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Govt seeks to raise Rs 14,000 cr from second tranche of Bharat Bond ETF

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Two new series will have maturities of April 2025 and April 2031.

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govt bonds

Jash Kriplani  |  Mumbai 

The government will be launching the second tranche of Bharat Bond ETF, seeking to raise Rs 14,000 crore in July.

The two new Bharat Bond ETF series will have maturities of April 2025 and April 2031. The base issue size of the ETF is Rs 3,000 crore, with a green shoe option of Rs 11,000 crore based on market demand.

“After an overwhelming response to the first tranche of Bharat Bond ETF in December last year, we are excited to announce this next tranche of two new maturity series. The launch is in line with our vision to create a ladder of Bharat Bond ETFs across various maturities on the yield curve. This will provide more options for investors to match their investment needs with different time horizons,” said Radhika Gupta, chief executive officer of Edelweiss Mutual Fund (MF).

ALSO READ: Sudden spike in bond yield amid coronavirus outbreak signals trouble

Edelweiss MF was given the mandate to manage Bharat Bond ETF by the Department of Investment and Public Asset Management.

The ETF will invest in constituents of the NIFTY BHARAT Bond Indices, consisting of AAA rated public sector units (PSUs). Bharat Bond Fund-of-Funds (FOF) with similar maturities will also be launched for investors, who do not have demat accounts.

Unlike other government ETFs, where investors can invest in equity shares of diverse government PSUs, Bharat Bond ETF allows investors to take exposure to a portfolio of debt papers of government PSUs.

The first launch of Bharat Bond ETF had raised over Rs 12,400 crore.

First Published: Fri, May 22 2020. 15:01 IST

Source: Business Standard

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RBI breather for trade: Higher export credit, more time to pay import bills

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The (RBI) on Friday unleashed a series of relaxations for exporters and importers, including higher export credit, more time to pay for import orders and increased flexibility in repaying loans. The measures are expected to give the sector more time and liquidity to tackle the ongoing coronavirus crisis. But while exporters have lauded the measures as timely, their call for more government support and a detailed package continues.

The rare intervention in foreign trade norms by the RBI came after the central bank took note of the deepening contraction in global activity and trade, and agreed that the impact on India’s foreign trade is substantial. India’s exports contracted by a record 60.28 per cent in April, following a fall of 34.5 per cent in March as the Covid-19-induced lockdown took its toll on trade with other countries. The latest drop in outbound trade was the most since at least April 1, 1995.

ALSO READ: Govt seeks to raise Rs 14,000 cr from second tranche of Bharat Bond ETF

“The measures would ease exporters’ distress, but the problem is far greater, posing existential crisis for the sector. Exporters would need direct fiscal support for staying alive in business. These measures can be in the form of waiver of electricity-user charges, reduction of levies at the ports, freight support and wage support for workers,” said Engineering Export Promotion Council Chairman Ravi Sehgal.

In a major move, the RBI boosted the coffers of the Export-Import Bank of India by extending a line of credit worth Rs 15,000 crore for a period of 90 days (with a rollover of up to one year) so as to enable it to avail a dollar-swap facility. This is expected to help in leveraging long term and project exports as a “marketing tool” as buyers would be more willing to buy products from the seller, according to the Federation of Indian Export Organisations (FIEO).


ALSO READ: Coronavirus LIVE: ICSE to conduct pending board exams from July 1-14

For exporters, the maximum permissible period of pre and post-shipment export credit sanctioned by banks has also been raised. As opposed to the current 12 months, this will now be 15 months, for disbursements made up to July 31 this year.

More needed

While the measures would usher in an era of very competitive credit rates to help manufacturing and overall economy, they would also ensure that inflation remains within the target range, said Sharad Kumar Saraf, President of “But RBI’s assessment of the economic revival during the first half remains bleak, with signs of revival to be only seen during the second half of the financial year. We again urge the government to immediately announce an export package covering all export sectors,” he added.

ALSO READ: Experts disagree with MPC stance that inflation will fall below 4% in H2

In a speech, RBI governor also pointed out that investment demand has stopped as imports of capital goods fell 27 per cent in March, before plunging by 57.5 per cent in April. Domestic production of capital goods declined by 36 per cent in March, spiralling downwards for the 14th straight month, despite the government’s efforts to open up even more sectors to easier foreign direct investment flows last year.

The RBI also extended the current loan moratorium by another three months. “The RBI should also consider extending this moratorium to NBFCs for their repayment to banks, without which the NBFCs sector is facing acute distress. One-time restructuring of loans to relieve stressed businesses may also be allowed,” the Confederation of Indian Industry said.

Time relief

Over the past two months, exporters had repeatedly pointed out the issue of massive chunks of export orders getting cancelled or postponed, and the subsequent delay in realization of bills. Now, the RBI has permitted an increase in the period of realization and repatriation of export proceeds to India from nine months to 15 months. This will be valid from the date of export for shipments sent out till July 31, 2020. RBI should continuously monitor the delicate economic situation and make pragmatic announcements after every two months interval.

ALSO READ: Gloom for savers: How RBI repo rate cut will impact FD investments, savings

For inbound shipments that arrive till the same date, importers will now get 6 more months to complete outward remittances. Currently, importers get 6 months to send remittances. The new facility, however, will not be available for import of gold, diamonds and precious stones or jewellery. The Gems and Jewellery Export Promotion Council said these items needed to be covered since liquidity has hit exporters in the sector and bank loans to jewellers have dried up since the Nirav Modi controversy.

The RBI has also suggested that the government reassess import duties for various items and crucially pulses. “Among the pressure points, the elevated level of pulses inflation is worrisome, and warrants timely and swift supply management interventions, including a reappraisal of import duties,” Das said.

RBI’s easier terms for trade

  • Exim Bank to get new line of credit worth 15,000 Cr
  • Pre, post shipment export credit to now be available for 15 months
  • Export proceed can be repatriated within 15 months
  • Importers will be able to complete outward remittance within 12 months
  • Ongoing loan moratorium extended by 3 months

First Published: Fri, May 22 2020. 15:08 IST

Source: Business Standard

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Experts disagree with MPC stance that inflation will fall below 4% in H2

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The Reserve Bank of India’s monetary policy committee (MPC) has cut the repo rate by 40 basis points despite the “highly uncertain” outlook on retail inflation. MPC expected the high inflation rate regime to be short-lived and said it would fall below four per cent in the second half of the current financial year.

However, experts are not on the same page as the MPC on inflation. Madan Sabnavis, chief economist at CARE Ratings, did not agree with MPC’s assessment that inflation would fall below four per cent in the third and fourth quarters of the current financial eyar.

He said,”Inflation would remain above four per cent, closer to five per cent, in the remaining months of FY21.”

ALSO READ: Covid-19 impact: Centre releases truncated WPI inflation data for April

According to Sabnavis, while demand in the non-food segment is low, supply has also been disrupted, which is why inflation would remain high. On the food side, inflation has not come down despite good Rabi output, as there is tendency to recoup earlier losses. This is likely to happen for Kharif crops as well, he said.

RBI also feared that the high food inflation may persist for a few more months, depending on the extent of the lockdown and restoration of the supply chains.

The consumer price index (CPI) for food and beverages rose to 151.4 points in April from 148.9 points in the previous months. However, a caution should be exercised in interpreting this number as many sub-groups such as meat and fish are missing in the April data due to lockdown.

The central bank was particularly worried about inflation in pulses and wanted the government to “reappraise” import duties, besides taking other supply side measures.

CPI in pulses stood at 150.4 points in April against 141.1 points.

RBI also wanted the Food Corporation of India (FCI) to offload some part of excess cereal stocks to cool down ceareal prices and create room for rabi procurement.

The RBi has also, for the first time, acknowledged that the economy will contract in the current financial year even as independent experts have already assessed so.


ALSO READ: RBI says India GDP will contract in FY21, cuts repo rate by 40 bps to 4%

However, RBI governor Shaktikanta Das did not give exact figure of fall in the gross domestic product (GDP). He looked forward to release of GDP data for 2019-20 by the statistics office next week to make a specific projection.

The governor expected gradual revival of the economy in the second half due to possible lifting of lockdown and fiscal/monetary stimulus. However, this has a downward bias as the governor said much depended on how quickly the Covid curve flattens and begins to moderate.

The RBI’s assessment came even as independent experts feared the economy to contract between five to seven per cent in FY’21.

Even today, ICRA further cut its projections for the economic contraction. From earlier expectation of one to two per cent fall in GDP for 2020 21, it now expected the decline to be five per cent.

“We now expect GDP to report contractions of 25 per cent and 2.1 per cent for Q1 and Q2 of FY’21, which implies that a recession is underway,” ICRA principal economist Aditi Nayar said.

On the assumption that the lockdown will be lifted within the first quarter of 2020-21, Nayar expected a V-shaped recovery.

“However, if there is a second wave of infections that forces subsequent lockdowns either in India or globally, the ensuing demand uncertainty and supply chain hiccups could result in a W- shaped economic cycle, the inflection points of which can’t be gauged at this stage,” she said.

First Published: Fri, May 22 2020. 14:51 IST

Source: Business Standard

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SBI Cards and Payment Services slips 9%, hits new low since listing

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Shares of and Payment Services slipped 9 per cent to Rs 495 on the BSE on Friday after the Reserve Bank of India (RBI) today announced an extension of the moratorium on loan EMIs by three months. The RBI commentary indicates that the stress in the economy on both demand and supply is likely to continue.

The non-banking finance company’s stock was trading at its lowest level since listing on March 16, 2020. It has fallen below its previous low of Rs 501 touched on April 16, 2020. The stock has now fallen 34 per cent against its issue price of Rs 755 per share.

In a new set of measures to trim the impact of coronavirus on the economy, the RBI today decided to cut the policy rate by 40 basis points from 4.4 per cent to 4 per cent. The reverse repo rate has been reduced to 3.35 per cent. It has also extended the moratorium on loan repayments by three more months.

For the working capital facilities, the interest payment has been deferred by another three months, in-line with extension of moratorium on term loans. The accumulated interest for the deferment period can be covered into a funded interest term loan payable be end of the current fiscal. Thus, borrowers need not pay accumulated interest in one shot immediately after the deferment period, which is a big relief for them.

“There is a risk of moral hazard issue creeping in, as borrowers who have the ability to pay, may even opt for moratorium. For MFIs and NBFCs catering to bottom of the pyramid customers, the risk of repayment behavior getting disturbed is higher,” Amar Ambani, Senior President and Head of Research – Institutional Equities, YES Securities said.

is the second largest credit card issuer in India. It offers various types of credit cards considering the need of retail clients (viz. Lifestyle Cards, Rewards, Shopping, Travel and Fuel). It also offers corporate cards and is the largest co-brand credit card issuer in India. It also issues card in partnership with smaller or regional banks.

reported a 71 per cent year-on-year (YoY) decline in pre-tax profit at Rs 112 crore in March 2020 quarter (Q4), due to additional bad loan provisioning of Rs 489 crore factoring in Covid-related disruption. The management of the company said the current quarter will get impacted because they are not able source new cards, and the collections are also down.

“While and loss of business have direct bearing on spends (16.7 per cent YoY growth in FY21E vs 27 per cent in FY20) and fees (23 per cent de-growth as against 32 per cent YoY growth in FY20) coupled with NPA spike (4-6 per cent over FY21-22E), we had to prune down FY21 earnings by 48 per cent,” analysts at Prabhudas Lilladher said in a results update.

FY22 should witness return to normalcy attributed to Co.’s SBI association, existing sophisticated technology infrastructure and data analytics. Valuation multiple stands trimmed as it reflects the vulnerability of unsecured nature of business to pandemic shocks, it added.


At 01:51 pm, SBI Cards was trading 5.5 per cent lower at Rs 513 on the BSE, as compared to a 0.89 per cent decline in the S&P BSE Sensex. A combined 3.9 million equity shares changed hands on the counter on the NSE and BSE so far.

Source: Business Standard

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