Welcome to Daily Banking Digest, your premier source for the latest news and insights on April 24, 2024, focusing on banking, the economy, and finance. Our platform offers a comprehensive overview of the day’s most critical financial stories, market trends, and economic developments. Whether you’re a professional in the financial sector, an investor monitoring market movement, or someone interested in staying informed about the economic landscape, Daily Banking Digest provides reliable, up-to-date information.

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Composite PMI Soars to 14-Year Peak of 62.2 in April

The Indian private sector continues to perform exceptionally well, with the flash composite Purchasing Managers’ Index (PMI) reaching a 14-year high of 62.2 in April. This surge is driven by strong performance in both manufacturing and service sectors, particularly due to increased new orders. However, job growth remains mixed, with stronger growth in manufacturing but not in services. Inflationary pressures have eased slightly, with slower rates of increase in both input costs and output charges.

Key Points:

PMI Surge: – Flash composite PMI surged to 62.2 in April, a 14-year high.

Sectoral Performance: – Strong performance in both manufacturing and service sectors, led by increased new orders. – Services growth accelerated further, with new orders rising in both domestic and international markets.

Job Growth: – Mixed news on job front, with stronger growth in manufacturing but not in services.

Inflation: – Slower rates of inflation for both aggregate input costs and output charges.

Growth Drivers: – Growth remained broad-based across manufacturing and service sectors. – Private sector sales expanded for the thirty-third successive month at the quickest pace in 14 years.

Future Outlook: – Overall future business outlook improved further in April, buoyed by robust demand.

Bihar’s Manufacturing Sector Lags Behind, with No Companies Listed on Stock Exchanges

Despite having a significant number of registered investors on the Bombay Stock Exchange (BSE), Bihar lacks a manufacturing sector, with no manufacturing units listed on the exchange. This is attributed to factors such as lack of sustained returns on investment, limited availability of raw materials, and a historical focus on agriculture and consumer-centric industries.

Key Points

Lack of Manufacturing Units

Bihar has over 66.5 lakh registered investors on BSE, but no manufacturing units listed.
Key industrialists with roots in Bihar have no manufacturing units in the state.

Growth of Stock Market Investors

Bihar has witnessed a 10% increase in BSE investors in the last quarter and 47% in the past year.
Aditya Vision is the only prominent company from Bihar listed on BSE, a multi-bagger that has grown significantly since its listing.

Reasons for Laggardness in Manufacturing

Lack of sustained secured returns on capital investment.
Limited availability of raw materials.
Historical focus on agriculture and consumer-centric industries.

Government Initiatives

Bihar Business Connect summit in December 2023 attracted investment proposals worth Rs 50,500 crore.
Government offers incentives for industries in textiles, leather, IT, food processing, and tourism sectors.
Land bank, plug and play facilities, and skill development grants are available.

Perception Barrier

Negative stereotypes and misconceptions deter potential investors.
Roadshows and awareness campaigns are needed to reshape perceptions.

Four Companies Compete for Pension Regulator’s Digitization Contract

PFRDA has shortlisted four bidders for the technical evaluation of a system integrator (SI) for its digital platform, PFRDA-TRACE. This platform aims to enhance regulatory compliance, data sharing, and workflow automation for PFRDA operations.

Key Points:

Bidders Shortlisted for PFRDA-TRACE SI: – Bahwan Cybertek – Inspira Enterprise India – NEC Corporation India – Trigyn Technologies

Purpose of PFRDA-TRACE: – Comprehensive tool for regulatory compliance reporting – Data sharing and monitoring – Workflow facilitation for PFRDA departments – Communication of observations and remarks – Validation of reports and data

TARCH Project: – Second phase of PFRDA’s technology architecture digitization – Modular and API-based platform

TARCH Modules: – Website revamp and chatbot – PFRDA online intermediary supervision engine (POISE) – PFRDA repository and information systems management: data and analytics platform (PRISM) – PFRDA Intranet — internal digitalisation (PINTRA)

Non-Compliance with KYC Norms: Over 7,000 Pesticide Firms Face Scrutiny

The government has implemented KYC norms to weed out spurious pesticide manufacturers, resulting in the cancellation of registrations for over 7,000 non-compliant firms. The government aims to establish an IPMS portal to monitor pesticide sales and distribution, and is considering allowing direct sales from manufacturers to farmers.

Key Points:

KYC Compliance: – Over 7,000 pesticide firms have been removed from registration due to non-compliance with KYC norms. – Only 2,584 companies have been found to be compliant.

Pesticide Management: – Pesticide management is a focus area for the government due to rampant chemical use. – KYC compliance will help identify genuine manufacturers and reduce unnecessary chemical usage.

IPMS Portal: – The government plans to launch an IPMS portal to track pesticide sales and distribution. – This will help monitor compliance and ensure responsible use of pesticides.

Online Sales: – The government may consider allowing direct sales of pesticides from manufacturers to farmers. – Challenges in returning pesticide containers need to be addressed.

Industry Transformation: – The government encourages the industry to move from pesticide sales to pest-control solutions. – Integrated pest management services will be promoted.

Verification and Enforcement: – Verification of registered companies under CIBRC was a long-pending demand. – The exercise will help eliminate unscrupulous manufacturers and counterfeit products.

Extension of Verification: – The Agriculture Ministry is urged to extend verification to products registered under FCO and bio-stimulants.

India Surpasses China as Global Leader in Electric Three-Wheeler Sales

In 2023, India surpassed China as the leading market for electric three-wheelers (3Ws), with sales exceeding 5.8 lakh units. This growth was driven by government incentives that lowered prices, while China’s sales declined by 8%. Globally, the electric 3W market expanded by 30%, with China and India dominating the sector. Despite being more expensive than gasoline variants, electric 3Ws in India offer significant cost savings over time due to lower operating costs.

Key Points

1. Market Share – India overtook China as the largest electric 3W market in 2023. – China’s sales fell by 8%, making it the second-largest market. – China and India account for over 95% of electric 3W sales globally.

2. Growth – Global electric 3W sales grew by 30% in 2023. – India’s electric 3W sales increased by 65% year-on-year.

3. Role of Subsidies – Government incentives in India helped lower electric 3W prices. – Electric 3Ws in India are cheaper to own than gasoline variants after eight years of service, even without subsidies.

4. Battery Technology – China primarily uses lead-acid batteries in electric 3Ws. – India and rural China use lead-acid batteries due to their lower cost. – Li-ion batteries are expected to gain ground in India with the introduction of the 2024 EMPS subsidy scheme.

Reliance Jio’s Q4 Earnings: Profit After Tax Surges 13% to Rs 5,337 Crore, Aligning with Market Expectations

Reliance Jio Infocomm reported a 13% year-over-year (YoY) increase in its standalone net profit to Rs 5,337 crore for the quarter ended March 31, 2024. The revenue for the quarter stood at Rs 25,959 crore. For the full financial year, the PAT stood at Rs 20,466 crore, a jump of 12.4%, while the revenue stood at Rs 1,00,577 crore, up by 10.3%. Jio Platforms (JPL) quarterly consolidated revenue stood at Rs 33,835 crore, up 13.3% YoY.

Key Points:

Net Profit: – 13% YoY rise to Rs 5,337 crore for Q4FY24 – 2.4% increase over Q3FY24

Revenue: – 11% YoY growth to Rs 25,959 crore for Q4FY24 – 2.3% sequential increase over Q3FY24 – 10.3% YoY growth to Rs 1,00,577 crore for FY24

Operating Margin: – Flat at 26.3% for Q4FY24

Net Profit Margin: – 17.5% for Q4FY24 – 17.4% for FY24, up 40 bps over FY23

Debt-to-Equity Ratio: – Increased to 0.22 in Q4FY24

Jio Platforms (JPL): – Quarterly consolidated revenue of Rs 33,835 crore, up 13.3% YoY – Net additions of 4.24 crore subscribers during FY24 – 10.80 crore 5G subscribers, accounting for 28% of wireless data traffic – ARPU of Rs 181.7 million for Q4FY24 – EBITDA increased 12.8% YoY – Annual net profit crossed Rs 20,000 crore mark

RBI Decides Against Activating Counter-Cyclical Capital Buffer

The Reserve Bank of India (RBI) has decided not to activate the countercyclical capital buffer (CCyB) as it is not necessary in the current economic circumstances. The CCyB framework was introduced in 2015 to build up a capital buffer in good times to maintain credit flow during economic downturns and prevent excessive lending during periods of high credit growth.

Key Points:

Definition of CCyB: A capital buffer built up by banks in good times to maintain credit flow during economic downturns.
Purpose of CCyB: To prevent excessive lending during periods of high credit growth and mitigate systemic risk.
Indicators for CCyB Activation: Credit-to-GDP gap, supplemented by other indicators.
RBI’s Decision: CCyB not activated as indicators do not warrant it.
Aim of CCyB Regime: To build up capital buffers in good times and restrict indiscriminate lending during periods of excess credit growth.
Origin of CCyB Framework: Envisaged by the Group of Central Bank Governors and Heads of Supervision (GHOS) after the 2008 global financial crisis.

BharatPe Unveils BharatPe One: A Comprehensive Payment Solution for Businesses

BharatPe has introduced BharatPe One, an all-in-one payment device that combines POS, QR code, and speaker functionalities. The device aims to enhance payment efficiency for offline merchants by providing a user-friendly interface, portable design, and comprehensive transaction dashboards. BharatPe plans to roll out the product in 100 cities initially, expanding to 450 cities within six months.

Key Points:

Product Launch: BharatPe One, an all-in-one payment device, has been launched.
Features: The device integrates POS, QR code, and speaker functionalities, offering versatile payment options.
Target Market: BharatPe One is designed for offline merchants across various sectors.
Benefits: The device streamlines transactions, provides enhanced performance and security, and caters to diverse merchant needs.
Expansion Plans: BharatPe aims to launch the product in 100 cities initially, scaling it to 450 cities within six months.

Credit Demand Surges in Non-Metropolitan Areas

During the festive season in India, credit demand has expanded beyond major cities, with Kanpur and Barabanki emerging among the top 10 cities for loan originations. This growth is driven by consumption-based lending, particularly for vehicles and consumer durables. Beyond the top 100 cities, there has been a significant increase in loan originations for two-wheelers, auto loans, and consumer durables.

Key Points:

Shift in Borrowing Pattern: Credit demand is no longer limited to large metros, with smaller cities like Kanpur and Barabanki showing strong growth.
Festive Season Impact: The festive season remains a major driver for consumption-based lending, benefiting both lenders and borrowers.
Growth in BT100 Cities: Cities beyond the top 100 have dominated loan originations for two-wheelers, consumer durables, and auto loans.
Increase in Low-Risk Borrowers: New loans to very low and low-risk borrowers have increased across all products.
Sector Dominance: Public sector banks drive value for auto loans, personal loans, and home loans, while NBFCs dominate volume for two-wheeler loans, personal loans, and consumer durable loans.

Mahindra Finance Uncovers Rs 150 Crore Fraud in Vehicle Loan Portfolio

Mahindra Finance has uncovered a fraud of approximately Rs 150 crore in its retail vehicle loan portfolio at one of its branches. The company has postponed its board meeting to approve financial results for 2023-24 due to this incident. Investigations are ongoing, and corrective actions are being implemented.

Key Points:

Fraud Detection: Mahindra Finance detected a fraud of Rs 150 crore in its retail vehicle loan portfolio.
Branch Involved: The fraud occurred at one of the company’s branches in the northeast.
Modus Operandi: The fraud involved forgery of KYC documents leading to embezzlement of company funds.
Financial Impact: Mahindra Finance estimates the financial impact of the fraud to be unlikely to exceed Rs 150 crore.
Investigations and Actions: Investigations are underway, and corrective actions, including arrests, have been initiated.
Board Meeting Postponement: The company’s board meeting to approve financial results for 2023-24 has been postponed due to the fraud.

RBI Restricts Operations of Maharashtra’s Konark Urban Co-operative Bank

The Reserve Bank of India (RBI) has imposed restrictions on The Konark Urban Co-operative Bank in Ulhasnagar, Maharashtra, due to its deteriorating financial situation. Depositors are entitled to receive up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). The restrictions include limitations on withdrawals, loans, investments, and property disposal. The bank’s banking license has not been canceled, and it will continue to operate with restrictions until its financial position improves.

Key Points:

Restrictions Imposed: – No withdrawals from savings, current, or other accounts – No granting or renewing of loans and advances – No investments or incurring of liabilities – No transfer or disposal of properties without RBI permission

Deposit Insurance: – Eligible depositors can claim up to Rs 5 lakh from DICGC

Banking License: – The bank’s banking license has not been canceled

Continued Operations: – The bank will continue to operate with restrictions until its financial position improves.

High Court Rules: PSBs Lack Authority to Issue ‘Look Out Circulars’ Against Loan Defaulters

The Bombay High Court has ruled that public sector banks lack the legal authority to issue Look Out Circulars (LOCs) against defaulting borrowers. This decision invalidates all LOCs issued by such banks against defaulters.

Key Points:

Invalidity of LOCs Issued by Public Sector Banks:
Public sector banks do not have the power to issue LOCs against default borrowers.
All LOCs issued by such banks are quashed.
Unconstitutionality of Office Memorandum Clause:
The clause in the office memorandum empowering bank chairpersons to issue LOCs is unconstitutional.
It is arbitrary and lacks legal basis.
Bureau of Immigration’s Role:
The Bureau of Immigration is prohibited from acting upon LOCs issued by public sector banks.
Exceptions:
The judgment does not affect LOCs issued by tribunals or criminal courts.
Amendment to Office Memorandum:
The 2018 amendment to the office memorandum empowered public sector banks to issue LOCs in the “economic interest of India.”
Petitioners’ Contention:
The petitioners argued that “economic interest of India” cannot be equated with the financial interests of banks.

IGST Exemption for SEZ Units on Services Procured from Domestic Tariff Area (DTA)

The Gujarat-based Authority for Advance Rulings (AAR) has ruled that units operating within special economic zones (SEZs) may be exempt from paying integrated goods and services tax (IGST) on specified services procured from the domestic tariff area (DTA) through the reverse charge mechanism. This exemption is contingent upon the units providing a letter of undertaking (LUT) or furnishing a bond.

Key Points:

Exemption from IGST: SEZ units may be exempt from paying IGST on specified services procured from the DTA through the reverse charge mechanism.
Qualifying Conditions: To qualify for the exemption, SEZ units must provide a LUT or furnish a bond.
Specified Services: The exemption applies to services such as goods transport, legal services, security services, and bus hiring for employees.
Reverse Charge Mechanism: Under the reverse charge mechanism, the recipient of services is responsible for paying GST to the government.
AAR Ruling: The AAR ruling was issued in a case involving Waaree Energies Ltd, an SEZ unit engaged in solar module manufacturing.
CBIC Clarification: The Tax Research Unit (TRU) at the Central Board of Indirect Taxes and Customs (CBIC) had previously clarified that SEZ units can procure services under the reverse charge mechanism without paying IGST if they furnish a LUT.
AAR’s Observation: The AAR noted that the CBIC clarification was specific to a particular SEZ unit but found no bar in applying its rationale.
Impact on SEZ Businesses: The ruling is considered a positive development for businesses operating within SEZs, as it aligns with the zero-rated intent of the GST Act and eases compliance burdens.

Government Unveils Strategy to Enhance Exports of High-Value Agricultural Commodities

The Indian government is developing a strategy to boost exports of 20 high-potential agricultural products, including basmati rice, alcoholic beverages, honey, mango, and banana. The plan aims to increase India’s global export share from 2.5% to 4-5% in the coming years.

Key Points:

Export Strategy: – The government is working on a strategy to boost exports of 20 high-potential agricultural products. – An action plan will be ready within the next three months.

Stakeholder Involvement: – The Department of Commerce and Apeda are discussing the plan with stakeholders, including states.

Global Export Share: – India’s current global export share is 2.5%. – The government aims to increase it to 4-5% in the next few years.

Agricultural Exports: – India’s overall agricultural exports have declined in the past year due to export restrictions on essential commodities. – External factors such as the Russia-Ukraine war and Red Sea crisis have also impacted agricultural exports.

High-Potential Commodities: – The 20 high-potential agricultural products include basmati rice, alcoholic beverages, honey, mango, and banana. – Worldwide imports of these commodities were $405.24 billion in 2022.

Export Potential Countries: – Countries with high export potential for these items include the United States, Malaysia, Canada, Russia, Germany, France, South Korea, China, Indonesia, Japan, Italy, Belgium, and the UK.

Basmati Rice Exports: – Basmati rice exports increased by 22% in April-February 2023-24 compared to the same period in the previous year.

Impact of Israel-Iran Conflict: – There has been no visible impact of the Israel-Iran conflict on exports so far.

Net Foreign Direct Investment (FDI) in India Declines to $14.55 Billion in April 2023-February 2024

India’s net foreign direct investment (FDI) witnessed a significant decline of 45.5% in the 11 months of Financial Year 2024 (April 2023 to February 2024) compared to the same period last year. This drop is primarily attributed to increased repatriation of capital.

Key Points:

Net FDI Decline: – Net FDI inflows dropped by 45.5% to $14.55 billion in April 2023-February 2024.

FDI Inflows and Outflows: – FDI inflows stood at $26.69 billion, while outflows reached $12.14 billion in April 2023-February 2024. – In the same period last year, inflows were $39.61 billion, and outflows were $12.90 billion.

Repatriation of Capital: – Repatriation by direct investors in India rose to $38.30 billion in FY24, up from $27.17 billion in FY23.

Sectoral Distribution of FDI: – Over 60% of FDI equity flows were directed towards manufacturing, computer services, energy, retail, and financial services.

Source Countries: – Singapore, Mauritius, the US, the Netherlands, Japan, and the UAE accounted for around 80% of FDI inflows.

India’s Investment Attractiveness: – India remained a favorable investment destination among Asian economies in 2023. – India ranked fourth in the 2024 FDI Confidence Index among Emerging Market Economies.

Trade and Economic Partnership Agreement: – India signed a Trade and Economic Partnership Agreement with the European Free Trade Association, including investment commitments.

Outward Remittances Surge to Record $29 Billion in April 2023-February 2024

Outward remittances under the Liberalised Remittance Scheme (LRS) surged by 21.7% to a record high of $29 billion during April 2023-February 2024. This growth was primarily driven by increased international travel, maintenance of close relatives, and overseas education expenses.

Key Points:

1. Outward Remittances Surge: – Outward remittances under LRS reached $29.43 billion in April-February 2024, up from $24.18 billion in the same period last year.

2. International Travel Segment: – International travel accounted for $16 billion in remittances, a 27.91% increase from the previous year.

3. Maintenance of Close Relatives and Overseas Education: – Remittances for maintenance of close relatives and overseas education stood at $4.22 billion and $3.28 billion, respectively.

4. February Remittances Dip: – Outward remittances in February 2024 declined by 23% to $2.01 billion, primarily due to a drop in international travel.

5. LRS Scheme: – The LRS scheme allows resident individuals to remit up to $250,000 per financial year for various current or capital account transactions.

6. Historical Trend: – Outward remittances under LRS have witnessed a steady increase in recent years, reaching a record high in FY23 and continuing to rise in FY24.

Inflationary Risks Escalate Amidst Extreme Weather Events: RBI Bulletin Warns

The Reserve Bank of India’s April Bulletin highlights concerns about inflation risks posed by extreme weather conditions and geopolitical tensions. Despite a slight decline in retail inflation, the central bank remains cautious due to volatile crude oil prices. Global growth momentum remains positive, but interest rates are rising in major economies. India’s economy is expected to experience a trend upshift in real GDP growth, supported by strong investment demand and positive consumer sentiment.

Key Points:

Inflation: – Extreme weather conditions and geopolitical tensions pose risks to inflation. – Retail inflation based on CPI eased to 4.9% in March. – RBI maintains key interest rate at 6.5% due to inflation concerns.

Global Economy: – Global growth momentum sustained in Q1 2024. – Outlook for world trade turning positive. – Treasury yields and mortgage rates rising in major economies.

Indian Economy: – Conditions favorable for an extension of trend upshift in real GDP growth. – Strong investment demand and upbeat business and consumer sentiments.

Foreign Exchange Market: – RBI bought $8.56 billion in spot foreign exchange market in February. – Indian rupee appreciated by 0.2% against the dollar in February. – RBI intervenes in spot and forwards market to curb exchange rate volatility.

Surge in NRI Deposits: Inflows Jump 84.4% to $11.8 Billion in April 2023-February 2024

Non-Resident Indians’ (NRIs) deposits witnessed a significant surge of 84.4% to $11.8 billion in the period April 2023-February 2024, primarily driven by inflows into Foreign Currency Non-Resident (FCNR) accounts. Outstanding NRI deposits also increased to $149.72 billion, with FCNR deposits reaching $24.90 billion.

Key Points:

Inflows into NRI Deposits: – Rose by 84.4% to $11.8 billion in April 2023-February 2024. – Maximum inflows were into FCNR accounts, amounting to $5.53 billion.

Outstanding NRI Deposits: – Increased by $1.99 billion to $149.72 billion at the end of February 2024. – Grew from $135.54 billion at the end of February 2023.

FCNR Deposits: – Stood at $24.90 billion in February 2024. – Higher than the $18.40 billion at the end of January 2023.

NRE Deposits: – Reached $97.68 billion in February 2024. – Up from $94.13 billion at the end of February 2023.

NRO Deposits: – Rose to $27.14 billion in February 2024. – Higher than the $23.0 billion a year ago.

RBI Holds Back Dollar Sales in February Despite Rupee Depreciation

The Reserve Bank of India (RBI) refrained from selling US dollars in February 2024, marking the first such instance in nine months. This decision was made despite increasing pressure on the rupee due to delayed rate cuts by the US Federal Reserve. The RBI instead purchased $8.5 billion in February to bolster foreign exchange reserves and stabilize the rupee.

Key Points:

No Dollar Sales in February: RBI abstained from selling US dollars for the first time in nine months.
Last Non-Sale Period: The previous instance of no dollar sales over a month was in May 2023.
Dollar Purchases in January: RBI sold $8.5 billion in the spot market in January 2024.
Foreign Exchange Reserves: India’s foreign exchange reserves reached a new peak of $648.56 billion in April 2024.
RBI Intervention: RBI intervened in the foreign exchange market to control rupee volatility.
Rupee Depreciation: The rupee depreciated by 0.6% in February.
Delayed Rate Cuts: Expectations of rate cuts by the US Fed were pushed back to June.
Market Expectations: The market now anticipates rate cuts in the second half of 2024, with some expecting only one cut in December.
RBI’s Focus: RBI’s intervention aimed to maintain the rupee within a range rather than build reserves.
Forward Purchases: RBI was a net buyer in the rupee forwards market, with net outstanding purchases reaching $9.6 billion in February.