1. WEEKLY FINANCIAL SNIPPETS—08/10/2016
1. RBI LOWERS BENCHMARK REPO RATE BY 25 BPS TO 6.25%: Reserve Bank of India
has cut the interest rates by quarter points and now the new repo rate would be
6.25%, which is the lowest in 6 years. With this, Mr Urjit Patel the new RBI Governor,
by dropping the interest rate to a near six year low, appears to be making way for a
different way of doing things despite the inflation forecast for financial year 2016
nudging over the target.
2. NEW GUIDELINES ON STRESSED ASSETS : Indian Banks which are burdened by bad
loans are likely to get a breather in the way they classify restructured stressed loans,
opening up the possibility of more bailouts for the ailing companies. RBI has said that
banks need not classify the sustainable part of restructured loans as bad. The
relaxation in the said guidelines will help most banks and will be a relief for the
banking system.
3. FINETECH STARTUPS TO GRAB BUSINESS FROM FINANCIAL INSTITUTIONS AND
BANKS: Finetech startup companies are rolling up their sleeves to get share in the
financial market. As consumption is picking up, the banks are struggling to keep up
with the growing market and then NBFCs are still slow to learn the ways of online
business, these Finetech startups are grooming up day by day. A few companies are
plugging the e-commerce sites directly to provide consumers with easy EMI options,
others are trying the personal loan segment by filling their wallets before they go out
for shopping.
4. DELINQUENCIES IN LAP (LOANS AGAINST PROPERTY) MAY RISE, NBFCs MAY HAVE
MORE STRESS: Delinquencies in LAP portfolio of financial institutions is likely to rise
to over 5% over the next four quarters. This is due to stagnant property prices and
risk aversion. More than the banks, NBFCs will have more stress as out of the total
LAP portfolio of Rs 2.5 lakh crores for the entire financial sector, about 1.2 lakh
crores is estimated to be on the books of NBFCs.
5. BANKS MAY DELAY IFRS IMPLEMENTATION ON ACCOUNT OF CAPITAL WORRIES:
Reporting agency Fitch has said that migrating to the International Financial
Reporting Standards (IFRS) format is likely to be delayed in the domestic banking
sector as banks are finding it difficult to meet Basel III requirement. Basel III capital
requirements are to be met by Indian banks by end of March 2019.