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The Reserve Bank of India has raised concerns on the increase in assets of money market mutual funds (MMMFs) in the past few months. The central bank observed that the infusion of liquidity in the wake of the pandemic had led to a sharp decline in term rates. Even as deposit yields fell, assets under MMMFs have grown, indicative of a search for yield. “Such risk taking among institutional investors, specifically in illiquid investments to earn targeted returns, may lead to build-up of financial vulnerabilities, with adverse implications for financial stability,” the RBI said in its financial stability report released on Monday. Average net assets under management of such money market funds rose to Rs 96,210 crore in December, up 61 per cent over Rs 59,512 held in April, the data from Association of Mutual Funds in India shows. The central bank said excess returns of MMMFs had started to normalise after turning negative in the previous quarter, reflecting increased proportion of liquid

  The Securities and Exchange Board of India (Sebi) has asked lenders to Dewan Housing Finance Corp. Ltd (DHLF) for details on the credit rating claims raised by Oaktree Capital in its bid for the bankrupt mortgage lender, two people aware of the matter said. The private equity firm recently wrote to DHFL’s committee of creditors that, according to views from some credit rating agencies, non-convertible debentures worth ?21,000 crore that DHFL will issue under its ownership will have better credit ratings than those proposed by rival Piramal group. The stock market regulator has asked the DHFL administrator for names of the credit rating agencies cited by Oaktree, as offering any such views or ratings grade or outlook on future plans or instruments would be a violation of its regulations on credit rating agencies, according to the people mentioned above, who spoke on condition of anonymity. Sebi also asked the lenders about the stance taken by lenders in this respect. The regulator was

  India’s key money-market rates and yields on short-term debt are set to rise after the central bank took its first small step to unwind emergency pandemic measures. The Reserve Bank of India will aim to drain 2 trillion rupees ($27.3 billion) of banking funds via a 14-day reverse repo operation on Jan. 15, the central bank said in a statement late Friday. This is the first move in a phased normalization of the central bank’s liquidity operations, it said. There has been growing consensus among traders that the RBI will have to start draining excess cash, as surging liquidity caused money-market rates to drop below the central bank’s interest-rate corridor and distort asset pricing. Quantum Asset Management Ltd. and IDFC Asset Management Ltd. have been among those forecasting that short-end rates will rise faster than the long-end as a result, though nobody expects the central bank to abandon its easy policy. The announcement is “a clear signal from the central bank that it wants to s

  The Reserve Bank of India’s (RBI) resolve to keep bond yields under check and the loud signal emitted in favour of a stronger rupee swiftly translated into rallies in the bond and currency markets on Tuesday. The rupee closed at 72.87 a dollar, up 1.03 per cent from its previous close of 73.62. The 10-year bond yields fell 18 basis points to close at 5.942 per cent from its previous close of 6.117 per cent. While announcing the bond market related measures on Monday post market hours, the central bank had observed that the “recent appreciation of the rupee is working towards containing imported inflationary pressures.” The central bank in the past few sessions had stopped buying dollars and let the rupee appreciate in sync with the daily deluge of capital flows. The statement made the central bank’s intent clear. In the absence of meaningful export growth in a contracting global economy, the RBI was more willing to curb imported inflation through stronger rupee. On a larger theme tho

  Goods and services tax (GST) collections slumped to a three-month low in August, and came in 12 per cent lower year-on-year (YoY), indicating slower recovery in economic activity. However, compensation cess collections rose for the first time in five months, and 6 per cent YoY, amid the tussle between the Centre and states. The overall mop-up remained well below the Rs 1-trillion mark for the sixth straight month owing to the pandemic, even as unlocking began in June. GST collections stood at Rs 86,449 crore in August, compared to Rs 87,422 crore in July, according to finance ministry data. It was at 88 per cent of August 2019 collections. A large portion of the fall could be attributed to imports, which were down 23 per cent YoY, while domestic transactions were down just 8 per cent YoY. “During the month, revenues from imports were at 77 per cent and revenues from domestic transactions (including import of services) at 92 per cent of revenues from these sources during the same mont

  A conspicuous silence from the Reserve Bank of India regarding support for the nation’s bonds has left traders wondering whether the recent gains in yields is a new normal. The central bank may be trying to increase the attraction of sovereign debt by letting yields rise, according to PNB Gilts Ltd. The benchmark 10-year bond yield advanced to 5.97% on Wednesday, the highest since May. If that’s true, the RBI would be treading a delicate balance as a prolonged absence from the market could raise questions over support for the government’s record Rs 12-trillion ($160 billion) debt sales this fiscal year. Indian bonds are offering negative real rates, after a surge in inflation brought on by a supply crunch due to rolling lockdowns. “The RBI could protect the 6% level. The level is a psychological mark that the RBI may want to see that yields don’t rise over and above,” said Vijay Sharma, executive vice president for fixed-income at PNB Gilts. The losses may deepen if the central bank