NEW DELHI: The Cabinet is likely to take up a Bill tomorrow to increase voting rights of stakeholders in banks. The development comes less than a week after Finance Minister Pranab Mukherjee exuded confidence that key financial sector reforms Bills would be legislated this year.
“The Cabinet may deliberate on the Banking Laws (Amendment) Bill 2011, on the basis of recommendations by the parliamentary standing committee on finance,” sources privy to the development told Business Standard.
The Banking Laws (Amendment) Bill, 2011, clubs various banking amendment Bills, including changes in the Banking Regulations Act, to increase the voting power of shareholders in banks.
According to the Bill, tabled in Parliament in 2011 and sent to the parliamentary panel, the voting power of stakeholders in nationalised banks would be capped at 10 per cent, against the current one per cent.
In private sector banks, the cap on voting rights of a single entity are scheduled to be increased in proportion to their stakes, against the current cap of 10 per cent of total voting rights.
However, the standing committee, headed by former finance minister Yashwant Sinha, recommended capping this right at 26 per cent. So, the Cabinet is likely to consider a cap of 26 per cent for private sector banks.
Last week, the finance minister had said in Washington, “On the legislative front, we have already committed the preliminary legislative process for the Pension Fund Regulatory Act, the Insurance Act and the Banking Amendment Act. These three Acts, I do hope, would get legislated this calendar year. If not in this Parliamentary session, then in the next.”
His remarks followed Chief Economic Advisor Kaushik Basu claiming he had been misquoted as implying major economic reforms in India would have to wait till the 2014 Lok Sabha elections.
After Standard & Poor’s downgraded India’s rating on Wednesday, all eyes would now be on the government’s reforms programme.
S&P MOVE A TIMELY WARNING, BUT NO REASON TO PANIC: FM
NEW DELHI: Finance Minister Pranab Mukherjee on Wednesday termed Standard & Poor’s (S&P) move to lower the outlook on India’s rating a timely warning and assured economic reforms would be on track to rein in the fiscal deficit at 5.1 per cent of the gross domestic product (GDP) for 2012-13, as projected in the Budget. Cautioning against any panic due to the S&P downgrade, Mukherjee exuded confidence that the economy would grow about seven per cent in 2012-13. The Budget had estimated economic growth this financial year at 7.6 per cent. “I am concerned, but I don’t feel panicky because I am confident our economy would grow at seven per cent, about seven per cent, if not more. We will be able to control the fiscal deficit, and it would be about 5.1 per cent,” he told reporters here. He said the government would take note of S&P’s decision to lower India’s rating outlook and work to push economic growth. “We should continue to work for higher GDP growth….We will take note. It is a timely warning….So, economic reforms will be on track,” he said. (For details log on to : http://www.business-standard.com/india/news/sp-movetimely-warningno-reason-to-panic-fm/472664/)
COST OF MONEY UNLIKELY TO GO UP SOON; BORROWER’S RATING IS KEY
MUMBAI: The impact of S&P’s revision of India’s long-term rating outlook to negative may not immediately raise borrowing costs for Indian corporations and banks in overseas markets. Hitendra Dave, MD& head, global markets, HSBC India, says: “Indian entities typically get better rates than the implied sovereign rating both in bond and loan markets.” Dave adds while sentiment may have been hurt, direct impact on pricing would be fairly limited right now. Recent issuances suggest a top-quality Indian company with a AAA rating would be able to borrow at treasury plus 325-330 bps in the bond markets or roughly at around 5.3%. In the loan market, rates would vary somewhat with the spread over Libor at 300-500 bps. Observes Srinivasan Varadarajan, executive director, Axis Bank: “We don’t believe there would be any change in borrowing costs for banks like us.” (For details log on to : http://www.financialexpress.com/news/cost-of-money-unlikely-to-go-up-soon;-borrowers-rating-is-key/941656/0)
CLOUDY OUTLOOK FOR 15 FINANCIAL INSTITUTIONS, TOP 3 IT COMPANIES
MUMBAI: The scramble to raise funds from the local bond market is set to intensify after Standard & Poor’s changed its outlook on India’s sovereign rating. The rating agency’s move is likely to make foreign borrowing expensive for India Inc. That, coupled with easing interest rates in the domestic market, will make local fund-raising more attractive, industry leaders and bankers feel. “It will affect the international lending rates for Indiaand the cost of borrowing from abroad would get rise… The international funding for external commercial borrowings and foreign currency convertible bonds will also be affected,” said Abhishek Goenka, founder and chief executive of India Forex Advisors. The rush is already visible, with Indian companies raising close to Rs 6,000 crore after the Reserve Bank of India (RBI) cut the repo rate by 50 basis points last week. (For details log on to : http://www.business-standard.com/india/news/cloudy-outlook-for-15-financial-institutions-top-3-it-companies/472651/)
EXEMPT CROSS-BORDER INVESTMENTS FROM GAAR, FIIS ASK FINMIN
MUMBAI: Foreign institutional investors (FIIs), which are still in a quandary over the possible tax implications of General Anti Avoidance Rules (GAAR), have shot off another letter to the finance minister, urging him to exempt cross-border portfolio investments from the provisions of the proposed regulations and the indirect transfer rules to avoid major disruptions in the Indian market. In a letter written on Tuesday, Asia Securities Industry & Financial Markets Association (ASIFMA) – an industry body comprising many leading FIIs – has said that it expects that “Indian companies will experience an increase of 10% or more in the cost of raising capital unless the portfolio exemptions are granted.” “Exemption of cross-border portfolio investments would permit FIIs to continue to play their supportive role in the Indian economy uninterrupted, while also continuing to pay taxes in line with internationally accepted practice,” it explains. (For details log on to : http://www.financialexpress.com/news/exempt-crossborder-investments-from-gaar-fiis-ask-finmin/941511/)
STATE BANK OF MYSORE TO HIRE 700 OFFICERS THIS FISCAL
BANGALORE: State Bank of Mysoreplans to recruit 700 probationary officers this fiscal. According to Ms Hamsini Menon, Managing Director, State Bank of Mysore, the bank saw 1,000 clerical staff joining duty during the fourth quarter of last fiscal. “The recruitments were mainly to balance the large number of retirements that the bank would see during the 2012-13 fiscal,” she said. About 400-500 SBM employees are due to retire this year. In addition, the bank would recruit 700 probationary officers and 500-600 additional clerical staff this fiscal. State Bank of Mysoreis on a branch network expansion mode as well. “We plan to take the number of branches to 1,000 in the next two years,” said Ms Menon. The bank currently has about 740 branches. (For details log on to: http://www.thehindubusinessline.com/todays-paper/tp-others/tp-international/article3354037.ece)
ALLAHABAD BANK TO OPEN FOUR BRANCHES OVERSEAS
NEW DELHI/KOLKATA: Allahabad bank has approached the Reserve Bank of India (RBI) for opening four overseas branches. At present, the bank has one overseas branch and representative office. Mr J. P. Dua, Chairman and Managing Director, Allahabad Bank, said: “We have approached the regulator for opening overseas branch each in Dhakha, Shanghai, Singaporeand Hong Kong. With this Hong Kongwill have two branches.” The bank has a representative office in China. The bank is celebrating 148 years of its existence. The oldest joint stock bank of the country aims to maintain net interest margin of 3 per cent during current fiscal. The bank expects credit and deposits to growth at 20 per cent each in the current fiscal, Mr Dua added. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-others/tp-international/article3354042.ece)
PUNJAB & SIND BANK TO HIRE 1,700
HYDERABAD: Punjaband Sind Bank has notified recruitment of 900 probationary officers and 800 clerks. The candidates who had taken the common written examination for probationary officers and clerical cadre vacancies conducted by the Institute of Banking Personnel Selection in 2011 and obtained a valid score card are eligible to apply. The clerical recruitment is earmarked for single window operators `A’ category of posts. The online registration for applying commenced on April 24 and will continue up to May 5, 2012, bank said in a notification. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3354080.ece)
MAHARASHTRA STATE COOPERATIVE BANK PLANS DIVERSIFICATION
MUMBAI: Enthused after receiving banking licence from the Reserve Bank of India (RBI) last week after more than a century of operations, Maharashtra State Cooperative Bank (MSCB) plans to diversify into corporate financing. It would thus, be reducing lending to the cooperative sector, especially sugar and spinning mills. The 1906-founded bank has identified information technology, manufacturing and engineering, infrastructure, state electricity boards and renewable energy for funding. This was necessitated as MSCB, which was predominantly financing cooperative sugar and spinning mills, is unable to do so in the future. Reason: its exposure to this sector has reached 34 per cent, which is close to the ceiling fixed by RBI and National Bank for Agriculture & Rural Development (Nabard). (For details log on to : http://www.business-standard.com/india/news/mscb-plans-diversification/472649/)
YES BANK Q4 NET UP 34 PER CENT
MUMBAI: Led by a robust growth in non-interest income, private sector lender YES Bank on Wednesday reported a 33.6 per cent jump in net profit for the quarter ended March 31, 2012, to Rs 271.8 crore. Its non-interest income grew 42.6 per cent, to Rs 266.4 crore, compared with Rs 186.8 crore in the same period a year ago. In the same period last year, the lender had reported a net profit of Rs 203.4 crore. “The bank has achieved sustained profit growth of 34.4 per cent on the back of steady NII growth, and a continued focus on revenue diversity, leading to strong non-interest income growth,” said Rana Kapoor, managing director & chief executive officer, YES Bank. Net interest income grew 28.6 per cent to Rs 448.2 crore, whereas total income of the bank stood at Rs 714.6 crore, up 33.5 per cent compared with the corresponding quarter a year ago. (For details log on to : http://www.business-standard.com/india/news/yes-bank-q4-net34/472648/)
FEDERAL BANK CUTS BASE RATE TO 10.45%
MUMBAI: Federal Bank on Wednesday trimmed its base rate by 20 basis points to 10.45% in response to the Reserve Bank of India’s recent reduction in key policy rates. The bank also reduced interest rates by 25 bps on long-term deposits of three years and above to 9% and on one-year deposit to 9.25%. Most banks now have a base rate of 10.50%, except the State Bank of Indiaand other private sector banks, which have lower rates in the industry. Last week, ICICI Bank had lowered its base rate by 25 basis points to 9.75%, while Punjab National Bank (PNB) and Bank of Baroda (BoB), too, reduced their base rates by 25 basis points to 10.5%. This is the second reduction in base rate by the bank in the last two months, taking the total reduction to 30 bps from the near term peak of 10.75%, said the bank. Union Bank of Indiaand Corporation Bank reduced rates by 15 bps to 10.50% and Central Bank of Indiacut its rates by 25 bps to 10.5%. (For details log on to : http://www.financialexpress.com/news/federal-bank-cuts-base-rate-to-10.45/941533/)
SIC FINALLY TERMS J&K BANK A PUBLIC AUTHORITY
SRINAGAR: After two years refusing information under the RTI act, full bench of the state information (SIC) on Tuesday announced the J&K Bank to be a public authority. The bank was given a month long period to train its staff and make its designated officials responsible for implementing the RTI act. “Our law department is examining the judgment and we will respond at the earliest,” Chairman and CEO of the J&K Bank Mushtaq Ahmad told The ET. He refused to elaborate. The judgment came on basis of a number of petitions pending disposal before the SIC. Invariably in all the cases, the bank’s law department had refused information citing its exclusion from the list of public authority institutions. The case took more than a year to be decided. CIS website has put the Tuesday judgment separate under ‘landmark judgments’ that chief information commissioner G R Sufi delivered with two information commissioners Dr Sudesh Kumar and Nazir Ahmad. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sic-finally-terms-jk-bank-a-public-authority/articleshow/12867012.cms)
CREDIT SUISSE POSTS SMALL Q1 NET PROFIT DESPITE LOSS FORECAST
ZURICH: Credit Suisse eked out a small first-quarter profit on Wednesday, confounding analyst forecasts for a big loss due to a 1.5-billion Swiss franc charge on its own debt, as it cut more costs than expected. Credit Suisse posted a net profit of 44 million Swiss francs, compared to 1.13 billion net profit last year. The quarter’s profits were bolstered by 178 million francs due to the selling down of its stake in Aberdeen Asset Management. Analyst estimates in a Reuters poll called for a 436 million Swiss franc net loss. The Swiss bank did not add to ongoing job cuts of 7% of its workforce, or roughly 3,500 staff, as some analysts had expected, but said it is ahead of a target to cut costs by 1.2 billion francs, when extrapolating the first quarter to 2012. (For details log on to : http://www.financialexpress.com/news/credit-suisse-posts-small-q1-net-profit-despite-loss-forecast/941538/)
STANDARD PROPOSAL FORM MOOTED FOR ALL LIFE INSURANCE COMPANIES
HYDERABAD: The Insurance Regulatory and Development Authority (Irda) has proposed a standard proposal form for all life insurers to bring in uniformity in information. It will be mandatory for all life insurance companies to adopt the proposals. In its circular, Irda said it proposes to mandate a revised proposal form for life insurance in respect of individual policies. “The purpose of these regulations is to provide for a standard proposal form for individual policies in life insurance that has an inbuilt flexibility for seeking additional information that is product-specific or specific to a particular risk category,” the draft said. These regulations are issued in terms of the powers vested upon the authority under Section 14 (b) of the Insurance Regulatory and Development Authority Act, 1999. (For details log on to : http://www.financialexpress.com/news/standard-proposal-form-mooted-for-all-life-insurance-cos/941528/)
ATTRACTIVE FEE FOR PENSION FUND MANAGERS LIKELY
NEW DELHI: The Pension Fund Regulatory and Development Authority (PFRDA) is set to introduce a fee structure for pension fund managers soon. This, it feels, would be a game-changer, extending the New Pension System (NPS) to 87 per cent of the country’s population, mostly in the non-government, or private, sector. PFRDA chairman Yogesh Agarwal told Business Standard the regulator was discussing the move with the government and it expected the clearances for implementing the proposal come soon. “It can happen any day,” he said, adding, “For the private sector, the Bajpai Committee has not recommended any fee. What we are proposing is we will fix a cap below which individual pension fund managers can quote their individual fees.” He said market forces would take care of the cost factor associated with the whole process. “What we have proposed is pension fund managers would be appointed, subject to a due diligence process, and once they are in the business, they can quote their own fee and approach the customer with advice. They can quote their fee structure and their yield track record, and the customer would decide which pension fund manager he would opt for,” he added. (For details log on to : http://www.business-standard.com/india/news/attractive-fee-for-pension-fund-managers-likely/472666/)
S&P CUT MAY BE BOON FOR PFRDA, INSURANCE BILLS
NEW DELHI: The Standard and Poor’s revision of India’s rating outlook to negative may be bad news for the economy but could just give the fillip needed to clear at least two economic Bills in this Budget session, namely the Pension Fund Regulatory and Development Authority Bill (PFRDA) and the insurance laws Bill. The bad news is, however, that it may just stop at that. According to leader of the Opposition in the Lok Sabha, Sushma Swaraj, the BJP has been approached by the government on the former with firm proposals and amendments. “We had two main issues, one dealing with the mention of a cap of 26% in foreign direct investment (FDI) in the Act itself rather than in the rules, which the government has agreed to and secondly that pensioners should be given the option of investing in fixed-return or equity-based plans,” she said. “The government will be bringing amendments to this effect in the Bill,” she added. (For details log on to : http://www.financialexpress.com/news/s&p-cut-may-be-boon-for-pfrda-insurance-bills/941715/)
LIC TO SELL STAKES IN GOOD TIME
MUMBAI: Life Insurance Corporation of India (LIC), the largest institutional investor in the country, is not in a hurry to bring down its holdings in unlisted companies to align with the 10 per cent equity exposure cap mandated by the insurance regulator. According to highly placed sources in LIC, the insurance behemoth has already made its stance clear with the government and the Insurance Regulatory Development Authority of India (Irda), citing the practical hindrances involved. The largest life insurer in the country has also requested the regulator to tweak some of the debt investment norms to allow more flexibility. “There are practical challenges involved, even if we are to bring down the stakes in these unlisted companies. It cannot happen overnight. We are aware of the regulations, but we are not in a hurry,” said an official at LIC. The insurer has exceeded investment limit in 57 unlisted firms. “We need to arrive at a valuation, then need to look for a suitor. Also, some have been hugely profitable investments. All these procedures are easy and take a lot of time. We have made our position clear to the government and regulator,” he added. (For details log on to : http://www.business-standard.com/india/news/lic-to-sell-stakes-in-good-time/472639/)
LIC HOUSING FINANCE Q4 NET SLIDES 19%
MUMBAI: LIC Housing Finance Ltd (LICHFL) on Wednesday said it had posted a 19 per cent dip in net profit for the fourth quarter ended March 31, at Rs 253 crore, on higher borrowing costs and provisioning. The city-headquartered life insurance giant LIC’s housing finance subsidiary’s net profit for the corresponding quarter in the last financial year was Rs 314 crore. “Our net profit went down due to higher cost of borrowing with interest rates being elevated, and a Rs 150-crore jump in provisioning due to revised norms announced by National Housing Bank,” LICHFL Chief Executive V K Sharma told reporters here. Additionally, last year the company had a one-time income of Rs 169 crore from stake sale in a mutual fund business, he said. The company’s scrip closed down 0.04 per cent at Rs 258 on the BSE, whose 30-share index ended 0.3 per cent down at 17,151 points. Sharma said the net interest margin (NIM) registered an improvement sequentially — from 2.3 per cent in Q3 to 2.4 per cent in Q4 — but was down year-on-year when it stood at 3.08 per cent. He sounded confident of regaining lost ground and touch three per cent as the quantum of loans given under floating rate increases and rates soften. (For details log on to : http://www.business-standard.com/india/news/lic-housing-finance-q4-net-slides-19/472640/)
LESS THAN 1,000 MEANS BIG BUSINESS FOR SUB-K
HYDERABAD: In a new twist to the microfinance story, which was all about lending, Sub-K iTransactions – part of the Vijay Mahajan-promoted Basix Group – is now working towards savings in rural households and urban slums. The company is the first to adopt a branchless banking model with a mobile-based technology on a real-time basis, along with biometric authentication in the rural households with income less than R1,000. And this is made possible through micro-ATM counters, thereby leading to decongestion at banks. Sub-K iTransactions MD and CEO Amit Mehta says the micro-ATM counters address the core issue of financial inclusion in banking services and give access to other digitised services, such as government payments, prepaid top-ups and utility payments. Sub K, which means less than R1,000, would help people access services within a distance of 1,000 metre with transaction values under R1,000. (For details log on to : http://www.financialexpress.com/news/less-than-1-000-means-big-business-for-subk/941541/)
IIFCL’S $1 BILLION INFRASTRUCTURE DEBT FUND TO BE OPERATIONAL BY MAY-END
NEW DELHI: India Infrastructure Finance Company Ltd (IIFCL) today said it expects its $ 1 billion (about Rs 5,000 crore) infrastructure debt fund (IDF) to be operational by the end of next month. “The company has initiated the process for launching an IDF along with other co-sponsors and investors for a corpus of around $ 1 billion with an investment of around Rs 1,500 crore through mutual fund route” IIFCL Chairman and Managing Director S K Goel said after announcing its annual performance. “We expect before May end this IDF may be operational,” he said, adding, the company has already got provisional approval from the Sebi. He said, IIFCL decided to go for mutual fund route because it is more flexible. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/iifcls-1-bn-infrastructure-debt-fund-to-be-operational-by-may-end/articleshow/12868033.cms)
MUTHOOT FINANCE EYEING 15-25% GROWTH THIS FISCAL
BANGALORE: Muthoot Finance, which grew over 100 per cent two years ago, looks at a slower growth this fiscal. “This year is one of consolidation, both for growth of assets under management and branch expansion,” Mr George Alexander Muthoot, Managing Director, Muthoot Finance, told Business Line. The NBFC is looking at 15-25 per cent growth in 2012-13. In 2010-11, its AUM grew over 100 per cent to Rs 15,000 crore, while in 2011-12 it grew about 50 per cent to Rs 24,000 crore. “The lesser growth is also due to our base growing over the years,” he said. The company will go slow on its branch expansion plans too. “During the last two years, we opened 900 branches in each year. This fiscal, we plan to open only 250-300 branches,” said Mr Muthoot. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-others/tp-international/article3354038.ece)
SEBI EYES GREATER FUND FLOWS FROM ABROAD
MUMBAI: To improve the framework for qualified foreign investors (QFIs) and facilitate broad-based participation, the Securities and Exchange Board of India (Sebi) is working on large-scale changes to the framework notified earlier this year. It has convened an informal forum with key market participants, such as custodians, qualified depository participants (QDPs), brokers and tax consultants. Representations on an ongoing basis have been made to Sebi and the finance ministry by various entities to iron out issues. Market players have also sought clarity on certain issues related to taxation and qualification of investors. The market regulator, in January, had issued guidelines for direct entry of QFIs. However, flows have not started to come through this route, which experts say is due to lack of clarity on the subject. According to sources, QDPs have strongly opposed the norm asking them to file tax returns on behalf of QFIs. They want Sebi to transfer the responsibility to QFIs themselves. By the current rules, QDPs are responsible for deduction of tax at source on profits or dividends or any other income made by QFI. (For details log on to : http://www.business-standard.com/india/news/sebi-eyes-greater-fund-flowsabroad/472593/)
SOVEREIGN RATING PROSPECT CHANGE LIMITS RUPEE RISE
MUMBAI: Dollar sales by foreign banks ahead of a US Federal panel meeting scheduled on Wednesday supported the rupee. The gains, though, were capped due to Standard & Poor’s (S&P) revising India’s sovereign rating outlook. After opening at 52.75, the rupee had risen to 52.46 per dollar in early trade on the back of dollar selling by companies. It fell to 52.74 after the ratings update by S&P. The rupee closed at 52.54 as compared with the close at 52.68 yesterday. “There was dollar supply from foreign banks squaring off positions with the focus on the Federal Open Market Committee meeting in the US,” said a foreign exchange dealer with a domestic consultancy firm. There was no intervention from the Reserve Bank of India, he added. Traders said a weaker dollar against the euro also helped the rupee appreciate against the greenback. However, the rupee is seen weak. “The market sentiment is already negative and any such news would further push equities and currency on a downward trajectory,” said Abhishek Goenka, CEO, India Forex Advisors. (For details log on to : http://www.business-standard.com/india/news/sovereign-rating-prospect-change-limits-rupee-rise/472641/)
PE PLAYERS STARE AT PROSPECT OF DISPOSING OF UNUSED FUNDS
NEW DELHI: A slew of private equity (PE) players who had raised India-focussed and dedicated funds in 2006-07 are now facing a problem because a majority of them are sitting on unallocated capital with their fund cycle nearing an end. They will now either have to return unused capital to their limited partners (investors in the fund) or go in for aggressive investments at unviable valuations to utilise the existing fund capital, even if it means settling for not the best of deals. In fact, Chrys Capital, which is managing a fund size of $1 billion, has asked its primary funds for shortening the fund size. FE spoke to a host of PE funds and LPs who are mulling taking similar position on this aspect. For the record, in 2006-2008, a whopping $15.990 billion was raised by India-dedicated funds and $33.877 billion by India-focused funds. (For details log on to : http://www.financialexpress.com/news/pe-players-stare-at-prospect-of-disposing-of-unused-funds/941622/)
MF INDUSTRY LOSES 80% OF BANKS, FINANCIAL FIRMS FOLIOS IN 2011-12
MUMBAI: The mutual fund industry shed around 80 per cent of folios belonging to banks and financial institutions in FY12. The decline was largely due to an RBI directive. RBI had asked banks to reduce their MF exposure to a maximum of 10 per cent of their net worth to mutual funds. Banks were supposed to comply first by October 2011. This was later pushed to December 2011. Banks and financial institutions closed around 10,000 folios during the last fiscal. However, the total number of folios fell by around two per cent during the same period. It stood at 4.64 lakh crore as at end March 2012. Folios, or the number of mutual fund accounts has been on a gradual decline for the past two year. At the end of FY10, the folios numbers stood at 4.79 crore, 4.72 crore in FY11 and 4.64 crore in FY12. At the end of March 2012, the AUM stood at Rs. 5.87 lakh crore, down one per cent from March 2011. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-markets/article3354070.ece)
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