Here is a roundup of the day’s top stories in brief.
1. Rajan, Acharya Question Need To Open Up Banking For Indian Corporates
Former Reserve Bank of India Governor Raghuram Rajan and Deputy Governor Viral Acharya flagged the timing of the central bank-formed internal working group’s recommendation to allow large industrial houses and corporates to promote a bank.
“Why now? Have we learnt something which allows us to override all the prior cautions on allowing industrial houses into banking?” according to a joint article by Rajan and Acharya posted on professional networking site LinkedIn.
Such a recommendation is a “bombshell”, and should not be considered, the two former Indian central bankers argued.
In fact, it’s even more important now for the regulator to stick to its tried and tested limits on corporate involvement in banking, they said, adding there’s a need to tread this path cautiously, especially at a time the financial system is still learning from the collapse of IL&FS and Yes Bank.
Rajan and Acharya listed two reasons why allowing corporates to promote banks could hurt the sector.
2. S&P Red Flags Corporates Owning Banks
The recommendations of the Reserve Bank of India’s internal working group allowing corporate ownership of Indian banks is fraught with risks, according to S&P Global Ratings.
“The RBI will face challenges in supervising non-financial sector entities, and supervisory resources could be further strained at a time the health of India’s financial sector is weak,” the global rating agency said in a statement.
The working group’s concerns regarding conflict of interest, concentration of economic power, and financial stability in allowing corporates to own banks are potential risks, S&P said.
Read more to see what are the risks involved with corporate ownership of banks.
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3. AstraZeneca-Oxford Vaccine Highly Effective
A Covid-19 vaccine developed by the University of Oxford and AstraZeneca Plc prevented a majority of people from getting the disease in a large trial, another promising development in the quest to end the pandemic, and the rollout could begin next month.
The vaccine stopped an average of 70% of participants from falling ill, an early analysis of the data show.
The effectiveness rose to 90% for one of two regimens, using half a dose followed by a full one later, close to the high bar set by Pfizer Inc. and Moderna Inc.
Despite being less effective than Pfizer and Moderna, the British vaccine has some advantages.
4. U.S. Stocks Gain; Dollar Falls To 2018 Lows
U.S. stocks rose and the dollar weakened on signs of progress toward a Covid-19 vaccine.
The S&P 500 bounced back from its end-of-the-week selloff, led by companies that will benefit from a return to normal economic activity.
Pfizer Inc. and Moderna Inc. climbed in after a U.S. government official said immunizations may start soon.
The dollar dropped to a two-and-a-half year low as the prospect of vaccine roll-outs added to headwinds for the world’s reserve currency.
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Nifty's Falls Short Of 13,000
Indian equity markets ended the first session of the November F&O expiry week with gains, even as banking stocks underperformed.
The S&P BSE Sensex ended 0.4% higher at 44,077.
The NSE Nifty 50 index ended 0.5% higher at 12,926, falling short of the 13,000-mark once again.
Follow the day’s trading action here.
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5. Investments From Hong Kong Put On Hold
India is subjecting foreign investment proposals from Hong Kong at par with China as part of a new policy that makes approval mandatory for plans from countries that share a land border, a person with the knowledge of the matter told Bloomberg News.
Nearly 140 investment proposals d at over $1.75 billion, mostly from China and Hong Kong -- China’s special administrative region -- have been put on hold pending scrutiny, the person said asking not to be identified citing rules on speaking to the media.
Amid a border stand off with China, the Indian government tightened rules for foreign direct investment from all nations sharing a land border, making scrutiny mandatory for such investments -- a restriction that was earlier applicable only to Pakistan and Bangladesh.
The delays may complicate deal-making and impact the flow of capital from private equity firms and hedge funds.
6. Hopes And Hurdles For A Vaccine In India
India hopes to start rolling out a Covid-19 vaccine by March 2021, but it faces a steep challenge: cold chain and distribution infrastructure.
While the availability of a vaccine is subject to the results of ongoing trials and licensing by the Drugs Controller General of India, “if all goes well” India expects a vaccine to be available in first quarter of 2021, said Rajesh Bhushan, secretary to India’s health ministry.
The nation with the world’s second-highest infections plans to use the existing cold chain network in place for its Universal Immunization Program, Bhushan said.
Still, infrastructure to immunise over 1.3 billion people remains inadequate and India will have to ramp up capacities significantly.
7. Quess Corp Says Jobs Are Back
Jobs are returning in India as the economy recovers from lockdown-related losses, according to the head of a top staffing firm.
Quess Corp., which claims to be India’s largest private-sector employer providing staffing services to companies, saw its workforce rise in October for the first time since the coronavirus outbreak.
Its numbers had dropped by 55,000 to 325,000 after Prime Minister Narendra Modi imposed a vast and sudden lockdown in March.
We are seeing a rebound definitely in the employment market. We expect to finish this year close to where we were at the beginning of the year. That is an indication of how the economy is going. I think the worst is over.Ajit Isaac, Chairman, Quess
That’s still only a fraction of the over 122 millon people went jobless in April.
8. Gartner Predicts IT Spends Rebound In 2021
IT spending in India is projected to rise 6% to $81.9 billion in 2021 compared to this year on the back of growth across segments like enterprise software and IT services, research firm Gartner said on Monday.
IT spending in 2020 is expected to total $79.3 billion, down 8.4% from 2019.
“The Covid-19 pandemic stalled many digital transformation projects for Indian enterprises, mainly because of the market uncertainties and reduced cash flows,” Gartner research vice president Arup Roy said.
Gartner said organisations that were digitally sound in a pre-pandemic world could contain the impact on their businesses.
9. Franklin Seeks Supreme Court Intervention
Franklin Templeton has said it will approach the Supreme Court to appeal against an order of the Karnataka High Court that made it mandatory to seek unit holders' consent for winding up six of its mutual fund schemes.
"After detailed deliberations, we have determined that it will be necessary to seek judicial intervention from the Hon’ble Supreme Court to ensure an appropriate implementation of the law in the best interest of unitholders," the company said.
On Saturday, a division bench of the Karnataka High Court had stopped Franklin Templeton Investment from closing its debt fund schemes without prior consent of investors.
Franklin Templeton has contended that the winding up of schemes was in accordance with the regulatory rules.
10. Kerala Puts Controversial Law On Hold
The Communist Party Of India (Marxists)-led Left Democratic Government in Kerala on Monday put on hold implementation of the controversial amendment to the state Police Act citing criticism from various quarters.
Chief Minister Pinarayi Vijayan said his government was not intending to implement the amendment act now as even those who supported the LDF and those who stood for protection of democracy expressed concern about it.
"We are not intending to implement the amended Kerala Police Act. A detailed discussion will be held in the state assembly in this regard and further steps will be taken after hearing views from various quarters," he said in a statement.
The amendment was widely criticised for being against free speech ideals.
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