RBI New Draft NBFC Regulations, PNB Q4 Results 2019, Govt to Ease Tax Norms for Startups Under Income Tax Law and Other Top Business News Today

NBFCs re-initiate talks with RBI regarding on-tap banking licences. RBI’s new draft NBFC regulations may affect credit growth, trigger consolidation. PNB Q4 net loss narrows to INR4,750cr on back of lower provisions. RBI likely to relax voting threshold of lenders to 90%. Consumer internet startups in talks to sell their goods and services on GeM. Tax norms to be eased to give advantages to startups under the second term of the Modi government. Wikipedia joins hands with Bengaluru-based NGO to expand content in local Indian languages. Alibaba looking to raise $20bn through second stock listing in Hong Kong. Oyo enters strategic partnership with China’s CTrip. 

 

Moving on to the top Business news of the day.

 

 NBFC 

NBFCs re-initiate talks with RBI regarding on-tap banking licences. RBI’s new draft NBFC regulations may affect credit growth, trigger consolidation. 
 

Renewed Talks: A few leading Non-Banking Financial Companies (NBFCs) have once again initiated discussions with the Reserve Bank of India (RBI) regarding regulatory issues around on-tap banking licences. 
 

Fear of Rejection: Multiple NBFCs have not applied for the licence fearing rejection without response. In cases where the application was rejected, lack of a formal feedback mechanism on the non-acceptance of applications further affected their ability to apply again.
 

Issued in Public Interest: In an attempt to protect lenders and depositors of NBFCs, the RBI recently released draft guidelines on liquidity risk management framework for NBFCs and core investment companies (CICs).
 

Blind Spot: As per the draft, the Central Bank plans to implement liquidity coverage ratio (LCR) in a phased manner over four years starting April 2020. However, setting aside 60% of their net cash outflows, as envisaged in the initial phase, in so-called high-quality liquid assets such as government securities and cash will prevent the NBFCs from deploying these funds for lending.
 

As per experts, a possible consequence of the norms is that weaker NBFCs with poor liquidity management will get absorbed into their larger counterparts to comply with RBI’s liquidity buffer norms.
 

Moreover, these norms could lead to a credit slowdown for NBFCs that do not have a well-managed asset-liability situation.
 

Read RBI’s original Press Release here.

 

 BANKING 


PNB Q4 net loss narrows to INR4,750cr on back of lower provisions. RBI likely to relax voting threshold of lenders to 90%.
 
 
All Cheers!: Punjab National Bank (PNB) reported narrowing of its net loss by nearly 65% to INR4,750cr in Q4 vs a loss of INR13,417cr last year, backed by decline in bad-loan provisioning and improvement in asset quality. 
 
 
The state-run bank recorded an operating profit of INR2,861cr vs operating loss of INR447cr last year. For the entire fiscal year, PNB has recorded a net loss of INR9975cr, lower than net loss of INR12,283cr in previous fiscal.
 
 
On the assets front, PNB witnessed improvement as the gross non-performing assets (NPAs) which were brought down to 15.50% of gross advances at end of March 2019, vs 18.38% at the end of March 2018. 
 
 
Net NPAs or bad loans too came down to 6.56% as against 11.24% a year ago. 
 
 
PNB had posted a staggering loss of INR13,417cr in Q4 Fy17-18, due to fraud committed by jeweller Nirav Modi and his uncle Mehul Choksi. 
 
 
The Times Are A Changing: The RBI is likely to relax the voting threshold of lenders — for any corporate debt restructuring — to 90% vs the earlier 100% under the February 12, 2018 circular.
 
 
The lowering of the voting threshold is expected to help several firms avoid bankruptcy, and aid banks in recovering dues faster.
 
 
 STARTUPS 
 
Consumer internet startups in talks to sell their goods and services on GeM. Tax norms to be eased to give advantages to startups under the second term of the Modi government. 
  
 
Towards a Larger Consumer Base: Startups like RentoMojo and UrbanClap are in talks with the government’s e-marketplace, and might now be able to sell their goods and services to the country’s central and state governments and public sector undertakings, among others – a consumer base which was previously unavailable to them. 
 
 
The discussions are occurring in the light of a tweet made in December last year by Suresh Prabhu, Union Minister for Commerce and Industry under the previous NDA regime. The tweet said that India’s startups would have access to the government market and would be able to sell their goods on it. 
 
 
This move will allow the government to cut down its capital expenditure by leasing goods from startups instead of buying them, and to reduce its disposal costs by letting them take over the maintenance responsibility as well. 
 
 
GeM was set up about two years ago as a one-stop shop for the procurement of goods and services by the government ministries, departments, PSUs and other apex autonomous bodies of the central government.
 
 
Boosting the Ecosystem: The re-elected Modi government is planning to ease its tax norms to give benefits to startups under the income tax law which allow 100% deduction. 
 
 
The provisions in place for the same since 2016 have been interpreted in a very stringent manner, due to which only less than a hundred startups have been certified till now. 
 
 
The startup ecosystem in India will thus receive a great boost as the government tries to review these laws, exempt startups from angel tax and extend tax breaks for them.  
 
 
 EXPANSION 
 
Wikipedia joins hands with Bengaluru-based NGO to expand content in local Indian languages. Alibaba looking to raise $20bn through second stock listing in Hong Kong.
 
 
Project Tiger: Wikipedia’s parent organisation Wikimedia, together with Bengaluru-based Center for Internet and Society (CIS), started ‘Project Tiger’ to generate more content for the website in local Indian languages. With its pilot project held from December 2017 to May 2018 and another phase starting next month, the initiative has helped to generate content in major Indian languages like Kannada, Tamil, Telegu, Punjabi, and Bengali, among others.
 
 
The contributors are of various age groups and hail from various regions - some even from remote rural areas – and were made to compete in ‘editathons’ that pit contributors of different language against each other.
 
 
Alibaba and the Twenty Billion Dollars: Alibaba, one of the world’s largest tech companies, is considering raising $20bn through a second listing in Hong Kong, allegedly to “diversify funding channels and boost liquidity”. 
 
 
The Chinese company is said to be planning to file a listing application confidentially as early as the second half of 2019.
 
 
 DEALS 
 
Oyo enters strategic partnership with China’s CTrip. 
 
 
Building Synergies: Hospitality firm OYO has entered a strategic partnership with China’s largest online travel aggregator Ctrip in an attempt to extend its offerings to travellers.
 
 
As part of the partnership, both companies will collaborate across multiple areas of business, including demand generation by providing access to customers of both brands, online-to-offline services integration, data operation and branding.
 
 
Match Made in Heaven: Fiat Chrysler Automobiles has proposed a merger with French rival Renault.
 
 
The deal, if it goes through, would create the third-largest auto maker, only behind Volkswagen and Toyota Motor with a combined value of about $37bn and annual vehicle production of almost nine million passenger cars and light trucks.
 
 
Here are some top twitter reactions to proposed merger.
 
 
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