SEBI's effort at decoupling

With all the theorist of decoupling debating on it's merits, SEBI seems to be finding a way to implementing it.

SEBI is proposing a margin payment from Institutional Investors from April 21 onwards.

Only Korea & Taiwan, of all Asian markets, require margins on high beta stocks.
The other spin to the story could be "Level Field", with retail,HNI and corporates having to pay 50% margin in the cash markets. With the proposed upfront T+1 margin collection, trading churn will reduce due to a portion of funds locked in margins. Is this an attempt to regulate financial markets to avoid slingers? May be. But the consequence is on risk, as conservative institutions like pension funds will be unwilling to pay advance for shares (margin payment on T+1, shares received on T+2).

The move is finding supporters (though from conservative folks ). Abhay Aima, Equity Head of HDFC says "Fair move, as more players come in & risk rises, market needs safeguards". Ved Prakash Chaturvedi, MD, Tata AMC says "This will reduce the amplitude of swings"

National Investment Fund Declared as QIB

In what could be a slow begining towards an Indian SWF, a SEBI Press release included National Investment Fund (NIF), a fund set up by the Government of India vide Gazette Notification no. F. No. 2/3/2005-DD-II dated November, 23, 2005 in the definition of QIB.

NIF is a fund consisting of the proceeds from disinvestment of Central Public Sector Undertakings, which would invest in equity in accordance with broad investment guidelines provided by the Government of India.

PE-VC funds may be deemed FDI

According to a latest draft put up on RBI site for public comment, various classes of investors have been broadened with specific mention of PE & VC funds.

"Secondly, the details of investment received in units of venture capital funds from FVCIs are proposed to be separately captured."

Details of investment received from foreign venture capital investors are also proposed to be captured separately. Part B of Form FC-GPR has been modified to capture details of such foreign investors. The date of filing Part B of the form has been extended from June 30 of every year to July 31.

FDI is permitted under automatic & approval route. An Indian company issuing shares and convertible debentures to non-residents under either route is required to submit details of the investment in a two-stage reporting procedure.

In the first stage, receipt of funds is to be reported to RBI within 30 days. In the second stage, the company has to file Form FC-GPR with RBI within 30 days from the date of issuing shares/convertible debentures.
Form FC-GPR was revised in April 2007 by which remittance receiving Indian banks were required to obtain a KYC report on the foreign investor from the overseas bank remitting the amount.

Go to Financial Express for the complete article

RBI Responds : FOREX Derivative Cap May Arrive

The RBI has called for data from banks to assess their expsoure to FOREX derivatives in domestic & overseas markets.
Local exposure mainly relates to interest rate and currency options and swaps while international investment includes credit derivative structures like credit-linked notes based on foreign currency loans and bonds raised by Indian companies abroad. RBI has asked banks to limit their capital market exposure to 40 per cent of their net worth, with direct exposure limited to 20 per cent.
As part of the proposed valuation norms, RBI could also ask banks to mark to market the derivative portfolio maintained in the held-to-maturity (HTM) category.

RBI lifts PwC Ban

RBI lifted ban on PwC auditing banks & NBFCs.

PwC was banned from auditing banks and NBFCs following its association with the now failed Global Trust Bank as its auditor for financial years 2002 and 2003. RBI had found that PwC underprovided for NPAs.

GTB eroded networth due to over exposure to Capital Markets. It tried to make up for the capital by roping in Newbridge Capital, but RBI disapproved on grounds of questionable source of money. Since bank was not able to make up for capital, it was put under moratorium and then a quick takeover by OCB.

New Mineral Policy

The National Mineral Policy (NMP) 2008, approved by the Cabinet last night, will reduce time delays in disposing off mining applications, boost FDI and "protect risk capital by providing automatic minning rights to miners".

The Cabinet aproved the policy after factoring in the recommendations by the high-level committee and other policy authorities at state level. Delays in ensuring mining leases is believed to be a key reason behind meagre investments in the sector, which the new policy aims to address.

He pointed out that the mineral-rich states of Orissa, Chhattisgarh, Jharkhand and Orissa would be given little more than a year to decide on the merit of the mining lease applications. If these states remain undecided by that period, the applications would be decided the Mining Tribunals, Minister of State for Mines T Subbarami Reddy added.

The Cabinet has also approved setting up of Mining Administrative Appellate Tribunal (MAAT), within six months. The minning states meanwhile will get higher royalty. The status of their demand for ad-valorem based royalty structure and share of export levy is unclear.