Tides of 13.04.2007

1. The mutual fund industry has to focus more on retail clients to expand further, said Mr Mukul K. Gupta, Chief Executive Officer, Birla Sun Life Mutual Fund. Although the industry saw substantial growth over the past two years, most of the money came from the top 15 cities or so. With at least 10-15 asset management companies looking to set up shop in India over the next 12-15 months, the industry would see increased competition with the new players also concentrating on the existing centres; hence, there is a need for players to expand geographically especially in the retail space.

2. The Bombay Stock Exchange today said it has received expression of interest from 20 parties for picking up 41% stake in the exchange at a price of Rs 5,200 per share. The interested investors include domestic financial institutions, domestic corporate houses, high net worth individuals and foreign funds. SBI, the largest financial institution, is said to be one of the bidders. Earlier this year, BSE, which is the oldest exchange in the country, sold 10 per cent of its stake to the German exchange operator Deutsche Börse (5%) and Singapore Exchange Ltd (5%) for Rs 189 crs each at a price of Rs 5,200 per share.

3. Nabard will extend capital or equity support to micro-finance institutions through its Micro Finance Development and Equity Fund. It has sanctioned Rs 1 cr to three MFIs each. The new scheme will facilitate MFIs to leverage funds from commercial banks, donor agencies and others, and help provide a range of micro-financial services at affordable costs to the poor. The scheme aims at providing promotional, equity, capital and revolving fund assistance to banks, NGOs, SHG Promoting Institutions and MFIs.

4. The ubiquitous post office may, in the coming days, begin to offer home loan products, with the postal department looking to enter into distribution partnership with home loan major HDFC. They may also distribute non-life insurance and other annuity products of private insurance companies. The Postal department already has distribution partnerships with various organisations like Oriental Insurance, State Bank of India, among others.

5. Private life insurance companies are upset over the Pension Fund Regulatory and Development Authority (PFRDA) plan to go exclusively for public sector pension fund manager (PFM) to manage the new pension scheme (NPS). The process of selecting the three PFMs would soon get started and completed within eight weeks. Only public sector asset management companies would be allowed to participate in the bidding process. The three PFMs are expected to manage the contributions made to the NPS by the new recruits of the Central and State governments effective from April 1, 2004.

6. Union Bank of India has raised its benchmark prime-lending rate by 75 bps to 13.25% from 12.50 %, effective April 11. The bank had last raised its prime-lending rate in February 2007 to 12.50% from 12%.The hike in interest rates will impact advances with floating interest rates linked to BPLR but will not apply to the extant housing loans on a floating rate basis.

7. Bank of India has hiked its benchmark prime-lending rate by 75 bps to 13.25% (12.50%), effective April 13. "Certain categories of advances like agriculture and SME with limits up to Rs 10 lakh, existing home loans that are linked to BPLR, all educational loans existing and also the new ones will not be affected by this increase. It had last hiked its PLR in February by 50 bps.

8. An infrastructure project that requires bank finance can now delay production by a year from the scheduled date of completion. The loan will be treated as a substandard account if the delay is beyond a year. (Against 6 months earlier)Earlier infrastructure projects were given a six months extension. "If the date of commencement of commercial production extends beyond a period of one year after the date of completion of the project, as originally envisaged, the account should be treated as sub-standard. The revised instructions come into force with effect from March 31," said an RBI notification. Factors beyond the control of the promoters may lead to delays in project implementation and involve restructuring or re-schedulement of loans by banks.

9. With the government withdrawing the blanket pass-through taxation status of private equity(PE) funds based in the country, domestic funds appear to be rejigging their portfolios smartly. ICICI Venture made a partial exit from seven listed companies in its portfolio in on March 28, all through bulk deals with UBS Securities. The PE fund would have raised anywhere between Rs 150-200 crore through the partial exits. The new tax regulations governing the pass through status of PE funds came into effect from April 1.