12 may 2001

banks barred from arbitrage operations
mumbai: the country’s apex bank, the reserve bank of india, has categorically banned banks from undertaking short-selling or arbitrage operations. while doing so the bank has, however, relented in its final guidelines and stated that loans against shares to individuals and corporates where the end-use is other than stock broking activities, will not be treated as exposure to capital markets.

earlier the proposal was to treat all loans irrespective of the purpose, where shares are taken as collateral, as exposure to the market.

the final norms also require banks to increase margins on loans against shares to a uniform 40 per cent for loans against dematerialised shares as well as shares held in the physical form.

the final guidelines also incorporate the earlier proposal that each bank should fix within the overall ceiling of five per cent a sub-ceiling for advances to all the stock-brokers and to individual stockbroking entities and interconnected companies.

as a measure of caution to minimise the nexus between the market operators and bankers, the revised guidelines call for a clear separation of decision making in regard to investment in shares and advances against shares which will be done by the investment committee, which in turn will be set up by the board.

the surveillance and monitoring of exposure to capital markets will be done by the separate and independent audit committee of the board which will review the total exposure of the bank to the capital market in all forms.

new rbi norms force foreign banks to cut assets
mumbai: with the reserve bank of india issuing new guidelines, foreign banks are seen to be under pressure to sell assets to comply with the new norms for tier-i capital.

with a capital adequacy of nine per cent, a foreign bank can technically have a maximum balance-sheet size of rs 1,333 crore, but to the extent it gives a $100 million cross-border loan, its capital base for single exposure-limit stands at rs 520 crore.

most senior foreign bankers feel that serious overseas banks will invest money to tide over the rbi stipulation thereby boosting foreign direct investments.

the big five foreign banks — citibank, standard chartered grindlays, hsbc, bankam, abn amro bank and deustche bank — are seen going all out to grow their businesses in line with their publicly stated stands. the heat will now be on the smaller foreign banks who have not invested or grown their local books even under the current norms.

10 may 2001

more sectors open to 100 per cent fdi
new delhi: in a major decision taken by the government, 100 per cent foreign direct investment has been allowed in the drugs and pharmaceuticals, airports, hotels and tourism, mass rapid transport systems, development of townships and courier services sectors.

in addition to this the government has also allowed 49 per cent fdi in banking, 74 per cent in isps, paging and end-to-end bandwidth, and 26 per cent in the hitherto sensitive defence production which has been opened up to domestic private players.

to add icing to the cake, the government has also waived the stipulation for foreign investors to compulsorily divest 26 per cent stake to indian partners in the pharmaceutical and hotel and tourism sectors. for the pharma sector, barring investment in drugs under dna technology, the foreign investment can come in through the automatic route.

private sector banks, which earlier could have only 20 per cent foreign equity, would welcome the hike in foreign investment to 49 per cent.

8 may 2001

fake accounts unearthed at iob
kolkata: the reserve bank of india has unearthed a number of fake bank accounts opened at the port blair branch of the indian overseas bank, in the names of famous personalities like `sourav ganguly’, `rhea pillai’, `marc robinson’, `david dhawan’, and `rahul dev’. the case has been handed over to the central bureau of investigation, while the bank is also considering a departmental enquiry.

what is being viewed most seriously is the larger issue of procedural lapse, despite clear-cut rbi regulations on identification of depositors.

such fake accounts in the names of film personalities had been detected earlier by the cbi, in branches in port blair and chennai, opened for the specific purpose of laundering money.

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