IndusInd Bank Q3 net profit up 34%

Mumbai: Private sector lender IndusInd Bank posted 34 per cent increase in net profit at Rs 205.9 crore for the third quarter ended December 31.

The bank had reported a net profit of Rs 153.8 crore in the corresponding quarter last fiscal, IndusInd Bank said in a filing with the BSE.

The total income of the lender also increased to Rs 1,654.8 crore during the quarter from Rs 1,110.8 crore over the year-ago period.

The bank's Net Interest Income (NII) stood at Rs 430.65 crore against Rs 363 crore in the same period previous year, registering a growth of 19 per cent.

For the first nine months of 2011-12, the bank reported 43 per cent rise in net profit at Rs 579.23 crore compared to Rs 405.56 crore in the same period a year ago.

The bank had a total income of Rs 4,579.9 crore in the first nine months compared to Rs 3,072.5 crore in the previous financial year.

IndusInd Bank is among the few private sectors banks to raise savings bank deposit rate in October after the central bank deregulated SB deposit rates.

It has raised its savings account interest rate up to six percent along with raising rates on its non-resident external accounts to 9.25 percent for deposits up to Rs one crore.

"After raising interest rates in our deposit accounts, we have witnessed a rise of around 22 percent in volume terms over the second quarter. Our new customer acquisition is around 50,000 per month in the post-hike period," Sobti said.

The private sector lender also reported an increase in asset quality in the third quarter with fall in non-performing assets (NPAs).

"While our gross NPA fell to 1.02 percent from 1.21 a year earlier, the net NPA decreased to 0.29 percent from 0.36 percent an year ago period," he said, adding the provisioning coverage ratio stood at 72 percent by the end of the third quarter.

During the first nine months period, its advances grew 30 percent to Rs 32,426 crore and deposits rose 32 percent to Rs 40,558 crore.

The bank has a capital adequacy ratio of over 15 percent at the end of the third quarter.

Source: Financial Express

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Banks may cut rates if funding costs fall: IBA

India's lenders may lower interest rates if their funding costs come down, but banks have not suggested any specific steps at a meeting with Reserve Bank of India officials, Bank of Baroda Chairman and Managing Director M.D. Mallya said on Tuesday.

"One has to see the funding cost coming down before any change in interest rates happen. We have not seen a change in funding cost in recent past," Mallya, who is also the chairman of Indian Banks' Association (IBA), told reporters.

He was speaking after the customary meeting of bankers with the central bank ahead of the monetary policy review on January 24.

The RBI is widely expected to begin easing monetary policy after 13 rate increases affected since March 2010 to rein in a stubbornly high inflation.

"We haven't suggested anything specific to the RBI, but nevertheless we have discussed about the present situation," Mallya said.

He did not comment on whether banks have specifically asked for a cut in cash reserve ratio -- the proportion of deposits banks keep in cash with RBI -- to boost liquidity. At present, banks' CRR is 6%.

The stress in asset quality is a major concern for banks, Mallya said.

Banks' non-performing assets, or bad loans, are expected to rise to about 2.6% of their total assets in the fiscal year ending March, from 2.3% a year ago, ratings agency Crisil said earlier this year.

Source: Business Standard

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Tax-saving bonds find little favour with investors

Tax-saving bonds seem to have become an opportunity wasted for the government, which is struggling to raise funds for its ambitious infrastructure development programme. The bonds’ unattractive structure seem to have found little favour with eligible taxpayers and infrastructure finance companies are hoping the government would do something to enhance product appeal.

“The incentive for taxpayers is very little. We have received only Rs 18 crore till now via tax-saving bonds, although our capacity to raise funds through these bonds is as much as Rs 6,000 crore,” said H D Khunteta, director, finance, Rural Electrification Corporation (REC). “We are requesting the government to increase the tax-saving limit up to Rs 50,000 or more.”

An infrastructure finance company can raise as much as 25 per cent of the incremental infrastructure investment of the previous financial year via these bonds. Currently, (unlike completely tax-free bonds), investors can save tax only up to Rs 20,000 of taxable income in these under Section 80 CCF of the Income Tax Act, over and above the Rs 1 lakh investment under Section 80C by investing in these bonds.

Some firms said the government was not very hopeful about the product. "Many of us had recommended the government make it Rs 50,000. And, we believe if it does become Rs 50,000, the response might actually be more. One reason the government had not accepted the demand was that last year the response was not very good. So, the government was not sure about the sustainability of these instruments," said Suneet Maheshwari, chief executive officer, L&T Infrastructure Finance. If the response is good this year, they might increase the limit to Rs 50,000, he added.

Sole reliance on retail participation has also taken a toll on the success of this kind of debt instrument. “For tax-saving bonds, the number of subscriptions required are many, as it is a product targeted at retail investors, to allow their participation in the country’s infrastructure development,” said Saud Siddique, joint managing director, SREI Infrastructure Finance.

Also, as compared to other instruments, the rates of return are much lower. For instance, a completely tax-free bond of the National Highways Authority of India or Power Finance Corporation offers a high coupon and even allows tax exemption on interest income for periods of 10 and 15 years. The gains derived via tax-free bonds are not capped, as the investment limit is very high. In tax-saving ones, investors get benefits on investments of only Rs 20,000 (Rs 6,600 for the highest income tax bracket). On the other hand, tax-free bonds like NHAI or PFC help investors earn returns of eight-plus per cent for a longer period, and without any tax. In effect, the final rate of return is 11.5-12 per cent.

Infrastructure finance companies are also taking small steps at a time with respect to the size of tax-saving bond issues. For example, SREI, which can raise up to Rs 500 crore via tax-saving bonds,has come out with a maiden issue of only Rs 300 crore, gauging the market. “We are just testing the response and, thus, have come out with a smaller issue size without a greenshoe (over-allotment) option,” said Sanjeev Sancheti, chief financial officer.

PFC, one of the most successful fund raisers, has raised about Rs 100 crore so far against its capacity to raise as much as Rs 5,300 crore through tax-saving bonds. It is planning to issue the second tranche by January end.

Many arrangers also said while one got upfront rebate on taxable income, the instrument does not allow benefits to retail investors who do not have savings of at least Rs 1 lakh. However, many also said that low levels of awareness among investors was a reason for the lukewarm response.

"A tax-saving bond as an instrument has the potential to raise Rs 20,000 crore every year, if just about one crore out of the 3.5 crore taxpayers of the country invest. There is enough opportunity for infrastructure companies to raise money but investor awareness needs to be created,” said Anup Bagchi, managing director and CEO, ICICI Securities, said.

Source: Business Standard

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Government to have two nominees on RBI board

The government has amended its laws to have a bigger say in the decision making of the Reserve Bank of India (RBI) by having two members on the central bank’s board as compared to one now.

At a time when the entire country was busy tracking the Lok Pal Bill debate in December, the Lok Sabha and Rajya Sabha passed the Factoring Regulation Bill, 2011. The law, which aims at addressing problems faced by small and medium enterprises, also amends the RBI Act, 1934, to have two government officials on the board on the central bank. At present, economic affairs secretary R Gopalan is the government nominee on the 17-member RBI board.

“In clause (d) of sub-section (1) of section 8, for the words ‘one Government official’, the words ‘two Government officials’ shall be substituted,” the Schedule of the Bill said. Section 8 (1) (d) of the RBI Act, gives the power to the government to nominate directors on the board.

The government has justified the move to increase its officials in the board to improve coordination with the central bank. But what has surprised many RBI officials is the manner in which the amendment was made. Sources said the amendment was done in last minute and was not in the agenda earlier.

The Bill had mooted amendment of acts like the Indian Stamp Act, 1899, and The Code of Civil Procedure, 1908, since the beginning of the deliberations. But the amendment to the RBI Act was introduced at the last moment.

The Factoring Regulation Bill stipulates all companies engaged in factoring activity to take prior approval of RBI to commence business. The act also gives power to RBI to penalize or cancel licence for violating norms.

The central board of RBI consists of official directors and non-official directors, and 10 non-official directors and one government official is nominated by the government. Directors are nominated for a period of four years. The RBI governor and four deputy governors are official directors in the central board.

The move to increase government’s say in RBI matters was being contemplated by the government in recent times.

Earlier, a Financial Stability and Development Council (FSDC) was operationalised which is chaired by the finance minister and the subcommittee is headed by RBI governor. Along with the introduction of FSDC, the High Level Coordination Committee on Financial and Capital Markets was scrapped which was headed by the RBI governor.

Source: Business Standard

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Cash retraction system in ATMs may be removed

The cash retraction system in ATM machines may soon be a thing of the past. The Reserve Bank of India has agreed to the National Payments Corporation of India's proposal to remove this functionality from all machines after a pilot proved extremely effective in curbing misuse.

The central bank is taking this step as it has come across cases of people forcibly trying to defraud the banking system by holding on to a few pieces of notes in ATM machines that has cash retraction system (that is, cash getting sucked back by the machine, if not removed within a specified time, often seconds), and then claiming non-receipt of cash.

“Of course due notice will be given to all customers. So remember, hereafter if you are careless to walk away from an ATM forgetting to collect your cash, it is lottery for the next user!,” said Mr G. Padmanabhan, Executive Director, RBI, at a function to launch the Tamilnadu Mercantile Bank's mobile banking service in Chennai.

kram@thehindu.co.in

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