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SBI, 4 more banks cut interest rates

The net effect is that depositors lose more than the gains accruing to borrowers resulting in widening of the banks' margins

New Delhi: Led by State Bank of India (SBI), four more banks cut interest rates on loans and deposits up to 1%, following reduction in the short-term policy rates by Reserve Bank of India (RBI) last week, reports PTI.

While banks have tweaked rates differently, the net effect is that depositors lose more than the gains accruing to borrowers resulting in widening of the banks’ margins.

SBI, the country’s largest lender, slashed interest rates up to 1% on fixed deposits of all but one maturity.

With these changes, the peak rate on SBI fixed deposits have come down to 9% per annum.

On the other hand, it has reduced interest rates marginally by about 0.25%, that too only on car loans.

SBI chairman Pratip Chaudhuri said that the bank may not go in for cut in the minimum (base) lending rate. “Our base rate is already one of the lowest in the industry,” he told CNBC TV18.

Other banks, including Allahabad Bank, United Bank of India and Kotak Mahindra Bank have reduced the base rate by up to 0.25%.

SBI’s base rate stands at 10%. It is the benchmark rate below which a bank cannot lend.

Lakshmi Vilas Bank reduced its FD rates on select maturities by 0.25%.

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Finance ministry may cut capital gains tax on PE investments

Several PE investors have appealed to the ministry to bring them at par with foreign institutional investors (FIIs) as far as tax treatment is concerned

New Delhi: In order to attract foreign capital, the finance ministry may cut long-term capital gain tax from 20% to 10% on investments made by private equity (PE) funds into shares of unlisted companies, reports PTI.

Several PE investors have appealed to the ministry to bring them at par with foreign institutional investors (FIIs) as far as tax treatment is concerned.

“For PEs investing in unlisted securities currently they are charged higher rate of tax than FIIs. So they have requested to being them at par with FIIs. Let us see,” finance secretary RS Gujral told PTI.

As per the provisions of the Finance Bill, 2012, while FIIs pay a long-term capital gain tax of 10% for investment in unlisted securities, private equity (PE) investors pay 20%.

For listed securities, however, there is no tax on long-term capital gains.

Experts, however, said if the tax structure of the PEs is relaxed that would help them exit their investment in India without worrying much on the tax payout.

PE investors usually invest with a longer term, usually 5-8 year horizon, in start-ups and they prefer to exit their holding at the time of listing of the company.

However, volatile stock market conditions are delaying the listing plans of several companies and PEs are now going for private share sale to exit their holding.

The government has been taking steps to attract foreign capital both as foreign direct investment (FDI) and portfolio investment. These issues have assumed importance in view of the global financial problems which are impacting investments into the country.

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