VisVoice

Have PSBs become resilient to absorb stress shocks? Recently, my friend  working in a Public Sector Bank (PSB), sent a performance comparison  among PSBs based on their financials as on 30th September 2023. Out of 26 parameters compared, 12 relate to business levels, 13 are in respect of operating results and one is in respect of capital adequacy ratio (CAR). He is fond of Bank of Maharashtra (BoM), which is the third smallest PSB in terms of total business. (Uco Bank and P & S Bank are behind BoM). The comparison sheet showed that BoM occupied the first position in 21 out of 26 ratios compared. Since I have detailed my views on BoM in another of my blog recently, I used the information to study the performance of PSBs in general. My impressions are as under: 1. The total business of all PSBs are on an upward path. The pace of growth in gross advances is much more than the pace of growth in total deposits, resulting in an increase of CD ratio among all PSBs. 2. The growth ...

   Risk Weights on loans to Corporates and NBFCs:  External ratings based concept deserve a relook Recovery in Corporate Loans: Mr. Bhagwad Karad, Minister of Finance informed Parliament last week, that while Rs.10.42 lac cr. loans were written off during the period 2014-15  to 2022-23, the recovery from the written off accounts was Rs.1.61 lac cr. in the same period. The following is the gist of information provided: 50% of the Rs.10.42 lac cr. written off in the above period relate to large corporate houses Wilful defaulters, having loans of Rs.5 cr. and above, defaulted around Rs.2 lac cr. The recovery from written off accounts in aggregate is less than 20% of the outstanding History: In this regard, it is worthwhile to recall that in respect of the  insolvency proceedings initiated against 40 companies under the RBI’s 1st and 2nd List, barring few exceptions like Bhushan Steel and Essar Steel, the amount realised by the banking system was not in exces...

  Monetary Policy Stance: A layman's understanding Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) has set inflation control as their target (currently 4% with a tolerance level of +/-2%) and  meets every two months  to review and decide on (i) policy rate (repo rate) and (ii) monetary policy stance (stance) (parameters set for inflation control through monetary policy). Since Feb 2023, the repo rate is kept unchanged at 6.5% and the stance is  "r emaining focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth ".  While the right to set the repo rate and stance lies with MPC, implementation of the stance, however, rests with RBI. As a layman, I attempted to capture the few steps taken by RBI in achieving the stance since May 2022, (when they started raising the repo rate). I. Withdrawing/tightening the accommodation measures, implemented as part of keeping the economy in float ...

  Why Repo Rate may be left unchanged? The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) will be meeting in Mumbai from 6th to 8th  December 2023  to review the policy (Repo) rate and its monetary stance.  In the present circumstances, the MPC is likely to keep the repo rate unchanged for the fifth consecutive time, after raising it by 25 bps in February 2023.  1. Positive factors ruling out any increase in the repo rate (i) Federal,Reserve has left its fund rate unchanged (range of 5.25% to 5.5%), for the second consecutive time, in its meeting on 2nd November 2023.  (ii)  Average Crude oil price for the eight months ended November 2023 and for the month of November 2023 remained below USD 85 levels, the price assumed by RBI in its inflation projections. (iii) Retail inflation, which dropped to 5.02% in September 2023, came down further to 4.87% in October 2023.  (iv) Forex Reserves at USD 598 bn. (an increase of USD 19 bn. over ...