Angelo Soares
Angelo Soares

Orowealth Weekend Reads: October 11, 2020


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⚡️ Digital Fifth’s India Fintech Report
Check out the Digital Fifth’s ‘India Fintech Report- October edition’ for an exclusive interview with Nitin Agrawal, Co-founder of Orowealth where he briefs upon the future of the Wealth management industry in the country.


#Compound Interest Waiver
In an affidavit filed with the Supreme Court, the government of India expressed its willingness to waive compound interest for all borrowers with loan amounts lower than Rs 2 crores. Essentially, it gave in to the mounting pressure overcharging interest on interest even if a borrower had opted for a moratorium due to the difficult circumstances caused by the coronavirus pandemic. This waiver would apply to retail and MSME loans across a plethora of categories. The government also said that this waiver would apply to all borrowers regardless of whether they had chosen the voluntary moratorium or not. The apex court still has to take a view on that proposal. Ira Duggal presented her opinion on Bloomberg Quint on the two options that the government had. She said the first option was to do nothing by rejecting the demand for waiving compound interest. She favored this option and supported it by saying that the RBI had already offered a six-month moratorium and allowed a one-time restructuring of retail and corporate loans. MSME Loan restructuring was already allowed under a previous scheme. But since the Supreme Court wanted to continue hearings on the matter, the government had to provide a suggestion. The second option for the government was to minimize the harm which is what it has done. She summarises her opinion by saying “The easier and the right thing to do was nothing. Both for the government and the apex court.”

Takeaway –
The suggestion that the government has made, subject to Supreme Court’s approval, would result in a challenging administrative exercise for lenders as they will now have three categories of borrowers to deal with – those who availed the whole moratorium, those who availed part of the moratorium, and those who did not avail of the moratorium.

#MakeInIndia Phones
The government has approved 16 companies under a Production Linked Incentive Scheme (PLI) for electronics manufacturing. It has also announced a 4% to 6% incentive for five years on incremental sales of goods that are manufactured in India. Samsung, Foxconn Hon Hai, Rising Star, Wistron, and Pegatron are among the international companies that have been approved under the mobile phone segment. Except for Samsung, the other companies are contract manufacturers for Apple iPhones. The government expects Samsung and iPhone manufacturers to expand their manufacturing base in India. Among Indian companies, Lava, Bhagwati (Micromax), Padget Electronics, UTL Neolyncs, and Optiemus Electronics have been approved and get an opportunity to become domestic leaders in the mobile manufacturing segment. Meanwhile six companies – T&S, Ascent Circuits, Visicon, Walsin, Sahasra, and Neolync – have been approved under the Specified Electronic Components Segment.

Takeaway –
The government expects major export promotion on the back of this move apart from employment generation. It expects more than two lakh direct job opportunities in five years apart from indirect employment.


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Angelo Soares
Angelo Soares
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