Banking wrap: Raghuram Rajan’s list of reforms for Modi 2.0; RBI extends RTGS timings

On May 30, Narendra Modi’s new Cabinet ministers took oath and were allocated portfolios to set the course of India’s economic growth for the next five years.

Former Reserve Bank of India (RBI) Governor Raghuram Rajan has flagged key issues that the new government needs to tackle immediately. These include reining in fiscal deficit at both the Central and state government level and focusing on distressed sectors like agriculture, power and banking.

The earnings season for the banks drew to a close this week, with state-run lender Punjab National Bank (PNB) and newly turned private sector lender IDBI Bank declaring their fourth quarter results. While both the lenders posted huge losses owing to ageing provisions, they also outlined strategies for the current financial year that includes fresh capital raising.

Rajan took to social media to share some of the recommendations detailed in his book What the Economy Needs Now. He said that stability in government policy is important so that farmers and firms can plan better, and markets can play a more effective role. Rajan also talked about creating a better business environment and reviving the idea of Special Economic Zones (SEZs) by a Centre-state productivity council.

State-run PNB plans to raise Rs 5,000 crore equity in the October-December quarter in order to meet its capital requirements this financial year.

The bank will also try to sell its stake in its housing finance arm, which was planned last year but did not go through for the want of regulatory clearance.

Mehta said the bank will make another attempt this year, depending on market conditions. PNB’s fundraising plans will help boost its capital adequacy ratio up from 9.73 percent, with Tier-I ratio at 7.49 percent at the end of March 2019.

After being granted a lifeline by LIC, the country’s largest insurer, the erstwhile state-run lender, IDBI Bank is now planning to turn to RBI for some forbearance to bring its house in order.

Once it is out of the prompt corrective action (PCA) framework, IDBI Bank aims to raise Rs 6,500 in capital, including Rs 2,500-3,000 crore of Tier-2 bonds this financial year. For equity, the bank may opt for a preferential allotment of shares or a rights issue.

The RBI has extended timings for customer transactions in the Real Time Gross Settlement (RTGS) system to 6.00 pm from 4.30 pm. The new time window for the cash transaction system will come into effect from June 1. The initial cut off for customer transactions will be 6 pm and the final cut off for inter-bank transactions will be 7.45 pm. The IDL reversal will take place between 7.45 pm and 8.00 pm.

[“source=moneycontrol”]