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Economy Current Affairs August 5th Week 20175
Author : Admin
Category : Economy Current Affairs
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Economy Current Affairs August 5th Week 20175

1. Govt notifies changes in Banking Regulation Act.

The government has notified the Banking Regulation (Amendment) Act under which it can authorise the RBI to issue directions to banks to initiate insolvency resolution process to recover bad loans.

The banking sector is saddled with non-performing assets (NPAs) of over Rs. 8 lakh crore, of which Rs. 6 lakh crore is with public sector banks (PSBs).Earlier this month, Parliament had approved the Act, which replaced an ordinance in this regard.

The government in May had promulgated an ordinance authorising the Reserve Bank of India (RBI) to issue directions to banks to initiate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.

Following the ordinance, the RBI had identified 12 accounts each having more than Rs. 5,000 crore of outstanding loans and accounting for 25 per cent of total NPAs of banks for immediate referral for resolution under the bankruptcy law.

The loan defaulters identified by the RBI include, Essar Steel, Bhushan Steel, ABG Shipyard, Electrosteel and Alok Industries.Under the Banking Regulation (Amendment) Act, 2017, the RBI can issue directions to banks for resolution of stressed assets.

The RBI can specify authorities or committees to advise banks on resolution of stressed assets. The members on the committees will be appointed or approved by the RBI. The bulk of the NPAs are in sectors such as power, steel, road infrastructure and textiles.
 
2. ICEX launches world’s first diamond futures contracts.
 
 
The Indian Commodity Exchange (ICEX) launched the world`s first diamond futures contracts on Monday to provide exporters with a hedging tool.

India is a global diamond polishing hub where 14 out of every 15 rough diamonds in the world are polished. At the launch, the first diamond contract for delivery in November was traded at Rs 3,279/cent. One cent is the one-hundredth of a carat (ct).
With over 103 registered members so far, ICEX has launched 1 ct diamond futures contract for delivery in November and followed by contracts with monthly settlements. 50 cents and 30 cents contracts will be introduced after making the initial contract successful. The 1-carat contract for expiry in November, December and January will have delivery centre at Surat.

The merger of Ahmedabad-based National Multi Commodity Exchange (NMCE) into ICEX was also announced on Monday. ICEX will soon approach the National Company Law Tribunal (NCLT), 

Ahmedabad, to initiate the merger procedure. After merger clearance, ICEX would automatically get approval for the launch of some agricultural commodities like rubber, coffee.

"The journey for diamond futures launch started over two and a half years ago with approaching several ministries to convince about the potential of this contract. With diamond not being a notified commodity, it was important for the exchange to convince the government officials about the need of such contract. Diamond was notified as a commodity for derivatives trading on online exchanges. Convincing ICEX Board was also a challenge. The Securities and Exchange Board of India (Sebi) has approved the contract after lots of consultations with the physical market intermediaries," said ICEX Managing Director (MD) and Chief Executive Officer (CEO) Sanjit Prasad.

The exchange had to suspend trading in 2014 when its net worth had eroded to little above Rs 40 crore on very thin volume because of stiff competition from its peers.

"Our net worth as of today stands at Rs 121.52 crore, way above the regulatory requirement of Rs 100 crore. Following the merger of NMCE, our net worth would surpass Rs 200 crore," informed Prasad.
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ICEX has been polling polished diamond prices for over 8-9 months for the settlement of the contract. Polling prices from the physical market would be used as a benchmark for the settlement of the contract. Price variation would be Re 1 with an initial margin of 5 per cent on value at risk (VAR) basis ICEX will offer HVS2 quality diamond certified by the International Institute of Diamond 

Grading & Research (IIDGR), a De Beers group company, and vaulting services will be offered by Malca Amit.

"It is a compulsory delivery contract. Hence, any attempt of price manipulation is associated with the fear of delivery. Thus, we do not see any risk of price manipulation by any trader or group of traders," said Prasad.

The contract has the facility to trade in one cent that can be accumulated over a period of time up to 1 ct and make it deliverable like systematic investment plan (SIP). Until the time of delivery, the trade quantity would continue to remain in an electronic account of the trader. The price displayed/traded includes delivery and transaction charges.

When asked about over dependence on one commodity and one contract, Prasad said, "Globally, an exchange is known for specific one or two commodities and [a] similar number of contracts. 

For example, London Metal Exchange (LME) is popular for its non-ferrous metal contract with copper being the primary commodity. Similarly, NYMEX (New York Mercantile Exchange), COMEX (Commodity Exchange), Bursa Malaysia and Multi Commodity Exchange are known for trading largely in one or two specific commodities and contracts only."

India imports rough diamond worth $19 billion and exports polished valued $24 billion annually. India caters to over 90 per cent of the world`s polishing market for rough diamonds.


 

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