Money markets: Rupee closes higher - G-Secs weaken
Mumbai: The rupee closed stronger at 43.68 against the dollar on Monday against its previous closing at 43.72/73 on Friday.

Forwards market: The 12-month premium closed at 1.46 per cent (1.40 per cent) while the six-month premium closed at 1.68 per cent (1.65 per cent).

G-Secs: The 7.38 per cent 10-year benchmark closed weak at Rs106.25/30 (6.55/54 per cent YTM) against Friday's close of Rs106.68/70 (6.49 per cent YTM).

Call Rates: In the 4.60- 4.75 per cent range.
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RBI roadmap: Foreign banks can convert local branches into subsidiary
Mumbai: The Reserve Bank of India (RBI) has come out with a flexible roadmap for foreign banks and ownership guidelines for private banks in India. However, the central bank will continue to retain considerable discretionary powers.

Foreign banks will now be allowed to convert their branches into wholly owned subsidiaries in two stages and later list their shares on the stock exchanges with minimum 26 per cent stake with the public. In the first phase, which is up to 2009, foreign banks already operating in India will be allowed to convert their existing branches to wholly owned subsidiaries.

To allow Indian banks sufficient time to prepare themselves for global competition, entry of foreign banks will initially be permitted only in private sector banks that are identified by RBI for restructuring. "In such banks, foreign banks would be allowed to acquire a controlling stake in a phased manner," the RBI said.

In the second phase (after 2009), the subsidiary of foreign banks, on completion of a minimum prescribed period of operation, will be allowed to list and dilute their stake so that at least 26 per cent of the paid up capital of the subsidiary is held by resident Indians at all times consistent with para 1(b) of the Press Note 2 of March 5, 2004. The dilution may be either by way of initial public offer or as an offer for sale.

After a review is made with regard to the extent of penetration of foreign investment in Indian banks and functioning of foreign banks, the RBI said, foreign banks may be permitted-subject to regulatory approvals and such conditions as may be prescribed-to enter into merger and acquisition transactions with any private sector bank in India subject to the overall investment limit of 74 per cent.
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Budget 2005-06: Legislative changes for Banking sector
New Delhi: Finance Minister P Chidambaram has proposed legislative changes in order to remove limits on the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR).

He said that lower and upper bounds to the SLR will be removed by amending the Banking Regulation Act in order to give RBI more flexibility to prescribe prudential norms. He also said the Reserve Bank of India Act will be amended to remove the limits of CRR to facilitate more flexible conduct of monetary policy and enable the Central bank lend or borrow securities by way of repo, reverse repo or otherwise.

The Banking Regulation Act will also be amended to allow banks to issue preference shares so that it can be treated as regulatory capital under specified circumstances as per Basel II norms.

He also said specific provisions would be made to enable consolidated supervision of banks and their subsidiaries by the RBI.
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Budget 2005-06:Banks to issue preferential shares
New Delhi: The Finance Minister, P. Chidambaram, has said that he would move legislative amendments in order to allow them to issue preferential capital.

Banking companies would be allowed to issue preference shares "since preference capital can be treated as regulatory capital under specified circumstances as per Basel norms," Chidambaram said.

Amendments to the Banking Regulation Act, 1949, would also be proposed to remove the floor and the ceiling limits of 25 per cent and 40 per cent on statutory liquidity ratio (SLR). Besides, the RBI Act would be amended to remove the minimum 3 per cent cash reserve ratio (CRR) to be maintained with the central bank.

The move on SLR and CRR is expected to provide the RBI greater flexibility in determining the limits according to the need of the hour and "to facilitate (RBI) a more flexible conduct of monetary policy," Chidambaram said.

He also said that for supervision of the banks and their subsidiaries by the RBI, specific amendments would be proposed in the banking laws.

He said that the RBI would separately announce a roadmap for banking sector reforms. "The RBI has prepared a roadmap for banking sector reforms and will unveil the same.

While most proposals will be implemented by the RBI on its own authority, some legislative changes would be required to be made," the Finance Minister said. On pension reforms, the Finance Minister said that the a Bill would be introduced in the current session of Parliament to replace the Ordinance issued in December to set up the Pension Fund Regulator and Development Authority (PFRDA).

He said that seven states - Andhra Pradesh, Chhattisgarh, Himachal Pradesh, Manipur, Rajasthan and Tamil Nadu - have introduced schemes similar to the one floated for new Central Government recruits under the new pension system.
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Budget 2005-06: Mumbai to become regional hub for finance
New Delhi: Mentioning that Mumbai lay almost midway between London and Tokyo, two nerve centres of world finance, and further that it was home to the National Stock Exchange and the Bombay Stock Exchange, which now ranked No. 3 and No. 5 among the stock exchanges of the world in the number of trades per year the Finance Minister said that in consultation with the RBI, he proposed to appoint a high-powered Expert Committee to advise the Government on how to make Mumbai a regional financial centre.

In his speech the FM said that in the last decade, the country had built world-class institutions in the securities markets, which now compared with the best in terms of technological sophistication, risk management and sound governance. Accordingly, he believed the time had come to begin work on making Mumbai a regional hub for finance.
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Budget 2005-06: Market borrowings to go up 42 per cent
New Delhi: The centre's market borrowing is set to go up by 42 per cent to Rs1,00,836 crore in 2005-06 as the government faces an uphill task in providing for the hike in spending for social sectors.

The Union Budget shows a fall in borrowings to Rs71,034 crore this fiscal as against the budgeted Rs1,15,501 crore, in a year which witnessed spiralling inflation and yields on government bonds. However, the Budget proposed a hike in borrowing to Rs1,00,836 crore for the next fiscal as inflation has shown signs of moderation in recent months.

The Budget estimates short-term borrowings at Rs24,474 crore in 2005-06, which includes Market Stabilisation Scheme of Rs18,019 crore and net borrowings of Rs6,500 crore through 182 days T-Bills.
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