Indian Banking Industry Update

14 March 2017

RBI / MoF / Govt. PoliciesRBI launches app for android, iOS platforms

B P Kanungo appointed deputy governor of RBI

FM Arun Jaitley, RBI Governor discuss bad loans

Demonetisation comes full circle, all cash withdrawal limits lifted from today

Public Sector Banks / Private SBI creates wholly-owned subsidiary to manage real estate

Karnataka Bank signs MoU with Bajaj Allianz

Karur Vysya Bank unveils new tech tools

Banks to make net interest income of Rs 4,500 crore from demonetisation

Canara HSBC OBC Life to launch term insurance with return of premium

Ahead of merger with SBI, loan processing and banking services at associate banks may be delayed

It’s the big sale at PSU banks as they rush to sell non-performing assets

ICICI Bank records most frauds: RBI

ICICI Bank wins tea mandate

ICICI Bank, SBI, StanChart top bank frauds list: RBI

Public sector banks rush to get cyber insurance policies

Co-operative Banks/RRBsForeign Banks / FIIs / I-Banks

Expect a massive jump in Nifty, sectoral indexes on Tuesday: Tirthankar Patnaik, Mizuho Bank

Rating & ResearchRupee remains stable

States' debt crisis set to worsen as repayment burden looms

ATMs, Credit & Pre-paid CardsAirtel Bank opens over 1 lakh savings accounts in TN

E-wallets are going to be dead with UPI coming in: PayU India's CEO Amrish Rau

RBI to now open up UPI for digital wallets like Paytm and MobiKwik

Housing FinanceDevelopment BanksNBFCs / FIs / MFI

Daimler financing arm rides on Mercedes

RBI caps cash loan against gold at NBFCs

Reliance Capital CEO Sam Ghosh to leave company on March 31

Chit fund industry seeks tax exemption in GST regime

Exempt NBFCs from Rs. 3-lakh cash restriction proposal: FIDC

Small loans, big impact: Microfinance now big business at banks

‘MFIs understand rural customers’: K. Paul Thomas , founder & chairman, ESAF Microfinance

Pending repayments remain high for MFIs: RBI staff report

Mutual Funds & AMCs UTI Mutual Fund eyes Rs 500 crore AUM in Woman Savings Plan

HDFC MF launches its 3rd cancer cure fund

Tax saver funds dole out dividends as markets rise

UTI MD Leo Puri says close to an IPO, will seek all shareholders’ nod

Equities, Pvt. Equity & Hedge FundsCanara Bank sells 13.45% in Can Fin Homes to GIC

As banks back away, private equities, non-banking financial companies back developers

Govt. Securities & Bonds Indian firms raising cheaper funds abroad

FPIs may invest aggresively in unlisted bonds after SEBI approval: Deloitte

Foreign investors pull out $4.8 b from Indian debt

Brokers / DistributorsBourses

Dissemination boards fail investors of regional exchanges

BSE to phase out weekly and monthly price bands for stocks

International Portugal's CGD bank seeks to sell Spanish, S.African operations

BoE under pressure from bankers on Hogg appointment

HSBC gets new chairman in rejig

EconomySensex gains 114 points for week on exit-poll position

RBI says note-ban impact on GDP was over

Demonetisation impact transient, says RBI paper

Closing

RBI / MoF / Govt. Policies

RBI launches app for android, iOS platforms PTISee this story in: Asian Age

Mumbai: The Reserve Bank of India today formally launched a mobile application version of its website on Android and iOSplatforms. The application can be downloaded from the Play Store/App Store, using the keyword 'Reserve Bank of India'.

To start with, the most accessed sections of the website press releases, IFSC/ MICR codes, bank holidays and current ratesincluding policy rates and reference rate of four major currencies have been made available on the app.

"There is a dynamic window on the top of the landing page of the app which alternatingly displays three public awarenessmessages the new design currency notes of Rs 2,000 and Rs 500 denominations as well as RBI's message on KYC under the 'RBIKehta Hai' series," the central bank said.

On clicking on any of these, the user can open and read the full text of the public awareness message issued. The user can alsoactivate the feature of 'push' notification to get an alert on new releases.http://www.asianage.com/business/economy/110317/rbi-launches-app-for-android-ios-platforms.html

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B P Kanungo appointed deputy governor of RBI PTISee this story in: Asian Age

New Delhi: B P Kanungo was today appointed Deputy Governor in Reserve Bank of India (RBI) for three years.

The Appointments Committee of Cabinet (ACC) has approved his appointment to the post with effect from the date of taking overthe charge on or after April 3, an order issued by Personnel Ministry said.

He has been appointed in place of R Gandhi, it said. Kanungo was in March last year appointed as Executive Director in the centralbank. The ACC has also named Dilip S Shanghvi as Member, Western Local Board of RBI.

The appointment of Shanghvi, the pormoter of Sun Pharmaceutical Industries Limited, to the post is for a period of four years, theorder said.http://www.asianage.com/business/economy/110317/b-p-kanungo-appointed-deputy-governor-of-rbi.html

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FM Arun Jaitley, RBI Governor discuss bad loans The Economic Times

New Delhi: Finance minister Arun Jaitley and senior government officials met the Reserve Bank of India governor and two deputygovernors to take stock of stressed assets of state-run banks.

A senior finance ministry official said that various options to deal with stressed assets were discussed, including setting up a badbank.

“Both the government and RBI are working jointly to resolve the issues and ensure quicker resolutions. We haven't firmed upanything yet,“ the official said.

Another official said dealing with In FY16, banks made recoveries worth `39,986 crore.

The Economic Survey had suggested the creation of a state-owned asset reconstruction company, Public Sector AssetRehabilitation Agency (PARA), to deal with the mounting bad loans that had stifled credit flow in the economy.

The survey had noted that private asset reconstruction companies (ARCs) had not been successful in resolving bad debts and thata professionally run central agency with government backing could overcome the coordination and political issues that haveimpeded progress in the past eight years.

The government had earlier explored the idea of setting up a Na tional Asset Management Company (NAMC) that could act as anodal agency to deal with bad loans.

In March, finance minister Jaitley had said that although the government would consider the suggestion for a bad bank, it was not infavour of the bad loan situation being tackled solely through the budget.

“We do not want to get into a situation where the whole business of asset reconstruction for which we have just widened thepolicy, and we do not want a situation where eventually it will all converge to a government issue and then the whole thing will haveto be supported only out of the budget and not otherwise,“ he had said. large defaulters had also been on the agenda.

“We discussed all issues pertaining to stressed assets, including large defaults and ways to support genuinepromoters,“ the second official said.

The meeting was also attended by chief economic advisor Arvind Subramanian besides financial services secretary Anjuly ChibDuggal and RBI deputy governors SS Mundra and Viral Acharya.

A senior official from the corporate affairs ministry was also present.

Gross non-performing assets or bad loans of public sector banks (PSBs) were pegged at over `6 lakh crore at the end of December2016.http://economictimes.indiatimes.com/markets/stocks/news/fm-arun-jaitley-rbi-governor-discuss-bad-loans/articleshow/57590033.cms

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Demonetisation comes full circle, all cash withdrawal limits lifted from today IANSSee this story in: The Economic Times

Mumbai: All limits on savings bank cash withdrawals post-demonetisation ended on Monday, as had been announced by theReserve Bank of India (RBI) last month.

In a two-stage process, the weekly withdrawal limit per account had been raised to Rs 50,000, from Rs 24,000, with effect fromFebruary 20, and all limits on ATM withdrawals were slated to cease from March 13.

The announcement had been made by RBI Deputy Governor R. Gandhi following the fiscal's last monetary policy reviewannouncement by the central bank in February, when it kept its key interest rate unchanged at 6.25 per cent, saying it awaited dataon the full impact of the government's demonetisation drive.

On January 30, the RBI had ended all curbs on withdrawals from Current Accounts, Cash Credit Accounts and Overdraft Accounts.

The limits were placed following the November 8 demonetisation of Rs 1,000 and Rs 500 notes. The upper limit at ATMs was justRs 2,500 initially and was later raised to Rs 4,500.

In January, the RBI had hiked the daily ATM withdrawal limit to Rs 10,000 and doubled the weekly Current Account withdrawal limitto Rs 1 lakh.

The upper limit for weekly withdrawal from bank accounts had been raised to Rs 24,000 from Rs 20,000 in November.

While lifting of ATM withdrawal limits represents coming full circle for these machines in respect of demonetisation, the return to

normalcy in terms of cash available in them is still awaited, indicating the slow pace of remonetisation.http://economictimes.indiatimes.com/news/economy/policy/demonetisation-comes-full-circle-all-cash-withdrawal-limits-lifted-from-today/articleshow/57615941.cms

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Public Sector Banks / Private

SBI creates wholly-owned subsidiary to manage real estate PTISee this story in: The Times of India

New Delhi: The country's largest lender State Bank of India has incorporated a specialised firm SBI Infra Management Solutions PvtLtd (SBIIMS) that will manage its premises and real estate property across the country.

The move is seen as public sector banks' efforts to exit non-core activities to improve balance sheet as they have piled up huge badassets over the past few years.

With strict guidelines from government, many state-owned banks are exiting their non-core activities as well as selling their badloans to asset reconstruction companies and other financial entities.

SBI said that the new entity has been established to save time of banks' executives who are involved in managing these non-corebusinesses.

"The primary role of the new entity will be to handle transaction management/ advisory services, project management, facilitymanagement and implementation of policies and initiatives," SBI said in a statement today.

With this, the officers who were involved in non-core activities would be better utilised for core banking services, it said.

"We realised that the job of acquisition, construction and maintenance of owned and leased premises, which is a non-core activity,were being looked after by 1,100 officials of the bank including 200 technical officials. Hence, it made sense to create separateentity employing much lesser number of employees," Arundhati Bhattacharya, Chairman of SBI said.

She said the new subsidiary will have 400 dedicated officials to handle premises and real estate related jobs.

SBIIMS will have its circle office in each local head office centre of SBI and about 100 zonal offices at administrative office centresof SBI on pan India basis.

Initially, this subsidiary will look after work related to premises and estate of SBI group only.http://timesofindia.indiatimes.com/business/india-business/sbi-creates-wholly-owned-subsidiary-to-manage-real-estate/articleshow/57594866.cms

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Karnataka Bank signs MoU with Bajaj Allianz PTISee this story in: The Hindu Business Line

Mangaluru: City-based Karnataka Bank has signed a Memorandum of Understanding (MoU) with Bajaj Allianz General InsuranceCompany for General Insurance business.

With the agreement, the bank would be able to provide vast choice of non-life insurance products to its customers across all its 747branches, supported by the customer centric products of Bajaj Allianz, bank Managing Director and CEO P Jayarma Bhat said.

The corporate agency agreement was inked yesterday at the Head Office of Karnataka Bank, the bank said in a statement.

Tapan Singhel, Managing Director and CEO of Bajaj Allianz, said the partnership was an important part of the company’sgrowth strategy which required a robust distribution network.http://www.thehindubusinessline.com/money-and-banking/karnataka-bank-signs-mou-with-bajaj-allianz/article9580917.ece 

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Karur Vysya Bank unveils new tech tools Deccan Herald

Bengaluru: Karur Vysya Bank has launched three new technological services named FASTag, Unified Payment Interface (UPI) andBharat Bill Payment System (BBPS) aimed to make banking more convenient for its customers.

FASTag is a service launched by KVB in association with Indian Highways Management Company Limited, a subsidiary of NationalHighways Authority of India, wherein preloaded tags affixed to the vehicles help them to move on without having to join the queues

at toll plazas and handling cash for payment of toll.

FASTag can be preloaded with amounts and the toll amount will automatically be debited by the toll plazas through sensors. Thetags can be reloaded as and when required. These tags are valid at all toll plazas throughout the country.

UPI is a mobile app that helps customers to transfer funds inter-bank, 24 X 7 through their smartphones. The transfer is effectedthrough the IMPS platform of NPCI. A single mobile application can access different bank accounts without the customer having toshare his bank details or having to remember user IDs and passwords.

Supported by the security of two factor authentication, payment requests can be initiated by the beneficiary or scheduled by theremitter.

The KVB UPI app can be downloaded from Android Play Store.

Bharat Bill Payment System (BBPS) is a facility offered through NPCI wherein customers can make utility bill payments likeelectricity, water, gas, DTH and telecom services through a single utility, instead of accessing multiple sites.

These three are the latest offerings from Karur Vysya Bank for its customers. The bank is also working on its existing tech platformsto enhance customer experience.http://www.deccanherald.com/content/600795/karur-vysya-bank-unveils-tech.html 

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Banks to make net interest income of Rs 4,500 crore from demonetisation George Mathew The Indian Express Mumbai: The Reserve Bank of India (RBI) has estimated that banks would make a net interest income (NII) of Rs 4,500 crore fromincreased deposits in a quarter after demonetisation. The RBI, in its assessment on the macroeconomic impact of demonetisation,said banks earned a return of 6.23-6.33 per cent under reverse repos and market stabilisation scheme (MSS) as against the cost ofCASA (current and savings account) deposits of around 3.2 per cent.

“Accordingly, for an average deployment of about Rs 6,00,000 crore in a quarter under reverse repos and MSS securities,banks’ net interest income from increased deposits is estimated at about Rs 4,500 crore in a quarter afterdemonetisation,” it said.

Bulk of the deposits so mobilised by banks have been deployed in reverse repos of various tenors with the RBI and cashmanagement bills (CMBs) issued under the Market Stabilisation Scheme (which is a part of investment in government securities inthe balance sheet of banks), the RBI said.

The increase in NII would need to be adjusted for the cost of managing withdrawal of Rs 500 and Rs 1,000 notes and injection ofnew bank notes (such as calibration of ATM machines, staff overtime, security arrangements, lower fees/waiver of fees on digitalmodes of payments), the RBI said. However, banks have slapped service charges on various customer services earlier this month.

As per the RBI, between October 28, 2016 and January 6, 2017 days immediately prior to and after demonetisation for whichfortnightly banking system data are available total currency in circulation declined by about Rs 8,80,000 crore. This, in turn, waslargely reflected in sharp increase of about Rs 6,72,000 crore in aggregate deposits of the banking system even after outflows inNRI deposits during the period, it said.

The RBI further said Jan Dhan account holders pulled out Rs 10,300 crore by March 1 this year from the maximum deposit level ofRs 74,600 crore on December 7, 2016 when the demonetisation drive was at its peak. The withdrawal from the Jan Dhan accountshappened in January and February, after demonetisation deadline expired on December 30, 2016. While Jan Dhan deposits fell toRs 64,300 crore as on March 1, 2017, they were still higher by 41 per cent over the level of November 9, 2016, whendemonetisation began, according to RBI data.

The central bank said post-demonetisation, 23.3 million new accounts were opened under the Pradhan Mantri Jan Dhan Yojana(PMJDY), bulk of which (80 per cent) were with public sector banks. Of the new Jan Dhan accounts opened, 53.6 per cent were inurban areas and 46.4 per cent in rural areas.

“The total balance in PMJDY deposit accounts peaked at Rs 74,600 crore as on December 7, 2016, from Rs 45,600 crore ason November 9, 2016, an increase of 63.6 per cent,” the RBI said. As there were reports regarding the use of these accountsto convert black money into white, the government issued a warning against the misuse of such accounts. The government alsocapped deposits into PMJDY accounts at Rs 50,000 on November 15, 2016. “Jan Dhan accounts contributed 4.6 per cent intotal accretion of aggregate deposits of commercial banks in the post-demonetisation period,” it said.

“Between end-December 2016 and early March 2017, there was a net increase in currency in circulation by about Rs2,60,000 billion. During this period, deposits with banks also declined moderately,” the RBI said. The RBI report alsorevealed that premiums collected by life insurance companies more than doubled in November. Premiums collected by LifeInsurance Corporation of India (LIC) rose more than 140 per cent (y-o-y) in November 2016, against less than 50 per cent by privatesector life insurance companies. “About 85 per cent of the total collections by LIC in November 2016 were under the‘single premium’ policies, which are paid in lump sum, unlike the non-single premium policies that can be paidmonthly, quarterly or annually,” the RBI said.

LIC effected a downward revision in the annuity rates of its immediate annuity plan Jeevan Akshay VI purchased from December 1,

2016, which might have created a spurt in collections in November 2016 for LIC. “The impact, however, seemed to be aone-time jump with the collections tapering subsequently,” the RBI said.

Loan disbursals by all categories of NBFCs declined significantly in November 2016 compared with the monthly average disbursalsduring April-October 2016, especially for micro finance companies (NBFC-MFIs) whose business is more cash intensive NBFCsoperating in semi-urban and rural areas rely more on cash and thus got affected, the RBI said. Fresh loan demand for large truckoperators fell with lower freight business.http://indianexpress.com/article/business/banking-and-finance/banks-to-make-net-interest-income-of-rs-4500-crore-from-demonetisation-4565834/  

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Canara HSBC OBC Life to launch term insurance with return of premium The Hindu Business Line

Mumbai: Canara HSBC Oriental Bank of Commerce Life Insurance Company plans to launch a pure term insurance product, withreturn of premium, in April in the wake of the insurance regulator coming out with guidelines for the same.

The Gurugram (Haryana)-headquartered life insurer will shortly approach the Insurance Regulatory and Development Authority ofIndia (IRDAI) to get approval for the product, said a top official.

IRDAI guidelinesReferring to IRDAI’s November 2016 guidelines on point of sale for life insurance products, Anuj Mathur, Chief ExecutiveOfficer, Canara HSBC OBC Life, said: “With term return of premium (ROP), if nothing has happened (no insured event deathoccurs during the policy tenure), whatever premium you have paid you will get it back.”

For example, for a 20-year term policy with a sum assured of Rs. 50,000, the annualised premium could be, say, Rs. 2,000. If theinsured event does not occur, the policyholder will get back the premium paid ( Rs. 24,000) over the 20-year period.

“In this particular product, the upper limit for sum assured is Rs. 15 lakh. And (there is) no underwriting. You just walk into thebranch and give your particulars to the branch manager. So, this product will be technology driven, with online submission ofparticulars, online (Aadhaar-based) authentication and across the counter policy issuance.

He added that no medical (test) is required because the company has that kind of risk appetite and the (policy) volumes will be bigtoo.

“We are talking of big numbers. So, there the mortality also gets spread out. So, we are keeping it (policy) very simple, whichwill click with the common man in Canara Bank or in OBC. That is how we are targeting this product,” said Mathur.

Biz outlookThe companyis expecting to end FY17 with new business income of about Rs. 630 crore as against Rs. 445 crore in the previousyear. It is targeting new business income of about Rs. 800 crore in FY18.

The CEO said gross written premium will touch Rs. 2,400 crore (new business plus renewals) in FY17 as against Rs. 1,850 crorelast year.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/canara-hsbc-obc-life-to-launch-term-insurance-with-return-of-premium/article9582391.ece

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Ahead of merger with SBI, loan processing and banking services at associate banks may be delayed G Naga SridharThe Hindu Business Line

Hyderabad: The associate banks of State Bank of India (SBI) will see some delay in loan processing and banking services duringthe month-end, ahead of their merger with SBI.

“The associate banks have been asked to treat March 25, as a cut-off date for disbursals of their loans and individualbanking products to facilitate business transition,’’ a top SBI official told Business Line on Monday.

The Government has already notified that April 1, will be the date for the merger. With this all shares of the associate banks wouldcease to exist as individual entities and would stand transferred to SBI, according to the gazette notification dated February 22,2017.

This will mark the end of business as individual entities of the five associate banks State Bank of Bikaner and Jaipur (SBBJ), StateBank of Mysore (SBM), State Bank of Travancore (SBT), State Bank of Hyderabad (SBH) and State Bank of Patiala (SBP).

While there is no official notification in this regard apparently to avoid any loss of business and migration of customers to otherbanks, customers are being informed at the branch level about the delay/or temporary halt in businesses, said a senior SBBJexecutive.

“The rationale behind the move is to ensure procedural correctness in aspects such as mortgages and legalformalities,’’ explained an official of SBH.

There are also differences among the product offerings of the associate banks and SBI. To ensure uniformity, all

individual/customised products of associate banks will be discontinued and the existing products of SBI will be sold by banks.

There is a rush to clear all existing loan proposals and complete disbursals by March 25 by different agencies that work forassociate banks.

“We are working over time to get legal opinion on home loan proposals to facilitate approval by the deadline. But not sure ifall could be completed,’’ said a senior legal counsel for SBH in Hyderabad.

Meanwhile, bankers insist that there is no need for panic among customers. “It will be temporary delay. Any normaltransactions will be hit a little by the annual closing of accounts. The merger procedures will add a little more delay after which everything will be normal,’’ said SBI official.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/ahead-of-merger-with-sbi-loan-processing-and-banking-services-at-associate-banks-may-be-delayed/article9582386.ece

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It’s the big sale at PSU banks as they rush to sell non-performing assets Joel RebelloThe Economic Times

Mumbai: Banks have rushed to sell their non-performing assets (NPAs) in the last quarter of the fiscal ending March 2017, asstricter provisioning norms on sale of stressed loans kick in from April 1.

Banks have lined up more than Rs 20,000 crore of NPAs to be sold to asset reconstruction companies (ARCs) so far in March morethan double the amount they had put up for sale in the first nine months of the year.

Under new norms notified by the Reserve Bank of India (RBI) in September, if security receipts (SRs) make more than 50 per centof the value of the asset under consideration, banks have to provide for these loans as if the loans continue on the books of thebank.

The guidelines released on September 1 push banks to make more NPA sales in return for cash rather than SRs to make sure thatstressed asset sales by banks are actually ‘true sale’ of assets. Security receipts are issued by ARCs to bankspending recovery from an account.

Banks can encash them only after the loan concerned has been recovered by the ARC. Since August 2014, banks have to ensurethat at least 15 per cent of the NPA sales are in cash. However, banks did not have to provide for the loans sold in exchange ofSRs. This will now change from April 1 likely forcing them to push more sales in exchange for cash.

“RBI directions on September 1are going to significantly change NPA asset sales by banks and financial institutions. TheNPA asset sales effective next year would be mostly on cash basis in the view of the change in regulations because banks will nothave any advantage on selling SRs,” said VP Shetty, chairman JM Financial Asset Reconstruction Co.

Gross NPAs of commercial banks in India have risen to Rs 6.97 lakh crore in the quarter ended December. In the past two years,gross NPAs have risen two and a half times from Rs 2.62 lakh crore mainly as a sharp drop in commodity prices and delays ininfrastructure projects have made repayment difficult for debt-laden companies.

However, banks putting these assets on blocks does not mean they will be sold. Most of the time these loans end up not being soldas there is a big difference in the price banks demand and what ARCs are willing to pay.

“Ultimately, the proof of the pudding is whether these assets really get sold. The accounts on the block this month are fromsmall enterprises, infrastructure and some individual loans but for most of these the valuation does not match and many are comingback after not being sold last year,” said a CEO of an ARC.

The strike rate for sale of these loans is extremely poor with many times less than 10 per cent being finally sold. The situation ismore acute currently because public sector executives are reluctant to take decisions due to fear of being pulled up later bygovernment agencies.http://economictimes.indiatimes.com/industry/banking/finance/its-the-big-sale-at-psu-banks-as-they-rush-to-sell-non-performing-assets/articleshow/57621999.cms

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ICICI Bank records most frauds: RBI IANSSee this story in: The Economic Times

New Delhi: Private sector ICICI Bank suffered the most number of frauds during the first nine months of the current fiscal, whilestate-run State Bank of India took the second place in this regard, the Reserve Bank of India (RBI) has revealed.

Data pertaining to the April-December period of 2016 provided to the Finance Ministry by the apex bank earlier this week, showedas many as 455 fraud cases involving Rs 1 lakh and above were detected in ICICI Bank. It was closely followed by SBI, which found429 such cases.

Among foreign banks, 244 frauds were perpetrated on Standard Chartered Bank during the period in consideration.http://economictimes.indiatimes.com/markets/stocks/news/icici-bank-records-most-frauds-rbi/articleshow/57616286.cms

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ICICI Bank wins tea mandate Abhranila DasThe Telegraph

Calcutta: The Tea Board has appointed ICICI Bank as the new settlement banker for holding pan-India auctions after a search fornearly four months.

"We have selected ICICI Bank as the settlement banker for the e-auctions from a total of five bankers and it is currently working withNSE.IT to align the software," Santosh Sarangi, chairman of the Tea Board, told The Telegraph.

A senior official of ICICI Bank confirmed the development.

The Tea Board issued the request for proposal for the appointment of a settlement banker on November 25, 2016. The last date forsubmitting the proposal was December 16.

The pan-Indian e-auction module was rolled out by the Tea Board in June last year in all the seven centres - Calcutta, Guwahati,Siliguri, Jalpaiguri, Kochi, Coonoor and Coimbatore.

In September, the post-auction module was implemented with the Bank of India as the settlement banker.

However, several technical glitches and payment and operational issues cropped up, forcing the Tea Board to put the post-auctionsettlement process on hold with effect from October 18.

According to sources, payments to sellers and producers worth Rs 133 crore had been held up.

The tea regulator then re-introduced the earlier payment procedures till all the technical issues were addressed.

Previously, the State Bank of India and IndusInd Bank were handling the auction payments. The tea industry had lobbied hard toretain the SBI and IndusInd as the settlement banks till the goods and services tax (GST) was in place.

However, Sarangi said, "ICICI Bank has all the required software solutions. So, we settled for them. Moreover, the SBI had quoted avery high price."

It would take at least three months for ICICI Bank to start its services.

"As soon as the banker is ready with its software, we will hold a meeting with the industry stakeholders, including brokers andsellers, to identify more areas of improvement. Once this is in place, we will run a pilot test in a single auction centre and then wewill scale up accordingly," said the Tea Board official.

According to a tea producer, bringing in a new banker is not the solution. "The Tea Board needs to direct NSE.IT, the softwaredeveloper of the post settlement module, to build its product in a way that will ease the entire financial transaction process both forthe banker as well as the industry stakeholders," he said.https://www.telegraphindia.com/1170314/jsp/business/story_140468.jsp#.WMdENmOqBkg

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ICICI Bank, SBI, StanChart top bank frauds list: RBI PTISee this story in:Business Standard

New Delhi: ICICI Bank topped the list of banks that witnessed most number of frauds during April-December period of 2016 withstate-owned SBI taking the second spot, RBI data said.

During the first nine months of the current fiscal, as many as 455 fraud cases involving Rs 1 lakh and above were detected in ICICIBank, closely followed by SBI (429), Standard Chartered (244) and HDFC Bank (237).

The other banks which reported large number of frauds to the apex bank during the period include Axis Bank (189), Bank of Baroda(176) and Citibank (150).

However, in value terms, frauds involving Rs 2,236.81 crore were reported in SBI, followed by Punjab National Bank (Rs 2,250.34crore) and Axis Bank (Rs 1,998.49 crore).

The data provided by RBI to the Finance Ministry also revealed the involvement of bank staffs in fraud cases.

In the case of SBI, 64 employees were involved in fraud cases, while it was 49 for HDFC Bank and 35 for Axis Bank.

In all, 450 employees were involved in fraud cases in different public and private sector banks during April-December 2016, in 3,870cases involving a total value of Rs 17,750.27 crore.http://www.business-standard.com/article/pti-stories/icici-bank-sbi-stanchart-top-bank-frauds-list-rbi-117031200226_1.html

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Public sector banks rush to get cyber insurance policies Shilpy Sinha & Pratik BhaktaThe Economic Times

Mumbai: Public sector banks, which are considered laggards in the digital space, are pulling up their socks in cyber insurance.Manystate-owned commercial banks are rushing to buy insurance for threats such as hacking, including data loss and associatedliabilities.

This comes in the wake of the Reserve Bank of India tightening reporting for banks, which for long ignored cyber threats, as well asa greater realisation among banks about the potential dangers of living in a digital world without cover.

In the wake of demonetisation and the increased push on going digital, banks are seeking cyber insurance policies with the growingperception of threats and high-profile cyber-related incidents. The recent malware attack on Hitachi Payment Services affected 3.2million debit cards across banks. While the exact claim amount has not been ascertained, industry officials said figures ranging fromRs 10 crore to Rs 100 crore are floating around.

“Two large banks have started the process to cover cyber risk,“ said two people familiar with the development.“While the major private banks are already covered, their public-sector peers are now looking for cover.“

Marsh India, a top insurance broker that works with seven of the top 10 banks, has seen limits going up to $100 million. Generally,limits vary from $10 million to $50 million.

Banks are seeking more cover for first-party costs related to forensics and cyber experts in case of a claim. This will pay for costs ofpost-breach investigations as well. Insurers said that in many cases, the cost of external experts was higher than the financial losscaused by a cyber breach.

The RBI has issued guidelines to banks to ensure cyber security for addressing risks emerging from new technology.

Banks are also looking to cover the cost of replacing plastic cards of customers, which may not necessarily have been affected by abreach. In the Hitachi ATM attack case, banks had to replace the entire set of cards used on the affected network, though all ofthem may not have been compromised.

“Banks are usually quick to reimburse small losses to individuals, even though it may not be the banks' fault, but in cases oflarge loss of a corporate customer, there maybe costs related to litigation,“ said an executive of an insurance company.

Cases of e-theft of funds and frauds such as phishing and impersonation are on rise, he said.

“Many banks are looking at fund transfer or white collar fraud done through digital means as an explicit cover in their cyberpolicies,“ said an insurance broker.

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Co-operative Banks/RRBs

Foreign Banks / FIIs / I-Banks

Expect a massive jump in Nifty, sectoral indexes on Tuesday: Tirthankar Patnaik, Mizuho Bank The Economic Times

In a chat with ET Now, Tirthankar Patnaik, India Strategist, Mizuho Bank, says in terms of tough decision making, this is a carteblanche for the Modi government. There is no more questioning on the demonetisation exercise and other reforms. That shouldcome as a shot in the arm for markets.

Edited excerpts

Do you think we can nudge or overtake the all time highs on Tuesday itself?

Yes, I will not be surprised if the markets reach all time highs on Tuesday. The market expectations were that BJP would prevailover the SP-Congress alliance but the numbers have been overwhelming for the BJP combine which has got more than 75% of theseats. That in itself is something of a record and clearly the market will register this positive surprise. We should see key indexesmove up very significantly, not just the Nifty but also sector indexes like the Bank Nifty should be near life time highs tomorrow. Weshould be expecting a massive jump, I will not be surprised on a 2.5-3% kind of jump in the morning on Tuesday.

You are a keen political watcher as well beside being a market commentator. You know the UP manifesto talks about a 10 point

agenda, 10 promises being made but beside that, what according to you will the market have its keenest eye on and what accordingto you would now be Modi’s priority when it comes to the reform agenda?

In terms of tough decision making, this is a carte blanche for the Modi government. There is no more questioning on thedemonetisation exercise. The longer term impact of demonetisation may be left for us economists to ponder when the data comesin, but in terms of what the market says and in terms of what the polity, what the populace of the country thinks of demonetisationwe need no more persuasion. So that should act as a big shot in the arm for the government and for the markets.

In terms of reforms, the 30 odd seats that the BJP would get in the Rajya Sabha would certainly enthuse a lot of us foreigninvestors, foreign banks where people look at the minority in the Upper House as a road block for the government. This is certainlygoing to be very helpful. And one of the expectations that we would have is obviously that labour reforms which are not really on thefederal list and more under the concurrent or the state list. might now be taken up with renewed gusto.

UP being the largest state would-- if it is able to take tougher labour reforms which allow more market friendly, more businessfriendly initiatives to come in, could really become an illustrative example for the rest of the states to follow. Nothing needs to saidon GST, clearly the support that the BJP has got now would make a lot more states fall in line as to whichever small road blocks arethere for GST implementation.

I guess 2019 is not for anyone to win, it is for the BJP to lose. The markets would expect in terms of decision making the sametempo to continue.

You were just so right in saying that all those Modi bashers on demonetisation will have to zip up their mouths right now. What forthe market is important next? We have talked about GST but from here after that huge pop that you may see, maybe the markettakes it to an all time high, maybe a little higher than that, what next? Does it get back to earnings and growth?

Let us look at it from a foreign investors’ perspective. The news from India is good. For the moment, even the centralbank’s change in stance from an accommodative one to a neutral stance is actually a supporting stance for growth. Sothings are positive for India. From a global markets perspective, from a global macro perspective, we are looking at a Fed rate hikein March, the odds are fairly high, more than three-fourth that we might see a normalisation step in global interest rates. That has toact as a minor road block to capital flows to all emerging markets, India not excluded.

So for a global investor this is something that he would have to take in his stride in the extremely near term. Beyond that, one wouldagain look at how the southwest monsoon comes in, we will have the first forecast from the met department come April, and the firstand second forecast would also have some impact on what should we see after a 6% kind of agri growth number that we saw in thethird quarter. Those are the important things. But from India the news is likely to be fairly positive, earnings in the fourth quarter arelikely to be somewhat subdued, there is no question about that but I guess the markets will take that in their stride.

But are you saying that if there is indeed a rate hike, you know the market back home will take in its stride because you are seeingsomething unique happening globally as well. In the last 10 days or so, the global rally has somewhat stalled, commodity priceshave completely turned around be it metals or for that matter crude which is now trading sub 50. Do you think we will be resilient to all these changes which are happening on the global front and take a rate hike which seems likean eventuality in our stride so to speak?

No, we would not be entirely unaffected by it but resilience will be something that we will have in our support while the foreigninvestor would definitely look at a Fed rate hike, the interest from domestic investors has been fairly strong all through and that isdefinitely likely to see a fillip come this emphatic win for the BJP-NDA combine.

This is where the domestic investor is likely to get a little more enthusiastic on the government’s ability to take strongerdecisions.

The markets support for such decisions and the economy’s resilience to a super harsh step like demonetisation, if we canweather demonetisation and come out trumps, then maybe even Trump could not hurt us, apologies for the pun. But the point is thatwe should definitely have the domestic macro favouring us even as we do see global headwinds.http://economictimes.indiatimes.com/markets/expert-view/up-election-result-expect-a-massive-jump-in-nifty-sectoral-indexes-on-tuesday-tirthankar-patnaik-mizuho-bank/articleshow/57593876.cms

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Rating & Research

Rupee remains stable Gurumurthy KThe Hindu Business Line

The Indian rupee remained range-bound, but was volatile in the past week. The currency fell to a low of 66.86 on Thursday andrecovered from there to close at 66.60 on Friday, up 0.17 per cent for the week. The markets were closed on Monday on account ofa public holiday. Strong foreign money inflows into the Indian equity markets supported the currency. The Foreign PortfolioInvestors (FPIs) bought $1.3 billion in the equity segment in the past week. The debt segment attracted an inflow of $152 million.

Volatility is well on the cards, as this week is packed with series of key events. On the domestic front, both the Wholesale PriceIndex (WPI) and the Consumer Price Index (CPI) inflation numbers are due today.

It will be followed by the much awaited US Federal Reserve meeting on Wednesday. A rate hike is widely expected which is already

getting factored in the market. The market is also keenly awaiting cues from the US Fed Chair Janet Yellen’s address togauge future rate actions. A strong indication of aggressive rate hikes during the year, can boost the dollar. In such a scenario, theIndian rupee may come under pressure and weaken going forward.

The dollar index (101.30) made a high of 102.25 on Thursday and has come-off sharply from there.

The index is still facing strong resistance to breach above 102. Support is at 100.5 and the index may remain range bound between100.5 and 102.25 at least until the outcome of the Fed meet is known on Wednesday.

A breakout on either side of 100.5 or 102.25 will then decide the next trend. A strong break below 100.5 can drag it to 100 and 99.5.On the other hand, if the index manages to surpass 102.25 decisively, a rally to 103 or even 103.5 can be seen thereafter.

On the charts, the near-term view continues to remain positive for the rupee as the support in the 66.90-67 zone is holding verywell.

Rupee outlookThe currency needs to break below 67 decisively to lose momentum. Such a break can take it lower to 67.20 and 67.50 thereafter.Can the outcome of the US Federal Reserve meet trigger such a fall? Only time will tell.

Immediate resistance is around 66.50, a break above which can take the rupee higher to 66.35 and 66.30. Further break above66.30 can see the rupee strengthening to 66.10 and 66.

The Indian rupee strengthening beyond 66 looks less probable at the moment. As such, a reversal from 66 will keep the broader66-68.85 range intact which has been in place for more than a year now. Such a reversal from 66 will then increase the likelihood ofthe rupee falling to 67 and 68 levels over the medium-term.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/rupee-remains-stable/article9582389.ece

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States' debt crisis set to worsen as repayment burden looms Namrata AcharyaBusiness Standard

Kolkata: Starting 2017-18, the debt burden of some of the indebted states could deepen further, with the repayment schedule ofmarket loans availed in 2007-08 kicking in.

According to the Reserve Bank of India (RBI) data, states’ total debt burden will more than double next financial year,increasing from Rs 31,820 crore in 2016-17 to about Rs 70,240 crore in 2017-18. This will further swell to Rs 1,19,900 crore in2018-19.

A recent report by rating agency ICRA estimated that the gross market borrowing of the state governments is likely to rise from Rs3.7 trillion in 2016-17 to Rs 4.5 trillion in 2017-18.

“One of the reasons for the high amount of borrowings would be large repayment obligation of all the states. None of thestates is in a position to pay debt out of surplus, as there is no surplus. So, the repayment has to come from freshborrowing,” said Jayanta Roy, group head corporate sector rating, ICRA. “However, in relation to the overall GDP andrevenue receipts, if the stock of debt remains within a limit, this is not alarming.”

Since 2007-08, there has been a spike in market borrowings due to various factors, including the financial crisis of 2007-08 anddrying up of small savings pool. The RBI, too, has been encouraging market borrowing as it meant states pay interest ratesaccording to their financial profile.

The burden of repayment would be particularly steep in highly indebted states Maharashtra, Uttar Pradesh and West Bengal.

Data from the RBI suggest that in 2018-19 Maharashtra’s debt burden from market loans would more than double to aboutRs 17,760 crore, against Rs 8,520 crore in 2017-18. In case of Uttar Pradesh, the rise would be nearly three-fold, as market loanrepayment burden would increase from Rs 4,420 crore in 2017-18 to about Rs 12,690 crore in 2018-19.

For West Bengal, the repayment burden on account of market loan would increase from Rs 3,200 crore in 2016-17 to about Rs11,610 crore in 2017-18.

“This rise in SDL issuance in the current year can be attributed to various factors, including the flexibility to some stategovernments to borrow an additional amount of up to 0.5 per cent of gross state domestic product (GSDP), above the anchor ofthree per cent of GSDP, based on the recommendations of the 14th Finance Commission,” according to the ICRA report.http://www.business-standard.com/article/finance/states-debt-crisis-set-to-worsen-as-repayment-burden-looms-117031300029_1.html

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ATMs, Credit & Pre-paid Cards

Airtel Bank opens over 1 lakh savings accounts in TN

The Hindu Business Line

Chennai: Airtel Payments Bank has enabled 100 villages across Tamil Nadu to go cashless to take its banking services deep intorural/unbanked areas and contribute to financial inclusion.

These villages now have access to basic banking services and the option of making digital payments, making them less reliant oncash, says a company press release.

Till date, over one lakh savings accounts have been opened with Airtel Payments Bank across Tamil Nadu. A network of over16,000 neighbourhood Airtel stores across the State act as banking points and offer basic banking services to customers, therelease said. Airtel Payments Bank is a fully digital and paperless bank with a network of over 250,000 neighbourhood Airtel retailstores that also function as banking points. This is more than the total number of ATMs in the country. The bank aims to scale itsnetwork to 600,000 banking points across the country.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/airtel-bank-opens-over-1-lakh-savings-accounts-in-tn/article9582390.ece

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E-wallets are going to be dead with UPI coming in: PayU India's CEO Amrish Rau Priyanka PaniThe Hindu Business Line

Mumbai: Naspers Group-backed digital payments firm PayU, which offers payment gateways, point of sale devices, billing solutionsfor merchants and consumers, is betting big on the Indian online payment system at a time when the Government is promoting acashless economy. PayU India's CEO Amrish Rau and its co-founder and COO Shailaz Nag spoke to BusinessLine on thecompany’s plan and the trends that will dominate the fintech space this year.

Excerpts

Its been over six months since you acquired Citrus Pay, how has the merger fared for the company?

Shailaz: With the acquisition of Citrus Pay, PayU India is now the biggest fintech player in India, catering to majorly all the segmentsunder the digital payments landscape.

Combining the merchant base, product line-up and the cultures of the two giants, PayUIndia has emerged as a full stack paymentprovider. The integration process has been seamless and within five months of working together, the company boasts of a 45 percent combined growth.

How soon do you think you will turn profitable?

Amrish: Next year we should get to about $100 million from both consumers and payments. We believe that while the market hasnot started, PayU India is at a stage where in 12 months’ time the company will be able to double our monthly transactionvalue to about Rs. 10,000 crore.

Shailaz: In the next 12 months my entire payments business will be profitable.

As a company we will not be. Credit and consumer side we will continue to invest. But our payments business (merchant side ofbusiness) which is today 97 per cent of our revenues, will be profitable in next 12 months.

How do you plan to transform digital payments in India?

Amrish: Credit is something we will invest in, along with making the payments faster. Second, we are going to go after UPI in a bigway. We are enabling UPI on a merchant side, we are going to come out with a UPI-led payment product. Faster payment is reallyhow do you do a quick transaction and get on with it. How do I use a mobile number to create a transaction? It could be a QR code,it could be UPI or it could be NFC. Perhaps, it could be newer way of transaction where the money can move between me and youfaster. So, we will invest into faster payments and obviously in our core around payments.

Third, in the long term we want to develop a digital banking solution for India. That’s the area we want to grow into, howeverthat is on the consumer side, and that is how one can become more relevant to the Indian consumer.

What kind of investments will go into all this? Any acquisitions?

Amrish: We can invest anything up to $250 million in the next 5 years. We are scouting for investments in the credit businesssegment. Late last year, we invested $6.5 million in consumer lending start-up ZestMoney.

What are the trends that will dominate fintech, especially payments, in India this year?

Amrish: 2017, for me, is going to be the year of going back to the basics. It will not be a year of buzzwords and sexy acronyms. Itwill be the year of world-class platforms and technology services and of handling amazing volumes. It will also be a year ofincremental product growth rather than disruptions, as far as India is concerned.

The focus should and will be on making the transaction flow easier to understand for the middle-aged and not just millennial.

What is the future of e-wallets?

Amrish: I have, for long, been a member of the camp that believes wallets are going to be dead with UPI coming in. In fact, with

faster payments coming in, wallets, as a concept is ready to die. We clearly realise that wallet is not the way that you are going towin a consumer and obviously did not push forward with that.

Shailaz: Consumers are going to ask for convenience to make payments using any form factor and that is what everyone needs tobe ready for.

That world is not going to operate in payments. For digital payments you have to give the choice to the consumer how they want tomake a payment transaction and I think that’s where PayU has remained extremely nimble. We have not gone down thepath of betting on one payment type. We said let’s go with everything.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/ewallets-are-going-to-be-dead-with-upi-coming-in/article9582387.ece

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RBI to now open up UPI for digital wallets like Paytm and MobiKwik Mugdha Variyar & Pratik BhaktaThe Economic Times

Bengaluru / Mumbai: Digital wallets such as Paytm and MobiKwik are set to become inter-operable as Reserve Bank of India (RBI)prepares to open up the Unified Payment Interface platform for them as part of the government’s digitisation campaign.

RBI is expected to issue guidelines shortly on interoperability and ‘know your customer' (KYC) norms for digital walletcompanies, according to two people familiar with the developments.

RBI will also decide on the interchange fees between the wallets for them to be able to access the UPI framework, they said,declining to be identified.

“The opening up of the UPI framework and, in turn, the permission to allow interoperability between wallets is something theRBI is looking into very seriously and should be able to activate in 2-3 months,” one of them said. Digital wallets cancurrently access the UPI network through partner banks to facilitate bank-to-bank money transfers. Allowing direct access will meanthat a PhonePe or a MobiKwik user will be able to send money directly to, say, a merchant with a Paytm or a FreeCharge digitalwallet, expanding the usability of these instruments.

Although digital wallets are older and more widely used, UPI, which currently allows only transfer of money across banks, is gainingin popularity because of the government’s high-decibel campaign as part of its efforts to transform India into a digitaleconomy. The government is also promoting an Aadhaar-based payment platform and another instrument for transactions using QRcodes. RBI did not reply to an email sent on Saturday.

Bipin Preet Singh, chief executive of MobiKwik, said the company “is keen to partner with other financial networks to developa collaborative financial services platform.” MobiKwik's digital wallet has about 50 million users.

Interoperability “will strengthen the business model of a wallet since the players will not need to acquire both merchants andcustomers,” said Bhavik Vasa, chief growth officer at payment and wallet company ItzCash. “Gradually, the marketwill start expanding as the ecosystem is built.”

Banking industry executives expect interoperability to make the battle for the retail payments pie fiercer, similar to what happened inthe ATM space when banks were instructed to allow users of other banks to withdraw money from their cash dispensing machines.

“We are hearing that the process (of opening up UPI for digital wallets) is likely to be fast-tracked,” said Ritesh Pai,country head for digital banking at Yes Bank, which has partnered with Flipkart-owned payments venture PhonePe. “Sincethe (prepaid payment instruments, or digital wallets) are also issued licences by RBI, the logical step is to open the UPIinfrastructure to them and make it more inclusive.”

This would make digital wallets less dependent on banks but the partnerships will likely hold since the movement of money willcontinue to be from underlying bank accounts, Pai said. “The bank’s role will continue since these wallet players willalso need to hold on to their partnerships for escrow management, settlement and reconciliation, grievance redressal, etc.”

RBI’s move follows recommendations by the government-constituted Ratan Watal committee in its December report to openup access to government-backed payment networks to non-bank payment service providers.

The regulator could also have been compelled by the slow adoption of banks-led UPI apps and the poor technical ability ofmid-sized and small banks to innovate with such platforms, banking industry executives said. On the other hand, digital walletcompanies, powered by their strong tech teams and innovation, can bring more people to the system, they said.

The PhonePe app, which enables UPI transactions through a partnership with Yes Bank, has been downloaded more than 10million times on Google Play store. Paytm, which does not presently facilitate UPI transfers, has 200 million wallet users.

Compare that with the Axis Pay and SBI Pay UPI apps, which have about 1 million downloads each, and ICICI Pockets UPI, whichhas about 5 million users. That said, the government-backed BHIM app for UPI transactions has been downloaded 17 million timessince it was introduced on December 30, 2016.

RBI data show that the UPI network logged about 4.2 million transactions worth Rs 1,900 crore in February and a similar 4.2 milliontransactions worth Rs 1,660 crore in January, indicating increasing comfort in using the platform for larger transactions. But RBIdata also show that digital wallets logged 261.67 million transactions worth Rs 8,350 crore in January.http://economictimes.indiatimes.com/news/economy/policy/rbi-to-now-open-up-upi-for-digital-wallets-like-paytm-and-mobikwik/articleshow/57622078.cms

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Housing Finance

Development Banks

NBFCs / FIs / MFI

Daimler financing arm rides on Mercedes Ajay ModiBusiness Standard

New Delhi: Mercedes-Benz Financial, the vehicle financing arm of German luxury carmaker Daimler, is expanding its business onthe growing popularity of its parent’s luxury car business in India. Mercedes emerged as the country’s biggest luxurycar player in 2015 and retained the position in the 2016 calendar year.

Every second vehicle sold by Mercedes in the country (on lease/finance) is now financed by Mercedes-Benz Financial or MBF. Thecarmaker said MBF saw a growth of 25 per cent in its transactions during 2016. “MBF is growing favourably with our risingpresence. They started just five years ago and have grown rapidly. They have introduced new concepts in financing and offer a highdegree of flexibility to buyers. It has helped us in regaining more customers. The company can make money on sale of vehicles andalso on financing them,” said Roland Folger, managing director and chief executive officer at Mercedes-Benz.

In 2015, Mercedes posted a 32 per cent growth in volumes and sold a record 13,502 vehicles in India to become the largest playerovertaking German brand Audi.

The company’s volume declined marginally to 13,231 vehicles in 2016 due to the diesel ban in the national capital regionand demonetisation, but it remained the largest player. MBF does not finance vehicles from the competition.

The financial services business of Daimler is also growing on the back of its commercial vehicle business in the country under theBharat Benz brand. Bharat Benz does not share the volumes it sells but Bharat Benz Financial finances every second commercialvehicle (CV) sold by the company.

Other than financing vehicles at competitive rates to banks, Daimler also offers insurance service for these vehicles, bringinganother income stream for its parent. The company said every two out of three luxury vehicles sold was protected withMercedes-Benz Insurance. In case of CVs, two out of every five units sold were protected with an in-house insurance product.

Daimler Financial Services India (DFSI) has played a key role in the growth of both passenger and CV business of Daimler in Indiaand it aims to be the first-choice provider of financial and mobility services for customers and dealers, the company said. It addedthat DFSI has executed more than 30,000 loan contracts in a period of just five years. Daimler Financial Services’ globalportfolio volume is more than 125 billion euros as of November 2016.http://www.business-standard.com/article/companies/daimler-financing-arm-rides-on-mercedes-117031100785_1.html

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RBI caps cash loan against gold at NBFCs k.t. jagannathanThe Hindu

Chennai: In a fresh push toward a less cash economy, the Reserve Bank of India (RBI) has prohibited non-banking financecompanies (NBFCs) of all kinds from lending more than Rs. 20,000 in cash against gold.

The NBFCs have been told to issue cheques for loan amounts above this prescribed limit. Earlier, NBFCs had been directed todisburse only high value loans of Rs. 1 lakh and above against gold by cheque.

The RBI has now decided to reduce the cash disbursal limit on loan against gold to Rs. 20,000 from Rs. 1 lakh in line with theprovisions of the Income-Tax Act. The RBI fiat comes into effect immediately.

“It [the RBI move] has come as a shock to us,” said George Muthoot, Director of Muthoot Fincorp, a part of theMuthoot Pappachan Group. The RBI fiat, he said, would inconvenience small-ticket customers. The average ticket size for Muthootwas in the vicinity of Rs. 35,000 to Rs. 40,000, he said.

“The RBI directive will create hassles for them,” he added.

He indicated that discussions were on to move the RBI through the association of gold loan firms to at least relax the cash disbursalnorm. The latest RBI fiat would only inconvenience small customers “who don't want to wait in the bank and who seekquicker disbursal of money. We have to manage the business anyway.”http://www.thehindu.com/todays-paper/tp-business/rbi-caps-cash-loan-against-gold-at-nbfcs/article17450737.ece

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Reliance Capital CEO Sam Ghosh to leave company on March 31 PTISee this story in: Daily News & Analysis

In a surprise move, Reliance Capital's long-serving CEO Sam Ghosh will leave the company on March 31, after spending nineyears at the financial services arm of Anil Ambani-led business conglomerate.

Ghosh had joined the company in April 2008 as Group Chief Executive Officer of Reliance Capital, while he was elevated to theboard in May 2015.

The company, which is present across sectors, including insurance, mutual fund and a host of other financial services sectors, saidin a regulatory filing that Ghosh will be completing his term of office on March 31, 2017, and the appointment of a new CEO will beannounced in due course.

"During this entire period (of nine years), Ghosh has served Reliance Capital with great passion and commitment, and contributedtowards building up a strong portfolio of businesses across asset management, life and general insurance, commercial and housingfinance, broking and distribution among others," the company said.

It also said that Reliance Capital is on track to complete its transition towards becoming a CIC (Core Investment Company) by endof March 31, as per RBI guidelines.

All operating businesses will be housed in wholly or majority owned subsidiaries, each led by the respective CEOs of thosebusinesses and their respective full-fledged independent organisations.

Ghosh, a Chartered Accountant from England, has been instrumental in several deals and alliances signed by Reliance Capitalduring his tenure. He played a key role in the expansion of core businesses as also in the divestment of non-core assets to beef upits resources.

Besides, he was said to be deeply involved in mentoring of Anil Ambani's elder son Anmol, who joined Reliance Capital board lastyear after two years of training at the company.

Welcoming him on the board, Ghosh had said at that time, "Anmol has been a fast learner, an active participant in all reviews anddisplayed sharp business acumen in various decision-making processes,".

Before joining Reliance Capital, he was the Regional CEO of Middle East and India Sub-Continent region of Allianz, a Germaninsurance company.

He has also served as CEO of Bajaj Allianz's India operations. Prior to that he was involved in setting up operations for Allianz inSouth East Asia.

He spent ten years in Australia in various capacities with Allianz from CFO to managing subsidiary companies as well as operationsin the Pacific Rim.

The company did not disclose any particular reason for his departure, while immediately it could not be ascertained where he isheaded to.

"The Board of Directors of Reliance Capital and all its people thank Ghosh for his service, and wish him the very best in his futureendeavours," the company said.http://www.dnaindia.com/money/report-reliance-capital-ceo-sam-ghosh-to-leave-company-on-march-31-2350478

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Chit fund industry seeks tax exemption in GST regime The Hindu Business Line

Hyderabad: The chit fund industry has sought exemption, or at least a lower slab, in the upcoming GST regime. The taxation shouldbe in a manner similar to other NBFCs, it has said.

Chit funds are the Indian equivalent of the Rotating Savings and Credit Association (ROSCA), which are popular throughout theworld. There are more than 30,000 registered chit operators having an annual turnover exceeding Rs. 30,000 crore. With theupcoming GST regime, where the indicated tax rates are upwards of the service tax rates, the chances of this traditional industrywinding up are high.http://www.thehindubusinessline.com/todays-paper/tp-others/tp-states/chit-fund-industry-seeks-tax-exemption-in-gst-regime/article9581744.ece

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Exempt NBFCs from Rs. 3-lakh cash restriction proposal: FIDC KR Srivats

The Hindu Business Line

New Delhi: The Finance Industry Development Council (FIDC) has urged Finance Minister Arun Jaitley to exempt non-bankingfinance companies (NBFCs) from a Budget proposal that seeks to restrict cash transactions of Rs. 3 lakhs or more in certainspecified situations.

Budget proposalThe Budget had proposed that no person can receive an amount of Rs. 3 lakh or more in aggregate from a person in a day; inrespect of a single transaction otherwise than by an account payee cheque or account payee bank draft or use of electronic clearingsystem through a bank account.

The same restriction holds even in respect of transactions relating to one event or occasion from a person, according to the FinanceBill.

This proposal is to come into effect from April 1. The intent behind the proposal is to reduce the generation and circulation of blackmoney.

Just as banks and co-operative banks have been exempted from this proposed restriction, the NBFCs registered with the RBI alsoshould be exempted as the nature of loan transactions is the same for banks and NBFCs, Raman Aggarwal, Chairman, FIDC,suggested in a letter to Jaitley.

FIDC is a self-regulatory body representing asset-financing NBFCs.

Clarity neededAs regards the Rs. 3-lakh cash restriction norm in respect of transactions relating to one event or occasion from a person, FIDC hassought clarification as to whether this is applicable for one financial year or the entire tenure of the event or occasion (which in FIDCcase shall be a loan transaction).

“It is unclear from a plain reading of the proposed Section whether this amount ( Rs. 3 lakh) would be for a financial year orwould it have to be aggregated over the entire period of the loan,” the FIDC letter said. “We presume it is the former,since a financial year is always the basis of reckoning under Income Tax Act.”

To illustrate this point further, FIDC has pointed out that if the aggregate of Rs. 3 lakh were to be the sum total of all loaninstalments repayable over the life of the loan, then lending institutions would have to keep track of EMIs paid over a substantiallylong period of time.

For instance, a loan given for affordable housing for a 20-year period or a tractor loan given to a farmer for 7 years would have to bemonitored over that period.

Difficult to monitorSuch monitoring would, from the lenders’ perspective, be extremely difficult to implement and from the department'sperspective extremely difficult to track, FIDC letter said.

Such a stringent step would have an unintended effect of impeding smooth credit flow to the deserving sectors of the economy suchas agriculturists, MSMEs, small transport operators and affordable housing, it added.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/exempt-nbfcs-from-rs-3lakh-cash-restriction-proposal-fidc/article9582388.ece

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Small loans, big impact: Microfinance now big business at banks Namrata AcharyaBusiness Standard

Kolkata: From being passive lenders to microfinance institutions (MFIs) till about five years earlier, banks have turned out to beactive players in the business of small loans.

As on end-December 2016, banks accounted for 37 per cent (Rs 36,683 crore) of microfinance portfolio of Rs 98,625 crore; fiveyears earlier, a handful of MFIs accounted for more than half.

High margins and volumes are two reasons why banks are exploring the market in thrift credit.

Most of them in MFI lending are private sector ones. A majority of this portfolio is with 11 banks Axis, Bandhan, DCB, Equitas,HDFC, ICICI, IDFC, Kotak Mahindra, RBL and YES.

This apart, several public sector banks have increased their MFI exposure, through business correspondents (BCs).

“We see a lot of synergies with the microfinance sector. More, it is quite well-regulated and growing at a fast rate, providing alot of business opportunities,” said an official in charge of a bank’s microfinance operations.

Also, over the past 18 months, banks have also been aggressive in taking equity stakes in MFIs. Last year, Kotak Mahindra Bankacquired Bengaluru-based BSS Microfinance.

RBL acquired 10 per cent in Utkarsh Micro Finance, which recently graduated into a small finance bank (SFB).

In July last year, IDFC Bank acquired Trichy-based Grama Vidiyal Microfinance, its second deal in the MFI space. Earlier, IDFC had

taken 10 per cent in east-based ASA International India Microfinance.

In March last year, DCB Bank had acquired a 5.81 per cent stake in Odisha-based Annapurna Microfinance. Earlier, RBL hadacquired 30 per cent in Swadhaar FinServe, a company acting as a BC.

Non-banking financial companies (NBFCs) have also shown interest. In 2015, Manappuram Finance had acquired Asirvad MicroFinance, a Chennai-based NBFC-MFI.

With a number of MFIs graduating to SFBs, the number in the MFI space is likely to further increase. And, even after graduating intoa bank, they are likely to keep much of their lending to microfinance. Bandhan Bank, earlier an MFI, has even after close to twoyears into operation as a bank still got over 80 per cent of its lending portfolio concentrated in microfinance.

“Over the past three years, banks have shown a high level of interest in microfinance, part of a diversification strategy. Also,at least for two to three years, the new SFBs are likely to focus on microfinance as they build their deposit base,” says RatnaVishwanathan, chief executive officer, Microfinance Institutions Network.

Seven of the proposed SFBs, some of which have transformed to a bank, together account for 46 per cent of the MFI portfolio,amounting to Rs 26,228 crore.http://www.business-standard.com/article/finance/small-loans-big-impact-microfinance-now-big-business-at-banks-117031300020_1.html

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‘MFIs understand rural customers’: K. Paul Thomas , founder & chairman, ESAF Microfinance Oommen A. NinanThe Hindu

Thiruvananthapuram: RBI had given in-principle approval for 10 institutions to start small finance banks (SFBs) in the country.Among them was ESAF Microfinance, which was set to begin operations as a bank from March 17. In an interview, K. Paul Thomas, founder and chairman, ESAF Microfinance dwelt on the space that SFBs needed to fill.

Edited excerpts

What is the significance of a small finance bank in India?

The financial inclusion agenda was first mooted about the year 2005. The Swabhimaan campaign was the first such initiative tocover villages with banking facilities.

The initiative proved to be a failure due to lack of financial literacy and technology-related issues. A few years ago, Prime MinisterNarendra Modi furthered the agenda by launching Pradhan-Mantri Jandhan Yojana and later by sanctioning licences to launchSmall Finance Banks and Payments Bank. The recent digital push that we witnessed can also be considered as part of the overallagenda. The fact, that 8 microfinance institutions were selected from a total of 10 SFB licences, was a great acknowledgment to thecontributions made by the microfinance sector in the field of financial inclusion. Universal banks are not in a position to understandthe needs of small-value customers.

But, MFIs have been practising financial inclusion for a long time and hence are in a better position to serve the underserved. Thecredit requirements of these customers are really low. In a country where a majority of the population comes under thelow-to-middle income group, this is absolutely important.

Many banks have started in India with the objective of inclusiveness. How do you justify your importance?

Universal banks have found it difficult to deliver the last-mile connectivity mainly due to issues like lack of proper understanding ofthe rural population, shortage of appropriate human resources and cost issues. MFIs have employees who understand ruralcustomers and they are always willing to slog it out to reach out to the poor.

At ESAF, we give emphasis to client convenience and financial literacy. We deliver door-step service according to the convenienceof the clients. Unlike universal banks, we have proved to be the true agents of financial inclusion.

As we understand various lifecycle needs of rural customers better, we can develop products and services that aptly serve theassets and liability requirements of the customer.

For decades, we have been catering to the small-value loan needs of the rural customer.

Now, we have an opportunity to deliver the full bouquet of banking services to rural folk, as they were badly missing it for quite sometime.

As an MFI, we have set social targets for each branch apart from financial targets. We are bent on taking the same values forwardand differentiating ourselves in a more meaningful manner in the banking space.

In India, co-operative banks have major presence and participation from people. You are likely to compete with them. How do yougather support to get business?

We are here to deliver a promise the promise of offering personalised attention that has been missing from the entire bankingscenario for a long time.

This is important when banking is getting more transactional in nature. We know that the scenario is competitive. Hence, we give

emphasis to branding and have adequate plans to build brand ‘ESAF’ through multiple platforms.

As we communicated through an earlier campaign ‘we build the nation from the roots’, we will focus more on buildingthe brand through community development. The proof of the pudding is always in the eating. So merely communicating withoutdisplaying the essence will only hamper our aspirations. So far we have grown mainly through word of mouth.

The community initiatives we have envisaged for the bank will hopefully help us in delivering the same results. We have aninteresting and innovative social product in the offing that can disturb the market dynamics. Co-operative banks are permitted tofunction only in a smaller geography and cannot offer banking services on a wide scale.

On the technology side also they are lagging behind. We come with technologically advanced products and state-of-the art digitalsolutions.

We combine the virtues of both co-operative banks and universal banks: the local connect of cooperative banks and technologicalmight of universal banks will reflect in SFBs.

We don’t consider co-operative banks alone as our competitors. Maybe for a short time it may count. In the long term, we willconsider competition on a wider horizon and will stay relevant to all categories of customers.

In that context, RRBs and Local Area Banks have not really succeeded in picking up...

Failure of RRBs and LABs led to the formation of these new categories of banks. As I said earlier, the last-mile connectivity can wellbe executed by the SFBs, who were the leaders in the microfinance domain in various markets. In a country with more than130-crore population, financial inclusion cannot be achieved through a single stroke. It’s an evolution. SFBs were born out ofthat evolution and hopefully, I believe this time the authorities have struck the right cord with their objective. The RRBs and LABswere functioning under regulatory restrictions. Thankfully, all those constraints were removed for SFBs.

Will you continue your micro-finance business?

Yes. Instead of microfinance we are moving in to micro banking. ESAF Microfinance and Investments (P) Ltd., the current company,will continue to be a core investment company. The biggest advantage of becoming a bank is that we can give higher loans and canencourage the savings habit among them. Going forward, ESAF Small Finance Bank will be the flagship brand of ESAF.

How many branches will you open in the initial stage? What are your expansion plans?

In the initial stage, we will open 85 flagship retail branches and 300 customer touch points through the year. In the long term, wehave plans to reach around 500 branches by 2020.http://www.thehindu.com/todays-paper/tp-business/mfis-understand-rural-customers/article17459205.ece

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Pending repayments remain high for MFIs: RBI staff report Abhijit LeleBusiness Standard

Mumbai: The financial sector may gradually be recovering from the effects of demonetisation, but microfinance companies, whosecustomers depend on cash transactions, are still grappling with pending payments with high risk of defaults.

A research paper by the Reserve Bank of India (RBI) staff said such customers often fall in the category of small farmers andunskilled labour.

Microfinance institutions faced problems in getting full repayment from clients in some pockets of the country because of currencyshortage. As the time progresses, the prospects of recovery from people who stay in default reduce, said bankers.

The RBI relaxed the norms for asset qualification for loan installments due between November and December 2016 as a step toreduce adverse impact on books of finance companies.

Data provided by the Micro Finance Institution Network (MFIN), a self-regulatory body of finance companies working in microfinance segment, however, suggest that pending repayments were still high in January 2017, the paper said.

In November 2016, the RBI provided an additional 60 days beyond what was applicable for the regulated entities in this sector forrecognition of a loan account as sub-standard.

Subsequently, on December 28, the central bank again announced forbearance of 30 days (in addition to the 60 days providedearlier). The impact of leeway on non-performing assets (NPAs) would be known by the end of March.

While the total loan amount outstanding declined by 4.1 per cent between November-end and January-end, loan amount disbursedincreased by 9.2 per cent during the same period. The cash collections, which initially witnessed significant reduction, improvedsubsequently, except for some pockets in the western region.

The latest feedback received by MFIN from their member MFIs suggests that there has been some improvement in collections sincelate December. While repayments are mostly made in cash, MFIs are striving to opt for different cashless ways for disbursements.

The paper, titled ‘Macroeconomic Impact of Demonetisation A Preliminary Assessment’, prepared by the staff of

Monetary Policy Department at RBI, claimed the impact of demonetisation on the real economy has been transient.http://www.business-standard.com/article/finance/pending-repayments-remain-high-for-mfis-rbi-staff-report-117031300025_1.html

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Mutual Funds & AMCs

UTI Mutual Fund eyes Rs 500 crore AUM in Woman Savings Plan PTISee this story in: The Economic Times

UTI Mutual Fund is looking at achieving assets under management of Rs 500 crore in Woman Savings Plan from Rs 200 crore atpresent within the next one year, a senior company official said.

Moreover, the company plans to increase the number of folios under the scheme to around 50,000 from 21,000 now, over the nextone year, he added.

The plan is an open-ended debt oriented scheme meant for women investors.

The objective of the scheme is to invest in a portfolio of equity/equity-related securities and debt and money market instruments witha view to generate reasonable income with moderate capital appreciation.

"The scheme was being offered by us for the past 16 years and it achieved an AUM of Rs 200 crore as on January 31. However, werelaunched the product on March 6," UTI AMC products head R Raja told.

"We plan to increase the AUM of Smart Woman Savings Plan to Rs 500 crore in one year's time," he said.

Similarly, the company is looking at increasing the number of folios under the scheme to around 50,000 from 21,000 at present,within next one year, he added.

According to Raja, the scheme has given an annual return of 12.6 per cent.http://economictimes.indiatimes.com/mf/mf-news/uti-mutual-fund-eyes-rs-500-crore-aum-in-woman-savings-plan/articleshow/57587899.cms

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HDFC MF launches its 3rd cancer cure fund Partha SinhaThe Times of India

Mumbai: HDFC Mutual Fund (MF), which has mobilised about Rs 81 crore for the Indian Cancer Society (ICS) to help nearly 3,200cancer patients during their treatment over the last six years, has launched its third fund under its cancer cure series.

In 2011, it had launched its first Cancer Cure Fund, a three-year closed-ended fund, which was followed by the second one in 2014(set to close by the end of the current month). All dividends generated in these funds, managed by HDFC MF, is contributed to helpcancer patients through hospitals empanelled by ICS.

In addition, the fund house also contributes money to the corpus and does not charge any management fees. Under the third fundin this series, HDFC MF will contribute up to Rs 15 crore every year to ICS, while the investors in the fund will contribute theirdividend earnings towards the same cause. Like in the two earlier funds, the principal amount will be returned to the investors at theend of the three-year period.

According to Milind Barve, MD, HDFC MF, a combination of factors prompted the fund house to launch this fund. "Firstly, in India,there is a need for sustainable and regular source of money for philanthropy — this fund aims at that. Secondly, we haveexpertise to manage money and the distribution capability to raise money, which we are leveraging for this cause. Further, we alsocontribute an equal amount to match the investors' contribution so as to double the total impact of the money that is contributed tothis cause," Barve said.

One of the most compelling reasons to take the fund structure was that, in the past, several well-intentioned initiatives to help needycancer patients were launched. However, the absence of any sustainable source of funds forced those initiatives to fold up. Thefund house is trying to address that problem.

This scheme by HDFC MF is the only one of its kind in the industry that caters to philanthropic and corporate social responsibility(CSR) needs of investors. And the fund is leading the initiative. "We are trying to introduce a new category of asset class throughthis fund, which is philanthropy," Barve said.

As of now, 16 hospitals across India are empanelled by ICS to help needy patients under this scheme. One of the qualifying factorsis that the annual family income of the patient should not be more than Rs 2 lakh, which translates into a monthly income figure ofabout Rs 16,700. There is a rigorous selection process and funds released under the scheme could be used for one or more ofseveral stages of treatment like surgery, radiation, chemotherapy, supportive care, rehabilitation and pre- & post-treatmentevaluation, according to the scheme documents.http://timesofindia.indiatimes.com/business/india-business/hdfc-mf-launches-its-3rd-cancer-cure-fund/articleshow/57621720.cms

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Tax saver funds dole out dividends as markets rise M AllirajanThe Times of India

Chennai: It is raining dividends for investors in equity-linked savings schemes (ELSS). With equity markets turning buoyant, asmany as 10 tax-saver mutual fund (MF) schemes, as ELSS is popularly known, have either paid dividends or are in the process ofdoing so this month.

Tax-saver funds have beaten benchmark indices such as the Sensex in the current rally as well as over the one-year timeframe.These funds surged 25.8% over the past one year and have delivered 9.9% returns so far in 2017. In contrast, the benchmarkSensex and the broader Nifty indices have gained 17.6% and 19.3% respectively over the one-year timeframe and have advanced8.7% and 9.1% so far in 2017.

Tata India Tax Savings Fund has given a dividend of Rs. 9 per unit, the highest by the fund since 2005. This is also among thehighest payouts by a fund in the ELSS category in the current financial year. But it has been a mixed bag for other funds, whichhave either maintained payouts at earlier levels or increased them marginally.

"The steady market conditions has helped ELSS to maintain the dividend track record," says A Balasubramanian, managing directorand CEO, Birla Sun Life MF. "Dividends would be usually above bank FD (fixed deposit) rates. Funds typically pay 11%-12% asdividends on an average," he says. "Equity markets have done well. This has enabled us to maintain payouts," says RaghavIyengar, executive vice president, ICICI Prudential MF.

Fund houses typically announce dividends in tax-saver MFs to attract investors who buy ELSS towards the end of the financial year.These payouts ensure income as well as tax savings for investors. Net inflows (higher purchase in schemes than sales) into taxsaver MFs surged 57.1% year-on-year to Rs 7,191 crore ($1.08 billion) in the first 11 months of 2016-17.

Dividends had dried up between 2010 and 2014 as the markets remained tepid. Several schemes did not pay dividends during thistimeframe because they did not have enough incremental profits. The last three months of the financial year is the busiest period forELSS as investors rush to buy these products to save tax on time.

Several equity funds used to offer high dividends even if the market conditions were bad just to lure investors in the past. Thisprompted market regulator SEBI to stipulate in 2010 that dividends should be given only from actual realised gains and not from theunit premium reserve. This has had a sobering effect on payouts with fund houses either stopping or offering lower dividends whenthe market conditions turned bad.http://timesofindia.indiatimes.com/business/india-business/tax-saver-funds-dole-out-dividends-as-markets-rise/articleshow/57621838.cms

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UTI MD Leo Puri says close to an IPO, will seek all shareholders’ nod Anirudh Laskarmint

Mumbai: UTI Asset Management Co. Ltd has enough shareholder backing to clear a proposal for an initial public offering (IPO), butthe management wants approval from all its five shareholders, said a top executive.

The country’s sixth largest asset manager has four state-owned companies holding 18.5% each—State Bank of India,Punjab National Bank, Bank of Baroda and Life Insurance Corp. The remaining 26% is owned by T. Rowe Price.

In terms of shareholder approval, UTI has more than the 51% backing required to do an offer for sale (which provides currentshareholders an exit), or even the 75% needed to raise fresh capital, but the company wants to build a consensus first, managingdirector Leo Puri said in an interview.

“We value all our shareholders and we believe that a decision of this importance should be conceived with the support of allour shareholders,” said Puri in an interview.

On 20 February, the Financial Express reported that LIC had withheld its consent to the IPO as it wanted to acquire UTI and mergeit with its own asset management unit. Puri declined to comment on LIC and was just willing to say that he is close to persuading allshareholders and the listing will take place “soon”.

The initial share sale is crucial for India’s oldest asset manager, which has been lagging behind industry growth for a while.The absence of a dedicated promoter, delay in going public, limited access to the banking channel for distribution and the absenceof large equity schemes in its portfolio has fettered UTI.

Between March 2012 and January 2017, the Indian mutual funds industry collectively grew assets at an annual average rate of25%, faster than UTI’s 22% pace despite its larger customer base and a half-century old brand. Currently, UTI has Rs1.35trillion in assets under management while the industry size is nearly Rs18 trillion.

In the past, it has faced other issues such as having to deal with outsized staff and employee unions.

“If I do nothing, I am more prey than a predator in this environment,” said Puri.

Puri attributes a lot of UTI’s problems to its complex legacy and issues with shareholders. All the state-owned shareholdershave their own asset management subsidiaries. They became reluctant shareholders 15 years ago when the government split theerstwhile Unit Trust of India into the asset manager and another unit—the Specified Undertaking of the Unit Trust of India(SUUTI), a repository of government holding.

“It does not help us if you have such large shareholders who determine your destiny, have a role on who gets appointed toyour board, have a role on whether you have a CEO or not, have a role on whether or not you can raise capital for your businessesand so on. And the same shareholder is aggressively competing with you in the market place,” Puri said.

After former UTI CEO U.K. Sinha moved on to head the Securities and Exchange Board of India, the asset manager was headlessfor more than two years before Puri took over.

Puri feels listing UTI will solve several issues. It will resolve conflicts of interest and offer UTI the capital to build new businesses, hesaid.

“Since we don’t have anyone who can downstream capital to us, we must have access to the public capital,”said Puri. “I need freedom for determining strategies not just for the level of products and processes or segments but alsoneed flexibility for execution of partnerships and M&As.”

Kaustubh Belapurkar, director of fund research at Morningstar India, agreed.

“Listing makes management decision making easier, it makes it easier to build up a strategy and get the right people onboard to drive growth,” he said.

Three out of UTI’s four state-owned bank shareholders have enough capital raising of their own to do because of limitedgovernment support and rising bad loans.http://www.livemint.com/Companies/bltIIMhVEXTuohCkqkzK4J/UTI-MD-Leo-Puri-says-close-to-an-IPO-will-seek-all-sharehol.html

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Equities, Pvt. Equity & Hedge Funds

Canara Bank sells 13.45% in Can Fin Homes to GIC Shilpy SinhaThe Economic Times

Mumbai: Public sector lender Canara Bank sold 13.45% stake in its mortgage unit Can Fin Homes to Singapore-governmentbacked Caladium Investment for RS.753.77 crore, helping the bank shore up its capital after the government decided to hold thepurse strings.

Caladium Investment, an affiliate of Singapore's sovereign wealth fund GIC, bought 35.8 lakh shares at Rs.2,105 apiece, a 6.4%premium to Friday's closing price. Post the sale, Canara Bank would own 30% in the mortgage company.

Shares of Can Fin Homes, which has a market capitalisation of Rs.5,264 crore, has risen by a fifth in the past year as investorsscrambled to own a piece of the mortgage market which is growing at nearly 15% and is given a big push by the government interms of interest subvention for affordable housing.

The sale comes part of a larger state-run banks' plan to shore up their capital after the government allocated just about `10,000crore capital for the next fiscal. Others like IDBI Bank, Punjab National Bank and even the State Bank of India are looking to sellsome of their investments to ensure they meet the regulatory capital needs.

“There is an increasing divide between the large and smaller PSBs, with the former having some access to growth capital,better market valuation, and also some non-core assets to divest, while the latter would only receive bailout capital ifrequired,“ said India Ratings in a report. Ind-Ra expects banks to require Rs.910 billion in tier-1capital (including Rs.500billion of Additional Tier-1 (AT1) bonds) till March 2019 to grow at a bare minimum pace of 8-9% CAGR. Canara Bank had a capitaladequacy of 12.2%.

Canara Bank holds 51% stake in Canara HSBC OBC Life Insurance and 51% in Canara Robeco Mutual Fund.http://economictimes.indiatimes.com/markets/stocks/news/canara-bank-sells-13-45-in-can-fin-homes-to-gic/articleshow/57588785.cms

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As banks back away, private equities, non-banking financial companies back developers Priyanka GhoshThe Financial Express

Mumbai: While banks may be a trifle reluctant to lend to real estate companies, non-banking financial companies (NBFCs) andprivate equity (PE) firms are willing to lend and even offer a two-year moratorium, three fund managers confirmed to FE.

Developers are finding it hard to service their debt as both sales and unit launches have plummeted. “Sales are now being

driven by end users and people will no longer buy apartments that are just a hole in the wall,” said Amit Pachisia, chief creditofficer at Altico Capital. Demand, which is sitting on the fence at the moment, might surge when there is some evidence of nearcompletion so execution is essential, Pachisia added.

Echoing him, Khushru Jijina, managing director of Piramal Fund Management, one of the largest real estate lending platforms at themoment, said that there is no better way to tackle the issue of flagging sales than to complete projects. Rampant execution meansthe need for urgent working capital intensifies in the sector.

Provisions of the Real Estate (Regulation and Development) Act, 2016, now do not allow companies to sell apartments at thelaunch stage, scuttling the age-old practice of monetising a parcel of land at the pre-sales stage itself. So developers have nochoice but to borrow. This is evident in the manner in which structured debt finance has exploded in the sector in contrast to bankcredit declining. At last count, an estimated 80% of $3.1 billion has made its way to residential projects last year in this form,according to a Cushman & Wakefield estimate. As per Reserve Bank of India data, bank credit to real estate grew by just 1% in thepast one year (until January 2017).

The moratorium is being given so that developers can use the funds to build without immediately worrying about velocity of sales.Banks, of course, will not make such adjustments. The assumption is that once customers see pace and progress in construction,sales will follow. “The value of a ready flat is far greater than that of under construction assets,” said Jijina. The idea isto match the repayment schedule to the time line of cash flow from the project.

It’s a win-win situation should market fundamentals improve and people be willing to purchase mature assets, which, asJijina mentioned, is more expensive. But if the last three years are any indication, projections can hardly be cast in stone, openingup the sector to the possibility of a massive debt trap and refinancing requirement.

Debt of the 10 listed real estate companies stood at a high of R46,268 crore for the quarter ended September 2016, up fromR44,159 crore, according to Bloomberg data.

But according to experts, the concerns surrounding capital availability will be allayed because of the provisions of RERA.“Transactions will become far more refined when RERA kicks in so factors like completion timeline, mismanagement offunds, etc, that worry funds will be taken care of,” said Neeraj Sharma, director at Grant Thornton.

Fund managers said despite the initial lenience, underwriting norms are getting far tighter. “Collateral often includes not justthe project for which the loan is being extended but also some of the other fast-moving, best-performing assets of thecompany,” said Pachisia. Besides, lenders are leaving no stone unturned to map the cash flow of the companies they arelending to. As Jijina pointed out, the monitoring has to be strong enough to pick up even the slightest warning signs of a default.Often, NBFCs and PE funds are buying out other financiers from projects because as lone lenders, they can exercise higher control.

There is no lowering of the return expectation either. albeit the life cycle of projects is changing. The timeline of investments ischanging, now the cycle is five or six years, which is how long it realistically takes to execute a project, Pachisia said.

Developers are in a difficult position. Typically, structured debt finance is about 8% more expensive than bank debt. But those whocan access structured debt will do so despite the higher cost because at the moment most might default for the lack of cash flow.Banks will not tailor or adjust to the extent a fund will, Sharma added.http://www.financialexpress.com/industry/as-banks-back-away-private-equities-non-banking-financial-companies-back-developers/586838/

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Govt. Securities & Bonds

Indian firms raising cheaper funds abroad Anup Roy Business Standard

Mumbai: Indian companies, specifically banks, in international markets are raising money through bonds at a finer rate than manyfinancial institutions from other countries rated superior to India are doing.

India has an international rating of BBB-, a notch above junk.

ICICI Bank last week raised $300 million through 5.5-year bonds at equivalent maturity US treasury plus 155 basis points. The fixedrate coupon of the bond came at 3.25 per cent. India’s largest lender, State Bank of India (SBI), similarly, priced its bondstoo at 3.25 per cent in January.

Axis Bank, through floating bonds, raised money at 2.135 per cent. State-owned NTPC Ltd raised money at 2.75 per cent.

These are superfine rates, considering they came from a country with a sovereign rating that is just above the speculative grade.

Consider these rates from well-known issuers in countries rated a few notches above India. Chinese companies and financialinstitutions regularly tap the market to raise bonds at 3.5 per cent plus. For example, China’s biggest conglomerate, CITICGroup, raised money at 3.875 per cent on February 28.

Germany’s Allianz SE raised money in September at 3.875 per cent, and Britain’s Prudential Plc at 5.25 per cent inJuly last year, around the same time BNP Paribas raised eight-year funds at 3.650 per cent, whereas drug major Pfizer Inc raised30-year funds at an annual coupon of 4.20 per cent.

Of course, not all Indian companies are pricing their bonds as competitively. But the pricing is any way cheaper than what theywould have raised in the domestic market. The pricing between companies also varied widely. For example, Shriram TransportFinance Co Ltd raised three-year money at 8.25 per cent, even as Adani Ports and Special Economic Zone raised five-year moneyat 3.95 per cent.

“In the global context, improvement in India’s macroeconomic parameters and higher growth prospects have reflectedin increased demand for Indian credits,” said an ICICI Bank spokesperson.

“ICICI Bank, on the strength of its robust franchise and strong capital position, has been a regular issuer in the USD bondmarkets. Through well-timed issuances, the bank has been able to access foreign funding at very competitive rates,” thespokesperson said.

To be sure, rates could be structured in a manner that can effectively mask the rating of the firm. For example, by giving a higherdiscount to the face value, the effective coupon could be squeezed even further. In that case, taking the coupon won’t be aright measure.

In that case, the best gauge is to see the yield in the secondary market of the firm’s existing bonds.

ICICI Bank had issued a certain bond at a coupon of more than 6.5 per cent in 2007. The secondary market yield of that bond isnow close to 3.8 per cent, which establishes that ICICI Bank paper is attractive. As yields fall, prices of bonds rise.

The same is the case with SBI bonds in the secondary market. Yields have fallen much below the coupon of these bonds.

This also indicates that international investors are now able to distinguish between good companies and bad, and are not verybothered about the country rating as long as their money is safe. This is something that rating agencies have to consider. Even asIndia lobbies hard with international rating agencies, the country rating has remained static for a very long time even as theagencies and other international investors continue to praise the economic resilience and fundamentals of the country.

Clearly, investors have moved ahead of rating agencies.

“Investors put their money in a company on a case-by-case basis. This is not unusual that a company with a lower-ratedcountry gets very good rates because the underlying fundamentals of the company and the structure of the paper are good,”said Lillian Georgopoulou, fixed income product specialist at the London Stock Exchange.

Add to that, there is a new confidence in the Indian story.

“Investors now have confidence in both the country and the currency. The rupee in the past had been quite a volatilecurrency. With the credible government reforms of the Modi administration, investors have got the confidence to invest evenlonger-term in India,” she said in an interview with Business Standard earlier this week.http://www.business-standard.com/article/markets/indian-firms-raising-cheaper-funds-abroad-117031100807_1.html

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FPIs may invest aggresively in unlisted bonds after SEBI approval: Deloitte Sachin DaveThe Economic Times

Mumbai: The market regulator, SEBI’s decision to allow foreign investors in the unlisted bonds could see a huge uptake fromforeign portfolio investors, said a recent research report from Deloitte.

“In addition to enhancing the eligible investment basket for investment by FPIs, the above amendment would open up anefficient funding alternative for Indian companies without the need of getting the bonds and NCDs listed on stock exchanges. Thisamendment is another step taken by the regulators to enhance investor base in debt securities and to further deepen the debtcapital market in India. It is pertinent to note the end-use restrictions introduced by RBI on unlisted debt securities which prohibitIndian companies from using the funds raised from such securities for investment in real estate business, capital market andpurchase of land. Further, RBI has mandated custodians to ensure compliance with the end-use restrictions,” the report said.

Investments in unlisted debt securities would be in the form of bonds and Non-convertible debentures (NCDs) issued by public aswell as private companies. Investments in unlisted debt securities would also be subject to the minimum 3 year residual maturitycondition applicable currently to listed bonds. Funds raised by Indian companies through unlisted debt securities cannot be used inreal estate business, capital markets and purchase of land, the report added.http://economictimes.indiatimes.com/markets/bonds/fpis-may-invest-aggresively-in-unlisted-bonds-after-sebi-approval-deloitte/articleshow/57595549.cms

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Foreign investors pull out $4.8 b from Indian debt Tanya ThomasThe Hindu Business Line

Mumbai: India’s debt market has been quietly facing a bloodbath this fiscal. From April 2016 till date, foreign investors havepulled out a whopping net Rs. 32,090 crore or $4.8 billion from Indian debt papers.

According to depository NSDL, the net outflows from Indian debt in FY17 is the highest-ever. At the same time, net inflows intoequity by foreign investors touched Rs. 32,488 crore.

In an investment outlook report, portfolio management firm Sanctum Wealth said, “The infusion of fresh deposits in thebanking system is likely to shore up demand for G-secs by banks, which augurs well for bond prices. However, the narrowing of therate differential is likely the keep foreign investor on the sidelines.”

Yields risingLakshmi Iyer, Chief Investment Officer (Debt) and Head Products, Kotak Asset Management, said while foreign investors werepulling out of the domestic market through most of last year, the sell-off aggravated in October-December after demonetisation.

“World-over, yields were rising and correlation (with the local market) had broken. Investors decided to book profits at theiryear-end.

“If you look at the way the numbers stack up, the last three months of 2016 account for the bulk of the sales,” sheadded.

From October to December, FPIs sold net debt of Rs. 46,087 crore.

Another Rs. 2,319 crore went out in January while February saw net inflows of Rs. 5,960 crore. The first two weeks of March havealso seen positive net inflows of Rs. 557 crore.

“But I don’t think the February trend indicates a reversal as yet,” Iyer added.

“Barely a tenth of the amount that went out has come back in since January. With the dollar-rupee showing signs of stabilityand market participants getting comfort that the central bank is not going to cut rates, I think investors are looking more for currencyhope and not nearly as much for capital gains.”

Flows to remain tepidThe negative sentiment for foreign investors to Indian debt is expected to remain the same through the rest of 2017, if debt marketwatchers are to be believed.

Sanctum expects FPI flows to remain tepid in the local debt market in the year ahead. “We expect rates to remainrange-bound with a slight downward bias.”

Iyer said even if foreign investors return, “it will still be very measured”.

“With interest rates in the US rising, investors based in the US will see the return of a strong home-country bias. Investorselsewhere will prefer US paper to that of emerging countries.”http://www.thehindubusinessline.com/todays-paper/foreign-investors-pull-out-48-b-from-indian-debt/article9582402.ece

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Brokers / Distributors

Bourses

Dissemination boards fail investors of regional exchanges Lokeshwarri SKThe Hindu Business Line

The Securities and Exchange Board of India faces a tough task in protecting the interests of investors holding stocks that werepreviously listed on Regional Stock Exchanges (RSE). For, the dissemination boards (DB) set up to provide an exit to theseshareholders has failed to deliver.

The regulator had given two options to the exclusively listed companies (ELC) of RSEs when the exchanges were shut to obtainlisting on any of the nation-wide stock exchanges, such as the BSE or the NSE, or to move to dissemination board that were set upon nation-wide stock exchanges.

The DB was supposed to provide a platform where buyers and sellers of these stocks could find each other.

Currently the dissemination board of NSE sports a list of 641 companies that were listed on the Ahmedabad, Madras, Uttar Pradeshand other RSEs. The dissemination board on the BSE has 1,659 stocks belonging to the Delhi, Vadodra, Gauhati and other stockexchanges.

Apart from these exclusively listed stocks, the dissemination boards also facilitates trading in 679 ‘vanishingcompanies,’ that were previously listed on RSEs.

Few transactionsBut there are hardly any transactions taking place on the dissemination boards on the BSE and the NSE. While lack of awareness isone of the reasons, transacting on this platform is also very difficult.

MS Annamalai, an investor from Salem, who holds many plantation stocks that were previously traded on the Madras StockExchange says, “They put so many conditions for trading on the dissemination board that it was difficult to transact on it. Forinstance the minimum order size asked by my broker was too large.”

Further, the dissemination board is just a list of companies carried on the exchange website. The transactions take place beyondthe exchange platform. The exchange does not guarantee the settlement of these transactions either.

Unfavourable buy-backsAccording to Kaushik Mukherjee, Partner BMR Legal, making these stocks list on nation-wide stock exchanges will be very difficultas they will not be able to meet the listing requirements. Most of them are defunct companies that were not complying with thelisting guidelines of the RSE on which they were listed. Demand for them were very weak even when they were traded on RSEs.

Buy-back snagsSEBI had asked companies unable to list on nation-wide exchanges to buy-back the shares from shareholders. But investors areunhappy with the price offered by some promoters to buy back shares.

A case in point is Schneider Electric President Systems, formerly listed on Pune Stock Exchange.

The company is offering to buy back the shares at Rs. 200. But investors feel that the exit price is not fair, as it does not take in toaccount the company’s improving financial performance in recent times.

Investors such as Annamalai are also not happy with the buyback offers made by companies such as Chembra Peak Estate andThanjavur Spinning Mills.

The way outExchanges were asked by the SEBI to relax the listing requirements for companies formerly traded on the RSEs. But the NSEissued a circular last week increasing the capital and networth criteria for these companies.

With a stalemate on almost all fronts, what is the way out?

S Venkateswaran, former Director of Madras Stock Exchange, says that it would be good if the RSE stocks were traded in thepermitted category of NSE and BSE for at least a year to allow a proper venue for transactions.

Another option, according to him, is to list the companies on the SME platforms of nation-wide exchanges.

Since the listing fee required by the nation-wide exchanges are high, SEBI can bear the cost, in the interest of the small investors.http://www.thehindubusinessline.com/todays-paper/tp-news/dissemination-boards-fail-investors-of-regional-exchanges/article9582418.ece

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BSE to phase out weekly and monthly price bands for stocks PTISee this story in: The Hindu Business Line

Mumbai: To align the periodic price band mechanism with the new graded surveillance measures (GSM) framework, the BSE hasdecided to do away with weekly and monthly price limits for securities listed on its platform.

The stock exchange will phase out the weekly price bands from March 20 and the monthly price bands from April 3 for companiesthat attract such periodic price limits.

To prevent excessive volatility in shares the stock exchange, in 2015, had introduced long duration price bands, in addition to dailyprice bands, for stocks exclusively listed and traded on its platform.

The weekly, monthly, quarterly and annual price bands were devised to contain volatility in the prices of stocks across long period toensure improved price formation and better regulatory oversight.

However, in a recent notice, BSE noted that the genesis to introduce periodic price bands was to create a rationalised andstructured framework to promote and implement an orderly price discovery of securities on its trading platform.

“With the recent formalisation and introduction of the GSM framework on February 23, 2017, a need has been felt torationalise periodic price band framework implemented by the exchange to compliment GSM framework and to align the proactivemeasures taken by exchange, in a phased and orderly manner,” BSE added.

Accordingly, the exchange will phase out weekly and monthly price bands for companies, but will retain the quarterly and yearlyperiodic price limits.

“Also, all other provisions of periodic price band framework shall remain unchanged,” it added.

Nation’s stock exchanges have put in place GSM to check any abnormal rise in share price not commensurate with thecompany’s financial health and fundamentals like earnings, book value, fixed assets, net worth, P/E multiple.

Among the steps being proposed under GSM are placing such securities in trade to trade category, requiring the entities to depositan additional amount as surveillance deposit which can be retained for an extended period, and freezing of price on the upper sideof trading in shares.

Making such securities available for trading just once in a week or month is also been proposed.

The mechanism has been implemented on back of recent instances where shares of certain companies have seen a steep surge inprices despite no major trigger.http://www.thehindubusinessline.com/markets/stock-markets/bse-to-phase-out-weekly-and-monthly-price-bands-for-stocks/article9581810.ece

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International

Portugal's CGD bank seeks to sell Spanish, S.African operations ReutersSee this story in: The Times of India

Lisbon: Portugal's largest bank, the state-owned Caixa Geral de Depositos, plans to slash its foreign assets by half by 2020 as partof an ongoing restructuring and will prioritise selling its Spanish and South African businesses, the lender said.

In a statement issued late on Friday, the bank, which posted a record 2016 loss of 1.86 billion euros, said it expects to cut itsinternational assets to no more than 12 billion euros by 2020 from 23 billion last year, while targeting a rise in return on equity fromthe operations to more than 15 percent from 13 percent.

CGD's total net assets at the end of last year stood at 93.5 billion euros, down from some 101 billion in 2015.

The lender said it planned to maintain operations "in markets with Portuguese affinity", which include Portuguese-speaking Angola,Mozambique and the Macau region in China, while selling or shutting down the remaining non-core international business.

"We will give priority to operations (to sell) in South Africa and Spain," CEO Paulo Macedo told reporters, adding that the bank'sFrench unit was also likely to be sold.

Banco Caixa Geral in Spain has 110 branches across the country and employs about 500 people. CGD's Mercantile Bank has anetwork of branches mainly in the Johannesburg region.

Most of CGD's businesses abroad made a positive contribution to last year's results, if smaller than in 2015, led by its Macausubsidiary, the French unit, which serves thousands of Portuguese emigrants, and Angola.

Burdened by massive bad loans, which now have largely been provisioned for leading to last year's huge loss, CGD is beingrecapitalised to the tune of 4 billion euros.

The European Commission on Friday cleared the recapitalisation as it was carried out on market terms and therefore involved nonew state aid. It said the plan presented by Portugal to ensure the bank's profitability meant the state would receive a market-basedreturn on its investment.http://timesofindia.indiatimes.com/business/international-business/portugals-cgd-bank-seeks-to-sell-spanish-s-african-operations/articleshow/57595700.cms 

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BoE under pressure from bankers on Hogg appointment BloombergSee this story in: The Economic Times

The Bank of England's newly-appointed deputy governor remains under pressure this week as she awaits a lawmaker report on herconduct.

Parliament's Treasury Committee is reviewing Charlotte Hogg's position after she admitted she didn't disclose that her brotherworks at Barclays, which the BoE regulates.

The Sunday Times newspaper reported that some commercial bankers have said that if Hogg remains in her post, they will use thatas an argument that they should also be treated more leniently.

The BoE and the Treasury Committee declined to comment on the story .

John Mann, a lawmaker who sits on the Treasury Committee, tweeted on Sunday that “Pressure on Charlotte Hogg to resignas Bank of England no 2 is increasing not diminishing."

The committee can't block the appointment, but it can recommend against it. While not chiefly in charge of regulating banks, Hoggsits on a committee with responsibilities for supervision.

Barclays Link

The controversy emerged late last month when Hogg, who took over as the deputy in charge of markets and banking this month,revealed that she didn't disclose the Barclays link when she was hired as chief operating officer in 2013.

She also didn't mention it in her application for deputy governor, and it only came to light after her appointment, in a questionnaireshe completed for the Treasury Committee.

The issue dominated her appointment hearing before lawmakers, while the chairman and deputy chairman of the BoE's governingbody were also grilled on the matter at length at a separate hearing last week.

The BoE's next interest-rate decision is on Thursday and will be the first to include Hogg as a voter on monetary policy.http://economictimes.indiatimes.com/markets/stocks/news/boe-under-pressure-from-bankers-on-hogg-appointment/articleshow/57615620.cms

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HSBC gets new chairman in rejig AFPSee this story in: The Telegraph

Hong Kong: Banking giant HSBC announced the appointment of a new chairman today as part of a management overhaul that willalso see it choose a new chief executive, following a massive drop in profits in 2016.

British businessman Mark Tucker, currently group chief executive and president of insurance group AIA, will take over from DouglasFlint in October.

He will lead the hunt for a new CEO to replace Stuart Gulliver who is set to retire in 2018, the bank said in a statement to the HongKong stock exchange.

The changes come after HSBC profits received a huge blow last year. The bank attributed the decline to protectionist fears underDonald Trump and uncertainties caused by Brexit when it announced its 2016 results last month.

That sent new shivers through markets already spooked by concerns over political stability in Europe, Brexit and US trade policies.

HSBC praised Tucker's "long track record of successful leadership of complex financial services businesses in both Asia and theUK" in its statement.

Before he took the helm at AIA, Tucker was head of insurer Prudential.

Gulliver and Flint have led HSBC since 2010 in what has been a difficult period for the bank. The duo were grilled by Britishlawmakers in 2015 and apologised for "unacceptable" failings at HSBC's Swiss division following allegations the unit helped richclients hide billions of dollars from the taxman.

HSBC was one of the six major US and European banks that were fined a total of $4.2 billion by global regulators in a November2014 crackdown for attempted manipulation of the foreign exchange market. It was also fined $1.92 billion by US prosecutors in2012 to settle allegations that it failed to enforce anti-money laundering rules exposing it to exploitation by drug cartels and terroristorganisations.

Since 2011, Gulliver and Flint have announced more than 87,000 job cuts and exited more than 80 businesses.https://www.telegraphindia.com/1170314/jsp/business/story_140465.jsp#.WMdEO2OqBkg

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Economy

Sensex gains 114 points for week on exit-poll position PTISee this story in: Asian Age

Mumbai: The benchmark Sensex ended the week green, gaining 113.78 points to finish at 28,946.23, while the broader Nifty closedabove the key 8,900-level, trending on BJP-gains in exit poll positions.

The week saw the investor wariness on assembly poll-results of five states, while exit polls declared BJP ahead of other rivalparties, traders still preffered to remain cautious till poll-outcome as the market consolidated in a narrow-range momentum.

The market started the week on bullish note with key index marking two-year closing highs of 29K, triggered by approval of finaldraft of central GST and integrated GST by all powerful GST council, it sidelined the possible March rate hike by the US Fed andtemporary suspension of HIB visa.

However, after the initial perk-up, the market took to consolidative mode rest of the week with profit-booking on gains as well asinvestors opting for wait and watch policy, while giving muted positive thumps-up on BJPs gains in exit-poll results and awaiting forfinal poll-results outcome.

The ruling BJP in need of majority in the Rajya-Sabha, as the party's win in poll-results would boost the chances of passing keyreform bills. The key indices opened the week higher by 28,859.21 and later rallied to mark two year highs at 29,098.17, it aloseased to 28,815.02 before settling the week at 28,946.23.

Showing a moderate gain of 113.78 points, or 0.39 per cent. The sensex had lost 60.52 points or 0.21 per cent in last week. TheNifty had also gained 37 points or 0.42 per cent to close above 8,900-level at 8,934.55. It had declined 41.95 points during previousweek.

Buying was witnessed in Auto, Banks, Consumer Durables, Capital Goods, FMCG and Power sectors. While, Metals, Realty,HealthCare, Oil&Gas, Power, IT, PSUs segments saw profit-booking followed by MidCap and SmallCap companies shares.http://www.asianage.com/business/market/110317/sensex-gains-114-points-for-week-on-exit-poll-position.html   

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RBI says note-ban impact on GDP was over PTISee this story in: Asian Age

Mumbai: Post-demonetisation, the RBI today warned of a possible spike in inflation and stressed the need to make digital payments"safe and secure", even as it felt that the adverse and transient impact on the economy has "byand large" dissipated already.

In a preliminary assessment report on 'Macroeconomic Impact of Demonetisation', an RBI paper said Rs 1000/500 notes valued atRs 15.6 trillion were demonetised, but the precise estimate of currency that returned to the banking system is not yet available asthe reconciliation process is still on.

"Hence, the adverse wealth effect on account of SBNs (specified bank notes of Rs 1000/500) not returning to the banking systemcould be assessed only after the reconciliation exercise is complete," it said, while adding that the total net currency in circulationhas gone up by about Rs 2.6 lakh crore between December-end and early March.

The RBI also said that the surplus liquidity with banks may decline going forward as the remonetisation process moves furtherwhich may also lead to some fall in bank deposits.

The RBI, which said the paper has been prepared by the staff of Monetary Policy Department (MPD) with contributions from otherdepartments and should not necessarily be interpreted as its official views, said the wealth effect isanother channel through which demonetisation could have impacted the economic activity.

The report also said the overall business climate should improve with the medium-term positive effects of demonetisation starting togain traction. "... Going forward, unfavourable base effects in February could push inflation up. The base effect remains neutral inMarch 2017. There is a considerable uncertainty as to how vegetables prices will pan out over the coming months," the ReserveBank said.

It also said the demonetisation led to a sharp immediate pick up in digital payments, but the pace of growth moderated somewhat inFebruary 2017.

"While it is important that efforts be made for increasing acceptance of digital payments, it is equally vital to ensure that digitalpayments are safe and secure," it said.

There is a need to constantly review and ramp up security features of digital payments to maintain and enhance trust of its users,especially, given the low levels of literacy in India, the assessment report said.

On the overall economy, the RBI said the assessment is that the impact of demonetisation on the real economy has been transient,given the information available so far.

"The analysis in this paper suggests that demonetisation impacted various sectors of the economy; however, the adverse impact, ingeneral, was short-lived as it was felt mainly in November and December 2016. "The impact moderated significantly in January anddissipated by and large by mid-February 2017, reflecting an accelerated pace of remonetisation."http://www.asianage.com/business/economy/110317/rbi-says-note-ban-impact-on-gdp-was-over.html

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Demonetisation impact transient, says RBI paper The Hindu Business Line

Mumbai: A Reserve Bank of India paper has assessed that the impact of demonetisation on the real economy has been transient,given the information available so far.

The analysis of the central bank’s paper suggests that demonetisation (scrapping of Rs 500 and Rs 1000 bank notes duringthe November 9, 2016 to December 30, 2016 period) impacted various sectors of the economy.

“However, the adverse impact, in general, was short-lived as it was felt mainly in November and December 2016. The impactmoderated significantly in January and dissipated by and large by mid-February 2017, reflecting an accelerated pace of

remonetisation,” it said.

In February, the RBI had pegged down GVA growth to 6.9 per cent for FY2017 against its earlier projection of 7.1 per cent. It hadassessed the impact of demonetisation on GVA growth at about 33 basis points for FY2017. A basis point equals one-hundredth ofa percentage point.

As the impact of the liquidity shock was assessed to largely dissipate by mid-February, growth was estimated to bounce back in2017-18, the paper said.

Inflation

The paper said the 240 basis points decline in food inflation during November 2016 to January 2017 was the combined effect ofrecord pulses production, large winter arrivals of vegetables and some fire sales due to decline in demand following cash squeeze.

“However, inflation, excluding vegetables, moderated only marginally. Also, inflation, excluding food and fuel, remainedsticky. The headline inflation outlook in the near term will hinge on how food inflation evolves,” it said.

CASA deposits

The sharp increase in low-cost CASA (current account, savings account) deposits by banks is expected to have increasedbanks’ net interest income. However, this will need to be adjusted against the cost of managing the process ofdemonetisation, said the paper.

As regards other segments of the financial sector, the paper assessed that some non-banking finance companies (NBFCs),especially micro finance institutions, were adversely affected, in terms of disbursals and collection of repayments. However, thesituation for most NBFCs began to improve from late December 2016.

Jan Dhan accounts increased by 23.3 million post demonetisation, while deposits under Jan Dhan accounts increased by Rs.18,700crore (41 per cent).

Overall assessment

The paper observed that overall, demonetisation has had some negative macroeconomic impact, which, however, has beentransient as remonetisation has moved at an accelerated pace in the last 12 weeks.

“More importantly, demonetisation is expected to have a positive impact over the medium to long-term. In particular, there isexpected to be greater formalisation of the economy with increased use of digital payments.

“The reduced use of cash will also lead to greater intermediation by the formal financial sector of the economy, which should,inter alia, help improve monetary transmission,” the RBI said.

Given the partial information that is available post demonetisation so far, the analysis, especially of growth, is only preliminary innature, it said. It should, therefore, be possible to make an analysis in greater detail as more data becomes available in the comingmonths.http://www.thehindubusinessline.com/economy/impact-of-demonetisation-on-the-real-economy-has-been-transient-rbi/article9580739.ece

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