Money Morning…


IDBI to sell part or entire stake in Care Ratings – Positive for IDBI Bank from short term perspective
Public sector IDBI Bank Ltd will sell a part or all of its 16.62% stake in local credit rating agency Credit Analysis and Research Ltd (Care) after the bank’s board approved the share sale in a meeting on Monday. The board at its meeting held on 29 December 2014 has permitted the sale of IDBI Bank’s part or whole shareholding of 4,818,292 equity shares (4.82 million) in Credit Analysis and Research in one or more lots subject to compliance with all applicable laws, regulations and guidelines.

IDBI is the largest shareholder in the ratings company and its stake in Care is valued at ~Rs.6.8 bn currently. Besides, the bank is also looking to sell its 5% stake in NSE which may fetch it ~Rs 10 bn. Positive for IDBI Bank from short term perspective as stake sales will support profitability and capital adequacy to certain extent. However, we recommend investors to avoid IDBI Bank from long term perspective as it is a structurally weak bank with poor asset quality and low return ratios.

Bad loans may come down to 4% by March 2016: RBI
Gross non-performing assets (GNPAs) of banking system is likely to drop to 4% by March 2016 with expected improvement in macroeconomic indicators going forward, the Reserve Bank said today. “The macro stress tests for credit risk suggest that under the baseline scenario, which assumes improvement in the overall macroeconomic scenario during the next financial year, the GNPA ratio of all SCBs may decline to 4 per cent by March 2016 from 4.5% as at end September 2014,”.

RBI pitches for structural reforms; sees 6% inflation in 2015:
Pitching for structural reforms to reinforce investor confidence, RBI today said falling inflation and political stability have helped check the macroeconomic vulnerabilities, while retail inflation is expected to stabilise near 6% level in 2015. “On the domestic front, macroeconomic vulnerabilities have abated significantly in recent months on the back of improvement in growth outlook, fall in inflation, recovery in external sector and political stability.

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