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BUSINESS AND ECONOMY - December 2019

Dec 2019

Dec 31, 2019

PFC, NTPC Stake Sales Hit Borrowing Clause Hurdle

  • The government is facing hurdles in trimming its stakes in Power Finance Corp. Ltd (PFC) and NTPC Ltd, as the companies may breach a bond covenant that requires the companies to be majority-owned by the government. Reducing the government's stake to less than 50% will also increase overseas borrowing costs for these companies, as they will lose their quasi-government status as borrowers.
  • NTPC and PFC are among state-run companies in which the government plans to reduce its stake by selling shares through its two exchange-traded funds (ETFs), a basket of securities that trade on exchanges. The government sells its stakes in listed central public sector enterprises (CPSEs) through the CPSE ETF and Bharat 22 ETF.

RBI Restricts UCBs from Offering Large Corporate Loans

  • The Reserve Bank of India (RBI) restricted urban cooperative banks (UCBs) from offering large corporate loans through several changes to lending norms, after depositors lost large sums of money following the crisis at Punjab and Maharashtra Cooperative (PMC) Bank.
  • The regulator slashed single and connected borrower exposure for UCBs, hiked the priority sector lending (PSL) target and specified a portfolio mix for at least half of their loan books. The guidelines will be applicable from March 31, 2023.
  • The prudential exposure limits for UCBs for a single borrower and a group of connected borrowers were lowered to 10% and 25%, respectively, of their tier-I capital. These limits were earlier at 15% and 40%, respectively.

RIL Gears Up to Take on Amazon and Flipkart

  • Billionaire Mukesh Ambani took the first step to challenge global e-commerce giants Amazon and Walmart in India's fast-growing market with the soft launch of his new commerce venture.
  • Reliance Retail Ltd, the retail arm of Reliance Industries Ltd, began sending invites to Jio telecom users for registering on the new venture named JioMart. Calling itself "Desh Ki Nayi Dukaan", JioMart will currently cater to online shoppers in the suburban Mumbai areas of Navi Mumbai, Thane and Kalyan.
  • JioMart is offering its users options to shop from 50,000- plus grocery products, free home delivery with no minimum order value, no-questions-asked return policy and an express delivery promise.

Electronic Invoicing, New Returns to be Introduced in 2020

  • Two things that will change the way transactions are reported under the goods and services tax (GST) system in 2020 are electronic invoicing and new returns.
  • While both of these will be introduced mandatorily from April 1, e-invoicing would be implemented on a voluntary basis by those having an annual turnover of above Rs. 500 crore from January 1. Those with an annual turnover of over Rs.100 crore can use e-invoicing from February 1. Finally, those with annual turnover of over Rs.100 crore will have to use e-invoicing system from the beginning of the next financial year.
  • In the e-invoicing system, the invoices are authenticated electronically by GST Network (GSTN) for further use on the common GST portal. Two procedures are required in e-invoicing system — generation of invoices in standard format and reporting it on to a central portal system.
  • The new system requires invoice details to be uploaded on the government site — Invoice Registration Portal or IRP — on real-time basis. Based on the uploaded details, a unique invoice reference number (IRN) will be allocated against an each invoice. IRN would be get validated through IRN portal and GSTN.

Kerala Retains Top Rank on SDG Index

  • According to the SDG India index brought out by NITI Aayog and the UN, Kerala, Himachal Pradesh, Andhra Pradesh, Tamil Nadu and Telangana were top performers in the race to achieve Sustainable Development Goals (SDG), including the eradication of poverty and inequality, while Bihar, Jharkhand, Arunachal Pradesh and Meghalaya have a lot to catch up.
  • The report released on Monday showed that Kerala retained its rank as the top state with a score of 70. A score of 100 would mean the state has achieved the SDG goals, which are to be met by 2030. Himachal Pradesh took the second spot, while Andhra Pradesh, Tamil Nadu and Telangana shared the third spot.
  • Among Union territories, Chandigarh maintained its top spot with a score of 70. The score is computed based on performance across several parameters, including the quality of education, gender equality, zero-hunger, climate action and reduction in inequalities.

Without Buyer, Air India Might be Forced to Shut Down by June 2020

  • Struggling Air India might be forced to shut down by June 2020 unless it finds a buyer as piecemeal arrangements cannot be sustained for long.
  • Amid continuing uncertainty over the fate of the national carrier, the official said there is also need for funds to restart operations of 12 grounded narrow-body planes.
  • The airline has a debt burden of around Rs. 60,000 crore and the government is still working on the modalities for the disinvestment.
  • Sounding alarm bells, Air India might well go Jet Airways way if a prospective buyer does not come on board by June 2020.

Relief for Huawei as Govt. Opens 5G Trials

  • According to Telecom Minister Ravi Shankar Prasad, the government allowed all applicants including China's Huawei Technologies Co. Ltd to participate in 5G trials.
  • This comes as a welcome relief to Huawei, which has been facing global scrutiny over network security concerns. The US has claimed that Huwaei's 5G equipment could be used by China to spy on other countries, an allegation Huawei has denied.
  • The approval for conducting 5G trials does not, however, automatically imply that Huawei's equipment will be cleared for a commercial rollout in the country. The Department of Telecommunications (DoT) will meet all telecom equipment vendors to discuss the timeline and other procedures to start trials. DoT will allocate the trial spectrum to its licencees, which are telecom service providers such as Reliance Jio, Bharti Airtel and Vodafone Idea that can then choose to partner with vendors such as Nokia, Huawei, Ericsson and Samsung.

Dec 30, 2019

Chiratae, Sequoia Lead Funding Round in GoMechanic

  • Gurugram-based vehicle service and repair startup GoMechanic has raised Rs. 105 crore in a Series-B funding led by Chiratae Ventures and Sequoia Capital with Orios Venture Partners also participating in the fundraise.
  • GoMechanic's current investors include Sequoia Capital, Orios Ventures Partners, Snapdeal founders Kunal Bahl and Rohit Bansal, and angel investor Dhianu Das. It had raised Rs. 35 crore in a Series-A round led by Sequoia Capital and Orios Venture Partners in January this year.

Bitcoin's Purported Creator May Not be Able to Hand over $3 Billion of His Fortune

  • The man who claims he invented the world's largest cryptocurrency and was ordered by a judge to surrender about $3 billion of his Bitcoin holdings said he may not be able to do so anytime soon.
  • In a statement to Bloomberg News, Craig Wright said that he "cannot be certain that information will in fact arrive" to help identify the coins he has to split in a legal dispute. The Australian scientist added that he hasn't said the "private keys" to those coins would become available or be actually used next month.

PE/VC Investments Climb to a Record $37 Billion this Year

  • Private equity (PE) and venture capital (VC) investments in India touched a record high of $37 billion on the back of large investments in the infrastructure sector, according to a report by private company data tracker Venture Intelligence.
  • With 861 deals worth $36.96 billion, 2019 beat the previous record of 2018, which had witnessed 937 deals valued at $36.14 billion, the report showed. The figure excluded private equity deals in the real estate sector.
  • Investment activity in 2018 was largely dominated by mega deals in the technology sector, specifically e-commerce, with the highlight of the year being the $16 billion acquisition of Flipkart by Walmart Inc.

Tesla CEO Elon Musk Proposes Quake-proof, Multi-level Tunnels to Kill Traffic

  • A nearly mile-long tunnel in Las Vegas meant to showcase a "traffic busting" alternative for overcrowded cities should be completed next year, innovative entrepreneur Elon Musk said on Twitter.
  • The people-moving tunnel is being built by The Boring Company, one of several future-oriented enterprises founded by Musk, along with the Tesla electric-car company and SpaceX, which develops launch vehicles.
  • The 48-year-old billionaire tweeted that "Boring Co is completing its first commercial tunnel in Vegas, going from Convention Center to Strip."
  • In a second tweet he said it would be "hopefully fully operational in 2020."

Panacea Biotec eyes $1  billion Hexavalent Vaccine Market

  • Panacea Biotec Ltd expects its hexavalent EasySix vaccine, containing the safer inactivated polio virus strains, to cater to a $1 billion market annually at its peak, the company's joint managing director Rajesh Jain said.
  • Panacea hopes to get the World Health Organization's (WHO's) prequalification by early 2022, Jain said in an interview.
  • Inactivated polio vaccine is considered a safer alternative to the oral polio vaccine (OPV), which has weaker live strains of the virus, and global health organizations such as WHO and GAVI (a global vaccine alliance) plan to gradually replace procurement of OPV with the inactivated variety of the vaccine.

NBFC, HFC Sector on the Mend, Shows FinMin Analysis

  • The non-banking financial company (NBFC) and housing finance company (HFC) sector is stabilizing post the Infrastructure Leasing and Financial Services (IL&FS) crisis because of steps taken by the government, according to an analysis by the finance ministry released.
  • Banks have continued to support NBFCs and HFCs, while it is the debt market that is distinguishing between good and not-so-good entities, according to the analysis. As a result, the better entities are able to get higher financing from both banks and the market, it said.
  • The shadow banking system in India has been struggling with liquidity pressures since the IL&FS crisis emerged starting with payment defaults by group companies in June last year, and the subsequent breakdown in September 2018. Some entities found it difficult to meet their funding needs, with banks turning cautious before extending credit and funds not being available from the markets.

Dec 29, 2019

No Extra Charge on Payments via RuPay, UPI from January 1

  • Finance Minister Nirmala Sitharaman said that from 1st January 2020, businesses with annual turnover of more than Rs. 50 crore will have to offer low cost digital payment options to customers and Merchant Discount Rate (MDR) will not be levied on either customers or merchants.
  • Low cost digital payment modes will include options such as BHIM UPI, UPI QR Code, Aadhaar Pay, Debit Cards, NEFT, RTGS, among others. The move is also expected to boost payments via home-grown real-time payments system Unified Payments interface (UPI) at merchant locations, along with RuPay debit cards.
  • Department of Revenue (DoR) will notify RuPay and UPI as the prescribed mode of payment for undertaking digital transactions without any MDR.

Reforms Restored PSBs' Health

  • The Ministry of Finance said that the health of public sector banks which have been reeling under non-performing assets for the last few years has been restored and a total of 13 banks reported profits in the first half of the current financial year.
  • Addressing the media after meeting the chiefs of public sector banks, Finance Minister Nirmala Sitharaman said that the reform measures undertaken by the government have helped bring the banks back to shape.
  • A statement from the ministry noted that the gross NPAs of the state-run banks have declined from Rs 8.96 lakh crore in March 2018 to Rs. 7.27 lakh crore in September 2019.

Pronab Sen to Head Panel on Economic Statistics

  • The statistics ministry has constituted a 28-member standing committee on economic statistics, chaired by former Chief Statistician Pronab Sen to improve the quality of data amid criticism of the government over political interference.
  • The first meeting of the standing committee on economic statistics is scheduled on Jan. 6, 2020. The agenda would be very broad-based.

No Extra Charge on Payments via RuPay, UPI from January 1

  • Finance Minister Nirmala Sitharaman said that from 1st January 2020, businesses with annual turnover of more than Rs. 50 crore will have to offer low cost digital payment options to customers and Merchant Discount Rate (MDR) will not be levied on either customers or merchants.
  • Low cost digital payment modes will include options such as BHIM UPI, UPI QR Code, Aadhaar Pay, Debit Cards, NEFT, RTGS, among others. The move is also expected to boost payments via home-grown real-time payments system Unified Payments interface (UPI) at merchant locations, along with RuPay debit cards.
  • Department of Revenue (DoR) will notify RuPay and UPI as the prescribed mode of payment for undertaking digital transactions without any MDR.

FPI Flows Cross Rs. 1-lakh crore in 2019

  • According to data from the National Securities Depository Ltd. (NSDL), FPIs have been net buyers at a little over Rs. 1 lakh crore in the current calendar year, the highest since 2013 when they net bought Indian shares worth Rs. 1.13 lakh crore.
  • Incidentally, FPIs have been net buyers at more than Rs. 1 lakh crore in a calendar year only on four occasions – 2019, 2013, 2012 and 2010 – with the highest single-year flows registered in 2010 at Rs. 1.33 lakh crore.

Dec 28, 2019

Vistara Partners with Nelco

  • Vistara partnered with Tata Group firm Nelco for in-flight data services, which are expected to be rolled by the full service carrier shortly. Nearly five years after starting operations, Vistara — a joint venture between Tatas and Singapore Airlines — is also likely to be the first domestic carrier to provide in-flight connectivity within India. Telecom Secretary Anshu Prakash said that the required spectrum was allocated for the purpose.

Nalco to Revisit Expansion Plans

  • As per Chairman and Managing Director Sridhar Patra, state-owned aluminium company Nalco is looking to revisit its expansion plans.
  • Last year, the company had said that it was all set to invest over Rs. 30,000 crore over the next four years to launch a number of new projects and undertake major expansion programmes.
  • The projects under execution include 1 MTPA capacity 5th stream alumina refinery in the existing complex at Damanjodi at an estimated cost of Rs. 5,540 crore which is expected to be completed by April 2021.
  • Around Rs. 9,000 crore was being spent for establishment of 6 lakh TPA smelter at the existing complex at Angul in Odisha.
  • National Aluminium Company Ltd (Nalco) is a navratna CPSE under the Ministry of Mines. The company has diversified operations in mining, metal and power.

Sharply Falling Revenue Risks Fiscal Parameters Warns RBI

  • The Reserve Bank has flagged falling government revenue as a threat to the overall fiscal numbers -- with tax and non-tax revenues lagging way behind targets -- saying this along with weaker private consumption and investment could prove to be a challenge.
  • The central bank, however, said that amidst all these negatives the nation's financial system remains resilient with the asset quality of banks improving (NPAs remaining stable at 9.3 per cent as of September as same as March 2019) thanks to the efforts of both banks and companies to clean up their balance sheets.
  • The warning assumes importance from many angels as revenue mop-up has been falling and budgeted expenditure (fiscal deficit) has crossed 107 per cent as of November, putting a big question mark on the government ability to meet the 3.3 per cent fiscal targets.

Adani Enters Cold Chain Business

  • Adani Logistics, a subsidiary of Adani Ports and SEZ, signed an agreement to acquire a 40.25 per cent stake in Snowman Logistics from Gateway Distriparks for Rs. 296 crore.
  • The acquisition is in line with the strategy and vision to be a leader in providing integrated logistics services in India and moving from port gate to customer gate. Cold chain is key product in customer gate strategy given India's consumer driven demand.
  • The announcement of this acquisition by Adani has come at the time when India is grappling with economic slowdown where domestic companies of several sectors are cutting capex amid not-so-strong revenue visibility.
  • As part of the transaction, Adani Logistics will make a mandatory open offer as per the Substantial Acquisition of Shares and Takeover Guidelines, 2011 for a maximum 26 percent of the public shareholding in the company.
  • The acquisition is subject to customary condition precedents and is expected to close by March 31, 2020.

Allahabad Bank Raises Rs. 1,500 crore

  • Public sector lender Allahabad Bank raised Rs. 1,500 crore through private placement of Basel III-compliant tier-2 bonds.
  • These bonds have a tenor of 10 years with a call option after five years. The issuance/placement of the bonds has been completed by the bank through NSE's Electronic Debt Bidding Platform.
  • In an earlier statement, Allahabad Bank had said the Centre had agreed to make a capital infusion of Rs. 2,153 crore. The contribution will be made via preferential allotment of equity shares (special securities or bonds) of the bank during financial year 2019-20.
  • The capital infusion comes just months before its amalgamation with the Chennai-based Indian Bank. The fresh capital would help the bank meet the regulatory requirements. Shares of the bank rose 8.17% to close to Rs. 19.20 on the BSE.

Govt. to Infuse Rs. 4,360 crore in Indian Overseas Bank

  • State-owned Indian Overseas Bank (IOB) said that the government would infuse Rs. 4,360 crore into the lender. In an exchange filing, the bank will get a fresh capital infusion from the government in the current financial year to meet regulatory requirements.
  • IOB Managing Director and Chief Executive Officer Karnam Sekar had said that capital infusion from the government would help the public sector bank get out of RBI's prompt corrective action (PCA) framework. He was also hopeful the bank would report net profit in March 2020.

Dec 27, 2019

FM Sitharaman May Announce 100% Aviation Fdi In Budget Speech

  • The government is contemplating a budget announcement to hike the foreign direct investment (FDI) limit in the aviation sector from 49% to 100% to attract international bids for Air India, slated for sale this financial year.
  • The current aviation FDI cap was not attractive enough and an increase would help troubled airlines, like Air India and Jet Airways, find buyers.
  • The Substantial Ownership and Effective Control (SOEC) clause bars any foreign investor from taking complete control of an airline, run by a board that has two-third members as Indians.

Renowned Hindi Author Ganga Prasad Vimal Killed In Road Accident

  • Renowned Hindi author Ganga Prasad Vimal was killed in a road accident in Sri Lanka.
  • His daughter, granddaughter and a local driver were also killed in the accident.
  • HRD Minister Ramesh Pokhriyal 'Nishank' condoled his demise. Vimal's death is an irreparable loss to the world of literature and a personal loss for him.  
  • Born in 1939 in Uttarkashi, Vimal wrote more than a dozen poetry collections, short story collections and novels. 

   RBI Tells Banks To Cap Stake In Insurance Companies At 30%

  • The Reserve Bank of India has asked lenders to cut their stakes in insurers to 30%, as the banking regulator attempts to shield banks from risks arising out of their non-banking businesses and steer focus to boosting credit growth in a slowing economy, four people with direct knowledge of the matter. 
  • RBI informed the bankers in a meeting last week that it will soon introduce rules to cap their holdings in an insurance company to 30%, requesting anonymity as the matter is confidential. The holding limit will be 50% for non-banking financial companies such as Housing Development Finance Corp. that have insurance units. Banks have been told to await RBI's official communication on the new rules.

IL&FS: SEBI Fines 3 Rating Agencies ₹25 Lakh Each

The Securities and Exchange Board of India (SEBI) has penalised rating agencies India Ratings & Research, CARE and ICRA for alleged lack of proper due diligence while rating non-convertible debentures of crisis-hit IL&FS.
In three separate orders, the SEBI imposed a penalty of ₹25 lakh each on them. "Though there is no allegation of any mala fide on the part of the Noticee, the failure by the Noticee is blameworthy and serious considering the degree of responsibility bestowed upon it by the statute. "Further, in the peculiar facts and circumstances of this case, the default has occurred due to lethargic indifference and needless procrastination and laxity of the Noticee.

   RBI Tells Banks To Cap Stake In Insurance Companies At 30%

  • The Reserve Bank of India has asked lenders to cut their stakes in insurers to 30%, as the banking regulator attempts to shield banks from risks arising out of their non-banking businesses and steer focus to boosting credit growth in a slowing economy, four people with direct knowledge of the matter. 
  • RBI informed the bankers in a meeting last week that it will soon introduce rules to cap their holdings in an insurance company to 30%, requesting anonymity as the matter is confidential. The holding limit will be 50% for non-banking financial companies such as Housing Development Finance Corp. that have insurance units. Banks have been told to await RBI's official communication on the new rules.

Allahabad Bank To Get ₹2,153 Crore

State-owned Allahabad Bank would get a fresh capital infusion of ₹2,153 crore from the government in the current financial year.
The Department of Financial Services conveyed the sanction for release of the fresh capital.
The infusion is towards contribution of the central government in the preferential allotment of equity shares of the bank during the financial year 2019-20 as the government's investment.
Infusion of the capital into the bank comes ahead of the merger with Indian Bank and would help the bank meet the regulatory requirement to get amalgamated with a bigger peer.
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