Ways2finance

Now, pay more for banking

noreply@blogger.com (Ways2earn) — Mon, 18 Jun 2012 04:15:00 +0000

With most banks increasing charges or introducing fees for various services, find out how much more you will have to shell out

    After petrol, the price hike bug has bitten the banks too, with several of them raising their charges in the recent past. Banks have also introduced fees for services which were available for free till now. For instance, ICICI Bank had allowed inter-bank mobile payments for free, but will now charge 5 per transaction. Here are some services that will be more costly.
Revised minimum balance
A big change is that you will now need to maintain an average monthly balance (AMB) instead of an average quarterly balance (AQB). The amount, however, remains the same. So, if you had to maintain an average of 20,000 in your account in a quarter earlier, you will now need to keep this amount every month. If the balance drops even for two days, you might be penalised.
    The penalty for non-maintenance has inched up too. Kotak Mahindra Bank has increased the charges for non-maintenance of quarterly balance to 750-1,000, depending on the percentage of balance, up from 600 charged earlier. Some banks have shifted to a monthly system. From 750 a quarter, the penalty for non-maintenance has increased to as high as 350 a month.
    Instead of quarterly, monthly is the new norm for most service charges. Earlier, you were allowed 12 branch transactions free in a quarter. However, now most banks have imposed a limit of four free transactions in a month, and all extra transactions will be charged. Even the fee for this has been hiked from 50-60 to 75-90.
    Keeping an eye on your branch transactions is even more important if you're careless about the average balance in your account. For instance, HDFC Bank allows five cash transactions free in a month if you maintain the AMB, but if you fail to do so, you can only transact twice.
Dormant accounts
You will have to pay for non-operational accounts too. HDFC Bank levies a fee of 50 per quarter if your bank account has been unused for a year, while HSBC Bank charges 150 per quarter if an account has been dormant for two years.
Credit card charges
If you have a credit card, leaving it idle may do you more harm than good. Standard Chartered Bank now levies a non-usage fee of 250 if a credit card has not been used for a year. If the card has not been swiped within the first three months of it being issued, you will have to pay 250. Banks have initiated a charge on credit card reward point redemption too. Currently, Axis Bank levies a fee of 30 for each redemption request, while Standard Chartered Bank has increased the reward handling charges to 99 from 50.
Good news
There's relief on some fronts as banks have waived some dues. Intercity clearing charges have been removed and mobile banking services are free. At HDFC Bank and HSBC Bank, balance enquiry is free at all branches. In case of HDFC Bank, if your account balance is 50,000 or more, transactions like NEFT, RTGS, cheque deposit and fund transfer are free. Earlier, charges were deferred if you had a fixed deposit equivalent to the minimum balance.
What you can do
If your bank has imposed a charge, tally it with the prescribed charges list, a copy of which is usually mailed by the bank to you at the end of the financial year. Also, make sure that you were informed about the revised rates 30 days before you were asked to pay the new fee. Though you can't complain about the charges being unreasonable, if you are unconvinced about the bank revising its charges, you can close your account. One way to avoid or reduce transaction costs is to use phone banking, Net banking and ATMs for services such as duplicate statements and stop payment of cheques, as these are usually free or can be availed of at a reduced cost through these mediums.

Mukesh funds Network18 promoters, cuts ETV stake

noreply@blogger.com (Ways2earn) — Wed, 04 Jan 2012 03:32:00 +0000

Mumbai: Ending weeks of speculation, Reliance Industries Ltd (RIL) and Network18 on Tuesday announced a complex multi-layered deal, adding momentum to the convergence of media and telecom in India. As part of the deal, Mukesh Ambani's RIL will sell a portion of its stake in Hyderabad-based Eenadu TV to Raghav Bahl-promoted Network-18 for Rs 2,100 crore in cash. It'll give Network18, which runs channels such as CNBC TV18 and CNN-IBN, 100% control in ETV's non-Telugu news, 50% in non-Telugu entertainment channels, and 24.5% in Eenadu Telugu (which has a news and general entertainment channel).

IN A NUTSHELL
tRIL sells 100% stake in Eenadu's non-Telugu news and 50% stake in non-Telugu entertainment channels; it also sells 24.5% in Eenadu Telugu as part of a Rs 2,100-crore cash deal with Network18
tPost-deal, RIL will continue to hold 50% stake in entertainment and 24.5% stake in ETV Telugu
tThe deal makes Network18 and TV18 a "debt-free" company (except promoters' debt of Rs 1,700 crore owed to RIL) and RIL will gain preferential access to the content of all media and web properties of Network 18 for its broadband launch RIL gains content for its 4G foray
    The RIL-Network18 deal marks the biggest consolidation move in India's broadcast business along with Walt Disney's recent Rs 2,000-crore buyout of UTV Software and STAR TV's acquisition of Asianet Communications three years ago. Network18 will gain broadcasting access to 11 vernacular language channels and expand its overall portfolio to 25 channels. RIL, which is scheduled to launch fourth generation (4G) broadband services, will have exclusive access to the media group's content.
    An RIL entity, Independent Media Trust, will extend promoter financing to Bahl, who now embarks on a Rs 4,000-crore rights issue through two listed firms, Network18 Media & Investments Ltd and TV18 Broadcast Ltd, to finance the Eenadu acquisition and to retire debts. Sources said RIL may finance Bahl's investment companies to the extent of Rs 1,700 crore through optionally convertible debentures.
    Even after dilution of stake, Bahl will retain 51% in Network 18 Media & Investments and 50% in TV18 Broadcast. Both companies will file draft letters of offer for their respective rights issues shortly, a company statement said on Tuesday. Their cumulative debt is estimated at around Rs 2,300 crore.
    Analysts said RIL's involvement with the Network18 Group carried interesting possibilities for the cash-rich, primarily oil-and-gas behemoth. RIL has been increasing its consumer-facing businesses with forays in retail, financial services and telecommunications. Incidentally, RIL's ownership of Eenadu channels was not publicly known till the company disclosed it before the Andhra Pradesh High Court some months ago.
    Nimesh Kampani of JM Financial, with the backing of RIL, extended a Rs 2,600-crore lifeline to Hyderabad-based entertainment magnate Ramoji Rao's flagship Ushodaya Enterprises in 2008. This translated into an ownership stake in Eenadu TV following a restructuring deal about a year ago. RIL's involvement with Ramoji Rao's broadcasting business has been a subject matter of speculation and political controversy in Andhra Pradesh.
    "As a part of the deal for the acquisition of ETV Channels, Network18 and TV18 have also entered into a Memorandum of Understanding with Infotel Broadband Services Limited, a subsidiary of RIL, under which the companies and their associates will have the right to distribute the content of all the media and web properties of Network18 and programming and digital content of all the broadcasting channels (including the ETV channels which are being acquired by the company) through 4G broadband network of Infotel," a joint statement from Network18 and TV18 said.
    Edelweiss, a brokerage firm, said in a report, "Post the deal, the TV18 bouquet will include more than 25 channels which will boost subscription revenues in both domestic and international markets and impart it higher bargaining power with advertisers. This will enable the company to have a strong pan-India bouquet of channels like Star and ZEE networks and edge ahead of Sony. Key concerns are huge dilution, competition in Kannada and Telugu markets with Sun TV (TV18's distribution partner) and potential merger blues."
    Media analysts said the Indian broadcasting industry, pegged at Rs 30,600 crore, has been waiting for a consolidation drive and this deal will pave the way for more action especially in the regional media space. "For RIL's 4G broadband play this gives them a diversified portfolio of genres except sports. And for Network18, it clears them of the heavy debts," said Jehil Thakkar, head, media & entertainment practice, KPMG India, a consultancy firm.
    On the Bombay Stock Exchange, RIL gained about 2.4% and closed at Rs 723.70 at the end of trade on Tuesday while Network 18 gained 20%. On the National Stock Exchange, TV 18 Broadcast gained about 20% to close the day's trade at Rs 33.70.
    Times NOW and ET NOW, owned by Bennett, Coleman & Co. Ltd, the publisher of this paper, compete with some of the Network 18 channels.
GROUND FOR BROADBAND PUSH
2008 | Backed by RIL chairman Mukesh Ambani, JM Financial's Nimesh Kampani bails out media and entertainment magnate Ramoji Rao with Rs 2,600-crore investment in his flagship Ushodaya Enterprises
2011 | RIL restructures Ushodaya investment; admits to have invested in Ushodaya before HC; gains 100% ownership of Eenadu's non-Telugu channels, and 49% in its Telugu channels
Dec 2011 | News of RIL backing a merger between Raghav Bahl's Network 18 and Eenadu TV surfaces; RIL denies a deal
Jan 3, 2012 | Network 18 announces acquisition of Eenadu's non-Telugu entertainment and news broadcasting business; an RIL trust will finance Bahl's plans to raise Rs 4,000 crore in rights issue to clinch Eenadu buyout

India Re dives to lifetime low of 52.73

noreply@blogger.com (Ways2earn) — Wed, 23 Nov 2011 05:44:00 +0000

Oil Cos Stack Up Dollar, RBI & Govt Indicate Inability To Prop Up Rupee

New Delhi/Mumbai: The rupee continued its free fall and touched a nadir of 52.73 against the dollar, before recovering a little to close at 52.32, amid indications from RBI and the government that there was little that authorities could do to prop up the currency.
    The Indian currency closed 16 paise lower compared to Tuesday's close which was a record low. The steep fall on Monday morning trade was due to heavy dollar demand from oil companies. Expectations of a further decline are also prompting importers to buy dollars, dealers said. There are clear indications from the market that the falling trend is going to last for a while. In the offshore market, three-month forward contracts traded at 53.46 to the dollar, compared with 53.05 on Monday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
    Even in the futures market, which is used by companies tohedge their currency risks against a steep appreciation or depreciation, traders were betting on the rupee trading at 52.80 in late January. The rupee is among the most depreciated currencies this year, having lost close to 15% in 2011, and is the worst performer among the 10 most-traded currencies in Asia.
    "The present situation is worse than the 2008 crisis which was essentially a problem faced by corporates. This time it is countries that are at risk which is a more serious problem. There is complete negativity on all fronts and it is not possible to forecast how low it can fall," said K N Dey, director at Basix Forex. Although RBI described the continuous slide as "disruptive", it indicated that there waslittle it could do. "We expect that a reverse adjustment (in the rupee) will take place when the European situation resolves itself," governor D Subbarao told reporters in Hyderabad.
    Finance minister Pranab Mukherjee was blunt, and said, "RBI intervention may not help." RBI typically steps in through public sector banks such as SBI to either sell or buydollars and check extreme volatility in the currency. Typically, in a situation like this, the central bank would sell dollars. But fearing that its actions could suck out Indian currency from the system and put further pressure on interest rates, the central bank has been selling the greenback in small lots. But that has not helped. "Our policy is that if the macro-economic situation is impacted due to the exchange rate fluctuation or undue volatility, we will have to
intervene. We are yet to decide whether to intervene or not at the moment," Subbarao said.
    The fall in the currency has sparked fresh pessimism in the market and even Mukherjee recognized that inflation management efforts would be hit. "As a result (of depreciation) whatever little benefit could have been derived from the softening of international commodity prices, has been wiped out," the FM said.
WHAT POLICYMAKERS SAY RBI reserves firepower for the worst Subbarao Says Rupee Will Firm Only After Europe Resolves Its Problems
Mumbai: One aspect of the rupee's sharp fall last week that has surprised markets is the Reserve Bank of India's muted response during the week. Dealers feel that the central bank is reserving its firepower as the global situation could worsen.
    On Tuesday, RBI governor D Subbarao told newspersons in Bangalore that the rupee would firm only after Europe resolves its problems. "We expect the reverse adjustment will take place when the European situation resolves itself. Until then, obviously, I can't comment whether RBI is intervening or not but we are watching the market," he said.
    Dealers feel that although the central bank is sitting on forex reserves of over $300 billlon they are not free reserves as they represents liability towards portfolio investors. "Last time when the rupee had crossed 50 the sensex had dropped below 8,500. This time the sensex is at 16,000, if the central bank were to support the rupee at this level it may encourage portfolio investors to further book profits," said a dealer.
    According to Subbarao, the central bank will intervene when it is consistent with RBI's policy. "Our policy remains the same, which is to manage volatility in exchange rate and to ensure that exchange-rate volatility does not impair macroeconomic stability."
    Subbarao's stance was reiterated by deputy governor Subir Gokaran in Mumbai. Speaking to reporters, Gokarn said that RBI did not have any target for the rupee but any action by the central bank must factor medium-term risks. He added that RBI was weighing possible actions on the rupee.
    Subbarao said the proposed legislation on food security may result in pushing up prices. The governor also said that higher income was driving an increase in protein consumption adding to demand pressures.
    Delivering a speech at the Indian Society of Agricultural Marketing in Hyderabad, Subbarao said: "The National Food Security Bill, 2011 is another potential source of pressure on inflation, and its inflationary impact will depend on the extent to which it will raise demand for food grains relative to the normal increase in supply." The proposed bill targets two categories of households—priority households and general households—which covers 75% of rural population and 50% of the urban population. The price restrictions are quite exacting and failure by the government to meet the obligations entails payment of a food security allowance to the beneficiary. "Estimates suggest that 68% of the country's 1.2 billion population will get a legal entitlement for food grains after the bill is enacted, significantly raising the annual grain procurement demand even as the available marketed surplus would not increase correspondingly.

RBI is monitoring the situation closely and will take the required action in light of the international developments as situation unfolds. However, RBI intervention (in the forex market) will not help Pranab Mukherjee | FINANCE MINISTER

Our policy is that if the
macro-economic situation
is impacted due to the
exchange rate fluctuation or undue volatility, we will have to intervene. We are yet to decide whether to intervene or not at the moment. The intervention in the forex market will be in accordance with the RBI's policy. But in real terms I cannot tell (when the central bank will intervene)
D Subbarao | RBI GOVERNOR

We should not overreact to movements in the exchange rate. But, also understand that there are good reasons for what is happening.
Expectations of economic events in certain parts of the developed world together with asset preferences are driving investors into taking decisions, which affect not only exchange rates but the prices of commodities
Rahul Khullar | COMMERCE SECRETARY

7 GOLDEN RULES OF RETIREMENT

noreply@blogger.com (Ways2earn) — Mon, 21 Nov 2011 19:10:00 +0000

Experts contend that retirement planning should start from the day you start earning. Sound advice indeed, but one that is seldom followed. So ET Wealth decided to bring to you seven rules of retirement planning that have been advocated by experts for decades. Follow them and you can be sure to retire in comfort

1. Save 10% of your income for retirement
The first rule of retirement planning is also the easiest to follow. If you have a regular job, then 12% of your basic salary and an equal contribution by your employer that flows into your Provident Fund account is a good way to build a nest egg. The best thing about this option is that you cannot avoid it. EPF rules require all employees to contribute 12% of their basic income to retiral savings, which include the Employee Provident Fund and the Family Pension Fund. It is a forced saving that becomes the default retirement plan for many individuals.
    The amount of contribution to the EPF does not matter. Given the power of compounding, even a small contribution can bloat into a big sum over the long term. Don't underestimate the significance of the savings in the first few years. Assuming that a 25-year-old investor puts away a fixed amount every month, his savings in the first five years will account for 44% of his total corpus when he is 60 years old. The later you start, the more you will need to save. If you have started late, say in your 40s or 50s, you will have to invest up to 20-25% of your income if you want a comfortable retirement.
    The 10% rule is crucial for self-employed professionals and others who are not covered by the EPF umbrella. They can opt for mutual funds, choosing the ones that suit their risk appetite and age profile. However, you need to have the discipline to put away the given sum on a regular basis.
SMART TIP: Start an SIP in a mutual fund and automate the process by giving an ECS mandate to your bank. In this way, your retirement planning will stay on track. 2. Increase investment as your income grows
According to recruitment firm ABC Consultants, India Inc hiked salaries by 12-15% in 2011. By how much did your income go up? More importantly, did you step up the quantum of your investments accordingly? Not many people do that. Sure, inflation has been on the rise and most of this year's increment would have been nullified by the increase in the cost of living. But even when there is a marked increase in the investible surplus, people don't match their investments with the increase in income.
    This is understandable since it is human nature to put things off, especially ones that require sacrifices in return for future rewards. This can severely undermine your retirement planning. If a 30-year-old with a monthly salary of 50,000 starts saving 10% ( 5,000) for his retirement every month in an option that earn 9% per year, he would have accumulated 92 lakh by the time he is 60. Now, assuming his salary increases by 10% every year and he raises his investment accordingly, he would have a gargantuan retirement corpus of 2.76 crore. If he does waits five years to raise it by 50%, he will have 1.93 crore.
    It is important to maintain the retirement savings rate at 10% so that your nest egg doesn't fall short of your requirements. The icing on the cake can be periodic boosters whenever you get a windfall, such as a tax refund or a lump-sum payment in the form of, say, an annual bonus. The trick is to commit yourself to save more in the future.
SMART TIP: Whenever you get a raise, allocate half of it to savings. You might not notice the change since you will be enjoying the other half of the raise.
3. Don't dip into corpus before you retire
This might sound weird, but every time you change jobs, your retirement planning is at a grave risk. This is because you have the option to withdraw your PF balance at that time or transfer it to the account with the new employer. Besides, there is the option to withdraw your PF amount if you need the money for specific purposes, including your child's marriage, buying or building a house, or in medical emergencies. Dipping into the corpus before you retire prevents your money to gain from the power of compounding. Don't underestimate what this can do to your retirement savings over the long term. A person with a basic salary of 25,000 a month at the age of 25 can accumulate 1.65 crore in the PF over a period of 35 years. This is based on the assumption that his income will rise by 10% every year.
    Yet, many people are unable to reach the 1 crore milestone in their PF accounts. Although the paperwork is minimal, a lot of people prefer to withdraw their PF money when they change jobs or for other purposes. This, despite the fact that the government discourages you from withdrawing the money. The withdrawals from the EPF within five years of joining are taxable.
    The sudden flush of liquidity can trigger a spending spree and ill-planned decisions that can cripple your financial planning. Often, the money goes into discretionary spending, which means your retirement planning is back at square one. A late start means a smaller corpus even if you start investing more.
SMART TIP: Instead of withdrawing your EPF balance when you change jobs, transfer it to the new account by filling 'Form 13' and
submitting it to the new employer. This
should be at the top in your list of priorities at the new workplace.
4. Withdraw 5% a year initially, then step up
One of the biggest challenges for tomorrow's retirees is to ensure that they don't outlive their savings. This is a distinct possibility because of two major factors: rising cost of living and an increase in life expectancy. High inflation, in fact, is enemy no. 1 for the retired investor. Sure, the inflation rate will not remain as high as it is right now. However, over 20 years, even a nominal inflation of 6% will reduce the value of 1 crore to 29 lakh. Besides, Indians are living longer. Life expectancy rose from 61.3 years in 2000 to 66.46 years in 2010. By 2020, the average Indian can expect to live till 72 years. In urban areas, where people have better access to healthcare, and in higher income groups, the life expectancy could extend beyond 80 years.
    To ensure that you don't run out of money in your old age, you must have a drawdown plan in place. The thumb rule is not to withdraw more than 5% of the corpus in the first five years of retirement. This can be progressively increased to 10% by the time the retiree is 70. This essentially means that the retiree should draw down less than the appreciation in the initial decade, but in the next 10 years, he can withdraw more than the accretion to the corpus. At 80, even a 20% annual drawdown rate would be considered safe.
    The problem arises because most Indians are not comfortable with the idea of drawing down from their corpus. There is an overarching desire to leave something behind for their heirs and dependents. Given the inability of a corpus to beat inflation in the long run, the retirees should be prepared for a depletion of their corpus.
SMART TIP: You can safely draw down half
the inflation-adjusted appreciation every
year. If the portfolio has earned 12%, you can easily withdraw 6%.
5. 100 — age = Your allocation to stocks
An investment portfolio's performance is determined more by its asset allocation than by the returns from individual investments or market timing. How much you have when you attend your last day at work will depend on how you divided your retirement savings between stocks, fixed income and other asset classes. Experts recommend that you should have an equity exposure of 100 minus your age. So, at 30, you should have about 70% of your portfolio in equities. At 55, the exposure to this volatile asset class should have been pared down to 45%. After you retire, your exposure to stocks should not be more than 25-30% of your portfolio.
    Even within equities, the type of stocks (or equity funds) in your portfolio should vary with age.
    This is not a hard and fast rule and should also take into account the financial situation of the individual. It assumes that all people at a certain age will have the same risk appetite. This is not true. A 45-year-old person with a good income and few dependants will be able to take on more risk than someone who is 30 but has a low and unsteady income.
SMART TIP: Invest in asset allocation funds that redistribute the corpus depending on the age of the investor. As he grows older, the exposure to equity is progressively reduced. 6. Borrow for education, save for retirement
Indian parents love to save for their children. Whether it is for their education or marriage, or even to provide them with a comfortable life, children are the biggest motivators of savings in the country. But before you pour money into a child plan, make sure your retirement savings target has been met. In an effort to fulfil the needs of the child, Indian parents sometimes sacrifice more than they should. Some even dip into their retirement funds to pay for the child's education. This is risky because your retirement is going to be very different from that of the previous generations. It will be entirely funded by you and won't have the cushion of defined benefits.
    This doesn't mean you should compromise on your child's education. It can still be done through an education loan. In the past two decades, we have seen how the MRP of a product has been replaced by its EMI in our everyday lives. Home, travel, car, education, gold,consumer durables—you can get a loan for almost anything and everything. What's more, the government encourages you to take loans by offering tax breaks on the interest paid on housing and education loans. No bank, however, is going to lend you for your retirement. Sure, there are reverse mortgage schemes, but those require your house to be kept as collateral.
    Under Section 80E, income tax deduction is available only if the education loan has been taken for yourself, your spouse or children. Also, the loan should be from a bank or a financial institution notified for the purpose. No tax deduction is available if the loan has been taken from a private source.
SMART TIP: An education loan helps
inculcate financial discipline in the child. If he is responsible for the repayment, he gets into the saving habit early in life.
7. Save 20 times your annual expenses
This rule is different from others because it is based on how much you spend, not on how much your investments earn. Knowing your post-retirement expenses is crucial to retirement planning. Some expenses, such as those on clothing and entertainment, come down. Others, such as transportation, medicine and insurance, go up. Add up all the expenses you are likely to incur after retirement to know how much you will need per month. Then, multiply this amount by 240 to know how much should be your retirement corpus.
    However, this calculation is based on a number of assumptions. Firstly, you should not have outstanding loans when you hang up your boots. Secondly, you and your spouse should have sufficient health insurance. A survey conducted by HSBC earlier this year shows that unforeseen expenses and medical costs are the biggest concerns for Indians during retirement.
    The good news is that Indians are increasingly becoming aware of the need to plan their retirement. In a 2010 survey by Bharti Axa Life Insurance in eight top cities in the country, 74% of the respondents said that they knew how much they would need after retirement. Three years earlier, only 53% had a fix on how much they would require in their sunset years.
SMART TIP: Buy a health insurance cover that continues till you are 70-75 years old. It is difficult to buy one afresh when you are older and not so healthy.

With Bold Moves, Subbarao Gets Reddy for Criticism

noreply@blogger.com (Ways2earn) — Mon, 19 Sep 2011 04:40:00 +0000

In his Predecessor's Steps: RBI guv has earned more critics than admirers in the past few months

When career bureaucrat Duvvuri Subbarao took the wheel at Mint Street in September 2008 at a time the financial world was crumbling, the popular belief was New Delhi would get a firm handle on monetary policy. The Lehman Brothers collapse and the 'synchronised' handling of the crisis between the government and central bank strengthened the belief. Three years later and the next crisis possibly round the corner, the story is different. Subbarao has earned more critics in recent months for supposedly killing growth, but a few admirers too for his conviction. Events are unfolding to create a landscape similar to the one that confronted his predecessor Yaga Venugopal Reddy — heaps of criticism for supposedly stifling growth and innovation.
"It was unnecessary given the sharp deterioration in the global environment and a significant slowdown in domestic activity," said Tushar Poddar of Goldman Sachs after the governor raised policy rates 25 basis points last Friday amid slowing economic growth. A basis point is 0.01 percentage point.
Industry was not far behind.
"At a time economic policy should focus on the creation of jobs, it is unfortunate that the economy is being forced into a sluggish growth phase," said B Muthuraman, president, Confederation of Indian Industry.
Subbarao, who parroted the policy stance of global central bankers during much of his first term, is deviating significantly. Policymakers in developed nations are keeping rates near zero and Federal Reserve Chairman Ben Bernanke has promised to keep it low till the middle of 2013. Most Asian central bankers have left rates untouched this month and Turkey and Brazil have cut interest rates. Subbarao is the odd man out by promising to keep raising rates till prices cool. Many admire his independence. "Subbarao is a pragmatic and astute central banker who has taken independent decisions based on his well-researched conviction," says Madan Sabnavis, chief economist at rating company Care. Warrior Caught in Padmavyuha
"He has recognised inflation as being the single most important malaise afflicting the economy and pursued the goal of increasing rates, notwithstanding the pressures being exercised from different quarters, displaying a lot of character."
Industry has been seeking a halt to raising interest rates, which started with 'baby steps' in 2010 with the governor's public admission of confusion with reference to his position being similar to a warrior caught in 'padmavyuha', a battle formation that is easier to get in, but difficult to get out.
The noise was loud enough to force him to declare last November that he would be putting the brakes on rate increases as manufacturing data showed weakness despite climbing prices. Industry and markets cheered, but it was short-lived.
He abandoned the baby steps for a shock treatment by raising rates 50 basis points in July, double of what the market forecast. "What the RBI will have to consider is that interest rate tightening has not had the desired impact on inflation that we were hoping for. It is having an impact on growth," Kaushik Basu, chief economic advisor to the finance minister, said before the rate hike decision last week.
The wildly-fluctuating Index of Industrial Production was presented as an argument for a pause. But Subbarao began to dig the surface. The economist in him found that data from the government was unreliable. A new series that was peddled by the government statistics department to be more reliable has been described by the governor as 'analytically bewildering'.
ASSERTING RBI'S AUTONOMY
It is not just his monetary policy actions by which Subbarao has asserted the central bank's autonomy. He has spoken out in public on some controversial issues such as the government's inability to rein in fiscal deficit, criticising banks that sold derivatives to unsuspecting customers and steadfastly resisting demands for investing foreign exchange reserves to build infrastructure.
He has spoken out on other matters as well. "The establishment of a statutory joint committee is itself problematic and raises issues about its potential misuse in ways that impair the autonomy of the regulators," Subbarao wrote to Mukherjee expressing his reservations about setting up a council headed by the finance minister to reconcile differences between regulators. But on this, the government ultimately had its way. Monetary authorities, in an unwritten rule, do not comment often about government finances. But in the last few months when criticism mounted on the RBI for raising rates, Subbarao said the government was not helping much to contain prices. In effect, saying that those in glass houses shouldn't throw stones at others. "Beyond the short term, the threat to the independence of central banks emanates from factors apart from public anger... as countries contemplate exit from these expansionary policies, the familiar tensions between monetary and fiscal policies are showing up again," he had said. "Many believe that these tensions are temporary, and will melt away once recovery takes root... that may not well be the case."
INCREASING TRANSPARENCY
Transparency is probably a word that does not exist in a central bank's dictionary. The RBI is probably as opaque as most central banks, but Subbarao has taken 'baby steps'. One example is the decision to make public the minutes of the technical advisory committee meeting. It probably may not be as significant as it is in the West due to non-voting nature of the members, but it has helped in at least one way — to show Subbarao does not hesitate to differ. Twice he has gone against the majority view of the advisory committee. The steps towards greater transparency are not surprising given his agenda all along has been "to improve communication" and "de-mystify the office of the governor".
"Since this governor has taken charge, the language in the policy statements has acquired much greater clarity as has the guidance for future policy actions," says Jahangir Aziz, Asia economist, JPMorgan Chase.
Ever since taking charge of monetary policy, he knew part of his job was to hold a mirror to the government. "The central bank has performed the role of being an effective counterpoint to the government, which often has to concentrate on short-term objectives," he had said. "The Reserve Bank has been able to take a medium-term view and what is prudent and optimal comes out of this synthesis. We should continue to do that."

14% MARKET SHARE IN DEPOSITS & LOANS New Gen Banks Streets Ahead

noreply@blogger.com (Ways2earn) — Tue, 30 Aug 2011 04:07:00 +0000

Since RBI last licensed private banks over 10 years ago, new generation private lenders have built a market share of 14% in deposits and also loans, which is much higher than the combined share of close to 12% of foreign banks, old generation private banks and regional rural banks. That is a reflection of the impact created by these banks, which forced staterun banks to shake off their slothful way of functioning and focus on customers and better service standards and product offerings. In 1993-94, RBI granted in-principle approvals for 10 entities to promote private banks. They included two finance companies — 20th Century Finance and CRB Finance — the Times Group and Hindujas, financial sector professionals Ramesh Gelli; Darshanjit Singh and Harpreet Singh, besides the ones promoted by HDFC, erstwhile UTI and IDBI and later the development financial institution ICICI, which reverse merged with ICICI Bank. Just before the licences were issued, CRB was caught in the centre of a scam and the in-principle approval was cancelled. Only five entities have survived since then — HDFC Bank, the UTI-promoted Axis Bank, IDBI Bank and the Hinduja-promoted IndusInd Bank. During this period, Times Bank and Bank of Punjab were acquired by HDFC Bank while GTB, promoted by Ramesh Gelli, was acquired by Oriental Bank of Commerce. Later in 2002, RBI licensed two more banks, Kotak Mahindra Bank and YES Bank, promoted by Rana Kapoor and others.

Over the past 15 years, new generation private banks have given government-run banks, which even now control 70% of the market in terms of deposits and advances, a run for their money by leveraging on technology.
Earlier in terms of product offerings and premium service, foreign banks were at the forefront. New generation private banks bridged that gap by providing efficient services at competitive rates, forcing foreign banks to change tack and PSU banks to embrace technology. However, unlike last time, the challenge for new banks will be greater, given intense competition and focus on rural inclusion.

SENSEX ROCKETS 567 PTS ON FED QE REJECTION, ANNA TRUCE D-St Gets a Stimulus on Bernanke’s No

noreply@blogger.com (Ways2earn) — Tue, 30 Aug 2011 03:41:00 +0000

Stock markets got a shot in the arm on Monday as traders cut bearish bets after the US Fed refrained from announcing another stimulus and political uncertainty abated with activist Anna Hazare ending his fast. Investors were relieved that America's central bank had stopped short of launching a third bond-buying programme, known as quantitative easing (QE), as it could have increased the flow of money into commodities and emerging markets, including India, stoking inflation.

Key indices rose 3.6% on Monday, the highest intra-day per cent rise since May 2009, mirroring gains in Asia and Europe. The Sensex gained 567.50 points, or 3.58%, to 16416.33. The Nifty rose 171.80 points, or 3.62%, to 4919.60. "Investors cut part of their short positions because the Fed refrained from doing QE3," said Sandip Sabharwal, CEO (portfolio management services), Prabhudas Lilladher. "A big uncertainty for the market has ended with the end of Hazare's fast."
The RBI on Monday unveiled the muchawaited draft norms on new banking licences that will allow corporates to set up banks. Shares of non-banking finance companies jumped after the announcement. Short-term Outlook Bearish
The broader market reflected the strength in the indices, with gainers outnumbering losers 2121:716 on the BSE. Foreign investors net bought .366.19 crore of shares on Monday after selling stocks worth .11,500 crore in August till Friday. But a resurgent Dalal Street could soon face challenges. Some are worried about the government's prolonged stand-off with Hazare and the possibility of more tussles ahead as a parliamentary committee considers various versions of the Lokpal Bill. Investors are also closely watching the gross domestic product (GDP) estimates for the second quarter, to be released on Tuesday, which will reflect the impact of higher interest rates on India's economic growth. GDP growth is expected to moderate to 7.6% in the June quarter, the slowest in six quarters.
"Non-agricultural growth is likely to soften, reflecting macro headwinds — high inflation and interest rates, in particular," said Barclays Capital in a note. A lowerthan-expected GDP reading is likely to spark hopes that the RBI could halt its monetary tightening spree. But that may not stop investors and traders from selling on Tuesday, ahead of the market holidays on Wednesday and Thursday, on worries that adverse events in the US and Europe on these two days could catch them on the wrong foot. The short-term outlook for equities is neutral to bearish due to global concerns such as European sovereign crises, higher crude oil prices and slow US economic recovery, according to a survey of 23 fund managers conducted by ICICI Securities. So far in 2011, the main indices have fallen 20%, while the BSE's smallcap index has tanked 27% on worries higher borrowing costs could squeeze corporate profits and drag down valuations. A 20% fall in key indices is broadly accepted as a bear market.
"Earnings expectation has been revised downwards in the past three months from 15-20% to 10-15% for FY12 as well as FY13. Of the fund managers, 30% believe earnings will be less than 10% for FY12, which reflects a cautious mood," the ICICI Securities report said.

Tightening to Stay till Prices Cool: RBI Central bank set to raise key rates by 25 bps today

noreply@blogger.com (Ways2earn) — Tue, 26 Jul 2011 03:22:00 +0000

The Reserve Bank of India, or RBI, has said the broad thrust of monetary policy will have to be on tightening despite risks of slower growth, in what is being perceived in the financial markets as an indicator that the central bank is set to raise interest rates again on Tuesday. In its latest report on macro and monetary developments of the economy, the RBI said monetary policy would have to preserve its tight monetary stance till there is credible evidence of inflation trending close to a level within the central bank's comfort zone of 4-4.5%. Taming inflation is an unfinished task considering that price pressures still persist, it said.

The report, unveiled on the eve of the policy review on Tuesday, is a pointer to another increase in the key repo rate, or the rate at which the RBI lends to banks against government securities. All 15 market participants polled by ET over the weekend were unanimous the central bank would raise repo rate by 25 basis points (1 bps is 0.01%). It has raised rates 10 times since March 2010 to cool inflation, but its job is far from over with headline inflation still over 9%. The RBI has projected inflation to come down to 6% by the end of this fiscal.
The macro report said if the monsoon turns sub-normal, upside risks to the projected moderation in inflation during the second half would go up. Not only is the headline inflation still hovering around 9%, but non-food manufacturing inflation also remains significantly high at above 7%, according to the RBI's assessment. It also cautioned against a potential impact of the Eurozone crisis on the domestic economy. "Challenges from the policy perspective have become even more stringent with increased risks to growth, though inflation is likely to remain high in near term. Risk factors have emerged that could adversely impact aggregate demand," the report said.

HDFC ups home loan rates

noreply@blogger.com (Ways2earn) — Sun, 15 May 2011 01:55:00 +0000

Interest For Floating Rate Clients To Be Hiked By 50 Bps From Mon

TIMES NEWS NETWORK

Mumbai: Home loan customers under floating rate with Housing Development Finance Corp (HDFC) shou ld brace themselves to pay higher interest from Monday.
    The mortgage financing major on Saturday evening said they would raise the interest rate by 50 basis points (100 basis points = 1%) for floating rate customers from May 16. This comes after the inflation rate prompted the Reserve Bank of India to increase key policy rates by 50 basis points (bps) on May 3, following which all banks, including SBI, ICICI, HDFC Bank and IDBI, hiked their lending rates. "HDFC has decided to revise its retail prime lending rate (RPLR) from May 16, 2011 by 50 bps (to 16%). This is in line with the increase in interest rates in the economy, which have hardened mainly due to high inflation," a release from HDFC stated. All loans from the housing finance major is linked to the RPLR.
    However, the change will not affect customers who have taken home loan under the fixed rate. For customers under the floating rate scheme, depending upon their current outstanding principal, the number of equated monthly installments (EMI)s to pay the loan fully, will go up. According to its policy of calculating interests and EMIs, the HDFC will apply the new rates on its existing customers in a phased manner, but the increase will be effective throughout the next three months.
    The rise will also impact new customers. Under its floating rate structure, the HDFC will charge 10.25% per annum interest rate for loans of up to Rs 30 lakh, 10.50% for more than Rs 30 lakh but below Rs 75 lakh and 11% for more than Rs 75 lakh. However, the financing major has left the interest on fixed rate home loans unchanged at 11.50%, even for new customers.
    After the increase, home loan rates from all top institutions in the sector such as SBI, ICICI Bank and HDFC, will be nearly on a par with each other.
    Since March 2010, the RBI has raised policy rates eight times, by about 225 basis points, while banks and financial institutions have increased it five to six times, as initially, they had the option to partially absorb the impact of the hiked rate.

To Tamp Inflation, RBI to Hike Rates

noreply@blogger.com (Ways2earn) — Mon, 02 May 2011 04:19:00 +0000

ET poll of bankers and economists shows majority expect a 25-bps hike tomorrow

Reserve Bank of India Governor Duvvuri Subbarao may take a ninth 'baby step' on Tuesday with an investor-pleasing 25-basis point increase in policy rates to tame the inflation beast that is galloping away. Although many economists and traders believe a 50-basis point raise is warranted to rein in inflationary expectations, they bet on Subbarao sticking to his anti-inflationary monetary stance, but without upsetting the market. A basis point is 0.01 percentage point.
The repo rate, the rate at which the central bank lends to banks, may be raised a quarter point to 7%, an ET poll of 11 bankers and economists shows. While eight are betting on a 25-basis point increase, the remaining are for 50 basis points. Opinion is on same lines for the reverse repo rate, the rate the RBI pays banks when they deposit their excess cash. "The fundamental dilemma is that the picture is not clear," said RVS Sridhar, SVP (treasury), Axis Bank. "Growth is also becoming a concern. We believe the RBI may increase policy rates by 25 basis points on both repo and reverse repo side as worries of growth being affected have surfaced. Also, inflation is still essentially is due to supply-side factors." Subbarao, who likened himself to Mahabharat's Pandava warriors stuck in Kaurava's 'Padma Vyuha' defensive formation, is falling behind in containing inflation that is at least a percentage point above his oftrevised forecast of 8%.
RBI Again Plays Rate Roulette

• Why will the RBI governor raise repo and reverse repo rates 25 bps and not 50 bps?
A predictable increase will ensure there is no wild swing in equities or debt market, and also raise the cost of borrowing. A 50-bps hike may slow economic growth

• What happened with 8 such rate hikes so far?
Inflation accelerated and is spreading to manufacturing goods too. That has prompted criticism that RBI governor's action is too slow and too small

• Where did the market interest rates go?
Companies' cost of borrowing has shot up 300 bps. It may rise further as investors seek higher rates to shield against prices. Depositors are seeing rates of 9.5%

• What is in store?
High inflation rate of 6-7% may become a 'new normal' that will keep interest rates high for many years as growth outlook still remains robust. With loans growing faster than deposits, interest rates may rise further Current Rates 6.67% REPO RATE 5.75% REVERSE REPO RATE 6.00% CASH RESERVE RATIO 24% STATUTORY LIQUIDITY RATIO Steep Rate Hike May Hit Growth
If Subbarao takes steep rate increases to contain inflation, the much-cherished economic growth may falter. The governor, who has been playing it by ear, may have to knuckle down as some believe the faith in the institution may wane if prices are not contained.
"While the base case is that of the RBI hiking by 75-100 basis points during the year, the current debate now is whether the RBI hikes by 25 basis points or 50 basis points on May 3," said Rohini Malkani, India economist at Citigroup.
"We place the odds at 60:40 for a 25-basis point tightening," she said.
Inflation as measured by the wholesale price index rose 8.98% in March, driven by sharp increases in prices of manufactured goods. With the government likely to raise the prices of oil products in May after state election results, there could be an acceleration in price increases. An RBI survey showed that urban households expect inflationary pressure to sustain through 2011 and touch 13.1% by the end of the year, from 11.8% last year. "We are expecting a 50-basis point rate hike on reporeverse repo side, because non-food and manufacturing inflation has risen to 7% which means inflation is spilling over," said Sandip Bagla, senior vice president (government securities & swaps), I-Sec Primary Dealership. "So it becomes necessary to increase the pace of monetary tightening and control inflationary expectations." But the economic growth rate may be losing steam with gross capital formation plunging.
The Index of Industrial Production (IIP) grew 3.6% in February, compared with an expectation of 3.9%. The manufacturing sector, with a weightage of over 74% in the IIP, fell 3.5%.
Corporates are calling for either a no-rise or a modest 25-basis point increase as their profit margins are getting whipsawed by higher cost of funding and soaring raw material prices.
A Royal Bank of Scotland survey of its corporate clients shows 83% are expecting a 25-basis point increase.
A quarter of the people polled expect an increase in the cash reserve ratio that will reduce liquidity in the system.
"The RBI can't hurt the India growth story by raising rates steeply," said Ramit Bhasin, managing director & head (markets), India, RBS.

Bad debts of PSU banks hit 30k cr

noreply@blogger.com (Ways2earn) — Fri, 15 Apr 2011 03:42:00 +0000

Priority Sector Lending Pinches Hard, Agri Tops List With 70% NPA

New Delhi: The government's agenda for inclusive growth and emphasis on priority sector lending is proving costly for the exchequer, with bad debts of state-run banks increasing to over Rs 30,000 crore till December, 2010. These bad loans—given to agriculture, small-scale enterprises and other priority sectors—are around half of the Rs 68,000 crore non-performing assets (NPAs) of government banks during the same period.
    The agriculture sector leads the pack, accounting for 70% of bad loans. In contrast, only 22% loans went bad in small-scale industries (SSI) sector during April-December 2010 as against 65% of NPAs in 2009-10. This issue will come up for discussion later this month during a meeting of CEOs of PSU banks with top finance ministry officials, a ministry official said. The assets quality of these banks has also raised concern on efficacy of due diligence on lending.
    The review on credit lending will ascertain if the banks are meeting the 40% mandatory lending to priority sectors on their own, or they have been borrowing such loans from regional rural banks (RRBs) and microfinance institutions (MFIs). If larger NPAs are attributed to such borrowings, the government may restrict these options in future.
    In the Budget, government enhanced agriculture credit limit to Rs 475,000 crore from Rs 375,000 crore in the previous year. Banks have been asked to step up direct lending for agriculture and credit to small and marginal farmers in a bid to increase farm productivity. But, considering that the banks have pressure from the government to meet the credit target within the financial year, the high-level of NPAs show the kind of compromise is being made on the eligibility criteria.
    A similar problem, which had occurred a few years ago and impacted banks' credit lending and reserves, had to be compensated by government's recapitalization and reimbursement through a farm loan-waiver scheme. A farm loan-waiver scheme announced in 2008-09 to compensate banks made a dent on the exchequer to the tune of Rs 70,000 crore.
    Besides, the farm loans, PSU banks have been writing off bad debts of more than Rs 10,000 crore every year to reflect a healthy balance sheet. The gross NPAs of all government banks have grown by 30% in 2009-10 to Rs 57,000 crore, and in the first nine months of 2010-11, it went up by more than Rs 10,000 crore to Rs 68,600 crore.

Finmin Against 49% Cap on FDI in New Banks

noreply@blogger.com (Ways2earn) — Thu, 24 Mar 2011 04:44:00 +0000

DIVERGENT VIEWSThe finance ministry has also said that promoters should have an initial minimum shareholding of 40%, which should be locked for five years. The ministry has supported the RBI's draft guidelines on initial minimum capital of Rs 500 crore, but has suggested that this should be raised to Rs 1,000 crore over a period of five years. "This will ensure that there are sufficient funds for initial smooth operations and also bank licence aspirants will have to be committed towards expansion," the official said.

RBI's proposal rejected, realtors may be barred from seeking licences

The finance ministry has opposed the Reserve Bank of India's suggestion to restrict foreign direct investment in new banks to 49%, saying the change in norms will hurt investor sentiment.
It has also asked the central bank to bar real estate firms from seeking banking licences and alter conditions relating to financial inclusion and stake dilution by promoters. "The rollback of the current FDI norm from 74% to 49% will not send a good signal to investors and is avoidable," a senior finance ministry official said. "We have asked the RBI to reconsider this."
The central bank's suggestion was part of its comments on the draft guidelines for new bank licences, which it submitted to the finance ministry earlier this month. The RBI was expected to issue the draft guidelines for new bank licences before the end of this month, but the differences of opinion with the finance ministry could delay the process.
The ministry has asked the RBI to ensure the guidelines clearly say that the new banks will be exempted from Press Notes 2, 3 and 4, which revamped the country's foreign investment policy and procedures. Without the exemption, these banks would become foreign banks if overseas investment in them crosses 50%. This would lead to imposition of the same restrictions on them that apply on foreign companies.
The government is already struggling with policy issues in respect of private lenders, such as ICICI Bank and HDFC Bank, where foreign holding is more than 50%.
The ministry has also suggested that the RBI should disqualify any group that has exposure to real estate from seeking a banking licence. "A lot of issues have risen with real estate companies who got 2G licences," said the official. "We would like to avoid such a situation."
The central bank had suggested that companies that derive 10% or more of their income or assets from real estate, construction or broking activities should not be eligible.
The finance ministry has also opposed the RBI's suggestions on financial inclusion and stake dilution by promoters of new banks. The central bank had proposed to make it mandatory for new entrants to have at least 25% of their branches in rural areas with population of less than 10,000.
Failing to Find Common Ground
74%

• FDI SOUGHT IN NEW BANKS

• BAR ON REAL ESTATE FIRMS
RBI had suggested that firms deriving 10% or more of income or assets from real estate, construction or broking should not be eligible
20%

• LEVEL OF PROMOTER HOLDING WITHIN 5 YRS OF OPS
25%

• BRANCHES HAVE TO BE IN TIER III-TIER VI CITIES Differences Over Stake Dilution
The ministry, however, wants it to allow new banks to open one-fourth of their branches in tier-III to tier-VI cities, having a population of up to 50,000. The ministry has also differed with the central bank on the schedule and the extent of dilution by promoters. The RBI had suggested that the promoter holding in the new banks should be brought down to 15% over a period of 10 years.
But the ministry wants promoter holding to be brought down to 20% after a period of five years and other shareholders should not hold more than 10% stake. "This will help in maintaining a balance between promoters' interest and good corporate governance norms," the official said.

RBI Raises Key Rates by 25 Bps to Lid Prices

noreply@blogger.com (Ways2earn) — Fri, 18 Mar 2011 03:39:00 +0000

After eighth hike in past one year, hints at more; admits growth is in jeopardy due to inflation

The Reserve Bank of India raised policy rates for the eighth time in a year by the expected 25 basis points to tackle inflation that is running disproportionately higher with a potential to whittle down the government's cherished 9% economic growth.
Come April, borrowers will pay more per month on their home and car loans. Companies' interest expenses will go up as banks raise their lending rate to pass on higher cost of deposits in the last two months.
"The action by itself is not a surprise," said Shikha Sharma, chief executive at Axis Bank. "Much of these hikes would be passed on. We cannot predict the exact timing, but it will get passed on."
The central bank said economic expansion is at risk as soaring commodity and oil prices due to civil strife in North Africa and West Asia could affect investments even as it pursues anti-inflationary policy. It lifted inflation forecast by 1 percentage point to 8%, from 7% set in January as price rise is spilling over to manufactured products from food articles. Inflation in February was at 8.31%. Current account deficit is forecast to fall to 2.5%, from 3.5% of gross domestic product on rising exports.
Repo rate, the rate at which the RBI lends to banks, has been raised 25 basis points to 6.75% which is still 1.55 percentage points lower than the inflation rate. Reverse repo, the rate it pays banks for deposits, has been raised by a similar proportion to 5.75%. A basis point is 0.01 percentage point. All other rates remain unchanged. The next monetary policy review is scheduled for May 3.
"Underlying inflationary pressures have accentuated, even as risks to growth are emerging," said the central bank statement on mid-quarter monetary policy review. "Rising global commodity prices, particularly oil, are a major contributor to both developments. As domestic fuel prices are yet to adjust fully to global prices, risks to inflation remain clearly on the upside, reinforced by the persistence of demand-side pressures as reflected in non-food manufacturing inflation."
Crude oil prices touched $120 a barrel recently due to supply disruptions in West Asia, the biggest exporting region in the world, as most authoritarian governments face revolt. Other commodities such as copper and rubber were at record highs as Western economies show signs of recovery. But last week's earthquake in Japan has complicated forecast.
"It is as yet too early to assess the macroeconomic consequences of the natural disaster in Japan," said the RBI. "Substitution of thermal for nuclear energy in Japan may exert further pressure on petroleum prices."
Finance Minister Pranab Mukherjee is hopeful that RBI's measures will have the desired effect.
"It will have its impact on the inflationary pressure," Mukherjee said. "I do hope it will have a salutary impact on inflationary pressure."
Sustained high inflation is threatening to derail growth with bigger portion of income being eaten away by higher prices. What was once thought to be limited to food items is spreading to manufactured products that will prevent easing of inflation rate even if food prices cool. The Wholesale Price Index is rising at more than 8% now, from 1.5% in March 2009 when the repo rate was at 5%.
The baby steps by Governor Duvvuri Subbarao may dent the central bank's credibility in tackling inflation since market rates have accelerated more than the RBI's policy rates. RBI's Credibility Eroded
"While the RBI has been incredibly consistent in taking 'baby steps', its inflation guidance have not been," said Jay Shankar, chief economist at Religare Capital Markets. "The RBI's inflation-fighting credibility is seriously eroded now. The risk now is derailing investment and growth."
Though India has been regularly raising policy rates since early 2010, it has not been able to contain inflationary pressures since it put growth above price rise. That has made it one of the few big economies where real rates are negative. That leaves room for as much as 75 basis points more increase this year, economists forecast. "As long as inflation remains high, the RBI will continue to act in terms of raising rates," said Shyamal Saxena, general manager (consumer banking), Standard Chartered Bank. "For customers, this could mean higher loan rates as cost of deposits stays high and could eventually impact loan demand and credit quality."

Infrastructure debt funds to roll out soon

noreply@blogger.com (Ways2earn) — Mon, 03 Jan 2011 01:23:00 +0000

Regulators agree on changes in law, paving way for funds to raise money overseas for core push at home

INFRASTRUCTURE debt funds are set to debut soon as financial regulators have agreed on the changes required in the law. They are expected to help the country raise billions of dollars overseas to boost infrastructure to support a 9% growth rate.
    Infrastructure development would require over $1 trillion in the 12th Five-Year Plan that begins next year.
    "Regulators have agreed to the basic changes needed in the law for these funds," said an official privy to the development.
    These funds are expected to be two layered—domestic and offshore—just like venture capital funds. The offshore entity will raise funds from overseas investors, including pension and insurance funds, and then direct them to the entity in India for downstream investment, the official said requesting anonymity.
    This structure would require changes in the rules governing external commercial borrowings (ECBs) as the current regime does not allow such borrowings by funds.
    Foreign funds can register as venture funds and provide equity to the infrastructure sector, but there is no such mechanism for intermediating debt funds.
    The finance ministry is looking at an overall ECB cap of $5 billion for such funds, with the idea of allowing multiple infrastructure debt funds.
    While the Securities and Exchange Board of India will have to create a framework for registering these funds on the lines of venture capital funds, the Reserve Bank of India will have to spell out a capital adequacy framework for them.
    Insurance and pension fund regulators will also need to tweak their rules to ensure flow of funds from such domestic entities to these debt funds.
    Finance Minister Pranab Mukherjee had some months ago told a parliamentary consultative committee that there could be a 30% shortfall in funds needed for developing infrastructure. He had said the capacity of banks to fund infrastructure projects was limited, and new sources such as insurance and pension funds need to be tapped for deployment in infrastructure projects.
    The maturity of bank deposits mostly ranges from three to five years. Infrastructure critical for economic growth
INVESTING such funds in long-gestation infrastructure projects—10 years or more—creates a serious asset-liability mismatch for them. However, independent experts argue the credit rating of these funds would not be good enough for them to raise funds from overseas insurance and pension funds.
    "Some kind of credit enhancement mechanism would be needed for these funds to enable them to pierce the sovereign rating," said Manish Agarwal, Executive Director, KPMG. Physical infrastructure has emerged as the single biggest constraint to the country's attempts to achieve 9%- plus economic growth. India is ranked 86th out of 139 countries in quality of overall infrastructure, in the WEF's 2010-11 index.

Stay Alert On Your Home-Loan Hunt

noreply@blogger.com (Ways2earn) — Fri, 01 Oct 2010 02:58:00 +0000

Look beyond the tempting offers this festive season to avoid falling into a long-term debt trap

THE window-dressing is perfect. Over-zealous executives of property developers, as well as banks and housing finance companies (HFCs), are falling all over one another to vie for your attention in the biggest festive season of the year. Several banks have already decided to put off raising their base rates to avoid losing prospective buyers. However, shut out the cheerful chatter and make sure that you don't get carried away by the promotional offers of getting the moon to your balcony. Take some time off and talk to your friends and gym buddies and you will soon get to know that many people fall prey to such promotional offers every year in search of an auspicious date. Here's how you can avoid such misadventures.
Avoid Teasers: After floating, teaser is the new term that has entered the lexicon of home hunters. Banks hate to use the term 'teaser rate' and prefer to call such loans special schemes, but you have to be careful about these special offerings. These schemes, typically offer the fixed interest rate (slightly lower than the prevailing market rate) during the initial years, say, two or three years. The rate may get linked to market rates once the initial honeymoon period is over.
    While the 'special' rates could indeed ensure huge savings on your equated monthly instalment (EMI) outgo in the first few years, be prepared to shell out more once the market-linked rates kick in later. Remember, a housing loan has a lengthy repayment period and if an increase in rates pushes up your EMI to unmanageable levels, you could land yourself in a debt trap. The scoop: Don't take long-term decisions merely on the basis of prevailing attractive interest rates.
Switch To The Base Rate: This one's applicable to old, or existing, borrowers with floating rate loans who, for years, have been crying themselves hoarse about the step-motherly treatment meted out to them. In the past, there have been complaints that banks resist passing on the benefits of a benign interest rate regime to existing borrowers, but they don't hesitate to lure new borrowers with lower rates. The banks, however, never hesitate from raising rates for the old borrowers when the interest rates in the system inch upwards. As an antidote for these problems, the Reserve Bank of India (RBI) came up with the base rate mechanism aimed at bringing in more transparent loan pricing and consequently, a fair treatment to existing borrowers. Under the new regime, which replaced the benchmark prime lending rate (BPLR) system from July 1, banks are required to review their base rates at least once every quarter and ensure that any changes made are passed on to all classes of borrowers. Existing borrowers can choose to switch over to the base rate and the bank cannot levy any charges for facilitating the transfer.
    While it remains to be seen if the new mechanism yields the desired results, many feel it is likely to fare better than the present system. "Some banks are yet to arrive at the rate linked to the base rate for existing borrowers or have not communicated with the branches in that regard. However, those borrowers who have a choice should certainly look at switching over to the base rate," says VN Kulkarni, chief counsellor with the Bank of India-supported Abhay Credit Counselling Centre.
Don't Borrow Beyond Means:This will perhaps rank as the most common mistake made by over-enthusiastic home seekers. Since a house is considered a prized asset, which is likely to be a once-in-a-lifetime purchase, many feel that overshooting the budget is justified. As a result, they tend to go for a three-BHK when their pocket permits only a two-BHK. Similarly, those constructing their house often stretch their budget to include luxury bathroom fittings, flooring or attractive false ceilings, which inflate the required loan amount. They often forget that once the EMI payments commence, the additional room or the plethora of amenities will turn out to be sources of uneasiness rather than providing any comfort to the home-owners.
Don't Be Over-Optimistic: For a long time till disaster struck in 2008-09 in the form of global slowdown, employees in India had become accustomed to lucrative raises and bonuses every year. On the back of such hikes, many had signed up for housing loans, car loans and even personal loans; not to mention running huge credit card bills. Their optimism boomeranged when the job market tanked, leaving them with huge loans and little income to service them.
    Rakesh Kataria (name changed) found himself caught in a similar situation last year. He was employed in the IT sector and had taken on a large home loan when the interest rates were low, assuming that his future increments would be capable of funding any increase in EMIs later. When the tide turned, the expected pay hike did not materialise, leaving him saddled with a huge debt. "Now, he has put in a request with his bank for extending the tenure, which is yet to be granted. The case demonstrates that it is always advisable to carefully assess your repayment capacity while applying for a loan. You should not make any assumptions, and determine your affordability on the basis of your current salary," advises Kulkarni.
    "This apart, those who buy a second home assume that the EMI payment will be funded by the rent it is expected to earn. If the house is an under-construction property and the work is not completed as per schedule, you could be in for serious trouble. If your house is not ready by the end of the moratorium period, you will have to start repaying the loan without the comfort of the rental income," points out a senior official with an asset reconstruction company.
Stay Away From Additional Loans: No one's ever satisfied with a house boasting of basic amenities or lacklustre painting carried out by the builder. Once the home buying part is done, borrowers happily lap up top-up loans offered by several banks for the purpose. While they are cheaper than personal loans, you should opt for them only if you are capable of repaying it. Funding high-cost debt like personal loans and credit cards along with your home loan will prove to be an uphill task once the repayment begins.
    The right time to buy a house, it is often said, is when you can afford it. You will do well to hold on to this view as a guiding principle while embarking on a house-hunting drive to ensure that one of the most cherished dreams of an average Indian – owning a house – remains a positive experience.

Banks free to transfer NPAs to peers: SC

noreply@blogger.com (Ways2earn) — Fri, 01 Oct 2010 02:54:00 +0000

ALL CLEAR

THE Supreme Court has ruled that the banks are free to transfer their debts including non-performing assets (NPA) to other lenders. The apex court set aside a Gujarat High Court order which had prohibited such transfers.
    A two-judge bench comprising chief justice SH Kapadia and justice Swatanter Kumar on Thursday held that the assignments of the debts and NPAs from one bank to the other is legal as per the provisions of the Banking Services Regulation Act.
    "There is nothing to prohibit under the banking regulation Act... We set aside the judgment of the high court," said the apex court.
    It passed the verdict on a bunch of appeals filed by some private banks such as ICICI Bank, Kotak Mahindra Bank and StanChart Bank, challenging the order of the high court.
    The case relates to the transfer of a basket of NPAs by ICICI Bank to Kotak Mahindra Bank along with underlying security interest. One of the borrowers, APS Star Industries, objected to the transfer and the matter landed in court. A division bench of the Gujarat HC held that the Banking Regulation Act did not allow for trading in debt.
    Advocate Mahesha Agrawal said, "it is a major relief to the banks. They can now transfer their debts to the other willing lenders and facilitate their business transactions". "The Supreme Court ruling clears the air on securitisation and loan sale deals in India. This should come as a relief to banks. Currently, in securitisation transactions, the parties incorporate a clause which says that the concerned bank will take back the loan if such transactions are found illegal by the court...This would stop," said MR Umarji, IBA chief legal advisor and architect of the security enforcement act, SARFAESI.

Govt crops loan interest subsidy by 50 bps

noreply@blogger.com (Ways2earn) — Fri, 01 Oct 2010 02:53:00 +0000

Priority Tag & 18% Mandatory Loans To Ensure Smooth Flow Of Credit To Farm Sector Despite Cut

THE government has cut interest subsidy offered to banks for providing short-term crop loans to farmers at low rates, a move that will affect the profitability of the lenders further after a recent increase in deposit rates.
    The decision, however, will not impact the flow of credit to the farm sector as banks are required to set aside 18% of their total advances for agriculture. It is part of the broader target of 40% to all sectors classified as a priority by the Reserve Bank of India.
    The government has reduced the interest subvention, or subsidy, on short-term crop loans lower than 3,00,000 by 50 basis points to 1.5% for the current rabi season, which begins in October. The banks, however, will still have to provide these loans at the earlier rate of 7%, implying a 50 basis points hit on these loans that would amount to at least 1,000 crore.
    The banks are expected to provide 2,00,000 crore in short-term crop loans this year. The government has set a target of 3,75,000 crore for farm loans this year. In 2009-10, banks disbursed around 3,66,000 crore to the agriculture sector.
    "The lower interest subvention has been given after taking into account the current interest rate regime and inputs from National Bank for Agriculture and Rural Development (Nabard)," said a senior finance ministry official.
    Banks are disappointed, but have no choice in the matter.
    "We have no option but to lend as we have to meet the priority sector targets," said a senior official with country's largest lender State Bank of India. He said this will affect the bank's profitability, given its large exposure in agriculture.
    The recent hike in deposit rates had increased the banks' cost of funds. Two of the country's largest lenders, State Bank of India and Punjab National Bank, raised their deposit rates by 25-75 basis points on Thursday. One basis point is a hundredth of a percentage point.
    Lower margins on these loans means the banks will have to exercise due caution in extending such loans as rates of default are high in this segment. According to government data, the net non-performing assets of 21 public sector banks have increased by over 30% since 2007. The net NPAs for all state-run banks stood at 20,620 crore on March 2009.
    A senior official with Punjab National Bank said banks are adhering to RBI guidelines on bad loans. PNB's agriculture loans stood at around 30,000 crore at the end of FY 2009-10. Crop loans are sanctioned to farmers depending upon their landholding and cropping pattern.
    Banks can, however, leverage the 2% interest rebate provided on timely repayment. The incentive was doubled to 2% this year as the government is keen to ensure that the debt waiver of 2008 did not encourage wilful default by farmers. With the rebate for timely payment, the effective cost of loan for farmers will only be 5%.

Let need decide your investment decisions

noreply@blogger.com (Ways2earn) — Wed, 18 Aug 2010 02:31:00 +0000

A financial product should not be bought off the shelf as it involves long-term planning. Prashant Mahesh tells you what you should do before buying a product

FOR those hooked onto the internet, all it takes is a couple of clicks to buy a financial product. It is so easy, that some even buy some financial products without looking into their financial requirements. Experts warn that such indiscriminate buying may lead to difficulties later. Here are some of the aspects you must consider before buying a financial product:
IMPORTANCE OF ASSET
ALLOCATION
Before buying a financial product it is essential for an investor to understand what his needs are. "Understand your risk appetite, know how long you are ready to stay invested, ignore short term market conditions that usually come in the way of meeting your goals and then decide the product you want to buy," says Ashu Suyash, managing director and country head — India of Fidelity International.
    It makes sense to profile yourself in conjunction with a financial planner. He creates a profile by understanding what your immediate needs are, what your future goals are and what kind of a person you are. Accordingly he could classify you as a conservative, moderate or aggressive investor. Once that is done, he would suggest a suitable asset allocation plan for you. Asset allocation refers to the amount that you should invest in various asset classes such as equities, debt, gold and real estate.
DO YOU NEED THE PRODUCT?
Before investing in a product, ask yourself whether you really need that product. Every financial product meets a particular need and hence every product is not meant for everyone. For example, a monthly income plan (MIP) of a mutual fund is meant to give a regular monthly income to the investor. A fixed deposit is meant to protect capital and so on. So an MIP may be suitable for a retired person with a low risk. However, for a 25-year-old person, with no liabilities and a five-year-plus time horizon for investment, it may be wiser to invest in equity mutual funds.
ENTRY AND EXIT
Investors spend a lot of time trying to time the market. "When we meet investors, the question asked is 'it the right time to invest'," says Vijai Mantri, MD and CEO of Pramerica Mutual Fund. It is impossible to time the markets and this is one reason why he feels a lot of retail investors did not make money though the markets have seen a sixtime jump from 2003 levels.
It would be wise to use Systematic Investment Plans (SIPs), as that helps you invest over a period of time.
CHOOSE PRODUCTS CAREFULLY
Buying a financial product is not like buying goods off the shelf. Once bought you can't discard them quickly. Choosing a wrong financial product could have long ranging financial implications. Don't buy equities, if you have to buy a house six months down the line and need all your savings to pay the initial instalment.
    Once you decide the asset class you need to invest in, you must choose the right 'service provider'. If it's a mutual fund that you are looking at, there are 40 AMCs today in India offering various schemes. You could look at things like reputation and experience of the fund house, the reputation of its fund management team and the past performance of its schemes before buying a product.
CHOOSING THE RIGHT DISTRIBUTOR
A financial planner is your guide in the financial jungle. It is impossible for any individual to track all asset classes at the same time, due to the sheer lack of time and resources. Hence it is best to choose your financial planner wisely. A financial planner should be able to understand your needs and should be able to offer you products from the entire investment basket. You must be comfortable with your financial planner. He should be able to devote time to your portfolio and must be well-versed with the happenings in the financial markets. Choose a fee based advisor over those who are paid by the product manufacturers. The advisor or the organisation should offer you convenience in both online as well as offline trading facilities.
    prashant .mahesh @timesgroup .com

SBI sets base rate at 7.5%, focus now on other banks

noreply@blogger.com (Ways2earn) — Wed, 30 Jun 2010 01:34:00 +0000

Switch Unlikely To Benefit Home Loan Borrowers

    STATE Bank of India (SBI) on Tuesday kicked off the new lending rate regime, known as base rate, at 7.5%, aimed at eliminating banks' opaque lending practices, improve policy transmission and do away with poor subsidising the rich. The bank's base rate is a good 200 basis points above its six-month cost of funds that would protect its profit margins, but would raise short-term borrowing costs for companies. A basis point is 0.01 percentage point. For SBI, about 3% of the corporate loans are below 7.5%. These will migrate to base rate once they come up for renewal.
    "Over a period of time, several concerns have been raised about the way the benchmark prime lending rates system has evolved," the Reserve Bank of India (RBI) had said. It includes, "lack of transparency, downward stickiness and perception of cross-subsidisation in lending."
    Bank of Baroda, Union Bank of India and Punjab National Bank have pegged their base rate at 8%. The new rates are effective July 1.
    No bank can now lend below their base rates, unlike the way they were doing under the prime lending rate, or PLR, regime, which was in effect from 1994 when the nation took early steps toward freeing up lending rates. But it became a mockery when banks began lending far below the PLR to top corporates while retail and small corporates were paying a rate far higher than that. The practice also made the central bank's adjustment of policy rates less effective, since banks were not adjusting their lending rates proportionately. While the latest move is expected to see some shift in short-term borrowing to commercial paper (CP) market, there may not be a significant loss to banks or a majority of the customers.
    "The business for short-term borrowing will move to the CP market and that is one of the intentions," said Mr Bhatt. "Interest rate may go up or down by 25 basis points on consumer loans."
    SBI's home loan customers will continue to pay the same rate under the new system as they paid earlier. If the benchmark lending rate was at 12% and the loan was priced at 200 basis points below that, then the interest rate on the loan was 10%. Under the new system, the customer will be charged base rate plus 250 basis points.
    The impact of interest rate on other consumer loans will be neutral. But some companies, which rely on short-term funds, may have to shell out more as interest. "There may be some rise in the rate offered on the short-end corporate loans to those who currently avail of loans at much lower rates," said Paresh Sukthankar, executive director, HDFC Bank.
    Mr Bhatt said he has proposed to RBI that the bank be allowed to introduce a sunset clause making it compulsory for all customers to shift to the base rate.
BUILDING FROM THE BASE
WHAT'S BASE RATE?
The new benchmark rate below which banks will not provide loans. It is linked to the cost of funds and will replace the benchmark prime lending rate, or BPLR, and bring in transparency in loan pricing. RBI has given banks the flexibility to fix their base rate. It will kick in from July 1.
WHAT'S CUSTOMERS' GAIN?
Small customers will no longer subsidise the larger ones. The range between the best and the highest rates charged by a bank is likely to narrow down. Also, any future changes in interest rates will be effected by varying the base rate. This will ensure that rate hikes or cuts are uniformly passed on to all borrowers.
WHICH SECTORS ARE EXEMPT?
The base rate will not apply to concessional loans for agriculture, exports and other specified sectors.
WHAT'S THE IMPACT OF SBI'S MOVE?
Experts feel most banks are likely to keep their base rates as close as possible to SBI's in a bid to stay competitive. On Tuesday, Bank of Baroda, Union Bank of India and Punjab National Bank pegged their base rate at 8%.

Banks are using their distribution strengths to move aggressively into MF space.

noreply@blogger.com (Ways2earn) — Mon, 17 May 2010 03:10:00 +0000

The scrapping of entry load has forced independent distributors and brokerages to shun MF schemes as they are no more remunerative.The regulatory change has opened a new line of business for commercial banks while independent AMCs find it tougher to stay afloat

Bakul Chugan Tongia ET INTELLIGENCE GROUP

    WHEN it comes to relying someone with one's hard-earned money, banks are the most entrusted of all institutions, especially in India. So much so, that even today, despite there being plenty of other investment avenues, an average Indian investor continues to trust banks with their savings.
    According to data by the Reserve Bank of India (RBI), the share of banks in the total financial savings of the household sector has increased from about 48% in 2006-07 to nearly 55% by 2008-09. In contrast, the share of mutual funds has declined from about 5.3% to -1.4% in the same period. And as the MF industry continues to adapt to the regulatory changes that have been tightening the noose around manufacturers, it will be little surprise if the share of MFs in the total financial savings of the household sector declines further in the year 2009-10.
    However, despite various challenges that the MF industry is currently facing, many new players, especially banks, have shown a great deal of interest in launching their own asset management companies. After the launch of Axis Asset Management last year, IDBI and Union Bank of India (UBI) are the latest banks to join the MF bandwagon. While IDBI has already launched its operations on its own accord, UBI has joined hands with the KBC group of Belgium and is likely to start business soon. With this, the total number of banks that are actively involved in the MF business stands at 10. And if Indian banks are yearning to be an active participant of the MF industry, it is not without reason. For, in the light of the current circumstances, banks are indeed better placed to run MF business in India than other institutions.
STRONG DISTRIBUTION NETWORK
Facilitated by a large distribution network through their extensive and continuously increasing branch network (see Distribution Strength), banks are indeed better positioned to tackle the main issue of distribution than independent asset management companies that are required to set up distribution networks right from scratch before starting their businesses.
    The table clearly reveals the distribution strength that banks command through their pan-India presence and the pace with which they are expanding their network to further expand their reach. Moreover, given their large customer base and the brand equity that banks enjoy with the investors, it makes a tad easier for them to cross MF products to their existing customers.
    The existence of a strong distribution network has in fact come to command a far greater importance following the Sebi diktat of introducing no-load regime for equity MFs last year. Not only has this new regulation compelled many in theindustry to alter their business models but has had far-reaching impacts even on the competitors of the MF industry.
NO-LOAD REGIME
Under the no-load regime, MF houses have been debarred from charging any commission or entry load from investors at the time of investment. If the investor is utilising the services of any distributor to invest in an MF product today, then the quantum of commission payable to the distributor now has to be mutually agreed upon between the distributor and the investor. This is in stark contrast to the earlier practice wherein investors were charged a flat fee of 2.5% of their investment amount as entry load by the fund houses, which was then used by the fund houses to pay the distributors for their services.
    While the no-load regime can be construed as an extremely positive step for MF investors, who are now aware of the amount of commission they pay to the distributor, the distribution community has severely criticised this regulatory move, which has had a grave impact on their commission income. In a country like India, where financial literacy is still at an extremely nascent stage, it is indeed difficult for many distributors to convince their investors to pay for MF advisory and servicing, leading them to boycott the sale of MF products, and instead promote other high incentive earning financial products.
    This, in turn, has greatly impacted sales of the equity MF products. Despite the markets making a dramatic recovery in 2009-10, the MF industry could add just about Rs 2,000 crore to its equity assets last year which is far lower than the equity inflows of about Rs 47,000 crore in 2007-08 or Rs 28,000 crore in 2006-07. Even the meltdown year of 2008-09 had witnessed equity inflows of more than Rs 4,000 crore.
ADVANTAGE BANKS!
With the MF industry's distribution network gone for a complete toss, bankbased fund houses are far better placed to reach out to investors. And this is not just plain thesis but a reality backed by factual data.
    During the period from November 2009 to March 2010, total number of equity MF investors (folios) in the country has declined marginally by about 0.05% from 411.4 lakh folios to about 411.2 lakh folios. However, if one were to assess the growth of folios for bank-backed MFs, the same has gone up by about 1.5% from 137.5 lakh investor accounts to 139.4 lakh accounts during the same period. These include folios of Baroda Pioneer, Canara Robeco, HDFC, ICICI Prudential, Kotak Mahindra, Principal PNB and SBI Mutual Fund combined. As far as all other fund houses are concerned, combined together, their number of equity folios declined from 273.9 lakh accounts to 271.8 lakh accounts during the same period.
    As far as the average assets under management (AAUM) of fund houses are concerned, while bank owned/backed fund houses reported an increase of about 45% in their AAUM during April 2009 - April 2010, the AAUM of all other fund houses combined has increased by just about 36% during the same period. Apart from convenience of distribution, it is also the popularity that these banks enjoy with the public at large that helps them gain the investor confidence.
    Axis Mutual Fund, for instance, managed to accumulate more than Rs 900 crore of assets under management (AUM) for its equity scheme that was launched in November last year even as the other newly-launched fund houses are struggling to reach out and convince the investors even today. Joining Hands With Bank
The development has not gone unnoticed by international fund houses planning to launch MF business in India. Thus, instead of launching an MF business in India on their own accord, these international MF brands have preferred to join hands with an Indian bank. We thus have Societe Generale Asset Management of France, which has entered into a JV with SBI Asset Management, while Pioneer Investments of Italy has partnered with Bank of Baroda. More recently Robeco Group of the Netherlands has joined hands with Canara Asset Management while US's T Rowe has entered into collaboration with the country's oldest asset management, UTI, which is already quite strong on the distribution front.
BANK OR NO-BANK – WHAT IT MEANS FOR INVESTOR?
While bank-based fund houses are definitely at an advantage today in terms of reaching out to the investors, it will, however, be foolish for investors to get prejudiced for any fund house simply because it is backed by a strong bank. For when it comes to investing, performance is the key criteria to be looked out for, followed by the financial strength and soundness of the organisation.
    Adjudging these fund houses solely on the basis of performance, Canara Robeco and HDFC Asset Management have topped the charts in this round of ET Quarterly MF Tracker with the highest and second highest fund house scores for the quarter ended March 2010.
    While HDFC asset management, the second largest mutual fund house of the country today, has seen a healthy turnaround in the performance of its schemes since the market meltdown of 2008, for Canara Robeco, which despite being one of the oldest is a relatively smaller fund house; the turnaround has been visible since the time it has collaborated with the Robeco Group of the Netherlands. As far as the performances of other fund houses are concerned — banks and non-banks, log on to our website www .etintelli gence.com to get the performance rating of MF schemes as well as the score card of the fund houses.
    bakul .chugan @timesgroup .com

India plans ‘Sovereign Fund' to seek energy assets abroad

noreply@blogger.com (Ways2earn) — Wed, 31 Mar 2010 21:37:00 +0000

CANCUN (MEXICO): In an indication of India turning aggressive in its hunt for energy assets abroad, the government is drawing up ambitious plans to set up a 'Sovereign Fund' that would help its state-run companies pursue acquisition of oil, gas, coal, LNG and other raw material in other countries in order to compete with China.

"We have already held a number of interactions and discussions with the Investment Commission on the issue. The proposed fund is being aimed at providing financial backing for acquiring assets in various shapes that will include all the raw material that India imports. It will not be limited to energy assets," Petroleum Secretary S. Sundereshan told The Hindu on the sidelines of the 12th International Energy Forum here.

Oil and Natural Gas Corporation Videsh Limited (OVL) had been told to pursue at least one major oil and gas asset every year. "Funds will not be a problem for these companies. In the past also we have supported the efforts of Indian companies to acquire assets in various countries. The government has assured us that any such acquisition will not suffer for lack of funds," he said.

Various Ministries including Coal, Mines, Steel and Petroleum have held a number of rounds of discussions with the Investment Commission to present their case for the creation of such a fund in order to compete in the increasingly competitive scenario.

Petroleum and Natural Gas Minister Murli Deora said Prime Minister Manmohan Singh had assured him that in case the state-run companies came up with interesting acquisition plans, the government would go out of the way to help them acquire such assets. "We are holding talks with various companies in Russia, Qatar, Saudi Arabia for joint ventures or acquiring new energy assets. We are hopeful that 2010 will bring a lot of good news for the country on the energy front." The Petroleum and Natural Gas Ministry has already asked the Finance Ministry to set up a fund using a part of the strong foreign exchange reserves. "Creation of such a fund would be very welcome if we are to compete with the Chinese," said R.S. Sharma, Chairman and Managing Director of the Oil and Natural Gas Corporation.

China, with $2.4 trillion of reserves and a $300-billion sovereign fund, has outpaced India in the global quest for resources to feed the world's fastest-growing major economies. Chinese companies spent a record $32 billion last year buying oil, coal and metal assets abroad, while a $2.1-billion investment by OVL was India's sole energy acquisition. OVL last year bought Imperial Energy Plc for £1.4 billion ($2.1 billion) in India's biggest energy acquisition.

Rate hike looms as industry grows

noreply@blogger.com (Ways2earn) — Sat, 13 Mar 2010 07:34:00 +0000

INDUSTRIAL output expanded 16.7% in January from the year-ago period on the back of robust manufacturing, giving the central bank room to hike policy rates in its April monetary policy review to tackle soaring prices. The figure announced on Friday was on expected lines, after a 16-year high output growth of 17.6% in December.

    "We expect RBI to hike the repo and reverse repo rates by 25 to 50 basis points," said Sonal Verma, an economist with Nomura Holdings.
    Encouraged by the pace of economic recovery, the government has already started withdrawing stimulus measures taken to insulate the economy from the global economic downturn. The finance minister had hiked the excise duty in last month's Union Budget, which has resulted in higher prices for many consumer goods, including passenger cars.
    The price increase could depress the demand for consumer durables, which grew a strong 31.6% in January, though a revision of income tax slabs that left more money in the hands of taxpayers could counter the impact to an extent. Finance minister Pranab Mukherjee also cautioned that a clear trend would emerge after one more month's IIP data. "Two straight months of high IIP growth are encouraging," he said.
    Food inflation eased a bit to 17.81% during the last week of February, but overall inflation is likely to go up, as the impact of last month's fuel price hike will get reflected in the inflation figure soon. Low base effect on Jan output
THE yield on the 10-year benchmark bond remained almost steady at 8.01% on Friday, from its previous close of 7.99%, as the market did not see the IIP numbers altering RBI's views. The Bombay Stock Exchange's Sensex closed the day at 17,169.48 points, almost unchanged from its previous close at 17,167.96 points.
    Planning commission deputy chairman Montek Singh Ahluwalia stuck to the robust growth projection of 8.5% for the next fiscal following the strong IIP numbers. Finance ministry's chief economic advisor Kaushik Basu was confident that the economy would grow at over 8.5% in the March quarter.
    The 6% GDP growth in the third quarter has raised a question mark over the forecast 7.2% growth for the entire fiscal being achieved.
    The strong January growth could, however, be marginally overstated because of the base effect. The industrial output grew by just 1% in January 2009.
    There are concerns that the excise duty hike could hurt industrial production, though credit rating agency Crisil's DK Joshi dismissed such fears, saying that income tax relief in the Budget would deliver more spending power to consumers.
    "There will be some moderation in industry output, as it can't keep registering 16% growth. But IIP should see a strong growth of 8% to 9% in the next fiscal as well," he said.
    Manufacturing, with an 80% weight in the IIP grew 17.9% in January 2010, compared to just 1% a year ago. Within manufacturing, capital goods registered a 56.2% growth in January 2010 and the consumer durables segment zoomed 31.6%. However, growth in consumer nondurables contracted by 3.1% in the month, and analysts blamed it on the weak monsoon.
    Meanwhile, mining activities clocked a growth of 14.6% in January, as against just 0.75% a year ago. Electricity generation, too, saw a robust 5.6% rise, compared to 1.85% in January 2009.

Focus on basic financial services: Turner to India

noreply@blogger.com (Ways2earn) — Fri, 19 Feb 2010 03:12:00 +0000

Not many in the world of high finance would dare talk of tighter regulation even after the credit crisis for fear of being branded anti-free market. But Adair Turner, chairman of the UK's beleaguered Financial Services Authority (FSA), worked hard to get the world agree to tighter scrutiny. He shares his views on a wide variety of topics such as his experience as a regulator and policy options for India in a free-wheeling interview with ET's Deepshikha Sikarwar & Vinay Pandey. Excerpts:

Have the agenda of financial sector reforms taken a back seat after the recovery?
No, I think we are in the process of producing a significant change in the global financial regulatory architecture. We have an extensive agenda that will lead to concrete decisions later this year. I don't think there has been any drawing back as recovery gets under way.
Will a change in the architecture of global finance affect capital flows?
I don't think so. The changes will not affect the flow of capital across the world in terms of attracting capital because capital can come in many forms. It can come as longterm direct investment, equity portfolio and as debt securities. None of that is affected by what we are doing. What will be affected is the flows that go through the banking system. A stable banking system means it will be less easy to extend crossborder credit on an upswing. But we know that sudden increases of cross-border credit on an upswing will be followed by withdrawals, which is quite destabilising.
What is the case for financial innovation, post the financial crisis?
We simply need to be more sceptical about the claim that extra financial innovation and extra financial intensity are always valuable. A major distinction has to be drawn here between the condition of a country like India, where there are lots of people who don't have access to basic banking services, and where a process of financial deepening would be valuable. What we wrongly assumed in the past is that financial deepening means more trading activity and more financial innovation. I think it is not obvious that the explosion of fancy financial innovation in America and the UK actually was economically beneficial.
Do sophisticated financial instruments have a role in an economy such as India?
I think some of those products have a role to play. But I don't think they are the priority for India. THE priority for India is a good competitive market in the provision of basic banking and insurance services to the population and to small and medium enterprises. This is more important than complex instruments.
Do you see a big risk of large capital flows into the emerging economies like India?
We all know that was one of the causes of the problems in 1997 in countries like Korea, Thailand and Malaysia. You had big hot money flows going into the banking system, into commercial real estate, speculation and then when there was a crisis of confidence, they suddenly went out. Now, a lot of those countries have very large foreign exchange reserves which can cushion sudden capital flights. We have to be pragmatic about short-term capital flows. There really isn't much economic value added to the world in carry trade. Now, there isn't much we can do about it and we shouldn't fool ourselves that we can ever stop that entirely because carry trade can be done almost alongside commercial activities once you have global corporates which are moving money around. But we should at least be open to some sort of tax restriction on short-term flows. If somebody takes a local portfolio investment in debt securities or equity securities, you can have a tax, which doesn't apply if they hold for a longer period of time.
Does that mean there would be a greater understanding of such measures in the developed world?
Oh yes, I think there will be. Before the crisis, there was an over simplistic belief in free market among some people, which has always been debated among economists. There is now a greater appreciation of the inherent instability of the markets and therefore, an understanding that we have to be open to a set of pragmatic responses to deal with some of these problems. We will see a pragmatic understanding when countries like India use a variety of tools to slow down the more speculative forms of short-term capital.
There has been this whole debate about foreign money coming...
I am not familiar with the details of how that works. In the real world of globalised economies, it is difficult to have total control because when you try and control one thing there will be some other instrument that takes the economic substance of it. One has to realise that a lot of these instruments of control are not perfect, but they are not useless either.
You advocated taxing capital flows at the G20, but it was not well received..
There has always been a distinction between the theoretical attraction and the practical difficulty of doing it. There are a number of economists over the years who expressed sympathy for it because a rational analysis of how financial markets work suggests that there would be nothing wrong about a small transactions tax. Again, you must not imagine it will transform things. The Brazilian tax which they have just introduced is a form of financial transaction tax on short-term capital flows. I have never said we have got to have a Tobin tax. All I have said is that we should be willing to consider openly. Because it came at a time when there was sort of free market hype, it was considered an offence against the total free market creed.
Will a co-ordinated approach within the emerging world would be a better idea?
It would make sense. It is not for me to try and orchestrate that. It's for emerging markets to get together and talk about it. That might be helpful.
If India were to raise rates unilaterally, it would risk attracting hot money. This dilemma must be faced by many countries. How will the world address the issue?
This is the fundamental problem of a monetary policy in the environment of floating exchange rates and free capital. There are no perfect solutions to this in monetary policy and exchange rate mechanism. Now for India, it is less of a problem than, say, a Thailand or Malaysia. India is a continental scale economy. Problems will be huge for smaller economies. I think for a country like India, the problems will be manageable, but for smaller countries this can be problematic.
In the UK there is debate about the future of FSA. For long, we in India have been debating a single regulator and the model was FSA. So where do things stand?
Often when people can see problems, they think the solution is to move around organisational boxes. Therefore, given that we all have problems as always some people are suggesting one thing and other people are suggesting exactly the opposite. In the UK the Conservative Party wants to recombine a prudential supervision particularly of banks with other things with the central bank. Our systemic moment has some benefits and one disbenefit. Our benefit is that we have prudential supervision altogether in one organisation. That is clearly an advantage compared with, say, the US where the separation between the SEC and the insurance regulator and OCC and the Fed led to the phenomenon of AIG which just escaped regulation because everybody thought it was a sort of insurance company but actually it was doing investment banking business. And so there is a lot to said for having one authority which can span over all of the prudential activities. And argument for that actually becomes stronger the more sophisticated and complex is your financial system because the more your financial system develops the more there is a possibility of AIG type institutions which do not fit into categories. So that's the argument for putting it altogether. The argument against there are two. One is that there is a very large span if you are also doing customer protection but the other more important one is that you can lose integration with the central bank. Because in particular in what is called the macro prudential policy which resides half way between monetary policy and pure prudential policy. So this is looking at credit aggregates, the overall supply of credit to the economy and if necessary slowing it down by sort of tools I described earlier. That can get lost between the regulator and the central bank. Whatever you do, how ever you do, you do not have a perfect solution here.
Do you see greater conservatism on part of regulators going ahead?
Yes. We are much more conservative. We use to talk about light touch regulation. We use to think of competitiveness.. We were encouraged to think of competitive of London versus other financial centres as a major aim for the regulator, which I think is a mistake.

Forex Robot World Cup Winner Talks

noreply@blogger.com (Ways2earn) — Fri, 12 Feb 2010 05:17:00 +0000

Hi,

--------------------------------------------------
=> NEVER Done Before In The Automated FX Industry
--------------------------------------------------

Like always...

I knew the FRWC was going to put out something new this week and they have! The Forex Robot World Cup is about to introduce you to the 1st place winner, Drazen Ziskovic (145.60%).

It's time to take a road trip!

This video is so cool - it really makes you feel like you're inside a global village. That's the secret weapon of the FRWC - tapping into the best minds on the planet!

YOUR PLIMUS AFFILIATE LINK

- Meet the creator of the LMD Multicurrency Robot

- FRWC keep up their end of the deal!

- 329 entries and the one man that beat them all!

http://www.sunnykesh.com/recommends/FRWC

- One man - a singular vision to build the better bot

- 145.60% in 2 months... REAL money, LIVE account!

- His thoughts on LMD (The future performance of LMD)

- What he thinks about testing (His testing was even more hardcore than FRCW's)

- What he's going to do with his prize money. (He lives and breathes Forex!)

http://www.sunnykesh.com/recommends/FRWC

You know, when you see this, you might not think too much about this guy. He comes across as quiet and unassuming. He's not a "life of the party" type of dude.

This is a guy who trades and was just trying to build the BEST ROBOT IN THE WORLD. He wasn't trying to sell it, he used it himself! He's a shy programmer from Croatia - just an ordinary guy with a genius streak.

http://www.sunnykesh.com/recommends/FRWC

All the best,

Sunny Kesh

P.S. If you take one thing away from this, let it be that you don't have to be a huge, multi-national corporation to change the world. One man with enough dedication to the pursuit of excellence did it - here's the proof:

http://www.sunnykesh.com/recommends/FRWC

---------------------------
Nothing in this email should be considered as advice on trading or on making investments. We are not regulated to give advice to anyone in any country regarding any type of investing or trading. The contents of this email and any website(s) visited as a result of this email should be considered as educational only.
---------------------------

Verified Real Money FX Trading Bots (72.5%/Month)

noreply@blogger.com (Ways2earn) — Sun, 07 Feb 2010 05:37:00 +0000

Hi,,

-------------------------------------------------------------------
The Forex Robot World Cup Shocks The FX Industry

- What Did The Winning Robots Do To Achieve Astounding Performance (live trading for 2 months)?

- How Much Effort Was Put Into It?

- WHAT Are You Truly Getting Here BESIDES 72.5% Per Month VERIFIED automatic in.co.me?

- How Transparent Was Their Competition?

http://www.sunnykesh.com/recommends/FRWC

I'm sure you've heard people say this before...

"We're only human!"

...We make mistakes, we have feelings, we're impulsive, over-cautious... in short - the same thing that makes us so unique is also our greatest enemy.

We can think many times faster than the best computers in the world yet, at any given time, we're thinking about so much that each thought affects the other...

Again, we're only human after all!

It's always been a problem for traders - we're NOT androids! We agonize over every decision we make... we feel greed and fear.

We lack discipline... and that's how some of our best trades slip through the cracks. Bottom line... we need to be cold, calculating and mechanical in order to make it in the markets.

This is exactly the reason why automated FX trading is making such huge waves in our industry. It takes us - our thoughts, our decisions, our judgments... out of the equation completely.

And THAT is the real way to profit from FX trading... AS LONG as you have the right automated solution.

Now... here's where things get really interesting...

They recently held the Forex Robot World Cup. Just like the soccer world cup decides which is the greatest team in the world... this contest decides which is the greatest FX ROBOT in the world.

It's the first contest of its kind and a true milestone in this industry... and, soon, the winning robots will be available for purchase in small quantities.

Now... what they have prepared for you here is amazing and you've *got* to see it:

http://www.sunnykesh.com/recommends/FRWC

They've made a simply awesome video that takes us backstage to see how everything came together. It's still hard to believe that Forex has come this far - this is something you absolutely HAVE to watch.

Here's a quick summary:

- A look at the top performing robots

- The truth behind the motive for the competition

- Why transparency is vital (and what do FX robot vendors hide from you!)

- Why the biggest FX broker in the world decided to become a sponsor

- Why over 92.7% didn't qualify to take part

- Why real-money, live trading is the only REAL proof for an FX bot

http://www.sunnykesh.com/recommends/FRWC

This exclusive video, awaited for so long by 1000's of FX traders, is only going to be available for a short period of time so, do yourself a favor, and watch this as soon as possible.

And, by the way, in the past 4 days alone, the FRWC organizers have had over 1,000 emails from people wanting to buy the FRWC's Royal Trader (their product that contains the top-performing robots of the competition).

They are going to release a limited number of copies... no way around it. Make sure you learn about them - their credibility level and their commitment to change the industry here:

http://www.sunnykesh.com/recommends/FRWC

All the best,

Sunny

P.S. In every industry there is an innovator... someone who does things differently... someone who is labeled as being the "FIRST". You will understand why this is the absolute first time in history that a REAL FX product is going to be introduced to the market:

YOUR PLIMUS AFFILIATE LINK

---------------------------

Nothing in this email should be considered as advice on trading or on making investments. We are not regulated to give advice to anyone in any country regarding any type of investing or trading. The contents of this email and any website(s) visited as a result of this email should be considered as educational only.
---------------------------