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Showing posts from August 8, 2019

RBI Eases Risk, Exposure Rules, Banks can Lend More to NBFCs

Reserve Bank of India Governor Shaktikanta Das gave a big push to retail lending by lowering risk weights for consumer lending and raising the bank exposure limits for non-banking finance companies which could directly boost borrowing capacities for top firms. Housing Development Finance Corp., Mahindra Financial and Chola are among the firms that could benefit from the RBI’s change of rule in regard to banks’ lending to NBFCs. Permission to classify bank lending to some NBFCs that lend to priority sectors as such would reduce the time taken for transmission which otherwise had to wait for securitisation. “This will reduce our capital requirements for these loans and increase our risk adjusted returns,” said PK Gupta, managing director at State Bank of India. “Some of these benefits can be passed on to the customer. It could have some impact on rates though we are yet to calculate it. The main reason this was done was because despite an expansion in these loans, delinquencies have not…

RBI monetary policy review: New orders grew, sales declined in Q4

The Reserve Bank of India released the quarterly survey on capacity utilisation (CU), order books and inventories in the industry for Q4 FY19. While CU keeps its six-year-high title this time too, new orders have grown this time, but sales have declined, the survey shows. Expansion in new orders is being seen as an uptick in activity. Improvement in inventory of raw material and finished goods is suggestive of decline in sales in this period, the RBI said. This survey provides a snapshot of demand conditions in India’s manufacturing sector. Business Standard, 8th August 2019

Repo rate at nine-year low after RBI announces first-ever cut of 35 bps

The Reserve Bank of India (RBI) on Wednesday moved for an unconventional repo rate cut by 35 basis points, the first of such magnitude by the central bank, to arrest falling economic growth while insisting that banks must now pass on the benefits to their customers. The central bank has lowered the growth projection for the current financial year to 6.9 per cent from 7 per cent earlier. It kept its inflation projection unchanged at 3.1 per cent. In response to the policy, State Bank of India (SBI), which recently lowered the deposit rates, cut its lending rate by 15 basis points across all tenors. Housing Development Finance Corp (HDFC), too, last week lowered its loan rates by 10 basis points. RBI Governor Shaktikanta Das said “all stakeholders must act together” to lift economic growth. He said while the RBI lowered rates, the government was looking at sectoral issues. The banks must now cut their lending rates, he added, though he did not say if these would be enough to encourage p…