Teji Mandi: Three things investors should know on February 16, 2021
Teji Mandi

Renewable sector seeks fresh investment :

If all goes well, India could see investments in the renewable sector rising to $500 billion by 2030. It is crucial if the country wants to achieve its target of installing 450 gigawatts (GW) of capacity.

A report by the Institute for Energy Economics and Financial Analysis (IEEFA) highlighted that a huge global capital pool is mobilizing to invest in renewable energy and grid projects in India. There are notable tailwinds that could make the decision easy for investors. It is likely to be helped by record-low solar power tariffs and lower cost of solar modules.

The report further elaborates the investment requirements in detail. As per the report, India would require an investment of USD 500 bn to create the 450 gigawatts (GW) of renewable capacity.

Out of this, $300 billion would be required for wind and solar infrastructure. Further $50 billion could be invested in gas-peakers, hydro, and batteries. And, $150 billion on expanding and modernizing transmission and distribution.

Credit growth stays muted :

As per the RBI data, bank credit grew by 5.93% to Rs 107.05 lakh crore during the fortnight ended January 29. In the previous fortnight ended January 15, 2021, growth in bank credit was 6.36%.

In December 2020, non-food credit growth of banks stood at 5.9% vs 7% in the same month of the previous year. Loans to industry contracted by 1.2% as compared to 1.6%. Personal loans also decelerated in December 2020 to 9.5% vs 15.9% in December 2019. Only agriculture and allied activities show growth in bank credit at 9.4% from 5.3% a year ago.

The RBI has eased its monetary policy considerably over the last 1.5 years. It includes measures such as reducing repo rates, ease in cash reserve requirements, and access to on-tap TLTRO funds.

Despite these measures, it is quite disappointing to see that credit offtake has yet not picked up. Credit growth is crucial for sustainable economic recovery. And, these muted numbers will put pressure on RBI to adopt extra policy initiatives.

PSB privatization :

The finance minister, in her budget speech, had expressed the desire of privatizing at least two public banks during FY22. In line with that, four public sector banks are under consideration in the first round. Though an official confirmation is awaited, the market believes that Bank of Maharashtra, Bank of India, Indian Overseas Bank, and Central Bank of India could be in line for the same.

Public sector banks are facing a heavy load of non-performing assets. And, privatization is seen as a major attempt to revamp them.

Privatization will be an important step to make PSBs free from political interference. It will help in bringing competent management. And will be an overall positive move for the entire banking industry.

Considering the political risk of this move, the government has opted for lower hanging fruits first. As we see, the government has avoided tinkering with larger public banks. All four banks under consideration are from the small-mid category.

There is no clarification on what the government intends to do with SBI. However, it is largely believed that the government will continue to hold its majority stake in SBI considering its strategic importance.

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