The net effect is that depositors lose more than the gains accruing to borrowers resulting in widening of the banks' margins
New Delhi: Led by State Bank of India (SBI), four more banks cut interest rates on loans and deposits up to 1%, following reduction in the short-term policy rates by Reserve Bank of India (RBI) last week, reports PTI.
While banks have tweaked rates differently, the net effect is that depositors lose more than the gains accruing to borrowers resulting in widening of the banks’ margins.
SBI, the country’s largest lender, slashed interest rates up to 1% on fixed deposits of all but one maturity.
With these changes, the peak rate on SBI fixed deposits have come down to 9% per annum.
On the other hand, it has reduced interest rates marginally by about 0.25%, that too only on car loans.
SBI chairman Pratip Chaudhuri said that the bank may not go in for cut in the minimum (base) lending rate. “Our base rate is already one of the lowest in the industry,” he told CNBC TV18.
Other banks, including Allahabad Bank, United Bank of India and Kotak Mahindra Bank have reduced the base rate by up to 0.25%.
SBI’s base rate stands at 10%. It is the benchmark rate below which a bank cannot lend.
Lakshmi Vilas Bank reduced its FD rates on select maturities by 0.25%.
Several PE investors have appealed to the ministry to bring them at par with foreign institutional investors (FIIs) as far as tax treatment is concerned
New Delhi: In order to attract foreign capital, the finance ministry may cut long-term capital gain tax from 20% to 10% on investments made by private equity (PE) funds into shares of unlisted companies, reports PTI.
Several PE investors have appealed to the ministry to bring them at par with foreign institutional investors (FIIs) as far as tax treatment is concerned.
“For PEs investing in unlisted securities currently they are charged higher rate of tax than FIIs. So they have requested to being them at par with FIIs. Let us see,” finance secretary RS Gujral told PTI.
As per the provisions of the Finance Bill, 2012, while FIIs pay a long-term capital gain tax of 10% for investment in unlisted securities, private equity (PE) investors pay 20%.
For listed securities, however, there is no tax on long-term capital gains.
Experts, however, said if the tax structure of the PEs is relaxed that would help them exit their investment in India without worrying much on the tax payout.
PE investors usually invest with a longer term, usually 5-8 year horizon, in start-ups and they prefer to exit their holding at the time of listing of the company.
However, volatile stock market conditions are delaying the listing plans of several companies and PEs are now going for private share sale to exit their holding.
The government has been taking steps to attract foreign capital both as foreign direct investment (FDI) and portfolio investment. These issues have assumed importance in view of the global financial problems which are impacting investments into the country.
The draft MFIs (Micro Finance Institutions - Development and Regulation) Act, 2011, circulated for public comments by the finance ministry has a provision that allows MFIs to collect small savings from Self Help Groups (SHGs) known as thrift
Mumbai: Reserve Bank of India (RBI) deputy governor Anand Sinha on Monday indicated the central bank was not in favour of allowing micro-finance institutions (MFIs) to take deposits from public, reports PTI.
“After all, whatever legislation passes, we have to work with that. But, RBI’s position has been that deposit-taking should be limited to banks,” he told reporters in reply to a question on whether MFIs should be allowed to take small deposits.
The draft Micro Finance Institutions (Development and Regulation) Act, 2011 circulated for public comments by the finance ministry has a provision that allows MFIs to collect small savings from Self Help Groups (SHGs) known as thrift.
Finance minister Pranab Mukherjee in his Budget speech had said the government proposed to introduce the Bill in the ongoing Budget Session.
Earlier also the government had introduced a Micro Financial Sector Bill in the Lower House of Parliament in March, 2007. However, it lapsed when the term of the 14th Lok Sabha ended in 2009.
Mr Sinha further said that MFIs will have to take care of issues like concentration risk, reduction of operational costs and corporate governance to overcome problems of the fledgling industry.
“Southern region has seen major concentration of MFIs, both in terms of borrowing and number of clients. I think, they have to go to other regions of the country in order to diversify,” he said.
He further said that MFIs must reduce the operational costs for long-term sustainability.
The deputy governor said MFIs have to balance between financial and social objectives and maintain appropriate corporate governance for customer protection.
The MFIs must measure and disclose performance apart from changing the governance practices, he added.
On Basel III norms, the deputy governor said earnings of banks are likely to come under pressure due to the higher capital requirements for the implementation of new global risk mechanism.
“There is going to be pressure on banks’ earnings, not only in India but across the world. That’s why, Basel-III implementation has been made longer, so that there will be least disruption”, he said.
“However, if you have to do the same activity with significantly higher capital, there will be pressure on return on equity (RoE),” he said adding the banks would have to increase productivity in order to protect their RoE.
Basel-III norms, proposed to be implemented from the beginning of 2013 till 2017, require the equity capital of a bank to be not less than 5.5% of risk-weighted loans, as per the draft guidelines issued by RBI.