Saturday, October 15, 2011
7:51 PM Blogger
Mumbai: Nearly a year after it busted an alleged bribes-for-loans scandal involving LIC Housing Finance, some public sector banks and a host of private companies, the CBI has quantified the loans disbursed in the case at Rs 12,000 crore.
The agency has also registered a fresh Preliminary Enquiry (PE) against DB Realty, as it allegedly availed of a loan of Rs 300 crore even though it failed the eligibility norms for corporate loans.
The CBI had last November claimed that it had smashed a massive loan racket and alleged that a Mumbai-based financial services company, Money Matters, was bribing senior officials of PSU banks and financial institutions for large-scale corporate loans.
It had arrested eight people, including the CEO of LIC Housing Finance, and top officials of Money Matters, LIC and the banks, but said quantification of size of the loans could be done only at a later stage in the probe. All the accused have since been released on bail.
The agency had registered five cases in the alleged scam and filed its first chargesheet in February. The rest were filed last week. The chargesheets name LIC Housing Finance CEO Ramchandran Nair, LIC’s Secretary (Investment) Naresh K Chopra, Bank of India General Manager R N Tayal, Punjab National Bank’s Deputy General Manager Venkoba Gujjal, Money Matters CMD Rajesh Sharma, its officials Suresh Gattani and Sanjay Sharma, and Central Bank of India Director (Chartered Accountant) Maninder Singh Johar.
“During our investigation we found DB did not pass even the basic eligibility for such corporate loans, but LIC Housing Finance sanctioned them a loan of about Rs 300 crore,” said a senior CBI officer from the probe team.
The new PE against DB was filed after investigators found a mismatch in the financial data of the company. “Numbers were inflated, forged and original documents too show astronomical figures,” the officer added. The enquiry was handed over to the Bank Security and Fraud (BS &F) cell last month.
LIC Housing Finance CEO Nair, the CBI alleged, played a key role in getting loans sanctioned for DB. “Nair’s assets multiplied in the last four years. He owns property worth nearly Rs 40 crore,” the officer said, adding that a Disproportionate Assets (DA) case has been registered against Nair, Gujjal and Chopra by the CBI’s Anti-Corruption Cell in Mumbai. The Delhi unit of the cell has registered a DA case against Johar.
The chargesheets allege that Nair, in connivance with Money Matters CMD Rajesh Sharma, would get loans sanctioned and earn commissions. While the CBI is still unsure if the 40 beneficiaries who availed loans though Money Matters were aware of its alleged dubious ways, it says DB Realty knew of the scam.
The chargesheets also allege that in 2009-10, similar loans were availed by the Mantri Group, another leading real estate company. According to the CBI, Rajesh Sharma had paid Nair a bribe of Rs 45 lakh to get a Rs 100 crore loan sanctioned for Mantri. In an affidavit filed before the CBI, Mantri denied any involvement in the scam.
The chargesheet also says that of the total commissions earned by Money Matters, 45 per cent came from LIC Housing Finance while the rest was contributed by Punjab National Bank, Bank of India and Central Bank.
Senior lawyer Harihar Bhave, who represents Nair, said he could not comment as he was yet to get the chargesheeet. “We would not know what exactly the chargesheet claims. We have not been able to get a copy of the chargesheet so far,” he said.
COMMENT FROM DB REALTY SPOKESPERSON
DB Realty has provided all documents as requested by the CBI and is cooperating fully. At this stage, we cannot disclose the subject matter or details of what has been shared with the CBI.
DB Realty would like to clarify that there has been no allegation of inflation of net worth, forgery of documents or the company not meeting the qualification parameters for the loan availed. DB Realty would also like to state here that of the Rs 188 crore availed from LIC, currently, only an amount of Rs 27 crore is outstanding. Again, a reflection on the low debt ratio of the company. All documents relating to the net worth of DB Realty and its group/associate companies are in the public domain viz. the DRHP and the Annual Reports and the same can be verified independently.
Also, we would like to clarify that there is no chargesheet filed against DB Realty or any of its officials in the LIC Housing matter.
As a reputed publication, DB Realty requests you not to publish factually incorrect and unverified information. Such false allegations only point to mala fide intentions aimed at hurting the image of the company. In such a situation, we will be left with no option but to take legal recourse against the publication.
Source: Financial Express
7:48 PM Blogger
NEW DELHI: State-owned IDBI Bank on Saturday said it plans to open about 250 branches across the country and a branch in Singapore over the next year.
"We will be opening 200-250 branches across various states in next 12 months," IDBI Bank Chairman and Managing Director R M Malla told PTI.
Besides, the bank is also looking at ramping up its international presence, he said.
The bank submitted applications to the Monetary Authority of Singapore for setting up an Offshore Banking Unit there and to the China Banking Regulatory Commission for setting up a representative office at Shanghai, he said.
IDBI Bank hopes to get licence from the Singaporean authorities within the next few months, Malla said on the sidelines of a seminar organised by IMI here.
Currently, the bank has one overseas office. It operates from Dubai (UAE). Domestically, the branch network of the Mumbai-based stood at 930 branches as of September.
The bank opened 107 branches in 2010-11, including specialised corporate branches, taking the total to 815 as on March 31, in addition to an overseas branch at DIFC, Dubai.
Of the domestic branch network, 238 are located in metropolitan centres, 307 in urban centres, 184 in semi-urban centres and 86 in rural centres.
In order to ensure improved operating domain, branches at a few locations were relocated and renovated to provide fresh look and feel, similar to other branches of the bank, he said.
The bank constantly endeavours to expand its branch network to execute its strategy of building sufficiently larger customer base, improved customer service and improved CASA contribution, he said.
9:03 AM Blogger
The Insurance Regulatory and Development Authority (Irda) wants all pension products to do exactly what they are expected to do — provide pension to policyholders.
Speaking to Business Standard, Irda chairman J Hari Narayan explained, “There are many traditional pension plans where annuity may or may not be available. This defeats the entire purpose of a pension plan. We want to make annuity compulsory for all traditional pension products because it is the basic premise of the product.”
If the annuity is not mandated, the policyholder is given a lumpsum at the end of the policy tenure. It works like a retirement fund, where the accumulation happens but the policyholder is not bound to buy an annuity from it. And this, according to Hari Narayan, should not happen.
In a circular issued to insurance companies last week, Irda has clarified that the guideline for pension products will include “all individual and group unit-linked pension products, all individual and group non-unit-linked pension products and all individual and group variable insurance pension products.” This implies that the pension draft guidelines introduced in August would be applicable to traditional plans as well.”
“The inclusion of traditional plans clears the confusion surrounding the draft guidelines as some insurers were under the assumption that they were only applicable to unit-linked pension plans,” said a life insurance company official. The Irda chief also wants more life insurers to provide annuity plans, because at present, apart from the state-owned Life Insurance Corporation of India (LIC), hardly any companies sell annuity products in India.
“There are many players active in the accumulation phase of a pension plan, but after that a policyholder has to shift to LIC. Around 90-95 per cent of the annuity business is concentrated with LIC, making it very risky for the company,” said Hari Narayan, adding that the risk concentration needs to be divided because there would be an increased demand for annuity plans once the New Pension Scheme increases its penetration.
However, in the recent circular, the insurance regulator has softened its stand on the amount that needs to be annuitised at the time of vesting or maturity of the policy. “Also, at the date of vesting or at the date of surrender, the policy holder shall be given an option to commute a percentage of the entire amount under the policy, in accordance with the extant rules of income tax,” Irda said.
“Currently according to the income tax law, commutation up to 33 per cent of the maturity amount is non-taxable, above that it is taxable. So, this has been done keeping in mind the Direct Taxes Code, which is expected to be in force from the next financial year. This move will also give flexibility to both insurers are policyholders,” said K Sahay, MD & CEO of Star Union Dai-ichi Life. Similarly, insurers will have to provide assured benefits not only when the policy matures, but also in case of the death of the policyholder or on the event of surrending the policy. The benefits applicable should be declared when a policy is purchased.
Insurers launched many traditional pension products after the minimum returns on them were made compulsory.
Many of the traditional pension plans launched in this period sold in the absence of any choice. Insurers did not launch new unit-linked plans after the older ones were withdrawn, as giving a guarantee on minimum return was not a viable option according to them.
Source: Business Standard
8:59 AM Blogger
KOLKATA: The Securities & Exchange Board of India (Sebi) is in talks with the finance ministry to tighten rules relating to issuance of Global Depository Receipts as the regulator has found that several local companies are skirting guidelines to raise funds overseas.
According to Sebi Chairman UK Sinha, some firms are misusing the facility to raise funds through issuance of equity overseas in the form of Global Depository Receipts (GDRs) which have underlying shares of Indian companies. Over the past six months, a surveillance system put in place by Sebi to monitor GDR transactions has thrown up evidence that some issuers are attempting to bypass the rules, he said.
What is worrying policymakers is that the liberal norms for raising foreign funds through GDRs are now being misused by a set of companies whose track record and pedigree are viewed as dubious by bankers. The government first allowed companies to list abroad by issuing GDRs and American Depository Receipts (ADRs) in 1993. The first set of issuers included India's blue chip companies led by Reliance Industries and a few Tata Group companies.
Compared to the rules on raising foreign debt, the norms on GDRs were far more liberal with restrictions limited to investment in real estate and the stock market. Sinha told the media on Friday that in a few cases of violation of GDR rules, the funds raised were not repatriated or brought back to the country. "There are also instances where companies have raised GDRs 12-13 times the paid-up equity," he said, while warning violators of stringent action.
The policymakers' decision to revise the rules comes in the wake of regulatory action in September. Last month, Sebi banned seven companies, including Asahi Infrastructure, IKF Technologies, Avon Corp, K Sera Sera and Cals Refineries, from issuing any shares or altering their capital structure in any manner till further notice for alleged manipulation of GDR norms. EThad reported in December 2010 several instances of companies skirting rules on GDRs, with little known firms also securing approvals to raise funds overseas. Sinha said Sebi had also made disclosures by foreign portfolio investors more stringent.
"From October 31, FIIs will file elaborate disclosures which would include the source and name of end beneficiaries. It is operational from end of second quarter (September 30), so the disclosures will start coming from October-end," he said. The Sebi chief said there have been instances of misconduct in the market in the past few months, which have been dealt with strongly.
"There is a provision for client code modifications. During a transaction, there could be a mistake but we found that transactions involving client code modification is close to .`56,000 crore few months ago which we felt cannot be just an error. We came down heavily on that. It is now only .`120 crore. But still I am not satisfied," he said.
Friday, October 14, 2011
11:05 PM Blogger
New Delhi: Users of online payments gateway PayPal in the country can now receive up to USD 3,000 per export-related transaction in their accounts, with the RBI raising this limit from USD 500 per transaction earlier.
The increase in the limit is with immediate effect, but merchants using Paypal accounts to receive funds would need to add their PAN (Permanent Account Number) and bank account details to comply with the RBI guidelines, PayPal said today.
The step will help the Indian SMEs and consumers who use Paypal to receive their payments. In addition, the move will support PayPal and the budding India business of its parent company eBay, an online marketplace.
"This is a huge step forward for PayPal and for Indian SMEs, who can grow their export business through e-commerce by tapping our 100 million active users in 190 markets across the globe, right from the US to the UK to Australia," PayPal India Country Manager Mayur Patel said in a statement.
"We are thrilled about the increase in transaction limit and would like to thank the RBI for understanding and being supportive of the needs of SMEs who wish to expand their business through cross-border trade," Patel added.
eBay, which claims to have an online community of 2.5 million in India, has about 12,800 registered merchants in the country, who consider selling through eBay either their primary or secondary source of income.
The Indian merchandise popular among foreign buyers includes precious stones and diamonds, jewellery, leather goods, handcrafts, furniture and ethnic wear.
eBay India Director - Category Management Kashyap Vadapalli said: "This is exciting news especially for eBay India merchants and Indian entrepreneurs who want to grow their business through retail exports and sell to millions of eBay's customers globally."
"Today's news can help these SME's sell higher valued hand-made jewelry, leather products, ethnic Indian clothing and even motor vehicle parts of up to USD 3,000 per transaction to buyers across the globe," he added.
Source: Financial Express
8:47 AM Blogger
India Post's plan to set up automated teller machines (ATMs) in its post offices may fail to impress the banking regulator.
India Post is in talks with the Reserve Bank of India (RBI) to set up ATMs. However, since according to norms, only banks are allowed to set up ATMs, the central bank is not in favour of allowing India Post to set up ATMs. According to sources in the banking industry, if India Post set up ATMs, they should fall under the RBI's purview for regulation purposes.
India Post has proposed to set up a subsidiary, Post Bank of India, for providing banking facilities. It has also identified nearly 1,000 post offices, out of its 1.5 lakh post offices, where the ATMs would be initially set up.
The sources said though RBI is uncomfortable with the idea of India Post setting up ATMs, it is yet to formally communicate its apprehensions to the department of post.
To increase efficiency and profitability, the department of post had planned to introduce banking solutions and set up ATMs and debit cards for its customers. It also plans to introduce core banking solution by 2012, and has initiated the process of modernising information technology (IT) during the current financial year. The cost of the IT modernisation project is estimated at around Rs 2,000 crore, which includes an integrated, modular software solution, covering postal operations, banking and insurance services.
The department of post also has plans to tie up with banks to help its customers use their India Post debit cards at ATM machines. It has also submitted a plan to the finance ministry for approval. The department aims to offer banking services through India Post in unbanked rural areas that lack formal financing facilities.
India Post already offers financial services, including post office savings schemes, postal life insurance, pension payments and money transfer services.
Source: Business Standard
8:45 AM Blogger
NEW DELHI: The International Monetary Fund has endorsed the current monetary tightening in India ahead of the policy review by the Reserve Bank of India on October 25, providing a counter to the rising chorus of demand for a pause in interest rate hikes.
In countries such as China, India and Korea where inflation remains above target, and inflation expectations have continued to rise, the current pace of monetary tightening remains appropriate, the IMF said in its Regional Economic Outlook for Asia Pacific released on Thursday.
The RBI has raised rates 12 times over the last eighteen months by a total of 350 basis points to tame the rapid rise in inflation. Headline inflation for August was 9.8% while latest numbers show food inflation at 9.3% for the week ended October 1.
The IMF notes that core inflation has increased in Hong Kong, India, Indonesia, Korea, Malaysia, and Thailand, because of the second-round effects of previous commodity price rises have resulted in generalized inflationary pressures.
The multilateral lender has pared Asia's growth forecast by half a percentage point to 6.25% in 2011 from April 2011 forecast, blaming it on the deteriorating exports outlook in advanced economies because of the eurozone debt crisis and a slowdown in the United States. It has suggested that Asia has not "decoupled" from advanced economies and therefore needs to focus more on domestic growth.
The impact will be less for domestic demand-led economies such as India, the fund notes.
It has upheld its September growth forecast of 7.8% for 2011 and 7.5% in 2012 for India, but warned that corporate funding in India could be hit if the European crisis worsens.
"In India, where corporate funding relies increasingly on external commercial borrowing and equity finance, a severe fall in investment would severely curtail growth," the report said.
"The panic sell-offs across Asian financial markets and safe-haven flows into Japan that occurred when European troubles intensified in August September 2011 demonstrate that there is 'no place to hide' when advanced markets come under pressure," the IMF said. It has also pointed out that in many economies including India the fiscal deficits in 2012 are likely to remain 1-2.5 percentage points above the pre-crisis levels.
It also indicated that high growth was not having adequate affect in reducing poverty in India. A one percent increase in real per capita income leads to about a 2% decline in the poverty headcount, the IMF said.
8:40 AM Blogger
NEW DELHI: The government is planning to change the way it controls state-run banks, so they can raise lots of additional capital without the government losing control over them. The finance ministry believes one common holding company to unite 21 state-run banks could eliminate ad hoc, last-minute infusion of resources that has been the practice so far.
A holding company structure allows for innovation in capital infusion, the reason why nearly 85% of US banks have such a structure. A holding company structure will allow the parent firm to raise debt at home and even abroad, a finance ministry official told ET.
The company may even be allowed to list later, which will enable it to raise equity as well as debt for the banks. But as banks raise new capital, the government's share is bound to go down.
To maintain control, the government is considering innovations such as differential voting rights, golden shares or shares with zero voting rights to preserve the public sector nature of these banks.
Finance Minister Pranab Mukherjee is believed to be not too enthusiastic about the golden shares mechanism because it will enable any amount of dilution of state equity, leaving only veto powers with the government.
The implicit sovereign guarantee will help the holding company raise debt funds at finer rates. "If need be, we can even consider an explicit sovereign guarantee," the official said, requesting anonymity.
The holding company could infuse funds into the bank where it will own majority through multiple routes such as subscribing to the bank's equity or buying the debt issued by it.
The structure may also allow the holding company to raise funds for a specific bank. For example, if a state-run bank needs Rs 3,000 crore, the holding company will raise money from investors, linking the returns on them to the performance of that bank, explained the finance ministry official.
"It is an interesting move as the government will be able to raise debt through the holding company without putting any pressure on its existing fiscal burden," said Amit Jain, corporate restructuring expert and partner with BMR Advisors.
The government will transfer all its shares in state-run banks to this holding company, which will resemble an investment special purpose vehicle for public sector banks.
The government has been finding it difficult to capitalise state-run banks due to the constrained fiscal situation and has been resorting to ad hoc allocation of funds among many claimants.
In the current fiscal, the budget had provided Rs 6,000 crore for infusion into banks, but that will fall short of needs. The State Bank of India alone needs a massive dose of cash to maintain its tier-I capital adequacy ratio at 8% by the year-end.
The finance ministry has written to the Planning Commission seeking Rs 14,000 crore this fiscal for bank capitalisation.
Thursday, October 13, 2011
11:02 PM Blogger
Mumbai: Market regulator Sebi has imposed a penalty of Rs 5 lakh on retail major Pantaloon for failing to address investor grievances within the stipulated timeframe.
"After considering all the facts and circumstances of the case ... find that the noticee (Pantaloon Retail India Ltd) failed/delayed in redressing the complaints ... within the time stipulated by Sebi," the market regulator said in an order while imposing the Rs 5 lakh penalty.
The Securities and Exchange Board of India (Sebi) had earlier identified the Kishore Biyani-promoted firm as one of the companies against whom a large number of investor grievances were pending for more than six months as on June 30 last year.
In July 2010, Sebi had asked the company to redress the complaints and submit an action taken report within 30 days. However, Pantaloon Retail failed to do so, Sebi said in the order.
The regulator had then initiated proceedings against the company.
“13 out of the 40 complaints were outstanding as on February 15, 2011," Sebi said, adding that several other complaints regarding delay in payment of dividend for 2005-06 and 2006-07 by the company were also received from an indivudual investor.
Sebi has sent a show cause notice to Pantaloon Retail in March this year and the company replied to the notice a month later.
After going through the matter, Sebi found that delays and failure had occurred in a few of the cases.
"...it is established beyond doubt that the notice delayed/failed to redress the investor grievances of complainants. The noticee, therefore, violated section 15C of Sebi Act which warrants imposition of monetary penalty under the same section of Sebi Act," the order said.
Section 15C of the Sebi act deals with imposition of penalty in case of failure to address investors complaints by listed firms.
Source: Financial Express
10:58 PM Blogger
The Reserve Bank of India (RBI) has opposed the creation of a $20 billion sovereign wealth fund, for acquisition of energy assets overseas, out of foreign exchange reserves and wants the government to create the corpus for it from the Budget.
A Group of Ministers headed by Finance Minister Pranab Mukherjee today deliberated on the possible ways of creating a fund on the lines of ones that exit in countries like China.
"Various things were discussed but no view has emerged," Oil Minister S Jaipal Reddy said after the 75 minute meeting.
Sources privy to the deliberations said RBI was against using nation's forex reserves for setting up the fund. So, the Planning Commission has been asked to work out surplus that may be generated after accounting for all Plan and non-Plan expenditure.
"What they are talking is $1-2 billion corpus which is hardly the size...For acquisitions of oil and gas fields or coal and other mineral mines," a source said.
"We decided we will take a look at it after the [12th Five Year] Plan approach paper is approved," Planning Commission Deputy Chairman Montek Singh Ahluwalia.
Asked if RBI agreed for sharing a part of the over $300 billion forex reserves, he said: "Those are some of the issues. I mean one view is that it could be done through use of forex reserve. There are some operational problems there. The other view is that if you do it out of budgetary resources."
He added, "...Obviously if you use budgetary resources then you are taking from other use of plan fund. That's what we have to look at."
Source: Business Standard
10:55 PM Blogger
Sunil Mehra, the renowned investment banker, is set to start his new stint at MAPE Advisory Group as Managing Director-I Banking. Before joining MAPE, Mehra was with Standard Chartered as a Managing Director in the Corporate Finance group.
Mehra, who enjoys an experience of almost 20 years in investment banking sector, has been involved with key transactions include Tata Chemicals’ acquisition of General Chemicals, Cimpor’s acquisition of Digvijay Cement, Mylan Labs’ acquisition of Matrix Labs, ADR issuance by Dr Reddy’s Labs and convertible bond issuances by Lupin, Panacea Biotech, Tata Motors and Tata Chemicals.
Before joining with Standard Chartered, Mehra worked with DSP Merryl Lynch as a director, during 2000-2006. Prior to that he was VP at ABN AMRO for 5 years and worked 3 years with Kotak I-Bank as manager.
When contacted, Mehra has confirmed the development. At MAPE, Mehra will focus on mergers and acquisitions, private equity and equity corporate finance.
MAPE Advisory Group, a boutique investment bank, was founded in 2001 by former DSP Merryl Lynch bankers Jacob Mathew and Ramprasad. MAPE handles mergers and acquisitions, capital raising, and financial advisory services to private and public companies.
During last 3-4 months, India Inc witnessed exit of a few senior investment bankers, especially in merger& acquisition space.
Replacing Mehra, Standard Chartered appointed Saurabh Agarwal, former head of investment banking, Bank of America Merrill Lynch, a few months back.
Bank of America Merrill Lynch also lost Promit Ghosh, former M&A head, and Raj Kataria, former managing director and head of financial institutions group.
Both have quit to start an advisory with Rajeev Gupta, former India head of Carlyle India Advisors Pvt. Ltd.
Anshuman Thakur, a former director at NM Rothschild, joined with Morgan Stanley as managing director at I-Banking. Sughosh Moharikar, managing director of investment banking at Credit Suisse India also had quit. He is reportedly joining with Deutsche Bank as M&A head.
Ganeshan Murugaiyan, former head of investment banking at UBS India has joined BNP Paribas’ corporate banking division, a couple of months back.
Source: Business Standard
10:49 PM Blogger
MUMBAI: The country's second largest private lender HDFC Bank on Thursday entered into a strategic alliance with Diners Club International to offer the latter's premium credit cards in the country.
The alliance will help HDFC Bank, which is already the country's largest credit card issuer, to further extend its foray into the super premium segment to address the uber rich clientele," the bank said in a statement.
The bank has around five million existing credit card customers in the country and it adds 18-20,000 new customers a month.
HDFC Bank country head for retail assets and credit cards Pralay Mondal said, "HDFC Bank enjoys the highest mind and wallet share in credit cards. We and Diners Club will now form a powerful combination that has potential to redefine the lifestyle experience of the elite with its global reach, exclusive privileges and customised personal services."
While for Diners, it will be a re-entry in the domestic market, as it was earlier associated with the Citibank, for HDFC, this will be their third premium card. The bank already has Infenia premium credit cards and the Regalia brand of travel cards in operation.
"Our strategic partnership with HDFC Bank demonstrates our continued commitment to expanding our brand in this market," Diners Club International president Rajive Chadha said. According to industry sources, there are around 50,000 Diners cardholders already in the country.
Diners Club is a subsidiary of the New York Stock Exchange-listed Discover, which is a leading credit card issuer and electronic payment services provider worldwide. Set up in 1950, Diners Club was the world's first multi-purpose charge card available across 185 markets.
8:34 AM Blogger
The bank's managing director and chief executive officer Amitabh Chaturvedi said that the lender would need fresh capital to support the bank's growth in the next three months.
However, he declined to comment on the size of capital-raising and the route through which funds will be raised as the bank is in its silent period prior to announcing its second quarter '11 on October 20. The bank is adequately capitalised with a capital adequacy ratio of 11.40% at the end of June 2011. The bank can raise up to Rs 500 crore in the form of Tier-II debt.
Chaturvedi told the media on Wednesday that the allegation of fudging of bank accounts by one of the bank's employee association were baseless. Following this the bank's stock had tanked 10% on Tuesday. On the BSE, the bank scrip ended the day up 2.48% at Rs 66.08 on Wednesday.
The protesting employees represent only 10% of the bank's workforce which would be about 1,298 employees of a total base of around 4,700 personnel, the bank management said.
"Their grudge is that we do not permit new employees to become members of the union. The campaign seems to be handiwork of some misguided employees and some outsiders. We are examining how we can get to the next level of legal action,'' Chaturvedi said.
8:28 AM Blogger
State Bank of India is likely to defer its overseas fund-raising plans on account of unattractive yields and moderation in growth. The country’s largest lender had planned to raise $1-billion funds through medium-term notes in November, but is now waiting for economic stability.
Pratip Chaudhuri“Right now the US treasury yield have fallen sharply, but investors want the same yield of 4.5 per cent as before. They do not want to understand the direction in which the treasury yields are moving,” SBI Chairman Pratip Chaudhuri told Business Standard. The spreads have widened, Chaudhuri added.
Last week, Moody’s Investors Service cut its rating on SBI’s financial strength to D+ from C-, and lowered its hybrid debt rating on the bank to Ba3 (hyb) from Ba2 (hyb) which will make the borrowing costs higher for the public sector lender.
The benchmark US treasury yields are near multi-year lows. They fell on September 23 to 1.6714 per cent, the lowest in Federal Reserve figures beginning in 1953.
“The bank may face higher borrowing costs on its overseas debt programme because of Moody’s action as well as tight liquidity in dollar funding markets,” Hemant Contractor, deputy managing director of international banking at SBI had said.
Most banks use the resources raised via MTN route for their overseas business. While SBI doubled the fund-raising limit from $5 billion to $10 billion recently under the MTN plan, Chaudhuri said once Indian companies start setting up operations overseas, it will then exercise the MTN option.
"Last time when we raised money through MTNs, we used it for funding Tata Steel UK’s acquisition of Corus. We will exercise the MTN option this time when such Indian companies decide to expand operations overseas," Chaudhuri said. SBI helped Tata Steel’s acquisition of Anglo-Dutch firm Corus in 2007 by lending $1 billion for the $12.9 billion deal.
According to Dealogic data, the number of merger and acquisition deals dipped by 30 per cent this year between January 1 and October 6 as compared to last year.
Source: Business Standard
8:26 AM Blogger
A tax-free bond Housing and Urban Development Corporation (Hudco) issued a fortnight ago has elicited poor response, prompting the government-owned entity to think of relaunching it with higher coupon rates.
According to market players, the collections — after the issue opened on September 29 — were just around Rs 10-20 crore in the first round that closed on Wednesday.
The urban infrastructure company had, after getting the approval from Central Board of Direct Taxes, offered tax-free bonds at coupon rates of 7.51 per cent for 10 years and 7.75 per cent for 15 years.
According to norms, the coupon rates are linked to the government bond’s closing yield at the end of the previous month.
The issue opened on a day when yields on the 10-year benchmark government bond jumped 9 basis points to settle at 8.44 per cent. “This implies that the issuances in October will offer higher coupon rates,” says a bond dealer with a domestic brokerage. “Hence investors have opted to wait.”
The 1970-incorporated Hudco on Wednesday said the aim was to raise Rs 100 crore in the first round. It is still optimistic.
“With better coupon rates in the second round, we are expecting better response,” said R K Khanna, the company’s executive director (resource mobilisation).
He declined to comment on the total amount raised in the first round. The company can raise up to Rs 5000 crore via sale of tax-free bonds this financial year.
Based on the annualised closing yield of September, the company will now offer 7.62 per cent for 10-year bonds and 7.83 per cent for 15-year bonds via private placement.
The coupon rates on tax-free bonds should not be less than 100 basis points lower than the annualised closing yield on government bond of previous month.
Source: Business Standard
Wednesday, October 12, 2011
10:12 PM Blogger
The Reserve Bank of India’s decision to automate the process of filing regulatory reports appears to have opened a door of opportunities for technology firms. Industry players expect banks to invest over Rs 500 crore over the next one year to migrate to the new system of automated data flow. Mid-sized software companies are also sensing an opportunity to cross-sell their other banking software products along with the automated data flow solution.
For instance, iCreate Software, a Bangalore-based information technology firm, has already secured contracts from HDFC Bank, IndusInd Bank and Dhanlaxmi Bank within three months of launching their automated data flow solution Biz$core ADF. IndusInd Bank has decided to use iCreate’s enterprise business intelligence solution along with the automated data flow software. While the latter will help the bank in meeting compliance needs, the business intelligence solution will aid in managing information effectively for business requirements.
Vivek Subramanyam, chief executive officer of iCreate, stressed the need for a technology solution to remove manual intervention in regulatory reporting. “Automated reporting increases the level of confidence on data, and decision-making becomes more accurate,” he told Business Standard. “There are 150 to 250 types of regulatory reports that banks have submit to RBI at periodic intervals. We are completely focussed on this opportunity and are engaging with the entire banking fraternity to position our Biz$core ADF solution.”
He said the company’s automated data flow solution cost “single to early double digits” crore of rupees.
In August, Ramco Systems, a software firm in Chennai, launched an automated data flow solution to help banks adhere to RBI guidelines on submission of regulatory reports without manual intervention. “Our ADF solution,” says Kamesh Ramamoorthy, chief operating officer of the Chennai-bases software firm, “can be deployed on any database management system. It can go live within weeks.”
However, some banks are likely to rely on their in-house teams to develop this software instead of outsourcing it to a technology firm. According to a senior official of a Mumbai-based private sector bank, if the in-house technology team of a bank is strong, then developing the software makes more sense as the lender can customise the solution according to its requirements. Another option is that the bank will build the software on its own, but will seek assistance of a technology firm for integrating it with the main system.
But most banks are expected to use third-party software as they have to comply with RBI’s guidelines within a specified time period. “It is not their core operations,” says an industry expert. “Hence, they will choose products of software companies to meet the guidelines.”
The new guidelines on automated regulatory report filing were released after the central bank was alarmed by the trend of eroding profitability of state-run banks soon after the retirement of the chairman. The move is aimed at minimising the scope of errors and manipulation in reports that are submitted to RBI at periodic intervals by banks.
Source: Business Standard
10:07 PM Blogger
The All-India Bank Officers Confederation (AIBOC) has written to the Reserve Bank of India (RBI), expressing concerns over the financial health of the bank. The employees association also opposed the extension granted to chief executive Amitabh Chaturvedi for a period of three years. “If the present management continues to be at the helm, the situation may deteriorate further,” said G D Nadaf, general secretary, AIBOC.
The 1927-founded bank's stock slumped 24.22 per cent in intra-day trade to touch a two-year low. However, it gained later, following the management’s denial of the mismanagement charges. The stock closed at Rs 64.45, down 10 per cent compared to its previous close.
The officers association has highlighted several concerns like the dependence on over-night borrowed funds, the capital adequacy ratio, and accused the bank of no real growth in the last six months. The association also alleged the bank was turning away from social banking by not catering to small agricultural borrowers, and levying high service charges.
However, in a detailed statement, the management said, “Dhanlaxmi Bank would like to unequivocally reiterate that all such allegations are baseless, and represent a motivated attempt by one of the employee associations de-recognised by the bank.”
“Moreover, the central bank had, last week, granted the bank's managing director and chief executive, Amitabh Chaturvedi, a second term of three years. The re-appointment is an affirmation of the fact that the audits and inspection of the bank's books have found nothing amiss,” the bank added.
In late 2008, the bank had put in place a new management team, headed by Chaturvedi, who earlier worked with aggressive organisations like Reliance Capital and ICICI Bank. Chaturvedi, with his new team, shrugged off the image of a regional lender and had chalked out plans to become a pan-India bank. After Chaturvedi's induction, the bank registered a whopping 229 per cent growth in advances between December 2008 and June 2011, and diversified its loan book, with emphasising on retail banking. The new management also unveiled a new logo for the bank and shifted treasury operations to Mumbai, though the bank continued to be headquartered at Trissur.
Dhanlaxmi's aggression on lending, branch expansion and venturing into newer businesses had also promoted the central bank to ask it to modify its speed. The bank, however, said it would consolidate its business this financial year, as business remained subdued due to the tight monetary policy.
Source: Business Standard
9:36 AM Blogger
MUMBAI: New loans by banks as a proportion of fresh deposits have fallen to a four-year low this September, indicating investors are flocking to the safety of banks when equity markets are wobbly, and that demand for loans are slowing due to high rates.
Although the so-called credit-deposit ratio has halved to less than 50% from as high as 100% at the beginning of the year, banks do not see any immediate fall in interest rates as they need to attract deposits ahead of huge government borrowing.
"Deposits are growing since the equities market is a little bit subdued and investors are choosing to park their money in safer avenues such as banks," said SBI chairman Pratip Chaudhuri.
Banks have raised Rs 3,22,298 crore as deposits between April and September this year, but lent only Rs1,51,072 crore, data from RBI show.
This translates into a credit-deposit ratio of 46.87%, the lowest in the month of September in four years - an indicator of how lending has slowed down. Indian shares are the worst performing in Asia and had fallen 20% this year, which many call a bear market.
Banks' asset-liabilities are swinging from one extreme to the other as RBI is poised to raise policy rates for the 13th time when it reviews its monetary policy on October 25 as it aims to tame inflation. Its efforts so far have cooled the demand for loans, but higher rates are drawing more deposits, leading to higher cost for banks. But the trend may be better for the system as a whole, since the distortion due to high lending in proportion to deposits was creating risks in terms of mismatches.
"Credit expansion in the recent period has been rather sharp, far outpacing the expansion in deposits. Rapid credit growth without a commensurate increase in deposits is not sustainable," RBI governor D Subbarao had said in his quarterly monetary policy statement in January this year.
Given the nature of the banking business, while deposits are reasonably steady in the initial few months, loan growth is generally slack even during the boom period in a business cycle.
Tuesday, October 11, 2011
10:45 PM Blogger
New Delhi/Mumbai: The Reserve Bank today announced 2 per cent interest subsidy on Rupee export credit to the labour-oriented and small scale sectors to cushion them from slowdown in the major markets like the US and Europe. Exporters of handicrafts, handlooms and carpets will be eligible for the interest subvention to be available upto March 31, 2012, the RBI said.
The exporters in the small and medium enterprises across all the sectors would also be entitled for cheaper bank credit, subject to a minimum interest rate of 7 per cent.
In a direction to the banks, the RBI said that the government has decided to extend the scheme from April 2011 to March 2012, for the four category of exporters.
"Banks may ensure to pass on the benefit completely to the eligible exporters," it said. The decision to help exporters was announced on a day when the high-level Board of Trade reviewed the situation arising out of renewed worries about the US economy and the debt crisis in Europe.
The BoT, headed by Commerce and Industry Minister Anand Sharma and comprising well-known industrialists, discussed issues like currency volatility, availability of dollar credit and high cost of credit. Although India's exports grew by 54 per cent in April- August period, the time ahead is viewed as full of challenges.
“I am apprehensive about the roll-out of next seven months. I hope we should be able to achieve $280 billion exports this fiscal," Minister of State for Commerce and Industry Jyotiraditya Scindia said. Exporters' body FIEO welcomed the interest subsidy but wanted more.
"We were expecting 3 per cent and also for sectors like textile, gems and jewellery and engineering," it said in a statement.
Source: Financial Express
10:42 PM Blogger
New Delhi: The Delhi High Court has held as illegal the decision of RBI to discontinue the services of a Statutory Central Auditor (SCA) of Punjab National Bank (PNB) without fair and proper enquiry into the allegations against the firm.
"The Court holds that the impugned decision of the RBI, as communicated in its letter on June 24, 2009 to the PNB, to discontinue the Petitioner as an SCA, even for the limited extended period ending 30th June 2009, was violative of the principles of natural justice and was, therefore, illegal," Justice S Muralidhar said.
The observations came on the plea of accounting firm, Gupta and Gupta Chartered Accountants, alleging arbitrariness on the part of RBI in asking PNB to discontinue it (firm) as an SCA without fair and proper enquiry. RBI, in a letter written on June 24, 2009, permitted PNB to discontinue the firm as an SCA on the allegations of the bank that it was delaying the audit of accounts.
"RBI ought not to have unilaterally accepted the complaint by the PNB without seeking explanation from the Petitioner (Gupta & Gupta Chartered Accountants) on PNB's specific allegations," the court said. Allowing plea of the firm, the court said "there is merit in the contention of the Petitioner that the discontinuance of an SCA, selected through such a rigorous process, is likely to have adverse consequences for its reputation and goodwill if such discontinuance is as a result of a complaint about its competence or integrity," it said.
SCAs are appointed by RBI on the recommendations of statutory auditor CAG for a period of four years to audit the accounts of public sector banks. In 2005, five SCAs had been appointed to audit the accounts of PNB.
"The greater the power to appoint and remove an SCA, the higher the responsibility on the RBI as the holder of such power to exercise it in a fair and reasonable manner after following a just procedure which comports with the principles of natural justice," the court said. The firm had alleged that it was discontinued as an SCA by PNB apprehending that it can detect some irregularities by the bank in granting loan to some real estate companies. The firm also contended that it was singled out for being discontinued as SCA and that this amounted to blacklisting of the petitioner firm apart from being mala fide. It also submitted that it was even not served any show cause notice.
Source: Financial Express
8:20 AM Blogger
MUMBAI: Members of Corporate India have told the Reserve Bank of India (RBI) that another increase in interest rate would hurt demand and pull down growth. They also urged the monetary authority to intervene in the currency market as a depreciating rupee could stoke inflation.
The views were spelt to RBI deputy governors and other senior central bank officials by a team comprising Godrej group chairman Adi Godrej, Hiranandani group managing director Niranjan Hiranandani, L&T chief financial officer R Shankar Raman, Crisil MD Roopa Kudva, senior officials of credit rating agencies and R Deora of the exporters' association FIEO, among others.
With the headline inflation number not softening, there is a widely shared perception that RBI may announce another rate hike when it presents the half-yearly monetary policy on October 25. There is a growing fear that higher interest rates may deal a body blow to growth and consumer sentiment.
Till now RBI has raised rates 12 times since March 2010. Even as interest high rates and commodity prices squeezed profit margins of companies, imports became expensive, with the rupee declining 10% against the dollar since August. While many felt that RBI should have sold dollar heavily to arrest the fall, the central bank preferred a wait and watch policy with the US currency gaining amid safe haven buying by institutions across markets.
At the meeting, Godrej and Hiranandani represented the industry bodies CII and Ficci, respectively. With loan demand beginning to shrink, last week, the bankers' lobby, IBA also urged RBI to pause on rate. The benchmark policy rate has gone up 350 basis points in the last 18 months.
But, the headline inflation number is nowhere close to RBI's comfort level. The central bank is targeting inflation at 6-7% by March but the inflation has remained above 9% for past several months. RBI senior officials will meet bank economists on Tuesday to understand their views on the economy and growth. Speaking to newspersons after the meeting, Hiranandani said the slowdown was clearly visible and higher rates were not helping to lower inflation.
"Interest rate hikes are working in reversal at this point of time and adding to the inflationary pressure. Credit availability for businesses as well as consumers drying up; this may push the economy into recession," he said. But HDFC Bank CEO Aditya Puri told a news agency that RBI may disregard representation by banks and go ahead with a rate increase.
Last week, IBA chief K Ramakrishnan said "capex has come to a halt and investment is not happening." Bankers are concerned because loan growth has slowed down and credit numbers reported by banks reflect disbursal of loans which were sanctioned earlier. They also fear that if rates continue to rise, small and medium-sized companies may default on loans.
8:17 AM Blogger
Srinagar: The business of Jammu and Kashmir Bank has increased by 25 per cent during the first two quarters of the current fiscal compared to corresponding period last year.
"As against last half year's business of Rs 60,000 crore, the Bank has achieved over Rs 75,000 crore during the corresponding period this year, registering an overall growth of about 25 percent," Jammu and Kashmir Bank Chairman Mushtaq Ahmad said at a meeting chaired by Chief Minister Omar Abdullah.
The Bank chairman presented two dividend cheques worth Rs 67 crore to Omar as the share of the State Government, which is majority stake holder in the bank.
Ahmad said during the current financial year the Bank expects to mobilize business aggregating to Rs 85,000 crore while the target for the next financial year has been fixed at Rs 1,00,000 crores.
Similarly, the profit of the Bank is likely to grow from current year¿s Rs 800 crore to Rs 1,000 crore in 2012-13 while it stood at Rs 615 crore for the last year, he said.
Jammu and Kashmir Bank alone has provided over Rs 600 crore credit through its more than 400 rural branches in the State in the first quarter of the year 2011-12.
"This is 70 per cent of the total credit provided by the banking system," he said.
Addressing the meeting, the Chief Minister asked the Bank to walk and extra mile in supporting the State to reorient rural development and enhance economic activities for the youth.
"While we appreciate your performance in extending hand for growth and development of the business in the State, we would like you to walk an extra mile in this direction and facilitate budding entrepreneurs and qualified youth to venture upon in industrial and other sectors for earning their livelihood," he said.
Describing Jammu and Kashmir Bank people's bank, Omar said people in the State for this reason have rightful expectations that the Bank would focus greater attention towards smooth credit flow to help generation of wide-ranging economic activities.
"Your role in reorientation of rural economy is significant and we would like you to deliver on this count more positively and willingly," he said.
The Chief Minister asked the Bank to fill up the vacancies regularly to avoid any vacuum in the availability of proper human resource which is imperative for up to the mark performance and functioning of the Bank.
Source: Financial Express
8:15 AM Blogger
Beed: Ninety-one people have been booked for allegedly cheating a city-based bank to the tune of Rs 6.65 crore, police said today.
The accused, who have been booked under various section of the IPC and the Public Deposits Security Act 1999, had allegedly cheated the Hina Shahin Co-operative Bank between April 2008 to March 2009, they said.
Police said that a director, deputy director, officials of the bank, pigmy agents and some accountholders helped some people to get loan without valid documents and by opening bank accounts under fictitious names.
Special bank auditor Dilip Chatirikar had filed a complaint with the police against the accused.
In all 91 persons were booked but no one has yet been arrested, police said, adding that further investigations are on.
Source: Financial Express
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