NEW DELHI: HDFC Bank will not be able to raise much money by way of foreign investment even as the Foreign Investment Promotion Board (FIPB) on Friday regularised its current overseas investment structure. That is because the board turned down the bank’s plea to not treat the promoter stake as foreign investment. Besides, the bank will also have to deposit a penalty as it was in the breach of FDI guidelines.
The FIPB is of the view that HDFC Bank’ parent HDFC Ltd’s 22.50 per cent holding in the bank is foreign investment and, hence, the total foreign holding in the bank stands at 73.20 per cent, which includes FII, FDI, ADR and GDR, according to an official.
As such, HDFC bank can increase foreign investment in it only by 0.80 per cent as the cap on overseas investment in private sector banks is 74 per cent. “The bank has a little headroom to raise funds from foreign investors,” an official said after the meeting. Shares of HDFC Bank were up 1.43 per cent to close at Rs 929.30 apiece on Friday. However, the FIPB decision was announced after market hours.
HDFC Bank had approached the FIPB to increase the foreign holding in it to 67.55 per cent from a little over 50 per cent last year.
Since then the proposal had been in cold storage as the definition of FDI had changed by press notes issued in 2009.
The Reserve Bank and the Department of Industrial Policy & Promotion were of the view that HDFC Bank, after taking into account its parent HDFC’s holding, was already close to the 74 per cent cap for foreign investment in private sector lenders.
After a change in the FDI policy in 2009, downstream investment by any entity controlled by foreign investors is taken as foreign investment.
“Any foreign investment already made in accordance with the guidelines in existence prior to February 13, 2009 (date of issue of Press Note 2 of 2009) would not require any modification to conform to these guidelines. All other investments, past and future, would come under the ambit of these new guidelines,” the policy said.
HDFC Bank had argued the law could not be applied retrospectively. It had stressed it had got legal opinion and the general view was that HDFC’s holding in HDFC Bank should be exempt from new regulations, as the holding already existed when the law came into force.
However, officials said the bank had increased its holding, though marginally, after the change in policy without taking FIPB approval.
In December 2013, RBI had barred foreign investors from buying additional shares in the company, after their shareholding hit the upper limit of 49 per cent allowed under the automatic route.
The official added that since before Friday’s clearance the bank was in breach of FDI regulations, there would be some penalty, which would be decided by the RBI.
(Source: Business Standard, November 15, 2014)
BANKING SECRETARY ADHIA TO MEET GOVT BANK CMDs ON NOV 20
MUMBAI: The finance ministry will meet chief executives of public sector banks on November 20 to take stock of the progress made under the Prime Minister’s Jan Dhan Yojana (PMJDY).
There will also be a review of the performance of the lenders.
Hasmukh Adhia, the newly appointed secretary of financial services, who took charge on November 8, will chair the meeting. Adhia, a Gujarat-cadre IAS officer of the 1981 batch, succeeded Gurdial Singh Sandhu, who has been appointed as the chairman of the National Authority for Chemical Weapons Convention.
The Prime Minister and the finance minister were scheduled to meet the bankers on 5 November to discuss the same issues but that interaction was cancelled at the last minute.
According to latest government data, close to 72.5 million accounts have been opened under the PMJDY till November 10 with on average half-a-million accounts every day. However, 54.8 million or over 75 per cent accounts have no balance in them.
The remaining 25 per cent garnered Rs ,600 crore since the scheme was launched in August 28.
While the target was to open 75 million accounts by January 26, it now seems that the target will be achieved well in advance. There is speculation that the account opening target will be revised upward.
Public sector banks are also experiencing rise in bad loans for more than two years now amid a slowing economy where interest rates stayed elevated. Rising in loan loss provisioning has depleted their capital at a time when the Basel-III norms has mandated higher Tier-I capital. The BJP government is yet to allocate fresh capital in the banks in the current financial year.
The previous UPA government had allocated Rs 11,200 crore in the interim budget for 2014-15.
The meeting assumes importance on the back drop of the new BJP government’s attempt to revive the economy which saw two successive years of sub-5 per cent growth.
Loan growth in the banking system has been sluggish with no new projects commissioned by the industry. According to latest data available, year-on-year credit growth was 11.2 per cent till October 31 as compared to 16.2 per cent during the same period of the previous year.
Loan growth remained muted amid high interest rates as the central bank yet to cut its key policy rate or the repo rate. Reserve Bank of India (RBI) has maintained status quo on interest rate in the last four policy reviews. The next policy review will be on 2 December.
(Source: Business Standard, November 15, 2014)
INDIA, RUSSIA MULL ‘HYDROCARBON’ PIPELINE
NEW DELHI: After cementing trade ties with China, energy-rich Russia is now looking to strengthen its relationship with India by reviving discussions on a hydrocarbon pipeline, in addition to inviting ONGC Videsh (OVL) to invest in oil and gas projects in the Russian Federation.
India and Russia have decided to form a joint working group to study laying a ‘hydrocarbon’ pipeline connecting the nations. Preliminary discussions were held in New Delhi last week, while a formal announcement is expected during Russian President Vladimir Putin’s visit to India in December, said officials privy to the development.
The two nations are yet to decide on whether they should lay a natural gas or a crude oil pipeline and, hence, decided to work out the feasibility of a ‘hydrocarbon’ pipeline.
Previously, India was considering negotiating with Russia for the extension of a $30-billion gas pipeline that Moscow plans to build to China till the Indian border. If the proposed pipeline from Russia via China’s Xinjiang province materialises, it will be among the world’s most expensive gas pipelines. The joint working group would “examine all feasible options”, an official directly involved in the negotiations told FE.
The Modi government’s intent is to bolster sourcing of oil and gas to meet the country’s rising energy demand. India is a huge importer of energy. In FY14, its net energy imports were 6.3% of the GDP. “Without energy imports, we calculate it would have run a current account surplus of 4.6% of the GDP,” Goldman Sachs said in a recent report.
During the World Petroleum Congress held in Moscow recently, petroleum minister Dharmendra Pradhan is learnt to have discussed the possibility of the pipeline with his Russian counterpart, Alexander Novak. India is looking to set up a pipeline from Russia, either through China or via the same route as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline.
During Putin’s visit to New Delhi, sources also say ONGC Videsh may further “fine tune” its talks with Russia’s Rosneft to pick up equity stakes in two blocks in East Siberia in two separate deals.
The exact size of the deals is not known but is believed to have combined worth of around $2 billion.
In one of the deals, OVL, the overseas subsidiary of India’s largest explorer ONGC, is looking at picking up a 10% stake in the Vankor fields that are producing crude oil, the source said, adding that feasibility studies are currently on. The field, which has been under production since August 2009, currently produces more than 400,000 barrel of oil per day, double the output of Barmer, India’s largest onshore field, which is operated by Cairn India.
The second deal OVL is discussing with Rosneft is to buy equity in a greenfield project, Yurubcheno-Takhomskoye. This is a discovered asset and OVL is evaluating picking up 49% stake.
The proposed two deals will bolster the asset base of OVL, whose overseas forays are a key part of India’s energy security strategy. The company, with cumulative investments abroad up to March 31, 2014, of over $22 billion, has stakes in 33 oil and gas projects in 16 countries.
(Source: The Financial Express, November 15, 2014)
$3 TRILLION GLOBAL SAVINGS GLUT CAN BOOST INDIAN INFRASTRUCTURE, SAYS CO-CEO, DEUTSCHE BANK
NEW DELHI: The savings glut in Europe and key emerging economies like China would lead to excess funds of $3 trillion in the next five years. This can come to the aid of India, which is starved of infrastructure investment, according to Anshu Jain, co-CEO of Deutsche Bank.
Speaking at the 13th Urban Age conference in Delhi on Friday, Jain, who is the first non-European to head Deutsche Bank, said, “The world’s financial markets can play a critical role — turning savings into the capital we need to develop our cities in ways which will benefit the citizens of the future. All of us in the financial industry have a duty to contribute to this process.”
Jain said that the $3-trillion surplus savings expected in five years was more than what the countries generated over the previous 15 years. “These savings, in particular retirement savings, will typically seek solid investments and predictable, annuity-like returns. Simultaneously, the scale of urbanization we are witnessing requires huge resources,” he said.
The Deutsche Bank CEO also came out strongly in support of the plan to have a 100 smart cities in India, stating that it will bring enormous benefits. Jain said that India needs to build the equivalent of a new Chicago every year for the next few decades to sustain its growth.
“We already understand why urbanization has driven prosperity. Scale economies play a role. Services like education, housing, power, water, sanitation and transportation are up to 50% cheaper on a ‘per-unit’ basis when people are clustered together. In addition, sharing of knowledge is much easier. Centres of innovation, expertise and creativity develop much faster where people come together,” said Jain. The event was organized by the Alfred Herrhausen Society — a non-profit society promoted by Deutsche Bank and the London School of Economics.
The concept of 100 smart cities was floated by Prime Minister Narendra Modi. “All of us here, if we use a smartphone or tablet, know how technology is transforming our lives. We can harness digital technology, and ‘big data’, to transform the way we manage our cities. Essential services — water, sanitation, energy, public transport and education — can all be managed and delivered more effectively, and economically, through smart use of technology,” said Jain.
(Source: The Times of India, November 15, 2014)
DoT ADMITS TO SPECTRUM CRUNCH
NEW DELHI: The telecom department has admitted to scarcity of spectrum availability to private telcos, raising hopes among carriers that New Delhi will take speedy steps to spur M&A and permit airwaves sharing and trading.
An internal presentation of the telecom department (DoT) points out that the biggest reason for slow wireless broadband speed is the paucity of bandwidth with telecom operators.
“The policy framework should enable making available sufficient spectrum to telecom operators. One step could be to facilitate consolidation of players in the telecom sector so that sufficient spectrum is available to each operator,” said the presentation titled ‘Why Broadband Speeds Are So Low’.
Telecom Regulator’s Views
“Further, sharing and trading of spectrum should be permitted… further trading would allow operators to aggregate their holdings into contiguous lot,” it added.
A week ago, the telecom department had turned down Telecom Regulatory Authority of India’s (Trai) recommendations on holding a multi-band auction and enhancing the supply of airwaves to be sold by utilising the bandwidth reserved for the defense services and after taking back part of the spectrum which aren’t been used by the state-run telcos.
The DoT had told the regulator that it would auction only the amount of airwaves it has and not increase the supply. The DoT has also steadfastly refused to accept Trai’s proposal of creating an extended GSM (e-GSM) band by utilising part of 800 MHz, which could, according to a group of operators, add to the spectrum pool.
The recent presentation that concedes that there is a shortage of supply of airwaves vindicates the views of the telecom regulator as well as private telecom operators who have harped on the issue of lack of airwaves and have been clamouring for more spectrum to be auctioned.
Both the sector watchdog and the carriers have been saying that the bandwidth scarcity is hampering network expansion plans, especially when the country is moving towards more data usage. However, the presentation is silent on how will the DoT increase supply of airwaves, apart from encouraging consolidation and spectrum sharing and trading.
“The substantial growth in data necessitates large quantity of spectrum to be made available if we are to accomplish the Digital India programme. We welcome the telecom department’s move in providing for additional spectrum,” Rajat Mukarji, the chief corporate affairs officer at Idea Cellular, told ET. “However, it must be remembered that the spectrum is contiguous, duly-harmonised and in the right band so that it can benefit the end user.”
The department’s report acknowledged the need for continuous spectrum too. It said that newer technologies such as LTE would require a contiguous block of 5 Mhz spectrum.
Referring to the surging data demand in the country, the internal presentation says there is need to provide adequate spectrum to operators in India to ensure availability of quality services. “With advent of more bandwidth hungry applications and sale of smartphones, scarcity of spectrum has become all the more glaring”. Operators couldn’t agree more.
Marten Pieters, chairman of GSM lobby group COAI, and Vodafone India’s Managing Director has repeatedly said that spectrum availability in India is not on a par with international markets such as the US and its scarcity is causing problems such as low voice quality and slow broadband speed.
Last month, the Trai, while recommending a reserve price of airwaves in the 900 and 1800 Mhz band, had pointed out how on an average the airwaves held by Indian telecom operators — at 6.6 Mhz — was much lower than those held by their counterparts in other countries.
In France alone, where there are just four operators, the average airwaves held by each in the 900 and the 1800 Mhz band was over 20 Mhz.
(Source: The Economic Times, November 15, 2014)
