BQuick On Dec. 10: Top 10 Stories In Under 10 Minutes

This is a roundup of the day’s top stories in brief.

1. SBI Reports Bad Loan Divergence

India’s largest lender State Bank of India has disclosed that the Reserve Bank of India detected a divergence of Rs 11,932 crore in the amount of bad loans reported by the bank and those assessed by the regulator.

• The bank had disclosed gross non-performing assets at Rs 1.72 lakh crore, while the regulator estimated it at Rs 1.84 lakh crore, the bank said in an exchange notification.
• The divergence works out to about 7 percent of the disclosed gross NPAs. According to existing norms of the RBI, a bank is required to disclose a gross NPA divergence of over 15 percent.
• However, guidelines issued by the SEBI in November state that banks will have to make disclosures if the divergence amount is more than 10 percent of its profit before provisions and contingencies.
• The net NPAs disclosed by the bank for FY19 stood at Rs 65,895 crore, while the regulator’s assessment of net NPAs was higher at Rs 77,827 crore.

Apart from SBI, nine other banks have disclosed divergence for the year ended March 2019.

In a sign of stability, SBI said that it is seeing a rise in retail loans and an increase in inquiries for corporate loans.

• “Initial viewpoint was that it’s because of the festival season, maybe some of the offers have been given by different corporates," Prashant Kumar, deputy managing director and chief financial officer told BloombergQuint in an interview.
• "But now we are seeing, when we talk to customers and large corporates, the feedback is that things have stabilised and are now moving in an upward direction,” he added.

There is an “actual pickup” in retail loans, Kumar said.

2. Yes Bank Leans Towards $500 Million Funding From Citax

Yes Bank Ltd.’s board today said that it’s willing to favourably consider the $500 million offer from Citax Holdings and Citax Investment Group. The board will decide on the final allocation of equity stake at its next meeting.

• A $1.2-billion binding offer from Canada’s Erwin Singh Braich and SPGP Holdings is still under discussion, the board said, without clarifying whether it will approve the offer.
• The lender’s board, Bloomberg reported yesterday, is poised to reject the offer from the Canadian billionaire.
• Braich and SPGP Holdings’ investment proposals had been questioned as there is very little public information available on Braich’s financial holdings.
• Moreover, SPGP Holdings has previously been unable to provide earnest money when it was bidding for Reid & Taylor Ltd. under the insolvency process.

It is unclear how the bank’s board is going to treat the investment proposals worth $300 million, other than these two investors.

3. Sensex Slips, U.S. Stocks Mixed

Indian equity benchmarks resumed fall after a one-day breather, led by the declines in ITC Ltd. and Tata Consultancy Services Ltd.

• The S&P BSE Sensex fell 0.61 percent or 248 points to end at 40,239.88.
• The NSE Nifty 50 fell 0.68 percent to close at 11,856.80.
• The broader markets represented by the NSE Nifty 500 Index fell 0.79 percent.
• The market breadth was tilted in favour of sellers.
• All the 11 sectoral gauges compiled by NSE ended lower.

Follow the day’s trading action here.

U.S. stocks fell as investors debated whether China and the Trump administration will reach a meaningful trade deal ahead of a looming tariff deadline.

• The S&P 500 Index dropped as investors digested dueling signals on the likelihood of fresh tariffs on Dec. 15. Multiple reports indicated a delay was likely, before administration officials said the outcome depends on how talks progress.
• The 10-year Treasury yield turned flat, while gold pared gains.
• West Texas Intermediate crude slipped 0.3 percent to $58.84 a barrel.

Get your daily fix of global markets here.

5. Car Sales Start Falling Again

Sales of passenger vehicles resumed their declining trend in November after a blip in the preceding month, indicating automakers are yet to recover from the worst auto slowdown in India in more than a decade.

• Domestic passenger vehicle sales fell 0.84 percent year-on-year to 2.64 lakh units in November, according to data released by industry body Society of Indian Automobile Manufacturers.
• While car sales were down 11 percent over last year to 1.60 lakh units, utility vehicle sales rose 32.7 percent to 92,739 units.
• “The way industry responded showed there is some recovery but it is too early to say if the worst is behind us,” Rajesh Menon, director general of SIAM, said.

Here is a segment-wise look at auto sales in November.

6. Karvy Crisis: Should Lenders Have Known Better?

In the latest Karvy Stock Broking Ltd. crisis, the Securities Appellate Tribunal has told four lenders to make their case before the market regulator in order to retrieve their funds.

As lenders make their case for relief before the market regulator, there are three questions that this case raises:

• Do brokers need client consent for every transaction under the power of attorney?
• Do lenders do any due diligence to ensure that the shares being pledged belong to the brokerage?
• And, finally what relief can lenders now hope for?

Find out the answers here.

7. Is There Hope For Troubled FMCG Distributors?

Distributors keep shampoos to staples flowing in India’s $67-billion consumer goods market. But this artery is in distress.

• Companies are directly supplying to supermarket chains that are setting up stores across big and small cities.
• Mom-and-pop stores in bigger cities are buying from cash-and-carry companies that offer more discounts.
• Lured by discounts, consumers in the metros are increasingly buying everything online. And Indians are spending less in a slowing economy.
• All that has culminated into a crisis for more than four lakh distributors that are the conduit between millions of local stores and manufacturers.

The disruption set in by changing buying preferences and technology is expected to alter how the channel evolves.

8. ‘India Is Just Another Vanilla Emerging Market Economy’

The “game” of basing growth story on globalisation is over for emerging market economies, including India, according to JPMorgan’s Jahangir Aziz, who said that with limited global headwinds, the Indian economy is struggling to find a new driver of growth.

• “We refuse to accept the fact that we (India) are just another vanilla emerging market economy that grew on the back of globalisation,” Aziz, who is the head of emerging markets economic research at the investment bank, told BloombergQuint in an interview.
• He said the “game is over” for emerging market economies that were “addicted to globalisation”—a model that served them well for the past 15 years.
• India, like other emerging market economies, is now struggling to change its growth driver, he said. A pushback against trade is the key driver of global distress and India is also facing it, he said.

Read more on what Aziz thinks is a myth that India has not stopped believing in.

9. The First Monetary Rock Star

Paul Volcker's leadership of the U.S. Federal Reserve was enormously consequential. The former chairman — who died Sunday in New York at the age of 92 — bequeathed to his heirs and the global economy two major legacies: one from which subsequent Fed chiefs benefit and another that central bankers have sought to dismantle, writes Daniel Moss.

• The benefit is an economic system from which inflation has been wrung. In the months after Volcker was appointed Fed chairman in 1979, consumer prices were increasing at about 15 percent.
• Volcker pushed interest rates to 20 percent to wrest control of inflation. A deep recession followed, as did an economic spurt in the 1980s when the medicine worked and borrowing costs came down.
• Now, to the legacy that more recent Fed leaders have tried to pull apart. The scale of Volcker's assault on inflation and his towering physical presence contributed significantly to the cult of the central banker, the primacy of an all-knowing, all-seeing chairman.

Volcker would approve of a bit of central bank de-canonization at this moment.

10. Protests Erupt As Lok Sabha Passes Citizenship Amendment Bill

Large parts of the northeast on Tuesday simmered with protests by students' unions and Left-democratic organisations against the contentious Citizenship (Amendment) Bill, passed by the Lok Sabha.

• A day before the divisive legislation is tabled in the Rajya Sabha, normal life was paralysed in Assam's Brahmaputra Valley, Arunachal Pradesh and Tripura during the shutdown.
• The strike coincided with the bandh called by Left-leaning organisations. Huge processions were taken out in different areas, with protesters raising slogans against the emotive legislation.
• Examinations were rescheduled by universities because of the bandh.
• In Tripura, agitators participating in a bandh set a market on fire, where shops were owned mostly by non-tribals.
• More than 1,000 scientists and scholars too signed a petition demanding withdrawal of the controversial bill.
• Internationally too, there was a reaction.

A federal U.S. commission has sought sanctions against Home Minister Amit Shah if the bill is passed.