Tides of 27.02.2010

1. The government today said it would infuse Rs 16,500 crore into public sector banks to ensure that they had a minimum Tier-I capital adequacy ratio of 8 per cent by March 2011.Out of the Rs 16,500 crore, Rs 15,000 will come from the World Bank. The World Bank has agreed to give a $2-billion loan for re-capitalising government-owned banks. As on December 31, at least four banks’ Tier-I capital was less than 8 per cent. These are UCO Bank (6.5%), IDBI Bank (6.6%), Bank of Maharashtra and Central Bank of India (7.14%). Some more banks may fall below the 8% level by the end of March as loan growth, muted for the first nine months of 2009-10, has picked up in the fourth quarter. According to the Reserve Bank of India’s norms, the minimum capital adequacy ratio for banks is 9%, with Tier-I capital of at least 6%.
2. Finance Minister Pranab Mukherjee today exuded confidence the economy would soon break the double-digit growth barrier and said the stimulus measures will not be fully withdrawn until a robust recovery is achieved. Mukherjee, however, remained concerned over high food inflation and the ambiguous nature of recovery in exports due to the uncertainty prevailing in the developed economies. "...I feel the fundamentals of the economy are strong. The positives from our recent performance outweigh the negatives, so that one can hope to see the economy breaking the double-digit growth barrier in the very near future, which is essential for reducing poverty in the country," Mukherjee said in his address to the 82nd AGM of FICCI.
3. Life becomes Saral for salaried-- Two-page Saral-II form for individual salaried taxpayers for coming assessment year.
4. Finance Minister Pranab Mukherjee presented a please-all Budget, that broadly focused on fiscal stabilisation.  Broadens income tax slabs; gives away Rs 26,000 cr in tax breaks
 Cenvat raised from 8% to 10%
 Direct Taxes Code, GST by April 2011
 Withdraws service tax exemption on Railway goods transport
 MAT up from 15% to 18%
 Targets Rs 75,000 crore from disinvestment, spectrum sale
The salaried class received some generous relief, with the upper limit for the lowest income tax slab of 10% raised to Rs 5 lakh from Rs 3 lakh earlier.
The corporate sector, however, was slapped with a higher minimum alternate tax (MAT) at 18 per cent, compared to 15 per cent earlier, but the reduction in surcharge by 2.5 percentage points to 7.5 per cent will offset much of the higher MAT impact.
The roll-back of the fiscal stimulus, introduced 15 months ago, began with a two percentage point increase in the Cenvat rate, a move that did not perturb industry leaders who had feared a bigger cutback.
Proponents of fiscal rectitude, too, were kept reasonably satisfied with the reduction in the fiscal deficit to 5.5 per cent of gross domestic product (GDP) for next year, down from 6.7 per cent in 2009-10.
5. A host of non-banking finance companies such as IDFC, Aditya Birla Financial Services, Reliance Capital, Religare Enterprises and Indiabulls is planning to queue at the Reserve Bank of India to seek banking licences. Following Finance Minister Pranab Mukherjee’s announcement of RBI’s intent to grant fresh bank licences, smaller finance companies such as Srei and Shriram Transport have also expressed their intent to approach the regulator. Foreign banks, most of which operate in the country as branches of an overseas subsidiary, are unlikely to apply given the higher tax that they would have to shell out on setting up an Indian banking company. Besides, many of the global banks are going slow on overseas expansion due to the stress in their home markets. In the last five years, RBI has not given any fresh licences.

Tides of 23.02.2010

1. The proposed new "base rate" regime would prevent large corporations from taking an advantage of ample liquidity in the banking system and negotiate competitive interest rates, State Bank of India chairman OP Bhatt said. In a far-reaching reform measure, the Reserve Bank of India (RBI) proposed to introduce a new concept called "base rate" that would serve as the minimum rate for all loans."Corporate lending is being done on fairly competitive rates but that is for large corporations, which is a function of high liquidity," Bhatt told reporters on Monday on the sidelines of a function organised by the All India Management Association (AIMA). The base rate system, which replaces the existing benchmark prime lending rate (BPLR) system from April 1, is being introduced to make bank lending more transparent. At present about 70 per cent of bank loans are offered at less than BPLR.
2. A sale of shares in Rural Electrification Corp was covered more than three times, helping raise about $760 million and easing concerns that interest in government stake sales was waning. The sale, which ran from Friday through Tuesday, was seen as a litmus test for a plan by the government to offload stakes in 60 state-run firms over the next few years.
3. ING Vysya Bank is looking to grow beyond south India. It raised Rs 415 crore in September 2009 through qualified institutional placement.
4. Chinese banks received a warning on Saturday not to lend too aggressively and to verify that their loans are being used for the intended purpose. The China Banking Regulatory Commission issued two directives on working capital and individual loans with the overarching aims of strengthening risk management and ensuring that banks lend at a steady, responsible pace. Banks lent a record 9.6 trillion yuan ($1,406 billion) in 2009 as they rushed to support the government's economic recovery programme. This year Beijing has set a loan target of 7.5 trillion yuan.
5. The World Bank has severely castigated Mumbai Metropolitan Region Development Authority's handling of infrastructure projects in the city, asking the regional planning body to improve its professional management capabilities of projects.MMRDA's management of the Santacruz-Chembur Link Road has come under the scanner with the deadline for completion being extended time and again. Projects have also been stalled due to non-clearance by the railway authorities.The MMRDA is undertaking infrastructure projects worth Rs 5,127 crore under the Mumbai Urban Transport Project (MUTP).
6. Satyam Computer Services Ltd filed a lawsuit against UK-based Upaid Systems Ltd in a New York state court seeking to declare a settlement pact between the companies valid and enforceable, according to a regulatory filing. Satyam, re-branded as Mahindra Satyam, was bought by Tech Mahindra in April last year after being hit by India's biggest corporate fraud. Satyam, which deposited $70 million as settlement amount into an escrow account as part of the Upaid deal, also sought court approval for the disbursement of funds from the account as per Indian laws.
7. IT firm Mindtree Ltd said on Tuesday its board has in-principle decided to raise $100 million by way of debt. The board has also in-principle approved raising of equity by issuing 15 percent of the current issued capital, it said in a statement to the NSE

Tides of 21.02.2010

1. In a measure that would bring cheers to savings accounts holders, RBI asked banks to start calculating interest rates on these accounts on daily basis from April The move will enable saving accounts holders to earn better interest income on deposits since banks currently calculate interest on the lowest available balance, from 11th and the last date of a month. In the existing system, if one withdraws certain amount from his savings accounts on the last day of a month, he will lose interest on that amount for the whole month. But, under the new system, even if he withdraws in the last day of the month, he will get the interest income on the first 29 days of the month.
2. For the sixth year in a row, the EPFO subscribers are likely to get 8.5% interest on their provident fund (PF) deposits for 2010-2011.
3. In the backdrop of India and Switzerland re-negotiating a bilateral tax treaty for exchange of information on tax evaders, Swiss banks have made it clear that any country seeking secret account details must be specific with names of the individual and the bank involved. "The country requesting information must name the specific individual and also give the name of the bank involved... The idea is to protect the privacy of clients innocent of any wrongdoing, and we believe this is correct," a top official at the apex body of Switzerland-based banks, Swiss Bankers Association (SBA) said. The practice of secrecy in operations of Swiss banks has always been a big political issue, with many Indians alleged to have stashed away billions of dollars in secret accounts there.
4. On February 26, when the Honourable Finance Minister presents the Union Budget, he will have to balance the expectations of multiple stakeholders.From a macroeconomic perspective, 2009 has been a difficult year. The global slowdown impacted Indian businesses in a big way. One of the consequences of the slow-down has been that most companies have resorted to cost cuttings with special attention to reducing employee related costs. From the employees' perspective, reduced bonuses and increments, combined with increase in costs of most essential items due to inflation has caused a hole in their pockets. Salaried persons would be expecting some respite and would be hoping that the Finance Minister proposes measures in the Budget to bring some relief by way of tax concessions for the salaried class.
5. Notwithstanding a grim financial picture in the face of a troubled political situation, Andhra Pradesh Chief Minister K Rosaiah presented a tax-free budget for 2010-11 with an outlay of Rs 1,13,675 crore and a projected expenditure of Rs 1,13,660 crore.The budget estimates, presented to the state Assembly, show a fiscal deficit of Rs 12,983 crore, which will be about Rs 1,300 crore less than the revised estimates for the 2009-10 fiscal, and a revenue surplus of Rs 3,548 crore, up from Rs 2,942 crore.
6. Foreign exchange reserves rose $485 million to $279.2 billion during the week ended February 12, largely on account of revaluation of non-dollar assets in reserves. According to the latest Reserve Bank of India data, of the total foreign exchange reserves, foreign currency assets (FCA) rose by $521million, while the value of SDR (special drawing rights) and reserves with the IMF dipped by $28 million and $8 million, respectively, during the week. The rise in foreign exchange reserves could be largely due to dollar marginally paring the gains against the euro on news about the bailout of Greece, which ran into fiscal trouble earlier in the month, pointed out a treasury official at a public sector bank.