1. News
  2. Explained

RBI Releases Draft Liquidity Framework Guidelines for Distressed NBFCs, New Direct Tax Code Likely to Replace the Income Tax Act and other Top Business News Today

Professor of Financial Economics and Part-time Value Investor, Transfin.
May 25, 2019 2:23 PM 5 min read

RBI releases draft liquidity framework guidelines for distressed NBFCs. New direct tax code likely to replace the Income Tax Act by July-end. 1.37 crore formal sector jobs were created in FY19, as per CSO. Huawei plans to launch its own operating system this year. Facebook plans to launch 'GlobalCoin' cryptocurrency in 2020. Removes more than 3 billion fake accounts in six months.


Moving on to the top Business news of the day.



RBI releases draft liquidity framework guidelines for distressed NBFCs.

Agents of Shield: In an attempt to protect lenders and depositors of non-banking financial companies (NBFCs), the RBI has released draft guidelines on liquidity risk management framework for NBFCs and core investment companies (CICs).

The guidelines come on the back of increasing need for a stronger asset liability management framework amidst the rating downgrades and debt defaults in the NBFC sector following the IL&FS crisis.

Breaking it Down: 


  • RBI plans to get large NBFCs to invest in government bonds or deposits to ensure that they have enough to make repayments for one month if funds dry up due to a liquidity crisis.
  • The draft proposes to introduce liquidity coverage ratio (LCR) for all deposit taking NBFCs and non-deposit taking NBFCs with an asset size of INR5,000cr and above. Under the LCR guidelines, finance companies will need to ensure that their borrowings broadly match the maturity of their loans.


Read the original Press Release here.



New direct tax code likely to replace the Income Tax Act by July-end. 1.37 crore formal sector jobs were created in FY19, as per CSO. 
The What: Following a meeting on Friday, Arun Jaitley has given the Central Board of Direct Taxes (CBDT) task force an extension of two months till July to draft the new direct tax code. 
The Aim: The existing direct tax law, which deals with personal income tax, corporate tax and other levies such as the capital gains tax, has undergone numerous changes over the years. The aim then is to rewrite it in line with the economic needs of the country and to keep pace with the evolving global best practices. 
  • One key consideration in the exercise is to improve tax compliance. It will seek to bring more assessees into the tax net and make the system more equitable for different classes of taxpayers. 
  • It may also try to make businesses more competitive by lowering the corporate tax rate and phase out the remaining tax exemptions that lead to litigation.
Delayed: CBDT was supposed to submit its report by May 31, but now it has got two more months to complete the task.
It’s Raining Jobs: As per data released by the Central Statistics Office (CSO)  around 1.37 crore jobs were created in the formal sector during FY2018-19. 
The CSO used addition to the Employees' Provident Fund (EPF) subscriber base to derive employment generation in the formal sector. As per the latest data, in the month of March 2019, around 8.27 lakh EPF subscribers were added.
Insider’s Take: While the government has time and again cited EPF to show that employment generation has been on the rise, many experts and statisticians opine that the EPFO data does not give a complete picture of the employment scenario.
L&T increases shareholding in Mindtree to 28.45%. SpiceJet and Vistara set to induct several aircraft in the coming months.
Hoarding: Infrastructure major Larsen and Toubro (L&T) has acquired over 24.9 lakh shares of Mindtree from open market, taking its shareholding in the IT services firm to 28.45%.
Earlier…: L&T had earlier this month purchased around 20% stake of V G Siddhartha and Cafe Coffee Day in Mindtree through a block deal for about INR3,210cr. It has been since acquiring shares of the IT company from the open market.
L&T had on Thursday acquired 4.5 lakh shares of Mindtree from the open market.
In all, L&T is eyeing up to 66% stake in Mindtree for around INR10,800cr, marking the country’s first-ever hostile takeover bid in the information technology industry.
Gearing Up: SpiceJet and Vistara are set to induct several aircraft in the coming months, as the two seek to increase their capacity in order to cater to the growing domestic demand triggered by the grounding of Jet.
SpiceJet, which is set to induct its hundredth aircraft in the coming days, will add more than 50 to its fleet this year.
Vistara has leased six more planes from BOC Aviation.
As per reports, IndiGo and SpiceJet have been allocated 130 slots each, Vistara 110, GoAir 52, Air Asia 42 and Air India 24 slots at Indian airports from Jet’s quota.

Facebook plans to launch 'GlobalCoin' cryptocurrency in 2020. Removes more than 3 billion fake accounts in six months.
Facebook's GlobalCoin: In an attempt to tap into the payments sector, social media giant Facebook is planning to launch its own cryptocurrency, dubbed GlobalCoin, in early 2020, allowing users to make digital payments in over a dozen countries.
The currency would enable Facebook’s 2.4 billion monthly users to change dollars and other international currencies into its digital coins. The coins could then be used to buy things on the internet and in shops and other outlets, or to transfer money without needing a bank account.
More on the GlobalCoin here.
Cleaning the Junk: Facebook removed more than 3 billion fake accounts from October to March, twice as many as the previous six months, the social media giant reported. 
The increase shows the challenges Facebook faces in removing accounts created to spread spam, fake news and other objectionable material.
Facebook also reported that it removed 7.3 million posts, photos and other material because it violated its rules against hate speech. That's up from 5.4 million in the prior six months.

Huawei plans to launch its own operating system this year.
We No Need Anybody: Chinese technology giant Huawei is planning to launch its own operating system this year in order to replace Google’s Android following a US blacklisting.
Huawei last week was granted a trademark, “Hongmeng,” for the operating system by the trademark office of China’s National Intellectual Property Administration. The company has been working on the system under the code name “Project Z” as an insurance policy in case it lost access to American technology like Android, which powers Huawei’s popular smartphones, and hopes to release it later this year.
The Big Picture: The news comes days after the US put Huawei and 70 affiliates on its so-called “Entity List” - a move that bans the telecom giant from buying parts and components from US companies without the US government approval, essentially forbidding it from doing business with American companies.
Bonus Read: While the Chinese telecom giant says it respects intellectual property rights, but competitors and some of its own former employees allege that Huawei goes to great lengths to steal trade secrets. More on this here.
(Don't want to miss out on these End Of Day Wrap Ups? Subscribe Now to our No Nonsense Email Digest and get the day's Top Business stories straight to your mailbox.)