RESERVE BANK OF INDIA TO GET MORE CONTROL OVER CO-OPERATIVE BANKS

The Reserve Bank of India will soon take full control of the co-operative banks due to the current fraud cases that have been making headlines in the banking sectors. It will soon be developing strict rules and regulations to prevent any of these cases from happening in the future. The banking sectors have been experiencing several backlashes as depositors are losing trust irrespective of the safety of their hard-earned money in the protection of banks. The fraud cases that have been occurring within the banking sectors date back to 2014, which have been left neither investigated. There has been no one rendered accountable for the fraud cases and depositors are now demanding that the RBI take full power over the functionality of the banks in India.

The Reserve Bank of India owning full power over the co-operative banks has been demanded to do so to put an end to these severe cases of fraud. According to sources, the urban co-operative banks have announced over 1000 cases of fraud which were worth over Rs. 220 crores. One of the recent cases that caused a big storm is the Punjab and Maharashtra Co-operative bank fraud that led to several Indian families and households unable to redraw money and as the case still continues, many depositors await a remedial measure and resolution towards the inconvenience caused by the fraud.

There have been changes approved by the Banking Regulation Act (BAC) to grant the Reserve Bank of India authority to make changes in the cooperative lender’s regulations and prevent such frauds as the one observed in the Punjab and Maharashtra co-operative bank. These cases affect the functions of families who trust banks to safeguard their savings, many of whom haven’t received their refund yet. This is a big dent in the banking system regulatory system. The Reserve Bank of India is expected to carry out critical supervisions and also restart new investigations to see the holes in the banking sectors.

The amendment would be cleared by the Parliament and furthermore, the cooperative banks would be audited adequately according to norms of the Reserve Bank of India and the central bank as well. This would be carried out in consultation with the state government and if any cooperative bank is found to be under stress, the RBI would be responding with relief measures. The Reserve Bank of India would also be responsible for appointing the chief executives of every co-operative bank and commercial banks as well.

However, the Cooperative banks in India are now under the authority of the Registrar of Cooperative Societies (RCS) and the Reserve Bank of India. The role of the registrar of cooperative societies includes supervising the incorporation, registration, management, auditing of the board and liquidation process. The Reserve Bank of India is also responsible for regulatory functions such as maintaining capital adequacy and also the cash reserves. The banks are going to be audited according to the Reserve Bank of India guidelines and recruitment of employees for the management of the banks will be based on the qualifications approved by the RBI as well. The RBI is implementing these guidelines in a phased manner to protect the interest of the banking sector and the depositors as well.

Mohit Kamboj is the author of this article. Find more information about Mohit Kamboj.

PUBLIC SECTOR BANKS TO BE MERGED TO FURTHER THE NEW INDIA PLAN

The open region bank’s financial crisis has influenced the consolidating strategy where the organization of India is genuinely finishing. In the prior year, the organization had revealed the mix often open fragment banks into four and would continue merging in order to make six overall evaluated banks. The longing to make changes that would provoke another India with more prominent headway progress and improvement. As far as possible 2020–21 has been the backbone of a key course of action figured by the organization to build up the falling portions, for instance, land, vehicles, etc. As the open portion banks (PSB) crisis and commitment accumulated as a result of the nonattendance of enthusiasm for a couple of parts have provoked the new association plan by the organization. The action is to decrease the number of open zone banks in India.

Beginning at now, the organization has chopped down a couple of open section banks from 27 to 12 would, regardless, continue with this breakdown this year. As showed by reports, the council has successfully mixed and recapitalized these banks. Furthermore, Insolvency and Bankruptcy Code (IBC) has increased more than ₹4 lakh crore to the banks. Further association or merger is communicated to depend upon the need to ascertain incorporated the new India arrange a plan. The course of action for an overall evaluated bank plan would be practiced through the mix of the open part banks which would help support the authoritative objectives to make India a 5 trillion economy by 2024 to 2025.

The combination would help give more prominent banks an increasingly broad go to, the ability to credit more, give better things and the best possible development to serve customers of New India. In the year 2019, the organization revealed plans to mix the United Bank of India and Oriental Bank of Commerce with Punjab National Bank which has made the suggestion the second greatest open section bank in India (PSB). There have in like manner been decisions made to unite Syndicate Bank with Canara Bank, while Allahabad Bank will be combined with Indian Bank. In like manner, Andhra Bank and Corporation Bank are to be gotten together with Union Bank of India.

As demonstrated by the reports, the State Bank of India (SBI) mixed five of its accomplice banks, for instance, the State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Hyderabad and moreover Bharatiya Mahila Bank. Bank of Baroda made its underlying three-way merger which incorporated the amalgamation of Vijaya Bank and Dena Bank.

The governing body of India is similarly advancing toward improving the agricultural parts. It has given Rs. 2. 83 lakh crore to help farmer welfare, common improvement, and cultivating purposes in India. In like manner, the inspiration is to improve farmer’s compensation in the accompanying two years. Likewise, the governing body has extended the credit centers in cultivating to ₹15 lakh crore for the accompanying money related year. There will progress new organizations and improving the establishment in preparing and besides reinforce young business visionaries in the new India.

Mohit Kamboj is the author of this article. Find more information about Mohit Kamboj.

INDIA’S ECONOMY SLOWDOWN IN 2019

The Indian economy in 2019 had experienced a slowdown in some of its sectors. For example, the real estate sector struggled with growth and investors moved away from housing realty to commercial reality. The stalled projects in the housing realty led to a lot of issues for the sector which also affected the Indian economy as a whole since this sector is one of the major instruments for the growth of the economy. Although the report of the economy going through a recession was false, it didn’t just hit the expected growth. The Indian economy experienced more of a slow progression, but it wasn’t a recession for India. The reasons for this slow down are due to a lot of reasons such as demonetization, goods and services tax (GST), etc.

According to the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva stated that the growth projections had to be revised and a downward fall to four percent was experienced in the year 2019. However, the expectation for this year is at a 5.8 percent growth rate and for 2021, the expected growth rate should be at 6.5 percent. Also, the non-banking financial institutions in India went through a lot of unsteady and uncertainty, in which the union budget 2020 is supposed to provide relief to the sectors as banks are not supporting the proposal of the government to grant the non-banking finance sectors loans and monetary funds. Also, the demonization and unified tax system proposed by the government proved to have short term impact, there is no denying that they do have long term benefits after a period of time. Even though, they may have been disruptive for the short term.

The IMF has stated to remain optimistic on the growth of India, as the budget session goes on what could be hoped for is that the government procures remedial measures to help find solutions to the problem that led to the slowdown of the economy in 2019. The process of regaining back the economy to a stable and progressive point, towards the end of last year, the government had pumped in crores of rupees to revive the real estate sectors and provide funds to developers.

Several measures have been taken in other sectors and various sectors have put in place demands in policies that would be revised in the union budget. For example, the gold industry expectations for the budget in terms of import duties to ease the illegal smugglings and also revive consumer demand through the hallmarking policy, etc. The budget revenue collection has been below the target and it is necessary to increase budgetary revenues so as to improve the fiscal positions. Tight spending won’t be the right way to go about it this year, there should be a way to improve collections from the revenue side.

Mohit Kamboj is the author of this article. Find more information about Mohit Kamboj.

BANKS IN INDIA ARE RELUCTANT TO LEND TO NON-BANKING FINANCIERS

Banks in India are looking for ways to gently persuade the government of India to boost the funding of shadow banks. For more than a year, even with the support of the government for banks to lend non- banking financiers, the banks are still hesitant to loan non-banking finance companies due to the growing defaults caused by the Infrastructure Leasing and Financing services ltd (IL &FS). Although, the center has been pushing the banks to pay out money in the form of loans to fund these NBFC’s companies. There have been several meetings held to discuss this issue with the banking sectors in India. The Finance Minister Nirmala Sitharaman recently met with the banking sector chiefs to urge the disbursement of funds into the banking sectors. The Minister stated that the banking sectors should without fail start providing more loans to boost the Non-banking finance sectors (NBFC’s).

Banks in India are expressing their concerns when it comes to funding these sectors. Most of the banks have stated their point of view to the government. They expect the government to understand that they are protecting their interest first which is the priority. Although, they have started providing loans to only those non-banking finance companies that are state-owned as a way to manage their self- interest. The sector which has slowly deteriorated has been observed to be recovering due to the credit cash flow that is being deposited into the sector, according to the Reserve Bank of India (RBI). But, the banks are trying to differentiate between the good and not so good non-banking finance sectors in India. Since it is hard to differentiate banks have decided the loans would be granted only to non-banking finance companies that are supported either by the government and the state.

The banks expect that the sectors start making the repayment of loans with the servicing interest in the place. There can’t be a continued lending process if there is no reimbursement of interest and repayment done. This is to safeguard the interest of banks. For receiving cash credit or working capital limits from banks, the borrower needs to repay the interest, but once it is converted to a term loan, the borrower would be required to start repaying the entire loan in installments. According to reports, the repayments made by non- banking finance companies accounted for Rs. 2,399 crore of the overall total repayments worth Rs. 9,945 crore.

In order for the government to observe changes, there needs to be a formal arrangement that is made with the government of India to adjust the process of transfer of dividends. The reason the repayment has increased from these sectors is due to the policy declared by the banking sectors in India of converting credit limits into term loans. Also, banks such as Bank of Baroda (BOB) have gone against renewing the existing credit lines for several non-banking finance companies. They are now converting them to term loans to reap a higher repayment at intervals. There should also be several measures taken by the government to ensure the repayment of existing credit loans before lending to these sectors.

Mohit Kamboj is the author of this article. Find more information about Mohit Kamboj.

INVESTMENTS IN REAL ESTATE 2020

The real estate in India has gained momentum in comparison to the previous year. The help the sector has received from the government of India has been immensely productive in restoring the sector. In terms of funds and various initiatives, the government of India has put in place to grow the industry back to a flourishing state. This has led to various static projects restarting its development process and also providing the right amenities for real estate developers to continue the construction of those projects. The New Year has brought forth a new era of investments for the real estate sectors.

This sector is going through a transformational change this year. For a long duration of time, real estate in India has enjoyed support and financing from wealthy investors and equity firms. Although, the past few years the housing sectors in India’s real estate have experienced a low in investment and consumer demands have progressively declined. This is because of the changes in the Goods and services tax, Real Estate (Regulation and Development) Act, demonetization issues, and also changes in a few other policies.

Commercial sectors in real estate:

The commercial sectors have been blooming in comparison to other sectors such as residential properties. As investors are losing confidence in regards to investing in housing or residential properties due to policy change and also housing tax duties. Investors have started taking minimal interest in residential properties, whereas the commercial sector has been performing well. Investors and real estate dealers are eyeing the commercial projects and warehousing properties rigorously like never before. From an investment point of view, the commercial properties are beneficial when it comes to financial returns as it offers more attractive investment yield. The depreciation of capital percentage is at 3 to 12 percent. Also, the return on investments for commercial properties is higher than residential properties. Although the commercial sectors are doing much better and investing helps reap more return on investment (ROI), it is very important to research on the type of commercial property to invest in and also know the occupancy rates of different vicinities.

India is now flooded with several Multinational corporations (MNC) and technology companies that have a high demand for premium office spaces. The corporation and commercial property demand have been increasing despite temporary setbacks such as the continuing economic slowdown. In the area of BKC (Bandra Kurla Complex) alone, Tokyo-based Sumitomo Corporation has offered more than Rs 2,238 crore for a three-acre plot, where there would be a plantation of an office complex. Also, the Blackstone Group has bought one Bandra Kurla Complex office building for Rs 2,500 crore and is also in talks of buying another multi-crore property around the vicinity.

Commercial spaces and properties have proven to be an extremely lucrative sector in real estate that is attracting new investors due to the fact that investors now see a major investment area for reaping a return on investment. It is also has a more structured form of investment that investors find appealing. Therefore, the commercial sector is the right way to go now, when investing in real estate in 2020.

Mohit Kamboj is the author of this article. Find more information about Mohit Kamboj.

PRIVATE BANKS TAKING A SLOW PACE IN PROVIDING BENEFITS OF FALLING INTEREST

Private Banks in India are less eager than other sectors to provide the benefits of the falling interest rates that are supposed to be given to the customers according to the Reserve Bank of India (RBI). The lending rates have been cut back to 12bps in comparison to the Reserve Bank of India’s 135 bps rate cuts in respective to the previous year.

The main reason why the private banks are slow on granting their customers the interest rate cuts is because of their cost of funds. The cost of funds for the private banks in India is higher than the fund costs of other sectors and also their rivalries.

The private banks pay the highest interest to depositors in India. In the arrangement order, private banks come first in the payment of high-interest rates, followed by public sectors and then foreign banks. Depositors were paid a 6.71% interest in November 2019 according to the latest data. Public sectors paid 6.65% interest to depositors while foreign banks paid 5.38%.

The credit growth of Public sectors is very slow in comparison to other sectors. Therefore the need to mobilize deposits through the offering of higher interest rates to depositors is very little. Foreign banks in India are the ones who pay the least to depositors, which means that the lending rates are the cheapest amongst other categories of banks.

Why foreign banks pay the cheapest interest rates to depositors is because of various reasons. One factor is because foreign banks have limited franchises in retail and so in the absence of retail depositors, they don’t have to offer high deposits rates. Hence, their deposit rates are lower than in other baking sectors. As banks began pricing all fresh retail and small business loans to an external benchmark in October, the one-year median MCLR has dropped to 5 bps for all categories of lenders.

The process of setting interest rates by banking sectors is definitely at its core. The Central bank of India has also for several years been trying to make it more transparent. This has led to the change from benchmark prime lending rates (BPLR) to the base rate and to MCLR. It has also led to the change in external benchmark based lending interest rates.

The trend that is observed in the median lending rates of private banks is somewhat different from the trend in weighted average lending rates. This is because of the reduction in the cost of funds for larger and stronger private banks which has been higher. Therefore, the lending rate reduction for these banks have been higher in comparison to some of the smaller private banks.

The median one-year marginal cost of funds based lending rate for private banks fell at 12 basis points (bps) to 9.18% between the month of January and December 2019, comparing to the Reserve Bank of India’s cumulative 135 bps cut in its key policy rate to 5.15%.

Most bank loans are typically priced over the one-year MCLR which makes it the most tracked rate.

Mohit Kamboj is the author of this article. Find more information about Mohit Kamboj.

GOLD PRICE TODAY HITS A RS. 41000 MARK DUE TO THE IRAN-US CONFLICT

Gold price hits a mark above Rs. 41000 rupees amidst the conflicts between the US and Iran. President Donald Trump had issued an airstrike on Iran killing Iran soldiers and also important Iranian commander Qasem Soleimani. This had disrupted political stands between the countries.

The US President, Donald Trump detected a state of alert in regards to Iran’s missile forces, the United States has announced a warning strike if Iran attacks any American person or targeted location in America.

Amongst geopolitical issues and uncertainty, gold benefits immensely as investors move to the safe-haven metal. Trader’s flight towards the yellow metal has pushed gold prices to a new record high above an Rs. 41000 level to Rs. 41,096. The united stated and Iran’s political conflict has escalated over the weekend.

Bullion may witness an upside momentum on the safe-haven demands in the coming weeks. Palladium hit a $2,000 upward level reaching a new record high too.

In the US markets, spot gold surged high up to 1.5 percent to $1,579.55 per ounce in the apprehensive trade market and has reached its highest momentum record since April 2013.

Bullion remains a safe asset for investors during these conflicted times. Asian shares pushed towards a lower level on account of tensions in the Mideast supporting the bullion prices in both the global market and domestic market.

Spot gold may rise into a range of $1,595 to $1,614 per ounce, clearing resistance at $1,568.

The US Federal Reserve Bank acknowledges the current rate stance to be appropriate in their final policy meeting of 2019. It has been proposed that the lower interest rate reduces the opportunity cost of holding non-yielding bullion.

Silver gained 2 percent to $18.39 per ounce, whereas platinum rose at a level of 0.6 percent to $985.87.

India’s gold imports in the year 2019 fell at 12 percent to the lowest level it has ever been in three years, as retail buying faltered in the second half of the year after gold local prices rallied to a record high.

Gold price also gained due to the weakness in the US dollar. The depreciation of the dollar has been a huge advantage in supporting the bullion market. Also, the announcement by North Korea on the debut of a new strategic weapon has also supported the gold price moving towards a high record.

Iran also declared that it was ramping up its nuclear program. It announced its fifth step back from a nuclear deal saying it will forego the limit on the number of centrifuges that were mandated in the deal.

US President Donald Trump threatened sanctions against Baghdad for the move and stated that if troops did leave, Baghdad would have to pay Washington for the cost of the airbase there.

Gold futures crossed above Rs 41,000-level to a record Rs 41,096. It was trading at Rs 40,939 per 10 gram, up to 2.06 percent. Silver futures were also up 2.08 percent to Rs 48,514 per kg.

Mohit Kamboj is the author of this article. Find more information about Mohit Kamboj.