Breaking News - 11th August 2023

Financial News 11th August 2023 

1.Banks cautious on lending to small businesses despite high demand, low NPAs

Lenders are cautious on providing loans to the micro, small and medium enterprises (MSME) segment, despite high demand, availability of analytical data and lower delinquencies. 

Demand for loans from MSMEs grew 33 per cent in the January-March period of the previous fiscal (Q4, FY23) compared to the year-ago period, but the supply of credit was up by only 11 per cent during the quarter, the report by credit information company Transunion Cibil. 

Credit flow to the MSME sector is slower compared to the increasing demand as lenders follow a cautious approach on commercial lending. 

The report said unpaid loans between 90 and 720 days improved to 2.4 per cent in Q4 FY23 as against 2.9 per cent in the year-ago period. 

2.Karur Vsysa Bank raises lending rate by 0.15%, to be effective from Aug 14

Karur Vysya Bank announced a hike in benchmark lending rate by 0.15 per cent to 7.75 per cent even as the Reserve Bank left its key interest rates unchanged for the third straight meeting. 

The External Benchmark Rate - Repo linked (EBR-R) of the bank would be revised from 9.60 per cent to 9.75 per cent. 

3.10% incremental CRR temporary, will drain out Rs 1 trn from system

Short-term rates on money market instruments like call money rates, treasury bills and commercial paper are likely to increase by 15-20 bps in the near term. 

Surplus liquidity in the banking system has gone up in recent months due to the return of Rs 2,000 banknotes, RBI’s surplus transfer to the government, increased government spending, and capital inflows. 

The overall daily absorption under the liquidity adjustment facility (LAF) was Rs 1.7 trillion in June and Rs 1.8 trillion in July 2023. 

4.Incremental CRR move to help suck out Rs 1 trn of excess liquidity

While announcing the move, Das had said the return of Rs 2,000 notes since May 19 this year, has led to instances of excess liquidity for which the move was being introduced. 

While announcing the move, Das had said the return of Rs 2,000 notes since May 19 this year, has led to instances of excess liquidity for which the move was being introduced. 

5.Tomato woes: MPC pegs inflation at over 6 per cent in current quarter

Inflation unlikely to fall to 4% target even in Q1 FY25; GDP growth projections kept intact. 

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has raised its projection for retail price inflation beyond its comfort zone of 6 per cent for this quarter of the current financial year. 

6.Protean, PayNearby partner for providing credit services on ONDC network

Once launched, the marketplace will also allow for easy discovery of various lending products at affordable pricing. 

Protean eGov Technologies and fintech platform PayNearby have collaborated for providing credit services on the ONDC network for last-mile borrowers and MSMEs. 

7.India overnight rates jump on RBI's CRR tweak ahead of trading holidays

The weighted average interbank call money rate jumped to 6.66% from an average of 6.38% between Aug. 1 and Aug. 10, and above the policy repo rate of 6.5%. 

The TREPS rate, at which non-banks borrow and lend overnight funds, rose to 6.54% from 6.27% in the first ten days of the month. 

Traders blamed the spike on the timing of the Reserve Bank of India's decision to impose an incremental cash reserve ratio (CRR) on banks. 

8.RBI's incremental CRR move a surprise, policy signal

The RBI asked banks to hold incremental CRR of 10% on an increase in deposits between May 19 and July 28 in Thursday's monetary policy decision, when it expectedly kept its key policy rate unchanged. 

The Reserve Bank of India's (RBI) move to ask banks to maintain additional cash reserve ratio (CRR) came as a surprise and could be used as a policy tool, an economist at Standard Chartered Bank said on Friday. 

9. Bank of Baroda, Canara Bank, BoM hike lending rates by up to 10 bps

The move will make EMIs linked to MCLR expensive. 

The one-year tenor MCLR is the rate against which most consumer loans are tied to. 

The revised one-year MCLR would be 8.70 per cent as against the existing rate of 8.65 per cent, BoB said in a regulatory filing. 

10.MSCI Global Standard Index review: PFC, REC among 8 entrants; ACC excluded

The MSCI Global Standard index, as part of its August review, shared a list of stocks that shall be included and excluded effective September 1, 2023. 

Around eight stocks will be make an entry to the index, which includes Power Finance Corporation (PFC), REC, HDFC Asset Management Company (AMC), IDFC First Bank, Astral, Cummins India, Supreme Industries, and Ashok Leyland.