ECONOMIC BRIEFS – 06.12.08
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Corp Bank raises Rs 200 cr (BL, ET 06.12.08)
Corporation Bank has raised Rs 200 crore through bonds. The bank informed the Bombay Stock Exchange that it has raised lower tier-II bonds [Series (III) (1)] for Rs 200 crore. The tenor of the bond was 120 months and coupon rate 10.80 per cent a year.
SBI awaits RBI cues for action on rate cuts (BL, FE 06.12.08)
SBI said that it would consider further cuts in the lending rates following the Reserve Bank's monetary measures, to be unveiled on Saturday. The RBI is expected to announce monetary measures including reduction in key policy rates, signaling a soft interest rate regime to fuel growth.
IOB in pact with Coir Board (BL, ET 06.12.08)
Indian Overseas Bank has signed a Memorandum of Understanding with Coir Board for implementation of rejuvenation, modernisation and technology up-gradation of the coir industry. The objective of the scheme is to encourage traditional coir units to migrate to modern methods with induction of modern, efficient and high speed machineries, equipments and looms and there by improve the production quantity, quality and profitability. The scheme will be operational during the XI five-year plan period ending 2012 with a total financial outlay of Rs 243 crore and will benefit about 15,000 coir units.
FCNR deposit rates cut (BL 06.12.08)
Bank of Rajasthan has slashed interest rates on foreign currency non-resident deposits and non-resident external rupee deposits from December 1. Interest rates on FCNR(B) deposits (Dollar), having a maturity of one year to less than two years, have been revised to 3.77 per cent (4.17) while for those in 2-3 years maturity, the new rate is 3.12 per cent (3.66 per cent), the bank said.
Outsourcing to be sticky issue at wage talks (BL 06.12.08)
The 9th bipartite wage settlement talks between the nine unions and the Indian Banks’ Association’s Negotiating Committee is likely to lead to a tug of war on the issue of outsourcing in public sector banks (PSBs). According to the union representatives, the last bipartite wage settlement talks did not allow outsourcing other than in specialist IT jobs. The IBA’s Negotiating Committee, however, is of the view that “enlarging the scope of outsourcing is an agenda during the current negotiations.” Besides wage hike, one more option for pension, and improved service conditions for around seven lakh bank employees, the wage settlement talks will also tackle the issue of outsourcing issue head-on. Unions have taken the stand that outsourcing of jobs of permanent nature should not be done. Bank managements, however, are of the view that IT, marketing, maintenance and upkeep and security could be outsourced. While unions have expressed concern that data pertaining to customers could be misused by a third party, the banker pointed out that banks will have a security policy in place. The banker stated that with financial inclusion, more and more people would be associated with the banking sector and this is unlikely to result in reduction in staff strength.
PSBs play it safe with nostro accounts in US (BL 06.12.08)
Public sector banks have now begun restricting their correspondent account balances to a handful of US banks. Senior banking sources said that nostro account balances or correspondent accounts were maintained with 17 banks, including Wachovia, till about 3 months ago. Bankers said that the Reserve Bank of India has now sought details of the number of nostro account balances with the various US banks. Domestic bankers said that the RBI also advised them to hold their nostro balances only with large banks that have clearing operations.
Leeladhar to step down as RBI Deputy Governor (BL 06.12.08)
The Deputy Governor of RBI, Mr V. Leeladhar, will relinquish office on Monday after serving in the post for a little over four years. The Government was yet to decide on a replacement, official sources said.
Govt to borrow Rs 45,000 cr more (BL 06.12.08)
To meet its additional expenditure, the Government of India will borrow an additional Rs 45,000 crore through the issuance of marketable securities. The Reserve Bank of India has come out with an issuance calendar for the period of December 1 to March 31 detailing the borrowing schedule.
NBFCs may get easier access to funds (BL 06.12.08)
Non-banking financial companies (NBFCs) may get some policy support from the Government and the Reserve Bank of India as part of the economic stimulus package slated to be unveiled on Saturday. Allowing such companies to access external commercial borrowings (ECBs) window was among several measures that figured in the discussions of the Prime Minister’s apex panel that finalised the stimulus package, highly placed sources said. It has been recognised that NBFCs, unlike banks, do not have access to low-cost deposits and are all “choked” on account of the growth seen in recent years.
ExIm Bank in 15-year loan pact (BL, FE 06.12.08)
Export-Import Bank of India has signed an agreement for a long term loan of Euro150 million for a tenor of 15 years with European Investment Bank. The loan agreement was signed by Mr. T. C. Venkat Subramanian, CMD, Exim Bank and Mr. Carlos da Silva Costa, Vice President, EIB, a press release issued by Exim Bank said.
Personal income-tax collections down 31% in November (BL, ET, FE 06.12.08)
The Centre's personal income-tax collections were pegged at Rs 5,782 crore in November 2008, reflecting a 31.28 per cent decline over the collections of Rs 8,414 crore recorded in the same month last year. Corporate tax collections too declined in November 2008 on a year-on-year basis. In November 2008, the Centre’s corporate tax collections stood at Rs 4,561 crore, recording a decline of 41 per cent over the collection level of Rs 7,741 crore in the same month last year.
Mumbai attacks: Chidambaram assures speedy settlement of insurance claims (BL 06.12.08) The Union Home Minister, Mr P. Chidambaram, said that the Government will ensure settlement of insurance claims related to the victims of the Mumbai terror attack in 3-4 weeks. He said he had asked the Finance Secretary to expedite the processing of insurance claims.
Marine premium income may decline (BL 06.12.08)
Marine insurance premium income for Indian general insurance firms are expected to decline this year due to a fall in the overall value of assets covered, triggered by falling commodity prices, industry experts said.
SEBI: Ensure cos maintain security deposit with SEs (BL 06.12.08)
The capital market regulator, Securities and Exchange Board of India, has asked stock exchanges to ensure that all listed companies maintain the mandatory security deposit with them. Under the listing agreement, companies have to deposit one per cent of the money collected from public shareholders with the exchanges as security deposit. Of this, 50 per cent shall be made in cash and the balance can be provided as bank guarantee. According to SEBI, in many cases bank guarantees kept with the stock exchanges by companies have expired and the exchanges had not asked them to renew such guarantees. The security deposit can be released by the exchanges only after obtaining a no-objection certificate from SEBI.
SEBI does its bit (BL 06.12.08)
SEBI’s resort to cosmetic changes in the primary market regulations is attributable to the extraordinary situation prevailing in the economy and the capital market.
SEBI signs MoU with Russian Federal Financial Markets Service (BL, ET 06.12.08)
The Securities and Exchange Board of India (SEBI) has signed a memorandum of understanding with the Federal Financial Markets Service of Russian Federation (FFMS) here on Friday.
Forex reserves jump $1.9 b (BL, BS, ET, FE 06.12.08)
The foreign exchange reserves swelled by $1.88 billion in the week ended November 28, to $247.68 billion. If one reckons the position obtaining as of December-end 2007, the forex reserves have, in fact, got depleted by $27.63 billion. The Reserve Bank of India’s data clearly indicate that in the April-September 2008 period foreign direct investments increased substantially by $19.295 billion (as against $7.250 billion in the corresponding period last year), portfolio investments saw an outflow of $5.480 billion (as against an inflow of $18.409 billion in the corresponding period last year).
Securitisation firms can take over management of borrower: RBI (BS 06.12.08)
A securitisation company (SC) or reconstruction company (RC) may take over the management of the business if the dues are 25 per cent or more of the total assets of the borrower, and where more than 75 per cent of the total secured debt has been financed by more than one secured creditor. These draft guidelines have been issued by the RBI as part of the norms called ‘Change in or takeover of the management of the business of the borrower by SC/RC’ under Section 9(a) of the SARFAESI Act.
Make loans easy for core cos, PSBs told (ET, FE 06.12.08)
The government has asked banks to consider giving cheaper loans to the infrastructure sector even beyond the prescribed sectoral limits. The move comes even as three of the country’s leading public sector banks - State Bank of India (SBI), Punjab National Bank (PNB) and Uco Bank - have indicated that further reduction in their lending rates is possible provided the Reserve Bank of India (RBI) reduces the key policy rates, repo rate and the cash reserve ratio (CRR). “We have decided to give loans to certain sectors beyond their sectoral limit in extreme circumstances. The facility would be available especially for our existing borrowers and the decision would be taken on a case-to-case basis,” Uco Bank chairman and managing director S K Goyal said, after the meeting of the chief of public sector banks with the finance secretary. “There is pain in some sectors like realty, export and SMEs. We have decided to consider the matter sympathetically,” PNB chairman K C Chakrabarty said. On reducing interest rates, Mr Chakrabarty said his bank has been the front-runner in reducing rates and it would further cut rates on appropriate signals from RBI. A senior official in SBI said the bank’s asset-liability committee is considering a revision in its lending rates and a decision may be taken soon after RBI decision to reduce the repo rate.
RBI asks banks to reassess financial support to realtors (ET 06.12.08)
India’s troubled realty firms may soon be thrown a lifeline with the Reserve Bank of India (RBI) indicating banks to consider providing support to large real estate companies. Recently, RBI wrote to select banks to assess the financial support given to builders and to finalise a workable solution. A senior banker said that almost all large real estate companies are included in the RBI list. A number of banks have already began discussions with these realtors. Lenders are now in the process of submitting the report to the central bank. According to bankers, the RBI move follows regular complaints from real estate companies that demand for homes have been sluggish due to the high interest rates. Their grouse is that there is resistance among banks to finance the realty sector.
Chanda Kochhar leads Kamath successor list (ET, BS 06.12.08)
Chanda Kochhar is tipped to be the next managing director and chief executive of ICICI Bank. There is a distinct possibility that the board of the country’s second largest bank will consider the successor to KV Kamath at its meeting on December 19. Mr Kamath, whose term comes to an end next April, is expected to become the non-executive chairman.
Pvt banks begin deposit rate cuts (ET 06.12.08)
HDFC Bank, the second-largest private bank, has slashed interest rates on deposits while other private banks such as IndusInd Bank will take a decision next week. The rates for deposits of a maturity of six months and 15 days have been reduced from 10.5% to 8.25%. For nine months and 15 days, they are from 10.5% to 9% while for one year and 15 days, they are now 10% from 10.5% earlier. The bank has also slashed the rates for two years and 15 days from 10.5% to 9.5%, making it the first private bank to cut deposit rates after some of the PSU banks cut rates a couple of weeks before. HDFC Bank has also slashed rates on bulk deposits. ICICI Bank is yet to take a final decision on rate cuts. Axis Bank is carrying out a review and may take a decision soon.
Health Plan: Mega booster dose for economy to be unveiled today (ET 06.12.08)
The industry booster package expected on Saturday is likely to include a reduction in bank rates, lines of credit for the infrastructure and housing sectors, excise duty cuts for commercial vehicles, easing of external commercial borrowing norms and measures to restore export growth, especially in labour-intensive sectors that have been worst affected by the global meltdown. “This will not be a single package. There will be a first package, second and third part of it,” commerce & industry minister Kamal Nath said.
Bids soon to man individual pension accounts (ET 06.12.08)
The regulator for the new pension scheme would soon invite bids from private sector fund managers to handle parts of its Rs 1,700-crore corpus, which the regulator expects to more than double in some time. Insurance companies such as Tata AIG and MetLife India Insurance Company partly owned by foreign investors can also participate in the fund management of the new pension scheme administered by the Pension Fund Regulatory Development Authority (PFRDA). The appointment of private fund managers comes ahead of the regulator’s plan to extend the scheme to private individuals from April next year. Now, participation in the scheme is compulsory for employees who joined government service after January 1, 2004 and voluntary for those who are already in public service.
US and China join to tackle global crisis (ET 06.12.08)
The United States and China pledged on Friday to work together to tackle global financial turmoil as they wrapped up economic talks but left open whether the high level dialogue will continue under president elect Barack Obama. Ending the fifth meeting of the two-year-old strategic economic dialogue, the two sides promised $20 billion to finance imports by developing countries and co-operation on regulating financial risks. Beijing said it would let local subsidiaries of foreign banks trade stocks in its market and Washington promised to speed up licensing of Chinese banks.
SBI Mumbai circle’s SME portfolio grows by Rs 2,400 cr (FE 06.12.08)
State Bank of India (SBI) Mumbai circle's SME portfolio had grown by nearly Rs 2400 crore in 2007-08. Also, the bank has got an outlay of Rs 3,750 crore for growing the SME portfolio in Maharashtra and Goa during the current year, said Narayanan Raja, chief general manager (CGM) of SBI's Mumbai circle.
Defaulters may get back seized units (FE 06.12.08)
The Reserve Bank of India on Friday has suggested that managements of defaulter companies can get back their units seized by banks, if they pay up within five years. The draft guidelines issued by RBI has made these changes in the Sarfaesi Act. The Act had given, for the first time, banks the legal backing to take over plants and machinery of companies that consistently defaulted on their loans.
Direct tax growth slows to 22.2% (FE 06.12.08)
Reflecting the overall slowdown in economic activities, the growth in direct tax collections too has reduced significantly to register a mere 22.2% increase between April to November this fiscal to amount to Rs1,77,251 crore. Till November last year, direct tax collections amounted to Rs 1,45,053 crore.
Short-term fund mobilisation falls sharply (FE 06.12.08)
As the credit crunch bites the economy, short-term fund mobilization by banks and companies have fallen sharply as investors turn away from issues of certificate of deposits (CDs) and commercial papers (CPs). As per latest data released by the Reserve Bank of India on Friday, banks and financial institutions issued CDs worth Rs 1,999 crore during the fortnight ending November 6 and Rs 1863 crore in the previous fortnight. This is far lower than Rs 12,016 crore of CDs issued for the fortnight ended October10.
Major rates & parameters as on 05.12.08 (BL, RBI)
Auction under RBI’s LAF
Govt. Securities (Yield)
8.24% 10-Yr 2018
7.95% 24 Yr- 2032
Rs 13,120 Cr
Rs 31,975 Cr
Source BL= Business Line, BS=Business Standard, ET=Economic Times & FE=Financial Express