bfsi.economictimes.indiatimes.com
Open in
urlscan Pro
2a02:26f0:1700:78f::3857
Public Scan
URL:
https://bfsi.economictimes.indiatimes.com/news/policy/hedging-63-66-per-cent-of-ecb-exposure-optimal-rbi-economist/89083384
Submission: On January 24 via api from CH — Scanned from DE
Submission: On January 24 via api from CH — Scanned from DE
Form analysis 4 forms found in the DOM
<form>
<ul class="tabs clearfix">
<li><a class="active" href="#" data-target="cookietabAnalytics">Analytics</a></li>
<li><a class="" href="#" data-target="cookietabNecessary">Necessary</a></li>
<li><a class="hideit" href="#" data-target="cookietabNewsletter">Newsletter</a></li>
</ul>
<div data-box="cookietabAnalytics" class="scroll-content ">
<table cellpadding="0" cellspacing="0">
<thead>
<tr>
<th></th>
<th>Name</th>
<th>Provider</th>
<th>Expiry</th>
<th>Type</th>
<th>Purpose</th>
</tr>
</thead>
<tbody>
<tr>
<td><input name="config.ga" id="id-config-ga" type="hidden" value="0"><input name="config.ga" type="checkbox" value="1"></td>
<td><label for="id-config-ga">Google Analytics</label></td>
<td><label for="id-config-ga">Google</label></td>
<td><label for="id-config-ga">1 Year</label></td>
<td><label for="id-config-ga">HTTPS</label></td>
<td><label for="id-config-ga">To track visitors to the site, their origin & behaviour.</label></td>
</tr>
<tr>
<td><input name="config.ibeat" id="id-config-ibeat" type="hidden" value="0"><input name="config.ibeat" type="checkbox" value="1"></td>
<td><label for="id-config-ibeat">iBeat Analytics</label></td>
<td><label for="id-config-ibeat">Ibeat</label></td>
<td><label for="id-config-ibeat">1 Year</label></td>
<td><label for="id-config-ibeat">HTTPS</label></td>
<td><label for="id-config-ibeat">To track article's statistics</label></td>
</tr>
<tr>
<td><input name="config.growthrx" id="id-config-growthrx" type="hidden" value="0"><input name="config.growthrx" type="checkbox" value="1"></td>
<td><label for="id-config-growthrx">GrowthRx Analytics</label></td>
<td><label for="id-config-growthrx">GrowthRx</label></td>
<td><label for="id-config-growthrx">1 Year</label></td>
<td><label for="id-config-growthrx">HTTPS</label></td>
<td><label for="id-config-growthrx">To track visitors to the site and their behaviour</label></td>
</tr>
</tbody>
</table>
</div>
<div data-box="cookietabNecessary" class="scroll-content hide">
<table cellpadding="0" cellspacing="0">
<thead>
<tr>
<th></th>
<th>Name</th>
<th>Provider</th>
<th>Expiry</th>
<th>Type</th>
<th>Purpose</th>
</tr>
</thead>
<tbody>
<tr>
<td><input name="config.optout" id="id-config-optout" type="hidden" value="1"><input name="config.optout" type="checkbox" value="1" checked="" disabled=""></td>
<td><label for="id-config-optout">optout</label></td>
<td><label for="id-config-optout">Times Internet</label></td>
<td><label for="id-config-optout">1 Year</label></td>
<td><label for="id-config-optout">HTTPS</label></td>
<td><label for="id-config-optout">Stores the user's cookie consent state for the current domain</label></td>
</tr>
<tr>
<td><input name="config.PHPSESSID" id="id-config-PHPSESSID" type="hidden" value="1"><input name="config.PHPSESSID" type="checkbox" value="1" checked="" disabled=""></td>
<td><label for="id-config-PHPSESSID">PHPSESSID</label></td>
<td><label for="id-config-PHPSESSID">Times Internet</label></td>
<td><label for="id-config-PHPSESSID">1 day</label></td>
<td><label for="id-config-PHPSESSID">HTTPS</label></td>
<td><label for="id-config-PHPSESSID">Stores user's preferences</label></td>
</tr>
<tr>
<td><input name="config.accessCode" id="id-config-accessCode" type="hidden" value="1"><input name="config.accessCode" type="checkbox" value="1" checked="" disabled=""></td>
<td><label for="id-config-accessCode">accessCode</label></td>
<td><label for="id-config-accessCode">Times Internet</label></td>
<td><label for="id-config-accessCode">2.5 Hours</label></td>
<td><label for="id-config-accessCode">HTTPS</label></td>
<td><label for="id-config-accessCode">To serve content relevant to a region</label></td>
</tr>
<tr>
<td><input name="config.pfuuid" id="id-config-pfuuid" type="hidden" value="1"><input name="config.pfuuid" type="checkbox" value="1" checked="" disabled=""></td>
<td><label for="id-config-pfuuid">pfuuid</label></td>
<td><label for="id-config-pfuuid">Times Internet</label></td>
<td><label for="id-config-pfuuid">1 Year</label></td>
<td><label for="id-config-pfuuid">HTTPS</label></td>
<td><label for="id-config-pfuuid">Uniquely identify each user</label></td>
</tr>
<tr>
<td><input name="config.OSTID " id="id-config-OSTID " type="hidden" value="1"><input name="config.OSTID " type="checkbox" value="1" checked="" disabled=""></td>
<td><label for="id-config-OSTID ">OSTID</label></td>
<td><label for="id-config-OSTID ">Times Internet</label></td>
<td><label for="id-config-OSTID ">1 Year</label></td>
<td><label for="id-config-OSTID ">HTTPS</label></td>
<td><label for="id-config-OSTID ">Oauth secure token</label></td>
</tr>
<tr>
<td><input name="config.OSSOID" id="id-config-OSSOID" type="hidden" value="1"><input name="config.OSSOID" type="checkbox" value="1" checked="" disabled=""></td>
<td><label for="id-config-OSSOID">OSSOID</label></td>
<td><label for="id-config-OSSOID">Times Internet</label></td>
<td><label for="id-config-OSSOID">1 Year</label></td>
<td><label for="id-config-OSSOID">HTTPS</label></td>
<td><label for="id-config-OSSOID">Oauth user identifier</label></td>
</tr>
<tr>
<td><input name="config.OSTPID" id="id-config-OSTPID" type="hidden" value="1"><input name="config.OSTPID" type="checkbox" value="1" checked="" disabled=""></td>
<td><label for="id-config-OSTPID">OSTPID </label></td>
<td><label for="id-config-OSTPID">Times Internet</label></td>
<td><label for="id-config-OSTPID">1 Year</label></td>
<td><label for="id-config-OSTPID">HTTPS</label></td>
<td><label for="id-config-OSTPID">used to sync accross portals</label></td>
</tr>
<tr>
<td><input name="config.fpid" id="id-config-fpid" type="hidden" value="1"><input name="config.fpid" type="checkbox" value="1" checked="" disabled=""></td>
<td><label for="id-config-fpid">fpid</label></td>
<td><label for="id-config-fpid">Times Internet</label></td>
<td><label for="id-config-fpid">1 Year</label></td>
<td><label for="id-config-fpid">HTTPS</label></td>
<td><label for="id-config-fpid">Browser Fingerprinting to uniquely identify client browsers</label></td>
</tr>
</tbody>
</table>
</div>
<div data-box="cookietabNewsletter" class="scroll-content hide">
<table cellpadding="0" cellspacing="0">
<thead>
<tr>
<th></th>
<th>Name</th>
<th></th>
<th></th>
<th></th>
<th>Purpose</th>
</tr>
</thead>
<tbody>
<tr>
<td><input name="config.newsletter" id="id-config-newsletter" type="hidden" value="0"><input name="config.newsletter" type="checkbox" value="1"></td>
<td><label for="id-config-newsletter">Daily Newsletter</label></td>
<td><label for="id-config-newsletter"></label></td>
<td><label for="id-config-newsletter"></label></td>
<td><label for="id-config-newsletter"></label></td>
<td><label for="id-config-newsletter">Receive daily list of important news</label></td>
</tr>
<tr>
<td><input name="config.promonewsletter" id="id-config-promonewsletter" type="hidden" value="0"><input name="config.promonewsletter" type="checkbox" value="1"></td>
<td><label for="id-config-promonewsletter">Promo Mailers</label></td>
<td><label for="id-config-promonewsletter"></label></td>
<td><label for="id-config-promonewsletter"></label></td>
<td><label for="id-config-promonewsletter"></label></td>
<td><label for="id-config-promonewsletter">Receive information about events, industry, etc.</label></td>
</tr>
</tbody>
</table>
</div>
<footer>
<label><input type="hidden" name="useragreement" value="0"><input type="checkbox" name="useragreement" value="1"> I've read & accepted the
<a style="color:red" href="https://bfsi.economictimes.indiatimes.com/terms_conditions.php" target="_blank">terms and conditions</a></label>
<input type="button" id="submitconsent" value="OK">
<span class="err_txt hide"></span>
</footer>
</form>GET https://bfsi.economictimes.indiatimes.com/search
<form method="get" id="search_form" action="https://bfsi.economictimes.indiatimes.com/search">
<input name="q" aria-label="Query" type="text" class="txt" autocomplete="off" placeholder="Search" value="">
</form><form action="" class="clearfix">
<div class="section clearfix">
<input id="subscribe_email_top" aria-label="Email" type="text" class="textbox" value="" placeholder="Your Email">
<input type="button" id="subscriber_btn_top" onclick="EtB2b.subscription.updateSubscription('top');" class="btn submit" value="Join Now">
</div>
<ul class="nwsltr_lst clearfix" style="display:none;">
</ul>
</form><form action="" class="clearfix">
<input id="subscribe_email_bottom" aria-label="Email" type="text" class="textbox" value="" placeholder="Your Email">
<input type="hidden" name="pip_category_id_bottom" id="pip_category_id_bottom" value="0">
<input type="hidden" name="pip_category_top" id="pip_category_bottom" value="">
<input type="hidden" name="newsletter_id_bottom" id="newsletter_id_bottom" value="">
<input type="button" id="subscriber_btn_bottom" class="btn submit" value="Join Now" onclick="EtB2b.subscription.updateSubscription('bottom');">
</form>Text Content
We have updated our terms and conditions and privacy policy
Click "Continue" to accept and continue with ET BFSI
ACCEPT THE UPDATED PRIVACY & COOKIE POLICY
Dear user,
ET BFSI privacy and cookie policy has been updated to align with the new data
regulations in European Union. Please review and accept these changes below to
continue using the website.
You can see our privacy policy & our cookie policy. We use cookies to ensure the
best experience for you on our website.
If you choose to ignore this message, we'll assume that you are happy to receive
all cookies on ET BFSI.
* Analytics
* Necessary
* Newsletter
NameProviderExpiryTypePurpose Google AnalyticsGoogle1 YearHTTPSTo track visitors
to the site, their origin & behaviour.iBeat AnalyticsIbeat1 YearHTTPSTo track
article's statisticsGrowthRx AnalyticsGrowthRx1 YearHTTPSTo track visitors to
the site and their behaviour
NameProviderExpiryTypePurpose optoutTimes Internet1 YearHTTPSStores the user's
cookie consent state for the current domainPHPSESSIDTimes Internet1
dayHTTPSStores user's preferencesaccessCodeTimes Internet2.5 HoursHTTPSTo serve
content relevant to a regionpfuuidTimes Internet1 YearHTTPSUniquely identify
each userOSTIDTimes Internet1 YearHTTPSOauth secure tokenOSSOIDTimes Internet1
YearHTTPSOauth user identifierOSTPID Times Internet1 YearHTTPSused to sync
accross portalsfpidTimes Internet1 YearHTTPSBrowser Fingerprinting to uniquely
identify client browsers
NamePurpose Daily NewsletterReceive daily list of important newsPromo
MailersReceive information about events, industry, etc.
I've read & accepted the terms and conditions
NEWS SITES
* Auto News
* Retail News
* Health News
* Telecom News
* Energy News
* CIO News
* Real Estate News
* Brand Equity
* CFO News
* IT Security News
* Government News
* Hospitality News
* HR News
* Legal News
* ET TravelWorld News
* Infra News
* B2B News
* CIOSEA News
* HRSEA News
* HRME News
Upcoming Event: CFO Meet & discussion on Revised Companies Act
Sign in/Sign up
* Follow us:
*
*
*
*
*
*
* ETBFSI Exclusive
* BANKING
* INSURANCE
* InsurTech
* NBFC
* FINTECH
* Payments
* Digital Lending
* RegTech
* Open API
* BFSI Videos
* Editor's View
* Brand Solutions
* REIMAGINE NEXT - THE FUTURE OF LEARNING
* ETBFSI.COM CONVERGE
BFSI: The world of Hyper-personalization
* FUTURE READY SECURITY FOR DIGITAL-FIRST BFSI
* LEARNFEST
* ETBFSI EXCELLENCE AWARDS 2021
AWARDS FOR EXCELLENCE IN INNOVATION
* THE DIGITAL NEXT: SERIES 2.1
Live Virtual Summit
* 3RD EDITION OF ETBFSI CXO CONCLAVE
Unlocking the BFSI Potential
* JOIN THE ECONOMIC TIMES FINANCIAL INCLUSION SUMMIT 2021
* 2ND EDITION OF ETBFSI VIRTUAL SUMMIT 2021
* ET BANKING LEADERSHIP SERIES PRESENTED BY MANIPAL ACADEMY
* NATIONAL COOPERATIVE SUMMIT
* FINANCIAL INCLUSION & PAYMENT SUMMIT
* Millennial Finance
* FinTech Diary
* BFSI Tech Tales
* Green Finance
* IBC
* ETBFSI Explains
* BFSI Movement
* More
* Blogs
* Innovation Masters
* POLICY
* FINANCIAL SERVICES
x
* BFSI News
* Latest BFSI News
* Policy
HEDGING 63-66 PER CENT OF ECB EXPOSURE 'OPTIMAL': RBI ECONOMIST
The ideal position would be to have at least 63 percent of total exposure of the
External Commercial Borrowings (ECBs) hedged at the system level , said a
research note from an RBI economist. Rules have however been evolving depending
on the prevailing market conditions.
* Gayatri Nayak
* ET Bureau
* January 24, 2022, 07:36 IST
*
*
*
*
*
*
*
*
Indian corporates which have borrowed in US dollars are exposed to currency
volatility as they may be 'inadequately' hedged to protect them from sudden
swings in the direction of currency movement. The ideal position would be to
have at least 63 percent of total exposure of the External Commercial Borrowings
(ECBs) hedged at the system level , said a research note from an RBI economist.
Rules have however been evolving depending on the prevailing market conditions.
All category of borrowers are not mandated 100 per cent hedging, though banks
are " In times of typical high forex volatility, firms issuing ECBs may take
recourse to hedge their exposure financially/naturally in the range of 63 per
cent- 66 per cent, which would translate to the total cost on loan, including
hedging cost, proportional to nearly 9 per cent. Moreover, this strategy is
likely to lead to protection against forex risk" said a research paper by
Ranjeev, assistant director at the Reserve Bank's department of statistics and
information management.
The study assumes significance as the rupee is expected to weaken with Fed
tightening and surge in dollar demand as crude and commodity prices surge.
"Hedging all FX exposures in their entirety may not be optimal in the sense that
with fully hedged FX exposure, the benefit of low-cost access to foreign capital
is foregone and at the same time unhedged foreign currency exposures may lead to
correlated defaults in debt servicing triggering build-up of systemic risk" the
author said.
External commercial borrowings at $219 billion comprise a third of India's
external debt as of September'2021. But there are no estimates of the level of
hedging as there are rules that are sector specific or tenor specific. The
existing rules prescribe mandatory hedging for specific sectors like
Infrastructure firms with only rupee revenues, in terms of tenor, it is mostly
for loans upto five years. Long-term ECBs with an average maturity of more than
5 years need not be hedged.
Many other corporates, though not mandated by the ECB guidelines, are taking up
financial hedging voluntarily where the decision to hedge depends on the broad
risk management decisions of the Board. Besides, the hedging decision depends on
the depth of the domestic foreign exchange market, the presence of natural
hedges/economic hedges among other factors.
Yet, a research paper by Reserve Bank of India economists underscore the need
for an optimal hedge ratio is a ratio - the percentage of total asset or
liability exposure that an entity ought to hedge against exchange rate
fluctuations.
Though policy makers would think it is prudent to hedge all foreign exchange
exposure, the borrowing corporate may think other- wise. " Corporates
undertaking hedging contracts for their forex exposure would be looking for a
trade-off between hedging cost and forex risk" the authors say. " This is
because, in times of high volatility, as was the case during the taper tantrum
in 2013, hedging costs increases enormously and the tradeoff becomes more
challenging" , the paper said.
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
reserve bank of india
RBI
external borrowings
currency movements
corporates
Read on App
Read on App
SUBSCRIBE TO OUR NEWSLETTER
50000+ Industry Leaders read it everyday
I have read Privacy Policy and Terms & Conditions and agree to receive
newsletters and other communications on this email ID.
POLICY
* 1 hr ago
SINGLE VOLUME ECONOMIC SURVEY LIKELY, MAY PROJECT GROWTH RATE OF AROUND 9%
* 1 hr ago
HEDGING 63-66 PER CENT OF ECB EXPOSURE 'OPTIMAL': RBI ECONOMIST
* 2 days ago
TWEAKS TO GOOGLE TAX UNLIKELY IN BUDGET
* 3 days ago
FINANCE MINISTRY RELAXES NORMS TO BOOST PUBLIC SPENDING
View More
EDITOR'S PICK
* 1 hr ago
BUDGET 2022: GOVT MUST CONTINUE WITH MSME SCHEMES INTRODUCED IN FIRST WAVE,
SAYS LENDINGKART CEO
* 1 hr ago
RUB-OFF EFFECT: LIC LISTING SET TO RAISE GOVERNANCE, TRANSPARENCY IN
INSURANCE SECTOR
* 1 hr ago
BUDGET 2022: CRYPTO PLAYERS URGE GOVT TO CLEAR UNCERTAINTY, INTRODUCE NORMS
* 1 day ago
KEEPING ALIVE THE SPIRIT OF INDIA’S SMALL BUSINESSES DIGITALLY
* 1 day ago
KEEPING ALIVE THE SPIRIT OF INDIA’S SMALL BUSINESSES DIGITALLY
BFSI VIDEOS
* COMPLETE DEARTH OF INVESTMENTS IN INDIA SINCE 10 YEARS: JM FINANCIAL MD SINHA
Dhananjay Sinha, managing director and chief – strategist of JM Financial
Institutional Securities Ltd, believes that for 10 odd years, there has been
a complete dearth of investments in India, which is the longest decline in
the country's investment cycle. Though there are phases where there is high
level of enthusiasm from the private sector, but overall the private capex
has been on a decline for a long period of time. Tune into the interview,
where Sinha shares his views with Amol Dethe, editor of ETBFSI, on FY23,
upcoming Union Budget, and state of the Indian economy.
* 6 days ago
UIDAI EYES SMARTPHONES AS UNIVERSAL AUTHENTICATORS: CEO SAURABH GARG
* 13 days ago
TECH, COLLABORATIONS, PERSONALISATION TO DRIVE CUSTOMER EXPERIENCE: BANKERS
* 17 days ago
DATA-DRIVEN LENDING IS THE “NEED OF THE HOUR”, SAY LEADERS
View More
SINGLE VOLUME ECONOMIC SURVEY LIKELY, MAY PROJECT GROWTH RATE OF AROUND 9%
The economy, as per the advance estimates of the National Statistical Office
(NSO), is expected to record a growth of 9.2 per cent during the current fiscal,
which is a tad lower than 9.5 per cent projected by the Reserve Bank.
* PTI
Click Here to Read This Story
*
*
*
*
*
*
*
*
The finance ministry is expected to come out with a single volume Economic
Survey for 2021-22 projecting a growth of around 9 per cent for the next
financial year. The Survey, which is tabled in Parliament by the Finance
Minister ahead of the Union Budget, is being prepared by Principal Economic
Advisor and other officials in absence of the Chief Economic Advisor (CEA), who
traditionally is the main architect of the document.
Even the first Economic Survey of the Modi government presented by the then
Finance Minister Arun Jaitley in July 2014 was prepared by senior Economic
Advisor Ila Patnaik.
At that time the post of CEA was vacant following the appointment of Raghuram
Rajan as Governor of Reserve Bank of India. Later, Arvind Subramanian moved in
as CEA in October 2014.
K V Subramanian completed his three-year term as CEA on December 6 last year.
The government has already initiated the process for appointing CEA who is a
Secretary rank official attached to the finance ministry.
The economy, as per the advance estimates of the National Statistical Office
(NSO), is expected to record a growth of 9.2 per cent during the current fiscal,
which is a tad lower than 9.5 per cent projected by the Reserve Bank.
On account of the outbreak of COVID-19 and subsequent nation-wide lockdown to
check the spread of the virus, the economy contracted by 7.3 per cent during
2020-21. The impact of virus on the economy was comparatively less during the
current financial year as the lockdowns were local in nature and did not cause
large-scale disruption in economic activity.
The Survey is expected to project a growth of about 9 per cent for the next
financial year, experts said citing base effect.
As per the recent report of the World Bank, India is projected to grow at 8.7
per cent while India Ratings and Research said it expects India's gross domestic
product (GDP) to grow 7.6 per cent on-year in FY23.
As per ICRA report, the country's real GDP is likely to maintain a 9 per cent
growth rate in fiscal 2022 and 2023 amid concerns over the Omicron variant of
Covid.
The Economic Survey 2020-21, released in January last year, had projected GDP
growth of 11 per cent during the current financial year ending March 2022.
The Survey had said growth will be supported by supply-side push from reforms
and easing of regulations, push for infrastructural investments, boost to
manufacturing sector through the Production-Linked Incentive (PLI) schemes,
recovery of pent-up demand, increase in discretionary consumption subsequent to
rollout of vaccines and pick up in credit given adequate liquidity and low
interest rates.
Also Read:
ECONOMIC SURVEY MAY LOWER FY23 GROWTH NUMBERS
The survey is expected to project a strong recovery after the ongoing Covid-19
wave, but statistical growth is expected to be lower because of the waning base
effect that has bumped up the current year's GDP growth.
See More Details
BUDGET EXPECTED TO RESTORE CONSUMER CONFIDENCE
The growth outlook for the next fiscal is clouded by various downside risks,
including new Covid-19 outbreaks, rising commodity prices, mounting inflationary
expectations, lingering supply bottlenecks and not-so-favourable global recovery
amid diminished fiscal and monetary policy support.
See More Details
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
indian economy
Single volume Economic Survey
gdp
Economic Survey
chief economic advisor
budget 2022
Read on App
Read on App
TWEAKS TO GOOGLE TAX UNLIKELY IN BUDGET
Under the Pillar One of the global deal, all signing countries are required to
withdraw their existing digital services taxes and other relevant similar
measures with respect to all companies and also commit not to introduce any new
unilateral measures in the interim period.
* Shrimi Choudhary
* ET Bureau
Click Here to Read This Story
*
*
*
*
*
*
*
*
The government is unlikely to tweak the equalisation levy in the upcoming Union
budget. The roadmap to phase out the levy will be worked out in line with the
deal with the US which envisages March 2024 as the end date or implementation of
the global tax deal.
Government officials told ET that any roll back will happen only then. The
budget, however, may outline final contours of the agreement between India and
the US to phase out the 2% levy on e-commerce.
While announcing the agreement on October 21, 2021, the finance ministry had
said the final terms of the deal would be finalised by February 1, 2022.
India will provide credit to US companies for any excess taxes accrued in the
interim period (between April 1, 2022 and March 2024) against tax collected
under the new regime.
The global tax deal, agreed upon by 136 countries, gives rights to countries,
including India, to tax digital players including Microsoft, Google, Facebook
and Netflix, besides setting a 'global minimum corporation tax' of 15%. It is to
be implemented from 2023.
Under the Pillar One of the global deal, all signing countries are required to
withdraw their existing digital services taxes and other relevant similar
measures with respect to all companies and also commit not to introduce any new
unilateral measures in the interim period.
"There are timelines set for adoption of the global tax deal, which is not
happening in the current year," said an official, who did not wish to be
identified.
Amendments to this effect will be brought in once there is a clear indication of
the contours, said the official.
"This transitional approach with US is more about assuring US firms that there
will be no change in the current tax regime till it is replaced by the new
Pillar One system, and they will even get credit for the levy paid during the
interim period," said Akhilesh Ranjan, former member, Central Board of Direct
Taxes (CBDT).
The final terms of the India-US agreement will lay down a mechanism for
taxpayers (US-based digital firms) to claim credit on the tax paid during the
interim period. Presently, there are two rates for digital tax - 6% for online
advertising (introduced in 2016) and 2% for e-commerce business (introduced in
2020). The agreement between India and the US referred to e-commerce business,
for which the rate of levy is 2%.
"The final terms of the deal would certainly relieve several Indian companies
from tariffs which could be levied as a result of US Trade Representative
proceedings," said Radhakishan Rawal, tax partner, Deloitte.
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
tax
india
google
finance ministry
equalisation levy
Budget 2022
Budget
Read on App
Read on App
FINANCE MINISTRY RELAXES NORMS TO BOOST PUBLIC SPENDING
As per the spending guidelines, ministries and departments are required to make
monthly or quarterly expenditure plans and cap it at 25% of Budget Estimates in
each of the first three quarters. For the fourth quarter, it has to cap it at
33% of the BE and 15% in March.
* Shrimi Choudhary
* ET Bureau
Click Here to Read This Story
*
*
*
*
*
*
*
*
In a bid to spur public spending, the Finance ministry has provided one-time
relaxation in the spending guidelines for January-March quarter to enable
central ministries and departments to expedite capital expenditure, according to
an office memorandum issued on Thursday. However, the spending ceiling should
not exceed the revised estimates, it said.
As per the spending guidelines, ministries and departments are required to make
monthly or quarterly expenditure plans and cap it at 25% of Budget Estimates in
each of the first three quarters. For the fourth quarter, it has to cap it at
33% of the BE and 15% in March.
“The guidelines have been reviewed..and it has now decided to relax the upper
limit of 33% of BE as applicable for last quarter (Jan-March) of the current
FY222, as a “one-time measure”, subject to the condition that ceiling of Revised
estimates is not exceeded, the Department of Economic Affairs said in an
memorandum.
It further said that for the items of capital expenditure, the ceiling of 15% of
BE in the last month (March) for the fiscal is also relaxed and will be
applicable with immediate effect, memorandum noted.
The move comes after several ministries and departments have reached out to the
ministry for a relaxing expenditure limit for Q4 as many of them have spent only
50% so far.
These restrictions shall be observed both scheme-wise as well as for Demand for
Grants as a whole.” This has been changed for the current fiscal, DEA said.
The Budget for FY22 provided Rs 5.54 lakh crore for capital expenditure which is
34.5% more than the BE of FY21.
As per the Controller General of Accounts (CGA) data, capital expenditure of 55
central ministries/departments with 101 Demands for Grants in April-November
period has been around Rs 2.74 lakh crore which is 49.4% of BE (vs 58.5% in FY
21). This means, the government will have to spend the remaining 50.6% in the
last four months of the current fiscal.
Those who reported lower capital spending in April-November period are Defence
(Capital Outlay on Defence Service), DEA itself, power ministry, key
infrastructure ministries such as Road Transport and Highways are among others.
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
Union Budget
road transport
finance ministry
department of economic affairs
Budget 2022
budget
Read on App
Read on App
STT MOPUP TARGET FOR FY23 LIKELY TO BE RAISED TO ₹21,000 CRORE
The actual STT collections for this year, in fact, are expected to be double of
the budget estimate, officials in the finance ministry told ET. These had
already reached ₹19,860 crore as on January 10.
* Anuradha Shukla
* ET Bureau
Click Here to Read This Story
*
*
*
*
*
*
*
*
Banking on the continuing buoyancy in the capital markets, the government is
expected to sharply increase its target for security transaction tax (STT)
collections next fiscal year. The Budget is likely to peg STT collections for
fiscal 2023 at more than ₹21,000 crore, compared with the ₹12,500 crore it had
targeted for the ongoing FY22.
The actual STT collections for this year, in fact, are expected to be double of
the budget estimate, officials in the finance ministry told ET. These had
already reached ₹19,860 crore as on January 10.
"For FY 23, the collection target will be raised by 70-75%. This is still low,
considering many big-ticket Initial public offers, including LIC, lined up in
the coming months," said one of the officials.
The collection of STT had exceeded the budget estimate for this fiscal year in
September itself, on the back of the buoyant capital markets.
Government data suggest that the collections have seen healthy growth in the
last three years, on account of increasing retail participation in the stock
markets.
STT collections totalled ₹11,430 crore in FY21, up 52% from the previous year,
despite the economy taking a hit due to the pandemic. STT mop up pre-Covid in
FY20 was Rs 8,130 crore.
The STT collections are in line with growth witnessed in overall direct tax
collections, which are also expected to overshoot the budget estimates this
fiscal year.
Rajesh Gandhi, partner, Deloitte India, said: "STT collections could increase
further because trading activity on the stock market is expected to remain high
due to continued interest among domestic and foreign investors, increase in
high-frequency trading and expected volatility due to internal and external
factors."
The STT levy, introduced in 2004, is a direct tax levied on every purchase and
sale of securities that are listed on recognised stock exchanges in India. The
Central Depository Services (India) Ltd (CDSL) had more than 52.6 million demat
accounts, while the National Securities Depository Ltd (NSDL) had around 24.5
million accounts, as on November 30, 2021. Last year, the total number of new
investor registrations was 8 million.
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
union budget
tax
stt
markets
india
budget 2022
budget
Read on App
Read on App
FED KICKS OFF DEBATE ON ISSUING ITS OWN DIGITAL CURRENCY WITH NEW WHITE PAPER
The paper tiptoes around a subject that has sparked debate inside the Fed's top
ranks, even as other central banks across the globe are exploring the adoption
of digital currencies.
* Reuters
Click Here to Read This Story
*
*
*
*
*
*
*
*
Creating an official digital version of the U.S. dollar could give Americans
more, and speedier, payment options, but it would also present financial
stability risks and privacy concerns, the U.S. Federal Reserve said in a
long-awaited discussion paper released on Thursday.
The paper made no policy recommendations and offered no clear signal on where
the Fed stands on whether to launch a central bank digital currency (CBDC), a
digital form of cash in your pocket. The Fed said it would not proceed with
creating one "without clear support from the executive branch and from Congress,
ideally in the form of a specific authorizing law."
The paper tiptoes around a subject that has sparked debate inside the Fed's top
ranks, even as other central banks across the globe are exploring the adoption
of digital currencies.
Nevertheless, it sets the stage for the central bank to collect public feedback
on the potential costs and benefits of a CBDC, which could ultimately advance
legislation long-term.
"While a CBDC could provide a safe, digital payment option for households and
businesses as the payments system continues to evolve, and may result in faster
payment options between countries, there may also be downsides," Fed officials
wrote.
Challenges include maintaining financial stability and making sure the digital
dollar would "complement existing means of payment," the Fed said. The central
bank also needs to tackle major policy questions such as ensuring a CBDC does
not violate Americans' privacy and that the government maintains its "ability to
combat illicit finance."
Unlike cryptocurrencies, which are typically run by private actors, a CBDC would
be issued and backed by the central bank. It would differ from electronic
transactions that happen through large commercial banks in that it could give
consumers a direct claim to the central bank, similar to physical cash.
About 90 countries are exploring or launching their own CBDCs, according to the
Atlantic Council. A widely used digital euro, yuan or dollar may still be years
away, but the projects could dramatically disrupt the global financial system.
Despite steering clear of policy recommendations, the Fed did shed some light on
how a digital dollar might function.
Critically, it said a digital dollar would "best suit" U.S. needs if it were
intermediated through the current financial system. That means individuals would
not have CBDC accounts directly with the Fed, an approach backed by some
Democrats who say a digital currency could help the unbanked. Banks worried that
such an approach would eat into their deposit base.
Still, Fed officials said they are not ruling anything out.
The central bank will collect comments on the issue via an online form for 120
days.
Thursday's paper is separate from research the Boston Fed has been working on
with the Massachusetts Institute of Technology to explore the technological
aspects of a CBDC. That research, including coding that could be used for a
potential U.S. CBDC, will be released as early as next month.
BOARD DIVISIONS
The paper partially echoed the views of Fed Chair Jerome Powell, who has said
such a project must have broad support and ideally be mandated by Congress.
Fed Governor Lael Brainard, meanwhile, has said it is not "sustainable" for the
United States to hold off on pursuing a digital dollar at time when competing
economies are moving ahead.
Others, including Fed Governor Christopher Waller, are more skeptical and point
out that many dollar transactions are already digital.
Jonathan McCollum, chair of federal government relations for Davidoff Hutcher &
Citron, said some in Washington worry the United States could weaken its
position as the holder of the global reserve currency if it does not move ahead.
"The U.S. has the opportunity to set the rules for how digital currencies
function in the international financial system, but it is critical we start
now," he said.
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
us dollar
federal reserve
digital dollar
digital currency
cbdc
Read on App
Read on App
GOVT TAPS EXPERTS ON TAXING CRYPTO ASSETS HELD BY FIRMS, FAMILY OFFICES
Companies currently have to disclose any holdings or dealings in
cryptocurrencies or crypto assets in their filings with the Registrar of
Companies (RoC).
* Sachin Dave
* ET Bureau
Click Here to Read This Story
*
*
*
*
*
*
*
*
The government has sought the views of tax experts on disclosure and taxation
guidelines for companies and family offices that hold cryptocurrencies, said two
people aware of the matter.
Companies currently have to disclose any holdings or dealings in
cryptocurrencies or crypto assets in their filings with the Registrar of
Companies (RoC). One of the people said the government could clarify the tax
implications of such investments in the upcoming Budget.
Most companies that hold cryptocurrency on their books are offering them as
income (mainly, business income), but because there is no clarity on taxation,
it is really difficult to compute actual income and how to treat them, tax
experts said.
"There are companies and family offices that have several transactions during
the year, and reconciliation becomes a really difficult process. Further, the
set-off of losses from cryptocurrency transactions with other business income
also requires clarity," said Yashesh Ashar, partner at tax advisory firm Bhuta
Shah & Co.
Losses from the investment or trading are unlikely to be allowed to set off
against regular profits as these are "speculative transactions".
"There are already regulations around holding cryptocurrency on companies' or
family offices' books, and it only makes sense to have a regulation around
disclosure and taxation. Many early investors have made substantial gains in
cryptocurrencies and they may also benefit if the government comes up with a
framework on whether this will be long-term or short-term capital gains," said
Siddharth Sogani, founder of CREBACO, a cryptocurrency research firm.
Tax experts pointed out that companies are reporting and applying tax on their
returns from cryptocurrencies differently due to regulatory confusion.
"There could be three types of companies that would have exposure to
cryptocurrencies, first those that are into the business of crypto assets,
second those who may have only invested in cryptocurrencies, and third, those
companies that accept payment in cryptocurrencies. Income from the sale of
investments in crypto should be treated as capital gains, whereas income from
dealing in crypto or where sale consideration is received in crypto should be
treated as ordinary business income of the company," said Sudhir Kapadia,
national leader-tax, EY India.
The ambiguity is also because of the nature of cryptocurrency, say tax experts.
It is still not defined as to whether cryptocurrency is a currency, an asset, or
a commodity. Tax rates and how companies treat them would depend on that, say
experts.
The new regulations could also mean that companies and even family offices will
have to report not just Indian holdings but even those outside India to the RoC
as well as the tax department.
The government is merely coming out with tax-related clarifications and is not
looking to roll out a separate cryptocurrency Bill in the upcoming Budget, ET
reported on January 12.
The government is looking to amend current income tax and disclosure rules in
the Budget to include cryptocurrency, ET reported earlier on December 4.
The government wants to capture cryptocurrency income and investments within and
outside India, two people aware of the development said, as per the December ET
report.
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
roc
family offices
cryptos
cryptocurrencies
crypto tax
bhuta shah
Read on App
Read on App
FORMER RBI GOVERNOR RAGHURAM RAJAN'S 8 CUES FOR BUDGET 2022
There is a need to shun incremental moves and look at new areas like
telemedicine, tele lawyering, edutech, Rajan said. According to him, what these
industries need is not funding, but better rules on data protection that meet
global standards.
* ET Online
Click Here to Read This Story
*
*
*
*
*
*
*
*
India urgently needs to move away from incremental budgetary policy moves and
stop thinking only about areas like manufacturing or agriculture, according to
former Reserve Bank of India governor Raghuram Rajan.
In an interview to ET Now, Rajan explained why one need neither be overly
optimistic nor overly pessimistic about India at the moment.
Aside from elaborating upon pressing issues like the state of key indicators of
the economy, the real shape of the recovery, India's susceptibility to another
possible round of Fed taper tantrums, etc, he also gave his take on where
exactly Modi government went wrong in respect of the contentious farm laws. Here
follows a round-up of what all he said.
Pressing issues for this budget
Maintaining the confidence of the markets as also of the public is among the key
issues for any budget.
There has to be a definite pathway on how to get the economy back on track. The
pathway should appear credible, one that doesn't hint at profligacy.
There is also a need to support demand at this point. There should be a push on
infrastructure — both by the Centre and the states. "It is important to ensure
that the states are doing what they can there because that will be important for
creating some of the low end jobs which are desperately needed but also creating
demand for domestic steel, for copper, cement etc," Rajan says.
Some of the measures should include keeping MGNREGA well funded, and handholding
the areas that are doing badly now.
There is a need to shun incremental moves and look at new areas like
telemedicine, tele lawyering and edutech. According to Rajan, what these
industries need is not funding, but better rules on data protection that meet
global standards.
According to Rajan, India should stop thinking about just manufacturing or
agriculture. It, instead, should start talking about services which is its big
strength.
More than anything else, this year's budget needs a vision, Rajan said: "I would
see the Budget document not so much as raising tariff A and providing subsidy B
but really a document which says this is the path we choose over the next five
years and every year we update it a little but that path, that vision seems
relatively constant."
Relevance of forex power in face of Fed taper
While the foreign exchange buffer that India has is a good one, the fact remains
that all other macroeconomic indicators must be in place as well, says Rajan.
These indicators include oil and gold imports and the widening current account
deficit. Of late, oil prices have surged and gold imports are on the rise,
leading to an expansion in the country's current account deficit.
To be sure, this CAD expansion has not yet reached worrying levels. Also,
exports have done well. But according to Rajan, that doesn't mean India can
ignore it anymore.
How rates can queer the pitch from here on
The time has again come to begin tracking the movement of interest rates, says
Rajan.
The amount of liquidity in the system — both in India and elsewhere — is
enormous and it's only a matter of time before policymakers find themselves
forced to raise rates.
Some of India's EM peers like Brazil have already bitten the bullet.
This is an era where all markets are inter-connected, so India needs to prepare
for the time US raises rates. According to Rajan, once rates go up in the US,
there will be financing issues elsewhere — issued that are currently
non-existent in places like India when money is still easier.
Real shape of economic recovery in India
According to Rajan, one need neither be overly optimistic nor overly pessimistic
at the moment. Both "bright spots and dark spots" is how the former RBI governor
describes the current state of the Indian economy.
The top end of businesses — including exporters, IT companies, businesses that
cater to the rich — is doing very well riding on pent-up demand. The upper
middle class, in the same manner, has done very good because they never had to
stop working/earning at any point during the pandemic.
At the other end of the spectrum — the lower middle class, people working
contact-intensive jobs — many have fallen through the cracks. Rajan cites the
rising employment numbers in agri sector to make his point, which he said is a
very peculiar phenomenon because no developing economy sees a rise in
agricultural employment.
The pandemic made that happen in India because a sustained reverse migration to
villages occurred after lower-end jobs vanished in cities and towns, he said.
India now has a real consumption problem because the less well-off segments did
really badly during Covid, Rajan added.
Limitations of monetary policy at this point
The credit scene in India is caught in a plethora of problems at this point,
Rajan said. These include (a) people are finding it difficult to borrow; (b)
lenders themselves are trapped; (c) credit flow is tepid at best.
According to him, the new-age credit boost from NBFCs and fintech is nowhere
near enough to fill that void.
India needs not just an increase in the demand for loans but also in the supply
of the same, but monetary policy can do little to remedy such a situation, he
said.
What fiscal policy can do
Targeted measures focussed on the urban poor could be the need of the hour.
One thing the pandemic did in India was expose the glaring lack of safety nets
for urban workers belonging to the lower-middle class. While rural India has
such a net in MGNREGA, urban India has none.
For urban workers, going back to their villages to the safety of MGNREGA is the
only way they can get any help. The sharp rise in beneficiaries during the
pandemic proved this beyond reasonable doubt.
So, India urgently requires an urban safety net. This budget could be a good
time for that.
The thing about inflation
According to Rajan, inflation has a way of getting entrenched over time and the
more it gets entrenched, the harder it is to dislodge.
India's inflation targeting framework has served the economy well so far, he
says, adding that without such a framework, the pandemic situation for India
could have been more adverse.
Rajan says no country can get complacent about inflation, and that India is a
case in point. The expectation that RBI will keep inflation under control keeps
borrowing rates reasonably low for India; some of the credit for G-Sec still
being in the 6% range also goes to the existence of this framework, he says.
Lesson from farm law fiasco
The idea is to be democratic, to talk to people, to bring together states with
the Centre and then devise a plan, Rajan said.
The main lesson from the recent farm reform episode is that there were a lot of
good things in it but Modi govt failed to sell those things more widely or
properly, he added.
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
raghuram rajan
budget 2022
rbi govenor
rajan
indian economy
budget
Read on App
Read on App
GOVT WEIGHS EXTENSION OF EMERGENCY CREDIT SCHEME
The scheme was launched after the national lockdown during the first Covid wave
to provide support to MSMEs and has since been expanded to cover other sectors
such as aviation.
* ET Bureau
Click Here to Read This Story
*
*
*
*
*
*
*
*
The government is examining a proposal to increase the validity of the Emergency
Credit Line Guarantee Scheme (ECLGS), which is now set to expire in March.
The scheme offers government guarantees for up to ₹4.5 lakh crore of loans, and
banks have so far sanctioned about ₹2.9 lakh crore under it. The government may
expand the validity of the scheme by up to a year and the overall loan cap by
10%, said a finance ministry official.
The scheme was launched after the national lockdown during the first Covid wave
to provide support to MSMEs and has since been expanded to cover other sectors
such as aviation. As of now, about 95% of the guarantees issued are for loans
sanctioned to MSMEs.
"We are examining it and an announcement for extension may be made in the
upcoming Budget," the official said. The government has received a
representation from the Indian Banks' Association (IBA) seeking an extension and
additional funding support, the official said.
In September last year, the government extended the validity of the scheme till
March 2022 or till guarantees for the entire ₹4.5 lakh crore were issued.
Disbursement can be made till June 2022, which was earlier March.
"Another year-long extension may come through," said the official, noting that
deliberations were ongoing.
The IBA, in its letter to the finance ministry last week, has argued that with
the effects of the pandemic on economic activity continuing, a need was felt for
continuing the support by government for one more year, up to March 2023.
"This will help banks to continue their support to the sectors affected by the
pandemic and ensure availability of liquidity support to the affected MSMEs," it
said in the letter, adding that economic revival which had begun already would
establish firmly resulting in copious cash flows to sustain the operations of
MSMEs.
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
union budget
india
eclgs
budget 2022
budget
Read on App
Read on App
FISCAL DEFICIT SEEN AT LOWER END OF 6-6.5% IN FY23: SBI ECOWRAP
The main objective of the upcoming Union Budget should be to create an
environment for giving higher weightage to short term stabilisation policies
rather than long term ones, the report said.
* Ishwari Chavan
* ETBFSI
Click Here to Read This Story
*
*
*
*
*
*
*
*
India’s fiscal deficit is seen at the lower end of 6-6.5% in the upcoming
financial year starting April 1, according to an SBI Ecowrap report.
The Indian economy is gradually heading towards recovery post the deep impact of
the pandemic in FY21, and the main objective of the upcoming Budget should be to
create an environment for higher weightage to short term stabilisation policies
rather than long term ones, it added.
Assuming the expenditure growth remains steady at 8% over FY22 estimates at Rs
38 lakh crore in FY23, and receipts – minus borrowing and other liabilities –
would grow by approx 10.8%, the fiscal deficit would lead to around Rs 16.5 lakh
crore or 6.3% of GDP in FY23, it said.
For FY23, the fiscal consolidation should remain limited to 30-40 bps from the
current fiscal. Any new taxes like wealth tax or others at this point could do
more harm than benefit, it added.
If the disinvestment of Life Insurance Corporation of India passes through in
FY22, the government might be ending the fiscal with a large cash balance of Rs
3 lakh crore, which could support a large part of government fiscal deficit
without taking recourse to market borrowings, the report said.
Gross borrowings
The government’s net market borrowing will be around Rs 8.2 lakh crore, and with
repayments of Rs 3.8 lakh crore, gross borrowing is seen at Rs 12 lakh crore.
The RBI, in FY22, has done open market operations (OMOs) of around Rs 2.6 lakh
crore, supporting a large government borrowing programme without disruptions.
The report expects that in FY23, without the support of OMOs, and with Rs 1.5
lakh crore seen via inclusion in bond index and credit offtake picking up, there
will still be an upward pressure on bond yields.
It states that bond yields may see major realignments in FY23 unless EM bond
index announcement happens in the Budget, with first inflows starting in the
second half of the upcoming fiscal.
Follow and connect with us on Twitter, Facebook, Linkedin, Youtube
Policy
sbi ecowrap
rbi
fiscal deficit
budget 2022
bond index
Read on App
Read on App
* Industry News
* Auto News
* Retail News
* Health News
* Telecom News
* Energy News
* CIO News
* Real Estate News
* Brand Equity
* CFO News
* IT Security News
* Government News
* Hospitality News
* HR News
* Legal News
* ET TravelWorld News
* Infra News
* B2B News
* CIOSEA News
* HRSEA News
* HRME News
* CONTACT US
ADVERTISE WITH US
We have various options to advertise with us including Events, Advertorials,
Banners, Mailers, Webinars etc.
Please contact us to know more details.
* SIGN UP FOR
ETBFSI NEWSLETTER
Get ETBFSI's top stories every morning in your email inbox.
50000+ Industry Leaders read it everyday
I have read Privacy Policy and Terms & Conditions and agree to receive
newsletters and other communications on this email ID.
* FOLLOW US
@ETBFSI
Follow @ETBFSI for the latest news, insider access to events and more.
*
*
*
*
*
* About Us
* Contact Us
* Advertise with us
* Newsletter
* RSS Feeds
* Embed ETBFSI.com Widgets on your Website
* Privacy Policy
* Terms & Conditions
* Guest-Post Guidelines
* Sitemap
Copyright © 2022 ETBFSI.com. All Rights Reserved.