The Finance Ministry has directed PSBs to monitor and provide for pledged shares of companies. In the past, pledged shares have fallen sharply in value when there has been a forced pledge sale by the lender. That risk is not captured by the banks when they lend to such companies, but the Finance Ministry now wants the PSBs to focus on that aspect too. The review was in the light of the global banking crisis and to test the resilience of Indian banking. PSBs have also been asked to create a crisis management playbook.
In calendar year 2022, equity investments in the realty space grew 32% to $7.8 billion. This is the highest annual investments recorded in India in real estate. The data was put out by CBRE. Equity flows in next 2 years are expected to be around $13 billion as institutions take a bigger interest in the realty sector in India, as a proxy for consumption. Apart from homes and offices, CBRE expects this growth to also come from office space, warehouses, and data centres. The last two years saw a surge in land acquisition also.
The World Bank has warned that the global economy could face a lost decade due to the fading of most key economic drivers of growth. In fact, the World Bank report has cautioned that the speed limit of the world economy could drop to a 30-year low by 2030. Major triggers to this slowdown would be the lag effect of the pandemic, continued supply chain constraints, weak demand, and consumption hesitancy. For 2021-2030 world GDP growth is likely to fall to 2.2% a year, compared to 2.6% between 2011 to 2020.
As the Finance Bill taxed debt funds at par with bank FDs, experts suggest it could act as a magnet for bank deposits. The IBA chairman expects nearly $36 billion of deposit accretion for banks as funds flow out of debt funds. Debt funds have already seen major outflows in the last 2 years and this would only further reduce the AUM of active debt funds. Another option is that funds may choose to hold more than 35% in equity so that they can get the old benefits. Deposit growth has lagged loan growth in Indian banks.
Oyo Hotels will sell lower number of shares and cut the size of its IPO value by nearly two-thirds due to the waning appetite for large IPOs in the Indian primary market. Oyo Rooms is planning to file a fresh IPO document with SEBI with the equity size reduced by almost 67%. Oyo is modelled on Airbnb and had once enjoyed valuations of $10 billion. But that looks a distant dream now and the IPO size will have to reflect that shift. Cash burn continues to be elevated and despite a pick-up in hospitality, it is still in deep losses.
IDFC First Bank partnered with Sweden-based Crunchfish pilot a project to exhibit offline retail payments. This will be part of the RBI pilot to enable offline payments. Under the new system, digital payments can be made even when there is no telecom network; making it very useful in smaller towns, where internet connections are still erratic. Of course, the interoperability between banks will be key for the success of the offline retail payment solutions. IDFC Bank has 707 branches, 253 asset service centres and 867 ATMs.
LIC of India, the largest institutional investor in India with an AUM of Rs42 trillion, plans to infuse nearly Rs240,000 crore into Indian equities in FY24. LIC also wants to use the recent correction to accumulate stocks at lower prices and will mark the biggest annual outlay to equities in any year. It is also expected to largely stabilize Indian equity markets. About a third of the allocation will be in listed companies. In the last couple of years, domestic funds and LIC have driven equity buying, even as FPIs have been sellers.
First Citizens BancShares confirmed it will acquire Silicon Valley Bank’s deposits and loans; and other assets from FDIC. The FDIC has received stock of First Citizens BancShares worth $500 million as part of the deal. First Citizens Bank will assume SVB assets of $110 billion, deposits of $56 billion and loans of $72 billion. Its loan book of $72 billion was purchased at a discount of $16.5 billion. Effective 27th March 2023, the 17 branches of SVB are part of First Citizen Bank; which has $109 billion assets and $90 billion deposits.
