Month: March 2021

Our Bureau

The government has decided to cancel the last weekly Government Securities (G-Secs) auction of FY21, aggregating ₹20,000 crore. This could soften G-Sec yields in the run-up to the close of the fourth quarter and the financial year.

“As per the revised Issuance Calendar dated February 1, 2021, for Government of India-dated securities, the next auction is scheduled to be held on March 26, 2021.

“On review of position of cash balance, the Government of India has decided to cancel the above scheduled auction,” said the Reserve Bank of India (RBI) in a statement.

Direct tax collection

Last Thursday, BusinessLine had reported about the possibility of cancellation of the last weekly G-Sec auction of FY21 on rising expectations that the overall direct tax collection may exceed the revised target.

Softening of G-Sec yields due to cancellation of the auction could have a salubrious effect on valuation of bond portfolio of banks, said Marzban Irani, CIO-Fixed Income, LIC Mutual Fund.

The 10-year benchmark G-Sec (carrying 5.85 per cent coupon rate) thawed about a basis point to close at 6.1801 per cent (previous close: 6.1927 per cent), with its price moving up by 9 paise to close at ₹97.61 (₹97.52).

The 15-year G-Sec (6.22 per cent) softened 3 basis points to close at 6.7345 per cent (6.7673 per cent), with its price rising by about 28 paise to close at ₹95.3850 (₹95.10).

Bond yield and price are inversely related, moving in opposite directions.

CARE Ratings, in a report last Friday, said the Central government raised ₹33,000 crore in its scheduled weekly auction for the week ended March 19, 2021, which is ₹4,000 crore more than the notified amount and ₹8,767 crore more than the previous week.

“This is the second consecutive auction wherein no bids were devolved to the primary dealers,” said Sushant Hede, Associate Economist, in the report.

Our Bureau

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹15 lakh on Fedbank Financial Services Ltd (Fedfina), Mumbai, for non-compliance with certain provisions of the central bank’s directions on monitoring of frauds.

“This penalty has been imposed in exercise of powers vested in RBI under the provisions of …the Reserve Bank of India Act, 1934.

“This action is based on deficiencies in regulatory compliance, and is not intended to pronounce upon the validity of any transaction or agreement entered into by the company with its customers,” said the RBI in a statement.

Fedfina is a subsidiary of Federal Bank. The bank has 74 per cent stake in the non-banking finance company (NBFC).

The central bank observed that the statutory inspection of the company, with reference to its financial position as on March 31, 2019, revealed, inter alia, non-compliance with certain provisions of the directions issued by the Reserve Bank of India contained in ‘Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016’.

In furtherance to the same, a notice was issued to the company advising it to show cause as to why penalty should not be imposed for failure to comply with the directions issued by RBI, the statement said.

After considering the company’s reply to the notice and oral submissions made during the personal hearing, the RBI came to the conclusion that the charge of non-compliance with aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, the RBI added.

The Reserve Bank of India (RBI) has set up a five-member committee, headed by former Deputy Governor Shyamala Gopinath, for evaluating applications for Universal Banks as well as Small Finance Banks.

The other members of the Standing External Advisory Committee (SEAC), whose tenure will be for three years, are: Revathy Iyer, Director, Central Board, Reserve Bank of India; B Mahapatra, former Executive Director, RBI and presently Chairman, National Payments Corporation of India (NPCI); TN Manoharan, former Chairman, Canara Bank; and Hemant G Contractor, former MD, State Bank of India and former Chairman, Pension Fund Regulatory and Development Authority (PFRDA).

The RBI’s guidelines for ‘on-tap’ Licensing of Universal Banks in the Private Sector (August 1, 2016) and Guidelines for ‘on-tap’ Licensing of Small Finance Banks in the Private Sector (December 5, 2019) indicated that the applications for Universal Banks and Small Finance Banks will be initially screened by the Reserve Bank to ensure prima facie eligibility of the applicants.

The guidelines also stated that a SEAC comprising eminent persons with experience in banking, financial sector and other relevant areas, will evaluate the applications thereafter and that the constitution of the SEAC will be announced by Reserve Bank.

The RBI, in a statement, said secretarial support to the committee would be provided by its Department of Regulation.