Top News of the Week: SEBI Probes IndiGo, PNB Defrauded Again, US Eases Green Card Restrictions & More

 

Stock Market witnesses a sweeping loss as Budget 2019 proposes surcharge on individual income above INR2cr. Government’s decision to waive MDR worries banks. No one saw zero MDR coming. Public spat between Indigo co-founders leads to IndiGo share price dropping to four-month low. After Nirav Modi, PNB hit by another huge defraud scam. Bhushan Steel is evolving into Indian courts’ biggest case ever. Divergent views on US economy as Fed affirms intention to ease policy and cut rates. US removes cap on Green Card applicants; Indian IT professionals to benefit. Some are looking to Singapore to escape the second Bolshevik Revolution. Why are some people in Shanghai spraying pesticide over their trash?

 

Moving on to the top Business news of the week.  

 

 BUDGET 

 

Stock Market witnesses a sweeping loss as Budget 2019 proposes surcharge on individual income above INR2cr. Government’s decision to waive MDR worries banks. No one saw zero MDR coming.

 

A Sweeping Loss: More than INR3L cr of equity investor wealth got wiped out on Monday as Budget 2019 proposed surcharge on individual income of INR2-5cr and over INR5cr by 3% and 7% respectively. 

 

This would mean that if a Foreign Portfolio Investor is to accumulate an income of over INR2cr entirely from listed equities, he/she will now attract 25% surcharge over he/her capital gains tax, short or long. In the case of income of INR5cr and above, the same will go up to 37%.

 

A Coin Has Two Sides: To encourage cashless transactions, the Union Budget had proposed that no merchant discount rate (MDR) be charged for companies with more than INR50cr turnover accepting payments digitally. The MDR will instead be absorbed by the respective banks and the RBI.

 

MDR is the fees levied by banks for the technology infrastructure that supports digital transactions between two banks.

 

Some fintech industry executives, however, are concerned that this will hurt banks, who will have to bear these additional costs , and also large payment firms like Mastercard and Visa, which will now have no reason to incentivise online payments.

 

Deer In The Headlights: Two expert committees on digital payments, one constituted by the Finance Ministry and the other by the RBI, had reportedly advised minimal government interference in setting of the merchant discount rate (MDR) and allowing it to be determined by market fluctuations.


Which is why many are still surprised that the government chose to waive all MDR and place the onus of paying this cost on the relevant banks. It must have hoped that this would bring more citizens into the digital economy, but many are concerned this will discourage new merchants and burden banks with additional costs.

 

 INDIGO 

 

Public spat between Indigo co-founders leads to IndiGo share price dropping to four-month low.

 

Simmering Tensions: In a letter to the Securities and Exchange Board of India (SEBI), Rakesh Gangwal accused co-founder Rahul Bhatia of several violations at IndiGo including those pertaining to related-party transactions, appointment of senior management personnel, directors and the chairman, who has always been an independent director by convention.

 

Gangwal had subsequently sought the market regulator’s intervention in the matter. 

 

Brushing off all allegations, Bhatia accused Gangwal of trying to dilute the controlling rights of his holding company InterGlobe Enterprises Pvt. Ltd (IGE) in the low-fare carrier.

 

More on the feud here.

 

Will The Bad Times IndiGo Away: The public spat between the two founders of India’s largest airline have hit InterGlobe Aviation, which operates IndiGo, hard.

 

The stock fell by almost 16.7% and its investors lost over $1.4bn in market value in the last two sessions. The stock has touched a rate of INR1313.4 a share, a level last seen on 15 March.

 

Meanwhile, the government will probe IndiGo’s shareholder pact for violations and market regulator SEBI will look at the allegations made by one of the founders, Rakesh Gangwal.

 

 FRAUD 

 

After Nirav Modi, PNB hit by another huge defraud scam. Bhushan Steel is evolving into Indian courts’ biggest case ever.

 

Here We Go Again: 19 Months after Nirav Modi/Mehul Choksi’s INR14,357cr scam hit headlines, Punjab National Bank is back in the news for another defraud.


 
Bhushan Power & Steel, one of PNB’s debtors, has defrauded the bank of INR3805.15cr, the bank said in a stock exchange filing last Saturday.

 

The Giant That Dwarves Goliath: To say the size of the Bhushan Steel case is titanic would be akin to calling Jupiter “sort of big”.

 

The MCA-filed chargesheet is 70,000 pages-long, the original accused are 284 in number, just taking the attendance of all accused could take almost five hours and there are talks of an alternate trial venue because how can a courtroom house all the accused and their counsel?

 

The case is now evolving into a multi-bank fraud investigation – in addition to PNB, as many as 33 lenders have exposure to Bhushan Power.

 

And considering the less-than-leisurely pace that Indian courts are notorious for, we can all safely assume that the bloated Bushan Steel trial will not end anytime soon. 

 

Too much legal? Yes. Hopefully there’s also too much (timely) justice as well.

 

 US 

 

Divergent views on US economy as Fed affirms intention to ease policy and cut rates. US removes cap on Green Card applicants; Indian IT professionals to benefit.

 

Two Roads Diverged In A Monetary Wood...: When US Fed Chairman Jerome Powell testified before Congress yesterday, he affirmed the view that the central bank was looking to ease monetary policy to re-energise the economy. The heads of the New York Fed and the Fed Governor seconded this view.


 
But when the Presidents of the Atlanta and Richmond Feds polled businesses in their districts, the general view was that the economy was still blithe and in no need of a rate cut.


 
This shows the contrasting viewpoints and sentiments prevalent in the US that the Fed has to take into account as the end-of-month policy meeting nears.

 

Green Going: The US House of Representatives overwhelmingly passed a law to remove the 7%-per-country cap on Green Card applicants.

 

Green Cards allow those from outside the US to live and work in that country. Now, the per-country limit will be 15% of all visas available that year. This is expected to benefit Indian IT professionals, who usually enter the US using the H-1B work visa.

 

 OFFBEAT 

 

Some are looking to Singapore to escape the second Bolshevik Revolution. Why are some people in Shanghai spraying pesticide over their trash?

 

The Rock That Became Wealthy: Five decades ago, Singapore was a dirty, impoverished piece of rock floating in the ocean. Today, it is an economic powerhouse, one of the original Tiger Economies, and one of the wealthiest places on earth.

 

The island-state’s transformation from economic backwater to developed country status in a single generation is a tale renowned and admired the world over.

 

Long Live The Revolution: For some in the world, though, Singapore’s wealth, security, low tax rates and allure serve a strange purpose. Some people, concerned over growing protectionism in the world and fearing that the resurgent left’s economics will be atavistic and mean a return to “Bolshevism”, are suggesting we take Singapore as “Plan B” and store our wealth there to escape economic Armageddon.

 

Apocalyptic thinking? A little too over-the-top? Well, it is ZeroHedge after all.

 

Trash Talk: If you’re cooking in Shanghai, make sure to dispose of the chicken bones in the “wet” waste can and the pork bones in the “dry” one. If you don’t, the repercussions will be ugly.

 

China’s financial capital has adopted trash-sorting rules with very sharp teeth. 30,000 trash-can enforcers will sift through your waste-bins to see to it that you obeyed the official rule to divide waste into four categories – wet, dry, recyclable and hazardous.

 

If you are found violating the norms, you will be fined and your social credit score will be affected, which could hurt your chances at everything from getting a job to buying a train pass.

 

That doesn’t mean people haven’t found workarounds. Right now, spraying pesticide on all your waste to categorise all of it as “hazardous”, shipping your trash out-of-town, and hiring others to do the trash-sorting for you are in vogue.

 

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