Tag: Reserve bank of India

Arvind Kejriwal

Put Images Of Lakshmi-Ganesha On Currency Notes: Kejriwal Appeals PM

By LokMarg

Delhi Chief Minister Arvind Kejriwal has appealed to Prime Minister Narendra Modi to consider including the images of Goddess Lakshmi and Lord Ganesh on currency notes in India to “improve the economic situation of the country”.

“Today I appeal to the central government and Prime Minister Narendra Modi. On Indian currency there is a photo of Gandhi Ji, let that be, on the other side of the currency, a photo of Shri Ganesh Ji and Lakshmi Ji should be put.
“As I said we have to make a lot of effort to improve the economic situation of our country. But also with that, we need blessings from Gods and Goddesses. The whole country will get blessings if, on currency notes, there is a photo of Ganesh Ji and Lakshmi Ji on one side and Gandhi Ji on another side,” Kejriwal said in his address.

“If Indonesia can do it; choose Ganesh Ji, so can we… I will write to the center tomorrow or the day after tomorrow to appeal for it… we need the almighty’s blessings apart from the efforts to settle the economic condition of the country,” Kejriwal said.

Lord Ganesha is inscribed on the 20,000 rupiah note of Indonesia.

India’s foreign exchange reserves during the week that ended on October 14 fell to an over two-year low of USD 528.367 billion, a drop of USD 4.5 billion from the previous week.

In the preceding week, the country’s foreign exchange reserves were at USD 532.868 billion, RBI data showed.

According to RBI’s data, India’s foreign currency assets, which are the biggest component of the forex reserves, declined by USD 2.828 billion to USD 468.668 billion during the week.

The value of gold reserves dropped by USD 1.5 billion to USD 37.453 billion during the week.

The value of India’s Special Drawing Rights (SDRs) with the International Monetary Fund declined by USD 149 million to USD 17.433 billion during the week under review, the RBI data showed. The reserves have been falling for months now because of RBI’s likely intervention in the market to defend the depreciating rupee against a surging US dollar.

For the record, the Indian rupee has been weakening over the past few weeks to hit fresh new all-time lows as the US dollar strengthened against major global currencies. (ANI)

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Rupee Hits All-Time Low; Decline After 4-Day Gains

By LokMarg

Indian stock indices, after having extended gains for the fourth straight session till the previous session, fell marginally on Thursday morning, tracking overnight weak sentiments from US markets.

Also, foreign capital outflows, widening current account deficit, and tightening monetary policy globally to tame inflation were some of the concerns among the investors’ community, analysts said.
At 9.56 am, Sensex traded at 58,962.18 points, down 145.01 points or 0.25 percent, whereas Nifty traded at 17,468.35 points, down 43.90 points or 0.25 percent.

“Sustained flows into mutual funds, particularly via the SIP route, is a major factor imparting strength to the market even in the context of negative global economic news. So long as DIIs are flush with funds markets are unlikely to correct sharply. Fundamental support to the market is coming from the good Q2 numbers, particularly from financials,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Meanwhile, the Indian rupee fell below 83 versus the US dollar for the first time on Wednesday as the US dollar continued to strengthen. The rupee plunged 61 points and closed at a record low of 83.01 against the dollar.

This morning, it opened near its record low.

Meanwhile, India’s forex reserves had dropped significantly, which is currently at a two-year low, because of RBI’s likely intervention in the market to defend the depreciating rupee.

Typically, the RBI intervenes in the market through liquidity management, including through the selling of dollars, with a view to preventing a steep depreciation in the rupee. (ANI)

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Stock Market Diwali Festival

Stock Market To Remain Volatile Ahead of Diwali Festival

By LokMarg

By Gyanendra Kumar Keshri

Corporate earnings and the central bank’s action amid a slide in the value of the rupee are likely to keep the Indian equities markets’ key indices – Sensex and Nifty – volatile in the coming weeks ahead of the Diwali festival.

The country’s largest IT firm Tata Consultancy Services (TCS) is scheduled to kickstart the Q2 earnings season on October 10.

According to TCS earnings release, “Tata Consultancy Services Limited will announce its results for the Second Quarter of FY 2023, ended September 30, on Monday, October 10, 2022, after-market trading hours.”

It will be followed by the announcement of the quarterly results by other IT giants like Infosys, HCL Technologies, Wipro, and Tech Mahindra. HCL Technologies and Wipro are scheduled to announce Q2 results on October 12 followed by Infosys on October 13.

Markets will closely watch the profit margins and earnings forecasts by the IT giants, especially in view of the challenges being faced due to the US Federal Reserve action.

“High-frequency indicators point towards improvement in activity and the early trends of festive demand appears strong. As we enter the Q2FY23 earnings season, the focus would be on corporate commentary on demand and margins,” said Shibani Sircar Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company.

Going ahead, there are multiple global macro factors at play and higher interest rates and inflation are likely to be sticky in the developed world. Indian growth outlook appears stable and a relative outlier. However, given the outperformance of the Indian markets and with relative valuations appearing stretched, it is possible that markets see some volatility in the near term. In the medium term, the outlook for equity markets remains healthy, given the strength of domestic macro growth and corporate earnings trajectory, Kurian said.

During the week that ended Friday, the markets witnessed volatility. It started the week on a negative note but a rally in the middle of the week helped the key indices register decent gains.

The 30 stock S&P BSE Sensex ended the week at 58,191.29 points, registering a gain of 764.37 points or 1.33 percent during the week.

The broader Nifty 50 of the National Stock Exchange gained 220.3 points or 1.28 percent during the week. It closed at 17,314.65 points on Friday, the last trading day of the week.

On the last trading day of the week, the key indices witnessed selling pressure but turned flat towards the end of the day. However, the indices closed with marginal loss.

On Friday, Sensex closed 30.81 points or 0.05 percent lower, while Nifty ended the day with a loss of 17.15 points or 0.1 percent.

Besides corporate earnings, global developments will have a significant impact on the markets. In the past couple of weeks, the equities markets have been volatile mainly due to global developments.

The main factors to watch for are the likelihood of further aggressive tightening by the US Federal Reserve and the other central banks and the continuing depreciation of emerging market currencies, the potential for an economic slowdown in the global economy, according to Joseph Thomas, Head of Research, Emkay Wealth Management.

The Indian rupee has also been under pressure in line with the currencies of the other emerging markets. The rupee touched a fresh record low of 82.42 during the week. On October 7, the Indian rupee closed at 82.32 against the US dollar, which is 98 paise lower when compared with its September 30 closing of 81.34 against the US dollar.

The Reserve Bank of India (RBI) seems to be burning its kitty to defend the currency. Due to the RBI action, the performance of the rupee has been much better than the currency of the other emerging markets.

However, the RBI’s action has taken a toll on the country’s foreign reserves. India’s foreign exchange (forex) reserves slumped by $4.854 billion to $532.664 billion for the week ended September 30, the lowest level since July 2020.

This is the lowest level of India’s forex reserves since the week ended July 24, 2020. The forex reserves had slumped by $8.134 billion during the previous reporting week.

As per the Reserve Bank of India’s weekly statistical supplement, foreign currency assets, which are the biggest component of the forex reserves, dipped by $4.406 billion to $472.807 billion during the week ended September 30.

“Indian equity markets remained volatile during the week. Despite the volatility, India continues to outperform MSCI emerging market and MSCI world indices. Growth in India has been resilient even as developed economies grapple with slowing growth and higher inflation,” said Kurian.

The US Federal Reserve remained hawkish and raised key policy rates 75 basis points or 0.75 percent recently. The monetary policy tightening stance of the US Fed resulted in a decline in the equities markets globally. It has also put pressure on emerging markets’ currencies.

In India, RBI hiked the policy repo rate by 50 basis points to 5.90 percent, largely in line with consensus expectations, continuing to frontload tightening to counter inflation risks.

Going ahead it is likely that RBI’s rate decision would be guided by domestic considerations whereby average CPI inflation is expected to moderate in FY24. Higher than-expected tightening by the US Fed and geopolitical uncertainties remain the key risks, Kurian remarked. (ANI)

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Stake In IDBI Bank

Union Govt And LIC To Divest 60.7% Stake In IDBI Bank

By LokMarg

The Government of India and the Life Insurance Corporation of India (LIC) will together divest a 60.72 percent stake in IDBI Bank. The government on Friday invited the expression of interest for the divestment of stakes in the bank.

“Expression of Interest is invited for Strategic Disinvestment of specified GoI and LIC stakes in IDBI Bank along with transfer of management control,” the Secretary, of the Department of Investment and Public Asset Management (DIPAM) said in a tweet.

The proposed strategic disinvestment includes the sale of 30.48 percent of the Government of India’s stake and a 30.24 percent stake of the Life Insurance Corporation of India.

IDBI Bank operates as a full-service universal bank serving customers from all segments. On January 21, 2019, LIC completed the acquisition of a 51 percent controlling stake making it the majority shareholder of IDBI Bank. The RBI, consequently, categorized IDBI Bank as a Private Sector Bank for regulatory purposes with effect from January 21, 2019.

Since then, IDBI Bank has showcased a turnaround in operations and is constantly exploring new avenues for growth in its business, especially in the retail segment, to maintain its competitive edge and strengthen its position in the banking landscape.

LIC holds 49.24 percent (529.41 crore shares) while the Government of India holds 45.48 percent (488.99 crore shares) in IDBI Bank as on March 31, 2022.

It has now been decided that pursuant to the strategic disinvestment of IDBI Bank (i) GoI shall sell a such number of shares representing 30.48 percent and Life Insurance Corporation of India shall sell a such number of shares representing 30.24 percent, aggregating to 60.72 percent of the equity share capital of IDBI Bank, along with transfer of management control in IDBI Bank, as per documents released by the Department of Investment and Public Asset Management, Ministry of Finance. (ANI)

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Experts Say Rupee To Fall Further, All Eyes On RBI Measures

By LokMarg

With increasing oil prices weighing on traders’ sentiments, the rupee plunged to an all-time low of 82.22 against the US dollar in morning trade on Friday. Depending on the rising crude oil and US payroll data, the US Federal Reserve’s stance on monetary policy could also be determined. The rupee had closed at 81.88 in the previous session.

Manoranjan Sharma, chief economist, of Informerics Ratings, said, “the Indian rupee vis-a-vis the US dollar fell 3 percent over the last six sessions to nearly Rs 82.50 versus the dollar. There are both global and domestic factors responsible for this fall. The global headwinds include heightened uncertainties post the Russia-Ukraine war and consequently, risk-aversion and flight to safe havens.”

“Macroeconomic factors include sluggish growth, high inflationary pressures, rising trade deficit, current account deficit, fiscal deficit and foreign investors withdrawing money from the Indian markets together with limited scope for the RBI’s intervention because the forex reserves have fallen from US dollars (USD) 642 billion to USD 540 billion.” He added: “We see India’s current account deficit to be about 3.3 to 3.4 percent of GDP this year. There is a need for close monitoring and vigil on this score,” Sharma said.

Exporters should not be allowed to keep USD earnings beyond five days. The interest rate on NRI (foreign currency) account needs to be increased, Sharma opined, adding that the import duties on non-essential items needed to be increased.

Banks need to be advised by the RBI to start special USD-fixed deposits drive for a maturity ranging from 6 months to 2 years, with enhanced interest rates.

Aditi Singh, economist, at the Bank of Baroda, said, “This was mostly like a reflection of the US data that came out yesterday. There is an anticipation that the US payrolls report will come today leaving some nervousness in the market. The dollar is continuing to strengthen because of that, and that is the reason we are seeing pressure on other currencies. 82 level is breached and we probably see the rupee moving towards 82.5 to 83 level.”

“In comparison to currencies of advanced economies, the rupee had relatively performed relatively better. So, if you see the advanced economies like the yen or the euro or the pound, these currencies have depreciated much more and when you compare it even with the strength in the dollar index, the dollar has appreciated by close to 20%. So, INR has performed relatively more rational, more strength than other currencies and that is because of the strong domestic fundamentals of the Indian economy that is reflected,” Singh said.

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Yes Bank

‘RBI Failed As A Regulator In The Yes Bank Fiasco’

By LokMarg

Abhishek Bharadwaj, a 28-year-old Chartered Accountant, says RBI may appear to be a saviour of Yes Bank but the debacle primarily happened under its watch

I work as a Chartered Accountant and I have been taught that it is always better to spread your finances/investments rather than keep all the eggs in one basket. I opened a bank account in Yes Bank only last year after a friend’s recommendation. However, being aware of the financial trends in the country I didn’t close down my accounts in other banks.

Now, even though the crisis is over, thank to RBI intervention, I have to admit that I had sleepless nights when I, around a fortnight ago, the news broke that RBI had imposed a moratorium on Yes Bank. We were anxious as we felt that it would extend for long. Mercifully, it was removed on March 18.

ALSO READ: ‘I Am Thankful To RBI And Govt’

Being an accounts professional, I promptly changed accounts to make payments as soon as I realised that the UPI (Unified Payment Interface) was creating problems. But I wonder about the others who were not so fortunate and were stuck with just one bank account. What if someone had an emergency in their homes? Back then, nobody knew when the matter would be sorted.

The RBI has strict guidelines and policies in place when it comes to the safety of the depositors’ money. However, the execution of these policies is getting lax with each passing day. More and more banks (and their owners) think they can get away with financial irregularities. So far (at least as far back as I can remember) it hasn’t happened that a bank went bankrupt. Banks facing losses and NPA (non-performing assets) are either merged or taken over, and the money of at least small investors is kept safe.

ALSO READ: Yes Bank Debacle & Crony Capitalism

It is commendable that the RBI directed many banks to help in the resuscitation of Yes Bank. Still I wonder what the authorities were doing since last year when rumours first started floating about Yes Bank. It is a failure on part of both the RBI as well as the government. Such things don’t happen in a day.

Back in 2016 when demonetisation had taken place, it was clear that banking decisions were not taken keeping all aspects in mind. I wasn’t in favour of it back then. Similarly, I feel even now it is the ordinary people who suffer (or at least start panicking) when it comes to decisions related to the banking sector. Every one might have a bank account these days, but not everyone is financially literate, so government should take care to soothe people in times of crisis.

Satabdi Gantait

‘I Am Thankful To RBI, Govt For Revival Of Yes Bank Ops’

By LokMarg

Satabdi Gantait had her salary account and Fixed Deposit in Yes Bank. She recounts the initial panic and the relief after the bank resumed normal operations

I can’t tell you how relieved I am after knowing that Yes Bank is operational again, thanks to timely intervention by the RBI and Centre government. I have my salary account in Yes Bank and when the news of Yes Bank collapse came, about a fortnight ago, many of us didn’t know what to do. I also had Fixed Deposits (FD) in the bank so I was doubly worried as to what fate my savings has in store.

Given that it was the beginning of the month, I was supposed to make payments to several people as well. It was chaos. Thankfully, I had another account in a different bank but it is horrifying to think about those who had all their savings in Yes Bank.

ALSO READ: Yes Bank Debacle And Crony Capitalism

I myself had been following news about the economy and various banks on and off, but in these times when there is so much of information flowing in all the time, one doesn’t know whom to trust and whom not to. Also, many a times one isn’t completely aware of what a particular step from the government means. We are dependent on news channels to decode information for us.

Following the news of Yes Bank collapse, the UPI (an online payment interface) on my phone stopped functioning. I teach interior designing to students in Kolkata and fashion is an industry where large amount of money exchanges take place. So undoubtedly there was panic in our group.

Thankfully, Union Finance Minister Nirmala Sitharaman came out and assured ordinary people depositors that their money was safe. That people didn’t need to panic and that the government was doing all it can to rectify the situation as quickly as possible. This was reassuring but we kept our fingers crossed. I wonder why we need to reach a situation like the Yes Bank one in the first place that ordinary people begin to panic!

ALSO READ: Centre Clears Plan To Salvage Yes Bank

I suffered during demonetisation as well and for a moment (at the beginning of the crisis around 15 days ago) I thought 2016 was going to play itself out once again in 2020.

I run an interior design firm and had to make and receive large amount of money. Both depositing and withdrawing money had become extremely difficult back then. Thankfully this time things are different.  I hope no more banks reach such a state, so that ordinary people don’t worry whether they will be able to withdraw and use their own hard-earned money.

Yes Bank Debacle & Crony Capitalism

By Sanjoy Narayan

The recent debacle of the Indian private sector bank, Yes Bank, whose board was suspended and superseded by the Reserve Bank of India (RBI), once again brings into sharp focus the extent and depth to which crony capitalism continues to prevail in the country’s economy.

Yes Bank was founded in 2004 by Rana Kapoor and his brother-in-law, the late Ashok Kapur. Early this month, the Central Bureau of Investigation (CBI), registered a criminal case against Kapoor, who was the CEO of Yes Bank; Dewan Housing Finance Ltd. (DHFL), a non-banking financial services company; and its promoter, Kapil Wadhawan. The CBI charged them with criminal conspiracy, cheating and corruption under the Indian Penal Code and the Prevention of Corruption Act.

ALSO READ: How To Pull Up Indian Economy

The allegations are that between April and June 2018, Yes Bank subscribed or invested Rs 3700 crores in DHFL’s short-term debentures. This financial assistance subsequently turned into non-performing assets as the bank was unable to recover the funds. More seriously, the allegations are that in lieu of the amount extended to DHFL, a company, Do it Urban Ventures, promoted by Kapoor’s three daughters, and received kickbacks in the form of loans amounting to around Rs 600 crores. In other words, the CBI alleges that Kapoor and DHFL entered into a conspiratorial quid pro quo: DHFL got the assistance (that have now turned into bad loans) and he and his family benefited from the kickbacks.

Rana Kapoor in custody of Enforcement Directorate

The agency has alleged that Rana Kapoor extended financial assistance to DHFL to get substantial undue benefit for himself and his family members via companies held by Kapoor and his family. On March 5, India’s central bank, the Reserve Bank of India, announced that it had suspended and superseded the board of Yes Bank. Customers were prevented from withdrawing more than Rs 50000 from their accounts and rating agencies downgraded the bank’s core bonds.

Yes Bank’s debacle turns the focus sharply on the continued prevalence of crony capitalism in India’s economy: an unholy nexus between banks, financial institutions (FIs), and business enterprises. Banks and FIs—and not only privately owned ones—in India are known to have cosy relationships with promoters of large and medium sized Indian companies and quid pro quo arrangements of the sort that Kapoor and Yes Bank are accused of are not uncommon. Rather, it is quite the opposite. Examples of misuse of bank funds are galore in the Indian economy.

One high-profile case is that of liquor baron Vijay Mallya who is currently in the UK while the Indian government is trying to get him extradited so that he can face investigation into charges levelled against him. Mallya is accused of misusing around Rs 9,000 crore (US$1.3 billion), which are loans that his companies, including a now-defunct airline that he started, took from 17 Indian banks. The allegations are that Mallya siphoned off these funds to 40 other companies that he controls around the world.

ALSO READ: Nirav Modi Arrested In London

In another headline-grabbing case in 2018, the CBI began an investigation into Nirav Modi, a high-profile Indian jeweller, on allegations that he and his partners defrauded the Punjab National Bank of Rs 28,000 crore, which he is alleged to have siphoned overseas by fraudulently obtaining letters of undertaking for making payments to overseas suppliers. Modi is absconding and is believed to be in the US even as the Interpol is looking for him.

More recently, in December 2019, another high-profile executive, Jagdish Khattar, the former managing director of Maruti Udyog Ltd., India’s largest carmaker, was booked by the CBI for charges against him of cheating the Punjab National Bank of Rs 110 crore. That case is still being investigated although Khattar has not been arrested.

These few examples are really the tip of the iceberg. Nefarious deals between banks and influential entrepreneurs abound in India. Not long ago, a private sector steel company was embroiled in a similar controversy when a partly government-controlled financial institution was believed to be lending it vast sums of money although past loans taken by the company had turned into non-performing assets.

The curious paradox about such cases is that in many of the cases, the authorities, including investigative agencies, wake up when it is already too late. In Yes Bank’s case, the RBI has been issuing warnings about financial inconsistencies in the bank’s reports. Doubts about Mallya’s ability to run his airline and manage his finances have been floating around long before he fled India.

The other, more disheartening, aspect of all this is the hagiographical treatment that the media have meted out to some of these controversial promoters and businessmen. Vijay Mallya, now 64, has had countless laudatory cover stories or “puff pieces” about him. Rana Kapoor, an aggressive publicity seeker, has found similar success with the Indian media. Jagdish Khattar was routinely lionised by India’s business press during his stint as managing director of Maruti between 2002 and 2007.

The truth is that India’s institutions, particularly in the financial sector, are prone to misuse—either because of the clout of powerful corporate borrowers or because of complicit bank officials, or both. India’s government has various laws, organisations and agencies that have been established to prevent financial fraud. Yet, with regular frequency, shocking instances of brazen misuse of the financial system come to light. What is needed is a will to break the cronyism that plagues the nexus between financiers and their corporate clients. And when frauds come to light, swift dispensation of justice could work as a deterrent.