Saturday, July 2, 2011
8:21 PM Blogger
Citigroup chief executive officer Vikram Pandit, who took a $1 salary after his bank received the most taxpayer assistance of any US lender, is poised to collect $80 million from other payments and awards that may eventually total more than $200 million.
Pandit, 54, will get the $80 million from Citigroup’s purchase of his Old Lane Partners LP hedge fund on Saturday, according to regulatory filings. The deal brought him to the lender in July 2007. JPMorgan Chase, which remained profitable through the financial crisis, has disclosed about $90 million in awards for CEO Jamie Dimon since 2007.
“Pandit, his $1 pay notwithstanding, cannot be considered modestly paid,” said Graef Crystal, a compensation expert and Bloomberg News consultant based in Las Vegas. “Taxpayers saved this bank, and he’s getting a bundle while shareholders are getting shortchanged on the stock price.”
Pandit’s $80 million is the last of the $165 million New York-based Citigroup agreed to pay for his share of Old Lane four years ago. The bank has since awarded him compensation, including stock and options, worth about $63 million when he received them. In May, he entered into a company profit-sharing plan which will give him an additional $25 million if the company meets analysts’ estimates.
The Old Lane payment also caps the end of six months in which Citigroup shares have fallen 12% amid investor concern that bank earnings will decline, placing the lender 13th on the 24-company KBW Bank Index. The shares have fallen about 92% since the Old Lane deal closed and 87% since December 11, 2007, the day Pandit was appointed CEO.
His own stake has suffered on his watch. Pandit’s shares and options are currently worth about $26 million, most of which is linked to awards the bank gave him in May of this year, according to an analysis by Crystal. Share awards from 2008 have lost most of their value, Crystal said. One period of Pandit’s tenure that Crystal studied was this year through May 17, when Citigroup’s compensation committee— chaired by former Alcoa Inc. CEO Alain Belda—awarded Pandit $10 million in deferred stock, entry to a company profit-sharing plan and stock options that Crystal valued at more than $10 million. Citigroup shares fell 12% during the period. The Standard & Poor’s 500 Index, which tracks the performance of 500 US stocks, gained 5.7%.
“This raises the interesting question as to why the comp committee decided the war was over and it was time to stage a victory celebration,” Crystal said.
Shannon Bell, a Citigroup spokeswoman, declined to comment. JPMorgan’s Performance JPMorgan has awarded Dimon, 55, about $90 million since 2007 including stock and options, according to filings, which don’t outline amounts for future awards. New York-based JPMorgan’s shares have declined 17%since the day Pandit sold Old Lane to Citigroup, making the firm the fifth-best performer on the KBW Bank Index during the period. Citigroup was the worst-performing.
The US treasury department provided a $25 billion bailout to JPMorgan in 2008. The bank, the second-largest in the US, repaid the funds in 2009 with a $1.75 billion profit for taxpayers. The lender’s profit for 2011 may be $20.8 billion, according to a survey of analysts.
Pandit replaced CEO Charles 'Chuck' Prince, 61, who resigned as the bank faced billions of dollars in losses linked to subprime mortgages and related securities. Under Pandit, the bank posted $29.3 billion in losses in 2008 and 2009. The US Treasury bailed out the company with a $45 billion cash injection and a guarantee of more than $300 billion of its riskiest assets. Some analysts credit Pandit with steering the third-largest US bank toward five straight profitable quarters since then as he boosted lending in emerging markets in Asia and Latin America and shrank the amount of toxic assets the company was carrying on its balance sheet.
The strategy enabled Pandit to pay back the Treasury’s bailout funds and deliver a profit to taxpayers of about $12 billion. The firm may post a $3.1 billion profit for the second quarter and is on course to make a $12.6 billion profit for the year, according to a survey.
Shareholders may benefit. Pandit, who reinstated a 1-cent dividend in May, could introduce an 80-cent payout in 2012, about $2 billion in total, and buy back up to $4 billion of stock, according to London-based Richard Staite, an analyst with Atlantic Equities, who rates the shares ‘overweight’.
“If Dick Fuld had been able to pull it off, how much would they have wanted to reward him?” said David Knutson, a Legal & General Investment management credit analyst, referring to the former CEO of Lehman Brothers Holdings, which collapsed in 2008. Pandit “has brought the bank back from the brink.”
Citigroup has sold about $300 billion of troubled assets in Citi Holdings, the unit Pandit formed to house and offload the bank’s most distressed businesses and investments. The division still had $337 billion in assets at the end of March, much of it tied to US mortgages, store-branded credit cards and securities.
If Pandit can wind down and sell the rest, regulators may consider the lender less risky than JPMorgan and Bank of America, according to Charles Peabody, an analyst with Portales Partners. “$80 million is a drop in the bucket relative to what he’ll get going forward if he turns this thing around,” Peabody said in an interview.
Pandit isn’t the only Citigroup executive who has been waiting four years for the last round of Old Lane payouts. Chief Operating Officer John Havens will also get $80 million, while Chief Risk Officer Brian Leach will get $8.6 million, filings show.
Source: Financial Express
8:18 PM Blogger
Mumbai: HDFC Chairman Deepak Parekh has said he hopes the RBI would maintain status quo on rates during its monetary policy review scheduled for later this month to maintain a balance between growth and inflation.
"I don't think the Reserve Bank will look at another interest rate hike because we need to have a balance between growth and inflation," he told reporters on the sidelines of an event here last night.
"I hope we get a breather before the next round of hike in interest rate... I hope the Governor of RBI does not do anything (hike rates) in July."
Since March 2010, the central bank has upped its key rates ten times, with the latest being on June 16, when it hiked short-term lending and borrowing rates by 25 basis points each to 7.5 and 6.5 per cent, respectively.
One could draw comfort from the declining trend in food inflation, the top financial sector expert said, adding this would help RBI to keep the key interest rates unchanged.
"I think inflation is settling down. The numbers that have come out on food inflation is certainly down, which is very hopeful."
After a month-long uptrend, food inflation plunged to a one-and-a-half month low of 7.78 per cent for the week ended June 18, down from 9.13 per cent in the previous week, as vegetables and pulses became cheaper.
On HDFC Bank increasing its interest rates, Parekh said it was not on the cards at the moment. On the e-auction of land, Parekh said, "the 'Land Acquisition Bill, 2007' is still pending before Parliament. I hope that in the monsoon session it is taken up because it has been in waiting for the last 3-4 years."
It may be recalled that Parekh had said in his annual letter to the shareholders on compulsory implementation of e-auction for land transactions and a special 'Settlement Commission' for now scrapped Urban Land Ceiling & Regulation Act (ULCRA) related-cases.
"These baby steps will go a long way in alleviating the housing problems in India," the finance sector veteran had said in the letter.
Source: Financial Express
8:15 PM Blogger
Geneva: The Basel Committee on Banking Supervision, which is overseeing global reforms in the sector, unveiled new guidelines that would require lenders to publish all details on their pay policies, particularly bonuses and performance incentives.
In the wake of global outcry against 'obscene' salaries and bonuses received by leading bankers, who caused the global financial crisis in 2008, the Committee has stipulated stringent capital adequacy requirements.
It has come down heavily on the salary benefits that fuelled bankers to take such huge risks that eventually led to global economic meltdown.
"These disclosure requirements, developed in consultation with the Financial Stability Board, will support effective market discipline by allowing market participants to assess the quality of a bank¿s compensation practices and the incentives towards risk taking they support," the Basel Committee said, while issuing new details.
"The Committee's Pillar 3 disclosure requirements add greater detail to the guidance on this topic that was included in the supplemental Pillar 2 guidance issued by the Committee in July 2009, it said, arguing that the proposals "cover the main components of sound remuneration practices".
Effectively, the new rules would force banks to provide timely information, including the names of people overseeing remuneration policies. Besides, the Banks will have to publish details on their employees overseeing risk-taking assignments in critical areas.
In a separate development, the Committee issued two papers on operational risk-Principles for the Sound Managementof Operational Risk and Supervisory Guidelines for the Advance Measurement Approaches.
They set out "the principles based on best industry practice and supervisory experience and cover three overarching themes: governance, risk management and disclosure" and "the regulatory capital adequacy framework."
Source: Financial Express
8:09 PM Blogger
NEW DELHI: State run THDC India Ltd has received loan of $648 million (about Rs 2,886 crore) from the World Bank for its project in Uttrakhand. With the loan, the 444-mw Vishnugad Pipalkoti hydroelectric project has achieved full financial closure, the company said in a statement.
The company has recently received environment ministry's nod for diversion of 80 hectare of forest land for the project that is expected to be completed by 2016.
THDC has a portfolio of hydro projects in Uttarakhand, Maharashtra and Bhutan with aggregate capacity of 8,868 mw. Its 1,000-mw Tehri hydro power project is operational since 2006-07. The company's 400-mw Koteshwar hydro power project is likely to be fully commissioned by 2012.
THDC is implementing 4060 mw Sankosh project in Bhutan for which a detailed report is under preparation. It is also implementing a 1,320-mw Khurja super thermal plant in Uttar Pradesh.
8:06 PM Blogger
CHANDIGARH: For the first time, Haryana Power Utilities have tied up to buy power through banking and return banking arrangements of over 1,000 megawatt.
"The Utilities are all set to create a new record of not buying electricity through tender route during the ongoing paddy season," a spokesman for the Uttar Haryana Bijli Vitran Nigam ( UHBVN ) said here today.
He said it was for the first time about 1000 to 1100 MW power has been tied-up through banking and return banking arrangements.
On an average, the State is receiving back about 500 MW power from other states which was given to them in the months of November, December, January and February.
In addition, 500 to 600 MW power is being procured through banking arrangements which will be returned by Haryana in October onwards, when the power demand in the State declines.
He said traditionally the state was procuring electricity through tender route/short term basis at a cost of Rs 6 to 7 per unit.
It has also been estimated to supply 22586.19 lakh extra units of power to the consumers from June to September this year, he said.
This year the electricity has been tied up in advance. The judicious banking arrangements would help save about Rs 565 crore, he claimed.
He further stated that the impact of banking arrangements during the ongoing paddy season would be that the consumers would not be burdened by fuel surcharge adjustments in future.
The spokesman also said that the Utilities have observed a reduction in overall per unit power purchase cost of Rs 3.06 per unit during the year 2010-11 as compared to Rs 3.25 in 2009-10.
The Utilities supplied 34543 million units of power to consumers in 2010-11 compared to 33558.58 million units in 2009-10, he added.
Friday, July 1, 2011
11:30 PM Blogger
In order to check banking frauds, the Reserve Bank of India (RBI) today asked public sector lenders to promptly report cases of cheating involving Rs 1 crore and above to the CBI, and of the lesser amount to the police.
"Incidence of frauds, dacoities, robberies, etc, in banks is a matter of concern," the RBI said, issuing guidelines for reporting frauds.
Private and foreign banks have been asked to report cases of fraud involving an amount of Rs 1 lakh and above to the police. Fraud by employees exceeding Rs 10,000 should also be reported to the police so that the guilty persons do not go unpunished, the RBI said.
Besides, it added that cases involving more than Rs 7.5 crore should be reported to Banking Security and Fraud Cell of the respective centres, which is specialised cell of the Economic Offences Wing of the CBI.
The central bank said that it had been observed that frauds are, at times, detected in banks long after their perpetration.
It also pointed out, "On some occasions, RBI comes to know about frauds involving large amounts only through press reports."
Banks should, therefore, ensure that the reporting system is suitably streamlined so that frauds are reported without any delay, RBI said, adding that they must fix staff accountability in respect of delays in reporting fraud cases to the central bank.
As per the guidelines, fraud cases involving amounts of Rs 1 crore and above should also be reported to Serious Fraud Investigation Office (SFIO) in Ministry of Company Affairs, besides CBI.
The guidelines also said the banks should ensure that all frauds of Rs 1 lakh and above are reported to their boards promptly.
The RBI has been advising banks from time to time about the major fraud-prone areas and the safeguards necessary for prevention of frauds.
Misappropriation and criminal breach of trust, fraudulent encashment through forged instruments, negligence and cash shortages, are some of the common frauds observed in the banking industry.
Source: Business Standard
11:26 PM Blogger
Three major lenders, including country's biggest private sector bank ICICI Bank, today announced an increase of 25 basis points, or 0.25 per cent, in lending rates, making auto, home and corporate loans more expensive for borrowers.
The rate hike will increase the cost for those who had taken advances on floating rate of interest. Besides ICICI Bank, state-owned Indian Overseas Bank and Dena Bank have also announced increase in their lending rates by similar margin.
The decision to hike lending comes within weeks of the
Reserve Bank of India (RBI) increasing in key lending (repo) and borrowing (reverse repo) rates by 25 basis points to tame rising inflation.
The ICICI Bank has decided to increase its base rate
(I-base) by 25 basis points to 9.50 per cent with effect from
Monday, the lender said, adding the interest rates on all new
loans are being determined with reference to the I-base rate.
The bank also announced to increase the benchmark prime
lending rate by 25 basis points. The decision would impact the customers who had taken loans from the ICICI Bank on floating rate of interest.
"The fixed rate customers will not be impacted by the...increase and their contracted rates will remain unchanged", ICICI Bank said.
Since base rate came into effect last year, lenders like HDFC Bank and Axis Bank have increased their rates by 200 bps. With today's increase, ICICI has also raised its rates by 200 bps.
The benchmark prime lending rate of the Chennai-based IOB will go up from 14.25 per cent to 14.50 per cent with immediate effect. IOB in a filing to the Bombay Stock Exchange (BSE) said
"The Board of Directors has approved the increase of the
Benchmark Prime Lending Rate (BPLR) of the bank by 25 basis points from existing 14.25 per cent to 14.50 per cent."
Dena Bank decided to raise its base rate by 25 basis points to 10.20 per cent and its benchmark lending rate by a similar margin to 15.25 per cent. The new rates will be effective from tomorrow.
Private lender Dewan Housing Finance Corp also announced an increase of 25 basis points in its retail prime lending rate.
Since the RBI had raised its key policy rates by 25 bps at its mid-quarter policy review on June 16 -- the 10th hike since March 2010 -- many banks have hinted at hiking their lending rates.
Yesterday, the Bangalore-based state-run lender Canara Bank became the first lender to increase rates, when it announced 25 basis points hike in base rate and lending rates to 10.25 per cent and 14.50 per cent, respectively.
With the private sector leader ICICI Bank announcing rate hike, many more banks in the public and private sector are expected to announce similar increase in their lending rates.
Source: Financial Express
11:17 PM Blogger
LUCKNOW: Spreading its wings further and taking financial inclusion deeper into the state, the State Bank of India opened 21 new branches on Friday. Besides, it also opened 101 new ATMs and 400 green channel counters.
Chief General Manager, SBI, Abhay Kumar Singh said that of the new branches 13 are in semi urban and rural areas emphasizing the banks reach across metros to small villages. SBI also opened its 700th customer service point in unbanked villages under the financial inclusion plan of the government.
Singh said that the bank already has 1,600 branches in UP and hundreds of villages have been covered through business correspondents and facilitators.
Chief Secretary Anoop Mishra said that SBI played an important role in the economy of the nation and its reach was unmatched.
Abhay K Singh said that SBI has started Green Channel Counters where customers can withdraw and transfer funds upto Rs 40,000 by just swiping their ATM card without filing any form. The facility would be available in 400 branches to begin with and would be helpful to businessmen and senior citizens.
Also present on the occasion were Regional Director, RBI, Dr Amrendra Sahoo, and additional Director (Institutional Finance) Rakesh Krishna.
11:13 PM Blogger
New Delhi: Libyan dictator Muammar Gaddafi has suffered huge losses on various funds despite paying hefty fees, but his investment in ICICI Bank gave impressive returns, a new leaked document showed today.
ICICI Bank is the single Indian company in the investment portfolio of Gaddafi-controlled sovereign wealth fund Libyan Investment Authority (LIA), whose assets totalled about USD 64.2 billion as of September 30, 2010.
The portfolio has been disclosed in a new leaked internal document, the Management Information Report of the LIA, which was published today by independent campaign group Global Witness.
The document dated September 30, 2010, showed that LIA's investment in ICICI Bank appreciated by about 38 per cent in the third quarter of 2010, that is between June and September.
LIA's total assets grew by 19 per cent in that period.
As per the document, LIA was asked by global accounting and advisory giant KPMG to cut down its investments in various funds that were yielding losses despite the payment of hefty fees.
This is the second time an internal document of LIA has become public. The earlier leaked document revealed LIA's portfolio and other financial details as of June 30, 2010.
The previous document had actually shown a loss of about 15 per cent, or USD 5.8 million dollars, during the April-June, 2010, quarter on an investment made in ICICI Bank.
The original investment in ICICI Bank ADRs (American Depository Receipts), the US-listed securities of India's largest private sector bank, stood at about USD 29.6 million.
It was not clear when the investment was made and whether the fund is still invested in ICICI Bank.
As per the portfolio, the value of the investment stood at about USD 32 million as of June 30, 2010, while the same was worth over USD 44 million by September 30 that year.
However, the investment is very small, compared to both the overall size of the fund as well as the shareholding derived in ICICI Bank by virtue of this investment.
The investment would account for only about a 0.1 per cent stake in ICICI Bank, and that too, as securities without voting rights. Also, the investment made in ICICI Bank is less than 0.05 per cent of the total fund size.
The Gaddafi family is said to have significant personal control over the state funds invested in LIA and the Prosecutor of the International Criminal Court has said that "Gaddafi makes no distinction between his personal assets and the resources of the country".
Earlier this week, the International Criminal Court issued a warrant against Gaddafi, who is facing an uprising for many months now against his 41-year rule and also an operation by Western coalition NATO for his ouster.
However, Gaddafi has alleged that the NATO operation is aimed at stealing Libya's huge oil reserves.
The internal LIA document also said it was recommended, under the advice of KPMG, that exposure to alternative investment funds should be reduced. It also listed out some of the poorest performing funds to be liquidated.
It said many of these funds had very high fees attached to them, although they have suffered huge losses.
LIA has investments across the world, the most prominent being US government treasury bonds, as well as bonds and stocks of large financial and other corporations across the world.
The report also said the fund owned shares worth billions of dollars in companies with household names, such as General Electric, BP, Vivendi and Deutsche Telekom, while it had strategic equity investments worth billions in companies like Unicredit, ENI, Siemens, Pearson, BASF and Repsol.
In addition, it had made non-strategic investments in companies like GE, Bayer, BP, AT&T, Pfizer, Vodafone, Deutsche Telekom, France Telecom, Nokia, Lafarge, Tesco, Exxon Mobil, ICICI Bank, Sanofi Aventis, Stanchart, Nestle and Royal Dutch Shell.
As of September 30, 2010, LIA had cash of about USD 593 million, deposits of about USD 20.2 billion, equity investment worth about USD 7.2 billion, bonds worth USD 3.2 billion and about USD 4 billion in alternative investments.
Furthermore, LIA had invested about USD 24.7 billion in its subsidiaries and over USD 4 billion in other investments.
Source: Financial Express
9:28 AM Blogger
HSBC Holdings is to cut about 700 jobs in its UK retail banking arm, people familiar with the matter said on Thursday.
The job cuts will include about 460 advisory positions across its UK branches, one of the sources said. The move comes prior to the implementation of the Retail Distribution Review rules, expected in January 2013, that will affect how UK banks offer advice.
HSBC declined to comment. The bank employs 55,000 staff in the UK.
Rival Lloyds said on Thursday it was cutting 15,000 jobs.
Source: Business Standard
9:15 AM Blogger
Private lender IndusInd Bank aims to grow its credit card portfolio four-fold to Rs 800-900 crore in the next three years. The bank also expects the business it acquired recently to turn profitable in the next 12 months.
“We are going to grow this business. We did not acquire the business to keep it at this level. Today, it is a Rs 200-225-crore portfolio and we will see a four-fold increase in size in the next three years,” Managing Director and Chief Executive Officer Romesh Sobti told Business Standard.
The credit cards portfolio, however, will continue to account for three-four per cent of the bank's loan book in the coming years. In April, IndusInd Bank bought Deutsche Bank's credit card business, outbidding six other banks. It is believed the private lender paid a modest premium of Rs 25 crore on the book value and acquired the portfolio for around Rs 250 crore.
The acquisition gave IndusInd Bank access to close to 200,000 card customers and the entire operating platform of the cards franchise, including technology and staff. Following the acquisition, the bank has launched 'IndusInd Credit Cards' from June 1.
“Our credit card acquisition was not an opportunistic decision. We had set out to complete our agenda of universality in our products and credit card was the only missing piece. The acquisition helped us to reduce the gestation period for the launch of our cards business. We are confident of making this business profitable within the first 12 months,” Sobti said.
According to him, the bank has successfully renegotiated with its vendors to reduce the cost structure, which will help the business break-even in the first year of its launch. “We have shown them (vendors) higher volumes. Our ability to scale up is a function of our client base. I have two million customers and I will sell credit cards to them. That will give me scale,” Sobti added.
He also dismissed fears that the acquisition of the credit cards business would strain the bank's asset quality saying the lender has not “inherited non-performing assets” from this buyout.
In April, the amount transacted through credit cards grew 29 per cent as compared to the same month last year, even as the number of cards fell by around eight per cent in the same period. The amount transacted in financial year 2010-11 touched a record high of Rs 75,515 crore.
“We believe that after three-four years of bloodbath and washout, the credit card industry is now ready to take off once again. It is a high risk, high reward business. We expect rewards will be higher now if we can manage the risks properly,” Sobti said.
Source: Business Standard
9:11 AM Blogger
The Reserve Bank of India (RBI) on Thursday said equity and preference shares could be issued to overseas parties, in cases dealt by the Foreign Investment Promotion Board (FIPB), for money payable for importing capital goods and pre-operative expenses.
Foreign direct investment (FDI) in activities not covered under the automatic route requires prior approval of the government. Such proposals are considered by FIPB. The existing norms for issuing equity and preference shares under the government route had been reviewed, RBI said in a communication to banks.
These shares can also be issued for payments relating to import of second-hand machinery. These imports must carry an independent valuation report from a third party entity. The independent valuer should be preferably from the country from which goods are imported.
All conversions of import payables for capital goods into FDI should be completed within 180 days from the date of shipment, RBI said.
The shares can also be issued for pre-operative or pre-incorporation expenses. These expenses include payment of rents as well. The statutory auditor must certify the pre-incorporation and pre-operative expenses. The payments should be made directly by the foreign investor to the company.
Payments made through third parties citing the absence of a bank account or similar such reasons are not eligible for issuance of shares towards FDI. The capitalisation should be completed within the 180 days permitted for retention of advance against equity, RBI added.
Under the automatic route, an Indian company can issue equity and preference shares to a person residing outside India who provides the technological or technical know-how. These shares can also be issued against royalty and lump sum fees due for payment. The issuance of shares is subject to entry route, sectoral cap, pricing guidelines and compliance with tax laws.
Source: Business Standard
9:08 AM Blogger
The robust growth in exports and improved net invisible surplus has resulted in India's current account deficit (CAD) declining to $5.4 billion in the quarter ended March from $12.8 billion a year ago.
The CAD, in absolute terms, rose to $44.3 billion in 2010-11 from $38.4 billion in 2009-10. However, as a percentage, it declined to 2.6 per cent of the gross domestic product (GDP) in 2010-11 from 2.8 per cent in 2009-10, according to the Reserve Bank of India (RBI) data.
The trade deficit moderated to $29.9 billion in the January-March period from $31.6 billion in the fourth quarter of 2009-10. Merchandise exports recorded growth of 47.1 per cent, while imports registered growth of 27.4 per cent in the fourth quarter of 2010-11.
The performance of the services sector also improved substantially, reflecting the trend in invisible trade. It reported 71.5 per cent growth in the fourth quarter of 2010-11, compared with the 29.5 per cent drop a year ago.
|Q4 FY11||Full year 2010-11|
|Merchandise trade balance||-29.9 (-31.5)*||-130.5 (-118.4)|
|Invisible net||24.5 (18.5)||86.2 (80.0)|
|Services||14.5 (8.1)||47.7 (35.7)|
|Transfers||13.8 (12.6)||53.4 (52.3)|
|Income||-3.8 (-2.1)||-14.9 (-8)|
|Current AC balance||-5.4 (-13)||-44.3 (-38.4)|
|*figures in bracket are for 2009-10 – quarter and full year (figures in $ billion) Source: RBI data|
The strong growth in receipts was led by travel, transportation, software, business and financial services. While net private transfer receipts remained buoyant at $13.8 billion, there was a net outflow on account of investment income, RBI said.
For 2010-11, the trade deficit widened to $130.5 billion (7.5 per cent of GDP) in 2010-11 from $118.4 billion (8.6 per cent of GDP) a year ago. Net invisibles earnings increased to $ 86.2 billion from $80.0 billion last year. Robust domestic economic activity resulted in a rise in imports, compared to exports in 2010-11, thus widening the trade deficit.
The net invisibles surplus rose to $86.2 billion in 2010-11 ($80.0 billion last year) mainly on account of a greater increase in invisibles receipts, compared to payments in absolute terms. The increase in invisibles receipts was mainly driven by services exports, which recorded growth of 37.8 per cent in 2010-11 (as against a decline of 9.6 per cent in 2009-10). Software exports to $59 billion from $49.7 billion a year ago, while non-software exports almost doubled to $40.9 billion in 2010-11 from $21 billion a year ago, RBI said.
Net capital inflows increased to $59.7 billion, owing to short-term trade credits, external commercial borrowing and banking capital. Although net capital inflows were higher, the accretion to foreign exchange reserves was marginally lower, as a larger share of increased flows was absorbed by the widened current account deficit.
Source: Business Standard
9:04 AM Blogger
The Reserve Bank of India (RBI) today extended the time limit for buyback of Foreign Currency Convertible Bonds (FCCBs) issued by companies, by nine months to March 31, 2012 but has reduced the discount slabs for the buyback.
The earlier deadline for buyback of FCCBs was set for June 30, 2011.
Indian firms can now buyback the FCCBs at a minimum discount of 8% on the book value utilising their foreign currency funds under the automatic route, as against 15% earlier, the RBI said in a notification.
Under the approval route, Indian companies have been allowed to buyback the FCCBs at a minimum discount between 10 and 20% on the book value utilising their internal accruals. This was earlier fixed at 25-50%.
"After reviewing the current policy on buyback/prepayment of FCCBs, the RBI in consultation with the government of India has decided to extend the time limit for buyback of FCCBs issued by Indian companies up to March 31, 2012 at reduced discount rates," the central bank said.
It further added: "The existing policy on the premature buyback of FCCBs has been reviewed and it has been decided to extend the time limit for such facility and liberalise the procedure."
FCCB is a debt instrument with an equity option by which companies raise funds from overseas. It remains a debt till the option is exercised and the bond is converted into equity.
The extension of the window allows greater freedom and leeway to Indian companies.
FCCBs witnessed a huge surge during 2006-07. However, the global economic meltdown on 2008-09 impacted most of the companies.
As per today's notification, under the approval route the companies have been allowed to buyback the FCCBs at a minimum discount of 10% of book value up for redemption of up to $50 million as against 25% earlier.
For redemption of $50-75 million the discount has been fixed at 15% as against 35% earlier. As for redemption of $75-100 million, the discount rate has been reduced to 20% from 50%.
Source: Business Standard
8:53 AM Blogger
New Delhi: Be ready to mandatorily flash your PAN card, for any purchase of jewellery worth Rs five lakh or more from tomorrow -- a move that would help the tax department keep an eye on such high value transactions.
As per the amendments in the income tax rules, coming into effect from July 1, quoting PAN (Permanent Account Number) will be mandatory for any payment of Rs five lakh or more for purchase of bullion or jewellery.
High-value purchase of jewellery, among valuables, have often been feared to be a much favoured route for circulation of black money and quoting of PAN would help the tax authorities in tracking such transactions.
Recently, RBI had also asked the banks to consider the jewellers and bullion dealers as high-risk customers and to keep an enhanced vigil on their transactions.
The business transactions of jewellers and bullion dealers are highly cash intensive in nature and it is feared that they could be used for flow of black money into the system.
In order to check any possible money laundering, the banking sector regulator in January wrote to banks and financial institutions to treat the accounts of entities dealing in the jewellery and bullion trade as ‘high-risk’.
Besides jewellery purchase of Rs five lakh and above, furnishing of PAN would be mandatory for some other transactions also with effect from tomorrow.
These include issue of a debit card by any bank, as against the current practice of the PAN being asked for issuing credit cards only.
The payment of Rs 50,000 or more in a year for life insurance premium would also require PAN from tomorrow.
The transactions that already require PAN include sale or purchase of any immovable property valued at Rs five lakh or more, sale or purchase of motor vehicles other than two- wheelers and bank deposits exceeding Rs 50,000.
These also include telephone connection applications, opening of bank accounts, hotel an restaurant bills of over Rs 25,000 and mutual fund investments of Rs 50,000 and above, among others.
Source: Financial Express
8:50 AM Blogger
Chennai: Public sector Indian Overseas Bank has raised its base rate from 10 per cent to 10.25 per cent with effect from Friday.
The city-headquartered company also raised the Bench Mark Prime Lending rate from 14.25 per cent to 14.50 per cent with effect from July one, 2011, a bank statement here said.
Source: Financial Express
Thursday, June 30, 2011
10:37 PM Blogger
Mumbai: Credit offtake from banks grew by 20.9 per cent to over Rs 41 lakh crore during the one-year period ended June 17, 2011, indicating an upswing in industrial activity.
According to the RBI data, credit offtake during the period stood at Rs 41.23 lakh crore against Rs 34.10 lakh crore in the same period of the previous year.
Meanwhile, deposits went up to over Rs 54.94 lakh crore till mid-June this year against Rs 46.64 lakh crore as on June 18, 2010. This is a rise of over 17.7 per cent on an annual basis.
In the annual monetary policy 2011-12 announced last month, the RBI had said that credit is likely to rise at a faster pace because of the economy's growth momentum.
"Sustained growth momentum could ... continue to exert pressure on interest rates through high demand for credit," it had said.
The RBI had projected credit growth to be 19 per cent this fiscal, while deposit growth has been pegged at 17 per cent.
During 2010-11, bank credit had increased by 21.5 per cent, while deposits grew by only 15.5 per cent.
In December last year, the apex bank had expressed concern over the widening ratio between the credit and deposit rates of banks. Toward the end of the last fiscal, however, the gap in the credit-deposit ratio stood reduced.
Source: Financial Express
10:36 PM Blogger
Mumbai: The Reserve Bank of India said it has decided to permit the issuance of equity, preference shares under the government route of the foreign direct investment scheme for some categories.
"Payments should be made directly by the foreign investor to the company. Payments made through third parties citing the absence of a bank account or similar such reasons will not be eligible for issuance of shares towards FDI," the notification said.
Foreign Direct Investment (FDI) in India - Issue of equity shares under the FDI Scheme allowed under the Government route
A. P. (DIR Series) Circular No.74
June 30, 2011
All Authorised Dealer Category-I Banks
Madam / Sir,
Foreign Direct Investment (FDI) in India - Issue of equity shares under the
FDI Scheme allowed under the Government route
Attention of Authorised Dealers Category – I (AD Category - I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time.
2. In terms of the Schedule 1 of the Notification, ibid, an Indian company may, under the automatic route, issue equity shares/ preference shares to a person resident outside India, being a provider of technology / technical know-how and against royalty / lumpsum fees due for payment subject to certain conditions like entry route, sectoral cap, pricing guidelines and compliance with the applicable tax laws.
3. The extant guidelines for issue of equity shares/ preference shares under the Government route have been reviewed in consultation with the Government of India and, accordingly, it has been decided to permit issue of equity shares / preference shares under the Government route of the FDI scheme for the following categories of transactions:
(I) Import of capital goods/ machineries / equipments (including second-hand machineries), subject to compliance with the following conditions:
- The import of capital goods, machineries, etc., made by a resident in India, is in accordance with the Export / Import Policy issued by the Government of India as notified by the Directorate General of Foreign Trade (DGFT) and the regulations issued under the Foreign Exchange Management Act (FEMA), 1999 relating to imports issued by the Reserve Bank;
- There is an independent valuation of the capital goods / machineries / equipments (including second-hand machineries) by a third party entity, preferably by an independent valuer from the country of import along with production of copies of documents /certificates issued by the customs authorities towards assessment of the fair-value of such imports;
- The application should clearly indicate the beneficial ownership and identity of the importer company as well as the overseas entity; and
- All such conversions of import payables for capital goods into FDI should be completed within 180 days from the date of shipment of goods.
(II) Pre-operative/pre-incorporation expenses (including payments of rent, etc.) subject to compliance with the following conditions:
- Submission of FIRC for remittance of funds by the overseas promoters for the expenditure incurred;
- Verification and certification of the pre-incorporation/ pre-operative expenses by the statutory auditor;
- Payments should be made directly by the foreign investor to the company. Payments made through third parties citing the absence of a bank account or similar such reasons will not be eligible for issuance of shares towards FDI; and
- The capitalization should be completed within the stipulated period of 180 days permitted for retention of advance against equity under the extant FDI policy.
4.(i) All requests for conversion should be accompanied by a special resolution of the company.
(ii) Government’s approval would be subject to pricing guidelines of the Reserve Bank and appropriate tax clearance.
5. These directions have been issued with reference to the relevant paras of the Consolidated FDI Policy Circular 1 of 2011 dated March 31, 2011, issued by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India.
6. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
7. Necessary amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000 will be issued separately.
8. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Chief General Manager-in-Charge
Source: Financial Express
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