MUMBAI: Global rating agency Moody’s on Monday downgraded Life Insurance Corporation of India’s (LIC) foreign currency insurance financial strength rating from Baa2 to Baa3. The rating outlook is stable.
It also cut the standalone bank financial strength rating for Axis Bank, ICICI Bank and HDFC Bank from C- to D+. The rating now maps to a baseline credit assessment of Baa3 from Baa2 on the long-term scale.
Moody’s said this revision was in the context of an ongoing global review affecting financial institutions and banks whose ratings are higher than the rating of the government where they were domiciled. The review was initiated on April 30 and has been concluded.
Moody’s ratings of the Government of India’s local and foreign currency bonds are at Baa3. The outlook on the ratings is stable.
India’s Baa3 government bond ratings incorporate credit strengths such as a diversified economic structure, strong actual and potential growth, a high domestic savings rate and a comfortable balance of payments position. The country also faces challenges such as weak government finances and a policy process often hamstrung by domestic politics. Susceptibility to inflationary pressures and infrastructure constraints on future growth also weigh on the economic performance, it said.
About the rating action on the three banks and LIC, Moody’s said it was driven by factors like the relatively low level of cross-border diversification of their operations. They have a high level of balance-sheet exposure to domestic sovereign debt, compared with their capital bases.
Aspects like franchise resilience, intrinsic strength within the operating environment and the absence of ongoing support from foreign ownership were also factored in. There are little, if any, reasons to believe that LIC and banks would be insulated from a government debt crisis, Moody’s said. They have significant direct exposure to government securities. For Axis Bank, it is equivalent to 239 per cent of tier-1 capital. In the case of HDFC Bank, it is 226 per cent and at ICICI Bank, 143 per cent of tier-1 capital.
In addition, these three banks are primarily domestic institutions, with similar macroeconomic exposure as the sovereign government. Therefore, the lower standalone ratings — now positioned at the rating of the Indian government — are more appropriate to capture the credit profiles of the banks and LIC, Moody’s said.STEP
On LIC, Moody’s noted the company was fully owned by the Indian government. It generates almost all its premiums inIndia.
This reflects concentration in one market, a high reliance on the domestic economy. And, LIC has meaningful and rapidly increasing direct or indirect exposure to the government through its holdings of government securities and equity investments in government-related entities, including banks and corporations.
As of December 31, 2011, the ratio of Indian government securities to adjusted shareholders’ equity was 764 per cent (excluding unit-linked invested assets).
RUPEE AT NEW LOW, RBI STEPS IN TO KEEP IT BELOW 54/$
MUMBAI: The rupee hit a new low today as it closed at 53.96 a dollar amidst a central bank intervention aimed at preventing it from touching the 54-a-dollar level. According to dealers, the Reserve Bank of India (RBI) intervened when the rupee touched 53.90 levels and helped it appreciate by 16 paisa. But, undiminished demand for the greenback made the Indian currency touch a new low just three trading days after it posted the previous record low of 53.83 on Wednesday. Intra-day, the rupee had touched 54.30 on December 15, 2011. On Friday, it had closed at 53.63 a dollar with the sixth consecutive weekly loss. The Indian currency has depreciated nearly nine per cent since March. The central bank’s foreign exchange intervention, believed to be in the range of $200-300 million, was seen at the 53.90-a-dollar level. “The RBI intervened but the supply wasn’t enough. The exchange rate was back to the day’s low towards the close. We may see the 54 mark tomorrow, probably, even if the RBI steps in,” said a foreign exchange dealer with a domestic brokerage. (For details log on to : http://www.business-standard.com/india/news/rupee-at-new-low-rbi-steps-in-to-keep-it-below-54/474355/)
SUBBARAO OVERRULED CONTRARY ADVICE ON RATE CUT
MUMBAI: Governor D Subbarao went ahead to reverse the Reserve Bank of India’s (RBI) policy stance in the April review, despite a majority of the external members on its monetary policy committee suggesting only a pause. After raising policy rates 13 times between March 2010 and October 2012, the central bank maintained status quo in the next three policy meetings. Then, in April, it had reduced the key repo rate (at which it lends money to banks) for the first time in these three years, by 50 basis points (bps) to eight per cent, to boost sluggish growth. RBI has released the minutes of the April 11 meeting of its Technical Advisory Committee on monetary policy. The meeting, chaired by Subbarao, was attended by the four deputy governors. The six external members (five attended) are—Shankar Acharya, Rakesh Mohan, Indira Rajaraman, Sudipto Mundle, Errol D’Souza and Ashima Goyal. (For details log on to : http://www.business-standard.com/india/news/subbarao-overruled-contrary-advicerate-cut/474326/)
CFOs SEE FOREX RATE VOLATILITY AS BIGGEST THREAT TO GROWTH: SURVEY
MUMBAI: The volatility in the foreign exchange rate appears to be the biggest threat to India Inc’s growth prospects in the coming years, say chief financial officers (CFOs) across companies in the country. According to the fifth annual American Express CFO Research Global Business and Spending Monitor, a survey of 541 senior finance executives from the US, Europe, Canada, Latin America, Asia and Australia, 45 per cent of India-based finance officials considered the exchange rate instability as a major concern. The rupee depreciated against the dollar by about 18 per cent in less than six months — between August 5, 2011, and December 15, 2011 — with the volatility almost doubling from five per cent to 12 per cent in this period, the Reserve Bank of India (RBI) data showed. (For details log on to : http://www.business-standard.com/india/news/cfos-see-forex-rate-volatility-as-biggest-threat-to-growth-survey/474325/)
PF BALANCE TO BE UPDATED EVERY MONTH
NEW DELHI: Subscribers of the Employees’ Provident Fund Organisation (EPFO) will soon be able to check the balance of their provident fund (PF) accounts on a monthly basis. Once in place, the new system is expected to benefit around 60 million workers covered under EPFO. “The new system will be operational next month,” said RC Mishra, Central Provident Fund Commissioner. At present, subscribers can view their balances only on a yearly basis. “We are moving towards a system similar to that of banks, where the accounts are updated instantly,” added Mishra. Apart from improving the service for the subscribers, the main trigger for the change was the repeated instances where employers had deducted the PF payments from the salaries of their employees, but had not submitted the deductions to EPFO, Mishra said. (For details log on to : http://www.business-standard.com/india/news/pf-balance-to-be-updated-every-month/474337/)
APRIL NET DIRECT TAX RECEIPTS UP 644% AT RS 14,812 CRORE
NEW DELHI: The government’s net direct tax collections zoomed 644 per cent to Rs 14,812 crore in April, against Rs 1,992 crore in the year-ago period, as refunds fell from Rs 25,099 crore in April 2011 to Rs 9,819 crore in April this year. A major portion of the receipts was accounted for by personal income tax. Collections from companies stood at Rs 383 crore in April, compared with a fall of Rs 6,490 crore in April 2011, owing to a higher refund outgo. Personal income tax collections rose 71 per cent to Rs 14,423 crore, against Rs 8,472 crore in the year-ago period. “All assessing officers are not yet attuned to the new system. They have to do one more process for better audit trail….The refunds would pick up in the coming months,” said a finance ministry official, denying that the Income Tax Department had slowed the process of refunds. (For details log on to : http://www.business-standard.com/india/news/april-net-direct-tax-receipts644-at-rs-14812-cr/474331/)
FOREX RESERVES CAN BE USED TO CHECK RUPEE SLIDE: PMEAC CHIEF RANGARAJAN
NEW DELHI: Prime Minister’s Economic Advisory Council (PMEAC) chairman C Rangarajan said on Monday that there was limited scope for the Reserve Bank of India (RBI) to cut interest rates in the wake of rising inflation. But the Reserve Bank of Indiacan deploy foreign exchange reserves to protect the rupee from sharp depreciation, which is caused by sudden fluctuations in the capital flows. RBI’s stated policy is to avoid sharp volatility. Forex reserves are basically to ensure the central bank in smoothening out temporary fluctuations in the financial market, he said while speaking at a PHD Chamber seminar. The country’s foreign exchange reserves stands at around $290 billion. “If the assessment (of RBI) is that depreciation in rupee is being caused by temporary fluctuation of capital flows, reserves must be used in order to see that impact is not felt on rupee,” he added. (For details log on to : http://www.financialexpress.com/news/forex-reserves-can-be-used-to-check-rupee-slide-pmeac-chief-rangarajan/949316/)
SBI TOP DECK IN KOLKATA FOR BUSINESS REVIEW AND STRATEGY MEET
KOLKATA: State Bank of Indiatop brass is now in Kolkata for a week-long business review and strategy meeting before it finalise financial accounts and sign the balancesheet on Friday. SBI chairman Pratip Chaudhuri is slated to address the bank’s upper deck on Tuesday before they discuss the segment wise performance of the bank. According to a source in the bank, the top managers will discuss branch expansion, bad loans and recovery, interest rate movement and HR issues threadbare for the next two days. The central board meeting will start on Thursday and continue to Friday morning. The series of such high-voltage meetings started on Saturday where circle development officers (CDOs) and general managers made detailed presentations about business growth in the bank’s 14 circles. CDO are exclusively responsible for HR development issues. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sbi-top-deck-in-kolkata-for-business-review-and-strategy-meet/articleshow/13138723.cms)
SBBJ OPENS BRANCH FOR HIGH NET-WORTH INDIVIDUALS
HYDERABAD: The State Bank of Bikaner & Jaipur opened Kohinoor Royale Banking Centre at Jaipur on Monday to tap business from high net-worth individuals. “This is a specialised branch, where the accounts shall be opened only by invitation,” Mr Shiv Kumar, Managing Director of the bank said. The Branch has a plush lounge named Deewan-e-Khas, which consists of Rajkosh, the locker facility; Shringar, the dressing room; and Darbar, a conference room with video-conference facility, apart from personal business centres and a cafeteria. The captain of the Rajasthan Royals team, Rahul Dravid, inaugurated the branch. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3419621.ece)
CORPORATION BANK TO RAMP UP SME LENDING
NEW DELHI: Corporation Bank is looking to grow its small and medium enterprises (SME) portfolio by an additional Rs 5,000 crore this fiscal, a top official of the bank has said. Exclusive SME loan centres in eight cities will help augment flow of credit to the vital segment, said Mr Ashwani Kumar, Executive Director, Corporation Bank, after launching an SME loan centre in the capital on Monday. The Bank’s portfolio under the segment stood at Rs 14,542 crore as at end March 2012. This is against the exposure level of Rs 10,707 crore as of March-end 2011. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3419622.ece)
RBI COULD GO FOR TWO MORE RATE CUTS BY DECEMBER, BUT NOT IN JUNE: SHYAM SRINIVASAN, MD & CEO, FEDERAL BANK
MUMBAI: In 2011-12, Federal Bank’s net profit grew at its fastest pace in three years, despite an uncertain macroeconomic environment that led to fading credit demand and increased the risks of asset quality deterioration. Shyam Srinivasan, managing director and chief executive of the Kerala-based bank, shares with Somasroy Chakraborty the bank’s strategy to maintain its growth momentum in the current economic environment. Edited excerpts: Your bank’s net interest margin is higher than most of your peers. In 2012-13, will you be able to maintain the margin at the current level? At the beginning of 2011-12, we had guided that our net interest margin will be in the range of 3.70-3.75 per cent. We closed the year with a net interest margin of 3.79 per cent. This year, we expect a slight moderation in our margin, as funding costs have not come down yet. We expect our margin to be in the range of 3.60-3.65 per cent. We have reduced our base rate by 30 basis points and also cut the interest rate on one-year deposits. But liquidity continues to remain tight. I think the cost of funds will start falling only towards the end of the quarter, once the liquidity situation improves. (For details log on to : http://www.business-standard.com/india/news/rbi-could-go-for-two-more-rate-cuts-by-decembernot-in-june-shyam-srinivasan/474324/)
J&K BANK PROFIT UP 50%; DECLARES RS 33.50 DIVIDEND
MUMBAI: Jammu & Kashmir Bank posted a 50 per cent jump in fourth-quarter net profit at Rs 208 crore compared with Rs 138.50 crore in the year-ago period. For the year ended March 31, the bank earned a net profit of Rs 803 crore compared with Rs. 615 crore a year ago. For the January to March quarter, the bank’s interest earnings jumped 34 per cent to Rs 1,358 crore (Rs 1,014 crore in fourth quarter of FY11). As at March-end 2012, the private sector bank had a capital adequacy ratio of 13.36 per cent (13.72 per cent as on March-end 2011). (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3419617.ece)
DEUTSCHE BANK INVESTORS SHOULDN’T SUPPORT BOARD, SAYS SHAREHOLDER ADVISOR
FRANKFURT: Deutsche Bank AG investors shouldn’t sign off on the supervisory board’s actions for 2011 at the bank’s annual general meeting this month, said Ivox GmbH and Glass Lewis & Co, which advise shareholders on how to vote. Overseers at Germany’s largest bank’s didn’t necessarily act in the interest of all investors or sufficiently follow corporate governance guidelines during the protracted succession of Chief Executive Officer Josef Ackermann, Financial Times Deutschland reported yesterday, citing Ivox and Glass Lewis. Ivox, based in Karlsruhe, Germany, and Glass Lewis spokesman Jaron Schneider confirmed the comments to Bloomberg News on Monday. Deutsche Bank said in July that investment-banking chief Anshu Jain and Germanyhead Juergen Fitschen would take over as co-CEOs at the end of May, ending more than two years of speculation over the bank’s future leadership. In November, Ackermann scrapped a plan to become chairman of the supervisory board, a move that have would skirted German corporate governance practice, after failing to generate enough shareholder support while counseling Europe’s leaders on combating the region’s debt crisis. (For details log on to : http://www.business-standard.com/india/news/deutsche-bank-investors-shouldnt-support-board-says-shareholder-advisor/474328/)
IRDA SET TO ALTER MIN SUM ASSURED ON LIFE PLANS
MUMBAI: The Insurance Regulatory and Development Authority (Irda) has underscored a minimum sum assured for all life insurance products in the event of death. Life cover should be either ten times annualised premium or 105% of the total premium paid till the date of death, the regulator said. Currently, death and maturity benefits are calculated on the basis of sum assured and bonus. Also, there is no specified sum assured limit. The change also means death benefits will be linked to premium payment unlike the case now. The move is to ensure that policyholders are adequately covered. “Product designs should be such that they meet the policyholder’s needs first and also allow cash flows to satisfy the business requirement of the insurer and other service providers,” Irda said in a circular. (For details log on to : http://www.dnaindia.com/money/report_irda-set-to-alter-min-sum-assured-on-life-plans_1688355)
INSURANCE COMPLAINTS REDUCE BY 9.5% IN 2011-12
NEW DELHI: The threat of changing the health insurer, the new guidelines for Ulips and a more responsive grievance redressal system combined to bring down the number of insurance grievances filed in 2011-12. The number of customer complaints reaching the Insurance Regulatory and Development Authority (Irda) fell sharply by 9.5% in 2011-12. While the number of life insurance complaints dropped 4.3%, from 4.08 lakh in 2010-11 to 3.9 lakh in 2011-12, the number of non-life complaints declined sharply by 26.5% from 1.27 lakh to 93,155. “This is largely due to the regulatory interventions in the areas of customer service, pro-active off-site and on-site monitoring of service parameters and the prescription of Policyholders’ Protection Board Sub-Committee for the insurance companies as part of Authority’s Corporate Governance Guidelines,” says Irda chairman J. Hari Narayan. (For details log on to : http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/insurance-complaints-reduce-by-9-5-in-2011-12/articleshow/13138330.cms)
INSURANCE FIRMS STAY AHEAD OF MUTUAL FUNDS & FIS IN EQUITY RETURNS IN PAST 3 YEARS
MUMBAI: Unit-holders of domestic insurance firms’ equity products have gained more or lost lesser than investors in mutual funds and foreign institutions in the past three years, according to an ET study. The investment strategy of buying in a weak market and selling when stocks are rising has helped insurance fund managers perform better than other institutional investors, said money managers at insurers and mutual funds. The value of equity investments of insurance companies rose 23.28% in 2010-11 and 7.82% in 2011-12. Mutual funds’ stock investment value grew 22.91% in 2010-11 and 0.45% in 2011-12. So far in 2012-13, insurers’ stock investment value has dropped 5.9% while that of mutual funds declined 6.4%, according to the ET study of all BSE-listed companies. The calculation is based on the number of shares held by institutions multiplied by the value at the end of each fiscal after deducting fresh inflows in 2010-11 and 2011-12. (For details log on to : http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/insurance-firms-stay-ahead-of-mutual-funds-fis-in-equity-returns-in-past-3-years/articleshow/13142985.cms)
FUTURE GENERALI LIFE SHUTS 55 BRANCHES, CUTS STAFF BY A THIRD
NEW DELHI/MUMBAI: Future Generali Life, the private life insurer promoted by the Kishore Biyani-led Future Group, has undertaken extensive restructuring since April. That has seen its workforce reduced by a third and the closure of 30 per cent of its branch network. According to sources, the downsizing is a direct fall-out of the slowdown in the business and the promoter’s plan to sell stake in the life insurance business. Sources indicate the company has abolished the positions of zonal heads and channel heads and significantly reduced the number of regional managers, area managers, branch managers and sales managers. There have been several exits at the senior management level, which includes the chief marketing manager, the head of the agency channel and others. However, when contacted, Deepak Sood, MD& CEO of the company, played down the restructuring issue and said there was a natural level of attrition while adding it had been a conscious decision to focus more on quality than quantity. (For details log on to : http://www.business-standard.com/india/news/future-generali-life-shuts-55-branches-cuts-staff-bythird/474356/)
IDFC TARGETS 20 PER CENT CREDIT GROWTH IN FY13
MUMBAI: Infrastructure Development Finance Corporation (IDFC) is looking to grow its loan book by over 20 per cent in the current financial year, with significant business from refinancing business. Its net loan growth in FY12 was about Rs 10,000 crore. Of this, the share of refinance was in excess of 30 per cent. In 2012-13, too, refinance will have a similar share in loan growth, said IDFC executive director Vikram Limaye. Its loan book increased by 28 per cent from Rs 38,215 crore as at March 31, 2011, to Rs 48,888 crore at the end of March 2012. The cost of funds for IDFC was less than that of banks which actually saw a rise in the cost of resources, including deposits, in 2011-12. It gave room to offer finer rates (charge lower lending rates than counterparts). (For details log on to : http://www.business-standard.com/india/news/idfc-targets-20-credit-growth-in-fy13/474327/)
SREI INFRASTRUCTURE BUSINESS UP 49 PER CENT TO RS 18,600
KOLKATA: Srei Infrastructure Finance reported a lower net profit of Rs 13.21 crore for the fourth-quarter (Q4) ended March 31, 2012, compared to Rs 14.20 crore net in the corresponding quarter last fiscal. The consolidated income from operations in the said quarter, however, was up at Rs 653.36 crore against Rs 627.75 crore in the corresponding quarter of the last financial year. Company officials claim net profit for the financial year ended March 31, 2012, at Rs 111.81 crore (Rs 179.24 crore) was impacted due to the sharp depreciation of Indian rupee against US dollar, resulting in a notional forex loss of Rs 64.80 crore. “The year under review also witnessed successive interest hikes which has brought profits under pressure,” the official added. Consolidated asset under management at the end of March 2012, grew by 51 % to Rs 30,881 crore from Rs 20,505 crore at the end of March 2011, while consolidated disbursements in the FY 2011-12 was up by 49 % to Rs 18,600 crore compared to Rs 12,497 crore in FY 2010-11. The com-pany’s board has recommended a dividend Re 0.50 paise per share for the year. (For details log on to : http://economictimes.indiatimes.com/news/news-by-company/earnings/earnings-news/srei-infrastructure-business-up-49-to-rs-18600/articleshow/13138531.cms)
CENTRUM GROUP REACHES OUT TO MORE SOUTHERN CITIES TO PROVIDE FINANCIAL SERVICES
Financial services and Forex provider Centrum Group is expanding its network in most cities in South Indiaintending to provide various travel and forex related products through its 100 plus branches and implant offices in major IT companies. Centrum Direct is approved by the Reserve Bank and is an authorised dealer catering to forex needs of high net worth individuals, retail investors and corporates through its branches spread across India. Centrum is very bullish on the growth potential of the sector in India, especially in the Southern part of India. Its customer base ranges from multinational companies to public sector organizations. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/centrum-group-reaches-out-to-more-southern-cities-to-provide-fin-services/articleshow/13138064.cms)
NSE DERIVATIVE TRADE DISRUPTED FOR AN HOUR
MUMBAI: Barely three weeks after the flash crash in Infosys and Nifty index futures, the equity derivatives segment on the National Stock Exchange (NSE) went for a toss on Monday due to a ‘technical glitch’. Trading in the futures and options segment suffered for nearly an hour as NSE tried to solve the issue, with order entries stopped or brokers unable to receive trading confirmations. Earlier, concerns had been raised over algo trading and many had blamed the volatility in the markets to such high-frequency trading (HFT). For nearly an hour, orders did not match as a price quote on NSE showed the best seller was at 5,875, while the best buyer was at 5,892. Brokers say this was a reverse quote and not usual. “How can a buyer say that I want to buy higher and a seller say I want to sell lower?” asked a broker. This created chaos for order matching. As a consequence, all futures products, such as the S&P CNX Nifty, Bank Nifty, CNX IT and the newly-launched FTSE were hit and prices frozen since 1.36 pm. It was only around 3 pm that trading again started functioning smoothly. Meanwhile, the futures contract of another benchmark index, the Sensex of BSE, had slipped by 225 points, only to recover during the last half an hour. Trading volumes in BSE’s derivatives segment were a little over Rs 23,000 crore. (For details log on to : http://www.business-standard.com/india/news/nse-derivative-trade-disrupted-for-an-hour/474304/)
SOUTHEAST ASIA GAINS AS FIIs EXIT INDIA
HONG KONG: Southeast Asian nations are swallowing an outflow of money from India, as foreign investors lose patience with its policy paralysis and slowing growth and aim instead for more promising emerging markets such as Indonesia. Corruption scandals and high inflation have added to India’s woes, which have seen growth slow to a three-year low while the fiscal deficit widened to 5.9 percent of GDP in the last financial year. “Indiawas sold on the promise of high growth which simply hasn’t panned out over the past four years,” said Gautam Prakash, founder of U.S.based hedge fund Monsoon Capital. Foreign portfolio flows into Indian stocks have dropped 99 percent to just 5.17 billion rupees ($96.5 million) since a March budget that largely disappointed investors. (For details log on to : http://economictimes.indiatimes.com/markets/stocks/market-news/southeast-asia-gains-as-fiis-exit-india/articleshow/13145650.cms)
MENU 