RBI forbids banks from issuing LoUs

The Reserve Bank of India has barred banks from issuing letters of undertaking, the instruments used by Nirav Modi and Mehul Choksi to defraud Punjab National Bank, in a move that may deal a blow to trade financing in India and raise credit costs for importers.

RBI also barred lenders from issuing letters of comfort as trade credit for importing goods into India with immediate effect. It, however, allowed banks to continue to issue letters of credit and bank guarantees.

The central bank’s move is likely to lead to a freeze in trade financing activities in India, increasing costs for importers who have relied on these instruments to get cheaper overseas credit to pay suppliers. It will also put companies that have received credit based on LoUs in a spot, as they have to now repay their borrowings since there will no rollover of existing LoUs.

Importers prefer taking loans based on LoUs as they are denominated in foreign currency and are cheaper than rupee credit. A letter of credit, on the other hand, is used to establish the credit worthiness of the buyer in the purchase of goods.

Lenders will have to look at alternative instruments like bank guarantees. LoUs and LoCs are used widely in several industries including gems and jewellery, oil and gas, electronic goods, solar panels and metals.

Until the PNB fraud surfaced, buyers’ credit was seen as a safe business because of its short term nature and the risk of default was essentially on another lender. That apart, it provided the LoU-issuing bank with a source of fee income.

Aadhaar linking deadline of March 31 extended

The Supreme Court extended the March 31 deadline to link Aadhaar with various government services, bank accounts, Permanent Account Numbers for filing tax returns and even mobile phone connections indefinitely until after it delivers a final verdict on petitions questioning the validity of the unique identification number.

Extension of the deadline offers relief to consumers bombarded by messages from service providers including banks and mobile phone companies asking them to link their accounts to Aadhaar before the deadline.

A five-judge bench led by Chief Justice Dipak Misra said the extension will not apply to government services and benefits like pensions and scholarships, subsidised foodgrains under the Public Distribution System, subsidised cooking gas and the flagship job guarantee plan for rural households.

Such benefits are covered by Section 7 of the Aadhaar Act, which deals with the delivery of financial benefits and subsidies and services under government welfare programmes.

Those drawing such benefits will be required to provide the biometric ID details and number assigned to them by the Unique Identification Authority of India.

The court restrained the authorities from insisting on Aadhaar for issuance of tatkal passports, which are processed faster.

In December last year, the top court extended until March 31, the December 31, 2017 deadline for mandatorily linking various services with their Aadhaar number, which has become the bedrock of government welfare programmes, the tax administration network and online financial transactions.

The bench is currently hearing petitioners who have questioned the validity of Aadhaar and subsequent rules making the number mandatory for such services. The government will respond after the petitioners present their case.

A final judgment is unlikely before the end of this month.

Naxals strike twice in 4 hours

Nine CRPF men were killed after Maoists blasted their mine-protected vehicle in Sukma district of Chhattisgarh. The casualties raised questions of a “tactical error” as troopers were attacked in less than four hours.

With last-minute changes in the travel plan after the first attack on Tuesday morning, a road opening party that provides security to the troop movement, could not be put in place, making the CRPF men soft targets..

Nearly 150 Red cadres struck around 7.30 am during a scheduled visit of the Central Reserve Police Force and local police led by the superintendent of police of Sukma from Kistaram to a new campsite at Potakpalli, deep inside the “core area” controlled by Maoist leader Hidma.

However, since the police team led by the SP had already reached, the decision was revised and the teams decided to go ahead with the original plan.

It was this team of the 212 Battalion of CRPF headed to the newly proposed campsite that was targeted in the second attack in which the nine men were killed around 12.15 pm, barely 300 metres from the spot of the earlier assault.

Sources said the visit to the new campsite should have been cancelled after the first attack, particularly because there was intelligence about the presence of over 100 Maoists in the area.

Last year, 12 troops were killed by the Maoists.

Home Minister Rajnath Singh called the “deeply distressing”. “My heartfelt condolences to the families of those personnel who lost their lives in Sukma blast. I pray for the speedy recovery of the injured jawans,” he tweeted.

The Farmer's Long March

In a desperate attempt to be heard by the government of Maharashtra, around 50,000 farmers from across the state walked into Mumbai yesterday. The demands of the farmers, who gathered at Azad Maidan, include an unconditional waiver of loans as well as electricity bills, implementation of the Swaminathan Commission recommendations, along with an announcement of minimum support price for agriculture produce and a pension scheme for farmers.

People from all age groups have been a part of the protest. Eighty-year-old farmer Vishram Yeshwant Lilake from Dindori (Nashik) has come with the sole hope that his ancestral property, which has been a source of income for his family, will be transferred to his name.

The march, which started a few days ago, has seen participation from even youngsters. Sixteen-year-old Mahesh Ramdas Kharpare from Shahpur says that education and water are on the top of his priority list.

The farmers are garnering support from people from different walks of life. Mumbaikars, including celebs, have tweeted in their support. 

Double Delight

Retail inflation cooled for the second consecutive month in February on the back of moderating food prices, while industrial output continued with its strong run in January, bringing a cheer for policymakers battling to fast-track growth and tame price pressures.

Retail inflation, as measured by the consumer price index, rose an annual 4.4% in February, slower than previous month’s 5.1%. Food prices softened during the month, with the index rising 3.3% in February, slower than previous month’s 4.7%. Economists said they expect the RBI to hold rates for now and the central bank may not turn hawkish in its April review.

Separate data showed industrial output growth rose an annual 7.5% in January, the second successive month of robust growth after December’s 7.1% rise, and above the 3.5% posted in the same month last year. Cumulative growth between April and January was 4.1%, slower than the 5% posted in the year-earlier period.

The growth surge was led by strong expansion in the manufacturing sector, which grew 8.7% in January compared to 2.5% in the previous year, while electricity rose 7.6% during the period. The capital goods sector, which is a barometer of industrial activity, rose 14.6% in January compared with a contraction of 0.6% in the year-earlier month.

Economists said the factory output data showed that the impact of disruptions caused by the roll-out glitches of the GST and demonetisation had diminished.

Maharashtra plans Defence Hubs

The Maharashtra state government will establish dedicated defence hubs with facilities such as test firing ranges and testing and research laboratories in Pune, Nagpur, Ahmednagar, Nashik and Aurangabad as part of its recently unveiled defence and aerospace policy.

“Several foreign companies, including those in Sweden and France, have evinced keen interests in setting up defence manufacturing facilities in Maharashtra. We have already asked the Maharashtra Industrial Development Corporation to create state-of-the-art common testing facilities for such investors,” state minister for industries Subhash Desai said.

The new policy envisages earmarking of a land spread over 200 acres for each of these cities to develop defence parks and townships that will have facilities for missile integration, aerospace and its allied fields. The aim is to attract $2 billion investment in the aerospace and defence sectors and create one lakh employment opportunities over the next five years.

Desai said, “Prominent companies such as Reliance, Bharat Forge, Larsen and Toubro and Mahindra and Mahindra are already into defence production and have created a conducive ecosystem in this sector in Maharashtra. The state will also consider to upgrade its vocational and technical training courses to meet the human resource requirement of the companies investing in defence hubs.”

Maharashtra records 10 tiger deaths in 70 days

 A four-month-old cub was found dead in Pench Tiger Reserve. With this, Maharashtra lost its 10th tiger in the past 70 days, since January 1, 2018.

Of the 10 tiger deaths, four were reported from Chandrapur, two from Pench and four newborn cubs in captivity in Gorewada rescue centre. Earlier, a tigress was found dead in Pench waters in Kolitmara. Pench field director Ravikiran Govekar said the latest death has nothing to do with the dead Kolitmara tigress.

Govekar added the cub was being monitored since March 5, near Piwarthadi area on the Madhya Pradesh-Maharashtra border as it was found moving alone. The field staff carried out physical monitoring and camera trapping of the area continuously since then.

The cub was again found moving around the same area on March 9.

“We tried to ensure that the cub unites with the mother and ensured minimum anthropogenic interference. Necessary feeding supplements and water was made available,” said Govekar.

Govekar said wildlife vet with the department, Dr GM Kadu, was involved in monitoring continuously. Field staff heard calls on Friday night and pugmarks showed that the tigress was moving around. However, the poor condition of the cub on Saturday indicated that the mother tigress was not accepting it.

The field staff conducted an extensive search operation on Sunday and found the carcass of the cub in a nearby meadow. “...The tigress is basically a resident of Piwarthadi-Chikalakhari area of Karmazari range of MP side of Pench and has been recorded with two cubs there,” Govekar said.