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Rating agency Moody's Investors Service has placed Yes Bank's foreign currency issuer rating of Ba1 under review for a potential downgrade. It has also placed the bank's long-term foreign and local currency bank deposit ratings of Ba1, foreign currency senior unsecured MTN programme rating of (P)Ba1, among other instruments under review.

It has affirmed the bank's short-term foreign and local currency bank deposit rating of NP.

The review for downgrade takes into account its expectation that the ongoing liquidity pressures will negatively impact the credit profile of Yes Bank, given the bank's sizeable exposure to weaker companies in the sector.

At the end of March, the bank’s exposure to housing finance companies (HFC) and non-bank finance companies (NBFC) represented 6.4 percent of its total exposure. “Yes Bank had a seven percent direct exposure to the commercial and residential real estate sector as of the same date, which is also under pressure, because liquidity conditions have worsened for the real estate sector, just like with the HFCs and NBFCs,” it stated.

Going forward, Moody's expects significant pressure on the bank's asset quality and therefore profitability and capital position. “In April, the bank classified about Rs 10,000 crore of its exposures, representing 4.1 percent of its total loans under watch-list, which could translate into non-performing loans over the next 12 months. Nevertheless, the impact will be somewhat cushioned by the bank's proactive loan loss provisioning for anticipated stress,” it explained.

The review notice takes into account Yes Bank’s fund raising plans of $1 billion. But cautions that a failure to do so would result in the bank’s loss absorbing capacity and therefore financial profile coming under pressure.

The rating agency has said it could downgrade Yes Bank's ratings if: 1) There is a sustained deterioration in impaired loans or loan-loss reserves, or if the rate of new nonperforming loan formation is significantly higher than previously experienced; or 2) Capital ratios decline because of its inability to raise new capital, or both.

In related news, Lt Gen Mukesh Sabharwal has resigned as Non-Executive Independent Director, the bank said in an exchange filing. It added that Sabharwal wants to spend time on academic pursuits.

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Orowealth

The RBI's latest monetary policy meeting was along expected lines with a 0.25 percent cut in repo and reverse repo rates.

However, the lack of any significant or concrete measure to contain the brewing liquidity crisis in the NBFC space has led to some disappointment (the stock market - Nifty 50 - closed 1.5 percent lower on the policy day).

Unless the rate cut of 0.25 percent and the previous two rate cuts of 0.25 percent each in February 2019 and April 2019 (amounting to a total of 0.75 percent) are completely passed to the end user, the RBI's decisions do not have much practical meaning. Till now, rates on new loans have fallen only by around 0.21 percent while rates on existing loans have increased by around 0.04 percent.

Banks and NBFCs point to falling deposits and high costs of capital for their inability to price loans cheaper. If the deposit collection is lower, banks cannot reduce deposit rates, which implies they will not be able to reduce lending rates. Similarly, if their cost of borrowing funds from the market is high (due to the ongoing liquidity crisis, cash is at a premium), they cannot lend to end consumers at lower rates. The RBI needs to work closely with them to solve this problem first.

The RBI also changed its monetary policy stance from neutral to accommodative, given the growth slowdown being currently witnessed. This is a good signal which shows the RBI's bigger fear is the falling economic growth, as compared to inflation (which has been low for quite some time and reasonably well-contained) at least for the foreseeable future.

Another important measure taken on June 6 that was not a part of the main monetary policy report was the RBI’s guidance to target 4 percent leverage ratio going ahead (against 4.5 percent currently) for domestic systemically important banks (like HDFC Bank, ICICI & SBI) and 3.5 percent for other banks.

The leverage ratio is defined as the ratio of a bank’s tier 1 capital (core assets such as equity capital and disclosed reserves) by its total consolidated exposure. A cut in leverage ratio implies that banks can lend more on the same capital base.

Given that current total consolidated exposure for the banking sector is around Rs 96 lakh crore, this decision gives the ability for lending to increase by approximately Rs 50,000-75,000 crore for the entire banking system as a whole.

The RBI's intention is that this excess money will reach sectors that are currently starved of liquidity especially MSME businesses. But, it remains to be seen how money much actually circulates into the economy.

On the whole, the RBI’s policy decisions were a step in the right direction. Now, it is time their benefit reaches the end customer.

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The government may reduce the lease period for projects under the toll-operate-transfer model to 20 years from 30.

The TOT model was implemented in 2016 to monetise publicly funded highways.

The move needs the approval of the Union Cabinet and an NHAI official told the paper that it has initiated the process.

The first round of TOT auctions fetched the government more than Rs 9,000 crore. However, the second auction was cancelled due to a lukewarm response.

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The RBI's Monetary Policy Committee meeting has been underway since June 4, and the decision has been made. For the third time in a row now, the RBI has cut rates by 25 basis points. This was widely expected, given the slowing economic growth along with rising global uncertainty. The MPC has also decided to change their stance from neutral to accommodative while stating that the RBI expects the government to remain broadly fiscal-prudent.

Amit Gupta, Co-Founder and CEO at TradingBells, says, "The RBI has announced a rate-cut of 25 basis points fuelled by a stable government, sharp decline in crude oil prices and a slowdown in the economy. The RBI changed its stance to accommodative, and a possibility of further rate-cuts this year remains open (we can expect a further rate cut of 50 to 75 basis points in 2019)."

"Real estate, NBFC, Banking, and Auto sectors would be the key beneficiaries of this rate cut where a temporary uptick can be seen in many stocks but quality stocks will continue to outperform," he added.

Shishir Baijal, Chairman & Managing Director – Knight Frank India, stated that the policy rate cut was likely to provide respite to the real estate sector.

"The first rate-cut in the newly-elected government’s regime is certainly a welcome step, especially for the real estate sector. The benefit of lower policy rate in terms of better credit cost as well as higher liquidity will hopefully be transmitted further by banks to NBFCs as well as home buyers," he said.

Baijal goes on to say, "The change in policy stance from neutral to accommodative is a welcome shift as it lays ground for further rate cuts. The cash-crunched NBFCs will definitely benefit from inflow of capital which will in turn benefit developers as well as home-buyers. NBFCs have been facing a liquidity crisis and this has negatively impacted their loans to real estate, including construction finance. Besides capital infusion into this important financier segment, this rate cut will also improve the home-buyers affordability and stimulate housing demand at this critical juncture.”

Romesh Tiwari, Head of Research – CapitalAim says, "25 basis point cut is in line with our minimum expectation and was already discounted in the market. The downward revision of GDP growth reflects concern over slowdown and supports shifting of RBI stance to accommodating policy. We expect banking shares to remain strong in the midterm while NBFCs may further correct before consolidating."

"Largely market will not be driven by this news. Current valuations do not justify Nifty and Sensex and are due for a correction soon. Now all the eyes will be on the budget session which may bring some big measures for revitalizing the economy. Short term target for Nifty is 11,880 and breaking below that may take the Nifty 11,660 levels in the medium term," he said.

Naveen Kulkarni, Head of Research, Reliance Securities says, "While the rate cut of 25 basis points was in line with our expectation, concerns over growth and challenges regarding liquidity continue to linger. The market is not necessarily cheering the rate cut as it had already factored in and something more was expected."

"RBI reduced repo rate by 25 bps as expected. The change in stance to ‘accommodative’ was a bit of a surprise. Debt markets will take this as a significant positive move though most of the rate cut cycle is probably over. The tone of the RBI policy was dovish and highlights the concerns on growth. We maintain our call for another 25 bps rate cut in August factoring in the benign inflation trajectory and the growing concerns on growth. However, transmission of the rate cuts will be key and the RBI should aim to maintain the liquidity, at least, at neutral over the next few months," said Suvodeep Rakshit, Sr. Economist, Kotak Institutional Equities.

Arvind Chari, Head –Fixed Income & Alternatives , Quantum Advisors Pvt Ltd said, "The Repo Rate cut of 25 bps was as expected. That it was unanimous, in a 6-0 decision is noteworthy. What is of most significance through for the bond markets is the change in stance to accommodative. This is a clear indication that the RBI is deeply concerned about growth and is prepared to use interest rates and liquidity to boost demand."

He also says, "Bond yields may have further room to drop as the markets will except further rate cuts especially another 25 bps in August to take the Repo rate to 5.5%. 10 year bond government bond yield at around 6.9%, is still attractively valued as more rate cuts gets priced in. We expect another rate cut in August but will caution against too much exuberance."

The GDP target has been lowered for financial year 2019-20 from 7.2 percent to 7 percent. The RBI also noted in its policy statement that consumer inflation for the first half has been pegged at 3-3.1 percent.

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The US' decision to withdraw incentives for Indian exporters violates global trade rules as it discriminates among developing countries, trade experts say. The US has decided to roll back export incentives provided under Generalised System of Preferences (GSP) from June 5. The move is expected to impact India's exports wroth USD 5.6 billion under this programme.

Dhruv Gupta, Partner (International Trade), Lakshmikumaran & Sridharan, said that irrespective of the eventual trade impact, the US' action of withdrawal of benefits against India is at loggerheads with its WTO obligations.

"It goes against the fundamental principle of non-discrimination because it discriminates between developing countries," Gupta said in a statement.

The decision also undermines the objective recognised in the preamble to the World Trade Organization (WTO) agreement that there is a need for 'positive efforts' to ensure that developing countries secure a share in their growth in international trade commensurate with the needs of their economic development, he said.

Industry body CII too has stated that this decision has been taken in "haste" and would hurt domestic exporters.

It has expressed hope that both the US and India would discuss the matter and find an amicable solution to this issue.

Federation of Indian Export Organisations (FIEO) said that in respect of products having GSP benefits of 3 per cent or more, exporters may find it difficult to absorb the GSP loss.

The sectors which would be impacted include most imitation jewellery, leather articles, pharmaceuticals, chemical and plastics, basic and processed agri goods, it said.

"Government should provide some supports to products where GSP loss has been significant so that the market is not lost. Extension of rebate of state and central tax levies scheme on such products on exports to US will be beneficial," FIEO President Ganesh Kumar Gupta said.

As many as 1,900 Indian products from sectors such as chemicals and engineering get duty free access to the US market under the GSP, introduced in 1976.

The US has alleged that India is not providing equitable market access to its companies and has raised serious concerns over capping of prices of certain medical devices. It is also seeking market for its dairy products.

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India's gold imports in May jumped 49% from a year earlier to 116 tonnes as a correction in local prices during a key festival boosted retail demand, a government source said on June 4.

Higher gold imports by India, the world's second-biggest consumer of the precious metal, could support global prices that are trading near their highest level in three months.

The country's gold imports in value terms rose to $4.78 billion in May from $3.48 billion a year ago, a government official said, who was not allowed to speak to the media.

India had imported 78 tonnes of gold in May 2018.

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Industry body Ficci Saturday hailed the Centre's decision to extend benefits under PM-KISAN scheme to all farmers, saying Indian agriculture is yet to realise its full potential. The government Friday decided to extend the PM-KISAN scheme to all 14.5 crore farmers in the country costing Rs 87,000 crore a year and also announced over Rs 10,000 crore pension scheme for five crore farmers, thereby fulfilling the BJP's poll promise.

The industry body also congratulated Prime Minister Narendra Modi for a new pension scheme for five crore farmers as one of the first decisions of his new administration.

With agriculture as top priority, Ficci has been advocating the extension of PM- KISAN to all farmers in its 100 days agenda to government.

The government had announced Pradhan Mantri Kisan Samman Siddhi (PMKSS) in the interim Budget to provide Rs 6,000 per year to about 12.5 crore small farmers holding land up to 2 hectares.

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Employee benefits firm Sodexo has launched Multi-Benefit Pass, which is a solution that can be used for not just meal-benefits but also for fuel or other purchases. The card will have a pin facility for meal benefits while the chip facility can be used for the other benefits offered in partnership with RuPay (National Payments Corporation of India).

Suvodeep Das, VP-Marketing for Sodexo BRS India, said that the idea of the product is to use one single card for multiple transactions by an employee. RuPay has a 3.6 million network in India.

"There is no such solution at present where one card can be used for multiple types of transactions. We wanted to bring that ease to the employee benefits space," he added.

Das said that the card will have multiple virtual wallets which can be used for meal benefits, fuel or telecom. Further, if companies want to offer digital gifting options to employee, the virtual wallet can be recharged for the particular amount during festivals like Diwali or Christmas.

However, he clarified that clients who want special gift cards can continue to get those from Sodexo as part of the gifting and recognition solutions.

This is the first such 2-in-1 card in India. Das said that their mobile application could be used for using the benefits of the card.

Sodexo offers gift cards and meal cards. At present, while the Sodexo meal card works on a propriety network in compliance with the Reserve Bank of India guidelines, the gift cards are accepted on the RuPay network for 3.6 million retail outlets and 90,000 major online portals.

"More than 75 percent of our consumers use our application frequently. We are hoping that this can be replicated with the new solution as well," he said.

With Sodexo Multi-Benefit Pass, the company aims to cut down the hassle for employees to collate and submit bills.

Nalin Bansal, Head of RuPay, NCMC (National Common Mobility Card) and NFS (National Financial Switch), NPCI said: "Prepaid cards is one of our core business under RuPay portfolio. As part of our strategy, we have increased our focus on the non-bank prepaid issuers and have developed a fast-track, seamless and cost effective onboarding process."

Sodexo Meal Pass is currently accepted across 100,000 plus points in 1,700 locations. The company has more than 11,000 clients in the public and private sector with 3 million daily users.

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India's GDP growth during the fiscal 2018-19 is expected at 6.9 percent, marginally lower than CSO's advance estimate of 7 percent, rating agency Ind-Ra Monday said and urged the new government to take short-term measures to arrest slowdown in the economy.

The Central Statistics Office (CSO) will be releasing the quarterly GDP estimate for the quarter January-March (Q4FY19), 2019 and provisional annual estimates for 2018-19 on May 31.

"Ind-Ra expects FY19 GDP growth to be 6.9 percent as against the 2018-19 advance estimate of 7 percent," it said. The GDP growth was 7.2 percent during 2017-18.

In a release, India Ratings and Research (Ind-Ra) said it expects 4QFY19 GDP growth to decelerate to 6.3 percent from 6.6 percent in previous quarter.

Clearly, Ind-Ra said 2018-19 will be the second consecutive year of an economic slowdown in India.

Arresting the slowdown and reviving the economy will be the first challenge for the new government, it said.

Prime Minister Narendra Modi will be taking oath of office on May 30 for a second time after BJP-led NDA secured majority in the just concluded general elections.

"In Ind-Ra's opinion, the new government will have to devise and execute both short-term and medium-to-long-term measures to arrest the slowdown.

"While cyclical challenges can be addressed through short-term measures, the need of the hour is to address the structural challenges plaguing the Indian economy," it said.

It further said that although little can be done with regard to the global trade environment, certainly a more proactive policy intervention could be pursued to aggressively revive investment.

Meanwhile, private sector lender ICICI Bank in a research report said the immediate priorities of the government should be focused on agricultural sector especially improving farm terms of trade, supporting systemic credit growth not just for banking sector but for the Non Banking Financial Company (NBFC) sector as well.

Growth rates to stay weak but a combination of strong government policy support and benign monetary policy environment should lead to recovery in growth prospects towards the second half of this fiscal year, it said.

According to the report, short term policy priorities of the new government should include, agricultural price stability measures, supporting system credit growth especially to small industry, and provision of adequate liquidity and accommodative policy environment among others.

Long term policy priorities should include, land and natural resource related measures, labour related measures, capital related measures, productivity related measures and sector-wise reforms, ICICI Bank's report added.

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Foreign direct investment (FDI) in India has been declining, even though recent US-China trade tensions and the increasing working population should ideally make the world's fastest-growing economy attractive for investors. This could be because of investors' pre-election nerves and also because of recent protectionist 

Earlier this year, the government announced new rules for e-commerce companies like Amazon and Walmart with respect to FDI to protect the interests of millions of India's small businessmen. Later in February, it was announced that an oil refinery project backed by Saudi Arabia worth $44 billion would be moved from its present place to a new location as farmers opposed the project.

On the other hand, the report noted that the Foxconn Technology Group recently announced that it would start manufacturing Apple's latest models in India. With tension brewing between the US and China, the two largest economies in the world, it may prove to be beneficial for both Apple and Foxconn to move their base to India.

"India definitely needs to attract investments in manufacturing and other sectors. There are huge opportunities for it, with western companies having second thoughts about their Chinese operations. If India could provide an alternative, it would have a great advantage," Vivek Wadhwa, professor at Carnegie Mellon University in Silicon Valley, told the wire agency.

To boost its investment to GDP ratio from 30 percent to 40 percent and see double-digit growth, according to Girija Pande, a former TCS CEO. "We have seen China and East Asian economies grow at such fast rates of growth with that kind of investment levels," he said.

The publication noted that though India's progress is notable as it jumped 23 spots to 77 in the World Bank's ease of doing business ranking in 2019, but old labour laws, long land acquisition processes, red tape and foreign exchange limitations are still in its way. The report said that to grow at over 8 percent, more FDI is crucial.

"It isn't much of a stretch to think that even a partial loosening of restrictions in large sectors like banking or multi-brand retail, could be enough to lift FDI inflows to over 2 percent of GDP from around 1.5 percent currently," Shilan Singh, an economist with Capital Economics (Asia) told the publication.