RBI Governor says India not immune, coronavirus may slow down growth
Reserve Bank of India Governor Shaktikanta Das said that India is not immune to the deadly virus and trade channels could be affected as exposure to China is relatively high. He also added that growth momentum of the country could be impacted by COVID-19.
"India is not immune to this pandemic. Already more than 100 cases have been reported. Efforts are being mounted by the government on war-footing. COVID-19 could impact India directly through trade channels, in which exposure to China is relatively high," he said.
Governor Das said, "Second round of effects of the pandemic could operate through a slowdown in the domestic economic growth and it would obviously be a result of synchronised slowdown in global growth. As a part of that, the growth momentum in India would also be impacted somewhat."
Shaktikanta Das' comments on the pandemic come as manufacturers in the country are feeling the heat of the disturbance in the supply chain. The Parliament was informed on Wednesday by Commerce Minister Piyush Goyal that due to the shutdown of factories in China, industries such as pharma, electronics and automobile that import components and raw materials could be affected.
In a separate press conference, Finance Minister Nirmala Sitharaman also said that the government and state governments are continuously monitoring and making sure that timely and effective steps are taken. "Each department is working best on ways to provide relief," said the minister.
The RBI Governor also spoke about the troubled Yes Bank at the press conference on Monday. "Swift action has been taken by the RBI and government of India. The lifting of moratorium will be on Wednesday, 18th March at 6pm. The new board will assume its position and the office of the administration will cease to exist on March 26," he said.
FM Nirmala Sitharaman to meet heads of merging banks on Thursday
Finance Minister Nirmala Sitharaman will hold meeting with chief executives of amalgamating banks on Thursday to review preparedness for the merger beginning April 1.
Earlier this month, the Union Cabinet headed by Prime Minister Narendra Modi approved consolidation of 10 state-owned banks into four. According to sources, the finance minister will review planning and preparedness of merging banks on March 12.
Agenda of the high-profile meeting includes readiness of anchor banks to minimise disruption to customers and ensuring credit flow to productive sectors of the economy, sources said. The meeting will also review preparedness of delivery of banking services and products to customers after the mergers.
It will also discuss business and financial plans, including credit and deposits growth, and year-wise synergy realisation after the mergers. The mergers are scheduled to come into effect from April 1.
As per the proposal, Oriental Bank of Commerce (OBC) and United Bank of India (UBI) would be merged into Punjab National Bank (PNB). The move will make PNB India's second-biggest public sector bank after State Bank of India (SBI).
Syndicate Bank will be merged with Canara Bank, creating India's fourth-largest public sector bank.
Union Bank of India, Andhra Bank and Corporation Bank will be merged together to create fifth-largest public sector bank. Indian Bank and Allahabad Bank will be merged to form India's seventh-largest public sector bank.
The mega consolidation would help create banks with scale comparable to global banks and capable of competing effectively in India and globally. Last year, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with SBI.
Citing an example of the merger of Dena Bank and Vijaya Bank with Bank of Baroda, Sitharaman after the Cabinet meeting had said the operating profit of the resulting lender has improved and retail loans are now sanctioned in 11 days on an average as compared to 23 days earlier.
Reliance Industries Suffers Biggest Single-Day Loss In At Least 10 Years
Shares of companies engaged in crude oil exploration business fell sharply after crude oil prices crashed in international markets. The operator of world's largest crude oil refining facility at Jamnagar and operator of KG-D6 basin in Krishna Godavari basin - Reliance Industries - slumped as much as 13.65 per cent, its biggest single-day fall in at least 10 years, to hit an intra-day low of 1,096.65, data from BSE showed. State-run oil explorer ONGC also slumped as much as 13 per cent to hit an intra-day low of Rs 77.80. Oil prices in international markets crashed more than 30 per cent after the disintegration of the Organization of the Petroleum Exporting Countries (OPEC)+ alliance triggered an all-out price war between Saudi Arabia and Russia that is likely to have sweeping political and economic consequences.
Crude oil fell the most since 1991 on Monday after Saudi Arabia started a price war with Russia by slashing its selling price and pledging to unleash its pent-up supply onto a market reeling from falling demand because of the coronavirus outbreak.
Brent crude futures fell by as much as $14.25, or 31.5 per cent, to $31.02 a barrel. That was the biggest percentage drop since January 17, 1991, the start of first Gulf War, and the lowest since February 12, 2016.
US West Texas Intermediate (WTI) crude fell as much as $11.28, or 27.4 per cent, to $30 a barrel. That was also the biggest percentage drop since the first Gulf War in January 1991 and the lowest since February 22, 2016. It was trading at $32.61.
Meanwhile, equity markets witnessed heavy selling pressure on Monday as benchmark indices slumped more than 4 per cent tracking a selloff in global markets, as investors panicked about the severity of coronavirus pandemic amid fears of recession.
Reliance Industries ended 13 per cent lower at Rs 1,104.50 and ONGC dropped 16 per cent to close at Rs 74.35, under-performing the Sensex which ended 5.2 per cent lower.
Coronavirus Impacts Businesses In India, Travel Industry Also Affected
A usually crowded Yaara market in South Mumbai today is largely deserted. This market specializes in selling Chinese products but supplies are now running low.
Aslam Malkani is in the mobile accessories business for last 10 years. He said, "prices are rising and all because of coronavirus."
"Due to coronavirus, the prices have gone up by 15-20% in past February and whatever is remaining, people are selling it at any price," said Aslam Malkani.
Jin Chin Sin is a Chinese business based out of Guangdong province in China and has his factory in Asia market of Guangzhou province.
"My business has suffered 50% losses because of coronavirus. There are a large group of people like businessmen and manufacturers who suffered big loss," Jin Chin Sin said.
Kantilal Purohit has his toy store in Manish market in Mumbai. He is seeing a 75% drop in sales. This is because factories in China are under closed down and there's no labour there. He's stocking Indian made products but these are costlier.
"My entire business is about Chinese products and it is not coming in..factories are closed there , there are no workers there and hence the entire business is down, " Kantilal Purohit said.
The sentiment is echoed by Ahmed Raza who sells general items mostly made in China.
"Difference between Made in China and Made in India products is that the profit margin is very low. There I could earn 50% but with Indian products, margin is just 10%. This has impacted my business a lot," Ahmed Raza said.
Even travel and hotel industries have been badly impacted with many cancellations amid coronavirus spread across the globe.
"Few airlines are not flying. Cathay Pacific is not flying, Air China not flying, hardly any flights here and there...This will impact the tourism industry very badly. Hotels have less occupancy. New bookings to southeast Asia has gone down to 50%," Shilesh Patil, CEO of Kesari Tours and travels said.
The deadly novel coronavirus is slowing catching up and is also impacting businesses across the country. Although the priority is treating patients at the moment but the effect on businesses can also not be neglected as it will have impact on the already slowing economy. According to a UN report, India figures among the top 15 economies most affected as slowdown of manufacturing in China disrupts world trade.
With the number of deaths crossing 3,000 and over 80,000 confirmed cases, China remains the worst-hit country in the world.
Banks' Merger To Come Into Effect From April 1, Says Nirmala Sitharaman
Finance Minister Nirmala Sitharaman on Wednesday said the exercise of consolidation of 10 public sector banks (PSBs) into four is on course and the merger will come into effect from April 1, 2020.
The Union Cabinet, she said, has given a go-ahead for the merger proposal and the government has been in regular touch with these banks.
There will be no regulatory issues, she said.
"The banks' merger is on course and decisions have already been taken by the respective bank boards," she told reporters here.
The mergers are aimed at creating global sized banks in India.
In the biggest consolidation exercise in the banking space, the government in August 2019 had announced four major mergers of public sector banks, bringing down their total number to 12 from 27 in 2017, a move aimed at making state-owned lenders global sized banks.
United Bank of India and Oriental Bank of Commerce will be merged with Punjab National Bank; Syndicate Bank will be merged with Canara Bank; Allahabad Bank will be amalgamated with Indian Bank; and Andhra Bank and Corporation Bank will be consolidated with Union Bank of India.
Last year, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with the State Bank of India.