Taking a tough stance against soaring bad loans, Reserve Bank of India (RBI) Deputy Governor KC Chakrabarty on Saturday asked lenders to move away from restructuring loans.
Speaking at the Bancon 2013 in Mumbai, Mr. Chakrabarty stressed that inadequate credit appraisals by banks was causing an exponential increase in bad loans (non-performing assets).
As per available figures, banks' total restructured accounts reached Rs 3.25 lakh crore by the end of June this year, of which nearly Rs 2.7 lakh crore was because of restructuring of corporate debt.
The Reserve Bank of India (RBI) recently proposed to give foreign banks certain incentives and treat them like "near national" banks if they convert into wholly owned subsidiaries (WOS), but foreign banks are in no hurry to adopt the WOS model.
Some consultants working closely with foreign banks like Citibank and HSBC said that the central bank's guidelines on the WOS model aren't very attractive for foreign lenders. They said foreign banks are still reluctant to abandon the branch model in favor of the WOS model.
The State Bank of India (SBI), the country's largest government-run lender,
On Tuesday announced its decision to hike its base rate (minimum lending rate) by 20 basis points to 10 per cent.
In addition to hiking base rate, the state-owned lender also hiked its benchmark prime lending rate by 20 basis points to 14.75 per cent.
It may be noted here that base rate is the minimum rate below which a bank can not lend money to customers. The hike in the base rate will push up the loan borrowers' EMIs (equated monthly installments), which will further squeeze their disposable income.
Co-operative bank is planning to announce more details relating to the rescue deal, which was reached during the previous weekend and some suspect that hundreds of jobs might be at risk as the bank looks to address its financial troubles.
It is believed that the under the terms of the deal, the bank's creditors including hedge fund, will take up about 70 per cent of the shares in the bank. Some say that the bank might cut around 1,000 jobs at its branches as some of the branches might be closed.
Indian economy is still in the grip of high inflationary pressures and the Reserve Bank of India (RBI) needed to bring it down through tough stance, the central bank's governor Raghuram Rajan said.
In an interview on Tuesday, Mr. Rajan said that RBI would take a tough stance to bring high inflationary expectation down. He added that the RBI aimed at bringing wholesale price index (WPI) down to 5 per cent, which is not dire for a poor economy like India.
The present economic scenario is unlikely to allow lending rates to come down, State Bank of India (SBI) Chairperson Arundhati Bhattacharya said on Tuesday.
Ms. Bhattacharya said when the lending rates were hiked by the reserve Bank of India (RBI); the bank had not hiked the rates and opted to absorb the cost.
Speaking on the topic, the newly-appointed chairperson said, "I don't see any way how interest rates will come down. When the rates were increased, we did not increase any lending rates and absorbed the cost. So, there is no question of reducing our lending rates."
Indian banking sector would offer a package of cheaper loans for retail investors during the imminent festive season, Reserve Bank of India (RBI) Governor Raghuram Rajan said.
Mr. Rajan said the government was pursuing talks with the central bank to decide the package for retail investors for the upcoming festive season. He added that the package would be announced soon.
Indian banks are expected to offer cheaper loans to customers to provide a much-needed boost to demand for consumer durables.
State Bank of India (SBI), the country's largest state-owned lender, on Monday suffered a decline in its senior unsecured debt & local currency deposit rating by global ratings agency Moody's.
Moody's slashed SBI's rating by a notch from 'Baa2' to 'Baa3', citing concerns over the lender's asset quality and recapitalization capability.
Announcing the move, Moody's said, "A combination of increasing pressure on credit fundamentals and ongoing reliance on fiscally constrained . argue for appropriateness of supported debt and deposit ratings at a level no higher than the sovereign."
India's headline inflation jumped to its six-month high of 6.1 per cent in the month of August, prompting experts to predict that new Reserve Bank of India (RBI) governor Raghuram Rajan would likely maintain status quo in the central bank's upcoming monetary policy review.
Analysts had pegged their average expectation for headline inflation or wholesale price index (WPI) for August at 5.8 per cent. In July, WPI was recorded at 5.79.
The government of India has approved a proposal to invest around 4.3 billion US dollar in the bonds of the World Bank Group.
The union cabinet approved the proposal to invest in the bonds during its meeting on 12 September 2013. The investment will ensure that the country receives additional cheaper funding from the multilateral agency for infrastructure related projects. The approval comes after the country nears its upper borrowing limit and more investment would allow the country to increase borrowing limits.