Category: Business

Justice M.R. Shah wonders what relief has ultimately been granted if interest continues to accrue for the moratorium period

The Supreme Court questioned the Reserve Bank of India’s (RBI) regulatory package requiring the continuation of payment of interest on bank loans after the three-month moratorium during the pandemic lockdown is lifted.

“On one hand granting moratorium and then payment of interest… This is detrimental… These are unprecedented times… These are not normal times,” Justice Sanjay Kishan Kaul orally remarked during the virtual court hearing.

Justice M.R. Shah, also on the Bench led by Justice Ashok Bhushan, wondered what relief had ultimately been granted if loan interest continued to accrue for the moratorium period.

Solicitor General Tushar Mehta, for the Centre, sought time to consult the Finance Ministry.

Justice Bhushan said there were two issues in the case. One, whether interest should be charged at all during the moratorium period. Two, whether there should be an accrual of interest to be paid by the borrower in bulk or at a monthly basis after the lifting of the embargo.

Next hearing on June 12

The court scheduled a hearing on June 12.

The hearing came a day after the RBI filed an affidavit in court saying it did not consider it prudent or appropriate to go for a forced waiver of interest, risking the financial viability of the banks it was mandated to regulate and putting the interests of the depositors in jeopardy.

Senior advocate Rajiv Dutta, for petitioner Gajendra Sharma, said the RBI affidavit reflected that the Central bank placed “profitability of banks over and above public interest in these distressing times”.

Mr. Dutta reminded the court about how it had recently said that commercial interests should not overawe public health and interest. This was with reference to Air India’s decision to assign middle seats to passengers in the Vande Bharat mission flights.

In its affidavit, the RBI was responding to a petition challenging the charging of interest rate on loans even during the three-month moratorium period declared amid the COVID-19 pandemic and national lockdown. The RBI had recently extended the moratorium till August 31.

‘Not a waiver’

The Central bank said its regulatory package introduced amid the pandemic lockdown was “in its essence in the nature of a moratorium deferment and cannot be construed to be a waiver”.

“Banks are commercial entities that intermediate between depositors and borrowers. They are expected to run on viable commercial considerations,” the affidavit said.

The RBI reasoned that banks were custodians of the depositors’ money.

“Actions are guided primarily by the protection of depositors’ interests… Any borrowing arrangement is a commercial contract between the lender and the borrower… Interest or advances form an important source of income for banks,” the RBI said.

It said the regulatory package introducing the moratorium was permitted with the object of mitigating the burden of debt servicing brought about by the disruption on account of COVID-19 to ensure continuity of viable businesses.

A Bench led by Justice Ashok Bhushan had earlier issued formal notice to the Central bank and the Centre on a petition by Gajendra Sharma, who said though there was a moratorium on loans, there was also accrual of interest, which had to be paid in bulk or at a monthly basis after the lifting of the embargo.

The court had wanted to know why the government and the RBI seemed to think that natural justice was not violated when “the government, on one hand, ceased the working of individuals and, on other hand, is asking to pay the loan interest during moratorium”.

Central to the challenge in the petition was the RBI notification of March 27.

“The interest charged during moratorium period would be added up into the EMIs at the end of three-month forbearance. It will have to be paid in one go or be equally divided in all future EMIs. The monthly bill for customers will increase… In the present scenario, when all the means of livelihood has been curtailed by the government of India by imposition of lockdown and the petitioner has no way to earn a livelihood, the imposition of interest will defeat the very purpose of permitting moratorium on loans,” the petition contended.

With inputs from The Hindu

Srinagar: The Salamabad Cross Union Trade Association Wednesday said that people involved in cross LoC trade are on verge of collapse and starvation as around Rs 500 crore have been lost since the trade was suspended last year in April by the Government of India.

Chairman Salamabad cross union trade (SCUT), Hilal Turkei said that an estimated Rs 5780 crore rupees turnover generated since the commence of trade back in 2008 till the suspension in last year April.

Turki told news agency—Kashmir News Observer (KNO), that the annual loss suffered since the suspension last year in April is around 500 crore rupees with traders and people linked to it are on verge of collapse.

He said the cross border trade between India and Pakistan started on 21 October 2008 and was shut last year on March 7 after some issues but on 18 April a notification was issued by government of India stating that the trade must be shut as new mechanism has to be set-up for the same.

Turki estimated the revenue generated in past 11 years around 5780 crore. He said the traders since suspension have suffered huge losses as number of firms were involved with 1000’s of people earning their livelihood from it including the truckers, labourers, representatives, mandi, house-holds, transport, petroleum and notified committees in towns.

He said 63000 truckers were hired for the process and they have given away at least 1,70, 000 job days at 800 rupees per day to labour class which is a handsome earning.

He said that not only the locals but people from Jammu, Rajouri and other parts of the valley were involved in the trade business as it provided jobs to the people living in off-site areas which have no other source of avenues to earn. “Even the educated un-employed people were involved in this trade to earn their livelihood and they are worst victims of the trade suspension.”

People involved in cross border trade are on the verge of starvation and if the suspension continues all may have to sell-out their assets including the homes to pay the bank instalments and the money borrowed from market, he said.

He said that over the years trade included the export of fresh fruits, species, embroidery items, herbal medicines and in return they imported dry fruits, fruits, matting embroidery and other things including vegetables.

“After the suspension of trade by Ministry of Home Affairs (MHA), it had assured to come up with new improved mechanism for cross LoC trade in backdrop of people quizzed and investigated about various issues.”

He requested the government of India to come up with full proof mechanism and furnish the guidelines and special operating procedure (SOP) so that the trade commences early without further delay and loss to the people.

Overall avenues are at grinding halt amid this pandemic and it’s high time to commence the trade so that the economy also gets boost at an earliest, he said—(KNO)

PTI

(Eds: Correcting DCM74 story released on Tuesday to say that AirAsia India is a joint venture between Tatas and AirAsia (Investment) Ltd))

Mumbai: AirAsia India has slashed salary of its pilots by an average 40 per cent for May and June, an airline source said.

However, the quantum of reduction in pay for other categories and senior management remains at the April level, the source said.

The senior management at AirAsia India had taken a pay cut of 20 per cent in April, while the wages of executives falling in other categories were reduced by 7-17 per cent.

However, employees getting a salary of Rs 50,000 per month or less were spared.

AirAsia India — a joint venture between Tatas and AirAsia (Investment) Ltd — will be completing six years of operations next week. It has a workforce of around 2,500 people. As many as 600 of them are pilots for its 30 Airbus A320 aircraft fleet.

On Tuesday, PTI erroneously reported that AirAsia India is a joint venture between Tatas and SIA.

“Earlier, a pilot was being paid for a fixed 70 hours irrespective of flying or no flying, which has now been reduced to 20 hours. This way, the average salary of a first officer (junior pilot) has come down to Rs 40,000 per month from Rs 1.40 lakh, and that of a captain (senior pilot) to Rs 1 lakh from Rs 3.45 lakh,” the source told PTI.

The reduction in pay accounts for 40 per cent of the total average salary of a pilot, the source said.

Responding to a PTI query on the issue, an AirAsia India spokesperson on Tuesday said, “We do not comment on the internal matters pertaining to the company”.

The source also said the airline has deferred its plans to induct any new plane in the fleet for the time being.

AirAsia India had plans to take delivery of five more A320s through March next year, the source added.

“The airline’s assessment is that the sector may take about two years to recover fully and domestic players are unlikely to expand network in the short-to-medium term in view of the demand. In this situation, fleet expansion will not serve any purpose in the next couple of quarters,” the source said.

Global aviation consultancy CAPA had estimated domestic traffic at 55-70 million (5.5-7 crore) and international air traffic demand at 20-27 million (2-2.7 crore) for the current fiscal.

AirAsia India is currently utilising only about 50 per cent of the total capacity (30 planes), and even if there is a surge in demand, the existing capacity should be able to cater to the traffic, the source said.

CAPA in its report had also said that Indian carriers would need to realign their fleet deployment plans with the expected levels of demand. It had estimated that airlines would be operating around 265-300 aircraft in the domestic market and 80-95 aircraft on international routes in the second half of the current financial year.

It is unclear when travelling will become a way of life, as it was pre-COVID, the company stated in a mail to employees

PTI

Online travel firm MakeMyTrip has laid off 350 employees due to the impact of the COVID-19 pandemic on its business.

Most of the fired employees are in international holidays and related line of business, according to sources.

In an email to employees, MakeMyTrip Group Executive Chairman and founder Deep Kalra and Group CEO Rajesh Magow said even as times remain unpredictable, what is evident is that the impact of COVID-19 crisis is going to be long drawn for the company.

It is unclear when travelling will become a way of life, as it was pre-COVID, they added.

“Over the past two months, we have analysed the impact closely and have spent considerable time thinking about the path to business recovery. As a result, it’s become agonisingly clear that there are certain lines of business that are far deeply affected and will take much longer than the others to recover,” they said.

It is evident that the pandemic has changed the context and viability of some of business lines in its current form, the mail said.

“Keeping this in mind we have had to take this sad but inevitable decision of rightsizing our workforce in these businesses,” Kalra and Magow said.

Mediclaim coverage

When asked about the number of employees that have been impacted, a company spokesperson confirmed that 350 employees have been impacted.

“To compassionately take care of the employees who have been impacted, we have tried to do our best to offer support including Mediclaim coverage for individuals and their families till the end of the year, leave encashment, gratuity, retaining the right to exercise part of RSUs as applicable, retention of company laptops and outplacement support apart from salary payments as per their notice periods,” they said.

Kalra and Magow also said that it was undoubtedly the toughest decision, “we have had to take so far and it’s the saddest day for us as an organisation”.

The company said its showrooms have also started opening in accordance with centre and state guidelines in a graded manner

PTI

The country’s largest carmaker Maruti Suzuki India (MSI) on Monday reported a 86.23% decline in total sales at 18,539 units in May.

The company had sold 1,34,641 units in May last year, MSI said in a statement.

Domestic sales declined by 88.93% to 13,888 units last month, as against 1,25,552 units in May 2019, it added.

The company exported 4,651 units last month, down 48.82% from 9,089 units in May 2019, MSI said.

The auto major said it has resumed manufacturing operations post lockdown, strictly in accordance with the government regulations and guidelines, from May 12 at its Manesar facility and from May 18 at its Gurugram facility.

Production also resumed at Suzuki Motor Gujarat, which manufactures cars on a contract basis for MSI, from May 25, it added.

Likewise, the company said its showrooms have also started opening in accordance with centre and state guidelines in a graded manner across different cities.

The IHS Markit India Manufacturing Purchasing Managers’ Index stood at 30.8 in May, up from 27.4 in April, pointing to another substantial decline in the health of the country’s manufacturing sector. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

PTI

The country’s manufacturing sector activity recorded another sharp deterioration in business conditions during May as new orders placed with producers continued to fall after April’s record contraction, leading firms to cut jobs at the quickest pace on record, a monthly survey said on June 1.

The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) stood at 30.8 in May, up from 27.4 in April, pointing to another substantial decline in the health of the country’s manufacturing sector, albeit one that was slightly softer than that recorded in April.

In April, the index had slipped into contraction mode, after remaining in the growth territory for 32 consecutive months. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

“The latest PMI data suggested that Indian manufacturing output fell further in May. This result is particularly poignant given the record contraction in April which was driven by widespread business closures,” said Eliot Kerr, economist at IHS Markit.

As per the survey, weaker demand drove output lower following April’s record decline. Consequently, firms cut staff numbers at the quickest pace since data collection began over 15 years ago.

“The further reduction in May highlights the challenges that businesses might face in the recovery from this crisis, with demand remaining subdued while the longevity of the pandemic remains uncertain,” Mr. Kerr noted.

Weak demand from international markets added to the deteriorating sales trend, with new business from abroad declining further in May.

“Anecdotal evidence suggested that global measures to stem the spread of COVID-19 continued to stifle exports,” the survey noted.

Going ahead, Indian manufacturers remained optimistic towards the one-year business outlook in May.

Confidence was supported by expectations for a return to growth once all coronavirus-related restrictions are lifted, the survey said, adding, that “the degree of positivity eased slightly from April and remained historically subdued”.

Meanwhile, India’s GDP growth tumbled to 3.1% in the March quarter — the slowest pace since the global financial crisis more than a decade ago. In 2019-20, the Indian economy grew by 4.2%, the slowest in 11 years.

Financials may be hit due to negative impact on economies of U.S., U.K., EU

The COVID-19 pandemic has its footprints all over Infosys’s annual report of fiscal 2020 that was released on Saturday.

The economic slowdown or other factors affecting the economic health of the U.S., the U.K., the EU and Australia are expected to cast a gloom on the financials of the Indian IT services giant.

Infosys, on account of its revenues being concentrated in a few geographies, expects to see a serious impact. “In fiscal 2020, 61.5%, 24.1% and 11.8% of our revenues were derived from projects in North America, Europe and the rest of the world, respectively,” the report said.

In fiscal 2020, it derived 31.5% of its revenues from the financial services and insurance industry. “Instability and uneven growth in the global economy has had an adverse impact on the growth of the IT industry in the past and may continue to impact it in the future. This instability also impacts our business and results of operations and may continue to do so in the future,” the report added. If the economies of the U.S., U.K. or the EU weaken or growth remains uneven — including as a result of the uncertainty surrounding Brexit — Infosys believes its clients may reduce or postpone their technology spending significantly. This may, in turn, lower the demand for its services, negatively impacting its revenues and profitability.

Meanwhile, during the fiscal, its employee count rose 6.09% over the previous fiscal, the report said. Infosys had 2,42,371 employees, of which 228,449 were professionals, involved in service delivery to clients. During the previous year, it had grown over 11%.

During the year, Nandan M. Nilekani voluntarily chose not to receive any remuneration for his services rendered to the company.

As an independent director, Biocon’s executive chairperson Kiran Mazumdar-Shaw received $150,000. During the fiscal ended March 31, CEO Salil Parekh received a total remuneration of $6 million, which was 27% higher than his previous year’s total remuneration of $4.8 million.

COO Pravin Rao’s total remuneration also rose to $2.2 million from $1.7 million last year, a 29% rise.

The company’s past policy was to pay out up to 70% of the free cash flow of the corresponding financial year in such manner (including by way of dividend and / or share buyback) as may be decided by the Board from time to time. Effective from fiscal 2020, the company expects to return approximately 85% of the free cash flow cumulatively over a 5-year period through a combination of semi-annual dividends and/or share buyback and/or special dividends.

With inputs from The Hindu

IANS

Microsoft is reportedly laying off at least 50 news production workers and replacing them with artificial intelligence (AI) — based algorithms to perform their editorial duties.

According to a report in the Seattle Times on Saturday, roughly 50 employees have been notified “that their services would no longer be needed beyond June 30”.

These news production contractors work with Microsoft News, the company’s news content arm that operates MSN.com and other properties.

A Microsoft spokesperson said in a statement that like all companies, they evaluate business on a regular basis.

“This can result in increased investment in some places and, from time to time, redeployment in others. These decisions are not the result of the current pandemic,” said the Microsoft spokesperson.

Some employees told Seattle Times that “MSN will use AI to replace the production work they’d been doing”.

The work includes using algorithms to identify trending news stories from dozens of publishing partners, rewrite headlines or adding better photographs or slide shows.

Besides the production work, the contract employees also planned content, maintained the editorial calendars of partner news websites and assigned content to them.

The facility is now available for PAN applicants who possess a valid Aadhaar number and have a mobile number registered with Aadhaar.

PTI

Finance Minister Nirmala Sitharaman on Thursday launched a facility for instant allotment of online PAN on furnishing of Aadhaar details.

The Budget 2020-21 had proposed to launch a system under which Permanent Account Number shall be instantly allotted online on the basis of Aadhaar without filling up the detailed application form as it sought to further ease the process of PAN allotment.

In a statement, the Central Board of Direct Taxes (CBDT) said Finance Minister Nirmala Sitharaman on Thursday formally launched the facility for instant allotment of PAN (on near to real time basis).

“This facility is now available for those PAN applicants who possess a valid Aadhaar number and have a mobile number registered with Aadhaar. The allotment process is paperless and an electronic PAN (e-PAN) is issued to the applicants free of cost,” the CBDT said.

The ‘beta version’ for instant allotment of PAN on trial basis was started on February 12, 2020 on the e-filing website of the Income Tax Department. Since then, 6,77,680 instant PANs have been allotted with a turnaround time of about 10 minutes, till May 25, 2020.

As on May 25, 2020, a total of 50.52 crore PANs had been allotted to taxpayers, out of which around 49.39 crore were allotted to individuals and more than 32.17 crore linked with Aadhaar.

The last date for the PAN-Aadhaar linkage is June 30, 2020. For generation of instant PAN, the applicant is required to access the e-filing website of the Income Tax Department, provide her/his valid Aadhaar number and then submit the OTP received on the Aadhaar registered mobile number.

On successful completion of the process, a 15-digit acknowledgement number is generated. If required, the applicant can check the status of the request anytime by providing her/his valid Aadhaar number and on successful allotment, can download the e-PAN.

The e-PAN is also sent to the applicant on her/his e-mail ID, if it is registered with Aadhaar, the CBDT said.

“The launch of the Instant PAN facility is yet another step by the Income Tax Department towards Digital India, thereby creating further ease of compliance for the taxpayers,” the CBDT added.