Money & Banking
Proposed RBI norms may put a dent in NBFCs’ profitability: ICRA

As per the proposed guidelines, the NBFCs have to recognise a loan as NPA if it is not serviced for 90 days from the present 180 days

Mumbai: The proposed guidelines by the Reserve Bank of India (RBI) for the non-banking finance companies (NBFCs) are likely to impact the profitability of these entities by 15-20 basis points (0.15%-0.20%) in medium-term, reports PTI quoting a research report by the rating agency ICRA.

 

“...the proposed revision in the NPA (non-performing assets) recognition norm to 90 days (against the existing 180 days), along with the adoption of higher provisioning requirements for NPAs and standard assets (in line with that for banks) could lead to a dip in NBFCs’ profitability by 15-20 basis points over the medium term.

 

“...The higher Tier-I capital requirement could translate into a decline of around 115 basis points in the sectors’ return on equity (ROE),” the report said.

 

As per the proposed guidelines, NBFCs have to recognise a loan as NPA if it is not serviced for 90 days from the present 180 days.

 

It also proposes to implement 10% capital adequacy ratio (CAR) norm for most of the NBFCs.

 

“While this is in general a positive step, some NBFCs offering products with annual or quarterly repayments may find their asset quality turn volatile because of this change,” it said.

 

The report also added that further increase in Tier-I capital as well as risk weights for some other asset classes would reduce the leveraging capacity of NBFCs compared to banks.

 

The research firm also said lack of access to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act as well as any liquidity back-up would continue to weigh on the performance of NBFCs.

 

Referring to liquidity management, the report said it may increase the cost of doing business for NBFCs.

 

It, however, added that enhanced disclosures are positive for the NBFCs.

 

According to the proposed guidelines, NBFCs have to seek prior approval from the RBI in case of change in shareholding by 25% or above, and appointment of chief executive officer in a NBFC with an asset size of more than Rs1,000 crore, among others.

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Diesel, kerosene rates may go up by Rs10/litre

The Kelkar Committee had recommended that diesel prices should be raised in staggered manner over the one-year period to wipe out Rs9.28 per litre loss on fuel sale. On kerosene, it had suggested raising rates by Rs10 per litre over two years

New Delhi: Diesel prices may have to be raised by Rs10 per litre over the next one year, and kerosene rates by same quantum over the next two years, if the government accepts recommendations of Vijay Kelkar Committee, reports PTI.

 

The committee, which was appointed by the finance ministry to formulate the fiscal consolidation roadmap, had in its report, suggested raising diesel and kerosene rates to cut the Rs1,63,000 crore fuel subsidy bill.

 

An oil ministry spokesperson said the report of the panel was with the government and no view on raising diesel or kerosene prices has been taken yet.

 

The ministry, he said, has “not moved any proposal or considering any increase” in rates at this point of time.

 

The Kelkar Committee had recommended that diesel prices should be raised in staggered manner over the one-year period to wipe out Rs9.28 per litre loss on fuel sale. On kerosene, it had suggested raising rates by Rs10 per litre over two years.

 

Price of diesel, which currently costs Rs47.15 per litre in Delhi, was last revised on 14 September 2012 when it was hiked by a steep Rs5.63 per litre. Kerosene rates have not changed since June last year and costs Rs14.79 per litre in Delhi.

 

“There is a need to rationalise prices. The losses have reached an unsustainable level,” a ministry official said.

 

Oil firms currently lose Rs30.93 per litre on kerosene.

 

Price hike along with promoting the use of LPG and natural gas will help cut kerosene consumption by 20%, he said.

 

 While government is likely to raise soon the number of subsidised cooking gas (LPG) from six to nine cylinders of 14.2-kg per household annually, the ministry wanted to have just two rates for the fuel—a subsidised price and a market rate, instead of four rates presently, he said.

 

Subsidised LPG costs Rs410.50 per 14.2-kg cylinder and any household requirement beyond current cap of six cylinders is to be bought at near market price of Rs895.50 per bottle. For non-domestic use, a 14.2-kg LPG cylinder costs Rs1,156 while a 19-kg cylinder for commercial use is priced at Rs1,619.

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NDC approves 12th Five Year Plan

Moving away from the previous practice of presenting single growth projection, the Planning Commission has come out with three different economic scenarios for the 12th Five Year Plan

New Delhi: India’s apex policy making body National Development Council (NDC) Thursday approved the strategy to achieve average growth rate of 8% during the 12th Five Year Plan (2012-17), generate 50 million new jobs and increase investments in infrastructure sector, reports PTI.

 

“I am very happy that NDC (National Development Council) has approved the 12th Five Year Plan. We have marginally reduced the average annual growth rate to 8% (from 8.2%).

 

“We expect with the growth rate of 5.8% this fiscal and little over 7% next fiscal, and with extra effort in the remaining three more years we can reach 8%,” Planning Commission deputy chairman Montek Singh Ahluwalia said.

 

The voluminous document, containing detailed policy strategy for the 12th Plan, was approved at the full meeting of the NDC chaired by prime minister Manmohan Singh.

 

The document has pegged the aggregate Plan resources at Rs37.16 lakh crore during the five year period starting 2012-13.

 

Moving away from the previous practice of presenting single growth projection, the Planning Commission has come out with three different economic scenarios for 12th Five Year Plan.

 

Singh assured all chief ministers that Centre has taken note of the points raised by them, including those in the written speeches. “All these points will be carefully considered by the Planning Commission,” he said, adding, the Plan is not a rigid blue print.

 

“It is a broad ‘directional’ and ‘aspirational’ document, which must allow for modification on the basis of experience ... We must now devote all our energies to implementing the Plan,” the prime minister said.

 

As per the ‘aspirational’ scenario one—of strong inclusive growth—India's economic growth will be average 8% in the five years.

 

The document also cautions that in the scenario of a “policy logjam”, the GDP growth could slow down to 5%-5.5%.

 

The document proposes to bring down poverty by 10% by the end of the 12th Plan and generate five crore new jobs in non-farm sector.

 

As regard the infrastructure sector, it says that efforts should be made to increase investment in this sector to 9% of the GDP by the end of the Plan period.

 

The other targets include increasing green cover by one million hectare every year and adding 30,000 MW of renewable energy generation capacity in the Plan period.

 

It also seeks to reduce emission intensity of the GDP in line with the target of 20%-25% reduction by 2020 over 2005 levels.

 

Although the document envisages 6.7% growth rate in the current fiscal, it has been projected at 5.7%-5.9% in 2012-13 by the finance ministry.

 

The strategy for the full Plan would aim at raising agriculture output to 4% and manufacturing sector growth to 10%.

 

It also wants all the states to set higher targets of growth than what was achieved in the 11th Five Year Plan.

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