ELECTORAL BONDS SCHEME IS STRUCK DOWN AS UNCONSTITUTIONAL
SC Order Says:
Electoral Bonds Are violative of Right To Information, Article 19(1)a
Voters have a right to information to cast votes -1/5 SC Order Says
*Info about funding of political parties is essential
*Political contribution give a seat at the table to the contributor, enhances influence over policy-making
*Fincl contribution could lead to quid-pro-quo arrangements 2/5

RBI orders banks & NBFCs to back consumer loans with more capital. Banks have to also set aside more capital for loans to NBFCs. Capital reqt for consumer loans will go up by 25%. Also more board oversight and stricter rules for all consumer loans. 1/4 2/4 RBI TIGHTENS: Housing,auto, education loans excused from higher capital reqt. NBFCs giving unsecured consumer loans most hit: their cost of funds will increase as banks charge more; Also NBFCs have to set aside more capital for consumer loans-eg SBI Cards, Baj Fin, Chola

Finance Bill Includes Unexpected & big changes in taxation of mutual funds: Gains made from investing in MFs with less than 35% in Indian equities (ie debt funds, gold funds and international funds) will now be deemed as short term capital gains & taxed at your marginal rate 1/1 2/Debt funds may see lesser inflows as the indexation benefit goes; also only 20% capital gains tax if you stay invested for 3 years goes.
3. Debt fund kitties have already been falling after interest rates fell during Covid; now their kitties may shrink further (contd)

Heavens wouldn’t have fallen if Rbi had waited till June 7. Clearly RBI wants to convey the urgency of the situation via 1. Timing of the hike,2. Extent of the hike (40! 25 not enuf) and 3. The added bite of of the 50 bps CRR In my book CRR hike hurts most. Tightening quantity of liquidity supply hurts more than just the price of money.

Worrisome surge in inflation. March CPI up 6.95%, pushed up by food inflation of 7.68%; Veggies up 11.64%; edible oils 18.79%, Meat n fish up 9.63%. 3 consecutive qtrs of 6%-plus inflation now likely: March Inflation at 6.95% implies Jan-Mar CPI avg of 6.34%; RBI sees Apr-Jun CPI avg at 6.3%; High March base can push July-Sept avg infln above 6%.(RBI forecast @ 5.8%)

Uday Kotak's learnings from IL&FS: ( each lesson is a gem) A. Extremely important policymakers and govt step in fast during a crisis B. IL&FS had a 6-layered structure which failed: management, board, its institutional investors, rating agencies, auditors and regulators (1) (2) Kotak's lessons from IL&FS:
C. We need to crack how to move our judicial process faster D. Sovereign govts- esp state govts- must respect contracts E. IL&FS can be a case study on how we build resolution frameworks which are in no-man's-land

India Sep trade deficit at $22.94 bn,is all time high monthly deficit
*trade deficit surges on spike in imports
*Sep imports at $56.38 bn, vs $47.01 bn in Aug21,
*Sep imports among highest ever monthly imports
*Sep imports up 84.75% over Sep2020 ; up 50% over Sep2019.
1/2 2/2 India Sep imports boosted by crude, coal, gold, edible oils, metals. Possible reason for high imports is commodity prices.
*India sep exports steady at $33.44bn up 21.35% over $27.56 bn in Sep2020 ; up 28.5% over Sep 2019

RBI releases discussion paper on scale-based regulations for NBFCs. The most important takeaway is what is not in the rules: No CRR or extra SLR to be imposed on large NBFCs(as CNBCTV18 told you on Tuesday)./1 2. RBi paper wants to classify NBFCs into 4 groups based on size, complexity, systemic import & interconnectedness with other financial units: base level, middle, upper & top level. /2

Govt announces a Leave Travel Encashment Scheme & Festival Advance Scheme for govt employees to boost consumption The fare (for roundtrip to home & back) to be tax free, provided employee spends 3 times the amount in goods that attract GST over 12%; must spend before March31 2020

New RBI regimen on opening of current accounts & cash-credit accts by companies likely to benefit corporate lenders like SBI, BOB, PNB, Canara; may take away curr acct float from banks like HDFC, ICICI, Axis which have good cash Mgmt products, but don’t lend to mid-corproates.1/7 Hereafter Banks can’t open current account for borrowers who have cash credit account with any other bank.
If borrowers don’t have any cash-credit account with any bank, they fall under 3 groups:
1. For those with under-5cr loans from banks: banks can open curr Acct 2/7