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Mumbai, Dec 3 :The RBI is expected to keep its key interest rate unchanged at its penultimate monetary policy review of the fiscal on Wednesday at a time when inflation – the central bank’s key concern – has softened, as has GDP growth, according to the figures for the second quarter ending in September.

At its previous bi-monthly review in October, the Reserve Bank of India’s (RBI) Monetary
Policy Committee (MPC) held its repo, or short term lending rate, unchanged at 6.5 per cent
in a context of rising crude oil prices posing an inflationary risk as well as a weakening
rupee.

Official data earlier showed that the consumer price index (CPI), or retail inflation in October, fell to its lowest in a year at 3.31 per cent owing to lower food inflation, from 3.7 per cent in the previous month.

Besides, from the depths it had plunged, the rupee has since appreciated to a level of just over 70 to the US dollar.

Moreover, global crude oil prices have softened sharply from $86 per barrel in October to currrent levels of around $60 amidst reports that Saudi Arabia and Russia have reached a deal to cut output so as to shore up falling prices.

Meanwhile, official data on November 30 showed the pace of India’s GDP growth slowed during the July-September quarter to 7.1 per cent, from 8.2 per cent in the previous one, mainly on the back of a drop in manufacturing, agriculture and mining.

“RBI may get the much needed elbow room to keep the policy rate unchanged in the forthcoming bi monthly policy review on December, 5,” said US rating agency Fitch Group subsidiary India Ratings and Research Chief Economist Devendra Kumar Pant.

“Based on the September quarter GDP growth and likelihood of lower growth in the second
half of the year, chances of fiscal slippage are very high. The central bank is expected to
stay on hold,” he added.

Belying market expectations of a rate hike in October, the RBI held its repo rate unchanged in the context of an uncertain global economic scenario but turned hawkish in its stance, moving to one of calibrated tightening from the ‘neutral’ it has maintained over its six previous policy reviews.

Elaborating on the change of stance to “calibrated tightening”, RBI Governor Urjit Patel said that it implied that “in this cycle, a rate cut is out of the table and we are
not bound to increase rates every time we meet.

“With this stance we have two options, we can either increase rates or hold them,” he said.A “neutral” stance allows the RBI to move either way on rates.

On the decision to hold the repo rate, Patel said that “actual inflation outcomes, especially in August, were below projections as the expected seasonal increase in food prices did not materialise and inflation excluding food and fuel moderated”.

The RBI has lowered its inflation projection for the July-September quarter to 4.0 per cent, and between 3.9-4.5 per cent for the second half of the fiscal “with risks somewhat to the upside”.India’s budgetary fiscal deficit for the April-October period at Rs 6.49 lakh crore has exceeded the target for the full fiscal, accounting for 103.9 per cent of the budgeted target of Rs 6.24 lakh crore, mainly owing to slow revenue growth.

The RBI’s policy review is coming at a time of slowdown in growth and private investment, and soon after the ongoing liquidity crunch has provoked a tiff between the government and the central bank.

The government’s differences with the RBI centres on four issues – the former wants liquidity support to head off any credit freeze risk, a relaxation in capital requirements for lenders, relaxing the prompt corrective action (PCA) rules for banks struggling with accumulated non-performing assets (NPAs), or bad loans, and support for micro, small and medium enterprises.

The current liquidity crunch, particularly among non-banking finance companies, follows a series of defaults last month by the privately-run Infrastructure Leasing and Financial Services and banks hesitating to lend after a series of scams, most notably the Rs 14,000 crore fraud on state-run Punjab National Bank reported in February.

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Markets open on positive note

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Sensex Nifty Equity

Mumbai, Feb 20: The 30-scrip Sensitive Index (Sensex) on Wednesday opened on a positive note during the morning session of the trade.

The BSE Sensex opened at 35,564.93 before touching a high of 35,581.14 and a low of 35,520.21.

It was trading at 35,528.69 up by 176.08 points or 0.50 per cent from its Tuesday’s close at 35,352.61.

On the other hand, the broader 50-scrip Nifty at the National Stock Exchange (NSE) opened at 10,655.45 after closing at 10,604.35.

The Nifty is trading at 10,656.25 in the morning.

IANS

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PF funds’ investment in IL&FS bonds have no government guarantee: Finance Ministry

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IL&FS Financial Service

New Delhi, Feb 19 (IANS) The provident and pension fund trusts that invested in the IL&FS bonds now fear loss of money as the debt-ridden company’s bonds are unsecured debt, and the Finance Ministry says superannuated bonds do not carry any government guarantee and all such instruments have to face all market-related risks.

“Since these are investments in bonds, the government does not ensure any guarantee on them as such and if these are invested in stock markets, they carry the market risks as applicable. It is between the bond issuer and bond holders…,” the Finance Ministry said in response to IANS queries.

Thousands of crores of money of more than 15 lakh employees of both public and private sector companies have exposure to IL&FS bonds.

However, queries sent to the EPFO Commissioner and Labour Minister Santosh Gangwar remained unanswered.

Over 50 funds that manage retirement benefits of over 15 lakh employees have exposure to IL&FS. PF trusts of state electricity boards, public sector undertakings (PSUs) and banks are among them. The provident and pension fund trusts have filed intervening applications in the National Company Law Appellate Tribunal (NCLAT) stating that they stand to lose all the money since the bonds are under unsecured debt.

Usually, retirement funds have a low-risk appetite and invest in “AAA” rated bonds (which IL&FS bonds used to be once upon a time) and get assured returns with low interest rates.

The worries of pension and provident fund trusts come from the classification of IL&FS profiling its companies as to which can meet the dues obligations. Many important trust managing funds of PSUs like MMTC, IOC, Hudco, SBI and IDBI are among those filing petitions. From private sector, HUL and Asian Paints are among the petitioners.

IL&FS is currently under resolution process at the National Company Law Tribunal (NCLT). The process will decide under Section 53 of the IBC the order of priority for distribution of proceeds of the process.

The beleaguered company has informed the NCLT that of the 302 entities in the group, 169 are Indian companies, out of which only 22 are emerging as those which can meet all obligations (green), while 10 firms can pay to only secured creditors (Amber). There are 38 companies of IL&FS (red) which cannot meet any obligations of payment, and 120 entities are still being assessed.

These PF and provident funds trusts are worried that if payment is limited to secured creditors, then only financial creditors like banks will receive the dues while unsecured bond-holders will be get any payments.

IL&FS bonds attracted investments by PF trusts as it had the shareholding of SBI and LIC giving its bonds the comfort factor.

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Sachin Bansal invests Rs 650 crore in Ola

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Sachin-Bansal

Bengaluru, Feb 19 (IANS) Internet entrepreneur and Flipkart co-founder Sachin Bansal has invested Rs 650 crore, or about $92 million, in ride-hailing platform Ola in his personal capacity as investor, the company said in a statement on Tuesday.

This investment is part of Ola’s larger Series J funding round. It is also the largest investment by an individual in Ola to date, it said.

“Ola is one of India’s most promising consumer businesses that is creating deep impact and lasting value for the ecosystem. On one hand, they have emerged as a global force in the mobility space and on the other, they continue to build deeper for various needs of a billion Indians through their platform, becoming a trusted household name today,” Bansal said.

He further said he has known Ola founder Bhavish Aggarwal as entrepreneur and friend over the years and that he has great respect for what he and the team at Ola have built in 8 years.

“We are extremely thrilled to have Sachin onboard Ola as an investor. Sachin is an icon of entrepreneurship and his experience of building one of India’s most respected businesses ground up, is unparalleled,” Ola CEO Bhavish Aggarwal said.

Ola integrates city transportation for customers and drivers onto a mobile technology platform ensuring convenient, transparent, safe and quick service fulfilment, the statement added.

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