NEW DELHI: The Left Front has started mobilising the support of non-NDA and non-UPA parties to garner support against the Congress-led UPA government’s move to push its economic reforms agenda with three much-delayed financial sector legislations.
The Left Front will reach out to regional parties, including AIADMK, Samajwadi Party, Janata Dal (Secular), Biju Janata Dal and Asom Gana Parishad, to gather numbers against the legislations. Despite reservations expressed by UPA ally Trinamool Congress, finance minister Pranab Mukherjee had told a Washington audience last month that the government was serious about pushing the three reform bills – Pension Fund Regulatory and Development Authority (PFRDA) Bill, Insurance Laws (Amendment) Bill and Banking Laws (Amendment) Bill.
CPM polit bureau member S Ramachandran Pillai said: “We will launch an agitation against the government’s move to introduce the three anti-people legislations inside and outside Parliament. There are like-minded secular parties we have worked with. We know they will support us.” Left Front is also banking on the fact that BJP has given its support for PFRDA only and not the other two legislations. “Their support to PFRDA Bill comes with riders. Even within BJP there are different voices,” said a senior CPM MP.
Numerically speaking, even if the Left gets support of regional allies the numbers would not be enough to defeat UPA’s intentions unless BJP comes on board. The Left Front (CPM, CPI, All India Forward Bloc, RSP) has 24 MPs in Lok Sabha. With Samajwadi Party (22), AIADMK (9), Biju Janata Dal (14), Janata Dal (Secular) (3) and Asom Gana Parishad (1), the Left Front would be able to get the support of mere 73 MPs. At best, this “third front” would be able to send a message of dissent through this. Only if BJP with its 114 MPs supports the initiative, such a move could have any substantial meaning.
Outside Parliament, the Left Front would launch an agitation with the help of trade unions. All India Trade Union Congress (AITUC) general secretary and CPI MP Gurudas Dasgupta said: “The protests would not be restricted inside Parliament. We are encouraged by the February 28 strike when all trade unions irrespective of political affiliations got together to oppose UPA’s policies. We will be launching mass action against the so-called reforms agenda outside Parliament as well.”
The Left Front has serious objections to the Government’s reforms agenda. In UPA-I when the Left Front was supporting the ruling coalition from outside, it had forced the government to shelve the Bills.
The Insurance Laws (Amendment) Bill was introduced in the Rajya Sabha in December 2008 by then finance minister P Chidambaram as part of UPA’s financial sector reforms. The Bill was seen as crucial by foreign investors toIndia’s commitment to reforms in this sector.
The Banking Laws (Amendment) Bill, which seeks to strengthen the regulatory powers of the Reserve Bank of India and the issue of capital raising capacity of banks, was first introduced in 2005, but lapsed with the dissolution of the 14th Lok Sabha.
BOND BUYBACKS TO BOOST G-SEC MARKET
NEW DELHI: The Reserve Bank of India (RBI) and the finance ministry are set to consolidate the government securities (G-sec) market through buybacks. Simultaneously, the central bank is considering reducing the G-sec portfolio of banks in the held-to-maturity category to lift trading. These measures are aimed at improving liquidity and trading volumes in the G-sec market, officials familiar with the matter said. The RBI has already initiated selective buybacks of government bonds that account for a miniscule chunk of the total outstanding government debt paper, a senior official said. “Currently, there are numerous debt papers of varying maturities where outstanding component is less than R2,000 crore. As not much trading happens in these papers, the government is planning consolidate these,” the official said. (For details log on to : http://www.financialexpress.com/news/bond-buybacks-to-boost-gsec-mkt/945207/)
CURRENT ACCOUNT DEFICIT MAY FALL THIS YEAR
NEW DELHI: The country’s current account deficit (CAD) is likely to remain under pressure this financial year, too, as merchandise exports are not expected to match the 21 per cent growth seen in 2011-12. Even so, the deficit may come down a bit as a percentage of gross domestic product (GDP) this financial year compared to the last one. Imports, too, may not witness the 32.15 per cent growth registered in 2011-12 and improvement in the conditions in the United Statesmight lead to services exports doing better, according to analysts. Besides, strong Gulf economies may continue to result in robust remittances from overseas Indians, they add. The CAD may fall anywhere between three and 3.6 per cent of the GDP in 2012-13, against 3.5-4 per cent expected for the last financial year, say economists. To finance such a high CAD for another year, capital inflows have to be very high, they say, adding government needs to clear the air on the General Anti-Avoidance Agreement Rule (GAAR) to attract investments from foreign institutional investors. (For details log on to : http://www.business-standard.com/india/news/current-account-deficit-may-fall-this-year/473379/)
BANKS SEEN IN NO RUSH FOR CAPITAL DESPITE BASEL III RULES
MUMBAI: The Reserve Bank of India (RBI)’s guidelines on Basel-III capital regulations are unlikely to make domestic lenders scramble for funds, at least in the near term, say industry analysts and bankers. “There is no desperation among Indian banks to raise capital,” said Rohit Bammi, partner, financial risk management at KPMG in India. “Most banks are well capitalised and do not have any immediate need for funds. Also, the banking story in Indiais still attractive for investors. This strengthens banks’ ability to access markets. So, even if they need to raise capital over the medium term due to growth in their businesses, there will not be any shortage of funds.” The new norms mandate Indian banks need to maintain a minimum capital adequacy ratio (CAR) of nine per cent, in addition to a capital conservation buffer, which will be in the form of common equity at 2.5 per cent of the risk weighted assets. (For details log on to : http://www.business-standard.com/india/news/banks-seen-in-no-rush-for-capital-despite-basel-iii-rules/473372/)
BANKS FOR FIXING MINIMUM PAY FOR FIELD AGENTS
MUMBAI: Field agents employed by business correspondents (BCs) for distribution of financial products in villages will now have a minimum fixed pay component in their remuneration package, instead of the variable and performance-linked structure now. Banks have decided that their BCs should pay their agents a minimum of Rs 3,500 per month. Incentives would be in addition to this fixed pay. The move is aimed at reducing the scope of reputational and operational risks of banks. Bankers note that field agents have a low fixed pay component, prompting them to often switch jobs to stabilise their monthly income. “These agents are distributing products on behalf of the bank,” said an official of a Mumbai-based public sector bank. “Hence, the bank’s reputation is at stake if they do not behave properly with customers. There is a need to incentivise them to reduce the bank’s reputational and operational risks.” (For details log on to : http://www.business-standard.com/india/news/banks-for-fixing-minimum-pay-for-field-agents/473373/)
IMPORTERS DRAG RUPEE TO 4-MONTH LOW
MUMBAI: The rupee fell for the third consecutive day to touch a four-month low, as importers rushed to cover short-term exposures amid a modest intervention by the central bank. Worsening macroeconomic scenario and policy uncertainty, leading to weak foreign fund inflows, also pushed the rupee to levels last seen in December 2011. The Reserve Bank of India (RBI) intervened in the foreign exchange market for the second consecutive day, but the effort was seen as inadequate. However, the intervention arrested the fall in the domestic currency to some extent. On Thursday, the rupee closed at 53.41 per dollar after touching an intra-day low of 53.47 and a high of 53.12. On Wednesday, the rupee had closed at 52.96. “Importers are covering for short term as well as for three months and six months, whereas exporters are going slow. Hence, there is pressure on the exchange rate,” said Abhishek Goenka, chief executive officer, India Forex Advisors. (For details log on to : http://www.business-standard.com/india/news/importers-drag-rupee-to-4-month-low/473363/)
NO MINIMUM BALANCE REQUIRED FOR SBI SAVINGS ACCOUNTS
THIRUVANANTHAPURAM: The State Bank of Indiahas asked its branches to remove the minimum balance stipulation and refund charges that were collected for failure to maintain the same. The circular issued on April 25 said the bank has decided to waive the requirement of maintenance of minimum balance for all types of savings bank accounts with immediate effect. Accordingly, no minimum balance charges would be levied every quarter henceforth, the circular addressed to chief general managers of all SBI circles said. Branches were advised to use approved publicity material to the effect and to have them displayed prominently on branch premises. In a preceding circular sent only the day before, the bank ordered refund of charges for non-maintenance of minimum balance ‘of personal segment’ customers. (For details log on to : http://www.thehindubusinessline.com/todays-paper/article3381557.ece)
SBI BUYS 10 ACRE NEAR KOLKATA FOR RS 58 CRORE TO BUILD TRAINING INSTITUTE
KOLKATA: State Bank of Indiahas acquired 10 acre at Rajarhat, the up and coming satellite township near Kolkata, to build a training institute. It has paid Rs 58 crore to the West Bengalgovernment for the plot. SBI said the training institute will come up near the proposed International Financial Hub at Rajarhat. Its chief general manager Suriender Kumar said the proposed institution will not only give training to its employees in the eastern zone, it will attract participants from banks in South East Asian countries and other neighbouring countries. The country’s largest bank has 2.20 lakh employees and training for such a large contingent is met through a two tier learning centres. It has international level institutes like the proposed one in Hyderabad, Gurgaon and Indore. It has learning centres established in 14 circles for imparting job knowledge, skill development and training to junior staffers. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sbi-buys-10-acre-near-kolkata-for-rs-58-crore-to-build-training-institute/articleshow/12982109.cms)
RATNAKAR BANK TO ADD 50 BRANCHES THIS FISCAL
MUMBAI: Private sector lender Ratnakar Bank is targeting to add around 50 branches this fiscal with a majority of them being outside Maharashtra, a top official said here today. The bank’s branch network has grown to 105 from 80 in the last 18 months and it will add up to 50 this fiscal, bank’s managing director and chief executive Vishwavir Ahuja told reporters here. During the 18-month period, when the bank had a massive revamp, it has been able to grow its balance sheet size by three times to nearly Rs 7,500 crore, he said. It is targeting to take the total number of branches to 300 in the next three years, Ahuja said. In line with its strategy of expanding in other parts, only a third of the incremental branches will be in Maharashtrawhile the rest will be outside, bank’s consumer and retail banking head Nitin Chopra said. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/ratnakar-bank-to-add-50-branches-this-fiscal/articleshow/12981729.cms)
TAIB BANK INVESTMENT UNDER ED, I-T SCRUTINY
NEW DELHI: An investment by a unit of Taib Bank, promoted by the Bahrain government, in Anant Raj Industries Ltd has come under the scanner of the Enforcement Directorate (ED) and the income-tax (I-T) department for alleged violation of foreign direct investment (FDI) norms and foreign exchange violations, according to three officials familiar with the development. Acacia Real Estate Ltd invested Rs.225 crore in 2008 to pick up a 26% stake in a mall developed by Anant Raj Industries in Delhi. Taib Bank is the principal founding shareholder in Acacia. There is no estimate available of the money that may be owed to the government. According to ED and I-T officials, who spoke on condition of anonymity, Taib Bank picked up the stake through entities based in Cyprusand Mauritius, and then sold the holding before the lock-in period of three years was over. (For details log on to : http://www.livemint.com/2012/05/03223825/Taib-Bank-investment-under-ED.html?atype=tp)
PENSION SPACE HAS GREAT POTENTIAL: SUDHIN ROY CHOWDHURY
Interview with Member (Life), Irda
MUMBAI: At a time when the life insurance industry is faced with unprecedented challenges with regard to growth, profitability and sustainability, newly appointed Member (Life) at the Insurance Regulatory and Development Authority (Irda) Sudhin Roy Chowdhury has his task cut out. In his first media interaction since taking charge, he tells Niladri Bhattacharya it is not correct to attribute the slide in premium collection to regulatory reforms. Edited excerpts: What are the key challenges you are faced with right now, as member (life) of Irda? The key challenge would be to keep the industry focused on overall growth — new business as well as conservation. Increasing the share of health segment in the total pie would be the need of the hour. There is an expedient need to bounce back in the pension space, where there is immense potential. Distribution and persistency are key challenges for the sector, both of which need to be nurtured carefully to preserve the long-term prospects of the sector. (For details log on to : http://www.business-standard.com/india/news/pension-space-has-great-potential-sudhin-roy-chowdhury/473364/)
ONE-TIME WONDERS
Irda’s liberal stance on single-premium insurance products has brought relief to insurers. Should you buy one?
Life insurance companies selling single-premium insurance products would continue to sell them with some tinkering in the product profile to meet the revised criteria to claim tax benefits. Even the Insurance Regulatory and Development Authority (Irda), citing high risk on the products, has now toned down its stance and will allow the products to be sold in the markets. In a single-premium life insurance product, the policyholder will have to pay the premium only once during the policy term and he will get a protection cover throughout the policy tenure. It constitutes a large part of the first-year premium of life insurance companies, and has been growing over the years. The country’s largest insurer, Life Insurance Corporation of India, is the market leader in single premium products. (For details log on to : http://www.financialexpress.com/news/onetime-wonders/945091/)
IRDA’S DRAFT ON STANDARDS PROPOSALS NEEDS MINOR TWEAKS
The Insurance Regulatory and Development Authority (Irda) has brought out a draft regulation on the standard proposal form for life insurance for individuals, to be implemented from September 1, 2012. The proposal form is mandatory for all life insurers and has four sections. While Sections A, C and D are standard and compulsory, Section B is optional. The objective of the regulation is to understand the need for a particular product and make recommendations to the prospect, based on suitability and transparency. The product should be based on the prospect’s risk profile, financial situation and investment objectives. The regulation has imposed obligations on the insurers, agents and brokers to determine suitability before selling the products. An insurer shall establish supervisory procedures to inform the insurance agents and brokers of the requirements on the standard proposal form and need analysis. Insurers, agents and brokers shall maintain record of transactions for five years after the insurance transaction is completed. (For details log on to : http://www.financialexpress.com/news/irdas-draft-on-standards-proposals-needs-minor-tweaks/945094/)
IFC TO DESIGN UNIVERSAL HEALTH INSURANCE PLAN FOR MEGHALAYA
CHENNAI: In a first of its kind initiative in India, the International Finance Corporation (IFC), a member of the World Bank group, is helping Meghalaya to implement a universal health insurance plan to benefit the state’s population of over three million, including those from low and middle-income households currently without health coverage. IFC will work jointly with the World Bank to assist the state in designing and implementing the insurance plan, including promoting private sector participation. It will broaden coverage for local families, allowing them to obtain quality healthcare and specialised treatment close to home. The project is also supported by the UK’s department for international development. “Through this first-of-its kind scheme in India, Meghalaya will be able to expand healthcare services to all,” said Donald Wahlang, the commissioner and secretary of the state’s department of health and family welfare. (For details log on to : http://www.financialexpress.com/news/ifc-to-design-universal-health-insurance-plan-for-meghalaya/945044/)
WESTERN UNION MAY START DOMESTIC MONEY TRANSFERS
MUMBAI: Western Union, a global money transfer services provider, might extend its business to the remittances segment within India. With 100,000 brick and mortar agent locations across this country already, it is thinking of leveraging existing infrastructure to provide person-to-person payment services between cities. “Indiahas witnessed steady growth of rural to urban and intra-state migration. All such people desire to send money home to support their families. If the opportunity presents, we are keen to play a role in domestic money transfers,” said Kiran Shetty, managing director for Indiaat Western Union. The company has experience in conducting the domestic money transfers in America, Philippines, Indonesia, Australiaand New Zealand. (For details log on to : http://www.business-standard.com/india/news/western-union-may-start-domestic-money-transfers/473365/)
BANDHAN FINANCIAL SERVICES MAY RAISE RS 500 CRORE VIA SECURITISATION THIS FISCAL
MUMBAI: Microfinance company Bandhan Financial Services may tap securitisation route to raise Rs 400-500 crore of debt in the current financial year, a top official said. “We may securitise Rs 400 to Rs 500 crore of loans in the current financial year to support our loan growth, which is likely to happen in the fourth quarter of FY13,” chairman and managing director, Chandra Shekhar Ghosh, told PTI today. Earlier, the micro-finance institution had securitised farm loans worth Rs 500 crore with IDBI Bank and Rs 25 crore each with Axis Bank and Development Credit Bank. Ghosh hoped that the banks will start lending to the troubled MFI sector this fiscal. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/bandhan-financial-services-may-raise-rs-500-crore-via-securitisation-this-fiscal/articleshow/12980956.cms)
FOREIGN PLAYERS SEE VALUE IN INDIAN MUTUAL FUND INDUSTRY
MUMBAI: After a slew of low-valued deals after the Lehman crisis, the domestic mutual fund (MF) industry is once again seeing deals at good valuations. Despite, short-term hiccups, untapped opportunity in asset management business in Indiais attracting foreign players who are betting on the long-term potential. At a time when the fund industry has been crying foul over regulatory tightening, bad market conditions and investors fleeing out, recent transactions are being done in the range of six to seven per cent of assets under management (AUM). Japan’s Nipponpicked up 26 per cent stake in Reliance AMC in January, offering a valuation of 6.64 per cent of the fund house’s AUM. Last week, Britain’s largest asset manager Schroders, bought 25 per cent stake in Axis AMC, broadly in-line with recent valuations. (For details log on to : http://www.business-standard.com/india/news/foreign-players-see-value-in-indian-mutual-fund-industry/473342/)
NINE IN RACE TO BE SEBI BOARD MEMBERS
MUMBAI: Nine candidates are said to have been shortlisted to fill two posts of members at the Securities and Exchange Board of India (Sebi). The list includes three chairmen of public sector banks, a head of a public sector unit and a Reserve Bank of Indiaofficial. One of Sebi’s existing officials has also been shortlisted. According to sources, interviews would be held at the capital markets regulator’s Mumbai headquarters on Tuesday, May 8. A senior finance ministry official said the selection process was expected to be completed quickly. Sebi has two vacant slots and a third vacancy would be created as member Prashant Saran’s term is coming to an end this month. For the two previously vacant slots, while Rajeev Agrawal was selected last year as one member, the second slot has been lying vacant for 10 months. (For details log on to : http://www.business-standard.com/india/news/nine-in-race-to-be-sebi-board-members/473371/)
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