Moody's on Monday, 19 August, reiterated its stable outlook on India's Baa3 sovereign rating, Bloomberg cited analyst Atsi Sheth.India's rating is supported by low levels of overseas government debt and adequate reserves for balance of payments needs in the near term, Sheth said in an email to Bloomberg. "The rating is also supported by domestic savings rate," it added.India's sovereign rating is at the lowest investment grade level. Moody's said that it will continue to asses the country's foreign exchange reserves adequacy. "India has adequate reserves for near-term BoP payments," it said.According to Moody's, flows are unlikely to accelerate unless growth outlook improves. "Fiscal policy is the weakest aspect of Indian economy," it said.Earlier in the day, in an interview with ET Now, Sheth said, "India has had certain amount of capital controls before and will likely continue to have capital controls into the future. Indian authorities have been very clear that capital account liberalisation is something they will address with caution.""In our view, India has always had capital controls. The measures announced recently were indeed adjustments in the amounts of controls. So depending on what your own view is, you can interpret it as new capital controls or an adjustment of capital controls. But the fact is that there were capital controls before, there will be capital controls now and the amount of control is what is being adjusted now," she added."In my view, what is affecting the attractiveness of the country as an investment destination are two factors. One is the growth outlook that we are seeing coming in and the second factor is the policy environment," Sheth said."We saw over the last year a flurry of announcements which have been seen positively by some because they open the doors to investment in certain sectors and they liberalise regulation in certain other sectors. But the net result of all those announcements has still not reflected in the growth. There is still uncertainty as to what next will come from the government that will really propel an improvement in the investment outlook.""Until there is some clarity that the government is going to take measures that will actually lead to private investors making direct investments, the attractiveness of India as an investment destination will remain subdued," she added.Earlier today, The rupee fell past 63 per dollar to a record low on sustained dollar demand from state-run and foreign banks.The rupee closed at 63.13 to a dollar, down 2.4 per cent on the day. The currency closed trading on Friday at 61.65/66 (not 61.55/56).
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The Reserve Bank of India said on Wednesday banks can exempt some foreign currency non-resident bank (FCNRB) deposits and non-resident external (NRE) rupee deposits when calculating their cash reserve and statutory liquidity ratios. The RBI said in a statement that starting from the bi-weekly cycle starting on 24 August, incremental three-year foreign FCNRB and NRE deposits with reference base dates of 26 July and above will be exempted from the cash reserve and statutory liquidity ratios. The cash reserve ratio is the proportion of cash deposits banks have to keep with the central bank in cash and the statutory liquidity ratio is the proportion that lenders must buy into government securities. The RBI also said it raised interest rates on longer-term deposits accounts held by non-residents. On foreign currency non-resident bank (FCNRB) accounts with maturities of 3-5 years, the central bank said it raised the interest rate ceiling to LIBOR plus 400 basis points from LIBOR plus 300. The RBI removed the ceiling on interest rates on non-resident external rupee deposits with maturities of three years and above. (Reuters)
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Stepped up efforts by Indian Finance Ministry to check revenue leakage have resulted in a detection of evasion of over Rs 2,158 crore in direct and indirect taxes in the last quarter of 2012-13.The detection came through a unique initiative of online monitoring system of suspicious transactions, named 'Virtual Office', which was set up by the ministry earlier this year for real-time coordination among revenue intelligence agencies and dissemination of various inputs pertaining to movement of illegal funds.The Central Board of Direct Taxes (CBDT) has detected unaccounted income and assets of Rs 1,408 crore using this platform.The Directorate General of Central Excise Intelligence (DGCEI) and Directorate General of Revenue Intelligence (DGRI)--two leading agencies under the Central Board of Excise and Custom (CBEC)--have together detected indirect tax evasion of at least Rs 750 crore, according to an official document.These agencies, which are part of the Virtual Office programme, detected the evasion after following up the leads in form of Suspicious Transaction Reports (STRs) passed on to them by Financial Intelligence Unit (FIU)--an agency tasked with analysing and disseminating information relating to dubious financial exchanges.Both DGCEI and DGRI have also effected a recovery of Rs 46.71 crore, on the basis of the STRs generated by the FIU, through Virtual Office. The CBDT has seized assets worth Rs 21 crore, the document said.An STR is a transaction of Rs 10 lakh and above believed to be proceeds of crimes including drug trafficking and black money.The Virtual Office was set up in January to monitor the feedback on the STRs disseminated by FIU-Ind, which is also providing administrative support to it.(PTI)
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Shares of Financial Technologies, which owns a series of exchange platforms, gained over 30 per cent on Monday, 5 August, after the senior management proposed an “agreeable” staggered payment schedules for parties who defaulted on payments after punching trades on Financial Technologies’ subsidiary National Spot Exchange Ltd.The exchange brokered peace between parties involved in the trades and hammered out a three-point settlement to meet outstanding payments worth Rs 5,600 crore on due contracts. As per the agreement, eight members, who dishonoured the contract, agreed to pay close to Rs 2,181 crore with immediate effect. Another 13 members have agreed to pay 5 per cent of the total dues every week, which after 20 weeks would add up to Rs 3,107 crore. Three other members have asked for more time to pay the remaining Rs 311 crore, said a Financial Technologies spokesperson.“We’ve received assurances for over 95 per cent of the payment,” the spokesperson said.As a second option, National Spot Exchange Ltd (NSEL) had asked non-payers to issue post-dated cheques amounting to Rs 4,900 crore against their settlement obligation.Read Also: Financial Technologies Crash: Sebi Begins Probe“While PDCs are a commitment, the payout process may not roll out smoothly in a month’s time. Hence, the market participants have proposed the first option (of staggered payments) as a safer alternative,” said a press note issued by NSEL.NSEL, which is an electronic trading platform for buying and selling of metals and agri-commodities, ran aground after it issued a circular that reduced the settlement cycle to less than 11 days (T+10) and barred intra-day square-off facility. Till that time, the exchange had larger settlement cycle often extending upto four weeks in the case of rare agri-commodities traded on the exchange. When the cycle got shortened, the market could not adjust to the new payment schedule. This gave rise to a mammoth payment default situation, triggering a massive drop in the shares of Financial Technologies.The stock fell over 79 per cent in two trading sessions, from Rs 584 on July 30 to Rs 120-levels at close on August 2. Financial Technologies shares ended trading at Rs 197.97 on the BSE on Monday.“FT shares may gain some more in the short-term, but it is going to be a pure trading play. Investors should keep proper stop-loss while trading on the stock. A better buy at this juncture would be MCX shares as there is more value there. Financial Technologies, over a longer term, may have systemic issues,” said Kishor Ostwal, CMD of CNI Research, a stock research firm.alertsmenon@gmail.comTwitter:@alertsmenon
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Hours after the Reserve Bank said that stabilising the battered rupee is its priority, Chief Economic Adviser to Finance Ministry Raghuram Rajan said RBI's action in this regard must not hurt the growth too much."RBI has come up with measures to put stability in the exchange rate. With these measures I hope there should not be serious consequences to growth. We must try to ensure that growth is not diminished," Rajan told a summit organised by the NSE, through a video link, this evening.The rupee strengthened to 58.69 to the dollar after the RBI first unveiled its measures on July 15, but has not closed below 59 since then and remains close to 60 levels after it had hit a record low of 61.21 on July 8.Earlier in the evening, the RBI said it will follow a cautious monetary stance, with focus on stabilising the domestic currency and containing the current account deficit.Hinting at a status-quo in tomorrow's policy review, the RBI's first quarter macroeconomic and monetary development report said: "The priority for monetary policy now is to restore stability in the currency market so that macro- financial conditions remain supportive of growth," even though it admitted that growth recovery is likely to be slower.Meanwhile, earlier in the day, Finance Minister P Chidambaram had said that the RBI should also look at boosting sagging growth and generating employment while focusing on price stability."All over the world thinking in changing. The mandate of a central bank must not only be price stability. The mandate of central bank must be seen as part of larger mandate which includes price stability, growth and maximising employment," he said while addressing a function of daily Divya Bhaskar.(PTI)
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Hinting at status quo on policy rates, the RBI said on Monday, 29 July its immediate focus is to stabilise rupee and made a case for calibrated action to contain the current account deficit, which is a major reason for the steep fall in currency.The central bank's policy focus has shifted from reviving economic growth to defending a rupee that hit a record low of 61.21 to the dollar on July 8, when it was down more than 9 per cent since the start of the year. "The priority for monetary policy now is to restore stability in the currency market so that macro-financial conditions remain supportive of growth. (However) this strategy will succeed only if reinforced by structural reforms to reduce the CAD and step up savings and investment," RBI said in its macroeconomic and monetary developments review released on the eve of the policy announcement."Amplifying macro-financial risks warrant cautious monetary policy stance," it added.Finance Minister P Chidambaram on the other hand said the mandate of a central bank is not only to ensure price stability but also to promote growth and generate employment.Stating he did not expect any hike in interest rates by the commercial banks, the Minister said they had enough funds to meet credit demands and that the onus of coming up with large investment projects rests with the industry."All over the world thinking in changing. The mandate of a central bank must not only be price stability. The mandate of central bank must be seen as part of larger mandate which includes price stability, growth and maximising employment," he said.RBI Governor D Subbarao had last week met Prime Minister Manmohan Singh and Chidambaram and is believed to have discussed the current macro-economic situation.Read Also: RBI Needs To Look At Growth: FMRead Also: RBI To Manage Liquidity As Rupee Stability Trumps GrowthA survey of external professional forecasters done by Reserve Bank increased its median expectation on rupee value to the 59.5 level to the dollar by March 2014 - nearly the same level at which the domestic currency is now trading. This is compared to the earlier expectation of 54.A majority of RBI watchers expect the policy to be a "no show" event, but are looking forward to the guidance which Governor D Subbarao gives in the quarterly policy announcement, which would be the last before he demits office early September.The depreciation in the rupee, which has shed over 10 per cent this fiscal, will weigh heavy on RBI, they said, adding that this is a shift from the central bank's focus on bringing down inflation and propping up economic growth."While monetary policy is largely guided by the growth-inflation dynamics, it is also tempered by considerations of risks of external imbalances," the report said.Depreciation in the rupee to a record low of 61.21 against a dollar has forced the RBI to take some unconventional measures to curtail liquidity and curb speculation in the past fortnight.The steps taken include limiting banks to draw only 50 per cent of their total deposits in overnight borrowings and maintaining 99 per cent average CRR everyday, apart from increasing of 2 per cent interest rate on the marginal standing facility.It said the measures give anything but "some breathing time" and would succeed only if reinforced by structural reforms to reduce the CAD.Flagging consumer price inflation, which has been constantly hovering in the double digits for the past 15 months even though wholesale price index has eased, RBI said the high retail inflation number puts pressure on public finances and erodes domestic savings, which in turn widen CAD.The CAD will improve only on structural reforms, it said, adding that CAD is expected to come lower in FY14 than the 4.8 per cent last fiscal. However, the 3.8 per cent achieved in the last quarter of FY13 is likely to be breached in the June quarter, it said.However, RBI said that even though the number may come in lower, the slowdown in the investor interest, which has resulted in outflows of USD 12 billion since last week of May alone, will mean financing the CAD will be a difficult task.On the growth front, RBI raised concern saying that the recovery is likely to be slower.(Agencies)
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The rupee posted its biggest single-day gain in nearly a month on 24 July' 2013 as the Reserve Bank of India's renewed efforts to shore up the currency by tightening cash conditions began to yield results. The RBI took new steps on 23 July' 2013 to support the rupee, including making it even harder for lenders to access funds with measures such as lowering the amount banks can borrow under its daily liquidity window. The efforts signal the RBI will stay the course with its defence of the currency despite the risks to economic growth. "I think these measures will stay in place for at least three to four months. These are not temporary," said Param Sarma, chief executive at NSP Forex. "These steps will only eliminate volatility from the market but for real appreciation bias to set in we need real flows, which can come in through an overseas bond sale. The rupee will hold between 58.50-60 band as long as these measures stay,". The partially convertible rupee closed at 59.13/14 per dollar compared with 59.76/77 on Tuesday. It rose to as high as 59.0150, its strongest since July 1. The unit gained 1.1 percent on the day, its biggest single-day gain since June 28. Rates and equity markets, however, reacted negatively to the further tightening of liquidity with the benchmark 10-year bond yield rising to a 14-month high of 8.50 percent while the 1-year overnight swap rate rose to a near 5-year peak. Traders will continue to monitor any comments from policymakers for near-term direction. "Rupee is likely to strengthen further towards 58-57 levels in the coming days as the central bank's actions are giving some strength to the local currency," the head of foreign exchange trading at a private bank said. Expectations of further tightening of domestic rupee liquidity pushed up onshore forward rates. The one-year onshore forward premium rose as high as 518.75 points, its highest since August 1998. Traders said the spot rupee was also helped by some long unwinding seen in the offshore non-deliverable forwards. The one-month NDF contract was at 59.57 while the three-month was at 60.46. In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 59.13 with a total traded volume of $3.3 billion.(Reuters)
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The rupee on Wednesday (24 June) gained 26 paise to 59.50 in early trade at the Interbank Foreign Exchange market on fresh dollar selling by exporters after the RBI announced additional measures to arrest the local currency's slide. Forex dealers said additional tightening measures announced by the RBI last night to contain excessive speculation and volatility in the foreign exchange market, supported the local currency.RBI has reduced the liquidity adjustment facility (LAF) for each bank from 1 per cent of the total deposits to 0.5 per cent, thus limiting the access to borrowed funds from the central bank. Read: Rupee Keeps Govt HangingIn another measure to suck out liquidity from the system, RBI has asked banks to maintain higher average CRR (cash reserve ratio) of 99 per cent of the requirement on daily basis as against earlier 70 per cent. CRR is portion of deposits that banks are required to keep with RBI.The rupee had lost four paise, to close at 59.76 against the dollar yesterday on sustained demand from importers and a rise in the US currency overseas.Sensex Down 76 Pts In Early Trade; Banks HitSnapping its five-day rally, the Bombay Stock Exchange (BSE) benchmark Sensex on fell nearly 76 points in early trade pulled down by financial sector stocks, including ICICI Bank and HDFC Bank, after the RBI announced additional liquidity tightening measures to check rupee slide.The 30-share barometer fell by 75.94 points, or 0.37 per cent, to 20,226.19 with banking, realty and consumer durables leading the fall. The index had gained over 451 points in the past five sessions. The wide-based National Stock Exchange index, Nifty shed 38.20 points, or 0.63 per cent to, 6,039.60.Brokers said fresh round of selling by participants after the RBI last night announced additional liquidity tightening measures to check rupee slide mainly dampened the trading sentiment.The BSE banking index suffered the most by falling 3.16 per cent to 12,424.40 points as stocks of SBI fell by 2.10 per cent to Rs 1,822, ICICI Bank by 2.97 per cent to Rs 960.40, HDFC Bank by 2.57 per cent to Rs 665.20 and Yes Bank by 4.44 per cent to Rs 419.25.In the Asian region, Hong Kong's Hang Seng index traded lower by 0.35 per cent, while Japan's Nikkei Index shed 0.58 per cent, in early trade.The US Dow Jones Industrial Average, however ended 0.14 per cent higher in yesterday's trade. PTI SUN(PTI)
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