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The department of economic affairs will approach the Cabinet this week seeking amendments to the Sebi Act of 1992.
Initially, the ministry intended to grant Sebi some peripheral probe powers. However, under pressure from agencies like CBI and Sebi�s own investigative branches as well as scathing comments from the Joint Parliamentary Committee which is investigating last year�s securities scam, the ministry has been forced to consider arming Sebi with new and, in some cases, sweeping powers as well as strengthen its board.
Sebi board�s strength itself will now go up to nine from six at present. Besides the chairman, it will, in future, include three other full-time members. An independent selection committee will also be appointed to select members of the Sebi board instead of the current procedure of the finance ministry forwarding names to the Cabinet Committee on Appointments.
The size of Sebi�s Appellate Tribunal (SAT) is also being increased to a three-member bench from a single member board. While one member will be from the judicial profession, two others will have specialisation in capital markets.
The new Sebi Act will now prescribe specific offences such as insider trading, fraudulent trade practices and market manipulations and define what constitutes such offences.
To try and stop offences from being committed, or to enable it to investigate an offence, Sebi will have the right to prohibit issue of an offer document, probe any transaction which it suspects can be detrimental to investor interest or which may result in market manipulation. It can also search, seize and take under custody any document it feels necessary for its probe.
It will have the right to probe any individual or company associated with the market for violation of the Sebi Act.
Sebi is also being empowered to suspend trading of a security, restrain persons from buying or selling or otherwise dealing in the securities market and attach up to one month�s bank accounts of brokers as well as impound and retain proceeds of any security transaction under investigation.
Sebi will also have the right to issue and desist orders to a person, broking firm from committing any crime under this Act. It can also impose monetary penalties, which have not been specifically spelt out in the note now being put to the Cabinet.
However, it is understood this could be in multiples of the amount involved in any given scam.
It can also grant immunity to any person turning witness under the Sebi Act.
The wide-ranging powers being given to Sebi come within a year of the bear scam on the stock market and former Sebi chief D.R Mehta complaints that his regulatory body lacks enough teeth to deal with market manipulations.
The powers that Sebi is now being sought to be clothed with are still reportedly being resented by the broking community and insiders say an intense lobbying war is still going on over this issue.
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Reddy was speaking to reporters on the sidelines of the Asian Bond Conference, jointly organised by the Thai Bond Dealing Centre, Fixed Income Money Market Dealers Association of India and Primary Dealers Association of India, in Bangkok today.
On being asked about the possibility of a cut in the benchmark rate, �A bank rate cut, as RBI governor Bimal Jalan says, can be any day, any time,� he noted.
The statement infused life into the otherwise lacklustre bond markets, as prices of some government securities even rose by about 50 paise over their previous levels. Government security prices had eased in the past few days over concerns on the political front, coupled with tax outflows that are likely to affect liquidity in the system.
For some time now, the bond markets have been speculating about a cut in the bank rate. These expectations were reinforced early this month when the central bank brought down the repo rate by 50 basis points to 6 per cent. Besides, finance minister Yashwant Sinha had lowered interest rates on small savings in the Union budget.
�The markets read too much into the RBI deputy governor�s statement and they interpreted it to mean that a cut in the bank rate was in the offing,� a dealer said commenting on the intra-day rally.
However, some analysts felt the statement on lowering the bank rate was a routine one, often made by central bank officials before the monetary and credit policy, due in the second week of April.
Reddy reiterated that heavy government borrowings limited the effectiveness of the monetary policy. �For a rate cut, domestic factors are more important although we also watch international developments.�
Rupee export credit
RBI today said it would extend a cut in interest rates on rupee export credit by six months to September 30.
In September last, the bank had announced a reduction in the ceiling on interest rates for export credit by one percentage point. The cut was applicable to both pre-shipment and post-shipment credit and was meant to last till March 31, 2002.
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The Japanese government had stopped fresh low-cost loans under this scheme in the aftermath of the nuclear tests at Pokhran.
Toshifumi Sakai, head of the Japan International Co-operation Agency here, said the delegation would also discuss ways to provide technical assistance.
Although diplomatic relations returned to normal last year, loans and other forms of aid have yet to be resumed�something which the meeting is expected to normalise.
The Japanese are also offering the services of experts who will come and work in any sector that the Indian government feels is necessary.
Among projects being considered is one to fund part of the Ganga Action Plan (GAP), to clean up a stretch of the river.
Finance ministry officials said they expected to tieup about Rs 500-600 crore in low cost ODA loans for not only the GAP project but also power and highway projects. Loans provided by the Japanese government through this window are usually at interest rates of 2 per cent.
JICA, which is the technical co-operation arm of the Japan government, will also be taking up the third phase of a project to produce high quality silk in south India, besides considering the expansion a Calcutta-based programme on prevention of emerging diarrhoea-related diseases launched in 1997.
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An investor in Haryana has pointed out that Jai Prakash Gaur, promoter of the company which has interests in construction, hotels and cement, has recently claimed that he and his associates own about 53 per cent, which would imply that he had acquired about 20 per cent stake in the past two years.
The promoters of companies are permitted to raise their shareholding in companies by 5 per cent every year under a special dispensation in the takeover code called the creeping acquisition route. However, an acquisition of 20 per cent in two years would be far in excess of the permissible level under the takeover code.
Despite repeated efforts, the Gaurs were unavailable to respond to the charges that have been levelled against them.
JPIL had apparently informed the stock exchanges that the promoters, along with persons acting in concert, held about 38.70 per cent as on March 31, 2001. The investor claims that the Gaurs have been making conflicting claims on the extent of their shareholding and says he has been stymied in his efforts to ascertain the exact extent of Gaurs� shareholding.
The aggrieved investor points out that in interviews given to various financial dailies in November 2000, J.P. Gaur had claimed that he and his associates own about 53 per cent of the company�s stake. However, in June 2001, Gaur claimed that he and his associates owned about 43 per cent.
After writing several letters to Sebi seeking a probe into the issue to determine whether the Gaurs had violated the takeover code, the investor got a reply from the market regulator stating �complaints pertaining to promoters quota/private placement of shares are not within the purview of Sebi.�
Under the provisions of the Sebi Act, the market watchdog can carry out independent investigations into share dealings of promoters if it has reason to suspect that there have been some code violations.
Sebi has been asked to direct the promoters of Jai Prakash Industries to make an open offer to acquire shares at the highest price paid by them for purchases already made by them within two weeks from the receipt of this notice or else face public interest litigation before the Delhi High Court.
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Tata Sons Ltd and Tata Power Ltd, the main promoters of the SPV, have issued unconditional and irrevocable corporate guarantees, which has enabled Panatone Finvest get a high rating for its debentures. Tata Steel and Tata Industries have a token presence in the SPV.
The one-year zero coupon NCDs have been assigned a P1+(SO) rating by Crisil, indicating a high degree of safety regarding timely payment of financial obligations on the instrument.
The leading rating agency said in its statement that the rating was based on the strength of the unconditional and irrevocable corporate guarantees provided by TSL and TPL to the debt instrument.
The guarantees are legally enforceable, and the payment structure is designed to ensure full and timely payment to investors.
�Since the tenure of the NCDs is one year, the instrument has been assigned a P1+(SO) rating reflecting the highest credit rating of TSL and TPL on the short-term scale,� Crisil explained.
The government, which currently owns about 53 per cent stake in Videsh Sanchar Nigam Ltd (VSNL), had divested 25 per cent (71.25 million equity shares) in the telecom major to a consortium of Tata group firms for Rs 202 per share. The government�s stake will be acquired by the SPV.
According to the regulations of the Securities and Exchange Board of India (Sebi) , following the acquisition of the government�s stake, PFL will have to make an open offer within three months to buy another 20 per cent in VSNL at the same price.
The total cost of the acquisition�both the government�s 25 per cent and 20 per cent through the open offer�amounts to Rs 2,591 crore. This will partly be funded with debt raised through the rated instrument and the balance by equity.
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The bank has appointed SBI Capital Markets to rope in the strategic partner. PNB AMC has an equity size of Rs 29 crore.
However, it can rope in the strategic partner only if RBI finds that PAMC is financially healthy. The central bank has already asked PNB to close its loss-making subsidiaries � PNB AMC and PNB Capital Services.
�The RBI had asked us to close down PNBAMC and not float any fresh scheme. However, on a request from us, it gave us time up to December 31, 2001, to submit a restructuring plan. The plan, which has been put before the apex bank, involves scouting for a strategic partner. PNB AMC has posted a profit of Rs 39 lakh on September 30, 2001, after a gap of almost five years. The RBI recently informed us that it will take a final decision after reviewing the company�s results as on March 31, 2002,� said PNB chairman S. S. Kohli.
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