In a letter to heads of public sector banks, the finance ministry said “instances of over-reporting of profit have been continuing year after year and no corrective action seems to have been taken to stop the recurrence”
New Delhi: The finance ministry has written to all public sector banks asking them to ensure profits are not overstated and to make appropriate provisions for bad loans, reports PTI.
In a letter to heads of public sector banks, the finance ministry said “instances of over-reporting of profit have been continuing year after year and no corrective action seems to have been taken to stop the recurrence”.
The letter assumes significance in the light of rising bad debts in the banking sector.
According to a senior official of a public sector bank, the letter has been issued recently by the finance ministry.
Sometimes there could be a difference of opinion about the classification of NPA (non-performing assets) which gets sorted out at the time of external audit or Annual Financial Inspection (AFI) by the Reserve Bank of India (RBI), the official said.
If the bank is unable to convince the RBI for not classifying some loans as NPA and subsequently not making provisions, then the bank has to make provision after AFI, the official said.
To that extent the profit is depressed later, the official said.
Banks have been trying to follow prudential guidelines of RBI on NPA in letter and spirit but there could be differences of opinion which gets resolved after AFI and reconciliation of accounts takes place, the official added.
During the third quarter of the current fiscal, banks profitability was hit due to jump in bad loans and restructured loans. There has been about 19% rise in restructured loan against the previous quarter as textiles, steel and infrastructure companies have suffered due to lower output and higher cost of funds.
Besides, there is NPA pressure for banks from the aviation and power sectors. They are struggling to recover Rs19,000 crore from the ailing national carrier Air India.
Worried over rising bad loans in certain sectors, the RBI is expected to meet banks to take stock of the NPA situation soon.
“Stress sectors are well known, the issues which are there. But we don’t think there is a great concern as of now,” RBI deputy governor KC Chakrabarty had said earlier this week.
“But any how we are going to discuss it (NPA issue) with the banks in the coming days. We are going to meet banks during this month or first week of March,” he had said.
Brian Clancey of STAT, which also tracks global pulses prices and forecasts global production levels, said that India’s pulses production apparently is up this year. But whether India will be able to sustain the high level of production is a question
Pulses production in India is likely to decline this year, resulting in higher imports, confirmed a government official at an international pulses conclave being held in Mumbai. Experts present at the meet highlighted the need for increasing pulses production to meet the demand from rising population.
“Pulses import is expected to touch 2.8 million tonnes (MT) till March and is slightly higher than last year, which was at 2.6 MT,” said Rajiv Agarwal, secretary, Department of Consumer Affairs-Foods and Public Distribution on the sidelines of the ‘Global Pulses Conclave 2012’ organized by India Pulses and Grain Association (IPGA).
Presenting the global perspectives on pulses, Brian Clancey, publisher and editor, STAT Publishing said, “The net field crop needs to rise at the rate of 1% per year by 2050 to meet the demand of rising population. If the output is even low by 0.5% then we have to face the issue of food shortage and higher prices”
Another panellist G Chandrashekhar of the Hindu Business Line, speaking on the global agricultural markets and outlook, elaborated on the factors such as weather conditions, inflation, slowing economy, prices of crude oil and speculative capital- impacting the agricultural commodities. “In the first half of 2012, the prices should be firm. It would be moderate because of the expectation of a rebound. There will be built up stock in the next 3-4 months. However, there is an upside risk of weather aberration.”
He adds, “Positive macro-economic data should give boost to the demand.”
Mr Clancey of STAT, which also tracks global pulses prices and forecasts global production levels, says that, “In India production apparently is up this year. It is less compared to last year, but both these years, production was way above for India. We calculated that the demand for pulses here is between 20-12 million tonnes. Prior to 2010, the production was hardly 15 million tonnes and the country imported around 3.5 million tonnes. That was way below what the country needed. Now the production has rebounded with a record crop last year. But still there is a gap which will be covered by imports.”
According to IPGA, around 1 lakh metric tonnes of chana have been already imported from Australia. India is the largest producer of pulses. Despite this, it is also the biggest importer of pulses, from countries like Australia, Canada and Myanmar, consuming about 15% of the world pulses trade. Of the total import basket, 50% is yellow peas, which is imported from Canada, Ukraine, Russia and France.
Mr Clancey says that, “Whether India will be able to sustain the high level of production is a question. Last year the record production was due to the Minimum Support Price (MSP) that the farmers got. Now, if the MSP falters, the farmers have to rely on the market. Indian pulses market is a diversified and sophisticated market.”The three-day conclave, which began yesterday, is an attempt to bring together all the stakeholders, from India and abroad, of the pulses industry. It is supported by the food and public distribution department of the consumer affairs ministry.
According to Mr Clancey, competition over acres for production, consumer demand, US Biofuel Policy and rising population of India and China will be the key drivers for the prices of pulses.
What is common between Microsoft’s steep rally in 2000, Petorchina’s rise in 2008 and Apple’s vertical move in 2011?
Apple made news recently when it was valued more than Microsoft and Google combined, when its market capitalisation was valued at an eye-popping $461 billion. It became the most expensive company in the world. However, what is more interesting than this little fact is the recent ‘parabolic’ rise in its share price while emerging as the largest company in the world by market capitalisation. For the uninitiated, a parabolic rise simply means sudden upwards rise in the share price that resembles a mathematical parabolic curve. What happens when the most expensive stock also records a parabolic rise?
Before we delve into Apple, we take a look at two other examples in the past. Microsoft, in 2000, was the world most valued company then, with market capitalisation of $586 billion. It came to occupy this perch with a parabolic rise in its share price during the dotcom boom. Similarly Petrochina was the world’s most valuable company in 2008, following a similar rise in its share price with crude oil prices hitting almost $150 a barrel. Now we have Apple’s parabolic rise to the top of the charts.
What do these three companies have in common? Well, according to Market Anthropology blog, there seems to be a correlation between the steep run up in the share prices of these companies, and what happened after. The steep or ‘parabolic’ rise in its share price made them the world most valuable companies. Immediately after this phenomenon, the entire market tanked and what followed was an overall bear market. In Microsoft’s case, it was the dotcom bust that followed its parabolic rise. In case of Petrochina, it was the sub-prime crisis and a crash in oil price speculation. And now we have Apple. The manner at which Apple became the most valued company is similar to the two examples above. Is Apple’s parabolic rise telling us something? Has the market peaked? We’ll get to know in a matter of time. In the meantime, investors can decide for themselves whether to sell their holdings or smell an incoming opportunity when the market falls.
The chart below, courtesy of Market Anthropology, tells the story: