MUMBAI: Reserve Bank of India (RBI) governor Raghuram Rajan on Tuesday argued that shifting the regulation of bond trading would severely hamper the development of the government bond market, including the process of making bonds more liquid across the spectrum. Rajan was referring to a suggestion made by the Financial Sector Legislative Reforms Committee (FSLRC) that all regulation of trading be merged under a new Unified Financial Agency. The FSLRC, headed by BN Krishna, submitted its report to the government in March 2013. Raghuramrajan The governor, however, said the RBI was wiling to give up some powers, adding that if the government wanted to manage its own debt, there was no reason for the central bank to hinder that. “I don’t believe the government suffers any less from conflicts of interest in debt management but the RBI could well carry out the government’s instructions without any loss in welfare,” he said. Rajan was delivering the keynote address at the State Bank of India’s Banking and Economics Conclave. He argued strongly against checks and balances on regulators through judicial oversight, as recommended by the FSLRC, saying it would completely vitiate the flexibility afforded by rewriting laws. The committee’s rationale for the oversight is to enable the system to deal with market failure. However, the governor felt it was important to strike a proper balance which might vary with the level of development.
STOP MORE-REVENUE-ANYHOW POLICY: SHOME
NEW DELHI: The Tax Administration Reform Commission (TARC) has a word of advice for Finance Minister Arun Jaitley on the quality of fiscal consolidation he should try for in his maiden Budget for 2014-15. The body, headed by tax expert Parthasarathi Shome (pictured), cautioned the government against pursuing an aggressive revenue targeting policy to achieve a better fiscal target figure. It also criticised transfer pricing measures used by the tax department for leading to a large number of disputes with Indian subsidiaries of multinational corporations (MNCs). “The TARC observes that the revenue target policy has been erroneous in as much as it is not just the numerical figure of fiscal deficit that counts but its quality,” the Commission said in its first report. If a fiscal deficit is reduced through coercive government action in an era of global information, international rating agencies are going to take note of the overall business environment, the panel said.
MAY SEES MODEST PICK-UP IN INDIRECT TAX COLLECTIONS
NEW DELHI: May saw a modest 5.2 per cent growth, year on year, in indirect tax collections to Rs 38,461 crore, with the slowing in economic growth still on and large refunds to taxpayers. This was a slight improvement from the 3.5 per cent growth in April (the first month of the 2014-15 financial year) but, officials said, signs of a revival are yet to be seen. The combined rise in these first two months of FY15 over a year before was 4.4 per cent, to Rs 72,607 crore. The data shows of the total gross collections from excise and service tax in May, almost half went in refunds. The latter, in an old and unwritten rule, were held back in February-March to meet the 2013-14 Budget collection target. “Most taxpayers took refunds or Cenvat credit (set off against taxes paid on inputs while manufacture of final product). The first two months are always like that. A clear picture (on whether there is a recovery) will emerge in the coming months,” said a tax official who did not wish to be identified, as the data had yet to be officially issued.
RBI WATCHING INFLATION, IRAQ DEVELOPMENTS CLOSELY: RAJAN
MUMBAI: While the tension in Iraq is an area of concern, as a rise in international crude oil prices could stroke inflation, the country is well-prepared to absorb any external shocks, Reserve Bank of India Governor Raghuram Rajan said on Tuesday. “I think the Iraq issue is an area of uncertainty, as we know that the oil resources are in the south still not directly affected by the fighting; but it is an issue that we are watching. We should be concerned about the fighting in the area,” Rajan said on the sidelines of State Bank of India’s Banking and Economic Conclave. According to him, the country’s foreign exchange reserves have grown, as the current account deficit was on the decline. “As far as the external front goes, we are in a much better position than we were last year. We have sufficient reserves; the current account deficit is low. One should not worry too much about the external side,” Rajan said. Foreign exchange reserves rose to $314 billion as of May 9, the highest since November 2011, as the central bank bolstered its ability to defend the rupee, before falling to $313 billion as of June 6.
COVER ALL INSURERS FROM DAY 1 OF NEW FDI CAP, SAYS DFS
NEW DELHI: The department of financial services (DFS), in its suggestion to finance minister Arun Jaitley, said the proposed hike in foreign investment in insurance from 26% to 49% should cover life, health and non-life segments from the very beginning and be devoid of any riders. Only such a wholehearted approach would bring the desired dividends by attracting long-term capital and the latest technology from serious overseas investors, the department said. The finance ministry has been considering a proposal to increase the foreign investment level in the sector to 49% but with a condition that voting rights of foreigners will remain restricted at 26%. Another proposal was to first ease the cap to 49% only in the non-life insurance segment, then extend it to health and finally to life insurance. Though the DFS is keen that the provision to hike the foreign investment to 49% “is not compromised”, a final decision by the minister will take into consideration the political ramifications of such a move, officials involved in the discussions told FE.
FIGHTING INFLATION TOPS RBI AGENDA
MUMBAI: Reserve Bank of India governor Raghuram Rajan on Tuesday said he will focus on fighting inflation in the coming months, hinting the central bank may not cut policy rates anytime soon. “For the next few quarters, we will be engaged in fighting inflation,” Rajan said on the sidelines of the SBI banking and economics conclave. The governor said food prices have had an effect in the last couple of months and hoped that with appropriate food management, prices will come down. “Both the government and RBI have to be vigilant on that,” explained Rajan. Rajan said RBI is also watching how the violence unfolds in Iraq and its impact on oil prices, adding India has enough foreign exchange reserves. “Oil resources in Iraq are in the south, still not directly affected by the fighting. However, it is an issue we are watching,” said Rajan. Allaying fears of the Iraq situation affecting India, Rajan said that on external front, India is in a much-better position than last year. “We have sufficient reserves; the current account deficit (CAD) is low and I think one should not worry so much about the external situation,” added Rajan.
Even though the economy has had some relief in the form of inflation on the consumer price index (CPI) falling to 8.28% in May this year from a high of 8.59% in April, the wholesale price index touched a five-month high of 6.01% in May 2014.
IBA OPPOSES FARM LOAN WAIVER BY ANDHRA PRADESH, TELANGANA GOVTS
HYDERABAD: Indian Banks’ Association (IBA) on Tuesday opposed the farm loan waiver schemes announced by the Andhra Pradesh and Telangana governments, expressing fear the move would create “ill will” in the community. IBA chief executive officer MV Tanksale said such schemes would dent the financial discipline and opined that instead of providing resources for such schemes, the governments should concentrate on long term development of farming community. “No banker is absolutely comfortable with the debt waiver schemes. It totally vitiates the payment culture in the industry. And everyone feels that sometime or the other government will come with a waiver and why they should really pay. “It creates ill will among those who are prompt payers, because debt waiver goes to only those who default the payment,” said Tanksale, also ex-chairman of Central Bank of India. As part of fulfilling poll promises, Andhra Pradesh CM N Chandrababu Naidu and his Telangana counterpart K Chandrasekhar Rao have initiated a process to implement loan waiver schemes for farmers.
LOWERING GOVT STAKE IN PSBs MAY HIT FUND-RAISING PLANS
MUMBAI: Should the government decide to bring down its holding in the public sector banks to less than 51%, it might hurt their capital-raising plans. NS Venkatesh, the executive director and head of treasury at IDBI Bank, said on Tuesday the PSBs will be breaching international covenants if the government stake falls below 51%. Lenders, he observed, had given loans on the basis of the ownership pattern. “A change in the ownership pattern might make it difficult for them to raise more capital,” said Venkatesh at a panel discussion at the State Bank of India’s banking conclave. The government is yet to take a decision whether it intends to lower its shareholding in public sector banks to 51%, although it has been selling stakes in some banks. SK Jain, the chairman and managing director of Syndicate Bank, said the overseas fund raising under medium term note programmes might run into trouble. “In all the MTM issues of banks, normally there is a stipulation that government holding in public sector banks will not fall below 51%. If the 51% level is breached then banks have to return the amount that has been raised,” Jain said. He also said the government will not immediately reduce holding in PSBs and that going forward, lenders will change the stipulations while raising money abroad if government holding falls below 51%.
NOW, TRANSFER FUNDS FROM US TO INDIAN BANK ACCOUNTS INSTANTLY
NEW DELHI: You can now transfer money from the US to any bank account in India instantly. Punjab National Bank (PNB) and Nasdaq-listed Xoom Corporation have partnered to roll out instant bank deposit services to bank accounts in India. The instant money transfer will be done by using the Immediate Payment Services (IMPS), a unique remittance processing platform offered by the National Payment Corporation of India. “Through this tie-up, money can be transferred instantly by a Xoom user from the US to not only bank accounts held in Punjab National Bank but to any bank account in India,” KR Kamath, Chairman & Managing Director, PNB, said at a press conference here. At present, IMPS has 63 banks (in India) as part of its ecosystem. Xoom, a digital money transfer company, is currently focused on remittances from the US to India on a bank-to-bank basis. PNB and Xoom have an ongoing tie-up for money transfer for over a decade now. But till date, there was no facility of instant remittance to India, Kamath said. India is the only market where Xoom does not levy any remittance fee for its users, John Kunze, President & CEO, Xoom Corporation, who was here for the announcement of the facility, told Business Line.
STATE BANK TO RAMP UP POS TERMINAL NETWORK
MUMBAI: State Bank of India, the country’s largest lender, will leapfrog rivals by ramping up its point-of-sale (POS) terminal network by 1.20 lakh each year over the next two years, said a top official. Banks install POS terminals at merchant outlets to facilitate acceptance of payments from customers by swiping their debit/credit/pre-paid cards on the terminals. Towards April-end, ICICI Bank had the largest network of POS terminals (2,90,898), followed by Axis Bank (2,47,392), HDFC Bank (2,12,748) and SBI (1,40,628). Overall, banks collectively had a network of 10.76 lakh POS terminals. According to Sushil Kumar Mishra, Deputy Managing Director, SBI, by adding 1.20 lakh POS terminals every year over the next couple of years, the bank will be catapulted to the numero uno position among all banks. Already, SBI has the largest network of ATMs (44,062 of April-end) in the country. With the ATM network of SBI’s five Associate Banks put together, the State Bank Group has 51,753 ATMs.
SYNDICATE BANK PLANS TO APPOINT 5,000 NEW STAFF
COIMBATORE: Syndicate Bank plans to recruit around 5,000 new staff this fiscal — 2,700 officers and 2,300 clerical staff. Among the 2,700 officers proposed to be recruited, 2,000 would be direct recruits through the IBPS (Institute of Banking Personnel Selection) route and the rest under the specialised officers’ category, said the bank’s Executive Director, M Anjaneya Prasad. “The bank has already given appointment letters to around 2,000 candidates. These candidates will be joining us within the next fortnight or so. All recruitments are to support our branch expansion plans and to fill the retirees’ vacancies,” he added.
PRIVATE BANKS DOUBLE HEADCOUNT IN 5 YEARS
KOLKATA: The headcount in India’s top private banks is on the rise, despite a slowing economy and uncertain business environment. Large private banks in the country appear to be on a hiring spree, with many of them doubling their staff count in the last five years. ICICI Bank, the largest private sector lender in India, closed last financial year with 72,226 employees compared to 35,256 staff at the end of March 2010. HDFC Bank increased its headcount to 68,165 from 51,888, while Axis Bank almost doubled its number of employees to 42,420 during this period. Mid-sized private lenders like IndusInd Bank and YES Bank have also been aggressive recruiters with nearly threefold rise in their employee base in last five years. “A lot of banks have been hiring in anticipation of a revival in economic growth. Some of them were also expanding their size and building infrastructure to grow their businesses. While I expect private banks to remain net recruiters, they might not be hiring at the same pace as before,” said Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services.
KOTAK MAHINDRA BANK PROPOSES TO RAISE FII CAP TO 40%
Kotak Mahindra Bank (KMB) proposes to raise the ceiling for FII investments in the bank to 40% from 37% to help it comply with RBI directive to bring down its current promoter stake by one-fourth in little over next two and half years. The private sector bank in its notice to shareholders for the upcoming annual general meet on July 16 has sought members’ approval to pass a resolution to this effect. “RBI had permitted the bank to increase the FII investment limit to 37% (from earlier limit of 35%) on September 2, 2013. It is now proposed to increase the limit on total holdings of FII and sub-accounts of FIIs, FPI and QFI to 40% of the paid-up equity capital of the bank, subject to such regulatory approvals as may be necessary,” said the bank in notice. The proposal comes after the bank’s promoters pared down their stake from 43.58% to 40.33% by selling nearly 2.50-crore shares. Kotak Trustee Company Private Limited, a promoter group entity, had on May 30 sold shares worth R2,200 crore through a block deal to Canada Pension Plan Investment Board. After this stake sale on May 30, Kotak Trustee Company owns 0.25% stake even as Uday Kotak continues to hold 39.76% directly.
DBS SEEKS EASIER PRIORITY SECTOR NORMS FOR FOREIGN BANKS
MUMBAI: Singapore-based DBS Bank, planning to convert its branches into a wholly-owned subsidiary in line with Reserve Bank of India’s guidelines, has requested the banking regulator to relax priority sector norms. The central bank had said the priority sector lending requirement for foreign banks would be 40 per cent like their Indian counterparts. Out of this, 18 per cent of loans have to be offered to the farm sector. The current cut off for foreign lenders in the PSL segment is 32 per cent (foreign banks with more than 20 branches, it is 40 per cent) but once they take up the WOS route, banks will have to move to achieving 40 per cent within five years of foreign banks converting into a wholly owned subsidiary. The foreign lender has sought clarification whether infrastructure loans could be considered priority sector loans. “We have asked for clarification on what all should go into the definition of PSL. We want the definition to be broadened. For instance, we have asked whether infrastructure lending can also be considered under PSL. If infrastructure is considered, then the horizon would broaden and also the quantum of loans under infrastructure are bigger as compared to say the agriculture sector and so it will be a help us in achieving the cut off target,” said an official familiar with the development.
SOON, COMMON SERVICE CENTRES TO BEGIN SELLING LIFE INSURANCE
HYDERABAD: CSC e-Governance Services India Ltd, a special purpose vehicle floated by the Government to operate common service centres, will begin selling life insurance in about a month’s time. “About 250 village-level entrepreneurs have completed the mandatory process and are ready to sell specially-designed insurance products through our centres,’’ Dinesh Kumar Tyagi, CEO of CSC e-Governance, told Business Line on Friday. Over 2,000 people have so far registered for the examination to become agents. CSC aims to enlist over 10,000. The organisation, which operates 130,000 common service centres to provide a host of services in rural areas across the country, has tied up with 14 insurers and is working on teaming up with the others. “We have just completed the technology integration required to sell insurance as e-Know Your Customer (KYC) norms have to be adhered to. A few insurance companies have already designed specific products and are waiting for approval from the Insurance Regulatory and Development Authority (IRDA),” Tyagi said.
SHRIRAM TRANSPORT FIN TO BORROW UP TO RS 3,000 CR VIA NCDs
Shriram Transport Finance plans to borrow up to R3,000 crore through non-convertible debentures (NCDs) to support its financing activities. The company has filed a draft offer document for the public issue of 3 crore secured redeemable NCDs of face value of R1,000 each, it said. The proceeds of the issue will be used for financing activities such as lending and investments, for repaying loans and for business operations, including capital expenditure and working capital requirements. JM Financial Institutional Securities, AK Capital Services, Edelweiss Financial Services and ICICI Securities are the lead managers of the issue. NCDs are bonds issued by a company that cannot be converted into stock and usually offer a higher interest rate than convertible debentures. Shriram Transport Finance, a part of the the Shriram group of companies, is into commercial vehicle financing, consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products such as life and general insurance and mutual funds.
XANDER TO BUY INFINITY TECH PARK FOR RS 650 CRORE
MUMBAI: Global financial services firm Xander Group Inc is buying Infinity Technology Park, a 7.8 lakh square feet commercial space owned by Tata Realty and Infrastructure in Mumbai suburbs, for roughly Rs 650 crore, three people with direct knowledge of the development said. The deal signals renewed interest by private equity funds to build commercial real estate assets in India as it offers annuity returns for a longer tenure but with minimal risks. “The due diligence is over and the asset will be transferred in less than a month from now,” said one of the three people quoted earlier. “Apart from Xander, other major funds including Blackstone and GIC had also shown interest in the property.” About 96% of the commercial property has been leased to blue chip tenants such as Accenture, BNP Paribas, Tata AIG and Mphasis (EDS) at an average rental of Rs 85 per sq ft a month. The rent agreements will come up for renewal by April 2015. Tata Realty & Infrastructure did not reply to email questionnaire. Real estate consultant JLL India, the exclusive advisor to the deal, declined comment on the development. In its email response, Xander said: “As a policy, we do not comment on market speculation.” The commercial space was earlier owned by Kotak Realty Fund, which manages $1 billion of assets. Kotak had sold it to the Tata group company for Rs 525 crore in 2011. The commercial property has been appreciating despite an economic slowdown in the past few years. In August 2006, Kotak Realty, through its Kotak Global financial services firm Xander to buy Tata Realty and Infrastructure-owned Infinity Tech Park for Rs 650 croreIndia Real Estate Fund I, had bought the Goregoan property, which was then under construction, from K Raheja Constructions for 230 crore.
SMALL, MID-CAP FUND ASSETS SWELL
MUMBAI: Piggybacking on the sharp rally seen in the shares of medium-size and small-size companies this year, assets under management (AUM) of these schemes have swelled nearly 40 per cent in the past year as against only a 5.4 per cent increase in overall equity assets. The bulk of these gains have come in the past three months. Since February, when the market started to rally, the AUM of mid- and small-cap funds have gone up nearly 32 per cent. The assets of these schemes stood at Rs 40,605 crore in May, compared to Rs 30,888 crore in February. Sector officials said the AUM rise has been driven primarily by improving stock performance, rather than a jump in investment flows into these funds. The Rs 10 lakh crore MF sector offers 57 unique mid-cap and small-cap funds, says Value Research, an entity tracking these. In the past three months, most of these schemes have delivered returns between 20 per cent and 60 per cent. The benchmark indices, the BSE Sensex and National Stock Exchange’s Nifty, have gained about 15 per cent since February. While the BSE mid-cap index has gained about 30 per cent, the BSE small-cap index has gained close to 40 per cent.
SEBI TIGHTENS NORMS FOR PUBLIC DEBT OFFERINGS
MUMBAI: Market regulator Securities and Exchange Board of India (Sebi) has tightened norms governing debt public offerings. Bringing in some elements of initial public offering (IPO) guidelines, the regulator has prescribed minimum subscription limit of 75 per cent for public issue of debt securities. Failing to garner minimum subscription of 75 per cent of the base issue size, the issuer will have to refund application money to investors within 12 days of issue closing. In an IPO, the company has to refund investors if it fails to garner the minimum subscription of 90 per cent of the issue size. Meanwhile, Sebi has prescribed a base issue size of a minimum Rs 100 crore for all public issue of debt securities. The regulator has also said issuers would be allowed to retain a maximum over-subscription of 100 per cent of the base issue size. Currently, there is no cap on the retention of over-subscription for public issue of non-convertible debentures.
SEBI WANTS TO VET ALL CROWDFUNDING
MUMBAI: The Securities and Exchange Board of India (Sebi) issued a consultation paper on Tuesday on proposed regulations for crowdfunding, the term for collecting small amounts of capital from a large number of investors through social networks or other web-based platforms. Sebi wants reactions by July 16. It has proposed that crowdfunding only take place through Sebi-recognised platforms. Entities which qualify include stock exchanges, depositories, technology incubators and associations of private equity or angel investors. “It is necessary that crowdfunding platforms are not established or not used to facilitate fund raising by fraudulent entities….Therefore, it is proposed that any online offering or issue or sale through the internet can be made only through a Sebi-recognised crowdfunding platform,” said the paper. The proposed regulations exclude donations or grants in which no financial return is expected. For others, the regulator has proposed three ways of looking at crowdfunding, based on equity, debt and funds.
SEBI FINALISES NORMS FOR RESEARCH ANALYSTS
NEW DELHI: To safeguard the markets from manipulative research reports including by foreign entities, Sebi has finalised detailed norms for ‘research analysts’ to ward off any conflict of interest in their activities. Foreign entities acting as research analysts for Indian markets or India-listed companies would need to tie-up with a registered entity in India, while domestic players will also be subjected to strict disclosures and scrutiny. The final norms in this regard would be notified soon after draft regulations are approved by the board of capital markets regulator Sebi at its meeting later this week, a senior official said. The new norms, which would also cover ‘proxy’ advisors or those providing advisory services similar to research analysts, have been framed in the wake of various instances of ‘mischievous’ research reports having been circulated among the investors in the past to manipulate the overall market trends or share price of individual companies.