Business, Economy & Banking Current Affairs - 2019
Business, Economy and Banking in Current Affairs 2019 with latest news and current affairs in Agriculture, Industry, Banking, Capital Markets, Import and Export and Government schemes in commercial sector.
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No-frills airline SpiceJet became fourth Indian airline to have a 100 aircraft in its fleet after a recent induction of a Boeing 737 which became its 100th plane. The other three domestic airline with 100 Aircraft fleet are national carrier Air India, now grounded Jet Airways and IndiGo.
- It is a Gurugram-based budget carrier (No-frills airline). It has an aircraft fleet of 30 Bombardier Q-400s, 68 Boeing 737s and two B737 freighters.
- At present SpiceJet on an average operates 575 daily flights to around 62 destinations 53 domestic and 9 international. It last one month alone the airline has added some 23 planes.
- SpiceJet is a key player in Union government’s regional connectivity scheme called UDAN (Ude Desh ka Aam Nagrik) as it operates 42 flights per day to and from various regional destinations.
- In 2015, SpiceJet placed an order for 205 aircraft with Boeing (US) worth $22 billion which was followed by order for 50 Bombardier Q400 planes worth $1.7 billion.
Other Indian Domestic Carriers
Eight main domestic carriers in India together have 595 planes in their fleet at the moment. They are-
- Air India has 128 planes in their fleet
- IndiGo has 230
- SpiceJet has 100
- GoAir has 49 planes
- Air India Express has 25 planes
- Vistara has 22 planes
- AirAsia India has 21
- Alliance Air (is regional subsidiary of Air India) has 20 ATRs for operations.
The Reserve Bank of India (RBI) released a draft circular titled ‘Liquidity Risk Management Framework for NBFCs and Core Investment Companies (CICs). RBI after analysing recent developments in NBFC sector proposed a set of guidelines for large Non-Banking Financial Companies (NBFCs) to help them deal with severe liquidity problems and to prevent re-occurrence of IL&FS type of debt crisis. The RBI has invited stakeholder comments on draft by June 14.
Key Highlights of Draft
- Liquidity Coverage Ratio (LCR) regime: In a phased manner, an LCR regime would be introduced in all deposit-taking NBFCs and non-deposit taking shadow banks with an asset size of Rs.5,000 crore and above. The shadow banks are non-bank financial intermediaries that provide services similar to traditional commercial banks but are not subject to regulatory oversight.
- Implementation: To ensure a smooth transition from current to the LCR regime RBI proposed that implementation will be done in a calibrated manner by a glide path over a period of 4 years starting from April 2020 and till April 2024.
- Binding Condition: LCR requirement would be binding on NBFCs from 1 April 2020 with minimum LCR of 60% that will be progressively increased in equal steps till it reaches required level of 100% by April 1, 2024.
- High Quality Liquid Assets (HQLA): An NBFC shall maintain an adequate level of unencumbered (free from debt) HQLA which under a significantly severe liquidity stress scenario can be converted into cash so as to meet its liquidity needs for a 30 calendar-day time horizon. HQLA means liquid assets that can be immediately converted into cash or readily sold at very little or no loss of value or either used as collateral to obtain funds in a range of stress scenarios.
- Asset-Liability Management Committee (ALCO): would consist of NBFC’s top management and should be responsible for ensuring adherence to risk tolerance and limits set by Board and for implementing NBFC’s liquidity risk management strategy.
- Contingency Funding Plan (CFP): should be formulated by NBFC for responding to severe disruptions which may affect NBFC’s ability to fund some or all of its activities in a timely manner and at a reasonable cost.
Reason for Draft Guidelines
- Ever since 2018 when IL&FS crisis erupted banks have been averse in lending to this sector, which has further put NBFC’s in a tight spot. There are rising concerns that NBFCs may run out of money, which will further lead to defaults.
- Many large NBFCs, such as DHFL and Indiabulls Finance came under severe liquidity pressure which compelled them to bring down their reliance on commercial papers (CPs). The CPs is a debt instruments which is issued by companies to raise funds for a time period of up to 1 year.
- As per estimates about Rs.1 lakh crore of commercial papers (CPs) raised by NBFCs from investors will be coming up for redemption in next 3 months. But since NBFCs are cash-strapped, there is a looming fear that they will default on CPs.
- In early May RBI also announced creating special cadre to supervise and regulate financial institutions, including banks and NBFCs.
Tags: 'Liquidity Risk Management Framework for NBFCs and Core Investment Companies (CICs) • Asset-Liability Management Committee (ALCO) • Commercial Papers (CPs) • Contingency Funding Plan (CFP) • Core Investment Companies (CICs) • DHFL • High Quality Liquid Assets (HQLA) • IL&FS crisis • Indiabulls Finance • Liquidity Coverage Ratio (LCR) • Reserve Bank of India (RBI) • Shadow Banks