RBI to infuse ₹ 10,000- crore liquidity via OMO route
BS REPORTER
Mumbai, 25 February
Liquidity conditions are likely to remain tight and may not fall below
₹ 1 lakh crore in the near term, despite the Reserve Bank of India
(RBI)' s announcement of open market operations ( OMOs) on Friday.
After market hours today, RBI announced an OMO up to ₹ 10,000 crore on
Friday. OMOs are market operations conducted by RBI by way of sale/
purchase of government securities to adjust rupee liquidity
conditions.
The government securities RBI will purchase through OMO are 7.32 per
cent 2014, 7.59 per cent 2016, 8.15 per cent 2022 and 8.20 per cent
2025. " The liquidity deficit in the system is not expected to improve
in a major way due to this. We need one more OMO next week and
probably another one, depending upon the situation," said Prasanna
Patankar, senior vice- president, STCI Primary Dealer.
Today, banks borrowed ₹ 1,28,400 crore from RBI's daily liquidity
adjustment facility (LAF), compared with an average borrowing of
slightly above ₹ 1 lakh crore last month, far ahead of RBI's comfort
zone.
But, the announcement of the OMO is expected to be positive for
government bonds.
"The bond market will get comfort and yields are expected to drop on
Tuesday," said S Srinivasaraghavan, executive vice- president and head
( treasury) at Dhanlaxmi Bank. The yield on the 10- year benchmark
bond 8.15 per cent 2022 fell marginally on Monday at 7.7976 per cent.
It is expected to drop by another two to five basis points tomorrow.
The Street believes to comfort liquidity conditions, government
spending, having slowed down during the current financial year, should
pick up.
"Government spending needs to flow into the system to bring down the
liquidity deficit. OMO will just support the market. There is oil
subsidy worth ₹ 25,000 crore that is expected. This fiscal, the
government has been trying to control its spending to keep the fiscal
deficit under control," said a treasury official of a private sector
bank.
The government has been trying to control spending in a bid to stick
to the fiscal deficit target of 5.3 per cent of GDP for FY13. Last
Friday, the government had cancelled the last scheduled auction of
government bonds worth ₹ 12,000 crore.
As the final instalment of corporate advance tax is due on March 15,
the Street expects the liquidity deficit to worsen.
"Around the first 10- 12 days of March, the system loses around ₹
15,000- 20,000 crore on account of rise of currency with public. This
is a seasonal phenomenon due to which liquidity deficit will again go
up and subsequently, there will be advance tax outflows of ₹ 60,000-
70,000 crore," said Suyash Choudhary, head ( fixed income), IDFC
Mutual Fund.
LAF (₹ cr)
Source: RBI
As the final instalment of corporate advance tax is due on March 15,
the Street expects the liquidity deficit to worsen
EPFO to pay 8.5% interest on deposits for FY13
Decision taken at the meeting of the Central Board of Trustees
PRESS TRUST OF INDIA New Delhi, 25 February
Retirement fund body Employees Provident Fund Organisation ( EPFO)
today decided to pay 8.5 per cent interest rate to its over 50 million
subscribers on their provident fund ( PF) deposits for the financial
year 2012- 13, higher than the 8.25 per cent provided in the previous
financial year.
The decision was taken at the meeting of the Central Board of Trustees
( CBT), the highest decision making body of EPFO, chaired by the
labour minister.
"A decision has been taken to pay 8.5 per cent interest on PF
deposits. But we have expressed our reservations, as we wanted higher
interest rate," said D L Sachdev, secretary, All India Trade Union
Congress, after the CBT meeting. Earlier, a note prepared by EPFO for
consideration of the February 15 meeting of the Finance and Investment
Committee ( FIC) had said, "... 8.5 per cent rate of interest for the
year 2012- 13 is feasible." According to the EPFO estimates, apayment
of 8.6 per cent interest rate on PF deposits would result in a deficit
of ₹ 240.49 crore whereas a8.5 per cent interest rate for the current
financial year would leave a surplus of ₹ 4.13 crore.
In the FIC meeting, union leaders refused to discuss the issue
regarding payment of interest in the current financial year, as the
agenda note for the issue was not provided in advance to them, sources
said, adding the note was tabled during the meeting.
They had said the EPFOs estimates would be directly tabled before the
CBT meeting ,for final approval.
The notification on interest rate is issued by the government after
concurrence with the finance ministry. Usually, EPFO announces
interest rate at the beginning of the year, but there has been a delay
this time.
Trade unions have been pressing for an early meeting of the CBT to
decide on the interest rate for the current financial year.
EPFO had paid 8.25 per cent interest to its subscribers for 2011- 12,
lower than the 9.5 per cent disbursed in 2010- 11.
Interest rate for the financial year 2010- 11 was 9.5%.
Usually, EPFO announces interest rate at the beginning of the year,
but there has been a delay this time
State FMs' panel agree on GST law: Odisha minister
BS REPORTER
Bhubaneswar, 25 February
The empowered committee of state finance ministers has reached a broad
consensus on preparing a model law for implementation of the proposed
Goods & Services Tax (GST), Odisha Finance Minister Prasanna Acharya
informed the legislative assembly here today.
The panel has agreed that such a law should be left to be adopted by
the states and the Centre voluntarily, as this arrangement will ensure
fiscal autonomy of the states, he said. The committee has also
decided, said Acharya, that the Constitution be modified to provide
for floor rates with aband, so that states have the flexibility to
raise tax.
In the proposed Article 279A of the Constitution ( 115th Amendment)
Bill introduced in Parliament by the Centre, a GST council has been
envisaged to make recommendations with references to taxes and tax
rates. The Bill also provides for an Article 279- B, on a GST Dispute
Settlement Authority to adjudicate between states or a state and the
Union. Acharya says the empowered committee has decided there should
not be any GST Dispute Settlement Authority. " The empowered committee
has reached a broad consensus that formulation of Entry 52 in the
Constitution amendment Bill should be modified, as the present
formulation is a retrograde step and shall take it back to collection
of octroi by the local bodies," the minister said. The consensus was
reached by the empowered panel in its previous meeting here on January
28- 29.
The Constitution amendment Bill, Entry- 52, of the State List is
worded in the Bill as " taxes on the entity of goods into a local area
for consumption, use or sale therein to the extent levied and
collected by apanchayat or municipality".
On the issue of central sales tax compensation, he said, "Due to
slashing of the CST rate (from four per cent to two per cent), Odisha
has suffered a revenue loss of ₹ 1,533.97 crore. The central
government has provided (only) ₹ 256.17 crore in 2011- 12 by way of
compensation." Odisha, he said, expected compensation of ₹ 1,235
crore.
The Centre has agreed that states will be given compensation of 100
per cent, 75 per cent and 50 per cent for 2010- 11, 2011- 12 and 2012-
13, respectively.
MSME body seeks tax breaks for job creation
KOMAL AMIT GERA
Chandigarh, February 25
The Federation of Indian Micro, Small and Medium Enterprises (FISME)
has sought tax breaks on employment generation on the same lines as
those for capital outlays, and tax exemptions for profit ploughed back
by small and micro industries into business.
The federation wants a simplification of the rules for refund of
excise duty, speedy introduction of goods and services tax ( GST), and
a review of current anti- dumping duties, because many of them are
levied to protect large monopoly domestic producers with "scant
regard" for the interests of MSMEs.
The CII favours streamlined policies and procedures for listing on
SMEs exchanges, and policy guidelines to encourage FDI participation
by NRIs in the SME sector, said Pikender Pal Singh, regional director,
CII Northern Region.
CII has also sought an interest subvention of two per cent for MSMEs,
and a complete rollback of the levy of 18.5 per cent alternate minimum
tax, in order to promote the MSME sector, Singh said.
The Federation of Indian Chambers of Commerce and Industry ( Ficci)
wants the excise exemption limit for MSME to be raised from the
existing ₹ 1.5 crore, the concessional excise duty of 60 per cent
under Cenvat credit to be restored, excise duty on raw materials used
by MSMEs to be reduced, Central sales tax to be replaced by GST, and
tax breaks to encourage R& D among MSMEs.
Banking licence benefits priced in most NBFC scrips
SHEETAL AGARWAL
Stocks of non- banking finance companies ( NBFCs) such as L& T
Finance, Shriram Transport Finance, Mahindra and Mahindra Financial
Services ( MMFS) and Bajaj Finserv have rallied significantly since
the Banking Amendment Bill was passed in the winter session of
Parliament.
Post announcement of final guidelines on Friday, the stocks rallied up
to 12 per cent intraday on Monday, with Religare Enterprises gaining
the most. This investor enthusiasm is driven by the potential benefits
that these NBFCs will derive after winning a banking licence such as
lower cost of funds, diversified lending book and better regulatory
environment.
Interestingly, companies that won the banking licence previously have
given handsome returns post- listing ( see table). However, experts
believe this time around, the new banking licence aspirants will have
quite a few hurdles along their way as the Reserve Bank of India's
objective of financial inclusion is likely to impact their
profitability. Whats more —the rally in stock prices also factors in
most of the expected near- term gains.
"We believe companies such as L& T Finance have run ahead of their
fundamentals as investors have already factored in the benefits of a
banking licence. We advise investors to tread with caution given that
it will take a lot of time before the new banks will be able to
leverage the benefits of a banking licence," says Santosh Singh,
banking analyst at Espirito Santo Securities.
While most NBFCs have delivered consistent financial performance in
the recent years and have a profitable business model, some of the
requirements of the new banking licences can dilute their
profitability significantly.
"We understand that the requirement of 25 per cent branches being in
centres of sub10,000 population could impact the economics of the
business (of the aspirants) negatively versus existing banks," says
Ashish Gupta, research analyst at Credit
Suisse. Turn to TSI, Page 2 > INSIGHT PAGE 8 >
>On your marks, get set ... RISING IN ANTICIPATION
Sector performance on the Street
(Price in ₹) Feb 25, 2013 % chg*% chg**
L& T Finance Holdings 85.70 58.41 4.96 Srei Infrastructure Fin 37.45
38.70 4.03 Aditya Birla Nuvo 1,081.95 19.13 0.91 M& M Fin Secs 200.50
15.62 0.68 Shriram Transport Fin 710.45 13.68- 0.56 Reliance Capital
406.70 6.54 - 0.04 Bajaj Finserv 851.35 - 0.05 3.36 Religare
Enterprises 293.85 - 3.35 8.69
S& P BSE Sensex 19,331.69 4.47 0.08
*Change over October 31, 2012, ** Change over February 22, 2013
Parliament winter session started on November 22, 2012 Data Compiled
by BS Research Bureau
--
CS A RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
Company Secretary, Chennai
CONVENOR, CHENNAI WEST STUDY CIRCLE ICSI-SIRC
email csarengarajan@gmail.com
http://www.csarengarajan.blogspot.com
http://companysecretarytalent.blogspot.com/
http://companysecretarybenevolentfund.blogspot.com/
http://csvacancies.blogspot.com/
mobile 093810 11200
CS Benevolent Fund is a collective effort towards extending the much
needed financial support to the community of Company Secretaries in
times of distress Let us lend support and join for noble cause.
SHARING KNOWLEDGE SKY IS THE LIMIT
This mail and its attachments (if any) are confidential information
intended for persons to whom the email is planned for delivery by the
sender. If you have received this mail in error please notify the
sender of the error by forwarding the email and its attachments (if
any) and then deleting the mail received in error and the relevant
email trail in this connection without making any copies or taking any
prints.
------------------------------------
receive alert on mobile, subscribe to SMS Channel named "aaykarbhavan"
[COST FREE]
SEND "on aaykarbhavan" TO 9870807070 FROM YOUR MOBILE.
To receive the mails from this group send message to aaykarbhavan-subscribe@yahoogroups.comYahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/aaykarbhavan/
<*> Your email settings:
Individual Email | Traditional
<*> To change settings online go to:
http://groups.yahoo.com/group/aaykarbhavan/join
(Yahoo! ID required)
<*> To change settings via email:
aaykarbhavan-digest@yahoogroups.com
aaykarbhavan-fullfeatured@yahoogroups.com
<*> To unsubscribe from this group, send an email to:
aaykarbhavan-unsubscribe@yahoogroups.com
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
No comments:
Post a Comment