MUMBAI: The Reserve Bank of India (RBI) on Monday said it might infuse up to Rs 12,000 crore this week via Open Market Operations (OMO), to ease liquidity pressure and create appetite for fresh supply of government bonds.
The central bank will purchase four lots of government securities using the multiple price method on Friday. This will be the first OMO conducted by RBI in the current financial year (April 1 onwards).
“This is an unexpected move, as OMOs were not seen coming before the second quarter,” said a senior treasury official of a large public sector bank. The official added that liquidity had remained tight for longer than expected. RBI had, last financial year, infused Rs 1 lakh crore through OMO.
Despite inflows of Rs 37,000 crore in the form of redemptions last week, repo borrowings from RBI’s Liquidity Adjustment Facility rose to Rs 1.12 lakh crore on Monday, as banks covered reserve needs on the start of the new reporting fortnight.
On Friday, repo borrowings had dropped to Rs 51,000 crore after staying above Rs 1 lakh crore for most of the week.
Market participants said RBI might have taken the measure to offset the liquidity pressure created by its recent foreign exchange intervention. The move would also help create space for heavy weekly auctions of government bonds.
“Liquidity is getting absorbed by government bond auctions, which are not being devolved on primary dealers,” said the official quoted earlier. The cut off yields in recent auctions had been inching up, reflecting the reducing appetite for fresh supply.
The government has pegged Rs 5.69 lakh crore of gross market borrowing this financial year, as compared to Rs 5.1 lakh crore raised in 2011-12. This has increased the weekly burden on debt markets to Rs 16,000-18,000 crore this year from Rs 12,000-15,000 crore in 2011-12.
RBI also said on Monday it would auction Rs 15,000 crore of dated government bonds on Friday.
This includes the current 10-year benchmark government bond, carrying a coupon rate of 8.79 per cent. Yields on the 10-year benchmark rose to 8.7 per cent on Monday, on expectations that the government would introduce the new benchmark security.
Typically, a bond turns illiquid on reaching issuances of Rs 60,000 crore, though there is no such regulatory ceiling. Issuances under the current 10-year benchmark bond have increased to Rs 70,000 crore, according to RBI data.
FOREIGN BANK ARMS MAY GET TAX RELIEF
MUMBAI: In an effort to encourage foreign banks to incorporate in the country, finance minister Pranab Mukherjee on Monday proposed to limit tax liability when they convert from branches into subsidiaries. The Reserve Bank of Indiais in the process of formulating a scheme for local incorporation of Indian branches of foreign banks to ring fence local depositors from external shocks. Existing laws require overseas lenders to pay up to 30% of the market value of their assets as capital gains and stamp duty while converting branches to a new entity. “To support this effort, I propose to provide tax neutrality for such incorporation,” said Mukherjee in the Parliament on Monday. (For details log on to : http://economictimes.indiatimes.com/news/economy/finance/finance-bill-foreign-bank-arms-may-get-tax-relief/articleshow/13042675.cms)
INDIA DENIES LOCAL BRANCH FOR IRAN BANK ON U.S. PRESSURE
NEW DELHI: Indiabarred an Iranian bank from opening a branch in the country because of U.S.pressure, making it harder for the Persian Gulfstate to settle oil trades with its second-biggest crude customer, two people with knowledge of the matter said. Parsian Bank, based in Tehran, had sought approval for a Mumbai office to facilitate trade transactions in rupees, the people said, declining to be identified because the information is confidential. An official at Parsian Bank in Tehranwho declined to be identified said the lender was yet to be granted a permit. A person who answered the telephone at India’s finance ministry in New Delhisaid D.S. Malik, a spokesman, was unavailable to comment. U.S. Secretary of State Hillary Clinton will meet Indian leaders in New Delhitoday where she will discuss assurances from the South Asian nation that it is curtailing Iranian crude imports. The U.S. and its allies are seeking international support for a campaign to pressure the Islamic Republic over its nuclear program which they say is a cover for building atomic weapons and Iran says is for civilian purposes. (For details log on to : http://www.bloomberg.com/news/2012-05-07/india-said-to-deny-local-branch-for-iran-bank-on-u-s-pressure.html)
NON-TRADED ITEMS ADD TO INFLATION PRESSURE: GOKARN
MUMBAI: Despite a fall in global commodity prices, headline inflation has been sticky due to supply bottlenecks and strong domestic consumption demand. There is an apparent divergence emerging in the link between commodity prices and headline inflation in India, said Subir Gokarn, deputy governor of the Reserve Bank of India (RBI), on Monday. “One very critical source is non-traded commodities, particularly food … where a lot of headline inflation is received here,” said Gokarn, while addressing a panel discussion here. Though inflation may not be linked to global commodity prices, he said, there is a significant element of commodity shock. (For details log on to : http://www.business-standard.com/india/news/non-traded-items-add-to-inflation-pressure-gokarn/473715/)
FM REMOVES DRACONIAN POWERS ON EXCISE, CUSTOMS DUTY CASES
NEW DELHI: Buckling under pressure from various quarters, the government on Monday withdrew the harsh provisions relating to excise and customs duty evasion cases. In Finance Bill 2012-13, it had earlier proposed to make certain excise and customs duty evasion cases non-bailable until the court had heard the public prosecutor. Finance Minister Pranab Mukherjee on Monday withdrew these provisions, which many members of Parliament had termed draconian and similar to those under the old Prevention of Terrorist Activities Act. “Certain amendments were proposed in the Customs and Central Excise Law in respect of classification of offences as cognisable and non-bailable. In response to concerns expressed by members that the proposal regarding grant of bail only after hearing the public prosecutor is too harsh, I propose to omit this provision entirely,” Mukherjee said in his opening remarks during a debate on the Finance Bill in the Lok Sabha. (For details log on to : http://www.business-standard.com/india/news/fm-removes-draconian-powersexcise-customs-duty-cases/473707/)
BANK OF INDIA BUYS 51% STAKE IN BHARTI AXA MF
MUMBAI: In a yet another sign of consolidation in the Indian mutual fund space, Bank of India (BoI) has acquired 51% stake in Bharti Axa Mutual Fund for an undisclosed amount. The deal marks the government-owned bank’s return to the MF industry after more than two decades. Bank of India and AXA Investment Managers Asia Holding have now upon receipt of all regulatory approvals, completed the formalities for acquisition of 51% of the equity stake of Bharti AXA investment Managers and Bharti AXA Trusteeship Services, the bank said in a filing to the BSE. While the remaining 49% stake will be with the Axa Group, the deal will lead to the exit of Bharti Enterprises, which had about 25% stake in the fund house, from the asset management business. The public sector bank has acquired 25% stake from Bharti, while the rest 26% from the Axa Investment Managers Asia Holdings. (For details log on to : http://www.financialexpress.com/news/boi-buys-51-stake-in-bharti-axa-mf/946679/)
INDIAN OVERSEAS BANK NET PROFIT RISES 22% TO RS 529 CRORE
CHENNAI: Indian Overseas Bank (IOB) has posted an increase of 21.76 per cent in net profit at Rs 528.81 crore for the quarter ended March 31, against Rs 434.29 crore registered during the year-ago period. Total income stood at Rs 5,416.09 crore for the quarter ended March, compared with Rs 3,916.58 crore posted for the corresponding period of last year, an increase of 38.29 per cent. The total business for 2011-12 grew to Rs 3,21,707 crore from Rs 2,59,020 crore during the previous year. The net non-performing assets (NPA) stood at Rs 1,907.44 crore, as against Rs 1,328.42 crore as on March 31, 2011, with net NPA ratio of 1.35 per cent and 1.19 per cent, respectively. IOB would need an additional capital of about Rs 9,500 crore by 2017-18 to maintain the capital adequacy ratio prescribed by the Base-III international accounting standards, which according to the Reserve Bank of India, would come into effect from January 1, 2013. (For details log on to : http://www.business-standard.com/india/news/iob-net-profit-rises-22-to-rs-529-cr/473677/)
SYNDICATE BANK EYES RS 40K CRORE BUSINESS FROM AP IN FY13
CHENNAI/HYDERABAD: Manipal-based public sector lender, Syndicate Bank, is aiming at garnering a total business of Rs 40,000 crore from Andhra Pradesh in the current financial year, as against Rs 30,000 crore achieved last year, according to executive director M Anjaneya Prasad. “Our growth in Andhra Pradesh is not at par with the state’s growth, and the real market share is yet to come to the fore. Our focus is now on scaling up our branch network in the state to trigger the targeted growth,” he told mediapersons here on Monday. The bank currently has less than five per cent market share in Andhra Pradesh with Anantpur, Kadapa and Kurnooldistricts being the market leaders. Of its total network of 2,700 branches, Andhra Pradesh stands second with 419 branches, next only to Karnataka, which is the home state for the bank. The bank’s CD (credit-deposit) ratio in the state is 123 per cent. Prasad said that the bank wanted to lay more thrust on areas where it has less or no presence to bring it close to the public and improve the business performance in Andhra Pradesh, and towards this was contemplating opening 100 branches in the state, including 10 in Hyderabadand adjoining districts, during the current financial year. (For details log on to : http://www.business-standard.com/india/news/syndicate-bank-eyes-rs-40k-cr-businessap-in-fy13/473679/)
ANDHRA BANK’S Q4 NET PROFIT INCREASES 9%
HYDERABAD: Andhra Bank has registered a net profit of R339.67 crore for the fourth quarter which is 9% higher than R312.78 crore reported for the same period last year. Net interest income touched R913.85 crore from R861.54 crore, an increase of 6% reported in the corresponding quarter last year. Total income rose by 21% to R3,228.90 crore from R2,662.48 crore in the previous year quarter. According to a BSE filing, the operating profit, before provisions and contingencies, for the quarter, declined by 4% to R680.95 crore from R711.50 crore in the prior-year quarter. For the financial year, the bank reported standalone net profit of R1,344.67 crore, up by 6% from R1,267.07 crore in 2011. Net interest income rose by 17% to R3,759.32 crore from R3,220.96 crore in the corresponding period last year. The total standalone income stood at R12,198.66 crore compared with R9,188.23 crore in April-March 2011, an increase of 33%. (For details log on to : http://www.financialexpress.com/news/andhra-banks-q4-net-profit-increases-9/946548/)
HEALTHY OUTLOOK ON LOAN GROWTH, SPREADS FOR HDFC
MUMBAI: Robust loan growth, stable spreads and improved asset quality are key reasons behind the better-than-expected profit delivered by HDFC for the March 2012 quarter. HDFC’s loan growth (after considering loans sold to HDFC Bank) at 20 per cent was better than expectations of 18 per cent, driven largely by a strong traction in the individual loan book, which grew 21 per cent. The loan growth was in line with the 19-22 per cent range witnessed in the past three quarters. These helped the company post net interest income (NII) growth of 24 per cent and net profit growth of 16 per cent over the March 2011 quarter. Disbursements and app-rovals registered growth of 18 per cent and 20 per cent, respectively, in the March quarter, an indication of future prospects. Keki Mistry, vice chairman and chief executive, said he expects the company to clock a healthy loan growth of 18 per cent in FY13 as well. While growth in certain markets like Mumbai has mellowed, demand across most other cities remains healthy, said Mistry. While the fundamentals and growth outlook remain good, the stock is likely to be range-bound, as valuations are fair and macro-economic conditions muted. Investors with a long-term outlook can consider buying on corrections. (For details log on to : http://www.business-standard.com/india/news/healthy-outlookloan-growth-spreads-for-hdfc/473699/)
HDFC Q4 NET SOARS 16 PER CENT
MUMBAI: A 24 per cent rise in net interest income enabled Housing Development Finance Corporation (HDFC) Ltd to report a 16 per cent rise in its net profit during January-March 2012 at Rs 1,326 crore, compared with Rs 1,142 crore in the corresponding period last year. In the quarter under review, the net interest income or the difference between interest earned and paid out stood at Rs 1,866.76 crore as against Rs 1,510.6 crore reported in the year-ago period. The total income of the country’s largest mortgage finance provider increased 29.4 per cent during the quarter — to Rs 4,885 crore from Rs 3,774 crore. The 1994-founded company, though, reported a stiff fall in profit on the sale of investments to Rs 79 crore compared with Rs 134 crore in the corresponding quarter of the previous year. (For details log on to : http://www.business-standard.com/india/news/hdfc-q4-net-soars-16/473716/)
SOUTH INDIAN BANK REPORTS RECORD PROFIT
KOCHI: Kerala-based South Indian Bank on Monday registered the highest ever annual net profit at R401.66 crore for 2011-12, up 37.29% from R292.56 crore in the previous fiscal. The net profit for the quarter ending March 31, was up 49.17% to R121.96 crore, as against R81.76 crore in the last quarter of the previous year. Announcing the results after a board meeting, the bank managing director and CEO VA Joseph said the bank is targeting a total business of R78,000 crore in 2012-13 and R1 lakh crore by 2014. The bank’s business increased by R13,616 crore to R64,136 crore from R50,520 crore on year-to-year basis. While the deposits increased 22.81% from R29,721 crore to R36,501, the advances grew by 32.87% from R20,799 crore to R27,635 crore. (For details log on to : http://www.financialexpress.com/news/south-indian-bank-reports-record-profit/946545/)
HCL GROUP TO BUY MAJORITY STAKE IN DLF PRAMERICA LIFE
MUMBAI: Indian billionaire Shiv Nadar’s foray into the insurance sector is likely to fructify soon. DLF Pramerica Life, seeking an Indian partner for its operation, is in talks with Nadar’s HCL Group to sell a majority stake. According to those in the know, both parties are back on the table to iron out the nitty-gritty, after the deal got stuck a year back due to stringent guidelines. Earlier regulations prevented Indian promoters of insurance companies from divesting stake before completing 10 years in the business. With the finance ministry deciding to waive that requirement late last year, HCL Group is now set to buy 51 per cent stake in DLF Pramerica Life Insurance Company. The deal size is expected to be around Rs 500 crore. KPMG has been appointed as the adviser for the transaction. Industry sources say Roshni Nadar, the 29-year-old daughter of Shiv Nadar and chief executive of HCL Corporation, is leading the negotiations on behalf of the IT company. The four-year-old insurance firm is a 74:26 joint venture between DLF and American insurer Prudential International Insurance Holdings, a wholly owned subsidiary of Prudential Financial. Pramerica is the trade name used by Prudential Financial. (For details log on to : http://www.business-standard.com/india/news/hcl-group-to-buy-majority-stake-in-dlf-pramerica-life/473746/)
AEGON MAY EXIT RELIGARE VENTURE
NEW DELHI/MUMBAI: Dutch insurance major AEGON could be the next sectoral player to exit the country, after New York Life ended its joint venture with Max India last month. AEGON operates in India through a joint venture with diversified financial services player Religare Enterprises Limited, called AEGON Religare Life Insurance Company Ltd. Sources in the direct know of developments said AEGON had started looking at all options, including the exit route, in the light of its inability to invest further in the business, considering the results till now and the receding chances of an increase in the cap on foreign direct investment (FDI) in the sector from the present 26 per cent to 49 per cent in the near future. Industry sources stressed that about half a dozen insurance companies faced the same problem as AEGON Religare and the developments might indicate a larger sector phenomenon. (For details log on to : http://www.business-standard.com/india/news/aegon-may-exit-religare-venture/473713/)
BUFFETT TARGETS ASIA FOR EXPANSION
NEW YORK: Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc, said he’s pursuing more opportunities in Asiaafter boosting reinsurance sales and expanding the Iscar Metalworking Cos unit on the continent. “Korea, Japanand you name it,” Buffett, 81, said on Saturday at Omaha, Nebraska-based Berkshire’s annual meeting. Buffett visited South Korea, Japanand Indialast year, and Chinain 2010. Berkshireowned almost four million shares of South Korean steelmaker Posco and a stake in Chinese carmaker BYD Co as of December 31, according to regulatory filings. Japan, rebounding from a March 2011 earthquake and tsunami, and Thailand, which suffered record floods last year, are among countries where Berkshirehas increased sales. The reinsurance unit has done “far more business in Asia” in recent months that it did a few years ago, he said at the meeting. Berkshire’s International Dairy Queen Inc ice-cream unit, led by CEO John Gainor, recently opened its 500th store in China, where the Green Tea Blizzard dessert is the No. 1 seller. The subsidiary has more than 270 outlets in Thailandand expanded into Singaporelast year. China“is far and away our fastest-growing market,” Gainor said yesterday in an interview. (For details log on to : http://www.business-standard.com/india/news/buffett-targets-asia-for-expansion/473720/)
SKS MICROFINANCE INCURS RS 330 CRORE LOSS
CHENNAI/HYDERABAD: SKS Microfinance Limited, the only listed microfinance company in the country, has incurred a net loss of Rs 329.5 crore for the quarter ended March 2012. The loss amount is 372 per cent higher than the loss of Rs 69.76 crore incurred in the corresponding quarter of the previous year. Total income during the quarter stood at Rs 66.15 crore, a 61.5 per cent decline, as compared to the income of Rs 174.73 reported in the same period last year. The company’s total loss during 2011-12 stood at Rs 1360.69 crore as against a loss of Rs 111.63 crore in 2010-11. SKS plunged into a crisis after the Andhra Pradesh (AP) government enacted a legislation in 2010 curtailing microfinance activity in the state. AP had been the industry hub at that time. The company stated in a press release on Monday that it had brought down the AP exposure to Rs 236 crore from a high of Rs 1,491 crore in October 2010 by writing off Rs 272 crore in the fourth quarter of FY 12. (For details log on to : http://www.business-standard.com/india/news/sks-microfinance-incurs-rs-330-cr-loss/473675/)
FM DEFERS GAAR MARKETS SIGH IN RELIEF
MUMBAI: Indian shares staged a smart recovery on Monday, amid a sea of red in the global markets, after the government deferred by a year implementation of a controversial tax rule that would have hit foreign investors. Finance Minister Pranab Mukherjee told Parliament the General Anti-Avoidance Rule (GAAR) would be delayed to financial year 2013-14, adding the burden of proving tax evasion would lie with the authorities rather than with foreign investors. The Bombay Stock Exchange benchmark the Sensex opened about 210 points lower in the morning, following weak Asian markets, as election outcome in Greeceand Francethreatened to derail the euro zone’s plan to tackle its debt crisis and weak USjobs data on Friday undermined hopes for global economic growth. The 30-stock index fell to a low of 16,513.77 in afternoon trade, but started recouping its losses after Mukherjee’s statement on GAAR, allaying tax-related concerns among foreign institutional investors (FIIs). The rebound forced traders to cut their bearish bets, boosting the market recovery. (For details log on to : http://www.business-standard.com/india/news/fm-defers-gaar-markets-sigh-in-relief/473690/)
PEs BREATHE EASY AS FM HALVES TAX ON LONG-TERM CAPITAL GAINS
MUMBAI: The finance ministry today decided to halve the tax on long-term capital gains for private equity (PE) investors to 10 per cent to help revive slowing inflow of foreign funds. The government will also exempt long-term capital gains on the sale of unlisted securities in initial public offerings (IPOs) from tax, the ministry said in a statement. It also decided to delay the introduction of the General Anti-Avoidance Rule (GAAR) to crack down on tax evasion by a year, following concerns among foreign investors. At present, long-term capital gain arising from the sale of unlisted securities in the case of foreign institutional investors (FIIs) is taxed at the rate of 10 per cent, while other non-resident investors, including PE investors, are taxed at the rate of 20 per cent. PE investors, based out of tax havens such as Mauritius, but who fail to comply with GAAR, were supposed to pay a long-term capital gain tax of 20 per cent while exiting investments through sell-out of shares. (For details log on to : http://www.business-standard.com/india/news/pes-breathe-easy-as-fm-halves-taxlong-term-capital-gains/473705/)
SEBI CONCERNED OVER POOR MF PENETRATION
CHENNAI: The capital market regulator Securities and Exchange Board of India (Sebi) has expressed concern over the low penetration of mutual funds (MFs) in the country. Sebi Chairman U K Sinha, who was here to inaugurate the regulator’s southern regional office, said, he is worried about the lack of growth in penetration of MFs in the country. At a time when the domestic mutual fund industry is reeling under pressure and has continuously been losing investor confidence, several investor awareness programmes by fund houses and industry body Association of Mutual Funds in India (Amfi), have failed to attract investors. (For details log on to : http://www.business-standard.com/india/news/sebi-concerned-over-poor-mf-penetration/473704/)
FIIs STEP UP BUYING AFTER RUPEE NEARS 53 AGAINST DOLLAR
MUMBAI: Foreign institutional investors (FIIs) infused money in both equities and debt, as the rupee was nearing 53 levels against the dollar last week, on hopes the domestic currency may not fall much from that level. In last week’s four trading sessions, FIIs, considered savvy investors, pumped in close to Rs 1,400 crore into Indian equities and another Rs 1,300 crore into the debt market, according to data provided by the market regulator, Securities and Exchange Board of India. According to market experts, FIIs propped up buying during the week on expectations that the Reserve Bank of India (RBI) would spring into action to reverse the weakness in the rupee. (For details log on to : http://www.business-standard.com/india/news/fiis-stepbuying-after-rupee-nears-53-against-dollar/473691/)
MUTUAL FUNDS’ AD VOLUMES FALL IN FY12 ON LACK OF NFOs, VOLATILE MARKET
MUMBAI: Advertising volumes for the mutual fund industry saw a sharp slide in the financial year 2012 over the year-ago period as volatile equities, lack of new fund offers (NFOs) and a tight budget compelled fund houses to go easy on marketing spends. For the fiscal year ended March 2012, television ad volumes dipped 12%, print volumes slumped 47% and ad volumes for radio fell 1% over the year-ago period, data collated by Tam AdEx, a division of Tam media research, shows. The number of advertisers declined to 5 from 15 for radio and to 33 from 38 for print in the same period. The tough business environment has forced AMCs to slash their marketing spends and cut down on above-the-line activities,” said the chief marketing officer of a large fund house, who did not want to be quoted. (For details log on to : http://www.financialexpress.com/news/mfs-ad-volumes-fall-in-fy12-on-lack-of-nfos-volatile-mkt/946623/)
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