MUMBAI: Short-term debt components, such as trade credit and external commercial borrowings, which tend to make the exchange rate volatile, have started rising again. It’s possible that increasing short-term liabilities could pressure the country’s balance of payments in the coming quarters, say economists. “Short-term trade credit can create a lot of volatility in the rupee,” said Abheek Barua, chief economist at HDFC Bank, observing that such loans have risen again. However, repayments should not be an issue. India’s foreign exchange reserves stood at $295 billion as on November 2 and seem to be comfortable to meet the short-term debt obligations.
Trade credit of about $80 billion is due for repayment between June 2012 and June 2013. Along with this, ECBs raised during the boom period of 2002-2007 are also due for redemption. Around $21 billion worth of ECBs will have to be repaid and along with non-resident Indian deposits and other short-term loans, the total debt stock that is up for repayment is a whopping $150 billion.
Meanwhile, short-term trade credit surged 8% during April-June to $70.51 billion from $65.13 billion in the previous quarter, according to data from the Reserve Bank of India; in previous quarters, trade credit had grown by just 4-5%. Economists said that trade credit has risen in the July-September quarter as well but were unwilling to estimate the amount. Data for July-September trade credit will be released by end of December as the RBI puts off balance of payments data with a lag of a quarter. Trade-related credit such as buyers’ credit or export credit are typically loans of up to one-year tenure while external commercial borrowings (ECBs)are both short term and long term.
However, refinancing debt may not be too hard. Barua said that with the concern of a downgrade of India’s sovereign rating receding and the US Federal Reserve committed to quantitative easing, many banks are willing to lend to Indian companies. “Asian banks are willing to give loans and there is a spurt of ECBs and trade-related loans now,” an investment banker said adding that European banks that dominated as lenders of forex loans no longer do so given the debt crisis in that region.
While all of the debt may not be repaid and most may be rolled over, the pressure on the exchange rate is palpable. In 2011-12 short-term debt of around $130 billion was due for repayment when the current account deficit amounted to a record $78.2 billion. Dollar inflows fell short of the amount required to bridge the gap and the impact on the rupee was evident. The currency depreciated 12% during that year even after the RBI sold $13 billion to stem the fall. The rupee has depreciated another 11% in the first three months of 2012-13 but largely due to global risk aversion and fears of a downgrade. While the debt repayments may not drag down the currency in a similar way, they may deter the RBI from intervening in the foreign exchange market, economists said.
FINMIN PUSHES FOR COMPUTERISATION OF DEBT RECOVERY TRIBUNALS
MUMBAI: Rising bad loans in the banking system, especially in public sector banks, has prompted the Finance Ministry to take up computerisation of debt recovery tribunals and debt recovery appellate tribunals. Increasing efficiency of the loan recovery process through computerisation has assumed urgency as bad loans in the banking system jumped 45 per cent to Rs 1,42,300 crore in FY12 from Rs 97,900 in FY11. Computerisation of the tribunals, as envisaged by the Ministry, will enable online registration of applications, online submission of applications and documents by the registered applicant, online issue of notices, orders and e-auctions. The system would also provide for hearing of cases through video-conferencing wherever required. “Once the debt recovery tribunals (DRTs) and debt recovery appellate tribunals (DRATs) are computerised we will be able closely monitor recovery cases from the head office almost on a day-to-day basis. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/finmin-pushes-for-computerisation-of-debt-recovery-tribunals/article4091597.ece)
RRBs NEED TO OPEN 1,700 BRANCHES THIS FISCAL: RBI REPORT
MANGALORE: The82 regional rural banks (RRBs) in the country need to achieve a 10 per cent growth in branch expansion in 2012-13. This, in spite of RRBs failing to achieve their branch expansion targets in the last two financial years. The RBI’s ‘Report on Trend and Progress of Banking in India 2011-12’ says that the RRBs are required to open around 1,700 branches during 2012-13. As per the Government’s advice, RRBs were to open around 2,000 branches during 2010-11 and 2011-12, however, they fell short of the target. They opened 521 branches and 913 branches during 2010-11 and 2011-12, respectively. The report said the Government has advised all sponsor banks of RRBs that 10 per cent of the existing RRB branch network will be the target for the year 2012-13. As on March 31, 2012, RRBs had a network of 16,914 branches. “Accordingly, RRBs will be required to open 1,700 branches during the year 2012-13,” the report said. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-economy/rrbs-need-to-open-1700-branches-this-fiscal-rbi-report/article4093765.ece)
BUILD ROBUST MECHANISM TO PREVENT E-BANKING FRAUD: RBI
MUMBAI: The Reserve Bank of Indiawants banks to build a robust mechanism to prevent incidents of fraud in areas of mobile/Net banking and electronic fund transfer. “With greater infusion of technology in banking, the incident of frauds in Internet banking has witnessed an increase in recent times. Banks need to improve customer awareness to contain incidents of frauds involving customers,” the RBI said in its latest Report on Trend and Progress of Banking in India. Ensuring efficiency of the banking sector by way of technology infusion while minimising the occurrence of fraudulent events has become one of the major objectives of the Reserve Bank in recent years. According to RBI, complaints related to unauthorised fund transfers, fraudulent withdrawals from ATMs using duplicate cards, phishing e-mails aimed at extracting personal information have registered significant increase in recent times. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/build-robust-mechanism-to-prevent-ebanking-fraud-rbi/article4091592.ece)
ATMs CROSS ONE-LAKH MARK
MUMBAI: The number of ATMs in Indiahas crossed the one-lakh mark, according to the National Payments Corporation of India (NPCI). The corporation said that all the banks put together have plans to install about one lakh more ATMs over the next two years, raising the number of ATMs per 10 lakh population to about 170 from 85. As of October 2012, the total number of ATMs was 1,04,500. Public sector banks and the State Bank group with about 61,500 ATMs accounted for 59 per cent of the ATMs. The private sector and foreign banks put together have about 41,800 ATMs, accounting for 40 per cent of the ATMs and the balance 1 per cent represents about 1,150 ATMs that have been deployed by co-operative banks/RRBs. Almost all the ATMs in the country are part of NPCI’s National Financial Switch (NFS) network which facilitates routing of ATM transactions through inter-connectivity between the bank’s systems, thereby enabling ATM/debit cardholders of the country to utilise the services in any ATM of a connected bank. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/atms-cross-onelakh-mark/article4091593.ece)
BANKS MAY BE ALLOWED TO ISSUE LONG-TERM BONDS TO RAISE FUNDS
MUMBAI: Banks may explore the option of raising resources through long-term (LT) bonds to enable them to extend LT fixed rate loan products, said a central bank panel. The RBI’s ‘Committee to Assess the Feasibility of Introducing More Long-Term Fixed Interest Rate Loan Products by Banks’, recommended offering of fixed rate LT loan products with periodic interest reset provision (say every 7-10 years). Other recommendations of the committee include popularising fixed deposit schemes with tenor of 5 years and above as the same are eligible for tax exemption, allowing banks to issue LT bonds for their exposure to housing loans qualifying for priority sector. Further, the committee wants take-out financing in case of housing loans and encouraging large institutional investors such as pension funds, provident funds, insurance companies, etc. to invest in bonds floated by banks. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/banks-may-be-allowed-to-issue-longterm-bonds-to-raise-funds/article4091594.ece)
SBI SLASHES Q2 SLIPPAGE NUMBERS, STOCK GOES UP
MUMBAI: The bank had on Friday said gross slippages were Rs 8,495 crore. After the revision, this has been pegged at Rs 7,111 crore, while fresh slippages are at Rs 2,277 crore. State Bank of India, the country’s largest lender, on Monday lowered its slippage figure by Rs 1,389 crore after realising these had been inflated due to double counting. During the second quarter earnings announcement on Friday, the bank had said gross slippages were Rs 8,495 crore. After the revision, this has been pegged at Rs 7,111 crore, while fresh slippages (net of upgradation and recovery) are at Rs 2,277 crore. “The accounts had slipped and been upgraded in the same quarter. However, there is no change in the closing NPA (non-performing assets) level,” Pratip Chaudhuri, chairman, told Business Standard. The accounts revised were loans to mid-size corporate entities. SBI had closed the quarter with a gross NPA ratio at 5.15 per cent, compared to 4.99 per cent on June-end. Net NPA increased to 2.44 per cent from 2.22 per cent. (For details log on to : http://www.business-standard.com/india/news/sbi-slashes-q2-slippage-numbers-stock-goes-up/492502/)
UNITED BANK IN TALKS TO OFFLOAD STRESSED ASSETS WORTH RS 300 CRORE
KOLKATA: United Bank of India plans to offload stressed assets amounting to Rs 200-300 crore to asset reconstruction companies (ARCs) by the end of this fiscal. According to Deepak Narang, Executive Director, the bank is already in talks with several ARCs for the sale of its stressed assets. “We have identified 70 accounts amounting to Rs 200-300 crore for offloading to ARCs. We will float tender and invite bids for these accounts,” Narang told newspersons on the sidelines of a press meet to announce the launch of U-Connect — a platform for share trading. Valuation is one of the biggest issues in sale of such assets. “We are looking for the right kind of price for these assets,” he said. The bank is also laying thrust on recovery mechanism to bring down its gross non-performing assets to 3.25 per cent (3.88 per cent during the July-September quarter) by the end of this fiscal. United Bank had set a target of achieving cash recovery of Rs 450-500 crore by the end of this fiscal. The bank has already recovered close to Rs 200 crore during the first six months, Narang said. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/united-bank-in-talks-to-offload-stressed-assets-worth-rs-300-cr/article4091599.ece)
BANK OF MAHARASHTRA TO BOOST CORPORATE LOAN PORTFOLIO
MUMBAI: At a time when most banks are seeing stress in the corporate segment and are focusing on the retail front, Narendra Singh, chairman and managing director of Pune-headquartered Bank of Maharashtra, says the bank plans to focus on bringing more corporate clients on board. “We plan to change our loan composition in favour of corporates. Corporate business has grown from 37 per cent in the first half of the year to 42 per cent. We plan to raise this to 50 per cent this financial year,” he said. Executive director C V R Rajendran said as the bank was a small-sized one, it was possible to take sanctions and approve loans faster, and this would work in its favour. “For this reason, big corporates are willing to consider us for their additional loan requirements,” he said. Since the bank had low exposure to corporate loans, it was able to maintain good asset quality. As of September-end, its gross non-performing asset (NPA) ratio stood at two per cent, against 2.15 per cent last year. The bank’s net NPA ratio fell from 0.97 per cent to 0.88 per cent in the same period. (For details log on to : http://www.business-standard.com/india/news/bankmaharashtra-to-boost-corporate-loan-portfolio/492503/)
BANKS’ RETAIL INCOME OVERSHADOWS SLOWDOWN IN CORPORATE FEE
KOLKATA: The rising spends on credit cards, increase in sale of third-party products and surge in consumer loan demand have allowed banks to limit the impact of slowdown in corporate fee income. Top private lenders in the country are witnessing a significant growth in retail fees, even as corporate fee income continues to dwindle in the current uncertain economic environment. Axis Bank, the third largest private sector lender in the country, reported 43 per cent year-on-year rise in retail fee income during the second quarter. The bank’s corporate fee income increased by 15 per cent, while small and medium enterprises (SME) and agri-banking fees expanded by 17 per cent during this period. “We continue to see strength in our retail fees. Growth in retail loans and increase in card spends are contributing to this rise. Also, the stock market is doing well and, hence, there is a demand for mutual funds. Demand for other third-party products like life insurance is expected to improve further from January. We are confident of a good show in our retail fees this year,” a senior official at Axis Bank told Business Standard. (For details log on to : http://www.business-standard.com/india/news/banks-retail-income-overshadows-slowdown-in-corporate-fee/492556/)
IRDA AMENDS RULES TO REDEFINE MEANING OF ‘INFRASTRUCTURE FACILITY’
MUMBAI: The Insurance Regulatory and Development Authority (Irda) has expanded the definition of ‘infrastructure facility’ under its Registration of Indian Insurance Companies Regulations. In a gazette notification, the insurance regulator made an amendment to the regulation wherein the term ‘infrastructure facility’ will be replaced by ‘harmonised master list of infrastructure sub-sectors’, as specified by the department of economic affairs, ministry of finance. Insurance companies, both life and non-life, are mandated to invest a certain percentage in infrastructure. To enable them in this endeavour, Irda has specified a list of ‘infrastructure facility’ for insurance firms to invest in. According to Section 2 (h) of Irda Registration of Indian Insurance Companies Regulations, 2000, infrastructure facility includes highways, bridges, airports, ports, railways, road transport systems, water supply projects, irrigation projects, industrial parks, water treatment systems and solid waste management systems. It also includes sanitation and sewage systems, generation, distribution or transmission of power, telecommunications and housing projects. (For details log on to : http://www.business-standard.com/india/news/irda-amends-rules-to-redefine-meaninginfrastructure-facility/492497/)
FIVE SENIOR EXECS QUIT TATA AIA LIFE INSURANCE
MUMBAI/KOLKATA: Tata AIA Life Insurance Co Ltd (formerly Tata AIG Life Insurance) is seeing attrition at senior management levels. According to sources, five senior management executives are in the process of leaving the organisation. The five, according to industry sources, are Mitali Dalal, senior vice-president; Vikas Bagga, senior vice-president & head of north zone; Natasha Joshi, senior vice-president & head of south zone; S Bharat, vice-president & head of strategy; and M Anand, vice-president. Tata AIA Life Insurance has 13 people at the senior vice-president level. However, the company downplayed the development. “Like every growing organisation, people movement is a regular part of Tata AIA Life Insurance,” the company said in reply to a questionnaire sent by Business Standard. Tata AIA Life Insurance has about 4,000 employees on its rolls. It recently appointed Mukesh Dhawan as deputy CEO and chief distribution officer. Dhawan is responsible for creating and implementing new strategies in marketing, product development and distribution. (For details log on to : http://www.business-standard.com/india/news/five-senior-execs-quit-tata-aia-life-insurance/492496/)
AIG KEEN TO SELL BANK, EXPAND IN MORTGAGES BUSINESS: CEO
HONG KONG: American International Group is planning to sell its savings and loan business as soon as a federal panel labels the insurance giant “too big to fail,” its chief executive said on Monday. But even without a banking business, AIG is looking more aggressively at making and purchasing mortgages as investment vehicles, Chief Executive Officer Bob Benmosche said in a telephone interview from Tokyo. AIG, which received $182.5 billion in bailout money from US taxpayers at the height of the financial crisis four years ago, has been working to repay the government and regain its credibility ever since. AIG is regulated by the Federal Reserve because it has a savings and loan business. But even without it, the insurer is likely to come under permanent Fed oversight anyway as a “systemically important financial institution,” or SIFI. Those designations have not been made yet, but AIG has said all along it is certain to receive one. (For details log on to : http://www.business-standard.com/india/news/aig-keen-to-sell-bank-expand-in-mortgages-business-ceo/492488/)
MICRO-FINANCE INVESTORS NOW EYE NBFCs
BANGALORE: Given the ongoing churn and regulatory uncertainty in the Indian microfinance industry, investors looking to hedge risks and diversify portfolios are now betting on the country’s non-banking financial companies. Global development finance institutions, which have together invested close to $500 million (Rs 2,700 crore) in the Indian microfinance sector, are exploring opportunities in the NBFC space – another sector that promises financial inclusion for India’s poor. “We would be very keen to look into the NBFC space. They fill the gap that exists between what MFIs in Indiado currently and where banks generally don’t go,” said Michael van den Berg, regional manager of Europe, Caucasus and Asiaat Triple Jump. Triple Jump, the Netherlands-based microfinance-focused investment manager, currently invests in Indiathrough social venture capital firm Lok Capital, which has invested in microfinance firms Ujjivan and Janalakshmi as well as in Vistaar Financial Services, a Bangalore-based NBFC. According to van den Berg, returns from NBFC-focused investments are at par with the investments in microfinance institutions. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/micro-finance-investors-now-eye-nbfcs/articleshow/17213522.cms)
LOK CAPITAL EXPLORING NEW STRATEGIES FOR SOCIAL IMPACT
MUMBAI: Rajiv B Lall, 55, managing director and chief executive of Infrastructure Development Finance Company, talks unlike his peers in the glamorous investment banking and private equity businesses. Lall, who holds a graduate degree from OxfordUniversityand a doctorate in economics from ColumbiaUniversity, has spent about thirty years with institutions such as Warburg Pincus, Morgan Stanley and Asian Development Bank. He discusses world history and finance with equal ease. Lall founded social impact fund Lok Capital. Currently, through Lok Capital and Lok Foundation, Lall and his colleagues are exploring new strategies for supporting social ventures that are not solely about making money. “We tried to persuade microfinance companies in our portfolio to plough some of their profits back into the communities they serve. But as an investor, if you are a minority equity owner, it is hard to influence an investee company. At the height of the microfinance boom, some of our portfolio companies were caught in the valuation game. Subsequently, they got into trouble when the bubble burst,” says Lall. Lok Foundation is considering new ways to invest in ventures that aim to be commercially self-sustaining, not profit-maximising. One such way is to support social entrepreneurship through Section 25 companies that are neither charitable trusts, nor for-profit companies under the Companies Act. It is not possible for a Section 25 company to distribute profits to shareholders in the form of dividends; the profit needs to be ploughed back into the company. (For details log on to : http://www.business-standard.com/india/news/lok-capital-exploring-new-strategies-for-social-impact/492562/)
SUN, RUSTOMJEE GROUP SPAR YET AGAIN ON VIRAR PROJECT
MUMBAI: Private equity firm SUN-Apollo has questioned realty developer Rustomjee Group’s move to partition part of the over 217-acre project in Virar with its joint venture partner Evershine Builders ‘in haste’, intensifying the simmering tussle between them. SUN and Rostomjee are locked in a legal tussle since the private equity firm accused the realty firm of selling floor space index at its projects without the funds’ consent and not respecting the rights of investors. SUN has now questioned the developer’s intentions as the deal for nearly 3 million sq ft was concluded over the weekend in two days between an order of the CLB on Friday, October 12 and SUN’s further appeal on the same on the following Monday. Rustomjee Group is now seeking to sell its share of Virar land partition admeasuring 1.47 million sq ft for 220 crore. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/sun-rustomjee-group-spar-yet-again-on-virar-project/articleshow/17200525.cms)
MUTUAL FUNDS SEE RISE IN OCTOBER INFLOWS
CHENNAI: With a significant rise in inflows into income funds, the assets under management (AUM) of mutual funds witnessed a rise of 6.7 per cent to Rs. 7.68 lakh crore in October from Rs. 7.20 lakh crore in the previous month, according to the latest data released by the Association of Mutual Funds in India (AMFI). Income funds registered 8.85 per cent rise in inflow during the month to reach Rs. 3.83 lakh crore in October from Rs. 3.52 lakh crore in September. Out of Rs. 48,135 crore net inflows, debt funds alone added Rs. 47,516 crore to the mutual fund corpus in October. Liquid and money market funds (short-term funds) saw a 13.62 per cent rise (Rs. 19,703 crore) in assets under management to Rs.1.64 lakh crore from Rs. 1.45 lakh crore. The total inflow into debt funds (including income, liquid and money market funds), thus registered a rise of 22.4 per cent. Inflows in to equity schemes, however, declined by 1.99 per cent to Rs. 1.59 lakh crore from Rs. 1.63 lakh crore. The mutual fund inflow details for October reveal that assets under management under Gold ETFs have risen by 2.49 per cent over September adding Rs. 279 crore to Rs. 11,477 crore. This is despite a decline in inflows into other exchange traded funds by five per cent to Rs. 1,715 crore from Rs. 1,806 crore in the previous month. (For details log on to : http://www.thehindu.com/todays-paper/tp-business/mutual-funds-see-rise-in-october-inflows/article4094202.ece)