Curbs on scam-tainted foreign banks to be relaxed

The RBI has decided to relax the restriction imposed on the branch expansion of a few foreign banks after their involvement in the securities scam in 1991-92. After keeping in abeyance the applications of some of these scam-tainted banks for close to five years, the RBI has now decided to allow foreign banks involved in the scam to open additional branches depending on their overall performance. These banks will be allowed to open branches in centres where they do not have a presence now.

FIs may pioneer issue of index-linked bonds

The financial institutions of the country are expected to launch capital index-linked bonds ahead of other issuers with large corporates following them. Index-linked bonds may well be floated during the calender year with the ICICI being viewed as a strong candidate for this. These bonds are expected to be marketed to a limited universe of investors, especially mature investors in the initial phase.

Over-optimism on primary deficit?

By now, the fiscal deficit has been widely accepted as one of the most important macro-economic policy instruments in the hands of the Government. But, of late, the Centre is trying to draw attention to the primary deficit, too, as a sound indicator of the economy’s fiscal health. And not without reason. For the first time ever, it may be in “surplus” of around Rs. 2,546 crore in 1997-98. This assumes importance given the fact-that the critical dividing line in the fiscal accounts is the point of zero primary deficit. As long as there is a primary deficit in the fiscal accounts, both Government interest payments and debt are likely to constitute an increasing proportion of the GDP.