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FOREIGN INVESTORS ARE BUYING INDIAN CORPORATE BONDS AS YIELDS ARE ATTRACTIVE

fsMUMBAI: Foreign funds are buying more Indian corporate bonds as there is no sign that the $25-billion limit on government securities — close to being exhausted — is going to be raised. Overseas portfolio investors have used up nearly half the overall investment limit in corporate bonds compared with 37 per cent four months ago. But foreign portfolio investors, or FPIs, can invest another Rs 1,23,580 crore to exhaust the full limit of $51 billion (about Rs 3,11,813 crore) in corporate bonds. “The fiscal and inflation target looks more achievable now than ever before,” said Ashish Vaidya, executive director and head of trading and asset liability management at DBS Bank. It places India in a sweet spot as the country gets the opportunity and time to rebuild its economy. “This helps create a positive trigger on both the rates and equity markets side and, hence, overseas investors find India an attractive investment destination, especially at a time when the rest of the world is struggling for growth,” he said. According to Prime Database, total monthly corporate bond issuances have surged 76 per cent to about Rs 43,880 crore in September from Rs 24,874 crore in June. With falling crude oil prices, India’s fiscal deficit is set to improve. It is estimated at 4.1 per cent of GDP in 2014-15. In September, retail inflation rose at a slowerthan-expected 6.46 per cent from a year earlier, the lowest since January 2012. RBI aims to bring it down to 6 per cent by January 2016. http://economictimes.indiatimes.com/markets/bonds/foreign-investors-are-buying-indian-corporate-bonds-as-yields-are-attractive/articleshow/44904472.cms?prtpage=1

 

RBI ADVISOR SAYS RATE CUT MAY BE POSSIBLE IN MARCH

 

Mumbai: The Reserve bank of India (RBI) could consider cutting interest rates as early as March, should inflation cool further after global oil prices fell to a four-year low, an advisor to the monetary authority said. Reducing the pace of consumer-price gains to four per cent from September’s three-year low of 6.46 per cent is achievable, Ashima Goyal, a member of RBI’s technical advisory committee that makes policy recommendations to Governor Raghuram Rajan, said without specifying a timeframe. Cheaper crude oil would also help the government cut subsidies and support its efforts to narrow the Budget shortfall, she said. “The drop in oil prices is a definite positive for India as it will help reduce the deficits and inflationary impulses,” Goyal said in a phone interview from Mumbai on Monday. “Various factors are coming together to enable the RBI to support the growth process by lowering interest rates.” Consumer-price gains have decelerated from as much as 11.2 per cent in November 2013 after the central bank raised rates even amid an economic slowdown. A 24 per cent slump in Brent crude since June 30 helped cut India’s import costs, boosting the odds of further declines in the inflation rate. http://www.business-standard.com/article/finance/rbi-advisor-says-rate-cut-may-be-possible-in-march-114102200025_1.html

 

RAJAN GETS HIS WAY ON RBI’S RESTRUCTURING PLAN

 

Mumbai: When Raghuram Rajan leaves for the picturesque hill town of Mussoorie at the end of this month to attend the annual Reserve Bank of India retreat, he would be fairly content with the progress made in revamping the central bank’s organisational structure – a plan he initiated during last year’s retreat at Udaipur. The central bank set a precedent on Tuesday when it interviewed 12 candidates for lateral recruitment of a Grade F officer, that is, chief general manager (CGM) in its economic policy and research department. It’s not that lateral recruitment hasn’t happened earlier, but they were only on contract basis, or for a particular project. In any case, no such recruitment had ever happened for a Grade F position, which is the highest promotional grade in RBI. This is the first time in its 79-year history that a candidate who has been laterally recruited will have the opportunity to get promotion within the central bank. This isn’t an isolated example. Despite internal opposition, Rajan has managed to bring in sweeping changes in the organisation, which central bank observers say, is a confirmation of his growing clout in the government. Following the Udaipur retreat, the RBI had set up three committees. The first one was on organisational restructuring headed by Executive Directors B Mahapatra (who retired earlier this year) and Deepak Mohanty and the second one looked at the review of training facilities and skill development. http://www.business-standard.com/article/finance/rajan-gets-his-way-on-rbi-s-restructuring-plan-114102200026_1.html

 

RBI REVISES RULES ON REPORTING OF BAD LOANS

 

Mumbai: The Reserve Bank of India issued new guidelines on Tuesday on the reporting of bad debt and the working of the Joint Lenders’ Forum (JLF). It said banks will be permitted to report their SMA-2 (Special Mention Accounts) and JLF formations on a weekly basis, at the close of business on every Friday. If a holiday, banks will have to report the details on the next working day. Earlier, RBI had set up three categories of SMAs. These were SMA-0, where principal or interest payment was not overdue for more than 30 days but the account showed signs of incipient stress; SMA-1, where principal or interest payment was overdue for 31-60 days; and SMA-2, where principal or interest payment was overdue for 61-180 days. It had set up a Central Repository of Information on Large Credits (CRILC) to collect, store, and disseminate credit data to lenders. The latter were required to report all such information here, including classification of an account as SMA, on all borrowers having aggregate fund-based and non-fund-based exposure of Rs 5 crore and above. With the new regulations, crop loans will be exempted from such reporting. However, banks will have to continue reporting their other agricultural loans as earlier. Banks also don’t need to report their interbank exposures to CRILC, including exposure to the national bank for Agriculture and Rural Development, Small Industries Development Bank of India, Export-Import Bank of India and National Housing Bank. http://www.business-standard.com/article/finance/rbi-revises-rules-on-reporting-of-bad-loans-114102200028_1.html

 

FOUR VERTICALS FOR EACH OF THE DEPUTY GOVERNORS

 

Mumbai: As a part of its organisational restructuring, the central bank has created four verticals which will be looked after by each of the deputy governors. In the new scheme, Deputy Governor H R Khan will look after financial markets and infrastructure, while Urjit R Patel has been given the charge of monetary policy and research. Banking supervision and regulation has also been separated in two distinct verticals, with R Gandhi in-charge of the regulation and risk management. S S Mundra has been assigned with the responsibility of supervision and inclusion. Earlier, RBI had increased the number of executive directors to 11 from 9 – which was a part of the restructuring programme. However, to implement the proposal for a chief executive officer with the rank of a deputy governor, RBI Act will have to be amended. http://www.business-standard.com/article/finance/four-verticals-for-each-of-the-deputy-governors-114102101263_1.html

 

PNB NET UP 14%, DISAPPOINTS STREET

 

New Delhi: Government-owned Punjab National Bank’s net profit in the quarter ended September 30 grew 13.8 per cent to Rs 575 crore on robust growth in other income. It had reported net profit of Rs 505 crore in the corresponding (July-September) quarter of 2013-14. “In the previous quarter, we had said our growth rate will catch up with that of the (sector) and, by and large, we have in this quarter,” said the bank. Other income showed a robust growth of Rs 1,558 crore as compared to Rs 899 crore in the year-ago period. All non-interest income components have performed well, contributing to 73 per cent growth in other income. “We had good recovery in return on assets this year, of Rs 483 crore,” Chairman and Managing Director, K R Kamath said here in a post-earnings conference call on Tuesday. Total income rose 11.9 per cent from a year ago to Rs 13,020 crore. Net interest income rose 3.4 per cent to Rs 4,151 crore. However, provisioning for bad assets rose 13.4 per cent to Rs 2,301 crore. The bank made an additional provision for wages by Rs 60 crore, in addition to the normal quarterly one of Rs 180 crore. http://www.business-standard.com/article/companies/pnb-net-up-14-disappoints-street-114102101374_1.html

 

SOUTH INDIAN BANK NET DIPS 40%

 

South Indian Bank on Tuesday reported a 40 per cent drop in net profit to Rs 76.3 crore in the quarter ended September 30, due to rise in provisioning towards bad assets. The bank had logged net profit of Rs 126.75 crore during the corresponding quarter in the previous financial year. Total income of the private lender increased to Rs 1,405.95 crore during the quarter under review, up from Rs 1,306.73 crore a year ago, the bank said in a BSE filing. Bank’s provisioning and contingencies jumped to Rs 95.71 crore in the second quarter 2014-15, up from 19.76 crore in the year ago period. On the asset front, its net non-performing assets (NPAs) came down to 0.9 per cent during July-September, over 1.39 per cent year ago. http://www.business-standard.com/article/companies/south-indian-bank-net-dips-40-114102100789_1.html

 

BAD LOANS CONTINUE TO DRAG PROFITABILITY

 

The worsening asset quality, high levels of restructured loans and elevated provisioning costs — aspects that have troubled Punjab National Bank in the last one year — continue to remain concerns. In the recent September quarter, the gross NPAs remained elevated at 5.65 per cent of loans, up from 5.4 per cent in the June 2014 quarter. The bank’s pile of restructured loans, at 10 per cent of total loans is one of the highest among the public sector banks. Provisions for bad loans shot up 63 per cent over last year. While PNB’s net profit grew 13.8 per cent in the September quarter, it was mainly led by a 73 per cent rise in other income. The bank’s core net interest income grew just 3 per cent over last year. On the loan front, PNB’s loan book grew by 13.7 per cent, but the yield on advances declined by 50 basis points over last year, thus impacting the bank’s net interest margin. The loan growth was led by agri loans which grew 23 per cent and the MSME segment, which expanded 24 per cent. Further, while the high-yielding retail loan book grew 19.7 per cent, it constitutes only 13 per cent of total loans, and has not helped margins. The large corporate book, which accounts for over a third of the bank’s loan book, declined 3 per cent. On the deposits front, the bank has been reducing its high-cost bulk deposits. The share of such deposits is just 6 per cent in the September quarter. However, the lower cost of funds has been offset by a lower yield on loans. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/bad-loans-continue-to-drag-profitability/article6524808.ece

 

HDFC BANK Q2 NET RISES 20%

 

Mumbai: HDFC Bank, country’s second largest private sector lender, reported a 20 per cent rise in net profit in the second quarter ending September, 2014 at Rs. 2,381.5 crore. This is the fifth consecutive quarter that the bank has posted net profit that is below its trend growth rate of 30 per cent. Provisions and contingencies increased 18 per cent to Rs. 456 crore (consisting of specific loan loss and general provisions) for the quarter under review from Rs. 386 crore in the same quarter last year. It also provided for tax expense of Rs. 1,223 crore before profit. Net interest income (difference between interest earned and interest expended) grew by 23 per cent to Rs. 5,511 crore. Other income grew by 11 per cent at Rs. 2,047 crore as against Rs. 1,844 crore in the corresponding quarter ended September 30, 2013. “We saw pick up in retail disbursements, which grew over 20 per cent, especially in car loans and personal loans. Commercial vehicles and equipment also saw a growth of 10 per cent, turning positive from flat or negligible growth a year ago,” said Paresh Sukthankar, Deputy Managing Director at HDFC Bank. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/hdfc-bank-q2-net-rises-20/article6524811.ece

 

KOTAK MAHINDRA BANK REDUCES INTEREST RATE ON SAVINGS DEPOSITS

 

Mumbai: Probably taking a cue from IndusInd Bank, Kotak Mahindra Bank has reduced its interest rate on savings deposits below Rs. 1 lakh by 0.5 percentage points to 5 per cent. “With effect from November 1, 2014, the interest rate on daily balances up to Rs. 1 lakh in your savings accounts will be revised to 5 per cent per annum,” the bank informed its customers. Daily balances over Rs. 1 lakh will continue to earn 6 per cent interest a year. Earlier the bank offered 5.5 per cent on deposits up to Rs. 1 lakh. “Generally, short-term interest rates have moderated a bit and in the money markets, liquidity has improved significantly. Also credit growth has been tepid,” said Mohan Shenoi, Head — Treasury and Global Markets, Kotak Bank. He said substantial reduction in interest rates depend on a decision on policy rates by the RBI. So long as policy rates stay where they are, interest rates will stay at current levels. “We have also reduced our term deposits by 10-15 basis points in select pockets, which is a regular process,” Shenoi added. In September, IndusInd Bank reduced its interest rate on savings deposits to 4.5 per cent from 5.5 per cent per annum earlier on daily balance of up to Rs. 1 lakh. On balance above Rs. 1 lakh, IndusInd Bank maintains an interest rate of 6 per cent. After the interest rates on savings bank accounts were deregulated by the RBI in 2011, banks such as IndusInd Bank, Kotak Mahindra Bank and YES Bank were among the first to increase rates above the regulator-stipulated 4 per cent. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/kotak-mahindra-bank-reduces-interest-rate-on-savings-deposits/article6524812.ece

 

BAJAJ ALLIANZ GENERAL INSURANCE Q2 NET UP BY 28%

 

Mumbai: Private non-life insurer Bajaj Allianz General Insurance has reported a 28 per cent increase in net profit at Rs 145 crore for the quarter ended September 30, compared to the year-ago period. The company said this was despite settling claims worth Rs 130 crore in the state of Jammu and Kashmir. Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance, said the rise in motor and health insurance business helped the company achieve a higher overall growth.  “Weather-based crop insurance has also contributed substantially to the growth. We are happy to clock a higher than industry growth of 19 per cent in the first half of the current financial year and are looking forward to maintain this momentum for the rest of the financial year,” he said. The company said focus on digitisation and better expense management had been instrumental in achieving the higher net profit. The company also added two new products to its health insurance portfolio and also launched an innovative cover in the home insurance segment. These new products have further added to the revenue, said the company. http://www.business-standard.com/article/companies/bajaj-allianz-general-insurance-q2-net-up-by-28-114102100790_1.html

 

 

FINANCE COMPANIES, BANKS CASH IN ON THE FESTIVE SPIRIT

 

Mumbai: It is Diwali time again and banks and non-banking finance companies are trying to woo customers with attractive offers such as cash-back, zero per cent interest, ultra-quick loan approvals, extra reward points, and, in some cases, even an overseas trip. The idea: Amid weak credit demand in the financial year so far, banks are trying to grab market share when the consumer propensity to spend is high. Private lender HDFC Bank, for instance, is trying to entice customers to spend, by offering a range of discounts on the use of debit and credit cards for purchases. Parag Rao, Senior Executive Vice-President, Business Head – Card Payment Products & Merchant Acquiring Services, HDFC Bank, said: “During the festive season, consumer spending is at the highest and credit card transactions are usually of bigger ticket size compared to cash. “Hence, merchants and banks promote the usage of cards with these deals.” HDFC Bank is offering various cash-back schemes, two-wheeler financing up to 90 per cent as well as reward points on credit and debit card purchases especially through e-commerce websites and at lifestyles stores. Since the loan demand is weak, other banks such as State Bank of India, HDFC Bank and ICICI Bank are also relying more on reward points and various card and cash-back schemes to boost credit demand to ride on the consumer spending wave during Diwali. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/finance-companies-banks-cash-in-on-the-festive-spirit/article6524817.ece

 

ADITYA BIRLA FINANCIAL SERVICES TO ENTER HEALTH INSURANCE

 

Mumbai: Aditya Birla Financial Services Group (ABFSG) has signed a memorandum of understanding (MoU) with MMI Holdings Limited, one of the largest insurance-based financial services groups listed on the South Africa Stock Exchange, to enter India’s health insurance market. ABFSG and MMI will enter into a formal joint venture in which the foreign partner will hold a 26 per cent stake – the maximum allowed as per the existing foreign direct investment norms in the sector. MMI has a right to increase its stake to a maximum of 49 per cent should the Indian regulatory environment be amended in the future. “Health insurance as a category has extremely low penetration levels in India. Given our group’s focus on building our retail presence across products, we foresee a huge potential to target the requirements of untapped customers and their families. Our partnership with MMI Holdings Limited will give us the competitive edge given their strong proficiency in the health insurance sector,” said Ajay Srinivasan, chief executive – Financial Services, Aditya Birla Group. The group’s life insurance company, Birla Sun Life Insurance, is a joint venture with Sun Life Financial Inc, a Canada-based financial services organisation. http://www.business-standard.com/article/companies/aditya-birla-financial-services-to-enter-health-insurance-114102101116_1.html

 

 

MFs DIG IN FOR FIGHT ON MARUTI’S GUJARAT PLANT

 

Mumbai: Eight months after India’s largest car maker, Maruti Suzuki India, announced plans for a Gujarat unit to be set up as a wholly-owned subsidiary of parent Suzuki, opposition to the move continues to simmer. Though Maruti later tweaked the proposal to appease shareholders, domestic mutual funds (MFs) weren’t convinced. They say they will oppose a special resolution in this regard, which the company is expected to bring to vote in early November. Multiple fund managers Business Standard spoke to said the proposal would result in the company changing from a manufacturing to a trading firm. The company has, however, maintained the move will only result in reducing the cost of manufacturing its cars. Domestic MF managers, who hold half the stake required to successfully oppose the move, could well scuttle the deal if other large shareholders side with them. “Why will I invest in a company that gets into distribution instead of the complete value chain?” asked a senior official at a fund house. Another said, “The proposal is marginally different but at the core, nothing has changed.” To bring its plan to fruition, Maruti requires the support of three quarters of its minority shareholders. In other words, if more than a quarter of minority shareholders oppose the deal, it cannot go through. As public shareholders hold 43.79 per cent stake, a quarter translates into 10.95 per cent. http://www.business-standard.com/article/companies/mfs-dig-in-for-fight-on-maruti-s-gujarat-plant-114102101505_1.html

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