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Limit to lowering interest rates, says SBI chief Rajnish Kumar

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SBI Chairman Rajnish Kumar on Saturday said that banks cannot lower interest rates beyond a threshold due to asset-liability mismatch issues.

“We can’t lower the interest rates without lowering the interest rate for depositors and there is a threshold below which we cannot reduce the interest rate for deposits,” he said at the FICCI’s 92nd Annual Convention, titled “India: Roadmap to a $5 Trillion Economy”.

On transmission of monetary policy, there has been constant nudging from the Reserve Bank of India to pass the reduction in repo rates by the whole amount to make the retail loans cheaper for consumers in a big push for consumption. This theory is not bought by the commercial banks who argue if they do 100 per cent transmission, then they will have no margin and will have to lower the deposit rates.

This may see flight of depositors from banks and also small savings rates are higher than the bank deposit rates which will make PSU bank deposit rates further unattractive.

RBI Governor Shaktikanta Das has been aggressively pushing for transmission of rates and has held multiple meetings with banks on the issue.

After the introduction of the external benchmark system, most banks have linked their lending rates to the policy repo rate of the central bank. As against the cumulative reduction in the policy repo rate by 135 bps during February-October 2019, transmission to various money and corporate debt market segments ranged from 137 bps (overnight call money market) to 218 bps (3-month commercial papers of non-banking finance companies).

Transmission to the government securities market, the MPC said, has been partial at 113 bps (5-year government securities) and 89 bps (10-year government securities).

The SBI chief also said that there is enough cash available in the banking system and it is now for the industry to take advantage of this.

On NPAs, Kumar said that banks will be in a good position with respect to stressed assets by March and there is no dearth of liquidity in the system for lending. He added that there are opportunities to lend in sectors such as infrastructure and consumer lending as there is not much of a decline in demand from consumers.

“By March 31, most of the banks will be in a good position with respect to stressed assets,” he said.

On lending to the telecom sector for the next round of spectrum auctions, the SBI chief said: “For us, lending to the telecom sector for spectrum is completely unsecured. On paper, it is secured as the auction is to be done by government but practically, it is totally unsecured.”

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Decline in equities continue for 4th straight sessions

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The 30-scrip Sensitive Index (Sensex) and broader 50-scrip Nifty on the National Stock Exchange (NSE) extended their losses from the previous three consecutive sessions and declined on Friday.

At 10.25 a.m., Sensex traded at 58,593 points, down 0.9 per cent from the previous close of 59,464 points. It opened at 59,039 points.

Nifty traded at 17,599 points, down 0.9 per cent from the previous close of 17,757 points. It opened at 17,613 points.

Bajaj Finserv, Tech Mahindra, Coal India, Adani Ports, Bharti Airtel were some of the top losers, NSE data showed.

Top gainers during the early trade were Hindustan Unilever, Tata Consumers, Bajaj Auto, Hero MotoCorp, and Power Grid Corporation.

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Consumer Price Index numbers for Agri, Rural labourers up by 5 points in Dec 2021

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The All-India Consumer Price Index Numbers for Agricultural Labourers (CPI-AL) and Rural Labourers (CPI-RL) for the month of December 2021 increased by 5 points each to stand at 1097 and 1106 points respectively.

The major contribution towards the rise in general index of Agricultural Labourers and Rural Labourers came from Fuel & Light group and miscellaneous group to the extent of 1.72 & 1.58 points and 1.02 & 1.06 points respectively mainly due to rise in prices of firewood, kerosene oil, medicine, barber charges, bus fare, toilet soap, washing soap, etc., a release from the Ministry of Labour and Employment said on Thursday.

The rise/fall in the index varied from state to state. In case of Agricultural Labourers, it recorded an increase of 1 to 20 points in 11 states and a decrease of 1 to 12 points in eight states while it remained stationary for Odisha. Tamil Nadu with 1,290 points topped the index table whereas Himachal Pradesh with 861 points stood at the bottom.

In case of Rural Labourers, it recorded an increase of 1 to 20 points in 11 States and a decrease of 1 to 14 points in eight states while it remained stationary for Odisha. Tamil Nadu with 1,276 points topped the index table whereas Himachal Pradesh with 915 points stood at the bottom.

Amongst states, the maximum increase in the CPI-AL and CPI-RL was experienced by Tamil Nadu (20 points each), mainly due to rise in the prices of vegetables & fruits, onion, chillies green/dry, tamarind, etc.

On the contrary, the maximum decrease in the CPI-AL and CPI-RL was experienced by Himachal Pradesh (12 points and 14 points respectively), mainly due to fall in the prices of wheat atta, pulses, onion, vegetables, and fruits etc.

Point to point rate of inflation based on the CPI-AL and CPI-RL stood at 4.78 per cent & 5.03 per cent in December 2021, compared to 3.02 per cent & 3.38 per cent respectively in November 2021 and 3.25 per cent and 3.34 per cent respectively during the corresponding month of the previous year.

Similarly, Food inflation stood at 2.99 per cent & 3.17 per cent in December 2021, compared to 0.88 per cent & 1.07 per cent respectively in November 2021 and 2.97 per cent & 2.96 per cent respectively during the corresponding month of the previous year.

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Air India to commence normal ops to US from Friday

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National carrier Air India will commence normal operations to US from Friday, the airline said.

On Tuesday, the national carrier said that it will not be able to operate a number of US-bound flights due to the deployment of 5G communications in the US.

As per industry insiders, the 5G network technology might cause certain crucial flight instruments to malfunction.

The airline informed passengers via its official Twitter handle: “#FlyAI : Flight operations to/from destinations in USA were affected during last two days.

“We would like to inform our passengers traveling to/from destinations in the USA that effective 0001hrs of 21st January 2022 normal flights operations will recommence to/from USA.”

Earlier in the day, Boeing had cleared AI to operate to the US on Boeing 777 aircraft.

Accordingly, the first Air India flight left from New Delhi to JFK airport on Thursday morning.

Besides, Air India is expected to operate other flights to Chicago and San Francisco.

“Arrangements to carry stranded passengers are being worked out,” the airline said.

The US air transport regulator, Federal Aviation Administration (FAA), has been concerned that a version of 5G could interfere with some airplane instruments.

Earlier, aviation industry groups had shared those fears. This is despite reassurances from federal telecom regulators and well as wireless carriers.

Specifically, the FAA has been worried that 5G cellular antennas near some airports – not air mobile devices – could throw off readings from some aircraft equipment designed to tell pilots how far they are from the ground.

The systems, radar altimeters, are used throughout a flight and are considered critical.

At present, Air India operates to 5 destinations in the US.

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