Finance, Business & Economy Current Affairs – August 2016

RBI to transfer Rs 60,000 crore to central government

RBI will transfer a surplus of Rs 60,000 crore to the Central government for the year 2016-17. RBI had transferred Rs 65,896 crore in the previous year. As per the RBI Act, RBI is required to transfer the surplus funds or balance profits to the government. These funds will help government to tame fiscal deficits which have already reached 61% of the target in the first three months of this fiscal.

Infra projects have seen huge cost overruns’

As per the data released by the Ministry of Statistics and Programme implementation, as many as 101 infrastructure projects across sectors such as power, railways and roads, each worth Rs 1,000 crore or more have reported a cost overrun of Rs 1.29 lakhcrore as of April 2016. The main reason for the cost overrun is the delay in completion of these projects. The additional delay is in the range of 1 to 13 months in projects relating to the sectors like power, petroleum, urban development, and road transport & highways sector.

New rules for incorporating a company under Companies Act, 2013

The Ministry of Corporate affairs has amended the rules for incorporating a company under the Companies Act, 2013. It has put in place stricter conditions for conversion of an unlimited liability company into a firm company limited by shares or guarantee. From now on, all those companies which has a website for conducting online business or otherwise, are required to provide details about their registration as well person to be contacted for grievances in their respective websites. CIN is a unique number an entity gets after registering itself under the Companies Act, 2013.

SME Business Environment Index

According to the SME Business Environment Index released by MasterCard, India is among the strongest in small and medium-sized enterprises sector in the Asia- Pacific region with a score of 50.4. However, it has observed that the poor infrastructure and insecurity over government regulations are retarding the growth of SME sector in the country. The index arrives at the score after evaluating six categories such as Digital engagement, economy, growth, financing etc. The other top performers in the region are China (53.8), Australia (52) and Indonesia (51.5).

IRCTC ties up with MobiKwik

MobiKwikThe Indian Railway Catering and Tourism Corporation (IRCTC) has recently tied up with MobiKwik, the Gurgaon-based mobile wallet company, to enable railway passengers to make e-cash payments on the IRCTC’s e-catering app “Food on Track”. The app allows passengers to book and get food from their preferred restaurants, delivered right at their train coaches. Apart from this, MobiKwik is also powering payments for IRCTC Connect Android App, which allows users to book railway tickets instantly.

RBI guidelines on-tap bank licence

RBI has released the final guidelines on on-tap licensing. The new guidelines follow the draft guidelines which were released on May 6. Following are the some of the salient features of the new guidelines:

• For the first time, RBI has come up with on-tap licenses through which an entity will be eligible to apply for license any time without waiting for the central bank to open a window. This move is a departure from the currently practiced stop-start policy according to which the RBI opens the window for bank licenses periodically but rarely.
• As per the new guidelines, Non-banking financial companies (NBFCs), qualified individuals and some private companies will be eligible to apply for licences,
• The new guidelines have kept the door closed for large business houses in order to avoid any spill over of risks.
• The license applications will be referred to a Standing External Advisory Committee (SEAC) which will be set up by RBI and finally examined by the Internal Screening Committee (ISC) consisting of the Governor and the Deputy Governors.
• The new banks will be required to essentially follow all the existing prudential regulations which normally apply to all the banks including opening of 25% of the total branch network in unbanked rural areas and exposure norms.

GSK and Verily Life Sciences form bioelectronic firm

GlaxoSmithKline and Verily Life Sciences (formerly Google Life Sciences) will create a new company named Galvani Bioelectronics, which will focus on fighting diseases by targeting electrical signals in the body. GSK and Verily will have 55% and 45% stake respectively in the new company. The new company will be based at London.

GTIL has become India’s first terminal to start continuous gate-in service for exports

Aimed at ease of doing business, Gateway Terminals India Ltd (GTIL) at the Jawaharlal Nehru Port Trust (JNPT) has introduced continuous gate-in service for exports. With this, GTIL has become India’s first terminal to offer continuous gate-in service for exports. With this new facility, the exporters can now deliver containers instantly at the terminal for the next shipping cycle, even when a vessel is docked at the terminal for the current cycle.

Earlier practice was, when a ship is docked at a terminal then the gate-in services for the next shipping cycle is closed until the docked vessel sails off. But, now the gate will be open for 24 hours and the trucks with containers need not wait for their shipping cycle to deliver the containers. They can directly come and deliver the containers at any time free of cost irrespective of the shipping cycle.

World’s first Masala bond by an Indian corporate on the LSE

HDFC issued the world’s first ever Masala bond in London Stock Exchange (LSE) and raised Rs 3,000 crore. The bonds will have a maturity of 3 years.

Masala bonds

Masala bonds are rupee-denominated bonds which are issued to overseas buyers.

Union Cabinet approves Spectrum Usage Charge for the spectrum in various bands

The Union Cabinet has approved the rates for Spectrum Usage Charge (SUC) for various bands of spectrum for which auction will be conducted shortly. With this approval the path is clear for issuance of the Notice Inviting Application (NIV) for spectrum auction by the Department of Telecommunications (DoT). SUC is the charge that telecom firms have to pay the government every year. The amount of SUC has been derived after taking into consideration the spectrum acquired in the coming auction.This will facilitate to move to a transparent, simple and flat ad-valorem SUC regime in the telecom sector. It will be done in accordance with the law and will avoid creative accounting to bypass the revenues. It is considered as a step towards a uniform rate for all players.The Union Government earns about Rs.7,000crore annually from it.

BSE inks cyber security MoU with IIT Kanpur

The Bombay Stock Exchange (BSE) has signed cyber security MoU (Memorandum of Understanding) with the Indian Institute of Technology (IIT) Kanpur. IIT Kanpur will assist BSE in testing its vulnerabilities in Information Technology (IT) system and network and help forming guidelines and auditing security operations. The key highlights of MoU includes Cooperation for cyber security research in financial markets; develop tools to strengthen cyber security;as well as to advise BSE in its cyber related issues.

RBI launches portal to curb illegal money

The Reserve Bank of India (RBI) has launched a website (sachet.rbi.org.in) to curb illegal and unauthorised pooling of funds by unscrupulous firms. It will help in filing and tracking of complaints relating to illegal and unauthorised pooling of funds by unscrupulous firms. It will also empower public to know whether any particular entity is registered with any regulator or not. This interface will help to enhance coordination among regulators and state government agencies to curb instances of unauthorised acceptance of deposits by unscrupulous entities.

Union Government fixes an inflation target of 4% for five years

The Union Government has set an inflation target of four per cent for the next five years i.e. till March 31, 2021. In this regard, Union Government will soon set-up Monetary Policy Committee (MPC) to adhere to the target till March 31, 2021. This target was fixed as per the agreement reached by the Union Government and Reserve Bank of India (RBI) on the Monetary Policy Framework in March 2015. The Union Government in June 2016 also had notified rules for setting up the MPC.

Monetary Policy Framework

Monetary Policy Framework is a move towards inflation targeting.The framework had set the inflation target at four per cent, plus or minus two per cent.

Inflation targeting

Inflation targeting is a monetary policy in which a central bank estimates and makes public a projected or “target” inflation rate. After declaration of target, the central bank attempts to steer actual inflation towards the target by making changes to the interest rates and other monetary tools.

Tarun Ramadorai Committee

The Reserve Bank of India (RBI) has constituted Dr. TarunRamadorai committee to study various facets of household finance in India. The committee will be chaired by TarunRamadorai, Professor of Financial Economics at University of Oxford. It will also have representation from all financial sector regulators in India. The Committee will primarily study various facets of household finance in India and benchmark India’s position against both the peer countries and advanced countries.

RBI keeps policy rate unchanged in 3^rd bi-monthly monetary policy review

The Reserve Bank of India (RBI) in its third bi-monthly monetary policy review has maintained status quo in key policy interest rate. It was last bi-monthly monetary policy review of RBI Governor RaghuramRajan who will step down in September 2016 after completing his term.

Policy Rates

• Repo rate under the liquidity adjustment facility (LAF) has been left unchanged at 6.50 per cent.
• Reverse repo rate under the LAF has also been left unchanged at 6.0 per cent.
• Marginal standing facility (MSF) rate: 7 per cent.
• Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 per cent of net demand and time liability (NDTL).
• Statutory Liquidity Ratio (SLR): Unchanged at 21 per cent.

NPA of commercial banks increased by 4%

The Union Government has announced that the Non-Performing Assets (NPA) of commercial banks have increased by around 4% in the last one year (March 2015 to March 2016). The NPA of banks was 5.43 percent in March 2015 which has risen to 9.32 percent in March 2016. The high incidences of NPAs are mainly related to power, road, steel, textiles and other sectors.It was announced by Union Minister of State for Finance (MoS) SantoshGangwar in a written reply to the RajyaSabha.

Non Performing Assets

NPAs (also called non-performing loans) are loans made by a bank or finance company on which repayments or interest payments are not being made on time. The loan is considered to be a NPA once the borrower fails to make interest or principal payments for 90 days.

Banned Ponzi schemes not under regulatory purview: SEBI

The Securities and Exchange Board of India (SEBI) told the Supreme Court that banned Ponzi schemes do not fall under its regulatory purview. This announcement was made after the apex court had asked government and SEBI, the stock market regulator about measures undertaken by them to check the menace of ponzi schemes while hearing on PIL filed filed by NGO ‘Humanity Salt Lake’against the menace of ponzi schemes running across the country in various forms which robbed the poor and small investors of their hard-earned money.

Ponzi scheme

Ponzi scheme is an investment fraud where clients are promised a large profit in short term at little or no risk at all.

Amitabh Kant committee to review e-commerce rules

The Union Government has constituted a committee to look at easing the policy regime for e-commerce players, including the rules for foreign direct investment (FDI). The committee is headed by Amitabh Kant, CEO of NITI (National Institution for Transforming India) Aayog. The other members in the panel include officials from Union Commerce Ministry and Industry and Department of electronics and IT among others. Representatives from four states including Maharashtra and Karnataka are also included as the members of the committee.

Cabinet approves liberalization of FDI norms for NBFCs

The Union Cabinet has approved liberalization of foreign investment norms for the non-banking finance companies (NBFCs) to improve the ease of doing business.Foreign investment in NBFCs can now come under the automatic route provided they are regulated by any of the financial sector regulators. However, entities not regulated by any of the regulators (RBI, SEBI, PFRDA etc.) or government agencies will need approval from the Foreign Investment Promotion Board (FIPB).

NBFC

A NBFC is a financial institution that provides banking services without meeting the legal definition of a bank, i.e. one that does not hold a banking license. It is established as a company registered under the Companies Act, 1956, but its operations are often still covered under a country’s banking regulations. NBFCs may be engaged in the business of loans and credit facilities, savings products, investments and money transfer services.

Union Government launches data bank portal for MSMEs

The Union Government has launched two important initiatives for the MSMEs, viz. MSME Databank Portal and Online Finance Facilitation Web Portal. They were launched by Union Minister of Finance & Corporate Affairs ArunJaitley on the sidelines of 14th Meeting of the National Board of MSME in New Delhi. The MSME Databank Portal aims to gather information about micro, small and medium enterprise (MSMEs) and Online Finance Facilitation Web Portal will provide collective funding options for MSMEs.

SBI approves merger of 5 associate banks, BMB with itself

The State Bank of India’s (SBI’s) board of directors has approved merger of its five associate banks and BharatiyaMahila Bank (BMB) with itself. These five subsidiaries are State Bank of Bikaner &Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Travancore and BharatiyaMahila Bank. The merger will create a global-sized bank with assets worth over Rs 37 lakhcrore. It will make SBI one of the top 50 global financial powerhouses in the world. The merged entity will have network of 22,500 branches and 58,000 ATMs serving a customer base of over 50 crore.

India Post Payments Bank Limited incorporated

The India Post Payments Bank Limited (IPPBL) has received the Certificate of Incorporation from the Registrar of Companies, Ministry of Corporate Affairs under the Companies Act 2013. IPPBL would be the first PSU under the Department of Posts (DoP). With the incorporation, the Board of the IPPBL is likely to be constituted soon. The incorporation of the IPPB Ltd paves the way for it to begin hiring of banking professionals to set up the bank to commence begin its operations in 2017. This could be the fastest roll out for a bank anywhere in the world. India Post Payments Bank (IPPB) will be a Public Limited Company under the DoP with 100% Government of India (GOI) equity.

BSNL inks MoU with Microsoft for enterprise business

State-run telecom giant Bharat Sanchar Nigam Limited (BSNL) has signed a strategic business Memorandum of Understanding (MoU) with Microsoft India. The MoU was signed to offer telecom and IT solutions for big businesses to meet the demand for IT and cloud services. The MoU will help BSNL to cater its end-to-end needs of enterprise customers involving many allied services in the field of IT, cloud infrastructure, software as a service, audio-video solutions etc.

JNPT signs ECB Agreement worth $400 Million with SBI and Development Bank of Singapore

India’s premier container port, Jawaharlal Nehru Port Trust (JNPT) in Navi Mumbai has signed 400 Million US Dollar agreement with State Bank of India (SBI) and Development Bank of Singapore (DBS) for External Commercial Borrowing (ECB). With this ECB Agreement, JNPT becomes the first major port in the country to take loans in dollars to improve the infrastructure. The ECB of 400 Million dollars will be primarily utilised for expansion of JNPT’s existing road network connecting to its port project. It will help JNPT to double its existing capacity.

RBI asks banks to extend loans to women SHGs at 7% rate

Reserve Bank of India (RBI) has asked banks to provide loans up to Rs 3 lakh at 7 per cent interest rate to Women Self-Help Group (SHG). This loan scheme must be provided under the National Rural Livelihoods Mission (NRLM)-Aajeevika scheme during 2015-16. The revised guidelines on interest subvention scheme under NRLM have been issued after approval from the Union Ministry of Rural Development. All women SHGs will be eligible for availing benefits under this scheme. Further, SHGs will be provided with an additional 3% subvention on the prompt repayment of loans. The funding for this subvention will be provided to the State Rural Livelihoods Missions (SRLMs) from the allocation for NRLM.

Union Cabinet approves creation of PDF to catalyse Indian economic presence in CLMV countries

The Union Cabinet has given its approval to create a Project Development Fund (PDF) for catalysing Indian economic presence in the CLMV countries viz. Cambodia, Laos Myanmar and Vietnam. The PDF will have corpus of Rs 500 Crore and shall be housed in Department of Commerce. The PDF will be governed by an Inter-Ministerial Committee under the chairpersonship of the Commerce Secretary. It will be operated through the EXIM Bank.It will benefit India’s industrial community for business expansion in the CLMV countries.

Green bonds

A green bond can be defined as a fixed income instrument for the purpose of raising debt capital frommarkets. The issuer of green bond publicly certifies that the capital is being raised to exclusively fund for specific “green” purposes.

Targets: India has embarked on an ambitious target of generating 160 GW (100 GW from solar and 60GW from wind energy sources) of renewable energy capacity by 2022. Also, the National Action Plan on Climate Change (NAPCC) has set an ambitious Renewable Purchase Obligation (RPO) target of 15 per cent by 2020.

Renewable Purchase Obligation (RPO): RPOs are the required minimum percentages of the total power that needs to be bought by the electricity distribution companies and by some large power consumers from renewable energy (RE) sources.

But unfortunately, Renewable energy is more capital intensive and this requires massive funding. At the same time, renewable projects financed by banks have higher interest rates and unattractive terms. In this scenario, Green bonds may be able to fill this gap.

Green bonds makes available a long term source of debt capital for renewable projects. Apart from facilitating the flow of capital to low carbon infrastructure investments, green bonds enable investor diversification; helps in refinancing bank loans at a lower cost; and mitigate risks as the repayment is tied to the issuer only.

Reduction in Guar-Gum production in India increases its prices

As the Guar seed cultivation has come down significantly this year on subdued international demand, exporters and traders had predicted around 30-40% in production. The area under guar seed cultivation in 2016-17 is likely to be one-fifth less than that of last year’s cultivation. As a result the Spot prices of guar seed have increased from Rs 3,200 per quintal in beginning of July to around Rs 3,600 per quintal now.

WTO launches new World Trade Outlook Indicator

• The World Trade Organisation has launched a new indicator designed to provide “real time” information on trends in global trade. The indicator with a reading of 100 will help in predicting the short-term trends in global trade.
• The new World Trade Outlook Indicator (WTOI) has suggested a slight slowdown in world trade in the third quarter.
• The indicator combines a variety of trade-related indices and would help in giving out an early signal by stating whether the trade is likely to slow or accelerate in the near future.
• The indicator will complement the existing tools such as the WTO’s longer-term trade forecasts, and other statistical releases.

UPI of NPCI to be rolled out soon

The Unified Payment Interface (UPI) of the National Payments Corporation of India (NPCI) is at an advanced stage of testing and would be soon rolled out. The release date got delayed due to the technical reasons.

UPI:

UPI is a flagship product of NPCI that will help India to move towards a cashless economy. It is a set of standard Application Programming Interface (APIs) that will provide uniform mobile payment system by leveraging digital trends such as increasing smart phone adoption and deeper penetration of mobile data. It will allow customers to send and receive money from their smartphones using virtual payments address without entering bank account details. It works as a single identifier that will eliminate the need to exchange sensitive information such as bank account numbers during a financial transaction.

National Payments Corporation of India (NPCI)

NPCI is the umbrella organisation for all retail payments system in India. It is being promoted the Reserve Bank of India. It was founded in 2008 as a not-for-profit organisation registered under section 25 of the Companies Act, 2013. It has successfully played pioneering role in the development of a domestic card payment network called RuPay, reducing the dependency on international card schemes.