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Link your PAN with bank for refunds
- The Income Tax department will “only” issues refunds via the e-mode into bank accounts of tax payers beginning next month and they should link PAN with their accounts to get refund directly, swiftly and securely
Electoral bonds in 3 tranches from March
- The government has authorised only STATE BANK OF INDIA to launch the sale of electoral bonds from March 1-15, April 1-20 and May 6-15 at 29 specified SBI branches.
- The electoral bonds will be valid for 15 calendar days from the date of issue. No payment will be made to any payee political party deposited after the expiry of the validity period
- Electoral bonds may be purchased by a person, who is a citizen of India or entities incorporated or established in India.
NCLAT pulls up SBI
- National Company Law Appellate Tribunal (NCLAT) on admonished State Bank of India (SBI), headed by chairperson SJ Mukhopadhyay saying that the SBI had given a false impression that the RCom-RJio deal would fetch about Rs 37,000 crore, gave a rosy picture before us. SBI worked with RCom and claimed that they would recover around Rs 37,000 crore from sale to Jio and cited losses of crores per day. You failed and now will seek to recover Rs 260 crore.
- The appellate tribunal pulled up SBI for not releasing the Rs 260- crore income tax returns lying with it, which could be used by RCom to pay Swedish telecom equipment maker Ericsson. The release would help RCom to clear a part of its Rs 550-crore dues to Ericsson.
- The Supreme Court had, on February 20, held RCOm chairman Anil Ambani and two others guilty of contempt for violating its order by not paying dues of Rs 550 crore to Ericsson. The apex court had said that they would face a three-year jail term if the company failed to pay up within four weeks.
- The NCLAT had earlier halted insolvency proceedings against RCom after the case was admitted by the Mumbai bench of National Company law tribunal (NCLT) on May 15, 2018. The apex court had on October 23 asked RCom to clear the dues by December 15, 2018. RCom has already deposited Rs 118 crore with the Supreme Court.
- On February 4, the NCLAT had allowed Ericsson to file its reply on RCom’s plea for withdrawal of the appeals.
Banks open to big haircuts
- Bad-loan accounts for sale by banks in the March quarter has risen to over Rs 27,000 crore as lenders rush to make cash recoveries ahead of the close of the financial year 2018-19 banks are demanding 1005 cash payments through ARC (asset reconstruction companies) sales to try their provisioning burden does not go up.
- For instance, Central bank’s reserve price for Alok Industries suggests an 84% haircut and IDBI’s reserve price for RCom implies a 55.5% haircut.
- Banks are making it clear to buyers that we want the cash in 60 days, delays in resolution through the insolvency and Bankruptcy Code (IBC) route may have also forced their hand.
RBI faces trouble getting banks to cut rates
- Indian lenders haven’t fully passed on the central bank’s latest interest rate cut to borrowers, pressuring the monetary authority to loosen policy even more to support economic growth, mean banks face a high cost of capital, limiting their ability to transmit monetary policy easing.
SBI snubs RCom
- SBI said to NCLAT that “RCom should pay Ericsson on its own and refused to release the Rs 266 crore worth of income- tax returns, money did not belong to RCom. The Supreme Court said that the money will come from the Retention and Trust account”.
RBI on Kotak’s plea
- RBI wants Uday Kotak to reduce his stake in the bank because RBI wants to separate Management from Ownership to improve corporate governance. After that Kotak Mahindra Bank Ltd’s filed a legal petition against the Reserve Bank of India.
- RBI “The reliefs sought in the petition, if granted, shall result in making inroads into the RBI’s autonomy, and to permit the petitioners and others to become regulators of their own selves”.
SEBI lifts foreign investment cap in corporate bonds
- On March 12 SEBI withdrew the 20% limit on investments by Foreign Portfolio Investors in corporate bonds of an entity. On June 2018 SEBI applied cap and on Feb’ 2019 RBI lifted the restriction.
SEBI cleaning house
- SBI put six non-performing accounts (NPAs) worth Rs 2,338 on sale and are being offered on a 100% cash basis. The government then put the details of project out in the public and invites proposals from others interested in executing it and the original contractor gets an opportunity to match the best bid. This may entail two rounds of bidding for a distressed company or its assets.
- Assume that Company A wins the first round of bidding by a quoting a price of Rs 5,000 crore for a power plant. This will be made public and a second set of bids invited. If Company B quotes Rs 5,500 crore, Company A will be offered a second opportunity to match it. If it refuses, Company B would be declared the winning bidder. If Company A steps up, then it will bag the power plant at Rs 5,500 crore.
2nd interim dividend
- Government has pressed cash-rich PSUs like Indian Oil Corp (IOC) and Oil and Natural Gas Corp (ONGC) to pay a second interim dividend for the current fiscal, ONGC has declined to pay. The rules are that a company cannot declare a second dividend within a month of the previous pay out. IOC has called a board meeting on 19 March. Government is struggling to meet the revised fiscal deficit target of 3.4% in Good and Services Tax (GST) and the shortfall is likely to be around Rs. 30,000-40,000 crore and a similar shortfall is expected in direct tax collections as well.
$3 trillion digital economy
- Ravi Shankar Prasad said, India could be a $3 trillion (digital) economy in the next four to five years in the 5th edition of the Times Network’s Digital India Summit. Digital India is designed to empower ordinary Indians and make India the biggest manufacturing hub in electronics with 1 crore employment in the electronics sector and 35-40 lakhs in the software sector.
- India is now second only to China in mobile phone manufacturing, also become the second largest starup movement in the world with the valuation of Unicorn is higher than in the UK.
RBI in Supreme Court on defaulters
- In March 2011 the gross NPAs ratio was 2.35% and in March 2018 it increased to 11.46%. RBI said “It is apparent that the petitioners don’t have any resolution plans, the additional period of 180 days also came to an end on 28.02.2019 barring 2 or 3 cases have been resolved and some cases have been referred to the NCLT, the positions remains the same”
February 12th circular by RBI-
- One-day default rule on term loans
- Banks need to finalise a resolution plan for defaults of over Rs 2,000 crore within the next 180 days.
- Failure to do so will kick start insolvency process
- RBI want to end evergreening of stressed accounts. Under the scheme for sustainable structuring of stressed assets (S4A), only 22 cases the restructuring could be implemented from June 2016 to February 2018, though banks invoked strategic debt restructuring in more than 140 cases.
Government Pinning hopes on advance tax collection
- The government had earlier estimated Rs. 11.5 lakh crore from direct tax collection but now increase of Rs 50,000 crore in the interim budget 2019-20 to meet the revised budget target of Rs 12 lakh crore from direct tax collection.
RBI concern over role of ‘rating advisers’
- Shaktikanta Das shows his conflict of interest in the functioning of credit rating agencies. He questioned the dual practice of rating agencies to rate a bond as well as decide its valuation which is used by mutual funds (MFs) to calculate the net asset value of a MF scheme. It is perceived that the motivation to downgrade a security would be lower for an agency which carries out both businesses. Das clearly spelt out that credit rating is a different kind of business in which revenue should not be the primary objective.
- Central bank is concerned over the role of the little-known club of ‘rating advisers’ which are unregulated entities acting as brokers between companies and rating agencies.
Purchase ATMs that are Make in India
- Department for Promotion of Industry and Internal Trade (DPIIT) had directed all departments to evolve an internal system of vetting the restrictive and discriminating terms against domestic manufacturers and also looking to amend the public procurement order so that penal action can be taken against erring officials of procurement agencies of any government department .The finance ministry has asked banks to give preference to Indian manufacturers under the ‘Make in India’ initiative when purchasing ATMs.
RBI Governor to hold pre- MPC meet
- On March 26 Shaktikanta Das will hold discussions with representatives of trade bodies and credit rating agencies on interest rate and steps to boost economic activities, aim to broadening the consultation process. The first MPC (monetary policy committee) meet scheduled for April 4 and the bi- monthly policy finalised by the six-member MPC before the commencement of the seven- phase general elections beginning April 11.
FII inflows, Fed rate decision to guide stock movement this week
- The equity market is expected to be guided by Fed interest rate decision, foreign fund inflows and crude oil prices. FED interest rate decision is the key event in which the Central Bank of USA decide their interest rate.
New Liquidity Tool
- Central bank has got new cash infusion tool to smoothen tight cash conditions in the banking system. Senior officials from the Reserve Bank of India met about two dozen bankers to discuss it.
- The RBI will conduct a forward dollar/rupee buy-sell swap auction worth $5 billion on March 26. RBI will buy dollars from banks for 3 years promising a specified premium for selling back the same at maturity, but the bankers suggested to lowering the tenure of the swap to below 3 years as well as reducing the minimum bid size which is $25 million currently.
RBI guv meets Banks
- Economists raised concerns over a sharp slowdown in Indian economy. Most economists expect the six-member MPC to cut the repo rate by 25 basis points for the second time in a row next month to 6.00 percent, a level last seen in August 2017. Indian’s economy expanded by 6.6 percent during October- December, its slowest pace in five quarters, on weak consumer demand and investments. Slowing growth has hit the federal government’s tax collections.
SEBI, IBBI sign MoU
- The Insolvency and Bankruptcy Board of India signed a memorandum of understanding on Tuesday with the Securities and Exchange Board of India for effective implementation of the new bankruptcy law. Executive Directors Anand Baiwar of the SEBI and Ritesh Kavdia of the IBBI signed the pact which provides for sharing information and resources, according to an official statement. There will be periodic meetings to discuss matters of mutual interest, including regulatory requirements, enforcement cases, research, data analysis, information technology and data sharing.
Goldman Sachs Rating
- Indian market has been witnessing a ’catch-up’ rally amid expectation of a potentially stable government. In September Golden Sachs had downgraded India to ‘MARKETWEIGHT’ now again upgraded India back to ‘OVERWEIGHT’. India remains among the most expensive markets in the world.
- The rally this year has been driven by purchases of overseas investors that have bought stocks worth nearly $.5.6 billion. This year’s inflow is a big swing from last year’s outflows of $4.2 billion.
- Expected earnings growth in India to pick up to 16% this year and 14% next year which should drive Nifty’s outperformance.
Banks promise RBI to look at lending rate cuts
- RBI governor Shaktikanta Das on Thursday exhorted bankers to ensure better transmission of rate cuts by the central bank and believed to have said that since monetary policy enunciations are based on specific calculations with respect to macroeconomic trends, he would expect better and quicker transmission. Bankers, on their part, are understood to have assured the governor that they would look at cutting rates.
Public Credit Registry
- The Monetary Policy Committee of RBI Reduced the repurchase rate from 6.5% to 6.25%, because of the low headline inflation, threats to domestic growth from global trade, geopolitical tensions.
- The present level of growth owes itself primarily to public spending in infrastructure. Private consumption and investment in bleak. Even though bank credit and overall financial flows remain robust, they are not broad- based.
- RBI’s report on sectoral deployment of credit: Gross bank credit to micro and small enterprises reduced by 0.9% year-on- year in December.
- MSME sector employs approximately 111 million people in 63 million units across the country, contributing 31.6% to gross value added and 49.86% to the country’s exports.
- The credit market is characterized by information asymmetry as a result, borrowers have disproportionately more information about their financial situation and ability to repay the loan than the lenders. There is also the problem of adverse selection, where safe borrowers are priced out if the credit market owing to their lack of credit history.
- For this we can set up public credit registry (PCR) which can act as a central repository of information on credit data of individuals and businesses. Central Repository of Information on Large Credits (CRICL) provides timely information on credit deterioration of large loan accounts those greater than Rs 5 crore and play a crucial role in the asset quality review process initiated by RBI in 2015, which helped identify significant divergences in bad loans recognized by several commercial banks in their annual reports. A PCR will enable sharing of credit information mandated by law, fostering transparency and encouraging competition. The next logical step now is the establishment of a PCR.
- The Insolvency and Bankruptcy Code, though far from perfect, has started the process of unlocking the dead capital of bankrupt firms.
Sale of ‘enemy shares’
- Sale of ‘enemy shares’ (the assets left behind by people who migrated to Pakistan or China and are no longer citizens of India) and buyback of stocks by CPSEs have together yielded the government over Rs 11,300 crore and collect Rs 700 crore through the first ever sale. This helped the exchequer mop up Rs 85,000 crore from disinvestment in the current fiscal.
- Cabinet in November 2018 gave it’s go-ahead to the Department of Investment and Public Asset Management (DIPAM) to sell such shares held in companies.
IDBI in a PSB
- IDBI Bank is acquired by LIC a fully government- owned entity. Reserve Bank of India (RBI) had classified IDBI Bank as a private lender in view of government stake falling below 51%, a lender ceases to be a public sector bank once the government stake in it falls below 51%.
SEBI seeks more power
- With an aim to thwart financial frauds, regulator SEBI has sought powers to conduct inspection of books of accounts of listed companies for contravention of any securities law also take direct action against the fraudsters. SEBI has proposed a heavy penalty for altering, destroying, mutilating, concealing or falsifying record and documents or other tangible objects with an intent to obstruct, impede or influence a legal investigation. However, the regulators has now asked the government that its power to undertake inspection of books at listed companies should be for contravention of any securities law without limiting it to violations relating to one or two regulations.
FPIs invest in March
- Foreign investors have poured inn a net amount of Rs 38,211 crore in the domestic capital markets in March, it was Rs 11,182 crore in February. Analysts attributed the increase in infusion to a shift in stance on monetary policy outlook by various central banks globally.
- RBI is going to issue guidelines for Regulatory Sandbox, it provides a secure environment for fintech firms to experiment with products under supervision of a regulator. It will reduce time to launch innovative products at lower cost. Idea for Sandbox was given by Sudarshan Sen Committee.
- “An appropriate fintech regulatory and supervisory framework was required to safeguard the interest of all the stakeholders” RBI Governor.
RBI’s swap mechanism
- “Liquidity situation in the economy was “comfortable”, and it will improve further with the central bank’s move to infuse Rs 35,000 crore”. Finance Ministry.
- Economic affairs secretary Subash Chandra Garg said the RBI’s swap arrangement is a” sound move”. This means the RBI will be buying dollars from banks and selling ‘forward dollars’ for a premium.
- Finance minister Arun Jaitley said that we need more GST Council like bodies. Such bodies can work to align the State’s and Centre’s interest on various subjects. Former chief economic adviser also talked about it last January.
GST Council is successful because–
- It parcels decision-making powers amongst the states and the Centre.
- Consensus is inevitable for any change to be made.
- In the process, various interests sometimes conflicting, are balanced and reform can happen.
- It helps iron out differences and reins in an overbearing Centre.
- GST Council-like structures can help the implementation of central schemes like Ayushman Bharat or PM Kisan Samman Nidhi Yojana overcome adoption-hurdles in opposition-rules states.
Currency & Demonetisation
- Currency in circulation as percentage of GDP declined by over 1 percentage (from11.55 percent to 10.48 per cent) points to 10.48 percent in the two years after demonetization.
- Post note ban, Rs 15.31 lakh crore worth demonetised notes were deposited in banks within a stipulated time. With regards to digital transactions, the official said the volume increased to 210.32 crore in October 2108, from 71.19 crore in October 2016. The value of digital Transaction also increased to Rs 135.97 lakh crore in October 2018 from Rs 87.68 Lakh Crore in October 2016.
Raghuram Rajan: will return if there is an opportunity
- Raghuram Rajan said he is willing to return to take an opportunity where he could be of use. He may be the finance minister if an opposition alliance wins the ensuing general elections. He denied a second term as Reserve Bank Governor by the BJP-Led government and said he is very happy where he is, but is open to opportunities.
Kerala masala bonds
- Kerala Infrastructure Investment Fund Board (KIIBF), the infra-funding body of the Kerala government, has raised Rs 2,150 crore via its inaugural masala bond issues in the London and Singapore markets. It’s the first government agency to access the offshore debt market and the largest dual currency issue by a sub-sovereign backed entity from Asia and other emerging market.
- Jet Airways India missed a $109 million loan repayment due to HSBC Bank this week of total $140 million (about Rs 1,000 crore). Jet had also missed the payment on the other $31 million tranche (around Rs 200 crore) tranche that was due on March 11 and hasn’t repaid any of the loans.
RBI imposes Rs 2 crore fine on PNB
- Reserve Bank of India (RBI) has imposed penalty of Rs 2 crore on Punjab National Bank (PNB) for non-compliance of regulatory directions with regards to SWIFT (Society for Worldwide Interbank Financial Telecommunication) operations. The fine was imposed on PNB for violations of regulatory directions observed during assessment of implementation of SWIFT- related operational controls.
- Previously, RBI had imposed penalties worth Rs 71 crore on 36 public, private and foreign banks for non-compliance with various directions on implementation and strengthening of SWIFT operations. Some of these banks were SBI, ICICI Bank, HSBC, Bank of Baroda, Citibank, Canara Bank and Yes Bank.
- Earlier also PNB was in news over issues of SWIFT system after Rs. 14,000-crore fraud carried out by jewellery designer Nirav Modi and his uncle Mehul Choksi by misusing this global messaging software.
RBI appoints 5-member committee to deepen digital payments
- Reserve Bank of India (RBI) has appointed a five-member committee under the chairmanship of Nandan Nilekhani to strengthen and encourage digital payments and enhance financial inclusion through digitization. It was announced by RBI Governor Shaktikanta Das at the first event of Financial Technology (Fintech) Conclave, which was organized by NITI Aayog in New Delhi.
- Composition of Committee
- It will be headed by Nandan Nilekani, Former Chairman, Unique Identification Authority of India (UIDAI). Other members are former Deputy Governor of RBI – H.R. Khan, former Secretary, Ministry of Information Technology and Steel – Aruna Sharma, former MD&CEO of Vijaya Bank – Kishore Sansi, Chief Innovation Officer, Center for Innovation, Incubation & Entrepreneurship (CIIE), IIM Ahmedabad – Sanjay Jain.
- Terms of Reference of Committee
- It will review existing status of digitization of payments in the country and identify current gaps in digital payment ecosystem and suggest ways to bridge them.
- It will assess the current levels of digital payments in financial inclusion.
- It will undertake global analyses with view to identify best practices that can be adopted in India to accelerate digitization of economy and financial inclusion through greater use of digital payments.
- It will suggest measures to strengthen safety and security of digital payments.
- It will provide road map for increasing customer confidence and trust while accessing financial services through digital modes.
- It will suggest a medium-term strategy for deepening of digital payments.
- SBI raises Rs. 1,251.30 crore by issuing Basel III-compliant tier-I bonds
- The country’s largest lender State Bank of India (SBI) has raised Rs. 1,251.30 crore by issuing Basel III-compliant additional tier-I bonds. The proceeds from these bonds will help SBI to boost its additional tier 1 capital ratio to meet systematically important bank (D-SIB) criteria to which SBI is mandated to meet.
SBI-Basel III-compliant tier-I bonds
- These bonds allotted to investors are in nature of taxable, perpetual, subordinated, unsecured. They are Basel lll compliant for inclusion in additional tier 1 capital. These bonds have face value of Rs 10 lakh each and carry coupon of 9.45% payable annually with call option after five years.
- Reserve Bank of India (RBI) has classified SBI along with ICICI and HDFC as domestic domestic systematically important bank (D-SIBs), which are too big to fail. These three banks are needed to comply most stringent capital rules by April 1, 2019.
- They are required to keep aside additional common equity tier 1 (CET1) requirement in addition to capital conservation buffer. Tier 1 capital is calculated as common equity Tier 1 (CET1) capital plus additional Tier 1 capital (AT1).
Forex reserves rises to $405.6 billion in March 2019
- According to the Reserve Bank of India (RBI), India’s foreign exchange (forex) reserves surged by $3.602 billion to $405.638 billion in week to March 15, 2019. The surge was driven by rise in foreign currency assets, a major component of the overall reserves.
Reasons for increase
- The increase in forex reserves could partly be attributed to rising investments by foreign investors in Indian capital markets. The net foreign portfolio investment (FPI) in equity markets in till March 15, 2019 was $2.9 billion, highest since January 2018. Indian debt markets also have seen positive inflow of $1.2 billion till March 15, 2019.
Forex Reserves in March 2019
- Foreign currency assets (FCA): Increased by $3.546 billion to $377.773 billion.
- Gold reserves: It rose by $38.9 million to $23.408 billion.
- Special drawing rights (SDRs) with International Monetary Fund (IMF): It rose by $5.9 million to $1.461 billion.
- RBI’s reserve position with IMF: It increased by $12.1 million to $2.995 billion.
- They are reserve assets held by central bank of the country in foreign currencies. These reserve acts as buffer to be used in challenging times. They are also used as back liabilities and also to influence monetary policy. Almost all countries in world, regardless of size of their economy, hold significant forex reserves.
- Components of India’s FOREX Reserves:Foreign currency assets (FCAs), Special Drawing Rights (SDRs), Gold Reserves and RBI’s Reserve position with International Monetary Fund (IMF). FCAs constitute largest component of India’s forex Reserves and is expressed in terms of US dollars.
- YONO Cash: SBI launches India’s first cardless ATM withdrawal service
- India’s largest bank State Bank of India (SBI) has launched of YONO Cash using which customers can withdraw money from ATMs without using card. With this, SBI became first bank in India to launch cardless ATM withdrawal service.
- SBI customers can initiate cash withdrawal process on YONO app and set six-digit YONO pin for transaction.
- After initiating process, customers will also get six-digit reference number for transaction on their registered mobile numbers via SMS.
- ATMs enabled for this service will be termed YONO Cash Point. Cash withdrawal under it has to be completed within 30 minutes at ATM using both PIN and reference number.
- The transactions using YONO is secured with two-factor authentication. It also eliminates risk of skimming and cloning.
- Through YONO, SBI seeks to create digital universe by integrating entire transactions ecosystem under one platform in coming years.
- It is designed to help SBI customers to withdraw cash without physical debit card.
- It seeks to maximize convenience and enhance banking experience for its customers.
- It will address concerns over using debit cards at ATMs for cash withdrawals by eliminating the possible associated risks
Usha Thorat Committee on offshore rupee markets
- Reserve Bank of India (RBI) has constituted eight-member task force headed by former RBI deputy governor Usha Thorat to examine issues related to offshore rupee markets and recommend policy measures to ensure stability of the external value of the domestic currency. This comes in pursuance of RBI’s guided objective of developing deep and liquid on-shore financial markets that act as price setter of rupee globally.
- Other members of task force:Nominee from Department of Economic Affairs, nominee from Securities and Exchange Board of India (SEBI), Ajit Ranade, Sajjid Chinoy, Surendra Rosha, and Chief General Manager, Financial Markets Regulation Department, RBI.
Terms of reference of the task force:
- It will assess causes behind development of offshore rupee market and study effects of offshore markets on rupee exchange rate and market liquidity in the domestic market.
- It will also recommend measures to address concerns, if any, arising out of offshore rupee trading besides proposing measures to generate incentives for non-residents to access the domestic market.
- It will also suggest measures to generate incentives for non-residents to access the domestic market and examine the role, if any, International Financial Services Centres (IFSCs) can play in addressing these concerns.