The rupee on Tuesday plunged further against the US dollar to close 46 paise lower at a record low of 72.97 as government measures announced last week failed to boost sentiment in the forex market. Investors are now pinning their hopes on the Reserve Bank of India (RBI) to raise interest rates at least two more times this year. Extended weakness in the rupee came on the back of rising crude oil prices and concerns on the intensifying US-China trade war front.
In a major move aimed at consolidation in the public sector banking space, the government of India has announced the merger of three state owned lenders—Gujarat originated Bank of Baroda (BoB), Dena Bank and Karnataka based Vijaya Bank. The proposal calls for “alternate mechanism” route for merger and will be subject to board approval of individual banks.
Markets watchdog Sebi on Tuesday said, ICICI Bank and Chanda Kochhar have replied to its show-cause notices on the probe into the alleged regulatory lapses by the bank's CEO-on-indefinite-leave in lending to Videocon group and her husband's business deals with the Dhoot family.
ICICI Bank and the business dealings of the Kochhar family have come under the regulatory glare of Sebi and other agencies after a whistleblower has reported to the government agencies that the Kochhar family had some quid pro quo in its dealings with the now bankrupt Videocon group.
Unveiling more reform measures for the securities market, the Securities and Exchange Board of India on Tuesday decided to come out with revised KYC norms for foreign investors, reduce the listing time after public offer to three days and slash the charges levied by mutual funds from investors.
In a significant move that would help deepen the commodities market, overseas entities have been permitted to trade in commodity derivatives segment. A common application form would be introduced for foreign portfolio investors seeking to enter the domestic markets.
Sebi chairman Ajay Tyagi on Tuesday said he is not sure of ICICI Bank filing a consent application with regard to the ongoing probe into alleged regulatory lapses by its CEO Chanda Kochhar in lending to Videocon group and her husband's business deals with the Dhoot family. He said ICICI Bank and Chanda Kochhar have replied to its show-cause notices.
The grandiose announcement of yet another bank merger — three-way amalgamation of BoB, Dena and Vijaya — may have impressed proponents of banking sector reform. But the proposal may just remain on table as it faces many a hurdle, the biggest of them all being Parliament approval. The timing is also suspect as the announcement came just six months ahead of the scheduled general elections in April-May next year. Experts pointed out that the merger could hit a roadblock as the Narendra Modi-led NDA government isn’t yet enjoying majority in the Rajya Sabha.
The government has announced yet another round of bank mergers to create mega banks. In the first round, State Bank of India absorbed its five associate banks and Bharatiya Mahila Bank. State-run insurer LIC is in the process of acquiring IDBI Bank. The three-way Bank of Baroda, Dena Bank and Vijaya Bank merger was announced on Monday.
The government’s measures to stem the rupee fall and deal with the capital account situation are unlikely to result in any significant shift in fund flows into the country in the immediate future. According to experts, these measures are better suited when the sentiment in the global market is positive towards emerging markets and in general when it is relatively easy for emerging market corporates to raise money abroad.
Ahead of the central bank’s monetary policy meeting next month, lenders are increasing their lending rates.
HDFC Bank, the country’s second largest private lender, has hiked its base rate by 0.20 percentage points to 9.15 per cent. The new rate is effective from September 12.
Fears of trade war escalating and a downgrade of Indian equity by a leading global brokerage house spooked the domestic market, with benchmark Sensex plunging over 505 points. The barometre plunged 505 points or 1.33 per cent to close at 37,585.51, Nifty 50 fell 137 points or 1.19 per cent to end at 11,377.75. Reliance, HDFC Bank, Sun
Pharma and SBI suffered major losers.