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E-Tender No. – RBI/Kanpur/HRMD/76/20-21/ET/733 The Pre-bid meeting for the captioned tender was scheduled on May 12, 2021 from 01:00 PM at New Conference Hall, 2nd Floor, RBI, Kanpur. 2. The Meeting was not attended by representative of any Company/Firm/Agency/Prospective bidder. |
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An increase in default risk, captured by gross non-performing assets (GNPA) ratio, drives up interest rate spread and reduces real credit growth, according to a bank-level panel data analysis in an Reserve Bank of India (RBI) study.
In other words, if the credit risk increases, commercial banks raise their interest rate spreads to hedge the risk of default which, in turn, raise the cost of borrowing and tighten up lending.
A positive shock to risk premium increases the interest rate spread by 30 basis points and contracts credit and output by 75 and 40 basis points, respectively, according to the study “Risk Premium Shocks and Business Cycle Outcomes in India”.
“It causes a downturn in consumption, investment and price of capital goods, while softens consumer prices…A mix of expansionary fiscal and monetary policy is found to be effective in reducing the risk premium driven contraction in economic activity and expediting the recovery,” said authors Shesadri Banerjee, Jibin Jose and Radheshyam Verma.
The authors observed that the Indian banking sector has been going through troubled times weighed down by the overhang of stressed assets and the subsequent decline in profitability.
“It is observed that stability of the banking sector, measured by Z-score, declined as non-performing assets (NPAs) shot up,” they said.
Furthermore, macro-financial linkages – the standard co-movements between real and financial variables – appeared to have deteriorated during the period of financial stress.
“Given the evidence of high NPAs of banks, we conceive financial shock as a shock to the interest rate spread stemming from the change in the default risk of borrowers. It is termed as the risk premium shock and occupies the central stage in this study,” opined the authors.
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E-Tender No. – RBI/Kanpur/HRMD/76/20-21/ET/734 The Pre-bid meeting for the captioned tender was scheduled on May 12, 2021 from 12:30 PM at New Conference Hall, 2nd Floor, RBI, Kanpur. 2. The Meeting was not attended by representative of any Company/ Firm/ Agency/ Prospective bidder. |
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When inflation is higher than the threshold level, estimated at 6 per cent for India, reduction in inflation rate leads to a much smaller gain in the long-term growth compared to when inflation is lower and rises towards the threshold level, according to a Reserve Bank of India study.
The Study estimated the trade-off between long run inflation and steady State growth (SSG) rate, whereby the long-term growth would fall by 40 basis points/bps (or 0.4 percentage point) if the initial inflation rate was less than the threshold rate.
However, if the initial inflation rate was higher than the threshold rate, it would result in an increase of long-term growth by 15 bps.
“…Of course, there are arguments in favour of lower inflation rate in terms of its favourable redistribution impact particularly on the poor and the financial stability concerns,” said authors Ravindra H Dholakia, Jai Chander, Ipsita Padhi and Bhanu Pratap.
However, the findings of the present study caution the policy makers not to ignore the probable cost of lower inflation in terms of lower long-term growth of output and employment and hence lower rate of the poverty reduction.
These costs and benefits of fixing a long-term inflation target will have to be considered while making the choice, the authors opined.
The findings of the Development Research Group (DRG) Study show that the threshold inflation and corresponding growth are not unique for a country but depend on the other two parameters – Fiscal Deficit (FD)/GDP and Current Account Deficit (CAD)/GDP.
If a country chooses the target values of FD/GDP and CAD/GDP to be achieved in the long run, its potential output growth gets determined through the corresponding value of threshold inflation.
“If the country then chooses an inflation target that is lower than the threshold level, it cannot achieve its potential output growth and the system would remain in long-run disequilibrium requiring constant policy interventions to stabilize,” the authors said.
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The Government of India (GOI) has announced the sale (re-issue) of three dated securities for a notified amount of ₹26,000 crore as per the following details:
| Sr No | Security | Date of Repayment | Notified Amount (₹ crore) |
GoI specific Notification | Auction Date | Settlement Date |
| 1 | 4.26% GS 2023 | May 17, 2023 | 3,000 | F.No.4(3)-B(W&M)/2021 dated May 24, 2021 |
May 28, 2021 (Friday) |
May 31, 2021 (Monday) |
| 2 | 5.85% GS 2030 | Dec 01, 2030 | 14,000 | |||
| 3 | 6.76% GS 2061 | Feb. 22, 2061 | 9,000 | |||
| Total | 26,000 |
2. GoI will have the option to retain additional subscription up to ₹6,000 crore against above security/securities.
3. The securities will be sold through Reserve Bank of India Mumbai Office, Fort, Mumbai – 400001, The sale will be subject to the terms and conditions spelt out in the ‘Specific Notification’ mentioned above and the General Notification F.No.4(2)–W&M/2018, dated March 27, 2018.
4. Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system on May 28, 2021. The non-competitive bids should be submitted between 10.30 a.m. and 11.00 a.m. and the competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. The result will be announced on the same day and payment by successful bidders will have to be made on May 31, 2021 (Monday).
5. Bids for underwriting of the Additional Competitive Underwriting (ACU) portion can be submitted by ‘Primary Dealers’ from 9.00 a.m. up to 9.30 a.m. on May 28, 2021 (Friday) on the Reserve Bank of India Core Banking Solution (E-Kuber) system.
6. The Stocks will be eligible for “When Issued” trading for a period commencing from May 25, 2021 – May 28, 2021.
7. Operational guidelines for Government of India dated securities auction and other details are given in the Annex.
Ajit Prasad
Director
Press Release: 2021-2022/264
Type of Auction
1. The auction will be a multiple price-based auction i.e. successful bids will get accepted at their respective quoted price for the security.
2. The auction will be yield based for new security and price based for securities which are re-issued.
3. In case of a Floating Rate Bonds (FRB), the auction will be spread-based for new security and price based for securities which are reissued. At the time of placing bids for new FRB, the spread should be quoted in percentage terms.
Minimum Bid Size
4. The Stocks will be issued for a minimum amount of ₹10,000/- (nominal) and in multiples of ₹10,000/- thereafter.
Non-Competitive Segment
5. In all the auctions, Government Stock up to 5% of the notified amount of sale will be allotted to the eligible individuals and institutions under the Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities.
6. Each bank or Primary Dealer (PD) on the basis of firm orders received from their constituents will submit a single consolidated non-competitive bid on behalf of all its constituents in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system.
7. Allotment under the non-competitive segment to the bank or PD will be at the weighted average rate of yield/price of the successful bids that will emerge in the auction on the basis of the competitive bidding.
Submission of Bids
8. Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system.
9. Bids in physical form will not be accepted except in extraordinary circumstances.
Business Continuity Plan (BCP)-IT failure
10. Only in the event of system failure, physical bids will be accepted. Such physical bids should be submitted to the Public Debt Office, Mumbai through (email; Phone no: 022-22632527, 022-22701299) in the prescribed form which can be obtained from RBI website (https://www.rbi.org.in/Scripts/BS_ViewForms.aspx) before the auction timing ends.
11. In case of technical difficulties, Core Banking Operations Team should be contacted (email; Phone no: 022-27595666, 022-27595415, 022-27523516).
12. For other auction related difficulties, IDMD auction team can be contacted (email; Phone no: 022-22702431, 022-22705125).
Multiple Bids
13. An investor can submit more than one competitive bid in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system.
14. However, the aggregate amount of bids submitted by a person in an auction should not exceed the notified amount of auction.
Decision Making Process
15. On the basis of bids received, the Reserve Bank will determine the minimum price up to which tenders for purchase of Government Stock will be accepted at the auctions.
16. Bids quoted at rates lower than the minimum price determined by the Reserve Bank of India will be rejected.
17. Reserve Bank of India will have the full discretion to accept or reject any or all bids either wholly or partially without assigning any reason.
Issue of Securities
18. Issue of securities to the successful bidders will be by credit to Subsidiary General Ledger Account (SGL) of parties maintaining such account with Reserve Bank of India or in the form of Stock Certificate.
Periodicity of Interest Payment
19. Interest on the Government Stock will generally be paid half-yearly other than in case of securities with non-standard maturities. The exact periodicity of coupon payment is invariably mentioned in the specific notification for the issue of security.
Underwriting of the Government Securities
20. The underwriting of the Government Securities under auctions by the ‘Primary Dealers’ will be as per the “Revised Scheme of Underwriting Commitment and Liquidity Support” announced by the Reserve Bank vide circular RBI/2007-08/186 dated November 14, 2007 as amended from time to time.
Eligibility for Repurchase Transactions (Repo)
21. The Stocks will eligible for Repurchase Transactions (Repo) as per the conditions mentioned in Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018 (Reserve Bank) Directions, 2018 as amended from time to time.
Eligibility for ‘When Issued’ Trading
22. The Stocks will be eligible for “When Issued” trading in accordance with the guidelines on ‘When Issued transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No. RBI/2018-19/25 dated July 24, 2018 as amended from time to time.
Investment by Non-Residents
23. Investments by Non-Residents are subject to the guidelines on ‘Fully Accessible Route’ for Investment by Non-residents in Government Securities and Investment by Foreign Portfolio Investors (FPI) in Government Securities: Medium Term Framework (MTF).
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The Result of the auction of State Development Loans for Six State Governments held on May 24, 2021.
Ajit Prasad Press Release: 2021-2022/263 |
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Fintech platform FlexiLoans.com has partnered with Vivriti Capital to provide working capital financing of over ₹300 crore to Micro, Small and Medium Enterprises (MSMEs) across the country.
MSMEs can apply for loans online and receive in-principal approval within 24-48 hours digitally without manual intervention.
The partnership will be powered by FlexiLoans.com’s technology and credit underwriting platform ‘BiFrost’, which has been integrated with Vivriti’s Co-lending platform ‘CredAvenue’The partnership is aimed at reaching out to more 10,000 MSMEs in the next 12-18 months, the company said in a statement.
Deepak Jain, Co-Founder, FlexiLoans.com said, “FlexiLoans has been scaling its co-lending platform since the IL&FS crisis a couple of years ago to service the wide range of ecosystem and boost assets under management growth. Vivriti has been our long-standing lending partner and its digital-first approach, deep lending expertise syncing perfectly with our co-lending ideology”.
Gaurav Kumar, Co-Founder, Vivriti Capital and CEO CredAvenue said, “The partnership is built on the combination of a deep technology integration via APIs and substantial capital base. We expect to unlock immense market potential and scale with it in the near future. CredAvenue’s co-lending platform has been specifically designed to enable scale-up of such partnerships for Banks, NBFCs and Fintech players vis automated discovery, underwriting, operations and reporting modules on one single portal”.
Since its inception in 2016, Flexiloans.com has disbursed more than ₹1,000 crore to over 30,000 customers across 1,500 cities in India. It receives over 1 lakh applications per month, largely from Tier-II, III and Tier IV cities.
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Fintech start-up Zeta, a company co-founded by billionaire and serial entrepreneur Bhavin Turakhia, has raised $250 million from SoftBank, while existing investor Sodexo also participated in this round as a minority investor.
The fund raise values Zeta at $1.45 billion, making it the latest to join the coveted unicorn status.
The fund was raised from SoftBank Vision Fund 2, and this is the largest single raise by a banking tech startup globally, said Bhavin Turakhia, Co-founder and CEO, Zeta told media over Zoom call.
In 2019, Fintech start-up Zeta raised a Series C investment of under $60 million from Sodexo at a valuation of $300 million. With this investment, Sodexo will have a minority stake of under 20 per cent in Zeta.
Also Read: Zeta secures Series C investment of nearly $60 million from Sodexo at $300 million valuation
Including Zeta, 14 startups have become a unicorn this year in the country.
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