Mumbai, March 14
Top private sector lenders ICICI Bank, HDFC Bank and Axis Bank said they were investigating allegations of widespread money laundering practices at their branches.

The shares of the banks fell briefly on Thursday after the independent investigative journalist, Aniruddha Bahal, made the accusations in a news conference televised by a local TV station in the morning.

Bahal, founder and editor-in-chief of Indian news and opinion website Cobrapost.com, said he had collected hundreds of hours of video recordings from "dozens and dozens" of bank branches across the country. He did not say when the recordings were compiled.

An article on the website posted on Thursday said an associate editor, using an alias and pretending to work for a fictitious politician who wanted to launder money, sought advice from bank officials on how to do it.

The article said branches across all the three banks suggested laundering methods that were "imaginative in their range and brazen in their approach."

In one case, Bahal said, a video excerpt on his website showed an HDFC Bank official explaining to an undercover reporter for Cobrapost.com different methods to launder money.

It said Cobrapost.com offered to hand over the videos to law enforcement officials or regulators. The article did not say if the recordings were eventually passed on to the authorities.

Market regulator Securities & Exchange Board of India had no comment on the matter, according to a spokesman.

'DEEPLY CONCERNED': ICICI Bank told Reuters that it was "deeply concerned" about the accusations. "We have constituted a high level inquiry committee to investigate into the matter and submit its findings in two weeks."

HDFC Bank was investigating the matter on "top priority." "We have constituted a high level inquiry committee to investigate into the matter and submit its findings in two weeks." Axis Bank also said it would investigate. — Reuters

New Delhi, March 14
Chief economic advisor in the finance ministry Raghuram Rajan said it was too early to say with certainty that the economy was finally in a recovery mode.

In a select briefing on Thursday, he said though there were indications of a revival, the growth process needed to become more sustained over the months to signal a strong turnaround. He underlined the need for economic investments for revival.

Pointing to the improved PMI and IIP indicators, Rajan said the government can create conditions for the turnaround but ultimately it is for the people to create that recovery. He added improvement in industrial growth numbers for one month is not adequate to call it a recovery, it has to be more sustained.

On the issue of corporates making investments abroad, Rajan said there was nothing wrong if Indian corporates are acquiring a global outlook.

However, he added if there is a feeling that it is easier to invest overseas, then it is important to understand why that is the case and then remedy that situation, for instance in a sector like mining.

On the wide gap between the wholesale and consumer inflation, Rajan added this is because the consumer price inflation index has a higher weightage of food articles which have been going up while other articles have been going down relatively. He said the Reserve Bank of India could not ignore food inflation but refused to speculate on what action it would take next week in its monetary policy review.

Expressing concern over the high current account deficit, he said in the short run it is a problem as exports face a difficult global environment and many imports are unavoidable. Though, on gold tariffs have been increased unless the root cause is tackled it will not meet the investment desires of the people. As gold prices have come down, Rajan said hopefully this will give people a pause in terms of demand.

“There’s not a whole lot one can do about the current account deficit except to boost exports, which also can’t be done very quickly. Exports have shown some stabilization in recent months and hopefully, as the global economy recovers, they will improve”, Rajan added.

New Delhi, March 14
India's headline inflation picked up in February on higher fuel costs but another measure of price pressure cooled, reinforcing expectations that the Reserve Bank of India will deliver a rate cut next week.

The wholesale price index (WPI), the main inflation indicator, rose an annual 6.84% in February, higher than the 6.54% rise estimated by analysts. Wholesale prices rose 6.62% in January.

But nonfood manufacturing inflation, which the RBI uses to gauge demand-driven price pressures slowed to 3.8% in February, the weakest pace since March 2010.

Rupa Rege Nitsure, chief economist at Bank of Baroda, said the inflation data showed a considerable slowdown in consumer demand, which should help keep inflation in check.

"Today's inflation data combined with continuous weakness in the real economic activities, in my opinion, would trigger the RBI to cut rates by at least 25 basis points on Tuesday."

The central bank, which has faced intense pressure from industry and government to loosen monetary conditions to help arrest the worst economic slowdown in a decade, cut its key lending rate by 25 basis points to 7.75% in January after leaving rates on hold for nine months.

Hopes for a further cut at its policy review on March 19 have risen after economic growth slipped below 5% in the December quarter and Finance Minister P. Chidambaram pledged to rein in the fiscal deficit at 4.8% of GDP in the year to end-March 2014.

Soon after the data, the benchmark 10-year bond yield fell 4 basis points to 7.86% on expectations that softer core inflation would give the central room to lower borrowing costs.

"Though the headline number is still high, the breakup (detail) shows that inflation will continue to ease going ahead and along with the government's fiscal consolidation efforts, there is even more reason to expect RBI to cut rates in March and for some more time going ahead," said Rahul Bajoria, regional economist at Barclays Capital.

HIGH FOOD PRICES: Fuel prices rose an annual 10.47%, faster than a 7.06% on-year rise in January. Manufacturing goods inflation dropped to 4.51% in February from 4.81% a month ago.

Food inflation also slowed down to 11.38% during the month from 11.88% in January. However, it stayed in double-digits for the third straight month, and has tempered expectations of any aggressive monetary easing. — Reuters

New Delhi, March 14
Indian telecom operators owe the government Rs 9,636.34 crore as outstanding amount for spectrum usage charges and licence fees.

Minister of State for Communications & IT Milind Deora in a written reply to the Lok Sabha on Wednesday also said the government had sent “show cause” notices to five telecom firms including Reliance Communications and Tata Teleservices for alleged understatement of revenues.

He said the country’s largest telecom operator, Bharti Airtel, owes the maximum amount of Rs 3,275.56 crore for spectrum usage charges and licence fees followed by state-run BSNL (Rs 2,092.95 crore).

Anil Ambani-owned Reliance Communications comes in at third place with dues of Rs 1,656.23 crore. Vodafone India (Rs 1,122.01 crore), Tata Teleservices (Rs 458.32 crore) and Idea Cellular (Rs 428.06 crore) are the other operators that owe the government money.

The government has also imposed penalties to the tune of Rs 2,199.73 crore on operators in respect of outstanding usage charges and licence fees, Deora said. He added operators owed the government an outstanding amount of Rs 23,177.65 crore for one-time spectrum charges for spectrum beyond 4.4 MHz in respect of GSM spectrum.

"The operators have been given an option of deferred payment. The first installment has not been paid by the operators, which have been taken as outstanding dues. The matter is sub judice. Most of the aforesaid dues are under litigation," Deora told the house yesterday. He added the government has sent “show cause” notices to five telecom firms including Reliance Communications and Tata Teleservices for alleged understatement of revenues of over Rs 10,000 crore for the 2006-07 and 2007-08 financial years.

However, the matter has been stayed by the Kerala High Court, Telecom Disputes Settlement Appellate Tribunal and the Madras High Court.

"A special audit of five major private telecom companies including the Vodafone group has been conducted for fiscal 2006-07 and 2007-08," Deora added. 

Mumbai, March 14
The government stated that companies will be allowed to invest in domestic taxfree bonds where the effective rate of returns is greater than the prevailing bank rate, according to a circular from the corporate affairs ministry seen by Reuters.

The circular clarifies a key provision that had been seen hampering company investments into taxfree bonds, given the provision was interpreted as preventing companies from investing in debt where the "rate of interest" is lower than the bank rate.

That had raised confusion because taxfree bonds offer a lower interest rate, ranging from 6.75% to 7.50%, but the returns are effectively higher since they are exempt from taxes. The circular clarifies that taxfree bonds would not violate this provision in cases where the "effective rate of return" is greater than the bank rate.

Reuters confirmed the existence of the circular with three separate company sources who declined to be identified because the corporate affairs ministry has not publicized the circular.

The government has allowed Rs 500 billion worth taxfree bonds to be issued in FY2013-14, the majority of which is intended for retail investors. Companies can invest in up to 10% of that total amount, or Rs 50 billion. — Reuters