S&P assigns stable outlook to 10 Indian banks

The rating action for domestic banks comes a day after S&P downgraded as many as 15 large banks globally, including some big American names like Bank of America, Citigroup and Goldman Sachs coming as a major blow to the already-struggling banking sector in a weak global economic scenario

New Delhi: Global rating agency Standard & Poor’s (S&P) on Thursday affirmed investment grade with ‘stable’ outlook to 10 Indian banks, including State Bank of India (SBI), ICICI Bank, HDFC Bank and IDBI Bank, reports PTI.

The rating affirmation came after applying new ratings criteria for banks, Standard & Poor’s said in a statement.

The banks, which are part of the list, include Axis Bank, Bank of India, HDFC Bank, ICICI Bank, IDBI Bank and Indian Bank.

Besides, other banks which have been provided investment grade are SBI, Indian Overseas Bank, Syndicate Bank and Union Bank of India.

The rating action for domestic banks comes a day after S&P downgraded as many as 15 large banks globally, including some big American names like Bank of America, Citigroup and Goldman Sachs coming as a major blow to the already-struggling banking sector in a weak global economic scenario.

Standard and Poor’s has also cut ratings for US-based banking giants like JP Morgan, Morgan Stanley, Wells Fargo, while some European banking titans like Barclays, HSBC, Lloyds Banking Group, RBS (Royal Bank of Scotland) and Rabobank have also been downgraded.

Earlier in October, another global ratings firm Moody’s downgraded its rating of SBI’s financial strength by one notch to ‘D+’ on account of the lender’s low Tier-I capital ratio and deteriorating asset quality.

The Moody’s move had evoked sharp reactions from the government and bankers who described the move as ‘unwarranted’ as the domestic banks are better than their global counterparts.

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Direct FII market access to come from full rupee convertibility: Expert

“Full convertibility of the rupee will take place when we achieve a positive trade balance. Our exports have to be more than our imports for over a series of years,” Multi Commodity Exchange of India chairman Venkat Chary said

Singapore: India needs to build up its export-oriented manufacturing sector to achieve a trade surplus and support full convertibility of the rupee before allowing foreign institutional investors (FIIs) to invest directly in the country’s stock, commodity futures and options markets, reports PTI quoting a senior Indian economist.

“The access (to the Indian markets) is finally going to be full convertibility of the rupee,” Multi Commodity Exchange of India chairman Venkat Chary said in Singapore on Friday.

Mr Chary made the remarks to PTI after fielding questions from international traders on when FIIs would be given direct access to the booming Indian stock and commodity markets.

“Everyone asks me these questions at conferences which I attend—when will they get access to the Indian market. And my short answer to that is—full convertibility of the rupee, which will take place when we achieve a positive trade balance,” he said.

“Our exports have to be more than our imports for over a series of years,” he added.

He noted that FIIs were especially keen on participating in the Indian stock, futures and options markets on account of the high level of liquidity.

Mr Chary pointed out that the Indian public and private sector was working on long-term development of the manufacturing sector, which in the past has not grown at the pace seen in sectors like information technology.

However, once the manufacturing sector is developed and India achieves trade surpluses from increasing exports, the country would achieve full convertibility of the Indian rupee, Mr Chary said.

This would strengthen the Indian rupee and allow a more manageable approach to the inflow of FII investments, he said.

Speaking after the conclusion of the Futures Industry Association’s Derivatives Conference here, Mr Chary said he believed that India would achieve a trade balance in five years, once the manufacturing sector starts ramping up exports.

He also highlighted advantages for India in years ahead, citing FIIs and foreign investors’ preference for India's democratic processes, free society, flourishing enterprises, young working class population and free press and new media.

India has a “noisy democracy”, which at times delays processes, but it also allows innovative thinking, he said.

This Indian system was preferred by foreigners compared to China, where the party-based ruling in Beijing maintains a tight and protective control despite the successful economy, he said.

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World on brink of another economic meltdown: UN

A serious, renewed global downturn is looming because of persistent weaknesses in major developed economies on account of problems left unresolved in the aftermath of the recession of 2008-2009, the UN ‘World Economic Situation and Prospects 2012’ report said

United Nations: The United Nations (UN) has warned that the world is on the brink of another recession, projecting that global economic growth will slow down further in 2012 and even emerging powerhouses like India and China, which led the recovery last time, will get bogged down, reports PTI.

The UN ‘World Economic Situation and Prospects 2012’ report has cut the global growth forecast for next year to 2.6% from 4% in 2010.

It has called 2012 a “make-or-break” year for the global economy, which will face a “muddle-through” scenario and continue to grow at a slow pace.

“Following two years of anaemic and uneven recovery from the global financial crisis, the world economy is teetering on the brink of another major downturn,” the UN report said, warning that “the risks for a double-dip recession have heightened”.

The report said the failure of policymakers, especially those in Europe and the United States, to address the jobs crisis, prevent sovereign debt distress and escalation of financial sector fragility poses the most acute risk for the global economy in 2012-2013.

Growth in developing countries like India and China, which had stoked the engine of the world economy so far, will also slow down to 5.6% in 2012 from 7.5% in 2010.

“Developing countries are expected to be further affected by the economic woes in developed countries through trade and financial channels,” the report said.

GDP (gross domestic product) growth in China and India is expected to “remain robust, but to decelerate”, it said.

India’s economy is expected to expand by between 7.7% and 7.9% in 2012-2013, down from 9% in 2010. In China, growth slowed from 10.4% in 2010 to 9.3% in 2011 and is projected to slow further to below 9% in 2012-2013.

Notably, the UN has revised its 2012 prediction downward for every major country.

It projected 1.3% growth for the US (down 0.7% from its last forecast), 1.5% for Japan (down 1.3%), 0.5% for the 27-nation European Union (down 0.8%) and 8.7% for China (down 0.2%).

A serious, renewed global downturn is looming because of persistent weaknesses in major developed economies on account of problems left unresolved in the aftermath of the recession of 2008-2009, it said.

“Most developed country governments have indiscriminately switched from fiscal stimulus to premature austerity measures.

This has further weakened global aggregate demand, already nurtured by persistent high unemployment,” the UN said.

Additionally, the economic woes in Europe and the US are exacerbating volatility in international financial and commodity markets and slowing growth in developing countries.

“All of these weaknesses are present and reinforce each other, but a further worsening of one of them could set off a vicious circle leading to severe financial turmoil and a renewed global recession for 2012-2013,” the report said.

The report outlines several policy directions that could avoid a double-dip recession, including the optimal design of fiscal policies to stimulate more direct job creation and investment in infrastructure, energy efficiency and sustainable energy supply, stronger financial safety nets, better coordination between fiscal and monetary policies, as well as providing sufficient support to developing countries for addressing the fallout from the crisis.

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