Cash loss fear in salary move

The state’s rural and co-operative banks are worried about losing out on service charges and loan interest because of Mamata Banerjee’s decision to disburse schoolteachers’ salaries through nationalised banks.

At present, around two lakh primary and high school teachers have salary accounts in co-operative and rural banks. These banks earn about Rs 60 crore annually as service charge from the government for disbursing salaries and Rs 170 crore as annual interest from loans given to teachers.

“We are worried about the decision to provide teachers’ salaries through nationalised banks. We will lose out on the service charge and loan interest. Also, repayment of loans given to teachers may become uncertain. The decision will affect our financial condition,” said Amit Rajak, the general secretary of the Co-operative Bank Supervising Staff Association in Burdwan.

Rajak, who is also the officer in charge of Samudragarh co-operative bank in Kalna, said the bank had disbursed loans of Rs 28 crore. “We will be in trouble if we fail to recover the amount,” he said.

Srijan Pal, the general secretary of the West Bengal Regional Rural Bank Officers’ Association, expressed similar fears. “The rural banks have disbursed around Rs 1,170 crore salary-linked loans to schoolteachers. The recovery process may now become uncertain. We will also lose out on the Rs 40 crore we earn as service charge every year,” he said.

Officials of co-operative and rural banks said most loans were repaid through EMIs deducted at source from the salaries of teachers.

The banks have written to the chief minister, finance minister Amit Mitra and co-operation minister H.A. Safwi urging them to reconsider the decision. “It will become difficult for us to compete with the nationalised and private banks,” Rajak said.

Naren De, the co-operation minister in the Left government, said: “I don’t know what prompted the government to take such a decision when there was no complaint from teachers. The government should support such banks as they are financially weak compared with nationalised banks.”

School education minister Rabindranath Bhattacharya said he was “looking into the matter”.

Courtesy- http://www.telegraphindia.com/1110628/jsp/bengal/story_14169449.jsp

Mutual funds set to get $10bn

Foreign individual investors can now invest up to $10 billion in domestic mutual funds. “A new class of investors called qualified foreign investors (QFIs), other than foreign institutional investors (FIIs), can invest money into domestic mutual funds,” said Thomas Mathews, joint secretary (capital markets) in the finance ministry. Qualified foreign investors can be individuals and bodies, including pension funds, and cumulatively they can invest up to $10 billion (about Rs 45,000 crore). “We are open to the idea (of increasing the $10-billion limit) if such inflows are less volatile. We will review it (the cap) after six months,” said Mathews. Till now, only foreign institutional investors and non-resident Indians were allowed to invest directly in local equity schemes. Foreign individuals could not directly put in their money. In Budget 2011-12, finance minister Pranab Mukherjee had allowed mutual funds registered with the Securities and Exchange Board of India (Sebi) to accept subscriptions from foreign investors in equity schemes that meet regulatory requirements. “This will enable Indian mutual funds to have direct access to foreign investors and widen the class of foreign investors in the Indian equity market,” the finance minister had said. The fund houses, however, will have to comply with know-your-customer (KYC) norms before seeking investment from overseas investors. Industry experts said the move was aimed at broad-basing the flow of foreign investment in the domestic stock market, reducing the dependence on FII funds. “Sebi will be the market regulator for all such investments,” said Mathews. According to the new proposal, individual foreign investors will be able to buy mutual funds in India through depositories already functioning in their countries or by opening an account with Indian depositories.

Tax relief for NY mission

The US Supreme Court today upheld a decision by a federal appeals court that had exempted the Indian and Mongolian missions from paying nearly $50 million in property taxes here.

In 2010, the second US circuit court of appeals in Manhattan upheld the state department intervention in 2009, which exempted taxes on property owned by foreign governments and UN missions that housed diplomatic staff.

In 2008, a federal district judge had ruled that India, which owns a 26-storey property near the UN, owed $42.5 million and Mongolia $4.4 million.

“It doesn’t matter what is fair or not fair,” Aaron Stiefel, the Indian mission’s lawyer, said after the Supreme Court denied New York City’s petition. Stiefel said the rule of reciprocity applied to the case since US diplomatic buildings in India were not taxed.

“While there is perhaps some unfairness to the city when the federal government retroactively declares property taxes imposed by the city against foreign countries to be null and void, this unfairness inheres in the federal government’s unquestioned supremacy in the management of foreign relations,” the judges wrote.

The state department had argued that if foreign properties in the US were taxed, then the US would have to pay millions of dollars in taxes for its own diplomatic buildings in many countries.