Wednesday / December 19.


fsNEW DELHI: The central government’s worries on the Insurance Bill aggravated on Tuesday with Congress accusing it of adopting double standards on the issue and dismissing threats from the treasury benches that a joint session may be convened, forcing BJP ministers to knock on the doors of parties like SP and BSP to muster the numbers in the Rajya Sabha. Congress sources maintained the government was reportedly keen on passing the insurance bill in Parliament in this session so that Prime Minister Narendra Modi can showcase it to the US during his visit in September and hence wants to hurry through the process without sending it to a select committee of the Rajya Sabha. BJP leaders, on the other hand, alleged Congress was playing politics on the issue and that was the reason for its volte-face on the bill which was brought by the erstwhile UPA government. The government has convened an all-party meeting on Wednesday in another bid to end the deadlock. Union ministers, preferring anonymity, said Congress has been requested to state all its objections and reservations it has on the bill and has promised to look into them. “We are ready to concede to the changes that Congress would suggest. The main amendment is regarding the increase in FDI from 26% to 49%. BJP has moved only 11 (of the total of 97) amendments to the original bill and three of them are technical in nature,“ a Union minister said.





Mumbai: Reserve Bank of India Governor Raghuram Rajan on Tuesday stood firm in his resolve to bring down inflation by keeping the key policy repo rate unchanged at eight per cent — a move that convinced bankers and analysts that markets will have to wait at least until next year for the next rate cut. This was the third policy review in a row when RBI kept the rate unchanged. Between September 2013 and January 2014, it had raised the rate 75 basis points — by 25 bps each on three occasions. Though the status quo was widely expected, RBI’s hawkish tone disappointed markets, which were looking for an indication of when the rate cycle will turn — something the governor avoided. “We are saying that if disinflation proceeds as warranted, we will eventually have room to cut rates,” Rajan said, assuring RBI would not hold rates any longer than necessary. Rajan said a “vigilant monetary policy” was the need of the hour, adding the next goal was to bring inflation down to six per cent by January 2016.




New Delhi: Responding to Reserve Bank of India (RBI) governor Raghuram Rajan’s statement that the central bank will not keep interest rates high longer than warranted if disinflation persisted, Finance Minister Arun Jaitley said the latter process had already begun. “Going forward, RBI should examine the liquidity situation, inflation and growth in setting policy rates,” the finance minister said. In a statement posted on his Facebook page, he said the recent data showed inflation was moderating. Consumer Price Index (CPI)-based inflation fell to 7.31 per cent in June compared to 8.28 per cent in May. Wholesale inflation fell to a four-month low of 5.43 per cent against 6.01 earlier. RBI stated its target of CPI inflation at around eight per cent by early 2015 seems likely. However, it was also necessary that the disinflationary process was sustained over the medium term. “The balance of risks around the medium-term inflation path and especially the target of six per cent by January 2016 are still to the upside, warranting a heightened state of policy preparedness to contain these if they materialise,” the central bank said.




New Delhi: The Bharatiya Janata Party (BJP) on Tuesday met to hail Prime Minister Narendra Modi’s “historic” Nepal visit. The meeting was also apprised of the government’s stand on the World Trade Organization (WTO) negotiations and the controversy over the Union Public Service Commission (UPSC) exams. Finance Minister Arun Jaitley told the BJP parliamentary party that the National Democratic Alliance (NDA) government was “determined to resist and block all anti-Indian farmer moves by WTO and other agencies”. Jaitley and Minister of State (Commerce and Finance) Nirmala Sitharaman briefed the party about the WTO negotiations, including India’s position on the Trade Facilitation Agreement (TFA). The finance minister, according to a statement issued by the party, said India was committed to the interests of India’s farmers and its poor, and any progress on trade facilitation was possible “only after categorical assurance on public stockholding of foodgrain, procurement of foodgrain and the public distribution system.”




Mumbai: To improve the sale of bad loans in the banking system, the Reserve Bank of India (RBI) has said it would come out with new norms for asset reconstruction companies (ARCs). “Over the next few days, we will be able to announce some measures on ARCs. I think the idea is broadly to ensure that financial assets are dealt with in a way to ensure the maximum value for the underlying real assets and to put the economy back on track in terms of growth. So, if there are distressed assets, then can we bring in new equity? If there is restructuring that is needed, then will the banks do that quickly? If there are assets to be sold, then can that be done speedily? Time, often, is the most important thing. The longer you wait, the more distressed the asset becomes,” said Raghuram Rajan, governor, RBI. He added if one can put the assets back on track quickly, then the overall losses to the system could be significantly reduced. Even earlier in February, RBI had stressed on the early detection of non-performing assets (NPAs).





Mumbai: Borrowers who were hoping for lower interest rates on their home or car loans might be in for some disappointment. With the Reserve Bank of India (RBI) keeping key interest rates unchanged in its review, it is unlikely that banks will lower their lending rates anytime soon. However, for depositors, this is an opportunity to lock into the current deposit rates for as long as they can, because banks could start cutting these. The first to do so was Oriental Bank of Commerce, which reduced rates on fixed deposits (FDs) of select maturities by 25 to 50 basis points (bps). “The reduction of statutory liquidity ratio by five bps will release Rs 1,000 crore for us. Since credit demand is sluggish, we have decided to lower the rates,” said S L Bansal, chairman and managing director (CMD) of OBC. Bankers said deposit rates will start coming down before the lending rates did. “While deposit rates will apply immediately to the deposits that come for re-pricing, there has to be a lead time to adjust the lending rates,” said C V R Rajendran, the CMD of Andhra Bank. On FDs of up to three years, most banks are offering 9-9.5 per cent. On the lending rate front, home loan rates are 10-11.5 per cent, depending on the loan size and tenure. Car loan rates are 11-15 per cent.




Mumbai: The Reserve Bank of India keeping interest rates unchanged in its monetary policy review on Tuesday, chief executives said it was trying its best to keep a lid on prices. The extra Rs 40,000 crore liquidity to be released into the banking system by a lower statutory liquidity ratio would help companies in the festival season when consumer credit picks up. “The RBI has pushed forward with monetary policy changes that encourage investment. It is a good move,” said Kiran Mazumdar Shaw, chairperson and managing director of Biocon. “The credit policy is without any exuberance as was expected. The RBI has no option but to hold rates till Inflation is fully under control. Once inflation is under control, the RBI, in its own words, will not hesitate to relax the repo rates,” said Prabal Banerjee, president of international finance at the Essar group. Corporate leaders said the RBI was trying to support growth through extra money supply, which was why the statutory liquidity ratio was being moderated in every policy.




Mumbai: The Reserve Bank of India (RBI)’s decision to cut the Statutory Liquidity Ratio (SLR) by 50 basis points (bps) hasn’t cheered the market much, since overnight rates seem likely to continue to be volatile. SLR is the minimum bond holding requirement for banks as prescribed by RBI. Overnight rates were volatile in June-July due to slow government spending and RBI mopping dollar flows through forward swaps. SLR now stands reduced to 22 per cent of banks’ Net Demand and Time Liabilities (NDTL), with effect from the fortnight beginning Saturday. The central bank also said it would continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL and liquidity under seven-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system.




Mumbai: The Reserve Bank of India (RBI) said it has asked the Andhra Pradesh government about how a more focused assessment of crop yields can be made to justify the restructuring of agricultural loans in the state. “We are in discussion with the government to say, where exactly the distress is so that we can take a more reasoned and focused view. It doesn’t appear from the production data, that the cyclone had widespread damage,” said RBI Governor Raghuram Rajan on Tuesday. Earlier, Andhra Pradesh Chief Minister N Chandrababu Naidu had announced farm loans and gold loans (taken for agricultural purposes) would be waived up to Rs 1.5 lakh per family. But RBI said it is yet to see merit in this demand. “Prima facie, it doesn’t look like the 50 per cent criterion is being met by any of the districts.




While achieving an eight per cent retail inflation rate by January 2015 is well within reach, Reserve Bank of India Governor Raghuram Rajan notes there is a second target, of six per cent by 2016. Edited excerpts from his interaction with the media after announcing the policy review: The idea behind the SLR cut is if the government finances are improving, and the government is on a fiscal consolidation path, we can afford to liberate more access to government financing and make it possible for the private and public sector firms to get access to that financing. We are hopeful that as the economy picks up and credit growth gets stronger, banks would be able to use that space to lend to the productive sectors of the economy. We have looked at those oscillations (of call rates) and have said in the past that we’re trying to keep the rate closer to eight per cent. Some of the oscillations are because of substantial and unanticipated variation in government balances. We are looking at the possibility of doing more frequent term repos, of shortening the maturity of term repos and perhaps also the timing of the auctions during the day, to minimise volatility.





Mumbai: Reserve Bank of India (RBI) Governor Raghuram Rajan on Tuesday cautioned against extrapolating the issue of alleged graft charges in a public-sector bank to the entire public sector banking system. He said it should not be concluded that all problems in the public sector banking system are because of criminality. Syndicate Bank Chairman and Managing director S K Jain was suspended by the government on Monday, two days after the Central Bureau of Investigation (CBI) arrested him for allegedly accepting a bribe of Rs 50 lakh to enhance the credit limit of some companies. “I think the balance has to be maintained, and we have to be careful that while we do a thorough investigation and culprits are brought to book, it doesn’t become a witch-hunt which then stalls the entire credit process. So, we have to be careful and I think that the investigative agencies will do their job appropriately,” he said. Rajan explained this particular situation raises troubling issues and it is important for law enforcement agencies to ensure that good investigation is done.




New Delhi: The finance ministry has decided to issue directives to public sector banks (PSBs) to be more transparent in their dealings, cut the role of intermediaries, and fix accountability for actions at the top level. This comes after the arrest of Syndicate Bank Chairman S K jain. The Department of Financial Services swung into action as it suspended Jain on Monday and and held an internal meeting on Tuesday to discuss ways to prevent more such cases. The issue has also been discussed with Finance Minister Arun Jaitley. “We are thinking of how to cut the role of intermediaries. There should be more openness and people should be held accountable. Approvals must be given in a timely manner. An advisory will be issued to state-owned banks in a day or two,” said a government official who did not wish to be identified. Jain’s case might also act as a trigger for pushing reforms at the boards of government banks. The finance ministry will make a stronger case for splitting the post of chairman and managing director and giving fixed five-year tenures to the heads of PSBs to make them accountable for their decisions.




Hyderabad: Andhra Bank’s net profit fell 53% to R107 crore in the June quarter compared with R231 crore a year ago. The bank attributed the fall in net profit to what it called lack of clarity on the loan waiver scheme proposed by the Telangana and Andhra Pradesh governments. “There is neither any official announcement of schemes nor relief by both the governments. The delay in loan waiver has resulted in farmers not repaying their loans. This has resulted in farm loans of R1,078 crore turning into NPAs,” CMD of the bank CVR Rajendran said.




Thiruvananthapuram: State Bank of Travancore saw its net profit plunge 73 per cent in the first quarter of this fiscal from the year-ago level as more standard assets went under. Gross non-performing assets (NPAs) grew 51.77 per cent and net NPAs rose to 68.39 per cent. Effective steps are being taken to achieve substantial reduction in NPA levels, a bank spokesman said. Full activation of asset-tracking centres is one of the major strategies being adopted to prevent further slippages in asset quality. Total income remained flat year-on-year and ‘other income’ fell by 12.68 per cent even as expenses rallied under various heads. Employee costs rose by 15 per cent and operating expenses by 12 per cent, which brought down operating profit by 33 per cent. In comparison, tax expenses sat comparatively light from the year-ago level, down by as much as 49 per cent.




Mumbai: In its third bi-monthly monetary policy, the Reserve Bank of India left the repo rate unchanged but cut the statutory liquidity ratio. In view of the upside risks to inflation, the RBI said it is appropriate to continue maintaining a vigilant monetary policy stance as in June, while leaving the policy rate unchanged. On the SLR cut, the central bank said that with the Budget renewing commitment to the medium-term fiscal consolidation roadmap, space has been opened up for banks to expand credit to productive sectors. Excerpts from bankers’ reactions to the monetary policy: Arundhati Bhattacharya , Chairperson, State Bank of India: The RBI policy statement strikes a slightly hawkish tone with a firm eye on 6 per cent inflation target by January 2016. The 50-basis-point cut in SLR is expected to provide roughly Rs. 40,000 crore growth-supportive liquidity to the system and the move is not intended to trigger an interest rate cut. The held-to-maturity (HTM) ceiling is being brought down by 50 bps to 24 per cent of NDTL. As all the major banks are holding less than 24 per cent in HTM, there will not be any immediate impact. We believe the retail inflation trajectory will be significantly benign in the current fiscal, but beyond November 2014, the inflation trajectory will be on the upside, though the 8 per cent inflation target by January 2015 looks sacrosanct. The 6 per cent retail inflation target looks challenging (remember, 6 per cent is the upper confidence level of the median RBI target at 4 per cent), and to that extent, the RBI will hold rates at least till that time it is not breached.





Mumbai: State-owned insurer Life Insurance Corporation (LIC) expects to invest Rs. 3 lakh crore in equity and bonds during the current fiscal year, a 17 per cent increase over the Rs. 2.5-crore it invested last year, said Chairman SK Roy. In an interview with BusinessLine , Roy said that the bulk of the investments would be in debt securities. About 15 per cent of the overall investment of Rs. 3 lakh crore (or around Rs. 45,000 crore) will be invested in equity. This, of course, would be subject to market conditions and opportunities, he added. Asked if LIC had used the recent upsurge in the equity market to book profits, Roy said: “We are very long-term investors; every time the market rises, it is not profit-booking time. We have liabilities that are 30 years old. “These investments will have to live out the tenure so that we meet our liabilities in the distant future. But, there could be an opportunity for churning, which we did last year.” He said that the life insurer is bullish on sectors such as infrastructure and real estate, and sectors that support them. Besides, LIC has traditionally favoured industries such as information technology, banking and pharma. Commenting on reports that public sector banks had approached LIC for a capital infusion, Roy said that as an investor, LIC was positive about the banking sector and would prefer to remain invested in the sector, subject to regulatory limits.




Hyderabad: The proposed Insurance Laws (Amendment) Bill 2008 will be detrimental to the interests of agents, according to Life Insurance Agents Federation of India (LIAFI). “We have staged peaceful demonstrations all over the country and are working on an action plan to intensify the agitation,” SB Sreenivasachary, president of LIAFI told BusinessLine in an interaction here on Monday. LIC agents had staged demonstrations at branches in Delhi, Chandigarh, Kolkata, Jammu & Kashmir, Hyderabad, Chennai and Bangalore, he added. LIAFI has over 11.78 lakh agents as its members, accounting for more than half of the total life insurance agents in the country. There are about nine lakh agents working for private life insurers. The agents claim that some of the provisions in the Amendment Bill are detrimental to their interests. “If implemented in totality, the persistency of the policies and an agent’s career would get adversely impacted. They will lose the statutory protection accorded to them by the Insurance Act, 1938,” Chary said. For example, Section 40 of the existing Act deals with the limits on commission payable to the agents on the first year and renewal premium procured. “But the Amendment Bill has no specific substitute section on commission limits,” he said





MUMBAI: The Securities & Exchange Board of India (Sebi) has warned its officials to avoid former colleagues working for firms that are fighting cases against the capital market regulator to avoid being unduly influenced by them. The advice was issued by Sebi’s Chief Vigilance Officer RK Padmanabhan and is aimed at combating lobbying efforts by companies, said a person familiar with the matter. Padmanabhan’s letter, which ET has reviewed, names six former Sebi officials. A senior official said the letter was issued in the face of intense pressure on Sebi from firms. “A trend has emerged that some of the corporates are now hiring former Sebi officials to deal and settle the matter,” he said. There was no response from the market regulator to an email query on the matter as of press time. The practice of companies hiring former Sebi officials to deal with the regulator isn’t new and neither is it restricted to the market regulator. But the issue has assumed importance with the regulator getting more active in cracking down on cases related to insider trading and stock market irregularities, lawyers said. The concern over officials joining the private sector, particularly after stints in regulatory agencies, isn’t just confined to India. Restrictions on US SEC officials too Last year, the US zeroed in on the practice of Securities Exchange Commission (SEC) officials moving to jobs at law firms and investment banks from where they could leverage their relationship with former co-workers. As a result, SEC employees have been banned from contacting old colleagues for one year after leaving the regulator, among other rules.




NEW DELHI: The Centre is planning to set up a designated court in Mumbai whose permission will be required for Securities and Exchange Board of India (Sebi) to raid the premises of businesses and defaulters. While moving the Securities Laws (Amendment) Bill, 2014 for discussion in the Lok Sabha on Tuesday, Finance Minister Arun Jaitley said that if Sebi officials wanted to search any premise, they should submit relevant documents to the special court and seek its permission. Earlier, Sebi was empowered to conduct search and seizure operations without any court warrant. This had caused resentment among stakeholders, and the suggestion for setting up the special court came up during discussions with them. And an agreement will be signed with market regulators abroad as part of efforts to bring ponzi scamsters to book. “Lawbreakers don’t respect national boundaries. Evidence of what they do may be available across the boundaries. Therefore, our regulator enter into arrangements with regulators outside the country for mutual sharing of information. Sharing of information also requires statutory backing, and the Act is being amended for that purpose,” Jaitley said. The Bill also suggests that profits recovered from ponzi operators go to an investor protection fund. The government also intends to enlarge the scope of the Act by bringing all ponzi schemes under its ambit. “Power will have some safeguards. Now, there are several provisions with regard to compensation and penalties which are being altered in these particular amendments,” Jaitley said.




New Delhi: To make its proposed REIT norms more attractive, capital markets regulator Sebi has agreed to incorporate industry suggestions to reduce their minimum asset size to R500 crore and to allow foreign investors at IPO and later stages. At the same time, the regulator is keen on REITs (Real Estate Investment Trusts) being limited to larger investors in the initial stages as it is associated with higher risks. The minimum investment amount would remain higher at R2 lakh. The final REIT regulations, along with that for another new product Infrastructure Investment Trusts (InvITs), are likely to be considered for approval by the Sebi board this Sunday, sources said. Along with foreign investors, domestic institutions like insurers, pension funds and provident funds would also be allowed to invest in these trusts. Through InvITs, the regulator is aiming to create a new avenue for raising funds to meet infrastructure investment requirements to the tune of R65 lakh crore for the 12th Five Year Plan (2012-17).




Mumbai: Asset management companies (AMCs) together have roped in global consultant KPMG to help them meet the complex requirements under the Foreign Account Tax Compliance Act (Fatca), a new anti-tax avoidance law in the US. According to those in the sector, the Rs 10-lakh crore mutual fund segment has been struggling with the extensive disclosures to be made under the new law, which has came into effect from July 1 globally. The decision to appoint KPMG was taken by the Association of Mutual Funds of India (Amfi), said a source. “Rather than 40 fund houses going to each of their consultants, we at Amfi decided to seek the views of one consulting firm and then share the view with everyone in the industry. The idea is to keep it simple and standard for the industry,” said a senior Amfi official on condition of anonymity. Fatca, expected to be implemented in India by the end of the year, aims to track investments made by US citizens outside the US and bring it under the US tax-net.

PDF Creator    Send article as PDF