ECONOMY AFFAIRS JANUARY 2015
- Companies can collaborate with each other for CSR
In a move that could benefit the corporate sector at large, the government has allowed companies to enter into collaboration with each other to engage in corporate social responsibility (CSR).The Companies Act had earlier prescribed companies can doCSR work only on their own or through a holding, subsidiary or associate company.
The ministry of corporate affairs has issued a notification to amend the CSR provision in the new Companies Act, allowing two companies to collaborate with each other on their own, or through their holding, subsidiary or associate companies. These two companies can form a trust, society or another third company for CSR work.
Companies above a threshold of their earnings have to spend a portion for CSR or explain the reasons for not doing so to the shareholders.The rules have permitted collaborative CSR efforts between unrelated entities, and this amendment would help operationalise that using a separate legal entity structure, he added.
According to the Companies Act, 2013, any company with a net worth of Rs 500 crore or a turnover of Rs 1,000 crore or net profit of Rs 5 crore needs to spend at least two per cent of its average net profit in the preceding three financial years on CSR activities.
The company’s report of the Board of Directors attached to the financial statements is required to include an annual report on the CSR activities of the company. This would cover a brief outline of the CSR policy, the composition of the CSR Committee, the average net profit for the past three financial years and the prescribed CSR expenditure.
If the company concerned fails to spend the specified amount on CSR, it has to specify the reasons for not spending in this report.CSR activities include spending on eradicating hunger, poverty and malnutrition, promoting preventive health care, education and gender equality, setting up homes for women, orphans and senior citizens, measures for reducing inequalities faced by socially and economically backward groups.
It also includes spending on ensuring environmental sustainability and ecological balance, animal welfare, protection of national heritage and art and culture, measures for the benefit of armed forces veterans, war widows and their dependents, training to promote rural, nationally recognized Paralympic or Olympic sports, contribution to the prime minister’s national relief fund or any other fund set up by the central government for socio economic development and relief and welfare of Scheduled Castes, Scheduled Tribes, other backward classes, minorities and women.
Contribution to political parties is not a part of CSR and only activities in India would be considered for computing such expenditure. - Centre plans 3 Greenfield ports
The Government of India is preparing a plan to develop new ports at Dahanu, Vijaydurg and Revas in Maharashtra, in association with the state government and the private sector.The total investment is estimated to be at least Rs 20,000 crore and each port is expected to handle 40 million tonnes of cargo annually. - Panel recommended raising FDI cap in Defense
India has to raise the foreign direct investment cap in Defense manufacturing to 51 per cent to get US companies to think seriously about investing in the country and share technology, said US India Political Action Committee (USINPAC) chief Sanjay Puri.
USINPAC represents the political views of Indian-Americans, encourages their political participation, and works on issues that concern the community.
Puri said the interest of the Defense sector was big for Obama as US is now India’s largest supplier of Defense equipment.
A global agreement on climate change is another issue very important for President Obama who wants it to be part of the legacy he leaves behind, Puri said.
Puri, however, admits that it would not be an easy task to get the same levels of commitment from India as it is at a different stage of evolution than US or China and has to balance its economic agenda with political agenda. - Centre to launch services sector push on April 23
After launching the “Make in India” initiative aimed at the manufacturing industry, Prime Minister Narendra Modi is set to initiate a big push for the services sector in April.
Mr. Modi will inaugurate a global exhibition on services on April 23 to showcase India’s strength in the sector and provide a platform to the industry to explore opportunities, Commerce and Industry Minister NirmalaSitharaman told on 27th January
Over 40 countries are expected to participate in the three-day exhibition. Besides IT, big opportunities exist in tourism, wellness, yoga, healthcare, education, logistics, media and entertainment, R&D, space and hospitality, she said.
India’s rank in the global exports of services improved from the 11th in 2009 to the sixth in 2013. Still, there is tremendous scope as India’s share in the global services trade is only 3 per cent, compared with 4.6 per cent of China, Commerce Secretary Rajeev Kher said.
The services sector has an important role to play in the success of “Make in India,” he said. “Unless we are competitive in services, we will not be competitive in merchandise.”
India ran a net surplus of $73 billion in services trade during 2013-14 as exports exceeded imports. The surplus in services helped provide for some part of the trade deficit in merchandise of $138 billion. - ADB funds for GMR’s Philippines project
The Mactan Cebu International Airport project in the Philippines, awarded to a joint venture comprising GMR Infrastructure, is getting $75 million Asian Development Bank (ADB) funds. In a regulatory filing on 27th January, GMR Infrastructure said the joint venture firm, GMR-Megawide Cebu Airport Corporation, has amended the financing documents of the project to include ADB. Megawide Construction Corporation has 60 per cent shareholding in the joint venture and GMR the balance. The loan for 70 per cent of the project cost of PHP 33 billion (about $750 million), is now being financed by a consortium of seven banks, including ADB. - CCEA clears FDI proposals of HDFC Bank, Lupin
The Cabinet Committee on Economic Affairs (CCEA) has cleared foreign direct investment (FDI) proposals of HDFC Bank and Lupin on 28th January.Both the proposals had earlier been approved by the Foreign Investment Promotion Board (FIPB), but had to be routed through the CCEA as they involved fresh foreign investments over Rs 1,200 crore. The CCEA’s nod will allow HDFC Bank to raise Rs 10,000 crore from foreign investors.
The CCEA also gave its approval to the proposal of Lupin Ltd to increase its aggregate limit of investment by foreign institutional investors (FIIs) and their sub-accounts registered with SEBI, from 33 per cent to 49 per cent. The approval would result in foreign investment of Rs 6,099 crore, an official release said. - Cabinet goes by HC tax relief for Vodafone
The Union Cabinet on 28th January decided not to challenge a Bombay High Court ruling that said Vodafone was not liable to pay a tax demand of Rs. 3,200 crore in a transfer pricing case. The Cabinet also decided not to appeal against similar verdicts in other cases against taxpayers.
The decision follows Attorney-General Mukul Rohatgi’s advice to the Income Tax Department not to appeal against the High Court judgment. - 3G auction: Cabinet nod for Rs 3, 705 cr. As base price
The Union Cabinet on 28th January approved a reserve price of Rs 3,705 crore per megahertz (MHz) for the March 4 auction of the 3G spectrum – which can fetch at least Rs 17,555 crore from this band.
The Telecom Commission-recommended reserve price is around 11 per cent higher than what telcos paid in the 2010 auction, and about 36 per cent higher than Telecom Regulatory Authority of India (Trai) recommendation of Rs 2,720 crore per MHz pan-India. The Commission had asked Trai to reconsider its recommendations on 3G pricing.
Apart from the 3G spectrum, the government is also going to auction 2G bands (800 MHz, 900MHz and 1800 MHz). Previously, it had approved reserve price for auction of 2G spectrum in 800 MHz, 900 Mhz and 1800 MHz bands that at the minimum rate set would get the government Rs 64,840 crore. Of these, the government will get Rs 16,000 crore from 2G spectrum sale and Rs 5,793 crore on 3G airwaves this fiscal and the remainder will flow in later. - FDI to India up 26% in 2014: UNCTAD report
Foreign Direct Investment (FDI) inflows to India increased 26 per cent to $35 billion in 2014, despite macroeconomic uncertainties and financial risks, according to a United Nations report on global investments.
China became the largest recipient of FDI in the world in 2014 with inflows of $128 billion (3 per cent growth), which was nearly four times more than India. Interestingly, among the top five FDI recipients in the world, four are developing economies which include Hong Kong ($111 billion), Singapore ($81 billion) and Brazil ($62 billion).
The US fell to the third place with FDI inflows of $86 billion, almost a third of their 2013 level, the report said. Global FDI inflows, however, declined 8 per cent to $1.26 trillion due to fragility of the global economy, policy uncertainty and geopolitical risks, according to the latest ‘Global Investment Monitor’ report released by United Nations Conference on Trade and Development (Unctad) on 29th January.
FDI flows to developing countries crossed $700 billion, which was 4 per cent higher than 2013, with a global share of 56 per cent. On the other hand, FDI flows to developed countries dropped 14 per cent to $511 billion, significantly affected by the US, the report said. Although FDI flows to the EU increased 13 per cent to $267 billion, those to Germany and France were negative.
In its forecast for 2015, the report said that trends in global FDI flows were uncertain. “The fragility of the world economy, with growth tempered by hesitant consumer demand, volatility in currency markets and geopolitical instability will act as a deterrent for investors,” it said.
On the positive side, the report said that stronger economic growth in the US, the demand boosting effect of lower oil prices and proactive monetary policy in the Euro Zone could support increased FDI. - India leads M&A activity in renewable sector: PwC
Mergers and acquisitions in the renewable energy sector in Asia Pacific has grown 22 per cent in 2014 to $6 billion, driven by JSW Energy’s $1.6-billion acquisition of Jaypee Group’s hydro power assets along with other deals in China and Australia.JSW Energy’s acquisition was in fact the second largest renewable energy deal globally, according to global accounting and consulting firm PwC’s research. - Indian firms need to broaden CSR vision: FICCI-Accenture report
Indian companies need to move from corporate social responsibility (CSR) to corporate responsibility (CR) by adopting a broader vision that combines commercial, social and environmental goals while improving competitiveness, says a report by global consultancy major Accenture and the Federation of Indian Chambers and Commerce Industries (FICCI).
Outlining a framework for this “seamless transition” from CSR to CR, the report, "Organizing for Success on Corporate Responsibility: The Path to High Performance,” notes that in the short run, most businesses in India will continue to focus on building their CSR capabilities but will gradually embrace the broader opportunities of CR.
The new company law has classified a range of activities as CSR, providing a path for companies to implement innovations and new forms of collaboration for “generating socially responsible profits”. To take advantage of this opportunity, a holistic CR agenda should not just focus on making companies commercially and socially viable, but also focus on sustainable and scalable initiatives, said Shaifalika Panda, co-chairperson, FICCI Young Leaders Forum, in a release.
The report suggests that companies need to have a vision that enables company leaders to engage with internal and external stakeholders and identify areas in which they can create value.
Developing distinctive capabilities, particularly in how they work with partners to identify talent and new ideas, and how they create models that share value appropriately between partners, is a crucial component of this vision, says the report. “Our framework is designed to help organisations think through a wide range of potential requirements and options — from their vision and strategy to their operating model, capabilities and culture — as they prepare to develop impactful CR initiatives,” said Sanjay Dawar, Managing Director, Accenture Strategy, India. - Fiscal deficit exceeds full-year target
The Central government’s fiscal deficit has exceeded the Budget estimate for the full financial year in the first nine months (April-December) of the current fiscal year. The fiscal deficit is the difference between the government’s income and expenditure.
Data released by the Controller General of Accounts show that the deficit during the April-December period was over Rs 5.32-lakh crore as against the Budget estimate of Rs 5.31-lakh crore. This is 100.2 per cent of the estimate as against 95.2 per cent during the corresponding period of the previous fiscal year.
The Government has repeatedly said that it will be able to contain the deficit within the Budget target of 4.1 per cent of GDP. Experts feel that with the change in calculation of Gross Domestic Product (GDP), the deficit number as a percentage of GDP will be lower than the Budget projection. - Panel on parameters for urban co-operative banks
The Reserve Bank of India has set up a High Powered Committee to re-examine and recommend an appropriate set of businesses, size, conversion criteria (into a mainstream bank) and licensing terms for the Urban Cooperative Banking Sector.
The committee, which will be chaired by R Gandhi, Deputy Governor, RBI, will look into the lines of businesses (that commercial banks undertake) that can be permitted for Urban Co-operative Banks and the necessary benchmarks in terms of size of business, capital requirement, regulatory regime, etc.
In view of the limited legal powers and resolution options, the committee will examine the appropriate size up to which a UCB may be able to grow without undue risk to the system, under the current regulatory framework.
The committee will examine whether the time is opportune to give licenses to new UCBs and if so the modalities of taking forward the recommendations of the Malegam Committee.The committee will determine the modalities of implementing the suggestion of the Malegam Committee (on Licensing of New UCBs) that 50 per cent of deposits (in value terms) should be held by voting members. - FDI inflows beat global trends, surge 26%
Foreign direct investment (FDI) inflows to India increased by about 26 per cent to $35 billion in 2014, despite macroeconomic uncertainties and financial risks, according to a United Nations report on global investments, released on 29th January.
China, however, received inflows worth $128 billion and with a modest increase of 3 per cent, went on to become the world's largest recipient of FDI. Brazil, another BRICS country and an emerging market like India, received $62 billion of FDI inflows.
The U.S. fell to the third position, with inflows plummeting to almost a third of the 2013 level. Global FDI flows declined 8 per cent to an estimated $1.26 trillion, down from a revised $1.36 trillion in 2013.
Among the top five FDI recipients in the world, four are developing economies — Hong Kong ($111 billion), Singapore ($81 billion) and Brazil ($62 billion).
Global FDI inflows fell due to the fragility of the global economy, policy uncertainty and geopolitical risks, the latest ‘Global Investment Monitor’ report released by the United Nations Conference on Trade and Development said. - India to grow 6.3% in 2016: UN
India will see a gradual growth acceleration with its GDP expected to reach 5.9 per cent this year and 6.3 per cent in 2016, the UN said on 19th January while partly crediting the recovery to improved market sentiment after the new government took office and announced key reforms.
India's economy expanded by an estimated 5.4 per cent in 2014, an improvement from growth of 5.0 per cent recorded in 2013, but still significantly below the 8.0 per cent pace of the pre-crisis period," said the United Nations World Economic Situation and Prospects 2015 (WESP) report, launched on 19th January. India is projected to see a gradual acceleration in growth, with GDP forecast expanding to 5.9 per cent in 2015 and 6.3 per cent in 2016, the report said.
The recovery is partly the result of improved market sentiment after the new administration took office in the second quarter of 2014 and announced plans to reform the bureaucracy, labour laws and public subsidies," it said.
The WESP report is produced at the beginning of each year by the UN Department of Economic and Social Affairs, the UN Conference on Trade and Development (UNCTAD), the five UN regional commissions and the World Tourism Organisation ( UNWTO).
Economic growth in South Asia is set to gradually pick up from an estimated 4.9 per cent in 2014 to 5.4 per cent in 2015 and 5.7 per cent in 2016, the report said
While the recovery will be led by India, which accounts for about 70 per cent of regional output, other economies such as Bangladesh and the Islamic Republic of Iran are also projected to see stronger growth in the forecast period," it said.
The global economy is expected to grow at 3.1 per cent in 2015 and 3.3 per cent in 2016, compared with an estimated growth of 2.6 per cent in 2014.
The world imports of goods and services is projected to grow by 4.7 per cent in 2015. The tepid growth of the world economy is a legacy of the global financial crisis of 2008 that continues to weigh on growth, while new challenges have emerged, including geopolitical conflicts such as in Ukraine and the Ebola epidemic, the report said. - IFC, GIC of Singapore to invest Rs 1,600 crore in Bandhan
The soon-to-be launched Bandhan Bank has firmed up equity infusion totaling Rs 1,600 crore from International Finance Corp (IFC) and GIC, Singapore's sovereign wealth fund, thus completing its effort to bring in outside strategic investors. While IFC would be putting in Rs 580 crore, GIC has committed to invest Rs 1,020 crore.
The combined holding of these two entities would be more than 50% of the bank's capital, which is expected to start operations with a capital base of Rs 3,200 crore including earlier investments by IFC.
While IFC, an exiting investor into the parent Bandhan Financial Services (BFSL), is holding 11% stake before the current round of fund infusion, GIC, with over $100 billion of assets in 40 countries, has been taking equity exposure into the Indian private sector including realty.
The World Bank arm is investing Rs 580 crore in total in the parent micro-lender Bandhan Financial Services as well as the bank being promoted by it, IFC said in a disclosure.
While IFC said it is separately investing in the two entities - the micro-finance firm as well as the proposed bank - Bandhan will merge the two entities going ahead.
IFC said it would assist the first of the new generation banks to emerge as the finest micro, retail and SME banking platforms in the country with specific focus on the country's under-banked population. The decision to invest in Bandhan will be taken at the IFC's board meet to be held on February 2.
Bandhan was founded in 2002 by Ghosh and subsequently transformed into a non-banking finance company. Apart from Ghosh and IFC, other key shareholders include Financial Inclusion Trust, North Eastern Financial Inclusion Trust, Bandhan Employees Welfare Trust and Small Industries Development Bank of India. As on December end, BFSI had a loan book of Rs 7,810 crore with disbursement to 61.52 lakh, mostly women borrowers, serving through its 2,022 branches spread across 22 states and union territories. - India surpasses China: IMF
The International Monetary Fund (IMF) on 20th January became the latest organisation to predict that India is on track to outpace China in the next few years and become the world’s fastest growing large economy.In its latest update to its World Economic Outlook (WEO) report, the IMF said India is likely to grow 6.5 per cent in 2016-17, higher than 6.3 per cent for China.
This prediction comes a week after the World Bank said that India is expected to outpace China in 2017-18 with growth of 7 per cent (as against China’s 6.9 per cent) on the back of reform initiatives of the Modi-led Government.
However, in the latest update, IMF lowered India’s growth projection for 2015-16 to 6.3 per cent, from 6.4 per cent estimated in October 2014.
The slowdown in China could drag the growth rates of most emerging Asian countries other than India, said the IMF report.India’s growth will not slide with others as it is expected to reap huge net gains from the fall in global oil and commodity prices, according to the IMF report.
In India, the growth forecast is broadly unchanged, however, as weaker external demand is offset by the boost to the terms of trade from lower oil prices and a pick up in industrial and investment activity after policy reforms, the IMF report added.
The latest IMF report also said world growth for 2015 and 2016 is projected at 3.5 per cent and 3.7 per cent, respectively, a downward revision of 0.3 per cent as against the October 2014 forecast.
China’s economy slowed down to 7.4 per cent in 2014 – the slowest in 24 years – missing the official target of 7.5 per cent. The IMF has now projected that China’s growth rate will decline to 6.8 per cent in 2015-16 and 6.3 per cent in 2016. - Nod for Defence, Telecom Ministries pact for spectrum
The ministries of Telecom and Defence have resolved the long pending difference over the swap formula for spectrum use between the Defence sector and telecom operators.
The Defence will now vacate 15 MHz spectrum in the 3G band in exchange for the same amount of spectrum in another frequency band. In return, the Defence forces will be given an exclusive spectrum band.
Telecom Minister Ravi Shankar Prasad said that the eight-year dispute has been resolved between the two ministries. However, it will take at least a year for the transition to take place as it is a complex exercise. The CCEA ratified the deal which would make available more spectrum for telecom companies, the Minister said. But the vacated airwaves will not be put up for auction in February, he added.
During this period, the Department of Telecom will set up a defence band for exclusive use by the armed forces. The DoT will create a defence band along 50 km of the international border, which will be known as Defence interest zone.
The Centre feels the arrangement is beneficial for telecom operators as they will get access to another 15 MHz of 3G spectrum. However, the industry had wanted this spectrum to be auctioned along with other frequency bands in February. The Cabinet had earlier decided that only 5 MHz of 3G spectrum will be sold now.
The CCEA, however, has not decided on the pricing of the 3G spectrum approved by the Telecom Commission (TC) at a base price of Rs 3,705 crore per MHz. - CSR projects: Centre allows firms to team up with unrelated entities
Corporates’ have been given more flexibility in their CSR spending with the Government allowing them to collaborate with unrelated entities for this purpose.The Corporate Affairs Ministry’s move to permit collaborative CSR efforts between unrelated corporate entities will help enhance the scale of CSR projects that could be undertaken by companies.
It will help companies raise more funds to carry out specific projects without budgetary constraints, say corporate observers. The latest move would also enable better direct monitoring of the actual CSR spend for corporates, they added.
Prior to the latest rule change, companies could undertake CSR only through ‘direct relationships’ and unrelated entities were not allowed to collaborate. This amendment clarifies setting up of entity singly or jointly.
About Corporate Social Responsibility
Under the Companies Act, 2013, any company having a net worth of rupees 500 crore or more or a turnover of rupees 1,000 crore or more or a net profit of rupees 5 crore or more should mandatorily spend 2% of their net profits per fiscal on CSR activities. The rules came into effect from 1 April 2014. - SEBI relaxes regulation for delisting of shares
Making the delisting process easier, the Securities and Exchange Board of India (Sebi) on 22nd January said the requirement of mandatorily purchasing at least 25 per cent shares of public shareholders would be relaxed subject to certain conditions.
The regulator also announced stricter norms for trustees of securitised debt instruments and made 25 per cent mandatory upfront payment for foreign investors in partly-paid shares.If the acquirer and the concerned merchant banker are able to “demonstrate that they have contacted all the public shareholders, about the offer in the manner prescribed”, then the condition of compulsorily acquiring 25 per cent shares from public shareholders would be relaxed, Sebi said. The regulator would make the amendment to the Sebi (Delisting of Equity Shares) Regulations, 2009.
Besides, the board has decided to provide 18 months time for entities trading on exiting bourses to get listed on nation-wide stock exchanges. The move comes after many entities expressed concern that present listing norms do not provide them enough time to get listed on nation-wide bourses.
The Sebi board approved stricter norms for trustees managing issuance of securitised debt instruments, as part of efforts to boost investor confidence in securitisation transactions. It has also approved a proposal allowing banks and public financial institutions to act as trustee without obtaining registration. - Time to review Food Security Act: panel on FCI revamp
Shanta Kumar committee on restructuring of Food Corporation of India has recommended reduction in coverage of population form 67 per cent to 40 per cent under the National Food Security Act. Briefing reporters about the recommendations of the committee, kumar said the legal entitlement of food grains should be raised form 5 kilograms to 7 kilograms per person per month.
The panel headed by former Food Minister Shanta Kumar has suggested gradual introduction of direct cash transfer regime for food subsidy. He said the initiative will help the government to save around 3000 crore rupees per year. On the farmers issues, Mr Kumar said there is no food security unless the government provides security to farmers. He also said farmers are committing suicides because they are not getting full benefits of subsidies given by the government.
The eight-member committee, which was set up in August 2014, submitted its report to the Prime Minister yesterday. In its report the committee recommended the procurement operations be streamlined to bring back private sector in grain markets. It has also suggested that FCI should be provided a free hand to dispose off the excess food grain stock above the buffer limits.
On stocking of grain, the committee recommended FCI should out source this to Central and State warehousing corporations and it should concentrate on creating bulk handling facilities at godowns and railway movements. The committee also advocated for opening more procurement centers in Northeast so that farmers could get Minimum Support Prices of their produce. - Govt pushes ahead with 2 major infrastructure projects for J&K
The Cabinet Committee on Economic Affairs, chaired by Prime Minister NarendraModi, has given its nod for four-laning of the Udhampur-Ramban and Ramban-Banihal sections of National Highway 44 in Jammu & Kashmir. This work will be under the National Highways Development Project (NHDP) Phase-II.
Implementation of these projects would provide all-weather-connectivity from Jammu to the Kashmir valley. It will also reduce journey time from Jammu to Srinagar and strategic border areas in the state of J&K. The Cabinet also approved 3G spectrum for the defence forces, identifying 49 slots in the band of 3 megahertz and 40 gigahertz. - A.P. revenue deficit may touch Rs 20,000 crore
The revenue deficit of Andhra Pradesh of Rs.16,000 crore, it is set to touch Rs.20,000 crore by the end of current financial year, according to a forecast.
Growing non-plan revenue expenditure, expected tax revenue shortfall of about Rs.15,000crore by March-end and no word on Rs.12,391 crore expected from Government of India, State apparently has no tangible source to fall back on.
It is expected that the Centre may shortly release Rs.2,000 crore to Rs.3,000 crore to bridge the deficit gap to some extent and give another Rs.50 crore to Rs.100 crore per district under the Special Development Package for the backward seven districts including four Rayalaseema districts. Centre is also expected to give industrial incentives for both A.P. and Telangana.
But Andhra Pradesh’s appeal for special category status is not likely to be conceded due to technical hurdles though it was one of promises made before the AP State Reorganisation Bill was adopted in Parliament. However, State may get part of aid in the form of grant and remaining as loan. The releases under all above heads still may not amount to significant sum given the projected non-plan revenue deficit of Rs.20,000 crore including Rs.4,435 crore non-plan revenue deficit as on June 2, 2014. - RBI eases norms for revamping ECBs
The Reserve Bank of India (RBI) has simplified the existing procedure for rescheduling/restructuring of external commercial borrowings (ECBs). It also delegated more powers to banks to deal with cases related to change in draw-down and repayment schedules.
Under the simplified procedure, the RBI has delegated powers to the banks (authorised to deal in foreign exchange) to make changes/modifications (irrespective of the number of occasions) in the draw-down and repayment schedules of the ECB raised both under the automatic and approval routes.
The abovementioned changes/modifications could either be associated with change/no change in the average maturity period and/or with changes (increase/decrease) in the all-in-cost.
ECBs are commercial loans availed from non-resident lenders with minimum average maturity of 3 years. Banks can allow reduction in the amount of ECB (irrespective of the number of occasions) along with any changes in draw-down and repayment schedules, average maturity period and all-in-cost. They can also permit increase in all-in-cost of ECB, irrespective of the number of occasions.
However, the RBI said banks can permit changes/ modifications in the draw-down and repayment schedules of the ECB provided the revised average maturity period and/or all-in-cost is/are in conformity with the applicable ceilings/guidelines; and the changes are effected during the tenure of the ECB.
The central bank said banks may also allow the cases requiring transfer of the ECB from one company to another on account of re-organisation at the borrower’s level in the form of merger/demerger/amalgamation/acquisition after satisfying themselves that the company acquiring the ECB is an eligible borrower and ECB continues to be in compliance with applicable guidelines. - European Investment Bank to lend € 100m to SBI
State Bank of India and European Investment Bank recently signed a loan agreement for € 100 million to be utilised for on-lending to private businesses in India.
The loan will be utilised to support the development of private sector, in particular small and medium-sized enterprises, social and economic infrastructure as well as climate change mitigation and adaptation in India.
The EIB funds will be earmarked for financing projects across a broad range of sectors, including manufacturing, as well as wholesale and retail trade and services This is 3rd tranche of a total loan sanction of € 200 million by EIB. A first tranche of € 55 and second tranche of € 45 million was signed on 25th June 2014 and 28th November 2014 respectively.
The agreement was signed on January 19 by Arundhati Bhattacharya, Chairman, State Bank of India and Roman Escolano, Vice President, EIB at Luxembourg at European Investment Bank head office. - FDI in November dips 6% to $1.53 bn
November 2014 witnessed Foreign Direct Investment into India declining by over 6 per cent year- on- year to USD 1.53 billion. In November 2013, the country had received FDI worth USD 1.63 billion. However, for the April-November period of the ongoing fiscal, FDI grew by 22 per cent to USD 18.88 billion as against USD 15.45 billion in the same period a fiscal before, according to the Department of Industrial Policy and Promotion data.
Amongst the top 10 sectors, telecom received the maximum FDI of USD 2.47 billion in the eight months period of the current fiscal, followed by services (USD 1.84 billion), automobile (USD 1.53 billion), pharmaceuticals (USD 1.15 billion) and computer software and hardware (USD 862 million).
During the period, India received maximum FDI from Mauritius at USD 5.20 billion, followed by Singapore (USD 3.74 billion), Netherlands (USD 2.42 billion), the US (USD 1.35 billion), Japan (USD 1.28 billion). In 2013-14, FDI stood at USD 24.29 billion as against USD 22.42 billion in the 2012-13 fiscal. - Pradhan Mantri Jan Dhan Yojna makes it to Guinness World Records
Prime Minister Narendra Modi's ambitious initiative financial inclusion scheme Pradhan Mantri Jan Dhan Yojna (PMJDY) has made its way into the Guinness World Records for opening the highest number of bank accounts in the least time. Launched by PM Modi on August 28, 2014, the government had given banks the deadline of January 26, 2015 to open 10 crore accounts. However, banks had achieved the target set by the government a month before the January 26 deadline.
99.74 percent households in the country have been covered by Jan Dhan Yojana, the Finance Secretary said. According to reports, 11.43 crore accounts were opened by banks across the country as of January 16. Of this, 8.24 crore accounts had zero balance.
Public sector banks alone opened 9.06 crore accounts, followed by regional rural banks which opened about 2 crore accounts. 13 private sector banks together open just 36 lakh accounts. - Industrial production grows by 3.8% in Nov
Reviving hopes of economic recovery, industrial production grew at a 5-month high of 3.8 percent in November due to improvement in manufacturing and mining sectors as well as better offtake of capital goods. The factory output, as measured by the Index of Industrial Production (IIP), had declined by 1.3 percent in the same month of 2013.
The revised figure for October last year remained unchanged, a contraction of 4.2 percent, according to the data released by Central Statistics Office on 12th January. For the April-November period of the 2014-15 fiscal, IIP is up 2.2 percent, as against 0.1 percent in same period of last fiscal.
Manufacturing output, which constitutes over 75 percent to the index, grew by 3 percent in November, compared to a dip of 2.6 percent in the same month a year ago. For April to November, the sector saw an output growth of 1.1 percent, compared to a contraction 0.4 percent in the year-ago period.
Output of the mining sector grew by 3.4 percent in November, compared to a growth of 1.6 percent. During the April-November period, the production has grown by 2.5 percent, compared to a contraction of 2.1 percent during the first eight months of last fiscal.
The production of capital goods, a barometer of demand, grew by 6.5 percent in November, as against a growth of 0.1 percent in same month of last year. During the April-November period, capital goods output grew by 4.9 percent as against a dip in production by 0.1 percent.
Overall, 16 of the 22 industry groups in manufacturing showed positive growth in November. According to the IIP data, power generation grew by 10 percent in November compared to a growth of 6.3 percent in the same month last year.
For the April-November period, electricity production is up 10.7 percent, compared to a growth of 5.4 percent in the same period of last fiscal. The consumer goods output declined by 2.2 percent in November as against a dip in output at 8.9 percent logged a year ago. - Indian economy picking momentum: OECD
Showing positive signs, India’s economic growth is firming up even as mixed trends are projected for most of the developed and developing nations, according to Paris-based think tank OECD. India, along with Japan, is expected to see positive changes in growth momentum.
OECD’s projections are based on its Composite Leading Indicators (CLIs) - which are designed to anticipate turning points in economic activity relative to trend.
The Organization for Economic Cooperation and Development on Monday said the indicators for November 2014 showed “diverging (growth) patterns across most major economies. Based on India’s November CLI of 99.5, the grouping said in a statement that the country’s growth is firming up. The CLI stood at 99.3 in October, higher than 99.1 seen in September. Prior to that, the indicator touched 99 in August which was more than July’s CLI of 98.8. - RBI, European Central Bank ink pact
Reserve Bank and the European Central Bank (ECB) have signed a memorandum of understanding for cooperation in the area of central banking. The MoU provides a framework for regular exchange of information, policy dialogue and technical cooperation between the two institutions. Technical cooperation may take the form of joint seminars and workshops in areas of mutual interest in the field of central banking, said the RBI. - Nod for Tata to buy DoCoMo
The Reserve Bank of India has given an in-principle approval to Tata Sons’ proposal to acquire NTT DoCoMO’s stake in Tata Teleservices (TTSL) at the price agreed to by the two parties in 2009.The RBI has observed that though the transaction is not in line with its 2014 circular, it is inclined to accept the proposal to protect investments given the strategic relationship with Japan.
NTT DoCoMo had filed for arbitration at the London Court of International Arbitration alleging that Tata Sons had failed to fulfil its obligation. In April 2014, NTT DoCoMo announced plans to sell its entire stake in TTSL, exiting India five years after entering the country. The exit came after the Indian company failed to achieve certain performance targets. In March 2009, the Japanese company had acquired the stake in TTSL for $2.7 billion (Rs13,070 crore at the then exchange rate).
Under the terms of the shareholder agreement, the Tatas had to find a buyer by December 2014 and if it failed to do so, it had to buy those shares from DoCoMo. The Japanese company is entitled to get at least ?7,250 crore for the entire stake, which is 50 per cent of its total acquisition price, from TTSL.
The key hurdle was an RBI circular, issued in January 2014, which stated that when the put option is exercised, it should be based on the prevailing return on equity at the time the option is exercised and not based on a pre-determined valuation. Tata Sons had engaged Pricewaterhouse& Co LLP to determine the fair value. - Ordinance promulgated on Mines and Minerals
The Centre has promulgated the Mines and Minerals (Development and Regulation) Amendment, Ordinance 2015. President Pranab Mukherjee gave his assent to the Ordinance on January 12, after the Union Cabinet approved the amendments on January 5.
The statement added that the number of mining leases granted in the country has fallen and also the second and subsequent renewals have been affected by Court judgments. This has resulted in the mining sector’s output falling, leading to imports.
For example, while India has abundant iron ore reserves, the country’s imports are expected to be 15 million tonne in 2014-15 while exports are only estimated to be around 8-9 million tonne, making India a net importer of the mineral.
The amendments to the MMDR Act include auctioning of the mineral concessions. Also renewals have been done away with and the concession period has been increased to 50 years from the current 30 years. At the end of the concession period, the mining lease will be put up for auction again. For the existing lease holders, the mining lease of existing lease holders has been extended till March 31, 2030 and for merchant miners it has been extended till March 31, 2020. - Indian business optimistic: Grant Thornton report
Indian businesses have emerged as being the most optimistic about the economy for 2015, with 98 per cent suggesting they are positive about the policies of the new government, way above the global average of 35 per cent, says a report by Grant Thornton.
According to assurance, tax and advisory firm Grant Thornton’s International Business Report, 94 per cent of Indian businesses are expecting an increase in revenues and 89 per cent expect rise in profits in the next 12 months.
While 41 per cent of businesses in India believe that exports would grow in the next 12 months, much better than the global average of 18 per cent, 53 per cent plan to ramp up investments in new buildings in 2015. Moreover, employment prospects look bright too for 2015 as 73 per cent expect to hire workers (the highest in the IBR survey) — the global average is just 28 per cent. - India will catch up with China's growth rate in 2016-17: WB
India will catch up with China's growth at 7 percent in the year 2016-17, the World Bank has forecast, saying India's economy has recovered in the wake of the economic reform measures taken by the new Indian govt, falling oil prices and lower interest rates.
India will catch up with China's growth in the year 2016 and 2017," World Bank Chief Economist and Senior Vice-President Kaushik Basu told reporters in Washington on 13th January.
The World Bank in its report forecast a growth rate of 7 percent each in the fiscal year 2016 and 2017 as against Chinas 7 percent and 6.9 percent respectively. This would be for the first time in recent past that India's growth rate would catch up with that of China.
The World Bank estimated a growth rate of 5.6 percent in 2014 and has forecast a growth rate of 6.4 percent in 2015, while that of world's second largest economy China as 7.4 (estimated) in 2014 and 7.1 percent (forecast) in 2015.
In its report, the bank said growth in South Asia rose to an estimated 5.5 percent in 2014 from a 10-year low of 4.9 percent in 2013.
Regional growth is projected to rise to 6.8 percent by 2017, as reforms ease supply constraints in India, political tensions subside in Pakistan, remittances remain robust in Bangladesh and Nepal, and demand for the region's exports firms, it said. According to the bank, implementation of reforms and deregulation in India should lift FDI.
A recovery in exports, declining oil import bills and strong remittance inflows are helping to narrow current account deficits, it said, adding that a particularly sharp compression occurred in India where the deficit printed at 2.2 percent of GDP in the third quarter of 2014, a 4.7 percentage point decline relative to its peak in fourth quarter of 2012. - Govt. sanctions Rs 996 crore for augmenting transmission facilities
Government has approved an investment of Rs 996 crore for the augmentation of transmission facilities. The Ministry of Power said in a release that the government has accorded the investment for capital projects of the Central Power Research Institute (CPRI) in order to serve the growing needs of research and development in the power sector including development of advanced testing facilities.
The investment would serve the growing needs of Research and Development in the Indian Power Sector including, development of advanced Testing Facilities, located at Bengaluru, Hyderabad, Kolkota, Guwahati, Noida and Nagpur. A new laboratory will also be established in Western Region at Nasik.
The main facilities proposed to be set up under the approved projects, include Short Circuit Test Facilities ,Transmission Tower Test Facility , Facilities for Switchgear Testing & Development , Facilities for testing of transformer oil ,Relocation and augmentation of thermal research centre at Nagpur, Establishment of new unit at Nasik and Establishment of Phasor Measurement Unit System and Smart Grid Research Laboratory. - Repo rate cut to 7.75%
Raghuram Rajan on 15th January announced his first rate cut since being appointed Reserve Bank of India (RBI) Governor in August 2013. The move prompted a near-unanimous opinion that this could be the beginning of a new easing cycle.
The central bank also hinted as much, saying inflationary pressures had ebbed since July last year and on current policy settings, inflation was likely to be below six per cent by January 2016. The reverse repo rate, at which the central bank drains excess liquidity from the banking system, also fell 25 bps to 6.75 per cent.
The rate cut, the first in 20 months, came 15 days ahead of a scheduled policy meeting of the central bank on February 3. - Households' inflation expectations ease: RBI survey
The Reserve Bank of India (RBI)’s quarterly survey on inflation showed households expect a much lower rate of consumer inflation, validating the central bank’s unexpected decision to cut interest rates earlier on 15th January.
The RBI released its October-December poll of 5,000 households across 16 cities on Thursday after earlier cutting its policy repo rate by 25 basis points to 7.75 per cent. The central bank said the fall in households’ inflation expectations likely was a possible “adaptive response to the decline in headline inflation in recent months.”
The survey showed households expected consumer inflation of 8.9 per cent in the October-December quarter in the year ahead period, down sharply from 16 per cent in the previous quarter.
Meanwhile, for the three-month period, the median showed households expecting inflation at 8.3 per cent, down from 14.6 per cent in the previous quarter. Those expectations are still well above the actual level of inflation, with data on Monday showing the consumer price index rose 5.0 per cent in December.
The survey also showed 79.8 per cent of respondents expect prices to increase over a one-year period, lower than the 90 per cent respondents in the previous quarter.For the three-month ahead period, 72.4 per cent of respondents expected prices to rise compared with 86.4 per cent of respondents in the September quarter. - Global economic outlook is glum despite cheaper oil: IMF
A sharp drop in oil prices and a stronger US economy will probably not be enough to brighten the outlook for globaleconomic growth this year, the head of the International Monetary Fund said on 15th January.
IMF Managing Director Christine Lagarde said while cheaper oil would help consumers in much of the world, the United States would likely be the only major economy this year to buck a trend of weakness in investment and consumption.
At the same time, the IMF also sees economic growth slowing in emerging market economies, led by a slowdown in China. "A shot in the arm (from lower oil prices) is good, but if the global economy is weak on its knees, it's not going to help," Lagarde said. - World Bank projects 6.4% economic growth in India
World Bank President Jim Yong Kim said that India should be the leader in eliminating poverty. Stating that he is looking forward to a Vibrant India along with Vibrant Gujarat, Mr. Kim said India's economy is expected to grow at 6.4 percent this year. Kim added that tax and subsidy reforms essential for inclusive growth in India. India has potential to be a leader in solar energy production, and the solar sector could be India's key contribution towards fighting climate change. The World Bank President said after slowing to sub-five per cent growth in the previous two financial years, the economy has started showing signs of pick-up as it expanded by 5.7 per cent and 5.3 per cent in the second and third quarter of 2015.
The World Bank President said Prime Minister Modi and his government have been quickly putting in place the building blocks for even more rapid growth, streamlining national regulatory structure and promoting social inclusion. Jim said he was very encouraged by the recent proposal of a Constitution amendment bill for Goods and Services Tax. He said the World Bank had a deep interest in promoting policies and supporting projects that maximise sustainable and inclusive economic growth. - BSE signs pact to set up global exchange in Gandhinagar
The Bombay Stock Exchange (BSE), Asia’s oldest stock exchange, will establish an international exchange in GIFT SEZ-IFC, a multi-services Special Economic Zone (SEZ) being developed as the country’s first International Financial Services Centre (IFSC) by Gujarat International Finance Tec-City Company Ltd (GIFTCL), in Gandhinagar.
The BSE signed a memorandum of understanding (MoU) with GIFT SEZ Ltd, a wholly-owned subsidiary of GIFTCL, at the Vibrant Gujarat Global Summit on 11th January.
The BSE intends to develop an international exchange providing electronic platform for facilitating trading, clearing and settlement of securities, commodities, interest rates, currencies, other classes of assets and derivatives by international investors in GIFT SEZ-IFSC in GIFT City, subject to necessary approvals and operating guidelines for IFC, Ramakant Jha, Managing Director and CEO, GIFTCL, said.
As per the MoU, the BSE, along with its associates and members, will invest up to Rs. 150 crore for establishing up to a 3 lakh square feet built-up area (BUA) to set up this international exchange. GIFT SEZ has been notified as an International Financial Services Centre (IFSC) by the Government of India as the country’s first IFC.
In the absence of an IFSC in India, India has lost roughly 50% market share in the two most important India-related products, with Rupee and Index being mostly traded on foreign platforms instead of onshore trading in such products. For instance, the trading volumes of the rupee and India-based indices is estimated at over USD 100 billion a day. Overseas venues like SGX (Singapore), DGCX (Dubai) and CME (Chicago, and worldwide), and the global OTC and NDF markets, have been very successful in this trading. - Cane fair price hiked
The Centre has decided to raise the Fair and Remunerative Price of sugarcane payable by millers to farmers to Rs. 230 per quintal for the 2015-16 sugar season as against Rs. 220 per quintal set for the previous sugar season. The Cabinet Committee on Economic Affairs chaired by the Prime Minister approved the proposal
The raise is consistent with the Rs.10 per quintal hike being given in the last few years, but it has been agitating farmers in various states especially Uttar Pradesh where the State Advised Prices are higher and being resisted by millers. In U.P., the SAP is Rs. 280 per quintal for 2014-15. - Food grain buffer norms revised
The Centre on 16th January revised the buffer norms for food grains reserves and decided to offload excess stocks through open market sales or exports. An inter-ministerial group, comprising the secretaries of the departments of Food and Consumer Affairs and Revenue, will decide on the offloading as a step to contain inflation and reduce storage costs.
A meeting of the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, gave its nod for setting up the group.
The buffer will include five million tons of strategic reserves of wheat and rice. The proposal is to upgrade the quarterly buffer requirement to bring it in line with the distribution needs under the National Food Security Act. - NTPC signs term loan agreement with SBI
Country's largest thermal power producer NTPC has signed a term loan agreement of Rs 10,000 crore with state-run lender State Bank of India (SBI) for partially funding its capital expenditure. NTPC has signed a term loan agreement for Rs 10,000 crore with State Bank of India. The loan has a door to door tenure of 15 years and will be utilized to part finance the capital expenditure of the company. The loan agreement was signed in the presence of Arup Roy Choudhury , CMD, NTPC , Arundhati Bhattacharya, chairperson, SBI and K Biswal, Director (Finance) NTPC. - HDFC, SBI among top 50 valued global banks
Two Indian banks, HDFC Bank and State Bank of India (SBI), now figure in a list of the top 50 global banks in terms of market capitalization. HDFC Bank, India’s second-largest private lender in terms of asset size, ranks 45th, with a market capitalization of $39 billion, Bloomberg data show. With a market capitalization of $38 billion, SBI is ranked 46th. ICICI Bank, ranked 53rd, is the only other Indian entity to figure in the list of the 100 most valued global banks.
The market capitalization, or value, of an entity is calculated by multiplying the total number of its shares outstanding by its stock price.
The huge leap in the rankings of Indian lenders is due to a sharp rally in their stocks in the past year. During this period, shares of HDFC Bank gained 50 per cent, while those of SBI nearly doubled. ICICI Bank added about 70 per cent. A year ago, no Indian bank featured among the 60 most valued global banks. At 65, HDFC Bank had the best ranking among Indian lenders. - Centre to implement Rs. 1,900-cr e-governance project for ESIC
The Centre is implementing a Rs. 1,900 crore e-governance project called ‘Panch Deep’ to automate transactions of the Employees State Insurance Corporation (ESIC), Union Minister for Labour Bandaru Dattatreya said.
Under the project, Enterprise Resource Planning (ERP) solution would be installed across the country which will give a unique card to the employees and facilitate clearance of third party bills.
According to Dattatreya the unique bio metric cards given to the members would make authentication easier. Besides, the ERP solution would help build a massive database of health records of all the members. The Ministry has asked the States to set up executive committees with a Principal Secretary as its head to deal with funds for the employees’ health schemes. Besides, the Centre has decided to revamp public hospitals. He said the Government has increased the spending on insured persons to Rs. 2,000 from Rs. 1,500.
Referring to the Employees Provident Fund Organisation, he said the Universal Account Number system would change the way the members operate their PF accounts. - Cabinet clears 2G auction
Expecting to harness a bumper Rs 64,840 crores, the Union Cabinet 5th January approved base prices for 2G spectrum auction. This doesn’t include revenue it expects from 3G spectrum auctions. Around Rs 16,000 crores is expected to be realised in the current fiscal from 2G spectrum auctions. This will help meet the 4.1 per cent fiscal deficit target this year.
The Cabinet approved the proposal for auctions in the 800, 900 and 1800 MHz bands. It cleared a reserve price of Rs 3,646 crores for pan-India per MHz in 800 band and Rs 3,980 crores for 900 band, excluding Delhi, Mumbai, Kolkata and J&K. - Ordinance for mines auction gets nod
The Central Cabinet on 5th January approved an ordinance for auction of iron ore and other minerals, adding to the growing list of such moves to push through what it believes are reform initiatives aimed at speeding up economic activity.
The ordinance, which will amend the mining laws to pave the way for more transparent allocation of minerals, is the fifth since Parliament session ended in third week of December. Union Government government has already pushed through ordinances to auction coal mines, increase the foreign investment ceiling in insurance from 26% to 49%, amend land acquisition-related laws and make arbitration rules simpler.
Amendments to the mining laws were expected to be rushed in through an ordinance last week itself but the government focused on land acquisition and arbitration. The government has argued that it has been forced to take this route as opposition parties led by the Congress were blocking key initiatives in the Rajya Sabha, where BJP does not enjoy majority.
The ordinance would pave the way for introduction of competitive bidding for allocation of iron ore and other non-coal mines. It will also enable creating District Mineral Funds for the welfare of the project-affected people.
The government has defended the latest move arguing that the legislative action was felt as the government was finding it difficult to allocate mines, because the mines ministry could not table a bill during the winter session of Parliament to amend the Mines and Minerals (Development and Regulation) Act, 1957. - Sensex steep fall since last 5 years
There was a chaos on the bourses on 6th January with the Sensex plunging over 850 points to post its steepest fall since July 2009. Investors lost over Rs. 2.75-lakh crore as stock markets fell 3 per cent on concerns of a slowdown in Europe and a fall in crude prices to $50/barrel levels. Political instability in Greece also fuelled the bearish sentiments. The Nifty closed at 8,127, down 251 points, while the Sensex ended the day at 26,987, losing 855 points. On July 6, 2009, the Sensex had fallen 870 points. Volatility was high with the volatility index, Vix, closing at 17.4200, up 23.09 per cent. - Rural wage growth lowest in 10 years, signals farm distress, falling inflation
Rural wages in India have registered an average annual growth of 3.8 per cent in November, the lowest since July 2005, according to Labour Bureau data. The 3.8 per cent year-on-year increase is a significant drop relative to the two-digit growth rates prevailing until June, and the peak 20 per cent-plus levels of 2011
The numbers confirm the findings that mid-year economic analysis that inflation is coming down sharply and, probably, sustainedly, according to the chief economic advisor in the Finance Ministry, Arvind Subramanian
The deceleration in rural wages — the 3.8 per cent nominal growth is lower than the annual consumer price inflation of 4.09 per cent for rural India in November — could further strengthen the case for the Reserve Bank of India (RBI) to initiate policy interest rate cuts sooner than later.
The Labour Bureau data showed the average all-India daily wage rate across 23 agricultural and non-agricultural occupations at Rs 266.26 for November 2014, as against Rs 256.52 for the same month of the previous year. The figures are based on a revised categorisation of occupations with effect from November 2013, and hence comparable. - Centre to compensate states against any loss after GST implementation
Finance Minister Arun Jaitley has strongly assured all states of full compensation of loss of revenue when Goods and Services Tax is implemented.
He inaugurated the West Bengal global investment summit in Kolkata.The highlight of the fourth edition of the two-day annual investment summit was a coming together of the Center and the state governments. Both promising to put aside their political differences to boost economic development and growth. - ICICI launches contactless cards in Hyderabad
Country’s largest private sector bank ICICI has announced launching of India’s first contactless debit and credit cards, enabling its customers to make electronic payments by just waving the cards near the merchant terminal in lieu of dipping or swiping them. The cards have been introduced in Hyderabad market along with two other towns -- Gurgaon and Mumbai. Over 1200 EDC machines capable of accepting contactless payments have been set up in these cities.
These cards are based on the Near Field Communication (NFC) technology, which provides customers the improved convenience of speed as these cards require significantly less time than traditional cards to complete a transaction along with enhanced security as they remain in control of the customer. - RBI issues norms for bank leverage ratio under Basel III
The Reserve Bank of India on 8th January said its revised guidelines on the leverage ratio framework for banks will come into effect from April 1, 2015. The leverage ratio under the Basel III regulatory framework for banks is defined as their capital measure divided by their exposure measure, with this ratio expressed as a percentage.
Capital measure for the leverage ratio is the Tier-1 capital and exposure measure is the sum of on-balance sheet exposures; derivative exposures; securities financing transaction exposures; and off- balance sheet items.
This ratio is calibrated to act as a credible supplementary measure to the risk based capital requirements and is intended to achieve two objectives.
The first objective is to constrain the build-up of leverage in the banking sector to avoid destabilising deleveraging processes which can damage the broader financial system and the economy. The second objective is to reinforce the risk-based requirements with a simple, non-risk based “backstop” measure.
Currently, the banking system is operating at a leverage ratio of more than 4.5 per cent. The final minimum leverage ratio will be stipulated taking into consideration the final rules prescribed by the Basel Committee by end-2017, the RBI said.
In the run-up to December-end 2017, Reserve Bank will monitor individual banks against an indicative leverage ratio of 4.5 per cent.
Banks operating in India are required to make disclosure of the leverage ratio and its components from April 1, 2015 on a quarterly basis.
The Basel III international regulatory framework for banks is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. - Unemployment rate in India rises to 4.9 % in 2013-14
Unemployment rate in the country rose to 4.9 per cent in 2013-14, mainly on account of increase in joblessness in rural areas. In 2012-13, it was 4.7 per cent. On the positive side, the unemployment rate dropped in urban areas to 5.5 per cent from 5.7 per cent in the previous fiscal.
According to the latest survey report by Labour Bureau, Unemployment rate among men increased to 4.1 per cent, from 4 per cent in 2012-13. Among women, it increased to 7.7 per cent last fiscal, from 7.2 per cent in 2012-13. However, the unemployment rate among women came down to 12.4 per cent in urban areas, from 12.8 per cent in 2012-13. - Govt approves 12 FDI proposals
The government has approved twelve proposals of Foreign Direct Investment (FDI) amounting to over 1827 crore rupees. According to an official release, these proposals were cleared on the basis of the recommendations of Foreign Investment Promotion Board.
Of them, the highest 1150 crore rupees FDI proposal of Ratnakar Bank Limited seeking an Initial Public Offer of its equity shares,was cleared by the government. Besides, a FDI proposal amounting to 422 crore rupees was also approved which is related to a pharma company, Tevapharm India Private Limited seeking permission for issuance of equity shares. - Fiscal deficit hits 99% of full-year target in April-November
The Central Government’s fiscal deficit for the April-November period touched 99 per cent of the Budget estimate for 2014-15. The fiscal deficit is the difference between the Government’s earnings and expenditure.
Data released by the Controller General of Accounts on 31st December showed that the deficit in the first eight months of the financial year touched Rs 5.25 lakh crore, against the Budget target of Rs 5.31 lakh crore. In percentage terms, the deficit is 98.9 per cent, against 93.9 per cent in the same period last year. The Government managed to collect just 43.4 per cent of estimated receipts, while its expenditure was 59.8 per cent. - Udupi district achieves 100% coverage under Jan Dhan
The Udupi district administration has announced 100 per cent coverage of households under the Prime Minister’s Jan Dhan Yojana (PMJDY). The PMJDY accounts opened after August 16 have a total balance of Rs5.51 crore. Banks in the district were allotted 170 sub-service areas in 146 village panchayats and 95 urban wards for the implementation of PMJDY. - Governance reform: Centre splits Chairman, MD post in state-run banks
In a bid to improve governance, the Centre has separated the posts of Chairman and Managing Director (CMD) in nationalised banks. It has also appointed Managing Directors (MD) for four banks, and they will also be designated as Chief Executive Officer (CEO).
Two Reserve Bank committees, headed by AS Ganguly in 2002 and PJ Nayak in 2014, had recommended separation of the post.
According to the Finance Ministry, henceforth, in public sector banks, other than State Bank of India, the chairman will be a part-time board member who would preside over the board meetings but will not be an executive chairman. The procedure for selection of part-time chairmen would be announced shortly, it added.
The four new MDs and CEOs are P Srinivas (United Bank of India), Animesh Chauhan (Oriental Bank of Commerce), R Koteeswaran (Indian Overseas Bank) and Kishor Kumar Sansi (Vijaya Bank).
The appointments are for three years or till the date of their superannuation, whichever is earlier.
These banks and four others have been functioning without a CMD. On October 27, the Government scrapped the existing selection process for appointment of CMD and Executive Directors in public sector banks and decided to initiate a new process, based on which the four names were selected.
A Finance Ministry statement said a replacement for Syndicate Bank CMD SK Jain, who was suspended following his arrest in an alleged bribery case, is still under consideration and would be decided shortly.For three large banks — Bank of Baroda, Punjab National Bank and Canara Bank — the Centre has decided to go for a fresh selection procedure, to be announced soon. - Central Bank revises rates on FCNR deposits
Central Bank of India has revised the interest rates on Foreign Currency Non-resident (Bank) Account (FCNR-B). The new rates will be applicable from 1st January
The bank now offers interest of 3.82 per cent on dollar deposits, 3.5 per cent on pound deposits, 2.41 per cent on euro deposits, 3.86 per cent on Canadian dollar deposits and 4.74 per cent on Australian dollar deposits (all of five-year maturity). These revised rates are valid till January 31.
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An FCNR account is a term deposit account that can be maintained by NRIs and PIOs in foreign currency. Thus, FCNRs are not savings accounts but fixed deposit accounts.
Prior to 2011, FCNR deposits were allowed to be maintained in six currencies: US dollar, Pound Sterling (GBP), Euro, Japanese Yen, Australian dollar and Canadian dollar. However, in October 2011, the RBI decided that authorised dealer banks in India may be permitted to accept FCNR deposits in any permitted currency. 'Permitted currency' for this purpose would mean a foreign currency which is freely convertible and popularly include Danish Krone, Swiss Frank and Swedish Krona among others. - Excise duty on petrol, diesel hiked; no change in retail price
The government on 1st January raised excise duty on petrol and diesel by Rs 2 per litre each but retail pump rates will not be increased. The third excise duty hike since November will help raise additional Rs 6,000 crore during remaining three months of the current fiscal as the government took advantage of a slump in global oil prices to five-year low to shore up revenue without stoking inflation. The oil firms had 31st December skipped cutting rates of the two fuels that had become necessary as international oil rates plunged to their lowest level since May 2009.
The excise duty hike has now been set off against the reduction in rates that was due because of slide in oil prices.
The slump in global oil rates had warranted a price cut of Rs 3.22 per litre in petrol and about Rs 3 in diesel and even after adjusting the excise increase; oil firms will have a neat margin of over Re 1 per litre. - Tax disputes mechanism streamlined
The dispute resolution mechanism for matters relating to international tax and transfer pricing has been streamlined. The Finance Ministry has put in place a new framework that seeks to bring much-needed rigour and neutrality to dispute resolution on international tax issues.
The new system, which replaces the one introduced in 2009, could go a long way in reducing tax litigation. The Central Board of Direct Taxes (CBDT) has introduced the new framework with effect from January 1.
The CBDT has now sought to correct the situation by staffing the new panels with dedicated full-time commissioners.
Under the new dispensation, there will be five dispute resolution panels — two each in Delhi and Mumbai and one in Bengaluru. These panels have been assigned dedicated areas for coverage across various States so that there is a pan-India rollout.
In the earlier regime, commissioners were taking up dispute resolution as “additional work” and not functioning on a full-time basis. Under the new framework, three commissioners will be assigned by the CBDT to each of the five panels. There will also be a reporting structure for these commissioners. The panel members in Delhi will report to the Principal Chief Commissioner of Income-Tax (International Taxation).
On the other hand, the members in Mumbai and Bengaluru will report to the Chief Commissioners of Income Tax (International Taxation) of the West Zone (Mumbai) and the South Zone (Bengaluru), respectively. The Chief Commissioner posts in Mumbai and Bengaluru have been newly created. - PM raises solar investment target to $100 bn by 2022
Indian Prime Minister Narendra Modi has ramped up his target for solar energy as he bets on renewables to help meet rising power demand and overcome the frequent outages
India gets twice as much sunshine as many European countries that use solar power. But the clean energy source contributes less than 1 per cent to India's energy mix, while its dependence on erratic coal supplies causes chronic power cuts that idle industry and hurt growth.
Modi now wants companies from China, Japan, Germany and the United States to lead investments of $100 billion over seven years to boost India's solar energy capacity by 33 times to 100,000 megawatts (MW), said Upendra Tripathy, the top official in the Ministry of New and Renewable Energy.
That would raise solar's share of India's total energy mix to more than 10 per cent. In Germany, a leader in renewable energy, solar accounted for about 6 per cent of total power generated in 2014.
India had earlier set an investment target of $100 billion for the next five years for all types of renewable energy, with wind taking up two-thirds of the total.
Solar energy in India costs up to 50 per cent more than power from sources like coal. But the government expects the rising efficiency and falling cost of solar panels, cheaper capital and increasing thermal tariffs to close the gap within three years.
To create sufficient demand, power distributors will have to raise renewable energy purchases to 8 per cent from 3 per cent by 2020. There is also a plan to require new thermal plants to have a 10 per cent renewable mix, which they can generate or buy from solar companies as credit.
India recently signed a $1 billion agreement with the Export-Import Bank of the United States for companies willing to ship equipment from that country. India is also thinking of solar bonds and helping foreign firms raise rupee bonds to cut costs. - RBI eases KYC norms for NBFCs
Amending rules for non-banking financial companies (NBFCs) with regard to their Know-Your-Customer (KYC) exercise, the Reserve Bank of India, on 2nd January, relaxed the time limit during which such due diligence is required. The rules have been eased due to practical difficulties and constraints in getting KYC documents at frequent intervals.
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