OPINION, P8&9 ECONOMY, P2 EDITORIAL Fixing it will take time, new IL&FS board a good step INTERNATIONAL, P14 S JAIN/P KAR APPOINTMENT MEDICINE Can resurrect Sec 57 ofAadhaar Act if govt brings in legislation that is not open-ended IMF hires Harvard prof Gita Gopinath as chief economist Scientists Honjo, Allison win Nobel for cancer research NEW DELHI, TUESDAY, OCTOBER 2, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 183, 18 PAGES, `6.00 (PATNA `6.00, RAIPUR `7.00) P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 36,526.14 ▲ 299.00 NIFTY: 11,008.30 ▲ 77.85 NIKKEI 225: 24,245.76 ▲ 125.72 HANG SENG: 27,788.52 ▲ 72.85 `/$: 72.91 ▼ 0.42 `/€: 84.63 ▼ 0.68 BRENT: $83.04 ▲ $0.32 GOLD: `30,499 ▲ `203 ROAD TO RESOLUTION Govt supersedes IL&FS board ROUHAN SHARMA & SURYA SARATHI RAY Mumbai/New Delhi, October 1 ● GETTING COSTLIER Banks raise lending rates ahead of policy MONEYIS BECOMINGcostlier even before the Reserve Bank of India meets to reviewpolicy this week, reports Shritama Bose in Mumbai. Banks have started hiking loan rates because the cost of borrowings has been rising even as the pace of growth of deposit growth has been slowing. State Bank of India, ICICI Bank, Punjab National Bank and HDFC raised loan rates over the last two days amid hardeningyieldsandincreased pricingpressurefornon-banking financial companies (NBFCs). NBFCs have taken away some of banks’ market share in recent years but now banks are more confident they can compete. Detailed report on Page 10 WITH THE RISK of contagion from the collapse of IL&FS threatening to derail the money markets, the government on Monday moved to supersede the board of the infrastructure financier.A sixmember board, headed by Uday Kotak, MD & CEO, Kotak Mahindra Bank, will attempt to resolve what is turning out to be a financial crisis of gigantic proportions. IL&FS owes lenders a whopping `91,000 crore and has defaulted on several of its commitments;ratingagencies failed to spot the firm’s fragile finances, down-grading the company to junk status in a matter of weeks. The stakeholders of IL&FS include Life Insurance Corporation,HDFC, State Bank of India and Orix Corporation. The sale of assets could fetch an estimated `60,000 crore but that might be an optimistic number. Meanwhile,the Special Fraud Investigation Office (SFIO) is believed to have initiated a probe into “alleged irregularities”at IL&FS. Indeed, the government’s petition invoking sections 241-242 of the CompaniesAct DOWNWARD SPIRAL Defaults and downgrades June 2018 IL&FS defaults on intercorporate deposit payment Sept 18 Aditya Birla Finance files case in Delhi HC; obtains stay order against sale of assets Sept 01-30 About 15 defaults on bank loans, intercorporate deposits, and commercial paper Aug 28 & 30 Two repayment defaults Total defaults worth over `1,000 cr ✩ ✩ ✩ till date The intangible assets of approximately `18,540 crore as on 31.3.2017 has increased to approximately `20,004 crore as on 31.3.2018 thus creating doubt about the correctness of the financial statements. UDAY KOTAK Kotak Mahindra Bank MD —Government lawyer Several downgrades to junk status by Icra, CARE and India Ratings Response SEPT 15 SEPT 21 SEPT 22 SEPT 24 SEPT 29 OCT 1 IL&FS appoints SC Mathur, former LIC head, as chairman Ramesh Bawa, CEO, IL&FS Fin Serv, and four directors, resign Reappoints Dilip Bhatia, CFO, as chief strategy officer, to sell road assets IL&FS files application in NCLT, seeking to restructure arrangement with creditors IL&FS AGM and board meeting; appoints Alvarez and Marsal Government moves NCLT to supersede the existing board; NCLT agrees presented in the National CompanyLawTribunal(NCLT), Mumbai, alleged the nonbanking financial corporation (NBFC) was being run in a “manner prejudicial to the interest of the companyand of the public” and “where the directors failed to discharge their duties”. While the move should calm the over-leveraged financial markets, it is unlikely corporate watchers, said a painless solution can be found. “There will be some haircuts and taxpayers’moneycould be used because too much has been lost,” a senior financial sectorexecutive observed.The newly-formed board meeting is to be held on October 8 and the government is hoping to be able to provide the firm From where has he (Rahul Gandhi) invented a proposal of `91,000-cr investment likely to take place by LIC and SBI in IL&FS? — ARUN JAITLEY FINANCE MINISTER with liquidity to ensure projects are not stranded. The government’s counsel on Monday referred to IL&FS as a‘parasite’. Continued on Page 2 Related report on Page 2 GST COLLECTIONS Special Feature Five pitfalls to avoid when using mobile banking services While mobile banking is certainly convenient, beware of malware, fake apps, fraud vis SIM swap to prevent any fraudulent transactions from your bank account ■ Personal Finance, P13 QuickPicks Core sector growth slows down to 4.2% in August THE GROWTH of eight infrastructure sectors slowed down to 4.2% in August against 4.4% a year ago on account of decline in production of crude oil and fertiliser, reports PTI. The output of crude oil and fertiliser dipped by 3.7% and 5.3%, respectively. On the other hand, coal, natural gas, and electricity production grew by 2.4%, 1.1% and 5.4%, respectively, compared to 15.4%, 4.2%, and 8.3%, respectively, in August 2017. PAGE 2 Nirav’s NY, London flats, other assets worth `637 cr attached THE ENFORCEMENT Directorate on Monday said it has attached assets worth `637 crore of absconding jeweller Nirav Modi and his family, reports PTI. The ED has issued as many as five provisional orders, under the PMLA, for attachment of assets in London, New York, bank balances in Singapore and other countries, a flat in Mumbai and diamond-studded jewellery that was shipped to India from Singapore. PAGE 2 Passenger vehicle sales enter slow lane for Maruti, Hyundai PASSENGER VEHICLE sales in H1 of FY19 moderated for the country's top two carmakers Maruti Suzuki India and Hyundai Motors India, report fe Bureaus in New Delhi and Mumbai. While Maruti grew at 10.5% against 16.6% a year ago, Hyundai saw a growth of 4.5% compared to 5.5%. The slowdown in growth has come about due to a combination of factors like high base effect, floods, among others. PAGE 6 Small rise in Sept, `1-lakh-cr FY19 shortfall? SUMITJHA & PRASANTA SAHU New Delhi, October 1 GST COLLECTIONS ROSE marginally to `94,442 crore in September, but with average collections in the first six months of the year at around `96,283 crore compared to the `1,12,316-crore budgeted for FY19, the government could be looking at a GST shortfall of at least around `1 lakh crore for the year. GST collections rose 0.8% compared to August 2018 and 4.2% as compared to September last year. GSTcollections in September were expected to be low due to the cut in GST rates thatwere made effective from July 27. How much tax collections will rise in the rest of the year is not clear; in the preGST days, 60% of indirect taxes were collected in the second half of the year, but that same relationship may GST REVENUES GST revenue collections (` crore) [LHS] No. of GST filers (in lakh) [RHS] 1,10,000 1,00,000 Required Monthly avg monthly avg collection (April-Sept 2019) (April-Mar 2019) `96,328 cr `1,12,316 cr 65 34.3 80 60 90,000 80,000 40 70,000 0 20 Aug 2017 Sept 2018 Other revenues Telecom revenues Target Likely `48,700 cr `29,000 cr Direct taxes Grew 16.1% in April-Aug this year vs budget target of 14.4% Surplus transfer `10,000 cr advance from RBI in FY18, could do it again this year not hold as, under the GST regime, taxes for each month are collected immediately. Disinvestment Target `80,000 cr Achieved so far `10,000 cr Possibilities: Sale of SUUTI stakes could fetch `35,000 cr Also sale of govt’s stake in NHPC (`17,565 cr) to NTPC, PFC (`13,718 cr) to REC, GAIL (a large part of `45,967 cr as pipeline will be hived off before sale) to BPCL or IOC Also, at 65 lakh, the number of filers has been stable at this level for a few months. While detailed invoice-level filing,vital forinvoice-matching, was abandoned in favour of a system where invoicematchingwould be part of the business process, this is not going to be implemented till after the elections. How large the budgetary shortfall is likely to be will then depend upon how much extra the government is able to mop up from other sources. “The government would be able to make up part of the GST revenue collection deficit from the buoyant direct tax collection as well as from divestment proceeds but this would still not be enough to achieve the total tax collection target,” a senior finance ministry official said. As compared to the budget target of a 14.4% growth in direct taxes, collections grew by 16.1% in April-August FY19. TACKLING SQUEEZE Bonds rally as RBI promises liquidity through OMOs UTSAV SAXENA Mumbai, October 1 BONDS RALLIED ON Monday afterthe Reserve Bank of India (RBI) on Monday promised to infuse liquidity to the tune of `36,000 crore in October through open market operations (OMOs).The yield on the benchmark fell to 7.99%, down four basis points over Friday’s close of 8.03%. The money markets have been thirstingforliquidity;thedaily average deficitwas a high `1.3 lakh crore a week ago before it started moderating to `83,100 crore.One big reason for the shortage of liquidity is that the foreign portfolio investors (FPI) have been pulling out money from the bond and equitymarkets – the withdrawals in 2018-19 so far are nudging $12 billion. SinceApril,thecentralbank has infused close to `50,000 crore via OMOs but with the busy season kicking in much more systemic liquidityiswarranted.“Money market deficit will average `50,000 crore in the December quarter even after `90,000 crore of OMO and `10,000 crore cut in the netborrowingsbygovernment in H2FY19,” Indranil Sengupta, economist, Bank of America,wrote. Banking system liquidity in recentweeks has been pressured by the continued intervention in the forex market to stem the rupee depreciation,a mismatch in the assets and liabilities of NBFCs and the quarter-end demand by the corporates. Whilethebondmarketsare Oil on boil assuaged somewhat by the government pruning its net borrowings for 2018-19 by `10,000 crore and gross borrowings by `20,000 crore, there are concerns about whether the government will be able to stick to its fiscal deficit targets when indirect tax collections, so far, have been somewhat lower than expectations. 10-year bond yield (%) Intra-day, Oct 1 8.01 7.988 7.98 7.95 7.92 7.89 7.86 7.83 7.9 Prev. close: 8.024 Open Close Economic affairs secretary Subash Chandra Garg said on Fridaythatthesmallerquantum of borrowings would be made up by cancelling buyback and higher collections from small savings. The government recentlyraised interest rates on ahostofsavingsproducts.Inthe secondhalfof2018-19,thegovernmentwillborrowanet`2.47 lakhcrore.Whileinearlieryears, the borrowing has been completed by the first week of February,this time the borrowings will continue till March. Continued on Page 2 FE BUREAU Oil crosses $83, ` falls to 72.9 Fuel prices at India’s petrol pumps will rise further with oil hardening and the rupee weakening. 84.78 Nov 03, 2014 83.16 Oct 01, 2018 `/$ Brent ($/bbl) 61.405 Nov 03, 2014 72.913 Oct 01, 2018 (Inverted scale) Continued on Page 2 RABI MSPs Wheat MSP to rise 6% even though it is more than double A2+FL cost PRABHUDATTA MISHRA New Delhi THE MINIMUM SUPPORTprice (MSP)forwheatwas112%over itsA2+FLcosts in 2017-18,but with elections around the corner, the government plans to raise it by another 6%. The announcementtoraisetheMSP by `105 to `1,840 per quintal, is likely to be made on Wednesdayafterthe Cabinet approval. Prices of chana that were already 78% over the A2+FL costs in the last rabi season are to be raised by 5% to `4,620 per quintal. FE had estimated that if market prices of crops (except sugarcane) are lower than the MSP by 20%, this could cost the exchequer as much as `1,75,000 crore in a full year; this assumes that all the crops will be brought to the market since farmers will find it more profitabletosellthecroptothe government and then buy back what they need for consumption when the prices fall. The announcement of MSP 2017-18 2018-19 MSP A2+FL % over Recommended (`/quintal) cost cost* MSP Wheat 1,735 817 112 Chana 4,400 2,461 78 4,620 Masur 4,250 2,366 80 4,475 Mustard 4,000 2,123 88 4,200 Safflower 4,100 3,125 31 Barley 1,410 845 67 1,840 4,945 *Govt promised MSP at least 50% over A2+FL cost 1,440 of rabi crops assume significance this year as sowing begins from October and the monsoon rainfall was 22% deficient in September bringing moisture level down. The Cabinet will consider the MSP of all five rabi crops and the recommendation is to increase them in the range of 2-21% from the last year’s minimum support prices (MSPs),sourcessaid.According to the proposal,masurmaysee a hike of 5.29% to `4,475 a quintal,sources said. TheMSPofmustard,thekey oilseed crop of the winter season,isalsolikelytobeincreased 5% to `4,200/quintal. In case of safflower, the MSP may be increased 20.61% to `4,945 a quintal as its benchmark price last year was less than the promised 50% over its A2+FL cost of production. Barley MSP islikelytosee2.13%increaseat `1,440/quintal. The government has already announced kharif crops’MSPsat150%overtheir cost (A2+FL).
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