Money & Banking
NPAs need firm but pragmatic handling so as not to hit credit: RBI
The issue of non-performing assets (NPAs), or bad loans, particularly of state-run banks, needs to be dealt with firmly, as well as with pragmatism to ensure that economic activity is not affected by drying up of credit, Reserve Bank of India Governor Urjit Patel said on Tuesday.
 
"The RBI is giving a lot of attention to the NPAs issue. It needs to be dealt with firmness, as well as with pragmatism to ensure that there is no drying up of credit, that there is no lack of credit in the economy," Patel told reporters here following the announcement of RBI's first bi-monthly monetary policy review by a newly-constituted committee.
 
"The four pillars of the strategy to deal with NPAs are identification, reporting, recording and resolution. It is the fourth pillar of resolving the NPAs issue that has been lagging behind the other three," he said.
 
Noting that there were many reasons for the huge accumulation of NPAs, the new governor of the RBI, who assumed charge last month, said that five sectors -- infrastructure, steel, textiles, power and telecom -- accounted for most of banks' NPAs in India.
 
Indian state-run banks have collectively made an operating profit of nearly Rs 35,000 crore this fiscal, but the massive provisioning for bad debts has pared their net profit down to Rs 222 crore, Finance Minister Arun Jaitley told reporters last month, adding they had finally turned the corner and reported a cumulative net profit.
 
Many state-run banks had reported huge losses for the first quarter ended June, owing to a sharp rise in provisioning for NPAs (Non Performing Assets) on account of an asset quality review ordered by the Reserve Bank of India.
 
Jaitley held a quarterly performance review meeting here in September with the Chief Executive Officers and Managing Directors of public sector banks (PSBs) and financial institutions. 
 
The government has recently announced infusion of Rs 22,915 crore capital for 13 PSBs, as part of the first tranche of capital infusion for the current fiscal.
 
"The broad picture is that PSBs still face the challenge of high NPAs. Detailed discussions have taken place in this regard, while the new RBI norms and changes in legislation like the new Bankruptcy Code and the DRT (Debt Recovery Tribunal) law have helped to empower the banks," Jaitley said.
 
Gross NPAs of the PSBs have surged from 5.43 per cent of the total advances (Rs 2.67 lakh crore) in 2014-15, to 9.32 per cent (Rs 4.76 lakh crore) in 2015-16.
 
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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COMMENTS

Ramesh Poapt

5 months ago

amt of restructred advancres?, amt where rest.adv.went bad?,A4S-5:25
amt of advances? protection to stressed sectors by MIP by depriving indian consumers of low international prevailing cost? cost of not allowing bubble to burst in ailing sectors ? unduly protecting defaulters to undervalue reporting?

GLN Prasad

5 months ago

There are two more questions never answered except total profit by all PSUs this year. What were the total NPAs written off from the last 5 years ? Where the money advanced has gone ? I do admit that some circumstances may be beyond the control of any bank, but not certainly in all cases . How effectively PSUs used the CBI for their recover, identification ? Who were the promoters ? We blame agricultural loan waiver given twice or thrice so far , but do not consider the total NPAs written off and the percentage of agriculture alone in such total amount. What happened to the real estate (land and buildings) and other collateral securities, ? Which segment is not faring well and what are the lessons and directives given by RBI after data analysis. This has to be published in larger public interest.

India, Pakistan border tension heats up after fresh firing
India on Tuesday alleged that Pakistan troops resorted to unprovoked heavy firing in at least three places on the de facto border in Jammu and Kashmir, stepping up the tension between the tense neighbours.
 
No injuries were reported from the Pakistan mortar shelling at Indian border posts in Jhangar, Kalsian and Makri areas of the Nowshera sector of Rajouri district along the Line of Control (LoC), a ceasefire line that divides Jammu and Kashmir between India and Pakistan.
 
Many shells landed near civilian areas in Nowshera, a police officer said.
 
The officer said the Indian Army retaliated and fired at Pakistani posts. Any possible damage on the other side of the ceasefire line was not known immediately.
 
The Pakistan Army made similar allegations, saying Indian troops "resorted to unprovoked firing" at 4 a.m.
 
"Pakistani troops befittingly responded to the unprovoked Indian firing... in Bhimber sector," an Inter-Services Public Relations (ISPR) statement said.
 
The heavy exchange of fire, which continued for several hours, was the latest in a series of violations of border truce signed in 2003.
 
Border tension between the two countries flared after 19 Indian soldiers were killed in the September 18 terror attack at an Indian military base in Uri town in Kashmir's Baramulla district.
 
India said the four attackers, who sneaked into the Uri camp, infiltraed from Pakistan. Islamabad denied the allegation.
 
Days later, the Indian Army said it had avenged the Uri attack by conducting "surgical strikes" in Pakistan-administered Kashmir where seven terror launch pads were destroyed and an unknown number of militants and their sympathisers were killed on September 29.
 
Since then, militaries of the two countries have been regularly firing at each other daily across the LoC and the International Boundary.
 
On Monday, three civilians were injured in a similar exchange of fire in Poonch district.
 
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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Monetary Policy Committee debuts with a 25bps cut in repo rate
In the first monetary policy review by the newly set up Monetary Policy Committee (MPC) as well as by new Governor Urjit Patel, the Reserve Bank of India (RBI), on Tuesday cut repo rate (the short-term lending rate charged by the central bank on borrowings by commercial banks) by 25 basis points (bps) to 6.25% with immediate effect. 
 
"The decision of the MPC is consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5% by fourth quarter of 2016-17 and the medium -term target of 4% within a band of plus or minus 2%, while supporting growth," the RBI said in a release. 
 
All six members of the panel, chaired by RBI Governor Urjit Patel, voted in favour of the monetary policy decisions -- the minutes of which will be released on 18 October 2016. The decision to cut repo rate is expected to bring much expected relief to commercial banks and corporates.
 
With repo rate reduced to 6.25%, the reverse repo rate under the liquidity adjustment facility (LAF) will now be 5.75%. Subsequently, the marginal standing facility (MSF) rate and the bank rate are adjusted to 6.75%.
 
Commenting on the RBI's fourth monetary policy review, Arundhati Bhattacharya, Chairman of State Bank of India (SBI), the country's largest lender, said, "The Committee decision to cut Repo rate by 25 bps was on the expected lines. With benign inflation trajectory going forward, RBI's policy stance is expected to remain accommodative. Banks will continue to transmit rates based on evolving liquidity scenario."
 
Talking about outlook, the central bank statement says, "The Committee expects that the strong improvement in sowing, along with supply management measures, will improve the food inflation outlook. It notes that the sharp drop in inflation reflects a downward shift in the momentum of food inflation – which holds the key to future inflation outcomes – rather than merely the statistical effects of a favourable base effect. The Government has announced several measures to cool food inflation pressures, especially with regard to pulses. These measures should help in moderating the momentum of food inflation in the months ahead. This has opened up space for policy action, as indicated in the third bi-monthly monetary policy statement. The easy liquidity conditions engendered by the Reserve Bank’s operations should also enable the smooth transmission of the policy action through various market segments. Furthermore, banks should find added impetus for better transmission by the recent downward adjustment in small savings rates. The Committee took note of potential cost push pressures that may emerge, including the 7th pay commission award on house rent allowances, and the increase in minimum wages with possible spill overs through minimum support prices. The fuller play of these factors will need vigilance to prevent a generalised cost spiral from taking root."
 
"On balance, the Committee envisages a trajectory taking headline CPI inflation towards a central tendency of 5% by March 2017, with risks tilted to the upside albeit lower than in the second and third bi-monthly monetary policy statements of June and August respectively," it added. 
 
 
The Reserve Bank expects the momentum of growth to quicken with a normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to the urban consumption spending from the pay commission’s award. It says, "The accommodative stance of monetary policy and comfortable liquidity conditions should support a revival of credit to the productive sectors. The continuing sluggishness in world trade and the smaller terms of trade gains than in the past point, however, are leading to further slackening of external demand going forward. Accordingly, the projection of growth of real gross value added (GVA) for 2016-17 is retained at 7.6%, with risks evenly balanced around it." 
 
 
VS Parthasarathy, Chief Financial Officer (CFO) of Mahindra Group, says, "This policy was a window into the thoughts of the Governor and the MPC. It is not only about the here and now, it is also about what the MPC thinks about risks and importantly it reveals the Governor's thoughts on structural matters. The focus will be on non-performing assetst (NPAs), financial market reforms, and financial inclusion for MSME. The policy has however stuck to monetary aspects and we have to wait to see the Governor's actions elsewhere. We trust he would continue to be vigilant, watching over the economic landscape with flexibility to act as the situation changes."
 
According to Anuj Puri, Chairman & Country Head of JLL India, the first question that arises after this rate cut is, of course, how it will help improve buyer sentiment in the housing sector. "The reason why housing sales have been sluggish is because of trust deficit between consumers and developers. Unless RERA and other pro-consumer policies come into play, buyers will continue to be wary. Therefore, we can expect only a marginal improvement in sentiment on the back of this rate cut. At this point, there is also no ready answer to the question of to what extent banks will actually pass on the benefit of the rate cut to borrowers," he added.
 
Here are the latest policy rates following MPC review…
 
Repo Rate.......................6.25%
Reverse Repo Rate........5.75%
CRR................................4%
Bank Rate.......................6.75%

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COMMENTS

narayanbhai patel

5 months ago

This decision was not taken by RBI Governer Mr.Patel the inflation was temporarily down so they have to wait up to next inflation data come out. It was a purely decided by political persons. Because pensioner persons are more effected by this decision. There was nobody in committee like the middle-class person they are all rich persons who decided this rates.

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