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Canara Bank Q4 net up 65% to Rs 1,666 cr on better net interest margins

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Lender to raise up to Rs 9,000 cr in capital via AT1, tier-II bonds

Public sector lender  posted a 64.9 per cent year-on-year rise in net profit to Rs 1,666.2 crore in the fourth quarter ended March 2022 (Q4FY22), on improvement in net interest margins.

It had posted a net profit of Rs 1,010.4 crore in Q4FY21.

For FY22, the net profit rose by per cent to Rs 5,678.4 crore from Rs 2,557.5 crore in FY21.

Recommend Dividend of Rs 6.50 per equity share (of face value of Rs. 10) for 2021-22 subject to shareholders nod.

The Bengaluru-based lender’s net interest income (NII) expanded by 24.84 per cent increased to Rs 7,005 crore in Q4FY22 from Rs 5,622 crore in Q4FY21. The net interest margin (NIM) improved to 2.93 per cent for Q4FY22 as against 2.51 per cent for Q4FY21.

Non-interest income declined by 5.12 per cent Year on Year (YoY) to Rs 4,462 crore in Q4FY22.

Advances increased by 9.77 per cent YoY to Rs 7.4 trillion as at end March 2022. The retail lending Portfolio increased 9.5 per cent YoY to Rs 1.26 trillion as at March 2022. The public sector bank has estimated 8 per cent growth in advances in FY23, said L V Prabhakar, it managing director and chief executive said.

The deposits rose by 7.47 per cent to Rs 10.86 trillion in March 2022. The share of low cost deposits – Current Account and Savings Account (CASA) – stood at 35.88. per cent as at March 31, 2022, up from 34.33 per cent in March 2021. It has set target of 38 per cent for FY23.

The asset quality profile improved with Gross Non-Performing Assets (NPAs) declining to 7.51 per cent as at March 31, 2022 from 8.93 per cent in March 202. Its Net NPA stood at 2.65 per cent as at end of March 2022 down from 3 82 per cent a year ago. The lender aims to reduce GNPAs to six per cent and net NPAs to two per cent by March 2023.

The provision coverage ratio for bad loans improved to 84.17 per cent in March 2022 from 79.69 per cent a year ago. It has indicated to improve it to 85 per cent by March 2023.

The capital adequacy ratio of the Bank, as per Basel III, was 14.9 per cent with Tier I ratio was 11.91 per cent as at March 31, 2022.

Bank aims to up to Rs 9,000 crore in Capital through additional tier I bonds and tier II bonds in 2022-23. Bank is not looking raising equity capital for now, Prabhakar said. It had raised Rs 9,000 crore in FY22 through equity, AT1 and tier II bonds.

Also Read:- Power shortage not as high as projected, import-base plants will be made functional: Pralhad Joshi

Power shortage not as high as projected, import-base plants will be made functional: Pralhad Joshi

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The power ministry on Thursday that the government has ordered all imported coal power plants ordered to operate at full capacity as power demand has surged almost 20 percent in energy terms.Power shortage not as high as projected, import-base plants will be made  functional: Pralhad Joshi

The government on Friday that the country has enough domestic coal supply and that the power shortage is not as high as it is being projected, CNBC-TV18 reported.

''We have 71 mt domestic coal with us and 21 mt coal is at the thermal power plants right now,'' the minister said. He added that the import-based plants are affected due to hiked coal prices and such plants were not operational.

Due to this, the minister said that the government plans to revive production in abandoned coal mines and is preparing to address coal supply shortages in the rainy season.

Also Read: India looking to boost coal output by up to 100 MT, reopen closed mines

Further, coal secretary A K Jain also said that India is looking to boost its coal output by 75-100 million tonnes in the next two-to-three years by restarting the closed mines, according to Reuters.

Meanwhile, the power ministry said in a statement on Thursday that the government has ordered all imported coal power plants ordered to operate at full capacity as power demand has surged almost 20 percent in energy terms.

In its statement, the power ministry explained that the demand for power has gone up by almost 20 percent in energy terms. The supply of domestic coal has increased but the increase in the supply is not sufficient to meet the increased demand for power, which is leading to load shedding in different areas.

Because of the mismatch between the daily consumption of coal for power generation and the daily receipt of coal at the power plant, the stocks of coal at the power plant have been declining at a worrisome rate, according to the power ministry.

The plants are have been told to first supply power to power purchase agreement (PPA) holders and sell the surplus to power exchanges. If generators or group companies own coal mines abroad, mining profit is to be set off to extent of shareholding, according to a CNBC-TV18 report.

PPA holders shall pay generating co on weekly basis, either at benchmark rate or mutually negotiated rate. If discoms or states are unable to buy power, either way, it will be sold in power exchanges.

State-run Coal India - the world’s largest coal miner, which produces 80 percent of India’s coal, plans to increase its annual output to one billion tonnes by 2024, from 622.6 million tonnes currently.

India, the world’s second-largest producer, importer, and consumer of coal, produced 777.2 million tonnes of the fuel during the year ended March 2022 and burnt over a billion tonnes.

India Covid death toll highest in world, says WHO as govt rejects report

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India's official Covid death toll is 481,486 between January 1, 2020, and December 31, 2021

Students undergo thermal screening as schools reopen after a gap of two years in view of the Coronavirus pandemic, at Spring Buds Educational Institute Ompora, in Budgam. Photo: ANI

The World Health Organisation (WHO) has put the number of Covid-19 deaths in India at around 4.7 million, which the highest in the world. The deaths, according to the report released on Thursday, could be directly due to the disease or indirectly caused by the pandemic’s impact on health systems and society. India’s Covid toll is approximately a third of the global death number, the report said.

The WHO estimate of Covid deaths in India is 10-times the official count, and the government has strongly rejected the figure and the methodology. In an official statement, the Union Health Ministry said that India had been consistently objecting to the methodology adopted by WHO to project excess mortality estimates based on mathematical models. “Despite India’s objection to the process, methodology and outcome of this modelling exercise, WHO has released the excess mortality estimates without adequately addressing India’s concerns,” the Health Ministry said.

India’s official Covid  is 481,486

between January 1, 2020, and December 31, 2021.

The WHO report pegs Covid deaths in India at precisely 47,40,894 during 2020 and 2021. The coinciding pandemic death figure (described as excess mortality) globally is approximately 14.9 million—ranging between 13.3 million and 16.6 million.

Excess mortality is calculated as the difference between the number of deaths that have occurred and the number that would be expected in the absence of the pandemic based on data from earlier years.

The WHO has also released the methodology followed by it to arrive at these numbers. It said: “We consider the most complex sub-national scenario in which the number of regions with monthly data varies by month, using India as an example. For India, we use a variety of sources for the registered number of deaths at the state and union territory level. The information was either reported directly by the states through official reports and automatic vital registration, or by journalists who obtained death registration information through Right To Information requests.”

India had released the Civil Registration System (CRS) report on births and deaths by the Registrar General of India (RGI) earlier this week.

The Health Ministry said that India had informed WHO that in view of the ’authentic data’ published through the CRS by RGI, mathematical models should not be used for projecting excess mortality numbers for the country.

India said that registration of births and deaths in the country is extremely ‘robust’ and is governed by decades-old statutory legal framework - Births & Deaths Registration Act, 1969.

“The CRS data of 2020 published by RGI on May 3, 2022 clearly reveals that the narrative sought to be created based on various modelling estimates of India’s Covid19 deaths being many times the reported figure is totally removed from reality,” the government said, adding that this data was shared with the WHO for preparation of excess mortality report.

“Despite communicating this data to WHO for supporting their publication, WHO for reasons best known to them conveniently chose to ignore the available data submitted by India and published the excess mortality estimates for which the methodology, source of data, and the outcomes has been consistently questioned by India,” the Union Health Ministry stated.

WHO director general Tedros Adhanom Ghebreyesus said, “These sobering data not only point to the impact of the pandemic but also to the need for all countries to invest in more resilient health systems that can sustain essential health services during crises, including stronger health information systems.” He added that WHO is committed to working with all countries to strengthen their health information systems to generate better data for better decisions and better outcomes.

WHO said that most of the excess deaths (84 per cent) are concentrated in South-East Asia, Europe, and the Americas. Some 68 per cent of excess deaths are concentrated in just 10 countries globally. Middle-income countries account for 81 per cent of the 14.9 million excess deaths (53 per cent in lower-middle-income countries and 28 per cent in upper-middle-income countries) over the 24-month period, with high-income and low-income countries accounting for 15 per cent and 4 per cent, respectively. It also said that the global  was higher for men (57 per cent) than females (47 per cent) and higher among older adults.

“The absolute count of the excess deaths is affected by the population size. The number of excess deaths per 100,000 gives a more objective picture of the pandemic than reported Covid-19 mortality data,” WHO noted.

The Indian government said that it had objected to WHO classifying India into a Tier II country. Tier classification is a simple grouping of countries based on mortality data availability.

According to WHO Countries are classified as Tier 1 if complete and nationally representative monthly all-cause mortality data for the specified period have been made available to WHO. Countries categorized as Tier 2 include countries for which WHO does not have access to the complete data and thus requires the use of alternative data sources.

The health ministry said that despite its contention that it does not 'deserve' to be placed in Tier II countries category, WHO till date has not responded to India's contention.

Also, India said it has consistently questioned WHO's own admission that data in respect of seventeen Indian states was obtained from some websites and media reports and was used in their mathematical model. "This reflects a statistically unsound and scientifically questionable methodology of data collection for making excess mortality projections in case of India," MoHFW said.

Further, the test positivity rate (a key variable used by WHO) for Covid19 in India was never uniform throughout the country at any point of time, the Health Ministry claimed.

"Such a modeling approach fails to take into account the variability in COVID positivity rate both in terms of space and time within the country. The model also fails to take into account the rate of testing and impact of different diagnostic methods (RAT/RT-PCR) used in different geographies," India said on Thursday.

India reasoned that owing to its large area, diversity and a population of 1.3 bn, it has consistently objected to the use of 'one size fits all' approach and model, which may be applicable to smaller countries, but cannot be applicable to India.

"The model assumed an inverse relationship between temperature and mortality, which was never substantiated by WHO despite India’s repeated requests...... In spite of these differences, India continued to collaborate and coordinate with WHO on this exercise and multiple formal communications (10 times from November 2021 to May 2022) as well as numerous virtual interactions were held with WHO," the health ministry statement read.

Fed's Mistakes on Inflation Came From Sticking With an Old Story

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The sudden shift in views on inflation are a reminder of the danger of narratives that encompass too much and tie down policy makers.Fed's Mistakes on Inflation Came From Sticking With an Old Story

In the space of a few short months, the prevailing narrative on U.S. inflation has veered from “It’s transitory” to “We have a problem.” This week, the Federal Reserve took another step toward acknowledging this, raising its policy rate by 50 basis points and leading investors to expect a faster pace of tightening from now on. That’s fine, you might say, the facts have changed – and to paraphrase John Maynard Keynes, when the facts change, you change your story. What’s interesting is that the story has changed more abruptly than the facts.

Economic policy seems especially susceptible to a certain dynamic. Ideas get fixed too firmly and for too long, so when they’re forced to change, the shift is violent. Narratives drive decisions, and stories shape events, rather than the other way round. The new account of inflation is an arresting example.

Yale’s Robert Shiller discussed the phenomenon in his 2019 book “Narrative Economics.” Writing before Covid-19, he proposed an analogy with epidemics. Frequently recurring infections include real-estate booms and busts, stock market bubbles and crashes, “boycotts, profiteers and evil business” and “the wage-price spiral and evil unions.” These and other tales can go viral, guiding both behavior and policy, directly or indirectly – validating themselves perhaps for years until they give way all at once to a new story.

Such epidemics certainly aren’t confined to finance and economics, as anybody glancing at Twitter can see, but they’re especially powerful in the economic domain because expectations are so central to economic decision-making.

The pivot in thinking on inflation wasn’t a timely course correction made in light of new data: In recent years, more has been at issue in debates over monetary policy than the latest figures on prices, output and jobs. Systems of claims amounting to different views of the world have been in contention. One came to dominate, and for longer than you’d expect, it recruited every new particle of data to its side. Without giving way, it was gradually undermined by news that didn’t quite fit. All of a sudden, it no longer worked, and a new narrative took its place.

The old story led to mistakes. The new one might well do the same.

In March, inflation surged to 8.5%, the highest since 1981. The cause was and remains an excess of demand over supply. The question is how much of this imbalance is due to higher demand, driven partly by fiscal and monetary policy, and how much is due to interrupted supply, caused first by the pandemic shutdowns and then, since February, by sanctions on Russia. Without knowing the answer, we can’t easily say how policy should respond.

The old story emphasized an edict from standard macroeconomics: If temporary supply interruptions are the main thing, you shouldn’t brake the economy by restricting demand, which will cut output further and raise unemployment. It’s better to put up with the transitory rise in prices induced by a supply shock and wait for the blockages to clear.

Long before Russia attacked Ukraine and the U.S. and its allies responded by choking its energy exports, inflation had moved higher than most analysts had expected. Prices were rising in sectors not directly impacted by the shutdowns. Attention was turning to signs of tightness in the labor market, and wages were edging higher as well. But none of this plainly refuted the old story: It’s a supply-side issue, so the inflation will be transitory. Russia’s war added a new supply shock of unknown scope and duration – but if the old story was right in January, it was still right after Putin launched his invasion.

On March 16, the Federal Reserve raised the policy rate by 25 basis points and projected more increases to come – enough, according to its closely followed “dot plot,” to leave the policy rate at a little under 2% by the end of the year and a little over the supposedly neutral rate of 2.5% in 2023. This very gentle liftoff seemed to accept the old story: It promised to leave substantial stimulus in place all through this year. But then the Fed’s officials turned more hawkish, guiding investors to expect increases of 50 basis points next time and at subsequent meetings – implying a substantially higher policy rate by December. This week the Fed duly delivered the first of these bigger increases.

So analysts are asking new questions. Just how high will rates need to go? If inflation persists above 2%, won’t the “neutral” rate of interest be higher than 2.5%? How much higher? Can inflation be controlled without a recession?

The Fed was reluctant to raise rates because the prevailing view dismissed fear of inflation as an anachronism. To begin with, this was quite plausible. For more than a decade after the Great Recession, the abiding challenge for monetary policy had been inflation that was persistently too low. With the short-term interest rate at zero, conventional monetary policy couldn’t stimulate demand any further. Unconventional measures – large-scale central bank purchases of debt (so-called quantitative easing) – helped lower long-term interest rates, but only by raising asset prices to worryingly high levels, and still not enough to get inflation back on target.

Timely fiscal stimulus would have helped. So might bolder use of unconventional measures – such as direct monetary financing of government spending (“helicopter money”). Instead, the Fed adjusted its monetary policy framework to address the matter more subtly. It said it would keep interest rates at zero for longer than would previously have been deemed wise, up to and beyond the point at which inflation was back at 2%, even seeking a temporary overshoot rather than treating the target as a ceiling. This promise to keep interest rates “lower for longer” and embrace a spell of above-target inflation would shift expectations and provide, in effect, additional stimulus.

Complementing this tacit relaxation of the inflation target, the Fed tweaked the other part of its so-called dual mandate, emphasizing “maximum employment” as opposed to “full employment.” By full employment, economists usually mean the highest rate of employment consistent with stable inflation. Restating the mandate in terms of maximum employment signaled that the Fed was more skeptical than before about pressure from the labor market on prices. Running the economy hot, it was thought, would draw discouraged workers back into the labor force, making “full employment” hard to gauge and an unreliable guide. And, again, why worry? A period of higher-than-target inflation was desirable.

Lower for longer was in. Fear of inflation was out. Add in a few more components, and your response to accelerating inflation is, “It’s transitory.”

First, the pandemic caused demand to lurch away from services such as travel and hospitality toward goods – a temporary deviation that worsens short-term inflation. As demand shifts back, this short-lived pressure will reverse.

Second, don’t be misled by parallels with the 1970s and 1980s, when energy-price shocks led to persistently high inflation and a subsequent Fed-induced recession. Back then, wage-price spirals were a thing. Workers saw inflation and demanded higher wages, which forced up prices – and so on, in a stubborn inflationary cycle. This doesn’t happen nowadays, partly because the bargaining power of labor is so much lower.

Also, if price and wage inflation stays high, it’ll be easier for the Fed to nip the problem in the bud. In 1980 inflation stood at nearly 15% – after years of upward drift and erratic, ineffective efforts to assert control. That history of inattention made it harder to get a grip once the Fed resolved to. As a result, Paul Volcker had to shock the economy, raising the policy rate at one point to 20%, causing a recession. In contrast, today’s Fed has a decades-long track record of low inflation, so it doesn’t have to crash the economy to prove it’s serious. A mild and gradual rise in interest rates – from “accommodative” to “neutral” – will suffice.

That’s why expectations of long-term inflation are securely anchored. Rapid growth, low unemployment, unprecedented numbers of unfilled job openings and enormous, if diminishing, monetary stimulus (an inflation-adjusted short-term interest rate of minus 6%) haven’t led investors or consumers to expect high inflation beyond this year or next. Inflation expectations tend to be self-fulfilling – so there’s no cause for concern.

Finally, again for the sake of argument, say inflation lingers well above target. How bad would that be, really? Come to think of it, there’s a good case for raising the inflation target anyway – to 3%, say, or why not 4%? A higher target would mean that the policy rate would be higher throughout the course of the business cycle, and less likely to hit the dreaded zero lower bound when demand slows. So the costs of assuming that the spike in inflation is transitory and then being proven wrong are low at worst. Making this mistake could even be a blessing in disguise.

That was the old story.

Welcome to the new story.

The preoccupation with “maximum employment” and running the economy hot has produced record-breaking measures of tightness in the labor market. Though the number of people employed hasn’t yet returned to its pre-pandemic level, suggesting that the economy is still some way from “maximum employment,” the figures for quits and job openings are setting records. Many of the people who stopped work because of Covid and the shutdowns might never rejoin the labor force, so who knows what “maximum employment” even means?

Meanwhile, employers are looking for workers and bidding wages higher. The view that pay wouldn’t respond to rising prices assumed that workers lack bargaining power and/or fail to notice slippage in their living standards. It turns out that in tight labor markets, workers are emboldened to quit and look for better terms, so they do have bargaining power. And with inflation approaching 10%, increases in the cost of living don’t slide by unseen.

Though the switch of demand from goods back to services is indeed under way, it isn’t helping as much as was hoped, partly because services such as health care and housing are also getting more expensive. The spreading pressure of higher prices is noted – and obsessed over – by social media. Inflation is trending.

So much for well-anchored expectations. The 10-year break-even inflation rate (the market’s estimate of average inflation over the next 10 years) has risen to roughly 3%. Consumers’ expectations of inflation are rising faster. The University of Michigan’s widely followed survey shows consumers expect 5.4% inflation over the coming year, compared with 4.9% a month ago and 3.1% a year ago. Richard Curtin, who’s directed the survey since 1976, says “There is a high probability that a self-perpetuating wage-price spiral will develop in the next few years… Much more aggressive moves against inflation may arouse some controversy. Nonetheless, they are needed.”

Remember how curbing inflation, should it be necessary, would be easy? The concern that faster tightening might cause a recession is now at the front of investors’ minds. It makes the Fed’s challenge all the more tricky because, if the choice really is between persistently higher inflation and recession, the argument that moderately higher inflation might not be such a bad thing is likely to command growing support. Granted, this idea is much more popular with economists than with voters, who tell pollsters that the rising cost of living is among their most pressing concerns. Indeed, the new narrative is replete with reports of the burden that higher inflation imposes on ordinary, and especially low-income, households. In the end, support for a higher inflation target is unlikely to prevail. Even so, expert discussion of the pros and cons could become yet one more factor sustaining inflation expectations and working against the Fed’s efforts to restore control.

So the old story was wrong and the new story is right?

Unfortunately, it isn’t so simple. Crucial elements of both narratives were, and still are, correct; others were, and still are, uncertain. The Fed was right, for instance, that a promise to maintain stimulus as inflation rises to, and even somewhat above, the target makes sense when interest rates have fallen to zero. But the view that inflation was no longer a risk to be taken seriously was wrong. And despite the need to keep interest rates lower for longer, the Fed did delay its move toward tightening – as it now admits – longer than it should have.

The old narrative is almost certainly right that the surge in inflation has a big transitory component – but the inference that all of the surge would naturally reverse without corrective policy action looks wrong. Consistent with this, a faster pace of tightening than the one the Fed was advertising until days ago will be needed – but it would be reckless to suppose that, because of its errors to this point, the Fed should stun financial markets with much higher interest rates regardless of the risk of recession.

In short, the danger resides in swallowing either of the narratives whole. Yet, in a phenomenon that surely has as much to do with social psychology as with technical expertise (or lack of it), analysts and pundits alike are apt to do exactly that.

Paradoxically, the seeming coherence of the respective narratives is what makes them such poor guides for policy. The problem isn’t that they’re simplistic: Often great ingenuity is required to make every piece of information fit the preferred story. But once that effort has been invested, the narrative can withstand a lot of countervailing evidence. And a story is especially durable if it aligns with strong political or ideological prejudices, as economic narratives often do. (Progressives want monetary policy to prioritize high employment; conservatives put more weight on stable prices.) Good policy needs minds that stay open to fresh and sometimes disobliging information, and narratives make that harder.

Where does this leave the Fed? With quite a challenge, to put it mildly. Olivier Blanchard, formerly chief economist at the International Monetary Fund, acknowledges the differences between the inflation of 1975-83 and what’s happening now, but also notes one disturbing similarity: Not since then has the gap between inflation and the stance of monetary policy, as measured by the real policy rate, been as big as now. The Fed has a lot of catching up to do.

In future, the Fed should see its task as simpler and more modest than it has of late – to keep demand on a broadly steady track, consistent with 2% inflation and trend growth in output. To do this, it would have to be more nimble, and sometimes more forceful, in responding to shifts in demand. And its officials would have to forswear narratives that purport to explain every economic fluctuation, that claim to justify departing from the normal track in pursuit of “maximum employment” or other ghostly objectives, and that commit the central bank to a given stance of monetary policy regardless of how demand is evolving.

As supply conditions change, this approach would mean inflation that was sometimes lower than target and sometimes higher – but the overshoots and undershoots would be contained. Changes in interest rates might be more frequent but they’d be easier to anticipate, less abrupt and less apt to destabilize the economy. Central bankers should be suspicious of narratives that encompass too much and tie them down. A simpler mandate and an open mind would serve them better.

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