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Govt's move on fund transfer to states led to spike in bond yields ast year the Union Finance Ministry changed the dates on which it periodically transfers to states their share in central taxes. The conventional practice was to transfer funds on a monthly basis. Instead, the Centre had decided, it would from April 2018 (when the new financial year began) be transferring the states’ share in direct taxes on a quarterly basis. Transfers from Centre are a significant proportion of state revenue. So, the change created a cash management problem for states - they would have to find their own resources for spending, till the central transfer at the end of each quarter. To meet this need for additional cash every quarter, states had planned to borrow more in the first half of the financial year from markets. This surge in the supply of state paper caused a turmoil in the bond markets in early April. Yields soared, catching market observers off-guard. Perhaps realising the cascading e

Jury is out on the impact of RBI's foreign portfolio investor measures As the short-term borrowing cost of companies spiked and foreign portfolio investors (FPIs) liquidated their bond holdings in India for greener pastures, the Reserve Bank of India (RBI) came out with various remedial measures. In the first week of April, the central bank had increased the limit of foreign investment in Indian bonds to 6 per cent of the outstanding (in two phases till 2019-20), from 5 per cent now. By the end of April, it allowed foreign investors to invest in any maturity they wished to, from the earlier restriction of investing only in papers with a residual maturity of at least three years. In corporate bonds though, the minimum residual maturity is one year, down from three years. While it did raise the cap on aggregate FPI investment in any government securities to 30 per cent, from 20 per cent earlier, the central bank also imposed a new limit that investment below one year should not

Finance ministry gears up for second round of PSB recapitalisation he finance ministry has begun the process of ascertaining the amount of capital to be infused into public sector banks (PSBs) this financial year as a part of the second round of recapitalisation. The department of financial services has written to public sector banks seeking an update on the implementation of the reforms agenda set out by the Centre, which will become an important parameter for allocating funds to banks. “We have asked public sector banks to update us about the implementation of the 30-point reforms agenda by May 11,” said a senior finance ministry official. While announcing the broad contours of the Rs 2.11 trillion recapitalisation plan for public sector banks, the Centre had chalked out a comprehensive time-bound reforms agenda, EASE (Enhanced Access and Service Excellence). State-run banks were asked to seek approval from their respective boards for implementing the EASE plan. Based on the gove

GST Council okays single return a month; differences emerge on sugar cess Two groups of ministers (GoMs) will deliberate further on these matters and submit their reports in a fortnight The GST Council on Friday approved a simplified return filing framework that would require a taxpayer to file only one return every month against three at present. The Council has set a period of six months for the transition to take place. However, there was no consensus on the proposal to levy Rs 3-a-kg sugar cess, and on incentives to promote digitisation. The former evoked sharp protests from Kerala, West Bengal, and Andhra Pradesh in the three-hour meeting via video conferencing, chaired by Union Finance Minister Arun Jaitley. There was also no consensus on reducing the GST rate on ethanol, currently taxed at 18 per cent. Two groups of ministers (GoMs) will deliberate further on these matters and submit their reports in a fortnight. Kerala Finance Minister Thomas Isaac, one of the vocal cri

SEBI proposes changes to norms governing raising of equity capital The Sebi has proposed to allow companies to extend the IPO time period from three days without reducing the price band. The Securities and Exchange Board of India (Sebi) on Friday proposed a slew of changes to norms governing raising of equity capital. Among the changes suggested by the Sebi include an increase in threshold from Rs 5 million to Rs 100 million for filing of a “draft letter of offer” for a rights issue. The regulator has also proposed to reduce the time gap between announcement of the price band and launch of an initial public offering (IPO) from five working days at present to just two working days. Further, the Sebi has proposed to allow companies to extend the IPO time period from three days without reducing the price band. Sebi has also proposed to merge the provisions of the institutional placement programme (IIP) with those of qualified institutional placement (QIP). Changes have also been p

India need not worry about rupee fluctuation: ADB India need not worry much about currency fluctuation at the moment as the country has good accumulation of foreign exchange reserves, but a depreciating rupee could put inflationary pressure on the economy, asian development bank(ADB) chief economist yasuyuki sawada sais on friday. The Business Standard, New Delhi, 05th May 2018

SEBI panel proposes stricter norms for RTAs A Sebi panel felt that since RTAs manage sensitive investor-related data, there need to be stricter governance rules for the A Securities and Exchange Board of India (Sebi) panel on Friday proposed tighter ownership and governance norms for registrar and transfer agents (RTAs).According to a discussion paper released by Sebi, the panel, headed by former Reserve Bank of India (RBI) deputy governor R. Gandhi, felt that since RTAs manage sensitive investor-related data, there need to be stricter governance rules for them. RTAs maintain detailed records of all investor transactions in mutual funds and shares. They also help investors complete their transactions and receive a record of their account statements.This is the second discussion paper by the panel after some market participants suggested it should add credit rating agencies (CRAs), RTAs and debenture trustees (DTs) in the list of market infrastructure institutions (MIIs) and fra