Finance ministry, Moody’s to discuss India’s sovereign rating next week

 

 

The officials are likely to talk about the steps the government has been taking to reduce the fiscal deficit, reform direct and indirect taxation system and recapitalise the banking sector

New Delhi: Credit ratings agency Moody’s, which lowered the outlook for Indian banking system, will hold consultations with finance ministry officials next week as part of the exercise to review the country’s sovereign rating, reports PTI.

“We are meeting Moody’s on Monday (14th November) to discuss India’s sovereign credit rating,” a senior finance ministry official told PTI.

The meeting is being held at a time when the Indian economy is passing through a rough patch. As per the Reserve Bank of India (RBI), the growth rate during the current fiscal is expected to moderate to 7.6% from 8.5% last year.

The officials are likely to talk about the steps the government has been taking to reduce the fiscal deficit, reform direct and indirect taxation system and recapitalise the banking sector.

The economy has been braving high inflation and the Centre’s fiscal deficit may exceed budget estimate of 4.6% in view of poor tax collection and low realisation from sale of government equity in state-owned companies.

Moody’s has assigned Baa3, the lowest investment grading rating, to India.

The rating agency on Wednesday downgraded the outlook for the Indian banking system to ‘negative’ from ‘stable’ saying that economic slowdown would impact asset quality, capitalisation and profitability.

However, differing with the downgrade accorded by Moody’s, ratings agency Standard & Poor’s on Thursday upgraded the Indian banking sector saying its domestic regulations are in line with international standards.

Ratings are significant as they help the country and other entities to borrow funds globally at competitive rates.

 

 

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Investor fined $9.6 million for manipulating RIL securities in UK

Rameshkumar Goenka, an Indian businessman living in Dubai, was found to be manipulating the securities of RIL by inflating the closing price of the company’s GDRs, listed on the London Stock Exchange, on 18th October 2010. The British market watchdog FSA has fined Mr Goenka $9,621,240 (about six million British pounds)

London: British financial market regulator Financial Services Authority (FSA) has imposed a fine of $9.6 million (about Rs50 crore) on a Dubai-based Indian investor for manipulating UK-listed securities of Mukesh Ambani-led Reliance Industries (RIL), reports PTI.

This is one of the biggest penalties imposed abroad for manipulation of foreign-listed securities of an Indian company. Besides, it is also the biggest ever fine imposed by the FSA on an individual for market abuse.

The wrongdoing was found to be committed by the investor alone and the company, India’s most valued firm, whose securities were manipulated, itself has not been implicated in the case.

The British market watchdog FSA said in its order that it has fined Rameshkumar Goenka, an Indian businessman living in Dubai for past 12 years, $9,621,240 (about six million British pounds).

Mr Goenka was found to be manipulating the securities of RIL by inflating the closing price of the company’s GDRs (Global Depository Receipts), listed on the London Stock Exchange, on 18th October 2010.

The shares of RIL, the flagship company of the Indian business conglomerate led by India’s richest person Mukesh Ambani, are primarily listed in India, but their GDRs are traded on the LSE also.

GDRs are like certificates of shares of a foreign company that can be issued and traded on international exchanges outside the company’s home country.

Announcing the penalty order, FSA said that “in publishing its findings against Mr Goenka, the FSA is not in any way criticising Reliance.”

FSA said that Mr Goenka was a “prominent and sophisticated” investor with a substantial portfolio of investments and had failed in a similarly-planned exercise for a different structured product in April 2010.

The fine could have been much higher at over $12.4 million (about Rs 62crore), but Mr Goenka was granted a 30% discount on his fine for settling the case at an early stage of the FSA’s investigation.

FSA said that Mr Goenka on 18 October 2010 placed orders and executed trades which artificially inflated the closing price of Reliance securities on the LSE.

Mr Goenka had held an over-the-counter (OTC) structured product maturing on 18 October 2010, for which the pay-out depended on the closing price of Reliance securities that day.

Because of the inflated price, Mr Goenka could avoid a loss of over $3 million on the previously purchased product.

As a result of his manipulation of Reliance closing price, the issuing bank of the structured product had to overpay him $3.1 million.

Dubai-based Mr Goenka's fine of $9,621,240 comprises a penalty of $6,517,600 and a restitution element of $3,103,640, which will be reimbursed to the bank.

Commenting on the order, Tracey McDermott, acting director of enforcement and financial crime at FSA, said: “Mr Goenka's structured product was an investment that would have made him a considerable profit had it been successful for him.

“When he saw that it was not going to produce the desired result Mr Goenka manipulated the market to avoid a substantial loss,” she added.

FSA said that Mr Goenka had an extensive experience as an investor and his misconduct involved considerable pre-planning and the manipulative trading necessitated very substantial financial outlay and involved others.

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Crisil to come up with credit indices to track bond market

Crisil will soon come up with credit indices that will track differently rated long-term and short-term bonds. These indices will help in penetration of corporate bond market in the country, which otherwise is less developed, director-capital markets of Crisil, Tarun Bhatia announced

Mumbai: Equities research and rating agency Crisil will soon come up with credit indices that will track differently rated long-term and short-term bonds and is likely to facilitate penetration of corporate bond market in the country, reports PTI.

“We will come up with credit indices that will track bond market. The various indices, we are planning to come up with are AAA rated long-term bond index, AAA rated short-term bond index, AA rated long-term bond index and AA rated short-term bond index,” director-capital markets of Crisil, Tarun Bhatia said here today.

He, however, said that the proposed indices would not be launched at one time and would be operational in phases.

“We will start with AAA rated bonds and then come to AA rated bond indices,” he added.

As per the research agency, these indices will help in penetration of corporate bond market in the country, which otherwise is less developed.

The rating firm will also come up with some sovereign indices that will track 10 year gilts along with T-Bills (treasury bills).

“Under sovereign indices, we will soon come up with a 10 year Gilt index, one year T-Bill index, 91 Day T-Bill index and composite T-Bill index,” Mr Bhatia said, without divulging the timeline for launch of these indices.

Currently, Crisil maintains Crisil long-term debt index, short-term debt index, liquid fund index, balanced fund index, MIP blended fund index, debt hybrid 75:25 index, and debt hybrid 60:40 index among others.

As per the research firm, more than 80 customised Crisil indices are used for benchmarking by mutual funds, insurance companies, pension funds and corporates.

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