The Reserve Bank of India (RBI) cautioned that any political instability after theLok Sabha elections in 2014 will drag the besieged economy further down, except there is a stable new government at the centre. On the release of the 8th edition of the RBI’s Financial Stability Report 2013, RBI Governor Raghuram Rajan stated that any political instability after general elections will lead to erode investor’s confidence in the economy. A stable new government would be positive for the economy.
Excerpts of the 8th edition of the RBI’s Financial Stability Report 2013
The gross Non-Performing Assets (NPAs) in the system will rise to Rs. 2.29 lakh crore by September 2014 from Rs. 1.67 lakh crore in September 2013.
External sector risks have been considerably reduced and the effect of the tapering on the economy is expected to be limited and short-lived.
The delay in the tapering of the $85 billion-a-month bond buyback programme by the US Fed till January 2014, has given the country time to replenish the forex reserves and rein in the high current account gap.
Realignment of global growth as well as high inflation differential between advanced economies (AEs) and Emerging Markets and Developing Economies (EMDEs) is a potential source of exchange rate volatility and may result in volatile cross-border flows with every reprising of risk.
Corporate performance continues to be weighed down by boom period expansions and excess capacities, amid shifting asset composition towards financial investments.
Five sectors – infrastructure, iron and steel, textiles, aviation and mining together contribute 24 per cent of total advances of Scheduled Commercial Banks (SCBs) and account approx 53 % of their total stressed advances.
House prices and outstanding loans for housing by housing finance companies have grown relatively faster during the last few years.
Inadequate social security coverage in India against a backdrop of changing demographics will pose challenges for expanding the pension system given the fiscal constraints. The National Pension System (NPS) created to serve Government employees and private sector workers.
Note: RBI publishes Financial Stability Report (FSR) in every six months. Its’ purpose is to create awareness about the vulnerabilities in the financial system and to inform about the resilience to stress of the financial institutions and to generally serve as a health check on the financial system.
RBI: Banks to continue accepting scribbled notes
January 3, 2014
The Reserve Bank of India (RBI) stated that banks will continue to accept currency notes with anything written on them and it has not issued any such instructions regarding discontinuity of scribed notes.
Nevertheless, the central bank reiterated that writing or scribbling on banknotes works against its ‘clean note policy’ and sought co-operation from public, institutions and others in keeping the banknotes clean by not writing anything on them.
Note: This announcement came on the wake of rumours that RBI issued a notification that from January 1, 2014, banks will not accept bank notes with scribbling.
FII inflow in Indian equities reaches Rs 1.13 lakh crore
January 3, 2014
The Foreign Institutional Investors (FIIs) are figured to have made a net inflow of over Rs. 1.13 lakh crore in the Indian equity market in 2013. At gross level, FIIs purchased stocks worth Rs 7.96 lakh crore in 2013 and sold equities to the tune of Rs 6.84 lakh crore; translating into a net inflow of Rs 1,13,136 crore.
Nevertheless, overseas investors pulled out Rs 50,847 crore from the bond market in 2013. This takes the overall investment by FIIs into the debt and equity market together to Rs 62,288 crore. Despite their unpredictable ‘hot money’ investment, these overseas entities are amongst the most important drivers of Indian stock markets.
As per the experts, FIIs are looking forward to a stable government that can move reforms process faster, irrespective of which political party comes to power at the Centre next year. Likewise, a strong performance by BJP in the recent assembly elections has promoted the chances of a stable government at the Centre.
The Baltic nation, Latvia joined the Euro Zone, with the expectation that the euro will lower its borrowing costs and encourage investors by eliminating currency risk. It became the 18th member of the European Union, which uses the Euro as its currency and the fourth smallest economy in the euro zone after Malta,Estonia and Cyprus.
The euro switchover ceremony took place at a site where Latvia’s crisis began – the former headquarters of the collapsed Parex bank, now headquarters of state-owned Citatele bank, which emerged from Parex’s ruins. The official conversion rate is 1 EUR = 0.702804 LVL.
About the Euro
Established by the provisions in the 1992 Maastricht Treaty.
Central bank: European Central Bank.
Official currency of the Eurozone.
The Eurozone is an economic and monetary union (EMU) of 18 European Union (EU) member states that have adopted the euro (€) as their common currency and sole legal tender.
Member states: Austria, Belgium, Cyprus, Estonia, Finland, France,Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, theNetherlands, Portugal, Slovakia, Slovenia and Spain.