Commerce Optional (UPSC-IAS)

Recent amendments to FDI policy – a boon or a bane? UPSC Commerce Optional- Routes of FDI, External commercial borrowing etc. Mains level : Paper 3- What are the issues with the FDI policy of India? Q.1 What changes were made in the FDI policy? Government approval route for investment: Investment is permitted through government route only in the following cases- 1) An entity situated in a country which shares a land border with India. 2) Where the owner of investment into India is situated in or is a citizen of any such country. FDI is defined under the Rules to mean investment through equity instruments by a person resident outside India in an unlisted Indian company, or in 10% or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company. Join🔜 @commerceoptional Also Join soon @civilservicegurukul Difficulties in seeking government approval The requirement of seeking government approval may also pose operational difficulties for many entities. For instance, the approval requirement seems to be applicable in all cases of further investments irrespective of the threshold. It applies whether or not such investments are in the form of rights issue (where all or almost all existing shareholders also participate) or preferential allotments. This may require global acquisitions of entities in other jurisdictions which have subsidiaries/ investee companies in India, by a person in one of India’s neighbouring countries, to be subject to the approval requirements, thereby impacting timelines for closing. Join🔜 @commerceoptional Also Join soon @civilservicegurukul No restrictions on external commercial borrowings (ECB) There are presently no such commensurate restrictions under the ECB regulations. Therefore, an eligible borrower could avail ECB from a recognised lender. Which includes a foreign equity holder in one of India’s neighbouring countries which are FATF compliant for any immediate funding requirements. Any conversion of the ECB or any part thereof, into shares of the Indian company, would be subject to the restrictions and approval requirements under the FDI policy and the Rules. Join🔜 @commerceoptional Also Join soon @civilservicegurukul Conclusion The government/RBI should provide necessary clarifications on these issues and ambiguities at the earliest. With there being no sunset clause presently contemplated on the applicability of these restrictions, only time will tell if the amendments to the Rules are a boon to the economy and a step in the right direction, or otherwise.

Join🔜 @commerceoptional Also Join soon @civilservicegurukul

Join🔜 @commerceoptional Also Join soon @civilservicegurukul

Join🔜 @commerceoptional Also Join soon @civilservicegurukul

Join🔜 @commerceoptional Also Join soon @civilservicegurukul

Daily Answer Writing Practice- DAY-51 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-51/ Daily Answer Writing Practice- DAY-52 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-52/ Daily Answer Writing Practice- DAY-53 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-53/ Daily Answer Writing Practice- DAY-54 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-54/ Daily Answer Writing Practice- DAY-55 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-55/ Daily Answer Writing Practice- DAY-56 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-56/ Daily Answer Writing Practice- DAY-57 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-57/ Daily Answer Writing Practice- DAY-58 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-58/ Daily Answer Writing Practice- DAY-59 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-59/ Daily Answer Writing Practice- DAY-60 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-60/ Daily Answer Writing Practice- DAY-61 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-61/ Daily Answer Writing Practice- DAY-62 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-62/ Daily Answer Writing Practice- DAY-63 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-63/ Daily Answer Writing Practice- DAY-64 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-64/ Daily Answer Writing Practice- DAY-65 Costing topic of Paper 1 of UPSC Commerce Optional https://www.civilservicegurukul.com/daily-answer-writing-practice-for-commerce-optional-upsc-mains-day-65/

Credit Rating Agencies in India • The Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 empowers SEBI to regulate CRAs operating in India. • As per the Regulations, CRA is defined as “a body corporate which is engaged in, or proposes to be engaged in, the business of rating of securities offered by way of public or rights issue”. • SEBI (Credit Rating Agencies) Regulations, 1999 provide for a disclosure-based regulatory regime, where the agencies are required to disclose their rating criteria, methodology, default recognition policy, and guidelines on dealing with conflict of interest. • There are seven Credit Rating Agencies registered with SEBI, viz. CRISIL, ICRA, CARE, India Ratings and Research, SMERA, Infomerics and Brickworks. @Commerceoptional

👆🏻Current affairs on Credit rating agencies

Recently, SEBI came up with set of wider disclosure norms for the Credit Rating Agencies (CRA). • It introduced a “probability of default” mechanism under which rating agencies have to disclose the probability of default for the issuers they rate by December 2019. • It also provides for formulation of Uniform Standard Operating Procedure for tracking and timely recognition of default.

Q. What are the new announcements made by RBI? A) Cutting Reverse-Repo Rate To begin with, the RBI has cut the reverse repo rate further by 25 basis points (100 basis points make up one full percentage point). The reverse repo rate now stands at 3.75 per cent while the repo rate is 4.40 per cent. The idea behind repeatedly cutting reverse repo more than the repo is to incentivise banks to borrow from it at low rates and lend it forward to customers. B) Targeted Long Term Repo Operations RBI has announced another TLTRO of Rs 50,000 crore but this time it has mandated that 50 per cent of this amount borrowed by the banks must go to small and mid-sized NBFCs and Micro Finance Institutions (MFIs). Again, the benefits of this move are two-fold. One, it provides more liquidity. More importantly, it also provides it targeted to those institutions that are most hit by the economic slowdown and, as such, most in need of funds to survive themselves. C) Credit to NBFCs and MFIs All India financial institutions (AIFIs) such as the NABARD, etc. will be provided special refinance facilities for a total amount of Rs 50,000 crore by the RBI. This credit will help the end consumer, especially in the rural sector, small industries, and housing finance companies. D) Expanding Ways and Means Advances (WMAs) On the issue of providing liquidity and fulfilling its role as “the lender of last resort”, the RBI also announced that it will provide more funding to state governments — under the WMA facility. The WMA is essentially is a facility by which state governments borrow from the RBI to meet the shortfall between their revenues and their expenditure. But the WMA is a short-term measure, only meant for exigencies. E) Easing NPA norms Apart from easing liquidity in the system like in the past, the other focus has been to provide an easier regulatory regime. The global lockdown has almost completely halted economic activity. Under the circumstances, it is natural that business will struggle to pay back their loans and there will be a steady accretion of non-performing assets (NPAs) across the board. Similarly, to ensure that loans given to real estate projects, that are getting delayed due to the crisis, do not turn into NPAs, the RBI provided an extension of another year before they are recognised as NPAs. F) Easing LCR norms Lastly, given the stress on the system and the demand for cash, the RBI has allowed Scheduled Commercial Banks to reduce their Liquidity Coverage Ratio from 100 per cent to 80 per cent with immediate effect. The LCR essentially mandates the amount of cash that a bank is required to keep with itself. At 100 per cent LCR, a bank would have been required to keep 100 per cent of the net cash it expects to flow out of the bank over the next 30 days. With this being reduced to 80 per cent, banks would have more cash to deal with. Join🔜 @civilservicegurukul Also Join soon @economyupsc Also Join @Commerceoptional

Page No.42 Finance bill 2020

Page No. 34 is related with Govt grants.