Coronavirus: RBI’s monetary statement, impact on business, households :

 

 Business enterprises devise their strategy based on optimism and economic conditions. Although these decisions and actions have to be pragmatic, there is always a hope for achieving more. In pursuit of these goals, many enterprises would have committed to make large investments, recruited workforce, spent on automation and offered attractive buying terms to its customers. Under normal conditions these are appreciated as aggressive strategies. However, today world is faced with two significant challenges, a health concern and economic downturn.

The scale of health concern is an unprecedented one. Coronavirus (COVID–19) presents an extremely challenging situation to Governments around the world. In order to contain the spread of disease, the first phase would be a lockdown which most Governments have already implemented. The spread of disease can be contained only through contact tracing, testing, isolation and enabling recovery of effected patients. These are steps that will follow the lockdown.

The lockdown has resulted in nearly one-third of the global population being in some way or other being confined to their homes. This includes the 1.3 billion persons in India as well. All business enterprises are under closure except for very essential goods and services. In such case, it is imperative that some economic decisions including changes in monetary policy have to be taken to reduce the economic costs and to mitigate hardship to business and citizens.

Indian businesses have traditionally relied on bank borrowings. Irrespective of scale of business operations – small MSMEs to Listed Enterprises have found it easy to go with bank finance rather than to raise money from other sources. Therefore, the Reserve Bank of India issued a monetary statement on 27-3-2020 to ease the situation arising out of this global health crisis that has led to a lockdown.

 

Here are some of the highlights of the statement:

1. RBI will also do a repo operation to Infuse Rs 1 lac crore (Repo is the rate at which RBI lends money to Commercial Banks). The rate has been also slashed by 75 basis points making it cheaper for banks to borrow.

2. Reverse Repo rate has been cut by 90 basis points – this makes it unattractive for banks to deposit excess funds with RBI. So banks will have more funds with them which can be used for lending to commercial borrowers rather than parking it with RBI.

3. The Cash Reserve Ratio – which is a certain percentage of bank deposits which banks are required to keep with RBI in the form of balance – is also reduced to 3%. This is expected to release Rs 1.37 lac crore rupees into the system.

4. The GDP forecast of 5%, as per RBI, is already at risk and therefore to overcome the challenge, the liquidity in financial system is being increased to infuse at least Rs 3.74 lac crore.

However, there is some upside that is also going to be complementary to ease the situation that is arising out of the current economic scenario.

• The crude oil prices have been reducing and this is an upside for the country which imports more than 80% of its oil requirement.

• Food prices are expected to soften in the backdrop of record food grain production.

These things alone would not help the ordinary citizens or businesses from the immediate cash flow crunch arising from unexpected slowdown of economic activity. Businesses have to pay for the salary, the employee benefit schemes like EPF/ESI, pay the taxes, rent and also to pay their creditors. The most important of all being salary. When businesses have loans coupled with these payments, it becomes nearly impossible to satisfy all the things at once. So, the RBI has announced that there will be a 3-month moratorium on payment of instalments of term loans and deferring of interest on working capital.

These steps have the dual advantage of – bank loans not being classified as NPA due to non-payment of interest or instalments and businesses having sufficient liquidity to pay the priority outflows like salary and vendor payments to keep the supply channel open.

 

Relaxation on term loan instalments and interest:

All term loans, including agricultural term loans, retail and crop loans will be having a 3 month moratorium period. Working capital interest will also have a moratorium period. Banks will have the discretion in deciding limits the limits on working capital. Any miss in payments will not be considered as a default and not reported to credit information companies. This will be a relief to all sections of society, public and businesses. This applies to banks and NBFC’s as well as all-India Financial Institutions. This will provide relief to all borrowers who have instalments falling between 1-March-2020 and 31-May-2020.

It is also important to note that RBI has specifically clarified that the repayment schedule and residual tenor of such loans will be shifted across the board by three months after the moratorium period.

Further, it is also to be noted that this is an option that will be given to borrowers who have genuine financial difficulties and they will have to approach bank with a request for the moratorium period.

This concession would be most required for businesses operating in the hospitality, tourism and other sectors like service providers where the business lost during this period of lockdown will not be recouped after the end of lockdown. Manufacturing and export entities may also face loss of orders/sales but the hit on service sector, transport including cabs and buses and entertainment sector could be large as these businesses have time utility factor.

 

Personal and housing loan repayment, credit card dues

The RBI has clarified that the moratorium benefits are available for personal and housing loans, car loans etc. It is applicable for instalments or interest, credit card dues, EMI’s and bullet repayments (one time repayment or large single payment).

 

Working capital loan interest condition

For working capital loans sanctioned in the form of overdraft or cash credit, lenders are permitted to defer the recovery of interest applied on such loans. The accumulated interest accrued interest shall be recovered immediately after completion of this period.

 

Economic package announced by the government:

The central government has also announced earlier in the week economic package of Rs 1.7 lac crore for relief of the poor. This includes both cash and non-cash benefit transfer. Some of these measures are strengthening of existing schemes and some are additional schemes. This is likely to address some of problems that arise from both demand and supply factors. Cash benefit transfer will give the benefit for demand side of economy and the supply will be taken care of Public Distribution System thus minimizing the effect of the poor section of society.

 

The road ahead:

The events of the last few days are some of most challenging and taking us to certain uncharted future. A global action coupled with economic package will help a quicker recovery.

It is time to think of new action and decisions in business. A careful and thoughtful act is the need of the hour.

How Pilots Use Air Navigation to Fly - By Manohar Bhat

 How Pilots Use Air Navigation to Fly

Air navigation is accomplished by various methods. The method or system that a pilot uses for navigating through today's airspace system will depend on the type of flight that will occur (VFR or IFR), which navigation systems are installed on the aircraft, and which navigation systems are available in a certain area.


Dead Reckoning and Pilotage
At the most simple level, navigation is accomplished through ideas known as dead reckoning and pilotage. Pilotage is a term that refers to the sole use of visual ground references. The pilot identifies landmarks, such as rivers, towns, airports, and buildings and navigates among them. The trouble with pilotage is that, often, references aren't easily seen and can't be easily identified in low visibility conditions or if the pilot gets off track even slightly. Therefore, the idea of dead reckoning was introduced.


Dead reckoning involves the use of visual checkpoints along with time and distance calculations. The pilot chooses checkpoints that are easily seen from the air and also identified on the map and then calculates the time it will take to fly from one point to the next based on distance, airspeed, and wind calculations. A flight computer aids pilots in computing the time and distance calculations and the pilot typically uses a flight planning log to keep track of the calculations during flight.

Radio Navigation
With aircraft equipped with radio navigation aids (NAVAIDS), pilots can navigate more accurately than with dead reckoning alone. Radio NAVAIDS come in handy in low visibility conditions and act as a suitable backup method for general aviation pilots that prefer dead reckoning. They are also more precise. Instead of flying from checkpoint to checkpoint, pilots can fly a straight line to a "fix" or an airport. Specific radio NAVAIDS are also required for IFR operations.

There are different types of radio NAVAIDS used in aviation:

ADF/NDB:
The most elementary form of radio navigation is the ADF/NDB pair. An NDB is a nondirectional radio beacon that is stationed on the ground and emits an electrical signal in all directions. If an aircraft is equipped with an automatic direction finder (ADF), it will display the aircraft's position in relation to the NDB station on the ground. The ADF instrument is basically an arrow pointer placed over a compass card-type display. The arrow always points in the direction of the NDB station, which means that if the pilot points the aircraft in the direction of the arrow in a no-wind situation, they will fly directly to the station. The ADF/NDB is an outdated NAVAID, and it's a system prone to errors. Since its range is line-of-sight, a pilot can get erroneous readings while flying in mountainous terrain or too far from the station. The system is also subject to electrical interference and can only accommodate limited aircraft at once. Many are being decommissioned as GPS becomes the primary navigation source.

VOR:
Next to GPS, the VOR system is probably the most commonly used NAVAIDS in the world. VOR, short for VHF Omnidirectional Range, is a radio-based NAVAID that operates in the very-high-frequency range. VOR stations are located on the ground and transmit two signals—one continuous 360-degree reference signal and another sweeping directional signal.

The aircraft instrument (OBI) interprets the phase difference between the two signals and displays the results as a radial on the OBI (omni-bearing indicator) or HSI (horizontal situation indicator), depending on which instrument the aircraft uses. In its most basic form, the OBI or HSI depicts which radial from the station the aircraft is located on and whether the aircraft is flying toward or away from the station.
VORs are more accurate than NDBs and are less prone to errors, although the reception is still susceptible to line-of-sight only.

DME:
Distance Measuring Equipment is one of the most simple and valuable NAVAIDS to date. It's a basic method using a transponder in the aircraft to determine the time it takes for a signal to travel to and from a DME station. DME transmits on UHF frequencies and computes slant-range distance. The transponder in the aircraft displays the distance in tenths of a nautical mile.
A single DME station can handle up to 100 aircraft at one time, and they usually co-exist with VOR ground stations.

ILS:
An instrument landing system (ILS) is an instrument approach system used to guide aircraft down to the runway from the approach phase of flight. It uses both horizontal and vertical radio signals emitted from a point along the runway. These signals intercept to give the pilot precise location information in the form of a glideslope—a constant-angle, stabilized descent path all the way down to the approach end of the runway. ILS systems are widely in use today as one of the most accurate approach systems available.

GPS
The global positioning system has become the most valuable method of navigation in the modern aviation world. GPS has proven to be tremendously reliable and precise and is probably the most common NAVAID in use today.

The global positioning system uses 24 U.S. Department of Defense satellites to provide precise location data, such as aircraft position, track, and speed to pilots. The GPS system uses triangulation to determine the aircraft's exact position over the earth. To be accurate, a GPS system must have the ability to gather data from at least three satellites for 2-D positioning, and four satellites for 3-D positioning.

GPS has become a preferred method of navigating due to the accuracy and ease of use. Though there are errors associated with GPS, they are rare. GPS systems can be used anywhere in the world, even in mountainous terrain, and they aren't prone to the errors of radio NAVAIDS, such as line-of-sight and electrical interference.

Practical Use of NAVAIDS
Pilots will fly under visual flight rules (VFR) or instrument flight rules (IFR), depending on the weather conditions. During visual meteorological conditions (VMC), a pilot might fly by using pilotage and dead reckoning alone, or they might use radio navigation or GPS navigation techniques. Basic navigation is taught in the early stages of flight training.

In instrument meteorological conditions (IMC) or while flying IFR, a pilot will need to rely on cockpit instruments, such as a VOR or GPS system. Because flying in the clouds and navigating with these instruments can be tricky, a pilot must earn an FAA Instrument Rating to fly in IMC conditions legally.

Currently, the FAA is emphasizing new training for general aviation pilots in technologically advanced aircraft (TAA). TAA are aircraft that have advanced highly technical systems onboard, such as GPS. Even light sport aircraft are coming out of the factory with advanced equipment these days. It can be confusing and dangerous for a pilot to attempt to use these modern cockpit systems in-flight without additional training, and current FAA training standards haven't kept up with this issue.

India's growth set to bounce back as slump bottoms out: Govt adviser

 

Indian economic growth is poised to bounce back after slipping to a more than six-year low of 4.5% in the July-September quarter as the government has taken measures to prop up investments and consumer demand, a top government adviser said.

 "Corporate tax reductions, the Insolvency and Bankruptcy Code and the banking sector reforms have helped and will help propel growth further," Sanjeev Sanyal, principal economic adviser at the finance ministry, told Reuters.

 The Insolvency and Bankruptcy Code, introduced in May 2016, has helped banks to recover billions of dollars stuck in outstanding corporate loans and offer loans to new borrowers.

Sanyal said economic growth was set to accelerate to 6% in the financial year beginning in April, compared with estimated growth of 5.0% in the current one.

But many private economists are less optimistic, saying the current downturn may continue for the next few quarters due to a dip in private investments and tepid consumer demand.

Nomura said Asia's third-largest economy will see a sub-par recovery, and forecast 4.7% GDP growth for the current fiscal year and 5.7% for the next fiscal year.

Sanyal dismissed the conservative estimates and said his numbers took into account early signs of recovery in manufacturing and a pick-up in consumer demand.

He said the government expected that average consumer price inflation would fall to 4% in the next financial year beginning April, after a recent spike driven largely by food prices.

There is enough space for the central bank to further cut interest rates, however, as inflation was likely to ease following a fall in vegetable prices, he said.

"While there was a slowdown, this slowdown has by and large now bottomed out, and if anything from here on, growth is going to go up," Sanyal said.

Finance Minister Nirmala Sitharaman, who tabled her annual budget earlier last month, told parliament  that the signs of "green shoots were visible" and the economy was no longer in trouble.

The Reserve Bank of India last week kept it policy rates steady but downwardly revised the country's growth forecast for the first half of the next fiscal year to 5.5-6.0% from an earlier projection of 5.9%-6.3%.

Sanyal said the budget has offered a clutch of tax incentives for sovereign wealth and insurance funds, which would leave more banking funds for private companies despite higher state borrowings.

Other than the corona virus outbreak in China, there is no "major other disruption," to India, he said adding it was difficult to quantify the impact as the situation was still evolving.

Enhancing Security of Card Transactions - By Manohar Bhat

 Enhancing Security of Card Transactions

All Scheduled Commercial Banks (SCBs) including Regional Rural Banks (RRBs) /
Urban Co-operative Banks (UCBs) / State Co-operative Banks (StCBs) /
District Central Co-operative Banks (DCCBs) / Payments Banks (PBs) /
Small Finance Banks (SFBs) / Local Area Banks (LABs) /
Authorised Card Payment Networks / Non-Bank PPI issuers

Over the years, the volume and value of transactions made through cards have increased manifold. To improve user convenience and increase the security of card transactions, it has been decided as under:

a) At the time of issue / re-issue, all cards (physical and virtual) shall be enabled for use only at contact based points of usage [viz. ATMs and Point of Sale (PoS) devices] within India. Issuers shall provide cardholders a facility for enabling card not present (domestic and international) transactions, card present (international) transactions and contactless transactions, as per the process outlined in para 1 (c).

b) For existing cards, issuers may take a decision, based on their risk perception, whether to disable the card not present (domestic and international) transactions, card present (international) transactions and contactless transaction rights. Existing cards which have never been used for online (card not present) / international / contactless transactions shall be mandatorily disabled for this purpose.

c) Additionally, the issuers shall provide to all cardholders:

    facility to switch on / off and set / modify transaction limits (within the overall card limit, if any, set by the issuer) for all types of transactions – domestic and international, at PoS / ATMs / online transactions / contactless transactions, etc.;

    the above facility on a 24x7 basis through multiple channels - mobile application / internet banking / ATMs / Interactive Voice Response (IVR); this may also be offered at branches / offices;

    alerts / information / status, etc., through SMS / e-mail, as and when there is any change in status of the card.

2. The provisions of this circular are not mandatory for prepaid gift cards and those used at mass transit systems.

3. Issuers and card networks may give wide publicity to the provisions of this circular.

4. These directions are issued under Section 10(2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007) and shall come into effect from March 16, 2020.

 

Source - Internet

Investment options

 

Most investors want to make investments in such a way that they get sky-high returns as fast as possible without the risk of losing the principal money. This is the reason why many investors are always on the lookout for top investment plans where they can double their money in few months or years with little or no risk.

However, it is a fact that investment products that give high returns with low risk do not exist. In reality, risk and returns are inversely related, i.e., higher is  the  risk, and vice versa.

So, while selecting an investment avenue, you have to match your own risk profile with the risks associated with the product before investing. There are some investments that carry high risk but have the potential to generate high inflation-adjusted returns than other asset class in the long term while some investments come with low-risk and therefore lower returns.

Here is a look at the top  investment avenues Indians look at while savings for their financial goals.

Direct equity
Investing in stocks is that over long periods, equity has been able to deliver higher than inflation-adjusted returns compared to all other asset classes. Further, it is advisable to pick the right stock, timing your entry and also exit on proper advice or research. To reduce the risk to certain extent, you could diversify across sectors. To invest in direct equities, one needs to open a demat account.

Equity mutual funds
Equity mutual funds predominantly invest in equity stocks.

Equity schemes are categorised according to market-capitalisation or the sectors in which they invest. Currently, the 1-, 3-, 5-year market return is around 15 percent, 15 percent, and 20 percent, respectively.

Debt mutual funds
Debt funds are ideal for investors who want steady returns. They are are less volatile and, hence, less risky compared to equity funds. Debt mutual funds primarily invest in fixed-interest generating securities like corporate bonds, government securities, treasury bills, commercial paper and other money market instruments. Currently, the 1-, 3-, 5-year market return is around 6.5 percent, 8 percent, and 7.5 percent, respectively.

 

National Pension System (NPS)
The National Pension System (NPS) is a long term retirement - focused investment product managed by the Pension Fund Regulatory and Development Authority (PFRDA). The minimum annual (April-March) contribution for an NPS Tier-1 account to remain active has been reduced from Rs 6,000 to Rs 1,000. It is a mix of equity, fixed deposits, corporate bonds, liquid funds and government funds, among others. Based on your risk appetite, you can decide how much of your money can be invested in equities through NPS. Currently, the 1-,3-,5-year market return for Fund option E is around 9.5 percent, 8.5 percent, and 11 percent, respectively.

 Public Provident Fund (PPF)
The Public Provident Fund (PPF) is one product a lot of people turn to. Since the PPF has a long tenure of 15 years, the impact of compounding of tax-free interest is huge, especially in the later years. Further, since the interest earned and the principal invested is backed by sovereign guarantee, it makes it a safe investment.

Bank fixed deposit (FD)
A bank fixed deposit (FD) is a safe choice, especially in Public Sector Banks, for investing in India. The interest earned is added to one's income and is taxed as per one's income slab.

Senior Citizens' Saving Scheme (SCSS)
Probably the first choice of most retirees, the Senior Citizens' Saving Scheme (SCSS) is a must-have in their investment portfolios. As the name suggests, only senior citizens or early retirees can invest in this scheme. SCSS can be availed from a post office or a bank by anyone above 60. SCSS has a five-year tenure, which can be further extended by three years once the scheme matures. Currently, the interest rate that can be earned on SCSS is 8.3 per cent per annum, payable quarterly and is fully taxable. The upper investment limit is Rs 15 lakh, and one may open more than one account.

 RBI Taxable Bonds
The government has replaced the erstwhile 8 percent Savings (Taxable) Bonds 2003 with the 7.75 per cent Savings (Taxable) Bonds. These bonds come with a tenure of 7 years. The bonds may be issued in demat form and credited to the Bond Ledger Account (BLA) of the investor and a Certificate of Holding is given to the investor as proof of investment.

 Real Estate
The house that you live in is for self-consumption and should never be considered as an investment. If you do not intend to live in it, the second property you buy can be your investment.

The location of the property is the single most important factor that will determine the value of your property and also the rental that it can earn. Investments in real estate deliver returns in two ways - capital appreciation and rentals. However, unlike other asset classes, real estate is highly illiquid. The other big risk is with getting the necessary regulatory approvals.

 Gold
Possessing gold in the form of jewellery has its own concerns like safety and high cost. Then there's the 'making charges', which typically range between 6-14 per cent of the cost of gold (and may go as high as 25 percent in case of special designs). For those who would want to buy gold coins, there's still an option. One can also buy ingeniously minted coins. An alternate way of owning paper gold in a more cost-effective manner is through gold ETFs. Such investment (buying and selling) happens on a stock exchange (NSE or BSE) with gold as the underlying asset. Investing in Sovereign Gold Bonds is another option to own paper-gold.

 

What you should do
Some of the above investments are fixed-income while others are market-linked. Both fixed-income and market-linked investments have a role to plan in the process of wealth creation. While market-linked investments help in navigating the volatility and in the process generate high return, the fixed income investments help in preserving the accumulated wealth so as to meet the desired goal. For long-term goals, it is important to make the best use of both worlds.