NEWS FEATURE

Narendra Modi-led NDA Govt looks to give SAARC ties a trade boost
Not merely a goodwill gesture of invitations to its leaders to attend the swearing-in ceremony on May 26,
more good news awaits India's South Asian neighbours from the incoming Narendra Modi government,
which is looking to economically integrate the region's 1.6 billion people.
Rupee becomes best performing Asia-Pacific currency
Boosted by capital inflows and euphoria around the incoming government, rupees surge to 11-month
high levels has made it the best performing currency in Asia-Pacific region against the US dollar so far in
2014.
More in this section
Foreign investment inflow expected to double to $60 bn: Assocham
Foreign investment inflows are estimated to more than double to $60 billion this fiscal riding on the high
expectations from the incoming Narendra Modi-led government, the Associated Chambers of Commerce
and Industry (Assocham) said on May 25.
Government approves 10 FDI proposals worth Rs 140 crore
The government has cleared 10 foreign direct investment proposal totalling Rs 139.95 crore, including that
of Equitas Holding and Ambit Pragma Fund II.
More in this section
OVERSEAS INVESTMENTS
ITP Division
Ministry of
External Affairs
Government of India
Issue no 572
I
May 20-May 26, 2014
p. 02/04
TRADE NEWS
Natural rubber imports shoot up 84% in April
Imports of natural rubber rose 84% to 26,445 tonne in April on account of lower prices in international markets
and drop in domestic production.
More in this section
p. 08/10
p. 05/07
p. 11/14
p. 15/16
SECTORAL NEWS
Narendra Modi government to boost power capacity with 4 ultra-mega projects
The Narendra Modi government is set to give a big push to India's power capacity addition programme by
putting four 4,000 MW ultra-mega projects (UMPPs) up for bidding in its first year in office.
More in this section
NEWS ROUND-UP
RBI to have regular process of bank licences: Rajan
Reserve Bank of India Governor Raghuram Rajan on May 20 said the central bank would soon announce a
regular process of granting bank licences, ending the current system of giving it in tranches.
More in this section
WEEKLY
ECONOMIC
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WEEKLY
ECONOMIC
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>> NEWS FEATURE
Issue no 572
I
May 20-May 26, 2014
Narendra Modi-led NDA Govt looks to give
SAARC ties a trade boost
Not merely a goodwill gesture of invitations to its leaders to
attend the swearing-in ceremony on May 26, more good news
awaits India's South Asian neighbours from the incoming
Narendra Modi government, which is looking to economically
integrate the region's 1.6 billion people.
The commerce ministry is putting together a plan to
deepen trade and investment ties with the South Asian Asso-
ciation for Regional Cooperation (Saarc) countries. Noting
that security concerns mainly between India, Bangladesh
and Pakistan have been holding back the economic integra-
tion of the region, a senior official involved in the formulation
of the new strategy told FE that the core of this plan is free
movement of goods, people and voice (by allowing easier
usage of SIM cards of member countries in each other's terri-
tory). The aim is to ensure that the next Saarc summit in
Nepal, likely in October-November, is a landmark one by inking pacts on game-changing proposals including a Saarc visa
system similar to the European Union's Schengen visa as well as a South Asian Development Bank. The member coun-
tries include Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
Currently, India runs a huge $15-billion trade surplus with other Saarc countries, with exports worth $17.5 billion and
imports of just $2.5 billion. The idea is to correct this skewed trading system in a way that Indian businesses can source
more from other Saarc countries and build better value chains. For this, India has to invest more in the region by taking
advantage of the arbitrage in wage and electricity rates, the sources said.
For better people-to-people ties, the proposal is to set up a Saarc visa regime envisaging liberal multi-entry visas like
the European Union's Schengen visa system to ensure that all citizens of the Saarc member countries can move freely in
South Asia. Currently, there is a Saarc Visa Exemption Scheme, in which some categories of people(including higher
court judges, businesspersons, parliamentarians, journalists, senior officials and sportsmen) are given a Special Travel
document that exempts them from visas within the region. This arrangement will now be reworked to promote tourism
(including medical tourism) and trade within the region.
The other measure being considered is a South Asian Development Bank with an initial corpus of $5-10 billion. This
will be used for ensuring better connectivity by building railway lines, roads, waterways, ports and customs stations to
resolve all the transit issues. In the pipeline is better connectivity between the Chittagong port (in Bangladesh) to Haldia
and Vishakhapatnam ports in India to avoid the current routing of goods through Colombo and Singapore ports.
Also, plans are afoot to exploit the potential of wind power in Sri Lanka, estimated at 20,000 MW, by linking this to a
bigger grid to be exported to India and exported back when there is a fall in wind power generation there.
Besides, on the cards is a Cabinet note to increase the usage of the interest subvention for project exports through
EXIM Bank of India for Saarc countries. This is linked to the Buyers Credit Scheme and is being implemented through
EXIM Bank, ECGC and the National Export Insurance Account. It is aimed at providing long term concessional credit
through EXIM Bank, as co-financing in infrastructure sectors. On the trade front, India already has a granted duty-free-
quota-free access to all least developed countries in Saarc (barring Pakistan and Sri Lanka) to the Indian market. Efforts
are also on to expedite the completion of negotiations for a Saarc Agreement on Trade in Services.
Source: The Financial Express
3
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>> NEWS FEATURE
Issue no 572
I
May 20-May 26, 2014
Boosted by capital inflows and euphoria around the incoming government, rupees surge to 11-month high levels has
made it the best performing currency in Asia-Pacific region against the US dollar so far in 2014.
With a gain of about 5.3 per cent since the start of this year, the rupee has sprinted ahead of its other Asia-Pacific
peers, including Indonesias rupiah and New Zealand dollar, in terms of year-to-date rise, shows an analysis of various
currencies vis-a-vis the greenback.
The rupee, which closed at 58.52 levels against the
US dollar on May 23, has incidentally seen a lions share
of 5.3 per cent gain in the past one month.
The Indian currency stood at Rs 61.80 level per US
dollar at the start of 2014 and has recorded a gain of
327 paise in less than six months, partly helped by ro-
bust foreign fund inflows. This marks a major turn-
around since August last year, when rupee touched its
life-time low of 68.80.
...positive sentiments out of the election results en-
abled us to upgrade our FII flows estimates by $5 billion
to $20 billion, implying an overall BOP (balance of pay-
ment) surplus of $29 billion. We expect the USD/INR
range to be 57-61 in FY2015, Indranil Pan, Chief Econo-
mist of Kotak Mahindra Bank, said in a report.
The highest-ever tally in the Lok Sabha elections has helped BJP secure a majority on its own, thus raising hopes of
big-bang reforms to revive the economy.
In Asia-Pacific, the rupees gains versus the US dollar are followed by the Rupiah (Indonesia) that has appreciated 4.6
per cent, New Zealand dollars 3.75 per cent rise and Australian currencys 3.5 per cent rise.
The Yen (Japan), the Won (South Korea) and the Ringgit (Malaysia) have gained between 2-3 per cent in this calendar
year so far.
Philippines Peso has appreciated 1.6 per cent against the US dollar, followed by 0.5 per cent uptick in Thailands Baht
and Singaporean dollar. While the Hong Kong dollar is almost unchanged since 2014 started, the Taiwan dollar and Chi-
nese Yuan have lost value.
Source: Business Line
Rupee becomes best performing
Asia-Pacific currency
4
WEEKLY
ECONOMIC
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Foreign investment inflows are estimated to
more than double to $60 billion this fiscal rid-
ing on the high expectations from the incoming
Narendra Modi-led government, the Associated
Chambers of Commerce and Industry (As-
socham) said on May 25.
Riding on huge expectations from the in-
coming Modi government, global investors are
gung-ho on the Indian economy, which is ex-
pected to witness over 100 percent increase in
foreign investment inflows - both FDI and FIIs -
to above $60 billion in the current financial
year against $29 billion during 2013-14, an
Assocham study projected.
The unfolding scenario also points to eas-
ing of prices and lowering of interest rates, the
two major challenges that the Indian economy
had been facing for some years now, Assocham President Rana Kapoor said.
However, Assocham immediately pointed to the challenge posed to the Reserve Bank of India by the emerging situa-
tion, where the problem of too few US dollars has become one of too many and the rupee in its exchange has strength-
ened to Rs.58.50.
"The emerging situation will pose a new challenge to the Reserve Bank to deal as it will have to balance the rupee
rate and inflation from the increased liquidity into the system," Assocham said.
In fact, the RBI does not want the rupee to strengthen further so as not to hurt exports, and has decided to ease con-
trols on gold imports its had imposed last year.
The new finance minister and the RBI, thus, will have to be on the same page in dealing with this scenario, which will
see the strengthening of rupee and a further improvement on the current account balance, Assocham said.
Foreign institutional investment (FII) in the current fiscal would remain more than foreign direct investment (FDI) in-
flows, Assocham said. The expectations are that FII investment in both debt and equity markets could exceed $35 billion
while FDI money could be above $25 billion.
India will continue to outpace all other emerging economies in terms of FII inflows, the study found.
Source: Indo-Asian News Service
Foreign investment inflow expected to
double to $60 bn: Assocham
Issue no 572
I
May 20-May 26, 2014
>> OVERSEAS INVESTMENTS
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WEEKLY
ECONOMIC
BULLETIN
>> OVERSEAS INVESTMENTS
Issue no 572
I
May 20-May 26, 2014
Government approves 10 FDI proposals
worth Rs 140 crore
The government has cleared 10 foreign direct investment proposal totalling Rs 139.95 crore, including that of Equitas Hold-
ing and Ambit Pragma Fund II. The proposals were cleared following recommendations for the same by Foreign Investment
Promotion Board ( FIPB) in its meeting held in March, the Finance Ministry said.
It further said decision on seven proposals was deferred while decision on five have been kept in abeyance.
Equitas Holding, a holding cum investment company in micro-finance sector, has got approval to increase FDI from 89.64
per cent to 95.64 per cent by transfer of shares from resident Indians to Non-residents.
The proposal entails investment of Rs 79.93 crore. Ambit Pragma Fund II, a Trust (APF - II) has got government's nod to in-
crease foreign equity from 93.04 per cent to 94.88 per cent.
The seven proposals on which decision has been deferred include that of Alhcon Parenterals (India), HBM Private Equity
India, Mauritius and Speciality Restaurants.
Decision has been kept in abeyance on the proposals of Amri India, Financial Software and Systems (P) Ltd, Brunswick
India and two others.
The government also rejected a proposal of I Energy Wind Farms (Theni) which had sought post-facto nod for issue of
shares to Indian Energy (Mauritius) Ltd, Mauritius (foreign investor) one day before receipt of inward remittances.
Source: Press Trust of India
India's forex reserves gain $1.09 bn
India's foreign exchange (forex) reserves rose by
$1.09 billion to $314.92 billion for the week ended
on May 16, led by a sharp jump in overseas cur-
rency assets, Reserve Bank of India (RBI) data
showed.
The reserves had gained by $1.97 billion to
$313.83 billion for the week ended May 9.
According to the RBI's weekly statistical supple-
ment, foreign currency assets, the biggest compo-
nent of the forex reserves, jumped by $1.26 billion
to $287.81 billion in the week under review.
The foreign currency assets had jumped by $1.97
billion to $286.54 billion.
The RBI said the foreign currency assets, ex-
pressed in US dollar terms, include the effect of ap-
preciation or depreciation of non-US currencies held in reserve such as the pound sterling, euro and yen.
However, India's reserve position with the International Monetary Fund (IMF) decreased by $158.1 million to $1.68 bil-
lion.
The value of special drawing rights (SDRs) also fell. The SDRs were down $14.5 million to $4.46 billion.
The value of gold reserves remained the same in the period under review at $20.96 billion. The reserves had declined
by $601 million at $20.96 billion in week ended on May 2.
Source: Indo-Asian News Service
6
WEEKLY
ECONOMIC
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>> OVERSEAS INVESTMENTS
Issue no 572
I
May 20-May 26, 2014
Now, Singapore is Indias top FDI source
Singapore has overtaken Mauritius as the largest source of foreign direct investment into India, ending its long run over
the top slot.
According to the latest data compiled by the department of industrial policy and promotion, FDI inflows from Singa-
pore added up to nearly $6 billion (over Rs 35,500 crore) in 2013-14, compared with $2.3 billion in the previous year.
In contrast, FDI inflows from Mauritius almost halved to $4.9 billion (Rs 29,360 crore) last year from $9.5 billion in
2012-13.
There was a change at the third spot as well with the UK reclaiming its position with inflows of $3.2 billion in 2013-14,
pipping Japan ($1.7 billion). The US retained the fifth slot with inflows of less than $1 billion.
Source: The Times of India
FIIs pour in Rs 14,000 crore in May
Overseas investors have pumped in over Rs 14,000 crore in Indian stocks so far this month as the new BJP government,
which is to take charge on May 26, is seen as being reforms-oriented.
Foreign Institutional Investors (FIIs) purchased shares worth Rs 84,777 crore and sold equities amounting to Rs
70,553 crore, a net inflow of Rs 14,224 crore ($2.4 billion) from May 2-23, according to data from the Securities and Ex-
change Board of India.
At the same time, foreign investors have infused a net amount of Rs 12,037 crore ($2.03 billion) in the debt market.
Market analysts said that foreign investors are betting on the new government under the Narendra Modi-led BJP as
they see it initiating reforms to spur economic growth.
Given the decisive political mandate, analysts believe that Indian markets have the potential to get more inflows.
FIIs, the main drivers of the equity market, have helped push up the BSE benchmark index, Sensex, by over 10 per cent
so far in May.
On the day of election results, May 16, it had shot up about 1,400 points in intra-day trading to cross the 25,000 mark,
a record high.
The strong inflows in the recent months have taken the net investment by FIIs to Rs 46,000 crore in Indian equities so
far this year, and over Rs 38,000 crore in the debt market during the period taking the total to Rs 84,000 crore.
They had invested Rs 9,602 crore in Indian stocks in April, compared with Rs 20,077 crore in March, Rs 1,404 crore in
February and Rs 714 crore in January.
Currently, there are 1,709 registered FIIs in the country, along with 6,418 sub-accounts.
Source: The Times of India
7
Issue no 572
I
May 20-May 26, 2014
WEEKLY
ECONOMIC
BULLETIN
>> TRADE NEWS
Natural rubber imports shoot up
84% in April
Africa-India Partnership Day being held in Rwanda
Imports of natural rubber rose 84% to 26,445 tonne
in April on account of lower prices in international
markets and drop in domestic production.
According to the Rubber Board data, India's nat-
ural rubber imports stood at 14,396 tonne in the
same month last year. Natural rubber imports in FY
2013-14 increased by 49% to 3.24 lakh tonne from
2.17 lakh tonne in 2012-13.
Imports increased despite the Centre raising im-
port duty on natural rubber to R30 per kg or 20%,
whichever is lower, in December last year.
The basic customs duty on natural rubber earlier
stood at R20 a kg or 20% whichever was lower.
"Imports have gone up as prices of both block rub-
ber and sheet rubber in the international market
are lower as compared to domestic prices," a sen-
ior rubber board official said.
The gap between international and domestic prices of block rubber is R30-35 per kg, while that of sheet rubber is R17-
18 per kg. About 95% of rubber imported is used by tyre manufacturers and India imports a big chunk from Vietnam and
Indonesia.
Meanwhile, the production of natural rubber dropped 4% to 51,000 tonne in April 2014 as against 53,000 tonne in the
same month last year. The consumption, however, fell marginally to 81,500 tonne in the month from 82,980 tonne in
April 2013, the data showed.
Rubber exports declined to 28 tonne in April this year as compared to 1,538 tonne in the same month a year ago.
Source: Press Trust of India
In an effort to further boost India-Africa business collaborations, an "Africa-India Partnership Day" was organised on May
22 on the sidelines of the African Development Bank's annual general meeting in Kigali, Rwanda on May 19-23.
The second such event, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Exim
Bank, has as its theme "Sharing Indias Experiences with Africa", FICCI said.
India's investments in Africa since 2005 total $50 billion and lines of credit to African countries total $8 billion.
Several multinational giants like Tata, Reliance, Bharti Airtel and Ashok Leyland have significant presence in Africa.
Bilateral trade between India and Africa has shot up from $25 billion in 2006-07 to around $70 billion in 2012-13. The
Indian government has targeted it to touch $200 billion by 2020.
According to FICCI, the Africa-India Partnership Day "will serve to help in synergizing the priority areas for engage-
ment between the African Development Bank, Government of India and Exim Bank of India."
Source: Indo-Asian News Service
WEEKLY
ECONOMIC
BULLETIN
>> SECTORAL NEWS
Issue no 572
I
May 20-May 26, 2014
The Narendra Modi Government is set to give a big push to India's power capacity addition programme by putting four
4,000 MW ultra-mega projects (UMPPs) up for bidding in its first year in office.
Apart from the UMPPs at Bedabahal in Odisha and Cheyyur in Tamil Nadu, where the Power Finance Corporation
(PFC) has already initiated the bidding process, two more mega projects are being readied for bidding one in Bihar and
another in Jharkhand in FY15.
While one of the two sites being examined at
Rajouli (Nawada district) and Rajouri (Banka district)
will be selected for a possible UMPP in Bihar, a
site at Deoghar in Jharkhand has already been se-
lected for the second UMPP in the state.
The ministry of coal has been asked to identify
urgently coal blocks suitable for UMPPs for Bihar
and the second Jharkhand ultra-mega power project.
The idea is to get all possible clearances for these
projects so that bidding could be initiated at the ear-
liest, said a power ministry official. The ministry has
already included UMPP programme in the to-do-list
to be taken up by the next government.
Sources said that UMPP in Bihar has assumed im-
portance after the recently concluded Lok Sabha
elections that has given good numbers for the NDA
in the state.
Bihar so far does not have a UMPP and the state
government had been pitching for at least one such
mega project for quite some time. It is expected that indigenous coal-based project in the state would get its fuel linkage
from a nearby mine in Jharkhand, which will also feed the coal requirements of Deoghar UMPP.
If all the four UMPPS are awarded in a space of one year, it would be record of sorts for the country as 16,000 MW of
new capacity would get the nods. Ever since the start of UMPP programme way back in 2006, only four projects have
been allotted of which three have been bagged by Reliance Power in Sasan (Madhya Pradesh), Krishnapatnam (Andhra
Pradesh) and Tilaiya (Jharkhand). The fourth, at Mundra in Gujarat, has been bagged by Tata Power.
The good response for the two UMPPs at Cheyyur and Bedabahal and the good sentiment prevailing in the country
after the elections has prompted the power ministry to push two more such projects in a single year. All the nine appli-
cants for Odisha and eight applicants for the TN UMPP have been selected for issuance of Request For Proposal (RFP) to
put in their price bids. These include companies such as NTPC, NHPC, Tata Power, Jindal Power, JSW Energy, CLP India,
Sterlite.
Source: The Financial Express
Narendra Modi Government to boost
power capacity with 4 ultra-mega projects
8
WEEKLY
ECONOMIC
BULLETIN
>> SECTORAL NEWS
Issue no 572
I
May 20-May 26, 2014
Beating the record of recent years, Punjab and Haryana have procured over 180 lakh tonnes of wheat this season, offi-
cials said on May 19.
"Punjab state has successfully achieved the wheat procurement target of 115 lakh tonnes on May 18 despite in-
clement weather conditions and untimely rains," a spokesman of the food and supplies department in Punjab said.
Farmers have been paid over Rs.14,378 crore for the wheat procured.
The spokesman said the procurement process was in full swing with various government agencies and private millers
procuring over 115.63 lakh tonnes of wheat till May 18 evening at 1,757 procurement centres.
The agencies had procured only 110.32 lakh tonnes of wheat in the like period last year.
"The Punjab government is committed to procuring all the wheat coming to the mandis (wholesale grain markets) of
Punjab despite meeting the procurement target already," he said.
Sangrur, Ludhiana and Bathinda districts led in procurement in the state this time.
In neighbouring Haryana, over 64.4 lakh tonnes of wheat has so far arrived in various grain markets. As much as 64.38
lakh tonnes out of these has been procured by government agencies, a state government spokesman said.
Last year, only 58.57 lakh tonnes of wheat had arrived in the corresponding period.
Sirsa, Fatehabad and Karnal districts led in wheat procurement.
Source: Indo-Asian News Service
Domestic air passenger traffic rose 4.75 percent in April to 53.18 lakh passengers -- up from 50.77 lakh ferried during
the corresponding month last year, data showed on May 20.
According to data furnished by the civil aviation ministry,
passengers carried by domestic airlines during January-
April, 2014 was up 2.02 percent at 206.99 lakh from 202.90
lakh passengers in the corresponding period of last year.
Regional passenger carrier Air Costa achieved the highest
overall occupancy in the month under review at 77.8 percent,
followed by IndiGo at 76.9 percent, GoAir at 76.1 percent,
JetLite at 76 percent, SpiceJet and Air India's domestic op-
erations both at 73.3 percent and Jet Airways at 70.9 per-
cent.
The data also showed that low cost carrier (LCC) SpiceJet
had the highest cancellation rate of one percent followed by
Air India's domestic operations at 0.8 percent, Air Costa at
0.5 percent, GoAir, Jet Airways and JetLite all stood at 0.4 percent and IndiGo at 0.1 percent.
Source: Indo-Asian News Service
180 lakh tonnes wheat procured in
Punjab, Haryana
Domestic air passenger traffic grows 4.75
percent in April
9
Issue no 572
I
May 20-May 26, 2014
WEEKLY
ECONOMIC
BULLETIN
>> SECTORAL NEWS
As part of efforts to ensure that Indian pharmaceutical products meet international standards, the government is spend-
ing about $500 million to build the capacity of the country's drug regulators, a senior official said in Mumbai on May 21.
National drug controller G.N. Singh said part of the money is to be used to set up a National Drug Regulatory Acad-
emy to train professionals who test drugs in the laboratories. "India believes in safety, efficacy and quality of drugs and
is organising the system to maintain standards," Singh told media on the sidelines of the second International Exhibition
for Pharma and Healthcare (iPHEX 2014) that began in Mumbai on May 21.
Singh said the government was also compiling a national pharmacopia to guide in the manufacture of drugs.
"We are also planing to harmonise the standards in all the states with a central regulatory system," he said, adding
that these were all gradual investments that would also see the improvement at the sea ports and other ports to ensure
that products that leave the country were of the right standard.
He said the government's zeal to bring about affordable quality drugs to the people could only materialise if the gov-
ernment's zero tolerance for poor quality drugs was monitored by implementing laws that punished those who violated
the rules. Sudhanshu Pandey, joint secretary in the ministry of commerce and industry, said Indian generic drugs have
become globally accepted and respected, and for this reason, there was the need to send a loud message out that the
government was ready to ensure that the manufacturers met the standards required of them.
Pandey said patents for about 160 drugs would be expiring soon and that would give manufacturers more opportuni-
ties but, at the same time, he cautioned that it meant that innovations in the industry will have to be transparent so that
global regulators would not question the standards.
Pharmaceutical Export Council of India (Pharmexcil) says that eight out of the world's top 25 generic companies come
from India.
Source: Indo-Asian News Service
India to spend $500 mn to boost capacity
of drug regulators
Inland shipping will get a boost with the government relaxing the baseline for inland vessels which can now move
deeper into the sea.
"Government has relaxed the norms for inland vessels to move deeper into the sea. The baseline has been relaxed by
12 km from coastline which is known as territorial waters," DG Shipping Gautam Chatterjee told PTI.
"This will help inland waterways transport. Now inland vessels can venture into sea to offload cargo from large ves-
sels directly and this in turn will bring huge operational cost saving for the trade," Chatterjee said. Currently, there are
some 800 redundant ocean going vessels being used in inland water transport, but gradually the picture will change
with the policy, Chatterjee said. Inland waterways transport companies are constructing new inland vessels, he said. Jin-
dal ITF is transporting imported coal to NTPC's power plant at Farakka through inland waterways. The company won a
Rs 650-crore contract from the Inland Waterways Authority of India.
Chatterjee said a proposal has been sent to the Ministry of Shipping to introduce Indian controlled tonnage concept to
increase cargo share by Indian shipping companies.
Currently, the share of cargo handled by Indian flag liners is just eight per cent.
Source: Business Standard
Inland shipping to get boost from coastal
baseline relaxation
10
Reserve Bank of India Governor Raghuram Rajan on May 20 said the central bank would soon announce a regular
process of granting bank licences, ending the current system of giving it in tranches. The Reserve Bank of India is com-
mitted to freeing entry in banking, Rajan said at an event organised by the Competition Commission of India in Mumbai.
We just announced two new commercial bank licences after
a rigorous vetting process. We are examining this experience,
and after making appropriate changes, will announce a more
regular process of giving licences - what has been termed li-
cences on tap, the governor said.
The RBI issued in-principle licences to infrastructure finan-
cier IDFC and micro lender Bandhan in April. These firms were
selected from over 25 applicants.
The RBI has asked IDFC and Bandhan to start operation
within 18 months.
Currently the RBI issues licences in tranches under window
system. The new system will pave the way for issuance of regu-
lar licences.
Rajan said the RBI is also planning to issue niche bank li-
cences with restrictions on the geographical reach or products.
The RBI can take more of a chance with new players if they get
the licence to open only a small bank or to conduct only one
segment of banking business, he said.
Such differentiated licences - licences with restrictions on
the geographical reach or the products offered by a new bank - can generate more organisational variety and efficiency,
the governor said.
Small banks tend to be better at catering to local needs, including needs of small and medium businesses. A pay-
ments bank, which will take deposits and offer payment and remittance services but be constrained to invest all its
funds in safe instruments such as government securities, could be very synergistic with other existing services, he
added.
Source: Indo-Asian News Service
RBI to have regular process of bank
licences: Rajan
11
WEEKLY
ECONOMIC
BULLETIN
>> NEWS ROUND-UP
Issue no 572
I
May 20-May 26, 2014
12
Relaxing rules for importing gold, the Reserve Bank of India on May 21 allowed star/premier trading houses to bring in
the yellow metal for sale in the domestic market. Last July, to rein in
increasing imports that swelled current account deficit and weak-
ened the rupee, the RBI had banned imports by trading houses for
sale in the local market. They were allowed to import only for re-ex-
ports. The RBI decision will increase the supply of gold and bring
down prices.
The decision has already started showing results: in the Mumbai
market on May 21, gold prices were hovering around Rs 28,300 per
10 grams, down from Rs 28,800 level at 5 pm.
Under the new scheme, when a nominated bank, agency or any
other entity imports gold, say 100 kg, of which 20 kg can be released,
in part or full, to exporters of gold. The remaining 80 kg can be sold or lent to the domestic entities engaged in jewellery
business, bullion dealers or banks operating the gold deposit scheme and gold loan.
Source: The Times of India
Digital payments in India is expected to touch Rs1.2 trillion by December 2014, a 40% increase from Rs85,800 crore the
previous year, propelled by growing Internet penetration, growth in e-commerce and the ease of online payments, ac-
cording to a report by the Internet and Mobile Association of India (IAMAI).
The market for payments made through digital medium has grown at a compounded annual growth rate (CAGR) of
10% between 2010 and 2013. The report titled Digital Money is IAMAIs first such on digital payments and was prepared
in association with the Payments Council Of India (PCI) and IMRB. The report states that nearly 60% of the total value of
transactions in 2013 came from online travel, 23% from financial services and 12% from online retailing. Nearly 80% of
these transactions were dominated by desktop personal computers and laptops, with smaller contribution from mobile
phones and tablets. However, the report expects phones and tablets to contribute close to 30% by 2020.
The four metrosDelhi, Mumbai, Kolkata and Chennaicontributed about 60% of the total digital payment gateway
market size, followed by Bangalore, Hyderabad, Ahmedabad, Pune which together contributed 25% in 2013. The report
said that about 53% of the 800 million online transactions made in 2013 were made using credit and debit cards while
44% came from Internet banking. The rest were attributed to Mobile Wallet, Pre-Paid Cash cards and Immediate Pay-
ment systems (IMPS) over the Internet.
Given the higher penetration of debit cards compared to credit cards in the country, about 32% of the transactions
were made through debit cards while 21% came from credit cards.
According to a Reserve Bank of India (RBI) report published in February 2014, there were nearly 350 million debit
cards compared to 19 million credit cards. Credit card penetration in India has been on a downward journey and the can-
nibalisation is benefiting debit cards and Internet banking. In 2012, the number of credit cards were 10-15% higher than
what it was in 2013 as banks are restricting the issuance of credit cards due to credit risk and higher non performing as-
sets (NPAs), according to Vishwas Patel, chairman of PCI.
Source: Mint
RBI eases curbs, gold prices to fall
Digital payments in India to touch Rs1.2
trillion by Dec: Report
WEEKLY
ECONOMIC
BULLETIN
>> NEWS ROUND-UP
Issue no 572
I
May 20-May 26, 2014
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WEEKLY
ECONOMIC
BULLETIN
Issue no 572
I
May 20-May 26, 2014