NUE rivals, China plots global domination, cookie fight and other news
Business news and insights to jump start your day
“Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are.”
- John Wooden
Good morning! 😀
In today’s edition, we take a look at:
NUE Rivals
Bad bank taking shape
China plans global domination
Let’s get started…
📈 How did the markets fare
BSE Sensex - 51,444.65 | +2.28% ⬆
NSE Nifty - 15,245.60 | +2.19% ⬆
10-Yr Bond Yield - 6.238% | +0.002 ⬆
S&P 500 - 3,819.72 | -1.31% ⬇
USD/INR - ₹ 72.71 | -0.88% ⬇
Gautam Adani’s Adani Enterprises joined the Rs 1-trillion-market capitalisation club. This is the third group company to achieve this feat after Adani Green Energy and Adani Ports and Special Economic Zone.
📰 What's happening around us
Finance
India’s booming digital payments ecosystem is set to get more competitive. Alliances are being forged to take on the ‘king of digital transactions’, National Payments Corporation of India (NPCI), which operates the digital payments system UPI and RuPay, the Indian alternative to Mastercard and Visa.
Banks, fintechs and technology providers are teaming up to apply for the license for New Umbrella Entity (NUE) that will allow them to set up a pan-India digital payments network. Those who receive the license can set up, manage and operate new payment systems, including ATMs, points of sales systems, remittance services and Aadhaar-based payments.
Here are the groups vying for the NUE license:
Group 1 - Tata Group's Ferbine along with MasterCard and PayU. HDFC Bank & Kotak Mahindra Bank hold 9.99% stake each in Ferbine. Airtel Digital to buy 10% stake
Group 2 - Paytm, Ola, IndusInd Bank, Centrum Finance, Zeta Pay and Electronic Payment and Services
Group 3 - Amazon, ICICI Bank, Axis Bank, Visa, Pine Labs and Billdesk
Group 4 - So Hum Bharat (subsidiary of Infibeam Avenues), Jio Infosystems, Google, Facebook and YES Bank holds stake in the company
Group 5 - FSS, Indian Bank, Central Bank of India, NABARD and India Post Payments Bank
Group 6 - FIS, Union Bank of India and Punjab National Bank
Reserve Bank of India has opened up the digital and retail payments sector to other players, hoping to encourage innovations in payments, reduce overdependance on NPCI and accelerate digital payments adoption across the country. But don’t worry, these systems will all be interoperable so a new payment system won’t mean more headaches for consumers.
Banking
The national bad bank proposed in the Union Budget is to be set up in the first quarter of FY22 and details regarding the players to be involved are beginning to emerge. The bad bank was proposed to clean up the balance sheets of public sector banks as getting these bad loans off the books will encourage them to lend more, thereby boosting the economy.
But first, let’s look at how a bad bank will operate. The bad bank structure will essentially have three parties:
ARC - Asset Reconstruction Company
AMC - Asset Management Company
AIFs - Alternate Investment Funds
The ARC will buy the bad loans from banks at a discount. Then the AMC will restructure these loans, turn them around and sell them to a potential investor or an AIF. And for its service, the AMC will charge a fee.
According to an ET report, nine banks and two non-bank lenders will invest Rs 7,000 crore to form the ARC. State Bank of India, Punjab National Bank, Bank of Baroda, ICICI Bank, Axis Bank and IDBI bank are some of the banks touted while Power Finance Corp, and Rural Electrification Corp are also set to be involved with each of them set to have an equal stake.
Foreign investors are reportedly lining up to be part of the AMC with US-based private equity firm KKR, Canada’s Brookfield and the World Bank’s International Finance Corp reportedly interested.
While the bad bank is a great idea for a one-time cleansing in the banking sector, further steps should be taken to ensure that banks don’t revert back to their old unhealthy lending practices.
International
As China’s economic influence grows, its relationship with western countries have increasingly become frayed. Now the country is readying itself for a tech revolution and cutting its dependence on the west as it looks to overtake the US to become the world’s largest economy by the end of the decade.
On Friday, the top Communist Party leaders will meet to approve the 14th five-year plan which will reportedly include massive investments into sectors from semiconductors and hydrogen vehicles to biotech.
After the trade war with the US and the Trump administration blacklisting Huawei and China’s largest microchip manufacturer SMIC (which effectively bans American companies from doing business with them), China has accelerated its efforts to become self-sufficient. With China threatening America’s global supremacy, expect more political and economic turmoil in the coming decade.
🎯 News Bites
Activity in India’s services sector, which makes up more than 50% of India’s GDP, expanded at its fastest pace in a year in February aided by the optimism around vaccine rollout. The India Services Business Activity Index rose from 52.8 in January to 55.3 in February. A reading above 50 signals expansion.
The Employees’ Provident Fund Organisation is considering curbs on early withdrawal of pension contribution, till at least two years after they quit a job. At present, workers can withdraw from the Employees’ Pension Scheme after two months of quitting.
Extreme weather events such as floods, droughts and cyclones will put at risk, $84 billion worth of Indian bank debt, according to a leading nonprofit environmental disclosure platform CDP. Lenders who’ve reported climate risks include State Bank of India, HDFC Bank, IndusInd Bank and Axis Bank.
The maker of Oreo biscuits has filed a case against Parle alleging that the design of the Indian firm’s Fabio biscuits is “deceptively similar” to that of Oreo. Biscuit makers fighting it out in court seems to be getting more frequent now.
Netflix is launching Fast Laughs, a TikTok-style feed of funny video clips. The short clips taken from different shows will play directly within the Netflix app and is now currently available only on iOS devices and in select countries.
That's it from us. Have a productive day!