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BFS7130th Aug, 2013
Weekly
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BFS Roundup @ FLIP
NSEL sacks MD, six others after payment
default The board of NSEL sacked 7 top officials including
the CEO and CFO, after it failed to repay the
nvestors on the first day of payout. The exchange
was able to raise only INR 92.73 crore of the INR
174. 72 crore committed.
FLIP’s View: This is a serious offence affecting
nvestor confidence. The sanctity of the exchange is
at stake, and the severest punishment must be
provided. Checks and balances must also be put in
place for these things not to recur.----------------------------------------------------
Earning Rs 10 cr ? Get ready for 35% income
tax
The government is considering imposing a tax rate
of 35% on the super-rich citizens i.e. those earning
more than INR 10 crores a year. This is expected to
help government in covering the fiscal deficit to
some extent.
FLIP’s View: An Optically pro-poor move, but will
do very little to fill the coffers.--------------------------------------------------------RBI increases rate of interest subvention on
export credit
RBI has decided to increase the rate of interest
subvention on pre- and post-shipment rupee export
credit for certain employment-oriented export
sectors from 2% to 3%, effective August 1. This
move is aimed at boosting exports and increasing
forex inflows.
FLIP’s View: Should give a higher fillip to exports,
and with the current exchange rate, if exports don’t
pick up, I don’t know if they ever will.
----------------------------------------------------------Rupee sinks as FIIs extend selling
The rupee tumbled to a near-69 level against the
dollar on Wednesday. The Indian currency slid 3.99
per cent — its biggest single-day fall in more than
21 years.
FLIP’s View: India is getting rammed from all
sides frankly. USD is strengthening against all
emerging market currencies, thanks to QE. The
domestic economics – CAD, fiscal deficit are adding
to the rupee woes, and finally, the nail in the coffin,
the Govt. doesn’t know what to do to fix it.
he week that was…. he week that was….
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Updates @ FLIP
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Did you know?
The RBI has allowed Cheraman Financial Services, a firm based in
Kochi to operate as a NBFC that follows Islamic Principles.Cheraman Financial Services plans to offer leasing and equity finance
products.
This is being seen as opening up of opportunities for NBFCs to offer
various sharia-compliant products.
Despite being home to about 177 million Muslims, Islamic Banking is
not permitted in India.
Under Islamic banking principles paying or receiving interest is
forbidden .Thus it uses innovative structures like asset buyback etc.,
to provide a return to investors. .
RBI governor Duvvuri Subbarao, who will step down in September,
has said Islamic banking on a broader scale is not possible in the
country, but sharia-compliant products could be delivered through
alternative means..
Term of the Week
Interest Subvention Scheme
You would have read a lot about subvention schemes offered by the government.
We will try to explain what they are, and how they help the economy?
What is a subvention scheme?
In case of an interest subvention scheme, the government provides an interest subsidy.
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For example: Recently, the government approved a scheme for providing short-term crop loans
to farmers at a concessional rate of 7% p.a.
What it means is that, farmers can borrow at a concessional rate of 7% (instead of the prevailing
market rate – 12 to 15%), and the bank can charge the government for the difference.
Government also provides a further interest subvention of 3% p.a., to farmers repaying their
loans promptly, thus making available the crop loans to them at 4% p.a.
How do these help the economy?
Government offers these schemes to provide impetus to sectors deemed critical for the
economy. These include agriculture, textiles, low-cost housing etc.
These structures attract investment into these sectors which helps in generating employment
and pushing economic development.