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This is a roundup of the day’s top stories in brief.
1. New Framework For Home, Auto Loans
The Reserve Bank of India asked lenders to link all new floating-rate loans to external benchmarks to improve transparency.
- Starting Apr. 1, floating-rate personal or retail loans and small business loans will be linked to an external benchmark.
- Final guidelines will be issued by the end of December.
- Banks will have the discretion to decide on the spread at the inception of the loan but that should remain constant over the period of the loan unless there is a change in the borrower’s credit score.
2. Status Quo, Dovish Tone
Calmed by a dramatic turn in crude oil prices and stability in the Indian currency, the Monetary Policy Committee kept the benchmark policy rate unchanged for the second consecutive meeting
- The monetary policy stance also remains unchanged at 'calibrated tightening' even though a sharp cut in inflation projections may suggest a pause in interest rates for the foreseeable future.
- Following the review, the repo rate remains unchanged at 6.5 percent. The reverse repo rate has been held at 6.25 percent.
- In his comments after the MPC decision was announced Reserve Bank of India Governor Urjit Patel said space may open up for a change in future policy action. “If upside risks to inflation do not materialise, or stay muted, there is the possibility of space for commensurate action,” said Patel.
3. Indian Stocks Fall, Bonds Rise
Indian equity benchmarks extended declines for second day in a row after the Monetary Policy Committee maintained status quo on policy rates and stance.
- The S&P BSE Sensex Index fell 0.7 percent or 250 points to 35,884.
- The NSE Nifty 50 Index declined 0.8 percent or 87 points to 10,783.
- Negative global cues also added to the weak sentiment in India following Tuesday’s fall on Wall Street, which was the biggest since mid-October.
- All 19 sector gauges compiled by BSE ended lower led by the S&P BSE Metal Index's 3.8 percent loss.
- Government bonds, though, rallied after RBI’s decision to extend open-market debt purchases till March.
- The RBI’s commitment for buying more debt is a “delight for markets,” said Vivek Rajpal, rates strategist at Nomura Holdings Inc.
European and Asian stocks dropped on Wednesday following the rout on Wall Street, though declines were contained and U.S. equity futures rose after China pledged to start delivering on trade agreements reached with America.
- While the Stoxx Europe 600 Index slumped as much as 1.2 percent, that was far less than the 3.2 percent plunge recorded by the S&P 500 a day earlier.
- Futures for America’s benchmark gauge advanced, though the U.S. market will be closed on Wednesday to mark the death of President George H. W. Bush.
- The pound stayed higher as the U.K. government published legal advice relating to its proposed Brexit deal.
- West Texas Intermediate crude fell 0.2 percent to $53.12 a barrel.
4. CCI Can’t Probe Jio’s Rivals
The Supreme Court today dismissed the Competition Commission of India’s plea to allow it to probe Reliance Jio Infocomm Ltd.’s allegations of cartelisation against its older rivals— Vodafone India Ltd., Idea Cellular Ltd. and Bharti Airtel Ltd.
- The bench, headed by Justice AK Sikri, was hearing the CCI’s appeals challenging a judgment passed by the Bombay High Court.
- The high court in September had ruled against the probe saying the CCI doesn’t have the jurisdiction to order a probe when there is a sector-specific regulator—in this case the Telecom Regulatory Authority of India.
- Reliance Jio in November 2016 filed a complaint with the CCI alleging that the incumbents were abusing their dominant position to prevent it from accessing points of interconnection.
5. Yes Bank Tries To Blame Rival For Bad Press
Search the internet for Yes Bank Ltd. and you’d have to look hard to find a positive story. Regulatory trouble, director resignations and stock price under pressure.
- While none of those events are imaginary, the bank would rather shift the blame to a rival.
- Yes Bank has accused financial newspaper Business Standard of publishing malicious and defamatory news reports, suggesting this was done at the behest of Uday Kotak, owner of the newspaper and rival Kotak Mahindra Bank Ltd.
- In a filing with the stock exchanges, Yes Bank enclosed a letter addressed to senior editors at Business Standard accusing the newspaper of “a persistent attack on a public trust institution like Yes Bank Ltd., which is going through a transition phase in its life cycle”
6. Mallya’s Money Back Policy
Fugitive liquor tycoon Vijay Mallya on Wednesday said his extradition from the U.K. to India will take its own legal course, while offering to pay back 100 percent of “public money”.
- Mallya, who has been fighting a legal battle against his extradition to India, claimed that he has been falsely dubbed as a “defaulter” by politicians and media.
- “The most important point is the public money and I am offering to pay 100 percent back. I humbly request the banks and government to take it, he said.
- Mallya, who fled to the U.K. in March 2016, is wanted in India over the default of Rs 9,000 crore that was loaned to Kingfisher Airlines by several banks.
7. Phone Calls, Internet On Flights May Start Next Month
The new norms allowing use of mobile phones for making calls and internet surfing during flights in the Indian airspace could come as early as January, after the Law Ministry gives its concurrence, Telecom Minister Manoj Sinha said on Wednesday.
- The Telecom Ministry is currently awaiting the views of the Law Ministry on in-flight connectivity rules and is hopeful of notifying the norms soon thereafter, Sinha said.
- The decision is expected to pave the way for travellers to use internet and voice services on mobile phone during flights in the Indian airspace.
8. Saving Promoters From Themselves
From maximising value while balancing between two sets of shareholders, independent directors' role is now to balance multiple agendas, writes Amit Tandon.
- Directors have always had three choices - exit, voice, or loyalty. Till recently most chose to stay loyal.
- Finally, directors have begun articulating why they are leaving boards.
- But, how does a director argue with someone who has skin in the game, when they themselves have no stake in the business?
9. Money Might = Electoral Victory?
The Bharatiya Janata Party is India's richest political party with more than four times the income of its closest rival, the Indian National Congress.
- The BJP’s total income rose to Rs 1,027 crore in 2017-18 compared with Rs 968 crore in 2014-15, when it came to power, according to Election Commission’s data.
- For the Congress, the income fell by more than half to Rs 225 crore by FY17. It’s yet to disclose FY18 numbers.
- While it’s not surprising for the party in power to receive more money, does that bring electoral gains?
10. The Biggest Political Risks In 2019
Governments behaving badly — with populists and authoritarians flouting the rules and international relations fraying — pose some of the biggest risks to the world economy in 2019.
- U.S.-China: Even if the G-20 truce holds, the dispute could represent the early stages of a prolonged economic cold war.
- Italy: Tensions between the ruling coalition partners — the anti-establishment Five Star Movement and the anti-migration League — could see the alliance collapse before or after next May’s European Parliament elections, plunging Italy into another bout of political chaos.
- Elections: Next year will see elections in several major emerging economies, with far-reaching implications for their policy stance and market stability. Argentina, India, Indonesia, South Africa and Nigeria are among those headed to the polls.
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