FINANCEOUTLOOKINDIAJULY, 20268REPORTRBI CONDUCTS RS 25,000 CR OVERNIGHT VRR AUCTION: HOW IT AFFECTS BANKS SEBI CHANGES FPI FEE STRUCTURE: CHECK KEY DETAILSSBI SEEKS PRIORITY STATUS FOR INFRA LOANS TOWARD VISION 2047SENSEX AND NIFTY END FOUR-DAY RALLY AS OIL PRICES RISEMONSOON RISKS THREATEN INDIA'S $35 BILLION MICROFINANCE BOOK: REPORTThe Reserve Bank of India (RBI) conducted Rs 25,000 crore overnight Variable Rate Repo (VRR) auction on Wednesday, July 8, as part of its ongoing efforts to manage short-term liquidity conditions in the banking system. The auction will be held between 9:30 am and 10:00 am under the Liquidity Adjustment Facility (LAF). Funds borrowed by banks through this auction will mature on July 9, the central bank said in a notification.A Variable Rate Repo (VRR) auction allows banks to borrow funds from the RBI for a short period by pledging government securities as collateral. Unlike fixed-rate repo operations, banks bid for funds at interest rates determined through the auction process itself, making it a flexible tool the central bank uses to fine-tune liquidity in the financial system based on prevailing conditions. The Securities and Exchange Board of India (SEBI) has notified changes to the Foreign Portfolio Investors (FPI) Regulations, shifting from the current US dollar-denominated fee to a rupee-denominated payment structure for foreign portfolio investors (FPIs) and foreign venture capital investors (FVCIs). The changes will take effect after six months, giving foreign entities time to transition.A report by State Bank of India (SBI) has proposed that all infrastructure loans be accorded priority sector status to boost investment in the sector. Alternatively, the report suggested exempting such loans from the calculation of adjusted net bank credit (ANBC) used for priority sector lending (PSL) purposes.Under current Reserve Bank of India (RBI) norms, banks must lend 40% of ANBC to the priority sector. "We need huge investments in infrastructure to achieve the Prime Minister's Vision 2047. Long-term resources available for the same are limited in the absence of a vibrant bond market," the report said, adding that infrastructure funding undertaken by banks from their own resources currently isn't allowed to be classified under PSL. India's microfinance lenders are grappling with renewed pressure on their loan portfolios as price pressures and a weak monsoon threaten rural incomes, raising the risk of rising defaults across the industry's $35 billion loan book, according to S&P Global Ratings."A weak monsoon could slow loan growth as lenders tighten underwriting standards and borrowers' repayment capacity deteriorates," said Geeta Chugh, India's benchmark indices, the Sensex and Nifty 50, snapped their four-day winning streak on Tuesday, July 7, as fresh US-Iran tensions pushed crude oil prices higher and triggered profit booking across the market. The Sensex dropped 104 points, or 0.13%, to close at 78,180.72, while the Nifty 50 shed 32 points, or 0.13%, to end at 24,398.70. Selling was broad-based, with the Nifty Midcap 100 and Smallcap 100 indices also ending lower, down 0.30% and 0.55%, respectively. The overall market capitalization of BSE-listed firms fell to below Rs 480 lakh crore, down from Rs 482.3 lakh crore in the previous session - making investors poorer by more than Rs 2 lakh crore in a single day. The decline came amid profit booking after fresh tensions between the US and Iran drove up oil prices, denting investor risk appetite. According to a report by Axios, Iran fired two missiles at commercial ships transiting the Strait of Hormuz on Monday night, with Washington likely to retaliate against Iranian targets. Sector Lead for Financial Institutions at S&P Global Ratings. Her comments point to a potential double squeeze on the sector -- slower disbursements as lenders turn more cautious, combined with weaker repayment ability among rural borrowers hit by the inflation and uncertain agricultural income.Per the notification dated July 3, the existing $1,000 fee under Regulation 43B(2) will be replaced with Rs 90,000 in eligible foreign exchange equivalent. SEBI has also revised registration charges for Category-I FPIs and FVCIs from $2,500 to Rs 2.3 lakh, with corresponding revisions to late fees and continuance fees.
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