The much-awaited RBI measures to stem rupee's slide did not match market expectations amid rupee plunging close to 58 level
Mumbai/New Delhi: To arrest the rupee slide, the Reserve Bank of India (RBI) on Monday increased foreign institutional investors (FIIs) limit in government bonds by $5 billion to $20 billion, while allowing up to $10 billion from overseas borrowings by India Inc for refinancing rupee loan, reports PTI.
Long term investors like Sovereign Wealth Funds (SWFs), multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks would be allowed to invest in government debts up to $20 billion, RBI said in a notification.
The rupee, which breached the 57-level on 22nd June, opened in the positive zone against the dollar but soon after the RBI measures were announced it sharply fell to 57.92 levels. Similarly, the BSE benchmark Sensex, which had climbed to a seven- week high of 17,132 during the day, lost momentum and touched a low of 16,853 after RBI annoucement.
The decisions have been taken "in consultation with the government," RBI said, adding that they will widen foreign investor base for government securities (G-Secs).
"It has been decided to allow Indian companies in manufacturing and infrastructure sector and having foreign exchange earnings to avail of external commercial borrowing (ECB) for repayment of outstanding rupee loans towards capital expenditure and/or fresh rupee capital expenditure under approval route. The overall ceiling for such ECBs would be $10 billion," the central bank said.
Industry body, FICCI, however said the steps announced (by RBI) are minimal in nature. "The steps announced so far are probably minimal at this time but could lead to some inward capital flows if this is supported by stronger fundamentals. We were however hoping for a broad based set of strong actions as well as policy reforms that could have a positive bearing on the overall environment. Every delay in announcing such measures is only reducing their ultimate effectiveness and extending the weak phase of our economy," said RV Kanoria, president, FICCI.
The RBI further said the existing limit for investment by foreign institutional investors in G-Secs has been enhanced by $5 billion.
"This would take the overall limit for FII investment in G-Secs from $15 billion to $20 billion. The sub-limit of $10 billion (existing $5 billion with residual maturity of 5 years and additional limit of $5 billion) would have the residual maturity of three years," RBI said.
Also, the terms and conditions for the scheme for FII investment in infrastructure debt and the scheme for non- resident investment in Infrastructure Development Funds (IDFs) have been further rationalised in terms of lock-in period and residual maturity.
Further, the conditions for investment by individual foreign investors have been relaxed in Mutual Funds.
RBI said that qualified foreign investors (QFIs) can now invest in those mutual fund (MF) schemes that hold at least 25% of their assets in infrastructure sector under the current $3 billion sub-limit for investment in mutual funds related to infrastructure.
The liberalisation measures for capital account transactions, which have come into operations with immediate effect, besides increasing foreign fund inflows into the country are also likely to check slide of rupee against the US dollar.
RBI has not been comfortable with the fast growth of gold loans, which led the regulator to tighten norms on banks' exposure and also bring down loan-to-value ratio
Mumbai: Under lens of the Reserve Bank of India, leading gold finance companies have decided to form a self-regulatory organisation (SRO) which will frame a fair business practices code for the industry, reports PTI.
The move is being spearheaded by industry leader Muthoot Finance's managing director George Alexander Muthoot and has Manappuram Finance, Muthoot Fincorp, Sriram Citi Union, and Kosamattam Financiers as members, among others.
“We feel that the RBI has not been comfortable with the fast growth of our industry, which led the regulator to tighten norms on banks' exposure to this industry in April and also bring down loan-to-value ratio," Muthoot told PTI from Kochi over the phone.
"We want to send out a message to the regulator that we are complying with all its regulations. We are giving them (RBI) time to understand our business model," he added.
Muthoot expressed hope that the proposed SRO, under the banner of the Association of Gold Loan Companies, will represent the sector better at the Reserve Bank of India (RBI).
The SRO will represent about 85% of gold loan portfolio, he added.
Muthoot said his company has seen its volume sliding by over 5% following RBI's tightening and said same would be case with other players.
This year, he is expecting a tempered growth of 10% to 25%. “But we expect the pace to pick up steam by Q3,” he said.
Muthoot Finance has also decided to curtail its expansion this year. The company which has 3,700 branches will be opening only 250-300 branches this year, Muthoot said, adding that he expects consolidation in the industry as general slowdown in volumes will hit the margins.
On fund raising, he said the company will not need much. “The focus will be on concentrating more on growth of existing branches, rather than adding more branches,” he said.
However, towards the later part of fiscal, the company will go in for some fund raising, primarily through an NCD issue of around Rs500 crore. Last fiscal, it had raised Rs1,500 crore three NCD issues, he said. Notably, the RBI has been tightening screws on the industry for quite some time.
While in late-March, the RBI tightened norms for gold loan NBFCs by asking them to increase their tier-I capital to 12 per cent and capped loans at 60 per cent of the market value of gold, in April, it had asked banks to reduce their exposure to gold loan NBFCs.
The move came as the RBI was concerned about rising gold imports, which touched $66.1 billion last fiscal against $40.5 billion in FY2011, widening the trade and current account deficit.
The RBI had also set up working group to suggest ways to deal with the industry.
While capping the LTV at 60%, the RBI had said, “The rapid growth of the gold loan segment, which grew 50% last fiscal, had increased risks to the banking system and retail investors.”
Accordingly, the RBI has directed that gold loan NBFCs having half their assets in gold should have a tier-I capital of 12% by April 2014. Further, these companies can not lend more than 60% of the value of gold jewellery.
The RBI is worried that since these companies lend 70%-75% of the value of gold, a fall in prices could destabilise the system.
The central bank has also banned these companies from lending against bullion, primary gold and gold coins, leaving just jewellery.
The RBI, in its annual policy had also asked banks to set up internal exposure limits for these NBFCs who have gold loans portfolio of over 50% of the total financial assets.
It also asked banks to reduce their exposure to a single NBFC, having gold loans to the extent of 50% or more of its total financial assets, from the existing 10% to 7.5%.
In the wake of huge spurt in gold imports and its impact on balance of payment, the Budget increased Customs duty on standard gold bars, gold coins of purity exceeding 99.5% and platinum from 2% to 4% apart from doubling customs on non-standard gold to 10%.
For FY2012, Muthoot Finance's total volume of gold under its custody rose 22% to 137 tonne from 112 tonne.
Besides disseminating the information on real-time basis to investors and others, the XBRL technology-based new system will also help SEBI itself as also other regulatory and investigative agencies in monitoring any irregularities
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) said it will set up a single platform to help companies report and disseminate mandatory regulatory filings, including financial statements, in the new XBRL-based format, reports PTI.
XBRL is a globally accepted standardised business reporting tool that enables easy dissection of bulk documents without delay.
"SEBI is in the process of setting up a SEBI Unified Platform for Electronic Reporting and Dissemination (SUPER-D), which will be a XBRL (eXtensible Business Reporting Language) technology based platform for reporting by listed companies, mutual funds and other SEBI registered intermediaries" it said in a statement.
It added that a tender process has already been initiated in order to set up the SUPER-D.
XBRL technology enables the computers read and divide the information provided in the filings under various heads and thus makes it easy to find any relevant details and to identify any irregularities.
The new system, called SUPER-D (SEBI Unified Platform for Electronic Reporting - Dissemination), is being developed in such a way that it is capable to manage simultaneous filing of 500 documents on normal days and have peak-period capacity to handle 15,000 simultaneous filings.
Besides disseminating the information on real-time basis to investors and others, the XBRL technology-based new system will also help SEBI itself as also other regulatory and investigative agencies in monitoring any irregularities in the affairs of companies and market intermediaries.
SEBI further said it has asked mutual funds to volunteer for XBRL filings.
"These XBRL filings will be in addition to the filings under the current system," it said.
Mutual funds and assets management companies can file reports like monthly cumulative report, percentage of assets under management from city clusters, ageing analysis of assets by AUM, number of branches of the AMCs, half yearly portfolio disclosures, deployment of funds in equity and debt schemes, and balance in load account.
"Till date, ten Mutual funds have joined in this pilot project of SEBI and have started XBRL filing of the specified reports with SEBI on voluntary basis," it said.
At present, BSE and NSE have a XBRL-based financial reporting platform for listed companies for all their filings and the system helps the investors get real-time access.