Banking, Financial and Economic Awareness

2020-05-05

1. Impacts of COVID-19 pandemic on oil sector     

  • Due to COVID-19 pandemic, consumer demand has become more important factor than oil producers in determining oil prices and the situation in oil markets.
  • The prices of crude oil and production have fallen significantly earlier also. But, the demand of oil has also fallen this time due to COVID-19 pandemic.
  • The domestic refiners are taking certain advantages of fall in prices by procuring more crude oil. 
  • But, the advantages might not last longer as the prices at which refined products are being sold are lower than the prices of crude.
  • As India is crude oil importing country, the current situation in which buyers are getting discount over the Brent Crude and Dubai prices is favourable for India. Brent Crude and Dubai prices are used as markers in oil trade.
  • Usually, Asian countries pay a premium over the Brent Crude and Dubai prices. Due to surplus of crude oil, they are getting discount over the Brent Crude and Dubai prices.
  • So, Asian premium or the premium received by OPEC countries from countries of Asia has lowered in current situation. But, it is still here.
  • Indian refinery sector is in surplus due to low demand of refined products. In April 2019-February 2020, the petroleum products have overall grown at 2%. In 2018-19, the growth was 4.5%.
  • The demand increased marginally after lockdown was opened partially on 21 April. But, the fuel sale is increasing over last few days.
  • Organization of the Petroleum Exporting Countries (OPEC) has 13 nations. It was formed in 1960. Its headquarters are in Vienna, Austria.

2. India developing land pool for companies moving out of China

  • India has been developing a land pool to provide land to companies moving out of China.
  • The size of land pool is almost double to the size of Luxembourg and 4, 61,569 hectares of land has been selected.
  • Of the 4, 61,569 hectares of land, 1, 15,131 hectares has been selected from industrial land in four states. They are Gujarat, Maharashtra, Tamil Nadu and Andhra Pradesh.
  • In India, land allocation has delayed projects of Saudi Aramco to Posco. Due to coronavirus outbreak, companies are trying to lower their dependence on China.
  • Access to land, power, and water and road can bring more investment to India. The inquiries from China, Japan, US and South Korea for relocation of businesses to India were received by Invest India.
  • China, Japan, US and South Korea are among top 12 trading partners of India and they contributed more than 68 billion dollar FDI to India.
  • On 30 April, PM held meeting with states and states will develop their own programmes to attract foreign investment.
  • An online system is being developed by Uttar Pradesh. It is meant for allotting land for all industrial and commercial purposes.
  • Luxembourg:
    • It is a landlocked country. It is located in Western Europe.
    • Belgium lies to the west and north of it. Germany is located to its east. France is located to its south.
    • Its capital (Luxembourg City) is one among the four official capitals of EU (European Union). Other three are Brussels, Frankfurt, and Strasbourg.

  • Invest India:

3. Ministry of Corporate Affairs sets up seven-member committee

  • Ministry of Corporate Affairs has set up seven-member committee to study comments on its consultation paper on increasing audit independence and accountability in India.
  • Along with studying comments, the committee will recommend amendments required in laws and rules to increase audit independence and accountability in India.
  • The committee will give its report by the deadline of June 30.
  • The ministry's consultation paper dealt with issues related with audit independence.
  • The issues dealt by consultation paper are listed below:
    • A proposal for disallowing audit firms from giving non-audit services to clients,
    • Ways to deal with oligopoly of audit firms
    • Setting up National Financial Reporting Authority (NFRA)
    • Forming separate group of auditors to appoint auditors of entities that are listed

4. PMI declines to lowest level of 27.4

  • In April, Purchasing Managers Index (PMI) has declined lowest level of 27.4 due to coronavirus pandemic.
  • In March, Purchasing Managers Index (PMI) stood at 51.8.
  • In the second half of a month, lHS Markit sends questions to purchasing managers and on the basis of their responses compiles PMI.
  • PMI is weighted average of five indices. They are new orders, output, employment, suppliers’ delivery times and stocks of purchases.
  • As per IHS Markit, the lockdown has reduced demand and firms have reduced their employees. The output has also declined due to COVID-19 lockdown.

5. Cibil report finds loans given to MSMEs face defaulting risk

  • A report released by credit information agency, Cibil or TransUnion Cibil finds that Rs. 2,32,000 crore worth loans given to MSMEs are facing defaulting risk.
  • The report shows continuous increase in NPA rate for MSMEs to 12.6% till December 2019.
  • As per Cibil, Rs 2, 32,000 crore worth MSMEs loans fall in CMR-7 to CMR-10.
  • CMR stands for CIBIL MSME Rank. While CMR 1 means lowest credit risk, CMR-10 represents highest risk of loan becoming NPA.
  • TransUnion Cibil is a credit information agency that operates in India. It was formed in 2000. Its headquarters are in Mumbai. Satish Pillai is its MD.

6. Silver Lake to put in Rs 5,656 crore in Jio Platforms

  • Silver Lake has made a proposal to put in Rs 5,655.75 crore in Reliance Industries Ltd's subsidiary, Jio Platforms.
  • On 22 April 2020, Facebook has also announced investment in Jio Platforms.
  • Silver Lake's investment estimates monetary worth of Jio platforms at Rs 4.90 lakh crore equity values and Rs 5.15 lakh crore enterprise values.
  • Enterprise value is also known as asset value. It excludes cash and only includes complete value of company's assets.
  • Equity value is also known as net asset value. It is the value available for company's owners or shareholders after excluding company’s debts.
  • Silver Lake is a private equity firm or investment management company of USA. Its headquarters are in Menlo Park.

7. CKP Co-operative Bank's licence cancelled

  • CKP Co-operative Bank's licence has been cancelled by RBI.
  • RBI has also asked Registrar of Co-operative Societies, Maharashtra to order to stop the bank's business and to name a liquidator.
  • The banks licence has been cancelled due to unsustainable position of its finances.
  • The bank did not have 9% minimum capital, which is required as per regulations.
  • The liquidation of bank will mean that banks’ depositors have right to be repaid their deposits to the maximum limit of Rs 5 lakh.
  • The amount will be repaid from Deposit Insurance and Credit Guarantee Corporation.
  • CKP Co-operative Bank is based in Mumbai.

 

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