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PSBs on Strike, Facebook Cryptocurrency, US Govt Shutdown et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Dec 21, 2018 2:09 PM 5 min read
Editorial

False alarm on surveillance? PSBs going on strike the same time when the government is bailing them out. NDTV goes Native. Facebook trying its hand at crypto (god help them! or perhaps us?) while US Government preparing to shutdown (a bit). 

 

Now to today's Top Business Stories:

PSBs on Strike, Facebook Cryptocurrency, US Govt Shutdown et al.

 

DATA

Govt allows 10 central agencies to intercept, monitor, and decrypt all data in any computer system.


Excuse Me?: In a late night order released yesterday from the Union Home Secretary, authorization was granted to 10 security and intelligence agencies: IB, ED, Narcotics Control Bureau, CBDT, Directorate of Revenue Intelligence, CBI, NIA, RAW, Directorate of Signal Intelligence, Commissioner of Police (Delhi), as per Section 69 of the IT Act, 2000. 

Contention: The order quickly turned into a political to-and-fro, especially in light of the ongoing Supreme Court-driven debate regarding Right to Privacy and Data Security. 

Fingers Crossed: The MHA followed up on the story today afternoon by posting a set of clarifications primarily clarifying that no new powers have been conferred (in addition to the ones already in force thanks to Section 69 - which allows surveillance "in the interest of the sovereignty or integrity of India...defence...security of the State...public order" etc. etc.) and yesterday's order was merely issued to notify the concerned ISPs, TSPs, Intermediaries etc. for codification purposes. 

MHA also asserted that the surveillance exercise would need to be approved by the Union Home Secretary, and such cases would be placed under a review committee headed by the Cabinet Secretary.

  
 
BANKS
 
PSBs go on strike, to be open only on Monday between Dec 21-26, demand wage revision. Govt announces capital infusion of INR83,000cr into PSBs by March-end. Some PSBs may come out of the PCA framework.  
 
 
First, let's talk of the strike: Called by various bank unions, the PSB strike is to protest against linking wages to profits/paying capacity of the bank, instead pushing for a "minimum guaranteed wage" framework. Private Sector Banks will not be participating in it.

 
Now the Recap plan: Well a broader infusion of INR83,000cr till March was announced. Parliamentary approval for INR41,000cr allocation that we spoke of in yesterday's newsletter remains outstanding. Interestingly, Corporation Bank, Bank of Maharashtra, Bank of India, and Allahabad Bank may be able to exit the RBI's PCA framework. Note that exclusion from PCA was one of the bones of contention in the Urjit Patel-era RBI vs. Govt saga. Things are already changing, it seems ;)
 
 
 
MEDIA
 
NDTV signs INR300cr five-year exclusive deal with Taboola, Stock up 10%.
 
 
What: NDTV, via NDTV Convergence, its digital media business which effectively controls all NDTV websites, including NDTV.com, announced a five-year exclusive deal valued at north of INR 300 crores with Taboola. The deal as such ties NDTV Convergence exclusively to Taboola and involves a guarantee of more than INR300cr for NDTV Convergence, making it one of the largest deals within the Indian media ecosystem. This comes at a meaningful uptick (c. 3x) to the earlier arrangement that NDTV had with Taboola, which was valued at INR100cr. Full press release here

 
Zoom Out: Taboola is a leading content discovery and native advertising platform with a robust global presence. Taboola helps publishers (such as NDTV) boost engagement and monetize their online properties while enabling advertisers and marketers to reach highly engaged audiences. As such, the Taboola engine will now power 'content recommendations' for NDTV's large audience. NDTV.com has over 200 million unique visitors, making it India's largest news website and the deal suggests an heightened focus on monetizing ad-supported digital platforms that NDTV runs. This also happens to be the largest deal that Taboola has ever signed in the APAC region.   

 
Also This: The deal was received quite favorably by market participants this morning. NDTV shares froze at 10% upper circuit following the deal announcement. However, the stock is still down c.14% year-to-date.
 
 

TECH
 
Facebook is developing a cryptocurrency for money transfer on WhatsApp, as per industry rumours.

 
What: As per Business Standard report, Facebook is building Stablecoin, a type of cryptocurrency (digital currency) pegged to the US dollar which would allow users to transfer money via WhatsApp, Facebook's fairly popular encrypted mobile-messaging app. As per grapevine, the strategy appears to be initially focused on the fairly robust and culturally popular remittance market in India. 

 
Zoom Out: It has been long speculated that Facebook will make a noteworthy move into the financial services domain and the hiring of former PayPal president David Marcus to run its Messenger app in 2014 serves as a clear endorsement. With WhatsApp payments via UPI already in play, and heightened focus on blockchain technologies among tech companies worldwide, the move appears to be somewhat intuitive. 
 
Furthermore, WhatsApp boasts a lofty c.200 million users base in India (and growing). India is also the front-runner in the world of remittances with World Bank reporting that c.$69bn was sent to India via remittances in 2017 and as per estimates this number could see a meaningful upswing to $79bn in 2018. In that context, this is perhaps a move engineered to capitalize on several sectoral tailwinds simultaneously at play whilst leveraging the benefit of scale which Facebook (and implicitly WhatsApp) already carry.
 

Caveat: The Indian banking regulator (RBI) still has a tortuous relationship with cryptocurrencies. Hence only time will tell how Facebook's supposed plans would unleash.
 
PSBs on Strike, Facebook Cryptocurrency, US Govt Shutdown et al.
 
SHUTDOWN
 
The US Govt may be reaching partial shutting down with funding set to expire for several Federal agencies. 
 
Explain: Due to President Trump's refusal to back down on his demand for $5bn for building the long-promised border wall, there is a deadlock in the Senate. If the seven spending bills aren't passed by 12:01am on Saturday, as per WSJ report, parts of the US Govt may cease to operate. 
 
 
Ok, but how can a government shutdown?: Good question. In the US system, it actually can. Unlike the Westminster model, the Executive and Legislature are segregated in the US. Hence the government needs to get various Appropriations bills passed through the Congress to get Federal funding allocated. If a bill gets stuck, the government can technically shutdown. Yikes?!

 
No sweat: In the current scenario, considering roughly 75% of US Federal spending till September 2019 has already been passed, any dead-lock would actually lead to a "partial" shutdown at best. Feel better?
 
 
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