Eco booster continues: Package for realty soon

September 24, 2012

P-Chidambaram

New Delhi, September 24: The government is readying a package to boost real estate activity by easing lending and provisioning norms for banks as part of a strategy to prop up the sector that provides significant employment in the country after developers expressed their inability to cut prices to increase demand.

The steps follow an interaction that finance minister P Chidambaram had with public sector bank chiefs last month, where he also asked the Indian Banks' Association (IBA) to prepare a simplified education loan scheme, backed by a credit guarantee fund.

While a new education loan code is a work in progress, bankers said a funding boost for real estate was discussed by financial services secretary D K Mittal with bankers and industry representatives in Mumbai last week and the government will seek simplification in norms by the Reserve Bank of India (RBI).

On education loans, while IBA is still working out the norms, a bank chief said the FM's suggestion to provide loans to students getting admission under the management quota was virtually accepted. Similarly, banks will change the service area approach for these loans and students will be able to avail of the facility from any branch.

At the meeting, Chidambaram sought feedback from banks on various sectors and has already taken up the issue of clearing infrastructure projects that are held up in the absence of land, fuel or environment clearances. Besides, he has asked state-run banks to devise schemes to push consumer durables sales, which was seen as a message to cut rates on auto loans.

Chidambaram said there were nearly five lakh apartments lying vacant in Mumbai alone and asked IBA to look at ways to prop up demand, get builders to complete projects and sell unoccupied dwellings.

A banker said developers had argued that it was tough to cut prices given the high labour and land cost as well as inputs such as cement and steel. Besides, they said the profit margin was not very significant to justify a reduction in prices. As a result, the government is now looking at ways to help the sector that can have a rub-off effect on sectors such as cement and steel besides creating jobs.

At the meeting, lenders demanded a change in approach by real estate developers, asking them to move to a project-specific borrowing model, which will make it easier for lenders to track funding. "We do not lend to a corporate house which is in the cement or power sector. We lend to a project that is being developed, which also provides us comfort," said a public sector bank chief.

Another bank chief said that for these projects, an escrow amount will be opened, where buyers would deposit their money and lenders would be able to take charge of those funds. "But when it comes to builders, it is easier said than done," the chairman added.

A key area where lenders are seeking a change in norms is to get the regulator to simplify norms so that the loans extended for residential projects to the builders are not treated at par with those for commercial real estate. Currently, all exposure to developers requires higher charge on capital, which means banks have to set aside more funds if they lend to companies.

RBI has traditionally been wary of bank lending to real estate and even has a cap of 5% on loans to the sector. Although home loans are treated separately, the regulator has often discouraged banks from lending to individuals as well.

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News Network
May 4,2020

New Delhi, May 4: The country's manufacturing sector activity witnessed unprecedented contraction in April amid national lockdown restrictions, following which new business orders collapsed at a record pace and firms sharply reduced their staff numbers, a monthly survey said on Monday.

The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) fell to 27.4 in April, from 51.8 in March, reflecting the sharpest deterioration in business conditions across the sector since data collection began over 15 years ago.
The index slipped into contraction mode, after remaining in the growth territory for 32 consecutive months.

In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

Amid widespread business closures, demand conditions were severely hampered in April. New orders fell for the first time in two-and-a-half years and at the sharpest rate in the survey's history, far outpacing that seen during the global financial crisis, the survey said.

"After making it through March relatively unscathed, the Indian manufacturing sector felt the full force of the coronavirus pandemic in April," said Eliot Kerr, Economist at IHS Markit.
Panellists attributed lower production to temporary factory closures that were triggered by restrictive measures to limit the spread of COVID-19.

Export orders also witnessed a sharp decline. Following the first reduction since October 2017 during March, foreign sales fell at a quicker rate in April. "In fact, the rate of decline accelerated to the fastest since the series began over 15 years ago," the survey said.

On the employment front, deteriorating demand conditions saw manufacturers drastically cut back staff numbers in April. The reduction in employment was the quickest in the survey's history.

"In the latest survey period, record contractions in output, new orders and employment pointed to a severe deterioration in demand conditions.
“Meanwhile, there was evidence of unprecedented supply-side disruption, with input delivery times lengthening to the greatest extent since data collection began in March 2005," Kerr said.

On the prices front, both input costs and output prices were lowered markedly as suppliers and manufacturers themselves offered discounts in an attempt to secure orders.

Going ahead, sentiment regarding the 12-month outlook for production ticked up from March's recent low on hopes that demand will rebound once the COVID-19 threat has diminished and lockdown restrictions eased.

"There was a hint of positivity when looking at firms' 12-month outlooks, with sentiment towards future activity rebounding from March's record low. That said, the degree of optimism remained well below the historical average," Kerr said.

In India, the death toll due to COVID-19 rose to 1,373 and the number of cases climbed to 42,533 as on Monday, according to the health ministry.

Meanwhile, the coronavirus-induced lockdown has been extended beyond May 4, for another two weeks in the country.

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News Network
April 25,2020

New Delhi, Apr 25: With 1,429 more COVID-19 cases reported in the last 24 hours, India's count of coronavirus cases has reached 24,506, said Ministry of Health and Family Welfare on Friday.

Out of these, 18,668 patients are active cases and 5063 cases have been cured, discharged, or migrated.

The death toll stands at 775, with as many as 57 deaths reported in the last 24 hours.

According to the morning update by the ministry, Maharashtra continues to be the worst-hit State with 6,817 cases of which 840 patients have recovered and 301 patients have died.

Gujarat now stands in the second spot with 2,815 cases, of which 265 have recovered and 127 people have died. Meanwhile, Delhi's count stands at 2,514 of which 857 patients have recovered, while 53 patients have lost their lives.

Tamil Nadu's COVID-19 figure stands at 1,755 with 866 patients recovered and 22 fatalities. Rajasthan has reported 2,034 cases of which 230 have recovered and 27 patients are dead.

Madhya Pradesh has reported 1,852 positive cases so far of which 210 patients have recovered and 92 patients have lost their lives due to the virus. In Uttar Pradesh, as many as 1,621 people have confirmed COVID-19, of which 247 recovered and 25 people have succumbed to it.

In Kerala, which reported the country's first COVID-19 case, 450 people have been detected positive for coronavirus.

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News Network
March 29,2020

New Delhi, Mar 29 : Notwithstanding the 21-day coronavirus lockdown, the Reserve Bank of India (RBI) has decided to go ahead with the merger plan of ten state-run banks into four larger bank from April 1. The apex bank has issued four separate releases announcing that the branches of merging banks will operate as of the banks in which these have been amalgamated from next month.

RBI's statement comes after Finance Minister Nirmala Sitharaman's clarification on Thursday that the mega bank consolidation plan was very much on track and would take effect from April 1.

The government on March 4 had notified the amalgamation schemes for 10 state owned banks into four as part of its consolidation plan to create bigger size stronger banks in the public sector.

Bank officers' unions, however, earlier this week wrote to the prime minister seeking to defer the merger schemes of lenders due to the lockdown triggered by coronavirus outbreak.

As per the scheme, Oriental Bank of Commerce and United Bank of India will be merged into Punjab National Bank; Syndicate Bank into Canara Bank; Allahabad Bank into Indian Bank; and Andhra and Corporation banks into Union Bank of India.

Under this, the branches of Oriental Bank of Commerce and United Bank of India will operate as branches of Punjab National Bank from April 1, 2020, and branches of Syndicate Bank as that of Canara Bank, the RBI said in a separate releases.

Allahabad Bank branches will operate as those of Indian Bank while the branches of Andhra Bank and Corporation Bank will function as the branches of Union Bank of India from the beginning of next fiscal year 2020-21, the RBI said.

"The Amalgamation of Oriental Bank of Commerce and United Bank of India into Punjab National Bank Scheme, 2020 dated March 4, 2020, issued by the Government of India... The scheme comes into force on the 1st day of April 2020," RBI said.

Customers, including depositors of merging banks will be treated as customers of the banks in which these banks have been merged with effect from April 1, 2020, the RBI noted.

Banking services across the country are impacted due to the effect of COVID-19 as a near shut down is being observed across the country.

In a letter written to the Prime Minister on March 25, the All India Bank Officers'' Confederation (AIBOC) said, "The finance minister yesterday announced a slew of measures in view of the deleterious effect of the contagion. We are also expecting an extension of closing related activities and the revision of the closing date itself from March 31 to June 30, which is the need of the hour."

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