RBI guv calls for ‘full throttle’ on easing financial conditions
COVID-19 EFFECT Drastic measures needed to offset demand collapse amid the pandemic
nMUMBAI: Reserve Bank of India (RBI) governor Shaktikanta Das called for a substantial easing of financing conditions when the lockdown is lifted, minutes of the central bank’s last rate-setting meeting showed, with members agreeing that the coronavirus pandemic has dealt a far more severe blow to the domestic economy than anticipated.
The monetary policy committee (MPC) meeting, which was scheduled from June 3 to 5, was advanced to May 20-22 as macroeconomic conditions deteriorated. On May 12 , Prime Minister Narendra Modi announced a ₹20 lakh crore stimulus package to support individuals and businesses.
“While all these measures should help support demand as and when the nationwide lockdown is lifted, given the enormity of a collapse in demand, the need is to move ahead full throttle to ease financing conditions further so as to revive consumption and revitalise investment. Since banks are the key players in financing consumption and investment, it is also imperative that they remain adequately capitalised,” the RBI governor said at the meeting.
On Friday, RBI released the minutes of the meeting, where the committee decided to cut policy rates by 40 basis points.
“Delaying timely monetary policy response by two weeks, waiting for the bi-monthly MPC meeting schedule, could be costly and irreversible. In fact, such a delay in monetary policy action could potentially become a source of risk itself to the deteriorating growth outlook,” read the minutes. According to governor Das, the key challenge for monetary policy at the current stage was to resuscitate domestic demand to avoid any harmful effect on income and employment in the short run, and potential growth over the medium term.
Along with the government’s ₹20 lakh crore Atmanirbhar package to provide economic support and protect the vulnerable sections of society, the RBI has also been proactively managing liquidity to ensure that funds flow to all productive sectors of the economy.
RBI deputy governor and MPC member Michael Patra also supported the governor’s view that threats to growth should be addressed “frontally and aggressively.”
RBI’S executive director and new MPC member Janak Raj said he expects economic activity to contract in 2020-21. “While supply lines are likely to be restored, demand would take far longer to revive to pre-covid levels. Even as some support will be provided by government expenditure, overall consumption is likely to slow down due to a slump in private consumption. More than private consumption, however, it is investment demand which is expected to be hit hard,” he said.
He also stressed on the need to capitalise banks to ensure easier financing conditions.
nMUMBAI: Franklin Templeton India on Friday filed a petition before the Gujarat high court urging it to vacate the stay on the company’s e-voting process involving Franklin’s unitholders, which is required to monetize the underlying assets of the six shuttered debt schemes.
If the stay is not vacated “it will cause grave harm and prejudice to the more than 300,000 unitholders of the schemes, including small/retail investors in these schemes as the process of returning the money to these numerous investors will be delayed”, Franklin said in its plea. has reviewed a copy of the petition.
The matter will be heard on Monday. Investors will be deprived of an expeditious return of their investments, said asset management company (AMC).
On May 28, Franklin had issued e-voting notices seeking unitholders’ authorisation to monetise the underlying securities set aside. E-voting notices were issued to 300,000 investors who invested in the six debt schemes. The e-voting to authorise either the trustees of Franklin or Deloitte Touche Tohmatsu India LLP to monetise the assets was scheduled for June 9-12.
This e-voting process was stayed till June 12 by the high court on a petition by Rasna promoters that the winding up decision was taken without the consent of the unitholders.
The AMC argued that the petition was not a writ and, therefore, was not maintainable, as the Securities and Exchange Board of India (Sebi) is the nodal agency and the market regulator to consider complaints of investors.
Sebi has ordered a forensic audit of the matter. Once that is completed it will decide upon the next course of action.“the original petitioners cannot ask this court to conduct a parallel enquiry in respect of the same set of allegations,” Franklin said.
nMUMBAI: Reliance Industries Ltd (RIL) on Friday announced two large investments by foreign investors totalling ₹13,640.4 crore into Jio Platforms Ltd. With this, the digital services unit of RIL has raised ₹92,202.15 crore from top global investors in less than six weeks.
In the first transaction, Abu Dhabi-based Mubadala Investment Co. bought a 1.85% stake in Jio Platforms for ₹9,093.60 crore, becoming the sixth global investor in the digital services firm.
Later in the day, RIL said Silver Lake, which had invested ₹5,655.75 crore in Jio Platforms on May 4, will invest an additional ₹4,546.80 crore, along with its co-investors, bringing its aggregate investment to ₹10,202.55 crore, for a 2.08% stake.
The latest investments value Jio Platforms at an equity value of ₹4.91 lakh crore and an enterprise value of ₹5.16 lakh crore, the RIL statement said.
Starting with Facebook’s ₹43,574 crore investment in April, Jio Platforms has sold stakes to private equity firms KKR & Co., Silver Lake, Vista Equity Partners and General Atlantic.
The high-value deals underscore the potential of India’s large, expanding base of telecom users and Jio’s leadership of this growing market.
A fast-expanding online retail market in India is also giving hope to global firms about the prospects of this market.
“I am delighted that Mubadala, one of the most astute and transformational global growth investors, has decided to partner us in our journey to propel India’s digital growth towards becoming a leading digital nation,” said Mukesh Ambani, chairman and managing director of Reliance Industries .
“I would like to emphasise that Silver Lake’s additional investment in Jio Platforms, within a span of five weeks during the Covid-19 pandemic, is a strong endorsement of the intrinsic resilience of the Indian economy, which will surely grow bigger with comprehensive digital enablement,” Ambani said.
MUBADALA INVESTED ₹9,093.60 CRORE IN JIO PLATFORMS, WHILE SILVER LAKE PLEDGED ANOTHER ₹4,546.80 CR