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#Linkfest – Lenders Veto NBCC’s Jaypee Bid, Binary Options Fraud, FITCH Ratings-IFIN Quid Pro Quo, Indian Bank Multi-crore Fraud, and More

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At Capitalmind Premium, we have a very active Slack channel where we discuss a lot of interesting topics. In there,  a number of interesting links come our way. Here’s the most interesting of such links shared by our members in recent days.

Lenders Veto NBCC Plan to Acquire Jaypee Infratech

A majority of the lenders to Jaypee Infratech have refused a proposal by state-run NBCC to acquire the company at the NCLAT. If a bid is to pass muster at the NCLAT, at least 2/3rds of stakeholders in a company must give their consent. Most homebuyers are eager to see NBCC take over Jaypee but they have just 60% of the voting rights. The remaining voting rights are with the lenders, who want the NCLAT to invite new bids or reconsider the bids from other parties. At least 23,000 homebuyers who had bought flats from Jaypee Infratech were left stranded when the company entered liquidation in August 2017. Link

The Big Fraud That is Binary Options Trading

On the surface, binary options trading looks quite simple. There are only two ways to bet on a binary option – yes or no and you bet on price movements of a financial asset. There is no buying or selling of the asset; just a wager on the price movement. Most clients are taken in by this simplicity and they fail to read the fine print in the deal, which is designed to make them invest more and lose more. No wonder, a large percentage of the people who invest in binary options end up losing money. This posts explains why trading in binary options is like throwing away money. Link

Top FITCH Ratings Official Bought Discounted Villa with Ex-IFIN CEO’s Help

The Serious Frauds Investigation Office (SFIO) has found that the ex-CEO of IL&FS Financial Services helped a senior official of FITCH Ratings buy a luxury villa at a discounted price. The suspicious nature of the deal raises questions of quid pro quo. This occurred when IFIN was in the midst of a monetary transaction with a defaulter. On its website, IFIN says that FITCH Ratings has given IFIN’s long-term borrowing program a rating of AAA(Ind), and its short-term borrowing program a rating of F1+(Ind). Link

57 People Booked by CBI in Chennai for Defrauding Indian Bank of 27 Crores

CBI Chennai’s Anti-Corruption Bureau has booked 57 people, including a former senior official of Indian Bank, Porur, for defrauding the bank of Rs. 27 crores. The accused reportedly submitted bogus documents to take a loan worth Rs. 27 crores. Once the loan was released into the accused’s bank accounts, the money was siphoned off into shell companies. The complaint was lodged by the zonal office of Indian Bank. The bank official was booked because he didn’t follow due procedure before releasing the money, which raised questions about connivance. Link

Indian Banks Hit With 53,334 Frauds in Last 10 Years

According to recent RBI data, Indian banks were hit with an estimated 53,334 frauds during the last ten years, with ICICI Bank (6811), SBI (6793) and HDFC Bank (2497) accounting for the largest number of these frauds. The frauds cost the banks an astonishing Rs. 2.05 lakh crores. The list of defrauded banks also includes some foreign banks in India, such as American Express Banking Corporation, Citi Bank, HSBC, and Royal Bank of Scotland. Link

Delay in Monsoon Arrival Puts Sowing Plans in Disarray

The monsoon typically reaches Central India by June 14. But this year, there has been no sign of the monsoon in that region, raising the specter of drought. This has delayed sowing plans across much of Madhya Pradesh, Maharashtra, Gujarat, and Karnataka. An official from the Indian Meteorological Agency sought to allay fears by saying that cyclonic conditions on the west coast of India, have removed much of the monsoon’s strength but it will recover soon. Link

Michelin Wants to Lease Tyres to Indian Truck Owners

If Michelin has its way, Indian truck owners will soon be leasing tyres from the company. The French company wants to launch a new operating model for trucks in India, where the user will pay Michelin based on the number of kilometers the tyre runs. According to Michelin, the new model will bring down the cost of tyres by half, which is important given that tyres make up 35% of the operating cost of a truck. The model is already popular in Brazil, Spain, Italy, France, USA, and UK. Link

Rating Agencies Stocks Lose Steam in the Aftermath of the NBCF Crisis

The equity shares of rating agencies such as ICRA, Care Ratings, and CRISIL are in the doldrums in recent times. Analysts are blaming this on the companies’ failure to report adequately and on time, on the NBFC crisis. Since 21st September, 2019, the shares of CRISIL, ICRA, and Care Ratings have eroded by 15.38%, 18.70%, and 22.51%, respectively. Of these, CRISIL seems to be in a better position, because it is not facing SEBI adjudication proceedings in the IL&FS case, unlike its peers. Link

PM Modi Wants to Deliver Piped Water to all Rural Homes by 2024

In the 5th meeting of the governing council of the NITI Aayog, the PM revealed that the government is working on a plan to take piped water to all rural households by 2024. A large number of rural households in India don’t have access to piped water, forcing women and children to walk huge distances to fetch it. The government has recently set up a Jal Shakti Ministry, which will most likely handle the new project touted to be on the scale of the Swachh Bharat Abhiyan. Link

Tata Asset Management Side Pockets Hazardous DHFL Debt

Recently, Tata Asset Management became the first Indian AMC to ‘side pocket’ bad DHFL assets. Side pocketing, also called ‘segregated portfolios’, allows an AMC to move bad assets into a separate portfolio, so that there are no more inflows or outflows into the bad assets. This will hold until the fund recovers the money from the bad assets. Side pocketing also ensures new investors don’t come into the fund just for high gains, if and when the fund recovers the money. Meanwhile, other AMCs holding the toxic DHFL assets have increased their exit fees, designed to prevent new investors from quickly entering and leaving the fund, and yet others have stopped fresh entries. Link

SEBI Wants to Lower Credit Risk on Debt Mutual Funds

According to a Business Standard report, SEBI might soon rework the guidelines on debt mutual funds to reduce their risk. One of the ideas being debated is reducing the credit exposure that can be taken by medium and short term debt funds. Currently, there are no credit limits on most categories of debt funds. However, if SEBI issues this edict, it may also reduce the returns on some categories of debt mutual funds. Link