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US Treasury's Mnuchin spoke with China Vice Premier Liu He: Report

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US Treasury Secretary Steven Mnuchin has resumed discussions with China Vice Premier Liu He, with the two speaking by telephone on Friday, the Wall Street Journal reported on Monday, citing sources.

The conversation did not lead to any breakthrough to resolve the tariff dispute between the world's two largest economies, the WSJ reported.

A US Treasury spokesman did not immediately respond to a query about the report.

The development comes as China President Xi Jinping and US President Donald Trump plan to meet on the sidelines of a G20 summit that is being held in Argentina at the end of November and early December.

Earlier this month, after a phone conversation with Xi, Trump said he thought the United States would make a deal with China on trade but stood ready to levy more tariffs on Chinese goods if no progress is made.

Trump has imposed tariffs on $250 billion of Chinese goods to pressure Beijing to stop intellectual property theft and forced technology transfers, improve market access for US firms and cut China's high-tech industrial subsidy program - major shifts away from China‘s state-led economic model.

The tariff rate on $200 billion in Chinese goods is set to increase to 25 percent from 10 percent on January 1. Trump has also threatened to impose tariffs on all remaining Chinese imports, about $267 billion worth, if China fails to address US demands.

Mnuchin in October said that China needed to identify concrete "action items" to rebalance the two countries' trade relationship before talks to resolve their disputes could resume.

Average spot power price rises 45% at Rs 5.94/unit in October

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Average spot power price at Indian Energy Exchange (IEX) rose 45.5 percent in October at Rs 5.94 per unit over Rs 4.08 per unit in the year-ago month. IEX witnessed highest ever sales volume of 7,125 million units (MU) during the month due to higher demand, coal shortage, lower wind and hydro power generation.

The average Market Clearing Price (MCP) at Rs 5.94 per unit last month registered 26 percent rise over Rs 4.69 per unit price in September 2018 and 45.5 percent increase over October 2017, an IEX statement said.

According to the statement, power prices and volume remained on the higher side throughout the month due to high demand of power from western, eastern and southern states as well as supply side constraints such as coal shortages, reduced hydro and wind generation affecting the market.

The electricity market at IEX, both Day Ahead Market (DAM) and Term Ahead Market (TAM), traded the highest ever monthly volume of 7,125 MU last month, up 22 percent over 5,829 MU traded in September and higher 63 percent year-on-year.

The average spot power price was highest at Rs 7.30 per unit during evening peak hours from 0600 PM to 1100 PM.

The DAM traded 6,505 MU last month – the highest ever achieved so far in any month, registering an increase of 14 percent month-on-month and 59 percent year-on-year. On daily average basis about 210 MU were traded, the highest during any month.

One Nation, One Price was realised for 17 days at IEX. The DAM experienced transmission congestion of 1 percent mainly in the import towards southern region. On daily average basis, 605 participants traded in the market during the month.

The TAM traded 620 MU in October 2018, registering 5 times increase in volume over previous month and 1.2 times increase over October 2017.

A total of 4,25,289 RECs (Renewable Energy Certificates) were sold in the REC trading session held on October 31 featuring trade of 2,95,010 Non-Solar RECs and 1,30,279 Solar RECs. The trading session saw increase of 24 percent year-on-year and decline of 73 percent month-on-month.

Both Solar and Non-Solar RECs saw reversal in REC demand-supply situation with buy bids exceeding the sell bids. Distribution companies were the major buyers in the session followed by captive and open access consumers.

On October 31, IEX also successfully launched its GST portal for smooth handling of GST collection, invoicing and associated obligations of TCS and TDS related to trade in the REC market.

Cabinet approves MoU between India and Korea in the field of tourism

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The cabinet on Thursday approved the signing of a memorandum of understanding (MoU) between India and Korea for strengthening cooperation in the field of tourism, a statement from the government said.

The main objectives of the MoU are to expand bilateral cooperation in tourism, including cooperation in data related to tourism, between tourism stakeholders, including hotels and tour operators, to establish exchange programmes for cooperation in human resource development and encourage investment in the tourism and hospitality sectors.

"India and Korea have enjoyed a strong diplomatic and long economic relationship. The two parties are now desiring to strengthen and further develop the established relationship for strengthening cooperation in the field of tourism," the statement said.

Digit Insurance expects to sell 2.5 lakh policies in October

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Digit Insurance, which has completed a year in operations, has sold 1 million policies in the Indian market. In an interaction with Moneycontrol, Kamesh Goyal, Chairman, Digit Insurance, talks about the business strategy and expansion plans. Excerpts:

Q: Digit has completed a year of operations. Will you continue with the partnership route?

We are more focussed on the partnership model. Depending on the category of the product, these could be auto dealers, OEM tie-ups, web aggregators, travel aggregators as large travel agents. Another major focus area is a partnership with mobile manufacturers and e-commerce firms.

What is the policy run rate currently?

We sell 10,000 products a day (excluding Sundays) and expect to sell 2.5 lakh policies in October. We have crossed 1 million product sales till now.

The company seems to be aggressive on the mobile insurance front. What is the reason?

The focus is on helping partners with a differentiated offering. Screen damages are the most common among mobile phone users.

In case of traditional mobile insurance products, an application is needed to be downloaded. Further, claim settlement can take three weeks. We were given to understand that insurance for screen damage is the biggest requirement. In case of mobile phones, almost 85 percent of customers get advanced cash payment for us. Further, 93 percent of claims get approved within 24 hours.

We establish whether a screen is damaged or not using a diagnostics application. In case of our partnership with Xiaomi, a customer can take it to their authorised service centres and get it repaired free of cost.

The idea is to expand insurance beyond motor and health. For instance, we have launched a household insurance product wherein a customer can insure their homes (and content) for a period when they are on vacation.

Will retail be the bigger focus?

We are doing a huge amount of retail insurance, but are also active in areas like property insurance. We are involved in direct insurance and reinsurance (after the ITI RE acquisition) from other companies.

By the end of the year, we are expecting 2/3rd of the business to come in from retail and a third from crop and property.

You have been absent from the health insurance space. When will the product be launched and will group health be on the list?

We are in the process of launching health insurance. We had a soft launch in October and for the next two to three months, we will test the ability to service the products. Post this, we will launch full-fledged health insurance products.

We want to do any business that is sustainable. Group health losses are still high, though it is primarily government-owned insurers who continue to write business at a loss.

After the funding round in June, what is the expansion plan for this year?

Currently, we are present in 38 cities and will add 6-7 more cities in the near future. By March 31, we will have the entire product suite in place. With the product suite in place, we are also looking at bancassurance tie-ups.

The focus, however, would continue to be on quick claims settlement. We get about 60 motor claims a day. Of this, 95 percent of claims are assessed through the image-based model. Also, 100 percent of our travel claims are automated.

We also track the first time resolution rate very closely. When a customer calls, 62 percent of customer requests are resolved at the call itself. We will seek to further improve this rate.

India tops as Asia's most investment savvy economy: StanChart

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India is Asia's most investment savvy economy and more than two-thirds of the country's affluent class prefer to use various investment products to achieve their financial goals and greater social mobility, says a study.

According to a new Standard Chartered study of 11,000 emerging affluent consumers across Asia, Africa and the Middle East, 68 per cent of Indian people belonging to this segment are using investment products to achieve their financial goals, as compared to an average figure of 57 per cent.

For the purposes of this study ‘investment products' refers to fixed income investments, stocks, equities, mutual funds, unit trusts, investment-linked insurance, self-invested pension funds, real estate investment trusts (REITS) and real estate property funds.

As per the study, the number one financial goal for India's emerging affluents is saving towards their children's education which is also the top savings priority across the markets in the study.

"It is exciting to see that social mobility is booming among the emerging affluents, and that they are outstripping their parents' success in education, careers and home ownership," said Shyamal Saxena, Head - Retail Banking, India, Standard Chartered Bank.

Saxena further noted, "digital financial products are enabling the emerging affluents to achieve their goals, and these tools will be crucial in helping them take their personal financial success to the next level".

The study said, 31 per cent of emerging affluents is selecting mutual funds, a quarter (25 per cent) choosing fixed income investments and 22 per cent equity investments. All figures are higher than the average in the study, which is 16 per cent, 19 per cent and 18 per cent, respectively.

The Emerging Affluent Study 2018– Climbing the Prosperity Ladder– examines the views of emerging affluent consumers – individuals who are earning enough to save and invest – from 11 markets across Asia, Africa and the Middle East.

PCA norms could be aligned to international practices: Banking secy Rajiv Kumar

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The government has hinted at easing of capital requirements by banks reeling under the Reserve Bank of India's (RBI) prompt corrective action (PCA) framework in a bid to "align regulatory norms to international practices".

"There was no easing which was ever required and which should be done. What is being talked about is aligning the PCA framework with best international practices," said Rajiv Kumar, Secretary, Department of Financial Services.

The comments three days after the RBI held its central board meeting on October 23. Economic Affairs Secretary Subhash Chandra Garg and Rajiv Kumar are on the board of RBI to represent the government.

A top finance ministry official had said after the meeting that the government expects "ease in PCA norms" in days to come.

PCA guidelines look at certain parameters to invoke the restrictions. These include capital to risk-weighted asset ratio, net non-performing assets and return on assets.

As per RBI's interpretation of capital requirements, banks are required to maintain a minimum common equity (CET) Tier-I ratio of 5.5 percent of risk-weighted assets. However, as per Basel - III guidelines, banks need to set aside a minimum of 4.5 percent of their assets.

If RBI accepts "aligning" it's regulatory requirements with international practices, banks could see more liquidity at hand.

Banks have strongly pitched for easing the regulatory requirements in order to expand their loan books.

"Bankers have certain expectations. Some of them have said that the PCA guidelines should be revisited because that is indirectly impacting their lending ability," union finance minister, Arun Jaitley had said in September after chairing public sector banks' annual review meeting. Out of 21 PSBs, 11 are under PCA.

Under PCA, banks are prohibited from distributing dividends and remitting profits. They are curtailed from expanding their branch networks while maintaining higher provisions. Management compensation and directors' fees are also capped.

While the government continues to remain optimistic about the ease in the norms, media reports suggest that RBI has rejected the idea.

"The regulator (RBI) has argued that the move has improved the financial health of some of the banks under stress," reports suggested.

Expect policy announcement soon

Kumar, who was speaking on the sidelines of SIDBI National Microfinance Congress 2018, said that the process of recapitalisation of banks is being worked out.

"We are assessing the performance of the banks in second quarter and recapitalisation could happen after this," he said.

The banking secretary also said that the finance ministry could soon make policy announcement to address issues in the financial sector and address the concerns.

"In a week or so, some policy announcement can be expected as things are being worked out," he said.

Saudi Arabia to sign $50 billion in oil, gas, infrastructure deals: Source

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Saudi Arabia plans to sign deals worth more than $50 billion in the oil, gas, industries and infrastructure sectors at an investment conference in Riyadh on Tuesday, a source familiar with the matter said.

The deals will be signed with companies including Trafigura, Total, Hyundai, Norinco, Schlumberger, Halliburton and Baker Hughes, the source said.

The deals will include the establishment of a copper, zinc and lead smelter with Trafigura Group; a joint agreement to build an integrated petrochemical complex and downstream park in the second phase of the SATORP refinery, jointly held by Saudi Arabia's Aramco and Total; and investments in retail gas stations also by Aramco and Total.

Asia petrol buckles under supplies; crack at over two-year low

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Asia's petrol margin fell to more than a two-year low late last week due to ample supplies, and the October average is now expected to be the worst for the month since 2013, based on Thomson Reuters data.

Petrol margins against Brent crude fell 63 percent from the start of the month to $3.04 a barrel on Thursday, the lowest since August 1, 2016, before recovering to $3.55 a barrel on Friday.

However, Friday's bounce was merely a reflection of easing oil prices, rather than a sign of better things to come, trade and industry sources said.

"Weaker demand in Europe and the U.S. have affected the Asian market," said KY Lin, spokesman for Formosa Petrochemical Corp, one of Asia's key exporters of light and middle distillates.

"The commercial operation of Vietnam's new refinery, the resumption of gasoline units in Reliance and Yasref and the announcement of a restart of (UAE's) RFCC (residue fluid catalytic cracker) are also keys to the crash of gasoline margin," Lin added.

Benchmark northwest European gasoline refining margins, for instance, have turned negative and fell to their lowest in seven years last Friday.

Faced with inflated supplies, Europe will ship its gasoline to any market that can absorb the petrol.

At least two ships, the Front Tiger and FPMC P Ideal, carrying a total of 180,000 tonnes of gasoline, are heading for Singapore next month, data from Refinitiv Eikon showed.

But despite the glut, refineries in Asia are unwilling to slash runs this quarter as it is the peak demand season for gasoil and kerosene, the sources said.

"Refiners are unlikely to cut runs as gasoil supplies are tight and demand is good," said a trader who trades middle distillates.

Refinery maintenance, outages and bad weather have disrupted supplies.

Japan's Idemitsu Kosan and Fuji Oil were recently affected by an earthquake and typhoon respectively, while India's Bharat Petroleum Corp Ltd shut a hydrocracker following a fire in August.

"The recent disasters that had hit Japan had given gasoil support due to supply disruptions," said Lin.

With Asia's 10 ppm gasoil cash differential hitting a new high for 2018 on Friday, refiners are expected to look past the high gasoline inventories and instead cash in on the lucrative gasoil premiums at least for now, trade sources said.

"I won't be surprised if we start seeing gasoline being floated on ships next year just like we did in 2016," said a gasoline trader.

CVC analysis shows lending habits to blame for most bank frauds

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If there is one single theme that dominates the Central Vigilance Commission (CVC) analysis of the top 100 bank frauds in India, it is the lax credit culture at banks, especially state-owned lenders.

Yes, borrowers have resorted to a host of fraudulent activities such as inflating the value of goods, fudging financial statements, diverting money to shell companies and so on, but the CVC analysis shows that most of these threw up enough red flags. That suggests willful ignorance of such red flags either owing to incompetence, laziness or corruption.

These are the same reasons why banks are sitting on almost Rs 10 lakh crore of bad loans. As for frauds, Reserve Bank of India showed that there were 5835 frauds reported in 2017-18 worth Rs 41,000 crore. There was a significant number in both the volume and value of frauds. Public sector banks accounted for 85 percent of frauds, higher than their business share of 65-75 percent.

That frauds and the bad loan crisis owe a lot to mismanagement can be seen from the fact that frauds reported by those banks under RBI’s prompt corrective action (PCA) framework were “well in excess of their relative share in credit,” according to the central bank.

The CVC analysis shows the lacunae in the credit appraisal and monitoring process. In many cases, banks did not do proper due diligence on borrowers. In case of consortium lending, members banks failed to carry out due diligence independently and relied on the lead bank entirely.

The CVC report is scathing about some of these arrangements. In one example, it said that the “exchange of information was more a ceremonial formality rather than to sift the data. The lead bank did not share the areas of concern.”

In yet other cases, banks and their credit officers did not have the necessary competence and skills to appraise the technical aspects of projects and blindly accepted whatever was stated by the borrower.

One example is the case, where banks financed a company based on brand valuation, which was done by a private company. Later this brand value was found to be inflated; whether it is incompetence or corruption is another question altogether.

Forget specialist knowledge, in some cases, basic red flags were ignored. For instance, branches failed to get confirmation from debtors of their customer. In one case, they did not see that working capital exceeded the sales in an account by a large margin and was much higher than that of industry peers. In another case, a company produced a use-of-funds certificate that was signed by an auditor other than the one who audited the company’s balance sheet. Regional and controlling offices failed to notice that their reporting branches discounted cheques beyond their delegated powers on several occasions without obtaining permission/ approval.

The CVC’s suggestions to plug these gaps is just common sense for the most part. It suggested that banks delist third-party experts such as auditors with questionable credentials. It has asked banks to pay more attention to internal control systems and improve oversight, and have proper working capital assessment.

It has asked new members in a consortium lending framework to check with other banks before advancing and enhancing credit limits. In sum, these recommendations say that banks should do proper diligence and monitoring.

Banks would do well to improve the use of information technology in improving oversight too. In the case of Punjab National Bank, the failure to connect its core banking system to the SWIFT messaging system was one key reason why a $2-billion fraud went undetected for several years.

Secondly, as this column has argued earlier, there needs to be better utilisation of human resources, especially in state-owned banks. They need to move to a system where merit is rewarded, and specialist/professional skills are recognised. Banks can improve their credit assessment capabilities by hiring specialists and having flexible compensation policies.

The government and the regulator should seriously consider the CVC report and implement the suggestions to improve governance. Frauds are a big bottleneck to the flow of credit and should be tackled quickly in a country where bank finance is still the dominant source of funding.

Warehousing industry may grow at 13-15% in medium term: Report

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The warehousing industry in the country is expected to grow at 13-15 percent in the medium term, driven by the growth in manufacturing, retail, FMCG and e-commerce sectors, said an October 16 report.

Growth in overall production and consumption, organised retail, logistics outsourcing and regulatory interventions such as WRDA Act and GST have improved prospects of the organised professional warehousing segment, Care Ratings said in its report.

Private investments in logistics and other infrastructure developments such as dedicated freight corridor (DFC) will also aid the segment growth, it added.

"The domestic warehousing industry grew from Rs 56,000 crore in 2013 to Rs 77,000 crore in 2017, and is expected to grow at a rate of 13-15 per cent in the medium term," the report said.

However, it added that the overall growth potential is limited by challenges like limitations in infrastructure connectivity, need for large capital and issues related to land acquisition.

The country's warehousing market is highly fragmented, with most warehouses having an area of less than 10,000 square feet, it said, adding about 90 per cent of the warehousing space is controlled by unorganised players.

The report said nearly 60 per cent of the modern warehousing capacity is concentrated in the country's top six cities namely Ahmedabad, Bangalore, Chennai, Mumbai, NCR and Pune, with Hyderabad and Kolkata being the other big markets.

"Going forward, due to factors like quality of infrastructure and availability of labour, these advantages are likely to remain with these cities," it added.

Care Ratings pointed out that the domestic industrial warehousing segment is expected to grow due to anticipated increase in global demand, growth in organised retail and increasing manufacturing activities, expansion of e-commerce options and growth in international trade.

It is also expected to witness significant activity as the presence of the unorganised segment is expected to reduce and the companies would be rationalising and consolidating their space requirements based on time to serve the market and not taxation, the report said.

The demand for agriculture warehousing is expected to grow moderately, according to the report, on account of high base and expected normal monsoons.

Integrated models, diversification across end-user industries are expected to drive growth of cold chain segment. Significant demand is also seen coming from storage of fruits and vegetables, and pharmaceutical segments, it said.

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