Daily Financial News Analysis – 28th May’20 – Free PDF Download

Banks

• Indian banks may need to raise $20-50 billion capital in the next two years.
• Bad loans and credit costs rise due to the Covid-19.
• Problem is far worse for PSBs
• Government not budgeting any capital infusion this fiscal.
• Govt to PSBs: rely on market for capital
• Credit Suisse: total capital requirement for India’s banking sector at $20 billion.
• $13 billion will be needed by public sector banks.
• The central government is already walking a tightrope after a sharp fall in taxes.
• Govt had infused more than Rs 3 lakh crore in PSBs in the last five years, of which more than Rs 1 lakh crore came through recap bonds.
• BofA Securities:estimated that state-owned banks’ NPLs could rise by 2-4%, which would result in a recapitalisation requirement of $7-15 billion.

4G spectrum sale

• The government is speeding up plans to auction 4G spectrum worth more than ₹4 lakh crore.
• An inter-ministerial note being drafted is likely to be presented to the Cabinet as early as next month.
• India’s top two telcos, have been pushing for an early 4G spectrum sale given the surge in demand for data and voice services.
• The government, in turn, requires the auction proceeds to meet spiralling expenditure.
• Analysts don’t expect the next sale to see stiff competition given the overall financial stress in the industry compounded by high debt levels of over Rs 7 lakh crore.
• Cashstrapped Vodafone Idea is unlikely to take a significant part given its financial troubles.
• The government may generate around Rs 55,000-60,000 crore, of which the telcos would need to pay around Rs 20,000-25,000 crore upfront while the balance will be paid over 16 years.

South-West Monsoon

• The monsoon, which is considered the lifeline of the rural economy, is now forecast to make further progress and reach the Kerala coast on June 5, four days later than normal.
• Last year, the monsoon winds had stalled for eight days over the same stretch, resulting in a delayed onset of rains throughout the country.
• Apart from the monsoon’s progress, the weather office had some good news for northern India.
• A western disturbance is forecast to bring temporary relief in the region with showers.
• Heatwave conditions are expected to reduce Friday onwards.
• Farmers are anxiously awaiting the onset of monsoon in Kerala, as they will need to complete the pre-sowing operations accordingly.

PM crop insurance scheme

• Telangana and Jharkhand have opted out of the crop insurance scheme, saying the premium is too high.
• Premium increased 2-3% after the scheme was made voluntary for farmers.
• More than 6 million farmers from these two states had enrolled for the scheme.
• West Bengal, Bihar, Punjab and Andhra Pradesh have already exited.
• Rajasthan and Maharashtra were debating whether to continue with the scheme.
• Under the crop insurance scheme, farmers contribute up to 2% of the total premium while the rest is shared equally between the state and the centre.
• Under the new insurance scheme, the provision that caps the central subsidy in the premium rates to 30% for unirrigated areas and 25% for irrigated areas has also discouraged states.
• Experts view it as a farm politics.

Government tracks package rollout

• The government is closely monitoring economic activity as a gradual relaxation in lockdown leads to reopening of businesses to see how the Rs 20 lakh crore package announced by it is rolling out on the ground.
• The focus is on implementation of the measures announced in the package before any fresh ones are undertaken.
• Respective departments and ministries are keeping a close tab on data such as credit offtake, power consumption, agricultural activity, fuel consumption and goods and services tax payments.

Cement – Steel Cos

• Tax kitties of states and the Centre are shrinking due to the lockdown, and that isn’t good news for ₹102 lakh crore of projects in various stages of execution.
• In turn, that’s bad news for cement and steel industries that undergird big infra.
• States are staring at a huge revenue deficit.
• The overall capex budget by states for FY 2021 is around ₹5,70,800 crore, which will witness steep cuts.

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