Subbarao says RBI must regulate all deposit-taking entities

For monetary policy to be effective and financial markets to remain stable, banks, NBFCs and other deposit-taking entities should be regulated by the RBI, Subbaro said

Reserve Bank of India (RBI) governor Duvuuri Subbarao on Tuesday cautioned against taking away regulatory oversight on non-bank financial companies (NBFCs) from RBI and placing them under a Unified Financial Authority (UFA). He said such a move will go against financial stability and whittle down the impact of monetary policy.

 

Speaking at the FIBAC, the two-day annual banking summit organised by the industry body FICCI, the outgoing governor said, “A unified regulation by the same regulator (RBI) is essential for financial stability as there are strong inter—linkages between banks and deposit-taking non-banking financial companies. (Moreover), for monetary policy to be effective, credit creation by banks and credit institutions like NBFCs should be regulated by the central bank”.

 

Stating that there are strong inter-linkages between banks, NBFCs and other deposit-taking entities, he said for monetary policy to be effective and financial markets to remain stable, they should be regulated by the central bank.

 

Explaining the reasons for his reservations against the move and why the RBI should regulate both banks, non-banking entities and all other deposit-taking bodies, Subbarao said, “One of the major causes for the 2008 financial crisis was that credit intermediation activities were conducted by non—banks or the so—called shadow banks, which were primarily outside the regulatory purview.

 

“This raised serious concerns of regulatory arbitrage, requirements for similar regulation of entities performing similar activities and issues of commonality of risks and synergies of unified regulation for such entities,” Subbarao, who completes his five—year term on September 4, said.

 

He further said the country is going against the global trend wherein after the 2008 crisis, most of the leading governments have been entrusting more, and not less, regulatory powers to the central banks.

 

Following the 2008 global credit crisis, the government constituted the Financial Sector Legislative Reforms Commission (FSLRC) “with a view to rewriting and cleaning up the financial sector laws and to bring them in tune with the current requirements”, and the commission chairman retired justice BN Srikrishan had submitted report in March 2013.

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M&M June quarter net profit up 17% on robust tractor sales

M&M's June quarter volumes were driven by robust growth in the tractors segment, however, volumes from automotive segment remained flat as utility vehicle volumes witnessed a sharp slowdown

Mahindra & Mahindra, India's largest tractor and utility vehicle maker, on Tuesday reported a 17% higher first quarter net profit on robust performance from its tractor division.

 

For the quarter to end-June the Mahindra group company said its net profit rose to Rs909 crore from Rs778 crore while total revenues, including sales, increased 8% to Rs10,801 crore, same period last year.

 

During the quarter, M&M's top-line registered 7% year-on-year (yoy) growth to Rs10,023 crore led by 6.4% yoy growth in volumes and 0.6% yoy growth in net average realization. The volume growth for the quarter was driven by an extremely strong growth in the tractors segment (up 25.2% yoy) on the back of the expectations of normal monsoon and better prospects for kharif crop. The automotive segment volumes however, remained flat as utility vehicle volumes witnessed a sharp slowdown following an increase in excise duty and also due to increasing competition in the segment.

 

The net average realization witnessed a decline of 3.7% sequentially as average realization in the tractor and automotive segments declined by 9% and 2.5% quarter-on-quarter (qoq), respectively. While the tractor segment revenues posted a strong growth of 26.7% yoy (36.6% qoq); automotive segment revenues recorded a 2.5% yoy (sharp fall of 19.6% qoq) decline during the quarter.

 

On the operating front, EBITDA margins expanded 100bp yoy (74bp qoq) to 12.8% marginally better than our expectations of 12.5%. The margin performance was led by softening of commodity prices, lower share of traded goods following decline in automotive volumes and also due to greater share of tractors (37.7% as against 25% yoy) in the product-mix. As a result, operating front grew 16% yoy (1.4% qoq) to Rs1,287 crore.

 

M&M closed Tuesday 1.3% up at RS870.9 on the BSE, while the 30-share Sensex too ended 1.5% higher at 19229.8.

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BSE to shift 25 scrips, NSE to move seven stocks to ‘T’ Group

BSE would transfer 25 stocks to the trade-for-trade segment or the ‘T’ Group while NSE would transfer seven scrips to this category

Both BSE and National Stock Exchange (NSE) have decided to move shares of several companies to T-group, the restricted trading category, from 19th August as a measure to safeguard the interest of the investors in the securities market.

 

BSE would transfer 25 stocks to the trade-for-trade segment or the ‘T’ Group while NSE would transfer 7 scrips to this category, the bourses said in separate notifications.

 

Some of the companies which would be shifted to the segment on both the stock exchanges are Cura Technologies, Delta Magnets, Farmax India, Mukand Ltd, Southern Ispat and Energy, Nitesh Estates and JD Orgochem.

 

In the trade-for-trade segment no speculative trading is allowed and delivery of shares and payment of consideration amount are mandatory.

 

As per BSE and NSE, the move is part of the surveillance review “to ensure market safety and safeguard the interest of investors”.

 

The bourses have advised the trading members to take “adequate precaution” while trading in these scrips.

 

However, they added that “the transfer of security for trading and settlement on a trade-to-trade basis is purely on account of market surveillance and it should not be construed as an adverse action against the concerned company”.

 

These securities would attract a circuit filter of up to 5%, which would be the maximum permissible limit within which the share price can move.

 

Besides, NSE said that as many as 125 stocks including that of United Breweries (Holdings), Kingfisher Airlines, Reliance Broadcast Network and Reliance MediaWorks “will continue in trade-for-trade segment series”.

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