MUMBAI: Leading public sector banks have lowered some of their term deposit rates by up to 100 basis points as credit growth remains sluggish and liquidity in money markets has improved (100 basis points = 1 percentage point). The lenders who reduced deposit rates recently include the Bank of Baroda, Bank of India and Andhra Bank. The State Bank of India, ICICI Bank and Central Bank of India had revised rates earlier last month. “We have been able to bring down interest rates on deposits because we hold surplus investments in government securities. The expectations of a reduction in interest rates have resulted in an improvement in the prices of bonds and we can liquidate our investments at a profit,” said C V R Rajendran, chairman, Andhra Bank. He said there was an expectation that the Reserve Bank of India will signal lower interest rates in its forthcoming monetary policy in December. Data released by the RBI shows that bank credit growth has improved to 11% as on October 17 but continues to underperform growth in deposits which have risen by 12.6%. A fortnight earlier, bank credit growth was struggling at 9.7% even as deposit growth was in excess of 13.4%. http://timesofindia.indiatimes.com/Business/India-Business/PSB-deposit-rates-cut-by-up-to-100-bps/articleshow/45029795.cms
FINMIN ASKS RBI TO EASE INFRA FUNDING NORMS
New Delhi: The Finance Ministry has asked Reserve Bank of India (RBI) Governor Raghuram Rajan to provide greater flexibility to banks funding stalled infrastructure projects, after concerns were raised by senior bankers that some lending requirements were too ‘stringent’. A department of financial services communication to Rajan sought to de-link the extent of cost overruns as a condition for classifying any project as a restructured asset. It also sought to allow lenders to decide the extent of funding, as well as the debt-equity ratio of the project, and the upfront contribution from promoters, finance ministry officials said. In a circular dated August 14, the central bank had stipulated that banks could fund cost overruns for projects where the date of commencement of commercial operations (DCCO) had been extended by two years, without treating the loans as a ‘restructured asset’, provided that funding any cost overrun, excluding interest during construction, be capped at 10 per cent of the original project cost. http://www.business-standard.com/article/economy-policy/finmin-asks-rbi-to-ease-infra-funding-norms-114110400026_1.html
RBI TO CONDUCT OPEN MARKET SALE OF GOVT BONDS FOR RS 10,000 CRORE
Mumbai: Government bond yields are set to see corrections on Tuesday ahead of the close of market hours, as the Reserve Bank of India (RBI) announced an Open Market Operations (OMO) sale of government bonds for an aggregate amount of Rs 10,000 crore on Wednesday. The yield on the 10-year benchmark bond had dropped for a third consecutive session on Monday, hitting a more than 14-month high on rising expectations of an earlier-than-expected rate cut by the central bank. The yield on the 10-year bond ended at 8.26 per cent on Monday compared with the previous close of 8.28 per cent. During intra-day trades the yield had touched a low of 8.22 per cent, a trough touched earlier on August 12, 2013. Bond traders believe on Tuesday, the 10-year benchmark yield may trend near 8.30 per cent due to the OMO sale announcement. http://www.business-standard.com/article/markets/rbi-to-conduct-open-market-sale-of-govt-bonds-for-rs-10-000-cr-114110301075_1.html
FIIs, NOT RBI POLICY, BEHIND BOOM IN MARKETS SINCE 2000
The US Federal Reserve has started to wean the US economy off phantom money, euphemistically called “quantitative easing” (QE). Reserve Bank of India (RBI) Governor Raghuram Rajan has been apprehensive about its potential impact on emerging economies like India. He made a vocal plea for a globally co-ordinated monetary policy action, ostensibly after due consideration of the impact of global capital flows on emerging economies. The then fellow at Peterson Institute Arvind Subramanian together with Princeton University economist Dani Rodrik, through an article in this paper (“Emerging Markets’ Victimhood Narrative,” February 1, 2014) pointed to the disingenuity of such claims of victimhood. They argued how emerging markets “consciously and enthusiastically embraced financial globalisation” to soak up foreign capital flows during times of easy money and contended that emerging markets are “simply reaping what they have sown”. Over the next few weeks and months, as the tide of US capital flows run out, naked swimmers in emerging economies could be exposed, (the tangible impact of Bank of Japan’s renewed benevolence in flooding the market with liquidity is still unclear). http://www.business-standard.com/article/opinion/praveen-chakravarty-the-white-man-s-burden-of-india-s-equity-markets-114110301338_1.html
BANK CREDIT UP JUST 1.76% IN MARCH-SEPT: RBI
Mumbai: Despite the boom in financial markets, the economy as a whole is yet to see a turnaround. This is borne out by the RBI’s latest credit deployment data, which show that growth in bank credit to almost all sectors has slowed. In the six months between March 21 and September 19 this year — the bulk of which period also coincides with the term of the new government in office — gross credit of the banking system grew by a tepid 1.76 per cent (or by Rs. 99,700 crore versus Rs. 3,32,700 crore in the year-ago period). Lack of credit demand from corporates and banks’ reluctance to lend to the sector in the face of rising non-performing loans dragged down the overall credit growth. “We have not witnessed any up-tick in credit demand as corporates are still de-leveraging. It will take about a year or so for the government’s measures to impact the banking and financial sector,” said Bank of India Chairperson and Managing Director Vijayalakshmi Iyer. In the same period, bank credit to industry decreased a tad. Industry constitutes about 43 per cent of the total bank credit. Within industry, medium and large enterprises contributed to the fall. “Deceleration in credit growth to industry was observed in major sub-sectors, barring construction, glass and glassware, beverages and tobacco, and mining and quarrying,” the RBI said. At the same time, priority sector loans by banks rose 1.4 per cent as banks lent more during the period to agriculture and allied activities and low-cost housing, the RBI data showed. http://www.thehindubusinessline.com/todays-paper/bank-credit-up-just-176-in-marchsept-rbi/article6562240.ece
GOVT BANKS RE-EVALUATING ATM CHARGES
Mumbai: Even as State Bank of India, the country’s largest lender, has decided to charge its customers for more than five transactions through automated teller machines (ATMs), private sectors banks continue to be on a wait-and-watch mode. However, following SBI’s decision, some major public sector banks are re-evaluating the cost of ATM transactions and are likely to take a decision on restricting the number of free transactions. Among them is public sector lender IDBI Bank. A senior IDBI bank executive said: “As of now, the bank has not changed the terms for ATM usage though RBI (Reserve Bank of India) permitted us. But it has become an expensive proposition, especially when our customer uses other banks’ ATMs. An internal assessment is underway for taking a call on revising the terms and charges.” IDBI Bank has 2,727 ATMs at the end of September 2014, he added. A Bank of India official also said they have not revised the charges as of now, but they will review the usage pattern and then take a decision accordingly. http://www.business-standard.com/article/finance/govt-banks-re-evaluating-atm-charges-114110400048_1.html
BANK OF INDIA CLOCKS 26% INCREASE IN NET PROFIT
Mumbai: Beating market estimates, Bank of India has posted 26 per cent rise in net profit at Rs 786 crore for the quarter ended September. The bottomline received a boost from expansion in interest income, including that from upgraded accounts and reversals of provisions. Market estimated net profit of Rs 762 crore, according to Bloomberg estimates. The net profit for the second quarter of last financial year (July-September 2013) was Rs 622 crore. Elucidating the rise in net profit, Bank of India (BOI) Chairperson and Managing Director V R Iyer said the bank made substantial recoveries from bad loans and booked interest income for them. Also, prudential provisions made for them were reversed. BOI stock closed flat at Rs 285 on the BSE on Monday. The net interest income (NII), interest earned minus interest expenses, for this quarter rose by 20 per cent to Rs 3,031 crore from Rs 2,527 crore. Its net interest margin (NIM) improved to 2.31 per cent from 2.29 per cent in the second quarter of 2013-14. The non-interest income fell to Rs 1,006 crore from Rs 1,100 crore in July-September 2013. http://www.business-standard.com/article/companies/boi-q2-net-up-26-on-recoveries-reversal-of-provisions-114110301094_1.html
CORPORATION BANK HOPEFUL OF MEETING JAN DHAN TARGET
New Delhi: Corporation Bank is on course to bring about financial inclusion by end-December in the villages and wards earmarked for it under the Jan Dhan Yojana, the bank’s Chairman and Managing Director SR Bansal said. The Finance Ministry had, as part of the Pradhan Mantri Jan Dhan Yojana (PMJDY), earmarked 2,252 villages and 924 wards where financial inclusion ought to be achieved before January 26 next year. “We are confident of covering all the villages and wards earmarked to us by December-end,” Bansal told Business Line. Corporation Bank has already completed a survey of the households in all 2,252 villages and 924 wards (in urban areas), said Bansal, who distributed account opening kits to the scheme’s beneficiaries at Palpa village in Badli, Haryana, on Monday. Till date, Corporation Bank has opened 11.50 lakh PMJDY accounts with total deposits at Rs. 171 crore, Bansal said. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/corporation-bank-hopeful-of-meeting-jan-dhan-target/article6562234.ece
GTL DEFAULT: BANKS STARE AT FRESH NPAs OF Rs 6,000 CR
Mumbai: A series of failed loan recast programmes continues to haunt banks. More than a dozen banks are now staring at Rs 6,000 crore of fresh non-performing assets, as GTL Infrastructure, a Mumbai-based company in the business of shared passive telecom infrastructure in the country, has failed to repay its restructured loans. Sources claimed Indian Overseas Bank, one of the lenders to GTL Infra, had already classified its advances to the firm as NPA; other lenders were expected to follow suit. This is likely to deteriorate the already-stressed asset quality of banks. GTL Infra is the latest addition to banks’ failed loan restructuring programme list, which also includes Vijay Mallya-controlled Kingfisher Airlines. GTL Infra had opted for a corporate debt restructuring in September 2011, with SBI Caps as advisor. Like in the case of Kingfisher Airlines, banks had taken a hair-cut while restructuring their loans to the telecom infra firm. SBI Caps had, in fact, helped GTL Infra raise syndicated loans from a group of banks in June 2010 to pay for Aircel Cellular’s tower business. A year later, the loans were recast as part of efforts to help the company manage a financial crisis. Banks had also converted a portion of the loans into equity as part of the restructuring package. http://www.business-standard.com/article/finance/gtl-default-banks-stare-at-fresh-npas-of-rs-6-000-cr-114110400024_1.html
SBI SEEKS RELIEF FOR POWER & METALS SECTOR FROM RBI
The country’s leading lender State Bank of India has asked the Reserve Bank of India to provide a short-term relief for the stress-hit power and metals industry by relaxing regulatory norms through a special dispensation. In a letter to RBI governor Raghuram Rajan, SBI chairperson Arundhati Bhattacharya pointed out that power and metals firms have been hit by the recent deallocation of operational coal blocks as well as suspension of raw material linkages both due to court and government orders. She said, therefore, the RBI should consider relaxing norms and allowing refinancing of project loans to such firms in such a way that they do not attract restructuring provisions. http://www.financialexpress.com/article/economy/sbi-seeks-relief-for-power-metals-sector-from-rbi/
S&P DOWNGRADES RATING FOR INDIAN OVERSEAS BANK
Global rating agency Standard & Poor’s (S&P) has cut long-term issuer rating for Indian Overseas Bank (IOB) from “BBB-“ to “BB+” on sharp deterioration in the asset quality. The outlook is stable. IOB’s reported non-performing loan ratio rose sharply to 7.3 per cent at the end of September 2014, from 5 per cent as of March 31, 2014. The share of gross standard restructured loans outstanding in IOB’s loan book is also high at 7.85 per cent. S&P in a statement said the asset quality is expected to remain weak over the next 12 months and revised assessment of the bank’s risk position to “weak” from “moderate”. The rating continues to reflect IOB’s “adequate” business position, “moderate” capital and earnings, “above average” funding, and “strong” liquidity. S&P said it still sees a “very high” likelihood that the government of India will provide timely and sufficient extraordinary support if the bank comes under financial distress. http://www.business-standard.com/article/finance/low-asset-quality-pulls-down-iobs-s-p-rating-114110301319_1.html
DCB BANK Q2 NET PROFIT UP 24%
Mumbai: Private sector lender DCB Bank (formerly Development Credit Bank) reported a net profit of Rs 41 crore for the quarter ended September 30, which is higher by 24 per cent as compared to the same period of the previous year. The rise in profit was mainly on account of higher net interest income or the difference between interest earned and interest expended, up 24.5 per cent to Rs 335 crore. “During the quarter, the bank’s interest income included interest on income tax refund of Rs 5 crore and a corresponding tax expense of Rs 1 crore,” the bank said in a release. Net interest margin, a key indicator of a bank’s profitability, was at 3.72 per cent in the second quarter as against 3.68 per cent in the corresponding period of the last financial year. http://www.business-standard.com/article/companies/dcb-bank-q2-net-profit-up-24-114110100715_1.html
LIFE INSURERS’ NEW BUSINESS PREMIUM COLLECTION DIPS 1.75%
Mumbai: New business premium for the life insurance industry declined 1.75 per cent for the half year period ended September 30, according to data released by the insurance regulator. The decline in growth was led by state-owned Life Insurance Corporation (LIC), which saw a fall of 5.4 per cent in its overall new business premium collection to Rs. 35,833.21 crore as against Rs. 37,906.37 crore in the year ag- period. The slide in premium collection was due to the limited number of products in its basket after the new regulatory guidelines came into force in January. Recently, LIC Chairman SK Roy said that at present the company has only 22 products in the market as compared with 60-odd products earlier and was seeking a special dispensation from the regulator for launching new products. Meanwhile, the private life insurance industry saw around 10 per cent growth in premium collection at Rs. 13,344.95 crore as against Rs. 12,150.20 crore. The growth was led, among others, by private life insurers, such as ICICI Prudential Life Insurance, HDFC Life Insurance, Max Life Insurance, Reliance Life Insurance, PNB Metlife and Birla Sunlife Insurance. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/life-insurers-new-business-premium-collection-dips-175/article6562231.ece
WE WANT ULIPS TO FORM 45% OF OUR PORTFOLIO: ARIJIT BASU
Mumbai: Insurance firm SBI Life Insurance has shown growth in both profitability and new business premiums, at a time when the industry has just begun to emerge from the volatile economic condition to show some green shoots. Arijit Basu, MD and CEO, in an interview with M Saraswathy, talks about the importance of bancassurance in the growth and the way forward. Edited excerpts: New business premiums have been an area of concern for the industry. How has your premium growth been steady? We have been doing quite well, with 10-15 per cent growth on an average. This year we have been steady. The second half of the financial year is always the better period for growth and we expect significant growth this year. The economy has started picking up and hence overall, prospects are good. Those issues related to Ulips (unit-linked insurance policies) and the issue of people getting disenchanted with the industry are over. Further, the regime is also stable since the product refiling process is also over. So, on all these counts, it is positive. We are well positioned to keep pace with industry growth from now on. Ulips are back with a bang in the market. Will SBI Life also increase its Ulip portfolio? At end of March, Ulips were 37 per cent of the total portfolio and we want to take it up to 45 per cent. We have achieved 39 per cent at end of September quarter. We would like to cross 40 per cent and be in 40-45 per cent at the end of this financial year. But we would not go up to 70 per cent, like some peers have. However, the overall product acceptance is good. http://www.business-standard.com/article/finance/we-want-to-have-higher-activation-rate-in-sbi-branches-to-grow-our-business-arijit-basu-114110300706_1.html
BANK CREDIT TO NBFCs SHRINKS
Mumbai: Non-banking financial companies’ (NBFCs) credit offtake from banks has declined substantially in September according to data from the Reserve Bank of India (RBI). Credit to NBFCs dropped 4.4 per cent in September this year compared to an increase of 26.6 per cent in the corresponding month last year. Vibha Batra, senior vice-president and co-head of financial sector rating at ICRA, said the shrinkage of credit to NBFCs is driven partly by the slowdown in the business of retail finance companies. If the overall funding requirement is low, then the demand for bank credit (from finance companies) will be less as well. Bank credit to NBFCs during the 12 months ended September 2013 had grown substantially. The finance companies opted to tap for money since coupon rates on money market instruments shot up during July-September 2013 as RBI took steps to curb liquidity in the system. http://www.business-standard.com/article/finance/bank-credit-to-nbfcs-shrinks-114110301363_1.html
UAE EXCHANGE INDIA REVAMPING BUSINESS MODEL
Mumbai: Non-banking financial company (NBFC) UAE Exchange India, hoping to get a banking licence in the next round, has begun changing its business model. Earlier, it had focused the entire business on remittances and foreign exchange services. It is now expanding the reach to focus on small-size loans, to target financial inclusion. This shift was after the company failed to secure a banking licence last year. In that round, IDFC and Bandhan were granted ‘in principle’ approval by the Reserve Bank of India (RBI) to set up a bank. V George Antony, managing director of UAE Exchange India, said after that failure, the company decided an important parameter they were not meeting was financial inclusion. So, it has begun offering small-size personal loans and two-wheeler loans. “The idea of giving personal loans is only for financial inclusion. We have moved into the domestic loan business and are very focused on it. http://www.business-standard.com/article/economy-policy/uae-exchange-india-revamping-business-model-114110400055_1.html
SEBI SEEKS LISTING OF ITS APPLICATION AGAINST SAHARA
New Delhi: The capital market regulator on Monday asked the Supreme Court (SC) to hear its application seeking directions against the Sahara group for the recovery of approximately `47,000 crore owed to investors. Lawyer Pratap Venugopal asked the court to list the Securities and Exchange Board of India’s (Sebi’s) application for hearing.
Justice T.S. Thakur said he would consider the request. The markets regulator, in an application filed on 30 October, sought court directions to be issued to Sahara to sell three overseas assets and a schedule for the payment of some `47,000 crore it owes investors who put money in securities sold by two group firms that the regulator ruled were illegal. It also sought a list of the offers Sahara received for the three properties. http://www.livemint.com/Money/veo4gghjnwB2q7k2vztEDI/Sebi-seeks-listing-of-its-application-against-Sahara.html?facet=print
MUTUAL FUND NAVS GAIN AS MARKETS END FLAT
Equity Mutual Fund NAVs closed in green on Monday as equity benchmarks saw consolidation after hitting record highs in early trade but the Nifty held its 8300-mark. Performance wise all Equity funds across categories including sector space advanced registering only few decline. The index rose 1.95 points to end at record closing high of 8324.15 while the Sensex fell 5.45 points to 27860.38 on profit booking. Meanwhile, the BSE Midcap and Smallcap indices outperformed equity benchmarks, rising 1 percent each. Though it was a consolidation day due to lack of triggers, the market will remain in a positive trajectory, say experts, adding the Sensex may see 28000 level soon. In the fixed income space, all the funds in debt space too ended higher. The 10-year bonds rose for the third consecutive session on Monday, hitting a more than 14-month high on rising expectations of an earlier-than-expected rate cut, but pared some of the gains after the country’s central bank announced an open market debt sale. http://www.moneycontrol.com/news/mf-news/mutual-fund-navs-gain-as-markets-end-flat_1218842.html
RETAIL INVESTORS FLOCK TO MUTUAL FUNDS AGAIN
New Delhi: Mutual funds registered a 4.6 per cent increase in retail folios in the past six months ended September 2014, marking the highest rise since March 2009, according to rating agency Crisil. n In absolute terms this translated to an increase of 16.6 lakh retail folios. The rise in retail folios was led by addition in equity fund folios. n The industry had 3.80 crore retail folios as on September 30, 2014, which is almost 96 per cent of the total folio base (including institutional and high net worth individual or HNI folios) of 3.95 cr folios. n At the aggregate level, mutual fund folios fell marginally due to a decline in high networth investor (HNI) folios. n Of the Rs 1.72 lakh crore of retail investment in equity-oriented mutual funds, Rs 1.10 lakh crore continued for over 24 months. The equity category, which reported a consistent decline in retail folios since the second half of FY11 till September 2014, posted a record addition of 16.89 lakh folios to 2.90 cr folios. Strong rally in the equity market and the consequent rise in investors’ interest led to the sharp increase in retail folios. The CNX Nifty gained 19 per cent in the six months ended September 2014. http://www.financialexpress.com/article/personal-finance/retail-investors-flock-to-mutual-funds-again/
