New Delhi: India Inc on Wednesday pitched for a rate cut by the Reserve Bank of India (RBI), saying the central bank should be “more courageous”, since inflation had come down drastically and growth is not picking up. RBI is slated to come out with its policy review on December 2. “RBI has to be more courageous,” said Anand Mahindra, chairman and managing director of Mahindra & Mahindra, at a session during the India Economic Summit, organised by the World Economic Forum and the Confederation of Indian Industry (CII), here on Wednesday. Mahindra said RBI Governor Raghuram Rajan had told him he was more concerned about core inflation than the headline number. However, core inflation has also come down to only a little over five per cent in retail price index terms, Mahindra added. He noted in the past the central bank was unable to bring down the rate due to high inflation. “The need of the hour has changed and it is time to start looking to support growth,” Mahindra said. Harvard University professor Gita Gopinath said it was not a question of being courageous. She, however, agreed there was an environment for interest rates to be brought down since inflationary expectations had. http://www.business-standard.com/article/companies/india-inc-bats-for-rate-cut-by-rbi-114110500364_1.html
INDIA ECONOMIC SUMMIT: GOVT READY TO PRIVATISE SICK PSUs, SAYS JAITLEY
New Delhi: Finance Minister Arun Jaitley on Wednesday said the government would look at privatising some of the loss-making public-sector undertakings (PSUs), as supporting those for long with taxpayers’ money was not possible. “Certainly, I am open to looking at some PSUs that could do better in private hands,” Jaitley said at the India Economic Summit, organised by the World Economic Forum. “They are being sustained merely on government support. That is not a long-term solution. Taxpayers cannot pay for loss-making businesses.” Certain PSUs were on the verge of closing down and people were going to lose employment, said the finance minister, adding if the choice was between these businesses continuing in their present form, and getting privatised, the second option would be preferable. Four PSUs were beyond revival, so would have to shut down, Jaitley had told Parliament in July. As many as 79 PSUs were making losses and the public investment in these firms was to the tune of Rs 1.57 lakh crore. Interacting with Klaus Schwab, founder & executive chairman of the World Economic Forum, Jaitley said the government was following the approach of divestment, and not outright privatisation, for other PSUs. With regard to foreign investors, the government would follow a sectoral approach. http://www.business-standard.com/article/economy-policy/india-economic-summit-govt-ready-to-privatise-sick-psus-says-jaitley-114110600046_1.html
ALERT CUSTOMERS BEFORE CLEARING HIGH-VALUE CHEQUES, RBI TELLS BANKS
Mumbai: The Reserve Bank of India (RBI) has asked banks to alert account holders by a phone call and contact the base branch in case of a non-home cheque before clearing a high-value payment. The move has been put in place to control cheque-related frauds. RBI advised banks to review and strengthen controls in the cheque presenting/clearing and account monitoring processes and to ensure that all procedural guidelines, including preventive measures, are followed meticulously by the dealing staff/officials. Banks have been asked to send an SMS alert to payer/drawer when cheques are received for clearing and examine cheques under UV lamp for clearance beyond Rs 2 lakh. Besides, RBI said that multi-level checking should be done before clearing cheques above Rs 5 lakh. According to RBI, banks should ensure the use of 100 per cent CTS 2010 compliant cheques. “Strengthening the infrastructure at the cheque handling service branches and bestowing special attention on the quality of equipment and personnel posted for CTS-based clearing, so that it is not merely a mechanical process,” said RBI. Banks should ensure that the beneficiary is Know-Your-Customer (KYC) compliant so that the bank has recourse to him/her as long as he/she remains a customer of the bank. RBI has stressed on the need to closely monitor credits and debits in newly opened transaction accounts based on risk categorisation. http://www.business-standard.com/article/finance/rbi-asks-banks-to-alert-customers-before-clearing-high-value-cheque-payment-114110501219_1.html
CUT IN REPO RATE UNLIKELY TO BOOST INVESTMENTS: CRISIL RESEARCH
Mumbai: The recent slowdown in the economy is on account of policy uncertainty and sluggish domestic demand, and a cut in repo rate is unlikely to spur investments, according to CRISIL Research. Investments have slowed in times of lower interest rates. What matters more is the business environment, or the expected return on investments, it added. The chorus on an interest rate cut to revive the economy has got louder with the recent climbdown in inflation. To be sure, the monetary policy tool of cutting the interest rate is conventionally used to energise a flagging economy. But this does not hold true under all circumstances, CRISIL report said. RBI has kept Repo rate, rate at which RBI provides short-term liquidity to banks, at 8 per cent. With inflation easing in recent months, there has been a growing clamour for a rate cut to boost the economy. Retail inflation or Consumer Price Index (CPI)-based inflation eased to 6.46 per cent in September, lowest since January 2012, from 7.73 per cent in August. http://www.business-standard.com/article/finance/cut-in-repo-rate-unlikely-to-boost-investments-crisil-research-114110600018_1.html
BOND YIELDS FALL ON EXPECTATIONS OF RATE CUT BY CENTRAL BANK
Mumbai: The bond market is strongly factoring in a rate cut by the Reserve Bank of India (RBI) as early as next month, This resulted in the yield on the 10-year bond ending seven basis points (bps) lower than the previous close. The fall was despite RBI’s move to suck out liquidity of at least Rs 10,000 crore in the sale of government bonds on Wednesday. The yield on the 10-year bond ended at a 14-month low of 8.19 per cent on Wednesday compared with Monday’s close of 8.26 per cent. This was the sharpest fall since August 13, when it dropped to 8.55 per cent as against the previous close of 8.62 per cent. The yield ended at 8.14 per cent on August 8, 2013. On Tuesday, the bond market was shut for Muharram. “There is an expectation that RBI will cut the rate and some people also believe it might happen as early as December. This is because of softening inflation,” said the head of treasury of a state-run bank. The fifth bi-monthly monetary policy statement is scheduled on December 2. Foreign investors continued to buy, with net purchases of debt in 15 of the past 16 trading sessions. On Monday, foreign institutional investors bought $15.85 million worth of bonds, showed regulatory data. http://www.business-standard.com/article/markets/bond-yields-fall-on-expectations-of-rate-cut-as-early-as-next-month-114110500913_1.html
PNB CMD’S EXIT CLOUDS DESTIMONEY SELL-OFF
Mumbai: The sale of Destimoney Enterprises (formerly known as Dawnay Day AV Financial Services), the retail financial services and distribution company, is expected to be delayed. The recent exit of the Punjab National Bank (PNB) chairman is learnt to have affected the sell-out discussions between the promoters of Destimoney and private equity investors. Destimoney, which is wholly owned by PE firm New Silk Route (NSR), holds a 49 per cent stake in Punjab National Bank Housing Finance Ltd (PNBHFL). The deal is expected to be in the range of Rs 1,000-1,200 crore. K R Kamath had quit as the chairman and managing director (CMD) of PNB with effect from October 28, after completing his five-year tenure. Kamath, who has another 13 months left to reach 58 years, was expected to get an extension. At present, no one has taken the charge of CMD at PNB and the position remains vacant. Although the sell-off decisions are taken by an independent committee, the final approval and formalities are to be completed by the chairman. http://www.business-standard.com/article/companies/pnb-cmd-s-exit-clouds-destimoney-sell-off-114110600009_1.html
UNION BANK CUTS LOAN RATES FOR MEDIUM ENTERPRISES UP TO 375 BPS
Mumbai: State-run lender Union Bank of India has reduced the lending rates for micro, small and medium enterprises (MSMEs) by 200 basis points (bps) to 3,765 bps to boost demand. The new rate, which came into effect on Wednesday, will be in the 12.25-13.75 per cent range. While the bank has decided to keep its base rate unchanged at 10.25 per cent, it has reduced the spread it charged for advances extended to MSMEs. The base rate is the benchmark rate to which all loan rates are linked. While Union Bank’s overall loan growth was sluggish at 9.4 per cent year-on-year as of end-September, the growth in the MSME segment was 31.6 per cent. “The interest rate cut in the MSME segment is expected to boost the demand from the manufacturing sector which is essential for the Make In India vision of the government,” said Arun Tiwari, chairman and managing director of the bank. The bank has identified three sectors – retail, agriculture and MSME – to boost its loan growth. The current loan growth in retail and agriculture sector is 28.5 per cent. http://www.business-standard.com/article/finance/union-bank-cuts-loan-rates-for-medium-enterprises-up-to-375-bps-114110500999_1.html
UBI TO CONTINUE WITH FREE ATM TRANSACTIONS
Kolkata: The United Bank of India (UBI) on Wednesday decided to continue with five free ATM transactions a month (including non-financial ones) at other bank ATMs for all savings bank account holders in both metros and non-metros. According to a release issued by the bank, it has also decided to continue with free transactions at its own ATM network without levying any cap. According to the new guidelines of the Reserve Bank of India (RBI), banks in six metros — New Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore — are free to charge other bank customers beyond three ATM transactions a month. Banks have also been allowed to restrict free transactions to five for customers at its own ATM network. According to Sanjay Arya, Executive Director, UBI, putting a further cap on ATM transactions may lead to increased footfall at branches thereby resulting in higher operating costs. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/ubi-to-continue-with-free-atm-transactions/article6568958.ece
FIN SERVICES CONSUMERS MOST LOYAL
Banks and other financial services consumers are the most loyal of all, revealed a survey by Aimia, a loyalty management company. The survey suggests 50 per cent of financial services consumers are loyal to their company/brand, followed by mobile consumers (40 per cent) and then came the technology brands with only a 36 per cent loyal customer base. The banking consumers also scored highest loyalty points when it came to loyalty schemes and credit card schemes. Other sectors such as supermarket and groceries rated lower than the banking consumers in terms of having a loyalty membership cards. Even when it came to effective communication, consumers gave financial services a thumbs up. http://www.business-standard.com/article/finance/fin-services-consumers-most-loyal-114110600017_1.html
LARGE RISK INSURANCE COVERS MAY SEE PREMIUM HARDENING IN FY16
Mumbai: Insurance premiums could rise next year as the industry tries to make up for claims, mostly from corporates, exceeding Rs 6,000 crore this year. The large claims following the floods in Jammu and Kashmir, Hudhud cyclone that hit coastal Andhra Pradesh and Odisha, as well as fires, have pulled up the claim ratio. As a result, there could be a hardening in premium in the next financial year. State-owned insurance companies said for large covers of Rs 4,000 crore and above, the premiums could go up by almost 10-15 per cent. On an average, large policies that cover business disruptions apart from fire and damages from natural disasters could go up to Rs 45 crore to Rs 60 crore, based on the size of the cover. “The large risks are backed by a big reinsurance cover, which is received both from Indian and international reinsurers. Since there have been major losses, the premiums would not only be dependent on the claims, but the capacity of the international reinsurers to cover these risks as well,” said a senior public sector insurance officer. In the past few months, general insurance companies, both private and public, have taken a hit on their books due to large claims from companies. http://www.business-standard.com/article/companies/large-risk-insurance-covers-may-see-premium-hardening-in-fy16-114110501140_1.html
GOOD INVESTORS HAVE COME TO US: CHANDRA SHEKHAR GHOSH
Bandhan, which got banking licence along with IDFC, has not taken any call on giving stake to private equity players so far. Its chairman and managing director, Chandra Shekhar Ghosh, tells Sanjeeb Mukherjee and Indivjal Dhasmana that his company will discuss the matter next month or in January. The issue of International Finance Corporation (IFC)’s interest in increasing its stake in Bandhan will also be discussed, he says on the sidelines of the India Economic Summit. Edited excerpts: There were reports that you are looking at private equity players to infuse equity in Bandhan. IFC has also shown interest in increasing its holding in Bandhan. Have you taken a call? We have not gone into the process of increasing equity infusion. IFC has also shown interest that it would like to increase its stake. I understand other investors are also talking to us. We have not yet taken any call. We could discuss the matter about IFC increasing its stake and other private equity players interested in stake in Bandhan in December this year or January next year. http://www.business-standard.com/article/finance/good-investors-have-come-to-us-chandra-shekhar-ghosh-114110600016_1.html
BANK FINANCE TO NBFCS AT A LOW; LIKELY TO MAKE A TURNAROUND SOON
Mumbai: Lack of credit appetite and availability of cheaper alternate sources of financing saw non-banking finance companies (NBFCs) rely less on bank financing in the past year. However, this trend is likely to reverse with most rating agencies predicting improved economic growth over the next one year. Year-on-year, bank loans to NBFCs saw a 4.4 per cent degrowth in September 2014 as against a robust growth of 26.6 per cent in September 2013. As on September 19, 2014, bank loans to NBFCs stood at Rs. 2.93 lakh crore compared with Rs. 3.07 lakh crore on September 20, 2013. This Rs. 13,400-crore drop in the one-year period represents a 4.4 per cent fall in bank credit to NBFCs. Ramesh Iyer, CEO and Managing Director, Mahindra and Mahindra Financial Services, said, “The overall market is tight…so, may be, the offtake (of loans from banks by NBFCs) is less.” Despite this, bank finance continues to be a major source of funding for NBFCs with some large NBFCs drawing as much as 80 per cent of their total fund requirements from them. Therefore, bank funding can be used as a proxy to ascertain the performance of NBFCs, but only to an extent. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/bank-finance-to-nbfcs-at-a-low-likely-to-make-a-turnaround-soon/article6568956.ece
DLF GETS TRIBUNAL NOD TO REDEEM MF INVESTMENTS
Mumbai: The Securities Appellant Tribunal (SAT) on Wednesday, in an interim relief, allowed DLF to redeem its mutual fund investments of Rs 1,806 crore to service its debt. The tribunal, while allowing DLF’s plea, said the company would have to give a certificate by the statutory auditor that the money was used for the stated purpose. The realty major has moved SAT against market regulator Securities and Exchange Board of India (Sebi)’s order banning the company from accessing the securities market for three years. “The Sebi order doesn’t stop the company from doing business. It is reasonable to allow the company to redeem mutual fund units as and when necessary,” said J P Devadhar, presiding officer, SAT, on Wednesday. During the previous hearing, the tribunal had directed DLF to give an affidavit stating the amount and the reason for withdrawing its MF investments. DLF, which has MF investments of over Rs 2,500 crore, was unable to withdraw these following the Sebi order of October. DLF had stated it needed Rs 767 crore in November and Rs 1,039 crore in December to service its loans and those of some subsidiaries. The company has debt of over Rs 20,000 crore, which it owes to various financial institutions. http://www.business-standard.com/article/companies/dlf-gets-tribunal-nod-to-redeem-mf-investments-114110500967_1.html
SEBI FOR ALLOWING FOREIGN VCS IN INFRA INVESTMENT FIRMS
Capital markets regulator Securities and Exchange Board of India (Sebi) on Wednesday proposed allowing foreign venture capital investors (FVCIs) in core investment companies (CICs) for the infrastructure sector, to help attract foreign funds in this space. The final norms would be put in place after taking into account public comments on the proposal and amending the existing regulations. Releasing a concept paper, Sebi said the proposal was aimed at “removing any hindrance for investment in the infrastructure sector through the FVCI route and to boost the infra sector”. According to the 12th five-year Plan (2012-17), India requires Rs 65 lakh crore investment in infrastructure. http://www.business-standard.com/article/markets/sebi-for-allowing-foreign-vcs-in-infra-investment-firms-114110501596_1.html
