On this page: Read following Articles

1.Labour Ministry declared banking industry as public utility service under ID Act 1947 till October 21, 2020
2.UNCTAD predicted $3.4 trillion debt for developing countries in 2020-2021; Global Debt Deal required
3.RBI opened Rs 50,000 cr Special Liquidity Facility for MFs from Apr 27-May 11,2020

4.HDFC acquires 6.43% stake in Reliance Capital through invocation

1.Labour Ministry declared banking industry as public utility service under ID Act 1947 till October 21, 2020

The Ministry of Labour and Employment has declared banking industry as a public utility service (PUS) for six months starting April 21, 2020 till October 21, 2020 under the provisions of the Industrial Disputes Act, 1947. It means the employees and officers of the banking sector are barred to do any strikes in the given period. This decision has been taken due to the adverse impact of COVID-19 on the economic activities.

•             The notification for the same has been issued by the Department of Financial Services in the Ministry of Finance to the Reserve Bank of India (RBI) stating about the order implemented by the Labour and Employment Ministry.

Need to declare banking as PUS
The employees of various Indian banks have very strong unions who used to negotiate their wage agreements with the Indian Banks Association (IBA) every three years. There are also several issues on which the bank unions don’t agree with the decisions of the government. In order to prevent any kind of agitation by the banking sector during the economic crisis imposed by COVID-19 outbreak, the union government has declared banking industry as PUS.

What is PUS?

A public utility service (PUS) is defined under the Section 2(n) of Industrial Disputes Act (ID Act), 1947. In simple terms it means any service whether public or private that provides everyday necessities to the general public. The Government is authorized to declare any service under the ID ActasPUS for a period of not more than six months by issuing a Notification in the Official Gazette.The period may extend from time to time but not exceeding six months.

What is of Industrial Disputes Act, 1947?
Established on 1 April 1947, ID Act secures industrial peace and harmony by providing mechanism and procedure for the investigation and settlement of industrial disputes. The laws apply only to the organised sector.

About Department of Financial Services:
The Department of Financial Services works under the aegis of the Finance Ministry. It covers the functioning of Banks, Financial Institutions, Insurance Companies and the National Pension System. The Department is headed by the Finance Secretary.

2.UNCTAD predicted $3.4 trillion debt for developing countries in 2020-2021; Global Debt Deal required

In accordance with the United Nations Conference on Trade and Development (UNCTAD) report titled “From the Great Lockdown to the Great Meltdown: Developing Country Debt in the Time of Covid-19″, developing countries’ repayments on their public external debt will increase between $2.6 trillion and $3.4 trillion in 2020 and 2021 amid COVID-19 pandemic.
•             For high-income developing countries it will rise between $2 trillion and $2.3 trillion while for middle and low-income countries it will mount between $666 billion and $1.06 trillion.
•             The report has suggested a “global debt deal”to reduce financial pressure on developing countries due to the coronavirus crisis.

About 3 Step global debt deal

A global debt deal for developing countries comprises three key steps to translate calls for global solidarity into action.

•             Automatic temporary standstills: Under this, facilitation of effective response is required to tackle Covid-19 through increased health and social expenditure for all crisis-stricken developing countries. It also calls for post-crisis economic recovery along sustainable growth, fiscal and trade balance trajectories.
•             Debt relief and programmes restructuring: To reassess longer-term developing country debt sustainability on a case-by-case basis. Also, measures to write-off debts need to be more systematic, transparent and coordinated. Already Debt repayment worth $215 million owed by 25 poorest developing nations was cancelled by the International Monetary Fund (IMF) in April 2020. Leaders of G20, too, announced suspension of debt repayments from 73 poor countries for the period from May to December 2020.
•             Safeguarding future dealing: Both developing country debtors as well as developed nations’ creditors should make it a priority to safeguard and promote future mutual dealing for timely implementation of Agenda 2030 for sustainable development goals (SDGs).

Key Points:
-COVID-19 crisis will accelerate record portfolio capital outflows from emerging economies and sharp currency devaluations in developing countries.
-The rupee fell to 76.02 against the dollar on April 24, 2020 from 71.3 on February 12, 2020 resulting in a 6.6% dip in two months.
-United Nations Development Programme (UNDP) estimated the income losses to exceed $220 billion in developing countries.

Actions taken by UN:
-A multi-partner trust fund for COVID-19 Response and Recovery announced by the UN along with the COVID-19 Solidarity Response Fund by the World Health Organisation (WHO).
-On March 30, UNCTAD announced a $2.5 trillion coronavirus crisis package for developing countries.

3.RBI opened Rs 50,000 cr Special Liquidity Facility for MFs from Apr 27-May 11,2020

In order to ease the liquidity pressures on mutual funds, impacted by coronavirus crisis, Reserve Bank of India (RBI) has initiated a special liquidity facility of Rs 50,000 crore namely “Special Liquidity Facility-Mutual Funds (SLF-MF)”under which RBI will conduct repo operations of 90 days tenor at the fixed repo rate.

•             The timeline of the scheme is from April 27, 2020 to May 11, 2020 or up to utilization of the allocated amount, whichever is earlier.
•             SLF-MF is on-tap and open-ended, and banks can submit their bids to avail funding on any day from Monday to Friday (excluding holidays).
•             Under this facility, the RBI will provide funds to banks at lower rates.

Usage of funds availed under SLF-MF:

The funds availed under the SLF-MF have to be used by banks exclusively for meeting the liquidity requirements of MFs by:

•             Extending loans or
•             Undertaking outright purchase of repos against the collateral of investment grade corporate bonds, commercial papers (CPs), debentures and certificates of Deposit (CDs) held by MFs.

Benefits availed under SLF-MF

-Any liquidity support availed under the SLF-MF will be classified as held to maturity (HTM) even in excess of 25% of total investment permitted to be included in the HTM portfolio.
-Exposures under this facility will also not be calculated under the Large Exposure Framework (LEF).
-The face value of securities acquired under the SLF-MF and kept in the HTM category will not be calculated for computation of adjusted non-food bank credit (ANBC).
-The support extended to MFs under the SLF-MF will be exempted from banks’ capital market exposure limits.

What is Mutual Fund?

Mutual funds pool money from the investing public and use that money to buy other securities, usually stocks and bonds. It’s different from investing in stocks as unlike stock, mutual fund shares do not give its holders any voting rights. A share of a mutual fund represents investments in many different stocks (or other securities) instead of just one holding.

Chemicals, Petrochemicals contributed 14.35% of total exports; becomes top exporting sector for 1st time

In a progressive move, the chemical & petrochemical industry became the Indian top exporting sector for FY 2019-20 as the export of chemicals increased by 7.43% to Rs 2.68 lakh crore during the April-January period of FY 2019-2020 in comparison to the corresponding period of 2018-19. This industry contributed 14.35% of the total exports.

•             Union Minister of Chemicals and Fertilizers Devaragunda Venkappa Sadananda Gowda has assured full support to the chemical industry towards and appreciated the efforts made by the Department of Chemicals and Petrochemicals making India a leading global hub for manufacturing of chemicals and petrochemicals.

4.HDFC acquires 6.43% stake in Reliance Capital through invocation

HDFC (Housing Development Finance Corporation Ltd.)has acquired 6.43% stake in debt-trapped Reliance Capital by invoking pledged shares. In this regard HDFC has acquired 25.27 crore shares of Rs 10 each i.e. the total value of these shares are Rs 252 crore.

What is invoking pledged shares/invocation?

Pledged shares are those against which promoters of a company in need of capital take loans from banks and Non-Banking Financial Companies (NBFCs). For lenders, these shares are collateral (security for re-payment of loan). However the share price keeps fluctuating, the value of the collateral also changes so promoters are required to maintain the value of the collateral all the time by providing additional shares to lenders when their value erodes.

The process of selling Pledged shares and invoking pledged shares is called invocation.