SUPREME COURT DECLARES FEBRUARY 12 RBI CIRCULAR ULTRA VIRES
The Supreme Court declared
the Reserve Bank of India Circular of February 12 relating to loan repayment of
stressed accounts ultra vires. The judgment was rendered by a Bench led by
Justice Rohinton Nariman. The decision rendered comes in a batch of petitions,
transferred to the Supreme Court from various High Courts where the RBI’s
circular of February 12, 2018, was challenged. This circular imposed very
stringent conditions on lenders in relation to large loan accounts. The Supreme
Court held that in light of section 35AA of the Banking Regulation Act, the RBI
could not have issued a generic circular mandating reference under the
Insolvency and Bankruptcy Code (IBC). The Court also held that reference under
IBC has to be on case specific basis and with authorisation of Central
Government. Since the circular has now been quashed, all consequential
proceedings including IBC proceedings initiated under section 7 of IBC are also
non est and quashed. The RBI, through this circular, had directed the Banks to declare
a borrowing Company a defaulter if a resolution plan was not arrived at within
a period of 180 days. This resolution plan was to be formulated by all the
lenders of the company should the company default in the payment of interest to
any one of its lenders. Such a stressed account would then have to be referred
to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy
Code by the Banks if a unanimous resolution plan was not made. This circular
was made applicable to all loan accounts over Rs 2000 Crore and also abolished
all existing debt restructuring schemes for stressed accounts. Effectively, it
left IBC as the only mechanism to deal with stressed accounts. Under the
circular, companies which were unable to implement a resolution plan by August
27, 2018, were scheduled to be referred to NCLT under IBC by September 11. This
circular had a bearing mainly on the power companies and also affected
companies in the textile, sugar and, shipping sector. The lobby groups for the
power sector challenged the said circular in various High Courts. They argued
that due to their peculiar situation, they cannot be treated similarly as all
other sectors. They asserted that they are heavily regulated and have been
facing stress due to factors which are beyond their control, such as
non-availability of fuel and cancellation of coal blocks. The Allahabad High
Court did not find merit in their arguments and refused to offer any relief
against the circular. Similar petitions were moved at the Madras High Court and
the Delhi High Court. The Supreme Court had then transferred all pleas filed
before the various High Courts to itself while asking the RBI and parties to
maintain status quo with regard to insolvency proceedings.
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SUPREME COURT STRIKES DOWN RBI'S FEBRUARY 12 CIRCULAR ON
DEFAULTING FIRMS, CALLS IT ILLEGAL
The Supreme Court has struck
down a controversial RBI circular that mandated banks to immediately resolve
all bad loans above Rs 2000 crore or file for insolvency resolution under the
IBC. The circular asked banks to either resolve or file for insolvency taking
away their discretion to not to act on bad loans. Several sectors such as
power, sugar and fertiliser especially the unregulated sectors challenged the
RBI circular as ultra vires on the ground that it wrongly classified them as
wilful defaulters They argued that they were stressed because of extraneous
reasons beyond their control and cannot be treated as wilful defaulters. They
also contended that the circular reduced the 270 resolution window further to
180 days.
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HUGE BLOW TO THE BANKRUPTCY CODE
The Supreme Court has erred
in quashing the controversial February 12 RBI circular that imposed stringent
conditions on lenders on loan repayments. It was meant to make the credit
system work well, by operationalising the bankruptcy code, a crucial
legislation to resolve corporate distress and bring discipline among borrowers
who game the system. That has got a set-back now. Needless to say, SCs ruling
will bring cheer to the industry that was howling in protest against the RBI
directive which said that a loan must be declared stressed if its servicing is
overdue by a day. And if a resolution is not arrived within 180 days -- of a
loan of Rs 2000 crore or more turning sticky -- the lender should refer it to
the bankruptcy court. Power companies led the protest, challenging the circular
in various high courts, arguing that they cannot be treated at par with other
sectors due to the peculiar nature of their problems that were beyond their
control such as non- availability of fuel and cancellation of power blocks. The
special case of power warrants special action within the insolvency and
bankruptcy code, but not diluting banking discipline. Buy-out funds set up by
banks, for example, can acquire these stressed assets and sell them later.
Today, the power sector is in a huge mess due to the lack of will among
politicians to make consumers pay for the power they consume and resources to
compensate utilities for the subsidy they are pushed to give certain sets of
consumers. Putting together patient capital to buy out the assets and hold on
to them till the political resolve to fix power materialises is the solution.
In short, the SC should have left prudential regulation to the RBI.
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SBI MOVES TOP COURT AGAINST NCLAT SUGGESTION IN ESSAR STEEL
CASE
State-run lender State
Bank of India (SBI) has moved the Supreme Court against the National Company
Law Appellate Tribunal (NCLAT) order suggesting that the committee of creditors
(CoC) consider a higher payout for Standard Chartered Bank in the Essar Steel
insolvency case—a move that is set to further delay resolution of the
21-month-old insolvency case. As far as paying more to operational creditors is
considered, the CoC agreed to give them an additional Rs 1,000 crore, over and
above the Rs 196 crore allocated in the original resolution plan approved by
the CoC in October last year. So far, operational creditors were slated to
recover less than five per cent, or Rs 214 crore, against their outstanding Rs
4,976 crore. That amount will now increase to around Rs 1,214 crore. Financial
creditors led by SBI, on the other hand, will get 92 per cent of their dues,
which comes to around Rs 41,987 crore of a total Rs 49,395 crore, as per the
proposal submitted by ArcelorMittal. The NCLAT will hear the matter furthe on
April 9. But whatever the decision of the tribunal, bankers expect Standard
Chartered to oppose taking the matter to the SC. Financial creditors led by
SBI, on the other hand, will get 92 per cent of their dues, which comes to
around I41,987 crore of a total I49,395 crore, as per the proposal submitted by
ArcelorMittal. The NCLAT will further hear the matter on April 9.
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RBI TWEAKS NPA DIVERGENCE DISCLOSURE NORMS
The Reserve Bank of India
Monday asked banks to disclose bad loan divergences in their financial
statements if the additional provisioning exceeds 10 per cent of profit before
provision and contingencies. In a notification, the RBI said it is observed
that some banks, on account of low or negative net profit after tax, are
required to disclose divergences even where the additional provisioning
assessed by RBI is small, which is contrary to the regulatory intent that only
material divergences should be disclosed. Therefore, it has been decided that
henceforth, banks should disclose divergences if the additional provisioning
for NPAs assessed by RBI exceeds 10 per cent of the reported profit before
provisions and contingencies for the reference period. RBI further said
disclosure has also to be made if the additional gross NPAs identified by RBI
exceed 15 per cent of the published incremental gross NPAs for the reference
period. In another notification regarding large exposures framework (LEF), the
RBI said non-centrally cleared derivatives exposures will be outside the
purview of exposure limits till April 1, 2020. However, banks must compute
these exposures separately and report to the Department of Banking Regulation
on quarterly basis, it added.
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COMPANIES CHALLENGE RBI ON DEBT RESOLUTION, SC JUDGEMENT ON
TUESDAY
The Supreme Court of India
will on Tuesday pronounce its judgement in the companies’ challenge to the
Reserve Bank of India’s February 12 circular. A two-judge Bench of Justice
Rohinton Fali Nariman and Justice Vineet Saran had heard the companies’ who had
moved the apex court against the circular. The banking sector regulator in this
circular had allowed 180 days for debt resolution failing which the asset would
have to be taken to National Company Law Tribunal (NCLT) for initiation of
insolvency against them. The deadline got over on August 31, 2018. The cases
challenging the circular were filed in several High Courts by Essar Power, RKM
Power, IL&FS, GMR Energy, Rattan India and KSK Mahanadi. Besides power,
shipping and sugar companies have also sought relief from the RBI notification.
Hearing petitions filed by power industry associations - APP and IPPAI on
behalf of all 34 stressed power assets, the Allahabad High Court had on August
27 denied any relief. Following the high court order, the companies had moved the
top court which transferred all the cases to itself. The apex court had then stayed
insolvency proceedings against these companies until further orders. There were
some companies which had challenged the validity of the Insolvency and
Bankruptcy Code itself, while others had questioned the constitutional validity
of the RBI's February 12 circular. Power companies, however, had sought
temporary relief from the circular only for themselves. In their submissions,
the power companies had alleged that RBI’s was based on a 'one-size-fits-all'
approach without taking into consideration factors such as the reasons for
non-payment, power companies. Citing that in their case, the supply side as
well as the demand side was under the watchful eyes of regulators, the power
companies had said that the sector should have been exempted from the RBI’s
diktat. On the supply side, there is a shortage of coal. How do I get coal? And
if I get coal, whether I will get linkages or not is another question. On the
demand side, I cannot increase my tariff. Even if I approach the regulator to
seek permission to do the same, it would take at least 2-3 years, the counsel
appearing for one of the power companies had told the court. The RBI on the
other hand, while defending its circular, had told the top court that stressed
accounts which were affected had not yet come up with a resolution plan,
despite ample time having been given to them. The banking sector regulator had
then also suggested that if the companies were ready with a plan, a time of
15-30 days could be given to them.
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NPA TO IMPROVE BY 180 BPS TO 8.5% IN MARCH 2020 ON SLOWER
SLIPPAGES: CRISIL
Systemwide bad loans will
improve by 180 basis points to 8.5 per cent in March 2020 from FY19 levels on
slower slippages, and the state-run banks will turn profitable for the first
time in four years, says a report. The banking system will close FY19 with
gross non-performing assets of 10.3 per cent, ratings agency Crisil said Monday
in its half-yearly report on credit movements. The credit ratio, which is the
ratio of upgrades to downgrades, moved up to 1.81 times in the second half of
FY19 from 1.68 times in the first half. From a quantum of debt perspective, the
debt-rated credit ratio moderated to 0.89 times primarily due to two telecom
firms slipping. A slump in advanced economies, as well as government, spends on
infra may lead to a moderation in the credit ratio in FY20, the agency warned.
The report sees NPA ratios improving by 180 bps to 8.5 from 10.3 despite a 14
per cent growth in assets expected during the financial year. Moderation in
slippages, coupled with recoveries from the bankruptcy resolutions, will play
the key role in NPA reduction, it explained. Incremental slippages came down to
3.8 per cent of total assets in FY19 from over 6 per cent levels in the
previous two fiscals, it added. This is slated to help the state-run lenders,
who are expected to return to the black after four consecutive years of losses,
it said. Over 60 per cent of total upgrades were in investment-linked and
export-linked sectors, which got a fillip from domestic infra spends and global
growth. We expect moderation in the credit ratio as global growth slackens and
pace of government's infra spends slows, Somasekhar Vemuri, told. Investment
demand is unlikely to revive in FY20 and the corporate loan requirements will
be driven by demand for working capital, the agency said. Meanwhile, its peer
Icra said credit quality pressures persist for the universe of companies it
rates with the aggregate volume of the debt downgraded FY19 at Rs 3.2 lakh
crore, which is 10 per cent higher. Downgrades were driven mostly by
company-specific concerns emanating from deterioration in business profiles or
worsening of capital structures or increased liquidity pressures on the rated
entities, its credit policy head Jitin Makkar said. Crisil said the number of
non- cooperative companies more than doubled to over 6,400 in FY19 from 3,000
in the previous fiscal year.
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SEBI MULLS CANCELLING APPLICATION PROCESS FOR SRO FOR MF
DISTRIBUTORS
The long-pending proposal
of self-regulating organisation (SRO) for mutual fund (MF) distributors got a
shot in the arm on Monday as the Securities and Exchange Board of India (Sebi) proposed
doing away with the application process and instead suggested a nomination
process This should expedite the process of granting SRO status to a suitable
body, said a senior MF official, requesting anonymity. Through the nomination
process, Sebi would grant SRO status to an entity after conducting its due
diligence. In another key proposal made in the consultation paper, the
regulator included stock exchange in the definition of an SRO. Earlier
definition categorically excluded 'stock exchange'. The market regulator
proposed setting up of an independent nomination committee, preferably headed
by a retired judge of a High Court or Supreme Court (SC), that gives its
recommendations to Sebi regarding suitability of an entity for the role of SRO.
The pending cases may also be considered by this committee. It is important
that the recognised body evenly represents all sets of distributors whether it
is independent financial advisors, banks or national distributors, said Bharat
Bagla, mutual fund distributor. The regulator in its consultation paper put out
various details on the composition of an SRO and what would be the roles of the
key personnel. The SRO's purview would be restricted to dealing with disputes
between investors and its members. The disputes between distributors and MFs
would be outside the ambit of the SRO. Citing the rise in complaints against
investment advisers (IAs), Sebi also underlined the need for an SRO for the
advisers. The market regulator has sought comments from the public on the
consultation paper latest by April 21.
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NEW ACCOUNTING STANDARD FOR LEASES TO IMPROVE QUALITY OF
FINANCIAL INFO, SAYS ICAI
The new accounting
standard for leases will bring substantial visibility of companies' lease
commitments and improve the quality of financial information about companies,
chartered accountants' body ICAI said Monday. Ind AS 116, which sets out the
principles for recognition, presentation and disclosure of leases has been
notified by the corporate affairs ministry. The standard is effective from
Monday. A senior government official said the standard would affect all
industries where leases are a predominant component in their businesses and
result in more transparency. Prafulla P Chhajed said the new standard on leases
ushers in a path-breaking reform in accounting for leases and would improve the
quality of financial information. It will bring substantial visibility of
companies lease commitments, financing and operating model and above all better
reflects economic reality, he said in a release. Leasing is a well-known and
long established form of obtaining finance. The new standard on leases ushers
in a substantial change in the accounting for operating leases by lessees and
few improvements in the disclosure-related aspects for lessors accounting,
according to the Institute of Chartered Accountants of India (ICAI). It said
the key changes in lessees accounting relate to introduction of single lease
accounting model by elimination of classification between operating and finance
leases, and recognition of gain/loss for sale and lease-back transactions. The
standard would have an impact on three components of financial statements --
balance sheet, cash flow statement, profit and loss account. The, extent of
impact would vary for each industry depending on the financing and leasing
structures prevalent in that industry, the release said. The institute also
noted that the exemptions given for short term leases and low-value asset
leases are expected to provide substantial relief from operational complexities
to many companies.
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SEBI ISSUES PAPER FOR SELF-REGULATOR FOR MUTUAL FUND
DISTRIBUTORS, ADVISORS
The Securities and
Exchange Board of India (Sebi) on Monday issued a discussion paper proposing a
self-regulator for distributors and advisors of mutual fund products. The
self-regulatory organisation would have powers to expel, suspend and impose a
non-monetary penalty on distributors and advisors if they indulged in
malpractices such as mis-selling of mutual fund schemes or churning of
portfolio, the regulator said in the discussion paper. This paper comes after a
long legal battle that started in 2013 when Sebi decided to appoint a company
floated by industry body Association of Mutual Funds in India (AMFI) as a
self-regulatory organisation for distributors. The decision was challenged in
the Securities Appellate Tribunal (SAT) and another appeal was made in the Supreme
Court. The appeal had alleged that the selection process contravened rules that
applied to self-regulatory organisations. Disputes between fund houses and
distributors would be governed by contractual obligations, Sebi said. Sebi has also
proposed to make a nomination committee comprising external experts and headed
by a high court or supreme court judge to recommend the self-regulatory
organisation. The self-regulatory organisation would be made up of 25% of
nominated members, 25% shareholder directors and 50% of public interest
directors suggested by Sebi.
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SBI DOES WELL TO CHALLENGE THE NCLAT IN ESSAR STEEL CASE
State Bank of India has
done well to approach the Supreme Court to challenge the National Company Law
Appellate Tribunal (NCLAT) asking the Committee of Creditors (CoC) to
reconsider its decision in the Essar Steel matter so as to ensure that
operational creditors – like Standard Chartered – get a higher amount than what
the CoC has agreed to The NCLAT, in turn, is asking the CoC to go by the order
of the Ahmedabad bench of the National Company Law Tribunal (NCLT) which
advised that 85% of the Rs 42,000 crore bid by Arcelor Mittal for Essar Steel
be kept for the financial creditors and 15% be kept for the operational
creditors as well as other stakeholders. The NCLT, or the NCLAT, can’t be
faulted for wanting the operational creditors to get more than what they are
getting now, in the same way they may want the financial creditors to get more;
but these wishes have to be in keeping with the Insolvency and Bankruptcy Code
(IBC) law. And the law is very clear in that the CoC take the final call on the
matter and that, after the costs of the bankruptcy process and the workers dues
for the last two years, it is the financial creditors that get the first
priority. The courts should admit a challenge to the CoC’s decision only if
mala fide is alleged and looks, prima facie, a possibility. The courts should
not be petitioned to get a better deal for one group or the other. Indeed, by
giving directions to the CoC, the NCLT/NCLAT are, in a sense, playing into the
hands of Essar Steel’s promoters, the Ruias who tried to upset the resolution
process by coming in with an offer of Rs 54,389 crore after the CoC had
approved the Arcelor Mittal proposal. The Ruia challenge, it is true, was set
aside by the NCLT when it approved Arcelor’s bid, but if the CoC’s decision is
to be questioned, the entire IBC law – and its functioning and hierarchy of
repayments – is under threat. While the IBC lays down a 180-day timeline for
resolution, the average time taken so far is around 313 days, and, in the case
of Essar Steel, this is over 550 days already. The fact that such challenges to
the IBC are taking place at a time when a new government is being elected only
adds to the uncertainty. Sadly, this is not the first time the NCLAT is
overstepping. In the case of IL&FS, when the central bank wanted banks to
declare their loans to the group as NPAs and to start making provisions for it,
the NCLAT said that the RBI couldn’t ask banks to declare IL&FS loans as
NPAs until this was cleared by it. As this newspaper has pointed out before,
the RBI is the regulator for the banking sector, and if it is to keep the
sector solvent, it has to ensure that banks are honest about declaring NPAs and
then provisioning for them out of profits. If it so happens that the NPA turns
viable later, the banks can write back the provisioning into their books and
declare a higher profit; if the NPA doesn’t get ok, the banking system will not
suffer a sudden shock since the banks would already have provided for it. In
this case, it is not just the NCLAT – it said RBI was making classification of
IL&FS loans as NPAs a ‘prestige issue’ – but even the Supreme Court is
examining the validity of the RBI’s February 12 circular; the judgment is
expected tomorrow. If the SC decides to set aside the circular, or parts of it,
it will set the NPA-resolution process back in a big way; it doesn’t help that
the IBC process is also fighting its own challenge.
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ESSAR STEEL'S DEBT RESOLUTION BATTLE MOVES TO THE SUPREME
COURT
The Essar Steel’s debt
resolution battle has moved to the Supreme Court with State Bank of India (SBI)
moving the highest court against the NCLAT (National Company Law Appellate
Tribunal) advice to give more cash to Standard Chartered Bank (SCB) – which has
made a claim of Rs 3,487 crore against the company. The SBI action came just
days before the NCLAT was to hear the outcome of the CoC meeting on April 9th. During
the NCLAT hearing, the State Bank of India had said as Standard Chartered Bank
is not a secured creditor, it should not be allowed to make any additional
claim from ArcelorMittal’s Rs 42,000 crore offer. Standard Chartered Bank had
informed the tribunal that it is only getting 1.7 per cent of its dues or Rs 60
crore while other lenders are getting 92 per cent, based on ArcelorMittal’s
payments plan. But State Bank of India, had opposed giving equal treatment to
StanChart, saying the bank is not a secured creditor as its loan was not to
Essar Steel directly but to a promoter entity.
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GENUS PRIME INFRA SETTLES DISCLOSURE LAPSES CASE WITH SEBI
Genus Prime Infra has settled
with Sebi a case regarding alleged disclosure lapses by paying nearly Rs 17
lakh as settlement charges. While examining the letter of offer filed by two
promoter group entities to acquire 26 per cent share capital in Genus Prime,
the regulator observed certain non-compliances regarding disclosure norms and
issued notice in May, 2017. The notice alleged that the firm had not made
yearly disclosures as required under SAST (Substantial Acquisition of Shares
and Takeovers) regulations. Besides, it was alleged that the company had made
delayed disclosures under PIT (Prohibition of Insider Trading) norms regarding
the purchase of shares in the firm by its promoter group entities. It was also
alleged that for the quarters ending December 2010 to December 2012, the firm
wrongly included the shareholding of two promoter entities -- Vivekshil Dealers
Private Ltd and Kailash Industries Ltd. The company remitted Rs 16.83 lakh
within the stipulated time, Sebi said. Accordingly, Sebi disposed of the
proceedings against Genus Prime Infra Ltd. As per a separate settlement order,
Johnson Controls Inc settled with Sebi a case of alleged violation of
disclosure norms in the matter of Hitachi Home and Life Solutions by paying Rs
6.8 lakh as settlement amount.
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CITIBANK SETTLES CASE WITH SEBI, PAYS RS 4.5 CRORE
Citibank N.A. has settled
a case with markets regulator Sebi regarding the bank's alleged failure to
adequately supervise an employee who carried out an unregistered portfolio
investment scheme. The case has been settled after payment of Rs 4.5 crore
towards settlement charges according to a Sebi order. As per the notice, he had
received signatures on blank fund transfer forms, which were used for
transferring funds from the accounts of such customers' to the linked accounts
of Shivraj family. Further, it was alleged that through such unregistered
portfolio management scheme gullible investors were promised high returns and
the Citibank N.A.'s infrastructure was utilised to forge portfolio statements,
bank statements of clients. Against this backdrop, Citibank N.A. filed an
application with Sebi under settlement mechanism and proposed to pay Rs
4,50,72,263 as settlement charges. The amount was approved by the panel of
Sebi's Whole Time Members, as per the order dated March 29.
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SC CLEARS PATH FOR PENSION TO RISE MANIFOLD FOR EMPLOYEES IN
ALL FIRMS
The Supreme Court on
Monday paved the way for higher pension to all private sector employees by
dismissing a special leave petition filed by the Employees Provident Fund
Organisation (EPFO) against a Kerala high court judgment. The high court had
asked EPFO to give pension to all retiring employees on the basis of their full
salary, rather than capping the figure on which contribution is calculated at a
maximum of Rs 15,000 per month. We find no merit in the special leave petition
The same is, accordingly, dismissed, the SC ruled. The only catch is that while
pension will increase, the provident fund corpus will be reduced as the extra
contribution will now go to EPS rather than PF. However, the amount reduced is
unlikely to be significant as the commutation of the part of increased pension
will be sufficient to fill the gap. The Centre had introduced the Employees
Pension Scheme (EPS) in 1995, under which an employer was supposed to
contribute 8.33% of the employee’s salary in a pension scheme. However, the
contribution was capped at 8.33% of Rs 6,500 (or Rs 541 per month). In March
1996, the government amended the act and allowed the contribution to be a
percentage of the actual salary, provided the employee and employer had no
objection. Subsequently, the Kerala high court set aside the September 1, 2014
amendment and also reinstated the old system of calculating the pensionable
salary as the average of the last one year’s monthly salary. However, even
after the SC judgment, EPFO refused to accept contributions of employees of
exempt companies, whose EPFs are managed by trusts, even when they were ready
to contribute the due amount. Provident funds of most of the large PSUs like
navratnas including ONGC, Indian Oil and others and large private sector
companies are managed by trusts as per norms suggested by EPFO. A number of
high courts like Kerala, Rajasthan, Andhra Pradesh and Madras, among others,
ruled in favour of employees and asked EPFO to allow them to contribute.
Monday’s decision of Supreme Court is expected to settle the issue once and for
all. Employees who have begun working after September 1, 2014, will also be
able to avail the benefit of pension on full salary.
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SEBI PROPOSES REGULATORY BODY FOR MUTUAL FUND PRODUCT
DISTRIBUTORS
The Securities and
Exchange Board of India has proposed a self-regulatory body for distributors
and advisors of mutual funds products. The regulator said the distributors of
mutual fund products and investment advisers are becoming important players in
the market and growing in number. There are about 1.24 lakh distributors of
mutual fund products as on February 28, 2019 and 1,136 investment advisers
registered with Sebi as on March 19, 2019. Therefore, their direct supervision
by Sebi would be challenging. Hence, some form of a first-level regulator is
required to have an oversight on them, Sebi has stated in a discussion paper on
Monday seeking public comments by April 21, 2019. Further, the same (SRO) may
be extended to such other intermediariesor other market participants as may be
notified by Sebi from time to time. The regulator has sought feedback on
whether there should be a single or different SROs for different classes of
regulatees and on enhancing the net worth of SROs from the existing Rs 1 crore.
At present, asset management companies are responsible for the conduct of the
distributors empaneled by it. But, there are diverse practices in the industry
regarding the relationships between the asset management company and the
distributor. Besides, a distributor is empaneled with multiple asset management
companies.
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GROWING FPOS PROVIDE BETTER MARKET LINKAGES TO MEMBER-FARMERS:
CRISIL
Farm producer
organisations (FPOs) have, by and large, succeeded in providing better market
linkages to member-farmers, but still face a host of challenges. FPOs are
collectives of primary producers (farmers, milk producers, fishermen, weavers,
and rural artisans). There are around 5,000 registered FPOs across the country
today, about 60 per cent of which have been set up as companies, while the rest
are societies or cooperatives. FPOs have helped by enabling farmers clinch
better prices through economies of scale -- i.e., by offering collectively a
bigger stock - and also harnessing profitable commodity markets. Around 200
FPOs with 2.5 lakh farmer-members, trade on the NCDEX. Between February 2017
and February 2019, the traded volume of FPOs has grown 66 per cent annually to
30,000 tonnes. Additionally, around 653 FPOs are registered and trading through
the Ministry of Agriculture and Farmers' Welfare eNAM portal, which networks
existing APMC mandis. But there are challenges galore.
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RAHUL GANDHI CASTS A LONG SHADOW OVER MPC
The impact of monsoons on
farmgate prices of crops and squabbles at the Organization of the Petroleum
Exporting Countries on crude oil rates may take a back seat for the first time
at the three-day meeting of the Monetary Policy Committee (MPC) that begins.
It’s not that the six members of the MPC would open a champagne bottle to
celebrate the taming of inflation in less than three years of its birth, but factors
beyond those that normally affect inflation would crowd their mind-space.
Several factors that determine the MPC’s decision – going by the text book –
are signalling a rate cut. Not just by 25-basis points, but even a
50-basis-point reduction to 5.75 per cent for the repo rate, the rate at which
RBI lends to banks. A basis point is 0.01 percentage point. Given the boldness
Governor Shaktikanta Das displayed so far in taking calls even if they meant
drawing criticism from the conservatives, there is speculation that he may even
reduce the Cash Reserve Ratio, a proportion of bank deposits that is kept at
RBI without any interest payments. Inflation targeting at 4 per cent in a band
of 2 percentage points either way is the main objective of the MPC. Going by
that, the scourge of inflation has been tamed. The central bank forecasts
inflation, as measured by the Consumer Price Index, to range between 3.2 per
cent and 3.4 per cent in the first half of this fiscal. Global conditions that
are beyond Indian administrators are also showing that easy monetary policy is
ahead. The US Federal Reserve has not only put the brakes on tightening, but
could make a U-turn and ease. There’s little to show that inflation is anywhere
on the horizon, thanks to benign commodity prices. It is not just the RBI
that’s optimistic about inflation, even economists at investment banks are.
Based on our outlook for food, partly offset by lower commodity prices, and a
stable core, we forecast average headline inflation to rise from 3.4 per cent
in FY19 to 4 per cent in FY20, forecasts Goldman Sachs. Unless hit by major
shocks, e.g., weather shocks of greater intensity than in 2014 and 2015, or
pressure showing up for commodities other than cereals and vegetables, food
inflation is likely to remain subdued going forward. We forecast average food
inflation in FY20 to be in the range of 1.5-2.0 per cent compared with 0.7 per
cent for fiscal 19. He promised to give Rs 72,000 every year to the poor in
mandatory income transfer scheme titled Nyuntam Aay Yojana or NYAY. Economists
estimate that it could cost anywhere between Rs 3.6 lakh crore and Rs 7.2 lakh
crore. To know the magnitude of the programme, just look at these numbers.
Fiscal deficit for the current fiscal is projected at Rs 7 lakh crore or 3.4
per cent of the GDP, so the expenditure on NYAY would be at least half the
deficit. Market borrowing is at Rs 4.48 lakh crore. If NYAY is added to it in
the absence of any details on how it would be funded, the borrowing would jump,
taking the fiscal deficit to nearly 8 per cent of the GDP.
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PAYTM MONEY RECEIVES SEBI APPROVAL FOR STOCK BROKING
Paytm Money announced that
it has received approval from SEBI (Securities & Exchange Board of India)
to offer Stock Broking service to its users. Paytm Money has received approval
for its membership from Bombay Stock Exchange (BSE) & National Stock
Exchange (NSE). It plans to introduce new product & offerings through its
app such as investing & trading in equities, derivatives, currency,
commodities, ETFs and other exchange traded products. With this approval, Paytm
Money is moving towards its aim to be a full stack wealth management platform.
Making investing in Stock Markets easier & accessible is in line with our
mission to bring wealth creation opportunities to millions of Indians. We
expect to go live within few months and eventually offer all exchange traded
products to our users. said Pravin Jadhav.
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RBI RESHUFFLES LEAD BANK RESPONSIBILITIES POST BANKS MERGER
The Reserve Bank has reshuffled
lead bank responsibilities in some districts of Chhattisgarh, Gujarat,
Karnataka and Union Territory Dadra & Nagar Haveli following the merger of
Dena Bank and Vijaya Bank with Bank of Baroda. Amalgamation of Vijaya Bank and
Dena Bank with Bank of Baroda has been notified on January 2, 2019. The
notification has come into force on April 1, 2019, the RBI said in a
notification. Following the merger, the RBI has decided to assign the lead bank
responsibility of districts hitherto held by Vijaya Bank and Dena Bank, the
central bank said. The lead bank responsibility in seven districts in
Chhattisgarh has been assigned to Bank of Baroda from Dena Bank. There is no
change in the lead bank responsibilities of the other districts across the
country, the RBI said.
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PIL ALLEGES PNB HOUSING ENGAGED IN ILLEGAL LENDING PRACTICE,
HC SEEKS STAND OF NATIONAL HOUSING BANK
The Delhi High Court on
Monday sought response from the National Housing Bank, the principal agency to promote
housing finance institutions in the country, on a PIL which alleged that PNB
Housing Finance Ltd was engaged in malicious and illegal predatory lending
practice and sought its audit by NHB. A bench of Chief Justice Rajendra Menon
and Justice A J Bhambhani issued notices to the NHB, a subsidiary of RBI, and
PNB Housing Finance Ltd and sought their stand on the plea by August 9. The
petition by Abhijit Mishra has contended that PNB Housing Finance was
defaulting on NHB's master circular on disbursement of housing loans to
individuals by not linking it with the stages of construction. It has sought
that PNB Housing be audited by the NHB in connection with the alleged violation
of the master circular and to take appropriate action against it. Mishra has
alleged that PNB Housing has not complied with the primary and essential
fiduciary responsibility of monitoring of the housing project development as per
the tripartite agreement.
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WAPCOS GETS CCI NOD FOR NPCC ACQUISITION
The Competition Commission
on Monday said it has given nod to public sector firm WAPCOS Ltd for acquiring
shares of National Projects Construction Corporation (NPCC). In a tweet, the
fair trade regulator said that it approves the acquisition of shares of
National Projects Construction Corporation Limited by WAPCOS Limited. The
transaction involves the acquisition of 98.89 per cent shareholding held by the
President of India, represented by and acting through the Ministry of Water
Resources, River Development & Ganga Rejuvenation, Government of India in
NPCC to WAPCOS along with the transfer of management control, a notice filed
with the competition watchdog said. The ownership of NPCC shall transfer from
the government to WAPCOS after the transaction, it added. In another tweet, the
Competition Commission of India (CCI) said that it approves the acquisition of
shares in Medplus Health Services Private Limited by PI Opportunities Fund-I. Separately,
the CCI also tweeted that it approves the acquisition of shares in Indo Rama
Synthetics (India) Limited by Indorama Netherlands B.V. The deal involves the
acquisition of 31.79 per cent equity shares of Indo Rama Synthetics by Indorama
Netherlands B.V. by way of a preferential allotment and equity shares amounting
to 25.06 per cent of the share capital pursuant to an open offer under the
relevant terms of markets regulator Sebi, a notice filed with the CCI said.
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HEALTHY CAPITAL RATIOS, LOW NPAS
The RBI’s policy rate cut
in February this year is likely to nudge banks to trim deposit rates over the
coming months. Though a sharp cut is unlikely in the near term, depositors with
surplus funds should consider locking into attractive rates now. DCB Bank
offers 8.05% for deposits with tenure of 15 months to less than 24 months. It
also offers 8.05% on its 36-month deposit. Banks had raised deposit rates last
year with those in the private sector hiking rates more aggressively. With the
RBI expected to cut the policy rate further in the coming months, retail
deposit rates offered by banks are likely to fall too. Hence, shop for higher
rates now. DCB Bank’s 8.05% is among the best offered by traditional banks
currently. Most other banks offer 6.5-7.5% for two to three year deposits —
though there are a few others such as IDFC First Bank that offer 8.25% for a
731-day deposit. Small finance banks offer a rate closer to 9%. If you are
looking for a longer horizon to park you funds, the36 months deposit is also a
good option. Healthy growth in core net interest income, other income boost and
favourable cost to income aided earnings. As of December 2018, gross NPAs stood
at around 1.9% per cent. However, DCB’s scale of operations is still modest,
and so are its return ratios. As of December 2018, the bank’s return on assets
stood at 1% while return on equity stood at 12.6%. Investments in branch
expansion and technology have kept profitability modest.
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PE INVESTMENTS IN COMMERCIAL REAL ESTATE RISE
The commercial segment of
real estate attracted most private equity (PE) investments during 2018. South
India, especially, saw the highest number of PE transactions. However, there
was a decline in PE investments in India as compared to the previous years. During
the calendar year 2018, real estate sector attracted announced investments
worth Rs 50,000 crore across 65 transactions. Foreign funds led the way, with a
majority of the total PE investments secured by the commercial sector, said
Shrinivas Rao. According to Rao, compared to previous years, increasing PE
participation in the residential sector too was observed in 2018, primarily
owing to the government’s thrust on its ‘Housing for All’ initiative with
various incentives for developers. Most PE investment made its way to the
southern region of India with South India accounting for about 47% of the total
share of PE investments in realty during 2018. This region also recorded the
maximum number of PE deals. The highest PE investment, value-wise as well as in
number was recorded in Mumbai, while the average investment size was the
largest in Bengaluru, added Rao. Anarock Property report mentions that out of
the total PE inflow of Rs 97,000 crore into the sector over the last four
years, 2017 and 2018 collectively saw maximum investments at Rs 60,000 crore.
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UP-RERA ISSUES NOTICES TO ANSAL API FOR DIVERTING RS 606 CRORE
FUNDS
Uttar Pradesh Real Estate
Regulatory Authority (UP RERA) on Friday issued show cause notices to Ansal API
for alleged fraud and diversion of funds in their four projects in Lucknow, the
authority said in a media release. A large number of complaints were filed
against these projects before us in respect of non-delivery of units/plots,
failure to refund money advanced by buyers, violation of various approvals etc.
Further, some serious allegations of mismanagement, diversion of funds etc.
were also made by the complainants. Hence, this was needed to protect the
interest of the Allottee(s) and to identify the ways and means to ensure the
requisite fund flow for the completion of the projects, said Rajive Kumar, Chairman,
UP RERA. The show cause notices have been issued to the developer following a
report submitted by Currie and Brown (C&B), the forensic auditor that had
investigated 91 projects of Ansal API over the last three months for financial
misappropriation. The auditor had submitted its report where it has stated that
under Ansal API, the projects have found to be in breach of RERA compliances,
managing separate accounts, half yearly project account audit and a possible
diversion of over Rs 600 crore from the projects to other purposes. We would give
the developer 30 days’ time to reply and deposit the amount in the concerned
separate account. If the developer fails to respond, we might revoke the
project registration with the Authority, impose penalties and other necessary
restrictions, Balwinder Kumar.
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TS-RERA RAISES PENALTY TO ₹3 LAKH
Telangana State Real
Estate Regulatory Authority (TS-RERA) has once again decided to give one more
opportunity to the real estate project developers for registering their
respective ventures by charging an enhanced ₹3 lakh as penalty, if done
by April 30. This process of registering of projects has been kept open for
which permission was taken between January 1, 2017, and August 31, 2018, from
competent authorities — municipal or urban development authorities — across
State, said TS-RERA chairman Rajeshwar Tiwari in an official release. It is
mandatory on the part of the promoter to make application for registration of
ongoing projects within a period of three months from the date of commencement
of Real Estate (Regulation and Development) Act, 2016. And, as per Telangana
state Real Estate (Regulation and Development) Rules, 2017, projects approved
on or after January 1, 2017, are to be registered with TS-RERA. From August 31
last year, TS-RERA has been issuing timelines for registration of projects
online with the first deadline being November 30, 2018. Ever since, it has been
extending deadlines and increasing penal amounts. Mr. Tiwari said applications
received after March 31 for registration of projects have violated RERA Act
provisions and their applications could be rejected.
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MORE DEMAND THAN SUPPLY OF TALENT IN AVIATION SECTOR:
TEAMLEASE DATA
India’s aviation industry
may be passing through turbulence because of the troubles at Jet Airways, but
it is not a mayday call for professionals working with top airliners. Beyond
cyclical headwinds, airliners are grappling with a gaping shortfall of talent,
data from staffing firm TeamLease Services suggest. The sector is staring at a
deficit of 500 pilots in 2019 against the 1,300 the airlines have on the roster
now. There is a dearth of cabin crew as well—1,350 short of the optimum 4,900.
To handle duties on the ground, there are only 9,200 personnel, compared with
the requirement of 15,800, TeamLease data scrolls put together. With most
airlines in expansion mode and looking to add more than 100 aircraft through
the end of 2020, we believe that the industry could add up to 18,000 jobs
(direct and indirect) across levels and functions in the same time period, said
Paul Dupuis. It may sound paradoxical that an industry going through rough
weather is facing a talent shortfall. While there are headwinds from high
aviation fuel prices and taxes that are hurting the margins of all airlines,
Jet Airways is troubled by heavy debt. But experts said the unprecedented fleet
expansion by India’s airliners has kept the demand for talent more than the
supply.
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FAKE, NO MORE: WHATSAPP LAUNCHES TIP LINE TO SUBMIT RUMOURS,
UNCERTAIN INFO DURING LS POLLS
WhatsApp Tuesday unveiled
its 'Checkpoint Tipline', where people can check the authenticity of
information received as the messaging giant looks to crack down on fake news
ahead of the general election in the country. Launched by PROTO, an India-based
media skilling startup, this tipline will help create a database of rumours to
study misinformation during elections for Checkpoint - a research project
commissioned and technically assisted by WhatsApp, the Facebook-owned company
said in a statement. It added that starting Tuesday, people in India can submit
misinformation or rumours they receive to the Checkpoint Tipline on WhatsApp
(+91-9643-000-888). Once a WhatsApp user shares a suspicious message with the
tipline, PROTO's verification centre will seek to respond and inform the user
if the claim made in message shared is verified or not. The response will
indicate if information is classified as true, false, misleading, disputed or
out of scope and include any other related information that is available, the
statement said. This centre is equipped to review content in the form of
pictures, video links or text and will cover English and four regional
languages - Hindi, Telugu, Bengali and Malayalam. PROTO will also look at
working with organisations at grassroot level to submit misinformation
circulating across different regions in India during the election period. The
verification reports PROTO sends back will encourage grassroots-level listening
posts to send more signals for analysis, they added. Following the project,
PROTO also plans to submit learnings to the International Center for
Journalists to help other organisations learn from the design and operations of
this project.
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FACEBOOK TAKES DOWN PAKISTAN MILITARY BACKED PAGES TARGETING
INDIA AHEAD OF LS POLLS
Ten days before the first
phase of polling for the 2019 general elections, Facebook on Monday announced
that it has removed and taken down multiple pages, groups and accounts for
violating the company’s policies on co-ordinated inauthentic behaviour or spam,
including 103 such accounts on Facebook and Instagram, that originated in
Pakistan. These accounts, Facebook added, were linked to individuals working
for ISPR - the publicity division of Pakistan’s military establishment, or the
Inter-Services Public Relations. The individuals from Pakistan’s military
establishment, Facebook’s head of cybersecurity policy, Nathaniel Gleicher
added, used fake accounts to operate Military fan pages, general Pakistani
interest Pages, Kashmir community pages, and hobby and news pages. They
frequently posted about local and political news including topics like the
Indian government, political leaders and military, he said. While those behind
these pages and accounts attempted to conceal their identities, Facebook said
its investigation found a Pakistani military link, with a mix of real accounts
of ISPR employees, and a network of fake accounts created by them. A majority
of these violations happened last month when India and Pakistan exchanged
hostilities following the Jaish-e-Mohammad sponsored Pulwama attack that killed
44 jawans of the Central Reserve Police Force. The Pakistan-based pages
indulging in this behaviour included Halka Phulka, Kashmir for Kashmiris,
Pakistan Army — The Best, and a page named Painter’s Palette, which ran a piece
of content relating to Wing Commander Abhinandan Varthaman, who was briefly in
Pakistan custody. Facebook said that this take down included 24 pages, 57
individual accounts, 7 groups and 15 Instagram accounts. It added that about
2.8 million accounts followed one or more of these Pages, while about 4,700
accounts joined one of these groups, and around 1,050 users followed one or
more of these Instagram accounts. These accounts and pages, Facebook said, had spent
$1,100 on ads on its platform paid for in US dollars and Pakistani rupees.
Gleicher also revealed that Facebook had taken down nearly 687 pages and
accounts linked to the social media department or IT Cell of the Indian
National Congress, the leading opposition party in India. He added that these
accounts were removed and taken down, for creating a network of fake accounts,
and importantly, concealing their identity, detected by the company’s automated
systems. The violating behaviour, in this case, was joining various Groups to
disseminate their content and increase engagement on their own Pages. Gleicher
further said they were working to create a large number of fake accounts that
would appear to be independent, go into Facebook groups, and deliver messages
that people would treat differently if they knew that these were coming from political
parties. He added, The page admins and account owners typically posted about
local news and political issues, including topics like the upcoming elections,
candidate views, the INC and criticism of political opponents including the
BJP. The crackdown on the Congress IT Cell, Facebook said, included 138 pages,
and 549 individual accounts, with one or more pages being followed by about
206,000 users. These accounts and pages also spent around $39,000 for
advertising on Facebook, paid for in Indian rupees. According to Facebook’s
investigation, the first ad ran in August 2014, with the most recent ad running
in March 2019. Among the pages taken down by Facebook includes Jo Feku, Baba
Brashtachari (in Hindi), and a page called Hum (in Hindi) It wasn’t just the
Congress that Facebook’s investigation cracked down on. A BJP-leaning page, The
India Eye, run by individuals of Ahmedabad-based IT firm Silver Touch, was also
taken down by the social network. The India Eye, a popular Facebook page, had a
significant following of 2.6 million likes. Gleicher said that the smoking gun
about The India Eye was that the page was being run to make it seem authentic
and independent while it posted content about local news and political events,
the Indian government, the upcoming elections, the BJP and alleged misconduct
of political opponents including the INC. In its investigation, Facebook had
found that a small number of Page admins and account owners belonging to
individuals linked with Silver Touch, had used a combination of authentic and
fake accounts to share their content across a variety of Pages, while
attempting to conceal their identities. It added that about 15,000 accounts
joined this group, while around 30,000 users followed its Instagram account.
The India Eye also ran advertising on Facebook worth $70,000, paid for in
Indian rupees, with the first ad it ran in June 2014, and the most recent one
in Febuary last month. Gleicher added, What we are looking for here, is for
pages that are designed to look independent, when in fact, they were centrally
coordinated, with networks that are using fake accounts to direct this
coordination. Facebook also removed 227 pages and 94 accounts from India for
violating its policies against spam and misrepresentation. These pages, it
said, was engaging in behaviours that expressly violate our policies. The
behaviour would include using fake accounts, multiple accounts with same names,
impersonation, posting links to malware, and posting massive amounts of content
across a network of Groups and pages in order to drive traffic to websites that
are affiliated with in order to make money. Facebook clarified that unlike the
other three instances of what it calls coordinated, inauthentic behaviour,
these accounts were not part of one coordinated operation.
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CONCERNED THAT PM THERESA MAY WILL ADD CUSTOMS UNION TO BREXIT
DEAL: LAWMAKER
A eurosceptic lawmaker in
British Prime Minister Theresa May's Conservative Party said on Monday that he
was worried that May could add a customs union to her Brexit deal with the
European Union as a way to break the current parliamentary impasse. My concern
is that the prime minister is more concerned to avoid a no-deal Brexit than
anything else and therefore I am very concerned that she could decide to go for
a customs union tacked on to her deal, Jacob Rees-Mogg said on LBC Radio. But
if that happens people like me will just continue campaigning to get us out of
the customs union, he added. Meanwhile, British MPs will attempt to chart a new
Brexit path on Monday after rejecting Prime Minister Theresa May's Brexit deal
for a third time, leaving her strategy in tatters and the country in limbo.
With less than two weeks to go until the day Britain risks crashing out of the
European Union, MPs will hold a series of votes to try and find a
majority-backed plan to end the current crisis.
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CHINA TO BUILD 6-8 NUCLEAR REACTORS A YEAR TO MEET 2030
DEVELOPMENT GOALS: OFFICIAL
China will be able to build
six to eight nuclear reactors a year if project approval processes return to
normal as expected in the near future, the chairman of the state-owned China
National Nuclear Corporation (CNNC) told. That should be enough to meet our
country's 2030 development plans, Yu Jianfeng said, speaking on the sidelines
of an industry conference. China did not approve any new conventional nuclear
projects for three years before giving the nod to two new reactor complexes in
southeast China earlier this year. China originally planned to put 58 gigawatts
of nuclear power into operation by 2020, with another 30 GW under construction.
Total capacity stood at 46 GW by the end of last year, with 11 GW still being
built. But the slowdown means it is unlikely to meet its 2020 goals, and
industry executives have been calling on the state to accelerate the approval
process in order to ensure that 2030 energy, climate and pollution targets can
be reached. China aims to raise the share of non-fossil fuels to 20 per cent of
its total energy mix by 2030, up from 15 per cent in 2020. It also aims to
bring greenhouse gas emissions to a peak by around the end of the next decade.
China's nuclear industry has made big achievements, but there are still a lot
of problems, and development is still incomplete and imbalanced, he said,
adding that China's total nuclear plants still amount to only 4 per cent of
total generation capacity.
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US APPRECIATES INDIA'S EFFORTS TO CUT OIL IMPORTS FROM
VENEZUELA
The United States on
Sunday appreciated India's efforts adding to Washington's sanctions to restrict
exports of Venezuelan oil in the global energy market. I would say that we have
had contacts with Indian companies and with the Government of India and that we
have found there to be a very considerable amount of cooperation, which we are
very happy to see, Sputnik quoted US Special Representative for Venezuela
Elliott Abrams as saying. The statement comes after several Indian companies
stopped importing oil from Venezuela after Washington urged oil refineries
around the world to cut their dealings with Caracas or face sanctions themselves.
The move comes after the US slapped additional sanctions on Venezuela's oil
industry earlier this year to weaken President Nicolas Maduro's government. Due
to the sanctions, Venezuela's overall exports of crude oil and fuel reportedly
dropped to 920,000 barrels per day in the first month of sanctions, roughly 30
per cent less than the 1.5 million barrels per day (bpd) traded in the prior
three months.
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