New Delhi: In a bid to take advantage of the bullish stock market sentiment, the finance ministry has kicked off the exercise to cut government stake in public sector banks to 51% and enable them to raise fresh capital to meet their growth requirements. Sources told TOI that the ministry has moved a cabinet note as the government is keen that banks are well capitalized to meet the funding requirement. With government finances already stretched, the BJP administration has decided that Centre’s holding be cut to 51% against the UPA-decided level of 58%. Through this move banks will be able to expand their equity base by issuing fresh shares to the public. While all state-run banks are well above the regulatory requirement of 9% capital adequacy ratio, several of them, led by State Bank of India, the country’s largest lender with a quarter of the pie, will need more equity to meet the higher fund requirement of corporate and retail borrowers in coming years. A higher equity base will enable banks to issue more bonds and maintain capital adequacy ratio of around 12%. Data available on the BSE website showed that government holding in at least six state-run banks is under 60% with at least four banks having capital adequacy ratio of below 12%. In his maiden Budget speech, finance minister Arun Jaitely had announced the government’s intention to cut its stake to 51%, which will ensure that the public sector character is maintained. http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Govt-plans-to-cut-PSB-stake-to-51-29102014025003
GOVT’S DECISION ON BANK CMDS LEAVES NO ROOM FOR KR KAMATH
Mumbai: KR Kamath of Punjab National Bank turns out to be the first victim of the Prime Minister Narendra Modi government’s decision to scrap the way bank chairman appointments were conducted, and the fate of Indian Bank’s TM Bhasin and UCO Bank’s Arun Kaul hangs in balance. While Kamath’s 5-year tenure ended this month, Bhasin and Kaul have at least five months before their term expires. These two do not turn 60 by the time their terms expire, but may have to leave if the government does not extend their terms. “We are looking at making it (appointment) in a more transparent manner,“ financial services secretary G S Sandhu had said.“We are proposing five years. So, it will be three plus two, based on their performance in the first three years another two years would be given. It will not be related to age of retirement.“ Kamath’s 5-year term at PNB ended on Monday even though he will reach superannuation on November 30, 2015. Meanwhile, Bha sin’s term ends in March 2015 even as he is set to reach superannuation in May 2016 while Kaul’s term ends in August 2015 even as he would turn 60 in January 2016. The government has junked the list of those executive directors and general managers who were selected by the previous government. This effectively means that government will once again invite applications for those posts of EDs and CMDs, giving opportunities for more candidates to aspire for higher posts.“Those with longer tenure of 3-5 years will be called for the interview unlike the past when only those with residual service of two years and above were called for interviews,“ said sources close to finance ministry. http://epaperbeta.timesofindia.com/Article.aspx?eid=31816&articlexml=Govts-Decision-on-Bank-CMDs-Leaves-No-Room-29102014010009
GET ACCOUNT HOLDERS UNDER JAN DHAN TO USE RUPAY CARD, FINMIN TELLS BANKS
Mumbai: To get customers opening accounts under the Pradhan Mantri Jan Dhan Yojana to use their RuPay debit cards, the Finance Ministry is believed to have asked banks to take a carrot-and-stick approach. So, to remain eligible for the Rs. 1 lakh accident insurance cover that comes with the Basic Savings Bank Deposit Account (BSBDA), the cards may have to be used at least once in 45 days. At a recent meeting, Finance Ministry mandarins told top bankers that mere issuance of cards will not suffice. The cards have to be activated at the earliest and made operational. Ministry officials said that customers have to be advised to operate the cards at a certain time interval, say, once in 45 days, in order to continue to enjoy the accident insurance cover without any charge to them. Banks were also advised to have an “SMS” alert system for BSBDA beneficiaries so that they use the RuPay card once in 45 days and remain eligible for the accident insurance cover, said a senior official of the Union Bank of India. RuPay is the home-grown card payment scheme launched by the National Payments Corporation of India (NPCI) to rival global payment processing giants Visa and MasterCard. It has been conceived to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions to participate in electronic payments. This card is accepted at all ATMs (for cash withdrawal) and at most of the PoS machines (for making cashless payment for purchases) in the country. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/get-account-holders-under-jan-dhan-to-use-rupay-card-finmin-tells-banks/article6542384.ece
RUPEE SLIPS A TAD TO 61.33
Mumbai: The rupee ended marginally weaker at 61.33 to the dollar against the previous close of 61.31 amid a higher closing in the domestic equity market. According to Suresh Nair, Director, Admisi Forex, “The rupee depreciated against the dollar on Tuesday as state-run banks continued to purchase dollars for domestic oil importers. However, the fall was limited on speculation that the RBI could ease policy rates if upcoming data is favourable.” According to dealers, investors are likely to adopt a wait-and-watch approach ahead of the US central bank’s bond purchase decision. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/rupee-slips-a-tad-to-6133/article6542388.ece
BANKS IN A QUANDARY OVER MISSING CMDs
Mumbai: The decision of the government to scrap all proposed appointments of chairman and managing director (CMD) for banks finalised by its predecessor has put financial institutions in a quandary. This decision is likely to adversely affect all the key functions – extending large credit, investments and human resource – of the banks. Bankers have suggested the senior-most executive director (ED) be given the charge of the CMD till the new appointments are finalised. The banks affected by this decision are Punjab National Bank, Bank of Baroda, Canara Bank, Oriental Bank of Commerce, Indian Overseas Bank, Syndicate Bank, United Bank of India and Vijaya Bank. In Vijaya Bank, the top post will fall vacant later this financial year. In Kolkata-based United Bank of India (UBI), the top post fell vacant following the sudden resignation of Archana Bhargava in February last year after bank’s losses mounted during the October-December quarter. A forensic audit was conducted and its loan-sanctioning limits were capped. Neither the previous government nor the present one has appointed a CMD till date. On Monday, the finance ministry said selection of eight CMD post and fourteen ED posts in public sector banks are cancelled following a review. http://www.business-standard.com/article/finance/banks-in-a-quandary-over-missing-cmds-114102900030_1.html
CUT IN SAVINGS A/C INTEREST RATES MAY HAVE NO IMPACT: BANKS
Mumbai: Banks that have been offering a higher interest rate on savings bank accounts have started reducing rates, prompted by the easing liquidity scenario and high operational cost of offering high rates on smaller amounts. Recently, both IndusInd Bank and Kotak Mahindra Bank have reduced their interest rates on savings deposits below Rs 1 lakh by 50 basis points to five per cent. Similarly, IndusInd Bank had also reduced its interest rate on savings deposits by 100 basis points to 4.5 per cent on a daily balance of up to Rs 1 lakh. Bankers say the general softening of interest rates in the industry has prompted them to reduce rates on savings bank accounts also. Sumit Bali, executive vice-president of Kotak Mahindra Bank, says, “There is a general sense of easing of money supply in the system. The deposit rates have continued to outpace credit growth rate and as a result you will see softening of interest rates in the savings bank account and also in shorter tenures.” As per October 3, Reserve Bank of India data credit in the banking system grew by 11 per cent year-on-year, whereas deposits grew by 13 per cent in the same period. “Apart from softening of the interest rate regime in the banking system, high operating cost of maintaining the savings account would have had also prompted banks to reduce interest rates in the below Rs 1-lakh bucket,” said Anish Tawakley, analyst at Barclays. http://www.business-standard.com/article/finance/cut-in-saving-a-c-interest-rates-may-not-have-impact-banks-114102700816_1.html
STATE BANK OF HYDERABAD NET JUMPS 90% IN SECOND QUARTER
Hyderabad: State Bank of Hyderabad has reported a 91 per cent jump in net profit at Rs 311 crore in the second quarter of FY15, on the back of a rise in net interest income and the intensive recovery efforts on the non-performing asset (NPA) front. The bank’s net profit in the year-ago period was Rs 163 crore. Interest income during the quarter under review increased 4.7 per cent to Rs 3,451 crore from Rs 3,296 crore in the year-ago period. However, a near-flat growth in interest expenditure and a marginally lower provisioning has added to the profitability of the bank during this period. “Intensive NPA recovery efforts taken by the bank have yielded results, and the gross NPAs declined to Rs 5,654 crore in September 2014 from Rs 6,174 crore in June 2014,” the bank said in a statement. Total business stood at Rs 2,19,307 crore as at the end of September 2014 consisting of Rs 1,20,664 crore in total deposits and Rs 98,643 crore in total advances with a credit deposit ratio of 83.19 per cent. http://www.business-standard.com/article/companies/state-bank-of-hyderabad-net-jumps-90-in-second-quarter-114102900029_1.html
BLACK MONEY TRAIL: DOS & DON’TS OF OPERATING A FOREIGN BANK ACCOUNT
New Delhi: Of the 700-odd Indians having foreign bank accounts, not all can be deemed to be operating these illegally. An Indian resident is allowed to open an foreign bank account under the Liberalised Remittance Scheme for undertaking current or capital account transactions. They can remit money from India – only up to a specified limit within a financial year – as prescribed under the Foreign Exchange Management Act (Fema) of 1999. Tax experts say at the time of opening an account, it is advisable for such persons to first approach an authorised dealer, appointed under Reserve Bank of India (RBI) guidelines. “This would establish their intent that they will be using this account only for money that will be remitted under the Liberalised Remittance Scheme,” says Kishore Joshi, senior associate from corporate law firm Nishith Desai Associates. Moreover, the account holder has to meet the know-your-customer compliance requirements of the foreign bank. Any deviation from the prescribed format of opening an overseas account can raise the red flag with banking and tax authorities. http://www.business-standard.com/article/finance/black-money-trail-dos-don-ts-of-operating-a-foreign-bank-account-114102900007_1.html
ING VYSYA BANK’S MD & CEO SHAILENDRA BHANDARI RESIGNS
Bangalore: ING Vysya Bank said that its Managing Director and Chief Executive Officer Shailendra Bhandari has expressed his desire to leave the company to pursue new challenges. The bank’s board, at its meeting on Tuesday, accepted Bhandari’s letter of resignation. Bhandari, who was at the helm of ING Vysya Bank for the past five years, will continue in office till January 31, 2015, and will work towards ensuring a smooth transition to his proposed successor. The Board, in pursuance of its succession plan, has identified Uday Sareen, currently Deputy CEO and Wholesale Bank Head, as the successor, an official statement said. Acknowledging Bhandari’s contribution, M Damodaran, on behalf of ING board, said: “…The board is unanimous in acknowledging that he was a driving force in steering the bank from strength to strength, over the last five years.” http://www.thehindubusinessline.com/todays-paper/tp-money-banking/ing-vysya-banks-md-ceo-shailendra-bhandari-resigns/article6542389.ece
IRDA MOVES TO TAKE ULIP REFORMS TO THE NEXT LEVEL
Mumbai: The insurance regulator is tightening the rules for Unit Linked Insurance Plans (Ulips) further as it indicated recently when it prevailed over an insurer to keep the component of investment option of debt or equity throughout the lifetime of the product instead of a specified period and asked another company to guarantee capital on its Ulips. The Insurance Regulatory and Development Authority (IRDA) had earlier advised that life insurance products be designed with a saving element such that at a uniform assumed gross yield of 4% per annum, the expected maturity in linked insurance products, is at least 90% of the total premium paid excluding the service tax. “The regulator wants fund value at maturity to be 90% of premiums paid, making it difficult to write Ulips for older age group where mortality charge is high. The total effect of total charges, including mortality on yield, could go well beyond 4% depending on age,“ said Sanjeev Pujari, executive director (actuarial), SBI Life. “Through recent communications, it seems like the regulator is indirectly trying to discourage Ulips for people above 55 years.“ IRDA is of the view that fund option is not independent of the product and it is not in favour of closed-ended products, said a senior executive of a large private sector insurance company. Another private insurer’s CEO said, on condition of anonymity, that the regulator is sending feelers to the market that there could be another round of reforms in Ulips. “IRDA has said we cannot withdraw fund options even if there is extreme situation when market corrects sharply,“ he said. http://epaperbeta.timesofindia.com/Article.aspx?eid=31816&articlexml=IRDA-Moves-to-Take-Ulip-Reforms-to-the-29102014010025
LIC MAY RAISE HOLDING IN PUBLIC SECTOR COS
New Delhi: Life Insurance Corporation of India, the country’s largest insurer, will consider increasing its holding in companies in which the government plans to sell shares this year, possibly up to the 15% limit allowed. LIC, which is also the country’s largest investor, is expected to invest about ` . 55,000 crore in the equity markets this financial year, up from about ` . 51,000 crore in 2013-14.The insurer will take a call on increasing its stake, depending on each issue, a senior LIC official told ET. Finance Minister Arun Jaitley has proposed raising a record `. 58,425 crore from the sale of government stake in companies such as Oil & Natural Gas Corporation, Steel Authority of India and Coal India. The key BSE Sensex index has gained 27% in 2014 amid expectations the Narendra Modi government will step up reforms and revive economic growth. “We believe that most PSU stocks at present are undervalued. Companies such as ONGC, Sail, Coal India have good fundamentals and therefore we may look to touch the equity ceiling in these firms,“ he said, adding that the move will support the government’s disinvestment programme. The government has already announced the sale of a 5% stake, which is valued at ` . 16,760 crore at the current market price, in ONGC. The company’s shares fell . 391.80 at the close on the 0.75% to ` BSE on Tuesday . “Our internal guidance is that company such as ONGC will trad at around ` . 700 in the next one yea or so. As an insurance firm, we ar long-term players and see good val ue in a stock such as this,“ the offi cial said. http://epaperbeta.timesofindia.com/Article.aspx?eid=31816&articlexml=WAITING-FOR-DIVESTMENT-LIC-may-Raise-Holding-in-29102014011010
UNITED INDIA INSURANCE EXPECTS PROFIT DESPITE HIGHER CLAIMS FROM NATURAL CALAMITIES
Chennai: Even as major natural calamities ravaged two parts of the country, pushing up insurance claims during the current financial year, United India Insurance Company Ltd is expecting a profit after tax of Rs 650 crore.In the last financial year, its profit was Rs 528 crore. The company is expecting claims of around Rs 1,100 crore from both the calamities. “In Andhra Pradesh, we have received claims for around Rs 440 crore so far, related to the damages due to the cyclone. It is likely to go up to Rs 750-800 crore. In Jammu and Kashmir, the claims were around Rs 300 crore for us,” said Milind Kharat, chairman-cum-managing director, United India Insurance Company. In Andhra Pradesh, the claims were mainly from the Vizag Steel Plant and some power projects. In Jammu and Kashmir, the total loss and claims were of around Rs 1,500 crore, in which the company has a share of Rs 300 crore. Kharat said the company is expecting to post a 23 per cent growth in net profit during the end of the year, owing to better underwriting and prompt measures to reduce cost. The company has also reinsured the losses in the natural calamities, under which the claims more than Rs 25 crore are covered by the reinsurers. http://www.business-standard.com/article/finance/united-india-insurance-expects-profit-despite-higher-claims-from-natural-calamities-114102700812_1.html
BANDHAN TO TAKE A CALL ON EQUITY INFUSION BY DEC
Kolkata: Kolkata-based microfinance institution (MFI) Bandhan, expected to foray into the banking sector by September 2015, will evaluate the need for equity infusion by December this year. Although Bandhan has a capital base of about Rs 1,500 crore, it might need an equity infusion for future growth, C S Ghosh, chairman and managing director, Bandhan, said on the sidelines of an event at the Bengal Chamber of Commerce and Industry. According to Reserve Bank of India norms, a bank should have a capital base of at least Rs 500 crore. The MFI is holding informal talks with existing investors, International Finance Corporation (IFC) and Small Industries Development Bank of India (Sidbi), for further capital infusion, Ghosh said. “As of now, there is no urgency, as we are adequately capitalised. We will decide if we need more capital or not, based on our business plan, which will be finalised in December. We are in talks with our existing investors like IFC for more equity but a final call will depend on our business plan.” http://www.business-standard.com/article/finance/bandhan-to-take-a-call-on-equity-infusion-by-dec-114102900028_1.html
ASSET QUALITY PRESSURE IN RETAIL NBFCS TO STABILISE ONLY LATER THIS YEAR: ICRA
Mumbai: Asset quality pressures for retail non-banking finance companies (NBFCs) are expected to stabilise only in the latter part of the second half of the financial year (October 2014-March 2015). However, some revival in growth is expected in 2015-16, said rating agency Icra. “Retail-focused NBFCs continue to witness a challenging period of subdued growth and build-up in delinquencies in the first quarter of FY15, as a result of weakness in the economic and business outlook witnessed in 2013-14,” said its report. The strong verdict in the Lok Sabha elections had led to an improvement in sentiment, fuelled by expectations of speedy decision making and investor-friendly reforms. Against this backdrop, ICRA expects the growth rate of gross domestic product for 2014-15 to improve to 5.3-5.5 per cent against the 4.7 per cent in 2013-14, which should result in a pick-up of credit demand. “As a result, NBFCs could see some revival in growth in FY15 to 11-14 per cent from about eight per cent in FY14, although expected largely during the latter half of the year,” said Icra. Recently, banks returned to focus on retail lending, as credit demand from companies remains weak. http://www.business-standard.com/article/finance/asset-quality-pressure-in-retail-nbfcs-to-stabilise-only-later-this-year-icra-114102801427_1.html
UTI MUTUAL FUND ALMOST ALLOWS DLF TO REDEEM INVESTMENTS DESPITE SEBI BAN
MUMBAI: UTI Mutual Fund, the country’s fifth-largest asset management company, had a narrow escape from being caught on the wrong side of the law. After Securities and Exchange Board of India (Sebi) barred real estate developer DLF and its promoters from accessing the capital market for three years, UTI MF went ahead with the redemption request of the company’s investment with it. All other fund houses had blocked the withdrawal requests, seeking clarity from Sebi. Realising it was the only fund house to allow the redemption, UTI MF immediately stopped transfer of the proceeds to DLF. “UTI Mutual Fund initially assumed the Sebi order doesn’t cover mutual fund units and processed DLF’s redemption request,” said a person familiar with the development. UTI Mutual Fund almost allows DLF to redeem investments despite Sebi ban “After it realised the stand of the other fund houses, the money was held back in the pool account and was not transferred.” The person said there was a “mistake” at UTI MF’s end. Had the fund house allowed the redemption, Sebi would have taken action against it. An e-mail query to UTI Mutual went unanswered. A DLF spokespersonssaid, “As per media reports, the Association of Mutual Funds of India (AMFI) has written to Sebi seeking clarity on whether they can entertain DLF’s request to exit its MF investments and are still awaiting a reply from Sebi. http://economictimes.indiatimes.com/mf/mf-news/uti-mutual-fund-almost-allows-dlf-to-redeem-investments-despite-sebi-ban/articleshow/44965869.cms?prtpage=1
MUTUAL FUNDS BET BIG ON SMALL COMPANIES
Domestic mutual funds have doubled their investment in several small companies in the quarter ended September. According to the data compiled by ET, mutual funds increased their stake in about 124 small and mid-level companies with a market capitalisation of less than Rs 2,000 crore. ITD Cementation has seen the highest increase in MF investment from 1.98% in the June quarter to 18.08% in the September quarter. Gammon Infrastructure (up 10.06%), Omkar Speciality (7.04%),Jyoti Structure (6.84%) and NRB Bearing (5.92%) have also seen signifi cant rise in MF investment. This kind of interest by mutual fund managers in mid- and small-cap stocks was unheard of since 2009 when this category of shares rallied sharply. Some companies in which MFs have reduced their stake are Easun Reyrolle, Texmaco Rail, Hinduja Ventures and Tilaknagar Industries. http://economictimes.indiatimes.com/markets/stocks/news/mutual-funds-bet-big-on-small-companies/articleshow/44966245.cms?prtpage=1
