The soundness and resilience of India’s scheduled commercial banks are bolstered by robust capital buffers, multi-decadal low non-performing loans and strong earnings, according to the RBI’s latest Financial Stability report.

The country’s scheduled commercial banks continued to record improvement in their asset quality, with the GNPA ratio and NNPA ratio declining to multi-decadal lows of 2.3 per cent and 0.5 per cent, respectively, the report states.

While overall gross NPAs (non-performing assets) of banks fell to 2.3 per cent of total loans as of March 31 from 2.8 per cent a year ago, public-sector banks registered a sharp decline in NPAs from 3.7 per cent in March 2024 to 2.8 per cent in March this year.

The gross NPA ratio of private-sector banks remained stable at 2.8 per cent, according to RBI data. Furthermore, macro stress test results showed that the scheduled commercial banks’ aggregate capital levels will continue to remain above the regulatory minimum, even under adverse stress scenarios, the report states.

Indian financial sector remained strong and resilient amidst global headwinds. Banks and non-banking financial companies (NBFCs) reinforced their capital and liquidity buffers while improving their asset quality. Bank credit growth decelerated and moved closer to deposit growth, narrowing the gap between both. The credit expansion by NBFCs was supported by improving credit quality and strong capital buffers.

A favourable interest rate environment, conditioned by monetary policy easing, is expected to catalyse credit offtake, going forward. The capital position of the urban cooperative banks (UCBs) strengthened, while that of the non-banking financial companies (NBFCs) remained well above the regulatory minimum.

The consolidated solvency ratio of the insurance sector, both life and non-life segments, remained above the minimum prescribed threshold limit. Stress test results of mutual funds and clear corporations affirm their resilience to shocks, according to the report. The half-yearly slippage ratio, measuring new accretions to NPAs as a share of standard advances at the beginning of the half-year, remained stable at 0.7 per cent while the provisioning coverage ratio of banks at 76.3 per cent in March 2025 was marginally lower than that in September 2024, the report added.

–IANS

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The Finance Ministry has asked public sector banks to increase credit availability for animal husbandry, dairying, and fisheries to ensure that targets are met for the current financial year.

According to a Finance Ministry statement issued on Wednesday, the progress of credit disbursement to these agri-allied activities was reviewed at a high-level meeting held by Secretary, Department of Financial Services (DFS), M. Nagaraju.

The meeting was attended by top officials of public sector banks, NABARD, and state/UT Level Bankers’ Committee. Representatives of state governments/UTs, the Department of Animal Husbandry & Dairying, and the Department of Fisheries also participated in the discussions. The Secretary also stressed the state governments to facilitate banks in improving the flow of credit to these sectors. He underscored the importance of the allied sector in driving agricultural growth and its employment potential in rural areas and highlighted the trend of regional disparity in credit disbursement in allied activities. He directed banks to conduct regional-level meetings to ensure disbursement of credit in all areas as all regions have huge potential in allied activities.

The Secretary also directed NABARD to coordinate with state line departments and LDMs in the identification of fish farmers and providing them with benefits of the KCC scheme. Nagaraju underlined the Centre’s focus on seamless access to affordable credit to the allied sector and urged all stakeholders to take necessary steps to increase credit flow to the sector, the statement added. As part of the Centre’s thrust to boost rural incomes, the Union Budget 2024-25 has hiked the allocation for the Department of Fisheries by 54 per cent to Rs 2,616.44 crore from Rs. 1,701 crore (revised estimate) during 2023-24. The sector provides sustainable livelihoods to over 30 million people mostly within the marginalised and vulnerable communities.

As much as Rs 2,352 crore of the total outlay has been allocated for the Pradhan Mantri Matsya Sampada Yojana (PMMSY) scheme which is a 56 per cent increase over the outlay of Rs 1,500 crore for 2023-24. Finance Minister Nirmala Sitharaman announced plans for setting up a network of a Nucleus Breeding Centre (NBC) for high-quality shrimp brood stocks.

Further, financing for shrimp farming, processing and export will be facilitated through NABARD. Establishment of state-of-the-art facilities in NBCs will improve the genetic quality of aquaculture species for higher productivity and quality, and reduce the dependence on the import of shrimp brood stock, according to the Department of Fisheries.

–IANS

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Earlier this month, it was reported that unitholders of the six shut mutual fund schemes of Franklin Templeton Mutual Fund would get ₹2,488.75 crore in the week starting Monday, May 3. This was to be the third tranche of disbursement for the investors after the distribution of ₹9,122 crore across five schemes in February and ₹2,962 crore last month.

A year ago, on 23 April 2020, Franklin Templeton had shut down six debt mutual fund schemes, which had Assets Under Management (AUM) of anywhere between ₹25,000 crore and ₹30,000 crore. A year-long battle between investors, investor-activists and Franklin Templeton saw some money being returned to the unitholders, with cases being heard in the Karnataka High Court and the Supreme Court. While all the money has not yet been paid back to the investors, the mutual fund house has come out virtually unscathed by all this tumult and scandal, with only its reputation taking a small hit. Justice is nowhere to be seen.

In fact, Franklin Templeton – worried about the public criticism and backlash – is using diplomatic channels to pressure the Indian government to go soft on it. It has threatened to pull out of India if it does not get “a just and fair hearing” or is slapped with hefty fines. While it has not even paid back the entire amount to its distressed investors, Franklin Templeton has brazenly said that if “disgorgement of revenue” or any penalty is “too steep”, it will “look bad for India”. It added that “several mutual fund companies have already left the country”.

This is not the first time that US-based globalist companies have threatened India with loss of business or capital, or intimidated the government with potential diplomatic backlash. This enmeshing of private financial institutions, large corporate organisations and big government clearly does not bode well for our country. At least, not without robust and enforceable regulations to prevent any and all kinds of malpractice and malfeasance.

Here are four more instances of when US-based companies threatened India when they made a mess of things, with the country losing not only massive amounts of taxpayer funds, but also scores of lives.

1 – Union Carbide and the Bhopal Gas Tragedy of 1984:

In 1984, Union Carbide benefited from political pusillanimity and collusion to get away with only pathetic, paltry compensations after the disastrous Bhopal Gas Tragedy. The gas leak incident on the night of 2–3 December, 1984 at the Union Carbide India Limited pesticide plant in Bhopal, Madhya Pradesh, resulted in the deaths of 15,000 people and thousands more suffering lifelong ailments.

2 – Citibank and the 1992 Harshad Mehta scam:

Within a few years, India almost defaulted on its foreign exchange obligations and was compelled to open up its economy to the world. The economic liberalisation was a condition of the bailout from the World Bank, and this is when the arm-twisting started. More and more foreign companies were let in as the economy opened.

Foreign banks like Citibank were involved in the 1992 Harshad Mehta scam. Citibank was one among the many major banks that were willingly flouting the regulations at the time, by letting brokers act as fronts. Senior executives at Citibank had even said at the time that “RBI guidelines were just that, guidelines – not the law of the land”. India was then seen as a corrupt and bankrupt nation that was desperate for foreign exchange. Apart from a few senior executives moving out of the country, foreign banks like Citibank got away with small penalties.

3 – The extent of Enron’s corrupt activities in India, from the 1990s till the company’s collapse in 2001:

Enron Corporation’s collapse in 2001 happened at around the same time as the fiasco with the international banks in India, when the fallout of the Harshad Mehta scam was still reverberating in the country. The worldwide disintegration of the energy, commodities and services company shook Wall Street to the core. The company had hidden away its mountainous debts and toxic assets in special purpose vehicles (SPVs) and showed investors profits in its books. With fake holdings and off-the-books accounting practices, Enron managed to fool US regulators for a long time. When Enron filed for bankruptcy, it was extremely embarrassing for the US, to say the least.

But, for almost ten years before the company actually blew up, Enron was here in India, corrupting everybody from police officials to government leaders (allegedly even the union minister for petroleum), influencing public policy and getting a sovereign guarantee on high-risk projects.

In the 1990s, with an astounding barrage of savvy media management and lobbying in the highest echelons both in the United States and India, Enron had signed a sweetheart deal to produce power in Maharashtra though the Dabhol Power Corporation (DPC).  LNG for the project would be imported from Qatar through a 20-year contract with Enron, and the electricity produced would be purchased by the Government of Maharashtra for 20 years.

Enron soon formed the Dabhol Power Corporation (DPC) and set up a 2184 MW power plant in Dabhol, Maharashtra. This was supposed to be the posterchild of India’s economic liberalisation and was the then single largest foreign direct investment in India’s history.

The contract was later cancelled by the Maharashtra government after the project was determined to be unviable and too cost intensive. The price that the Maharashtra state electricity board would have to pay for electricity produced by DPC was more than twenty times what it paid for hydroelectricity.

However, Enron used its links with the United States’ Bush administration to pressure India. Enron’s then chairman had been a large funder of the Bush campaign. Two US Ambassadors to India even had the temerity to lecture the Government of India, threatening that India would lose face and American money.

The cancelled contract was later revived, with the project renegotiated at three times its original price.

After the Enron scandal in 2001, the DPC stopped producing electricity. The plant was later revived in 2005 and was converted to the Ratnagiri Gas and Power Private Limited (RGPPL), a company owned by the Government of India.

4 – Morgan Stanley’s Indian debut in 1994:

Morgan Stanley was the first foreign mutual fund house to make its debut in India. Morgan Stanley tied up with State Bank of India (SBI) in a 50:50 joint venture as an offshore scheme, with SBI named as the major partner.

The venture came apart when SBI officials discovered that Morgan Stanley had given itself veto powers over investment decisions by slipping in a clause into the deal. This clause effectively made Morgan Stanley the major partner in the joint venture. Surprisingly, the clause had not been discovered by lawyers or other representatives of  SBI at the time when the deal was signed. The venture fell apart as relations between the two sides soured.

In 1994, Morgan Stanley debuted in India as a standalone mutual fund house. As this was the first foreign firm offering mutual funds in India and with its managers playing on the ignorance of Indian investors to whip up hype about the scheme, Morgan Stanley’s mutual fund units were being sold at a premium higher than its actual price in grey markets.

While Indian investors were expecting a spectacular performance from the much vaunted American fund house, the performance of its scheme was sadly terrible.

The trumped up and arrogant executives, with the help of a management-broker nexus, had ignored research reports and invested their Indian clients’ hard-earned money in absolute garbage. Despite a desperate revamping of its portfolio, the scheme only gave an abysmal 3% returns in 20 years.

Morgan Stanley lost investor trust and had to sell its Indian business to HDFC Mutual Fund in 2014.

Morgan Stanley is a cautionary tale not only for investors but for the big fund houses as well. Even if Franklin Templeton exits India, it will be Franklin Templeton’s loss and not that of the Indian investor, as the Indian market has an abundance of mutual fund houses today, from Edelweiss to ICICI to SBI to ABSL to Nippon, and many more. The total assets under management (AUM) of the entirety of mutual fund schemes in India has grown 2.5 times in just over years, from ₹13 lakh crore in 2015 to ₹32 lakh crore in February 2021. There is always a bull market somewhere and there truly is a raging bull market in stocks and mutual fund schemes in the country.

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The Reserve Bank has come out with a revised long format audit report (LFAR) norms with a view to improve the efficacy of internal audit and risk management systems prevalent in banks.

LFAR applies to statutory central auditors (SCA) and branch auditors of banks, and it has been updated considering the large scale of changes in the size, complexities, business model and risks in the banking operations.

The revised LFAR format will be put into operation for the period covering 2020-21 and onwards, the central bank has said.

The overall objective of the LFAR is to identify and assess the gaps and vulnerable areas in the business operations, risk management, compliance and the efficacy of internal audit and provide an independent opinion of the same to the Board of the bank and provide their observations. RBI asked the banks to ensure timely receipt of the LFAR from auditors. The LFAR must be placed before the Audit Committee of Board and Local Advisory Board of the bank indicating the action taken or proposed to be taken for rectification of the irregularities.

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Finance Minister Nirmala Sitharaman has advised banks not to refuse to provide emergency loans to small, medium and micro-enterprises (SME) under the emergency credit guarantee scheme to ease the pressure on firms facing liquidity crunch.

“Banks cannot refuse credit to MSMEs covered under emergency credit facility. If refused, such instances must be reported. I will look into it,” she said.

As on July 23, 2020, the total amount allowed under the 100 per cent emergency credit guarantee scheme in public sector banks and private banks was ₹ 1,30,491.79 crore. Of this, ₹ 82,065.01 crore has already been disbursed. Small, medium and micro enterprises have suffered a sharp decline due to the curfew. In order to repair them, the central government had announced that it would provide a loan of ₹ 3 lakh crore without any collateral till October.

The Finance Minister also said that the Ministry of Finance was in  talks with the Reserve Bank to further extend the repayment period for loans obtained from banks and to restructure loans.

Finance Minister Ms @nsitharaman addresses FICCI members at #FICCINECM. pic.twitter.com/IFDXzzHvCw

— FICCI (@ficci_india) July 31, 2020

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