(Current Affairs) Economy & Energy | January: 2015

Economy

Indian Rupee ends almost flat at 61.41 against US dollar

  • The Indian rupee ended almost flat at 61.41 against the Greenback on alternate bouts of buying and selling.

  • Despite a strong start, the rupee erased all its morning gains during intra-day due to sharp bouts of dollar demand from importers. However, it fell later before recouping losses to close almost flat at 61.41 on the back of fresh dollar selling from banks and exporters.

  • Sustained capital inflows into equities also helped the rupee to cap the fall to some extend, dealers said.

  • At the Interbank Foreign Exchange market (Forex), the domestic unit commenced higher at 61.35 a dollar from previous close of 61.40. It moved in a range of 61.34 and 61.49 before settling at 61.41, showing a marginal fall of one paise.

  • Meanwhile, US dollar continued its strong rallying momentum against a basket of currencies in late Asian session trade in the wake of Republican wins during the mid-term elections as well as steady improvement in US data.

Five global banks slapped fines totalling $3.4 b for forex market rigging

  • British, American and Swiss regulators slapped fines totalling $3.4 billion ( Rs.20, 900 crore) on five banks after a global regulatory probe found them guilty of rigging the foreign exchange market.

  • Five banks, including HSBC, Citibank, JP Morgan Chase, the Royal Bank of Scotland and UBS, have been fined £1.1 billion ($1.7 billion) by Britain’s market regulator, the Financial Conduct Authority for failings over foreign exchange operations.

  • Simultaneously, the US Commodity Futures Trading Commission imposed fines totalling $1.4 billion on the same five banks while UBS faced an additional fine of $138 million from the Swiss regulator, FINMA.

  • The FCA slapped a fine of £225.5 million on Citibank, while HSBC faced a penalty of £216 million. JP Morgan Chase, RBS and UBS were fined £222.1 million, £217 million, and £233 million respectively.

  • The fines related to failure to control business practices in the banks’ G10 foreign exchange trading operations, a market that FCA said was “systematically important.”

  • The banks failed in their responsibility to manage obvious risks that included conflicts of interest and confidentiality, the FCA said.

  • “Between January 1, 2008 and October 15, 2013 ineffective controls at the banks allowed G10 spot FX traders to put the banks’ interests ahead of those of their clients, other market participants and the wider UK financial system.” As a result, traders were able to behave “unacceptably” as they shared confidential information, often colluding with other traders, and attempted to manipulate G10 spot FX currency rates.

  • “Today’s record fines mark the gravity of the failings we found and firms need to take responsibility for putting it right,” said Martin Wheatley, Chief Executive of the FCA.

Retail inflation declined to 5.5% in October

  • Helped by softening prices of food items, the retail inflation declined to 5.52 per cent in October, the lowest since the new series of data was introduced in January 2012.

  • This is the fourth consecutive month of decline in the Consumer Price Index based inflation or retail inflation, which had fallen to 6.46 per cent in the previous month.

  • The overall food inflation measured on CPI came down to 5.59 per cent in October against 7.67 per cent in the previous month.

  • Retail prices of vegetables declined by 1.45 per cent against a rise of 8.59 per cent in September, according the data released by the Ministry of Statistics and Programme Implementation.

  • Inflation in fruits slowed to 17.49 per cent from 22.4 per cent in September. Similarly the rate of price rise in protein rich items like eggs, fish and meat was at 6.34 per cent in October, slightly down from 6.35 per cent in the previous month.

RBI tightens norms for NBFC Companies

  • Tightening norms for non-banking financial companies (NBFCs), the Reserve Bank of India raised the capital adequacy requirement and the net owned fund limit, among others, with an objective to mitigate risks in the sector.

  • With a view to streamlining the regulations for the sector, the RBI also revoked temporary suspension on issuance of Certificate of Registration (CoR) to companies that want to conduct business of non-banking financial institution (NBFI).

  • As per the latest directives, the RBI has raised the limit for NBFCs to maintain the net owned fund (NOF) requirement to four times by 2017 to Rs.2 crore.

  • At present, the NOF requirement is at Rs.25 lakh. In a phased manner, the NBFCs would be required to raise it to Rs.1 crore by March, 2016, and to further double it to Rs.2 crore by 2017. “NBFCs failing to achieve the prescribed ceiling within the stipulated time period shall not be eligible to hold the CoR (Certificate of Registration) as NBFCs.

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