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Indian Banks to Request Regulator Not to Increase Provisioning for Infrastructure Loans

Indian Banks to Request Regulator Not to Increase Provisioning for Infrastructure Loans

The Indian Banks’ Association (IBA) plans to ask the Reserve Bank of India (RBI) to maintain the current provisioning requirements for infrastructure project loans. This response is in light of the RBI’s recent proposal to significantly increase the capital banks and non-banking financial companies (NBFCs) must set aside for these loans, according to three banking sources cited by Reuters on Wednesday.
In May, the RBI suggested that banks and NBFCs should allocate a provision of 5% of the total loan amount for infrastructure projects during the construction phase, a substantial rise from the current requirement of 0.4%.
“The blanket 5% provisioning requirement will sharply increase the cost of implementing such projects and will hurt project financing,” one source familiar with the matter stated. They suggested that additional provisioning should only be required if there is a delay in project completion.
Indian banks have previously faced significant defaults on infrastructure loans during 2012-2013 due to aggressive lending, which strained the banking system. Currently, India is experiencing a surge in government-led infrastructure projects aimed at boosting the economy. Given that asset quality issues are not particularly alarming at present, two banking sources believe implementing stringent provisioning rules may not be wise.
The IBA met on Tuesday to discuss feedback from individual banks and intends to submit a formal request before the June 15 deadline. The association did not immediately respond to Reuters’ request for comment.
The Finance Industry Development Council (FIDC), representing NBFCs, has also opposed the RBI’s proposal, suggesting the provisioning requirement remain at the current level. Additionally, the IBA will request that the new norms not apply to loans extended prior to the implementation of these guidelines.

June 13, 2024
Industrial Output Grows 5% in April, Bolstered by Mining and Power Sectors

Industrial Output Grows 5% in April, Bolstered by Mining and Power Sectors

India’s industrial production growth fell to a three-month low of 5% in April 2024, primarily due to a weaker performance in the manufacturing sector, despite strong contributions from the mining and power segments, according to official data released on Wednesday.
Factory output, as measured by the Index of Industrial Production (IIP), had grown by 5.4% in March and 5.6% in February 2024. The previous low for IIP was 4.2% in January 2024. For the fiscal year 2023-24, IIP growth was 5.9%, compared to 5.2% in the preceding fiscal year.
In April 2024, India’s IIP grew by 4.6%, according to the Ministry of Statistics & Programme Implementation. The latest data revealed that mining output growth accelerated to 6.7% in April, up from 5.1% in the same month last year. However, manufacturing sector growth decelerated to 3.9% in April from 5.5% a year ago. Power generation increased significantly by 10.2% in April, compared to a contraction of 1.1% in April of the previous year.
In terms of use-based classification, the capital goods segment’s growth fell to 3.1% in April 2024 from 4.4% in the same period last year. Consumer durables output expanded by 9.8% in April, rebounding from a contraction of 2.3% in April 2023. Conversely, consumer non-durable goods production contracted by 2.4% in April 2024, following an 11.4% growth in April 2023.
Infrastructure and construction goods reported an 8% growth in April 2024, down from a 13.4% expansion in the previous year. Primary goods output grew by 7% in April 2024, a significant increase from the 1.9% growth recorded a year earlier. The intermediate goods segment saw an expansion of 3.2% in April 2024, up from 1.7% in the same period last year.

June 13, 2024
SBI Launches ‘SME Digital Business Loans’, Promising Sanction in 45 Minutes

SBI Launches ‘SME Digital Business Loans’, Promising Sanction in 45 Minutes

The State Bank of India (SBI), the nation’s largest lender, has introduced ‘SME Digital Business Loans’ aimed at approving loans within 45 minutes. This initiative targets micro, small, and medium enterprises (MSMEs), which SBI has identified as key to its growth and profitability over the next five years.
“This innovative product marks a significant leap forward in digitalisation by offering SMEs a digital loan journey with an end-to-end sanction turnaround time of up to 45 minutes,” SBI stated.
The new loan offering eliminates the need for traditional credit underwriting and lengthy appraisal processes, introducing a simpler, faster, and more accessible approach to MSME lending. For loans up to Rs 50 lakh, SBI has waived the requirement for financial statements, relying instead on transaction history and GST returns for appraisal.
SBI has developed a data-driven credit assessment engine that uses authentic data footprints from income tax returns (ITR), GST returns, and bank statements. This engine can provide sanction decisions within 10 seconds after the necessary details are submitted, without any human intervention.
“We are committed to setting a new industry benchmark with SME Digital Business Loans, underscoring our constant efforts to drive innovation in MSME lending,” said Dinesh Khara, chairman of SBI. “By leveraging the rich data footprint of MSME units in the ecosystem, we aim to provide the fastest and most intuitive lending process, further solidifying our position as the leading MSME lender in the country,” Khara added.
SBI’s outstanding SME loan portfolio has grown from Rs 2.67 trillion at the end of March 2020 to Rs 4.33 trillion at the end of March 2024. Additionally, the asset quality of this portfolio has improved, with gross non-performing assets decreasing from 9.43% in March 2020 to 3.75% in March 2024.

June 12, 2024
Ixigo IPO Heats Up: Strong Initial Response Raises Eyebrows

Ixigo IPO Heats Up: Strong Initial Response Raises Eyebrows

The much-anticipated IPO (Initial Public Offering) of Ixigo, the travel technology company behind the popular travel search platform of the same name, has generated significant buzz in the Indian stock market.
Oversubscribed Debut
On its opening day (June 10th, 2024), the Ixigo IPO received a robust response from investors, with reports indicating it was oversubscribed. This strong initial showing suggests investor confidence in Ixigo’s growth potential within the Indian travel tech sector.
IPO Details
The public issue is a combination of fresh issue (₹120 crore) and Offer for Sale (OFS) (₹620.10 crore), raising a total of ₹740.10 crore. The price band has been set at ₹88 to ₹93 per equity share, with a minimum investment amount of ₹14,973 for retail investors. The lot size is 161 shares.
Listing and Allotment
The bidding window for the IPO remains open until June 12th, 2024. Allotment of shares is expected to be finalized on June 13th, with a tentative listing date set for June 18th on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
Reasons for Investor Interest
Several factors might be contributing to the positive investor response. The travel and tourism industry in India is expected to witness significant growth in the coming years, and Ixigo’s established brand presence and online travel platform could position it well to capitalize on this trend. Additionally, the company’s focus on technology and innovation might be seen as a competitive advantage.
Overall, the Ixigo IPO has gotten off to a promising start. However, potential investors should conduct thorough research and due diligence before committing their funds. While Ixigo boasts a strong brand name, a closer look at its financial performance might be necessary before making any investment decisions. With a competitive travel tech landscape in India, it’s crucial to assess whether the IPO price accurately reflects Ixigo’s long-term value proposition.

For more information on Ixigo’s IPO, read more here: https://www.news18.com/business/ixigo-ipo-gets-strong-response-subscribed-1-95-times-on-first-day-8928977.html

June 11, 2024
Policy Changes Expected from New Modi Government to Boost MSME Sector

Policy Changes Expected from New Modi Government to Boost MSME Sector

With the newly elected NDA government led by Prime Minister Narendra Modi preparing to announce ministry allocations, several policy changes are anticipated to enhance job creation, entrepreneurship, and business growth.
According to a report by CNBC-TV18, citing sources, at least nine policy changes are expected, some of which may be introduced in the upcoming July budget. These include higher indemnity for banks issuing loans to MSMEs, integrating MSMEs into production-linked incentive (PLI) schemes, and establishing a new institute to facilitate increased credit access for small businesses and enhance exports.
Additional anticipated changes include a revamp of the government’s Atal Innovation Mission to focus more on entrepreneurship and job generation, increased funding for the aspirational districts program, and more.
Industry experts are also advocating for increased support for MSMEs to drive job creation and export growth. Vijay Kalantri, Chairman of MVIRDC World Trade Center in Mumbai, emphasized the need for Prime Minister Modi to simplify regulations and expand the PLI scheme to boost industry and trade productivity.
“The capacity building is crucial to enable us to export more and employ more people,” said Kalantri.
One of the key changes expected is a revision of the 45-day payment rule for MSMEs to address delayed payment challenges. Last month, Finance Minister Nirmala Sitharaman hinted at potential changes during an interaction with MSMEs and local industries in Ludhiana. She mentioned that the government would consider repealing modifications to Section 43B of the Income Tax Act if MSMEs prefer operating without payment timeline uncertainties.
Additionally, the Federation of All India Vyapar Mandal (FAIVM) has called for extending the payment period for MSMEs from buyers to 180 days from the current 45 days. FAIVM President Jayendra Tanna indicated that the body will urge the new NDA government to implement this extension to better support MSMEs.

June 11, 2024
How India is Poised Amid Global Demand Revival

How India is Poised Amid Global Demand Revival

As global demand shows signs of revival, India must seize the opportunity to capitalize on this trend.
In 2023, global demand was relatively subdued due to lower consumer consumption and rising inflation in key markets such as Europe and the US. This resulted in a decline in India’s merchandise exports. However, experts now anticipate a gradual recovery in global demand, evidenced by a 11.86% year-on-year growth in exports (to $41.4 billion) in February 2024.
Despite the slowdown, industrial products like engineering goods, petroleum products, pharmaceuticals, and electronic goods maintained or increased their export levels. In contrast, consumer-facing segments such as garments, gems and jewelry, and handloom products saw a decline, according to Anubhav Kathuria, Director of Synergy Steels.
“In macro terms, we see inflation cooling down to preferable levels in Europe, which could enhance prospects for consumer-focused merchandise producers in India. The stainless steel industry, impacted by global macroeconomic developments, is looking at the year ahead with cautious optimism,” said Kathuria.
Aruna Sharma, Former Secretary, Ministry of Steel, believes a demand revival would also benefit small businesses and generate employment. “India contributes around 16% of global growth and has maintained a consistent growth rate of 6-8% in recent quarters. Despite challenges and reduced savings, the demand for FMCG goods is reviving. A global economic revival will positively impact MSMEs, driving employment and economic growth,” Sharma stated.

Strategies to Capitalize on the Gradual Demand Revival

Gopalakrishnan Narasimhan, Partner & Director-Africa at Kaizen Institute, noted that the gradual revival in global demand is expected to benefit key industries. Exports of electronic goods have seen remarkable growth, increasing over 25% from $21.07 billion in April 2023 to $26.51 billion in April 2024.
India’s major exports include pearls, precious and semi-precious stones and jewelry (16%); mineral fuels, oils, and waxes (12%); nuclear reactors, boilers, machinery, and mechanical appliances (5%); pharmaceutical products (5%); and organic chemicals (4%).
“Product linked incentives (PLI), which are expected to bring in incremental investment of Rs 7,920 crore and increase exports worth Rs 64,400 crore, alongside flexible FDI policies, have significantly diversified India’s export basket towards more value-added products like electronic goods and chemicals,” Narasimhan added.

Strengthening Supply Chains

Kathuria highlighted that India has learned from the pandemic to create a robust domestic base for raw materials and components in key manufacturing industries. This strategy includes infra-investments, financial incentives, and policy direction. The Critical Minerals Mission, for example, promotes the exploration of 30 critical minerals crucial for manufacturing stainless steel, electronics, and electrification products, which currently rely heavily on imports.
Narasimhan emphasized the volatility in the geopolitical realm and the potential disruptions to supply chains due to geopolitical tensions and economic sanctions. He projected the manufacturing industry’s share of GDP in India to increase from 15.6% to 21% by 2031, doubling India’s export market share. The government aims to boost merchandise exports to $1 trillion by 2027-28.
“With increased budgetary allocations for the manufacturing industry and the integration of emerging technologies like AI, along with dedicated schemes like Gati Shakti and the National Infrastructure Pipeline, India is on track to enhance its manufacturing and distribution networks and emerge as a global manufacturing hub,” Narasimhan noted.

Impact of Demand Revival on India’s Trade Destinations

Sharma pointed out that building trade centers takes years, and maintaining consistent supply and presence is crucial. “India lost the market in iron ore exports from Goa after a court stay on mining in 2018. Such setbacks need to be avoided. India has great potential in sectors like agriculture, textiles, pharmaceuticals, steel, and MSME products. The revival of the global economy is an opportunity for these sectors to thrive. Ensuring access to cheap working capital and complying with emission norms will enhance their export capabilities,” Sharma explained.
Since the 1991 reforms, India’s trade relations have significantly transformed, with increased exports to key markets like the US, Europe, and Asia. Narasimhan highlighted the exploration of newer markets such as Montenegro, Turkmenistan, Mongolia, and Honduras.
“The key reasons for the stellar export performance are the sharp recovery in key markets, increased consumer spending, accumulated savings, disposable income due to fiscal stimulus by major economies, global commodity price rises, and an aggressive export push by the government,” Narasimhan said.
India’s progress as a global export hub, coupled with increasing free trade agreements (FTAs) with major nations and entities, is expected to strengthen trade relationships in line with changing consumer trends and market dynamics.

June 11, 2024
Leading Handset Body Urges New Government for Robust Policy to Quadruple Electronics Sector Output in 5 Years

Leading Handset Body Urges New Government for Robust Policy to Quadruple Electronics Sector Output in 5 Years

The Indian Cellular and Electronics Association (ICEA), representing major players like Apple, Foxconn, Dixon, Xiaomi, Oppo, Vivo, and others, emphasizes that the new government should focus on establishing a robust and predictable policy framework. This framework should incentivize domestic manufacturing, attract global investments, and scale up India’s electronics manufacturing sector to integrate with global value chains (GVCs).
“To make India a significant player in the global value chain (GVC) in the electronics sector, a mission-mode approach with clear goals and timelines is crucial. Our target to quadruple the sector’s output in the next five years requires coordinated efforts across multiple ministries and continuous engagement with industry leaders,” said Pankaj Mohindroo, chairman of ICEA.
ICEA stresses the importance of building Indian Champion companies. Mohindroo highlighted the necessity of a predictable regulatory environment to foster innovation and growth in the electronics sector. “Creating a robust policy framework that incentivizes domestic manufacturing and attracts global investments is essential. The new administration needs comprehensive reforms to make India more competitive with countries like Vietnam and China, boosting our manufacturing and export capabilities.”
Mohindroo urged the new government to prioritize scaling up India’s electronics manufacturing sector to align with GVCs. This involves enhancing competitiveness by improving infrastructure, streamlining regulatory processes, and attracting foreign direct investment.
“Sustainable growth and employment opportunities require a collaborative approach between industry stakeholders and policymakers. GVCs should be the highest priority since 90% of global electronics trade is with them. We need to make our nation the best location for GVCs to do business,” he added.
Introducing virtual GVC trade clusters could streamline manufacturing processes, attract more investments, and enhance export potential. “An appropriate PLI for components, sub-assemblies, wearables, and hearables will drive domestic value addition and attract new investments. Comprehensive reforms are needed to make India more competitive with countries like Vietnam and China,” Mohindroo stated.
Currently, India accounts for only 3-4 percent of global electronics manufacturing, despite having a large domestic market. Over the past decade, electronic components manufacturing in India grew at a 13 percent CAGR, trailing the overall electronic manufacturing industry growth of 19 percent CAGR.
The Indian electronics manufacturing industry witnessed a significant four-fold increase from $25 billion in FY13 to $100 billion in FY23, driven by the aim to reduce dependence on imports of finished goods. This translates to a 19 percent CAGR over the past decade, equivalent to 78 percent of the Indian electronics market. The Government of India (GOI) has also set an ambitious target for the industry to reach $300 billion by FY26.

June 7, 2024
Industry Anticipates Stronger Emphasis on Electronics Manufacturing from New Government

Industry Anticipates Stronger Emphasis on Electronics Manufacturing from New Government

The industry is optimistic that the new government will support the localization of component production and help homegrown brands excel on the global stage.
In his inaugural address following the General Elections, where the BJP fell short of a majority but secured the halfway mark with its allies, Narendra Modi expressed confidence in securing a third consecutive term. Remaining true to his pre-election promises, Modi reiterated his commitment to advancing the agenda established during the past decade. The NDA government has introduced several production-linked incentive (PLI) schemes for mobile phones, IT hardware, and other sectors to realize its vision of a self-reliant India. In his third term, Modi aims to strengthen production in the electronics and semiconductor industries. During his address, Modi stated, “We made India the second-largest smartphone manufacturer. Now, we will increase work in semiconductors and electronics production sectors.”
The industry is encouraged by this sentiment.
Amit Khatri, Co-Founder of the homegrown wearable company Noise, commented, “We trust that the new administration will significantly advance India’s electronic manufacturing sector. Guided by the vision of Aatmanirbhar Bharat, we also hope for government support in localizing component production and creating an environment where homegrown brands can lead India on the global stage. We are optimistic about the future and are ready to collaborate with the new government to make India a global leader in the smart wearable industry, driving economic growth, creating jobs, and delivering innovative products that enhance the lives of millions.”
While India has made strides in smartphone manufacturing and with laptops and PCs also being produced locally, the wearable and TV industries are also expecting a significant push from the new government. In recent years, many Indian companies have already begun manufacturing and assembling their products locally in response to the Make in India initiative.
Varun Gupta, Co-Founder of Boult, noted, “The robust growth of India’s manufacturing sector, serving as the primary driver amidst a global slowdown, underscores the nation’s resilience with over 8.2% GDP growth. Particularly, the electronics sector is poised to transcend mere import substitution and evolve into a formidable export hub. The PLI scheme tailored for hearables and wearables is poised to play a pivotal role in realizing the government’s ambitious export targets, providing a substantial boost to the sector’s competitiveness and contribution to the global market.”
Continued adherence to policies and a dedicated focus on infrastructure initiatives is seen as crucial for the industry.
Avneet Singh Marwah, CEO of SPPL, a contract manufacturer for TVs, washing machines, and ACs in India, stated, “Our industry thrives on stability and conducive policies. We look forward to a government committed to fostering innovation, streamlining regulations, and investing in infrastructure. Expedited project completions and a reduction in GST on televisions and air conditioners from 28% to 18% will further propel our sector’s growth, enabling us to contribute significantly to India’s economic progress. Together, with the right governmental support, we aim to drive not just our company’s success but also contribute significantly to India’s journey towards becoming a global electronics hub.”

June 6, 2024
India now has 4.5 crore registered MSMEs of which 98% are micro enterprises

India now has 4.5 crore registered MSMEs of which 98% are micro enterprises

Of the 4.5 crore MSMEs, 4.4 crore or 98.1 per cent enterprises were micro units followed by 7.04 lakh small enterprises and 67,266 medium enterprises.
The total number of micro, small and medium enterprises (MSMEs) in the country registered with the MSME Ministry has crossed the 4.5 crore mark. According to the data from the government’s Udyam registration portal launched on July 1, 2020, to ease registration of small businesses in the country, 4,50,64,147 units were registered with the MSME Ministry, at the time of filing this report.
Of the 4.5 crore MSMEs, 4.4 crore or 98.1 per cent enterprises were micro units followed by 7.04 lakh small enterprises and 67,266 medium enterprises. The micro enterprise count also included 1.86 crore micro enterprises outside the ambit of the Goods and Services Tax (GST) such as street vendors, registered via the Udyam Assist Platform launched in January 2023.
Importantly, according to the 2015-16 national sample survey by the government, India has 6.33 lakh crore unincorporated non-agriculture MSMEs. The current count of registered MSMEs indicates that 71 per cent of unincorporated non-agri MSMEs are now in the formal economic fold.
Before Udyam registration, the government had the Udyog Aadhaar Memorandum (UAM) and prior to that Entrepreneurs Memorandum (EM-II) in place for MSME registration. According to the MSME Ministry’s 2020-21 annual report, 21,96,902 EM-II filings were recorded during the 2007-2015 period while from September 2015 till June 30 2020, there were 1,02,32,451 (1.02 crore) UAM registrations.
The Udyam registration for MSMEs offers benefits including registration on the government’s e-commerce marketplace GeM, delayed payment monitoring portal Samadhaan, onboarding on the TReDS platform for invoice discounting, availing schemes such as credit guarantee scheme, public procurement, priority sector lending from banks and more.
However, wholesale and retail traders registering for Udyam certification are limited to the benefits of priority sector lending.
According to the details from the Udyam portal, the registered MSMEs have so far reported 19.5 crore jobs and the number of women employees is over 4.3 crore.

June 6, 2024
DoT Launches Baseline Survey for MSMEs, Emphasizing Digital Evolution with 5G

DoT Launches Baseline Survey for MSMEs, Emphasizing Digital Evolution with 5G

The Department of Telecommunications (DoT) has invited proposals from organizations and startups to develop a comprehensive Industry 4.0 baseline survey focused on the digital transformation of India’s MSME sector through 5G technologies. This survey aims to evaluate the current readiness of MSMEs in the manufacturing sector for Industry 4.0, identifying areas for improvement and prioritizing investments.
Industry 4.0 represents a major transformation in manufacturing, driven by advanced technologies like artificial intelligence, the Internet of Things (IoT), and cloud computing to boost efficiency, productivity, strategy, and competitiveness. The Telecom Centre of Excellence India, a public-private partnership initiative, is spearheading the survey to understand the challenges MSMEs face in adapting to these technologies.
“The survey aims to establish a robust ecosystem that can leverage the capabilities of 5G and 6G networks. This includes identifying sector-specific needs in at least 10 sectors, recognizing the diverse landscape of MSMEs, and providing targeted support to foster innovation and competitiveness,” the department stated.
The survey is designed to address immediate barriers to digital transformation and pave the way for the integration of cyber-physical systems through 5G and 6G technologies, driving sustainable growth across sectors. It will cover five sectors each in the northern and southern parts of India over a 60-day period. The key recommendations from the survey will inform policy interventions to achieve the transformative adoption of Industry 4.0, enhancing the competitive positioning and survivability of MSMEs.

June 6, 2024