Investments Current Affairs

Investment in P-notes hits 9-year low at Rs 80,341 crore

Investments through participatory notes (P-notes) into Indian capital markets- equity, debt, and derivatives have plunged to over nine-year low of Rs 80,341 crore till July 2018-end. This is the lowest level since April 2009 when the cumulative value of such investments stood at Rs 72,314 crore.

Background

The decline comes amid stringent norms put in place by market watchdog Securitas Exchange Board of India (SEBI) to check misuse of these instruments.  In July 2017, Sebi had notified stricter norms stipulating fee of US $1,000 on each instrument to check any misuse for channelising black money. It had also prohibited FPIs from issuing such notes where underlying asset is derivative, except those which are used for hedging purposes. Earlier in April 2017, SEBI also had barred resident Indians, NRIs and entities owned by them from making investment through P-notes.

Participatory Notes (P-notes)

P-notes are offshore/overseas derivative instruments (ODIs) issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be part of the Indian stock market without registering themselves directly. They, however, need to go through due diligence process. P-Notes are not used within the country but are mainly used outside India for making investments in shares listed in the Indian stock market. SEBI had permitted FIIS to participate and register in the Indian stock market in 1992.  Earlier, investing through P-Notes is very simple and is very popular amongst FPIs, FIIs.

Month: Categories: Business & Economy Current Affairs 2018

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Credit Enhancement Fund: Government to launch Rs.500 crore fund

Union Government is going to launch Rs.500 crore Credit Enhancement Fund (CEF) in July 2018 to facilitate infrastructure investments by insurance and pension funds.

The CEF provides additional source of assaurance or gaurantee that borrower will service their loan. It also helps borrower to raise loans at lower interest rates. The  fund was first announced in Union Budget for fiscal year 2016-17.

Credit Enhancement Fund (CEF)

CEF will provide credit enhancement for infrastructure projects which will help in upgrading credit ratings of bonds issued by infrastructure companies and facilitate investment from investors like pension and insurance funds.

The initial corpus of the fund will be Rs 500 crore and will be sponsored by IIFCL (India Infrastructure Finance Company). It will operate as a non-banking finance company (NBFC). IIFCL will hold 22.5% stake in the NBFC, while Asian Infrastructure Investment Bank (AIIB) has been offered by the Government to pick up 10% stake.

Background

At present, only $110 billion is being invested in infrastructure in India, against requirement of $200 billion, leading many analysts to classify India as infrastructure deficit country. Most of the present infrastructure project financing is done by banking system. But all these lenders are saddled with problem of non-performing assets (NPAs). So there is need for the private sector to be more active on the infrastructure investment front. CEF will serve as alternative for rising of money for infrastructure projects through corporate bonds.

Month: Categories: Business & Economy Current Affairs 2018

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