More FDI Tweaks Ahead In Banking, Insurance And Defence; Iran-Israel Crisis Begins To Hurt India Inc

Further FDI Rule Liberalisation In Banking, Insurance, Defence

Foreign direct investment (FDI) norms for banking, insurance and defence are being closely examined by the government for liberalising them further, the Economic Times reported. Most recently, the rules for FDI were relaxed for the space and satellite sectors. 

Officials said that although most of the heavy lifting in terms of FDI reforms has been completed, talks are ongoing to see if conditions for these key sectors can be further eased. Any changes will be made after the elections. Finance, insurance and defence could still be looked at in terms of further reduction. FDI equity inflows fell 13 per cent year-on-year to US$32.03 billion during April-December 2023. The United Nations Conference on Trade and Development attributed the FDI slump in developing nations to weak investment and economic uncertainty. More here

RBI Tells Payment Companies To Watch High-Value Transactions, Recurring Payments

The Reserve Bank of India has directed all regulated payment companies to track high-value or suspicious transactions during the course of general elections, the Economic Times reported. In a letter dated April 15, the RBI asked payment system operators (PSOs) to prevent any potential misuse of electronic fund transfer mechanisms to influence voters or indirectly fund poll candidates.

The report quoted a senior executive saying the regulator wanted tracking of high-value payments, specifically along with recurring person-to-person payments. Companies like Razorpay, Cashfree, CCAvenue and Mswipe are all regulated payment aggregators while PhonePe and MobiKwik are mobile wallet licence holders. Read more

HSBC Geneva: ITAT Order Asks How Can Balances, Not Incomes, Be Taxed? 

An order of the Income Tax Appellate Tribunal, Mumbai has questioned the IT Department’s approach in going after individuals whose names were in the infamous list of information stolen from HSBC Geneva, the Economic Times reported. 

In a decision that could have a bearing on other 'HSBC account' cases, a tribunal last week ruled that the IT department cannot go back 16 years to reopen old matters to tax the 'peak balance' lying in such bank accounts. This is because, the order said, a bank balance reflects 'assets' and not 'income', and, under the law, only income can be taxed. More here

Iran-Israel Conflict Has India Inc Showing Early Signs Of Stress

India Inc is already showing early signs of stress caused by the Iran-Israel conflict with longer deliveries, doubling freight rates, extended working capital cycles, and higher costs, the Business Standard reported.

Oil prices and related escalation in fuel costs are immediate concerns for both the Indian government and industry watchers. Oil and liquefied natural gas (LNG) prices are likely to shoot up if Iran blocks the Strait of Hormuz, through which India imports crude oil from Saudi Arabia, Iraq, and the UAE, leading to a spike in inflation, analysts said. The conflict has escalated over the past few days. Iran first launched drone and rocket attacks on Israel, which retaliated by firing a missile. Read more

Payments Banks May Get To Offer Small Loans Soon

Payments banks are expecting to get to offer small-ticket loans sometime soon, the Business Standard reported quoting an industry source familiar with the matter. The industry has been in talks with the Reserve Bank of India (RBI) for some time in seeking lending rights.

At a time when many payments banks are struggling, allowing them to provide loans could help improve their margins, a senior executive from one such bank told Business Standard. The RBI regulations bar payments banks from offering loans to customers. However, these banks can offer loans to employees using their own resources, adhering to a board-approved policy that specifies the limits on such loans. More here

Tesla Gains Better Terms In India’s New EV Policy Than In China 

Tesla CEO Elon Musk may have postponed his India visit but the government’s new electric vehicle policy offers some key terms that are more attractive for car makers than what Tesla could get from China when it set up its plant in Shanghai in 2019, the Business Standard reported. 

Under the new policy, India has offered a localisation term of reaching a domestic value addition (DVA) of 25 per cent in three years, and 50 per cent in 5 years from the date of issue of the approval letter. When Tesla started in 2019, about one-third of the components were from China. Read more