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Yes Bank Share Price Jumps Over 25% On Reports that an SBI-Led Group Might Buy Stake in the Distressed Lender

Professor of Financial Economics and Part-time Value Investor, Transfin.
Mar 6, 2020 4:48 AM 5 min read
Editorial

Yes Bank share price jumps over 25% on reports that an SBI-led group might buy stake in the distressed lender. Union Cabinet approves the merger of 10 public sector banks. NRIs permitted to own up to 100% stake in Air India. Coronavirus outbreak could cost Indian trade $348m.

 

Table of Contents

 

UNION CABINET

Union Cabinet approves the merger of 10 public sector banks into 4.

Green Light

Yesterday, the Union Cabinet approved the consolidation of 10 public sector banks (PSBs) into four entities.

 

“The amalgamation is being done so that customers are able to reap the benefit of larger banks being scaled up and more fund being available for credit," Finance Minister Nirmala Sitharaman told reporters.

 

Presently, India has 18 PSBs, down from 27 in 2017. After the consolidation, the number will come down to 12.

 

“Banks are fully on board and this will be effective from April 1st," Sitharaman said. “To a large extent, I am convinced that the banks are on course. They have no issues carrying forward with the merger activity...core interest for banking, customers have been kept in mind." [Livemint]

 

NRIs permitted to own up to 100% stake in Air India. 

For those Away from Home

Here’s something else the Union Cabinet has done: non-resident Indians (NRIs) will now be allowed to acquire 100% of Air India.

 

“Today’s decision on Air India is one milestone decision where NRIs who are Indian citizens will get permission to invest 100% in the airline,” Information and Broadcasting Minister Prakash Javadekar told reporters in a briefing.

 

Before this, NRIs could own only up to 49% of the national carrier. The Government has put 100% of Air India up for sale. [ET Aviation]

 

POLICY

EPFO slashes interest rate on deposits to 8.50% for FY20.

Change is the Only Constant

For the second time in a year, the Government has amended the Companies Act.

 

72 changes to 65 sections of the Act have been approved, Finance and Corporate Affairs Minister Nirmala Sitharaman said.

 

She told reporters, "Out of 66 compoundable offences under the Act, 23 will get recategorised so that they can be dealt with through in-house adjudication framework, seven have been omitted altogether, 11 will have limited punishment in the form of fines alone by removing imprisonment provision, five will be dealt with under different alternative frameworks, six which had earlier been decriminalised will now have reduced quantum of penalties." [The Hindu]

 

Government approves amendments to Companies Act. 

Cut the Rate

The Employees' Provident Fund Organisation (EPFO) today lowered the interest rate on provident fund deposits to 8.50% for FY20 from 8.65% in FY19.

 

The move, which will affect the PF deposits of over 6cr active subscribers, was announced by Labour Minister Santosh Gangwar. [Business Today]

 

 

BANKS

Yes Bank share price jumps over 25% on reports that an SBI-led group might buy stake in the distressed lender.

Song and Dance

Shares of private lender Yes Bank today soared over 25% before closing at ₹37.20 (+26.96%) on the back of reports that the Government has approved a plan for the State Bank of India (SBI) to lead a consortium that will buy a stake in the distressed lender.

 

The lender has been trying to raise $2bn in fresh capital for two quarters but has failed to do so, burdened by high levels of bad loans due to its exposure to troubled sectors. [Firstpost]

 

A rate cut might be under way. 

Following Suit

The Federal Reserve recently announced an emergency rate cut – its first since December 2008 – of half a percentage point in response to the growing economic threat from the coronavirus.

 

And perhaps taking a cue from the emergency cut, the Indian bond market expects the RBI to also announce a cut, considering that the benchmark 10-year bond yield dropped as much as 13 basis points to 6.21% before closing at 6.23%.

 

FYI

The RBI had held rates at 5.15% in its last MPC meeting, maintaining the status quo.

 

However, does an emergency rate cut make sense for India? Read this article to know what the experts think. [Moneycontrol]

 

CORONAVIRUS FALLOUT

Coronavirus outbreak could cost Indian trade $348m.

Dire Straits

The economic consequences of the COVID-19 outbreak on India could be severe, according to a recent report by the United Nations Conference on Trade and Development (UNCTAD).

 

The trade impact of the epidemic for India is estimated to be about $348m and the country is listed among the top 15 economies most affected as the slowdown of manufacturing in China disrupts world trade.

 

While $348m is a high number, other countries are staring at more adverse damage. Among the most affected economies are the European Union ($15.6bn), the United States ($5.8bn), Japan ($5.2bn), South Korea ($3.8bn), Taiwan ($2.6bn) and Vietnam ($2.3bn). [BS]

 

UK airline Flybe collapses as global aviation industry braces for first drop in demand since global financial crisis. 

Storm on the Radar

Flybe, Europe’s largest regional airline has collapsed under the weight of the slump in flight demand due to the coronavirus outbreak. The airline had already been struggling for a while when its financial challenges were “compounded by the outbreak of coronavirus which in the last few days has resulted in a significant impact on demand," the airline said in a statement widely reported by UK media.

 

The global airline industry has been severely affected by the outbreak. The International Air Transport Authority has said that the outbreak will likely cost airlines tens of billions of dollars and reduce global traffic by 4.7%, marking the first overall decline in demand since the global financial crisis. [CNN Business]

 

COMPANIES

OYO to let go of about 5,000 employees.

Testing Times

OYO Hotels & Homes will reportedly let go of about 5,000 employees across the world, mainly in China.

 

The COVID-19 outbreak, which has ravaged China’s economy, has hit the hotel room aggregator’s operations in China, which it calls its second home market. [ET Tech]

 

French court rules that Uber drivers are employees, not independent contractors. 

Winds of Change

France’s highest appeals court has ruled that a former Uber driver should be recognised as an employee rather than an independent contractor.

 

This is the strongest judicial argument yet in support of the notion that employees of companies like Uber are not merely contractors but full-time employees and thus deserve relevant benefits.

 

The ride hailing giant is facing similar litigation elsewhere, including in the US and the UK.  However, it recently won a case in Brazil, which ruled that its drivers aren’t employees. [WSJ]

FIN.

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