Issue: 1344
· US Treasury authorises
Russian diesel transactions until April 2027.
· UAE overtakes US as India’s
top LPG supplier in September.
· Veteran South African jurist
of Indian origin, Navanethem "Navi" Pillay, has been awarded the 2026
Nobel Peace Prize.
· Jewar airport to be renamed
Narendra Modi International Airport.
· Financial Stability Board
flags gaps in emergency funding for failing banks.
· African lender Ecobank plans
to join China’s cross-border yuan payments system.
RBI announces Rs 25,000
crore OMO sale; bond yields seen opening 4-5 bps higher on Monday: RBI on October 9 announced an open market operation
(OMO) sale of government securities worth Rs 25,000 crore to absorb surplus
liquidity from the banking system. Market participants expect the announcement
to put pressure on bond prices, with yields likely to open higher on Monday. “Bond yields may open 4-5
basis points higher on Monday following the RBI’s announcement of the OMO
sale,” said a dealer at a primary dealership. OMO sales drain liquidity from the banking system
as the central bank sells government securities to market participants in
exchange for funds. The latest announcement comes as the RBI continues to
manage the liquidity surplus following inflows under its FCNR-B deposit
mobilisation measures.
(Moneycontrol)
World economic growth to
slow to 2.6% in 2026, UN trade body says: Global economic growth will
likely slow to 2.6% in 2026, down from 2.9% ?last year, as the energy shock
from the crisis ?in West Asia is putting ?the global economy to the test, the ?United Nations agency for
trade and development said on Friday. Trade in goods and services is expected
to ?expand by 4% in constant prices, after global trade reached a record $35
trillion in ?2025, but the projected rise is driven ?by ?higher energy prices, UNCTAD
said in its ?trade and development report.
(Business Line)
Crude oil, uneven monsoon
pose risk to banks despite benign asset quality: Report: Higher crude oil prices and
drought conditions in five states may impact Indian banks' asset quality
outlook. This follows a stable credit cost scenario for private and public
sector banks. The report suggests monitoring external factors affecting
borrowers' repayment capacity. While deposit growth has improved, there are
risks to profitability and net interest margins. Investors are advised to keep
an eye on these developments in the coming quarters.
(Economic Times)
RBI raises daily CRR
maintenance requirement to 99% from October 16: RBI on October 9 raised the
minimum daily cash reserve ratio (CRR) maintenance requirement for banks to 99
per cent from 90 per cent of the prescribed requirement, effective from the
fortnight beginning October 16. Under the existing framework,
banks are required to maintain at least 90 per cent of their prescribed CRR on
a daily basis during a reporting fortnight, while ensuring that the average
daily balance is not below the prescribed CRR. The revised requirement will
reduce banks’ flexibility to dip below their prescribed reserve requirement on
individual days. The impact on individual banks will depend on their existing
reserve positions and liquidity management.
(Moneycontrol)
Rabi crop risks put banks’
agri loan books in focus: The upcoming Rabi season is
emerging as a key risk for agricultural credit, with weak reservoir levels and
El Nino conditions threatening to pressure rural cash flows even as banks have
not seen any meaningful deterioration in repayments or delinquencies so far. While
announcing the outcome of the Monetary Policy Committee meeting on Wednesday,
the Reserve Bank of India Governor Sanjay Malhotra said that the weak southwest
monsoon along with strong El Nino conditions may impact the upcoming rabi
season and rural demand. The likely resilient non-farm activity, however, will
continue to support rural consumption, he added.
(Financial Express)
Ageas Federal launches
multi-currency life insurance plan at GIFT City: Ageas Federal Life Insurance
has launched a multi-currency unit-linked insurance plan (ULIP) at GIFT City,
allowing customers to invest in US dollars, euros or pounds while receiving
life insurance cover. The Aurum Advantage Plan is
the insurer’s first product launched at Gujarat International Finance Tec-City,
India’s International Financial Services Centre (IFSC), marking the
commencement of its operations there. The plan offers investment
options across international equities, fixed income and gold, allowing
customers to diversify their portfolios across geographies and asset classes.
(Economic Times)
Bank profits may rise 25%
in Q2FY27, margins to recover gradually in second half: Report: According to a report by Emkay
Research, Indian banks might report a 25.4 percent year-on-year increase in net
profit. Higher foreign currency deposits could exert pressure on lending
margins, impacting profitability. Loan growth remains healthy, contributing to
income increases and reduced provisions for loan losses. Overall banking system
growth is anticipated to moderate as FCNR-B funding normalizes.
(Economic Times)
Banks’ precious-metal
imports lose tax exemption: The government did not extend
the tax benefit available to banks importing gold, silver and other precious
metals. According to Reuters, citing local media and the revenue secretary, banks
have consequently been paying 3% Integrated GST since April. The government
informed the GST Council about the position on 8 October. The stated objective
is to ensure equal tax treatment of precious-metal imports through different
routes. This is a clarification of an existing tax position, rather than a new
levy introduced today.
(Reuters)
Exporters to get refunds
for tax paid on plant and machinery: Exporters are set to get relief, with the GST
Council recommending refunds of tax paid on plant and machinery, widening the
pool of recoverable taxes on services and simplifying rules governing when a
transaction qualifies as an export. According to a note on the outcomes of the
GST Council meeting, four conditions that had restricted export benefits have
been eased, an earlier restriction on refunds has been resolved in favour of
exporters and the refund process will increasingly be automated. The Council
has recommended allowing exporters to claim refunds of GST paid on plant and
machinery, with the refund spread over five years.
(Business Line)
Jio Platforms targets
approximately $106 billion valuation in proposed IPO: Jio Platforms is targeting a valuation of
approximately Rs.10.3 trillion, or $106 billion, according to bankers familiar
with the transaction. Sources indicated a potential price band of Rs.1,065–Rs.1,119
per share. At the upper end, the offer could raise roughly Rs.30,200 crore,
exceeding Hyundai Motor India’s 2024 issue. The figures are source-based
estimates rather than a confirmed company announcement; Reliance had not
immediately responded to Reuters’ request for comment.
(Reuters)
Government rejects monopoly
allegations over Starlink’s India entry: India’s telecom minister rejected allegations
that political influence was obstructing Starlink’s launch. Responding to Elon
Musk’s remarks concerning Mukesh Ambani, Jyotiraditya Scindia said India does
not permit monopolies in any sector. The dispute brings attention to
competition and regulatory access in satellite communications, an emerging
business segment involving global satellite operators and established Indian
telecom companies. The government’s response defended its approach to market
access.
(Reuters)
CEA pitches for
MSME-specific approach to NPA classification norms: Chief Economic Advisor V Anantha Nageswaran on
Friday made a case for revisiting non-performing asset (NPA) classification
norms for micro, small and medium enterprises (MSMEs) by the Reserve Bank, saying
the rules should reflect domestic business practices and cash flow patterns
rather than follow a globally uniform framework. From a policy perspective, the
Finance Ministry has been advocating a review of the norms, Nageswaran said,
highlighting that MSMEs across sectors have different working capital
requirements and cash flow cycles.
(Business Line)
IRDAI may roll out
insurance commission caps from January, overhaul distribution rules: India's insurance regulator is planning
significant reforms to the insurance distribution system, aiming for
implementation soon. Proposed changes include capping commissions for brokers
and reducing management expenses over time. These measures could substantially
impact insurance-linked stocks and potentially affect up to one million jobs in
the sector. Insurers and brokers have time to submit responses to the
consultation paper until October 25.
(Economic Times)
GST Council recommends
simpler registration, reconciliation and refund procedures: The 57th GST Council meeting
recommended changes aimed at simplifying GST administration, including clearer
registration documentation, improvements to the application portal, easier
amendments to registration details and greater automation of refunds. The
proposals also address return reconciliation and input tax credit
discrepancies. Faster refunds could ease businesses’ working-capital pressure,
while simpler procedures could reduce compliance costs. These recommendations
should be distinguished from operative rules: implementation depends on the
relevant amendments, notifications and effective dates.
(India Briefing)
FISCAL DOMINANCE
§ Fiscal
dominance arises when the government’s borrowing needs and debt burden
constrain the central bank’s ability to control inflation. For example, raising
interest rates may be necessary to curb inflation, but it also increases the
government’s debt servicing costs. Pressure to keep borrowing affordable can
therefore influence monetary policy and weaken the central bank’s focus on
price stability.
§ For
banks, fiscal dominance can affect inflation expectations, government bond
yields and the real value of financial assets. It also highlights why sound
public finances support effective monetary policy: a central bank has greater
freedom to manage inflation when government debt remains sustainable.
RBI KEY RATES
Repo
Rate: 5.50%
SDF:
5.25%
MSF
/Bank Rate: 5.75%
CRR:
3.00%
SLR:
18.00%
FOREX RATES (RBI REF. RATE)
INR
/ 1 USD : 96.6149
INR
/ 1 GBP : 127.8859
INR
/ 1 EUR : 108.4728
INR
/100 JPY: 61.0800
EQUITY INDEX
Sensex:
72472.33 (+879.09)
NIFTY:
22520.45 (+288.65)
Bnk NIFTY: 55256.65 (+741.60)
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