The Serious Frauds Investigation Office (SFIO) has summoned Chanda Kochhar of ICICI Bank and Shikha Sharma of Axis Bank in connection with the PNB scam involving Nirav Modi and Mehul Choksi, both of whom are currently absconding. While Axis Bank had actually financed Nirav Modi against fraudulent LOUs issued by PNB, ICICI Bank had lent liberally to Gitanjali Gems. It is by now clear that there were serious lapses in the compliance standards, due diligence and audit procedures followed at various banks. Most banking shares came under pressure on Tuesday.
RCOM’s proposed sale of telecom assets to Reliance Jio may run into regulatory hurdles. The NCLT has already restrained the sale of RCOM assets to Reliance Jio based on the Ericsson petition. Ericsson, which had signed a 7-year deal with RCOM in 2014, has sought compensation to the tune of Rs.1150 crore which is disputed by RCOM. As a result, Ericsson of Sweden had filed bankruptcy proceedings against RCOM. That virtually puts a halt on RCOM selling its assets to a third party. Most likely the Ericsson issue may be resolved out of court as the stakes in the sale to Jio are much higher.
In the aftermath of the US decision to impose 25% import tariffs on steel and 10% on aluminium, the EU has drawn up a list of retaliatory tariffs to be imposed on US imports. EU proposes to impose 25% retaliatory tariffs on US imports like jeans, motorcycles, consumer goods etc. The big issue for Europe will be steel as it has a total turnover of Euro 170 billion and accounts for 15 of EU GDP. Of course, the US will be a little circumspect as some of the Republican senators come from constituencies that could suffer from higher EU tariffs. More often, a trade war eventually leads to a currency war.
The government appears to be going on an overdrive against likely errant borrowers. Today it instructed banks to take passport details of borrowers for loans above Rs.50 crore. The idea is to prevent a repeat of cases like Nirav Modi and Mehul Choksi. It is also proposed to modify the loan application to incorporate passport details too. Most of these absconders also have dual citizenship and are able to escape the Indian laws. The cabinet has already passed the Fugitive Economic Offender Bill which gives the right to confiscate the assets of the defaulter even held in name of proxies.
Saudi Aramco, the world’s largest oil company, has estimated that the global oil sector will require $20 trillion investment over the next 25 years. This will be largely due to a sharp rise in oil demand and the depleting production capacity of existing oil fields. The opportunity loss in terms of investments lost since 2014 has been to the tune of $1 trillion. According to Aramco, the majority of oil demand comes from vehicles and they still run on the internal combustion engine. That means oil demand is likely to remain buoyant in the foreseeable future and alternatives are likely to take a long time coming. It may be recollected that Aramco is planning a mega IPO which is likely to value the company at well above $1 trillion. Of course, the success of the IPO will largely hinge on buoyant oil prices.
After a lot of pulling and pushing, the government may end up with an interim dividend of Rs.10,000 crore from the RBI. It may be recollected that the RBI had cut the dividend to the government by half to compensate for the cost of printing currency and to transfer to a contingency reserve. The government saw its fiscal deficit slip by 30 basis points beyond the FRBM level and it desperately required funds to fill the gap. While the cost of demonetization will have to be factored in the RBI may put off transferring a sum of Rs.13,000 crore to the contingency reserve, as it had announced earlier.
