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Rates are being raised between 25 basis points and 75 basis points across maturities. A basis point is 0.01 percentage point.

The increases come a day after the Reserve Bank of India raised key policy rates and sent signals that it is on course to keep it going until it manages to temper the demand pull price increase, which forced it to raise inflation forecast for the year to 6% from 5.5%.

"Considering that liquidity in the system has moved into a negative terrain and that there is a strong potential for loan growth, we think it is the appropriate time to raise deposit rates," said Paresh Sukthankar, executive director at HDFC Bank. "The transmission to base rate will take a few weeks."

Base rate is the minimum at which a bank can lend. The second-largest private bank said it will pay 25 basis points more for two-year deposits at 7.5%, and 7% for one year. These are effective July 30. The sharpest increase of 75 basis points, to 5.25%, is for six months, where temporary factors may keep the market tight.

Source: Economic Times Banks Hike Deposit Rates, But Lending Rates May Stay Unchanged

While India Inc has welcomed the recommendation for increasing the threshold for making open offers from 15 per cent to 25 per cent, it is worried about the proposal that will require the open offer to be made for the entire 100 per cent stake.

"That's quite harsh. One will have to mobilise a huge amount of money for an acquisition now," said Isaac George, chief financial officer, GVK Power & Infrastructure. "Mergers and acquisitions will now be restricted to those with deep pockets and those who want to acquire lock, stock and barrel," he said.

Under the existing code, which is set to change, an acquirer has to make an open offer for an additional 20 per cent stake when it crosses the 15 per cent threshold.

"The M&A activity may slow down in the short run as non-serious acquirers or those with a short-term vision may think twice before making a bid," said Siddharth Shah, principal, Nishith Desai Associates, a Mumbai-based law firm. "But it should not be a hindrance to M&As in the long run," he said.

Source: Business-standard M&As to become more expensive

Realty had a reality check when it melted furiously and was brought to realistic levels. It's now back in the limelight, with demand picking up slowly. When there is a dearth of buyers, products get the much needed innovative streak and this is what happened. Structured products in this sector have hogged the stage for some time. A quick rendezvous on how they work and whom they suit.

WHAT IS A STRUCTURED PRODUCT?
Typically, structured products are pre-packaged investment strategy across different asset classes --- equities, derivatives, debt, real estate and so on. They are best suited for high networth individuals (HNIs), wherein the minimum ticket price is significantly high. Normally, it is upwards of Rs 50 lakh.Today, financial institutions offer much lower entry options, with the intention of widening their target market.

Often, real estate investments are known to provide quick capital appreciation. However, this product adds a new perspective to this line of thought. It gives guaranteed returns in the form of interest or rental yield, with capital appreciation as a bonus or an add-on benefit.

PROCESS OF INVESTMENT
Since structured real estate invests in physical property, one may be able to avail off a home loan or a commercial loan. The regular monthly income will ease the equated monthly installment (EMI) burden significantly, compared to any other property.

Real estate products are meant for the long term and such investment opportunities are for those with an investment horizon of three years or more.

Most options allow for registration of the property. However, some may not require registration. And helps you save on the cost involved in it.

The writer is CEO, Right Horizons

Source: Business-standard Investing in realty via structured products

• REAL ESTATE FUNDS VERSUS STRUCTURED REAL ESTATE

• OPPORTUNITIES IN THIS SPACE

• FINAL TAKE

The revised exposure margin requirement would be effective from July 15. The exposure margin requirement was similar prior October 2008, after which Sebi increased the exposure margin requirement to higher of 10 per cent, or 1.5 times the standard deviation, to promote market safety and safeguard investor interest.

The finance ministry is expected to take up the matter with the Reserve Bank of India (RBI) and seek suitable policy changes to lift restrictions placed on such investments by the Foreign Exchange Management Act (Fema).

"The changes are deemed necessary, since the stock market regulator (Sebi) allows domestic venture capital (VC) funds to raise money from both foreign and domestic investors by issuing units," said a senior finance ministry official.

 NRIs are allowed to invest in shares and bonds of public sector companies, mutual funds, and government securities. Units of venture capital funds do not come under the definition of securities.

The move will benefit the domestic venture capital industry, which raise capital through issue of units to investors on a private placement basis.

Source: Economic Times By Dheeraj Tiwari Domestic VC fund doors may be opened to NRIs

The draft regulations on compensation of private banks come within days of the US Congress passing a major financial reform bill to discipline firms on Wall Street.

Coincidentally, a finance ministry panel has only this week recommended better pay for chiefs of public sector banks.

In the draft, RBI has hit out at guaranteed bonuses saying they are "not consistent with sound risk management or productivity-linked principles" and proposed that they should not be a part of a compensation plan.

Bonus should only be given for hiring new staff and be limited only to the first year, the draft said.

 Source: Economic Times RBI wants pay cut for pvt bankers on poor show

No business house without at least five years of experience in financial services will be permitted to own stake in an asset management company, said a person close to the development who did not want to be identified.

Anyone who owns over a 10% stake in the fund house would be deemed a sponsor, and will have to go through ``tough screening'' before getting an approval, the person said. Some subjective measures such as past customer service record will also be applied while giving out new licences.

"Corporates who wanted to fly below the radar with less than a 40% stake can no longer do so,'' said the official. "They would be evaluated as a sponsor if they have more than 10%, use the brand name, or have a board position."

SEBI, which has been cracking the whip on mutual funds for more than a year now, is determined to let only serious investors into the business, instead of short-term ones who lend their names in the beginning and exit later.

Source:Economic Times Non-Finance Cos' MF Foray Gets Tougher

Insurance companies will be required to adhere to the Reserve Bank of India's latest guidelines on pricing of shares of unlisted companies, increasing the amount investors would have to pay for buying into them.

The central bank has taken up the issue with the insurance regulator, IRDA, after the latter had said the new rules will not apply to insurance companies.

Irda is expected to clarify on the issue soon, said a government official privy to the development.

A number of Indian promoters are believed to have entered into agreements with their foreign partners to allow them to increase their stake to 49%, as and when regulations allow.

Foreign investment in insurance is capped at 26% but a bill proposing to increase the limit to 49% is with Parliament. According to the new RBI norms, shares of unlisted companies can be transferred at a price not less than the fair value, which is to be determined by a Sebi-registered merchant banker or chartered accountant as per the discounted free cash flow method.

Source: Economic Times By Deepshikha Sikarwar New Valuation Norms For Insurers Too

This is one of the many chang- es the central bank is planning to make in licensing norms for the new set of banks that may be al- lowed to open for business in the next two years or so. In the early 1990s, when RBI allowed the first set of new private banks to start business, they were required to have a net worth of Rs100 crore.
Earlier this decade, when RBI al- lowed two more banks to come into being, the amount was raised to Rs300 crore.

Among other norms, RBI may want at least 25% of the distribu- tion network or branches of an NBFC to be in rural areas and its non-performing assets (or bad loans) to be not more than 2%, a person familiar with the devel- opment said.

Yet another critical criterion is a prospective NBFC's exposure to sensitive sectors such as real estate and capital markets (the less the better). "Besides, the en- tity must have a diversified own- ership," added this person, who did not want to be identified.

To be sure, nothing has been finalized as yet and RBI's inter- nal discussion is at a preliminary stage, he added.

anita.b@livemint.com

Source: Live Mint By Anita Bhoir RBI may raise net worth for new banks

"Certainly, yes," Insurance Regulatory and Development Authority (IRDA ) chairman J Hari Narayan told PTI when asked whether the insurance regulator would unveil new guidelines for ULIPs to make them attractive for investors.

The government has ended the turf war between IRDA and Sebi, saying unit linked insurance plans (ULIPs) will be regulated by IRDA.
On Friday night, President Pratibha Patil issued the Ordinance, explaining that the life insurance business shall include any unit-linked policy or scrips or any such instruments.

The government has also constituted a high-level committee chaired by Finance Minister Pranab Mukherjee, which will sort out all issues of jurisdiction regarding hybrid products.

Source: Business-standard IRDA to frame new guidelines on ULIPs

Senior officials in the ministry told Business Standard the rate of taxation would remain the same in the final version of DTC. "The idea of DTC is to make the tax structure simple. We believe the taxation rates of 10 per cent, 20 per cent and 30 per cent are the simplest for taxpayers, as well as tax authorities. If we try to tax the income at 5 per cent, 15 per cent, 25 per cent, or any other rate, it could become complicated," said an official.

Another said the country had these rates for the past several years and would continue to have the same in the future as well. He said any tinkering with the rates was not required when the purpose could be served by adjusting the tax slabs in line with the government's revenue considerations.

While the rates of taxation have remained static over the years, income tax slabs were revised upwards twice in 2009-10. Presenting the first Budget of UPA-II in July 2009, finance minister Pranab Mukherjee had widened the slabs. The revised slabs were Rs 1.6-3 lakh, Rs 3-5 lakh and above Rs 5 lakh.

Source: Business-standard By Vrishti Beniwal Change in personal I-T rates unlikely

This gives IRDA the sole right to adjudicate over any issue relating to insurance,and eliminates any room for the other regulator,SEBI,to claim regulatory jurisdiction over the ULIPs business.IRDA and SEBI were engaged in an intense turf battle over ULIPs.

This would set at rest all the issues regarding ULIPs between the two financial regulators, a statement issued by the finance ministry said on Saturday.

The feud over ULIPs began in April this year when the SEBI banned 14 life insurers from raising any fresh money from ULIPs unless they were registered with it.Its contention was that ULIPs were like mutual funds since they invested the majority of their corpus in the capital market.

The IRDA,however,protested saying SEBI has no jurisdiction over ULIPs and that regulating any product related to insurance fell under its domain.The finance ministry first refrained from mediating saying that the two regulators should seek legal recourse and till then status quo should be maintained.

Source: Times Of India ULIPs part of life insurance business  

The permission to relocate units will be given on a case-to-case basis by the BOA, a commerce department official has said. The board, chaired by commerce secretary, clears SEZ proposals and frames rules guiding these zones.

Permission to relocate could easily be granted to units that are yet to start their operations or units that have started sourcing inputs but not started production, he said. BOA may take a cautious approach in cases where production and exports have started. "Where production and sale of goods have started in a unit, one has to consider provisions for income tax exemptions for migration of goods," he said.

The BoA, therefore, decided that permission would be given to units seeking transfer on a case to case basis.

Allowing SEZ units to shift base could help in business consolidation as companies with several units in different SEZs would have the option of bringing them under one roof. It would also help if for reasons of geographical proximity to a source of input or to a market, a unit owner wants to move to another SEZ. "While it is not a frequent request that we get, but for reasons of consolidation or geographical proximity, a unit may want to shift. We thought that there was no harm in allowing them to do that," said L B Singhal, director general, export promotion council for EoUs and SEZs and a member of the BoA. The commerce department is also likely to come up with guidelines for transfers so that adequate monitoring takes place during the process.

"The direction is clear. We are in favour of deregulating all interest rates, but the decision will be taken only after adequate debate," said KC Chakrabarty, deputy governor , RBI.

Currently, the savings rate of banks stands at 3.25 per cent.

On being asked whether a huge difference between the savings bank rate among banks post deregulation is possible, Charabarty said, "In highly competitive markets prices do not vary much. What rate a customer gets depends on market conditions. If the rates vary too much then customers will move from one bank to another."

Chakrabarty also added that this deregulation, which is a part of financial reforms ,is approved by Parliament.

Agreeing with the views of Chakrabarty, C Rangarajan, chairman, Prime Minister's Economic Advisory Council too, has favoured a deregulation in the interest rates. "It is just a matter of time before we see deregulation in savings deposit rates," he noted.

DTC will change this. Property held for less than a year is called a short-term gain and the profit is added to your income. If you gained Rs10 lakh in a property flip and you are in the 30% tax bracket, you will pay an additional Rs3 lakh as tax. If you have held it for more than a year, then you can index your property to wipe out the rise in property value due to inflation and pay the tax on the real (ex-inflation) gain. The tax rule remains the same; the profit gets added to your income and you pay at the marginal tax rate.

The other change is that in the base date for the calculation of tax on the value of the property will be shifted from 1 April 1981 to 1 April 2000. The impact of this depends on the age of the property. Says Hemal Zobalia, executive director, KPMG: "You stand to gain if your property is old and was acquired some 15-20 years back, but if you have a relatively new property, acquired post-2000, you will lose."

The big relief for home loan borrowers is the continuation of the tax deduction of Rs1.5 lakh. The August 2009 discussion paper had proposed doing away with this tax break and was met with huge resis- tance. This tax break is back on the cards.