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Jaitley Shuns Demand for Sharp Cut in Tax on Fuel Minister says suggestion is a ‘trap’ that will burden India with ‘unmanageable debt’ Finance minister Arun Jaitley rejected the demand for a sharp cut in taxes on fuel, saying the suggestion was a “trap” that would burden India with “unmanageable debt,” as he highlighted the macroeconomic stability achieved by the government India has firmly established itself as the world’s fastest-growing major economy with “phenomenal” 7.7% growth in the March quarter, Jaitley said in a Facebook post on Monday. This followed two challenging quarters due to structural reforms including demonetisation, the goods and services tax (GST) and the Insolvency and Bankruptcy Code (IBC). “The future looks much brighter than the past. This trend is likely to continue for some years,” said Jaitley, who is recuperating after a kidney transplant. Railway minister Piyush Goyal is handling the portfolio in his absence. On the issue of employment, Jaitley s...

ePayment Cos Want KYC Norms Eased for Now Write to Reserve Bank to delay implementation of its stringent customer verification rules The digital payments industry has written to the Reserve Bank of India to delay implementation of its stringent customer verification rules until mobile wallet providers are allowed to access the Aadhaar database for user authentication, said three people aware of the matter. “The (prepaid payments instrument) industry is in a precarious situation right now and therefore we request you to keep the (know-your-customer) regulations in abeyance till the time these concerns are resolved,” Payments Council of India (PCI) wrote in a letter to RBI, which ET has reviewed. The industry body said payment companies would be committed to the KYC guidelines once they receive global authentication agency (AUA) licences that will enable them to authenticate customers using Aadhaar. RBI did not respond to ET’s queries on if and how it plans to resolve the industr...

  Working capital loans to now come with withdrawal commitment & fees  The Reserve Bank of India on Thursday tightened norms for firms seeking working capital loans by ordering them to pay a fee and commit on withdrawal of sanctioned funds in an attempt to shore up bank treasuries to handle surplus funds from now on. The RBI said large borrowers will have to stipulate a minimum level of ‘loan component’ in fundbased working capital finance to promote greater credit discipline among borrowers. RBI said that a draft norm on this will be released soon.  “The working capital requirements of borrowing entities are met by banks through a cash credit limit which is a revolving facility. The cash credit facility places undue burden on the banks in managing their liquidity requirements. Currently banks do not charge any commitment fee and do not maintain any capital on the undrawn portion of the cash credit because it is classified as an unconditionally cancellable fac...

For mid-cap stocks, optimism may be priced in, but not the uncertainties The rosy mid-caps bull story is pretty much over for now. So far this calendar year, the Nifty Midcap 100 index has shed 11%. On the other hand, the Nifty index (comprising of 50 large cap firms) has gone up 2.7%. Its sharp outperformance earlier had resulted in soaring valuations for mid-caps and a correction was overdue. Ritesh Jain, chief investment officer at BNP Paribas Asset Management India Pvt. Ltd says mutual funds (MFs) had to rebalance their portfolio in keeping with Sebi (Securities and Exchange Board of India) norms, which defined categories such as large caps, mid-caps and small caps. “This put many mid-cap stocks out of favour with the MFs. Secondly, global liquidity has vanished from emerging markets,” added Jain. A combination of these two accentuated the problem. Nonetheless, valuations of midcaps are at a premium to their large cap peers. Have a look at Chart 1. Even as the one-year forw...

  Foreign holding rules for NBFCs raise risk of data breaches  The Indian financial system faces a new threat from overseas – data and capital dumping. The regulatory arbitrage between NBFCs and banks could open up avenues through which Chinese investors in NBFCs could take out data of Indian borrowers. While the Reserve Bank of India has been strict with foreign ownership of Indian banks, a loophole in NBFCs’ ownership, which are competing and eating into market share of banks, poses a threat.  The industry is concerned about the easy access of data by foreign entities in the financial services sector. Some leading players want to have a relook at the regulation relating to holding structure of NBFCs.  “There are two different issues --one is data and the other is capital dumping,” said Gagan Banga, vice chairman, Indiabulls Housing Finance. “If capital dumping is coming from promoters, who are in the habit of losing capital for the first few years and buildin...

Bank Nifty likely to be rangebound, experts recommend short strangle  Traders can hope to rake in modest gains by initiating a risky short strangle on Bank Nifty options, which data show would trade in a 26,000-27,000 range this series. The strategy consists of selling a Bank Nifty call and put at 26,800 and 26,000, respectively, which covers the 1,000-point range when the premium for selling the strangle is included. Both the options expire on June 28. The Bank Nifty closed at 26,417.4 on Friday.  The risk lies in the index breaking sharply above or below the 1,000-point range, if global trade tensions escalate, in which case losses can be unlimited, unless the trader puts stop losses.  Assuming Friday closing prices of Rs 124 a share (40 shares equal one contract) for the 26,000 put and Rs 118 for the 26,800 call, the seller receives a combined Rs 242 from the sale of the two strikes. The expectation as of now is that the Bank Nifty would not break out of the 26,8...

Rising corporate deposit rates likely to move further up  Savers have enough reason to rejoice after the Reserve Bank of India (RBI) effected the first rate increase in more than four years, pointing to a commensurate rise in rates for corporate deposits.  Although commercial banks did not raise rates in bulks, at least four nonbanking finance companies (NBFCs) — Bajaj Finance, Dewan Housing Finance, Shriram Transport Finance and Mahindra Finance — have increased rates by 10-60 basis points. On renewals, most of them now offer 15-25 basis points extra.  Senior citizens can earn about quarter to half a percentage points more in returns.  Following RBI’s policy action, the latest series of rate hikes have come from non-banking finance companies than any commercial banks,” said Anil Chopra, group director — corporate affairs, at Bajaj Capital. “Retail investors have again started making a beeline for highyielding corporate deposits after the rises in past one or t...

Reserve Bank of India relaxes norms for FPI investment in bonds FPIs had lobbied with the RBI and finance ministry, as well as the Securities and Exchange Board of India (Sebi), that a huge lot of NCD issuance was stuck because of RBI rules The Reserve Bank of India (RBI) on Friday relaxed its April notification, which forbade FPIs from investing more than 20 per cent of their portfolios in bonds issued by a single corporate group. While the regulations remained the same as mentioned in April, the central bank said FPIs could carry on with transactions committed till April 27, when the notification came. In the April 27 notification, the central bank had said an FPI, or its entities, could not have more than 50 per cent of investment in a single corporate bond and their portfolios could not take more than a 20 per cent exposure in any single corporate group. On Friday, the RBI said its April provisions could be relaxed if a commitment for investment had been made by April 27 ...

 Centre, state to share GST anti-profit funds Centre and the ‘concerned state’ will equally share the amount deposited by erring businesses in the consumer welfare fund set up as part of the GST anti-profiteering rules, as per a Finance Ministry notification. following the rollout of GST in july last year, the government set up a national anti-profiteering authority to penalise business for failure to pass on tax benefits to consumers. In case the customer is not identifiable, the money has to be deposited in the consumer well are fund. The Business Standard, New Delhi, 16th June 2018

Higher interest rate may cap GDP at 7.5%: Nomura Growth in the current fiscal year will be faster in the first half and will likely face pressure in the second half to end the year at 7.5 per cent, a Japanese brokerage said on Friday. The rate hike by RBI and the oil prices raise concerns over sustainability of what ws termed as a " cyclical, broad-based recovery", Nomura 's chief india economist sona varma said. "We feel growth will be front-ended in fy19. The first quarter can see growth of 7.5-8 percen," she said. The Business Standard, New Delhi, 16th June 2018

India's exports hit 6-month high; trade deficit widens as imports up 14.85% The aftershocks of the Rs 140-billion Nirav Modi scam continued to affect the gems and jewellery sector A rise in receipts of petroleum, engineering and pharmaceutical products boosted May’s export growth figures to a six-month high of 20.18 per cent, up from 5.71 per cent in April. Even then the trade deficit widened to a four-month high of $14.62 billion, compared to the Dollar 13.7 billion deficit in April as imports rose by 14.85 per cent during the month, compared to the 4.60 per cent rise in April. This could pressurise the current account deficit in the first quarter of the current financial year after it stood at 1.9 per cent of GDP in the fourth quarter of 2017-18, compared to 2.1 per cent in the third quarter. However, within exports, major labour-intensive sectors, such as gems and jewellery and ready-made garments, continued to see declines, which might affect jobs. The export growth r...