MUMBAI: At one of the customary premonetary policy meetings with industry, former Reserve Bank of India governor Duvvuri Subbarao wanted to know how many of those present would benefit from an interest rate cut. Almost all hands went up. The next question was how many would pass on the lower cost to customers. Almost no one raised their hands. Subbarao kept interest rates unchanged. The voice of industry, which is always seeking a cut in the cost of funds, is getting louder again, thanks to both consumer and wholesale price readings dropping to record lows in September. It’s natural that governor Raghuram Rajan, who has made it his mission to bring inflation as measured by the consumer price index permanently under 6 per cent, will be under greater pressure to cut rates. But will he budge at the next monetary policy announcement, scheduled to be made on December 2? It seems unlikely. Easing price pressures may be a lot more sustainable than in the past given that most commodity prices are in the grip of a bear market. Crude oil is down nearly a fourth, while iron ore and coal have nearly halved from recent peaks. Apart from bringing down inflation, this is boosting the profitability of companies. But the central bank believes companies are not doing enough to alleviate price pressure. RBI may look to companies to slash prices before lowering rates “Beyond a point, once the bottom line gets hit, the corporates also price their product in such a way that they prefer cutting down on their production rather than compromising on price,” RBI executive director Deepak Mohanty told analysts recently. http://economictimes.indiatimes.com/articleshow/44865250.cms
ARUN JAITLEY CITES TAX PACT WITH GERMANY TO BUTTRESS GOVT STAND
New Delhi: On a day when the government told the apex court that it can’t make public information on black money stashed by Indians in foreign banks because tax treaties with the countries constrain such revelation, and came under attack by the Opposition for its “reluctance” to fulfill a poll promise in this regard, finance minister Arun Jaitley said the government indeed had no difficulty in divulging the information provided due process of law was followed. He cited the Double Tax Avoidance Agreement signed between India and Germany in June, 1995, “when a Congress government was in power” for its inability to reveal details of doubtful financial accounts held by Indians in overseas banks until and unless charges have been filed in Indian courts. Claiming a breakthrough with the Switzerland authorities on them sharing with New Delhi details of Indians’ accounts in Swiss banks, the holders’ names were obtained by India earlier, Jaitley said, adding the Swiss government would now give details of the accounts on which India has conducted investigation and gathered independent evidence but require information from the European country for completing the due process. “The absolute prohibition (with regard to revealing of information) by Swiss authorities no longer exists,” the minister said. http://www.financialexpress.com/news/arun-jaitley-cites-tax-pact-with-germany-to-buttress-govt-stand/1299503
DEFENSIVE JAITLEY SAYS WILL GIVE NAMES AFTER CHARGES ARE FILED
New Delhi: Under fire from various quarters for toeing the UPA’s line on black money (which the BJP had attacked when in Opposition), Finance Minister Arun Jaitley on Friday said the Government would make public the names of people having black money stashed abroad once charges were filed against them in court. Jaitley’s statement came after the Government filed this clarification in a black money case being heard in the Supreme Court, following which Opposition parties and people on social media slammed the Government, alleging that it was singing the same tune as the previous Government. The issue trended heavily on social media, forcing the Government to call in the Finance Minister for a fire-fighting operation though he has been operating from home following a surgery. “We will make the names public only in accordance of law as we are bound by treaties,” Jaitley said in a hurriedly-called press briefing late in the evening at his residence. He said the tax pact signed by the then Congress Government with Germany on June 19, 1995 was constraining the Centre from declaring the names of persons having black money accounts overseas. Based on this treaty, the German Government has raised objections on making public the names of Indian accountholders in LGT Bank, Liechtenstein, he said. http://www.thehindubusinessline.com/todays-paper/defensive-jaitley-says-will-give-names-after-charges-are-filed/article6513191.ece
INDIA’S FOREX RESERVES NEAR 4-MONTH LOW
Mumbai: The country’s foreign exchange reserves fell to near four-month low for the week-ended October 10, show data released by the Reserve Bank of India (RBI) on Friday. During the week under review, reserves fell $1.31 billion to $312.74 billion. Reserves stood at $312.59 billion in the week-ended June 6. Foreign currency assets, a key component of reserves, fell $1.30 billion to $286.89 billion. However, gold reserves remained unchanged during at $20.01 billion. The Special Drawing Rights (SDRs) fell $9.3 million to $4.29 billion, while the country’s reserve position with the International Monetary Fund was down $3.3 million to $1.54 billion. http://www.business-standard.com/article/finance/india-s-forex-reserves-near-4-month-low-114101800035_1.html
RUPEE SEEN STABLE DUE TO EASING CONCERNS OF INTEREST RATE HIKE BY US
Mumbai: After recovering from a seven-month low, the rupee is set to stabilise in the near-term because of easing concerns of an interest rate hike by the US. According to experts, the rupee might trade in the range of 59-62 in the near-term, and 61-62 for the week ahead. According to St Louis Federal Reserve Bank president James Bullard, the US should delay the plan to end its bond-buying programme, amid concerns that slowing growth in the rest of the world will weigh on recovery in the US. The Federal Open Market Committee is expected to wrap-up the bond-buying programme at its next meeting to be held later this month. The programme, which once stood at $85 billion, now stands at just $15 billion. “If the US delays its interest rate hike, then foreign flows will keep coming to India and that will support the rupee. Besides that, even the Reserve Bank of India (RBI) is supporting the rupee through its intervention strategy,” said the head of treasury at a state-run bank. On Thursday, the rupee had ended at a seven-month low owing to widening of trade deficit. Trade deficit widened to $14.25 billion in September following a jump in oil and gold imports. On Friday, the rupee rose the most in two months, even as investors pushed back bets for a hike in interest rates in the US. The rupee ended at 61.44 to a dollar, compared to the previous close of 61.85 against the greenback. The rupee had opened at 61.69 on Friday and, during intra-day trades, it touched a high of 61.42. http://www.business-standard.com/article/finance/rupee-seen-stable-due-to-easing-concerns-of-interest-rate-hike-by-us-114101701035_1.html
S&P KEEPS RATING ON IDBI BANK INTACT
Mumbai: Standard & Poor’s Ratings Services on Friday said its rating on IDBI Bank (BB+/Stable/B) is not immediately affected by the bank’s recent issue of Rs. 2500 crore in Basel III compliant hybrid Tier-1 capital. According to the credit rating agency ‘BB+’ rating is considered highest speculative grade by market participants. “We believe this is credit positive because IDBI’s pre-diversification risk adjusted capital (RAC) ratio in fiscal 2015 (year ending March 31) could rise above 7 per cent, which we generally consider to be adequate capitalisation. “However, we do not expect IDBI’s RAC ratio to stay above 7 per cent in fiscal 2016 because the bank’s internal accruals are likely to be low to support growth,” the agency said in a statement. Standard & Poor’s currently views the bank’s capitalisation as moderate. The agency pointed out that it could upgrade IDBI if the bank raises further capital such that it expects the RAC ratio to remain above 7 per cent, and the bank improves the quality of its capital and earnings. In line with its criteria, S&P is likely to attribute equity benefits to IDBI Bank’s issue because it is perpetual in nature and has loss-absorbing features. The rating on IDBI continues to reflect the “very high” likelihood of government support for the bank and its satisfactory business and geographic diversification. http://www.thehindubusinessline.com/todays-paper/tp-news/sp-keeps-rating-on-idbi-bank-intact/article6513231.ece
AXIS BANK Q2 NET RISES 18% ON INCOME GROWTH
Mumbai: Axis Bank, the country’s third largest lender, reported 18 per cent increase in net profit for the second quarter ending September 30, at Rs. 1,611 crore. Net interest income (difference between interest earned and expended) rose 20 per cent to Rs. 3,525 crore during the period, while other income grew 10 per cent to Rs. 1,948 crore. “Growth in net interest income and non-interest income led to the growth in net profit during the second quarter,” said Sanjeev K. Gupta, Executive Director and CFO, Axis Bank. Total advances grew 20 per cent year-on-year to Rs. 2.42 lakh crore on the back of 27 per cent rise in retail advances. On the other hand, total deposits increased 11 per cent to Rs. 2.84 lakh crore. “We expect deposit growth to be about 13-14 per cent, while credit growth to be at 20 per cent going forward,” Gupta said. The bank’s gross non-performing assets (NPAs) worsened to Rs. 3,613 crore (1.34 per cent of total advances) as on September 30, 2014 as against Rs. 2,734 crore (1.19 per cent) as on September 30, 2013. “The NPAs were largely from the mid-corporate segment, largely from three to four sectors,” Gupta said. The bank restructured assets worth Rs. 570 crore in the reporting quarter, with total restructured assets (at Rs. 6,690 crore) constituting 2.52 per cent of net customer assets. Axis Bank plans to raise resources via infrastructure bonds in the second half of the year. The bank has received shareholders’ approval to raise up to Rs. 6,000 crore, Gupta said in a briefing to media. Axis Bank shares ended at Rs. 401.95 a share, 2.04 per cent higher over the previous close on the BSE. The results were declared after market closing hours. http://www.thehindubusinessline.com/todays-paper/tp-news/axis-bank-q2-net-rises-18-on-income-growth/article6513230.ece
IRDA TO LOOK INTO PRICE UNDERCUTTING IN GROUP HEALTH INSURANCE SEGMENT
Mumbai: The Insurance Regulatory and Development Authority (Irda) might take an exception to undercutting by non-life companies in the group-health space. Speaking at a summit organised by the National Insurance Academy, M Ramaprasad, member (non-life), Irda, said the regulator will look into the group-health space, which constitutes 55 per cent of the health segment; retail health makes up the rest. Claims in group health are much higher than in the retail side of the business, he said, adding the high claims, 100 per cent at one point, was a matter of concern. Experts said unhealthy competition is eroding the group-health space. The regulator is looking into this matter and will look at having higher capital requirements or solvency rates for those insurance companies that quote unviable prices. To retain corporate accounts, certain non-life sector insurers are offering high discounts. Industry players say there is not just transfer of accounts from private to public, but also from one private non-life insurer to another. Industry experts said it was not sensible to offer discounts to large profitable firms, as such companies were capable of purchasing insurance without a subsidy. Health insurance, which has an almost 23 per cent market share in the general insurance space, has seen the incurred claims ratio touch 96.43 per cent in FY13, against 94 per cent in FY12. While for public sector general insurers, the incurred claims are still less than 100 per cent, private sector general insurers have seen it cross 100 per cent. http://www.business-standard.com/article/finance/irda-to-look-into-price-undercutting-in-group-health-insurance-segment-business-standard-news-114101700368_1.html
DIFFERENTIAL PENALTY QUANTUM A NORMAL PRACTICE: T S VIJAYAN
T S Vijayan, the chairman of the Insurance Regulatory and Development Authority (Irda), on Friday said the practice of imposing differential penalties on companies was a normal practice. “The regulator weighs the gravity of violations by the insurer and then imposes a penalty. This (the amount) can be different from the one imposed on another company as only the maximum quantum of penalty, which is Rs 5 lakh, is defined under the law,” Vijayan said, when asked about the Central Bureau of Investigation (CBI) quizzing a former Irda chief with regards to the penalty imposed on a non-life insurance company. CBI has started a probe into alleged undervaluation of penalty to the tune of nearly Rs 17,500 crore on Reliance General Insurance Company Limited by officials Irda in 2009. A Reliance General Insurance spokesperson termed the view that penalties of Rs 17,500 crore could have been imposed on it as “baseless, unfounded and devoid of any legal foundation”. Vijayan added whatever penalty was imposed, a detailed information on the quantum and justification was available in the public domain. Talking about health insurance products, Vijayan said there was a need to have long-term products in this space as also savings linked to health insurance. http://www.business-standard.com/article/finance/differential-penalty-quantum-a-normal-practice-t-s-vijayan-114101700964_1.html
LENDING TO MINING SECTOR STRESSED DUE TO SLOW GROWTH: NBFC OFFICIAL
Ahmedabad: Lending to mining sector is stressed because of the sector’s slow growth accentuated by factors like high risk, large exposure and small margins, resulting in diversification of loans to auto and other sectors, a senior official of Non Banking Financial Corporation (NBFC) Magma Fincorp Ltd said here on Friday. “Lending to mining sector has been stressed because of the sector’s slow growth accentuated by high risk, large exposure and small margins. This has resulted in diversification of loans to auto and other sectors,” said, Sachin Khandelwal, Chief Sales Officer, Magma Fincorp Limited. The Kolkata-based NBFC is aiming for 20 per cent growth in Gujarat market in the current financial year on back of car and tractor loans. “We will bank on car loans and tractor loans to drive our numbers in Gujarat this year. Our focus on auto loans which has been our mainstay in the state so far will also continue and we are confident our renewed focus on the rural and semi rural markets will come useful,” said Khandelwal. It disbursed Rs 443.60 crore across Gujarat in 2013-14. He also informed said that Magma HDI General Insurance Company Ltd and Magma Housing Finance Company will achieve break-even in the current financial year. Magma, which posted a net profit of Rs 45.77 crore in the first quarter of this financial year, reported 33% growth in disbursements to Rs 2398 crore in the said quarter. http://www.business-standard.com/article/economy-policy/lending-to-mining-sector-stressed-due-to-slow-growth-nbfc-official-114101700939_1.html
INVESTORS PUT OVER RS 30,000 CRORE IN MUTUAL FUND SCHEMES DURING SEPTEMBER
NEW DELHI: Investors pumped around Rs 30,500 crore into various mutual fund schemes in September, making it the third consecutive month of inflows. As per the latest data available with the Securities and Exchange Board of India, investors put Rs 30,517 crore in mutual fund schemes (MF) last month after pouring in a staggering Rs 1,00,181 crore in August. Investors had poured in Rs 1,13,216 crore in MF schemes in July. Prior to that, there was an outflow of Rs 59,726 crore in June. At gross level, MFs mobilised Rs 54.1 lakh crore in September, while there were redemptions worth Rs 53.8 lakh crore as well. This resulted in a net inflow of Rs 30,517 crore. According to market analysts, investors have put in most of the money in equity mutual fund and equity-linked savings schemes. MF is an investment vehicle that pools funds from many investors for investing in securities such as stocks, bonds, money market instruments and similar assets. http://economictimes.indiatimes.com/mf/mf-news/investors-put-over-rs-30000-crore-in-mutual-fund-schemes-during-september/articleshow/44853238.cms?prtpage=1
SEBI TWEAKS ADJUDICATION PROCESS TO ENSURE FAIRNESS
Mumbai: Capital market regulator Securities and Exchange Board of India (Sebi) has tweaked its adjudication process to ensure more fairness and effectiveness. To ensure judicial discipline, Sebi, a quasi-judicial body, has decided that separate departments will conduct investigation and decide on punishment. For recent, the recent order against realty major DLF was investigated by Sebi’s corporate finance department, which is headed by whole time member Prashant Saran. While, the final order was the passed by whole time member Rajiv Agarwal, who is in charge of the market regulation department. According to sources, Sebi’s enforcement and adjudication processes have undergone several changes based on the recommendations made by international consultant Oliver Wyman. The consultant was roped in by Sebi in 2012 to assess its performance and to advise on organisational restructuring. “The decision to separate adjudication and investigation is to ensure fairness and avoid conflict of interest,” said a Sebi source. Welcoming the changes, RS Loona, managing partner, Alliance Corporate Lawyers said the prosecutor and the judge cannot be the same. “Basic principle of law is that prosecutor should not be judge in his own cause. http://www.business-standard.com/article/markets/sebi-tweaks-adjudication-process-to-ensure-fairness-114101700815_1.html
