Finatix Newsletter- September 2012

Definition Zone

Rebate Barrier Option: Options contracts give the holder the right, but not the obligation, to buy or sell a financial asset at an agreed-upon price at, or before, a certain specified date in the future. A rebate barrier option is a knock-out option that provides a refund in the event the knock-out occurs. Since the rebate diminishes the option writer's profits, this type of exotic option is not common.

Source: http://www.investopedia.com/terms/r/rebatebarrieroption.asp#ixzz268E7qmS8

The best of Economics, Finance and Politics

Government Raises Borrow Limit against FCNR for NRIs

Economic Times, India September 5, 2012

Non-resident Indians will be able to borrow more against their foreign currency deposits in the country, a facility the government hopes will encourage them to park more funds in India helping the country to build foreign exchanges reserves.

At present, NRI can take a loan of maximum 1 crore rupees against Foreign Currency Non-Resident, or FCNR (B), deposit, popular non taxable deposits which have seen a net outflow in the recent months. The new limit will be decided in consultation with RBI.

On 2nd September, SBI introduced four new currencies – Swiss Franc, New Zealand dollar, Swedish Krona and Danish Krone – in its basket of currencies for FCNR deposits and also increased the interest rate by 8 basis points to 3.87% on deposits of 5 year maturity.

The finance ministry is of the view that higher loan limit will make these deposits attractive to NRIs, as they will be able to use such borrowed funds for investments while their deposits earn interest not available to their home countries. But RBI is apprehensive that such money will flow specially into sensitive sectors which may create artificial sectoral bubbles. 

SEBI plans to Relax FIIs Collateral Norms

Business Line, India September 6, 2012

In an effort to revive market sentiments, SEBI is planning to relax the collateral requirement for Foreign institutional Investors (FIIs). At present, FIIs are asked to give full collateral in cash for derivatives as well as the cash segment. Now, the SEBI may allow them to submit domestic instruments, such as approved securities, bank guarantees, fixed deposits, government bonds and mutual funds, as collateral.

Such a move is also expected to help improve forex inflow. This is important as the current account deficit in 2011-12 touched a record 4.2 per cent.

Partnership in between Alstom Grid and Toshiba Corp

The two corporate giants Alstom Grid and Toshiba Corp entered into partnership for their smart grid business by signing a Memorandum of Understanding on 6 September 2012. The goal of the collaboration is to secure the supply of energy by identifying different types of electricity management solutions. This partnership will help in ensuring consistency in outcome and support of the supplied energy. Both the organizations are expecting to develop systems that support the integration of renewable energy for bringing down the cost of energy production.

Alstrom and Toshiba, both are looking forward for extending the business in the global market. Alstrom Grid is a 125 years old company and placed among the three global players of electrical transmission. Whereas, Toshiba Corp is a renowned Japanese electronics company engaged in development of electrical products, internet based services and solutions and more in the domain.

SEBI allowed Partial Flexibility in IDRs for Investors

India’s market regulator Security and Exchange Board of India (SEBI) on 28 August 2012 allowed partial flexibility in the conversion of Indian Depository Receipts (IDRs) into equity shares by investors. The SEBI move is aimed at retaining domestic liquidity beside, it is also expected to attract foreign entities to enroll their IDRs on India stock exchanges.

In another circular released by the RBI, the central bank put an overall cap of 5 billion dollar for raising of capital through IDRs by foreign companies in Indian markets. The RBI measure will help Indian investors to convert their depository receipts into equity shares of the issuer company and vice versa.

News at Glance

FIIs Invest about 11k cr in August, highest in 6 months

PSBs Need 90k cr rupees to meet Basel-III Norms-Subbarao

Plan panel to cut annual GDP Growth Target to 8.2% from 9% envisaged earlier

OECD slashes G7 growth forecasts on Europe Outlook

India ranked to be 59th in the report released by World Economic Forum

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