Midnight News Update – Jul 07th 2017
The minutes of the Federal Reserve showed clear signs of tightness as Fed members were getting increasingly worried about the slow pace of rate hikes. On Thursday there was a virtual bond price rout in most markets including the US, Germany and Australia as bond yields hardened on expectations that the Fed may be inclined to move up rates faster. A lot will now hinge on the jobs report that will be out Friday, which is once again expected to be strong. Another bout of strong jobs data will be an impetus for the US Fed to move faster than the 4 rate hikes proposed till the end of calendar year 2018.
After banks like ICICI Bank and Axis Bank had reported serious divergences between their reported NPAs and RBI approved NPAs, it is not the turn of RBL Bank to report a divergence of Rs.339 crore in its NPAs for the fiscal year 2015-16. For the fiscal year ended March 2016, RBL Bank had reported Gross NPAs of Rs.208 crore versus the RBI assessed sum of Rs.547 crore. This would have resulted in additional provisioning of Rs.137 crore in the books of RBL Bank. The RBI has recently called upon all banks to explicitly disclose any divergence between the reported NPAs and the NPAs assessed by the RBI.
Net direct tax collections for the first quarter ended June 2017 were up by nearly 15% at Rs.1.42 trillion. This represents nearly 14.5% of the full year tax collections estimates and in terms of time flow it seems to be on track. India has a direct tax target of nearly Rs.10 trillion for the full year. While corporate tax collections grew by 4.8% for the quarter, personal income tax and STT collections were up by nearly 12.9% for the quarter. The tax authorities have reported that there has been a sharp surge in the collections of advance tax on the personal income tax front as well as on the corporate tax front.
In what was long overdue, the RBI has finally revised the guidelines for dealing with digital fraud. RBI has clarified that where customers face losses due to the negligence of banks the customer will face zero liability. Additionally, customers will have zero liability if the losses happen due to leaks in third party networks provided the banks is informed within 3 days. In case of basic savings bank accounts, the liability of the customer will be limited to Rs.5000 or the size of the transaction whichever is lower. Banks will have a liability to ensure that all such cases are resolved within a period of 90 days.
Even as Essar Steel is dragging the liquidators to court, it has openly blamed the RBI and the government for its debt problems. Essar Steel is one of the 12 companies identified by the RBI for speedy resolution of bank NPAs through the Insolvency and Bankruptcy Code (IBC). Essar has blamed the failure of the revival package initiated by banks for its current woes. Both SBI and Standard Chartered Bank had initiated insolvency proceedings against the Essar group company. According to Hazira, the losses happened due to the government’s decision to halt supply of gas to its Hazira facility, which resulted I losses to the tune of Rs.26,000 crore. Essar has also highlighted that all major capital expenditure decisions were undertaken with the full knowledge and approval of the bank lending to the project.
The street is rife with the possibility of a mega merger between IDFC Bank with either Shriram City Union Finance or Shriram Transport Finance. Of late many private banks have been looking to expand their rural footprint through the acquisition of last mile NBFCs and MFI, who bring with them reach and expertise. For the finance companies, this merger gives them access to a much bigger and healthier balance sheet. IDFC Bank has a board meet scheduled on Saturday, where this is likely to be discussed and an announcement made. Both IDFC and IDFC Bank have rallied sharply this week.
