Banking and Financial News – 10 May 2014
Banking and Financial News – 10 May 2014
Forex Reserves surge by $1.95 b to $311.9 b (The Hindu) – Foreign Reserves of India was US $ 311.857 billion as on 2 May 2014.
Saradha scam : ED probe not to clash with the CBI’s (The Mint) - A probe by the Central Bureau of Investigation (CBI) into the Sardha ponzi scheme scam will not overlap with the ongoing investigation by the Enforcement Directorate (ED), a senior ED official said on Saturday. “The ED will primarily track the flow of funds and the persons responsible for money laundering . The scope of ED was much wider,” he said. CBI on the other hand will investigate persons involved in the scam. The Supreme Court on Friday ordered a CBI probe into the Saradha scam which had hit depositors not only in West Bengal, but also in Odisha and Assam.
EU mango ban : Onus on Indian exporters, says UK (Hindustan Times) - Britain has said it will push to lift the European Union’s ban on Indian mangoes and some vegetables if there was a clear message from India that export procedures had improved to ensure that consignments were free of pests and insects.
Sebi proposes overhaul of current delisting norms (The Mint) - India’s capital market regulator on Friday proposed to overhaul the existing delisting norms to make the system more effective and eliminate the risk of price manipulation in the process of taking a listed stock off the exchange where it is traded. The Securities and Exchange Board of India (Sebi), in a discussion paper, proposed altering delisting rules to eliminate any opportunity for speculation and make it easier for companies to delist without compromising with the price discovery mechanism to protect minority shareholders’ interest. As one of the options, Sebi proposed that reverse book-building be modified to remove the influence of a single set of shareholders on the process. To do this, Sebi proposed that the exit price determination may not be based on the price at which the maximum number of shares are tendered, but on the price at which shareholders representing a requisite number of shares tendered are willing to exit, i.e., the highest price at which the promoter touches the threshold limit.
RBI tightens rules to curb evergreening of loans (The Mint) - The Reserve Bank of India (RBI) on Friday said Indian companies will not be permitted to refinance their rupee loans in the domestic market by raising funds through external commercial borrowings (ECBs), in a bid to curb the so-called evergreening of loans. Evergreening refers to the practice of companies taking a fresh loan to pay up an old loan.
In a separate notification, the RBI permitted banks to allow re-scheduling of ECBs as a one-time facility. But, while doing so, banks cannot effect any increase in the rate of interest and any additional cost, RBI said.
Raghuram Rajan says RBI decides policy independently (The Mint) - India’s monetary policy decisions, including setting the benchmark interest rate, are taken by the central bank independently, governor Raghuram Rajan said. “We control, of course, the monetary policy,” Rajan said in reply to a question in St. Gallen, Switzerland on Friday. “I determine the monetary policy. I say what it is. Ultimately the interest rate that is set, is set by me.”
Rajan has raised the benchmark rate ((Repo Rate) by 75 basis points to 8% since taking charge of the Reserve Bank of India in September and said controlling inflation is crucial to reviving growth from a decade low.
Raghuram Rajan seen hamstrung by inflation on weak monsoon (The Mint) - India’s prediction for a below-average monsoon this year is fuelling concern that inflation will quicken, limiting room for Reserve Bank of India (RBI) governor Raghuram Rajan to cut interest rates to revive the economy. Morgan Stanley says inadequate rainfall could reverse a recent slowdown in food-price increase.
Important Financial Terms in the News explained
Foreign exchange reserves - Also called Forex reserves, in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, SDRs (Special Drawing Rights) and IMF (International Monetory Fund) reserve positions.
Ponzi Scheme: A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop.
Money Laundering : When a customer uses banking channels to cover up his suspicious and unlawful financial activities, it is called money laundering. The process of concealing the actual source of the large amount of money obtained from serious crimes, such as drug trafficking or terrorist activity, to create the appearance that the money originated from a legitimate source.
Reverse book- building process is used to determine the exit price for de-listing, giving investors an opportunity to decide the price at which he or she wants to sell and the company’s management to decide if it wants to accept it.
