SEBI removes ban related to promoters of Bank of Rajasthan

“I have noted that there is no allegation as to any price or volume manipulation by the promoters. Therefore, I am of the opinion that purely from a securities market point of view, the severity of the offence could be considered not very grave,” SEBI order on Bank of Rajasthan promoters

The Securities and Exchange Board of India (SEBI) has removed the ban on 100 entities related to the promoters of Bank of Rajasthan (BoR) from dealing in the securities market. SEBI had banned these entities for allegedly violating a number of rules, including the takeover norms, and indulging in fraudulent trade practices.

SEBI had banned these entities saying that the promoters had indicated that they were reducing their stake in Bank of Rajasthan from 44.71% to 28.61% to comply with an RBI directive. Instead, the Tayals had actually increased their stake to 55%.

“I am of the opinion that such an offence (holding in the bank being camouflaged) would have been considered as very serious or fatal if the wrongful disclosures would have led genuine investors into trades that would eventually expose them to much greater risk.

“I have noted that there is no allegation as to any price or volume manipulation by the promoters. Therefore, I am of the opinion that purely from a securities market point of view, the severity of the offence could be considered not very grave,” said Mr Prashant Saran, whole-time member, SEBI, in his order.

“It would be reasonable to assume that on the basis of the material available on record, there is no indication of a likelihood that the entities shall indulge again in wrongful disclosures of their holdings of which they have been charged with in the first place,” SEBI said further in its order.

BoR had been amalgamated with ICICI Bank. The BoR shares have been swapped for ICICI Bank shares.

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RBI to continue tight liquidity stance till inflation eases

Tight liquidity situation in the system had forced banks to borrow over Rs1.90 trillion from the RBI

The Reserve Bank of India (RBI) said its tight liquidity stance would continue as long as inflation is above its comfort level.

"If inflation is high above the comfort level, RBI's general effort will be to keep the liquidity tight," RBI deputy governor KC Chakrabarty told reporters on the sidelines of SKOCH summit in New Delhi.

Wholesale price-based inflation, which remained high during most of 2011, has started showing signs of moderation and was measured at 6.95% in February.
Tight liquidity situation in the system had forced banks to borrow over Rs1.90 trillion from the RBI.

Notably, banks have been borrowing over Rs1 trillion from the central bank on an average per day basis for the past two months. To ease the tight liquidity pressure, the central bank has reduced cash reserve ratio—the portion of deposits banks are required to keep with the RBI—by a total of 1.25% in two separate tranches in its January and March policy review this fiscal year so far. These steps infused a total Rs80,000 crore into the banking system. Asked if excise duty increase would lead to increase in inflation, he said, “if we can use technology and improve the work system processes, absorb the cost then there would not be inflation”.

The finance ministry and the RBI are likely to finalise the market borrowing programme for the first half of the next financial year soon. The government borrows funds from the market to bridge revenue-expenditure gap and also roll over the past debts which mature for repayment. While unveiling the Budget proposals for 2012-13, Finance Minister Pranab Mukherjee had said that the net market borrowings for the fiscal would be Rs4.79 trillion, up from Rs4.36 trillion estimated in the current fiscal. Last year the government had exceeded the budgeted borrowing target by over Rs92,000 crore as high subsidy expenditure led to overshooting of government finances.

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Centre to borrow Rs3.79 trillion in first half of next fiscal

For 2012-13, the government has pegged the fiscal deficit at Rs5.13 trillion or 5.1% of the GDP

The Centre said it would borrow Rs3.79 trillion from the market in the first half of the next fiscal, which would be over 65% of the total amount that it wanted to raise from borrowings during 2012-13.

“We have budgeted the fiscal deficit at Rs5.13 trillion. In the first half, gross borrowing will be Rs.3.79 trillion,” department of economic affairs secretary, R Gopalan told reporters after a meeting to decide the borrowing calendar for the next fiscal.

The meeting was attended by RBI deputy governor HR Khan and senior officials of the Finance Ministry. The gross borrowing during the first half will be 65% of the total planned during the next fiscal.

Mr Gopalan said, “We had some problem about IT refund last year. That we have taken care this year and we have also planned according to what will be the inflow and expenditure pattern. We think this will be a reasonable way of aligning with the reality of the cash requirement.”

For 2012-13, the government has pegged the fiscal deficit at Rs5.13 trillion or 5.1% of the GDP.

During 2011-12, the government borrowed over Rs5.10 trillion from the market. The borrowing had exceeded the budgeted borrowing target by over Rs92,000 crore as high subsidy expenditure led to overshooting of government finances.
Pinning hope of increase in small savings collection, he said borrowing could come down if it improves.

“If my small savings collection improves, it will definitely be (borrowing will come down from the Budgeted level),” he said.

“Small savings rates have been revised upwards. We hope that repo rate will start coming down because of lower inflation. Once that happens and with the rate of small savings, it is a possibility that more amount flow into the small savings and to that extent general borrowing will be less,” Mr Gopalan said.

On the tight liquidity scenario, Mr. Gopalan said, “OMO (open market operation) is the RBI's decision. As far as liquidity stress is concerned, the RBI is monitoring it closely.”

“As and when they perceive stress in liquidity, they will keep on taking necessary step,” he said.

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