Market buzz:

Beware of  PSBs:

Prime Minister Sri Modi is meeting the top Bankers today to discuss at length the tardy growth performance of banks particularly in the area of lending which is causing a great concern for the Economists. Absence of  flow of credit to corporates and the MSMEs is causing a lot worry to all at the helm of affairs. The only option to invigorate the economic wheels of the country would be to push the stagnating demand consumption through incentives. So PM is expected to drive home this point as the GDP is at stake and the unemployment and per capita are areas of apprehension.

The topics  on agenda include credit products and  efficient bankable models for timely delivery. financial empowerment through technology, prudential practices for stability and sustainability  of the financial sector”

Banking sector plays an important role in accelerating the wheels of the economy towards growth through financing infrastructure, exports, agriculture, local manufacturing including MSME.

One wonders when the banks are flush with funds and the liquidity is not an issue per se, what prevents the Banks in identifying the needy and support them and motivate them to lend prudentially. Another area of concern is what the Chairman of HDFC has stated that the moratorium announced by the Govet. and RBI if extended would do great damage to the credit settlement culture amongst the borrowers and the “wilful defaulters’ list” would go unabated which would in turn impact heavily the bottom line of Banks. PSBs particularly instead of taking credit delivery decisions, tend to avoid it and instead park their surplus with RBI under reserves and Reverse Repo. So all the initiatives of the Govt and RBI are nullified with no results in offing.

The  growing NPA portfolios of PSBs is a potential threat for their very existence and the Union Govt. will have to pump in chunk of their revenue towards buffering their capital base as their net worth is dwindling fast due to Covid ‘ 19 impact and other reasons. So the future of PSBs is under challenge and hence investors will do well to wait and watch this sector. Instead other opportunities like investment in Pharma, Agri. related Industries, Fertilizers, I.T etc., could be thought of.

Domestic stock markets started Wednesday’s session on a choppy note amid cautious gains in Asian equities, ahead of a policy statement by the Federal Reserve in which the US central bank is expected to strike a dovish stance. NSE and BSE witnessed a correction from yesterday’s closing levels.

Analysts awaited corporate earnings for near-term cues. Dr Reddy’s Laboratories, IndiGo and Maruti Suzuki are slated to report their financial results for the April-June period later in the day, and Reliance Industries on Thursday.

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