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Theme
of the week:
Issue and Management of Currency by Reserve Bank of India Organizational Arrangements for Note Issue - IV *
1.Introduction Currency
Management is a central banking function, which has a high degree of public
credibility in 2.Legal
Backing for Note Isssue The
RBI has the power to do all the needful under the Reserve Bank of India Act
1934. Preample
of the Act vests the power for note issue with the RBI and Section 3 of the
Act gives it powers for currency management. RBI
is the sole authority for the issue of currency in Section
38 of the Act prevents central government from putting into circulation
rupee coins and small coins except through the Reserve
Bank. Section
27 of the Act prevents the Bank from reissue of bank notes, which are torn,
defaced or excessively spoiled. Section
28 of the Act RBI prevents any person to recover from the central government
or the Bank, the value of any lost, stolen, torn, mutilated or imperfect
currency note of the Government of India or bank note as a matter of right. Section 58 of the Act gives the Central Board of the RBI powers to make regulations consistent with this Act to provide for all matters for which provision is necessary or convenient for the purpose of giving effect to the provision of this Act. 3.
Exchange of Mutilated Notes
The
RBI is prevented from putting into circulation of torn, defaced or
excessively soiled notes into circulation by the Act under Section 27 of RBI
Act 1934,At the same time, Section 28 of the Act prevents any person to get
value of a torn and mutilated note as a matter of right as explained above.
However, the RBI may refund the value of such notes as a matter grace, under
the circumstances enumerated in the Note Refund Rules to mitigate the
inconvenience to the public. Accordingly the RBI, under Section 27 of the
Act read with Section 58, framed RBI (Note Refund) Rules. Given
below are the important provisions of the RBI (Note Refund) Rules. Rule
2: Definitions Bank
means the Reserve Bank of Bank
note means any note issued by the RBI, but does not include a Government
note. Essential
features mean the features which are necessary for the identification of a
note namely; (i)
the name of the
issuing authority in Hindi or English, i.e., Reserve Bank of (ii)
the guarantee clause
in Hindi or English; (iii)
the promise clause in
Hindi or English; (iv)
the signature in
Hindi or English; (v)
the Ashoka Pillar
emblem or the Mahatma Gandhi portrait; and (vi)
the water mark of the
Ashoka Pillar emblem or the Mahatma Gandhi portrait. Essential features of a currency note have been enumerated with a view to making the application of Rule 9 easier. Definition should be read with Rules 9(1)(a) and 9(2)(a). If any one of the Hindi or the English versions of an essential feature is slightly damaged, but the other version is intact, the essential feature in question shall be deemed to be available on the note. In the case of watermark, minor damage should be ignored and in applying the rules, if a major portion of the watermark is identifiable, the watermark may be treated as being available. Rule
3: Presentation and disposal of claims A
claim in respect of any note may be presented to the Issue Department of any
office or any branch of the Bank . Currently public sector banks and
designated branches of other banks having currency chests to accept and
exchange mutilated notes are permitted to entertain claims. Rule
4: Right to call for information or to hold enquiries The
prescribed officer can call for any information or hold any inquiry relating
to any claim presented under these rules. Rule
5: General Provisions
A
claim in respect of a note, which is alleged to have been stolen, shall not
be entertained.
Similarly,
if the concerned officer is satisfied that a mutilated note presented to him
is one which appears to have been cancelled at any office of the RBI or
claim on which appears to have already been paid under these rules, may
reject the claim on such note after making enquiries under Rule 4.
A
claim in respect of a note – which cannot be identified with certainty by
the officer as a genuine note for which the RBI is liable under the Act or which
in the opinion of the officer has been made imperfect or has been mutilated,
with a view to making it appear to be of a higher denomination, or has been
deliberately cut, torn, defaced, altered or dealt with in any other manner,
not necessarily by the claimants, with a view to establishing false claim
under these rules otherwise to defraud the RBI or public, or
which carries any extrinsic words or visible representations intended
to convey or capable of conveying any message of a political character, or
which
has been imported into
in
respect of which value is payable by some other authority, or in
relation to which any information requested by the officer is not furnished
with in 3 months In
all the above cases the claim will be rejected. Rule
7: Imperfect Notes An
Imperfect Note means any currency note, which is wholly or partially
obliterated, altered or undecipherable but does not include a mutilated
note. The value of such note can be paid if the prescribed officer is
satisfied that it is a genuine note from the available and decipherable
printed matter of the note. This rule is applicable only to notes, which
appear entire but are wholly or partially obliterated. Eg.
Washed notes Rule
9: Mutilated Note Mutilated
Note means a note of which portion is missing or which is composed of
pieces. Presently
note in two pieces having number(s) intact
is classified as a soiled note Rule
9.1:
The value of a mutilated note of a denomination of one thousand rupees or
less, on which the number is printed at one place only (mainly
Re.1, Rs.2 and Rs.5 ) , may be paid, if – a)
the
note presented is in one or two pieces, all features , even if partially ,
are present and complete undivided number is available on one piece. b)
the
note is in one piece or in more than one piece, complete undivided number is
available in one piece, and the piece on which full number is available is
not less than half the are of the note c)
the
note is in pieces, major portion of the number is available in an undivided
area on one of the pieces and all the pieces belong to the same note. Before
rejecting the claim of a particular note these three rules are applied one
after another. Claim
will be rejected in the following circumstances (i)
only
one piece is presented and it is of an area less than half the area of a
note Rule 9(1)(b) (ii)
note
in pieces and major portion of the number is not identifiable in an
undivided area on one of the pieces Rule 9(1)(c) (iii)
note
is in pieces and none of the pieces cannot be identified as belonging to the
same note Rule 9(1)(c) (iv)
note
is in pieces and the pieces can be identified as belonging to the same note,
but the pieces presented together form an area less than half the area of
the note Rule 9(1)(c). Rule
9 (2):
The value of a mutilated note of a denomination of one thousand rupees or
less, on which the number is printed at two places, only
(mainly Rs.10, 20,50,100,500 and 1000), may be paid, if – (a)
the
note presented is not more than two
pieces, all features are present
and both the pieces can be identified as belonging to the same note and
complete number can be identified in an undivided area at each of the two
pieces at which it is printed (b)
note
is in one piece or in more than one piece, major portion of the number is
available at both the places on one undivided piece, and the piece is not
less than three-fourth the area of the note. (c)
note
is in pieces, major portion of the number is available in an undivided area
at both the places even if in two separate pieces and all the pieces taken
together form not less than half the area of the note. Before
rejecting the claim of a particular note these three rules are applied one
after another. Rule
9 (3): Half the face value of a
mutilated bank note of a denomination of one thousand rupees or less on
which the number is printed at two places may be paid, if the piece, or one
of the pieces presented, has an undivided area which is not less than half
the area of the note and a major portion of the number can also be
identified on such piece at least at one of the places at which it is
printed. It
has been found that there has been a drastic decline in the exchange under
note refund rule in recent period. This decline is interalia due to
RBI’s decision to redefine a note in 2 pieces as a soiled note which was
hither to treated as mutilated note for exchange across counters of the
issue office and bank branches. 4. Issue of the Rupee Notes and Coins and Small CoinStatutory
provisions governing issue of coins are laid down in the Indian Coinage Act
1906 and the coins are issued by Central Government. Though the one rupee
coins /notes and subsidiary coins are issued by the government, they are put
into circulation by government under the proviso of Section 38 of the RBI
Act 1934 only through the RBI, thereby keeping the inviolability of the RBI
as the sole authority for the issue of coins and notes.
The
currency of India consists of one rupee notes and coins and small
(subsidiary) coins both issued by Government of India and the currency notes
issued by the RBI. The minting of Rupee coins is governed by the Coinage Act
1906, while the rupee note is issued under the Currency Ordinance, 1940.
Small coins, that is, coins of value less than one rupee, are also issued
under the provisions of the Coinage Act.
System of
decimal coinage was introduced on April1, 1957, with the rupee continuing to
be the monetary unit of the currency equivalent to 100 paise. The subsidiary
coins are in the denominations of 1,2,3,5,10, 20,25 and 50 paise. Prior to
this a rupee is divided into 16 annas or an anna into 12 pies (192 pies in
all). Government of The
RBI has set up small coin depots/sub depots along with currency chest to
store small coins for exchange. The coins in depot are the property of the
Government of India and any transaction are debited or credited to the
government account as the case may be. As
on June 30, 2007 there are 4,042 small coin depots/sub-depots along the
length and breadth of the country. On that date the value of small coins was
Rs.1,367 crore . With a view to
supplementing the efforts of the banking network in distribution of coins,
the RBI, at time sought the help of post offices, state run transport etc.
The
denomination wise number of coins and value of coins are depicted in Table
1. It can be seen from there that there is fall in small coins which
consists mainly of 1,2,3,5,10,20,25 and 50 paise both in volume and value
mainly because of no demand of coins of small denominations such as 5,10,20
paise. Consequently, it has been decided to phase out such coins from
circulation. Banks have been directed to accept and remit these coins to
government mint, as there was a reverse flow of coins. Further, in response
to complains from public regarding non-acceptance of coins at bank branches
the RBI advised all banks to accept coins of all denominations and also made
arrangements with government of Offices
of the Reserve Bank have been accepting coins in bulk quantity by weight for
the sake of convenience of the public and bank branches. Banks have been
directed to implement this measure. Polythene pouches are being made
available at some of the bank branches to pack 100 coins for quick and
smooth service to the public. 5.
Growth of ATMs and Demand for Higher Denomination Banknotes
Ever
since the first automated teller machine (ATM) was introduced in the late
1960s, the usage of ATM has grown exponentially. The cash dispenser and the
ATMs have gradually become the electronic face of banking. It is estimated
that there are 49 billion cash withdrawals worldwide through ATMs in a year. Foreign
banks in With
the increase in the usage of ATMs, a shift has taken place towards stocking
higher denomination banknotes - particularly Rs.100 and Rs.500 denominations
- as banks do not find it commercially viable to stock the machines with all
denominations of banknotes. Lower denomination banknotes run out sooner and
increase both capital cost and operating costs. The Reserve Bank has
accordingly been facing an increasing demand for fresh banknotes in Rs.500
and Rs.100 denominations. In the context of the increased demand for ATM-fit
banknotes, emphasis has been laid on banks using desktop sorters to salvage
good quality banknotes 6.Computerization
of Currency Management The
Reserve Bank has taken up the task of putting in place an Integrated
Computerized Currency Operations and Management System (ICCOMS) in the issue
department of all regional offices and in the central office.
Computerization will cover issue accounting, resource planning and
distribution of currency, cash department operations, note exchange counters
in Issue department, claims section, currency chest reporting and management
information systems in the Regional and Central Offices.
The project also includes computerization and networking of the
currency chests with the Reserve Bank’s offices to facilitate prompt,
efficient and error-free reporting and accounting of the currency chest
transactions and seamless flow of information between issue department and
the central office in a secured manner with proactive monitoring. All
offices of the Reserve Bank commenced 'live-run' on the Currency Chest
Reporting System (CCRS) and the Chest Accounting Module (CAM) of ICCOMS-ID
component. Once these two components are completed, the Currency Management
Information System (CMIS) Module at the Department of Currency Management (DCM)
at the Central Office of the Reserve Bank will be taken up for
implementation, the testing for which has already begun. It
is expected that the IT initiatives taken by the banks for computerisation
of branch operations coupled with the advances in the communication
facilities in the country will provide the necessary environment for
successful implementation of the system across all banks and all over the
country. The
progress of the system is being closely monitored. Parallel run has started
in Belapur and Mumbai offices. Workshops have already been conducted for all
offices to provide a first hand knowledge of the Currency Chest Reporting
System (CCRS). The CCRS module is being rolled out parallel in phases in all
Issue Offices and is expected to be completed in all offices by August 2006.
All modules pertaining to ICCOMS are likely to be completed by September
2006. Thereafter, the MIS module for Department of Currency Management (DCM)
shall be implemented. The entire project is expected to be in place and
operational by December 2006. The
Reserve Bank has taken up the task of putting in place an Integrated
Computer ised Currency Operations and Management System (ICCOMS) with a view
to ushering in greater operational efficiency, improved customer service and
providing decision support tools for policy making in the area of currency
management. The project includes computerisation and networking of the
currency chests with the Reserve Bank’s offices to facilitate prompt,
efficient and error-free reporting and accounting of the currency chest
transactions in a secure manner. The system will provide a uniform computing
platform across all the Regional Offices for transaction processing,
accounting and management information systems relating to currency. It would
lead to migration from the existing computer systems used for the Issue
accounting functions. 7.
Automation in Currency Chests Banks have been advised to provide, in a time-bound manner, note sorting machines of appropriate capacity at currency chest branches for proper sorting of banknotes and identification of suspect banknotes. These note sorting machines will help: (i) mitigate the circulation of counterfeit banknotes through the banking channel; (ii) ensure that only non-issuable banknotes are sent to the Reserve Bank while re-issuable banknotes are sent to the public; and (iii) facilitate smooth processing of banknotes in the Reserve Bank. Out of a total of 4,428 currency chests, 4,292 currency chests are maintained by various banks and rest are with State Treasury Offices (STOs) and the Reserve Bank. Of the 4,292 currency chests maintained by the banks, 2,027 currency chests have so far been equipped with note sorting machines and orders have been placed in respect of 2,087 currency chests. The position is being monitored in the remaining 178 currency chests. Out
of the banks having less than 100 currency chests, 12 public sector banks
and 17 private sector banks have mechanised their currency chests fully. The
Reserve Bank is closely monitoring the progress made by various banks. 8.
Currency Link on the Reserve Bank Website The
Reserve Bank has set up a 'Currency Link', in its website, which covers
various aspects related to Indian currency and coinage, images and security
features of contemporary banknotes in Mahatma Gandhi series, frequently
asked questions (FAQs) and press releases on currency issue. The Master
Circular on note exchange facility has been placed on the Reserve Bank
website for wider dissemination of information among the public. The
Reserve Bank has taken up the task of establishing a 9.Reserve
Bank Monetary Museum The
President of India Dr. A.P.J. Abdul Kalam inaugurated the Reserve Bank of The
entire display has been divided into self-contained thematic modules. The
coinage section spans a period going back from the early issues of punched
marked coins in the sixth century B.C. to the contemporary 10.
Brief Note on Star Series Banknotes Genuine banknotes bear a distinctive serial number along with a prefix. The prefix consists of a numeral and a letter depending upon the banknote denomination. Banknotes up to Rs.20 denomination have two numerals and one alphabet as prefix while banknotes of Rs.50 and above denominations have one numeral and two alphabets as prefix. Fresh banknotes issued by the Reserve Bank, at present, are serially numbered. The notes are issued in packets containing 100 pieces. In the existing system, the banknotes/packets with defects related to printing, numbering and wrong cuts are replaced at press level with good re-numbered (same number) banknotes to maintain the sequential numbering of banknotes in a packet. This procedure involves additional time/cost and manual intervention. Adoption
of star series concept would imply that a fresh banknote packet which, at
present, contains banknotes numbered from 1 to 100 may contain 100 pieces
that are not serially numbered from 1 to 100. The packet would still contain
100 pieces but one or more pieces in the packet may have a different number
containing the star series notes. This system would help in streamlining
procedures and reducing manpower deployed in replacement activity. Star
series banknotes, to begin with, will be issued in Rs.10, Rs.20 and Rs.50
denominations and will look exactly like the existing banknotes in the
Mahatma Gandhi series but will have an additional character viz., * (Star)
in the number panel between the prefix and the serial number. The bands of
the fresh note packets containing the star series numbered note/s will
clearly indicate the presence of such banknotes in the packets. The packets
with star series notes will, as usual, have 100 pieces but not in serial
order. The quantitative correctness of these packets can be verified with
the help of note counting machines provided at the counters by banks. It may
be mentioned that the serially numbered banknotes are available only in
fresh banknote packets. The majority of the public/users of cash receive re-issuable
banknotes, which are not serially numbered. Star series banknotes will be
legal tender. Adequate publicity in Hindi, English and regional languages
through print/electronic media is being given to this effect. 11.
Customer Service
Efforts
were continued to provide timely and efficient customer service not only at
the Reserve Bank Offices but also at bank branches. The Reserve Bank stepped
up efforts to improve customer services in the issue of coins, acceptance of
coins from public and exchange of soiled and mutilated notes. The Reserve
Bank introduced a single window customer service at its Issue Offices under
which coins and notes of all denominations are either issued or accepted at
one counter. Similarly, mutilated notes are accepted in a Drop Box (even
beyond normal banking hours) without any limit. The Reserve Bank continue to
reiterate its directions to all scheduled commercial banks to issue coins
and, accept coins and soiled banknotes in transactions or for exchange
without any restriction. Adequate availability of coins in circulation was
thus ensured. Offices where demand for coins has picked up were advised to
arrange for coin camps at identified locations in consultation with banks.
The Reserve Bank also revised the Citizens’ Charter and placed the same on
its website. The
Regional Offices of the Reserve Bank took several initiatives for
distribution of coins by installing coin vending machines in the banking
hall of the Issue Departments as also by encouraging banks in their
jurisdiction to install such machines in their premises. The Regional
Offices continued with the practice of sending coin bags to city centres to
distribute coins directly to the public. A
noteworthy development in this regard in 2003-04 was the constitution of a
Committee on Procedures and Performance Audit on Public Services (Chairman:
Shri S.S. Tarapore) to study, inter alia, services relating to individuals
(non-business) on currency management. The recommendations of the Committee
on Procedures and Performance Audit on Public Services (CPPAPS) have been
accepted for implementation. Committee
on Procedures and Performance Audit on Public Services
The
major recommendations of the Committee, which have been accepted by the
Reserve Bank, are: Transparency
in currency management; Early
introduction of Rs.10 coin; Phasing
out of Rs.5 note totally; Currency
Chest Agreement to be revised to incorporate a provision for monetary
penalty for non-compliance with the Reserve Bank’s instructions; A
Systems Study of Banking Hall arrangements in the Mumbai Office of the
Reserve Bank to be commissioned with the help of a specialised agency to
resolve the bottlenecks in the smooth flow of transactions; Suitable
measures to separate location/time for services to money changers
and other individuals; Citizens’
Charter for Currency Exchange Facilities be made available to customers
visiting the Banking Halls
of the Reserve Bank offices and bank branches; Authorised
bank branches to exhibit prominently a notice that soiled/mutilated currency
notes are freely exchanged at the bank branch; Reserve
Bank Note Refund Rules to be written in easily understandable language; The
practice of pasting of mutilated notes at the time of tendering for exchange
should be reviewed by the Reserve Bank; and Stringent
action to be taken against violation of instructions by banks on exchanging
soiled/ mutilated notes. All
Issue offices have implemented the major recommendations of the Committee on
Procedures and Performance Audit on Public Services (Chairman: Shri S.S.
Tarapore) on services relating to individuals on currency management. *
This note has been prepared by R.Krishnaswamy References:
1
GOI (1980), The Reserve Bank of 2
RBI (1980), RBI (Note Refund) Rules, 1975 (as amended up to 1980) 3
RBI (1983), RBI Functions and Working 4
RBI (2004),‘Committee on Procedures and Performance Audit on Public
Services’, May. 5
RBI (2007), RBI Annual Reports 2006-07 and previous issues * This not has been prepared by R.Krishnaswamy
Highlights of Current Economic Scene AGRICULTURE Sowing
of paddy in the on-going kharif season has risen by 23 per cent to
14.88 million hectares as on July 17, 2008 as against 12.1 million hectares
in the same period last year. This
is mainly due to increase in area under coverage in the states like Uttar
Pradesh from 14.54 lakh hectares to 36.41lakh hectares, All
India Fair Price Shop Dealers’ Federation (AIFPSDF) has requested Union
Minister of Agriculture to raise allotments of wheat for Public Distribution
System over and above what is being currently allotted under the Targeted
Public Distribution System (TPDS) for the states. This request has been made
in the wake of the newspaper reports recently quoting Mr Pawar saying that
the Centre is contemplating to release 6 million tonnes of wheat in the open
market through the state governments. Five
new sugar mills in Uttar Pradesh are likely to begin crushing in 2008-09
season taking the total number of sugar mills functioning in the state would
to 137 from 132. However, these new sugar mills are slated to close down
from October 2008 once the crushing gets over. The leading sugar producers
of the state, namely, Birla and Balrampur groups are setting up these sugar
mills. This year, the state has recorded the substantial plunge in sugarcane
acreage and production due to litigation over cane payment and seasonal
demand supply fluctuations. The total sugarcane acreage for 2008-09 has been
estimated at 2.25 million hectares, down form last year’s 2.5 million
hectares. The average sugarcane yield in the state is about 56 tonnes per
hectare and by this average the total production in 2008-09 crushing season
is estimated at 126 million tonnes as against 160 million tonnes last year.
According
to Solvent Extractors Association (SEA),
imports of edible oil and non-edible oil in According
to Soyabean Processors Association of India, soyameal exports from the
country are likely to breach 50,00,000 tonnes mark this season, surging by
45 per cent from last year, on the back of strong demands from overseas
countries such as Traders
and Industrial Official have reiterated that poor monsoon in Potato
production in Erratic
rainfalls in the coffee-growing areas of Karnataka are likely to affect the
crop in 2008-09. Lack of rains and low moisture level has not only made
these areas dry but also has made the crop vulnerable to leaf rust disease
and white stem borer (WSB) attacks. Water table and other non-coffee farming
activities in the state are also likely to get affected. If these regions do
not get rainfall then it may result in failure to meet the post blossom
estimates of 293,000 tonnes. The International Coffee Organisation (ICO) has
estimated that the global production in 2008-09 would be around 128 million
bags as compared with 118 million bags in 2007-08. Consumption during 2007
is estimated to be around 122.7 million bags and likely to remain unchanged
in 2008. Agricultural
and Export Development Authority (APEDA) would place traceability system for
pomegranate, mango and other organic products by the end of the financial
year 2009, enabling importers to trace the origin and level of pesticide
residue in Indian farm products. This system was introduced in 2006 for
grapes after European Union raised concerns over the level of pesticides in
Indian grapes. Under the pilot grapenet (internet
based Residue traceability software system, for monitoring fresh grapes
exported from According
to the national executive member of Mango Growers Association, early monsoon
in Uttar Pradesh has not only damaged the Dusssheri mango crop but has also
changed the shape of the traditional Dussheri besides changing its colour to
black. This fruit has failed to meet their export commitments to oversea
countries like Indigenous
ammonium sulphate has been brought under the subsidy (concession) scheme
with an effect from July 1, 2008. Under this scheme the maximum retail price
(MRP) of this fertiliser would be at Rs 10,350 per tonne. Before this
notification, ammonium sulphate was ruling around Rs 19,000 per tonne at
market level. Under the subsidy scheme triple
super phosphate (TSP)
from decontrolled phosphatic and potassic fertilisers would have an MRP of
Rs 7,460 per tonne from April 1, 2008. Monthly concession for indigenous and
imported TSP would be based on the average of low and high f.o.b. prices of
TSP published in the Fertiliser Market Bulletin (FBM) plus the freight for
the previous month or the actual weighted average of the landed price for
the month under consideration, whichever is lower. According
to Abare, Australia’s independent agriculture and research economics
agency, global coarse grain production is likely to be around 1.1 billion
tonnes in 2008-09, even though corn production is estimated to decline by 15
million tonnes (mt) to 775 million tonnes. Corn accounts for over 70 per
cent of the world coarse grain production. The decline in corn production
would offset by 8 million tonnes of increase in barley production, the
second major coarse grain. Production
of barely is projected to be 142 million tonnes during 2008-09.The areas
under corn in the US is forecast to decline by 7 per cent to 41 million
hectares in 2008-09. Despite this decline, the largest area would be covered
under corn in the Industry Index
of Industrial Production (IIP) with base 1993-94 for the month of May 2008
registered a growth of 3.8% higher as compared to the level in the month of
May 2007. The cumulative growth for the period April-May 2008-09 stands at
5.0% over the corresponding period of the pervious year. The
Mining, Manufacturing and Electricity sectors for the month of May 2008
registered growth rates of 5.2%, 3.9% and 2.0%, respectively, as compared to
May 2007. The cumulative
growth during April-May, 2008-09 over the corresponding period of 2007-08 in
the three sectors have been 5.6%, 5.3% and 1.7% respectively, which moved
the overall growth in the General Index to 5.0%. In
terms of industries, as many as eleven (11) out of the seventeen (17)
industry groups (as per 2-digit NIC-1987) have shown positive growth during
the month of May 2008 as compared to the corresponding month of the previous
year. The industry group ‘Beverages, Tobacco and Related Products’ have
shown the highest growth of 31.1%, followed by 12.3% in ‘Transport
Equipment and Parts’ and 9.5% in ‘Basic Chemicals & Chemical
Products (except products of Petroleum & Coal)’. On the other hand,
the industry group ‘Wood and Wood Products; Furniture and Fixtures’ have
shown a negative growth of 30.7% followed by 10.4% in ‘Rubber, Plastic,
Petroleum and Coal Products’ and 9.0% in ‘Jute and Other Vegetables
Fibre Textile (except Cotton)’. As
per Use-based classification, the Sectoral growth rates in May 2008 over May
2007 are 3.0% in Basic goods, 2.5% in Capital goods and 1.2% in Intermediate
goods. The Consumer durables and Consumer non-durables have recorded growth
of 4.4% and 8.1% respectively, with the overall growth in Consumer goods
being 7.2%. Infrastructure The
Index of Six core-infrastructure industries having a combined weight of 26.7
per cent in the Index of Industrial Production (IIP) (base 1993-94)
registered a growth of 3.5% (provisional) in May 2008 compared to a rise of
7.8 % in May 2007. During
April-May 2008-09, the growth of 3.5% (provisional) was almost half to that
of 6.9% during the corresponding period of the previous year. Crude
Oil production (weight of 4.17% in the IIP) registered a growth of 3.2% (provisional)
in May 2008 compared to a negative growth rate of
1.6% in May 2007. The Crude Oil production registered a growth of 2.1%
(provisional) during April-May 2008-09 as against a decline of 0.1% during
the same period of 2007-08. Growth
in Petroleum refinery production (weight
of 2.00% in the IIP) at 0.1% (provisional) in
May 2008 is miniscule compared to growth of 14.9%
in May 2007. The Petroleum refinery production registered
a growth of 2.1% (provisional) during April-May 2008-09 compared to 15.0%
during the same period of 2007-08. Impressive
growth of 8.3 per cent in coal (weight of 3.2% in the IIP) in May 2008
compared to growth rate 0.5% in May 2007 has been the only silver lining in
an otherwise bleak performance.. Coal production grew
by 9.3% (provisional) during April-May 2008-09
compared to an increase of 0.5% during the same period of 2007-08.
Electricity
generation (weight of 10.17%
in the IIP) registered a growth of 2.0% (provisional)
in May 2008 compared to a growth rate 9.3% in May 2007. Electricity generation
grew by 1.7% (provisional) during April-March
2008-09 compared to 9.0% during the same period of 2007-08. Cement
production (weight of 1.99%
in the IIP) registered a growth of 3.8% (provisional)
in May 2008 compared to 9.9% in May 2007. Cement
Production grew by 5.4% (provisional)
during April-March 2008-09 compared to an increase of 7.8% during the same
period of 2007-08. Finished
(carbon) Steel production (weight
of 5.13% in the IIP) registered a growth of 5.2% (provisional)
in May 2008 compared to 8.4% (estimated) in May
2007. Finished (carbon) Steel production grew by 4.5%
(provisional) during April-May 2008-09 compared to an increase of 5.6%
during the same period of 2007-08. Inflation The
annual rate of inflation, calculated on point to point basis, stood at 11.91
percent for the week ended 05/07/2008 to 4.61 percent as on 07/07/2007) i.e.
a year ago. The
index of primary articles, major group primary articles declined by 0.1
percent to 246.1 (Provisional) from 246.4 (Provisional) for the previous
week mainly due to due to lower prices of fruits & vegetables (1%).
However, the prices of tea (2%) and maize, masur and moong (1 % each) moved
up. The
index fuel,power,light and lubricants rose
by 0.5 percent to 376.3(Provisional) from 374.4 (Provisional) for the
previous week due to higher prices of naphtha (8%), light diesel oil (7%),
furnace oil (6%), aviation turbine fuel (5%) and bitumen (2%). However, the
prices of liquefied petroleum gas (5%) declined.
The
price index of manufactured products increased by 0.3 percent to
205.4(Provisional) from 204.8(Provisional) for the previous week. The
index for 'Food Products' group declined by 0.5 percent to 211.2
(Provisional) from 211.3 (Provisional) for the previous week due to lower
prices of bran (all kinds) (6%) and salt and oil cakes (1% each).
However, the prices of rice bran oil and maida (2% each) and cotton
seed oil, atta, coconut oil, imported edible oil and gingelly oil (1% each)
moved up. The
index for 'Textiles' group rose by 0.1 percent to 139.8 (Provisional) from
139.6 (Provisional) for the previous week due to higher prices of hessian
cloth and hessian & sacking bags (2% each) and texturised yarn (1%).
The
index for 'Paper & Paper Products' group rose by 0.1 percent to
199.5(Provisional) from 199.4 (Provisional) for the previous week due to
higher prices of printing paper white (1%). The
index for 'Chemicals & Chemical Products' group rose by 0.5 percent to
222.1(Provisional) from 221.0(Provisional) for the previous week due to
higher prices of purified terephthalic acid (pta) (13%), soda ash (sodium
carbonate) (6%), benzene (5%), acid(all kinds) (4%) and p.v.c. resins(3%).
However, the prices of liquid chlorine and caustic soda (sodium
hydroxide)(1%each) declined. The
index for 'Basic Metals Alloys & Metal Products' group rose by 0.7
percent to 298.8 (Provisional) from 296.6(Provisional) for the previous week
due to higher prices of steel ingots (plain carbon) (21%), bright bars
(10%), basic pig iron and foundry pig iron (5% each), bars & rods (2%)
and steel sheets, plates & strips and ms bars & rounds (1% each).
However, the prices of other iron steel (8%), lead ingots ( 3%) and
zinc ingots (1%) declined. The
index for 'Machinery & Machine Tools' group rose by 0.3 percent to
174.7(Provisional) from 174.1(Provisional) for the previous week due to
higher prices of material handling equipment (24%), roller bearings (9 %)
and ball bearings (2%). The
index for 'Transport Equipment & Parts' group rose by 0.1 percent to
174.0 (Provisional) from 173.9 (Provisional) for the previous week due to
higher prices of other automobile spare parts(1%). The final wholesale price index for 'All Commodities’ (Base:1993-94=100) stood at 230.6 as compared to 229.0 (Provisional) and annual rate of inflation based on final index, calculated on point to point basis, stood at 8.57 percent as compared to 7.82 percent (Provisional). Banking Bank
of Maharashtra is exploring options to raise around Rs 500 crore. The bank
is looking at various options, including a follow-on public offer. The
RBI has allowed urban co-operative banks to issue preference shares and
raise long term deposits with maturity not less than five years to raise
funds to comply with capital adequacy norms. The perpetual non-cumulative
preference shares will be treated as Tier-I capital, while the deposits
would be treated as lower Tier-II capital. Financial
Sector Capital
Markets Primary
Market The
initial public offering (IPO) of Multi Commodity Exchange (MCX) is slated
for launch during the first half of August, braving the turbulent market
conditions. According to Mr Joseph Massey, Joint Managing Director, MCX, the
decision on the exact date for the IPO launch will be taken early on July
fourth week. MCX, which received the Securities and Exchange Board of
India’s (SEBI) approval on May 15 and has to tap the market before August
15, after which the SEBI approval will expire. Vishal
Information Technologies, a company in the field of ITES/BPO services and a
subsidiary of Tutis Information Technologies, entered the capital markets on
July 21with an IPO of 27.9 lakh equity shares. The price band has been fixed
between Rs 140 and Rs 150 an equity share of Rs 10 each. The issue size is
Rs 39.06 crore at the lower end of the price band and Rs 41.85 crore at the
upper end. The issue will close on July 24. On
July 14, 2008, KSK Energy Ventures debut on the stock exchanges was below
its issue price; it closed down 17.06 per cent or Rs 40.95 at Rs 199.05
against its issue price of Rs 240 on the NSE. On the BSE too, it closed
below its issue price at Rs 190.50, at a discount of 20 per cent. Secondary
Market The
domestic stock indices oscillated during the week by touching a new low in
the current financial year and yet closing on a strong position. The BSE
Sensex dipped to 12576 points on July 16 but then gained over 1,000 points
to reach 13,635 in the last two trading sessions as it expected a favourable
outcome at the confidence vote in the parliament. Similarly, the NSE Nifty
was up by 1.07 per cent after it closed on 4092.25 points as it bounced from
an intra-day low of 3790. The Defty also up 1.04 per cent as the rupee
weakened a little. This has been a relief for the markets as equities lost
out heavily at the beginning of the week on political uncertainty, rising
crude oil prices and inflation. Among
the sectoral indices of BSE, IT and metal were the worst performers with
more than 8 per cent decline, over the week due to the fears of An
intense selling of equities in the domestic markets by foreign instutional
investors (FIIs) and unwinding of participatory notes has resulted in
windfall gains for the
The
The
pace of growth was, however, slowed down from nearly 85 per cent registered
during the last two financial years. During 2007-08, when the stock markets
were booming, the Centre mopped up Rs 8,577 crore as STT, compared to Rs
4,648 crore in the previous fiscal. For the current financial year, the
finance ministry is targeting a 5 per cent increase to Rs 9,000 crore. While
an official said that the number was finalised in February, when the
meltdown had just started, the fall in share prices is partly responsible
for the lower growth target. Derivatives Derivatives
volumes rosed on July 18, 2008, as futures and options (F&O) recorded
over Rs 50,000 crore trading. At the same time, cash volumes were on the low
side of normal. This combination of high F&O and low cash volume usually
means high volatility. Nifty future traded in a narrow range of 3800-4300
during the week due to some recovery on Thursday and Friday. The Nifty July
future closed at 4077.65, with a gain of 1.4 per cent over its previous
week’s close. The discount narrowed down further to 14.6 points, mainly
driven by the unwinding of short positions. After hitting the low of 3760
intra-week, the Nifty July future recovered quite smartly, backed by higher
volumes. After moving in a narrow range in the last couple of weeks, the
Nifty July future faces minor resistance at 4140-50 and a major one at 4400. Many
background signals are bearish despite recovery in the Nifty over the last
three sessions. Other broader indices did not move up. The August Nifty saw
open interest (OI) expand by over 34 lakhs (OI rose 10 per cent on Friday
including 5 lakh in July Nifty). OI expansion and carryover of that order
suggests optimists are in the game as well. The Nifty option put-call ratios
(PCR) are in the normal zone rather than at extremes. There has been put
build up and calls have been cashed but the overall PCR (in terms of OI) is
1.24, while the July PCR is 1.15 and non-July contracts are 1.4. About 23
per cent of OI is in December 2008 contracts or beyond. Again, that argues
long-term interest, which is inconsistent with total bearishness. Implied
volatilities (IV) are ruling firm above 40 per cent. The puts IV is hovering
around 46 per cent and the calls IV at 44 per cent. The firmness in implied
volatility of puts and calls indicates that the market could be heading for
a volatile period. The
NSE Volatility index (VIX) jumped to 49.77 – the level which it did not
touch since January 28 crash. In fact, on January 28, the index closed at
54.4 – the highest so far in this month. This indicates panic setting into
the market. The VIX, which generally reflects the fear among market
participants, is a measure of market’s expectation of volatility over the
near term. It may be recalled that the reading of VIX reached almost 45 in
1998 as the LTCM (Long-term Capital Management) crisis exploded. It took a
few months for the investor’s fears to abate and the VIX to return to
below 20. The World Trade Centre bombing also made the VIX climb above 45,
as the investors’ fear level reached the zenith. Government
Securities Market Primary
Market On
July 16, 2008, Resserve Bank of India (RBI) auctioned 91-day and 364-day
treasury bills (T-bills) for the notified amounts of Rs.3,000 crore (out of
which Rs.2,500 crore under MSS) and Rs.2,000 crore (out of which Rs.1,000
crore under MSS), respectively. The cut-off yields for 91-day and 364-day
T-bills were 9.11 per cent and 9.45 per cent, respectively. Secondary
Market Inter
bank call rates remained elevated but steady while a CRR hike taken effect
on July 05 and another has been due on July 19. The call rates hovered
around 9 per cent during the week. At the LAF, RBI lent an average of
Rs.33,584 crore through the repo window and mopped up Rs 5 crore through the
reverse repo window, which has been a solitary bid. The 10-year benchmark
yield plunged to 9.09 per cent from close to 9.5 per cent along with the
drop in crude oil prices. The yield jumped to 9.47 per cent initially owing
to the disappointing Fitch report that lowered Bond
Market Exim
Bank tapped the market by issuing bonds to mobilise Rs 50 crore by offering
10.75 per cent for 3 years with put and call at the end of 18 months. The
bond has been rated AAA by Icra. Rural
Electrification Corp Ltd tapped the market by issuance of bonds by offering
10.75 per cent for 5 years to mobilise Rs 250 crore. The bond has been rated
AAA by Fitch and Care. Housing
Development Finance Corp Ltd tapped the market by issuance of bonds by
offering 11.15 per cent for 3 years to mobilise Rs 250 crore. The bond has
been rated AAA by Crisil. Foreign
Exchange Market The
rupee appreciated to 42.76 from 42.88 per dollar; it dipped midweek to a low
of Rs 43.23. The rupee droped to a one-week low on July 15, 2008, after
Fitch Ratings downgraded the local currency outlook and rising global oil
prices highlighted worsening underlying economic conditions. The partially
convertible rupee ended at Rs 43.23, 0.7 per cent weaker than previous days
close of Rs 42.92. The domestic investment grade credit rating looked under
threat after the move. The rupee rebounded after oil prices started to
decline rapidly mid-week. Forward premia were choppy during the week
before ending lower. The six-month annualised ended at 4.78 per cent from
5.18 per cent. Corporate
have recorded fresh losses on foreign exchange derivatives, due to sudden,
7-per cent depreciation of the rupee in the quarter ended June 2008, with
much of the fall coming in May. After HCL Technologies announced that it
will suffer forex losses of $65-75 million (nearly Rs 278-322 crore) for the
quarter ended June 30, 2008, the other three companies also
saw taking a hit on forex derivatives. Bangalore-based biotech
company Biocon saw its net profits decline by 72 per cent for the quarter
ended June 2008, a forex loss of Rs 6 crore and a mark-to-market provision
of Rs 26 crore for its exposures to forex derivatives.
IT major Tata Consultancy Services (TCS) reported a forex loss of Rs
75.30 crore for the same period, which partly resulted in its net profits
growing slower at 7 per cent year-on-year to Rs 1,291 crore. MindTree also
posted a loss for the quarter, as it reported a net loss of $3 million (Rs
12.9 crore) even as rupee revenues grew 9 per cent quarter-on-quarter.
The Sebi would allow only select stock exchanges to offer currency futures and the selected exchanges would have to comply with the eligibility criteria drafted by the regulator. According to a senior official, the market regulator is scheduled to hold its board meeting in mid-August and it expects to roll out this scheme in the next month. A standing technical committee of RBI and Sebi has submitted a report on exchange traded currency futures on May 29. Sebi has subsequently discussed the report once in its board meeting on June 20. NSE and MCX have already applied to Sebi for starting exchange trade currency futures platform on their exchanges. The RBI-Sebi panel has said in its report that an existing or a new exchange recognised by the market regulator can set up currency futures segment after obtaining the market regulator’s approval. The exchange should further have a minimum net worth of Rs 100 crore and online surveillance capability to monitor positions, prices and volumes in a real time environment. The report also said that initially currency future contracts would be allowed only on Indian Rupee-US Dollar, and foreign institutional investors, and non-resident Indians would not be permitted to participate in these futures. Commodities
Futures derivatives Multi
Commodity Exchange (MCX) increased the special margin on all net long
positions of mentha oil contracts to 17.5 percent from 7.5 percent with
effect from July 15, 2008. According to the exchange circular, the margin
increase is a risk management measure. MCX imposed a 7.5 percent special
margin on July 13, 2008. The
most-active domestic corn August futures fell on July 16, 2008 after the
farm minister Sharad Pawar said that India expects a good harvest of kharif,
or summer-sown, corn. The August futures were also dragged by profit booking
after gaining about 6 percent in last four sessions. As per analysts, the
futures rose in the last four sessions after the trade ministry relaxed a
July 3 export ban order, which may lead to some more exports. The
Ministry of Consumer Affairs has given the approval to the proposal of
Indiabulls and MMTC to set up the country's fourth national-level commodity
exchange to facilitate trade in commodities across all sectors. The exchange
has been proposed to be set up in Gurgaon on the outskirts of the national
capital. Earlier, commodity market regulator Forward Markets Commission
(FMC) has recommended approval for the proposal to set up a new commodity
futures exchange. FMC has sought clarification on the proposed shareholding
pattern and registration of new company for the venture. MMTC is the
country’s largest international trading house with an annual trading
turnover of $4 billion, while Indiabulls is a leading financial services
conglomerate with $4 billion in market cap. The
MCX, promoter of the recently launched country's first energy exchange (IEX)
is all set to introduce more crude derivative futures to enable better
management of price risks. According to Joseph Massey, MD and CEO of MCX,
the exchange, plans to leverage on positive signals inspite of the weak
market sentiments, which is shortly going to launch its IPO. According
to industry officials and analysts, prices of essential commodities are
soaring in the local spot and futures market as deficient rains in half the
country delayed sowing, spurring fears of lower production. Despite
the government’s ban on futures trading on eight agricultural commodities
and downturn in stock market, the turnover on the country’s biggest
commodity exchange MCX witnessed a record turnover of more than Rs 28,000
crore on July 15, 2008 against the previous highest turnover of Rs 27,740
crore on March 5. The average daily turnover of MCX is in the range of Rs
15,000 crore to Rs 17,000 crore. FMC is in the process of formulating new guidelines for upgradation of regional commodity exchanges. The new guidelines will facilitate existing regional exchanges to upgrade or change status from regional to national exchanges. The Forward Contract Regulation Act (FCRA) is being amended to facilitate upgradation of regional exchanges. According FMC chairman B C Khatua the FCRA would be taken up in the next parliamentary session. Insurance Max
India has offered the US-based New York Life International to raise its
stake in their insurance joint venture Max New York Life to 49 per cent
subject to regulatory permission. Max India has restructured its joint
venture agreement whereby the foreign partner has been given the option of
increasing its shareholding in the venture to 49 per cent. As per the
existing guidelines, a foreign entity cannot hold more than 26 per cent
stake in an insurance venture in Corporate
Sector Continental
Automotive Company, a part of € 26.4 billion Continental Corporation,
supplier of automotive components, announced plans to invest Rs 100 crore
over the next two years to expand its plant in Vinod
Mittal-led Ispat Industries is all set to get Latua iron ore mine in
Jharkhand for the proposed 2.8 million tonnes steel plant in the state, with
the government giving the necessary approval. The
Siemens Energy division has bagged a Rs 200 crore order from Ceylon
Electricity Board, Leading
tyre cord manufacturer SRF is going to acquire South Africa-based Industex
Technical Textiles, a belting fabric firm. BEML,
public-sector mining equipment company, has bagged an export order worth Rs
35 crore from African countries. Sterlite
Technologies, providing power transmission conductors, optical fibres and
telecommunication cables, bagged three contracts worth $15.5 million (around
66 crore) from infrastructure firms in Africa (Nigeria, Uganda and Algeria)
and Asia (Bangladesh). Sterlite has been chosen as the sole manufacturer and
supplier of power conductors for the contracts. IFGL
Refractories, manufacturer of specialised refractories, has announced the
acquisition of Hofmann Group of Companies through a SPV named IFGL GmbH, a
100 per cent subsidiary of Monocon International Refractories of UK. External
Sector Exports
during May 2008 had been US $ 13782 million as against US $ 12210 million in
May 2007 registering a growth of 12.9 per cent. As against this Imports was
valued at US $ 24548 million as against US$ 19313 million recording a growth
of 27.1 per cent. In
rupee terms, while export increased by 16.6 per cent , import flared up by
31.3 per cent.As a result trade deficit was estimated at US $ 10766 in May
2008 million higher than the deficit at US $ 7103 million during May 2007Oil
imports were estimated during May 2008 at US$ 8465 million
and non-oil imports at US $ 16083 million was 50.8 per cent and 17.4
per cent higher than that in last year Telecom Swam
Telecom, which has received licences to operate mobile phone services in 13
circles out of the 22 telecom circles in GSM
major Bharti Airtel’s services continued to be partly disrupted in Mumbai
for around two days, following a fire that broke out at the company’s
Lower Parel office in BSNL
is planning to invest around Rs 5,000 crore in its WiMax project. The
company aims to roll out wireless broadband connectivity through WiMax
technology commercially. It is also planning to set up 50,000 IT-enabled
kiosks called common services centre (CSCs) running on WiMax technology,
across the country. Information Technolgoy The
IT-BPO industry is becoming increasingly alert on fake bio-datas.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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