Banking, Financial and Economic Awareness of 13 December 2019

1. Discrepancies found in DHS's audit report on IFIN

• The gaps have been found by NFRA in DHS’s audit quality review report (AQR).
• NFRA found that Deloitte Haskins and Sells (DHS) accepted explanations of the management and approved positive NoF and CRAR accounts of IFIN.
• The management of IL&FS Financial Service (IFIN) did not disclose negative Net Owned Funds (NoF) and Capital to Risk Assets Ratio (CRAR) of IFIN as on March 31, 2018.
• Negative NoF and CRAR accounts may cause termination of the company's NBFC license.
• NFRA also found that the independence of auditors was also compromised as they provided non-audit services. Section 144 of the Companies Act, 2013 prohibits auditors from providing non-audit services.
• NFRA may initiate disciplinary proceedings against under Section 132(4) of the Companies Act, 2013.
• National Financial Reporting Authority (NFRA):
  • The government formed NFRA on 01st October 2018
  • It supervises the work of auditors, establishes and enforces standards of accounting and auditing.
  • Chairperson: Rangachari Sridharan
• Infrastructure Leasing & Financial Services:
  • CEO: Arun K. Saha
  • Key subsidiaries: IL & FS Investment managers, IL & FS financial services (IFIN) and IL & FS Transportation Networks India Limited
  • Headquarters: Mumbai

2.  3.8 % decline in IIP and retail inflation stands at 5.54 %

• Index of Industrial Production (IIP) for October 2019 declined by 3.8 %. In October 2018, IIP increased by 8.4 %.
• All three components of IIP (manufacturing, mining and electricity) showed negative growth in October 2019.
• Consumer Price Index (CPI) based inflation (retail inflation) for November 2019 stands at 5.54 %.
• Retail inflation was 4.62 % in October 2019 and 2.33 % in November 2018.
• Index of Industrial Production (IIP):
  • It is a measure of changes in industrial output over a period of time.
  • In IIP, Mining, Manufacturing and Electricity sectors carry weightage of 75.5%, 14.2% and 10.3% respectively.
  • Central Statistical Organization (CSO) compiles and publishes it on a monthly basis.

3. Government decides to sell its complete stake in Air India

• Government will sell its 100% stake in Air India in order to revive it.
• In 2018-19, Air India’s net provisional loss was estimated as Rs 8,556.35 crore.
• It is having over Rs. 50,000 crore debt.
• Reconstituted Air India Specific Alternative Mechanism (AISAM) has earlier approved re-initiation of Air India's strategic disinvestment.
• Air India:
  • CEO: Pradeep Singh Kharola
  • Subsidiaries: Alliance Air, Air India Express

4. Change in dispute resolution committee of MNRE

• Anil Swarup, who was part of MNRE’s dispute resolution committee, resigned from his post.
• He has been replaced by PK Basu. Other members of the dispute resolution committee are MF Farooqui and AK Dubey.
• In June 2019, MNRE announced its decision to form a committee to resolve disputes involving solar/wind power developers and NTPC/Solar Energy Corporation of India (SECI).

5. Bharat Bond ETF issued

• Edelweiss Asset Management company has issued Bharat Bond ETF.
• It aims to raise ₹ 3000 crore and ₹ 4000 crore as an initial amount.
• The initial amount of ₹ 3000 crore will have a greenshoe or over-allotment option of ₹ 2000 crore in the 3 year maturity period (2023).
• Initial amount of ₹4000 crore will have a green shoe or over-allotment option of ₹ 6000 crore in the 10-year maturity period (2030).
• Greenshoe or over-allotment option during initial public offering (IPO) prevents a fall in share price below the issue price after issuing of shares.
• Department of Investment and Public Asset Management has mandated Edelweiss AMC to design and manage Bharat Bond ETF.
• Features of Bharat Bond Exchange Traded Fund (ETF):
  • First corporate Bond ETF of India
  • Small unit size of Rs 1,000, low cost of 0.0005 percent and exchange tradable.
  • Transparent Net Asset Value (NAV) and daily disclosure of the portfolio on the website (transparent portfolio).
  • Fixed maturity date