Subrata Jana/Mint
Subrata Jana/Mint

Janet Yellen surprises hedge funds who cut gold bets

Janet Yellen's soothing words on the pace of US interest rate hikes were a day late for hedge funds losing faith in gold

Janet Yellen’s soothing words on the pace of US interest rate hikes were a day late for hedge funds losing faith in gold. Money managers cut their bullish bets on bullion by the most since 2015 in the week ended 14 March.

The next day, Federal Reserve chair Yellen reiterated that monetary policy will remain accommodative for “some time", easing market fears that there might be more than three rate hikes this year.

Her words sparked the biggest gold rally since November.

The funds reduced their gold net-long position, or the difference between bets on a price increase and wagers on a decline, by 47% to 49,835 futures and options contracts in the week ended 14 March, according to US Commodity Futures Trading Commission data released three days later.

That was the biggest decline since December 2015.

Credit info sharing may hurt SHG lending

The Reserve Bank of India’s directive for banks to collect and share credit information of self-help groups (SHGs) may dampen credit growth in microfinance institutions.

Data will weed out customers who at present may be borrowing from multiple sources and breaching the overall credit limit of Rs1 lakh.

Religare Capital Markets Ltd in its report says that the southern states of Karnataka, Tamil Nadu and Kerala have about two-thirds of its microfinance credit accruing in SHGs.

It adds that in the near term, it may affect repayment of loans in SHGs and hence their asset quality, as the availability of credit database and common sharing will curb the current trend of customers refinancing debt from weak public sector banks.

Uttar Pradesh must look beyond farm loan waiver

If the newly formed Bharatiya Janata Party government in Uttar Pradesh goes ahead with its promise to waive off the loans of farmers, its fiscal position would come under extreme stress.

In a research note, economists at State Bank of India (SBI) highlight that the farm loan waiver would amount to around Rs27,419.70 crore, based on the latest Reserve Bank of India data on agriculture loans given by banks in the state.

Such a waiver could wipe out more than 8% of the state government’s revenue, the note said, and added, “This will definitely cause some amount of stress for the state’s fiscal arithmetic in the coming year." The incumbent government in Uttar Pradesh has to go beyond the traditional solutions and find innovative ways of adding to its revenues. SBI researchers list measures such as multiple cropping by farmers, linking various government exercises such as the soil health card scheme to the Pradhan Mantri Jan Dhan Yojana as potential solutions to address distress in agriculture rather than one-time farm loan waivers.