The Indian central bank’s efforts to tighten the availability of rupees in the market and halt a slide in the currency may squeeze profitability at the nation’s lenders as it raises their funding costs, according to the local unit of Moody’s Investors Service.
The rupee, Asia’s worst-performing currency this year, touched a record low on Thursday with rising oil prices threatening to stoke inflation and worsen government finances. State-run banks probably sold dollars on behalf of the Reserve Bank of India to arrest these declines, local traders said. Creating a shortage of the local currency risks worsening liquidity in India’s banking system, which is already running short of cash.
“Liquidity is already tight in the system and any efforts by RBI to strengthen the local currency will suck that out and squeeze banks further,” said Karthik Srinivasan, group head of financial sector ratings at ICRA, the local unit of Moody’s. “A profit pinch will be felt and lenders with a higher portion of funding coming from bulk deposits and debt will be affected the most.”
Indian lenders can hardly afford another headwind as they absorb trading losses from the past year’s drop in sovereign bonds and continue to battle one of the world’s worst bad-loan ratios. The country’s largest banks including State Bank of India and ICICI Bank raised lending rates earlier this month given a combination of weak deposit growth and the strongest loan demand in four years.
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Read more
Indian rupee slides to all-time low against the US dollar
Indian bond deregulation "good for the market", say analysts
Further India rate hike more likely as inflation surges
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Liquidity in the financial system is currently at a deficit of around 215.7 billion rupees ($3.14 billion), according to the Bloomberg Economics India Banking Liquidity Index, having moved from a surplus of 5.5 trillion rupees in March 2017. Advance tax outflows in the second half of June sparked the cash crunch.
Banks that have large investments in corporate bonds will see a further erosion in profits if yields surge following measures by the RBI to curtail currency volatility, according to ICRA.
The average yield on top-rated 10-year corporate notes issued by state-run companies has already climbed 77 basis points this year to 8.61 per cent on Thursday, according to data compiled by Bloomberg. The rate had soared to 8.80 per cent on June 7, the highest since October 2014.
In 2013, when the rupee depreciated 18 per cent in four months, the RBI raised interest rates, capped its daily fund infusions and moved to drain money from the economy through bond sales. It raised its benchmark rate for the first time since 2014 this month, joining central banks in Indonesia and the Philippines, which tightened monetary policy to defend their currencies. The central bank maintains it doesn’t protect any rupee level but intervenes only to smooth volatility. The RBI declined to comment.
One way for the central bank to prevent an immediate liquidity impact from its foreign-exchange operations is by intervening in the onshore forwards or currency futures market, thus pushing the impact on rupee liquidity to a future date. The RBI has been increasingly using these for its forex interventions.
As most banks have excess capital reserve buffers, “breathing space of about a month will be available,” Mr Srinivasan said. “We haven’t changed credit outlook of any lenders based on this so far.”
UAE currency: the story behind the money in your pockets
Europe’s rearming plan
- Suspend strict budget rules to allow member countries to step up defence spending
- Create new "instrument" providing €150 billion of loans to member countries for defence investment
- Use the existing EU budget to direct more funds towards defence-related investment
- Engage the bloc's European Investment Bank to drop limits on lending to defence firms
- Create a savings and investments union to help companies access capital
Know before you go
- Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
- If you’re driving, make sure your insurance covers Oman.
- By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
- Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
- Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
Meg%202%3A%20The%20Trench
%3Cp%3E%3Cstrong%3EDirector%3A%20%3C%2Fstrong%3EBen%20Wheatley%3Cbr%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3EJason%20Statham%2C%20Jing%20Wu%2C%20Cliff%20Curtis%2C%20Page%20Kennedy%2C%20Cliff%20Curtis%2C%20Melissanthi%20Mahut%20and%20Shuya%20Sophia%20Cai%3Cbr%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E2%2F5%3C%2Fp%3E%0A
The specs
Engine: Dual 180kW and 300kW front and rear motors
Power: 480kW
Torque: 850Nm
Transmission: Single-speed automatic
Price: From Dh359,900 ($98,000)
On sale: Now
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Sweet%20Tooth
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COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%203S%20Money%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202018%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20London%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Ivan%20Zhiznevsky%2C%20Eugene%20Dugaev%20and%20Andrei%20Dikouchine%3Cbr%3E%3Cstrong%3ESector%3A%3C%2Fstrong%3E%20FinTech%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%3C%2Fstrong%3E%20%245.6%20million%20raised%20in%20total%3C%2Fp%3E%0A
Thor%3A%20Love%20and%20Thunder%20
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Mia Man’s tips for fermentation
- Start with a simple recipe such as yogurt or sauerkraut
- Keep your hands and kitchen tools clean. Sanitize knives, cutting boards, tongs and storage jars with boiling water before you start.
- Mold is bad: the colour pink is a sign of mold. If yogurt turns pink as it ferments, you need to discard it and start again. For kraut, if you remove the top leaves and see any sign of mold, you should discard the batch.
- Always use clean, closed, airtight lids and containers such as mason jars when fermenting yogurt and kraut. Keep the lid closed to prevent insects and contaminants from getting in.
The%20Genius%20of%20Their%20Age
%3Cp%3EAuthor%3A%20S%20Frederick%20Starr%3Cbr%3EPublisher%3A%20Oxford%20University%20Press%3Cbr%3EPages%3A%20290%3Cbr%3EAvailable%3A%20January%2024%3C%2Fp%3E%0A
KILLING OF QASSEM SULEIMANI
MATCH INFO
Chelsea 3 (Abraham 11', 17', 74')
Luton Town 1 (Clark 30')
Man of the match Abraham (Chelsea)