RBI debt buys come as bonus for banks at quarter-end

The RBI is expected to continue to buy bonds heavily in the coming fiscal year to help smooth the way for the government's increased borrowing

Mumbai: The Reserve Bank of India's debt purchases in the current quarter have come as a blessing for state-run banks, which are making large profits on the transactions, reports PTI.

The problem, analysts say, is that they are not using those profits to buy at government bond auctions. That, in turn, is keeping yields elevated and making it more costly for the government to fund its huge fiscal deficit.

The RBI has bought about 1.13 trillion rupees ($22.6 billion) of bonds in 12 rounds of bond purchases through open market operations since late November, aiming to ease tight cash conditions and make room for banks to buy the bonds the government is selling.

In theory the RBI's purchases should pull down yields. But this has not happened, in part because of the reluctance of state-run banks to load up on government paper ahead of next Friday's budget and the RBI policy announcement the day before.

"There is strong resistance for the 10-year bond yield below 8.20% as no buying is coming from public sector banks," said a dealer with a foreign bank in Mumbai. The yield on the 10-year government bond has risen 15 basis points since the start of February as rising oil prices dampened expectations of an interest rate cut in March.

Most of the bonds that the banks are selling to the RBI are less-liquid securities that are normally held to maturity. The fact the RBI is targeting these bonds has resulted in a windfall for the banks and will help banks avoid showing losses on these bonds when they close their books at the end of the fiscal year on March 31.

Banks can sell up to 5% of their held-to-maturity bonds without the need to declare it on their balance sheet. Bonds sold through an OMO do not need to be declared at all. "The net effect will be positive (for them)," said Anjan Barua, deputy managing director at government-controlled State Bank of India, the country's biggest lender.

In meantime, the banks are avoiding buying heavily at auctions to prepare for an expected jump in borrowing by the government to be announced in the 2012/13 budget. "The idea is to sit light before the budget because yields may be higher three months from now," said a trader with a state-owned bank.

A Reuters poll last week showed the government is expected to announce total borrowings of Rs5.3 trillion for the new fiscal year, up from Rs5.1 trillion in the current year.

However, many in the market expect that borrowing figure to rise over the course of the year, just as it did this year. Some traders expect the 10-year yield to rise to 8.50% by the end of March, a level last seen in early January, if the central bank does not cut interest rates next week.

The RBI is expected to continue to buy bonds heavily in the coming fiscal year to help smooth the way for the government's increased borrowing.

But it will be more difficult for banks to turn a profit in the months ahead because they will have to start buying bonds to meet statutory requirements for the new year and yields are likely to rise, dealers said.

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Public Interest Exclusive
Why are our seafarers still getting killed on our coast?

 What is happening on the west coast of India lately with the MV Enrica Lexie, in and around Kerala, defies all logical explanation. Except one big one—the crew in this case happens to be European, not third world

At a modest estimate, there will be over 120 ships of all sizes, shapes and flags “under arrest” for a variety of reasons on the Indian coast. There will be a full crew, or at the bare minimum, a skeleton crew with the essential seafarers onboard. Stranded, variously, often in terrible conditions.

Six crew members of the MV Cosco Busan, involved in an incident where the huge container ship slammed into the Bay Bridge connecting San Francisco to Oakland in November 2007, are still detained in the US only to give evidence despite the conviction of the American pilot and attribution of neglect to various authorities ashore. The ship itself was renamed the MV Hanjin Venezia and sailed out a month after the incident with a fresh crew, after repairs.

In the case of the MV Rena, which ran right onto the Astrolabe Reef in New Zealand at full speed a few months ago, the master and the second officer are being held in custody while the ship itself eventually broke up. Laws in the Antipodes, however, were rapidly changed to assign liability and responsibility to not just the ship’s complement but also the owners, operators, charterers, managers and agents.

And there are thousands of cases like this all over the world. Ships do suffer unfortunate incidents, loss of life does take place, and investigations continue. The criminalisation of seafarers is nothing new—and it is only getting worse.

(My own name shows up on some police records in a particular Far Eastern country only because I was the duty officer—at the ripe old age of 18—when all of about 75 litres of diesel overflowed from my ship into the sea. I was taken ashore, finger-printed, photographed, provided with dinner, posed for more photos for the local press, was suitably jeered at by some more local people for local television the next day who then posed for more photos with me and shook my hand and invited me to their homes, and was then brought back to the ship in a police car, with a small doll as a gift. Over 30 years later, in transit an airport in that country, in the course of the usual passport check, the immigration officer suddenly spotted this police record, froze for a moment, then let out a big smile, named the ship, the date, the port and all the other relevant details, asked me if I was the same person, showed me my own photograph taken 30 years ago, and then waved me through.)

But what is happening on the west coast of India lately with the MV Enrica Lexie, in and around Kerala, defies all logical explanation. Except one big one—the crew in this case happens to be European, not third world like in all the cases listed above.

Enough has already been written about the St. Antony/Enrica Lexie incident, but more facts emerge every day, which point towards behaviour which is at the very least, surprising. The not inconsiderable might of the Vatican, San Marino, Italy and the European Union (EU) itself is bearing down using a vast variety of pressure points in India in such a way that it is breath-taking for its brazen nature. All sorts of threats are being held out against people of Indian origin in Italy by not just the loony right-wing, but also by ministers and others, including suggestions of springing the accused free by means of a raid.

What is most amazing is the information that the armed mercenaries on board, who claim to be disciplined soldiers from Italy’s most prestigious San Marco regiment, were not just being paid a hefty per-diem for their services in addition to their salary, but were also assured a bounty for each documented and confirmed ‘kill’. Like standard issue contract killers out on ‘supari’. This writer, incidentally, has been referring to these armed guards as ‘mercenaries’ from the start for just this reason—soldiers are not promised cash awards for killing other people, civilians especially.

Unlike what the spin doctors would have us believe, this incident has nothing to do with international waters, UN resolutions or saving a ship from pirate attacks.

It is simply a crime committed on Indian territory—the MV St Antony. This had everything to do with, in the first case, a bounty to be collected and shared for killing anybody and then labelling them pirates. And in the second case, to establish a very sinister and colonial approach towards what the Italians have always called the “Mare Nostrum”, or domination of the seas at any cost. That’s what needs to be taken very seriously by those who are responsible for India’s military and economic security.

The subsequent case involving the mid-sea collision between another fishing vessel, the Don-1, and the MV Prabhu Daya, is also moving into territory that is simply unbelievable. But here are the logical explanations which are filtering through:

# The “night orders” specifically laid out that a course and distance well away from the Kerala coast was to be maintained. However, it appears as though the second officer, who hails from Trivandrum, quietly brought the ship closer to the coast to raise a mobile phone signal. If only more ship-owners would provide basic internet facilities on board ships, this risk would be reduced vastly.

# After the collision, it appears as though the bridge did inform the master, but then a decision to scoot away was jointly taken. The records of suspicious movements and course alterations have been variously sourced. This is where an accident or negligence becomes a crime.

# At some stage on the voyage back to Chennai, which in itself is not fully explained when Tuticorin or Kochi would have been more logical choices, the second officer was given what is known as a “blanket party”, trussed up, and thrown overboard.

# A missing/Man Overboard report was then filed, at which point a search and rescue operation was launched and some Sri Lankan fishermen found the second officer.

# The Prabhu Daya is technically flying under the Singapore flag for tax haven reasons, but is totally owned and controlled out of India, which is another aspect of Indian shipping that has to be explained separately.

There are much larger economic issues at play here, and some hard decisions will have to be taken, as far as protecting the Indian coast, Indian waters and Indian assets in Indian waters are concerned.

It is much beyond the ship and fishing vessel issues on the Indian Coast—that can be resolved to a large extent by directing all ships not specifically making Indian ports to stay far away, by imposing specific traffic separation schemes.

The larger issue is that a perception about how unsafe the Indian coast was is fast being sought to be shown as being a fact by way of these incidents, and the heavy publicity as well as pressure from developed countries is only accentuating matters, while India as a country chooses to sit back and not do anything. The issue of Gujarati fishermen being kidnapped in hundreds by Pakistani forces, or Tamilian fishermen being slaughtered by Sri Lankan forces are never brought up or resolved by the Indian government the way they should be.

In these cases, however, the fact that Kerala is a state where high literacy levels as well as evolved sentiments of what are human rights and what is simply incorrect, means that such issues shall be taken to logical conclusions.

The MV Enrica Lexie case must be approached as one which involves contract killing by mercenaries. Nothing less. Either that, or be forever marked as a weak economic power, unwilling to take a stand for itself in a world where of late, nothing is more important than that.

(Veeresh Malik started and sold a couple of companies, is now back to his first love—writing. He is also involved actively in helping small and midsize family-run businesses re-invent themselves. Mr Malik had a career in the Merchant Navy which he left in 1983, qualifications in ship-broking and chartering, a love for travel, and an active participation in print and electronic media as an alternate core competency, all these and more.)

 

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COMMENTS

Veeresh Malik

2 years ago

Latest update

http://www.moneylife.in/article/why-are-...

"Italian marines pressurised Captain to cover up"

GK

5 years ago

Rogue US soldier kills 16 in Afghanistan rampage

http://www.indianexpress.com/news/rogue-...

Any comments Mr. Gianfranco?

REPLY

Gianfranco R

In Reply to GK 5 years ago

there is no much to comment, it is simply horrible.

malq

In Reply to GK 5 years ago

Something more interesting on the owners of the ENRICA LEXIE just came up:-

http://www.intermodal.gr/site/news/index...

Bit of an old article, but increasingly looking like some sort of an insurance ploy underway for a company losing and bleeding . . .

rgds/VM

Gianfranco

5 years ago

Wrt the mercenaries you are completely wrong. San Marco personnel receive just their per diem for being abord a merchant vessel. There is no reward at all, and you will be surprised when you will see that they will be soon set free since there is no evidence at all. In Italy we love indians and have nothing against, yes there is some bla bla but is limited to few guys underscored by the media to sell news.

REPLY

malq

In Reply to Gianfranco 5 years ago

Dear Gianfranco - thank you for writing in.

Slowly slowly the facts are coming out. First it was that there was some other ship. Then it was that there was no attack. Then it was that there was an attack but mercenaries did not fire. Then it became oh yes the mercenaries fired but missed. Then it became that the bullets were from a horizontal alignment.

Evidence is the job of the investigating agencies. Leave it at that.

Regards/VM

gianfranco

In Reply to malq 5 years ago

no, please now you have to report what is your source for claiming the italians are paid for killing. Do not know if you are a journalist, but if so you should be more professional instead of reporting lies. You are calling two soldiers mercenaries ...based on what? slowly slowly?! sorry but the bullets on the bodies are available to the police...it would not take more than an hour to report what caliber are! but I understand the the issue is political now and even for the police/justice of India is becoming also difficult to admit the mistake because all the public opinion would think of a conspiracy...so better for them to wait the end of the election. But plese report me who told you about the soldiers being paid for killing.

malq

In Reply to gianfranco 5 years ago

Dear Gianfranco, like so many things in Italy starting from the top downwards are secrets and protected by privilege, my sources too are protected.

I learnt this method, of keeping things secret, from the word "secretarium". From my Italian friends. You know what it is?

I am the author writer of this article and my identity is well known.

And I stand by what I have written and said with my name and address behind it.

You want to know the truth about bravery at sea? Here is an example;-

http://www.youtube.com/watch?v=irFCxY7ul...

(Not being proud of some soldier shooting unarmed people from a distance.)

rgds/VM

Ash Nallawalla

5 years ago

It's no use speculating why nothing is being done (as far as the public can see). Just contact some appropriate TV journalists, e.g. BBC Panorama, ABC Four Corners, US/AU 60 Minutes, etc and let them do a decent story. Then there might be some meaningful exposure.

REPLY

malq

In Reply to Ash Nallawalla 5 years ago

I am sure matters are under control. After all, every byte of communication to/from the ship, their offices and their people, including the moles in the shipping administration, is surely being monitored.

Evidence like the VDR and other data loggers are suspected to have been tampered with. However, nothing can ever be totally removed from a hard disc, so if the original hard-discs are not thrown into the sea - they will tell the story regardless of how many times erased or re-formatted.

rgds/VM

Capt Deepak Divekar

5 years ago

Dear Veeresh,

The only thing that hurts me is your mention of "Third World".
Was there some kind of RACE arranged and we stood third in it? Every thing else thast you have written is to the point.
Any takers?

REPLY

Ash Nallawalla

In Reply to Capt Deepak Divekar 5 years ago

The term "Third World" does not reflect current economic development. It is an archaic term that was fine until the 1980s. The US and its allies are the First World, The commies are the Second World, and the rest are the Third World.

Exports post mere 4.3% growth in February; slowest in 3 months

India’s exports recorded the slowest pace of growth in three months at 4.3% year-on-year at $24.6 billion in February. In sharp contrast, imports grew at a faster rate of 20.6% to $39.8 billion in the month under review, translating into a trade deficit of $15.2 billion

New Delhi: India’s exports recorded the slowest pace of growth in three months at 4.3% year-on-year at $24.6 billion in February, mainly due to the global slowdown, reports PTI.

In sharp contrast, imports grew at a faster rate of 20.6% year-on-year to $39.8 billion in the month under review year-on-year, translating into a trade deficit of $15.2 billion.

Expressing concerns over the ballooning trade deficit, commerce secretary Rahul Khullar said that since October last exports are decelerating faster than imports.

“There is a large ballooning of trade deficit. October onwards, export started coming down sharply whereas the lag in imports deceleration was larger. The two big drivers for high import bill are crude oil and gold and silver,” he said.

From a peak of 82% in July, export growth slipped to 44.25% in August, 36.36% in September and 10.8% in October and 3.8% in November 2011.

However, exports grew 6.7% in December, and over 10% in January.

During April-February period, exports aggregated to $267.4 billion, a year-on-year growth of 21.4%, thanks to the surge witnessed in the early months of the fiscal.

“Roughly speaking, exports through the year should be in the neighbourhood of $292-$298 billion. Imports will be close of about $480 billion and we are looking at a trade deficit in the order of $175-$180 billion,” Mr Khullar said.

During the 11-months period, oil imports increased by 41% to $132.6 billion.

Elaborating about the high import bill, he said: “We have to import coal, fertiliser and vegetable oil. It is a double whammy... you are paying higher prices for these things.

These are essentially demand constraints compelling us to import these goods”.

Exporters’ body FIEO said exports have been hit by the slowdown in the US and Eurozone, the traditional markets which account for about 35% of India’s exports.

Mr Khullar said that increasing import bill and widening trade deficit would put pressure on the Indian rupee.

Exporting sectors which registered healthy growth in April-February include engineering and petroleum.

Engineering and petroleum exports grew by 20.9% and 46% to $54.5 billion and $53 billion, respectively.

Gems and jewellery exports increased by 28.8% to $40.6 billion, readymade garments by 19%, electronics by 3.5%, drugs by 21.4% and leather by 20.4%.

“Electronic exports are down due to the slowdown in European markets,” he said.

About 60%-70% of India’s electronic goods exports go to European markets.

On the other hand, imports of gold and silver rose by 38.5% to $55 billion, machinery (27%), electronics (21.8%), coal (72%), chemicals (24.9%), fertiliser (49%) and vegetable oil (46.3%).

FIEO president Rafeeque Ahmed too said that these figures clearly indicate that 2012 would be a difficult year for exports in view of growing uncertainty in the Eurozone, slacking of demand in other advance economies and third country effect on our exports to emerging economies.

“Next fiscal year would be difficult for us,” Kush Suri, a leading dry fruit exporter said.

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