BQuick On Aug. 6: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. India Inc.’s Fundraising Blitz
India Inc. raised more than Rs 2.78 lakh crore from capital markets in the quarter ended June as companies strengthen balance sheets even as Asia’s third-largest economy is expected to contract the first time in more than four decades because of the pandemic.
About 76% of the funds raised came through private debt placement, according to data shared by Prime Database.
The rest, or about Rs 67,000 crore, was equity, mostly contributed by Reliance Industries Ltd.’s rights issue.
The fundraising spree comes as the regulator eased pricing guidelines for preferential allotment and eased capital raising via other modes.
Companies used the opportunity to raise cash to tide over the tough period, taking benefit of record liquidity infused by the central bank.
2. Time To 'Restructure' Your Personal Loan?
To provide relief to individual borrowers struggling because of the pandemic-induced economic slowdown, the Reserve Bank of India has allowed lenders to restructure personal loans till the end of 2020 with some conditions.
Here, personal loans mean consumer credit, education loans, loans for creation or enhancement of immovable property, including housing, and loans given for investment in financial assets, according to a central bank notification.
Such loans classified by lenders as standard, but not in default for more than 30 days as on March 1 this year, would be eligible to be restructured, RBI said.
The resolution can't be invoked later than Dec. 31 and must be implemented within 90 days of the invocation.
But this shouldn’t be considered as a free pass for borrowers. Here’s what you should keep in mind.
Now Get Bigger Loans Against Gold
The RBI has revised its guidelines for gold loans by increasing the loan-to-value ratio to 90% to help stressed borrowers unlock more value.
Customers looking to borrow funds from banks for non-agricultural purposes can now get loans of up to 90% of their pledged gold ornaments and jewellery compared to 75% now, Shaktikanta Das, governor at the central bank, said on Thursday.
According to the guidelines issued by the central bank, the enhanced 90% loan-to-value ratio will be applicable up to March 31, 2021.
Thereafter, the ratio will reverse to the earlier limit of 75% for all fresh gold loans sanctioned on and after April 1, 2021, it said.
This will help put more funds in the hands of borrowers and also increase lenders’ loan books.
3. MPC Leaves Rates Unchanged; RBI Allows One-Time Restructuring Of Loans
India’s Monetary Policy Committee voted to leave policy rates unchanged after two emergency cuts even though the economy faces a sharp contraction due to the Covid-19 virus.
The committee voted unanimously to keep the repo rate unchanged at 4%. It maintained an accommodative stance on monetary policy.
The RBI, which controls the reverse repo rate, separately decided to keep that unchanged at 3.35%.
The MPC noted that economic activity had started to recover but fresh infections have led to a leveling-off of the pick-up in activity.
The MPC was of the view that persisting supply-chain disruptions will impact inflation.
RBI has decided to permit a one-time restructuring of loans, amid the ongoing Covid crisis which is hitting businesses hard.
Announcing a review on monetary and credit policies on Thursday, RBI Governor Shaktikanta Das said a window under the June 7 stressed asset resolution framework will be provided which will enable lenders to implement a resolution plan, without a change in ownership.
In addition to the provision for restructuring of large corporate loans and personal advances, stressed MSME borrowers will also be allowed to restructure their debt provided they were classified as standard on March 31, 2020.
This window will be available till March 2021.
Find out what restructuring 2.0 will look like.
4. Corporate Borrowers Face New Current Account Rules
The central bank set new conditions for banks to open current accounts for large borrowers in order to strengthen credit discipline.
Use of multiple operating accounts by borrowers—both current well as cash/overdraft accounts—has been observed to be prone to vitiating credit discipline, the RBI said its Statement on Developmental and Regulatory Policies on Thursday.
"The checks and balances put in place in the extant framework, for opening of current accounts, are found to be inadequate,” it said, adding that the central bank has revised its guidelines to bring in appropriate safeguards.
The revised norms are also expected to bring in the requisite discipline in collective actions by creditors.
5. HDFC Bank Under Scrutiny Again
One of India’s biggest credit bureaus has informed the central bank about delays in receiving information from HDFC Bank Ltd., the country’s second-largest lender by assets, people familiar with the matter told Bloomberg News.
The local unit of Experian Plc told RBI in July that HDFC Bank has been late in providing details of its loans, including the repayment status of its millions of retail borrowers, the people added, asking not to be identified because the information is confidential.
Such tardiness has been an issue for about two years, the people said, without giving further details, including on the length or extent of these delays.
Lenders are obliged by the RBI to provide information on their borrowers to Experian and three other credit bureaus on a monthly basis.
A spokesperson for HDFC Bank denied any delays in supplying the information. Find out more.
6. Nifty Climbs To 11,200; U.S. Stocks Fluctuate
Indian equity markets held on to gains to end the weekly options expiry session on a strong note.
The S&P BSE Sensex ended 0.96% higher at 38,025.
The NSE Nifty 50 index closed 0.9% higher at 11,200.
Nifty I.T. was the top sectoral gainer in today’s session, ending with gains of 2%.
The metal index gained for the fifth straight day today.
Follow the day’s trading action here.
U.S. stocks were mixed as traders weighed an uncertain outlook for Congress to approve more stimulus with better-than-forecast jobs data.
The S&P 500 Index swung between small gains and losses.
Retailers were among the best performers after applications for unemployment benefits fell to the lowest since the pandemic started.
Turkey’s lira tumbled to a record against the dollar as interventions by state banks failed to reassure markets.
Gold climbed above $2,050 an ounce.
Get your daily fix of global markets.
7. Eight Losses In A Row For Vodafone Idea
Vodafone Idea Ltd., the beleaguered wireless carrier facing a government demand for billions of dollars in back fees, reported an eighth straight quarterly loss and said a court verdict on a staggered payment plan for the dues is critical for survival.
Net loss stood at Rs 25,460 crore compared with a loss of Rs 11,643 crore last quarter.
Average revenue per user fell to Rs 114 from Rs 121.
The operator recorded an exceptional loss of Rs 19,923 crore in relation to the telecom AGR dues.
Vodafone Idea is losing subscribers to rivals as it trims coverage to cut costs.
8. Consumer Confidence Plummets To A Historic Low
Consumer confidence hit a record low in July on account of a bleak economic scenario amid the disruptions caused by the coronavirus pandemic.
The current situation index dropped to 53.8 in July from 63.7 in May, according to the RBI’s forward-looking surveys released on Thursday.
The index has remained weak since May last year.
Consumers are pessimistic over the economic situation, employment, price and income compared to the position a year ago, the survey found.
Most respondents reported a reduction in discretionary spending, though their overall spending increased during the last one year.
They do not expect to increase non-essential spending in the coming year as well, it said.
The respondents remained buoyant over hopes of a more optimistic outlook ahead.
9. Atmanirbhar Push For TV Manufacturing: What It Means For Industry
India’s clampdown on imports of televisions as part of its self-reliance push is unlikely to impact major manufacturers as they mostly make or assemble TVs in India.
The government put import of fully made televisions in ‘restricted’ list compared with ‘free’ imports allowed earlier, according to a July 20 notification.
Importers will have to approach the Directorate General of Foreign Trade to apply for licences before importing TV sets.
India’s television market comprising all kinds TVs was worth nearly Rs 80,000 crore as of FY18, according to IBEF, a government-backed think tank. Imports, however, contribute less than a tenth of it.
Read more to find out why the TV industry is unlikely to be impacted significantly.
10. India's Covid-19 Death Toll Crosses 40,000
Covid-19 cases in India continued to rise at heightened pace amid the third phase of reopening the economy.
India added over 56,000 fresh cases, taking the total tally to over 19.6 lakh.
This is the second-biggest spike in new cases in the country so far.
Over 40,600 have died and 13.2 lakh patients have been discharged.
India has added over 4 lakh cases in just eight days.
More than 6.6 lakh samples were tested on Aug. 5
Track all Covid-19 related news developments in India, here.
Covid-19 Vaccine Risk For Markets?
Investors should consider the risk of a successful coronavirus vaccine unsettling markets by sparking a sell-off in bonds and rotation out of technology into cyclical stocks, according to Goldman Sachs Group Inc.
The increased probability of an approved vaccine by the end of November is underpriced by equity markets, wrote strategists including Kamakshya Trivedi in a note Wednesday.
Over the next few months, the ramifications of the U.S. election and the evolution of the virus -- in part as schools reopen -- are also likely to be key drivers of the market, they said.
If a vaccine happens along with a change in the U.S. administration, emerging market equities could benefit.