2019-08-11_Business_Today

THE BUZZ

MODEL TENANCY ACT

NBFCs

GET A

LIFELINE

THE `29 lakh crore troubled NBFC sector has got a lifeline

from the government by way of generating `1 lakh crore of

liquidity through sale of pooled assets to state-owned banks.

The guarantee cover of first loss up to 10 per cent would

encourage banks to buy the assets and the RBI is working

on a framework or a set of conditions for this. Clearly, there

is a need for due diligence of the pooled assets and also

the NBFCs. The financially sound NBFCs – track record of

profitability, low level of NPAs and leverage, etc – would be

able to participate. But there is the risk of the asset quality

risk getting transferred to banks.

Banks would also have to devise their buying strategy

based on the kind of assets they should be buying as

government guarantee comes only for the first six months.

The big question is whether the `1 lakh crore in liquidity

achieved through sale of pooled assets will be enough for

the battered sector. Moreover, troubled NBFCs or the

ones that need money desperately have been kept out

because of financially sound criterion.-Anand Adhikari

A Long Haul Ahead

THE UNION BUDGET has pro-

posed a Model Tenancy Act to give

a fillip to rental housing in India,

where over 11 million houses were

lying vacant as per the 2011 Census.

The draft rent rules include cap-

ping the security deposit at just two

months’ rent (against the norm of

10 months in most Tier 1 cities),

heavy penalties for failure to vacate,

and a notice of three months before

the house owner revises the rent.

While the measures are aimed at

encouraging renting over owner-

ship to utilise vacant houses, the

proposed Act may meet with limited

success as most such houses are in

far flung areas where infrastructure

is not well developed. Moreover,

land is a state subject. So, if states

decide to drastically modify propos-

als, the Act may be rendered ineffec-

tive. As things stand, only stringent

measures on fast-tracking dispute

resolution between tenants and

owners can really promote rental

housing.

-Rashmi Pratap

WITH AN over 25 per cent share, pe-
troleum products and gems & jewel-
lery exports have always impacted
the performance of India’s merchan-
dise exports ($330 billion in 2018/19).
That is why when exports in these
two categories slid 32.85 per cent
and 10.67 per cent, respectively, in
June 2019 (compared to June 2018),
India’s merchandise exports shrunk
9.71 per cent to $25.01 billion from
$27 billion in the corresponding pe-
riod of the previous year. Take these
out, and the decline was statistically
less severe, at 4.86 per cent. That is
no solace, rather it only hides the big-
ger problem, as petroleum and gems
& jewellery exports are entirely de-
pendent on imported raw materials
and their fortunes in value terms are
merely a factor of price volatility in
global raw material prices.
The fact that 19 out of 30 major
product groups, excluding these two
sectors, showed a decline in export
growth last month is what is worri-
some. And this includes key labour
intensive sectors such as textiles and
leather. A clear policy to minimise the
impact of sluggish global demand
and rising trade war needs to be in
place on a war footing. –Joe C. Mathew

POOLED ASSETS SALE

FALLING EXPORTS

TIME FOR A

POLICY RETHINK

12 I BUSINESS TODAY I August 11 I 2019