Rupee fall not to trigger rating action: Fitch

 
Effects of the rupee depreciation have not been significant enough to impact India's credit rating so far, said global agency Fitch on Thursday, attributing the decline to low growth, high inflation and widening current account deficit (CAD).

Economic growth in the current fiscal is expected to decline to 4.8 per cent, from 5 per cent in 2012-13 but it could recover to 5.8 per cent in 2014-15, it said.

"The spillover effects of a weaker rupee have not significantly hurt India's creditworthiness, and hence would not trigger any rating action at this point," Fitch said in its report, 'India: Repercussions from the emerging markets sell-off'.

The agency has a 'stable outlook' on India's 'BBB-' sovereign rating.

The rupee declined close to 30 per cent against the US dollar between April and August. It touched a record low of 68.85 against the American currency on August 28, but has recovered since then. It closed at 62.93 on Thursday.

The sharp depreciation of the Indian rupee in mid-2013 highlights the country's difficult transition following an extended period of low growth, high inflation and a widening in the CAD, Fitch said.

The ability to implement fiscal consolidation and continue with the overall economic adjustment process would be supportive developments for ratings, it said.

However, the government's resolve "to implement both tighter fiscal and monetary policies may still be tested as the general election approaches", it said. The election are due by May 2014.

Fitch said the government will heavily cut expenditures in the second half of the fiscal to trim fiscal deficit to 4.8 per cent of the gross domestic product (GDP). The fiscal deficit in the first half of the fiscal has crossed 76 per cent of budget estimates.

Fitch forecast CAD to decline to 3.1 per cent of GDP in 2013-14. This fall, however, will not be enough to shield India from further pressures related to the eventual start of Fed tapering, it added.

The government expects to bring down CAD to below $56 billion, from last year's $88 billion.

CAD, which is the difference between the inflow and outflow of foreign currency, touched a high of 4.8 per cent of GDP in 2012-13. The government has taken a host of measures, including gold import curbs, to bring it down.

Overall, Fitch said: "The modest economic recovery, however, will continue to undermine India's banking sector, which is facing a combination of weakening asset quality, eroding profit and declining capital.

"Nonetheless, these factors are likely to have only a moderate effect on the banking sector's ability to supply credit to the economy."

Retail banking grows despite economic slowdown Anand Adhikari

 
Leading banks in India continue to grow their retail banking business. A report by the Reserve Bank of India on 'Trends and Progress of Banking in India 2012-13' says that "… even in a period of overall slowdown in credit growth, retail credit maintained its growth."

SBI, ICICI Bank, HDFC Bank and Axis Bank , among others, are aggressive in retail banking. In fact, retail banking is actually compensating for the lower credit growth in the corporate book.

There appears to be little hope of recovery in corporate loans for banks in the near future. Many corporates have already built large capacities but demand has been hit because of the economic slowdown.    

The share of retail loans in the total loans has risen from 18.4 per cent in 2011/12 to 18.8 per cent in 2012/13. In absolute terms, the retail loan portfolio expanded 15 percent, from Rs 4,11,800 crore in 2011/12 to Rs 4,75,400 crore in 2012/13.  

The growth in the retail portfolio was lead by a double-digit growth in housing loans . Auto loans also saw healthy growth.  Meanwhile, the number of credit cards issued grew 10 per cent, from 17.7 million in 2011/12 to 19.5 million in 2012/13. The private banks were the most aggressive in issuing more cards and their numbers improved from 9.7 million to 11.1 million. The credit card transaction value witnessed a rise of 27.3 per cent in 2012/13 at Rs 1, 23,000 crore.  Debit cards have been a more popular mode of electronic money than credit cards in India, according to the report. The total number of debit cards increased from 278.4 million to 331.2 million. The debit card transaction value saw a jump of 39 per cent in 2012/13 at Rs 74,300 crore.

Don't use retro amendment of tax laws to raise revenue: Parthasarathi Shome

Amid long-pending dispute between the UK-based telecom giant Vodafone and the tax authorities, finance minister's advisor Parthasarathi Shome on Wednesday said the government should not use retrospective amendment of tax laws to raise revenues. "We have to take away risk and uncertainty. We can't use retrospective amendment of tax laws to raise revenue. I have always given example of Brazil and Sweden where they have constitutionally removed retrospective taxation," said Shome without referring to the tax dispute between Vodafone and the Income Tax department. He is also the chairman of the Tax Administration Reform Commission and was speaking at a CII event in New Delhi. Vodafone is facing a tax liability of over Rs 11,200 crore, along with interest, for its 2007 acquisition of Hong Kong-based Hutchison Whampoa's stake in Hutchison Essar, an Indian telecom company. Vodafone has expressed keenness to reach an amicable settlement of the matter. Its India chief Analjit Singh had met Finance Minister P Chidambaram to settle the dispute. A committee was set up under Shome to recommend measures to deal with the retrospective amendment of income tax laws and suggest ways of treating taxation cases which involve indirect transfer of Indian assets, of the likes of the Vodafone-Hutchison deal. The committee had recommended last year that either the retrospective tax amendment should be withdrawn or penalty/ interest, if covered under taxes should be waived off.

Indian rupee down 37 paise at 62.94 vs US dollar

The Indian rupee extended its losses for the second day in a row, declining by 37 paise to 62.94 against the US dollar in late morning trade, on sustained demand for the US currency from banks and importers. The rupee resumed lower at 62.85 per dollar against the last closing level of 62.57 at the Interbank Foreign Exchange (Forex) Market and dropped further to 62.98 before quoting at 62.94 at 10.40 am. It hovered in a range of 62.79 and 62.98 per dollar during the late morning deals. Banks and importers preferred to increase their dollar position on the back of firm dollar in overseas market. In New York market, the US dollar rose against the euro on Wednesday after the Federal Reserve minutes suggested more willingness among officials to slow its bond buys, at the same time the European Central Bank is mulling a potential deposit-rate cut into negative territory if more economic stimulus is needed. The BSE Sensex dropped by 245.43 points, or 1.19 per cent, to 20,389.70 at the same time.

BSE Sensex trades higher on sustained buying by funds, retail investors BT Online Bureau

 
The BSE Sensex gained over 69 points in early trade on Tuesday on sustained buying by funds and retail investors amid a strengthening rupee.

The buying took place mainly in realty, metal, capital goods, oil and gas and IT sector stocks.

Brokers said sentiments remained firm on sustained buying by participants driven by the Reserve Bank of India's (RBI) plans to inject Rs 8,000 crore into the financial system to ease liquidity and further strengthen the rupee.

Rising for the third straight session, the 30-share index of the Bombay Stock Exchange gained 69.59 points, or 0.33 per cent, to 20,920.33.

In the past two sessions, the Sensex had gone up by 656.34 points.

The 50-share Nifty of the National Stock Exchange traded 18.80 points, or 0.30 per cent, higher at 6,207.80.

In the Asian region, Hong Kong's Hang Seng rose 0.53 per cent while Japan's Nikkei shed 0.73 per cent in early trade on Tuesday.

The US Dow Jones Industrial Average ended 0.09 per cent higher after crossing 16,000 points for the first time in Monday's trade.