Indian Economy News & Discussion - Nov 27 2017

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Mollick.R
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Mollick.R » 07 Dec 2018 13:09

More rate cuts and rationalization on the pipeline. Good for consumers and optics in the election year but bad for revenue collection target & fiscal deficit targets.

Air conditioners, TVs may get cheaper as GST Council likely to slash tax rate to 18%

The Council, chaired by FM Arun Jaitley is expected to meet in the week beginning December 17, to discuss the proposal in what could effectively set 18% as the highest GST tax slab, except only three categories of goods and services.A range of goods from air conditioners to dishwashers, from television sets to digital cameras, will likely become cheaper, with the Goods and Service Tax (GST) Council expected to slash rates to 18 percent on all products in the 28 percent slab, except demerit goods, cement and automobiles.

The Council, chaired by Finance Minister Arun Jaitley is expected to meet in the week beginning December 17, to discuss the proposal in what could effectively set 18 percent as the highest GST tax slab, except only three categories of goods and services.

The move comes barely four months ahead of the crucial Lok Sabha elections in April-May, 2019. The cut in rates, however, could affect GST revenues, given that the collections are still short of the budgeted target.

“Discussion on rate cut has already begun. The idea is to remove most of the items from the highest tax slab of 28 percent, barring luxury and demerit goods,” a senior government official to Moneycontrol.
“Some items will be moved to the 5 percent tax bracket from the 18 percent slab to remove anomalies,” the official said.

Cement, the official said, will continue to remain the 28 percent slab as the government gets a substantial chunk of revenue from the commodity.

In the last one-and-a-half-year since the implementation of GST, the Council has significantly pruned the list of items placed in the highest tax slab of 28 percent, demonstrating the Centre and states’ growing confidence in the new system that seeks to unify India into one common national market.

Currently, there are only 35 items in that tax bracket as compared with 226 items that were there during the rollout of GST on July 1, 2017.

The last major round of rate cut happened in July when the Council decided to cut tax on refrigerators, washing machines, electrical appliances, perfumes, and several handicraft items, among others, ahead of the festival season.

The government, then, had to forego revenue worth of Rs 10,000 crore-Rs 11,000 crore annually, as a result of the rate cut.

The revenue impact of the latest round of rate cut, if it is approved by the government, may become a hurdle towards achieving the indirect tax mop-up for the current financial year 2018-19.

The government has set a target of over Rs 12 lakh crore for the financial year 2018-19, which can be achieved if the average monthly mop up is around Rs 1 lakh crore, as compared with Rs 89,885 crore in 2017-18.

Till now (April-November), the government has collected Rs 7.76 lakh crore revenue from GST. Achieving the revenue collection target is crucial as it has a direct bearing on the fiscal deficit, which is a gap between government’s revenue and expenditure.

In the last eight months, tax mop-up has crossed Rs 1 lakh crore twice — in April and October. While revenue in April was higher as businesses generally pay arrears for some of the previous months, mop-up in October was Rs 1 lakh crore due to the onset of the festive season.


https://www.moneycontrol.com/news/business/economy/air-conditioners-tvs-may-get-cheaper-as-gst-council-likely-to-slash-tax-rate-to-18-3262651.html

rgosain
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby rgosain » 07 Dec 2018 18:38

Many thanks for the above, on the gap in GST collections and tax revenues going into an election year. In 2004, the govt gifted a surplus to the incoming upa government which then used it as a slush fund to remain in power for 10 years through bribery, destroying the finances in the process, and setting industry back by a decade.
The opportunity cost of an opposition coming to power in 2019 is far too great, therefore it is incumbent upon the present admin to take a temporary hit on tax receipts if only to reward current taxpayers and consumers in the electorate. "Recentness" is a concept that influences voters.
The other factor is that the RBI, in its quest against inflation has been sucking credit out of the system even though inflationary expectations have been subdued despite the run up in oil prices from 2017 to Oct 2018. The recent fall back to $50-65 range should quell further rate rises.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 07 Dec 2018 20:53

Please avoid politics and election discussions here.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Singha » 07 Dec 2018 23:16

it seems vijaypat singhania gave away his 1000cr stake in raymonds to his son on retirement, onlee to have his son go after his retirement duplex and harass him away

https://economictimes.indiatimes.com/ne ... 000185.cms

https://economictimes.indiatimes.com/ne ... 256371.cms

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 08 Dec 2018 00:15

Govt appoints Krishnamurthy Subramanian new CEA.

https://swarajyamag.com/insta/revolutio ... netisation

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby arshyam » 10 Dec 2018 17:52

Breaking...

Urjit Patel resigns as RBI governor - Livemint

Reserve Bank of India (RBI) governor Urjit Patel resigned Monday citing personal reasons.

“On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honour to serve in the Reserve Bank of India in various capacities over the years. The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank’s considerable accomplishments in recent years. I take this opportunity to express gratitude to my colleagues and Directors of the RBI Central Board, and wish them all the best for the future. Urjit R. Patel 10th December 2018 “


Sudden announcement, that too on a Monday. Wonder what's going on?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Yagnasri » 10 Dec 2018 18:03

No thanks to anyone from GoI. Interesting.

I hope that there will be serious relook at lending to MSMEs and on rate of interest under the new person.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby RKumar » 10 Dec 2018 18:08

Breaking News: UK court orders extradition of Vijay Mallya

Mollick.R
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Mollick.R » 10 Dec 2018 18:10

Another Big Development

UK court orders Vijay Mallya's extradition

What next ??
Appeal to a higher court ?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby rajkumar » 10 Dec 2018 18:41

Mollick.R wrote:Another Big Development

UK court orders Vijay Mallya's extradition

What next ??
Appeal to a higher court ?



Appeal to higher court is possible. The Secretary of State for Home has the final decision post the magistrate hearing pls refer to https://www.gov.uk/guidance/extradition ... erritories

So the chances of Vijay Mallya being back in India before Christmas are very high right now especially in light of the fact that the Magistrate found prima facia evidence against Vijay Mallya
Last edited by rajkumar on 10 Dec 2018 18:56, edited 2 times in total.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby srin » 10 Dec 2018 18:52

Singha wrote:it seems vijaypat singhania gave away his 1000cr stake in raymonds to his son on retirement, onlee to have his son go after his retirement duplex and harass him away

https://economictimes.indiatimes.com/ne ... 000185.cms

https://economictimes.indiatimes.com/ne ... 256371.cms


From the article ...
JK House was a 14-storey structure when it was unveiled in 1960. Four duplexes in the building were later handed over to a Raymond subsidiary Parthian Holdings. In 2007, the company decided to go in for redevelopment. According to a 2007 family agreement, Mr Singhania, his son Gautam, and the widow and two sons of Vijaypat Singhania's brother Ajaypat Singhania, were to get a duplex each in JK House.


Serious corporate governance issue here. The property is owned by Raymond (through its subsidiary) which is a public company, but the Singhanias fight over it as if it is their personal property.

The promoters don't have majority stake, so the board can actually act if it cares to.

Added later (and I should have Google'd even more):

It does appear as if corporate governance *did* work and put a stop to this nonsense.

As reported earlier, Raymond shareholders in June voted against a proposal to sell flats in the company-owned JK House building to the promoters at throwaway prices. "The shareholders voted against the resolution," the company had said back then.

At the 92nd annual general meeting of the company held at its registered office in Ratnagiri, the company had put to vote a resolution with respect to the sale of apartments in JK House. According to a 10-year-old agreement, the promoter family members were to get four duplex flats at Rs 9,200 per square feet. The move, however, had drawn the ire of proxy advisory firms and brought to the fore a legal battle over the property between the two factions of the family members.


So the family is fighting for a property that isn't going to go to them anyway.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 10 Dec 2018 20:10

Urjit patel resigns.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Najunamar » 10 Dec 2018 20:25

Does this mean there's a temporary Governor till the next cycle and only then a full term Guv is appointed?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Viv S » 10 Dec 2018 20:28

Fascinating. Given that Patel took office in Sept 2016 that makes the length of his tenure, 2 years 3 months, leaving him with 9 full months left to go on his contract, not counting a 2 year extension.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 10 Dec 2018 20:43

I hope Prof R Vaidyanathan is appointed. Full desi and good understanding of Indian society and economy.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Nihat » 10 Dec 2018 20:44

ArjunPandit wrote:Urjit patel resigns.


The government really needs to take care of the optics of this situation. It's been under the scanner as it is and this is not helping at all. Also, any deviation from norms in appointing the next gov will be in very bad light.

I wish they would stop shooting themselves in the foot so much at this crucial juncture

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 10 Dec 2018 21:19

Nihat wrote:
ArjunPandit wrote:Urjit patel resigns.


The government really needs to take care of the optics of this situation. It's been under the scanner as it is and this is not helping at all. Also, any deviation from norms in appointing the next gov will be in very bad light.

I wish they would stop shooting themselves in the foot so much at this crucial juncture


Best would be not to bring in these US style loudmouth consultants into key positions. If we have to use them, use them as a consultant with well drafted contracts reigning their public speaking.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Arima » 10 Dec 2018 21:31

Karthik S wrote:I hope Prof R Vaidyanathan is appointed. Full desi and good understanding of Indian society and economy.


how is he a best fit for the post head of monetary policy board??? :shock:

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 10 Dec 2018 21:52

Arima wrote:
Karthik S wrote:I hope Prof R Vaidyanathan is appointed. Full desi and good understanding of Indian society and economy.


how is he a best fit for the post head of monetary policy board??? :shock:


Looks like you are not awake of his background:

http://www.iimb.ac.in/node/4960

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Uttam » 10 Dec 2018 22:22

I don't think Urjit Patel's resignation is an unexpected event. Given the disagreement between RBI and Govt., this was very much expected.

Now, who should be the new governor? What should be the role of RBI for an emerging economy that needs a lot of growth to increase living standards for more than a billion people?

Typically, Central banks in developed economies have two main roles - Inflation targeting, employment growth. These two roles are not independent of each other and usually the central banks can assist employment growth by inflation targeting. However, developing economies like India are different. RBI has more roles than a developed economies central banker. In addition to inflation targeting and emplyment growth, RBI is also responsible for managing "managed float" of INR. It also serves as the main supervisor of commercial banks in India. These two roles are not assigned to Federal Reserve in US as USD is fully "floated" and every commercial banks in US are managed by two agencies. Federal Reserve supervises just a few large Bank Holding Companies. Another difference is that the Indian Government serves as the Deposit Insurer in most cases, wheseas other nations have an independent Deposit Insurer.

Many of these roles assigned to RBI are contrary to each other. For example, Managing Currency value often runs against inflation targeting. Bank's supervision may not always align with employment growth and inflation targeting.

So before we answer who should be the next governor, we should reexamine RBI's role. As I argued before, Indian financial system is a lot more complex than it has never been, and this complexity is likely to go up by leaps and bounds. The govt should think about creating new agencies to take care of some of the roles played by RBI. Bank's supervision should be assigned to an independent agency whose role is to maintain healthy banking system. This agency can also serve as Deposit Insurer, who charges banks an insurance premium based on the risks they are taking. So the new governor should come with a vision of reducing RBI's influence. Any applicants???

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 10 Dec 2018 23:51

RBI and GOI were at logger heads at several levels, particularly on infrastructure and financial closures of projects.

Surface transportation minister (GOI Cabinet Minister) is on record that circulars issued by RBI are interpreted very narrowly leading to delays (and non-closures) of infrastructure projects. Some 2 lakh crore investment is thus blocked even when the infrastructure is deemed viable, the contractors are solvent and the RRI on the projects are viable. In some case it had come to a point where a cabinet minister was asked to chase a circular to its logical end!!

Given this, the RBI governor had to go. RBI was narrowly focused on inflation - rightly so. However it was also inflexible. At this point, either the RBI governor had to resign or the GOI had to resign. Since GOI cannot resign, RBI governor resigned.

World over the Bank governors (Federal Reserve Chairman in US/ RBI Governor in India) have started to appropriate roles for themselves which is not in their charter and they have been making decisions which impact wide swaths of economy without proper data and incorrect economic models. Sometimes it feels that the world over people are guinea pigs to their economic theories! And some of them do love the lime light (for eg. Ben Bernanke's 'breakfast' with Maria Bartiromo which caused a huge wild swing) to the detriment of the country's economy.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Singha » 10 Dec 2018 23:56

UK can earn some goodwill here by sending him back.

unlike other assets which they cultivate , he lacks any marketable BIF skill.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 11 Dec 2018 02:57

As soon as they appointed Gurumurthy to the RBI board whole atmosphere became toxic. If course is not corrected soon more resignations and turmoil might follow. Not a good time for govt to do these things so close to elections. This could be a big distraction to economy

Era of NRIs has come to an end. Time for SDREs to take over....

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 11 Dec 2018 03:03

Please avoid sophisticated politics trolling - it's very transparent and will get very little leeway here - at the very least posts will disappear.

Gurumurthy was appointed to the RBI board in mid August 2018 in a part time capacity. Urjit Patel's departure has been in the making since much before that.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 11 Dec 2018 03:19

Direct tax collections jump 16% in April-November period
In a boost to the government, the direct tax collections during April-November period are up nearly 16 percent as against the corresponding period of the last year. The provisional figures are at Rs. 6.75 lakh crore which is 15.7 percent higher than the gross collections for the preceding period, the government data showed.

“The provisional figures of direct tax collections up to November, 2018, show that gross collections are at Rs 6.75 lakh crore which is 15.7 per cent higher than the gross collections for the corresponding period of last year,” the finance ministry said in a statement.

The refunds to the tune of Rs 1.23 lakh crore have been issued, which is 20.8 percent higher than refunds issued during the given period last year, the data showed.

The net collections (after adjusting for refunds) have surged by 14.7 percent to Rs. 5.51 lakh crore during the period. The net direct tax collections represent 48 percent of the total budget estimates of direct taxes for FY 19 (Rs 11.50 lakh crore).

Disinvestment drive gathering pace: Receipts nearing FY19 target; to hit Rs 65,000 crore by Jan-end
If the transactions already initiated and the plans laid out materialise, the Centre’s disinvestment revenue by January-end may touch Rs 65,000 crore, at a striking distance from the FY19 target of Rs 80,000 crore.

So far this year, the Centre has garnered about Rs 32,998 crore in disinvestment receipts, 77% of which via exchange-traded funds. While another Rs 17,000 crore worth transactions are expected by end-January, about Rs 15,000 crore is assured from the proposed Power Finance Corporation’s purchase of the Centre’s 52.63% stake in Rural Electrification Corporation after Cabinet accorded in-principle nod to the deal on Thursday.

Top dollars: India retains top position in remittances as expats send home $80 billion
India will retain its position as the world’s top recipient of remittances this year with its diaspora sending a whopping USD 80 billion back home, the World Bank said in a report Saturday. India is followed by China (USD 67 billion), Mexico and the Philippines (USD 34 billion each) and Egypt (USD 26 billion), according to the global lender.

With this, India has retained its top spot on remittances, according to the latest edition of the World Bank’s Migration and Development Brief. The Bank estimates that officially-recorded remittances to developing countries will increase by 10.8 per cent to reach USD 528 billion in 2018. This new record level follows a robust growth of 7.8 per cent in 2017.

Global remittances, which include flows to high-income countries, are projected to grow by 10.3 per cent to USD 689 billion, it said. Over the last three years, India has registered a significant flow of remittances from USD 62.7 billion in 2016 to USD 65.3 billion 2017. In 2017, remittances constituted 2.7 per cent of India’s GDP, it said.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 11 Dec 2018 03:48

Suraj wrote:Please avoid sophisticated politics trolling - it's very transparent and will get very little leeway here - at the very least posts will disappear.

Gurumurthy was appointed to the RBI board in mid August 2018 in a part time capacity. Urjit Patel's departure has been in the making since much before that.


How is it trolling? There is nothing sophisticated about my post, I am only stating what was talked about in the media. Man you are acting like a partisan thought police lately.

In the last 16 years of my posting at BRF you are the only one who have called me a troll. It is not my intention nor desire to troll although i’ll post my views unaltered as i have always done. And like you have already been doing, you can selectively delete my posts, if they do not fit your particular political views. That is your prerogative.


I follow all the rules of BRF so stop calling me a troll. Why do you talk like a school headmaster talking to a primary school kid? I am not going to take your bait.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 11 Dec 2018 04:06

Your post is factually wrong, in the sense that Urjit Patel's or any prior Governor's disagreements with GoI far precede any recent RBI board appointments. You have offered no reason why the appointment of one person 3 months ago to a part time position is somehow the reason 'the whole atmosphere became toxic'. There's more an significant amount of press describing how RBI's inflation targeting efforts have been poor and far off the mark, buttressing the GoI's entire care against RBI's obstructionist behavior.

And then you whine about being called out for obvious behavior, ignoring that posters have no business debating moderation actions on threads, except through the feedback one.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby VKumar » 11 Dec 2018 05:21

The RBI by its stance of keeping interest rates high over the past since RR has damaged the MSME sector almost beyond repair. Compare interest rates in India with the competitors in USA, Japan, China , EU. Keep in mind that MSME sector has the largest employment potential per rupee invested. In this matter RBI has acted against National interests.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby yensoy » 11 Dec 2018 07:03

ArjunPandit wrote:Best would be not to bring in these US style loudmouth consultants into key positions. If we have to use them, use them as a consultant with well drafted contracts reigning their public speaking.


Dr Patel is the exact opposite of "loudmouth". He has been very quiet and maintained a very low profile - which I believe is best for the RBI Governor role. Today's Bloomberg in fact says that he has been so quiet that we don't know what is really the matter here.

I believe both the current GoI and RBI are doing their patriotic duty, unfortunately the alignment is off. We have an inflation fighting/NPA disciplining role in the RBI which prevents it from flooding the market with the liquidity that is needed to pull the country out of economic doldrums (into which it entered precisely because of consuming strong medicine). I am sure RBI has its concerns - money that is pumped in will probably be used for asset and housing speculation rather than machinery and equipment for small & medium enterprises. From GoI's point of view, the overall liquidity should be driven by the national needs rather than a strict formula (see Gurumurthy's interview if that is a proxy for GoI PoV) - there is some merit to it.

The US Fed pumped money into the system during 2008-09 to tide over the subprime crisis (which is basically an NPA crisis). So this kind of policy response isn't unprecedented. Institutionally what kind of policies and mechanisms do we have in place to ensure that money that is lent is used for the intended purpose? The same 1 crore can cause inflation if it is only used to bid up prices, or it could cause growth/disinflation if used to purchase a machine to make, for instance, sanitary pads.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Viv S » 11 Dec 2018 13:39

Uttam wrote:So before we answer who should be the next governor, we should reexamine RBI's role. As I argued before, Indian financial system is a lot more complex than it has never been, and this complexity is likely to go up by leaps and bounds. The govt should think about creating new agencies to take care of some of the roles played by RBI. Bank's supervision should be assigned to an independent agency whose role is to maintain healthy banking system. This agency can also serve as Deposit Insurer, who charges banks an insurance premium based on the risks they are taking. So the new governor should come with a vision of reducing RBI's influence. Any applicants???

The RBI's role is the regulation & supervision of the banking system. Monetary policy is now framed by the MPC rather than the governor. And we already have independent regulators for the insurance, securities & commodity markets.

The only role that the RBI could be divested off is the regulation of payment & settlement systems & currency management, which isn't very practical given the overlap with the banking system.

disha wrote:Given this, the RBI governor had to go. RBI was narrowly focused on inflation - rightly so. However it was also inflexible. At this point, either the RBI governor had to resign or the GOI had to resign. Since GOI cannot resign, RBI governor resigned.

Unlike the government, the RBI isn't supposed to be responsive to political considerations. It stops being an independent body when it does. Whether its policies are right or wrong depends on who you ask - but the call is ultimately meant to be the bank's.

World over the Bank governors (Federal Reserve Chairman in US/ RBI Governor in India) have started to appropriate roles for themselves which is not in their charter and they have been making decisions which impact wide swaths of economy without proper data and incorrect economic models. Sometimes it feels that the world over people are guinea pigs to their economic theories! And some of them do love the lime light (for eg. Ben Bernanke's 'breakfast' with Maria Bartiromo which caused a huge wild swing) to the detriment of the country's economy.

The alternative to an independent central bank, regardless of what data & economic models it employs, is a central bank beholden to the govt. If the country is in its collective wisdom decides that the bank's functions ought to directed by the govt, as the duly elected representatives of the people, so be it. But while it may seem like a good idea going into an election year, just keep in mind that govts come and go, but changes to institutions stay in place.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Arima » 11 Dec 2018 14:27

Urjit Patel stands tall among predecessors with his final act; but his silence on note ban triggered the unmaking of RBI

https://www.firstpost.com/business/urjit-patel-stands-tall-among-predecessors-with-his-final-act-but-his-silence-on-note-ban-triggered-the-unmaking-of-rbi-5708601.html

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Arima » 11 Dec 2018 14:31

Karthik S wrote:
Arima wrote:
how is he a best fit for the post head of monetary policy board??? :shock:


Looks like you are not awake of his background:

http://www.iimb.ac.in/node/4960


I know he is a prof at IIM B, but i have aversion to put people from academia into such post. just personal thought.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Dumal » 11 Dec 2018 15:19

Karthik S wrote:
Looks like you are not awake of his background:

http://www.iimb.ac.in/node/4960


Didn’t know much about Prof Vaidyanathan before reading this but still he seems to be on the Corporate Finance side. How is that going to measure up in a macroeconomics context?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 11 Dec 2018 16:11

yensoy wrote:
ArjunPandit wrote:Best would be not to bring in these US style loudmouth consultants into key positions. If we have to use them, use them as a consultant with well drafted contracts reigning their public speaking.


Dr Patel is the exact opposite of "loudmouth". He has been very quiet and maintained a very low profile - which I believe is best for the RBI Governor role. Today's Bloomberg in fact says that he has been so quiet that we don't know what is really the matter here.

Thanks for the correction sir. It was more for RR and Viral Acharya

yensoy wrote:The US Fed pumped money into the system during 2008-09 to tide over the subprime crisis (which is basically an NPA crisis). So this kind of policy response isn't unprecedented. Institutionally what kind of policies and mechanisms do we have in place to ensure that money that is lent is used for the intended purpose? The same 1 crore can cause inflation if it is only used to bid up prices, or it could cause growth/disinflation if used to purchase a machine to make, for instance, sanitary pads.

That's mainly because the printed dollahs could be purchased in the form of Tbills by Chinese without immediate fears of inflation or raising interest rates. India doesnt have that luxury. That said, i see your main point and tend to agree with it. That we have taken the hard pills, that has cleaned up the system a bit (more cleanup still required) but now tonic of liquidity needs to be given too. This needs to be done while controlling the money pilferage through banking system that is usually the case even for MSMEs.


Katare
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 12 Dec 2018 06:21

11 Banks that are put into PCA by RBI ....

The 11 banks already under PCA framework are IDBI Bank, UCO Bank, Bank of India (BoI), Central Bank of India, Indian Overseas Bank, Dena Bank, Oriental Bank of Commerce (OBC), Bank of Maharashtra (BoM), United Bank of India, Corporation Bank and Allahabad Bank.

- These are relatively small banks and net impact on loan activity can not be substantial.

- Top two PSBs- SBI and Punjab National Bank are not in the list
- None of the private sector banks failed the stress test.

Katare
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 12 Dec 2018 06:28

This speech has some very nice graphs showing current status of PCA banks-
Viral Acharya Speech on PCA

Some interesting facts-
Net NPA of banks -

PSB Banks in PCA - 11.53%
PSBs not in PCA - 6.6%
Private sector banks - 2.39%

Another interesting fact is that until 2014 these 11 Banks were reporting the same Net NPA as other PSBs. Once RBI launched asset quality review exercise (AQR) these banks were caught fudging the numbers by hiding NPAs. Once these cheating toxic banks were identified they were quarantined from rest of the healthy sector.

Govt (as promoter) and other investors were forced to bring in fresh capital, new loan growth was reduced to below zero by allowing lowest risk loans only, disallowing high cost deposits and renewable of risky assets. Simple act of balance sheet contraction coupled with asset quality improvement and new capital, these banks have turned the corner by almost catching up on providing coverage on all stressed assets. Once that is achieved the job is done, from thence forward they can only grow profitable unless they start cheating again.

Yagnasri
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Yagnasri » 12 Dec 2018 10:18

Katare wrote:
- These are relatively small banks and net impact on loan activity can not be substantial.


I do not agree with it. The so called small banks are are lending to MSME sector and stopping lending will hit MSME sector. In fact small banks generally tend to have small size loans, as they can not take risk with large loans and they are critical to economic activity and job creation.

In respect of private sector banks having less NPA % wise, there is lot of "creative accounting" and write offs which we are not seriously looking into. Let us say there are many ILFS type things going around. Further Private Banks can be more selective in lending whereas PSU Banks can not. This of course will not take away the bad practices of PSU Banks. There are horrible things done by them (and still being done by them) which are not being stepped effectively. RBI as a regulator knows this for years and kept quite.


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