Major Financial Upsets 2018

December 24, 2018
investment banking

2018 was definitely a landmark year when it comes to financial events. There were a number of events which shook the nation at the time, and importance of these cannot be understated. Let us take a look at some of the biggest events this year, which has the potential to affect the landscape over the long term.

Recap Bonds

The government went through with the plan it had conceived in October 2017 and issued recap bonds worth Rs. 88000 crore at the start of 2018. This was the first instalment in a total of Rs. 2.11 lakh crore and the government said that it would move towards bank capitalisation by infusing at least Rs. 1.06 lakh crore in issue bonds.

PNB Scam

By far the biggest scandal to rock the financial landscape this year, the first quarter was rocked by the allegations regarding a massive fraud regarding Nirav Modi and the Punjab National Bank. The size of the scam was alleged to be more than 14000 crores, and this meant that the bank had to request the RBI to spread the scam out over 4 quarters, unlike the usual procedure.

FPI Debt Investments

One of the many bold decisions which the RBI took this year, this one saw the RBI lowering the mandatory holding period by foreign investors of government debt securities in the nation from the previous tenure of three years to one, and this happened in April.

Loan Waivers

There was a huge number of loan waivers this year, with a huge amount of existing farming loans in states being waived off by the banks. It is to be noted that seven out of the nine states where this occurred were scheduled to undergo elections this year. The total loan amount waived off by the banks amounted to Rs. 1.72 lakh crore.

IL&FS

IL&FS was the largest infrastructure company in the nation, and in 2018, it defaulted on a debt of Rs. 91000 crore it had racked up. This had a huge impact on the balance sheets of many companies which worked with this organisation, and there was a massive tremor felt across the financial landscape in the nation. Even DSP Mutual Fund wrote down the investments it had in IL&FS to zero after this news was announced by the organisation.

Bank Mergers

This was a year of Bank mergers, and many banks like Dena Bank, Vijaya Bank and the Bank of Baroda underwent mergers. LIC also increased the share it has in IDBI Bank from 11% to 51%.

Resignation

After a long period of tussling with the central government regarding the higher dividends and allowing eh banks to lend more, RBI Governor Urjit Patel finally resigned from his position citing personal reasons. After a brief interim period, Shantikanta Das was appointed as the Governor of the Reserve Bank of India.

These are only a few of the many financial upsets which took place this year. We must wait to see what 2019 has in store for us, and hope that it is not as shocking a year as 2018 was.

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