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Private sector lenders see strong demand in rural India, says Finance Minister Nirmala Sitharaman

Clearing the air: Slump in demand for commercial vehicles is a cyclical issue, says Nirmala Sitharaman. PTI

India’s economic growth is likely to pick up in the October-March period as consumer demand is expected to improve, Finance Minister Nirmala Sitharaman said on Thursday.

India’s economic growth in April-June fell to a six-year low of 5%.

Ms. Sitharaman added that the private sector banks had assured her that there was no liquidity crunch and there was strong demand in rural areas.

Addressing the media following a meeting with the heads of the private sector banks, non-banking financial institutions and microfinance institutions, Ms. Sitharaman said many private banks had also agreed to take part in the government’s outreach effort to increase credit offtake in rural India.

“After my meeting with the private sector bank heads, I can say it was like a tonic,” Ms. Sitharaman said.

“Not a single bank said that there was a liquidity crunch, and they all said that demand growth was strong in the deep rural areas.”

“The Finance Minister gave us two hours of patient hearing, and we all conveyed to her that there was no liquidity shortage,” said V. Vaidyanathan, MD and CEO, IDFC First Bank. “Many said that there was strong growth in demand, especially at the lower end of the spectrum, and it was growing in the range of 18-25%.”

The Finance Minister also said that the bankers told her that they felt the slump in demand for commercial vehicles was a cyclical issue, but this was not the case for passenger vehicles.

“They said that for commercial vehicles, it was a cyclical phenomenon and that it would be resolved in one or two quarters,” Ms. Sitharaman said.

“For passenger vehicles, they said it was a matter of sentiment,” she added.

Affordable housing

According to the Minister, some banks had also asked if the credit limit for affordable housing could be raised to ₹50 lakh from the current ₹45 lakh.

“Lenders flagged the need for self-declaration of their present address with respect to lenders who are already e-KYC authenticated to enable hassle-free lending and ease in the co-origination of loans by banks and NBFCs,” a source who attended the meeting said.

“The Minister said instructions to address the issue would be given by October 1,” the source added.

(With Reuters inputs)

Rules bar such agreements, says Tyagi

Ajay Tyagi

The Securities and Exchange Board of India (SEBI) has pulled up mutual funds for entering into standstill agreements with promoters and has clarified that regulations do not have provisions for such arrangement between corporates and asset management companies (AMCs).

“It is not there in any of the regulations. We have made our position clear. Entities have to follow the regulations that are there. There is no confusion in that,” SEBI chairman Ajay Tyagi said at a capital market conference organised by industry body FICCI.

The SEBI chief was replying to a specific query on how some fund houses were entering into such standstill agreements.

Deadline with Essel

This assumes significance as the SEBI statement comes only a day after certain fund houses extended the deadline of such agreements with Essel Group, which had earlier got time till September to meet its repayment obligations.

While such standstill agreements have come under criticism by a section of market participants, they have found favour from some fund managers who feel that they ensure that the investments do not turn junk.

“There is only a liquidity issue as the company is fundamentally strong and has assets that can be monetised. Panic sale will only put further pressure on the stock and hence giving the company more time is a prudent call,” said the head of a domestic fund house that has an exposure towards Essel Group.

On a different note, Mr. Tyagi said that the regulator was examining the order by the Securities Appellate Tribunal (SAT) in the Price Waterhouse (PW) matter, wherein the tribunal said that the capital markets watchdog has no jurisdiction over the audit firm and hence cannot bar it from the capital markets.

Mr. Tyagi also hinted that following the acquisition of IDBI Bank, Life Insurance Corporation of India (LIC) will have to dilute its stake in the National Stock Exchange (NSE).

“Whatever excess shareholding they have, they will have to divest,” he said, adding that there was no deadline by which he expects the divestment.

As per SEBI norms, certain categories of investors, including insurance companies, can hold up to 15% in a stock exchange. However, post its acquisition of IDBI Bank, the insurance behemoth will be classified as a deemed trading member and hence cannot hold more than 5%.

Currently, LIC and IDBI Bank collectively hold nearly 14% stake in NSE.

Precautionary action pending outcome of ongoing tests

Gettyimages/istock

GlaxoSmithKline Pharmaceuticals Ltd. (GSK) on Thursday said it had voluntarily recalled Ranitidine hydrochloride tablets produced in India following alleged detection of genotoxic nitrosamine NDMA by global and Indian regulatory authorities. It is a global recall including in India.

“GSK has been contacted by regulatory authorities regarding the detection of genotoxic nitrosamine NDMA in ranitidine products. Based on the information received and correspondence with regulatory authorities, GSK made the decision to suspend the release, distribution and supply of all dose forms of ranitidine hydrochloride products to all markets, including India,” GSK said in a statement.

“The recall is a precautionary action pending the outcome of ongoing tests and investigations,” it said.

The raw material used in the tablets were supplied by Saraca Laboratories Ltd. Thus, the European Directorate for the Quality of Medicines (EDQM) has suspended its certificate of suitability for ranitidine hydrochloride issued to Saraca with immediate effect.

GSK manufactures Ranitidine Hydrochloride IP Tablets 150 mg and 300 mg (Zinetac) using API from Saraca and SMS Lifesciences India Ltd., for supply to Indian market.

“As a precautionary action, GSK has made the decision to initiate a voluntary recall [pharmacy/retail level recall] of Zinetac Tablets 150 mg and 300 mg products manufactured in India using API sourced from Saraca,” GSK said. The product manufactured using API from SMS will not be recalled. However, all such products will remain on hold while the test results are awaited.

‘Patient safety’

“GSK is continuing with investigations into the potential source of the NDMA. These investigations include continued engagement with our API suppliers. Patient safety remains our utmost priority and we are taking this issue very seriously,” it added. The market for Ranitidine anti-acidity product is worth ₹700 crore, including ₹200 crore of GSK. It is learnt that other manufacturers are still selling the tablets under different brands.

Refiner eyeing alternative to lithium-ion batteries; plant likely in Chennai

S.S.V. Ramakumar

Indian Oil Corporation Limited (IOCL) is in talks with Hindalco Industries Limited to source aluminium for its proposed one GW (gigawatt) aluminium air battery facility as the State-owned entity looks for an alternative to lithium-ion batteries.

This move is in tune with the government’s strategy to facilitate the adoption of electric vehicles (EVs) in India to cut the fuel import bill.

Confirming the development, a senior official of Hindalco Industries told The Hindu, “They have approached us. We are in talks with them. It’s at an initial stage. They are developing it in joint venture with an Israel firm.”

Last year, IOCL had signed an initial pact with Israel’s Phinergy Ltd. for developing ultra lightweight metal-air batteries that can be used in EVs. Aluminium air battery is said to be much cheaper, lighter and available in abundance compared with the lithium-ion batteries and ideal for EVs. Besides, aluminium air battery for an EV has a long-lasting regenerative cathode with a very high ‘energy density’ that can be stored and provided for the car.

The aluminium-air battery plant is likely to come up near Chennai, a hub for automobile manufacturing.

The plant is likely to be set up through a special purpose vehicle formed between IOCL and Phinergy Ltd. Confirming the development, Gurmeet Singh, director, marketing, IOCL told The Hindu, “The potential sites for setting up the facilities could be in metros like Chennai, which has large car manufacturing facilities around.”

When asked for comments, IOCL’s director for R&D, S.S.V. Ramakumar said, “We cannot talk about our commercial strategy, but we are in an advanced stage.”

IMO mandated cutting sulphur content in fuel by Jan. 2020

Essar Shipping Ltd. said it was fully prepared to meet the International Maritime Organization’s (IMO) deadline for reducing sulphur content in fuel.

The IMO had mandated that starting January 2020, the global cap of sulphur content in shipping fuel must be reduced to 0.5% from the current 3.5%. This decision was taken as high sulphur emissions caused damage to marine environment, especially in Northern European countries, with the U.K. suffering the most.

Essar Shipping said it was in the process of adapting to the environment-friendly measures and implementing processes that would reduce the harm caused to maritime environment.

“We are undertaking the change by installing scrubbers in some of our big vessels and simultaneously switching over to the use of compliant (low sulphur) fuel in the rest of our vessels. We will make capital investments of about $6 million in four out of our 12 owned vessels, which have been lined up for installation of scrubbers,” said Ranjit Singh, executive director and CEO, Essar Shipping Ltd.

The identified four vessels comprise three mini capes (bulk carriers) and one very large crude carrier (VLCC) . With scrubbers, these vessels still can use the existing fuel till they are exhausted completely or till the time the company would be comfortable to switch over to the new recommended fuel.

The company said that the installation of scrubbers would be completed by April/May 2020, by the time the regulations kick in. As per IMO, its order must be fully complied with within three months of the cut off date that is January 2020.

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