Month: August 2021

Will Gold Prices Fall Anytime Soon?

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Investment

oi-Kuntala Sarkar

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Gold prices have been experiencing uncertainty in the MCX since last month. The market is obviously quite down than it was eight to nine months ago.

On 4th August, in MCX (FUTCOM) the gold market opened with Rs. 47920 (per 10 grams). The scale went highest to Rs. 47950. It has seen a 0.17% change in the price. Besides gold, silver started with Rs. 67956 and last traded with Rs. 68156. These fluctuations are impacting the prices of gold in every city in India.

How spot gold prices are moving?

The spot market price of gold is on the other hand trading low at Rs. 47842 per 10 grams. Indian spot gold prices are actually showing a flat scale since July. It is quite down from last year’s up-turning curve. Global economic crisis, investors’ fear regarding the oil and US dollar helped gold to reach its peak back then. But the situation has changed now.

Will Gold Prices Fall Anytime Soon?

This happened ahead of US jobs data that is to be released soon this week. The expectations locked the price range tight. Investors are also buoyed by worries due to the spread of the coronavirus delta variant and low bond yields. The Federal Reserve is about to take strong decisions regarding the country’s employment scenario and economy. As the Fed takes decisions about bond yields and interest rates the gold prices will again see its pace.

In a meeting earlier on June 16, Fed Governor Jerome Powell elevated the forecast of economic growth and inflation in the states. The Fed additionally projected two likely hikes in interest rates. This tight monetary policy was not expected for all investors; it was a sudden change for some of them. They became skeptical one way or another.

On the other hand, federal banks in other parts of the globe, like in European countries or in Japan, did not think about interest rate hikes in their countries. This certainly says that the US, unlike other countries, is quite focussed to give US dollar a better and stronger hold in the global market.

The economic slowdown of the USA in the last year has triggered the US Fed and their think tanks. This is influencing the gold prices directly. Growing valuation of the US dollar this year is indicating the current trend of falling gold prices in the long term.
But in the currency exchange the valuation of the US dollar did not show much change today (4th August). It actually helped the gold mcx in India to get a better outlook.

The gold market is now overall showing a muted reaction in daily gold prices for both futures and spot. The monthly reactions are prominent though. From January the monthly rates have been falling in big numbers. Certainly it is a good time to invest in gold; but not to sell the gold in reserve.

A larger picture says that gold prices fell (4% in Q1 2021) due to a drop in financial investment demand due to rising US real yields.

A report titled ‘Commodity Markets Outlook – April, 2021’ states, “The yield on 10-year treasury Inflation-Protected Securities rose from -1% in January to -0.66% in March – its highest level since June 2020. Higher real yields make gold less attractive to investors. Gold-backed exchange-traded funds holdings have also fallen sharply in recent months, and central banks have reduced gold purchases.”

Gold prices thrive when the news is negative?

Gold rates tend to outperform when there is pessimism and the world can be full of that. From a Covid third wave to rising inflation, there are more triggers for gold to go up, then down. Gold is a precious metal and identified as a hedge against inflation. Keeping in mind the higher inflation rates likely across the globe, the yellow metal might rise again soon. Beside the physical demand of gold, investments in SGB and through ETF are having promising views. So, time will only be able to tell if gold will continue to glitter this year or not. Investors are certainly hopeful for the long term.



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KM Birla steps down as non-exec chairman of Voda Idea, BFSI News, ET BFSI

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Aditya Birla Group (ABG) chairman Kumar Mangalam Birla has resigned as the non-executive chairman and director of Vodafone Idea (Vi), intensifying the gloom over the cash-strapped telco which has been desperately trying to raise funds and seek government help to survive.

Birla is being replaced by Himanshu Kapania, currently a non-executive director and a former managing director of the erstwhile Idea Cellular before its merger with Vodafone India.

“The Board of Directors of Vodafone Idea Limited, at its meeting held today, have accepted the request of Mr. Kumar Mangalam Birla to step down as Non-Executive Director and Non-Executive Chairman of the Board with effect from close of business hours on 4th August, 2021,” the company said in a notice to stock exchanges on Wednesday.

UK’s Vodafone Group, the co-parent of Vi with a 44.39% stake, declined to comment.

Birla’s announcement – which came after market hours – comes less than two months after he wrote to the government, offering to hand over the group’s 27.66 % stake in Vi to any public sector or domestic financial entity who could keep the company afloat. He had also asserted that without immediate government support, the telco would be driven to an irretrievable point of collapse.

The Vodafone Group didn’t comment on Birla’s letter. But its CEO Nick Read on July 23 – over a month and a half after Birla’s June 7 letter – reiterated UK major’s stance that it won’t infuse any more equity in its Indian JV.

The government hasn’t responded to Birla’s letter. Officials though say that the Centre is preparing a relief package for the telecom sector, which would also benefit Vi. The package could include allowing surrender of spectrum, reduction of bank guarantees, phasing out or reducing levies such as licence fees and spectrum usage charges and prospectively redefine adjusted gross revenue (AGR) to exclude non-telecom items.

Vi’s stock crashed 20% to its 52-week low on Wednesday to Rs 5.94 before ending 18.5% down at Rs 6.03 as investors dumped the company, fearing it is headed for a default and bankruptcy, said market experts. The shares lost Rs 3,936.75 crore in value, a day after losing Rs2,443 crore when the scrip ended 10.3% lower. Contents of the letter were made public on Monday.

Market watchers said the planned relief package won’t address the immediate cash needs of the telco, which is staring at a potential $3.1 billion (Rs 23,500 crore) shortfall in cash flows in FY23, as per Kotak Securities. Vi’s cash balance at March end was Rs 350 crore and its efforts at raising Rs25,000 crore for the last 10 months hasn’t been successful so far.

Birla had taken over as non-executive chairman of Vodafone Idea in August 2018 upon the closure of a $23-billion merger between Idea Cellular and Vodafone India, the telecom unit of Vodafone Group. The merged entity became the country’s largest telco by revenue market share and subscriber share.

But since then, as the two companies worked to integrate the two large telcos, Vodafone Idea rapidly lost both revenue and subscriber market share to rivals Reliance Jio and Bharti Airtel.

Its debt ballooned to Rs1.8 lakh crore in the January-March quarter as it borrowed to buy spectrum and invest in its network, at a time revenue was falling sharply, leading to dwindling cash flows and heavy losses. Vi has never reported a quarterly profit since the merger. Its net loss in the January-March quarter was Rs 6,985.1 crore.

The telco was pushed to the brink after the Supreme Court ruled in September 2019 to widen the definition of AGR to include non-telecom items and left Vi with a statutory bill of over Rs58,000 crore. It has paid Rs7854 crore so far, and all its attempts to reduce the AGR bill by legal means has come to nought.

In his letter, Birla said that over the last year, the telco has made all efforts to improve the operational efficiency of the company through prudent capital spending, manpower restructuring, and other cost cutting steps.

“Despite all that, the financial condition (particularly the liquidity position) of the company has sharply deteriorated,” he said.

Birla had also sought positive actions on long standing requests such as clarity on AGR liability, adequate moratorium on spectrum payments, and a floor price regime for investors to have confidence in the sector to invest in Vi. The letter predated last month’s Supreme Court order which dismissed the plea of Vodafone Idea and other telcos to permit rectification of ‘arithmetical errors’ in the computation of AGR dues.

He added that without backing from the government on the three major issues by July 2021, VIL’s financial situation will drive its operations to an “irretrievable point of collapse”.



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Myanmar limits foreign hires in banks in troubled financial sector, BFSI News, ET BFSI

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BANGKOK – Myanmar is limiting the number of foreign staff allowed to work in domestic banks, a move that industry sources warn could further impede financial development in a country that had seen a boom in foreign investment before the military coup.

A letter dated Aug. 2 and posted on the central bank’s website said major banks can now employ no more than 25 foreign staff, 15 at a medium-sized bank and eight at small lenders.

In addition, a bank must obtain authorisation 30 days before hiring a foreign national and some senior posts must be held by local citizens, it said.

Military authorities replaced the central bank’s leadership after the Feb. 1 coup against the elected government of Aung San Suu Kyi, which sparked almost daily protests and fighting between the army and newly formed people’s defence forces.

The country’s banking sector has already been battered by strikes amid a civil disobedience campaign to defy the military and there have regularly been huge queues at branches as residents try to withdraw cash.

Central bank deputy governor Win Thaw did not answer calls seeking comment on the decision.

Some other countries in Southeast Asia have placed limits on the number of foreign staff at banks to encourage local hiring, but the Myanmar central bank’s letter did not mention if that was its intention.

A senior manager at one of Myanmar’s biggest banks who asked not to be identified due to the sensitivity of the issue said there was still a crucial need for foreign expertise .

An executive at another Myanmar bank said limiting foreign staff meant the banking sector would become more isolated and could have less oversight.

Myanmar had enjoyed a flurry of foreign investment in sectors ranging from telecoms to consumer goods after an easing of western sanctions as the country appeared to be opening up and on a democratic path when Suu Kyi’s party won polls in 2015.

In the banking sector, foreign investors in recent years include Singapore sovereign wealth fund GIC and Norway’s Norfund, which both have stakes in Myanmar’s Yoma Bank.

Yoma Bank, which is part of First Myanmar Investment, a sister company of Singapore-listed Myanmar-focused conglomerate Yoma Strategic Holdings, did not have an immediate comment on the central bank’s new rules.

Sanctions have stalled inflows of investment to Myanmar, and foreign companies doing business there face pressure from rights groups and Myanmar’s parallel civilian government to ensure payments do not flow to the military government.



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Post-IPO, Nykaa founder Falguni Nayar will remain in the saddle, BFSI News, ET BFSI

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Omnichannel beauty retailer Nykaa will not only be the first woman-led Indian unicorn to launch an Initial Public Offering (IPO), but Falguni Nayar, its founder and CEO, is also expected to have strong control over the company compared to founders of other startups such as Paytm, PolicyBazaar, Zomato, Mobikwik and CarTrade.

Including Nykaa, six Indian startups have filed their draft prospectus with markets regulator, the Securities and Exchange Board of India (Sebi). Food delivery app Zomato has already made a stellar stock market debut.

Falguni, a banker-turned-entrepreneur, will have – as a promoter of the company – the right to nominate up to “50% of the number of directors on the board as well as nominate at least one such nominee director as member on each statutory or other committee constituted by the board…,” according to the IPO draft papers.

The option of exercising such rights comes at a time when most startup entrepreneurs are often left with less than 10% stake in their ventures by the time they list publicly.

This will be valid as long as Nykaa’s promoters hold more than 25% in the company.

As long as Falguni Nayar, husband Sanjay Nayar – the chairman of private equity major KKR India, the Nayar Family Trust and Sanjay Nayar Family Trust continue to be classified as promoters, they can nominate up to one-third of the board of directors as well as nominate at least one such nominee director as a member on a committee constituted by the board.

Falguni, Sanjay and their children own over 53% stake in Nykaa parent FSN E-commerce Ventures.

Nayar, a source told ET, will retain majority control even after the IPO.

The company will continue to be an inventory-led ecommerce platform as well. Foreign-owned ecommerce platforms are not allowed to have inventory models in the country and have to operate as a marketplace, like Walmart-owned Flipkart and Amazon India.

Further, Nykaa’s promoters will have the right of first refusal when a shareholder with less than 3% stake sells shares.

These rights are an outcome of the majority shareholding Nayar and her family hold as promoters.

“For a majority stakeholder, these broad rights can be accorded as per the laws. However, she is the only founder among the top-tier founders to have such a stake in the firm going into the IPO,” a senior industry executive who has worked with startups on IPO regulations said.

“In addition to the above, Sanjay Nayar and Falguni Nayar, as long as each of them is a director, is not liable to retire by rotation for as long as their total number does not exceed one-third of the total number of directors, excluding independent directors, or such other limit as may be permitted under applicable law,” the draft prospectus added.

Revival in sales
Meanwhile, Nykaa has made a full sales recovery to pre-Covid-19 second wave levels at the end of last month, a person aware of the matter said.

The overall impact on monthly sales was relatively less during the second wave compared to the first.

Last year, Nayar had told ET that being an omni-channel retailer helped it during the Covid-19 outbreak even as online sales recovered faster. She told ET that 85%-90% of its customers were registered in Nykaa database and that it was able to cater to them through hyperlocal, and in some cases by taking orders over the phone as well.

“By the end of last month, sales were back to pre-second wave levels. Overall, the expectation is that this year would be another good year for growth,” the person said.

Nykaa sells several third-party beauty and personal care brands but is also building its own set of private labels across categories.

Its fashion business is now about 20% of overall sales, sources aware of the matter said.

For now, Nykaa’s in-house labels are relatively a smaller vertical.

“Nykaa is seeing recovery across the board but there is a sharp rebound in tier 2 and tier 3 cities. Non-metros seem to be less impacted in terms of consumption for Nykaa users,” this person added.

In the DRHP, Nykaa said sales from tier 2 and tier 3 cities contributed 64% in FY21 compared to 59% in FY20.

It has also cited current draft ecommerce proposals as a risk-factor as the proposals could impact its operations.

Nykaa clocked total revenue of Rs 2,452.6 crore in FY21 compared to Rs 1,777.8 crore in FY20, a growth of 38%.

Its net profit stood at Rs 61.96 crore in FY21 compared to a net loss of Rs 16.34 crore in FY20.

Its gross merchandise value jumped by over 50% to almost Rs 4,046 crore in FY21.



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Buy These 3 Stocks For Robust Returns, Says Sharekhan

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Buy Castrol India, says Sharekhan

The brokerage is optimistic on the stock of lubricant major Castrol. The firm has set a price target of Rs 172 on the stock, as against the current market price of Rs 140.

According to Sharekhan, the alliance with Jio-BP will help gain market share and focus on new revenue streams (focus to launch vehicle care products in collaboration with 3M) and drive long term volume growth is good.

“Volumes started recovering in June 2021 and further gained traction in July 2021. Castrol has gained 200 basis points market share in the Bazaar segment. Calibrated price actions (taken three price hikes since Jan’21) to protect margin from high base oil price,” the brokerage has said.

Current market price of Castrol India Rs 140
Target price Rs 172

“Valuation of 14.7 times its CY2022E EPS is attractive (41% discount to historical level) despite strong earnings growth outlook, FCF/dividend yield of 8%, 5%, and Return on Equity of 55%. We retain Buy on Castrol India with a revised target price of Rs. 172,” the brokerage has said.

Buy Kajaria Ceramics for an upside of Rs 1,202

Buy Kajaria Ceramics for an upside of Rs 1,202

Sharekhan likes the stock of tiles company Kajaria Ceramics and has suggested a buy on the stock for a target price of Rs 1,202.

According to the brokerage firm, the management is confident of achieving 20% y-o-y revenue growth in tiles led by 15-16% y-o-y volume growth for FY2022. However, operating profit margin guidance was reserved due to higher gas prices.

“Brownfield capex plan of Rs 250 crore is on track. Strong net cash position and healthy free cash flow generation to aid in capital expenditure plans without leveraging balance sheet,” the brokerage has said.

Current market price of Kajaria Ceramics Rs 1,031
Target price Rs 1202

The company also sees retained strong net cash position as a big positive. “We introduce FY2024E earnings in this note. We expect revenue/operating profit/net profit to rise at a 17%, 20% and 26% CAGR over FY2021- FY2024E. We retain our Buy rating on the stock with a revised price target target price of Rs 1,202,” the brokerage has said.

Vinati Organics

Vinati Organics

The last of the stock picks from the recent reports of Sharekhan is the stock of Vinati Organics. The brokerage says that the likely higher ATBS margin (tight demand-supply situation) and ramp-up of butyl phenol capacities to drive a 29% PAT CAGR over FY2021-FY2024E, while potential incremental earnings contribution from integration of Vinati Organics would further aid earnings growth. The management has guided for 40-45% y-o-y revenue growth and margin of 30-35% for FY2022E.

Current market price of Vinati Organics Rs 1,951
Target price Rs 2,350

“We upgrade our rating on Vinati Organics to Buy with a revised target price of Rs. 2,350 given our expectation of strong earnings recovery across segments supported by dominant market share in ATBS and ramp-up capacities while return profile remains strong with RoE/RoCE of 23%/30%,” the brokerage has said.

Disclaimer

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets are near record highs.



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Banks to discuss next course of action on Vodafone Idea, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: Lenders to Vodafone Idea (VIL) are expected to hold talks to decide on the future course of action with regard to their exposure to the debt-laden telecom player which is struggling to stay afloat.

This comes in the wake of Aditya Birla Group chairman Kumar Mangalam Birla offering to hand over his stake in VIL to the government or any other entity so that the company remains functional.

Meanwhile, Birla on Wednesday stepped down as non-executive director and non-executive chairman of Vodafone Idea.

S S Mallikarjuna Rao, MD and CEO of Punjab National Bank, on Tuesday said the developments in the last few days were areas of concern for the banking industry, referring the AGR-related issues for the telecom players.

Rao, however, said PNB‘s exposure is not very high in VIL and it is not going to impact its balance sheet.

“However, we will be definitely discussing with other bankers to see what kind of action we need to take going forward considering the statement of K M Birla only yesterday,” Rao said, referring to the billionaire businessman’s offer to hand over his stake in VIL to the government or any other entity.

The Supreme Court has dismissed applications by telcos for recalculation of AGR-related dues.

According to official data, VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore, out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

The apex court, in an order passed in September last year, had asked the telecom players to settle their AGR related dues worth Rs 93,520 crore towards the government over a period of 10 years.

VIL’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021.

IDFC First Bank has marked the account of VIL as stressed and has made provisions of 15 per cent (Rs 487 crore) against the outstanding exposure of Rs 3,244 crore (funded and non-funded).

“This provision translates to 24 per cent of the funded exposure on this account. The said account is current and has no overdues as of June 30, 2021,” the lender said in its Q1FY22 investor presentation, referring to the account as “one large telecom account”.

Writing a letter to Cabinet Secretary Rajiv Gauba in June, Birla, who holds around 27 per cent stake in VIL, said investors are not willing to invest in the company in the absence of clarity on AGR liability, adequate moratorium on spectrum payments and most importantly floor pricing regime being above the cost of service.

“It is with a sense of duty towards the 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity- public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in the letter.

Among the other players, the AGR liability of Bharti Airtel is Rs 43,980 crore, Tata group Rs 16,798 crore, BSNL Rs 5,835.85 crore and MTNL Rs 4,352.09 crore.

Bharti Airtel has paid the government Rs 18,004 crore, Tatas Rs 4,197 crore and Reliance Jio has cleared its entire dues of Rs 194.79 crore.

Anil Ambani-owned Reliance Communications owes Rs 25,194.58 crore, Aircel Rs 12,389 crore and Videocon Telecommunications Rs 1,376 crore. However, these companies are under liquidation process.

Companies like Loop Telecom, Etisalat DB and S Tel, which jointly owe the government Rs 604 crore, have shut down their India operations.



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ANZ Bank’s Mathur, BFSI News, ET BFSI

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NEW DELHI: The Governor of the Reserve Bank of India, Shaktikanta Das, said last year that the Covid-19 crisis is the sort of event that occurs once every 100 years. Policymakers from North Block to Mint Street have been attempting to find an adequate response to a crisis of this magnitude.

The Chief Economist, South East Asia and India at ANZ Bank, has a contrarian view.

In a chat with ETMarkets.com, Sanjay Mathur, a veteran economist, said the need of the hour is not capital spending that generates long-term gains. “Rather, what is important now and for years to come, is to lift people out of poverty, as that would have a larger impact on the economy,” he said.

“Let me take a controversial stand here. Our thinking on the fiscal has become somewhat stereotyped – capital spending is good and revenue spending is bad. And for FY22, the focus has been on capital spending. But the nature of the current crisis is different: it is a humanitarian crisis that calls for more massive welfare measures. A large section of our population has slipped into poverty, income and wealth disparities are rising,” Mathur said.

The government and RBI have unveiled various spending schemes since the pandemic struck last year; the flagship programme being the ‘Atmanirbhar Bharat’ scheme, which essentially prioritises import substitution.

However, out of the Rs 20 lakh crore announced by Prime Minister Narendra Modi, the actual fiscal outgo is very small. A bulk of the programmes are reflective of RBI’s liquidity infusion in the banking system, while the rest are mostly credit guarantees.

One cannot exactly blame the government, as its finances have been under strain since well before the pandemic.

In the last Budget, the government put aside the prescriptions of the Fiscal Responsibility and Budget Management Act and announced a fiscal deficit of 6.8 per cent of GDP for this financial year. The Centre had earlier set a target of 3.0 per cent fiscal deficit by 2017-18 (Apr-Mar).

However, it will not be accurate to say that the entire strain was on account of the pandemic. A year before Covid-19 wreaked havoc on the economy, the government had already skipped the targets it had set for itself under the FRBM Act, as tax collections fell short of targets.

Mathur said the government and the central bank together have done what they could within their constraints. “There was very little fiscal headroom to start with,” he said.

“So while I do acknowledge that asset creation has a larger multiplier on growth, this crisis is also unique and requires a different response,” he added.



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Lookout notice in bank fraud case, BFSI News, ET BFSI

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Thrissur: Crime branch team probing the scam in Karuvannur Cooperative Bank has initiated steps to issue lookout notices against six accused in the case. According to the crime branch sources the requests for issuing the lookout notices have been submitted to emigration authorities so that the accused can be prevented from going abroad. There are reports that one of the accused has already gone abroad.

The crime branch team has started collecting the details of the assets of the accused in the fraud. According to preliminary estimates the bank has incurred a loss of over Rs 100 crore in the scam. Authorities said the properties of the accused would be auctioned to recover part of the lost amount.

Three of the accused have filed their anticipatory bail applications at the principal district and sessions court.

M Biju Kareem, the bank manager and C K Jilse, the accountant, and Reji Anilkumar, an employee at a supermarket run by the bank, had filed their bail applications soon after the fraud was exposed last month.

The bail application came up for hearing on July 21 and the prosecution has been asked to file its response. The petition is likely to come up for hearing on August 6.

The probe team has been facing criticisms from Congress and BJP over the delay in the arrest of the accused.

They have been alleging that the probe team has been trying to protect the fraudsters because of their links with CPM.

The investigators have refuted the allegations, saying that they have been making all efforts to book the accused.

Can cops be faulted for pursuing accused: Court

The high court on Wednesday asked whether police can be faulted for pursuing the accused in the bank fraud case.

Justice K Haripal made the statement while considering an anticipatory bail plea filed by TR Sunil Kumar, secretary of Karuvannur bank and the first accused in the case. He had contended that he did not have a significant role in allowing loans and that his custodial interrogation is not required.

During the hearing, the applicant’s counsel submitted that the pre-arrest bail plea should be heard as early as possible as the applicant has been made an accused and police have following him around. The court asked how can the police be faulted for following an accused.

The applicant had contended that he was removed from the loan-sanctioning section on December 5, 2019 after department of cooperation began an enquiry into some alleged irregularities at the bank.

As the secretary, he has very limited role in sanctioning loans and it is the governing body that considers the applications and sanction loans, the petition said. It is due to the lapses on the part of the governing body that a probe was required and the banks employees have no part in it, the applicant said. The court will hear the case in detail on August 9.



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ED arrests Gautam Thapar of Avantha Group, BFSI News, ET BFSI

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The Enforcement Directorate (ED) arrested the Avantha Group of companies promoter Gautam Thapar on charges of playing a key role in laundering more than Rs 500 crore in a Yes Bank loan fraud case.

Thapar, 60, was remanded in one-day custodial interrogation of the ED by a local court on Wednesday, after being arrested the previous night following raids by the agency against his businesses in Delhi and Mumbai.

In its remand paper, the agency alleged that “illegal favours are found to have been extended by Yes Bank to Avantha Group”. “Any quid pro quo for extending such illegal benefit is yet to be ascertained,” said the document, a copy of which was seen by ET.

The court sought the complete case file and the enforcement case information report, equivalent to a first information report (FIR), registered by the agency against Thapar and others in June. The agency had sought 14 days of remand.

The ED had filed a case under the Prevention of Money Laundering Act on the basis of an FIR filed by the Central Bureau of Investigation (CBI) which accused Thapar and others of defrauding Yes Bank.
The remand paper said that the ED probe had revealed money laundering through Oyster Buildwell Pvt Ltd (OBPL), Jhabua Power Limited (JPL), Jhabua Power Investment Ltd (JPIL), Avantha Power & Infrastructure Ltd (APIL), Avantha Realty Ltd and other entities “controlled and beneficially owned directly or indirectly” by Thapar.

It said that “sham agreements were made by these entities to fraudulently obtain huge amount running into more than Rs 500 crore from Yes Bank and further by different modes of layering the tainted amount was laundered and the loan account thus turned NPAs causing a loss of huge public money”.

Thapar’s counsel, Vijay Aggarwal, however said that his client was the “victim” in this case and that the said sham agreements were executed by Yes Bank executives to secure “valuable shares” of Thapar’s companies. He claimed that Thapar had also complained against the Yes Bank executives but no investigative agency had taken cognisance of the matter.

Aggarwal produced an email purportedly sent by a Yes Bank executive to show that the so-called sham agreements were “forced upon” Thapar’s group of companies. He further claimed that the entire transaction had taken place because Yes Bank wanted to ensure “evergreening of loans”.

The ED informed the court that Thapar’s statements were recorded twice in July and once on Tuesday, and that he allegedly “misled” the investigators.

“JPL entered into a sham operations and management agreement for its thermal power project with its group company namely JPIL for a monthly consideration of Rs 7.5 crore and JPIL entered into a further sham sub-contract for the same work with OBPL for a monthly consideration of Rs 15 crore,” alleged the remand paper.

It said that “to give a plausible justification and explanation for seeking of loan, a special clause related to provision of an interest free security deposit to be kept by OBPL to JPIL to the tune of Rs 514.27 crore was added in the non-genuine agreement executed between JPIL and OBPL which was sought as loan from Yes Bank”.

The agency alleged that OBPL is a paper company with no business activity. “The company had no employees working in it and has just held landholdings in its name,” said the remand paper.

The ED claimed that two directors of OBPL have “confirmed” to the agency that OBPL is a paper company. “And that OBPL had no prior experience of handling O&M work of thermal power plant. Neither was any service given by OBPL to JPIL with regard to the O&M agreement nor was any consideration paid by JPIL to OBPL,” said the remand paper.



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RBI extends current a/c freeze deadline, BFSI News, ET BFSI

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Mumbai: The RBI has given banks time until October 31 to comply with its circular on introducing discipline in the opening of current accounts.

The RBI has said that banks should escalate to the Indian Banks’ Association (IBA) any issues they face in implementing the directive, and if it still remains unresolved they should be forwarded to the RBI for regulatory consideration.

According to a PSU bank chief, the RBI in its meeting with public sector lenders made it clear that the circular needs to be implemented in spirit but if there are operational issues faced by customers, they should be resolved at the industry level.

In a fresh circular on the guidelines for current accounts, the RBI reiterated that it does not apply to borrowers who have not availed of cash credit (CC) or overdraft (OD) facility and the banking sectors exposure to them is below Rs 5 crore.

In the case of borrowers who have not availed of CC/OD facility from any bank and the exposure of the banking system is Rs 5 crore or more but less than Rs 50 crore, there is no restriction on lending banks to such borrowers from opening a current account. Even non-lending banks can open current accounts for such borrowers though only for collection purposes.

According to bankers, technically there is no reason for a borrower with CC/OD facility to undertake transactions through another account. Bankers said that the main reason why many borrowers sought to keep a separate current account was to control their collections. “Many customers choose to transfer funds from their other account to repay their loans as they fear that using their loan account for collections could lead to problems when they are short on funds,” said a banker.

However, several businessmen said that while they have old loans with public sector banks, they need the technology-based products of private banks particularly in the area of trade finance. The central bank’s circular comes at a time when some customers in Kerala initiated legal action to stall the implementation of the RBI directives.



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