Money & Banking
Bank consolidation, a positive development in the long term
Chennai : Global credit rating agency Fitch Ratings on Thursday said a consolidated Indian banking structure would be a positive development in the long term.
 
"We believe that consolidation coupled with higher capital requirements and governance reforms would position the banking system better in support of a more open and higher-growth economy," Fitch Ratings said in a statement.
 
According to the agency, more stable banking systems tend to be structured around a number of large "pillar" banking groups.
 
"These large banks in a consolidated banking system enjoy scale benefits leading to better diversification of risks and stronger overall profitability contributing to higher credit ratings," the statement added.
 
The agency said the financial systems would benefit from more banks of a similar size to State Bank of India (SBI).
 
"The system is quite fragmented at present, with around 50 domestic banks - with PSB's (public sector bank) accounting for around a 70 percent asset share," Fitch Ratings said.
 
According to Fitch Ratings, SBI has performed much better than its PSB peers through this credit cycle, thanks in part to greater scale benefits which enhance pricing power from a funding perspective and diversification.
 
SBI has stronger capital ratios and is better positioned to absorb the asset-quality issues that have plagued the sector.
 
Agreeing on implementation challenges during the consolidation process, Fitch Ratings said the long-term benefits far outweigh short-term challenges that tend to be associated with a consolidation process that is forced on the sector.
 
However, notwithstanding the talk about potential consolidation, the need to address the PSB's asset quality and potential capital shortfalls are the more immediate issues that need to be addressed.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Nifty, Sensex getting overbought – Wednesday closing report
Rally has been on lower volumes
 
We had mentioned in Tuesday’s closing report that Nifty, Sensex had hit a resistance but as long as Nifty does not dip below 7,350, bulls are safe. The major indices of the Indian markets were on a minor rally and the indices closed with gains of around 0.6% over Tuesday’s close. 
 
 
The Sensex closed in the green for the sixth consecutive day on Wednesday and Nifty closed above its crucial psychological level of 7,500, powered by buying in capital goods, realty, power and banking shares.  In the early part of the day, there was profit taking in metal stocks after last week's rally. However, late buying in blue-chip stocks such as Reliance Industries, Larsen & Toubro, Infosys and HDFC Bank helped the indices recover from the day’s lows. For about a week now, the investors in the Indian stock markets appear to have been receptive to FM Jaitley on his budget proposals, and the major indices have been on an upswing.
 
The Supreme Court on Wednesday issued notice to beleaguered liquor baron Vijay Mallya on a plea by a consortium of 17 banks led by the SBI seeking his personal appearance before it along with his passport as it was told that Mallya has already left the country. The Supreme Court case is making waves in the banking industry, which is over-burdened with non-performing assets, due to default in repayment by many borrowers. Bank Nifty rose 0.88% on the NSE to close at 15,279.05.
 
In other news of severe action being taken in the banking industry, the Central Bureau of Investigation (CBI) had registered a case against five officials from Syndicate Bank, a CA, three private people and others on charges of causing a loss of Rs1,000 crore to the bank by discounting of fake cheques and bills against fake insurance policies and overdraft limits against non-existent policies. 
 
With the acquisition of Pivavav Defende formally in its fold, Anil Ambani-led Reliance Group is eyeing a sizeable share in the potential $60-billion pie of the Indian and overseas defence-related market where it now has a presence, sources said. Towards this, the government has already approved 12 industrial licenses for Reliance Defence, a subsidiary of Reliance Infrastructure for the manufacture of a wide range of equipment required by the armed forces in India and abroad. Listing the potential, sources said in the aerospace segment, where Reliance Group has a nod for military aircraft and choppers, the potential is Rs.9,000 crore in amphibious aircraft for Indian Navy, light choppers worth Rs.20,000 crore and medium-to-heavy choppers worth Rs.50,000 crore. Reliance Infrastructure shares closed at Rs515.60, up 6.94% on the BSE.
 
Crompton Greaves will sell its power business overseas to a US private equity fund for an enterprise value of 115 million euros, the company said in a regulatory filing on Wednesday. The statement said the company will sell its European, North American and Indonesian power transmission businesses to the US private equity fund, First Reserve International Ltd. The company manufactures fans, air coolers and power transmission equipment. Crompton Greaves shares closed at Rs151.85, up 8.81% on the BSE.
 
Tata Power Renewable Energy Ltd (TPREL), an arm of Tata Power, has inked a share purchase agreement with Indo Rama Renewables Ltd (IRRL) to acquire 30 MW wind farm, the company announced on Wednesday. Indo Rama Renewables Jath Limited (IRRJL), a 100% subsidiary of IRRL, has a 30 MW wind farm in Sangli district of Maharashtra. The transaction is expected to be consummated within the next few weeks, TPREL said in a statement. Tata Power shares closed at Rs58.85, up 0.09% on the BSE.
 
Market regulator Securities and Exchange Board of India (SEBI) on Tuesday finally held that Reliance Petroinvestments Ltd is not guilty of insider trading in respect of Indian Petrochemicals Corporation Ltd (IPCL). IPCL was merged with Reliance Industries Ltd (RIL), after it was acquired by the latter.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

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How to double farmers' income in seven years
Doubling of farmers' incomes will require large-scale changes in the output that India currently produces and how it goes about producing it. India will gain massively by shifting focus to pulses and horticulture and by moving people out of agriculture, says a report
 
Prime Minister Narendra Modi on Wednesday strongly defended his government's ambitious promise to double farmers' income in five years that was doubted by the opposition. He said the plan was possible if farmers start using novel agricultural practices and value-add their products. However, this requires a radical rethink of Indian agriculture, including a decisive break from the past and move from cereals to pulses and horticulture, says a research report.
 
In the report, Kotak Institutional Equities Research says, "...doubling of incomes will require large-scale changes in the output that India currently produces and how it goes about producing it. India will gain massively by shifting focus to pulses and horticulture for local consumption, export and import-substitution and by moving people out of agriculture."
 
According to the research note, there are two ways for doubling agricultural income, one increasing the actual income and two, making farming less labour-intensive activity. It said, "There are two ways to think about the Finance Minister’s commitment to double the incomes of farmers by 2022. One is to think about doubling the incomes such that (current and future) farmers make 2 times the incomes they make currently. The other is to make farming less labour-intensive such that the farmers that remain get 2 times the income that they currently make. India will need to pursue policies that embrace both these dimensions. It is important to note that what will eventually matter are the ‘real’ increases in incomes. India recently had a disastrous run with wide-spread inflation partly stemming from large nominal increases in food crop prices."
 
The oft-quoted statistic of half of India’s population contributing only a sixth or less of its GDP highlights the poor state of affairs of farmers and agriculture. The chart below shows that the average income of a household associated with agriculture is half that of those in the services sector.
 
 
Indian agriculture continues to remain labour-intensive and accommodates many disguised unemployed. India’s output of about 500 million tons of cereals, pulses and horticulture is less than half the output of the US grown over similar 150 million hectare (ha) of cultivated area; also US has only around three million farmers, compared to about 250 million people in India associated with agriculture. New jobs, as the chart below shows, are all expected to be created outside of agriculture. A move out of agriculture is required both by the Indian agri-economy and its non-agri counterpart, the report says.
 
 
 
India needs to produce more agriculture products, the research note says, adding, "India’s agricultural output has been shaped by the various support structures put in place by the government including minimum support prices and procurement infrastructure. The focus of both of these has been meaningfully skewed towards cereals like wheat and rice. India now over-produces cereals for its requirements but significantly under-produces cereals and vegetables. Typically, farmers end up realizing around Rs15 a kg for cereals; pulses and vegetables, however, can fetch them between Rs20 and Rs40 per kg at farm-gate prices, fruits, in some cases, higher."
 
 
The rebalance in output that India requires for its own consumption over the next decade, based on the ideal calorie requirements of the country’s population in 2025. "Even as India rebalances – and increases – its output for its own consumption, it should look at global markets for its produce by dramatically increasing yields. A corollary advantage of exporting to the world by meeting stringent phytosanitary conditions of global trade is that it will improve the overall quality of Indian produce, even for local consumption. Exports will help build capital in the agri sector similar to the trends seen in manufacturing and services," the report says.
 
According to Kotak Institutional Equities Research, India needs to focus on building the processing infrastructure and marketing linkages for pulses and horticulture. "Farmers gain comfort and confidence if they can see others around them producing a commodity and making money – creating pulses and horticulture zones with processing capacities can convince farmers to shift their cropping pattern. Opening up of foreign direct investment (FDI) in the food processing sector is hence a positive. Coupled with mechanisation and high-yielding seeds, growth in topline can manifest in even stronger bottom-line growth. The goal of two times farmer income is achievable – we just need to break from the past in our approach," it concluded.

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COMMENTS

Nalin Patel

11 months ago

government does good thing for farmer, they provide machinery like tractors etc to farmer at a very low price, but corruption takes place at the machinery shop site, all the machines are rendered useless, so if some onegoes to the government machinery depot for hiring machine, they get standard answer machines need repair and it will take some time to hire them out, and by that time season changes and there is no use of machine, farmer has to act in time with season.......... also government has to shift to proper units to make understand theri statical data, they should use "constant ruppee" along with "quantitative unit like tons or kilograms " dual units or triple units are needed to render statistical data meaniningful, they may add demand supply units surplus unit also....... also 100% jump in income is not possible at a single point, the increase will be achieved some 1% here and 2% ther and another 10% there like these they can addup to 100% cumulatively......

Jyoti Dua

11 months ago

Very informative article with lot of facts and figures. Hopefully our farmers are encouraged to shift from cereals to pulses and vegetables. Govt should provide infrastructure for it.
Milk production should be secondary source of income for every farmer.

PPM

11 months ago

The only way to double the income of the farmers is to reduce the input costs - there were no chemical fertilizers used before and chemical fertilizers are the villains of both the farmers and the general public.

SuchindranathAiyerS

11 months ago

This report smells, uncomfortably, of Centralized Planning and Control. The Totalitarian Way. All the State needs to do is provide infrastructure (up to the last mile) of power, irrigation, transport and storage, broad cast market information (prices, production estimates,by category against demand estimates etc) remove all input subsidies, remove all social engineering legislation, ban GM, chemical fertilizers and pesticides, and impose taxes on agricultural income. In this same sequence. It will take more than seven years, but it result in Quintupling India's GDP, food security and distributed rural prosperity.

Raghu Mandava

11 months ago

Following ZBNF promulgated by Subhash Phalekar, will do good for the farmers by increasing their income.
Recently govt had awarded him Padma Sri, why don't they take his advice.

No farmer committed subside who followed his ZBNF farming.

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