Rising NPAs not posing threat to banking system: RBI

RBI deputy governor Subir Gokarn attributed the rise in NPAs to various domestic and international reasons. “There is an overall business cycle movement. There is overhang from the previous shock of 2008-09...” he added

Mumbai: Attributing rising bad loans to business cycle, the Reserve Bank of India (RBI) today said that non-performing assets (NPAs) are not posing any threat to the banking system, reports PTI.

“It (NPAs) is not reaching a point where it threatens the integral system. I don’t think we are at that point,” RBI deputy governor Subir Gokarn said here.

He attributed the rise in NPAs to various domestic and international reasons. “There is an overall business cycle movement. There is overhang from the previous shock of 2008-09...” he added.

Non-performing assets of state-owned banks have increased to 2.31% of their assets at the end of March 2011 from 2.27% in the year-ago period.

Amid concerns of rising NPAs in the banking sector, the country’s largest lender State Bank of India (SBI) had put in place a separate mechanism to contain them. SBI’s NPAs had reached a three-year high of 3.52% of loans in the quarter ended 30th June.

On RBI’s decision to deregulate the savings account interest rates, Mr Gokarn said the move would increase competition among banks for retaining customers.

Earlier, banks were mandated to give 4% interest rates on such deposits, but with the freeing of rates, several private sector lenders, like Yes Bank and Kotak Bank, have hiked rates to 6%.

“We did it at a time when banks are not grappling for deposits. The deposits are quite healthy. The gap between deposit growth and credit growth is quite narrow now,” Mr Gokarn added.

Referring to inflation, he said, the structural drivers of inflation are still strong and the RBI expects it to remain high through October and November.

The government is yet to announce the inflation data for October.

Headline inflation stood at 9.72% in September.

Besides, food inflation, which account for over 14% in the overall inflation basket, stood at a nine-month high of 12.21% at the end of 22nd October.

“The structural drivers of inflation are still very strong...The fact that food inflation will remain high despite good monsoon is something that will shape our view on growth inflation balance for sometime to come,” he said.

In its mid-year monetary policy, the RBI had said it could halt rise in key interest rates provided the inflation cools down.


Exports up 10.8% in Oct; trade gap widens to ‘worrying’ level

“Exports growth continues to look good and every sector is posting good growth. However, the balance of trade is something to be very worried about because at this rate you are going to breach the $150 billion mark (for the fiscal 2011-12),” commerce secretary Rahul Khullar said wile releasing the data

New Delhi: India’s exports grew year-on-year by 10.8% to $19.9 billion in October while imports expanded at a sharper rate, leaving a big trade deficit of $19.6 billion, reports PTI.

Imports increased by 21.7% to $39.5 billion in October, according to data released by commerce secretary Rahul Khullar here today.

For the cumulative April-October period, exports aggregated $179.8 billion, showing a handsome growth of 46%, thanks to sterling trend witnessed in the previous months of the current fiscal.

Imports for the seven-month period stood at $273.5 billion growing by 31%, while leaving the trade gap of $93.7 billion.

“Exports growth continues to look good and every sector is posting good growth,” Mr Khullar told reporters here.

However, he said, the balance of trade “is something to be very worried about because at this rate you are going to breach the $150 billion mark (for the fiscal 2011-12).”


Share prices to see range bound movement: Tuesday Closing Report

Nifty’s range remains between 5,160 and 5,325

The market, which started the day in the positive, gave up its gains in the early trade itself and was range-bound till the end of the session. Lack of any domestic triggers ensured a flat close. Last week we had mentioned that the Nifty would move in the range of 5,160 and 5,310. The index had a close brush with the upper level and ended in positive at 5,289 (up five points). We may still see that range continuing. Today’s marginal gain was on volume of 45.67 crore shares on the National Stock Exchange (NSE).

The Indian market opened marginally in the green after an extended weekend on positive sentiments in the global arena. Wall Street closed higher amid a choppy session as investors were tracking the developments in Italy. Similarly, the Asian pack was mostly up in morning trade, giving a boost to the market here. The Nifty opened eight points up at 5,292 and the Sensex started trade at 17,594, a gain of 31 points over its previous close on Friday.

The benchmarks hit the day’s high in the first 15 minutes itself with the Nifty going up to 5,304 and the Sensex touching 17,632. However, profit booking at higher levels resulted in the market paring its early gains and entering the negative territory around 10am.

The indices continued to trade sideways in the red in the absence of any domestic trigger. The market fell to the day’s low in the pre-noon session with the Nifty falling to 5,252 and the Sensex going back to 17,455.

Select buying, which resumed in noon trade, helped the indices move higher. However, the market was listless in subsequent trade and witnessed a flat close.  At the end of trade, the Nifty gained five points at 5,289 and the Sensex settled at 17,570, up seven points.

The advance-decline ratio on the NSE was 803:880.

Among the broader indices, the BSE Mid-cap index rose 0.21% while the BSE Small-cap index lost 0.17%.

The BSE Consumer Durables index (up 0.94%) was the top gainer in the sectoral space. It was followed by BSE Oil & Gas (up 0.20%); BSE Power (up 0.19%); BSE Capital Goods (up 0.15%) and BSE Bankex (up 0.14%). The noteworthy losers were BSE Realty (down 1.38%); BSE Healthcare (down 0.51%) and BSE Auto (down 0.08%).

State Bank of India (up 1.70%); Tata Motors (up 0.82%); Hindalco Industries (up 0.47%); Sterlite Industries (up 0.45%) and Hindustan Unilever (up 0.42%) were the major gainers on the Sensex. The losers were led by Sun Pharma (down 2.05%); DLF (down 1.76%); Cipla (down 1.43%); NTPC (down 1%) and Jaiprakash Associates (down 0.88%).

The Nifty movers were Cairn India (up 5.11%); Reliance Communications (up 4.50%); Reliance Infrastructure (up 3.96%); Reliance Power (up 3.06%) and SBI (up 1.77%). BPCL (down 3.33%); Sun Pharma (down 2.81%); IDFC (down 2.79%); HCL Technologies (down 2.52%) and DLF (down 2.40%) settled at the bottom of the index.

Markets in Asia were mixed as a surge in Italian bond yields sparked fresh concerns that the country could face problems in raising funds even as Greece is working towards selecting a new leader. Meanwhile, Japanese optical equipment maker Olympus Corporation plunged 29% following revelations by the company that it concealed losses by paying inflated fees to advisers on the 2008 acquisition of Gyrus Group Plc.

The Jakarta Composite gained 0.73%; the KLSE Composite rose 0.20%; the Straits Times surged 0.64% while the Hang Seng ended flat. On the other hand, the Shanghai Composite fell by 0.24%; the Nikkei 225 tanked 1.27%; the Seoul Composite declined 0.83% and the Taiwan Weighted lost 0.27%.

Back home, institutional investors—both foreign and domestic—were net buyers in the equities segment on Friday. While foreign institutional investors pumped in funds totalling Rs128.62 crore, domestic institutional investors bought shares worth Rs70.49 crore.

KEC International (KEC), the flagship company of the RPG Group, has secured new orders worth Rs400 crore from Saudi Arabia and India for supply and construction of transmission lines on a turnkey basis.

The Saudi Arabia order worth Rs306 crore is for 380 kV double circuit overhead transmission lines. The company has also secured two domestic orders, from Power Grid Corporation of India (PGCIL) and another from a private customer—VISA Power—for 400 kV double circuit overhead transmission lines, worth Rs94 crore. The stock fell 3.99% to close at Rs51.75 on the NSE.

Shares of SKS Microfinance, India’s largest and only listed microfinance company, tumbled 7.70% to Rs193.10 on the NSE, after the company’s net plunged on huge loan write-offs. The company reported a net loss of Rs384 crore for the September quarter against a profit of Rs80.55 crore in the July-September quarter of the previous fiscal. During the quarter, SKS’ provisions against bad loans rose to Rs353 crore, a twenty-fold jump from Rs17 crore in the year-ago period.

Balaji Amines, a manufacturer of specialty chemicals, has drawn up plans to invest Rs70 crore for expanding its manufacturing facilities at Solapur in Maharashtra. The expansion is in its methyl amines, di-methyl amine hydrochloride and dimethyl formamide facilities. All these facilities produce ingredients that are used in the pharma and drug industry. The stock gained 1.90% to close at Rs37.55 on the NSE.


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