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Rupee down 20 paise- securities bearish
Mumbai: The rupee crashed to an eight-and-a-half month low against the greenback as rising prices of global crude sparked heavy dollar buying. The domestic currency ended the trade at 43.89, down by about 20 paise from its previous closing of 43.6850/6950.

Forwards market: The 12-month premia ended at 0.6 per cent (0.67 per cent) and the 6-month closed at 0.51 per cent (0.59 per cent).

G-Secs: The 7.37-9 year-2014 paper closed at Rs102.12 (7.04 per cent YTM), down from Friday's Rs102.16 (7.03 per cent YTM). The 10.25-16 year-2021 paper closed at Rs125.50 (7.47 per cent YTM), lower than Friday's Rs125.56 (7.46 per cent YTM). The 7.38-10 year 2015 benchmark paper was dealt at Rs102.10 (7.08 per cent YTM).

Call rates: The inter bank rates remained unchanged at 4.90-5.05 per cent.

Reverse repo: In the one-day auction, the RBI received and accepted 35 bids amounting to Rs22,255 crore.

CBLO market: 214 trades for Rs10,673.25 crore in the rate range of 4.75-5 per cent, were realised.
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RBI: Sheltered domestic oil prices to add to fiscal burden
Mumbai: The Reserve Bank of India has warned that if domestic oil prices were not allowed to track the international price line, the fiscal burden of the Government could increase.

In its annual report for 2004-05, released on Monday, the RBI said, "Holding back the pass-through of international oil prices to domestic prices involves quasi-fiscal cost which could eventually turn into a binding constraint for the fiscal authority."

"Spike in crude oil prices could result in increased fiscal burden in terms of duty concessions, larger petroleum subsidies or lower dividends from oil PSEs," the report said.

The RBI caution comes on a day when crude prices soared beyond $70 a barrel in the international market. The last time domestic prices of diesel and petrol were hiked was in June 20, 2005. Since then, the global oil price has increased more than 10 per cent. All the PSU oil companies reported heavy losses in the last quarter.

At the same time, the annual report, which projected brighter near-term prospects for the Indian economy, also said the pass-through of crude prices continues to remain the most critical factor influencing domestic inflation.

More than one half of the annual inflation was on account of the fuel group, even as the pass-through from international crude prices remained incomplete. Excluding the fuel group, annual inflation was 1.8 per cent as on August 6, significantly lower than headline inflation, the report said.

But the report pointed out that "underlying inflationary pressures appear to have been contained so far in the current year and inflation for 2005-06 is expected to remain in the range of 5-5.5 per cent as projected in the RBI's annual policy."

Referring to the performance of the economy, the report said leading macro-economic indicators suggested that the Indian economy is poised to build upon the gains secured in the last fiscal.

Backed by strong growth in non-food credit, capital goods imports and vibrant capital markets, the Indian industry is likely to remain buoyant in 2005-06.

However, the report said that, despite strong export growth, the trade deficit is expected to be higher in 2005-06 mainly on account of oil and non-oil imports.

The report said credit off-take has been quite robust so far. The demand for bank credit remained strong with year-on-year non-food credit growth of commercial banks reaching 30.2 per cent as on August 5, on top of 24.4 per cent a year ago.
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RBI suggests rationalizing of import tariffs at 10 per cent
Mumbai: According to RBI's annual report, released on Monday, the country's external environment including foreign exchange reserves allows for rationalisation of tariffs with respect to imports and has suggested a single uniform tariff rate of 10 per cent for all imports.

According to the apex bank, the move towards a uniform rate will help simplify customs procedures in line with the best global practices and improve competition as well as exports.

The central bank's report says that the India's merchandise exports have risen at a rate of over 20 per cent a year in dollar terms during 2002-05. However, the country's current account balance has moved from a surplus of 1.7 per cent of GDP in 2003-04 to a deficit of 0.9 per cent in 2004-05, mainly due to a substantial rise in imports.

As per the report, since the capital flows into the country were in excess of the current account deficit, the overall balance of payments remained comfortable. The country's foreign exchange reserves (excluding valuation effects) increased by US$26.2 billion during 2004-05 which, according to the central bank, can finance about 14 months of imports.

While the exports, at $79.3 billion grew by 24.1 per cent, imports at $107.1 billion grew by 37 per cent in 2004-05.

Oil imports at $29.8 billion have shot up by 45.1 per cent in 2004-05, mainly on account of the surge in international crude oil prices in volume terms. However, in terms of growth rate, oil imports slowed to 5.5 per cent in 2004-05 from 10.6 per cent in 2003-04. Non-oil imports excluding gold and silver witnessed a substantial increase at 61.1 per cent during April-May 2005, led by imports of mainly industrial units.
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RBI's domestic income falls - earns more globally
Mumbai: The Reserve Bank of India (RBI) has earned more from its foreign and less from domestic investments during 2004-2005.

Increase in the level of foreign currency assets, hardening of short-term interest rates in the US and lower market to market depreciation on securities resulted in higher earnings from foreign sources. RBI's earnings from foreign sources increased to Rs16,979.47 crore (Rs9,103.50 crore).

Domestic income fell to Rs2,048.81 crore (Rs5,220.20 crore) on account of booking substantially higher depreciation in the value of the rupee securities as the yields hardened during the year, lower availment of Ways and Means Advances (WMA) by Central and State Governments, investment of Government of India surplus balances in rupee securities from the Bank's portfolio and earmarking of certain securities to cover the liabilities in provident fund, superannuation fund and encashment of ordinary leave fund.
The net interest income on rupee securities was negative on account of higher depreciation during the year.

RBI's gross income for the year 2004-05 was Rs19,028.28 crore, against Rs14,323.70 crore in 2003-04, an increase of Rs4,704.58 crore or 32.8 per cent. However, net income fell to Rs12,215.27 crore (Rs13,166.14 crore).

Gross income comprises Transfer to Contingency Reserve, which increased to Rs6,125.92 crore (Rs969.47 crore), Asset Development Reserve, which rose to Rs687.09 crore (Rs188.09 crore) and Surplus (profits) transferred to Government remains unchanged at Rs5,400 crore.

Total expenditure declined to Rs6,811.27 crore, (Rs7,762.14 crore), a fall of Rs950.87 crore or 12.3 per cent. Interest payment decreased to Rs1,386.28 crore (Rs1,808.48 crore).

Other liabilities include the internal reserves and provisions of RBI and net credit balance in the RBI General Account. These liabilities declined to Rs1,00,356.27 crore (Rs1,29,929.49 crore) mainly on account of decrease in levels of Currency and Gold Revaluation Account (CGRA). The balance in the CGRA fell to Rs26,906.21 crore (Rs62,283.04 crore), due to increase in level of foreign currency assets during 2004-05 and appreciation of rupee against US dollar and appreciation of dollar against other currencies.

Foreign currency assets rose to Rs5,75,863.66 crore (Rs5,24,865.01 crore), due to net purchases of US dollars from market and interest and discount received, net of revaluation losses.

Investment in Government securities increased to Rs68,476.48 crore (Rs40,179.74 crore). Other assets declined to Rs14,403.57 crore (Rs14,459.77 crore).

These comprise fixed assets, gold holdings in the banking department, amounts spent on projects pending completion and staff advances.
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