Economy
Top bureaucrats take stock of economic situation

The prime minister has called for reversing the climate of pessimism and regeneration of “animal spirit” in the economy

New Delhi: The day after Indian prime minister Manmohan Singh called for reversing the mood of pessimism, top bureaucrats on Thursday took stock of the economic situation with secretaries of various ministries to firm steps for arresting the slowdown in growth, reports PTI.

"Cabinet secretary (Ajit Seth) took meeting of secretaries of economic ministries. We took stock of the current economic situation," a senior official said, after the meeting.

Among others, the meeting was attended by finance secretary RS Gujral, economic affairs secretary R Gopalan, commerce secretary SR Rao, industry secretary Saurabh Chandra and power secretary P Uma Shankar.

The meeting of top bureaucrats comes a day after the prime minister, who assumed charge of the finance ministry after Pranab Mukherjee quit to contest for the presidential election, has called for reversing the climate of pessimism and regeneration of "animal spirit" in the economy.

India's economic growth during 2011-12 slipped to nine-year low of 6.5% and the current fiscal it is not expected to do much better. The domestic currency too has depreciated sharply in the recent weeks going below Rs57 to a dollar.

The PM on Wednesday held meetings with key economic advisors including PMEAC chairman C Rangarajan, Planning Commission deputy chairman Montek Singh Ahluwalia and chief economic advisor Kaushik Basu.

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Will SEBI reintroduce entry load?

Media reports say that SEBI may be asked to reconsider the entry load ban, an arbitrary move made by SEBI in 2009 August

Within a day of taking over the responsibility as finance minister, prime minister Manmohan Singh yesterday urged senior ministry bureaucrats to "revive the animal spirits in the country's economy" (the same comment he had made in 1992 as the finance minister) and "reverse the climate of pessimism"- thereby making it clear that he means business. He also mentioned that "There are issues about the mutual funds industry which need to be resolved." It may just mean that the Securities and Exchange Board of India (SEBI) maybe asked to reintroduce the mutual fund entry load norms in a meeting that the finance ministry will organize with industry association and stakeholders from the mutual fund community and distributors on 2nd July according to media reports. With one single swipe in August 2009 and without much discussion, SEBI changed the mutual fund industry, for the worse.

A few months back the Association of Mutual Funds of India (AMFI) chairman HN Sinor charged that (SEBI) made serious a policy mistake of banning entry loads on mutual funds. (Read: Two and half years later, there are murmurs of SEBI bungling on the entry load ban) He said, "One mistake SEBI made was to implement the entry load ban in a cut-and-dry manner." Only Moneylife foresaw the mutual fund industry's decline, with distribution largely getting affected with this arbitrary move. (Mutal Fund turmoil: Can SEBI be held accountable?). This was just one of the many articles where Moneylife commented on the arbitrariness of SEBI's action when the mainstream media was either silent or supportive of SEBI's moves.

He further said, "We need to dispassionately review the (entry load ban) decision once again. We have to expand this industry, and for doing that if we have to bite the bullet, we should bite the bullet."

It's been almost three years since SEBI abolished entry load. Noticing a big drop in inflows, sometime ago SEBI decided to introduce a transaction fee. This too didn't go down well with distributors. According to a consulting firm, only 16% of distributors have opted for charging transaction fee. It may be remembered that the fund industry too was to blame for charging huge upfront costs to the unit holders including, foreign junkets, in order to sell funds. Instead of controlling these practices, SEBI has gone to the other extreme by banning upfront commissions and dozens of concomitant rules, which were hailed as pro-investor by the mainstream media, putting a halo around the head of CB Bhave when he retired. Will SEBI review the entry load ban now that the finance ministry has put pressure? Or will it come up with another half-baked scheme as UK Sinha did sometime last year?
 

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COMMENTS

MAYUR

4 years ago

I dont think, this move will help now.The damage has already been done b'cause Most of actively performing distributors have left the field and have switched to some other occupation.

Just Check with AMFI for distributor count in 2009 vis a vis distributor count today.

The most important problem of MF & Insurance industry is that, persons with no field sales experience are taking distribution-strategy decision.

So revival of entry load will not help immediately. IT will take atleast 5 - 10 years to recover this damage.

Economy & Nation Exclusive
HSBC likely to sell stake in Axis, Yes Bank

HSBC has 4.75% stake (1.9 crore shares) in Axis Bank, through HSBC IRIS Investments Mauritius. It also has 4.76% stake in Yes Bank and holds 1.67 crore shares in it through the Mauritius-based entity


New Delhi: UK-based HSBC is likely to sell stake in private sector lenders Axis Bank and Yes Bank as part of its global strategy and is understood to have appointed merchant bankers for the deals, reports PTI.
 
To be done through block deals by HSBC Securities, the two stake-sales could be worth about Rs2,430 crore at the prevailing market price of the India-based lenders.
 
HSBC has 4.75% stake amounting to 1.9 crore shares in Axis Bank through HSBC IRIS Investments Mauritius, as per the latest BSE filings available.
 
It also has 4.76% stake in Yes Bank and holds 1.67 crore shares in it through the Mauritius-based entity.
 
The global banking major is in the process of offloading stake in Axis and Yes Bank and has already appointed merchant bankers, according to sources.
 
When contacted, HSBC declined to comment on the issue.
 
In December 2003, HSBC had bought about 20% in Axis Bank (then UTI Bank) from private equity major CDC. The British bank bought the stake in Yes Bank in 2008.
 
In April, the Netherlands-based Rabobank sold about 3.4% stake in Yes Bank for about Rs 453 crore. Rabobank sold 1.26 crore shares for Rs357.03 apiece through an open market transactions.
 
Of this, Bajaj Allianz Life insurance picked up 25.2 lakh shares, while Citigroup Global Markets Mauritius picked up 22 lakh shares at Rs357 per unit, according to the BSE data.
 
Rabobank owned about 1.67 crore shares or 4.73% stake in Yes Bank at the end of 31 March 2012.
 
In 2010, Rabobank had sold about 11% in Yes Bank and had thus reduced its stake in Yes Bank from around 15.9% to 4.9%. Rabobank has been reducing its stake in Yes Bank as it plans to enter banking space on its own in the country.
 
Earlier this year, Citigroup sold its stake in housing finance major HDFC for nearly Rs10,000 crore ($1.9 billion), while US private equity major Warburg Pincus offloaded its stake in Kotak Mahindra Bank for about Rs1,350 crore ($274 million).

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