ISSUE: 716 2024 25 December 2024

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India’s forex reserves drop $2 bn to $653 bn

in December; RBI estimates 11-months of
import amid multi-month low: India's foreign
exchange (forex) reserves are sufficient to meet over
11 months of import needs and nearly 96 per cent of
external outstanding debt requirements as of the
end of June 2024, reported the news agency ANI
citing the Reserve Bank of India (RBI) on Tuesday, December 24. The
forex reserves rose $6.4 billion in the financial year 2024-25 to $652.9
billion as of December 13, as per the news report citing a monthly
bulletin. India's ―foreign exchange reserves remained robust,‖ as reflected
in the sustainable levels of reserve adequacy metrics, said the central
bank.
(Mint)
RBI report sees economic recovery in Q3; FPI flows turns
positive in Dec: India’s gross domestic product (GDP) growth, which
plunged to 5.4 per cent in the July–September quarter, is making a
comeback in the October–December period, according to high-frequency
indicators cited in the State of the Economy report by the Reserve Bank of
India (RBI). ―High-frequency indicators (HFIs) for the third quarter of
2024–25 indicate that the Indian economy is recovering from the
slowdown in momentum witnessed in Q2, driven by strong festival
activity and a sustained upswing in rural demand,‖ the report, authored
by RBI staff, including Deputy Governor Michael Patra, said. The report
said India’s growth trajectory is poised to lift in thesecond half of 2024-
25, driven mainly by resilient domestic private consumption demand.
―Supported by record-level foodgrain production, rural demand, in
particular, is gaining momentum. Sustained government spending on
infrastructure is expected to further stimulate economic activity and
investment,‖ it said. GDP growth is estimated at 6.8 per cent in Q3 and
6.5 per cent in Q4 of the current financial year. The RBI, in the December
review of monetary policy, lowered the FY24 growth projection to 6.8 per
cent from 7.2 per cent.
(Business Standard)

Insurers report rise in commission

expenses: he insurance industry saw a significant
jump in commission expenses in FY24 after the
sector regulator removed caps on payouts. Life
insurers saw commission expenses increase 22%
while general insurers saw commission expenses
double in FY24. This follows the Insurance
Regulatory and Development Authority of India's (IRDAI) decision to
remove commission caps in April 2023, showed the latest IRDAI Annual
report.
(Economic Times)
UPI QR transactions jump 33% at retail stores in Bharat this
year: UPI transactions at retail stores have increased by 33 per cent in
semi-urban and rural areas this year, reflecting the growing adoption of
digital payments, says a report. Moreover, insurance policy purchases and
premium collections saw a 127 per cent increase in transaction volume
and a 96 per cent growth in new customer adoption during the year, the
report by branchless banking and digital network PayNearby said. "The
data highlights the role digital retail stores play in overcoming the
challenges of insurance penetration across Bharat," it stated. The report is
based on an analysis of real transaction data derived from over 10,00,000
small retailers offering financial and digital services spread across India
in rural and semi-urban regions.
(Economic Times)
Digital lenders disburse 3 crore loans worth Rs 37,000 crore in
Q2FY25: Digital lenders disbursed 3 crore loans worth nearly Rs 37,000
crore at the end of the September quarter, with growth moderating to
19% on year versus a growth of 44% in the same period last year, the
Fintech Association for Consumer Empowerment (FACE), an RBI-
recognised Self-Regulatory Organisation said in a report. The report is
based on data from 34 FACE member companies lending to customers,
23 of which have in-house NBFCs.
(Economic Times)
Business correspondents meet Irdai, seek consent to sell
insurance products: Digital lenders disbursed 3 crore loans worth
nearly Rs 37,000 crore The Business Correspondent Resource Council
(BCRC) has made a pitch to the Insurance Regulatory and Development
Authority of India (Irdai) that field agents be allowed to hawk insurance
products. As of now, the business correspondents’ (BCs’) channel —
introduced in 2007 — only offers last-mile banking services. BCRC’s
stance is that shocks from climate-related issues are affecting those at the
bottom of the pyramid in a big way. It presents an opportunity to sell
weather-indexed insurance: policies designed to trigger payouts
(livelihood support) based on specific weather conditions, such as low
rainfall, extreme heat conditions, and similar events.
(Business Standard)

Number of non-farm firms grew 13% to 7.3

crore: Govt survey: The number of non-farm
firms in the country comprising proprietorships,
partnerships and self-help groups increased 12.84%
to 7.34 crore, the Union statistics ministry said,
citing an annual survey of enterprises other than
companies for the period October 2023 to September
2024. The ministry said in a statement that its
'annual survey of unincorporated sector enterprises results for 2023-24’
highlighted ―significant growth in establishments, employment, and
productivity in the unincorporated non-agricultural sector,‖ showing its
recovery from pandemic-related challenges and its resurgence with
renewed momentum.
(Mint)
Fund mobilisation by Indian companies surged 10 times over
last ten years: Over the last ten years, fund mobilisation by Indian
companies has grown tenfold. A report by the State Bank of India (SBI)
says that fund mobilisation through capital markets has increased from
Rs 12,068 crore in 2014 to Rs 1.21 lakh crore in FY25 (up to October).
This significant growth reflects the strengthening of India's economy and
the rising confidence of investors. It said, "In the last 10-years, funds
mobilized by Indian companies from capital markets has increased more
than 10-fold." The report also highlighted that a 1 per cent rise in the
stock market's, market capitalization contributes to a 0.06 per cent
increase in the country's GDP growth rate.
(Economic Times)

GST on popcorn: Varying rates may be

difficult to implement, lead to classification
disputes, say experts: The humble popcorn is in
the eye of a storm with the recent clarification by the
Goods and Services Council that different kinds of
popcorns will attract different rates of tax. The move
has not only raised the hackles of consumers and
economists and unleashed a series of memes on social media, but could
also be difficult to implement and lead to classification disputes according
to tax experts. The GST Council in its meeting on December 21 clarified
that popcorn will attract three kinds of GST rates based on its spice mix.
Accordingly, ready-to-eat popcorn that is mixed with salt and spices
attracts 5% GST if supplied as other than pre-packaged and labelled and
12% GST if supplied as pre-packaged and labelled. However, when
popcorn is mixed with sugar thereby changing its character to sugar
confectionary, such as caramel popcorn, it would attract 18% GST.
(Business Today)
NFRA flags deficiencies in BSR & Co's audit of related party
transactions: The National Financial Reporting Authority (NFRA) has
highlighted significant shortcomings in the audit practices of BSR & Co
LLP, a KPMG sub-licensee, particularly in related party transactions. The
audit regulator's inspection was conducted in August 2024, which
reviewed three BSR audit engagements from the FY ending March 2022
and March 2023. In a 13-page inspection report, NFRA found lapses
related to auditing standards and compliance with the Companies Act
2013. Among the critical observations were deficiencies in verifying
related party transactions. The inspection report also revealed a complex
series of transactions initiated by an unnamed company, involving its
promoter entity.
(Business Standard)

RBI KEY RATES FOREX EQUITY

(RBI REF. ) /COMM. MARKET
Repo Rate: 6.50% INR / 1 USD : 85.1932 Sensex: 78472.87 (-67.30)
SDF: 6.25% INR / 1 GBP : 106.7851 NIFTY: 23727.65(-25.80)
MSF /Bank Rate: 6.75% INR / 1 EUR : 88.5646 Bnk NIFTY: 51233.00 (-84.60)
CRR: 4.00% INR /100 JPY: 54.2500
SLR: 18.00%
BUSINESS/FINANCIAL CONCEPTS
LEVERAGED BUYOUT
 A leveraged buyout (LBO) is the acquisition of another company using
a significant amount of borrowed money (bonds or loans) to meet the
cost of acquisition. The assets of the company being acquired are often
used as collateral for the loans, along with the assets of the acquiring
company.
 The buyer typically wishes to invest the smallest possible amount of
equity and fund the balance of the purchase price with debt or other
non-equity sources. The aim of the LBO model is to enable investors to
properly assess the transaction and earn the highest possible risk-
adjusted internal rate of return (IRR).
 In an LBO, the goal of the investing company or buyer is to make high
returns on their equity investment, using debt to increase the potential
returns.

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