Pvt sector sales spike signals turnaround in Q4 FY16: RBI

The country's private corporate sector "signaled a turnaround" and recorded positive sales growth at the aggregate level in the last quarter of 2015-16 after successive contraction for four quarters, RBI said today.
"Operating profit growth continued to improve at the aggregate level and across all sectors, mainly on account of improved sales growth and continued contraction in raw material expenses," RBI said.
Services (other than IT) sector primarily contributed in the rise of year-on-year interest expenditure at the aggregate level and witnessed contraction in net profits, according to the data on performance of non-financial private corporate business sector during the fourth quarter of 2015-16.

Aggregate sales grew by 2.3 per cent after contraction for four successive quarters. Sales growth also improved for the manufacturing and IT sectors, while it moderated for services (other than IT), the data said.
At the aggregate level, operating profit grew by 16.8 per cent in the fourth quarter.
Operating profit growth stood at 11.8 per cent for the manufacturing sector. It improved for both services and IT sectors.

"Net profit grew by 16.4 per cent in Q4 2015-16 against 15.9 per cent in the previous quarter.
"Among the sectors, net profit showed a sharp deceleration for the manufacturing sector and contraction for services (other than IT) sector but improved significantly for IT sector," the data said.

At the aggregate level and in manufacturing and services (other than IT) sectors, expenses on raw material contracted at a slower pace than previous quarter.
Year-on-year growth rate of staff cost moderated across sectors. Cost of raw materials to sales ratio declined at the aggregate level and in the manufacturing sector.
RBI further said pricing power measured by operating profit margin remained at similar levels in January-March 2015-16 period as in the previous quarter at the aggregate level as also for the manufacturing sector. However, it improved for services and declined marginally for the IT sector.
On minimum capital requirement, the RBI further said the

promoter/s and the promoter group/Non Operative Financial Holding Company (NOFHC), should hold a minimum of 40 per cent of the paid-up voting equity capital of the bank which would be locked-in for a period of five years from the date of commencement of business of the bank.
Regarding the corporate structure, the guidelines said NOFHC has been made non-mandatory in case of promoters being individuals or standalone promoting/converting entities who/which do not have other group entities.
Individual promoters/promoting entities/converting entities that have other group entities, should set up the bank only through an NOFHC.
"Not less than 51 per cent of the total paid-up equity capital of the NOFHC shall be owned by the Promoter/Promoter Group. Specialised activities would be permitted to be conducted from a separate entity proposed to be held under the NOFHC," the RBI said.

Also, no shareholder, other than the promoters/promoter group, shall have significant influence and control in the NOFHC.
RBI further said "the bank is precluded from having any exposure to its promoters, major shareholders who have shareholding of 10 per cent or more of paid-up equity shares in the bank, the relatives of the promoters as also the entities in which they have significant influence or control".
The bank should get its shares listed on the stock exchanges within six years of the commencement of business by the bank. The bank shall open at least 25 per cent of its branches in unbanked rural centres (population up to 9,999 as per the latest census).

The bank should comply with the priority sector lending targets and sub-targets and the board of the bank should have a majority of independent directors are some of the other conditions outlined in the guidelines.
After considering the experience of licensing two universal banks in 2014 and granting in-principle approvals for Small Finance Banks and Payments Banks, the Reserve Bank has now worked out the framework for granting licences to universal banks on a continuous basis.