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Foreign direct investments in the country more than doubled to $4.66 billion in May from $2.21 billion a year earlier, indicating investors’ confidence in the Indian economy. The investment, the government said, was the second highest monthly inflow in 11 years, and the upward trend was likely to continue this fiscal. Going by the rate at which investments have come in during the first two months of this fiscal, the full year may see a total of $46 billion — more than double last year’s figures. Some of this increase would be from major merger and acquisitions waiting to be approved, officials said. “The slowdown in foreign direct investment appears to have been reversed in the current financial year, where a significant upward trend is evident,” officials said. In the April-May period of the current fiscal, FDI went up 77 per cent to $7.78 billion from $4.39 billion in the corresponding period last year. “The sudden surge in inflow could be due to the government’s efforts to review the double taxation treaty… perhaps funds are coming back before curbs come into play. There has not been any big ticket investment during the period and the economic numbers have also not been encouraging,” N.R. Bhanmurthy of the National Institute of Public Finance and Policy said. In the previous fiscal, equity inflows through FDI had dipped 25 per cent to $19.42 billion. The government expects the upward trend in FDI to continue this fiscal. The proposed tie-up between British Petroleum (BP) and Reliance Industries, with a likely FDI of over $7 billion, could possibly be the single largest inflow into the country. Vodafone’s purchase of Essar’s stake at around $5 billion, approvals given to Posco and the Cairn-Vedanta acquisition, a deal worth around $8-9 billion, are also likely to substantially increase FDI inflows this year. “There has been a continuing and sustained effort to make the FDI policy more liberal and investor-friendly. Significant rationalisation and simplification of the policy has, therefore, been carried out in the recent past, which seems to have boosted investment apart from the faith in the country’s growth story,” officials said. Meanwhile, FDI data indicate that inflows from tax havens such as Mauritius and Cyprus have dropped significantly during 2010-11. Mauritius has been the most favourite destination to route FDI inflow into the country. While FDI inflows from all sources declined 25 per cent in 2010-11, the drop was steeper at 33 per cent at $6.98 billion from Mauritius. Inflows from Cyprus were down 44 per cent to $913 million. In 2009-10, FDI from Mauritius stood at $10.37 billion against $11.22 billion in 2008-09. FDI inflows from Cyprus in 2009-10 stood at $1.62 billion.

Sri Lanka stock exchange in talks with LSE

The London Stock Exchange is in talks with Sri Lanka’s Securities and Exchange Commission over allowing trading of some of the island nation’s shares on the London bourse and vice-versa, a regulator official said on Monday. An agreement will help Sri Lanka’s selected blue chips to be traded in London, opening up its market to foreign investors. “This is still in an initial stage. We hope to progress after the discussion and if it happens, it will be a great opportunity for Sri Lanka,” Malik Cader, director-general of the SEC, said on the sidelines of a national economic forum in Colombo. Cader declined to comment on the time frame for the process. The LSE, which was forced to abort its $3.5-billion merger with Canada’s TMX Group last week, has links with Sri Lanka after buying Sri Lankan technology company, Millennium IT. The SEC is encouraging foreign companies to list on the Colombo Stock Exchange to get access to trade their shares in the London market. Shares on the LSE ended higher today aided by oil stocks. Gains were limited by weaker banks after Standard & Poor’s warned a potential Greek debt deal would amount to a default. The FTSE 100 index added 27.78 points, or 0.5 per cent, to 6017.54, closing above 6000 for the first time since mid-May.

RBI imposed penalty on Citi

The Reserve Bank of India has imposed a penalty of Rs 25 lakh on Citibank for last year’s Rs 400-crore fraud at its Gurgaon branch perpetrated by a rogue official who was handling the accounts of the bank’s high net worth clients. According to the central bank, Citibank contravened Know-Your-Bank (KYC)/Anti-Money Laundering (AML) guidelines and its failure to follow the norms led to the fraud. The RBI imposed the penalty in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) of the Banking Regulation Act, 1949. The apex bank added that it had issued a show-cause notice to the bank on April 21 in response to which the lender submitted a written reply on May 6. “After considering the facts of the case and the bank’s reply and also oral submissions made during the personal hearings held on June 7, the RBI came to the conclusion that the violations were substantiated and warranted imposition of the penalty,” it added. The fraud at the Gurgaon branch of Citibank was uncovered late last year. An employee of the bank — Shivraj Puri — allegedly diverted close to Rs 400 crore from accounts of 40 high net worth clients and corporate entities. Some of them who were hit by the fraud included the promoters of the Hero Group and Helion Advisors managing director Sanjeev Aggarwal, who alleged that he was duped of around Rs 33 crore. The allegations were that Puri sold investment products to high net worth clients claiming that they would generate high returns. Since then, the central bank has stepped up its vigil against frauds. In order to check such practices, recently the RBI asked public sector bank to immediately report cases of cheating involving Rs 1 crore and above to the Central Bureau of Investigation, and of lesser amount to the police. On the other hand, private and foreign banks have been asked to report cases of fraud involving an amount of Rs 1 lakh and above to the police.