other hand, when Indian businesses and companies import foreign goods and products, such as crude oil, gold, consumer electronics, among other things, they convert their rupees into dollars, which is the global currency for international trades. If imports exceed exports, demand for the dollar goes up and the rupee weakens against it. Since India has been a <a href="https://www.indiatoday.in/news-analysis/story/current-account-surplus-india-net-exporter-explainer-1705281-2020-07-28">net importer</a>, we import more than we export, the rupee has gradually depreciated over time. <div type="image" title="Rupee vs Dollar in the last five years" msid="91526067" hostid="261" caption="&amp;lt;p&amp;gt;Rupee vs Dollar in the last five years&amp;lt;/p&amp;gt;"></div> As the upward trend of the graph shows, you had to shell out ₹64 in May 2017 for 1 US dollar. Today, you have to pay ₹77.26 in exchange for a dollar. To deal with this <keyword id="688216" type="General" weightage="20" keywordseo="Rupee-depreciation" source="Orion">rupee depreciation</keyword>, you can reevaluate your investment portfolio and consider companies that have a substantial amount of foreign exchange earnings such as in sectors like pharma, FMCG, and IT. Here's a short video <div type="image" title="Here&amp;#39;s what happens when the Rupee depreciates" msid="91526220" hostid="261" caption="&amp;lt;p&amp;gt;Here&amp;#39;s what happens when the Rupee depreciates&amp;lt;/p&amp;gt;"></div> Disclaimer: This is not investment advice, it is for informational purposes only.

SIMPLY PUT: Why is the rupee falling and how it affects your food, education, healthcare and other expenses

I have earlier written <a href="http://www.businessinsider.in/Lenders-Yet-To-Reward-Good-Credit-Behaviour-Can-We-Break-The-Logjam/articleshow/38610787.cms">Part 1</a> of this topic – the surprise I had over the changed (increased) interest rate on my credit card in spite of having a wonderful credit history and a high score. I have also discussed some possible reasons as to why this is happening – why I am not getting a lower rate of interest. Now I want to talk about possible ways to break the logjam. 
 
But to discuss this, we need to understand why interest rates are so high on credit cards. The main reasons are: 
1. Very high non-performing loans or NPLs resulting in higher provisioning, losses and write-offs. 
2. High operating costs including technology, salaries and other infrastructure. 
3. Seemingly no ‘nudge’ from the regulator on what looks like an extraordinary interest rate. 
 
So why are NPLs so high? Although no published or authenticated figures are available, the numbers doing the rounds range from 8-15% of the portfolio. These are alarming figures and to put them into perspective, housing loan NPLs are less than 1%. Yes, we do agree that the very nature of credit cards makes them more risky and that explains the higher NPLs to some extent. But the current numbers are unacceptable by any standard, especially when they begin to be justifications for the high rates of interest. The main reasons for this are indiscriminate acquisition methods and questionable underwriting and approval policies. I do believe that card issuers have become more sensitive and rationale now, but there is a huge legacy portfolio that needs to be ‘cleaned up.’ 
 
Card issuers should make their acquisition, risk and underwriting processes more conservative. That will reduce your <keyword id="796753" type="ORGANIZATION" weightage="100" keywordseo="NPL">NPL</keyword> numbers and you will be able to reduce interest rates. 
 
High operating costs could be another key issue. While one accepts there is a high investment in technology and back office operations to run an efficient card business, the pressure to recover this investment should be spread over a longer period, rather than what is currently in practice. Salaries, bonuses, performance incentives – again all of them are acceptable but can these be ‘tempered’ and brought down to more realistic numbers? 
 
Investment in technology is a one-time cost and should be viewed accordingly. It doesn’t have to be recovered in a shorter timeframe. Also, watch the other overheads – infrastructure and salaries. Salaries and bonuses seem to have skyrocketed with no logical justification except to say ‘the market is driving them.’ The question is – are we not the market? 
 The regulator in India has been incredibly proactive and done a great job of regulating a difficult and complex market, in fairly volatile conditions. However, for some reasons, the Reserve Bank of India has been silent on the interest rates being charged on credit cards by the commercial banks it regulates. It is more than 35% on an annual basis – does seem high, doesn’t it? The <keyword id="30067" type="ORGANIZATION" weightage="100" keywordseo="RBI">RBI</keyword> probably has reasons for its silence and may continue to maintain the status quo. 
 
Is there a strong case for the RBI to take a stronger view and a more proactive role in the current practice of charging the rates that card issuers do charge? Maybe cap it at no more than half of the current rates? 
 
Additionally and in conclusion I would like to leave everyone (RBI, card issuers and you, the reader) with some thoughts: 
 
1. The principle of risk versus reward has to come into play – why should I pay such a high rate when I have such a good score? 
2. Incentivise me for being such a good and regular servicer of my card. 
3. Do not make me subsidise the defaulter. 
 
And let us not forget one thing. The government has already realised that the collections from tax are higher once the tax rates are reduced. Therefore, if the banks lower their interest rates, people could resolve their credit issues and repay what they otherwise wouldn’t – resulting in higher earnings in spite of lower rates. 
 
Meanwhile, individuals like us should never overshoot the due date and always pay on time, so that the interest cost is ‘zero.’ 
 
About the author: Satish Mehta is the Founder and Director of Credexpert, a credit and debt counselling company in India. 
Image: Thinkstock

Lenders Yet To Reward Good Credit Behaviour: How To Break The Logjam (Part 2)

Mumbai, Mar 25 () Pegging the cost of the COVID-19 lockdown at USD 120 billion (approximately Rs 9 lakh crore) or 4 per cent of the GDP, analysts on Wednesday sharply cut their growth estimates and stressed on the need to announce an economic package. The Reserve Bank of India (RBI), which is scheduled to announce its first bi-monthly policy review on April 3, is set to deliver a deep rate cuts and it should also be assumed that the fiscal deficit targets will be breached, analysts said. Prime Minister Narendra Modi announced a three-week complete lockdown of the country to prevent the spread of the coronavirus infections in the country. The equity markets were in the red early into the trade on Wednesday, down 0.47 per cent. "We estimate that the cumulative shutdown cost around USD120 billion or 4 per cent of the gross domestic product (GDP)," British brokerage Barclays said in a note, revising down its FY21 growth forecast by 1.7 percentage points to 3.5 per cent. It specified the cost of the three-week nationwide lockdown to be alone at USD 90 billion, which is over and above the lockdowns announced by various states like Maharashtra earlier. They also said that the RBI is most likely to go for a 0.65 per cent rate cut in the April review and will slash interest rates further by 1 per cent during the course of the year. Domestic brokerage Emkay congratulated policymakers for acting earlier than other countries, but rued that there is not much to cushion the economic impact. "The Indian government has so far been largely silent on the economic impact from the lockdown, leave alone any measures to cushion the hit," it said. The unorganised sector, which is already reeling under the twin impact of demonetisation and goods and services tax (GST), will be pushed to the brink because of these measures, Emkay warned. It suggested soft loans to smaller businesses, loan restructuring and cash transfers as the possible tools the government can adopt as part of the economic package. Edelweiss said, India so far lags peers in a policy response to the crisis, which has been limited to liquidity support, installing a task force and some spending measures by states. India needs a lot more, it said, pointing out that there's plenty of monetary room but little option on the fiscal front. Finance Minister Nirmala Sitharaman, while announcing some measures to help the economy on Tuesday, had hinted that an economic aid package is in the making. Analysts at Barclays said the government will most likely invoke the cause for natural calamities under the fiscal prudence framework in FY21 and estimated the fiscal deficit to come at 5 per cent of GDP versus the 3.5 per cent budget target. AA ANSANS

Experts peg India's cost of COVID-19 lockdown at USD 120 bn

The <keyword id="6431122" type="General" weightage="100" keywordseo="euro" source="Orion">euro</keyword> and the dollar have reached parity for the first time in 20 years, signalling the market's assumption that the European economy is heading for a deep recession as a result of <keyword id="6358826" type="General" weightage="50" keywordseo="russia" source="Orion">Russia</keyword>'s invasion of <keyword id="6355101" type="General" weightage="20" keywordseo="ukraine" source="Orion">Ukraine</keyword>, <keyword id="5246880" type="General" weightage="50" keywordseo="euro-news" source="Orion">Euro News</keyword> reported. Today, 1 EUR equals 1 USD. The shift means European companies and consumers will pay more for the goods and services they import, while European exports become immediately cheaper in international markets. The euro has experienced a dramatic loss of value since early February when it was worth over $1.13. The fall accelerated in recent weeks as fear spread that Russia, the EU's main energy provider, was going to completely cut off gas flows in retaliation for Western sanctions, Euro News reported. All eyes will be on the euro to see if it ends up falling below the American dollar. The last time this happened was in November 2002, when the euro was worth $0.99. Since then, the euro enjoyed a steady rise, reaching almost $1.60 in the summer of 2008, when the Great Recession was wreaking financial havoc across the US. But Russia's full-scale attack against Ukraine has turned the tables around, taking a heavy toll on the EU's economy. The invasion has upended energy markets and sent gas bills soaring to all-time highs, Euro News reported. The sudden shock has triggered record-breaking inflation across the eurozone, with an 8.6 per cent figure in June, together with a gradual slowdown in economic activity. The combination of both factors has brought back the spectre of stagflation, a dangerous mix that depresses growth while goods remain excessively expensive for consumers and companies. The <keyword id="84979" type="General" weightage="50" keywordseo="european-central-bank" source="Orion">European Central Bank</keyword> has already hiked the interest rates in a bid to tame inflation and plans to continue doing so as the situation further deteriorates. But some analysts have criticised the <keyword id="60971" type="General" weightage="50" keywordseo="ecb" source="Orion">ECB</keyword> for moving too late compared to its counterparts in the US, the UK and <keyword id="6356687" type="General" weightage="20" keywordseo="canada" source="Orion">Canada</keyword>. "Maybe on some level, parity of Euro versus US Dollar is just a number," <keyword id="4243347" type="General" weightage="50" keywordseo="robin-brooks" source="Orion">Robin Brooks</keyword>, chief economist at the <keyword id="159732" type="General" weightage="50" keywordseo="institute-of-international-finance" source="Orion">Institute of International Finance</keyword> (IIF), wrote on Twitter. "But markets are made up of human beings who happen to care about levels, which gives parity a special psychological significance, not least since we haven't seen (parity) in 20 years. This is a big deal." SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/cryptocurrency/news/crypto-airdrops-here-is-everything-that-you-need-to-know/articleshow/92807961.cms">Crypto airdrops: Here is everything that you need to know</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/rbi-makes-more-efforts-to-take-rupee-international-with-new-framework/articleshow/92817742.cms">RBI makes more efforts to take Rupee international with a new framework</a>

One Euro equals one Dollar - for the first time in 20 years

Mumbai, Dec 30 () The rupee appreciated by 4 paise to settle at 71.31 against the US currency amid weakening of the US dollar in overseas markets even as crude oil prices surged.
 Subdued domestic equity markets and high crude oil prices restricted the gains in the rupee, analysts said.
 At the interbank foreign exchange market, the rupee opened at 71.36 against the US dollar. During the day, the domestic unit saw a high of 71.30 and a low of 71.39.
 The domestic unit finally settled at 71.31, higher by 4 paise over the previous closing price. On Friday the rupee had settled at 71.35 against the American currency.
 "Rupee traded with flat range trade between 71.28-71.41 mainly due to oil importers are buying dollars frequently for their month-end outflows," LKP Securities Senior Research Analyst (Commodity &amp; Currency) Jateen Trivedi said.
 According to V K Sharma, Head - PCG &amp; Capital Market Strategy, HDFC securities, "Indian rupee gains following weaker dollar index versus major trading currencies. The trading activity remained muted on global forex markets ahead of New Year holiday".
 On the domestic market front, the 30-share BSE Sensex ended 17.14 points, or 0.04 per cent, lower at 41,558. The broader NSE Nifty, however, closed 10.05 points, or 0.08 per cent, higher at 12,255.85.
 Foreign institutional investors (FIIs) remained net buyers in the capital markets, as they purchased shares worth Rs 81.37 crore on Friday, exchange data showed.
 Market participants, however said that rising crude prices weighed on the local currency.
 Brent futures, the global oil benchmark, rose 0.66 per cent to USD 68.61 per barrel.
 The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.11 per cent to 96.80.
 The 10-year government bond yield was at 6.51 per cent on Monday.
 "The benchmark 10 year bond yield steady at 6.51 per cent on central banks open market operation. RBI has conducted second successful "Operation Twist" of Rs 100 billion in Monday's session," Sharma said.
 The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.2214 and for rupee/euro at 79.1859. The reference rate for rupee/British pound was fixed at 92.5532 and for rupee/100 Japanese yen at 65.04. DRR MR

Rupee settles 4 paise higher at 71.31 against US dollar

Mumbai, Mar 9 () The rupee on Monday slipped past the 74-level against the US dollar to settle at 74.14 (provisional), down 27 paise tracking heavy selling in domestic equity market amid rising concerns over coronavirus-led economic slowdown.Forex traders said the rupee depreciated versus major trading currencies as a collapse in oil prices added to risk off sentiment caused by relentless spread of coronavirus across the globe.At the interbank foreign exchange market, the local currency opened at 73.99. During the day, it saw a high of 73.85 and a low of 74.17.The Indian currency finally settled at 74.14, lower by 27 paise against its previous close.The domestic unit had settled at 73.87 against the American currency on Friday."The sharp underperformance of INR was a reminder that there are no real safe havens in high-yielding emerging market forex. INR seems to have over-reacted to confirmation of COVID-19 infections while news of the RBI being forced to rescue a big private sector bank did not help," said Rajesh Cheruvu, Chief Investment Officer, Validus Wealth.In their biggest ever single-day drop in absolute terms, the BSE Sensex crashed over 1,941 points and the NSE Nifty tumbled 538 points as no let-up in coronavirus spread and a massive crude oil plunge fuelled global recession fears.Besides, both indices also marked their biggest intra-day fall of all-time.Benchmarks Sensex and Nifty slumped intra-day 2,467 points and 695 points, respectively.At the closing bell, the 30-share Sensex was down 1,941.67 points or 5.17 per cent at 35,634.95 -- the lowest level in about 13 months.The broader Nifty settled at 10,451.45, dropping 538 points or 4.90 per cent.Meanwhile, crude oil prices were in a free fall, plunging nearly 30 per cent to USD 32.11 per barrel after top exporter Saudi Arabia launched a price war in response to a failure by leading producers to strike a deal to support energy markets.Brent crude futures, the global oil benchmark, was trading 21.23 per cent down at USD 35.66 per barrel."Oil markets crashed more than 30 per cent after the disintegration of the OPEC+ alliance triggered an all-out price war between Saudi Arabia and Russia that is likely to have sweeping political and economic consequences," said VK Sharma, Head PCG &amp; Capital Markets Strategy, HDFC Securities. DRRBAL

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SIMPLY PUT: Why is the rupee falling and how it affects your food, education, healthcare and other expenses

Lenders Yet To Reward Good Credit Behaviour: How To Break The Logjam (Part 2)

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