29.03.2010

Politics & the Nation

• On cash/coupon subsidies
• Here is an excellent write up that takes a critical look at the proposed cash/coupon subsidies. Very good one. A must read.

Finance & Economy

• Tatas and Birlas may not see their banking ambitions fulfilled
• The government has reportedly told the Reserve Bank of India (RBI) that the norms for approval of new banking licences could be based mainly on the existing policy framework for ownership of private banks, smothering the hopes of large local business houses keen on promoting and running banks.
• Finance minister Pranab Mukherjee announced in this year’s Budget that RBI was considering granting additional banking licences to private sector players and non-banking finance companies, if they fulfilled certain norms.
• The government had reportedly told the RBI that the existing rules on new licences for private banks could continue to apply.
• The Indian central bank’s ownership norms place a premium on diversified ownership in local private banks. They specify that the shareholding by an individual or group of related entities has to be capped at 10%, making it difficult for large industrial houses to own majority stakes in banks.
• The norms do provide for a higher shareholding by promoters when new licences are issued for private banks, but on the condition that the holding would be reduced to 10% over a timeframe which is supposed to be three years.
• BTW do you know that there are 170 banks with about 81,000 branches in India?
• The last time RBI issued licences to over half-adozen entities was over 15 years ago. Subsequently, two more banks, YES Bank and Kotak Bank, were allowed. The last new bank was by way of a legislative change, enabling an old development finance institution, IDBI, to convert itself into a bank. From the last lot — the most successful were the ones promoted by institutions such as HDFC Bank and UTI Bank, later christened as Axis Bank.
• The government now appears to be veering around to the view that consolidation and extension of financial services could run in parallel.
• Interesting snippets on solar power scene
• Solar Thermal Federation of India (STFI), is the newly-formed industry body for solar power.
• It feels India is likely to miss the official target of having in place 20 million square metres of collector area by 2022. It adds that 18.7 million sq m would be a more realistic target.
• Nationally the installed-capacity of collectors is already 3.5 million sq m.
• China has smartly overtaken the US in sheer investment in the renewable energy sector. China's latest estimate of investment in green technology is $34.5 billion, twice that of the US.
• Two of the important measures suggested for promoting solar power in India:
• Specifically, we need to boost demand for solar power so as to increase energy supply, improve efficiency and cut down costs with economies of scale.
• Bank finance for solar power products could be brought under priority sector lending.
• What are the reasons for the lack of investor interest in profit making PSUs?
• Why are retail investors wary of putting their hard earned money in these companies?
• There are primarily three:
• One, the equity option in PSUs is largely dependent on the government's policies in that particular sector. This more so in areas where the PSU companies enjoy a near monopoly and the government flip-flops on its policies raising huge uncertainties over returns on equity investments.
• Two, shareholders of such government companies have to live with uncertainty over their returns as the government continues with its non transparent ad hoc subsidy policies.
• Finally, issues of corporate governance is yet another factor. It is not just about filling company boards with the mandatory number of independent directors. In several cases, there have been instances where these candidates are nominated (albeit unofficially) by ministers of the administrative ministries. PSU bosses owe their jobs to the government's recruitment process where often merit is a casualty.
• French auction still finds favour for IPOs
• Disinvestment department is keen to take the French auction route for the initial public offers (IPOs) of public sector companies despite the method failing to get the desired result in follow-on public offers.
• In French auction, investors are asked to bid for shares above a certain floor price. Bidders are allotted shares starting from the maximum price bid till the offer is exhausted.
• In the traditional book-building, investors have to bid within a price band and the final price is decided after all the bids are in. Every one is offered shares at this price.

International

• Recess appointments and why they are in the news...
• Recess appointments, refer to the appointments made by the US President when the Congress is not in session. These have been used by both parties -- Democrats and Republicans -- to evade potentially difficult Senate confirmations required for senior federal posts.
• Obama has reportedly made about 15 of them recently, thus bringing them into debate.
• It is significant to note that Obama’s Democrats lost their 60-seat super majority in the Senate in January, denying them the votes needed to overcome procedural delays by Republicans.

Language Lessons

• revue: Noun
• A variety show with topical sketches and songs and dancing and comedians
• eg: ...though their only contact with ABBA's oeuvre is via Mamma Mia, the Bollywoodesque musical revue starring Meryl Streep and Pierce Brosnan.
• oeuvre: Noun
• The total output of a writer or artist (or a substantial part of it)
• palaver:Noun
• Flattery intended to persuade; Loud and confused and empty talk