Mumbai: After years of regulatory dithering, foreign and domestic institutions might look forward to entry into the commodity derivatives market. The Reserve Bank of India (RBI) and the Forward Markets Commission (FMC) are meeting next week to consider the proposal, suggested by a sub-committee of the Financial Stability and Development Council. Allowing domestic financial institutions such as banks and mutual funds was made by the commodities markets regulator many years earlier. The FSDC sub-committee has gone a step forward by suggesting even foreign companies and foreign institutional investors (FIIs) be allowed in commodities derivatives. The suggestion was made at a meeting in August, the abridged details of which were released by RBI on Monday. FIIs, banks and other financial institutions are presently allowed in all financial derivatives such as currencies and equities but not in commodities. Samir Shah, managing director of the National Commodities and Derivatives Exchange said it had been asking for allowing foreign traders active in India’s physical commodities market to hedge their risk on commodity exchanges. http://www.business-standard.com/article/finance/rbi-fmc-to-discuss-entry-of-foreign-domestic-institutions-in-commodity-futures-114102001354_1.html
RBI WILL NOT CHANGE GOLD IMPORT RULES – SOURCES
NEW DELHI: The Reserve Bank of India (RBI) will not change its gold import rules, sources with knowledge of the matter said, responding to a report that the world’s second-largest consumer of the precious metal was keen to limit imports. The RBI has already eased some import controls by allowing seven trading houses to import the metal, driving a sharp jump in overseas buying despite a record import duty of 10 percent. A surge rise in gold imports widened the trade deficit to an 18-month high of $14.25 billion in September, creating concerns for the government of Prime Minister Narendra Modi, an unidentified Finance Ministry official told the Economic Times newspaper. The ministry also sent a letter to the central bank seeking a review of the May relaxations, according to the report. But two officials familiar with the RBI’s policies told Reuters on Monday it was not considering any change. The Finance Ministry could not be reached for comment. http://in.reuters.com/article/2014/10/20/india-gold-imports-idINKCN0I91BE20141020
RUPEE GAINS, BOND YIELDS FALL DUE TO POLL RESULTS, OPTIMISM
Mumbai: The rupee gained on Monday, after the Bharatiya Janata Party (BJP)’s success in two state elections and the government’s removal of diesel subsidies and an increase in natural gas prices sparked hopes for further reforms. Government bond yields fell to a one-year low on expectation that the removal of diesel subsidies and rise in natural gas prices would help reduce fiscal subsidies. The rupee ended at 61.36 to the dollar, compared with the previous close of 61.44. During intra-day trade, it touched a high of 61.18. It had opened at 61.21. The yield on the 10-year benchmark bond ended at 8.36 per cent, compared with the previous close of 8.39 per cent. The yield had ended at 8.19 per cent on September 19, 2013. On Saturday, the government lifted diesel price controls and raised the cost of natural gas, giving market forces greater sway. Prime Minister Narendra Modi’s BJP also made big elections gains in Maharashtra and Haryana, an endorsement likely to encourage him to step up the pace of economic reforms. “For the rest of the month, the rupee might trade in the range of 61.10 to 61.90. http://www.business-standard.com/article/finance/rupee-gains-bond-yields-fall-due-to-poll-results-optimism-114102000973_1.html
LOAN RECAST HINGES ON COAL SUPPLY TO STEEL, POWER SECTORS
Mumbai: The government’s decision to revive the process of allocation of coal blocks notwithstanding, banks might still have to recast their loans if users of coal are unable to start production and repayment of dues by March next year. This is because, from April 1, banks have to treat all restructured loans as non-performing assets (NPAs) in terms of provisioning, according to Reserve Bank of India (RBI) norms. According to industry estimates, about Rs 3 lakh-crore bank funding is stuck in several companies, which are into infrastructure development, due to deallocation of the coal blocks by the apex court. “This is a welcome decision, as it removes uncertainty. However, it remains to be seen how soon can steel and power producers could get the input and start production. If the process takes time, we have to recast the debt by the end of the financial year,” said a senior banker. Restructuring of standard assets requires provisioning of five per cent. From April 1 next year, banks have to provide at least 15 per cent for debt recast, in line with provision required for sub-standard assets. http://www.business-standard.com/article/finance/loan-recast-hinges-on-coal-supply-to-steel-power-sectors-114102100041_1.html
NO PLAN TO BRING PSBS UNDER COMPANY LAW: SANDHU
New Delhi: The Centre is not planning to bring public sector banks (PSBs) within the ambit of the new Company Law for now, a top Finance Ministry official has said. There is no immediate plan to repeal the existing statutes governing PSBs and incorporate the banks as companies, GS Sandhu, Financial Services Secretary told Business Line. Currently, almost all but two PSBs are operating under a statute, which is popularly known as the Bank Nationalisation Act. The RBI-appointed PJ Nayak Committee, which reviewed the governance of the Boards of banks in India recommended that existing statutes under which PSBs were constituted be repealed and banks be incorporated as companies. The Panel had recommended that once banks are incorporated as companies, the Government’s shares in them will be transferred to a Bank Investment Company (BIC). Sandhu said the immediate priority of the Government will be to allocate Rs. 11,200 crore as capital promised to PSBs in Budget 2014-15. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/no-plan-to-bring-psbs-under-company-law-sandhu/article6520845.ece
BANKS URGED TO FOCUS ON CAPITAL SAVINGS
New Delhi: As the owner and the single largest shareholder of public sector banks (PSBs), the Government is now flexing its muscles to ensure that PSBs optimally use their capital. Setting the tone clearly, the Finance Ministry has shot off a letter to chief executives of all public sector banks, asking them to “strive hard” to achieve the targeted objectives set out in the memorandum of understanding (MoU) signed with the Central Government in 2011-12. The banks have been asked to “pull up their socks” during the residual one-year period of MoU, as the achievements so far have been “below par”, official sources said. The objective of the five-year MoU is to improve long-term profitability, quality of assets and optimum utilisation of capital, a scarce resource. The Department of Financial Services (DFS) has now suggested five areas through which banks can strengthen their internal processes and generate additional capital savings in the near-to-medium term. These areas are capital release through risk weighted assets reduction, deploying more stringent risk-based pricing, strengthening performance management, capacity building of key bank staff and review of all subsidiaries/JVs of the bank. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/banks-urged-to-focus-on-capital-savings/article6520846.ece
IDBI BANK RAISES RS 2, 500 CR CAPITAL VIA AT-1 BONDS
Mumbai: Public sector lender IDBI Bank has raised Rs 2,500 crore through Basel-III-compliant additional Tier-I (AT-I) bonds to enhance its capital adequacy. The coupon (interest rate) for AT-I bonds is 10.75 per cent payable annually. The Mumbai-based bank is also in the international market to raise up to $500 million through five-year bonds. It will use the money for off-shore lending to customers. The bank, in a statement, said the size of its Basel-III-compliant AT-I bonds was Rs 1,500 crore, with an option to retain over-subscription up to Rs 1,000 crore. The issue — which opened on September 29 — received an overwhelming response and has been fully subscribed. The bonds are rated AA (high safety) by CRISIL. This was the first AT-I bond issuance by a bank in India, after the Reserve Bank of India modified its Basel-III guidelines on September 1. Basel-III is an international norm on capital preservation that all Indian banks must adhere to fully by March 2019. M S Raghavan, chairman and managing director, IDBI Bank, said this issuance will pave the way for other banks to issue Tier I bonds in the domestic market. Axis Bank Ltd, Darashaw & Co. Pvt. Ltd, ICICI Bank Ltd, Trust Investment Advisors Pvt. Ltd and IDBI Capital Market Services Ltd acted as the arrangers to this issue. http://www.business-standard.com/article/finance/idbi-bank-raises-rs-2-500-cr-capital-via-at-1-bonds-114102000761_1.html
CORPORATION BANK LAUNCHES E-MANDATE SERVICE
Mangalore: To provide a robust platform for large volume of repetitive payments, Corporation Bank has launched the e-Mandate (digital mandate) service. A release by the bank said on Friday that the e-Mandate service can be used by utility companies for monthly subscriptions/ bill payments; insurance companies for premium payment by policy holders; NBFCs and other finance companies for instalment payments; education institutions for school fee payment; and manufacturing companies. Currently, most of these transactions are done either through post-dated blank cheques or through Electronic Clearing Services (ECS). The activities under e-Mandate include collection of mandate, and scanning and uploading of scanned image to NPCI (National Payments Corporation of India). The company will collect the duly signed mandate from their customers in the NPCI-specified format and deposit with Corporation Bank. The bank will scan and capture the details and upload these to the NPCI with image and mandate data. The release said that NPCI will create a Unique Mandate Reference No (UMRN) and forward the image to the destination bank (the account holder’s bank) for acceptance. The destination bank will verify the signature of the account holder against the signature on the mandate form. NPCI, along with UMRN, willsend the final status of acceptance by the destination bank branch within five days to Corporation Bank.Customers will be provided with MIS on successful transactions/ mandate registration, returns/ rejection with reason in the desired format. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/corporation-bank-launches-emandate-service/article6520844.ece
YES BANK PLANS TO ENTER CREDIT CARD BUSINESS
Mumbai: In a bid to strengthen its retail credit portfolio, private sector lender YES Bank is looking at entering the credit card business. “Credit card is one thing that is missing in our portfolio and we would surely like to enter that. But launching a credit card business takes a minimum of eight-ten months as there are lots of things such as underwriting, marketing etc that one needs to take care of,” said Pralay Mondal, senior group president-Retail & Business Banking. The new generation private sector lender, which started its operations in 2004, has a customer base of 1 million and would look at launching its credit card business once the customer base hits the 1.5-million mark. The bank has been focusing on customer acquisitions aggressively and is confident of reaching the mark soon. Mondal said the bank would be focusing on starting the credit card business organically instead of taking the inorganic route. “There are not very good opportunities present in the market now. And we believe that it is better to grow the business slowly and steadily. So even after entering, we would like to focus on giving unsecured credit only to our internal customer.” The bank has working at growing its retail business mix. Currently, retail contributes to 43 per cent of the total business. Mondal believes it is likely that the retail mix can increase to 50 per cent in two years. http://www.business-standard.com/article/finance/yes-bank-plans-to-enter-credit-card-business-114102001003_1.html
YES BANK RAISES $422 MILLION BY DUAL CURRENCY LOAN FACILITY
Mumbai: Private sector Yes Bank today said it has raised $422 million by way of dual currency multi-tenor syndicated loan facility. The amount, a combination of $288 million and 103.5 million euro, shall be utilised for general corporate purposes, the bank said in a statement. The private lender, however, did not specify the coupon for the issue. The loan facility has a maturity of one, two and three years. “This is a significant commitment from global banks, reinforcing our differentiated business and financial model as well as reflecting faith and trust reposed in the bank,” said Managing Director and CEO Rana Kapoor. The facility was launched in August this year as $275 million plus a green shoe option. The bank decided to close the book once it crossed the $400 million mark, which was within the comfort level of the green shoe amount. The loan has received commitments from 21 banks, representing 14 countries across the US, Europe, Africa, West Asia, Japan, Taiwan and Australia, with larger commitment coming in the two and three year tranches, the statement said. http://www.business-standard.com/article/pti-stories/yes-bank-raises-usd-422-mn-by-dual-currency-loan-facility-114102000777_1.html
IRDA ASKS SBI LIFE TO COMPLY WITH PRIOR ORDER ON PENALTY PAYMENT
Mumbai: Insurance Regulatory and Development Authority (Irda) on Monday rejected an appeal by SBI Life Insurance Company and ordered it to pay Rs 84.31 crore to its group insurance members/beneficiaries. Irda asked the company to distribute wrongful payments of Rs 84.31 crore to the members/beneficiaries of respective group insurance policies. In October 2012, Irda had ordered SBI Life to distribute the wrongful payments made to some of its master policyholders. In June 2008, an onsite inspection carried out at SBI Life found that the company had paid Rs 204.71 crore to 14 master policyholders flouting norms. In 2011, the regulator had levied on SBI Life a fine of Rs 70 lakh. In 2012, the regulator ordered the life insurer to distribute Rs 84.31 crore to the members/beneficiaries of the respective group insurance policies. Irda had asked them to identify the members/beneficiaries as the case may be of each Master Policy against which the Life Insurer has reimbursed the administrative expenses as a percentage of premium. Further, they had asked them to distribute the wrongful administrative charges paid, amongst the respective members/beneficiaries of each Master Policy by way of refund to the respective members/beneficiaries. SBI Life had made a submission to the authority post this. However, Irda has said that they did not find any mitigating factors to consider either in the submissions made in the personal hearing or in the representation preferred under the Act and therefore the representation preferred under the Act is rejected and accordingly disposed off. SBI Life has been directed to immediately implement the directions and submit a compliance report within thirty days from the date of this letter. http://www.business-standard.com/article/finance/irda-asks-sbi-life-to-comply-with-prior-order-on-penalty-payment-114102001092_1.html
CORPORATE BOND ISSUANCE AT 7-YEAR HIGH IN SEPT
Mumbai: Corporate bond issuances through the private placement route touched the highest in the past seven financial years in September, owing to a fall in borrowing costs, comfortable liquidity and bond buying by foreign institutional investors (FIIs). The latest data from the Securities and Exchange Board of India (Sebi) show companies raised around Rs 58,000 crore in September through private placement of bonds, the highest raised in a single month since FY08. According to estimates of issue arrangers, the borrowing cost of bonds dropped by 40 basis points in September, which encouraged corporates to resort to bond raising. The coupon rate for these bonds works out to be 9-10 per cent depending on the credit rating of the corporate. A senior official with IFCI said: “We can borrow through corporate bonds for a longer tenure. This allows me to have a comfortable position with respect to asset-liability. When it comes to borrowing through bonds, the coupon payments are usually semi-annual or annual. In case of bank loans, we have to pay interest monthly.” IFCI’s public issue of bonds opened on Monday and the company plans to raise up to Rs 2,000 crore. IFCI bonds are available in the tenures of five, seven and 10 years, while the coupon rate per annum ranges between 9.40 per cent and 9.90 per cent. http://www.business-standard.com/article/finance/corporate-bond-issuance-at-7-year-high-in-sept-114102100027_1.html
SKS MICROFINANCE Q2 PROFIT DOUBLES
Hyderabad: SKS Microfinance’s standalone net profit more than doubled at Rs. 57 crore in the second quarter ended September 30 against Rs. 16.34 crore in the corresponding quarter of previous financial year. The total revenue increased to Rs. 190 crore ( Rs. 130 crore). The company’s scrip zoomed 8.8 per cent to close at Rs. 312.80 on the BSE on Monday. Its portfolio excluding Andhra Pradesh and Telangana increased 50 per cent to Rs. 3,043 crore from Rs. 2,029 crore in the same period last year, according to a release. The loan disbursements too, registered a 73 per cent growth to Rs. 1,693 crore ( Rs. 978 crore). This led to 63 per cent growth in the net interest income at Rs. 110 crore. As of September 30, SKS had a net worth of Rs. 951 crore and capital adequacy of 33.2 per cent without the Reserve Bank of India dispensation on the Andhra Pradesh and Telangana provisioning. Cash and cash equivalents (excluding security deposit) stood at Rs. 530 crore. The un-availed deferred tax benefit of Rs. 522 crore will be available to offset tax on future taxable income. http://www.thehindubusinessline.com/todays-paper/tp-news/sks-microfinance-q2-profit-doubles/article6520887.ece
LOWER LOAN MARGINS POSITIVE FOR HOUSING FINANCE COMPANIES
The decision by the National Housing Bank (NHB) to permit home loan borrowers to bring in just 10 per cent as upfront payment for loans above Rs. 20 lakh will give a boost to big-ticket loans. The rider that such loans should have a mortgage guarantee cover from a registered company is not expected to be a deterrent as Housing Finance Companies (HFCs) would have tie-ups with a mortgage provider for extending the cover. In an interview to BusinessLine , Deo Shankar Tripathi, President & COO, Dewan Housing Finance Corp (DHFL), says the move would result in uniformity in lending and help borrowers of high-value loans. Edited excerpts: How do you view NHBs’ decision to relax the norms for home loans borrowers from HFCs? Under the earlier rule, borrowers had to bring in 10 per cent for loans up to Rs. 20 lakh, 20 per cent for loans over Rs. 20 lakh to Rs. 75 lakh, and 25 per cent for loans beyond Rs. 75 lakh. This has now been rationalised and for all loans and the minimum upfront payment by the beneficiaries is 10 per cent. However, this comes with a stipulation that for loans higher than Rs. 20 lakh, there should be a mortgage guarantee cover given by an authorised agency. (India Mortgage Guarantee Corporation is the only registered mortgage guarantee company at present). This move by the regulator has brought in uniformity for all customers to get home loans up to 90 per cent, subject to their being eligible. This is a welcome move which will certainly benefit borrowers who find it difficult to contribute 20-25 per cent of the cost from their own sources. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/lower-loan-margins-positive-for-housing-finance-companies/article6520847.ece
THE DLF-SEBI TIMELINE, STARRING ROBERT VADRA
The shares of property developer DLF listed on the bourses in July 2007. Seven years and three months later, the Securities and Exchange Board of India (Sebi) barred the company and promoters for three years from the exchanges. A closer look at the timeline shows how the case ran parallel to the rise of UPA chairperson Sonia Gandhi’s son-in-law Robert Vadra’s real estate interests. Vadra launched Skylight Hospitality four months after the DLF shares got listed, amid complaints of inadequate disclosure from investor associations and former business partner Kimsuk Krishna Sinha. Skylight’s first deals were inked even as the Delhi high court was in the process of hearing Sinha’s writ. The case took a ‘long and arduous’ route, even as the association between the realtor and the son-in-law solidified in the form of joint ventures and luxury residential projects. When the mother-in-law’s party was voted out of power, the son-in-law’s ‘friends’ began facing the heat, with the killer blow coming on the eve of another crucial poll. Street Food brings you some important dates from information in the public domain. http://www.business-standard.com/article/markets/the-dlf-sebi-timeline-starring-robert-vadra-114102000828_1.html
