MUMBAI: The insurance regulator has rejected Life Insurance Corporation’s demand to raise the ceiling on equity holding in a company but turned a blind eye in some cases where it has breached the limit, said two people familiar with the decision.
The Insurance Regulatory & Development Authority (Irda) last week told the nation’s biggest insurer that rules can’t be eased for one company when a dozen more are in the field.
If allowed at the industry level, it could worsen the risk profile of insurers, the insurance giant was told.
“LIC wanted to increase stakes in companies, but we have asked it to follow the current investment guidelines,” said an Irda official who did not want to be identified.
The state-run insurer, which is also seen as a ward of the government, has been demanding a relaxation in the rule that says no insurer should own more than 10% of a company, or 10% of its net worth.
LIC recently stepped in for the cash-strapped government and bought up stakes in many state-run lenders, including Punjab National Bank and Dena Bank, following which it ended up breaching the 10% cap on holdings.
“Whenever there is a need, we go to the regulator and keep it informed in view of our large investment portfolio of over 13 lakh crore. Our needs are different and not comparable to others in the industry,” said a senior LIC executive.
The insurer has drawn flak for bailing out the Centre’s disinvestment programme and helping capitalise banks. In the last quarter of the previous fiscal year, LIC invested 12,000 crore in the ONGC auction and another 8,000 crore in state-run banks. Post the purchase, LIC’s stake in ONGC stands at over 9%.
“Authority (Irda) should be given powers to take penal action beyond monetary fine as it has no meaning. Insurance companies should adhere to rules. Some companies, however, may not like to increase their stake beyond 10% because of concentration of risk,” said Ashwin Parekh of E&Y.
The insurance regulator sought details and called LIC executives for a meeting at its headquarter in Hyderabad after policyholders and investors criticised the government for using the insurer as a tool to fill its revenue gap.
LIC has bought Punjab National Bank shares worth 1,574 crore through the preference share route that would increase the investment to beyond 10%. LIC held 8.54% stake in PNB at the end of December 2011.
Similarly, LIC has pumped in 1,037 crore into Bank of India, 650 crore into Union Bank of India, 302 crore into Indian Overseas Bank and 148 crore into United Bank of India in the last quarter, according to filings with the BSE.
But in some cases such as Tata Steel, where it has breached the limit, there is no direction from the regulator. Irda officials said neither was LIC asked to pare its holdings to 10% nor could it retain whatever it owned. The indecision has left the corporate governance issue unresolved.
GOVT TO FIRM UP VIEW ON PARLIAMENTARY PANEL REPORTS ON INSURANCE, PENSION
The government will soon finalise its response to Parliamentary panel reports on insurance and pension sector bills so that the modified versions could be taken up for consideration and passage in the second leg of Budget session beginning April 24. The Micro Financial Sector (Development and Regulation) Bill, 2011, will also be vetted by Cabinet for tabling in Parliament, a senior finance ministry official said. “The long pending financial sector bills like the Pension Fund Regulatory and Development Authority Bill 2011, Banking Laws (Amendment) Bill 2011 and Insurance Laws (Amendment) Bill 2008, will be soon sent to Cabinet for approval,” a senior finance ministry official said. The pension and insurance sector reform Bills are stuck for long on account of opposition from both BJP and key allies of the UPA government. (For details log on to : http://economictimes.indiatimes.com/news/economy/policy/govt-to-firm-up-view-on-par-panel-reports-on-insurance-pension/articleshow/12579005.cms)
NO SIGNIFICANT EXPOSURE TO EURO ZONE: RBI
MUMBAI: Policy makers need to be cautious about the indirect effects of the euro zone’s sovereign debt crisis on India, though the country’s banks do not have a significant exposure to these according to the Reserve Bank of India (RBI). Speaking at a seminar yesterday, RBI Deputy Governor Anand Sinha said, “The Indian corporate sector and banks had an exposure of about $206 billion as of June 2011, according to data provided by the Bank for International Settlement (BIS). Of this total, our exposure to European banks is not significant.” However, he also added, India could be impacted due to the indirect effect or the feedback loop in terms of exports, tourism and even remittances. “The European Union accounts for 30 per cent of India’s total tourist arrivals and a slump in the zone could affect the tourism industry,” Sinha said. (For details log on to : http://www.business-standard.com/india/news/no-significant-exposure-to-euro-zone-rbi/470596/)
FIIs CUT INDIA DEBT ON RUPEE, TAX FEARS
MUMBAI: A weakening rupee and higher hedging costs are prompting foreign institutional investors (FIIs) to pare their positions in the Indian debt market. That apart, some investors are apprehensive of how the General Anti-Avoidance Rules (GAAR) would impact their exposures. GAAR, which is part of the proposed direct taxes code (DTC), is expected to come into effect in 2012-13. Says Birla Sunlife AMC CEO A Balasubramanian: “Some of the money that came in a year back is due for renewal but in the meantime, forward premiums have shot up. While last year at this time they were about 4.5-5%, currently they are at almost 6.5%-7% for one year. For FIIs to want to invest here, the arbitrage needs to be at least 200-300 basis points; otherwise they wouldn’t be interested”. That’s why despite yields being relatively high — the yield on the 10–year benchmark is hovering around 8.6% — FIIs turned net sellers in March after having been net buyers for five consecutive months between October 2011 and February 2012. Indeed in December, January and February they had bought close to $10 billion worth of bonds after the government eased quotas and allowed them to hold paper of shorter maturities. The auctions were oversubscribed several times with investors paying up to 150 basis points simply to have the right to buy the paper. (For details log on to : http://www.financialexpress.com/news/fiis-cut-india-debt-on-rupee-tax-fears/934364/)
GOVT PANEL PROPOSES ADDITIONAL TAXES ON PERSONALISED VEHICLES
NEW DELHI: A government sub-committee looking into probable sources of funds for urban transport projects in the 12th Plan has suggested the creation of a national fund, resource for which can be generated through taxes on vehicles and petrol consumption. The recent report of the Sub-Committee on Financing Urban Infrastructure in the 12th Plan said investments to the tune of 87,000 crore were required in the Five Year Plan duration. The huge investment needs cannot possibly be met only from traditional budgetary sources, the sub-committee, constituted by the Urban Development ministry, said. “Learning from the global examples, a dedicated urban transport fund has been recommended at the national level as envisaged in (National Urban Transport Policy) or NUTP-2006,” it said. (For details log on to : http://economictimes.indiatimes.com/news/economy/policy/govt-panel-proposes-additional-taxes-on-personalised-vehicles/articleshow/12590476.cms)
GOVT EASES PROMOTION RULES FOR PSB OFFICERS
NEW DELHI: The government has relaxed the rules on compulsory rural service for officers of public sector banks to be eligible for promotions by saying the stricture can be applied prospectively. This will enable state-run banks to promote hundreds of officers at the middle and junior management levels, even if they have not served at a rural branch. Such officers are now eligible for promotions and can complete their rural stint after the promotion. Recently, the finance ministry issued a note to all public sector banks saying that the requirement for compulsory rural service can be applied prospectively. Mint has reviewed a copy of the letter. Till now, officers were required to have two to three years of experience in rural and semi-urban areas for promotion up to the level of manager, and minimum three years experience as a branch head to become eligible for promotions to higher posts such as chief and assistant general managers. (For details log on to : http://www.livemint.com/2012/04/08212205/Govt-eases-promotion-rules-for.html?atype=tp)
STRENGTHEN RECOVERY MECHANISM FOR NBFCs: FINMIN PANEL
To strengthen the NBFC sector, a finance ministry-appointed committee has suggested that non- banking finance companies should be allowed to recover bad loans in line with banks by bringing them under the Recovery of Debts Due to Banks Act. The advisory group under the chairmanship of Alok Nigam, Joint Secretary (Banking Operations), recommended that NBFCs should be allowed to recover their debt in line with banks. The committee has urged the Finance Ministry to consider bringing NBFCs under the purview of the Recovery of Debts Due to Banks (RDDB) Act. “It would empower NBFCs in recovering their loans at par with banks and without significant delays. The existing procedure for recovery of debts by NBFCs, which takes a lot of time, has resulted in NBFCs treating a significant portion of their debts as unproductive loans,” the report submitted by the group said. (For details log on to : http://economictimes.indiatimes.com/news/economy/finance/strengthen-recovery-mechanism-for-nbfcs-finmin-panel/articleshow/12580749.cms)
BANKS FAIL THE ‘DEPOSITS’ TEST AFTER SEVEN YEARS
For six long years, the Indian banking industry has had no difficulty in collecting a larger sum as fresh deposits than the previous year. That record had been broken in 2011-12 with the industry failing to match the collections of 2010-11. For the year ended March 2012, banks added Rs 6.95 lakh crore to their deposit base, a decline from the figure of Rs 7.15 lakh crore garnered in 2010-11. The shortfall in fresh mobilisation also resulted in the growth rate declining from 16 per cent in 2010-11 to a little over 13 per cent in the fiscal year just gone by. The decline has come about despite a trend of rising interest rate that began in the later part of 2010-11 being sustained through the whole of 2011-12. (For details log on to : http://www.thehindubusinessline.com/todays-paper/article3294583.ece)
PSU BANKS TOLD TO IDENTIFY, SHUT LOSS-MAKING URBAN BRANCHES
NEW DELHI: The state-run banks could soon down shutters on many of their urban branches and close ATMs under a finance ministry goaded review of operation to identify and close down loss-making delivery channels to improve profitability. The North Block has asked the public sector banks to provide details of all the branches that are not making profit for the last two financial years, a finance ministry official said. The ministry, facing a difficult task of finding 3.5 lakh crore over the next ten years to capitalize state run banks, may then lean on the banks to close down branches that not profitable, particularly the urban ones. The higher profits will reduce the capitalization burden on the government. Net profit of public sector banks declined 2.7% in the first nine months of the last fiscal, as rising non-performing loans forced them to set aside more funds to cover potential losses. (For details log on to : http://economictimes.indiatimes.com/news/economy/finance/psu-banks-told-to-identify-shut-loss-making-urban-branches/articleshow/12590575.cms)
SBI WON’T CHARGE TRANSACTION FEE ON MUTUAL FUNDS
MUMBAI: State Bank of Indiawill no longer charge the recently-introduced transaction fee while selling mutual fund schemes to investors. The state-owned bank, one of the largest distributors of mutual fund schemes among lenders, which had earlier decided to charge its clients this fee, has now decided against it citing inconvenience in fee collection as the reason. Other banks, which sell mutual fund schemes, may also follow suit, industry sources said. Transaction fees are levied over and above advisory charges levied by the distributor. Market regulator Sebi, in July 2011, had imposed a transactional charge of 100 on existing mutual fund investors and 150 on first-time investors — an attempt by the regulator to incentivise fund distributors. (For details log on to : http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/sbi-wont-charge-transaction-fee-on-mutual-funds/articleshow/12590124.cms)
CORPORATION BANK PLANS PAN-INDIA EXPANSION
PUNE: Corporation Bank has planned to expand its presence across the country, chairman and managing director Ajai Kumar said on a visit to the zonal office in Pune to review the business operations. To expand branches in northern and western parts of the country, especially in Gujarat, Rajasthan, Punjaband Haryana, 12 new zonal offices have been opened recently, he added. Circle office concept being introduced by the Bank will hasten the decision-making process, he informed. He further announced that the Bank proposes to open SME loan centres across the country and first such centre shall be opened in Pune very soon. (For details log on to : http://www.financialexpress.com/news/corp-bank-plans-panindia-expansion/934138/)
UNION BANK TO FOCUS ON RETAIL BIZ, RECOVERY OF NPAS THIS FISCAL
KOLKATA: Union Bank of Indiaplans to focus on growing its retail business and recovery of non-performing assets this fiscal. The bank will tap the home and vehicle loan segments to expand its retail portfolio, said Mr D. Sarkar, Chairman and Managing Director, Union Bank. Mr Sarkar – former Executive Director of Allahabad Bank – took charge at Union bank of Indiaafter Mr M.V. Nair, retired on March 31. Currently, retail accounts for ten per cent of the bank’s total advances. As on December 31, 2011, Union Bank’s total advances stood at close to Rs 1.5 lakh crore. “With over 3,200 branches and 3,800 ATMs across the country, Union Bank has a strong delivery channel. We need to put this network of 7,000 odd delivery channels to optimum use in order to improve our retail portfolio,” Mr Sarkar told Business Line. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3294589.ece)
TECH-ORIENTATION REQUIRED FOR BANKERS: SHUBHALAKSHMI PANSE
Ms Shubhalakshmi Panse has been the Executive Director of Vijaya Bank for over two years now. She has handled a range of assignments including field postings as she moved up the hierarchy. She was earlier General Manager with Bank of Maharashtra where she began her career in 1976. She counts her stint as head of IT as one of her most interesting assignments. This gave her an understanding of the changes that were happening in banking and helped her mature as a leader. She says, “Unless your thinking is tech-oriented you can’t be a good banker. Any new customer project you take up, you should be IT-savvy. All bankers who are moving to the top should be more IT- savvy.” In an interview at her Bangaloreoffice, Ms Panse answered a range of questions on her bank and industry issues. This interview focused on how public sector banks are handling issues related to ATMs. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3294591.ece)
SYNDICATE BANK UNION PLEA FOR BETTER INDUSTRIAL RELATIONS
THIRUVANANTHAPURAM: The Syndicate Bank Staff Association (SBSA) has called for better human and industrial relations in the bank. A total shift is needed in the policies that govern the respective departments, said Mr K. S. Bhat, all-India Secretary of SBSA. Industrial relation in the bank has been deteriorating in recent times, he said in a statement here. Employees, especially the clerical staff, are made to toil owing to reduced manpower, stiff competition, and sky- high expectations of customers. Temporary posting of attenders and sweepers seems to have been perpetuated. Drivers work beyond working hours without proper compensation. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-others/tp-states/article3294622.ece)
DHANLAXMI BANK TO CUT CORPORATE BIZ, REDUCE STAFF TO BOOST FINANCIALS
MUMBAI: The Thrissur, Kerala-based Dhanlaxmi Bank, which is facing a strain on liquidity due to its bloated cost structure, will cut the size of its corporate business unit, downsize manpower and focus on high-yielding businesses, such as gold loans, to boost its financials. PG Jayakumar, the bank’s new managing director and chief executive officer, says the idea is to cut operating expenses by 50% for the year ending March 2013 from the previous year’s levels. “In the current scenario, cost reduction is as important as fresh income generation. Manpower deployment shall be base minimum, so that cost can come down,” Jayakumar said in a memo to the bank’s employees. Jayakumar, who is seen to be close to the employees’ unions, was appointed as the MD & CEO in February, when Amitabh Chaturvedi quit following differences with the bank’s management. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/dhanlaxmi-to-cut-corporate-biz-reduce-staff-to-boost-financials/articleshow/12590205.cms)
BASIX MAY TRANSFORM TO FIN SERVICES FIRM IF CDR NOT APPROVED: PROMOTER
Basix Microfinance may transform itself into a financial services offering company if the debt restructuring plan that it has proposed to banks, does not get through, Basix Group promoter Vijay Mahajan has said. He said the company, which is struggling to keep its head above waters like many others in the micro-finance sector, has already put forth the proposal offering services to some banks and was advised to wait. “The only other possibility (if CDR fails to take off) is to have purely partnership model with banks. That means there will be no loans on our books. Our staff is experienced in understanding rural customers. So we could become pure distribution company,” Mahajan told PTI. “That means we originate loans from banks and we service them. We will be paid a fee for that. A service company model or partnership model,” he said. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/basix-may-transform-to-fin-services-firm-if-cdr-not-approved/articleshow/12581243.cms)
SEBI TO OPEN 5 LOCAL OFFICES IN 2012-13
MUMBAI: With an aim to take its services at the door-step of investors, the Securities and Exchange Board of India (SEBI) has decided to open five more local offices, including at Chandigarhand Jaipur, in the current fiscal. As part of its decentralisation of work to regional offices, the Mumbai-headquartered Sebi is opening new local offices in different regions of the country. The five new offices will be opened at Chandigarh, Jaipur, Indore, Patnaor Bhuwneshwar and Banglore or Kochiin 2012-13, according to an official document. These offices have been “identified inter-alia” on the basis of number of demat accounts, registered folios, exchange trading terminals and rate of growth in beneficiary accounts. The idea behind new offices is to deepen of securities market. (For details log on to : http://economictimes.indiatimes.com/markets/regulation/sebi-to-open-5-local-offices-in-2012-13/articleshow/12590011.cms)
PE PLAYERS EYE OVERSEAS BOURSES TO LIST PORTFOLIO COMPANIES
MUMBAI: Private equity funds are looking to list their portfolio companies on overseas stock exchanges as the volatile Indian stock market offers them lower returns. “We have made structures for some of our portfolio vehicles in such a way that the listing of the holding company on the foreign stock exchanges becomes easier,” says Parag Saxena, founding general partner and CEO at PE firm New Silk Route (NSR). “If the foreign vehicle or the foreign holding company holds substantial assets, then a global listing is possible.” Ascend Telecom Infrastructure, Reliance Infratel, Aster, Coffee Day Resorts, KS Oils and 9X Media are some of New Silk Routeinvestment companies. Asia-focused New Silk Routehas been investing since 2006 and manages $1.4 billion. (For details log on to : http://www.financialexpress.com/news/pe-players-eye-overseas-bourses-to-list-portfolio-companies/934366/)
SEBI MULLS DERIVATIVE PUSH, NO-FRILLS A/C FOR MARKET GROWTH
NEW DELHI: With the number of new investor accounts falling by nearly half in the last fiscal and the trade volumes nearing a plateau, regulator Sebi is mulling various steps to deepen the Indian stock market this year. The measures are being undertaken to launch new products in the derivatives segment, already the mainstay of the market in terms of volumes, and introduce no-frills trading accounts to attract new investors to cash market as well. While the cash segment of the stock market involves sale and purchase of shares of listed companies, the derivatives trade provides for trade in contracts whose price is derived from change in the value of one or more underlying assets. In the Indian capital market, derivative contracts are available with underlying assets like individual stocks, stock indices, currencies, and interest rates, among others. However, trade volumes have been relatively sluggish in most of the non-stock derivatives and the steps would be taken this year to boost these segments, a senior official said. (For details log on to : http://www.business-standard.com/india/news/sebi-mulls-derivative-push-no-frills-ac-for-market-growth/470634/)