Rupee may appreciate to 50 against dollar: FinMin

http://www.thehindubusinessline.com/industry-and-economy/economy/article3945787.ece

The Finance Ministry hopes that the rupee may strengthen to 50 against dollar in a few months time. The Government also hopes to keep the fiscal deficit to the Budget target.

This hope has come at a time when rupee closed at a five-month high of Rs 52.85 against the dollar on Friday. The rupee dipped to all time low at Rs 57.13/dollar in June. The Department of Economic Affairs Secretary Arvind Mayaram said, “Today it has breached Rs 53. It has gone below Rs 53. This brings down the subsidy requirement, especially in the petroleum sector. With the steps the Government is taking, we expect it could even touch Rs 50 in the next 2-3 months or four months, in which case our subsidy burden will go down even further.”

Appreciation in rupee is expected mainly because of higher inflow not just into the stock market but also through foreign direct investment. There is also some impact expected due to announcement of quantitative easing (QE 3) by the US Federal Reserve. Euro gaining strength after Spain announced tough new austerity measures is also helping the rupee gain against the dollar.

Although he refused to give details about reduction in fuel subsidy due to appreciation of rupee, Mayaram did admit, “One rupee change in exchange rate can bring about 80 basis point change in the rate of inflation.”

Meanwhile, forex experts differ on the Government’s estimation about the rupee.

Vivek Rajpal from Nomura termed this as “optimistic”. He said that the rupee has appreciated to Rs 52.50 from Rs 56. “This is a very big move and there is expectation that a similar trend will continue.”

His expected level is Rs 52/$ while Citi Group’s Maya Bhandari’s level is Rs 48 by the year end.

StanChart appoints former SBI chief Bhatt as board member

http://www.thehindubusinessline.com/industry-and-economy/banking/article3946323.ece

British banking major Standard Chartered Plc today appointed former SBI chairman O P Bhatt as board member. The appointment of 61-year old Bhatt, as an independent non-executive director, would be effective from January 1, 2013.

“Bhatt is a career banker with over 30 years banking experience and retired as Chairman of the State Bank Group in 2011,” StanChart said in a statement.

State Bank Group includes SBI, India’s largest commercial bank and five associate banks.

He is among the four new independent non-executive directors appointed by StanChart as part of efforts to enhance the experience, depth and diversity of its board.

“We are adding significant banking, financial and risk management experience to the board as well as increasing its diversity. These individuals will be excellent additions to the board bringing with them a wealth of experience from some of our largest markets, including India, Hong Kong, China and Taiwan,” StanChart board chairman, Sir John Peace said.

The three other new directors are Lars Henrik Thunell, Margaret Ewing and Louis Chi-Yan Cheung. The appointments of Thunell and Ewing would be effective from November 1, 2012, that of Bhatt and Cheung would be from January 1, 2013.

“We are taking a long-term, strategic, forward-looking approach to refreshing the board, balancing our need both to maintain longevity and stability on the Board whilst regularly refreshing its composition,” Peace said.

Bhatt is already serving on boards of Tata Consultancy Services, ONGC and Hindustan Unilever Ltd.

“He has extensive banking, financial services and leadership acumen with deep knowledge and experience across India, one of our largest markets,” the statement said.

Bhatt had also headed the Indian Bank’s Association.

Earlier today, the UK-based global banking giant HSBC Holdings Plc said that N R Narayana Murthy, co-founder of IT giant Infosys would retire as its director at the end of 2012.

Residency certificate a must for foreign investors to get tax benefit

http://www.thehindu.com/todays-paper/tp-business/residency-certificate-a-must-for-foreign-investors-to-get-tax-benefit/article3940406.ece

The government has mandated that from April 1, 2013, all foreign investors desirous of claiming benefits under the double taxation avoidance agreements (DTAAs) will have to produce tax residency certificates (TRC) of their base country in which they are located.

According to a notification issued by the Central Board of Direct Taxes on September 17, 2012, the amendments to the Income Tax Act, 1961, will take effect from April 1, 2013, and apply in relation to assessment year 2013-14 and subsequent years. The notification, in effect, amends Section 90 and Section 90A of the I-T Act dealing with taxation of foreign investment and tax benefits under DTAAs. 

Till date, India has inked DTAAs with 84 countries. Under Section 90 (4) of the Act, as inserted by the Finance Act, 2013, with effect from April 1, 2012, it is provided that an assessee, not being a resident, to whom an agreement referred to in sub-section (1) of Section 90 applies, shall not be entitled to claim any relief under a DTAA unless a certificate, containing such particulars as may be prescribed, of his being a resident in any country or specified territory outside India is obtained by him from the government of that country or specified territory.

A similar provision has been inserted in sub-Section (4) of Section 90A of the Act and pursuant thereto, the CBDT notification seeks to insert Rule 21BA and Forms 10FA and 10FB specifying the manner in which the TRC should be obtained.

Accordingly, the TRC to be obtained by an assessee for availing himself of tax benefits shall contain the name of the assessee along with status — whether it is an individual or a company — the nationality (in case of individual) and the country wherein the company or firm is registered or incorporated. 

This apart, the TRC should have the tax identification number (TIN) of the assessee, its residential status for the purposes of tax, the period for which the TRC is applicable and the address of the assessee for that period. Also, the certificate shall be duly verified by the government of the country or the specified territory of which the assessee claims to be a resident for the purposes of tax. A clause in the various DTAAs that India has entered into, the assessee can take the advantage of paying capital gains tax in either of the two nations, wherever the rate of the levy is lower. Thus, the interplay of treaty and domestic legislation ensures that a taxpayer, who is resident of one of the contracting countries to the treaty, is entitled to claim applicability of beneficial provisions either of treaty or of the domestic law.

Banks reject Kingfisher loan demand; SBI Caps to draw up fresh revival plan

http://www.thehindu.com/business/companies/banks-reject-kingfisher-loan-demand-sbi-caps-to-draw-up-fresh-revival-plan/article3942736.ece

Turning down a request for Rs.200-crore working loan by Kingfisher, the State Bank of India-led lenders consortium, on Thursday, asked SBI Capitals to chalk out a fresh revival plan for the cash-strapped airline in the next 2-3 weeks.

Kingfisher Chairman Vijay Mallya made a presentation at a meeting with lenders in Bangalore on Thursday, the first such meeting after the government’s policy decision to allow foreign airlines to invest in domestic carriers.

According to the lenders, Mr. Mallya did not offer any concrete revival plan as he could not commit on equity infusion by the promoters.

An official from a public sector bank said the lenders turned down a request from Mr. Mallya for an immediate working capital loan of Rs.200 crore. Since January, the airline has not been servicing its Rs.7,000-crore bank debt.

The official said the lenders had asked SBI Capitals to make a new revival plan, the third one, for the airline in the next 2-3 weeks.

Though the company suggested a second debt restructuring, nothing was finalised, a source said.

When asked whether banks were open to a second CDR in two years, the source said that would depend on the SBI Caps’ proposal.

The meeting comes amidst reports of the airline talking to prospective foreign airlines to offload its stake.

At the last meeting on September 3 in Mumbai, the bankers had demanded that Mr. Mallya should make the revival plan. This is the third time that SBI Caps has been asked to prepare a rejig exercise for the airline.

In 2010, it had made a debt recast plan for the airline, and, in November that year, its Rs.6,500-crore worth loan was recast.

Earlier this year, SBI Caps was asked to make another revival plan.

Meanwhile, the Bombay Stock Exchange, on Thursday, halved its circuit limits on shares of Kingfisher Airlines and group firm United Breweries Holdings, capping their maximum movement in a day at 5 per cent and 10 per cent, respectively.

The proposed changes, announced by the BSE through a circular and will be effective from Friday, follow a sharp rally in the share prices of the two companies in the past few days.

Earlier, Kingfisher shares were allowed an upward or downward movement of 10 per cent in a day, while the circuit filter limit for the group’s holding firm United Breweries (Holdings) was 20 per cent.

The exchanges generally lower the circuit filter of a stock as part of their surveillance mechanism to avoid excessive movement in the share price. Kingfisher shares, on Thursday, rose by 8.03 per cent to close at Rs.16.96 on the BSE, after touching an intra-day high of Rs.17.18 - its highest level in a month. The stock had gained 9 per cent on Wednesday as well, after Mr. Vijay Mallya said the air carrier was in talks with foreign airlines for possible stake sale.

UB Holdings had also gained nearly 11 per cent on Wednesday, although its share price settled only 1.85 per cent higher at Rs.146.05 in Thursday’s trade. Earlier in the day, UB Holdings had risen to as high as Rs.155.85 — its highest level in a year. While Kingfisher shares have been rallying sharply in the last couple of weeks, shares of other group companies have been on an uptrend for much longer period, largely on reports and speculations about stake sale in various businesses.

The National Stock Exchange and the BSE have also sought clarifications from Kingfisher Airlines on reports that the carrier is in talks with foreign entities and domestic investors for stake sale.

Both bourses in separate notices on Thursday said they were awaiting the response from Kingfisher.

Kingfisher in talks with foreign carriers: Mallya

http://businesstoday.intoday.in/story/kingfisher-airlines-talks-vijay-mallya/1/188460.html

A day before making a presentation to lenders on revival plan of Kingfisher Airlines, its Chairman Vijay Mallya on Wednesday said the carrier is in talks with overseas airlines for investment.

When asked if the debt-ridden airline is in touch with overseas airlines for investment, Mallya said, "Yes, we are in talks." He, however, did not provide details citing "privacy and confidentiality" reasons.

Mallya also informed that his airline will be making a presentation to the SBI led consortium of banks.

"We have regular meetings with KFA banking consortium. I can confirm that there is meeting tomorrow. We will make presentation to them as requested," he told reporters on the sidelines of the annual general meeting of the UB Group.

When asked how beneficial will be the new FDI policy , which allows foreign airlines to pick stakes in domestic air carriers, for Kingfisher, Mallya said, "It is too early to say about the status report of the FDI policy ... There is an established FDI approval procedure. I see a normal course of business going to happen."

Two days ago, SBI, the lead bank of 17-member lenders consortium had expressed the hope that Mallya will come up with "something tangible" for its revival of Kingfisher in the wake of liberalisation in FDI in the sector.

Banks together have an exposure of nearly Rs 7,000 crore in the airline and the loans have all become non-performing assets since January. SBI has an exposure of Rs 1,500 crore to Kingfisher Airlines. 

Govt clears tax incentive scheme for first-time equity investors

http://businesstoday.intoday.in/story/rajiv-gandhi-equity-savings-scheme-rgess-mutual-fund/1/188295.html

Are you yet to start investing in equities? If you have been planning to take the plunge, it might be a good time. First-time retail investors in stocks and equities-based mutual funds can now avail of tax benefits under the Rajiv Gandhi Equity Savings Scheme (RGESS).

In a bid to increase participation of small investors in the equity market, the finance ministry on Friday (21 September 2012) approved the scheme under which beginners investing up to Rs 50,000 in approved stocks and mutual funds can claim 50 per cent of the amount as tax deduction. However, only those with an annual income of less than Rs 10 lakh would be eligible for the deduction. 

Top 100 stocks listed on the BSE 100 (of the Bombay Stock Exchange) and CNX 100 (of the National Stock Exchange) indices and shares of government-owned Navratna, Maharatna and Miniratna companies have been approved for the benefit. 

Investments in follow-on public offers (FPOs) of the aforementioned companies and initial public offerings of state-owned companies with an annual turnover of Rs 4,000 crore or more in the three years preceding the issue would also be eligible for the tax deduction. 

Exchange-traded funds (ETFs) and mutual funds investing in the approved securities have also been included in the incentive scheme. The tax deductions can be claimed under Section 80CCG of the Income Tax Act, 1961. Investments can be made in parts during the financial year for which a tax deduction is claimed under the scheme.  

Investments under the scheme will have a lock-in period of three years. For one year from the date of purchase of equities/mutual funds units under the scheme, an investor cannot sell the securities or take appreciation benefit at all. 

From second year onwards, one can sell the securities provided the portfolio does not fall below the amount for which deduction was claimed or the value of the portfolio before initiating the first sale transaction, whichever is less, for at least 270 days in a year during the lock-in period. If an investor fails to meet these conditions, the tax benefit will be withdrawn.

By restricting the ambit of the incentive scheme to large-cap stocks, the government has tried to limit the risk exposure of new investors. Some market experts had expressed concern that the scheme might expose small investors to the vagaries of stock markets.

Equity market experts and the mutual fund industry have welcomed the move saying it would broaden the equity investors' base and bring more depth into equity markets.

SBI sits on excess fund of Rs 80,000 crore, could lower lending rates further

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sbi-sits-on-excess-fund-of-rs-80000-crore-could-lower-lending-rates-further/articleshow/165

State Bank of India is sitting on excess funds of around Rs 80,000 crore, an amount equivalent to what all banks put together borrow from the central bank, indicating it could lower lending rates further. Last week, the lender lowered the so-called base rate to 9.75 per cent from 10 per cent earlier. A basis point is 0.01 percentage point.

The bank's deposit growth has been double that of loans, allowing it to be liberal with lending rates to boost flagging demand for loans.

SBI chairman Pratip Chaudhuri said that the bank has seen robust growth in deposit mobilisation while demand for loans is lukewarm. He said, in the first five months of this fiscal year, the bank has seen a deposit growth of 8 per cent while advances have risen 4 per cent. On a year-on-year basis, deposits rose 22 per cent while advances grew 14 per cent.

The central bank has projected loan growth of 17 per cent and deposit growth of 16 per cent for the current fiscal year.

Chaudhuri indicated that the bank has started investing surplus money in commercial papers and certificate of deposits besides investing in government securities. He said the bank holds excess government securities to the tune of five percentage points than mandated by RBI. The central bank mandates banks to hold 23 per cent of their deposits in the form of Gilts.

In 2009, post-credit crisis period, excess liquidity to the tune of Rs 70,000 crore at SBI led to the former-chairman OP Bhatt launching fixed home loan rate of 8 per cent for the first year. The scheme, which was termed as teaser scheme, was disapproved by the Reserve Bank of India.

The current chairman Pratip Chaudhuri has lowered lending rates across the board by cutting base rate and prime lending rate by 25 basis points to 9.75 per cent and 14.50 per cent, respectively. Besides, the bank has lowered lending rates for home loans up to Rs 30 lakh to 10 per cent and for loans above Rs 30 lakh to 10.15 per cent.

Even as SBI lowered the lending rates, Chaudhuri said the bank will not disappoint its depositors. "We will not bring deposit rates below the post office savings rate of 8.5 per cent," he said. When asked if the bank could look at a further reduction in lending rates, SBI chief said: "Already our interest rates on loans are the lowest in the industry. Also, we have an obligation to our shareholders."

He said that total sacrifice due to cut in lending rates is Rs 1,250 crore. He indicated that despite the cut in the lending rate, the bank is maintaining a healthy net interest margin.

"NIMs are very robust at 3.94 per cent for the month ended August," he said. SBI's margin for the first quarter ended June 2012 stood at 3.2 per cent.

Maharashtra is No. 1 in bank heists in country

http://timesofindia.indiatimes.com/india/Maharashtra-is-No-1-in-bank-heists-in-country/articleshow/16521671.cms

Banks in Maharashtra have lost more money to heists since 2007 than elsewhere in the country. The state tops the National Crime Records Bureau (NCRB) list, with Rs 18.97 crore lost to bank heists from 2007 to 2011. Among cities, while Mumbai topped the list with Rs 11.43 crore burgled, two other Maharashtra cities, Nashik and Pune, were among the top six. 

Banks in Maharashtra reported 876 cases of theft and burglary from 2007 to 2011. Of the Rs 18.97 crore lost to heists, around 75% (Rs 11.47 crore) was lost in 2011 alone. 

Surprisingly, states like Madhya Pradesh, Uttar Pradesh and Bihar were nowhere close. Kerala followed second with Rs 16.88 crore stolen and 100 cases reported. Karnataka was placed third with Rs 12.46 crore lost and 681 offences registered. 

Mumbai reported 105 cases of bank heists. Banks in Bengaluru lost Rs 2.4 crore, with 214 cases registered. Nashik is placed third among cities with Rs 34.1 lakh and 32 offences, the NCRB report said. 

Kerala topped the chart from 2007-09 but reported a major dip in the following two years. However, Maharashtra, which was placed second from 2007-09, saw a sharp rise of almost 400% in money lost during 2010 and 2011. Karnataka remained in the second spot from 2009 to 2011. The city trend shows Mumbai topped the chart in 2007, and again from 2009 to 2011, while Bengaluru claimed top spot in 2008. 

Former Thane police commissioner S P S Yadav said the reason for the increasing bank heists is complacency by bank officials in checking security measures and maintaining secrecy. "This was noticed in almost all recent bank heists where the accused often turned out to be insiders from the bank who helped burglars plot the heist and escape without getting caught. Very few bank heists get solved," Yadav said. 

Chidambaram lowers taxes on overseas borrowings

http://businesstoday.intoday.in/story/chidambaram-lowers-taxes-on-overseas-borrowings/1/188286.html

The government on Friday reduced tax on overseas borrowings by domestic companies to 5 per cent from 20 per cent so that local companies could easily raise funds abroad.

Finance Minister P. Chidambaram said the reduced tax rate will be applicable to the funds borrowed between July 2012 and June 2015.

This lower rate of taxation will apply to interest paid to a non-resident by an Indian company for money borrowed in foreign currency from a source outside India, either under a loan agreement or by way of long-term infrastructure bonds.

Chidambaram said appropriate amendments would be made in the Income Tax Act, 1961, under which the interest income of a non-resident investor will be taxed at the reduced rate.

SBI reclaims most valued bank status, topples HDFC Bank

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/SBI-reclaims-most-valued-bank-status,-topples-HDFC-Bank/articleshow/16492870.cms

SBI today reclaimed its position as the country's most valued bank with a total market valuation of over Rs 1.48 lakh crore, surpassing private sector player HDFC Bank. 

Shares of State Bank of India surged 4.3 per cent to close the day at Rs 2,212.6, taking its market value to Rs 1,48,475 crore, making it the overall seventh most valued company. 

On the other hand, shares of HDFC Bank gained 3.02 per cent to Rs 625.25. In the process, the market capitalisation (m-cap) of the private bank rose to Rs 1,47,444 crore. 

HDFC Bank had on July 27 toppled SBI to become the country's most valued lender in terms of market cap. 

Meanwhile, Reliance Industries Ltd (RIL) continued to remain at the number one position with a m-cap of Rs 2,74,987 crore, while TCS was at second place with Rs 2,55,084 crore value. 

It was followed by ONGC (Rs 2,50,975 crore), Coal India (Rs 2,34,905 crore) and ITC (Rs 2,05,254 crore). 

Among the top-10 on the Sensex, Infosys was at sixth place with a market value of Rs 1,48,992 crore, while SBI was at seventh position, followed by HDFC Bank, NTPC (Rs 1,39,059 crore) and ICICI Bank (Rs 1,22,821 crore). 

In the broader market today, the BSE benchmark Sensex closed at 18,752.83, up 403.58 points or 2.2 per cent.

Sabbatical yet to gain momentum

http://www.thehindubusinessline.com/industry-and-economy/banking/article3918857.ece

For most women, priority is home, however career minded they may be. While some have the advantage of having a member of the extended family take care of their children, most mothers prefer to stay with them during their decisive growing years.

Considering this, the Khandelwal Committee report on HR issues of public sector banks (PSBs) recommended in 2010 that sabbatical of two years be allowed at request to women employees to meet their special problems during their career.

Following this, the Ministry of Finance issued a broad guideline on February 28 this year asking the PSBs to grant sabbatical of two years to women employees.

The annual report of Central Bank of India for 2011-12 says that it implemented this with effect from April 1. Some other banks are also mulling this decision now.

Usha Ananthasubramanian, Executive Director of Punjab National Bank, said that her bank has also implemented this recommendation.

“Recently, one of our sub-staff availed herself of this as her husband, who was working in another PSB, was posted to an overseas branch of that bank. We were certain that she will be away for the two-year period. This gives some clarity, and helps us in manpower planning,” she said.

Though the union representatives agree with the fact that this is a good move by the Government, they cite the shortage of manpower as the main problem for its implementation in PSBs.

Yet another banker said: “Read between the lines of the recommendation.”

It says two years sabbatical during the career. There are people who go on a sabbatical in instalments, first for a period of six months, then they return to work for a couple of months and prefer to take the rest after a gap. “We cannot deny them this, but the manpower planning goes for a toss,” said this official.

ATM Pin: Avoid birth date, numerical sequences

http://www.thehindubusinessline.com/news/article3918275.ece

If your ATM pin code is your birth date, a year in the 1900s, or an obvious numerical sequence, the chances of thieves cracking your password are way higher, according to a new study.

Researchers from the data analysis firm, Data Genetics have found that the three most popular combinations — “1234”, “1111”, and “0000” — account for close to 20 per cent of all four-digit passwords.

Every four-digit combination that starts with “19” ranks above the 80th percentile in popularity, with those in the upper-1900s coming in the highest, Slate magazine reported.

Also quite common are combinations in which the first two digits are between “01” and “12” and the last two are between “01” and “31”.

So choosing your birthday, your birth year, or a number that might be a lot of other people’s birthday or birth year makes your password significantly easier to guess.

On the other end of the scale, the least popular combination 8068 - appears less than 0.001 per cent of the time.

Rounding out the bottom five are “8093”, “9629”, “6835”, and “7637”.

Data Genetics came up with the numbers by analysing a database of 3.4 million stolen passwords that have been made public over the years.

Most of these are passwords for Websites. But by looking specifically at those that comprise exactly four characters, all of which are numerals, the researchers figured they could get a decent proxy for ATM pins as well.

The data also showed that people prefer even numbers to odd, so “2468” ranks higher than “1357”.

Far more passwords start with “1” than any other number.

In a distant second and third are “0” and “2”.

Among seven-digit passwords, the fourth-most popular is “8675309,” which should ring familiar to fans of ‘80s music.

The 17th most popular 10-digit password is “3141592654”.

Two-digit sequences with large numerical gaps, such as “29” and “37” were found often among the least popular passwords.

Banks follow SBI in reducing lending rates

http://www.business-standard.com/india/news/banks-follow-sbi-in-reducing-lending-rates/187498/on

A day after the country's largest lender State Bank of India (SBI) slashed its base rate, a couple of public sector banks have announced a reduction in their lending rates.

Kolkata-based UCO Bank said it has reduced its interest rate on loans to retail, mid-corporate, SME and farm sectors by 25-150 basis points with immediate effect. The state-run lender has pared interest rate on home loans by 25 basis points, car loan rates by 50 basis points and educational loan rates by 150 basis points.

In addition, the bank will offer loans above Rs 1 crore to retail, mid-corporate, SME and farm sectors at 25-150 basis points lower rates.

State Bank of Bikaner and Jaipur (SBBJ) went a step ahead and cut its base rate or minimum lending rate by 25 basis points to 10.25 per cent. The new rates will be applicable from October 1, 2012. The bank has also reduced its deposit rates by 25 basis points for tenures between one to five years.

UCO Bank to pay Rs 25K for raising illegal demand

http://www.financialexpress.com/news/uco-bank-to-pay-rs-25k-for-raising-illegal-demand/1004452/0

UCO Bank has been directed by a consumer forum here to pay Rs 25,000 to one of its customers for "illegally" demanding Rs 14,442 from him on the ground of increase in rate of interest, after he had paid all his loan installments.

The New Delhi District Consumer Disputes Redressal Forum awarded the compensation saying the loan agreement did not provide for increase in rate of interest and that UCO Bank had not produced any evidence to show the enhancement in interest.

"The reading of the clause providing for interest in the (loan) agreement does not provide for any enhancement or any notifications of changed rates. In this case, opposite party (UCO Bank) has failed to produce any evidence of increase of its rate of interest, i.e., since when and for how long... In our view, bank has acted totally illegally in demanding Rs 14,442.

"Opposite party is directed to issue no objection certificate, withdraw charges of Rs 14,442 and also pay Rs 25,000 as compensation for harassment and litigation expenses to complainant (loanee)," said the bench presided by C K Chaturvedi.

The forum's order came on the complaint of Rohini resident Ramnessh Garg, who had said the bank had demanded the amount after he had fully paid all installments.

The bank while admitting that he had paid all the loan installments, had contended in its defence that the amount was demanded from him, as per the clauses of the loan agreement.

IRDA comes out with draft IPO norms for general insurance cos

http://www.thehindubusinessline.com/industry-and-economy/banking/article3914924.ece

General insurance companies planning to tap the capital market for funds should have a 10 year experience and will have to seek prior approval from the sector regulator, Insurance Regulatory and Development Authority (IRDA) said in its draft guidelines.

“No general insurance company shall approach the SEBI for public issue of shares and for any subsequent issue, without the specific previous written approval of the Authority,” IRDA said in the draft norms for initial public offering (IPO) of non-life insurers.

The draft norms —— IRDA (Issuance of Capital by General Insurance Companies) Regulations, 2012 —— states that the regulator would take into account the insurer’s financial position, its capital structure and regulatory record before permitting them to come out with the share sale.

The IRDA has kept with it the powers to prescribe the extent to which the promoters shall dilute their respective shareholding and the shares that can be allotted to foreign investors. Further, the IRDA would also prescribe the minimum lock-in period for the promoters after the share sale.

The IRDA would also look into the purpose for which the insurer is proposing to raise the funds from the market and the insurer’s capital structure.

“An applicant company proposing to raise share capital through a public issue may do so only on completion of 10 years from the date of commencement of business,” the IRDA said, adding that the approval granted by the Authority shall have a validity period of one year.

The regulator has also prescribed additional information —— risk factors specific to insurance companies, an overview of the insurance industry and a glossary of terms used in the insurance sector —— in the offer document for companies to come out with share sale offer.

The IRDA has invited comments from general insurance companies by September 30 on the exposure draft.

Last year, the IRDA had notified the guidelines for life insurance companies to tap the capital market.

SBI cuts base rate by 0.25 pc to 9.75 per cent

http://ibnlive.in.com/news/sbi-cuts-base-rate-by-025-pc-to-975-per-cent/292882-7.html

Acting on the cue from the Reserve Bank of India (RBI), the State Bank of India (SBI) on Tuesday announced a reduction in the minimum lending rate by 0.25 per cent, giving relief to all types of borrowers.

"The cut in base rate was driven largely by the RBI's decision to cut the CRR yesterday," State Bank's Chairman Pratip Chaudhuri said late on Tuesday evening.

The bank's Asset Liability Committee (Alco) met on Tuesday and decided to cut the base rate to 9.75 per cent.

The reduction is effective from September 20.

The decision by the country's largest lender comes a day after the Reserve Bank cut Cash Reserve Ratio (CRR) by 0.25 per cent to 4.5 per cent inducting Rs 17,000 crore into the system.

SBI is the first to cut base rate after RBI's policy announcement and its rate is among the lowest in the market. Other banks are likely to follow suit and cut lending rates in the coming days.

Chaudhuri said the cut would have a "very minor" impact of up to four basis points or 0.04 percent on its margins.

According to Chaudhuri, of the bank's Rs 6 lakh crore loan book, up to Rs 5 lakh crore is linked to the base rate mechanism.

The base rate mechanism came into effect in July, 2010 as a new transparent alternative to the earlier benchmark prime lending rate.

The remaining Rs 1 lakh crore is linked to the BPLR, he added.

Ratios and Rates - as on 17.09.2012 - CRR, SLR, Repo, Bank Rates

Bank Rate :  9.00 %

Repo Rate : 8.00 %
Reverse Repo Rate : 7.00 %

Cash Reserve Ratio (CRR) : 4.50% (Reduced from 4.75%)
Statutory Liquidity Ratio (SLR): 23.00% 

RBI cuts CRR: Home and auto loan rates expected to come down

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/rbi-cuts-crr-home-and-auto-loan-rates-expected-to-come-down/articleshow/16433460.cms

Your home and auto loan rates are expected to ease after the Reserve Bank of India slashed cash reserve ratio by 25 basis point to 4.50% in its mid quarter review of the monetary policy on Monday. CRR is the minimum proportion of deposits that banks must hold with the central bank. The CRR reduction is expected to inject Rs 17,000 crore liquidity into the banking system. 

The move is primarily aimed at managing the tight liquidity expected in the next few weeks on increased currency leakage during the upcoming festive season, and to ensure smooth flow of credit to productive sectors of the economy. 

Adequate and sustained liquidity will add to the banking and business confidence. We have seen a concerted reduction in deposit rates and eventually we will see lending rates softening. This will be translated into retail rates as well,'' said Rana Kapoor managing director and chief executive officer, Yes Bank. 

The country's largest bank, State Bank of India has slashed interest rate on select retail loans including home and auto loans. Private sector banks like ICICI BankBSE 5.39 %, HDFC Bank and Axis BankBSE 4.37 % have reduced their deposit rates by upto 50 basis point. 

Aditya Puri, MD & CEO HDFC Bank had also said,Interest rates are expected to come down as most banks have cut their deposit rates.'' 

Despite, adequate liquidity and low interest rates the loan growth has come down to less than 17% year on year in August 2012. 

As per the IIP data, the industrial growth during the four-month period ending July 2012, contracted by 0.1%, as against the growth of 6.1% in the same period last fiscal. 

During July itself, the growth rate slowed down to 0.1% from 3.7% a year ago. To boost sentiments and investment the government recently increased diesel prices by Rs5 and capped the subsidy on cooking gas. It also introduced select reforms by permitting FDI in aviation and retail. 

The measures taken in the first week and the FDI reform augur well for economic revival and boosting business confidence. While it may not immediately catalyze investment and capital formation,'' said Kapoor. 

The 25bps CRR cut would boost bank profitability by Rs2,000 crore, much higher than Rs75 cr cost reduction that a 25bps repo rate cut would have effected,'' said Sujan Hajra, co-head, research and chief economist, institutional equities, AnandRathi. We expect 50bps reduction in cost of funding of the corporate. Also, we expect yield on G-sec to soften by 100bps on the short and 25bps on the longer end,'' said Hajra.

Why RBI chose not to cut policy rate and instead ease CRR?

http://www.moneycontrol.com/news/economy/why-rbi-chose-not-to-cut-policy-rateinstead-ease-crr_758552.html

The market was expecting the Reserve Bank of India to cut interest rates after the government announced some key policy reforms last week. But by keeping the repo rate unchanged at 25 basis points, the RBI has made it clear that it is more worried about curbing inflation in the short term. However, in a bid to ease liquidity in the system, the central bank has trimmed the cash reserve ratio by 25 basis points. 

Following are the key points from the mid-quarter monetary policy review, and an explanation for why RBI chose to keep the repo rate unchanged.

* Globally, as risks have risen, both the European Central Bank (ECB) and the US Fed have responded with liquidity measures intended to calm financial markets and provide further stimulus to economic activity. While these measures have certainly mitigated short-term growth and financial risks, they will also exert pressure on global asset prices, and particularly, commodity prices.

 (What this means: Easy global liquidity will fire up commodity prices, increasing India’s import bill and weakening the rupee. Also a long term cure to the problems in Eurozone and the US have not yet been found)

* While the recent upward revision in diesel prices and rationalisation of subsidy for LPG is a significant achievement, in the short-term, there will be pressures on headline inflation. It is important to note that these revisions were anticipated at the time of the April policy when a front-loaded repo rate reduction was undertaken.

 (What this means: The government should have hiked diesel prices much earlier. Even otherwise, higher diesel prices will fuel inflation in the economy)

 * Growth in several major emerging and developing economies (EDEs) is also moderating.  Additionally, drought conditions in major grain-producing areas of the world and the possibility of further hardening of international crude prices in view of the fresh dose of quantitative easing impart ubiquitous risks to overall global macroeconomic prospects.

 (What this means: Food inflation could worsen in the coming days)

 * A moderation in the trade deficit combined with increased inflows in response to domestic policy developments could ease pressures on the balance of payments. However, risks from global factors, in terms of both capital movements and oil prices will persist. Given these external risks, holding down the CAD to sustainable levels will depend on durable fiscal consolidation.

 (What this means: The benefits from recent FDI approvals in retail, broadcast carriage and aviation will take time to yield benefits. In the meantime, the rupee could come under pressure because of tepid foreign capital flows and high oil prices)

RBI warns about fraudulent mail

http://www.thehindubusinessline.com/industry-and-economy/banking/article3897708.ece

The Reserve Bank of India has cautioned members of the public about a fraudulent email being sent and signed in its name.

The email informs bank accountholders about the RBI setting up a new 24x7 Centralised Monitoring Centre to monitor financial transaction flow from the Internet Banking Accounts, the central bank said in a statement.

DON’T OPEN, DOWNLOAD

The central bank asked members of the public receiving such emails to not open or download them or provide their data on such links as it may lead to their data being compromised.

The fraudulent email, which has referred to the Banking Regulation Act, 1949 and the Prevention of Money Laundering Rules, 2005, gives a link asking bank accountholders to update their account information for updation in their database, the RBI said in a statement.

The Reserve Bank said it has not sent any such mail and has not set up any 24x7 Centralised Monitoring Centre to monitor financial transaction flow from the Internet Banking Accounts.

Women Bank Staff - Not moving up the career graph fast enough

http://www.thehindubusinessline.com/industry-and-economy/banking/article3897718.ece

Bank jobs have always attracted women. Take any branch in your town or city and you are likely to find quite a few women ‘manning’ the counters. Most of them join as clerks, and a few, as officers. Today, some of the big banks have women at the helm too.

Yet, the representation of women in the executive cadre (at the level of Chief Manager and above), is yet to improve.

According to the Khandelwal committee report on HR issues of public sector banks, till 2009, of the total women workforce of 78,000-plus, only around 300 of them were in executive positions. More than 47,000 belonged to the clerical cadre.

So, why have more women not gone up the career graph?

THE CHALLENGES

“It is not that they are incompetent, but the challenges of work-life balance coupled with transfers force them to not go beyond a point in their career,” said Usha Ananthasubramanian, Executive Director, Punjab National Bank.

The Khandelwal committee observed that in spite of competence, many female employees are not able to move up in the hierarchy. The mobility factor is a principal reason for their inadequate representation in the senior managements of PSBs.

A regional head of a PSB in Mangalore said that nearly 65 per cent of the new clerical recruits who joined his bank in Dakshina Kannada district this year were girls. On an average, the number of women joining banks is more than 50 per cent, he said.

Meera Arhanha, the first woman to become an executive and general manager in the 88-year-old Karnataka Bank, said that women are now inspired by seeing more of their ilk at the top now. That is an attraction for younger generation, and they aspire to hold such position in the bank, she said.

Meera Arhanha felt that the technology advancement has made the banking job more comfortable for the young new entrants. Since they are techno savvy, they are more comfortable in this sort of an atmosphere.

The All-India Bank Employees’ Association General-Secretary C.H. Venkatachalam observed that women earlier were expected to take up counter service, but now they are taking up even challenging assignments.

NRI deposits in banks surge six-fold in April-July

http://www.thehindubusinessline.com/industry-and-economy/banking/article3889520.ece

Attracted by high interest rates in their homeland, Non-Resident Indians (NRIs) are pouring money into bank deposits.

In the financial year so far (April-July), NRIs have parked almost six times more money in deposits compared with the year-ago period.

According to Reserve Bank of India data, NRIs made deposits aggregating $7.375 billion in banks, against $1.246 billion in the year-ago period.

A break-up shows that all inflows have been into the Non-Resident (External) Rupee Accounts (NR(E)RA) deposits.

However, two other NRI deposit schemes — Foreign Currency Non-Resident (Banks) or FCNR (B) and Non-Resident Ordinary Rupee Account or NRO — have seen outflows.

In the first four months of the current financial year, NR(E)RA deposits saw robust inflows of $8.389 billion against outflows of $641 million in the year-ago period. FCNR(B) deposits have seen an outflow of $625 million against inflows of $853 million in the year-ago period.

NRO deposits too have seen outflows of $389 million against an accretion of $1.034 billion in the year-ago period.

The attractiveness of NR(E)RA deposits lies in the fact that they fetch high interest rate (for example, State Bank of India offers 8.50 per cent on deposits between one year and 10 years).

Further, the accrued interest income and balances held in the account are exempt from income-tax and wealth tax. The other two deposits schemes — FCNR(B) and NRO — do not enjoy tax exemptions, said a banker. Loans up to Rs 1 crore can be extended against security of funds held in NRE Account either to the depositors or third parties.

“Due to higher interest rate and tax exemptions, NRIs are parking money in NR(E)RA deposits. The proceeds of FCNR(B) and NRO deposits are also finding their way into NR(E)RA deposits,” said a public sector bank official.

As at July-end, NRI deposits with banks stood $62.45 billion against $53.33 billion in the year-ago period.

Syndicate Bank’s ‘golden’ run in Andamans

http://www.thehindubusinessline.com/industry-and-economy/banking/article3893492.ece

Gara Charma, near Port Blair, may not ring a bell. But for Syndicate Bank, its branch there is a star performer in the gold loan business.

With a business of Rs 15 crore in the last fiscal, this branch of Syndicate Bank did the best among competing banks on the Andaman and Nicobar islands, according to Executive Director M. Anjaneya Prasad.

Akin to mainland, in the islands of Andaman and Nicobar as well as Lakshadweep too the yellow metal is a sought-after asset and also used to secure quick loans.

In addition to Syndicate Bank, at least half a dozen major banks such as State Bank of India, HDFC Bank and Indian Overseas Bank operate there.

Because of the growing gold loan business, the Manipal-headquartered Syndicate Bank is planning to nearly double its ‘gold loan shoppes’ by March across the country. The bank has 60 such shoppes now and wants to take them to 100, Anjaneya Prasad told Business Line.

Syndicate Bank has more than a dozen branches on the Andaman and Nicobar, Lakshadweep and other islands. There is a sizeable population of South Indians and Bengalis, who seem to be buying and pledging gold.

Customers paying more for banking services

http://www.thehindubusinessline.com/industry-and-economy/banking/article3893457.ece

The cost of banking services rose a sharp 22.1 per cent between 2004-05 and 2011-12, with customers paying more on everything from ATM transactions to making deposits. The rise was driven primarily by higher fees for accepting deposits and giving loans and advances, called intermediation services.

While the cost of these intermediation services shot up 26.7 per cent during the eight-year period, fees imposed on direct banking services such as issue of demand drafts, cheque and bill collection, foreign exchange services, bank guarantee and ATM transactions rose by just 5.3 per cent, according to a new experimental index put together by the Economic Advisor’s Office, attached to the Ministry of Commerce and Industry.

An analysis of the index reveals that intermediation services have a greater contribution to the overall rise or fall of banking costs. This is on account of the larger proportion of bank revenues generated from these activities. As such, intermediation services have been allocated a higher weight of 78.58 per cent in the index.

The costs of banking services have been increasing from 2004-05 up to 2008-09, when they declined. This is explained by the global economic recession. Thereafter, the prices moved up gradually again, surpassing previous levels in 2009-10 and 2010-11, before they slid in 2011-12.

In the case of direct banking services, however, the trend has been different. Direct banking service costs rose from 2004-05 onward till 2008-09. But in 2009-10, they fell by 5.9 per cent and have been on the decline since.

The cost of banking services fell by 3.3 per cent in 2011-12 after rising in the previous two years. This was primarily on account of reduced fees levied by banks on accepting deposits and giving loans and advances, which declined by nearly 4 per cent year-on-year, according to the Economic Advisor’s Office.

There was also a reduction in the cost of direct banking services. However, the cost of these services only declined by 0.4 per cent, as per an experimental banking services price index put together by the Economic Advisor’s Office.

Data for the indices were compiled by the RBI on the basis of responses from 21 banks, of which 13 were in the public sector, four were private, two were foreign banks, one was a cooperative bank and one was a regional rural bank.