Tuesday / December 3.


fsMumbai: Credit in the banking system slipped marginally despite the festive season. Data from the Reserve Bank of India suggests that in the period between October 3 and 17, bank credit slipped 0.7 per cent. However, in the past one year, credit growth was up 11 per cent. In the period ended October 17, it was Rs 62,20,004 crore, up from Rs 55,97,985 crore a year before. Though credit demand has been tepid for several quarters, this fortnightly dip came just ahead of the Diwali week, the main festive season for banks. To improve the retail demand, banks have come out with several discounts and offers on both home and automobile loans. In the previous fortnight, buoyed by festive demand, credit demand had shown a marginal improvement but the momentum could not be sustained, suggests the data. A senior executive with Punjab National Bank said the dip in deposits and advances in the fortnight after the close of a quarter is normal. The part of business which gets booked in the run-up to a quarter’s end is unwound. The demand for credit remains subdued, though the sentiment has definitely improved, he said. http://www.business-standard.com/article/finance/bank-credit-dropped-in-1st-half-of-october-114102901397_1.html





India’s first cut in borrowing costs since May 2013 could be only months away as a slide in oil prices cools inflation, interest-rate swaps show. The fixed payment to lock-in rates for a year using the derivatives fell 37 basis points this month, the most since September 2013, to 8.10 per cent, data compiled by Bloomberg show. That’s the biggest decline in Asia. Reserve Bank of India (RBI) Governor Raghuram Rajan has held the repurchase rate at eight per cent since an increase in January. The scope for Rajan to use monetary policy to spur India’s economic recovery has increased after a 23 per cent slide in Brent crude oil prices since June helped cut the pace of consumer-price gains to a three-year low. Ashima Goyal, an adviser to RBI, said last week the central bank could consider cutting rates as early as March, should lower energy costs help ease inflation further in a nation that imports almost 80 per cent of oil. “The drop in international oil prices has come as a boon for India,” Sujoy Kumar Das, head of fixed income at Religare Invesco Asset Management Co in Mumbai, said in a telephone interview on October 21. “Swaps are reflecting expectations that the retreat in crude will help curb inflation further and allow the central bank room to act on interest rates.” Standard & Poor’s upgraded its outlook for India’s credit rating last month, citing reduced price pressures and a government plan to narrow the budget deficit to a seven-year low of 4.1 per cent of gross domestic product. http://www.business-standard.com/article/finance/rajan-rate-cut-bets-spur-asia-s-biggest-swap-drop-114103000013_1.html





Mumbai: Global rating agency Moody’s on Wednesday said its outlook on India’s banking system remained negative. The high leverage in the corporate sector could prevent any meaningful recovery in asset quality over the next 12-18 months. The negative outlook on the system pertains mainly to public sector banks. They represent a little more than 70 per cent of total banking system assets, said Gene Fang, a Moody’s vice-president and senior credit officer. State-owned banks have experienced higher growth rates in non-performing and restructured loans and greater weakening in profits than private sector banks. These trends are unlikely to improve for public sector banks, added Fang. The outlook for the banking system remained negative, as it has been since November 2011. Going forward, India’s corporate sector will remain highly levered, representing an obstacle to a cyclical recovery in asset quality. The outlook expresses Moody’s expectation of how bank credit worthiness will evolve in this system over the next 12-18 months. http://www.business-standard.com/article/finance/outlook-for-indian-banking-system-remains-negative-says-moody-s-114102900345_1.html




Hyderabad: Bankers in Andhra Pradesh have requested the Reserve Bank of India (RBI) to allow them to re-phase the loans of small businesses that had suffered losses in the recent Hudhud cyclone in Visakhapatnam and few other towns of north coastal Andhra. The re-phasing of loans to small businesses was a new idea mooted by the banks in place of a normal one-year moratorium on repayment of loans given to the small businesses under such circumstances, according to a senior bank official. “We all requested the RBI governor for rephrasing of loans of small businesses when he was in Hyderabad recently. He responded positively to this suggestion,” the official, said adding that the exact scheme had to be worked out only by the regulator.  The idea was to allow small borrowers to repay their loans in small tranches as they face a very grim situation in the aftermath of the cyclone, according to the official. Refusing to give the details of their discussions with the RBI governor, State Bank of Hyderabad (SBH) managing director Santanu Mukherjee, however, said their efforts were directed at offering relief to those who had suffered losses under the impact of Hudhud. http://www.business-standard.com/article/finance/banks-suggest-re-phasing-of-small-business-loans-in-vizag-114102900244_1.html




Mumbai: Asset management companies (AMCs) and insurance entities are awaiting fresh issuances of inflation-indexed bonds (IIBs) by the central bank, to launch new offers in the segment. Last week, SBI Mutual Fund launched a new fund offering for its IIBs. More players said they could launch similar products if the Reserve Bank of India (RBI) decides to conduct auctions for inflation-linked bonds. So far this financial year, such bonds haven’t been auctioned by the central bank, forcing AMCs and insurers to hold back their plans. “We don’t want to launch a fund where the underlying market is extremely illiquid. We had considered this product and also filed the prospectus. But once the issuance stopped, we decided to not go ahead with the product. It is an asset class about which we are positive,” said R Sivakumar, head of fixed income and products, Axis MF. He said Axis MF would look at launching it if RBI looks at primary issuances of this product. However, as inflation is on a declining path, experts believe IIB funds at this point might not see high demand. http://www.business-standard.com/article/finance/rbi-auction-awaited-for-launching-new-inflation-indexed-bond-funds-114102901005_1.html




New Delhi: Finance Minister Arun Jaitley on Wednesday asked the Comptroller and Auditor General (CAG) not to sensationalise its findings to get into headlines, a view the Congress had voiced in the past after huge notional losses were projected in reports on 2G spectrum and coal allocation scams. “The Auditor should be conscious of the fact that he is reviewing a decision that has already been taken. Have the fair procedures been followed? He doesn’t have to sensationalise. He doesn’t have to get into the headlines,” Jaitley said at the annual conference of the CAG, further adding, an auditor has to be “an active auditor but activism and restraint are always the two sides of the same coin.” The CAG reports on 2G spectrum allocation and coal mine allotment, which carried figures of notional losses to the tune of Rs 1.76 lakh crore and Rs 1.84 lakh crore respectively, had caused tremendous discomfort for the UPA government and the Congress that headed the coalition. On Monday, Parliament’s Public Accounts Committee Chairman and senior Congress leader K V Thomas too had said in the conference that the auditor should restrict audits to financial impropriety and not come out with “astronomical” figures of notional losses. http://www.business-standard.com/article/pti-stories/jaitley-asks-cag-not-to-sensationalise-its-report-114102901144_1.html





New Delhi: State-owned Oriental Bank of Commerce (OBC) on Wednesday reported 16 per cent increase in net profit at Rs 291 crore for the quarter ended September, on account of a rise in fee income. The net profit was Rs 251 crore in the same quarter last financial year. The figure has gone up primarily due to rise in non-interest income and good recovery, Executive Director Bhupinder Nayyar told reporters here. Gross non-performing assets (NPAs) as a percentage of total advances rose to 4.74 per cent from 3.77 per cent in the same quarter a year ago. Net NPAs went up to 3.29 per cent from 2.69 per cent at the end of September 2013. Asset quality remains a challenge and the bank is making all efforts to contain it, he said. OBC shares closed 4.30 per cent down at Rs 266.85 on the BSE. The non-interest income of the bank rose 25.90 per cent to Rs 392.64 crore as compared to Rs 311.87 crore in the second quarter of the previous fiscal. http://www.business-standard.com/article/pti-stories/obc-q2-net-rises-16-per-cent-to-rs-291-crore-114102900379_1.html




New Delhi: Canara Bank inked a memorandum of understanding (MoU) with post-harvest management services company Origo Commodities India Pvt Ltd on Wednesday to provide warehouse receipt financing (WRF) to farmers across States such as Karnataka, Andhra Pradesh, Tamil Nadu and Maharashtra. WRF is a tool that enables farmers to get financing and avoid distress sale of their produce. The bank, through the partnership with Origo, is targeting Rs. 1,000 crore WRF business in the coming season. “Given the importance of produce loan financing, this MoU will go a long way in helping the farmer clientele of Canara Bank. It will be a win-win situation for all parties and allow farmers to reap benefits from the produce loan scheme to improve yields,” said S Ramesh, General Manager, Canara Bank. Mayank Dhanuka, Director, Origo Commodities, said, “The association…will be key to target under-penetrated villages and leverage Origo’s infrastructure to provide the best possible support to farmers in the coming season.” http://www.thehindubusinessline.com/todays-paper/tp-money-banking/canara-bank-origo-comm-ink-financing-pact/article6546186.ece




Hyderabad: State Bank of Hyderabad reported a 91 per cent increase in net profit at Rs. 311 crore in the second quarter ended September 30, compared with Rs. 163 crore in the corresponding year-ago period. The net interest income rose 15.9 per cent to Rs. 1,094 crore ( Rs. 945 crore). There was a 2.5 per cent decline in provisions and contingencies. The total business stood at Rs. 2.19 lakh crore. “Intensive efforts undertaken for recovery of non-performing assets have yielded results,” Santanu Mukherjee, Managing Director, SBH, told newspersons here on Tuesday. The net NPAs declined to 2.87 per cent from 3.37 per cent. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/sbh-net-up-91-in-second-quarter/article6546185.ece





Mumbai: YES Bank has entered the burgeoning housing loan market, with a focus on the affordable housing segment. The move by the private lender, which started operations 10 years ago, comes in the wake of the Reserve Bank of India’s decision to allow banks to raise long-term resources to finance affordable housing. The money raised via bonds will not attract the cash reserve ratio and statutory liquidity ratio norms. As a result, this will reduce the cost of funds for banks. “Home loan is a strategic product for us. The product has reached our branches and we are in the process of rolling it out,” said Pralay Mondal, senior group president (retail and business banking).  The average size for mortgage loans will be about Rs 35 lakh, he added. According to a report by rating agency Icra, the home finance market in India stood at Rs 9-lakh crore at the end of March. Of this, banks finance 63 per cent. Till now, the bank had been offering loans in collaboration with Dewan Housing Finance and Indiabulls Housing Finance. “With the new infrastructure bonds, one can effectively work like a housing finance company. http://www.business-standard.com/article/finance/yes-bank-enters-home-loan-business-114102901180_1.html




Mumbai: Life Insurance Corporation of India will have a new unit-linked plan (Ulip) by the end of this financial year, chairman S K Roy said. Speaking at a summit hosted by Asia Insurance Post, he said their design team was working on the product. After the new norms for traditional products kicked in from January 1, 2014, life insurance companies had to stop selling existing products and introduce new ones. LIC, too, had to withdraw its products from the market and introduce new guidelines-compliant variants of the products, which included money-back plans. However, there was no Ulip launch in 2014. Ulips constitute less than 10 per cent of the total product mix of LIC and the rest comprises traditional life insurance products. The last time the life insurer launched a Ulip plan was in January 2013, that too after a gap of two years. Roy explained its number of products has come down significantly from 60 insurance products to 16 life insurance products and eight group insurance products. LIC has also made equity investments worth Rs 20,000 crore. “We have a long bull run and this is an opportunity to book some profits. Since we are a long-term investor, we have to a do a balancing act,” he said. The Centre has planned to monetise its holding in Specified Undertaking of UTI, or Suuti, through an exchange traded fund, expected to raise Rs 7,000 crore. http://www.business-standard.com/article/finance/lic-to-have-ulip-by-end-of-fiscal-114102901135_1.html





Mumbai: The Securities and Exchange Board of India (Sebi) has received complaints that PACL (Pearl Agrotech Corporation Limited) continues to collect money from investors, defying the market regulator’s ban. The market regulator, also entrusted with the responsibility of cracking down on illicit money collection schemes, plans to issue an advisory, cautioning investors against investing in schemes offered by the Delhi-based company. In August, Sebi had passed an order against PACL, asking the firm to refund around Rs 50,000 crore raised from 58.5 million customers. A Sebi official said the regulator plans to caution investors by issuing advertisements against PACL. “After the investigation, we will come out with an advisory notice warning investors against the company and not to invest in the schemes launched by it,” said a senior Sebi official. Two emails sent to PACL did not elicit a response. Sources indicate that PACL is accepting investments in cities, including Mumbai, Delhi and Ahmedabad. Sebi, while issuing the order against PACL, had also referred the matter to the state government and local police, asking them to register a civil or criminal case against PACL “for offences of fraud, cheating, and criminal breach of trust and misappropriation of public funds”. http://www.business-standard.com/article/companies/sebi-to-caution-investors-against-pacl-114102901098_1.html




Mumbai: The Central Bureau of Investigation (CBI) has begun a probe against four officials of market regulator Securities and Exchange Board of India (Sebi) in the Rs 10,000-crore Saradha chit fund scam. According to CBI sources, three existing Sebi officials and one former official are being examined. The investigative agency plans to file a second chargesheet, naming more perpetrators in the Saradha scam. The role of one Jash, mentioned by Saradha chief Sudipta Sen in his purported letter to the CBI in 2013, is also being probed. “Sebi’s internal probe report on the Saradha case is being examined by the CBI to ascertain whether Sebi officials could have played a more proactive role in uncovering the scam,” said a source. Earlier this year, the Supreme Court had criticised the role of various regulators for their approach in handling the scam. http://www.business-standard.com/article/markets/four-sebi-officials-under-cbi-lens-in-saradha-scam-114102900523_1.html




Mumbai: Mutual funds were the most-favoured destination for auto companies to park their excess fund in the last financial year. An analysis of the mutual fund investments by five auto companies that represent the sector in the Nifty basket shows that their investments jumped over four-fold in fiscal 2013-14 compared with the previous year. The net mutual fund investments by these five companies together went up by Rs 10,300 crore in FY14 against Rs 2,272 crore in FY13. Moreover, at Rs 30,196 crore, the cumulative investment made by these companies in mutual funds constitutes about 72% of their total current investment, as of March 2014. In FY14, while Maruti Suzuki made a net investment of Rs 3,019 crore, more than double the funds it parked in the previous year, mutual fund investment of Bajaj Auto and M&M rose four-fold to Rs 4,512 crore and Rs 433 crore, respectively. Generally, MF investments by the companies comprise fixed-maturity plans (FMPs) and liquid debt funds. Experts believe a slowdown in the capex cycle coupled with the tax benefit that was available to certain non-equity instruments till July 2014 were the key reasons for the higher investments in mutual funds by the companies. http://www.financialexpress.com/news/auto-firms-park-over-rs-10000-cr-in-mfs/1302938




Mumbai: Mutual funds registered a 4.6% increase in retail folios in the first six months of the current fiscal, marking it the highest rise since March 2009, when the Amfi started declaring half-yearly folio data. As per Crisil data, this translates into an increase of 16.6 lakh retail folios against 3.6 crore retail folios at the end of FY14. The rise was led by an addition in equity fund folios. At the end of H1FY15, the industry had 3.80 crore retail folios, almost 96% of the total folio base of 3.95 crore folios, including institutional and high networth individual (HNI) folios. On an aggregate basis, mutual fund folios fell marginally due to a decline in HNI folios. The analysis showed that of Rs 1.72 lakh crore of retail investment in equity-oriented mutual funds, Rs 1.10 lakh crore continued for over 24 months. The equity segment, which reported a consistent decline in retail folios since H2FY11 till H2FY14, posted a record addition of 16.89 lakh folios in H1FY15 to 2.90 crore folios. A strong rally in the equity market and the consequent rise in investor interest led to the sharp increase in retail folios. CNX Nifty gained 19% in the six months ended September 2014. http://www.financialexpress.com/news/at-4.6-mfs-post-highest-rise-in-retail-folio-since-2009/1302939


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