Brisbane: DRIVEN by a strong domestic political agenda of getting black money back home, Prime Minister Narendra Modi on Sunday managed to get the Group of 20 include a certain clause in the final Leaders’ Communique that will make it difficult for tax havens to give complete tax exemption to companies. This, along with the G-20’s endorsement of a global Common Reporting Standard for automatic exchange of tax information on a reciprocal basis, are the twin pillars in India’s fight against tax evasion and repatriating unaccounted money, said Suresh Prabhu, sherpa to Modi for the G-20 Summit, on Sunday. Prabhu said the PM made a strong pitch against black money. “At present, there are many rigidities in international tax laws, and the past tax treaties also do not facilitate easy exchange of information,” he said. India has to make specific requests with tax jurisdictions for information, and more often such information is shared with caveats. http://www.financialexpress.com/article/economy/india-gets-its-way-on-black-money-at-g-20-meet/
FINANCE MINISTRY REVIEW MEETING WITH CHIEFS OF PSU BANKS, FIS ON NOVMBER 20
NEW DELHI: The Finance Ministry has called a meeting of chiefs of public sector banks on November 20 to review their financial performance and Jan Dhan Yojana, among other things. Chief executives of financial institutions like Nabard and NHB are also attending the meeting. “Finance Minister Arun Jaitley may attend the meeting. If the Minister is unable to, Department of Financial Services Secretary Hasmukh Adhia will head the review meeting,” a source said. The main agenda of the meeting is discussing financial performance at the end of the second quarter, sources said. The progress of Pradhan Mantri Jan Dhan Yojana (PMJDY) is another important issue that will be discussed in the meeting. The issue of asset quality and recovery of bad loans would also be discussed. Credit to farm sector, MSME, housing and education loans may also come up talks, sources said. Besides, there would be deliberation on lending to stalled projects. The Prime Minister on August 28 launched the the PMJDY scheme to boost financial inclusion. About 7 crore bank accounts have been opened under Jan Dhan scheme so far. As on November 10, 7.24 crore accounts have been opened under Pradhan Mantri Jan Dhan Yojana (PMJDY) of which 4.29 crore in rural and 2.95 crore are in urban areas. RuPay Cards have been issued in case of 3.97 crore accounts. http://economictimes.indiatimes.com/news/economy/finance/finance-ministry-review-meeting-with-chiefs-of-psu-banks-fis-on-novmber-20/articleshow/45165903.cms?prtpage=1
DON’T MAKE FORTUNE OUT OF POOR: RAJAN TO MICRO LENDERS
Mumbai: Asking micro-lenders to look at only a “reasonable profit” to sustain their business while serving borrowers at the bottom of pyramid, Reserve Bank of India Governor Raghuram Rajan has said one should not think of making a fortune while serving the poorest of the poor. The comments come in sharp contrast to management guru late C K Prahalad’s views in his book The Fortune at the Bottom of the Pyramid. This concept was originally appeared in an article by Prahalad and Stuart L Hart in business journal Strategy+Business in 2004. It was followed by a book with the same title that discussed new business models targeted at providing goods and services to the poorest. Microsoft founder Bill Gates has described the book as something that offers an intriguing blueprint for how to fight poverty with profitability. Rajan said during a recent microfinance event, “I think Prahalad did a disservice by saying there is a fortune at the bottom of the pyramid.” http://www.business-standard.com/article/pti-stories/don-t-make-fortune-out-of-poor-rajan-to-micro-lenders-114111600286_1.html
BOND MARKET LOOKING AT RBI, NOT FED
THE end of the quantitative easing (QE) programme of the US Federal Reserve and potential rate hikes next year could have a significant impact on our bond markets. We look at what happened the last time the Fed embarked on a series of rate hikes and try and draw some conclusions. Between 2004 and 2006, the Fed hiked rates from 1% (then a historic low) to 5.25%. From a bottom of 5% in 2003, Indian 10-year benchmark yields rose to 7.5% by the time these rate hikes ended. The sell-off should be seen in two phases. Between October 2003 and November 2004, yields rose by about 200 basis points from 5.1% to 7.2%. This was the period when the markets adjusted to the change in local and global monetary policy. In comparison to the 2001-03 period when rates came down in India and the US, rates were expected to rise. Consequently we saw a sharp market re-pricing as the bond market adjusted itself to revised expectations. It is instructive to note that this adjustment occurred largely before the rate hikes started (the first Fed hike was in June 2004 and the first RBI hike was in October 2004). During the actual period of the Fed hikes, the market was relatively sideways. In comparison, we have already seen a 200+ bps sell-off in bonds last year. From a low of 7.2%, 10-year benchmark G Sec yield rose to 9.4% last year in response to expected Fed tapering of QE. Once again this has happened in advance of any actual tapering or rate hike by the Fed. This leads us to believe that a substantial part of the risk of future US rate increases has probably been priced into our markets. http://www.financialexpress.com/article/markets/indian-markets/bond-market-looking-at-rbi-not-fed/
BANKS’ DEPOSIT GROWS AT 12.3% TO `81 TN IN Q2
New Delhi: Bank deposits grew by 12.3 per cent to Rs 81.14 lakh crore in the second quarter of the current fiscal. Bank deposits growth was 11.5 per cent (Rs 72.26 lakh crore) in the corresponding July-September quarter of 2013-14. ‘Growth in aggregate deposits accelerated to 12.3 per cent in September 2014 from 11.5 per cent a year ago whereas gross bank credit decelerated to 9.5 per cent from 15.1 per cent during the year. ‘This acceleration in aggregate deposits as well as deceleration in gross bank credit was broad based and observed across all population groups,’ RBI said. http://www.millenniumpost.in/NewsContent.aspx?NID=75856
BANK OF BARODA: INTEREST INCOME RISES
Bank of Baroda’s earnings performance for the quarter was better than peers on the back of strong NII (net interest income) growth led by NIM (net interest margin) expansion and flat provisions. High tax rate hurt earnings growth (PBT grew 21% year-on-year). Fresh impairments were at 3.2% of loans with a large share of slippages being explained by restructured loans. We continue to like the bank as it is relatively well-capitalised, with differentiated loan portfolio and available at attractive valuations. Maintain Add (target price unchanged). PBT growth strong: BoB reported an earnings decline of 6% y-o-y despite 21% growth at the PBT level primarily on higher tax in the investment portfolio. NII growth was impressive at 18% y-o-y on the back of 14% y-o-y growth in loans. Slippages were at 1.9% while fresh restructuring was higher at 1.2% of loans. Gross NPLs (non-performing loans) increased 20 bps quarter-on-quarter to 3.3% while restructured loans declined 20 basis points to 5.8% of loans. A large share of the slippages has come from the restructured loan portfolio. Revenue growth can surprise if focus shifts: The strong performance on NII comes as a source of comfort as it is giving the bank cushion to manage credit costs with relative ease compared to peers. NIM in the international business seems to have stabilised at 1.2% while NIM in the domestic portfolio improved sequentially (5 bps) to 3%. http://www.financialexpress.com/article/markets/indian-markets/bank-of-baroda-interest-income-rises/
FULL RECOVERY STILL SOME WAY OFF FOR GOVERNMENT BANKS
Mumbai: State Bank of India (SBI), the country’s largest lender, showed signs of improvement in asset quality in the second quarter of the current fiscal, raising hopes that the banking system may slowly be returning to health along with the rest of the economy. However, a closer look at a wider set of banks suggests that any improvement will be painfully slow. To be sure, banks have become more proactive in trying to clean up their books and one way this is happening is through one-time settlements (OTS) with promoters whose loan accounts have turned bad or are up for restructuring. Proposals for OTS are piling up as promoters and banks look for a quicker resolution rather than go through a prolonged restructuring process, said two senior bankers familiar with the trends in recent months. Data on such settlements is not released by banks separately. To be sure, such settlements are possible mostly for small and medium-sized accounts. “We have received some OTS requests, and we are evaluating them,” said the first person quoted above, an executive director with a bank, adding there have been more such proposals in the second quarter. The banker, who did not wish to be named, said it was encouraging to see promoters approaching the banks with such proposals, as it will help banks report lower bad debt numbers. While the exercise has started in earnest in some large banks, it will be standard practice in all banks after some time, said the second banker quoted above, who also did not wish to be named. http://www.livemint.com/Industry/JBngzq3rtNBCgPz33A6RHM/Full-recovery-still-some-way-off-for-government-banks.html?facet=print
BANKS CUT LENDING ON GOLD AS PRICES FALL
Mumbai: Banks have swung into action as gold prices continue to slide. Reduced loan-to-value ratio (LTV), cautious lending, and a close monitoring of the gold loan portfolio have prompted them to hedge their loan books against the reduction in prices. The yellow metal has lost 14.5 per cent in the past year and fallen to Rs 26,660 for 10 gm from Rs 31,190 for 10 gm a year ago. In the past six months, the speed of slide has increased, with gold losing 10 per cent. To safeguard themselves, lenders have reduced the LTV (the part that can be given as loan) on gold. For instance, Federal Bank was earlier financing up to 70-75 per cent of LTV on gold ornaments, and has reduced it to around 60 per cent for a one-year tenure. “We are also looking at starting short-tenure loans of up to a month, three months, etc. For such loans, we will be ready to provide higher finance. But for a loan of one year, we are now looking at an LTV of 60 per cent or so compared to the 70 per cent or so we were lending earlier. The prices have become very volatile,” said A Surendran, general manager and head (retail business) at Federal Bank. http://www.business-standard.com/article/finance/banks-cut-lending-on-gold-as-prices-fall-114111700031_1.html
MAHILA BANK: UPA’S RS 1,000 CRORE MISADVENTURE
The 5,000 sq. ft Bharatiya Mahila Bank Ltd branch at Nariman Point’s landmark Air India building in Mumbai—the sole branch in Maharashtra till now—is managed by half-a-dozen employees. They outnumber customers most days of the week. The scene is similar to many of 40-odd branches of the one-year-old bank across Indian cities. Barring Jammu and Kashmir and some north-eastern states, the lender has opened branches in all states, but its business is yet to take off. There aren’t too many people who know about this bank meant for women. Bharatiya Mahila Bank is also finding it difficult to expand its branch network as landlords are not too excited about offering premises to it till they are told that it is wholly owned by the government of India. It is the only public sector bank in the country entirely owned by the government, and is probably the last company to be incorporated under the old companies law of 1956. At its launch in Mumbai on 19 November last year—the 96th birth anniversary of former prime minister Indira Gandhi—former finance minister P. Chidambaram had said the bank would break even in the next three-five years. Its total business—advances and deposits—would be `60,000 crore by 2020, when it would have a 770-strong branch network and would be listed in the stock exchanges in due course. Former prime minister Manmohan Singh and United Progressive Alliance (UPA) chairperson Sonia Gandhi graced the occasion. http://www.livemint.com/Opinion/FDfNMCnIZFuDdjWUx7sTbK/Mahila-Bank-UPAs-1000-crore-misadventure.html?facet=print
SENSEX TRADES 35 POINTS LOWER; HDFC BANK FALLS
Mumbai: India’s benchmark 30-share Sensex index was trading 35 points lower on Monday morning, led by losses in IT and banking shares. At 9.40am, the BSE Sensex was down 0.13%, or 37.81 points, at 28,008.85 points, while the National Stock Exchange’s broader barometer 50-share Nifty was trading down 0.22%, or 18.15 points, at 8,371.75 points. The gainers included Tata Motors Ltd which rose 2.2% to `535.20 after the company reported better-than expected operating performance and consolidated Ebitda (earnings before interest, tax depreciation and amortization) margin in the September quarter. Ebitda margin at the Jaguar Land Rover unit also came in better than analyst estimates. State Bank of India (SBI) rose 1.2% to `2,822 after its net profit rose 30.54% to `3,100.41 crore in the three months ended 30 September from `2,375.01 crore in the year-ago quarter. Analysts polled by Bloomberg had estimated net profit at `3,252.1 crore. Among the losers, HDFC Bank Ltd fell 1.5% while Housing Development Finance Corp. Ltd (HDFC) fell 1.2%. The government has cleared a proposal by HDFC Bank, India’s second largest private-sector bank by assets, to increase the foreign investment limit in the lender while taking the view that the stake held by its parent HDFC amounts to overseas investment. http://www.livemint.com/Money/plTrYooVCzu2MeON7iDRlO/Sensex-trades-35-points-lower-HDFC-Bank-fall.html?facet=print
INSURANCE TO BECOME COSTLIER IN CYCLONE-PRONE AREAS
Mumbai: General insurance premiums for coastal regions of Andhra Pradesh and Odisha are likely to shoot up next year due to the high incidence of claims following the severe cyclones that hit the coast in the last two years. Last year, coastal Andhra Pradesh and Odisha were hit by cyclone Phailin and the general insurance industry received claims exceeding Rs. 1,500 crore. According to industry estimates, claims from cylone Hudhud, which severely affected the coastal city of Visakhapatnam this year, are likely to exceed Rs. 2,000 crore. Sanjay Kumar, Vice-President and Head, Motor Underwriting of Bharti AXA General Insurance, said that premiums for large commercial projects located in cyclone-prone areas will go up as insurers have faced substantial losses. As part of mega policies, insurers typically insure big industrial assets against business disruptions apart from fire and damages. These policies are primarily reinsurance driven as insurance companies pass on part of their risk to reinsurers to mitigate risks associated with high severity losses. Reinsurers on their part have warned general insurers to stop undercutting premium rates to large corporates while taking into account the high severity of losses. G Srinivasan, Chairman and Managing Director, New India Assurance said that while reinsurance rates have been soft for insurers due to overcapacity, major losses from catastrophes may trigger a rise in reinsurance rates during renewal next year which in turn would lead to a rise in premium rates. Kumar said that while insurers will be able to absorb the losses from motor insurance, premium rates for home insurance in the cyclone prone areas and weather based insurance based products will also see a rise. http://www.thehindubusinessline.com/todays-paper/tp-news/insurance-to-become-costlier-in-cycloneprone-areas/article6605906.ece
THE ROAD AHEAD FOR NBFCs
The Reserve Bank of India (RBI) recently issued a slew of regulatory changes to tighten rules and bring about a level playing field between non-banking finance companies (NBFCs) and banks. In a nutshell, NBFCs will now have to maintain higher capital, recognise bad loans earlier and increase their provision on bad loans. But despite the more stringent norms, this space continues to offer good opportunities for investors. For one, the new regulations have ended the uncertainty over how the RBI will address the iniquity arising from the regulatory advantage that NBFCs have been enjoying over banks. Two, over the long run, a better regulatory framework to mitigate risk, improve disclosures and strengthen governance standards will also reduce the perceived risks of NBFCs. Lastly, and more importantly, while most of the changes have been in line with earlier recommendations, the additional time given by the RBI to comply with these norms comes as a relief for the sector. NBFCs can implement these norms in a phased manner up to March 2018. Hence the impact on the profitability of NBFCs will be lower than what was expected earlier. However, some companies, given the nature of their customer segment, may find it more challenging to comply with these norms. http://www.thehindubusinessline.com/todays-paper/tp-investmentworld/the-road-ahead-for-nbfcs/article6605861.ece
NEW NORMS TO BRING LISTING OF SHARES, COMPLIANCE UNDER SEBI’S SCRUTINY
Chennai: Listing of shares and compliance thereafter will soon come under the scrutiny of the Securities and Exchange Board of India. According to SEBI sources, the market regulator at its board meeting on November 19 plans to bring in a regulation for listing to replace the current listing agreement and the contract system between exchanges and companies. Market experts said, on condition of anonymity, that this is a good move for investors as exchanges will become more proactive against errant promoters and companies. The new norms will also check insider trading as it will ensure companies are always in compliance of the listing regulations. The SEBI board will, among other things, also come out with norms for reclassification of promoter(s). Of late, promoters are relinquishing their promotership for various reasons, including to meet the minimum public shareholding norm, without losing hold on the company. SEBI’s new norms will bring more clarity on this issue. The regulator will also come out with guidelines if these shareholders want to come back as promoters. Apart from these issues, the board meet in Mumbai will also consider simplifying rules for delisting. Trading activity in the shares may also be restricted during the last few days before closure of reverse book building process (delisting process). This is to ensure that all the shares are available for tendering in the delisting. http://www.thehindubusinessline.com/todays-paper/tp-news/new-norms-to-bring-listing-of-shares-compliance-under-sebis-scrutiny/article6605885.ece
SEBI HELPS US REGULATOR BUST SOCIAL MEDIA INVESTMENT SCAM
New Delhi/Washington: In one of the biggest cross-border regulatory cooperation, markets watchdog Sebi has helped its counterpart in the US bust a major investment scam being run through online social media platforms. The ‘Profit Paradise’ scam was being run by two Indians — one based in Mumbai and another in Hyderabad —in the name of a ‘High Yield Investment Product (HYIP)’ wherein gullible investors were being enticed through pervasive social media pitches on Facebook, Twitter, Google Plus and YouTube. Such FYIP schemes have become very popular on various online platforms, wherein the operators solicit investments in securities, but most of them have turned to be yet another frontier for defrauding gullible investors in name of high and quick returns. In the latest case, the operators of ‘Profit Paradise’ were inviting investors to deposit funds that would supposedly be pooled with other investors’ funds to make ‘huge profits’ in forex, stocks, and commodity trading. Although operating from India, they disguised Profits Paradise’s physical location by providing the false Internet data, indicating that Profit Paradise’s operations were within the United States when they were not. While probing the case, the US markets regulator SEC (Securities and Exchange Commission) sought assistance from its peers in India, Canada and Hong Kong. After completing the probe and announcing charges against the two Indians, Pankaj Srivastava and Nataraj Kavuri, SEC said it ‘appreciates the assistance of the Securities and Exchange Board of India (Sebi) as well as the Autorite des Marches Financiers in Quebec, the Ontario Securities Commission, and the Securities and Futures Commission in Hong Kong.’ The case is being seen as one of the biggest in terms of cross-border cooperation among regulators to crack down on illicit investment schemes. http://www.millenniumpost.in/NewsContent.aspx?NID=75857
MF EXPOSURE TO SOFTWARE STOCKS HITS RECORD-HIGH IN OCT
New Delhi: The mutual fund industry is betting big on software companies as its equity exposure to the sector climbed to a fresh all-time high of about Rs 33,000 crore at the end of October. This also marks the fifth consecutive rise in mutual fund (MF) industry’s exposure to software stocks. Mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. The funds’ investment in software stocks stood at Rs 32,838 crore as on 31 October, 2014, accounting for 10.43 per cent of their total equity assets under management (AUM) of Rs 3.15 lakh crore, according to data available with the Securities and Exchange Board of India (Sebi). At current levels, the MF industry has the highest exposure to software sector since August 2009. Data is not available for sector-wise exposure before August 2009, when the equity funds had deployed Rs 11,913 crore (6.71 per cent) in software shares. http://www.millenniumpost.in/NewsContent.aspx?NID=75814
