THE WEEKLY FINANCIAL NEWS
Securities and Exchange Board of India (Sebi) had announced new foreign portfolio investor (FPI) regulations to put in place easier registration process and operating framework for such entities. The new class of investors, FPIs, would encompass all FIIs (foreign institutional investors), their sub-accounts and qualified foreign investors (QFIs), and would be divided in three categories as per their risk profile. Sebi has also decided to grant them a permanent registration, as against the current practice of granting approvals for one year or five years to the overseas entities seeking to invest in Indian markets.
Chidambaram says people of India save like no other people anywhere in the world and if these savings are channelized into productive investment and if a climate where people can take risk is created, there is no doubt that India will be able to get over this period of stress.
Chidambaram, who last year oversaw cuts worth over 1 trillion rupees, is aiming to prevent the budget for the fiscal year to March 2014 from stretching beyond a deficit target of 4.8 percent of GDP. A budget blow-out would be a concern for credit ratings agencies. India has the lowest investment grade rating and Standard & Poor's maintains a negative outlook. A cut to "junk" status would raise its borrowing costs and could trigger further panic on financial markets after the rupee fell as much as 20 percent this year and the economy posted its weakest growth in years.
“The basic complaint against RBI is that it is killing growth by keeping interest rate high. But people forget that interest rate is high because inflation is high and inflation is high because people are not working. For inflation to come down, you have to produce more food grains at less prices,” Reserve Bank of India (RBI) deputy governor K.C. Chakrabarty said.
Proliferation of innovative financial products in the market
Deposit-taking companies in India have been exploiting multiple laws with overlapping jurisdictions to divert and siphon off funds raised from investors. There has been proliferation of innovative financial products in the market due to technological advancement and extensive use of the Internet to market such products to investors. The Saradha group, one of eastern India’s biggest deposit-taking enterprises, collapsed in April. At stake is 4,000crore of funds deposited by a reported 1.4million people. The West Bengal government has announced a 500 crore reparation fund to compensate the poorest of the depositors who lost money.
The weakening rupee provided no help because of how dependent manufacturers are on imported materials: Manufacturing firms reported higher prices paid for imported raw materials. Overall input costs rose sharply, with all three sectors covered by the survey signalling stronger rates of cost inflation in the latest month. Furthermore, the index measuring purchasing costs climbed to its highest mark in 15 months. Consequently, prices charged were raised further.
The RBI Governor, Raghuram Rajan said that the three members including RBI former Deputy Governor Usha Thorat, former SEBI Chairman Chandu Bhave and Nachiket Mor had been appointed to the committee formed to recommend granting new licenses to the private banks.
The Reserve Bank of India (RBI) has said the economy would grow by 5 to 5.5 per cent in the current fiscal, pinning its hopes on good farm output and improved exports. RBI Governor Raghuram Rajan based his optimism on expectations of a good kharif crop, improvement in exports and core sector performance data.
RBI Governor Raghuram Rajan defended his development index for measuring backwardness of states, saying the aim is to "encourage development" and "everything over and above that is a political spin."
Last month, the Raghuram Rajan panel report made a case for ending the 'special category' criteria for providing additional assistance to poorer states. It ranked Goa and Kerala as the most advanced states and Odisha and Bihar the least.
"The whole point was we want to encourage development. If your development increases, then there will be bonus of more funds...Everything over and above that is a political spin," Rajan said after an RBI board meeting in Raipur.
Why India's rampant inflation remains a puzzle? By: Ajay Chhibber, Director General, Independent Office of Evaluation, Government of India.
A SNEAK PEAK INTO THE WORLD OF FINANCE
Click on the slide show below to know how economic indicators can affect your financial lifeTERM OF THE WEEK
- An off-market transaction is settled between two parties on mutually agreed terms and the clearing corporation or the stock exchange is not involved.
- These include legacy transfers, gifts, transfer of shares between two demat accounts, shifting of securities between a client and a sub-broker, and transactions in unlisted securities.
- One party is the transferor, while the other is the transferee.
- The transferor has to give a delivery instruction slip (DIS) to his depository participant (DP), instructing the latter to transfer the securities to the receiver's (transferee's) demat account.
- The 'off-market trade' option must be selected in the DIS.
- The transferor has to give details of the receiver, including the name of the DP, DP ID, along with purpose of transfer.
- The DIS must contain the ISIN and quantum of securities to be transferred, and the execution date on which the transfer is to take place.
- It has to be signed by the transferor. In case of joint holders, the signatures should be in the order of their names in the account.