Banking, Financial and Economic Awareness of 28, 29 and 30 November 2020

By PendulumEdu | Last Modified: 30 Nov 2020 18:12 PM IST

Main Headlines:

Topic: Indian Economy

1. Rupee continues to lose against US Dollar while currencies of other emerging economies continue to rise.

Rupee is continuing to lose against US Dollar while currencies of other emerging economies are continuing to rise from April 2020.
In 2020, Rupee has lost 3.59% against the greenback (informal term for dollar) and performed worst among Asian currencies such as China’s Renminbi, the Philippines’ Peso, Taiwan’s dollar and Korea’s won.
These currencies appreciated by more than 4% against the dollar. Monetary easing by US Federal Reserve has caused the greenback index (US Dollar index) to move down by over 10% from its peak in March 2020.
Between March and October, Rupee also appreciated from 76.3 to 72.7. But, it depreciated in the last two months.
Rupee is continuing to lose despite heavy inflows from Foreign Portfolio Investors (FPIs) over the last two months.
Foreign Direct Investments (FDIs) have been 25% higher in April September 2020 from that of the same period last year.
In April-September 2020, the average monthly merchandise trade deficit remained at $3.9 billion. In April-September 2019, it remained at $12.9 billion.
Weakening or depreciation of rupees is mainly due to RBI’s interventions in the currency market.
In March and April, RBI sold dollars. Since then, it is purchasing dollars as visible from data available for July to September and from the rise in forex reserves from around $540 billion to $575 billion since October.

Topic: Regulatory Bodies

In IBBI’s latest quarterly newsletter for July-September 2020, IBBI Chairman MS Sahoo has said that a resolvability index should be developed for companies.
IBBI Chairman has also said that a legally decided minimum threshold of resolvability will prevent viable companies from closing and facilitate more credit flow to companies.
Resolvability shows the readiness of companies to implement strategies to rescue them from financial stress.
Companies with a higher resolvability index will be preferred in the market and have better access to credit.
Insolvency and Bankruptcy Board of India (IBBI):
- It was established on 1 October 2016 under the Insolvency and Bankruptcy Code, 2016.
- It is responsible for the implementation of the IBC code.
- It is a unique regulator that regulates a profession as well as process.
- Chairperson of IBBI: M.S. Sahoo

Topic: Banking System

RBI has advised writing off of Rs 318-crore worth tier-II bonds of Lakshmi Vilas Bank (LVB).
RBI had earlier decided to write off ₹8,400 crores worth Additional Tier 1 (AT1) bonds of Yes Bank in March 2020.
AT-1 bonds are Basel-III compliant. They have a loss absorbency clause. This allows their writing off or conversion into equity in case of stress to banks.
Loss absorbency clause or writing off of bonds is triggered when Common Equity Tier 1 (CET1) falls below 5.5% prior to March 2019 and then below 6.125% later.
At the request of RBI’s order, the bonds can also be written off in case of a point of non-viability (PONV) event. PONV refers to a situation in which a bank is no longer viable.
Writing off of Additional Tier 1 (AT1) bonds of Yes Bank was triggered by PONV. Basel III Tier 2 bonds can also be written off in the case of PONV.
Bank is also considered non-viable if it is reconstituted or amalgamated with another bank under section 45 of the Banking Regulation Act, 1949.
In October, LVB’s Tier 2 bonds were given B- rating by Care ratings. It means a high risk of default.
SEBI has recently allowed only Qualified Institutional Buyers (QIBs) to participate in AT 1 bond.

Topic: Regulatory Bodies

Central government may bring Competition amendment bill in the winter session of Parliament.
The Competition amendment bill may give the Competition Commission of India (CCI) power to appoint the head of its investigative arm.
Currently, the Centre appoints the head of investigative arm of CCI, Director-General.
The Competition amendment bill may also bring in new settlement and commitment mechanism for quick disposal of cases.
The experts think that the appointment of the head by CCI itself may affect DG’s autonomy.
Under the new settlement mechanism, the firm may reach an agreement with CCI for faster disposal of the case by stopping anti-competitive conduct and paying fines. Resolved cases would not be open to appeals.
Competition Commission of India (CCI):
- CCI was formed on 14 October 2003 under the Competition Commission Act, 2002.
- It has a chairperson and six members. It is a quasi-judicial body.
- The chairperson and members are appointed by the Central government
- It aims to eliminate practices that affect competition in the Indian market and protect the interests of the consumers.
- Current Chairperson: Ashok Kumar Gupta

Topic: Indian Economy

Office of Economic Adviser releases Index of Eight Core Industries for October 2020 and combined Index of Eight Core Industries stood at 124.2 in October 2020.
Index of Eight Core Industries in October 2020 declined by 2.5% in comparison with the index of October 2019.
In the data released for October 2020, the final growth rate of Index of Eight Core Industries for July 2020 has been revised to (-) 7.6%.
The index for November 2020 will be released on 31 December 2020. Eight core industries carry 40.27% weightage in the Index of Industrial Production. The weightage for Eight Core Industries is summarized below:
- Refinery Products production – 28.04%
- Electricity production – 19.85%
- Steel production – 17.92%
- Coal production – 10.33%
- Crude Oil production – 8.98%
- Natural gas production – 6.88%
- Cement production – 5.37%
- Fertilizers production – 2.63%

Topic: Indian Economy

Finance Minister Nirmala Sitharaman held the 5^th meeting to review Capital Expenditure (CAPEX) of CPSEs in the current financial year.
The meeting was held through Video Conference and Secretaries of the Ministries of Power, Mines and Department of Atomic Energy participated in the meeting.
The Chairman-cum-Managing Directors (CMDs) of 10 Central Public Sector Enterprises (CPSEs) of these Ministries also participated in meeting.
Ministry of Finance has said that 24 thousand 227 crore rupees capital expenditure has been done against the target of 61 thousand 483 crore rupees for 2020-21.