ECB for Civil Aviation Sector

Considering the bad conditions in which the civil aviation sector is in India these days, RBI has thrown a lifeline to the sector by allowing them to avail ECBs for working capital purposes. Each airline company can avail USD 300 million each subject to a cap of USD 1 billion for the entire sector in itself. The ECB will be on approval basis. There are few other conditions as well, prominent among them is that repayment of ECB should be out of the foreign exchange earnings, and not from borrowing from the Indian market. A copy of the circular can be found here

ECB Liberalisations

RBI has vide two notifications both dated 20th april 2012 further liberalised the ECB regime.

In the first notification, which can be accessed here the infrastructure sector has been given the sops. Power sector is allowed to use 40% of the ECB loan availed for refinancing costly rupee loan, but this will be on approval basis and also subject to the condition that the balance 60% is to be used for capital expenditure.

In the second notification which can be accessed here a new ECB can be raised at a higher rate than the existing ECB and that second ECB can be used for refinancing/ rescheduling an existing ECB on approval basis. The all in cost ceilings should not be broached.

I wonder why should anybody borrow at a higher rate in order to reschedule a ECB taken at a lower rate, unless I am missing something. 

Government payments on e-payments mode

The Government of India, Ministry of Finance has issued a press release which stipulates that all government payments above Rs.25,000/- from the government to its vendors, suppliers, loanees, grantees etc. will be made by direct credit to the payee's bank account instead of by cash or cheque. All payments to government employees other than salaries above this limit will also be similarly made by direct credit. Even the government employees can opt to have their salaries credited by direct credit to their bank accounts. However, the limit of Rs.25,000/- fails logic - why not make the entire government payments spectrum on e-payment basis from Re.1 onwards.

Government press release

Consolidated FDI Policy

The Department of Industrial Promotion and Policy (DIPP) under the Ministry of Commerce has published the latest edition of the Consolidated FDI Policy effective from April 10, 2012. The DIPP undertakes to issue revised Consolidated FDI Policy every six months in April and October every year. Now onwards they will issue it on a yearly basis i.e. the next consolidated FDI policy will be issued in March 2013.

Simultaneous to the consolidated FDI policy which makes for ponderous reading because it is more than 100 pages, the DIPP has also issued a press release detailing the changes that were carried out in the FDI policy from October 2011. Some of the changes in the policy is highlighted below:

i)                    In Commodity Exchanges, government approval is required only for the FDI component, not for the FII investment;

ii)                  In case of NBFC, FDI is allowed only on financial lease activity, not on operational leases;

iii)                In case of conversion to equity on the value of imported machinery etc. Second hand machinery, capital goods etc. Will not be allowed to be converted into equity, only first hand imported state of the art technology;

iv)                Investment by Foreign Venture Capital Investors and Qualified Financial Investors in permitted securities;

v)                  FDI in single brand retailing upto 100%,

Among others

The copy of the press release can be found here

A copy of the consolidated FDI circular can be found here

Category II Authorised Dealers

Category II Authorised Dealers have been given certain additional powers vide RBI circular dated 4th April 2012 on the subject. They have now been allowed to issue forex pre-paid cards to residents travelling out of India on personal/ business visits subject of course to adhering to KYC norms. However the settlement of forex pre-paid cards can be made only through category I Authorised Dealers.

Further they have also been allowed to open Nostro accounts subject to some conditions such as (1) only one nostro account per currency, (2) Balances in the nostro accounts to be used only for making remittances which are permissible and not for settlement of forex pre-paid cards, which can be done only through Category I Authorised Dealers, (3) No idle balance should remain in the account (4) Reporting requirements.

Category II authorised dealers are travel agents such as Thomas Cook, Cox & Kings and other finance companies which are not banks.

Copy of the RBI circular can be found  here

International Debit Cards

RBI has vide its circular no. 102 dated 2nd April 2012 relaxed conditions for redemption of international debit cards/ store value cards/ charge cards/ smart cards which is used by resident Indians while on a visit out of India. Hitherto there was a condition that the unutilised balance lying in the card would be redeemed only after 10 days of the last transaction. Now they can redeem the unutilised balance in the card immediately on arrival but the Authorised Persons shall retain some amount for (a) amounts that are authorised by the traveller but remaining unclaimed from the AP on the date of request for redemption, (b) a sum not exceeding $100 for any pipeline transactions, and (c) transaction fees/ service tax payable in India. A copy of the said circular can be accessed here

Echoes in the Darkness

Just finished reading a true crime story by Joseph Wambaugh - "Echoes in the Darkness". This book is regarding the murder mystery of Susan Reinert a divorced school teacher and her two children Karen and Micheal who were never found since that fateful day in June 1979. She was having a secret with another school teacher William Bradfield who was famous for his numerous flings with women. He was having another secret affair with another teacher Sue Myers and this after having two failed marriages in the past. Whilst he was juggling with the two teachers he started and successfully carried two more affairs both with students of the Upper Merion High School in Main Line, Philadelphia where they were all enrolled. One of the student was a minor when he started his affair, but all his women swore by his affections. The principal of the school was Jay Smith an ex-army officer and quite a character in himself with revelations of sexual escapades and fantasies, shoplifting and his own daughter Stephanie and son-in-law Eddie Hunsberger were never found – it was alleged that Smith had murdered his daughter and son-in-law but they just vanished from the face of earth and were never found to this day. The prosecution had to rely on circumstantial evidence in this case. Much of the book in the first half is devoted to the peccadilloes of William Bradfield and Jay Smith in conjuring up their images as crazy, demented individuals.