Saturday, March 19, 2011
10:27 AM Blogger
State Bank of India (SBI) raised around Rs 1,500 crore via certificates of deposit (CDs) in the past two days. Following the huge success of its retail bond issue, the country’s largest lender in the beginning of March had said it would not tap CDs or offer higher rates on bulk deposits. It had raised Rs 5,500 crore through the retail bond issue.
“There are no liquidity issues as such. These are more for trading purposes. There is still an opportunity to earn 40-50 basis points,” said a senior SBI official.
SBI raised Rs 150 crore via 3-month CDs at 9.75 per cent and Rs 820 crore via one-year CDs at 9.95 per cent. Yesterday, the state-run lender had raised Rs 600 crore for three months at 9.70 per cent. “There is no definite plan to raise, but we might raise as far as pricing allows,” the official said.
Banks have been aggressively accessing the CD market for funds since November 2010, as there were concerns on the pace of deposit growth. According to the Reserve Bank of India, the outstanding amount in CDs rose to Rs 4 lakh crore as on February 11. CDs worth Rs 51,000 crore were issued during the fortnight ended February 11.
CD rates had shot up above 10 per cent levels, as banks were shoring up their deposit base towards the end of the financial year. Though CD rates have peaked, they continue to stay high. “Liquidity is expected to improve in April and, hence, short-term interest rates may come down further,” said the official.
Banks have been heavily borrowing from the RBI’s repo window. Today, repo drawdown was around Rs 1.4 lakh crore, as there are pressures on liquidity on account of advance tax outflows.
Source: Business Standard
10:25 AM Blogger
IDBI Bank plans to increase its lending to mid-size companies by 15 to 20 per cent annually in the medium term to grab higher business share and support bottom line.
There is robust demand for funds from mid-size companies (with a turnover of Rs 100 crore to 500 crore). They also provided better margins, as against large companies, who had more options to raise funds, IDBI Bank Executive Director Vinay Kumar said.
At the end of December 2010, the bank’s outstanding loan portfolio for the mid-size segment was at Rs 30,000 crore. It was lending to intermediaries and real estate companies on selective basis, which were part of the segment, he said. It has also begun to provide multi currency remittance facility for making payments in miscellaneous currencies. With this facility, its customers can make remittances in more than 125 currencies across the world.
“The facility offers absolute transparency to the customer in terms of exchange rate of the exotic currency and insulates against subsequent volatility,” he said.
Source: Business Standard
10:23 AM Blogger
Banks have urged the Reserve Bank of India (RBI) against withdrawing the priority sector status for loans extended to microfinance institutions (MFIs).
“Our main reservation is that nothing should happen which could result in the withdrawal of priority sector status,” said K Ramakrishnan, chief executive officer of the Indian Banks’ Association (IBA).
“Banks will always analyse, assess and conduct the required due diligence before giving loans to MFIs. However, if the latter don’t follow the regulations, banks should not be penalised. This was the main concern raised in today’s meeting,” he added.
Top bank officials met RBI deputy governor KC Chakrabarty on Thursday to give feedback on Malegam committee’s recommendations on the MFI sector.
MFIs, which mostly lend to poor people in rural areas, have witnessed heightened regulatory scrutiny over the past few months. This followed reports that they charged high interest rates and adopted coercive recovery practices.
This prompted the central bank to set up a panel under its board member Yezdi H Malegam to look into the operations of these firms. Apart from suggesting that RBI regulate the sector, it recommended the creation of a separate category for MFIs among the non-banking finance company (NBFC) category.
The findings and recommendations of the committee were made public on January 19. Based on the feedback received from bankers and other stakeholders, RBI will come up with guidelines to regulate the sector.
Bankers hinted that RBI may implement some recommendations from April 1.
“The committee’s recommendations will be applicable from April 1. The loans which have been already given to MFIs will not be governed by these regulations,” said Aditya Puri, managing director of HDFC Bank.
A similar view was echoed by Dena Bank’s chairman and managing director DL Rawal, who said the proposed norms would only regulate MFI loans sanctioned April onwards.
It was not clear if the proposed norms will include all the recommendations. However, bankers said the suggestions on interest rate cap and loan exposure of MFIs to a single borrower were likely to be implemented from next month.
The committee has recommended that MFIs’ lending rates be capped at 24 per cent. It suggested the total outstanding loans to a single borrower should not exceed Rs 25,000. Also, borrowers could not have an annual household income more than Rs 50,000.
Bankers also noted that RBI was unlikely to persuade the Andhra Pradesh government to withdraw its legislation on regulating MFIs.
“RBI said it didn’t have any control on state-level legislation. However, the view is if good things are done here, the legislation could be withdrawn by the state on its own,” IBA’s Ramakrishnan said.
In Andhra Pradesh, which accounts for nearly one-third of microfinance business in India, the state government has introduced a new law to regulate MFIs.
However, these firms complain the new law has affected their loan disbursals and recoveries in the state, thus deteriorating profitability.
“RBI cannot do anything on states’ legislation. However, if RBI does become the regulator, states will not feel the need to regulate MFIs individually,” HDFC Bank’s Puri said.
Source: Business Standard
10:22 AM Blogger
New Delhi: India Inc's entry into the banking business is creating problems for the authorities who are looking to guard against those entities which may seek to manipulate the business.
The government is considering adding more teeth to Reserve Bank of India to deal with banking sector problems before permitting private sector entities to float commercial banks.
Empowering RBI is essential for obtaining information about other businesses of the corporate houses seeking banking licences, in order to protect depositors' interests, official sources said.
The government, sources said, is considering to amend the Banking Regulation Act through which RBI would be empowered to seek information from an entity running bank and other businesses like insurance and asset management as well.
Sources said this is relevant as the risks of these companies can slip into banks by virtue of same parentage, sources said.
Banking Regulation Amendment Bill is likely to be tabled in the Monsoon session of Parliament.
Presently, insurance companies are regulated by Insurance Regulatory and Development Authority and asset management business comes under the purview of SEBI.
After the clearance of the bill, RBI would have power to call for information and assess information, sources said, adding, these powers are required if the private entities are allowed to enter into banking space to protect interest of depositors.
As per the current practice, India follows subsidiary model where non-banking business of a bank like insurance and asset management are subsidiaries. By virtue of this, risks attached with this can impact the banking entity.
Meanwhile, RBI has already said it will look at business plan for financial inclusion, in addition to other things, before granting banking licence to new companies.
"One of the criteria for evaluating application (for new bank licence) that we will get in due course of time, will indeed be their business plan for financial inclusion," RBI Governor D Subbarao had said earlier this month.
The apex bank had brought out a discussion paper in August, 2010, on giving out new banking licenses to business houses and non-banking finance companies, besides regulations for the same to foster competition.
The RBI also sought to know "whether industrial and business houses could be allowed to promote banks."
Various entities like Reliance Capital, IndiaBulls, Religare, IFCI and Aditya Birla Financial Services are said to be mulling entry in the banking space.
India presently has 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.
Source: Financial Express
10:20 AM Blogger
NEW DELHI: Handset maker Nokia is the latest to join the mobile money transfer bandwagon in India. The cellphone maker along with Union Bank of India launched a mobile-to-mobile cash transfer service called Union Bank Money on Monday, which would allow any mobile users on any network to shop, pay utility bills, top-up prepaid cards using only a mobile phone.
Both Nokia and Union Bank of India said their offers would help the Indian government address its social obligation of financial inclusion, especially in rural areas.
More than 800 million people have access to mobile phones but less than half of the country's population does not hold a bank account, a UBI executive said, leaving a lot of room for growth of such initiatives. Targeting financial inclusion, more than 2 lakh Nokia retail outlets would become business correspondents, or BC, enabling consumers to open no-frill accounts, deposit and withdraw cash up to 50,000 and conduct transactions of the same value every day.
The bank plans to add disbursement of micro-loans, ticketing facilities and other government services in the near future.
Nokia India vice-president and managing director D Shivakumar said the companies have made significant investment in technology and securing the service platform apart from giving a six-week training to each business correspondent at Nokia's retail outlets.
Nokia is pre-installing the application on all its mobile phones while existing mobile phone users can register for the service at a Nokia retail outlet. The bank is also providing ATM cards for cash withdrawal. Registration for the service is free for six months and the companies will decide on the timeline and cap of charges to be paid by consumers.
Customers in Delhi, Faridabad and Noida can immediately start using the service, while a countrywide rollout will be complete by this year-end, Shivakumar said.
10:17 AM Blogger
Mumbai: The youngest public sector lender IDBI Bank has launched a multi-currency remittance facility to make payments in miscellaneous currencies, taking its remittance offering to over 125 bills.
The facility offers transparency to the customers in terms of exchange rates and insulates against subsequent volatility, the bank said in a release.
The facility will be available to all customers of IDBI Bank for both trade and non-trade payments at its all branches.
The bank has an aggregate balance sheet size of Rs 2,84,729 crore as on December 31, 2010 and in the nine month ended December 2010 the bank had a net profit of Rs 1,134 crore. It has 802 branches and 1,354 ATMs.
Source: Financial Express
10:14 AM Blogger
Indore: Four persons have been arrested for trying to sell a fake USD one million currency note here.
Acting on a tip-off, police laid a trap and arrested Mohammad Taj of Asansol district in West Bengal, along with Radheshyam Luniya, Narendra Dangi and Prem Narayan Rathod – all from Madhya Pradesh -- yesterday, police said today.
The accused were trying to sell the note for Rs 2 lakh.
Luniya had been arrested twice earlier for circulating fake Indian currency notes, according to the police.
In April last year, the city police had arrested three persons for trying to sell a fake USD one million note.
Source: Financial Express
10:12 AM Blogger
Friday, March 18, 2011
8:29 AM Blogger
New Delhi: India Inc's reaction, to RBI raising rates by 25 bps, was quick and furious indeed.
Industry said the continuous monetary tightening by the Reserve Bank will affect "adversely" growth prospects of the country.
"Series of hikes in repo and reverse repo rates have had a visible impact on the industrial production numbers, which have decelerated substantially in recent months," industry chamber Ficci said.
The Reserve Bank has raised its short-term lending and borrowing rates, for the eighth time since March 2010, by 25 basis points in a bid to rein in inflation.
"RBI's action in raising policy rates, though expected, will adversely affect growth prospects ... There is also a lot of nervousness in the market given the global developments," Ficci Director General Rajiv Kumar said.
The overall inflation was marginally higher in February at 8.31 per cent against 8.23 per cent a month ago.
Assocham said the 25 basis points increase in short-term lending (repo rate) and borrowing (reverse repo rate) by RBI will hit the manufacturing sector which is already witnessing a slowdown due to rising input costs and wages.
Assocham President Dilip Modi said: "RBI should have waited till the new agriculture crop which is expected next month".
"The continuous hike in policy rates can have impact on economic growth and consumption demand," PHD Chamber President Salil Bhandari said.
Deceleration in manufacturing and mining sectors pulled down the factory output growth rate to a meagre 3.7 per cent during January from 16.8 per cent in January last year.
Fixer said that the government would have to focus urgent attention to addressing supply side constraints and improve the investment environment.
Source: Financial Express
8:28 AM Blogger
Mumbai: Borrowers will have to pay more for their home and auto loans as the Reserve Bank today announced an increase of 25 basis points in key policy rates-- 8th hike in one year--in a bid to contain spiraling prices of essential commodities.
Bankers said they will take a call on rates next month but ruled out an immediate hike in interest rates.
The Reserve Bank of India (RBI) in its mid-quarterly policy review raised repo (short-term lending) and reverse repo (borrowing) rates to 6.75 and 5.75 per cent respectively.
RBI injects liquidity through repo rate, while it absorbs funds through reverse repo window.
Finance Minister Pranab Mukherjee and Planning Commission Deputy Chairman Montek Singh Ahluwalia welcomed the decision, but India Inc expressed fears that the move would hurt growth.
The RBI move apparently dampened the investor sentiment. Reacting to hike in policy rates, the Bombay Stock Exchange benchmark Sensex nosedived by close to 210 points to close at 18,149.87 points.
This is the eighth time the central bank is hiking its key policy rates since March 2010 to fight rising inflation, which was at 8.31 per cent in February, much above the RBI's comfort level of 5-6 per cent.
The central bank upped its March-end inflation forecast to 8 per cent from 7 per cent projected earlier in view of rising global crude oil prices and high food prices at home.
In the global markets, crude rates had shot up to over USD 115 per barrel in the wake of unrest in the Middle-East "It is good. It will have its impact on the inflationary pressure," Mukherjee said hoping that inflation would calm down to 7.5 per cent by March-end.
Ahluwalia said the hike in rates was on expected lines as inflation was high. "I think it is on long expected lines. I don't think markets would be surprised by (RBI key rate hike) given that inflation is not in the comfort level, I think it has done the right thing," he said.
Commenting on the development, bankers said they are unlikely to pass on the policy rate hike immediately to customers and would hold on current rates till March-end.
"I think rates would remain stable during this month. Beyond March, it would depend on various factors, like call money rates..," IOB Chairman and MD M Narendra said.
Similarly, Punjab & Sind Bank Executive Director P K Anand said banks are unlikely to tinker with their rates now and any revision in rates by banks would happen in April.
RBI said the rate hikes are expected to rein in demand-side inflationary pressures and contain the spillover of food and commodity price rise to other sectors.
The Reserve Bank also warned that sharp rise in oil prices following turmoil in the Middle-East and North Africa would have implications for the economy, especially inflation.
"... coming on top of already elevated food and other commodity prices, the spike in (global) oil prices has endangered inflation concerns," RBI said.
Source: Financial Express
8:26 AM Blogger
New Delhi: With the RBI raising rates for the 8th time, experts have drawn a danger line for the Indian economy, reminding one of the proverbial 'Laxman rekha' that was to safeguard Sita – the consequences are there for all to see in the epic 'Ramayana'.
Terming the RBI's move to raise key policy rates by 25 basis points as in-line with market expectations, analysts said the apex bank should not go for any further rate hikes in the current year in order to keep the India growth story intact.
The Reserve Bank of India today raised its short-term lending (repo) rate and borrowing (reverse repo) rate by 25 basis points each to 6.75 per cent and 5.75 per cent, respectively, for the eighth time since March, 2010 in a bid to rein in inflation.
Market observers (experts' reactions) feel the 25 basis points hike by the apex bank is on expected lines and was discounted by the market.
"RBI has acted on expected lines. The problem of inflation is still on top of RBI's mind, so they have continued tightening monetary policy even at the cost of growth momentum slackening," Motilal Oswal Financial Services Joint Managing Director Raamdeo Agrawal said.
Analysts feel the RBI should not opt for another hike in the calendar year as it may hurt the economic growth of the country.
"The increase of 25 basis points would be detrimental to our economic growth estimates and if banks opted to pass on all the increase to consumers, the capital formation in the economy will remain subdued.
The inflation should come down in the fiscal year 2012, and this rate increase is almost all the increase we need in this calendar year," MAPE Securities Head (Research) Kislay Kanth said.
Kanth added the RBI raising the inflation projection to 8 per cent for March-end, against 7 per cent estimated earlier is a matter of concern.
Echoing Kanth's opinion, Padmakshi Financial Services Director (Institutional Equities) & Chief Strategist Sailav Kaji said, "We believe RBI is near end of tightening as inflation is expected to moderate with lag".
Experts also feel the government needs to come out with more policies to tackle food inflation apart from the measures taken by monetary authorities, in view of the rising global uncertainties and soaring oil prices as the RBI's continuous rate hikes may impact India's long-term growth story.
Source: Financial Express
8:25 AM Blogger
New Delhi: After months of haggling, the Finance Ministry is expected to concede to the EPFO’s proposal for an additional one per cent interest rate on retirement savings. This will mean that the 4.72 crore subscribers of the Employees’ Provident Fund Organisation will enjoy an interest rate of 9.5 per cent on their Provident Fund deposits in 2010-11.
“The Ministry is expected to notify the 9.5 per cent interest rate soon,” said an official.
This is expected to come with certain riders — the EPFO will have to update members’ accounts within six months to get a clearer picture of the actual money in its interest suspense account.
Last September, the EPFO had announced the additional interest rate after discovering a Rs 1,731.57-crore surplus in its interest suspense account. But the Finance Ministry and the Comptroller and Auditor General questioned this; the CAG blamed the “non-updation” of members’ accounts for the accumulation of the surplus in EPFO’s suspense account.
Source: Financial Express
8:22 AM Blogger
United Bank of India (UBI) on Thursday said it was expecting the government to infuse Rs 308 crore into the bank by the end of this month. The infusion will be part of the government’s recapitalisation programme wherein it was injecting funds into public sector banks to shore up their capital adequacy ratio.
“We hope to have a capital infusion of Rs 308 crore by the end of March,” said Bhaskar Sen, chairman and managing director, United Bank of India.
Asked about the fundraising plans of the Kolkata-based lender, which got listed last year, Sen said there was headroom, but the bank would take a call (on the follow-on public issue) by the end of the next financial year. He ruled out possibility of an FPO this year.
The government holds 84 per cent in the bank. Capital infusion will take place through preferential allotment of equity and would raise the government's holding.
Asked about the impact of the policy rates’ rise on the bank’s lending and deposit rates, Sen said a call on revising the base rate would be taken next week.
Source: Business Standard
8:20 AM Blogger
Following the rise in key policy rates by the Reserve Bank of India (RBI), banks are expected to raise lending rates. However, deposit rates may have peaked already, according to bankers.
The central bank has raised the repo and reverse repo rates by 25 basis points (bps) each to tackle inflation. Also, based on the evolving growth and inflation scenario, RBI is likely to persist with its anti-inflationary stance.
“Deposit rates may not rise as there has been a substantial increase over the past few months. However, banks may pass on the increase in lending rates to customers if there is a demand for loans in April. Policy rates have risen more than the lending rates. So, there is room available... maybe about 25 bps,” said M V Nair, chairman and managing director, Union Bank of India.
Since October, most public sector banks have raised the base rate, the benchmark rate for loans, by 150 bps to 9.5 per cent. As a result, the effective lending rates for home loans and even the highest-rated corporate loans are more than 10 per cent now. Deposit rates, on the other hand, have increased by 250-300 bps.
Some banks are considering raising lending rates this month itself. This is because loan demand is expected to decline April onwards.
“With respect to the policy, the take away for bankers is that interest rates increases will happen more sooner than later. We will give it a serious thought. Also, if we want to raise lending rates, we will do it before the end of March. Though there has been a pass-through in deposit rates, some more can happen on lending rates,” said Romesh Sobti, managing director and CEO, IndusInd Bank.
With the rise in lending rates, loan growth started moderating from December. However, for the current financial year, it is expected to stay more than what the central bank had projected. It was 23 per cent on-year till February, higher than the central bank’s projected trajectory of 20 per cent. On the other hand, deposit growth was 16.4 per cent, lower than the 18 per cent projected by RBI.
Crisil Research expects credit growth to moderate to 18-19 per cent in 2011-12, thanks to the decline in the growth of investments across sectors like telecom, airport infrastructure, cement and petrochemicals. “Also, the prevailing high interest rates are likely to impact the credit growth of the industry as well as the retail segment,” Crisil said.
Banks expect RBI may continue to hike rates and they may have to hike interest rates for a few more rounds in response to RBI’s rate action, if inflation continues to stay high.
“Going ahead, there are upside risks to inflation. Further action may be warranted if inflation continues to stay high,” Sobti said.
“Money market conditions will remain tight for the next few weeks,” said TCA Ranganathan, chairman and managing director, Export Import Bank of India. Short-term money market rates might move up, he added. However, he did not elaborate on the quantum of increase.
Source: Business Standard
Thursday, March 17, 2011
8:16 AM Blogger
MUMBAI: Billionaire Mukesh Ambani , chairman of India's most valued company Reliance Industries or RIL, has joined the board of the Bank of America Corporation, the largest US lender by assets. Mr Ambani's nomination will be ratified at the bank's annual meeting of shareholders.
"Bank of America's shareholders will benefit from the global perspective Mr Ambani brings to our board," Bank of America's chairman Charles O. Holliday, Jr was quoted as saying in a press statement issued late Wednesday evening, Indian time.
"It is a privilege and a great honour for me, as the first non-American citizen to join the board of one of the world's largest financial institutions" said Mr Ambani.
RIL shares rose 0.8% to close at Rs 1,045 on the BSE on Wednesday. The announcement came after market hours.
Mr Ambani, who figured among the top 10 on the Forbes billionaire list in 2011, owns RIL, India's largest private business enterprise with $44.6 billion in annual revenues and over $70 billion in market capitalisation.
RIL operations encompass production and exploration of oil and gas. It also runs a refinery at Jamnagar, Gujarat which is said to be the world's largest at a single location. It also has a petrochemical business and a fledging retail operation with around 1,000 stores.
RIL recently announced that it was entering into a joint venture with British Petroleum that operate various oil refineries and has assets in India. BP will own 30% of the assets. The group also has licences to offer fast internet access using wireless to all parts of India.
8:14 AM Blogger
MUMBAI: Nearly two decades after the Harshad Mehta scandal resulted in claims worth thousands of crores, the Income-Tax department has got its full share of the amount that was due from the late stock broker . The State Bank of India, or SBI, and Standard Chartered, however, may have to wait for some more time before their dues are cleared.
The I-T Department and State Bank of India together received payments totalling 2,195 crore on Wednesday in the largest disbursement of claims against losses incurred on account of the 1992 securities scam.
With this, the custodian appointed by the central government to liquidate the assets of Harshad Mehta and his entities and to distribute the proceeds against his outstanding dues, has released more than 4,000 crore. Of this, 3,400 crore has gone to the I-T department alone, custodian Satish Loomba told reporters.
While the amount released so far are the priority payments of principal amount, the total outstanding liability of Harshad Mehta and his group companies relating to the scam and non-scam period amounts to a huge 27,000 crore. This includes the I-T department's demand of 22,000 crore (principal amount of 2,100 crore and interest of 20,000 crore), banks and financial institutions' share of 5,200 crore and 200 crore due to other parties, Mr Loomba said.
Of the 2,194 crore released on Wednesday, 1,996 crore was paid to the I-T department while the remaining was 199 crore was given to SBI. A total of 1,700 crore is due to banks, of which Rs 800 crore has been cleared, said Mr Loomba.
He also said Standard Chartered Bank has claimed 500 crore, which, is yet to be released. The bank has moved the Supreme Court claiming a share of Harshad Mehta's assets. It has appealed against an order of the special court, but has not been able to get any stay on the disbursement of the proceeds from the sale of his assets. The total I-T demand of 2,100 crore, the principal amount, has been met in full, said Mr Loomba.
Standard Chartered Bank has said the distribution based on the date of decree is wrong.
The custodian has attached both movable and immovable assets of the stockbroker and his group companies, which largely include cash and securities. The funds released from the sale of assets are being disbursed among the claimants, which mostly includes banks and financial institutions.
Soon after the scam broke, parliament legislated the Special Court Act to deal with the extraordinary situation arising out the scam. The Act gives powers to the custodian to notify individuals and entities and attach their assets to solve dispute and settle claims of the scam-hit parties. The custodian also received claims from many individual investors for loss of capital on account of the scam. The custodian, however, could not act on those claims, as, said Mr Loomba, the Act gives priority to bigger claimants like the I-T department, banks and financial institutions.
8:12 AM Blogger
KOLKATA: Muhammad Yunus , the celebrated pioneer of micro finance, has criticised India's microfinance practitioners for turning the sector into a money spinning opportunity.
The Nobel Peace Prize winner in 2006, jointly with Grameen Bank for creating economic and social development from below in Bangladesh, said microfinance activities in India have taken a wrong turn and referred this as one of the major reasons behind the near-collapse of the sector.
"I feel sorry for the current situation in microfinance sector in India," Yunus said in an interview with ET, even as he is fighting a legal battle against his expulsion from Grameen Bank.
"One reason for this problem (In India) is some of these microfinance programmes have taken a wrong turn. They see microcredit as a money-making opportunity to make profit for themselves. That has shaken the trust of people who believed in its mission," said the 70-year old Yunus.
"We never saw micro-credit as an opportunity to make money out of the poor," Yunus said. The 38-year-old Grameen Bank today serves 8.3 million poor borrowers. The Nobel laureate has, however, been subjected to bitter smear campaign in Bangladesh since 2007 when he announced to form a political party.
8:11 AM Blogger
Mumbai: Foreign institutional investors (FIIs) put in bids for about $4.3 billion of Indian government securities and corporate bonds, or nearly double the stock on offer, indicating robust appetite for Indian debt, five market sources said on Wednesday.
Foreign investors bid for around 97 billion rupees ($2.1 billion) of corporate bonds against 27 billion rupees on sale, as the paper did not have any sector or tenor restrictions.
They bid 98 billion rupees of government bonds, compared with around 75 billion rupees on offer for maturities of more than 5 years.
The auction was held on Tuesday by the Securities Exchange Board of India (SEBI) to allocate unutilized FII limits for government bonds and corporate bonds.
Since the limits that were auctioned under the corporate bonds did not have any tenure restriction, they were lapped up by FIIs, but we can't be so optimistic when SEBI auctions the new limits which have restrictions, said a foreign bank dealer who had bid in the auction.
In the 2011/12 annual budget on Feb. 28, Finance Minister Pranab Mukherjee had raised the FII limit in bonds with residual maturity of more than five years issued by companies in the infrastructure sector by an additional $20 billion taking the limit to $25 billion.
This will raise the total limit available to FIIs for investment in corporate bonds to $40 billion.
The current FII limit in government debt stands at $10 billion of which $5 billion must be invested in bonds of more than 5 years maturity.
The commissions foreign investors were willing to pay for corporate bonds were sharply higher than for government bonds, indicating the strong demand.
These ranged from 1.05 to 1.4 percent on corporate bonds, compared with 0.04 to 0.055 percent on government bonds, the sources said.
Source: Financial Express
8:09 AM Blogger
New Delhi: Amidst high food inflation, falling industry output and uncertain crude oil prices, the Reserve Bank is likely to raise key policy rates by 25 basis points in its mid-quarterly review on Thursday, say experts.
The RBI is expected to hike interest rates by 25 basis points, said State Bank of India (SBI) Chief Finance Officer (CFO) Hemant Contractor.
Despite moderation, food inflation is still high at 9.52 per cent on account of rising prices of essential items. At the same time, factory output grew by 3.7 per cent in January compared to 16.7 per cent in the same month a year ago.
"Current growth and inflation trends clearly warrant that we persist with the anti-inflationary monetary stance. Looking beyond 2010-11, the Reserve Bank expects the domestic growth momentum to stabilise," RBI Governor D Subbarao had said in the last policy review announced on January 25, 2011.
"Inflation is expected to moderate from the first quarter of 2011-12, but several upside risks are already visible. The monetary stance will be determined by how these factors impact the overall inflationary scenario," the Governor had said.
Wholesale price based inflation inched up to 8.31 per cent in February, against 8.23 per cent in January.
RBI has raised policy rates seven times since March, 2010, with a hike of 175 basis points in short-term lending (repo) rate and 225 basis points in short-term borrowing (reverse) repo rate in its bid to arrest inflation. Though analysts are not sure whether any further tightening of interest rate can check the price rise, the central bank seems to have few options but to hike rates.
"RBI is unlikely to raise rates in the upcoming policy review," said Corporation Bank Chairman and Managing Director Ramnath Pradeep.
It is to be noted that RBI chose not to tinker with the policy rates during December, 2010 review, even though food inflation was in double digits.
"RBI till now has clearly communicated the stance that they want to balance between growth and inflation. That's why they want to take a calibrated stance to raise rates. From that perspective, 25 basis points hike seems to be on the cards," said Standard Chartered Head (Research) Samiran Chakrabarty.
Echoing a similar view, Crisil Chief Economist D K Joshi said: "RBI may raise key policy rates by 25 basis points to arrest food inflation spreading to manufacturing sector."
Source: Financial Express
8:07 AM Blogger
Mumbai: The Export-Import Bank of India (Exim Bank) has entered into an agreement with Malawi for providing a USD 50 million line of credit for financing exports and consultancy services for projects in the African nation.
The credit agreement under the line of credit (LoC) is effective from February 23 this year and the date of execution of the agreement is February 1.
"Exim Bank has concluded an agreement dated February 1, 2011 with the government of Malawi, making available to the latter a LoC of USD 50 million for financing eligible goods and services, machinery and equipment including consultancy services...," the Reserve Bank said in a statement.
The agreement mainly involves financing of projects in the agriculture sector in Malawi, including cotton processing facilities .
The goods and services, including consultancy services from India for exports under this agreement are those which are eligible for export under the foreign trade policy of the Indian government.
Out of the total credit under this agreement, the goods and services including consultancy services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India.
Source: Financial Express
8:06 AM Blogger
Mumbai: National Payments Corporation of India (NPCI) has reduced the switching fee for mobile money transfers using the inter-bank mobile payment service (IMPS) to 10 paise from the proposed 25 paise for a successful transaction to the remitting bank. It would be effective from April 1 until the end of the next fiscal.
“We have waived the fee for the current financial year (till March 2011) to promote this product. This service was launched in November last year. As of today, we have already issued 66 lakh mobile money identifiers (MMIDs) — the account number through which one can do transactions on mobile phones,” NPCI managing director & chief executive officer AP Hota told The Indian Express on Monday.
“We are targeting to bring 5 crore bank customers under the IMPS fold by March 2012,” Hota said. IMPS service is the first of its kind in the world, which allows fund transfer between individuals through their mobile phones. It provides any time instant money transfer service through mobile phones to any other person registered for the IMPS service in any of the participating banks. Now, inter-bank funds transfer is done through national electronic funds transfer (NEFT). But the main issue with these transfers is the time lag as this is not a real time service and transactions are settled in batches.
Source: Financial Express
8:04 AM Blogger
Tata Steel Ltd, the country’s biggest producer, aims to raise as much as Rs 1,500 crore ($332 million) in the nation’s first sale of rupee perpetual bonds by a non-finance company, two people with direct knowledge of the matter said.
JPMorgan Chase & Co and ICICI Bank Ltd will arrange the sale, said one of the people, declining to be identified because the matter is confidential. The Mumbai-based company will pay a coupon of 11.8 per cent on the bonds, which can’t be called for redemption for the first 10 years, the person said.
Tata Steel Group Chief Financial Officer Koushik Chatterjee announced a Rs 7,000 crore fundraising plan in November. The bonds will add to the $5.6 billion of loans Tata Steel obtained on September and the Rs 3,480 crore raised from a share sale in January to replace debt used to buy Corus Group Plc in 2007 for $12.9 billion.
Chatterjee did not respond to an e-mail and a phone call made to his office. Kavita Sonawala, a spokeswoman for JPMorgan in Mumbai, declined to comment. Charudatta Deshpande, ICICI Bank’s spokesman in Mumbai, did not respond to an email.
Tata Steel shares gained as much as 2.4 per cent to Rs 607.5 and traded at Rs 606.8 as of 1.35 pm in Mumbai. The benchmark Sensitive Index of the Bombay Stock Exchange rose 1.5 per cent.
Source: Business Standard
8:03 AM Blogger
SKS Microfinance, the country’s largest microfinance lender, on Wednesday said it would not participate in the corporate debt restructuring (CDR) programme as suggested by its lenders, owing to availability of sufficient funds to repay loans.
“At its meeting on March 16, the Board of directors has decided against corporate debt restructuring. Instead, it will explore other possibilities for additional fundraising from various banks and financial institutions,” the company said in a statement.
Earlier, banks had approached the Reserve Bank of India, seeking approval to extend the debt restructuring programme for microfinance companies beyond March 2011. The move was aimed at protecting their profitability without making additional provisions on these loans.
MFIs, including SKS, which mostly lend to poor people in rural areas, have been facing heightened regulatory scrutiny for the past several months, following reports these companies charge borrowers a high rate of interest.
The Andhra Pradesh government recently passed a legislation curbing unethical loan recovery practices of MFIs. The state accounts for nearly one-third of the sector’s business. Banks were also reluctant to offer fresh loans to them.
These factors raised fears about microfinance companies’ ability to repay debt. SKS, however, clarified it had sufficient funds to pay-off its loans, estimated to be around Rs 2,700 crore.
“We don’t want to be a part of the CDR programme. We have enough cash to repay debts,” a company official told Business Standard.
SKS, which counts Infosys’ co-founder NR Narayana Murthy and billionaire George Soros among its investors, raised Rs 1,654 crore through its maiden share sale in July 2010. It is the first and only microfinance institution in India to be listed on local stock exchanges.
Source: Business Standard
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