The First Forum is an initiative which focuses on covering the latest happenings going around in the world in a brief format. This is in lieu with the importance of catching up with these events in this fast changing world.
In this Thirty Fifth Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Shruti Jha, Nikunj Gulati and Kanika Meena)

Business

HCL’s acquires Cisco’s SON tech for $49 million; to boost 5G tech deployment
Country’s third-largest software services firm HCL Technologies NSE has announced the acquisition of Cisco’s Self-Optimizing Network (SON) technology in an all-cash deal for $49 million. The acquisition, which comprises products and services built on Cisco’s SON technology, will help HCL cater to customers in the telecommunications industry as SON has become a major component in the move towards 5G networks, including tier-one communications service providers globally. Read MoreIt helps customers boost performance, harmonize the multiple technologies that comprise a RAN, and maximize the capabilities of existing infrastructures, resulting in reduced capital and operational expenditures. The deal – which is expected to be completed by January 2021 – is worth “USD 49,999,000”. As part of the deal, employees who work on Cisco’s SON technology will move from Cisco to HCL. The Cisco SON technology uses machine learning and a set of applications to automate the Radio Access Network (RAN). It helps customers boost performance, harmonize the multiple technologies that comprise a RAN, and maximize the capabilities of existing infrastructures, resulting in reduced capital and operational expenditures. HCL’s decision to make this acquisition comes in line with our Mode 3 (products and platform) strategy. As we expand our footprint in this space and support the mobility needs of our customers; the SON products and services will now be included in our telecommunications offerings. Cisco said it continues to develop solutions for its software-defined mobile network architecture as well as invest in 5G innovations aimed at helping its service provider customers maximize their 5G investments.

SC issues notice to Tata Sons on cross-appeal of Mistry group firm against NCLAT order
The Supreme Court Friday issued notice to Tata Sons Pvt Ltd (TSPL) and others on a cross-appeal filed by Cyrus Mistry and his firm seeking removal of anomalies in the NCLAT order for getting representation on the TSPL board in proportion to the stake held by his family.The top court had on January 10 granted relief to the Tata group by staying the National Company Law Appellate Tribunal (NCLAT) order of December 18 last year, by which Mistry was restored as the executive chairman of the salt-to-software conglomerate. Read MoreA bench of Justices A S Bopanna and Hrishikesh Roy in Friday proceedings, held through video-conferencing, also issued a notice on the cross-appeal of Cyrus Investment Pvt Ltd and tagged the plea with that of TSPL. Mistry, the ousted chairman of TSPL, is seeking representation in the company in proportion to the 18.37 percent stake held by his family, the cross-appeal said. According to the petition, the Mistry group firm has sought remedies for many anomalies in the NCLAT order, including about not looking at alleged oppression of minority shareholders as well as converting Tata Sons into a private limited company as a post-facto move.

Renault and Nissan rule out a merger as they unveil survival plan
Renault, Nissan Motor Co, and Mitsubishi Motors Corp ruled out a merger on Wednesday and doubled down on a plan to cooperate more closely on car production to save costs and salvage their troubled alliance. The companies have been hit hard by the coronavirus pandemic just as they were trying to rework their partnership following the arrest of its chief architect, Carlos Ghosn, who had been pushing for a merger despite stiff resistance from Nissan. Read MoreThe new plan, which entails cutting the alliance’s vehicle ranges by a fifth, pooling manufacturing by region and capitalizing on joint designs, is meant to serve as a peace treaty, sources have told Reuters. Renault and Nissan were among the weakest global automakers going into the coronavirus crisis and had lacked a clear plan for using their alliance to emerge from the slump and share the burden of investing in electric vehicles and other technology. Renault shares, which have been depressed by the tensions with Nissan and the French carmaker’s first loss in a decade in 2019, surged by almost 20% following Wednesday’s announcements. Renault is also on course to receive 5 billion euros ($5.5 billion)in French state aid although the government wants it to keep car manufacturing in France in return.

America’s largest airline LATAM files for US bankruptcy protection
Airlines Group SA said on Tuesday the company and its affiliates in Chile, Peru, Colombia, Ecuador, and the U.S. have filed for Chapter 11 bankruptcy protection in the United States. LATAM is the latest corporate victim of the coronavirus pandemic that has brought a virtual halt to air travel, joining Colombia’s Avianca Holdings SA and Australia’s Virgin Australia Holdings Ltd in bankruptcy protection as it seeks to restructure its debt. The airline will continue to fly while it is in bankruptcy protection and its affiliates in Argentina, Brazil, and Paraguay were not included in the Chapter 11 filing. Read MoreU.S. carrier Delta Air Lines Inc is the biggest shareholder in LATAM, having last year paid $1.9 billion for a 20% stake during better times for the industry. To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing. LATAM listed assets and liabilities in the range of $10 billion and $50 billion, according to a filing with the U.S. Bankruptcy Court in the Southern District of New York. The airline was downgraded by S&P and Fitch on Friday after the company confirmed it did not pay interest and principal on three tranches of 2015 $1 billion enhanced equipment trust certificates.

Tencent to invest $70 billion in ‘new infrastructure’
Chinese tech giant Tencent Holdings will invest 500 billion yuan ($70 billion) over the next five years in technology infrastructure including cloud computing, artificial intelligence, and cybersecurity, the company said Tuesday. The announcement comes after a call by Beijing last month for a tech-driven structural upgrade of the world’s second-largest economy through investment in “new infrastructure” and a boom in demand for business software and cloud services. Read MoreOther key sectors of the investment include blockchain, servers, big data centers, supercomputer centers, internet of things operating systems, 5G networks and quantum computing, Dowson Tong, senior executive vice president of Tencent, told state media in an interview. Tencent is best known for its WeChat messaging app and a range of popular games but is aiming to expand into business services as consumer internet growth slows and companies shift number-crunching from their own computers to the cloud. Tencent shares were 2.5% higher following the announcement. Tencent has said while cloud businesses suffered amid the COVID-19 outbreak is expected to see accelerated cloud services and enterprise software adoption from offline industries and public sectors over the longer term. Tencent Cloud had 18% of China’s cloud market in the fourth quarter, trailing Alibaba Group Holding Ltd which commanded 46.4%, according to research firm Canalys. Alibaba said last month it would invest 200 billion yuan in its cloud infrastructure over three years.

Economics

India’s worst-ever recession is here, says CRISIL
India’s fourth recession since independence, first since liberalization and perhaps the worst to date, is here, global rating and recession agency CRISIL said. The report titled “Minus Five” forecasts the Indian economy shrinking 5% in fiscal 2021(on-year) because of the Covid-19 pandemic. The first quarter will suffer a staggering 25% contraction. CRISIL points out, in the past 69 years, India has seen a recession only thrice as per the available data in fiscals 1958, 1966 and 1980. Read MoreThe reason was the same each time -a monsoon shock that hit agriculture, then a sizable part of the economy. A fourth recession will be tough for India to return to its pre-pandemic growth levels at least for the next three years, irrespective of policy support. It estimates India will suffer at least a 10% permanent loss to real GDP, assuming an average growth rate of 7% between fiscals 2022 and 2024.

China scraps annual economic growth target for the first time
China will not set an economic growth target for the current year due to the great uncertainty caused by a coronavirus pandemic. It is the first time Beijing has not had a Gross Domestic Product target since 1990 when the record began. The announcement was made by Premier Li Keqiang at the start of the country’s annual parliament meeting. Every year China sets a formal target for GDP growth, usually around 6%, and generally meets it. Read MoreChina’s top leaders have promised to set up a policy stimulus to bolster the virus-ravaged economy amid rising worries that job losses could threaten social disability. The move comes as tensions between Beijing and Washington are becoming increasingly strained over the coronavirus pandemic, trade, and Hong Kong. The lack of a formal growth target was a surprise to many economists, though some had predicted Beijing would have no choice given the extraordinary challenges this year. In the first quarter of 2020, China’s economy suffered its first contraction in more than 4 decades shrinking by 6.8% from a year earlier.

S.Korea central bank cuts rates to record low as pandemic hits the economy
South Korea’s central bank cut its benchmark interest rate to a record low to extend liquidity to businesses hit by the coronavirus pandemic. The Bank of Korea’s policy board voted to cut the base rate by 25 basis points from 0.75% to 0.5%, the lowest since the bank adopted the current policy system in 1999. This is the second relief measure the Bank of Korea (BOK) has taken this year. Read MoreIn March it carried out an emergency 50 basis point cut and pledged unlimited liquidity through June via repurchase agreements and began lending to securities firms for the first time in its 70-year history. The cut comes as the central bank said the economy will contract 0.2 percent this year, a dramatic downgrade from the 2.1 percent growth it had forecast at the onset of the coronavirus outbreak in February. Inflation will slow to 0.3 percent, the BOK said.

China says banks’ bad loans high due to virus, credit risks grow
China’s banking and insurance regulator said that bad loans at banks now stand at a high level. Lenders recorded rising soured debt and shrinking net interest margins, a gauge of banks’ profitability, amid the economic impact from a prolonged pandemic. Small firms have been allowed to delay loan and interest repayments to help them weather the dislocation in the economy caused by the lockdown ordered while bringing China’s epidemic under control. Read MoreThe country’s largest state-backed lenders posted stable first-quarter results despite the impact of the virus. But smaller lenders, who have less capital reserves and lend less to well-financed state borrowers, would be more vulnerable to the resulting economic slowdown. The non-performing loan (NPLs) ratio of the country’s 134 city commercial banks stood at 2.49% by the end of March, while that of thousands of rural banking institutions was at 4.9%. Moreover, analysts believe the real amount of bad debt on banks’ books is much higher than reported.

Rising US job losses stir fears of lasting economic damage
Roughly 21 million Americans lost their jobs last week despite the gradual reopening of the businesses around the country, the scourge is doing deep and potentially long-lasting damage to the U.S. economy. There were some encouraging signs: The overall number of Americans currently drawing jobless benefits dropped for the first time since the crisis began, from 25 million to 21 million. And first-time applications for unemployment benefits have fallen for eight straight weeks, as states gradually let stores, restaurants and other businesses reopen and the auto industry starts up factories again. Read MoreBut the number of U.S. workers filing for unemployment benefits is still extraordinarily high by historical standards, and that suggests businesses are failing or permanently downsizing, not just laying off people until the crisis can pass, economists warn. The U.S. unemployment rate was 14.7% in April, a level not seen since the Depression, and many economists expect it will be near 20% in May.

Finance

Banks, NBFCs gear up to tackle biggest loan collection exercise post lockdown
Banks and non-banking financing companies (NBFCs) are looking at strategies to tackle the biggest loan collection challenge they will face in the coming months following the exit from the lockdown. Financial institutions are drawing up plans to trace down low-ticket borrowers and other consumer loan borrowers once the lockdown and the accompanying loan moratorium is completely lifted, with many repurposing existing staff, a large portion of which has been idle given sluggish business environment. State Bank of India, the country’s largest lender, for instance is exploring a tie-up with the Department of Post to reach out to the bank’s customers spread across the country. Read MoreThe bank is also looking to divert its business correspondents for collection purposes for agriculture loans. SBI has nearly 60,000 business correspondents which are used for account opening, remittances and other basic banking operations. The bank has already done a pilot in Maharashtra and is looking to extend this across the country. “There is a need to have a mechanism in place to improve collection efficiency and also sensitise borrowers to repay on time. As of now collections are done through branches. It’s time that we engage with more business correspondents in this way so that there is a regular cash flow coming and accounts don’t go into stress,” said a senior SBI official. Bajaj Finance Ltd, one India’s largest non bank lender, is looking to augment its collection capacity. In its earnings call, the management said it has used the last 60 days to boost its collection capacity. “We are adding close to 2,800 officers in the company to this activity,” Rajeev Jain, managing director and chief executive officer said. Credit scoring firms have warned that fintech, NBFCs, and small finance banks with exposures to the mass market segment with an average loan amount of ₹25,000 and average savings of ₹4,000 need to be wary of bad loan build-up in this segment. These customers have seen a sharp drop in income and are unlikely to fulfil EMI obligations beyond two months.

Delhi govt seeks ₹5,000 crore from Centre to pay employees’ salaries
The Delhi government has demanded ₹5,000 crore assistance from the Centre to be able to pay salaries to its employees, Deputy Chief Minister Manish Sisodia said on Sunday. Sisodia, who also holds the finance department charge, said the Delhi government requires ₹3,500 crore per month to pay salaries to its employees and to meet other needs. “However in the past two months, our GST collection has been only ₹500 crore each month. Read MoreWe need at least ₹7,000 crore to be able to pay salaries to our employees many of whom are discharging frontline duties against the coronavirus epidemic,” Sisodia said in a press conference. The Deputy CM said that in a letter to Union Finance Minister Nirmala Sitharaman, he had demanded ₹5,000 crore from the Centre as Delhi did not get anything from the disaster relief fund that was given to other states.

Investment in foreign stocks gets easier as LRS goes online
Indian residents can invest up to $250,000 per year in foreign stocks, bonds and ETFs. Making the money transfer to the foreign broker has traditionally involved a bank branch visit. However, fintechs in this space are gradually easing up the process by offering pickup and drop services for transfer forms. In addition, banks such as ICICI Bank allow a completely online process for transfers up to $25,000—10% of the total liberalised remittance scheme (LRS) limit. Investment in international stocks has been looking attractive over the past year as Indian markets have underperformed their US counterparts in a big way. The Nasdaq is up about 24% in the past one year and close to it’s all-time highs. Read MoreThis is sharply in contrast to a 23% decline in the Sensex (as of 29 May 2020). According to the Reserve Bank of India (RBI) data, Indians remitted $431 million ( ₹3,258 crore) for investment in foreign stocks and bonds in FY20. This was slightly higher than the $423 million remitted in FY19 despite the sharp depreciation in the Indian rupee against the US dollar, which has moved up from 69.8 to 76 a dollar. “Current account transactions (fees, healthcare and family maintenance) are mostly online across the board. Banks have limits from $10,000 to $25,000 on these. Capital account transactions (used for investing) are not online right now, except for with the ICICI Bank. We digitize the capital account bit (investing) to a great extent by generating the automated-filled-customized documentation online when someone wants to fund their Stockal account. Then we schedule a pickup and deal with banks to get the processing done. In this, if a customer has an ICICI Bank account, we enable him to do it 100% online,” said Sitashwa Srivastava, founder and CEO, Stockal, a fintech player focusing on international investment, which has a tie up with HDFC Securities. International diversification is an important part of risk reduction in an investor’s portfolio. As fintechs and banks ease up this process, your ability to do this is enhanced. Keep a close watch on the transaction costs (such as currency conversion), reputation of the foreign broker and the regulations involved. Budget 2020 also imposed a 5% tax collected at source (TCS) on foreign remittances above ₹7 lakh although this can be offset against your other tax liability (from sources like salary, business or capital gains).

IDFC First Bank launches video KYC facility for opening of savings accounts
Private sector lender IDFC First Bank today announced that it has come out with a new video-based KYC facility for onboarding of new customers. Using the new facility, customers can open savings bank accounts without the need to visit a branch office. “Video KYC makes the online journey for opening savings accounts simple and fast as customers do not have to venture outside their homes or meet anyone from the bank to complete the process,” said Amit Kumar, Head – Retail Liabilities, IDFC First Bank. Read MoreThe zero-contact method completely does away with paperwork or biometric verification, thereby removing physical interaction between the bank and customer from the known customer (KYC) process. Customers can start earning 7 per cent interest and maximise their returns on funds held or invested anywhere else, it added. This is especially relevant in the current times given loss of incomes and low returns offered by most other options, Kumar said. The RBI-sanctioned video-based KYC process for opening of online savings accounts allows customers to open a full-fledged savings account with no limit on maximum account balance. The pandemic has altered the way customers want to interact with their banks as they increasingly rely on digital and mobile channels to transact, the lender said.

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