MUMBAI: The Cabinet-approved Banking Amendments Bill proposing a rise in public sector bank shareholders’ voting rights may see investors vie for larger stakes and a greater say. The cap on voting rights is proposed to be raised from one to 10 per cent in public sector banks (PSBs) and from 10 to 26 per cent in private sector banks. The Bill will now go to Parliament.
In essence, it means the government is opening doors for investors who want to have voting rights and a say in the working of PSBs — a move many see as positive. Earlier, even if an investor held more than one per cent in a PSB, their voting rights were limited to one per cent. For instance, Lazard Asset Management LLC (a foreign institutional investor) held 4.6 per cent in Punjab National Bank at March-end. However, its voting rights were limited to one per cent. Now, the FII may feel encouraged to raise its stake for more voting powers.
Ashwin Parekh, partner (financial services), Ernst & Young, said, “This is a constructive change, as there has been improvement in the working of state-owned banks due to competition. The increase in investors’ interest (institutional investors) will bring in further improvement in governance.”
Industry officials said domestic and foreign institutional investors (FIIs), with substantial holding, would get a chance to seek a board seat. There could be one board seat that may come to FIIs or non-government shareholders.
With PSBs accounting for over 70 per cent of banking assets, their equity capital requirement is going to be huge. But given the state of government finances, it may think of lowering the threshold for its minimum stake below 51 per cent to facilitate fund-raising from the market. The move may be a precedent to that as well because it will encourage institutional investors to participate in any equity offering by PSBs.
There could be a couple of hurdles. For one, according to Reserve Bank of India guidelines, any investor can hold stake in a bank only up to five per cent. Any investor wanting to hold above this limit needs the banking regulator’s permission.
Another hindrance, many say, could be the government’s tight grip on the working of PSBs. The government has been asking banks to hike exposure to retail loans, review rate policies (effectively, cut lending rates) and so on. That may sour any potential investor’s mood.
An industry official said, “Decisions like waiving off farm loans would be debated more in board meetings if there are non-government officials present.” A senior India Banks’ Association official says at present it is the government that calls the shots through its board nominees. Plus, the CMD and executive directors are its employees. “It will be a good beginning but it is going to be long-drawn process to see a shift in corporate governance at PSB boards,” added the official.
Hemindra Hazari, head of institutional equity research at Nirmal Bang Securities, said the move should give shareholders some say in management.
NOW YOUR ACCOUNT IS PORTABLE WITHIN YOUR BANK
MUMBAI: Bank customers who change jobs or shift homes will find it easier to shift their account to a branch at the new location. Reserve Bank of India has made it mandatory for banks to permit customers to transfer accounts from one branch to another without insisting on fresh account opening or making the customer undergo full know your customer process again. In the past because accountholder information was maintained with local branches, banks used to insist that customers go through the account opening procedure all over again when they shift to a different location. “It has been brought to our notice that some banks are insisting on opening of fresh accounts by customers when customers approach them for transferring their account from one branch of the bank to another branch of the same bank. Such insistence on opening of fresh account or making the customer undergo full KYC process again causes inconvenience to them resulting in poor customer service,” RBI said in a circular to all banks. (For details log on to : http://timesofindia.indiatimes.com/business/india-business/Now-your-account-is-portable-within-your-bank/articleshow/12898792.cms)
FINANCE MINISTRY PULLED UP FOR WRONG FOOD BILL MATH
NEW DELHI: An expert panel of the Planning Commission has pulled up the finance ministry for underestimating the food subsidy in the Budget, saying the unrealistic assessment would lead to avoidable payment of arrears and interest payouts. A working group for the 12th Five Year Plan (2012-17) said in a report that since implementing the Food Security Bill will raise the government’s subsidy burden from Rs 80,000 crore in 2011-12 to over Rs 1,00,000 crore, the finance ministry should have budgeted a more realistic amount for food subsidy. The ministry has earmarked Rs 75,000 crore for food subsidy in 2012-13. “When the Food Security Bill is implemented, the subsidy levels will rise to more than Rs 1 lakh crore,” a senior official in the Planning Commission told ET. “If the figures are under-budgeted, then interest payouts on such a huge sum will be devastating for the fisc.” (For details log on to : http://economictimes.indiatimes.com/news/economy/finance/finance-ministry-pulled-up-for-underestimating-the-food-subsidy-in-the-budget/articleshow/12904040.cms)
US SAYS RETRO TAX TO IMPACT INVESTMENT, PRANAB DIFFERS
NEW DELHI: Finance Minister Pranab Mukherjee on Friday told Lok Sabha the retrospective amendments to the tax laws proposed in the Budget will not have any impact on foreign investment, just after the new USambassador to Indiaraised the issue at a business function. The proposed amendments will not override the provisions of the Double Taxation Avoidance Agreements with 82 countries, the finance minister said. Proposed amendments ‘just clarify’ what is already there in law to remove ambiguity and provide certainty, he said even as the USraised the issue again. “… it will not have any impact on foreign investment flow in the country. This is more so because these clarifications … will not override the provisions of Double Taxation Avoidance Agreements with 82 countries…,” Mr Mukherjee said. (For details log on to : http://economictimes.indiatimes.com/news/economy/finance/us-says-retrospective-tax-to-impact-investment-pranab-mukherjee-differs/articleshow/12904203.cms)
STAGE SET FOR DEBUT OF NEW PRIVATE BANKS
NEW DELHI: Decks have been cleared for the Reserve Bank of India (RBI) to issue new bank licences to private sector players, with the Union Cabinet on Thursday approving amendments to the Banking Regulations Bill which clarifies regulatory issues in this respect. The government hopes the Banking Laws (Amendment) Bill will be passed in the Budget session of Parliament. While welcoming the move towards entry of new banks, analysts criticised the government’s decision to cap shareholders’ voting rights. The Cabinet approved a proposal from the standing committee on finance to cap shareholders’ voting rights in private banks at 26% irrespective of their total holding, as against the original proposal of aligning voting rights with the level of shareholding. At present, voting rights in private banks are capped at 10% irrespective of their shareholding in the entity. (For details log on to : http://www.financialexpress.com/news/stage-set-for-debut-of-new-private-banks/942708/)
INDIAN BANK, IOB CUT LENDING RATES BY 0.25%
NEW DELHI: Indian Bank and Indian Overseas Bank (IOB) today slashed lending rates by 0.25 per cent, in line with other lenders. The separate announcements come a week after RBI reduced policy rate by 0.5 per cent. The bank decided to reduce its base rate by 0.25 per cent from the existing 10.75 per cent to 10.50 per cent per annum, Indian Bank said in a filing on the BSE. Similarly, IOB has also cut the base rate to 10.50 per cent from 10.75 per cent. Base rate is the benchmark rate below which a bank cannot lend. With the reduction in the base rate all kinds of loans would be cheaper by at least 0.25 per cent. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/indian-bank-iob-cut-lending-rates-by-0-25/articleshow/12901670.cms)
SBI STAFF UNION MEET TO DISCUSS WAGE ISSUES
THIRUVANANTHAPURAM: A special convention of the State Bank Staff Union will be held in Kochion Sunday to discuss the various issues concerning the pay revision in the banking sector. According to a SBSU (Kerala circle) release, union leaders from south Indian states would participate in the meet which would focus on wage reivison due in the banking sector as well as various contemporary issues relating to banking sector. Papers would be presented on topics like “the 10th bilateral agreement–possibilities and challenges”, ” financial sector and tasks of trade unions” and ” contemporary issues in the banking sector”, SBSU general secretary A Jayakumar said. Union Minister for Food and Civil Supplies, K V Thomas, will inaugurate the convention to be presided by SBSU Kerala Circlepresident M Sreepathi Rao. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sbi-staff-union-meet-to-discuss-wage-issues/articleshow/12893410.cms)
AXIS BANK Q4 NET UP 25% ON LOWER PROVISIONING
MUMBAI: Private sector lender Axis Bank on Friday reported a 25 per cent rise in net profit for the quarter ended March on the back of robust growth in net interest income and fee income, and lower provisioning. Net profit rose to Rs 1,277 crore, from Rs 1,020 crore a year earlier. Net interest income grew by 26 per cent to Rs 2,146 crore in the fourth quarter, while fee income was up eight per cent to Rs 1,327 crore. Provisioning was down from Rs 254 crore to Rs 139 crore. The bank clocked annual growth of 19 per cent in advances and 16 per cent in deposits. Shikha Sharma, managing director and chief executive officer of Axis Bank, said the lender would aim to achieve credit growth of above 17 per cent, the projection made by the Reserve Bank of Indiafor 2012-13. Current accounts and savings accounts constituted 42 per cent of the total bank deposits at the end of 2011-12. However, an increase in the cost of funds led to lower net interest margins (NIMs) during the quarter. NIMs fell from 3.65 per cent to 3.59 per cent. (For details log on to: http://www.business-standard.com/india/news/axis-bank-q4-net25lower-provisioning/472841/)
ICICI RECORDS 31% HIGHER Q4 NET, RAISES LOAN QUALITY
MUMBAI: In a good set of numbers, India’s number two lender ICICI Bank on Friday reported a 31% year-on-year (y-o-y) growth in net profit to R1,901.76 crore for the fourth quarter of 2011-12. The bottom line was driven up by a 24% y-o-y increase in net interest income supplemented by strong other income growth, up 36% y-o-y to R2,228 crore. Profitability improved with net interest margins (NIMs) up 31 basis points sequentially to 3.01%. The ICICI Bank stock gained 2.28% to close at R860.75 on the Bombay Stock Exchange, on a day when the benchmark 30-share Sensex ended flat. While the quantum of loans restructured during the three months to March 2012, was R,200 crore, taking the outstanding restructured portfolio to R4,256 crore, the bank’s asset quality improved. While gross net performing assets (NPAs) fell 20 bps sequentially to 3.62%, net NPAs came off to 0.73%, lower by 10 bps over the December 2011 quarter. “The bulk of the restructuring has been completed and while there could be some restructuring in the pipeline, it would be a small amount,” Chanda Kochhar, MD and CEO, said, adding the outlook on asset quality was stable. (For details log on to : http://www.financialexpress.com/news/icici-records-31-higher-q4-net-raises-loan-quality/942701/)
AXIS BANK REWORKS SHARE SWAP RATIO FOR ENAM DEAL
MUMBAI: After the much-awaited green signal from the apex bank to its much-delayed takeover of Enam Securities, Axis Bank today reassessed the valuation and said Enam shareholders will now get only five shares of the bank for every single share of the brokerage firm. As per the revised scheme, Enam shareholders will receive five Axis Bank shares for one Enam share held, translating into about 2.93 per cent shareholding in Axis bank, managing director and chief executive of Axis Bank Shikha Sharma told reporters here late this evening. She said the prevailing market conditions and commercial considerations have prompted this revision. Earlier, the swap ratio was 5.7 shares of the bank for one Enam share and the brokerage firm would have got 3.3 per cent stake in the bank. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/axis-bank-reworks-share-swap-ratio-for-enam-deal/articleshow/12901770.cms)
RABOBANK SELLS 3.4% STAKE IN YES BANK FOR RS 453 CRORE
NEW DELHI: The Netherlands-based Rabobank today sold about 3.4 per cent stake in the private sector lender Yes Bank for about Rs 453 crore. Rabobank sold 1.26 crore shares of Yes Bank for Rs 357.03 a piece through an open market transactions. Of this, Bajaj Allianz Life insurance picked up 25.2 lakh shares, while Citigroup Global Markets Mauritius picked up 22 lakh shares at Rs 357 per unit, according to the BSE data. Rabobank owned about 1.67 crore shares or 4.73 per cent stake in Yes Bank at the end of March 31, 2012. Shares of Yes Bank closed at Rs 357.10 on the BSE, down 2.54 per cent. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/rabobank-sells-3-4-stake-in-yes-bank-for-rs-453-crore/articleshow/12898783.cms)
$63.7 BILLION REMITTANCES FROM NRIs IN 2011
NEW DELHI: Weak rupee and robust economic activities in the Gulf region resulted in Indiareceiving the highest amount of remittances among developing countries at $63.7 billion from nationals working overseas in 2011. In fact, the country is estimated to have got marginally more remittances than neighbouring Chinathat received $62.5 billion, according to an update on migration and remittances released by World Bank on Friday. The World Bank said the remittance flow to Indiasurged by $5.8 billion due to the weak rupee and robust economic activities in the Gulf countries, which are the major destinations of recent migrants. The pickup in inflows have come very timely for India, as it has struggled to attract capital flow to bridge the high current account deficit. (For details log on to : http://www.business-standard.com/india/news/637-bn-remittancesnris-in-2011/472854/)
CREDIT SUISSE, BARCLAYS FEEL INVESTOR IRE
LONDON/ZURICH: Annual shareholder meetings were stormy at Credit Suisse and Barclays on Friday, with many attendees complaining bosses are getting too big a slice of bank income at their expense. But pay plans of both banks got enough votes to pass, the banks said. “You should be ashamed of yourselves for taking so much money away from us,” said Rudolf Weber, to applause from other shareholders at the Credit Suisse meeting. “We are the owners of this bank, and you are our employees. We should be the ones who decide what you earn.” Barclays’ investors expressed discontent over the 17-million pounds pay package handed to CEO Bob Diamond last year. At Credit Suisse, chief executive Brady Dougan was not the top earner for 2011 – that honour went to Robert Shafir, who earned 8.5 million francs for running the asset management arm which posted a 10 per cent rise in pre-tax profit. Almost a third of Credit Suisse shareholders rejected the bank’s pay plan on Friday and over a quarter of shareholders of UKrival Barclays voiced opposition to the bank’s remuneration report. (For details log on to : http://www.business-standard.com/india/news/credit-suisse-barclays-feel-investor-ire/472826/)
I-T DEPT SLAPS RS 9,000-CRORE TAX NOTICE ON LIC: REPORTS
MUMBAI/NEW DELHI: The Income Tax department has slapped the Life Insurance Corporation of India (LIC) with a notice demanding a tax of Rs 9,000 crore. It was in December 2011 that the country’s largest life insurer was served with the tax demand, on a Rs 37,000-crore entry. The reason, according to television reports, is negative reserves in LIC’s 2008-09 balance-sheet. The I-T department has issued this notice after taking into account Rs 37,000 crore of income that the LIC had treated as “negative reserves”, but the tax authority argues this was actual income. LIC officials, when contacted, denied receiving any such notice. IT officials, though, confirmed the demand was raised in December 2011, and the matter was before an appellate authority. “Negative reserves represent the present value of premium receivables on a policy contract, minus the liabilities during the tenure of the policy,” the report said. (For details log on to : http://www.business-standard.com/india/news/i-t-dept-slaps-rs-9000-cr-tax-noticelic-reports/472855/)
INDIABULLS FINANCIAL SERVICES TO MERGE WITH INDIABULLS HOUSING FINANCE, PROMOTERS TO INFUSE RS 451 CRORE
MUMBAI: Indiabulls Financial Services will merge with its wholly owned company Indiabulls Housing Finance while the promoters of Indiabulls Financial will infuse Rs 451 crore capital in the company. This was decided in a board meeting of Indiabulls Financial Services held today. The company also announced a 350% dividend on the back of 302 crore profit earned in the fourth quarter ending March 2012, a rise of 27% over the corresponding period last year. The promoters will infuse capital by way warrants that can be convertible into equity shares at Rs 218 per share and partly by preferential allotment of shares. With regards to the merger, Indiabulls Housing Finance said that Amarchand & Mangaldas & Suresh Shroff & Co are acting as legal advisor and it will be with effect from April 1, 2012. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/indiabulls-financial-services-to-merge-with-indiabulls-housing-finance-promoters-to-infuse-rs-451-cr/articleshow/12894496.cms)
MAGMA FINCORP PLANS HOUSING FINANCE SUBSIDIARY
KOLKATA: Asset finance company Magma Fincorp plans to enter into the housing finance market which is growing at 17-18% rate. It is also going to start gold loan business this fiscal. Magma vice chairman and managing director Sanjay Chamria said it plans a separate subsidiary for housing finance business and will focus on affordable housing segment in tier 4 to 6 towns. “We will apply for the licence shortly,”” Chamria said. “”It will be a 100% subsidiary to start with,”” he said. The proposed company will be registered with National Housing Bank. T he country’s Rs 5 lakh crore mortgage finance market is growing at 17-18% rate with Rs 1.5 lakh crore of incremental annual business. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/magma-fincorp-plans-housing-finance-subsidiary/articleshow/12896457.cms)
MAHINDRA FINANCE TO VENTURE INTO SMALL BUSINESS LENDING
NEW DELHI: Mahindra Finance plans to take its first step into corporate lending this year with small and medium enterprise (SME) financing. For the BSE-listed firm, this will add to an expansive portfolio — from auto lending and second-hand vehicle loans, to housing loans and insurance broking. “It’s in synergy with our core business. We have a large Mahindra supplier and dealer network, so we will start by participating in their expansion plans,” Mr Ramesh Iyer, Managing Director, Mahindra & Mahindra Financial Services, told Business Line. Though the financer’s focus will remain on rural and semi-urban India, the new product will be offered in around 60 of its 600-plus branches in the bigger cities. In the first year, the company is eyeing up to Rs 1,000 crore of SME financing, with a target of Rs 4,000 crore in three years. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-economy/article3361851.ece)
IDFC TO RAISE $1-1.5 BILLION FOR NEW INFRASTRUCTURE FUND
MUMBAI: India’s Infrastructure Development and Finance Co is in the early stages of raising US $1 to $1.5 billion for a new fund to invest in infrastructure in the country, two sources with direct knowledge of the matter told Reuters. The funds will be raised for IDFC Project Equity, in which Citigroup and I ndia Infrastructure Finance Co, a state-owned infrastructure finance firm, are key investors, the sources said. The company already has a project equity fund, which manages about $930 million in roads, ports, airports and power projects. The new fund, which is set to be launched in the second half of this year, will also invest in such projects, said the sources. (For details log on to : http://www.tribuneindia.com/2012/20120428/biz.htm#2)
FIIs BULLISH ON INDIA EQUITY FUNDS
MUMBAI: Foreign portfolio investors seem to have taken a fancy for equity mutual funds these days, even as their domestic counterparts are reducing exposure to such funds. Better onshore fund management capabilities of Indian fund managers coupled with high levels of transparency and exposure to quality second-line stocks are prompting international pension funds and insurance pools to invest in domestic equity funds, industry sources said. According to AMFI data, FII investments in equity funds stood at Rs 1,212 crore over 87 folios at March 31, 2012 against Rs 1,048 crore in September 2011 and Rs 1,027 crore in March 2011. Though the increase in allocation is only marginal, there’s a feeling in industry that this could be just the beginning of large long-only funds giving core investment mandates to Indian fund managers. (For details log on to : http://economictimes.indiatimes.com/markets/stocks/market-news/fiis-bullish-on-india-equity-funds/articleshow/12904358.cms)
HSBC SECURITIES SEES SENSEX AT 19,300 BY YEAR-END
MUMBAI: HSBC Securities has set an year-end Sensex target of 19,300, citing slowing momentum of earnings cuts, easing monetary policy and favourable valuations. The foreign brokerage’s target implies a 12.63 per cent upside for the 30-stock benchmark index of the Bombay Stock Exchange (BSE) from its last close of 17,134.25 on Friday. According to HSBC, the Sensex is trading at about 13.5 times its forward price-to-earnings (PE), below its five-year average of 15.5 times. “This should provide some comfort to investors that the market is not being fuelled by excesses,” said Jitendra Sriram, head of research–India, HSBC Securities, in a strategy note. (For details log on to : http://www.business-standard.com/india/news/hsbc-securities-sees-sensex-at-19300-by-year-end/472817/)