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FS Daily Bytes: 16th June

India

  1.  A report by India Ratings, has warned of significant impact on micro lenders & small finance banks if the impact of demonetization stretches for long. This may raise the credit cost and erode capital as collections efficiency is only 75-80% in May 2017 on portfolio outstanding as of Dec-16
  2. PMO to review NPA progress on June 19th
  3. In a new rule, CVC in consultation with RBI has now mandated public sector banks to report frauds to police only if the amount involved is greater than 1 lakh (earlier it was 10,000 INR) with the exception that if staff is involved then it still need to be reported. This will reduce the banks inconvenience in reporting all such incidents to polices
  4. Aadhar made mandatory for opening bank a/cs and transactions with value > 50,000 INR. For existing account holders, they must register their Aadhar with the bank before 31st Dec 2017, failing which the account will be made inoperative
  5. RBI clarified that there is no immediate plan to release the next set of loan defaulters as follow up to its earlier list of 12
  6. RBI DG S.S Mundra mentioned that the total capital infusion required for public sector banks far exceeds the 70,000 crores INR budgeted till March-2019.

International

  1. Lufax, one of the largest peer to peer lender & online wealth managers in China, has now postponed its hugely awaited IPO. The primary reason seems to be the lack of clarity on upcoming regulation in this sector. The sector has seen multiple incidents involving billions of dollars with impact on retail customers. These platforms which connects borrowers & lenders outside the system are expected to be on the wrong side of the rules, once it is released
  2. The probable detainment of one of the biggest name in Chinese financial system, Wu Xiaohui (Chairman of Chinese insurance & financial giant Anbang) has created ripples in the market. While questions have been raised earlier on the phenomenal growth of the small-time car insurance player to such a huge financial behemoth in a short time, but no one saw this coming. This may be ripple effect on the overall economy of the country and in more particular, retail customers owning Anbang’s products)
  3. US economist Larry Summers believe that Federal Bank’s policy of inflation targeting is not right and has outlined 5 reasons for the same in his blog. Interesting for Indian banking system as well, where RBI also targets inflation in its monetary policies.

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