Housing finance may come under priority lending

“We are trying to put housing finance for weaker section as a part of priority sector. There is a committee which is looking into it. Hopefully, by the first week of February this report will come,” RBI deputy governor HR Khan told reporters

New Delhi: The Reserve Bank of India (RBI) on Monday said it is considering categorising housing finance for weaker sections as priority sector lending by early next month to ensure adequate flow of credit, reports PTI.

“We are trying to put housing finance for weaker section as a part of priority sector. There is a committee which is looking into it. Hopefully, by the first week of February this report will come,” RBI deputy governor HR Khan told reporters here.

The committee is headed by Union Bank of India chairman and managing director MV Nair, was constituted by the RBI to look into various issues related to priority sector lending, including review of loan limits under the segment.

The committee has sought to address issues like desirability of simplifying the approach to direct lending, inconsistencies or ambiguities in the existing guidelines, nature of activities presently classified as priority sector that need relook and new areas which should be incorporated.

The terms of reference of the Nair Committee is to revisit the current eligibility criteria for classification of bank loans as priority sector with reference to nature of activities and types of borrowers (individuals versus institutions, corporate and partnership firms) of loans.

It will review nature of activities and types of borrowers (individuals versus institutions, corporate and partnership firms) of loans which can be brought under priority sector segment.

The terms of reference of the panel include review of limits on loan amounts.

It will also review appropriate documentation and due diligence thresholds to ensure that loans extended by banks are for the eligible categories of purposes and borrowers, which need special attention and treatment, the terms of the report state.

Besides, the panel will consider the desirability, or otherwise, of capping interest rate on priority loans.

The panel will also review the current allocation mechanism for Rural Infrastructure Development Fund (RIDF) and other funds.

The RBI deputy governor further said the apex bank is also trying to co-ordinate with the government and market regulator SEBI for developing and broadening the corporate bond market.

As much as 40% of the total bank lendings is for priority sector including agriculture and small sector industry.

 

User

Core industry growth slows to 3.1% in December

The slowdown in the core sector is likely to impact adversely the IIP figures for December. The IIP numbers will be released in the second week of February

New Delhi: In a poor performance, the eight core industries grew by 3.1% in December mainly due to slackening output of crude oil, steel and natural gas, reports PTI.

The eight core industries, which include coal, cement, natural gas, petroleum refinery and fertilisers, had recorded a growth rate of 6.3% in December 2010.

This is the second lowest growth rate of the core industries in 2011-12 after October when the infrastructure sectors had expanded by just 0.3%.

For the April-December this fiscal, the growth was lower at 4.4% compared to 5.7% in the corresponding period of 2010-11 in wake of deceleration in investment.

The eight industries together contribute 37.9% in the overall Index of Industrial Production (IIP).

As per the data released by the commerce and industry ministry, crude oil production contracted by 5.6% in December against 15.8% in the same month last year.

Natural gas production too contracted by 10.8% against (-) 0.2% year-on-year.

In December, the petroleum refinery output slowed to 0.8% (from 8.3%) and steel to 2.2% (from 9.4%).

On the other hand, coal output was up by 5.6% in December this fiscal from 3.8% year-on-year.

Fertilisers segment expanded by 0.8% (from 0.3%), cement by 13.3% (from minus 2.2%) and electricity by 8% (from 5%).

Concerned over slowing economic activities in the country, finance minister Pranab Mukherjee in Chicago had said one of the key objective in the current year is to rejuvenate the markets and improve the business sentiments which have been at low levels for most of the last year.

As per a latest CII survey, the Business Confidence Index (BCI) in the country declined by five points to 48.6 during the October-December quarter.

During April-December, coal production declined by 2.7% against 0.8% growth year-on-year. Crude oil output was meagre 1.9% during the period against 12% in the year-ago period.

The slowdown in the core sector is likely to impact adversely the IIP figures for December. The IIP numbers will be released in the second week of February.

 

User

RBI keeps OMO option open to infuse liquidity

“If there is a persistent shortage after this (CRR cut), we are certainly keeping the OMO option open,” RBI deputy governor Subir Gokarn said after delivering a lecture at the Madras School of Economics

Chennai: The Reserve Bank of India (RBI) is keeping the Open Market Operations (OMO) option open to address the pressure on liquidity, reports PTI.

“It is really the first market day after the CRR (Cash Reserve Ratio) cut. So we will have to observe the response over the period of time. But, as we have said, in the past policy interactions that if we need to address liquidity for the OMOs, we are open to that,” RBI deputy governor Subir Gokarn told reporters here.

“If there is a persistent shortage after this (CRR cut), we are certainly keeping the OMO option open,” he said after delivering a lecture at the Madras School of Economics.

On the interest rates especially in the present inflation pattern, he said, “There is no short-term fix...It very tempting to say... lower interest rate to stimulate growth. But if the consequence of that is the spike in inflation in few months down the road, then it has really not accomplished anything...

“We need to look at inflation management not for a month or two, but on a sustained basis, it has to come down and stay down at least below certain thresholds for some period of time for it to start impacting positively on investment behaviour in particular.”

Replying to a query on criticism of RBI’s strategy to tackle pressures on liquidity, Mr Gokarn said, “I think we made judgements that are based on assessment of both growth and inflation. I would say we generally have found some sort of a middle ground between these two extremes. Those are the reasonable decisions to make, given the circumstances and given the information we have.”

He said although food inflation continued to be low, protein products were still costly. “For the moment, it looks likes, even though food inflation overall has gone down...the protein part of it, still remains quite high,” he said.

“There is a strong demand driven pressure on protein prices. Households, are in a sense, because of increasing affluence are shifting their dietary habits, dietary patterns and there is much more demand for products like milk, meat and eggs and so on,” Mr Gokarn said.

On the MGNREGA’s (Mahatma Gandhi National Rural Employment Guarantee Act) impact on the cost of agricultural production, he said, “When we look at the behaviour of rural wages in the last two years, the average increase has been substantially more than might have been projected on the basis of NREGA floor. That may be contributing. But, there are other things that are driving wages up.”

Skill mismatch was one of the major reasons behind the increase in the cost of agricultural production, he said.

“The solution to all of this in a sustainable way is more supplies. Better productivity of these food products, more skilling, that is, more people being trained and equipped to meet market requirements,” Mr Gokarn said.

 

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)