Banking Sector

Even though the RBI may have frontloaded the rate hikes, it remains to be seen how it influences the trajectory of rupee over the medium term. While the rupee did witness a smart recovery after the policy announcement, it was unable to hold onto the gains. Research suggests that countries with low prior FX reserves are more likely to choose an interest rate defence than countries with high reserves. This is probability, not the case for India (FX reserves: $572 billion).

"The bond market sold off after the policy announcement with yields moving higher by 15-20 basis points across the curve. Given that the bond yields have come down significantly over the last month, there is a possibility of a further rise in bond yields in the short term," said Pankaj Pathak, Fund Manager - Fixed Income, Quantum AMC.

The Governor, who had announcing a policy rate hike of 50 basis points (bps) to 5.40 per cent, said: "It is now proposed to enable BBPS to accept cross-border inward bill payments. This will enable Non-Resident Indians (NRIs) to undertake bill payments for utility, education and other such payments on behalf of their families in India. This will greatly benefit the senior citizens in particular."

"Industry reckons the RBI's focus on sustainable economic growth with Real GDP forecast at 7.2 per cent for FY23, while continuing its monetary intervention to tame global inflation headwinds by increasing repo rate by 50bps. As the home loan borrowing is at the flexible rate, short term interest rate spike will certainly hurt the homebuyers' sentiments, but it averages out the cost positively in the long term," said Dr Niranjan Hiranandani, National Vice Chairman, Naredco.

Several banks have already raised their borrowing rates and some will again increase their rates after this hike by the central bank. "For any financial institution including NBFCs Cash in the Inventory. All NBFC must borrow money from the market and then lend to customers. Difference between borrowing cost and lending income is the profit for NBFC.

The Insurance Regulatory and Development Authority of India (IRDAI) has also proposed curbing of variable pay of the CEO/MD, Whole Time Directors and key management persons, if there is a deviation of over 10 per cent of actual expenses over projected one and additional solvency is not maintained as stipulated.

Studying the results of corporates tracked by it, Motilal Oswal said that the BFSI sector has driven 124 per cent of the incremental year-on-year (YoY) earnings growth during the 1QFY23 which was largely subdued. Loan growth has spiked fueled by continued momentum in retail and small and medium enterprises (SME) segments.

"In the month of June, the banks have borrowed heavily amounting to Rs 83,000 crore through CD issuance. However, we saw a dip in the month of July. Possibly the market must have reacted to volatile yield movements due to external factors," said Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincorp, a Mumbai-based debt advisory firm.

According to Indian Bank, it had earned a net profit of Rs 1,213.44 crore for the period ended June 30, up from Rs 1,181.66 crore earned during the corresponding period of the previous year. During this period, the bank's advances grew by nine per cent to Rs 425,203 crore over Rs 389,626 crore a year ago, primarily driven by the growth in the retail, agriculture, and MSME segments. Indian Bank's total deposits grew by eight per cent to Rs 584,251 crore as compared to Rs 540,082 crore during the corresponding period a year ago.

According to the company, it had posted an after tax profit of Rs 3,669 crore for the period ended June 30, 2022 up from Rs 3,001 crore logged during the previous year's corresponding period. The company said its average size of individual loans stood at Rs 35.7 lakh compared to Rs 33.1 lakh in FY22. As on June 30, 2022, the assets under management (AUM) stood at Rs 671,364 crore as against Rs 574,136 crore in the previous year.