Personal Loan Rates Surge as RBI Raises Risk Weightage, Setty Named Next SBI Chairman, and More Financial News and More.

Personal Loan Rates Surge as RBI Raises Risk Weightage

Following the RBI’s November 2023 decision to raise the risk weightage on personal loans, several private banks, including ICICI, Kotak Mahindra, HDFC, and Axis, have increased their interest rates by 30-50 basis points. This move aims to curb excessive growth in unsecured retail loans. Consequently, retail loan growth dropped to 17.8% in May 2024 from 19.1% the previous year. The RBI’s action reflects growing caution in the lending landscape.

Understanding Basis Points (bps)

Basis Points (bps) are a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point equals 0.01%. For example, an interest rate increase from 10.50% to 10.80% is a rise of 30 basis points. This precise measure helps in clear communication of changes in interest rates, bond yields, and other financial metrics.

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Source: Live mint

CS Setty to Succeed as Next SBI Chairman

The Financial Services Institutions Bureau (FSIB) has recommended Challa Sreenivasulu Setty as the next Chairman of the State Bank of India (SBI). Setty, currently the Managing Director of Global Markets & Technology, will succeed Dinesh Kumar Khara in August 2024. Setty, who has served as MD since January 2020, was chosen over Ashwini Kumar Tewari and Vinay M Tonse. SBI, India’s largest bank, reported a record net profit of ₹20,698 crore in Q4 FY24.

Understanding the Role of SBI Chairman

SBI Chairman is the top executive position at the State Bank of India, responsible for overseeing the bank’s operations, strategic direction, and overall performance. The chairman leads the executive team and ensures compliance with regulatory standards. This role is crucial in steering the bank towards achieving its financial and strategic goals.

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Source: The Hindu Business Line

Cashless Payments Lead to Increased Spending on Luxury Goods

A study by the University of Melbourne and the University of Adelaide reveals that cashless payments are causing consumers to spend more, particularly on luxury items. Analyzing spending habits across 17 countries, the research found that the absence of physical money makes budgeting harder. While donations and tipping remain unchanged, luxury spending as a status symbol has surged. Over time, the influence of cashless payments on overall spending is diminishing.

Why Cashless Payments Increase Spending

Cashless Payments make transactions easier and faster, reducing the psychological impact of spending money. Without the tangible act of handing over cash, people often underestimate their expenditures. This can lead to higher spending, particularly on non-essential items like luxury goods. As a result, consumers may find it harder to control their budget compared to when they use cash.

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Source: Live mint

New EPS Rules to Benefit 23 Lakh Employees

The Indian government has amended the Employees Pension Scheme (EPS) of 1995, allowing withdrawal benefits for employees with less than six months of service. This change is expected to benefit over 7 lakh EPS members annually. The modification to Table D ensures that service for every month is considered, with withdrawal benefits proportional to service time and wages. Previously, benefits required a minimum of six months of contributory service.

Understanding the Employees Pension Scheme (EPS)

Employees Pension Scheme (EPS), introduced in 1995, provides pension benefits to employees in the organized sector. Both employer and employee contribute to the fund managed by the Employee Provident Fund Organisation (EPFO). Recent amendments allow withdrawal benefits for service periods less than six months, making it more inclusive. This scheme ensures financial security for employees post-retirement.

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Source: Live Mint

MoSPI Establishes Advisory Panel to Revise GDP Base Year

The Ministry of Statistics and Programme Implementation (MoSPI) has formed a 26-member committee to revise the base year for GDP calculations. Chaired by Biswanath Goldar, the committee will align GDP with indices like WPI, CPI, and IIP, and will serve for five years. The committee’s terms include advising on new data sources, seasonal adjustments, and improving National Accounts estimates. Representatives from key institutions like RBI and Niti Aayog are included.

Base Year in National Accounts

The base year is a benchmark year used for comparison in economic statistics like GDP, WPI, CPI, and IIP. It reflects the economy’s structure at a certain time, allowing for accurate growth measurement. Updating the base year ensures that data remains relevant, accounting for economic changes over time.

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Source: Live mint

Heineken’s Strategy: Sparking Global Connections through Sports Sponsorships

Jacqueline Van Faassen, Premium Brands Director at Heineken India, emphasizes Heineken’s focus on human connections and memorable experiences. Sponsoring major sports events like the UEFA Champions League and F1, Heineken enhances its global image and consumer engagement. The brand’s campaigns, such as “Cheers to All Real Hardcore Fans,” highlight inclusivity and diversity in football fandom, offering unique experiences and deepening its digital and social media presence.

Heineken’s Sponsorship Strategy

Heineken’s sponsorship strategy involves partnering with premier sporting events to elevate brand experience. By aligning with global events like UEFA and F1, Heineken fosters human connections and creates unique, immersive experiences for fans, enhancing brand loyalty and presence worldwide.

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Source: Financial Express

Personal Loan Rates Rise by 30-50 bps After RBI’s Risk Weightage Increase

Following the RBI’s decision in November 2023 to increase the risk weightage of personal loans from 100% to 125%, several banks have raised their interest rates by 30-50 basis points. This move aims to curb excessive growth in unsecured retail loans. Consequently, retail loan growth fell to 17.8% in May 2024 from 19.1% a year earlier. Banks like ICICI, Kotak Mahindra, HDFC, and Axis have adjusted their rates accordingly.

Risk Weightage in Banking

Risk weightage refers to the percentage of a loan’s value that banks must hold as capital. Increasing risk weightage makes loans riskier, requiring banks to hold more capital and thus discouraging excessive lending. This measure aims to ensure financial stability and reduce default risks.

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Source: Live mint

Center for Investigative Reporting Sues Microsoft and OpenAI for Copyright Infringement

The Center for Investigative Reporting (CIR) has filed a lawsuit against Microsoft and OpenAI, accusing them of using copyrighted journalistic content without permission to train AI models like ChatGPT. CIR’s CEO, Monika Bauerlein, criticized this practice as a violation of copyright and unfair to journalists. This lawsuit joins similar actions by The New York Times and other media outlets, contrasting with some organizations that have signed licensing deals with OpenAI.

Copyright Infringement in AI Training

Copyright infringement involves using protected material without permission. In AI training, scraping content without authorization violates copyright laws, potentially harming content creators’ revenue and partnerships.

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Source: Business Today

NTPC to Raise ₹12,000 Crore via Bonds and NCDs for Project Expansion

India’s largest power producer, NTPC, will raise up to ₹12,000 crore through bonds or non-convertible debentures (NCDs) for ongoing and new projects. The funds, approved in a recent board meeting, will be raised via private placement in domestic markets. NTPC, operating 50 power stations, is focusing on renewable energy and Flue Gas Desulphurisation projects. Shares of NTPC rose 0.46% to ₹378.35 post-announcement.

Non-convertible Debentures (NCDs)

Non-convertible debentures (NCDs) are fixed-income instruments issued by companies to raise long-term capital. Unlike convertible debentures, NCDs cannot be converted into equity shares of the issuing company. They offer higher interest rates compared to convertible debentures, making them attractive to investors seeking stable returns. NCDs can be secured or unsecured and are traded in secondary markets, providing liquidity to investors.

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Source: Live Mint

Ola Electric Advances in Solid-State Battery Development

Ola Electric, led by founder Bhavish Aggarwal, is advancing in solid-state battery development, aiming to power its scooters with these cells by next year. The new batteries promise improved safety, longevity, and faster charging compared to conventional lithium-ion batteries. Despite challenges in raw material availability and high costs, Ola’s gigafactory in Tamil Nadu will spearhead commercial production. The firm has already started manufacturing efficient 4680 battery cells for testing.

Solid-State Batteries

Solid-state batteries use solid electrolytes instead of the liquid or gel-like electrolytes found in conventional lithium-ion batteries. They offer significant advantages, including higher energy density, longer life spans, and enhanced safety due to reduced flammability. However, their mass adoption faces challenges such as complex manufacturing processes, high costs, and raw material constraints.

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Source: Live Mint

Budget 2024: Key Focus on Defence, Railways, Infrastructure, and Renewable Energy

Analysts predict Budget 2024 will prioritize defence, railways, infrastructure, and renewable energy. Ravi Singh of Religare Broking highlights infrastructure investments aimed at sustainability and modernization, while energy policies will focus on renewables to meet global goals. The budget is expected to positively impact sectors like affordable housing and capital expenditure, though IT and Pharma might see fewer benefits. Market anticipation is high as stakeholders await the budget’s influence on economic growth.

Capital Expenditure (Capex)

Capital expenditure (Capex) refers to funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. It’s essential for a company’s long-term investments to improve operational efficiency, expand capacity, or modernize technology. High Capex typically indicates a company’s growth strategy and its commitment to increasing production capabilities and market reach.

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Source: Live mint

India’s Exports Expected to Surpass $800 Billion in FY25

Commerce Minister Piyush Goyal projects India’s goods and services exports to exceed $800 billion in FY25, up 3% from FY24’s $776.68 billion. Despite global challenges and geopolitical tensions, Goyal remains optimistic about export growth. The gems and jewellery sector may see flat growth due to geopolitical issues and upcoming U.S. elections. Goyal also anticipates progress on the India-UK FTA, regardless of election outcomes.

Free Trade Agreement (FTA)

A Free Trade Agreement (FTA) is a pact between two or more nations to reduce or eliminate barriers to trade, such as tariffs and import quotas, to facilitate easier exchange of goods and services. FTAs aim to foster economic growth by opening markets and promoting competitive practices. They can cover a wide range of economic activities including goods, services, and intellectual property.

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Source: Business Standard