New Delhi, August 30
The Reserve Bank has informed the government that the impact of eurozone crisis on the Indian banks may be limited.

As per the Financial Stability Report (FSR) of RBI, the first order impact of the eurozone crisis may be limited as there is no presence of Indian banks in Portugal, Italy, Greece and Spain, Minister of State for Finance Namo Narain Meena has said in a written reply to the Lok Sabha.

"Secondly, none of the Indian banks has any exposure to bonds issued by Portugal, Greece and Spain, while exposure to Italian bonds is negligible," he said.

He also said that the funding dependence of overseas branches of Indian banks on European entities, except for the UK, is also not very significant. Replying to another question, Meena said that RBI has stated that there had been no report of serious crisis in the form of run on Dhanlakshmi Bank.

However, the Annual Financial Inspection (AFI) on the bank carried out by the RBI for the financial year 2010-11 and 2011-12 brought out certain irregularities in the accounting practices adopted by the bank, he said.

These included non-adherence to RBI guidelines on income recognition, asset classification, provisioning norms and disclosure requirement, he added.

RBI has advised the bank to take corrective steps in the matter and is closely monitoring the day-to-day operations of the bank, he added.

In response to another question, Meena said, with a view to achieve greater financial inclusion, RBI has advised banks on August 10, 2012 to offer basic 'Savings Bank Deposit Account'.

Such accounts would come with some more enhanced facilities, including facility of ATM card or ATM-cum-Debit Card.

"This account shall not have the requirement of any minimum balance," he said.

The facilities will be provided without any charges, he said, adding, the existing basic banking no-frills accounts are also to be converted to Basic Savings Bank Deposit Account.— PTI

New Delhi, August 30
The quantum of gold import crossed 1,000 tonne in 2011-12 fiscal, the government said on Thursday.

Gold imported in the country in 2011-12 fiscal was 1,067 tonne, Minister of State for Finance S S Palanimanickam said in a written reply to the Lok Sabha.

This was higher than 969 tonne imported in 2010-11 fiscal and 850 tonne in 2009-10, he said, adding that so far in the current fiscal the import stood at 204 tonne.

India produces around two tonne of gold a year against the imports of 900 tonne.

Palanimanickam said as per the existing policy, people returning from abroad after a minimum stay of six months are allowed to bring 1 kg of gold on payment of appropriate customs duty.

The Directorate General of Foreign Trade, under the Commerce Ministry, has said that there is no proposal to change the present import policy, he said.

Gold prices have been ruling firm in the recent past and is hovering over Rs 31,350 per 10 gm.— PTI

New Delhi, August 30
The telecom penetration in urban areas has reached a saturation point. It was confirmed on Thursday as the Comptroller and Auditor General (CAG) in its report on telecom sector said subscribers in the rural sector have outpaced their counterparts in the urban areas over the past five years.

According to the report tabled in the Parliament, rural subscribers have grown to 282.23 million as on March 2011, from 45.71 million in 2006-07, while the urban user base increased to 564.08 million from 160.15 in the same period.

Reflecting the people empowerment in the rural India, the CAG said, "The growth rate of subscribers in rural areas during the last five years was higher at 485 per cent compared to 233 per cent in urban areas."

The situation is quite same for the telecom operators who are now concentrating more on the rural sector than urban areas.

The subscriber growth figures released by the Telecom Regulatory Authority of India (TRAI) earlier this month pointed out that there had been negative growth in the urban areas as compared to the rural areas.

The CAG report said the overall telephone subscribers increased from 206 million to 846 million, registering a growth of 310 per cent during the 2006-07 to 2011 period. It also pointed out that there had been a decline in the wire-line segment of the subscribers. It said, "While the wireless user base increased by 647 million, the wireline base recorded a decline of six million".

It said that the rural tele-density, which was six on the scale of 100 as on March 31, 2007, increased to 34 at the end of March 2011 as compared to urban tele-density of 47 and 157 respectively.

New Delhi, August 30
The Micro, Small and Medium Enterprises (MSME) Ministry on Thursday said it has not received any proposal to dilute guidelines related to foreign direct investment in the single-brand retail sector.

Foreign retailers, who want to set up 100% single brand retail stores in India, have raised concerns over the mandatory condition of 30% sourcing from small and cottage industries.

"There is no proposal with this ministry at present for diluting FDI guidelines in single brand retail," MSME Minister Vayalar Ravi said in a written reply to the Rajya Sabha.He said the guidelines for FDI in retail were approved by the cabinet with inputs from all concerned ministries.

The government has eliminated 51% cap on foreign direct investment (FDI) for single brand retailers like IKEA, Adidas, Louis Vuitton and Gucci.

However, those opting for taking FDI beyond 51% will have to source at least 30% of their merchandise from the domestic micro and small enterprises.

Swedish furniture firm IKEA, who has moved application for raising FDI up to 100%, has sought easing of norms from the government for compulsory procurement from the micro and small enterprises.

At present, a company up to investment of Rs 5 crore qualifies to be called MSE.

The IKEA argument is that once big time orders are placed on domestic entities, they will have to expand capacity and pump in more investment and thus would not remain the MSEs eligible for sourcing by global firms.

The furniture retailer plans to invest Rs 10,500 crore to set up about 25 stores in India.

In another reply, Ravi said several suggestions for the amendment to the Micro, Small and Medium Enterprises Act 2006 have been received from various associations. Earlier, Commerce and Industry Minister Anand Sharma has said the government is working on revising the definition of MSME to help foreign retailers.

New Delhi, August 30
Credit rating agency Crisil on Thursday said the loans restructured by Indian banks may increase sharply to Rs 3.25 trillion between 2011-12 and 2012-13, against the earlier estimate of Rs 2 trillion.

Loans of Rs 1.6 trillion have already been restructured in 2011-12 and in the first quarter of 2012-13. The majority of restructuring will be in loans to the state power utilities (SPUs), and the construction and infrastructure sectors. The rise is a result of significantly higher funding challenges being faced by companies with large debt, a statement said.

According to Pawan Agrawal, senior director, Crisil Ratings, "In recent months, availability of unsecured short-term loans from Indian banks has diminished. This is exacerbating refinancing and liquidity pressure, especially for the SPUs. This will lead to a significant increase in restructuring of SPU loans to nearly Rs.1.5 trillion. So far, SPU loans of Rs 0.6 trillion have been restructured".

Most likely SPU-loan restructuring will happen through a centralised scheme coordinated by the central government. "Furthermore, inability to raise adequate equity in a timely manner is straining the balance sheets and financial flexibility of developers in infrastructure and construction sectors, resulting in an increased likelihood of restructuring", Agrawal added.

Other vulnerable sectors include iron and steel, textiles, and engineering. The proportion of restructured loans in this period will be high at around 5.7 per cent of banks' advances as on March 31, 2013. Around Rs 0.50 trillion of these restructured loans may slip into NPAs, though this will depend on the terms of restructuring and fundamental viability of the projects and the companies. These slippages can aggravate the already stressed asset quality of banks by further increasing NPAs by 50 to 75 basis points beyond March 2013. The loans to SPUs are unlikely to slip into NPAs, given the support expected from state and central governments.

Despite continued weak growth and profitability in the corporate sector, the large restructuring will help limit the increase in the banks' NPAs in the near term. According to Crisil estimates, the lower GDP growth of 5.5 per cent expected in 2012-13 may result in increase in banks' gross NPAs to 3.5 per cent by end-March 2013.

New Delhi, August 30
After allowing foreign direct investment (FDI) from Pakistan, India will issue a clarification on allowing outbound investments to Pakistan to boost bilateral trade ties.

Currently, there is a grey area on investments from Indian companies flowing to Pakistan which will be corrected by a notification from the Finance Ministry in a week, government officials said.

RBI would set up a screening committee to clear outbound FDI from India. The notification for outbound investments will be issued before the secretary-level talks between the two countries, scheduled for mid September in Islamabad

On the trade front, there have been several initiatives between the two countries. Pakistan has cut down the list of negative items of trade with India and the MFN nation status is likely to be completed by year-end.

The Cabinet has already approved reduction of 30 per cent in South Asian Free trade Agreement (SAFTA) sensitive list which means peak customs duty on 264 tariff lines would be reduced to five per cent in a three-year period. The finance ministry will issue a notification in this regard shortly.

As part of broadening the trade ties, both countries are working on initiatives in power and petroleum sectors. Talks are on for an electricity link between Amritsar and Lahore through a grid. On petroleum, discussions are on for extending the Bhatinda gas pipeline to Pakistan. The Petroleum Ministry is also open to the idea of building a pipeline.

New Delhi, August 30
German auto major Daimler has said it will start assembly of its luxury sports utility vehicles M and GL-Class from Mercedes-Benz's portfolio in the country by next year.

The move comes as part of its strategy to strengthen its standing in the Indian market where it has lost out the market leader tag it held for years to its other German counterparts, BMW and Audi.

The company will also start assembling the SUV in two South East Asian countries -- Thailand and Indonesia.

In a statement available on its website, the company said, "The necessary preparations at the selected three production sites in India, Thailand and Indonesia are proceeding full steam ahead. Later on in the year, final assembly of the M-Class using SKD kits will start there for the respective local market."

Presently, the SUV kits are imported from Tuscaloosa or Alabama, USA.

"For the first time, Daimler will start the final assembly of the SUV model series for the new Mercedes-Benz M-and GL-Class outside the SUV parent plant in Tuscaloosa or Alabama in USA," the company said.

The statement added that following the start of production of the M-Class in India, Thailand and Indonesia this year, the first units of the new GL-Class made from semi knocked down kits would be roll out from the assembly lines in India and Indonesia in 2013.

At present, Mercedes-Benz assembles its luxury sedans C, E and S-Class at its facility near Pune in Maharashtra.

"Our new SUVs are very popular with our customers. We expect high growth rates also in the emerging markets and, therefore, extend our local production. Thus, we open up new potential as part of our growth strategy," Daimler AG member of the board of management Wolfgang Bernhard said.