Tag: central bank

Analysts, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The Reserve Bank may be hitting the end of its tolerance for high inflation and will most likely hike interest rates in the first half of 2022, analysts said on Friday.

The central bank will also start rolling back its accommodative policies which have led to easy liquidity conditions, they said.

The view from analysts came even as inflation cooled down to 5.6 per cent for July, after two months of breaching the upper end of the RBI‘s tolerance band of 6 per cent.

The central bank has been keeping the status quo on policy and continuing with the accommodative stance to help revive GDP growth.

Finance Minister Nirmala Sitharaman had on Thursday opined that the current conditions do not warrant withdrawal of the accommodative measures.

“The RBI has been tolerant of inflation and has stayed accommodative to support growth given the deep hit suffered by the economy. But it appears to be reaching the end of tether as inflation remains elevated,” rating agency Crisil said.

“If this pressure (on inflation) continues and systemically important central banks, especially the (US) Fed, begin normalising, the RBI will start to roll back accommodation. We expect the RBI to make a more definitive statement by this fiscal end, and raise rates by 0.25 per cent,” it added.

Its peer Acuite said it expects policy normalisation to begin in a gradual fashion with comfort on vaccination, clarity on fiscal stance, and global rates setting and called the increase in the quantum of variable reverse repo auctions as the first small step towards the same objective.

Next, the central bank can look at increasing the reverse repo rate by 0.40 per cent to narrow the difference between repo and reverse repo rate to 0.25 per cent by February 2022, it said, adding that the repo will be unchanged at 4 per cent.

In parallel, the vaccination drive is expected to lead to herd immunity and thereafter, the RBI will follow up with a 0.25 per cent rate hike in April 2022, it said.

Analysts at Japanese brokerage Nomura said last week’s review had signs of RBI policy pivoting towards normalization, pointing out to one of the members of the monetary policy committee also dissented against the “accommodative stance” and the increase in FY22 headline inflation target to 5.7 per cent.

“The August policy meeting already bore initial signs of a policy pivot via calibrated liquidity normalisation. We believe this will be followed by the phasing out of durable injectors of liquidity, a 0.40 per cent reverse repo rate hike (in December quarter) and 0.75 per cent of repo/reverse repo rate hikes in 2022,” it said.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

Global banks unwind lucrative India trades after RBI warning, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


NEW DELHI: Foreign banks have been forced to unwind billions of dollars worth of profitable currency trades at the behest of India’s central bank, according to people with knowledge of the matter.

The issue in focus is a flurry of currency swap trades that involved the banks converting rupee-denominated deposits into dollars that were then used to buy foreign sovereign debt including US Treasuries, which are unlisted in India. The Reserve Bank of India warned the banks of a regulatory breach last week, saying they must limit their holdings of such unlisted securities to no more than 10% of investments classified as the non-statutory liquidity ratio portfolio.

Some lenders had racked up exposures of more than $1 billion each by using a regulatory loophole created in February to convert rupee deposits into dollars using a buy-sell swap — buying the greenback now while selling the same amount at a specified date in the future. They then used the proceeds to purchase US government debt and profited from the arbitrage, paying around 3.5% on the local currency deposits and earning 4.9% on the 12-month yield on the currency pair.

As the biggest buyer of the greenback in the forwards market, the RBI was effectively funding some of the trading profits.

The central bank, as part of its intervention strategy, had been offsetting its dollar purchases in the spot market, by entering into sell-buy swaps in the forwards markets. That had swelled its forwards book to over long $70 billion, causing dollar/rupee forward premiums to spike and foreign banks to book arbitrage gains from the trade earlier this year.

Indian entities were net buyers of almost $3 billion worth of Treasuries over April and May, according to US government data, the first inflows from the South Asian nation since October.

The biggest beneficiaries of the swap trades have been overseas lenders in India, which have easy access to large dollar investments, the people said. An email to the RBI was unanswered.

The banks are in the process of unwinding the trade, the people said. They are selling Treasuries and conducting sell-buy swaps — selling the greenback and agreeing to buy at a later date specified in the contract.

The impact of the unwinding was visible in the forward dollar-rupee rates. The implied 12-month yields rose 7 basis points on Friday and Monday after the order and is currently trading at 4.34%.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

Companies don’t want to reveal loan details to public, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Starting August, the Reserve Bank of India (RBI) made it mandatory for credit-rating agencies (CRAs) to disclose bank-wise term-loan details of clients or the borrowers for whom ratings were reaffirmed or freshly given.

This mandate was given to the CRAs early this year with the objective to increase disclosures in rating reports. CRAs began implementing this order from the central bank, but sources in the know say India Inc. is resisting such disclosures. “Many companies have expressed their discomfort in divulging bank-wise details of loan exposure and don’t want it to be part of the rating rationale,” says the CEO of a leading CRA.

India Inc. on its part has also approached the central bank to reconsider its stand on such disclosures. Some large conglomerates have written to the RBI asking it to withdraw this requirement. “Information shared with banks and CRAs is highly confidential and is governed by client privilege. Why should such important information be made public?” asks the CFO of a leading cement company.

To put things in context, there are three segments which make up rating documents. Rating rationale captures the score ascribed to the instrument or loan exposure under review and also explains how the score or rating was arrived at. As part of improving transparency, CRAs are required to disclose bank-wise outstanding of the borrower and this is required for fund and non-fund-based exposures as an annexure to the rating rationale.

Whenever there is an increase in credit facility and/or change in composition of term loans, it has to be updated in the annexure. Among the other two documents – rating perspective and rating letter, the former is a paid service which has elaborate details of the client. The rating letter is a confidential communication between the borrower (client) and the CRA and is shared with bankers of the client. This enumerates lender-wise and facility-wise exposure of the borrower.

“For new rating engagements, we have started following this method of reporting. However, in case of legacy clients, some are not comfortable adopting this format of disclosure,” says a senior rating officer of a CRA. On whether such clients should be classified as non-cooperative or not, CRAs say they would first intimate the RBI about such clients. “Technically they are not non-cooperative. They are only resisting certain disclosures being made public,” he adds. “It’s now for RBI to take a call on the matter” says the CFO quoted earlier.

According to highly placed sources, this time around it is unlikely that the RBI would budge on requests from India Inc. Bank-wise public disclosure of loan details in the credit-rating documents was something which was in the works for several years and it has now been implemented. “If the objective is to disseminate as much information as possible, why should the RBI roll back this requirement?” asks the person quoted earlier.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Peru central bank chief Velarde to stay for another term -source, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


LIMA – Peruvian central bank President Julio Velarde has agreed to stay on for an extra term, a source familiar with his decision said on Monday, a move poised to calm markets rattled by the election of the country’s new left-wing president.

“Julio Velarde has agreed to continue in the role and is following the conversations to define the members of the bank’s board,” said the source, who declined to be identified because the decision has not yet been made public.

A central bank representative was not immediately available for comment.

Velarde, a prestigious central banker, has been in the role since 2006 and helped cement Peru’s economy as one of the most stable in Latin America. Peru’s central bank is independent from the government, with the rest of the bank’s board split between nominees proposed by the executive and legislative branches.

Newly inaugurated President Pedro Castillo asked Velarde to stay in the role. Velarde initially said he planned to retire later this year.

Peruvian markets have been battered on Castillo‘s election, with the local sol currency hitting a record low against the dollar on Monday.

Castillo belongs to a Marxist-Leninist party, has named several hardliners to his Cabinet and is pushing to redraft the country’s constitution.

(Reporting by Marco Aquino; Editing by Christian Schmollinger and Leslie Adler)



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

BIS, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less



By Marc Jones

LONDON: Central banks and financial regulators urgently need to get to grips with the growing influence of ‘Big Tech‘, according to top officials from central bank umbrella group the Bank for International Settlements (BIS).

Global watchdogs are increasingly wary that the huge amounts of data controlled by groups such as Facebook, Google, Amazon and Alibaba could allow them to reshape finance so rapidly that it destabilises entire banking systems.

The BIS, in a paper led by its head Agustin Carstens, pointed to examples such as China where the two big tech payment firms Alipay and WeChat Pay now account for 94% of the mobile payments market.

China has already rattled its markets with a series of clampdowns https://www.reuters.com/world/china/no-gain-without-pain-why-chinas-reform-push-must-hurt-investors-2021-07-28 on top tech and e-commerce firms. Last November regulators torpedoed the public listing of Jack Ma’s fintech Ant Group and in the nine months since other tech giants and, lately, tutoring firms, have all faced scrutiny.

In many other jurisdictions too, tech firms are rapidly establishing footprints, with some also lending to individuals and small businesses as well as offering insurance and wealth management services.

“The entry of big techs into financial services gives rise to new challenges surrounding the concentration of market power and data governance,” the BIS paper https://www.bis.org/publ/bisbull45.pdf published on Monday said.

There was scope for “specific entity-based rules” notably in the European Union, China and the United States, it added.

“Any impact on the integrity of the monetary system arising from the emergence of dominant platforms ought to be a key concern for the central bank.”

Stablecoins – cryptocurrencies pegged to existing currencies such as Facebook’s Diem – and other Big Tech initiatives could be “a game changer” for the monetary system, the paper added, if the “network effects” of social media and e-commerce platforms turbo-charged their uptake.

It could lead to a fragmentation of existing payment infrastructures to the detriment of the public good. “Given the potential for rapid change, the absence of currently dominant platforms should not be a source of comfort for central banks,” the paper said.

It said they should anticipate developments and formulate policy based on possible scenarios where Big Tech initiatives are already reshaping payments and other parts of financial systems.

“Central banks and financial regulators should invest with urgency in monitoring and understanding these developments” it added. “In this way, they can be prepared to act quickly when needed.”



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

China’s central bank says it will keep pressure on crypto market, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


China’s central bank vowed to maintain heavy regulatory pressure on cryptocurrency trading and speculation after escalating its clampdown in the sector earlier this year.

The People’s Bank of China will also supervise financial platform companies to rectify their practices according to regulations, it said in a statement on Saturday. Policy makers met on Friday to discuss work priorities for the second half of the year.

China launched its most intense crackdown on crypto trading and mining since 2017 in recent months, after a surge in Bitcoin and other tokens heightened authorities’ concerns over risks of fraud, money laundering and excessive energy usage. It also imposed a series of regulatory actions targeting monopolistic behavior at online payment platforms such as Ant Group Co. over the past year.

The central bank will act to prevent major financial risks and push to lower the number of high-risk financial institutions in key provinces, according to the statement. It will also accelerate its work to create a financial stability law, which was proposed by Deputy Governor Liu Guiping in March.

The PBOC reiterated that its prudent monetary policy will be flexible, targeted, reasonable and appropriate. It vowed to implement a good “cross-cyclical” policy design, a term widely interpreted to mean authorities will use a longer time frame when considering policy support and will avoid overstimulating the economy.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

It’s time for digital currency to counter crypto, says RBI, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


MUMBAI: The Reserve Bank of India (RBI) has said that it is working towards a phased implementation strategy for its digital currency and examining use cases where it can be deployed with little disruption. Making a strong argument in favour of a central bank digital currency (CBDC) for India, the RBI has said that it would reduce currency costs for the government and would help offset the threat of virtual currencies.

“Developing our own CBDC could provide the public with uses that any private virtual currency can provide and to that extent might retain the public preference for the rupee. It could also protect the public from the abnormal level of volatility some of these virtual currencies experience,” RBI deputy governor T Rabi Sankar said on Thursday at a webinar organised by the Vidhi Centre for Legal Policy. Sankar added that conducting pilots on CBDC in wholesale and retail segments may be a possibility in the near future. “As is said, every idea will have to wait for its time. Perhaps the time for CBDCs is nigh,” he said.

On the consequences of digital currencies on banks, Sankar said that while it could reduce the need for maintaining deposits, the impact would be limited as they cannot pay interest. “Thus, potential costs of disintermediation mean it is important to design and implement CBDC in a way that makes the demand for CBDC, vis-a-vis bank deposits, manageable,” said Sankar.

The key issues examined by the RBI include whether these should be used in retail payments or also in wholesale payments, whether it should be a distributed ledger or a centralised ledger, whether it should be token-based or account-based, whether it should be directly issuance by the RBI or through banks and the degree of anonymity.

In a strong attack against virtual currencies (cryptocurrencies), Sankar said, “Private virtual currencies sit at substantial odds to the historical concept of money. They are not commodities or claims on commodities as they have no intrinsic value, some claims that they are akin to gold clearly seem opportunistic. For the most popular ones now, they do not represent any person’s debt or liabilities. There is no issuer. They are not money.”

The deputy governor said 86% of central banks were actively researching the potential for virtual currencies and 60% were already experimenting with the technology, and 14% are deploying pilot projects. He said that interest had spiked to replace paper and avoid the more damaging consequences of private currencies.

The deputy governor’s statement comes at a time when the RBI has been forced by a Supreme Court order to withdraw a ban on bank services to cryptocurrencies. Although the RBI has earlier spoken about plans to launch a digital currency, this is the first time that the central bank has gone into so much detail. Central banks across the world have drawn up plans to launch their digital currency to battle cryptocurrencies. China has said that its e-CNY has been tested in 70 million transactions.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

RBI imposes Rs 1 lakh penalty on Melur Co-operative Urban Bank, Madurai, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Mumbai, Jul 20: The RBI on Tuesday imposed a penalty of Rs 1 lakh on Melur Co-operative Urban Bank, Melur, Madurai for contravention of certain provisions concerning board of directors. The RBI said statutory returns submitted by the bank for the period ended March 2020, revealed, inter alia, “contravention of / non-compliance” with the directions on Board of Directors – UCBs.

A show cause notice was issued to the Tamil Nadu-based bank.

After considering the bank’s replies, the RBI came to the conclusion that the charges of non-compliance with the extant RBI directions were substantiated and warranted imposition of monetary penalty.

The central bank, however, said the penalty is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Follow and connect with us on , Facebook, Linkedin



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

Nirmala Sitharaman urges G20 nations for aligning recovery strategies with climate concerns, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


Finance Minister Nirmala Sitharaman on Saturday urged G20 nations for aligning economic recovery strategies with climate concerns.

Participating virtually in the Third G20 Finance Ministers and Central Bank Governors (FMCBG) Meeting under the Italian Presidency, Sitharaman shared recent policy responses of Government of India to strengthen the health system and economy, including the efficient application of CoWIN Platform to scale-up vaccination in India.

She highlighted the need for international coordination and cooperation in view of the emerging CoVID-19 variants.

Sitharaman added that this platform has been made freely available to all countries as humanitarian needs outweigh commercial considerations in this extraordinary crisis.

As the co-chair of Framework Working Group of the G20, India along with UK, views digitalization as an agenda that will continue to play a key role in bolstering economic growth, she said.

Regarding the ‘Statement on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy’, released by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS-IF) on July 1, the G20 Finance Ministers called on the OECD/G20 BEPS-IF to swiftly address the remaining issues.

Sitharaman suggested that further work needs to be done to ensure a fairer, sustainable and inclusive tax system which results in meaningful revenue for developing countries, the Finance Ministry said in a statement.

Earlier this month, India along with other nations joined OECD-G20 framework for global minimum tax. Total 130 countries agreed to an overhaul of global tax norms to ensure that multinational firms pay taxes wherever they operate and at a minimum 15 per cent rate.

Some significant issues including share of profit allocation and scope of subject to tax rules, remain open and need to be addressed. Further, the technical details of the proposal will be worked out in the coming months and a consensus agreement is expected by October.

Speaking on the need for aligning recovery strategies with climate concerns, the Finance Minister called for climate action strategies to be based on the principles of the Paris Agreement and noted the criticality of timely fulfilment of international commitments on climate finance and technology transfer.

The Finance Minister joined other G20 members in welcoming the Report of the G20 High-Level Independent Panel on Financing the Global Commons for Pandemic Preparedness and Response and emphasized on the urgent need to strengthen multilateralism for global health.

The G20 Finance Ministers and Central Bank Governors reaffirmed their resolve to use all available policy tools for as long as required to address the adverse consequences of COVID-19.

Sitharaman appreciated the Italian G20 Presidency for identifying three catalysts of resilient economic recovery from the pandemic as being Digitalization, Climate Action and Sustainable Infrastructure and shared the Indian experience of integrating technology with inclusive service delivery during the pandemic.

The two-day deliberation held on July 9-10 saw discussions on a wide range of issues including global economic risks and health challenges, policies for recovery from the CoVID-19 pandemic, international taxation, sustainable finance and financial sector issues.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

RBI warns of stress build-up in consumer credit, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The pandemic and its fallout on the economy has made consumer lending riskier for banks even as it has been the only sector to help banks keep their loan books afloat at such times.

The delinquency rates for such loans are going up particularly for private sector banks and NBFCs during the pandemic warned the Reserve Bank of India‘s latest financial stability report. At the same time the second wave has also affected demand for such loans with a steep fall in demand in April , it said.

The Reserve Bank’s latest Financial Stability Report notes that the delinquency rates for consumer credit in private sector banks doubled from 1.2 per cent in January 2020 to 2.4 per cent in January 2021. While for NBFCs it went up from 5.3 per cent to 6.7 per cent in the same period. Overall consumer credit deteriorated after the loan moratorium programme came to an end in September 2020.

“While banks and other financial institutions have resilient capital and liquidity buffers, and balance sheet stress remains moderate in spite of the pandemic, close monitoring of MSME and retail credit portfolios is warranted.” the report said.

Consumer credit includes home loans, loans against property, auto loans, two-wheeler loans, commercial vehicle loans, construction equipment loans, personal loans, credit cards, business loans, consumer durable loans, education loans and gold loans.

The overall demand for consumer credit in terms of inquiries had stabilised in Q4’2020-21 after a sharp rebound during the festive season in Q3’2020-21 after the first COVID-19 wave receded. But the second wave, however, has sharply affected credit demand, with a steep fall in inquiries across product categories in April 2021. Growth in credit-active consumers- consumers with at least one outstanding credit account- and, outstanding balances, however, remains sluggish compared to the previous comparable period. For unsecured loans, the fastest-growing category in this segment, for example, fell from 39.4 per cent in January’20 to 6.5 per cent in FY’21. For home, which accounts for a major chunk of this segment, the growth rate of credit-active consumers slowed from 12.03 per cent to 0.3 per cent during the period.

On a positive note, loan inquiries are more from better-rated borrowers. “Loan approval rates remain healthy as the risk tier composition of inquiries shows a distinct tilt towards better-rated customers.” the central bank‘s report said.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,
1 2 3 4 5 6