RBI rate cuts: If you were thinking good times were upon us, think again

So, the rate cut has come, and it’s a full 25 bps. In all likelihood, that should be all from the inflation-targeting rate panel this year. What’s next? The struggling industries must be happy having  to get the ‘miracle cure’ they terribly wanted. Now that a 25 bps cut has come, it seems banks will finally start lending to them after consistently not doing so over the past several years. 

The 25 bps RBI is not going to make life easier for any of us. The talk of big gains that the rate cut will bring to the world is, at best, a joke. The reality is: Wednesday’s rate cut is not going to make banks restart giving loans for the good of the society any better than what they have been already doing. This is because of the simple reason that high lending rates aren’t quite the reason why lending is not happening, particularly to industries.

The issue lies with low demand from corporations and extremely high bad loans that the banks are stuck with. They are also wary about the stricter scrutiny of every big loan deals they enter into.

New projects aren’t coming up in a big way and many projects where banks have already made financial commitments are stuck for a verity of reasons. The only area where the lending is happening is for the retail borrowers, such as housing and auto loans. Until economic reality changes on the ground, this scenario wouldn’t change. The industry lobbies which have been making a ruckus for the RBI’s rate cut should actually pay attention to the Wednesday’s policy document a bit closely.

Big corporations have already moved to the money market where interest rates are lower. But, smaller companies with lower credit ratings aren’t that lucky. They will have to still depend on banks’ money. But, the lenders seem to be reluctant to look at this category of customers since these firms are perceived as a high-risk category. It’s time the rate-cut lobby did a serious rethinking and called for more fiscal reforms.

Sources-

  1. Firstpost- http://www.firstpost.com/business/rbi-slashes-rate-to-6-lowest-since-nov-2010-do-we-expect-more-cuts-will-it-boost-realty-experts-decode-3887559.html

2. Economic Times-http://economictimes.indiatimes.com/markets/stocks/news/if-rbi-cuts-rates-today-these-12-stocks-will-be-sureshot-winners/articleshow/59875471.cms

Image Source-

Reuters

Snapdeal, Flipkart terminate merger talks

Online marketplaces Snapdeal and Flipkart have called off their talks regarding a possible merger, bringing an end to five months of deliberations and board meetings, Snapdeal confirmed on Monday, July 31. According to Business Standard, had it come to fruition, this would have been the biggest consolidation in the history of Indian e-commerce. Snapdeal will now go forward as an independent entity.

The beleaguered Snapdeal, based in Gurgaon, whose biggest stakeholder is the Japanese giant SoftBank Group, had shown reluctance in going through with the merger. An official statement released by it said that Snapdeal had decided to pursue an “independent path”. That Snapdeal founders Kunal Bahl and Rohit Bansal were not happy with the deal was evident when Flipkart’s initial offer for the struggling online portal was rejected. Snapdeal has now rejected Flipkart’s second offer of $850 million made on July 17, according to Economic Times.

According to sources, SoftBank may go ahead and invest in Flipkart on its own and may not continue its association with Snapdeal. The latter is all set to reveal Snapdeal 2.0, stripped down, rebooted version of the company, which will be an open marketplace set-up that is supposed to achieve gross profitability. The company is also gearing up to sell non-core assets and has already sold off its online wallet Freecharge to Axis Bank. The money from this as well as the existing resources will enable it to run for atleast four more years.

Sources: Economic Times, Business Standard

RBI stops printing Rs 2000 notes and focuses on new Rs 200 notes

According to Livemint, the Reserve Bank of India (RBI) has stopped printing Rs 2000 notes for the current fiscal year. The notes were introduced post the demonetisation drive on November 8, 2016; in a bid to quickly increase currency in circulation. The RBI has not printed Rs 2000 notes for the past five months from its Mysuru mint; instead is expected to release new Rs 200 notes by next month.

RBI data reveals, eight months post demonetisation, the currency in circulation was only 86% at Rs 15.55 trillion as on July 14 in comparison to Rs 17.7 trillion on November 4, 2016. In majority, so far, nearly 14 billion pieces of new Rs 500 notes have been printed (close to 90% of the current currency circulation).  However, sounding cautious the SBI chief economist Soumya Kanti Ghosh said, “RBI is possibly keeping the supply of Rs 2000 bank notes low to get a right mix.”

Further, a report dated July 19, 2017 by SBI’s economic research wing shows banks with 5.4 per cent of currency in circulation, versus 3.8 per cent before demonetisation. This means that most ATMs or bank branches have excess cash lying with them, which can probably be Rs 2000 bank notes. The report also highlighted the mismatch in distribution of currency towards smaller denomination as the presence of Rs 2000 denomination straight after Rs 500. The introduction of Rs 200 notes aims to address this gap.

Sources: Livemint, Business Standard

Kotak Mahindra Bank’s first quarter Net Profit rises

India’s fourth largest private sector lender by assets, Kodak Mahindra Bank publicly announced a 23% jump in its first quarter net profit on Thursday, June 20, 2017. The core income which the bank earns by giving out loans, increased 17%, that is Rs. 245.55 crores. Other incomes have also shown a hike of Rs. 906.88.  As reported by the TOI, analysts on an average had expected the bank to make a net profit of Rs. 16.24 billion. But, the quarter year ending on June 30, gave even better figures. Provisions for bad loans and contingencies is Rs. 203.74 crores for the June quarter.

The RBI had identified the four of the twelve accounts, where this bank has a total exposure of Rs.236 crores for insolvency proceedings. During the merger in 2015, Kotak Mahindra inherited these four accounts from ING Vysya Bank.

Some market experts believed that asset quality of the bank will probably remain the same, while Gross Non-Performing Assets (NPA) will show an increase. Likely, gross advances of NPA rose to 2.58% from 2.50%, as of the June quarter, at the same time net NPA rose from 1.21% to 1.25%, as reported by the TOI.

 

Source: TOI, Reuters

Cigarrete prices to increase after GST

The stock market saw a fall of 15 percent in the shares of ITC Ltd, its steepest fall in 25 years. Many brokerages downgraded the stock and reduced their target prices as the government increased their cess on cigarettes, which ultimately led to the company going through an erase of nearly Rs50,000 crore in market value.

Not just that, other cigarette companies like VST Industries Ltd went down 3 percent and Godfrey Phillips India Ltd shares have also gone down by 6 percent mentioned Inshorts.

CLSA in a note mentioned “We were forced to downgrade to ‘sell’ as earnings outlook weakens,” adding, “Price hike would be required to grow earnings which may also impact volumes. The outcome is clearly negative from the neutral stance that the government always mentioned.”

Livemint also reported, that the prices of cigarettes will also increase by Rs 4.8-7.9 per 10 sticks, which further depends upon the specific filters and length of the cigarettes. Finance Minister Arun Jaitley, quoted after GST Council meeting, the increase in cigarette cess will ultimately benefit the exchequer by an approximate amount of Rs5,000 crore per year.

Sources: Inshorts, Livemint

The Advertising Standard Authority to ban gender stereotypes in UK

Britain’s advertising watchdog, The Advertising Standards Authority said on Tuesday that all advertisements not following the norms of gender stereotypes can be banned. The new rules inform the agencies that all content that leads to misinterpretation for children limiting their aspirations and has a harmful impact will not be approved. Gender stereotypes and characteristics have a long term effect on the minds of the children and are the reason for the new law to be implemented.
All confusing and problematic advertising such as specific activity which is meant for girls and vice versa will be taken down. “Portrayals which reinforce outdated and stereotypical views on gender roles in society can have a harmful impact,” said Advertising Standards Authority (ASA) Chief Executive Guy Parker to Reuters.
 
ASA has also banned all the ads in the past, that can be easily categorized under objectification, unhealthily thin and inappropriate sexualisation. Since television and visual images have an intense effect, it leads to assumptions of whether a man or women could do a particular task. 
 
According to a statement, the ASA has confirmed that however, not all the ads will be banned. A woman cleaning or a man doing DIY tasks is acceptable.
The Indian gender stereotypical advertising has gone down in ratio, however, the decrease is gradual. One of the prominent examples of this was Ariel’s “Share the Load”. It showed how a couple could easily share the daily chores of the house. The ad focused on breaking the stereotype of women being assigned to wash clothes. The coming years we hope to see much progress eliminating the grounds of discrimination.
Sources: Reuters, BBC
Image Source: Skynews

Volkswagen Finance appoints Patrik Riese as the new MD and CEO

On Monday, Volkswagen Finance Private Ltd, the financial branch of the Volkswagen Group in India, announced Patrik Riese as their new Managing Director and CEO. He replaced Andreas Kutzner, who took the position in June 2015 as reported by PTI.

Riese studied International Business and Marketing from the Business school at the University of Gothenburg. Previously, holding the position of the Managing Director of Volkswagen financial services in South Africa and Sweden, his career spans over 26 years in the automotive industry.

Volkswagen Finance Private Ltd is also responsible for catering operations along with other major automotive brands in India. Skoda Financial Services, Audi Financial Services are among the few companies. It also provides financial services to Porsche, Lamborghini, and Sacia in the country.

The company is set to launch their new cars in the upcoming months. Volkswagen Passant will be launched September 2017, with an estimated price of Rs 25.00 Lakhs. Similarly, the company will be launching Up (hatchback) and T-Roc (SUV), both in the month of October.

Sources:

LivemintIndia Today