1. Rabobank, the Netherlands-based financial institution, is planning to set up a $100 million private equity fund in India which will focus on the agriculture value chain. The plan to set up an agri-focussed fund is a logical extension of more than a century old tradition of backing the food and agribusiness by Rabobank.
2. Axis Bank today reported a 70.56 per cent increase in net profit during the fourth quarter of 2006-07 to Rs 361.4 crore mainly due to a steady rise in interest and fee income. The private bank announced a dividend of 60 per cent for the year ended March 2008. The diluted earnings per share (EPS) were at Rs 31.31 compared with Rs 22.79 at the end of March 2007. During 2007-08, the bank¡¯s net profit rose 62.52 per cent to Rs 1,071.03 crore as against Rs 659.03 crore during the previous financial year. The private bank ended the last financial year with a capital adequacy ratio of 13.73 per cent compared with 11.57 per cent in 2006-07. The increase in profits during the fourth quarter is despite non-tax provisions more than doubling to Rs 164.22 crore on account of provision of Rs 72 crore for mark-to-market losses on six derivatives transactions and a Rs 20 crore provision for depreciation in its credit-linked notes portfolio.
3. The liquidity in the system continued to remain surplus. The Reserve Bank of India absorbed around Rs 18,000 crore from the system. The hike in cash reserve ratio (CRR) comes into effect from April 26 and the system will thus remain in surplus mode till then, said a dealer. Call rates fell to a low of 2 per cent before closing the day at 5.75 per cent. The mutual funds are flush with funds and thus the collateralised borrowing and lending obligation (CBLO) rates fell to a low of 1.10 per cent. The government expenditure and the RBI’s intervention in buying dollars to stem the rupee appreciation are the major source of revenue for the markets.
4. The Reserve Bank of India (RBI) proposes to come out with prudential norms for reverse mortgage loans to safeguard banks in a falling real estate market. The prudential norms are likely to be announced in the forthcoming annual monetary policy of RBI on April 29. Reverse mortgage allows senior citizens with inadequate income sources to mortgage their own homes for a monthly stream of income for up to 15 years. It involves a senior citizen borrower mortgaging the house to a lender, who then makes periodic payments to the borrower during the latter’s lifetime. It is a way of monetising the owner’s equity in the house.
5. Karnataka Bank will take up the matter of bringing in a fresh investor at its next board meeting scheduled for April 24. The move comes on the back of the Reserve Bank of India (RBI) rejecting the Mangalore-based private sector lender’s proposal to rope in Washington-based International Finance Corporation (IFC) as an equity investor through a preferential allotment of shares.
6. tepid response to the Employee Stock Purchase Scheme (ESPS) has forced State Bank of India (SBI) to relax the one-year lock-in period norm under the scheme. After raising about Rs 17,000 crore through a rights issue, the country’s largest commercial bank had offered its shares to employees at a price of Rs 1,590 apiece. This was also the price for the rights issue. The number of shares that an employee is eligible for under ESPS is linked to his or her position in the bank hierarchy. Starting with 20 shares for award staff, entitlement rises to a maximum of 1,500 for the chairman.
7. State Bank of India (SBI) and ICICI Bank, the nation’s two biggest banks, will be worst hit by the central bank’s decision to increase the amount of cash they must hold with it, according to a Goldman Sachs Group report. The Reserve Bank of India (RBI) said on April 17 it would raise the cash reserve ratio (CRR) to tackle inflation, which is running at a three-year high. Banks, already facing slower loan growth with interest rates at the highest in six years, would see earnings and returns fall by 1 per cent to 2.7 per cent, the Goldman analyst said.
8. Axis Bank today said it has made provisions of Rs 71.97 crore during the fourth quarter of 2007-08 for six foreign exchange derivatives transactions that have been repudiated by two of its customers. While the bank has 188 derivatives transactions with an aggregate mark-to-market (MTM) loss of Rs 673.55 crore at the end of March 2008, there are six transactions where companies are not unwilling to honour the contract. Of the 188 deals, 113 are outstanding transactions dealing in foreign exchange derivatives where the aggregate MTM loss is Rs 547.72 crore.
9. Standard Chartered is poised for an expansion unprecedented in scale and one that will transform the bank by giving it a sizeable presence in the rural areas, including a consumer finance brand. Already the largest foreign bank in India, Standard Chartered has sought the Reserve Bank of India’s permission to open 100 rural branches, which are in addition to its annual plan of 40 new branches and 300 ATMs this year, which it has submitted to RBI for approval.
10. The Hyderabad High Court yesterday said that the ICICI Bank cannot treat as non-performing assets the amount of money Hyderabad-based NCS Sugars owes the bank on account of losses on foreign exchange derivatives. However, the court did not restrain the ICICI Bank from proceeding against NCS Sugars on other issues. The next hearing of the case NCS and ICICI Bank, which are locked in a legal dispute over losses incurred by the former on derivatives products, is scheduled for next week. When contacted, NCS Sugars executives declined to comment.
