21/05/2013
Cooperative-commercial link could fuel systemic risk: RBI
The Reserve Bank of India (RBI) has stumbled upon a possible nexus between cooperative and commercial banks that, in its opinion, could be allowing large amounts of unaccounted funds to be channelled into banks.The RBI has extended its initial probe into three private sector banks to 30 banks — the thematic study on these banks is yet to be made public. Commercial banks, RBI's report says, allowed clients of cooperative banks to issue at par cheques on them for third-party payments and remittances. Large parts of this money may have found its way into mutual funds and insurance schemes.
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21/05/2013
RBI curbs on gold counter-productive
The Reserve Bank, in its May 13 notification, restricts with immediate effect, the import of gold on consignment basis by banks. This will now be allowed only to meet the genuine needs of exporters of gold jewellery.It is aimed at reducing the demand for gold for domestic use. How will the restrictive measure impact various players?So far, a substantial portion of gold imports has been taking place on a consignment basis. Under this arrangement, even on import of gold into India, the ownership of gold continues to rest with the overseas supplier.The supplier of the metal happens to be the ‘consignor’ and the nominated banks are the ‘consignee’.As and when the sale of metal under consignment takes place, the remittances will be made by the latter to the former in accordance with the dispatches.
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20/05/2013
RBI to fix tenor & rates for loans to foreign arms
The RBI is set to end the free-run enjoyed by Indian companies in extending loans and guarantees to their overseas arms, a tool often used to retain foreign earnings overseas.
Indian companies will now be able to provide such loans only on fixed rate of interest and for a fixed tenure, ensuring periodic interest is repatriated and principal comes back at the end of the tenure."There is no prescribed tenor for loans and guarantees nor interest rate ...This will ensure smooth repatriation," said a senior government official privy to the development.The RBI is keen to ensure that steady inflows are maintained for the smooth financing of the current account deficit that touched record high levels last year and put pressure on the Indian rupee.
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20/05/2013
RBI may cut rates at next meet, feel research houses
Taking a cue from the continued downward surprises in inflation and sluggish growth indicators, the Reserve Bank of India is likely to go for further monetary easing in its June 17 meet, global investment banking majors have said.The headline wholesale inflation fell to 41-month low in April (4.89%), dropping within the central bank’s comfort zone of less than 5% and fuelling market hopes of more monetary easing to revive sagging economic growth.
Barclays said that “we expect the repo rate to be cut to 7% (another 25 bp cut) by mid-2013. Moreover, we think the likelihood of further rate cuts (another 50bp to 6.5%) in the second half of 2013 has risen significantly”.
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20/05/2013
RBI moots review of all bank licences on 'fit & proper' norms
The Reserve Bank of India (RBI) has proposed a review of all banking licences from the ‘fit and proper’ angle, following the allegations made by Cobrapost.In a report to the department of financial services in the finance ministry, RBI has said “all banking licences need to be reviewed on the fit-and-proper criteria, which involves assessment of the promoters, management, CEOs, even for the existing banks”.The issue basically relates to inter-connectedness among entities forming part of a banking conglomerate, with insurance, mutual funds and brokerage arms in its ambit. The RBI note has said the review is necessary to ensure that an arm’s length is maintained from these various operations, to avoid a systemic risk.
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20/05/2013
Notification No.RBI/2012-13/503
Export of Goods and Software – Realisation and Repatriation of export proceeds – Liberalisation
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17/05/2013
RBI to cut rates in June, July after April WPI: BofA-ML
Bank of America-Merrill Lynch expects the Reserve Bank of India to cut interest rates by 25 basis points on June 17, and then by another 25 bps in July - revising its prior expectation of a cut in October - according to a note on Wednesday.The investment bank cites lower-than-expected wholesale price inflation data on Tuesday as the reason behind its expectations of early rate cuts."We have added a second 25 bps RBI rate cut on July 30 after the one on June 17 to revive growth after April WPI inflation dropped to 4.9 percent," economists at the bank wrote in a note.
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17/05/2013
Notification No.RBI/2012-13/502
FDI in India - Issue of equity shares under the FDI scheme allowed under the Government route against pre-operative/pre-incorporation expenses
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16/05/2013
RBI to issue inflation-linked bonds to lure investors away from gold
The Reserve Bank of India will kick off the sale of inflation-linked bonds for the first time in over a decade to lure investors away from gold, the imports of which have widened India's current account deficit.RBI will issue the inflation-indexed bonds (IIBs) worth Rs 12,000-15,000 crore this fiscal year, as announced in the Union Budget. Inflation-indexed bonds are a new category of debt instruments to be introduced in India where the coupon and principal amount would be linked to the rate of wholesale price inflation with a lag of four months, said the RBI notification.
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15/05/2013
RBI eases ECB rules in housing, aviation sector
The Reserve Bank on Tuesday eased overseas borrowing norms to allow companies access to cheaper funds for key infrastructure sectors. "The RBI has extended the external commercial borrowing (ECB) relaxation for affordable housing, which was there for one year to two more years (now) and aviation for a few more months," RBI's deputy governor HR Khan told reporters. He was speaking after a meeting of the high-level committee on ECB, which was chaired by Department of Economic Affairs (DEA) secretary Arvind Mayaram. Khan, however, said that there has been no overall change in ECB limit, which is $40 billion, adding that the central bank will soon come out with an uniform definition for infrastructure companies.
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