Today's Hot Stories - December 29, 2012
10 Headlines for Today
(1) India Gate, Raisina Hills closed for public, security beefed up
(2) PM’s assurance on water policy cuts no ice with States
(3) Storm blows through East; 135,000 in dark in Arkansas
(4) Bharti Infratel plunges over 13 % on debut
(5) Raman takes over as whole-time member of SEBI
(6) ColorPlus goes in for a new retail identity
(7) Former England cricket captain Tony Greig dies
(8) Vintage Yuvraj stars in India’s win
(9) Sri Lanka slumps to innings defeat against Australia
(10) Oscar-nominated composer Richard Rodney Bennett dies
5 Stories for Today
(1) Congress playing politics on Telangana, says BJP
(2) Obama ‘modestly optimistic’ after meeting Congress leaders
(3) Mistry to take over reins today
(4) Obama, Congress in last push to avert ‘cliff’
(5) Risk to banking sector increasing, says RBI
(1) Congress playing politics on Telangana, says BJP
While reiterating that it is ready to support formation of a Telangana State if a Bill is introduced in the budget session of Parliament, the Bharatiya Janata Party has hit out at the Congress for “playing politics” on the contentious issue.
BJP spokesman Prakash Javedkar told journalists that the Congress-led UPA government was misguiding Telangana people in the name of meetings, commissions and committees.
Referring to Home Minister Sushilkumar Shinde’s announcement, after an all-party meeting in New Delhi on Friday, that a decision on the Telangana demand would be made within a month, Mr. Javedkar said: “This is the third such all-party meeting. What decision will you take? The then Home Minister, P Chidambaram, had on December 9, 2009 announced that the process of formation of a separate State for Telangana has begun.”
Mr. Javedkar said that during Friday’s meeting, all parties asked the Congress to make clear its view on the issue as the ruling party at the Centre was “doing politics.”
‘Countdown has begun’
The former APCC president and Rajya Sabha MP from Andhra Pradesh, V. Hanumantha Rao, however, welcomed Mr. Shinde’s statement and said only the Congress government could fulfil the people’s long-pending Telangana demand.
Other prominent Telangana protagonists and Congress leaders G. Vivekanand, Ponnam Prabhakar, Manda Jagannath and Sudhakar Goud said the countdown for formation of a new State had begun.
(2) Obama ‘modestly optimistic’ after meeting Congress leaders
U.S. President Barack Obama appeared “modestly optimistic” after meeting top Congressional leaders and urged them take immediate measures to address the looming fiscal cliff before the December 31 midnight deadline, in absence of which the nation faces the prospect of another economic recession.
“I’m modestly optimistic that an agreement can be achieved. Nobody is going to get 100 per cent of what they want, but let’s make sure that middle-class families and the American economy — and, in fact, the world economy — aren’t adversely impacted because people can’t do their jobs,” Mr. Obama told reporters at the White House following his hour-long consultations with the top Congressional leaders on Friday.
“We’re now at the point where, in just four days, every American’s tax rates are scheduled to go up by law.
Every American’s paycheck will get considerably smaller. And that would be the wrong thing to do for our economy, it would be bad for middle-class families, and it would be bad for businesses that depend on family spending.
“Fortunately, Congress can prevent it from happening if they act right now,” he said.
Mr. Obama cut short his Hawaii vacation and returned to Washington on Thursday, leaving the First Lady and two daughters behind, in his last-ditch effort to avoid the nation hitting a fiscal cliff.
But as of Friday, not much visible progress were seen despite his meeting with Congressional leaders and some behind the scene hectic paralysis, which were expected to continue over the weekend.
“I just had a good and constructive discussion here at the White House with Senate and House leadership about how to prevent this tax hike on the middle class, and I’m optimistic we may still be able to reach an agreement that can pass both houses in time,” he said.
The Senate Majority leader, Harry Reid, and the Minority Leader, Mitch McConnell, were working on such an agreement, he noted.
“But if an agreement isn’t reached in time between Senator Reid and Senator McConnell, then I will urge Senator Reid to bring to the floor a basic package for an up-or-down vote — one that protects the middle class from an income tax hike, extends the vital lifeline of unemployment insurance to two million Americans looking for a job, and lays the groundwork for future cooperation on more economic growth and deficit reduction,” Mr. Obama said.
“I believe such a proposal could pass both houses with bipartisan majorities as long as those leaders allow it to actually come to a vote.
“If members of the House or the Senate want to vote no, they can — but we should let everybody vote. That’s the way this is supposed to work. If you can get a majority in the House and you can get a majority in the Senate, then we should be able to pass a bill,” he said.
Mr. Obama said American people are watching all this and their patience is already thin.
“This is deja vu all over again. America wonders why it is that in this town, for some reason, you can’t get stuff done in an organised timetable; why everything always has to wait until the last minute.
“Well, we’re now at the last minute, and the American people are not going to have any patience for a politically self-inflicted wound to our economy. Not right now,” he said in his brief remarks to the press.
Mr. Obama said the economy is growing, but sustaining that trend is going to require elected officials to do their jobs.
“The housing market is recovering, but that could be impacted if folks are seeing smaller paychecks. The unemployment rate is the lowest it’s been since 2008, but already you’re seeing businesses and consumers starting to hold back because of the dysfunction that they see in Washington,” he said.
“Economists, business leaders all think that we’re poised to grow in 2013 -- as long as politics in Washington don’t get in the way of America’s progress,” he added.
(3) Mistry to take over reins today
Bombay House, headquarters of the Tata Group, braced for a change of guard at the top with its chairman of 21 years, Ratan Tata, retiring on his 75th birthday to make way for his appointed successor, Cyrus Mistry.
From Saturday, when 44-year-old Mr. Mistry takes over, Mr. Tata will be Chairman `Emeritus' of the Tata Group.
Even as Mr. Mistry entered Bombay House on Friday morning amid a huge media presence, Mr. Tata was on a visit to Pune, Tata Group sources said.
Low-key
In spite of all the hype surrounding the change in leadershipit was a change devoid of any ceremony, speech or event - typifying Mr Tata's style. He has remained low-key, media-shy and unassuming throughout his illustrious tenure.
Mr. Mistry is the sixth chairman of the 144-year old Tata Group and has worked with the Tata group since 2006. Though not directly related to Mr. Tata, Mr. Mistry's sister is married to Mr. Tata's younger half-brother, Noel Tata, who initially was tipped to take over from Mr. Tata.
Shapoorji Pallonji
Mr. Mistry is the son of Pallonji Mistry, who owns construction firm Shapoorji Pallonji, and is the largest individual shareholder in Tata Group holding company, Tata Sons, with an 18.4 per cent stake.
Born on July 4, 1968, Cyrus Mistry is a civil engineering graduate from Imperial College London and has a Master's degree in Management from the London Business School.
He is credited with growing Shapoorji Pallonji by over seven times since he took over as Managing Director in 1994 to a $ 1.5 billion organization. Under him, it has evolved from a pure construction company to one implements projects in the marine, oil & gas and rail sectors.
Since last year's announcement of the decision by the Tata Sons board to appoint Mr. Mistry as the new chairman, he has accompanied Mr. Ratan Tata on visits to group offices and factories in India and overseas, besides several annual general meetings (AGMs) of the group, this year.
Young management
Mr. Mistry will be ably supported by a relatively young senior management at most group companies, who have recently assumed top positions. These include N.Chandrasekaran, MD & CEO of Tata Consultancy Services, Harish Bhat, MD & CEO, Tata Global Beverages, Karl-Ulrich Kohler, MD, Tata Steel Europe, Karl Slym, MD, Tata Motors, Ralf Speth, CEO, Jaguar Land Rover and R. Mukundan, MD, Tata Chemicals among others. Mr. Mistry will have his work cut out, when he takes over from Saturday, as Mr. Tata's reign will indeed be a hard act to follow.
(4) Obama, Congress in last push to avert ‘cliff’
President Barack Obama and members of Congress prepared for one last try to avert across-the-board tax increases and spending cuts known as the fiscal cliff, as the U.S. Treasury Department warned that it will begin taking action to prevent the government from hitting its debt limit.
Treasury Secretary Timothy Geithner said on Wednesday in a letter to congressional leaders that the department will use accounting measures to save approximately $200 billion. That could keep the government from reaching the debt limit which is embroiled in the fiscal cliff talks for about two months.
The move comes as Mr. Obama and the Republican congressional leadership resume negotiations that hit a stalemate last week over how to avoid the fast approaching fiscal cliff, which some economists warn could cause another recession after it takes effect in the new year. Mr. Obama decided to cut short his Hawaii vacation for an overnight flight expected to get him back to the White House on Thursday. But Congressional officials said on Wednesday they knew of no significant strides toward a compromise over a long Christmas weekend, and no negotiations have been set.
Mr. Obama has sought to include an increase in the borrowing limit in the talks. But House of Representatives Speaker John Boehner and other Republican leaders have demanded concessions in return.
The Senate is due in session Thursday, although the immediate agenda includes other matters. The House has no plans to convene, following last week’s rebellion in which conservatives torpedoed Boehner’s legislation to prevent scheduled tax increases on most, while letting them take effect on million-dollar wage earners.
Mr. Obama insists that no tax cuts be extended for anyone earning over $400,000 per year.
Mr. Geithner said the negotiations over tax and spending policies make it difficult to predict how long he can delay reaching the borrowing limit. The absence of a specific timeframe may be intended to pressure Republicans to allow a debt limit increase in a potential budget deal.
For now, Treasury will take several steps to delay reaching the limit. Mr. Geithner said it will stop selling Treasury securities used by state and local governments to support their own sales of tax-exempt bonds. That will keep the department from accumulating more debt.
And the department will stop investing in government retirement funds.
The two sides may strike a short-term agreement before New Year’s that postpones spending cuts until spring. And even if New Year’s passes with no deal, businesses and consumers would not likely panic as long as some agreement seemed imminent. The $671 billion in tax increases and spending cuts could be retroactively repealed.
Also, the impact of the tax increases would be felt only gradually, with most people receiving slightly less money in each pay check.
“The simple conclusion that going off the cliff necessarily means a recession next year is wrong,” says Lewis Alexander, an economist at Nomura Securities. “It will ultimately depend on how long the policies are in place.”
The borrowing limit is the amount of debt the government can pile up. The government accumulates debt two ways- It borrows money from investors by issuing Treasury bonds, and it borrows from itself, mostly from Social Security revenue.
In 2011, Congress raised the limit to nearly $16.4 trillion from $14.3 trillion. Three decades ago, the national debt was $908 billion. But Washington spent more than it took in, and the debt rose steadily surpassing $1 trillion in 1982, then $5 trillion in 1996. It reached $10 trillion in 2008 as the financial crisis and recession dried up tax revenue and as the government spent more on unemployment benefits and other programs.
In August 2011, the rating agency Standard & Poor’s stripped the U.S. government of its prized AAA bond rating because it feared that America’s dysfunctional political system couldn’t deliver credible plans to reduce the federal government’s debt. S&P decried American “political brinksmanship” and concluded that “the differences between political parties have proven to be extraordinarily difficult to bridge.”
A year and a half later, the two political parties are still as deadlocked as ever.
Despite S&P’s warnings and the political stalemate, investors still want U.S. Treasuries. Given economic turmoil in Europe and uncertainty elsewhere, U.S. government debt and U.S. dollars look like the safest bet around.
That is why the interest rate, or yield, on 10-year Treasury notes has fallen from 2.58 Aug. 5, 2011 to 1.75 percent Wednesday.
(5) Risk to banking sector increasing, says RBI
Tight liquidity, deteriorating asset quality contribute to the decline in stability of the banking system
The Reserve Bank of India (RBI), on Friday, said that the risks to banking sector had been increasing in recent years with a continued deterioration in the stability of the banking sector since 2010. It also said that the aggregate risks remained at an elevated level during 2012.
“An analysis of the components contributing to banking stability show that tight liquidity, deteriorating asset quality and reducing soundness are the major contributors to the decline in stability of the banking system,” the RBI said in its Financial Stability Report (FSR) 2012.
However, it said that a marginal improvement in the indicator during the last two quarters was observed primarily because of better liquidity condition, due to regulatory prescriptions and enhanced profitability ratios, arising out of lower provisioning coverage.
The Banking Stability Map, which reflects the relative changes in the vulnerabilities since the previous FSR, further reveals that the asset quality and soundness indicators have deteriorated vis-à-vis their position in March 2012, while the liquidity indicators show some improvement as at the end of September 2012. The profitability indicators in the current quarter, though better than March 2012, show marginal deterioration as compared to June 2012
Total bank credit grew at 15.9 per cent, while total deposits growth was 14.3 per cent as at end September 2012 (year-on-year). Despite faster credit growth relative to deposit expansion, the credit-deposit (C-D) ratio has declined to 74.4 per cent as at end September 2012 from 76.0 per cent as at end March 2012.
“The incremental C-D ratio has also declined during the half-year since March 2012, indicating the trend that banks have deployed a greater share of incremental deposits in investments and other assets,” said the RBI.
The steepest fall in growth rate of gross advances (year-on-year) as at end-September 2012 from the previous quarter was for the foreign banks; from 17.3 per cent to 6.5 per cent, followed by old private sector banks from 23.1 per cent to 18.6 per cent. There was a moderate fall in the growth rate of advances for public sector banks to 15 per cent, while the new private sector banks had a slight increase in the growth rate of advances at 22.7 per cent.
The asset quality of banks has seen considerable deterioration during the half-year under review. Gross non-performing advances (GNPA) ratio for all banks rose sharply to 3.6 per cent from 2.9 per cent. Net NPA ratio stood at 1.7 per cent as against 1.2 per cent.
The concerns on asset quality are also underscored by the increasing trend in the slippage ratio as well as ratio of slippages to actual recoveries (excluding upgradations).
“Except for foreign banks, these ratios increased for all bank groups since March 2011. However, slippage to recovery ratio for all the bank groups improved marginally during the quarter ended September 2012. With the growth rate in GNPAs continuing to tread well above the credit growth and movements in slippages remaining upward, the profitability of banks may come under pressure in the coming quarters,” the RBI said.
Restructuring of loans, particularly of big ticket loans, under the corporate debt restructuring (CDR) mechanism, has recently come under closer scrutiny due to the steep rise in the number and value of such advances.
Between March 2009 and March 2012, while gross advances grew by less than 20 per cent (compounded annual growth rate), the restructured standard advances grew by over 40 per cent. The proportion of restructured standard advances to gross advances increased from 3.5 per cent in March 2011 to 4.7 per cent in March 2012. This has further increased to 5.9 per cent as at the end of September 2012.
The apex bank further said that the pressure on asset quality in the power sector had worsened since FSR 2011. “Impairments have risen in the preceding year ending September 2012. Instances of restructuring, too, have registered a steep increase in the recent quarters. The large exposure to this sector remains an area of concern for banks.”
(1) India Gate, Raisina Hills closed for public, security beefed up
(2) PM’s assurance on water policy cuts no ice with States
(3) Storm blows through East; 135,000 in dark in Arkansas
(4) Bharti Infratel plunges over 13 % on debut
(5) Raman takes over as whole-time member of SEBI
(6) ColorPlus goes in for a new retail identity
(7) Former England cricket captain Tony Greig dies
(8) Vintage Yuvraj stars in India’s win
(9) Sri Lanka slumps to innings defeat against Australia
(10) Oscar-nominated composer Richard Rodney Bennett dies
5 Stories for Today
(1) Congress playing politics on Telangana, says BJP
(2) Obama ‘modestly optimistic’ after meeting Congress leaders
(3) Mistry to take over reins today
(4) Obama, Congress in last push to avert ‘cliff’
(5) Risk to banking sector increasing, says RBI
(1) Congress playing politics on Telangana, says BJP
While reiterating that it is ready to support formation of a Telangana State if a Bill is introduced in the budget session of Parliament, the Bharatiya Janata Party has hit out at the Congress for “playing politics” on the contentious issue.
BJP spokesman Prakash Javedkar told journalists that the Congress-led UPA government was misguiding Telangana people in the name of meetings, commissions and committees.
Referring to Home Minister Sushilkumar Shinde’s announcement, after an all-party meeting in New Delhi on Friday, that a decision on the Telangana demand would be made within a month, Mr. Javedkar said: “This is the third such all-party meeting. What decision will you take? The then Home Minister, P Chidambaram, had on December 9, 2009 announced that the process of formation of a separate State for Telangana has begun.”
Mr. Javedkar said that during Friday’s meeting, all parties asked the Congress to make clear its view on the issue as the ruling party at the Centre was “doing politics.”
‘Countdown has begun’
The former APCC president and Rajya Sabha MP from Andhra Pradesh, V. Hanumantha Rao, however, welcomed Mr. Shinde’s statement and said only the Congress government could fulfil the people’s long-pending Telangana demand.
Other prominent Telangana protagonists and Congress leaders G. Vivekanand, Ponnam Prabhakar, Manda Jagannath and Sudhakar Goud said the countdown for formation of a new State had begun.
(2) Obama ‘modestly optimistic’ after meeting Congress leaders
U.S. President Barack Obama appeared “modestly optimistic” after meeting top Congressional leaders and urged them take immediate measures to address the looming fiscal cliff before the December 31 midnight deadline, in absence of which the nation faces the prospect of another economic recession.
“I’m modestly optimistic that an agreement can be achieved. Nobody is going to get 100 per cent of what they want, but let’s make sure that middle-class families and the American economy — and, in fact, the world economy — aren’t adversely impacted because people can’t do their jobs,” Mr. Obama told reporters at the White House following his hour-long consultations with the top Congressional leaders on Friday.
“We’re now at the point where, in just four days, every American’s tax rates are scheduled to go up by law.
Every American’s paycheck will get considerably smaller. And that would be the wrong thing to do for our economy, it would be bad for middle-class families, and it would be bad for businesses that depend on family spending.
“Fortunately, Congress can prevent it from happening if they act right now,” he said.
Mr. Obama cut short his Hawaii vacation and returned to Washington on Thursday, leaving the First Lady and two daughters behind, in his last-ditch effort to avoid the nation hitting a fiscal cliff.
But as of Friday, not much visible progress were seen despite his meeting with Congressional leaders and some behind the scene hectic paralysis, which were expected to continue over the weekend.
“I just had a good and constructive discussion here at the White House with Senate and House leadership about how to prevent this tax hike on the middle class, and I’m optimistic we may still be able to reach an agreement that can pass both houses in time,” he said.
The Senate Majority leader, Harry Reid, and the Minority Leader, Mitch McConnell, were working on such an agreement, he noted.
“But if an agreement isn’t reached in time between Senator Reid and Senator McConnell, then I will urge Senator Reid to bring to the floor a basic package for an up-or-down vote — one that protects the middle class from an income tax hike, extends the vital lifeline of unemployment insurance to two million Americans looking for a job, and lays the groundwork for future cooperation on more economic growth and deficit reduction,” Mr. Obama said.
“I believe such a proposal could pass both houses with bipartisan majorities as long as those leaders allow it to actually come to a vote.
“If members of the House or the Senate want to vote no, they can — but we should let everybody vote. That’s the way this is supposed to work. If you can get a majority in the House and you can get a majority in the Senate, then we should be able to pass a bill,” he said.
Mr. Obama said American people are watching all this and their patience is already thin.
“This is deja vu all over again. America wonders why it is that in this town, for some reason, you can’t get stuff done in an organised timetable; why everything always has to wait until the last minute.
“Well, we’re now at the last minute, and the American people are not going to have any patience for a politically self-inflicted wound to our economy. Not right now,” he said in his brief remarks to the press.
Mr. Obama said the economy is growing, but sustaining that trend is going to require elected officials to do their jobs.
“The housing market is recovering, but that could be impacted if folks are seeing smaller paychecks. The unemployment rate is the lowest it’s been since 2008, but already you’re seeing businesses and consumers starting to hold back because of the dysfunction that they see in Washington,” he said.
“Economists, business leaders all think that we’re poised to grow in 2013 -- as long as politics in Washington don’t get in the way of America’s progress,” he added.
(3) Mistry to take over reins today
Bombay House, headquarters of the Tata Group, braced for a change of guard at the top with its chairman of 21 years, Ratan Tata, retiring on his 75th birthday to make way for his appointed successor, Cyrus Mistry.
From Saturday, when 44-year-old Mr. Mistry takes over, Mr. Tata will be Chairman `Emeritus' of the Tata Group.
Even as Mr. Mistry entered Bombay House on Friday morning amid a huge media presence, Mr. Tata was on a visit to Pune, Tata Group sources said.
Low-key
In spite of all the hype surrounding the change in leadershipit was a change devoid of any ceremony, speech or event - typifying Mr Tata's style. He has remained low-key, media-shy and unassuming throughout his illustrious tenure.
Mr. Mistry is the sixth chairman of the 144-year old Tata Group and has worked with the Tata group since 2006. Though not directly related to Mr. Tata, Mr. Mistry's sister is married to Mr. Tata's younger half-brother, Noel Tata, who initially was tipped to take over from Mr. Tata.
Shapoorji Pallonji
Mr. Mistry is the son of Pallonji Mistry, who owns construction firm Shapoorji Pallonji, and is the largest individual shareholder in Tata Group holding company, Tata Sons, with an 18.4 per cent stake.
Born on July 4, 1968, Cyrus Mistry is a civil engineering graduate from Imperial College London and has a Master's degree in Management from the London Business School.
He is credited with growing Shapoorji Pallonji by over seven times since he took over as Managing Director in 1994 to a $ 1.5 billion organization. Under him, it has evolved from a pure construction company to one implements projects in the marine, oil & gas and rail sectors.
Since last year's announcement of the decision by the Tata Sons board to appoint Mr. Mistry as the new chairman, he has accompanied Mr. Ratan Tata on visits to group offices and factories in India and overseas, besides several annual general meetings (AGMs) of the group, this year.
Young management
Mr. Mistry will be ably supported by a relatively young senior management at most group companies, who have recently assumed top positions. These include N.Chandrasekaran, MD & CEO of Tata Consultancy Services, Harish Bhat, MD & CEO, Tata Global Beverages, Karl-Ulrich Kohler, MD, Tata Steel Europe, Karl Slym, MD, Tata Motors, Ralf Speth, CEO, Jaguar Land Rover and R. Mukundan, MD, Tata Chemicals among others. Mr. Mistry will have his work cut out, when he takes over from Saturday, as Mr. Tata's reign will indeed be a hard act to follow.
(4) Obama, Congress in last push to avert ‘cliff’
President Barack Obama and members of Congress prepared for one last try to avert across-the-board tax increases and spending cuts known as the fiscal cliff, as the U.S. Treasury Department warned that it will begin taking action to prevent the government from hitting its debt limit.
Treasury Secretary Timothy Geithner said on Wednesday in a letter to congressional leaders that the department will use accounting measures to save approximately $200 billion. That could keep the government from reaching the debt limit which is embroiled in the fiscal cliff talks for about two months.
The move comes as Mr. Obama and the Republican congressional leadership resume negotiations that hit a stalemate last week over how to avoid the fast approaching fiscal cliff, which some economists warn could cause another recession after it takes effect in the new year. Mr. Obama decided to cut short his Hawaii vacation for an overnight flight expected to get him back to the White House on Thursday. But Congressional officials said on Wednesday they knew of no significant strides toward a compromise over a long Christmas weekend, and no negotiations have been set.
Mr. Obama has sought to include an increase in the borrowing limit in the talks. But House of Representatives Speaker John Boehner and other Republican leaders have demanded concessions in return.
The Senate is due in session Thursday, although the immediate agenda includes other matters. The House has no plans to convene, following last week’s rebellion in which conservatives torpedoed Boehner’s legislation to prevent scheduled tax increases on most, while letting them take effect on million-dollar wage earners.
Mr. Obama insists that no tax cuts be extended for anyone earning over $400,000 per year.
Mr. Geithner said the negotiations over tax and spending policies make it difficult to predict how long he can delay reaching the borrowing limit. The absence of a specific timeframe may be intended to pressure Republicans to allow a debt limit increase in a potential budget deal.
For now, Treasury will take several steps to delay reaching the limit. Mr. Geithner said it will stop selling Treasury securities used by state and local governments to support their own sales of tax-exempt bonds. That will keep the department from accumulating more debt.
And the department will stop investing in government retirement funds.
The two sides may strike a short-term agreement before New Year’s that postpones spending cuts until spring. And even if New Year’s passes with no deal, businesses and consumers would not likely panic as long as some agreement seemed imminent. The $671 billion in tax increases and spending cuts could be retroactively repealed.
Also, the impact of the tax increases would be felt only gradually, with most people receiving slightly less money in each pay check.
“The simple conclusion that going off the cliff necessarily means a recession next year is wrong,” says Lewis Alexander, an economist at Nomura Securities. “It will ultimately depend on how long the policies are in place.”
The borrowing limit is the amount of debt the government can pile up. The government accumulates debt two ways- It borrows money from investors by issuing Treasury bonds, and it borrows from itself, mostly from Social Security revenue.
In 2011, Congress raised the limit to nearly $16.4 trillion from $14.3 trillion. Three decades ago, the national debt was $908 billion. But Washington spent more than it took in, and the debt rose steadily surpassing $1 trillion in 1982, then $5 trillion in 1996. It reached $10 trillion in 2008 as the financial crisis and recession dried up tax revenue and as the government spent more on unemployment benefits and other programs.
In August 2011, the rating agency Standard & Poor’s stripped the U.S. government of its prized AAA bond rating because it feared that America’s dysfunctional political system couldn’t deliver credible plans to reduce the federal government’s debt. S&P decried American “political brinksmanship” and concluded that “the differences between political parties have proven to be extraordinarily difficult to bridge.”
A year and a half later, the two political parties are still as deadlocked as ever.
Despite S&P’s warnings and the political stalemate, investors still want U.S. Treasuries. Given economic turmoil in Europe and uncertainty elsewhere, U.S. government debt and U.S. dollars look like the safest bet around.
That is why the interest rate, or yield, on 10-year Treasury notes has fallen from 2.58 Aug. 5, 2011 to 1.75 percent Wednesday.
(5) Risk to banking sector increasing, says RBI
Tight liquidity, deteriorating asset quality contribute to the decline in stability of the banking system
The Reserve Bank of India (RBI), on Friday, said that the risks to banking sector had been increasing in recent years with a continued deterioration in the stability of the banking sector since 2010. It also said that the aggregate risks remained at an elevated level during 2012.
“An analysis of the components contributing to banking stability show that tight liquidity, deteriorating asset quality and reducing soundness are the major contributors to the decline in stability of the banking system,” the RBI said in its Financial Stability Report (FSR) 2012.
However, it said that a marginal improvement in the indicator during the last two quarters was observed primarily because of better liquidity condition, due to regulatory prescriptions and enhanced profitability ratios, arising out of lower provisioning coverage.
The Banking Stability Map, which reflects the relative changes in the vulnerabilities since the previous FSR, further reveals that the asset quality and soundness indicators have deteriorated vis-à-vis their position in March 2012, while the liquidity indicators show some improvement as at the end of September 2012. The profitability indicators in the current quarter, though better than March 2012, show marginal deterioration as compared to June 2012
Total bank credit grew at 15.9 per cent, while total deposits growth was 14.3 per cent as at end September 2012 (year-on-year). Despite faster credit growth relative to deposit expansion, the credit-deposit (C-D) ratio has declined to 74.4 per cent as at end September 2012 from 76.0 per cent as at end March 2012.
“The incremental C-D ratio has also declined during the half-year since March 2012, indicating the trend that banks have deployed a greater share of incremental deposits in investments and other assets,” said the RBI.
The steepest fall in growth rate of gross advances (year-on-year) as at end-September 2012 from the previous quarter was for the foreign banks; from 17.3 per cent to 6.5 per cent, followed by old private sector banks from 23.1 per cent to 18.6 per cent. There was a moderate fall in the growth rate of advances for public sector banks to 15 per cent, while the new private sector banks had a slight increase in the growth rate of advances at 22.7 per cent.
The asset quality of banks has seen considerable deterioration during the half-year under review. Gross non-performing advances (GNPA) ratio for all banks rose sharply to 3.6 per cent from 2.9 per cent. Net NPA ratio stood at 1.7 per cent as against 1.2 per cent.
The concerns on asset quality are also underscored by the increasing trend in the slippage ratio as well as ratio of slippages to actual recoveries (excluding upgradations).
“Except for foreign banks, these ratios increased for all bank groups since March 2011. However, slippage to recovery ratio for all the bank groups improved marginally during the quarter ended September 2012. With the growth rate in GNPAs continuing to tread well above the credit growth and movements in slippages remaining upward, the profitability of banks may come under pressure in the coming quarters,” the RBI said.
Restructuring of loans, particularly of big ticket loans, under the corporate debt restructuring (CDR) mechanism, has recently come under closer scrutiny due to the steep rise in the number and value of such advances.
Between March 2009 and March 2012, while gross advances grew by less than 20 per cent (compounded annual growth rate), the restructured standard advances grew by over 40 per cent. The proportion of restructured standard advances to gross advances increased from 3.5 per cent in March 2011 to 4.7 per cent in March 2012. This has further increased to 5.9 per cent as at the end of September 2012.
The apex bank further said that the pressure on asset quality in the power sector had worsened since FSR 2011. “Impairments have risen in the preceding year ending September 2012. Instances of restructuring, too, have registered a steep increase in the recent quarters. The large exposure to this sector remains an area of concern for banks.”
