MUMBAI: Banks are raising short term money at much higher price than what they paid prior to the CRR cut, a move that would impact their margins but is aimed at renewing deposits that are due to mature this year-end. In the last two days, banks have paid 11.35% to 11.60% on the three-month certificate of deposits (CD) – an instrument which can be traded on the exchange and similar to bulk deposits. This is significantly higher than 10.90% to 11.15% that banks paid prior to the Friday’s 75 basis point cut in cash reserve ratio (CRR) – a share of deposits which banks have to park with central bank – to 4.75%. Theoretically, a cut in CRR – which is a liquidity easing measure – should result in a fall in interest rates in the secondary market. Contrary to this, some banks are willing to pay a higher price on CDs. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/despite-crr-cut-banks-raise-short-term-money-at-higher-rate/articleshow/12255047.cms)
SELLOFF TARGET SET AT R30K CRORE FOR NEXT FISCAL
NEW DELHI: Finance minister Pranab Mukherjee on Tuesday said the government has set a target of R30,000 crore from stake sales in state-run firms in the next fiscal. The figure is lower than R40,000 crore, which is the target for the current fiscal. In a written reply to a question in the Rajya Sabha, Pranab said, “The indicative targets for PSU disinvestment for 2012-13 and 2013-14 are R30,000 crore and R25,000 crore, respectively, which are based on the projected figures in the Medium Term Fiscal Policy Statement of the Union Budget for 2011-12.” Despite frantic efforts, the government failed to garner R40,000 crore from divestment of PSUs in 2011-12. The modest figure indicates that the government is not sure whether the markets will rebound in the near term. Also, there is a realisation that repeated failures to meet targets could be embarrassing for the policy makers even as it disrupts fiscal calculations. (For details log on to : http://www.financialexpress.com/news/selloff-target-set-at-r30k-cr-for-next-fiscal/923534/)
BOOSTER DOSE LIKELY FOR PRIVATE FUNDS IN AGRICULTURE
NEW DELHI: The path drawn up by the government’s first-ever official agriculture survey in suggesting more private investment in farming is likely to find resonance in this year’s Budget. Officials said apart from infrastructure and skill development, agriculture could be the next big focus area. In 2009-10, private sector investment in agriculture stood at Rs 1.09 lakh crore, constituting 82 per cent of the total investment in the farm sector. Total investment in agriculture was as low as 2.7 per cent of gross domestic product (GDP), when the total investment rate was 36.6 per cent. Of that 2.7 per cent, as much as 2.3 per cent came from the private sector. The rest was from the public sector and this proportion has been stagnant since 2005-06. “This clearly shows public investment in agriculture is not the way to achieve faster farm growth, but private investment is,” officials said. They said the Budget would try to encourage private investment in seed research and production, capacity building, storage, allied activity like dairying, fisheries and, most important, in farm marketing, with the help of business chambers such as Ficci and CII. (For details log on to : http://business-standard.com/india/news/booster-dose-likely-for-pvt-funds-in-agriculture/467690/)
TIME FOR ‘TOUGH’ DECISIONS ON SUBSIDY FRONT
NEW DELHI: Finance minister Pranab Mukherjee may have to take tough decisions to bring down the subsidy burden, estimated to touch 2.5 per cent of gross domestic product (GDP) this financial year. Analysts cautioned the government there could be fiscal stress in 2012-13, too, as the burden might touch a high of three per cent of GDP if corrective steps are not taken. Ahead of the Budget, the PHD Chamber of Commerce and Industry has estimated the subsidy outgo this financial year at 2.5 per cent of GDP. This takes into account two supplementary demands for grants, with a net cash outgo of around Rs 66,000 crore. The third supplementary, which could come in the Budget session, has not been taken into account. If the government adds Rs 25,000 crore to the subsidy bill for 2011-12, the subsidy would touch 2.75 per cent of GDP, said S P Sharma, chief economist at PHD. (For details log on to : http://business-standard.com/india/news/time-for-tough-decisionssubsidy-front/467668/)
PARLIAMENTARY PANEL ON DTC SUGGESTS WIDER INCOME-TAX SLAB
NEW DELHI: A Parliamentary panel has recommended the income tax (I-T) exemption limit be raised to Rs 3 lakh a year in its report on the Direct Taxes Code Bill, against Rs 180,000 at present. Raising hopes of some relief for taxpayers in the coming Budget, the report was tabled in the Lok Sabha on Tuesday. The Bill, which will replace the I-T Act, 1961, is expected to be effective from April 1, 2013. Although introduction of the Direct Taxes Code, earlier scheduled for April 2012, may be pushed further due to lack of time to complete necessary formalities, submission of the report by the Standing Committee on Finance at this juncture may pave the way for the introduction of some provisions of the Bill in the Union Budget on March 16. The panel suggested 10 per cent tax be levied on taxable income between Rs 3-10 lakh, 20 per cent between Rs 10-20 lakh and 30 per cent on income over Rs 20 lakh. At present, the slabs are Rs 1.8-5 lakh, Rs 5-8 lakh, and above Rs 8 lakh, while the slabs proposed by the finance ministry under the Direct Taxes Code Bill were Rs 2-5 lakh, Rs 5-10 lakh and above Rs 10 lakh. (For details log on to : http://business-standard.com/india/news/parliamentary-paneldtc-suggests-wider-income-tax-slab/467661/)
MAURITIUS READY TO SHARE PAST BANKING INFORMATION PROVIDED INDIA ASKS FOR IT
NEW DELHI: In what may strengthen the government’s resolve to track illicit money stashed in tax havens, Mauritiushas agreed to share past banking information with Indiaif New Delhimakes a request in this regard. The development assumes significance as Indiahas maintained that countries are not willing to share banking information with retrospective effect and there is a need for changes in the international standards. Getting past information would help target the real tax-evaders who have a track record on moving black money. Under the terms of tax treaties that Indiahas with various countries, there is no exclusive provision for sharing past banking information. Mauritiushas walked the extra mile to provide this privileged piece of information to Indiapurely on a voluntary basis. (For details log on to : http://www.financialexpress.com/news/mauritius-ready-to-share-past-banking-information-provided-india-asks-for-it/923425/)
DURABLES INDUSTRY HAS HEAVY DUTY DEMANDS FROM BUDGET
NEW DELHI: Having faced its worst possible quarter that saw diminishing sales, the consumer durables industry now wants a reduction in various taxes, such as customs duty and special additional duty, and zero taxes on research & development to boost domestic production and spur consumer spending. However, the consumer durables industry and the cable industry are at loggerheads over reduction in customs duty on imported set-top boxes. Consumer durables players want the duty to be hiked to 10% to spur domestic production. However, DTH and cable operators want zero duty to boost digitisation as 95% of the boxes are imported. According to Anirudh Dhoot, director, Videocon, & president, Consumer Electronics and Appliances Manufacturers Association (CEAMA), the last quarter of 2011 has not been very fruitful for the consumer durables industry. (For details log on to : http://www.financialexpress.com/news/durables-industry-has-heavy-duty-demands-from-budget/923442/)
STATE BANK PLANS TO INSTALL AUTHENTICATION BIOMETRIC DEVICES
MUMBAI: In a bid to prevent manipulation of its core banking solution platform, State Bank of Indiais planning to install authentication biometric devices at select branches in the country. These live scan capture devices — single finger capture and authentication biometric device — will be used by the bank’s employees at the front-end in branches in conjunction with a backend, centralised biometric authentication software solution. The biometric devices (or scanners) will be used as a second factor authentication of the users of the bank’s core banking solution, where the primary user authentication will continue to be user ID and password. Initially, the bank intends to install 5,000 such units. It may install them in all its 14,700 branches in the future. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article2992423.ece)
IDBI BANK TO SELL EQUITY HOLDINGS IN 229 INDIAN COMPANIES
MUMBAI: IDBI Bank plans to sell its equity holdings in 229 Indian unlisted and unquoted Indian companies within the next 15 days. IDBI’s stake in these companies will be sold under individual offers and no one can bid for the whole portfolio in consolidation. These investments span almost the whole industry spectrum from containers to paper to petrochemicals to textiles to electronics and to telecom. The bank could be cleaning up what appears to be dud portfolio, said those tracking the banking sector. “It is never too late to do spring cleaning and remove dust accumulated over a couple of decades,” said Mr Arun Kejriwal, Founder, KRIS Research. (For details log on to: http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article2992431.ece)
HDFC BANK BEEFS UP I-BANKING DIVISION, HIRES DONALD D’SOUZA, NISHIKANT DAS
NEW DELHI: At a time when global investment banks are downsizing their operations in India and handing over pink slips in large numbers, HDFC Bank, one of India’s largest banking giants, is strengthening its i-banking division with fresh recruitments. The bank has appointed Donald D’Souza from IIFL (India Infoline Ltd) and Nishikant Das from Standard Chartered, said a Mumbai-based headhunter familiar with the recruitment process. While D’Souza joined earlier this month as the head of Equity Capital Markets, Das is slated to join next month to head debt capital markets, he added. The senior level hiring comes at a time when many global investment banks are grappling with layoffs and restructuring. Firms which axed executives ‘jobs in India since the beginning of September last year include Daiwa Securities, Bank of America Merrill Lynch, Nomura and UBS. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/hdfc-bank-beefs-up-i-banking-division-hires-donald-dsouza-nishikant-das/articleshow/12254496.cms)
BUNDESBANK BUILDS BUFFER AGAINST EURO BANK LOAN RISK
FRANKFURT: Germany’s Bundesbank used a substantial part of last year’s profit to boost its risk buffer because of growing worries about the price euro zone central banks will have to pay for saving the bloc’s banking system. The European Central Bank helped to avert a credit crunch by flooding the euro zone’s banking system with over Euro 1 trillion ($1.3 trillion) in cheap three-year loans, and also loosened the rules on what collateral it would accept from banks in exchange for the funding. The Bundesbank has warned of the increasing risks the euro zone’s central banks have taken on as a result of such steps and this is also reflected in its balance sheet. The Bundesbank’s 2011 profit fell to Euro 643 million from Euro 2.2 billion in 2010 as it raised its provisions for risks related to credit, exchange rate, gold and other prices by Euro 4.1 billion compared with an increase of Euro 1.6 billion in the previous year. (For details log on to : http://business-standard.com/india/news/bundesbank-builds-buffer-against-euro-bank-loan-risk/467676/)
DEUTSCHE BANK RAISES CAPITAL BASE BY RS 455 CRORE
MUMBAI: Deutsche Bank on Tuesday said it had increased its capital base in Indiaby Rs 455 crore to finance its expansion plans here. The bank’s capital base now stands at Rs 5,500 crore. This is the fifth time the foreign lender has increased its capital base in Indiasince 2007. The capital base pertains to only the bank’s branches. It excludes other Deutsche Bank entities in India, including equity broking, investment banking, primary dealership, asset management and shared services. Gunit Chadha, chief executive, Deutsche Bank in India, said, “It (capital increase) underscores India’s significance in Deutsche Bank’s global plans. This increase enables us to further service and finance our corporate, institutional and retail clients in one of the fastest growing markets globally.” (For details log on to : http://business-standard.com/india/news/deutsche-bank-raises-capital-base-by-rs-455-cr/467679/)
GOVERNMENT TO INTRODUCE HEALTH INSURANCE FOR CENTRAL STAFF, PENSIONERS
NEW DELHI: Government said it was contemplating introduction of a health insurance scheme for central government employees and pensioners with special focus on non-CGHS areas. Stating this in a written reply to a question in the Rajya Sabha, Health Minister Ghulam Nabi Azad said the serving central government employees in non-CGHS areas are provided healthcare facilities under the CS(MA) Rules, 1994, but pensioners are not covered under these rules. The Minister said the pensioners are, however, entitled to a fixed medical allowance of Rs 300 per month. He said pensioners residing in non-CGHS areas have the option to become a CGHS member in any CGHS-covered city of their choice to avail the medical facilities under the Scheme. (For details log on to : http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/government-to-introduce-health-insurance-for-central-staff-pensioners/articleshow/12251391.cms)
INSURANCE SECTOR HOPES FOR RELOOK AT DTC PROPOSAL, FDI CEILING
MUMBAI: The insurance industry’s expectations from this year’s Budget include an overall re-look at the proposals of the Direct Tax Code, waiver of service tax and an increase in the ceiling on foreign direct investment. Although implementation of the DTC has been deferred for a year, the fear is that some of its proposals may be included in this year’s Budget. According to Mr Amitabh Chaudhry, Managing Director and CEO, HDFC Life, most of the DTC recommendations are negative for the insurance industry. So the real concern is that the Budget may pick up elements of the DTC and implement them. However, with the Standing Committee on Finance recommending that sum assured should be 10 times the annual premium (instead of 20 times as recommended by the DTC), companies are hopeful that at least this will be implemented. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-economy/article2992360.ece)
ONGC’S INSURANCE PREMIUMS LIKELY TO RISE 15-20%
MUMBAI: Oil and Natural Gas Corporation (ONGC) may have to pay higher premiums when its insurance policy comes for renewal on May 11. Last week, ONGC, which holds the country’s biggest insurance policy, had floated a tender to the underwriters to primarily cover its offshore assets worth $33.7 billion. Given the recent spike in reinsurance rates, premiums for the new policy are likely to rise 15-20 per cent. Last year, ONGC paid $25-27 million to cover assets worth $32.6 billion. United India Insurance Company has been appointed the lead insurer. Based on the technical bids submitted, the state-owned general insurance company has shortlisted four broking firms, Aon, MNDastur, Marsh and JWT, to help it secure cover from international reinsurers. (For details log on to : http://business-standard.com/india/news/ongcs-insurance-premiums-likely-to-rise-15-20/467675/)
LIC BEARS BURDEN OF RISING GOVERNMENT DEBT
MUMBAI: With more than a quarter of a billion customers, the Life Insurance Corporation (LIC) of Indiahas once again dug into its pockets to prop up the financially-strapped government. Policyholders in LIC could be forgiven for watching with a helpless sense of déjà vu. LIC has bailed out the government before. It bought shares in state-owned banks in 2009. In 2010, it bought the government’s stake in a mining firm. This time, it is injecting a billion dollars into some state banks. It has also bought out part of the government’s stake in an oil firm. Taxpayers should have been outraged at LIC’s decision earlier this month to buy $2.5 billion of overpriced shares in the Oil and Natural Gas Corporation (ONGC). Analysts believe the government sold them at a 5-7% premium to the market price of R283. The shares were trading at about R282 on Tuesday. (For details log on to : http://www.financialexpress.com/news/lic-bears-burden-of-rising-govt-debt/923308/)
EDELWEISS TOKIO LIFE INSURANCE LAUNCHES NON-LINKED CASHFLOW PROTECTION
MUMBAI: Private insurer Edelweiss Tokio Life Insurance today launched Cashflow Protection, a non-linked, participating endowment assurance money back participating plan, that enables one to plan for important stages or milestones in life. The plan aims to cover the need of wealth accumulation, retirement and legacy transfer, the company said in a release issued here. The entry age of Cashflow Protection is five years with an option of selecting the maturity age as 85, 90, 95 or 100 years, a protection for the whole life. “We are indeed delighted to offer Cashflow Protection, a plan that caters to three important milestones, which include wealth accumulation, planning for retirement and building a creating a legacy for children and grandchildren,” Edelweiss Tokio Life Insurance CEO Deepak Mittal said. (For details log on to : http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/edelweiss-tokio-life-insurance-launches-non-linked-cashflow-protection/articleshow/12247734.cms)
IFC, TVS CAPITAL INVEST RS 1.24 BILLION IN FOOD PROCESSING FIRM DUNAR FOODS
MUMBAI: Indian private equity fund TVS Capital and International Finance Corp, an arm of World Bank, have jointly invested Rs 1.24 billion ($24.81 million) in rice processor, Dunar Foods. Dunar, which is based in the northern Indian state of Haryana, exports basmati rice to Middle East, Europe and the U.S., a statement issued by Dunar and TVS Capital said. IFC, along with U.S.private equity firm, Warburg Pincus, recently invested $50 million in a non-banking finance company, Au Financiers. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/ifc-tvs-capital-invest-rs-1-24-bn-in-food-processing-firm-dunar-foods/articleshow/12246766.cms)
SCHRODERS SET TO ACQUIRE 30% STAKE IN AXIS AMC
MUMBAI: Schroders, the UK-based asset management giant that manages close to $291 billion in assets, is set to acquire nearly 30 per cent stake in Axis Asset Management Company, sources familiar with the deal have told Business Standard. The transaction will help Schroders revive its Indiapresence and end Axis Asset Management Company’s search for a strategic partner in the mutual fund business. While two other companies had evinced interest in buying a stake in the asset management company promoted by Axis Bank, sources say Schroders is set to seal the deal. A senior management team from the firm’s Londonheadquarters is scheduled to visit Mumbai next week to finalise the transaction. In the mutual fund industry, deals are valued on the basis of the asset mix of the fund house, network strength, long-term earning prospects and profitability. The deal value increases if the assets are more in equity schemes. This is because these schemes earn better commissions compared to debt and other hybrid funds of the same tenure. (For details log on to : http://business-standard.com/india/news/schroders-set-to-acquire-30-stake-in-axis-amc/467689/)
PANEL SUGGESTS BIGGER FII PLAY IN ASSET RECONSTRUCTION COMPANIES
NEW DELHI: A government-appointed advisory group on asset reconstruction firms has favoured $20 billion limit for investments by foreign institutional investors in security receipts (SRs) issued by securitisation firms. The report of the advisory group, which has now been submitted to Finance Minister Pranab Mukherjee, had also recommended that the sub-cap of 10% participation by foreign institutional investors in SRs should be removed. Security receipts are issued by a securitisation company to qualified institutional buyer or banks as they do not pay cash upfront. They are issued for a period of seven years. The government had constituted an advisory group to look into the condition of ARCs, which in its report among other measures, had recommended that reconstruction firms should be allowed to buy performing loans from banks, arrange them in groups, and issue bonds on such groups or securitise in banking parlance. (For details log on to : http://economictimes.indiatimes.com/news/economy/policy/panel-suggests-bigger-fii-play-in-asset-reconstruction-companies/articleshow/12256241.cms)
SMART INVESTORS CASH OUT AS MARKETS RISE
MUMBAI: The smart investor is selling. Among the top sellers are global institutions like Citigroup, private equity players like Carlyle and Warburg Pincus and domestic majors. Some top executives and promoters have also been selling while others have announced their intention to sell. The latest to join the list is Wipro’s Azim Premji Trust. On Monday, the promoter-group entity announced its intention to sell shares worth Rs 1,500 crore. Several others, including State Bank of India (SBI) and ICICI Emerging Sectors Fund, have sold their long-term holdings in Multi Commodity Exchange after listing at a huge premium. Experts say sales in such huge quantities was unthinkable only a few months ago. According to them, many private equity funds, which invest with targeted time frames but could not sell last year due to weak market conditions are selling now. Sandip Sabharwal, chief executive (portfolio management services), Prabhudas Lilladher, said, “It’s not a question of price but of time. Last year, the market was dead, there were no volumes. Sentiment was really bad. Promoters and investors couldn’t sell even if they wanted to at any price.” The deal where Citi could sell a huge quantity of shares at almost the existing market price wouldn’t have been possible last year, he adds. (For details log on to : http://business-standard.com/india/news/smart-investors-cash-out-as-markets-rise/467634/)
MUTUAL FUND AUM INCREASES 2% ON MARK-TO-MARKET GAINS IN EQUITY FUNDS
MUMBAI: The mutual fund industry’s month-end assets under management (AUM) rose by over 2% (R16,100 crore) to R6,75,2 00 crore in February on the back of mark-to-market gains in equity funds and inflows in money market funds, or liquid funds, according to data from industry body Amfi. Assets of equity funds rose 3.5% (R61 billion) to R1,860 billion due to mark-to-market gains on upsurge in the underlying markets. However, the category saw outflows of R2,800 crore in the month. This was the second consecutive month of outflows in the category as investors booked profits on recent gains in the market, according to Crisil Research. The benchmark indices rose around 4% in February on the back of persistent foreign institutional investors (FII) inflows and firm global cues. FIIs bought equities worth over $5 billion in February and over $2 billion in January. (For details log on to : http://www.financialexpress.com/news/mutual-fund-aum-increases-2-on-marktomkt-gains-in-equity-funds/923432/)
UTLOOK BLEAK FOR INDIAN BANKS: S&P
MUMBAI: The operating performance of some Indian banks is likely to remain weak in the fiscal year ending March 31, 2013, a report by Standard & Poor’s has noted, citing a slowing economy, a dip in credit growth, rising delinquencies and tighter margins. “The asset quality of Indian banks is likely to remain weak, or even deteriorate, due to the moderation in economic activity, high inflation, and high interest rates,” the report stated. “We expect restructured loans to rise in fiscal years 2012 and 2013. Small and mid-size companies are particularly vulnerable,” it added. According to the report, credit growth in Indiais likely to weaken to 16-17% in 2012 and 2013, from about 23% in 2011. The agency expects net interest margins of Indian banks to remain tight in 2013 due to intensifying competition amid low credit growth, and borrowers’ limited ability to absorb higher interest rates. (For details log on to : http://www.financialexpress.com/news/outlook-bleak-for-indian-banks-s&p/923297/)
MUTUAL FUNDS MOVE COURT TO AVERT ACCOUNT FREEZE BY I-T
MUMBAI: The country’s mutual fund industry is battling a Rs 500-crore tax demand on interest earnings from some of their earlier investments in securitised papers. In order to pre-empt tax authorities from freezing their bank accounts, fund houses have moved court challenging the order. Leading mutual funds including UTI MF, SBI Mutual Fund, HSBC AMC, Birla Sun Life MF, Reliance Mutual Fund, Religare and Kotak have filed writ petitions, praying for a stay, before the Bombay High Court. Even though MFs are exempt from paying tax on their income from investments, the Income tax Department believes that income from securitised instruments, better known as pass through certificates (PTCs) in financial markets, are taxable. Close to 20 MFs have received notices from the tax department. (For details log on to : http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/mutual-funds-move-court-to-avert-account-freeze-by-i-t/articleshow/12255199.cms)
MUTUAL FUND ASSETS ROSE 2% TO RS 6.75 TRILLION IN FEBRUARY: CRISIL
NEW DELHI: The mutual fund industry’s assets increased to Rs 6.75 trillion by the end of February, registering an increase of Rs 161 billion over Rs 6.59 trillion in January. According to Crisil Research, the 2 per cent month-on- month rise in mutual fund assets in February 2012 was largely due to mark-to-market gains notched by equity funds and inflows witnessed in money market funds. Owing to the uptick in the equity market, assets of equity funds rose by Rs 61 billion to Rs 1.86 trillion. The benchmark S&P CNX Nifty rose around 4 per cent in February on the back of persistent foreign institutional investor (FII) inflows and firm global cues. FIIs bought equities worth Rs 252 billion in February, the highest monthly net buying since records are available and compared to Rs 111 billion in January, Crisil Research said. (For details log on to : http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/mutual-fund-assets-rose-2-to-rs-6-75-trillion-in-february-crisil/articleshow/12247708.cms)
NSE TWEAKS LISTING RULES TO STRENGTHEN SME PLATFORM
MUMBAI: The National Stock Exchange has tweaked the framework for listing of small and medium enterprises (SMEs) in an effort to encourage issues by such companies on its special SME platform. The bourse said on Monday that it will let SMEs choose whether to let their shares trade in call auctions in fixed time slots during the day or follow the normal practice of allowing the stocks to trade in market hours. “Either the merchant banker or the issuer can opt for any one option before the shares are listed,” said Ravi Tyagi, head of NSE’s SME project. If a company chooses the call auction route, NSE will allot the time slot in which this will take place depending on the level of trading activity through the day. (For details log on to : http://economictimes.indiatimes.com/markets/regulation/nse-tweaks-listing-rules-to-strengthen-sme-platform/articleshow/12255439.cms)