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AADHAAR MAY BECOME MANDATORY FOR BUYING SHARES, MUTUAL FUNDS

MUMBAI: Aadhaar may soon become mandatory for buying shares and mutual funds. The government and the Securities and Exchange Board of India (Sebi) are planning to link Aadhaar to financial market transactions to try and curb sharp practices such as conversion of black money into white through the stock market.

Two people familiar with the development said the government has realised that the permanent account number (PAN) may not be enough to plug tax leaks. Top Sebi officials have informally sounded out select market intermediaries about the possibility of linking Aadhaar to financial market transactions, a top official with a financial services firm familiar with the development said.

“We have been told that making Aadhaar compulsory is in the offing,” the official said. The timing of the move is still unclear. It is also not clear whether Aadhaar will replace PAN as the sole identification number for financial market transactions.

The government recently mandated that Aadhaar, launched in 2009 by the UPA government, be linked to PAN, bank accounts and mobile phone numbers. The deadline for existing bank account holders to provide their Aadhaar details is December 31.

The unique ID can be used for conducting the mandatory knowyour-client (KYC) check for mutual fund transactions online. In online KYC — known as e-KYC — done with Aadhaar, MF investors do not need to go to fund houses to submit their forms and get their signatures identified in person.

RBI HALVES DIVIDEND TO GOVT TO RS 31K CR

Mumbai: In a surprise announcement, the Reserve Bank of India (RBI) said that it has halved its dividend payment to the government to Rs 30,659 crore for 2016-17 from nearly Rs 66,000 crore in each of the previous two years. The lower dividend is due to huge expenses borne by the RBI by way of interest payment to banks as part of its liquidity management exercise and in printing notes following demonetisation.

The dividend amount was decided by the central board of directors, which met to finalise accounts for the year ended June 2016. The board would have also finalised how the central bank deals with the demonetised currency notes that were not turned in before June 2017. However, the RBI is yet to divulge details on whether it has extinguished the currency which has not been deposited.

The halving of dividend will hurt the government’s finances. “The lower amount will be a concern since the government’s non-tax receipts will be affected. In the Budget, it was assumed that around Rs 75,000 crore would come from RBI, public sector banks (PSBs) and financial institutions compared with a little over Rs 76,000 cr in FY17,” said Madan Sabnavis, chief economist, CARE Ratings. According to Sabnavis, as PSBs are unlikely to do better than last year and the RBI will be transferring a smaller amount, this will impact the fiscal deficit numbers. “If other conditions remain unchanged, the fiscal deficit can increase from 3.2% to 3.4% this year,” he added.

Devendra Kumar Pant, chief economist, India Ratings, said the drop in dividend is due to lower earnings due to reverse repo transactions (where the RBI borrows from banks) and high costs incurred in printing of notes. Besides this, the appreciation of the domestic currency vis-a-vis the US dollar led to lower returns in rupee terms. “First-quarter direct tax collections, if continued in the fiscal, will provide some buffer for central government deficit,” he added.

The minister of state for finance Arun Meghwal had earlier said that it costs between Rs 2.87 and Rs 3.09 to print the new Rs 500 note and Rs 3.54-3.77 for a Rs 2,000 note. Given these numbers, it would have cost the RBI over Rs 13,000 crore to print fresh currency notes during demonetisation. This is almost thrice the Rs 3,421 crore the RBI spent on printing notes in the previous year.

According to economists, when the macro fundamentals are sound, the RBI ends up with weak earnings and, conversely, when the country’s fundamentals are under strain, the central bank generates exceptional gains. This is because at times of stress, the RBI tightens liquidity and makes windfall profits lending to banks at high rates. But when the rupee is strengthening, the central bank loses money by buying a falling dollar. The biggest cost to the RBI by far, when the country is facing a problem of plenty, is the cost of impounding surplus liquidity.

Banks are sitting on surplus funds due to absence of credit demand. Soumya Kanti Ghosh, chief economist, SBI, said, “Credit growth has decelerated by Rs 1.5 lakh crore in current fiscal — a historic low.” He added that given surplus funds, SBI, Axis Bank and Bank of Baroda have reduced the savings bank rate to keep the lending rate low.

Since November, banks have been awash with surplus liquidity thanks to cash being deposited with them. While most of these were slowly withdrawn, a large chunk continued to remain with banks. In addition to funds coming due to demonetisation, the RBI has been busy absorbing the surplus funds generated by its sale of dollars in the foreign exchange market.

According to dealers, the surplus liquidity with banks has risen to Rs 3 lakh crore as compared to the RBI’s target range of Rs 1 lakh crore. Part of the reason for this is strong inflows from foreign funds, which has forced the central bank to buy close to $10 billion of forex. Foreign investments into debt and equity have crossed $31 billion in 2017 compared to $2.7 billion in sales in 2016.

Bankers believe that surplus funds that have stayed in banks as a result of demonetisation are around Rs 2 lakh crore. According to data released by the RBI, currency in circulation has increased to Rs 15.41 lakh crore in the first week of August, which is around Rs 2.46 lakh crore below the peak level in November 2016.

DRL’S BACHUPALLY UNIT-2 UNDER GERMAN REGULATOR SCANNER

Hyderabad: City-based pharma giant Dr Reddy’s Laboratories (DRL) has run into a regulatory roadblock yet again. Only this time it has run afoul of the German regulator Regulatory Authority of Germany (Regierung von Oberbayern).

The latest setback comes even as the company has been battling regulatory issues raised by the United States Food and Drug Administration (USFDA) at a couple of its manufacturing units in India.

“Betapharm Arzneimittel GmbH, Germany, (our wholly-owned subsidiary) received a communication from the Regulatory Authority of Germany (Regierung von Oberbayern) last night, that the GMP compliance certificate in respect of the company’s formulations manufacturing Unit-2 plant in Bachupally, Hyderabad, is not renewed consequent to the recent inspection of the plant,” the company informed the bourses on Thursday.

This means that the company will not be able to despatch any products from the unit for the European Union market unless cleared by the regulator. “Pending revocation of the non-compliance notification, the plant will not be able to make any further despatches to the European Union until the next inspection to be initiated by an invitation from Betapharm,” the company added.

On being asked about the impact of the German regulatory action on the company’s exports to the EU and hence revenues, the company spokesperson said it was too “premature” for the company to comment on the issue.

Reacting to the news, the company’s scrip tanked 4.77% to close at Rs 1,948.95 per share as against the previous close of Rs 2046.65 per share on BSE.

HFCL Q1 PROFIT DECLINES BY 41.5% TO RS 27.73 CR

New Delhi, Aug 10 () Telecom gear maker HFCL posted 41.55 per cent decline in standalone profit to Rs 27.73 in the first quarter ended on June 30, 2017, mainly on account of increase in material and services expenses.

The company had posted a profit of Rs 47.45 crore in the same period a year ago.

The total income jumped by 62.64 per cent to Rs 909.61 crore in the reported quarter from Rs 559.27 crore in corresponding period of 2016-17.

The expenses of Himachal Futuristic Communications Limited on account of cost of material and services consumed increased by about 41 per cent to Rs 415.56 crore from Rs 295.01 crore during the period under review.

The board of HFCL approved setting up an optical fibre manufacturing facility at Hyderabad with estimated cost of Rs 225 crore which is likely to start operations in 18 months.

“To reduce the input cost and to overcome the worldwide shortage of fibre supply, the Board of Directors of the Company has considered and approved setting up a Optical Fibre Manufacturing Facility…at Hyderabad having capacity of approximately six million fibre kilometre per annum,” the company said.

HFCL manufactures optical fibre cable at its Goa plant and at Chennai in company’s subsidiary HTL Limited.

“The estimated project cost (of new facility) will be Rs 225 crore. The same is proposed to be funded by way of debt, internal accruals, fresh funding, etc. The Facility is likely to be operational in eighteen months’ time,” HFCL said.

Shares of HFCL closed at Rs 15.15 a unit, down by 7.9 per cent compared to previous close, at BSE.

GOVT FIRMS INVESTING $2 BILLION IN BIOFUELS: DHARMENDRA PRADHAN

NEW DELHI: Oil minister Dharmendra Pradhan on Thursday said state-run companies are investing $2 billion in R&D (research and development) on second-generation biofuel refineries, even as road transport minister Nitin Gadkari cautioned that a 22% annual growth in the number of automobiles was unsustainable without promoting public transport running on alternative fuels.

Addressing a function to mark World Biofuels Day, Pradhan said the government is working on a biofuels policy as the industry has an investment potential of Rs 1 lakh crore in the next one to two years. Ways are being explored to make fuel out of urban and rural waste and cultivate feedstock on waste/barren land for 2G biofuels.

Gadkari said efforts are on in a big way to promote public transport based on cheaper and greener biofuels and electricity. He said he would ask the finance minister to reduce GST on bio-diesel from the current 18% to 5%.

The government has brought in the necessary regulations for flexi-engines. Nagpur city is running 55 buses on 100% bio-ethanol and another 50 on bio-CNG, essentially methane from sewage water.

This is in addition to a 200-strong fleet of electric taxis and autos. The shipping and inland waterways sectors too are gearing up for running ships and barges on methanol.

Besides bringing down pollution, biofuels produced indigenously from agricultural waste, plants such as bamboo, non-edible oilseeds or municipal waste will help reduce the country’s huge oil import burden.

In addition, it will also generate employment and boost the economy in rural areas, including the north-east and the areas with barren wasteland.

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RCOM PLANS TO ISSUE SHARES TO LENDERS IN LIEU OF DEBT

NEW DELHI: Telecom operator Reliance Communications (RCom), which is reeling under debt of about Rs 45,000 crore, plans to issue shares to lenders for the debt that it has raised from them, as per a regulatory filing of the company.

The board of RCom is scheduled to meet on August 12 which will consider convening annual general meeting of shareholders to enable the firm seek their nod for converting debt into equity shares.

In a regulatory filing, RCom said that the board will consider and approve matters related to merger scheme between the company and Aircel along with other deleveraging measures.

The board will in the same meeting will consider “approving notice convening annual general meeting seeking shareholders’ enabling approval for various items including conversion of debt into equity shares, if and when required, for issue of privately placed non-convertible debentures/ other debt securities”.

The RCom board will also consider update on the ongoing strategic debt restructuring scheme of the company.

The company has defaulted on some of the payments to lenders and it has received time till December for strategic restructuring plan under which it will get a seven-month standstill to service loans amounting to Rs 45,000 crore.

Anil Ambani-led RCom has earlier blamed “freebies” offered by a new telecom operator — an apparent reference Reliance Jio run by his elder brother Mukesh Ambani– for woes of the sector even as it has denied having delayed any payment of debt by more than three months from the due dates.

The company has announced sale of mobile towers to Brookfield Infrastructure and combination of its wireless business with Aircel group which, on completion of the deal, will reduce existing debt by up to Rs 25,000 crore.

RBI ISSUES FINAL GUIDELINES FOR TRI-PARTY REPO TRANSACTIONS

Mumbai, Aug 10 () The Reserve Bank issued the final guidelines on tri-party repo transactions as part of its attempt to energise the corporate bond market and generate more liquidity in the segment.

A tri-party repo is a contract between a buyer and a seller of a security along with a third party agent. In most cases, the third-party agent may be a custodian bank, which will facilitate services like collateral selection, payment and settlement, custody and management during the life of the transaction.

Such repos can be traded over-the-counter (OTC) including on electronic platforms, or, on stock exchanges, and should reported within 15 minutes of the trade for public dissemination to CCIL or to exchanges or any other reporting platform authorised for the purpose by the Reserve Bank, it said in a notification.

The RBI had issued the draft guidelines on April 11, 2017 and had promised on the August 2 policy that it would issue the final guideline shortly and said “tri-party repos will enable market participants to use underlying collateral more efficiently and facilitate development of the term repo market.”

The draft guidelines were issued after recommendations from a committee headed by former deputy governor HR Khan in August 2016.

The RBI allowed commercial banks, entities regulated by it or the Sebi, and those who have prior RBI approval to act as agents for tri-party repo.

The applicant should have at least five years of experience in the financial sector, preferably in offering custodial services. They will have to maintain minimum of Rs 25 crore in the form of net-owned funds has also been mandated.

Tri-party repos may be traded using any trading process authorised under RBI directions,including bilateral/ multilateral, anonymous or otherwise, quote driven or order driven and

On settlement, RBI said all settlements will be on delivery vs payment (DvP) basis, with or without netting of securities and/or cash. Settlement can also be guaranteed or non-guaranteed bilateral/ multilateral, through clearing houses of exchanges or any other clearing arrangement approved under the Payment and Settlement Systems Act of 2007.

On the tenor, haircut and disclosures, it said these will be identical to those applicable to normal repos, in terms of the Reserve Bank directions.

Repo is an instrument for borrowing funds by selling securities with an agreement to repurchase the same on a mutually agreed future date at an agreed price including interest for the funds borrowed, while reverse repo is an instrument for lending by purchasing securities with an agreement to resell the same on a mutually agreed future date at an agreed price including interest.

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