Economy & Banking Current Affairs

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.

INR-USD Futures and Options Contracts launched by Finance Minister

On May 9, 2020, the Union Finance Minister Smt Nirmala Sitaraman launched the INR-USD Futures and Options contracts in the BSE and NSE platforms. They were launched at the GIFT International Financial Service Centre (IFSC) in Gandhinagar, Gujarat through video conference.

Significance

The contracts have been launched to increase economic activity and employment in the country. A significant market share of India has moved to other International financial Centres in the last decade. The move will help to bring back those businesses back to India.

In Addition, the world-class business environment at the GIFT IFSC will help to bring in larger global participation.

What is Future and Option?

Future and Options are financial products that allow investors to buy or sell shares at specific price by a specific date.

Options contract give the right to buy or sell the shares at any time till the validity of the contract exists. Under Futures contract, a buyer and seller can buy or sell only on specific future date.

Types of Option

There are two types of Option. The Call Option is used to buy a stock at the strike price and put option is used to sell a stock at a specific price.

RBI announces Special Liquidity Mutual Funds worth Rs 50,000 crores

On April 27, 2020, the Reserve Bank of India announced the special liquidity facility for mutual funds of Rs 50,000 crores. The Reserve Bank of India is increasing liquidity flow in capital markets as COVID-19 has imposed liquidity strains on mutual funds.

Highlights

The Special Liquidity Facility for Mutual Funds (SLF-MF) is to conduct repo operations for 90 days. Under the scheme, the banks shall submit their bids on any days between Monday and Friday.

Key Features

The Funds are to be used by the banks exclusively to meet the following liquidity requirements

  • To extend the loan period
  • To undertake purchases of investment-grade corporate bonds, debentures and certificates of Deposit. A debenture is a long-term security that yields fixed rate of interest secured against assets.
  • Under the scheme, the liquidity support even when exceeds 25% of total investment is to be permitted to be included as Held to Maturity.
  • The banks shall decide the repo or the lending rates of the mutual funds. However, the Reserve Bank of India is to hold the tenor of repo rates for a minimum of three months.

Held to Maturity

The Held to Maturity are debt securities that are acquired to hold it till maturity. It is usually recorded as amortized cost in the financial statements of a company.