Icelanders protest against PM's tax haven allegation
Reykjavik: Thousands of Icelanders gathered in front of parliament to express their anger against the government following the release of the Panama Papers, which suggest Prime Minister Sigmundur David Gunnlaugsson and two other cabinet members have ties to offshore companies.
The riot gear equipped police used iron fences to separate protester and the parliament building. After the speeches, the protesters chanted, banged drums and threw bananas, toilet paper and yogurt towards the parliament building, demanding the government's dismissal, Xinhua reported.
"The government should respect the basic rules of democracy and stand down at once. We therefore demand elections now!" said a demand on Facebook.
The documents, leaked from a Panamanian law firm called Mossack Fonseca, reveal Gunnlaugsson co-owned a company called Wintris Inc, set up in 2007 on the Caribbean island of Tortola in the British Virgin Islands, to hold investments with his wife Anna Sigurlaug Palsdottir.
He sold his entire shares to Palsdottir for one dollar in late 2009. But he failed to declare his interest in the company after he entered Iceland's parliament in 2009.
As the Wintris claimed millions dollars in assets in three bankrupted Icelandic banks after the financial crisis in 2008, Gunnlaugsson is faced with allegations from opponents that he has hidden a major financial conflict of interest from voters ever since he was elected a parliament member seven years ago.
The prime minister's office said in a statement that his holding of Wintris shares was an error. He and his wife corrected it after they got married in 2009.
However, in an interview with the media on Monday, Gunnlaugsson said he was not going to resign and the current government performs well.
The documents also suggest both the minister of finance and economic affairs Bjarni Benediktsson and the interior minister Olof Nordal were in connection with offshore companies.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


RBI cuts repo rate by 25bps to 6.50%, narrows policy rate corridor to 50bps from 100 bps
The central bank decided to narrow the policy rate corridor from 100 bps to 50 bps by reducing the MSF rate by 75 bps to 7% and increasing reverse repo rate by 25 bps to 6% 
As expected by the markets and economists, the Reserve Bank of India (RBI), in its first bi-monthly credit policy review on Tuesday for FY2016-17 has cut repo rate by 25 basis points (bps) to 6.50%. The central bank also decided to narrow the policy rate corridor from 100 bps to 50 bps by reducing the marginal standing facility (MSF) rate by 75 bps and increasing reverse repo rate by 25 bps.
With repo rate reduced to 6.50%, the reverse repo rate under the liquidity adjustment facility (LAF) will now be 6%. The Central bank also cut the minimum daily maintenance of cash reserve ratio (CRR) to 90% from 95%, while keeping CRR unchanged at 4%. The bank rate, which is aligned to the MSF rate also stands adjusted to 7%.
In a statement, RBI Governor Dr Raghuram Rajan said, "Perhaps more important at this juncture is to ensure that current and past policy rate cuts transmit to lending rates. The reduction in small savings rates announced in March 2016, the substantial refinements in the liquidity management framework announced in this policy review and the introduction of the marginal cost of funds based lending rate (MCLR) should improve transmission and magnify the effects of the current policy rate cut. The stance of monetary policy will remain accommodative. The Reserve Bank will continue to watch macroeconomic and financial developments in the months ahead, with a view to responding with further policy action as space opens up."
"Given that new instruments such as variable rate reverse repo auctions allow the Reserve Bank to suck out excess short term liquidity from the system without the excess liquidity being deposited with the Reserve Bank through overnight fixed rate reverse repo, it is possible for the Reserve Bank to keep the system closer to balance on average without the operational rate falling significantly. Thus, the past rationale for keeping the system in significant average liquidity deficit no longer is as compelling, especially when the policy stance is intended to be accommodative. Moreover, given that the Reserve Bank’s market operations rather than depositing or borrowing at standing facilities determine the operational interest rate, the policy rate corridor can be narrowed, as suggested by the Expert Committee," he added.
Chanda Kochhar, MD and CEO, ICICI Bank, said, "The higher than normal systemic liquidity deficit had been a matter of concern among market participants. The announcement that the RBI will progressively lower the average liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality significantly addresses this concern. This should support the transmission of RBI’s accommodative policy stance. The reduction in the repo rate signals that overall inflation trends are in line with expectations, and also responds to the Government’s commitment to fiscal prudence."

Commenting on the monetary policy, Arundhati Bhattacharya, Chairman, SBI, said, "The RBI decision to cut repo rates by 25 basis points was as per market expectations even as the liquidity management measures were a pleasant gift to the market. The decision to keep liquidity deficit at neutral mode and also narrowing the LAF corridor will result in a predictable and stable liquidity regime going forward facilitating better transmission across financial markets."
Nomura, in a note, said, "We believe the narrowing of the corridor supports our steepening view in both swap and bond curves. This will reduce the volatility in overnight rates and will ensure that the RBI can become aggressive with liquidity infusions. Also, MIBOR need not necessarily trade over the repo rate in medium term".
According to RBI, retail inflation measured by the consumer price index (CPI) dropped sharply in February after rising for six consecutive months. This favourable development was due to a larger than anticipated decline in vegetable prices, helped by prices of pulses starting to come off the surge that began in August, and effective supply management that helped limit cereal price increases. Accordingly, food inflation eased for the first time in the second half of 2015-16. "Notably, this occurred on a decline in prices rather than favourable base effects, which were at work in the first half of the year," it said.

Inflation in the fuel group moderated across electricity, kerosene, cooking gas and firewood, the latter easing pressures on rural inflation. Three months ahead household inflation expectations declined to a single digit for the second consecutive round of the survey in response to these dynamics.

CPI inflation excluding food and fuel edged up in February, mainly under housing, education, personal care and transport and communication, suggesting capacity constraints in the services sector. Excluding petrol and diesel from this category, inflation stayed elevated and persistent at or above 5%, indicating a possible resistance level for further downward movements in the headline, the central bank says.

RBI said, "The stubborn underlying inflation momentum is unlikely to be helped by the 7th Pay Commission award and the effects of the one-rank-one-pension (OROP) award, or by the cost-push effect of the increase in the service tax rate. However, rural wage growth as well as the rate of increase in corporate staff costs was moderate. Also, input and output prices polled in purchasing managers' surveys rose modestly for manufacturing and services."

"Going forward, CPI inflation is expected to decelerate modestly and remain around 5% during 2016-17 with small inter-quarter variations. There are uncertainties surrounding this inflation path emanating from recent unseasonal rains, the likely spatial and temporal distribution of monsoon, the low reservoir levels by historical averages, and the strength of the recent upturn in commodity prices, especially oil. On the other hand, there will be some offsetting downside pressures stemming from tepid demand in the global economy, Government's effective supply side measures keeping a check on food prices, and the Central Government's commendable commitment to fiscal consolidation," the central bank added.
Saravana Kumar, Chief Investment Officer, LIC Nomura Mutual Fund, says, "While the stance of monetary policy remains accommodative, the tone of the RBI’s policy was not dovish. It is possible that CPI inflation will undershoot RBI trajectory, and is expected further repo rate cut of 25bps in June ’16.  The room for any aggressive rate cut is significantly lower now as effects of 7CPC (estimated 100-150 bps higher inflation) and slower disinflationary impulses from the global economy amongst others will keep the inflation trajectory on a steady but slower downtrend".

RBI feels that the uneven recovery in growth in 2015-16 is likely to strengthen gradually into 2016-17, assuming a normal monsoon, the likely boost to consumption demand from the implementation of the 7th Pay Commission recommendations and OROP, and continuing monetary policy accommodation. It said, "After two consecutive years of deficient monsoon, a normal monsoon would work as a favourable supply shock, strengthening rural demand and augmenting the supply of farm products that also influence inflation. On the other hand, the fading impact of lower input costs on value addition in manufacturing, persisting corporate sector stress and risk aversion in the banking system, and the weaker global growth and trade outlook could impart a downside to growth outcomes going forward."

According to the Reserve Bank, liquidity conditions, which had tightened since mid-December, were stretched further by the larger-than-usual accumulation of cash balances by the Government, unusually heightened and persistent demand for currency, a pick-up in bank credit and flatter deposit mobilisation at this time relative to past years.
Dr Arun Singh, Lead Economist of Dun & Bradstreet India, said, “The lowering of policy rate, and more importantly, measures to support liquidity needs in the system are laudable as it would improve the transmission process. Lower interest rates are likely to have a bigger impact on consumer spending. There is a need for further rate cut in 2016 to lower cost of funds for the industry and spur investments, which has been rather flat. Policy rate cut along with government recent reforms initiatives are likely to provide push to the recovery of Indian economy going forward.”
Here are the latest policy rates following RBI review…
Repo Rate.......................6.50%
Reverse Repo Rate.........6%
Bank Rate.......................7%



MG Warrier

1 year ago

The following announcement which has come as part of Monetary Policy Statement is indicative of a welcome shift in RBI’s approach to branch licensing:
“Rationalisation of Branch Authorisation Policy: Currently, banks provide services through a variety of business outlets – branches; extension counters; satellite offices; mobile branches; ultra small branches and the like. The current
policy approach is to facilitate adequate outreach of banking outlets in unbanked
areas while at the same time providing autonomy to banks to decide their business
strategy. Given that regulations are written in terms of branches, with a view to
facilitating financial inclusion and providing flexibility on the choice of delivery
channel, it is proposed to redefine branches and permissible methods of outreach
keeping in mind the various attributes of the banks and the types of services that are sought to be provided.”
There is also a proposal to have more categories of ‘Differentiated Banks’ about which clarity will emerge once RBI comes out with the discussion paper on the subject.

More names, underworld shadow in 'Panama Papers' Part II
The paper also gave glimpses of their alleged modus operandi
A now-deceased underworld don, a politician, an industrialist and an ex-cricketer are among those with alleged off-shore links, even as the agency that helped them set up the entities stonewalled New Delhi's probe efforts, the Indian Express reported on Tuesday.
In a series of articles under "Panama Papers Part 2" -- as part of the global expose on people with alleged offshore links -- the paper published its second list of Indian names, along with an article on how an aide of don Dawood Ibrahim used a set of 17 entities to buy properties abroad.
Named in the second list, with some repeats, are: Politician Anurag Kejriwal, industrialists Gautam and Karan Thapar, businesspeople Ranjeev Dahuja and Kapil Sain Goel, jeweller Ashwini Kumar Mehra, ex-cricketer Ashok Malhotra, and pharmaceuticals maker Vinod Ramachandra Jadhav.
Also named in the list are IT consultant Gautam Seengal, agribusiness owner Vivek Jain, retired government employee Prabhash Sankhla, and garment exporters Satish Govind Samtani, Vishal Bahadur and Harish Mohnani.
The paper also gave glimpses of their alleged modus operandi.
On Monday, after the first list, Prime Minister Narendra Modi had ordered a multi-agency probe team on the expose, conducted by the International Consortium of Investigative Journalists (ICIJ) along with over 100 global media organisations, dubbed the "Panama Papers".
"A multi-agency group is being formed to monitor the black money trail," Finance Minister Arun Jaitley had told reporters here, after he met with the prime minister. 
"Details of assets worth Rs.6,500 crore have already been found," Jaitley added.
On Monday, the newspaper ran several pages of the investigation reports alleging, among other people, Bollywood superstars Amitabh Bachchan and Aishwarya Rai as being directors in companies in Panama. The two did not immediately respond, despite efforts to contact them.
Others named in the report were Sameer Gehlaut of India Bulls and K.P. Singh of DLF. 
Them apart, Vinod Adani, elder brother of industrialist Gautam Adani, politician Shishir Bajoria from West Bengal and Anurag Kejriwal of Loksatta Party were also alleged to have companies in tax havens. All of them since denied any wrong-doing.
Soon after Modi's order, the finance ministry announced that the probe team will comprise officers from the Central Board of Direct Taxes' Financial Intelligence Unit, its Tax Research Unit and also officials from the Reserve Bank of India.
"The group will monitor the flow of information in each one of the case. The government will take all the necessary actions as required to get maximum information from all sources including from foreign governments to help in the investigation process," the ministry statement added.
The expose by The Indian Express on Tuesday said Mossak Fonseca, the Panama law firm that helped in the setting up of off-shore companies, sought to stonewall every effort by New Delhi to get into the bottom of the issue, even as in some cases the Indian authorities themselves floundered.
This apart, the paper alleged, the elder brother of Gautam Adani, also wanted his name changed to Vinod Shantilal Shah, dropping the family name. The paper said earlier Vinod and his wife were two directors in the off-shore entity, and later his wife made room for their son Rakesh.
On Iqbal Mirchi, the associate of don Dawood Ibrahim, who died in London in 2013, the expose alleges that he and his family took the off-shore route to buy properties in countries like Cyprus, Turkey, Morocco and Spain.
Mossak Fonseca has 46 files on one such entity alone, Country Properties Ltd.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


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