BSNL, MTNL bids for basic licences rejected
New Delhi: Three government-owned operators, Bharat Sanchar Nigam, Mahanagar Telephone Nigam and Videsh Sanchar Nigam, have been told by the department of telecommunications that their applications for licenses for basic telecom operations have been rejected.

This rejection is on the grounds that the three telecom operators have the government has their promoter. According to the existing license conditions, a promoter cannot have stake in more than one licence in a circle.

While this news may be a body blow to the public sector telecom giants, it is good news for private players like Reliance, HFCL, Bharti and the Tata who have received LoIs.
Back to News Review index page  

Banks barred from arbitrage operations
Mumbai: The country’s apex bank, the Reserve Bank of India, has categorically banned banks from undertaking short-selling or arbitrage operations. While doing so the bank has, however, relented in its final guidelines and stated that loans against shares to individuals and corporates where the end-use is other than stock broking activities, will not be treated as exposure to capital markets.

Earlier the proposal was to treat all loans irrespective of the purpose, where shares are taken as collateral, as exposure to the market.

The final norms also require banks to increase margins on loans against shares to a uniform 40 per cent for loans against dematerialised shares as well as shares held in the physical form.

The final guidelines also incorporate the earlier proposal that each bank should fix within the overall ceiling of five per cent a sub-ceiling for advances to all the stock-brokers and to individual stockbroking entities and interconnected companies.

As a measure of caution to minimise the nexus between the market operators and bankers, the revised guidelines call for a clear separation of decision making in regard to investment in shares and advances against shares which will be done by the investment committee, which in turn will be set up by the board.

The surveillance and monitoring of exposure to capital markets will be done by the separate and independent audit committee of the board which will review the total exposure of the bank to the capital market in all forms.
Back to News Review index page  

IPPs may be allowed to directly sell power to retail customers
New Delhi: The power ministry has initiated a major policy shift by planning a move to allow power generating companies to sell their production directly. This would mean that independent power producers (IPPs) putting up generation projects will also have the right to distribute power to the end-users.

It is understood that a proposal to this effect has been forwarded to various state governments and electricity boards for their approval. The consent of states is important as the subject of distribution rests with the state governments.

Under the existing private power policy, IPPs are only allowed to generate power and sell it to the state electricity boards (SEBs), which in turn sell to the retail consumers.

This move has largely been prompted by the fact that most SEBs are going through a massive cash crunch and are in a very bad financial shape.

One of the crucial issues that would need to be worked out if the states agree to this proposal is whether these companies would be allowed as licencees. The present companies such as Tatas, CESC and BSES operate as licensees as under the Electricity (Supply) Act, 1948, whereby there is a a ceiliing on the profits that they can earn as per the schedule VI of the Act.
Back to News Review index page  

New RBI norms force foreign banks to cut assets
Mumbai: With the Reserve Bank of India issuing new guidelines, foreign banks are seen to be under pressure to sell assets to comply with the new norms for Tier-I capital.

With a capital adequacy of nine per cent, a foreign bank can technically have a maximum balance-sheet size of Rs 1,333 crore, but to the extent it gives a $100 million cross-border loan, its capital base for single exposure-limit stands at Rs 520 crore.

Most senior foreign bankers feel that serious overseas banks will invest money to tide over the RBI stipulation thereby boosting foreign direct investments.

The big five foreign banks — Citibank, Standard Chartered Grindlays, HSBC, BankAm, ABN Amro Bank and Deustche Bank — are seen going all out to grow their businesses in line with their publicly stated stands. The heat will now be on the smaller foreign banks who have not invested or grown their local books even under the current norms.
Back to News Review index page