The Chairman/ Managing Director Chief Executive Officer Small Finance Banks
Dear Sir/Madam,
Priority Sector Lending (PSL) – On-lending by Small Finance Banks (SFBs) to NBFC-MFIs
As per extant guidelines, lending by Small Finance Banks (SFBs) to Micro-Finance Institutions (MFIs) for on-lending is not reckoned for priority sector lending (PSL) classification. In view of the fresh challenges brought on by the COVID-19 pandemic and to address the emergent liquidity position of smaller MFIs, it has been decided to allow PSL classification to the fresh credit extended by SFBs to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector and which have a ‘gross loan portfolio’ of upto ₹500 crore as on 31 March 2021, for the purpose of on-lending to individuals. Bank credit as above will be permitted up to 10% of the bank’s total priority sector portfolio as on 31 March, 2021.
2. The above dispensation shall be valid upto March 31, 2022. However, loans thus disbursed will continue to be classified under Priority Sector till the date of repayment/maturity whichever is earlier. Further, banks will be required to adhere to the conditions prescribed for on-lending under para 21 of our Master Directions on PSL dated September 4, 2020 (updated as on April 29, 2021).
3. The guidelines shall come into effect from the date of the issuance of this circular.
Yours faithfully
(Sonali Sen Gupta) Chief General Manager-in-Charge
The Reserve Bank of India (RBI) on Wednesday announced a host of measures, including a special ₹50,000 crore term liquidity facility for banks for on-lending to entities such as vaccine manufacturers involved in the fight against Covid-19, a special ₹10,000 crore long-term repo operation to support small finance banks to on-lend to MSEs, and a resolution framework 2.0 for individuals, small businesses and MSMEs.
The special ₹50,000 crore term liquidity facility for banks to create a Covid loan book will be three years tenor and available at the repo rate. This facility will be available to Banks up to March 31, 2022.
Banks’ creating Covid loan book by lending to entities such as vaccine manufacturers, importers of life-saving equipment, hospitals and clinics will be incentivised by giving such lending the priority sector lending (PSL) tag.
Further, they will also be allowed to park an amount equivalent to the amount deployed in the aforementioned activities in the reverse repo window and earn 40 basis points higher interest rate than the current reverse repo rate of 3.35 per cent.
Small Finance Banks can tap a special ₹10,000 crore long-term repo operation of three years tenor to on-lend to MSE up to ₹10 lakh per MSE. This facility will be available up to October 31, 2021.
Further, SFBs loans to micro-finance institutions (with asset size of up to ₹500 crroe) will be recognised as priority sector lending. This move is aimed at enhancing the flow of credit to MFIs.
RBI has brought in a resolution framework 2.0 for vulnerable borrowers — individuals, small businesses and MSMEs.
In order to incentivise new credit flow to the micro, small, and medium enterprise (MSME) borrowers, Banks will be allowed to deduct credit disbursed to ‘New MSME borrowers’ from their net demand and time liabilities (NDTL) for calculation of cash reserve ratio (CRR) up to December 31, 2021. This exemption will be available for exposures up to ₹25 lakh per borrower.
Indian authorities asked state-run banks to protect their dollar deposits on concern they could be frozen if Cairn Energy Plc moves to seize India’s offshore assets as part of a tax dispute.
Lenders aren’t committing to U.S. dollar purchases in the forwards market since this guidance last week, the people said, asking not to be identified discussing private deliberations. U.K.-based Cairn Energy can push authorities to impound Indian assets if the South Asian nation declines to honour an arbitration ruling in a $1.2 billion tax dispute, according to a letter the company sent to the Indian High Commission in the U.K. earlier this year.
The advice from Indian authorities came ahead of a summit on Tuesday between Prime Minister Narendra Modi and his U.K. counterpart Boris Johnson.
Cairn had said in March it’s considering three options, including talks with the government, preparation for possible enforcement, and potential to monetize the award, either partially or in full, to a third party. “As yet, no decision has been taken,” a spokesman for the company said Tuesday.
The banks’ decision to avoid adding more dollars to their offshore account has roiled India’s exchange rate in recent days because state-run banks are the usual counterparties who swap rupees into dollars and their absence makes the forward trade more expensive. The one-month USD/INR premium rose to as much as 10% on Tuesday on an annualized basis, from 5.41% on Thursday.
The surge in India’s USD/INR premium has been worsened by an abundance of dollars from IPO-related inflows.
The Reserve Bank of India didn’t immediately reply to an email seeking comment. A call to a finance ministry spokesman outside business hours wasn’t answered.
Reserve Bank of India said Governor Shaktikanta Das will make a speech Wednesday, an unscheduled appearance as ferocious new coronavirus wave devastates the country.
The address will be broadcast at 10 a.m. local time, the RBI said on Twitter, without providing further details.
The Covid-19 wave that has slammed India in recent weeks will probably worsen before it starts to taper off sometime later this month, forecasters warn. Pressure from industry groups has begun mounting on Prime Minister Narendra Modi to impose lockdowns to stem its spread, a move he has so far resisted to avoid the economic damage suffered last year.
RBI Governor @DasShaktikanta at 10:00 am today, May 05, 2021.YouTube: … https://t.co/mK8nIUhfjW” data-createdat=”1620178540000″ data-id=”1389755643620298754″>
Watch out for the address by RBI Governor @DasShaktikanta at 10:00 am today, May 05, 2021.YouTube: … https://t.co/mK8nIUhfjW
The RBI has augmented fiscal support measures from Modi’s government with loan holidays and cash injections, as well as by cutting interest rates. It has pledged to keep monetary policy loose though its room to act has been constrained by inflation concerns.
Reserve Bank of India said Governor Shaktikanta Das will make a speech Wednesday, an unscheduled appearance as ferocious new coronavirus wave devastates the country.
The address will be broadcast at 10 a.m. local time, the RBI said on Twitter, without providing further details.
The Covid-19 wave that has slammed India in recent weeks will probably worsen before it starts to taper off sometime later this month, forecasters warn. Pressure from industry groups has begun mounting on Prime Minister Narendra Modi to impose lockdowns to stem its spread, a move he has so far resisted to avoid the economic damage suffered last year.
The RBI has augmented fiscal support measures from Modi’s government with loan holidays and cash injections, as well as by cutting interest rates. It has pledged to keep monetary policy loose though its room to act has been constrained by inflation concerns.
Das has been meeting with with bankers and shadow lenders since last month to discuss topics including the current economic situation, potential stress to balance sheets, credit flows and liquidity. CNBC reported Tuesday that bankers have requested relief, including payment moratoriums, citing banking sources.
Animal spirits are alive and well in the cryptocurrency world, with the frenzy sending Dogecoin surging as much as 50% again and crashing Robinhood’s trading app.
Other so-called altcoins also took off, with Dash spiking as much as 14% and Ethereum Classic jumping more than 30%. In the world of DeFi, tokens such as Force DAO and Tierion surged more than 1,000% on Tuesday, according to CoinMarketCap.com data. Meanwhile, Robinhood said it is experiencing issues with crypto trading and is working to resolve them as soon as possible, according to its status update page.
“You have money looking for a home and this is one of those areas of the market where there is speculation happening, there is significant appreciation happening in a short period of time,” Chad Oviatt, director of investment management at Huntington Private Bank. “You get that excitement there.”
The rallies defied easy explanation and continued a trend that’s seen the value of all digital tokens surge past $2.25 trillion. Doge, created as a joke in 2013, has been used in marketing gimmicks, the latest by the Oakland A’s baseball team, which offered two seats to games this week for 100 Dogecoin. The Gemini crypto exchange backed by Tyler and Cameron Winklevoss said it now supports Doge, and will soon enable trading of it.
Dogecoin’s red-hot advance from around 0.002 cents a year ago — when it was worth about $300 million — has captured the interest of many on Wall Street. It’s even caught the attention of the Federal Reserve — the central bank’s chairman last week answered “some of the asset prices are high” when asked if things like GameStop Corp.’s and Dogecoin’s supercharged rallies created threats to financial stability.
As a sign of Dogecoin’s rising popularity, the Robinhood app is among the top 10 downloads at the Apple App Store. Meanwhile, Coinbase Global, the largest U.S. crypto exchange, doesn’t offer Doge trading — its shares are down more than 5% Tuesday, on track for the lowest close since its market debut last month.
“It’s pretty amazing that something that started out as a joke has become so popular,” said Matt Maley, chief market strategist for Miller Tabak + Co.
Though interest in digital assets has picked up in recent months as more traditional firms who were long hesitant to the crypto space warm up to cryptocurrencies, it’s alternative coins that have captured the most attention in recent days. Bitcoin has taken a backseat following record-setting rallies from Ether and Doge, wrote Edward Moya, senior market analyst at Oanda.
“The Dogecoin bubble should have popped by now, but institutional interest is trying to take advantage of this momentum and that could support another push higher,” he said in a note. “Dogecoin is surging because many cryptocurrency traders do not want to miss out on any buzz that stems from Elon Musk’s hosting of Saturday Night Live.”
Meanwhile, many — including famed crypto investor Mike Novogratz — have warned that the rallies could be unsustainable. Novogratz, chief executive officer of Galaxy Digital Holdings, said recently he’d be “very, very worried” were one of his friends to invest in Doge.
“It seems that investors are careening from one hot dot to another, like a pinball game,” said Mike Bailey, director of research at FBB Capital Partners. “My sense is this speculative wave will suffer the same fate as the GME and other Robinhood ‘flash-in-the-pan’ stocks. Cryptocurrencies may have become a new asset class, like precious metals, but surges such as these seem unsustainable.”
Sotheby’s said on Tuesday it would accept bitcoin and ethereum as payment for Banksy‘s iconic artwork “Love is in the Air”, a first for a physical art auction and the latest sign of growing mainstream acceptance of cryptocurrencies.
Bidding for the work is estimated at $3 million to $5 million, Sotheby’s said, with the buyer having the option to pay with cryptocurrency.
The auction house has tied up with cryptocurrency exchange Coinbase Global Inc for the sale. Coinbase said in a blog it would help manage price fluctuations during the auction in New York next week.
Bitcoin hit a record high just shy of $65,000 last month, the latest landmark on the emerging asset’s march to wider acceptance. Its gains have been fueled by growing acceptance among major U.S. companies and financial firms.
Cryptocurrencies have already made a mark in the world of digital art.
A digital artwork – “Everydays – The First 5000 Days” by American artist Mike Winkelmann who is better known as Beeple – sold for nearly $70 million at Christie’s in March, in the first ever sale by a major auction house of a piece of art that does not exist in physical form.
Coinbase said its partnership with Sotheby’s could pave the way for further adoption of cryptocurrency across the bidding house’s auctions.
The 1-year returns from the fund is a pretty decent 50%. However, readers should know that at the same time in May last year (May 2020), the Sensex was near the 30,000 levels on account of the global sell-off in equities following the rapid spread of the corona virus. However, currently (May 2021) the Sensex is now near the 48,000 levels mark and hence the Sensex has jumped nearly 50%, which is why most equity mutual funds are showing 1-year returns of 50% or more.
The 3-year returns from the Canara Robeco Bluechip Equity Fund is 14.85%, while the 5-year returns are close to 16%. Even in the longer term horizon, the returns are pretty good.
Solid portfolio
Canara Robeco Bluechip Equity Fund has a sound portfolio. Among the stocks in the portfolio include bluechip names like HDFC Bank, Infosys, ICICI Bank, Reliance Industries and TCS among others. Together they account for almost 32% of the equity portfolio. About 96% of the funds are invested in equities and the balance is held in cash and cash equivalents.
The company’s portfolio has the largest chunk of holdings in financials. Currently, the corpus size of the fund is Rs 2100 crores and the net asset value under the growth plan is Rs 34.77. One can invest in the fund through the SIP route, where the minimum amount for investment is Rs 1,000. There is an exit load of 1%, if you exit the fund before a period of 1 year.
Should you buy into Canara Robeco Bluechip Equity Fund?
There is little doubt that this fund has been highly rated By CRISIL, Morning Star and Value Research. However, given the way the markets have rallied in the last 1 year, we believe that there is very limited scope to make solid returns.
Yes, nominal returns are very much possible, but, if you are looking at higher returns, you should wait for the markets to dip and a fall in the NAV. The better option we would suggest is to avoid putting a lumpsum and hedge your risk by way of investing through the SIP route. The markets have run-up too sharply and with lockdowns and curfew across cities, corporate numbers are going to be impacted even for FY 2021-22 as well. Therefore, we believe that markets are overpriced at these levels. Investors should hence exercise caution, before pumping large money into mutual fund schemes.
About the author
Sunil Fernandes has spent 26 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, mutual funds and tax planning.
At the MCX gold for June delivery settled on Tuesday (May 4, 2021) below Rs. 47000 at a price of Rs. 46873, while in the physical market 22K and 24K gold in the National Capital is available for Rs.44520 and Rs. 48570 per 10 gm, respectively. Now as it is time and again suggested that amid a whole lot of uncertainties that continue to grip the world, yellow metal shall rise. Now we shall discuss here is it the right time and correct price level to get into gold investment.
6 Global And Domestic Reasons As To Why You Should Buy Gold Currently
Here we segregate the situation considering global and domestic factors that are at play:
Domestic factors at play:
1. Gold available at a discount for the first time:
Against the premium charged a week back, amid crisis due to the Covid 19 second wave, dealers in India are offering a discount of $2 per ounce this week versus the domestic official prices.
2. Equities volatile:
Not far ago, we can talk here on equities volatility seeing the market action on May 4, 2021 wherein Indian indices after having started on a firm note became flat and later ended down by 1 percent owing to unabated Corona and IPL suspension. In such a scenario, people flock to other investments which serves as a hedge against position in other assets as well as to diversify their portfolio. So as the situation is currently, while any steep correction in Indian equities is ruled out, volatility shall be staying unless corona situation improves in the country.
3. Indian economy recovery again threatened owing to Covid 19 second wave:
Currently the country is grappling with the worst case situation of Covid 19 with over 3 lakh cases being reported daily and over 3000 deaths. And this again points to disruptions in economic activity. It is at this time again when gold gains sheen i.e. downward spiral is again a positive for gold.
Global factors:
1. Interest rate outlook by the US Fed and other major central banks continue to be dovish:
In its recently concluded Fed meet, the US central bank kept the short term interest rates anchored near zero and declined to let up on its easy monetary policy and this stance works in favour of gold.
2. Cryptocurrencies relentless rally partly driven by speculations:
Of late there has been diversion of some of the funds from gold to bitcoin and other digital currencies which have sharply run up on trust and global institutional acceptance. But not to forget as losses posed by cryptos can be huge, holding gold in one’s portfolio always makes sense. Being a store of value, it serves as a hedge against risk from other assets being credit and default risk-free.
3. Gold can be bought as a dollar hedge:
Though there is no direction for the US dollar, any weakness in the dollar shall be favouring gold. And as there is expected that the US central bank may again release some aid to support the economy, higher dollar liquidity will weigh on dollar and be positive for gold price.
“Gold may remain choppy as US dollar index struggles for direction amid increasing optimism about US economy as well as Fed’s increasing emphasis on keeping interest rate low. We however expect to see buying interest at lower levels owing to loose monetary policy stance of major central banks and persisting virus risks,” Kotak Securities said in a recent note. (With Agency Inputs)
Gold outlook is bullish
Now as broadly most experts in the domain suggest buying gold at every dip because gold price have probably bottomed out, here we tell you the different gold price levels that you should watch out for:
Amit Sajeja, Vice President – Research at Motilal Oswal said, “In spot market, gold price has strong support at $1,750 per ounce and it is expected to hit $1,820 per ounce in immediate short-term as weakness in the US Dollar (USD) against the Indian National Rupee (INR) is expected to continue further. In terms of MCX, the gold price may soon go up to Rs. 47,800 per 10 gm levels.” In the medium term, gold price at MCX may go up to Rs. 50,000 per 10 gm levels in medium-term as the spot gold price will be heading for $1,880 per ounce after hitting its immediate $1,820 per ounce target.
So for capital appreciation, portfolio diversification and to hedge against the risk from all other assets given the current turbulent times, gold is a must have and any dip can be considered taken as a perfect to ‘buy’ gold.
GoodReturns.in
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