Bank of England might be cutting interest rates ahead of the US Federal Reserve. Tune into this detailed analysis to understand the key.

As the Bank of England gears up for its upcoming decision, speculation mounts on potential interest rate cuts this summer, contrasting with investors’ expectations of a postponed easing outlook. Governor Andrew Bailey has emphasized the UK’s divergence from escalating consumer price pressures in the US, highlighting “strong evidence” of receding inflation domestically. While economists anticipate the central bank to maintain rates at a 16-year high of 5.25 per cent, attention will be on hints regarding whether policymakers view June or August as opportune moments to initiate reductions in borrowing costs.

However, a dovish shift in tone by Bailey and Deputy Governor Dave Ramsden in April caused some economists to reckon that the timing of BOE cuts may be closer to the European Central Bank — which is widely expected to act in June — than to the Federal Reserve, whose chief, Jerome Powell, has avoided offering a timeline for US easing.

Bailey expects UK inflation to fall close to his 2 per cent target in upcoming data for April, though some on the nine-member Monetary Policy Committee are still concerned over underlying price pressures. “The BOE has sounded increasingly dovish at each of its meetings this year. We think there could be a similar theme in May with policymakers having lately signaled little concern about recent upside data surprises.”

The central bank decision will be followed on Friday by gross domestic product data predicted to show the UK economy exited a shallow recession in the first quarter. Economists expect the figures to show output growing 0.4 per cent after two consecutive quarterly drops last year.

Elsewhere, a cliffhanger decision in Sweden, a likely hawkish hold in Australia and rate cuts in Brazil and Peru are among the central bank announcements due.

The US economic data calendar is light. On Friday, the University of Michigan will issue its preliminary survey of consumer sentiment for May. Confidence is expected to be little changed as Americans assess elevated prices, high interest rates and a moderating job market.

A day earlier, the government will issue weekly jobless claims figures. Applications for unemployment benefits remain near historically low levels.

In the week after the Fed held rates unchanged, several central bank officials are scheduled to speak. They include New York Fed President John Williams and the Richmond Fed’s Thomas Barkin on Monday, followed by Neel Kashkari of Minneapolis on Tuesday. Later in the week, investors will also hear from Chicago Fed President Austan Goolsbee and Fed Governor Michelle Bowman.

The Bank of Canada on Thursday will publish its annual financial system review, assessing stability risks to the country’s banking sector. Officials previously flagged concerns about homeowners’ ability to manage debt in a high-rate environment.

On Friday, economists expect Canada’s April labour force survey to show job gains remain well below the pace of population growth, bolstering an argument for policymakers to pivot to rate cuts as early as June.

Asia The Reserve Bank of Australia may amplify its hawkish tone when it meets on Tuesday in the wake of hotter-than-expected inflation gauges for the first quarter, as well as robust jobs stats. The board will consider revised growth, inflation and labour-market projections, with any revisions probably signaling no policy pivot any time soon. Overnight Index Swaps are now pricing more chance of an Aussie rate hike than a cut this year.

On Thursday, Malaysia’s central bank sets its benchmark rate and the Bank of Japan releases a summary of opinions from last month’s meeting, when Governor Kazuo Ueda’s seemingly sanguine stance on the yen helped usher in more losses for the beleaguered currency.

In data, Indonesia first-quarter economic growth is seen staying around 5 per cent year on year, while it may contract a tad versus the prior quarter. The Philippines also releases GDP data. Consumer inflation figures are due in the Philippines, Thailand and Taiwan, while China, the Philippines and Taiwan all get trade data.

Japan’s wage stats on Thursday will probably look a little glum as the outsized pay increases pledged by companies after negotiations with unions won’t fully kick in for a few more months.

Europe, Middle East, Africa On Wednesday, Sweden’s Riksbank could become the second major developed-world central bank – after the Swiss National Bank – to lower rates in what looks likely to be a cliffhanger decision.

After their meeting in March, Governor Erik Thedeen said he and colleagues expect to make their first easing move in May or June. Domestically, there are now very few obstacles to them acting sooner rather than later. Inflation has slowed and looks set to fall below the central bank’s 2 per cent target, the economy remains sluggish, and companies appear to have concluded that they won’t be able to raise prices to the extent they have in the past couple of years.

However, the krona still concerns policymakers, who’ve watched the currency weaken almost 5 per cent against the euro this year. If they decide they can’t risk further deterioration, that could be a reason to delay a first cut, much as Norway did on Friday.

On the other hand, there’s scope to argue that whatever the Swedish central bank does, the currency’s destiny is determined by other factors, including risk aversion and US bond yields. If that view wins the day, the Riksbank could well cut.

Three other monetary decisions are expected around the wider region: On Tuesday, sticky inflation may persuade Madagascar’s central bank to keep its rate at 11 per cent for a third time in a row.

Two days later, Poland’s central bank will likely also leave borrowing costs unchanged, even after April inflation stayed within its target range. Governor Adam Glapinski, who holds his briefing the following day, has repeatedly quashed expectations for rate cuts this year.

And the National Bank of Serbia on Friday is likely to keep its rate at 6.5 per cent for a 10th month, cautious to avoid premature easing while watching to see how long peers in bigger economies wait before cutting.

In the upcoming week, alongside other central bank events, a Bank for International Settlements conference in Basel will host monetary leaders from Germany to Singapore. The European Central Bank (ECB) agenda includes appearances by Belgian governor Pierre Wunsch and Executive Board members Luis de Guindos and Piero Cipollone. Additionally, a report detailing the central bank’s April 11 decision will be released on Friday. Due to public holidays occurring on various days across economies such as the UK and France, the frequency of data releases will be restricted.

SBI-led lenders seek RBI approval to transfer JAL’s Rs 18,000 crore debt to NARCL for a Rs 10,000 crore acquisition.

State Bank of India (SBI) and other lenders have sought RBI approval to transfer Jaiprakash Associates’ (JAL) Rs 18,000 crore debt to the National Asset Reconstruction Company Limited (NARCL). This would mark NARCL’s biggest debt acquisition from a single company, with an offer of Rs 10,000 crore to lenders pending RBI’s approval. NARCL has made RBI’s approval a prerequisite for acquiring JAL’s loans, as per reports.

JAL is the flagship firm of the Jaypee Group, led by Manoj Gaur, and operates in cement, hospitality, real estate, fertilizers, and construction. In Financial Year 2022-23, NARCL acquired 62% of Jaypee Infratech’s debt amounting to Rs 9,234 crore, resulting in a 39% recovery for lenders through an uncontested Swiss challenge auction.

Lenders are pursuing approval because in 2017, shortly after the enactment of the Insolvency and Bankruptcy Code (IBC), the RBI instructed banks to refer 28 companies, including JAL, for debt resolution under IBC. JAL was part of the second batch of 28 accounts referred by the RBI for resolution under the IBC.

Although banks initiated the debt resolution process for JAL by filing an application with the National Company Law Tribunal (NCLT) around the same time, the company has not yet been admitted due to ongoing litigation.

For some of the 28 companies referred by the RBI, lenders sold debt to private asset reconstruction companies without RBI approval. For JAL’s debt resolution, they are seeking proper channels.

In November last year, Jaiprakash Associates entered into an agreement with ICICI Bank to transfer 18.9 crore shares to the bank, which were pledged as collateral. It was anticipated to result in a recovery of approximately Rs 366 crore for the bank, based on the last closing price of the shares.

However, lenders assert that JAL’s complex structure, comprising multiple large businesses under one entity, necessitates RBI clearance for NARCL’s acquisition to avoid potential regulatory issues.

If lenders proceed with the debt transfer to NARCL, the asset reconstruction company will gain control over JAL’s cement division, prime land housing the Buddh International Race Circuit, several luxury hotel properties, and a construction business.

Separately, SBI and ICICI Bank have filed petitions with the Allahabad NCLT to admit JAL for debt resolution. Meanwhile, Dalmia Cement (Bharat) has made a binding offer to acquire JAL’s clinker, cement, and power units at an enterprise value of Rs 5,666 crore. The funds from this offer are intended to partially settle the lenders’ debt.

Although the cement unit has a capacity of 9.4 million tonnes, the clinker plant boasts 6.7 million tonnes, and the power plant generates 280 MW, the deal remains pending as lenders have not issued a no-objection certificate.

NARCL’s proposed offer includes a 15% cash component and the remainder in securities receipts, comprising a cash portion of Rs 1,500 crore and the remaining Rs 8,500 crore as securities receipts redeemable upon NARCL’s recovery of the dues.

In April, Unified Payment Interface (UPI) transactions experienced a slight decline in both volume and value compared to March 2024, with a decrease of 1 percent in volume and 0.7 percent in value. The total value of UPI transactions in April was Rs 19.64 trillion, down from Rs 19.78 trillion in March. Similarly, the number of transactions stood at 13.3 billion in April, compared to 13.44 billion in March.

Vive Ayer, a partner at Grant Thornton Bharat, explained the decline by stating, “UPI volumes and values continue to grow year-on-year (Y-o-Y), reflecting the ongoing focus on digital adoption across the country and the convenience that UPI offers. The month-on-month reduction is not a comparable factor, given that March typically sees higher volumes during the year, hence April 2024 figures are lower than those of March 2024.”

On a year-on-year basis, UPI transactions showed significant growth, with a 50 percent increase in volume and a 40 percent increase in value. In February 2024, transactions stood at 12.10 billion, with a total value of Rs 18.28 trillion.

Meanwhile, Immediate Payment Service (IMPS) transactions also experienced a decline in April compared to March, with a 7 percent decrease in value and a 5 percent decrease in volume. The total value of IMPS transactions in April was Rs 5.92 trillion, down from Rs 6.35 trillion in March. The number of transactions decreased from 581 million in March to 550 million in April. However, on a year-on-year basis, IMPS transactions saw an increase of 11 percent in volume and 14 percent in value.

Similarly, FASTag transactions declined in both volume and value in April, with a 3 percent decrease in volume and a 6 percent decrease in value compared to March. The total transaction value for FASTag in April was Rs 5,592 crore, down from Rs 5,939 crore in March. The volume of transactions decreased to 328 million in April, compared to 339 million in March. However, compared to April 2023, FASTag transactions witnessed growth of 8 percent in volume and 9 percent in value.

In April, the Aadhaar Enabled Payment System (AePS) also experienced a decline in both volume and value compared to March. AePS transactions amounted to Rs 25,172 crore in April, down from Rs 27,996 crore in March. The number of transactions decreased to 94 million in April, compared to 108 million in March. However, on a year-on-year basis, AePS transactions saw a decrease of 7 percent in volume and 15 percent in value compared to April 2023.

Overall, while some digital payment channels experienced a decline in April compared to the previous month, the year-on-year growth indicates a continued trend towards digital adoption and the increasing convenience offered by digital payment platforms like UPI, IMPS, FASTag, and AePS.

Bank credit growth to agriculture and services sector at more than 20 per cent year-on-year, in March 2024, surpassed loans to industry which grew by 8.5 per cent yoy in the month under observation. On a yoy basis, non-food bank credit registered a growth of 16.3 per cent in March 2024, as compared with 15.4 per cent a year ago, Reserve Bank of India said on Wednesday.

Credit growth to agriculture and allied activities was robust at 20.1 per cent yoy in March 2024 as compared to 15.4 per cent growth a year ago, according to RBI data on sectoral deployment of bank credit for the month of March 2024, collected from 41 select scheduled commercial banks, accounting for about 95 per cent of the total non-food credit deployed by all scheduled commercial banks. Credit growth to services sector improved to 20.2 per cent (y-o-y) in March 2024 (from 19.6 per cent a year ago), with higher growth in credit to ‘transport operators’ and ‘commercial real estate’.

Credit growth to ‘non-banking financial companies (NBFCs)’ and ‘trade’, however, decelerated in March 2024 as compared with March 2023. The share of the services sector in bank credit increased marginally to 28.3 per cent. Within services, the highest credit growth was recorded by the aviation sector, which grew 56 per cent to Rs 43,246 crore. Credit to industry grew by 8.5 per cent as compared with 5.6 per cent in March 2023. The pace of credit growth at 7 per cent to large industries more than doubled in FY24 from the 3.1% per cent a year before.

As 22 March, 2024, the share of industry in bank credit contracted 23.1 per cent from 24.8 per cent in March 2023. Among major industries, growth in credit yoy to sectors such as chemicals and chemical products, food processing and infrastructure’ accelerated in March 2024 as compared with the corresponding month of the previous year, while that to ‘basic metal and metal products’ moderated. An ICRA report also points out that incremental non-food bank credit expansion has been robust so far at Rs. 20.9 trillion in FY2024 (till 8 March, 2024, exceeding the year-ago level of Rs 16.8 trillion, aided by the retail and services segments.

The rating agency estimates incremental credit at Rs 22.0-22.5 trillion in FY2024 (excluding the impact of the HDFC-HDFC bank merger), implying a yoy growth of 16.1 per cent -16.5 per cent as compared to 15.4 per cent plus in FY2023). This would be the highest-ever credit expansion in any year, far outpacing the Rs 18.2 trillion seen in FY2023. On the sectoral front, within industry, infrastructure saw loans grow by 6.5 per cent to Rs 12.8 lakh crore.

A CRISIL Ratings study of 11 large and listed residential developers, accounting for one third of the residential property sales in the country, indicates that large developers have already strengthened their credit profiles by deleveraging balance sheets via robust sales and collections over the past two fiscals and focusing more on asset light-models (joint ventures and joint development).

Higher collections and sharper focus on asset-light models have enabled deleveraging of balance sheets, which, in turn, supports the credit profiles of developers. “The momentum in demand and robust collections will help developers fund new launches and withstand any downcycles without stressing their credit profiles. Developer’s ability to maintain leverage amid more launches will bear watching,” says Pallavi Singh, Associate Director, CRISIL Ratings.

For FY 2025 , ICRA projects the incremental credit growth at Rs 19.0-20.5 trillion (including the impact of the HDFC-HDFC bank merger), implying a yoy growth in outstanding credit of 11.7 per cent -12.5 per cent, lower than the growth expected in FY2024 amid muted export demand in certain sectors, impact of higher interest rates as well as the increase in risk weights.

Banks worldwide, including those in India, have a significant opportunity to enhance productivity and boost revenues by integrating generative AI (GenAI) into their operations, according to a report by IT consultancy firm Accenture. The study analyzed publicly available employee data to assess the impact of GenAI on banking tasks and modeled the financial implications for over 150 large banks globally over a three-year period.

The research findings suggest that banks implementing GenAI swiftly across their organizations could potentially increase revenues by up to 600 basis points (bps) within three years. Effective adoption and scaling of GenAI could also lead to a substantial 30% increase in employee productivity by streamlining various language-related tasks. Additionally, the study highlighted that operating income could see a significant uptick of around 20%, while return on equity levels might rise by 300 bps. Moreover, GenAI could drive cost savings of 1-2% by enhancing operational efficiency, with cost-to-income ratios potentially declining by up to 400 bps.

Accenture emphasized the critical importance of optimizing the usage of GenAI applications by banks, alongside upskilling existing employees and attracting specialized AI and data talent to support scaling and operationalization efforts. The report identified that 41% of all banking occupations have high potential for automation, indicating substantial scope for leveraging AI technologies in the sector.

Manoj Singodia, MD and Lead-Financial Services at Accenture in India, stressed the necessity for banks to adopt a holistic and long-term strategy to unlock the full potential of GenAI. This strategy involves integrating AI into banks’ value chains, reimagining traditional processes, and building a robust foundation of data and digital capabilities powered by cloud technology.

In summary, the Accenture report highlights the transformative potential of generative AI in the banking sector, offering a pathway for banks to enhance productivity, drive revenue growth, and optimize operational efficiency. As banks in India and globally navigate the evolving digital landscape, the strategic adoption of AI technologies like GenAI is poised to play a pivotal role in shaping the future of banking operations and customer experiences.

The Reserve Bank of India on Tuesday barred state-owned Bank of Baroda from onboarding new customers on its mobile app ‘bob World’ following material supervisory concerns. The state-owned lender said it has already taken corrective action to address the central bank’s concerns and has started additional actions to close any holes that may still exist in response to the RBI’s directives.

“The Reserve Bank of India has, in exercise of its power, under Section 35A of the Banking Regulation Act, 1949, directed Bank of Baroda to suspend, with immediate effect, any further onboarding of their customers onto the ‘bob World’ mobile application,” the central bank said in a statement. The action, the RBI said is based on certain material supervisory concerns observed in the manner of on boarding of their customers onto this mobile application.

“Any further on boarding of customers of the bank on the ‘bob World’ application will be subject to rectification of the deficiencies observed and strengthening of the related processes by the bank to the satisfaction of RBI,” it added. Bank of Baroda has been further directed to ensure that already on boarded ‘bob World’ customers do not face any disruption on account of this suspension. In a filing to stock exchanges, the bank said, “We will work closely with the RBI to address their concerns at the earliest to their satisfaction”.

The lender also assured its customers that they will not face any disruption and continue to experience uninterrupted services on the mobile app. “Further, this order does not impact any of the bank’s other digital banking channels such as net banking, WhatsApp banking, debit cards, ATMs, etc, for servicing its existing customers as well as for on boarding of new customers,” the lender added. The bank does not expect the RBI’s action to have a material impact on its overall business and growth plans.

In December 2020, the RBI had barred HDFC Bank from issuing new cards and launching new digital initiatives after repeated instances of technical outages, which is the market leader in the credit cards segment. Following several occurrences of breakdowns in online banking, mobile banking, and payment utilities over the previous two years, the RBI took action.

In August 2021, the RBI partially restored the prohibition on card issuances after HDFC Bank took corrective action. The prohibition against starting new technological ventures persisted, though, and it was repealed in 2022.