The First Forum – Edition 41

The First Forum is an initiative that 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 Forty-First Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Mehak Gupta , Nikunj Gulati and Kanika Meena)

Business

Google to help summer interns with open-source technology at home
Thanks to the open-source technology, thousands of young people will join Google from their homes in 43 countries for the summer internship as in-person classes and graduation ceremonies have been canceled. This is the first year when Google summer internship programme would be virtual and several technical internships would focus on open-source projects. Read MoreGoogle said on 13th June that although many aspects of the programme remained the same with interns working from home, the company had to make some adjustments. Open source is a model that makes a product’s underlying code available for anyone to work on, so even though interns didn’t have access to certain technical resources in a Google office, they could still contribute to meaningful projects.

SBI knocks on NCLT’s doors to recover Rs 1,200 cr from Anil Ambani
State Bank of India has filed an application in the National Company Law Tribunal (NCLT) to recover more than Rs 1,200 crore from Anil Ambani under the personal guarantee clause of the bankruptcy law. Anil Ambani had given a personal guarantee to the loans given to Reliance Communications and Reliance Infratel. The RCom and RITL Resolution Plans were approved by 100 percent of their lenders in March 2020. These Resolution Plans are awaiting the approval of NCLT, Mumbai.Read More In March, the board of State Bank of India had approved a resolution plan for Reliance Communications that envisaged lenders recovering around Rs 23,000 crore of their money, entailing a haircut of nearly 50%.

IT companies jittery over Donald Trump’s plan to suspend H-1B visa
The Donald Trump Administration is considering a proposal to suspend several employment-based immigration visas, including the H-1B visa, according to a report in The Wall Street Journal. Though details of the proposed suspension are vague so far, the report says that the suspension “could extend into the government’s new fiscal year, beginning October 1, when many new visas are typically issued”. Read MoreIt further says that the US could bar new H-1B visa holders outside the country from coming to work until the suspension is lifted, though visa holders already in the country are unlikely to be affected. The Indian information technology industry, which has long been a beneficiary of the H-1B visa regime, is likely to be directly impacted if such a suspension is announced for a longer-term. However, experts suggest that getting legal sanction for such a proposal will not be easy. They also point out that this is expected rhetoric in an election year — the presidential election is scheduled for November.

Redington India loses sales worth Rs 1,800 cr due to Covid-19 spread
Redington (India), which provides end-to-end supply chain solutions for the IT and telecom sectors, has said it has lost sales worth Rs 1,800 crore due to the Covid-19 situation. This includes sales worth Rs 800 crore lost in India distribution. These orders would have pushed the top line up by 15% and even boosted the bottom line, said the company officials. Read MoreThe company had many major confirmed orders, but the firm was unable to execute on account of lockdown. The company has recently started implementing various measures to improve cash flow. It was able to bring down working capital on a consolidated level, especially in India. It has delivered positive free cash flow, both in India and at the overseas level.

Kedaara Capital invests Rs 567 cr in Religare’s health insurance arm
Religare Group said it had completed a transaction with Kedaara group entity, Trishikhar Ventures LLP, for investments in its health insurance subsidiary called Religare Health Insurance Company Limited (RHICL). This transaction will further the growth of the health insurance business for Religare and help RHICL to emerge as a stronger insurance player. The equity infusion is in sync with the long-term vision of the company to be future-focused, explore its full potential, and accelerate growth. Read MoreThe total investment made by Kedaara to acquire shares of RHICL is Rs 567.31 crore which comprises of primary capital infusion of Rs 300 crore and Rs. 267.31 crore for the purchase of RHICL shares from the existing shareholders, including the purchase of a 6.39% stake from the company against consideration of Rs 200 crore.

Economics

Indian Economy to grow at 9.5% next fiscal: Fitch Ratings
The good news for the Indian economy, Fitch Ratings said that the Indian economy would register a sharp growth rate of 9.5% next year if it manages to avoid further deterioration in the financial sector. This forecast comes hours after credit rating agency Standard & Poor’s (S&P) retained India’s sovereign rating at “BBB”- the lowest investment-grade level with a stable outlook and promised to upgrade the country’s ratings if the government significantly curtailed its fiscal deficit. Read MoreOne of the negatives is a material increase in the fiscal deficit, causing the gross general government debt/GDP ratio to be placed on a sustained upward trajectory. The coronavirus pandemic will lead to shrinking of the already slowing economy in 2020-21 that started in April. Fitch Ratings also forecast a 5% contraction in the GDP in the ongoing financial year.  To support the economy, the government has announced stimulus measures amounting to 10% of GDP and the Reserve Bank of India has eased monetary policy by cutting policy rates and providing liquidity to boost the economy.

Indians pawn gold for loans as borrowings from banks become tougher
Many Indians are using gold to secure loans, bankers and experts say, as banks are unwilling to lend during the coronavirus pandemic due to fear of the loan souring. There are growing concerns that people will struggle to repay riskier business and personal loans. The overall loan growth in India’s banking system has already been decelerating and is expected to hit a multi-decade low of 0 to 1% in this financial year due to the fallout from the pandemic, said credit rating agency Crisil. Read MoreAnd using gold as security is not unusual in India but gold-backed loans are becoming more popular with banks, which tend to consider them safer than other unsecured borrowings.

Finance Ministry proposes to decriminalize minor offenses under 19 legislations
The Finance Ministry has proposed to decriminalize a host of minor offenses such as cheque bounce, non-repayment of loans, etc, to help businesses tide over the crisis caused by the coronavirus outbreak. The 19 legislations include the Negotiable Instrument Act (cheque bounce), SARFAESI Act (repayment of bank loans), LIC Act, PFRDA Act, RBI Act, NHB Act, Banking Regulation Act and Chit Funds Act. Read MoreDecriminalization of minor offenses is expected to go a long way in improving ease of doing business and helping unclog the court system, the FM said. The Department of Financial Services asked the stakeholders’ feedback regarding the decriminalization of acts by June 23. The move is expected to boost investor confidence by reducing the fear of penalties for minor violations. This would also be a significant step in the government’s objective of achieving ‘Sabka Saath, Sabka Vikas, and Sabka Vishwas’.

Singapore replaces the US as India’s top market for engineering exports
India’s engineering goods exports posted growth only in China and Singapore in April 2020, while shipments declined sharply in other top markets like the US, the UAE, and the EU as the world struggled to cope with the pandemic. So, only Singapore and China, out of top 25 destinations of India’s engineering exports, could manage a positive year- on- year growth in April 2020 while the rest conceded massive contraction up to 91% in some cases, due to a hugely disruptive impact of Covid-19, EEPC India analysis has shown. Read MoreExports to Singapore grew by over 95% during the month to $553 million from $283 million in April 2019. India’s engineering exports to China grew by more than 19% to $ 173 million in April 2020 from $145 million in April 2019. On the other hand, engineering shipments to the US declined by about 75% to $222 million during the month, compared to $ 883 million in the comparable month of 2019.

PSBs disburse Rs 12,200 crore loans to MSMEs
The Finance Ministry said Public Sector Banks (PSBs) have disbursed Rs.12,200.65 crore till June under Rs.3 lakh crore Emergency Credit Line Guarantee Scheme for the MSME sector, hit hard by the coronavirus induced lockdown. They have sanctioned loans worth Rs.24,260.65 crore under the 100% Emergency Credit Line Guarantee scheme for the Micro, Small and Medium Enterprises. The scheme is the largest fiscal component of the Rs.20 lakh crore Self-Reliant India Mission Package. Read MoreUnder the scheme, 100% guarantee coverage will be provided by National Credit Guarantee Trustee Company (NCGTC) for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested Micro Units Development and Refinance Agency (MUDRA) borrowers, in the form of a guaranteed emergency credit line (GECL) facility. For this purpose, a corpus of Rs 41,600 crore was provided by the government spread over the current and the next three financial years.

Finance

Home Loans get cheaper as HDFC cuts rate by 20 base points
Housing Development Finance Corp Ltd (HDFC), India’s largest private-sector mortgage financier has reduced its benchmark lending rate by 20 basis points amid a gradual decline in the cost of borrowing across the system, with immediate effect. One basis point is 0.01 percentage point so new rates will now range between 7.65%-7.95% for existing salaried home loan customers. Read MoreRates across the banking system have headed south in the last few months, as the Reserve Bank of India (RBI) and the government work in tandem to propel the slowing economy. This is HDFC’s third reduction in its so-called retail prime lending rate (RPLR) since March. It will lead to a reduction in interest payments for all borrowers of the company. The company’s RPLR now stands at 16.20% after the latest rate cut. The total reduction in RPLR since March 2020 is at 40 basis points.

Lebanon to pump dollars to strengthen pound as protests escalate
Angry Lebanese protesters blocked roads across the country with burning tires, debris, and their vehicles, incensed over the local currency’s depreciation by more than 25% in just two days to 6000 to the dollar. In response, the government announced a series of measures intended to stabilize the value of the currency. President Michel Aoun said that Lebanon’s central bank will begin injecting dollars into the market beginning on Monday to strengthen the Lebanese pound, following a rapid fall in the currency in recent days. Read MoreThe Lebanese government is in talks with the International Monetary Fund, but any bailout is expected to involve painful economic reforms. The depreciation of the Lebanese pound has plunged the country into its worst economic crisis in decades. It has lost 70% of its value since October when protests began. Hundreds of businesses have gone bust and more than a third of the population is unemployed.

India’s forex reserves cross $500 bn but RBI won’t let rupee rise: Expert
India’s foreign-exchange reserves are at a record and crossed the $500 billion mark for the first time, and yet, the rupee is Asia’s worst performer over the past three months. It is because the Reserve Bank of India is not giving the currency a free run even as most of its regional peers have rebounded from the virus-induced selloff. Analysts say the central bank is adding to reserves to guard against a likely downgrade in India’s credit rating or to ensure a bigger transfer of surplus to the revenue-starved government. Read MoreThe RBI likely bought about $9 billion in the forex market in the four weeks ended May 29, pushing up reserves to a record $493.5 billion. The rupee has lost 2% in the past three months, having hit a record low of 76.9088 per dollar in April.

RBI modifies framework for financial market infrastructure, retail payment system
The Reserve Bank came up with a modified oversight framework for financial market infrastructure and retail payment systems with a view to ensure the safety and stability of payment structure. RBI said that the document by enhancing supervisory transparency and disclosure, would enable better regulatory compliance by payment systems operators, and enhance customer awareness, eventually contributing to the safety and stability of our payment systems. Read MoreThe RBI, as per the document, will carry out the oversight activity through monitoring existing and planned systems, assessment of the FMIs and RPSs against the oversight objectives, and inducing change for improvements, where necessary.

Reliance Industries’ rights issue shares to list on June 15
The Rs 53,124 crore rights issue of Reliance Industries Ltd (RIL) received an overwhelming response from investors and now the partly paid-up rights shares are set to debut on bourses on June 15. The partly paid-up shares will be separately listed under the RELIANCEPP symbol. RIL completed the allotment of partly paid-up shares to the Demat accounts of its shareholders on June 11 under the recently concluded rights issue, the company had informed the stock exchanges. Read MoreThe rights issue reached from announcement to allotment within just 42 days entirely on a digital platform, defying the constraints of the COVID-19 induced lockdown. RIL’s Rs 53,124 crore rights issue was India’s largest-ever rights issue. It was also the world’s largest rights issue by a non-financial institution in the last ten years. It ended last week with a 1.6 times subscription – a commitment exceeding Rs 84,000 crore.