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The Supreme Court on Tuesday warned the Reserve Bank of India (RBI) of contempt proceedings for failing to disclose information regarding the annual  inspection reports of banks sought under the Right to Information (RTI) Act. The top court gave the RBI one week’s time to comply with the directions or “be  ready to face the consequences”. The matter will be next heard on April 2. In January, the apex court had issued notice to the RBI on a contempt petition alleging the central bank had not provided information about the inspection  conducted on some banks said to be involved in irregularities inside the Sahara Group. The petitioner alleged that the RBI had denied information regarding  inspection reports for ICICI Bank, Axis Bank, HDFC Bank and State Bank of India (SBI) despite clear orders of the top court. The RBI, however, had denied disclosing the information, claiming that the said inspection reports fell under the definition of 'fiduciary information' and   hence c

A Securities and Exchange Board of India (Sebi) panel headed by former Reserve Bank of India deputy governor HR Khan is set to recommend liberalisation of investment caps for foreign portfolio investors. At present, foreigners can own up to 24% in a listed Indian company with any further increase requiring approval from the firm’s board.  The panel is considering to propose removal of the 24% restriction and making the different sectoral caps under foreign direct investment (FDI) rules as the new ceiling. This will give companies room to raise money from foreign investors while improving India’s weightage on the MSCI Index. The committee is expected to submit its recommendations to Sebi in April.  “Basically, we are only flipping around the current regime that requires each company to separately pass resolutions to increase FPI limits up to the sectoral caps to one where less-prepared companies can resolve to reduce the FPI limits from the sectoral caps to the level they choose,” s

The Reserve Bank of India (RBI) on Tuesday infused Rs. 34,561 crore into the banking system in exchange for dollars, in its first dollar-rupee swap auction. In a statement, the central bank said the auction received bids for dollar 16.31 billion, approximately three times the notified amount.  Through the auction, RBI bought dollars totalling dollar 5.02 billion at a premium of Rs. 7.76, which works out to an annualized rate of 3.76% from authorized dealers and paid them rupees in return.  After three years, these banks will buy back the same amount of dollars at the premium offered in Tuesday’s auction. The enthusiastic response to the auction could prompt the Indian central bank to take this route as an alternative to open market operations (OMOs), which are frequently used to manage liquidity, experts said.  “It is a very well-offered auction and it only shows confidence within the central bank and the market participants that this instrument can be used as an alternative to OMO

The finance ministry has given its nod to set up a precious metals’ board to bring clarity on how the new comprehensive gold policy will be implemented.  The proposed board, to be known as the Precious Metals Board of India, will be the regulatory body for gold, silver, platinum, palladium and other commodities the government notifies.  During a meeting of government officials and industry stakeholders in New Delhi, the plan to set up the board was finalised and a proposal on this will be sent to the Prime Minister’s Office in a day or two, said a source.  The board is expected to have a chairman, two whole-time members, two part-time members from the finance ministry and one member each from the Securities and Exchange Board of India (Sebi), the commerce ministry and the warehouse regulator. The plan to constitute such a board was under consideration for long.  The finance ministry had set up a high-level panel to discuss its formation. The panel included representatives from Sebi

The Reserve Bank of India should instead consider cutting the cash reserve ratio, a move it last resorted to six years ago The Indian central bank’s  purchases of bonds to inject cash into the financial system may have an unintended effect of distorting bond prices, according to Deutsche Bank AG.  The Reserve Bank of India should instead consider cutting the cash reserve ratio, a move it last resorted to six years ago, as various reserve requirements  enforced by the authority so far are curbing deposit growth and transmission of rate cuts, said Srinivas Varadarajan, managing director for fixed income and  currencies at the bank’s Indian unit.  “Open-market operation interventions beyond a point do have an impact on the micro structure of the government bond market,” he said in an interview. “The   RBI should look at CRR in addition to OMOs as active instruments to manage durable liquidity in the system.”  The central bank has bought a record Rs 3 trillion ($43.5 billion) of govern

Non-banking finance companies (NBFCs) are beginning to add crucial jobs across various functions, indicating that stability has returned to a key sector that was unsettled last autumn by a liquidity squeeze and subsequent increases in capital costs.  NBFCs could hire about 15,000 people in FY20, an estimate by recruitment firm TeamLease showed. Among those adding jobs are Mahindra Finance, Shriram Transport Finance, Piramal Capital, Aditya Birla Finance, IIFL, Magma FinCorp, and Ugro Capital. These companies have already begun recruitments, and the Jan-March quarter alone could account for half the expansion in FY19, which ends in 10 days. According to TeamLease, NBFCs have hired around 10,000 employees in FY19.  Sector Overcomes IL&FS Setback “The (NBFC) sector is poised for the next level of growth in next few years and well-run NBFCs would benefit the most (from this expansion),” said Ramesh Iyer, managing director at Mahindra Finance. “We are also expanding and diversifyi

The Reserve Bank of India is likely to ease the rules governing disclosure of transfer of bonds among various categories in the portfolios of banks. This could lead to a surge in the treasury income for banks.  The central bank may say that banks need not disclose the transfer of state bonds from the held-to-maturity (HTM) category to the available-for-sale (AFS) segment, said a person with direct knowledge of the matter. The RBI didn’t respond to an email seeking comment until publication of this report.  Banks will also get to shift more of state loans which are in the HTM category to AFS — which means an increase in liquidity as these bonds carry higher coupon rates. This will also help state governments buy back bonds if they want to cut their borrowing costs in falling interest rate regimes.  The matter was discussed in a meeting held between the RBI and state finance secretaries a week ago. The RBI had proposed a rulebased approach in fixing new ways and means limits for st