YV Reddy calls for Tobin tax again

Former RBI governor YV Reddy said, “Since currency holders are mostly the market intermediaries, there is an element of volume play in the market. Since higher volume brings in higher fees, we need to look into this and introduce banking transaction charges or Tobin tax to curb this volatility”

Mumbai: Former Reserve Bank of India (RBI) governor YV Reddy on Wednesday called for taxing banks saying such a step can curb volatility in the entire financial markets, especially in the currency segment, reports PTI.

“Tobin tax should be imposed to control currency volatility as there is an element of incentives behind these wild fluctuations in the forex markets,” Mr Reddy told reporters on the sidelines of a meet on the financial stability organised by the RBI set-up Centre for Advance Financial Research and Learning (Cafral) and the Bank for International Settlement (BIS) here.

Explaining further, he said, “Since currency holders are mostly the market intermediaries, there is an element of volume play in the market. Since higher volume brings in higher fees, we need to look into this and introduce banking transaction charges or Tobin tax to curb this volatility.”

The former central banker is credited with firmly anchoring the domestic banking system from the 2008 global financial meltdown.

Speaking to reporters, former IMF deputy managing director John Lipsky also supported the view saying taxing banks can help curb the irregularities in the system.

Ever since the 2008 crisis, Mr Reddy has been a vocal critic of the way banks are being run and has been calling for more prudential steps to curb mal practices in the system. He also called for simpler financial products.

The last time Mr Reddy had called such a tax was way back in 2005, when he was at the helm of the RBI. His statement then had resulted in markets getting into a free-fall and was roundly criticised by all market participants.

In his 2005 speech, the concept was not in acceptance in global policy circles. But he had underscored the need to constantly revisit the relevance of the objectives, desirability and the feasibility of Tobin tax.

He had said the tax could be applicable not only to currency markets, but also to other markets, particularly in the aftermath of the global financial crisis.

The tax on cross border transactions was named after its original proponent American economist James Tobin, who in the 1970s, had argued that a tax on short-term capital flows would make exchange rates reflect long-term fundamentals relative to short-term expectations and risks, to some extent.

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IRDA hints at curbs on NAV-based products

“The high guaranteed NAV products can be misunderstood and it requires regulatory call soon. We cannot keep it hanging for long,” IRDA chairman J Hari Narayan said

Mumbai: The insurance regulator Insurance Regulatory and Development Authority (IRDA) on Wednesday said it was examining the high-guaranteed net asset value (NAV) products and will take a decision on them soon, reports PTI.

“The high guaranteed NAV products can be misunderstood and it requires regulatory call soon. We cannot keep it hanging for long,” IRDA chairman J Hari Narayan said here on the sidelines of a CII Insurance Summit.

When asked about the expected time-frame for the non-life IPO guidelines, he said, “The norms for non-life will come out shortly.” 

Earlier in June, the regulator had issued draft IPO norms for life insurers. The Securities and Exchange Board of India (SEBI) has already finalised the guidelines, however, there is some technical work left after which the final norms will be out soon, Mr Narayan said.

Replying to a query on de-tariffing the third party motor pool, Mr Narayan said there are no immediate plans for it.

“We don't have any immediate plans to de-tariff the third party motor pool,” he said.

Highlighting the importance of increasing the penetration of micro-insurance products, Mr Narayan said, even as the industry has done excellent work in this segment, there is a need for continuity of transactions as at present there are only annual products. 

There is also a lack of efficient delivery of the products by the industry and hence the rural and social sector obligations may suffer, he added.

About pension products, he said, most of them were financial accumulation offerings.

“When we sell a pension product it should be that.

However, the industry should also have financial accumulative products designed for the young people,” Mr Narayan said.

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SEBI asked to probe charges that NSE harming investors’ interests

Accusing NSE of having issued some circulars deliberately to favour stock brokers, in violation of SEBI rules and guidelines, the Investors Protection Group plea had sought the court’s directions to SEBI to probe the issuance of those circulars

New Delhi: Stock market watchdog Securities and Exchange Board of India (SEBI) was on Wednesday asked by the Delhi High Court to examine an investor group’s allegation that the National Stock Exchange (NSE) was acting against investors to protect stock brokers’ interests, reports PTI.

“The issue raised by the petitioner needs serious consideration by SEBI,” said a bench of acting chief justice AK Sikri and justice Rajiv Sahai Endlaw, disposing a petition by Investors Protection Group (IPG), a group of investors.

Accusing NSE of having issued some circulars deliberately to favour stock brokers, in violation of SEBI rules and guidelines, the IPG plea had sought the court’s directions to SEBI to probe the issuance of those circulars.

The investors also accused NSE of providing information to investors/clients only after they are ordered to do so by an arbitration award.

The group further alleged NSE is allowing brokers to make agreements on their own without mandatory signature of the clients required at the time of registration.

The investors group also alleged SEBI was shirking its responsibility and was not ensuring proper implementation of directions, guidelines, bye-laws for protection of investors at large and not regulating the market as required for the smooth running of financial institution.

It is also not taking appropriate steps for the protection of the small investors, the IPG plea added.

It also alleged the regulator and NSE are acting in collusion to protect the interests of stock brokers.

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