Thu, 22nd June 2017

Anirudh Sethi Report


Archives of “Indian numbering system” Tag

Farm loan waivers by states might hit Rs 2,57,000 crore by 2019 elections: BofA-ML Report

With Maharashtra also joining the farm loan waiver bandwagon, various state governments are expected to waive off $40 billion, or Rs 2,57,000 crore, of farmers’ loans in the run-up to the 2019 general elections in the country, a global banking group has said.

Farm loan waivers will amount to 2 per cent of gross domestic product (GDP) by the 2019 polls, as other states are also likely to follow the BJP’s Maharashtra and UP governments, according to a Bank of America Merrill Lynch (BofA-ML) report.

“We grow more confident of our call that farm loan waivers will spread across states after Maharashtra followed Uttar Pradesh in waiving farm loans on Saturday. This begs the question, how much of farm loans will eventually get waived? $40 billion, or 2 per cent of GDP, in our view, in the run-up to the 2019 general elections.

This covers bank loans to farmers with up to five acres of land,” it said.

How will they be funded? “We assess that the Ministry of Finance will eventually have to come up with a UDAY bond-type solution that will securitise banks’ farm loans into long-dated non-SLR state government paper,” Merrill Lynch said. “It may affect credit culture, although we recognise that a good part of farmer debt arose on rural stress from poor harvests.”


Investments in domestic capital markets via participatory notes (P-notes) have surprisingly surged to 4-month high of Rs 1.78 lakh crore at the end of March despite stringent norms put in place by Sebi to curb inflow of illicit funds. P-notes are issued by registered Foreign Portfolio Investors to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They however need to go through a proper due diligence process.

According to Sebi data, total value of P-note investments in Indian markets – equity, debt and derivatives -increased to 1,78,437 crore at March-end, from Rs 1,70,191 crore at the end of February. Prior to that, the total investment value through P-notes stood at Rs 1.75 lakh crore in January-end and Rs 1.57 lakh crore in December-end. In March, investments through the route had touched the highest level since November, when the cumulative value of such investments stood at Rs 1,79,648 crore.    

Rangarajan says bank cannot control NPAs

Former Reserve Bank of India Governor C Rangarajan today said banks cannot escape from the responsibility of controlling Non-Performing Assets (NPA) in their balance sheets.

At a panel discussion on ‘Union Budget-2017’, Rangarajan also said that though the adverse impact of demonetisation will wear off as the currency availability improves, some affects will not go away even as sectors like real estate will have to rethink their business models.

“The banking system is undoubtedly under stress. How to resolve that particular problem is only through capitalisation. Please remember even in good old Basil-I, the capital is 8 per cent of the risk weighted assets.

So Rs 10,000 crore (capital infusion to banks in 2017-18 as mentioned in the budget) should not be compared with Rs 1 lakh crore or Rs 2 lakh crore,” he said. “I think that the general scene is that the capital provided is not adequate…I think this cannot let the banks

escape the responsibility for the non-performing assets that they have in their asset portfolio.

Maharashtra’s Manchester hit hard, 70% of units shut; 80,000 workers affected

Exactly a month after demonetisation, powerlooms in Ichalkaranji, better known as the Manchester of Maharashtra, are struggling to come to terms with the effects of the currency ban. Over 70% of the units in the town are shut and more than 80,000 workers engaged in the looms and yarning, sizing and processing units are either leaving town or are reluctant to come back after Diwali as there is no cash for payment their wages.

Most of the workers come from Uttar Pradesh and Bihar. “The last two years have been very difficult for the industry and we have been barely managing to survive despite making losses because of high rates of the raw material. Powerlooms have been running at barely 30% capacity in the last 8-9 months because production lines cannot be shut. The scrapping of the Rs 500 and Rs 1,000 currency notes has brought the industry to a halt.

“Traders have cancelled orders and the units now have nothing to work on,” Satish Koshti, president, Ichalkaranji Powerloom Weavers Cooperative Association said. From a daily turnover of Rs 45-50 crore, business has sharply dropped down to barely Rs 10-15 crore, he said.

Demonetisation has affected the entire cycle of production and supply. Ichalkaranji has over 1.25 lakh powerlooms some 25,000 semi-auto looms and 7,000 shuttleless looms providing employment to over 80,000 people. Ichalkaranji produces some 1.5 crore meters per day generating revenues of Rs 45-50 crore crore per day.

Ichalkaranji has some 25,000 small units in this sector. Around 15% of this is direct exports while another 40% is exported indirectly. Located around 200 km from Pune, Ichalkaranji has been a major textile hub in the country and sends ready cloth to Ahmedabad, Mumbai, Madhya Pradesh, Delhi, West Bengal and Karnataka. According to Koshti, the season usually begins after Diwali and continues till June every year and this time after a two bad seasons, the industry was looking forward to a good season because of good monsoons.

“Initially for a fortnight, traders were forcing the industry to accept the demonetised notes.

India -In a first, Bank deposits cross Rs 100 lakh crore

India’ banking system reported total deposits of Rs 100 lakh crore for the first time ever in September, data released by the RBI show, reports Shakti Patra in Mumbai. With demand deposits crossing R10 lakh crore and time deposits crossing the Rs 90 lakh crore mark, the month saw the highest-ever monthly rise of Rs 5.32 lakh crore — more than the total deposits in the banking sector 20 years back.

Although Rs 100 lakh crore is a big milestone, historical data reveal deposit growth slowed down considerably over the last five years. While banks’ deposits grew at a CAGR of 12.88% in the last five years, they had grown at a CAGR of 19.9% in the previous five years. The slowing down in the pace of deposit growth was in line with the slowing down of M3 or broad money supply in the economy. An analysis of historical data suggests that while M3 in India grew at well over 20%  (y-o-y) for several years in the middle of last decade, it has been growing in the sub-teens in recent years.


In the fortnight ended September 16, M3 stood at R121.9 lakh crore, having grown by 10.9% over the same quarter last year.

Reliance Jio loses its advantage; Airtel, Vodafone can easily counter it now

Top three telcos — Bharti Airtel, Vodafone and Idea — have secured adequate 4G spectrum during the recently-concluded auction to counter Jio, making them more competitive to poach subscribers, analysts said today.

The spectrum auction, which was touted as the largest sale of mobile airwaves, ended in a whimper yesterday, with just Rs 65,789 crore of bids coming in over five days as against an expectation of Rs 5.6 lakh crore.

Nearly 60 per cent of airwaves, including premium 4G bands, remained unsold.

“We now believe that the top three telcos have adequate 4G spectrum to counter Jio, making it more competitive to poach subscribers. We now also see faster consolidation among smaller telcos, given lack of data spectrum,” Bank of America Merrill Lynch said in a report.

It added that the top three operators, however, still lack a sub-1 GHz 4G band that Jio has and therefore, there is a possibility that these companies may purchase spectrum in the 700 MHz in future.

The appetite may be driven by improvement in capacity utilisation, led by data growth.

INDIA-Bank union threatens to disclose names of 7,000 defaulters

All-India Bank Employees Association (AIBEA) today threatened to make public the names of top 7,000 wilful corporate loan defaulters who have defrauded around Rs 70,000 crore.

The union also demanded filing criminal cases against these defaulters.

AIBEA General Secretary C H Venkatachalam also said around 10 lakh employees and officials would go on a one-day strike, called by nine unions on July 29 to oppose what he calls the “anti-people banking reforms being pushed by the government.”

“Wilful defaulters have taken loans for some purpose but have diverted and misused the money. There are around 7,000 big companies who are wilful defaulters and they owe Rs 70,000 crore to the system. We will reveal their names in a few days,” Venkatachalam said here.

He accused the government of going soft on these big defaulters saying, “we believe the government is soft on wilful defaulters. We want to know why no criminal action is taken against them, but only civil suits are being filed against them?”

Poor have to pay, why do defaulters run away with thousands of crores: SC pulls up RBI

Questioning the Reserve Bank of India (RBI) over what it called a “mind-boggling” amount of bad outstanding loans given by state-owned banks, the Supreme Court Tuesday rued that farmers are forced to sell their land for failing to repay agricultural loans of some thousands of rupees, while those defaulting in repayment of thousands of crores manage to run away.

A bench led by Chief Justice T S Thakur told the RBI that the amount of bad loans disclosed in the regulator’s affidavit makes it clear that the “outstanding is very large” and that the court would need to know about the steps being taken to retrieve the money.

 RBI was asked to explain the huge amount of loans written off by public sector banks (PSBs) in the last five years after the bench took suo motu cognizance of The Indian Express report dated February 8 that Rs 1.14 lakh crore had been written off as Non-Performing Assets (NPAs) by 29 state-owned banks in the last three years.

“Are you not supposed to keep vigil? Is RBI not supposed to maintain information and act on how public sector banks are advancing loans? These banks are supposed to act prudentially but if they have been doing it by flouting norms and without ensuring adequate assets as securities, are you not supposed to take actions against them? RBI is the regulator… you must act as a watchdog,” the bench told RBI’s counsel Jaideep Gupta. Underlining that the top court has now enlarged the scope of the matter and that it would examine all aspects of bad loans and their write-offs, the bench added: “What is this happening? There are people who take thousands of crores in loans and they manage to run away. Banks are left to waive the loans or restructure them. On the other hand, farmers getting some thousands in loans are compelled to even sell their lands if they cannot repay.” The court also perused the details of defaulters of loans of Rs 500 crore and more, submitted by the RBI in a sealed cover envelope to maintain “confidentiality”, and said that “the information does make out a case for us to examine the matter”. The bench also issued notices to the Union Finance Ministry and the Indian Banks’ Association, after making them parties in the case.

Tax proposals on spectrum allotment to lead Rs 30,000 crore outgo: COAI

The budget proposals to tax all spectrum allotments will lead to an outgo of Rs 30,000 crore in 2016-17 for assignment of airwaves and licence fees, putting further financial stress on the telecom industry, GSM operators body COAI said on Monday.

The Union Budget which intends to impose a 15% tax on all spectrum allotment by the Centre (via auctions) and spectrum transactions between licencees (trading and sharing) will have a detrimental impact on the telecom industry directly and on the nation and customers indirectly, COAI said.

“The broad estimates of tax outgo on spectrum assignment and licence fees amounts to Rs 30,000 crore for FY17. This input tax will ultimately need to be collected on telecom service rendered to the end consumers to offset from a cash flow perspective,” COAI said in a letter to Finance Minister Arun Jaitley.

Sharing figures, the body said as per broad estimates, in the upcoming spectrum auction, if all the airwaves are sold, the government will get atleast Rs 5.36 lakh crore, on which operators have to pay Rs 77,000 crore as service tax.

The industry body said additional taxes proposed in the Budget 2016 will force the industry to increase tariffs across the board which will impact the entire Indian population.

Defence Minister Manohar Parrikar finds $3 bn lying forgotten in US account

In a disquieting comment on how the ministry of defence(MoD) manages its money, Defence Minister Manohar Parrikar revealed on Friday that he discovered India was paying the US Department of Defense (Pentagon) for new weaponry, even though $3 billion which had been earlier remitted was lying in an account in Washington.

New Delhi had placed the money in the Pentagon-managed account for weaponry it was buying under theForeign Military Sales (FMS) programme. In this, the Pentagon procures equipment on behalf of foreign governments from US vendors like Boeing and Lockheed Martin.

“Because of ill-management, or lack of attention to this account, we had slightly less than $3 billion which is piled up in this account, which was not earning any interest. It was just lying there in the account,” Parrikar said at a press conference here. Parrikar added that he drew on this account, saving money from this year’s capital budget, which was returned to the finance ministry. “From somewhere near $3 billion, the account has come down to $1.7-1.8 billion. During last year, we must have paid nearly Rs 6,000 crore from this fund for our committed liabilities…. We have saved almost $700-800 million in foreign exchange”, he said.

He also claimed to have saved up to Rs 3,000 crore by tightening up payment norms to Indian vendors, including the defence public sector undertakings (DPSUs). He said payment had been made even to companies that failed to deliver the contracted equipment.