If reports are to be believed, this is what is recommended by SEBI to the Finance Ministry. It is likely that the RBI and the Government may also be veering round to the same view. What triggered this proposal?
SEBI is uncomfortable with MF industry’s unhealthy dependence on short-term funds from corporates. Though this helps fund houses grow their assets and boost valuations, policymakers are worried about the systemic implications of any swift outflow of such institutional funds that could hobble some of the fund houses. This was evident during the secondhalf of 2008, when the Reserve Bank of India (RBI) had to keep liquidity support open to help MFs meet their redemption obligations.
RBI has also been unhappy at the way banks have been parking their surplus with MFs, which in turn finds its way back to banks. The central bank has nudged banks to restrict their investments in MFs.
Any move, either to do away with the tax benefits or to tweak the tax rates, could hurt the local MF industry whose growth is linked to the flow of funds from corporates. Over 50% of the money that Indian MFs attract for their debt schemes comes from corporate treasuries and banks. According to latest data, the assets under management of the Indian MF industry are a little under Rs 7-lakh crore.
While RBI's suggestion to banks -- made in the context of teaser loans being offered -- about teaser loans in unexceptionable, it is wrong in interfering in pricing decisions of banks in asking them to lend at the same rate to the old and new customers alike. In this context, the following suggestions deserve a close look:
One, urge caution in lending, as the RBI deputy governor has already done.
Two, ensure more transparency so that borrowers know what they are getting into — it can tell banks to incorporate an illustrative example in the loan document so that the implications become plain to customers.
Three, encourage financial literacy so that customers cannot be taken for a ride so easily. Four, keep a tab on the level of non-performing assets (NPAs) and act against those banks whose NPAs start flashing red.
Five, and most important of all perhaps, address the cause rather than the symptom of the disease: excess liquidity in the system that is forcing banks to push credit by any means.
Every major policy decision in the country goes through a one to three-year cycle of Pota: proposition, opposition, treaty consensus and action. Many of the key reforms are now moving towards the action phase. Five key measures that are likely to move to the ‘action’ stage in 2010-11 are the goods and services tax system, consolidation of public sector deficit, meaningful steps towards divestment of government stake in state-owned enterprises, acceleration in infrastructure spending, particularly in roads, and direct tax reforms.
The current system taxes production whereas the GST will aim to tax consumption. Indeed, the current law levies taxes on movement of goods from one state to another — effectively creating borders within borders. It distorts the allocation of resources and inhibits productivity growth. The transition to GST will be an important milestone from a macro perspective.
Since the formation in May 2004 of the coalition government led by the United Progressive Alliance, the pace of divestment in state-owned enterprises has been extremely slow. The total proceeds from divestments during the five years ended March 31, 2009, were just $3.1 billion.
The value of government stake in listed state-owned enterprises is estimated to be at about $320 billion. If we include the unlisted companies, the total value would be about $460 billion.
Denis Ndiso of Kenya clinched his first marathon title with an impressive timing of 2:12:34 while Bizunesh Mohammed led an Ethiopian clean sweep of top three slots among women in the $310,000 Standard Chartered Mumbai Marathon.
The second spot among men was taken by Ethiopian Siraj Gena who clocked 2hrs 13mins 58secs. He was followed by another Kenyan Samson Limareng (2:24:24) at the third place.
The women’s race became a two-way battle between winner Bizunesh Mohammed (2:31:09) of Ethiopia and her compatriot Haile Kebebush (2:31:11) — the defending champion, with the former surging ahead only in the last 100 metres.
Another Ethiopian Azalech Masrecha (2:32:12) finished third.
It is a Bengali term used to denote the new class of 'gentlefolk' who arose during colonial times (approximately 1757 to 1947) in Bengal. It is still used to indicate members of the upper middle and middle classes of Bengal.
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eg: If the pun was intended, then the company deserves to be commended with at least a smirk: what could be better for both British shopper and shop than pounds dropping — transmogrified, from the weighing scales into the till?