QBiz: Bank Stakes in Insurance Cos Capped; Rating Firms Penalised

Here are the top business stories of the day.

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1. RBI Tells Banks to Cap Stake in Insurance Companies at 30%

The Reserve Bank of India has asked lenders to cut their stakes in insurers to 30%, as the banking regulator attempts to shield banks from risks arising out of their non-banking businesses and steer focus to boosting credit growth in a slowing economy, four people with direct knowledge of the matter said.

RBI informed the bankers in a meeting last week that it will soon introduce rules to cap their holdings in an insurance company to 30%, the people said, requesting anonymity as the matter is confidential.

(Source: Mint)

2. Sebi Penalises Rating Agencies Over Lapses in IL&FS

Securities and Exchange Board of India (Sebi) in two orders passed on Friday evening found credit ratings agencies or CRAs lapsing and lacking in conduct when they rated the Non Convertible Debentures or NCDs of Infrastructure Leasing and Financial Services Ltd (IL&FS).

In a rare instance the regulator levied a penalty of Rs 25 lakh each on three rating agencies ICRA ltd, India Ratings & Research and Care Ratings Ltd for not exercising due-diligence and lapsing on their duties to investors by not taking timely rating actions.

(Source: Mint)

3. Air India Stake Sale: Govt Likely to Float EoI for Airline After Mid-Jan

The disinvestment department is likely to issue the expression of interest ((EoI) for the debt-ridden Air India after the winter holiday season which will ensure greater participation by foreign buyers.

"Tentatively the EoI could be any time after 10 January" said a source.

While the government is keen to sell off the loss-making state-owned carrier Air India, attempts to showcase it as an attractive proposition to buyers have not been successful.

4. Bank Credit Growth May Fall to 6.5-7% in FY20, Says Icra

With the Indian economy caught in a slowdown, bank credit is expected to expand at a muted 6.5-7 percent in 2019-20 (FY20) from 13.3 percent in FY19, rating agency ICRA said in a report. This will be the lowest in 58 years, mainly on account of lower working capital requirements by companies and risk aversion among lenders.

According to ICRA, even in a high-growth scenario, wherein the second half of FY20 sees the incremental bank credit rise to Rs 6.5-7 trillion, there will still be a 40-45 percent year-on-year (YoY) decline.

5. FM to Meet CEOs of State-Owned Banks on Saturday

Finance Minister Nirmala Sitharaman will hold a meeting with heads of public sector banks on Saturday to review financial performance of the lenders and their business growth, sources said.

Given the importance of the banking sector in generating demand and boosting consumption, the sources said the meeting with the MD and CEOs of PSBs ahead of the Budget 2020-21 is considered important.

Sitharaman is expected to present her second full Budget on 1 February.

The meeting is also expected to take up discussion on non-performing asset recovery through both NCLT and non-NCLT means, the sources said.

Banks have recovered Rs 4,01,393 crore over the previous four financial years, including record recovery of Rs 1,56,702 crore during 2018-19.

6. RBI to Purchase, Sale Government Securities Worth Rs 10,000 Crore Each on Monday

The Reserve Bank of India on Thursday announced simultaneous purchase and sale of government securities through special open market operations (OMOs) for Rs 10,000 crore each on 30 December following a review of liquidity situation.

Earlier this week, the central bank had conducted a similar OMO and purchased securities worth Rs 10,000 crore and sold worth Rs 6,825 crore.

"On review of the current liquidity and market situation and an assessment of the evolving financial conditions, the Reserve Bank has decided to conduct one more simultaneous purchase and sale of government securities under OMO for Rs 10,000 crore each on 30 December 2019," it said in a statement.

7. Railways Says Will Rationalise Freight Charges, Passenger Fares

Indian Railways is rationalising passenger fares and freight rates, railway board chairman Vinod Kumar Yadav said on Thursday.

“We are going to rationalise the fares and freight rates. Something is being thought about. I cannot divulge more. This is a sensitive subject. While the freight fares are already high, our target is to draw more traffic from road to railways," Yadav told reporters.

Yadav, however, did not say if the prices will be increased.

Indian Railways runs one of the largest logistics and transportation networks in the world. The scale of operations makes it a challenge to cater to the demands of both freight and passengers, in terms of congestion in routes, leading to delays.

(Source: Mint)

8. FPI Investments in Corporate Bonds at Over 30-Month Lows

Foreign portfolio investors (FPIs) investments in Indian corporate bonds have hit over a two-and-a-half year low after falling below the $27 billion-mark in December. FPIs have utilised only 58.36 percent of the investment limits available, NSDL data shows.

Experts indicate that after the NBFC default crisis, foreign investors are avoiding exposure to papers that are not of high quality. On top of it, liquidity still remains a concern in the Indian corporate bond market.

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