NIMs to stay robust in second half of FY18: Federal Bank's Shyam Srinivasan

Kochi-based Federal Bank posted a 25 per cent growth in credit in Q2, bucking a slowdown trend being seen across the banking industry. SHYAM SRINIVASAN, its managing director and chief executive, tells Abhijit Lele the growth trajectory would remain. Edited excerpts:
Your net interest income (NII) grew 23.8 per cent in the quarter. What contributed to this growth?
There has been all-round growth. Consistency in credit growth, better credit-to-deposit ratio and lower interest rate reversal (for bad loans) contributed to better NII.
Net interest margin improved in the quarter? Will the bank post better NIMs in the second half of the year?
NIMs in Q2 rose by 18 basis points to 3.31 per cent in Q2 from 3.13 per cent in the first quarter. The margins are expected to be in a similar range in the second half (October 2017-March 2018).
What is your outlook on interest rates?
Policy rates are not likely to see any sharp dip. As for the bank’s interest rate, we want to be competitive. We are now a significant player with about one per cent of the market.
Other income saw a marginal rise in the second quarter. What factors impacted performance?
Treasury income was impacted because of market developments. Fee income and foreign exchange streams have seen robust growth.
Your loan book rose by 25 per cent (year-on-year). The second half of a financial year is usually a busy season. Will there be an acceleration in pace then?
Almost two-thirds of credit demand is seen in the second half. We are confident of maintaining the growth tempo.
The quarter saw a system transiting to the goods and services tax (GST) regime. Did small and medium enterprises log a jump in the working capital limit use, especially during the liquidity crunch?
We have seen a rise in the use of working capital limits in some pockets, like textiles. The full effect of the new tax regime will be seen the third quarter.
The cost-to-income ratio declined to 50 per cent, indicating improvement in efficiency. Will there be a further drop in the ratio?
We are not signalling any dramatic cut in the C\I ratio. The bank has made investments in various areas, including expansion of network, for better growth. So, cost of income is expected to be 50-51 per cent for some time.
One of your peers (IndusInd Bank) has just signed a deal to acquire a microfinance company. Is Federal Bank also looking at such growth opportunities?
We are exploring such opportunities. But nothing is on the cards for now.

Fundraising via IPOs at record high; crosses Rs 40,000 crore mark in CY17

So far in 2017, 28 companies have collectively mopped up ~44,853 cr
With the initial public offering (IPO) of General Insurance Corporation of India (GIC Re) getting fully subscribed, fundraising through the IPO route has hit a record high in 2017, crossing the ~40,000-crore mark.
Thus far in the calendar year 2017 (CY17), 28 companies have collectively mopped up ~44,853 crore through IPOs, surpassing the previous high recorded seven years ago. In the entire CY10, as many as 64 companies had raised ~37,535 crore via IPOs.
Twenty-four companies raised ~30,853 crore in the first nine months of CY17, data from PRIME Database shows. In October, four companies — Godrej Agrovet, MAS Financial Services, Indian Energy Exchange, and GIC Re — have collectively mobilised around ~14,000 crore, totalling ~44,853 crore in CY17.
The amount is 82 per cent higher compared to the same period last year, when 24 companies mobilised ~24,653 crore from the primary market. In the entire CY16, 26 firms raised ~26,494 crore, the data shows.
Among sectors, financials, including housing finance and insurance companies, have cornered nearly two-thirds share, or about ~30,000 crore, of the total fund raised thus far in CY17. The companies from the sectors like construction, trading, and pharmaceuticals raised over ~1,000 crore though IPOs.
Analysts say the positive secondary market sentiment has rubbed off on the primary market as well, with 12 of 24 companies debuting on the exchanges this year listing at over 10 per cent premium against their respective issue price.
“Promoters are making use of the bull run in the secondary market to raise funds via the IPO route. Valuations for a lot of mid-cap companies have improved over time, and promoters are using this opportunity to tap the market for funds, including micro-finance companies, non-banking financial companies (NBFCs) and private banks,” says G Chokkalingam, founder and managing director, Equinomics Research.
Avenue Supermarts (owner of the D-Mart brand), Central Depository Services (India) or CDSL, Shankara Building Products, Apex Frozen Foods, and PSP Projects have seen their market value more than doubled from their issue price. Dixon Technologies, AU Small Finance Bank, Capacit’e Infraprojects, Housing and Urban Development Corporation, and Cochin Shipyard were up in the range of 30 per cent to 65 per cent against their issue price.
With the economic cycle likely to witness an upturn going ahead, analysts expect more companies, especially from the banking and NBFC space, to hit the primary market. This, they feel, will also be led by the need for capital for expansion.
“Credit growth is likely to pick up over time given the formalisation of the economy. That apart, consumption and penetration levels of corporates (into rural India) are going up. For this, corporates, including banks and NBFCs, will need funds to grow. The unlisted ones, as a result, will tap the markets to meet this requirement,” says Vinay Khattar, associate director and head of research at Edelweiss.
On the other hand, big-ticket IPOs like SBI Life Insurance Company, ICICI Lombard General Insurance Company, and Eris Lifesciences have underperformed the market by recording single digit or negative return post their listing.
“A lot also depends on the IPO pricing as well. For these insurance companies, the pricing was aggressive and left little for the investors on the table. As a result the IPOs have underperformed,” Chokkalingam said.

Wholesale inflation falls to 2.6% in September

The Wholesale Price Index (WPI)-based inflation data released on Monday provided yet another indicator of improving macroeconomic parameters.
Wholesale inflation fell to 2.60 per cent in September from 3.24 per cent in August due to a subdued rate of price rise in food items, particularly vegetables. However, economists warned that data of a few more months would have to be analysed to come to any conclusion on macroeconomic improvement.
Though food inflation declined to 2.04 per cent, against 5.75 per cent in August, the rate of price rise in onions was elevated. Despite moderation, inflation in onions stood at 79.78 per cent against 88.46 per cent. Otherwise, inflation in vegetable prices cooled to 15.48 per cent in September, against a high of 44.91 per cent in the previous month.
Inflation in manufactured products witnessed a slight increase at 2.72 per cent, against 2.45 per cent in August.
Fuel and power inflation cooled to 9.01 per cent, against 9.99 per cent in August.
Aditi Nayar, principal economist with ICRA, said a favourable base effect aided moderation in inflation on fuel and power, despite the recent rise in prices of petrol, diesel, aviation turbine fuel and other fuels. “Initial data has placed the index for crude petroleum at 55.6 points for September 2017, only 1 per cent higher than the level for June 2017, despite the 17 per cent increase in the average price of the Indian crude oil basket in the rupee terms during this time period. There is a possibility that inflation for September 2017 would subsequently be revised higher on account of crude oil," she said.
The inflation number would provide a boost to those claiming macroeconomic numbers were on the upswing now.
Industrial production grew at a nine-month high of over 4 per cent in August, mainly on account of robust performance of mining and power sectors, coupled with higher capital goods output. Exports rose to over 25 per cent in September, the second consecutive month of double-digit rise. Retail inflation remained at 3.28 per cent in September, unchanged from August, even as vegetable and cereal prices softened.
All these data came after gross domestic product growth declined to a three-year low of 5.7 per cent in the first quarter of FY'18, reflecting a major slowdown in the economy due to lingering impact of demonetisation and pre-GST jitters.
Nayar, however, cautioned against over-interpreting these numbers. "The recent set of macroeconomic data indicates some improvement. However, we need to watch whether this sustains over the next few months. One month's data may not provide a clear picture regarding the future trend.”
To buttress her point, she said the year-on-year pace of growth of electricity generation, Coal India's production and automobile production had declined in September. This could dampen the rise in September industrial production to some extent, she added.
Madan Sabnavis, chief economist with CARE Ratings, said," while there are inherent pressures which can push up this rate, we expect it to be within the range of 3-3.5% by the end of the year, which is definitely not going be a concern."
In fact any upside in this number for manufactured products would be good news for this sector as it would imply regaining pricing power, he said.
Earlier this month, the Reserve Bank kept benchmark interest rate unchanged on fears of rising inflation, while lowering growth forecast to 6.7 per cent for the current fiscal year. It also raised its retail inflation forecast to 4.2 to 4.6 per cent for the rest of the current fiscal year, from 4 to 4.5 per cent.

Over 69 lacs subscribers join Atal Pension Yojana with contribution of Rs. 2690 crores

Atal Pension Yojana currently has over 69 lacs subscribers with contribution of Rs. 2690.00 crores. Chairman, PFRDA Shri Hemant G Contractor however emphasised the need of increasing the pension coverage in India at a recently concluded conference on Atal Pension Yojana. The conference organised by Pension Fund Regulatory and Development Authority (PFRDA) in the national capital saw participation from all major banks, representatives from NPCI, SCHIL, SIDBI, Access Assist and some major MFIs.
A large section of the society still does not have access to pensions and this is a cause of concern for PFRDA and Government, Shri Contactor said. Congratulating the winners of the contest organised by PFRDA the Chairman said that APY has made progress in covering the intended subscribers but much remains to be done. He mentioned that on an average, a little less than 2% of the eligible population is covered under APY and hence a lot has to be done to provide people a regular access to old age income. He also touched upon the issues of persistence in the APY accounts and asserted that the objective of the scheme is to provide pension and this will only happen if the contribution in the account has been regularly paid. He urged the APY Service Providers to educate the subscribers on the importance of the same. He also urged upon the APY Service Providers i.e Banks and Post Offices under Department of Post to achieve the targets allocated by government by putting in their best efforts.
A video message of Shri Rajiv Kumar, Secretary DFS was played during the occasion. Shri Rajiv Kumar mentioned that Atal Pension Yojana is flagship program of the Government of India under financial inclusion and financial security. The pension coverage in this country is at around 12% and banks and other stakeholder need to work towards greater coverage under the scheme. He also said that DFS is monitoring the progress under the scheme and targets allocated under the scheme to banks should be accomplished. He touched upon the subject of providing a digital platform for APY by PFRDA i.e e-APY. Secretary Shri Rajiv Kumar congratulated the banks on their performance under the campaigns and urged them to continue the work.
While the government has a pension scheme for the BPL persons but the amount is meagre and is not sufficient for old age needs. 9% of the population of India, i.e 110 million people are over 60 years and by 2030 this figure is expected to cross 180 million. The 60 plus age groups is the fastest growing demographic in the country. With increase in longevity of the people, disintegration of the joint family system in India and inflation, there is greater need for old age than ever before. Currently pension benefits are available India basically to the organised sector. Atal Pension Yojana introduced in 2015 by Government of India provides a self- contributory savings pension scheme with guaranteed pension of Rs. 1,000/- to Rs. 5,000/- with a very low contribution by the subscriber. All banks and Department of Post have pushed the product to the interiors of the country. APY has option for increasing the pension amount from Rs. 1000/- to any other amount up to Rs. 5000/- as per the savings capacity of the subscriber, and further allows the spouse to continue the account in the event of the death of the subscriber before the age of sixty years. PFRDA has also been engaging with various State Governments for providing co-contribution under the scheme. With the introduction of e-APY through Aadhaar, the banks will be able to effectively utilise the digital platform for greater coverage.

Growth in India to pick up further in 2017, 2018: IMF

Washington: India will stay ahead of China on the growth curve in 2017 and 2018, said the International Monetary Fund (IMF) while retaining the country's GDP forecast at 7.2 per cent for the current fiscal.
"Growth in India is forecast to pick up further in 2017 and 2018," the IMF said in its latest World Economic Outlook Update released in Kuala Lumpur on Monday.
China's growth, the IMF said, is expected to remain at 6.7 per cent in 2017, the same level as in 2016, and to decline only modestly in 2018 to 6.4 per cent.
Global output is projected to grow by 3.5 per cent in 2017 and 3.6 per cent in 2018, said the report.
"While activity slowed following the currency exchange initiative, growth for 2016 at 7.1 per cent was higher than anticipated due to strong government spending and data revisions that show stronger momentum in the first part of the year," the IMF said in its latest update.
Global growth for 2016 is now estimated at 3.2 per cent, slightly stronger than that of April 2017.
This primarily reflects much higher growth in Iran and stronger activity in India following national accounts revisions, the report said.
"Economic activity in both advanced economies and emerging and developing economies is forecast to accelerate in 2017, to 2 per cent and 4.6 per cent respectively, with global growth projected to be 3.5 per cent, unchanged from the April forecast," it said.
The growth forecast for 2018 is 1.9 per cent for advanced economies, 0.1 percentage point below the April 2017 WEO, and 4.8 per cent for emerging and developing economies, the same as in the spring.
The 2018 global growth forecast is unchanged at 3.6 per cent.
The revisions mirror primarily macroeconomic implications of changes in policy assumptions for the world's two largest economies, the United States and China, the multilateral agency said.
According to the report, China's forecast for 2017 was revised up by 0.1 percentage point, signalling the stronger than expected outturn in the first quarter of the year underpinned by previous policy easing and supply-side reforms.
For 2018, the upward revision of 0.2 percentage point mainly reflects an expectation that the authorities will delay fiscal adjustment to meet their target of doubling 2010 real GDP by 2020.
The delay comes at the cost of further large increases in debt, but downside risks around this baseline have also increased, it said.
According to the IMF, China's failure to continue focus on addressing financial sector risks and curb excessive credit growth could result in an abrupt growth slowdown, with adverse spillovers to other countries through trade, commodity price, and confidence channels.
A faster-than-expected monetary policy normalisation in the United States could tighten global financial conditions and trigger reversals in capital flows to emerging economies, along with US dollar appreciation, it predicted.
The US is projected to grow at a clip of 2.1 per cent in 2017 and 2018.

Prime Minister Modi and Prime Minister Costa launch unique Start-up portal

New Delhi: Prime Minister Modi and Prime Minister Costa today launched a unique startup Portal - the India-Portugal International StartUp Hub (IPISH) - in Lisbon.
This is a platform initiated by Startup India and supported by Commerce & Industry Ministry and Startup Portugal to create a mutually supportive entrepreneurial partnership.
IPISH hosts a range of tools and will provide information on the start-up hotspots of Bangalore, Delhi and Lisbon; and on associated subjects, such as policy, taxation, and visa options. It will develop a Go-To-Market Guide to support start-ups.
IPISH is expected to help in mutual capacity building, and enable connections between start-ups, investors, and incubators from relevant sectors. It is also expected to establish a network of honorary ambassadors based in India and Portugal to guide start-ups from both countries.
Background:
There are strong complementarities between India and Portugal in the start-up sector. Portugal has one of the highest rates of business creation in Europe and has emerged as one of the most vibrant European eco-systems for entrepreneurship. Lisbon is hosting the Web Summit - a key annual international technology conference - for 3 years from 2016 onwards. The last Web Summit had 700 participants from India, and the number is expected to go up further this year. The governments of both India and Portugal are focusing on promoting Start-ups.

MFs get record monthly SIP inflows

New Delhi: Inflows into mutual fund schemes through the so-called systematic investment plan (SIP) route hit a record high of Rs 4,584 crore in May. SIP inflows were 44 per cent higher compared to the corresponding month of last year and 20 per cent more than one-year average.
SIP is an option wherein an investor makes a recurring commitment to put in a fixed income periodically. SIPs, as opposed to lump sum investments, help mitigate risk, particularly when the markets are trading at near record levels.
Even the mutual fund industry benefits from SIPs flows as they are consistent in nature. The industry has been creating a lot of awareness investing through this route. Market players say inflows through the SIP route will only increase from current levels. Broking firm Geojit Financial Services in a recent note said SIP flows could double to Rs 10,000 crore in next two years. “Investors are increasingly coming to equity markets through SIP route, leading to a sudden spike in SIP folios in the past one year and the trend is likely to gather more speed over the next couple of years,” the brokerage says.

Indian renewable market to witness strong growth: Moody's

Mumbai: As India is moving towards meeting its commitments under the Paris agreement on climate change, its renewable energy market is likely to witness a strong growth over many years, says Moody's Investors Service.

"However, renewable energy projects face challenges related to the weak credit quality of offtakers, an evolving regulatory framework, as well as financing and execution risks," Moody's vice-president and senior analyst Abhishek Tyagi said in a statement issued here.

According to the rating agency, India's emission reduction commitments under the Paris agreement will lead to a sharp rise in renewable energy capacity.

India aims to achieve 40 per cent of cumulative installed capacity through non-fossil fuel sources by 2030 from the current 30 per cent and also plans to grow its renewable energy capacity to 175 GW by 2022 from the current 57GW.

"Such growth will be driven by the public and private sector. However, the key offtakers for most renewable projects are state-owned distribution companies, and these firms typically demonstrate weak financial profiles.

"This situation poses a key challenge for developers.

And, while there is no history of defaults under power purchase agreements, payment delays are quite common," he said.

Moody's also points out that the evolving policy framework for renewables presents a risk for renewable projects.

"Adherence to renewable purchase obligations has been limited, leading to lower demand for renewable energy.

Nevertheless, the feed-in-tariff and competitive bidding guidelines for wind and solar projects are well established and improve revenue visibility over the life of purchase power agreements," the agency noted.

It further said the rise in renewable energy capacity will bring execution challenges, including land acquisition, establishing resource quality, grid connectivity and availability.

On the financing of renewable energy projects, India will need to invest close to USD 150 billion to meet its 2022 renewable energy targets.

Since domestic banks are constrained in their lending to renewable projects, foreign capital will play an important role. However, foreign currency financing is constrained by the limited hedging products available to fully cover the rupee currency risk of purchase power agreements, it said. PTI PSK

LPG sales jump by record 9.8 pc on Ujjwala push

New Delhi: LPG sales have jumped by 9.8 per cent in the fiscal year ended March 31 after the government gave a record number of cooking gas connections, most of them to poor households.
Public sector fuel retailers sold 18.9 million tons of packed domestic LPG -- the fuel that is sold to consumers in cylinders -- during 2016-17.
"Packed LPG growth in 2015-16 was 7.1 per cent and in 2016-17 it was 9.8 per cent," a senior oil ministry official said.
The growth rate assumes significance considering that petroleum product sales have stagnated at 4-6 per cent.
India consumed 5.2 per cent more petroleum products like petrol, diesel, LPG and jet fuel, in 2016-17 at 194.2 million tons.
"LPG is the highest grosser. As many as 111.3 crore cylinders were sold in 2016-17," the official said.
State-owned Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) together have 23.71 crore LPG customers registered with them out of which 23.46 crore customers are domestic users. Of these only 19.88 crore are active users.
The official said about 3.32 crore new domestic LPG connections were issued during 2016-17, including two crore under Pradhan Mantri Ujjwala Yojana (PMUY).
Under the PMUY, the government is giving free LPG connections to poor households with a view to weave them away from polluting fuel like firewood.
The PMUY has helped increase LPG coverage to 72.8 per cent of the population, up from around 50 per cent three years ago.
The official said there may be few states where the LPG refil purchase has been below the national average of 4-5 cylinders a year but overall there has been a tremendous growth in LPG consumption.
"Bihar recorded the highest growth at 22.7 per cent, followed by Chattisgarh at 17.6 per cent, Jharkhand at 16.7 per cent, West Bengal at 15.9 per cent and Uttar Pradesh with 15 per cent growth rate," he said.
States which do not have abandunt alternate cooking fuel like forest wood, have shown greater ease in switching over to LPG usage.

25 Ministries/ Departments to turn into e-office by end of June, says Dr. Jitendra Singh

25 Ministries/ Departments to turn into e-office by end of June, says Dr. Jitendra Singh
E-files increased from 8,000 to 4,62,000, says MoS (PP)
The Union Minister of State (Independent Charge) Development of North-Eastern Region (DoNER), MoS PMO, Personnel, Public Grievances & Pensions, Atomic Energy and Space, Dr Jitendra Singh visited the office premises of Department of Administrative Reforms and Public Grievances (DARPG) here today, to review the implementation of the Swachhta Action Plan. The DARPG and Department of Pension and Pensioners’ Welfare are observing the Swachhta Pakhwada from 16th-30th June, 2017.
On the occasion, Dr. Jitendra Singh complimented both the Departments for undertaking various Swachhta related activities during this Pakhwada and also expressed happiness that the two Departments are working together as one team. He said that the habit of cleanliness should be practised by all and it should be the responsibility of everyone to keep their surroundings clean. Highlighting the steps taken by DARPG, he said that 25 Ministries/ Departments will be turned into e-office by the end of this month. He also said that there has been an increase of a whopping 6000%, in the number of e-files with 4,62,000 e-files generated in 2017, compared to 8,000 e-files last year.
Dr Jitendra Singh said under the guidance of Prime Minister Shri Narendra Modi, the Departments are committed to provide maximum Governance to the public. He said that the process involved in the Civil Services Day has been completely transformed by DARPG in the last three years, as the participation and involvement of stakeholders has increased many folds. He said that DARPG is seen as the HR department of the Government of India. All good practices originate from this Department, he added. The Minister said that an MoU between India and Portugal on Cooperation in the field of Public Administration and Governance Reforms has been recently approved by the Cabinet. Dr Jitendra Singh expressed happiness over the fact that there has been near 100% disposal of grievances under Centralized Public Grievance Redress and Monitoring System (CPGRAMS) and 50% of the feedbacks received under Centralized Pension Grievance Redressal and Monitoring System (CPENGRAMS), have expressed satisfaction on their grievance redressal.
Secretary, DARPG Shri C Viswanath said that Modernisation and Swachhta go hand in hand and the allocation for DAPRG Modernisation has been doubled compared to last year. He said that the Department has implemented 100% e-office with digitisation of records. He also said that 58 Central Ministries/Departments and 33 States and UTs have abolished affidavits and attestation. He highlighted the various activities being undertaken by the Department during the Swachhta Pakhwada.
The DARPG is undertaking various activities like recording, reviewing and weeding out of old records, digitization of records, disposal of old and obsolete items etc. A poster(s)/ slogan competition has also been organised on the theme of Swachha Bharat. The best workstation will also be declared in the Department and appreciation certificate will be awarded to the winner. The Department has also planned to utilise Rs 10 lakhs for Swachhta related activities in the department during the current financial year. The Department of Pension & Pensioners' Welfare is also undertaking similar activities during this Pakhwada.