Money & Banking
RBI imposes restrictions on bank lending against gold

The central bank further said that banks cannot give advances against gold Exchange Traded Funds and units of gold mutual funds

In a bid to restrict the demand for gold, the Reserve Bank of India (RBI) Monday imposed curbs on banks and NBFCs for providing loans against gold coins as well as units of gold ETFs and mutual funds.

 

“...it is advised that while granting advance against the security of specially minted gold coins sold by them, banks should ensure that the weight of the coin does not exceed 50 grams per customer,” RBI said in a notification to banks.

 

Also banks have been asked to ensure that the amount of loan to any customer against gold ornaments, gold jewellery and gold coins (weighing up to 50 grams) should be within the board approved limit.

 

As specially minted gold coins sold by banks may not be in the nature of bullion or primary gold, there would be no objection to the bank granting loans against these coins, it added.

 

The central bank further said that banks cannot give advances against gold Exchange Traded Funds (ETFs) and units of gold mutual funds.

 

Banks are currently permitted to grant advances against gold ornaments and other jewellery and against specially minted gold coins sold by banks.

 

However, no advances can be granted by banks for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold exchange traded funds and units of gold mutual funds.

 

The government has taken several steps recently, including raising import duty, to curb the inbound shipments of gold. RBI too had put restrictions on banks on gold imports, which has led to forex outflow and widening of the current account deficit (CAD).

 

While there may not be any objection to grant of advances against specially minted gold coins sold by banks, there is a risk that some of these will weigh much more, thereby circumventing the RBI’s guidelines regarding restrictions on grant of advance against gold bullion, it said.

 

In a separate notification, RBI said no advances should be granted by NBFCs for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold ETF and units of gold mutual funds.

 

Worried over widening CAD, finance minister P Chidambaram last week had indicated that the government and the RBI could take more steps to check gold imports.

 

“Some more steps, if necessary, would have to be taken, but I appeal to the people of India to contain their passion for gold,” he had said.

 

Gold imports jumped by 138% to $7.5 billion last month, the highest so far this year, pushing up the trade deficit to $17.7 billion.

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Lease land fraud: Shailesh Gandhi sends notices to revenue secretary, collectors of Mumbai and suburbs

Maharashtra has decided to offer lands to the lessees at about 20% to 30% of the market value. Some lessors are even allowed to continue at the old rates. That too when the state government could earn Rs25,000 crore annually just from the lease rents

Seeking correct price determination while giving the government lands on lease and asking the Maharashtra government to stop the “75% discount sale”, Shailesh Gandhi, former Central Information Commissioner, has sent notices to the authorities.
 

In the notices sent to the state revenue secretary, collector of Mumbai and collector for Mumbai Suburban, he said, “I had raised this issue in 2005 and I have been given a large file showing how my letter titled “Arbitrariness and huge loss of Public money in Public lands given on Lease” led to an eight year confabulation. At the end of this, it appears that the revenue department has come up with a bizarre policy to give away public lands to lessees at 20% to 30% of the Ready Reckoner values. It pains me that the revenue department appears to have done no calculations of revenue potentials and has arbitrarily decided to put up the lands on a 75% discounted sale, limited to the buyer being an existing lessee.”
 

The former CIC learnt, through Right to Information (RTI), that the land was given away by the Maharashtra government at throwaway prices instead of market prices. The Maharashtra government had leased out land at 20%-30% discounts rather than market rates. This will have ramifications on how the State intends to services its people in the future.
 

Mr Gandhi estimates that the government’s decision to mindlessly give away land will lead to an annual loss of about Rs5,600 crore, collectively from each of the three  departments mentioned above. The basis of the legal notice was on the incrimination information found in the RTI. Read  RTI exposes a revenue loss of Rs25,000 crore in Maharashtra
 

Mr Gandhi stated, in his legal notice, “The revenue department has informed me that a bizarre policy has been evolved to give away public lands to lessees at 20% to 30% of the Ready Reckoner values. This is arbitrary, since it decides to give largesse only to people who were given leases earlier, and has no rational basis.”
 

Basically, when any individual or institution gives land or a property on lease and the lease expires, a fresh lease is drawn up at the prevailing market rates if the lessee wants to continue. This simple principle has not been followed in Mumbai and possibly in the state of Maharashtra, according to Mr Gandhi.
 

Given that real estate values are higher today than many years back, the Maharashtra government ought to lease land at prevailing market rates. Instead, it is being disposed off at a discount. Moreover, the leased land is being given away only for a one-time fee and not on a recurring basis (i.e. lease revenue). This means, the state is devoid of steady and regular income that it needs so badly to service its gargantuan debt of over Rs2.5 lakh crore! Instead, the taxpayers are being made to pay for it.
 

He stated in an earlier piece, “This is a revenue stream (i.e. lease revenue) which is partial hedge against inflation, saving future generations from having to pay ever higher taxes.” It is estimated that Rs25,000 crore could be generated if lease revenue model is adopted instead of one-time fee.
 

In the legal notice, Mr Gandhi cited precedents from previous court cases where it was ruled that state governments not only must act rationally but also in a fair and transparent manner. One such precedent, quoted from Sachidanand Pandey Vs State of West Bengal (1987) 2 SCC 295, stated, “State-owned or public-owned property is not to be dealt with at the absolute discretion of the executive. Certain precepts and principles have to be observed. Public interest is the paramount consideration. One of the methods of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders.”
 

Another precedent, Mr Gandhi quotes the Supreme Court Judgement in the case of Kasturi Lal Krishna Reddy Vs State Jammu & Kashmir (1980), was quoted: “Every action taken by the government must be in public interest; the government cannot act arbitrarily and without reason and if it does, its action would  be liable to be invalidated. If the government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touch-stone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid”
 

Through the notices, Mr Gandhi expects the revenue secretary, Suburban Collector and the Mumbai Collector, to justify their action and method for disposing off lands at cheap rates. “You are a Public servant representing the poorest man in Vidarbha who may be starving, and is an equal and rightful owner of this land. It is necessary that the appropriate revenue is obtained for him, and his land and interest are safeguarded,” he said in the notices.

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COMMENTS

R Balakrishnan

4 years ago

I think every citizen of Bombay should join this petition. Hats off to Mr Shailesh Gandhi. Please let us know, Sir, if we could join in and strengthen the cause. I think every reader of Moneylife should.

Coal India consolidated Q4 net up 35% at Rs 5,414 crore
The consolidated net profit of the PSU for the year ended 31 March 2013 also went up to Rs17,356 crore against Rs14,788 crore in the previous fiscal
 
State-owned Coal India (CIL) today reported almost 35% rise in the consolidated net profit at Rs5,413.9 crore for the fourth quarter ended 31 March 2013on the back of lower expenses.
 
The company’s net profit in January-March quarter last fiscal stood at Rs4,013 crore, the company said in a filing with the exchanges.
 
The consolidated net sales of the PSU during the quarter also went up from Rs19,904 crore to Rs19,418 crore over the corresponding period of FY12, the statement added.
 
Total expenses of the company during the period came down to Rs14,225 crore from Rs16,021 crore in Q4 FY12, it said.
 
Employee benefit expenses of CIL during the quarter reduced to Rs7,469 crore over Rs9,465 crore over the same quarter in FY 2011-12.
 
The consolidated net profit of the PSU for the year ended 31 March 2013 also went up to Rs17,356 crore against Rs14,788 crore in the previous fiscal.
 
The income from operations of the company rose to Rs68,302 crore for the year ended 31 March 2013 from Rs62,415 crore in the year-ago period.
 
The company produced 452.2 million tonnes (MT) of coal in FY13 against 435.8 MT in the FY 2011-12.
 
CIL’s offtake also went up to 465 MT in the year ended March 31, 2013 against 433 MT in the year-ago period.
 

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COMMENTS

Gopalakrishnan T V

4 years ago

The company like other well run PSUs do not share the profit with share holders. The IPO was priced very high and investors have not been benefited so far. The rating of any company should also include inter-alia as to how the share holders have been rewarded by the Company on an year to year basis. SEBI has to ensure that Companies do reward the retail shareholders well to attract them to capital market.

REPLY

Sohil

In Reply to Gopalakrishnan T V 4 years ago

The company is paying dividend regularly.i invested during iPo and getting 13.8 rupee dividend at iPo price of 233 which is more than 5% dividend yield.Even at present price it's equivalent to 4.5% dividend yield.It never went ever around IPO price.

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