Punjab National Bank to issue 1.51 million shares to govt

Punjab National Bank would issue 1.51 million shares to the government on a preferential basis, at Rs 1,218.8 apiece, the bank said in a notice to the stock exchanges on Thursday. The government will infuse Rs 184 crore into the bank through this allotment. Following this, the government’s stake in the bank will increase to a little over 58 per cent, as against the 57.8 per cent now. PNB would seek shareholder approval for the allotment at an extraordinary general meeting on Monday.

Source: Business Standard

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High NPAs remain deterrent for bank lending in NE: RBI

The Reserve Bank of India (RBI) has said a high level of non-performing assets (NPAs) has been a stumbling block for banks extending loans in the North Eastern states of the country. The central bank said there was a need to improve credit culture and asked banks to increase staff strength.

“A deterrent for bank lending is the high level of non-performing assets (NPAs) in the region (North-East). This has been, in part, due to the unaviability of some of the activities financed by banks and a lack of adequate engagement with the borrowers,” Deepak Mohanty, executive director of RBI, said in a speech at the Gauhati University.

“There is, therefore, a need to improve credit culture in which financial education could play a vital role. In addition, banks will have to augment the staff strength in their branches with an emphasis on staff with knowledge of local customs and practices,” he said.

Mohanty said the group lending model could be successful for credit delivery in the region and for that bank linkages with self-help groups (SHGs) should be promoted. The central bank said the National Bank for Agriculture and Rural Development (Nabard) had an important role to play, not only in the promotion of SHGs, but also in capacity building, along with SIDBI and the state government agencies concerned.

Mohanty also said banks could explore innovative structures for housing loans with a greater emphasis on group lending because expansion of housing loans remained poor as mortgages could not be created in many parts of the North Eastern States (NES).

In order to speed up the financial inclusion processes in NES, RBI had relaxed the branch authorisation policy and permitted domestic scheduled commercial banks (other than Regional Rural banks) to open branches in rural, semi-urban and urban centres in NES and Sikkim without prior permission from the RBI. “However, the progress towards opening branches has been slow because of a lack of proper infrastructure in the identified centres,” said Mohanty. He said 55 per cent of the finance in the region was availed from the non-formal sector, which was significantly higher than the all-India level, with the share of the informal sector at 42 per cent.

In terms of the region’s fiscal state, he said it was important for NES to improve the quality of their expenditure with greater emphasis on capital expenditure for sustaining the fiscal consolidation process. “There is also a need for NES to improve their own tax revenue,” he said. RBI said the North-Eastern Region had immense potential and the need was to identify the opportunities and recognise the challenges to work towards sustainable and inclusive growth of the region, with greater penetration of the formal financial sector.

Source: Business Standard

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Axis Bank undershoots farm lending, to refocus

India’s third largest private lender, Axis Bank, aims to lend more to farmers in 2011-12, to improve its share of agriculture loans in net advances. The move will help the bank meet its priority sector commitments in farm credit, where it has fallen short of the target till now.

The share of farm loans is currently 15 per cent of Axis’ net advances, below the Reserve Bank of India (RBI) mandate of 18 per cent.

“On an overall basis, we have met our priority sector targets. In agriculture, it is slightly below the target. We have revamped our agriculture business. We expect to catch up with the benchmark 18 per cent,” S K Mitra, president, agri and rural banking for Axis, told Business Standard.

The bank plans to hire more staff in its agriculture business unit and add branches in rural and semi-urban centres. “We currently have around 12 agri business centres. We plan to add a few more this year, beside opening new branches in tier III, IV and V towns,” Mitra said. “We are also looking to increase our headcount significantly and looking to hire graduates from agriculture universities, rural management institutes and even top business schools like the Indian Institutes of Management.”

The RBI report on ‘Trend and Progress of Banking in India for 2009-10 (April-March)’ showed a host of private and government banks had failed to lend 18 per cent of their net credit to the agriculture sector. While private lenders found it difficult to meet the priority sector targets because of relatively less number of branches in rural regions, even some public sector banks with more rural branches also failed on these commitments.

Mitra said besides offering loans to farmers directly, Axis is also exploring opportunities in contract farming, which includes agriculture lending through tri-partite agreements between banks, farmer and companies. “In contract farming, the loan recoveries are better. So, it helps in maintaining the asset quality. We looking to lend more through contract farming,” he said.


Source: Business Standard

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Kotak Mahindra Bank launches interbank mobile payment service

MUMBAI: Kotak Mahindra Bank today launched Interbank Mobile Payment Service (IMPS) for its customers.

With this facility, customers will enjoy 24x7 instant funds transfer, thereby enabling the beneficiary to avail of the credit immediately, the lender said in a statement.

Kotak Mahindra Bank is among leading Indian banks that offer this service, which is powered by National Payment Corporation of India (NPCI), Mumbai. NPCI is the umbrella organisation for all retail payment systems in India and governs the modalities of the IMPS payments.

"IMPS is India's first instant, real-time, 24x7 funds transfer facility in the retail payment sector. With the explosion of mobile penetration in the country, this service is set to benefit all banking customers at large. The service is very easy to use, comes without any charges, and is yet another endeavour to provide simple and easy financial solutions to our customers," Kotak Mahindra Bank Executive Vice President Shalini Mehta said.

Source: EconomicTimes

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SBI bonds listing: Dalal Street debut yields 3% returns

AHMEDABAD | MUMBAI: SBI's retail bonds traded the highest ever for a fixed income security on debut on bourses, yielding 3% returns for investors, but it may not yet be the beginning of evolution of a vibrant bond market which regulators and the government are hoping for.

The nation's largest bank's bond sale may be a one-off event as hardly any issuer could match SBI's clout both in network, marketing costs and branding.

The debut trading price was lower than investors expected as many retail traders sold off their bonds ahead of the fiscal year ending March 31 and the possibility of further rate increases that could lower bond prices.

The bonds worth Rs 8,500 crore traded for Rs 2,900 crore, or Rs 28.28-lakh bonds, after starting to trade at 10,200 a bond. Its intra-day high was Rs 10,373 and the low was Rs 10,170, before ending at Rs 10,267.42. "The marketing cost of issuance is high almost about 2-2.4%, if the issuer is to reach out to the masses," says JP Morgan MF chief investment officer Nandkumar Surty.

RBI and the government have been talking for more than a decade to make the bond market vibrant, but it hardly happened due to various regulatory and tax issues. Response to bond floats from infrastructure lenders this year reflects the poor appetite for them since they are not attractive and have poor liquidity.

SBI chairman Om Prakash Bhatt created a flutter when he offered the highest coupon on bonds, surprising and drawing criticism from some. But the rest of the market is now following as they scramble for funds in a rising interest rate regime.

SBI's Rs 2,000-crore public sale of 10-year bonds at 9.75% and 15-year ones at 9.95% with call options last month received bids for at least Rs 8,500 crore. While more than two lakh retail investors got full allotment, funds and wealthy individuals who bid for more than 5 lakh were given just a fourth of what was bid for. It was allotted on the first-come-first-serve basis. This was despite SBI restricting its collection centres that drew criticism from investors in smaller towns and cities.

Applications were accepted in just 126 or less than a percentage of its branches. The sale was supposed to take the bond culture to retail investors. However, there was just one collection centre in Guwahati for eight northeastern states. Bihar and J&K had one each, Gujarat at least 15 while Mumbai alone had seven centres.

"I think this was like a promotional offer for retailers. We have also observed retail participation in the bond market for the first time. Many buyers, in fact, do not know much about the bond market," said Meghal Shah, an Ahmedabad-based stock broker.

But the trading interest may wane in the next few days as those traders who had profits have locked it up. "Yields are likely to see some correction, as the selling pressure eases and they may see some alignment around yields seen in the bonds dealt in the whole sale debt market (around 9.15-25%)," said Edelwiess Capital senior vice-president Ajay Manglunia.

Source: EconomicTimes

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State Bank of Indore merger with SBI in public interest: govt

The government today said the merger of State Bank of Indore with the State Bank of India (SBI) is in public interest.

The merger is in "overall public interest," Minister of State for Finance Namo Narain Meena said replying to the debate on the State Bank of India (Subsidiary Banks) Amendment Bill, 2010 in Rajya Sabha.

"Now, they (State Bank of Indore customers) can deposit and withdraw money from all the branches of State Bank of India," he said.

The Upper House later passed the bill seeking to omit all references to the State Bank of Indore, which has been acquired by the SBI in July last year.

The Minister said the merger would provide State Bank of Indore customers, mainly in Madhya Pradesh and Chattisgarh, access to entire 14,000 SBI branches across the country and abroad.

"Now, they can deposit and withdraw money from all the branches of State Bank of India," he said and added that the acquisition is in "overall public interest."

He assured the members that interest of the employees and retired employees would be protected.

To queries, Meena said there were 86,000 branches of banks in the country out of which 32,000 were in rural areas.

"In recent times, the number of bank branches opened every year is around four to five thousand," he said.

Meena said Indian banks were doing a "commendable job" and registering profits and performed similarly during the global recession period also.

"The credit for this goes to the regulator Reserve Bank of India (RBI) and the banks," he added.

Source: Business Standard

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HDFC named best retail bank in India

Mumbai: Country's second largest private lender HDFC bank has won the Asian Banker's 'Best Retail Bank in India' award this year.

Beating a host of other competitors in Asia Pacific, Middle-East, Central Asia and Africa on a range of parameters, the bank has won the 'Best Retail Bank in India' award for the fifth year in a row, a release issued here said.

More than 150 retail financial institutions from 29 countries across the Asia Pacific, Middle East, Central Asia and African regions participated in the competition.

Source: Financial Express

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Banks to have extended working hours on March 30, 31: RBI

The Reserve Bank of India (RBI) asked banks to have extended working hours on March 30 and 31, 2011, to facilitate receipt of government revenue from members of public even at late hours.

It has been decided in consultation with the Controller General of Accounts that all regional offices of RBI and branches of agency banks conducting government business will suitably extend the banking hours to conduct government business by keeping their counters open for the purpose on March 30 and 31, 2011, the central bank said in a statement.

This will facilitate receipt of revenue from members of public even at late hours, it said.

It will help in accounting of all the government transactions of the current financial year (2010-11) by March 31, 2011, it added.

Source: Business Standard

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Five-year-old Indian becomes millionaire

DUBAI: A five-year-old Indian boy has become a millionaire overnight after winning a lottery at a national bond draw here.

Ebrahim Fahimuddin Shaikh became the second millionaire in the year when the February draw of National Bonds Corporation picked his name.

Ebrahim's father received the life changing call on Saturday.

"At first, I thought it was a prank call so I carried along with the call, shortly after it struck me, I am truly really speaking to National Bonds CEO in person," he said.

"I was overwhelmed with joy and happiness for my son! I realised I have just become the father of a millionaire and that my continued dedication to teaching Ebrahim the importance of savings has just been rewarded," Sheikh said.

Sheikh said he opted to save for his child's future at a young age with National Bonds saving scheme.

"Thank You National Bonds. I want to buy candy and sweets with it, save like my dad and get toys and gifts for my family," said the young winner.

Ebrahim's family represents the rapidly growing segment of expats in the UAE who are realising the importance of committing to a financially-safe lifestyle and a brighter tomorrow, by taking control of their finances through responsible spending and regular saving with a trustworthy highly rewarding scheme.

Till date, 63 per cent of National Bonds' millionaires have been expatriates, and more than 166 million Dirhams worth of prizes have been distributed to expat bondholders. With over 610,000 customers for the National Bonds, the number of expatriate bondholders increased by 8 percent between 2009 and 2010.

Mohammed Qasim Al Ali, CEO of National Bonds Corporation said that the scheme continues to exceed customers' expectations by offering innovative initiatives to make saving a rewarding and enriching experience.

"Most of our customers have turned to more frequent savers since they joined the programme, giving them financial security and peace-of-mind. I am proud to see more and more customers and their families committing to savings and looking ahead for a better financial future."

He said that minors such as Ebrahim form 13 per cent of the overall number of bondholders and this number has increased year on year.

"This means that we are encouraging positive savings values from a younger age and this enhanced financial responsibility will lead to a stable economy in the future," he said.

Source: EconomicTimes

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BoB CMD says no need to increase interest rates

LUCKNOW: The Chairman and Managing Director, Bank of Baroda , MD Mallya said that he did not forsee any need for the bank to increase its interest rates in the backdrop of RBI hiking key policy rates last week.

He said that most banks had already factored in the possibility of key interest rates being hiked by the central bank and had accordingly adjusted their rates at which they lend and take deposit from customers.

Mr Mallya who was in Lucknow on Tuesday said that credit demand peaks before March and then sees a dip from April onwards. The demand for credit would therefore remain subdued during the first few months of the next fiscal and as such increasing interest rates by banks may not be prudent.

Mr Mallya said that the BoB would be adding 500 more branches in the next fiscal year and expects to close 2011-12 with 4,000 branches across the country. They would also bee adding 16 international branches or offices taking BoBs presence abroad to 100 locations.

He said that BoB has seen an avergae credit growth of about 25-30 per cent over the last few years and in UP 33 per cent of the total lending is directly to the agriculture sector.

Mr Mallya also participated in the State Level Bankers Committee meeting of which BoB is the convener.

He said that UPs Credit Deposit ratio which stood at around 43 per cent till a few years back has now improved to 60 per cent. At the SLBC it was discussed that in districts where the CD ratio is below 40 per cent, the lead banker of the district should take steps to improve the availability of credit locally.

He said that BoB has business worth Rs 40,000 crore from UP alone and they are giving equal thrust towards penetrating the rural and semi urban centres.

Source: EconomicTimes

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RBI sets holding company rider for bank licence

NEW DELHI: The Reserve Bank of India will allow a promoter or a promoter group to establish new banks if they set up a holding company, which will own the bank and all other financial services companies regulated by the central bank or other financial sector regulators.

The holding company structure is described in the draft guidelines that the central bank has sent to the finance ministry last week. The guidelines are not final but provide a clue to its thinking. The norms governing new banks will be made public once the finance ministry responds.

Such a structure is aimed to ring fence the regulated financial services activities of an industrial house, including the new bank, from other activities such as manufacturing and trading that are not regulated by financial sector regulators.

In his Budget speech, the finance minister had said the Reserve Bank of India would release a set of rules governing new banks before March 31. The rules will come into force only after a public discussion.

A number of conglomerates such as the Tatas, the Aditya Birla Group and Mahindra and Mahindra are keenly awaiting final guidelines, which are likely to be released by the end of this month, as many have shown interest in starting a bank in India. The draft guidelines refer to conglomerates as promoter groups.

The draft guidelines sent to the finance ministry stipulate that companies and promoters considered eligible for banking licence by RBI would have to set a wholly-owned non-operative holding company (NOHC), which needs to be registered as a finance company with RBI, and will be governed by a separate set of prudential guidelines.

But the draft rules say groups that derive 10% of their 'income' from broking or real estate shall not be eligible. This may hit the plans of financial services companies with big brokerage units seeking to enter banking.

NOHC will not be permitted to borrow funds for investing in group companies or "undertake activities which banks are permitted to undertake departmentally". Simply put, it will just be a vehicle to hold investments in all regulated financial sector entities on behalf of the promoter/promoter group for regulatory and prudential comfort.

The central bank has also suggested that the proposed banks will have to maintain arm's length relationship with promoter group entities, their business associates and their suppliers and customers.

"The whole concept behind these draft guidelines is to ensure that systematically important financial institutions, which are granted banking licences, do not endanger the banking institution in the country," said a senior official involved in framing the guidelines.

To ensure this, it has suggested that the exposure of the bank to any entity in the promoter group shall not exceed 10% and the aggregate exposure to all the entities in the group shall not exceed 20% of the paid-up capital and reserves of the bank. All exposures to promoter group entities will have to be approved by the board.

Source: EconomicTimes

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Bonds out, IDFC to raise Rs 250-cr long-term capital

KOLKATA: Infrastructure Development Finance Company (IDFC) plans to raise 250-crore long-term capital as it has no time left for mobilising more funds through tax-saving retail bonds.

The infrastructure financing company has mobilised around 1,500 crore by selling bonds to tax payers in three tranches, 56% less than what it had targeted to raise via retail bonds. Market sources said this has perhaps prompted IDFC to enter the private placement subordinated debt market before the end of the current fiscal.

A top IDFC official confirmed the development, but said: "We are not desperate for funds." He, however, said as 2010-11 draws to a close, the company did not have enough time to come out with the fourth tranche of infrastructure bonds.

A lead arranger to the 15-year bond issue said IDFC fixed the coupon at 9.33% a year. The bonds will carry a call option at the end of 10 years.

ICICI Bank and Trust Capital are the lead arrangers to the issue.

At the beginning of the year, it had the approval to raise 3,400 crore through tax-savings infrastructure bonds, which is equivalent to 25% of its total exposure to infrastructure lending.

From the first two tranches, IDFC mobilised 1,300 crore from some 6.6-lakh investors. According to primary estimates done by the company, it raised another 200 crore in the third time for which the deadline was extended to March 21 from March 16 earlier. The details of the third issue will be finalised in a couple of days.

"This is almost a test product for the first year," an IDFC official said. His views were corroborated by almost everybody in the infrastructure bond space.

The finance minister has allowed these companies to raise funds through retail bonds in the fiscal year 2011-12 as well.

Source: EconomicTimes

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Message 'Unhappy' to complain to SBI

Mumbai: Not satisfied with the services you get from the nation's largest lender State Bank and want to get back to the bank on the same? Forget the pen and paper to write it down or even email the same but just message "Unhappy", and your issue will be resolved within 48 hrs.

After being on pilot test since last October at select centres and seeing the huge response, bank chairman Om Prakash Bhatt today launched the initiative in Bhopal.

With this nationwide customer service initiative called 'SMS Unhappy' to serve its 130-million strong customers, does away with the previous mode of registering their complaints in writing.

Prior to this, for an SBI customer who has a complaint had to do so in writing with his branch, or send an email to the bank, detailing his problem.

With this initiative, anyone can lodge it by sending an SMS with "Unhappy", to 8008202020, which would reach the bank's "Happy Room" at the circle headquarters, from where a bank executive would call the customer back on his mobile phone, understand the nature of the problem and then take up with his the branch, Bhatt said. And then the issue has been resolved, the customer will be contacted by his branch.

Under the scheme, he said, most of the complaints will be closed within 48 hrs. "Feedback received from the pilot run has been very encouraging and already complaints are on a decreasing trend," Bhatt added.

Source: Financial Express

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IndusInd to buy Deutsche Bank's India credit card biz

Mumbai: IndusInd Bank is poised to acquire Deutsche Bank India’s credit card business. The bank has narrowed in on Axis Bank and IndusInd Bank from the initial 11 bidders. Deutsche Bank has 1.5 lakh active cards and outstandings of R200-250 crore.

“IndusInd is close to striking the deal with Deutsche Bank and could offer a small premium to the amount outstanding on the current credit card base which is in the range of R225-250 crore,’’ said a source in the know of the development. A few banks, including Dhanlaxmi Bank, Karnataka Bank, Standard Chartered Bank who had evinced interest initially, opted out of the buyout citing high valuation for a small portfolio.

“The deal is in its last leg and IndusInd seems to have an edge over Axis Bank as it would be able to absorb the 217 people employed in the credit card division of Deutsche Bank. It would be a lift and drop deal with IndusInd as it is in the process of launching its credit card business,” said another banker in the know of the development, adding that the deal is expected to conclude over the next quarter.

IndusInd Bank in November 2010 had appointed Anil Ramachandran to head its credit card operations. Ramachandran was earlier with Deutsche Bank as head credit cards business for India. He has also worked with Citibank where he was associated with the credit card function in various senior positions.

“Unless you have scale it is difficult to run a profitable credit card business. We would continue to focus on mobilising retail deposits and grow the mortgage business,” said a senior official from Deutsche Bank on the condition of anonymity.

Credit card portfolios of most commercial banks were hit by the slowdown in September 2008. Non-performing loans rose to around 20% in 2009-10. Banks were compelled to scale back business, reintroduce fees and focus on top-end customers. “The quality of the portfolio has thrown up no surprises as all credit card players did go through a rough patch in 2009-10,” a source, involved in the deal, said.

Source: Financial Express

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Plans on to list 10 CPSUs in FY12 to raise Rs 40,000 cr

NEW DELHI: The department of disinvestment plans to list as many as 10 central public sector units that have turned profitable to raise the budgeted 40,000 crore from disinvestment in the next fiscal.

"We are looking at around 10 companies," a senior finance ministry official said. "A final decision will be taken after reviewing their overall performance and future prospects."

The department would rather list these firms as follow-on offers of already listed companies are not expected to receive a warm welcome from investors when the markets are choppy.

There are 158 profitable state-run companies, of which only 47 are listed. Among the turnaround companies that can be listed are Bharat Pumps & Compressors Limited , Cement Corporation of India , Heavy Engineering Corporation and MECON Limited .

In an interview with ET earlier this month, disinvestment secretary Sumit Bose had said that the government would also look at smaller issues to unlock the value in these companies and broadbase their ownership.

"We do have some big issues (lined up); but there will be small issues, too, otherwise they will never get listed," he had said.

The government will now prepare a road map for listing these companies in consultation with the department of public enterprises, the nodal agency for all state-run units.

The department will provide a detailed list of these companies and their long-term operational and financial viability.

"It needs to be looked into whether this turnaround is only because of government support or if the company has a plan," the finance ministry official said.

The net profit of all the 217 central public sector units rose by 11% to 92,593 crore in 2009-10, according to data released by the department of public enterprises. These firms had made a net profit of 83,867 crore in the previous year.

"We can look at 5-10% stake sale in these companies, however, much will depend upon the company's financial and the response from investment bankers," the official said.

Investment bankers are of the view that issues of smaller state-run companies will get a decent response even in tough market conditions. "A lot, however, will depend on the pricing of the issue," said Jagannadham Thunuguntla, strategist & head of research at SMC Global Securities.

Source: EconomicTimes

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Traditional life insurance or ULIPs?

What are traditional life insurance plans? Why should I buy a traditional plan? How will I benefit from it? And how is it relevant in today’s environment? How are these different from the more popular ULIPs?

These are some of the questions you would generally ask before making a purchase decision.

Traditional insurance plans, which include term, endowment and whole life policies, offer multiple benefits in terms of risk cover, return, safety and tax benefit. Traditional policies are considered risk-free, as they provide fixed income returns in case of death or maturity of the policy. Investment guidelines also ensure safety of funds with a cap on equity investment.

Here are some of the reasons why traditional life insurance plans are the answer to the apprehensions and challenges faced by consumers and the Life Insurance industry.

1.The interest of the company and the customer are aligned: In participating products the life insurance company can make margins only when the customer makes margins and to that extent the interest of the company and the customer are aligned. As per the insurance law, the company can retain only 1/10th of the profits with 9/10th of the profits shared with the customers. This is colloquially known as the “90/10” rule in the industry. Put simply if the company makes Rs 100 as profits, Rs 90 ( approximately) has to be given to the customer first.

2. Investment risk is managed better in Traditional products: In Unit Linked products the investment risk lies with the customer. But most customers do not fully appreciate the risks involved in such products. In traditional participating products the investments are managed by the company in a prudent manner. This works out to the advantage of a passive investor as there are investment guarantees built into the product design. Not only are investments done in a more conservative manner, the dividends are also 'smoothed' and declared in a steady fashion.

3. Traditional Insurance is closer to Protection: Right from the sale when the premium is a function of the sum assured to the bonus declaration which also adds to increased growth of protection component within the policy, traditional insurance is closer to protection than ULIPs wherein protection element of the policy, in most cases is more or less constant or subject to vagaries of the market and fund value.

4. The chances of mis-selling are much lower: Traditional participating plans offer in-built guaranteed benefits hence the 'give and get' equation is fairly simple to comprehend which significantly reduces the risk of mis-selling. Unlike ULIPs these products are sum assured based and not market linked products leaving much less scope for speculative selling and buying behaviour.

In a nut shell

World over Traditional Par Insurance is much more popular than ULIPs and its variants. Customers in western markets who have seen market swings empty out retirement funds have come to appreciate the 'risk-return spectrum' of insurance plans as well as the difference between investment and savings.

Traditional plans provide the dual advantage of guaranteed returns and protection for long term savings to consumers. This is why traditional participating products are recognised as ideal vehicles for long term savings and protection, even in the Indian context.

— Author is, Director & Head - Products and Persistency Management, Max New York Life Insurance

Source: Financial Express

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India Inc profit margins eroding: RBI

Mumbai: Increasing raw material cost and rising salary bill eroded the profitability of India Inc during April-September period of the current financial year, says an RBI analysis.

According to a Reserve Bank of India (RBI) study which analyses the performance of the Indian private corporate sector during the first half of the current fiscal, sales growth was robust on the back of pick up in demand.

"However, despite robust revenue growth, companies in aggregate could not generate higher profit margin primarily on account of higher input prices and rise in interest outflow," the RBI study said.

It said even as the sales growth in both manufacturing and the services sector was robust during the period under review, profit growth in both the sectors was comparatively lower during the period.

During the first half of the current fiscal, India Inc's staff cost rose by 17 per cent to Rs 71,133 crore, the RBI study said. The staff cost grew by 7 per cent in the same period of previous fiscal.

"Generally it is observed that staff costs is higher for IT companies compared to manufacturing and services sector companies," it said.

In the April-September period, the expenditure on consumption of raw materials shot up by 27.7 per cent YoY to Rs 4.36 lakh crore.

"Higher input cost, that led to noticeable rise in total expenditure, vis-a-vis relatively lower revenue for companies resulted in a contraction in profit growth at the operating level," the study said.

Source: Financial Express

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India Inc profit margins eroding: RBI

New Delhi: ICICI Bank and Intuit, a global developer of business and personal finance management solutions, launched Money Manager, an online personal finance management solution.

It will help bank customers understand their spending habits and organise their finances by providing them with details of all their ICICI Bank accounts on a single platform, the bank said in a statement.

This web-based solution, available through ICICI Bank's website, delivers the flexibility to focus on specific details such as earnings, savings, spends and loans, it said.

Money Manager makes it easy for customers to quickly and easily categorise their expenses and set and track a realistic budget to achieve their financial goals, it said, adding, it is currently available for all ICICI Bank net banking customers.

It is a subscription-based product with 90-Day free trial, it added.

Source: Financial Express

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Birla Sunlife MF, HDFC MF, Reliance MF and Franklin Templeton offer payouts to retain investors

MUMBAI: Fund houses are attempting to woo flighty investors by offering handsome dividends, with the market trading flat over the past one year. Fund houses such as Birla Sunlife Mutual Fund, HDFC MF , Reliance and Franklin Templeton have announced dividends ranging from 15% to 20%, in an effort to incentivise investors and persuade them to retain money in existing schemes.

Much more than the current market, it is the year-ago (2009-2010 ) market rally that is helping mutual funds to dole out higher dividends to investors. The ' dividend cushion' that funds created in 2009-2010 - when the stock market more than doubled - is helping fund managers pay dividends in 2010-2011, when the benchmark Sensex returned just over 1.4%.

"Even though the market returned over 100% last year, fund houses distributed just about 20-30% as dividends. Fund houses are paying dividends from the gains they made last year," said the head of investment of a bank-promoted fund house. "Fund managers of highdividend paying funds have managed to shelter their 'dividend cushion' (generated from last year's investments) from market volatility," the investment head said.

Apart from 'dividend cushion', several small-sized fund houses have seen their asset bases widening over the past six months, thanks to regular inflows, especially through systematic investment plans. Asset bases of Axis Mutual and Mirae Asset Investment have grown 44% and 34%, respectively, between April and December 2010. Asset under management or the AUM, of JP Morgan Mutual Fund, DSP Blackrock , Franklin Templeton and Fidelity Mutual Fund rose 15 to 26% during this period.

"Smaller fund houses are paying higher dividends than big-sized asset managers. Fund houses, like Taurus and Sahara Mutual , have paid dividends in the range of 20-25 %. By paying out high dividends, these fund houses expect to attract more investors into their schemes," said Rupesh Bhansali, head-mutual fund research, GEPL Capital.

According to Mr Bhansali, if one takes an year-on-year comparison, dividend yields generated by top fund houses have come down significantly this year. If one compares industry numbers, overall dividend yields have fallen from 25-30 % in 2009 to 17-19 % in 2010, he said.

Fund houses announce dividends to keep retail investors in good spirits. A good dividend payout, especially at a time when the market is choppy will prompt them to stay invested in schemes. A huge dividend payout will also help distributors sell the product more efficiently and bring in more money. "Retail investors, especially elderly investors, expect dividend payouts periodically," Birla Sunlife Mutual Fund CEO A. Balasubramanian.

"We could generate distributable profits from investments made in the first half of current year. The market has turned bearish only since September. We were also able to keep our NAV at higher levels, when the market was trending down," Mr Balasubramanian said.

Conventional fund management wisdom makes it imperative for fund managers to declare dividend as it is one of the few ways to take profits off the table. This is more so in the case of an overheated market, where there are not many good investment opportunities.

Source: EconomicTimes

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Car loan rates may rise in April

NEW DELHI: Get ready to pay more for your cars from the next fiscal as lenders are likely to raise rates on auto loans after the latest round of interest rate tightening by the RBI.

Lenders such as HDFC, Kotak Mahindra Prime and ICICI Bank will take a call on hiking the rates next month. "A final decision will be taken from April on-wards as we want to finish our pipeline of our cases for March, before altering future interest charges ," a senior executive of HDFC Bank said.

Private banks charge rates ranging from 10.5-14-5 %. Public sector banks such as SBI , Punjab & Sind Bank, Canara Bank and Bank of Baroda , which offer lower rate of interest on auto loans in the range of 9.25-12 %, will also hike charges from the next fiscal year.

Strong economic growth and positive consumer sentiments had driven demand in the Indian auto market without impacting growth. Domestic sales grew 30% to 22.72 lakh units in the first 11 months of the fiscal and had absorbed the higher interest rate that rose five times in the current fiscal. "The demand for cars could be impacted if this incessant rise in interest rates reaches the psychological rate of 15% in the coming fiscal. Right now, minor hikes will not impact monthly instalments, but in the long term, it will, " a Delhi-based analyst said.

Source: EconomicTimes

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SBI bonds likely to yield 5% returns on Street debut

MUMBAI: Largest lender State Bank of India's (SBI) retail bonds , which were bid over four times the offer and were beyond the reach of millions of investors, may yield a 5% return when it begins trading on Monday. The attractive yields may prompt institutional investors who did not get those bonds in public sale to lap up when they trade, say investment advisors.

The Rs 10,000 face value bonds may be traded in Rs 10,400-10 ,500 range, reflecting the grey market trading value. "I expect these bonds to get listed at minimum Rs 10,400-10 ,500. Because at this level, it will also offer 9.15-9 .30% interest over a 15-year period.

With considerable interest from institutional investors such as retirement funds and not many primary issuances expected, these bonds may see a price of Rs 10,600, resulting in an yield of 9%," says the head of fixed income at a domestic broking firm. The 9.5% SBI 2025 bond is now trading at a yield of around 9.15- 9.18%. SBI's Rs 2,000-crore public sale of 10-year bonds at 9.75% and 15-year ones at 9.95% with call options, last month, received bids for around Rs 8,500 crore.

While more than two lakh retail investors got full allotment, funds and wealthy individuals who bid for more than Rs 5 lakh were given just a fourth of what was bid for. It was allotted on a firstcome-first-serve basis.

The bonds, considered near sovereign, yielding more than a percentage point, will be a draw for insurance companies, pension funds and other long term investors. There are many retail investors, too, who missed the bus since they were accepted in just 126 or less than a percentage of its branches.

Middle class investors in smaller towns and retirees complained that they were being discriminated against which bank chairman OP Bhatt said would be rectified during the next sale. The sale was supposed to take the bond culture to retail investors had just one collection centre in Guwahati for eight North-Eastern states.

Bihar and Jammu & Kashmir had one each and Gujarat, the most prosperous state, at least 15, and Mumbai alone seven. The early gains may not last, given that some investors may flip and that there are prospects of higher rates, given the Reserve Bank of India's continuation of anti-inflationary stance.

"There could be some selling pressure for listing gains by those who had bought the issue to flip. Long-term investors should not sell on listing," says Vishal Dhawan, founder, Plan Ahead Wealth Advisors. The interest received on these bonds will be treated as income from other sources and shall form a part of the total income of the assessee in that financial year in which they are received. There are no tax benefits for investing in these bonds.

Source: EconomicTimes

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How to update your PAN details

The permanent account number (PAN) card, issued by the income tax authorities, is now widely used in financial transactions and is the single most convenient proof for identity. So, it may be useful to keep the PAN card updated to reflect your current details.

The tax information network (TIN), operated by the National Securities Depository Limited (NSDL), provides this service. This facility only allows you to update details such as photograph, address and signature, not the number itself. The PAN change request form is available online.

Online application

The form can be submitted online with details such as name, address and a recent photograph. An acknowledgement form with a 15-digit unique number will be generated.

Dispatch

The acknowledgement, along with supporting documents for any changes sought, should be sent to NSDL, 3rd floor, Sapphire Chambers, near Baner, Pune, 411045.

Mode of payment

You need to pay Rs 94 (Indians) and Rs 744 (NRIs), which can be sent online or by a cheque or DD, payable at Mumbai, along with the documents.

Delivery and tracking

The new PAN card will be delivered by post. The status of the application can be tracked online.

Points to note

Online form: The online form will ask for basic details printed on the PAN card. All the categories requiring a change (differing from the existing PAN card) have to be specifically checked.

Deadline: The documents supporting the online application should reach NSDL within 15 days of the online submission of application.

Others: The same form can be used to cancel a previously issued PAN card or for re-issuance of a lost PAN card.

(Content Courtesy: Centre for Investment Education and Learning, CIEL)

Source: EconomicTimes

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