The Week in Review for 23 December 2011

The Week in Review for 23 December 2011

On Thursday the Reserve Bank released its new Financial Stability Report. It concludes the country’s banking industry can cope with credit risk shocks. RBI’s stress test found that when bad debts were increased to 150% of their current state the system was reasonably poised to deal with it.

Moving on, State Bank of India may not proceed with its plan to raise $5 billion through bond sales. Mint has learnt the bank is seeing lower loan demand thanks to the slowdown and other delays. Another factor is the rise in interest rates.

SBI could reconsider its decision next fiscal. The bank had planned to borrow $5 billion worth of foreign debt through so-called medium-term notes.

The many troubles of India’s airline industry are not new, but a recent study concludes they’re losing money just by running flights. The consultancy Centre for Asia Pacific Aviation says airlines lose at least 1,300 for every passenger they fly. All in all, it expects they’ll lose $2.5 billion this fiscal. The estimate says this fiscal has been the worst ever for India’s airlines. It also says banks that have lent to airlines could take a hit.

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Staying with aviation, the European Union’s controversial move to charge airlines for their carbon emissions has received legal backing. On Wednesday, the European Court of Justice gave unreserved support to the decision. The court said the emissions scheme did not violate international laws or the open-skies agreement. Under the scheme, flights in and out of the EU will have to buy permits starting 1 January 2012. By 2020, the scheme is expected to cost €9 billion.

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