Tag: Nirmala Sitharaman

FM Sitharaman on LIC IPO, BFSI News, ET BFSI

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While all eyes are on India’s biggest issue of the year, Finance Minister Nirmala Sitharaman said she’s yet to disclose the proportion being sold off in the IPO of Life Insurance Corp. (LIC). Sitharaman exclaimed, in an exchange with ET, that LIC did not have an ’embedded’ valuation mechanism.

ET asked her if she commits that the government stake would stay above 51% with general insurance companies to which she attested that she will have ‘government’s presence’ in that area and that it will obviously hold stake.

“We will have a fix obviously, but I will tell you only when I’m ready to tell you. The time which has been consumed for this is only to get the mechanisms put in place. You will know how unprepared public sector companies are for even facing their own realities. They (LIC) did not have an embedded valuation mechanism. Will you believe it!,” she replied on being inquired about there being a fix on how much stake the government will divest in LIC.

“Yes, it is an IPO,” validated Sitharaman on whether the government will maintain its stake at about 51% in case of the LIC IPO too.

‘Bare minimum’ presence of government will be there in all three segments of Insurance- life insurance, general insurance and reinsurance, the Finance Minister confirmed while adding that insurance is also a part of core and strategic sector listed items.

Companies that can’t either be merged or brought in for a bigger scale will be disposed of.

LIC IPO is important for the government to meet its yearly disinvestment target of Rs. 1.75 lakh crore. Government has plans to privatise two public sector banks and one insurance firm.

Rs 1.75 lakh crore is expected to come from selling of government stake in state-run banks and financial institutions. While Rs 75,000 crore is projected to flow in through CPSE disinvestment receipts.

The size of the share sale will be decided by a commission led by Finance Minister Nirmala Sitharaman. For the proposed IPO, the government has revised the LIC Act of 1956. The LIC has appointed Arijit Basu, the former MD of State Bank of India and former MD & CEO of SBI Life, as a consultant to help execute the IPO.



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FM Nirmala Sitharaman, BFSI News, ET BFSI

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India is among a few G20 countries on track towards United Nations Framework Convention on Climate Change (UNFCCC) and Paris Agreement goals and has taken decisive actions to tackle climate change, Finance Minister Nirmala Sitharaman said on Wednesday. The minister, in a meeting with COP 26 president-designate Alok Sharma, said the government is taking concrete steps and at appreciable speed to meet its commitments on the target of 450 GW of renewable energy by 2030.

She also said 100 GW of this renewable energy had already been achieved.

Among other important initiatives, she mentioned the extensive work done on Hydrogen Energy Mission.

The minister discussed various issues related to climate change and specifically COP 26 — the 26th UN Climate Change Conference of the Parties, a Finance Ministry statement said.

The UK will host the international climate conference COP 26 in November this year.

With regards to ongoing discussions on climate change in various fora, Sitharaman referring to the dialogue on climate justice spoke about the need to bring a sense of compassion towards the poor.

The Finance Minister expressed hope that the commitment made by the developed countries to provide USD 100 billion per year to developing countries would be achieved and was optimistic about a positive outcome on the new collective goals on finance in COP 26.

The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 countries at COP 21 in Paris, on December 12, 2015 and entered into force on November 4, 2016.

Its goal is to limit global warming to well below 2, preferably to 1.5 degree Celsius, compared to pre-industrial levels.



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Finance Minister Nirmala Sitharaman to meet CEOs of public sector banks on August 25, BFSI News, ET BFSI

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Finance Minister Nirmala Sitharaman is scheduled to meet heads of public sector banks (PSBs) on August 25 to review financial performance of the lenders and progress made by them to support the economy battered by COVID-19 pandemic.

Given the importance of the banking sector in generating demand and boosting consumption, sources said the meeting with the MD and CEOs of PSBs is considered important.

Recently, the Finance Minister said the government is ready to do everything required to revive and support economic growth hit by the COVID-19 pandemic.

“Growth will be given its importance. Growth will be pushed both by the Reserve Bank and by us…,” she had said.

Interestingly, this would be the first physical review meeting since the outbreak of the pandemic in March last year.

The meeting is expected to take stock of the banking sector, progress on restructuring 2.0 scheme announced by Reserve Bank of India (RBI), sources said, adding that banks may be nudged to push loan growth in productive sectors.

The revamped Rs 4.5 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) would also be reviewed during the meeting likely to be held in Mumbai, sources said.

Besides, the Finance Minister is expected to take a stock of the bad loan or non-performing asset (NPA) situation, and discuss various recovery measures by banks, they said.

As a result of government’s strategy of recognition, resolution, recapitalisation and reforms, NPAs have since declined to Rs 7,39,541 crore on March 31, 2019, Rs 6,78,317 crore on March 31, 2020 and further to Rs 6,16,616 crore as on March 31, 2021 (provisional data).

At the same time comprehensive steps were taken to control and to effect recovery in NPAs, which enabled PSBs to recover Rs 5,01,479 crore over the last six financial years, the government informed Parliament recently.

As far as credit growth of scheduled commercial banks (SCBs) is concerned, it has remained positive for 2020-21 despite contraction in GDP (-7.3 per cent) due to the COVID-19 pandemic.

Gross loans and advances – outstanding of SCBs increased from Rs 109.19 lakh crore as of March 31, 2020 to Rs 113.99 lakh crore as of March 31, 2021. Agriculture and allied activities, micro, small and medium enterprises, housing and auto have witnessed a year-on-year growth of 12.3 per cent, 8.5 per cent, 9.1 per cent and 9.5 per cent, respectively, during the year.

Notwithstanding economic disruptions caused by the pandemic, PSBs have managed to raise a record Rs 58,700 crore from markets in 2020-21 through a mix of debt and equity to enhance capital base. As a result capital to risk weighted assets ratio rose to 14.04 per cent as of March 31, 2021, as against regulatory requirement of 10.875 per cent boosting the ability of PSBs to further increase lending.

As a result, PSBs in aggregate recorded a profit of Rs 31,816 crore, highest in five years, despite 7.3 per cent contraction in economy in 2020-21.

The primary reason for PSBs to post such a Rs 57,832-crore turnaround from a loss of Rs 26,015 crore in 2019-20 to a combined profit of Rs 31,816 crore was the end of their legacy bad loan problem.



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Analysts, BFSI News, ET BFSI

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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.



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Government will do ‘everything’ to revive growth, says finance minister, BFSI News, ET BFSI

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NEW DELHI: The government is committed to doing everything that is required to revive the economy, finance minister Nirmala Sitharaman said on Thursday as she assured industry about the Centre’s commitment to reforms and urged India Inc to come out in a big way and show its risk taking abilities.

Addressing the annual session of the Confederation of Indian Industry (CII), Sitharaman also said the government and the RBI will both push growth and take all necessary steps to keep inflation contained.

“Government’s commitment to recovery is shown in so many different ways and we are going to continue doing that because recovery and its sustainability is something which the PM is very keenly invested in,” said Sitharaman.

“I am not looking at growth versus inflation. We shall attend to inflation and keep it contained, take all the necessary steps but never forget the fact that growth is that will make all the difference to the economy’s revival, growth will eventually remove poverty and bring in a level-playing field for all Indian citizens,” FM said, adding that both the Centre and RBI are working as partners to address issues linked to the economy.

She said the messages and the indications that are coming in are very clear that the economy is revving to come out. The FM said the financing needs of the growing economy have been successfully met by the over Rs 5 lakh crore of capital, which was put in the hands of various stakeholders through the credit outreach programmes of the government.

Sitharaman also said the economy has not reached a level where the liquidity which was pumped in during the pandemic can be pulled back.

“I don’t think we have reached that level and I am glad that RBI has been voicing that understanding that too quick a retrieval or sucking out of the liquidity from the economy may not do the necessary stimulus, which is required. I am glad that RBI has kept that understanding and they have not given any indication about wanting to suck out the liquidity which is available there,” the FM said.

Sitharaman cited the passage of crucial bills in Parliament in the just concluded monsoon session as the government’s commitment to push ahead with reforms. The FM made it clear that the government will push through stake sales in all the companies such as Air India, BPCL this year as well as proceed with the asset monetisation plan. “Policy-driven disinvestment and privatisation will continue with the same fervour,” said Sitharaman, adding that “necessary rigorous work is going on and the government is committed to the disinvestments announced in the budget.

The FM urged the industry to venture into new areas and take decisions to expand.

“I thank the Indian industry for being very level headed to face the challenge of the first and even face the challenge of the second wave of Covid-19 when many countries are still wondering how they would face their economy and pick the economy from where it is left behind,” said Sitharaman.

“Indian industry is moving into totally new areas. It is time for the Indian Industry to come around in a big way and it is time to show its risk-taking capacity”, said Sitharaman, adding that the stock market was showing the way. “Please do follow it,” said the FM.



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Rupee Bank administrator meets FM, BFSI News, ET BFSI

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Pune: The administrator of the stressed Rupee Cooperative Bank, Sudhir Pandit, met Union finance minister Nirmala Sitharaman on Wednesday and sought a resolution of the current situation of the bank, which was denied permission to merge with Maharashtra State Cooperative Bank by RBI last week.

The meeting was also attended by the Pune Lok Sabha MP Girish Bapat. “I apprised the FM of the situation of the bank, which is more than a century old, and the issues that senior citizens will face, who comprise nearly all of the high-value depositors. The FM assured me that she will look into the issue for a resolution. I told her of the plans that we have drawn up regarding the revival of the bank into a small finance bank,” he said.

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IndusInd Bank empanelled as agency bank to RBI

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Private sector lender IndusInd Bank has been empanelled by the Reserve Bank of India (RBI) as an ‘Agency Bank’ to facilitate transactions related to government businesses.

It can now be authorised to handle transactions related to government businesses such as income tax, indirect taxes and goods and services tax payments, pension payments, work related to small savings schemes, collection of stamp duty charges, collection of stamp duty from citizens for franking of documents and also collection of State taxes such as professional tax, value-added tax and State excise duties.

“Given IndusInd Bank’s exclusive suite of services comprising innovative and cost-effective solutions, coupled with our state-of-the-art technology platforms, we are confident of being a ‘partner of choice’ for the government, its enterprises, as well as stakeholders in fulfilling their financial aspirations in a seamless manner,” said Soumitra Sen, Head – Consumer Bank, IndusInd Bank.

Also read: IndusInd Bank net profit surges 111.7% in Q1

Finance Minister Nirmala Sitharaman had on February 24 this year announced that the embargo on grant of government business to private banks has been lifted.

The RBI had then notified guidelines for the appointment of scheduled private sector banks as agency banks.

This was seen as a significant benefit for mid and small-sized private sector lenders as earlier only the three large private sector banks apart from public sector banks were permitted to do government business such as deposits, public provident fund and Sukanya Samriddhi accounts, tax payments and pension payments, amongst other initiatives.

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FM introduces bill in Lok Sabha to privatise general insurance firm

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Finance Minister Nirmala Sitharaman on Friday introduced a bill in the Lok Sabha to offload part of government’s stake in public sector general insurance companies. The bill will amend the General Insurance Business (Nationalisation) Act, 1972. Although the bill has a provision to enable the government to bring down its shareholding below 51 per cent, Sitharaman clarified that this bill is not for privatisation.

“The apprehensions mentioned by the members is not well-founded at all. What we are trying to in this is not to privatise. We are bringing some enabling provision so that the government can bring in public, participation, Indian citizens, the common people’s participation in the general insurance companies,” she said while introducing the bill amid dins.

The amendment was a follow-up to the budget announcement when Sitharaman had said: “We propose to take up the privatisation of two Public Sector Banks and one General Insurance company in the year 2021-22. This would require legislative amendments, and I propose to introduce the amendments in this Session itself.” However, the bill could not be tabled during the budget session as it was curtailed on account of pandemic.

On Friday, Sitharaman said public-private participation in the general insurance industry would help get more resources. “Why do we need to raise the resources from the market? Our market can give the money from the retail participants who are Indian citizens. Through that, we can have greater money, bring in better technology infusion, and enable faster growth of such general insurance companies. We need money to run them,” she said.

The Minister said general insurance companies in the private sector have greater penetration. They raise more money from the market and give a better premium for insuring the public and have innovative packages. “Whereas public general insurance companies are not able to perform because they are always short of resources,” Sitharaman said.

Three amendments

The bill proposes three amendments.  The first one aims to omit the proviso to section 10B of the Act to remove the Central Government’s requirement to hold not less than 51 per cent of the equity capital in a specified insurer. The second one is to insert a new section 24B providing for cessation of application of the Act to such specified insurer on and from the date on which the Central Government ceases to have control over it. And the third is to insert a new section 31A providing for liability of a director of specified insurer, who is not a whole-time director, in respect of such acts of omission or commission of the specified insurer which has been committed with his knowledge and with his consent..

“With a view to provide for greater private participation in the public sector insurance companies and to enhance insurance penetration and social protection and better secure the interests of policy holders and contribute to faster growth of the economy, it has become necessary to amend certain provisions of the Act,” statement of objects and reasons of the bill said.

As of date, there are four general insurance companies in the public sector – National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and the United India Insurance Company Limited. Now, it is not yet known which one of them, the government will lower its shareholding.

 

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To strengthen TReDS, Factoring Amendment Bill passed by Lok Sabha, BFSI News, ET BFSI

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The Factoring Amendment Bill which was introduced in the Lok Sabha last year was passed on Monday. The Bill seeks to amend the Act of 2011 and widen the scope of entities which can engage in factoring business.

This Bill is aimed at increasing the traction on the Trade Receivables Discounting System (TReDS) platform introduced by the Reserve Bank of India in 2014.

The Bill will also help the micro, small and medium enterprises (MSME) which are plagued by the issues of delayed payments. Finance minister Nirmala Sitharaman said that the government had also accepted the recommendations by the Standing Committee which had looked into the Bill last year.

Commenting about the Bill, Ram Iyer, Founder & CEO, Vayana Network, said, “This has been a much-needed intervention. Allowing non-NBFC factors and other entities to undertake factoring is expected to increase the supply of funds available to SMEs. This may result in bringing down the cost of funds and enable greater access to the credit-starved small businesses, ensuring timely payments against their receivables. The recommendations of the Standing Committee are expected to increase the traction of TReDS platforms. Steps like integration with GSTN, mandatory listing of the government dues and direct filing of charges will improve the operational efficiency and acceptability of the platforms among the financiers.”

TReDS, which was introduced to improve liquidity with small businesses, has not been able to take off properly. According to the data accessed by ET, of the total transaction volume of about Rs 36,000 crore conducted by the three TReDS exchanges in India so far, only Rs 2,700 crore was from central public-sector enterprises (CPSEs).

TReDS works as an exchange between lenders, buyers and MSMEs. Lenders bid to settle the claims of an MSME supplier upon the acknowledgment of the invoice by the buyer. The buyer then repays the lender, which is usually a bank, after a predetermined period.

There is no collateral involved, and lenders consider the buyer’s credit rating while paying the supplier. RXIL, Invoicemart and M1Xchange are the three TReDS platforms.

(With inputs from ET Bureau)



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SBI opens branch in President’s Estate, BFSI News, ET BFSI

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New Delhi, Jul 24: The country’s largest lender State Bank of India (SBI) on Saturday opened a branch at President’s Estate. The branch was inaugurated by President Ram Nath Kovind along with First Lady Savita Kovind, in the presence of Finance Minister Nirmala Sitharaman, SBI said in a statement.

The branch will provide all types of banking services including safe deposit lockers to the residents of President’s Estate, it said.

Secretary to the President K D Tripathi, SBI Chairman Dinesh Khara and other senior officials of the bank were also present at the inauguration ceremony, it said.

This branch at President’s Estate is a jewel in the crown for SBI and will offer a convenient and seamless banking experience to all the customers, said Khara.

SBI has the largest network of more than 22,000 branches and 60,000 ATMs serving around 45 crore customers through its 2.5 lakh employees. DP MR



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