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RBI withdraws 20% limit on investments by FPIs in corporate bonds

The Reserve Bank of India (RBI) on Friday withdrew the 20 per cent limit on investments by FPIs in corporate bonds of an entity with a view to encourage more foreign investments. As part of the review of the FPI investment in corporate debt undertaken in April 2018, it was stipulated that no FPI should have an exposure of more than 20 per cent of its corporate bond portfolio to a single corporate (including exposure to entities related to the corporate). While the provision was aimed at incentivising FPIs to maintain a portfolio of assets, market feedback indicates that foreign portfolio investors (FPIs) have been constrained by this stipulation, the RBI said. "...in order to encourage a wider spectrum of investors to access the Indian corporate debt market, it has been decided to withdraw this provision with immediate effect," the central bank said. The RBI said the directions in this regard have been issued the Foreign Exchange Management Act. The Business Standard, 16th Fe…
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Exports up 3.74 pc in Jan; trade deficit narrows

The country's exports grew 3.74 per cent to USD 26.36 billion in January on account of growth in sectors such as gems & jewellery, pharmaceuticals and chemicals, according to data from the commerce ministry. Imports almost remained flat at USD 41 billion during the last month, narrowing the trade deficit to USD 14.73 billion. The trade deficit stood at USD 15.67 billion in January 2018. Gold imports also grew 38.16 per cent to USD 2.31 billion in January this year as against USD 1.67 billion in the corresponding month of 2018. During the April-January period of the current financial year, exports grew 9.52 per cent to USD 271.8 billion. Imports rose by 11.27 per cent to USD 427.73 billion. The trade deficit widened to USD 155.93 billion during the 10 months of the current fiscal from USD 136.25 billion in April-January 2017-18. The Business Standard, 16th February 2019

Sebi role in promoter financing, MF jumble

In the iconic Bollywood movie, Sholay, a number of policemen have been featured. There is the bumbling jailor who relies on weak market intelligence and ends up burning his fingers. Then, there is the stereotypical Bollywood cop who arrives after all the action is over in the last scene. In the recent furore over fancy structures used by mutual funds for promoter financing, market regulator Securities and Exchange Board of India (Sebi), unfortunately, displays similar weaknesses. To start with, its market intelligence comes across as extraordinarily poor, if not absent. Reports say the regulator is now concerned about undue risks taken by mutual funds, although there was no inkling of any concerns of the kind anytime in the past. Likewise, while market participants are now calling for better disclosures of such financing structures by listed companies, Sebi is yet to make a statement on this. J.N. Gupta, managing director, Stakeholders Empowerment Services (SES), says: “Sebi will have …

FinMin Seeks RBI’s Rs 27,380 Cr Retained For Risks, Reserves

The finance ministry has sought from the Reserve Bank of India (RBI) Rs 27,380 crore that was withheld by the central bank towards risks and reserves in the previous years, said sources. The RBI had retained Rs 13,190 crore towards risks and reserves during 2016-17. It increased to Rs 14,190 crore in 2017-18. Together, retained amount is Rs 27,380 crore. The ministry has requested the RBI to provide an interim surplus for the current fiscal on the analogy of the previous financial year and transfer the amount withheld from the surplus of 2016-17 and 2017-18, sources said. Earlier this month, Economic Affairs Secretary Subhash Chandra Garg had said the government expects Rs 28,000 crore from the RBI as interim dividend during the current fiscal. The RBI, which follows July-June financial year, has already transferred Rs 40,000 crore in the current fiscal. If the central board of the RBI approves transfer of Rs 28,000 crore requested by the government as interim dividend for the current …

Taxman Goes After Indirect Investments in Overseas Cos

Many well-heeled Indians who own stocks and properties abroad or are beneficiaries of offshore trusts may come under the glare of the income tax (I-T) department for failing to spell out their ‘indirect investments’. Indirect investments are the nextlevel investments — or, holdings in other overseas companies — by the entity in which the resident Indian is a stakeholder. Consider an individual holding 15% equity interest in an unlisted offshore firm (A) in Dubai, which in turn is a shareholder in three US companies (B, C and D). According to the department, indirect ownership in B, C and D has to be disclosed in the income tax return along with the investment in A. The tax office, sources said, has asked a few “high-profile individuals” to explain why they did not disclose their indirect investments because under the law the Indian resident is the ultimate beneficial owner (UBO) of all the companies. Non-disclosure of information could attract a penalty of at least ?10 lakh; and, if th…

RBI Cuts Repo 25 bps, Softer Rate Regime on the Horizon

The Reserve Bank of India on Thursday cut the key interest rate by 25 basis points to 6.25% and shifted the policy stance to ‘neutral’ terming it a ‘decisive’ act to promote investment and consumption in an economy facing weak demand. The move may open the doors to a lower interest rate cycle based on receding inflation, though it could only be for a short term going by past trends. After claiming success in tackling price pressures since inflation targeting was adopted about two years ago, the Monetary Policy Committee voted unanimously on Thursday for a shift in stance to ‘neutral’ from ‘calibrated tightening’ and lowered inflation forecast. The central bank also brought nonbanking finance companies (NBFCs) on a par with manufacturing companies with regard to capital requirements for banks that lend to them. The credit rating of an NBFC will now determine how much capital the bank has to set aside, making thousands of crores of rupees available for lending to a sector buffeted by con…

CBDT Chairman Promises Speedy Solution to Startups’ Tax Worries

The government may soon find a solution to address the tax concerns of startups, Central Board of Direct Taxes (CBDT) chairman Sushil Chandra said. “Very shortly, we will find out a solution on the basis of the suggestions we have received. We will have to decide which startups are real startups and how they can be exempted from Section 56 (2) of the Income Tax Act,” he said at an Assocham function here on Thursday. Various startups had raised concerns over the notices sent to them under this section to pay tax on angel investments. The CBDT chief said any startup recognised by the Department for Promotion of Industry and Internal Trade is exempt from Section 56 (2) and the tax notices sent to startups have been stayed. Last week, officials from the department, along with tax department officials, met startup industry representatives to hear their suggestions. Section 56 (2) provides that the amount raised by a startup in excess of its fair market value would be deemed income from oth…