Indian Finance Industry Update

27 Jan 2017

RBI / MoF / Govt. PoliciesRestrictions on cash withdrawal likely to go away by Feb-end

Financial sector reforms in FY17: Road map in the works for state-run banks

RBI may reopen deposit window for old notes

Cannot disclose preparedness to handle demonetisation crisis: RBI press

Regulatory Bodies / IRDA / SEBIIRDA of India seeks comments on draft norms on outsourcing activities

Post-launch, Pradhan Mantri Fasal Bioma Yojna shows 22% rise in crop insurance by farmers

Insurance to be provided to Nepalese working in India

Cyber Security: Insurance is critical in a digitised world

Private / Public Sector BanksIndian Bank's Q3 profit up by 672% at Rs 373.48 cr

Kotak Mahindra Bank Q3 net profit up 34% to Rs 1,267 crore

Kotak Mahindra Bank: A lot of luck and a bit of grit

Medi-claim renewal rates for SBI retirees may rise 300%

HDFC Bank eases out 4,581 staff in Q3, calls it ‘rationalisation’ exercise

Indian Bank profit rises more than six-fold to Rs373.48 crore

Karnataka Bank inks pact with Tirth Agro Technology

Interest income lifts Kotak Bank net 39%

What Q3 numbers say about segmental performance of Kotak Mahindra Bank

IDFC Bank net down 21% on bad loan provisioning

New banks woo customers with higher deposit rates

Budget 2017: What may be in store for IDBI Bank stock

BoB eyes IL&FS custodian business in Rs 600-cr deal

Now, Bank of Baroda debit card holders can conduct big buying through new EMI facility

Yes Bank migrates to ISO certification for EMS policy

KVB Q3 net falls 24%

Post-demonetisation, IDFC Bank may see margin pressure as banks cut lending rates: CFO Sunil Kakar, IDFC Bank

Foreign Banks / FIIsBNP says Fed to hike rates every quarter in 2018

Rating & Research Rupee stuck in a narrow range

Credit & Pre-paid CardsNPCI upgrades BHIM app

Housing FinancePiramal Finance to start home loans in four months, eyes small corporate lending too

‘PNB Housing Finance continues to have a very strong retail story’: Sanjaya Gupta, MD, PNB Housing Finance

Housing finance cos to face heat

Development BanksNBFCs / FIs / MicroFinance

Cholamandalam Finance net rises 12% in third quarter

Now, the salaried can tap SalaryTopup for loans

Budget 2017: What may be in store for Mahindra & Mahindra Finance stock

Demonetisation to dent MFI profitability

Bharat Financial surprises positively in a tough quarter

Brokers / DistributorsBourses

BSE public issue closes on a high note

Life & General InsuranceMutual Funds & AMCs

MF investments: direct investors panic more during volatility

Equity mutual funds shopping for stocks continues

Pvt. Equity & Hedge FundsPSU stakes: Centre begins ‘strategic sale’ process

Muthoot Microfin raises Rs. 130 crore from US-based Creation Investments

Pension Funds / PF / EPFPension plan for seniors with 8% return

Govt Securities & BondsMutual funds invest Rs 27,473 cr in debt market in Jan

NTPC raises €500 mn via overseas bonds sale

Bond market doesn\'t expect surprises

Vedanta issues $1 billion bonds to refinance debt

Bond yields, call rate rises

International NewsRBS to take $3.8 billion charge tied to US mortgage probe

Fed to Hike Rates Every Quarter in 2018

Economy Rupee falls 4 paise against US Dollar

Sensex soars 333 points

'GDP growth to slow to 6% in Oct-Dec 2016'

High govt debt limits room for quick deficit reduction: Moody’s

‘Demonetisation to boost transparency of economy’

Business sentiment outlook for Q4 deteriorates: RBI

Closing

RBI / MoF / Govt. Policies

Restrictions on cash withdrawal likely to go away by Feb-end PTISee this story in: The Hindu Business Line

New Delhi: With the cash crunch situation easing, the Reserve Bank of India may do away with the weekly withdrawal limits frombanks as well as ATMs by the end of next month, bankers said.

RBI had recently raised the ATM withdrawal limit to Rs. 10,000 a day but maintained the weekly cap at Rs. 24,000 for savingsaccount and Rs. 1 lakh for current account holders.

“I think the restrictions on withdrawal by RBI should be completely lifted by February-end or by first half of March as cashsituation is easing gradually,” Bank of Maharashtra Executive Director R K Gupta told PTI.

It is entirely RBI’s decision and the central bank would decide after making a holistic assessment of the situation, he said.

According to SBIs research report Ecowrap, “By the end of February, 78-88 per cent of the currency could be back in thesystem under the best case scenario in terms of an optimal currency distribution (more small denomination notes),” thereport said, adding that “it seems within next 2 months things would be pretty close to normal.”

Another senior public sector bank official said the situation is easing and it is a matter of weeks when the curb on withdrawal gets

eased.

“My hunch is that it should happen before end of the current fiscal,” the official said, adding that RBI has beenprogressively easing the curb.

RBI had earlier increased the daily withdrawal limit from ATMs to Rs. 4,500 from Rs. 2,500 effective January 1, just a day after50-day demonetisation period ended.

Meanwhile, RBI Governor Urjit Patel could not set a timeframe before the Standing Committee on Finance for return of normalcy inthe banking system even as the central bank asserted that Rs. 9.2 lakh crore or 60 per cent of demonetised currency has beenreplaced.

In a surprise move on November 8, Prime Minister Narendra Modi had announced demonetisation of old Rs. 500 and Rs. 1,000notes.

Following the decision, RBI had put restrictions on withdrawal of cash from ATMs as well as from banks to deal with the shortage ofnew high denomination currency notes. This led to long queues at ATMs and bank branches.

All over the country, banks had to deal with huge rush of people who thronged their branches to deposit junked notes. The deadlinefor depositing old notes with banks ended on December 30.http://www.thehindubusinessline.com/money-and-banking/restrictions-on-cash-withdrawal-likely-to-go-away-by-febend/article9502792.ece

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Financial sector reforms in FY17: Road map in the works for state-run banks Business Standard

New Delhi: As the finance minister gears up to present the Union Budget for the new financial year, Business Standard scans the2016-17 Budget speech for a status check on key announcements made by Finance Minister Arun Jaitley last year regardingfinancial sector reforms and assesses how much has been achieved.

Passage of the Insolvency and Bankruptcy law

Status: In May last year, Parliament passed the Insolvency and Bankruptcy law code 2016.

Code on Resolution of Financial Firms to be introduced as a Bill in the Parliament during 2016-17

Status: A draft Bill has been finalised by the finance ministry and put in the public domain for comments. The government is in theprocess of reviewing the comments received.

The RBI Act, 1934, is being amended to provide statutory basis for a Monetary Policy Framework and a Monetary Policy Committeethrough the Finance Bill 2016

Status: The amendment to the RBI Act of 1934 was passed in the Finance Bill 2016. Subsequently, the six-member monetary policycommittee was formed with three external members appointed by the government. The RBI governor, the deputy RBI governor incharge of monetary policy and an RBI official are the other three members of the committee.

A Financial Data Management Centre under the aegis of the Financial Stability Development Council (FSDC) will be set up tofacilitate integrated data aggregation and analysis in the financial sector

Status: A committee headed by Ajay Tyagi, additional secretary in the finance ministry has submitted its report and a draft bill titled‘The financial data management centre bill 2016’ to the government.

Amendments in the SARFAESI Act, 2002, to enable the sponsor of an ARC to hold up to 100 per cent stake in the ARC and permitnon-institutional investors to invest in securitisation receipts

Status: The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016was passed by Parliament in August. It amended four laws: Securitisation and Reconstruction of Financial Assets and Enforcementof Security Interest Act, 2002 (SARFAESI), the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the IndianStamp Act, 1899 and the Depositories Act, 1996.

Proposed to bring in comprehensive legislation in 2016-17 to deal with the menace of illicit deposit taking schemes

Status: Instead of a law, the government formulated the Direct Selling Guidelines 2016 framework model guidelines for states toemulate and curb ponzi schemes and regulate direct selling.

The Bank Board Bureau will be operationalised during 2016-17 and a road map for consolidation of public sector banks will be speltout

Status: The road map for consolidation of public sector banks is yet to be put in the public domain.

General insurance companies owned by the government will be listed on the stock exchanges

Status: In mid-January 2017, the cabinet committee on economic affairs gave the go-ahead for listing of shares of five general

insurance companies. The five insurance companies are New India Assurance, United India Insurance, Oriental Insurance, NationalInsurance, and General Insurance Corporation of India.http://www.business-standard.com/budget/article/financial-sector-reforms-in-fy17-road-map-in-the-works-for-state-run-banks-117012700071_1.html

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RBI may reopen deposit window for old notes Asian Age

Mumbai: The Reserve Bank of India may allow deposit and exchange of discarded Old High Denomination currency notes in bankaccounts. However, exchange facility at banks would be for limited amount of money, Hindustan Times reported on Thursday.

“If allowed, deposits would only be for smaller sums to ensure that the window, which will be for a limited period, was notmisused,” HT quoted sources as saying.

The decision most probably would be taken after the central bank received in bulk requests and queries from citizens who for somereasons failed to surrender scrapped currency notes.

The amounts are as small as Rs 2,000… the issue is being looked into and the advice would be to hold on to those notes aswe are examining (opening) another window for these genuine people, the report said.

Many queries that the RBI received were about currency notes that people found tucked away somewhere in their house and thatthey discovered on a later date than December 30.http://www.asianage.com/business/economy/260117/failed-to-deposit-old-notes-on-dec-30-rbi-may-give-you-another-chance.html

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Cannot disclose preparedness to handle demonetisation crisis: RBI press PTISee this story in: The Economic Times

New Delhi: The quantum of new currency notes of Rs 2,000 and Rs 500 printed before the announcement of demonetisation onNovember 8 cannot be disclosed as it may affect interests of the State, a subsidiary of Reserve Bank of India (RBI) responsible forprinting currency, has said.

The response of the subsidiary came following an RTI query sent to RBI under the Right to Information Act seeking to know thepreparedness of the Bankers' Bank to handle the cash crisis arising out of sudden announcement by Prime Minister Narendra Modito demonetise Rs 1,000 and Rs 500.

The central bank forwarded the query to Bhartiya Reserve Bank Note (P) Limited, Bengaluru which is wholly owned subsidiary ofRBI to respond to query "how much currency of new Rs 2,000 and Rs 500 was printed before announcement of cessation of Rs 500and Rs 1000 as legal tender was made on November 8".

The subsidiary was established 21 years ago with an aim to augment currency printing capacity of RBI "to bridge the gap betweenthe supply and demand for bank notes in the country" with present capacity for its presses of 16 billion note pieces per year on atwo-shift basis, as per web site of BRBNL.

In its response to RTI query, BRBNL said the information cannot be disclosed citing section 8(1)(a) of the RTI Act.

The section allows declining information disclosure of which would prejudicially affect the sovereignty and integrity of India, thesecurity, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence.

The Press did not give any reasons to justify as to how giving plain data about currency printed by it before November 8 wouldqualify in any of the categories given under Section 8(1)(a) to deny the information.

Ironically, the RBI in a separate response had said that it had 2,473 million pieces of 2,000 rupee notes on November 8 which had avalue of over Rs 4.94 lakh crore.

The RBI has not been fothcoming with information about currency situation in the country and its preparedness in the wake ofdemonetisation citing one exemption or the other.

The monetary policy regulator had refused to give reasons, sought under the RTI Act, behind the drastic decision announced by thePrime Minister to demonetise about 86 per cent of currency in circulation

It had adopted silence on whether the views of Chief Economic Advisor and Finance Minister were taken before demonetisationwas announced.

The monetary policy regulator also refused to give any details about the time it will take to replenish the currency notes.

The query is in the nature of seeking future date of an event which is not defined as information as per Section 2(f) of the RTI Act,RBI had said in response to an RTI query.http://economictimes.indiatimes.com/news/economy/policy/cannot-disclose-preparedness-to-handle-demonetisation-crisis-rbi-press/articleshow/56794944.cms

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Regulatory Bodies / IRDA / SEBI

IRDA of India seeks comments on draft norms on outsourcing activities PTISee this story in: The Economic Times

New Delhi: Irdai has proposed regulations for outsourcing of non-core activities supporting policy servicing and premium collectionfor insurance companies and contingency plan to deal with any untoward development.

IRDAI (Outsourcing of Activities by Indian Insures) Regulations is aimed to ensure that insurers follow prudent practices onmanagement of risks arising out of outsourcing with a view to prevent negative systemic impact and to protect the interests of thepolicyholders.

The Insurance Regulatory and Development Authority of India (IRDAI) also aims to ensure sound and responsive managementpractices for effective oversight through these regulations.

The draft said insurer is prohibited from outsourcing 'core activities' like investment, fund management, compliance with AML andKYC, and product designing and policyholders grievances redressal.

It further said that while policy servicing remains a core activity for the Insurer who is totally responsible for the services rendered,however, "the activities that support policyholder servicing may be outsourced".

The draft also proposes that where collection of premium is outsourced, insurers should put in place procedures for issuance ofpremium acknowledgments instantaneously.

The insurers are also expected to establish and maintain adequate contingency plans.

"This includes disaster recovery plans and backup facilities to support the continuation of an outsourced activity with minimalbusiness disruption in the event of reasonably foreseeable events that affect the ability of an Outsourcing Service Provider tocontinue providing the service," the draft said.

Irdai has invited comments on the revised draft on outsourcing of activities by insurers by February 7. It had issued the initial draft inAugust last year.http://economictimes.indiatimes.com/industry/banking/finance/insurance-regulatory-and-development-authority-of-india-seeks-comments-on-draft-norms-on-outsourcing-activities/articleshow/56791529.cms

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Post-launch, Pradhan Mantri Fasal Bioma Yojna shows 22% rise in crop insurance by farmers Sandip DasThe Financial Express

New Delhi: Following the launch of the Pradhan Mantri Fasal Bima Yojana (PMFBY) a year ago, the number of farmers opting forcrop insurance in the kharif season 2016 has increased by over 22% compared to 2015.

According to the agriculture ministry data, over 3.77 crore farmers have enrolled in PMFBY in Kharif 2016 against 3.09 crorefarmers who had opted for crop insurance in kharif 2015. Out of the farmers enrolled under PMFBY, around 27% (1.04 crore) of thefarmers did not avail agricultural credit earlier while rest of the farmers had availed agricultural credit. An agriculture ministry officialtold FE that the focus of PMFBY has been to encourage more and more non-loanee farmers to take up crop insurance so that riskinvolved in the agricultural sector could be dealt with.

Source said the allocation for PMFBY in FY18 is expected to increase sharply compared to provision of Rs 5,501 crore in FY17budget estimate. However, finance minister Arun Jaitley has already sanctioned R13,240 crore as per the revised estimate for theflagship crop insurance scheme in the current fiscal.

According to an agriculture ministry note, the performance in kharif season was better despite the fact that there were teethingissues to begin with. “For instance, many states did the bidding process for selection of the insurance companies forconcerned clusters for the first time and consequently, the notification of the scheme was delayed in a number of states,” thenote had stated.

While around 1.67 crore farmers had taken crop insurance in the rabi season of 2015-16, the agriculture ministry hopes that morefarmers will enroll under PMFBY in the ongoing rabi season.http://www.financialexpress.com/india-news/post-launch-pradhan-mantri-fasal-bioma-yojna-shows-22-rise-in-crop-insurance-by-farmers/521237/

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Insurance to be provided to Nepalese working in India PTI 

See this story in: The Statesman

Kathmandu: For the first time, Nepalese workers going to India would be provided mandatory insurance cover under an ambitousplan unveiled by Prime Minister Prachanda for the welfare of people working in foreign countries.

Prachanda on Tuesday said that the government is to regulate Nepali migrant workers going to India, issuing them permissionletters and provide insurance and other facilities such as are enjoyed by migrant workers in other countries.

This is the first time that the government has decided to regulate Nepalese working in India since the signing of the Nepal-IndiaTreaty of Peace and Friendship, 1950.

"Now onwards, those going to work in India have to obtain a permission from the district administration office (DAO).

Before issuing such permission the DAO has to enlist them for a mandatory insurance and welfare fund," according to the plan.

Migrant workers for destinations other than India will now have to buy life insurance and general insurance coverage worth Rs.2million from January 28.

However, workers going to India, after taking permission from the concerned district administration office from February 12, can buythe insurance worth up to Rs.1.25 million.

Hundreds of Nepalese cross the porous southern border with India every day in search of job opportunities. It seems difficult toimplement such a plan due to lack of mechanism to stop the movement of migrant workers at Nepal-India border.

While unveiling the plan, Prachanda said it was aimed at providing better social security schemes to migrant workers, moreimportantly to the families of those killed and injured at their work destinations.

The decision, if enforced, could benefit more than 5 million Nepalese working at more than 110 work destinations across the world.

Officials said it might be extremely hard to persuade workers to buy insurance package due to bureaucratic hassle and cost factor.

"A majority of the people go India because they cannot afford to pay to go to the Gulf or Malaysia. Each worker will at least needRs.20,000 to follow the due process," according to the official.http://www.thestatesman.com/business/insurance-to-be-provided-to-nepalese-working-in-india-1485334339.html

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Cyber Security: Insurance is critical in a digitised world Mukesh KumarThe Financial Express

TECHNOLOGY plays a very critical role in the world of business and for long has been leveraged as an asset, making businessesincreasingly dependent on it. Today, with the demonetisation of Rs 500 and Rs 1,000 currency notes in India, transactions over theinternet are playing a key role in how most organisations conduct business and reach out to their customers. But, despite all thebenefits IT has to offer, it also exposes businesses to risks which can be detrimental to their interests.

As business organisations become more reliant on the internet and advanced communications technologies, cyber risks, too,continue to evolve with the advances in technology. This has made businesses increasingly vulnerable to risks associated withtheft, loss or misuse of data. In our country, where controls over IT are not entirely foolproof, many cyber crime incidences havebeen reported with confidential customer information being compromised. The recent incident, where the data of 3.2 million debitcards was compromised, indicates how vulnerable IT can be despite the best security measures put in place. According to theNational Crime Records Bureau, there has been a 150% jump in the incidence of cyber crimes or IT-related crimes in India from2012 to 2014. A total of 9,622 cyber crime offences were reported in 2014, 69% higher than 5,693 cases registered in 2013.

Studies indicate that for every single data that is breached, the victim organisation has to spend up to $200 on litigation andcompensation. Therefore, organisations must proactively consider a plan on their approach towards cyber security, which includesinsurance for all the assets sailing on the online space.

Ideally, a cyber insurance coverage is made to protect businesses from the liability and expenses arising as a repercussion of theftor loss of data, as well as liability and expenses that may arise from the breach of data security or privacy, particularly when thecompany is hosting client information.

Typically, a cyber insurance policy will cover for impaired access liability; unauthorised access to, use of, or tampering with data;disclosure of confidential data (invasion of privacy); loss of data or digital assets (malicious or accidental); introduction of maliciouscode or viruses; cyber extortion or terrorism threats; personal mediainjury (defamation, libel, or slander) from electronic content; regulatory action, notification, or defense expenses; crisis managementexpenses; data or system restoration and business interruption expenses.

As the first step, create a cyber risk profile of your company by listing the expenses that need to be covered in an event of a cyberbreach along with an estimate of third-party costs. It is a must that before purchasing a cyber insurance policy organisations build amature information security programme and most importantly, have an understanding of the total cost of cyber risks.

With the constant change in technology, computer systems cannot be completely secured and the reality is that data breaches,most often, are beyond the organisation’s control. But, cyber insurance provides the organisation protection to limit their risk.http://www.financialexpress.com/economy/cyber-security-insurance-is-critical-in-a-digitised-world/522537/

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Private / Public Sector Banks

Indian Bank's Q3 profit up by 672% at Rs 373.48 cr T E NarasimhanBusiness Standard

Chennai: Indian Bank has reported a 671.65 per cent growth in profit at Rs 373.48 crore during the quarter that ended in Decemberas compared to Rs 48.4 crore in the same period last year.

Total income has increased from Rs 4,444.58 crore in the third quarter in 2015 to Rs 4,557.25 crore in the corresponding period thisyear.

The bank's gross NPA to gross advances ratio stood at 7.69 per cent in December as against 5.61 per cent during the same periodlast year. Net NPAs to net advances ratio stood at 4.76 per cent as against 3.17 per cent in the corresponding period in 2015.

Provision coverage ratio(PCR) stood at 56.46 per cent on December-end as against 55.11 per cent as in September this year.

Post demonetisation, the bank's request for new debits cards increased from a monthly average of 2.5 lakh to 13.30 lakh in lessthan two months.

Point of Sale (PoS) and e-commerce transactions increased to 2.5 lakh from 70,000 in a day. Net banking registration rose by 6.4per cent, while mobile banking registration rose by 19.2 per cent, said Jain.

He added, Bank's Capital Adequacy Ratio (CRAR) as per Basel III was 13.89 per cent as on December of which, Tier I capital stoodat 12.24 per cent.

CASA deposits (domestic) grew by 33.47 per cent to Rs 69,003 crore as on December from Rs 51,698 crore, a year ago. The shareof CASA deposits (domestic) reached a level of 38.71 per cent from 30.71 per cent in the corresponding period in 2015.http://www.business-standard.com/article/companies/indian-bank-s-q3-profit-up-by-672-at-rs-373-48-cr-117012500829_1.html

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Kotak Mahindra Bank Q3 net profit up 34% to Rs 1,267 crore Nupur AnandBusiness Standard

Mumbai: Private sector lender Kotak Mahindra Bank’s consolidated net profit increased by 34% to Rs 1,267 crore for theOctober-December 2016 quarter from Rs 945 crore a year ago on the back of higher net interest income.

Net interest income, the difference between interest earned and interest expended, increased by 15.9% to Rs 2,747 crore. Otherincome that includes fees, commission etc also increased to Rs 2,004 crore as compared to Rs 1,804.7 crore in the same quarterlast year.

Net interest margin, a key indicator of the bank's profitability expanded to 4.49% from 4.34% in the corresponding quarter last year.The management explained that as a result of demonetisation, low cost deposit increased which aided NIM growth. The bank saw a45% increase in its savings account growth and a 24% increase in its current account growth. Also as a result of demonetisation,the bank saw an increase in digital transactions both in volume and value terms.

Standalone net profit rose by 39% in the October-December quarter to Rs 880 crore.

Consolidated net interest margin, a key indicator of the bank’s profitability, improved by 7 basis points (bps) year-on-yearand 2 bps sequentially to 4.48% in Q2 FY17.

Loan growth slowed due to demonetisation. “Certain segments like agri, SME, commercial vehicles etc were impacted due todemonetisation. Some of these sectors had started picking up in October but from November the growth has come off. The ruralsegment has been more affected than the urban areas," said Dipak Gupta, joint managing director, Kotak Mahindra Bank.

Consolidated advances increased 12% to Rs 157,801 crore as on December 31, 2016 from Rs 141,136 crore in December 2015.

The bank saw a slight uptick in bad loans at the standalone level with the percentage of gross non-performing assets (NPA)increasing to 2.42% from 2.30% in the corresponding quarter last year. In the same period net NPA also increased to 1.07% from0.96%.

At the end of the December quarter, restructured loans considered standard were down to 0.11% of net advances to Rs 146 crore.The management added that with the integration process of the ING Vysya Bank merger completed, the benefits on the retail sideshould start kicking in from the next quarter.

The bank remains well-capitalised with a consolidated capital adequacy ratio of 18% (including unaudited profits) and tier-1 ratio at

17.2%.http://www.business-standard.com/article/companies/kotak-mahindra-bank-q3-net-profit-up-34-to-rs-1-267-crore-117012501327_1.html

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Kotak Mahindra Bank: A lot of luck and a bit of grit Aparna Iyermint

Kotak Mahindra Bank’s December quarter results reflect a lot of luck and some grit as well. At a time when the currencywithdrawal had hit credit growth for most banks, the private sector lender’s loan disbursals grew 12%, driven by its corporateloan book rather than retail book, which was the case for most banks. The lender’s corporate loan book expanded by 23.6%while its retail disbursals consisting of loans to homebuyers, small businesses, personal loans and loan against property grew by12%.

But there is more. According to Dipak Gupta, joint managing director of Kotak Mahindra Bank, the third quarter numbers reflectmore of the integration of the lender with ING Vysya Bank rather than demonetization on the asset side. This simply means that themerger paid off and as processes and operations of both banks meshed, the output generated was more in terms of higher loangrowth.

The effect on deposits is, of course, as expected. The lender’s current and savings account ratio surged to 42% as of 31December, driven by a 45% jump in savings account balances. This gave muscle to its margins, making them expand to 4.49%.

However, Kotak Mahindra Bank didn’t escape the effects of the currency withdrawal. Its loan disbursals to small and mediumenterprises stagnated and Gupta said that the bank had noticed a slowdown in the momentum of disbursals from Novemberonwards due to the currency withdrawal. Perhaps investors should watch out for lingering effects of demonetization in the comingquarters.

Asset quality was a mixed affair with bad loan ratios deteriorating from a year ago despite the strong loan growth. Grossnon-performing assets (NPAs) were 2.42% of the total loan book, higher than 2.3% a year ago while net NPA ratio stood at 1.07%,which was higher than the 0.96% in the year-ago period.

It is no surprise that the stock surged 7% to Rs794.65 on Wednesday as the private sector lender delivered a net profit growth of39% for the quarter ended December, beating the estimate of the most bullish analysts. At this price, the shares trade at a steepmultiple of 5.28 times expected book value for the current fiscal year.

But investors should perhaps wait another quarter to assess whether the management’s guidance of a strong FY17 secondhalf comes true.http://www.livemint.com/Money/nMOoIUKb2HznVuCxAynZRK/Kotak-Mahindra-Bank-A-lot-of-luck-and-a-bit-of-grit.html

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Medi-claim renewal rates for SBI retirees may rise 300% Vinson KurianThe Hindu Business Line

Thiruvananthapuram: Renewal premium rates of the family floater group medi-claim policy for retirees of State Bank of India (SBI)may go up by 300 per cent or more.

The family floater policy had replaced the SBI Retired Employees Medical Benefit Scheme that gave assured benefit of Rs. 7 lakh topensioners/ spouse/ dependants during their lifetime by paying Rs. 62,000.

High claim ratioThe family floater was launched on January 16, 2016, and was due for renewal on January 15, this year. According to the terms, therates for renewal would be negotiable if the claims ratio exceeded 140 per cent.

United India Insurance had conveyed to the bank that the claims ratio had exceeded this level as early as on November 15, 2016.

Anticipating further escalation by the end of the policy term in January 2017, it had quoted renewal premium rates with high loadingpercentages.

Changes approvedFollowing discussions with the insurance company and brokers, the SBI management approved modifications in the policy and itsrenewal on the revised rates across various plans.

Sources say that an estimated 2.43 lakh pensioners, their spouses and children (counting up to around five lakh in total) are likely tobe impacted.

According to them, the higher premium will see many opting out, leading to likely escalation in premium rates in the years to come.

Service tax hikeThey are concerned that the Centre’s proposal to raise service tax from 15 per cent to 18 per cent would only add to the

premium outgo.

The policy will continue to be available to pre-merger retirees, surviving spouses of pre-merger retirees, and deceased employeesof erstwhile State Bank of Saurashtra and State Bank of Indore.

New retirees of associate banks, which are expected to merge shortly, will also be permitted to join in.

Prospective members can opt for any one of these by paying the premium from their own sources.

Employee optionsExisting members covered under any plan will have the option of switching to a different plan subject to payment of appropriatepremium.

Pensioners removed from service may be permitted to join, but those dismissed from service may continue to be excluded.

Eligible new retirees/ spouses of deceased employees will be allowed to join within three months from the date of retirement/ deathby paying the premium from own sources on pro-rata basis.

Employees who are members of the National Pension System will be allowed to join on completion of 20 years of confirmed service.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/mediclaim-renewal-rates-for-sbi-retirees-may-rise-300/article9502517.ece

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HDFC Bank eases out 4,581 staff in Q3, calls it ‘rationalisation’ exercise PTISee this story in: The Financial Express

Mumbai: Country’s second biggest private lender HDFC Bank has rationalised its staff by 4,581 employees in a singlequarter courtesy efficiencies in the system and lower hiring. The bank, which reported its slowest profit growth ever at 15 per centfor the December quarter, saw total headcount reduce to 90,421 on December 31, 2016 as against 95,002 in September 30, 2016.

In an e-mailed response, the country’s most valuable bank sought to de-link the reduction in employees from any otherfactor but efficiencies and lower hiring.

“The drop in headcount has primarily been a result of combination of natural attrition and a hiring at a clip lower than normalmade possible by achieving higher productivity and efficiencies over the last few months,” it said.The Indian banking industryhas an attrition rate of 16-22 per cent every year, while for HDFC Bank the same is at 18-20 per cent. However, no data is availableon the ‘involuntary attrition’ (sackings) in the industry.

With efficiencies setting-in, a company may decide not to replace a hand who quits with a new one, which results in a decline on theoverall headcount.As compared to the year-ago period, the bank’s employee count increased by 5,802 over the 84,619people in December 2015.

The benefits of the staff reduction were visible on the cost to income front, with the ratio dipping to 43.8 per cent in December 2016,from 43.7 per cent in September and 44.7 per cent in the year-ago period.The employee costs have, however, increased to Rs1,688.63 crore from Rs 1,657.21 crore in the preceding quarter.

It can be noted that there has been a greater degree of automation in banking with algorithms making it easier to reducedependence on employees and also doing the same work much faster. Accounts are being opened over the counter courtesyAadhaar, loans are getting cleared in minutes and technologies like blockchain are reducing human intervention in operations.http://www.financialexpress.com/industry/banking-finance/hdfc-bank-eases-out-4581-staff-in-q3-calls-it-rationalisation-exercise/523737/

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Indian Bank profit rises more than six-fold to Rs373.48 crore Ashwin Ramarathinammint

Mumbai: State-owned Indian Bank Ltd Wednesday said net profit for the December quarter rose more than six-fold due to higherother income and lower provisioning.

Net profit for the quarter stood at Rs373.48 crore as compared to Rs48.48 crore a year ago. Five analysts polled by Bloomberg hadforecast a net profit of Rs334.1 crore.

Net interest income (NII) or the core income a bank earns by giving loans increased 12.22% to Rs1,246.57 crore from Rs1,110.81crore last year. Other income increased to Rs599.70 crore from Rs445.19 crore in the same period last year, up 34.70%.

Gross NPAs rose 5.25% to Rs9,675.10 crore at the end of the December quarter from Rs9,192.07 crore for the September quarter.On a year-on-year basis, it jumped 36.82% from Rs 7,071.35 crore.

As a percentage of total loans, gross NPAs stood at 7.69% at the end of the December quarter as compared to 7.28% in theprevious quarter and 5.61% in the year-ago quarter.

Net NPAs were at 4.76% in the December quarter compared to 4.62% in the previous quarter and 3.17% in the same quarter lastyear.

Shares of Indian Bank closed at Rs272.15 per share on BSE, up 5.63% from its previous close, while India’s benchmarkSensex rose 1.21% to close at 27,708.14 points.http://www.livemint.com/Companies/DCgf8u6nZyo3bsnoTNHU9H/Indian-Bank-profit-rises-more-than-sixfold-to-Rs37348-cror.html

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Karnataka Bank inks pact with Tirth Agro Technology The Hindu Business Line

Mangaluru: Karnataka Bank Ltd has signed a memorandum of understanding (MoU) with the Rajkot-based Tirth Agro TechnologyPvt Ltd (manufacturer of agricultural equipment and implements) for financing agricultural mechanisation.

Quoting P Jayarama Bhat, Managing Director and Chief Executive Officer of the bank, a press release said here that the MoU aimsto work together to promote agricultural mechanisation by utilising the experience the bank has in agricultural finance through itsvast network of branches and the expertise of the company in the field of manufacturing of agricultural equipment and implements.

The bank has a network of 740 branches in 21 states and two Union Territories.

Tirth Agro Technology Pvt Ltd manufactures agricultural implements under the brand name ‘Shaktiman’. It has anetwork of more than 685 dealers and 42 distributors across the country, the release said.http://www.thehindubusinessline.com/economy/agri-business/karnataka-bank-inks-pact-with-tirth-agro-technology/article9502930.ece

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Interest income lifts Kotak Bank net 39% The Hindu Business Line

Mumbai: Kotak Mahindra Bank turned in a strong performance in the December quarter of this fiscal (Q3 FY17). Net profit rose 38.6per cent to Rs. 880 crore ( Rs. 635 crore in the year-ago period) on higher net interest income and other income on standalonebasis.

Net interest income (NII) grew 16 per cent year-on-year (y-o-y) to Rs. 2,050 crore while other income grew 26 per cent to Rs. 910crore. The bank also grew its net interest margin 15 basis points to 4.49 per cent.

Balance sheet

The bank’s total assets grew 11 per cent y-o-y to over Rs. 2.01 lakh crore. Deposits rose 14 per cent to over Rs. 1.49 lakhcrore.

Of this, low-cost current account, savings account (CASA) deposits contributed 42 per cent (35.3 per cent in the year-ago period)primarily due to demonetisation.

Advances grew 12 per cent to over Rs. 1.29 lakh crore with the ratio of retail to corporate loans at 40:60.

Asset qualityGross non-performing assets (NPA) to gross advances rose 12 basis points to 2.42 per cent while net NPA rose 11 bps to 1.07 percent.

Capital adequacy ratio of the bank, according to Basel-III norms, rose 78 bps to 15.99 per cent. During the quarter, the bank did notundertake any corporate/strategic debt restructuring, transfer any loans to asset reconstruction companies, convert any balancesheet item to off-balance sheet, give out any 5/25 loan, or rectify any standard asset.

At the end of the quarter, the bank had a network of 1,348 branches and 2,051 ATMs.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/interest-income-lifts-kotak-bank-net-39/article9502516.ece

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What Q3 numbers say about segmental performance of Kotak Mahindra Bank Devangi GandhiThe Economic Times

The stock of Kotak Mahindra Bank (KMB) gained 7% in Wednesday's trade after the private sector lender outdid street expectationson earnings growth and net interest margin (NIM). In a quarter that was expected to be mired with the impact of demonetization, byposting superior margin (4.49%) compared to its private sector counterparts KMB has once again justified the valuation premium itcommands. However, a closer look in the December quarter performance shows few pain points that bank is working on.

First of all, for a second consecutive quarter KMB has reported a sub-15% loan growth. Even as demonetization may have curtailed

some of the growth opportunities in the latest quarter, the bank is likely to fall behind meeting its expected credit growth of 20% forFY17. To be sure, the bank is still seeing some impact of its integration with ING VysyaBSE -0.32 % operations in some of thebusiness segments and hence it may take time to report strong loan growth numbers reported by some of the smaller private sectorbanks.

The SME segment or business banking division, in particular is weighing on total credit growth. It has de-grown sequentially duringthe last two quarters and during the December quarter the loan growth to the division fell by 8% compared to last year. Themanagement however considers the slower growth as a boon at a time when demonetization impacted the unorganized sectorwhich represents SME universe, severely.

On the retail side, while credit card and personal loan segments while continued to grow during demonetization, a fall in the workingcapital requirement of small businesses resulted into the whole segment reporting an 11.5% growth as against 18.7% in theprevious two quarters. The management acknowledged that after witnessing 25% dip during November, the volumes for homeloans and loans against property (LAP) segment witnessed a recovery in December. As such, the division credit is growing a steady12-13% growth rates in the last three quarters. However, the management is hopeful that retail operations will start reflecting thegrowth trajectory of corporate banking which was integrated about eight to nine months prior.

Meanwhile, there are several bright spots in the Q3FY17 report card. With 24% y-o-y increase, while the corporate banking divisionsupported the credit growth for the bank, close to 40% expansion of the CV & CE ( commercial vehicle and construction equipment)loans indicate an increased market share in the segment. The management remains upbeat on the growth outlook for the segmentas demand for LPG carriers is expected to go up.

The current and savings account ratio of the bank surged to 42% as of December 31, 2016 driven by a 45% jump in savingsaccount balance in turn aiding the NIM expansion of 19 basis points compared to last year. While sequentially there was a marginaldecline in gross non performing asset ratio, an 18% y-o-y drop in aided strong 39% jump in net earnings.http://economictimes.indiatimes.com/markets/stocks/earnings/what-q3-numbers-say-about-segmental-performance-of-kotak-mahindra-bank/articleshow/56797987.cms

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IDFC Bank net down 21% on bad loan provisioning The Hindu Business Line

Mumbai: A jump in bad loan provisioning proved to be a drag on IDFC Bank’s bottomline, with the net profit declining 21 percent year-on-year to Rs. 191 crore in the third quarter ended December 31, 2016, as against Rs. 242 crore in the year-ago quarter.

Net interest income, which is the difference between interest earned and interest expended, was up 35 per cent at Rs. 521 crore (Rs. 386 crore in the year-ago quarter).

Other income, including commission, fees, earnings on foreign exchange and derivatives transactions, jumped 54 per cent to Rs.335 crore ( Rs. 218 crore). Provisions (other than tax) and contingencies shot up to Rs. 232 crore ( Rs. 12 crore). Tax expenseburden was down to Rs. 53 crore ( Rs. 134 crore).

Sunil Kakar, Chief Financial Officer, said the bank made significant provision towards one non-legacy account, which slipped, andmark-to-market provision on bond investments due to interest rates not moving in the direction they were expected to.

As at December-end 2016, gross non-performing assets as a percentage of gross advances rose to 7.03 per cent from 3.09 percent as at December-end 2015.

Kakar said IDFC Bank, which started its operations on October 1, 2015, is acquiring customers at the rate of 50,000 a month. As atDecember-end 2016, the bank had 12.5 lakh customers.

Shares of IDFC Bank closed at Rs. 65.55 apiece, up 2.90 per cent over the previous close on the BSE.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/idfc-bank-net-down-21-on-bad-loan-provisioning/article9502514.ece

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New banks woo customers with higher deposit rates Financial Chronicle New Delhi: A host of small finance banks and universal banks that have launched operations are offering almost 2-3.35 per centhigher interest rate on savings accounts and up to 2 per cent more on fixed deposits. Two micro finance companies, Suryoday andUtkarsh, began operating as small finance banks this week. Suryoday has opened its first branch in Navi Mumbai and it is offeringhighest interest rate of 9 per cent for 1-2 year deposits. This is much higher than other commercial banks that are offering 6-7 percent.

For senior citizens, Suryoday is offering 9.75 per cent, 75 basis points higher than normal rates offered by established banks thatusually pay around 50 basis points higher than normal rates. On savings deposits, the bank is paying in the range of 6.25-7.25 percent (payable monthly as compared to quarterly for most of the other banks).

Similarly, Utkarsh Small Finance Bank is offering deposit rates that are 1-1.25 per cent higher than other banks as it targets toachieve 23 lakh customer base under its liability books by March 2018.

Newly launched private sector banks IDFC Bank and Bandhan Bank too are offering higher interest rates on fixed deposits and

savings accounts.

On the other hand, the country largest lender State Bank of India (SBI) is offering a 6.90-6.95 per cent on fixed deposits of 1-2 yearswhile private lender ICICI Bank is offering 6.90-7 per cent, HDFC Bank is offering 6.25 to 6.95 per cent.

So, should you take the bait? “These rates are just invitation rates and may not be sustainable over the long-term. So, if anindividual has surplus cash, he can look at locking a small portion of their investments for a smaller tenure of 1-2 years. And onlyonce a complete picture on their performance and track record emerges, he can look at increasing the allocation to their fixeddeposits,” said Suresh Sadagopan, a certified financial planner.

“Don’t look at just interest rates but look at the credit rating of a small finance bank before putting your money in theirfixed deposits. Since they have just launched, they come with a risk and thirdly fixed deposits are taxable and therefore one shouldlook at better investment avenues such as MFs,” said Pankaaj Maalde, a certified financial planner.

Parag Jariwala, vice-president, institutional research, banking and financial services, Religare Capital Markets, said, “Smallfinance banks and payment banks are too small to offer any direct competition to small-mid size fast growing private sector banks.In addition, a few large HNI customers, cash-rich companies (for bulk deposits) may go with a bank having well-established trackrecord.”http://www.mydigitalfc.com/news/new-banks-woo-customers-higher-deposit-rates-632

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Budget 2017: What may be in store for IDBI Bank stock Business Standard

Planned outlay towards recapitalisation of public sector banks (PSBs) is one key factor impacting IDBI Bank and its peers aroundthe Budget. The government‘s plan for structural and sustainable turnaround of these banks has helped. Last year’sannouncement on privatising of IDBI Bank, akin to Axis Bank also boosted sentiment.

Current Budget: Clarity on plans to privatise the bank will be watched in the coming Budget. Also, the government’s outlayfor recapitalisation of PSBs will be important. Putting in place a holding company structure for PSBs is also among the keyexpectations. Announcements of any interest subvention schemes, steps to boost digital payments, etc, would impact IDBI Bankand its peers.

Note: Net sales and net profit are for trailing 12 months ended September 2016; Price, market cap and PE ratio are as on Jan 25,2017; sales, profit and market cap figures are rounded off. Source Capitaline/Exchangehttp://www.business-standard.com/budget/article/budget-2017-what-may-be-in-store-for-idbi-bank-stock-117012700049_1.html

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BoB eyes IL&FS custodian business in Rs 600-cr deal N Sundaresha Subramanian & Abhijit LeleBusiness Standard

New Delhi/Mumbai: State-owned lender Bank of Baroda (BoB) is in advanced talks to buy controlling stake in IL&FS SecuritiesServices (ISSL), the custodian arm of Infrastructure Leasing & Financial Services, said two people familiar with the matter. At anenterprise valuation of Rs 750 crore, the deal could fetch the infrastructure major around Rs 600 crore, they added.

“Talks are on. Board-level discussions have happened recently,” said one of them. If concluded, the Rs 600-croredeal would be the first major acquisition by the bank since the new management under P S Jayakumar took over a little over a yearago. Jayakumar, a Citibank veteran and among the first private sector executive hired to lead a public sector bank, did not respondto calls or text messages.

IL&FS executives, too, declined to comment.

ISSL is one of the leading professional clearing members in the derivatives segment in the stock exchanges. ISSL custodialclientele includes corporates, institutions, high net worth individuals and non-resident Indians (NRIs). Under this service, it managesthe settlements of all security transactions undertaken by clients on the stock exchanges. It also manages client securities flow indemat form. Custodial service also includes safekeeping of clients’ holdings. It also offers back-office services for brokingentities and operates through separate subsidiaries such as ISSL Settlement & Transaction Services, ISSL Market Services andISSL CPG BPO.

The non-bank custodial services sector is seeing a churn after the Reserve Bank of India made clear its intentions to come up withregulations for custodian banks. Non-bank players are either scouting for additional capital or looking for exit routes opening upinvestment opportunities. “The possibility of creating new kinds of differentiated banks, such as custodian andwholesale-financing, will also be explored,” said the central bank’s recent report on trends and progress in banking.

The custodian business could augment the bank’s international operations, adding to the bouquet of services available tointernational clients and bring with it relationships of global institutional and NRI customers, analysts said. While the parent IL&FSand its associated entities hold 81.24 per cent, IL&FS Employee Welfare Trust holds 9.01 per cent. Croupier Privé Mauritius has afive per cent stake, while Japanese leasing firm Orix Corporation owns 4.75 per cent.

According to the latest BoB annual report, international business contributed significantly to the total business. “As on March

31, 2016, it contributed 31.3 per cent of global business. Of the total international loan book, 47.92 per cent comprisedbuyer’s credit/BP/BD portfolio where the exposure is on the banks. Exposure to India-related corporates and non-Indianentities, by way of syndicated loans/ECBs, was at 22.03 per cent and 4.30 per cent, respectively. Remaining 25.75 per centexposure was by way of local credit.”

In an interview to Business Standard last year, Jayakumar had said, “The bank is working on a strategy for internationaloperations. It takes a lot of energy and time. We are looking at focused and better quality business in retail banking in the UK,where we have 14 branches. Overall, the bank will focus on local business done locally, the diaspora (non-resident Indians),cross-border trade and investments.”

Both foreign investors have board seats on the ISSL, which is led by Executive Chairman Arun K Saha, and Managing Director &Chief Executive Officer Rengarajan Seshadri, according to the company website.

The IL&FS custodian business is over two decades old and initially housed a strategic business unit within the infrastructure major.It was spun off as a separate company in 2007. In 2007, Orix had picked stake in the company for Rs 36 crore.http://www.business-standard.com/article/finance/bob-eyes-il-fs-custodian-business-in-rs-600-cr-deal-117012501304_1.html

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Now, Bank of Baroda debit card holders can conduct big buying through new EMI facility PTISee this story in: Daily News & Analysis

Mumbai: State-run Bank of Baroda on Wednesday launched EMI facility for its debit card holders to purchase electronics andconsumer durables products. The product known as - Debit Card EMI, will enable customers to convert their high value purchasetransactions into easy installments, the bank said in a statement in Mumbai on Wednesday.

"The offering will be a kind of instant approval of personal loan to the bank's customers, at the time of purchase of product throughe-commerce or shopping portals," the bank said. To begin with, customers can avail loan up to Rs 50,000. Currently, the facility islaunched on 'Kissht', an e-commerce merchant platform for electronics and consumer durable goods. The platform will provideaccess to 50 online partners, including Amazon and 5,000 physical touch points to the bank's customers.

The bank said this facility will be soon extended directly to the online portals of other leading merchants such as Flipkart andSnapdeal.http://www.dnaindia.com/money/report-now-bank-of-baroda-debit-card-holders-can-conduct-big-buying-through-new-emi-facility-2296128

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Yes Bank migrates to ISO certification for EMS policy PTISee this story in: Business Standard

New Delhi: Yes Bank today said it has become the first bank globally to migrate to the ISO certification for its environmentalmanagement system (EMS).

"This extraordinary global achievement by an Indian bank comes on the back of Yes Bank's unmatched commitment toenvironmental sustainability," Yes Bank said in a statement.

The private sector lender said it has developed robust process driven approaches, created a comprehensive e-learning module foremployees and adopted a new EMS policy, among other initiatives, aimed at integrating environmental sustainability into itsoperations.

In 2014, Yes Bank became the first bank in India to receive the ISO 14001:2004 certification for bringing down resource usage,waste generation and disposal costs, energy consumption and implementing environment friendly practises.http://www.business-standard.com/article/pti-stories/yes-bank-migrates-to-iso-certification-for-ems-policy-117012500834_1.html

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KVB Q3 net falls 24% The Times of India

Chennai: Karur Vysya Bank (KVB) on Wednesday reported a 24% year-on-year (y-o-y) fall in net profit to Rs 115.76 crore duringthe third quarter of the current financial year as the bank saw lower interest income from its loans and higher expenses.

The bank's interest income dropped 7% y-o-y to Rs 1,411.16 crore during the quarter. Total income was up marginally by 3.6% y-oyto Rs 1,581.26 crore. KVB made less money from its treasury operations, which fell 18% y-o-y to Rs 361.53 crore.

Segment revenue from corporate banking was nearly flat at Rs 444.20 crore. Retail banking, however, posted a marginal 0.9%y-o-y to Rs 773.26 crore. Total expenses increased 9.1% y-o-y to Rs 1,309.44 crore, as did provision against loan losses that wentup 1.7% y-o-y to Rs. 94.31 crore.

Gross non-performing assets (NPAs) worsened to 2.66% compared to 1.91% in the year-ago quarter. Net NPA rose to 1.68% from0.96%. Return on assets (ROA) —an indicator of a company's profitability measured against its assets — fell to 0.74%from 1.10%.http://timesofindia.indiatimes.com/business/india-business/kvb-q3-net-falls-24/articleshow/56786771.cms 

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Post-demonetisation, IDFC Bank may see margin pressure as banks cut lending rates: CFO Sunil Kakar, IDFC Bank The Financial Express

IDFC Bank on Wednesday reported a 21% fall in its Q3 net owing to a multi-fold jump in provisions. IDFC Bank CFO Sunil Kakarsaid the bank is expected to see margin pressure owing to lowering of lending rates following demonetisation.

Edited excerpts…

What is the size of your watch list?

The watch list is around Rs 9,000 crore roughly. So this Rs 9,000 crore has not changed since the beginning and they have justchanged classification from restructured to bad loan. Currently Rs 3,587 crore is the gross NPAs and the movement is difficult topredict. Having said that, it is no longer critical for us since we have already provided for that. The movement from restructuredassets to NPLs will not have any impact on the P&L and the profitability.

What has been the impact of demonetisation?

Demonetisation has had an impact in a second order impact if I may say so. The fact that demonetisation has resulted in a sharpdecline in marginal MCLRs, will put some pressure on our margins. That is because we are largely wholesale and corporate bondfunded and so in that extent, the margin pressure will come but the asset quality has not been impacted by demonetisation. As amatter of fact, our collection ratio – since we have just acquired Grama Vidiyal Microfinance – has been consistentlybeen 99% and have not faced any problems.

I am anticipating that margins will come under pressure. All large banks have reduced their MCLRs significantly driven by the factthat they have large deposits during the demonetisation phase. Whereas a young bank like us does not have any significantly largeamount of deposits continue to borrow from the markets. And MCLR formula is more related to the incremental cost of funds.

Has demonetisation affected your recoveries?

Our exposure is largely to the infrastructure sector and the recovery from the infrastructure sector is related to power, gas, coal andthe pricing by the state electricity boards. So it is not a function of demonetisation.

What were the reasons behind the jump in provisions?

It has always been our philosophy that once there is a provision to be taken, we are prudent and that is reflected in the quantum ofprovisions we have already taken in the infrastructure book.

The provision we have made are for the legacy book. In the legacy book at a portfolio level, 50% of provisions or about Rs 4,500crore are still adequate. But there are 50 assets which are specific assets and some assets have deteriorated and some we arevery confident will not need the kind of provisions we have done. But I cannot interchange between the two because they arespecific. There have been no ARC sales.

One asset requires more than what was provided for in the legacy book. Assume there were 50 assets and of these there is apossibility that 8-10 assets may require more provisions than what we had provided for while another few may need less provision.But when the asset which requires more provision moves then at that time we have to increase the provision.http://www.financialexpress.com/industry/banking-finance/post-demonetisation-idfc-bank-may-see-margin-pressure-as-banks-cut-lending-rates-cfo-sunil-kakar/522600/

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Foreign Banks / FIIs

BNP says Fed to hike rates every quarter in 2018 Ranjeetha Pakiammint

Singapore: The Federal Reserve is about to go rapid-fire on interest rates, boosting them in the second half of this year andfollowing that with a rise in every single quarter of 2018, according to BNP Paribas SA, which expects the tightening to strengthenthe dollar and push gold down toward $1,000 an ounce.

The US central bank is seen raising borrowing costs later this year given the fiscally expansive policies proposed by Donald Trump,and the new president’s agenda may help to lift wages in 2018, hoisting labour costs, the bank said in a 25 January report.BNP was the top gold and precious metals forecaster in the fourth quarter, according to data compiled by Bloomberg.

“Gold may yet find support from higher inflation in the first half of 2017. But the Fed will pursue rates hikes in the second half

of the year, keeping the dollar strong,” commodity strategists Harry Tchilinguirian and Gareth Lewis-Davies wrote. “In2018, BNP Paribas expects the Fed will hike every quarter.”

The Fed raised rates in December for the first time in a year, and investors are seeking to determine the likely timing of further hikesas the world’s largest economy shows signs of recovery and Trump gets down to business with vows to accelerate growth,create jobs and boost spending on infrastructure. The precious metal dropped after Trump’s surprise win in November amidoptimism about the outlook, then rebounded this month.

There’s scope for gold “to hold on to the January gains, even possibly add to them,” BNP said. “But aswe near the end of 2017, expectations of Fed rate hikes will take over stewardship of gold prices. In turn, the path of leastresistance for gold is likely to be downward again.”

Bullion outlook

Bullion for immediate delivery traded at about $1,199 an ounce on Thursday, up 4.5% this year, according to Bloomberg genericpricing. Last year, it rose 8.1% to snap three annual declines even after dropping in the final quarter. Prices may average $1,210this year, $80 more than previously forecast, and $1,100 in 2018, BNP said.

Last month, policy makers lifted the target range for the benchmark federal funds rate to 0.5% to 0.75%, and penciled in threequarter-point increases for 2017, according to the median of their quarterly estimates. While the BNP note didn’t spell out infigures the size of the hikes it expects, a graph showed six quarter-point increases through to the end of 2018.

Fed chair Janet Yellen has backed a strategy for gradually raising rates, arguing in remarks a day before Trump’sinauguration last week the bank wasn’t behind the curve in containing inflation pressures but nevertheless can’tafford to allow the economy to run too hot.

“For now, Yellen indicates that the Fed is not ‘behind the curve’ and that resource/capacity utilization is yet tobe strained,” the BNP analysts said. “This suggests rates hikes are more likely to come later, rather than earlier thisyear. In the interim, year-on-year inflation will pick up.”

The forecast period for hikes given by the bank through to the end of next year goes beyond the end of Yellen’s current term,which expires in February 2018. The rate-setting Federal Open Market Committee is set to meet next week for the first of its eightscheduled gatherings of 2017. Bloomberghttp://www.livemint.com/Industry/VrILsoCRuUj4FVNxOyD9VO/BNP-says-Fed-to-hike-rates-every-quarter-in-2018.html

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Rating & Research

Rupee stuck in a narrow range Gurumurthy KThe Hindu Business Line

The rupee was stuck in a narrow sideways range of 68.02-68.27 in the past week. The currency closed at 68.07 on Wednesday.

This leaves intact the broader sideways consolidation range of 67.7-68.35 within which the rupee has been trading for more thanfive weeks now.

Neither the weak dollar nor the strong domestic equity market is helping the rupee. The dollar has been weakening against majorcurrencies, such as the euro and the pound, over the last few weeks.

Though this is limiting the downside in the domestic currency, it is not helping the rupee to strengthen against the greenback. This issignificant because if the dollar regains momentum against the major currencies, then the rupee might come under pressure.

Foreign portfolio investors continue to remain net sellers. After selling about $5.9 billion in debt and $3.9 billion in equities over thelast two months, FPIs have sold $422 million and $495 million in Indian debt and equity segments, respectively, so far this month.

If the FPI sell-off intensifies, then the rupee may come under pressure, going forward.

Dollar index

The dollar index has tumbled 2.6 per cent so far this year. This fall has dragged the index in the past week below a crucial supportat 100.68. The index is currently trading around the psychological 100 mark.

For the index, key supports remain in between 99.7 and 99.5. A strong reversal from this support zone may ease the downwardpressure in the dollar index. Such a reversal may take the dollar index higher to 101.

Further break above 101 will see the upmove extending to 102 or even higher levels. On the other hand, the dollar index willcontinue to remain under pressure if it declines below 99.5 in the coming days. Such a fall can drag it to the 99-98.85 support zone.

Rupee outlook

The narrow sideways move in the past week leaves the outlook on the rupee unchanged. The currency may continue to retain its

sideways move at least until the Union Budget next week.

At present, the psychological resistance at 68 is capping the near-term upside in the rupee. A strong break above 68 is needed forthe rupee to strengthen to 67.7 — the upper end of the current range.

But the price action on the daily chart suggests that an immediate break below 68 is less probable. Also, the series of keyresistances between 67.90 and 67.70 may cap the upside in the rupee even if it strengthens above 68 in the coming days.

As such, a revisit of the 68.35-68.40 resistance zone is more likely in the near term. A strong break below 68.4 can see the rupeeweakening to 68.7 and 68.85 in the short term.

As reiterated in this column, the region between 68.80 and 68.85 is a crucial support zone. A strong break and a decisive weeklyclose below 68.85 will bring renewed pressure on the rupee and will also keep intact the medium-term bearish view.

Such a break can see the rupee testing 69 initially. Further break below 69 will drag the currency lower to 69.6 and 70.2 over themedium term.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/rupee-stuck-in-a-narrow-range/article9502513.ece

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Credit & Pre-paid Cards

NPCI upgrades BHIM app The Hindu Business Line

The National Payments Corporation of India (NPCI) has upgraded Bharat Interface for Money (BHIM), the nationwide commonplatform for making simple, easy and quick payment transactions using the Unified Payments Interface (UPI). It has incorporatedfeatures such as ‘Pay to Aadhaar Number’ and a ‘Spam Report’ to help users to block unknownpersons requesting for money. The updated BHIM version 1.2 is now available on Google Play Store, NPCI said in a statement. APHota, MD & CEO, said, “...The new version offers enhanced security features, and superior user experience which makesdigital transactions much more safe and secure.”

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Housing Finance

Piramal Finance to start home loans in four months, eyes small corporate lending too

Madhurima Nandymint

Bengaluru: Piramal Finance Pvt. Ltd, which houses the entire financial services business of the Piramal Group, will start lending tosmaller corporate groups, form a joint venture platform for slum redevelopment investments, lend to new sectors and begin housingfinance operations in four months’ time, said a company executive.

The Mumbai-based firm is setting up a new line of business where it will focus on emerging corporate lending, for transactions ofRs30-90 crore, similar to lending to small and medium enterprises (SME), a segment it hasn’t tapped so far.

The year started with Piramal Finance announcing its new housing finance business, where 70-75% of its lending book will offerhousing finance to individuals and the rest will comprise of construction loans of up to Rs 50 crore to small developers.

Under the real estate investment business, the company is at an advanced stage of forming a joint venture with another investor todo equity and structured lending deals in slum redevelopment projects in Mumbai.

“Apart from achieving growth, the underlying theme this year is to diversify our portfolio and adopt a retail-centric approachtowards lending. There is huge potential to expand our lending base and it is in line with our strategy to improve the quality of ourlending book as well as diversify risks,” said Khushru Jijina, managing director at Piramal Finance.

Piramal Enterprises Ltd (PEL) has recently completed a second and conclusive restructuring of its financial services business, bymoving all assets and liabilities related to lending to real estate and non-real estate projects to its unit, Piramal Finance. Last year,the financial services business was first restructured and integrated in a prelude to the spin-off of the unit and PEL’shealthcare business.

Piramal Finance’s Structured Finance Group (SFG) or its non-real estate lending business is expected to grow significantlythis year. SFG’s lending book is expected to double in 6-8 months from Rs2,160 crore as of September, Jijina said.

SFG has already started lending to new sectors such as cement, entertainment, and security services and is actively evaluatingother sectors such as engineering, healthcare, and automotive components. Lending will be a mix of senior debt, loan against

shares and structured debt which will include large transactions of Rs800-900 crore as well as smaller Rs150-200 crore deals.

Jijina said a large portion of the company’s growth will come from SFG this year and the pace of growth may even be fasterthan its staple real estate funding business.

Piramal Finance’s real estate book, which includes both debt and private equity funds, deployed and as well as sanctionedloans that have not been disbursed, was around Rs35,000 crore as on 31 December, 2016.

FOR WEB

“We saw green shoots of recovery in real estate till October, after which demonetization impacted customer sentiment andsales dipped. We have reached out to our developer partners asking them not to stop construction and have offered additionalfinancing to complete construction,” Jijina said.

Besides the slum redevelopment investment plans, Piramal will also set up a $300 million equity platform with a Canadian pensionfund in a couple of months.

Under its flexible lease rental discounting (LRD) model, which was launched last November in a bid to diversify into commercialrealty, the company has already signed three deals of Rs1,500 crore and disbursed and sanctioned funds for LRD are expected totouch Rs10,000 crore in the next 15-18 months.

While structured debt lending and equity investments to residential projects will continue, Jijina said he sees a lot more growth inrent-yielding stabilized assets.

Last year, Piramal announced a proposed credit limit of Rs15,000 crore to top-of-the line developers to enable them to grow faster.Around 60% of this has already been committed and the firm is now taking this ahead and planning to offer holistic funding solutionsto established developers, not on a project basis but to iron out cash flow mismatches. It will invest in large deals of Rs1,000 croreand above.

“Piramal’s next strategy of growth will be to capture new accounts, offer new products and retain existing clients. Thegroup has gone about building their (financial services) platform in an organized manner, where they started with real estate andthen moved to non-real estate and then to housing finance, which gives them wider reach,” said Nitin Gupta, managingdirector, Macquarie Capital.

In real estate, Gupta said Piramal will continue doing large ticket deals because that differentiates them from the others.

“Their business approach is good. They understand the pain points of developers and offer them financing solutions,”he said.http://www.livemint.com/Industry/N9rLeGpT6nkcNFV47eHH3J/Piramal-Finance-to-start-home-loans-in-four-months-eyes-cor.html

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‘PNB Housing Finance continues to have a very strong retail story’: Sanjaya Gupta, MD, PNB Housing Finance Prashant Nair & Ekta Batramint

Sanjaya Gupta, managing director, PNB Housing Finance, comments on the lender’s fiscal third-quarter earnings.

Edited excerpts from an interview: 

Your assets under management growth has actually been strong at around 53% on a year-onyear basis. Could you just take usthrough details on how this growth has come through for you all this quarter?

Primarily, this growth is driven by retail loans and we continue to sort of have a very strong retail story. Eighty-five percent of ourportfolio even on 31 December was all about retail. So, the main growth came from retail housing finance.

The other parameter loan mix has also remained quite stable. Any changes in that?

The mix has not changed and that is what I keep saying from the last 24 quarters. So, on the portfolio 61% is pure retail housingloans, about 29% is loan against property (LAP), LRD (lease rental discounting loan) and corporate term loans and remaining 11%is construction finance.

The other parameter was of course your net interest margin which stood at around 2.83% in quarter three. Banks have cut rates,any guidance in terms of where the net interest margins could going forward possibly be for the company?

One is that our margins will remain in the range between 2.1-2.15% because of our product mix that we have decided to keep ondoing it and as I explained on the portfolio also and considering that banks have cut down their MCLRs (marginal cost of fundsbased lending rates) by about 90 basis points to about 100 basis points well even our marginal cost of funds have come down. Wedon’t sell our loans at the bottom of the rack rates we are somewhere mid, so today for example when we were to sell ourhousing loans to incremental customers it comes at about 875 to 880 rather than 835-850 of the banks. We are able to get quite agood traction with our new customers.

The gross non-performing assets (NPAs)—very stable sequentially but it has risen. It is at 0.37% versus around 0.26% on a

sequentially basis. Could you provide more colour in terms of the gross NPA situation?

One is I would like to put to rest all speculation on the wholesale book. As of 31 December there is a zero NPA on the wholesalebook. Now on the retail book between quarter two and quarter three it is always a strategic sort of a move of all the lendinginstitutions to make forward flows in quarter two so that in quarter three we can enforce legal actions under the Securitisation andReconstruction of Financial Assets and Enforcement of Security Interest Act, (SARFAESI Act) and get our portfolio cured. So everyyear for most of the lender community you will see that quarter three NPA figures are higher than quarter two figures.

So, that is normal, if you were to compare our quarter three of this year vis–a –vis quarter three of previous year, thegross NPAs are gone up by 2 basis points taking in to account the 60 days grace which National Housing Bank has given us torecognise substandard assets.

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Housing finance cos to face heat PTISee this story in: Asian Age

Mumbai: With banks reducing their interest rates, housing finance companies business is likely to be affected and they will beforced to realign their strategies, says a report. “The large-ticket housing loan segment primarily ticket size above `5 lakh islikely to face disruption, as HFCs would be forced to realign their strategies in view of a sharp reduction in lending rates by banks.This may affect business growth for HFCs, on account of increased competitiveness of banks,” domestic rating agency IndiaRatings (IndRa) said in a note on Wednesday.

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Development Banks

NBFCs / FIs / MicroFinance

Cholamandalam Finance net rises 12% in third quarter The Hindu Business Line

Chennai: Cholamandalam Investment & Finance Company reported a 12 per cent increase in net profit to Rs. 163 crore for quarterended December 31, 2016, against Rs. 146 crore in the year-ago period.

The Murugappa Group company’s total income from operations rose 12 per cent to Rs. 1,176 crore ( Rs. 1,054 crore in theyear-ago period).

Net income margin (as a percentage of assets) fell marginally to 8.39 per cent from 8.77 per cent, according to a statement.

In the December quarter, which was marked by the impact of demonetisation, total disbursements grew a marginal 3 per cent at Rs.4,373 crore ( Rs. 4,260 crore in Q3 of the previous fiscal). It disbursed Rs. 3,491 crore of vehicle loans against Rs. 3,245 crore inthe year-ago period, an increase of 8 per cent. This was primarily driven by strong growth in volumes of both heavy commercial andpassenger vehicles during October.

Home equity disbursements were down at Rs. 619 crore ( Rs. 882 crore).

Its gross non-performing assets (NPA) increased to 3.8 per cent, which was slightly higher than the September 2016 quarter figureof 3.5 per cent.

“Delinquencies in early buckets have increased owing to the temporary cash crunch of borrowers. However, the companycontinued to adhere to the existing board-approved provisioning norms, which is at 120 days, without taking shelter under the RBIcircular for deferment of NPA. Thus, net credit losses of the company for the current quarter are at 1.4 per cent,” added thestatement.

The board declared an interim dividend of 35 per cent ( Rs. 3.50 per share).http://www.thehindubusinessline.com/todays-paper/tp-money-banking/cholamandalam-finance-net-rises-12-in-third-quarter/article9502512.ece

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Now, the salaried can tap SalaryTopup for loans Siddhant MishraThe Hindu Business Line

Chennai: At a time when rising bad loans are plaguing banks, Baroda-based start-up SalaryTopup is making loans available to

those who need instant money.

Kanika Pandey, Co-founder of SalaryTopup and a resident of Australia, said all kinds of loans are easily available Down Underthrough different channels.

“In India, the system is too complex as the problem only starts once you disburse a loan. The real challenge is getting itback.”

She said that even foreign banks that entered India did not work out a model for collection. “We decided to go B2B, with aproper model for collection.” Till date, the start-up has disbursed over 200 loans with no default, Pandey said. The companyfocusses on providing loans to staff of employers who partner with SalaryTopup. Employees of partner corporates can get loans ofup to ₹2 lakh in their account on the same day.

Unlike mainstream banks and NBFCs, the start-up doesn’t take into account the CIBIL score before providing loans; giventhat the loans are given against salaries and recovered later.

The start-up is backed by Catholic Syrian Bank, from whom it received funding of ₹100 crore. By the end of 2017, the start-up istargeting a loan book of at least ₹100 crore.Creating a niche

“There is no silver bullet as to how we can provide loans to everyone, but we are looking to serve a decent size of themarket,” she said.

On expansion plans, Pandey said, “We don’t have any plans now, but we could consider private equity when we feelthe time is right.”

In addition, the company aims to improve financial literacy by educating people about loans and banking operations, throughKocharTech, a BPO in Baroda.Challenges

The biggest challenge, however, is to find the right partner. “We spoke to a major banking organisation and though theyappreciated the idea, they asked why they should partner with us and not proceed alone,” says Pandey.

She added that the company was not in any conflict with RBI regulations because it doesn’t identify as a“banking” start-up, but just as that of a facilitator of credit.Demonetisation impact

The company says that post-demonetisation, people have become more curious about digital transactions. Pandey added that therole of players like SalaryTopup in educating people about going digital and managing finances has increased.http://www.thehindubusinessline.com/money-and-banking/now-the-salaried-can-tap-salarytopup-for-loans/article9503217.ece

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Budget 2017: What may be in store for Mahindra & Mahindra Finance stock Business Standard

The Budget usually has some goodies for the rural population through direct transfers or otherwise. Either way, it is good forcompanies such as Mahindra & Mahindra Financial, which draws 60 per cent of its revenue from rural India. Incentives for farmersand agriculturalists have also helped the company revive its rural business.

Current Budget: Given the aftermath of demonetisation, there is a strong hope that this Budget would have measures which wouldleave more cash with those in rural and semi-rural areas. A measure of this nature is seen as crucial to help the company improveits loan book meaningfully and arrest the pressures on account of bad loans.

Note: Net sales and net profit are for trailing 12 months ended December 2016; Price, market cap and PE ratio are as on Jan 25,2017; sales, profit and market cap figures are rounded off. Source Capitaline/Exchangehttp://www.business-standard.com/budget/article/budget-2017-what-may-be-in-store-for-mahindra-mahindra-finance-stock-117012700033_1.html

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Demonetisation to dent MFI profitability Abhijit LeleBusiness Standard

Mumbai: With demonetisation taking a toll on recoveries during November and December, micro finance institutions (MFIs) mightreport a substantial dip in profit for 2017-18.

The rise in credit and operating costs are expected to bring down return on equity from 13-15 per cent to below 10 per cent forFY18, according to rating agency ICRA.

Collection dived to 75-80 per cent in November-December, from 99 per cent prior to demonetisation of Rs 500 and Rs 1,000currency notes on November 8.

The Rs 55,000 crore sector (MFIS and non-bank finance companies) had displayed strong asset quality till recently, said ICRA, withthe share of overdue loans lower than one per cent as on September 30. That number for MFIs had increased to 19 per cent as onDecember 31.

In its reporting in September, ICRA had estimated that MFIs would need aggregate capital of Rs 1,600-4,700 crore (40-120 per centof the existing net worth) to grow 30-35 per cent over the next three years.

While the growth targets might be tempered, credit losses could be higher, which could impact internal capital generation. While it isa bit early to accurately estimate the likely increase in credit costs, ICRA says the entities which are highly leveraged would beimpacted more.

ICRA said there is some link between the districts in the country reporting low collection efficiencies after the demonetisation, withinherent over-leveraging issues in some of the areas and the coming state assembly elections.

Demonetisation has brought into focus certain longstanding concerns the sector has been facing. MFIs are grappling with a highpace of growth, concerns over the quality of growth and over-leveraging of borrowers. They also face a challenge from potentialdilution in the rigour associated with micro lending and the possibility of more loans being used for consumption than for incomegeneration, says ICRA.http://www.business-standard.com/article/finance/demonetisation-to-dent-mfi-profitability-report-117012600816_1.html

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Bharat Financial surprises positively in a tough quarter Sheetal AgarwalBusiness Standard

A better-than-expected showing in the December 2016 quarter (Q3) boosted the stock of Bharat Financial Inclusion (BFIL), or theerstwhile SKS Microfinance, on Wednesday. The scrip surged 10 per cent to Rs 745.15 against one per cent rise in the S&P BSESensex. In the quarter, hit by demonetisation, there was a sequential fall in the company’s loan disbursements, assets undermanagement (AUM) growth as well as the net interest margin, which is a profitability indicator. Despite these adversities, thecompany restricted the decline in net profit to two per cent sequentially. The net profit figure of Rs 143 crore was way ahead of theconsensus estimate of Rs 113 crore. The sharp fall in provisions was one catalyst for earnings in the quarter and lower taxes wasanother.

What surprised was the asset quality, which remained healthy, brushing aside the concerns on increased stress due todemonetisation. BFIL's continued emphasis on collections and strategy of lending only in centres (regions) where collections were100 per cent enabled it to keep its asset quality intact. The gross non-performing assets (NPA) ratio stood at 0.06 per cent, lowerthan the 0.1 per cent both sequentially as well as in the year-ago quarter. RBI's leeway of 90 days for recognising bad loans also ledto this meaningful drop in the gross NPA ratio. It will be interesting to see if this metric sustains at current levels after this windowexpires in April. Though most analysts believe the company's asset quality is unlikely to deteriorate meaningfully from here, someare sceptical and are watching the developments in Uttar Pradesh, Uttarakhand and western Maharashtra closely. Investors shouldalso note that the company has now started to ease its lending norms by extending loans in centres where at least twoborrower-groups have paid their dues entirely (the company typically lends to groups and women). While this will aid disbursementsgrowth, it could also lead to slight pressure on asset quality, estimate analysts.

Despite Wednesday's surge, the BFIL scrip trades closer to its historical average one-year forward price to book a ratio of 2.9 times.Even as two of its listed peers start their journey of becoming small finance banks, BFIL is a pure play on the high-margin,high-growth potential segment of microfinance. Analysts say though the demonetisation blues will hover on its growth in the ongoingquarter, the company is poised to gain traction in its AUMs, earnings and return ratios. It is not surprising that most analysts have apositive view on the stock.http://www.business-standard.com/article/opinion/bharat-financial-surprises-positively-in-a-tough-quarter-117012501417_1.html

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Brokers / Distributors

Bourses

BSE public issue closes on a high note The Hindu Business Line

Mumbai: The BSE, Asia’s oldest stock exchange saw a whopping response from all categories of investors on the closingday of subscription Wednesday of its initial public offering.

The IPO was subscribed over 25 times the issue size. Institutions and HNIs, who had not fully subscribed to the portions allocatedto them, bid in huge quantities, and as a result the institutional portion was oversubscribed more than 22.8 times while the HNIportion was oversubscribed 76.55 times.

Retail investors who had already oversubscribed their portion of the IPO on day two, bid further and at 7 p.m. on day three, the retail

portion was oversubscribed over 4.35 times.

On Saturday, anchor investors had been earmarked (finalisation of allocation) 46.28 lakh equity shares by the BSE at a price of Rs.806 a share totalling Rs. 373 crore, a statement said.

The IPO, which opened on Monday, closed on Wednesday.

The IPO is an offer-for-sale of up to 1.54 crore equity shares of face value Rs. 2 each in a price band of Rs. 805-806 an equityshare, constituting up to 28.26 per cent of the fully diluted post-offer issued share capital of BSE. Bids can be made for a minimumof 18 equity shares and in multiples of 18 thereafter.

The global coordinators and book running lead managers are Edelweiss, Axis Capital, Jefferies India, and Nomura. The bookrunning lead managers are Motilal Oswal Investment Advisors, SBI Capital Markets and SMC Capitals, while the co-book runner isSpark Capital Advisors (India).http://www.thehindubusinessline.com/todays-paper/tp-markets/bse-public-issue-closes-on-a-high-note/article9502530.ece

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Life & General Insurance

Mutual Funds & AMCs

MF investments: direct investors panic more during volatility Tanya ThomasThe Hindu Business Line

Mumbai: Retail investors, who invest directly, are more likely to panic and pull out of their mutual funds during volatile markets,compared to those advised by distributors.

According to data presented by registrar and transfer agent Karvy, over 80 per cent of mutual fund investors who opt for direct plans— bypassing the advice of a distributor — pull out their money within a year of investment.

The corresponding figure for investors who opt for the regular plan, taking advice of distributors, is between 28 per cent and 36 percent, depending on market volatility. During volatile markets, almost 60 per cent of redemptions were in less than three months.

Independent financial advisors (IFAs), who distribute mutual funds, argue that data proves that as soon as the market turns volatile,direct investors decide to move out of mutual funds, while distributors are seen as being able to convince their client to stayinvested.

Different version

According to the Foundation of Independent Financial Advisors (FIFA), during both the periods, investors had redeemed only afterfive years. “In fact, approximately 40 per cent of IFAs’ investors had a holding period of more than two years,”FIFA argued in a recent letter to the securities market regulator SEBI.

However, voices from the mutual fund industry don’t wholly agree with this theory. Jimmy Patel, CEO, Quantum MutualFund, said that the churn rates at their fund house are very low. “In fact, we have seen our investor base swell to 50,000 nowand are seeing net positive inflows.”

Quantum sells its plan almost exclusively online, and most investors buy their funds directly.

Quantum does not pay commissions to distributors.

Distributors are paid a commission by mutual fund houses for each product they sell to an investor. Over the last six monthshowever, SEBI has been voicing its concerns over the incentive structure for distributors and now wants to prohibit them from givinginvestment advice.

It wants investors to instead go to trained professional advisors and receive investment advice for a fee.

IFAs believe that such a move could put many distributors out of business, leading to an overall fall in penetration of the mutual fundindustry.http://www.thehindubusinessline.com/todays-paper/tp-markets/mf-investments-direct-investors-panic-more-during-volatility/article9502529.ece

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Equity mutual funds shopping for stocks continues Business Standard

Mumbai: India’s equity mutual fund (MF) managers have bought stocks worth Rs 4,079 crore so far this month, from data

issued by the Securities and Exchange Board of India.

In December, they'd pumped in Rs 9,200 crore, despite weak market sentiment. Despite this, they carried forward into January acash position of nearly Rs 20,000 crore in their combined portfolios.

According to fund managers, the stocks chased the most in January include State Bank of India (SBI), ICICI Bank, Tata Motors,YES Bank and Larsen & Toubro.

“We have been buying and have restrained a bit over the past few days. Inflows are good and we also have good cashavailability to deploy. SBI was our main buy pick and recently from the private banking space, we have added Axis Bank. Given thepossibility of global uncertainty, fund managers are sticking to large-cap quality names,” said the equity head of a mid-sizefund house.

During the December quarter, fund managers had put Rs 30,000 crore in stocks. Compared with that, the start of 2017 looks a bitweak. However, fund managers add, the figure does not include investment in the CPSE Exchange Traded Fund (ETF) and in theBSE exchange's initial public offer.

“We, along with several other fund houses, have invested in the CPSE ETF and the IPO of BSE. I believe nearly Rs 1,000crore should have gone for these issues from the industry players," said the chief executive of a large fund house. BusinessStandard could not independently ascertain the investment figures in fresh issuances.

Since the start of FY15, inflows in the equity segment of MFs have been robust. Nearly Rs 2 lakh crore of fresh money has found itsway into equity MF schemes during this period. So, fund managers never ran short of money to deploy and whenever stocks fell,they used the opportunity for heavy buying.

There are a little over 450 equity related schemes offered by the sector, which collectively manage assets worth about Rs 5 lakhcrore.http://www.business-standard.com/article/markets/equity-mutual-funds-shopping-for-stocks-continues-117012500978_1.html

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Pvt. Equity & Hedge Funds

PSU stakes: Centre begins ‘strategic sale’ process KR SrivatsThe Hindu Business Line

New Delhi: The Centre has kick-started the process for ‘strategic sale’ of equity stakes in public sector undertakings.First off the blocks will be BEML, in which the Narendra Modi government intends to sell a 26 per cent stake. The Centre has a54.03 per cent stake in BEML. The Department of Investment and Public Asset Management (DIPAM) has sought bids forengagement of a “transaction advisor” for strategic disinvestment of BEML, official sources said.

The transaction advisor is expected to provide advisory services and manage the disinvestment process.

BEML has three major business verticals — mining and construction, defence, and rail and Metro. For the current fiscal year,the Centre aims to mop up Rs. 56,500 crore through divestment of its stake in PSUs.

It has already garnered Rs. 23,500 crore (before the recent Central Public Sector Enterprises Exchange Traded Fund) this fiscalthrough share sales and share buybacks by the companies.

If one were to include the near Rs. 6,000-crore mop-up from the just-concluded CPSE-ETF, the government has garnered Rs.30,000 crore from PSU disinvestments this fiscal year. This includes Rs. 480 crore that the Centre mobilised through a 10 per centstake sale in MOIL on Wednesday.http://www.thehindubusinessline.com/todays-paper/psu-stakes-centre-begins-strategic-sale-process/article9502528.ece

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Muthoot Microfin raises Rs. 130 crore from US-based Creation Investments The Hindu Business Line

Kochi: Muthoot Pappachan Group-owned Muthoot Microfin (MML) has raised Rs. 130-crore capital for its micro-finance businessfrom Chicago-based PE fund Creation Investments.

Post-infusion, Creation will hold 11 per cent stake in Muthoot Microfin. The capital so raised will be utilised to serve BoP clients andto expand business to newer geographies, such as Bihar, Uttar Pradesh, Odisha, Chhattisgarh, Haryana and Punjab in addition tothe 10 existing States.

MML proposes to open 500 new branches in the next three years to expand its footprint pan-India.

Promoters’ capital

Thomas Muthoot, Executive Director, Muthoot Pappachan Group, said the promoters have committed to infuse Rs. 150 crorecapital by March 2018. The capital raised through the PE will be used for adoption of modern technology and to promotedigitisation.

MML has a micro-finance customer base of 13 lakh. In FY17 (till December 2016), the company has extended loans to over fourlakh rural households.

According to Sadaf Sayeed, CEO, Muthoot Microfin, the company has set a scorching pace of growth with assets undermanagement (AUM) growing at 122 per cent and profit at 222 per cent over the last one year.

MML aims to reach Rs. 10,000 crore of AUM by March 2020 and a client base of four million households in the next three yearsfrom 1.3 million now.http://www.thehindubusinessline.com/todays-paper/tp-news/muthoot-microfin-raises-rs-130-crore-from-usbased-creation-investments/article9503372.ece

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Pension Funds / PF / EPF

Pension plan for seniors with 8% return Financial Chronicle New Delhi: With interest rates headed downwards due to increased liquidity in the banking system post demonetisation, thegovernment has decided to shield senior citizens who depend on interest income to sustain their lives.

The government on Tuesday approved a pension scheme for senior citizens that would provide a guaranteed return of 8 per centfor 10 years. The scheme, Varishtha Pension Bima Yojana 2017, would be launched by the state-owned LIC during the currentfinancial year to protect elderly persons, 60 years and above, against a potential fall in their future interest income due to uncertainmarket conditions.http://www.mydigitalfc.com/news/pension-plan-seniors-8-return-633

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Govt Securities & Bonds

Mutual funds invest Rs 27,473 cr in debt market in Jan PTISee this story in: The Hindu Business Line

New Delhi: Mutual fund managers have pumped in over Rs 27,000 crore in debt market so far this month, primarily on account ofparticipation from corporate and retail investors.

This follows a fund infusion of over Rs 3.31 lakh crore in debt market in the entire 2016.

Further, experts believe that the trend is expected to continue in the coming months too due to fall in interest rates.

“With interest rates continuing to fall, both corporate and retail money can continue to come into debt funds. The debt marketcan also see support due to the inflows coming in from the demonetisation move,” said Srikanth Meenakshi, COO atFundsIndia.com.

Quantum Mutual Fund chief executive Jimmy Patel said: “In 2017, we will see more focus on retail investors, who are alreadyshowing a lot of commitment and maturity.”

According to the Securities and Exchange Board of India (SEBI), fund managers have invested Rs 27,473 crore in debt markets inthis month (till January 23). The investment is expected to rise further as the month is yet not over.

This is the highest investment level since September, when fund managers had poured in Rs 53,347 crore.

Besides, fund managers have put in a little over Rs 4,000 crore in equities during the period under review.

The industry, comprising 41 active players, has an assets under management of Rs 16.93 lakh crore.

Mutual fund is an investment vehicle with a pool of funds collected from investors to buy securities such as stocks, bonds, moneymarket instruments and similar assets.http://www.thehindubusinessline.com/markets/stock-markets/mutual-funds-invest-rs-27473-cr-in-debt-market-in-jan/article9502832.ece

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NTPC raises €500 mn via overseas bonds sale PTISee this story in: The Hindu Business Line

New Delhi: NTPC Ltd, India’s biggest power producer, has raised €500 million through overseas bonds sale that perhapsmay be the first longest tenor euro-denominated issuance by an Indian company.

NTPC got bids for $2.4 billion, or nearly five times the targeted size, through euro-denominated bonds sale with 10-year maturity,the longest in the currency. Securities have been priced at 200 basis points over Euro Treasury.

“The 10-year bond has been issued at a coupon of 2.75 per cent with a yield of 2.814 per cent,” the company said in astatement.

Proceeds of the bonds issue would be used for capex.

This is the first-ever 10-year Euro denominated bond issuance by an Asian utility issuer and also the first-ever 10-year EURtransaction by an Indian issuer.

NTPC said the issue saw participation from more than 125 investors from across the globe.

This, it said, is the first “10-year EURO bond for BBB— issuer from Asia-ex Japan” and the “longesttenor achieved by a BBB— issuer from Emerging Markets since 2005.”

Also, it is the first 100-year Euro bond by an Indian issuer, the statement said.

Vedanta Resources had yesterday raised $1 billion through an offshore bond issuance.

The company’s five-year bonds were priced at a coupon of 6.375 per cent. Proceeds from the bond sale will“pro-actively address the refinancing liabilities of the company over next two years,” the billionaire Anil Agarwal-ledfirm had said in a statement.

Vedanta plans to use the proceeds from this offering primarily to purchase its outstanding $750 million, 9.5 per cent, bonds due2018 and $1.2 billion 6.00 per cent bonds due 2019, and to repay its other existing indebtedness.http://www.thehindubusinessline.com/markets/stock-markets/ntpc-raises-500-mn-via-overseas-bonds-sale/article9502933.ece

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Bond market doesn\'t expect surprises Anup RoyBusiness Standard

Mumbai: The central government is likely to keep the gross borrowing number on the higher side, considering the heavy redemptionpressure in the next financial year. However, net borrowing could be at par with that in this financial year, say economists and bonddealers.

In 2017-18, about Rs 2.28 lakh crore of bonds are set to mature. The government borrowing programme will have to account for it.To avoid paying the entire amount at one go, the government enters into arrangements with the Reserve Bank of India (RBI) orlarge institutions like insurance companies to swap some of the maturing bonds with dated papers, maturing in five to 10 years. Thisis called a ‘switch’.

The switch doesn’t disturb the market, as the government buys these from the secondary market and swaps it with longertenure bonds issued to these institutions. This time, bond dealers expect the government to switch at least Rs 30,000-40,000 crore,to keep redemption pressure low.

The gross borrowing number for the current financial year turned out to be Rs 5.82 lakh crore, after the government cancelled Rs18,000 crore of auction earlier this month. The net borrowing, after adjusting for the reduction, stood at 4.07 lakh crore. Governmentborrows from the market in the form of dated bonds to bridge its money deficit.

“This time, the fiscal (numbers) could be a bit loose, owing to the focus on infrastructure spending but the government mightget good support from small savings and other sources, thereby keeping the borrowings within a reasonable limit,” said RamKamal Samanta, vice-president for treasury at SBI DFHI.

He expects net borrowing to be Rs 4.15-4.2 lakh crore and gross borrowing at around Rs 6 lakh crore, about the same as thecurrent financial year.

Siddhartha Sanyal, India economist for Barclays, estimates the net borrowing to be Rs 4.25 lakh crore and gross borrowing at Rs 6lakh crore, after adjusting for the switch. He expects a fiscal deficit at 3.3 per cent of the gross domestic product (GDP).

State Bank of India’s group chief economist, Soumya Kanti Ghosh, expects gross borrowing at Rs 5.8 lakh crore and net at4.05 lakh crore, on a fiscal deficit of 3.4 per cent of the GDP and tax revenue of Rs 13.7 lakh crore.

“After accounting for other liabilities, we estimate net borrowings through dated securities at Rs 4.4 lakh crore. Afteraccounting for some more buybacks/switches in the remaining part of FY17, we estimate redemptions for next year at around Rs 2lakh crore. This implies a gross borrowing number for FY18 at Rs 6.4 lakh crore, higher than Rs 5.8 lakh crore in FY17,”

wrote the IDFC Bank chief economist in his report.

The bond market is not so worried about the Centre’s borrowing programme this time. What they are concerned is how thestate governments would borrow. State Development Loans (SDLs), another term for bonds issued by states, are getting too hugefor the market to absorb, say observers. The exact amount of these are difficult to gauge, as various states provide estimates atdifferent times. Worse, they don’t stick to their plans and go on borrowing more than planned.

Earlier, SDLs were used to be about one third of the Centre’s borrowing but have since become almost equal to the latter'snet borrowing. States have already borrowed about Rs 3 lakh crore from the market on a net basis. By the end of the financial year,March 31, this could touch Rs 3.5 lakh crore. This is crowding out private demand, say bond market participants. They fear worsewith demonetisation and the resulting revenue loss.

“Borrowing by the central government has been stable, whereas borrowing by states have increased substantially. This year,net borrowing by states can come closer to that of the Centre. So, the critical element is states' borrowing, where marketparticipants might not have clear views, owing to absence of proper borrowing details at the starting of the fiscal,” saidSoumyajit Niyogi, associate director at India Ratings and Research. “High state borrowing can exert pressure on thecorporate bond curve, disallowing further softening.”http://www.business-standard.com/article/markets/bond-market-doesn-t-expect-surprises-117012600827_1.html

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Vedanta issues $1 billion bonds to refinance debt The Hindu

Mumbai: Anil Agarwal-led Vedanta Resources Plc. has priced an offering of bonds for the aggregate principal amount of $1 billion.The 6.375% bonds, due for maturity in 2022, will help to refinance part of its 2018 and 2019 maturities and extend its average debtmaturity.

The company intends to use the net proceeds from this offering primarily to fund its offer to purchase for cash any and all of itsoutstanding $750 million 9.5% bonds due 2018 and $ 1.2 billion 6% bonds due 2019. The company also plans to use the proceedsto repay its other existing debt, it said in a statement.

Commenting on the deal, CEO Tom Albanese said: “This transaction is in line with our financial strategy to extend maturities,optimise the balance sheet and create value for all stakeholders. We are pleased with the strong demand these bonds received,with support from all major markets.”

Vedanta has received and accepted for purchase approximately $370.8 million of the 2018 bonds and $425 million of the 2019bonds (excluding $227,000 of the 2018 bonds and $200,000 of the 2019 bonds that remain subject to the guaranteed deliveryprocedures), said the company statement.

Vedanta received strong investor interest for the tenders and these bonds, the statement said. This is the largest single-tranche G3high-yield bond issuance from Asia ex-Japan since 2015. The bonds are being sold in a private offering to qualified institutionalbuyers. The offering is expected to close on January 30, 2017.http://www.thehindu.com/todays-paper/tp-business/Vedanta-issues-1-billion-bonds-to-refinance-debt/article17095398.ece

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Bond yields, call rate rises The Hindu Business Line

Government bonds (G-Secs) surged following heavy demand from corporate and banks. The 7.61 per cent 10 year benchmarkbond maturing in 2030 climbed  to Rs. 107.66 from Rs. 107.42 while its yield eased to 6.73 percent from 6.75 percent.  Theovernight call money rate turned higher due to good demand from borrowing banks amid tight liquidity in the banking system.

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International News

RBS to take $3.8 billion charge tied to US mortgage probe Richard Partington & Michael J. Mooremint

London: Royal Bank of Scotland Group Plc said it will take a £3.1 billion ($3.8 billion) charge in its fourth-quarter results, as thelender used other banks’ settlements to estimate the impact from a US probe into sales of mortgage securities.

The lender is continuing to cooperate with the US Department of Justice on its investigation, though timing of a settlement remainsuncertain, the Edinburgh-based bank said Thursday in a statement. RBS has now taken £6.7 billion of provisions related to as manyas 15 mortgage investigations and lawsuits, and said further charges may still be needed.

RBS is among the final global lenders yet to settle in a years-long probe that’s garnered more than $50 billion in penalties forthe DOJ since it began investigating the pre-crisis sale of mortgage bonds. Bloomberg reported last week that the UKtaxpayer-owned lender was considering taking a provision based partly on Deutsche Bank AG’s $7.2 billion settlement andCredit Suisse Group AG’s $5.3 billion accord, both announced in December.

RBS investors, including the UK government, are paying a “heavy price for decisions made by RBS before the crisis.It’s another painful example of that legacy,” chief executive officer Ross McEwan said on a call with reporters. Thecharge “reflects the legacy of time when RBS lost its way on its quest to build a global bank.”

The shares gained 1.9% to 231.8 pence at 8:38am in London trading on Thursday. The stock declined 26% last year.

Although the lender’s board was able to make the fresh provision based on other European banks’ settlements, chieffinancial officer Ewen Stevenson said RBS isn’t yet in any active negotiations with the Justice Department. McEwan said hewouldn’t speculate on whether changes in the US administration under President Donald Trump may change the tone of anytalks or delay the process.

“We’re keen to resolve this as quick as we can,” McEwan said on the call with reporters. “We’llwork constructively with the appropriate authorities whoever they are.”

RBS’s fourth-quarter charge is larger than the £2.7 billion that Citigroup Inc. analysts led by Andrew Coombs predicted in anote to clients last month. The provision would have reduced the bank’s common equity Tier 1 capital ratio by 1.35percentage points based on where it stood in September, RBS said.

“If the $3.8 billion provided for today ends up being the settlement amount with the DOJ on such matters, it would be wellwithin market expectations for a $2 billion to $8 billion charge,” Joseph Dickerson, a bank analyst at Jefferies InternationalLtd, said in a note to clients.

No clawbacksWhile the bank had about £9 billion of provisions for regulatory and legal matters on its balance sheet in September, analysts hadsaid it probably needed more to cover residential mortgage-backed securities settlements and associated legal costs. The companyis scheduled to report full-year earnings on 24 February.

Drawing a line under the US investigations would clear a significant barrier for McEwan in his task to return RBS to profit andrestore dividends. While he must also divest its Williams & Glyn consumer division, settling the probes could make it easier for thegovernment to sell its majority stake in the lender.

RBS is the last of 18 banks yet to settle Federal Housing Finance Agency accusations it sold faulty mortgage bonds to Fannie Maeand Freddie Mac from 2005 to 2007. The amount of securities subject to the FHFA’s complaints can serve as a guide as tohow much the Justice Department will seek in penalties, according to Bloomberg Intelligence. RBS sold $32.1 billion, more thanDeutsche Bank and Credit Suisse combined.

The bank closed its US mortgage-backed securities trading and origination business in 2015 as part of McEwan’s plan to cutinvestment banking operations around the world in order to focus on consumer and commercial lending in the UK and Ireland.Although RBS cannot claw back compensation from staff at the unit because pay decisions at the time didn’t include suchrestrictions, the CEO said the value of the bank’s bonus pool would fall in 2016 from a year ago.

RBS is now a “completely different business. Pay reflects the bank today and not 2007,” McEwan said on the call withreporters. While “since 2010 bonuses have fallen over 90 percent in the investment bank, that downward trajectory willcontinue when we announce pay decisions later this year.” Bloomberghttp://www.livemint.com/Industry/mBbtyHtQcGCSDCIPA1DR3O/RBS-to-take-38-billion-charge-tied-to-US-mortgage-probe.html

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Fed to Hike Rates Every Quarter in 2018 The Economic Times

The Federal Reserve is about to go rapid-fire on interest rates, boosting them in the second half of this year and following that witha rise in every single quarter of 2018, according to BNP Paribas SA, which expects the tightening to strengthen the dollar and pushgold down toward $1,000 an ounce.

The US central bank is seen raising borrowing costs later this year given the fiscally expansive policies proposed by Donald Trump,and the new president's agenda may help to lift wages in 2018, hoisting labour costs, the bank said in a January 25 report.BNP wasthe top gold and precious metals forecaster in the fourth quarter, according to data compiled by Bloomberg.

“Gold may yet find support from higher inflation in the first half of 2017. But the Fed will pursue rates hikes in the second halfof the year, keeping the dollar strong,“ commodity strategists Harry Tchilinguirian and Gareth Lewis-Davies wrote.“In2018, BNP Paribas expects the Fed will hike every quarter.“

The Fed raised rates in December for the first time in a year, and investors are seeking to determine the likely timing of further hikesas the world's largest economy shows signs of recovery and Trump gets down to business with vows to accelerate growth, createjobs and boost spending on infrastructure. The precious metal dropped after Trump's surprise win in November amid opti mismabout the outlook, then rebounded this month.

There's scope for gold “to hold on to the January gains, even possibly add to them,“ BNP said.“But as we near

the end of 2017, expectations of Fed rate hikes will take over stewardship of gold prices. In turn, the path of least resistance for goldis likely to be downward again.“

Bullion OutlookBullion for immediate delivery traded at about $1,199 an ounce on Thursday , up 4.5% this year, according to Bloomberg genericpricing.Last year, it rose 8.1% to snap three annual declines even after dropping in the final quarter. Prices may average $1,210 thisyear, $80 more than previously forecast, and $1,100 in 2018, BNP said. Last month, policy makers lifted the target range for thebenchmark federal funds rate to 0.5% to 0.75%, and penciled in three quarter-point increases for 2017, according to the median oftheir quarterly estimates. While the BNP note didn't spell out in figures the size of the hikes it expects, a graph showed sixquarter-point increases through to the end of 2018.

Fed Chair Janet Yellen has backed a strategy for gradually raising rates, arguing in remarks a day before Trump's inauguration lastweek the bank wasn't behind the curve in containing inflation pressures but nevertheless can't afford to allow the economy to runtoo hot. Yellen said wages had risen “only modestly“ and manufacturing was operating well below capacity.

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Economy

Rupee falls 4 paise against US Dollar PTI See this story in: The Statesman

Mumbai: The Rupee weakened by four paise to quote at 68.19 against the Dollar in early trade at the Interbank Foreign Exchangemarket on Wednesday on month-end demand for the American currency from importers and banks.

The Dollar was firm against major global currencies, which dampened Rupee sentiment, but a higher opening of the domestic equitymarket capped the fall, dealers said.

On Tuesday, the Rupee made a modest recovery to end higher by five paise at 68.15 against the American greenback in yetanother day of extremely thin and lethargic trade.

Meanwhile, the benchmark BSE Sensex rose 105.92 points, or 0.38 per cent, to 27,481.50 in early trade.http://www.thestatesman.com/business/rupee-falls-4-paise-against-us-dollar-1485321939.html

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Sensex soars 333 points The Pioneer 

Mumbai: Sensex on Wednesdy returned to its pre-demonetisation level by jumping 333 points to end at a nearly 3-month high of27,708 on the back of strong earnings amid positive global feelers while NSE Nifty went past the 8,600-mark for the first time sinceNovember 1.

Covering of pending short positions following the expiry of the January futures and options contracts today and positive earnings bysome companies aided sentiment. Stock exchanges will be shut tomorrow for the Republic Day.

After a positive start, the 30-share Sensex rose further and settled up 332.56 points, or 1.21 per cent, at 27,708.14 -- a level lastseen on November 1 when it had closed at 27,876.61. It hit an intra-day high of 27,736.83.

The gauge had rallied 341.08 points in the previous two sessions.

Also, the 50-issue NSE Nifty ended at 8,602.75, up 126.95 points, or 1.50 per cent, after moving between 8,612.60 and 8,493.95.

“Market had come to the pre-demonetisation level supported by the ongoing quarterly results which largely survived theexpected slowdown. Positive global cues also added excitement in the market rally,” said Vinod Nair, Head of Research,Geojit BNP Paribas Financial Services.

Banking, metal, auto and consumer durables stocks were in fine nick, lifting the key indices.

Mood was aided by optimism ahead of the Union budget on February 1 amid a firming trend in Asia and Europe following overnightrecord close in the US on hopes of fresh spending by new US President Donald Trump, traders said.

The banking index advanced the most by surging 2.33 per cent, followed by consumer durables (2.26 per cent), oil and gas (1.75per cent), PSU (1.64 per cent) and metal (1.39 per cent).

HDFC Ltd emerged as the top gainer in the Sensex kitty, climbing 4.31 per cent, followed by Adani Ports (up 3.61 per cent). HDFCBank surged 1.56 per cent after the lender today reported 15.04 per cent growth in net profit for the December quarter.http://www.dailypioneer.com/business/sensex-soars-333-points.html

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'GDP growth to slow to 6% in Oct-Dec 2016' PTI See this story in: The Statesman

New Delhi: Demonetisation has stymied India's GDP growth and the October-December quarter show is likely to be around 6 percent, while for January-March it could climb down to 5.7 per cent, forecasts a Nomura report.

According to the Japanese financial services major, the consumption and services, which were the fastest growing segmentspre-demonetisation, were the worst-hit.

However a V shaped recovery is expected from the second half of 2017, it said.

"We expect GDP growth to slow from 7.3 per cent year-on-year in July-September 2016 to 6.0 per cent in October-December 2016and 5.7 per cent in January-March 2017," Nomura said in a research note.

Earlier, Nomura had said in a report last November, that demonetisation could slow India's GDP growth to 6.5 per cent in the fourthquarter of 2016 against its estimate of 7.3 per cent and to 7.5 per cent in the first quarter of 2017 from 7.9 per cent.

Nomura said, "We expect a V-shaped recovery from second half 2017 due to the release of pent-up demand after remonetisation,wealth redistribution and lower lending rates."

Regarding the Reserve Bank's monetary policy stance, the report said a final 25 bps repo rate cut is likely in February, provided thegovernment consolidates its budget deficit in 2017-18.

"Beyond February, we expect the RBI to stay on hold as we also expect both growth and inflation to rebound sharply in the secondhalf of 2017," it added.

On December 7, the central bank kept interest rate unchanged despite calls for lowering it and also lowered the economic growthprojection by half a percentage point to 7.1 per cent in the first policy review post-demonetisation.

The central bank will hold its next monetary policy meet on February 8.http://www.thestatesman.com/business/gdp-growth-to-slow-to-6-in-oct-dec-2016-1485328723.html

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High govt debt limits room for quick deficit reduction: Moody’s PTISee this story in: The Hindu Business Line

New Delhi: Days ahead of the Budget, Moody’s said its positive outlook on India reflects the expectations of continued policyreforms reducing government debt even as it feels that the high debt level limits the room to cut fiscal deficit quickly.

Cautioning that India’s debt-to-GDP ratio at 68.6 per cent is high compared to peers, it said the economy will return to theprevious trend by mid-2017 after the temporary effects of demonetisation fade away.

“Our positive outlook on India’s Baa3 credit rating reflects our expectation that continued policy reforms will allowbalanced growth to support a sustainable reduction in the government’s debt burden, currently a key constraint onIndia’s credit worthiness,” Moody’s Investors Service V-P Sovereign Risk Group William Foster told PTI.

He said persistent sizeable deficits imply that any reduction in India’s debt burden will largely rely on robust nominal GDPgrowth, which, in turn, is linked to a sustainable recovery in private investment.

“India’s general government debt-to-GDP ratio, at 68.6 per cent, is high relative to peers. Therefore, room to reducethe deficit quickly is limited as wages and salaries account for about 50 per cent of total expenditure with a large, once-in-10-yearsincrease in central government compensation just implemented. As a result, fiscal policy decisions will need to be carefullycalibrated, moving forward,” Foster said.

The government aims to lower fiscal deficit to 3.5 per cent of GDP in the current fiscal, from 3.9 per cent last. The 2017-18 Budget,which is due on February 1, will outline the fiscal deficit target.

Government capital expenditure that crowds in such private investment through infrastructure investment could support suchgrowth, he said.

Asked if demonetisation could derail the fiscal consolidation roadmap, Foster said in the medium term, it will strengthenIndia’s institutional framework by reducing tax avoidance and corruption.

“Demonetisation should also result in efficiency gains through greater formalisation of economic and financial activity, whichwould help broaden the tax base, enhance tax revenues and expand usage of the financial system. We believe economic activitywill stabilise and return to its previous trend by the middle of this year, after the temporary effect of demonetisation fades,” headded.

Moody’s had in November affirmed India’s ‘Baa3’ ratings while maintaining a ‘positive’

outlook, saying it expects policymakers to continue reforms to achieve balanced growth and reduce the government’s debtload. Baa3 rating implies lowest investment grade — just a notch above ‘junk’ status.

“The outlook reflects our expectation that continued policy reforms implementation will allow balanced growth to support areduction in the government debt burden, currently a constraint on India’s rating,” it said.http://www.thehindubusinessline.com/economy/high-govt-debt-limits-room-for-quick-deficit-reduction-moodys/article9502844.ece

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‘Demonetisation to boost transparency of economy’ The Hindu Business Line

New Delhi: President Pranab Mukherjee said demonetisation of high value currency notes will immobilise black money and aid thefight against corruption.

Addressing the nation on the eve of Republic day, he said, “Demonetisation, while immobilising black money and fightingcorruption, may have led to temporary slowdown of economic activity. As more and more transactions become cashless, it willimprove the transparency of the economy.”

Bullish on economyMukherjee said that the Indian economy is on the path to recovery despite of ‘challenging global economicconditions’.

He said, “In the first half of 2016-17, it grew at a rate of 7.2 per cent – same as that last year – showingsustained recovery. We are firmly on the path of fiscal consolidation and our inflation level is within comfort zone. Though ourexports are yet to pick up, we have managed a stable external sector with sizeable foreign exchange reserves.”

Need for electoral reformsHe said that imperfections have to be recognised and rectified while commenting on the need for electoral reforms.

The President said, “The time is also ripe for a constructive debate on electoral reforms and a return to the practice of theearly decades after independence when elections to Lok Sabha and State assemblies were held simultaneously. It is for theElection Commission to take this exercise forward in consultation with political parties.”

The economy needs to grow in double digits, according to Mukherjee to succeed in the war against poverty.

He said, “Our economy is yet to grow at over 10 per cent for an extended period of time to make a significant dent onpoverty. One-fifth of our countrymen still remain below poverty line. Gandhiji’s mission to wipe every tear from every eye stillremains unfulfilled.”http://www.thehindubusinessline.com/todays-paper/tp-news/demonetisation-to-boost-transparency-of-economy/article9502562.ece

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Business sentiment outlook for Q4 deteriorates: RBI PTISee this story in: The Economic Times

Mumbai: The business sentiment outlook for the January-March quarter of the fiscal has shown deterioration in respect of demandconditions, an RBI survey said.

The outlook on business sentiments in Q4: 2016-17 largely followed the pattern of October-December period, which too hadwitnessed moderation in the sentiments in demand condition for the second successive quarter, according to the latest ReserveBank's Industrial Outlook Survey.

The outlook on business sentiments in Q4: 2016-17 largely followed similar pattern, the survey said.

"However, in respect of demand condition (Order Books, Production), the outlook deteriorated. Pressure from rise in cost of rawmaterial was expected to bring down profit margin. Improved sentiments were expressed in pending orders, exports, and cost offinance," it said.

The survey elicited response from 1,221 manufacturing companies.

RBI said the survey provides qualitative assessment of business situation of companies in the Indian manufacturing sector forQ3:2016-17 and their expectations for the ensuing quarter.

The survey responses are those of the respondents and are not necessarily shared by the Reserve Bank, the central bank added.http://auto.economictimes.indiatimes.com/news/industry/business-sentiment-outlook-for-q4-deteriorates-rbi/56790109

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