MUMBAI: Dismal growth numbers may force the Reserve Bank of India (RBI) to cut interest rates and soften its monetary policy stance. While a diesel price hike by the government will make the central bank’s job simpler, RBI Deputy Governor Subir Gokarn on Monday hinted that there was some scope for easing. “I think there are two factors that are suggesting more room. One, the growth is lower than expected. This may have a positive impact on core inflation. Two, oil prices have come off, more than expected… I don’t think people saw this sharp decline in oil prices coming,” he told reporters on the sidelines of a Nomura Securities conference here.
But Gokarn reminded that headwinds like high food prices, weak rupee and widening fiscal deficit will continue to fuel inflationary pressure. “There is fiscal pressure in the sense that the actions that were indicated, to bring fiscal deficit to its budget numbers, have not yet been taken,” he said.
Financial markets are expecting at least a token rate cut on June 18 when RBI releases its quarterly monetary policy review. In April, the RBI had cut rates by 50 basis points, but warned the scope for more cuts may be limited.
It must be emphasised that the deviation of growth from its trend is modest. At the same time, upside risks to inflation persist. These considerations inherently limit the space for further reduction in policy rates,” Governor D Subbarao had said in his press statement on April 16.
But Friday’s weak GDP numbers may force the Reserve Bank to take a more clear-headed stance, economists and experts feel. “…Will it (RBI) now shift to a greater emphasis on growth? We certainly believe it should, given the fact that economic growth leads inflation and is running well below everybody’s estimate of trend. We also believe it will, with Governor Subbarao able to point to the weakness of the RBI’s preferred measure of core inflation as evidence that underlying price pressures justify further monetary easing. All in all, we continue to expect another 125 bps of repo rate cuts by the end of the current fiscal year in March 2013,” said Robert Prior Wandesforde, director-Asian Economics, Credit Suisse.
India’s economy grew 5.3% in the quarter ended March ’12, lower than the consensus 6.1% and the lowest since 2004. Institutions such as JPMorgan, Morgan Stanley and Standard Chartered have already cut their growth estimates for FY13 below 7%. The government has come under attack for inaction in the face of a worsening macroeconomic situation. “PMI data, coupled with the dismal GDP numbers for Q4 FY12, as well as a 2.1% print for the April infrastructure index all suggest that the growth slowdown is here to stay. While headline/ suppressed/retail inflation is at uncomfortable levels, the growth slowdown, moderating core inflation and lower oil prices could prompt the RBI to cut rates more than what is currently priced in,” said Rohini Malkani, economist, Citi India. Despite widespread weakness, the RBI will have to be watchful as there are several challenges to a stable inflationary outlook. “Elevated and sticky inflation limits the scope for aggressive rate cuts and suggests a need for continued caution,” said HSBC economist Leif Eskeseen in his report.
The subsidy on fuel and foodgrain has suppressed inflation so far and the increase in petrol prices last month could push up inflation. The increase in indirect taxes in the budget has also added to inflation. Several economists, including those in the RBI, have been pointing out that schemes like the National Rural Employment Guarantee Act, or NREGA, push up inflation as higher wages generate higher purchasing power. Wholesale prices rose 7.3% in April led by food and fuel, which rose over 10%. The rupee has depreciated over 15% versus the US dollar since mid-February, making imported essentials more expensive. Among other things, the impact of softening global crude and other commodity prices could get negated on account of weak currency.
FALLING OIL PRICES TO EASE PRESSURE ON RUPEE, CUT CAD: GOPALAN
NEW DELHI: The recent fall in global crude oil prices may ease pressure on the depreciating rupee and rein in a galloping current account deficit (CAD), economic affairs secretary R Gopalan said on Monday. “The good thing is that crude prices are going down. So that has some positive for us,” Gopalan said. Global crude oil prices have tumbled by 17% since April to around $98 per barrel, as a deepening global macro-economic crisis has threatened to drag down demand. The country’s CAD surged to an unprecedented level of 4.3% of the gross domestic product from 2.9% in the previous fiscal, thanks to a trade deficit of $184.9 billion in 2011-12 following record crude oil and bullion imports. The current account comprises the balance of trade, net factor income such as interest and dividends and net transfer payments. (For details log on to : http://www.financialexpress.com/news/falling-oil-prices-to-ease-pressure-on-r-cut-cad-gopalan/957979/)
RBI CANCELS MADHAVPURA MERCANTILE’S BANKING LICENCE
AHMEDABAD: The Reserve Bank of India (RBI) on Monday cancelled the banking licence of scam-hit Madhavpura Mercantile Cooperative Bank (MMCB) Ltd. The apex regulator cancelled the licence under Section 22 of the Banking Regulation Act, 1949 (AACS) late Monday evening as the bank failed to recover over Rs 1,100 crore. “RBI has cancelled the licence of MMCB on Monday evening as we were not able to make recovery.” Total recovery pending is over Rs 1,100 crore and NPAs have touched 99.9 per cent of total deposits,” admitted BKR Maruti, chief executive officer of MMCB. RBI had issued a showcause notice to the board of administration in March asking why the bank’s licence should not be cancelled. So far, the bank has been able to recover only Rs 3 crore from defaulters. Among pending recoveries include Rs 800 crore from Ketan Parekh and his two aides. (For details log on to : http://www.business-standard.com/india/news/rbi-cancels-madhavpura-mercantiles-banking-licence/476347/)
UNION BANK OF INDIA ROLLS OUT UNIQUE ATMs
MUMBAI: Union Bank of India’s 4000th ATM, to be opened on Wednesday in Ahmedabad, will be unique as it would be disabled-friendly, an official at the bank said. These ‘talking ATM’ would provide services such as withdrawal, balance inquiry and mini-statement and would be accessible to persons with disability by providing ramps so that wheel chair users can access them, Lalit Sinha, GM, alternate delivery channels & new initiative department, Union Bank of India, said. The bank is expecting to roll out more such ATM after a two-month pilot study and customising it for local needs. As per the Reserve Bank of India guidelines, a third of new ATMs opened by banks need to be such talking ATMs with Braille keypads and should be placed strategically in consultation with peer banks to ensure that at least one such ATM with Braille keypad is generally available in each locality for catering to needs of visually impaired persons. (For details log on to : http://www.financialexpress.com/news/union-bank-rolls-out-unique-atms/957882/)
SBM TO MARKET POLICIES OF SBI GENERAL INSURANCE
MUMBAI: State Bank of Mysore, an associate bank of State Bank of India, has entered into a corporate agency agreement with the SBI General Insurance for marketing its general insurance policies. “With nearly 68 lakh accounts across 737 pan-India branches, State Bank of Mysore will provide us enormous scope for catering to the diverse insurance requirements of its business as well as individual customers,” said Mr R. R. Belle, MD and CEO, SBI General Insurance. The insurer will be launching customised policies for the bank customers in due course of time. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3491357.ece)
BANKS STEP UP LOAN RECOVERY BY AUCTIONING MORTGAGED PROPERTY
HYDERABAD: Unlike earlier, banks are now increasingly resorting to the use of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) 2002 to recover their dues. The Act empowers banks and financial institutions to auction mortgaged residential/commercial property when borrowers fail to repay their loans. The Act, which was enacted when the economy (including banking) was booming, has been rarely used to recover smaller dues; it can be applied to any loans/dues over Rs 1 lakh. But now one can find many possession notices in banks/newspaper even for dues as low as Rs 1.5-2 lakh. “This is because of the worrisome increase in the non-performing assets and the Reserve Bank of India’s constant goading to keep NPAs under manageable limit,” a top official of Canara Bank said. According to Mr B. A. Prabhakar, Chairman and Managing Director, Andhra Bank, the Sarfaesi Act has proved to be a “very effective instrument” for recovery. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3491358.ece)
REPCO BANK REPORTS PAT AT RS. 73 CRORE
CHENNAI: Repco Bank has posted a profit after tax of R72.65 crore for the financial year ended March 31, as compared to R56.18 crore over the corresponding previous year registering a growth of 29%. The total income recorded a jump of 44.39% during the year to R521 crore from R361 crore. The total business of the bank grew to R7,061 crore as on 31 March 2012 from R5,242 crore as on 31 March 2011 recording a y-o-y growth of 35%. The total deposits grew to R4,035 crore from R2,975 crore recording a year-on-year growth of 36%. The gross advances increased to R3,026 crore from R2,267 crore, registering a growth of 33%. The bank has added four new branches during the year taking the total net work of branches to 76. (For details log on to : http://www.financialexpress.com/news/repco-bank-reports-pat-at-rs.-73-cr/957878/)
KARNATAKA BANK TO LAUNCH MOBILE BANKING SOON
MANGALORE: Karnataka Bank Ltd will launch mobile banking soon. Speaking at a function at the Founders’ Branch of the bank at Dongarakery in Mangalore on Monday, Mr P. Jayarama Bhat, Managing Director of the bank, said that the bank will start offering mobile banking facility in the next two months. With this, the customers of the bank can carry out their transactions through their mobile phones. Mr Bhat said that the bank, which crossed a business level of Rs 53,000 crore in 2011-12, is planning to do much more in the years to come. The bank has set a target of achieving Rs 1 lakh crore business by 2015, he said. As of now, the average business of the each branch of the bank is more than Rs 100 crore, he said. The bank re-named its Dongarakery branch as Founders’ Branch on the occasion. The bank started functioning from this branch on May 23 1924. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-others/tp-states/article3491368.ece)
MUMBAI’S ZOROASTRIAN COOPERATIVE BANK ACQUIRES SURAT-BASED CITY COOP BANK
MUMBAI/AHMEDABAD: Mumbai-based urban cooperative bank, Zoroastrian Co-operative Bank Limited (ZCBL) has acquired Surat-based City Co-operative Bank Limited making the former a multi-state scheduled urban cooperative bank. The ZCBL has been authorised by the statutory authorities to acquire the Surat-based City Co-operative Bank. The acquisition brings six branches of City Cooperative Bank under ZCBL, which currently has 12 branches located in parts of Mumbai and Pune. Currently, ZCBL has about 45,000 to 50,000 accounts with a total business of Rs 1,100 crore as on March 31, 2012 and its net worth is nearing Rs 100 crore. The bank maintains the Capital Adequacy Ratio (CAR) in excess of 14 per cent, as against the requirement of 9 per cent set by the Reserve Bank of India (RBI). According to sources, ZCBL has acquired 100 per cent holding of the City Cooperative Bank, along with its cumulative loss of Rs 7.5 crore. “We are confident to turn this loss-making bank into profit making soon. This is the first acquisition by Zoroastrain Cooperative Bank and it is likely to boost our operations and business outside Maharashtra,” said an official of ZCBL. (For details log on to : http://www.business-standard.com/india/news/mumbais-zoroastrian-cooperative-bank-acquires-surat-based-city-coop-bank/476256/)
BANK OF AMERICA WITHHELD MERRILL LOSSES BEFORE DEAL
Days before Bank of America shareholders approved the bank’s $50 billion purchase of Merrill Lynch in December 2008, top bank executives were advised that losses at the investment firm would most likely hammer the combined companies’ earnings in the years to come. But shareholders were not told about the looming losses, which would prompt a second taxpayer bailout of $20 billion, leaving them instead to rely on rosier projections from the bank that the deal would make money relatively soon after it was completed. What Bank of America’s top executives, including its chief executive then, Kenneth D Lewis, knew about Merrill’s vast mortgage losses and when they knew it emerged in court documents filed Sunday evening in a shareholder lawsuit being heard in Federal District Court in Manhattan. The disclosure, coming to light in private litigation, is likely to reignite concerns that federal regulators and prosecutors have not worked hard enough to hold key executives accountable for their actions during the financial crisis. (For details log on to : http://www.business-standard.com/india/news/bofa-withheld-merrill-losses-before-deal/476352/)
GOLDMAN SACHS SEES POTENTIAL FOR S&P 500 BEAR MARKET ON EUROPE
NEW YORK: An intensifying financial crisis in Spainor elsewhere in Europe has the potential to drive American stocks into a bear market, Goldman Sachs Group Inc’s chief USequity strategist said. While David Kostin’s mid-year forecast for the Standard & Poor’s 500 Index calls for a 3.7 per cent gain from last week’s close to 1,325, the measure may fall to 1,125 should the situation in Europeworsen. That would give the S&P 500 a more- than 20 percent loss since its 2012 closing peak of 1,419.04. The June 1 report from Goldman Sachs said the most likely scenario is Greek elections resulting in the nation remaining in the euro zone. Concern it will leave has helped drag the S&P 500 down 10 per cent since April 2, including the biggest monthly decline since September. “Financial contagion or crisis in Spain” could prompt a bear market, according to the report. (For details log on to : http://www.business-standard.com/india/news/goldman-sachs-sees-potential-for-sp-500-bear-marketeurope/476349/)
BOLLOJU APPOINTED INTERIM CEO OF DEUTSCHE BANK INDIA
KOLKATA: Shrinath Bolloju will succeed Gunit Chadha as the chief executive officer for Deutsche Bank’s Indiabusiness, industry sources told Business Standard on Monday. Bolloju, currently chief operating officer of the bank in India, has been appointed for an interim period. The Reserve Bank of Indiahad approved the appointment, sources said. Chadha has relocated to Singaporeafter he was named as the co-chief executive of Deutsche Bank’s Asia-Pacific operations. He and Alan Cloete (also appointed co-chief executive for the Asia-Pacific) have also joined Deutsche Bank’s global group executive committee. Bolloju, a veteran banker with two decades of experience, is known for his ‘people and change management’ skills. He started his career with Citi in their information technology arm in Indiain 1988, working mainly in the securities processing business. (For details log on to : http://www.business-standard.com/india/news/bolloju-appointed-interim-ceodeutsche-bank-india/476342/)
PNB REWORKS DEAL WITH METLIFE TO FIT REGULATORY BILL
NEW DELHI/MUMBAI: Punjab National Bank (PNB), which had proposed to buy 30 per cent in MetLife Insurance for Rs 1, has reworked the sale agreement amidst the insurance regulator’s discomfort with the deal structure. According to the new proposal, the existing partners (apart from MetLife International) will sell stake to MetLife, which will be offered to PNB. That will ensure the equity capital base of the insurance company is not increased so that the efficiency ratios are kept unchanged. The previous proposal envisaged stake dilution by existing partners by issuing fresh shares and PNB buying stake from the expanded equity base. According to the deal, all PNB branches (more than 5,600) will sell MetLife’s insurance products. The bank will earn a fee for selling those products. The new proposal has been submitted to the regulator for approval. Interestingly, the former proposal was approved by the Reserve Bank of Indiabut hit a roadblock with the Insurance Regulatory and Development Authority (Irda) over the valuation. (For details log on to : http://www.business-standard.com/india/news/pnb-reworks-dealmetlife-to-fit-regulatory-bill/476318/)
BUY CRITICAL ILLNESS COVER TO ENHANCE YOUR HEALTH COVER
MUMBAI: Aviva Life Insurance has launched an online health plan called Aviva Health Secure. It is a critical illness product, which will provide the policyholder with a lump sum amount on diagnoses of any critical illness as covered by the policy. This product will help the family to fund unplanned medical expenses and get the best possible treatment. This critical illness product can only be bought online. The annual premium works to Rs 2000 and above. The minimum sum assured is Rs 5 lakh and the maximum is Rs 50 lakh. The plan can be bought by a person from 18 years to 55 years of age for a minimum policy term of 10 years and a maximum term of 30 years. “These days, people have become vulnerable to critical illnesses at an early age due to lifestyle and stress. Hence, health insurance is critical keeping in mind the rising medical costs. It is estimated that the total healthcare expenses in Indiawill rise to USD 425 billion by 2016. Even now 79% of Indians fund their own medical expenses compared to 17% in the UK,” says TR Ramchandran, CEO& MD, Aviva India said, (For details log on to : http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/buy-critical-illness-cover-to-enhance-your-health-cover/articleshow/13813189.cms)
AVIVA LIFE LAUNCHES ONLINE PLAN FOR CRITICAL ILLNESS
MUMBAI: Aviva Life Insurance launched an online health plan, Aviva Health Secure, on Monday. The plan provides the policyholder with a lumpsum amount on diagnosis of any of the 12 critical illness covered by the policy. The policy premium amounts to Rs 2,000 and above a year. The policy can be bought at www.avivaindia.com for any major medical expenses by the insured. The minimum sum assured is Rs 5 lakh, and extends to a maximum of up to Rs 50 lakh. The age limit ranges from 18-55 years for a minimum policy term of 10 years and a maximum of 30 years. The company said that unlike other health insurance products offered by the non-life insurance companies which are indemnity based, Aviva Health Secure offers the policyholder a lumpsum based on the sum assured for the illnesses irrespective of the hospital bills. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3491356.ece)
GOVERNMENT MAY RELOCATE UK ARM OF INDIA INFRASTRUCTURE FINANCE COMPANY TO NETHERLANDS
NEW DELHI: Although the finance ministry is tightening its rules around companies that invest in Indiathrough countries with favourable tax regimes, the ministry itself is looking at options to save taxes for India Infrastructure Finance Company’s (IIFCL) UK-based subsidiary. It is considering a plan to relocate the UKarm of the infrastructure financier to the Netherlandsto save taxes and make it more viable. “We will have to only pay one-fourth of taxes of what we currently pay in the UK,” IIFCL chairman SK Goel told ET, confirming the proposal to relocate the company to the Netherlandsis in advanced stages. IIFCL was established in 2006 as a special purpose vehicle to provide long-term financial assistance to infrastructure products, and the company’s cumulative disbursements to the infrastructure sector in the past three years have grown to 22,542 crore till March 2012. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/government-may-relocate-uk-arm-of-india-infrastructure-finance-company-to-netherlands/articleshow/13829350.cms)
DEBT TRAP TURNS TRAGIC FOR ANDHRA MFI CHIEFS
KOLKATA/HYDERABAD: Life seems to have turned a full circle for some professionals in the microfinance industry of Andhra Pradesh, but with tragic consequences. About a year and a half back, microfinance institutions in the state were accused of coercive recovery practices that forced many poor borrowers to commit suicide. Following a regulatory crackdown, the situation appears to have reversed, with chief executives of at least two small to medium sized microfinance companies committing suicide in recent months. Only this time they were at the receiving end of alleged coercion after a rising debt burden made their operations go deep in the red. Last week, A Prathap Reddy, chief executive officer of SEWA MACTS Federation, a Hyderabad-based micro-lender, ended his life. Industry players claim he was stressed, as the microfinance company was not in a position to repay its debts. (For details log on to : http://www.business-standard.com/india/news/debt-trap-turns-tragic-for-andhra-mfi-chiefs/476316/)
AMFI LOBBIES WITH SEBI FOR HIGHER EXPENSE RATIO MINUS SERVICE TAX FOR AMCs
MUMBAI: The Association of Mutual Funds in India(Amfi) is lobbying with the capital market regulator Sebi to weed service taxes out of the expense ratio – the total annual fee that asset management companies (AMCs) charge unit-holders. The industry association for mutual funds is pushing for Sebi’s permission to charge the 10.03% service tax in addition to the 2.5% expense ratio. The move will increase the overall charges borne by unit-holders to 2.65-2.70%, industry officials said. At present, AMCs pay service tax from the 2.25% expense ratio they receive from unit-holders. In a presentation made to Sebi last week, Amfi suggested increasing the expense ratio to 2.5% from 2.25%. Also, Amfi has decided not to push for the re-introduction of the entry load while selling equity mutual funds. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/amfi-lobbies-with-sebi-for-higher-expense-ratio-minus-service-tax-for-amcs/articleshow/13831728.cms)
DECLARE STOCKS IN WAREHOUSES: FORWARD MARKETS COMMISSION
MUMBAI: Forward Markets Commission (FMC) on Monday asked commodity bourses to declare the stocks of commodities lying in their accredited warehouses. “This would help traders to know the stock lying in warehouses. They can take their trading calls accordingly,” said FMC chairman Ramesh Abhishek. FMC is changing the rules of the game to make the platform more accessible for genuine traders and market participants, he said. ET first reported the development on May 11. The exchanges will have to declare the charges for depositing the stocks for a particular period of time. Most traders don’t know about the stock kept at warehouses and base their trades on market rumours. (For details log on to : http://economictimes.indiatimes.com/markets/regulation/declare-stocks-in-warehouses-forward-markets-commission/articleshow/13833404.cms)
CANARA ROBECO LAUNCHES NEW GOLD FUND
MUMBAI: Asset management company Canara Robeco today launched a fund-of-fund scheme called Canara Robeco gold savings fund, where the customers can invest in gold. The new fund is an open-ended fund-of-fund scheme, which will invest predominantly in units of Canara Robeco gold ETF, the AMC said in a release. “Given the current global uncertainties, gold is fast becoming an alternate asset with increasing demand from several central bankers and investors globally. In the domestic market too, rising investment demand, increased risk aversion and high inflationary conditions favour Gold as a good investment option for the next few years,” Canara AMC investment head Ritesh Jain said. The minimum investment in the fund would be Rs 5,000 and the scheme is open for subscription from today and closes on June 18. (For details log on to : http://economictimes.indiatimes.com/personal-finance/savings-centre/savings-news/canara-robeco-launches-new-gold-fund/articleshow/13816101.cms)
RELIANCE AMC PIPS HDFC AS MOST PROFITABLE FUND HOUSE
MUMBAI: Reliance AMC has emerged as the most profitable fund house in FY12, nudging past rival HDFC Mutual Fund by a few crores, analysis of profit figures for top six fund houses shows. The top three fund houses posted a rise in their net profit figures this fiscal despite the weak equity markets and regulatory changes. Reliance Mutual Fund posted a net profit of R276 crore for the full year ended March 31, 2012, a 5.6% gain over the previous fiscal. HDFC Mutual Fund’s net profit rose 11% to R269 crore in FY12 from R242 crore in FY11. ICICI Prudential Mutual Fund saw its profit rise 22% to R88 crore from R72 crore for the period under consideration. The top five fund houses make up about 54% of the industry’s assets under management, while the top 10 fund houses make up about 77%. “We have been investing in technology, widening our reach among retail investors and increasing our branch network over the past few years,” said Sundeep Sikka, CEO, Reliance Mutual Fund. “We have focused on the right product mix and tried to get retail investors to invest in debt products. Considering that the fund industry still remains under-penetrated, we will keep investing for the future,” Sikka added. (For details log on to : http://www.financialexpress.com/news/reliance-amc-pips-hdfc-as-most-profitable-fund-house/957905/)
EQUITY MUTUAL FUNDS FALL MOST IN SIX MONTHS IN MAY
NEW DELHI: There is little respite seen for equity mutual funds in the near term, with government inaction to tackle a sharp slowdown in domestic growth and a shaky global economy driving investors away from risky assets. India’s diversified stock funds fell the most in six months in May, pulled down by banks and automobiles among others, and any chance for a rebound is unlikely after March-quarter GDP growth fell to its slowest pace in nine years. “It’s going to be very, very tough,” said TP Raman, managing director, Sundaram Mutual Fund. “Neither what the government is doing is right, nor what globally things are happening are right.” Diversified funds fell 5.65% in May, their worst monthly performance since November and the third consecutive month of decline, according to data from fund tracker Lipper. In comparison, the BSE Sensex fell 6.4%. (For details log on to : http://www.financialexpress.com/news/equity-mutual-funds-fall-most-in-six-months-in-may/957907/)