Mumbai, September 27
The rupee rose to a four and a half month high on Thursday, breaching the psychological level of 53 to the US dollar, on strong capital inflows, with further gains expected after the government stuck to its borrowing target for the fiscal year.

The government said after the close of markets it will stick to its fiscal second-half borrowing plans of Rs 2 trillion and will not exceed the budgeted borrowing via bonds.

Dealers are seeing large flows into the forex market in recent sessions, primarily driven by large foreign fund inflows into Indian equities after a slew of fiscal and economic reforms announced by the government.

Plentiful global liquidity after a third round of quantitative easing from the US Federal Reserve has also helped, with Indian equities attracting more than $3 billion in foreign investor inflows in September alone.

"Foreign banks sold heavily on custodian inflows. The supply perception is improving and stop-losses are getting triggered with the rupee appreciation," said Subramanian Sharma, director at Greenback Forex.

"If the dollar/rupee closes the quarter below 53.20 tomorrow, I expect another 1-2 per cent gains for the rupee."

The partially convertible rupee rose to 53.01/02 to the dollar as per State Bank of India closing rate from Wednesday's close of 53.51/52. It rose to as high as 52.99 in intraday trade, it strongest since May 10.

"The market is in a mood to celebrate. The rupee will likely gain tomorrow on the government sticking to its borrowing," said M. Natarajan, head of treasury at Scotiabank in Mumbai. — Reuters

New Delhi/Mumbai, Sept 27
The government vowed to stick to its planned borrowing for the year on Thursday, despite higher than expected spending on subsidies and welfare programmes as it seeks to rein in the fiscal deficit and stave off a credit rating downgrade.

Analysts tracking the trajectory of government revenues and spending, however, remain skeptical the government will be able to carry through its commitment, and a Reuters poll this week showed most economists expect an additional borrowing of Rs 500 billion for the year.

Economic affairs secretary Arvind Mayaram said the government will borrow Rs 2 trillion selling bonds in the second half of the current fiscal year that begins on October 1. "The option for fresh borrowing announcement later always exists, but we don’t expect it would be used," he added.

In March, the government had pencilled in gross market borrowing of Rs 5.7 trillion for fiscal 2012-13 to help bridge its fiscal deficit that is forecast to be 5.1% of the GDP.

But a slowing economy and spending on fuel subsidies and welfare programmes, such as a guaranteed rural employment scheme, launched by the left-leaning Congress part-led government have cast doubt on its ability to meet the full year fiscal gap target.

Already the government's subsidy burden is running higher than it had expected.

But Mayaram played down such concerns. "We will take more steps towards fiscal consolidation and efforts will be to keep fiscal deficit within budgeted target," he said.

The government is due to sell Rs 150 billion of bonds this week, taking its borrowings in the first six months of this fiscal to Rs 3.7 trillion, or 65% of the full-year target.

India's investment grade sovereign credit rating is at risk because of the high fiscal deficit, whose funding through market borrowing is crowding out private investors and lowering growth prospects.

To improve public finances, Prime Minister Manmohan Singh earlier this month raised the price of heavily subsidized diesel sharply and cut subsidized supplies of cooking gas in the face of political opposition.

"This is as clear as it can get. It’s a serious fiscal consolidation step. One large uncertainty is clearly behind us," said Sandeep Bagla, executive vice president at ICICI Securities Primary Dealership referring to the government's plan not to overshoot the borrowing target.

The benchmark 10-year bond yield closed down 1 basis point at 8.16 percent before the announcement.

"There should be a small rally (in bonds) tomorrow. Besides, this move also would fuel expectations for a rate cut. The government is moving towards fiscal consolidation, so the ball is now set for a rate cut in October," said Kushal Maheshwari, a fund manager with Bajaj Corp. — Reuters

New Delhi, September 27
Commerce & Industry Minister Anand Sharma said on Thursday the public good and public interest could not be subservient to revenue maximization when it came to disbursement of natural resources or national resources. Reacting to the Supreme Court verdict on the 2G presidential reference on auction of natural resources, he said the verdict was important because there was a lot of confusion in the national discourse on the subject.

Sharma said the Supreme Court’s decision clears the air (on the upcoming 2G spectrum auction) and vindicates the position absolutely. “There was never any doubt in my mind, or in the mind of my colleagues in the government, that there was no constitutional mandate for auction", he said.

“The issue of governance had come under stress because whatever decisions are made, the larger public good is kept in mind. In the concept of a welfare state the government has to consider many things”, he said.

Sharma added even when it came to telecom sector, the revolution in that sector had ensured teledensity, which was very low in India, had multiplied manifold with over 900 million Indians now having phones. He mentioned it is also connected with inclusion when people are using this new technology and instruments even for banking for payments of bills.

On the issue of public welfare, he added that when a state has to take a decision say about construction of a hospital for the poor or housing for the slum dweller or the poor, school a collage or a university a rail corridor, an old age home an orphanage a disability centre then the issues come up.

“If we’ve to go by the wisdom of those who are repeatedly saying the auction is the only way forward, then nothing of this will come up. The state has a responsibility in a welfare state, that’s why it’s the maximization of public good not the maximization of revenues”, Sharma added.

Gurgaon, September 27
In what comes as a huge aid to the agencies probing controversial Reebok India case, the company has sought an extension of two months from the Registrar of Companies to file its audited financial and accounting details for 2011-12.

Reebok has reportedly claimed though it had to submit its statements latest by September 30, it could not finalize the statutory audit of its accounts by December due to some financial irregularities.

According to the officials of the economic offence wing of Gurgaon police, the move is significant as it will allow them to inspect fresh accounting statements before taking any further call on the course of the enquiry.

“We’ve been told by our investigating agencies that rather than going for usual 12 months accounting, the company has been requested to do so for a period of 15 months (starting January 1, 2011 to March 31, 2012). It will be huge help as our FIR (First Information Report) has the status only till December 31, 2011 and the suspects who have been arrested have, through their counsel, claimed in court that all pending return statements concerning the goods in question as of December 31, 2011, which stood at Rs 62.99 crore, were processed and duly reconciled between January and March 2012. We’ll now be able to verify the claim,” said a senior police official.

In an FIR filed with the Gurgaon police on May 21, German sports clothing manufacturer and Reebok’s parent company Adidas AG had accused Prem and Bhagat of criminal conspiracy and fraudulent practices over a period of time that allegedly caused the company a loss of Rs 870 crore.

The Gurgaon police last Wednesday arrested the two former executives, along with three other persons. All five are currently in the police remand for seven days and are being grilled for further leads in the case as the police suspects other officials to be part of this planned mismanagement scam.

New Delhi, September 27
As the Cabinet Committee on Economic Affairs earlier this week announced the financial restructuring policy for the state distribution companies (discoms), it emerged that six states, including Punjab and Haryana, contributed 70% of the total losses of the distribution companies.

According to ICRA report, the overall book losses of the discoms till March 31, 2011 was estimated at Rs 1.90 trillion, of which 70% of the losses were estimated to be contributed by the discoms of Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Madhya Pradesh.

Power Minister Veerappa Moily earlier in the week said the state electricity board's debt had crossed Rs 2 lakh crore and the government would be bringing in a draft model bill for efficient running and fixing responsibility on the state discoms.

According to ICRA, the banking sector's short term exposure to the distribution companies was estimated at Rs 1.5 - 1.7 trillion as on March 2012. This includes 3-3.6% of banking credit and 45-52% of total power credit. A major chunk of these loans were taken to fund cash losses of the discoms.

These losses have been contributed by several factors, including inadequate tariff hikes and AT&C losses. So as long as loans from the banks were freely available to fund these losses, there was limited pressure on the state government and distribution entities to go in for difficult decisions like tariff hike.

The key to the stated objectives of financial turnaround for the discoms however rest on the ability to implement the performance-linked measures, including regular tariff increases.

ICRA believes that over the next four years, on an all-India basis the discoms would require an annual tariff increase of around 10-11% to recover all costs and 50% balance short-term debt over a seven-year period commencing FY2016.

Chandigarh, September 27
Kotak Mahindra Bank claims to have garnered close to Rs 2,233 crore in its savings accounts following deregulation of interest rates. Deposits have risen from Rs 3,307 crore to Rs 5,540 crore, a jump of 68% year-on- year.

With the bank offering an additional 50% hike in interest rates on these accounts, it has managed to get good business. The bank claims that by offering 6% interest it has enabled customers to match this return on savings accounts with post-tax yields of short to medium term term deposits.

The bank’s president (consumer banking), K.V.S. Manian, said: “This has ensured current and savings accounts have improved significantly to Rs 11,000 crore. In several states including Punjab and Haryana the total deposit base is now evenly distributed between term deposits and current/savings accounts.”

He added total business was now Rs 83,900 crore, with Rs 42,300 crore as advances and Rs 41,600 crore as deposits. “This year, we are targeting a growth of over 25%. The bank’s business in Punjab and Haryana was around Rs 4,500 crore. The bank is looking at expanding its branch network from 379 to 500 branches by December 2013.