Remittances To Hit Rough Patch in FY on COVID-19 Worries: Report
Muted external remittances growth is more of a structural issue than transitory and it would further weaken aggregate consumption demand, though the impact will be restricted to a few states, given their skewed shares in foreign remittances, says India Ratings and Research (Ind-Ra). 
 
Historically, India has remained the largest receiver of remittances in the world. However, the share of remittances as a percentage of gross disposable income receded to 2.5% in FY18-19 from 3.5% in FY09-10. The growth rate in four different periods shown below suggests that the flows had started to moderate even before the outbreak of COVID-19, the ratings agency says.
 
 
Various empirical studies have suggested that remittances are an important driver of a smooth consumption cycle. Thus, countries with large dependence on remittances act as a counter cyclical buffer against a fall in domestic output. Additionally, remittances have a positive impact on household savings and act as a consumption booster. Therefore, the ratings agency feels that the pandemic-led slowdown in consumption is likely to get exacerbated by the muted remittance flows. 
 
The falling oil prices and recessionary pressures that exacerbated due to the COVID-19 outbreak have led to job losses and salary cuts globally, it added. 
 
According to World Bank, Indian diaspora constitutes close to 16 million people around the world, of this, 55% are situated in Gulf Cooperation Council. Furthermore, remittances from the region constitute 54% of the total remittances to India. 
 
According to the Bank, global remittances are projected to decline by 20% yoy in 2020 due to the economic crisis induced by COVID-19 pandemic.
 
Interestingly, the NRI (non-resident Indian) accounts excluding FCNR (foreign currency non-resident) account have seen positive growth, owing to higher savings by NRIs due to COVID-19 related uncertainty.
 
 
On the macro front, a considerable flow of remittances directly impacts aggregate demand and thus the banking sector deposits. Meanwhile, banks with a higher NRI deposit ratio in the total portfolio will be better able to hedge their risk than others, as the overall banking sector deposits are stable along with muted credit offtake.
 
According to Ind-Ra, FCNR has witnessed a year-on-year (y-o-y) fall in deposits, whereas overall NRI accounts have reported an increase. However, in Ind-Ra’s rated portfolio, The Federal Bank Ltd and The South Indian Bank Ltd have reported subdued growth in NRI deposits. 
 
The ratings agency opines that the key risk for banks will only emerge if the fall in deposits will continue amid an increase in withdrawals due to the factors induced by the pandemic. At the same time, it says, banks will be able to manage this risk better with the help of improved domestic deposits amid muted credit growth. 
 
Ind-Ra says it believes that in spite of the muted external remittances, the impact would largely be restricted to the aggregate consumption level in the first order and the buoyancy in foreign capital flows would compensate the requirement of capital. 
 
According to the ratings agency, there are multiple dynamics of sending remittances, starting from the pattern of migration, taxation, cost of remittances to comparative return between host and home countries and all these factors are structural enablers for remittances, whereas income generation is the largest driver. 
 
"Remittances are not closely linked to capital flows because it is a transfer of income to home destination. Therefore, the motivation is less of speculation, and remittances have remained more of a stable source. The cyclicity of remittances have largely been dependant on the country of origination of remittances. In the case of India, Gulf countries are the largest source of remittances, thus oil price has been recognised as the major driver for quantum of flows. Additionally, geopolitical conditions play a critical role," Ind-Ra added. 
 
India receives its major remittances from the Gulf Cooperation Council (GCC) nations which have stagnated since 2015 due to volatile oil prices in global markets. The economic growth of the region depends heavily on oil prices. The remittances from the region will be further pressured due to COVID-19 related factors coupled with falling oil prices, Ind-Ra says.
 
 
The NRIs, besides sending money back home, also avail bank facilities to park their funds as deposits in Indian banks to avail the benefit of high interest rates. Owing to the deteriorating macro variables of host countries, there has been a slight fall in the overall NRI deposits. The ratings agency opines that FCNR deposits will continue to witness a muted flow in FY20-21.
 
 
Ind-Ra says it has assessed NRI deposits in its rated portfolio to check the vulnerability of its rated issuers. The NRE (non-resident external) account of Federal Bank constitutes 40% of its total deposits whereas 30% of the total deposits of South Indian Bank are dependent upon NRI accounts. Both the banks have reported a rise in their NRE accounts and NRI accounts, respectively. 
 
 
 
"The major cause behind the heightened deposits, despite falling remittances, is more savings amid the COVID-19 crisis, along with favourable interest rates. The banks have proved a stable deposit ratio like during the previous crisis such as the 2008-2009 global financial crisis. The banks will be able to manage this risk with stable deposit growth coupled with muted credit offtake. However, in case the inflows continue to slacken, increased withdrawals will heighten risks," the ratings agency concludes.
  • Like this story? Get our top stories by email.

    User 

    NCLAT sets aside plea against CarVal's resolution plan for Uttam Value Steel
    The National Company Law Appellate Tribunal (NCLAT) has given its go ahead for the resolution plan of New York-based CarVal Investors' to acquire the debt-ridden Uttam Value Steels Ltd.
     
    The appellate tribunal in a judgment on Wednesday set aside a plea challenging the order by National Company Law Tribunal's (NCLT) Principle Bench approving the resolution plan.
     
    The company has a total admitted debt of Rs 3,003 crore.
     
    The appellate tribunal noted that the appellants are aggrieved with the allocation of a "tiny" amount of 0.18 per cent of the outstanding dues.
     
    The collective admitted operational debt of the appellant was Rs 423.82 crore which was 80.88 per cent of the total operational debt of the corporate debtor total being Rs 524 crore. The appellant was also representative of the operational creditor in the meeting of CoC, being holder of more than 10 per cent of the total admitted debt of Rs 3,003 crore.
     
    Five operational creditors moved the NCLAT post the NCLT's approval to the plan alleging that the adjudicating authority has approved the resolution plan, where the appellant is getting hardly 0.18 per cent or 0.19 per cent of its claims. The appellant is logically upset that they are paid 0.19 per cent whereas the Financial Creditors (CoC decision takers) are getting 41.75 per cent of their claims.
     
    The figure cited by the Operational Creditor, that the Financial Creditor have got Rs 1,035 crore from an admitted debt of Rs 2,479 crore (41.75 per cent)
     
    The three-judge bench said that the issue of prior approval from the Competition Commission of India (CCI) under the Insolvency and Bankruptcy Code, 2016 is incorrect and CCI approval is not a condition precedent for the approval of the resolution plan.
     
    "The CCI approval has been procured on June 4, 2019 in compliance with the provisions of the Code. It is submitted that condition requiring CCI Approval is 'directory' and having obtained the same, the provisions Section 31(4) have been complied with," the order said.
     
    After several observations, the NCLAT bench said: "We find that there is no merit in this Appeal and the Appeal is hereby dismissed. Pending IA, if any, are disposed of in terms of above observations and directions. Interim orders, if any, stand vacated. There shall be no order as to costs"
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    saharaaj

    2 weeks ago

    WHy can't appellate impose deterrent fine on such litigants filibusters obstructionists or they love to show out put based on work done such interlopers

    shailendra.dukane

    2 weeks ago

    Finally, What share holder will get who are since years. Over 25 years of investment is dead. Will this recover at any point.

    Veterans Seek Investigation into Posts about Non-Existent 'Muslim Regiment' on Social Media
    As many as 120 veterans, including Admiral L Ramdas, have requested immediate intervention by the President, who is also the supreme commander of the Indian armed forces, to investigate and take action against all those who are posting false messages on social media about Muslim regiment, claiming that this regiment was disbanded after the 1965 war.
     
    The veterans have requested the President to investigate the antecedents of individuals who have made the 'Muslim Regiment' posts, to identify and charge those individuals with anti-national activities, to issue warning to the social media providers (Facebook & Twitter) who have enabled these posts and issue immediate instructions to all state governments that the generation of false and seditious messages in social media should be acted upon with alacrity, to not jeopardise national security. 
     
    “Saying that Muslim soldiers of this so-called ‘Muslim Regiment’ refused to fight the war against Pakistan in 1965 and hence the ‘Muslim Regiment’ was disbanded, denigrates and questions the loyalty of all serving and retired Muslim soldiers. Further, it helps the enemy by striking at the morale of India’s soldiers to degrade their operational capability.” 
     
    “Our soldiers fight shoulder-to-shoulder as a team at every level of all military functioning and operations from the section and platoon level up to the highest level, based upon mutual trust, respect, comradeship and fraternity, regardless of the religion, language, caste, etc. of other members of the team. Social media posts like the ‘Muslim Regiment’ posts put in the public domain are an insidious attack on the morale of our armed forces. It generates doubts in the public mind that if Muslim soldiers cannot be trusted, then other Muslims too are no different. It exacerbates mistrust and hate between communities,” the veterans point out.
     
    Maj Gen SG Vombatkere, one of the veterans, says that there are a number of social media posts propagating the falsehood that the soldiers of a 'Muslim Regiment' of Indian army had refused to fight against the Pakistani army during the 1965 India-Pakistan war, and that the 'Muslim Regiment' was thereafter disbanded (the word used in the tweets is 'dismantled').
     
    He says, "We are all aware of the security problems that our country is facing all along the Chinese and Pakistan borders. In a near war scenario, these social media posts are probably part of the 'psy ops' of Pakistan's ISPR, other organisations inimical to India's national security and indeed of the many groups named in the various social media posts referred to in the text of our open letter. Whatever be the source, these malicious allegations are clearly designed to generate ill will and raise suspicions against Muslims in general and lower the morale of our armed forces." 
     
    "Senior and decorated veterans have viewed these developments with utter dismay and have decided to write to the supreme commander of the armed forces, the President of India, requesting immediate enquiry and punitive actions against the propagators of these posts and the platforms over which these posts are hosted," Maj Gen Vombatkere added.
    Here is the letter sent by the veterans to the President.
     
     
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    2009anandsingh

    2 weeks ago

    It is targeted outside international borders and targetted to spread the hate. It really brings morale down for those who are "Unknown Heroes Of India" and "known heros of India". Vande Matram and Jai Hind.

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 4 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone