The latest information of price rise crossing a high of 7.41% in 42 months led by increase in
steel, cement, food grains, sugar, edible oils, vegetables and other essential items has set the alarm
bells ringing in the polity of the country. The Union Cabinet has met twice without any major policy decision. The prices of various commodities are high worldwide and even the imports have not been able to contain the price rise.
The Government committed a blunder by restricting money supply artificially to real estate, industry and housing sectors resulting in increase in interest rate, reduced credit availability and apprehensions of a slowdown in growth of industries, construction sector and capital goods sector. The sentiment of Indian industry is on its lowest ebb in the last 5 years as due to subprime crisis there, a recession in US economy is apprehended. The Indian industry is keeping its fingers crossed to an adverse impact on India. The sentiment ultimately got translated into subdued capital market. In this back drop, immediate policy initiatives by the Government is crucial to the direction of economic vibrancy. The Growth requirements of low cost funds require a reduction in prime lending rates, easing of the credit and an ample increase in money supply for propelling growth at substantially lower interest rates. We need to learn from US experience and cut rates to counter recessionary tendencies. The price rise needs to be checked by addressing supply side. The Government may consider an immediate ban on commodity trading in essential commodities, dissuade hording and ban export of items like iron ore and other items propelling inflation. If the food grain price rise results into higher flow of value to
agriculturist it need not worry us.

Cash withdrawals from bank will not attract tax from April 1, 2009. This is following abolition of the banking cash transaction tax (BCTT) in the Union Budget 2008-09.

It may be noted that although the ICAI has issued AS 30, Financial Instruments : Recognition and Measurement, which contains accounting for derivatives, it becomes recommendatory from 1st April 2009 and mandatory from 1st April 2011. In this scenario, the Council expressed the view that since the aforesaid Standard contains appropriate accounting for derivatives, the same can be followed by the entities, as the earlier adoption of a standard is always encouraged. In case an entity does not follow AS 30, keeping in view the principle of prudence as enunciated in AS 1, Disclosure of Accounting Policies, the entity is required to provide for losses in respect of all outstanding derivative contracts at the balance sheet date by marking them to market.

It has been observed that in respect of any complaints/ comments received by SEBI, the issuer company is responding to the complaint and lead manager merely forwards a copy of reply to the complainant without adding any comments. As per the latest instructions by SEBI for the merchant bankers, Lead Managers have to reply directly to the complainant after independently examination of the matter instead of merely acting as an intermediary between the complainant and the respondent (issuer company). In case of complain regarding inadequate disclosures in the offer document, merchant bankers shall provide for adequate disclosures and inform SEBI at the earliest.

In order to provide a level playing field to all the investors in the cash market as in the case of derivatives market, it has been provided w.e.f. 21st April 2008 that all institutional trades in the cash market would be subject to payment of margins as applicable to transactions of other investors. To begin with, from 21st April 2008, all institutional trades in the cash market would be margined on a T+1 basis with margin being collected from the custodian upon confirmation of the trade. Subsequently, with effect from 16th June 2008 the collection of margins would move to an upfront basis.

As per SEBI circular dated 12th March, 2008 it has been decided that in cases of merger, demerger, amalgamation, capital reduction, scheme of arrangement in terms of the Companies Act and / or as
sanctioned by the Courts, in cases of rehabilitation packages approved by the Board of Industrial and Financial Reconstruction under Sick Industrial Companies Act and in cases of Corporate Debt Restructuring (CDR) packages by the CDR Cell of the RBI, there is no need to have a price band
on the first day of commencement/recommencement of trading (as required under the current policy). The price band may be retained in all other cases on the first day. This policy shall come into force with immediate effect.

The Reserve Bank of India has asked banks to make their own assessment of their various risk exposures, through a well- defined internal process, and maintain an adequate capital cushion for such risks. The RBI has issued guidelines on the Pillar 2 of the Basel II Framework. Pillar 2 deals with Supervisory Review Process (SRP).

The finance ministry has extended by one year the deadline for corporate provident funds to comply with the new norms for continuing to enjoy tax exemptions. The Finance Bill, 2008, proposes to extend the time limit to March 31, 2009, to provide time to the Employees’ Provident Fund Organisation (EPFO) to decide on the pending applications seeking exemption under Section 17 of the Employees Provident Fund and Miscellaneous Provisions (EPF&MP) Act, 1952.

Partnership firms, private companies and unlisted public limited companies can look forward to convert themselves into the more flexible form of limited liability partnership (LLPs) without paying stamp duty to state governments. The government intends to allow these entities to vest the ownership of their assets with a newly-formed LLP without executing a deal to transfer these assets. As of now transfer of assets can be done only through a conveyance or an instrument that attracts stamp duty from state governments. To remove this requirement, the government has introduced a special provision in the proposed new LLP Bill for vesting of assets on the LLP at the time of its registration.

The group to review issue process (GRIP) has recommended elimination of application forms in the primary market. The sub-panel of primary market advisory committee (PMAC), a standing committee of Securities and Exchange Board of India, has also suggested there should be no manual intervention in the issue process of the primary market. The GRIP panel has suggested that the entire initial public offering (IPO) process can be carried out through the internet platform. Another option is to use the secondary market infrastructure already available with the market. .

As per SEBI Chairman CB Bhave, fees payable by mutual funds, custodians and those who file offer documents has been cut by as much as 80% from April 1, 2008. It has also slashed the fee for offer documents for buy back of securities and the registration fee for venture capital funds. The fee for filing offer documents for public issue and mutual funds will be reduced from 0.03% of the amount raised to 0.005%. While the cap of fee for public offer is Rs. 3 crore, the same for mutual fund is Rs. 50 lakh. The annual registration fee for custodians has been slashed from 0.001% to 0.0005% of assets under custody. SEBI has also reduced the registration fee for venture capital funds from Rs.10 lakh to Rs. 5 lakh. The fee for rights issue offer documents has been slashed from 0.05% to 0.005%,
subject to a maximum of Rs. 5 lakh. The fee for filing offer documents for buyback of securities has been reduced from 0.05% to 0.125%, subject to a maximum of Rs. 3 crore.

According to a directive from market regulator Securities and Exchange Board of India. Stock
Broking Firms will have to notify clients about the latter’s daily margin position from 1st April 2008

Four regional stock exchanges of Ludhiana, Delhi, Kanpur and Jaipur will collectively set up a separate platform in a bid to facilitate trading in the equity shares of regional companies listed at their exchanges. The exchanges have roped in major information technology companies including CMC,
Financial Technologies and TCS for developing a special software to interconnect them.

Amid the gloom surrounding the equity markets in India currently, the rise in the number of new FII
registrations is a silver lining. Since October 2007, 190 FIIs and 470 sub-accounts have registered with the market regulator.

In a move aimed at moderating the entry of retail investors in the stock derivatives market, market regulator SEBI has proposed that investors should have a certain minimum amount of net worth, as a criterion for trading in the segment. It also reminded the broking community about basic duties to clients to improve transparency in the market. As per the capital market regulator, a net worth certificate from a practicing chartered accountant or I-T return documents could be used as proofs for data regarding net worth.

Insiders will not be able to use derivative instruments to take advantage of privileged information for gains. In a bid to extend the definition of securities to derivative instruments, capital markets regulator, SEBI, has proposed that regulations be amended to broaden the class of securities beyond shares Current regulations leave out disclosure of a key means of taking an exposure to the economic in shares and that too on a leveraged basis (i.e. higher exposure). The proposal is part of SEBI’s proposed norms for insider trading.

Rising inflation along with high commodity prices may push the government to take up the issue of essential commodities being delisted from futures trading once again.

Photocopies of PAN Cards are not required to be attached as per the SEBI (DIP) Guidelines. SEBI (DIP) Guidelines as amended on 29th November 2007 only require that PAN number must be quoted in the application form irrespective of the size of the application.

For the First time, the Center’s net direct tax collection have crossed Rs 3- Lakh Crore mark.
To grasp the significance of the milestone, one needs to go back only 15 year or so. In 1990-91,
the center’s net direct tax collection were about Rs 11000 crore, which was only about one-fifth of the centre’s entire tax kitty.

The Central Sales Tax phase out plan misses a crucial deadline with both central and state government failing to converge on the compensation package. As per the plan, CST which was
reduced from April 1, 2007, is further slashed by 1% further to 2% as envisaged in the Finance
Bill 2008. State finance ministries are scheduled to hold discussion with Union finance
minister P Chidambram on April 8.

Central Board of Direct taxes(CBDT) has notified eight return forms for different categories of tax payers for the Assessment Year 2008-09 as per notification no. 752(E), dated 28-3-2008.

Finance Minister P Chidambram has hinted at a central Goods and Service tax (GST) rate of around 14 percent. GST is scheduled to be implemented from 1st April 2010. There will be one or more central and state GST rates for all goods and services.

For the corporate sector in the country, electronic payment of direct taxes has become mandatory from 1st April 2008 . This payment norm would apply to tax audit assesses . Taxpayers can make electronic payments through the Internet banking facility offered by any of the authorized banks. They also have the option of Credit or debit card for making the e-payment.

Giving a boast to investment by Non-resident Indians, the Authority for Advance Rulings has said the non-resident ordinary (NRO) deposits should be treated as investment income and taxed at 20%. At
present, banks consider such deposit as interest income or income from other sources and deduct tax at source at the rate of 30%. NRO account are the same as saving account for resident Indians but are so designated on change of residence . The interest rate for such deposit is at about 9% per annum. The AAR held that since the applicant would make the NRO deposit with convertible foreign
exchange in banking company, which was not a private company, it would be treated as ‘foreign exchange asset’. The income through interest earned from the deposit would-be treated as investment income under section 115C of the I-Tax Act and would taxed at 20%

Despite an offer to monetarily compensate Mauritius for losses as a result of tightening tax norms, India has given up hope for the time being of amending the 26-year double taxation avoidance agreement with the tiny Indian Ocean tax heaven off the Southeast coast of Africa. Mauritius accounts for nearly half of all Foreign direct investments (FDI) inflows to India. A key change to the treaty being pushed by India is to move from a “residence based system of taxation” to a ‘source based” system, meaning investor from Mauritius would need more than a proforma registered office in the island to qualify for a tax breaks

In phishing ( a type of a fraud), a customer gets an email that deceptively claims to be from the bank and asks for account sensitive information, credit card numbers, passwords and PIN. It often resembles a notice from a bank and misleads customers. As a measure to educate customers about frauds that may happen via internet, the banks regularly issues letters to its customers warning them to be wary of fraud web sites and not to disclose personal details over the internet.

The IMF sees sluggish economic growth in the US but no recession. It also brushed off a fall in the US dollar against major currencies saying it was quite strong on a broad, trade-weighted basis given US trade with emerging Asia.

The Reserve Bank of India has introduced necessary modification in National Electronic Fund Transfer (NEFT) settlement system to enable all RTGS (real time gross settlement) members, including the banks not having direct clearing membership of Mumbai Clearing House, to participate
in the system.

Public sector companies such as BHEL , SAIL, Bharat Earth Movers (BEML), Telecom Consultants India (TCIL) and ITI should be ready for tough competition. The government Plans to scrap the purchase preference policy from April 1,2008. The department of public enterprise (DPE) has
issued a circular in this regard to all the central public sector enterprise(CPSE). Central PSUs
get 10% price preference under the prevailing policy.

The Reserve Bank of India has revised the time limit for lodging complaints with banking ombudsman to ensure speedy redressal of grievances of customers. As per RBI statement if the complaints of customer are not addressed satisfactorily with in 30 days of lodging complaints, then he should now be able to approach the office of the concerned banking ombudsman for redressal of his complaints and grievances.

Asset management companies will now be allowed to invest $7 billion abroad , with the reserve
bank of India relaxing norms relating to overseas investment by mutual funds. The move is
in line with the central banks stated policy of encouraging flow of money outside the country. The regulator also feels that the move will enable MFs to have greater opportunities for investment overseas. The existing facility allowing a limited number of qualified Indian Mutual Fund to invest
cumulatively up to $1 billion in overseas Exchange traded Funds shall remain unchanged.

The government has extended the duty entitlement pass book (DEPB) scheme into the forthcoming Financial Year that starts 1st April 2008.