BQuick On August 2: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. Tighter Rules For PSU Bank Directors
The Reserve Bank of India tightened rules for elected directors on the boards of public sector banks, responding to criticism that boards of these lenders failed to prevent a build-up of bad loans in the previous lending cycle.
- In a set of master directions issued on Friday, the RBI laid down far tougher eligibility criteria and also put down a negative list of people who would not be eligible for appointment.
- The regulator also said that directors can be elected for a three-year period and cannot hold the post for more than six years in total.
- The new rules say that candidates to be considered for board should have experience relevant to banking companies in areas such as information technology, payments, human resources and other such fields.
- This provision is similar to what exists in private sector banks.
RBI also laid down rules for those who will be considered ineligible for appointment to avoid conflicts.
2. SBI Back In Black
State Bank of India reported a profit in the quarter ended June on lower provisions, but it missed analysts’ estimates.
- Net profit stood at Rs 2,312 crore in the June quarter compared with loss of Rs 4,785.8 crore a year ago.
- Net interest income rose 5 percent to Rs 22,939 crore.
- Gross NPA ratio remained unchanged at 7.53 percent.
- Net bad loan ratio stood at 3.07 percent against 3.01 percent.
- The core operating numbers were in line with the street’s expectations, said Ravikant Anand Bhat, research analyst (banking) at IndiaNivesh.
- “However, the biggest surprise is the gross slippages, which is almost two times of what we were estimating,” Bhat told BloombergQuint.
Find out what led to the higher slippages.
3. Profit Jumps For HDFC, ITC
Housing Development Finance Corporation Ltd.’s profit jumped meeting estimates in a quarter the mortgage lender sold stake in its subsidiary Gruh Finance Ltd.
- Net profit jumped 46.3 percent year-on-year to Rs 3,203 crore.
- HDFC booked Rs 1,894-crore profit from the sale of investment in the quarter.
- Net interest income increased 11 percent over a year earlier to Rs 3,042 crore.
The board approved a plan to raise Rs 45,000 crore.
ITC Ltd.’s profit in the first quarter met estimates after its operating margin rose.
- Net profit rose 12.6 percent year-on-year to Rs 3,174 crore.
- Revenue rose 5.8 percent over last year to Rs 11,503 crore.
- Operating profit rose 8.7 percent year-on-year to Rs 4,566 crore.
This comes at a time Indians are purchasing fewer biscuits to cars, indicating a slowdown.
4. Nifty Remains Flat Capping A Bad Week
Indian equity benchmarks registered their worst week since May 12.
- The S&P BSE Sensex declined around 2 percent this week to end at 37,118.22
- The NSE Nifty 50 ended at 10,997.35, down 2.5 percent.
- The broader market represented by the NSE Nifty 500 Index closed 2.7 percent lower.
- On Friday, the 31-share index closed 0.32 percent higher at 37,137.011 and the 50-stock index ended 0.16 percent.
- Seven out of 11 sectoral gauges compiled by NSE ended lower.
Follow the day’s trading action here.
U.S. stocks careened toward the worst week of 2019 as investors fretted over Donald Trump’s escalation of his trade war with China. Treasuries rose with the yen.
- The S&P 500 fell for a fifth straight day, putting the measure on track for its steepest weekly loss since December’s sell-off.
- The S&P 500 Index dipped 0.6 percent as of 9:53 a.m. New York time.
- The Stoxx Europe 600 Index sank 1.9 percent.
- The U.K.’s FTSE 100 Index sank 1.9 percent.
- West Texas Intermediate crude climbed 3.2 percent to $55.70 a barrel.
Get your fix of global markets update here.
5. Housing Financiers Get A Rs 10,000-Crore Window
The National Housing Bank will open a liquidity infusion facility of Rs 10,000 crore for housing finance companies to ease flow of funds to the stretched real estate sector.
- The liquidity will be available from today, helping lend money to individuals buying affordable houses, according to a statement from the Ministry of Finance.
- This would be over and two existing refinance schemes of the NHB, the release said.
- All mortgage lenders registered with the NHB and with a minimum internal rating of ‘B’ can avail funds under the scheme till June 30 next year.
- The purpose is to create individual housing loan portfolio of companies within the next three months, according to details by NHB.
- If the amount drawn under the scheme is not used for three months, it will have to be refunded.
The lenders can use the facility for financing individual housing loans which fall under priority sector.
6. A Case For Scrutiny Of ‘End Use’ Of Bank Funds
On July 23, the Supreme Court of India came down hard on lenders to the Amrapali Group. The real estate developer delayed projects and left homebuyers stranded despite borrowing large sums of money from the banking system. Some of these loans, the court found, had been diverted from projects they were intended for.
- The Amrapali case, while among the more extreme instances of misuse of bank funds, is certainly not an outlier.
- Another such instance emerged when the Central Bureau of Investigation filed a First Information Report in the Bhushan Power & Steel Ltd case.
- Instances such as Amrapali, Bhushan Power and many more have raised concerns about the extent of misuse of bank funds and pushed lenders into looking for ways to tighten scrutiny.
- The efforts are still work in progress.
But how common is misuse of bank funds? And why are bankers struggling to comply with regulations?
7. D Subbarao’s Harsh Words For The Government
Raiding the reserves of the central bank only illustrates the "desperation" of a government, and we should be very wary and careful while determining the value of the excess reserves, warned former governor D Subbarao on Friday.
- “A government trying to raid the balance sheet of a central bank anywhere in the world is not a good thing. It shows that the government is desperate,” he said, speaking at a CFA Society India event in Mumbai.
- In defence of his opposition to the desperate attempts to carve out the reserves, the former governor, who was at the helm during the 2008 global meltdown, said the risks undertaken by the RBI are different from other central banks and it will not be entirely beneficial to draw from international practices.
Here’s why the bureaucrat-turned-central banker thinks there’s little use of the transfers from a fund inflow perspective.
8. ‘Investment Isn’t Charity’
India’s minister for petroleum and natural gas said the nation’s undergoing a paradigm change in its energy strategy, based on the principle that investments are made for profit and not charity.
- Speaking on the sidelines of the Bloomberg New Energy Forum 2019, Dharmendra Pradhan said India needs to respect the energy investments it brings in by securing the interests of the companies.
- “Government of India’s approach towards energy was who can give us more revenue and profit,” he said.
- “But from the vision of PM Modi, we have shifted that strategy from more profit or revenue to more production,” Pradhan added.
Pradhan isn’t satisfied with the current level of energy investments and thinks India needs more.
9. Terror Alert In Kashmir
India said it has deployed additional troops in Kashmir following increased security tensions along the border it shares with Pakistan.
- Reinforcements were summoned after intelligence agencies received information about possible rise in militant violence in the state, Dilbag Singh, the state’s Director General of Police, told reporters on Friday without giving details of how many extra soldiers have been called up.
- An Indian home ministry official separately told reporters on Aug. 1 that about 10,000 troops have been moved.
- The deployment comes as thousands of devotees are on an annual pilgrimage to the Amarnath cave in the state that houses a shrine to the Hindu god Shiva.
The J&K Government has advised Amarnath pilgrims and tourists to curtail their stay and return as soon as possible due to terror threats.
10. Google Plans Auction To Skirt Antitrust Scrutiny
Alphabet Inc.’s Google will require rivals to bid in order to become listed as alternative search providers on Android smartphones, a move to try to keep additional antitrust scrutiny at bay.
- Starting next year, Google will prompt users to make a choice between Google and three other rival options as their default search provider.
- Google invited search providers to bid as part of an auction on the new choice screen, which will appear when a user sets up a new Android smartphone or tablet in Europe for the first time.
- The European Commission, the bloc’s antitrust body, last year fined Google 4.3 billion euros ($4.8 billion) for strong-arming device makers into pre-installing its Google search and Chrome browser, giving it a leg up because users are unlikely to look for alternatives if a default is already preloaded.
Rivals said they will be part of the auction, but still called it abuse of dominant position.