1. In a move that may dampen some investor interest in financial institution IFCI Ltd, where 26% stake is on offer, the government and Reserve Bank of India have decided against altering the character of India’s oldest FI and converting it into a bank like its peers ICICI and IDBI.
2. The All India Bank Officer’s Association (AIBOA) is setting up an Institute of Banking & Trade Union Research at Mamallapuram near Chennai. The Rs 1.25-crore project is expected to be commissioned on June 2, 2007. The objective of the institute was to develop the overall expertise of bank employees. "The economic scenario, trade union philosophy, and competitive banking activities are all under going rapid changes. The coming up of the institute is, therefore, appropriately timed. Spread over an area of 11,000 sft, it can accommodate 100 students.
3. The tax burden on foreign banks , which avail of funds from their parents for operations in India, may go up substantially following a recent order passed by the Mumbai Income Tax tribunal in the case of UAE-based Mashreq Bank. The order has stated that the expenditure incurred by a foreign parent company for its operations in India will be taxed if it exceeds 5% of the profit. Indian entities, however, are exempt from such a tax. The decision holds good even if the country has a double-taxation treaty, which provides for similar tax treatment of foreign companies with its Indian counterparts. Most foreign banks operating in India through branches or representative offices borrow funds from their parent offices and repatriate interest earned on such advances as profit. This is known as head-office expenditure. Tax experts clarified that even if the Indian Income Tax Act provides for taxation of the expenditure of foreign banks and companies, these entities have been availing relief citing earlier orders of the tribunal.
4. RBI has issued the final and elaborate prudential guidelines on "capital adequacy and market discipline" for implementation of Basel-II capital adequacy framework. The guidelines, which have taken into account feedback received from stakeholders on two drafts issued by the apex bank in February 2005 and March this year, cover areas including capital funds, credit charge for credit risk, risk mitigation and capital charge for market risk and operational risk. Foreign banks operating in India and Indian banks having operational presence outside India should adopt the standardised approach (SA) for credit risk and basic indicator approach (BIA) for operational risk under the revised framework with effect from March 31, 2008. For the other Banks (Excepting Coop Banks & RRBs) the effective date will be 31.03.2009.
5. After making the Permanent Account Number mandatory for those trading in shares through depository participants, the Securities and Exchange Board of India will make PAN the sole identification number for all participants in the securities market, including mutual funds, from July 2.
6. State Bank of India claimed that it had catapulted to the number one spot in the industry with regards to funding overseas acquisition. Its financing of outbound acquisitions in FY 07 stood at around USD 1.3 billion. This is at least USD 100 million more than its nearest competitor, ICICI bank. Till even four months back, ICICI Bank was the leader in this segment.
7. Bad loans in India are beginning to increase, with the highest rise occurring in the real estate sector, State Bank of India’s chairman has said. "Bad loans are expected to spill into other sectors as well, as inflation was not moderating and infrastructure bottlenecks continued. "The incidence of bad home loans was about 3-4%, or about 0.5% higher than earlier. ""At the moment there is no cause for concern, but there is definitely a cause to think, plan and act."
