India Regulatory Brief: High-Value Rupee Demonetization Updates and Government Slashes Prices of Life-Saving Drugs
Latest Government Updates on Implementation of High-Value Rupee Demonetization
Banks in India are reeling from the real-time spate of announcements made by the government to manage the incredible scale of logistics involved in the sudden demonetization of the 500 and 1000 Rupee notes. In the latest notifications announced, the government directed banks to use indelible ink to mark customers exchanging the defunct currency, introduced new caps on amounts that can be exchanged – first increasing it to US$ 65.99 (Rs 4500) from US$ 58.66 (Rs 4000), and subsequently, reducing it to US$ 29.33 (Rs 2000) before putting a temporary moratorium on the exchange, before reverting to the US$ 29.33 (Rs 2000) limit. However, in terms of expanding points-of-sale (PoS), petrol pumps will now offer cash withdrawal services (via card swipe machines) for maximum limit of Rs 2000 (US$ 29.33). Initially, this will be available at 2,500 petrol pumps (gas stations) across the country that have card swipe machines from State Bank of India, which will then be extended to 20,000 outlets that have card swipe machines from HDFC Bank, Citibank and ICICI Bank. Currently, about a third of India’s 202,000 ATMs have been upgraded to dispense the new Rs 2000 and Rs 500 notes.
In terms of withdrawal limits, on November 13, the government raised the weekly withdrawal cap to US$ 351.93 (Rs 24,000) and removed the daily restriction, while on November 14, it was announced that current account holders can withdraw US$ 733.19 (Rs 50,000) per week. Also, the withdrawal limit from ATMs was raised to US$ 36.65 (Rs 2500). This was followed by a notification that farmers can withdraw US$ 366.60 (Rs 25,000) per week if they are on crop loan or kisan credit card or receive kharif (winter crop) payments by checks or real-time gross settlement systems (RTGS). Families will also now be allowed to withdraw US$ 3665.96 (Rs 250,000) for spending on marriage arrangements. Finally, in order to step up the scrutiny on black money, the government notified that Permanent Account Number (PAN) card details would be required if aggregate cash deposits by a customer crossed US$ 3665.96 (Rs 250,000) by December 30, 2016.
In addition to the above, the RBI introduced a regulatory relaxation whereby small-ticket borrowers will be given a grace period of 60 days to repay loans without being classified as defaulters. This will be over and above the 90 day grace period according to existing guidelines. To be eligible, the borrower must have a sanctioned limit of not more than US$ 146595.50 (Rs 10 million) and the repayment should be due between November 1 and December 31.
Ease of Doing Business Task-force in Each Government Ministry
India’s ranking rose by just one place since last year to reach 130 in the World Bank Ease of Doing Business index for 2017. This was met with much disappointment given the spate of economic reforms announced by the government as part of its concerted efforts to promote India as an attractive investment destination. As a result, the Department of Industrial Policy and Promotion (DIPP) will set up an ease of doing task-force in all government departments.
The aforementioned task-forces or third party evaluators will track the progress made by respective ministries, and more importantly, communicate the specific metrics of evaluation of the World Bank Report to ensure that reforms and corrective measures are framed effectively. This is to be a part of a four-pronged approach by the DIPP, which will further include a definitive feedback mechanism through discussions with stakeholders and the respondents in the World Bank study. This is a necessary step as the latest study indicated a gap between the reforms announced and user familiarity. Finally, all ministries will also establish a reforms cell on their websites to inform and clarify all the steps undertaken by them to ease the process of doing business.
India Drug Pricing Watchdog Slashes Prices of More Life-Saving Medicines
The National Pharmaceutical Pricing Authority (NPPA) recently slashed the prices of more drugs, including those that treat cancer, HIV, and blood clots. These price caps will result in a price reduction of about US$ 2.93 million (Rs 200 million). According to the NPAA, it revised or capped the prices of 540 drugs, in the last seven months, belonging to the 2015 National List of Essential Medicines (NLEM).
In its latest notification, the NPPA capped the prices of nine scheduled drugs, revised the prices of 34, and fixed the prices of 11 retail formulations. For instance, Zydus Cadila’s Zyrop injections, which are used to treat anemia due to chemotherapy or chronic kidney disease, will now retail for US$ 72.23 (Rs 4925.59 per pack). The price of Imatinib (400mg), which is used to treat certain types of cancer and blood diseases, is now capped at US$ 3.48 (Rs 236.99) per capsule. Fertility medicine Chlomiphene (100mg) is now priced at US$ 0.76 (Rs 51.64) for a pill. HIV/AIDS drug efavirenz (200mg) will now cost US$ 0.30 (Rs 20.17) per tablet. The price ceiling of life-saving drug streptokinase (15,00,000 IU), used to dissolve blood clots in blood vessels immediately after heart attacks, is now fixed at US$ 24.35 (Rs 1660.84), after being slashed by 30 percent from US$ 32.93 (Rs 2245.83). Popular streptokinase brands for this strength include Abbott Healthcare’s Icikinase, Bharat Serums and Vaccines’ Rthrombo, Cadila Pharmaceuticals’ Stpase and Lupin’s Lupiflo.
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