Daily Financial News Analysis – 7th Sep'19

Table of Contents

Pradhan Mantri Kisan Maan-Dhan Yojana

12th September, Ranchi
Prime Minister Narendra Modi will launch the farmers’ pension scheme PM-KMY.
Subscriber base: 1 million-plus
scheme was announced budget
A monthly pension of Rs 3,000 will be provided to small and marginal farmers in the age group of 18-40 years on attaining the age of 60. Optional scheme
Registration for the farmers’ pension scheme was started on August 9.
It offers a guaranteed income to farmers in their old age.
Life Insurance of India (LIC) has been appointed insurer for this scheme.
Farmers will have to make a monthly contribution of 55-200, depending on the age of entry, in the pension fund till they reach the retirement date.
Centre will contribute equal amount.

UP orders e-buses

Biggest order for electric vehicles(EVs) in the country so far.
Uttar Pradesh to buy 700 electric buses in one go at a cost of Rs 1,065 crore to run them in 15 cities, including Varanasi, Agra and Lucknow.
FAME (Faster Adoption and manufacturing of Hybrid and Electric Vehicles in India) 2 scheme
Under FAME-II 5,595 air-conditioned electric buses are to be bought across the country.
The FAME-II scheme proposes to give a push to EVs in public transport and to encourage their adoption by way of market creation and demand aggregation.
UP has nearly 15,000 EVs under the first phase of FAME scheme and is the biggest consumer market in the country for automobiles.

Measures to boost exports

The government is expected to soon announce measures to boost the country’s subdued exports.
In the Union Budget 2016-17, it was announced that income tax benefits to new SEZ units would be available to only those entities that commence activity before March 31, 2020.
Certain sectors, including gems and jewelry.
The government may extend the deadline for removal of tax benefits to units in the special economic zones (SEZs).
There is also a consideration to increase the insurance coverage by the Export Credit Guarantee Corporation of India for export credit from the current 60 percent to 90 percent.
To promote domestic manufacturing and cut imports, there is a plan for strict implementation of rules of origin criteria to check diversion of imports via free-trade agreement countries.
A standard operating procedure could be implemented for faster clearance of import and export consignments.
Exporters are demanding several other measures such as enhancing benefits of the Merchandise Exports from India Scheme (MEIS) for sectors like nonbasmati rice and textiles, besides interest subvention for large pharmaceutical companies.

Zero-Cost Poultry

After the announcement of zero-budget farming, the low-cost natural alternative to fertiliser based agriculture.
The govt is planning to introduce zero-cost poultry for production of no cost protein-rich egg and meat.
Novel idea: integrating animal husbandry and poultry.
Bred in common area feeding on each other’s organic refuse and yield rich eggs and rich meat.
Animal Husbandry and fisheries minister Giriraj Singh
“In 2010, when I was animal husbandry minister of Bihar, I had done this experiment successfully in my own backyard where I reared around 300 goats and 200 hens simultaneously”.
Hen fed on the organic refuse of goats and their leftover feed. Surviving on goats’ feed and organic refuse, each hen would lay 150 eggs a year and gained 2kg weight- perfect to be a boiler for meat.
That way we were able to get a no cost egg with chicken meat as bonus.
This will help farmers in income.

Bank mergers: Good or Bad?

Merger of PSBs is often seen as a compromise as it does not change the way in which banking is conducted.
Ownership remains with the government.
The staff count does not go down.
There are savings, in case branches are closed.
PSBs are still talked of as instruments used for meeting larger political goals. MUDRA loans to SMEs targets have been set for PSB, but not for private banks.
When there is an assurance that some
PSBs have agreed to link their lending rates to the repo rate, it is implicit that there are orders from above. PSBs are not as free as their private counterparts when it comes to taking credit decisions at the macro level.
Even the Jan Dhan exercise was driven by PSBs, as are loan waivers.
A lot of changes will be seen in the governance structures, such as appointments to the Board, remuneration to Board members, review by the Board of all designations above general manager, etc.
Chief risk officer position would be mandatory, and there would be outside recruitment at market pay.
Does this mean that PSBs with a total officer staff of over 400,000 do not have the talent to fix 12 posts in these banks?
Bringing in a performance-linked bonus for high performers would have the sent right signals in the market, and raised morale.
It has been argued that large banks with bigger capital can take larger exposures.
But, is that what we want? RBI’s large exposure norms clearly want banks to lower their exposures to large borrowers in order to reduce concentration, and are being prodded to borrow from the bond market.
Timing of these mergers is also curious Merging for the sake of merging banks, without changing the operational structures, may not necessarily lead to an optimal solution. True, any rationalisation in costs, like closing of branches or ATMs, can help the profit-and-loss account.
But, the same could have been worked out between PSBs without such mergers, too, with, say, PNB not retaining a branch where OBC has one.