MUMBAI: The Securities and Exchange Board of India (Sebi) would discuss and announce various reforms to revamp India’s capital markets, including revision in initial public offerings (IPOs) and offer for sale (OFS) framework at its board meeting in New Delhi on Thursday. The regulator intends to rectify anomalies and bring more flexibility pertaining to the minimum issue size in IPOs, which many companies have been exploiting. At present, all companies with a post-issue capital of below R4,000 crore are required to offer at least 25% stake in an IPO, while companies with above R4,000 crore post-issue capital are required to offer at least 10%. However, it created anomalies in borderline cases and companies slightly below the R4,000-crore mark showed valuation of the company as R4,000-crore plus. The Sebi will also “favourably look” at increasing the quota of anchor investors in the qualified institutional investors (QIB) portion, sources said. In the OFS segment, the capital market regulator may allow private equity funds and other large investors to off-load their stakes in listed companies, and also expand the eligibility to top 200 companies. At present, only top 100 companies by market capitalisation are permitted to use the OFS route for share sale.
CENTRE MAY MAKE IT LESS TAXING FOR INSURANCE FIRMS IN BUDGET
NEW DELHI: The government may give a boost to the insurance sector in the upcoming Budget with a host of tax incentives. Official sources told FE that in the Budgetary recommendations to the department of revenue, the department of financial services (DFS) has mooted the removal of service tax on micro-insurance, reduction of the service tax burden on life insurance premium, increasing the deduction limit to senior citizens and individuals for health insurance as well as a separate deduction limit of Rs 1 lakh under the Income Tax Act (I-T Act) for insurance premium. At present, investments in insurance premium are included in the consolidated deductions under Section 80C (of I-T Act) for which the limit is Rs 1 lakh. Apart from insurance premium, the Rs 1-lakh limit includes investments in mutual funds, public provident fund and small savings among other things. Pointing out that insurance is product that has to be ‘sold’ and therefore a ‘push’ product and not one which is ‘bought’ and thereby called a ‘pull’ product, the DFS has said that only a major incentive by way of a separate deduction limit will help in increasing insurance penetration in the country.
RBI DIRECTS BANKS TO SHOW SECTOR-WISE ADVANCES FROM FY15
MUMBAI: The Reserve Bank of India (RBI) on Wednesday directed banks to disclose sector-wise advances in the ‘Notes to Accounts’ section in their financial statements from the financial year 2014-15 onwards. To enhance transparency, the RBI in March 2010 had said that banks should disclose sector-wise non-performing assets (NPAs), movement of NPAs, overseas assets and revenue, and other special purpose vehicles sponsored by banks. During the bi-monthly policy announcement on April 1, RBI governor Raguram Rajan had proposed banks prescribe certain additional disclosure requirements in the financial statements by end-June 2014 as per the recommendations of the Nachiket Mor committee to actively manage their exposures to various sectors, including priority sector. The RBI has been taking active steps for the early recognition of NPAs in the system and is also seeking to enhance transparency within banks to push for more prudent lending. The RBI also asked banks to classify accounts based on the number of days their interest payments are pending known as Special Mention Accounts (SMA).
PRIORITY SECTOR CREDIT DISBURSALS RISE 22% IN KARNATAKA IN FY14
BANGALORE: Disbursement of priority sector credit has increased 22.2 per cent to Rs 73,993 crore during the fiscal ended March 2014 as against Rs 60,559 crore in the previous year in Karnataka. Banks in the state achieved a 30 per cent growth in credit disbursals under the agriculture sector at Rs 45,753 crore as against Rs 35,173 core in the previous year. Giving details of the achievement of the banking sector under the annual credit plan 2013-14, chairman of State -Level Bankers’ Committee (SLBC) Sudhir Kumar Jain said the banks had disbursed Rs 31,911 crore under crop loans, showing a growth of 43.3 per cent over the previous year’s disbursal of Rs 22,274 crore. The National Bank for Agriculture and Rural Development (Nabard) has projected Rs 85,725 crore under the priority sector credit for 2014-15, a growth of 26 per cent over the previous year. The share of agriculture credit is Rs 57,236 crore comprising Rs 39,246 crore crop loan and Rs 17,990 crore investment credit. An amount of Rs 8,411 crore and Rs 20,077 crore has been earmarked towards micro small medium enterprises (MSME) and other priority sectors, respectively.
AVOID REFUND DELAYS, TREAT TAXPAYERS AS CUSTOMERS: TAX PANEL TO REVENUE DEPT
NEW DELHI: The practice of delaying tax refunds by the revenue department has drawn sharp criticism from Tax Administration Reforms Commission (TARC), which said such delays exert an inequitable pressure on good taxpayers. The commission, chaired by Parthasarathi Shome, pointed out that revenue targets that are blind to the changing economic scenario result in tax gaps, which are mostly addressed by the authorities by putting pressure on taxpayers to contribute more or by postponing refunds that are due, especially in the last quarter of the fiscal. “Such policies would be illegal in other law-abiding societies,” the commission said in its report, adding that modern tax regimes do not use ‘static’ revenue targets. The consequence, unsurprisingly, is twofold — first, a dearth of meaningful tax policy or tax administration policy and, second, an inequitable pressure on the good taxpayer, Shome said in the report. The report also said that the practice of delaying refunds by asking for irrelevant information was undesirable and non-transparent.
RBI FIAT LIKELY TO TEMPER INTEREST IN KOTAK BANK
Shares of Kotak Mahindra Bank may come under pressure on Thursday, as the RBI said foreign institutional investors should seek its approval for buying more shares as FII holding in the bank, under the portfolio investment scheme, has reached the trigger limit. On Tuesday, Kotak Mahindra Bank said it would seek shareholders’ nod to hike the FII limit to 40 per cent from 37 per cent. In reaction to that, the bank’s stock gained 2.2 per cent on Wednesday.
FINANCE MINISTRY LOOKS TO DIVEST STAKES IN 7 PSUs
NEW DELHI: The finance ministry is working on a road map to divest stake in seven big state-run companies, which include Coal India, Sail, MMTC, NMDC, NHPC and Nalco. The government holds 80% or more stakes in these companies. “We will draw a road map and accordingly start consultations with the respective administrative ministries,” said a senior finance ministry official. The Securities & Exchange Board of India (Sebi) has proposed to bring public float in state-run firms at 75%, equal to that of private companies. The finance ministry is of the view that Sebi will give at least two to three years to meet the norms and it can accordingly work out a road map so that there is no glut of PSU stocks in the market. “If the Sebi norms are accepted, we will have to work out a mechanism to help them meet the new guidelines, keeping in mind both the timing of the issues and the appetite of the market,” said the official quoted earlier, adding that focus is on increasing participation from retail investors. The government, which is expected to retain the disinvestment target through stake sale in PSUs at Rs 36,000 crore, will kickstart with bigger issues such as Coal India and Sail. A 10% stake sale in Coal India alone will fetch the government around Rs 22,000 crore at current market prices. “We are hopeful of Coal India issue before the end of this year,” said the finance ministry official.
GOVT ISSUES NEW GUIDELINES FOR QUICK PENSION DISBURSAL
NEW DELHI: An employee can now send an undertaking directly to the bank to ensure quick disbursal of pension in his or her account, according to the new guidelines by the government. ‘The government has decided that the requisite undertaking may be obtained by the head of office from the retiring employee and forwarded to the pension disbursing bank along with the Pension Payment Order (PPO),’ the Ministry of Personnel said in a release issued on Wednesday. The bank shall credit the pension to the account of the pensioner as soon as this undertaking is received along with the pension documents, it said. ‘This change in procedure has an added advantage that the PPO can now be handed over in person to the retiring employee along with other retirement dues. Earlier the pensioner had to approach the bank for PPO,’ the ministry said. With this change in rules and procedures, the pensioners would be saved of considerable inconvenience and delay and the pension will commence as soon as one retires, the release added. The matter of delay in pension had come up for discussion during a workshop held here with the pension secretaries of various state governments on Thursday.
STATE-RUN BANKS’ NPAs MAY RISE TO 4.7% BY END OF FY’15: ICRA
MUMBAI: State-run banks may continue to see stress on the asset quality and their gross non-performing assets are likely to be in the range of 4.4-4.7 per cent by the end of current fiscal, says domestic credit rating agency Icra. The report also warned that PSBs’ fresh NPA generation rate may remain at elevated levels in the short-term. “We expect public sector banks’ (PSBs) gross NPAs to remain at 4.4-4.7 per cent by March 2015 as against 4.4 per cent as on March 2014,” Icra Senior Vice-President and Co-Head (Financial Sector) Vibha Batra told reporters in a webinar here today. For the banking system as a whole, gross NPAs declined to 3.9 per cent in FY’14 from 4.1 per cent as of December 2013, following 30 basis points decline in PSBs gross NPAs to 4.4 per cent. As of March 2014-end, tier-I capital of PSBs stood at around 8.6 per cent as against the requirement of 6.5 per cent, while that of private sector banks was close to double the requirement at 12.8 per cent.
UNITED BANK PLANS TO RAISE Rs 1,000 CRORE VIA RIGHTS ISSUE, QIP
KOLKATA: State-run United Bank of India, which suffered a loss of more than R1,200 crore in FY14, is hopeful of posting a net profit in FY15, a top official said on Wednesday. The lender is also planning to raise up to R1,000 crore capital by the way of public issue, rights issue and qualified institutional placement (QIP) to shore up its capital adequacy ratio. Although the crisis-hit bank improved its profitability in Q4FY13, for the entire year its bottomline remained in the red as it posted a net loss of R1,213 crore against a profit of R392 crore in 2012-13. In the second and third quarters of FY14, the bank registered a total net loss of more than R1,700 crore. “Since the last quarter we have started earning net profit. So, we hope that we will continue to the same path of recovery. This year we are all hopeful that we will have net profit,” United Bank of India executive director Sanjay Arya told shareholders during the annual general meeting. Making a turnaround, the bank reported a net profit of R469 crore for the March quarter on the back of a strong bad loans recovery performance coupled with a decent growth in net interest income.
BTI PAYMENTS EYES GROCERY, TELECOM SHOPS TO INSTALL WHITE LABEL ATMs
BANGALORE: BTI Payments, a joint venture between Banktech Group and ICICI Ventures, plans to install white label ATMs in grocery stores, telecom shops and photocopying facilities in Tier II and III cities and smaller towns. The company, which holds the RBI licence for 9,000 white label ATMs, is making elaborate arrangements to install 1,000 units this fiscal. White label ATMs are not owned by banks and are just cash-dispensing machines. “We have set our eyes on Tier II, III and smaller cities and found that grocery stores, telecom shops and photocopying facilities are the ideal places to install ATMs as a lot of activities revolve around them,” K Srinivas, Managing Director and CEO, BTI Payments, told Business Line. The company recently installed ATMs in Gubbi and in kirana shops in two more towns in Karnataka which became quite popular. “Banktech ATMs globally are not on main roads, they are inside 7/11 convenience stores or in petrol or railway stations,” Srinivas pointed out.
DRAFT RULES BAN REPLACEMENT OF LIFE INSURANCE POLICIES
MUMBAI: The Insurance Regulatory and Development Authority (Irda) said insurers could not replace life insurance policies unless in the interest of policyholders. This was to protect the long-term interest of policyholders and to discourage intermediaries from persuading customers to surrender their policies and take up new ones, Irda said in the exposure draft on rules related to the replacement of life insurance policies released on Wednesday. Feedback on the draft can be given till July 20. The guidelines said insurers should make full disclosure and give transparent information to the policyholder to avoid any possible misrepresentation of financial consequences of replacing a life insurance policy. Irda said these guidelines encouraged fair market conduct and fair business practices among life insurers and insurance intermediaries. Replacement of a life insurance policy means an intermediary, agent or an insurer selling a new policy within six months of surrender of the earlier policy, entailing modification in the terms resulting in reduction of the benefit amount of the existing policy. Irda said the priority of agents and insurers should be to keep the existing life insurance policy in force. In case of replacement of a life insurance/annuity policy, the agent or intermediary should obtain a written consent from the customer.
SKS MICROFINANCE RATING UPGRADED
HYDERABAD: SKS Microfinance Ltd’s credit rating for bank borrowings has been upgraded by a leading rating agency. According to a release, the rating was upgraded to Al+ from Al for short-term facilities and to A+ from A for long-term facilities for an aggregate sum of Rs. 2,000 crore. The company’s borrowings were Rs. 1,456 crore as of May 31, 2014. “The company expects the upgrade to have a positive impact in terms of reduction in the cost of borrowing, but is unable to quantify the same at this point in time,” SKS said.
FII EQUITY INFLOWS AT $10 BILLION IN CY14
MUMBAI: Foreign institutional investors’ (FIIs) buying touched $10 billion for the current calendar year, the most among eight Asian markets and the second highest among emerging as well as developed markets as tracked by Bloomberg. On Wednesday, overseas funds bought nearly $61 million worth of shares in the cash segment, showed provisional data from stock exchanges. Wednesday’s buying takes the tally of FII buying to $1.835 billion in June and $9.972 billion for CY14. Only Canada has received the highest flows ($10.17 billion) among the list of countries tracked by Bloomberg, followed by Taiwan at $9.08 billion and Brazil at $5.69 billion. Capital markets said FIIs are bullish on Indian equities, amid hopes the new government will introduced big bang reforms, while surrounding Asian nations are not exactly in tandem with India. Chinese economy is reportedly slowing down and Japan only just beginning to recover. Europe and the US markets are still recovering from the 2008 financial crisis.
FINANCIAL LITERACY VITAL FOR MUTUAL FUNDS’ GROWTH: FRANKLIN TEMPLETON
COIMBATORE: Financial literacy is vital if the mutual fund industry is to grow beyond metros and large towns and it is the industry’s responsibility to educate the investors there about the benefits of professional fund management, according to Harshendu Bindal, President, Franklin Templeton Investments (India). Despite high savings rate, Indians tend to put their savings largely into unproductive physical assets due to poor financial education and the fund house seeks to fill this gap. Bindal, in a press release, said much of the high household savings in the country was diverted to “unproductive physical assets”. He felt that the primary reason for this was the “lack of awareness” about MFs and the absence of a “robust distribution network” beyond metros and towns. He said investors in these places sought refuge in traditional investment avenues that were not adequate to meet their different financial needs.