"The net borrowings by banks from RBI in the recent times, is a reflection of the deficit liquidity conditions," finance minister Pranab Mukherjee said to a question in the Lok Sabha
New Delhi: The government today said that the banking system is facing a liquidity crunch as is reflected from increased borrowings by lenders from the Reserve Bank of India (RBI), reports PTI.
"The net borrowings by banks from RBI in the recent times, is a reflection of the deficit liquidity conditions," finance minister Pranab Mukherjee said to a question in the Lok Sabha.
On an average, banks and primary dealers have borrowed Rs46,298 crore on a daily basis from the RBI so far this fiscal (April-August).
This is marginally lower than the Rs46,946 crore borrowed in the previous fiscal (2010-11).
"Borrowings by banks from the RBI with the government securities as a collateral is a normal liquidity management operation for banks and this happens whenever there is overall liquidity deficit in the system," Mr Mukherjee added.
According to the minister, during 2008-09 and 2009-10, banks have placed funds worth Rs4,212 crore and Rs1,00,310 crore with the RBI.
Banks invest in government securities as part of their statutory requirement to maintain the Statutory Liquidity Ratio (SLR), which is currently at 24%.
The RBI managed the day-to-day liquidity in the banking system through its Liquidity Adjustment Facility (LAF). Under this facility, banks which are short of liquidity can borrow from the RBI (overnight) at the Repo Rate (8%), by keeping government securities as collateral.
"This is in line with the best international practices," Mr Mukherjee added.
He said that increased bank borrowings from RBI indicates strengthening of the monetary transmission mechanism and is consistent with the anti-inflationary stance of monetary policy.
As part of efforts to control inflation, the RBI has hiked policy rates 11 times since March 2010. However, inflation continued to remain on higher trajectory. The overall inflation, which crossed the 9% mark in December 2010, stood at 9.22% in July.
Nifty may go up to 5,200 in the best case scenario
The stock market rose for a third straight day on Friday to close the truncated trading week on a positive note, after five consecutive weeks of losses, this despite continuing negative news.
Today's intra-day high on the Nifty of 5,065 crossed the 5,060 mark, which we had mentioned in our Tuesday's closing report. The benchmark is likely to see its first resistance at 5,100.
If the trend of making a new high in the current upmove continues, we may see gains of up to 5,200. The National Stock Exchange (NSE) saw a volume of 46.84 crore shares, which was below its 10-day moving average of 59.68 crore shares.
Refreshed after a two-day holiday, the domestic market brushed aside weak economic indicators and lower Asian markets to open in the positive. Oil & gas, banking, healthcare and auto sectors saw good buying in early trade, supporting the gains.
Late morning, food inflation figures for the week ended 20th August jumped into double digits at 10.05%, up from 9.80% in the previous week. Also, factory output as measured by the HSBC Manufacturing PMI fell to 52.6, in August, its slowest pace since March 2009.
The benchmarks witnessed a gradual upmove to touch the intra-day high in noon trade. The Nifty climbed to 5,065, while the Sensex rose to 16,902. However, profit booking at higher levels resulted in the indices paring all gains in post-noon trade and touching their previous closing levels. At the day's low, the Nifty was at 4,993 and the Sensex dropped to 16,688.
However, the market bounced back after that, closing higher for a third consecutive day. The Nifty settled 39 points up at 5,040 and the Sensex finished 145 point higher at 16,821.
The advance-decline ratio on the NSE was 1050:677.
Among the broader indices, the BSE Mid-cap index closed 0.81% higher, while the BSE Small-cap index added 0.03%.
BSE Metal (up 2.75%) was the leader in the sectoral space. It was followed by BSE Consumer Durables (up 2.19%), BSE Oil & Gas (up 2.16%), BSE Auto (up 2.09%) and BSE Realty (up 1.73%). But the BSE IT (down 1.31%), BSE Power (down 0.97%), BSE TECk (down 0.53%) and BSE Capital Goods (down 0.14%) indices all settled lower.
DLF (up 5.93%), Tata Steel (up 4.26%), Sterlite Industries (up 4.04%), Mahindra & Mahindra (up 3.87%) and Bajaj Auto (up 3.21%) were the main Sensex gainers. The major losers on the index were Tata Power (down 2.13%), TCS (down 1.82%), BHEL (down 1.74%) and NTPC (down 1.56%).
The major gainers on the Nifty were Reliance Capital (up 7.50%), Reliance Communications (up 6.85%), DLF (up 6.68%), Tata Steel (up 5.11%) and Sterlite Industries (up 4.24%). HCL Technologies (down 3.39%), IDFC (down 3.25%), Siemens (down 2.14%), Tata Power (down 2.05%) and TCS (down 1.76%) were the index losers.
Markets in Asia settled lower ahead of key US jobs data and speculation over China continuing with its tight monetary policy. Exporters declined on fears that a negative jobs report would dent sales.
The Shanghai Composite declined 1.09%, the Hang Seng tanked 1.81%, the Nikkei 225 fell 1.21%, the Straits Times slipped 0.84%, the Seoul Composite lost 0.69% and the Taiwan Weighted shed 0.01%. Bucking the trend, the KLSE Composite gained 0.85%.
Back home, institutional investors-both foreign and domestic-were net buyers of equities on Tuesday. Foreign institutional investors were buyers of stocks worth Rs620.90 crore, while domestic institutional investors purchased shares worth Rs101.91 crore.
The Anil Ambani group firm Reliance Power has received a Rs400 crore loan from the US Export-Import Bank for a 40MW solar plant in Rajasthan. The company is developing the country's largest solar photo voltaic (PV) project with a 40MW generation capacity, which is scheduled to be commissioned by March 2012. The stock lost 0.53% to close at Rs84.40 on the NSE.
Pharma major Dr Reddy's Laboratories (DRL) today said it has started the phase-II study in Europe to test the safety and efficacy of its 'DRL-17822' molecule, to treat coronary heart disease. Three human phase-I studies (on a select small human sample) with the molecule have already been conducted in Europe, where it was shown to be safe and well-tolerated, the company said. The stock closed at Rs1,509.50, up 0.90% on the NSE.
Shipments of India's second-largest cement maker ACC, rose in August by 19.75% to 1.88 million tonnes, compared to 1.57 million tonnes a year ago. The company, in which Swiss cement maker Holcim holds about 46% stake, said production in August rose by 20.51% to 1.88 million tonnes from 1.56 million tonnes a year ago. ACC rose 0.92% to Rs1,012 on the NSE today.
Despite repeated persuasion, investors’ complaints filed with the market regulator either remain unheard, or are disposed off with vague replies. Moneylife has had a personal experience of this
For some years now, Moneylife has heard from investors and has been writing that the market regulator, the Securities and Exchange Board of India (SEBI) functions more like an 'in and out' mail system, especially in dealing with investor complaints and grievances redressal. Although SEBI claims to respond to complaints and give a registration number, investors say that the market regulator does nothing in terms of redressal. Moneylife has had a similar experience recently.
On 26 July 2011, Moneylife sent an e-mail regarding Gujarat-based NMart Retails, which collects money from people under the pretext that they are purchasing vouchers of its retail store. It also promises a smart card, credit facility and loyalty bonus of Rs11,000 after staying/shopping with NMart for 48 consecutive months.
Experts say that the activities of the company have features of a Collective Investment Scheme (CIS), specified under section 11 of the SEBI Act read with regulation 3 of the SEBI (CIS) Regulation. Accordingly, we asked SEBI if the company had obtained a certificate of registration to run the CIS and if not, what action SEBI was planning against the company.
There was neither any reply from SEBI, nor even a simple acknowledgement. Then on 26th August we received a letter dated 30th July from SEBI which said that the complaint is not under its purview and that the appropriate authority should be contacted in the matter.
It is interesting to note that the reply did not give any explanation as to why the issue does not come under SEBI's purview, or mention any details or reference of the complaint, which is usually done in formal letters. In addition, the e-mail was sent by Moneylife's deputy editor, but SEBI addressed its reply to Moneylife Foundation, which is a not-for-profit affiliate of Moneylife. We are also wondering, what took the letter over 26 days to reach our office at Dadar, which is only a 20-minute drive from the SEBI headquarters at Bandra-Kurla Complex, in suburban Mumbai.
Moneylife has been regularly writing about SEBI's hands-off approach on complaints and investors' grievances. (Read, 'Investor interest: SEBI's hands-off approach'.) SEBI has also introduced a new high-cost complaints redressal system called SCORES (SEBI Complaints Redressal System), which is a "web-based centralised system for the speedy redressal of grievances" that was launched in the last few days of the tenure of former chairman CB Bhave. (Read, 'Complaints redressal: SEBI's high cost experiment'.)
According to a comment posted by a reader on our website, SEBI has told him that it does not have an investor grievances redressal system. The reader says, "In a reply to my RTI application, SEBI had informed that there is no Investor Grievances Redressal System in SEBI. There is only Investor Complaints facilitation centre. It does not guarantee redressal of investor complaints. It also stated that investor should file their complaints in a court of law for redressal. So what happened to SEBI's role as protector of investors' rights? In fact, SEBI Mutual Fund refused to examine my complaint and give its ruling, when the mutual fund (company) failed to resolve a complaint of misconduct and negligence in handling an additional purchase transaction resulting in loss of NAV (net asset value) and dividends."
In one of our earlier articles, an investor commented: "If inspite of making (filing) many complaints SEBI is not taking any action against Compact Disc India, a BSE listed company, for non-payment of declared dividend for past two years and making many bogus announcements such as share buyback for delisting, big contracts, etc, then what investor protection can SEBI do?"
Another comment reads: "My case against ICICI Bank is pending with SEBI since the past eight years and they have done nothing but acknowledging. The same case forwarded by the RBI and me four times, but nothing has been done. Even recent letters to chairman has not produced any results."
This attitude of the regulator has taken a toll on India's investor population. Moneylife has repeatedly pointed out that India's investor population has declined from 20 million in 1992 (according to official reports) to just eight million (equity and mutual funds), according to the D Swarup Committee report 2009.