Page 6 - Banking Finance January 2022

BANK UPDATE

the amount of cash that banks must Nova Scotia exiting their precious met- benchmark lending rate, or base rate,
hold in reserve, its second such move als business, many large bullion deal- by 10 bps without waiting for the RBI
this year, releasing 1.2 trillion yuan ers who were previously clients of the to hike the repo rate or reverse repo
($188 billion) in long-term liquidity to banks, have set up their own refiner- rate. SBI's revised base rate is 7.55 per
bolster slowing economic growth. ies, said the World Council of India re- cent. Base rate is the minimum inter-
port on 'Bullion Trade in India'. est rate at which a bank could lend to
The People's Bank of China (PBOC) said
its customers under the base rate re-
on its website it would cut the reserve In the last five years, dore imports
gime.
requirement ratio (RRR) for banks by made up 30 per cent of total official
50 basis points (bps), effective from gold imports due to lower duty. The This means the overall interest rate of
December 15. number of refineries have increased old borrowers with floating rate loans

The world's second-largest economy, from three in 2012 to 32 in 2020. like home loans linked to the base rate
which staged an impressive rebound Currently, some 25-26 refineries are will go up. Home loan customer will
have to shell out higher equated
from last year's pandemic slump, has active, with a combined refining ca-
monthly instalments (EMIs) or they will
lost momentum in recent months as it pacity of 1,200 to 1,400 tonnes.
grapples with a slowing manufacturing Of these, 23 refineries imported dore have to extend their loan tenure.
sector, debt problems in the property in 2020 and the top five refineries ac-
market and persistent Covid-19 out- counted for over 70 per cent of India's To rejuvenate 'life' in agri-
breaks. dore imports. cultural fields, Nabard to
Some analysts believe growth could With lower duty on dore, the share of roll out Jiva
slow further in the fourth quarter from gold imports has increased from 11 per To rejuvenate 'life' around agriculture,
the third quarter's 4.9%, although the
cent in 2014 to 29 per cent in 2020. the National Bank for Agriculture and
full-year growth could still be around Rural Development (Nabard) is rolling
8%. In last five years ending 2020, imports out Jiva (life) with its network of non-
made up 86 per cent of India's gold
"The RRR reduction will help alleviate supply, while recycling accounted for governmental organisations and other
the downward pressure on the 13 per cent and mining accounted for stakeholders in rural areas.
economy and smooth the economic
just one per cent. "Jiva is about rejuvenation of earth,
growth curve," said Wen Bin, a senior creating life around the agricultural
economist at Minsheng Bank.
No RBI signal, but lenders fields, using natural resources. We
"Although there is little pressure to have created watersheds, ensuring
achieve this year's economic growth kick-off rate hikes in India water security to 2.5 million hectares
target, economic work will face big Although the Reserve Bank of India of land," Nabard Chairman GR
pressures and challenges next year." (RBI) is yet to jack up key policy rates, Chintala told.
interest rates are slowly showing signs
The government has set a relatively Now that the water security is ensured
of rising in the financial system, in line
modest annual economic growth tar- the question now is whether the soil is
with the global trend. At a time when
get, at above 6%, for this year, com- enriched, whether the microbial activ-
ing off the pandemic-stricken 2020. global central banks are scheduled to ity in the soils is maintained well,
tighten their monetary policies and whether the farmers are practising
hike rates, Indian banks and financial
Banks' share of gold im- entities have started announcing rate proper agricultural practices. "Jiva is
about creating a system where no
ports drop to 19% in 2020 hikes. more harm can be done to the soil,

Banks' share of gold imports have Even as the Bank of England hiked the nature," he said.
shrunk to 19 per cent in 2020 against interest rates by 15 basis points to 0.25 The Nabard is roping its network of
40 per cent in 2017 as the share of per cent and the US Federal Reserve NGOs and other stakeholders to roll out
dore (unrefined gold) imports by refin- decided to accelerate tapering of bond this programme. A training
ers increase steadily. purchases ahead of a rate hike, programme is on in Maharashtra to
Moreover, with bullion banks such as State Bank of India (SBI) has raised the sensitise stakeholders.

6 | 2022 | JANUARY | BANKING FINANCE