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Microfinance sector recorded surge in NPAs to Rs. 50000 crore
Banking, Business, Equities, Markets - February 27, 2025

Microfinance sector recorded surge in NPAs to Rs. 50000 crore

Microfinance sector recorded surge in NPAs to Rs. 50000 crore

 

Microfinance sector in India recorded non-performing assets (NPAs) of Rs. 50,000 crore at the end of December, 2024. The NPAs of the microfinance sector is about 13 percent of the gross credits. Despite the efforts of RBI to mitigate risk by lowering capital allocation requirements for risky unsecured loans, the NPAs of the microfinance sector hit an all-time high record of Rs. 50,000 crore.

 

Hike in portfolio at risk (PAR)

The portfolio at risk which could convert into NPA surged to 3.2 percent of the total credit. It was only 1 percent last year. Overall scenario of the microfinance loan portfolio indicates serious concerns about the credit discipline prevailing in the sector. 

 

Cautious Approach

In the midst of a hike in NPAs and the portfolio at risk in the microfinance segment, industry leaders in the market are looking at the future with a careful approach. Managing director of IndusInd Bank, Sumant Kathpalia said that the bank continues to have a prudent approach in terms of the microfinance segment. He stated that the bank’s customer base is indicating early signs of stability and it will be highlighted in the first quarter of the financial year 2026. Though, there is a probability of a rise in slippages in the upcoming quarter of the financial year 2025. 

 

Total share of NPA in microfinance segment

According to the information of Crif High Mark, the total proportion of NPAs, which are due for more than 90 days in the microfinance segment, is about 13 percent.  The total credit not paid for about 91 to 180 days accounts to 3.3 percent of the total loans. Also, the loans not paid for more than 180 days are recorded at 9.7 percent of the total loans.

 

The information does not include the data for the previous six months. It is likely for NPAs of the microfinance sector to hike to 14 percent of total loans or Rs. 56,000 crore, if the previous six months’ data is added to it. 

 

Performance of microfinance sector

In the past three quarters of the financial year, the microfinance sector in India recorded contraction in growth. Even though lenders tried to clean up their financial records by writing off bad assets. Another reason for this subdued performance is giving too many credits to low-income borrowers in order to achieve high growth quickly. It led to further expansion in defaults in the microfinance sector. 

 

Microfinance credit is generally given to women from low-income households with income less than Rs. 3 lakh on yearly basis. These loans usually do not have any collateral leading to becoming risky in terms of economic issues. 

 

Effect on Financial institutions and banks

The hike in NPAs in the microfinance sector indicates high risk for banks largely operating in unsecured lending segments. Though, every unsecured credit does not come in the microfinance sector. Some of the banks with large unsecured loans and currently facing high pressure in the loan segment are IDFC First, RBL Bank, Bandhan Bank, and IndusInd Bank. In the past, Bandhan Bank was a microfinance institution which later changed into a universal bank. At the present times, the bank has about Rs. 56,120 crore of unsecured loan portfolio and 7.3 percent of these unsecured loans are NPAs at the end of December, 2024. 

 

Recently RBI took the decision to lower capital requirement on micro loans given to MFIs to about 75 percent, which was earlier 125 percent. It aided in releasing more capital for creditors to lend and expand their businesses. The unsecured loans offered for the purpose of consumption remain at 100 percent of capital requirement.

 

Major Concerns of small finance banks and NBFCs

Due to the rising NPAs and potential risk of NPAs in microfinance lending, small finance banks like Utkarsh and ESAF recorded net losses in the third quarter. Small finance banks like Ujjivan, Equitas, Jana, and Suryoday recorded contraction in net profits by about 64 percent, 67 percent, 18 percent, and 42 percent on YoY basis, respectively, in the third quarter.

 

In terms of NPAs in microfinance loans in universal banks is recorded to be around 15.7 percent. On the other hand, total NPAs in microfinance loans in small finance banks stood at 18.3 percent. 

 

NBFC-MFIs like Spandana and Fusion broke their financial agreement due to recording quarterly losses in a row. The main reasons for these losses were expansion in the number of bad loans and hike in funding costs. 

 

In the past, the microfinance sector acted as a main driver for financial inclusion in the economy. It is now facing serious concerns as lenders are unable to balance both asset quality and growth of the finance institutions. 

 

 

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Deal-making in the Indian Hospital Segment booming

 

 

 

 

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Deal-making in the Indian Hospital Segment booming

Deal-making in the Indian Hospital Segment booming

 

Overview

The hospital sector is undergoing a rise in dealmaking, with KKR paying $400 million for Healthcare Global. This pattern demonstrates the industry’s increasing investor interest, which is being fueled by the expanding need for high-quality healthcare services.  The sector has grown significantly due to a number of factors, including medical tourism, government assistance, and rising insurance coverage.

 

The healthcare industry in India is humming with frantic negotiations.  In the most recent of the major transactions that are bringing major players into the industry and consolidating it, KKR, a global private equity and investment firm based in New York, paid close to $400 million to acquire a controlling interest in Healthcare Global (HCG), a leading cancer care hospital chain, from private equity peer CVC Capital Partners. After one of its largest payouts in India left Max Healthcare two years ago, KKR returned to the industry last year when it acquired Baby Memorial Hospital.

 

Deal making in the Healthcare Sector

In recent years, India’s hospital industry has seen a boom in deal-making, with hospitals now accounting for the majority of FDI, according to a December TOI report.  Hospitals received $1.5 billion, or 50%, of all foreign direct investment (FDI) in FY24.  Hospitals’ proportion of healthcare FDI has more than quadrupled from 24% in FY21 and has been increasing from 43% in FY20, indicating its increasing relevance. This is a significant increase.  Alongside the historically favored pharmaceutical industry, the pattern also shows a growing investor preference for hospitals.

 

According to a senior executive of the European investment bank Rothschild & Co., the robust private equity interest in India’s healthcare services firms is a very reliable sign of the multi-decade growth potential present in the industry. Hedley Goldberg, partner and worldwide head of healthcare services at Rothschild & Co., recently stated that an increase in interest is anticipated as foreign businesses assess the market and become more accustomed to the domestic environment.

 

Large Indian companies are also drawn to the healthcare industry in addition to a number of private equity investments. Although a number of corporations, like Tata, Birla, and Hinduja, are involved in the healthcare industry, none have established a substantial presence throughout India. However, the Bajaj Group is getting ready to enter the healthcare industry by establishing a network of hospitals in the nation’s major cities. It has set aside Rs 10,000 crore as an initial investment, according to Bloomberg.

 

Reliance Industries, owned by billionaire Mukesh Ambani, paid Rs 375 crore a few months ago to acquire Karkinos, a technology-driven healthcare platform with a cancer focus.  Under the Insolvency and Bankruptcy Code (IBC), Reliance purchased it.  During the Covid-19 pandemic, hospitals in particular saw significant growth in the healthcare industry.  However, many independent hospitals found it challenging to maintain their operations as the situation improved. Two groups of bidders have shown interest in these hospitals: those who are already in the business and looking to grow, as well as those who wish to turn these organizations around before they are sold to another party.

 

Prominent healthcare organizations, such as Manipal Hospitals, Apollo Hospitals, and Fortis Healthcare, have been making significant investments in key areas by purchasing both new and old buildings for greenfield projects. These purchases assist healthcare providers reach high-demand areas with inadequate medical infrastructure in addition to enabling them to swiftly develop their operations.  Last year, Manipal Hospitals, a division of Temasek Holdings, paid Rs 415 crore for a five-story hospital complex in the western district of Andheri, Mumbai.

 

Indian Healthcare Sector: A sweet spot for investors

The Indian hospital and diagnostic industry’s market capitalization has risen ninefold from Rs 37,500 crore in FY20 to Rs 3.5 lakh crore, revealing that the industry has attracted significant investor attention during COVID-19.  The growth has been driven by a combination of improved pricing, expanded insurance coverage, and shift towards more advanced surgeries, including transplants. The shares of major hospital chains such as Apollo Hospitals and Max Healthcare performed well in the stock market.  The large underserved rural market beyond urban areas, increased disease incidence, and growth in insurance coverage are the key growth drivers of the industry. The sector is highly attractive to investors as hospital chains are putting more money into growth, which is projected to grow at a rate of 12% per year in the next three years.

 

Need for more beds

India’s healthcare sector is being led by a rising number of lifestyle diseases and the requirement for affordable treatment. Seven listed hospitals will increase 14,000 beds in the next three to five years, supplementing the 22,000 extra beds in private hospital chains, as per a report by HSBC Global Research. The WHO states that India currently has a very low bed availability of approximately 16 per 10,000 individuals, and even with these augmentations, there will not be beds to spare. Over the next five to seven years, India will need to have an additional 100,000 beds to meet the growing healthcare demands of the nation, particularly as non-communicable diseases such as diabetes, cancer, and cardiac ailments increase.

 

Budget 2025 incentives

Healthcare and industry professionals praised the Union Budget 2025-26, which was released in February, for its emphasis on developing a patient-centric environment and reinvigorating medical tourism.  ‘Heal in India’ and medical tourism would be pushed in collaboration with the business sector, according to Finance Minister Nirmala Sitharaman.  According to her, it will be supported by simplified visa requirements and capacity building.

 

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Weakest performance of Rupee at 87.21 against US dollar

 

 

 

 

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Equities, Markets - February 26, 2025

Weakest performance of Rupee at 87.21 against US dollar

Weakest performance of Rupee at 87.21 against US dollar

 

Following 3rd February, 2025, Indian rupee recorded its worst intraday fall on 25th February, 2025. It faced a contraction of 0.57 percent which accounts to Rs. 87.21/USD. The reason for this is the expiration of the position of RBI in the non-deliverable forwards (NDF) segment. It resulted in an increase in demand for the US dollars leading to depreciation of the Indian rupee. 

 

Despite the efforts of the RBI to mitigate losses, the performance of the Indian rupee was identified as the worst compared to other Asian currencies in the market. It closed at Rs. 87.21 per US dollar contracted from its previous close of Rs. 86.70 per US dollar.

 

Reasons for depreciation of Indian rupee

In the non-deliverable forwards (NDF) market, the Reserve Bank of India had a forward dollar position. It expired on 25th February, 2025, resulting in a surge in demand for US dollars in the market. Additionally, there was higher demand for US dollars in the market at the end of the month. The end of the month’s demand was driven by importers’ payments in the midst of growing uncertainty in the market due to Trump’s trade tariffs. 

 

Apart from this, foreign portfolio investors sell-off their Indian equities leading to expansion in demand for US dollars in the market. Ultimately, it led to a contraction in the value of the Indian rupee. 

 

According to the information of BSE data, foreign portfolio investors sold equity stock of around R. 3,529 crore on 25th February, 2025. As per the depository information, stocks worth Rs. 30,390 core are sold by foreign portfolio investors until now in the month of February, 2025.This fresh sell of equity shares in the market resulted in high pressure on performance of Indian rupee in the market as demand for Indian rupee contracted. 

 

The dollar index was positioned at 106.65 US dollars against a basket of six important currencies in the world leading to a burden on rupee value. The rally in the dollar index indicates a surge in demand for US dollars compared to other currencies. Trump’s regime confirmed tariff enforcement on Mexico and Canada. It indirectly affected Indian rupee due increase in market uncertainty, boost to foreign investment outflows, severe impact on trade, and surge in demand for US dollars.  

 

Apart from this, elevated crude prices, imposition of US tariffs on Iran oil sector,  increase in demand for oil led to strong depreciation in rupee value. 

 

Performance in relation to other Asian currencies

Following the depreciation of Thai Baht to 0.6 percent, depreciation of Indian rupee is considered as the second worst performer among Asian currencies’ performance in the market. The depreciation of Indian rupee is identified to be its largest intraday decline in the previous three weeks. Though, a marginal recovery in value of Indian rupee was recorded after this sharp drop.  

 

In the present times, there is a probability of persistent depreciation in Indian rupee due to growing geopolitical concerns, inflation in crude prices, and strong capital outflows. 

 

 

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India- EU to work together on major industries

 

 

 

 

 

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India- EU to work together on major industries

India- EU to work together on major industries

 

Overview

India and the EU will work together on semiconductors, telecoms, electric vehicles, and Al, with a focus on secure connectivity. With a budget of Euro 60 million, they seek to standardize EV charging standards and concentrate on battery recycling research. Commitments to market access will also be discussed at high-level discussions.

 

India-EU to cooperate on key industries

In their top-level meeting this week, India and the EU are likely to enhance cooperation in vital infrastructure and technology sectors, including telecom, semiconductors, electric vehicles (EVs), and artificial intelligence (AI). The establishment of “secure and trusted” communications networks will be among the priority areas, providing an alternative to China-led infrastructure projects.

 

To ensure efficiency and compatibility, both sides aim to harmonize EV charging infrastructure standards. A “joint research cooperation” program will also be established with the intention of recycling electric car batteries. The Horizon Europe program and India will have a joint budget of €60 million to fund these projects.

 

India is pushing the EU to commit to more stronger ties in the short term on market access. There have been disagreements, however, with the EU wanting this issue to be dealt with within the framework of the agreed free trade agreement and India demanding explicit mentions in the Trade and Technology Council statement.

 

Previous and Current Meets

On Thursday and Friday, EU President Ursula von der Leyen will visit India with the European Union College of Commissioners. Von der Leyen is visiting India for the third time having traveled to India in September 2023 to attend the G20 Leaders’ Summit and in April 2022 on a bilateral diplomatic visit. Von der Leyen and Prime Minister Narendra Modi have frequently met outside of global gatherings.

 

The EU College of Commissioners’ first-ever trip to India will be one of the first of its kind since the current European Commission’s mandate began in December 2024, following the June 2024 European legislative elections. Von der Leyen and Modi will preside over a plenary session of the College of Commissioners and the Indian government during the visit. While Von der Leyen and Modi will meet bilaterally, College members will also meet with their counterparts one-on-one.

 

The EU said last Friday that Vice-President Virkkunen, High Representative/Vice-President Kaja Kallas, and commissioners Maros Sefcovic and Ekaterina Zaharieva will represent the EU at the second meeting of the Trade and Technology Council, which will also take place during the heavy-duty visit. The EU’s second such bilateral forum is the council with India; the first was with the US and was established in 2021.

 

Conclusion

Through the council meeting, which will be led by the Ministry of Electronics and IT, India is likely to examine more cooperation and purchases with the EU in the semiconductor sector. India and the EU are cementing their ties in strategic sectors such as semiconductors, telecom, electric vehicles, and AI under a shared budget of €60 million. A focus on bringing EV charging systems into harmony as well as pioneering battery recycling technologies is among these. Although access to markets remains an area of negotiation, visits such as the one by EU President Ursula von der Leyen indicate deepening cooperation. The partnership is intended to enhance safe connectivity and offer an alternative to China-driven infrastructure projects, which reflect the strategic value of India-EU relations.

 

 

 

 

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FMCG companies initiative to lower replenishment period in rural areas

 

 

 

 

 

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FMCG companies initiative to lower replenishment period in rural areas

FMCG companies initiative to lower replenishment period in rural areas

 

In recent times, rural demand in India is growing more rapidly than the demand in urban areas. Major fast-moving consumer goods (FMCG) players like Britannia, Godrej Consumer, and ITC are using  stock-ready vans to quickly deliver their products to small shops in rural areas. It will aid the shop owners in getting stock at faster speed and also keep their stock full. It will promote good business for the retailers as well the companies. Its main purpose is to contract turnaround times for shop owners. 

 

Old two-step process of FMCG distribution

In the past, FMCG used to distribute their products to the retailers in rural areas by following a two-step process of FMCG distribution. In this, the sales representatives will visit retailers in rural areas and collect their respective orders. The delivery of the stock will be completed on the same day or the next day. 

 

New initiative of FMCG firms

In this new plan, many FMCG players partnered with stock distribution vendors. These vendors are the one with responsibility to coordinate between stockists and van drivers. According to this new initiative, the stockists load the company’s products in a van. On a daily basis, the van driver, along with stock distribution vendors goes to 4 to 5 villages. The most important benefit of this initiative is that it leads to immediate fulfillment of the order in just a few hours. In the past, the time period required to fulfill orders was 1 to 2 days leading to stockout. With the help of this plan, replenishment period is contracted to just a few hours. 

 

The main goal of the plan is to reduce replenishment time to less than a single day. It will aid in mitigating revenue losses caused by no stock. In the previous few months, some FMCG players have implemented this strategy. 

 

It broadens the role of van drivers to someone who is knowledgeable about a firm’s product portfolio and also able to promote it. In the past, the role of van drivers was just to deliver products of the companies at the right location. 

 

In the midst of growth in rural demand, this initiative of FMCG firms is gaining progress. Many firms are adopting this strategy to expand their market presence in rural areas. 

 

Steps taken by ITC

ITC is the leading company to introduce a van-led distribution model in rural areas for a long period of time. To ensure their products reach to the most remote parts of the country, ITC uses stock-ready mobile vans. It is cost-effective and makes it easier and faster to deliver products in the most remote parts of India as well. It ensures the products are reached to small retailers in the village in a short span of time and helps them to not get stockout. 

 

The company also appointed stockists to handle the work of vans in order to improve its distribution network in the country. Apart from this, the firm uses the latest technology like artificial intelligence (AI) and geo-spatial mapping. It helps the company to recognize high potential markets and plan the best route for their delivery vans. It aids in improving the efficiency of distribution networks. 

 

In order to expand product sales via vans in rural areas, Godrej Consumer launched Vistaar 2.0. Many companies have identified the growing potential of rural demands supported by expansion in disposable incomes and rise in internet penetration in rural areas.

 

In the present times, many companies are using stock-ready vans, and smart logistical strategies. The recent initiative of FMCG companies will help them to improve their sales efficiency and transform the dynamics of the rural retail market in India. It will increase availability and accessibility of essential products in the rural market. 

 

 

 

 

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Adani, Ambani to invest Rs. 50,000 Cr. in Assam

 

 

 

 

 

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Adani, Ambani to invest Rs. 50,000 Cr. in Assam

Adani, Ambani to invest Rs. 50,000 Cr. in Assam

 

Overview

At the Advantage Assam 2.0 Summit, Adani and Reliance Industries each pledged to spend Rs 50,000 crore in Assam. Among other projects, Mukesh Ambani revealed plans for an Al-ready Data Center. The Adani Group will invest in a number of areas, such as renewable energy and infrastructure. JSW and Tata are also expected to make large investments in the state.

 

Huge investment promises

Advantage Assam 2.0 Investment & Infrastructure Summit 2025 got underway in Guwahati on Tuesday with Reliance Industries Limited and the Adani Group having pledged to invest Rs 50,000 crore and Rs 50,000 crore, respectively. Speaking at the event, Reliance Industries Limited Chairman Mukesh Ambani stated that AI would refer to both Assam intelligence and artificial intelligence. In 2018, during the last summit, Reliance pledged to invest Rs 5,000 crores in Assam. We have since invested more than Rs 12,000 crore in the state. In the next five years, Reliance plans to more than treble its investment in Assam to over Rs 50,000 crore in the five priority areas listed below.

 

Ambani to set up Data Centres

Mukesh Ambani underlined Reliance’s intent to make Assam “Tech-Ready and AI-Ready” as part of its digital transformation vision. An AI-ready Data Center may be built in Assam which would apply AI assisted teachers to improve education, AI assisted doctors to better healthcare, and AI assisted farmers for agriculture. Assam will enable its youth to learn and earn from home. Furthermore, Reliance will help Assam become a leader in clean atom and green energy, adopting the government’s nuclear policy for the participation of the private sector.

 

RIL’s 5 schemes for development

Mukesh Ambani provided five grand schemes for development of Assam’s economy. Reliance is set to construct two world class Compressed Biogas (CBG) facilities on reclaimed wasteland, and are expected to produce 8 lakh tonnes of clean biogas yearly that could power 2 lakh passenger automobiles daily. New Mega Food Park in Assam would enable it to become a key supplier of food and non-food agro based consumer goods at the national and international level by increasing the value chain of the local produce. Within five years, Reliance Retail is set to double its stores in Assam from 400 to 800. To further develop Assam’s tourism and hospitality sector, Reliance plans to build a seven star luxurious Oberoi hotel. These measures are sure to provide a wealth of direct and indirect employment opportunities for the youth.

 

Adani targets infrastructure

Gautam Adani, Chief of the Adani Group, made a landmark investment of ₹50,000 crore in Assam. These investments will target major infrastructure domains such as airports, ports, city gas distribution, power transmission, cement making, and road development. They are meant to drive the growth of Assam’s economy, increase connectivity, and enhance the distribution of energy.

 

Tata Sons’ pledge for renewable power

N Chandrasekaran, Chairman at Tata Sons, also delineated the development ambitions of the Tata Group for Assam. The corporation will set up 5GW of renewable power in the state within the next five years and help India in its green energy mission and in curbing carbon emissions. Apart from this, the Tata Group will also make an investment in a mega project of large-scale manufacturing technology that will provide jobs for 30,000 youngsters. The venture will help drive Assam’s industrialization, provide skilled jobs, and reinforce the local economy.

 

Other major investments in Assam

Sajjan Jindal, JSW Group Chairman and MD, announced investments in Assam’s renewable energy sector. Further, Anil Kumar Chalamalasetty, MD of Greenko Group, announced that the company will be investing ₹10,000 crore in two Assam units. Greenko is already working with Numaligarh Refinery Limited on ongoing projects.

 

Vedanta Group subsidiary Cairn Oil & Gas invested ₹50,000 crore in oil and gas exploration and production in the region. Vedanta Group Chairman Anil Agarwal informed that the company has three locations in Assam and Tripura and will set up world-class oil and gas exploration and production (E&P) facilities in Assam. The potential of the state to emerge as a Mega basin of the world and an energy production center of the country was highlighted. Vedanta is going to invest more than ₹50,000 crore in Assam to produce 100,000 barrels of oil and gas per day. This project will create world-class exploration and production (E&P) facilities and provide direct and indirect employment to 1 lakh youth, strengthening the position of Assam as a power player in India’s energy sector.

 

Conclusion

The Advantage Assam 2.0 Summit attracted big-ticket investments with Reliance and Adani committing ₹50,000 crore each for AI, clean energy, and infrastructure. Tata, JSW, Greenko, and Vedanta also committed to renewable power, oil and gas, and manufacturing. The investments make Assam a pioneering center for innovation, energy, and industrial development, with thousands of jobs being created.

 

 

 

 

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Easing of risk weights on loans given to MFIs and NBFCs

 

 

 

 

 

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Easing of risk weights on loans given to MFIs and NBFCs

Easing of risk weights on loans given to MFIs and NBFCs

 

On 25th January, 2025, Reserve Bank of India (RBI) lowered the capital requirement leading to easing up of giving micro loans and loans to microfinance institutions (MFIs) and non-banking finance companies (NBFCs).  RBI lowered the risk weight to 100 percent for NBFCs. These new regulations will come into effect from 1st April, 2025. The main aim of the Reserve Bank of India is to increase liquidity, better loan flows, and also boost growth in the economy. 

 

Actions taken by RBI

In order to support economic growth, RBI declared a contraction in policy rate by 25 basis points which accounts to 6.25 percent on 7th February, 2025. In less than a month, RBI took the decision of lowering the capital requirement against loans given to NBFCs and MFIs. 

 

Prior to this, the risk weights on bank credits to Non-Banking Financial Companies (NBFCs) was expanded to 125 percent from 100 percent.  The reason for the implementation of this action was to limit unsecured loans, which had expanded to 25 percent in the month of October, 2023. Following expansion in risk weight, NBFCs faced high borrowing costs leading them to demand for relief. 

 

The recent decision of the RBI restored the risk weights on credits to NBFCs back to 100 percent. It will not only lead to expansion in liquidity but also lower borrowing costs for NBFCs giving them relief from the persistent concerns about high borrowing costs.

 

Impact of actions taken by RBI

The recent steps of RBI to lower capital requirement will lead to capital of around Rs. 40,000 crore more available for the banks. The banks can now give credit up to Rs. 4 lakh crore to AAA-rated entities. It will lead to lower funding costs,  rise in liquidity, and better margins for institutions. Its goal is to have strategic growth in the economy and to resolve the issue of subdued bank loans to NBFCs.

 

Changes in risk weight on loans to MFIs

Prior to this decision, banks had to have a capital requirement of 125 percent on loans given to MFIs. The aim of this regulation was to lower potential risks. It made lending to MFIs expensive. 

 

In a recent decision of RBI, the risk weight is assigned to be 75 percent on loans given to MFIs which will encourage more credit to MFIs. The loans given for consumption purposes are assigned a risk weight of 100 percent.

 

Reasons for lowering capital requirement 

The decision of RBI to restore risk weight highlights that potential risk prevailing in the economy of unsecured credit has contracted. The previous measures of RBI to expand risk weight has helped the economy and the banking sector. Though, it affected NBFCs, particularly small NBFCs as they faced the issue of high funding costs. Many large NBFCs had to keep their liquidity levels high in order to have enough funds to maintain lending activity.

 

In the current financial year, the bank loans to NBFCs are recorded to be sluggish. Also, contraction in liquidity in the market was observed. These are reasons why RBI lowered capital requirements and also to prioritise loan flow to under-served segments for growth in the economy. 

 

It is now time for the economy to target strategic economic growth. It will give more access to funds leading to strong growth in the sector. 

 

Benefit to banks

The change in regulations of RBI will not only help MFIs and NBFCs but also banks in the sector. The credit system of NBFCs generally functions by taking loans from banks and then using that loan amount to give loans to its customers. The lowering of capital requirement will likely lead to lower interest rate to NBFCs by banks. It will lower the funding costs of NBFCs. 

 

Bandhan Bank is considered to get more gains as a quarter of its portfolio used to attract 125 percent risk weight but now it will attract 75 percent risk weight. It will aid the bank to lend more as it will have more capital to give credit. It will lead to improvement in its profit margins.

 

In conclusion, the main aim of the RBI is to have strategic growth by lowering funding costs and improvement in margins for the sector. It also gives relief in terms of loans given to NBFCs and MFIs and addresses the issue of subdued bank credits to NBFCs. 

 

 

 

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Nasdaq and S&P 500 dip in the midst of AI worries

 

 

 

 

 

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Nasdaq and S&P 500 dip in the midst of AI worries

Nasdaq and S&P 500 dip in the midst of AI worries

 

Overview

As investors waited for market giant Nvidia’s results and fretted about the demand for equipment underpinning artificial intelligence, the Nasdaq Composite slid more than 1% on Monday, with large technology firms acting as the largest drag. The Dow managed to squeeze out a small gain, but the S&P 500 ended the day marginally lower, marking its third consecutive day of declines. Additionally, it was the third straight loss for the Nasdaq and the fourth time in February that it had dropped more than 1% in a single day.

 

Friday’s sharp drops ended a negative week for stocks, which was characterized by data indicating that American firms and consumers are growing uneasy about Trump’s tariff proposals. President Donald Trump said at a news conference on Monday that tariffs on Canada and Mexico would “go forward on time, on schedule,” when a one-month postponement ends next week.

 

AI worries shadow US markets

As they awaited Nvidia’s quarterly reports on Wednesday, investors were worried about the company’s ability to meet future demand for its expensive AI chips. Since China’s DeepSeek shocked the industry in January with its low-cost AI models, concerns about significant spending on the technology have grown.

 

Uncertainty was increased when a TD Cowen analyst note revealed late Friday that Microsoft has canceled leases for sizable data center capacity in the US, raising the possibility of an excess of AI infrastructure. Microsoft stated that while it “may strategically pace or adjust” infrastructure in some areas, its ambition to invest more than $80 billion in AI and cloud capacity this fiscal year remains intact.

 

Gene Goldman, chief investment officer at Cetera Investment Management, stated that since AI has been driving market rise in recent years, any issue about the technology is viewed as a justification to reduce profits. Goldman noted that markets are already anxious and searching for an excuse to take profits. Further, according to Goldman, market hesitancy on whether we are facing an inflation or growth scare is what is driving volatility.

 

Following a poor projection from Walmart and a slew of negative economic data this week, investors are growing increasingly concerned about economic growth in addition to tariffs and inflation.

 

US market performance

The S&P 500 dropped 29.88 points, or 0.50%, to 5,983.25; the Nasdaq dropped 237.08 points, or 1.21%, to 19,286.93; and the Dow Jones Industrial Average increased 33.19 points, or 0.08%, to 43,461.21.

 

Tech drove US market down

Technology was the largest loser, closing down 1.43%, while the more defensive healthcare index led percentage gains, closing up 0.75%. The largest index point drag on the S&P 500 was Nvidia, which ended the day down 3.1%. Broadcom Inc., a chip manufacturer, opened a new page, down 4.9%, and Amazon.com, down 1.8%. Microsoft’s stock fell 1% in the end. Another well-known AI stock, Palantir Technologies, saw the largest percentage reduction in the tech sector, falling 10.5%. Though these businesses are still excellent stocks, the AI tech industry’s supremacy has ended. According to Peter Boockvar, CIO at Bleakley Financial Group, the market is about to enter a significant digesting phase.

 

Inflation data out this week

Regarding statistics, the Federal Reserve’s favored inflation indicator, the Personal Consumption Expenditure index, is anticipated on Friday and may aid markets in determining when the central bank may decrease interest rates for the first time this year.

 

Fed Rate Stability Expected Until June, Stocks Gain on Key Announcements

According to CME Group’s FedWatch, which launches a new tab feature, interest rate futures show traders’ views that the Fed would keep borrowing prices the same until June. Following the iPhone manufacturer’s announcement of plans to invest $500 billion in the United States over the next four years, including the establishment of an AI server facility in Texas, individual stocks ended the day up 0.7%. After Warren Buffett’s conglomerate announced a record yearly profit, Berkshire Hathaway’s class B shares ended up more than 4%, and the company’s shares reached record highs in early trade.

 

Conclusion

The U.S. overall stock market did not do well, with the Nasdaq declining over 1% due to concerns regarding demand for AI gear, economic growth, and tariffs. Tech stocks, and especially those that deal in AI, were hammered, with the Dow managing only a small gain. Some stocks were boosted by positive news from Apple and Berkshire Hathaway, but investors are waiting until inflation figures and Nvidia’s quarterly results are announced. Market sentiment is still cautious, with most waiting until there are more positive economic indications.

 

 

 

 

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Reliance Consumer Products’ pricing strategy could lead to price war in beverage industry

 

 

 

 

 

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Reliance Plans ₹8,000 Crore Expansion to Boost Beverage Manufacturing Nationwide
Equities, Markets - February 25, 2025

Reliance Consumer Products’ pricing strategy could lead to price war in beverage industry

Reliance Consumer Products’ pricing strategy could lead to price war in beverage industry

 

 

India’s beverages industry is likely to face price war for the first time. The reason for this is the aggressive pricing strategy of Reliance Consumer Products. The company has launched its brand Campa Cola and new energy drinks at Rs. 10. It will likely lead to an intense competition with other companies like Coca-Cola, Dabur, and ITC.

 

Reliance pricing strategy

The company has launched its brand Campa Cola at Rs. 10. Apart from this, it has also launched its sports drink Spinner and also energy and rehydrating beverage product known as RasKiK Gluco Energy at Rs. 10.  

 

This aggressive pricing strategy of the company has severely impacted products under the category of out-of-home consumption higher than products under category of in-home consumption. In the financial year 2024-25, the company recorded revenue of Rs. 1,000 crore from its Campa brand. In a few states, the Campa brand has a market share of higher than 10 percent in the sparkling beverage segment.

 

Plans of firms operating in beverages industry

As the summer season is coming near, companies like ITC and Dabur operating in manufacturing of fruit-based beverages are planning to serve attractive discounts and deals to the consumers. Beverages are generally out-of-home consumption products. Pricing strategy is important in these products as out-of-home consumption products contribute to about 40 percent of the beverage business.

 

Dabur has plans to reduce the prices of its Real juice nectar products to about Rs. 100 per litre, which was earlier Rs. 130. The chief executive officer of Dabur, Mohit Malhotra stated that the sales growth of Real juice is adversely impacted due to prices of Coke and Pepsi being Rs. 50 per litre. He further stated that Dabur will launch a new better affordable range of product portfolio in the consumer market. It will also provide some slightly higher margins to its distribution networks. Its aim is to attract more consumers and also to incentivize its distributors. It has joined hands with McKinsey & Company, who earlier worked with PepsiCo and Coca-Cola  to prepare a strong beverage strategy. 

 

The price of Coca-Cola bottlers contracted to Rs. 15 for 250-ml, which was earlier Rs. 20. According to the company, it is a promotional offer to the consumers and not a price cutting strategy of the company. It is a historical trend of the company to reduce its price before the upcoming festivals like Holi. 

 

The owner of B Natural Brand, ITC is also preparing for aggressive consumer offers and pricing strategy. 

 

In the past, Coca-Cola and PepsiCo had several price wars but it was only between them and no involvement of other brands and players. This is for the first time that many beverage companies along with juice makers are aggressively competing in the market for the same consumer base at large pricing points. 

 

The chairman of PepsiCo, Ramon Laguarta stated that pricing strategy is a crucial part for the development of beverage segments, particularly in emerging and developing nations. The company is already following this in the USA and it plans to do so in India as well in the upcoming terms. 

 

Tata consumer Products has decided to increase profit margins for retailers on its Tata Gluco+, glucose drink. It will act as an incentive to retailers who promote and sell Tata Gluco+ as it will earn them more profit. The main aim of the company is to expand the product sales and consumer attraction towards Tata Gluco+. The improvement in the total profitability of the brand and company will be worked on later. 

 

Impact in long-run

The ongoing aggressive price strategy of the beverage companies will be profitable in the short-run and this summer season but it will be adverse in the long-run. It will certainly affect the profitability of the companies. In the past, Pepsi and Coca-Cola declared a pricing of Rs. 5 which was quite profitable in the short-run but the companies had to pay the price with its profitability levels.

 

Perception of consumer demand

The summer season is an important term for the beverage players as 60 to 65 percent of their yearly sales is earned in the period of March to June. 

 

Dabur stated that the purchasing behaviour for out-of-home consumption products is based more on impulse. The consumers tend to buy the beverage which they find cold and it could be refreshment drinks or fruit juice or anything. In recent times, many new brands have entered the beverage industry which includes energy drinks and colas segments. It led to widening the availability of a variety of products for the consumers.

 

Expansion in Production Capacity

Reliance is rapidly expanding its production capacity in the market. Varun Beverages, the biggest bottler of PepsiCo has also expanded its production capacity to around 20 to 25 percent YoY for the upcoming summer season. The company states that there is a large scope for affordable products offered by regional brands in the country who have a market share of 20 percent. The company is optimistic about the ongoing competition and believes that all brands have enough space to grow. It also believes that this will lead to expansion in the market. The main focus of the company is to expand 10 to 12 percent of more retail outlets each year. 

 

The product categories like tender coconut water, 100 percent juices, and bottled water are not yet affected by the price war. The reason for this is these products are considered as healthy options and are sold at higher prices. 

 

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Easing of restrictions on New India Co-operative Bank

 

 

 

 

 

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Easing of risk weights on loans given to MFIs and NBFCs
Banking, Equities, Markets - February 25, 2025

Easing of restrictions on New India Co-operative Bank

Easing of restrictions on New India Co-operative Bank

 

Overview

With effect from February 27, 2025, the Reserve Bank of India has loosened restrictions on New India Co-operative Bank, permitting withdrawals of up to Rs 25,000. This comes after the bank’s liquidity status has been evaluated. The general manager of the bank was also taken into custody on suspicion of embezzling Rs 122 crore.

 

Depositors can withdraw

Starting February 27, the Reserve Bank of India (RBI) has permitted ₹25,000 withdrawals to depositors of the fraud-plagued New India Cooperative Bank, providing some respite. More than half of all depositors would be able to withdraw their full balances with the aforesaid relaxation, and the remainder depositors will be allowed to withdraw up to ₹25,000 from their accounts, according to the RBI.

 

Depositors can make this withdrawal using the bank’s ATM channel or in-branch. It was explained, however, that the total amount that any depositor may withdraw will be ₹25,000 or the amount that is available in their account, whichever is less.

 

With effect from February 25, the RBI has also reorganized the Committee of Advisors (CoA) to the Administrator. CoA members include former State Bank of India general manager Ravindra Sapra, former Saraswat Co-operative Bank Ltd. deputy general manager Ravindra Tukaram Chavan, and chartered accountant Shri Anand M. Golas. However, the Administrator has not changed.

 

RBI had issued AID

As a precautionary step to safeguard depositors’ interests, the RBI issued All Inclusive Directions (AID) to the bank on February 13, 2025, prohibiting any withdrawals from current, savings, and other accounts. The central bank then replaced its Board on February 14, 2025, and established an Administrator and a Committee of Advisors (CoA) to supervise the situation and guarantee the stability of the bank.

 

The RBI was developing a proposal to permit extraordinary withdrawals for personal and medical situations for depositors of the financially troubled New India Co-operative Bank. In the event of a bank failure, savings up to Rs 500,000 are guaranteed under present regulations, and payouts must be given within 90 days. A request for comment was not immediately answered by the RBI.

 

Citing worries about the bank’s financial condition and ongoing supervisory challenges, the RBI placed severe limitations on the bank last week, forbidding it from issuing new loans, suspending deposit withdrawals for six months, and designating an administrator.

 

Story so far

On February 17, Hitesh Mehta, the bank’s general manager and head of accounts, was taken into custody on suspicion of embezzling Rs 122 crore. Mehta admitted to giving a real estate developer Rs 70 crore to finance an SRA (Slum Rehabilitation Authority) project in Charkop, Kandivali, according to a police official.

 

Mehta and developer Dharmesh Paun were detained in connection with the investigation and placed under police prison until February 1, 2025.  The bank’s interim CEO, Devarshi Ghosh, filed the case at the Dadar police station on Friday. The Mumbai police’s Economic Offences Wing (EOW) took over the case after the complaint was filed, and it is currently investigating the alleged theft at the bank’s Prabhadevi and Goregaon branches.

 

Conclusion

Thus, the RBI is supporting the New India Co-operative Bank and its depositors by easing restrictions. The checking of the bank’s liquidity position has yielded positive results. This increased facility has given relief to depositors as above 50% of them are able to access all of their funds while some of them are permitted to withdraw Rs 25,000. Steps have also been taken to restructure the bank by changing the Committee of Advisors and placing the administrator under active oversight. This comes after the recent arrest of the bank’s general manager, Hitesh Mehta, for suspected embezzlement of funds to the tune of 122 crore rupees, thus exposing shocking levels of corruption and internal inquiry into the financial mismanagement. Despite challenges, the RBI aims to balance the interests of the depositors and restore order to the meandering waters of financial chaos still looming around the bank.

 

 

 

 

 

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Hike in limit on small-value credits of Urban co-operative banks

 

 

 

 

 

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