Govt mulls tax sops to boost corporate bond market

“Bringing liquidity in the corporate bond market has been an issue for long. We may consider tax incentives, like doing away with the withholding tax, and reduction in stamp duty,” a finance ministry official said

New Delhi: The government is mulling tax incentives, reduction of stamp duty, and simplified regulatory norms to promote the corporate bond market for helping companies raise funds at competitive rates, reports PTI.

“Bringing liquidity in the corporate bond market has been an issue for long. The government is ready to put whatever is there to get it going. We may consider tax incentives, like doing away with the withholding tax, and reduction in stamp duty,” a finance ministry official said here.

The issues concerning corporate bond market were discussed at an internal meeting of the finance ministry on Tuesday.

The finance ministry, the official said, would also hold discussions with the representatives of financial institutions, like Morgan Stanley, ICICI Securities, PNB Gilts, AK Capital and Tata Group, on Thursday on the steps for boosting corporate bond market.

At present, government securities are preferred over corporate bonds as they enjoy sovereign guarantee and are highly liquid as compared to bonds.

A vibrant corporate bond market, as suggested by India Inc in its 1st August meeting with finance minister Pranab Mukherjee, would go a long way in meeting the infrastructure needs of the country.

The government envisages doubling of infrastructure spending to $1 trillion in the 12th Five Year Plan beginning 1 April 2012.

Sources said tax benefits could include reduction in Securities Transaction Tax (STT) and stamp duty, besides withdrawal of withholding tax.

“Development of corporate bond market is the most complicated policy issue being dealt by us. But we are keen to bring vibrancy in this segment,” the official said.

Earlier in March, the Securities and Exchange Board of India (SEBI) had constituted a 16-member committee to suggest a roadmap for developing the corporate bond market.

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Finance ministry to monitor 10-15 large infrastructure projects

The finance ministry’s decision to monitor progress of large projects, which may include Dedicated Freight Corridor, was taken ahead of a meeting of secretaries of 11 important ministries like civil aviation, coal and mines, commerce and industry, communication and IT, agriculture and, environment and forest

New Delhi: Responding to India Inc’s concerns about the impact of poor infrastructure on growth, the finance ministry on Tuesday decided to monitor progress of 10-15 large projects in the public sector, reports PTI.

“The projects are yet to be identified, but it is important that infrastructure develops at a faster pace and we will be closely monitoring 10-15 large projects,” a senior official in the ministry said.

The finance ministry’s decision to monitor progress of large projects, which may include Dedicated Freight Corridor, was taken ahead of a meeting of secretaries of 11 important ministries like civil aviation, coal and mines, commerce and industry, communication and IT, agriculture and, environment and forest.

Captains of industry, in their interaction with finance minister Pranab Mukherjee on 1st August had demanded close monitoring of large infrastructure sector projects being undertaken by the public sector.

Yesterday’s meeting, which was chaired by economic affairs secretary R Gopalan, also decided to hold road shows abroad to portray India as an attractive investment destination.

“When interest rates are near zero in (developed) countries, we should try our best to attract funds,” the official added.

Ministry officials also deliberated on the steps required to make the corporate bond market more vibrant.

As various steps taken by the government failed to increase liquidity in the sector, strengthening of the corporate bond market could go a long way in financing infrastructure development in the country, the official said.

Wednesday’s inter-ministerial meeting would review the progress of different ministries on the suggestions made by corporate India.

“It is a pre-cursor to the meeting which would be taken by the finance minister in the second week of October where he would take stock of the progress,” the official said.

Besides other things, Indian industry had given suggestions to Mr Mukherjee on the steps needed to improve infrastructure and corporate bond market. Poor infrastructure is seen as a major bottleneck to sustain high level of economic growth.

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L&T on banking licence: 25% rural branches may not be viable

The RBI last month had issued the draft guidelines on new bank licences, pegging the minimum required capital for the holding company at Rs500 crore, and limits the foreign shareholding at 49%. It also said new banks should open at least 25% of its branches in unbanked rural centres

Mumbai: The Larsen & Toubro (L&T) group, a serious contender for a new banking licence, on Tuesday expressed doubts over the viability of new banks having 25% of their branches in rural areas as prescribed in the Reserve Bank of India (RBI) draft guidelines, reports PTI.

L&T Finance Holdings also asserted that the company will consider definitely the prospect of entering the banking space.

“It is not easy to say that rural branches are viable or not. Is there any other mode of servicing the rural clients without the normal brick and mortar banks? These are areas that we really need to work on,” L&T Finance Holdings president and whole-time director N Sivaraman told reporters here.

He was replying to a question whether the 25% stipulation for rural branches would deter the aspiring entrants.

“All those evaluations will have to be completed. We definitely need to do a thorough evaluation on whether it will be worthwhile at this point of time,” he added.

Mr Sivaraman, however, quickly added, “I will not say that we are not interested. Definitely, as a financial services player, that is of great interest to us, and we will actively consider the prospect.

“I think, it is an opportunity that is important for a financial services player. So we can not ignore it. We will have to wait for the final guidelines to come out. Once RBI announces its final guidelines we will definitely work on it,” he said replying to a query on whether the group will pursue entering the banking space given the strict entry norms.

The RBI last month had issued the draft guidelines on new bank licences, pegging the minimum required capital for the holding company at Rs500 crore, and limits the foreign shareholding at 49%.

The draft guidelines also said new banks should open at least 25% of its branches in unbanked rural centres.

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