Tides of 30.11.2007

1. Indian workers in other countries will soon be able to send money, less than $100, to their family back home using a mobile phone. Bharti Airtel and Western Union have decided to jointly develop and pilot a mobile money transfer service in the country. The move is part of a global initiative by the GSM Association wherein 35 mobile operators spread across 100 countries have taken a commitment to enable the world’s 200 million international migrant workers to easily and securely send remittances to their dependents.

2. Short-term hedging, particularly those ranging from 12 months to within three years, are the most frequently used by corporates and there are hardly any takers for the long-term hedging contracts in India, as per a survey report.

3. The Insurance Regulatory and Development Authority (IRDA) plans to soon come out with separate guidelines for health insurance players, aimed at comprehensive medical insurance coverage and redressal of consumer grievances.“To handle a plethora of issues relating to health insurance with focussed attention, a separate health unit has been set up in the Authority; specialised resources have been inducted to strengthen the role of IRDA in the development and better conduct of health insurance business,” Mr C.S. Rao, Chairman of IRDA, said at a conference organised by FICCI.

4. Faced with a deteriorating US dollar, public sector banks (PSB) are beginning to reduce their cash and cash equivalent balances with the American banks and shifting to the Euro.

5. Mr K.V. Kamath, Chief Executive Officer of ICICI Bank, has been named the Businessman of the Year 2007 by Forbes Asia magazine. The 60-year-old is the third Indian in four years after Mr Nandan Nilekani of Infosys.

6. Reliance Industries Ltd plans to investment Rs 17,000 crore in oil and gas exploration over the next few years.

7. Credit Analysis & Research Limited (CARE) and United Bank of India have signed a MoU for facilitating Bank Facility Ratings to borrowers of United Bank of India from CARE for the purpose of Basel.

8. ICICI Bank is talking to the West Bengal government to involve with the University of Calcutta for starting a banking and insurance course.

9. Bank of India (BoI), along with its partners Union Bank of India and Dai-Ichi Insurance, is likely to infuse around Rs 500 crore in the next 6-7 years in a proposed life insurance joint venture.

10. The Foreign Exchange Services (FES) division of Centurion Bank of Punjab Limited (CBoP) is contemplating forging tie ups with travel companies like Kuoni Travel Group and Cox & Kings for launching various travel products. Aimed at offering convenience in payments and credit to travellers, the FES division plans to launch a slew of products including holiday loans and travel-oriented cards. The move is aimed at cashing in on the growing outbound tourism market in India. The number of Indians travelling abroad is set to reach 50 million by 2010.

Tides of 24.11.2007

1. Import power plants, facilitate corporate borrowings, reduce dollar liabilities, and don’t squander away foreign exchange (forex) reserves. These are among the suggestions that Mr N. A. Mujumdar makes in a recent book titled ‘Inclusive Growth: Development Perspectives in Indian Economy’ ( www.academicfoundation.com).

2. The country’s forex reserves increased by $967 million for the week to touch $271.148 billion for the week ended November 16, as per figures released by the RBI. The forex reserves had increased by $3.663 billion to touch $270.181 billion in the previous week. Forex reserves have been rising for over two months now. The buying of dollars by the RBI to keep the rupee from appreciating suddenly has also helped augment the forex kitty.

3. ICRA Ltd and the city-headquartered United Bank of India have signed a memorandum of understanding to rate the bank’s loans and its other exposures under the standardised approach of RBI’s new capital adequacy framework for Basel-II. According to statement by the company, its ratings for the standardised approach would be carried out under its ‘Line of Credit” rating service, and would enable UBI to assess the new risk weights applicable to its borr owers under Basel-II. The risk weights would be linked to the various rating categories and would be as per RBI’s relevant guidelines. ICRA will assist borrowers of the bank to obtain ratings and offer special terms to the clients of the banks covered by the MoU. An ICRA rating for the bank’s client will enable faster loan processing and competitive credit terms from the bank.

4. The merger of Centurion Bank of Punjab (CBP) with the Kerala-based Lord Krishna Bank (LKB) would be completed by March next.

5. Effective management, optimal use of capital, and implementation of sound human resource practices are the key challenges facing the Indian banking industry, according to Mr. H N Sinor, Chief Executive, Indian Banks’ Association (IBA). These must be addressed in order to prepare Indian banking for adopting global best practices. “Managing capital risk is particularly important in order to maximise returns,” said Mr Sinor, in the context of two-day Bankers’ Conference (BANCON) in Mumbai, starting November 26.

6. The Life Insurance Corporation of India has formed a separate company called “LIC Pension Fund Ltd” to manage pension funds. This is the first company incorporated in India to manage pension funds under the New Pension System (NPS).

7. Banks may have access to a new means of loan recovery if the recommendations of a working group appointed by the Indian Banks’ Association are accepted by the Reserve Bank of India and the Government.The IBA’s suggestions include setting up of fast track courts on the lines of a ‘Lok Adalat’ to facilitate the speedy recovery of loans and repossession of property within the existing legal framework.“What is missing in our country is the presence of some special courts, which can deal with such cases expeditiously. There is a need to create such infrastructure so that there is some legal recourse for such problems,” said Mr H. N. Sinor, Chief Executive, Indian Banks’ Association.The working group will submit its recommendations in the next 15 days.

8. Dhanalakshmi Bank Ltd is contemplating the rights issue route to enhance its capital base.

9. ICICI Bank has joined hands with Johnson & Johnson, world’s largest healthcare product manufacturer and had offered a free blood glucose monitoring test for its customers at Vadakara branch.

10. Indian corporates have raised around $11.9 billion through overseas borrowing in the first five months of 2007-08, according to the Reserve Bank of India (RBI) data on external commercial borrowings.

Tides of 21.11.2007

1. The global economic and financial environment continues to deteriorate. The (sub?) prime concern is the US. A new study estimates credit will contract $2 trillion as financial institutions repair balance sheets. That puts a lot of new lending on hold, which means less spending (the American economy is credit-driven, if not anything else) and considerably increases the odds of a recession.
2. State Bank of India has tied up with its wholly owned subsidiary SBICAP Securities Ltd for providing e-trading services to its customers, the bank said in a notice to the BSE today. SBI already provides online trading through ‘eZ-trade@sbi, in a tie-up with Motilal Oswal Securities Ltd. It is a three-in-one account where the demat account and the savings or current account is with SBI and the trading account is with Motilal Oswal.
3. ICICI Prudential AMC has entered into a strategic partnership with Central Bank of India for distribution of its mutual fund schemes to further strengthen its distribution reach. Central Bank of India will now be distributing ICICI Prudential Mutual Fund products to its customers across India. This alliance between ICICI Prudential AMC and Central Bank of India will be a step further towards reaching retail investors and providing them with investment solutions to facilitate their inclusive growth in the process of wealth creation.
4. Syndicate Bank has launched an online loan application facility that does away with the branch as an intermediary for generating loan queries. The bank has launched this facility for housing loans, educational loans, Rs 10 lakh and above loans for SME sector and Rs 2 lakh and above loans for self-employed, professionals and traders.
5. State Bank of India Staff Association (SBISA) will oppose the merger of associate banks with State Bank of India, despite having agreed to the merger of Bank of Saurashtra with the parent bank.
6. The US economy may fall into a recession if the Fed takes counter-measures, such as tightening credit.
7. The Indian banking sector is undergoing rapid transformation and is expected to change and evolve considerably in the near future.Mainly two factors are driving these changes. One, Indian banks are gearing up to face the post-2009 challenges, when they will be exposed to increased foreign competition. From April 2009, foreign banks will be allowed to own up to 74 per cent stake in Indian private banks. The foreign banks with large capital, advanced technology, best international practices and skilled personnel are expected to pose competitive challenges to Indian banks. Two, several Indian banks are expanding overseas as Indian companies are going global and India is attracting more foreign capital. Banks have to match their services to global standards.
8. The Hinduja Group is planning to enter the financial services space in India with a bang. Apart from plans to set up life insurance, non-life insurance and asset management companies, the group is also working towards areas such as wealth management, broking and portfolio management services. The group has finalised its partners for setting up a holding company, which will have three business arms offering wealth management, broking and portfolio management services. In a three-way agreement, IndusInd Bank along with AMAS Bank (a private banking entity owned by Hinduja Group in Switzerland) will own 51 per cent stake while the foreign partner will own the remaining 49 per cent in the holding company. IndusInd Bank officials, however, refused to disclose the name of the foreign partner.
9. Life Insurance Corporation of India (LIC) is in another legal soup, this time on overcharging of fees for assignment of insurance policies. LIC is already facing two legal suits over not allowing assignments for trading and lending in ealrier insurance policies. The petitioner in the present case is Dravia Finance, an NBFC owned by Ketan B Mehta, the person who won both the ealrier cases in the Bombay High Court against LIC over the same issue. Assignment or transfer is a method by which a policyholder can transfer his rights and benefits in the life insurance policy to another entity. The assignee entity can be a family member, relative, friend, a lending institution like a bank or a non-banking finance company (NBFC). The case has been filed in the Bombay High Court on grounds that Section 38 of the Insurance Act does not permit any insurer to exceed a fee of Re 1 for an assignment.
10. Indian Bank is gearing up to further its financial inclusion initiatives and increase penetration into rural areas. The public sector bank, the first one to implement a financial inclusion project (which involves instilling the banking habit among the lesser privileged of urban and rural India), expects to open five lakh “no-frills accounts” to encourage rural savings and business ventures by the end of this financial year. It has already opened over 4.5 lakh such accounts.

Tides of 17.11.2007

1. Corporation Bank on Friday launched two maiden services for its customers — ‘Financial Health Check-Up’ and ‘Invest Shoppe’ — in Mangalore. While the financial health check-up service facilitates the customer to get his/her finance portfolio examined from the point of having a healthy mix and to get advice on risk-reward portfolio sharing, Invest Shoppe provides a host of financial services such as investments in share market, sale of mutual funds and gold coins and tax collection under one roof.

2. Inflation is the result of synchronised currency debasement by central bankers the world over. The markets understand this better and have been sending the right message through rising gold prices, particularly during the last few years. The RBI woul d do well to read the signals and take appropriate measures, says SHANMUGANATHAN in Business line.

3. The country’s forex kitty swelled by $3.663 billion to $270.181 billion for the week ended November 9. The reserves had increased by $4.068 billion to touch $266.518 billion for the week ended November 2, 2007.

4. Resident Indians may soon have a new instrument to hedge themselves against exchange rate fluctuations. A panel appointed by the Reserve Bank of India has recommended trading in currency futures on dedicated exchanges.A currency future is an exchange-traded derivative that allows investors to sell or buy a currency at a fixed price on a future date. To begin with, futures trading would be allowed only in rupee-dollar contracts. The Indian rupee has appreciated by around 11 per cent against the dollar this calendar year.

5. United Bank of India proposes to shortly launch online trading of shares and cash management services as part of its efforts to boost non-interest income. It has achieved more than 65 per cent growth in non-interest income in the first half and it wants to continue with it in the second half also, particularly when the net interest margin is under pressure.

6. Central Bank of India is poised to regain its position and market share among the public sector banks (PSBs) as at the time of nationalisation. Currently in 7th place, the bank is working to secure a market share of 4.25 percent by the end of this fiscal.

7. Public sector banks saw a slowing down of profits in the second quarter. Profit growth was at about 23 per cent compared to over 47 per cent in the first quarter. And a few banks faced difficulty in this quarter with profits actually dipping compared to last year. State Bank of Bikaner and Jaipur was one of them.

8. The Finance Minister, Mr P. Chidambaram, met exporters from the textiles, clothing and handicrafts sectors on Thursday, who have been hit by the strengthening rupee and hardening interest rates over the last several months. The meeting was also attended by chiefs of a number of public sector banks and institutions.According to industry players, the Minister assured them that the Government would work out “concrete measures” to help them tide over the crisis. The Export Promotion Council for Handicrafts Executive Director, Mr Rakesh Kumar, told presspersons after the meeting that the Minister was “very positive” and had assured them that the Government would come out with steps to help the exporting community.

9. The Reserve Bank of India has launched a financial education Web site.
The Web site is aimed at teaching the basics of banking, finance and central banking to children of different age groups. It will soon also have information that would be useful to other target groups such as women, rural and urban poor, defence personnel and senior citizens.

10. IndusInd Bank today signed up with Cholamandalam MS General Insurance Company to sell the insurer’s products through its branches.

Tides of 11.11.2007

1. Canada’s largest public pension fund, Caisse de Depot et Placement du Quebec (CDPQ), is eyeing investments in the booming Indian real estate sector, with plans to invest up to $1.7 billion (US dollars) over the next five years.

2. The forex reserves increased by $4.068 billion to touch $266.518 billion for the week ended November 2, 2007, according to the Reserve Bank of India’s Weekly Statistical Supplement.

3. The excess supply of funds is expected to continue, despite the recent measures announced by the Reserve Bank of India to mop up the surplus, say analysts and bank treasury managers, even after the 50 basis points hike in cash reserve ratio.

4. Public sector entities are expected to swamp the domestic financial markets with bonds worth Rs 9,000 crore over the next four months.Public sector banks (PSBs) alone are expected to raise Rs 5,500 crore during the period. Banks in the fray to raise resources through bonds include Bank of India, State Bank of India, Union Bank of India, Vijaya Bank, UCO Bank and Dena Bank. In addition, transmission utility, PowerGrid Corporation of India Ltd, is expected to raise Rs 3,300 crore during the current financial year. Banks are raising the resources to beef up their respective Tier II capital, for propelling their asset growth and partly for offsetting the impact on capital standards after migrating to Basel II next financial year.

5.LIC Housing Finance may look at the possibility of issuing equity shares through preferential allotment to promoters or investors. This is in addition to the option of issuing equity shares on Qualified Institutional Placement basis.

6. The Reserve Bank of India has further relaxed the remittance limit to $300,000 from $100,000 to importers of rough diamonds provided import bills and documents are directly procured from overseas suppliers.

7. The Government has elevated seven General Managers from various public sector banks to the post of Executive directors, filling up top level vacancies in certain banks.

8. The Reserve Bank of India has constituted an Internal Working Group under the Chairmanship of Mr V.S. Das, Executive Director, Reserve Bank of India, in order to examine the recommendations of the Radhakrishna Expert Group on Agricultural Indebtedness. The report submitted by the committee addresses issues relating to creation of credit absorption capacities, need for risk mitigation practices, introduction of cyclical credit system, dispute resolution mechanisms and setting up of a debt redemption fund.

9. Appreciation of rupee against the dollar has thrown a new M&A opportunity for India Inc, which wants to reach out to the world by acquiring concerns on a global scale, according to the industry chamber, Assocham.

10. The Reserve Bank of India has advised banks to ensure that promoters of projects bring in their equity capital before the debt is advanced. RBI has also asked banks also to ensure that the stipulated debt equity ratio is maintained throughout the life of the debt.
In a circular to banks, the central bank said normally, the promoters either bring their entire contribution upfront before the bank starts disbursing its commitment, or they bring certain percentage of their equity (40–50 per cent) upfront while the balance is brought in stages.

Tides of 3.11.2007

1. Forex reserves were up by $1.307 billion to touch $262.450 billion, for the week ended October 26, according to figures released by the Reserve Bank of India. The rise was mainly on account of currency revaluation. The gain was lower than the previous week’s rise of $4.457 billion, when the forex reserves touched $ 261.143 billion. Forex reserves have been rising for over two months now. It has also been aided by the Reserve Bank of India buying dollars to keep the rupee from appreciating.

2. Corporate India may be reporting good profit numbers. But lending money didn’t make much for public sector banks as a group in the second quarter ended September 30. Their net interest income (or interest earned less interest expense) did not grow at all in this quarter. Yet profits grew 23 per cent for a set of 21 public sector banks for which the figures are available.It was liquidation of some of their equity investments, cashing in on the stock market boom, some recoveries of old bad debts, some treasury gains from the bond and forex markets and some other non-interest income that rescued public sector banks this quarter. Other income grew 45 per cent for these banks contributing almost the entire profits for this quarter.

3. Dhanalakshmi Bank has posted a net profit of Rs 13.50 crore during the half year ended September 30 as compared to Rs 7.02 crore for the previous corresponding period, registering a growth of 92.31 per cent. The operating profit increased from Rs 16.65 crore to Rs 25.04 crore. The total income increased from Rs128.08 crore to Rs170.73 crore. The total deposits increased from Rs 2,643 crore to Rs 3,247 crore , while total advances moved up from Rs 1,776 crore to Rs 1,978 crore .

4. Birla Sun Life Insurance has registered 94 per cent growth in new business premium at Rs 585 crore in the first six months of the current fiscal.The company would grow faster than the life insurance industry this fiscal. It hopes to end the year with a growth of 150-170 per cent in new business premium. The industry is expected to end the fiscal with a growth rate of 50-60 per cent.

5. For the first time, the market share of Life Insurance Corporation of India, the first year premium income fell below 50 per cent in September to 49 per cent, compared with 79.6 per cent a year ago, and 74.5 per cent in August, according to the data compiled by Insurance Regulatory and Development Authority. The sharp fall in market share was on account of a 47.4 per cent year-on-year decline in LIC’s first year premium income to Rs 2,555 crore in September.

6. The World Bank has signed three loan agreements with India for total assistance of $944 million towards three projects in the critical areas of rural finance, vocational training and restoration of water bodies.The loan agreements are for strengthening of rural credit cooperatives involving a loan assistance of $600 million, vocational education training project with assistance of $280 million and additional financing for the Karnataka Community-based Tank Management project involving $64 million loan and credit.

7. To tap the transport and energy financing market, German bank NORD/LB plans to set up an office in India shortly. The representative office, to come up in Mumbai, is expected to commence operations in January 2008.

8. Central Bank of India plans to launch the reverse mortgage scheme for the senior citizens. “We are ready to launch the product soon, but we are just waiting for the taxation issues to get resolved,” said Ms H. A. Daruwalla, its Chairperson and Managing Director.Reverse mortgage is a stream of loan payments against the homeowner’s net equity stake in the property. In this scheme, the lending institution gives the borrower a fixed sum of money on monthly basis. The borrower can also choose to take a lump sum payment.

9. Karur Vysya Bank has introduced yet another variant of its multi-city current account product – KVB Economy.The other variants include KVB Standard, KVB Classic, KVB Premium, KVB Gold and KVB Platinum. The major difference in opting for a particular variant of this product is in the maintenance of the minimum average balance. KVB Economy, according to a release, would require current account holders to maintain a minimum average balance of Rs 10,000.

10. Bank of Baroda is planning to raise about Rs 2,500-3,000 crore by January to meet capital requirements under Basel II norms and for further growth in business. The bank is yet to decide on whether the capital would be tier-I or tier- II.

Tides of 1.11.2007

1. The Extraordinary General Meeting (EGM) of shareholders of Karnataka Bank on Wednesday passed a unanimous resolution giving consent to the issue of 63.73 lakh equity shares of Rs 10 each on preferential basis.

2. Canara Bank rebalanced its credit portfolio and shifted focus to priority sector areas during the second quarter of the current financial year.
It has contained the growth of retail advances. Retail advances grew only 5.91 per cent on year-on-year basis to Rs 17,187 crore. Priority sector advances grew 25.08 per cent during the same period to Rs 38,920 crore.The portfolio moderation notwithstanding, the yield on advances improved to 10.23 per cent from 8.95 per cent. The improved yield was partly achieved through repricing of advances.

3. Bank of Baroda is planning to raise about Rs 2,500-3,000 crore by January to meet capital requirements under Basel II norms and for further growth in business. The bank is yet to decide on whether the capital would be tier-I or tier- II.

4. Backed by a growth in other income, Centurion Bank of Punjab has posted a 33.76 per cent in net profit at Rs 41.64 crore for the quarter ended September 30, 2007, against Rs 31.13 crore in the corresponding quarter of the previous year.

5. ICICI Bank Eurasia LLC, a subsidiary of ICICI Bank, has opened a branch in St Petersburg. The branch will offer a range of banking and financial services.This is the 5th branch that ICICI Bank has opened in Russia.

6. Standard Chartered Bank plans to ramp up its activities in the microfinance space in the coming months. It will increase its exposure as well as the number of microfinance institutions (MFI) partners. Microfinance is also a commercially attractive proposition. The aim is to increase the exposure from current level of close to Rs 100 crore to about Rs 500 crore by December 2008.

7. The economy continues to do well with GDP registering a growth of 9.3 per cent in the first quarter of this fiscal. Thoughthis is lower than the 9.6 per cent recorded in the same period last year.

8. The most significant announcement by the RBI Governor, Dr Y. V. Reddy, is the hiking of CRR by 50 basis points. The Bank rate, the repo rate and the reverse repo rate have thankfully been kept unchanged.

9. Karur Vysya Bank has registered a net profit of Rs 43.41 crore for the quarter ended September 2007 against Rs 42.56 crore during the corresponding quarter of the pervious fiscal.

10. Karnataka Bank Ltd has recorded a net profit of Rs 60.14 crore in the second quarter of the current financial year as against Rs 59.61 crore in the corresponding period of the previous year, registering a growth of 0.89 per cent.