Here is a roundup of the day’s top stories in brief.
1. Bank Ownership: Major Changes Proposed
An internal working group of the Reserve Bank of India has recommended significant changes across the banking sector, ranging from a higher promoter stake over a long period of time, the entry of corporate houses into banking and permitting large non-bank lenders to convert into banks.
Large corporate or industrial houses may be allowed as promoters of banks after relevant changes to the Banking Regulation Act.
The cap on promoters’ stake in the long run, over 15 years, may be raised from the current level of 15% to 26% of the paid-up voting equity share capital of the bank.
Large NBFCs with an asset size of Rs 50,000 crore, may also be allowed to convert to private banks.
Find out the full list of key recommendations made by the working group.
2. Sensex’s Third Straight Weekly Gain
Indian equity markets managed to end higher and posted gains for the third straight week.
The S&P BSE Sensex ended 0.65% or 282 points higher at 43,882.
The NSE Nifty 50 index ended 0.7% or 87 points higher at 12,859.
Broader markets outperformed for today's trading session.
Follow the day’s trading action here.
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U.S. Stocks Slip Amid Fed-Treasury Dispute
U.S. stocks slumped as traders weighed a conflict between the White House and Federal Reserve over emergency lending programmes along with assurances that the government has plenty of room to help the economy.
The S&P 500 Index edged lower in the wake of the disagreement over releasing government funds to further shore up growth, even as Treasury Secretary Steven Mnuchin said “markets should be very comfortable.”
West Texas Intermediate crude fell 0.5% to $41.52 a barrel.
Get your daily fix of global markets.
3. Gland Pharma Rallies On Market Debut
Gland Pharma Ltd. rallied in its trading debut on Friday after the initial public offering of the Chinese-owned drugmaker raised $873 million in India’s biggest-ever IPO by a pharmaceutical firm.
Shares of the unit of Shanghai Fosun Pharmaceutical (Group) Co. ended at Rs 1,819.55, up about 21% from the IPO price of Rs 1,500.
Gland Pharma’s initial public offering was subscribed 2.05 times.
Find out what boosted the fortunes of the drugmaker.
4. RIL-Future Group Deal Clears Another Hurdle
The Competition Commission of India has approved Reliance Industries Ltd.’s proposed acquisition of retail, wholesale, logistics and warehousing businesses of Future Group.
The Rs 24,713 crore deal that is expected to boost RIL’s fast-growing retail business was announced in August.
In a tweet, the regulator said it had approved the acquisition by Reliance Retail Ventures Ltd. and Reliance Retail and Fashion Lifestyle Ltd.
As per the notice submitted to the CCI, there are at least seven target entities.
5. How Often Have Shareholders Seen An Equity Write-Off?
The Reserve Bank of India’s draft plan for the amalgamation of The Lakshmi Vilas Bank Ltd. with DBS Bank India Ltd. includes a complete write-off of equity, meaning shareholders will get nothing from the rescue.
At least two large shareholders in the bank confirmed to BloombergQuint that they do intend to write to the regulator seeking a review.
In such situations the Banking Regulations Act would supersede the Companies Act, as it is a question of protecting depositors, said TN Manoharan, the RBI-appointed administrator for the bank.
So unlike other companies, Lakshmi Vilas Bank would not need shareholder approval to delist its shares.
In early 2000s, there were at least three instances where the RBI prioritised protecting depositors over shareholders.
6. The Lakshmi Vilas Bank Rescue Does Not Mark A Trend
Questions will again be asked about the effectiveness of the supervisor. Intervening in a private bank’s operations is a situation in which the RBI is damned if it does and damned if it doesn’t, writes TT Ram Mohan.
Act early, and you are accused of micro-managing affairs at a private bank.
Act late, and you are guilty of letting things get out of hand.
Meanwhile DBS’ acquisition should not be seen as pointing to more such possibilities with other foreign banks following.
That’s so for several reasons.
7. India’s Corporate Stress Lowest In Five Years, Says Credit Suisse
India’s corporate stress level fell to its lowest in five years in the quarter ended September, led by a recovery in metals and telecom sector.
The share of debt among stressed Indian companies across sectors, which have an interest coverage ratio of less than one, has reduced sharply to 35% in the July-September quarter of fiscal ending March 2021, Credit Suisse said in a report.
Total share of debt with stressed companies across sectors fell to Rs 15 lakh crore in the second quarter from Rs 23.8 lakh crore in the three months ended June, according to the report.
Here’s what helped the corporates reduce debt on their books.
8. India’s Economic Scorecard Improves
A quicker than expected rebound in India’s economic activity has prompted economists to tweak their estimates for GDP contraction in the current financial year.
Economists, however, continue to warn that medium-term risks remain and the Covid damage to the Indian economy will be substantial.
Now, ahead of the release of the second-quarter GDP data, economists are revising their forecasts higher.
Strengthening high-frequency indicators and hope of a vaccine are driving the upgrades.
Despite the revision in forecasts for the ongoing and the next financial year, concerns over India’s mid-term growth outlook remain.
9. India Could Face Retaliatory Tariffs From U.S.
The U.S. will soon issue the results of probes into Austria, Italy and India’s decisions to tax local revenue of Internet companies such as Facebook Inc., which could pave the way for retaliatory tariffs, people familiar with the situation told Bloomberg News.
Determinations on the three countries are due because all of them have instituted so-called digital services taxes -- or levies on local sales of companies such as Alphabet Inc.’s Google -- this year, said the people who couldn’t be identified because the information is private.
There may also be findings on Indonesia, U.K. and Turkey, one of the people said.
This could eventually snowball into a world-wide retaliatory tax and tariff war between the U.S. and other countries.
10. Rising Covid Cases And Questionable Testing Worry India
India's active case trajectory rose for the first time in 45 days as the country's total infection tally crossed 90 lakh.
India added nearly 45,882 fresh cases in 24 hours, according to the health ministry.
That includes nearly over 84 lakh recoveries and 1.3 lakh deaths.
Track news and developments around the outbreak in India here.
Lower Cases Or Unreliable Tests?
India’s daily coronavirus infections have been cut in half since a peak of more than 97,000 in mid-September, but the significant drop has raised fresh questions over the South Asian nation’s testing regime and whether it reflects the true state of its epidemic.
Daily testing has picked up since the early days of the pandemic -- currently at about 1 million -- but it’s still much lower than most countries with high infections.
Just as significant, nearly half come from less-reliable quick antigen tests, which can report false negatives as much as 50% of the time.
A comparison between Bihar and Delhi might offer clues about the real picture.
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