1. Patel out, Over to Government
Urjit Patel unexpectedly resigned as Reserve Bank of India (RBI) governor on Monday, 10 December, citing personal reasons, following months of bickering between the regulator and the government over autonomy and the central bank’s hard line on cleaning up the financial system.
Despite an apparent easing of tensions at the last RBI central board meeting, Patel’s tough stance against government demands on easing the prompt corrective action (PCA) for weak banks last week at the Board for Financial Supervision (BFS) meeting could have been the immediate trigger for the resignation, said people familiar with the matter.
Another could have been an imminent push from the government to give the RBI central board greater sway over the regulator, they said. The central board, which had become the site of the battle between the RBI and government nominees, was scheduled to meet next on December 14.
(Source: The Economic Times)
2. Moody’s on Urjit Patel: Govt Attempt to Curtail RBI Independence Credit Negative
In the backdrop of RBI Governor Urjit Patel’s resignation, Moody’s Investors Service on Monday, 10 December, said the independence of a country’s central bank is an important consideration while assessing a country’s institutional strength and any attempt by the government to curtail it would be credit negative. Patel, on Monday, resigned from the post citing personal reasons. Patel, whose three-year term was to end in September 2019, is the first governor since 1990 to step down before his term ended.
To a query on the sovereign rating impact of the developments around RBI, Moody’s said, “While the motivation for the RBI Governor’s resignation is unclear, the independence of a country’s central bank is an important consideration in our assessment of a sovereign’s institutional strength.” It said that Moody’s assumes that the RBI will continue to pursue price and financial stability and implement policies towards these goals.
(Source: The Financial Express)
3. Govt Stops Foreign Funding to 156 NGOs for Defying Order
Cracking the whip, the government has barred 156 NGOs from receiving foreign funds for six months for defying an order to open accounts in any of the 32 designated banks.
The Home Ministry said about a year ago, it had directed all non-governmental organisations (NGOs), business entities and individuals who receive funds from abroad to open accounts in any of the 32 designated banks for higher level of transparency.
However, the latest order said that it has been observed that the associations have not yet opened their bank accounts in central government’s Public Financial Management System (PFMS)-integrated banks and contravened the provisions of the Foreign Contribution (Regulation) Act 2010 by not complying with the December 2017 direction.
(Source: Livemint)
4. Entire NPS Withdrawal at Retirement Is Now Tax-Free
The Centre said on Monday, 10 December, all government and non-government employees are now exempt from paying income-tax on the entire National Pension Scheme (NPS) money withdrawn at the time of retirement, or on reaching 60 years of age.
It has also allowed Central government employees to park 50 percent of their NPS corpus in equity investments. The decisions were approved by the Cabinet last week but not made public as Rajasthan and Telangana were going to polls on December 7.
The Central government offers NPS for its employees who joined services on or after 1 January 2004. The employee contributes 10 percent of basic salary and DA and the government contributes 10 percent. Any private individual can also open an NPS account, but the contribution will be entirely his.
(Source: The Hindu Business Line)
5. Kotak Mahindra Bank Moves Court Against RBI Decision On Promoter Shareholding
Private sector lender Kotak Mahindra Bank Ltd has moved Bombay High Court after the Reserve Bank of India restricted it from reducing promoter holding using preference shares.
In a statement to stock exchanges on Monday, 10 December, the bank said that it has filed a writ petition to “protect its interests” as a “matter of abundant caution.”
In August, Uday Kotak proposed to reduce his promoter holding in the bank using preference shares rather than bringing down his share of common equity. Within 10 days of the proposal, the RBI told Kotak that the Perpetual Non Convertible Preference Shares (PNCPS) route to dilute promoter shareholding was not acceptable.
In its statement on Monday, the bank said that it had once again explained its position to the RBI but is yet to hear back from the regulator.
(Source: Bloomberg Quint)
6. Unilever Used HUL Buyback Gains to Secure GSK Health Deal
Unilever said it had used the buyback of Hindustan Unilever shares five years ago and the subsequent near-three-fold increase in share price of the Indian unit to ‘secure’ last week’s GSK Consumer Healthcare transaction.
The company had in 2013 acquired an additional 15% stake in HUL through a buyback at Rs 600 per share. In the last five years, the share price of the Indian unit has risen to Rs 1,700 per piece, and this has helped more than nullify the impact of Unilever’s 5.3 percent stake dilution in Hindustan Unilever, caused by the merger with GSK Consumer Healthcare.
The growth of HUL shares resulted in ‘an effective gain of €1.7 billion’ (Rs 14,021 crore) for Unilever, CFO Graeme Pitkethly told analysts in a global investor meet last week. Unilever has arrived at this figure by deducting about €0.9 billion (the price it paid for acquiring a 5.3 percent stake at the time of the buyback) from €2.7 billion (the current value of the 5.3 percent stake).
(Source: The Economic Times)
7. Markets, Rupee, Bond Prices Fall as Exit Polls Indicate Close Fight
Indian markets, rupee and bond prices slumped on Monday, 10 December, after exit polls showed that the ruling Bharatiya Janata Party (BJP) is likely to face defeat in Rajasthan while it faces close contest in Madhya Pradesh and Chhattisgarh from rival Congress party.
Exit polls on Friday, 7 December, suggested that the Congress is projected to wrest power in Rajasthan with an absolute majority. In two other BJP-ruled states, Madhya Pradesh and Chhattisgarh, the exit polls predict a close fight with Congress.
The Sensex was trading at 35169, down 503 points, or 1.33 percent, while the Nifty stood at 10,550, falling 138 points, or by 1.3 percent. Rupee was trading at 71.36 a dollar, down 0.78 percent from its Friday’s close of 70.81. The currency opened at 71.31 a dollar. The 10-year government bond yield stood at 7.5 percent from its previous close of 7.464 percent. Bond yields and prices move in opposite directions.
(Source: Livemint)
8. Ahead of Vote, EU’s Top Court Says UK Can Unilaterally Stop Brexit
The European Union's top court ruled on Monday, 10 December, that the United Kingdom can unilaterally revoke its divorce notice, raising the hopes of pro-Europeans ahead of a crucial vote in the British Parliament on Prime Minister Theresa May's divorce deal.
Just 36 hours before British lawmakers vote on May's deal, the European Court of Justice said in an emergency judgement that London could revoke its Article 50 formal divorce notice with no penalty.
May's government says the ruling means nothing because it has no intention of reversing its decision to leave the EU on March 29. But critics of her deal say it provides options — either to delay Brexit and renegotiate terms of withdrawal, or cancel it altogether if British voters change their minds.
(Source: The Hindu Business Line)
9. SEBI Fines 2 Entities for Fraudulent Trade in Stock Options
SEBI on Monday, 10 December, imposed a total penalty of Rs 12 lakh on two entities for executing non-genuine trades leading to creation of artificial volume in the illiquid stock options segment of BSE.
Those facing penalties are Kashi Vishwanath Steels and one Kirti Ramji Kothari. The markets regulator conducted an investigation into the trading activities of certain entities in illiquid stock options on BSE from April 2014 to September 2015.
In April, SEBI announced to take action in a phased manner against 14,720 entities for fraudulent trade in illiquid stock options segment and passed several orders in past few weeks against such entities. Following the probe, Sebi found that the reversal trades executed by the entities were not genuine and created misleading appearance of trading.
(Source: The Financial Express)
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