Reserve Bank of India – Press Releases
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Month: October 2021
Shiba Inu crypto falls from record after Musk damps speculation
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Elon Musk helped Shiba Inu vault up the ranks of the largest cryptocurrencies by market value by tweeting a photo of his puppy. Now the meme token is down after he said he doesn’t own any.
Musk, who has repeatedly touted Dogecoin on social media and frequently commented on cryptocurrencies more broadly, responded to a query from a Twitter user asking how much Shiba Inu he holds with, “None.” In a follow-up tweet, he said he has bought Bitcoin, Ether and Dogecoin, and “that’s it.”
As of 9.30 a.m. on Monday, SHIB, as the crypto is known, was down 15 per cent from its all-time high reached on Sunday Hong Kong time, according to pricing from CoinGecko.com. The token – centered around a breed of Japanese hunting dogs – has risen more than 400 per cent in the past 30 days to be the 11th-largest by value.
Also read: Bitcoin and why its value has rocketed once again
Dogecoin has climbed about 10 per cent in the past 24 hours, according to CoinGecko. Shiba Inu has rallied amid factors including a push to get it listed on Robinhood, its ecosystem’s foray into non-fungible tokens and general enthusiasm for meme assets.
However, many market observers say there’s often little reason for its movements and caution that the token may struggle to maintain its current momentum. It was founded in 2020 by an anonymous person going by the name Ryoshi.
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3 Best Bluechip Funds For SIP In 2021 Based On 5-Star Rating of Value Research
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Axis Bluechip Fund Direct Growth
It is an open-ended equity fund that invests mostly in large-cap stocks and was established by the fund house Axis Mutual Fund in 2013. According to the figures of the fund house, Axis Bluechip Fund Direct Plan-Growth returns over the previous year have been 54.34 percent, and it has provided 18.02 percent average annual returns since its inception as of September 30, 2021.
The fund’s expense ratio is 0.48 percent, which is comparable to the other funds in the same category. The fund’s top 5 equity allocations are the Financial, Technology, Services, Healthcare, and Construction sectors. Bajaj Finance Ltd., HDFC Bank Ltd., Infosys Ltd., ICICI Bank Ltd., and Tata Consultancy Services Ltd. are the fund’s top five holdings.
The fund’s Net Asset Value (NAV) was Rs 52.96 as of October 22, 2021, and its Asset Under Management (AUM) is Rs 33,153.71 Cr as of September 30, 2021. Systematic Investment Plan (SIP) can be started with as little as Rs 500, and the fund imposes a 1% exit load if units worth more than 10% are redeemed within a year of the investment date.
| Period | Annualised(%) | Nifty 50 TRI Benchmark(%) | S&P BSE SENSEX TRI Additional Benchmark(%) |
|---|---|---|---|
| Since inception 01 Jan 2013 | 18.02% | 14.61% | 14.98% |
| 5 Years | 19.64% | 16.81% | 17.60% |
| 3 Years | 22.27% | 18.58% | 19.03% |
| 1 Year | 54.34% | 58.54% | 56.96% |
| Data as of September 30, 2021. Source: axismf.com |
Canara Robeco Bluechip Equity Fund Direct Growth
It is a large-cap mutual fund scheme from Canara Robeco Mutual Fund, and the fund’s 1-year returns are 56.01 percent, and it has provided 16.50 percent average annual returns since its debut. The financial, technology, energy, construction, and healthcare sectors account for the majority of the fund’s equity exposure. Infosys Ltd., HDFC Bank Ltd., Reliance Industries Ltd., ICICI Bank Ltd., and Housing Development Finance Corpn. Ltd. are the fund’s top five holdings.
The fund has an expense ratio of 0.35% and an exit load of 1%. As of October 22, 2021, the fund’s Net Asset Value (NAV) was Rs 47.13, and its Asset Under Management (AUM) was Rs 4701 Cr as of September 30, 2021. With a minimum amount of Rs 100, you can begin a systematic investment plan (SIP).
| Period | Canara Robeco Bluechip Equity Fund – Dir – Growth | Scheme Benchmark (S&P BSE 100 TRI) | Additional Benchmark (S&P BSE Sensex TRI) |
|---|---|---|---|
| CAGR since Inception | 16.50 % | 14.70 % | 14.90 % |
| 1 Year | 56.01 % | 58.92 % | 56.96 % |
| 3 Year | 23.19 % | 18.51 % | 19.03 % |
| 5 Year | 18.78 % | 16.54 % | 17.60 % |
| Data as of September 30, 2021. Source: canararobeco.com |
Mirae Asset Emerging Bluechip Fund Direct Growth
It’s an open-ended equity fund with a 2010 launch date that invests in both large and mid-cap companies. The fund invests 35-65 percent of its capital in the top 100 large-cap companies and 35-65 percent in the top 250 mid-cap companies, according to the market capitalization.
Mirae Asset Emerging Bluechip Fund Direct-Growth returns over the last year have been 67.88 percent, with an average annual return of 26.11 percent since its inception, according to the date of Groww. The fund’s top 5 equity allocations are allocated across the Financial, Healthcare, Technology, Automobile, Energy sectors. HDFC Bank Ltd., ICICI Bank Ltd., Axis Bank Ltd., Infosys Ltd., and State Bank of India are the fund’s top five holdings.
The fund has an expense ratio of 0.68% and a minimum SIP can be started from Rs 1000. The fund’s Net Asset Value (NAV) was Rs 108.81 as of October 22, 2021, and its Asset Under Management (AUM) was Rs 21,263.17 Cr as of September 30, 2021.
3 Best Bluechip Equity Funds In 2021
| Funds | 1 mth returns | 6 mth returns | 1 Yr returns | 3 Yr returns | 5 Yr returns | Since inception |
|---|---|---|---|---|---|---|
| Axis Bluechip Fund | 1.13% | 26.58% | 50.71% | 25.93% | 19.96% | 18.05% |
| Canara Robeco Bluechip Equity Fund | 2.01% | 25.25% | 52.33% | 26.77% | 18.87% | 16.68% |
| Mirae Asset Emerging Bluechip Fund | 3.07% | 30.18% | 67.88% | 30.71% | 21.58% | 26.11% |
| Source: Groww |
Disclaimer
The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advice to buy or sell stocks, gold, currency, or other commodities. Investors should certainly not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates, and authors do not accept culpability for losses and/or damages arising based on information in GoodReturns.in
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Many Indian expats turn to crypto to remit money, BFSI News, ET BFSI
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Abir Roychaudhary, a 39-year-old engineer working in Qatar, has transferred around ₹2 lakh to his family based in Mumbai every month using traditional cross-border, cross-currency players.
In October for the first time, Roychaudhary bought cryptocurrencies worth half that amount – ₹1 lakh – and his wife who has access to his wallet could use the sum when needed.
Roychaudhary like many Indian, Pakistani, Bangladeshi and Filipino expats are increasingly experimenting with cryptocurrencies to remit money to their families back home and save on commissions charged by wire transfer companies and other middlemen.
Industry trackers say that the sudden growth in the crypto investments even in smaller towns across India has also led to people exploring various uses.
“The process of remittances through cryptocurrencies into India is a lot more efficient and faster than the conventional process, and all transactions are visible on the blockchain network from a regulatory point of view,” said Edul Patel, CEO of Mudrex, a Global Crypto Investing Platform.
“Looking at current hype in crypto assets like Bitcoin, Ethereum, Binance Coin, United Farmers Finance and Grain, it should be easy to remit money to India and anywhere in the world, more over you can earn more from this crypto by staking or by providing liquidity in our ecosystem,” said Santhosh Bhhandarii, co-founder, United Farmers Finance, a crypto farming platform.
Remittances in India are pegged at about $80 billion which are mainly transferred through banking or other financial channels.
Industry trackers say that the way Indians are warming up to crypto assets as well as decentralised finance, remittances through crypto assets is only set to grow, especially because transferring smaller amounts can be expensive through the traditional services.
Globally, several blockchain startups like Satoshi Citadel in the Philippines have started offering services to facilitate bitcoin remittances in a user-friendly way.
There are close to 1.5 crore crypto investors in India holding digital assets worth ₹15,000 crore. All the large cryptocurrency exchanges saw at least 100% increase in their trading and investment in the last few months.
Experts say that though Bitcoin was the preferred choice for remittances but its transaction costs are rising, currencies like Ripple and Dash are good replacements due to substantially lower fees.
Cryptocurrency remittances became a lifeline for Afghans after Western Union ceased operations for some time after the US withdrew from Afghanistan.
Experts also say that crypto is becoming popular in places with high inflation like Lebanon, Turkey and Venezuela.
Experts point out that remittances in crypto are finding favour because people want to protect themselves against hyperinflation.
Most of those looking to remit money are doing so through some of the less volatile crypto assets such as Stablecoins, say industry trackers. “While remitting money, users would want the value to remain as intended, unhindered by market volatility. Stablecoins pegged to the US dollar are the preferred choice for doing such transactions. Users mostly use stable currencies like USDT/USDC to do these transfers,” said Patel.
The RBI has had a faceoff with cryptocurrency exchanges in the past. It had asked banks to stop dealing with cryptocurrency exchanges, but had to back off following a Supreme Court order.
The government is planning to define cryptocurrencies in the new draft bill and could treat it as an asset/commodity for all purposes, including taxation.
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P2P lending machine fires on all cylinders amid slackened bank loan disbursals, BFSI News, ET BFSI
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It has never been better for peer-to-peer (P2P) lending platforms, which are seeing a considerable increase in the number of people wanting to lend or borrow money. While slackened loan disbursals by banks and other institutional lenders have driven borrowers to peer-to-peer lenders, low fixed-income returns are prompting rich investors to lend money on these platforms at rates ranging from 10% to 18% per annum.
P2P lending is the practice of lending money to individuals via an online platform that connects lenders with borrowers. This mode is useful for both lenders and borrowers because the former can earn a higher interest rate (than bank savings account or many other debt instruments) and the latter can obtain funds (unsecured loans) at lower rates than what banks or nonbanking financial companies (NBFCs) offer. India has nearly 20 P2P lenders, with a combined outstanding loan book of around ₹5,000 crore. These entities are regulated by the RBI.
“We do nearly ₹130 crore worth of loan disbursals every month. Over the past one year, we have grown over 30 times,” said Rajat Gandhi, founder and CEO of Faircent, which claims to have a loan book worth ₹2,000 crore. “Our volumes shot up after we rolled out a string of new products for both lenders and borrowers. At a portfolio level, we are able to deliver 12-15% returns, after adjusting for expenses and defaults,” he adds.
The bulk of the lenders filling up the rosters of prominent P2P platforms are return-hungry retail investors and traders with surplus cash flows. Several high net worth individuals and family offices are writing large cheques favouring borrowers on these platforms.They are prompted to lend on platforms because their traditional fixed-income investments – such as bank fixed deposits, savings accounts, debt MFs, debentures and corporate FDs – are yielding 3-7% on an annual basis.
Diversifying Investment Portfolio
“Apart from P2P lending, there’s no asset class that is yielding 14-16% annual returns in the current scenario,” said V Shankar, founder-director, I-lend, a P2P platform that is planning to restart operations after it stopped loan disbursals last year, when the first wave of Covid-19 struck the country. “We have lenders asking us to resume operations. There’s a lot of interest now. With macroeconomic factors looking good, and people having enough savings due to WFH, there’s more willingness to lend at a higher interest rate.”
For lenders (investors), giving loans on a P2P platform is a way to diversify their investment portfolios even further. Many a time, they route their stock market gains or monthly surpluses to generate higher returns. A lot of financial advisors and wealth managers are also advising their clients to lend on P2P platforms, but they do not recommend an exposure exceeding 10% (of the total investment portfolio) to this asset class.
Borrowers are flocking to P2P lenders because most banks and NBFCs have gone slow on disbursing personal loans to customers with relatively lower credit scores. Also several fintech and digital lenders (especially those that did small-ticket, short-tenure, pay-day loans) have been put out of business by law enforcement agencies a few months ago, as they indulged in unethical collection methods to recover loans. This has forced borrowers to tap the peer-to-peer network for funds. The loan ticket size of most P2P lenders ranges between ₹50,000 and ₹70,000 – often given for a period of 12 months. These loans are disbursed at 10-18% interest rates, depending on the credit profile of the borrower.
“The quality of borrowers has gone up because we get a lot of bank/NBFC customers as well these days. There is a lot of awareness about credit now,” said Bhavin Patel, founder-CEO of LenDen Club, which currently has a loan book worth ₹700 crore. “Even new-to-credit customers are knowledgeable about various loan products. This has helped P2P business grow considerably over the past three years. Compared with pre-Covid levels, we are doing 12 to 15 times more transactions now,” he adds.
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Analysts, BFSI News, ET BFSI
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NEW DELHI: The ongoing quarterly earnings will be the major factor driving market trends going ahead and benchmark indices may face volatility this week amid derivatives expiry, analysts said.
Markets will also track global equities for further direction, they added.
Santosh Meena, head (research) at Swastika Investmart, said, “If we talk about the cues for this week then the next batch of earnings season and the October month F&O (futures and options) expiry may cause volatility in the market.”
Meena added that the market will react to earnings of Reliance Industries and ICICI Bank on Monday.
Tech Mahindra, Ambuja Cement, Axis Bank, Kotak Mahindra Bank, Adani Ports, L&T, Bajaj Auto, ITC, Maruti Suzuki, DLF, Indigo and Tata Power will come out with their earnings during the weak, Meena said.
Siddhartha Khemka, head (retail research) at Motilal Oswal Financial Services, said: “On Monday, investors will react to Reliance and ICICI Bank results along with global cues.”
ICICI Bank on Saturday reported its highest-ever quarterly profit on a standalone basis at Rs 5,511 crore for the September 2021 quarter, on the back of healthy loan growth across verticals, aided by a fall in bad loans.
Billionaire Mukesh Ambani’s Reliance Industries on Friday reported a 43 per cent jump in its September quarter net profit, as its businesses from oil to retail fired on all cylinders, growing both sequentially and on a year-on-year basis.
Yesha Shah, head (equity research) at Samco Securities, said: “The market may struggle to hold its footing this week and is likely to stay range-bound. With the monthly expiry this week, market volatility may linger.”
Last week, the 30-share BSE benchmark declined 484.33 points or 0.79 per cent.
“In the week ahead, domestic markets will continue to track Q2 results for further direction. Any, further inconsistency, as seen in recent numbers, can lead to further fall in the short term,” Vinod Nair, head (research) at Geojit Financial Services, said.
Trading in the markets will also be influenced by movement in rupee, Brent crude oil and foreign institutional investors.
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Is tokenisation the way forward? Here’s what the industry thinks, BFSI News, ET BFSI
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Tokenisation will help bring huge value to the digital payments space, and is likely to gain momentum in the coming months, said Ravi Varma Datla, Mastercard‘s vice president – digital products, South Asia.
Last month, the Reserve Bank of India issued guidelines, allowing card-on-file tokenisation. Tokenisation helps consumers to enter and save a 16-digit token on e-commerce or merchant platforms, instead of storing their card details.
“Card-on-File tokenisation enhances the safety and security of the entire transaction value chain in e-commerce payments. It builds trust and can significantly increase convenience for consumers and create efficiencies for merchants. It means there is no need for a consumer to enter his card number every time he transacts, or to login to an online shopping account to update their details due to redundant card credentials,” Datla said.
Last week, National Payments Corporation of India (NPCI) announced the tokenisation system for RuPay cards. The NPCI Tokenisation system will support tokenisation of cards as an alternative to storing card details with merchants.
“We are confident that the NPCI Tokenisation System (NTS) for the tokenisation of RuPay cards will instill further trust in the millions of RuPay cardholders to carry out their day-to-day transactions securely,” said Kunal Kalawatia, chief of products at NPCI.
Also read: What is tokenisation, and how can it ensure safe transactions?
When buying a product or service online, consumers are usually forced to store their credit or debit card details. This is where tokenisation plays a significant role in ensuring consumers’ safety.
“What makes this type of token unique is that it can be used just like your normal card for online payments but only by the merchant that requested it. This means that if a bad-guy or hacker gets their hands on a token – it simply cannot be used. For the sake of identification and reconciliation, RBI has permitted merchants to display the last 4 digits of the original card number to the consumers,” Datla said.
Datla added that as of today, customers have no single view of all the merchants where they have saved their card number. With tokenisation, customers can reach out to their respective banks and view the list of all the tokens saved at merchants and also request to delete or update them.
Recently, Visa launched its card-on-file tokenisation service in India. The company has enabled its tokenisation services across 130 countries. As a large number of shoppers make the shift to online payments, Sujai Raina, Visa’s India business development head, believes it will ensure a frictionless checkout experience for consumers, and drive higher payment success rates for merchants and issuers.
“We believe the RBI’s directive to roll out card-on-file tokenisation in addition to the earlier device-based tokenisation protocols, will help build a safe, secure and seamless environment for digital payments, thus enhancing consumer trust across digital platforms,” he said.
When asked Mastercard about its plan to launch its tokenisation services in India, Datla said the company is working with its partner banks, merchants, payment aggregators, and other stakeholders towards a smooth rollout.
So far, Mastercard has rolled out tokenisation for consumers in over 2,500 banks across the globe. The company has found that the tokenisation has enabled a safer payment ecosystem, and has also increased transaction volume across the digital channel to return greater revenue for merchants, Datla said.
Datla also believes that tokenisation will help make digital payments seamless. “By replacing sensitive payment data with digital tokens, a superior ecommerce experience is created which provides increased security, approval rates and a frictionless consumer experience,” Datla said.
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Is tokenisation the way forward? Here’s what the industry thinks, BFSI News, ET BFSI
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Tokenisation will help bring huge value to the digital payments space, and is likely to gain momentum in the coming months, said Ravi Varma Datla, Mastercard‘s vice president – digital products, South Asia.
Last month, the Reserve Bank of India issued guidelines, allowing card-on-file tokenisation. Tokenisation helps consumers to enter and save a 16-digit token on e-commerce or merchant platforms, instead of storing their card details.
“Card-on-File tokenisation enhances the safety and security of the entire transaction value chain in e-commerce payments. It builds trust and can significantly increase convenience for consumers and create efficiencies for merchants. It means there is no need for a consumer to enter his card number every time he transacts, or to login to an online shopping account to update their details due to redundant card credentials,” Datla said.
Last week, National Payments Corporation of India (NPCI) announced the tokenisation system for RuPay cards. The NPCI Tokenisation system will support tokenisation of cards as an alternative to storing card details with merchants.
“We are confident that the NPCI Tokenisation System (NTS) for the tokenisation of RuPay cards will instill further trust in the millions of RuPay cardholders to carry out their day-to-day transactions securely,” said Kunal Kalawatia, chief of products at NPCI.
Also read: What is tokenisation, and how can it ensure safe transactions?
When buying a product or service online, consumers are usually forced to store their credit or debit card details. This is where tokenisation plays a significant role in ensuring consumers’ safety.
“What makes this type of token unique is that it can be used just like your normal card for online payments but only by the merchant that requested it. This means that if a bad-guy or hacker gets their hands on a token – it simply cannot be used. For the sake of identification and reconciliation, RBI has permitted merchants to display the last 4 digits of the original card number to the consumers,” Datla said.
Datla added that as of today, customers have no single view of all the merchants where they have saved their card number. With tokenisation, customers can reach out to their respective banks and view the list of all the tokens saved at merchants and also request to delete or update them.
Recently, Visa launched its card-on-file tokenisation service in India. The company has enabled its tokenisation services across 130 countries. As a large number of shoppers make the shift to online payments, Sujai Raina, Visa’s India business development head, believes it will ensure a frictionless checkout experience for consumers, and drive higher payment success rates for merchants and issuers.
“We believe the RBI’s directive to roll out card-on-file tokenisation in addition to the earlier device-based tokenisation protocols, will help build a safe, secure and seamless environment for digital payments, thus enhancing consumer trust across digital platforms,” he said.
When asked Mastercard about its plan to launch its tokenisation services in India, Datla said the company is working with its partner banks, merchants, payment aggregators, and other stakeholders towards a smooth rollout.
So far, Mastercard has rolled out tokenisation for consumers in over 2,500 banks across the globe. The company has found that the tokenisation has enabled a safer payment ecosystem, and has also increased transaction volume across the digital channel to return greater revenue for merchants, Datla said.
Datla also believes that tokenisation will help make digital payments seamless. “By replacing sensitive payment data with digital tokens, a superior ecommerce experience is created which provides increased security, approval rates and a frictionless consumer experience,” Datla said.
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Dollar catches footing as inflation pressures rates outlook, BFSI News, ET BFSI
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By Tom Westbrook
The dollar steadied on Monday after its steepest weekly loss in more than a month, as traders weigh the effect of inflation on the relative pace of looming rate hikes – with a wary eye on U.S. growth data and a European Central Bank meeting.
The greenback had softened, especially against the yen, after Federal Reserve Chair Jerome Powell said on Friday it was time to start cutting back asset purchases, though not yet time to begin raising interest rates.
His remarks came as investors have priced in Fed rate hikes starting in the second half of next year and yet have begun to trim long dollar positions in anticipation that other central banks could get moving even sooner.
On Monday, the dollar was firm at $1.1643 per euro and found a footing on the yen at 113.54 after Friday’s slide. The Australian and New Zealand dollars were held below the multi-month peaks they had scaled during last week. [AUD/]
The Antipodeans, along with sterling, had bounded ahead this month as traders scrambled to price in higher rates while inflation runs hot, with markets now eyeing a near 60% chance of a Bank of England hike next week.
Sterling was up 0.1% at $1.3772, but analysts were cautious about further gains especially as the Fed edges closer to tapering and policy tightening. The Aussie was steady at $0.7473 and the kiwi at $0.7157.
“Dollar risks remain skewed to the upside,” said Kim Mundy, a currency analyst at the Commonwealth Bank of Australia in Sydney.
“(Fed) members are slowly conceding that inflation risks are skewed to the upside (and) the upshot is that interest rate markets can continue to price a more aggressive Fed Funds rate hike cycle which can support the dollar.”
This week, Australian inflation data due on Wednesday is likely to set the tone for the next stage in a tussle between traders and a resolutely dovish central bank.
On Thursday, U.S. growth data is expected to show a slowdown in growth as consumer confidence has faltered, but a surprise on either side might have consequences for the interest rate outlook.
Also on Thursday the Bank of Japan and the European Central Bank meet. Neither are expected to adjust policy, but in Europe market gauges of projected inflation are at odds with the bank’s guidance.
In the background, traders remain nervous about trouble brewing at indebted developer China Evergrande Group. It surprised investors by averting default with a last-minute coupon payment last week, but other pressing debts loom.
China’s yuan held just shy of a five-month peak in offshore trade at 6.3804 per dollar. Cryptocurrencies were steady below the heights reached last week, with bitcoin up 2% at $62,000.
In emerging markets the beaten-down Turkish lira was braced for selling as state banks are expected to follow a surprise rate cut from the central bank.
========================================================
Currency bid prices at 0110 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar
$1.1645 $1.1646 -0.01% -4.69% +1.1649 +1.1626
Dollar/Yen
113.7350 113.4900 +0.18% +10.07% +113.7400 +113.5750
Euro/Yen
132.45 132.17 +0.21% +4.35% +132.4500 +132.1200
Dollar/Swiss
0.9163 0.9162 +0.00% +3.56% +0.9169 +0.9157
1.3771 1.3756 +0.13% +0.81% +1.3775 +1.3752
Dollar/Canadian
1.2362 1.2368 -0.03% -2.90% +1.2379 +1.2358
Aussie/Dollar
0.7478 0.7470 +0.11% -2.79% +0.7478 +0.7465
NZ
Dollar/Dollar 0.7161 0.7150 +0.15% -0.29% +0.7162 +0.7148
All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook; Editing by Sam Holmes)
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Will profitable PSUs need capital support from govt this year?, BFSI News, ET BFSI
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The government is likely to pump capital in public sector banks during the last quarter of the current financial year to meet regulatory requirements.
The government in Budget 2021-22 made an allocation of Rs 20,000 crore for capital infusion in the state-owned banks.The capital position of banks would be reviewed in the next quarter, and depending on the requirement, infusion will be made to meet the regulatory needs.
In the current fiscal so far, all 12 public sector banks have posted a profit, which is being ploughed back to bolster the balance sheet of the banks.
Going forward, the rise in stressed assets would determine capital requirement. If numbers are anything to go by, the financial health of public sector banks are showing gradual signs of improvement across the spectrum.
What Icra says
As per Icra’s estimates, public sector banks (PSBs) may not need the capital budgeted by the government for FY22, even with enhanced capital requirements.
However, banks are advised to keep provisions for any unforeseen events as it would provide confidence to banks, investors and credit growth. Icra said that large private sector banks (PVBs) also remain well-capitalised though few mid-sized ones could need to raise capital.
“We continue to maintain our credit growth estimate of 7.3-8.3 per cent for banks for FY2022 compared to 5.5 per cent for FY2021,” Icra said.
Despite expectations of moderation in gains on bond portfolios because of expectations of rising bond yields in FY22, the return on equity for banks is likely to remain steady at 4.4-7.6 per cent for PSBs (5.1 per cent in FY21) and 9.5-9.9 per cent for PVBs (10.5 per cent in FY2021), the report said.
PCA framework
Last month, the Reserve Bank of India removed UCO Bank and Indian Overseas Bank from its prompt corrective action framework, following improvement in various parameters and written commitment from them that would comply with the minimum capital norms.
The only public sector lender left under the PCA framework is Central Bank of India.
PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital, and quantum of the non-performing asset. These restrictions disable the bank in several ways to lend freely and force it to operate under a restrictive environment that turns out to be a hurdle to growth.
Last financial year, the government infused Rs 20,000 crore in the five public sector banks. Out of this, Rs 11,500 crore had gone to three banks under PCA — UCO Bank, Indian Overseas Bank, and Central Bank of India.
The government infused Rs 4,800 crore in Central Bank of India, Rs 4,100 crore in Indian Overseas Bank and Kolkata-based UCO Bank got Rs 2,600 crore. The government has infused over Rs 3.15 lakh crore into public sector banks (PSBs) in the 11 years through 2018-19.
In 2019-20, the government infused a capital of Rs 70,000 crore into PSBs to boost credit for a strong impetus to the economy.
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