NEW DELHI: The government is set to remove the legal hurdle in the entry of banks into commodity futures trading, despite the Reserve Bank ofIndia’s reservations on the issue.
Banks can now trade in shares, bonds and currencies, but Section 8 of the Banking Regulation Act prohibits them from trading in goods.
But, the finance ministry has now supported the consumer affairs ministry’s proposal to amend the law, as it would provide a hedging tool for banks. Sources familiar with the developments say the Banking Laws Amendment Bill is likely to be tabled in the Monsoon session of Parliament. Interestingly, the proposal to amend Section 8 of the Act was not examined by Parliament’s standing committee on finance, as it was not part of the original Bill.
The Forward Contracts (Regulation) Act, 1952 allows all entities to participate in commodity futures trading.
The move comes despiteIndiabeing one of the most vocal critics of the commodities market at international fora. In fact, in Parliament, Finance Minister Pranab Mukherjee recently blamed increasing “financialisation” for the spurt in oil prices despite a poor economic environment in developed countries.
The RBI has been against allowing banks to enter this sensitive area, as there is no “autonomous and independent” commodity regulator in the country.
The Forward Markets Commission, which regulates commodity players, comes under the administrative control of the food and consumer affairs ministry. A Bill to provide autonomy to the commodities market regulator will be tabled in the next session of Parliament after Cabinet approval.
Government officials, however, say though the FMC has not been accorded an independent status by law, the government does not interfere in the functioning of the commodities market regulator
The RBI has also raised the issue of a lack of manpower in the FMC that has affected effective monitoring and supervision of commodity players — something the commodities regulator also acknowledges.
Though banks are not allowed to trade in commodity futures, they support the clearing services and also provide fund and non-fund-based facilities to exchange members for managing their working capital requirements.
Commodity derivatives trading inIndiawas almost non-existent till 2002, except for a few regional exchanges which supported such activity. It gained momentum after the introduction of national commodity exchanges like the National Commodities and Derivative Exchange (NCDEX) and the Multi Commodity Exchange (MCX).
SBI LAUNCHES SIGNATURE CARD FOR HIGH NETWORTH INDIVIDUALS
MUMBAI: SBI Cards has launched a signature card targeted at high networth individuals and the affluent customer segment. SBI Cards is a joint venture between State Bank of Indiaand GE Capital.“The average income limit will be higher than that of all other SBI credit cards,” Mr Kadambi Narahari, CEO, SBI Cards, said. “With the SBI Signature Card, we now have an enhanced offering for the affluent customer segment. SBI Signature Card is another product innovation from our side and comes with a distinct value proposition,” Mr Narahari added. The card is available at an annual fee of Rs 5,000 whereby the cardholders would be entitled to an airline ticket or gift vouchers worth Rs 5,000 upon enrolment. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3487672.ece)
SBT LAUNCHES IMP SERVICE
CHENNAI/KOCHI: State Bank of Travancore (SBT) has launched an Inter-Bank Mobile Payment Service (IMPS) for transferring money among bank accounts using mobile phones and the mobile banking facility. This facility enables a customer having a mobile banking facility to transfer funds to the account of any other beneficiary, either with the same bank or with another bank, using a mobile phone, on a 24×7 basis. The beneficiary should have a unique seven-digit number known as the mobile money identifier (MMID) assigned by his/her bank, which is linked to the account and the mobile phone number. Meanwhile, SBT has also launched a ‘Know Your Customer’ (KYC) updating campaign for 30 days starting June 1, 2012. (For details log on to : http://www.business-standard.com/india/news/sbt-launches-imp-service/476195/)
INDIAN OVERSEAS BANK BUSINESS REGISTERS 22.4 PER CENT GROWTH
ERODE: The total business of Indian Overseas Bank (IOB) has registered a growth of 24.2 per cent in 2011-12, touching Rs 3,21,707 crore, according to a top bank official. “Certainly within a couple of years our bank will touch a total business of Rs 4 lakh crore through its branches. Last year alone we inaugurated 447 branches, mainly in rural areas”, IOB Chairman and Managing Director M Mahendra told reporters here yesterday. He said deposits had recorded a 22.86 per cent growth at Rs 1,78,434 crore in 2011-12 compared to 2010-2011. Mahendra said IOB has devoted attention to agriculture sector lending and that it proposed to extend the credit of Rs 500 crore to the farming sector during the bank’s Agriculture Investment Credit Campaign. (For details log on to: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/iob-business-registers-22-4-pc-growth/articleshow/13776917.cms)
ICICI BANK’S LOSSES ON SECURITY RECEIPTS WIDEN TO RS 408 CR IN FY12
MUMBAI: ICICI Bank’s losses on its security receipts portfolio have nearly doubled to Rs 408 crore in the financial year 2011-12, from Rs 231 crore a year ago. “This loss, primarily, comprised mark-to-market losses, based on the net asset value declared by asset reconstruction companies (ARCs) after taking into account the potential recovery estimates,” the bank spokesperson told Business Standard in an e-mailed response. ARCs buy non-performing loans from banks by paying cash or offering security receipts. These loans are rated every year to assess their recovery potential. If the rating is downgraded, the bank holding the security receipt against that asset suffers a mark-to-market loss. Industry analysts, however, feel the losses on the bank’s security receipts portfolio may have peaked as the country’s largest private sector lender has refrained from selling non-performing loans to ARCs in the past couple of years. (For details logon to : http://www.business-standard.com/india/news/icici-banks-lossessecurity-receipts-widen-to-rs-408-cr-in-fy12/476214/)
NEW PRIVATE BANKS OUTSHINE NATIONALISED BANKS IN 2011-12
Overall economic growth has dipped from 8.5 per cent in 2010-11 to 6.5 per cent in 2011-12. The slowdown has impacted the business growth of the banking system. Excluding window dressing by banks, deposits and advances grew 13.4 per cent and 17 per cent in 2011-12 respectively compared to 15.9 per cent and 21.5 per cent in 2010-11. In such a scenario how have the nationalised banks (NBs) and new private banks (NPBs) fared? Business Growth: Business growth can be seen from the perspective of deposits and advances. The NPBs were more aggressive than NBs both on both deposit mobilisation and credit disbursement. Compared to a 15 per cent growth for NBs, deposits of NPBs grew 16.3 per cent. On the lending side, growth for NBs was 18.1 per cent compared to 20.1 per cent for NPBs in 2010-11. NIMs: Not only the deposits and loan growth for NPBs was higher than that for NBs, they also reported better interest margins. NIMs for NBs declined 21 bps to 2.95 per cent compared to an much smaller decline by 8 bps for NPBs to 3.53 per cent in 2011-12. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3487669.ece)
‘BIG FOUR’ TO AUDIT SPAIN’S BANKING SECTOR
MADRID: Spainhas picked the “Big Four” accounting firms KPMG, PwC, Deloitte and Ernst & Young to carry a full, individual audit of its ailing banks, a source with knowledge of the decision told Reuters on Saturday. The review, which should take a few months, will complement an ongoing exercise to stress test Spain’s banking sector by consulters Oliver Wyman and Roland Berger, whose first results are expected around mid-June. “I can confirm (the names),” the source said. Spain’s Prime Minister Mariano Rajoy on Saturday said his government would have a clear view of how much money will be needed to recapitalise troubled lenders by the end of June. He also said the government would make clear by then how it intends to inject the money. Economy Minister Luis De Guindos said earlier this week that Spain would likely go to the markets to find the euro 19 billion (£15.29 billion) nationalised lender Bankia said it would need to be cleaned up but investors are doubtful it can manage to prop up the entire sector without outside help. (For details log on to : http://www.business-standard.com/india/news/big-four-to-audit-spains-banking-sector/476231/)
CHINATRUST COMMERCIAL BANK TO OPEN BRANCH AT SRIPERUMBUDUR
CHENNAI: Chinatrust Commercial Bank is set to open its second branch in the country at Sriperumbudur, near Chennai, on June 6. Chinatrust, the only Taiwanese bank operating in India, at present, has a branch at Connaught Placein New Delhi. The bank recently secured permission from the RBI to open its second branch in India, says a release from the bank. Corporate banking products, competitive pricing, quick turnaround time, latest processing platform and personalised customer attention are the highlighting features of the bank, the release adds quoting Mr Subhasis Banerjee, CEO of the bank in India. He also added that Taiwanese business interests are on the rise in India, and we look at this as an opportunity to take a bigger role in development of the relationship between the two countries and their business interests. The bank also has further expansion plans in India. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-others/tp-states/article3487696.ece)
MUTHOOT FINANCE EYES 10% GROWTH IN ASSETS UNDER MANAGEMENT
NEW DELHI: Gold loan financier Muthoot Finance Ltd is looking at 10 per cent growth in its assets under management (AUM) this fiscal, its Managing Director, Mr George Alexander Muthoot, has said. This is much lower than the 55 per cent increase in AUM seen in 2011-12 and over 100 per cent growth in 2010-11. As of end March 2012, the company had AUM of about Rs 24,417 crore. “This year will be a year of consolidation for us,” Mr Muthoot said, adding that bottomline growth is also likely to be flat during 2012-13. Muthoot Finance’s profit after tax recorded 80 per cent increase in 2011-12 to Rs 892 crore as against Rs 494 crore in previous fiscal. Income from operations nearly doubled to Rs 4,536 crore in 2011-12. Mr Muthoot said that the company has already made representation to the RBI on the latter’s move to clamp down on gold loan companies in February by bringing down the loan-to-value ratio to 60 percent. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3487670.ece)
L&T FINANCE HOLDINGS: NBFC TODAY, BANK TOMORROW
When Fidelity Investments, a global money manager, put its Indian mutual fund arm on the block, it attracted a long line-up of bidders. They ranged from Templeton to the Birlas. But in the end it was a dark horse — L&T Finance — which walked away with the deal. What prompted a finance company, engaged in the business of funding power projects and tractors, to aggressively bet on mutual funds? “We think it is an excellent business for the long-term,” says Mr Y.M. Deosthalee, Chairman and Managing Director of L&T Finance Holdings. “Excellent, is really the word,” he adds for emphasis. That seems an unusual view when the Indian mutual fund industry is going through a rough patch. But it does make sense when put in the context of L&T Finance’s larger game-plan — diversification. (For details log on to: http://www.thehindubusinessline.com/todays-paper/tp-corporate/article3487627.ece)
DOWNGRADES IN EARNINGS LOOM FOR SENSEX FIRMS
MUMBAI: The risk of further downgrades in earnings has increased, thanks to Thursday’s lower GDP numbers. The consensus Sensex earnings for financial year 2013 have already been lowered by about 14 per cent in last one year to about Rs 1,280 currently. At current levels, the market is building expectations of Sensex earnings growing in the region of 16 per cent in 2012-13. However, looking at the GDP data and the recent cut in GDP growth estimates as well, there is a possibility the earnings growth expectations will be toned down. In fact, some brokerages have already started factoring this. “While the possibility of de-growth is rising with the pronounced slowdown in the economy, our base scenario is that we will see EPS growth of zero-five per cent for the Sensex in FY13,” says Saurabh Mukherjea, head of equities at Ambit Capital. While Mukherjea’s estimate is far lower than consensus expectations, he says, “To the extent that some brokerages have more optimistic forecasts than ours, they are likely to throttle their numbers back.” Given the current environment, experts say the 16 per cent growth figure is too high to expect. “I do not think 16 per cent growth is possible, and we should not even talk about it. In the current context, we are expecting nine per cent growth in the earnings (of Sensex companies) in FY13,” says Rajat Rajgarhia, director of research at Motilal Oswal Securities. (For details log on to : http://www.business-standard.com/india/news/downgrades-in-earnings-loom-for-sensex-firms/476218/)
EXPERTS SEE RE WEAKENING ON EURO ZONE WOES
MUMBAI: The rupee, which touched a fresh low last week, is expected to stay under pressure in the near term, as concerns from the debt-ridden Euro zone continue to drive away foreign investors to safe haven currencies like the dollar and yen. With depreciation of 6.4 per cent against the dollar, the Indian currency was the worst performer among Asian currencies in May. On Friday, the rupee closed at 55.59, thereby registering its eighth consecutive weekly loss against the greenback. During the week, it fell to a fresh all-time low of 56.52 per dollar. Market participants said given the weak domestic fundamentals and global headwinds, the rupee might again fall below 56 in the near term. “Market forces are strongly in favour of the dollar; not ruling out an extended rally in the dollar index into 85.25-85.50 and euro spot into 1.20-1.18 before a sharp reversal tracking build-up of roll out of QE3,” said Moses Harding, head (ALCO and Market & Economic research), IndusInd Bank. (For details log on to : http://www.business-standard.com/india/news/experts-see-re-weakeningeuro-zone-woes/476215/)
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