India Inc raised $2.78 billion from overseas markets in October this year, up 44 per cent from a year ago, according to the Reserve Bank of India (RBI) data. Domestic firms had raised $1.93 billion the overseas market in the same month a year ago. Of the total borrowings during the month, $69.43 million was raised through the approval route, while $2.71 billion came through the automatic route. As many as 56 companies raised money from automatic route while 3 firms raised funds via the approval route, the RBI data showed. In the approval route category, Indiabulls Housing Finance Limited raised $50 million for sub-lending, Roxul-Rockwool Insulation India Private Ltd $11.43 million for general corporate purpose and Cargill India raised $8 million for rupee expenditure. Under the automatic route, the major borrowers were Tata Motors raising $750 million for rupee expenditure and refinancing of earlier ECB and Reliance Jio Infocomm $750 million for rupee expenditure. Bharat Mumbai Container Terminals raised $494.53 million for port project and Larsen & Toubro borrowed $400 million for refinancing of earlier ECB and redemption of FCCBs. Among others, Aditya Birla Nuvo raised $42 million for refinancing of the earlier ECB; Srei Infrastructure Finance, $30 million for sub-lending, and Tata Hitachi Construction Machinery Co $39.14 million for general corporate purpose. External Commercial BorrowingsMeanwhile, the RBI allowed external commercial borrowings to be parked with banks in the country as term deposits for up to six months pending their utilisation. The borrowers are required to bring the proceeds meant for rupee expenditure such as payment for spectrum allocation, capital goods into India. The existing external commercial borrowing guidelines on the cost ceiling, permitted end-use and others will also be applicable to all such debt where the proceeds will be parked with banks in the country, the RBI said. (Agencies)
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Worried by potentially destabilising hot money flows, the Reserve Bank of India (RBI) could take action if foreign investors pour excessive amounts into mutual funds to bypass limits on ownership of government debt, according to a senior policymaker. Foreign institutional investors (FIIs) have almost reached their $25 billion limit on direct holdings of government debt, but have begun raising their exposure by investing through debt-focused domestic mutual funds. "This is a way of working around the rule," the policymaker, who has direct knowledge of the RBI's thinking, told Reuters. "If the flows become quite high into g-secs (government bonds), then we may have to take some action with SEBI," he added, referring to the Securities and Exchange Board of India. During the first two weeks of November, 30 billion rupees ($484 million) flowed into these funds, raising total foreign investment in them to 110 billion rupees, according to several fund executives, citing data tracked by clearing and depository agencies. "It doesn't look like a big amount has come through this route yet, but we are watching," the policymaker said. A senior SEBI official said there were discussions with the central bank, but gave no further details. India is sensitive to "hot money" flows. Midway through last year heavy outflows sent the rupee hurtling to record lows amid India's worst market turmoil in more than two decades, but authorities have since brought the country's external imbalances down to more manageable levels. Market participants anticipate that any potential steps to curb flows into mutual funds would likely involve tightening rules to specify foreign investors can only invest in funds focused on corporate bonds. The policymaker said the RBI had not reached the point where specific actions were under consideration. The RBI did not have immediate comment. Foreign investors have bought a net $12.4 billion of government debt so far this year, banking on easing inflation and fiscal reforms by Prime Minister Narendra Modi, who was elected in May by a nation desperate for an economic recovery. India's debt market is the best performer among major emerging market economies, in sharp contrast to last year. UBS estimates bonds have provided nominal returns of 12.4 percent so far this fiscal year, their best in 11 years. "With expectations that both fiscal situation and inflation will get better, confidence among overseas investors is very high," said A. Balasubramanian, CEO of Birla Sun Life Asset Management, which manages 1 trillion rupees. (Reuters)
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The pending Insurance Laws Amendment Bill, which seeks to raise the FDI cap in the sector to 49 per cent, is likely to the Parliament approval in the upcoming winter session, Finance Minister Arun Jaitley said on Sunday. "We have opened up investments in various sectors. I do hope this (winter) session I will be able to pass the Insurance Bill," he said at the India Global Forum meeting in New Delhi. The month-long winter session of Parliament is scheduled to commence from November 24. FDI in the sector is capped at 26 per cent at present. Jaitley also said he hoped to begin a delayed programme to sell stakes in government owned companies "in the next couple of days". He said the government was aiming to bring down its equity in public sector banks to about 52 per cent. The much-delayed Insurance Bill has been referred to the Select Committee of Parliament. The Bill, which comes with a rider that the management control would rest in the hands of Indian promoter, has been pending since 2008 in the Rajya Sabha. The minister said India is pursuing the policy of allowing foreign investment with sectoral cap keeping in mind the requirements of the economy and the appetite of the Indian political system. "When we were in the government last time we opened up the sector. At that time, the political system had an appetite for a limited opening. We are now opening up the sector a little more," he added. Bowing to opposition pressure, the government had in August agreed to refer the Insurance Bill to the 15-member Select Committee. The committee is expected to submit its report by the third week of November. The reform, according to experts, could increase the flow of foreign investment to the tune of Rs 25,000 crore into the private insurance companies. The move would help insurance firms to get the much-needed capital from overseas partners. There are about two dozen private sector insurance firms, both in life and non-life segment in the country. Goods and Services TaxJaitley also said that amendments to the goods and services tax (GST) law may be introduced in the winter session of parliament. "I am in the last stage of my discussion with the states on the eve of parliament session before introducing the amendments to the GST law in parliament," Jaitley said. The GST regime aims at subsuming most of the indirect taxes at the central as well as state level. The UPA government in 2011 introduced a Constitution Amendment Bill in the Lok Sabha to pave the way for introduction of GST. The GST rollout has missed several deadlines because of lack of consensus among states over certain crucial issues on the new tax regime. Pending since 2006, the discussion on GST Bill is stuck at a crucial stage where states have proposed to keep products such as petroleum, tobacco and alcohol out of GST ambit and had demanded the exemption list be included in the Constitutional Amendment Bill. (Agencies)
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Even as the 30-stock BSE benchmark index Sensex touches new heights every day, a report by Deloitte Global has stressed that India needs to focus on some key sectors like banking and infrastructure to attract foreign investment.In the report titled Competitiveness: Catching The Next Wave In India, Deloitte Global lists out the challenges faced by major sectors in the country. “To fully realise its potential, India must continue to invest in infrastructure, particularly transport networks and power systems, as well as work to enhance the employability of its working population. In addition, adopting an environment that enables innovation and collaboration to flourish across borders is critical to India’s economic growth. And of course, all this requires effective implementation,” says Gary Coleman, global managing director, Industries, Deloitte.The report has taken a growth horizon of 30 years for the country. The report says that the rural areas and lower-middle class in the urban areas are set to grow in the coming years. The report states that these are the two areas which would provide biggest opportunities for the financial services sector. “Despite the fact that more than 40 per cent of Indian households currently do not have access to banking services, the government’s strategy to promote financial inclusion in India, along with the country’s rising middle class, will likely continue to drive demand for services in the sector,” the report states.The report also emphasises the importance of the infrastructure if India is expected to achieve its targets in coming three decades. Indian infrastructure is set to become the world’s third-largest construction market by 2025. The country can bring back the growth in the sector by “removing bottlenecks for existing projects, and reviving the capital-expenditure cycle.”The report also goes on to mention the other sectors like retail, automobile manufacturing, pharma and IT that would also be crucial for the country’s growth in coming 30 years.
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The Federal Reserve on Wednesday ended its monthly bond purchase programme and dropped a characterisation of US labour market slack as "significant" in a show of confidence in the economy's prospects. In a statement after a two-day meeting, the central bank largely dismissed recent financial market volatility, dimming growth in Europe and a weak inflation outlook as unlikely to undercut progress toward its unemployment and inflation goals. "On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing," the Fed's policy panel said in an important departure from prior statements, which had described the slack as "significant." "The committee continues to see sufficient underlying strength in the broader economy," it said. US stocks added to earlier losses after the statement but came back to close down only marginally, while the yield on the 5-year US Treasury note jumped, putting it on track for its biggest one-day increase since mid-March. The yield on the benchmark 10-year US Treasury note was little changed. The dollar rose to a three-week high against a broad basket of currencies as traders pulled forward expectations of when the Fed would eventually raise interest rates. Rate futures shifted to show better-than-even odds of a rate increase in September 2015; previously, they had pointed to a hike in October. The Fed has held rates near zero since December 2008 and has more than quadrupled its balanced sheet to $4.4 trillion through three separate asset purchase programs. "The market is saying that the Fed has now stepped closer to tightening interest rates because of the labor market," said Andrew Wilkinson, chief market analyst at Interactive Brokers LLC in Greenwich, Connecticut. The Fed also added broad, flexible language that ties the timing and pace of any future rate hike to incoming economic data, as Fed Chair Janet Yellen has stressed in recent remarks. While the central bank retained its basic guidance that overnight borrowing costs would remain near zero for a "considerable time" following the end of bond purchases this month, the new phrase marks a turn towards a new regime. "If incoming information indicates faster progress toward the committee's employment and inflation objective than the committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated," the statement said. The changes in language seemed to accommodate the concerns of Fed officials worried the central bank was falling out of step with improvements in the economy. Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher, who dissented at the previous meeting last month, voted in favor of the statement this time. Slightly Hawkish TiltLike investors, economists generally saw the new language as having a slightly hawkish tilt, downplaying risks the recovery will ebb and sticking with the underlying forecast of moderate US economic growth and steady improvement in the job market. "Despite the recent market volatility, the statement ... was, if anything, more hawkish,” said Paul Ashworth of Capital Economics. "So, on balance, the Fed believes it is getting closer to meeting the full employment side of its mandate." Minneapolis Fed President Narayana Kocherlakota was the only one who broke ranks, arguing for the committee to make a bolder commitment to meet its 2 percent inflation target given a lack of price pressures. A global stock market sell-off two weeks ago, a dip in inflation expectations and flagging growth in Europe had raised the risk that global weakness could hamper the US recovery and undercut the Fed's effort to move inflation higher. The Fed made only slight reference to those events. It acknowledged that lower energy prices "and other factors" were holding inflation down. But it said risks to the economy were balanced, and it repeated its view that the likelihood of inflation undershooting its target had diminished since earlier this year. The decision to shutter the bond-buying program was almost foregone. The monthly purchases had been steadily cut from $85 billion to $15 billion as part of the Fed's gradual turn away from policies launched to fight the 2007-2009 recession and breathe more life into a tepid recovery. The Fed will continue reinvesting the proceeds of securities that mature each month, meaning its balance sheet will remain intact for the time being. (Reuters)
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The Narendra Modi government has cancelled the appointment of six public sector bank chiefs made during the previous UPA rule after a high-level panel found irregularities in their selection. The government said late on Monday that it has decided to draw up a new process to appoint chairman and managing directors (CMDs) as well as executive directors at state-run banks. As a result, eight posts of bank chiefs and 14 posts of their deputies will fall vacant and have to be filled up "de novo", the Finance Ministry said in a statement, without giving further details. The move comes months after an investigation began into whether the head of state-controlled Syndicate Bank took bribes to roll over a loan to family-controlled Bhushan Steel. A panel headed by the Reserve Bank of India (RBI) governor during the previous United Progressive Alliance government had shortlisted CMDs for Bank of Baroda, Canara Bank, Indian Overseas Bank, Oriental Bank of Commerce, United Bank and Vijaya Bank. The selections made by the panel had been sent to the Finance Ministry for ratification by the Appointments Committee of the Cabinet (ACC) but the government decided to scrap the entire selection process and fill these vacancies as well as two others, including at Syndicate Bank, through a fresh selection process involving the RBI governor. Following the arrest of Syndicate Bank CMD S.K. Jain in August for alleged graft, the Finance Ministry had set up a committee comprising the Expenditure Secretary, RBI Governor and Secretary of School Education to examine the appointments at six public sectors banks. After the committee's report, the government has decided to cancel the current selection process, the Finance Ministry said. Selections were earlier made by a panel headed by the RBI governor. Applications are processed by the Cabinet Secretary and placed before the Appointments Committee of Cabinet for its final approval. Finance Minister Arun Jaitley had earlier said the government was scrutinising recent appointments of bank chiefs. "Time has come to be strict with PSU (public sector undertaking) banks. I have urged the Cabinet Secretary and the RBI Governor to examine recent appointments in public sector banks," he had said. The Syndicate Bank chief was arrested for allegedly receiving a bribe of Rs 50 lakh. The investigation not only raised broader concerns about weak oversight, corruption and politically directed lending at state banks, but also brought into focus irregularities in appointments at the banks. Stressed loans - those categorised as bad and restructured - currently amount to about 10 per cent of all loans, making banks circumspect over lending. Fitch Ratings expects stressed assets to reach 14 per cent of loans by March next year. While a sluggish economy is the main reason for a rise in distressed assets, an RBI report in August also blamed lending to certain "excessively leveraged" groups.
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Rengan Rajaratnam, who was cleared of criminal insider trading charges following the conviction of his older brother, Galleon Group founder Raj Rajaratnam, has agreed to pay more than $841,000 to resolve civil claims by the U.S. Securities and Exchange Commission.The settlement was filed on Thursday by the SEC in New York federal court, three months after a federal jury in Manhattan acquitted Rengan Rajaratnam of conspiring to engage in insider trading, a rare defeat for U.S. prosecutors. Under the agreement with the SEC, Rajaratnam will pay the $841,243 in four equal payments and will neither admit nor deny wrongdoing. The deal must be approved by U.S. District Judge John Koeltl in Manhattan.As part of the agreement, Rajaratnam, 43, also agreed to be barred from the securities industry, the SEC said."The settlement ensures he's out of the industry and paying a serious price for breaking the law," Andrew Ceresney, the SEC's enforcement director, said in a statement.Daniel Gitner, a lawyer for Rajaratnam, emphasised in a statement that his client had been found not guilty in the criminal trial and the settlement did not include an admission of wrongdoing."Rengan is moving on to the next phase of his life," Gitner said.The SEC and Rajaratnam disclosed settlement talks in July, days after a jury acquitted the onetime portfolio manager at his brother's Galleon hedge fund of conspiring to engage in insider trading.Prosecutors had accused Rengan Rajaratnam of participating in an insider trading scheme with his brother involving technology companies Clearwire Corp and Advanced Micro Devices Inc in 2008.The SEC lawsuit included some of the same allegations but also contended Rengan Rajaratnam engaged in a broader scheme from 2006 to 2008 involving additional stocks and trading during his time at Sedna Capital Management, a fund he founded.Those other stocks included Polycom Inc, Hilton Hotels Corp and Akamai Technologies Inc, the SEC said. The trading resulted in more than $3 million in illicit gains, the SEC said in the lawsuit, which was filed in March 2013 on the day Rajaratnam was also indicted.Rajaratnam's acquittal in the criminal case represented the first loss in more than 80 insider trading cases brought by Manhattan U.S. Attorney Preet Bharara since 2009 as part of a major crackdown.Raj Rajaratnam, 57, is serving an 11-year prison sentence after being found guilty at trial in 2011 of engaging in an insider trading scheme that resulted in $63.8 million in illicit profit.The case is SEC v. Rajarengan Rajaratnam, U.S. District Court for the Southern District of New York, No. 13-cv-1894.(Reuters)
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India along with 20 other countries on Friday signed an agreement to become founding members of the China-backed Asian Infrastructure Investment Bank (AIIB) to aid the infrastructure development in the Asian region and reduce the dependence on Western-dominated World Bank and IMF. Usha Titus, a joint secretary at the economic affairs division of the Ministry of Finance, signed the MoU on behalf of India at a ceremony at the Great Hall of the People in Beijing. China's Vice Finance Minister Jin Liqun, who was also the former Vice-President of the Asian Development Bank, has been appointed as the Secretary General of AIIB. The bank, to be headquartered in Beijing, is expected to be operational by next year. The MoU specifies that the authorised capital of AIIB is $100 billion and the initial subscribed capital is expected to be around $50 billion. The paid-in ratio will be 20 per cent. Voting rights are to be decided after consultations among the members over fixing the bench marks which were expected to be combination of GDP and Purchasing Power Parity (PPP). Based on this formula, India will be second largest share holder of the bank after China. Elaborating on decision to participate in AIIB, Titus said India's view is that the new bank provides rich resource capital base for infrastructure financing, which is good for the regional development. Chinese Foreign Ministry spokesperson Hua Chua Chunying welcomed India's participation in new bank. China regards India's support as a major boost to the bank's formation which was largely seen as an effort to enlarge funding for the Asian countries reducing the dependence on ADB and other Western-dominated global financial institutions like World Bank and IMF. China was keen about India's participation and an invitation in this regard was extended by Chinese President Xi Jinping during his first meeting with Prime Minister Narendra Modi on the sidelines of BRICS summit in Brazil in July. The AIIB is in addition to the BRICS (Brazil, Russia, India, China and South Africa) Development Bank formed this year, which will be based in Shanghai. It is set to commence its operations with an Indian as its President. Besides India and China, other AIIB members are Vietnam, Uzbekistan, Thailand, Sri Lanka, Singapore, Qatar, Oman, the Philippines, Pakistan, Nepal, Bangladesh, Brunei, Cambodia, Kazakhstan, Kuwait, Lao PDR, Malaysia, Mongolia and Myanmar. Some AbstainedAustralia, Indonesia and South Korea skipped the bank's launch as the United States said it had concerns about the new rival to Western-dominated multilateral lenders. The IMF and the World Bank are accused by many countries of leading policies that do not serve economic interests of Asian, African and Latin American countries. Many also see them as institutions serving Western policies. Media reports said US Secretary of State John Kerry put pressure on Australia to stay out of the AIIB. The Australian Financial Review said Kerry had personally asked Australian Prime Minister Tony Abbott to keep Australia out of the AIIB. "Australia has been under pressure from the U.S. for some time to not become a founding member of the bank and it is understood Mr Kerry put the case directly to the prime minister when the pair met in Jakarta on Monday following the inauguration of Indonesian President Joko Widodo," the paper reported. In a speech to delegates after the inauguration, the Chinese president said the AIIB's operation needs to follow multilateral rules and procedures. "We have also to learn from the World Bank and the Asian Development Bank and other existing multilateral development institutions in their good practices and useful experiences," Xi said. Asian Development Bank (ADB) President Takehiko Nakao, who was in Beijing, said he did not think the AIIB was a threat to the ADB's role. Japan, which along with the US plays a major role in the ADB, was conspicuous by its absence. China has a 6.5 per cent stake in the ADB, while the US and Japan have about 15.6 per cent each. The ADB, created in 1966, offers grants and below-market interest rates on loans to lower to middle-income countries. At the end of 2013, its lending amounted to $21.02 billion, including co-financing with other development partners. According to a joint study by the ADB and Asian Development Bank Institute, the infrastructure finance gap in Asia alone is somewhere in the range of $8 trillion for the next decade. In India itself current requirement for infrastructure development is estimated to be over $1 trillion. (Agencies)
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DLF Ltd shares fell to a record low on Tuesday, wiping out $1.2 billion in market value, after India's securities regulator banned the property giant from capital markets and raised investor concerns about how it will service its debt. DLF, whose shares slumped as much as 27 per cent in Mumbai, may be forced to sell assets to pay down its debt that reached 191 billion rupees ($3.13 billion) at end-June, analysts say. DLF's debt has been a longstanding investor concern, and it will not be the first time the company is offloading non-core assets. The ruling by the Securities and Exchange Board of India (Sebi) on Monday marks the latest regulatory threat to the property developer, which is facing a probe from the antitrust watchdog and is also at the centre of a political controversy over sweetheart land deals in Haryana. "DLF's inability to access capital markets could impact its fund-raising program, both at the listed company level and potential listing of its commercial assets such as Real Estate Investment Trusts (REITs)," Macquarie research said. "DLF, in this case, would have to resort to large asset sales to reduce debt in the future." The ban follows what SEBI said was DLF's failure to provide key information on subsidiaries and pending legal cases at the time of its record-breaking 2007 initial public offering (IPO). DLF is the largest real estate group in the country with nearly Rs 10,000 crore annual turnover and market value of over Rs 26,000 crore. Its market cap had crossed Rs one lakh crore mark soon after its listing in 2007, but fell later. DLF's IPO in 2007 had fetched Rs 9,187 crore -- the biggest IPO in the country at that time. Sebi has barred the realty major as well as its six top executives, including chairman and main promoter K.P. Singh, from the securities market for "active and deliberate suppression" of material information at the time of its IPO. Besides Singh, those barred from the markets include his son Rajiv Singh (vice chairman), daughter Pia Singh (whole time director), Managing Director T.C. Goyal, former CFO Ramesh Sanka and Kameshwar Swarup, who was ED-Legal at the time of the company's public offer in 2007. DLF said in a statement on Monday the order dated October 10 came to its notice only on October 13 and it is being reviewed by DLF and its legal advisors. The company said it did not violate the law “either during its initial public offer or otherwise” and would defend its position against any adverse findings in the Sebi order. "DLF has full faith in the judicial process and is confident of vindication of its stand in the near future," the statement said. (Agencies)
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The Reserve Bank of India (RBI) has finally made progress in taming the country's volatile money markets, displaying two traits it has been rarely associated with in the past: flexibility and a willingness to correct course mid-way. The overnight cash rate, a key indicator of liquidity, has recovered from a summer of wild swings that threatened RBI Governor Raghuram Rajan's key goal of reforming India's money market. The swift response shown by a central bank under new management impressed bankers. Appointed a little over a year ago, Rajan, a former chief economist at the International Monetary Fund, is credited with making the RBI more amenable to change. "The new RBI management has been very proactive in responding to markets, be it money markets or forex markets," said Pramod Patil, an assistant vice-president of fixed income and foreign exchange trading at United Overseas Bank in Mumbai. Money markets are crucial in India because banks rely on overnight funding to finance longer-term borrowing - a reliance that has often made the market volatile. After Rajan pledged in August to look into the causes of the volatility that gripped the overnight cash rate the previous month, the bank quickly made the changes that bankers wanted, including injecting short-term cash more frequently. That instantly calmed the market, sending a message that, under Rajan, the RBI was no longer staid and unresponsive but had instead become more attuned to market needs. RBI officials declined to comment on the central bank's nimble action, but fired by success they appear set to make further reforms. Among the RBI's plans is the introduction of longer-term repos - potentially as long as 180 days, according to one official - and to build a yield curve that allows banks to borrow in several maturities. The longest-term repo regularly offered is currently 14 days. Other initiatives include the development of a private repo market, where lenders would be allowed to lend to each other, as in the United States and other more developed markets. Readiness To CorrectBy reducing banks' reliance on overnight funding and shifting to a longer-term policy tool, the RBI hopes to force banks to plan their short-term cash needs better. To accomplish that, a year ago the RBI had started injecting funds via term repos – or cash-for-loans transactions - to smoothen volatility. Banks welcomed the steps, but panned the implementation, saying the RBI was not injecting funds often enough and not unveiling repos of shorter terms than 7 days. Rajan's term repo initiative had appeared to unravel in July, when the overnight cash rate suffered volatility, with bankers and RBI officials privately blaming each other for the wild swings. Rajan stunned bankers in early August by acknowledging that the RBI's measures appeared to be failing and, days later, by announcing that overnight repos would be injected at weekly auctions. This readiness to correct stood in contrast to the six years the RBI had taken before admitting the bond futures it implemented in 2003 had flopped, and another five years to admit it had got it wrong a second time. Two months on, with the overnight cash rate stable at around the repo rate of 8 percent, bankers are growing confident that those measures have worked. The ends of the next two quarters will be critical tests of whether Rajan has succeeded in taming the money markets. The big test will come at the end of March when the fiscal year ends and banks tend to hold on to cash. "If these issues do not recur at the end of December and March, then we can say this model works in smoothening out liquidity in the system, and therefore is a model that can be followed for an extended period of time," said Mohan Shenoi, a treasurer at Kotak Mahindra Bank. (Reuters)
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