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Friday, March 10, 2017

IDFC buys Natixis’s stake in mutual fund unit for Rs 244 crore

Financial services major IDFC has decided to buy Natixis Global Asset Management’s 25 per cent stake in IDFC Mutual Fund for over Rs 244 crore. The shares will be purchased through IDFC Financial Holding Company, a wholly-owned subsidiary of IDFC.

“The transaction is in line with the terms of the shareholders agreement that we signed with Natixis six years ago,” IDFC Managing Director and Chief Executive Officer Vikram Limaye told PTI.

IDFC Financial Holding Company holds 75 per cent stake of IDFC Asset Management Company (AMC) and IDFC AMC Trustee Company. The remaining 25 per cent stake is held by Natixis.

In December 2010, Natixis had entered into a share purchase agreement to pick stake in IDFC AMC and IDFC AMC Trustee.

As part of the agreement, there was a requirement that both shareholders would review the partnership at the end of five years.

Following a review clause in the agreement, IDFC “agreed to acquire through IDFC Financial Holding Company the balance stake (about 25 per cent) in IDFC AMC and IDFC AMC Trustee from Natixis Global Asset Management”, the financial major said in a filing. It has agreed to buy the stake for Rs 244.24 crore.

The deal, subject to regulatory approvals, is expected to conclude by the end of this month. IDFC AMC is among the top 10 firms in the mutual fund space with an assets base of Rs 57,998 crore at the end of December quarter. The turnover of the fund house stood at Rs 325 crore at the end of March 31, 2016.

Currently, there are 42 players in the mutual fund industry that manage assets worth more than Rs 17 lakh crore.

“Our agreement with Natixis had a clause which required us to distribute all our international products through Natixis only but after the conclusion of deal we will own 100 per cent of the business then we have the flexibility to think about exploring distribution and or strategic partnerships with others as well.

“Our relationship with Natixis has been very good and nothing prevents us from using the Natixis distribution,” Limaye said.

IDFC AMC, which manages a range of funds across debt and equity classes, has several new products in credit and balance fund category.

Limaye said that the company is focusing on portfolio management services (PMS) business quite aggressively.

Source : Financial Express
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IndusInd Bank confirms deal talks with MFI Bharat Financial

Mid-sized private lender IndusInd Bank today said it is in talks with multiple entities for business expansion, including the widely speculated merger of Bharat Financial Inclusion (BFI).

"...the management has been exploring strategic alternatives, and engaging in discussions from time to time with various parties, including Bharat Financial, as and when required," the bank said in a late evening exchange filing.

In the statement issued to bourses following media reports that IndusInd and BFI (formerly SKS Microfinance) are likely to announce a merger in an all-stock deal, the bank said the management has been authorised to evaluate strategic opportunities for business expansion.

It soon added that no decision has yet been made in this regard by either the board or any of the committees and also termed the media reports as "speculative".

As per the reports, the merger ratio is likely to be 10:7, wherein shareholders will get seven shares of IndusInd Bank for every 10 shares of BF. In its clarification to bourses yesterday, BF said it had been exploring various options but termed the media reports as "speculative".

Speculation regarding a deal between the two has been on for many months now and some reports had said the Hinduja Group-promoted bank may be looking at buying a minority stake in BFI. But off late the buzz has shifted to takeover

There have been a slew of deals between private sector lenders and MFIs as the former eye to expand their network in the hinterland which will help them meet the priority sector lending mandates and offer cross-sell opportunities.

In a note yesterday, Australian brokerage Macquarie had said such a merger was positive from a medium-term perspective for the bank but flagged execution as the key given the stress on MFI's books. A merger can enhance IndusInd's return on assets by up to 0.25 per cent and make it among the highest in the industry, it said.

BFI already has a business correspondent relationship with IndusInd in Karnataka for many years now. The then SKS had a tumultuous time four years ago as it first faced a repayment crisis in its largest market of Andhra Pradesh and a corporate battle over leadership which ended with the exit of founder Vikram Akula.

If the merger fructifies, it will be the third deal for IndusInd Bank, after Deutsche Bank's credit card portfolio in 2011 and RBS' diamond financing book in 2015.

Both IndusInd and BFI counters have seen a rally this year, but the stocks today corrected 0.26 per cent and 1.40 per cent respectively on the BSE.

Other banks, including IDFC Bank, Kotak and RBL, have either acquired or taken minority stakes in MFIs in past 18 months.

Source : Economic Times
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Thursday, March 9, 2017

SBI launches 'Work from Home' facility for employees

Country's largest lender State Bank of India today launched a new facility to enable its employees to work from home.

The Board of the bank has recently approved the 'Work from Home' policy to enable its employees to work while at home using mobile devices to address any urgent requirement they may have, that prevents their travelling to work.

The lender will be using mobile computing technologies and shall have continuous control over all the enabled devices centrally to manage and secure the data and applications on the mobile devices, the bank said in a statement here today.

The use of technology and services shall be monitored through carefully designed MIS and dashboard to enable improvements and refinements, it said.

The bank said going forward cross-sell, marketing, CRM, social media management, settlement & reconciliation, complaints management applications will also be enabled to make the work from home services comprehensive and increase the employee productivity multi-fold.

Source : Economic Times
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Banks are not Shylocks sucking money, customers need to pay for better service: HDFC's Aditya Puri

Banks are not Shylocks bent on sucking out money from customers, but those seeking higher levels of service must be open to paying for the convenience, said Aditya Puri, MD of HDFC Bank.

India’s longest serving bank chief also said strong third-quarter GDP growth has proved demonising of demonetisation was wrong.

Scrapping all banking charges ends up subsidising the wealthy carrying out high-end transactions and reduces banks’ ability to offer services to the poor, Puri said.

“You don’t go to Oberoi Hotel and ask for Mahesh Lunch Home rates,” Aditya Puri told ET in an interview.

“We are not here to charge usury costs, let us be very clear. As you go higher up on the type of product, it is perfectly reasonable to charge. There is a segment of the population which should not becharged, which we agree with.”

Recent charges levied by banks for ATM transactions and cash deposits beyond a limit have drawn criticism, especially in case of SBI, which restored the minimum balance amount after scrapping it in 2012. Opposition to charges on use of debit and credit cards at merchants is also strong, especially after demonetisation, which has led to a surge in digital payments.

“If I have to put up the (point of sale) terminals and they have to get it free, are you saying I should also subsidise Louis Vuitton or Pantaloons or Taj Hotels? Their sales are rising, he is swiping. Why should I subsidise him?” Puri said.

Demonetisation of high-value notes is pushing digitisation of Indian banking and it has not impacted growth much, though there has been some pain in the informal sector. “Admit that the impact (of demonetisation) has not been drastic,” said Puri.

He also rubbished claims that GDP growth was overstated as impact on informal sector had not been accounted for. “Now to start saying impact on parts of the informal economy was not reflected… we are talking about this for 20 years.”

Source : Economic Times
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SBI justifies penalty; says need money to bear Jan Dhan costs

Facing a backlash for levying penalty on non-maintenance of minimum balance in accounts, SBI today justified its move saying the bank needs to impose some charges to balance the "burden" of managing a large number of no-frills Jan Dhan accounts.

The bank also said it has not received any "formal communication" from the government for re-considering the penalty and it will take a call "if something comes". It also clarified the penalty would not apply to Jan Dhan accounts.

Last week, the country's largest lender decided to re- introduce penalty on non-maintenance of minimum balance in accounts and also revised charges on other banking services. The new charges would be applicable from April 1. The move by the state-run banking major has faced a lot of criticism, including from the opposition parties.

"Today, we have lot of burden such as we have 11 crore financial inclusion or Jan Dhan accounts. To manage such a large number of Jan Dhan accounts, we need some charges. We have considered many factors and after analysing carefully, we have taken this step," SBI Chairperson Arundhati Bhattacharya told reporters here on the sidelines of a women entrepreneurs' national convention.

As per the list of revised charges of SBI, failure to maintain Monthly Average Balance (MAB) in accounts will attract penalty of up to Rs 100 plus service tax.

In metropolitan areas, there will be a charge of Rs 100 plus service tax, if the balance falls below 75 per cent of the MAB of Rs 5,000. If the shortfall is 50 per cent or less of the MAB, then the bank will charge Rs 50 plus service tax.

The charges and MAB varies according to the location of bank. It is minimum in case of rural branches.

Bhattacharya said all the banks have minimum balance requirement for account holders and SBI as such has the lowest minimum balance requirement.

She said the penalty was there earlier also and SBI was the only bank to withdraw it in 2012.

"Our analysis have shown that most of the account holders maintain more than Rs 5,000 on a monthly basis and so they do not have to worry about any penalty," Bhattacharya said.

She clarified that the penalty on non-maintenance of minimum balance will not be applicable on Jan Dhan accounts.

Asked about the government's direction to the bank to reconsider the decision, SBI's Managing Director Rajnish Kumar (National Banking) said the bank has not received any communication on this issue.

"There is no formal communication. We will see if something comes," Kumar said.
Under the revised charges, withdrawal of cash from ATMs will attract a charge of up to Rs 20 if the number of transactions exceeds three from other bank's ATMs in a month and Rs 10 for more than five withdrawals from SBI ATMs.

However, SBI will not levy any charge on withdrawals from its own ATMs if the balance exceeds Rs 25,000. In case of withdrawal by its customers from ATMs of other banks, there will be no charge if the balance exceeds Rs 1 lakh.

"We are charging as people go to ATMs, withdraw cash and give it to somebody who in turns deposit it into the bank. This type of transaction involves a cost which is not known to public as bankers do not levy any charge on the customers.

"There is some cost involved in printing cash, in transportation, counting and providing security to cash. The cost is borne by the tax payers. There is a cost in installing an ATM and so we feel the charges are very reasonable," Bhattacharya said.

She said the customers must use alternate channels like mobile, internet to do their transactions.

"We do not see there is a requirement for an household person to withdraw cash through ATMs for more than four times. Daily cash requirement is more for people doing businesses and we want them to use mobile and internet banking to do transactions," she said.

While addressing the convention, Bhattacharya said the bank so far has given loan worth to Rs 1,60,000 crore to the MSME sector.

"This year alone we have done more than Rs 10,000 crore. We wish to do around Rs 16,000 crore of Mudra loans by the end of this financial year," she said.

At present, nearly 55 per cent of the bank's balance sheet comprises retail segment and balance is to large segment.

"I have no problem at all if I am able to tilt that more in favour of retail. I would love to do that. Of course large segment needs support because of that you would have the airports ... the roads you have today, for defence you are going to set up an SME and for that you need steel, cement.

"So, the large sector also needs support from the bank. But that does not mean that we (banks) are not there for you (retail segment)," she said.

Source : Economic Times
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All you need to know about saving taxes using ELSS

The last month of the financial year sees investors rushing to save tax by investing in tax-saving instruments. You can save tax by investing upto Rs 1.5 lakh in equity-linked savings scheme (ELSS) under section 80C of the Income Tax Act.

What are tax saving or ELSS schemes? How much can one invest in them?

An equity-linked savings scheme (ELSS) is a mutual fund that gives the option to save tax. These funds invest in equities and investors can choose the dividend or growth options. You can invest any amount up to 1.5 lakh in an ELSS scheme to save tax.

ELSS schemes offer growth and give investors the opportunity to earn higher returns in the long run. However, as is the case with all mutual fund schemes, there is no guarantee of any fixed returns.

What is the process to invest in an ELSS scheme?

Once an investor is KYC compliant, he can invest in an ELSS scheme just like any other mutual fund scheme.

Investment can be done by writing a cheque and filling the relevant form, or can be also done on line.

Does ELSS have any advantage over other tax-saving options under section 80C?

ELSS has the smallest lock-in period of three years.

Compared to this, the Public Provident Fund (PPF) has a minimum lock-in of 15 years, and allows only conditional withdrawal before that. The EPF is usually locked in for the term of your employment. Other tax-saving products like Tax-saving Fixed Deposits, or the National Savings Certificate (NSC) are locked in for a period of five years and above. The National Pension Scheme (NPS) is locked in until you reach 60 years of age, and only allows conditional withdrawals. ELSS also has intermittent cash flows in the form of dividends which are tax free, if one opts for the dividend option. Also, in an ELSS you do not pay any tax on dividend or at the time of redemption.

What should an investor do with his ELSS funds, once the lock-in period is over?

Investors have the option to continue holding the mutual fund units after three years or redeem them. Financial planners say investors could continue holding them if the funds perform in line with their expectations in order to meet their financial goals.

Source : By Prashant Mahesh, THE ECONOMIC TIMES
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