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Non-food bank credit grows at 6.8 per cent in September: RBI data

Banks’ non-food credit growth accelerated to 6.8 per cent in September 2021 as against a rise of 5.1 per cent in the same period of last year, RBI data showed. Loans to agriculture and allied activities registered a higher growth of 9.9 per cent in September 2021 as compared to 6.2 per cent in the year-ago period.

The Reserve Bank of India (RBI) Friday released Sectoral Deployment of Bank Credit – September 2021.

Credit growth to industry picked up to 2.5 per cent in September 2021 from 0.4 per cent in September 2020.

Size-wise, credit to medium industries registered a robust growth of 49 per cent in September 2021 as compared to 17.5 per cent last year.

“Credit to micro and small industries accelerated to 9.7 per cent in September 2021 from a contraction of 0.1 per cent a year ago,” the data showed.

Advances to large industries continued to contract at one per cent in September 2021 as compared to a contraction of 0.2 per cent a year ago.

Credit growth to the services sector decelerated to 0.8 per cent in September 2021 from 9.2 per cent in September 2020, mainly due to contraction in loan growth to NBFCs, trade and commercial real estate, it said.

Personal loans registered an accelerated growth of 12.1 per cent in September 2021 as compared to 8.4 per cent a year ago, primarily due to faster credit growth in housing, vehicle loans, and loans against gold jewellery, it said.

High valuations not a deterrent for India deals: Partners’ CEO

Mumbai: Switzerland-based global buyout firm Partners Group Holding AG will not shy away from rich Indian valuations as it looks to aggressively expand its footprint in the world’s second largest democracy, a senior company executive said.

“Private market investors have to pay aggressive multiples to access India’s growth potential. Yes, it’s a high price, but per unit of growth, it can be reasonable, and we are willing to pay a full and fair price for the investments that fit our themes and meet our criteria,” David Layton, chief executive and head of private equity, told ET in an exclusive interaction.

The PE firm said last month that it had raised $15 billion for its fourth PE fund to invest in technology, healthcare, and consumer goods companies. While $6 billion was through a direct equity fund, the remaining was through separately managed accounts investing alongside the fund.

“India is a geography that has a tremendous amount of upside potential for us. The close of our recent, larger fund coincides with there being larger businesses in India for us to invest in,” Layton said.

Since 2012, Partners has deployed $2 billion across four investments in India, ahead of China where it has only deployed $500 million so far.

High Valuations not a Deterrent for India Deals: Partners’ CEO

The PE firm stands to make more than seven to eight times its initial investment in Aavas Financiers, which went public in 2018. It invested Rs 609 crore ($90 million at exchange rates then) between 2016 and 2018 and booked a partial exit in August this year. Ecom Express, another portfolio company since late 2020, is planning to make its public market debut at a valuation of more than $2 billion.

Like several of its peers, Partners Group has also been on a deal spree amid the Covid-19 pandemic.

Earlier this year, Partners Group exited its first India investment when it sold CSS Corp to Capital Square Partners for $500 million. After accounting for leverage, the firm doubled the investment of $270 million it made in 2013.

It bought a controlling stake in ACT Broadband, a leading non-telco internet service provider, at a $1.2 billion enterprise value, in August, its largest cheque in India till date.

Partners followed that up a week after by selling Straive (formerly known as SPi Global), a global provider of technology-driven content and data solutions company, to Baring Private Equity Asia for $1 billion, making a 3x return on a 4-year-old bet.

Forex reserves decline by $908 mn to $640.1 bn

The country’s foreign exchange reserves declined by USD 908 million to USD 640.1 billion in the week ended October 22, RBI data showed. In the previous week ended October 15, the reserves had increased by USD 1.492 billion to USD 641.008 billion. The reserves had touched a lifetime high of USD 642.453 billion in the week ended September 3, 2021.

In the reporting week ended October 22, the dip in the reserves was due to a fall in foreign currency assets (FCA), a major component of the overall reserves, and in the gold reserves, Reserve Bank of India’s (RBI) weekly data released on Friday showed.

FCA declined by USD 853 million to USD 577.098 billion in the reporting week, the data showed.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves were down by USD 138 million to USD 38.441 billion in the reporting week, the data showed.

The special drawing rights (SDRs) with the International Monetary Fund (IMF) rose by USD 74 million to USD 19.321 billion.

The country’s reserve position with the IMF increased by USD 10 million to USD 5.240 billion in the reporting week, the data showed.

Govt gets Rs 413 crore as dividend from 5 CPSEs

The government has received Rs 413 crore as pidend tranches from five CPSEs, including NLC and NALCO. “Government has received Rs 78 crore and Rs 165 crore respectively from Antariksh corp and NLC as pidend tranches,” DIPAM Secretary Tuhin Kanta Pandey tweeted.

Besides, NBCC, Cochin Shipyard Ltd and NALCO have paid Rs 52 crore, Rs 24 crore and Rs 94 crore, respectively, as pidend tranches to the government.

As per the Department of Investment and Public Asset Management (DIPAM) website, so far in the current financial year (April-March) the government has received Rs 15,651 crore as pidend from central public sector enterprises (CPSEs).

Besides, about Rs 9,330 crore has been mobilised through disinvestment of minority stake in CPSEs.

India is said to seek to narrow budget deficit target to 6.3%

India aims to narrow its budget deficit to 6.3% of gross domestic product this fiscal year, or half a percentage point lower than initially targeted, on the back of improving revenues, according to people familiar with the matter.

The target reset is buoyed by expectations of robust tax collections in the coming months and achievement of assets-sale target, said the people, who asked not to be identified as the estimates are being discussed internally. The government will maintain its spending targets, with a focus on capital expenditure, they said.

The median forecast in a Bloomberg survey of economists is for an annual deficit of 6.7%, with estimates ranging from -6.1% to -10.8%.

A finance ministry spokesman wasn’t immediately available for a comment.

defictBloomberg

Indirect tax revenue, especially collections from a nationwide consumption tax have surpassed a minimum monthly Rs 1 trillion ($13.5 billion) target in recent months, keeping the government from borrowing more. That signals recovery is gaining traction in the economy, where curbs put in place to stem the pandemic’s second wave have been almost fully lifted.
The economy is expected to grow 10% in the year ending March, said the people, whose assessment leans more toward the optimistic scenario. The Reserve Bank of India, and the International Monetary Fund, expect a 9.5% expansion during the period.

Plans to sell assets, including an initial share sale in insurance behemoth Life Insurance Corp. of India by March, are underway, the people said.

The government meeting its target to raise Rs 1.75 trillion from sale of state assets this year is key to narrowing the budget gap. It has missed its fiscal deficit targets in the past four years, with the shortfall touching a record 9.3% of GDP in the year ended March 2021.

The fiscal deficit could possibly be in the range of 7.2% to 7.5% as revenue assumptions look tough to achieve, according to Care Ratings Ltd. “We have six months left to get the disinvestment story right. Will this happen is a big question?” the rating company said in a note Tuesday.

ADB, AIIB processing $2 billion loan for India to buy COVID-19 vaccines

China-based Asian Infrastructure Investment Bank (AIIB) along with the Asian Development (ADB) are currently processing a USD 2 billion loan for India to purchase COVID-19 vaccines.

Of the USD 2 billion loan, the Manila-based ADB is expected to finance USD 1.5 billion and AIIB is considering providing USD 500 million, AIIB’s Vice President D.J. Pandian said here on Tuesday.

“The ADB has agreed to finance USD 1.5 billion and AIIB will supplement with another USD 500 million,” Pandian said.

The loan is under consideration from the AIIB board, he said, adding that India has applied for it three months ago. About 667 million doses of COVID-19 vaccines were expected to be procured through the loan, according to the Bank.

He said the vaccines will be purchased by the Government of India through a competitive process and the ADB will be administering the purchasing system and implement it under ADB’s APVAX, or Asia-Pacific Vaccine Access Facility, mechanism.

India, which produces Covishield and Covaxin, has recently crossed an inoculation milestone of administering 100 crore Covid-19 vaccine doses to its citizens against the deadly virus. India also plans to resume vaccine exports and provide the jabs to a number of countries.

Besides funding various infra projects in India, the AIIB has also granted USD 1.75 billion to India for the COVID-19 relief budget support.

Pandian said the Beijing-based AIIB, in which India is the second-largest shareholder after China, has so far approved 147 projects amounting to USD 28.9 billion.

Besides being the second-largest shareholder, India has emerged as its biggest beneficiary by obtaining USD 6.7 billion for 28 projects, he told the media as the bank held its 2021 annual general body meeting through video link.

On Tuesday, the AIIB formally granted USD 356.67 million loans for the expansion of the Chennai metro rail system. The bank is also considering several other infrastructure projects for the development of Chennai city and its suburbs.

Pandian said the AIIB is backing several other infrastructure projects for Chennai. “The USD 400-million Chennai Metro Corridor-5 is already under pipeline at an advanced stage of project approval process. We are also working on a few other transport projects in Chennai, including the Chennai Outer Ring Road project worth USD 300 million,” Pandian said.

The energy and transport sectors have received the highest amount of financing from the AIIB, said Pandian who oversees all sovereign and non-sovereign lending for the AIIB in South Asia, the Pacific Islands and South-East Asia.

He said that since its inception, the AIIB has so far approved 147 projects amounting to USD 28.9 billion. By 2025, the bank’s climate finance will be 50 per cent and from next year all projects to be approved will be Paris climate agreement aligned, he said.

Significantly, the AIIB sponsored by China has not funded any projects under Beijing’s Belt and Road Initiative (BRI) nor its flagship USD 60 billion China-Pakistan Economic Corridor (CPEC).

“We are a multilateral bank. Our job is to do infrastructure development projects. The BRI is different, AIIB is different. To my knowledge nothing has come up from BRI,” Pandian said while replying to a question.

India has objected to China over the CPEC as it is being laid through Pakistan-occupied Kashmir (PoK).

Pandian said the bank has a strict policy related to financing projects in the disputed areas. Consent from all sides is required to fund such projects, he added.

In Pakistan, he said, the AIIB has financed seven infrastructure projects amounting to USD 1.5 billion.

Starting with a membership of 57 countries in 2015, the AIIB membership has now grown to 103 countries spread across the world. The US and Japan, however, have not joined the bank over their reservation of China’s sponsorship.

About how the bank has fared since its inception, Pandian said, “I think AIIB has done its job. It’s a start-up bank” starting from scratch.

In future, the bank’s concentration will be on small countries where more projects, even if they are small, will be undertaken, he said.

He said the Bank has put in an excellent multilateral governance system. It has 12 directors from different countries and has a non-resident board. Its Management was drawn from different countries and followed universal procumbent policy, he said.

India Post Payments Bank & HDFC join hands to offer home loans

India Post Payments Bank (IPPB) and mortgage lender HDFC Limited on Tuesday announced a strategic alliance to offer home loans to nearly 4.7 crore customers of IPPB.

Leveraging its wide network of 650 branches and over 1.36 lakh banking access points, IPPB aims to make HDFC Ltd’s home loan products and its expertise available to its customers across India. These home loans will be made available in unbanked and underserved areas with many of them having little or no access to finance.

“Financial inclusion cannot be achieved without enabling access to credit,” said J. Venkatramu, MD, India Post Payments Bank. “Complemented by our robust network and HDFC’s leadership in the housing finance market, the alliance aims to make housing loans available and accessible, using a digitally enabled agent banking channel.”

IPPB will offer housing loans through nearly 190,000 banking service providers (Postmen and Gramin Dak Sevaks). While the credit, technical and legal appraisals, processing and disbursement for all home loans will be handled by HDFC Ltd, IPPB will be responsible for sourcing of loans.

“IPPB has a strong presence across the country and this strategic alliance will go a long way to promote affordable housing in the remotest locations of our country in line with the Prime Minister’s vision of Housing for All,” said Renu Sud Karnad, Managing Director –HDFC Ltd.

Under the Pradhan Mantri Aawas Yojna scheme, HDFC has the highest number of beneficiaries at over 250,000, with cumulative disbursements of 43,000 Crore and a subsidy amount of Rs 5,800 Crore as of June 30, 2021.

Rising commodity prices to push CAD to 1.3 pc or $40 bn this fiscal: Report

Rising global commodity prices, led by crude, coal and metals, will shave a lot off the current account leading to higher imports and a rise in current account deficit, which is likely to print at 1.3 per cent of the GDP or USD 40 billion, up from 0.9 per cent surplus last fiscal, according to a brokerage report.

However, the report, by the Wall Street major Bank of America Securities, said the balance of payments (BoP) is strong enough to defend any US Federal Reserve taper impacts on the rupee and the bond yields even though the BoP peak is history now.

Given the sharp increase in global commodity prices, particularly oil, concerns about current account deficit (CAD) and its serviceability have resurfaced. Potential taper by the Fed has only added to these jitters. “But, we see FY22 CAD at 1.3 per cent of GDP or USD 40 billion, up from a 0.9 per cent surplus in FY21, but still well-contained under the threshold of 2.5 per cent of GDP,” BofA said on Tuesday.

On the other hand, capital account surplus is expected to rise despite moderating foreign inflows and a steady FDI on account of other sub-components faring better in FY22 than in FY21, it adds.

The June 2021 quarter current account balance was surprised with a larger-than-expected surplus of USD 6.5 billion or 0.9 per cent of GDP, led by a lower trade deficit, higher-than-expected private income transfers and lower-than-usual investment income outflows.

Capital account also saw robust inflows of USD 25.8 billion and accordingly, the BoP surplus for Q1 rose sharply to USD 31.9 billion, from a small USD 3.4 billion surplus in the March 2021 quarter.

“Despite this solid start to FY22, we believe the peak BoP surplus is behind us and going forward, trade deficit and, therefore, CAD to rise sharply as domestic demand continues to recover. Imports are also expected to rise due to higher global prices, particularly oil,” it added.

Supported strongly by other flows, the capital account is set to end the year with a surplus of USD 93 billion in FY22, up from USD 64 billion in FY21. While FPI inflows are expected to moderate given already-rich equity market valuations and expectations of policy normalisation, FDI inflows are expected to stay robust.

Yet, BoP surplus will moderate to USD 53 billion in FY22 from USD 87 billion in FY21, while the basic balance (CAB and net FDI) is likely to come in close to zero as CAD gets largely offset by steady FDI inflows.

With forex reserves already up USD 60 billion this year so far, including the USD 17.9 billion special drawing rights (SDR) allocation in August, the full-year BoP surplus is seen at USD 53 billion.

Stating that they don’t see any fundamental reason for the rupee to depreciate, the report said the external position is significantly in better shape than in 2013, the potential US Federal Reserve taper is unlikely to exert any serious and sustained pressure on the rupee.

Moreover, the USD 640 billion of forex reserves can cover 13 months of imports. At the current level, forex reserves stand at 22 per cent of the GDP now versus 15 per cent in 2013.

GST Council sets up two GoMs to look into rate rationalisation, systems review

India has set up a group of ministers to look into the rate rationalisation under the goods and services tax including the current slab structure.

The goods and services tax council secretariat Monday notified the setting up of two GoM, one to look into the rate structure and another to look at systems reforms required to plug revenue leakages. The GST Council had decided to set up the two GoMs in its meeting earlier this month.

“… review the current tax slab rates and recommend changes in the same as may be needed to garner required resources,” the office memorandum said.

The current GST has as many as seven rates – exempt, 0.25%, 3%, 5%, 12%, 18% and 28%. The 15th Finance Commission had also recommended the GST rate structure revamp its report.

The seven-member panel, looking to rate structure, would be headed by Karnataka chief minister Basavaraj Bommai and include West Bengal finance minister Amit Mitra, Kerala finance minister K N Balagopal, Bihar deputy chief minister Tarkishore Prasad, Uttar Pradesh finance minister Suresh Khanna, Goa transport minister Mauvin Godinho and Rajasthan urban development and housing minister S K Dhariwal.

The GoM has been given two months to submit its report of short, medium and long term recommendations. The panel may submit an interim report for such immediate measures as it may deem fit.

It would also look at measures needed to eliminate breaking of input tax credit, special rates and rationalisation and review inverted duty structure.

P11GST

Systems revamp in focus
The GoM on GST system reforms would identify potential sources of evasion and suggest changes in business processes and IT systems to plug revenue leakage.

The eight-member panel, headed by Maharashtra deputy chief Minister Ajit Pawar, would include Delhi deputy chief minister Manish Sisodia, Tamil Nadu finance minister Palanivel Thiaga Rajan and Chhattisgarh commercial tax minister TS Singh Deo.

The panel would review IT tools and interface available with tax officers and suggest ways to make them more effective, identify potential sources of evasion and suggest changes in business processes and IT systems to plug revenue leakage.

The panel would also identify possible use of data analysis towards better tax compliance and suggest ways of better coordination between central and state tax officers.

The panel will give its recommendations to the Council from time to time, and will review implementation of the recommended changes. GST Network will provide the necessary secretarial support to the GoM.

( Originally published on Sep 27, 2021 )

Dearness Allowance hike to 31% effective from July 1, says Finance Ministry

Dearness Allowance for central government employees has been hiked to 31 per cent of the basic pay from 28 per cent with effect from July 1, 2021, the Finance Ministry said. In an office memorandum, the Department of Expenditure, under the Finance Ministry, said the term ‘basic pay’ means the pay drawn as per the 7th pay commission matrix and does not include any other type of pay like special pay, etc.

“….the Dearness Allowance payable to central government employees shall be enhanced from the existing rate of 28 per cent to 31 per cent of the basic pay with effect from July 1, 2021,” said the office memorandum dated October 25.

The hike will also apply to civilian employees paid from the Defence Services, while in respect of Armed Forces personnel and Railway employees, separate orders will be issued by the Defence and Railways Ministry, respectively.

The Union Cabinet had last week approved a 3 per cent hike in dearness allowance (DA) for central government employees and dearness relief (DR) for pensioners over the 28 per cent existing rate.

The decision will benefit about 47.14 lakh central government employees and 68.62 lakh pensioners.

In July this year, and DA rate was increased from 17 per cent to 28 per cent. With a 3-per cent hike now, the DA rate will become 31 per cent.

The combined impact on the exchequer on account of the Dearness Allowance and Dearness Relief would be Rs 9,488.70 crore.

Following the COVID pandemic outbreak, the government had frozen the three additional instalments of the DA and DR, which were due from January 1, 2020, July 1, 2020, and January 1, 2021. The freeze was lifted from July 1, 2021, and the DA, DR rate was hiked by 11 percentage points to 28 per cent.