Banking sector this week was weighed in by the Supreme Court decision to stay the insolvency proceedings against Jaypee Infratech even as Reserve Bank of India (RBI) declared HDFC Bank as the third “too big to fail bank” but RBI’s former head Raghuram Rajan stole the cake talking about demonetisation at the launch of his book “I Do What I Do”.
The week started with the Supreme Court staying a major insolvency case against real estate-firm Jaypee Infratech at the National Company Law Tribunal (NCLT) bringing some relief to the homebuyers. However, IDBI Bank, lender to Jaypee Infratech, has contested this stay and asked for the insolvency proceedings to continue.
Further, in a letter to the Prime Minister Narendra Modi, all-India homebuyers group has sought help under RERA Real Estate (Regulation and Development) Act 2016.
HDFC Bank too big to fail
The central bank on Monday declared that HDFC Bank would join the list of 'too big to fail' group announced in 2015, which at that time included India's largest lender SBI and largest private sector lender ICICI Bank. Here’s what 'too big to fail' means.
HDFC Bank also saw movement of its corporate head K Balasubramanian, 46, who is going back to his former employer Citi to take a larger role as the head the corporate banking for South Asia.
IDBI Bank Stake Sale
Government lender facing major capital constraints and already under Prompt Correction Action (PCA) has kick-started its sale of non-core assets with sale of its stake in SIDBI. Last month, IDBI Bank planned to pare 16.25 percent stake in the micro, small and medium enterprises financier but "have already identified a buyer for the remaining 2.54 percent" it owns in SIDBI.
In another development, Union Bank of India also said it would pump in Rs 3,500 crore including Rs 1,500 crore capital infusion from the government.
In another smaller news Singapore-based foreign lender DBS got final approval to operate as a wholly-owned subsidiary (WOS) in India after a delay of two years.
Raghuram Rajan – I Do What I Do
Breaking silence, former RBI Governor Raghuram Rajan said he had cautioned the Centre on the short-term costs of demonetisation outweighing the long-term benefits, but despite his reservations, the Centre went ahead with the move.
He said he opened up on the topic of demonetisation as some of the responses given to the Parliamentary Committee by RBI about demonetisation were not in accordance with his actual response.
Here are the key takeaways from his speech.
He said, the Indian economy's health is a matter of concern given that Gross Domestic Product (GDP) growth has significantly slowed to 5.7 percent in the April-June quarter, coupled with low inflation and job creation.
Viral Acharya suggests Sudarshan Chakra
On the other hand, current deputy governor Viral Acharya took to mythology to find answers to the questions that are keeping him awake at night as he attempts to resolve the banking sector stress.
On similar lines, bank mergers were also gaining momentum as the government asks public sector banks to present merger proposals based on their commercial strengths
Digital Payments
Even though digital payments surged post demonetisation, transactions through the electronic channel have been witnessing a slower pace of growth each month with August transactions showing 26.5 percent dip in value terms from its peak in March.
Although the transactions have grown compared to the month of July, it is a marginal rise of 2.2 percent, RBI data showed.
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