dfa-8-sep

Daily Financial News Analysis – 8th Sep’20 – Free PDF Download

 

Kamath Panel

  • RBI tasked Kamath committee to prepare broad parameters for restructuring loans of Covid-hit companies.
  • KV Kamath committee has selected 26 sectors for such recast and recommended categorising accounts into mild, moderate and severe to ensure quick turnaround.
  • The 26 sectors include aviation, real estate, automobiles, consumer durables, construction, roads, wholesale trading, textiles and tourism.

  • The committee has also recommended that banks keep in mind five major ratios while doing the recast.
  • Sector-specific thresholds for such ratios have also been recommended.
  • The panel will also scrutinise restructuring of loans above ₹1,500 crore.

Compensation Cess

  • The Centre will seek to convince states they should borrow from the market.
  • Centre would like to keep its powder dry, to raise funds in the event of hostilities with China escalating.
  • States are well placed to raise funds from the market as their borrowings remain below the mandated level under the Fiscal Responsibility and Budget Management (FRBM) Act and have as much as ₹2 lakh crore parked in treasury bills.
  • The Centre will compensate states fully for revenue loss on account of GST transition and revenue loss incurred due to Covid-induced slump and honour these commitments in “letter and spirit”.
  • Even in the case of the first option, under which states will borrow ₹97,000 crore, they will not be denied the remaining amount.
  • The Centre has already raised its borrowing target for the fiscal year to ₹12 lakh crore from ₹7.8 lakh crore proposed in the budget.
  • More borrowing by the Centre will also push up benchmark yields, raising rates for states themselves and the corporate sector that needs cheaper credit to overcome the Covid challenge, the Union government feels.

Bad Loans

  • Foreign portfolio investors (FPIs) may soon be able to directly acquire bad loans being sold by banks and other lenders.
  • The move could be a shot in the arm for the stressed assets market in India as FPIs are known for their big-ticket purchases.
  • RBI allows a onetime restructuring of loans due to the Covid-19 crisis and the end of a six-month debt repayment moratorium.
  • The move on FPIs is part of the RBI’s efforts to enhance liquidity in India’s bad loan market, freeing up banks to lend afresh.
  • FPIs can currently invest in stressed assets indirectly.
  • Asset Restructuring Companies (ARCs) acquire them from lenders and in turn issue security receipts, which FPIs can buy.

August recorded 27% excess rainfall

  • The country is likely to see normal to above normal rainfall in September as per India Meteorological Department, which in turn will help Indian economy.
  • The good progress and spread of southwest monsoon this year has spurred sowing of kharif crops.
  • In the second week of September, monsoon rain is likely to be deficient in most parts of the country, including northwest and central India.
  • But it is likely to resume after September 17.
  • Though the South West monsoon will start withdrawing at the fag end of second week of September, the decrease in showers might not be swift in other parts of the country as new low pressure areas are developing over the Bay of Bengal.
  • These are likely to cause good rains over Maharashtra, Karnataka and Kerala in the next four weeks.
  • In other parts of the country, there could be a increase in rainfall from the third week of September.
  • Apart from a 10% deficiency in the North east, all other parts of the country received normal monsoon.
  • IMD said that there has been a significant improvement in forecast accuracy of severe weather events by 15% to 35% during the last 5 years.
  • According ministry of Earth science,10 new Doppler Weather Radars will come up in North west India by 2021.
  • Accurate rainfall and flood predictions over the last three years have aided timely relief measures.

 

 

 

Download Free PDF