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HomeIndia TakesMUTED CORPORATE LOAN DEMAND IMPACTS BANKS

MUTED CORPORATE LOAN DEMAND IMPACTS BANKS

fsKolkata: The fear of bad loans and limited lending opportunities to top companies have prompted several banks to shift focus towards the retail (individual loans) and small & medium enterprises segments. India Inc’s reluctance to borrow money is keeping bankers worried. While lenders were able to stem fresh impairment in their credit quality in the July-September period, low demand for corporate loans has decelerated the growth in banks’ interest income, restricting improvement in their profitability. The fear of bad loans and limited lending opportunities to top companies have prompted several banks to shift focus towards the retail (individual loans) and small & medium enterprises segments. However, analysts believe this shift in strategy is not working well for many. M B Mahesh, analyst with Kotak Securities, said in a note to clients on Monday: “We believe this is likely to be the biggest source of concern in 2014-15, as fresh sanctions have not shown improvements, repayments are increasing from existing loans and retail – where banks have shifted focus – contributes to only 20 per cent of overall loans.” The year-on-year growth in non-food credit moderated to 11.2 per cent (its lowest level since June 2001) at the end of this financial year’s second quarter. http://www.business-standard.com/article/finance/muted-corporate-loan-demand-impacts-banks-114111900010_1.html

 

 

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REVIVED RATE CUT HOPES LEAD TO FALL IN BOND YIELDS

 

Mumbai: The rally in the bond market picked up again on hopes of a rate cut by the Reserve Bank of India (RBI) as early as next month, following comments by Finance Minister Arun Jaitley on Monday and continued inflows from foreign investors. Jaitley had said if RBI brought the repo rate down in the monetary policy review scheduled on December 2, it would provide a “fillip” to the economy. Banks have been the biggest buyers of government bonds, as credit growth has been muted. The festive season, too, has failed to revive credit growth due to which banks are expanding their duration in bond portfolio. The other key factor contributing to the rally has been flows from foreign institutional investors (FIIs) in debt. 2014 has been a year when FII flows in debt has surpassed equity. FIIs have invested Rs 1.42-lakh-crore in debt compared with Rs 92,952 crore in equities. Jaitley had said in a key-note address at the Citi’s Investor Summit here on Monday: “I am quite clear in my mind that the cost of capital has to come down. Inflation has moderated, global fuel price has eased. http://www.business-standard.com/article/finance/revived-rate-cut-hopes-lead-to-fall-in-bond-yields-114111800434_1.html

 

NO NEED FOR PAN TO INVEST IN KISAN VIKAS PATRA

 

New Delhi:  There will be no requirement to furnish Permanent Account Number (PAN) for investing in the re-launched Kisan Vikas Patra (KVP). However, the interest earned will be taxable. The instrument was re-launched on Tuesday by Finance Minister Arun Jaitley and Communications Minister Ravi Shankar Prasad to channel more savings from the domestic sector. “There will be no name on the certificate. It will be just like a currency note,” Jaitley said, adding that “it would be better to put currency in the scheme, as it will give interest.” The scheme will be available for everyone, not just farmers. At an annualised interest of 8.5 per cent, money invested in the scheme will double in 100 months (eight years and four months). Jaitley said KVP would serve two purposes: “One, it would help poor, gullible investors channel their savings toward a trusted Government scheme instead of Ponzi schemes where their hard-earned savings disappear. “Two, there is an urgent need to raise savings in the country… Such a savings instrument not only earns interest, but also helps in the country’s development,” he said. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/no-need-for-pan-to-invest-in-kisan-vikas-patra/article6612745.ece

 

RURAL BANKING TURNING INTO A PROFITABLE ENTERPRISE: CRISIL

 

Mumbai:  In a classic example of adversity turning into opportunity, rural banking, which till now was shunned by banks citing unfavourable economics, is gradually becoming a gainful pursuit. “Increasing economies of scale (with higher business per branch) and usage of low-cost channels such as business correspondents (BCs) will help public sector lenders, who are currently incurring losses in their rural operations, to turn in profits over a five-year timeframe,” according to a report by Crisil Research. As for private banks, rural operations are mildly profitable already, generating a tenth of their overall returns, and the situation will get even better. “In the last five years, business per branch in rural areas has grown at a compounded annual growth rate of 7 per cent, despite the overall branch network growing at 9 per cent annually. The economies of scale are set to increase further in the years to come. “A case in point is the recently launched Pradhan Mantri Jan Dhan Yojana,” the report said. While this poses challenges for banks in the short term, in the longer term, it would augment business per branch. Banks are also bringing down operating expenditure and expanding rural reach by experimenting with smaller branches and increasingly using BCs. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/rural-banking-turning-into-a-profitable-enterprise-crisil/article6612738.ece

 

NPA SALE TO REMAIN SLOW FOR TWO QTRS

 

The pace of bad loan sales to asset reconstruction companies (ARCs) by banks slumped in the second quarter of the current financial year, after the sector witnessed a deal-making frenzy in the first quarter. It is expected to stay in a slow lane for another two quarters, as ARCs grapple with fund and capital raising plans and reworking business models, according to survey by Alvarez and Marsal (A&M), a performance improvement and turnaround management firm. The Reserve Bank of India (RBI) has made significant changes in norms for asset buying and selling to ensure ARCs have skin in the game. The rules were revised to make banks identify stressed loans early and take immediate steps to find solutions. According to A&M, over the next six months, most ARCs feel that the sale of stressed assets would slow down and regain momentum only in the subsequent quarters. This was anticipated with increased cash component of the acquisition price and additional disclosures regarding valuation of assets by ARCs. In the next six months, ARCs expect SBI and its associates and Central Bank of India to offload the maximum value of stressed assets in the market among the public sector banks. This will also rationalise pricing. http://www.business-standard.com/article/finance/npa-sale-to-remain-slow-for-two-qtrs-114111900009_1.html

 

RUPEE OPENS LOWER AT 61.84 PER DOLLAR

 

Mumbai: The Indian rupee on Wednesday weakened against the dollar, tracking losses in the Asian currencies market. The local unit opened at 61.84 per dollar. At 9.09am, the home currency was trading at 61.86, down 0.18% from previous close of 61.75, while India’s equity benchmark Sensex index was trading at 28,192 points on BSE, up 0.10%. Most of the Asian currencies were trading lower. South Korean won was down 0.57%, Japanese yen fell 0.35%, Thai baht 0.23%, Singapore dollar 0.21%, Taiwan dollar 0.12% and Philippines peso 0.12%. The yield on India’s 10-year benchmark bond was trading at 8.156%, compared with its Tuesday’s close of 8.154%. Bond yields and prices move in opposite directions. Since the beginning of this year, the rupee has weakened 0.07%, while foreign institutional investors have bought $15.43 billion during the period from local equity markets. The dollar index, which measures the US currency’s strength against major currencies, was trading at 87.726, up 0.17% from the previous close of 87.575. http://www.livemint.com/Money/bgcp9Md1V8RRSYYZpWAfNJ/Rupee-opens-lower-at-6184-per-dollar.html?facet=print

 

 

STATE-OWNED BANKS MAY PROFIT FROM RALLY IN BOND PRICES

 

Mumbai: A rally in bond prices since the beginning of October may help boost profits for banks, particularly the state-owned lenders, which have sizeable holdings of government securities. State Bank of India could see notional gains of close to `2,000 crore from the recent rally in bond prices, followed by Punjab National Bank and Canara Bank, which could see notional gains of more than `700 crore each, according to Mint research and data available from brokerage houses. Bond prices have gained and yields have fallen on hopes that the Reserve Bank of India (RBI) would consider cutting its benchmark policy rate at its 2 December policy in response to falling inflation. The 10-year benchmark bond yield has fallen from 8.51% on 30 September to 8.15% on 18 November, a drop of 36 basis points. Bond prices and bond yield move in reverse directions. One basis point is one-hundredth of a percentage point. As the price of government securities rises, banks are allowed to book mark-to-market gains on parts of their bond portfolio that are available for trading. Banks are allowed to trade in government securities which are placed in their available for sale (AFS) and held for trade (HFT) segments, while the rest must be held till maturity (HTM), according to RBI guidelines issued in July 2010. State Bank of India, India’s largest lender, has the largest investment portfolio worth `485,734 crore, as on 30 September, according to data compiled by brokerage Espirito Santo Securities. Of this, it has `109,954 crore worth of securities in AFS segment and `18,010 crore worth of securities in the HFT segment. According to a public sector banker, every time the benchmark yield falls by one basis point, banks earn a mark-to-market (MTM) gain of nearly 4.5 paise on a government security with a face value of `100. Based on this equation, SBI could earn an MTM gain of nearly `2,074 crore. http://www.livemint.com/Money/XkTbPpQQ2xsjYAZok8TS0M/Stateowned-banks-may-profit-from-rally-in-bond-prices.html?facet=print

 

JAN DHAN YOJANA CROSSES 75 MN ACCOUNTS, COMPLETES TARGET

 

Mumbai: Nearly three months after financial inclusion mission Pradhan Mantri Jan Dhan Yojana was launched by Prime Minister Narendra Modi on August 29, the target of opening 75.16 million bank accounts for the un-banked has been met. This is a notable achievement as it comes two months ahead of the target of January 26, 2015. However, as many as 75 per cent of the accounts thus opened, 56.64 million, do not have any cash balance. Also, only 58 per cent of the account holders, 43.3 million, have been provided with the RuPay debit card. (Read: Is Jan Dhan really a success?) According to the latest data available with the finance ministry, State Bank of India tops the list with 13.4 million accounts opened across its branches till November 15 this year. Bank of Baroda, which opened 4.04 million accounts, came in second, closely followed by Canara Bank with 3.92 million bank accounts. Among private lenders, HDFC Bank stood on top with 600,000 accounts followed by ICICI Bank that opened 490,000 accounts. Jammu & Kashmir Bank came next with 270,000 accounts and Axis Bank opened 190,000. Federal Bank opened 130,000 accounts as of November 15 this year. http://www.business-standard.com/article/finance/jan-dhan-yojana-crosses-75-mn-accounts-completes-target-114111800398_1.html

 

 

AXIS BANK RAISES $500 M VIA SENIOR UNSECURED NOTES

 

Mumbai: Riding on the strong demand for Indian paper overseas, Axis Bank raised $500 million through dollar-denominated senior unsecured notes at a yield of 3.25%, the lowest for any Indian lender. The bank gained an edge in pricing partly due to a fall in the five-year US treasury note yield which has fallen 28 bps over the last two months.

The yield on the five-year US note was around 1.83% on September 18 when ICICI Bank issued bonds and at 1.59% on April 10, the date of SBI bond issue. The treasury yield has since then fallen to 1.55% at the time of the Axis Bank bond issue pricing. However, the spread over US treasury yield demanded by investors has also shrunk, indicating a growing demand for Indian paper. ICICI Bank, had raised $500 million through bonds in September and had to pay a spread of 180 bps over US treasury yield. “If ICICI Bank or SBI were to offer bonds today, the pricing would be similar or even tighter than Axis Bank as the US yields have fallen,” said a banker. SBI bonds (in April) were priced at 240 bps above US treasury yield. http://www.financialexpress.com/article/industry/banking-finance/axis-bank-raises-500-m-via-senior-unsecured-notes/

 

ICICI PRU EXPECTS RBI TO CUT RATES ONLY IN MARCH 2015

 

Mumbai: ICICI Prudential Mutual Fund, the second-largest mutual fund house in the country with an asset of Rs. 1.27-lakh crore, expects the Reserve Bank of India to cut bank rates only by end-March even as corporate houses are pitching for a 50-basis point reduction in repo rates (the rate at which RBI lends to banks) following the recent fall in inflation rates. The RBI will take a call on repo rates at its fifth bi-monthly monetary policy review scheduled on December 2. The call for a rate cut has gained momentum with the recent fall in inflation rate, drop in crude oil prices and lower exchange rate volatility. Speaking to BusinessLine , Nimesh Shah, Managing Director and CEO, ICICI Prudential Mutual Asset Management Company, said that not reducing interest rates in a hurry may be seen as negative in the short term, but praised the RBI saying that for the first time the central bank is working not only on inflation but also on inflationary expectations. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/icici-pru-expects-rbi-to-cut-rates-only-in-march-2015/article6612739.ece

 

BANKS LIKELY TO REVISE PRICING FOR SAVINGS DEPOSIT ABOVE Rs 1 LAKH

 

Kolkata: Your opportunity to earn higher interest by keeping more than Rs 1,00,000 in your savings bank account might soon be limited. Only a few private banks currently pay more than four per cent interest on savings deposit balance. IndusInd Bank and Kotak Mahindra Bank had recently reduced their interest rate on savings deposit balance of up to Rs 1,00,000. But no bank, offering higher interest rate, has revised its rate for savings deposits over Rs 1,00,000. This is likely to change, as term deposit rates are now expected to head southwards. Romesh Sobti, managing director and chief executive officer at IndusInd Bank, told analysts during a recent interaction: “As fixed deposit rates fall, there will be a crossover sort of an intersection when the savings bank rates fully loaded for savings bank transaction cost become equal to fixed deposit rates. Beyond that it makes no sense to hold savings bank rate at six per cent. So, I think we will watch…For the time being, our drop in rates beyond Rs 1,00,000 will be dictated by a drop in fixed deposit rates.” http://www.business-standard.com/article/finance/banks-likely-to-revise-pricing-for-savings-deposit-above-rs-1-lakh-114111900011_1.html

 

 

LIFE INSURERS CRY FOUL, SAY DELAY IN PRODUCT APPROVALS HURTING BUSINESS

 

Hyderabad:  The delay in obtaining product approvals from the regulator is making life insurers restive even as new business premium is on the wane. “The Insurance Regulatory and Development Authority is sitting pretty on product approvals of late. There are over 200 products filed by different insurers which are awaiting clearance. This is adversely impacting business,” the Chief Executive Officer of a leading private life insurance company, who did not wish to be identified, told Business Line. According to a report of the Life Insurance Council, the new business premium (NBP) collected by the industry declined 2 per cent to Rs. 49,179 crore during April-September 2014 compared to the year-ago period. In September, the industry saw a 21 per cent decline in NBP, with LIC witnessing a 27 per cent drop and private sector insurers recording flat growth. A couple of top executives of insurance companies said the regulator was unable to arrest the decline even as new products were expected to drive business growth. In recent months, product approvals by the IRDA have been almost nil, they said. A reason for the delay is said to be because of the absence of Member (Actuary) at IRDA, a post which has been vacant for almost two years. Of the five sanctioned members, IRDA now has only three; the position of Member (Life) had fallen vacant in February this year. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/life-insurers-cry-foul-say-delay-in-product-approvals-hurting-business/article6612740.ece

 

 

MFs HIT NEW RECORD IN EQUITY LAUNCHES

 

Mumbai: The mutual fund (MF) sector appears set to break all its previous records this calendar year. Its total of assets under management (AUM), net inflows and gross sales in equity schemes are hitting all-time highs. So has the number of equity new fund offers (NFOs). In the 10 months from January to October, the Rs 11 lakh crore fund sector has successfully marketed a massive 55 equity NFOs. This is the highest ever, surpassing the boom year of 2007 when fund houses brought in 48 equity NFOs. All this is, clearly, resulting from the steep rally in Indian shares. Put together, they’ve managed to garner Rs 8,623 crore, a six-year high, of investors’ money. Though, compared to what it used to raise during 2005-2008, the assets currently being garnered are nowhere near, sector executives say. This has started reflecting in the rising pace of asset gathering. Against the total of Rs 3,326 crore the sector raised in the first half of the current calendar year, the four months from July to October saw Rs 5,300 crore. What is unique is the strong and unexpected return of close-ended equity schemes from fund houses’ kitty of products. Nearly two in every three equity NFOs is a close-ended product , or 35 of the total of 55, with a lock-in period of two to five years. Experts say this will rise. http://www.business-standard.com/article/pf/mfs-may-hit-new-record-in-equity-launches-114111801048_1.html

 

SEBI MAY LET COS GET LISTED SIX DAYS AFTER 1ST SHARE SALE

 

Mumbai: Capital markets regulator Sebi is working on plans to reduce the time duration for a company to start trading on stock exchanges after initial public offer (IPO) to six days. At present, the time taken for a company to get listed after initial share sale is around 12 days. A proposal on it is expected to be discussed during Sebi’s board meeting here on Wednesday, official sources said. Sebi may reduce the post issue timelines from T+12 days (12 days from issue closure to listing and trading) to T+6 days, they added. Once the process gets stabilised, timelines could be further curtailed to T+2/3 days, the sources said. Sebi had formed a group comprising of representatives from the stock exchanges, depositories and others to work on norms that would enable use of existing secondary market infrastructure for collection of IPO bids and application money; reduce the post issue timelines and help companies reach more retail investors. Among others, there is a proposal to enable investors to submit its applications to any registered stock broker or depository participant. Investors may also have the option to submit Applications Supported by Blocked Amount (ASBA) to its bank. According to the proposal, making ASBA mechanism mandatory for retail investors has the potential to reduce the post issue timelines. http://www.millenniumpost.in/NewsContent.aspx?NID=76098

 

SEBI’S PLAN FOR KYC REGISTRATION AGENCIES FAILS TO MAKE A MARK

 

Mumbai: A centralized repository of investors’ know-your-customer (KYC) data planned to reduce account-opening documentation has not helped stock brokerages much, many of which insist on specific contracts with their clients which are kept in the physical form.

Two years ago, the Securities and Exchange Board of India (Sebi) had launched KYC registration agencies (KRAs) to create a centralized pool of investor details, which could then be used by brokerages and clients easily. The idea was that investors could get their KYC process done just once and all market intermediaries could access it. Market participants said KRAs collect the identity and address proofs of investors along with a basic broker-client agreement, but little else. “Life has not changed much. The (KRA) project is very good, but the documentation that you need for the complete KYC and account opening is still offline and so, the utility is limited. Many a time, even the identity and address data could be old,” says the compliance head of a large domestic brokerage, asking not to be named as he is discussing the matter with the regulator as well. The absence of standardized agreements between brokerages and clients has also reduced the utility of KRAs. In 2011, Sebi allowed certain categories of institutions to set up KRAs, which essentially maintain the KYC details of investors, store the records and provide it to market participants at a nominal charge. The five KRAs currently registered with Sebi are NSDL Database Management Ltd (NDML), a subsidiary of National Securities Depository Ltd; CDSL Ventures Ltd (CVL), a division of Central Depository Services (India) Ltd; DotEx International Ltd, a unit of the National Stock Exchange of India Ltd (NSE); Karvy Data Management Services Ltd and CAMSKRA, set up by Computer Age Management Services (Cams). http://www.livemint.com/Money/LcuvOLuU6tpYk0aNo8hyEO/Sebis-plan-for-KYC-registration-agencies-fails-to-make-a-ma.html?facet=print

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