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No beating about the bush.
With easy access, large players oversubscribed IRFC’s bond issue within a few hours, leaving small and individual players high and dry
Indian Railway Finance Corp’s (IRFC) first tranche of a 5-year tax-free bond issue carrying an interest rate of 6% has reportedly been fully subscribed within two hours of its announcement. While the issue was easily accessible to larger players, smaller retail investors and brokers could not lay their hands even on a single bond.
Earlier this month, the Central Board of Direct Taxes (CBDT) permitted IRFC to issue tax-free, non-convertible bonds worth Rs5,000 crore carrying an interest rate in the range of 6.5% to 7.25% per annum, by 31 March 2010. Interest earned from these bonds is exempted from tax under Section 10 of the Income-tax Act, 1961. CBDT said that IRFC would have to issue Railway Bonds at Rs1,000 each for the public or Rs1 lakh each in other cases, including private placements. IRFC was also given a flexibility to peg the coupon rate of 6.5% to 7.25% per annum depending upon the size and tenor of the tranche.
“There is no transparency in these bond issues. Only large players pump in their investors’ money in such bond issues. It is almost like a private placement. The brokerage involved in this issue is only one basis point. The logistics were also formulated in such a way that it discouraged the retail investor. If I have to send the application form and get it signed from my customer it will at least take two hours. So there is no question of him getting a share of the issue,” said an independent financial advisor.
The CBDT has also permitted the National Bank of Agriculture and Rural Development (NABARD) to issue 9.52 million (10-year) zero-coupon Bhavishya Nirman bonds by March-end with a maturity value of Rs20,000 each.
Despite a more-than-expected hike in the Cash Reserve Ratio (CRR), banks today ruled out any immediate hike in lending rates
Retail and corporate borrowers can breathe easy as bankers today said that an immediate hike in lending rates is unlikely even as the RBI tightened money supply by raising the CRR by 75 basis points, reports PTI.
"There may not be an immediate hike in the lending rates as liquidity at the moment is sufficient. We need to see how the liquidity conditions pan out. Going forward, as the credit off-take picks up, there may be an increase in rates," State Bank of India’s chief financial officer S S Ranjan told PTI.
IDBI Bank director Sushil Munhot echoed his sentiments. "I doubt if there would be a hike in interest rates immediately as there is enough liquidity in the system,” he said.
According to Corporation Bank executive director Asit Pal, there would not be any change in prime lending rate as there is sufficient liquidity in the system and credit off-take is also muted at this point of time. However, Mr Pal said that there could be some spike in inter-bank call rate.
Shubhada Rao, chief economist at Yes Bank, said that rate hikes would depend on the overall growth dynamics. "Rate hikes are unlikely in the immediate horizon as economic growth is still on the agenda. I don't see banks upping their interest rates—at least, not yet," Mr Rao said, adding that liquidity was comfortable and would remain comfortable even after the two-tranche CRR hike announced today.
In its third quarter monetary policy review, the RBI raised CRR by 75 basis points to 5.75% to mop up Rs36,000 crore from the system. However, the apex bank retained short-term lending and borrowing rates at 4.75% and 3.25%, respectively.
The steel ministry had expressed concerns on increase in steel prices by domestic firms, including SAIL and Tata Steel, which own captive reserves of iron ore and coking coal
State-run Steel Authority of India Ltd (SAIL) on Thursday said that it may cut prices of some of its products in the near future, reports PTI. The company last week had raised prices of flat and long products by Rs1,500.
"Since long steel product prices have gone up to a certain level, there may be some correction in the category in near future," SAIL chairman SK Roongta said when asked if the company will revise prices of its products soon.
Long steel products are mainly consumed by construction and infrastructure sectors.
It is learnt that the steel ministry had also expressed concerns on increase in steel prices by domestic firms, including SAIL and Tata Steel, which own captive reserves of iron ore and coking coal.
Many steel companies had cited increase in input cost besides the demand surge, for the price increase. Iron ore prices, which had fallen below $50 a tonne last year, are hovering at $100 a tonne at present.
However, Mr Roongta said, "Input cost does not determine steel prices. It’s market fundamentals which decide prices."
On prices of flat steel products, which are primarily consumed by automobile and consumer durables industries, he said, "Prices are governed by international trends and international prices are rising."