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The Reserve Bank of India (RBI) will conduct its second dollar-swap auction in a month to inject $5 billion (about Rs 34,500 crore) of liquidity into the  banking system, marking a new trend in balancing the economy’s cash needs and ensuring speedier transmission of policy rate actions.  “In order to meet the durable liquidity needs of the system, the Reserve Bank has decided to inject Rupee liquidity for longer duration through long-term  foreign exchange Buy/Sell swap in terms of its extant Liquidity Management Framework,” RBI said Monday.  The central bank will conduct the auction on April 23.  “The US Dollar amount mobilised through this auction would also reflect in RBI’s foreign exchange reserves for the tenor of the swap while also reflecting  in RBI’s forward liabilities,” said the RBI note. This is how the swap mechanism would work: High-street banks would sell dollars to the RBI at a dollar-rupee exchange rate fixed by the central bank. Three  years later, the banks would

The financial year 2018-19 (FY19) ended on a happy note on the goods and services tax (GST) front. At Rs 1.06 trillion, the government has announced the  highest monthly collection from GST in March since its roll-out 21 months ago.  This is the fourth time in FY19 that the monthly GST collection has crossed the Rs 1-trillion mark, meeting the target.  With this, the total GST collected during the year has touched Rs 11.77 trillion, still nearly Rs 75,000 crore short of the initial annual expectation. Even so, the GST mop-up, together with the direct tax collection of Rs 11.5 trillion (against a Budget target of Rs 12 trillion), may somewhat ease the  government’s worry about a steep tax shortfall for now. Analysts said the latest numbers would help the government move closer to the fiscal deficit target  of 3.4 per cent of the country’s gross domestic product (GDP) set for FY19.  “The monthly average of GST revenue during FY19 is Rs 98,114 crore, which is 9.2 per cent higher than

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loss of competitiveness once the concessional duties enjoyed under the Generalised System of Preferences (GSP) are withdrawn.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