India Ranks Low

India ranks low in financial inclusion: ICRIER
India has been ranked poorly, even below African countries like Kenya and Moracco, in the first-ever index of financial inclusion prepared by city -based think-tank ICRIER to find out the extent of reach of banking services in 100 country's of the world.
India has been placed at the 50th spot, much above Russia but below China, in the index of financial inclusion (IFI) prepared by the Indian Council for Research on International Economic Relations (ICRIER).
The financial inclusion index, which gives the extent of availability and usage of banking services in key nations of the world, is based on indicators like number of bank accounts per thousand adults, number of ATMs and bank branched per million people and amount of bank credit and deposit.
The index assumes significance as one of the major goals of the 11th Five-Year Plan is to work for financial inclusion and extend the reach of microfinance to meet credit needs of approximately 80 per cent of the population not directly covered by banks.
Spain has occupied the top position in the IFI, which is based on 2004 data, followed by Canada and Portugal, while countries including Nepal, Zimbabwe and Bostwana are at the bottom of the list.
Among the important countries, Germany has been placed at 4th position, the UK 17th, USA 21st and Japan 22nd.
Referring to India, the ICRIER study said inspite of low density of bank branches, the usage of banking system in terms of volume of credit and deposit seems to be moderately high.
source-business standard
New Delhi July 23, 2008, 15:42 IST

Disinvestment process

Disinvestment process may gain speed

“We will complete the NHPC IPO by September-October, if market conditions permit”, says Mr Jairam Ramesh.

New Delhi, July 23 After the initial euphoria over reforms getting a leg-up following the United Progressive Alliance (UPA) Government surviving a trust vote and freeing itself from the Left’s clutches, reality seems to be dawning upon policymakers.
The win at Tuesday’s confidence vote will technically allow the Congress-led alliance to be in power till April next. But as a senior official noted, the ‘window of opportunity’ to push through major reforms exists only till around October, after which Assembly elections would take off in six States.
“Any Bill to be passed would have to be taken up in the Monsoon session, starting next month.
“While there is also the Winter session after that, it would be politically difficult to enact any big-ticket legislation then”, he pointed out.
The Finance Minister, Mr P. Chidambaram, on Wednesday, stated that the Government will ‘try’ to take up various pending Bills in the coming session itself.
These pertain to raising the existing 26 per cent foreign direct investment (FDI) limit in insurance companies to 49 per cent, removing the 10 per cent individual voting rights cap in banks and conferring statutory status to the Pension Fund Regulatory and Development Authority.
“Getting each of them passed is akin to surviving a fresh trust vote. After all the bad blood created in the recent vote, it would take some deft manoeuvring to obtain the support of the main Opposition, Bhartiya Janata Party (BJP), leave alone the Left”, the official said.
While the Government’s new ally, Samajwadi Party (SP), has indicated that it is open to pension, banking and insurance reforms, “it is risky to rely just on their numbers, more so after all the recent horse-trading allegations”.
The official was also pessimistic on FDI being permitted in retail, even if it involves no legislation per se. “Forget SP, even sections within the Congress are dead opposed to it”, he added.Possible areas
So what reforms can one realistically expect? Disinvestment is one area that could see some action. With the Left off its back, the Government is planning to go full steam with the initial public offerings (IPO) of NHPC Ltd and Damodar Valley Corporation (DVC).
Confirming this, the Minister of State for Power, Mr Jairam Ramesh, told Business Line, “We will complete the NHPC IPO by September-October, if market conditions permit”.
The company is slated to issue 10 per cent fresh equity and offload five per cent through an offer for sale, which will reduce the overall Government stake to 86.3 per cent.Study under way
In the case of DVC, the Government has already commissioned KPMG to work out the modalities for going public. “DVC is a statutory corporation that was, in fact, created 60 years back through an Act of the Constituent Assembly. The consultant is examining various options, including floating of a subsidiary that can be listed without the need to amend the Act relating to the parent company”, Mr Ramesh said.
The Government also wants to list companies such as Satluj Jal Vidyut Nigam and North Eastern Electric Power Corporation, though these are unlikely to happen in the current Government’s term, Mr Ramesh admitted.

SOURCE :Business Daily from THE HINDU group of publicationsThursday, Jul 24, 2008

TDS MAY BE WAIVED ON RENTAL INCOME

TDS may be waived for rental income up to Rs 2 lakh

July 24, 2008, 0:06 IST

Source- Business Standards
The Central Board of Direct Taxes (CBDT) is likely to increase the exemption limit for tax deducted at source on rental income to Rs 2,00,000 a year from Rs 1,20,000 at present.
The move will go a long way towards reducing the tax burden of individuals and companies earning rental income. Professionals, small businesses and companies paying rent above Rs 1,20,000 annually are statutorily required to deduct TDS.
The TDS rate is 15 per cent for individuals and 20 per cent for companies earning rental income from land, buildings (including factory buildings) and furniture. The rate is 10 per cent on rental income from machinery, plant and equipment.
The move to increase the rental income limit has become necessary after the basic exemption limit from income tax for individuals was raised to Rs 1,50,000 a year in Budget 2008, officials said.
"The move will be a great relief to pensioners and retired people whose only source of income is from immovable property like house rent," said a tax consultant.

Golden Quotes

Why not be instrumental in solving the problems of others instead of being a problem yourself?

THE WARREN BUFFETT WAY

THE WARREN BUFFETT WAY
Business Tenets
1. Is the business simple and understandable?
2. Does the business have a consistent operating history?
3. Does the business have favorable long-term prospects?
Management Tenets
4. Is management rational?
5. Is management candid with its shareholders?
6. Does management resist the institutional imperative?
Financial Tenets
7. What is the return on equity?
8. What are the company’s “owner earnings”?
9. What are the profit margins?
10. Has the company created at least one dollar of market
value for every dollar retained?
Value Tenets
11. What is the value of the company?
12. Can it be purchased at a significant discount to its value?

In evaluating people, you look for three qualities: integrity,
intelligence, and energy. If you don’t have the first, the other
two will kill you............................WARREN BUFFETT, 1993

FURTHER TIPS/METHODS WILL BE GIVEN TOMORROW.......

LET US ALL ENJOY TODAY AND WAIT FOR BEAUTIFUL TOMORROW....

SATBIR SINGH

PRESIDENT

JAB WE MET CA

REDEFINING PROFESSIONALISM........

Money Market

Money Market and its Instruments
Money Market: Money market means market where money or its equivalent can be traded.
Money is synonym of liquidity. Money market consists of financial institutions and dealers in
money or credit who wish to generate liquidity. It is better known as a place where large
institutions and government manage their short term cash needs. For generation of liquidity, short term borrowing and lending is done by these financial institutions and dealers. Money Market is part of financial market where instruments with high liquidity and very short term maturities are traded. Due to highly liquid nature of securities and their short term maturities, money market is treated as a safe place. Hence, money market is a market where short term obligations such as treasury bills, commercial papers and banker’s acceptances are bought and sold.
Benefits and functions of Money Market: Money markets exist to facilitate efficient transfer of short-term funds between holders and borrowers of cash assets. For the lender/investor, it provides a good return on their funds. For the borrower, it enables rapid and relatively inexpensive acquisition of cash to cover short-term liabilities. One of the primary functions of money market is to provide focal point for RBI’s intervention for influencing liquidity and general levels of interest rates in the economy. RBI being the main constituent in the money market aims at ensuring that liquidity and short term interest rates are consistent with the monetary policy objectives.
Money Market & Capital Market: Money Market is a place for short term lending and borrowing, typically within a year. It deals in short term debt financing and investments. On the other hand, Capital Market refers to stock market, which refers to trading in shares and bonds of companies on recognized stock exchanges. Individual players cannot invest in money market as the value of investments is large, on the other hand, in capital market, anybody can make investments through a broker. Stock Market is associated with high risk and high return as against money market which is more secure. Further, in case of money market, deals are transacted on phone or through electronic systems as against capital market where trading is through recognized stock exchanges.
Money Market Futures and Options: Active trading in money market futures and options
occurs on number of commodity exchanges. They function in the similar manner like any other
futures and options.
Money Market Instruments: Investment in money market is done through money market
instruments. Money market instrument meets short term requirements of the borrowers and
provides liquidity to the lenders. Common Money Market Instruments are as follows:
 T reasury Bills (T-Bills): Treasury Bills, one of the safest money market instruments, are
short term borrowing instruments of the Central Government of the Country issued through
the Central Bank (RBI in India). They are zero risk instruments, and hence the returns are not
so attractive. It is available both in primary market as well as secondary market. It is a
promise to pay a said sum after a specified period. T-bills are short-term securities that
mature in one year or less from their issue date. They are issued with three-month, six-month
and one-year maturity periods. The Central Government issues T- Bills at a price less than
their face value (par value). They are issued with a promise to pay full face value on maturity.
So, when the T-Bills mature, the government pays the holder its face value. The difference
between the purchase price and the maturity value is the interest income earned by the
purchaser of the instrument. T-Bills are issued through a bidding process at auctions. The bid
can be prepared either competitively or non-competitively. In the second type of bidding,
return required is not specified and the one determined at the auction is received on maturity.
Whereas, in case of competitive bidding, the return required on maturity is specified in the
bid. In case the return specified is too high then the T-Bill might not be issued to the bidder.
At present, the Government of India issues three types of treasury bills through auctions,
namely, 91-day, 182-day and 364-day. There are no treasury bills issued by State
Governments. Treasury bills are available for a minimum amount of Rs.25K and in its
multiples. While 91-day T-bills are auctioned every week on Wednesdays, 182-day and 364-
day T-bills are auctioned every alternate week on Wednesdays. The Reserve Bank of India
issues a quarterly calendar of T-bill auctions which is available at the Banks’ website. It also
announces the exact dates of auction, the amount to be auctioned and payment dates by
issuing press releases prior to every auction. Payment by allottees at the auction is required to
be made by debit to their/ custodian’s current account. T-bills auctions are held on the
Negotiated Dealing System (NDS) and the members electronically submit their bids on the
system. NDS is an electronic platform for facilitating dealing in Government Securities and
Money Market Instruments. RBI issues these instruments to absorb liquidity from the market
by contracting the money supply. In banking terms, this is called Reverse Repurchase
(Reverse Repo). On the other hand, when RBI purchases back these instruments at a specified
date mentioned at the time of transaction, liquidity is infused in the market. This is called
Repo (Repurchase) transaction.
continued tomorrow----
Topics of tomorrows will be

Repurchase Agreement
Commercial Papers

let us wait for beautiful tomorrow.......

SATBIR SINGH
JAB WE MET CA
REDEFINING PROFESSIONALISM.....
KHOO NA ZAYEE YEAH ........TARE ZAMNEE PAR.......

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PRESIDENT

JAB WE MET CA

REDEFINING PROFESSIONALISM.......

IAS-2 (TECHNICAL SUMMARY)

Technical Summary

This extract has been prepared by IASC Foundation staff and has not been approved by the IASB. For the requirements reference must be made to International Financial Reporting Standards. IAS 2 Inventories
The objective of this Standard is to prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised. This Standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.
Inventories shall be measured at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
The cost of inventories shall be assigned by using the first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula for all inventories having a similar nature and use to the entity. For inventories with a different nature or use, different cost formulas may be justified. However, the cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs.
When inventories are sold, the carrying amount of those inventories shall be recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories shall be recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, shall be recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

5 reasons why windfall profits tax is wrong

A day after Reliance Industries [Get Quote] chairman Mukesh Ambani met Prime Minister Manmohan Singh to forestall political attempts to throttle his oil refinery business, the petroleum ministry has come out with a detailed presentation to show that the demand for the windfall profits tax (WPT) on private oil companies is 'short-sighted populism' and 'bad economics.'
The ministry claims that WPT would neither help in reducing prices of petroleum products nor would it lead to any increase in output. WPT could lead to lower investment in the petroleum sector and undermine India's energy security, the presentation cautions.
Concerned that the WPT would make investment and production by the domestic oil companies more expensive, the ministry says these companies should be incentivised to go in for drilling and that any deterrent will slow down any research that could help make future energy in the country less expensive.
In a note, prepared in response to first the Left and now the Samajwadi Party leader Amar Singh's demand for windfall profits tax, the ministry has given five reasons why such a tax defies logic. These are:
* India is neither a major oil producer nor Indian companies have gained much from the rising global prices of oil. * The government is bound by the contract of the production sharing agreement as part of the NELP (New Exploration Licensing Policy). * As part of the profit sharing plan, the government is already a beneficiary of the rise in profits of oil companies, besides 35 per cent corporate tax on such profits. * WPT on the basis of revenues in discovered blocks ignores the huge risks, investments and poor chances of discoveries. * WPT will discourage long-term investments in oil industry.
The ministry points out that all over the world discerning opinion leaders see windfall profits tax as no more than a populist political tool designed to make people feel good.
The ministry's note asserted that the clamour in India for such a tax is based on the misleading logic that the rising prices of oil across the globe has helped the oil companies make profits far in excess of what they legitimately deserve.
What about the profit margins in other businesses during boom periods, the ministry asked, and

Put mobile payment services on hold-RBI

RBI asks banks to put mobile payment services on hold

In a significant decision, the Reserve Bank of India (RBI) has restrained banks in launching their mobile payment services for the time being. In a notification on Tuesday RBI said that all the banks, which have already started their mobile payment services, will have to suspend them till the issuance of final guidelines.
The RBI found that there are a number of attendant issues and therefore, has asked banks to keep on hold their mobile payment services till issuance of the final guidelines.Banks have been told that they may also dissociate themselves from any mobile based money transfer service which has not received explicit approval of RBI or not covered by any of the guidelines issued by the central bank, the central bank said.
The central bank observed that a few banks have already started offering mobile payment services to their customers without waiting for the release of RBI’s guidelines.
Recently, few banks like Standard Chartered, ICICI and Barclays have been seen offering mobile payment services.”While the RBI has no objection for use of mobile channel to provide basic services such as mobile alerts for credit or debit entry, balance enquiry etc, which are in the nature of providing information, due care needs to be taken for permitting the channel for customers to initiate payment instructions,” the RBI said in its statement issued on mobile payments in India - operating guidelines for banks, on Tuesday.
Speaking on this matter, an ICICI Bank spokesperson said, “As far as our mobile banking facility is concerned, the withdrawal of cash happens only through the branch banking and so, we adhere to all RBI regulations. Our mobile banking facilitates the money transfers across bank accounts.”
Meanwhile, the RBI is in the process of finalising the operative guidelines for banks on mobile payments. The draft guidelines were placed on the RBI website and a number of comments have been received.
The comments are being compiled and after evaluation of the comments, the final guidelines would be issued, the RBI said.