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BUSINESS AND ECONOMY - June 2019

Jun 2019

Jun 30, 2019

Pakistan Signs Syndicated Loan with UAE Banks

  •  Pakistan signed a $375 million syndicated loan with banks in the United Arab Emirates, made up of conventional and Islamic banking tranches.
  • The tranches were fully subscribed by a syndicate of leading UAE banks.
  • Emirates NBD Capital Limited was global coordinator. The transaction was anchored and arranged by Commercial Bank of Dubai, Emirates NBD Bank, Noor Bank, Dubai Islamic Bank, Mashreqbank and Sharjah Islamic Bank.

Price Waterhouse Steps Down as Auditor

  •  Price Waterhouse & Co. Chartered Accountants LLP (PwC) stepped down as auditor of Eveready Industries India Ltd. (EIIL)
  • In a letter dated June 28, 2019, PwC expressed its inability to continue as auditors of the B.M. Khaitan flagship company.
  • As per Eveready Industries, the decision was based on review of annual continuance process at EIIL.
  • EIIL board approved the appointment of Singhi & Co. Chartered Accountants in the place of PwC.
  • The company, which also suffered rating downgrades, also announced the sale of its tea packet brand to Madhu Jayanti International.

New GST Return Filing System

  •  A new return filing mechanism — Goods and Service Tax 2.0 — would be rolled out from October, 2019, for big businessmen and from January, 2020 for small businessmen.
  • According to Bihar Deputy Chief Minister Sushil Modi, who chaired a Group of Ministers' meeting, the GST, which is entering the third year from July 1, 2019, would focus on simplification of procedures, compliance and crackdown on tax evasion.
  • It has registered an average monthly collection of Rs. 91,334 crore in the last 21 months.
  • Mr. Modi said that traders/businessmen having zero transactions or nil filers could now file returns through SMS.
  • For those dealing with business to consumer with an annual turnover of less than Rs. 5 crore a year would have a new format 'Sahaj' and they could file returns once in four months.
  • A new single return format called 'Sugam' is ready for traders dealing with business-to-consumer and business-to-business.
  • Businessmen having annual turnover of more than Rs. 5 crore will have to file returns every month.

HUL Sets up Council for Digital Transformation

  •  FMCG major Hindustan Unilever Limited (HUL) set up a council for digital transformation.
  • It comprises a cross functional team of leaders, who are designing and landing the agenda of Reimagining HUL.
  • Currently, more than 80 experiments are under way in the business to accelerate HUL's journey in digital transformation.
  • Mr. Mehta spoke about how HUL had created a full-fledged, end-to-end, digital transformation programme that would redefine the ways of working, going forward.

Lenders Approve JSW's Bid for ACCIL

  •  Lenders of Asian Colour Coated Ispat Ltd. (ACCIL) approved the JSW Group's Rs. 1,550-crore bid to acquire the debt-ridden steel firm.
  • ACCIL went into insolvency in July, 2018 after the National Company Law Tribunal (NCLT) admitted an application by State Bank of India (SBI) to initiate the Corporate Insolvency Resolution Process (CIRP) for the company.
  • The Resolution Professional (RP) appointed to carry out the insolvency process was Kuldip Bassi.
  • The total admitted debt in the resolution process was about Rs. 6,500 crore. The committee of creditors approved the bid of JSW Group, with nearly 80% of lenders voting in favour.
  • For approval, a resolution plan needs at least 66% votes in favour.
  • To acquire ACCIL, JSW offered Rs. 1,550 crore, almost all of which would go to financial creditors.
  • SBI, Bank of Baroda and IDBI Bank are the main lenders, along with some other banks and financial institutions.
  • ACCIL is a steel product manufacturing company and has plants near Delhi and Mumbai, with an annual capacity of one million tonnes.

Jun 29, 2019

Airtel Shuts 3G Service in Kolkata

  •  Telecom operator Bharti Airtel announced the closure of 3G service in Kolkata as part of its plan to replace the third generation mobile technology with 4G in the country.
  • In Kolkata, Airtel would use 900 Mhz frequency band for the 4G service, which was earlier being used for 3G.
  • Airtel is deploying the state of the art L900 technology in the 900 MHz band to complement its 4G service in the 2300 Mhz and 1800 Mhz bands.
  • Airtel claimed that with L900 technology, its smartphone customers will enjoy improved 4G service.

Indusind Bank Pick Up Stake in Satin Creditcare

  •  IndusInd Bank Ltd. picked up a 2.58 per cent stake in microfinance firm Satin Creditcare Network Ltd., by converting debentures which the private bank had subscribed earlier.
  • The stake purchase in Satin Creditcare, which was first announced in 2017, came day ahead the merger of Bharat Financial Inclusion with IndusInd Bank on July 4. 
  • IndusInd Bank was 13,43,283 equity shares of Satin Creditcare, representing 2.58 per cent stake in the microfinance firm. These shares were allotted against 13,43,283 optionally convertible cumulative redeemable preferential shares which were allotted to IndusInd Bank in December 2017 at Rs. 335 each.
  • The stake in Satin Creditcare held by Trishashna Holdings & Investments, a promoter group company, also went up to 27.04 per cent, after allotment of 17,91,044 shares.
  • They were given against an equal amount of fully convertible warrants, which was allotted in December 2017 at Rs. 335 each.

FDI from China during Apr'14- Mar'19

  •  As per reports, India received $1.81 billion (around Rs. 12,474 crore) foreign direct investment from China during April 2014 to March 2019.
  • The sectors which received maximum inflows from China during the period include automobile industry ($876.73 million), electrical equipment ($152.5 million) and services sector ($127 million).
  • The information was provided by Commerce and Industry Minister Piyush Goyal in a written reply to the Rajya Sabha.
  • As per Mr. Goyal, the trade deficit (difference between imports and exports) declined to US 53.57 billion in 2018-19 from $63 billion in 2017-18 with China.
  • Moreover, India received FDI worth $13.62 billion during the period from the US.
  • The sectors which received maximum inflows from the US include computer software and hardware, automobile industry and services sector.

India a Haven for Aluminium Scrap Dumping

  • India overtook China as the preferred destination for aluminium scrap with imports growing 18.8% in the January-March 2019 quarter compared with the same quarter of 2018.
  • This, according to industry players, is hurting Indian industry and is the direct result of the trade war between China and the U.S.
  • India imported 3,34,725 tonnes of aluminium scrap in the January-March 2019 quarter compared with China's 3,30,567 tonnes in the same period, according to a report by S&P Global Platts. While India's imports grew 18.8% over this period, China's declined by 32.1%.
  • The U.S. had imposed an import duty of 10% on aluminium in March 2018 and in response, China had implemented a 25% duty on the import of aluminium scrap from the U.S.

RBI Allows ARCs to Buy Financial Assets

  •  The Reserve Bank of India (RBI) allowed asset reconstruction companies (ARCs) to buy financial assets from other such entities. However, all such transactions have to be settled in cash.
  • In view of amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, it was decided to permit ARCs to acquire financial assets from other ARCs.
  • Price discovery for such transaction shall not be prejudicial to the interest of security receipt holders. The selling ARC must utilise the proceeds so received for the redemption of underlying security receipts.
  • The date of redemption of underlying Security Receipts and total period of realisation should not extend beyond eight years from the date of acquisition of the financial asset by the first ARC.

ONGC Looks for Exploration Partners

  •  Amid stagnating oil and gas production, state-owned ONGC is seeking partners to enhance oil and gas production from its 64 marginal nomination fields with the intention of maximising recovery from these fields by adopting new technology.
  • The oil explorer has come up with the notice inviting offer (NIO), which allows interested companies to participate in the international competitive bidding (ICB) process announced for 17 onshore contract areas comprising 64 oil- and gas- producing fields with total in-place oil and oil equivalent gas (O+OEG) volume of about 300 million metric tonnes of oil equivalent (Mmtoe).
  • "Companies, either alone or in consortium or joint ventures, may bid for one or more contract areas," said the offer document, adding that the bidders are required to fulfill the requisite technical and financial criteria and the bids would be evaluated on the basis of revenue sharing from the incremental oil and gas production.
  • ONGC will offer marketing and pricing freedom to sell oil and gas on arm's length basis through competitive basis and the contractor will be selected on a revenue sharing basis.
  • The revenue will be shared on incremental production over and above the baseline production under Business-As-Usual (BAU) scenario.

Jun 28, 2019

Government Revamps WPI Revision Team

  •  The government has reconstituted the working group tasked with revising the current wholesale price index (WPI).
  • The terms of reference (ToR) of the working group include selecting the most appropriate base year for the preparation of a new official series of index numbers of wholesale price (WPI) and producer price index (PPI) in India.
  • The working group would also have to review the commodity basket of the current WPI series and suggest additions or deletions of commodities in the light of structural changes that occurred in the economy since 2011-12.
  • The ToRs also include a review of the existing system of price collection and suggesting improvements, along with coming up with a computational methodology to be adopted for the monthly WPI and PPI.
  • The current series of wholesale price index with 2011-12 as base year was introduced in May 2017.

Sale of Delhi-Agra Toll Roadway

  •  Reliance Infrastructure said that the sale of its entire stake in the Delhi-Agra Toll Roadway to Singapore-based Cube Highways would be completed by the end of August 2019.
  • Reliance Infrastructure signed a binding share purchase agreement with Cube Highways for its 100 per cent stake in Delhi-Agra toll road for Rs. 3,600 crore.
  • Reliance Infrastructure would receive enterprise value of Rs. 3,600 crore including equity of up to Rs. 1,700 crore.
  • Reliance Infrastructure  would utilise 100 per cent of proceeds only for debt reduction.

Govt. to Revive Air India Disinvestment Plan

  •  The government will go ahead with the disinvestment process of Air India.
  • In a meeting, the Cabinet Committee on Economic Affairs had in-principle approved the consideration for strategic disinvestment of Air India & its five subsidiaries.
  • An Air India Specific Alternative Mechanism (AISAM) was constituted by CCEA for this.
  • In an AISAM meeting held in March 2018, it was decided that due to issues like volatile crude oil prices and adverse fluctuations in exchange rates, the atmosphere was not conducive for the disinvestment.
  • However, continued support from the government had resulted in improvement of financial & operational performance of Air India.
  • As per the recommendations of AISAM, the government would now go ahead with the process of disinvestment of the company.
  • Meanwhile, provisional figures issued by the government  showed that the national carrier posted a loss of Rs. 7,365 crore in the year ended March 31, 2019, more than the Rs. 5,337 crore loss reported during 2017-18.
  • The loss in fiscal year 2018 was a 17% decline from the previous year (2017) though it exceeded the civil aviation ministry's provisional estimate of a loss of about Rs. 3,579 crore.

Jun 27, 2019

Investors Oust FundsIndia.com Founders

  •  C.R. Chandrasekar and Srikanth Meenakshi, founders of Wealth India Financial Services Private Limited that runs online financial services platform, FundsIndia.com, were ousted from the company following differences of opinion with the firm's private equity investors.

Fonterra Enters Indian Dairy Market

  •  Fonterra Future Dairy Pvt. Ltd., a joint venture between New Zealand's dairy nutrition company Fonterra and Kishore Biyani's Future Consumer, entered the value-added dairy products market in India with its new brand Dreamery targeted at youth and urban families.
  • The Dreamery range, comprising dahi (curd), ultra-high temperature (UHT) toned milk, and chocolate and strawberry milkshakes would be available in markets across western India in the first phase, followed by the south and then the rest of India.
  • The company plans to have pan-India distribution in two years and targets 5% market share of value-added dairy products in five to seven years.

L&T Completes Mindtree Takeover 

  •  Larsen and Toubro Ltd (L&T) gained a controlling interest in Mindtree Ltd, raising its stake to 60% in the Bengaluru based company and successfully concluding India's first hostile takeover of a software developer.
  • L&T completed buying the 31% additional stake it targeted to acquire in Mindtree for Rs. 4,988.82 crore through an open offer as large investors rushed to sell their holdings.
  • The offer to purchase 50.9 million shares of Mindtree from public shareholders was subscribed 1.2 times.
  • The 60% stake in Mindtree gives L&T complete control over the software company's board and management.

Acquia to Set Up Delivery Unit at Pune

  •  Boston-based Acquia Global, an open source digital experience company with a revenue of $200 million, announced plans to develop Pune as its global delivery centre, to support innovation and its clients over the world.
  • The company, which provides technology to leading brands and helps them in their digital drive, opened a new office in Pune to expand its presence in India and Asia-Pacific, a high-growth region for the company.
  • Acquia plans to grow its staff across multiple departments in Pune and deploy people in product development.
  • This move positions Pune to become a part of one of the fastest growing digital experience centres globally.
  • Acquia Global has been in the India for over five years. 

Foreign Firms can Process Abroad, but Must Store Data in India

  •  According to the Reserve Bank of India (RBI), foreign payment firms such as Mastercard and Visa can process transactions made in India outside of the country but the related data should be brought back for local storage within 24 hours.
  • The announcement was made to clarify the central bank's directive in April 2018 that mandated foreign firms to store their payments data only in India for unfettered supervisory access. 

RBI Begins Monitoring HFCs

  •  The Reserve Bank of India (RBI) started monitoring the liquidity position, asset-liability gap and repayment schedules of housing finance companies (HFCs) on a daily basis after the liquidity crisis hit these firms, resulting in defaults.
  • Mortgage lenders are regulated by the National Housing Bank. But the central bank is of the view that since the liquidity crisis of the HFCs could have a spill over effect on the other segments in the financial sector, including banks, and hence, could affect financial stability, it was necessary to monitor these entities on a regular basis.
  • The move to monitor HFCs on a daily basis comes after some mortgage lenders started feeling the pressure to meet their financial obligations.

Jun 26, 2019

DHFL Partially Defaults on CP Repayment

  •  Mortgage lender Dewan Housing Finance Ltd. partially defaulted in repaying its investors of commercial paper. The company could pay only 40% of the aggregate amount.
  • According to a notification to the stock exchanges, DHFL paid 40% of Rs. 375 crore, which is Rs. 150 crore, on a proportionate basis.
  • While DHFL met liability obligations of Rs. 40,000 crore since September 2018, there was no recourse from lenders.
  • The company met all its financial obligations through a combination of internal accruals, sell down of its loan assets and monetisation of non-core assets.

LIC Cuts Stake in Axis Bank

  •  State-owned LIC sold over 5.25 crore shares, representing about 2 per cent stake, of Axis Bank through open market transaction.
  • With the sale of these shares, the stake of LIC (Life Insurance Corporation of India) in the private sector bank has now come down to 10.2 percent from 12.21 percent earlier, as per the BSE filing by Axis Bank.
  • LIC sold 5,25,06,202 shares through open market, the filing said without disclosing the sale value.
  • The total sale value could not be ascertained as the insurer sold the shares over a period of time.
  • The bank's shares closed at Rs 762.85, a piece on BSE, down 1.18 per cent.

Sinha-led Panel Proposes Stressed Asset Fund

  •  A committee formed by the Reserve Bank of India (RBI), headed by former SEBI Chairman U.K. Sinha, recommended a Rs. 5,000 crore distressed asset fund for micro, small and medium enterprises (MSMEs).
  • The fund would assist units in a cluster where there is a change in the external environment such as plastic ban, which had resulted in large number of such entities becoming non-performing.
  • This would be of significant size which makes equity investments that help unlock debt or help revive sick units. It is a variation of venture capital fund, meant for equity investment of Rs. 1 lakh to Rs. 10 lakh in proprietary or partnership MSMEs, which would not or cannot list on the stock exchanges.
  • The structure would recognise that exits will not be big bang but through a percentage of revenues or profits over a period of 3-5 years. The onus of creating this fund would lie with the government.
  • The panel also suggested that the RBI should increase the limit for non-collateralised loans to Rs. 20 lakh, and this would address a significant proportion of the sector needs.
  • In addition, it also suggested revision in loan limit sanctioned under MUDRA by the Finance Ministry to Rs. 20 lakh from Rs. 10 lakh.
  • The committee also recommended banks that wish to specialise in MSME lending, their sub-targets for farm loans under the priority sector lender could be waived off, and instead can be given a target for loans to the SME sector.
  • The targets, committee said, could be of 50% of the net bank credit for universal banks and 80% for small finance banks.
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