Fixed Income
RBI to launch inflation bonds for attracting household savings on 4th June

The first tranche of the IIBs-2013-14 for Rs1,000-Rs2,000 crore will be issued on 4th June, and the maturity period of these bonds will be 10 years

The Reserve Bank of India (RBI) today announced it will launch inflation-linked bonds every month, starting 4th June, to attract household savings of up to Rs15,000 crore this fiscal so as to discourage investments in gold.

“RBI, in consultation with the Government of India, has decided to launch Inflation indexed Bonds (IIBs),” the central bank said in statement.

The first tranche of the IIBs-2013-14 for Rs1,000-Rs2,000 crore will be issued on 4th June, it said, adding that the maturity period of these bonds will be 10 years. The total issue size will be Rs12,000-Rs15,000 crore in 2013-14.

After the first tranche, bonds will be issued on last Tuesday of every month.

While the first series of the bonds will be open for all class of investors, the second series issue—beginning October—will be reserved exclusively for retail investors.

RBI said the bonds are pursuant to the Budget proposal to “introduce instruments that will protect savings of poor and middle classes from inflation and incentives household sector to save in financial instruments rather than buy gold”.

Both the government as well as the RBI are concerned over the rising gold imports as its putting pressure on current account deficit (CAD), which widened to historic high of 6.7% in third quarter of 2012-13.

Gold and silver imports last month shot up 138%, year-on-year, to $7.5 billion.

Announcement of the bonds to discourage investments in gold is the second major move by RBI in the last three days. On Monday, it had placed restrictions on banks to import gold.

Giving details of the for first series of IIBs, RBI said while the coupon rate (interest rate) will remain fixed, the principal amount invested in the bonds will be linked to inflation based on Wholesale Price Index (WPI).




4 years ago

To the mango man, what matters the most is the post tax return

Sensex, Nifty on a fresh uptrend: Wednesday Closing Report

A fresh upmove has started. As a long as the indices don’t close below any previous day’s low, the market is headed higher


The market closed at its highest level since January 2011 after the RBI governor on Tuesday rekindled hopes of a cut in interest rates going ahead, on the decline in headline inflation. A fresh upmove has started. As a long as the indices don’t close below any previous day’s low, the market is headed higher. The National Stock Exchange (NSE) reported a volume of 69.48 crore shares and advance-decline ratio of 930:472.

The market witnessed a firm opening on hopes that the easing of the headline inflation might prompt the Reserve Bank of India (RBI) will cut rates in its policy meeting. Asian markets were higher in morning trade as the fall in the value of the yen boosted prospects for exporters in the region. Overnight US indices scaled fresh highs on speculations that the Federal Reserve will not withdraw its support to the economy.

The Nifty opened 24 points higher at 6,019 and the Sensex started the day at 19,798, a gain of 76 points over its previous close. The opening figures on both benchmarks were also their intraday lows.

Buying support from rate-sensitive sectors led the market to a higher trajectory as trade progressed. Gains in banking, realty, auto and capital goods led the benchmarks on a northward journey in noon trade.

The benchmarks continued to rise in the late session and hit their highs in the last half hour of trade as across-the-board buying led all sectoral gauges in the positive. The Nifty touched 6,157 and the Sensex climbed to 20,242 at their respective highs.

The market settled near their highs as hopes of a rate cut by the RBI gained momentum as governor D Subbarao on Tuesday remarked that he would take note of the fall in the inflation rate for future policy decisions.

The Nifty climbed 151 points (2.52%) to 6,147 and the Sensex surged 491 points (2.49%) to close the trading session at 20,213.

While the broader indices also closed in the positive, they underperformed the Sensex, as the BSE Mid-cap index climbed 1.58% and the BSE Small-cap index advanced 0.98%.

The broad-based rally saw all sectoral indices closing higher. The top gainers were BSE Realty (up 4.04%); BSE Bankex (up 3.95%); BSE Capital Goods (up 3%); BSE PSU (up 2.36%) and BSE Auto (up 2.29%).

Among the 30 stocks on the Sensex, 29 settled higher. The key gainers were HDFC (up 4.70%); State Bank of India (up 4.07%); Larsen & Toubro (up 3.85%); ICICI Bank (up 3.80%) and HDFC Bank (up 3.72%). Wipro (down 0.53%) was the lone loser.

The top two A Group gainers on the BSE were—UCO Bank (up 8.80%) and Punjab National Bank (up 7.49%).

The top two A Group losers on the BSE were—Amara Raja Batteries (down 2.85%) and Gujarat State Petronet (down 1.75%).

The top two B Group gainers on the BSE were—Wanbury (up 20%) and Nectar Lifesciences (up 19.96%).

The top two B Group losers on the BSE were—Remi Metals Gujarat (down 19.27%) and Emmsons International (down 18.44%).

Of the 50 stocks on the Nifty, 47 ended in the in the green. The main gainers were Punjab National Bank (up 7.60%); Reliance Infrastructure (up 5.22%); IndusInd Bank (up 5.14%); Kotak Mahindra Bank (up 5.12%) and DLF (up 4.78%). The losers were Power Grid Corporation (down 0.74%); UltraTech Cement Co (down 0.51%) and Cairn India (down 0.08%).

Markets across Asia, with the exception of the KLSE Composite index, closed higher with the Nikkei 225 rising to a five-and-half year high on a declining yen. The rest of the Asian pack closed with modest gains as concerns about the global recovery persisted.

The Shanghai Composite rose 0.35%; the Hang Seng gained 0.50%; the Jakarta Composite added 0.16%; the Nikkei 225 jumped 2.29%; the Straits Times rose 0.26%; the Seoul Composite gained 0.12% and the Taiwan Weighted surged 0.81%.  Bucking the trend, the KLSE Composite lost 0.30%.

At the time of writing, the key European indices were trading higher as Bank of England governor Mervyn King that a recovery for the UK economy was within reach. At the time, the US stock futures were mixed with a positive bias.

Back home, inflows from foreign institutional investors in the equities segment on Tuesday were offset by withdrawals by domestic institutional investors. While FIIs pumped in funds totalling Rs420.99 crore, FIIs pulled out Rs412.66 crore from stocks.

Glenmark Pharmaceuticals’ US subsidiary Glenmark Generics Inc has received approval from the US health regulator to sell generic versions of AstraZeneca's Zomig and Zomig ZMT tablets, a migraine drug, in the American market. According to IMS Health, for the 12-month period ended December 2012, the products garnered annual sales of $176 million. Glenmark Pharma gained 2.53% to close at Rs562.50 on the NSE.

Tata Communications today said that it will delist its American Depository Shares from the New York Stock Exchange, due to low trading volumes. The decision to terminate its ADR programme was aided by new public shareholding norms by the Indian market regulator, SEBI. The guidelines dictate companies listed on Indian bourses to offload at least 25% of its stake to its shareholders. Tata Communications rose 0.78% to 239.20 on the NSE.

Tata Chemicals today said it has partnered with Institute of Chemical Technology (ICT) for creating an endowment chair with a donation of Rs3.5 crore to promote research in chemical engineering. The two entities would collaborate on several new initiatives such as conducting R&D programmes with a focus on sustainability, green chemistry, undertaking projects at ICT based on chemical technology related challenges. The stock advanced 0.62% to close at Rs324 on the NSE.


Deliberate Obfuscation

Savers will continue to lose money in chain money schemes because the regulators are pretending not to understand the core issues

Over the past year, the Securities & Exchange Board of India’s (SEBI) war with the Sahara group has, at least in the public eye, imbued the market regulator with a sense of heroism. SEBI has gone after Sahara with remarkable tenacity—but only on the issue of synthetic convertible debentures issued by two Sahara group companies; it has also made a push to check MPS Greenery and sundry goat-rearing and emu farming frauds, categorised as ‘collective investment schemes’. Once the collapse of Saradha chit fund blew up into a major scandal, SEBI rushed to issue a flurry of orders against the promoters, after pussyfooting on it for three years. 
The lack of clarity over regulation of chit funds and chain schemes is clear from a reply to the Rajya Sabha by Sachin Pilot, minister of state for corporate affairs. On 4th March, Mr Pilot said that these scheme were liable for action under The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (the Act) administered by the ministry of finance (department of financial services) through the state governments; those that can be classified as ‘collective investment schemes’ would come under SEBI.
An Act, administered by the finance ministry through state governments (read local police) to regulate schemes, which may or may not be registered under the Companies Act, but the minister of corporate affairs answers questions about it? What can be more confusing? There is more.
The finance ministry had also set up an inter-ministerial group comprising RBI, SEBI, MCA, ministry of consumer affairs and the central economic intelligence bureau to prepare draft model rules to give teeth to the Act of 1978. The draft—‘The Money Circulation Scheme (Banning) Rules, 2012—has finally been put in the public domain for discussion, after the Saradha debacle. 
Mr Pilot, having identified broad regulatory responsibility for pyramid schemes said, he had “written to the Finance Minister to increase surveillance by RBI over unauthorised NBFCs (Non Banking Financial Companies).” Finally, he said that his ministry had initiated action against 87 companies that had floated ‘fraudulent investment schemes’. There is no clarity on how these ‘fraudulent’ schemes were identified, but Mr Pilot says, various state governments had been asked to initiate ‘vigorous’ action under the Prize Chits Act. 
Mr Pilot’s answer is a succinct iteration of the confused regulation of these dubious money circulation schemes. I suspect that the confusion is deliberate because it allows all ministries and regulators to evade direct responsibility for the frequent chain scheme collapses that destroy people’s savings. The SFIO (in 2012) and SEBI chairman UK Sinha (in recent weeks) had another idea. They want a central regulatory agency for implementing the Act. This is probably because the draft model rules leave the flawed regulatory structure untouched, but only update various definitions to try and include disguised money circulation schemes (any scheme where returns depend on enrolling new subscribers in various pre-specified formats) that pretend to sell a product or service.  
The demand for an independent regulator is another piece of obfuscation. The Andhra police, led by DIG VC Sajjanar, the lone crusader against chain money schemes, has once again scored by arresting the founder of NMart, a chain money scheme that initially proliferated in Gujarat. There is nothing to stop the government or its agencies from acting against highly publicised schemes, such as SpeakAsia or QNET or a Rose Valley or Alchemist, long before they collapse. 
As we write, a convicted Russian fraudster, Sergey Mavrodi, is luring tens of thousands of people into a fictional cult with its own fictional currency, but can be bought only for Rs5,000 deposited in a member’s account. A quick look at the hysterical comments by members of this cult to Moneylife’s exposé of this fraud ( reveals how dangerous this is. The government has refused to act even though EAS Sarma, a former Union secretary and a person of unimpeachable integrity, has written to every ministry and regulator as well as the prime minister about the dangers of these schemes. Mr Sarma pointed out that, far from stopping these dubious schemes, the Foreign Investment Promotion Board (FIPB) was planning to allow foreign direct investment in MLM companies. Global MLMs, like Amway, Avon, Tupperware and others, which fall foul of the Act, entered India in the 1990s through FIPB approval which apparently operates independently of all other laws!
Ironically, the only specific response that Mr Sarma has received so far is from SEBI which, in August 2012, told him, “The subject matter of complaint does not fall under purview of SEBI. You are requested to take up your complaint with appropriate authority.” Yes, the same SEBI which has issued several hurried orders about Saradha chit fund, after its collapse and whose officers are under a cloud, after Saradha promoter Sudipta Sen told the police that he had paid large sums of money to Sajjan Agarwala, an intermediary, to buy up the SEBI officials. SEBI, in turn, claims that its officials were manhandled when they tried to inspect the then-powerful Saradha group in 2012. But do recall that CBI had arrested a SEBI general manager Rajesh Pratap Singh in Kolkata for taking a Rs25-lakh bribe from Gautam Kundu, chairman of another notorious pyramid scheme Rose Valley.
Clearly, we do not need yet another regulator. We need the finance ministry and MCA to show the gumption to act decisively to squash pyramid schemes. Many of them are not even registered in India or come under the MCA’s purview but it is easy to initiate action on them, as Mr Sajjanar has repeatedly done, over the past decade. We also need a clear policy about raising public deposits. On page 20, our columnist R Balakrishnan points out how India is one of the rare countries that allows all kinds of entities—from builders to manufacturing companies to jewellers—to raise public deposits. 
Consider this. The blue-chip Titan Industries had a gold deposit scheme, called Annutra, with over 2.5 million investors. They deposit a small amount each month for 11 months; the 12th instalment is paid by the company (interest) and the scheme has to be redeemed by purchasing gold jewellery. Now, Titan is a rock solid blue-chip company—but the government is allowing it to run a tax-free recurring deposit scheme, with exit restrictions. 
What’s worse, jewellers in every street are offering similar schemes to lure people. So long as gold prices moved steadily northward, everybody was happy. What happens if this cheerful boat is rocked by turbulence in gold prices? What are the tax laws that govern these deposits? There are no answers. Probably because the wives and daughters of our netas and babus are all invested in such schemes. 
Last week, Sumit Bhatia, a Moneylife reader, wrote to say that Big Bazaar had advertised a scheme calling for deposits of Rs10,000 from the public and would offer them goods worth Rs12,000 in a year, with some caveats. He asks, doesn’t this amount to deposit-taking? Shouldn’t it be regulated by RBI? Who governs this fund collection by a company already burdened by heavy debt from banks? And, if a citizen can spot this, aren’t regulators sleeping?
This is really the key issue. While regulators are looking to fine-tune the already regulated legal financial sector (banks, insurance, finance companies, mutual funds and broking companies), they are completely unconcerned about the ever-expanding shadow financial sector that is allowed to have a free run for savers’ wallets, especially those of the poorest.


You may also want to read...




R Balakrishnan

4 years ago

Our governments seem to encourage financial fraud at every level. The lack of deterrent punishment is one of the prime drivers of financial frauds. And regulators pretend to chase the crooks after the money has vanished. Wonder if things will ever change?

shailesh gandhi

4 years ago

I think you are actually exposing muddled thinking in the Government as to who should be responsible. I hope your continuous and committed efforts will bring results.
I agree we do not need more regulators.

nagesh kini

4 years ago

The multiplicity of Regulators, with the MOF and State Governments joining the band wagon makes money multiplying schemes a game of ducks and drakes. This must be put an end to with a single more comprehensive enactment encompassing collecting of monies or deposits by any name called. The present lack of clarity has been exploited by the unscrupulous operators that is why we have blade companies in Kerala and the Saradhas and others a free hand to cheat with impunity.

We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)