GIFT city Current Affairs - 2020
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.
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.
Tags: Bombay Stock Exchange • Finance Minister • GIFT city • IFSC • National Stock Exchange
The Budget 2020-21 has been framed on the basis that Governance and Finances are the two major hands in achieving the three themes of the budget. The three themes include aspirational India, Economic Development and Caring India
The Budget has allocated funds for the following in the efforts of achieving 5 trillion USD economy.
Public Sector Banks
The GoI has earlier approved consolidation of 10 major banks into 4. In order to achieve this a fund of 3,50,000 crores has already been infused into the economy. Still, in order to make them robust and competitive, budget has allocated funds to carry out reforms in these banks
A robust mechanism is to be put in place to monitor the health of Scheduled Commercial Banks. This is being done to make sure if the depositor money is safe.
Deposit Insurance increased to 5 lakhs
The Depositor Insurance Coverage (DIC) has been increased from 1 lakh to 5 lakh per depositor. The DIC is looked after by Deposit Insurance and Credit Guarantee Corporation (DICGC).
Amendments to acts proposed
The following acts are to be amended
Banking Regulation Act
The Banking Regulation Act is to be amended to increase professionalism, improve governance, enable access to capital and enable sound banking through RBI
The SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) act, 2002 is to be amended. This is to reduce the limit of debt recovery of NBFCs from 500 crores to 100 crores. The debt recovery for loans of the NBFCs is to be reduced from 1 crore to 50 lakhs
The Pension Fund Regulatory Development Authority India Act is to be amended. According to the amendment the role of PFRDAI is to be strengthened. This is being done to infuse auto enrolment in Universal Pension Coverage scheme. The act will also enable establishment of Private trusts by employees.
Factor Regulation Act, 2011
The act will be amended to extend invoice financing to the MSMEs. This will help in enhancing their financial and economic sustainability.
A scheme is to be introduced to increase the working capital credit of the MSMEs. Under the scheme, subordinate debt is to be provided for entrepreneurs of MSMEs.
RBI’s Restructuring of Debts
In 2019-20, more than 5 lakh MSMEs have been benefitted with the RBI restructuring its permissible debts. The GoI has requested RBI to extend the window till March 31, 2021.
Application to be launched
An application is to be launched to raise invoices of loan products introduced for MSME sector. This will reduce the problem of cash flow mismatches and delayed payment problems.
Scheme by EXIM and SIDBI
Together both the EXIM and SIDBI will launch a scheme of 1000 crores. The institutions will contribute 50 cores each.
The scheme will help the MSMEs in technology upgradations, business strategies and Research and Development.
- The limit of FPI in corporate bonds that are currently at 9% is to be increased to 15%
- A legislation is to be framed that will create a mechanism for netting of financial contracts. This will help to increase investor confidence
- Upon the success of the Exchange Traded Fund introduced recently, Gol has allocated budget to expand ETF focusing primarily on government securities
- A partial Credit Guarantee scheme is to be formulated to address the liquidity constraints of NBFCs.
International Bullion Exchange Centre in GIFT city
Budget 2020-21 allocated funds to establish the GFT city. The GIFT has International Financial Service Centre (IFSC). IT has been approved to set up Free Trade Zone for housing vaults. There are more than 40 banking entities and 19 insurance entities operating in the city. The city is to be established as an International Bullion Exchange centre.