Hyderabad: Reserve Bank of India (RBI) Governor Raghuram Rajan has said the central bank is in talks with the Centre to set up a financial resolution authority (FRA). “We really need a financial resolution authority so that we can close financial institutions in trouble, without necessarily merging those and taking the losses. We need to clean institutions…while resurrecting those functioning well. FRA will be the entity that will do it,” Rajan said in an hour-long interaction with students of the Indian School of Business here on Thursday. He added RBI was also in discussions with the government about the monetary policy framework, in terms of making the objectives of the central bank more expressive. “One objective could be a specific level of inflation to which it can move. Another could be financial stability. The third objective could be growth. Also, what will be discussed is how to determine this process,” he said. After taking charge of the central bank in September last year, Rajan had set up a committee under Deputy Governor Urjit Patel to review India’s monetary policy framework. Among other things, the panel suggested a shift to a rule-based monetary policy from the current discretionary monetary policy. It also suggested an inflation-targeting framework. The government wants to announce the roll-out of the new monetary policy framework during the announcement of the 2015-16 Union Budget. http://www.business-standard.com/article/economy-policy/rbi-in-talks-with-govt-over-a-financial-resolution-authority-114101601145_1.html
FINMIN CALLS FOR PLAN BUDGET ESTIMATES
In a formal shift of responsibility for determining the annual plan expenditure from the Planning Commission to the finance ministry, the latter has asked all ministries and departments to furnish their Plan Budget estimate for 2015-16 directly to it. Earlier, the proposals used to be sent to the Planning Commission, which vetted these and prepared the annual plan outlay of central ministries and also of state governments. The size was finalised after negotiations between the two bodies. The plan expenditure forms an important part of the government’s annual Budgeted expenditure. Prime Minister Narendra Modi had announced the winding up of the Planning Commission to be replaced with a new body during his maiden Independence Day Speech. Though, the new body has not been constituted it, but the government has in the meantime sought suggestions from general public on the shape of the new body and also held a meeting with eminent economists and thinkers on the same. http://www.business-standard.com/article/economy-policy/finmin-calls-for-plan-budget-estimates-114101700032_1.html
RBI CENTRAL BOARD DISCUSSES BANKING ISSUES
Hyderabad: The Central Board of Directors of the Reserve Bank of India, which met in Hyderabad on Thursday, has reviewed the functioning of the central bank as well as the current economic situation and global and domestic challenges and policy responses. “In particular, the Board reviewed areas relating to payment and settlement system, banking supervision, banking regulation, activities of the financial markets department and the Deposit Insurance and Credit Guarantee Corporation,” a release issued by RBI said. RBI Governor Raghuram Rajan chaired the meet. The board meeting is being held in Hyderabad after a gap of over six years. The last meeting was held on February 8, 2007. RBI Governor Raghuram Rajan chaired the meeting while Directors Anil Kakodkar, Kiran Karnik, Nachikiet Mor, Y H Malegam, G M Rao, Indira Rajaraman and Damodar Acharya attended the meeting. Deputy Governors Harun R Khan, R Gandhi and S S Mundra were also present, according to the RBI release. Governor Rajan came to the city on Tuesday night on a two-day visit. On Wednesday, he met Telangana chief minister K Chandrasekhara Rao and Andhra Pradesh finance minister Yanamala Ramakrishnudu and discussed issues of mutual interest. http://www.business-standard.com/article/finance/rbi-central-board-discusses-banking-issues-114101600862_1.html
RUPEE TUMBLES TO 7-MONTH LOW
Mumbai: The rupee on Thursday plummeted to 61.93 and closed 43 paise down at over a seven-month low of 61.85 against the greenback on heavy capital outflows and a spike in demand for US dollars. The dollar index was up by 0.45 per cent against basket of six major global rivals, which also pushed the rupee to log its biggest daily loss since September 15. A widening trade deficit that hit a 18-month high in September was also among the factors that led to rupee depreciation. At the Interbank Foreign Exchange (Forex) market, the local unit commenced lower at 61.56 and attempted a recovery to touch a high of 61.43. However, it fell back to a low of 61.93 and closed at 61.85, logging a loss of 43 paise. The rupee had last closed at 61.85 to the dollar on March 4. Worries that foreign investors would reduce their exposure are starting to weigh on sentiment, after strong buying in shares and debt had helped support the rupee so far this year. The Reserve Bank of India (RBI) had been active in the market for most of the day, but stepped up intervention as the rupee threatened to breach the 62-mark, traders said. http://www.business-standard.com/article/finance/rupee-tumbles-to-7-month-low-114101700018_1.html
ECONOMIC GROWTH IS PICKING UP, SAYS RAJAN
Hyderabad: Economic growth is picking up and fundamentals of the economy are good, according to Reserve Bank of India Governor Raghuram Rajan. “We are expecting a 5.5 per cent growth this year, which could go up a little more to 6 per cent next year and touch 7 per cent later,” Governor Rajan said in an interaction with students of the Indian School of Business (ISB) here on Thursday. The current account deficit has come down and some pick-up is seen in industrial growth though the shutdown of the Nokia manufacturing unit in Chennai had adversely impacted the Index of Industrial Production to some extent. On sustainability of growth rate and the likelihood of reaching the growth target set by Prime Minister Narendra Modi, he said: “The Prime Minister has an ambitious agenda for India. In the US, I was told by the investors about the buzz he created. The level of expectations is high. But to sustain growth we need to think how to reform the system.” http://www.thehindubusinessline.com/todays-paper/tp-money-banking/economic-growth-is-picking-up-says-rajan/article6508572.ece
PSU BANKS EYE SALE OF FAMILY SILVER TO RAISE CASH
Mumbai: Wary of diluting its grip on some of the lenders — the government is encouraging lenders to sell assets to meet their Basel-III capital needs. State-owned banks, weighed down by bad loans and lacklustre profits, could within months begin the sale of billions of dollars of unwanted assets to help raise cash needed to meet tougher regulation. State-run Central Bank of India could be among the first off the block, according to a tender document for advisors seen by Reuters, which outlines a plan to sell all or part of its home finance unit by the end of December. IDBI Bank Ltd — another state-owned lender which owns stakes in the country’s top stock exchange and rating agency Credit Analysis and Research Ltd (CARE) — could put some of its non-core stakes on the block by March, the bank’s chairman told Reuters. “We are waiting for an opportunity to sell,” IDBI Bank’s M S Raghavan said in a phone interview, referring to the stakes as “family gold”. In the past three decades, Indian banks, often under pressure from a Delhi government wishing to develop markets or encourage home ownership, invested heavily in a network of home lenders, rating agencies and even the country’s largest stock exchanges. http://www.business-standard.com/article/reuters/state-lenders-eye-sale-of-family-silver-to-raise-cash-114101601084_1.html
ANDHRA BANK CHIEF HITS THE STREETS TO BOOST BIZ
Hyderabad: In a novel move, a public sector bank chief went from shop to shop in a business area in a marketing campaign. CVR Rajendran, Chairman and Managing Director, Andhra Bank, along with a team of officials, undertook the exercise, covering over 350 shops/business establishments in a commercial area in Hyderabad. “We have launched a shop-to-shop campaign to market credit and current account facilities among businesses. But as some staff were either shy or slow, I told them I would also join them, and we almost covered every shop, over two hours,” said Rajendran in a chat with BusinessLine. Andhra Bank plans to continue this marketing initiative in important business centres in major cities/towns involving both top executives in the general manager cadre and lower-rung officials. The campaign also doubled up as a customer survey as every businessman was asked details of his bank account, what he expects from his banker, and so on. http://www.thehindubusinessline.com/todays-paper/andhra-bank-chief-hits-the-streets-to-boost-biz/article6508582.ece
DIFFERENT STROKES
New Delhi: Uncertainty at the top hits public sector banks (PSBs) hard, while their private sector peers show why steady leadership has a positive bearing on financial performance. The chairman and managing director’s position in six PSBs continues to be vacant. The lack of steady leadership in almost all PSBs is reflected in their poor return on assets (RoA) and rising bad loans. Of the six banks that currently have their top positions vacant, five have seen a decline in RoA since 2008. But the situation is different in private sector banks that have seen steady management in the past few years. Of the top five private banks, only one has seen a decline in the RoA. Unlike PSBs that have seen a significant rise in non-performing assets (NPAs) in the past six years, the NPA situation have remained either stable or has improved significantly for these private sector banks since 2008. http://www.business-standard.com/article/finance/different-strokes-114101700020_1.html
CAP OF 3 FREE ATM TRANSACTIONS MAY APPLY IN CITIES NEAR METROS
Mumbai: If you are staying in a city abutting one of the six metros then you may not get to enjoy the convenience of five free transactions a month at other bank ATMs in the city of your residence. Reason: banks are planning to consider cities lying on the outskirts of the six metros as part of the metros and rationalise the number of free transactions (from five to three per month) with effect from November 1. In August, the RBI had identified six metros — Mumbai, New Delhi, Chennai, Kolkata, Bangalore and Hyderabad — for the purpose of rationalisation of the number of free transactions for savings bank account customers at other banks’ ATMs. The central bank also said that at other locations — other than the six metro centres mentioned above — the present facility of five free transactions for savings bank account customers will remain unchanged. This reduction will, however, not apply to small / no frills / Basic Savings Bank Deposit account holders, who will continue to enjoy five free transactions. With the RBI asking banks to determine the jurisdiction of the six metros, bankers are of the view that since cities on the periphery of the metros have also seen proliferation of ATMs such areas too should be included within the jurisdiction of metros. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/cap-of-3-free-atm-transactions-may-apply-in-cities-near-metros/article6508566.ece
GROWING FEDERALISM, RISING MIDDLE-CLASS TO HELP SHAPE ECONOMIC POLICIES: S&P
Mumbai: The shift of central policymaking to States and expansion of the middle class are two important trends in India, according to Standard & Poor’s Ratings Services. The scrapping of the Planning Commission is a significant step towards enhancing the autonomy of States, the credit rating agency said in a report published on Thursday. The agency observed that India’s State Governments are on the verge of gaining much more discretion in the use of transfers from the Centre. Standard & Poor’s credit analyst Joydeep Mukherji said, “Fiscal decentralisation should result in more competition between States in attracting investment and promoting growth, setting the stage for further economic reform and modernisation.” The Government has reduced the number of centrally-sponsored schemes and given States more flexibility in using the money in those schemes. S&P said a bulging young lower-middle income group in large and small cities, with strong aspirations for upward mobility, has swelled the middle class in India. Poor GDP growth of recent years has made the middle class more favourable toward economic reforms, which they increasingly see as necessary for rapid economic expansion and their own continued prosperity. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/growing-federalism-rising-middleclass-to-help-shape-economic-policies-sp/article6508571.ece
AXIS BANK REDUCES BASE RATE BY TEN BASIS POINTS
Mumbai: Axis Bank, India’s third-largest private sector lender, has reduced its base rate by 10 basis points (bps) to 10.15 per cent on the back of a decline in cost of funds. The move comes despite the Reserve Bank of India (RBI) deciding to hold interest rates in the past four policy reviews, the last one being in September. Sidharth Rath, president (treasury, business banking and capital markets) at Axis Bank, said: “The bank has reduced the base rate by 10 bps as the cost of fund has eased due to softening of interest rates based on improving liquidity and other macroeconomic developments.” After a spell of tight liquidity in July and August, liquidity has eased considerably as the government started spending, while loan demand has remained muted. Several other banks have also been reducing their corporate bulk deposit rates because of the comfortable liquidity situation in the market. Base rate is the benchmark rate that all loan rates are linked to. A cut of 10 bps in base rate will lead to the reduction in all other lending rates – such as that of home loan and auto loan – by a similar quantum. According to RBI data, credit grew by a mere 11 per cent for the year till October 3, which was above 16 per cent in the previous year. http://www.business-standard.com/article/finance/axis-bank-reduces-base-rate-by-ten-basis-points-114101600801_1.html
CHINESE WALLS EXIST BETWEEN DIFFERENT BUSINESSES: KOTAK
Mumbai: The Kotak Mahindra Group on Thursday said that its personal loan business was independent from other companies in the group, including its investment bank, and that personal loans given to DLF executives did not require any end-use specification. The statement is in response to a Business Standard query regarding the observation made by the Securities and Exchange Board of India on Friday that the bank (group entity, Kotak Mahindra Capital, was one of the managers to the DLF public issue in 2007) had given personal loans of Rs 20 lakh each to eight DLF executives whose wives used the money to buy the holdings of DLF’s subsidiaries in three other subsidiaries – Sudipti, Felicite and Shalika – around the time of DLF’s initial public offer in 2007. “Given that the bank has a number of subsidiaries involved in different business operations, the bank had clearly defined Chinese walls between companies of the group”, a bank spokesperson said in a written statement. The spokesperson said Kotak Mahindra Capital Company, the investment banking subsidiary, was part of a consortium of eight merchant bankers who were book running lead managers on the issue. The consortium carried out independent due diligence on the company and adopted best practices and international standards of diligence. Disclosures made in the prospectus were in full compliance with regulations. http://www.business-standard.com/article/finance/chinese-walls-exist-between-different-businesses-kotak-114101700019_1.html
FEDERAL BANK NET UP 6.4%, AS PROVISIONING UP
Mumbai: Private lender Federal Bank had a net profit of Rs 240 crore in the July-September quarter, a rise of 6.4 per cent from the Rs 226 crore in the same quarter last year. An increase in other income and net interest income (NII) was offset by a rise in provisioning. The bank provided for Rs 45.7 crore as compared with a writeback of Rs 4 crore in the same period a year before. NII grew 10.5 per cent to Rs 606 crore from Rs 548 crore in the year-ago period. Deposit growth was 13.7 per cent. Non-interest income rose 36.6 per cent to Rs 196 crore from Rs 143 crore a year before. Net interest margin improved by five basis points (bps) to 3.35 bps per cent from 3.3 per cent in the same period last year. Gross non-performing assets (NPAs), as a percentage of total advances, was 2.1 per cent as compared with 3.39 per cent in the corresponding period a year before. The net NPA ratio fell 32 bps to 0.66 per cent from 0.98 per cent in the quarter last year. Fresh slippages were Rs 174 crore as compared to Rs 224 crore in the June quarter. http://www.business-standard.com/article/companies/federal-bank-net-up-6-4-as-provisioning-up-114101601027_1.html
DCB BANK RAISES RS. 250 CR VIA QUALIFIED PLACEMENT
Mumbai: DCB Bank (formerly Development Credit Bank) raised about Rs. 250 crore of Tier I capital through a recently concluded qualified institutions placement (QIP). The board of directors of DCB Bank had approved the issue and allotment of 3.04 crore equity shares of face value Rs. 10 each to eligible qualified institutional buyers (QIBs) at the issue price of Rs. 82.15 an equity share, aggregating to approximately Rs. 250 crore.
In a notice to BSE and NSE, the DCB Bank said consequent to the issue and allotment of the equity shares through the QIBs, its paid-up equity share capital stands increased to Rs. 281.20 crore divided into 28.12 crore equity shares of face value Rs. 10 each, up from the pre-QIP paid-up equity share capital base of Rs. 250.77 crore divided into 25.07 crore equity shares of face value Rs. 10 each. As of June 30, 2014, DCB Bank’s Capital Adequacy Ratio (CAR) was 13.63 per cent (of which Tier I capital was 12.77 per cent and Tier II at 0.86 per cent according to Basel III norms). This does not consider the impact of the QIP. As a result of the QIP, the shareholding of DCB Bank’s promoter will be reduced to approximately 16.43 per cent from 18.45 per cent as of June 30, 2014. Murali Natrajan, Managing Director & CEO of DCB Bank, said, “The capital raised will certainly help DCB Bank execute plans for growth in the near future. We are mindful of the responsibility to ensure secure and stable growth of the bank.” http://www.thehindubusinessline.com/todays-paper/tp-markets/dcb-bank-raises-rs-250-cr-via-qualified-placement/article6508595.ece
UK HEDGE FUND EXITS COAL INDIA
Calcutta: UK-based hedge fund The Children’s Investment (TCI) Fund Management LLP has offloaded its entire stake in Coal India, four years after picking up shares at the maiden offer of the state-run miner. A CIL executive, requesting anonymity, said TCI had been gradually lowering its stake in CIL and held around 1.6 lakh shares before selling it off. At the current market price, the sale is likely to have fetched TCI over Rs 5 crore. With TCI’s exit, the Life Insurance Corporation (LIC) has become a prominent investor in Coal India after the central government. While the government holding at the end of the September quarter was 89.65 per cent, the LIC had a 2.33 per cent stake. http://www.telegraphindia.com/1141017/jsp/business/story_18935311.jsp#.VECruEGDxkg
SEBI ORDER TO HIT DLF’s DEBT REDUCTION PLANS
Mumbai: Real estate major DLF’s wait to cut its debt could get longer because of the recent order by the Securities and Exchange Board of India (Sebi) banning the former from capital markets for three years. Early last year, DLF had said it would reduce debt, which at that time stood at Rs 21,000 crore, to Rs 10,000-11,000 crore. In May this year, the company said its plans to cut debt would be delayed by two years, owing to subdued market conditions. According to analysts, this is now set to be delayed further. Besides, the company’s debt might also go up, given the current market conditions. “The capital market ban could hurt DLF either in terms of delayed pace of construction at its projects or rising indebtedness over the course of the next three years,” said Krishnan A S V, an analyst with Ambit Capital, in an October 14 report. DLF’s net debt stood at Rs 19,064 crore as of June 30. Another analyst, Adhidev Chattopadhyay of HDFC Securities, said: “Markets have already factored in that the debt of the company will go up. The debt will keep on rising unless they (DLF) make new launches, and the market recovers.” An email questionnaire to DLF did not elicit any response. A company source said the firm would look at new launches and sell non-core assets to reduce debt. Bankers as well as analysts indicated that the realty major would have to face higher cost of debt if rating agencies downgrade the company’s debt. On Wednesday, CRISIL placed DLF’s bank debt and non-convertible debentures under “rating watch with negative implications”. http://www.business-standard.com/article/companies/sebi-order-to-hit-dlf-s-debt-reduction-plans-114101700013_1.html
QUESTIONS ARISE OVER ICICI’S TAKEOVER OF BANK OF RAJASTHAN
New Delhi: The Securities and Exchange Board of India (Sebi) had changed its mind on the treatment of ICICI Bank shares that came into the accounts of promoter group entities of Bank of Rajasthan (BoR), led by Pravin Kumar Tayal, following the merger of the two entities in 2010. In August 2010, it had taken a view that the merger would not affect the ban on the promoter group entities from the securities market. Nearly two years later, it said as the merger had been approved by the Reserve Bank of India (RBI), the promoters could be allowed to sell these shares. RBI spoke to Sebi before giving its approval to the merger, in August 2010. The central bank approved it only after Sebi had clarified that the ban on the promoter group entities of BoR would continue to apply with respect to the ICICI Bank shares these would receive as a result of the merger process. The Sebi volte face, which emerges from documents accessed by Business Standard, throws fresh light on the merger, now a subject of a Central Bureau of Investigation (CBI) inquiry and court cases. http://www.business-standard.com/article/finance/questions-arise-over-icici-s-takeover-of-bank-of-rajasthan-114101600931_1.html
