Business News at 10:00 am on 18th March, 2024

Let’s begin – The tightening of compliance regulations by the Reserve Bank of India may prompt banks to lean towards collaborating with larger fintech companies for co-branded card partnerships. Bankers cite the risk of non-compliance with the RBI regulations as the prime concern, fearing that smaller fintechs may lack the expertise and resources to fully understand and adhere to regulatory requirements. Banks have become wary of joining hands with smaller fintechs for co-branded cards after the RBI amended the rules for credit and debit cards. The central bank on March 7 amended the master direction on credit and debit cards and asked issuers to establish a robust system for monitoring the end use of funds. Following the amendments, Federal Bank and South Indian Bank have decided to stop issuing new co-branded credit cards.

Meanwhile – Makers of beverages, ice-creams, air conditioners and coolers are anticipating strong demand for their products this summer season as mercury levels rise. The Indian Meteorological Department recently said that the March-May period this year would be long and dry, with more days of heat waves and above-normal temperatures across the country. This is good news for consumer firms, who are dependent on summers for sales, since it comes on the back of two years of unseasonal rains during the summer months. Most expect sales growth to be in the region of 30-50% across categories this summer season versus last year. Jayen Mehta, managing director, Gujarat Co-operative Milk Marketing Federation, the maker of the Amul brand of ice-creams, beverages and dairy products, added that he was anticipating a 50% year-on-year sales growth this summer for his products.

In another development – Even as the Department of Financial Services has written to all public sector banks asking them to review gold loan portfolios for any lack of regulatory compliance, Canara Bank, the largest gold loan provider amid PSBs, is confident of sustaining a higher double-digit loan growth in the segment, two senior officials told FE. Canara Bank’s gold loan portfolio stood at Rs 1.45 trillion as on December 31, 2023, up 20% year-on-year. The same for Union Bank of India and Bank of Baroda stood at Rs 68,072 crore and Rs 45,074 crore, respectively. State Bank of India’s retail personal gold loan portfolio was at Rs 30,881 crore. Banks extend two set of gold loans — retail gold loans and agriculture loans backed by gold as collateral.

In a separate development – The near-13 year high services trade surplus in February has prompted economists to scale down their projections of India’s current account deficit for the current financial year. Many economists now expect CAD to come in at 0.8-0.9% of the GDP during the entire FY24, as compared to their previous forecast of 1.1-1.2%. “The services trade surplus has consistently risen since November 2023, narrowing the gap with the merchandise trade deficit, giving a fillip to the current account balance,” said Barclays economists in a note. India’s overall trade deficit during February was meagre $2billion, lower than $4.2 billion in January. During February, country’s services trade surplus came in at $16.8 billion – the highest since April 2011 – as against $16.2 billion in January.

Now news related to statups – Revenue-based financing, or non-collateralised debt against a percentage of gross revenue, is gaining traction amongst statups and digital SMEs, as venture capital flow continues to be dry and traditional credit remains out of reach for many. Platforms such as GetVantage, Velocity and Klub, all of which came up between 2019-2020, are rushing in to fill the working capital gap in market, estimated to be over $150 billion, as per a Redseer study published in August 2023, which says only about 30% of the existing $220 billion credit demand of digital SMEs is being addressed.

In another development – With mandi prices of tur dal ruling close to 50% above MSP of Rs 7000/quintal, the government agencies are struggling to purchase the pulse variety under the direct procurement from farmers at market prices aimed at building a buffer of one million tonne. Sources told FE that agencies such as farmers’ cooperative Nafed and National Cooperative Consumers Federation (NCCF) have purchased only 20,000 tonne of tur dar from farmers so far since the government launched purchase of pulses above MSP through a ‘dynamic price’ formula earlier this year.

Lastly – GIFT Nifty traded down by 48 points or 0.22% at 22,048.50 indicating a negative opening for domestic indices NSE Nifty 50 and BSE Sensex on Monday. Shares in the Asia-Pacific region are trading in negative territory on Monday morning. The Asia Dow is trading up by 0.18%, where as Japan’s Nikkei 225 is trading in red, down by 0.26%, Hong Kong’s Hang Seng index is ended lower by 1.42% and benchmark Chinese index Shanghai Composite is ended up by 0.54%.