BQuick On March 5: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Yes Bank Put Under Moratorium, Board Superseded
The Government of India placed Yes Bank Ltd. under moratorium and capped withdrawals for a month, while the Reserve Bank of India superseded the board of the private lender citing a steady decline in its financial position.
The Ministry of Finance took the decision after considering an application submitted by the Reserve Bank of India, said a ministry statement on Thursday evening.
The moratorium will last till April 3 and all legal proceedings against the bank will be stayed during the period, it said.
It’s the first instance of a large private bank being put under such a moratorium by the government. And it came the day Bloomberg reported that the government has approved a proposal to allow a consortium led by State Bank of India to invest in the struggling lender. There is no confirmation of such a rescue plan as yet.
The bank is not allowed to pay any depositor more than Rs 50,000 without written permission from the RBI during the period of moratorium.
This is irrespective of how many accounts depositor may have in the bank.
If the depositor has dues payable to the bank, those will be adjusted first before withdrawal of any amount
Here are the other restrictions imposed on Yes Bank.
2. RBI Governor Explains Why India’s Central Bank Is Different From Others
The Reserve Bank of India has “multifarious responsibilities”, much wider than its international peers such as the U.S. Federal Reserve or the Bank of England, according to Governor Shaktikanta Das.
“Currently if you ask, while all departments are important, the main focus of RBI is maintaining financial stability, supporting growth, maintaining price stability—which is the mandate given to us under the RBI Act—and also to focus on sharpening our regulation and supervisory functions,” Das said in an exclusive interview with BloombergQuint.
The RBI, a full service central bank since inception, adopted a flexible inflation targeting regime in 2015. Since then, the mandate of inflation control moved to the six-member monetary policy committee.
In recent months, the signals from the MPC and the RBI have diverged due to multiple concerns in the economy.
While the MPC remained focused on inflation control, the RBI stepped in with measures that appeared to be targeted at bringing down rates without an actual rate cut.
Is there a dichotomy between the RBI's and MPC's thinking? Watch the full exclusive interview here.
3. EPFO Rates On Deposits Cut To 7-Year Low
The Employees’ Provident Fund Organisation cut the interest rate on provident fund deposits to a seven-year low of 8.5 percent for 2019-20.
The EPF interest rate was 8.65 percent in 2018-19.
It stood at 8.55 percent in 2017-18, 8.65 percent in 2016-17, 8.8 percent in 2015-16, 8.75 percent in 2014-15 and 2013-14, and 8.5 percent for 2012-13.
The rate-cut decision was taken at a meeting of EPFO's apex decision-making body—the Central Board of Trustees.
EPFO will have a surplus of over Rs 700 crore this fiscal due to this step, Labour Minister Santosh Gangwar said.
There would have been a deficit if EPFO had provided a rate any higher than that.
4. OPEC Gambles With A Large Oil Output Cut
OPEC ministers took a gamble, agreeing on a large production cut to offset the demand hit from the coronavirus epidemic without having overcome Russian opposition to the move.
- Ministers from the Organization of Petroleum Exporting Countries agreed at talks in Vienna on Thursday that crude output should be reduced by 1.5 million barrels a day in the second quarter, but if Moscow doesn’t back the move there’s no deal, Iranian Oil Minister Bijan Namdar Zanganeh told reporters.
- Russian Energy Minister Alexander Novak wasn’t present at the conference, having left the city on Wednesday, is still opposed to the idea.
- A third of the cut would come from Russia and other non-OPEC allies, Zanganeh said.
Oil prices have been down since the start of the year and the debate between OPEC and allies is being closely watched across the globe.
5. Sensex Flat, U.S. Stocks Tumble
Indian equity markets gave up nearly all of their gains to end little changed. The S&P BSE Sensex and the NSE Nifty50 Index traded volatile for most parts of the day and ended with marginal gains.
- Both the benchmark indices ended with gains of 0.16 percent.
- The Sensex ended at 38,470 while the Nifty closed at 11,269.
- Among sectoral indices, media, metal and real estate sectors were the key laggards.
- The FMCG along with the PSU Banking index ended with gains, though substantially off the highest point.
Follow the day’s trading action here.
India’s central bank kept amassing dollars all through 2019, ending the year with Asia’s biggest jump in foreign-exchange reserves. That may come in handy now.
Read the full story on what this could mean for the rupee.
U.S. stocks tumbled, giving up more than half of Wednesday’s steep gains as volatility sparked by the spread of the coronavirus woes continued to grip financial markets.
- The S&P 500 dropped more than 2 percent, as wild swings pile up.
- The measure has notched three 4 percent moves since its February record and two other 3 percent drops in the most volatile stretch since the week after S&P Global Ratings cut the U.S. debt rating in 2011.
- The 10-year yield sank to a record 0.94 percent, while the dollar dropped against the yen and the euro.
- Gold advanced, and oil was little changed as OPEC debated output cuts to battle the impact of the virus.
Get your daily fix of global markets here.
6. One More Coronavirus Case Detected In India Even As Fatalities Slow Globally
One more case of novel coronavirus was reported in Ghaziabad in the national capital region, taking the total number in the country to 30 so far. Still, there was some respite globally as fatalities from the outbreak moderated in China and cases appeared to slow in South Korea.
- The patient in Ghaziabad is a middle-aged man with a recent travel history to Iran.
- Meanwhile, the five people who came in contact with the Paytm employee that tested positive in Gurugram have been tested and quarantined.
- The government has asserted that there is no shortage of raw material for drugs or other medical equipment.
- The India-European Union summit which was slated to be held later this month has also been rescheduled.
- Delhi government has announced that primary schools will remain shut till March 31.
- The government has also designated 31 labs across India for coronavirus testing.
Follow the developments around coronavirus in India here.
7. IndiGo, SpiceJet Face Turbulence
Occupancy is expected to fall for domestic airlines as Indians cut back international travel amid the new coronavirus outbreak.
- Tracking the global trend, passenger load factor, or the percentage of seats filled, is likely to fall for most international flights for InterGlobe Aviation Ltd., the operator of India’s largest carrier IndiGo, and SpiceJet Ltd. as virus cases rise, including in India.
- Shares of the two airlines have tumbled 16-25 percent in the last one month because of a dip in flight ticket bookings, especially to Southeast Asia.
- International operations of the two carriers are expected to contribute nearly a fourth to their overall capacity in March, according to data compiled from RDC Aviation, a U.K.-based aviation analysis company.
Tourists are wary of making fresh bookings to the virus-affected locations and airfares to these destinations have dropped 20-30 percent.
8. Is Royal Enfield Primed For A Revival?
While Eicher Motors Ltd.’s two-wheeler sales contracted in all but two of the last 16 months, analysts have found a reason to be optimistic. They see the maker of Royal Enfield motorcycles better prepared to deal with the disruption that has prolonged India’s auto slowdown: transition to stricter emission standards.
- The company’s dealer inventory is among the lowest, at about 10 days, and they would benefit from customer response to the switch to Bharat Stage-VI emission norms and favourable base, Goldman Sachs said in a report authorised by analyst Pramod Kumar.
- It estimated that as much as 70 percent of the Royal Enfield motorcycles sold in February complied with newer norms.
- Royal Enfield was the only two-wheeler maker to register a growth in sales in February amid a slowdown, a higher base and intense competition.
- But this was only the second time in the past 16 months that sales rose—the last time being in October 2019—a period when India’s auto sector saw its worst slowdown in more than two decades.
Find out why analysts are expecting a 21 percent upside to the stock from its current market price.
9. Homebuyers Win Another Round In Jaypee Infra Case
More than 16 lenders, including State Bank of India, Axis Bank Ltd. and ICICI Bank Ltd., that were hoping to recover their dues via Jaypee Infratech Ltd.’s insolvency resolution suffered a setback as a result of the recent Supreme Court ruling.
- Not only have their loan transactions to parent Jaiprakash Associates Ltd. backed by the subsidiary’s properties, been set aside, they won’t even get a seat at the committee of creditors’ table.
- This will benefit Jaypee Infratech’s creditors and homebuyers, experts said.
- The outcome is a result of two findings by the apex court: First, Jaypee Infratech’s 858 acres of land that was used by it as collateral to secure the debt of its parent—Jaiprakash Associates—was a preferential transaction and has to be reversed.
- Two, a lender with a secured interest over the insolvent company’s assets would be considered only a secured creditor, and not a financial creditor.
The second finding is worrisome. Here’s why.
10. What Slowdown? India’s Ultra-Wealthy To Double In Five Years
The number of ultra-wealthy Indians is set to double in five years as the economy grows.
- The count of individuals with a wealth of more than $30 million—including their primary home—is expected to grow at 73 percent over five years to 10,354 in the country, real estate consultancy Knight Frank said in a report.
- That will come on the back of estimated 7 percent growth in the GDP by 2022, the report said. “Despite the current slowdown, global economic pundits see strong long-term economic growth.”
- India’s ultra-wealthy are piling into residential properties despite the real estate sector in the country facing many problems.
- Nearly a quarter of such individuals, according to the report, plan to buy property this year.
Want to find out where the richest invest their wealth? Read more.