1. Gaining traction from the economic turnaround, the annual growth in bank credit has for the first time exceeded the Reserve Bank of India’s (RBI’s) estimate of 16 per cent for 2009-10, giving the regulator more room to raise policy rates to control inflation. According to latest data from RBI, loan disbursement by scheduled commercial banks, including regional rural banks, recorded 16.04 per cent growth at the end of March 12, 2010, on a year-on-year basis. This is above RBI’s projection of 16 per cent credit growth in this financial year. With loans worth Rs 35,527 crore disbursed in the fortnight ended March 12, banks are on track to meet the credit and deposit growth targets set by RBI.
2. The Reserve Bank of India (RBI) today said the banking sector was in a position to withstand asset quality stress even if loans under restructured accounts became non-performing. Following the global financial crisis, Indian banks were allowed, as a one-time measure, to restructure loans without classifying these accounts as sub-standard. The restructured accounts in the standard category constituted 3.1 per cent of the gross advances as on December 2009. “Stress tests indicate that the banking sector is comfortably resilient and, even if, in the worst-case scenario, it is assumed that all restructured standard advances become NPAs (non-performing assets), the stress will not be significant,” the central bank said in its Financial Stability report.
3. For the first time, the Reserve Bank of India (RBI) said it should be privy to information on activities of investment banks (i-banks) in the country to ensure they did not become a potential cause of financial vulnerability. At present, investment banks registered in India are solely regulated by capital markets regulator Securities and Exchange Board of India (Sebi).
4. Given that companies today operate in a climate of increased global economic volatility, it is critical they hedge their exposure to foreign exchange risk, the Reserve Bank of India has said. According to data from commercial banks compiled by RBI, the unhedged exposure of companies as a percentage of total exposure increased from 5.1 per cent as on December 2008 to 25.4 per cent as on March 2009. “As this was a period of heightened volatility, unhedged exposures can impact the health of the corporate sector and translate into increased credit risks for the banking sector,” the report said.
5. The rate of food inflation, as measured by the Wholesale Price Index (WPI), eased to a four-month low of 16.22 per cent for the week ended March 13, primarily due to fall in prices of cereals and onions. The rate of food inflation stood at 16.3 per cent for the previous week and at 7.46 per cent during the corresponding period in 2009. The inflation rate for fuel products rose to 12.68 per cent, compared to -6.06 per cent in the corresponding period last year. The prices of petrol and high-speed diesel oil rose at the rate of 16.82 per cent and 14.99 per cent, respectively, on an annual basis during the week.
6. The Reserve Bank of India (RBI) is likely to take tougher action than Friday’s revision in its key policy rates if headline inflation aggravates, says chief statistician Pronab Sen. “If non-agricultural inflation goes up, RBI is likely to take much stronger action (in its forthcoming annual monetary policy announcement next month),” Sen said. In a surprise move late Friday, RBI raised its short-term lending and borrowing rates — the repo rate (the rate at which it lends to banks) and the reverse repo rate (the rate at which banks park their surplus funds with it) — by 0.25 per cent each to 5 per cent and 3.75 per cent, respectively, to cool off runaway inflation, which has already crossed the central bank’s forecast for March at 8.5 per cent, signalling interest rake increase.
2. The Reserve Bank of India (RBI) today said the banking sector was in a position to withstand asset quality stress even if loans under restructured accounts became non-performing. Following the global financial crisis, Indian banks were allowed, as a one-time measure, to restructure loans without classifying these accounts as sub-standard. The restructured accounts in the standard category constituted 3.1 per cent of the gross advances as on December 2009. “Stress tests indicate that the banking sector is comfortably resilient and, even if, in the worst-case scenario, it is assumed that all restructured standard advances become NPAs (non-performing assets), the stress will not be significant,” the central bank said in its Financial Stability report.
3. For the first time, the Reserve Bank of India (RBI) said it should be privy to information on activities of investment banks (i-banks) in the country to ensure they did not become a potential cause of financial vulnerability. At present, investment banks registered in India are solely regulated by capital markets regulator Securities and Exchange Board of India (Sebi).
4. Given that companies today operate in a climate of increased global economic volatility, it is critical they hedge their exposure to foreign exchange risk, the Reserve Bank of India has said. According to data from commercial banks compiled by RBI, the unhedged exposure of companies as a percentage of total exposure increased from 5.1 per cent as on December 2008 to 25.4 per cent as on March 2009. “As this was a period of heightened volatility, unhedged exposures can impact the health of the corporate sector and translate into increased credit risks for the banking sector,” the report said.
5. The rate of food inflation, as measured by the Wholesale Price Index (WPI), eased to a four-month low of 16.22 per cent for the week ended March 13, primarily due to fall in prices of cereals and onions. The rate of food inflation stood at 16.3 per cent for the previous week and at 7.46 per cent during the corresponding period in 2009. The inflation rate for fuel products rose to 12.68 per cent, compared to -6.06 per cent in the corresponding period last year. The prices of petrol and high-speed diesel oil rose at the rate of 16.82 per cent and 14.99 per cent, respectively, on an annual basis during the week.
6. The Reserve Bank of India (RBI) is likely to take tougher action than Friday’s revision in its key policy rates if headline inflation aggravates, says chief statistician Pronab Sen. “If non-agricultural inflation goes up, RBI is likely to take much stronger action (in its forthcoming annual monetary policy announcement next month),” Sen said. In a surprise move late Friday, RBI raised its short-term lending and borrowing rates — the repo rate (the rate at which it lends to banks) and the reverse repo rate (the rate at which banks park their surplus funds with it) — by 0.25 per cent each to 5 per cent and 3.75 per cent, respectively, to cool off runaway inflation, which has already crossed the central bank’s forecast for March at 8.5 per cent, signalling interest rake increase.
