Money & Banking
Allowing banks to buy back gold could curb imports: SBI head

Banks are not allowed to trade on the commodities market, including gold, as the regulator and the government fear that their entry could spike inflation that too when all banks are selling gold, but are not allowed to buy back the same

Mumbai: The Reserve Bank of India (RBI) should relook at the ban on banks buying back gold as such a move could improve liquidity in the system, increase supply of the metal and bring down imports, said Pratip Chaudhuri, chairman of State Bank of India (SBI).
Banks are not allowed to trade on the commodities market, including gold, as the regulator and the government fear that their entry could spike inflation.
"The existing ban is impeding the liquidity of gold holdings in the country. Today all banks sell gold, but the RBI does not allow them to buy back their own gold. Suppose, somebody has taken gold from my bank and the same gold, even without opening the seal comes back to me, I cannot buy it back", Chaudhuri said, addressing a panel discussion on gold imports at the second day of the national banking summit Bancon.
"What could be the underlying thought? Don't you think it is impeding the liquidity of gold holdings in the country," Chaudhuri asked RBI deputy governor Subir Gokarn, to which he responded that the RBI could revisit the subject once the BKU Rao report on the subject is submitted.
"Obviously, we have to reconcile to the existing regulatory barriers. Once we have feedback on the points, we will come for debate," he said, adding that the RBI panel would shortly elaborate on ways to deal with the problem arising from high gold imports on the macroeconomic front, in the from of balance of payments.
Experts blame rising gold demand, price rise and the resulting surge in imports to hoarding by jewellers and other market participants.
Gokarn called for dematerialisation of gold to arrest rising gold demand, as rising imports of the metal has been blamed for the high current account deficit feared to touch new record highs this year.
The current account deficit or CAD has been rising on the back of record trade deficits, which in October jumped to a 12-year high of $21 billion on the back of rising crude oil and gold imports.
He said while global gold output has stayed stable at around 4,000 tonne per year, domestic consumption of the yellow metal doubled to 1,000 tonne annually since 1999, despite a massive rally in prices.
As gold imports touched a record high last year, pushing up the current account deficit to a historic high of 4.2% in the year, the RBI unveiled a slew of curbs on gold purchase and financing.
Last fiscal, there was a 39% rise in gold imports and in gross terms, it constituted for 80% of the current account deficit, which reached an all time high of 4.2%, Gokarn said, adding that net gold imports constitute for 1.8-2.4%t of GDP.


Nifty, Sensex may see an upmove: Weekly Market Report

A close above 5,665 on the Nifty on Monday may see the upmove gaining strength, possibly to 5,710

The market gained around a percent mainly on international support as global indicators point to a gradual improvement in the economies across the world. However, the domestic gains were capped towards the end of the week as the first two days of the Winter Session of Parliament was a washout due to opposition to FDI in multi-brand retail and the issue of scheduled castes and scheduled tribes promotions. Parliament proceeding and the expiry of the November F&O contract will keep the market volatile next week.
The Sensex closed the week at 18,507, up 197 points (1.08%) and the Nifty finished 53 points (0.94%) higher at 5,627. A strong close above 5,665 may bring more momentum to the uptrend and may see the index reach to the level of 5,710. However, Friday’s low continues to be the crucial level to watch.
The market settled flat with a mixed bias on Monday after remaining listless for a major part of the session. Selling pressure in realty, oil & gas and metal stocks saw the benchmarks paring their gains and ending flat on Tuesday. Hopes of the government’s reforms being approved by Parliament in the Winter Session pushed the market higher on Wednesday.
Opposition to the government’s reforms marred Parliament proceedings on Thursday resulting in the benchmarks closing flat. The market settled flat to negative on Friday as the second day of the Winter Session also proved to be a washout.
BSE Fast Moving Consumer Goods (up 3%) and BSE Auto (up 2%) were the key sectoral gainers while BSE PSU and BSE Power (down 1% each) were the main losers.
Among Sensex stocks, Mahindra & Mahindra (up 7%), ITC, HDFC Bank, Sun Pharmaceutical Industries and Maruti Suzuki (up 4% each) were the chief gainers. NTPC (down 4%), BHEL, GAIL India, ONGC and Tata Motors (down 2% each) settled at the bottom of the index.
The key Nifty toppers were M&M (up 7%), HCL Technologies (up 5%), ITC, HDFC Bank and Sun Pharma (up 4% each). The major losers on the index in the week were Ranbaxy Laboratories (down 5%), NTPC (down 4%), Lupin, ONGC (down 3% each) and BHEL (down 2%).
Kick-starting the disinvestment process of this year, the government on Friday sold 5.58% stake in Hindustan Copper for about Rs808 crore at an average price of Rs156.56 apiece, with bulk of the bids coming from LIC and PSU banks. 
Encouraged by the response to the first stake sale in the current financial year, finance minister P Chidambaram expressed the hope that government would able to garner the targeted Rs30,000 crore in 2012-13 through disinvestment.
The government on Thursday cleared the National Pharmaceutical Pricing Policy that will bring 348 essential drugs under price control, leading to reduction in prices. The pricing now would be based on simple average of rates of all brands which have more than 1% market share. While drug companies may declare that it will impact their profit margins for some drugs, they must have sighed a relief that cost-based model is scrapped. MBP will legitimise overpricing of life-saving drugs.
Reports of a possible agreement with the Congress on the US budget and positive economic data from across the world helped the US markets close the week at their best since June. Meanwhile, Greece said the International Monetary Fund had made some concessions in the debt-cutting target for the country, suggesting lenders were closer to a deal for a vital aid tranche to be paid.


Why is the AP government shielding Dharmana Rao, asks EAS Sarma

EAS Sarma, former secretary of the GoI, has questioned the AP government's decision to reject a CBI plea for prosecution of Dharmana Rao, the minister who is accused and charge-sheeted in the Vanpic Port land scam

The Andhra Pradesh (AP) government has rejected a plea from the Central Bureau of Investigation (CBI) for prosecution of AP roads and buildings minister Dharmana Prasada Rao, who has been named as an accused and charge-sheeted in the Vanpic Port land scandal. Following this decision, EAS Sarma, former secretary of the Government of India (GoI), wrote a letter to AP governor ESL Narasimhan requesting him not the accept the recommendation of the state government keeping in mind the public interest.
Mr Sarma, in his letter, said, there is evidence of malfeasance in the irregular and improper land deals in the Vanpic case. “Already, one state minister and several officers are facing the heat of CBI prosecution in Vanpic, Emaar MGF and other cases. There cannot be one set of norms for them and another set for Dharmana Prasada Rao. It will amount to discrimination and an infringement of Article 14 of the Constitution,” he said.
Dharmana submitted his resignation from the minister’s post on ‘moral grounds’ on 14th August, a day after he was charge-sheeted by the CBI in the Vanpic Port land scam. AP chief minister N Kiran Kumar Reddy, however, did not take any decision on the minister’s resignation and kept it pending for more than three months now.
Meanwhile, according to PTI sources, health minister DL Ravindra Reddy objected to the issue being raised in the Cabinet meet. “Granting or rejecting permission (for prosecution) is an issue to be decided by the chief minister. Why should it be placed in the Cabinet?” Ravindra Reddy questioned and said he was opposing the Cabinet resolution.
Panchayat raj minister K Jana Reddy said there was no need for a discussion on the issue in the Cabinet. “As ministers, we will accept your decision,” he told the chief minister, reports PTI.
Here are the points raised by the former secretary in his letter written to the AP Governor, against the denial of permission for CBI prosecution by AP government...
1. In Vineet Narain & Others Vs Union of India, the Supreme Court pronounced a landmark order on 18 December 1997 laying down norms to be followed by the government in sanctioning permission to the CBI and other agencies to prosecute senior public functionaries. I have extracted below an important portion of the order for your ready reference.
“Every person accused of committing the same offences is to be dealt with in the same manner in accordance with law, which is equal in its application to everyone. The Single Directive is applicable only to certain persons above the specified level who are described as ‘decision making officers’. The question is whether any distinction can be made for them for the purpose of investigation of an offence of which they are accused. Obviously, where the accusation of corruption is based on direct evidence and it does not require any inference to be drawn depend on the decision making process, there is no rational basic to classify them differently. In other words, if the accusation be of bribery which is supported by direct evidence of acceptance of illegal gratification by them, including strap cases, it is obvious that no other factor is relevant and the level or status of the offender is irrelevant”.
The essence of the above order is that there can be no double standards on the part of the government in sanctioning permission for prosecution in such cases. Already, one state minister and several officers are facing the heat of CBI prosecution in Vanpic, Emaar MGF and other cases. There cannot be one set of norms for them and another set for Dharmana Prasada Rao. It will amount to discrimination and an infringement of Article 14 of the Constitution.
2. In another case relating to illegal occupation of government lands on the basis of fabricated documents, a senior revenue minister at that time and several senior officers had benefited the culprits in return for posh apartments at nominal prices, about which I had made a reference in my letters 1st to 3rd and 5th cited. The state is yet to grant me permission under the Prevention of Corruption Act to prosecute the culprits. It clearly shows how the state is shielding the corrupt deliberately. In a way, by shielding them, they have become abettors in the criminal offences committed by the concerned public servants. Clearly, the state cabinet's recommendation in this case is coloured and prejudiced, not based on any judicious consideration.
3. In Madhya Pradesh, in a similar case of a corruption case involving a senior public functionary, the state cabinet recommended to the governor to reject permission to the investigating agency to prosecute the concerned. The governor, however, felt that public interest was involved and rejected the cabinet's recommendation. His decision was upheld by the apex court. This case will be of relevance to the case of Dharmana Prasada Rao. You may like to get the details of this.
4. As the constitutional head in the state, under article 159, the governor is committed to “preserve, protect and defend the Constitution and the law” and “devote (himself/herself) to the service and well-being of the people of the state”. In consonance with this oath, it will be appropriate for you to uphold the public interest by sanctioning prosecution by the CBI. 
5. In the instant case of Vanpic, lands tilled by D-Patta assignees (who were all marginal farmers) were illegally given away to rich individuals. Compensation due to them was allowed to be misappropriated by him as a result of the deliberate acts of the culprits in this case. Government lands were transferred to an industrialist in violation of the Doctrine of Public Trust. Water bodies have been damaged in violation of the environmental norms laid down by the apex court. There cannot be a more appropriate case than this for bringing the culprits to book.
Mr Sarma, requested governor Narasimhan to reject the recommendation of the state government and allow prosecution of Dharmana Rao by the CBI, in public interest.



Vaibhav Dhoka

4 years ago

Its EYEOPENER for all public,this is how congress government has bankrupted nation.This is tip of ICEBERG.Unless we increase literacy level of common public this is bound to continue in some states regularly.Lets see what Governor of AP takes view on this representation.

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