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Showing posts from October 9, 2018

'Examine if rate cut benefits reach consumers'

The plea by an NGO cited an RBI report that found banks were not passing benefits of lower rates to customers The plea alleged that by failing to take action on the petitioner’s repeated requests for justice on behalf of citizens, RBI had deliberately acquiesced in the discrimination by banks in the name of implementing the marginal cost of funds-based lending rate (MCLR) regime. From time to time, RBI has expressed concerns about the reluctance of banks to pass on rate cuts to consumers, and made several attempts to change the way they price their loans. In 2003, RBI introduced the benchmark prime lending rate (BPLR), but this failed to bring in transparency, as a large part of the lending took place at interest rates below the announced BPLRs. Then came the base rate, which was to be the minimum rate for all loans and calculated on the basis of cost of funds. Individual borrowers were charged a spread over the base rate, which was tweaked to benefit only new borrowers. The drawbacks o…

Higher LTCG Tax for Those Betting on Mergers

LACUNAE Grandfathering benefit for taxes on longterm capital gains doesn’t cover mergers, demergers Investors of at least two dozen companies, including Capital First, Ultra Tech Cement, Bharat Financial, will have to shell out higher capital gains tax. This is because the ‘grandfathering’ benefit for taxes on longterm capital gains — reintroduced in this year’s Union Budget — doesn’t cover mergers and demergers. Grandfathering refers to exemptions on the gains made prior to enactment of a new law from the ambit of the new law. The government said longterm capital gains tax will be calculated based on the Jan 31 trading price of a stock. However, this benefit applies only to stocks acquired or purchased before Jan 31, 2018. If the shares were non-existent or unlisted as on Jan 31 long-term capital gains tax would be calculated based on original cost of purchase. In mergers, investors of the company getting acquired receive shares of the new company in exchange for their original shares.…

Sovereign Gold Bonds 2018-19 series-II issue opens on October 15

Bonds would earn an interest of 2.5 per cent per annum, payable every six months on the nominal value The Central government will issue Sovereign Gold Bonds 2018-19 for public subscription from October 15-19. "Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds-2018-19," a Finance Ministry statement said on Monday. "The Sovereign Gold Bonds will be issued every month from October 2018 to February 2019." According to the statement, bonds would earn an interest of 2.5 per cent per annum, payable every six months on the nominal value. The bond certificates would be issued on October 23. "Price of bond will be fixed in Indian rupees on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last 3 working days of the week preceding the subscription period," the statement said. "The issue price of the Gold Bonds wil…

Rupee pares gains, slips back to 74 levels

The domestic unit on Monday slumped 30 paise to finish at a fresh lifetime low of 74.06 amid strengthening of the greenback and steady capital outflows. The rupee on Tuesday slipped back to 74 levels after opening 18 paise higher at 73.88 against the US dollar. The domestic unit fell up to 74.02 in the early trade. At 09:44 am, the currency was trading at 73.98 against the greenback. Earlier, after crashing to a fresh record low of 74.06 on Monday, the rupee recovered a bit and opened 18 paise up at 73.88 against the US dollar on Tuesday. The domestic unit on Monday slumped 30 paise to finish at a fresh lifetime low of 74.06 amid strengthening of the greenback and steady capital outflows. It was the 6th straight session of rupee depreciating against the dollar. Foreign institutional investors (FII) were net sellers to the tune of Rs 4,419 crore on October 5, 2018. FIIs have been net sellers to the more than Rs 11,405 crore in October 2018, according to a note by ICICI Securities. "…

IMF retains economic growth projection for India at 7.3% for FY19

Echoes RBI on exchange rate intervention, but differs on rate tightening The International Monetary Fund (IMF) on Monday retained economic growth projection for India at 7.3 per cent for 2018-19 (FY19), lower than the government’s and the Reserve Bank of India’s (RBI’s) forecasts. This is, however, noteworthy as the IMF cut global growth projections by 0.2 percentage points. In its World Economic Outlook (WEO), the IMF said foreign exchange interventions should be limited to address disorderly market conditions, something which RBI Governor Urjit Patel also talked about. The IMF wants the RBI to tighten monetary conditions, something which it did not do in the October policy review. For the next year (FY20), the IMF lowered India’s growth projections by 0.1 percentage points to 7.4 per cent. As such, the IMF does not see India’s growth reaching 7.5 per cent even in FY19. However, the RBI pegged India’s growth projections at 7.5 per cent. The government expected the rate to exceed 7.5 pe…