BQuick On Aug. 27: Top 10 Stories In Under 10 Minutes  

This is a roundup of the day’s top stories in brief.

1. Two Options, Seven Days—What Will States Do?

The Government of India has presented states with two options to resolve the issue of compensation cess shortfall under the goods and services tax.

• Estimated compensation cess owed to states in FY21: Rs 3 lakh crore

• Estimated compensation cess collection for FY21: Rs 65,000 crore

• Estimated compensation cess shortfall for FY21: Rs 2.35 lakh crore

  • The centre has assessed this shortfall into two buckets — one on account of GST implementation and the other on account of the Covid-19 impact. Excluding the Covid 19 impact, the centre estimates that states are owed Rs 97,000 crore on account of GST implementation.

  • States have been given the option to borrow this money from the Reserve Bank of India via a special window, details of which were not forthcoming.
    The second option offered to the states is to borrow the full shortfall of Rs 2.35 lakh crore.
    
    

Now states have seven working days to decide.

2. Fed Shifts To A More Relaxed Approach

Federal Reserve Chair Jerome Powell unveiled a new approach to setting U.S. monetary policy, letting inflation sometimes run faster than it traditionally allowed, in a shift that will likely keep interest rates low for years to come.

• Powell said the Fed will seek inflation that averages 2% over time, a step that implies allowing for price pressures to overshoot after periods of weakness.

• It also adjusted its view of maximum employment to allow labor-market gains to run more broadly.

• “Our revised statement emphasizes that maximum employment is a broad-based and inclusive goal,” Powell said in a speech delivered virtually for the central bank’s annual policy symposium traditionally held in Jackson Hole, Wyoming.

This change reflects Fed's appreciation for the benefits of a strong labor market, he added.

U.S. stocks’ record-breaking rally resumed and yields on longer-maturity bonds rose after Jerome Powell reiterated that the Federal Reserve is in no rush to raise interest rates.

• The S&P 500 reached an all-time high for a fifth day, while the yield premium demanded by investors on bonds compared to notes increased after Powell's comments.

• The dollar fluctuated against its major peers.

• West Texas Intermediate crude fell 1% to $42.97 a barrel.

Get your daily fix of global markets.

3. Why Shaktikanta Das Is Treading With Caution

Reserve Bank of India Governor Shaktikanta Das said a careful unwinding of counter-cyclical measures announced by the banking regulator will need to be initiated after the Covid-19 pandemic subsides.

• “The framework for Covid-19-related stressed assets is aimed at striking a balance between financial stability, protecting depositors and preserving economic value of businesses,” Das said at an event organised by Business Standard.

• But the banking system, he said, will need to look beyond these temporary measures.

• “The financial sector should return to normalcy without relying on regulatory measures as the new norm... Not saying that the RBI will unwind all measures taken during the Covid-19,” Das said.

Here’s what the RBI Governor is bracing for in the post-Covid economy.

4. Sensex Surrenders Gains; Rupee Hits 5-Month High

Indian equity markets gave up the modest gains of the session to close the August F&O series on a subdued note.

• The S&P BSE Sensex ended little changed at 39,113 while the NSE Nifty 50 too ended flat at 11,559.

• Both Sensex and Nifty have posted gains for the August series - their third successive F&O series gain.

• The real estate index was the top sectoral gainer in today's session, ending 6.2% higher, it’s biggest gain in two months. Find out why.

Follow the day’s trading action here.

The rupee gained sharply in afternoon trade and ended at 73.81 against the U.S. dollar on Thursday - its highest level in five months.

• This after RBI Governor Shaktikanta Das said the central bank has not exhausted its ammunition to deal with the current situation due to the coronavirus pandemic.

• The rupee rose nearly 50 paise to close at 73.81 against the dollar.

More on the domestic currency here.

5. FTSE Setback For Three Indian Banks

FTSE Russell won’t be including HDFC Bank Ltd., Kotak Mahindra Bank Ltd. and IndusInd Bank Ltd. to its indices as they fail to meet minimum foreign headroom requirement.

• The changes will come into effect after close of business on Sept. 18, 2020.

• Shares of the private banks gained through the week on expectations of inflows from inclusion in the FTSE world indices as part of its semi-annual review.

• So far this week, HDFC Bank is up 2.6%, while Kotak Mahindra Bank and IndusInd Bank have gained up to 6% and 18%, respectively.

Here's why FTSE Russell had decided to increase the weight of Indian constituents in its global indices.

Related Coverage

• Biggest India broker sees Nifty retesting record high by March

• Penny stock boom sparks 4,300% gain in Indian firm with no sales

6. GMR Infra's Pure-Play Airports Operator Avatar

GMR Infrastructure Ltd. has received the board’s approval to spin off its non-airport business into a separate entity as it aims to attract sector-specific global investors and unlock value for the current shareholders.

• GMR Infrastructure will be a pure-play airports company after the demerger. As part of the restructuring, there will be a vertical split of the non-airport business, including energy, urban infrastructure and others, into GMR Power and Urban Infra Ltd., according to a media statement.

• Before the demerger, GMR Power Infra—which is in the business of setting up, maintaining, operating all types of power plants, and is a wholly owned subsidiary of GMR Infra—will be amalgamated with GMR Infra, the statement said.

Separate listing of both businesses will help in simplifying the corporate holding structure.

7. Court Suspends Bankruptcy Case Against Anil Ambani

An Indian court halted personal bankruptcy case hearings against Anil Ambani, in order to hear his broader challenge against certain parts of the country’s insolvency law.

• The Delhi High Court on Thursday restrained the former billionaire from selling or transferring his assets.

• It allowed insolvency proceedings against Ambani’s telecom companies, including Reliance Communications Ltd., to continue.

The outcome could set a precedent for other cases, where Indian businessmen pledged to repay loans on behalf of their companies that later went bankrupt.

8. Insurance Cover For Jan Dhan Holders?

India is looking at providing free life and accident insurance cover to Jan Dhan account holders, as part of a push to bring such individuals under a social security net.

• The government’s flagship Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana would be extended to eligible Jan Dhan account holders, and soon expanded to cover all operational 34.81 crore accounts, a government official told BloombergQuint on the condition of anonymity.

• The measure is being proposed to coincide with the sixth anniversary of the Pradhan Mantri Jan Dhan Yojana.

• The PM Jeevan Jyoti Bima Yojana provides life insurance cover worth Rs 2 lakh at Rs 330 per annum to all account holders aged between 18 to 50 years.

The government is weighing whether the social security cover should be paid by for a limited number of years to nudge them to opt for the insurance cover.

9. RBI’s Restructuring Framework Needs Deft Finishing Touches

Certain rules that have been proposed in the restructuring framework may end up creating a bottleneck, while adding limited value to the process. In the worst-case scenario, it is possible that the exercise is compliant with the rules but fails in terms of meeting the economic objectives, writes Deep Mukherjee.

• In the worst-case scenario, it is possible that the exercise is compliant with the rules but fails in terms of meeting the economic objectives.

• Borrowers with preexisting weak credit profiles may get the benefit, while genuine Covid-19-impacted borrowers may lose out.

• Compliance with narrow rules is not a replacement for robust economic decision making.

• Watchful stakeholders reacting to transparent timely data is more effective in getting the best out of banks.

Read more.

10. Covid-19: India New Cases Spike Past 75,000

Covid-19 cases in India rushed past the 33-lakh mark, with the nation reporting the highest number of fresh cases in a day so far. The virus has killed over 60,000 people now.

• India added over 75,000 new cases in a matter of 24 hours, taking the total tally to over 33 lakh.

• Deaths spiked again with more than a 1,000 people succumbing to the disease in the last 24 hours.

• Recoveries fell to its lowest in 11 days.

Track all Covid-19 related news and updates in India, here.

Worldwide Covid-19 infections exceeded 2.4 crore as cases continued to climb in Europe and Asia, with Italy, France and South Korea reporting the most new infections in months.

• Japan’s most recent and largest wave of infections is showing signs of subsiding, despite a lack of heavy intervention from the government.

• A shift in guidelines on U.S. testing drew criticism from state leaders and public-health experts.

Follow the global spread of the virus here.