MUMBAI: The Reserve Bank of India swung into action today after the rupee depreciated 1.7 per cent in four trading sessions and went close to its all-time low levels in early trade today. In a communication made after market hours, the central bank relaxed norms to encourage foreign currency inflows.
The RBI relaxed the interest rate ceiling on foreign currency non-resident (FCNR) deposits of banks with maturities of one to three years to 200 basis points above the LIBOR or swap rate, from 125 basis points now. On three-five year maturity FCNR deposits, the rate ceiling will be relaxed to 300 basis points above LIBOR. The central bank also allowed banks to freely determine the interest rates on export credit in foreign currency.
Market participants, however, said these measures might help the rupee only marginally, as deposit rates were having a softer bias. Clarification on policy issues like General Anti Avoidance Rules (GAAR) and correction in oil prices will play an important role on the fate of the Indian currency.
The central bank’s announcement came on the back of high volatility in the foreign exchange market that saw the domestic currency weaken to 53.92 in early trade, triggered by comments made by Minister of State for Finance S S Palanimanickam that the country would review the tax treaty with Mauritius.
However, during the last hour of trade, the currency staged a remarkable recovery when state-run lenders started selling dollars on behalf of the central bank. Exporters also helped the rupee gain, as software majors and a heavy engineering firm sold dollars to book profits in anticipation of resistance at the 54 a dollar level.
All that helped the rupee close at 53.48 a dollar, a little weaker than yesterday’s close of 53.41. However, the currency bounced in both directions as it touched an intra-day low of 53.92 in early trade and then rose to 53.44 towards the end of the day, according to Bloomberg data.
While the central bank intervention was seen around $200 million, exporters, including a few large ones, sold around $500 million to take advantage of the weak rupee levels.
Finance Minister Pranab Mukherjee today blamed volatility in global commodity prices for currency depreciation and said the deteriorating balance of payments (BoP) situation in several Asian countries also put stress on currencies.
“In several Asian countries, excepting China, the BoP is under stress, which leads to currency depreciation,” Mukherjee told reporters in Manila.
“There is a high possibility of the rupee falling to all-time low levels if it breaches the current resistance at 53.80. There is a need for clarity from the government in terms of policies like the General Anti Avoidance Rule to strengthen foreign fund inflows,” said Ajay Marwaha, executive vice-president and head of trading at HDFC Bank.
Deutsche Bank pointed out in a report that over 40 per cent of FII investment into Indian equities, which comes to around $100 billion, is channelled throughMauritius, some of which could be jeopardised by future GAAR liabilities.
Meanwhile, dollar demand from Indian companies to make foreign debt repayments and to buy expensive crude oil continued to add pressure on the exchange rate. On the other hand, a slowdown in exports does not augur well for the country and the currency.
On December 15, 2011, the rupee had touched an all-time low of 54.30 against the dollar, following which the RBI introduced a slew of measures along with an aggressive intervention in the foreign exchange market. The central bank sold around $20 billion in the September-February period.
However, little is expected from the central bank this time. “India’s foreign exchange adequacy is at levels last witnessed in financial year 2000-01 and the liquidity deficit remains larger than the target of one per cent of net demand and time liabilities. Hence, the RBI is unlikely to be able to keep supplying substantial amounts of dollars to the markets,” said economists at Standard Chartered Bank in a note.
Also, problems resurfacing in the euro zone may weigh heavily on the Indian currency. Analysts at Edelweiss Securities note that European banks have sizeable exposure to India and would tend to retrench their exposure across emerging markets as risk-aversion rises. “The trend may be at play in April as well,” they said.
“A correction in oil prices and a clarification on GAAR next week may help the rupee. RBI measures announced today may help increase flows marginally,” said Vivek Rajpal, India rates strategist, Nomura.
NEW SCHEME TO MOBILISE FOREX DEPOSITS FROM NRIs ON CARDS
MUMBAI: After a gap of more than a decade, the government may turn to India’s diaspora to boost foreign exchange reserves. The government and the Reserve Bank of India (RBI) have started discussing the possibility of unveiling a scheme to mobilise deposits from non-resident Indians, similar to the hugely successful India Millennium Deposit (IMD) launched by the State Bank of India (SBI) in 2000. According to sources, the central bank is keen on such a scheme to attract foreign exchange, as the country’s reserves have seen a depletion in the wake of a weakening domestic currency. Sources say though no formal communication has been made by the government to the SBI and the lender is yet to discuss the issue in its central management committee, informally the idea has been taken up. (For details log on to : http://www.business-standard.com/india/news/new-scheme-to-mobilise-forex-depositsnriscards/473468/)
RUPEE GETS SUPPORT FROM INDIA INC
MUMBAI: The steep slide in the rupee against the dollar persuaded the poster boys of India Inc into selling dollars. A large construction company and two top-tier information technology firms on Friday sold $100-125 million each, industry sources and bankers told Business Standard. This combined with the Reserve Bank of India (RBI)’s intervention in the foreign exchange market helped the local currency in recovering some of its losses in Friday’s trade. The rupee recovered 44 paise from the day’s low and closed at Rs 53.48. The exchange rate was still seven paise lower than Thursday’s close. Market participants estimate that $500-700 million was sold by the central bank and local exporters, which, other than the three large companies, also included several small and mid-sized players. They said these trades prevented the rupee from breaching the 54-mark. (For details log on to : http://www.business-standard.com/india/news/rupee-gets-supportindia-inc/473477/)
FOREIGN CURRENCY DEPOSIT RATE CAP HIKED
MUMBAI: Faced with a depreciating rupee due to dwindling dollar inflows, the Reserve Bank of India (RBI) on Friday announced measures to attract more dollars into the country. Banks can now offer higher interest rates on foreign currency deposits of non-resident Indians. The RBI raised the ceiling on 1-3-year foreign currency deposit rates to 200 basis points above the London Interbank Offered Rate (LIBOR) from 125 basis points earlier. On deposits of 3-5 years, banks can offer rates of up to 300 basis points above Libor, instead of 125 basis points earlier. Further, in a separate notification, the RBI deregulated interest rates on foreign currency loans to exporters and said that banks can now decide interest rates by themselves. Till now, interest rates on such loans were capped at 350 basis points above the Libor. (For details log on to : http://www.financialexpress.com/news/foreign-currency-deposit-rate-cap-hiked/945504/)
INCOME TAX ACT CHANGES NOT TO HURT FDI: SS PALANIMANICKAM
NEW DELHI: The government has said its proposal to amend the Income Tax Act with retrospective effect to tax Vodafone-type merger and acquisition deals will not hurt foreign investment. “These (Income Tax Act) amendments will not have any impact on foreign investment flow in the country,” the minister of state for finance SS Palanimanickam told the Lok Sabha in a written reply. Moreover, the minister added, as proposed changes in the Income Tax Act, 1961 are only clarificatory in nature they, “will not override the provisions of Double Taxation Avoidance Agreements with 82 countries, which are relevant for taxation of non-residents in the case of offshore mergers and acquisitions”. (For details log on to : http://economictimes.indiatimes.com/news/economy/policy/income-tax-act-changes-not-to-hurt-fdi-ss-palanimanickam/articleshow/13003602.cms)
BANK OF BARODA Q4 NET PROFIT RISES 17 PER CENT
MUMBAI: Lower tax provisions helped public sector lender Bank of Baroda to report a 17.3 per cent rise in net profit for the quarter ended March 31, at Rs 1,518 crore, from Rs 1,294 crore in the corresponding period a year earlier. Operating profit rose 5.4 per cent to Rs 2,051 crore on the back of a seven per cent growth in net interest income. The bank got a tax refund of Rs 400 crore in the last quarter, compared with Rs 61 crore a year before; “this had a positive impact on our profits for the quarter”, said M D Mallya, chairman and managing director. Net interest income or the difference between interest earned and paid out was Rs 2,797 crore, up seven per cent from Rs 2,614 crore over the year. Net interest income growth was limited due to the rising cost of deposits, up a little over 150 basis points during the quarter on a year on year basis, to 7.17 per cent. (For details log on to : http://www.business-standard.com/india/news/bob-q4-net-profit-rises-17/473494/)
CORPORATION BANK NET UP 1.7 PER CENT
MUMBAI: Corporation Bank on Friday reported a marginal 1.7 per cent growth in net profit for the fourth quarter ended March 2012 at Rs 351.3 crore due to higher provision for restructured assets and a dip in non-interest income. The public-sector lender had posted net profit of Rs 345 crore for January-March 2011. Ajai Kumar, chairman and managing director of the Mangalore-headquartered bank, said the operating environment was difficult, indicating effects of slowdown. Credit demand in the fourth quarter was subdued. The net interest income was up 9.5 per cent to Rs 814.3 crore. The net interest margin was 2 per cent, down from 2.8 per cent a year ago. The non-interest income was down by 10.7 per cent to Rs 423 crore. Net profit rose 6.6 per cent to Rs 1,506 crore from Rs 1,4133 crore. (For details log on to : http://www.business-standard.com/india/news/corp-bank-net17/473495/)
BANK OF INDIA LOWERS HOME LOAN RATES AFTER SLASHING BASE RATE
MUMBAI: Public sector lender Bank of India has reduced interest rates on home loans in tandem with the reduction of 25 basis points in its base rate as on May 1. Besides the loan rate cut, the bank would give housing loans of up to R30 lakh at the base rate. Earlier, the bank provided home loans of only up to R25 lakh at the prevailing base rate. Under the reduced rates, the bank will give housing loans up to Rs. 30 lakh at the base rate of 10.50%. Loans above Rs. 30 lakh and up to Rs. 75 lakh will be given at 25 basis points above the base rate. Loans over and above R75 lakh will attract an interest rate of 11.25%, which is 75 basis points higher than the base rate. (For details log on to : http://www.financialexpress.com/news/boi-lowers-home-loan-rates-after-slashing-base-rate/945515/)
PRIVATE BANKS POST ROBUST Q4 RESULTS, BUT WORRIES REMAIN
MUMBAI: Financial results of private sector banks for the January-March quarter released so far indicate that despite the economic slowdown and high inflation, earnings have been in line or ahead of analyst expectations. The five major private sector banks, including ICICI Bank, Axis Bank and HDFC Bank, posted a 25-34% year-on-year growth in earnings, driven by core performance and lower provisions for non-performing assets (NPA). Key ratios, such as net interest margin (NIM) and return on assets (ROA), also showed improvement. Analysts, however, caution that potential worries around slowing loan growth and asset quality remain. Ratings agency Standard and Poor’s (S&P) lowered its outlook on 11 major financial institutions over sovereign risks. An HSBC Global research report states that HDFC Bank’s historical trajectory of 30%-plus earnings growth may slow to 23-24%, due to the weak macro-environment and slower credit cycle. An Emkay Global report factors in a lower growth for Axis Bank along with margin pressures. (For details log on to : http://www.financialexpress.com/news/private-banks-post-robust-q4-results-but-worries-remain/945521/)
TAMILNAD MERCANTILE BANK Q4 PAT UP 66% AT RS. 120.09 CRORE
CHENNAI: Tuticorin-based private sector lender Tamilnad Mercantile Bank (TMB) has posted a profit after tax of R120.09 crore for the fourth quarter against R72.34 crore it logged in the same quarter the previous fiscal, registering a growth of 66%. The net interest income has increased from R157.49 crore to R182.11 crore during Q4. Other income has grown 34.44% from R61.43 crore to R82.72 crore due to recovery in written-off accounts. For the full year, the total income of the bank recorded a growth of 35.60% to reach R2,114 crore compared to R1,559 crore during the preceding financial year. Sustaining the core earnings growth, the bank’s interest income recorded a growth of 37.30%. (For details log on to : http://www.financialexpress.com/news/tmb-q4-pat-up-66-at-rs.-120.09-crore/945518/)
RBS TO REPAY LAST OF GOVERNMENT AID, REINSTATE DIVIDENDS
Royal Bank of Scotland Group Plc, Britain’s biggest publicly assisted lender, will pay back the last of its emergency aid from the UKtaxpayer, bringing the company a step closer to moving out of government ownership. Operating profit rose four per cent in the first quarter to £1.18 billion ($1.91 billion) from £1.13 billion a year earlier, the Edinburgh-based bank said in a statement today. Analysts predicted a profit of £917 million, according to the median estimate of six surveyed by Bloomberg. The repayment of the £164 billion of emergency funding it received from the UKand the USgovernments by the end of next month removes an obstacle to the lender’s return to private ownership. That won’t happen immediately because the bank’s shares are still trading at less than half the level at which the government bought its 82 per cent stake for about £45.5 billion. (For details log on to : http://www.business-standard.com/india/news/rbs-to-repay-lastgovernment-aid-reinstate-dividends/473492/)
BNP PARIBAS PROFIT RISES 10 PER CENT IN FIRST QUARTER
PARIS: BNP Paribas, the biggest French bank, reported on Friday that its first-quarter net income rose nearly 10%, helped by the sale of a real estate business, and said it was on track to reach its capital strength targets. The bank, based in Paris, posted net income of 2.9 billion euros ($3.8 billion), up 9.6% from the same period a year earlier. That was better-than-the-average estimate of analysts surveyed by Reuters, who had expected a profit of around 2.3 billion euros. BNP Paribas’ revenue in the first three months of the year totaled 9.9 billion euros, down 15.4% from a year earlier. The bank said revenue was hurt by an 843-million-euro charge on a revaluation of its own debt, a 142-million-euro loss on the sale of sovereign bonds and a 74-million-euro loss on the sale of loans. (For details log on to : http://www.financialexpress.com/news/bnp-paribas-profit-rises-10-in-first-quarter/945517/)
PENSION SYSTEM SUBSCRIBERS CAN CHOOSE ANNUITY SERVICE PROVIDER
NEW DELHI: Subscribers to the New Pension System (NPS) would have a choice of six insurance companies from which they can buy annuity products after exiting the scheme. Annuity products are those designed to provide payments to holders at specified intervals, usually a year. The six insurance companies the Pension Fund Regulatory and Development Authority has empanelled are Life Insurance Corporation of India (LIC), SBI Life Insurance, ICICI Prudential Life Insurance, Bajaj Allianz Life Insurance, Star Union Dai-ichi Life Insurance and Reliance Life Insurance. Under NPS norms, a maximum of 60 per cent of the corpus accumulated at the time of exiting the scheme, usually when one is 60 years old, can be withdrawn. However, at least 40 per cent of the corpus has to be utilised to purchase an annuity product. (For details log on to : http://www.business-standard.com/india/news/nps-subscribers-to-have-six-firms-to-buy-annuities-from/473461/)
PRIVATE EQUITY FUNDS SEEK TO CO-INVEST WITH RIVALS TO FETCH LARGE DEALS, LOWER RISKS
MUMBAI: Many private equity funds (PEs) are seeking to invest jointly with rivals in companies as it mitigates risks and insulates them from allegation of failures. “Co-investments are certainly becoming a trend not only from the size perspective but also from the view of jointly evaluating and negotiating transactions,” says Darius Pandole, partner at PE firm New Silk Routeor NSR. Co-investments provide an independent valuation and add more conviction to investment decisions. “The funds draw on the comfort that comes from having a new pair of eyes to review and vet the opportunity,” says Subbu Subramaniam, founder of $60-million PE fund MCap Advisors, which had earlier co-invested in wind power projects solution provider ReGen Powertech with IDFC. It re-invested recently in it alongwith TVS Capital. (For details log on to : http://www.financialexpress.com/news/private-equity-funds-seek-to-coinvest-with-rivals-to-fetch-large-deals-lower-risks/945564/)
HOUSE PANEL WANTS CBI PROBE INTO IRREGULARITIES IN FMC EXCHANGES
NEW DELHI: The parliamentary standing committee on food and consumer affairs has recommended CBI to look into cases of irregularities in the Forward Markets Commission (FMC) exchanges. “Despite regulatory mechanism in the FMC, there are reported cases of trading irregularities and market manipulations…The Committee recommends that FMC should seriously consider that cases of malpractice noticed in the national and regional commodity exchanges should be handed over to CBI for proper and thorough investigation,” the report on Demands of Grants for 2012-13 states. The Forward Contract (Regulation) Amendment Bill, which is currently pending in Parliament, provides for the appointment of an investigating authority, which will report to FMC about violations of the Act. The Commission oversees the functioning of five national and 16 regional commodities. (For details log on to : http://economictimes.indiatimes.com/markets/stocks/market-news/parliamentary-panel-wants-cbi-probe-into-irregularities-in-fmc-exchanges/articleshow/13003724.cms)
FITCH PUTS A NUMBER TO BANKS’ CAPITAL
Indian banks may need to raise up to $50 billion (Rs 2.7 lakh crore) of additional equity under the Basel-III capital regulations announced by the Reserve Bank of India, on top of retained earnings, according to Fitch Ratings. Most of the requirement is back-ended, with a little over 75 per cent needed to be added between FY16 (financial year ended March 2016) and FY18, according to a statement by the rating agency. The additional equity reflected growth capital and a buffer above the regulatory minimum, said Fitch. The guidelines released on May 2 do not yet provide for a counter-cyclical capital buffer or additional capital for systemically important banks. Fitch’s calculations add half a percentage point of additional common equity to the regulatory minimum, which banks mighty like to maintain to avoid breaching the conservation buffer, with attendant restrictions on dividends and other payouts. (For details log on to : http://www.business-standard.com/india/news/fitch-putsnumber-to-banks-capital/473493/)
S&P RATINGS OF SPAIN, ITALY 2 NOTCHES HIGHER THAN INDIA
NEW DELHI: Even though European nations like Spain, Italyand Irelandare facing debt crisis, Standard and Poor’s has said that their income and economic structures are better than that of India. This is the reason given by the rating agency for assigning them higher rating as compared to India. Besides, the euro is a reserve currency unlike rupee and so it has great acceptance. “The ratings of Spain, Italy, and Irelandare two notches higher than the sovereign rating of India. Although bond spreads for the three European sovereigns have widened, they still possess an income and economic structure more developed than India’s, with greater financial market development,” S&P director of Sovereign and International Public Finance Ratings Takahira Ogawa told FE in an emailed response. (For details log on to : http://www.financialexpress.com/news/s&p-ratings-of-spain-italy-2-notches-higher-than-india/945641/)
REGULATING INVESTMENT ADVISORS WILL BENEFIT INDUSTRY: SEBI
MUMBAI: The proposed regulation of investment advisors will benefit the industry once enforced, a senior Sebi official said here today. “Once the regulation of investment advisors comes into effect, the industry will benefit,” Securities and Exchange Board (SEBI) deputy general manager Maninder Cheema said while addressing a seminar on ‘Future of career in financial planning,’ organised by the Financial Planning Standards Board here. In a move aimed at addressing conflicts of interest in distribution of financial products, the Sebi had issued a concept paper to regulate investment advisors last September. The capital markets regulator intends to keep a check on investment advisors through the self-regulatory organisation (SRO) route. (For details log on to : http://economictimes.indiatimes.com/markets/regulation/regulating-investment-advisors-will-benefit-industry-sebi/articleshow/12996502.cms)
HSBC MUTUAL NOT LOOKING TO SELL STAKE OR EXIT INDIA
MUMBAI: Puneet Chaddha, chief executive officer of HSBC Mutual Fund, has quashed rumours that the fund house is looking to sell stake or exit its asset management business in India. Mr Chaddha said HSBC is very serious about its Indiaoperations and has no plans to sell stake or partner with anybody to continue its business here. “I can categorically say that am not involved in any such discussion (to sell stake or exit fund business in India),” Mr Chaddha said, adding, “We’re certainly not looking to sell stake or partner with anyone.” On the contrary, Mr Chaddha said, HSBC is open to acquiring assets to grow its business in India. “We’re very open to growing inorganically… But we’re very careful about valuations. We’re very conscious of the value that we would have to pay for any such acquisitions. The deal has to make sense – both financially and strategically,” Mr Chaddha said. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/hsbc-mutual-not-looking-to-sell-stake-or-exit-india/articleshow/12992106.cms)