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Showing posts from January 4, 2019

RBI is on Test Under Das. Is It Kingfisher 2.0?

Vijay Mallya, after a great run in building a liquor business, is now the poster boy of 21st century India’s Robber Barons, though more qualified men compete for that title. If banks are to be blamed partly for the magnitude of the losses in Kingfisher Airlines default, the remaining lies at the doorsteps of the Reserve Bank of India. Sometime in 2010, being kind trumped other obligations. The regulator abandoned its role of a referee and decided to play the saviour. It extended the muchabused Corporate Debt Restructuring scheme to the services sector too as it attempted to save an airline that was about to run aground instead of flying. Despite the noble intentions, it met its fate. While the extension of that restructuring provision might be justified in the absence of a bankruptcy law then, it still exposes the regulatory weakness which let itself to be pulled in the direction that vested interests desire. That ultimately led to bloating up of Kingfisher Airlines’ debt and default. …

Ease capital requirement for banks, parliamentary panel tells RBI

In 2017, the government announced a plan for an infusion of 2.11 trillion rupees ($30.06 billion) into 20 state banks by March 2019 to meet Basel-III global demands A parliamentary panel on Thursday asked the Reserve Bank of India (RBI) to ease its rules on capital requirements for banks so that they can increase lending. "Such stringent norms stipulated by the RBI for our banks ... is unrealistic and unwarranted," said a report tabled in parliament by the Parliamentary Committee on Finance. The report comes after the government and some of the board members of the RBI have put pressure on the central bank to relax capital requirements for banks as they seek to boost credit and economic growth. Former RBI governor Urjit Patel, who quit last month, opposed the government's demand for lowering capital requirements and warned about the need for a cushion to offset unexpected risks. Indian banks are required to maintain a minimum capital to risk weighted asset ratio (CRAR) at…

Govt staring at a shortfall of Rs 500 bn to Rs 1 trn in GST collection?

The Narendra Modi government could be staring at a shortfall in Goods and Service Tax (GST) collection of anywhere between Rs 500 billion and Rs 1 trillion this fiscal, according to estimates put out by analysts over the last month. Any potential shortfall in GST revenues – a prospect that the Centre has tried to ignore – will have an impact on government spending, which in turns has implications for India’s economic growth. A report put out by the State Bank of India’s research wing this week expects a shortfall of “around Rs 900 billion in GST and excise collections”. Out of this, Rs 105 billion is on account of recent reduction in petrol taxes. The SBI report reckons that it could result in a federal spending cut of nearly Rs 700 billion, or one-fourth of projected capital expenditure for 2018-2019. This, it notes, would be twice the Rs 360 billion cut in capital spending that the Centre carried out in 2017-2018 in order to make sure the fiscal deficit didn’t cross 3.5% of gross dom…