Market regulator lens now on funds with small number of investors
Private equity and venture capital funds holding money for five or fewer investors have drawn the attention of India’s capital market regulator. The Securities and Exchange Board of India has in an email on September 12 sought information on funds formed with a small club of investors. Sebi has been gathering a wide range of data on alternative investment funds, given the rise in their importance as investment vehicles.
Why it’s important: The development comes a week after the regulator asked private equity and venture capital firms to disclose their valuation practices. Such moves by Sebi could lead to regulatory changes.
Reserve Bank may raise repurchase rate by 0.35-0.5 percentage point
The monetary policy committee of the Reserve Bank of India could increase the policy repurchase rate by 0.35-0.5 percentage point on September 30, according to a poll conducted by Business Standard newspaper, in order to bring retail inflation within its target range. Consumer price index has been over 6 percent for eight consecutive months.
Why it’s important: The repo rate at which the central bank lends to banks is presently at 5.4 percent. It is practically a given that the rate will rise further to tame high inflation.
Government to introduce comprehensive indirect tax regime for crypto assets
The central government has started work on an all-inclusive indirect tax regime for crypto assets that would check any revenue loss to the exchequer due to the ambiguity around the nature of these assets. The finance ministry plans to define the characteristics of cryptocurrencies, their usage and how they fit into the existing legal framework. Once its legal definition is decided, the appropriate GST rate will be decided, which could even be a new slab between 18 and 28 percent.
Why it’s important: The Reserve Bank thinks cryptocurrencies are a threat financial stability, while the government wants a global consensus on regulating such assets. How to tax crypto assets remains a grey area, with tax authorities trying to catch up with advances in technology.
India’s bad bank aims to purchase 18 distressed accounts by the end of October
National Asset Reconstruction Company of India Ltd, the bad bank promoted by the government, is preparing to acquire 18 distressed accounts totaling Rs 39,921 crore by October 31. This follows directions from finance ministry officials to government-owned banks at a meeting held last week. The government-owned firm has informed lenders that it has drawn up two lists. Phase one will consist of with eight accounts with Rs 16,744 crore debt and phase two will comprise 10 accounts with Rs 18,177 crore debt.
Why it’s important: The bad bank has failed to buy a single package of bad loans in a year of operation. The regulator’s rules stipulate that an asset reconstruction company must close at least one deal within a year of starting if it wants to retain its license. The haste is justified.
Merchant association flags concerns over readiness on mandatory tokenisation
Top global service providers such as Netflix, Microsoft, Spotify, and Disney Hotstar are among those that have raised questions on the feasibility of making recurring payments through mandatory tokens from October 1, seeking central bank intervention through an industry body to ensure glitch-free transactions in a regime that will bar merchants from storing subscriber card details. The Merchant Payments Alliance of India has requested the Reserve Bank to plug issues around recurring payments through tokens before giving effect to the no-card storage rule.
Why it’s important: Central bank rules require all merchants to delete customer debit and credit card details before October 1 and replace card payments with unique tokens. This could lead to disruptions in recurring payments, as was seen last year when the rule was first brought into effect.
Highways authority plans infrastructure investment trusts to raise Rs 10,000 crore
State-owned National Highways Authority of India plans to raise close to Rs 10,000 crore from the capital market through infrastructure investment trusts. The first of the InvITs may open around Diwali to raise Rs 3,000-4,000 crore to operate and maintain completed roads and highways. An additional Rs 5,000-6,000 crore worth of highways are expected to be moved to InvITs by December.
Why it’s important: InvITs allow the public to invest in infrastructure projects and offer dividends to unitholders in return. The initiative is expected to deepen the asset monetization market.
Volatility expected in India’s stock market ahead of US Fed policy meeting
The 50-share Nifty, which rose 19 percent over three months, fell 3 percent on Friday on significant selling by foreign portfolio investors. As market volatility rose, option sellers sold Rs 2.08 lakh crore worth of more calls than puts across the market, the most in three months.
Why it’s important: The options trades underline the bearish sentiment ahead of the two-day US Fed meeting that ends on Wednesday. Market choppiness could rise over the next few sessions.
Reserve Bank may allow peer-to-peer firms to enter secured lending
The Reserve Bank of India is weighing the possibility of allowing peer-to-peer platforms to foray into secured lending to enable them to diversify risks from having a completely unsecured book with relatively new-to-credit customers who have been outside the reach of legacy credit vendors.
Why it’s important: There has been exponential growth in P2P lending in recent years, which shows no signs of slowing. Clear regulations are required for these firms to diversify and de-risk their businesses.
Advance tax collections rise 17 percent between April and September
The advance tax collection, both corporation and personal, has grown 10.1 percent on an annualised basis to Rs 1.92 lakh crore in the second quarter of 2022-23. The cumulative advance tax collection between April 1 and September 17, comprising first and second instalments, surged 17 percent to exceed Rs 2.95 lakh crore, according to the Central Board of Direct Taxes.
Why it’s important: The surge in collections can be attributed to higher compliance and plugging of leakages. It indicates robust economic activity that seems to have recovered from the disruptions caused by the pandemic.
Younger TCS employees prefer to continue working from home
It major Tata Consultancy Services is struggling with the continued unwillingness of the majority of its millennial employees to return to the workplace, even as the software services company is keen to end the work-from-home arrangement that was put in place in the wake of the Covid-19 pandemic in early 2020. Not more than 20 percent of TCS employees have returned to work from office despite efforts by the management.
Why it’s important: This could be the situation in many business sectors, particularly infotech. The advantages of working from home are many and returning to the legacy mode of office e work could be an uphill task.