Should India Ease Entry Rules for Foreign Banks?

By Kavaljit Singh | Briefing Paper # 13 | November 2013

On October 12, Raghuram Rajan announced that the Reserve Bank of India will soon issue new rules allowing a more liberal entry of foreign banks in India. While examining the past performance of foreign banks in India, the author contends that the key issue is not xenophobic hostility towards foreign banks but their niche business model devoid of social and developmental banking. Several big international banks including JPMorgan, HSBC and UBS have recently paid billions of dollars in regulatory fines for their alleged role in Libor rate fixing, money…

The NSEL Payment Crisis: The Price of Poor Regulation and Supervision

By Neeraj Mahajan and Anil Tyagi | Briefing Paper # 12 | October 2013

The nearly $1 billion payment crisis at the unregulated National Spot Exchange Ltd is possibly the biggest scandal in the Indian commodity markets of this decade spawned by the combination of a lackadaisical regulatory regime, greedy promoters and easily pliable bureaucrats and politicians. The NSEL payment scandal is a classic case of the failure of regulation and supervision of Indian commodity markets, argue the authors.

Surprisingly, the NSEL has been functioning as an unregulated commodity exchange for the past many years. It is only after the crisis that the commodity…

Why is the Indian Rupee Depreciating?

By Kavaljit Singh | Briefing Paper # 11 | September 2013

The Indian rupee touched a lifetime low of 68.85 against the US dollar on August 28, 2013. The rupee plunged by 3.7 percent on the day in its biggest single-day percentage fall in more than two decades. Since January 2013, the rupee has lost more than 20 percent of its value, the biggest loser among the Asian currencies. There is no denying that India is not the only emerging market experiencing a rapid decline in its currency’s value. Several emerging market currencies are also experiencing sharp depreciation over the prospect…

Decoding the Commodity Transaction Tax

By Kavaljit Singh | Briefing Paper # 10 | March 2013

On 28th February 2013, India’s Finance Minister P Chidambaram proposed a transaction tax on the commodity futures trading under the direct tax provisions in the Union Budget 2013-14. The commodity transaction tax (CTT) would be levied at 0.01 percent (Rs.10 for transaction worth Rs.100000). The CTT would be levied only on non-agricultural commodities futures contracts (e.g., gold, copper and oil) traded in the Indian markets. While the agricultural futures contracts would be exempted from CTT. The tax will be payable by the seller of futures contract.

Banking on Commodity Derivatives Trading: A Risky Proposition

By Kavaljit Singh | Briefing Paper # 9 | December 2012

On 10th December 2012, India’s Finance Minister P Chidambaram added a new clause in the Banking Laws (Amendment) Bill 2011 which was not part of the original amendments vetted by the Parliamentary Standing Committee on Finance last year. The new clause allowed the entry of banks in commodity futures trading in India. It also allowed mutual funds, insurance companies and institutional investors to trade in Indian commodity futures markets.

Due to strong opposition by several political parties on the grounds of violation of Parliamentary procedure, the government was forced to drop this clause from the…