Mumbai: Non-performing assets (NPAs) in the banking system are set to increase in the range of R60,000 crore to 1 lakh crore in the next five months, rating firm India Ratings and Research said on Tuesday. With the Reserve Bank of India’s forbearance on classification of restructured asset to end after March 31, 2015, no fresh restructured accounts can be classified as standard after the deadline. The agency, for this report, has analysed the credit metrics of the top 500 corporate borrowers, whose aggregate debt stood at R28.76 lakh crore in FY14, which was 73% of the total bank lending to industry, services and export sectors. “Around 82 of these 500 largest borrowers have already been formally tagged as financially distressed (identified as NPA, CDR or restructured) and another 83 (17%) of these top 500 borrowers accounting for 9% of the overall debt of the group, have severely stretched credit metrics,” it said. India Ratings said potentially one-third to half of these 83 accounts could be in the category of SMA 2 (special mention accounts) with delays in debt servicing ranging between 61 and 90 days. http://www.financialexpress.com/article/economy/bank-npas-may-rise-by-rs-1-lakh-crore-in-next-five-months/
CORPORATES TO SPEND Rs. 14,000 CR ON CSR: JAITLEY
New Delhi: Finance Minister Arun Jaitley on Tuesday expressed confidence that increased CSR spend will have beneficial impact on the social sector in India. “In the first year, corporates are going to spend Rs. 14,000 crore toward CSR. This is only going to increase year-after-year as profits of corporate sector rises,” Jaitley said after giving away the ‘social entrepreneur of the year’ awards in the capital. The spread of the corporate CSR spend is only going to expand in the coming years, he said. Sudharshan from Karuna Trust bagged the Social Entrepreneur of the Year-India 2014 award. The Schwab Foundation for Social Entrepreneurship and the Jubilant Bhartia Foundation are promoting social innovation in India through the annual Social Entrepreneur of the Year India awards. Corporate Social Responsibility (CSR) has become mandatory for certain companies in India with effect from April 1, 2014. About 15,000 Indian companies are within the CSR ambit this fiscal and are expected to fork out about Rs. 14,000 crore this fiscal. http://www.thehindubusinessline.com/todays-paper/tp-news/corporates-to-spend-rs-14000-cr-on-csr-jaitley/article6565149.ece
FINANCE MINISTRY MEETING WITH BANKS DEFERRED
New Delhi: With Financial Services Secretary GS Sandhu shunted out, the Finance Ministry has postponed a crucial meeting with public sector banks scheduled to be held on November 5. The meeting was supposed to discuss the progress in the Pradhan Mantri Jan Dhan Yojana and the way ahead, as also the strategy for direct cash transfer for LPG cylinders. Launched in August, accounts opened under the financial inclusion scheme have already crossed 6 crore, while direct benefit transfer for LPG cylinders through bank accounts (irrespective of being seeded with Aadhaar) is to be launched in 54 districts from mid-November and from January 1 in the rest of the country. Late evening on Monday, the Government announced that Hasmukh Adhia, a 1981 batch Indian Administrative Service Officer from the Gujarat cadre, will replace Sandhu. Adhia is, at present, Additional Chief Secretary in Finance Department, Gujarat Government. Sandhu will now move on to serve as Chairman of the National Authority for Chemical Weapons Convention. With preparations for the General Budget 2015-16 on, the Finance Ministry now has a new team. It has Rajiv Mehrishi as Economic Affairs Secretary, Ratan Watal as Expenditure Secretary, Shaktikanta Das as Revenue Secretary, Aradhana Johri as Disinvestment Secretary, Hasmukh Adhia as Financial Services Secretary, and Arvind Subramanian as the Chief Economic Advisor. http://www.thehindubusinessline.com/todays-paper/tp-news/finance-ministry-meeting-with-banks-deferred/article6565151.ece
WE EXPECT RATE CUT OF 25 BPS IN NEXT RBI POLICY MEET: C V R RAJENDRAN
Mumbai: Hyderabad-based Andhra Bank is aiming to get a significant proportion of the state government’s business, to boost its share of low-cost deposits, C V R Rajendran, chairman and managing director, tells Manojit Saha. Edited excerpts: With retail inflation coming down, the market is expecting a reversal of the central bank’s policy stance, also reflected in a softening of bond yields. How soon do you expect an interest rate cut from the Reserve Bank of India? A rate cut should come in the next policy review, by at least 25 basis points (bps). Already, crude oil prices have come down; domestically, both petrol and diesel prices have been cut. This will have a major impact on retail inflation. Commodity prices have also come down. I don’t believe food prices are likely to go up. Agricultural production is good and this government is managing the supply-side issues much better. What impact do you see on bond yields if there is a rate cut? Yields could further fall and might reach eight per cent if there is a rate cut. But, maintaining eight per cent over a period will be difficult. http://www.business-standard.com/article/finance/we-expect-rate-cut-of-25-bps-in-next-rbi-policy-meet-c-v-r-rajendran-114110500007_1.html
ICRA SAYS REPO RATE TO STAY UNCHANGED THIS FISCAL
Mumbai: Credit ratings agency ICRA expects the Reserve Bank of India to stick to a firm anti-inflationary stance for the remainder of fiscal 2015 with no likelihood of a repo rate cut by March-end 2015. ICRA in a statement said: “CPI inflation in January 2015 to be well below the target of 8 per cent as per the glide path announced by the central bank, despite the waning of the favourable base effect post-November 2014. Nevertheless, ICRA expects the RBI to stick to a firm anti-inflationary stance over the remainder of fiscal 2015, to rein in expectations and impart credibility to its inflation targets,” ICRA said in a statement. “ICRA’s baseline expectation factors in the commencement of a rate easing cycle in the first quarter of fiscal 2016, with repo rate cuts of up to 50 bps,” it added. ICRA has revised its forecast for credit growth during fiscal 2015 to 13.5-14.5 per cent from the previous estimate of 14.0-15.0 per cent, while maintaining its estimate for deposit growth at 12.75-13.50 per cent. “Credit growth is expected to recover moderately by the fourth quarter of fiscal 2015 as large-ticket corporate loans pick up with improvement in economic growth conditions. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/icra-says-repo-rate-to-stay-unchanged-this-fiscal/article6565113.ece
LENDERS MAY RECAST RS 1 LAKH-CR MORE BY MARCH 2015
Mumbai: Lenders afflicted with bad loans are unlikely to see any improvement over the next five months, according to rating agency India Ratings, despite industries and trade looking up because of a new and stable government at the Centre. Lenders might restructure assets worth Rs 60,000 crore to Rs 1,00,000 crore between now and March next year, as many companies have failed to generate adequate cash flows to service the debts, the rating agency said in a report. Around one in four of the 500 largest corporate borrowers may formally be tagged as financially distressed — identified as bad loans or restructured asset — by end-March, adds the report. The aggregate debt of these 500 corporates is Rs 28.76 lakh crore, which is 73 per cent of the total bank lending to industry, services and export sectors, India Ratings said. While the corporate cash-generation ability has shown a minor uptick, it might not improve substantially in the next six to nine months, the report added. Thus, the weakest corporates with stretched credit metrics may remain so in the short to medium term. http://www.business-standard.com/article/finance/lenders-may-recast-extra-rs-1-lakh-cr-loans-by-march-15-114110400879_1.html
EXIM BANK EYES OPENING SPECIAL WINDOW TO FUND INFRA PROJECTS IN SAARC REGION
New Delhi: Taking forward the proposal for a SAARC Development Bank, India is examining the feasibility of creating a special window within the Exim Bank of India dedicated to funding infrastructure development in South Asia. “The Finance Ministry has asked the Exim Bank to have a study done on whether a separate special window can be created (in the bank ) dedicated to South Asia to do multilateral funding,” a Government official told BusinessLine . It is one of the options being looked at, he added. In the July ministerial meeting of the South Asian Association for Regional Cooperation (SAARC), there was a consensus on the need for of a SAARC Development Bank to meet low-cost infrastructure funding needs of the region. http://www.thehindubusinessline.com/todays-paper/tp-news/exim-bank-eyes-opening-special-window-to-fund-infra-projects-in-saarc-region/article6565145.ece
PRIVATE SECTOR BANKS TURN SPOTLIGHT ON SMALL BUSINESSES
Mumbai: With credit demand from the corporate sector showing no signs of a pick up, private banks are eyeing the opportunity in financing small businesses within the small and medium enterprise (SME) segment. According to Reserve Bank of India (RBI) guidelines, micro and small enterprises are those in which the loan size is up to Rs 5 crore. This segment is dominated by public sector banks. Barring large players such as HDFC Bank and Axis Bank, private sector lenders in general have so far been cautious in lending to such businesses. “There are a lot of opportunities in this segment, as most large banks tend to focus on the top-end of the segment. We believe that in the coming days, the contribution from the small segment will grow significantly and we are looking at working more closely with the smaller end of the business segment,” said Mahesh Dayani, country head (retail assets) at ING Vysya Bank. Dayani noted these small-ticket loans also qualify for priority-sector lending and, if done prudently, can turn out to be profitable. http://www.business-standard.com/article/finance/private-sector-banks-turn-spotlight-on-small-businesses-114110400999_1.html
PREMIA HIT ROCK BOTTOM AS COMPETITION INTENSIFIES IN ONLINE TERM INSURANCE SPACE
Mumbai: You have a product that costs you Rs 540 a month. It is then reduced to Rs 500 a month. Now, a competitor enters the scene and the price is further reduced to Rs 450 a month. We are not talking about a fast-moving consumer goods product, but an online term insurance plan with a cover of Rs 1 crore. Competition has intensified in the online term insurance space with the premium for a Rs 1 crore pure-term cover coming down as low as Rs 5,400 a year. With several life insurance players entering this space, industry experts say the price war is likely to continue, benefiting the end customer. Deepak Yohannan, CEO of MyInsuranceClub.com, a web aggregator approved by the Insurance Regulatory and Development Authority (Irda), explains that competition has resulted in lower pricing of products, because pricing is a key factor that customers look for before buying an insurance product. “Compared with earlier times when term plans were quite expensive, now, when one insurer entered the online market with an aggressive pricing, others followed suit. http://www.business-standard.com/article/finance/premia-hit-rock-bottom-as-competition-intensifies-in-online-term-insurance-space-114110401379_1.html
OUR CORE STRENGTH LIES IN RENEWABLE ENERGY SECTOR
Stalled projects in the infrastructure space may finally get a leg-up, as many initiatives planned by the Government are implemented over the next one or two quarters, says G Krishnamurthy, Chief Executive, L&T Infrastructure Finance. He also sees huge potential in the renewable energy sector, where the company has built its core strength. Excerpts from an interview with Business Line: Now that some of the issues pertaining to financing of long infrastructure projects have been tackled — allowing banks to issue infra bonds as well as setting up of Infrastructure Debt Funds (IDFs) — can we expect significant recovery in the infrastructure sector over the next one to two years? Yes, we believe so. The Government has done a lot to kick-start the projects in this space. For instance, they have announced the coal auction and they are working towards ensuring coal for all plants that are coming up in the next couple of years. There are a number of other initiatives, such as gas pricing policy, that have been announced. Apart from this, what really needs to be done — and the Government is working towards it — is to kick-start all stranded projects in the coal, thermal and road sectors, for instance. These initiatives will translate into action in the next one to two quarters, and the impact on the broader economy will take a couple of more quarters to be felt. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/our-core-strength-lies-in-renewable-energy-sector/article6565111.ece
NON BANKING FINANCE COMPANIES FIND RAISING MONEY DIRECTLY FROM THE MARKET CHEAPER
MUMBAI: With banks holding on to their lending rates even as market rates have fallen sharply, non-banking finance companies or NBFCs such as Shriram Transport Finance and LIC Housing Finance, their biggest customers, have turned their backs on the banking system and resorted to borrowing more by selling commercial paper and short-term bonds. For the first time in more than four years, bank lending to NBFCs turned negative at the end of September, falling 4.4 per cent compared to the year-ago period to Rs 2.93 lakh crore, according to the latest Reserve Bank of India data. In 2013, bank lending had risen 26 per cent in the corresponding period over the previous year. Bank loans have traditionally been a major source of funding for NBFCs. However, with the base rate, the benchmark over which banks lend to NBFCs has remained high as RBI has not signalled lower rates due to persistent concerns over high inflation. NBFCs have, therefore, found it cheaper to raise funds directly from the market. Indian firms, including NBFCs, raised almost Rs 1 lakh crore between September 15 and October 15 through commercial paper, according to RBI data. Some firms raised money at as low as 8.4 per cent interest rate. http://economictimes.indiatimes.com/markets/stocks/news/non-banking-finance-companies-find-raising-money-directly-from-the-market-cheaper/articleshow/45041132.cms?prtpage=1
DO NOT INVEST WITH UNREGISTERED NBFCS, SAYS PUNJAB ADVISORY
Chandigarh: To safeguard people from illegal money-pooling schemes, Punjab government has issued a public advisory cautioning people against investing with unregistered Non Banking Finance Companies (NBFCs). The advisory has been issued after the state government noticed that most of the frivolous NBFCs amass public money by resorting to fraudulent tactics, a spokesman for the state finance department said. http://www.millenniumpost.in/NewsContent.aspx?NID=74554
SEBI BATS FOR ‘PRIORITY SECTOR’ TAG FOR LISTED SME
Mumbai: The Securities and Exchange Board of India (Sebi) has proposed that bank funding to listed small and medium enterprises (SMEs) be given a priority lending tag. The move will give a huge fillip to the SME trading platform introduced by Sebi in 2012, to ease the financing needs of smaller companies. According to sources, Sebi’s proposal has received an in-principle approval from the Union finance ministry. However, the Reserve Bank of India (RBI) will need to agree. By RBI norms, banks compulsory have to lend 40 per cent of advances (of the previous year) to the so-called priority sector. There are over 80 SME companies listed, with 77 listed on BSE itself. In November, RBI had allowed incremental bank loans up to the credit limit of Rs 13 crore, (extended after November) to medium-size manufacturing enterprises (as defined in the MSME Act, 2006) to be considered as priority sector advances. http://www.business-standard.com/article/markets/sebi-bats-for-priority-sector-tag-for-listed-sme-114110400845_1.html
SEBI STARTS ATTACHING ASSETS OF DEFAULTERS
Mumbai: Armed with new powers, the Securities and Exchange Board of India (Sebi) has initiated the process of attaching and selling securities held by entities that have failed to pay penalties imposed by the regulator. Over the past fortnight, the capital market regulator has passed over 10 separate orders, allowing the recovery officer to sell securities held by the defaulters. These are the first instances of Sebi moving beyond the attachment of movable properties. “Notice is hereby given that in the absence of any order of postponement, the said shares shall be sold during the market trading hours on the National Stock Exchange of India (NSE)/Bombay Stock Exchange Ltd (BSE)… till entire dues are recovered in full or till the attached shares of the scrips are exhausted, whichever is earlier,” the orders say. The total amount owed by defaulters against whom proceedings have been initiated is over `4.25 crore. http://www.livemint.com/Money/vApG51W0OxjKNtYkMJlduO/Sebi-starts-attaching-assets-of-defaulters.html?facet=print
