Tides of 24.06.2007

1. Punjab National Bank (PNB) has won the `PC Quest Best IT Implementation Award' for `maximum business impact' for 2006-07.

2. ICICI Bank has fixed the offer price of its follow-on public issue at Rs 940 per equity share. For retail investors the price would be Rs 890, which is a discount of Rs 50 from the offer price.

3. Banks resorting to "extra constitutional" method, like engaging recovery agents, to recover dues from debtors could not be condoned, and the lender bank had ample power to seek recovery, the Madurai Bench of the Madras High Court has held.
Mr Justice K. Chandru, who heard the petition of Mr S. Ovuraj, a farmer, challenging seizure of his tractor and trailer by State Bank of India, Vilathikulam, Tuticorin district, quoted a Supreme Court order [2007(2) CTC 334] dealing with practice of multi-national banks in engaging recovery agents, and said the impugned action of the first respondent bank, "is shocking" inasmuch as owned by Central Government, the bank was also taking similar mode of recovery by engaging agents.

4. Citigroup India said that its net profit for the fiscal year 2006-07 grew 39 per cent, on a conglomerate basis, to Rs 1,566 crore against Rs 1,127 crore in the previous year. The net profit of Rs 1,127 crore in fiscal 2005-06 excludes the Rs 2,188 crore from the gain on sale of holding in one of the group companies. For the year ended March 31, 2007, Citigroup India, comprised of all Citigroup entities in the country, reported revenues of Rs 7,315 crore.

5. The country's foreign exchange reserves rose $1.468 billion to $211.015 billion in the week ended June 22 mainly due to the RBI's intervention in the forex market. The reserves had increased by $1.174 billion to $209.547 billion in the week ended June 8. The foreign exchange kitty has seen accretion to the tune of $7.028 billion in four consecutive weeks. Foreign currency assets rose $1.469 billion to $203.646 billion, according to RBI's Weekly Statistical Supplement.

6. The interest rates have peaked but might soften to some extent in the short term, though it is difficult to give a perspective on this for the medium and long term," said Mr V.P. Shetty, Chairman and Managing Director, IDBI Bank, on the sidelines of its annual general meeting in Mumbai on Friday. Mr Shetty felt that the overall liquidity in the system gave an impression of a comfortable situation and that under such a situation the interest rates might not harden further. IDBI Bank plans to increase its retail portfolio to about 20-22 per cent of its total portfolio in fiscal 2007-08.

7. The Centre would make cash payment of Rs 35,531.33 crore to the Reserve Bank of India for acquiring the latter's entire holding in State Bank of India (SBI). Currently, the RBI has a 59.73 per cent stake in SBI, which is the largest commercial bank in India. The stake transfer involving 31,43,39,200 equity shares of Rs 10 each of SBI would happen on June 29. The ordinance amending the State Bank of India Act to enable the transfer of RBI's entire holding in SBI to the central government was promulgated on Thursday. The Government had in this year's budget provided a sum of Rs 40,000 crore for SBI stake buy from the RBI.

8. Karnataka Bank hopes to disburse Rs 500 crore towards agriculturesector and increase its priority sector lending to 10 per cent from its current level of about 7 per cent. The Chairman, Mr Ananthakrishna, said that growth in other businesses and the difficulties faced by coffee farmers had combined to reduce its exposure in agriculture below the statutory requirement of 18 per cent. The bank hopes to achieve the target in stages by increasing its lending to contract farming segment apart from micro-finance segment.

9. The board of directors of Karur headquartered Lakshmi Vilas Bank has recommended a dividend of 7 per cent for the 2006-07 fiscal against 25 per cent the earlier year. Bank sources attribute it to higher provisioning and additional dividend outgo consequent to the rights and bonus shares issued last year. The audited results show a 19.05 per cent growth in business volume to Rs 8,750 crore (Rs 7,350 crore) and higher total income of Rs 474.99 crore (Rs 357 crore). While the operating profit soared by 84 per cent to Rs 73.58 crore (Rs 39.91 crore), its net slipped to Rs 17.58 crore (Rs 22.47 crore). Its total income increased to Rs 474.99 crore (Rs 357 crore). Interest on advances grew by 44 per cent to Rs 312.12 crore (Rs 216.67 crore). The bank managed to reduce its net NPA from 1.89 per cent to 1.58 per cent. The bank has set for itself a business target of Rs 11,200 crore this fiscal.

10. With global interest rates showing signs of hardening, external commercial borrowings (ECBs) are beginning to become more expensive. Bankers said they have already cautioned some of the intending external commercial borrowers to hedge their open positions. Most international borrowings are currently linked to the London Inter Bank Offered Rate (LIBOR). Six-month LIBOR is currently 5.5 per cent. Inclusive of swap and hedging costs, the effective rates were currently in the region of about 9 per cent. This was assuming that corporates were borrowing at rates of about 100 basis points over LIBOR.

11. Deutsche Bank has posted a net profit of Rs 218.22 crore for the fiscal ended March 2007, an increase of 73 per cent from the previous year's Rs 125.92 crore. Total income increased 40 per cent to Rs 1,625.36 crore, from Rs 1,158.97 crore. Total assets of the bank jumped 47 per cent to Rs 17,715 crore from Rs 12,050 crore.

12. The Security Department of Syndicate Bank's head office in Manipal has been awarded ISO 9001:2000 certificate. This is the first security department among all public sector banks to be ISO certified.

13. Syndicate Bank has launched a small credit scheme tied to its Pygmy Plus 2007 branded deposit product. The loan product offers financial assistance up to Rs 1.5 lakh to customers of small means, including redemption of high-cost debt. It added that the scheme called `SyndsmallCredit' provides flexibility to customers where they can contribute varied amounts at their doorstep to the Pigmy Plus 2007 account. These could ultimately be appropriated towards the loan account. The product also offers a three-month repayment holiday in addition to a stepped-up repayment option, the release added.

14. Syndicate Bank is planning to come out with a public issue during the current fiscal to meet the needs of Basel II requirements and to continue the growth in business, according to the Chairman and Managing Director, Mr C.P. Swarnkar.

15. Bank of Maharashtra has paid a dividend of Rs 66.10 crore to the Government for the financial year 2006-07 at 20%.

16. Karur Vysya Bank has unveiled the triple `S' - Spouse Senior Citizen Deposit Scheme. The scheme is applicable to term deposits opened in the joint names of husband and wife (where one is a senior citizen). In the event of the demise of either of the partners during the pendency of the deposit, the surviving spouse would be eligible to receive one per cent additional interest over the card rate of special interest offered to senior citizens from the date of the original deposit till maturity.

Tides of 20.06.2007

1. SBICAP Securities Ltd has obtained licence from the RBIto offer portfolio management services and the product would be available to investors by September. The company plans to expand its branch network to 50 by the end of the current fiscal and would have 15 franchisees offering its bouquet of services.When the company began its operations, it focussed on institutional players. In the last two years, it has been turning towards retail players and has opened 34 branches across the country.
2. LIC Housing Finance Ltd will be foraying into the reverse mortgage segment within a month. It "sees huge potential in the reverse mortgage segment in view of the changes in the social and economic fabric of the country.
3. PNB has decided not to extend its `PNB Mahabachat' scheme beyond June 30. This is a special fixed deposit scheme launched by the bank early this calendar year to boost its deposits base and fund the surge in credit growth.PNB Mahabachat scheme, which has already been extended twice, is to end on June 30. It offered 9.5% interest per annum to individuals on minimum deposit of Rs 25,000. Senior citizens were offered an additional interest rate of 0.25%.
4.UCO Bank is examining the possibility of providing stock broking services in order to add value to the services it currently provides to its customers.The bank, which will need to tie-up with a broking firm to meet this objective, is aware that a section of its clients are increasingly taking to broking services, given their need to transact in the stock market.
5. Standard & Poor’s Ratings Services on Monday assigned a BB rating to State Bank of India’s (SBI’s) proposed $225-million hybrid tier-I perpetual notes under its $5-billion medium term notes (MTN) programme. BB in the S&P rating scale means inadequate safety.
6. The Indian banking sector, had assets worth $600 billion, which is one-tenth the size of China’s $6 trillion. Indian banks must participate in the growth story. India Inc is investing $500 billion in the next four-five years. If banks have to partner in that process, Banks in India need to grow in size. India was a large market, but to reach economies of scale, technological consolidation should be a priority.
7. The Securities and Exchange Board of India on Tuesday asked 15 stock broking firms, including Indiabulls, and ten other entities to desist from violating SEBI code on futures and options (F&O) trading.
8. The Reserve Bank of India on Monday launched a multi-lingual site, carrying information in 13 languages. The site includes recent instructions of the RBI on customer service, frequently asked questions, lending rates of banks, banking ombudsma n scheme, right to information Act and links to commercial banks’ websites.
9. In the run up to the largest ever share sale by an Indian entity at home and abroad, ICICI Bank on Saturday announced a price band of Rs. 885 to Rs. 950 for its upcoming domestic public offer to mop up Rs 8,750 crs.This is part of the combined offer, wherein India's largest private sector bank would issue American Depository Receipts to raise an identical amount after getting necessary clearances. The bank has an option of retaining an additional 15 per cent bids both from the domestic and international market.
10. An investor protection fund to save gullible investors from defaulting member brokers will be set up by early July, Securities and Exchange Board of India (SEBI) Chairman M Damodaran said on Wednesday.He, however, said the SEBI Act needs to be amended ahead of setting up such a fund. Indications were that the changes will be carried out by July.Investor protection fund will be a consolidated fund that will be created from the money collected through fines and penalties, as per the announcement made by Finance Minister P Chidambaram in his budget speech early this year, Damodaran said.
11. Canara Bank today announced the launch of a new retail loan scheme called 'Canara Guide' to finance Tax Return Preparers (TRPs) selected by Union Ministry of Finance.TRP was a novel scheme introduced by the Centre recently to provide self-employment opportunities to unemployed or partially employed graduates all over the country, a bank release here said.Under the scheme, upto Rs 60,000 would be sanctioned at an interest rate of one per cent less than the Benchmark Prime Lending Rate of the Bank, which is at present 12.25 per cent. The loan was returnable within 60 months.
12. Stock markets continue to remain a key route for corporates' to raise funds for expansion, with the worldwide IPOs space posting a record net proceeds of $246 billion in 2006, a new study shows.

13. India's IPO market emerged as the eighth largest with $7.23 billion (Rs30,000 crs) in net proceeds through 78 public issues, global research and consultancy firm Ernst & Young said in its Global IPO report released on Wednesday.Across the world, the companies raised $ 246 billion, up from $167 billion in 2005, through a total of 1,729 IPOs, led by Chinese companies at the top with net proceeds of $56.6 billion.However, the biggest number of IPOs came from the US with 187 offerings, followed by Japan with 185 and China with 175 IPOs.

Tides of 19.06.2007

1. Financial Intelligence Unit-India (FIU-IND) has been admitted as a member of the Egmont Group at its recent Plenary Session at Hamilton, Bermuda.The Egmont Group is the international organisation for stimulating cooperation amongst FIUs across the globe and has FIUs of more than 100 countries as its members.
2. Even as it is awaiting Government of India's nod for converting into a commercial bank, Repco Bank has set up a NBFC subsidiary exclusively for SME financing.Repco Bank, originally set up to help repatriates (not refugees!) from Myanmar and Sri Lanka, is today a multi-state co-operative bank.
3. Cashing in on the banking community's enthusiasm for reverse mortgage products, Nucleus Software plans to launch a reverse mortgage solution for banks and financial organisations in the next three months.
4. Global rating agency Standard & Poor's assigned its `BB' rating to State Bank of India's proposed $225-million Hybrid Tier I perpetual bonds indicating it as non-investment grade.The bonds would be issued under its $5-billion Medium Term Notes (MTN) programme. The bonds will be perpetual notes with a call option of 10 years from the date of issue, said a press release from Standard & Poor's. The rating differential between the `BBB-' counter party credit rating and the `BB' rating on the Hybrid Tier I notes reflects the junior subordinated nature of the notes and the embedded interest deferral feature.
5. Centurion Bank of Punjab has identified Gangtok as a high growth region.The bank hopes to tap the potential with its products and services, including personal loans, mortgages, wealth management products such as life and general insurance through its partners and a range of select mutual funds.It has opened its first full-fledged branch office.
6. PNB has decided against making any equity offering this fiscal that could lead to trimming of the Government stake from 57.8% to 51%.The bank, however, plans to raise tier-II capital and even look at innovative perpetual debt to fund business growth this fiscal.
7. All international operations of ICICI Bank, comprising branches and wholly owned subsidiaries outside India (except its wholly owned Canadian subsidiary), have broken even. It has a presence in 17 countries.ICICI Bank's foreign operations accounted for 19 per cent of its consolidated balance sheet.
8.Forex reserves virtually make up the Reserve Bank of India's entire assets. From a position of shipping gold to London to borrow a few millions to the $200-billion reserves today, it has been a remarkable journey. A debate on making funds available for infrastructure projects has ensued.To sustain the booming economy there is need for huge investments in infrastructure, but the prospects of rationing of funds and increased costs would act as a dampener. When scarce resources have to be deployed judiciously, some selectivity and rationing are inevitable. Though costlier, opening the LAF or repos window by the RBI would lead to more efficient use of resources. Using borrowed funds would also mean stringent scrutiny of their application.
9. The Centre's buyout of the Reserve Bank of India's entire holding in State Bank of India (SBI) would be done as per SEBI specified pricing formula. The price is likely to be the 26-week average of the quoted price of SBI calculated from a day prior to the date of transfer. The pricing will be as per the SEBI formula.

Tides of 16.06.2007

1. The Centre's buyout of the Reserve Bank of India's entire holding in SBI would be done as per SEBI specified pricing formula. The price is likely to be the 26-week average of the quoted price of SBI calculated from a day prior to the date of transfer. "The pricing will be as per the SEBI formula.

2. Kerala will be declared a "total banking state" by June 30 with every family having at least one bank account. This is in tune with the RBI guidelines for ensuring total financial inclusion in all the districts of the country. In September 2006, Palakkad in Kerala had become the first district in the country to achieve the status of a `total banking district'.

3. The home loan market could grow faster, with the National Housing Bank (NHB) working on ways to structure products that will expand the market for housing finance to include urban slums and low-cost rural housing. The housing regulator is looking at products where the repayment schedules coincide with the cashflow of farmers and self-employed. Banks and housing finance companies (HFCs) prefer to enter this space, in partnerships with established microfinance institutions (MFIs). The key issue in expanding the market to include low-cost funding is the lender’s fixation for equated monthly installments.

4. Goldman Sachs Group Inc, the world's most profitable investment bank, offered to buy shares in ICICI Financial Services. ICICI Financial, which controls the insurance and asset- management arms of India's biggest bank by market value, said on June 12 it received bids from investors for as much as 5.9% of its stake.

5. Consumer education is finding its way into housing finance now. Customers have been questioning disparities in home loan agreements, varied service charges and hidden costs for some time now. They may get answers from a common forum of banks and housing finance companies (HFCs). NHB is mulling over an idea to promote a common forum of banks and HFCs. The idea is to promote customer protection and education in the housing finance arena. Letters have already been dispatched to leading banks and housing finance companies asking for their feedback.

6. The Kerala government has unveiled an action plan to convert the state into a favoured investment destination by promoting public-private partnership in infrastructure development and offering to set up exclusive industrial parks for NRI investors. While the policy speaks about setting up product-specific Special Economic Zones, that in a state like Kerala, large quantum of land like 30,000 acres could not be set apart for SEZs.

7. Foreign institutional investors (FIIs) and mutual funds (MFs) are likely to be allowed to trade in bullion and energy futures on the country’s commodity exchanges. According to officials, the finance and agriculture ministries have finally come to an agreement on the proposal. Besides giving small investors access to the commodities market, the participation of FIIs and MFs is expected to lend depth to trades in these areas. FII and MF investments in commodity exchanges will fall under the purview of the Sebi, while the Forward Markets Commission (FMC) regulates the exchanges.

8. United Bank of India will complete the mop-up of Rs 575 crs upper tier-II bonds today. The bonds are being raised to meet the capital adequacy requirements and fund the business growth in the current financial year. The 15-year bonds are being taken at a coupon rate of 10.65%.

9. ICICI Bank is offering baits to entice retail investors to invest in its equity share issue aimed at mobilising Rs 10,062.5 crs from the domestic market, including a greenshoe option (or, the option to retain a part of the oversubscription) of Rs 1,312.5 crs. Apart from a discount of up to 5%, the bank is providing small investors an easy option to pay for the shares on offer through the book-building process (an auction conducted by investment bankers). Retail bidders also have the option to pay only Rs 250 per share on application, Rs 250 on allotment and the balance on call, which will be issued within six months of allotment. ICICI Bank will also list the partly paid shares for the benefit of retail investors. ICICI Bank has defined retail investors as individual bidders, including Hindu undivided families and NRIs, whose bid amount does not exceed Rs 1,00,000.

10. UTI bank , the third largest private bank of the country, has chalked out a plan to increase its lending in Orissa by 55 % during the current fiscal. The bank , which lent Rs.450 crs during 2006-07, plans to increase lending to Rs.700 crs during the current fiscal. However, in the overall growth of credit, focus will be on priority sector lending. The bank's lending to the priority sector of the state was Rs.140 crore last fiscal. It aimed to increase priority sector lending by 64 percent to Rs 230 crore. Similarly, the agricultural lending target had been raised by 91% to Rs 65 crs from Rs 34 crs at present.

11. IDBI Bank will set up a mutual fund subsidiary with IDBI Capital markets, its wholly-owned subsidiary, once its proposed life insurance venture gets off the ground. The bank will have a 65% stake in the asset management company (AMC) with IDBI Capital holding the remaining share, according to a senior IDBI official. The bank’s application for setting-up the AMC business is already with the RBI. The central bank, however, has asked the public sector bank to focus on getting the insurance business off the ground before taking up new businesses.

Tides of 13.06.2007

1. ICICI Bank will issue a 5.9% stake in its proposed subsidiary (the holding company for its non-banking businesses) for Rs 2,650 crs to private investors. This would value the subsidiary at Rs 44,600 crore on a post-issue basis, said the bank in a letter to the National Stock Exchange. ICICI Bank said that discussions had been initiated with potential investors and definitive offers have been received for the subscription to equity shares of the proposed subsidiary. The bank did not elaborate on the identity of its potential investors.

2. HDFC Bank has bagged the Best Retail Bank in India award at the sixth Asian Banker Excellence in Retail Financial Services Awards function held in Shanghairecently. At the same programme, ICICI Bank won the inaugural Excellence in Remittance Business award for outstanding performance in 2006. About 150 senior bankers from award winning banks in 22 countries across the Asia Pacific, the Gulf Region and Central Asia attended the programme, administered by The Asian Banker.

3. IndusInd Bank may set up a wealth management subsidiary and hopes to tie-up with an overseas player for the same.
It has a comfortable capital adequacy ratio of about 12.54% and it can look at setting up a subsidiary. It may partner an overseas entity and will soon apply to RBI for permission. It has a sizeable client base of NRIs and Indian residents who are high networth individuals or mass affluent customers. The wealth management business will benefit these customers.

4. Ranbaxy Group promoted Religare, a financial services provider, and Indusind Bank have a
tie-up; the bank will provide a 3-in-1 offering for the bank's savings account customers with a savings and a DP account from the bank along with an Internet trading account from Religare.
Initially, Religare will provide Internet trading platform to the bank's customers eventually followed by the entire spectrum of Religare's services.

5. Karnataka Bank Ltd has targeted a forex business of Rs 8,500 crs during 2007-08. The bank, which achieved a forex merchant turnover of over Rs 6,100 crs showing a growth of around 31.53 % during 2006-07, has envisaged an addition of Rs 2,400 crs for 2007-08. During 2006-07, the export credit outstanding crossed Rs 1,100 crs amounting to 11.47 % of net bank credit of the bank. For the current fiscal, it has targeted an export credit of Rs 1,450 crs.

6. Some 35,000 women members of the Self Help Groups (SHGs) in the Nilgiris under the umbrella of Repco Foundation for Micro Credit, an NGO floated by the Union Home Ministry's Repco Bank, can now look to have their products getting internationally marketed, thanks to a memorandum of co-operation (MoC) which the Repco Bank will enter into with the Exim Bank on June 15.

7. IndusInd Bank Ltd has informed the BSE that Mr R. Seshasayee has been appointed, with the approval of Reserve Bank of India, part-time non-executive chairman of the bank for a period of two years. Mr Seshasayee is the Managing Director of Ashok Leyland, the Hinduja Group flagship company. Prior to Mr Seshasayee, Mr R.J. Shahaney was the non-executive chairman of the bank.

8. Barclays Bank PLC, which recently launched retail banking services in India, has tied up with ICICI Lombard General Insurance Company Ltd for bancassurance. ICICI Lombard will provide exclusively designed non-life insurance products for Barclays retail customers. It will also provide insurance products for Barclays customers who have availed themselves of credit cards, personal loans, SME loans, premier investment services or any other banking products.

9. Bankers may not break into a jig to the tunes of ringing cash registers in the manner of heroes of films that they finance. But they have reasons to feel happy. With a better repayment record than conventional loans, film financing has the best script in their business. "The film-financing scheme has been quite successful and bad loans so far are negligible," says Mr Jitender Balakrishnan, Deputy Managing Director, IDBI Bank, a big player in this business. For Exim Bank it is an even better story. "There are no bad loans in this segment," said Mr Mathew John, General Manager and Head-Corporate Banking, Exim Bank.

10. A 13-year-long saga of stake-sale controversy in Tamilnad Mercantile Bank ended last month, when seven foreign investors bought out the holding of Mr C. Sivasankaran. With a networth of Rs 760 crore and total business of Rs 10,067 crore, Tamilnad Mercantile Bank is one of the more profitable old private sector banks in the country. Growth had been stunted to some extent by the controversy surrounding ownership. Now with that problem gone and with a new professional at the helm of affairs, TMB is like a just-unshackled racehorse.

11. In what is arguably the first buyout led by an Indian private equity firm in the international market, ICICI Venture, the private equity arm of ICICI Bank, has acquired majority control in US-based clinical research company Radiant Research. The deal amount is not known but said to be in millions of dollars. Last year Radiant Research had sold a part of its clinical research business, constituting eight clinical pharmacology centres, to US-based clinical research company Covance for $65 million. Today, Radiant has 26 other clinical centres. Going purely by the number of centres, the current deal led by ICICI Venture could have been valued at $150 million plus.

12. The central bank’s efforts at tempering the rate of loan growth through monetary measures are paying off. According to the figures released by the RBI, loan disbursements dipped by Rs 36,672 crore since end-March 2007 to Rs 18,86,520 crore on May 25. Last fiscal, loans had dipped by Rs 13,644 crore during the same period. On a year-on-year basis, the growth was 26.3% as against 30.9% last year.

Tides of 11.06.2007

1. To facilitate faster credits, State Bank of Hyderabad has introduced `Express Clearing' in its 104 branches in Hyderabad and Secunderabad. "Express Clearance is the first of a number of programmes lined up for the next couple of months to provide higher comfort levels to the customers. While the cheques drawn on any branch of our bank can be cleared on the same day, instruments drawn on other local banks would be cleared within one working day. All 104 branches of the bank in the twin cities would have a drop box. Further, a jumbo box is kept at the service branch in Abids here which would be cleared once in every half an hour for processing cheques and DDs.
2. Fixed maturity plans, which were hugely in demand till recently, are suddenly not so hot any more. Other debt products, and, certainly, bank deposits, seem to be regaining their appeal insofar as a large section of the market is concerned. The situation calls for a fresh look at the FMP segment, especially with regard to the products that are now in place and the ones that are likely to be rolled out in the near future.
3. Fraudsters have declared an open season on banks. And most ‘serious’ fraudsters are using non-electronic methods to cheat. Largely because electronic methods are easily traceable. While methods vary, all of them revolve around misleading banks about the identity of fraudsters. A popular technique they use is the ‘set-up’ fraud. Consider the case of Godrej Consultancy. This company had nothing to do with the Godrej group, but it was enough to attract direct selling agents who were looking forward to acquire new customers. There were around 30 employees in the company which had an operational record of around three months. Based on the name and operations, the employees were able to obtain credit cards from many important banks. After receiving the cards, they maintained clean credit histories on credit card spendings for a while, which attracted banks to sell them personal loans. The moment the loans were disbursed, the employees did a vanishing act. Thus, banks became victims to what is termed as identity theft. There is an estimate that many banks have lost at least Rs 1 crore through this modus operandi, but no bank is willing to admit the problem.
4. Life Insurance Corporation of India is reducing its exposure to real estate stocks, taking a cue from the banking regulator, the Reserve Bank of India, which has warned of an asset bubble building up in the sector.
5. The Reserve Bank of India (RBI) has announced enhanced auctions of treasury bills and government bonds totalling Rs 22,000 crore next week as part of the government’s borrowing programme. The RBI will on Monday issue 91-day and 182-day treasury bills for Rs 3,000 crore and Rs 2,000 crore, respectively, followed by auction of 7.49 per cent, 2017 bond in tranches of Rs 5,000 crore on Tuesday and Rs 6,000 crore on Friday. Another auction of 91-day and 182-day t-bills for Rs 5,000 crore would be held on Wednesday.
6. The Reserve Bank of India has barred companies from raising funds overseas through issue of optionally and partially convertible bonds under foreign direct investment (FDI) regulations.
Companies will now be allowed to only sell bonds that compulsorily convert into equity within a specified timeframe.

Tides of 10.06.2007

1. Foreign banks with presence in India and Indian banks with overseas operations may have to categorise their income from banking services (such as loans, deposits, payment services, among others) into income paid by "residents" and "non-residents". This is one of the suggestions made by a technical group set up by the RBI to "finetune" the data (for statistical purposes) on international trade in banking services for negotiations under General Agreement on Trade in Services (GATS).

2. Pressure is mounting on the Finance Ministry to look into various aspects of the reverse mortgage scheme and take decisions on tax treatment at the hands of both the borrower and the lender under such a scheme. With reverse mortgages taking off in a small way in the Indian market, bankers and prospective users of this product are keen that all taxation issues are addressed upfront by the Ministry as a matter of precaution. Sources said that the Ministry was looking into the taxation aspect and no final view has emerged on the taxation policy on reverse mortgages. The main contentious issue is whether the recurrent monthly payments received by a senior citizen under a reverse mortgage (equitable mortgage) would be characterised as a capital receipt or income for taxation purpose. Also, clarity is needed on whether any element of profit embedded in cases where the loan is substantially more than the cost of acquisition of the property should be brought to tax or not.

3. City Union Bank plans to introduce yet another deposit scheme - `CUB 500', effective June 11. The bank has decided to offer interest at 10.75% for general category and 25 basis points higher for senior citizens, who park their funds under this scheme. Depositors have to invest a minimum of Rs 10,000 under this scheme. The upper limit is Rs 2 crore. The bank is expecting to garner Rs 2,000 crore through this product.

4. Recent private equity investments in non-banking finance sector in India portend further consolidation in this segment, likely to be driven by foreign banks and financial institutions trying to find a way out of restrictive regulations, observers say. While strategic investors pick up stake in companies as a part of growth plans, private equity players tend to invest in companies only to sell their stakes eventually (usually in about seven years). In case of investments in publicly-held companies, the exit could even be earlier. Thus, investments by private equity players could be an indicator of what they expect to happen in that sector.

5. IFCI Ltd has got a tax refund of Rs 3.8 billion. The refund was on account of some extra provisioning from previous years, and "this will add to the profits of this quarter."

6. The new Confederation of Indian Industry (CII) president, Sunil Bharti Mittal, wants US companies to make long-term and "inclusive" investments in India as the country today offers "the perfect combination" for partnership. "Thanks to economic reforms India is growing at a fast pace, understanding of US industry is increasing in India and irritation levels are going down in America."

Tides of 9.06.2007

1. The export prices of Indian products in major exporting sectors have become uncompetitive by 10-12% on an average compared to competing countries' products as a result of rupee appreciation against the US Dollar, according to a survey conducted by industry chamber FICCI.
2. Forex reserves have increased by $3.439 billion to $208.373 billion for the week-ended June 1 on revaluation of non-dollar currencies against the dollar and RBI's intervention in the forex market. Forex reserves had gone up by $952 million to $204.934 billion for the week-ended May 25.
3. The air is abuzz with talk of a new hi-tech, low-cost deal for farmers and other rural folk. Hub and spoke models are spoken of, and ATMs wired for bio-and speech-recognition. Salaries, loan disbursals, proceeds of bulk sales at procurement centres and market yards, and revenue earned by sales to private traders, could be directly credited at a centralised location. Account holders could check that this has been done, or draw on this money at any one of the dozens of ATMs sprinkled all over the place. Tedious visits to branches, time and time again, would no longer be necessary. But, though life would become a great deal easier for account holders, whose numbers would, therefore, increase in leaps and bounds, bankers themselves would need to be pretty nimble to avoid indiscriminate lending and ensure good recoveries. Customers, too, would face a problem if they wished to deposit cash. ATMs can pay out thousands in a jiffy. But their ability to count is greater than their ability to recognise what they are counting. They can be `taught' how to scrutinise notes fed into them. But they are slow learners. It would still take them three to five minutes to verify every note. Feeding 100 tenor fifty rupee notes into an ATM would take pretty much all day.
4. The Union Finance Minister, Mr P. Chidambaram, has asked the Security Printing Press - Hyderabad (SPPH) to diversify into tapping commercial business opportunities in smart cards, university degree printing, MICR cheques, National I-Card project and so on.Promising substantial investments in the next 5-10 years in equipping the Press with latest technology, Mr Chidambaram said the National I-Card project itself demands 100 crore cards. Similarly, printing of driving licenses offers big business.
5. RBI has mandated that only instruments which are fully and mandatorily convertible into equity, within a specified time would be reckoned as equity under the Foreign Direct Investment policy; and reckoned as eligible for issuance to persons resident outside India.
6. Centurion Bank of Punjab is providing loan to DLF group employees to participate in the issue of DLF Ltd. The bank offered to provide loans to the DLF employees for subscribing in the IPO against shares. One million shares are reserved for the employees of DLF out of a total offering of 175 million equity shares of Rs 2 each at a price band fixed between Rs 500 and Rs 550. Only a section of the 2,600 employees, including 2,100 professionals of DLF group comprising DLF Ltd and its subsidiaries, will be eligible for the preferential allotment of equity shares from the company's upcoming IPO.
7. Air India has floated enquiries calling for bids from banks and financial institutions for the second tranche of aircraft deliveries beyond December 2007 till March 2009, as also pre-delivery payments in respect of aircraft and spare engines. The financial packages have been invited for EXIM guaranteed facility for $1.06 billion and commercial facility of $181.25 million for 10 aircraft, comprising a combination of 777-200 LRs, 777-300 ERs and 787. Air India said it would evaluate any other innovatively structured financing package that is not based on US EXIM- guaranteed financing or a sovereign guarantee.
8. Gross bank credit fell by Rs 4,541 crs and stood at Rs 18,86,520 crs for the fortnight ended May 25, according to the RBI 's Weekly Statistical Supplement. The gross bank credit was inclusive of food credit, which dropped by Rs 2,541 crs to touch Rs 44,864 crs and non-food credit, which fell by Rs 2,001 crs to Rs 18,41,656 crs.
9. Barclaycard, part of the Barclays Bank Group, sees partnerships as a cornerstone for its growth in the Indian credit card market. Although a recent entrant in the domestic credit card market, it soon hopes to be among the larger players in this market on the back of its brand equity, product innovation and the focus on scale besides partnerships.
10. The All India State Bank Officers' Federation has deferred the countrywide strike scheduled for June 8 by two weeks. It has deferred the strike to avoid inconvenience to customers and also to give some time to the management to address its demands. The federation had called for a strike in protest against the "unilateral actions" by the management on issues such as promotion policy and outsourcing of core banking operations to private institutions.
11. Bank of Baroda and Reliance Capital Asset Management Co Ltd have entered into a marketing tie-up for distribution of Reliance Mutual Fund products through select branches of the bank. BOB looks at this tie-up as customer centric strategy. In the drive towards providing greater customer convenience, the bank will continue to enlarge its basket of products, both its own and also third party, leveraging its vast branch channel, latest technology and customer base.
12. "A large foreign bank" is on the verge of picking up minority stake (up to 49 %) in Repco Home Finance Ltd, the housing finance subsidiary of Repco Bank, the Chennai-based multi-state co-operative bank. Confirming this to Business Line, Mr M. Balasubramanian, Managing Director of Repco Home Finance, said that the deal was likely to be sealed in August. "The due diligence is over and we are in the final stages of negotiations," he added.
13. The loans against securities (LAS) scenario is undergoing another round of change, with lending institutions looking at hiking rates in the context of recent modifications in the interest-rate structure and growing uncertainties in the markets. Investors who had lately opted for LAS point out that many of them now have a tough time dealing with revised rates, following decisions by LAS providers to do so. Such moves are to be seen against rates that have risen steadily over the past few months. Capital market circles agree that investors — bank clients who have taken loans — may well find it more expensive to borrow and invest, a likelihood that may discourage a section of them from adding to their leveraged exposure.
14. Foreign investors have picked up 46,862 shares of Tamilnad Mercantile Bank Ltd , which works out to 16.47% of the paid-up equity of the bank. Members of the Nadar community have also purchased another 48,556 shares of the bank, or 17.06%. With this, all the 95,418 shares (33.58%) of the bank that were with Mr C. Sivasankaran, Chairman of the Sterling group of companies, have been bought out. This effectively brings the curtain down on the controversial stake-sale that has been raging for 14 years now.Senior sources in the bank said that the transactions have been approved by the RBI.
15. The Finance Ministry plans to take a re-look at the criteria for appointment of additional executive directors (EDs) in public sector banks (PSBs), especially from the viewpoint of the number of branches. Currently, the additional ED appointment is determined on the parameters of business turnover and number of branches. For the recent round of additional ED appointments, the Finance Ministry went by the parameter of Rs 1,00,000 crore of business turnover and branch network of around 2,000 as on the balance sheet date of March 31, 2006.
16. Banks and financial institutions in the country might lay a major thrust to the adoption of packaged software in areas beyond core banking. The non-core banking applications are that of customer relationship management and human resources management among others. Packaged software worth $263 million has been purchased and installed by banks and financial institutions during 2006, according to a recent Skoch Consultancy research, which is expected to go up to $305 million in 2007.

Tides of 5.06.2007

1. Bank of Baroda plans to launch a `reverse mortgage' - a stream of loan payments against the homeowner's net equity stake in the property- product for customers based on the recent guidelines issued by the National Housing Bank (NHB). It will introduce a `reverse mortgage' product in the next three months' time based on the revised NHB guidelines.
2.HDFC Bank has opened 19 branches in a day in Delhi and the National Capital Region (NCR), outdoing its own record of 14 branches in a day in October 2005. With the launch of 19 branches on Saturday (June 2), the total number of branches in Delhi and NCR has gone up to 116 and to 270 in North India. As on March 31, 2007 the bank had a network of 684 branches and 1,605 ATMs in 316 towns and cities.
3. More than a million small borrowers, who are approaching micro-finance institutions (MFIs), to get their financial needs will be brought into an electronic portfolio, which makes it easy to keep track of their operations. Through the implementation of a software solution, it would soon be possible to capture data transactions from the various units of the MFIs, operating in the rural and semi-urban areas, where the small borrowers are. An Electronic Portfolio Tracker will be put in place. To make this possible, Spandana-Spoorthy Innovative Financial Services, an MFI and Satguru have signed a memorandum of understanding. They will together develop a management information system, to be called Spandana Information Management Systems (SIMS).
4. The five PSBs where CMD appointments have been made are Indian Overseas Bank (IOB), Punjab National Bank (PNB), Bank of India (BOI), Indian Bank and Oriental Bank of Commerce (OBC). After the due clearance from the Prime Minister's Office (PMO), the Finance Ministry today issued formal orders for the lateral movement of Mr T.S. Narayanasami, CMD of IOB, to BOI and Mr K.C. Chakrabarty from Indian Bank to PNB. The latest round of top-level appointments also saw a number of executive directors (EDs) getting elevated as CMDs.
The UCO Bank Executive Director, Mr S.A. Bhat, has been promoted as CMD of IOB. While Mr M.S. Sundara Rajan, currently Executive Director of Indian Bank, has been elevated as CMD of the same bank, Mr Alok Mishra, Executive Director at Canara Bank, has been promoted as CMD of OBC.
5. Dr A.K. Khandelwal, CMD of Bank of Baroda, has been appointed as Deputy Chairman of Indian Banks' Association (IBA). Dr Khandelwal succeeds Mr S.C. Gupta, Chairman and Managing Director of Punjab National Bank, who retired from services of the bank on attaining superannuation.
6. Private sector lender City Union Bank has received shareholders' approval to raise over Rs 125 crore by allotting equity stakes to a clutch of domestic and foreign investors.
7. IFCI is planning to carve out its bad loans amounting to nearly Rs 6,000 crore and transfer them to its asset reconstruction company in a bid to separate grain from the chaff. ARC is expected to buy out bad loans at a significant discount — less than 30% of the original outstanding amount. Initially, bad loans of IFCI, which are to the tune of Rs 6,000 crore, will be bought out by way of loans. This means that the ARC will buy out bad loans for Rs 2,000 crore and is expected to generate recoveries of at least Rs 4,000 crore over these assets.
8.

Tides of 4.06.2007

1.Tamilnad Mercantile Bank (TMB) has signed up with UAE Exchange Centre LLC, Abu Dhabi, for money transfer services. The arrangement, which comes into effect immediately, enables NRIs in the Gulf to remit funds to India by sending rupee drafts drawn on the UAE Exchange Centre to any of the 182 branches of the bank. This includes both the traditional draft drawing arrangement and the speed remittance arrangement that provides Web-enabled money transfer in minutes.
2.Madhu, serving a life imprisonment, is a member of one of the three self-help groups (SHG) formed by the SBI in the female prison of Yerawada Jail, on the outskirts of Pune.The bank has formed three groups — Savitri, Jijau and Mahalakshmi — with about 12 members in each group."As the prisoners in jail cannot carry the banking functions on their own, SBI has included two women jail guards and a member of an NGO called Janeev Samajik Sanstha in each of the group for operating accounts on behalf of the prisoners. The inmates of the jail feel that the group concept has created a bond and a spirit of healthy competition among them. "We now sit together and discuss our ideas freely.
3. The repayment of housing loans should be flexible enough to take into account the income flows of individuals, said Dr Rakesh Mohan, Deputy Governor, RBI."There is a need for standardisation of procedures and documents in the area of housing finance. There should also be flexibility in collection systems," he said, speaking at a seminar on `National Conference on Affordable Housing' .Dr Mohan's observation comes on the heels of an RBI notification issued in May advising banks to consider having a ceiling on the interest rate besides processing and other charges on housing loans.
4. SC VTB Bank (VTB), Russia's second biggest bank, hopes to start operations in India by opening a corporate branch in the Capital by the year-end. The bank aims to address problems of Russian companies operating in India on issues that arise in their foreign economic activities.
5. The National Housing Bank is working on several new initiatives in the area of housing finance including the introduction of Certified Independent Mortgage Counsellors."These counsellors will represent the borrower," said Mr S. Sridhar, Chairman and Managing Director, National Housing Bank. Globally, such independent advisors help clients obtain mortgage finance at the most competitive rates from lenders.
6.The country's foreign exchange reserves rose by around $952 million to $204.934 billion for the week ended May 25, due to the RBI's intervention in the forex market.In the week ended May 18, the reserves had fallen by $9 million to $203.98 billion.
7. Punjab & Sind Bank saw a sharp rise in profitability and a steep decline in its NPAs for 2006-07.The bank's net profit more than doubled in 2006-07 to Rs 218.53 crore from Rs 108.32 crore (102 per cent) in the previous year. Its gross profit went up by 76.55 % to Rs 472.44 crore (Rs 267.60 crore). The return on assets stood at 1.01 %.
8. UTI Bank plans to raise fresh capital by way of an overseas issue and a preferential allotment to promoters.In a notice to the Bombay Stock Exchange, the bank said it would raise its Tier-I capital (core capital) by issuing up to 4.23 crore equity shares. Overseas issue would be equity linked securities or depository receipts.The bank would be raising around Rs 2,442 crore through the fresh issue.The bank will also offer 3.19 crore shares to the promoters on a preferential allotment basis. This is to help maintain the promoters' stake after the overseas issue.
9. Indian Bank has launched biometric-enabled smart cards to bring about financial inclusion in the unbanked areas. The card was launched at a function held at Dharavi, Mumbai.
10. Married couples where one of the partners is below 60 years can now avail themselves of reverse mortgage loan (RML) facility. Earlier, the National Housing Banks (NHB) norms required both the partners to be above 60 for availing themselves of the scheme.In a release issued today, NHB said that it has relaxed the age restriction for availing loan facility by senior citizens under the RML scheme.
11. ICICI Lombard General Insurance Corporation Ltd has raced ahead and grabbed the second spot in the insurance sweepstakes, displacing three public sector companies in the process.ICICI has earned a premium of Rs 448.65 crore for April, a 35 % growth over the corresponding period of the last financial year. Public sector New India Assurance, however, remains on top with a gross premium of Rs 650.82 crore for the same period. New India has grown by only 8.2% over the corresponding period of the last financial year.
12. Canara Bank, Thiruvananthapuram Circle, has entered into a memorandum of understanding with the Southern Railway division here for installation of 11 ATMs-cum-e-ticketing kiosks at the railway stations in the State.The ATMs will be installed at Thiruvananthapuram, Ernakulam, Kollam, Thrissur, Kayamkulam, Kottayam, Thrissur, Guruvayur, Changanassery and Wadakkancherry.
13. YES Bank has launched a $100-million (approximately Rs 400 crore) private equity fund called the Food and Agribusiness India Fund. The objective of the fund is to invest in around 10-15 companies in the food and agribusiness sector.