OPINION, P6 M GOVINDA RAO COMPANIES, P4 Budget FY22 signals reform,but the real test will be implementation MARKETS, P12 EDITORIAL MEETING TODAY CLOSED MF SCHEMES Capitalising the ARC with the provisions banks have set aside will leave them enough capital for growth Airtel board to mull financing strategies, fund-raising plans Pay `9,122 crore to unitholders, SC tells Franklin Templeton NEW DELHI, WEDNESDAY, FEBRUARY 3, 2021 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL. XLVI NO. 290, 24 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: 49,797.72 ▲ 1,197.11 NIFTY: 14,647.85 ▲ 366.65 NIKKEI 225: 28,362.17 ▲ 271.12 HANG SENG: 29,248.70 ▲ 355.84 `/$: 72.97 ▲ 0.06 `/€: 88.06 ▲ 0.27 BRENT: $57.59 ▲ $1.24 GOLD: `48,208 ▼ `516 AERO INDIA 2021 ● REVIVAL MODE Exports grow 5.4% in Jan, trade deficit narrows FE BUREAU New Delhi, February 2 SIGNALLING A RECOVERY, merchandise exports in January 5.4% from a year before, the highest since September 2020 and compared with a 0.1% rise in December, showed the preliminary estimate of the commerce ministry released on Tuesday. Imports, too, recorded a second successive month of growth, though the pace of expansion slowed from the January level, reflecting the fragile state of domestic demand. Trade deficit narrowed to $14.75 billion in January from $15.44 billion in the previous month. Continued on Page 16 BANK ARC No capital from govt, lenders to pitch in DFI to have larger developmental role, go beyond project financing, says DFS secretary Panda BANIKINKAR PATTANAYAK New Delhi, February 2 LENDERS WILL HAVE the option to transfer dozens of large stressed assets worth about `2.25 lakh crore to the proposed asset reconstruction company (ARC) once it takes off, financial services secretary Debasish Panda said on Tuesday. While the government backs the idea of setting up the ARC,orthe so-called bad bank, for the resolution of bad debt and cleaning up of the lenders’ "The DFI will have a huge developmental role along with the financing role. It will also facilitate project structuring and foster innovation in financial products within that space. So, it will be an institution with a difference." —DEBASISH PANDA DFS SECY books, it will not provide capital forit.Instead,banks — both state-run and private — will put in the capital, he added. A detailed framework is in the works but banks feel the requirement of certain regulatoryrelaxation,which the central bank will look into. Panda said the developmentfinanceinstitution(DFI), proposed in the Budget 202122 will have ambitious developmental goals and, unlike extant institutions like IFCI or IIFCL, its role will stretch well beyond the realm of mere project financing.State-run IIFCL, given its experience in project financing, could also be subsumed by this DFI. Initially, the DFI will be wholly owned by the government,which has announced a capital infusion of `20,000 crore. But the government is willingtodiluteitsstaketo26% once long-term investors come on board,the secretarysaid. Continued on Page 16 ‘Tax targets achievable with no extra burden on taxpayers’ THE PROJECTED GROWTH in direct tax collectionsforFY22wouldbeachievedon thebackofexpansionoftaxbasewithout having to put any additional burden on taxpayers,financesecretaryAjayBhushan Pandey told Sumit Jha in NewDelhi.The Budget has estimated that the combinedrevenuefromcorporateand personal income taxeswould rise by22.4% to `11.08 lakh crore in the next fiscal.The Budget estimates for the next fiscal have peggedgrosstaxrevenuegrowthat16.7% withbuoyancyof1.2.Thecollectionshave contractedinthelasttwoyears—by3.4% in FY20 and a likely 5.5% (RE) in the current fiscal. ■ Detailed report on P2 Help us to settle Claims in time ● SERVICE OUTAGES DISINVESTMENT RBI appoints firm to audit IT infra of HDFC Bank Strategic-sector sales to boost Centre’s non-debt receipts FE BUREAU Mumbai, February 2 THE STRATEGIC-SECTORS policy unveiled in the Budget on Monday will help create a large pipeline of central public sector enterprises (CPSEs), including Bharat Heavy Electricals and Steel Authority of India,forprivatisation,thereby boostingtheCentre’snon-debt receipts meant to be spent on development programmes, departmentofinvestmentand public asset management (DIPAM) secretary Tuhin Kanta Pandey told FE. He said the disinvestment THE RESERVE BANK of India (RBI)hasappointedanexternal professionalinformationtechnology (IT) firm to carry out a special audit of the entire IT infrastructure of HDFC Bank. In a notification to the exchanges, the lender said the audit will be carried out under Section 30 (1-B) of the Banking RegulationAct,1949,atthecost ofHDFCBankunderSection30 (1-C) of the Act.“The Bank shall accordinglyextend its cooperationtotheexternalprofessional IT firm so appointed by RBI for conducting the special IT audit as above,” the notification said. On December 2, 2020, RBI had barred HDFC Bank from launching any new digital initiatives and issuing fresh credit cards.The penaltywas issued in view of repeated outages at the bank’s data centres. In a recent post-results call,the bank management said it has envisaged two legs to its action plan for remedying its digital strategy. One is its cloud strategy,which involves a 12-18-month plan, andtheotherentailstheimplementation of other aspects of the plan over10 to 12weeks. Continued on Page 2 PRASANTA SAHU New Delhi, February 2 “The government has kick-started selective denationalisation in the financial sector. It is basically a reversal of processes that happened in 1960s and '70s, wherein several private banks were taken over.” —TUHIN KANTA PANDEY DIPAM SECRETARY receipts target of `1.75 lakh crore for the next fiscal would surely be met, if not exceeded. The process has already commenced for big-ticket sales, so achieving the target won’t be difficult at all, he added. Pri- vatisation of fuel retailerBPCL isexpectedtoconclude earlyin the yearwhile the mega IPO of insurer LIC will likely hit the market in Q3-Q4,Pandeysaid. Continued on Page 2 On the rise Bond yields hit five-month high The bond yield climbed to the highest in over five months after the government unveiled a bigger-than-expected borrowing plan for the next fiscal on Monday, reports Bloomberg. The Centre also raised this year’s financing target for the third time. The 10-year yields rose 7 basis points to 6.13%, the highest since end-August 2020. 6.20 6.143 10-year bond yield (%) 6.127 6.10 6.057 Sept 28 6.00 Nov 27 5.90 5.911 5.898 Sept 3 5.80 5.836 Oct 26 5.825 Jan 4, 2021 5.70 August 28, 2020 February 2, 2021