According to Care Ratings, the recent RBI measures to regulate NBFCs more will impact profitability and asset quality in the short term, though they will bring in more transparency and improve NBFCs ability to withstand asset quality shocks in the long run
Earlier this week, the Reserve Bank of India (RBI) released the ‘Revised Regulatory Framework for NBFC’ in line with its desire to strengthen financial system and reduce the regulatory arbitrage between banks and non-banking finance companies (NBFCs).
"In the short term, these measures will impact the profitability and asset quality of the NBFCs; however, these measures will bring in more transparency and improve NBFCs ability to withstand asset quality shocks in the long run," says Care Ratings in a research report.
It said, "The new regulatory framework will lead to strengthening of NBFCs balance sheet, with increase in loss absorbing Tier I capital requirement for systemically important NBFCs and deposit accepting NBFCs and restricting leverage for smaller NBFCs in line with higher core Tier I requirement for banks under Basel III guidelines. On NPA recognition norms and provisioning on standard assets also, banks and NBFC will be at par. The increase in disclosure requirement and corporate governance norms will improve the transparency and increase the accountability of management and the board and improve the investor awareness."
Here are the key changes and its likely impact on NBFCs...
Over the years, the NBFC sector has become systemically important with rise in assets under management from around 11% of bank assets in 2009 to 13% of bank assets in 2013. The rising importance of NBFCs and their growing interconnectedness with banks as well as issues like risk management framework for the sector, regulatory gaps and arbitrages, compliance and governance issues have led to the RBI making certain regulatory changes.
RBI had set up various Working Groups to study these dimensions of the sector and the important recommendations of the Usha Thorat Committee (August 2011) and Nachiket Mor Committee (January 2014) have been drawn upon in the revised regulatory framework.
According to reports, Mamta and her drug kingpin husband Vicky Goswami were arrested following an investigation by the US DEA and Mombasa Police department for drug trafficking
Mamta Kulkarni, who was part of several Bollywood films in the 1990s and her husband Vijay aka Vicky Goswami are reportedly arrested in Kenya for drug trafficking. According to reports, the couple was arrested following an investigation by the US Drug Enforcement Agency (DEA) and the Mombasa Police department.
Earlier reports about Mamta suggested that she had shifted to Dubai with her boyfriend and international drug kingpin 'Vicky' Goswami. In 1997, Vicky was arrested in Dubai for trafficking 11.5 tonne of mandrax and was sentenced for life for 25 years, as per Dubai laws. The 52-year-old kingpin's sentence was reduced to 15 years owing to his good conduct, and Vicky was released 15 November 2013. The couple then shifted to Nairobi.
Mamta Kulkarni made her debut through the Tamil film Nanbargal which was directed by Shoba Chandrasekar. She made her Bollywood debut with the 1992 movie Tirangaa. In 1993 she starred in Aashiq Awara, which won her a Filmfare Lux New Face Award. She went on to appear in many popular films such as Waqt Hamara Hai (1993), Krantiveer (1994), Karan Arjun (1995), Sabse Bada Khiladi (1995) and Baazi (1995).
In the blockbuster 'Karan Arjun' (1995), directed by Rakesh Roshan, Mamta Kulkarni starred alongside Shah Rukh Khan and Salman Khan. She had a 'knack' of landing into controversies, which started with her posing topless for the cover of Indian magazine Stardust in 1993. She quit Bollywood after her appearance in the film Kabhie Tum Kabhie Hum. Indian TV show Bigg Boss approached Mamta to be a contestant in its Season 7 but Mamta refused.
According to Nomura, the significant undershooting on inflation in 2015 is opening up some room for policy easing, but this room is very limited and the RBI may remain on prolonged pause during its policy meeting next month
India's inflation based on consumer price index (CPI) eased to 5.5% in October from 6.5% in September mainly on favourable base effect in food inflation. Nomura feels beyond November, the CPI inflation would bounce back to 6.0% to 6.7% in first quarter of 2015 and the Reserve Bank of India (RBI) is likely to remain on a prolonged pause in its next policy meeting on 2nd December.
"Although the lagged impact of the growth slowdown, lower rural wages, low minimum support price increases and higher real rates should result in continued disinflation into 2015 with CPI inflation falling below the RBI's 6% target set for January 2016 by the central bank, in mid-2015," it said in a note.
Nomura says, "The recent moderation in CPI inflation and our expectation of continued disinflation in 2015 does not change our view on monetary policy. In our view, the RBI is focused on ensuring that inflation remains low even as the growth cycle starts to pick up in 2015-16. As we highlighted last month, the significant undershooting on inflation in 2015 was opening up some room for policy easing, but this room is very limited. For now, we expect the RBI to remain on a prolonged pause, including at its next policy meeting on 2nd December."
Recent reports suggest that delayed harvesting is resulting in an increase in vegetable prices in November. However, base effects are very positive, which should result in an under-5% CPI inflation reading.
A gradual industrial recovery is under way
Industrial production (IP) growth rose to 2.5% in September from 0.5% in August. On a seasonally adjusted basis, IP rose 1.5% m-o-m after contracting in the previous three months. Nomura says, "In our view, part of the rebound in IP reflects increased production ahead of the festive season in October. Much of the rebound was due to the volatile capital goods segment. Except capital goods, IP growth moderated as a result of still weak consumer durables output growth, partly because of the shutdown of a mobile handset plant and also muted consumer non-durable goods output growth, lower agriculture-related production."
Industrial output growth is likely to weaken in October owing to there being fewer working days in October 2014 (19 working days) than in October 2013 (24).
"However," Nomura said, "We remain optimistic that a gradual recovery in industrial growth is under way. Other high frequency indicators such as auto production, visitor arrivals and non-oil non-gold imports indicate that domestic demand is picking up. Leading indicators such as the OECD's composite leading index for India also continue to suggest that industrial production growth should pick up in the coming quarters."