B U S I N E S S

SBI cuts benchmark lending rate by 0.25%
Mumbai, September 22
The country's biggest lender, State Bank of India, said on Saturday it has cut its benchmark prime lending rate, the interest rate that commercial banks normally charge, by 25 basis points to 14.50 percent per annum with effect from September 27.

Walmart’s first store within 18 months
Mumbai, September 22
US retail giant Walmart aims to open its first store in India within the next 12-18 months, a day after the government notifies foreign direct investment in retail.

A file picture of Walmart supercenter in the US. WalMart Stores Inc may be the first to tap the huge Indian market as global retail rivals Carrefour SA and Tesco Plc focus on battling falling profits and consumer spending.

Forex reserves jump
Mumbai, September 22
India's foreign exchange reserves rose by US $2.44 billion to $294.47 billion on the back of a healthy increase in the currency assets during the week ended Sept 14. Total reserves had risen by $1.58 billion to $292 billion in the previous week.

SBI cuts benchmark lending rate by 0.25%

Mumbai, September 22
The country's biggest lender, State Bank of India, said on Saturday it has cut its benchmark prime lending rate, the interest rate that commercial banks normally charge, by 25 basis points to 14.50 percent per annum with effect from September 27.

New customers of the bank are now offered loans on or above the base rate but there is a section of old borrowers who still have loans linked to the PLR.

Earlier this week, the bank cut its base rate by 25 basis points to 9.75 percent.

The Reserve Bank of India on Monday cut the cash reserve ratio, the share of deposits banks must keep with it, by 25 basis points to 4.5%. Earlier this month, SBI had cut deposit rates between 50-100 basis points across maturities.

For deposits between 241 days and one year, the downward revision was 1 per cent. The new rate would be 6.5 per cent as against 7.5 per cent.

Of the total 9 maturity periods for fixed deposits, 0.5% downward rate revision was for six categories.

With the revision, the interest rate on 7-90 days fixed deposit came down to 6.50%, from 7%.

Similarly, term deposit 91-179 days was down by 0.5 per cent, at 6.50 per cent and 180 days fixed deposits would also attract 6.50 per cent interest rate.

Fixed deposit with maturity of 181-240 days would now provide interest rate of 6.50%, down from 7.25%. For one year to less than 2 year maturity period fixed deposits, the new rate will be to 8.5% as against 9%, down by 0.5%.

At the same time, interest rate for fixed deposits with maturity period between 2-3 years and 3-5 years has been slashed by 0.5% to 8.5%. However, the bank has left interest rate unchanged at 8.5% for term deposit of 5-10 years.

The base rate mechanism came into effect in July 2010 as a new transparent alternative to the earlier benchmark prime lending rate.

Of Rs 7.81 lakh crore domestic loan book (advances), around Rs 1 lakh crore is still on the BPLR, SBI chief GM for finance control Sunil Pant said. The remaining loans are on the base rate regime. As of the June quarter, the bank’s total loan book stood at Rs 9.59 lakh crore which includes foreign loans and loans to staff.

Asked about the impact on margins, he said the annual impact will be under Rs 250 crore in terms of interest income,and as the current fiscal is halfway through, the impact on the margin will be a minuscule 0.01 percent.

The impact of the base rate cut on the margins would be around 0.04 per cent. — Agencies

Walmart’s first store within 18 months

Mumbai, September 22
US retail giant Walmart aims to open its first store in India within the next 12-18 months, a day after the government notifies foreign direct investment in retail.

“The company is capable of opening stores within 12 to 18 months and would be seeking permission to do so from states that have already indicated their willingness to have the US retailer set up shop,” Scott Price, president and CEO, Walmart Stores, Asia, said in an interview to The Wall Street Journal. “Two years would be a reasonable time frame in total.”

The company has not yet decided where or how many stores it would like to have in India, said Price, adding, the company expects to continue its current partnership with Bharti Enterprises in a chain of 17 cash and carry stores.

Raj Jain, the managing director of Bharti Walmart, the joint venture that operates 17 outlets that cater to small businesses in India, confirmed by email that Walmart plans to open stores that serve consumers over the next 18 months, but declined to say how many.

While India’s retail infrastructure, such as cold storage areas and warehouses, is “desperately lacking,” Walmart can bring its own systems, said Michael Moriarty, a partner in the retail practice of management consulting firm A.T. Kearney.

India’s rules are more restrictive than those of China, Thailand, Russia, Brazil and Indonesia, all of which allow 100% FDI in multibrand retail, according to Goldman Sachs. — Agencies

Forex reserves jump

Mumbai, September 22
India's foreign exchange reserves rose by US $2.44 billion to $294.47 billion on the back of a healthy increase in the currency assets during the week ended Sept 14. Total reserves had risen by $1.58 billion to $292 billion in the previous week.

Foreign currency assets (FCAs), a major component of the forex reserves, shot up by $2.39 billion to $261.51 billion for the week under review, the Reserve Bank's weekly statistical data showed on Friday.

FCAs, expressed in US dollar terms, include the effect of appreciation or depreciation of the non-US currencies such as the euro, pound and yen, held in the reserves.

Gold reserves remained unchanged at $26.24 billion during the week, the central bank said. — PTI

investor guidance
No capital gains tax payable on income less than Rs 1.9 lakh
A.N.Shanbhag

If taxable capital gains is, say, Rs 1 lakh, can I invest this amount in REC/NABARD bonds? I have no other substantial income except some interest from bank deposits. If capital gains tax is to be paid, can I adjust it against the shortfall in basic income tax exemption?

— Ritu

For a resident individual or a "Hindu undivided family", where total income as reduced by short or long term capital gains on which tax is payable falls below the minimum tax threshold, the gains would be reduced by the amount by which the total income so reduced falls short of the threshold and the remaining gains will be taxed at the rates applicable. In short, where the tax liability arises only because of inclusion of such capital gains in the total income, tax is levied on the excess over the minimum taxable limit. In your case, if your total income including the amount of capital gains is less than Rs 1.9 lakh, you do not have to pay any capital gains tax nor do you have to file tax returns.

Will short-term capital gains from selling a vacant residential plot qualify for any tax exemptions along the lines of CGAS for long-term capital gains?

— Ganesh

Tax on only long-term capital gains may be saved by reinvesting in another property. Since taxpayers have two years to reinvest in property, the amount not invested by the due date for filing tax returns has to be invested in a bank deposit called CGAS. However, note that this system of saving tax by reinvesting in another property (CGAS, etc) is only for long-term capital gains. The same is not applicable for short-term capital gains.