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Cabinet approves a new scheme for promotion of rural housing in the country
Jan 24,2017

The Union Cabinet chaired by the Prime Minister Narendra Modi has approved a new scheme for promotion of Rural Housing in the country. The Government would provide interest subsidy under the scheme. Interest subsidy would be available to every rural household who is not covered under the Pradhan Mantri Aawas Yojana (Grameen), PMAY(G).

The scheme would enable people in rural areas to construct new houses or add to their existing pucca houses to improve their dwelling units. The beneficiary who takes a loan under the scheme would be provided interest subsidy for loan amount upto Rs. 2 Lakhs.

National Housing Bank would implement the scheme. The Government would provide net present value of the interest subsidy of 3 percent to the National Housing Bank upfront which will, in turn, pass it to the Primary Lending Institutions (Scheduled Commercial Banks, NBFCs etc.). As a result the equated monthly installment (EMI) for the beneficiary would be reduced.

Under the scheme, the Government would also take necessary steps for proper convergence with PMAY-G including technical support to beneficiary through existing arrangements. The new scheme is expected to improve housing stock in the rural areas, as well as create employment opportunities in rural housing sector.

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FFO of CPSE ETF gets overwhelming response as issue gets oversubscribed by wide margin
Jan 21,2017

The Central Public Sector Enterprises (CPSE) Exchange Trade Fund (ETF) gets overwhelming response as issue gets over-subscribed by wide margin. CPSE ETF FFO gets bids of approx Rs. 12,000 crore (US$ 1.7 billion) -- Over two and half times the Base Issue size of Rs 4,500 crore (US$471 million). FFO was launched from January 17, 2017 till January 20, 2017. Investors across all categories offered 5% upfront discount.

CPSE ETF FFO received applications from over 2 lakh investors across 300 cities across India. This was the largest Disinvestment Program undertaken by the Government of India using ETF and largest fund offering by any Mutual Fund in India till date. Anchor investors submitted bids of Rs 6,000 crore (US$ 895.5 Million).

Morgan Stanley, Nomura, Kotak MF, EPFO, SBI Bank, LIC amongst prominent Domestic and Foreign Institutions that participated as Anchor Investors. Non-Anchor portion received bids of Rs 6,000 crore -- two times of Rs 3,000 crore ( Base) reserved in the issue. Non-anchor portion was largely subscribed by retail investors and PFS - both domestic and foreign.

Retail Investors will get First Preference and assured allotment as part of the CPSE ETF FFO norms. CPSE ETF FFO planned to raise up to Rs 4,500 crore (US$ 671 Million). As Base Issue size, with an option to retain over-subscription of Rs. 1500 crore.

Further Fund offer is part of larger Disinvestment Program announced by the Department of Investment and Public Asset Management (DIPAM), Ministry of Finance.

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Ministry of Railways Signs Joint Venture Agreement with the Govt. of Jharkhand
Jan 21,2017

A Joint Venture Agreement was signed on 20th January 2017 between Ministry of Railways and Government of Jharkhand for developing railway infrastructure in the State.

n++n++ This Joint Venture agreement for development of Railway Infrastructure will

n++n++ Provide active representation to States in the Planning and Implementation of Railway Infrastructure Projects

n++n++ Speed up the Development of Railway Projects on staten++fs priority

n++n++ Generate more financial resources through participation of State & other stakeholders in the project specific subsidiaries

n++n++ Government of Jharkhand has initially identified 3 projects viz., Namkum - Kandra, Giridih - Parasnath-Madhuban, Tori - Chatra Rail Line covering a length of 222 km at a cost of Rs. 2150 Crore for taking up through the proposed JV Company after establishing their viability, bankability and financial closure.

n++n++ Governments of Kerala, Andhra Pradesh, Karnataka, Maharashtra, Odisha, Haryana, Chhattisgarh and Gujarat have already signed JV agreement with Ministry of Railways.

n++n++ Government of Jharkhand with 51% equity is the 9th State which had agreed to form a Joint Venture Company with the Ministry of Railways.

n++n++ The present railway network density in Jharkhand is 17.64 Km per 100 square Km which is the best in India and way above the national average of 2.01 Km per 100 square Km.

n++n++ Signing of these JVs will go a long way in developing infrastructure in the State of Jharkhand.

n++n++ The average outlay to Jharkhand in Railway Budget was Rs.1544.3 crore during 2014-15 to 2016-17 which is an increase of 238% over the average outlay of 457.2 crore during 2009-10 to 2013-14.

BACKGROUND:

n++n++ Indian Railways has been playing a major role in national integration by connecting the remotest places and bringing people closer to each other. Railways receive a large number of demands for network expansion as a Railway line acts as an engine of growth for the area it serves.

n++n++ Railways have a large shelf of ongoing New Line, Gauge Conversion and Doubling projects needing about Rs 3.86 lakh crores to complete. We have been trying to meet the aspirations of public within limited availability of funds.

n++n++ To expedite the projects, Railways have been trying to mobilize resources through other than Gross Budgetary Support. Towards this mission, 10 State Governments have till now agreed to share the cost of 41 ongoing projects ranging from 25% to 67% of the project cost. Some States are providing land free of cost in addition to sharing of construction cost.

n++n++ In view of the growing demands for Railway Lines in various States and huge requirement of funds to execute them, Honn++fble Minister for Railways has taken an initiative for setting up of Joint Ventures with States for focused project development, resource mobilization, land acquisition, project implementation and monitoring of critical rail projects.

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Ministry of AYUSH and Advertising Standards Council of India sign MoU to co-regulate misleading advertisements in the AYUSH sector
Jan 21,2017

In order to curtail malpractices in the advertisement of AYUSH drugs, the Ministry of AYUSH has signed a MoU with the Advertising Standards Council of India (ASCI). Addressing the cases of misleading advertisements with respect to Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy drugs, treatments and related services, ASCI will comprehensively monitor these advertisements across print and electronic media. The MoU was signed by Advisor (Ayurveda), Ministry of AYUSH Dr, Dinesh Chan Katoch and Chairman, ASCI Shri Srinivasan K Swamy in the presence of Secretary AYUSH Shri Ajit M Sharan at New Delhi.

ASCI has been given a self-monitoring mandate by the Ministry of AYUSH to identify potentially misleading advertisement in the AYUSH sector and process complaints through its Consumer Complaints Council (CCC). The Ministry of AYUSH will also redirect complaints against misleading advertisements they receive, to the ASCI, which will be reviewed using ASCIs code and guidelines. The MoU also requires ASCI to report to the Ministry of AYUSH, all advertisements in potential violation of the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 and Rules thereunder as well as non-compliance of ASCIs CCC recommendations for the Ministry of AYUSH to take further action.

Commenting on the partnership, Secretary, Ministry of AYUSH Sh. Ajit M. Sharan, said that the MOU is yet another important step taken by the AYUSH ministry to ensure that Indian consumers have access to safe and effective medicines. The arrangement would also ensure that any advertisement making claims for diseases and disorders, in violation of the existing regulations, are immediately brought to our attention.

Chairman, ASCI, Sh. S.K. Swamy, added that AYUSH is among top three sectors where we find a high incidence of misleading advertisements and some of the advertisements in the AYUSH sector claiming treatment of certain diseases in violation of the Drugs and Magic Remedies Regulations have been a cause of concern. ASCIs partnership with the Ministry of AYUSH will provide the necessary support to our efforts in effectively curtailing misleading advertisements in this sector.

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Indias natural gas production flat in December 2016
Jan 19,2017

Indias natural gas production was flat at 2.74 billion cubic meters (bcm) in December 2016 over December 2015. Natural gas output of ONGC rose 5.9% to 1.93 bcm, but that of private and JV companies dipped 13.6% to 0.56 bcm. Meanwhile, the natural gas production of Oil India also fell 7.4% to 0.25 bcm in December 2016.

Natural gas output declined 3.3% to 23.89 bcm in April-December 2016 over April-December 2015.

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Indias crude oil refinery output rises 5.3% in December 2016
Jan 19,2017

Indias crude oil refinery output increased 5.3% to 20.73 million tonnes (mt) in December 2016 over December 2015. The output of public sector refineries improved 11.2% to 11.39 mt, while the output of private refineries dipped 3.0% to 7.89 mt. Further, the refinery output of public-private JV refiners moved up 11.0% to 1.45 mt in December 2016.

Among public refineries, the output of Chennai Petroleum Corporation increased 48.1% to 0.70 mt, while the output of Bharat Petroleum Corporation moved up 12.7% to 2.19 mt and Indian Oil Corporation 12.3% to 5.36 mt in December 2016 over December 2015. The output of Numaligarh Refineries also inched up 11.2% to 0.26 mt and Hindustan Petroleum Corporation 7.7% to 1.54 mt, but the output of Mangalore Refineries declined 3.5% to 1.33 mt in December 2016.

Among private refiners, the output of Reliance Petroleum fell 3.0% to 6.20 mt, while that of Essar Oil declined 3.3% to 1.70 mt in December 2016 over December 2015. Among JV refineries, the output of Bharat Oman jumped 28.0% to 0.58 mt, while the output of HPCL Mittal rose 2.0% to 0.87 mt in December 2015.

The cumulative refinery output increased 6.7% to 178.59 mt in April-December 2016. The output of public refineries increased 10.9% to 96.45 mt, while that of private refineries moved up 2.9% to 70.32 mt. The refinery output of JV refineries declined 1.7% to 11.82 mt in April-December 2016. Among public refineries, the output of Chennai Petroleum Corporation improved 21.2%, Indian Oil Corporation 12.9%, Bharat Petroleum Corporation 8.4%, Mangalore Refineries 7.7%, Numaligarh Refineries 6.5% and Hindustan Petroleum Corporation 5.4%.

The overall capacity utilization was lower at 109.7% in December 2016 compared with 110.6% in December 2015, while it was higher at 106.1% in April-December 2016 compared with 105.5% in April-December 2015.

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Indias crude oil production declines 0.8% in December 2016
Jan 19,2017

Indias crude oil production declined 0.8% to 3.06 million tonnes (mt) in December 2016 over December 2015. Crude oil output of ONGC rose 0.5% to 1.90 mt, while that of Oil India also improved 3.9% to 0.28 mt. However, the crude oil production of private and joint venture (JV) companies dipped 4.8% to 0.87 mt in December 2016. ONGCs offshore output declined 0.7% to 1.40 mt, while onshore production rose 3.7% to 0.51 mt.

Crude oil output fell 3.2% to 27.05 mt in April-December period of the fiscal year ending March 2017 (April-December 2016), in addition to 0.8% fall recorded in the corresponding period of last year. Output of ONGC eased 1.5% to 16.63 mt, while that of Oil India declined 0.8% to 2.43 mt and private companies fell 7.3% to 7.99 mt in April-December 2016 over April-December 2015.

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Negotiation Committee Constituted on Mahanadi and its Tributaries
Jan 19,2017

Ministry of Water Resources, River Development and Ganga Rejuvenation has constituted a negotiations committee to assess availability and utilisation of waters of Mahanadi and its tributaries. The committee will also examine existing water sharing agreements on river Mahanadi and will consider claims of Odisha, Chhattisgarh, Madhya Pradesh, Maharashtra and Jharkhand regarding availability and utilisation of waters of these rivers.

The committee has been set up with reference to complaint of State of Odisha under section 3 of the ISRWD Act, 1956 regarding utilisation of waters of Mahandi Basin. The committee will be chaired by Member (WP&P), Central Water Commission and will have 11 other members comprising representatives from the States of Odisha, Chhattisgarh, Madhya Pradesh, Maharashtra and Jharkhand, Union Ministries of Agriculture, Environment Forest and Climate Change, Water Resources, River Development and Ganga Rejuvenation, India Meteorological Department and Central Water Commission. The committee has been asked to submit its report within three months.

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Bankruptcy code to reduce dependence on bank finance, says Chairperson of Insolvency and Bankruptcy Board of India
Jan 19,2017

Bankruptcy code will reduce peoples dependence on bank finance, said Dr M S Sahoo, Chairman of the recently-constituted Insolvency and Bankruptcy Board of India.

In a bid to ensure greater ease of doing business, the Board is focusing on time-bound resolution for insolvency and exit, Dr Sahoo said at the inaugural session of the Conference on Insolvency and Bankruptcy Code 2016: Impact Analysis organized by CII Eastern Region here today.

The whole exercise is sought to be driven by market, not the Government, Dr Sahoo told a large assembly of MDs, CEOs, CFOs, company secretaries, chartered accountants, finance & tax professionals, corporate advisers, cost accountants, law firms & consultants, asset reconstruction companies, financial institutions coming from across the country.

n++In our vision, the states job is to create a mechanism which will support a system which will let the market have its way and deliver,n++ he said, adding that improving the ease of doing business is all about allowing businesses to granting a freedom of choice. n++That explains why we have moved to a model which is inclusive and participatory where the market takes the call, not the state,n++ he explained.

Mr Sahoo also said Insolvency and Bankruptcy Board of India is working on a framework for direct liquidation bypassing Insolvency resolution. n++We will come out with the framework for voluntary liquidation approach that is direct liquidation by February end or March,n++ he said.

A company has to apply to National Company Law Tribunal to begin the process on the code, he said. The board has selected 974 Insolvency professionals on a temporary basis for six months and begun a certification test for being a regular professional, he added.

On the recommendations of the Parliamentary Joint Committee on Insolvency and Bankruptcy Code, the Board has decided not to recommend any Insolvency professionals and instead will be decided by creditors committee initiating Insolvency action, Dr Sahoo said.

According to Mr Bhupender Yadav, Rajya Sabha MP, the new code will ensure economic freedom which will in turn lead to better economic performance. n++As part of the Governments commitment to promoting a culture of transparency and vibrancy in businesses, the Government is working hard to evolve a culture of making payments. And hence the Code,n++ Mr Yadav, who headed the Parliamentary Joint Committee on Insolvency and Bankruptcy Code, said at a Special Plenary. The insolvency law caters to workmen, employee, unsecured and secured creditors, he explained. Insolvency will create orderliness of resolution and exit causing low default and more recovery bringing in more projects and improving the ease of doing business with an improvement in the debt market.

Mr M R Umarji, Member, Bankruptcy and Law Committee, spoke of the structural changes brought in the code. n++Making payments on time is very critical for trade and industry to grow,n++ he said. In fact, there is a need for creditors and a company to sit together and find out whether the company is viable or not.

Mr Vijai Pratap Singh, Member, National Law Company Tribunal, explained how the new Code will not only help rid the financial sector of bad-debt problems, but will also enable the banking industry to address stressed accounts.

n++The Ministry of Corporate Affairs (MCA) on June 1, 2016 introduced the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT), in place of the Company Law Board (CLB) as per the amendment of the Companies Act of 2013. The NCLT will be a single judicial platform to judge all disputes regarding the affairs of the Indian companies. The objective is to minimize delays in the resolution of disputes, which would serve as a huge relief for the litigants. With the constitution of NCLT, the Company Law Board constituted under the Companies Act, 1956 now stands dissolved. Reports show that around 4,000 cases were transferred to the NCLT after the CLB was dissolved,n++ he said.

Mr Mahesh Shah, Member, Institute of Cost Accountants of India, said n++The code is a milestone for both creditors and companies, he said, adding that the code will ensure quick action to resolve insolvency and bankruptcy.

Mr Vijay Maheshwari, Co-Chairman, CII Eastern Region Economic Affairs, Finance & Taxation Subcommittee & Director, Sumedha Fiscal Services Ltd, said the new Code will strengthen the existing regulatory framework and a new institutional structure, involving insolvency resolution of companies and individuals. The objective of any insolvency procedure is to maximise return to the creditors.

Mr Bijay Murmuria, Director, Sumedha Fiscal Services, said It would also improve the ease of doing business, said the new Code will eventually lead to more investments bringing about higher economic growth and development.

n++It shall serve as a useful tool for creditors and investors, both domestic and international by enabling a better and faster debt recovery mechanism. However, the implementation of the new institutional structure would be a challenge in finally reaping the benefits of the new Code,n++ he said.

Mr Anil Vaswani, Chairman, CII West Bengal, said the new Code may serve a resolution of the companies and factories which have been closed down for years.

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The OPEC Reference Basket jumped nearly 20% in December to $51.67/b, ending above $50/b for the first time in 18 months
Jan 19,2017

The OPEC Reference Basket jumped nearly 20% in December to $51.67/b, ending above $50/b for the first time in 18 months. In contrast, the Baskets yearly average value came in at its lowest in more than 12 years at $40.76/b. The oil complex surged on news of the historic cooperation between OPEC and non-OPEC. ICE Brent ended $7.84 higher at $54.92/b, while NYMEX WTI soared $6.40 to $52.17/b. For the year, ICE Brent and NYMEX WTI averaged $45.13/b and $43.47/b, respectively, the lowest since 2004.

World economic growth for 2016 and 2017 has been revised up by 0.1 percentage point to stand at 3.0% and 3.2%, respectively. The OECD growth in 2017 was revised higher to 1.8%, following growth of 1.7% in 2016. Chinas forecast remains at 6.7% in 2016 and 6.2% in 2017, while Indias growth in 2016 was revised down slightly to 7.2%, followed by growth of 7.1% in 2017. After two years of recession, both Russia and Brazil are forecast to recover in 2017 with growth of 0.9% and 0.4% respectively.

Global oil demand growth in 2016 is expected at 1.25 mb/d after a marginal upward revision of around 10 tb/d, mainly reflecting the better-than-expected performance in OECD Asia Pacific and Europe. World oil demand is expect to average 94.44 mb/d in 2016. In 2017, world oil demand is anticipated to rise by a solid 1.16 mb/d y-o-y to average 95.60 mb/d. This represents an upward revision of 10 tb/d, mostly due to an expected uptick in oil requirements in OECD Europe in 1Q17.

Non-OPEC oil supply in 2016 is now expected to show a contraction of 0.71 mb/d, following an upward revision of 70 tb/d, mainly driven by higher-than-expected growth in Norway, Russia and the US. In 2017, non-OPEC oil supply is projected to grow by 0.12 mb/d, representing a downward adjustment of 0.18 mb/d. Downward revisions to Russia, Kazakhstan, China, Congo and Norway, were partially offset by a 0.23 mb/d upward adjustment to US supply. OPEC NGL production is forecast to grow by 0.15 mb/d in 2017, following growth of 0.15 mb/d last year. In December, OPEC production decreased by 221 tb/d, according to secondary sources, to average 33.08 mb/d.

Product markets showed a mixed performance in the Atlantic Basin in December 2016. US refinery margins were supported by the recovery seen in the gasoline cracks on the back of healthy domestic demand amid stronger exports to Latin America. Refinery margins in Europe weakened due to slower gasoline export opportunities and a lack of support at the middle of the barrel, despite the colder weather. In Asia, product oversupply weighed on margins.

Tanker spot freight rates in December 2016 rose in both dirty and clean segments of the market. Average VLCC, Suezmax and Aframax spot freight rates rose by 18%, 25% and 1%, respectively, from a month before. The higher rates were driven by delays in eastern ports, pre-holiday activities and thinning tonnage supply in some areas. Average clean spot freight rates for both East and West of Suez increased in December by 19% and 26% m-o-m, respectively. Compared to the same month last year, both clean and dirty spot freight also increased on average.

Total OECD commercial stocks fell in November 2016 to stand at 2,993 mb, some 271 mb above the latest five-year average. Crude and product inventories showed surpluses of 190 mb and 82 mb, respectively. In terms of days of forward cover, OECD commercial stocks in November stood at 63.7 days, some 5.2 days higher than the seasonal average.

Demand for OPEC crude in 2016 is estimated to stand at 31.2 mb/d, some 1.8 mb/d higher than in 2015. In 2017, demand for OPEC crude is forecast at 32.1 mb/d, a further increase of 0.9 mb/d over 2016.

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Moodys and ICRA: Outlook stable for Indian commercial vehicle and mortgage loan-backed securitization, despite demonetization
Jan 19,2017

Moodys Investors Service and its Indian affiliate, ICRA, say that the performance of Indian commercial vehicle (CV) loans backing asset-backed securities (ABS) will stay stable in 2017. Similarly, the performance of Indian home loans backing residential mortgage-backed securities (RMBS) will be stable over the same period.

Delinquency rates for CV loans backing ABS transactions should increase in the short term, owing to the countrys demonetization, says Dipanshu Rustagi, a Moodys Analyst. Nevertheless, CV loan delinquencies should fall back to around 2016 levels over the course of 2017, owing to Indias robust economic growth and low oil prices.

Moodys expects oil prices to remain low in 2017. Moodys forecast is for Brent crude oil prices of $45 a barrel in 2017, with a price band of $40-$60. Low oil prices are positive for the performance of CV loans, because fuel accounts for 40%-50% of the costs of commercial vehicle operators.

Moodys explains that in November 2016, CV operators benefitted from various support measures announced by the government, such as the acceptance of old currency notes at petrol pumps and waiver of toll charges; thereby relieving some liquidity pressure. However, the impact on the performance of these operators in the next few months n++ in the absence of these short-term allowances n++ remains to be seen.

While November collection performance reports showed stable performance, December and January reports will provide more relevant information. Moodys points out that November collection reports reflected performance mostly driven by October economic conditions.

Looking ahead, Moodys says that CV loan portfolios backing new Indian auto ABS issued in 2017 will n++ like portfolios backing existing transactions n++ show good credit characteristics, such as geographic and borrower diversification, fully amortizing repayment terms, low loan-to-value ratios of around 65%-70% for used vehicle loans and 80%-85% for new vehicle loans, and the presence of significant excess interest spread. These characteristics will support the performance of Indian auto ABS.

On the home loans, arrears for mortgages backing Indian RMBS should remain low throughout 2017, supported by lower interest rates, and the fact that most of the homes were purchased by owner-occupiers, says Vibhor Mittal, an ICRA Vice President.

Home loans in India have adequate collateral cover, with initial loan-to-value ratios of around 60%-80%. Moreover, in most cases, the underlying property is occupied by the borrower, a credit positive. The eventual loss to the lenders n++ post liquidation of the collateral n++ should therefore stay low.

In addition, ICRA explains that factors like favorable demographics n++ in particular, a young working population and the rapid nuclearization of families n++ strong latent housing demand, and the governments accommodative policy will continue to provide impetus to the housing sector.

ICRA points out that entities operating in the affordable housing segment n++ catering to borrowers with marginal repayment capacity and showing a greater reliance on cash collections n++ could witness an uptick in early delinquencies. On the other hand, the prime housing loan segment n++ dominated by salaried borrowers n++ have not been impacted much by demonetization.

In November 2016, collections for ICRA-rated housing loan pools stayed strong, with an average collection efficiency rate of more than 98%. Similarly, collections in CV loan pools remained resilient, with a collection efficiency rate of 94% in November 2016 as compared to 93% in October 2016.

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Moodys sees stable outlook for Asia Pacific sovereigns; negative outlook for banks
Jan 19,2017

Moodys Investors Service says that the outlook for Asia Pacifics sovereigns is stable in 2017, reflecting a mix of credit-supportive increases in incomes and strengthening institutions, and a credit-challenging external environment with slow global trade and capital outflows.

Moreover, political risk, although generally low, is becoming increasingly unpredictable.

At the same time, the outlook for Asia Pacifics banks is negative, in view of challenges related to asset quality and profitability, while Chinas ongoing process of reforms -- including that of state-owned enterprises (SOEs) -- remains a key determinant for future growth.

Global conditions are largely unfavourable for sovereigns in Asia Pacific, which are reliant on trade and capital flows. Furthermore, in some cases, the presence of large financing needs -- stemming from current account or external debt -- means direct exposure to capital flows, says Marie Diron, an Associate Managing Director with Moodys Sovereign Group.

Moodys says that increasing capital flows into Asia Pacific in recent years have contributed to higher leverage.

With the banking system, Moodys sees a negative outlook because challenging operating conditions in the region are weighing on the banks asset quality and profitability, says Stephen Long, Moodys Managing Director for Financial Institutions in Asia Pacific.

In such an environment, problem assets will continue to rise, foreign private capital flows will remain volatile, and property price increases in some parts of the region will further amplify credit risk for the banks.

With the corporate sector, steady macro conditions and the partial recovery in commodity prices support stability in credit quality, but the details differ for each economy in Asia Pacific, says Gary Lau, a Managing Director in Moodys Corporate Finance Group for the region.

Financial leverage for private-sector companies will remain broadly stable due to earnings stability and/or manageable levels of capital expenditure, while steady economic growth, low commodity prices and competitive edges among companies support stable earnings.

Stable outlooks are existent for key sectors across Asia, including China property, refining & marketing, telecommunications and power; but challenges will continue for the steel sector.

For Asia Pacific corporates as a whole, the funding environment will remain favorable.

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Fitch: Agency Less Optimistic than Market on Top Indian Companies
Jan 19,2017

Fitch Ratings and India Ratings & Research (collectively Fitch) are less optimistic in their projections for the 27 Indian corporates they publicly rate compared with Bloomberg consensus estimates (BEst), the agency says in its credit change zone report for the countrys listed corporates.

BEst expect 87 of Indias top-100 listed non-financial corporates by market capitalisation to be in the credit-positive change zones of cash flow growth exceeding net debt growth over the financial years ending-March 2016 (FY16) to FY18, while 13 are expected to be in the credit-negative change zones of net debt growth exceeding cash flow growth. This represents a more optimistic position compared to FY14-FY16, where 64 corporates were in credit-positive change zones.

Fitch projects 17 of the 27 Fitch-rated corporates in the top-100 portfolio to be in credit-positive change zones, where leverage is forecast to fall, and 10 companies in the credit-negative change zones, where leverage is forecast to rise. For this same set of corporates, BEst forecast a higher 20 in credit-positive change zones and only seven in credit-negative change zones.

Four of the 27 Fitch-rated companies are positioned in opposite credit change zones when comparing Fitch and BEst estimates. Fitch forecasts Wockhardt (AA-(ind)/Negative), NHPC (BBB-/Stable), and Reliance Industries Ltd (BBB-/Stable) to be in credit-negative change zones, whereas BEst forecasts these companies in credit-positive change zones. Conversely, Fitch forecasts Bharti Airtel Limited (BBB-/Stable) in the credit-positive change zone, whereas BEst forecasts this company in the credit-negative change zone.

We believe market expectations of improving corporate credit profiles is driven more by projected higher EBITDA generation than lower debt and capex. BEst forecasts aggregate net debt/EBITDA leverage for the top-100 portfolio to fall to 1.3x by FY18, from 1.7x in FY16. Leverage is forecast to fall most for corporates in the construction and engineering sector, followed by metals and mining, then the retail, leisure and consumer products sector.

The report includes Venn diagrams illustrating overlapping areas of our top-10 lists based on BEst projections. Vedanta (AA(ind)/Negative) stands out as being in the Blue Joy Zone of BEst-projected higher EBITDA and debt paydown over FY17f and FY18f. Conversely, Idea Cellular Ltd is in the Top-10 Red Pain Zone of BEst-projected EBITDA decline and rising net debt over the projected period. The report also contains scatter charts illustrating the credit zone of each company in both projected and historical periods as well as explanatory notes and rating sensitivities for the 27 Fitch-rated listed Indian corporates.

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Digital payment promotion gets a boost
Jan 19,2017

The Governments efforts to give a boost to the digital payment systems and the cashless economy, post-demonetization have generated enthusiastic response from the people. People from different age groups, occupations and different walks of life have taken part in a big way in the Lucky Grahak Yojana and Digi-dhan Vyapar Yojana giving a fillip to digital transactions.

More than 3.81 lakh consumers and 21,000 merchants have been declared the winners of prize money worth Rs.60.90 crore at 24 Digi-Dhan Melas across the country. Giving the details, the Union Minister Law & Justice, Electronics and Information Technology Shri Ravi Shankar Prasad said that the Common Service Centres under the Deptt. of Electronics and Information Technology have trained 1.94 crore citizens and 5.93 lakh merchants so far for carrying out transactions through digital payment systems.

The prize money worth Rs. 60.90 crore to over 3.81 lakh winners of NITI Aayogss lucky draw schemes Lucky Grahak Yojana, LGY for consumers and Digi-Dhan Vyapar Yojana, DVY for merchants has been declared at 24 Digi-Dhan Melas across the country - daily as well as weekly. The list includes winners from different walks of life including the small farmers, Anganwadi workers, housewives, labourers, etc.

Data analytics provided by the National Payments Corporation of India (NPCI) has highlighted a positive response among the people to adopt digital payments. Maharashtra, Andhra Pradesh, Tamil Nadu, Uttar Pradesh and Karnataka have emerged as the top 5 states with maximum number of winners. Active participation has been seen among men and women while most of the winners were in the age group of 21-30 years.

The two schemes were launched on December 25, 2016 and shall remain open till April 14, 2017. The schemes are aimed at incentivizing the consumers and the merchants to promote digital payments. 15,000 daily winners vie for total prize money of Rs. 1.5 crore at the rate of Rs.1000 per person. Besides, over 14,000 winners qualify for weekly draws with the total prize money of over Rs. 8.3 crore per week.

Customers and merchants using RuPay Card, BHIM, UPI (Bharat Interface for Money/Unified Payment Interface) USSD based *99# service and Aadhaar enabled Payment Service (AePS) are eligible for participating in the daily and weekly lucky draws.

These lucky draws are being held at Digi-Dhan Melas across the country. Over 100 Digi-Dhan Melas will be held across the country to inculcate digital payment among the people. Till date, 24 Digi-Dhan Melas have been held across the country since 25th December, 2016. These include New Delhi, Gurugram, Ludhiana, Panaji, Dehradun, Lucknow, Ranchi, Raipur, Mumbai, Meerut, Haldwani, Amritsar, Pune, Patna, Vijayawada, Chandigarh, Guwahati, Kochi, Bilaspur, Bokaro, Dadra & Nagar Haveli, Bengaluru, Jammu and Hyderabad. The exercise has covered so far 12 states and 3 Union territories. By 1st February, the exercise will have covered the cities from 21 States and 4 UTs.

Background:

Lucky Grahak Yojana and Digi-Dhan Vyapar Yojana awards were launched in New Delhi on December 25, 2016 by Union Minister of Finance and Corporate Affairs, Arun Jaitley and Union Minister of Electronics & Information Technology and Law & Justice, Ravi Shankar Prasad to incentivize digital payments. The lucky draws have been planned at over 100 Digidhan Melas spread across the country in 100 different cities till April 14, 2017. The highlights of the Schemes are as follows-

n++ All transactions done by consumers and merchants from November 9, 2016 till April 14, 2017 will be eligible for winning prize under the scheme.

n++ All such transactions irrespective of the fact whether it has won daily / weekly prize, will be eligible for Mega Draw to be conducted on April 14, 2017.

n++ Three Mega prizes for consumers worth Rs. 1 crore, Rs 50 lakh and Rs 25 lakh.

n++ For merchants too, there would be three mega prizes worth Rs. 50 lakh, Rs. 25 lakh and Rs. 12 lakh.

n++ The draw of winners are presented at different centres on each day by the senior officials of NPCI in the presence of senior minister from GoI, representatives of NITI Aayog and general public.

n++ Schemes have total outlay of Rs. 340 crore of which - Rs. 300 crores would be spent on consumers and merchants while the remaining Rs. 40 crore on awareness and publicity.

n++ Total winners under the scheme are expected to be over 18.75 lakh.

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India sees large rise in cybercrime: ASSOCHAM-PwC study
Jan 19,2017

Cyber security incidents are seeing a rise in India, with a total of 39,730 incidents reported in the first 10 months of 2016, as against 44,679 and 49,455 observed during the years 2014 and 2015 respectively, a recent ASSOCHAM-PwC joint study said.

The Indian Computer Emergency Response Team (CERT-In) has reported a surge in the number of incidents till October 2016 with close to 39,730 security incidents, noted the study titled Securing the cashless economy, conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) jointly with PwC released at the ASSOCHAM Workshop on n++Securing the Cashless Economyn++.

With more time to detect and time to respond to these attacks, the return on investments for cyberattacks is greater in emerging markets like India as compared to developed markets like the US, noted the study.

Demonetisation has given an impetus to e-wallet services. Mobile wallets have witnessed a massive rise in app downloads. With programmes for financial inclusion, digitisation of the economy and increased use of smartphones, online transactions are already quite popular among the urban Indian population. The result has been that leading mobile wallets have witnessed growth of upwards of 100% in app download numbers and have similarly seen an increase of upwards of 400% increase in wallet recharges, pointed out the joint study.

This smartphone revolution has led to the emergence of e-commerce, m-commerce and other services, including app-based cab aggregators, who encourage digital payments for use of various services. The value added services such as cash back, bill payment facilities, loyalty points, rewards and ease of use have promoted increased usage of such digital platforms.

As the country is experiencing a digital revolution, the impact of this transformation makes it imperative for financial service players to revisit their cyber security resilience. The number of incidents occurring in banking systems has increased in the last five years. In the month of October 2016, an ATM card hack hit Indian banks, affecting around 3.2 million debit cards. Hence, efforts are needed to enhance cyber security as businesses and citizens embrace this new digital wave, noted the study.

Addressing ASSOCHAM Masterclass Workshop n++Securing the Cashless Economyn++, Mr Sanjay Sahay, ADGP, Police Computer Wing, Bangalore, Karnataka said we should have our own standards & protocol and operating system. The types of cyber security incidents such as phishing, scanning, website intrusions and defacements, virus code and denial of service attacks will continue to grow, highlighted the study.

Dr. Ajeet Bajpai, Director General, National Critical Information Infrastructure Protection Centre, NTRO said that post demonetisation banking and financial sector has become the most critical. He also said that earlier (cyber) threats were of nuisance value, now they are disruptive and may become destructive.

While addressing the workshop organised by ASSOCHAM, Dr. Ajeet Bajpai said why should a banking app want to access your camera and audio of your phone? He further said that the biometric solutions may actually be more compromising. Dr. Bajpai said, we need to create transactional literacy.

More intelligent transaction monitoring will have to be carried out as part of continuous surveillance. Crisis response and recovery strategies will have to step up along with the increased digital footprint. Security awareness of all the stakeholders will be a vital pillar of a secure cashless society, adds the study.

Security assessment and testing will need to be embedded into the agile development life cycle. Agile security testing methods based on automation will have to be adopted. In many ways driving, a paradigm shift is needed in the way security testing is undertaken today.

The new era will call for hyper-interoperability across different value chain players. In order to enable this, each ecosystem player will need to create multiple application programing interfaces (APIs). While this will deliver a seamless experience to customer, there is also a risk of malware injection through such APIs. With faster proliferation of interfaces, protecting APIs will become critical to ensure malware and persistent threats do not propagate through such untrusted/ untested APIs.

In the new cashless world, frauds will be driven mainly by impersonation and will become a daily affair. Accordingly, the need for stronger authentication of transactions will gain significance. The current techniques of authentication based on location and timing will no longer be adequate. Adaptive authentication will need to be embedded into the heart of transaction processing.

Protecting context-rich personally dentifiable information (PII); Both regulators and organisations will be obligated to invest in strong processes and technology to prevent the misuse of context-driven rich PII. While traditional controls such as data masking and encryption will need to be enhanced, capabilities to hunt down any misuse of PII will have to be built by organisations.

In the new digital/ cashless economy, mobility-based solutions will continue to gain prominence and, hence, security concerns will no longer be limited to the organisation architecture boundaries. In order to ensure endpoint security containerised apps with built-in advanced persistent threat (APT) capabilities will have to be developed. Controls for in memory data and additional controls like device certification will be considered. To ensure security of data in endpoints, there may be a requirement for guidelines to define the kind of sensitive data that end devices retain. Hence, the next generation financial infrastructure may involve the adoption of advanced end-user device management solutions.

As the ecosystem continues to be interconnected and overlapping, cybercriminals will try to exploit possible lapses and, hence, strategies need to be built to deal with such eventualities. Given this interdependence on the all the players of the financial ecosystem, it becomes crucial to identify any anomaly at a pace which mirrors real time or near real time.

The security boundaries of the various players will be extended to end users, third parties and other ecosystem partners. Security controls will no longer be defined in contracts limited to uptime and resolution of vulnerabilities, but will actually be embedded in the partner ecosystem. The process for monitoring of parameters will also have to be integrated with the companys incident response framework.

The awareness theme for tomorrow will thus be multichannel, multilingual and multicultural, and hence go beyond the scope of traditional programmes. Regulators may have to start thinking across industries and develop an awareness programme that addresses this need.

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