BQuick On August 1: Top 10 Stories In 10 Minutes
This is a roundup of the day’s top stories in brief.
1. MPC Hikes Rates... Again
India’s Monetary Policy Committee decided to raise the benchmark interest rate by 25 basis points, while retaining a 'neutral' monetary policy stance. Of the 53 economists polled by Bloomberg, 40 had forecast a rate hike at the August policy meeting.
RBI Governor Urjit Patel said that main reason for the hike is to ensure that inflation comes back down towards the 4 percent target.
We took two steps, one in June and one in August, to maximise our chances that we don’t drift away from 4 percent and in fact we move towards 4 percentUrjit Patel, Governor, RBI
- The MPC said the risks to inflation include volatile oil prices, hardening of household expectations, risks of fiscal slippage and uncertainty about the full impact of the hike in minimum support price for Kharif crops.
- The MPC expects inflation to be at 4.7-4.8 percent in the second half of the fiscal and then rise to 5 percent in the first quarter next fiscal.
- The committee added that rising trade tensions could pose a "grave risk" to global growth prospects.
Here’s why India raised rates for the second straight time.
2. India’s Payments Banks Have A Compliance Problem
The Reserve Bank of India has barred at least two payments banks from accepting new customers. The reason, say officials in the know, is the lack of strict compliance with a couple of banking provisions - including not only banking-related Know Your Customer norms but also provisions under the Prevention of Money Laundering Act.
- Fino Payments Bank has been barred from adding new customers as some accounts were found to have more than the Rs 1 lakh deposit limit permitted.
- Paytm Payments Bank had been asked by the RBI to stop accepting new customers immediately, Mint reported on Wednesday.
- BloombergQuint has now found out that the problem lies with the lack of robustness in e-KYC followed by most payment banks such as Paytm.
- “For the regulator compliance is sacrosanct,” said Naresh Makhijani, partner at KPMG. “The RBI won’t shy away from levying a penalty if it finds issues with compliance.”
Here's why RBI isn’t happy with the e-KYC framework implemented by payments banks.
3. Sensex Halts Record Spree; U.S. Treasuries Drop Ahead Of Federal Reserve Rate Decision
Indian equity benchmarks halted their record-high closing spree after the MPC raised interest rates for the second time in the current financial year.
- The S&P BSE Sensex Index closed 0.2 percent lower at 37,522.
- NSE Nifty 50 Index closed 0.1 percent lower at 11,346.
- Rate sensitive stocks were worst hit with the Nifty Auto Index and the Nifty Private Bank Index both falling 0.8 percent.
Follow the day's trading action here.
Treasuries slid and the dollar pared gains as investors counted down to the latest Federal Reserve rate decision. Apple Inc.’s rally buoyed the tech sector as an escalation in trade-war rhetoric weighed on equities and battered commodities.
- Bond sell-off that started in Japan spread to Europe and picked up steam in U.S.
- Nasdaq Composite Index climbed after Apple signalled strong demand for iPhones and rose to a record.
- Most S&P 500 members fell as investors weighed earnings results.
Get your fix of global markets update here.
4. GST Collections Rise In June
Goods and Services Tax collections for June stood at Rs 96,483 crore. That compares with Rs 95,610 crore revenue collected for May, Rs 94,016 crore received in April, and Rs 1.03 lakh crore in March. Compliance improved with 66 lakh GSTR-3B returns filed by July end.
Here’s the break-up:
- Central GST: Rs 15,877 crore.
- State GST: Rs 22,293 crore.
- Integrated GST: Rs 49,951 crore (includes Rs 24,852 crore collected on imports).
- Compensation cess: Rs 8,362 crore.
Here's a detailed look into June's GST collections.
5. Buy-One-Get-One Free Offers May Still Have Hope
A panel set up to review the Goods and Services Tax law suggested giving companies some room for offers like buy-one-get-one-free and free samples, two government officials told BloombergQuint.
- The panel will suggest amendments in the law that will allow companies to claim input tax credit for promotional schemes.
- This credit will be restricted to 1 percent of the taxable turnover.
- Proposals have been submitted and are yet to be considered by the GST Council.
- These proposals are likely to resolve the dispute between the taxman and companies over treatment of samples and promotional offers under GST.
Here's how the proposed move may bring much needed clarity.
6. HDFC May Have Spared Itself Further Blushes
Deepak Parekh, chairman of housing finance company HDFC Ltd., retained his seat on the company’s board by the skin of his teeth. In the annual general meeting of HDFC's shareholders, approval was sought to reappoint Parekh as non-executive director as he was liable to retire.
Ordinarily, the appointment of director requires a simple majority of votes in favour of the resolution. But the introduction of a new governance provision in SEBI's Listing Obligations and Disclosure Requirement Regulations now requires that any director above the age of 75 seeking reappointment must do so via a special resolution.
- But Parekh was not the only HDFC director who suffered a narrow miss. Bimal Jalan and Bansi Mehta might have met the same fate.
- Institutional Shareholder Services and Glass Lewis, the global proxy advisory firms that had recommended voting against Parekh, also advocated voting against Jalan and Mehta.
Here’s more on how Jalan and Mehta escaped a similar, if not worse, fate at the AGM as Parekh did.
7. Maruti Suzuki Sales Fall First Time In 19 Months
India’s largest carmaker Maruti Suzuki India Ltd. saw its monthly sales decline for the first time in 19 months in July due to weak demand for its smaller hatchbacks Alto and WagonR. The country’s largest automaker sold 1.64 lakh units last month, a decline of 0.6 percent from the year-ago period, according to its exchange filing.
- Bajaj Auto Ltd. sold 4 lakh units in July, a growth of 30 percent over the same month last year.
- Ashok Leyland Ltd.'s sales rose 27 percent to 15,199 vehicles.
- Mahindra & Mahindra Ltd. sold 47,199 vehicles, an increase of 13 percent, led by commercial vehicles. Car sales fell.
- TVS Motor Co. sales rose 18 percent to 3.21 lakh units.
- Hero MotoCorp Ltd.'s sales grew 9 percent to 6.79 lakh units.
Here’s how Indian automakers fared in July.
8. How States Plan To Roll Out Modi’s Ambitious Health Insurance Scheme
Most states have opted to set up subsidy pools to fund Prime Minister Narendra Modi’s health insurance scheme that will cover more than half of Indians, as insurers stayed away because of pricing concerns and officials rush to meet the Aug. 15 deadline.
- 23 out of 36 states and union territories will create non-profit trusts to pool in subsidy contributed by central and state governments.
- Only 8 states have opted for mixed model where payments below Rs 50,000 will be covered through insurance and the rest from the trusts' corpus.
- Experts have said it is a quick fix to rush its launch and could increase government's liabilities, delay claim settlements and trigger more frauds.
- Selecting hospitals to offer healthcare services hasn't begun either.
Here's a look at how state governments are implementing the Ayushman Bharat National Health Protection Scheme.
9. Flipkart’s Second Attempt To Take On Amazon Prime
India’s largest e-commerce firm Flipkart is making a second attempt at a customer loyalty programme to take on Amazon’s Prime subscription service that contributes more than a third of the retail giant’s gross sales in the country.
- Flipkart Plus will go live on Aug. 15 and will be free. Amazon charges its Prime subscribers a monthly and annual fees and bundles in all offerings under one roof.
- Flipkart will instead offer digital currency called Plus Coins that users earn on every purchase.
- Coins can be redeemed for discounts, early access to sales and on platforms like Hotstar, Zomato and MakeMyTrip.
- Flipkart didn't disclose criteria to earn loyalty points.
Will Flipkart’s bet pay off? Read here.
10. The End Of The Global Housing Boom
From London to Sydney and Beijing to New York, house prices in some of the world’s most sought-after cities are heading south.
- Tax changes to damp demand, and tougher lending standards have undermined the housing market.
- The downturn in one country could pose more of a threat to markets elsewhere, according to the IMF.
- Prices in London are falling due to Brexit fears and a slowing economy.
- Beijing buyers are holding off due to China's clampdown on overheated property prices.
- Sales in Sydney are falling due to credit curbs, stretched affordability and the end of “fear of missing out”.
Here’s how top housing markets are performing.