RBI: RECOVERY GATHERING PACE, MORE ROOM LIKELY FOR FISCAL SUPPORT

MUMBAI: India’s economic recovery is strengthening and policymakers may soon have more room for steps to support the revival, an article published in the Reserve Bank of India’s January bulletin said, citing the improvement in high-frequency data.

“Recent shifts in the macroeconomic landscape have brightened the outlook, with GDP [gross domestic product] in striking distance of attaining positive territory and inflation easing closer to the target. If these movements sustain, policy space could open up to further support the recovery,” it said.

The central bank cut policy rates last year to support the recovery ,but has left rates unchanged in the recent months due to rising inflation.

The article said the number of e-way bills issued in December 2020 was the highest ever, “suggesting that the recovery is no longer aloft on the fleeting tailwinds of festival spending but is rising Phoenix-like on the wings of an intrinsic momentum”.

The Indian economy shrank 23.9% in the first quarter and 7.5% in the second quarter on account of the Covid-19 pandemic. The RBI expects the economy to contract by 7.5% in the current fiscal to March.

An early revival in investments will be critical to secure a durable turnaround, it said.

MUMBAI: The Securities and Exchange Board of India (Sebi) has imposed a fine of ₹1 crore on HDFC Bank for invoking securities pledged by BRH Wealth Kreators in violation of the regulator’s interim orders.

Sebi in an order said that the bank had extended loan facility of ₹87.75 crore against shares to BRH and BRH Commodities. However, it invoked securities pledged to the extent of ₹158.68 crore without giving any notice to the clients.

The invocation of pledged client securities was not in conformity with the directions contained in the interim order issued on October 7, 2019, Sebi said. Sebi has asked HDFC Bank to deposit an equivalent amount of ₹158.68 crore along with interest from October 14, 2019 till date at the rate of 7% per annum, in a separate interest bearing escrow account, till the settlement of clients’ securities is reconciled. The interim order against BRH banned the broker from buying or selling any shares and also the bank from selling off the pledged shares. Following this order, HDFC bank had recalled credit facilities from the borrowers as it had been called upon to honour the bank guarantees it had issued for exchange margin requirements. The Sebi order said that HDFC Bank did not conduct adequate due diligence at the time of creation of pledge and that the bank also invoked the pledge of securities without giving the requisite notice of five days to the clients of BRH, thus depriving them of a fair opportunity to claim back securities.

However, the bank in its reply to Sebi last year maintained that it is entitled in law to appropriate proceeds from sale of securities for any outstanding of the borrowers concerned, whether the securities were provided for that specific facility or not.

“The bank humbly submits that its actions are in accordance with law … and thus, it would not be correct to state that the same are not in conformity with (the Interim order), whether for the reasons cited in your letter or otherwise. The bank’s act of invoking the securities provided under the overdraft/loan against securities facility for amounts higher than the outstanding under the said facility is in accordance with its right of general lien as afforded under Section 171 of the Contract Act, 1872, which right is expressly reserved in the relevant loan documents executed with BRH and BRH Commodities, respectively, as stated in our letter dated November 7, 2019,” the bank had said in a February 14 letter to Sebi.