🏦 Moratorium extension, PSU reduction & India funds.

Gaurav Chakraborty
Gaurav Chakraborty
gauravc@orowealth.com

Orowealth Weekend Reads: July 26, 2020

LAST WEEK MARKET MOVES

SensexNiftyNifty Midcap 100Nifty Smallcap 100
38,128.90 (+3.00%)11,194.15 (+2.68%)15,528.55 (+1.88%)4,989.40 (+2.83%)

 

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NEWS WE HAVE BEEN FOLLOWING

#PSU Reduction

Government sources say that India may see over 50% of its public sector banks privatized, thus reducing their number to just five. Presently, there are 12 state-owned banks and this is part of the plan to overhaul the banking industry in the country. In the first part of the plan, the government could sell its majority stake in Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab & Sind Bank. A government source said that this plan would be detailed in a new privatization plan being put together currently after which it would be tabled before the cabinet for its approval. Many government committees, along with the Reserve Bank of India, have opined that India should not have more than five public sector banks. Further, the coronavirus pandemic has sapped the government’s revenue sources. The privatization plan aims to raise money for the government by selling stakes in non-core companies and sectors. A bank official said that since the government has announced its decision to not merge PSU banks anymore, the only option they have is to sell the stake.

Takeaway-
The sources of this news said that the divestment may not happen this financial year due to unfavorable market conditions.

#MoratoriumExtention

The Reserve Bank of India (RBI) is considering letting lenders allow companies from stressed sectors to extend the loan moratorium beyond its end date of August 31. Stressed sectors refer to sectors like aviation, automobiles, and hospitality, among others. The two sources, who were in the know of the development, also said that the central bank has been conducting a study on the impact on sectors in terms of repayments and cash flow of borrowers since lockdown in order to better understand the challenges faced by them. They added that the bank is expected to extend the moratorium because it thinks that some sectors will need continued support. The loan moratorium may not be extended for individual borrowers, though.

According to data from banks and NBFCs, about 29% of loans given out by banks and home loan companies and 59% of loans by NBFCs were under moratorium between April and June. This amounted to Rs 28.3 trillion. This amount could drop to Rs 16.22 trillion by the first quarter of FY21.

Banks are asking for restructuring for large loan account to avoid having to declare them as NPAs.

Takeaway-
Both the government and the RBI are considering restructuring company loans as a one-time exemption as the central bank has been against this practice due to its misuse in the past.

FROM OUR BLOG SECTION

India Funds

India funds are mutual funds that seek to invest in the Asian Subcontinent and emerging markets such as India. These funds can be either indexed or can be actively managed by a fund manager.

QUOTE OF THE WEEK
“Perfect courage means doing unwitnessed what he would be capable of with the world looking on.” – François de La Rochefoucauld (French author)
Chosen by Ranjith – Orowealth.

Gaurav Chakraborty
Gaurav Chakraborty
gauravc@orowealth.com

Gaurav is an engineer-turned-digital marketeer. Also a personal finance blogger with experience in financial planning and crowdfunding sector. He is a part of the Marketing team at Orowealth.

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