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RBI Trims its Gilt Holdings as Rates Rise in US

The Reserve Bank of India is trimming its holding of US Treasuries joining many other emerging economies which have been selling off US bonds amid rising rates. Yet, it figures in the list of top-15 foreign lenders to the US government. RBI sold $16.3 billion worth of US treasury (USTs) bonds since April with its stock slipping from $157 billion as of March-end to $140 billion as of August-end, according to the latest data released by the US Treasury department. In the same period, China sold USTs worth $22.6 billion, while Taiwan sold $6.9 billion worth of USTs. This could be to reduce their mark-to-market losses as bond prices fall when interest rates rise. In India’s case, it is also due to the fact that RBI needed US dollars to sell in the market to stop the steep currency slide. The Indian central bank sold foreign currencies worth $18.6 billion in the spot market since April to rein in the value of the rupee. Foreign portfolio investors have pulled out more than $10 billion of th…

'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…

Aadhaar enrolment, update services by banks, post offices to stay: UIDAI

For now there is no change or review in the norms put by the UIDAI for banks to carry out enrolment and updation activities The UIDAI has said that the Supreme Court order restricting use of Aadhaar will have no bearing on enrolment and update services being carried out at banks, post offices and government premises. The move comes as service providers may still use offline verification tools that leverage the unique ID without authentication. The apex court has ruled that Aadhaar is not mandatory for opening bank accounts, but the norms set for banks and post offices to undertake Aadhaar enrolment and updation activity will stay as these are different from authentication services, Unique Identification Authority of India (UIDAI) CEO, Ajay Bhushan Pandey told PTI in an interview. "As Aadhaar is going to be used in the offline mode, for opening bank accounts and other services, and because use of Aadhaar in Direct Benefit Transfer, Pan-ITR has also been held constitutional, the role…