On Saturday, PM Modi announced PM-CARES fund to support the people who are directly or indirectly affected by COVID-19. From India’s mammoth Industrial houses to Armed Force Personnel to Bollywood actors, many citizens have contributed to the fund. Complete Coverage: Coronavirus
Crux of the Matter
We Care Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) is a public charitable trust set up by the Union Government of India. The collected amount will be used to facilitate the smooth running of the life of needy people stuck far away from their homes and of the daily wagers. It will be used to boost the medical-infrastructure and to fulfill medical demands in this time of health crisis.
Industrialist Ratan Tata has donated ₹500 crores, biggest till now. His group Tata Sons has committed ₹1,500 crores towards fighting COVID-19. The Adani group and JWS Group have donated ₹100 crores each. Reliance Industries have pledged to provide free fuel for the emergency vehicles occupied in the treatment of Coronavirus patients. Besides donating ₹5 crore to Maharasthra CM Relief Fund, Ambani’s RIL has decided to produce 1 lakhs masks every day and to distribute free meals among the affected poor people.
Bollywood star Akshay Kumar has donated ₹25 crores to the PM-CARES fund. Baahubali star Prabhas has donated ₹4 crores to fight against Covid- 19. Many other Bollywood stars have come forward to help people by donating funds. India’s wealthiest sporting body, BCCI vowed to contribute the share of ₹50 crores in the PM-CARES fund. Suresh Raina and Sachin Tendulkar have donated ₹52 lakhs and ₹50 lakhs respectively.
India is also facing a scarcity of ventilators required during the treatment of Coronavirus infected people. To fill the gap, the Mahindra Group has declared that the company has started the process to figure out how their industrial plants will produce the ventilator.
How to Donate to PM-CARES Fund? You can do your share by donating to the PM CARES fund by following these simple steps: 1) Go to the website pmindia.gov.in if you want to make an online payment or want bank details. Here are the bank details if you want to pay via cheque or any other electronic means. Name of the Account: PM CARES Account Number: 2121PM20202 IFSC Code: SBIN0000691 SWIFT Code: SBININBB104 Name of Bank & Branch: State Bank of India, New Delhi Main Branch UPI ID: pmcares@sbi
(Note that there are frauds being carried out using UPI ID “pmcare@sbi”. The correct UPI ID is mentioned above.)
2) Pay on the website through the following modes: i) Debit Cards and Credit Cards ii) Internet Banking iii) UPI (BHIM, PhonePe, Amazon Pay, Google Pay, PayTM, Mobikwik, etc.) iv) RTGS/NEFT
Finance Minister Nirmala Sitharaman has announced a ₹1.7 lakh crore relief package to help the daily wagers and poor during the 21-day lockdown due to COVID-19. Meanwhile, RBI has also followed suit and decided to slash interest rates by 75 basis points or 0.75%. Complete Coverage: Coronavirus
Crux of the Matter
Shielding the Real Economy FM announced that the relief package, ‘Gareeb Kalyan Yojna’, will include a mix of direct cash transfer benefits and food supplies. Food security under the Pradhan Mantri Gareeb Kalyan Ann Yojna (PMGKY) is likely to benefit 80 crore people. Under this scheme, every household will get an additional 5 kg of Wheat or Rice and 1 kg of Pulses for three months. She also announced an insurance cover of ₹50 lakh for every healthcare worker for the coming three months. Following benefits will be given under the Direct Benefit Transfer:
₹2,000 will be transferred to 8.69 crore farmers in the first week of April.
MNREGA workers will get a hike of ₹2,000 on their wages.
₹1,000 will be transferred in two installments to 3 crore senior citizens, widows, and people with disabilities.
20 crore women account holders in Jan Dhan will receive ₹500 per month for the coming three months.
Under the Ujjawala scheme, BPL families will get free cylinders for the coming three months.
RBI Follows Suit To cope with the slowing demand, like Central banks across the globe, the Reserve Bank of India (RBI) has also reduced the interest rate. It slashed the repo rate by 75 basis points or 0.75% (1 basis point = 0.01%) and brought it down to 4.4%. Repo rate is the rate at which RBI lends money to commercial banks and is generally linked closely to the interest rates that commercial banks charge on loans. The US had cut its interest rate twice and brought it down to near 0 to combat the dipping demand due to Coronavirus.
RBI also announced that it is permitting all banks and NBFCs to allow a moratorium of three months on term loans. This means banks can allow you to put your EMI on term loans on hold for the coming three months without affecting your credit history.
Repo rate is the rate at which RBI lends to its clients generally against government securities. Reduction in repo rate helps the commercial banks to get money at a cheaper rate. Increase in repo rate discourages the commercial banks to get money as it becomes expensive. Reverse repo rate is the rate at which RBI borrows money from commercial banks.
Increase in the repo rate increases the cost of borrowing and lending of banks which discourages the public from borrowing money and encourages them to deposit. As the rates increase, the availability of credit and demand decreases. More Info
The Cabinet Committee on Economic Affairs (CCEA) has given a green signal to infuse ₹1,340 crore capital in the Regional Rural Banks (RRBs) so that they can meet the minimum capital requirements and become financially stronger by extending quality loans.
Crux of the Matter
What’s the Deal? Regional Rural Banks were formed under the RRB Act, 1976 with an aim to extend credit and other facilities to farmers, artisans, and agricultural labourers in the rural region. The government’s recapitalization plan for RRBs began in 2011 and is going on in phases.
This year the CCEA has approved ₹1,340 crores for RRBs to help them maintain their capital to risk-weighted asset ratio (CRAR). This ratio is an important measure of a bank’s health as it measures the capital available with the bank versus the various risks it undertakes. A higher positive balance denotes a healthy company that has the capacity to absorb losses as well.
The government will infuse ₹670 crores in the RRBs in the next financial year to stabilize RRBs’ CRAR. Other ₹670 crores will be infused by sponsor banks. The recap will be directed to only those RRBs that are unable to maintain CRAR of 9%.
Why is it Important? Structurally, the government holds a 50% stake in the RRBs, while 35% and 15% are held by sponsor banks and state governments. Adhering to the RBI guidelines, RRBs have to lend 75% of their total credit under the Priority Sector Lending (PSL) that includes lending to small farmers, rural artisans, small enterprises, and weaker sections of the society. Therefore, infusing capital in RRBs is the government’s responsibility so as to enable these banks to lend to these borrowers and continue their support to rural livelihoods.
Regional Rural Banks are Indian Scheduled Commercial Banks (Government Banks) operating at a regional level in the different states of India. They have been created with a view of serving primarily the rural areas of India with basic banking and financial services. However, RRBs may have branches set up for urban operations and their area of operation may include urban areas too.
The area of operation of RRBs is limited to the area as notified by Government of India covering one or more districts in the State. RRBs also perform a variety of different functions. Such banks perform various functions in the following heads:
Providing banking facilities to rural and semi-urban areas.
Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions, etc.
Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, UPI etc.
The American nonprofit organization ProPublica and US tabloid Daily Beast have reported that members of Congress sold equities after receiving briefings on the Dow Jones (DJIA) stock market dangers of COVID-19, much before the Trump administration announced it publicly. Two Senators, Richard Burr and Kelly Loeffler that came in the red limelight of insider trading, have conveniently denied the allegations.
Crux of the Matter
Public Servants by Day, Perpetrators by Night? Senator Richard Burr, the chairman of the Senate Intelligence Committee downplayed the financial threat to the American citizens while he was hastily unloading between $628,000 and $1.72m of personal holdings. Next in the row, Senator Kelly Loeffler, wife of New York Stock Exchange’s chairman, sold a substantial amount of stock while buying shares in the teleworking company Citrix.
Public Servants’ ‘Insider Edge’ Insider trading/dealing occurs when someone who has a fiduciary duty to another person, or to an institution, corporation, partnership, firm, or entity, makes a trade of stock based on information that’s not available to the general public. This can directly lead to the former’s unfair gain and the latter’s unfortunate loss. Just like in the aforementioned cases wherein Members of Congress are legally barred from buying and selling based on the information they get in classified briefings.
This practice wasn’t considered illegal at the beginning of the 20th century and a Supreme Court ruling once referred to it as a “perk” of being an executive. A whistleblower, while in conversation with a popular US Daily, once claimed that members of Congress and higher-ups in government jobs were not only trading on inside information they gleaned from their regular assignments, but were also being fed tips from agencies like the Internal Revenue Service on corporate takeovers.
Nonetheless, after feeling the negative shift in public opinion regarding the decade-old deleveraging, the U.S. Securities and Exchange Commission (SEC) became involved and the Securities Exchange Act was passed in 1934. Section 16 of this act requires that when an “insider“, defined as all officers, directors, and 10% owners, buys the corporation’s stock and sells it within six months, all of the profits must go to the company. Additionally, they ought to disclose the changes in the ownership of their positions, including all purchases and dispositions of shares. This aims to remove major trading activities when it’s impossible for insiders to personally gain from small moves.
STOCK v/s Private Moonlighting The STOCK (Stop Trading on Congressional Knowledge) Act is a law that was passed during the Obama era, in 2012 and it clearly states that members of Congress and other government employees are not allowed to engage in insider trading based on information they learn through their jobs. Even the President, the Vice President, executive branch employees and judges were included in this law, making it a far stricter enforcement from the previous two trading laws.
However in 2013, it did get rid of a provision that the financial disclosures required by the law be posted online on official websites. Burr, who had opposed the bill passed for STOCK, said in his defence to this ongoing pandemic stock market wrongdoings that he relied solely on public news reports. He tried to offer alternate explanations for choosing to make money at a time when he should have been offering Americans the truth.
Can They ever be Tamed? SEC to the Rescue?
Make blind trusts mandatory for Members of Congress to end Congressional Insider Trading once and for all.
– Peter Schweizer, author of Profiles in Corruption: Abuse of Power by America’s Progressive Elite.
The first thing that pops in the mind now is that can these people be trusted to make laws neutrally, if they are financially invested in only the outcome of those laws? Is this simply an invitation for more corruption? After all, unethical behavior becomes especially more unacceptable in the midst of a deadly pandemic like COVID-19 that has infectedmore than 450,000 and killedmore than 20,000 to date.
SEC has officially announced the provision of conditional regulatory relief for certain publicly traded companies. The order, in an effort to address potential compliance issues, gives public companies an additional 45 days to file certain disclosure reports that would otherwise have been due between March 1 and April 30, 2020. Among other conditions, companies must provide a summary of why the relief is needed in their particular circumstances.
Stephanie Avakian and Steven Peikin, co-directors of the SEC’s division of enforcement, have urged public companies to be mindful of their disclosure controls and procedures, insider-trading prohibitions, codes of ethics and Regulation FD. This step has been rightfully taken to prevent improper dissemination and use of material non-public information.
Additionally, whistleblowers, including those who reside outside of the United States, can qualify for financial awards under the Dodd-Frank Act’s whistleblower provisions. In case they qualify SEC’s confidential filing procedures, they can file potential fraud violations to the Commission anonymously via the TCR (“tip, complaint, and referral”) form. They are even eligible for a reward once the SEC issues sanctions based on the whistleblower’s information of $1 million or more. The office says it has paid over $300 million to the anonymous tippers in the past.
Stock market refers to the collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly-held companies take place. Such financial activities are conducted through institutionalized formal exchanges or over-the-counter (OTC) marketplaces which operate under a defined set of regulations. There can be multiple stock trading venues in a country or a region which allow transactions in stocks and other forms of securities. The leading stock exchanges in the U.S. include the New York Stock Exchange (NYSE), Nasdaq, and the Chicago Board Options Exchange (CBOE). These leading national exchanges, along with several other exchanges operating in the country, form the stock market of the U.S. More Info
The Dow Jones Industrial Average (DJIA), is a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States. The value of the index is the sum of the price of one share of stock for each component company divided by a factor which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index. Investing in the DJIA is possible via index funds as well as via derivatives such as option contracts and futures contracts. More Info
Delhi Police notified that e-commerce or online delivery services will be included in essential services. Those e-commerce operators who supply essentials like food, groceries, medicines and household necessities have been allowed in many parts of the country. They had halted their operations after PM Modi announced a 21-day lockdown to stem the spread of Coronavirus. Complete Coverage: Coronavirus
Crux of the Matter
Owing to the lockdown, E-commerce operators had halted their services. Figuring out safe passage was becoming hard for them. Amazon’s pantry page had announced that it was unable to deliver because of the local restrictions and they were in talks with the government authorities to allow them to deliver the essentials.
Medlife CEO Ananth Narayanan said that one of the company’s delivery person was hit by cops in Delhi. Flipkart, Amazon, Big Basket, etc. had announced that their services would be suspended temporarily during the lockdown. However, the government later notified that delivery operators of essential goods like groceries, food, pharmaceuticals, medical equipment, etc.will be allowed to operate.
We have been assured of the safe and smooth passage of our supply chain and delivery executives by local law enforcement authorities and are resuming our grocery and essentials services later today (Wednesday).
– Kalyan Krishnamurthy, Flipkart Group CEO
Industry experts also voiced their concerns over the proper classification of essentials across states. They also said that challenges in front of delivery operators are not less as the interstate movement of goods besides the local movement of delivery persons have been affected due to the lockdown.
In the National Capital Region and many parts of the country, online delivery operators like Flipkart, Amazon, Swiggy, Zomato, UrbanClap, Big Basket, Grofers, Reliance Fresh, Medlife, Pharmeasy, etc will be allowed to operate.
E-Commerce in India – India has an internet user base of about 475 million as of July 2019, about 40% of the population. This number is expected to be 627 million by the end of 2019. Despite being the second-largest userbase in world, only behind China (650 million, 48% of population), the penetration of e-commerce is low compared to markets like the United States (266 million, 84%), or France (54 M, 81%), but is growing, adding around 6 million new entrants every month. The industry consensus is that growth is at an inflection point.
Foreign e-commerce is subject to regulations in India; under local law, foreign companies are to serve solely as marketplaces between vendors and their customers, and are forbidden from holding inventory in the country. Under new regulations effective 1 February 2019, foreign companies will be forbidden from selling any products from vendors that they control or have equity stakes in, and it is forbidden to enter into exclusivity deals between vendors and websites. This regulation is seen as a counter to Amazon and Walmart’s influence on the market, which have given smaller traders a disadvantage in the market. More Info