NEW DELHI: The Union Cabinet on Thursday deferred the long-awaited legislation on pension reforms for fear of upsetting a key ally, in a clear indication that implementing economic reforms would be far from easy in the absence of a political consensus.
On Wednesday, the prime minister had presided over a meeting of ministers in charge of infrastructure sectors and had announced a number of big-ticket projects in an attempt to dispel the widespread perception of policy paralysis.
The government had hoped to get the Pension Fund Regulatory and Development Authority Bill, which seeks to give legal sanction to the interim pension regulator that was set up by way of an executive order in 2003, passed in the monsoon session of Parliament. But the government’s leadership refrained from taking a decision after the Trinamool Congress expressed its opposition.
Railway Minister Mukul Roy, a nominee of the regional party, reminded Prime Minister Manmohan Singh that his party had conveyed its opposition to the bill through a letter to him and Finance Minister Pranab Mukherjee, according to people familiar with the proceedings. “We are not taking up the bill,” the finance minister said at the meeting.
Industry and markets were hopeful of a burst of activity from the government after GDP growth dropped to a nine-year low of 6.5% in 2011-12.
The letter from the railway minister had pointed out that his party was not part of the standing committee that cleared the bill, according to people familiar with its contents. Trinamool MP Sudip Bandopadhyay was a member of the standing committee on finance, but he quit the post after being made a minister of state. “We did not get an opportunity to present our views when the standing committee cleared the bill,”Roysaid in his letter to the PM & FM.
TMC’s support is crucial for ensuring the election of a Congress nominee as the next president.
The deferment of the bill gave yet another opportunity to the principal Opposition, the BJP, to criticise the Manmohan Singh-led government. “The government acts first and thinks later. The same route is being taken on all major issues. The government issued an order to open domestic retail sector to foreign supermarkets and then withdrew it. If the government had to consult its allies, it should have been done before taking the decision. The repeated adjournments only confirm the impression of policy paralysis,” said former finance minister Yashwant Sinha.
Parliament’s standing committee on finance, headed by Sinha, had recommended that foreign investment in Indian pension companies should be capped at 26%, the same as in insurance. The original version of the bill did not have any cap on foreign investment.
INDIA CAN GET UP TO $90 BILLION IN 2 YEARS: FINMIN
NEW DELHI: The finance ministry has received feedback that the Indian capital markets could witness $20-25 billion inflows on the pessimistic side and $80-90 billion on the optimistic side in the next two years, from the newly announced category of qualified foreign investors (QFIs) route. QFIs include foreign individuals, groups and associations. This was an input the ministry received from qualified depository participants (QDPs), through which QFIs would be allowed to invest, Thomas Mathew, joint secretary in the capital markets division of the finance ministry said on Thursday. He clarified these are not the estimates of the finance ministry, but were given by QDPs at a recent meeting. If this sum of money on the optimistic side does come in the markets in the next two years, it would help stem the depreciation of the rupee, analysts said. However, the sum on the optimistic side is much higher than recent inflows from foreign institutional investors (FIIs) into the Indian equity markets. Till June 7, FIIs have net invested $12.30 billion in the capital markets. They had invested a net of $8.29 billion in 2011, $39.47 billion in 2010 and $8.65 billion in 2009. (For details log on to: http://www.business-standard.com/india/news/india-can-getto-90-bn-in-2-years/476654/)
GOVT ROADSHOWS OVERSEAS TO SELL INDIA TO QFIs
NEW DELHI: Keen to increase capital inflows in an uncertain global scenario, the government on Thursday unveiled a plan to organise roadshows in five Gulf nations next week and in Europe and the USa few weeks later, targeting qualified foreign investors (QFIs) who were recently allowed to invest in the Indian stocks directly. The roadshows will be aimed at attracting investors to Indian debt and equity markets, which offer better returns compared with European markets, an official said. “We want to tell foreign investors that there is tremendous opportunity in India. We will address their apprehensions, if any, about investments here,” department of economic affairs secretary R Gopalan said. With the possibility of another round of quantitative easing by the USand long-term refinancing operations by Europe, it may also be a good time to encourage FII flows, Gopalan said. Investment banks are optimistic about the QFI scheme — a major reform in Indian capital markets — which allows almost every foreign investor meeting KYC norms to invest. Officials from the external affairs ministry, Sebi, RBI, BSE and NSE will join the campaign — ‘Indiaas an Incredible Investment Destination’. (For details log on to : http://www.financialexpress.com/news/govt-roadshows-overseas-to-sell-india-to-qfis/959392/)
HOUSE FINANCE PANEL FOR CLEARING ‘AUDITOR’, ‘AUDIT FIRM’ DISTINCTION
NEW DELHI: The Parliament Standing Committee on Finance wants the current ‘tenuous’ distinction between auditors and audit firms tightened in the new Companies Bill. Apparently keeping in mind the Satyam controversy, the panel also wanted a cap on the number of companies for which a person can be auditor. “The clause may thus clearly provide for the maximum number of companies a person can be appointed as auditor of, as provided for in the case of directors of companies,” the report, which will be tabled in Monsoon session of Parliament, said. The committee also endorsed the provision prescribing liabilities for auditors and extending them to audit firms as well, since the distinction between the two, according to the panel, is rather tenuous. Nevertheless, the panel supported the existing system of appointment of auditors by shareholders at every annual general meeting to be continued. This should be done in the interest of accountability to shareholders, the committee said in its report on Companies Bill, 2011. (For details log on to : http://www.thehindubusinessline.com/todays-paper/article3502489.ece)
NET DIRECT TAX COLLECTION UP 172% IN APRIL-MAY
NEW DELHI: The net direct tax collection rose by a whopping 172% to R35,323 crore during April-May this year, compared to the corresponding period last fiscal. The rise in mop-up is mainly on account of slower disbursal of refunds. According to sources, the income tax department issued refunds of R16,909 crore during the first two months of the fiscal, 55% lower than the year-ago period. ‘‘Last year, there was a drive to issue most of the refunds in the early months which is not this year. However, refunds disbursal will increase in the coming months,’’ an official said. The corporate tax collection stood at R9,576 crore during April-May against minus R5,141 crore in the year-ago period, while personal income tax mop-up this year was R25,732 crore, up from R18,079 crore. (For details log on to: http://www.financialexpress.com/news/net-direct-tax-collection-up-172-in-aprilmay/959203/)
RBI SCRAPS MADHAVPURA BANK LICENCE
NEW DELHI: The Reserve Bank of Indiaon Thursday cancelled licence of security scam-tainted Madhavpura Mercantile Cooperative Bank following failure of efforts to revive it. “All efforts to revive it in close consultation with the government had failed and the depositors were being inconvenienced by continued uncertainty,” RBI said in its order cancelling the licence of the Ahmedabad-based cooperative bank. The cooperative bank, was granted a licence by RBI in 1994, resorted to indiscriminate lending, particularly to companies linked to stock broker Ketan Parekh, in gross violation of lending norms during 1999-2000. In March 2001, there was a sudden run on the cooperative bank following rumours of its large exposure to Ketan Parekh, who suffered huge losses in his share dealings, it said. (For details log on to: http://www.financialexpress.com/news/rbi-scraps-madhavpura-bank-licence/959235/)
CABINET OKAYS R632-CRORE CAPITAL INFUSION IN RRBs
NEW DELHI: In order to improve the capital adequacy and lending capacity for the agriculture sector, the Union Cabinet on Thursday approved R632 crore capital infusion in cash-starved regional rural banks (RRBs). Indiahas 82 RRBs and almost all of them are equipped with core banking solutions. “RRBs will get R632 crore from the central government,” a senior government functionary said after the Cabinet meeting. Following recommendations of Reserve Bank deputy governor KC Chakrabarty, the government had initiated recapitalisation process in 2009-10 for 40 financially weak RRBs, which mainly provide credit to rural and agriculture sectors. However, till March 2012, capitalisation was done in 16 banks as several states did not provide their contribution. In order to complete the process of recapitalisation, the Cabinet has decided to extend the scheme by two years. (For details log on to : http://www.financialexpress.com/news/cabinet-okays-r632cr-capital-infusion-in-rrbs/959229/)
CDR CELL RECEIVED 4 CASES IN MAY FOR RECASTING LOANS WORTH R2,000 CRORE
MUMBAI: The corporate debt restructuring (CDR) cell in May received four new cases for recasting loans amounting to a little over R2,000 crore, according to a senior banker. This takes the overall number of cases referred to the CDR cell in the first two months of this fiscal to 22. These loans are valued at around R9,000 crore. Among the four cases that were referred to the CDR cell in May, Varun Industries with R1,755 crore worth of loans accounted for a major bulk of the loans sought to be recast. Varun Industries, which has a major presence in the stainless steel business, is also diversified into other businesses like mining, wind energy, gems and jewellery. Indian Bank is said to be the lead banker in the consortium of 10 other banks including Central Bank of Indiaand United Bank of India. Varun Industries made a loss of R158 crore in financial year 2011-12 on revenues of R3,177 crore. (For details log on to : http://www.financialexpress.com/news/cdr-cell-received-4-cases-in-may-for-recasting-loans-worth-r2-000-crore/959227/)
K C CHAKRABARTY MAY GET 2-YR EXTENSION AS RBI DY GOVERNOR
MUMBAI: The government is likely to extend K C Chakrabarty’s tenure as deputy governor of the Reserve Bank of India (RBI) by two years. Chakrabarty, appointed deputy governor in June 2009, was given a three-year term that ends on June 14. The other three deputy governors are Subir Gokarn, Anand Sinha and H R Khan. A deputy governor in the central bank can be appointed for five years and the retirement age is 62 — the age limit is 60 for other RBI officials. A candidate has to be younger than 60 to be eligible. An exception to this rule was made during the re-appointment of Shyamala Gopinath in 2009. Chakrabarty, who was chairman and managing director of state-run lenders Punjab National Bank and Indian Bank before joining RBI, will turn 60 by the end of the month. (For details log on to : http://www.business-standard.com/india/news/k-c-chakrabarty-may-get-2-yr-extension-as-rbi-dy-governor/476681/)
GOVT WIDENS AMBIT OF SERVICE TAX
NEW DELHI: A visit to an astrologer may cost you more from next month. The negative list for taxation of services will come into effect from July 1. Those services outside the list will be taxed, including astrologers, marriage-makers, actors, private tutors, board of directors and a host of new services under the tax ambit. Residential construction of more than one unit will also be taxed at 12 per cent in the new tax regime. Service tax will be levied on other construction services like new work contracts of immovable property, construction for non-government for non-commercial purpose, private roads and renting to government and non-for-profit organisations. In the entertainment sector, services of commercial artists, performers, TV and film actors, directors and reality show judges will be subjected to service tax. Other forms of entertainment such as magic shows, mimicry, western music or dance, modern theatres, brand ambassadors, etc, will also be taxed. However, activities by a performing artist in folk or classical art forms of music, dance or theatres will not be taxed. Services provided by sportspersons in IPL would attract service tax, as it is not a recognised sports format. (For details log on to : http://www.business-standard.com/india/news/govt-widens-ambitservice-tax/476685/)
SBI CUTS DEPOSIT RATES BY 0.25 PER CENT
MUMBAI: State Bank of Indiaon Thursday reduced its interest rates on retail term deposits by 0.25% in tenors up to 240 days for deposits up to R15 lakh. The bank now offers customers 7% and 7.25% for deposits of up to 180 days and 240 days while it offers 7.50% for tenure up to one year. Banks like Kotak Mahindra Bank and Indusind Bank offer 6% on savings accounts for deposits above R1 lakh. Should savers be willing to park their money for a longer period of six months or eight months, they can earn a better rate from banks like SBI. Other leading public sector banks such Bank of Baroda and Punjab National Bank continue to offer 7.50% for deposits of less than 270 days as does the private lender ICICI Bank. However, HDFC Bank offers 7.75% for deposits in the six months 16 days period. (For details log on to : http://www.financialexpress.com/news/sbi-cuts-deposit-rates-by-0.25/959217/)
NOW, PUBLIC SECTOR BANKS ON ‘USB’ DRIVE
MANGALORE: Opening USBs or ultra-small branches is the new mantra for public sector bankers in the country. Over 900 villages, or about 2.5 per cent of the villages, where public sector banks have implemented financial inclusion programme have USBs. For the past few years, banks have been trying to reach un-banked villages as part of a regulatory mandate. The roadmap to financial inclusion had envisaged covering 74,414 villages with population above 2,000 by March 31, 2012. Recently, the Reserve Bank of Indiasaid that banks have covered 74,199 villages or 99.7 per cent of the target. As part of their commitment, public sector banks have covered over 37,000 villages. Annual reports of various banks that are just coming out make prominent mention about USBs. The RBI thinks that opening of USBs would lead to efficiency in cash management, documentation, redressal of customer grievances and close supervision of business correspondent (BC) operations. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3502471.ece)
ICICI, YES BANK INK DEAL WITH EXIM BANK OF MALAYSIA
MUMBAI: India’s private lenders, ICICI Bank and YES Bank, on Thursday signed a collaborative deal with the Export-Import Bank of Malaysia Berhad (Exim Bank) to enhance trade, especially palm oil, between the two countries. Through this deal, Exim Bank, a development financial institution, wholly owned by Malaysia’s Ministry of Finance, will provide credit lines to ICICI Bank and YES Bank to facilitate import of goods from the South-East Asian nation. “We have entered into a $100-million master facility agreement to facilitate the ongoing trade and finance transactions between YES Bank and its importing customers. This will play an active role towards further augmenting trade flows in the Indo-Malaysia corridor by arranging overseas trade credit for Indian importers,” YES Bank said. (For details log on to : http://www.business-standard.com/india/news/icici-yes-bank-ink-dealexim-bankmalaysia-/476675/)
CHINA‘S BIGGEST BANKS INCLUDING BANK OF CHINA RAISE DEPOSIT RATES
BEIJING: China’s top five banks said on Friday they have raised deposit rates to 3.5 per cent, above the benchmark level, less than a day after Chinatook a step towards liberalising its interest rate market. The websites of all five banks showed they were offering 3.5 percent deposit rates, higher than the benchmark 3.25 per cent level. Under China’s new banking rules that came into effect on Friday, banks can offer deposit rates of up to 110 per cent of benchmark rates. The five banks are Industrial and Commercial Bank of China , China Construction Bank, Bank of China, Agricultural Bank of Chinaand Bank of Communications. (For details log on to: http://economictimes.indiatimes.com/news/international-business/chinas-biggest-banks-including-bank-of-china-raise-deposit-rates/articleshow/13920859.cms)
BNP PARIBAS, BOFA-ML & HSBC TO HOLD ROAD SHOWS PROMOTING INDIAN GROWTH STORY IN EUROPE
NEW DELHI: Barely a week after the plunge in GDP growth to a nine-year low of 6.5% in 2011-12 delivered a shock, a small but growing number of voices feel the pessimism is overdone. At least three global banks will hold investor conferences in Europe over the next few months to highlight India’s potential. “We believe the Indiastory is still intact and a few decisions will not stop inflows. In the wake of uncertainty in Europe, a GDP better than the most, we feel investors will park funds in a safe and attractive proposition – India,” BNP Securities has written to the Finance Ministry. BNP Paribas has finance ministry participation in its road show in Europe. Bank of America Merrill Lynch and HSBC are also planning similar shows, perhaps to ensure that investors cash-in on the opportunity that may have presented itself in form of the current crisis. (For details log on to : http://economictimes.indiatimes.com/news/economy/indicators/bnp-paribas-bofa-ml-hsbc-to-hold-road-shows-promoting-indian-growth-story-in-europe/articleshow/13910666.cms)
ANIL AMBANI EYES BIYANI’S GENERAL INSURANCE VENTURE
MUMBAI: After Future Capital, Kishore Biyani is getting ready to unlock value in his general insurance joint arm. According to three independent sources, Reliance General Insurance, the non-life insurance arm of the Anil Ambani-led Reliance Capital, has initiated talks with Biyani on a potential merger between Reliance General and Future Generali India Insurance Company. “Talks are on currently, but both the parties are yet to agree on the valuation. Also, Generali Group is keen on having operational control in the merged entity,” said a source. Formed in 2007, Future Generali is a joint venture between Biyani’s Future Group and the Generali Group of Italy. The Future Group owns 74 per cent stake in the company, while the Italian insurer owns the remaining 26 per cent, the highest permissible limit by Indian laws. Of the 74 per cent, Biyani’s flagship Pantaloon Retail directly and via special purpose vehicles holds close to 50 per cent stake, while the Biyani family holds around 25 per cent. Both companies have a similar joint venture in life insurance, named Future Generali Life. (For details log on to : http://www.business-standard.com/india/news/anil-ambani-eyes-biyanis-general-insurance-venture/476690/)
GLOBAL INSURANCE COMPANIES REMAIN COMMITTED TO INVESTING IN PRIVATE EQUITY FUNDS: PREQIN
MUMBAI: Preqin, the leading source of information for the alternative assets industry says that a lmost two-thirds of the leading global insurance companies are planning to make new private equity investments before the end of this calender year. The latest Preqin research reveals that despite the impending Solvency II regulatory changes, the vast majority (79%) of insurance companies have not altered their levels of exposure to private equity. “Fund managers will also be buoyed by the news that nearly one-third (30%) of insurance companies are currently below their target allocations to the asset class, and 88% plan on maintaining or increasing their allocation to private equity over the longer term,” it said. The results of the most recent Preqin Special Report show that 30% of insurance companies are below their target allocations to the asset class. 85% plan on maintaining or increasing their allocations in the next 12 months and 88% in the longer term. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/global-insurance-companies-remain-committed-to-investing-in-private-equity-funds-preqin/articleshow/13898012.cms)
INVESTORS CHEER CHEAP CRUDE OIL-FUELLED RALLY ON STREET
MUMBAI: Amid all the gloomy predictions, the market has surprised with a sharp rally in the past few trading sessions. Posting its longest winning streak since early February, the benchmark Sensex has jumped 900 points or 5.72 per cent from the June 4 intra-day low of 15,748.98 to 16,649.05. The gains in the Indian market have mirrored global markets, which have rallied on hopes of further stimulus measures to revive economic growth. Expectations among investors that European officials and the central bank would spring into action to tackle the region’s debt crisis have led to a sharp rally in risky assets. In India, investors are now hoping for a 25-basis point cut in policy rates on June 18 as a sharp decline in crude oil prices has given more elbow room to the central bank for further easing. The government’s initiative to push infrastructure projects has also boosted the sentiment. Opinion is divided if the rally would be sustained but experts believe valuations are reasonable and investors can start accumulating shares. “Time teaches us the most money is made on stocks not when the macroeconomic situation is great or the conviction in profit growth is high but when equity valuations are inexpensive,” said Ridham Desai, strategist and head of Indiaequity research at Morgan Stanley. (For details log on to : http://www.business-standard.com/india/news/investors-cheer-cheap-crude-oil-fuelled-rallystreet/476702/)
44 BSE 500 COMPANIES BEAT RIL RETURNS SINCE 1991
NEW DELHI/MUMBAI: Younger companies such as technology majors Infosys and Wipro and mining firm Sesa Goa have created more value for their shareholders in the past two decades than what Reliance Industries has done since 1977. An investment worth Rs 1,000 in Reliance Industries’ initial public offer (IPO) about 35 years earlier is now worth Rs 7.78 lakh, said its chief, Mukesh Ambani, on Thursday. Noting this was a compounded annual growth rate of 21.6 per cent, he promised further value creation for shareholders, at the company’s 38th annual general meeting here on Thursday, according to a PTI report. While this is impressive, Rs 1,000 invested in Infosys in its initial share sale in 1993 would be worth Rs 20.42 lakh today. And, not just Infosys; several other large companies have outperformed the “investors’ darling” in the past two decades. While Infosys and Wipro are from the fast growing information technology sector, there are some surprises such as Hindustan Unilever (HUL), ITC and State Bank of India (SBI). (For details log on to : http://www.business-standard.com/india/news/44-bse-500-companies-beat-ril-returns-since-91/476705/)
SHORT-STAFFED SEBI MANAGES WITH ONLY SINGLE WHOLE-TIME MEMBER FOR SECOND TIME IN 2 YEARS
MUMBAI: For the Securities and Exchange Board of India (Sebi), this could well be a case of deja vu. For the second time in two years, the capital market watchdog is finding itself short-staffed at the highest level. Against a sanctioned strength of at least three whole-time members (WTM), the regulator is currently managing with only one. The regulator has landed in this situation again after whole-time member Prashant Saran completed his three-year tenure last month. Saran’s exit has left the regulator with only one member—Rajeev Kumar Agarwal — who joined Sebi in October last year. This spells bad news for the market as policy decisions apart from important adjudication orders might take a hit with only one member to assist the chairman. Important departments including, vigilance, surveillance, market regulation, corporate finance and supervision of foreign investors, collective investment schemes and mutual funds all fall in the lap of a single member. (For details log on to : http://www.financialexpress.com/news/shortstaffed-sebi-manages-with-only-single-wholetime-member-for-second-time-in-2-years/959310/)
SEBI ALLOWS NRIs, MORE COUNTRIES UNDER QFI REGIME
MUMBAI: Market regulator Securities and Exchange Board of India (Sebi) on Thursday tweaked the definition of qualified foreign investor (QFI), which will allow residents of six Gulf countries (UAE, Bahrain, saudi Arabia, Oman, Qatar, Kuwait) and all 27 members of the European Commission (EC) to buy Indian shares and corporate bonds. The new norms will also allow non-resident Indians (NRIs) to come through the QFI route, but they will have to close their existing accounts. In a circular, Sebi said QFI would now mean a resident in a country that is a member of the Financial Action Task Force (FATF) or a member of a group which is a member of FATF. Earlier, the market regulator was of the view that only the 34 FATF member-states would be regarded as compliant with FATF standards for the purposes of the QFI definition. However, this excluded those countries from the Gulf Cooperation Council and EC, which are not members of FATF. (For details log on to : http://www.business-standard.com/india/news/sebi-allows-nris-more-countries-under-qfi-regime/476655/)
EQUITY MUTUAL FUNDS GET SURPRISE RS 506-CR FRESH INVESTMENTS IN MAY
MUMBAI: Nothing would make Indian mutual fund players happier than investors returning to their equity schemes. This turned out to be a reality in May, as retail investors pumped Rs 506 crore in fresh investments in equity categories, after four months. For the first time this year, equity segments saw positive flows during a month when the key benchmark indices lost over six per cent, amid weak global economic scenario. Fund managers are pleasantly surprised at this development. The chief marketing officer of a large-sized fund house said, “It’s contrary to our expectations. We had noticed a positive momentum was building up, but had not expected inflows to cross Rs 500 crore. I believe, market corrections propelled investors to get into opportunistic buying, which is good from a long-term perspective.” (For details log on to : http://www.business-standard.com/india/news/equity-mutual-funds-get-surprise-rs-506-cr-fresh-investments-in-may/476657/)
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