It is time to hear, learn and use Clearing Corporation of India updates which are of world class standards to increase streams of income from various channels so far unheard by us. It was set up in 2001 to provide guaranteed clearing and settlement functions for transactions in money, G-secs, foreign exchange, and derivative markets. Suffice to say that CCIL’s adherence to the stringent principles governing its operations as a Financial Market Infrastructure has resulted in its recognition as a Qualified Central Counterparty (QCCP) by the Reserve Bank of India in 2014. Let us hear the latest updates from this august body.
Before we venture to hear from CCIL, let us quench our intellectual desire to learn about it and why it was created?
Let me imprint its vision, mission, and values, the fundamental blocs of its existence. (totally from its website)
VISION
“To be a pivotal Financial Market Infrastructure.”
MISSION
“1. To promote safety, efficiency, systemic and financial stability and other related public interests through technology and robust risk management processes and practices setting global standards.
2. To encourage research and collaborative thinking for shaping he future of financial markets through innovation. “
VALUES
1. “Driven by public service.
2. Learning and innovating organization.
3. Practicing highest ethical standards and practices.”
It is equally interesting to know about various functions of this august body in many advanced financial and technological fields.
CCIL provides non-guaranteed settlement for Rupee interest rate derivatives and cross currency transactions through the CLS Bank. CCIL’s adherence to the stringent principles governing its operations as a Financial Market Infrastructure has resulted in its recognition as a Qualified Central Counterparty (QCCP) by the Reserve Bank of India in 2014.
It has also set up a Trade Repository to enable financial institutions to report their transactions in OTC derivatives.
The above developments foreseen by RBI through various management committees, involvement of its top -level management/economic experts and timely actions were necessitated by India emerging as a top FDI destination for world level high net worth individuals, and large financial institutions who started looking at India for their investment goals on a fast growing trillion dollars economy.
What other fastmoving fields where CCIL has set its excellence?
- Through its fully owned subsidiary, Clearcorp Dealing Systems Limited execution of various platforms for undertaking electronic deals in various market segments.
- Developed and manages the NDS-OM- the RBI owned anonymous electronic trading system for dealing in G-Secs, and for reporting of OTC deals as well as the NDS-CALL platform which facilitates electronic dealing in the Call, Notice & Term Money market.
Updates
Macro-Economic Updates September 16, 2021(I intend discussing these facts at the end as our observations for detailed analysis and how to use them to make more income for us) from CCIL website.
- Foreign Trade: India’s Trade Deficit stood at USD 13.81 billion in Aug’21.
- India registered a merchandise trade deficit of USD 13.81 billion in Aug’21 against USD 6.77 billion in Aug’20, recording a rise of around 104% on Y-o-Y basis.
- The Rupee ranged between Rs.73.15 – Rs.74.43 per USD before closing at Rs.73.15 per USD in the month of Aug’21, vis-à-vis Rs.74.39 per USD recorded in Jul’21.
- Exports: The country’s merchandise exports were reported at USD 33.28 billion in Aug’21 as against USD 22.70 billion recorded in Aug’20, recording a positive growth of 46.6% Y-o-Y. Cumulatively, the country’s merchandise exports for the period of Apr-Aug’21 stood at USD 185.27 billion, rising by 89.71% in comparison to exports recorded in same period of the previous fiscal.
I want to know which are the sectors that showed enough promise during those not so bright days as per newspapers?
The country witnessed a sharp rise in exports during the month of August across the segments of Engineering Goods, Gems & Jewelry, Petroleum Products, RMG of all Textiles, Electronic Goods and Marine Products, among others. The country’s imports also increased primarily in the segments of Iron & Steel, Pearls, precious & Semi-precious stones, Petroleum, Crude & products, and Gold among others.
I would like to mention the names of export segments as a panacea for hearing negative news.
More details of export segments that contributed enormous exports.
Engineering Goods, Petroleum Products, Gems & Jewellery, Organic & Inorganic Chemicals, Drugs & Pharmaceuticals, , Cotton Yarn/Fabs./made-ups, Handloom Products, , RMG of all Textiles, Electronic Goods, Plastic & Linoleum, Rice.
Equally heartening is to know about import segments that showed actual achievements. Imports contribute to more exports.
Petroleum, Crude & products, Gold, Electronic goods, Machinery, electrical & non-electrical, Pearls, precious & Semi-precious stones, Organic & Inorganic Chemicals, Coal, Coke & Briquettes, Artificial resins, plastic materials, Iron & Steel, Vegetable Oil.
Quantum wise, the country’s merchandise imports bills stood at USD 47.09 billion in Aug’21, increased by 59.8% from a year ago.
Cumulatively, value of imports expanded by 96.53% to USD 232.63 billion during the period of Apr’21-Aug’21 vis-à-vis USD 118.37 billion recorded in the previous financial fiscal.
Now the irksome oil imports.
Oil imports increased to USD 11.65 billion, posting a Y-o-Y rise of 81.5%.
Yes, you are right that the Oil imports constituted around 25% of the total imports, during the month.
Let us also look at export /import of services.
The country’s service exports stood at USD 18.92 billion Aug’21 (estimate), compared to USD 16.44 billion (estimate) recorded during the same period of the previous year.
India’s services imports stood at USD 11.48 billion in Aug’21 (estimate) in comparison with USD 9.60 billion (estimate) recorded in Aug’20.
Our discussion
The above actual information indicated by CCIL, and on the basis of Ministry of Commerce, speaks of enormous growth in exports/imports which arise because of revival of commerce both locally, and also abroad.
Various industries involved in exports arise from small/medium industries category. Rather than presenting a gloomy picture of the economy, the reality is more positive in nature.
In sectors like jewellery, textiles, handloom products etc., many self-employed persons are the owners and the resultant growth percolates down to the enormous risks as well as efforts taken by the owners/employees of the industries.
Let us also draw inspiration from following developments.
Market developments
- RBI conducted the auction of G-secs for an aggregate amount of ₹26000 crore on September 17, 2021.
- Eleven state governments sold SDLs for an aggregate amount of ₹13847 crore (Face Value) on September 14, 2021.
- The Government of India announced the conversion/switch of its securities through auction for an aggregate amount of ₹10000 crore (face value) on September 20, 2021 (Monday).
- Eight state governments have offered to sell securities by way of an auction, for an aggregate amount of ₹8901 crore (Face Value) on September 21, 2021 (Tuesday).
- RBI notified Master Direction – Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2021.
- RBI notified on application for Aadhaar e-KYC authentication license.
- RBI cautioned against frauds in the name of KYC updating.
- RBI and the Monetary Authority of Singapore announced a project to link their respective fast payment systems viz. Unified Payments Interface (UPI) and Pay- Now by July 2022. I have separately covered by my article in tax guru this development.
Other global developments for updating our knowledge.
- Finance Minister Nirmala Sitharaman assured that liquidity is no longer a major concern for the economy and the government would kick-start a credit outreach program from October 15th.
- The United Nations Conference on Trade and Development (UNCTAD) pegged India’s GDP to grow 7.20% in 2021
- NCAER expects the Indian economy to grow around 10% in FY22 on the likelihood of fewer Covid linked supply disruptions and buoyancy in the global economy.
- Fitch Ratings expects that Indian banks may not need fresh core capital to meet minimum capital requirements because of the regulatory forbearance to help them manage pandemic-related stress.
- Federal Reserve data indicated US industrial production returned to pre-pandemic levels in August. A robust revival of economy.
- Eurozone’s unadjusted trade surplus with the rest of the world fell to $24.40 billion in July.
- Japan recorded a trade deficit of $5.81 billion in August, the largest shortfall since December 2012.
- US consumer prices rose an annualized 5.30% in August 2021.
- The Eurozone annual inflation rate was confirmed at 3.0 percent in August 2021.
- Annual inflation rate in the UK jumped to 3.20% in August of 2021 from 2% in July.
- CCIL successfully carried out the 23rd cycle of the Portfolio Compression exercise in the Interest Rate Swaps market for MIBOR Benchmark in September.
In a nutshell, what does the above detailed development indicate?
Increase in inflation rate in U.K., Federal reserve of USA to intimate return of industrial growth in their country, fall in unadjusted trade surplus of Eurozone, CCIL undertaking successful exercise related to MIBOR Benchmark in September, and assurance of Finance minister to kickstart credit outreach program which shows glimmer of hope for the whole world.
Let me also venture to hear about the role of CCIL in bond market and what it does to enhance its image among us?
The sovereign bond market is the most liquid segment of the bond market. A sovereign bond index serves as a benchmark for portfolio management, an indicator of market performance and development, and forms the basis for derivative products like options and futures.
The bond portfolio performances, which are driven by their coupons as well as the appreciation of the asset, are monitored by the indices. A well-constructed bond index mirrors the economic policy changes of the government and structural reforms, which have a bearing on the interest rate in the economy.
So CCIL’s role is——————
CCIL is the Central Counterparty for all transactions in the Indian Government Securities market and follows the process of netting through novation to provide guaranteed settlement for all secondary market transactions. The trading information is used to compute the volume weighted average prices of all traded securities.
The theoretical price of the securities is also computed using an YTM Curve model developed internally. To capture the movements in the bond market, the two major indices proposed are:
- CCIL Broad Index: An index that comprises of top 20 traded bonds based on volume and number of trades.
- CCIL Liquid Index: An index that comprises of top 5 traded bonds based on volume and number of trades.
Any one keen to learn more can refer to CCIL Website.
Conclusion
Quite often, we fail to admire or say encouraging words about the excellent public institutions of excellence who have transformed a sleeping but giant economy like ours into the modern world totally controlled by frauds or crooks who would play their parts in siphoning of the monetary transactions. CCIL came into existence to fill the gap in management of various complex roles as an innovator, regulator, and an inspiration for our industries to travel those untrodden paths in the past. With its excellence, and unblemished record as the world level regulator in complex foreign exchange, treasury operations, or the most complex derivative markets, it has started with an outstanding result. Being an admirer and close follower of foreign exchange field, I am happy future course of events would lead us towards our goal of multi trillion dollars economy. Who knows I may not even use US $ but Indian rupee as the referred currency for my calculations?
Reference
CCIL Website: https://www.ccilindia.com/AboutUs/Pages/CompanyProfile.aspx.
What statistics get released by CCIL?
The statistics relating to the trading and settlement operations in the government securities, forex, money, and derivatives market both on daily and historical basis is disseminated on CCIL’s website and to major info-vendors. Other releases include various indices like Bond, CASBI, Tenor, SDL and T-Bill catering to various investor classes and benchmark rates like CCBID/CCBOR tracking the CBLO market and the CCIL Spot Reference Rate, which are released daily. Please refer to the website for details.
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Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc. before acting because of the above write up. The possibility of other views on the subject matter cannot be ruled out. By use of the said information, you agree that Author/Tax Guru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors, or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.
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