MUMBAI: Rating agency Moody’s on Monday downgraded the rating for Union Bank of India (UBI) by a notch, owing to weak asset quality and inadequate loss-absorption capacity. The move comes a day before its shareholders meet to approve a proposal on issuing fresh shares to the government and Life Insurance Corporation of India. In recent weeks, it is the third public sector bank that the rating agency has either downgraded (Bank of India) or changed its outlook for (Central Bank of India). In the revised ratings, bank financial strength (BFSR) has been cut from ‘D+’ to ‘D’, while global local currency deposits were cut from Baa2/Prime-2 to Baa3/Prime-3. Vice-president and senior credit officer Beatrice Woo said, “The rating action considers UBI’s weaker financial metrics, particularly its high level of troubled assets and low provision coverage, and this has pushed the bank into a lower standalone rating band.” Though capital infusion is expected to boost the bank’s capital ratio, its loss-absorption cushion is modest, considering its deteriorating asset quality and expected growth. Tier-I capital ratio stood at 7.98 per cent at the end of December. This is slightly below the eight per cent mark that the government has mandated for public sector banks. It is also lower than that of its peers. (For details log on to : http://www.business-standard.com/india/news/moodys-downgrades-union-bankindia/468323/)
FOREIGN VCs CAN INVEST IN MARKET VIA THIRD PARTIES
MUMBAI: In its bid to deepen the equity and debt markets by attracting overseas funds, the Reserve Bank on Monday allowed foreign venture capital investors to invest in securities through private arrangements or purchase from a third party. “It has now been decided to allow foreign venture capital investors to invest in eligible securities (equity, equity-linked instruments, debt and debt instruments, debentures of a domestic venture capital undertaking or VC funds, units of schemes/funds set up by a VC fund) by way of private arrangements or purchase from a third party also,” a Reserve Bank circular said. Under the existing rules, market regulator Sebi-registered foreign VC investors are allowed to invest in these instruments through initial public offerings or through private placements. Also, they can invest in units of schemes or funds set up by a fund. (For details log on to : http://www.financialexpress.com/news/foreign-vcs-can-invest-in-mkt-via-third-parties/925747/)
QFI ROAD TO INDIAN CORPORATE BONDS MAY BE BUMPY
MUMBAI: The government has opened the doors for qualified foreign investors (QFIs) to the developing corporate bond market in India. However, the country would need more than just higher yields to attract fund inflows from this segment. On Friday, Finance Minister Pranab Mukherjee had made the announcement when he presented the Union Budget for 2012-13. The move is expected to add depth to the corporate bond market. Currently, an Indian corporate bond with ‘AAA’ rating maturing in five years offers close to 9.5 per cent. The coupon rate increases as the ratings decrease. “Even after hedging, a QFI may be able to earn a return of 3.5-4 per cent, which is better than those in other countries,” said a market arranger with a domestic brokerage. (For details log on to : http://www.business-standard.com/india/news/qfi-road-to-indian-corporate-bonds-may-be-bumpy/468320/)
NO GST IN UPA’S TENURE, PREDICT STATE MINISTERS
NEW DELHI/CHANDIGARH: The Goods and Service Tax (GST), already delayed by three years, is unlikely to be implemented any time soon because most state governments believe the Union government will not initiate major economic policy changes as it approaches the 2014 general elections. Chief ministers of states ruled by Opposition parties go a step further. They say GST will not be implemented in the tenure of the current Congress-led coalition. Finance Minister Pranab Mukherjee conceded, when asked when GST would come, that political conditions were not propitious for its early roll-out. “It is a measure that requires a constitutional amendment. And that requires two-thirds majority in Parliament,” he said at a press conference yesterday. Senior ministers within the United Progressive Alliance (UPA) government have also told chief ministers of both Congress-led and Opposition-ruled states that the Union government will not push for major initiatives like GST until after the general elections. (For details log on to : http://www.business-standard.com/india/news/no-gst-in-upas-tenure-predict-state-ministers/468371/)
NABARD SEEKS RS 5,000 CRORE FROM CENTRE
MUMBAI: With its borrowing capacity nearing the authorised limit, National Bank for Agriculture and Rural Development (Nabard) has sought capital infusion of Rs 5,000 crore from the government for business growth during 2012-17. Chairman Prakash Bakshi told Business Standard the thrust on increasing lending to the agriculture sector and scaling up rural development plans meant a substantial increase in the bank’s capital needs. It has sought the additional capital for balance-sheet expansion through refinancing operations and funding cooperative bodies. Nabard expects its balance sheet to touch Rs 178,000 crore by the end of March, compared with about Rs 158,800 crore a year earlier. For every Rs 1,000-crore extra capital, its borrowing capacity would increase 10 times. (For details log on to : http://www.business-standard.com/india/news/nabard-seeks-rs-5000-crcentre/468324/)
NABARD PLANS TO USE EXTRA ALLOCATION TO CONSOLIDATE
MUMBAI: National Bank for Agriculture and Rural Development (Nabard), currently in the midst of a restructuring and reorganisation exercise, plans to consolidate its position in microfinance, warehousing development and rural infrastructure, in the wake of increased budgetary allocation. The finance minister had allocated Rs 1,5000 crore under the Rural Infrastructure Development Fund (RIDF), Rs 300 crore for the promotion, training and linking self-help groups (SHGs) with the banking system and Rs 5,000 crore for developing warehousing projects. Chief general manager K R Nair told Business Standard, “The budgetary provisions have come as a shot in the arm. In Union Budget 2011-12, the government had made a dedicated allocation of Rs 2,000 crore for financing warehousing infrastructure under the RIDF. Though it was a new activity, the guidelines for which were approved only in September, Nabard has already sanctioned warehousing projects to state governments aggregating Rs 1,500 crore, and refinance drawal applications from banks worth Rs 500 crore are being processed. This would also be released shortly. The assistance of Rs 2,000 crore is likely to result in the creation of a storage capacity of 5.5 million tonnes.” (For details log on to : http://www.business-standard.com/india/news/nabard-plans-to-use-extra-allocation-to-consolidate/468325/)
FM HAWKS BUDGET TO RBI, CONFIDENT OF DEFICIT TARGET
NEW DELHI: Finance minister Pranab Mukherjee on Monday tried to hard-sell the credibility of the fiscal consolidation plan announced in the Budget to the Reserve Bank of India (RBI). “(The finance minister) explained to us why we should take fiscal consolidation measures announced in the Budget as credible,” RBI governor D Subbarao said after a meeting of the directors of its central board attended by Mukherjee. The central bank has been vocal about the importance of early efforts to contain the fiscal deficit as it felt that in the absence of a tighter fiscal policy, its efforts to control inflation were not yielding the intended results. (For details log on to : http://www.financialexpress.com/news/fm-hawks-budget-to-rbi-confident-of-deficit-target/925768/)
EASING OF ECB NORMS FOR INFRA TO COME WITH CAPS
NEW DELHI: The easing of the ECB (external commercial borrowing) policy for key infrastructure sectors announced in the Budget will come with sectoral caps and time lines. That apart, the Reserve Bank of Indiawill vet the ECB proposals of individual companies on a case-by-case basis, officials said. The budget proposal was to ease debt constraints of firms in aviation, road construction and power sectors by allowing them to raise cheaper funds through ECBs. A senior government official requesting anonymity said: “RBI in discussions with finance ministry has decided to put these ECBs on the approval route, as these are capital intensive sectors.” The new sectors will raise funds within the overall ECB ceiling is $30 billion. The government sees the whole arrangement as a temporary measure to help funds-starved firms to get cheaper funds from overseas till the time the domestic interest rates drop. (For details log on to : http://www.financialexpress.com/news/easing-of-ecb-norms-for-infra-to-come-with-caps/925808/)
UBI TO BE THE BANKER FOR INDO-MYANMAR TRADE
KOLKATA: United Bank of India is designated Banker for Indo –Myanmartrade. It has been facilitating settlement of trade transactions in EURO and Singapore Dollar (SGD) through the account of Banks in Myanmarbeing maintained with its Mumbai Overseas Branch. The barter trade at Moreh –Tamu is executed with assistance of Moreh Branch of the Bank. The Myanmareconomy is gradually opening up. Looking at the possibility of increased business opportunity in Indo –Myanmartrade Board of Directors of the Bank approved opening of a representative office in Yangoon Myanmar. Reserve bank of Indiaalso accorded it’s in principle approval for opening of the representative office. Bank will now seek permission of Central Bank of Myanmarfor opening its representative office at Yangoon Myanmar. This will be the maiden venture of a bank incorporated in Indiato have its presence in Myanmar. The office is expected to be opened during the first quarter of the next financial year. (For details log on to : http://www.business-standard.com/india/news/ubi-to-bebanker-for-indo-myanmar-trade/468280/)
BANK OF BARODA HIKES FIXED DEPOSIT RATES BY UP TO 0.25%
MUMBAI: Amid talks of a possible cut in lending rates, Bank of Baroda (BoB) on Monday raised fixed deposit rates of select maturities by up to 0.25 percentage points. BoB becomes the first bank to revise short-term fixed deposit rates, following the CRR reduction by RBI earlier this month. Deposits worth less than Rs 1 crore with maturity period of 7-14 days will earn 5 per cent interest as against 4.75 per cent earlier, the bank said in a statement. Similarly, interest rates on 15-45 days and 46-90 days fixed deposits have been raised by 0.25 percentage points to 5 per cent, while those on 181-270 days term deposits have been increased from 7.60 per cent to 7.75 per cent effective today. Term deposit between 271 days to 1 year will earns 8 per cent against 7.75 per cent, it said. Interest rates have been left unchanged for fixed deposits with duration beyond one year. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/bank-of-baroda-hikes-fixed-deposit-rates-by-up-to-0-25/articleshow/12332887.cms)
HDFC BANK TO HOLD 500 LOAN FAIRS NEXT FISCAL
MUMBAI: Private sector lender HDFC Bank plans to hold 500 rural loan fairs called as ‘Grameen Mega Loan Mahostava’ in the next financial year as part of its initiative to reach out to rural customers. The private sector lender, which has a board mandate to help 10 million families through its viable financing initiatives, disburses loans such as financing for tractors, auto, two-wheelers, commercial vehicles and agriculture in these loan fairs. “Through viable financing, we give loans to rural customers to be self-dependent. This kind of financing is different from pure consumption loans given to rural customers,” managing director and chief executive Aditya Puri told reporters after disbursing loans to rural customers at Dudivada near Vijayawada in Andra Pradesh over the weekend. The bank, which held its 300th rural loan fair at Gudivada, has already hosted 500 such loan fairs in the past two years. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/hdfc-bank-to-hold-500-loan-fairs-next-fiscal/articleshow/12329195.cms)
SAHARA CARE TO PAY RS 2.5L TO LEGAL HEIRS OF POLICY HOLDER
NEW DELHI: Sahara Care, an insurance firm of Saharagroup, has been directed by a consumer forum to pay Rs 2.5 lakh reimbursement and compnesation to the legal heirs of one of its mediclaim policy holders, who died during treatment with the firm refusing to settle medical expenses over it. The District Consumer Disputes Redressal Forum passed the order, holding the company guilty of being “deficient” in providing medical facility, under its policy. “Holding respondent deficient in providing the medical facility and reimbursement of the claim under the policy, we direct it to pay a sum of Rs 2,00,000 under the policy of medi claim to the heirs of the deceased Jagat Singh together with Rs 50,000 as compensation for causing harassment to his heirs,” the forum said. (For details log on to : http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/sahara-care-to-pay-rs-2-5l-to-legal-heirs-of-policy-holder/articleshow/12328605.cms)
TAX-FREE INFRA BONDS MAY LOSE SHEEN IN 2012-13
MUMBAI: The optimum utilisation of the enhanced Rs 60,000-crore limit for issuing tax-free infrastructure bonds by companies seems unlikely. This is despite the government trying hard to boost infra development in the country by doubling the issuance limit for such bonds, which received a euphoric response in 2011-12. Firms that secured approvals to raise funds are unsure if these would be able to harness the entire available limit, owing to delays in decision making by the government and the increase in bank rate. Companies like National Highways Authority of India (NHAI) and Indian Railways Finance Corporation (IRFC), which had been allowed to raise Rs 10,000 crore each through the issuance of tax-free bonds, have just begun the absorption process for the amount raised in 2011-12, and this may take a while. For financial year 2012-13, these have again been permitted to issue tax-free bonds up to Rs 10,000 crore each. (For details log on to : http://www.business-standard.com/india/news/tax-free-infra-bonds-may-lose-sheen-in-2012-13/468318/)
BANKS AGREE TO RECAST BASIX’S RS 700-CR MFI LOANS
MUMBAI: Banks have finally agreed to restructure micro-lender Bhartiya Samruddhi Finance (BSFL)’s debts of about Rs 700 crore on the condition that the Vijay Mahajan-led BASIX Group would offer corporate guarantees against these. BSFL’s loan recast proposal was referred to the corporate debt restructuring cell. “It was decided the holding company of the Group would give corporate guarantees on these loans and pledge its shares with the banks,” a senior company official told Business Standard, requesting anonymity. Bhartiya Samruddhi Investments and Consulting Services is the holding company of the BASIX Group. Besides BSFL, it also owns Bhima Samruddhi Local Area Bank. (For details log on to : http://www.business-standard.com/india/news/banks-agree-to-recast-basixs-rs-700-cr-mfi-loans/468322/)
IFC TO INVEST IN DOSHION UP TO $25 MILLION
AHMEDABAD: International Finance Corporation (IFC), the private investment arm of World Bank, will invest in Ahmedabad-based Doshion Ltd, a company engaged in water management. The deal size could be around $25 million and the company intends to invest the fund in new projects, one person in the know of the development said. He said: “Both entities have agreed that IFC would pick up convertible preferential shares which would be converted into equity shares over a period of time.” IFC will invest somewhere between $18 and $25 million. Usually, IFC has seven to 10-year lock-in period for its investments, he added. IFC would decide on the exit route — either through initial public offer (IPO) or through promoter buy-back. An email query sent to Doshion remained unanswered. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/ifc-to-invest-in-doshion-up-to-25-million/articleshow/12328529.cms)
MUTUAL FUND AGENTS LAUGH MORE ON THE WAY TO THE BANK
MUMBAI: Having been battered by life-changing regulatory moves for over a couple of years now, mutual fund distributors finally have something to smile about. The finance minister has given a significant relief by exempting their services from the ambit of service tax of 12 per cent. According to a notification on Saturday, the “services rendered by a mutual fund agent or distributor to mutual fund or asset management company for distribution or marketing of mutual fund” form part of 34 items exempt from service tax. “The government, being satisfied it is necessary in public interest so to do, exempts the following taxable services from the whole of the service tax leviable thereon under section 66 B of the Finance Act,” said the notification. Distributors are relieved. K Ramesh Bhat, chief executive, IFA Galaxy, a Chennai-based group of independent financial advisors (IFA), said, “It is big relief. Asset management companies used to directly deduct this 10.3 per cent from the commissions payable. And, since it was not in the nature of tax deducted at source (TDS), we could not even set it off against expenses. Distributors had to bear it all themselves. They could not pass it on, too.” (For details log on to : http://www.business-standard.com/india/news/mf-agents-laugh-morethe-way-tobank/468372/)
FII TAP WILL NOT DRY UP DESPITE MARCH HICCUPS
MUMBAI: Despite three eagerly-anticipated domestic events in March doing little to boost investors’ sentiments, foreign investors are likely to pump money into Indian shares in the short term, as global liquidity remains strong. The Congress’ poor show in state elections, uncertainty over the quantum of future rate cuts and an insipid Union Budget are unlikely to hurt inflows from foreign institutional investors (FIIs), experts say. The negative market reaction to the Budget, the 400 points decline in the last two sessions of the Sensex, is now in the price, they say. The 30-stock index closed down 1.1 per cent, or 192.83 points, at 17,273.37 on Monday. FIIs have poured Rs 42,822 crore ($8.62 billion) into Indian shares till March 15, helping the Sensex rise 11.8 per cent. (For details log on to : http://www.business-standard.com/india/news/fii-tap-will-not-drydespite-march-hiccups-/468300/)
MUTUAL FUNDS EYE RAJIV GANDHI EQUITY SAVINGS SCHEME
MUMBAI: Indian fund managers want the proposed Rajiv Gandhi Equity Savings Scheme (RGESS) to be routed through mutual funds (MFs). Though there is no clarity yet on how the scheme would operate to attract retail investors into the equity markets, industry executives and experts say there is no other vehicle best suited for the proposed initiative except MFs, provided the product is structured well. But, would mutual fund investments qualify for the scheme, ask market experts. “Often, new investors would prefer to come through the MF route as they may have little knowledge about investing directly in equity markets,” says Rajiv Bajaj, managing director of Bajaj Capital. In his Budget speech the finance minister made his intentions clear that he wanted to encourage the flow of savings into financial instruments and improve depth of the domestic equity markets. He proposed to introduce RGESS, which would allow new retail investors investing up to Rs 50,000 directly in equities, an income tax deduction of 50 per cent. The scheme would have a lock-in period of three years. Investors with annual income of below Rs 10 lakh would be eligible to reap the benefits of the scheme. (For details log on to : http://www.business-standard.com/india/news/mfs-eye-rajiv-gandhi-equity-savings-scheme/468301/)
INVESTORS GIVE A MISS TO EQUITY NFOs
MUMBAI: New launches in the equity mutual fund space are getting lukewarm response from investors. The situation is so bad the fund industry could not even raise one per cent of the amount it mobilised during the peak period of 2005-06. So far in the current financial year, only seven new fund offers (NFOs) in the equity segment hit have the market, garnering a paltry sum of Rs 354 crore. Stringent norms from the market regulator forced fund players to reduce the number of NFOs to as low as one-fifth of that launched during 2005-2007. Players who dared to launch NFOs in tough equity market conditions failed to get good response from investors. Most new launches have been from the newer fund houses, which are in their initial phase of building product baskets. These include Peerless Mutual Fund, Union KBC, Edelweiss and Indiabulls AMC. (For details log on to : http://www.business-standard.com/india/news/investors-givemiss-to-equity-nfos/468307/)