Economy News-Daily Digest: 6 Key Updates
1. Cabinet nod for DNA regulator, accession to WIPO treaties
The Union Cabinet approved the setting up of a regulatory body for DNA laboratories and a Bill to regulate the use of human DNA. The DNA Technology (Use and Application) Regulation Bill, 2018 is meant to expand the application of DNA-based forensic technologies to support and strengthen justice delivery system in the country and provide mandatory accreditation and regulation to DNA laboratories.
It seeks to ensure that DNA test results are reliable and the data is protected from misuse or abuse in terms of people’s privacy rights.
The proposed legislation will enable cross-matching of DNA of persons reported missing and unidentified dead bodies found in the country, and also for establishing the identity of victims during mass disasters. The Cabinet Committee on Economic Affairs approved expanding the scope of Higher Education Financing Agency (HEFA) and enhanced its capital base from Rs 2,000 crore to Rs 10,000 crore. It will also be allowed to raise Rs 1,00,000 crore for Revitalizing Infrastructure and Systems in Education (RISE) by 2022.
To allow universities and higher education institutes that do not have adequate internal resources, the Cabinet approved five windows for funding under HEFA, which was set up on May 31, 2017, as a non-profit, non-banking financing company to raise extra-budgetary resources for building crucial infrastructure in higher educational institutions under the Central government.
The Cabinet also agreed to accede to the WIPO Copyright Treaty and WIPO Perfomers and Phonograms Treaty, that extends the coverage of copyrights to the Internet. This will help creative right holders to enjoy rights for their work over the internet globally.
2. PNB shifting most a/cs over Rs 50 crore to 60 SIBs across India
Punjab National Bank has started shifting most of its the borrowal accounts above Rs 50 crore to over 60 branches across the country, which are being turned into Systemically Important Branches (SIBs). The bank has embarked upon a credit restructuring exercise that will ensure that large accounts and lending operations are concentrated in a few specially designated branches.
Apart from these SIBs, most of the bigger accounts will be operated from branches designated as Large Corporate Branches (LCBs) while regular branches will concentrate on regular accounts.
PNB posted a net loss of Rs 13,416.91 crore for the January-March quarter, the biggest ever by any domestic lender.
3. Cabinet nod for extension of RRB recapitalisation scheme
To ensure financial stability of Regional Rural Banks, the Cabinet approved extension of recapitalisation scheme for RRBs for next three years up to 2019-20 to help them maintain their minimum capital adequacy ratio. The scheme started in 2010-11 and was extended twice in 2012-13 and 2015-16. The last extension was up to March, 2017.
Rs 1,107.20 crore, as government’s share, out of Rs 1,450 crore, has been released to RRBs till March last year. The remaining Rs 342.80 crore will be utilised to provide recapitalisation support to RRBs whose Capital to Risk Weighted Assets Ratio is below 9 per cent, during 2017-18, 2018-19 and 2019-20.
A strong capital structure and minimum required level of CRAR will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meeting the credit requirements of rural areas.
Identification of RRBs requiring recapitalisation and the amount of capital will be decided in consultation with National Bank for Agriculture and Rural Development.
There were 56 functioning RRBs with total credit outstanding of Rs 2.28 lakh crore as on March 31, 2017.
4. Initial RBI nod for Bank of China
Bank of China — one of the four biggest state-run Chinese lenders — has received in-principle approval from the Reserve Bank of India (RBI) to open branches in India.
The approval marks only the first step for a foreign bank seeking to start business in India. The lender, which is one of the few state-owned commercial lenders in China, would now need to identify preferred branch locations and seek regulatory approval separately for the branches. The RBI, typically, grants permission to open one branch to start with, though there have been exceptions.
Bank of China has a presence in 51 countries. The lender is categorised as a Global Systemically Important Bank (GISB) by the Basel Committee on Banking Supervision.
The move (to open branches in India) follows Prime Minister Narendra Modi’s last month’s visit to China where he met Chinese President Xi Jinping and committed to give the Chinese lender the necessary permissions to start operations in India.
Industrial and Commercial Bank of China (ICBC) is the other Chinese lender that has presence in the country.
While most foreign banks in India operate through the branch route, since the last few years RBI has been encouraging foreign lenders for local incorporation that is, operating through wholly-owned subsidiary.
RBI had promised if foreign lenders adopt wholly-owned subsidiary route than they would be treated at par with domestic banks that enjoy liberalised branch licence regime. Foreign banks that operate through branch route face a restrictive regime as they have to take RBI’s prior approval for opening each branch.
5. Insolvency resolution: IBBI amends norms, notifies procedures for homebuyers
The Insolvency and Bankruptcy Board of India (IBBI) issued revised norms to initiate insolvency resolution process, paving way for homebuyers to seek relief as financial creditors and allowing conditional withdrawal of insolvency applications, among other key changes.
The regulator put in place time frames to be adopted by resolution professionals (RPs) and stipulated that an RP should assess whether a corporate debtor had indeed indulged in fraudulent transactions within a time-line during the resolution process.
The changes to the IBBI (Insolvency Resolution Process for Corporate Persons) regulations were necessitated after the government had issued an ordinance last month amending the Insolvency and Bankruptcy Code (IBC). The changes will provide more clarity on procedural requirements for various classes of creditors, including homebuyers.
Where the interest rate has not been agreed upon between the parties, the voting share of such a creditor would be in proportion to the financial debt that also includes an annual 8% interest rate. This will apply to cases like those of homebuyers, as the norms now provide clarity on the calculation of total financial debt that would influence their voting rights.
As for time frames, RPs have to publish an invitation for expression of interest (EoI) by the 75th day from the insolvency commencement date. RPs have to publish a provisional list of prospective applicants within 10 days from the EoI submission deadline.
6. Ministry of Electronics & IT enters into agreement with HDFC Bank
CSC SPV, a Special Purpose Vehicle under the Ministry of Electronics & IT, has entered into agreement with HDFC Bank to enable its three lakh Village Level Entrepreneurs (VLEs) managing the Common Services Centers operate as Banking Correspondents of HDFC Bank.
Under the agreement, VLEs of CSC will work as Banking Correspondent of HDFC Bank and support the Government initiative to promote financial inclusion and make banking services more accessible in rural areas. This agreement is expected to be a game changer as it would significantly contribute to Government’s objectives of enabling Direct Benefit Transfer (DBT) of various schemes. Women, senior citizens and persons with disability will especially get benefitted through this initiative. This will facilitate withdrawal and deposit of government entitlements such as payments under MGNREGA as well as various social welfare schemes like widow pension, handicapped and old age pension, etc.
The HDFC BC (CSC) under this arrangement will also function as Business Facilitator (BF). This is a unique facility being extended through CSC by HDFC. This will help and support the citizens, especially merchants, youth, entrepreneurs, farmers and women avail loan facility from the Bank to support in their economic uplift.
Apart from this, HDFC Bank will support CSC SPV in converting 1000 identified villages into Digi Gaon (Digital Villages) within this financial year. CSC SPV is implementing Digi Gaon initiative in rural and remote villages of the country, with the mandate of the Ministry of Electronics & IT, where citizens can avail various online services of the central and State government. In the pilot project, CSC SPV has adopted six villages in the country. The Digi Gaons are positioned to promote rural entrepreneurship and building rural capacities and livelihoods through community participation and collective action for engendering social change through a bottom-up approach with key focus on the rural citizen.
Under its’ commitment to enhancing women’s health and hygiene, HDFC Bank will also support CSC SPV by funding Stree Swabhiman Sanitary Napkin Manufacturing Units. CSC SPV, through its initiative ‘Stree Swabhiman’ is striving to create a sustainable model for providing affordable and accessible sanitary products close to the homes of adolescent girls and women in rural areas. So far 204 sanitary pad manufacturing units have become operational across the country.
The Common Service Center (CSC) Scheme is an integral part of “Digital India” initiative of Ministry of Electronics and Information Technology (MeitY), Government of India. Currently, close to three lakh VLEs are operational across the country, of which 2.10 lakh are at Gram Panchayat level.