Economy Banking Finance News PDF – Daily Top News – For RBI Grade B & SEBI Grade A 2020

We are all well-aware of the importance of current affairs in competitive exams like RBI Grade B & SEBI Grade A. Whether be it Phase 1 or Phase 2 of RBI Grade B, Economy Banking Finance News carries a considerable weightage. In the SEBI Grade A 2020 Notification, it is mentioned that current affairs mostly pertaining to financial awareness would be asked in Phase 1 (Paper 1) and some GA questions can be asked in Paper 2 as well. 

Keeping all the above-mentioned things in mind, we are starting this daily top news of the day which will mostly cover Economy Banking Finance News to keep you abreast about the latest happenings that might be asked in the exams. Let us get started. Also, get the weekly PDFs here.

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Daily Economy-Banking-Finance News

20 Jan 2021

1. Ola to build Rs 2,400-crore EV manufacturing facility with Siemens

  • Ola has said it had tied up with Siemens to build its upcoming electric vehicles (EV) manufacturing facility in Tamil Nadu. The announcement comes after the mobility firm announced a Rs 2,400-crore deal with the Tamil Nadu government last month to set up its first factory in the state.
  • The manufacturing factory will generate almost 10,000 jobs and have an initial capacity of 2 million units a year, Ola said in a statement.
  • It will serve as Ola’s global manufacturing hub, catering to its customers in India as well as key markets across Europe, the UK, Latin America as well as Australia, and New Zealand, it added.
  • Ola’s factory will have almost 5,000 robots deployed across various functions. The mobility firm will have access to Siemens’ integrated digital twin design and manufacturing solutions. This will help digitalise and validate product and production ahead of actual operations.


2. CCI okays Flipkart’s Rs 1,500 cr stake in Aditya Birla Fashion and Retail

  • The Competition Commission of India (CCI) on Wednesday approved the acquisition of a 7.8 percent minority stake in Aditya Birla Fashion and Retail Ltd by Flipkart Investments Private Ltd. The competition watchdog made the announcement in the evening on Twitter.
  • Last October, Flipkart Group and Aditya Birla Fashion and Retail Limited (ABFRL) formed a new strategic partnership aimed at enhancing the consumer fashion experience. Through an investment of Rs 1,500 crore, Flipkart Investments said it will acquire about a 7.8 percent stake in ABFRL. The companies have partnered to leverage synergies in the fashion segment.


3. Fintech firm BharatPe raises Rs 50 crore debt from Trifecta Capital

  • Fintech company BharatPe has said it has raised Rs 50 crore (about USD 7 million) in debt from venture debt firm Trifecta Capital.
  • This is the third tranche of debt fund financing raise by BharatPe. In the last two tranches, the company has raised Rs 199 crore in debt.

19 Jan 2021

1. Google, Lightbox, others invest $40 mn in e-comm, delivery startup Dunzo

  • Google-backed delivery and e-commerce firm Dunzo has attracted a fresh round of $40 million in capital from new and existing investors. Investors including Google, Lightbox, Evolvence, Hana Financial Investment, LGT Lightstone Aspada, and Alteria participated in this Series E Round. The funding would help it compete with players such as Swiggy, Zomato, Amazon, and Flipkart.
  • This capital comes after a year of robust growth amidst the Coronavirus (Covid-19) pandemic. In the coming year, the local commerce platform will focus on deploying its playbook for sustainable growth across its fastest-growing cities such as Mumbai, Chennai, and Pune. With a gross merchandise value (GMV) growth of 2X over the past year, Dunzo is now an about $100 million annualized GMV business. The growth in 2020 comes on the back of strong, organic user demand while maintaining gross margin profitability for the overall business.
  • “Dunzo’s mission resonated stronger than ever in 2020. We have been amazed by everything merchants and users have started to depend on the platform for,” said Kabeer Biswas, chief executive, and co-founder, Dunzo Digital Pvt. Ltd.


2. Uttar Pradesh emerges fifth largest exporter during Covid-19 pandemic

  • The Yogi Adityanath-led government in Uttar Pradesh has emerged as the fifth largest exporter of goods during the Covid-19 pandemic.
  • Goods like rice, medicines, carpets, silk, fertilisers, sugar, toys, and fish from the state have been exported abroad.
  • The state government made efforts under its ‘ease of doing business’ policy to offer big concessions to the exporters so that all the products could be easily shipped abroad.
  • According to the latest data released by the Central government, Uttar Pradesh outpaced many states, including Telangana, Kerala, Punjab, and West Bengal, in terms of exports during the pandemic.


3. FinMin allows Madhya Pradesh to raise Rs 1,423 cr through market borrowing

  • The Finance Ministry on Tuesday said Madhya Pradesh has been permitted to raise additional Rs 1,423 crore through market borrowing after the state implemented power sector reforms.
  • In a statement, the ministry said Madhya Pradesh has started Direct Benefit Transfer (DBT) of electricity subsidy to farmers in one district of the state with effect from December 2020. Thus, it has successfully implemented one of the three stipulated reforms in the power sector.
  • Successful implementation of the reform has made the state eligible to mobilise additional financial resources equivalent to 0.15 percent of its Gross State Domestic Product (GSDP).
  • “Accordingly, the Department of Expenditure has granted permission to the State to mobilise additional financial resources of Rs 1,423 crore through Open Market Borrowings. This has provided the much needed additional financial resources to the State to fight COVID-19 pandemic,” the statement said.

18 Jan 2021

1. PhonePe beats Google Pay tops UPI app space in December: NPCI data.

  • Walmart-backed PhonePe has emerged as the top unified payments interface (UPI) application (app) in December, with 902.03 million transactions accounting for Rs 1.82 trillion, followed by Google Pay with 854.49 million transactions worth Rs 1.76 trillion, thus, controlling the lion’s share of the UPI market, according to the data by National Payments Corporation of India (NPCI).
  • These top two apps account for more than 78 percent of the UPI market in terms of volume of transactions and 86 percent of the market by value of transactions in December.
  • The NPCI had recently imposed a 30-percent cap on third-party apps on total volume transactions processed via UPI, effective January 1, 2021. This had prompted many to criticise the regulator for stifling competition in the UPI space.
  • However, the existing third-party app providers processing over 30 percent of transactions will have a period of two years from January 2021, to comply with the same in a phased manner.
  • Both Google Pay and PhonePe will have to comply with the NPCI’s diktat and bring down the share in UPI transactions to below 30 percent in the next two years.

16 & 17 Jan 2021

1. PM Modi announces Rs 1,000 cr startup fund to push the growth of tech ventures

  • Prime Minister Narendra Modi on Saturday launched a Rs 1,000 crore startup seed fund at ‘Prarambh: Startup India International Summit.’ This fund would help to launch and grow new-age ventures.
  • PM Modi said this fund is one of the initiatives that the country has started so that startups don’t face any capital crunch. Startups are already being helped to raise equity capital through the Fund of Funds scheme. Further, the government will also help startups raise debt capital through guarantees.


2. 21% of startups and MSMEs benefited from govt Schemes in 2020: Survey

  • With economic recovery starting in September 2020 and the uncertainty of new coronavirus strains, the startups, and micro, small and medium enterprises (MSMEs) are seeing growth for their business and the necessary funds as the top challenge.
  • According to a survey by community platform LocalCircles, about 28 percent of small firms posted raising funds or loans as a top challenge. Another 25 percent are worried about finding growth. There was also 19 percent of firms who said they worry about the survival of their business, and 13 percent maintained bureaucratic inefficiencies as their top challenge in 2021.
  • “Only 31 percent of startups and MSMEs have cash reserves to sustain for more than 3 months,” said the survey.
  • In LocalCircles’ previous survey, startups and SMEs had voted ‘securing funding’ or loans as their top challenge in 2020. About 21 percent said that they have benefitted from various Government schemes like Startup India, MSME Samadhan, no or low-interest loans, Make in India, and Aatmanirbhar Bharat in the last 12 months. About 68 percent said “no” to the same question. Around 18 percent of firms in 2018, 20 percent in 2019, and 21 percent in 2020 said to have benefited from the various Government programmes.

15 Jan 2021

1. India’s m-cap to GDP ratio crosses 100% for the first time in over a decade

  • The combined market capitalisation of all listed companies in India has crossed the country’s GDP for the first time in more than 10 years.
  • This happened last in September 2010, when the market capitalisation to GDP ratio was 100.7 percent. The current ratio is, however, much lower than the all-time high of 149.4 percent in December 2007.
  • In the past 15 years, the ratio has seen a low of around 52 percent in March 2005, with a median value of 78.6 percent.
  • On Thursday, the ratio on the BSE reached Rs 197.7 trillion, against India’s nominal GDP at current prices of around Rs 190 trillion during the year ended December 2020.
  • The GDP number is based on advance estimates for FY21 by the National Statistical Office (NSO). The government agency expects an 11 percent year-on-year expansion in India’s nominal GDP in the second half of FY21 against a 20 percent contraction in the first half of the year.
  • It expects India to end FY21 with nominal GDP of around Rs 195 trillion, lower than the current market capitalisation of the BSE-listed companies.
  • The ratio was 99 percent at the end of December 2020, 56 percent at the end of March last year, and 78 percent at the end of December 2019.
  • While this ratio is more than 100 percent for developed markets such as the US, the UK, Japan, France, Hong Kong, Canada, Australia, and Switzerland, it is less than 100 percent for Germany.
  • India has one the highest market cap to GDP ratios among the emerging markets. The ratio is 75 percent for China, 70 percent for Brazil, and 47 percent for Russia. For Indonesia, a country with a per capita income similar to India’s, it is around 49 percent.

14 Jan 2021

1. TCS market capitalisation touches an all-time high of Rs 12 trillion

  • The market capitalisation (m-cap) of TCS on Thursday topped the Rs 12-trillion-mark for the first time.
  • Shares of the Tata group flagship closed at a record high of Rs 3,250.15, up 2.9 percent, valuing the company at Rs 12.02 trillion.
  • TCS is India’s second-most valuable firm after Reliance Industries (RIL), which has an m-cap of nearly Rs 12.9 trillion (including m-cap of partly-paid up shares).

13 Jan 2021

1. RBI constitutes a working group to develop and regulate digital lending

  • With frauds in the digital lending space coming into sharp relief, the Reserve Bank of India (RBI) on Wednesday constituted a working group to develop and regulate digital lending, including lending through online platforms and mobile applications (apps).
  • The working group will study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players, said the RBI. “Recent spurt and popularity of online lending platforms/mobile lending apps have raised certain serious concerns which have wider systemic implications,” said the RBI in a statement.
  • The group will evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI-regulated entities. It has also been tasked with identifying risks posed by unregulated digital lending to financial stability, regulated entities, and consumers. Furthermore, the working group is mandated to suggest regulatory changes to promote the orderly growth of digital lending. It will also recommend measures for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies, the RBI added.
  • The working group will also prepare a robust fair practices code for digital lending players, insourced or outsourced; suggest measures for enhanced consumer protection. Finally, the working group will recommend measures for robust data governance, data privacy, and data security standards for digital lending services, the RBI added.
  • The working group, chaired by RBI Executive Director Jayant Kumar Dash, will consist of both internal and external members and submit its report within three months.


2. New Foreign Trade Policy 2021-2026 to be rolled out from April, says Govt

  • Union Ministry of Commerce and Industry on Tuesday said that India”s new Foreign Trade Policy 2021-2026, under formulation, will come into effect from April 1, 2021, for five years and will strive to make the country a leader in international trade.
  • The Parliamentary Consultative Committee of the Ministry of Commerce and Industry held a meeting on the subject ”New Foreign Trade Policy 2021-26”, the commerce ministry said in a statement.


3. Sebi proposes to separate KYC and account opening process

  • Capital markets regulator Sebi on Wednesday proposed that KYC and account opening process should be separated in order to standardize the process and avoid duplication.
  • It has been suggested that KYC should be done through stock exchanges, depositories, and KYC Registration Agencies(KRAs), and documentation for the opening of an account for entering into the transaction would continue to be the responsibility of concerned registered intermediaries.
  • At present, the KYC of clients in the securities market is conducted by registered intermediaries — stock brokers, depository participants, RTAs — and then Registered Intermediaries (RIs) upload KYC records in the KRA system.
  • The role of KRAs is centralisation of the KYC records, ascertaining the upload of KYC documents and sharing KYC records with Sebi registered intermediaries as and when required, Sebi noted in the consultation paper.
  • The responsibility of conducting the KYC and maintenance of records rests with the RIs and KRAs is only a repository of KYC records.
  • In the existing KYC process, every RI has to invest in infrastructure, manpower, technology, and implement processes that often vary between intermediaries.
  • Also, in the eventuality of cancellation of registration of RI, original KYC documents collected by it may not be available to subsequent RI and the investor has to undergo the KYC process again.
  • The proposed process would help in achieving multiple objectives of standardising the KYC process, making the KYC process more robust, avoiding duplication, saving cost to RI among others, Sebi said.
  • The Securities and Exchange Board of India (Sebi) has sought comments from the public till February 15 on the proposal.
  • With regard to clients of mutual funds, in the proposed system, the Registrar to an Issue and Share Transfer Agent (RTA) appointed by the mutual fund should perform the KYC of the clients of mutual funds through the system of KRA as front-end or else may also seek registration as KRA from the regulator.
  • Since the KRAs should be responsible for the KYC of the clients and they should continue to be the repository of KYC data, the existing KYC records of clients submitted by RIs should be re-verified by KRAs and KRAs should ensure the correctness of the KYC records maintained by it, Sebi said.
  • “KRA shall ensure the correctness of all KYC records maintained by it by December 2021 after due verification,” it added.
  • The cost of conducting KYC by KRA should reasonable and should not cast an additional burden on investors.
  • With regard to authentication of existing records of clients with KRA, Sebi said such verification cost should be borne by KRA or KRA may be funded (one time) for such verification cost by Investor Protection Fund (IPF) of Sebi, stock exchanges, and depositories.


4. Sebi reduces application and registration fee for investment advisors

  • Markets regulator Sebi has cut down application and registration fees for individuals and corporates seeking a registered investment advisor status.
  • Now, individuals and firms (partnership) will have to pay Rs 2,000 while applying for an investment advisor certificate. Earlier, they had to cough up a higher amount of Rs 5,000 as an application fee, according to a Sebi notification issued on Monday.
  • The application fee for corporates including Limited Liability Partnerships (LLPs) has been brought down to Rs 10,000 from Rs 25,000.
  • At the time of grant of a certificate, individuals and firms will have to shell out a fee of Rs 3,000 and Rs 15,000 by bodies corporate. Earlier, the registration fee was Rs 10,000 and Rs 5 lakh for individuals as well as firms and body corporates respectively.
  • The cut down in fees is expected to help those seeking registration as investment advisors.
  • The move comes after a series of tightening of norms by the Securities and Exchange Board of India (Sebi) for registered investment advisors.
  • In September, Sebi came out with detailed guidelines for investment advisers asking them to ensure segregation of advisory and distribution activities at the client level.
  • Besides, Sebi had fixed a cap on fees that investment advisers (IA) can charge from clients. It had also put in place a procedural framework pertaining to audit and record-keeping.

12 Jan 2021

1. RBI forms working group on digital lending as frauds come into sharp focus

  • With frauds in the digital lending space coming into sharp focus, the Reserve Bank of India has set up a working group to study the digital lending activities of the regulated and unregulated players.
  • The group will suggest steps to regulate digital lending including online lending platforms and mobile lending.
  • The recent spurt and popularity of online lending platforms/mobile lending apps have raised certain serious concerns that have wider systemic implications, RBI said in a statement.
  • The six-member panel comprised of four RBI internal and two external members are expected to submit its report within three months.
  • The group will evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities.
  • It would identify risks posed by unregulated digital lending to financial stability, regulated entities, and consumers.
  • The Working group is mandated to suggest regulatory changes to promote the orderly growth of digital lending.
  • It would recommend measures for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies, RBI added.
  • It would prepare a robust Fair Practices Code for digital lending players, insourced or outsourced, suggest measures for enhanced Consumer Protection.
  • Finally, the working group would recommend measures for robust data governance, data privacy, and data security standards for digital lending services, RBI added.

11 Jan 2021

1. Paytm Payments Bank leads cashless toll market with six million FASTags

  • Paytm Payments Bank Ltd (PPBL) said it is the leading issuer of the electronic toll collection system FASTag in the country with over 6 million FASTags, as more citizens avail the service with the government extending the deadline for its adoption.
  • The firm said Paytm FASTag has gained popularity amongst users in the country due to its seamless onboarding and integration process which requires minimum documentation, instant activation, and customer care support. PPBL has now enabled cashless toll payments across 250 plazas in the country.
  • He said users have embraced the convenience of paying for tolls directly from their Paytm Wallet and not create separate accounts. “We continuously strive to ensure that customers are always charged the correct toll and have a hasslefree time on the road,” said Gupta.
  • Tags issued by other banks require buyers to provide multiple documents like ID proof, photographs, share personal details and maintain separate accounts and login credentials. Also, unlike tags from other banks which may require a couple of hours to get activated, Paytm FASTags are activated instantly from the moment users receive it. All FASTag transactions can be monitored on the Paytm app. Users can raise complaints on the app itself which are addressed by a dedicated customer support team working 24×7.
  • PPBL said it is the top issuer and the largest acquiring bank under the National Electronic Toll Collection (NETC) programme. It has also meticulously analyzed claims of higher toll charges raised by toll plazas against users. The company said PPBL has fought on the behalf of users against higher charges owing to misidentification of vehicles and double taxation. The firm said it has also successfully reversed the vast majority of wrong toll charges. Ensuring that users are not inconvenienced, Paytm said it has the distinction of being the FASTag issuer which raised 60 percent of all disputes and 95 percent of all arbitration cases in the NETC Programme.


2. IFC to fund Parag Milk’s working capital needs, long-term expansion plans

  • Parag Milk Foods Limited (Parag) is planning to raise money from International Finance Corporation (IFC) for meeting the company’s working capital needs and for its long-term expansion plan.
  • IFC committed around $31 million (around Rs 230 crore) to Parag in the form of non-convertible debentures to support the company’s working capital needs and long term CAPEX plans.
  • IFC’s investment under the RSE Covid-19 facility aims to provide Parag with sufficient additional liquidity in support of its working capital needs and its long-term expansion plans.


3. Icra sees GDP up by 10.1% YoY in FY22, but value just a tad ahead of FY20

  • Icra has projected the economy to grow by double digits year-on-year, at 10.1 percent in the next financial year, but cautions that the value of the gross domestic product (GDP) will only mildly surpass the 2019-20 level. India’s economy is expected to contract by 7.7 percent this financial year as per official advance estimates, but Icra pegged the GDP fall at 7.8 percent.
  • The rating agency expects the stance of the monetary policy to change to neutral from accommodative in the August 2021 policy review or later, after there is greater certainty on the durability of the awaited economic revival.


4. Indian banks’ bad loans may rise significantly: Financial stability report

  • Indian banks may see bad loans double despite signs of an improvement in the economic impact of the COVID-19 pandemic, a report from the Financial Stability and Development Council said on Monday.
  • The gross Non-Performing Assets of banks may increase from 7.5% in September 2020 to 14.8% under a severe stress scenario. Even under a baseline scenario, it may rise to 13.5% by September 2021, the council said.
  • The council is an umbrella group of regulators and releases the FSR report twice yearly to give a detailed overview of the health of the Indian financial system.
  • RBI Governor Shaktikanta Das said in his foreword to the report that maintaining the financial health of banks remained a priority and that lenders must look at raising capital and altering their business models to sustain future expansion.
  • The report also highlighted the challenges to the banks’ capital positions and said four lenders might fail to meet the capital requirement by September under a baseline scenario and could rise to nine banks in a severe stress scenario.
  • The central bank did not give the names of the lenders it was concerned about nor elaborate on the different scenarios.


5. NPA classification period likely to get a 30-day extension as bad loans mount

  • The Centre is in talks with the Reserve Bank of India (RBI) and other stakeholders to consider the possibility of easing the norms for non-performing assets (NPAs), or bad loans, by extending the classification period to at least 120 days. At present, a loan account turns into an NPA if it is not serviced for 90 days.
  • The proposal comes in the wake of mounting bad loans, particularly of state-owned lenders, due to disruptions caused by the Covid-19 pandemic. According to the RBI, the NPA ratio of all commercial banks may increase from 8.5 percent in March 2020 to 12.5 percent in March 2021.
  • The government is of the view that the time given under the existing norms is too short for assets to be classified as bad loans.
  • Currently, banks have three internal benchmarks before classifying a loan as an NPA. Accounts that are overdue for 1-30 days are classified as special mention account-0 (SMA-0), those that are overdue for 31-60 days are classified as SMA-1, and those overdue for 61-90 days are classified as SMA-2. Any account overdue for more than 90 days is recognized as an NPA.


6. Alternative investment funds get partial relief as Sebi relaxes norms

  • In a partial relief to alternative investment funds (AIFs), capital markets watchdog Securities and Exchange Board of India (Sebi) has provided certain exe­m­­ptions to such funds with re­gard to the investment committee.
  • Under the new norms, members of an investment committee of an AIF will no longer be responsible for investment decisions.
  • Also, members of the committee would not be liable for the compliance of the AIF investments with the regulatory provisions, governing documents of the AIF, and other applicable laws. However, the exemption in the AIF rule is conditional upon the capital commitment of at least Rs 70 crore from each investor accompanied by a suitable waiver, Sebi said in a notification on Friday.
  • The exemptions are limited to an “AIF in which each investor other than the manager, sponsor, employees or directors of the AIF or employees or directors of the Manager, has committed to invest not less than Rs 70 crore …and has furnished a waiver to the AIF in respect of compliance with the said clauses, in the manner specified by the board”. In October, Sebi amended AIF regulations that provided for shared responsibilities for the members of the investment committee (IC) with the investment manager.
  • The members of the IC of funds were also made liable for investment decisions and regulatory lapses in cases, where such a committee was set up for approving investment decisions.

9 & 10 Jan 2021

1. KYC must for a cash purchase of jewellery above Rs 10 lakh, govt clarifies

  • The Department of Revenue (DoR), Ministry of Finance has clarified that any purchase of gold, silver, jewellery, or precious gems and stones below Rs 2 lakh does not require PAN or Aadhaar of a customer as mandatory Know Your Customer (KYC) document.
  • Sources said that the notification issued under PML Act, 2002, on December 28, 2020, is a requirement of FATF Dealers in Precious Metals and Precious Stones (DPMS) to carry out KYC and Customer Due Diligence only when they conduct cash transactions above Rs 10 lakh.
  • “This is a requirement of FATF (Financial Action Task Force) – the global money laundering and terrorist financing overseer which as the inter-governmental body sets international standards aimed to prevent illegal activities on terror funding and money laundering,” they added.
  • According to sources, one of the recommendations requires the DPMS sector to fulfill obligations of Customer Due Diligence (CDD) when they conduct cash transactions above a certain limit (USD/EUR 15,000). India is a member of FATF since 2010.
  • “The misinformation being circulated in a certain section of media that any purchase, even if below Rs 2 lakh, of gold, silver, jewellery or precious gems and stones in cash require KYC are baseless,” sources added.
  • Since in India, cash transactions above Rs 2 lakh are not allowed under section 269ST of Income-tax Act, 1961, dealers not receiving cash more than Rs 2 lakh in compliance with the existing provisions of the Income-tax Act will not be covered under this notification, they said further.


2. Firms likely to raise $5 billion through dollar bond sales in January

  • Foreign fund-raising activity by Indian entities has begun on a strong note with banks and financial institutions mopping up $2 billion in the first week of the new year. Many Indian corporate houses are in advanced stages of resource mobilisation, which may take the fund-raise tally to $5 billion by early February, investments bankers said.
  • Fund-raising volumes across the globe, especially through dollar bonds, were the highest ever in 2020, and the first three sessions of 2021 witnessed about $50 billion in fund-raising.
  • In India, Export-Import Bank of India raised $1 billion, State Bank of India garnered $600 million, and Shriram Transport about $500 million. This was done without conducting roadshows.
  • They were able to tighten the price guidance by 20-45 basis points (bps) compared to the initial price guidance. Like in the case of SBI, the price guidance was revised from T+175 bps to T+140 bps on the back of strong demand.
  • Sunil Khaitan, India head, Global Capital Markets, Bank of America, said it has been a good start to the new year from a fund-raising perspective. Three deals have been executed in the first week of January. This is a precursor to the deal activity that will happen through this month and hopefully during the year.


3. MCA proposes pre-packaged insolvency resolution process for Covid defaults

  • The Ministry of Corporate Affairs has proposed a framework for a ‘prepackaged’ insolvency resolution process that may be implemented in phases to give priority to Covid-related defaults for which the corporate insolvency resolution mechanism is not available and defaults that are anywhere between Rs 1 lakh and Rs 1 crore.
  • A draft proposal by the sub-committee of the insolvency law committee has recommended that the corporate debtor (CD) may initiate the pre pack since it may prove difficult to implement if creditors are allowed to do so without the willingness of the promoter.
  • Unlike the corporate insolvency resolution process (CIRP), where the resolution professional takes charge of the company, the sub-committee has proposed a debtor-in-possession model for pre-packs.
  • The Insolvency and Bankruptcy Code (IBC) may make a skeleton provision enabling pre-pack, and prescribe the contours of subordinate legislation, that will allow the government to introduce “many sophisticated variants of pre-pack in the course of time”.
  • The future phases would cover a default above Rs 1 crore, followed by Rs 1 to Rs 1 lakh and then the pre-default stress which would require the consent of 75 percent of the creditors to avoid any potential misuse, said the sub-committee.
  • The committee has invited industry suggestions for the scheme by January 22. “Given the urgency to roll out a pre-pack, the IBC may be amended quickly, preferably by an Ordinance,” said the committee.
  • The corporate debtor would require the consent of a simple majority of unrelated financial creditors for initiation of the pre-pack.
  • The framework also specifies that no two proceedings – pre-pack and CIRP – under the Code shall run parallel.
  • The committee of creditors (CoC) should approve or reject a resolution plan, as it does in a CIRP, according to the framework proposed.
  • Market participants will get 90 days to submit the resolution plan to the adjudicating authority, and 30 days thereafter to approve or reject it.
  • Provisions of 29A that prohibit persons with specified disabilities to submit a resolution plan must not be diluted in the design of the pre-pack framework, added the committee.
  • Since the success of the pre-pack hinges upon the cooperation and active participation of the CD, its promoters, management, and the board of directors in the process the draft proposal has laid out tasks that have to be undertaken before commencing the pre-pack. These include a board meeting, followed by a general meeting of shareholders of the CD, to approve the proposal to initiate the pre-pack.
  • The committee has recommended a faster and simplified claim verification process and criminal action if the CD provides any wrong information or fails to provide material information with respect to any claim.
  • It is also proposed that access to interim finance should be available, subject to the approval of the CoC, as is the current requirement under Section 28 of the IBC, and it shall be included in the insolvency resolution process cost.
  • In order to provide a calm period for working out a resolution plan, the sub-committee has said the moratorium under Section 14 should be available till the closure of the process.


4. Sebi permits the transfer of bourses’ excess contribution from core SGF

  • Sebi has given the green light for transfer of excess contribution by exchanges, from core settlement guarantee fund (SGF) of one clearing corporation to another, in an inter-operable scenario.
  • This comes following requests made by the stock exchanges.
  • “It has been decided to allow the transfer of excess contribution made by exchanges from the core SGF of one clearing corporation to the core SGF of another, in an inter-operable scenario,” the regulator said in a circular.
  • However, stock exchanges and clearing corporations have been asked to ensure certain conditions.
  • Following the receipt of a request from an exchange in this regard, the clearing corporation that receives such a request will transfer directly such excess contribution of the exchange, in its core SGF to the core SGF of another clearing corporation, under intimation to that bourse.
  • Explaining further, Sebi said that suppose exchange ‘A’ requests to transfer its excess contribution from core SGF of clearing corporation ‘B’ to core SGF of clearing corporation ‘C’, then after receipt of such request from ‘A’, ‘B’ will transfer directly the excess contribution of ‘A’ from core SGF of ‘B’ to core SGF of ‘C’, under intimation to exchange ‘A’.
  • In addition, the clearing corporations have to ensure compliance with requirements of the minimum required corpus of core SGF, as prescribed by Sebi.
  • In 2014, the Securities and Exchange Board of India (Sebi) had put in place a new layer of safety net in form of a ‘core settlement guarantee fund’ to mitigate risks from possible default in institutional trades.

8 Jan 2021

1. Fiscal deficit to hit 6.1% of GDP in FY21: Govt’s first advance estimates

  • The Centre’s fiscal deficit will touch at least 6.1 percent of gross domestic product (GDP) in 2020-21 (FY21). This based on the first set of advance growth estimates released by the government on Thursday, ahead of the Union Budget on February 1.
  • This assumes the gap between the Centre’s expenditure and revenue to be at least Rs 12 trillion, based on increased borrowing announced by the government in May to deal with the Covid-19 outbreak.
  • However, economists estimate the full-year’s fiscal deficit to range between 7 percent and 9 percent of GDP, against 3.5 percent estimated by the government in the Budget. Then, the government had assumed nominal GDP growth of 10 percent over the previous fiscal year at Rs 224.8 trillion.
  • The government had budgeted disinvestment proceeds of Rs 2.1 trillion for FY21, but only 3 percent of that has been achieved till October.
  • The Centre’s fiscal deficit had widened to 135 percent of the full-year’s Budget Estimates at Rs 10.7 trillion in the first eight months of FY21. It is 33 percent higher than the corresponding period last year. The fiscal deficit had breached the Budget target in July itself as the economy faced the most stringent Covid lockdown in Q1.
  • Finance Minister Nirmala Sitharaman had last month outlined the government’s resolve to increase spending to support the economy without worrying about the fiscal deficit target.


2. Per capita income set to witness a 5% fall: First advance estimates

  • Indians are likely to see a 5.4 percent decline in incomes during FY21 if the national income is evenly divided among the population.
  • The per capita income is projected to decline to Rs 1.27 lakh in the year compared to Rs 1.34 lakh in the previous year by Advance Estimates.
  • The plight of the common man would be worsened due to the fact that income distribution is vastly unequal and Covid-19-induced lockdowns have rendered many jobless.


3. First advance estimates: GDP to grow 8-11.5% in FY22, say experts

  • The economy will grow between 8 and 11.5 percent at constant prices and at 11-15.5 percent at current prices during 2021-22, say economists.
  • It is the gross domestic product (GDP) growth or economic expansion at current prices that plays a crucial part in Budget making. It is on the basis of this number that tax figures and fiscal deficits are projected.
  •  As the economy is expected to decline 7.7 percent in the current fiscal year, D K Srivastava, chief policy advisor, EY India, has pegged GDP growth at constant prices at 8 percent in 2021-22. He projected nominal GDP to be 11-11.5 percent.
  • He said there would be a very strong recovery next fiscal year largely due to the base effect.
  • He said manufacturing, which was projected to decline by 9.4 percent in the current financial year by advance estimates, would do better. Also, construction will do well, he said.
  • Within services, financial, real estate, and professional services are expected to perform well, he said. This sector was projected to fall by 0.8 percent in 2020-21.
  • On the other hand, trade, hotels, transport, communication, and services related to broadcasting are likely to witness continued contraction, Srivastava said.
  • However, the rate of construction may fall compared to the 21.4 percent decline expected this financial year by official estimates, he said.
  • Government-induced public administration, defense, and other services are likely to grow 8 per cent in the next financial year compared to a fall of 3.7 per cent projected this financial year by advance estimates.


4. Gap between PMJDY scheme beneficiaries and RuPay cards issued widens

  • More than 38.2 million beneficiaries were added under the Pradhan Mantri Jan Dhan Yojna (PMJDY) in a year (December 2019 to December 20­20), according to the website of the scheme. However, only 8.9 million additional RuPay cards were issued to beneficiaries during this period.
  • This comes at a time when the government has been pushing banks to focus more on RuPay cards and provide it as the first option to customers.
  • According to the PMJDY website, benefits under PMJDY include one basic saving account for an unbanked person, where there is no need to maintain a minimum balance. Also, a RuPay debit card is provided to these account holders.
  • The card can be used to make transactions at all ATMs, point of sale (PoS) terminals, and e-commerce websites. It also comes with a personal accidental death and total disability coverage of up to Rs 2 lakh.
  • RuPay, operated by the National Payments Corporation of India (NPCI), is India’s homegrown card network. It competes against glo­bal peers such as Visa and Mastercard in the Indian market. Gov­ernment data on the PMJDY website shows that as of December 30, 2020, there are 415.8 million beneficiaries under the central government’s ambitious financial inclusion programme (PMJDY). Deposits in these accounts are a little over Rs 1.35 trillion.
  • However, for the 415.8 million beneficiaries under the scheme, only 306.2 million RuPay cards have been issued. A year ago, as of December 25, 2019, the number of beneficiaries under PMJDY was 377.6 million while the number of Rupay debit cards issued to beneficiaries was 297.3 million. Similarly, a year prior to that (as of December 26, 2018), the total number of beneficiaries was 336.56 million and the number of RuPay cards issued was 268.71 million. So, clearly, the gap has been increasing every year.
  • According to Anand Kumar Bajaj, founder of Pay­Nearby, in November 2019, around 150 million RuPay cards were moved out of the acceptance system as they were not chip and pin compliant. So, this could be one of the explanations for the gap. Bajaj also argued that income to banks from RuPay debit cards has reduced because of the government’s decision to do away with MDR (merchant discount rate). So, the banks are in a dilemma when it comes to issuing RuPay debit cards.
  • “More importantly, the ru­ral population is able to get access to money through thumb impressions. Hence, there is no requirement for a debit card and a PoS machine. Also, there are not enough PoS ma­chines in rural areas. So, with UPI coming up, what is the point of giving cards?” he said.
  • Explaining the gap, a senior banker said it is always not technically possible to issue a card even when the rule says otherwise. “PMJDY accounts have to be issued RuPay cards. But it is not possible to do 100 percent coverage. I do not thi­nk banks are avoiding issuing RuPay cards to PMJDY acco­unts. At least for public sector banks, no MDR on Ru­Pay cards is not really an issue,” the public sector banker added.
  • To make RuPay cards attractive to banks, a request has been made to the government to re-introduce MDR on RuPay, the banker said.
  • In its annual progress report on banking, the Reserve Bank of India (RBI) had said that in six years of its implementation, the total nu­mber of accounts opened un­der PMJDY reached 414 milli­on, with Rs 1.30 trillion of de­­p­osits as of December 2, 2020.
  • Of these accounts, nearly two-thirds are operational in rural and semi-urban areas. As of September 2020, more than 60 percent of PMJDY accounts were with public sector banks. However, usage of these ac­counts remains a concern, with lackluster growth in the average balance in these accounts.


5. Sebi eases FPO norms; scraps minimum promoter’s contribution requirement

  • Capital markets watchdog Sebi on Friday relaxed the framework for Follow-on Public Offers (FPOs), a move that will help promoters of companies to raise funds more easily through this route.
  • The applicability of minimum promoters’ contribution norm and the subsequent lock-in requirements for the issuers making FPO have been done away with by the regulator, as per notification.
  • Earlier, promoters were mandated to contribute 20 percent towards a company’s FPO. Besides, in case of any issue of capital to the public, the minimum promoters’ contribution was required to be locked-in for three years.
  • The regulator said the relaxation would be available for those companies which are frequently traded on a stock exchange for at least three years. Also, such firms should have redressed 95 percent of investor complaints.
  • The issuer company needs to be in compliance with the LODR (Listing Obligations and Disclosure Requirements) Regulations for at least three years, according to Sebi.
  • Subject to certain conditions, an issuer who has not complied with the listing requirements relating to the composition of the board of directors for any quarter during the last three years immediately preceding the date of filing of the draft offer document would be deemed as compliant.
  • The condition is that the issuer should be compliant with the requirement at the time of filing the preliminary paper and that adequate disclosures are made in the offer document about such non-compliances.
  • Sebi board had approved the proposal in December.

7 Jan 2021

1. SBI raises $600 million from bonds to fund overseas business expansion

  • State Bank of India (SBI) has said it has concluded the issuance of USD 600 million (about Rs 4,500 crore) from bonds to fund the expansion of the overseas business.
  • The fund raised through senior unsecured fixed-rate notes having the maturity of 5.50 years and coupon of 1.80 percent payable semi-annually under Regulation-S, SBI said in a regulatory filing.
  • “The bonds will be issued through our London branch as of January 13, 2021, and shall be listed on Singapore Stock Exchange and India International Exchange, GIFT City,” it said.


2. Farmers’ protest: MSP distorting cropping patterns, says WTO report

  • Amid demand by farmers on legalising the minimum support price (MSP), the World Trade Organization (WTO) has taken up a review of India’s trade policy, that states floor prices distort cropping patterns.
  • Distortion of cropping patterns is in favour of commodities such as wheat, rice, cotton, and sugar that are pro­cured by the central government at MSP and away from other items such as pulses, coarse grains, and oilseeds, said a report by the WTO Secretariat, written independently.
  • The practice of procurement from certain states has also resulted in regional disparities in production, the report taken up for review among other trade policies said.
  • “It is also suggested that due to fragmentation of agricultural markets and weak infrastructure, farmers rece­ive only a fraction of the price paid by consumers, with the bulk going to intermediaries,” it said. India’s last policy review took place in 2015.
  • The issue of guaranteed MSP is one of the main concerns of farmers currently protesting near Delhi to repeal new farm laws introduced by the government. The government has held seven rounds of consultations with farmer unions that have remained inconclusive over their two key demands of repealing the newly enacted laws, and provision of legal guarantee on the MSP.
  • India’s agricultural policy aims at providing stability in domestic food prices and food security, and to ensure this its food subsidy accounts for almost half of the government’s total subsidies, the report said. An additional third of total explicit subsidies are accounted for by the subsidy for fertilisers.
  • The report quoted independent research that estimated the size of the government’s subsidies for agriculture was at around 8 percent of farm output in 2015-16, while public-sector investment in the sector continued to decline.
  • To address these, India introduced marketing reforms by implementing new laws — Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 — that give freedom to farmers and traders to conduct intra or interstate trade of agricultural products. It also encourages contract farming with the goal to protect and empower farmers, so that they can engage with agri-business firms, processors, wholesalers, exporters, or large retailers for farm services at mutually agreed prices, in a transparent manner, the report said.


3. Covid slump may cause 7.7% GDP contraction in FY21: First Advance Estimate

  • India’s economy is set for its biggest annual contraction in records going back to 1952 as the rapid spread of coronavirus cases and measures to contain them hurt businesses and households.
  • The gross domestic product will shrink 7.7% in the financial year ending March 2021, the statistics ministry said in its first advance estimate published on Thursday. That’s steeper than a 7.5% drop forecast by the Reserve Bank of India, as well as economists surveyed by Bloomberg and other agencies.
  • Agriculture is projected to grow at 3.4 percent this financial year and manufacturing to contract 9.4 percent. Trade, hotel, and transport in the services sector are projected to contract 21.4 percent.
  • The projections, following a contraction of nearly 24 percent in the April-June quarter and 7.5 percent in the July-September quarter, reflect the slowdown affected by the coronavirus pandemic and the economic impact of months-long nationwide lockdown. The country’s GDP shrank 15.7 percent in the first half of the year. Against this backdrop, the estimate of a GDP contraction for the full financial year comes as no surprise; it is mostly in line with those by most agencies and differs only in scale (see table).
  • While the Reserve Bank of India (RBI) has pegged 2020-21 GDP contraction at 7.5 percent, the World Bank sees the economy shrinking by 9.6 percent this year. In its Global Economic Prospects report, the World Bank said the informal sector, which accounts for four-fifths of employment, had been subject to severe income losses during the pandemic. “In India, the pandemic hit the economy at a time when growth was already decelerating. The output is estimated to contract by 9.6 percent in the fiscal year 2020-21, reflecting a sharp drop in household spending and private investment,” it said.
  • The First Advance Estimate is important as it would serve as a guideline for Finance Minister Nirmala Sitharaman and her team as they prepare Union Budget 2021, to be presented early next month. The NSO’s advance estimates are seen as a significant gauge for the economy: They have accurately projected the real GDP growth rate in three of the past 12 years.
  • “In terms of the sectoral data, our own estimates pencil in a weaker performance of construction, financial, real estate and professional services (FRP), and public administration, defense, and other services (PADOS), and a stronger performance of manufacturing, mining, and quarrying, trade, hotels, transport, communication and services related to broadcasting (THTCS), compared to the Advance Estimates for FY2021,” said Aditi Nayar, of rating agency ICRA.


4. India’s fiscal deficit likely to be over 7% in 2020/21: Report

  • India’s fiscal deficit for the year ending in March is likely to be over 7% of gross domestic product, three sources told Reuters, as revenue collections suffered from a lockdown and restrictions to rein in the spread of COVID-19.
  • India’s government had projected a fiscal deficit of 3.5% of GDP for the current year last February. It estimated government borrowing of 7.8 trillion rupees, later revised to 12 trillion rupees, to provide relief to millions of people and businesses hurt by the pandemic.

6 Jan 2021

1. Regional connectivity gets a boost as airlines expand flights under RCS

  • Bareilly in Uttar Pradesh and Sindhudurg in Maharashtra will be added to the aviation map of the country in the next few weeks as Air India’s regional arm Alliance Air plans to expand services under the regional connectivity scheme (RCS).
  • While this will increase the number of operational airports in the country to 131, other smaller towns too are seeing an increase in connectivity. Jharsuguda in Odisha will get SpiceJet flights to Mumbai and Bengaluru from January 12. Hisar in Harayana is getting connected with Chandigarh, Dharamshala, and Dehradun in the same month. This service will be operated by Air Taxi airline using a three-seater Italian made Tecnam aircraft.


2. MP, AP to get additional financial assistance of Rs 1,004 crore for CAPEX

  • Madhya Pradesh and Andhra Pradesh have become the first states to complete three out of four citizen-centric reforms stipulated by the Ministry of Finance.
  • The two states have completed the One Nation, One Ration Card reforms, Ease of Doing Business reforms, and Urban Local Bodies reforms, according to an official statement issued on Wednesday.
  • The Department of Expenditure has decided to provide additional financial assistance of Rs 1,004 crore to these states under the newly-launched scheme of ‘Special Assistance to States for Capital Expenditure.’
  • Andhra Pradesh will get an additional amount of Rs 344 crore while Madhya Pradesh has become entitled to receive Rs 660 crore for capital projects.
  • The scheme was announced by Finance Minister Nirmala Sitharaman on October 12 last year as part of the Atmanirbhar Bharat package. The additional financial assistance for the capital expenditure is in addition to the permission of Rs 14,694 crore issued to these states for extra borrowings for completing the reforms.
  • The scheme of ‘Special Assistance to States for Capital Expenditure’ is aimed at boosting capital expenditure by state governments which are facing a difficult financial environment this year due to a shortfall in tax revenue arising from the Covid-19 pandemic.


3. SMCB becomes India’s first urban co-operative bank to transition to SFB

  • Shivalik Small Finance Bank (SSFB) will start its banking operations in April 2021. It has received the commercial banking license from the banking regulator Reserve Bank of India (RBI). This will mark the transition of Shivalik Mercantile Co-operative Bank (SMCB) to a Small Finance Bank (SFB).
  • SMCB is the first urban co-operative bank (UCB) in India to transition to an SFB under the voluntary transition scheme. The bank had received in-principal approval from the RBI for transitioning to an SFB in January 2020. The RBI had given an 18-month timeline to commence business.
  • Suveer Kumar Gupta, MD & CEO of Shivalik Mercantile Cooperative Bank, said in a statement that an advanced technology platform including the ability to implement open banking will help to easily collaborate with the external ecosystem, including fintech, digital businesses, and non-banking financial service providers.
  • SSFB operates through 31 branches and over 250 banking agents in Uttar Pradesh, Madhya Pradesh, Delhi, and Uttarakhand with 400,000 customers. As of March 31, 2020, the total deposit base of the bank stood at Rs 1,140 crore and total advances stood at Rs 719 crore.
  • Technology adoption will allow us to explore previously under-explored customer segments and expand across the country without reliance on a physical branch network, Gupta added.
  • According to RBI’s Trends and Progress in Banking report, combined loans and advances of existing SFBs rose by 29.7 percent from Rs 69,856 crore in FY19 to Rs 90,576 crore in FY20. Deposits were up by 48.1 percent from Rs 55,686 crore in March 2019 to Rs 82,488 crore in March 2020.
  • SFB, as a group, booked a net profit of Rs 1,968 crore in FY20 as against a loss of Rs 727 crore in FY19. Their capital adequacy ratio rose to 20.2 percent in March 2020, up from 16.7 percent in March 2019.

5 Jan 2021

1. Indian economy expected to contract by 9.6% in 2020-21: World Bank

  • India’s economy is estimated to contract by 9.6 percent in the fiscal year 2020-21, reflecting a sharp drop in household spending and private investment, and the growth is expected to recover to 5.4 percent in 2021, the World Bank said on Tuesday.
  • In its Global Economic Prospects report, the World Bank said that the informal sector, which accounts for four-fifths of employment, has been subject to severe income losses during the Covid-19 pandemic.
  • In India, growth is expected to recover to 5.4 percent in 2021
  • South Asia is projected to grow by 3.3 percent in 2021.


2. India witnessing ‘V-shaped’ economic recovery since June: FinMin Report

  • India has been witnessing a ‘V-shaped’ recovery since June with the gradual easing of restrictions on economic activities, said a Finance Ministry report.
  • “The sustained improvement in high-frequency indicators ignite optimism of an improved performance in the second half of the year,” it said.
  • The Monthly Economic Recovery for December by the Department of Economic Affairs (DEA) also noted that the impending vaccination is set to spur the momentum in economic activity globally.
  • “The effective management of Covid-19 spread despite the festive season and onset of the winter season, combined with sustained improvement in high-frequency indicators and V-shaped recovery along with easing of lockdown restrictions distinguish Indian economy as one riding against the Covid-wave,” it said.
  • The agricultural sector remains the bright spot of the Indian economy, with healthy year-on-year growth of 2.9 percent in rabi sowing, accelerating tractor sales, and reservoirs’ live storage at 122 percent of the decadal average.
  • As per the DEA report, the rise in minimum support prices accompanied by record procurement, and accelerated wage employment generation through MGNREGS, bodes well for rural incomes and bears testimony to PMGKY’s success in alleviating rural distress.
  • “This rise in rural incomes is mirrored in the healthy, though moderated, sales in passenger vehicles, two and three-wheelers and tractors, and a rebound in vehicle registrations for the first time after March 2020,” it added.
  • Further, the industrial production growth ran parallel to the festive fervour of October and rose to an eight-month high, led by the manufacturing and electricity sector. The core industries registered a slight decline in November driven by natural gas and cement, while coal production, electricity, and fertilizers’ production registered growth.


3. Exim Bank sells bonds worth $1 billion to global investors at a dirt low rate

  • The Exim Bank has started the new year on a high note raising $1 billion through a dollar-bond sale to international investors, offering just 2.25 percent for the ten-year money, setting a new low in pricing.
  • The issue was oversubscribed four times or worth $4 billion as against $1 billion on offer, managing director David Rasquinha said, adding that in Asia the issue was oversold within three hours of the launch with the order book hitting $1.75 billion Monday morning.


4. RBI starts LEI for large value transactions in centralised payment systems

  • The Reserve Bank of India (RBI) on Tuesday introduced the legal entity identifier (LEI) in a phased manner in the over-the-counter derivative and non-derivative markets as well as for large corporate borrowers.
  • It will be introduced for all payment transactions of Rs 50 crore and above by entities using RBI’s Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT).
  • LEI is a 20-digit number used to uniquely identify parties to financial transactions worldwide.
  • In order to prepare for the full-scale introduction of LEI, banks have to advise entities who undertake large value transactions (Rs 50 crore and above) to obtain LEI in time, if they do not already have one. Also, they have to include remitter and beneficiary LEI information in RTGS and NEFT payment messages and maintain records of all transactions of ₹50 crores and above through RTGS and/or NEFT.


5. Card networks to make recurring payments to PIDF, support initial corpus

  • The Reserve Bank of India’s (RBI) payment infrastructure development fund (PIDF) scheme intended to create three million touchpoints in the country every year for digital payments with a focus on developing payment infrastructure in tier-3 to tier-6 centers, has been operationalized. It will be valid for three years, effective January 1, 2021, but can be extended by two more years, if required.
  • While RBI will contribute Rs 250 crore towards the scheme initially, the authorized card networks are expected to put in Rs 100 crore. Furthermore, the card-issuing banks will also contribute to the scheme based on the card issuance volume at the rate of Rs 1 and Rs 3 per debit and credit card issued by them, respectively. The RBI is expecting to get the collections done by the end of this month.
  • Apart from the initial contribution, the card networks and the card-issuing banks based will have to make recurring contributions to PIDF based on their turnover. For example, for card networks, they have to contribute 0.01 paisa per rupee of a transaction; banks, on the other hand, 0.01 and 0.02 paisa contribution per rupee of a transaction through debit and credit card, respectively. But they have to contribute Re 1 and Rs 3 for every new debit and credit card issued by them respectively during the year. However, if there is any shortfall, the RBI will contribute to filling it up. The contribution will be collected by January 31, based on data till December 31, and by July 31, based on data of June 30.
  • “The objective of PIDF is to increase the number of acceptance devices multi-fold in the country. The scheme is expected to benefit the acquiring banks / non-banks and merchants by lowering overall acceptance infrastructure cost”, RBI said.
  • Under the scheme, the northeastern states will be given special focus. Furthermore, merchants who do not have any payment acceptance device will be targeted under the scheme. While tier-3 and tier-4 centers will get 30 percent of the total acceptance devices, tier-5 and tier-6 will get 60 percent, and northeastern states will get the rest 10 percent.
  • The scheme will be on a reimbursement basis hence claims will have to be submitted only after making payment to the vendor. While the maximum cost for a physical acceptance eligible for subsidy is Rs 10,000 (including a one-time cost of Rs 500), while that for digital acceptance will be Rs 300, with the one-time cost.
  • Mostly merchants providing essential services, government payments, fuel pumps, public distribution scheme (PDS) shops, healthcare, and Kirana shops will be the targeted market segment of the scheme.
  • “Multiple payment acceptance devices/infrastructure supporting underlying card payments, such as physical PoS, mPoS (mobile PoS), GPRS (General Packet Radio Service), PSTN (Public Switched Telephone Network), QR code-based payments, etc”, the RBI said.
  • More importantly, the subsidy amounts will vary upon the acceptance devices. A subsidy of 30 percent to 50 percent of the cost of physical PoS and 50 percent to 75 percent subsidy for Digital PoS shall be offered.
  • The RBI has said, the parameters/rules for claiming the amount of subsidy for the capital expenditure, taking into account the type of device, deployment location, etc., shall be framed by the advisory council.
  • And, the subsidy will be granted on a half-yearly basis only upon ensuring that the performance parameters have achieved, including conditions for the ‘active’ status of the acceptance device and ‘minimum usage’ criteria.
  • “The minimum usage shall be termed as 50 transactions over a period of 90 days and active status shall be minimum usage for 10 days over the 90-day period”, RBI said.
  • Furthermore, only 75 percent of the subsidy claims will be released and the rest 25 percent amount will be released subject to the acceptance device being active in 3 out of the 4 quarters of the ensuing year.

4 Jan 2021

1. Farmers’ protest: Govt may add rice, wheat in PM-ASHAA to end the logjam

  • The Centre is looking at various options, such as the inclusion of paddy and wheat in the Pradhan Mantri Annadaata Aay Sanrakshan Abhiyan (PM-ASHAA), to break the deadlock with protesting farmers.
  • Inclusion in PM-ASHAA will make paddy and wheat eligible for deficiency price payment, which, as of now, is applicable to pulses and oilseeds. It is also exploring the option of a minimum reserve price for private traders based on the cost of production of farm produce.
  • Officials said the government is toying with various options to break the impasse as farmers seemed adamant on a legal guarantee for the minimum support price (MSP) along with the repeal of the three farm laws as the main conditions to end their month-long sit-in at Delhi’s borders.
  • In case of repeal of the laws, officials said already, a lot of objections raised by farmers have been included in the dilutions suggested by the government. These include allowing states to levy market fees on private mandis and empowering them to frame rules for registration of private traders, which should address the concern.
  • PM-ASHAA provides a mechanism through which the Centre can either directly procure specified farm produce or pay the difference if prices fall below the MSP. Broadly, the PM-AASHA has three components — the Price Support Scheme (PSS), the Price Deficiency Payment Scheme (PDPS) — modelled on the lines of erstwhile Bhawantar Bhugtan Yojana of Madhya Pradesh — and Private Procur­ement and Stockiest Scheme that was launched on a pilot basis. Under the scheme, the Centre’s total procurement is capped at 25 percent of the total production of a crop in a state. This can be expanded up to 40 percent if the commodity is used for the public distribution system or any other state welfare scheme.
  • Meanwhile, in case of a minimum reserve price, officials said an option could be to explore something like a floor rate for private traders to buy farm produce based on the production cost as estimated by the Commission for Agriculture Costs and Prices (CACP). However, this could be applicable only for the 23 crops for which CACP determines the production cost.
  • The Committee for Doubling Farmers’ Income has also talked about such a reserve price. It said there was a need for setting a minimum reserve price, distinct from the MSP to protect the interests of farmers without distorting the market forces. Whenever market prices fall before the notified MSP, there is no minimum reserve price for private trade to buy the farm produce.


2. FinMin releases Rs 6K crore to states to meet GST compensation shortfall

  • The Finance Ministry on Monday released the tenth installment of Rs 6,000 crore to the states to meet the GST compensation shortfall, taking the total amount provided so far under this window to Rs 60,000 crore.
  • The Centre had set up a special borrowing window in October 2020 to meet the estimated shortfall of Rs 1.10 trillion in revenue arising on account of the implementation of GST. The Ministry of Finance in a statement said it has released the tenth weekly installment of Rs 6,000 crore to the states to meet the GST compensation shortfall.
  • Out of this, Rs 5,516.60 crore has been released to 23 states and Rs 483.40 crore has been given to the three Union Territories (UTs) with Legislative Assembly (Delhi, Jammu & Kashmir, and Puducherry), who are members of the GST Council.


3. Manufacturing shows marginal improvement in Dec, PMI inches up to 56.4

  • Manufacturing sector activity showed a marginal improvement in December compared to the previous month even as employment generation remained low, showed a widely-tracked IHS Markit purchasing managers’ index (PMI) survey. PMI inched up to 56.4 in December compared to 56.3 in November.
  • However, it remained lower than 58.9 in October and 56.8 in September, the two months when the economy saw a lifting of lockdowns. A reading above 50 shows growth, while the print below 50 means contraction.


4. Exim Bank hits the international bond market with a $1 billion issue

  • The Exim Bank is in the international bond market with an over USD 1 billion dollar money issue, merchant bankers have said.
  • The bank is in the dollar money market with a seven-year bond issue, selling Reg S bonds worth at least USD 1 billion. The issue will be closed in the US markets on Monday, two merchant bankers told PTI.
  • The sources, however, refused to share more details like likely pricing and citing confidentiality.
  • Regulation S bonds are issued by foreign issuers in the US debt market and are denominated in US dollars, but resident American citizens cannot subscribe to them.
  • This is the first international debt sale from the country in the new year and i-bankers are expecting higher debt money to come to the domestic shores this year given the record low-interest rates in the western markets. Companies will also be raising money to meet the likely CAPEX or repayments demands as the economies slowly return to normalize after the year-long pandemic.
  • In the first week of January 2020, the bank had raised USD 1 billion in 10-year dollar money at a record low rate of US Treasury plus 1.70 bps. Normally, the bank issues 5-, 7- and 10-year debt to meet its project export needs and other international commitments through the government to overseas administrations.
  • In 2020, the foreign exchange (forex) debt issuance was dull due to the pandemic and was one of the lowest in recent years, with domestic issuers collectively mopping up only around USD 14 billion through the year.
  • International rating agency Fitch has assigned proposed senior bond sale by the Export-Import Bank (Exim Bank) at BBB-, reflecting the sovereign nature of the issuer.
  • It added that the proposed senior notes constitute Exim Bank’s direct, unconditional, unsubordinated, and unsecured obligations. These will at all times rank pari passu among themselves and with all of its other unsubordinated and unsecured obligations, Fitch said rating the issue on par with the sovereign rating of the country.
  • The rating reflects the agency’s expectation of a high probability of extraordinary state support to the bank.
  • In 2020-21, the government infused Rs 1,300 crore in fresh equity in Exim Bank. In 2019-20, it had received Rs 6,500 crore from the government, increasing its common equity tier-1 ratio by 191 basis points, from nearly 18 percent in 2019-20.


5. Cred raises $81 million funding, undertakes $1.2 million buyback plan

  • Cred on Monday said it has raised USD 81 million (about Rs 591.2 crore) in funding, valuing the fintech firm at a post-money valuation of USD 806 million (about Rs 5,883 crore).
  • Existing investor, DST Global led the series C round along with Sequoia Capital, Ribbit Capital, Tiger Global, and General Catalyst, a statement said.
  • In addition, Sofina, Coatue, and Satyan Gajwani of Times Internet also invested in this round, it added.
  • As part of the process, existing and former employees have liquidated their employee stock ownership plans (Esops), collectively worth USD 1.2 million (Rs 9 crore), it said.
  • The company has raised USD a total of USD 228 million in four rounds till date. This includes USD 1 million in seed capital by founder Kunal Shah (QED Innovations), USD 25 million in series A and USD 120 million in series B round.
  • Cred rewards credit card users for making timely bill payments and offers various benefits to them. It has over 5.9 million users on its platform currently, up from 3 million in March last year. Admission to Cred is based on a user’s credit score, and anyone with a score over 750 can be part of the community.

2 & 3 Jan 2021

1. 60.3 million GST e-invoices were generated in December 2020

  • As many as 6.03 crore GST e-invoices were generated in December 2020, higher than 5.89 crores in November, according to an official release.
  • The government had made it mandatory for businesses with a turnover of over Rs 500 crore to generate electronic invoices or e-invoice for B2B transactions, from October 1, 2020.


2. UPI handled record 2.23 bn transactions, worth Rs 4 trillion, in December

  • Unified Payments Interface (UPI) handled 2.23 billion transactions worth Rs 4.16 trillion in December, a record both in terms of volume and value.
  • It breached the 2-billion mark for the third straight month, according to the National Payments Corporation of India (NPCI). In November, UPI had recorded 2.21 billion transactions worth Rs 3.90 trillion and had clocked Rs 3.86 trillion of payments in October, which is when it had surpassed 2 billion transactions for the first time.
  • Launched in 2016, UPI crossed 1 billion transactions for the first time in October 2019. While it took UPI three years to reach a billion transactions in a month, the next billion came in just a year.


3. RBI comes up with an index on digital payments

  • The RBI on Friday introduced a digital payments index (DPI) to capture the extent of the digitization of payments in the country.
  • It will use five parameters. Among these, payments enablers will have a weighting of 25 percent, while payment infrastructure (demand-side factors) a share of 10 percent.
  • Payment infrastructure (supply-side factors) will have a 15 percent weighting, while payment performance and consumer centricity will have 45 percent and 5 percent, respectively.
  • The DPI has been formed with March 2018 as the base period — which means the DPI score for March 2018 is set at 100. The DPI for March 2019 and March 2020 works out to 153.47 and 207.84, respectively, indicating appreciable growth. From March this year, the DPI will be published on the RBI’s website on a semi-annual basis, with a lag of 4 months, the RBI said.


4. GST mop-up at a record high, surges to Rs 1.15 trillion in December

  • Signaling an economic revival, goods, and services tax (GST) collection touched a record high in December, posting growth of 11.6 percent year-on-year (YoY) and surpassing the Rs 1-trillion mark for the third straight month, the official data showed on Friday. The double-digit expansion in the collection could partially be attributed to the government’s drive against GST evaders and fake bills, besides tighter compliance measures. However, some economists credited it to the festival season sales.
  • GST collection stood at Rs 1.15 trillion in December as against Rs 1.05 trillion in the previous month, the data released by the finance ministry showed. Before this, the highest GST collection was Rs 1.14 trillion in April 2019.


5. Government removes import restrictions on room and car fresheners

  • The government on Friday removed import curbs on room/car fresheners.
  • A notification in this regard was issued by the Directorate General of Foreign Trade (DGFT), under the commerce ministry.
  • “Import of odoriferous preparations such as room fresheners/car fresheners that do not operate by burning is free,” the DGFT said.
  • Earlier, imports of the product were under the restricted category.


6. Govt to divest 26% stake in BEML; EoI submission open till March 1

  • The Centre has invited bids for strategic divestment in BEML, four years after the Cabinet approved divestment in the company.
  • The government will sell 26 percent out of the total 54.03 percent stake it holds in the company along with transfer of management control, according to the preliminary information memorandum released by the Centre.
  • Last Monday, the Core Group of Secretaries on Divestment had approved the sale of a government stake in the company that has interests in defense, aerospace, mining, and rail.
  • The sale would push the Centre’s privatization drive at a time when the government wants to limit PSU presence, and exit from companies in non-strategic sectors.
  • The sale could fetch the government Rs 1,055 crore, according to the company’s share closing price on Friday. The government, in December 2016, had approved a plan to divest a 26 percent stake in the state-owned entity.
  • The disinvestment will be through a two-stage open competitive bidding process.
  • Expressions of interest (EoIs), that will have to be submitted by March 1, 2021, would be vetted based on the eligibility criteria specified in the first stage. Interested parties will be allowed to send their queries from Monday, and will have to submit their EoIs by March 1 electronically, and a physical copy by March 16.
  • Based on the evaluation of EoIs, shortlisted bidders will be provided with the request for proposal (RFP), including a draft share purchase agreement and draft shareholders agreement. The shortlisted bidder, approved by the Cabinet Committee on Economic Affairs, will be designated the successful bidder.
  • The successful bidder will have to undertake certain obligations, such as employee protection, asset stripping, business continuity, and lock-in of shares acquired in the proposed transaction. These conditions will be specified in the RFP.
  • The government has appointed SBI Capital Markets as its transaction advisor to advise and manage the strategic disinvestment process.
  • The company’s non-core assets will be hived off and will not be a part of the divestment. The board of the company, based on the government’s decision, has agreed to hive off surplus land separately and exclude it from the process of strategic disinvestment.
  • If the asset hive-off process is not completed before the strategic disinvestment process, then a separate mechanism will be formulated to ensure that the non-operational surplus land does not form part of the total assets of the company, post disinvestment.
  • The company owns operational and non-operational land totaling 2,945 acres. It also owns flats, offices, and guest houses totaling 10.99 lakh square feet.
  • One of the subsidiaries of the company — Vignyan Industries — will not be part of the divestment, and will be shut down.
  • Given that BEML is a listed company, the acquisition of 26 percent would trigger a mandatory open offer. The investor will be required to make an offer to acquire an additional 26 percent from public shareholders once the shareholding increases to 25 percent or more.

1 Jan 2021

1. RBI constructs index to capture digital payments penetration in-country

  • The Reserve Bank of India on Friday said it has constructed a composite Digital Payments Index (DPI) with March 2018 as the base period to capture the extent of digitization of payments across the country.
  • “The DPI for March 2019 and March 2020 work out to 153.47 and 207.84, respectively, indicating (an) appreciable growth,” it said in a statement.
  • Going forward, RBI-DPI will be published on the central bank’s website on a semi-annual basis from March 2021 onwards with a lag of four months.
  • The RBI-DPI comprises five broad parameters that enable the measurement of deepening and penetration of digital payments in the country over different time periods.
  • The parameters are payment enablers (weight 25 percent), payment infrastructure demand-side factors (10 percent), payment infrastructure supply-side factors (15 percent), payment performance (45 percent), and consumer centricity (5 percent).
  • Each of these parameters has sub-parameters which, in turn, consist of various measurable indicators, RBI said.
  • The RBI-DPI has been constructed with March 2018 as the base period, meaning the DPI score for March 2018 is set at 100.
  • Digital payments in India have been growing rapidly.
  • Earlier in February, RBI had announced it will construct and periodically publish a composite DPI to capture the extent of digitization of payments effectively.
  • The objective of DPI is to reflect accurately the penetration and deepening of various digital payment modes.


2. Indian banks’ loans rose 6.1% in two weeks to Dec 18, shows RBI data

  • Indian banks’ loans rose 6.1% in the two weeks to Dec. 18 from a year earlier, while deposits rose 11.3%, the Reserve Bank of India’s weekly statistical supplement showed on Friday.
  • Outstanding loans rose 518.61 billion rupees ($7.09 billion) to 105.50 trillion rupees in the two weeks to Dec. 18.
  • Non-food credit rose 546.21 billion rupees to 104.56 trillion rupees, while food credit fell 27.60 billion rupees to 931.52 billion rupees.
  • Bank deposits fell 1.01 trillion rupees to 144.83 trillion rupees in the two weeks to Dec. 18.
  • ($1 = 73.1200 Indian rupees)


3. Foreign exchange reserves decline by $290 million to $580.84 billion

  • After touching a record high, the country’s foreign exchange reserves declined by USD 290 million to USD 580.841 billion in the week ended December 25, RBI data showed.
  • In the previous week to December 18, the reserves had surged by USD 2.563 billion to a lifetime high of USD 581.131 billion.
  • In the reporting week, the drop in reserves was on account of a fall in foreign currency assets (FCA), a major component of the overall reserves.
  • FCA slipped by USD 253 million to USD 537.474 billion, the Reserve Bank of India’s (RBI) weekly data showed.
  • Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound, and yen held in the foreign exchange reserves.
  • The gold reserves decreased by USD 308 million to USD 36.711 billion in the week ended December 25, according to the data.
  • The special drawing rights (SDRs) with the International Monetary Fund (IMF) dipped by USD 4 million to USD 1.510 billion.
  • The country’s reserve position with the IMF rose by USD 276 million to USD 5.145 billion.

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