MUMBAI: The RBI may cut the repo rate by 25 basis points as economic recovery continues to remain fragile, say economists.
With factory output growth, as measured by the index of industrial production (IIP), in the April 2011-February 2012 period slowing to 3.5 per cent, against 8.1 per cent in the year-ago period, economists feel that growth concerns have come to the fore.
The central bank is scheduled to announce its Annual Monetary Policy for 2012-13 on April 17. It has indicated in the previous three policies that the rate cycle has peaked and future actions will be towards lowering the rates.
According to Ms Upasana Bharadwaj, Economist, ING Vysya Bank, weak economic growth momentum clearly warrants an initiative by the policymakers to propel investment activity. Hence, RBI is expected to cut the repo rate by 25 bps in the forthcoming meeting.
To tide over temporary liquidity mismatches, banks borrow funds from the RBI at the repo rate. The repo rate is currently at 8.50 per cent. (One basis point is equal to one-hundredth of a percentage point. or 0.01 per cent.)
Shift in focus
Mr Sudhakar Shanbhag, Chief Investment Officer, Kotak Mahindra Old Mutual Life Insurance, said the February IIP at 4.1 per cent was far below the market consensus of about 6.7 per cent.
Also, the rate and degree of revision of previous month’s data (to 1.1 per cent from 6.8 per cent) is increasingly making reliance on the data a challenge. “From the growth-inflation perspective, it is increasingly getting clear that focus has to shift to growth and hence the market expectation of rate cut from the RBI has increased post this data release…..
“Global dynamics especially oil prices are critical and RBI would also get to see the inflation release on April 16, 2012 before it takes a stand on rate cuts,” he said.
Primary Dealership firm STCI, in a report, observed that the RBI may cut policy rates mainly to provide some boost to the growth sentiment.
“We also expect the RBI to ease the cash reserve ratio by 50 basis points as liquidity is expected to tighten going ahead,” said Economists Mr Amol Agrawal and Ms Neetika Shridhar in the report.
Mr Chaitanya Pande, Head-Fixed Income, ICICI Prudential Asset Management, said the market is suffering from number fatigue, with the fiscal deficit and government borrowing overshooting the Budgeted target in 2011-12 and the IIP numbers getting revised lower.
He said the RBI may not act on the repo rate unless there is clear indication that the inflation is heading lower.
YEAR-END RUSH SEES RS 2 LAKH CR FLOWING INTO BANKING SYSTEM IN ONE WEEK
MUMBAI: The usual year-end scramble for deposits by banks turned into a mad rush this year, with Rs 2 lakh crore flowing into the banking system in the last week of March. This was the highest flow in at least five years. This helped deposits rise to Rs 9 lakh crore, compared to Rs 6.5 lakh crore in the previous financial year. Year-on-year deposit growth, which fell to 13.4 per cent just a fortnight back, shot up to 17.4 per cent as on March 30, data released by the Reserve Bank of India (RBI) showed. Bankers, however, said this was only a temporary phenomenon and the deposit base would come down sharply in April. RBI’s projected deposit growth for 2011-12 was 17 per cent. Meeting yearly targets, especially by public sector banks, led to this mad rush for deposits, but came at a very high cost. The rate on three-month certificate of deposits in the last week of March went up to 11.75 per cent – which is 150-200 bps higher than what it was a month back. Banks fear the high cost of deposits would dent their margins. (For details log on to : http://www.business-standard.com/india/news/year-end-rush-sees-rs-2-lakh-cr-flowing-into-banking-system-in-one-week/471311/)
R1,500-CRORE INFUSION INTO PUBLIC SECTOR BANKS IN FY13
NEW DELHI: The government on Friday said it will infuse about R1,500 crore into public sector banks (PSBs) during the current fiscal. “I understand… the constraints under which the Indian banking system is working… As you have noticed in the last two years, to build the capital adequacy of the Indian banking system, particularly PSBs, I have injected R32,000 crore,” said finance minister Pranab Mukherjee. “To improve the capital adequacy of public sector banks, I am going to provide around R1,500 crore in 2012-13 because we want our banks to have adequate capital so that they can compete with others,” he said. Speaking at the 118th foundation day function of Punjab National Bank, Mukherjee added: “We can fully meet expectations and meet Basel-III norms.” (For details log on to : http://www.financialexpress.com/news/r1-500cr-infusion-into-psbs-in-fy13/936483/)
FOREX RESERVES FALL TO 12-WEEK LOW, LARGELY ON RBI INTERVENTION
MUMBAI: India’s foreign exchange reserves declined to a 12-week low of $292.927 billion as of April 6 from $294.398 billion in the previous week, the central bank said in its weekly statistical supplement on Friday. This is a weekly drop of sharp $1,470 million compared to the drop of $742 million in the previous week. According to the data, in the financial year 2011-12, the reserves increased to the peak level of $ 320 billion at the first week of September, 2011 and reached its lowest at $292 billion in the second week of January, 2012. The reserves in the first week of new financial year 2012-13 are worst than it was in the beginning of the previous financial year, which was at $294.011 billion. (For details log on to : http://www.financialexpress.com/news/forex-reserves-fall-to-12week-low-largely-on-rbi-intervention/936478/)
ALLOW CUSTOMERS TO OPT FOR ELECTRONIC REPAYMENT: RBI TO BANKS
MUMBAI: Following complaints from customers, the Reserve Bank has made it clear to banks that there are no restrictions in allowing use of electronic modes for various transactions including repayment of loans. “It is, therefore, advised that all banks should allow the customers to choose National Electronic Funds Transfer (NEFT) as one of the electronic modes of making payment towards loan EMIs or repayments etc.” the RBI said in a notification today. Launched in 2005, the NEFT or an electronic transfer of funds has been occupying an important place in the payment system space of the banks. “The system is meant for one-to-one funds transfer and can be used for transferring funds to beneficiaries (individual, institutions etc) and no restrictions have been placed thereon,” the notification said. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/allow-customers-to-opt-for-electronic-repaymentrbi-to-banks/articleshow/12652772.cms)
DEVELOPMENT CREDIT BANK Q4 NET JUMPS 52% ON LOWER NPAs
MUMBAI: Development Credit Bank (DCB) today reported 52% rise in net profit at Rs 17.3 crore in the fourth quarter ended March 31 as against Rs 11.4 crore in the year-ago period on the back of lower provisioning and overall reduction in costs. “We have seen all-round improvement in our performance in Q4 as well as during the entire fiscal, driven by lower provisioning, reduction in overall cost and better quality of our loan books,” DCB Bank Managing Director and CEO Murali M Natrajan told PTI over phone from Bangalore. During the quarter under review, the bank’s gross NPA ratio came down to 4.40% at Rs 7 crore from 5.85% or Rs 11 crore. Its net NPA ratio improved to 0.57% from 0.96%. For the full year, the bank, which primarily focuses on MSMEs, SMEs and retail mortgages, saw its net profit more than doubling to Rs 55.1 crore from Rs 21.4 crore, driven by lower provisioning which massively came down to Rs 29 crore from Rs 65 crore. (For details log on to : http://www.business-standard.com/india/news/development-credit-bank-q4-net-jumps-52lower-npas/162963/on)
HDFC’S KEKI MISTRY SAYS REPO RATE CUT LIKELY SOON
MUMBAI: The largest mortgage player HDFC said there is a possibility of a cut in the repo rate or the rate at which banks borrow from the central bank, in the immediate future, but ruled out a reduction in cash reserve ratio. “The amount of funds being raised by banks through the liquid adjustment facility has come down and is now hovering around Rs 70,000-90,000 crore, which is not significantly higher than the Reserve Bank’s comfort level of Rs 60,000 crore. So, any injection of liquidity (through a CRR cut) is unlikely. However, reduction in interest rate during this quarter is very much expected,” HDFC chief executive Keki Mistry told reporters here today. Mistry, who was talking to reporters on the sidelines of a BSE function, however, said timing of the cut in repo rate is difficult to predict. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/hdfcs-keki-mistry-says-repo-rate-cut-likely-soon/articleshow/12652718.cms)
WINDOW DRESSING: COMMERCIAL BANKS RAISE RS 2 LAKH CRORE IN 6 DAYS
MUMBAI: Commercial banks in the country raised a record Rs 2 lakh crore as deposits in the last six days of March, managing to achieve an annual growth of 17.4% and reaching the Reserve Bank’s comfort zone. This is reckoned to be the largest window-dressing effort to shore up the deposit figures. Banks raised a total of Rs 61.12 lakh crore as on March 30, up Rs 2 lakh crore since March 23. Banks succeeded in raising huge amounts in a short span as many large banks, including the country’s largest, State Bank of India, raised deposit rates, particularly for shorter tenor products in the last few days, despite the Reserve Bank signalling rates may ease. Besides, banks were also selling certificates of deposits, or CDs, at high rates. Rates on three-month CDs were around 10% in the last week of March. Even though the rates were marginally lower than in the previous weeks, they were still reckoned to be high. Besides, banks have been raising rates and have also created special tenors like 91-day deposits and 100-day deposits, which offered 9% to 10%. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/window-dressing-commercial-banks-raise-rs-2-lakh-crore-in-6-days/articleshow/12658094.cms)
EUROPEAN CENTRAL BANK FAVOURS BUYING BONDS OVER BANK LOANS
LONDON/FRANKFURT: The European Central Bank will restart its controversial government bond purchases rather than offer banks another round of unlimited three-year loans as the sovereign debt crisis worsens, a survey of economists shows. Of 22 economists polled this week, 17 predicted the ECB will be forced to resume the securities markets programme while only one forecast it will offer another batch of three-year cash. Nine said the central bank may consider shorter maturity loans of one or two years. “Market stresses will eventually force the ECB to restart the bond programme, but it’s not imminent,” said Ken Wattret, chief euro-area economist at BNP Paribas in London, who participated in the survey conducted April 11-12. “Trying to get consensus on the council for it will be difficult.” (For details log on to : http://www.business-standard.com/india/news/ecb-favours-buying-bonds-over-bank-loans/471304/)
FURTHER CRR CUT WILL ENSURE THE MUCH NEEDED LIQUIDITY: HSBC
KOLKATA: Ahead of the Reserve Bank of India’s monetary policy next Tuesday, Naina Lal Kidwai, country head in Indiaand director for Asia Pacific, HSBC, on Friday said liquidity crunch called for a further cut in cash reserve ratio (CRR) and token reduction in interest rate. The RBI has cut CRR by a total of 125 basis points since January amidst staggering gross domestic product (GDP) growth numbers. While the CRR cut had injected close to Rs z30,000-40,000 crore in the money markets, the same amount was withdrawn by depositors between January-March 2012, said Kidwai. “In effect, the money in circulation has been counterbalanced in the system. It has cancelled the potential impact of CRR cut. Tight liquidity points to high interest rates,” said Kidwai. (For details log on to : http://www.business-standard.com/india/news/further-crr-cut-will-ensuremuch-needed-liquidity-hsbc/471297/)
JPMORGAN PROFIT FALLS 3.1%, BEATS ESTIMATES
JPMorgan Chase reported a 3.1% drop in earnings, a smaller decline than analysts estimated as mortgage revenue surged and trading almost doubled from the fourth quarter. First-quarter net income fell to $5.38 billion, or $1.31 a share, from a record $5.56 billion, or $1.28, in the same period a year earlier when there were more shares outstanding, the New York-based company said on Friday in a statement. Per-share profit compared with an average estimate of $1.17 from 28 analysts surveyed by Bloomberg. JPMorgan, led by chief executive officer Jamie Dimon, 56, benefited from gains in mortgage lending as low interest rates and federal incentive programmes encouraged homeowners to refinance. (For details log on to : http://www.financialexpress.com/news/jpmorgan-profit-falls-3.1-beats-estimates/936484/)
LIQUIDITY CHALLENGE LIKELY TO RE-EMERGE IN 2012-13, SAYS STANDARD CHARTERED
NEW DELHI: Projecting a challenging year for the Indian banking sector, global financial services major Standard Chartered today said the liquidity challenge is likely to re-emerge in 2012-13, forcing RBI to take action. “Our projections for FY13 indicate that the liquidity challenge is likely to re-emerge, necessitating RBI action,” a research report from Standard Chartered said. After 125 basis points (bps) of cash reserve ratio (CRR) reductions in the second half of 2011-12, it said “we expect the RBI to rely more heavily on OMOs (open market operations) in FY13”. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/liquidity-challenge-likely-to-re-emerge-in-2012-13-says-standard-chartered/articleshow/12655558.cms)
INSURERS TOLD TO FOLLOW EXPENSES REPORTING NORMS STRICTLY
The insurance regulator has asked insurers to strictly adhere to norms related to reporting of expenses management to ensure uniformity. In a circular sent to all insurance companies, Mr R. K. Nair, Member (Finance and Investments), said a detailed review of statements filed by the insurers had shown divergent practices in the interpretation of terms mentioned in the regulation. These divergences are mainly observed in the interpretation of the terms ‘charges’ and ‘expenses capitalised’, he said. Clarifying the intended meaning of the terms, the IRDA said charges would include all charges levied directly or indirectly in respect of the insurance business, but exclude taxes which are a charge against profits. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3312522.ece)
IRDA FINES BIRLA SUN LIFE
HYDERABAD: The Insurance Regulatory and Development Authority has imposed a penalty of Rs 6 lakh on Birla Sun Life Insurance Company Ltd. The fine was imposed for involvement of unlicensed entities in solicitation of insurance business and violation of norms pertaining to the settlement of claims in the group policies. The regulator has also directed the company to stop payment of commission to agents in all such cases where premium is funded by the company as part of premium waiver benefit. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3312525.ece)
BHARTI AXA TARGETS 45% GROWTH IN GROSS PREMIUM INCOME THIS YEAR
COIMBATORE: Bharti AXA General Insurance (GI) is planning to double its business in the South by December 2012. The company’s premium income grew by 47 per cent to Rs 775 crore in 2011, its Senior Vice-President and Head (Motor Vertical), Mr K. N. Murali, said. The company is targeting 45 per cent growth in gross premium income this calendar year. To achieve the growth target, the company plans to penetrate deeper into smaller cities and towns through strategic tie-ups with micro financial institutions and by tapping the small and medium businesses in the region. He said Coimbatorehas been a key market for the company, contributing to nearly 10 per cent of its overall business in Tamil Nadu. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-others/tp-states/article3312565.ece)
THE DEAL PROVIDES THE RIGHT SIGNAL FOR INTRINSIC VALUE OF MAX INDIA: RAHUL KHOSLA
MUMBAI: With more than Rs 800 crore in its pocket following the deal with Japanese insurer, Mitsui Sumitomo, Max India is looking to tap newer growth opportunities, both organic and inorganic. Rahul Khosla, managing director, tells Niladri Bhattacharya, the deal augurs well for the group, as it means substantial gains without diluting stake in the company. Edited excerpts: Talk us through how this deal worked out. What’s the rationale behind the deal? New York Life (NYL), as a part of its global strategy was looking to exit some markets like Indiaand China, to concentrate on its core markets in the USand Mexico. There was an unsolicited offer from Mitsui to New York Life, which fetched an attractive valuation (more than Rs 10,500 crore). This gave NYL a good return for their investments and an exit route from Indiasince they are focusing more on their core markets. For Max India, it meant a substantial gain for the group without diluting the stake in the company while gaining a partner whose strategy and outlook are aligned with ours. Max New York Life is the most profitable business in Max India’s portfolio and forms about 80 per cent of the Group’s revenue. Given this, the deal provides the right signal for the intrinsic value of Max India. (For details log on to : http://www.business-standard.com/india/news/the-deal-providesright-signal-for-intrinsic-valuemax-india-rahul-khosla/471312/)
LIC HOUSING PLANS TO RAISE R25,000 CRORE
MUMBAI: LIC Housing Finance, a subsidiary of state-run insurance giant LIC, is planning to borrow around R25,000 crore in the current financial year, which is about 13.5% higher than FY12, a top official said today. “We have plans to borrow around R25,000 crore in the current fiscal to support our business growth against R22,000 crore we had raised last fiscal,” LIC Housing chief executive V K Sharma said on the sidelines of an event organised by Indian Merchants Chamber here. Sharma said most of these funds would be raised through bonds. The housing finance firm raises money from banks and also from markets by issuing bonds. The ratio of money raised through bonds is around 65% of the total fund raised by the company. On growth projection for FY13, Sharma said the company is likely to grow its loan book by 20-25%. “We hope to grow by around 20-25% in the current financial year.” (For details log on to : http://www.financialexpress.com/news/lic-housing-plans-to-raise-r25-000-cr/936475/)
IL&FS TRANSPORTATION PLANS TO SELL $200-M YUAN BONDS
MUMBAI: A unit of India’s IL&FS Transportation Networks is looking to raise up to $200 million worth of yuan-denominated bonds, sources close to the deal said on Friday, which would be the second dimsum bond offering by an Indian company. ITNL Offshore is set to start road shows for the sale in Singaporeon Monday, and in Hong the following day, the sources said. RBS, Deutsche Bank and UBS are the underwriters for the deal, they said. ITNL Offshore, a Singapore based unit of IL&FS Transportation, is likely to borrow in the three or five years maturity buckets depending on investor response, said the source. It was not immediately clear what the proceeds would be used for. The bonds are unconditionally and irrevocably guaranteed by the Export-Import Bank of India, a source said. (For details log on to : http://www.financialexpress.com/news/il&fs-transportation-plans-to-sell-200m-yuan-bonds/936481/)
COMPANIES MUST HIKE PUBLIC HOLDING TO 25 PER CENT BY AUGUST 2013: SEBI
MUMBAI: The capital market regulator has issued a stern warning to companies that are taking lightly the requirements of the minimum public shareholding norms. The watchdog has made it clear that the deadline will not be extended and the non-compliant entities will be seriously dealt with. Speaking at a seminar, the Securities and Exchange Board of India (Sebi) chairman UK Sinha said enough time has been given to companies to comply with the regulations and there will be no extension. “The companies and their advisors are perhaps thinking that this time limit will be extended. But let me tell you, that I am going to make it difficult,” he said. “This is a very important requirement. Three years’ time-frame has been given, more than one-and-half years are over, but there is absolutely no movement towards it,” he added. (For details log on to : http://www.financialexpress.com/news/cos-must-hike-public-holding-to-25-by-aug-13-sebi/936518/)
SEBI TO ISSUE CONSENT ORDER NORMS IN FOUR WEEKS
MUMBAI: The Securities and Exchange Board of India (Sebi) on Friday said it would unveil a new set of norms for consent order settlement in four weeks. Market players say this could pave the way for settlement of the much-awaited insider trading case against the Mukesh Ambani-led Reliance Industries Ltd (RIL). On the sidelines of an event on Friday at the Bombay Stock Exchange, Sebi Chairman U K Sinha said consent order guidelines would be out in four weeks. Sinha had expressed disapproval of the ‘arbitrary’ manner in which certain serious cases were settled by the regulator in the past, said top officials. The consent order mechanism was adopted by Sebi in 2007. Those charged with specific violations were let off by paying a settlement charge, without admitting or denying guilt. This helped Sebi rake in close to Rs 200 crore in just over four years. Even some of the serious market manipulation cases and those related to the Initial Public Offer scam were let off under these norms. (For details log on to : http://www.business-standard.com/india/news/sebi-to-issue-consent-order-norms-in-four-weeks/471289/)
NO AMC IS KEEN ON REAL ESTATE MUTUAL FUND
MUMBAI: No fund house has launched a Real Estate Mutual Fund (REMF) even four years after regulations were made. “Even while the regulator was keen, the funds weren’t,” Mr U K Sinha, Chairman of SEBI said on Friday The regulations for REMFs were released in 2008-09. These were defined as mutual fund schemes established in the form of a trust, which invests directly or indirectly in real estate assets or other permissible assets. The fund is allowed to invest at least 75 per cent of the scheme’s net assets in real estate companies and related securities. Of this, a minimum of 35 per cent was to be invested directly into real estate. The funds were also not allowed to invest more than 30 per cent in a single city, not more than 15 per cent in a single real estate project and not more than 25 per cent of the total issue capital of any unlisted company. These funds were required to have mandatory listing on the stock exchanges. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-markets/article3312513.ece)