Now IRFs in Indian Market

The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) jointly agreed on enabling exchange-traded interest rate futures (IRF) this week. Interest rate futures are derivative contracts which have an interest bearing security as the underlying instrument. The introduction of this instrument will help banks, insurance companies, bond houses and provident funds manage risks arising from interest rate fluctuations in their fixed income portfolios. Foreign portfolio investors have been allowed to tradeand banks have been allowed to participate in IRFs, but limits have been put in place to keep their influence under check.

This is the second attempt to introduce IRFs. IRFs were launched over five years ago by the NSE, but did not take off due to deficiencies in product design and banks not being allowed to trade in these products. The new IRFs are based on the yield-to-maturity (YTM) curve, which is used daily by traders for their calculations. To start with, futures contracts will be based on the 10-year government bond, with a semi-annual coupon of 7%. There would be quarterly contracts worth Rs 2 lakh crore per contract. Limits have been placed on gross-open positions of clients across all contracts at 6% of the total open interest or Rs 300 crore, whichever is higher.

Source:ET

New 10 rupee coin with Unity-In-Diversity theme

The 10 Rupee coins which were supposed to be released three years ago, but were delayed due to some technical issues are all set to surface in the year 2009. The Reserve Bank of India (RBI) has launched 10 Rupee coins in 2009. The 10 Rupee bimetallic coins will be available in the market soon. There is no official word yet but this is the latest buzz in the nation. It is a great idea to avoid and get purge of the old half torn ten rupee notes circulating in the market. Undeniably a coin will be trouble-free to use.

Rumours’ subsisting reflects that a limited number will be introduced and the coins will be offered in some auction websites. The 10 Rupee coin was designed by National Institute of Design (NID), Ahmedabad with the theme of Unity in Diversity. The coins are being prepared at Noida and Mumbai mints.

 The new 10 Rupee coin has the lion capitol, the numeric 10 and the year of manufacturing on one side. The value of the coin is indicated on both Hindi and English.On the reverse side, is a symbolic representation of "Unity in Diversity" - Four head sharing a common body. 

RBI says: Four headed symbol shall be thought of as people from all four parts of the country coming together under one banner and identifying with one nation. 

Since the press release is out the year inscribed in the new Ten Rupee coin will be apparently 2009.But the issue lies in the fact that the coin may still face impediments, as the  defect which existed 3 years ago  still persists. Reports are that some of the coins’ outer rings may break away from their inner center piece  -the outer rings are composed of Aluminum Bronze (95% copper, 6% aluminum and 2% nickel). The inner is struck from Cupro Nickel (75% copper and 25% nickel).I hope the defects get repaired by the institute so that we have the 10 rupee coin floated in the market in the same year.

RBI extends date for liquidity to fin companies

The Reserve Bank of India (RBI) said that a fund run by lender IDBI would continue to provide liquidity support to non-deposit-taking finance companies until June 30.

Earlier, the central bank had said that this funding to finance firms would be provided until March 31.

In February, the central bank had appointed Industrial Development Bank of India Stressed Asset Stabilisation Fund (IDBI-SASF) to provide liquidity support to non-deposit-taking finance companies.

IDBI-SASF, which is a special purpose vehicle, would stop making fresh purchases after Sept. 30 and recover all dues by Dec. 31, the central bank said in a statement.

Investments available to NRIs--

The government gives non-resident Indians (NRI) the opportunity to open rupee-dominated accounts in India for repatriating funds. The most popular among these are the NRE and NRO accounts. Non-Resident Indians (or NRIs) are treated as a special category of investors, given their Indian antecedents and their growing importance as a significant source of foreign capital in India. The government including regulators like the Reserve Bank of India and SEBI have been formulating and regulating investments by NRIs in Indian securities. It is therefore imperative for NRIs to understand the rules that would have bearing on their investment-making process.

NRIs can invest in shares and convertible debentures of Indian companies listed on NSE/BSE under the Portfolio Investment Scheme (PIS) route.Under this route, an NRI is permitted to invest up to a maximum of 5% of the paid-up share capital / value of each series of convertible debentures of listed Indian companies on repatriation and non-repatriation basis. The aggregate investment by all NRIs cannot exceed 10% of the paid-up share capital / value of each series of convertible debentures of the company. The aggregate ceiling of 10% can be raised to 24%, if shareholders of the Indian company pass a special resolution to that effect.

NRIs may also, without any limit, purchase on non-repatriation basis dated government securities, treasury bills, units of domestic mutual funds, units of money market mutual funds. NRIs are not permitted to make investments in Small Savings Schemes including PPF.

Another indirect mode of investment available to NRIs is by investing in India-focused offshore funds that invest as Foreign Venture Capital Investor (FVCI), Foreign Institutional Investor (FII) or Foreign Direct Investor.

Home Loan Dilemma-- now or later???

Everyone who's working or searching a job or a housewife, husband,Mom,Dad,Bro,Sis , I and who doesn't want to have a home and live a lovely life- a secured one.Until recession struck economy badly, selecting a home loan was child's play. This was because Floating rates  were a few percentage points below the fixed rates.This was an attracting offer for the borrowers.But now if you are looking for a new home? Get ready to sweat it out when you apply for a loan.Home loans are getting more and more difficult to come by as some of the biggest players in the market tighten their mortgage norms. 

Inflation--The spiraling inflation and rising property prices have plunged the prospective borrowers in a dilemma. Moreover it is seen that there is a continuous  increase in the interest rates on home loans.Today if you or anyone for that matter  wants to go for a home loan, you think twice that is it the right time or it would be preferrable to wait for another 2-3 months;as the fixed rates are currently high - to the tune of 13 to 14 percent.Inflation has added the remaining  fuel to fire. RBI recently increased the cash reserve ratio (CRR) and the repo rate by 0.5 percent. Leading banks were quick to pass on the burden of hike to borrowers .Banks are in consultations with the government and the Reserve Bank of India to revise eligibility criteria for disbursing home loans. Currently, the cap is calculated based on one’s capacity to pay the equated monthly instalment (EMI) and other criteria.

In recent times, banks and institutions have tightened norms for some industries like call centres, IT professionals and investment bankers. Chidambaram said housing is an important sector and a major driver of the economy. "Steel, cement, bricks, pipes, wires, electrical equipment, construction, labour everything depends on housing," he added.So we can expect for certain cuts in the interest rates and a review of the eligibility criteria can help many to turn their dreams into reality--- "My Home"

Inflation dives to nine-month low--

India's headline inflation fell to a nearly nine month low of 6.84 per cent mainly on account of cut in domestic fuel prices after nearly 20 per cent decline in the global crude oil prices and declining prices of vegetables, fruits, pulses and iron, steel items-- the lowest in nine months.A Rs 5 per litre cut in petrol prices and Rs 2 per litre reduction in diesel rate on December 6 helped bring down inflation.

At the same time, the government said it was seeking extra spending of about $9 billion for the current fiscal year to the end of March as part of a fiscal stimulus to lift economic growth and offset the impact of the global slowdown. 

Inflation, measured by wholesale price movement, dipped by 1.16 per cent for the week ended December 6 from the previous week, triggering demands from the industry for further cuts in key policy rates by the Reserve Bank.

Commenting on the decline, FICCI secretary general Amit Mitra said, "RBI should cut interest rate expeditiously and by a significant quantum. It must also ease availability of credit further."

Nosediving of inflation to 6.84 per cent coupled with falling oil prices is likely to trigger more lending rate cuts upto one per cent by Banks, economists said . Many state-owned banks and a few private sector banks had slashed their prime lending rates after RBI's monetary measures rate and finance minstry's calls for immediate rate reductions. However, if the decline in the inflation continues in this pace, that may pause policy hurdles by mid-next year.

GDP growth rate--- 7 to 7.5%

The global financial crisis is expected to hurt the Indian economy more than previously anticipated, with Prime Minister Manmohan Singh on Sunday projecting GDP growth to slow down to 7-7.5% next fiscal. 

Although the government and the Reserve Bank battle contraction in credit growth, he underlined the facts that fundamentals of the economy were strong and banks were safe, and promised accelerated efforts to prop up growth. 

"Due to the current international economic and financial situation, our growth rate may come down somewhat next year. However, we still hope to achieve a growth rate of 7 to 7.5% next year," he said.

Reserve Bank of India last month said the $1.2 trillion economy may grow at 7.5% this fiscal as opposed to 9% in 2007-08. The rate in 2008-09 would be the weakest since 2005. 

"The fundamentals of our economy are strong. Our banking system and financial institutions are well capitalized and secure," PM stressed, while pointing to the high-level committee he had constituted to monitor the situation. 

"Our domestic savings rate is 35% of our GDP and our investment rate is 37% of our GDP," he said.

Drop in Repo rate

The Reserve Bank of India (RBI) lowered the repo rate,(the rate at which it lends to banks), by 100 basis points to 8 per cent(earlier 9 %).A reduction in the repo rate will lower the cost of funds for banks. In recent weeks there are signs of strain in the credit markets which had an indirect impact in the global liquidity."The global financial situation continues to be uncertain and unsettled. Even as countries directly affected by the turmoil have taken aggressive action to manage the crisis, confidence and calm is yet to be fully restored in the financial markets. Effective October 11, the cash reserve ratio or the proportion of deposits that banks set aside, has been lowered 250 basis points to 6.50 per cent to inject around Rs 100,000 crore liquidity into the system. Further, a special window has been opened to allow banks to access up to

Rs 25,000 crore from RBI against their farm debt relief arrears. In RBI's first liquidity adjustment facility session today, there were no bids from banks to borrow funds through the repo window. Thanks to the RBI's steps the liquidity conditions in the markets have eased a little with the weighted average call rate, according to data on the Clearing Corporation of India.