Page 11 - Banking Finance July 2021

RBI CORNER

This format shall enable the borrowers soured credit among major economies The survey collects information from
to compare interest rates as well as and a crisis in the shadow banking mutual fund companies and asset
other fees associated with a sector culminated in the rescue of two management companies on their
microfinance loan in an easy-to- lenders and bankruptcy of two more external financial liabilities and assets
understand manner. over the past couple of years. as at end-March of the latest financial
The framework proposes to align Despite those struggles, strategists year.
pricing guidelines for NBFC-MFIs with expect India's marquee lenders to Consolidated results of the survey are
that prescribed for NBFCs. withstand the impact of two waves of released in the public domain, besides
virus infections on the economy being used for compilation of India's
Financial instability thanks to robust provisioning and new external sector statistics.
looming over India's measures that will allow them to hide
the true extent of their bad loans RBI plan to boost forex
banking sector through 2022. That may boost the tailwind for trade
Former Indian ex deputy governor sector's performance - which has been
Rakesh Mohan warned of looming middle-of-the pack this quarter - in an The accumulation of foreign
financial instability in India's already equity market that's looking beyond exchange may check the
struggling banking sector, citing the the economic impact of the strengthening of the local currency
growing divergence between the pain pandemic's second wave as the index and fuel Indian exports in the short
in the real economy and the hits record highs. term, experts said, with the central
exuberance in the capital markets. bank hinting that current reserves of
RBI launches FY21 round $600 billion are sufficient to cover
Mohan, who served as deputy imports for a shorter duration than
governor of the Reserve Bank of India of survey on ITES exports many other large economies.

twice between 2002 and 2009, said The Reserve Bank said it has launched
loan growth has mostly been sluggish the 2020-21 round of its annual survey The Reserve Bank of India's (RBI's) 16
in the economy despite the RBI's on computer software and June monthly bulletin said forex
recent measures to boost flow of bank information technology enabled reserves crossed $600 billion, making
credit. The only exception was credit services (ITES) exports, results of India the world's fifth-largest reserve
to small- and medium-sized which are used for compilation of holding country. However, RBI said
enterprises, he wrote in a paper balance of payments statistics. The this will still cover less than 15 months
published by the Centre for Social and RBI has been conducting this annual of projected imports, against
Economic Progress. survey since 2002-03. It collects data Switzerland's 39 months, Japan's 22
months, Russia's 20 months, and
"Hence there is a mismatch between on various aspects of computer China's 16 months. Since the
the performance of the real sector services exports as well as exports of publication of the bulletin, the
and financial markets," Mohan said. ITES and business process outsourcing reserves rose further to $608.08
"This could potentially lead to (BPO). billion as on 11 June.
enhanced stresses experienced by The survey results are released in the "There is an intrinsic bias towards
both lenders and borrowers, leading public domain, besides being used for accumulation, which will have a
to potential financial instability." compilation of balance of payments
residual impact on the rupee. There is
His views come days before the (BoP) statistics and other uses, it said a chance that the rupee will mostly
central bank releases its bi-annual in a release. underperform compared to emerging
Financial Stability Report, which will In another release, the RBI said it has market peers even with healthy
give investors a clearer picture on also launched the 2020-21 round of emerging markets flows," Madhavi
how India's banking sector is dealing the annual survey on 'Foreign Arora, lead economist at Emkay
with an economic downturn. The Liabilities and Assets of Mutual Funds Global Financial Services, said over
country has one of the biggest piles of and Asset Management Companies'. the phone.

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