As part of the policy announcement, the RBI announced a task force to create a secondary market for corporate loans. PSU banks will benefit from the task force. The monetary policy document announced the intent to set up a task force to develop a secondary market for corporate loans, giving fine pricing and also a ready secondary market for banks to exit such loans. The Task Force is expected to submit the report by August 2019. The big challenge for the task force is loan pricing formulae and the standardization of such loan assets, especially considering that most of them are illiquid in nature.
A day after talks of 54,000 people being laid off by BSNL were doing the rounds, the PMO has intervened to ensure that there are no large scale job losses in an election year. In fact, DOT has been instructed by the PMO to expedite the revival proposals for both companies. Both have been consistently losing market share on the back of strong competition from private telecom majors. Other than Air India, these two telecom companies have been bleeding the government with losses. With Air India sale still in limbo, the revival of these two telecom companies is going to be far from simple.
With time running out fast, Britain may be truly caught between a rock and a hard place. UK may opt to request EU for a further delay in the BEXIT deadline till the time there is a consensus on the deal in UK. Conservative and Labour representatives will make an attempt to break the stalemate this week before making the request next week. As of now it is not clear as to how, when and whether Britain will leave the EU. The sudden exit of UK from the EU will create large scale disruption in the global financial markets; something neither UK, nor EU, nor the rest of the world is prepared for.
The sage of NPAs may be just about getting increasingly murkier. After IL&FS Financial, Videocon may throw an NPA surprise at lenders. Days after lenders were reconciling to taking a 90% hit on IL&FS Financial Ltd. a similar surprise awaited them in the Videocon case. Between Videocon Industries and Videocon Telecom, they owe banks close to Rs.90,000 crore, with little chance of recovering anything out of these loans. SBI is the lead syndicator for these loans and Videocon is already involved in conflict of interest investigations with ICICI Bank former CEO as one of the parties to the investigation.
The Sensex and Nifty reacted negatively to RBI Policy rate cut. The RBI cut repo rates by 25 basis points to 6% but kept the stance of the policy as “Neutral”. Markets were hoping either for a shift to an accommodative stance or a trajectory of lower rates. The A/D ratio was marginally unfavourable at 23:27. Apart from the market pressure, the rupee weakness also spooked the Indian equity markets. The rupee weakened to 69.17/$ by more than 100 basis points on Thursday. The dollar swap auctions had already put a lid on rupee appreciation. On top of that, the combination of FPI selling in recent days, rate cuts and political uncertainty took their toll on the rupee. The recent Reuters poll also hinted at a weaker rupee in the current quarter and FPI flows have also turned negative in last few days.
In the midst of US-China trade talks, Trump refuses to announce Summit date. Negotiations are currently on to arrive at a mutually acceptable solution to the trade war problem. The US has not extended the tariffs and China has agreed to commit purchases from the US. However, China has not been too willing to commit on structural and intellectual property related issues. The US runs a $600 billion trade deficit with China. Trump will meet the trade delegation. The prolonged trade war is hitting the exports of the US and China and IMF has already downgraded global growth by 20 bps.
