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FDI in multi-brand retail

and Aviation passed

The Union Cabinet cleared the

proposal of foreign direct investment

(FDI) for 51 percent in the multi-

brand retail chains and 49 percent in

Aviation power exchanges industry.

Passing of the proposal have

cleared the floor for welcoming the

multi-brand retail chains like Wall mart

and Tesco and Carrefour in the

country for setting up of their shops

and retail outlets. Similarly, the 49percent of FDI allowed in aviation and

Power exchanges will bring in funds

for the domestic carriers on a verge

of death and will help in

enhancement of power availability

and distribution management,

respectively.

Conditions put forward forConditions put forward forConditions put forward forConditions put forward forConditions put forward for

investors in the proposal for theinvestors in the proposal for theinvestors in the proposal for theinvestors in the proposal for theinvestors in the proposal for the

multi-brand retailsmulti-brand retailsmulti-brand retailsmulti-brand retailsmulti-brand retails

1. The proposal makes a clear

stand that investors looking

ahead for investments will have

to take the permission in form

of approvals from the Foreign

Investment Promotion Board2. Investment of minimum $100

million is a must for any foreign

investor planning to invest in

India, out of which 50% of the

investment should be made in

creation of back-end

infrastructure. Back-end

investment means investments

that is made in quality control,

wareho use crea ti on , co ld

storage, design improvement,

manufacturing, processing and

packaging

3. The investors will have to get

30% of the production of their

total products by the small-scale

industries

4. The proposal also clears that the

agricultural produce like pulses,

flowers, fruits, vegetables,

poultry item, fishery, meat and

others can be unbranded

5. Investors can invest in the 51

cities with a minimum

population of 10 lakh people as

per the census presented in the

year 2011

For making investment inFor making investment inFor making investment inFor making investment inFor making investment inthe aviation sector, thethe aviation sector, thethe aviation sector, thethe aviation sector, thethe aviation sector, the

proposals haveproposals haveproposals haveproposals haveproposals have

1. This will help in making equity

invasion for the aviation

companies seeking financial

support at the time when

maximum of the domestic

airlines are passing through a

phase of losses.

2. Investors who are not functional

in airline business can own

equity of 49 percent directly or

indirectly in the Indian Aviation

Companies.

FDI in Power ExchangesFDI in Power ExchangesFDI in Power ExchangesFDI in Power ExchangesFDI in Power Exchanges

will be guided viawill be guided viawill be guided viawill be guided viawill be guided via

1. 49 percent of FDI in power

trading exchanges will be taken

care of as per the regulation laid

EconomyEconomyEconomyEconomyEconomy


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down by SEBI and Central

Electricity Regulatory

Commission (Power Market)

Regulations) 2010

2. The commerce minister statedthat Foreign Institutional

Investors cannot exceed a limit

of 26 percent investment and

the paid-up capital will be

restricted to 23 percent

3. FII can be permitted under

automatic routes whereas; the

FDI will be scrutinized under

the route approved by the

government

4. The generation of electricity,

power transmission and

distribution along with tradingwill be done in accordance to

the provisions of the Electricity

Act 2003

5. The current policy allows FDI

up to 100 percent in power

sector (atomic energy is an

exception)

What does it mean forWhat does it mean forWhat does it mean forWhat does it mean forWhat does it mean for

different economic sections ofdifferent economic sections ofdifferent economic sections ofdifferent economic sections ofdifferent economic sections of

IndiaIndiaIndiaIndiaIndia

1. Economy:Economy:Economy:Economy:Economy: Help in reversal of

the economic slowdown,attract the investment of billions

of dollars from foreign market

and spin jobs to a greater extent

2. Kirana Stores:Kirana Stores:Kirana Stores:Kirana Stores:Kirana Stores: Will lower

down the selling price, because

they will purchase the supplies

from deep down retailers

3. Retailers:Retailers:Retailers:Retailers:Retailers: Can sell their equity

up to 51% to the global leaders

4. Farmers:Farmers:Farmers:Farmers:Farmers: They can sell their

produce directly at higher

prices and the presence ofmiddle man will end

5. States:States:States:States:States: Decision to allow the

retail giants or prohibit lies in the

hands of states

6. Common Man:Common Man:Common Man:Common Man:Common Man: A chance to

gain big discount with many

options to shop

7. UPA government:UPA government:UPA government:UPA government:UPA government: Got a

chance to wash away the

blames of policy paralysis

Union Government Cleared

Increase of FDI in Insurance

The Union Government on 4

October 2012 approved the

Companies Bill, 2011 and Pension

Fund Regulatory and Development

Authority (PFRDA) Bill, moving with

its proposal to hike the foreign

investment in the insurance sector to

49 percent from the present 26

percent with also opening up the

pension sector for FDI. The decision

was taken by Union Cabinet headed

by Prime Minister Manmohan Singh.The benefit of this amendment will

go to the private sector insurance

companies which require huge

amount of capital and that capital will

be facilitated with increase in FDI to

49 per cent. With this, the state-run

insurance companies will remain in

the public sector. The government

also gave green signal to foreign

investment in pension funds and said

the FDI limit could go up 49 per cent

in line with cap in the insurance

sector. Also with opening up the

pension sector, PFRDA bill gives

statutory powers to the interim

regulator, constituted through an

executive order in 2003. However, it

is not easy for the union government

to pass this legislation in the

parliament because the

Opposition Bhartiya Janta Party

(BJP) opposed the hike in FDI limit

in insurance and insisted for the bill

to be brought again in Parliament

Standing Committee.

Foreign Investment cap

hiked to 74 percent forBroadcasting Services

The Government of India on 20

September 2012 hiked the foreign

investment cap for the broadcasting

service providers to 74 percent. The

registered hike in foreign investment

cap is for service providers of Direct

to Home (DTH), modernized cable

network and mobile television. This

move of the government will allow

the global players in acquiring major

stakes in the broadcasting

companies. Before his decision was

passed, the eligibility of DTH and

multi-system cable operators to make

foreign investment was limited to 49

percent only. In its decision last

week, the Cabinet Committee on

Economic Affairs cleared its stand on

the companies of broadcast content

that the TV news Channels and FM

radio channels can have a foreigninvestment cap of 26 percent. This

decision was made to make sure that

majority of control remains back in the

hands of Indian Partner.

Trial to make MaharajaExpress affordable for

domestic tourists

In a hunt to pull the interests of

domestic tourists by making Maharaja

Express affordable, IRCTC (Indian

Railway Catering and Tourism

Corporation) announced a cut in thejourney along with discounted offers

for twin travellers. Indian Railway

Catering and Tourism Corporation

have declared four trips in the festive

season for the runnining financial year.

The IRCTC had shortened the

distance of travel and duration of two

trips along with a discounted offer of

50 percent discount to the second

companion.

The trips of eight days and

seven nights have been shortened to

be of four days and three nights. The


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two trips scheduled for the year

includes the one during Dussehra

and the other during Diwali,

commencing on 20 October 2012

and 27 October 2012. The trip

named to be Indian Panorma will

move on the route mentioned Delhi-

Jaipur-Ranthamobore-Agra-Gwalior-

Orchha-Khajuraho-Varanas i -

Lucknow-Delhi). The offered

package includes meals along with

sight-seeing, 24-hour valet service,

paramedics on-board and entrance

fees to the sights. Beer, liquor and

house wines will be served as

complementary.

The other route of travel will

cover Delhi-Agra-Ranthambore-Jaipur-Bikaner-Jodhpur-Udaipur-

Balasinor-Mumbai and is named to

be and Indian Splendour. The

package with deluxe cabin start at a

$ 5560 per person and the one

travelling with a companion will be

charged $8340 instead of $11120.

Packages with shortened distances

and duration are named as Gems of

India and Treasures of India and will

commence from Delhi and travel

through Agra, Ranthambore and

Jaipur and terminate back at Delhiand have been priced at $ 3850 for

one in deluxe cabin and with the

discounted offer of 50 percent it will

cost $7160 for two persons.

EGoM cut down the loaninterest rate to 7 percent in

the drought affected areas

The EGoM (Empowered Group

of Ministers) declared to slash down

the interest rate from 10 to 12 percent

to 7 percent in the entire 350 drought

hit Talukas of the four states namely,

Gujarat, Maharashtra, Rajasthan and

Karnataka. They also came up with a

declaration of providing additional 50

days of work guarantee to that of 100

days under MGNREGS (Mahatma

Gandhi National Rural Employment

Guarantee Scheme) to the registered

households. The decision will be

applicable for a period of one year

from the day of announcement. The

decisions made in the meet, are

subject to be practiced in the

drought affected areas only. There is

a total of 8 percent deficiency in the

monsoon to that of the 20 percent

recorded in the first four months of

the season. The EGoM is headed by

Food Minister K V Thomas, Agriculture

Minister Sharad Pawar, Home Minister

Sushil kumar Shinde and Urban

Development Minister Kamal Nath. In

the current financial year government

has provided Rs 33,000 crore budget

for MGNREGS to make sure thateveryone gets a justifiable

employment opportunity of 100

days. EGoM during its last meet in

June 2012, declared a relief budget

of 2000 crore for the drought hit areas

along with the subsidy on diesel.

GAAR Report submitted bythe Shome Committee

The GAAR report was

submitted to the finance minister of

India by the Shome Committee

constituted by the Central Board ofDirect Taxes, after the approval of

Prime Minister of India. The

committee in its report has tried to

create a balance in between the

investors being invited to the country

and protection of the tax base from

tax avoidance and evasion, using

aggressive tax planning.

The major findings of the

GAARs committee to create a

balance in between the investors and

chances of tax avoidance and evasion

includes:

1. Tax Evasion, Tax Mitigation and

Tax Avoidance

2. Overcharging Principle

Applicability of GAAR3. Monetary Threshold

4. Arms Length Test

5. Test to Misuse or Abuse the

Provisions of Act

6. Factors for determination of

Commercial Substance

7. Grandfathering of existing

Investments

8. GAAR will not override the

CBDT circular 789 of 2000 with

respect to the tax-treaty in

between India and Mauritius

9. GAAR will not be applicable at

places where so ever anti-

avoidance provisions are in

existence in the treaty of tax

and any type of anti-avoidance

rule exists in the Act

10. Impermissible Avoidance

arrangements

11. Tax abolition in cases of gains

that rises out by the transfer of

listed securities

12. Foreign Institutional Investors

13. Corresponding adjustments

14. Implementation of the Onus on

the revenue authority

15. Tax Withholding

16. Definition of the term

Connected Person

17. Constitution of approval panel

18. Time limit for GAAR provisions

19. AAR to pass ruling within 6

months

20. Prescription of Statutory forms21. Implementation issue

22. Reporting requirements

The committee in its findings

has stated that the GAAR guidelines

should be introduced in the country

at the time of economic stability.


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Hence, it has recommended the

postponement of its implementation

by 3 years. Committees recommen-

dation also states about the

implementation of the findings with

complete spirit and has laid emphasis

on transition period of the taxpayers

and preparedness of the

administrators. To provide clarity on

GAARs applicability provisions in

different situations 27 illustrations

were made and are mentioned under

different conditions like:

1. Tax Mitigation- GAAR cant be

invoked

2. Tax Avoidance- SAAR is

applicable hence GAAR is not

invoked3. Court Approved

Amalgamations or demergers

4. Tax Avoidance- GAAR invoked

5. Tax Evasion can directly be

dealt of law without invoking

the GAAR

Following the Finance Act

2012, the introduction of the General

Anti-Avoidance Rules (GAAR) was

done into the Income Tax Act, 1961.

The committee briefly analysed the

provisions of GAAR as per the inputsavailable from stakeholders and

following the recommendations

made the amendments in the Act

were made for finalization of the

guidelines for the Income Tax Rules,

1962.

Shomes Committee

The expert committee onGAAR (General Anti-Avoidance

Rules) was constituted under the

Chairmanship of Dr. Parthasarsthi

Shome with members, namely Shri N.Rangachary (Former Chairman of

IRDA and CBDT), Dr. Ajay Shah (Prof.

NIPFP) and Shri Sunil Gupta (JointSecretary-Tax Policy and Legislation,

Department of Revenue) for

undertaking the consultations ofstakeholders and finalization of

guidelines for GAAR. The main

objective of the committee was to get

feedbacks from the stakeholders andprepare new guidelines or to amend

the previous guidelines after

examining the things finely.The

committee was constituted by theCentral Board of Direct Taxes after

being approved by the Prime Minister

of India.

The committee formedThe committee formedThe committee formedThe committee formedThe committee formed

referred to following terms:referred to following terms:referred to following terms:referred to following terms:referred to following terms:

To receive feedback from both

public and stakeholders on the

Guideline of GAAR mentioned

on the website of Government

of India.

To rework on the guidelinesfollowing the feedback

received and examining the

same and then publish the same

in form of second draft

To find out and finalise,

guidelines along with an road-

map for implementation of

GAAR and submit it to the

government

Analysis of the GAAR

provisions

The provisions for the GAAR are

mention in Chapter X-A (Section 95

to 102) of the Act. Presented

provisions allow the authority of tax,

despite of containing anything in the

Act with clear declaration on the

arrangements made for assesses

(estimated value, nature or extent of

amount of the fine) that has entered

into the impermissible avoidance

arrangement to face the

consequences with regard to the tax

liability determined by thearrangement.

Indian external debts are

within manageable limits

The Department of Economic

Affairs (DEA) published its annual

publication- Indias external debt: a

status report 2011-12. As per the

published report, Indias external

debt in the end of March 2012 was

$345.8 billion, which is 13% high than

the previous years debt or $ 39.9

billion from where India stood at the

end of March 2011. The publication

points out about the upward

movement of the stress that is put on

the current account deficit (CAD) of

the nation because of the risks thrown

on it, from the external sectors that

comprises Fall in the reserve cover

for imports and external debt,

depreciation in the exchange rate of

rupee, rise in the level of external

debts and the increased share of the

short term commercial borrowing inthe complete external debt

quantum. The finance ministry

cleared on 10 September 2012 that

there can be a rise in the global

economic risks that may rise with a

weakened recovery and a slow

growth scopes that may lead into high

debts and seek growth finances even

in the advanced economies. This

clearance was based on Indian

Vulnerability Index indicators, which

has been experiencing the euro zone

debt crisis and the global slowdown.A detailed analysis of Indias

position in external debt at the end

of March, 2012 has been presented

in the status report. It is also based on

the data released by the Reserve Bank

of India on 29 June 2012. The report

not only presents the analysis of

external debts trend and

composition on the country but it also

presents a comparative picture of this

debt in reference to other developing

nations of the world with respect tothe fluid global economic situations.

The best part of the report produced

is that instead of all the facts

presented and developments Indias

debt is within manageable limits and

can be indicated by the debt service

ratio to 6 percent and external debt-


5/9





to-GDP ratio of 20 percent in 2011-

2012. Thus India continues to be

within the less vulnerable countries

when it comes to external debt

indicators compared to that of theindebted countries. The Global

Development Finance, 2012 from

World Bank, India stood at the fifth

position for absolute debt stocks

when compared with the 20 other

developing debtor countries. But

when taken care of the ration of

external debt to that of the gross

national income, India was at the fifth

position from the lowest side.

Indian Sovereign Rating is

Stable-MoodyThe rating agency, Moodys

Investors Services on 26 September

2012 in its Outlook for India

expected stability due to the newly

announced reforms (FDI & hike in

petrol rates). It believed that these

reforms will help India in pairing up

of the fiscal deficits. Indian sovereign

credit rating outlook was kept by the

agency at Baa3 for the medium

term. Sovereign Risk Group at

Moodys, vice-president, Atsi Sheth

said that the nations target may

exceed the fiscal deficit due to the

reforms being practiced. He also

predicted that the gross fiscal deficit

of India can overshoot the estimated

target of 5.1 percent of the GDP

proposed for the fiscal year 2012-13

that will end in March. Whereas, the

outlook to India by the rating

agencies Fitch and Standard & Poors

was negative , where the two

agencies showed concerns towards

the pace of reforms going on in Indiaalong with the economic downfall.

Service Tax on high-endclass travel, freight and

auxiliary service rail fares

The new Railway Minister C.P.

Joshi and the Finance Minister P.

Chidambaram in their meeting held

on 26 September 2012 came up with

the decision to regulate service taxes

on high-end passenger classes like

AC along with freight and auxiliary

services provided by the railways. The

taxation will be in effect from 1

October 2012. Implementation of the

taxes will help the exchequer in

generating estimated revenue of Rs

3100 Crore annually.

Percentage increase in thePercentage increase in thePercentage increase in thePercentage increase in thePercentage increase in the

fair chart for different segmentsfair chart for different segmentsfair chart for different segmentsfair chart for different segmentsfair chart for different segments

is as follows:is as follows:is as follows:is as follows:is as follows:

First Class - 7 percent

Air-conditioned - 3.708

percent

Freight charges - 3.708 per cent

Auxiliary services at stations

12.36 percent

The fair for high-end passengers

have been increased by 30

percent

Busy route surcharge during

busy season of maximum 10 percent

va ry ing from commodity to

commodity on freight will also come

on effect from 1 October 2012. This

step will help in winning an additional

sum of Rs 826 crore in upcoming sixmonths for the railways.

Shimla MunicipalCorporation introduced

Green Tax

Shimla Municipal Corporation

introduced Green Taxon Shimla

entry of vehicles not registered in

Himachal Pradesh. The Corporation

Commissioner M.P. Sood stated that

the vehicles crossing the entry points

of the town will have to pay theimposed tax. The tax will be imposed

on automobiles on both commercial

and non-commercial category. By

imposing the tax, the corporation will

increase its revenue by Rs 6 crore per

year. The taxes will be charged on

the four entry points of the city

namely, Totu, Tara Devi, Dhalli and

Mahali.

Tax imposed as per the

category of vehicles:

1. Two wheelers- Rs 100 per entry2. Car- Rs 200 per entry

3. Utility Vehicles- Rs300 per entry

4. Bus/truck- Rs 500 per entry

CVC instructed CBI toexpand the scope of

investigation on Coalgate

The Central Vigilance

Commission on 24 September 2012

instructed the Central Bureau of

Investigation to expand its

investigation scope on Coal BlockAllocation to private firms in between

1993 to 2004. The decision was made

after CVC received a letter from the

Coal Minister, Shriprakash Jaiswal

seeking a probe from CBI on

allocations made, since 1993.

Widening of the scope ofinvestigation will bring into scanner

the allocation done to private

companies during the reign of P.V.

Narasimha Rao led congress

government after 1993, includingUnited Front Government from 1996

to 1998 and BJP-led NDA

government from 1996 to 1998.

Report of Comptroller and Auditor

General of India (CAG) - Vinod Raion coal block allocations tabled in the

parliament states-

1. Due to arbitrary allotment of the

coal blocks the Indian

exchequer suffered a loss of Rs

1.86 lakh crore equivalents to $

37 billion


6/9





2. Up to 31 March 2011 total 194

coal blocks were allotted to

different private and

government parties with an

aggregate quantity of 44,440

million tonnes of coal

3. The beneficiary of these

allotments as per CAG report

were 25 major companies of

India including Essar Power,

Ji nd al Stee l an d Po we r,

Hindalco and Tata Power

4. To bring out transparency in the

process, the CAG suggestedcompetitive bidding as a better

solution

Finance Ministry demandedthe Bank details of CoalMining Firms

In wake of the raging Coal Gate

Scam, the Finance Ministry on 18

September 2012 asked forinformation related to bank loans of

the mining companies. The ministry

also asked details of companies not

directly engaged in mining but

collaterally engaged to coal blocksallocated from the public sector

banks. The ministry also demanded

details related to sanctioned and out-standing fund and non-funds of the

companies along with their status ofasset classification. The move of the

ministry is a result of irregularities

found in allocation of the coal-blocks

to the 58 power and iron and steel

companies, whose bank guaranteeshave been invoked by the Ministry of

Coal followed by the

recommendation made by the inter-

ministerial group on coal or the de-

allocation of the coal-blocks that is

under process. The need for all thesedetails by the finance ministry is in

the wake of the report submitted by

the CAG (Comptroller and Auditor

General) of India related to non-transparent allocation of coal blocks,

which lead to an es timated

exchequer loss of Rs 1.86 lakh crore.

RBIs data related tosectoral deployment of

credit states

1. Bank exposure to power sector

is Rs 344980 Crore

2. Bank exposure to iron and steel

is Rs 36320 Crore

3. Bank exposure to cement and

cement products is 36320 Crore

4. Bank exposure to mining andquarrying is Rs 36600 Crore

Power producers in India

consume almost 70 percent of thetotal production of coal in the

country.

Government cleared Rs 808crore FDI proposal byCloverdell

Mauritius based, CloverdellInvestments Ltd. got a clearance for

their foreign direct investment

proposal of investing Rs 808 crore on

6 September. The Mauritius basedcompanys case was taken into

consideration by the Foreign

Investment Promotion Board (FIPB)in the meeting conducted on 27 July

2012, but the approval came after

getting clarifications on certainissues. Clearance for making the

investment in form of FDI to

Cloverdell raised the total number of

cleared FDI application to 11 withan expected investment of Rs

2,067.98 crore. Cloverdells

investment will be directed tointroduce the foreign equity directly

into the operating Non Banking

Finance Company (NBFC) like thecompanies engaged in commodity

broking, stock broking, housing

finance and depository participantservice.

Chidambaram pitched forPrime Minister led National

Investment Board

Finance Minister P.

Chidambaram on 15 September 2012

pitched for institutionalization of a

National Investment Board under the

leadership of Prime Minister. The

formation of the board will help in

speeding the approval of the

proposals, for the mega projects and

their implementation. Formation of

the board will help the country in

achieving the targeted growth for the

twelfth five year of 8.2 percent.

At the meet ing of the fu ll

planning commission under the

chairmanship of Prime Minister

Manmohan Singh, the finance

minister expressed his concern on the

delayed implementation of the mega

projects and stressed on the fact that

the decision made by the NationalInvestment Board (NIB) to be taken

as the final decision. Chidambaram

also insisted interference by any other

authority on the approvals and

decisions made by the NIB will be

entertained. He also added to his

statement that NIBs role will be

limited to the projects with

investments of Rs 1000 crore or more.

NBFC-MFI norms modified

All registered non-banking

financial companies (NBFCs)intending to convert themselves into

non-banking financial company-

micro finance institutions (NBFC-

MFIs) must seek registration with

immediate effect, and, in any case,

not later than October 31, the

Reserve Bank of India said in a

notification on Friday. The NBFCs

have to maintain net-owned funds

(NOF) at Rs..3 crore by March 31,

2013, and at Rs.5 crore by March 31,

2014, failing which they must ensurethat lending to the micro finance

sector, that is, individuals, SHGs or

JLGs, which qualify for loans from

MFIs, would be restricted to 10 per

cent of the total assets, the RBI said

in a notification. The RBI made some

modifications in the directions issued


7/9





on December 2, 2011, to NBFC-MFIs.

In order to provide encouragement

to NBFCs operating in the north-

eastern region, the minimum NOF is

to be maintained at Rs.1 crore byMarch 31, 2012, and at Rs.2 crore by

March 31, 2014.

However, all new companies

desiring NBFC-MFI registration will

need a minimum NOF of Rs.5 crore

except those in the north-eastern

region Rs.2 crore.

To allow operational flexibility,

the RBI has asked these NBFCs to

ensure that the average interest rate

on loans during a financial year does

not exceed the average borrowing

cost during that financial year plus the

margin, within the prescribed cap.

Moreover, while the rate of interest

on individual loans may exceed 26

per cent, the maximum variance

permitted for individual loans

between the minimum and the

maximum interest rate cannot

exceed 4 per cent.

The average interest paid on

borrowings and charged by the MFI

are to be calculated on the average

monthly balances of outstanding

borrowings and the loan portfolio,

respectively.

It has also been decided that

the cap on margins as defined by the

Malegam Committee may not exceed

10 per cent for large MFIs (loans

portfolios exceeding Rs.100 crore)

and 12 per cent for others. This

measure will ensure that in a low cost

environment, the ultimate borrower

will benefit, while in a rising interest

rate environment, the lending NBFC-

MFIs will have sufficient leeway to

operate on viable lines. The figures

may be certified annually by statutory

auditors and also disclosed in the

balance Sheet, the RBI said in the

notification.

CCEA approved 1.90 crorelakh package on debt

restructuring for the SEBs

The Cabinet Committee on

Economic Affairs (CCEA) on 24

September 2012 approved a 1.90

lakh crore package on debt

restructuring for the state-electricity

boards. The taken step will allow the

state- distribution companies

(DISCOMS) to facilitate their

turnaround. The committee met

under the leadership of Prime

Minister Manmohan Singh and gave

its nod to the package forcing the red

marked distribution companies to

start the fresh round of tariff increase.The note of the cabinet states that all

this has been done to maintain a

balance in between the average cost

of supply to that of the average of the

revenue released. To avail the

package the discoms and the state

government will have to keep revising

the tariffs on a regular basis.

RBI for open policy on

pricing of liabilities

The Reserve Bank of India

(RBI), on Tuesday, asked banks tohave a board-approved transparent

policy on pricing of liabilities and

they should also ensure that variation

between retail and bulk in

interest rates on single term deposits

of Rs.15 lakh and above and other

term deposits is minimal. Banks are

offering significantly different rates

on deposits with very little difference

in maturities. This suggests

inadequate liquidity management

system and inadequate pricing

methodologies, the RBI said in anotification.

There are wide variations in

banks retail and bulk deposits rates,

making it unfair to retail depositors,

the RBI had said in its last annual

policy statement. The Reserve Bank

of India had permitted banks, in

1998, to offer, at their discretion,

differential rates of interest on single

term deposits of Rs.15 lakh and

above, subject to the condition that

the schedule of interest rates payable

on deposits, including deposits on

which differential interest was paid,

was disclosed in advance and not

subject to negotiation between the

depositor and the bank. Earlier, the

RBI had also stipulated that banks

should not discriminate in the matter

of interest rate paid on deposits,

except in respect of fixed deposit

schemes specifically meant for

resident Indian senior citizens and

single term deposits of Rs.15 lakh andabove.

IRCTC introduced InterbankMobile Payment System

The Indian Railway Catering and

Tourism Corporation Limited

introduced the Interbank Mobile

Payment System (IMPS) for making

the payment of the bookings via

mobile phones. On use of IMPS

system, the user will be charged with

Rs 5 for transactions of up to Rs 5000

and Rs 10 for transactions more thanthat.

The facility of booking via IMPS

will be available to those with their

phone number registered in the

respective bank accounts as the M-

Pin and the MMID (Mobile money

identifier) will be required for

furnishing the details required. This

facility will ensure smooth and

functioning of the booking criteria via

SMSs.

Modified allotment system

The Securities and Exchange

Board of India (SEBI), in a move to

increase the participation of retail

investors, modified the share

allotment system, irrespective of his

application size. It ensures every retail


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applicant gets allotted a minimum

bid lot, subject to availability of

shares in aggregate. The system will

satisfy more number of smaller

applicants in the oversubscribed

issues. The minimum application size

for all investors is also being increased

to Rs.10,000 -15,000, as against the

existing Rs.5,000-7,000.

To encourage professionals and

technically qualified entrepreneurs

who are unable to meet the requisite

20 per cent contribution by

themselves as promoters they will be

allowed to meet the same with the

contribution of SEBI-registered

Alternative Investment Funds such as

SME Funds, Infrastructure Funds, PEfunds and VCFs, subject to a cap of

10 per cent. SEBI also said that it

would permit additional routes,

including rights and bonus issue, to

facilitate companies to reach

minimum public shareholding

requirements. To allow more

flexibility to the issuers, changes up

to 20 per cent in the amount

proposed to be raised as given in the

objects of the issue at the red-herring

prospectus (RHP) stage, as against

the existing 10 per cent, will notnecessitate re-filing with SEBI. To

facilitate qualified institutional

placements (QIPs) even in a falling

market, issuers will be allowed to

offer a maximum discount of 5 per

cent to the price calculated as per

the SEBI regulations.

NSE became the WorldsLargest Bourse in Equity

Segment

As per the latest global ranking

compiled and published by the

World Federation of Exchanges

(WFE) in August 2012, the National

Stock Exchange of India (NSE)

become the worlds largest bourse

in terms of the number of trades in

equity segment for the first six months

of 2012. A total of 735474 trades took

place in the equity segment of NSE

in the January-June period of 2012,

making it the worlds largest

exchange on this parameter. NSE

was followed by NYSE Euronext and

Nasdaq OMX at the second and the

third positions.

Industry experts attributed the

recent position of NSE acquired bythe bourse to growing investor base,

use of latest technology and newproducts. NSEs platform is

connected to two lakh tradingterminals in more than 2000 towns

and cities across the country. NSE is

the second largest exchange globallyafter Korea Exchange for index

options. Eurex was the third largestexchange worldwide in terms of total

number of index options traded

during the first six months of 2012.

BSE recorded a total of 187824trades during this period in its equitysegment. The total number of listed

companies is much larger in case of

the BSE, the exchange however lagsbehind NSE significantly in terms of

volume and value of trades. The latestdata published by WFE indicated that

investors from tier-three cities

contributed more than 45 per centof total cash market retail turnover in

the financial year 2011- 12. The tier-three cities account for more than half

of the total retail investor base on NSEplatform.

CRR slashed to inject Rs17000 crore

Reserve Bank of India on 18

September 2012 injected a liquidity

of around Rs 17000 crore by slashing

down the Cash Reserve Ratio

(CRR)by 25 basis points to 4.50

percent from 4.75 percent. The

indicative policy rates were remained

at its original level. The repo rate,

state-term policy rate and reverse

repo rate remained unchanged with

8 and 7 percent respectively. The RBI

stated following its mid-term review

of the monetary policy that with

increased risks of growth and

inflation. In the situation, where there

is a persistent inflammatory pressure

of fiscal and current deficits

constraints, there exists a need of a

stronger policy targeting growth risks.

The monetary policies are of great use

in reviving the growth rate as per theexpectations of the market.

T h e Cash Reserve Ratio(CRR)will come into effect from 22

September 2012. So far in 2012, RBI

has slashed the CRR by 150 basis

points. Cash Reserve Ratio, basically

is a portion of deposits that the banksare supposed to keep with the

central bank (RBI), these deposits

doesnt earn any interest the

depositing bank. Repo Rateis a rate

at which the central bank offer funds

to the borrowing banks, whereas thereverse repo rate is the rate of parking

the funds available by the banks with

the central bank.

T h e Wholesale Price Index

(WPI)have been moving around 7.5percent across the financial year,

without much changes and so is the

condition ofConsumer Price Index

(CPI)that has been rotating around

10 percent in spite of price hike infood items.

Wholesale Price Index (WPI)

means the price fixed as arepresentative for a wholesale grain.

In India, WPI is used for monitoringinflation. Consumer Price Index (CPI)

is a statistical estimate that helps inmeasurement of price change of

services and consumer goodspurchased by the households.


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