Category: Banking & Finance

Prices of Government Securities (G-Sec), especially short-tenor, rose on Friday as the government raised ₹10,000 crore less at the weekly auction of G-Secs.

Against the notified amount aggregating ₹32,000 crore, the government raised about ₹22,000 crore through auction of three G-Secs.

The Reserve Bank of India (RBI), however, rejected all the bids (329) aggregating ₹38,739.313 crore it received at the auction of the fourth G-Sec (five-year maturity; notified amount ₹11,000 crore).

Yield of the four-year G-Sec (coupon rate5.15 per cent) softened about 9 basis points to close at 5.4389 per cent, with its price rising 35 paise to close at ₹98.85.

Bond yield and price are inversely related and move in opposite directions.

Yield of the 10-year benchmark G-Sec (coupon rate: 5.85 per cent) thawed about 2 basis points to close at 6.035 per cent, with its price rising 11 paise to close at ₹98.66.

Market players are of the view that the government would have raised less because it has balances with the RBI. However, they cautioned that the thaw in yields will last only as long as the RBI supports the market through open market purchase of G-Secs, G-Sec acquisition plan.

At the auction of the floating rate bond (maturing in 2033) and four-year G-Sec (coupon rate 6.64 per cent), the RBI accepted bids amounting to ₹4,800.097 crore (notified amount ₹4,000 crore) and ₹13,255.648 crore (₹10,000 crore), respectively.

At the auction of the 49-year G-Sec (coupon rate 6.67 per cent), the RBI accepted partial amount of ₹3,948.282 crore (₹7,000 crore).

Mahindra and Mahindra Financial Services reported an 8 per cent decline in consolidated net profit for the fourth quarter of 2020-21.

Its consolidated net profit was ₹219 crore during the quarter ended March 31, 2021, against ₹239 crore in the corresponding quarter last year.

The total income declined marginally by 3 per cent at ₹3,038 crore during the fourth quarter of 2020-21 against ₹3,140 crore in the corresponding quarter in the previous fiscal.

For the full fiscal 2020-21, Mahindra Finance reported a 28 per cent drop in consolidated net profit at ₹780 crore, compared to ₹1,086 crore in 2019-20.

“The board of directors has recommended a dividend of ₹0.80 per share on equity share of ₹2 each, that is 40 per cent, subject to the approval of the members at the ensuing 31st Annual General Meeting of the company,” it said in a statement on Friday.

In 2020-21, total disbursements fell by 41 per cent to ₹19,001 crore against ₹32,381 crore in 2019-20. The loan assets stood at ₹64,608 crore as on March 31, 2021, compared to ₹68,089 crore as on March 31, 2020.

The Gross Stage 3 levels stood at 9 per cent as on March 31, 2021, against 8.4 per cent as on March 31, 2020.

Mahindra Finance said it has recorded a total additional ECL overlay of ₹996.36 crore as on March 31, 2021, in the standalone balance sheet and ₹1,093.81 crore in the consolidated balance sheet, to reflect deterioration in the macroeconomic outlook.

The Reserve Bank of India (RBI) has imposed restrictions on American Express Banking Corp and Diners Club International Ltd from on-boarding new domestic customers onto their card networks from May 1.

In an order issued on Friday, the RBI said the aforementioned entities have been found non-compliant with the directions on Storage of Payment System Data. This order will not impact existing customers, it added.

The RBI’s circular on Storage of Payment System Data (April 6, 2018) had directed all Payment System Providers to ensure that the entire data relating to payment systems operated by them is stored in a system in India within six months.

They were also required to report compliance to the RBI and submit a board-approved System Audit Report (SAR) conducted by a CERT-In empanelled auditor within the timelines specified therein.

American Express Banking Corp and Diners Club International Ltd are Payment System Operators (PSOs) authorised to operate Card Networks in the country under the Payment and Settlement Systems Act, 2007 (PSS Act).

The RBI, in a statement, said the supervisory action has been taken in exercise of powers vested in it under Section 17 of the PSS Act.

Besides American Express Banking Corp and Diners Club International Ltd, India has three other card payment networks – MasterCard Asia/ Pacific Pte Ltd, Singapore; National Payments Corporation of India; and Visa Worldwide Pte Limited, Singapore.

State Bank of India’s Business Activity Index is now at a 5-month low at 86.3 in the week ended April 19. All indicators have shown a dip with maximum decline in Apple mobility, weekly food arrival at mandis, and RTO revenue collection, according to SBI’s ERD.

This is in line with Nomura India Business Resumption Index (NIBRI), which indicated that the pace of economic activity has dipped to 83.8 for the week ending April 18 versus 88.4 in the previous week (revised down from 90.4) This suggests that the economy is ~16.2pp below its pre-pandemic normal, and at levels last seen in October-end.

“A key reason behind the fall in NIBRI is a deterioration in mobility indicators in response to the restrictions and cautious consumer behaviour. Google retail and recreation and workplace mobility indicators have fallen by 1.3pp and 3.6pp from the previous week, respectively, while the Apple driving index has dropped by a significant 19pp, particularly in the cities of Maharashtra. The Traffic Congestion Index (TCI) has also fallen further to 7.5 as of April 18 versus ~10 as of April 13, and down from 16 a month earlier, although above the levels (of 2) a year earlier,” sais Nomura on April 19.

GDP growth forecast

SBI’s Economic Research Department has also revised its real GDP growth forecast downwards from 11 per cent to 10.4 per cent in FY22 in view of the pandemic-related partial/ local/ weekend lockdown in almost all States.

The ERD estimated the total monetary impact (total loss) of current lockdown in various States at ₹1.5-lakh crore. Of this, Maharashtra, Madhya Pradesh and Rajasthan account for 80 per cent.

“Maharashtra has put up a stringent lockdown among all States. Being the economically biggest and most industrialised State in India, this lockdown will have huge impact on growth.

“Currently we estimate loss of around ₹82,000 crore for Maharashtra (accounts for 54 per cent of the total loss), which will definitely increase if restrictions are further tightened,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

Migration of labour

As per ERD’s presentation, ‘Thwarting the Second Wave: Rapid Vaccination Should be the Primary Tool and Not Lockdown’, migration of labour is continuing unabated.

According to the data provided by Western Railways (headquarters, Mumbai; for the period April 1-12), almost 4.32 lakh people have returned to States such as Uttar Pradesh (UP), West Bengal (WB), Bihar, Assam and Odisha from Maharashtra.

“Of 4.32 lakh, around 3.23 lakh reverse migrated to UP and Bihar alone. From Central Railways our estimate indicates that around 4.7 lakh reverse migrated to northern and eastern states from Maharashtra,” said the presentation.

The ERD’s model suggests that the estimated peak time is 96 days from February 15, indicating the peak happening in the third week of May.

“It may be noted that we are incrementally adding around 15,000 more cases over peak of previous day as of today, though such numbers are difficult to predict.

“Uttar Pradesh and Maharashtra achieved peak before national peak in first wave. Now, new cases in Maharashtra seem to be stabilising but the share of cases in total of various other States (Chhattisgarh, Madhya Pradesh, Gujarat) has increased in the current second wave and these are showing increase in daily new cases,” said Ghosh.

So, if other States also implement strict actions and control the spread, then national peak may come within two weeks after Maharashtra peak, he added.

The Reserve Bank of India has approved the appointment of Atanu Chakraborty as part-time Chairman of HDFC Bank.

In a regulatory filing on Friday, the private sector lender said the appointment is for three years with effect from May 5, 2021, or the date of his taking charge, whichever is later.

“A meeting of the board of directors of the bank will be convened in due course to inter alia consider the appointment of Atanu Chakraborty as the part time Chairman and additional independent director of the bank,” said HDFC Bank.

A 1985 batch IAS officer of Gujarat cadre, Chakraborty retired as Secretary, Department of Economic Affairs, in April 2020. Previously, he also served as Secretary, Department of Investment and Public Asset Management (DIPAM).

The board of HDFC Bank had, in December last year, submitted its recommendation to the RBI for the approval of part-time Chairman. The term of its previous Chairperson Shyamala Gopinath came to an end on January 1 this year.

Chakraborty graduated as a Bachelor in Engineering from NIT-Kurukshetra. He holds a Diploma in Business Finance (ICFAI, Hyderabad) and a master’s degree in Business Administration from the University of Hull, UK.