Welcome to Daily Banking Digest, your premier source for the latest news and insights on April 26, 2024, focusing on banking, the economy, and finance. Our platform offers a comprehensive overview of the day’s most critical financial stories, market trends, and economic developments. Whether you’re a professional in the financial sector, an investor monitoring market movement, or someone interested in staying informed about the economic landscape, Daily Banking Digest provides reliable, up-to-date information.

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India’s Economic Outlook Brightens: Growth Momentum Sustained, Inflationary Pressures Abate with Favorable Monsoon

Despite global economic challenges, India remains a key driver of global growth, according to a report by the Finance Ministry. The report highlights India’s strong economic indicators, including robust growth, price stability, and a steady external sector performance. It also notes the positive impact of a predicted above-normal monsoon on inflation concerns.

Key Points:

Growth Outlook: – India continues to be the fastest-growing major economy. – IMF, ADB, and RBI have revised their growth projections for India upwards.

Inflation Management: – Global inflation remains contained, but core inflation warrants attention. – India’s government and RBI have effectively managed inflation through policy rates, food buffers, and import easing. – Retail inflation in FY23-24 reached its lowest level since the COVID-19 pandemic. – A predicted above-normal monsoon in 2024 eases inflation concerns.

Foreign Exchange Inflows: – FPI inflows saw a significant turnaround in FY23-24. – India received the highest equity inflows among emerging market peers. – The inclusion of India’s sovereign bonds in global bond indices is expected to further spur demand.

Foreign Direct Investment: – Net FDI moderated in the first ten months of FY23-24. – Foreign exchange reserves reached an all-time high of $645.6 billion.

DBT Savings Surpass ₹63,000 Crore in FY23

Direct Benefit Transfer (DBT) has resulted in significant savings for the Indian government, exceeding ₹63,000 crore in FY22-23. This has enabled better targeting of beneficiaries and reduced leakages. DBT is currently used in 314 schemes, with the Public Distribution System contributing the highest savings.

Key Points:

Savings through DBT: – Savings in FY22-23: ₹63,000 crore – Total savings since inception: ₹3.48 lakh crore

Impact on Rural Employment Scheme: – Savings in FY23 can cover a significant portion of the allocation for the Rural Employment scheme in FY25.

Governance Reforms: – DBT and other reforms have eliminated duplicate/fake beneficiaries and plugged leakages.

Schemes Covered by DBT: – 314 schemes implemented by 53 Central Ministries and Departments.

Highest Savings: – Public Distribution System: Over ₹50,000 crore in FY23, with a total saving of over ₹1.85 lakh crore. – PM KISAN: Over ₹10,000 crore in FY23, due to the deletion of ineligible beneficiaries. – LPG Subsidy: Over ₹500 crore in FY23, with a total saving of over ₹73,000 crore.

DBT Implementation: – Started on January 1, 2013, with a phased rollout. – Expanded across the country on December 12, 2014.

JAM as DBT Enabler: – Jan Dhan Account, Aadhaar, and Mobile connections facilitate DBT implementation.

Benefits of DBT: – Efficiency, effectiveness, transparency, and accountability in government systems. – Increased confidence in governance.

GIFT City: A Catalyst for Transforming Trade Finance

India’s export firms face credit constraints, hindering their ability to capitalize on global opportunities. The domestic credit market is characterized by high costs and limited access, while foreign currency borrowing (FCB) offers a low-cost alternative. FCB has been shown to improve export performance, especially for MSMEs. The International Finance Securities Center (IFSC) at GIFT City plays a crucial role in on-shoring FCB and reducing trade finance challenges.

Key Points:

Credit Constraints for Export Firms: – Export firms face access, volume, cost, and maturity mismatch issues in obtaining credit. – Lack of trade finance exacerbates business fluctuations and global shocks.

Domestic Credit Market Challenges: – High-cost structure, dormant corporate bond market, and overburdened scheduled banks. – Need for low-cost and easy access to credit to reduce export costs.

Foreign Currency Borrowing (FCB): – FCB provides low-cost capital, easing domestic credit constraints. – MSMEs increasingly utilize FCB due to inaccessibility of domestic credit markets.

Improved Performance with FCB: – Export firms with FCB access show improved export sales performance. – FCB enables firms to expand production and sales during currency depreciation.

Government Support: – Grants and subsidies are often insufficient to address credit gaps. – Export firms with FCB access utilize government support more effectively.

Role of IFSC at GIFT City: – IFSC facilitates on-shoring of FCB, offering similar benefits to offshore credit. – Light regulation, simplified taxation, and tax incentives make IFSC attractive for banks and corporates. – IBUs are increasingly providing trade finance to Indian entities through GIFT City.

Kotak Bank CEO Discusses Concerns with RBI, Seeks Resolution

Kotak Mahindra Bank is addressing concerns raised by the Reserve Bank of India (RBI) regarding IT deficiencies and non-compliances. The bank’s operations remain uninterrupted for existing customers, but it has been restricted from onboarding new customers and issuing credit cards through online and mobile channels.

Key Points:

RBI’s Concerns: – Significant concerns from IT Examination of 2022 and 2023 – Continued failure to address concerns comprehensively and timely

Deficiencies and Non-Compliances: – IT inventory management – Patch and change management – User access management – Vendor risk management – Data security and data leak prevention strategy – Business continuity and disaster recovery

Governance Issues: – Deficient IT Risk and Information Security Governance for two consecutive years – Non-compliance with Corrective Action Plans issued by RBI

Impact on Bank: – Restrictions on onboarding new customers and issuing credit cards through online and mobile channels – Operations remain uninterrupted for existing customers

Bank’s Response: – Actively working to address concerns – In constant communication with RBI to resolve issues promptly.

Scrutiny of Insurance-Bundled Loans Offered by Small Finance Banks

Banking and insurance regulators are investigating the mandatory bundling of life insurance products with loans offered by small finance banks (SFBs). This practice has raised concerns about mis-selling, as borrowers are often forced to purchase insurance even if they do not need it. The regulators are questioning the rationale for this practice and its potential impact on borrowers, banks, and insurance companies.

Key Points:

Mis-selling of Insurance Products: – SFBs are allegedly forcing individual borrowers to purchase life insurance products as a condition for loan approval. – This practice is not permitted for loans sold to individuals, but is allowed for joint liability group loans. – Borrowers are threatened with loan cancellation if they decline to purchase insurance.

Problem of Mis-selling: – Small-ticket unsecured MFI loans are often bundled with life insurance products, reducing the loan amount disbursed to borrowers. – The banking regulator has warned SFBs that such products may not benefit borrowers, banks, or insurance companies.

Lack of Persistency: – Customers often fail to pay premiums on bundled life insurance policies after the first year. – The persistency ratios of such products are very weak, adding little value to insurance companies.

Income Assessment Discrepancies: – Income assessments for life insurance and loan eligibility are often different, with sum insured amounts exceeding the capped annual household income for MFI loans.

Regulatory Scrutiny: – The banking and insurance regulators are investigating SFBs and insurance companies involved in mis-selling practices. – A directive or circular from the RBI is expected to address this issue.

Kotak Mahindra Bank’s RBI Penalty: The Culminating Event on April 15, 2024

The Reserve Bank of India (RBI) has imposed restrictions on Kotak Mahindra Bank due to serious deficiencies and non-compliances in its IT infrastructure and risk management practices. The bank has been barred from onboarding new customers through online and mobile banking channels and from issuing new credit cards.

Key Points:

1. RBI’s Concerns:

Serious deficiencies in IT inventory management, patch and change management, user access management, vendor risk management, data security, and data leak prevention strategy.
Non-compliance with IT Risk and Information Security Governance requirements for two consecutive years.
Inadequate, incorrect, or unsustainable compliance with Corrective Action Plans issued by the RBI.

2. IT Infrastructure and Outages:

Frequent and significant outages in the bank’s Core Banking System (CBS) and online and digital banking channels.
Service disruption on April 15, 2024, causing customer inconveniences.

3. RBI’s Actions:

Barring Kotak Mahindra Bank from onboarding new customers through online and mobile banking channels.
Stopping the bank from issuing new credit cards.
Imposing these restrictions to protect customers and prevent prolonged outages that could impact the financial ecosystem.

4. Industry Perspective:

The restrictions highlight the importance of strong and sustainable IT systems in the context of digital banking growth.
Banks need to upgrade their IT systems as their business grows to ensure IT security and customer service standards.
Robust systems and procedures are essential to handle the increasing volume and complexity of business transactions.

Axis Bank Reports Strong Q4 Performance: Profit Surges to Rs 7,130 Crore, NII Grows 22%

Axis Bank reported a strong financial performance for the quarter and full year ended March 31, 2024, with significant growth in net profit, net interest income, and loan advances. The bank also witnessed a rise in fee income, operating profit, and digital transactions.

Key Points:

Net Profit: – Q4FY24 net profit: Rs 7,130 crore, up 160% YoY – FY24 net profit: Rs 24,861.43 crore, up 160% YoY

Net Interest Income (NII): – Q4FY24 NII: Rs 29,224.54 crore, up 22% YoY – FY24 NII: Rs 1,09,368.63 crore, up 28% YoY

Loan Growth: – Loan advances grew 15% YoY and 4% QoQ – Rural loans grew 30% YoY and 15% QoQ – Small business banking loans grew 33% YoY and 7% QoQ – Mid-corporate book grew 22% YoY

Deposits: – Total deposits grew 13% YoY and 6% QoQ – Savings account deposits grew 2% YoY and 4% QoQ – Current account deposits grew 5% YoY and 18% QoQ – Term deposits grew 22% YoY and 5% QoQ

Payments & Digital: – 12.4 lakh credit cards issued in Q4FY24 – 96% of individual customer transactions were digital in Q4FY24 – 79% of individual retail term deposits opened digitally in FY24 – 39% YoY growth in UPI transaction value in Q4FY24 – 52% YoY growth in mobile banking transaction volumes in Q4FY24

Asset Quality: – Gross NPA: 1.43% as of March 31, 2024 – Net NPA: 0.31% as of March 31, 2024 – Gross slippages: Rs 3,471 crore in Q4FY24 – Recoveries and upgrades from NPAs: Rs 2,155 crore in Q4FY24

Engineering Exports from India Surge by 10.7% in March

India’s engineering goods exports, including steel and machinery, experienced a 10.7% year-on-year growth in March, reaching $11.28 billion. Despite ongoing supply chain disruptions due to the Red Sea crisis, exports have grown in double digits for the second consecutive month. However, overall merchandise exports declined in the 2023/24 financial year, with engineering exports to the U.S. and automobile exports facing setbacks. Key markets such as North America, the EU, and North East Asia showed signs of recovery, while exports to Russia surged. Exporters remain concerned about uncertainties in the coming months due to protectionist policies and economic challenges.

Key Points:

Growth in Engineering Goods Exports: – 10.7% year-on-year growth in March to $11.28 billion – 2.13% growth in the 2023/24 financial year to $109.3 billion

Challenges to Exports: – Slowdown in global demand – Russia-Ukraine war – Red Sea shipping crisis

Decline in Merchandise Exports: – First decline since 2020/21 – Fell to $437 billion from $451 billion in the previous year

Performance in Key Markets: – North America and EU remain top destinations for engineering exports – Engineering exports to Russia grew sharply – Exports to China remained flat

Concerns for Exporters: – Protectionist environmental policies in the EU – Slow economic revival in China

Russian Chamber of Commerce and Industry Establishes Presence in Mumbai, Sparking Entrepreneurial Interest in India

The Russian Chamber of Commerce and Industry (CCI) has established an office in Mumbai to facilitate bilateral trade between Russia and India. The office aims to connect Russian entrepreneurs with potential Indian partners, expand business opportunities, and promote participation in exhibitions and congresses.

Key Points:

Opening of CCI Office in Mumbai: The CCI has opened an office in Mumbai to enhance trade relations between Russia and India.
High Demand for Russian Entrepreneurs in India: Russian entrepreneurs are actively seeking partnerships in India, leading to the establishment of the new office.
Expanded Opportunities: The office will provide increased opportunities for finding partners, organizing business missions, and participating in industry events.
Significance for CCI: The office is crucial for the CCI to meet the growing demand for Russian entrepreneurs in India and expand its reach.

India Explores International Partnerships for Lithium Processing to Reduce Dependence on China

India is actively seeking partnerships with various countries to acquire technical expertise in lithium processing. This move aims to support the development of its domestic lithium mining and electric vehicle industries, reducing reliance on China.

Key Points:

1. Partnerships for Lithium Processing: – India is in discussions with Australia, the United States, Bolivia, Britain, Japan, and South Korea for technical assistance in lithium processing. – Russia’s TENEX has also offered technology and collaboration opportunities.

2. Domestic Lithium Mining: – India has discovered lithium blocks in Jammu and Kashmir and Chhattisgarh. – Companies like Ola Electric, Shree Cement, and Coal India are bidding for mining rights.

3. Technical Challenges: – India lacks the necessary technology to process lithium ores into battery-grade materials. – It requires expertise in beneficiation, hydrometallurgy, leaching, and pyrometallurgy.

4. Reliance on China: – China currently dominates the global lithium processing industry. – Without domestic processing plants, India would have to export lithium ores to China and import the processed metal.

5. Government Incentives: – NITI Aayog has recommended incentives for establishing lithium processing plants in India. – The country aims to meet its projected lithium carbonate demand of 56,000 metric tons by 2030.

Credit Card Spending Surges 20% to Record Rs. 1 Lakh Crore in March

Online credit card expenditures in India surpassed Rs 1 lakh crore for the first time in March 2024, marking a significant increase in digital payments. The rise in card usage has led to a surge in transaction volume, with point-of-sale transactions and online payments witnessing notable growth. However, debit card payments have declined due to the popularity of UPI transactions.

Key Points:

Online Credit Card Expenditures: – Surpassed Rs 1 lakh crore in March 2024, reaching Rs 1,04,081 crore. – Increased by 20% from March 2023 and 10% from February 2024.

Offline Credit Card Transactions: – Totaled Rs 60,378 crore in March 2024. – Up 19% from the previous year.

Overall Credit Card Transactions: – Amounted to Rs 1,64,586 crore in March 2024. – Increased by 20% from the previous year.

Credit Card Issuance: – Total number of credit cards in India crossed 10 crore in February 2024. – Reached 10.2 crore by March 2024. – HDFC Bank held the largest market share at 20.2%.

Transaction Volume: – Point-of-sale transactions surged by 28% year-on-year to 18 crore in March 2024. – Online payments increased by 33% to 16.4 crore.

Impact of UPI: – Card transactions now available on the UPI network. – Debit card payments declined by 30% in stores and 41% in online transactions.

Mukesh Ambani’s JioCinema Premium: Unlocking Entertainment for Less Than a Rupee a Day

Reliance Jio has launched JioCinema Premium, a subscription service offering ad-free streaming in up to 4K quality for Rs 29 per month. This move aims to expand JioCinema’s audience, bolster its revenue streams, and position it as a leading player in the streaming industry.

Key Points

Affordable Push for Larger Audience – JioCinema aims to attract a wider audience with its affordable premium offering.

Strategic Response to Market Demands – The pricing move responds to evolving consumer demands and the competitive streaming landscape.

4 Reasons for Price Reduction – Expand subscriber base with a more comprehensive content library. – Leverage Jio’s distribution network for a competitive advantage. – Cater to premium users who value ad-free content. – Gain a competitive edge against global OTT platforms.

Aggressive Pricing Strategy – JioCinema’s pricing strategy aims to democratize access to premium entertainment. – Live sports and catch-up broadcast content remain free, underscoring JioCinema’s commitment to diverse content.

Sports Content Remains Free – Sports content will continue to be free on JioCinema, supported by advertising revenue. – Potential for increased overall advertising revenue through bundling with Disney content.

Raising the Bar for OTTs – JioCinema Premium’s extensive content library and competitive pricing raise the bar for streaming services in India. – The move may drive further consolidation in the industry.

Price-Conscious Market – India’s price-conscious market has forced Netflix to cut prices and regional OTTs to attract local audiences. – JioCinema Premium’s pricing offers a significant discount compared to peers.

Growing OTT Market – India’s OTT video market is projected to grow to $7 billion by 2027. – Streaming remains a capital-intensive venture with challenges in monetization.

Axis Bank Extends Amitabh Chaudhry’s Tenure as MD & CEO for Three Years, Shares Surge

Axis Bank’s board has approved the reappointment of Amitabh Chaudhry as Managing Director & Chief Executive Officer for another three years, effective January 1, 2025. The reappointment is subject to approval from the Reserve Bank of India. The board also approved the reappointment of Meena Ganesh and Gopalaraman Padmanabhan as Independent Directors for four years each.

Key Points:

Reappointment of Amitabh Chaudhry as MD & CEO – Approved by Axis Bank’s board for another three years – Effective from January 1, 2025 to December 31, 2027 – Subject to approval from the Reserve Bank of India

Reappointment of Independent Directors – Meena Ganesh and Gopalaraman Padmanabhan reappointed for four years each – Subject to approval from bank members

Axis Bank Q4 Performance – Consolidated net profit of Rs 7,599 crore – Standalone net profit of Rs 7,130 crore – 17% increase in net profit on a sequential basis – Net profit for FY24 surged to Rs 24,861.43 crore

RBI to Implement Measures to Safeguard Bank Accounts from Cyber Fraud

India’s central bank, the Reserve Bank of India (RBI), plans to amend guidelines to allow banks to temporarily freeze accounts suspected of cybercrime. This move aims to combat the rising wave of online fraud, which has resulted in significant financial losses for individuals.

Key Points:

1. Rising Cybercrime: – Individuals have lost nearly $1.26 billion to cyber fraud since 2021. – Approximately 4,000 fraudulent accounts are opened daily.

2. RBI’s Response: – RBI plans to allow banks to suspend accounts suspected of cybercrime without requiring police complaints. – This will free victims from the need to file police reports before freezing accounts.

3. Account Suspensions: – Suspensions will target accounts frequently used to transfer funds gained from cybercrime. – Banks will receive information from the Indian Cybercrime Coordination Centre to identify such accounts.

4. Data Sharing: – The Indian Cybercrime Coordination Centre maintains a portal with data on misused bank accounts, electronic devices, and criminals. – This data is accessible to banks, police, and telecom operators.

5. Need for Centralized Investigation: – A new centralized body is needed to investigate cyber frauds effectively.

Fintech Companies May Seek RBI’s Approval for Streamlined Merchant KYC Procedures

Fintech companies are proposing a simplified KYC process for small merchants and a risk-based approach to customer verification. They argue that the current physical verification requirement for all merchants is costly and impractical for small businesses with low transaction volumes.

Key Points:

1. Proposed KYC Simplification for Small Merchants: – Fintech players suggest a digital and minimal KYC process for merchants with monthly transactions below Rs 50,000.

2. Risk-Based Verification Approach: – Additional verification procedures, such as document collection and physical verification, should be required only when transaction volumes increase over time.

3. Concerns over Physical Verification Costs: – Fintech companies argue that physical verification of small merchants is expensive and may deter them from onboarding.

4. Alternative Verification Methods: – Fintech companies propose using video-based customer identification processes (V-CIP) as an alternative to physical verification for small merchants.

5. Merchant Monitoring System: – Payment aggregators should implement merchant monitoring systems to flag suspicious transactions that deviate from the merchant’s business profile.

Services Exports Surge 11.4% in 2023 Amidst Global Uncertainties: UNCTAD Report

India’s services exports surged by 11.4% to $345 billion in 2023, outperforming China’s decline of 10.1%. This growth was driven by sectors such as travel, transport, medical, and hospitality. Despite a marginal dip in imports, India’s services exports have the potential to expand further in emerging markets.

Key Points:

Growth in Services Exports: India’s services exports increased by 11.4% to $345 billion in 2023.
Contributing Sectors: Travel, transport, medical, and hospitality sectors contributed to the growth in services exports.
Global Services Exports: World services exports surpassed $7.9 trillion in 2023, with an annual rise of 8.9%.
Leading Exporters: India, China, Singapore, Turkiye, Thailand, Mexico, and Saudi Arabia are among the leading exporters of services.
Marginal Dip in Imports: India’s services imports declined marginally by 0.4% to $248 billion in 2023.
Growth Driver: International travel receipts were the main driver of the year-on-year rise in services exports in Q4 2023.
IT and Travel Exports: IT and IT-enabled services, as well as travel, are performing strongly in India’s services exports.
Business Services: Engineering, architecture, legal, and accounting services, as well as research and management consulting services, have growth potential.
Diversification of Export Destinations: India has historically focused on North America and Europe for services exports, but there is potential for growth in emerging markets.

India’s Economic Growth to Mitigate High Food Inflation: Ashima Goyal

RBI Monetary Policy Committee member Ashima Goyal believes that India’s high food inflation problem will diminish in the future due to modern supply chains and diversified sources. She emphasizes the importance of increasing agricultural productivity and reducing the weight of food in consumption to mitigate food price shocks. Goyal also highlights the need for policy continuity, supply-side reforms, and enhancing economic resilience.

Key Points:

1. Modern Supply Chains and Diversified Sources: – Modern supply chains with diversified sources can quickly address sudden spikes in food prices. – Advanced economies do not experience significant price spikes in specific food items due to diverse geographic regions and integrated markets.

2. Declining Weight of Food in Consumption: – As India develops, the weight of food in consumption will fall, reducing the impact of food price shocks. – Food consumption is becoming more diversified, further mitigating the effects of price fluctuations.

3. Flexible Inflation Targeting: – Flexible inflation targeting helps anchor expectations and reduce the impact of food price shocks.

4. Importance of Agricultural Productivity: – Stable agricultural prices are crucial for non-inflationary growth. – India needs to focus on increasing agricultural productivity through policy resets and new technologies.

5. Distorting Subsidy System: – India’s subsidy system for farmers and consumers has been distorting and expensive. – It has kept inflation high and reduced government investment in agriculture.

6. Policy Continuity and Supply-Side Reforms: – Policy continuity is essential for sustainable economic growth. – Supply-side reforms are necessary to enhance economic resilience and diversity.

7. Economic Outlook: – India’s economy is expected to grow near 8% in 2023-24. – The IMF and ADB have raised India’s growth projections for 2024.

March Engineering Goods Exports Surge 10.7% to $11.28 Billion

Key Points:

Growth in Engineering Goods Exports: – Engineering goods exports rose 10.7% in March to $11.28 billion. – The sector grew 2.13% in the 2023/24 financial year to $109.3 billion.

Challenges to Exports: – Global demand slowdown, Russia-Ukraine war, and Red Sea shipping crisis have impacted exports. – Engineering exports to the U.S. declined 5.7% in 2023/24. – India’s overall merchandise exports fell in the 2023/24 financial year.

Market Trends: – North America and the EU remain top destinations for engineering exports. – Engineering exports to Russia grew sharply in the fiscal year. – Exports to China remained almost flat.

Concerns for Exporters: – Protectionist environmental policies in the EU and slow economic revival in China create uncertainties. – Automobile exports declined 5.5% in 2023/24 due to forex reserve shortages in some markets.

Sebi Approves Crisil ESG Ratings for ESG Scoring

Crisil ESG Ratings & Analytics has received approval from SEBI as a Category 1 ESG rating provider. This approval follows the market regulator’s overhaul of ESG rating norms, requiring registration and certification for ESG scoring businesses. Crisil ESG Ratings, a subsidiary of Crisil, will now transfer its ESG scoring business to the newly approved entity. ESG scores assess a company’s sustainability and ethical practices, guiding asset managers and investors in aligning their investments with ESG standards.

Key Points:

SEBI Approval: – Crisil ESG Ratings & Analytics has received SEBI approval as a Category 1 ESG rating provider.

ESG Scoring Business: – Crisil ESG Ratings launched its ESG scoring business in 2021 and tracks over 1,000 companies across 65 sectors. – The business will be transferred to the subsidiary Crisil ESG Ratings.

ESG Scores: – ESG scores indicate a company’s sustainability and ethical practices. – Asset managers and investors use these scores to align their investments with ESG standards.

SEBI Norms for ERPs: – SEBI introduced two categories for ESG rating entities based on net worth and functions. – The regulation aims to ensure transparent, practical, accurate, and India-specific methodologies.

Business Responsibility and Sustainability Report (BRSR) Core: – SEBI introduced BRSR Core to prevent greenwashing and ensure comprehensive sustainability reporting.

AMFI Seeks SEBI Intervention to Address KYC Challenges

The Association of Mutual Funds in India (AMFI) and the Securities and Exchange Board of India (SEBI) are working to resolve issues related to the validation of investor KYC records. SEBI’s August 2023 circular required KYC Registration Agencies (KRAs) to validate KYC attributes, resulting in changes to investor KYC statuses. The current impasse is impacting investment flows, particularly for non-resident Indians and those with limited access to online services.

Key Points:

1. KYC Validation: – SEBI has asked KRAs to validate KYC attributes, including PAN-Aadhaar linkage, name, address, mobile number, and email ID. – KYC statuses have been changed to KYC validated, KYC registered, or KYC on hold.

2. Flow Disruptions: – The impasse is affecting investment flows, especially from NRIs and those with limited internet access. – NRIs face challenges with physical KYC modification, while resident investors encounter online hurdles. – Investors are not being notified of KYC on hold status, leading to rejected transactions.

3. Industry Response: – AMFI and individual fund houses are discussing the issue with SEBI. – Industry officials expect efforts to help investors move to validated status conveniently. – Distributors suggest implementing new KYC rules later and providing a carve-out for senior citizens.

4. Importance of Aadhaar-Based KYC: – Mirae Asset Mutual Fund CEO emphasizes the importance of Aadhaar-based KYC for investor protection. – Investors are encouraged to safeguard their money through proper verification and identity processes.

Reservoir Levels Plummet to 30% Capacity, Marking 29 Consecutive Weeks of Decline

Summary

Indian reservoirs are facing a severe water crisis, with levels dropping to 30% of capacity. The decline has continued for 29 consecutive weeks, leaving seven reservoirs dry and several others with precarious levels. The situation is particularly concerning in Andhra Pradesh and Bihar, where water levels are below 10% of capacity. The crisis is attributed to deficient rainfall, exacerbated by the El Nino phenomenon.

Key Points

Water Level Decline – Water level in 150 major Indian reservoirs has dropped to 30% of capacity. – Seven reservoirs have gone dry, and several others have precarious levels.

Rainfall Deficit – India has been experiencing deficient rainfall since 2024, with over 50% of regions receiving below-average precipitation. – El Nino has contributed to prolonged dry periods and drought conditions.

Regional Impact – Southern region reservoirs have the lowest storage levels, with 17% of capacity. – Andhra Pradesh and Tamil Nadu have particularly low water levels. – Northern region reservoirs are at 32% of capacity, with Punjab and Rajasthan facing concerns. – Eastern region reservoirs are at 39% of capacity, with Bihar having the lowest levels. – Western and central region reservoirs have storage levels below 50% of capacity.

Concerns for Agriculture – The water crisis raises concerns for timely kharif sowing and irrigation for the zaid crop. – Poor soil moisture is also a concern, despite potential relief from pre-summer rains.

Forecast – IMD forecasts fresh rain in the north-west region, which could improve the situation in the coming days.

RBI Ban Costs Asia’s Richest Banker Uday Kotak $1.3 Billion

Uday Kotak, Asia’s richest banker, faces a significant challenge after India’s regulator imposed a ban on Kotak Mahindra Bank’s digital customer acquisition and credit card issuance. The ban, citing governance and risk issues, has led to a decline in the bank’s shares and a drop in Kotak’s wealth.

Key Points:

Ban on Digital Customer Acquisition and Credit Card Issuance: – RBI imposed a ban on Kotak Mahindra Bank from adding new customers through digital channels and issuing fresh credit cards. – The ban was due to governance and risk issues related to the bank’s technology systems.

Impact on Kotak’s Wealth: – Kotak’s wealth declined by $1.3 billion due to the selldown in the bank’s shares. – Axis Bank overtook Kotak’s market capitalization for the first time since 2016.

Governance and Risk Issues: – RBI found deficiencies and non-compliance in Kotak’s technology systems, including data security and vendor risk management. – Kotak has taken measures to strengthen its IT systems and resolve the issues.

New CEO and Growth Strategy: – Ashok Vaswani took over as CEO of Kotak Mahindra Bank in early 2023. – Vaswani has emphasized the importance of scale and technology investment for the bank’s growth.

Kotak’s Background and History: – Kotak founded an investment company in 1985 and partnered with Mahindra the following year. – He became CEO of Kotak Mahindra Bank at its inception and gained control in 2006. – Kotak Mahindra Bank has a significant digital presence, with almost 98% of savings account transactions conducted digitally.

Impact on Bank’s Growth: – The ban on digital customer acquisition is expected to impact Kotak Mahindra Bank’s growth, as it is a slow expander of physical branches. – The RBI ruling has created negative sentiment towards the bank.

Axis Bank Overtakes Kotak Mahindra Bank as India’s Fourth Largest Bank by Market Capitalization

Kotak Mahindra Bank has lost its position as the fourth largest banking stock on Dalal Street to Axis Bank due to a ban by the RBI on digital sourcing of customers and issuance of fresh credit cards. This has led to a decline in Kotak’s market capitalization, while Axis Bank’s has increased.

Key Points:

Market Value: – Kotak Mahindra Bank has lost its status as the fourth largest banking stock to Axis Bank in terms of market value. – Axis Bank’s market capitalization is now higher than Kotak’s at Rs 3.4 lakh crore, while Kotak’s has fallen to Rs 3.3 lakh crore.

RBI Ban: – The RBI has banned Kotak from onboarding new customers through online and mobile banking channels and issuing fresh credit cards. – This ban is expected to impact Kotak’s growth trajectory in retail products and overall profitability.

Historical Performance: – Kotak and Axis Bank were at similar market value levels in 2015. – Kotak’s market value surged ahead of Axis’s in the following years. – However, Kotak’s stock has underperformed in the last 3 years due to succession-related issues.

Analyst Outlook: – Analysts fear a potential derating for Kotak’s stock if the regulatory issues are not resolved quickly. – Motilal Oswal believes the RBI ban will disrupt Kotak’s growth trajectory and impact its margins and profitability.

Kotak’s Response: – Kotak has stated that it is taking measures to strengthen its IT systems and will continue to work with the RBI to resolve the issues. – The restrictions are expected to be reviewed upon completion of an external audit and corrective action plan, which typically takes 6-12 months.

LIC Reduces Holdings in 16 PSU Stocks Amidst Portfolio Expansion to Rs 14 Lakh Crore

Life Insurance Corporation of India (LIC), India’s largest domestic institutional investor, has reduced its ownership in 80 stocks, including 16 PSUs, in the March quarter. Despite this, the market value of LIC’s portfolio has surged to Rs 14 lakh crore, driven by the ongoing bull run. LIC has also increased its bets on several other PSUs and other stocks.

Key Points:

LIC’s Portfolio Changes:

Reduced ownership in 80 stocks, including 16 PSUs, in the March quarter.
Cut stakes in BHEL, SAIL, Coal India, Oil India, Mahanagar Gas, MOIL, SBI, Canara Bank, HPCL, NMDC Steel, NMDC, Shipping Corporation, IOC, Container Corporation Of India, ONGC, and NTPC.
Increased bets on 9 other PSUs, including NLC, IGL, Bank Of Baroda, NHPC, HAL, SJVN, IRCTC, Power Grid Corporation, and RVNL.
Raised holdings in Navin Fluorine, Bata India, Swan Energy, LTIMindtree, Asian Paints, Apollo Tyres, Patanjali Foods, Infosys, Nestle, Sona BLW, and Kotak Mahindra Bank.

LIC’s Investment in Adani Group:

Value of LIC’s investment in Adani Group has increased from Rs 52,779 crore to Rs 61,660 crore.
Adani Ports and Adani Enterprises are among the biggest bets for LIC within the conglomerate.

PSU Stocks:

PSU stocks have been re-rated due to favorable government policies, balance sheet restructuring, and attractive valuations.
Aggregate market capitalization of PSU stocks has surged to Rs 67 lakh crore.
Some investors have turned cautious on PSU stocks due to valuation concerns and have been trimming their holdings.

CBDT Extends Registration Deadline for Charitable Trusts to June 30th

The Central Board of Direct Taxes (CBDT) has extended the deadline for charitable and religious trusts to file registration applications (Form 10A and Form 10AB) with tax authorities until June 30, 2024. This extension aims to alleviate genuine hardships faced by taxpayers and provide an opportunity for trusts to rectify any errors in their applications.

Key Points:

Extended Deadline: The deadline for filing Form 10A and Form 10AB has been extended to June 30, 2024.
Form 10A: This form is used by trusts/institutions seeking income tax exemption.
Form 10AB: This form is used by trusts/institutions to renew their permanent registration.
Provisional Registration: Trusts that have applied for provisional registration as new entities can surrender their Form 10AC and apply for registration as existing trusts in Form 10A by June 30, 2024.
Rejected Applications: Trusts whose re-registration applications were rejected due to late filing or incorrect section code can submit fresh applications in Form 10AB by June 30, 2024.

ICEA Advocates for Recognition of Chip Design and Manufacturing as a Strategic Industry

The India Cellular and Electronics Association (ICEA) has proposed measures to enhance India’s position in semiconductor design and manufacturing. These include encouraging corporate investment, establishing an exclusive market exchange, and providing government support.

Key Points:

1. Investment and Strategic Sector Status: – Encourage large Indian corporates to invest in semiconductor design. – Treat chip design and manufacturing as a strategic sector for access to low-cost funds.

2. Exclusive Market Exchange: – Establish an exclusive market exchange for electronics and hi-tech industry to drive growth and innovation.

3. Prevention of Dumping: – Prevent dumping of higher node and memory chips from China to avoid a similar situation as in the display industry.

4. Design Linked Incentive (DLI) Scheme: – Include ‘mask sets’ in the DLI scheme to facilitate the emergence of a strong Indian IPR framework.

5. Innovative Funding Approaches: – Explore innovative funding approaches to support the semiconductor design ecosystem.

6. Advanced Semiconductor Manufacturing: – Leverage spare capacities in advanced semiconductor manufacturing to accelerate India’s entry into sub-14 nm technology nodes.

7. Government Investment and Support: – Invest in refurbished fabs and support semiconductor design firms. – Build a skilled semiconductor workforce to foster a self-reliant ecosystem.

India Faces Challenges in Intellectual Property Protection and Enforcement, According to US

The Biden Administration has placed India on the Priority Watch List of its 2024 Special 301 Report due to ongoing concerns about the country’s protection and enforcement of intellectual property (IP) rights. Despite some progress, India faces challenges in addressing issues such as online piracy, trademark opposition backlogs, and insufficient trade secret protection.

Key Points:

1. Priority Watch List Placement: – India has been placed on the Priority Watch List for inadequate IP protection and enforcement.

2. Long-Standing Concerns: – High rates of online piracy – Extensive trademark opposition backlog – Insufficient legal means to protect trade secrets – Incomplete implementation of WIPO Internet Treaties – Extension of copyright statutory licenses to interactive transmissions

3. Inconsistent Progress: – India has made some progress in addressing IP issues, but overall progress has been inconsistent.

4. Patent Issues: – Potential threat of patent revocations – Procedural and discretionary invocation of patentability criteria – Long waiting periods for patent grants – Excessive reporting requirements – Vagueness in the interpretation of the Indian Patents Act

5. High Customs Duties: – India maintains high customs duties on IP-intensive products, despite justifications of limiting IP protections for access to technologies.

Alphabet’s Cloud Growth Soars in Q1, Driven by AI Advancements

Alphabet Inc. reported strong first-quarter revenue, exceeding analysts’ expectations, driven by growth in its cloud computing unit. The company also announced its first-ever dividend and plans to repurchase $70 billion in stock. Despite facing competition in generative AI and digital advertising, Google’s core search business remains a significant revenue generator.

Key Points

Revenue and Earnings – Revenue: $67.6 billion, exceeding expectations of $66.1 billion – Net income: $1.89 per share, compared to estimates of $1.53 per share

Cloud Computing – Revenue: $9.6 billion, up 28% – Profit: $900 million, ahead of projections of $672.4 million – AI capabilities driving demand for cloud services

Generative AI – Google facing competition from ChatGPT and other generative AI tools – Company investing heavily in AI development – Early efforts marred by blunders, including the Gemini scandal

Digital Advertising – Search advertising revenue: $46.2 billion, up 14% – Facing increased competition from Meta and Snap – AI tools being integrated into advertising business

YouTube – Revenue: $8.1 billion, exceeding estimates of $7.7 billion – Strong growth driven by live sports investments and monetization improvements

Other Bets – Revenue: $495 million – Loss: $1 billion – Focus on spinning out companies and freeing up resources for AI investment

Layoffs and Restructuring – Rolling rounds of layoffs to invest in AI – Total employees: 180,895, down from 190,711 in the previous year – Ruth Porat to focus on overseeing Other Bets investments