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The government is considering a scheme to refund taxes imposed on India’s exports to the US that will suffer loss of competitiveness once the concessional duties enjoyed under the Generalised System of Preferences (GSP) are withdrawn.  A Rebate of State Levies (ROSL) kind of scheme, which would refund unrebated taxes that are included in the price of goods, would incentivise exporters and ensure India’s shipments do not drop. The unrebated taxes would be refunded through the drawback route. “Leather, textiles, some lines of organic chemicals, and nuclear reactors and boilers are some sectors that are likely to face a disadvantage. The government may consider ROSL for these sectors,” an official in the know of the development said.  While most Indian exports are incentivised through the Merchandise Exports from India Scheme, the programme has been disputed by the US for violating the World Trade Organization (WTO) rules.  ROSL is compliant with international trade norms and found fa

The Reserve Bank of India (RBI) is likely to reduce the cost of money for the second time in as many months as mounting concerns over a global economic slowdown, particularly in the US, and its impact on the emerging markets make investors rather wary of fresh investments into capital assets.  According to an ET survey of 26 market participants, an overwhelming majority expect a quarter percentage point reduction in the repo, or the rate at which banks borrow short-term money, when the central bank concludes its monetary policy review Thursday. The repo is now set at 6.25%. “Global economic conditions point to a synchronised growth slowdown, dampening oil prices,” said Gaurav Kapur, chief economist at IndusInd Bank. “This in turn will strengthen RBI’s rate-cut call as inflation is unlikely to spring a negative surprise over the next couple of quarters. RBI will focus more on ensuring future liquidity support to make the transmission of rate cuts more effective.”  Two participants,

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