SVB crisis, lower bank interest rates among top business news today
The Federal highlights some of the major developments to look out for in the business sector on Monday (March 13).
- SVB crisis resolution in sight
As Washington rushed to prevent the fallout from the large institution’s failure sweeping through the financial system, US federal regulators announced on Sunday that the government would ensure that all depositors of Silicon Valley Bank, which failed Friday, would be paid back in full.
Impact: This announcement should come as a huge relief for Indian start-ups, even though a few banks in India said they would assist these companies to tide over the current crisis. Start-ups never have it easy either because they find it difficult to raise funds on a sustained basis or cannot hold on to talent in an industry where high attrition is common. Hence, parking all their funds or even some of them in US banks may no longer be a safe option even though it is considered the right thing to do. Most Indian start-ups usually incorporate their entities in the US in an attempt to access international markets. Hopefully, start-ups will learn their lessons and find alternative ways to park their funds.
Also read: SVB solution ensures taxpayer dollars are not put at risk: President Biden
- Banks offer lower rates to attract more home buyers
Several banks have started offering lower interest rates as demand for home loans has decreased during the last few months. The RBI has been steadily increasing repo rates (the rate at which RBI lends money to banks).
Impact: Lower interest rates will certainly result in uptake in home loans, but only for the short term, as any further hike in repo rate could deflate the industry. Over the years, the previous five repo rates have steadily upped interest rates, and now it is expected to breach the 9.5 per cent mark. According to the chief economist and head of research at JLL, Samantak Das, the continuous rise in home loan interest rates is expected to impact actual sales among home buyers.
- Hyundai Motor India may buy GM plant
Hyundai Motor India has inked a term sheet to acquire land, manufacturing equipment and buildings at General Motors India’s Talegoan plant. The manufacturing plant has an installed capacity of around 1.3 lakh units and 1.6 lakh engines annually.
Impact: With the waiting period for cars, especially Hyundai’s popular model Creta, ranging between 3 months and 6 months, additional capacity would help India’s second largest car maker to allow faster delivery of models. It would also help it gain market share from other car makers whose models have a similar waiting period, and introduce more models into the Indian market.
Also read: RBI hikes repo rate to 6.5%; projects inflation to fall to 5.3% in FY24
4: Infrastructure growth may not keep pace with the surge in aircraft orders
With at least two major airlines in India ordering a large number of aircraft, domestic airlines are worried that necessary infrastructure, like the development of more airports and existing facilities, may not be enough to keep pace with the increase in aircraft orders.
Impact: Domestic airlines may have to find solutions sooner than later to sustain their growth as the existing infrastructure in the country, like the parking of planes and the development of regional airports, is woefully inadequate. Even though the current Union Budget has hiked the amount for regional air connectivity to Rs 1,244.07 crore for the next financial year, there has been a lack of progress at the ground level. The government has said 50 additional airports, heliports, water aerodromes and advancing landing grounds will be set up over the course of the next year.
