Important points from The Hindu::

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RBI tightens takeover norms for shadow banking

RBI said any purchase of a stake of 26 per cent or more in a company, or a change in more than 30 per cent of its directors, would need the central bank’s permission.

The RBI has been continuously trying to strengthen this sector so that this should not be a back yard for people we don’t know

NBFCs play a critical role in extending credit to areas where traditional finance cannot reach in a country where only just over half of the population has access to the mainstream banking system. However, controlling these NBFCs has been made a key priority for the RBI, given their size and reach.

Rbi also said the source of funds behind new investors in any NBFC will have to be disclosed.

1.     DEFINITION of 'Shadow Banking System' The financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. Theshadow banking system also refers to unregulated activities by regulated institutions.[Investopaedia]

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The central bank now mandates that banks set aside funds for emergency use in a so-called counter cyclical capital buffer to guard themselves against an economic downturn.

 

Up to half that buffer, held as of December 31, can now be used for provision against bad loans, up from 33 per cent allowed formerly, the RBI said.

The RBI has been keen to spur the sector to lend more and fuel economic growth, but only a handful of banks have cut lending rates despite two cuts in interest rates, due to weak demand for credit and the high cost of funds

Banks also continue to struggle with non-performing loans.

The gross bad loans ratio at banks has doubled in the past two years amid an economic downturn.

State-owned banks have amassed bad loans faster than private sector lenders.

Banks’ gross bad loans ratio could rise to as much as 5.7 per cent by March, 2016, from 4.5 per cent last December, rating agency ICRA estimates.

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SEBI proposes new fund-raising platform for start-ups

To help start-ups and young entrepreneurs [by the new-age companies having innovative business model and belonging to knowledge-based technology sector]  raise funds, the Securities and Exchange Board (SEBI) of India today proposed an ‘ALTERNATE CAPITAL RAISING PLATFORM’, wherein such firms can raise money from institutions and HNIs[HIHG NET WORTH INDIVIDUALS] from the capital markets under a relaxed regulatory regime.

However, retail investors would be restricted from investing in such companies, given the risks involved therein.

It is proposed that the new platform for raising money within the country will be initially made applicable to companies which are in the area of software product development, ecommerce, new-age companies having innovative business model.

Besides, SEBI has proposed that capital raising would be allowed on the Institutional Trading platform (ITP). The proposed platform will have two categories of investors — Qualified Institutional Buyers (QIB) and Non-Institutional Investors (NII). 

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Roof Top Solar Project: Cut in subsidy

The government has set an ambitious target of adding 40,000 MW by 2022[in rooftop solar project] through distributed and rooftop solar projects. It aims to add 10,000 MW in the next three years. These targets are part of the Indian government’s ambitious goal of achieving 100 GW by 2022 in solar.

Centre has planned to cut the subsidy on rooftop solar plants to 15 per cent from 30 per cent due to

1.       decline in price of solar panels,

2.      large target set for rooftop solar power plant and

3.      limited availability of funds for subsidy.

On the other hand, though, the economic viability of this solar segment has been rapidly increasing. Over 40 per cent of the Indian states have achieved grid parity in commercial rooftop. With Accelerated Depreciation (AD) benefits, a same percentage of states see viability in industrial segment.

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China releases details of Silk Road plans

The “belt and road” have two components —

the Silk Road Economic Belt (SREB) that would be established along the Eurasian land corridor from the Pacific coast to the Baltic Sea, and

the 21st century Maritime Silk Road (MSR).

Analysts say that the “belt and road” initiative, backed by an extensive China-led funding infrastructure, could shift the centre of geo-economic power towards Eurasia, and undermine the “Asia Pivot” of the United States and its allies.

The “belt and road” run through the continents of Asia, Europe and Africa, connecting the vibrant East Asia economic circle at one end and developed European economic circle at the other.

Specifically, the SREB focuses on bringing together China, Central Asia, Russia and Europe (the Baltic); linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia; and connecting China with Southeast Asia, South Asia and the Indian Ocean.

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