Economy
SBI Composite Index for manufacturing sector slips to 51.5

Increase in automotive sales, and benign inflation are the positive factors, but, sluggish credit growth to major sectors and elevated interest rate has dragged the index downwards, SBI said

 

The SBI Composite Index, an indicator for tracking India’s manufacturing activity, registered a decline on a month-on-month momentum in January, amid sluggish credit growth and elevated interest rates.
 
The Monthly Index has slipped from 55.4 (high growth) in December 2014 to 51.5 (low growth) in January 2015, the state run lender said in a statement.
 
“Increase in automotive sales, and benign inflation are the positive factors contributing to the index. But, sluggish credit growth to major sectors and elevated interest rate has dragged the index downwards,” SBI said in the research note.
 
On a year-on-year basis however, the index inched up to 52.1 in January (signalling moderate growth) from 50.6 (low growth) in December 2014.
 
The Index captures two components of the manufacturing cycle – month-on-month and year-on-year – growth on a scale of 0 to 100.
 
Index above 50 implies growth over previous respective period and less than 50 will suggest a contraction over respective period.
 
The SBI Composite Index rivals the existing data point from British lender HSBC. It has been developed on the basis of the bank’s internal loan portfolio, which mirrors the credit demand in the country, and other data sets available in public domain.
 
Commenting on the recent marginal pick up in bank credit growth, the report said that this is being driven to some extent by pick up in personal loans, primarily credit card outstanding.
 
“We believe that such increase may be attributed to the emergence of e-retail platforms, and it remains to be seen whether this augurs well for the revival in consumer sentiment,” the report added.
 
An index value of less than 42 means large decline, while value of 42 to 46 means (moderate decline), 46 to 50 (low decline), 50 to 52 (low growth), 52 to 55 (moderate growth) and above 55 high growth, SBI said.
 

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RBI allows banks to act as insurance brokers

The new guidelines from RBI allow banks to act as brokers and permitting them to sell insurance policies from different insurance companies

 

Seeking to increase insurance penetration in the country, the Reserve Bank of India (RBI) has allowed banks to act as brokers for insurers, set up their own subsidiaries and also undertake referral services for multiple companies.
 
“Banks may undertake insurance agency or broking business departmentally and/or through subsidiary,...,” RBI said in the guidelines for entry of banks into insurance business.
 
Banks have also been allowed to set up subsidiaries and joint venture companies for undertaking insurance business with risk participation, the central bank added.
 
They can also act as corporate agents without seeking prior approval from the RBI. However, they will have to comply with Insurance Regulatory and Development Authority (IRDA) guidelines.
 
Under existing bancassurance guidelines, a bank can act as a corporate agent and sell policy of only one life insurer and one non-life insurance company.
 
The new guidelines allow banks to act as brokers permitting them to sell insurance policies of different insurance companies.
 
The guidelines follow an announcement made by the former Finance Minister P Chidambaram in 2013-14 Budget.
 
“Banks will be permitted to act as insurance brokers so that the entire network of banks’ branches will be utilised to increase the penetration of insurance,” the Budget had said.
 
There are about 87 commercial banks in the country with 1.2 lakh branches across the country. There are 52 insurance companies operating in India; of which 24 are in the life insurance business and 28 are in general insurance business. In addition, GIC is the sole national reinsurer.
 

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Coal Scam: Tata Steel, JSPL, Essar, NTPC among others to get fresh notices

The notice sent to prior allottees of around 130 coal blocks asks for reasons behind delays in mines development. It also warned of deduction in their bank guarantees if they failed to furnish replies

 

The Indian government on Friday issued fresh show cause notices to prior allottees of coal blocks like Jindal Steel and Power Ltd (JSPL), JSW and Tata Steel, among others. The notice ask these entities reasons behind delays in mines development and warned of deduction in their bank guarantees if they failed to furnish replies.
 
The Coal Ministry, in the notice sent to the prior allottees of around 130 coal blocks, said, "You are hereby called upon to show cause to why the delay in the development of the coal blocks should not be held as violation of the terms and conditions of the allocation letter, including in detail the reasons for slippage in respect of each milestone and agency responsible for such delay, within a period of three weeks from the date of issue of this show cause".
 
The companies issued fresh notices include others like Monnet Ispat and Energy Ltd, Bhushan Ltd, Nalco, Hindalco Industries, NTPC, Essar Power, SAIL, Adani Power and Tata Power.
 
The ministry further said, if they failed to do so "it would be presumed that your company (ies) has (have) no explanation to offer and course of action regarding invocation/deduction of bank guarantee (BG) would be decided against your company (ies)."
 
It said the inter-ministerial group (IMG) at its meeting held last month has observed that subsequent annulment of coal blocks cannot exempt the prior allottees of the cancelled coal blocks from invocation/deduction of BG.
 
"Subsequent development or consequence cannot override the condition precedent or bounden stipulations of allocations of coal blocks. As per the conditions of allocation letter, allocates were bound to develop the coal blocks within the time period," the ministry said.
 
The issue of BG remains alive, it said adding that the IMG also felt that it was a fact that apart from delays and lapses on the part of the prior allottees, the same might have also been caused due to delay both on the part of agencies of Central Government as well as the State Governments.
 
"Accordingly, the IMG has recommended to issue show cause notice (SCN) afresh to coal block allocates as to why the BG submitted with the government should not be deducted for delay in development of coal block until the block was held by the companies and for not adhering to the milestones chart prescribed for block development," it said.
 
The recommendations of the IMG have been accepted by the government, it said.
 

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