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Centre to pump Rs. 70,000 cr. into PSU

banks

The Modi government has announced a big-bucks

boost to investments in the economy. Union Fi-

nance Minister Arun Jaitley told Parliament that the Centre will over the next four years infuse

Rs.70,000 crore out of budgetary allocations into

state-owned banks.

Later, Minister of State for Finance Jayant Sinha told reporters that the proposed National Invest-

ment and Infrastructure Fund (NIIF) will make

equity investments of Rs. 20,000 crore every year

in commercially viable long gestation projects which will help to kick-start the economy.

FLIP’s View: Definitely a short term relief for

PSBs. The structural problem of NPAs still re-

mains. Till that is addressed, no amount of capital

will be sufficient.

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RBI holds rate but says open to cuts

In line with market expectations, the RBI has

kept the key interest rate unchanged at 7.25% at

its third bi-monthly review of monetary policy.

The central bank cited uncertainties related to the

monsoon and a spike in core inflation. It, howev-

er, added it would monitor developments pertain-

ing to room for more rate cuts.

FLIP’s View: I think RBI is just being a little

more cautious. If Fed hikes rates in September or

in December (more likely), I think RBI will make

its move in September with a 25 bps cut.

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Banks may face RBI action if they mis-report

NPA numbers

The RBI has said it will now begin to take action

against banks that misreport the non-performing

assets on their books. It had been observed that

in certain cases, loans that had already become

NPAs were still treated as standard assets.

Apart from ensuring that the numbers put out by

the banks are correct, the regulator is also going

to closely monitor the cases being refinanced un-

der the 5/25 scheme by banks are using for the right purpose.

The week that was….

Under the 5/25 scheme, banks can extend loan

repayments for a period up to 25 years, with an

option of refinancing the loan every five years.

FLIP’s View: There is still some grey area espe-

cially among PSBs, on the amount of NPAs. The

amount of loans that have been restructured, may

also be NPAs for example. That remains the worry.

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Centre liberalizes single-brand retail norms

India might see a flurry of single-brand retailers entering , with the government allowing them to

operate across multiple platforms.

Several investment proposals by Tommy Hilfiger,

H&M, Swarovski, Sketchers, Nike and Adidas were stuck in the pipeline as they wanted to run compa-

ny-owned direct retail outlets as well as franchise

outlets. Some of them like Tommy Hilfiger wanted

to have a wholesale presence as well.

In an important clarification, the government

tweaked the foreign direct investment (FDI) policy

on single-brand retail last month stating that non-

resident entity/entities will now be allowed to un-

dertake single-brand retail trading business through "one or more wholly owned subsidiaries or

joint ventures (JVs)."

According to an official, proceeds from franchise

business will come into the current account, while those through the FDI route will be accounted in

the capital account.

Presently, 100% FDI is allowed in single-brand re-

tail trading, out of which proposals beyond 49% require prior approval from the government.

Shriram City Union Finance Ltd. is a part of Shriram

Group (financial conglomerate engaged in providing

various services like insurance, chit fund, stock bro-

king etc.)

Shriram City Union Finance Ltd.

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Understanding Money!

HDFC Bank has launched ‘Dhanchayat’, an edu-

cational film to raise awareness on the dan-

gers of borrowing money from unorganized

sources. The film has been launched under the

aegis of Swachh Banking, the bank’s corporate

social responsibility (CSR) initiative.

As a part of the initiative, HDFC Bank-

branded Dhanchayat video vans will travel

across India, covering thousands of villages.

Through the film, the bank will showcase to

the rural population, the importance of trans-

parency in dealings, as also the dignity of the

individual in the borrowing process.

The bank will cover 5000 villages in phase 1

and encourage the local populace to join the

organized banking sector in line with the

National Investment and Infrastructure Fund (NIIF)

Cabinet approves creation of National Infrastructure and Investment Fund

Recently, the Union Cabinet cleared the proposal for creation of National Infrastructure and Invest-

ment Fund. The fund will have a corpus of INR 20,000 crore.

The NIIF is being created with an objective to maximize the economic impact mainly through infra-

structure development, for commercially viable projects. The fund was proposed by Finance Minister

Arun Jaitley in his Budget for 2015-16.NIIF would raise debt, to invest in the equity of infrastructure

finance companies such as Indian Rail Finance Corporation (IRFC) and National Housing Bank (NHB).

These infrastructure finance companies can then leverage this extra equity, manifold.

In that sense, NIIF is a banker of the banker of the banker (For example -It will finance NHB, which

finances Housing finance companies). It will be run on a commercial basis by managers, who will be

paid globally competitive salaries. The Centre will own 49% of this Mumbai-based fund, which won’t

be answerable to Parliament nor audited by the CAG. The Fund will be regulated by market regulator

SEBI.

To be operational by the year end, NIIF will primarily focus on fund infusion in infrastructure projects

-greenfield, brownfield and the stalled ones. Smart cities would be an important area of investment

for NIIF.

government's vision for financial inclusion. The vans will also

have micro-ATMs with biometric facility fitted in them to

enable instant e-KYC using Aadhar.

Besides a low presence of banking channels, lack of aware-

ness has also contributed to the financial exclusion of rural

communities. Low or non-availability of cheap credit is one of

the major causes of socio-economic inequity in rural areas.

Let’s hope public and private sector initiatives in this direc-

tion make a difference in the current scenario!

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FLIP’s View: This might ease business on the Retail side, and India can become a global Retail

destination, given the huge purchasing power in India today.