UniFocus IAS ( UNIFOCUS UNIVERSAL )

Regulated entities (REs) ( Banks and NBFCs ) make investments in units of  Alternative Investment Funds (AIFs)  ( Venture capital funds, angle funds, infrastructure funds, private equity funds and hedge funds, among others  )  as part of their regular investment operations. However, certain transactions of REs involving AIFs that raise regulatory concerns have come to our notice. These transactions entail substitution of direct loan exposure of REs to borrowers, with indirect exposure through investments in units of AIFs. In order to address concerns relating to possible evergreening through this route, RBI, through its order ( RBI/2023-24/90   DOR.STR.REC.58/21.04.048/2023-24 ), barred REs from making any investments in any scheme of AIFs which has downstream investments either directly or indirectly in a debtor company of the RE. The debtor company of the RE, for this purpose, shall mean any company to which the RE currently has or previously ha...

For this classification IMF sighted following reasons: Based on  Foreign exchange intervention  (FXI)  data that the RBI publishes on a monthly basis, IMF concluded that the RBI has been using FXI to cushion the impact of external shocks, smooth market volatility, preclude emergence of disorderly market conditions (DMC), and opportunistically replenish its FX reserves. IMF Further reported that during December 2022-October 2023, the Rupee-U.S. Dollar exchange rate moved within a very narrow range, suggesting that FXI likely exceeded levels necessary to address disorderly market conditions. The observed stability of the exchange rate prompted staff to reclassify India’s de facto exchange rate regime from “floating” to “stabilized arrangement” for that period, while the de jure classification remained “floating” (see Informational Annex) .  Implications: IMF & Currency Manipulation: The new language of Article IV, which went into effect in 1978, said that countries...

 As per the new circular, Card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks. Card issuers shall issue cards across more than one card network. Card issuers shall provide an option to their eligible customers to choose any one among the multiple card networks. This option may be exercised by customers either at the time of issue or at any subsequent time. This circular prohibits banks from making exclusive arrangement with card issuers. Except for RuPay Cards, there is a Merchant Discount Rate ( MDR ) for all other card networks.    MDR is charged to a merchant for the payment processing of debit and credit card transactions. MDR charge is payable by the merchant to his bank ( Acquirer). A portion of this is shared by the acquirer bank with the card issuing bank and the card network operator.   At present there is no MDR on RuPay Debit Card. This circular along with ze...

As per the Securities Contracts ( Regulation) Act, 1956 ( SCRA ), trading in the shares of companies between persons other than members of a recognized stock exchange is illegal. Members of stock exchange are required to get certificate of registration as “Stock Broker” from the market regulator, Securities and Exchange Board of India ( SEBI ) for buying or dealing in the securities. However, there are instance where certain un-registered persons carry out trades in securities outside the stock exchange mechanism which are illegal trades and are referred to as “Dabba Trading”. Dabba trading is generally carried out by persons not registered with SEBI wherein one person or a group of persons carry out trading in securities by using price/quotes of securities available from the stock exchange trading platform/internet/television screen etc. The details of such dealings are noted down in a separately maintained book which may be either in physical or electronic form. In order to avoid a...

Evolution of Exchange Rate Mechanism in India: The exchange rate is a key financial variable that affects decisions made by foreign  exchange investors, exporters, importers, bankers, businesses, financial institutions,  policymakers and tourists in the developed as well as developing world. Exchange rate  fluctuations affect the value of international investment portfolios, competitiveness of  exports and imports, value of international reserves, currency value of debt payments,  and the cost to tourists in terms of the value of their currency. Movements in exchange  rates thus have important implications for the economy’s business cycle, trade and  capital flows and are therefore crucial for understanding financial developments and  changes in economic policy. India has been operating on a managed floating exchange rate regime from March  1993, marking the start of an era of a market determined exchange rate regime of the  rupee wi...

  V-Shaped Recovery: In a V-shaped recession, the economy suffers a sharp but brief period of economic decline with a clearly defined trough, followed by a strong recovery. V-shapes are the normal shape for a recession, as the strength of the economic recovery is typically closely related to the severity of the preceding recession. U -Shaped Recovery: A U-shaped recession is longer than a V-shaped recession and has a less-clearly defined trough. GDP may shrink for several quarters, and only slowly return to trend growth.  Simon Johnson , former chief economist for the  International Monetary Fund , says a U-shaped recession is like a bathtub: "You go in. You stay in. The sides are slippery. You know, maybe there's some bumpy stuff in the bottom, but you don't come out of the bathtub for a long time." W -Shaped Recovery: In a W-shaped recession (also known as a double-dip recession), the economy falls into recession, recovers with a short period of growth, then falls b...

An ETF is a type of mutual fund that can be traded on the stock exchange like an individual stock. ETFs are just what their name implies: baskets of securities (Indices) that are traded, like individual stocks, on an exchange. Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the trading day like any stock. ETFs have lower cost of transactions and annual changes compared to index funds. ETFs are considered a safer product for risk averse and first-time investors who want market linked returns. The Exchange traded funds (ETFs) began their journey in India way back in 2002, when the first ETF by Nippon India Mutual fund (erstwhile Benchmark Asset Management Company Ltd) was launched in India on the Nifty 50 Index. The ETF was listed on NSE on January 8, 2002 and day one witnessed trading of Rs. 1.30 crores on NSE.   The journey to listing of the 100th ETF on NSE took more than 19 years. Last one-year period has seen a lot of activity in the ETF space, with 21 E...