NEW DELHI: Finance Minister Pranab Mukherjee will meet the chairmen and managing directors of state-run banks on June 12 to review their performance for the previous financial year and will also discuss the road map for the current financial year.
The ministry will review public sector banks’ performance on growth of deposits and advances, non-performing assets (NPAs), return on assets and loan disbursal. Loan growth in the previous financial year — 2011-12 — was sluggish with interest rates staying at elevated levels. However, the last fortnight of the financial year saw a huge spurt in loan off-take, which helped advances to clock growth of 19.3 per cent, higher than the central bank’s projection of 16 per cent. Deposit growth for 2011-12 was 17.4 per cent.
Though a formal agenda is yet to be finalised, bankers said issues likely to top the agenda of the meeting include rising NPAs, financial inclusion, pension liabilities of public sector banks and flow of credit to sectors such as agriculture, infrastructure and micro, small and medium enterprises.
Issues in lending to distressed sectors, such as real estate, power, aviation and telecom may also be flagged off. Banks may be urged to join the New Pension System of the Pension Fund Regulatory and Development Authority.
The finance minister is likely to ask the banks to improve their lending to infrastructure and employment-generating sectors, while keeping a check on their bad loans.
Gross NPAs of public sector banks stood at 3.3 per cent in FY12.
At an event on Monday, Mukherjee had asked banks to act upon the Reserve Bank’s advice on appropriate NPA management.
To address the problem of exposure to sensitive sectors and bad loans, the ministry has suggested banks consider lending to large projects by forming a consortium and that if such a loan becomes an NPA in one bank, then all lenders in the consortium treat it as a bad loan. Banks have expressed reservations on such suggestions.
Banks may also have to give a report on performance of the ultra low-cost branches set up in the last two years in about 73,000 villages across the country.
To extend the reach of banking to the rural hinterland, banks were in 2010-11 advised to provide appropriate banking facilities to habitations with a population of more than 2,000 by March 2012.
In Budget 2012-13, Mukherjee proposed to extend the campaign to habitations with population of more than 1,000 in North-eastern and hilly States, and to habitations that had crossed 2,000 according to Census 2011.
The meeting comes at a time when bank chiefs are expressing concerns at increasing interference by the finance ministry in their day-to-day operations.
Ministry officials, on the other hand, defended the frequent advisories to the banks. “Government, being the majority shareholder in these banks, can give suggestions. We are not forcing them to accept whatever we are saying. Banks can discuss the suggestions in their board meetings and the board members are free to decide whichever way they consider appropriate,” said the official.
FINANCE MINISTRY GIVES NOD TO RESTRUCTURE RS 35,000 CR OF TEXTILE SECTOR DEBT
MUMBAI: The finance ministry has accepted the textile ministry’s proposals on restructuring about Rs 35,000 crore of the textile industry’s debt. The proposals included a two-year moratorium on repayment of the principal and converting some working capital loans to term loans. The finance ministry will now ask the Reserve Bank of India (RBI) to have these loans so restructured. This was decided at a meeting on Tuesday of officials of the two ministries in New Delhi. The textile industry has a debt of Rs 55,000 crore and big losses. The textile ministry had recently asked Bank of Baroda Capital (BoB Capital) to study the sector and prepare a debt restructuring plan. The merchant banking subsidiary of Bank of Baroda gave its report last week. On Tuesday’s decision is based on this report. (For details log on to : http://www.business-standard.com/india/news/finance-ministry-gives-nod-to-restructure-rs-35000-crtextile-sector-debt/475729/)
FINMIN TO DISCUSS TAX ISSUES WITH IIT, IIM & LAW SCHOLARS
NEW DELHI: The finance ministry has decided to invite scholars from IIMs, IITs and national law schools besides accountancy students for brainstorming sessions to get fresh ideas in the emerging areas of international taxation and transfer pricing. The ministry, through its Foreign Tax and Tax Research Division (FT and TR), has decided to begin a six-month internship programme for young scholars studying economics and finance at various reputed institutions across the country. While international taxation deals with taxing of investments and business deals involving overseas assets and entities, transfer pricing refers to adjustment of charges made between related parties for goods and services rendered. (For details log on to : http://www.financialexpress.com/news/finmin-to-discuss-tax-issues-with-iit-iim-&-law-scholars/955392/)
RBI GOVERNOR CALLS FOR FISCAL CONSOLIDATION AT STATE LEVEL
MUMBAI: Reserve Bank of India (RBI) governor D Subbarao on Tuesday called on the state finance secretaries to pay more attention to fiscal consolidation with a focus on expenditure restructuring at the state level. “There is greater need to improve the tax-GDP ratio so that debt remains sustainable,” Subbarao said while addressing a state finance secretaries conference at Mumbai. He also pointed out that the market borrowings by the state governments has gone up, attaining a critical mass alongside huge and rising market borrowing by the Centre. “Therefore there is need for coordinated debt management to avoid pressure on liquidity, and crowding out,” Subbarao added. The governor highlighted that the large borrowing requirements by the government has the potential to crowd out credit to the private sector and such phenomenon will become more critical if there is fiscal slippage. (For details log on to : http://www.financialexpress.com/news/rbi-governor-calls-for-fiscal-consolidation-at-state-level/955415/)
RESERVE BANK PROPOSES TWEAKING FII DEBT LIMITS
MUMBAI: The RBI has proposed to the finance ministry reducing the minimum lock-in debt investment periods for foreign institutional investors as a way to boost inflows and help protect a weakening rupee, a senior official said on Tuesday. The Reserve Bank of India has also proposed recasting the investment limits within the country’s existing debt categories, an official with direct knowledge of the proposals told Reuters, given more than a third of foreign investment limits across all Indian debt categories are unutilised. He declined to be identified because the proposals have not been publicised. The finance ministry would make the final decision on these suggestions. The two proposals are intended to boost foreign inflows into debt markets, without raising the overall debt amounts held by foreign investors. (For details log on to : http://www.financialexpress.com/news/reserve-bank-proposes-tweaking-fii-debt-limits/955410/)
BOND YIELDS UNCHANGED WITH DEALERS CAUTIOUS ON GDP DATA
MUMBAI: The government bond yields were unmoved for the seventh straight trading day on Tuesday as dealers continued to stay cautious ahead of the GDP data expected on Thursday. Moreover, there was some uncertainty over the Reserve Bank of India’s (RBI) bond purchases via open market operations (OMOs). The yield on the 10-year benchmark ended the session at 8.5%. Expectations of more bond purchases by the RBI via OMO have been building since the persistent pressure on the rupee could necessitate intervention. Bond buys could be needed to offset the stress on liquidity, dealers said. The rupee weakened by 49 paise on Tuesday to end at 55.67/$1. The rupee depreciated on Tuesday to end at 55.67/$1, snapping a two-day rise as oil companies scrambled for dollars to meet their month-end demand. The RBI was said to be largely absent from the forex market on Tuesday. Treasury officials expect the RBI to continue with its bond purchases through OMOs but are unsure of the quantum and frequency. (For details log on to : http://www.financialexpress.com/news/bond-yields-unchanged-with-dealers-cautious-on-gdp-data/955406/)
SBI TO REWORK STRUCTURE IN CIRCLES
MUMBAI: State Bank of India (SBI) is revamping the structure within business circles to improve oversight and recoveries. The country’s largest lender will reduce an average number of branches being looked after by one regional manager to 40 from 60, as part of the restructuring. The 14 circles spanning states and Union territories are part of the national banking group. They are key to retail, micro and small enterprises, farming business and financial inclusion activity. The bank has decided to limit the number of branches under each regional general manager. “We have split regions that are large to improve oversight,” said Pratip Chaudhuri, chairman of the bank. Its branch network has expanded from 11,448 at the end of March 2009 to 14,097 at the end of March 2012. Staff strength has grown to 2,15,481 at the end of March 2012 from 2,05,896 three years ago. (For details log on to : http://www.business-standard.com/india/news/sbi-to-rework-structure-in-circles/475748/)
STATE BANK TO CUT BAD LOANS TO 1.6 PER CENT IN FY13
CHENNAI: State Bank of Indiaon Tuesday said it would reduce the proportion of its net non-performing assets (NPAs) to the total from the present 1.8 per cent to 1.62 per cent this financial year. Only yesterday, Union Finance Minister Pranab Mukherjee had expressed concern over the asset quality of banks. To achieve the target, SBI, the country’s largest bank, constituted a Stressed Asset Management Group (SAMG) during the past financial year. According to Pratip Chaudhuri, chairman, the SAMG managed a cash recovery of around Rs 1,000 crore during 2011-12 by working on these NPAs, the highest in a single year in the bank’s history. He was speaking to reporters after handing over keys of an ambulance van to the Cancer institute here, as part of SBI’s corporate social responsibility programme. The SAMG has around 400 people and has opened nine offices, focusing only on stressed assets. “We are asking the borrowers to consider restructuring loans, ahead of default. Most of the stressed assets are related to exports, especially of the textile industry,” said Chaudhuri. Asked if the bank would sell these stressed assets, he said, “Last year we could not, since asset reconstruction companies did not have cash.” (For details log on to : http://www.business-standard.com/india/news/state-bank-to-cut-bad-loans-to-16-in-fy13/475747/)
KVG BANK AGGRESSIVE ON FINANCIAL INCLUSION FRONT
CHENNAI/DHARWAD: The Karnataka Vikas Grameen Bank (KVGB) under the financial inclusion scheme has covered 418 villages and of this, 53 villages have brick and mortar branches. Meanwhile, the bank plans to open 50 regular branches and 50 ultra small branches and achieve a business-level of Rs 13,000 crore. Declaring 50 more villages as solar villages and establishing nine financial literacy centres are other schemes. KVGB chairman C Sambasiva Reddy told reporters here that the bank’s net profit for the year 2011-2012 stood at Rs 128 crore showing a growth of 35 per cent. The bank’s capital plus reserves have risen to Rs 839 crore from Rs 711 crore. (For details log on to : http://www.business-standard.com/india/news/kvg-bank-aggressivefinancial-inclusion-front/475711/)
RBS WEALTH DIVISION LAUNCHED WEALTH PLANNING SERVICES IN INDIA
MUMBAI: RBS Wealth Division, a part the Royal Bank of Scotland Group, launched wealth planning services in India. The service will offer bespoke solutions to clients to meet their long-term plans for structuring, protection and transmission of wealth. This is an important step for RBS Wealth Division as it complements their existing banking and investment services offerings, as part of a comprehensive wealth management proposition. Wealth planning involves structuring of assets for protection, preservation and transmission of wealth for the benefit of intended beneficiaries who could be individuals or institutions. The solution so structured could exist during and beyond the lifetime of the principal, also known as the settlor or grantor. The wealth planning services that RBS will provide in Indiawill include advice in the areas of succession planning, asset preservation, asset consolidation, and philanthropy. Mr. Shiv Gupta, Managing Director, RBS Private Banking in Indiasaid, “From a delivery standpoint, the breadth and depth of the RBS franchise in Indiaallow us to structure the offering appropriately.” (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/rbs-wealth-division-launched-wealth-planning-services-in-india/articleshow/13636360.cms)
GENERAL INSURERS’ PREMIUM INCOME FROM MARINE HULL, AVIATION POLICIES SEES MUTED GROWTH
MUMBAI: General insurers’ premium income from marine hull and aviation policies grew less then 5% in fiscal 2011-12 due to a slowdown in expansion in the sectors. According to data from Insurance Regulatory and Development Authority, or Irda, marine hull insurance premium income grew 1.05% to Rs 1,006 crore, while income from aviation premium grew 4% to Rs 486 crore. “Aviation companies have not expanded in terms of fleet or added new destination in the last one year. Rates go up only when they expand,” said a senior executive of a large private sector insurance company. “Globally, there were not many huge claims.” The gross written premium for the industry rose 23.23 % to Rs 47,000 crore in 2011-12, driven by increase in health and motor insurance. “Marine hull and aviation sectors are largely reinsurance driven. They have high severity claim and the rates go up depending upon global experience,” said KG Krishnamoorthy Rao, MD and CEO, Future Generali. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/general-insurers-premium-income-from-marine-hull-aviation-policies-sees-muted-growth/articleshow/13652597.cms)
MAX NEW YORK LIFE CLOCKS RS 733-CRORE NET PROFIT IN FY12
MUMBAI: Private life insurer Max New York Life Insurance posted a 159 per cent growth in net profit at Rs 733 crore for the fiscal year 2012 on the back of sales of endowment and money-backed products. The profit was at Rs 283 crore in the year ago period. Gross premium grew 10 per cent at Rs 6,391 crore (Rs 5,813 crore). The renewal premium recorded a growth of 20 per cent at Rs 4,489 crore. During the year, the solvency margin of the company increased to 534 per cent on better reserves as compared to 365 per cent last year. The solvency surplus in FY12 stood at Rs 1,703 crore (Rs 892 crore in FY11). The company sold 5.72 million policies in FY12. “We were the early ones to start long-term savings and protection (LTSP) policy. We have maintained the protection cover mandated by IRDA (Insurance Regulatory and Development Authority) at 10 times the sum assured,” said Ms Anisha Motwani, Chief Marketing Officer, Max New York Life Insurance. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3470818.ece)
SUNDARAM FINANCE SEES MARKET DISCOURAGING THIS FINANCIAL YEAR
CHENNAI: Chennai-based non-banking finance company, Sundaram Finance Limited, is expecting a tough market in near future, considering the current uncertainty in the economy coupled with other challenges, said the company management. Speaking to reporters here, TT Srinivasaraghavan, managing director, Sundaram Finance, said, “The 12 months starting from April 1, 2012 seem to be very much challenging with the uncertain macro environment. Most of the key parameters, which indicate growth, are far from encouraging and appear rather risky.” The company management abstained from giving out its outlook for the current fiscal, commenting that the year ahead seems uncertain. The global uncertainty, which is now playing in the domestic market as well, the current account deficit and liquidity issues, the weakening of the Rupee and inflation are discouraging to the auto industry, as any other industry at present. (For details log on to: http://www.business-standard.com/india/news/sundaram-finance-sees-market-discouraging-this-financial-year/475709/)
GLOBAL GIANTS EYE ING’S MUTUAL FUND BUSINESS IN INDIA
MUMBAI: Three global giants are interested in purchasing Dutch firm ING Asset Management’s Indian mutual fund business, which may be carved out of the Asian operations and sold separately. South Korea’s Mirae, Vanguard and US-based Pramerica have held talks with ING on the issue, people close to the transaction told ET. ING is selling its Asia-Pacific insurance and asset management businesses to help repay the assistance provided by the Dutch government in 2008 at the time of the global financial markets meltdown. The company is hoping to raise $7 billion. The Indian business is tiny compared with the Asian operations, having assets of only 797 crore as of April this year and is barely profitable. A separate sale is likely to fetch only 40 crore, an industry official estimated. ING and Mirae did not respond to the email query sent by ET. A Vanguard spokesperson said the news was not true. “A lot of players are below the threshold of meaningful acquisitions, and lot of these companies might not add much value to those who acquire them,” said Dhirendra Kumar, founder and chief executive, Value Research. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/global-giants-mirae-vanguard-pramerica-eye-ings-mutual-fund-business-in-india/articleshow/13652036.cms)
FOREIGN INVESTOR NORMS EASED TO ACCELERATE CAPITAL INFLOWS
NEW DELHI: The government today allowed qualified foreign investors (QFIs) from six member-countries of the Gulf Cooperation Council (GCC) and 27 countries of the European Commission (EC) to invest in the Indian capital market to enhance foreign capital inflows. Saudi Arabia, Bahrain, the United Arab Emirates (UAE), Oman, Qatarand Kuwaitare the six countries. With this, a $1-billion window over and above the current $20-billion limit has been created for QFI investment in corporate bonds and mutual fund debt schemes. The window is meant to test the waters for the time being and could be widened if required. Norms for opening accounts in Indiaand keeping funds in them have also been relaxed substantially. A QFI is an individual, group or association resident in a foreign country that is compliant with Financial Action Task Force (FATF) standards and is a signatory to the International Organisation of Securities Commission’s (IOSCO’s) Multilateral Memorandum of Understanding (MMoU). QFIs do not include FIIs (foreign institutional investors) or sub-accounts. (For details log on to : http://www.business-standard.com/india/news/foreign-investor-norms-eased-to-accelerate-capital-inflows/475755/)
QFIs ALLOWED TO BUY CORPORATE DEBT, WINDOW OPEN TO 11 MORE COUNTRIES
NEW DELHI: The government on Tuesday widened the ambit of qualified foreign investors (QFIs) and eased several norms to facilitate their greater participation in the Indian market as it struggles to attract fund inflows and curb currency volatility. With the inclusion of all member nations of the Gulf Cooperation Council and the European Commission, QFIs from 45 countries will be able to invest in Indian equities, debt mutual funds and corporate bonds as against 34 earlier. The government has also allowed QFIs to invest up to a separate ceiling of $1 billion in corporate bonds and mutual fund debt schemes, said Thomas Mathew, joint secretary in the finance ministry. He added this will be on top of the $20-billion cap for investments in general corporate bonds. “This is the beginning and we are sort of testing waters,” Mathew said, hinting that if the scheme is a sucsess, the limit may be raised further. (For details log on to : http://www.financialexpress.com/news/qfis-allowed-to-buy-corporate-debt-window-open-to-11-more-countries/955350/)