The RBI bulletin for the month of August released last week highlighted the views of economists on the performance of NBFC sector in recent times, privatisation of public sector banks and state of economy and the real time monitoring of economic activities.
NBFC sector performance in recent times
Non-banking financial companies (NBFCs) have established themselves as an integral part of the financial landscape. Using supervisory data, this article evaluates the performance of non-banking financial company (NBFC) sector in 2021-22 (up to Q3:2021-22) and the highlights include:
Double digit growth in the balance sheet in the quarter-ending December 2021.
The profitability of the NBFC sector improved in Q3:2021-22 compared to the corresponding quarter in 2020-21.
NBFCs continue to maintain adequate provisions and their capital position remains strong.
The gap between the spreads of AAA/AA- rated NBFC bonds began to reduce from January 2021 onwards and reached pre-covid levels in December 2021 indicating growing market confidence in the sector.
NBFCs continued to provide maximum credit to industrial sector followed by retail, services, and agriculture.
Privatization of Public sector bank
Privatization of public sector banks (PSBs) is a widely discussed topic in India and the researchers are of the view that instead of a big bang approach, a gradual approach as announced by the Government would result in better outcomes.
Some of the highlights of the research paper includes
The recent mega-merger of PSBs has resulted in a consolidation of the sector, creating stronger and more robust and competitive banks.
Using data envelopment analysis (DEA) this article finds that while private sector banks (PVBs) are more efficient in profit maximization, their public sector counterparts have done better in promoting financial inclusion.
Labour cost efficiency is higher in PSBs in comparison to PVBs.
State of economy and real time monitoring of economy
Easing of supply chain pressures and the recent ebbing of commodity prices are providing some breather from record high inflation. The economists are of the view that the inflation will fall from 7 to 5% in Q1 next financial year – within the tolerance band, hovering closer to the target, but not yet positioned for landing “. Robust central government capital outlays are supporting investment activity. RBI will be deploying robust statistical data and machine learning (ML) techniques to strengthen real-time tracking of economic activity in a bid to effectively deal with the impact caused by the pandemic. Two different indices have been developed to track the latest development in the Indian economy. These are:
A 7-indicator weekly activity index (WAI) using the dynamic factor model reflecting changes in economic activity on a year-on-year basis
A 15-indicator weekly diffusion index (WDI) reflecting directional movements on a sequential basis.
SEBI allows AIFs and VC to to invest in foreign entities without having an India connection
Capital markets regulator Sebi has allowed India registered Alternative Investment Funds (AIFs) and Venture Capital Funds (VCFs) to invest in foreign entities without having an India connection. AIFs or VCFs will be allowed to invest in an overseas investee company, which is incorporated in a country whose securities market regulator is a signatory to the International Organization of Securities Commission’s (IOSCO) Multilateral Memorandum of Understanding or a signatory to the bilateral pact with Sebi.
Earlier, one of the conditions was that such overseas investments were allowed only in those companies which had an Indian connection. Like, a company has a front office overseas, while having its back office operations in India.
Capital markets regulator Sebi on Friday joined the account aggregator framework, a move that will give a boost to the Reserve Bank of India-regulated financial-data sharing system. The move will allow customers to share information about their mutual fund and stock holdings with financial service providers.
According to this framework the Financial Information Providers (FIPs) in the securities market, like depositories and asset management companies (AMCs) — through their Registrar and Transfer Agents or RTAs — will provide financial information pertaining to securities markets to the customers and consented Financial Information Users (FIUs) through any of the account aggregators registered with the Reserve Bank of India (RBI).
Tata Pension Management sponsored by Tata Asset Management has been appointed as a Pension Fund Manager by the Pension Fund Regulatory and Development Authority, for managing the funds under the National Pension System.
