Indian Finance Industry Update

04 May 2017

RBI / MoF / Govt. PoliciesCabinet approves NPA ‘package’ for banks

RBI sends notices to 8 companies on concerns of fund round-tripping

Union Cabinet clears ordinance to tackle bad loans of banks: Sources

Regulatory Bodies / IRDA / SEBIOver 1,600 entities default in paying fine to Sebi

Sebi board trying to solve issues that dampened employee morale

Private / Public Sector BanksAffordable home loans grew 23% in last five years, says TransUnion CIBIL

IBA sets up committee to negotiate with unions

Slippages moderate, but asset quality issues persist

ICICI Bank Q4 profit soars three-fold to Rs. 2,025 crore

Central Bank of India gets new premises

Need to tightly manage asset quality going ahead, says Vishwavir Ahuja, RBL Bank

RBL Bank climbs 2% after Q4 results

RBL Bank may take a breather

Threat of automation: Robotics and artificial intelligence to reduce job opportunities at top banks

Despite automation, banking to see big rise in hiring

Smaller players bank more on government’s Digital India push

Australian investor looks to exit IDFC

Ujjivan SFB to open 171 branches by year-end

Exim Bank to provide $15 bn credit to Asian countries

Union Bank raises Rs 500 cr to boost core capital

We are in line for another capital raising in the first half of this fiscal: Vishwavir Ahuja

Foreign Banks / FIIsRBI to hold key rate next month; cut 25 bps in August: BofAML

AIIB grants $160 mn for Andhra Pradesh power project

Rating & Research Credit & Pre-paid Cards

Cash still in currency, ATM demand up

Housing FinanceAffordable housing safer bet for lenders with under 1% NPA

DHFL net up 31% in Q4

DeMo turned out to be positive for Housing Fin: DHFL's Wadhawan

PNB Housing Finance is Carlyle’s 3rd biggest holding in a listed firm: Bill Conway

DHFL plans to raise Rs 22,000 cr via NCDs

Development BanksHousing push, attractive price make Hudco offer a good bet

NBFCs / FIs / MicroFinanceSrei Infra eyes 25% growth in loan disbursements for FY18

Reliance Capital gets bourses approval for demerger

Village Financial Services gets award

Citi bank's Aditya Narain to join Edelweiss

Edelweiss ARC builds war chest to shop for NPAs

Expect FY18 to see steady (Foreign) inflows in Govt & Corporate bonds: Ajay Manglunia, Ex VP at Edelweiss Financial Services.

Ujjivan Small Finance Bank commences operations in Pune

Brokers / DistributorsBourses

‘Deglobalisation’ is the ‘top worry for Indian market’: CJ George, Founder and MD, BNP Paribas,Geojit Financial Services

Life & General InsuranceSBI Life Insurance Q4 profit jumps 31%

Star Health ties up with Hero Corporate

The industry grew 30% but we grew 40% last year: Rakesh Jain, Reliance General Insurance

Fear of boardroom battles sees cos seeking exotic cover

HDFC Life Q4 net profit at Rs 274 crore

Why bequeathing vehicle matters, too

Mutual Funds & AMCsMFs see highest growth in assets from hinterland in FY17

Outflows from equity mutual funds triple in four months

April SIP inflows hit all-time high of Rs 4,200 crore

PPFAS Mutual Fund launches 'PPFAS Self Invest' mobile application

Still bullish on domestic biz, underweight on IT and pharma: Harsha Upadhyaya, Kotak AMC

RIL seeks nod for MF investment

Pvt. Equity & Hedge FundsIndian equities close flat on negative global cues

Equity market at all-time high, but that benefits very few Indians

IRB Infra InvIT issue subscribed 7% on Day 1

Brigade Enterprises raises Rs. 500 cr via QIP

Pension Funds / PF / EPFGovt Securities & Bonds

Spread compression may hit debt market: Aditi Nayar, ICRA

Masala bonds help companies diversify fund source without forex risk, says Icra

In Q4, 39% of $ 7.4 bn funds raised via Rs. bonds

International News‘Sharper Fed rate hikes a key risk to Asia’

Standard Chartered picks Frankfurt for its new EU hub on Brexit

BNP Paribas Q1 profit rise powered by trading

Economy Rupee gains 6 paise vs dollar

Sensex ends flat; ICICI Bank results, Federal Reserve policy outcome eyed

ADB pegs India’s growth at 7.4% for 2017-18

ClosingLast Financial Closing....

RBI / MoF / Govt. Policies

Cabinet approves NPA ‘package’ for banks The Hindu Business Line

New Delhi: The Union Cabinet on Wednesday approved a set of key measures to tackle the non-performing assets (NPA) mess in

the banking system.

Briefing newspersons on the key decisions, Finance Minister Arun Jaitley said the measures would be sent to President PranabMukherhee for approval.

Indications are that the measures widely expected as a new NPA resolution policy may involve amendment to the BankingRegulation Act. The amendment is being made through an ordinance route.

The Prime Minister’s Office, the Finance Ministry and the Reserve Bank of India had recently arrived at a consensus on anew NPA resolution policy.

Under the agreed policy, the oversight committee (OC) will have special powers to resolve NPAs.

The RBI had set up an oversight committee under the Scheme for Sustainable Structuring of Stressed Assets (S4A).

It was primarily tasked with overseeing the loan restructuring process in a transparent manner.

Indications are that the new policy will allow banks to take a haircut within permissible limit. A new formula to give effect to this isbeing put in place.

The OC will recommend the extent of haircuts that banks can take using this formula.http://www.thehindubusinessline.com/money-and-banking/cabinet-approves-npa-package-for-banks/article9679132.ece

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RBI sends notices to 8 companies on concerns of fund round-tripping Sugata GhoshThe Economic Times

Mumbai: Reserve Bank of India (RBI) has slapped notices to at least eight companies including some software firms amid concernsof round-tripping of fund and violation of rules on foreign borrowing.

The banking regulator has questioned the investments made by overseas joint ventures and wholly-owned subsidiaries of thesecompanies into other Indian entities.

The central bank suspects that some Indian groups and business families have misused overseas arms to raise cheap dollar loansand bring back the money as foreign direct investment (FDI) into local outfits owned by the same group.

RBI, in its letter sent over the last one month, has asked the companies whether specific approvals were taken for creating suchstructures, a senior banker told ET.

The regulator has in similar cases directed companies to unwind such investments, accept contravention committed under theForeign Exchange Management Act (FEMA), and cough up a settlement fee for compounding the offence.

The nature of the fund-flow could typically be like this: company A floats a subsidiary or acquires an offshore company (say B, in theUS), with B subsequently raising external commercial borrowing to buy equity of company C in India.

According to RBI’s order, either B will have to sell off its stake in C or A will have to divest its holding in B. But this would notbe painless if a business group particularly infotech firms which operate in multiple jurisdictions and post their engineers in variouslocations have genuine business reasons and commercial considerations that justify such fund-flow.

According to sources in the financial markets, offshore structures such as these have indeed been used in the past by Indianmanufacturing and a few real estate companies to sidestep stringent regulations on external commercial borrowings (ECBs) inaccessing inexpensive loans overseas.

The regulator is taking a closer look to figure out whether a slice of the inflow masquerading as FDI is actually leveraged offshoremoney and round tripping of the undeclared fund that was earlier parked in the bank account of foreign unlisted companies wherethe Indian group has a sizeable control.

“However, RBI is yet to question the inflow from old overseas JVs or subsidiaries which have been in existence since thedays of FERA. While some firms do indulge in such sharp practices, it will be unfortunate if genuine operating companies with bonafide businesses are pulled up,” said another person familiar with the development.

Under the circumstances, RBI may have to come out with a certain clarification to spell out the nature of overseas subsidiaries andinvestments that are permissible. “One is not clear about the ‘specific approval’ that RBI is taking about in itsnotices. An overseas company that is acquired may have pre-existing subsidiary or surplus cash,” said the person.http://economictimes.indiatimes.com/news/economy/finance/rbi-sends-notices-to-8-companies-on-concerns-of-fund-round-tripping/articleshow/58504802.cms

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Union Cabinet clears ordinance to tackle bad loans of banks: Sources PTISee this story in: The Times of India

New Delhi: The Union Cabinet on Wednesday approved promulgation of an ordinance to amend the Banking Regulation Act forresolution of the NPA crisis facing public sector banks, top sources said.

Finance ministry sources said the ordinance on NPA resolution will empower the Reserve Bank of India to issue direction to banksto effectively resolve bad loans.

Public Sector Banks are saddled with non-performing assets or bad loans to the tune of a staggering Rs 6 lakh crore.

Without giving details, Finance Minister Arun Jaitley said the Cabinet has taken some important decisions in respect of the bankingsector.

"There is a convention that when some proposal is referred to the President, then details of it cannot be disclosed till it is approved.As soon as approval comes, details will be shared," he said.http://timesofindia.indiatimes.com/business/india-business/union-cabinet-clears-ordinance-to-tackle-bad-loans-of-banks/articleshow/58500973.cms

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Regulatory Bodies / IRDA / SEBI

Over 1,600 entities default in paying fine to Sebi PTI See this story in: The Statesman

New Delhi: More than 1,600 entities failed to pay penalties imposed on them by markets regulator Sebi for various violations tillMarch 2017.

These defaulters include individuals and companies, which failed to pay penalties levied on them by Sebi for various offencesrelated to securities market, while some of these cases are nearly two decade old.

Some of the defaulters have not paid up amounts as small as Rs.15,000, while the majority of individual penalties are worth a fewlakhs of Rupees and a few others amounting to a few crores of Rupees.

Moreover, some of these dues are pending since 2000, while many of these cases are also pending in courts and at other forums.

As per the latest data released by Securities and Exchange Board of India (Sebi), total number of 'defaulters' in payment of penaltyimposed by the regulator as on March 31, 2017 stood at 1,628.

Meanwhile, Sebi has also begun to exercise its powers of attaching bank as well as demat accounts and other assets for recoveryof the outstanding dues pending for up to 17 years.

More than 2,500 attachment notices have already been issued to several entities, as part of Sebi's effort to recover funds fromdefaulters.

Securities Laws Act empowers Sebi to recover penalties imposed by the Adjudicating Officer, amount directed to be disgorged andmoney ordered to be refunded to the regulator.

The recovery powers include attachment of bank as well as demat accounts and sale of assets of the defaulters.http://www.thestatesman.com/business/over-1-600-entities-default-in-paying-fine-to-sebi-1493811974.html

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Sebi board trying to solve issues that dampened employee morale Jayshree P. Upadhyaymint

Mumbai: The board of Securities and Exchange Board India (Sebi), under the chairmanship of Ajay Tyagi, is attempting to bridgethe divide that had emerged between the board and its employees by addressing concerns around issues that had dampenedemployee morale, two people familiar with the development said.

The two most contentious issues are the appointment of employees as executive directors and external inquiries related to actionstaken by them in official capacity.

The number of inquiries have risen to such a level that one in 10 Sebi employees is facing scrutiny from agencies such as theCentral Bureau of Investigation and income tax department.

According to one of the two people cited earlier, SEA (Sebi Employee Association) in a recent meeting with whole time member G.Mahalingam highlighted the need for an institutional mechanism, where the vigilance department acts as the nodal agency toaddress external agency inquiries.

“The Sebi board is mulling on having such a mechanism. In the meantime to address the past queries, Sebi officer will have

the support of Sebi as an institution through the chief vigilance officer (CVO) to draft replies for investigative agencies,” saidthe second person, on condition of anonymity.

“If a CVO is helping draft replies, then he would have already examined the queries raised by the investigative agency fromcorruption and procedural lapses stand-point,” said the first person.

Additionally, to avoid unnecessary queries, Sebi board is devising a comprehensive file noting system. “Even though blanketimmunisation from investigative actions is not possible, Sebi officers need to be allowed to take a fair judgement call on what actionto take,” said Sandeep Parekh, Founder, Finsec Law Advisors.

SEA had approached the Bombay high court against Sebi’s policy of hiring external candidates at ED level in February 2016,citing lack of professional growth impacting employee morale.

The court dismissed the appeal stating that Sebi regulations give the regulator the power to hire external candidates. SEA officebearers were planning to appeal the decision in the Supreme Court.

To avoid the stand-off, the regulator in a recent board meeting approved a proposal to amend Sebi employee regulations.“The board has now cleared a proposal that internal EDs would be 2/3 and external 1/3 of the nine ED posts. Earlier half ofthe appointments at the level of EDs were reserved for external candidates which hampered professional growth for officials whogrew with Sebi,” said the first person.http://www.livemint.com/Money/gSXeGJyYSWBeO84D1Od27M/Sebi-board-trying-to-solve-issues-thatdampened-employee-mor.html

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Private / Public Sector Banks

Affordable home loans grew 23% in last five years, says TransUnion CIBIL The Hindu Business Line

Mumbai: Loans meant for affordable housing (ticket size less than Rs. 10 lakh) have shown a robust 23 per cent compoundedannual growth rate (CAGR) over the last five years.

A report by TransUnion CIBIL said the growth has come while keeping the delinquency rate firmly under control at around 1 percent.

Further, the average ticket size has been decreasing from Rs. 4.8 lakh in 2009-10 to Rs. 4.1 lakh now, possibly suggesting thecredit industry’s success in the financial inclusion drive.

The report also pointed out that the accounts opened in the last five years have shown a steady pace of growth with an averageincrease of 23 per cent from 2012 to 2016.

In total, the new accounts opened in the last five years have been close to 3.5 million. In the year 2016, approximately Rs. 30,400crore of loans was sanctioned in the affordable housing segment.

The report also noted that Maharashtra, Madhya Pradesh, Gujarat, Tamil Nadu and Andhra Pradesh are the top five States with thehighest number of loan accounts meant for affordable housing opened in the last five years.

The five States contribute 55-60 per cent of the total accounts opened and hold roughly the same share in total amount sanctioned.

Maharashtra holds the top spot with the highest number of accounts opened at over 6.53 lakh, followed by Madhya Pradesh at 5.60lakh; Gujarat at 3.13 lakh; Tamil Nadu at 2.65 lakh and Andhra Pradesh at 2.28 lakh.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/affordable-home-loans-grew-23-in-last-five-years-says-transunion-cibil/article9679183.ece

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IBA sets up committee to negotiate with unions Business Standard

Indian Banks Association (IBA) has set up a six member committee to hold talks with banks unions on wage revision.

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Slippages moderate, but asset quality issues persist Radhika MerwinThe Hindu Business Line

Barring the one cement account that resulted in about Rs. 5,300 crore of slippages, additions to bad loans for ICICI Bank declinedsequentially during the March quarter.

But the asset quality pain for the bank appears to be far from over. On the face of it, slippages (excluding the cement account)moderating to Rs. 5,911 crore from the peak of around Rs. 8,200 crore in the June 2016 quarter, may appear comforting. But thestill sizeable additions to bad loans, around Rs. 19,000 crore of outstanding accounts in the watchlist, notable portion of loansrestructured under 5:25 scheme and strategic debt restructuring (SDR), and also divergences observed in asset classification andprovisioning from RBI norms all suggest more pain for ICICI Bank in the coming quarters.

Until the December 2015 quarter, when slippages first shot up, ICICI Bank’s quarterly additions to bad loans were in the Rs.1,600-2,200 crore range. At nearly Rs. 6,000 crore, the latest March quarter slippages still remain elevated.

Outstanding accountsICICI Bank had outstanding accounts of around Rs. 44,000 crore as of end-March 2016 under the watchlist. This has shrunk bymore than half as of March 2017. Nonetheless, given that chunk of the reduction (about Rs. 20,000 crore) in these accounts havehappened from slippages to NPAs, the bank can see more pain in the coming quarters. Assuming that the outstanding accountsunder the watchlist slip into NPAs over the next four quarters, the pace of quarterly slippages are likely to hover in the Rs.4,500-4,700 crore range.

ICICI Bank has about Rs. 5,200 crore worth of accounts restructured under the SDR and Rs. 2,600 crore under 5:25. Slippages, ifany, from these accounts could add to the asset quality pain.

The RBI’s recent circular requires banks to make suitable disclosures in case of material divergences from its norms in assetclassification and provisioning (pertaining to fiscal 2016). According to ICICI Bank management, the RBI assessed incrementalgross NPA to the tune of Rs. 5,100 crore as part of this exercise. About 40 per cent of this was accounted for during the June 2016quarter, according to the management, and as of FY17, all such accounts have been classified as NPAs and provided foraccordingly. A chunk, 84 per cent of these accounts, was part of the bank’s watchlist.

Core performanceOverall loan growth (including overseas loans) stood at a muted 6.7 per cent. However, on the domestic front, loans grew 14 percent year-on-year, far higher than the overall 5 per cent growth for the sector.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/slippages-moderate-but-asset-quality-issues-persist/article9679181.ece

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ICICI Bank Q4 profit soars three-fold to Rs. 2,025 crore The Hindu Business Line

Mumbai: ICICI Bank has ended the fourth quarter of FY2017 in style, logging a near-three-fold jump in standalone net profit andannouncing issue of bonus shares and dividend.

The bank also said additions to bad loans will be significantly lower this financial year compared with the previous year.

India’s largest private sector bank by consolidated assets recorded a standalone net profit of Rs. 2,025 crore in the reportingquarter ended March 31, 2017 compared with Rs. 702 crore in the year-ago quarter.

The bottomline in the reporting quarter was supported in good measure by an income tax refund of Rs. 981 crore and relativelylower provisioning burden of Rs. 2,898 crore ( Rs. 3,326 crore in the year-ago period).

For the full financial year (FY2017), standalone net profit was almost flat at Rs. 9,801 crore ( Rs. 9,726 crore in FY2016).

The Board has recommended a dividend of Rs. 2.50 per share, and an issue of bonus shares in the ratio of one equity share forevery 10 equity shares.

In the reporting quarter, net interest income (the difference between interest earned and interest expended) was up 10.3 per centyear-on-year (y-o-y) at Rs. 5,962 crore.

Non-interest income, including fee income, other income and treasury income, edged up 1.3 per cent to Rs. 3,017 crore.

While total advances increased 7 per cent to Rs. 464,232 crore, total deposits increased 16 per cent to Rs. 490,039 crore.

Loan growthMD & CEO Chanda Kochhar observed that y-o-y growth in domestic loans was 14 per cent, driven by retail loans, which grew at18.5 per cent.

The bank consciously de-grew its overseas loan book by 20 per cent.

In FY2018, Kochhar expects domestic loans to expand by 15-16 per cent, with retail and SME loans growing at 18-20 per cent and15-20 per cent, respectively. The share of retail loans in total loans increased to 51.8 per cent at March 31, 2017 from 46.6 per centat March 31, 2016.

On the asset quality front, the ICICI Bank chief sees additions to non-performing assets (NPAs) in FY2018 to be significantly lowerthan in FY2017 due to asset resolutions coming to fruition and upgrade in loan accounts.

Asset qualityThe additions to NPAs had been gradually declining from Rs. 8,249 crore in the first quarter to Rs. 8,029 crore in the second quarterand Rs. 7,037 crore in the third quarter.

However, in the fourth quarter, the additions to NPAs have been elevated at Rs. 11,289 crore. Of the additions to NPAs in thereporting quarter, Rs. 5,378 crore was due to one account in the cement sector. Kochhar said a merger and acquisition transactionhas been announced in respect of the said cement company. The bank expects part of the loan to be upgraded on conclusion of thetransaction.

Higher write-offsWrite-offs in the reporting quarter were sharply higher at Rs. 5,386 crore ( Rs. 148 crore in the year-ago quarter).

The ICICI Bank scrip closed at Rs. 272.75, down 1.16 per cent over the previous close, on the BSE on Wednesday.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/icici-bank-q4-profit-soars-threefold-to-rs-2025-crore/article9679184.ece

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Central Bank of India gets new premises The Hindu Business Line

New Delhi: The public sector Central Bank of India has a new premises 'Sorabji Bhawan' in the capital. This new premises at KarolBagh was inaugurated by Rajiv Rishi, Chairman and Managing Director, Central Bank of India, on Monday.

Sorabji Bhawan would house the Delhi zonal office and regional office, Delhi South, an official release from the bank said.http://www.thehindubusinessline.com/money-and-banking/central-bank-of-india-gets-new-premises/article9678360.ece

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Need to tightly manage asset quality going ahead, says Vishwavir Ahuja, RBL Bank The Economic Times

In a chat with ET Now, Vishwavir Ahuja, MD & CEO, RBL Bank says that the gross NPA was 0.98 per cent excluding one corporateaccount that slipped and four out of five accounts had already got recovered. He also sees some deterioration in financial inclusionand micro finance banking book.

Edited excerpt

ET Now: What has led to the strong profit growth, your margin expansion and also what would you attribute the strong other incomegrowth to?

Vishwavir Ahuja: The fact that our various business engines which we have been investing in over the last several years many ofthem are coming to fruition, they are reaching important levels of scale and escape velocity. And as we go along we are able toexpand our customer franchise, our ability to cost sell more and also increase our overall distribution across the retail and massbanking segments that we have. All of this is kicking in well and we have a strong team, we are responsive, fleet-footed nimbleinstitution and that helps in challenging credit environment where obviously there is some movement of market share that ishappening from some players who have certain difficulties. The whole idea is to able to take advantage of some of thoseopportunities in the current environment. It is a combination of various factors but the good news is that across all our businessesthere is growth and improvement in operating profitability and the various financial metrics and parameters are all seem to beimproving.

ET Now: Is this margin expansion really sustainable? How do you see yield and cost of funds shaping up?

Vishwavir Ahuja: As far as the interest rate environment and yields are concerned and we have pretty much reached the bottom ofthe interest rate cycle for the time being. We will see much further rate reductions in the immediate foreseeable future and that hasbeen played out. The way forward is going to be in improve operating efficiencies, in bringing down cost of funds, improve the feeincome and the other income components and to improve the asset mix of the businesses going forward, we also need to tightlymanage asset quality just as we have been able to do in the past. These are going to be the key parameters and to create alternatechannels of customer acquisition and distribution which can be done at lower cost. As we increase our customer base, the cost offunds has been coming down.

ET Now: The NPA stress has risen by about 25% on a sequential basis what has led to the high NPAs? Which sectors are youseeing stress in? How has your stress shaped up in the MFI book?

Vishwavir Ahuja: Our NPA position and provisioning has increased in this quarter and even compared to last year. If I break it downthat actually comes down to one corporate account which came up in the RBI review happened on March, where they wanted us torecognise as NPA five accounts essentially, four out of five NPA accounts had already got repaid and recovered. Therefore that hadno effect, one account which we had to recognise was in value terms of about Rs 65 crore. And in terms of basis points of NPA itwas 22 basis points and that is something that we had to take at the fag end of the fiscal year in March. The gross NPA was 0.98per cent, which has improved over the last quarter. The March 2016 gross NPA was 0.98, December 2016 gross NPA was 1.06%and if I take this one particular corporate account out of the consideration then it was 0.98%. In many ways the overall portfolioquality was intact and in fact slightly improving.

ET Now: What are your slippages and recoveries for Q4? What is your outlook going forward? Do you also see provision coverimproving from the current levels of 59%?

Vishwavir Ahuja: As a matter of stated policy we had said time and again last year that asset provisioning is around 55% to 60%.

The provision coverage ratio perspective is adequate and I do not think we are changing that position. We will stay close to 60%even going forward, that is the first part. The credit environment going forward we do see slight deterioration largely because ofsome of the hazards post demonetisation in the financial inclusion and micro banking portfolio which is not an insignificant number.It is a very big number which is about 15% of the total portfolio and within that portfolio there are some challenges but again relativeto the industry we are much better off. They are relatively modest in our case but having said that even at those modest levels wemay see some impediment and some provisioning coming from that space in the fourth quarter.

ET Now: Your deposits have been up 42%, advances up 39% what is then the growth outlook for FY18? What sort of product mixchange do you envisage?

Vishwavir Ahuja: Yes, the growth outlook is positive. We see strong momentum in all businesses. Basically we have given indicationin our Vision 2020 plan, that we expect to grow the book between 30-35% per annum on a compounded annual growth rate. In thecurrent year we will stick to that guidance and we expect to see that kind of growth even on a higher base. The retail and bankingbusinesses will grow little faster than the wholesale businesses, while both will grow handsomely, they will grow faster and in theasset mix over a three-four year time frame we will move closer to the 50-50 balance in terms of wholesale and non-wholesalewhich currently is 61-39. It is 61 wholesale, 39 non-wholesale but we expect to move that gradually to the 50-50 balance. Earlier weexpect strong deposit growth to continue, improvement in CASA to continue and that seems to be the story going forward.

ET Now: How would you describe your capital consumption so far? Should we expect some capital raising from you in FY18?

Vishwavir Ahuja: We have been averaging our capital consumption of about 60 bps per quarter. In the last quarter it was a littlehigher at 70 bps. In total we consume 2.5% of capital in the year that just went by which brings us to a tier one capital ratio of11.7%. Overall capital adequacy of 13.7% that is where we are at. So we are reaching the thresholds of our capital comfort and weexpect to raise capital within the next few months i.e. within the first half of the current fiscal year.

ET Now: Will you also be exploring any inorganic growth plans during FY18 and if so what would be the nature of business, thesector that you would be interested in?

Vishwavir Ahuja: There are no such plans that we have on the table as of now and therefore our entire growth strategy and forwardmomentum is based on the organic build out of our various businesses in line with our guidance that we have already given out.Going forward we see the entire landscape gradually changing and we do believe that opportunities will get thrown up. Thoseopportunities will become available to a clutch of few banks at the end of the day.http://economictimes.indiatimes.com/markets/expert-view/need-to-tightly-manage-asset-quality-going-ahead-says-vishwavir-ahuja-rbl-bank/articleshow/58493536.cms

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RBL Bank climbs 2% after Q4 results The Economic Times

New Delhi: Shares of RBL Bank climbed over 2 per cent in Wednesday’s trade after the private lender reported a 54.6 percent YoY surge in net profit at Rs 130.13 crore for the March quarter.

The rise in profit was seen during the quarter despite a jump in provisions for bad loans rose.

The bank had reported a net profit of Rs 84.18 crore in the corresponding quarter last year.

Following the announcement, the stock rose 2.46 per cent to hit a 52-week high of Rs 600 on BSE.

Total income of the quarter climbed 35.17 per cent YoY at Rs 1,222.87 crore , compared with Rs 904.66 crore in the same quarterlast year.

Net interest income (NII) rose 29.44 per cent YoY to Rs 986.32 crore, compared with Rs 761.95 crore in the year-ago quarter.Gross NPAs for the quarter stood at 1.20 per cent of gross advances, compared with 0.98 per cent in the same quarter last year.The bank made provisions and contingencies of Rs 82.10 crore for the quarter, which was twice the Rs 37.88 crore provision itmade in the year-ago quarter.http://economictimes.indiatimes.com/markets/stocks/news/rbl-bank-climbs-2-after-q4-results/articleshow/58490933.cms

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RBL Bank may take a breather Hamsini KarthikBusiness Standard

Despite encouraging March quarter (Q4) results, RBL Bank's stock didn't react much to the numbers, rising only half a per cent onWednesday's trade. Despite strong results that came after market hours on Tuesday, analysts are turning cautious, given the 77 percent rise in stock price this year, and one-year gain of 160 per cent.

"Though we remain positive on RBL Bank, a large part of the growth story is well captured in current valuations. So, upside can belimited," says a local analyst reviewing his 'buy' recommendation for the stock. Kotak Institutional Equities and Citi turned cautiouson the stock early on.

RBL Bank continued to report leading loan growth of 40 per cent year over year, which helped its net profit grow 55 per cent, but

slippages (loans that turn bad) were higher in Q4 at six per cent. There could also be pain in the bank's microfinance book in FY18,as repayment for four per cent of micro-loans are due over 90 days.

Also, non-performing loan (NPL) ratio at 1.2 per cent of loans in Q4 is among the highest in recent times, and the provisioning for 47per cent of bad loans for 2016-17 is the lowest in recent years.

The bank has been commanding premium valuation for its clean book and strong growth till now. At 4.4 times the bank's FY18estimated book value, the stock price is ahead of larger peers IndusInd Bank, HDFC Bank, and Yes Bank.

"These valuations leave very little room for error. Therefore, if growth is achieved at the cost of loan quality, that could lead tode-rating of the stock," warns the local analyst quoted above.

Those at Kotak caution that any negative surprise on loan quality or growth could affect fund-raising and hurt rising return ratios.They believe that a slower growth could ease up some concerns.

Riding on the success of the Initial Public Offering (IPO), the bank shouldn't face any major hurdle to raising capital, unless loanquality worsens further. However, given the loan quality, it will be interesting to see how many takers the stock finds at the currenthigh valuation. This could, in turn, affect the bank's fund-raising plan.

Going ahead, investors will also monitor how the bank uses capital, given its relatively weak retail (individual) loan exposure. Also,the bank's deposits are weaker than peers. Seen against a current account-saving account ratio of 35-50 per cent for its peers, RBLBank's CASA at 22 per cent needs improvement.

Also, with the loan book continuing to be dominated by corporate and commercial loans (60 per cent of total loans), an improvementin the bank's retail franchise would be appreciated by its investors. These factors, coupled with fund-raising likely by September2017, could check RBL Bank's stock for a while.http://www.business-standard.com/article/opinion/rbl-bank-may-take-a-breather-117050301417_1.html

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Threat of automation: Robotics and artificial intelligence to reduce job opportunities at top banks Saloni Shukla & Joel RebelloThe Economic Times

In a conventional bank branch, a clerk seated next to the cash dispensing teller was a sought after banker because he used toupdate the pass book of the account holder after the cash withdrawal or a deposit. That job has almost vanished in the past decadewith few account holders getting a pass book.

Coming years would see even the position of the teller, who is fast being replaced by sophisticated automated teller machines, andmuch more jobs going away as computing makes it possible to do more with less heads at the branches.

The banking industry which was among the big job creators along with the information technology industry in the past two decadesis at an inflection point where technology is enhancing efficiency by doing more and at a faster pace than what humans could do.

Traditional jobs like passbook updating, cash deposit, verification of know-your-customer details, salary uploads are also goingdigital increasing job redundancies. The likes of Axis Bank, ICICI Bank and HDFC Bank are pushing the boundaries of technologyby implementing robotics to centralise operations and for quicker turnarounds in things like loan processing and selling financialproducts to customers. This is reducing the need for a manual worker at the back end.

“Look at the quintessential cheque book request, today 75 per cent of that happens digitally. Earlier, these customers used towalk into our branches,” says Rajiv Anand, head – retail banking at Axis Bank. “There is increased automationwithin branches. We have more than 1,500 cash deposit machines, so why do I need a teller?.”

“A salary upload that we do monthly… today there are 5 people who are doing the job and this will get automated. Thelinearity at the back end —that as transactions go up the number of people should also go up —has beenbroken.”

The Indian banking industry has been witnessing a slow transition from people-driven to machines controlled in the past few years.The technological development, which has made banking easier, has also led to a slowdown in the hiring of staff at banks. Althoughthere have been hirings, the nature of skill sets required is changing with a lot more focus on the front end talent.

“Low-end back office jobs like data entries will no longer be required in the next three years. The rate of growth of new jobs inthe banking sector will definitely come down,” said Saurabh Tripathi, senior partner and director at BCG.

“Low-skill workers do not have a bright future. They will have to reskill or perish.” A sign of things to come is beingwitnessed at HDFC Bank, the country’s most valuable lender and the most expensive one among top lenders. The bank hasnot only been slowing branch expansion and hirings, it has also been reducing overall headcount even as it remains the goldstandard of Indian banking.

HDFC saw staff strength fall for two-quarters in a row. The employee count fell by 6,096, or 7 per cent, to 84,325 in the quarterended March 2017 from 90,421 in December 2016. At the same time, it has expanded its network to 4,715 branches, from 4,520 ayear earlier, ATMs to 12,260 from 12,000.

“It is not that we are asking people to resign and go away,” says Paresh Sukthankar, DMD, HDFC Bank. “Now

we are saying while we will still add in certain areas as required, if based on productivity improvements you have people who arenot gainfully employed in one particular function, you redeploy them in other areas. But after doing all that if we don’t havethe need for a certain number of people, we will not hire as many.”

But the decline in bank jobs started even before the digital wave hit the banking industry. Indian banks employed nearly 13 lakhpeople at the end of March 2015, out of which state-run banks alone employ nearly 8.6 lakh people, while private sector banksemployed 3.2 lakh people, a paltry growth of 3 per cent over March 2014, data from RBI shows.

Analytics and artificial intelligence are already being used by banks to do jobs once considered sacred, like underwriting loans.What this means is that human skills, which were considered imperative for basic banking not long ago, may not be required.“We are now helping banks to underwrite on the spot, which means the underwriting skills as we know it may not beneeded,” said Piyush Singh, MD, financial services (Asia-Pacific), Accenture.

India is experiencing what banks in advanced countries have been doing for the past many years. Barclays chairman AnthonyJenkins warned of the Uber moment for banks a few years ago, and that is coming true.

The number of bank branches in the United States will shrink by as much as 20 per cent in five years and that could save as muchas $8.3 billion annually if it trimmed the number of branches and downsized the average bank branch from 5,000 to 3,000 squarefeet, says Jones Lang Lasalle, a real estate consultant.

Citigroup has forecast that nearly a third of the jobs in the banking industry could be lost in the decade between 2015 and 2025.“The future of branches in banking is about focusing on advisory and consultation rather than transactions,” writesJonathan Larsen, global head of retail and mortgages at Citi.

“The return on having a physical network is diminishing. Branches and associated staff costs make up for about 65 per centof the total retail cost base of a larger bank and a lot of these costs can be removed via automation.”

Changing faceWhile Indian banks haven’t started trimming the bank branches, the growth in the number and the size of branches hasdefinitely come down. The growth rate of branch network in India halved at the end of 2016 to 5 per cent from 2010.

Likewise, ATM additions which grew at 9 per cent in 2016, was growing at over 40 per cent in 2010. Thanks to payments systems,banks do not need people at branches. The number of transactions on a digital network at the end of March 2016 was over 15.1billion, up from 11.1 billion in the same period last year. That is essentially the number of cheques not issued.

Automation does not necessarily mean that there would no more be banking jobs. But they will be at a different level. Banks need toapproach customers and educate them about financial products that are in the market.

“Footprint increase is not the number one priority in absolute branch strength. Increasing reach and distribution is our priority.Reach and distribution we will increase through digital and more feet on street and relationship managers of the bank,” saidShyam Srinivasan, CEO at Federal Bank.

New banksAlso, the entry of new banks like small finance banks like Au Financiers, Equitas or Ujjivan would require an army of people as theyexpand to rural areas. Boots on the ground may be the mantra for these new banks which will have to marry technology with thehuman touch.

“Automation for us means improving productivity to ensure my employees can do more. 50 per cent of our loans has to bewith a ticket size of less than Rs 25 lakh and 75 per cent priority sector. Our customers need hand-holding right from the applicationto the payment stage and we need people on the floor for that,” said Sanjay Agarwal, MD at AU Financiers, whichcommenced small bank operations earlier this year.

AU Financiers plans to hire 4,000 people in the next six months. Total hiring in the next two to three years will be 10,000, Agarwalsaid. Then there is the microfinance turned-universal bank Bandhan, which plans to increase its workforce to 30,000 by March 2018from 24,000 at present.

“All our people (customers) are still not comfortable with digital banking. They need to see branches and go and askquestions. It will take time for digital banking to fully take shape. More is needed to be done,” said Chandra Shekhar Ghosh,founder and MD at microfinance turned-universal bank Bandhan, which has 68 per cent of its branches in rural areas.

Just like the automobile industry, the banking industry will thrive and employ millions. But the way it would happen has beentransformed. “I think banks will continue to open branches and distribution networks,” says Axis’ Anand.“Financial services will continue to create jobs particularly at the front end but the rate of growth of that job creation will slowdown, that is for sure.”http://economictimes.indiatimes.com/news/industry/banking/finance/threat-of-automation-robotics-and-artificial-intelligence-to-reduce-job-opportunities-at-top-banks/articleshow/58485250.cms

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Despite automation, banking to see big rise in hiring Business Standard

Mumbai: The financial services industry, more specifically banking, is expected to see a substantial rise in jobs in the next few yearseven as automation encroaches on most of its core activities.

Automation, chat bots and big data analytics programmes might take a toll on the sector in the next decade or so. But now, digital

technology, together with physical labour, is scaling new heights in the banking sector.

With financial exclusion being as high as 55-60 per cent of adult population, notwithstanding Prime Minister’s Jan Dhanpush, banks will continue to hire a number of well-trained people armed with cutting-edge digital technology but reaching out toharvest customers who can’t make use of these services on their own. HR managers are bullish on the industry.

“Banking is the new IT industry in terms of employment generation,” says Ajay Shah, head of recruitment services atTeamlease, a manpower firm. According to Shah, incremental hiring in private sector banks would increase 10-11 per cent in thenext 12 months. HR does not count public sector banks, as these do not follow a linear recruitment path. Moreover, these banks areeither overstaffed or understaffed.

Between 2010 and 2013, the government recruited 85,000 people in public sector banks. Every year, on an average, 12,000-15,000people are recruited in public sector banks in both clerical and officer positions. The employment ratio is 1:1, which means for everyone clerical position, there has to be one officer in the bank. In 2016, public sector banks recruited about 9,000 probationary officersand about an equal number of clerks, according to the Institute of Banking Personnel Selection (IBPS), the agency that conductscommon admission tests for such banks.

According to the Reserve Bank of India (RBI) data, as on March 31, 2016, the banking industry had 1.26 million employees. Theprivate sector banks employed about 300,075 people, foreign banks had 25,214 and nationalised banks, including the State Bankgroup, had about 860,000 people. These numbers have increased in 2016-17. HR managers expect a good rise in 2017-18 as well.Also, the banking industry is expected to grow at over 20 per cent for the next two-three years.

Retail banking will be the key growth driver for banks, along with corporate credit, SME banking, cross-selling of other financialproducts and services like insurance, mutual funds, fee-based sources of income and technological upgrade, according to theInstitute of Finance Banking and Insurance, a manpower training agency for the financial sector. Experts maintain that the stresswould be on expansion of branches and financial inclusion.

The new normalEven as HDFC Bank reduced its manpower by more than 10,000 in the last six months, HR managers and bankers take it as thenew normal.

HDFC Bank’s Deputy Managing Director Paresh Sukthankar said the bank had decided not to replace those staff, as thelender witnessed a good traction in its digital transactions and therefore needed fewer people. HR experts said HDFC Bank couldbe an outlier. Most other banks are bullish on hiring. “If you look at any mid-sized private sector bank, the outlook for hiring isextremely positive for the next one year. Ten small banks and 78 fintech companies are on a hiring spree,” Shah said.

A few banking service providers, such as payments bank licence holder PayTM, have ambitious plans in terms of hiring andbusiness expansion as they start banking operations.

The digital push has helped banks to expand business and penetrate rural areas, bankers said. Some lenders, such as IDFC Bank,have been hiring people to tap customers who still cannot use technology on their own. “Technology is very important but notin the way many people imagine,” said Rajiv Lall, head of IDFC Bank. “Having a smart-app is not going to help me tapcustomers who don’t have a smartphone,” he added. Instead, the bank is hiring 3,000 as direct employees and asimilar number by acquiring a microfinance firm in South India. Another entrant, Bandhan Bank, plans to ramp up its headcount to30,000 in this financial year from 24,000 (including microfinance workers), Managing Director and CEO Chandra Shekhar Ghosesaid.

Shape of things to comeGetting an opportunity to interact with humans would be preserve of a few, says Stuart Milne, head of HSBC India.

“If I see banking technology of future, it’s likely a few wealthy customers will have access to a relationship manager,but most of us won’t. It will be a robot, algorithms in most way. Does it mean that it will be less good? I don’t think so.I think it’s actually better,” said Milne.

Milne has a time horizon of 100 years in mind. That is some time away. For now, the banking industry would continue to absorbpeople as it reaches out to new clients waiting to get financially included.http://www.business-standard.com/article/economy-policy/despite-automation-banking-to-see-big-rise-in-hiring-117050400079_1.html

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Smaller players bank more on government’s Digital India push Surabhi AgarwalThe Economic Times

New Delhi: Smaller and newer banks have taken the lead in pushing the government’s digital economy drive, rolling out aslew of innovative digital banking products much faster than traditional banks to expand their footprints.

Kerala-based Federal Bank, for instance, has over the last few months launched several solutions that enable merchants both smalland large to accept digital payments using their existing infrastructure without spending additional money on new devices orapplications.

Similarly, IDFC Bank was the first to launch Aadhaar-enabled biometric payment even before Prime Minister Narendra Modi flaggedit off on April 14.

For old banks, digital technology is one more way of reaching out to the existing customer, while for new banks digital is the heart of

the strategy for reaching out to all customers, said Aruna Sundararajan, secretary at the ministry of electronics and IT (MeitY).“It is their predominant growth strategy,” she told ET.

The government has been campaigning for a less-cash economy since demonetisation.

Sundararajan, who is leading the Digital Payments Mission and driving the target of touching 2,500-crore digital transactions thisyear, said the government is telling banks to adopt strategies that telecom companies adopted to grow from 50 million subscribersto 500 million.

“They have to go through digital branch-less banking. Till now, only 145 million people have credit in this country, clearly 750million people need credit. So there is big room for digital branch-less banking to register the fastest growth,” she said.

Solutions that Federal Bank has launched under the ‘Lotza’ name range from a simple QR code for micro merchants,such as vegetable vendors, to sophisticated applications for large supermarkets to enable payments through UPI and provideprinted receipts to customers and merchants for record keeping.

Shyam Srinivasan, managing director at Federal Bank said, the idea was to put in place technology where the merchantsdon’t have to make large investments in point-ofsale (PoS) devices and can convert existing terminals to payment acceptingfacility from people without debit or credit cards.

“Currently, we have 7,000 merchants in Kerala on our solutions, and our target it to scale it tremendously and reach 1,00,000merchants in the next 100 days across India,” he told ET.

Federal Bank also launched selfiebased account opening. IDFC Bank, which received its banking licence only in 2015, launchedAadhaar-based e-KYC to speed up account opening. The bank already has a customer base of close to 1.4 million customers, ofwhich more than 4,00,000 customers have been acquired organically.http://economictimes.indiatimes.com/news/industry/banking/finance/banking/smaller-players-bank-more-on-governments-digital-india-push/articleshow/58489155.cms

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Australian investor looks to exit IDFC Sachin Dave & Joel RebelloThe Economic Times

Mumbai: First State Investments ICVC-Stewart Investors Asia Pacific Leaders Fund or FSAPLBA, an investment arm ofCommonwealth Bank of Australia (CBA), is looking to exit IDFC, where it holds about 5.89% stake, people with direct knowledge ofthe matter said.

“The investment arm is looking to exit IDFC and this (exit) could happen within next three months,“ a person in theknow said. FSAPLBA had already scaled down its stake in in IDFC from 8.17%. This comes months after CBA announced that it islooking to exit India. The bank applied to the Reserve Bank of India to wind up its India operations.

The bank, which had only branch in India, entered the country about seven years back.However, it is understood that it could notexpand its India opera tions as expected and announced exit from the country last year.

IDFC had transferred its financing undertaking to its sister concern, IDFC Bank. As of now IDFC is primarily an investment holdingcompany . IDFC on Tuesday closed down 1.94% at Rs 60.65 on the BSE. By Tuesday's market valuation IDFC had marketcapitalisation of Rs 9,679.39 and value of the stake would be about Rs 579 crore.CBA and IDFC did not respond to ET's emailquestionnaire.http://economictimes.indiatimes.com/news/industry/banking/finance/banking/australian-investor-looks-to-exit-idfc/articleshow/58492645.cms

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Ujjivan SFB to open 171 branches by year-end The Financial Express

Ujjivan Small Finance Bank (Ujjivan SFB) will be accelerating expansion of the branch network and will open up to 171 branchesacross the country by the end of this year, Samit Ghosh, CEO and MD of Ujjivan SFB, said. The small finance bank started itsoperations in Bengaluru in February 2017 and has reached 30 branches in the first phase of the branch rollout. The goal is toconvert all the 451 microfinance branches into SFB branches in three years, Ghosh said. “So far we are on track and afterthis month we will accelerate branch expansion.”

Sanjiv Bajaj, MD of Bajaj Finserv, inaugurated the Ujjivan Small Finance Bank’s foray in Pune. Ujjivan SFB opened fourbranches in the city on Wednesday with a fifth to be opened in the next couple of days. Bajaj Finserv invested in Ujjivan three yearsago and holds 7% in the holding company of the bank. Ujjivan is a wholly owned subsidiary of Ujjivan Financial Services.

Bajaj said his company has had a long and fruitful relationship with Ujjivan and this relationship has significantly expanded, leadingto investing in the institution. “We covered two crore lives with Ujjivan by going to places where others don’t want togo. Ujjivan also had a lending relationship with Bajaj Finance. There has been multiple relationships with Ujjivan and this willcontinue to flourish,” Bajaj said.

Ujjivan SFB is now looking at tie-up with Bajaj to sell general insurance products, Ghosh said. Bajaj and Ghosh launched the Ujjivan

Adhaar based biometric ATM card in Pune. Ghosh said the process of converting existing customers into bank customers is a longand slow process. So far, it has managed to convert 31,000 customers into bank depositors. The second set of customers the SFBis targeting are those who have bank accounts but are still out of the banking systems as they are intimidated by big banks and theircomplex processes, Ghosh said.

As retail deposits will take time to grow, Ujjivan SFB will rely on wholesale deposits to grow and cover the gap. It would look atinstitutional depositors, wholesale deposits, HNIs and cooperative institutions, Ghosh said.http://www.financialexpress.com/market/ujjivan-sfb-to-open-171-branches-by-year-end/653307/

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Exim Bank to provide $15 bn credit to Asian countries N. AnandThe Hindu

Export-Import Bank of India (Exim Bank) will be providing lines of credit worth more than $15 billion to Asian countries over the nextthree to four years, said a top official.

The countries getting credit support include Bangladesh ($9.5 billion), Sri Lanka ($3 billion), Nepal ($1.5 billion) and Myanmar ($1.5billion).

“We are extending credit support of $1.6 billion for setting up a super-critical ultra thermal power plant in Bangladesh,”said David Rasquinha, MD, Exim Bank.

“Another $2 billion will be for supply of buses and railway wagons, among others,” he said.

Railways, water

Sri Lanka will get credit support of $3 billion for developing railway and water projects among others. Nepal will use the credit fordeveloping its transportation system. The bank is also planning to extend cross-border financing to Cambodia and Vietnam.

For the current year, Exim Bank is targeting a growth of 8-9% as key markets have started to recover.

In the current year, the bank plans to raise $2.5 billion from overseas markets. “Right now, we are very liquid and might thinkof raising money after July. The current liquidity will last till December. Currently, we are watching a few markets — Thailand,Poland, Australia or Singapore — and might tap them, if there is an opportunity,” he said.http://www.thehindu.com/todays-paper/tp-business/exim-bank-to-provide-15-bn-credit-to-asian-countries/article18380264.ece

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Union Bank raises Rs 500 cr to boost core capital Business Standard

Public lender Union Bank has raised Rs 500 crore by issuing Basel III compliant bonds, a step that will add to its core tier-I capital.

Union Bank said it has issued 5,000 non-convertible, unsecured subordinated Basel III compliant perpetual bonds today to beincluded as additional tier-1 capital.

"The bond is issued for face value of Rs 10 lakh each at par aggregating Rs 500 crore on private placement basis," it said in aregulatory filing.

Perpetual bonds are treated as equity than debt and so, they do not carry any maturity date.

The bonds will carry a coupon rate of 9.08 per cent payable annually.

The Mumbai-headquartered Union Bank's board of directors had approved the capital plan for 2017-18 on April 28.

It had announced raising up to Rs 6,350 crore this fiscal in the form of core equity capital and/or additional tier I or tier II bonds forthe current fiscal.

Besides, the lender has planned to raise up to Rs 4,950 crore through follow-on public offer, rights and private issue, includingqualified institutional placement or preferential allotment to the government.

The stock closed 4.75 per cent up at Rs 178.60 on the BSE.http://www.business-standard.com/article/pti-stories/union-bank-raises-rs-500-cr-to-boost-core-capital-117050300851_1.html

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We are in line for another capital raising in the first half of this fiscal: Vishwavir Ahuja

mint

Vishwavir Ahuja, managing director and chief executive of RBL Bank, spoke about the company’s fiscal fourth-quarterearnings and the outlook for the lender. “Our general long-term guidance is to grow between 30% and 35% every year andbased on our vision 2020, indications that we gave last year at the time of initial public offering (IPO) that up until 2020 we should tryand maintain annual growth rate in that range,” he said.

The bank’s growth is planned on the basis of an organic strategy across multiple business segments, he added. On netinterest margin (NIM), he said, the average for the year is close to 3.4%. He expects to maintain margins in that range as well tomaintain a very strong growth trajectory.

The bank is thinking to raise capital in the second quarter of FY18, he added. Edited excerpts:

Credit growth has slowed a bit if you look at it quarter on quarter basis, can you tell us what is the outlook for the growth aheadgiven that the environment is not very conducive these days?

We are comparing numbers which are quite positive and significant. As far as we are concerned, our general long term guidance isto grow between 30-35% every year. Based on our vision 2020, indications that we gave last year at the time of IPO, that up until2020 we should try and maintain annual growth rate in that range. So, I would say that taken all things into consideration in terms ofcredit markets, the overall environment, certain challenges that are there in certain pockets particularly in the retail and microbanking segments, if you take all that into consideration, a 39% growth is a pretty handsome growth.

My view is that some of the challenges that existed in these small pockets as I mentioned, as they sort themselves out and businessin these segments becomes more normal and stable going forward, then we will see decent growth rates in those segments also.

I would say we are very satisfied with this level of growth.

Will credit growth be on organic basis going ahead or are looking at inorganic route as well?

Our growth is planned on the basis of an organic strategy across multiple business segments. The good news is that allcomponents of our various businesses are growing very nicely, whether it is the corporate business, the mid corporate business, theretail and mass banking segments, the agri rural space or the development banking and finance inclusion business.

So, the good news is that all these business segments are growing nicely and we are seeing good strong organic momentum basedon the platforms, the products and the services and the distribution architecture that we have created in the country all of which isexpanding and growing and that is giving further support to the growth trajectory of our franchise.

Will we see the net interest margin at the current level which is quite commendable at 3.4%? Is that something that you can sustainover the course of the next six months?

In a range I would say, if you see the average for the year, it is more close to 3.4%. So, whether it is 3.4-3.5%, in that range, wehope to be able to maintain margins in that range and on top of that maintain a very strong growth trajectory.

Your slippages, though aligned with RBI are still on the higher side. Any details on that?

I will answer not only for the quarter, but for the year also. You mentioned a certain amount, yes that is the correct amount and thatamount actually relates exactly equal to one particular account that where based on RBI intervention, we had to recognise as anNPA (non-performing asset) in the month of March itself.

So, basically, it is the slippage so to say is essentially contributed by only one name. All other things were either recovered or werewell within, if I may say, the previously established portfolio quality standards of the bank.

So if I may put it in actual numbers, the total slippage is 22 basis points. Last year, we ended at a gross NPA number of 0.98. Thistime, it is 1.2. The total movement is 22 basis points and this one account is equal to 22 basis points. So, if that had not happened,we would have maintained in fact, exactly the same level of NPA.

You consumed about 70 basis points of capital in Q4, what is the comfort level below which you will look to perhaps raise funds infuture?

We consumed 70 basis points of capital this quarter. In the previous quarters we have been consuming at an average of 60 basispoints of capital every quarter and that is takes us to almost 2.5% or points of capital in a year. And based on that, in the very nearfuture, we will be in line for another capital raise and that could happen in the very first half of the current financial year.

Can you tell us where do you intend to take the Tier-I ratio to?

Now we are sort of reaching the threshold level where we begin to start thinking of raising capital.So, another one quarter perhaps of capital consumption and then we are ready to raise capital. That is where we are coming out at.

We have been keen on the microfinance institution (MFI) sector as well, is there any opportunity that you are exploring currently inthat space?

No, there is nothing concrete on the table and whatever you may hear is purely speculative and that is where it stands. Our organicmomentum is intact and our business plans have been basically created accordingly.

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Foreign Banks / FIIs

RBI to hold key rate next month; cut 25 bps in August: BofAML PTISee this story in: The Economic Times

New Delhi: The Reserve Bank is expected to hold the key rate at its monetary policy review next month but may opt for a 25 bps cutin August, says a Bank of America Merrill Lynch (BofAML) report.

The global brokerage cited three reasons for the central bank to cut rates in August. First, the growth remains weak, second,inflation remains within RBI's 2-6 per cent range and a rate cut would help RBI to recoup forex reserves.

"As it has just hardened its stance, the RBI will likely wait for transfer of the 'special' dividend to the fiscal from demonetisation andgood rains before cutting in August," BofAML said in a research note.

It noted that GDP growth based on old series is running at 4.5-5 per cent, well below its estimated 7 per cent potential.

Inflation, it said, would average 4 per cent in the first half of 2017.

A rate cut, it added, would help attract foreign portfolio investors (FPI) in equity flows by supporting growth.

"We continue to expect RBI monetary policy committee to pause on June 6 and cut rates by 25 bps in August," it said.

The Reserve Bank in its monetary policy review meet on April 6 kept the repurchase or repo rate -- at which it lends to banks --unchanged at 6.25 per cent but increased reverse repo rate to 6 per cent from 5.75 per cent.

On rupee, the report said that although the domestic currency has strengthened to 64/USD level, going forward seasonality will turnagainst it and it might depreciate to some extent.

"While INR has strengthened to Rs 64/USD, seasonality will turn against it in coming weeks. Our Asia forex strategists see Rs66.75/USD by December," it noted.http://auto.economictimes.indiatimes.com/news/policy/rbi-to-hold-key-rate-next-month-cut-25-bps-in-august-bofaml/58495360

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AIIB grants $160 mn for Andhra Pradesh power project PTISee this story in: The Hindu Business Line

Beijing: China-sponsored Asian Infrastructure Investment Bank (AIIB) today approved USD 160 million loan for a power project inAndhra Pradesh, the first credit from the bank for an Indian project.

The AIIB, in which India is the second largest shareholder after China, has approved the project with the objective to strengthen thepower transmission and distribution system in Andhra Pradesh, said a bank statement.

The ‘24x7 Power for All’ project is part of Government of India’s ‘Power for All programme’ thatwas launched in 2014 to provide an efficient, reliable and affordable electricity to all consumers across selected states within fiveyears from the start of implementation.

The project is co-financed by the World Bank. Andhra Pradesh is one of the first states selected for the roll out of the programme.“AIIB supports its members in their transition towards a low-carbon energy mix by promoting the improvement of energyefficiency, such as upgrading the existing transmission and distribution networks,” said Jin Liqun, President of the bank.

“I am delighted that AIIB is working closely with India, who is our second largest shareholder, in energy and otherinfrastructure sectors, and we expect the Andhra Pradesh 24x7 Power for All project to be the first of many projects AIIB invests inIndia,” Liqun said.

The project aims to support Andhra Pradesh by strengthening the transmission and distribution network, increasing networkcapacity, improving system reliability and supporting operational reforms to improve the commercial performance of thestate’s distribution companies, the statement said.

It will directly contribute to the economic development of the State of Andhra Pradesh and India by increasing delivery of reliable,grid-based electricity to households, business and the agricultural sector, it said.

“The Power for All programme in Andhra Pradesh will be the starting point for AIIB to extend its assistance to other countriesin Asia moving towards an ‘Energy for all’ initiatives,” said DJ Pandian, Vice President and Chief InvestmentOfficer of the AIIB.

“This aligns well with AIIB’s mandate to promote economic development in Asia by helping build reliable and stableenergy distribution systems,” said Pandian, who is India’s nominee in the bank.

The AIIB opened for business last year with 57 founding members and authorised capital of USD 100 billion. China is the largest

shareholder with 26.06 per cent voting shares. India is the second largest shareholder with 7.5 per cent followed by Russia with5.93 per cent and Germany 4.5 per cent.http://www.thehindubusinessline.com/news/national/aiib-grants-160-mn-for-andhra-pradesh-power-project/article9678140.ece

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Rating & Research

Credit & Pre-paid Cards

Cash still in currency, ATM demand up Pratik BhaktaThe Economic Times

Mumbai: At a time when talks of less cash economy and Aadhaar-enabled digital pay ments rule the headlines, new ly-licensedsmall finance banks and smaller scale pri vate sector banks are bring ing new business to the good old automatic teller ma chine(ATM) industry .

Around 20,000 new teller machines, majorly cash re cyclers, have been deployed or are in the process of in stallation across thecoun try, industry insiders say.

“Cash recyclers are emerging as the most attractive proposition for banks as they are optimising cash usage at the very pointof cash collection -the most cost efficient way to handle cash,“ said Rupinder Sandhu Anand, chief executive officer at OKIIndia, a major supplier of ATMs.

“The cash recycling ATM had very rapidly displaced traditional ATM rapidly displaced traditional ATM over the past two yearsas it can accept as well as dispense validated cash among other basic banking activities,“ she said. “The subsidybeing offered by RBI on cash recyclers is attractive for initial migration from standard cash dispensers, as it makes it cheaper forbanks to deploy such infrastructure.“

Tamil Nadu-based private bank Karur Vysya Bank has deployed around 450 recyclers. A senior banker at Equitas Small FinanceBank said the Chennai-based new small finance bank has around 300 cash recyclers deployed across the country in Haryana,Rajasthan and Tamil Nadu. Bigger banks like State Bank of India and Axis Bank have also gone live with cash recycling machines.While new-age banks are looking to minimise cash-based operations, small finance banks use recyclers as their retail touch pointsnot only for dispensing cash but also for collecting re payments from small loan customers. Smaller banks that don't haveaggressive branch expansion plans find cash dispensers ideal as they reduce cash refilling and branch setting up costs.

Ashok Kumar, deputy general manager in charge of data centre at Karur Vysya Bank, said, “We have deployed a majorchunk of recyclers outside our branches, which enables customers to deposit cash and do basic banking even after banking hours.This has improved our deposit numbers and helped customers maintain healthy account balances.“

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Housing Finance

Affordable housing safer bet for lenders with under 1% NPA PTISee this story in: The Economic Times

Mumbai: With higher loan growth rate of 23 per cent over almost the past five years and low delinquency rates of under 1 per cent,the affordable housing segment offers strong growth opportunities for lenders, says a report.

A study by credit information company Cibil today said loans meant for affordable housing (home loans of under Rs 10 lakh ticketsize) has shown a robust 23 per cent CAGR over the past five years, while the delinquency rate has been firmly under control ataround 1 per cent.

In 2016, the affordable housing loan book stood at Rs 30,400 crore extended to around 7.5 lakh borrowers.

"The golden lining is that there have been low delinquency rates on affordable housing loans over the past five years. These trendsindicate a very growth potential for lender," the report said.

The study said the average ticket size in the segment has been coming down from around Rs 4.8 lakh in 2009-10 to nearly Rs 4.1lakh now, possibly suggesting the lenders' success on the financial inclusion drive.

"Looking at the average ticket size, we expect to witness more and more small banks and micro-lenders getting in affordablehousing lending in the coming years," Cibil chief operating officer Harshala Chandorkar said.

"The possible reason for the steady growth in the affordable housing loan segment is the increase in lending towards the bottom ofthe pyramid. In consideration of the rise in home prices, this could be seen as a significant development indicator," she added.

The study found that Maharashtra, Madhya Pradesh, Gujarat, Tamil Nadu and Andhra are the top five states with highest number ofaffordable home loans in the last five years, contributing around 60 per cent of the total such accounts opened.

Maharashtra holds the top spot with the highest number of accounts (over 6.53 lakh) followed by MP (5.60 lakh), Gujarat (3.13lakh), TN (2.65 lakh) and Andhra with 2.28 lakh such accounts.http://economictimes.indiatimes.com/news/economy/finance/affordable-housing-safer-bet-for-lenders-with-under-1-npa/articleshow/58499167.cms

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DHFL net up 31% in Q4 The Hindu Business Line

New Delhi: Housing finance company DHFL on Wednesday reported a 31 per cent increase in net profit for the quarter endedMarch 31, at Rs. 248 crore (against Rs. 190 crore in the previous year corresponding quarter).

Total income increased 21 per cent to Rs. 2,378 crore ( Rs. 1,960 crore).

For the financial year ended March 31, DHFL registered net profit of Rs. 927 crore, a 27 per cent increase over the net profit of Rs.729 crore recorded in the previous fiscal.

Total income was up 21 per cent at Rs. 8,857 crore for the year ended March 31. Gross NPA stood at 0.94 per cent while netinterest margin stood at 2.99 per cent.

Commenting on the financial performance, Kapil Wadhawan, Chairman & Managing Director, DHFL, said: “DHFL hasregistered a robust growth in business in the fourth quarter as we continue to take several proactive steps towards fulfilment ofDHFL’s mission built over three decades to enable every Indian to own a home of his own.”http://www.thehindubusinessline.com/todays-paper/tp-money-banking/dhfl-net-up-31-in-q4/article9679186.ece

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DeMo turned out to be positive for Housing Fin: DHFL's Wadhawan The Economic Times

Dewan Housing Finance chairman Kapil Wadhawan expects the company to post 18-20% growth in housing finance business thisyear. In an interview with Shilpy Sinha, Wadhawan says demonetisation turned out to be positive for the sector.

Excerpts:

Where did you see growth in housing loans?

Our loans approved and disbursed are up almost 18% for the year. The growth is equally distributed. We have pan-India presence.Post demonetisation, we saw growth in affordable housing segment and housing for all.

How did developer loan segment grow?

Our 80% portfolio is home loan and 20% is non-house loan. It has been fairly stable and consistent. We have marginally increaseddisbursement in project financing. Our disbursement on project financing was catering to small towns and cities, where there aregood developers but do not have the ability to go out and borrow from outside ecosystem. We have been increasing our projectfinancial portfolio. More than 50% of the lending would be in affordable segment. This is without considering developer loans thatfall in the segment.

Did you see any impact on lending post demonetisation?

When the major policy initiative was announced, there was apprehension. It turned out positive for the housing finance sector. Ourgrowth numbers are a reflection of demonetisation.

What is the change in life insurance ownership?

In the last quarter, we monetised our life insurance business (DHFL Pramerica Life Insurance). DHFL held a 50% equity in thebusiness. DHFL's initial investment was Rs.30 crore. We have monetised the business at Rs.2,000 crore. This means that Rs.1,900crore has gone as tier-I capital of ` the life insurance company. The holding company, Wadhawan Global Capital, raised resourcesto purchase the equity stake of the (life insurance) subsidiary.DHFL does not hold any equity in the life insurance business. Theholding company is a CIC core investment company.

What kind of growth do you expect in housing finance this year?

I am looking at 18-20% growth. We ended with  Rs.28,000 crore incremental lending for this year. Incremental lending will be in linewith last year. We expect AUMs to cross Rs.1lakh crore.

Will you look at changing your borrowing profile this year?

We have been able to reduce cost of funding. We see a change in borrowing profile. Our bank funding has come down from 50% to41-42%.

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PNB Housing Finance is Carlyle’s 3rd biggest holding in a listed firm: Bill Conway Swaraj Singh Dhanjalmint

Mumbai: Carlyle’s group’s $1-billion-plus holding in mortgage lender PNB Housing Finance Ltd is now the privateequity fund’s third biggest holding in any listed company, the group’s co-founder Bill Conway said.

Carlyle is a global alternative asset manager with $162 billion of assets under management across 287 investment vehicles as of 31March.

Carlyle holds 37.55% stake in PNB Housing Finance, which went public in November 2016 after an initial public offering in whichthe company raised Rs3,000 crore. The IPO was subscribed 29.5 times.

Shares of PNB Housing Finance, which were sold at Rs775 in the IPO, listed at an 11% premium at Rs865, and last traded atRs1,364.95 on the BSE on Wednesday. With this, the value of Carlyle’s holding has grown from Rs4,819.9 crore at the timeof the IPO, to Rs8,488.9 crore ($1.32 billion).

The performance of its investment in PNB Housing has also provided a significant boost to its Asia buyout fund, through which itholds the PNB Housing investment.

“In Asia buyout, our latest fund, Carlyle Asia Partners IV, appreciated 25% in the quarter on the back of strong appreciationin India-based PNB Housing and other investments. We have long felt that we have the best investment teams in China and Japan,and recently our business in India has become much more substantial. PNB Housing is now our third largest public position with afair market value of over $1 billion,” said Conway in Carlyle’s first quarter earnings call on Wednesday.

According to a October research report by IDBI Capital, several factors make PNB Housing Finance an attractive company.

“Strong recent growth rate (approximately 60% CAGR FY14-FY16) that is bound to continue albeit at a more moderatedpace, operating leverage advantage over medium term, a healthy housing and non-housing mix (70:30), and a well-diversifiedborrowing profile with the cost advantage of a AAA rated company,” the report said.

The company also has a robust origination to disbursal model with the requisite risk management structures, giving it the confidenceto grow at the extremely fast pace at which it has been growing, the report added.

India also contributed to Carlyle’s exits in the first quarter of the calendar year, with the PE firm exiting its stake in EdelweissFinance Services Ltd.

“We realized proceeds for our fund investors of $3.5 billion in the quarter and almost $29 billion over the last 12 months. Wecompleted block sales in Focus Media and Bank of Butterfield, and closed transactions for ITRS in Europe and Edelweiss FinancialServices in India,” said Conway.

Talking about the group’s strategy going ahead, co-founder David Rubenstein highlighted credit as an important area ofgrowth for the firm.

“Already today, we have a leading global CLO (Collateralized Loan Obligation) business, a high performing distressedinvesting business, and a fully re-loaded energy credit business. We have several other credit strategies in place or in fundraising,and yet we see substantial white space to raise and invest new credit strategies for our LPs. We expect global credit to beapproximately 20% of our fundraising target,” said Rubenstein.

Credit strategies the PE investor is keen to explore include real estate credit and opportunistic credit.http://www.livemint.com/Companies/2OZUzB6QP7J3pD5qI0Nd0N/PNB-Housing-Finance-is-Carlyles-3rd-biggest-holding-in-a-l.html

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DHFL plans to raise Rs 22,000 cr via NCDs PTISee this story in: Business Standard

New Delhi: Mortgage firm DHFL today said it plans to raise up to Rs 22,000 crore through issuance of non convertible debentures(NCDs) on private placement basis to fund business growth in the current fiscal.

The board of director has approved issuance of securities "on private placement--non convertible secured/unsecured debentures upto an amount Rs 20,000 crore, non convertible subordinated unsecured debentures up to an amount of Rs 1,000 crore, nonconvertible perpetual unsecured debentures up to an amount of Rs 1,000 crore," DHFL said in a statement.

Dewan Housing Finance Corporation Ltd (DHFL) will seek shareholders' approval for the same in its annual general meeting

scheduled on July 21.

Asked as to whether the company will float NCDs linked to retail inflation, DHFL Chairman and Managing Director Kapil Wadhawansaid, it depends on market conditions and the requirement of the company.

Last fiscal, the mortgage firm had raised Rs 14,000 crore through a retail bond sale, which offered interest rates linked to consumerprice-based inflation.http://www.business-standard.com/article/pti-stories/dhfl-plans-to-raise-rs-22-000-cr-via-ncds-117050300628_1.html

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Development Banks

Housing push, attractive price make Hudco offer a good bet Devangi GandhiThe Economic Times

Investors hoping to benefit from the government's push towards affordable housing and infrastructure sectors can look to subscribeto the initial public offering of Housing and Urban Development Corporation (Hudco), a wholly-owned subsidiary of the Governmentof India.

The issue priced at an attractive 1.3 times the company's book value at the upper price range may bring long-term gains forinvestors, given the business model that is skewed towards state government spending and likely tapering of bad assets in the loanportfolio of Hudco.

Through the issue, which is in the form of offer for sale (OFS), the Government of India is set to reduce its stake in the company to89.8%. Of the total issue size (20.4 crore shares), 36.2% is reserved for retail investors, including employees of the company , andthe issue will be availed at a discount of `2 per share on the offer price for these investors.

BusinessHudco, a miniratna, is in the business of financing housing and urban infrastructure projects. As of December last year, itsoutstanding loan book stood at `36,386 crore with housing and infra segments accounting for 37% and 63% of advances,respectively. Since FY14, the proportion of housing portfolio has increased from 26% and it hopes to raise it further as it looks topartici pate in government schemes such as Pradhan Mantri Awas Yojana (PMAY) and National Urban Livelihoods Mission(NULM).

Although Hudco caters to private sector players and individuals (through Hudco Niwas), state governments and agencies accountfor the majority of loan sanctions (99.9% for 9MFY17). The board and management have since March 2013 decided to stopsanctioning of new housing and urban finance loans to private sector entities till an improvement in the credit risk of private players.

FinancialsHudco's loan book has grown at a compounded rate of 17% since FY14 based on annualised FY17 numbers. While net earningsgrew at 7% CAGR between FY12 and FY16, for the first nine months of FY17, the profitability has moderated due to a jump in totalloan provisions from Rs 129 crore in FY16 to Rs 280.5 crore.

The provisions were because ageing of non-performing assets, especially from the private sector portfolio which currently bears agross NPA ratio of 5.98% as against 0.75% for loans made to state governments. With incremental sanctions to private sectorhaving stopped since the past four years, the bad asset ratio and provisions could peak in the next one year.

RisksSlower than expected tapering of bad assets and related provisions is a risk that could dent the profitability going ahead.The tractionin net interest income (NII) will depend on how efficiently the portfolio balance is shifted towards housing finance segment whichtypically has lower average yield compared to urban infrastructure loans. The resolution of loans to state electricity boards under theUday scheme could continue to adversely impact the recognition of interest income from the exposure that accounts for 5.4% of theloan portfolio.

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NBFCs / FIs / MicroFinance

Srei Infra eyes 25% growth in loan disbursements for FY18 Abhishek LawThe Hindu Business Line

Kolkata: As growth prospects improve in the domestic market, Kolkata-headquartered Srei Infrastructure Finance is looking to focuson its core businesses that include equipment and project financing. Plans for overseas expansion have been put on hold.

According to Sunil Kanoria, Vice-Chairman, Srei Infra, the company is expecting a 25 per cent growth in disbursements for FY18.

This comes on the back of the industry’s expectation of a 30 per cent upward movement in construction and miningequipment sale.

“We have too many things (happening) in India at the moment. Two years ago, there was no growth; and, so we werethinking what to do, where to go and so on,” he told BusinessLine during an interview.

The Kanorias brothers Hemant and Sunil had previously, thought of exploring an overseas foray in the telecom tower maintenancebusiness through one of their arms, Quippo.

However, with the infrastructure sector witnessing growth over the last one year, aided primarily by government intervention, Srei islooking to focus on the domestic market.

As construction of roads regains momentum, the company plans to list its subsidiary, Bharat Road Network which currently has aportfolio of seven projects. The IPO is expected to hit the markets in June-July. Srei would also not be averse to acquisition ofstressed road projects through this arm.

“We are building up the equipment financing business and our entire focus is on that. Then in the roads sector, we intend tolist the company (Bharat Road); and grow the portfolio. Presently, these top the priority list,” Kanoria added. Equipmentrental is expected to be another growth driver. Srei’s equipment rental business is operated through four firms under Quippo.The online marketplace for equipment rental and allied services, iQuippo, will also be scaled up now.

According to Kanoria, implementation of GST should help create a viable option for the low-profile equipment leasing market.Multiplicity of taxation was a hindrance.

Looking for investorSrei is also looking to bring in a strategic investor for Sahaj e-Village, a network of at least 64,000 common service centres, mostlyacross villages, that were created to provide G2C services. Sources say, around Rs. 350 crore has gone in as investment towardsbuilding these centres.

“We will look for an investor partner, including a PE. Business is doing better and growing. Post demonetisation, thedigitisation of rural areas is picking up,” Kanoria pointed out.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/srei-infra-eyes-25-growth-in-loan-disbursements-for-fy18/article9679182.ece

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Reliance Capital gets bourses approval for demerger PTISee this story in: The Hindu Business Line

New Delhi: Reliance Capital has received ‘no-objection’ from the BSE and the NSE for the demerger of RelianceHome Finance, a move that will facilitate independent listing of the home finance unit on exchanges.

The company is proceeding with filing the scheme of demerger with the National Company Law Tribunal for approval, and RelianceHome Finance is on track to be independently listed on stock exchanges during the next few months, Reliance Capital said in astatement today.

For every share held in Reliance Capital, shareholders will get one share of Reliance Home Finance after listing.

The proposal is expected to unlock substantial value for all existing shareholders and will benefit nearly one million shareholders ofReliance Capital.

Reliance Home Finance, a 100 per cent subsidiary of Reliance Capital, provides a wide range of solutions like home loans,construction finance and affordable housing loans.

As on March 31, 2017, Reliance Home Finance has an asset base of Rs. 11,174 crore.http://www.thehindubusinessline.com/markets/reliance-capital-gets-bourses-approval-for-demerger/article9678571.ece

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Village Financial Services gets award The Hindu Business Line

Kolkata: Village Financial Services, a Kolkata-based NBFC – MFI has bagged MSME Banking Excellence Awards 2016. Theaward was instituted by the Chamber for Indian Micro, Small & Medium Enterprises (CIMSME).

Village Financial Services won the award under the category ‘Best NBFC-MFI for Promotional Schemes’.

The NBFC-MFI was also adjudged as the runner-up in Eco-Technology Savvy NBFC-MFI category, it said in a release.

Kuldip Maity, CEO and Managing Director, VFS, received the awards from Arjun Ram Meghwal, Minister of State for Finance andCorporate Affairs, at New Delhi.http://www.thehindubusinessline.com/money-and-banking/village-financial-services-gets-award/article9678604.ece

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Citi bank's Aditya Narain to join Edelweiss Business Standard

Edelweiss has appointed Citi bank India Managing Director Aditya Narain as the head of research for its institutional equitiesbusiness. At Citi bank India, too, Narain was the head of research. At Edelweiss, he will report to Nischal Maheshwari, head ofinstitutional equities.http://www.business-standard.com/article/companies/citi-bank-s-aditya-narain-to-join-edelweiss-117050400006_1.html

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Edelweiss ARC builds war chest to shop for NPAs N Sundaresha SubramanianBusiness Standard

New Delhi: Edelweiss Asset Reconstruction (EARC), the largest player in the growing distressed assets sector, has built up aformidable war chest to buy out stressed assets over the next couple of years. The company is gearing itself for the big opportunityas the government and the Reserve Bank of India (RBI) look for ways to de-stress the banking system it sees the new corporateinsolvency regime as a game changer for the sector.

“We plan to invest Rs 12,000-13,000 crore over the next two-three years,” Siby Anthony, managing director and CEO,EARC, told Business Standard in an interview. About $650 million (Rs 4,300 crore) of this would come from Canadian pension fundCDPQ, which had picked up a 20 per cent stake in the firm, which is a part of the Rashesh Shah-promoted listed financial servicesgroup, last year.

The company, part of Edelweiss’ Global Asset Management vertical, has so far acquired non-performing assets (NPAs) ofabout Rs 80,000 crore, spread across some 550 companies. “We have acquired nearly Rs 80,000 crore of NPAs withconsideration paid in form of cash and security receipts (SR) of Rs 38,000 crore. That makes us the largest,” Anthony said.

Though it has a number of small accounts, a legacy from the early days when banks sold loans in baskets, about 70 per cent of thisportfolio is what Anthony terms “good assets” companies which are “Ebitda earning” and have thepotential to turn viable through financial restructuring. “There would be some haircut. The haircut would be by debt convertedinto equity. This is to ensure that if the company does well, the lenders have an upside.”

Anthony said EARC’s portfolio had a mix of steel, infrastructure, and shipping and logistics, which contribute about 45 percent. “We have not looked at power due to the structural issues there. But, we now want to look at a few powerassets,” he said.

Anthony sees a significant role for asset reconstruction companies (ARCs) as India prepares to tackle its Rs 7-lakh crore stressedassets. In addition, with restructured assets amounting to a little over half that number, “the opportunity is huge”, hesaid. According to him, ARCs hold the key in accounts with a ticket size of up to Rs 15,000 crore.

Tracing the company’s own evolution, Anthony said EARC had moved “from buying every asset (in the early days),we are now focusing on Ebitda-earning assets, financially broken with a lot of potential to improve operations”.

A former executive director at IDBI Bank, Anthony has built the venture from scratch. In 2010, when Edelweiss started itsstressed-assets business by launching the ARC, banks did not show much interest in selling, he said. Edelweiss started out bybuying “deep-distress loans” at “deep-discount rates” on a full-cash basis.

“Till that time, ARCs were used as a last resort for banks. Every bank had its own recovery department. After they triedeverything and when nothing could be done, they sold it (stressed asset) to an ARC,” Anthony said.

Then came September 2013, when Raghuram Rajan became governor of the Reserve Bank of India. In his first speech, Rajan saidwhen ARC infrastructure was available, banks should sell when there was life left in the assets so that these could be turnedaround. But the consideration structure, then with five per cent cash and 95 per cent SR, was seen to be skewed in favour of ARCs.

In August 2014, Rajan intervened again, saying ARCs did not have enough “skin in the game”. “That’show the 15: 85 structure came into being. This is an ideal structure. The ARCs’ skin in the business is high. If they have toearn their expected return in the range of 18-22 per cent, assets have to be priced rightly.”

The move proved to be a big boon for the industry over the next six-eight months as big banks, including SBI, warmed up to theidea.

Today, the new corporate insolvency regime, which has recently come into force, has the potential to be a similar game changer forthe industry. Under the new norms, the committee of creditors plays a crucial role, and ARCs, with their expertise in aggregation,have a head start in the process. EARC, which wants to chalk out the entire resolution process, and moving tribunal, it has filedthree cases Murli Industries, Bharti Shipyard, and Falcon Tyres.

While the first two are under process, in the Falcon case, an intervention by the high court has delayed the process by 50-60 days.“Such delays hit the efficiency of the process and can be avoided,” Anthony said.http://www.business-standard.com/article/markets/edelweiss-arc-builds-war-chest-to-shop-for-npas-117050400001_1.html

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Expect FY18 to see steady (Foreign) inflows in Govt & Corporate bonds: Ajay Manglunia, Ex VP at Edelweiss Financial Services. The Economic Times

If the inflation trajectory moves up sharply, it will heighten the probability of a rate increase during 2017 18, said Ajay Manglunia, executive vice-president at Edelweiss Financial Services. In an interview with Saikat Das, Manglunia said the appetite for lower-ratedcorporate bonds is increasing with more companies tapping the debt market instead of bank loans.

Edited excerpts:

What new trend do you expect in debt capital market?

Big-ticket bond sales are likely to increase, especially from the private sector players making the market more liquid. The publicissue of bonds space was earlier dominated by tax-free bond issuances. Public issue sales are at about Rs 30,000 crore despite theabsence of taxfree bonds this year. Edelweiss has been the leading arranger in the public issuances since FY15.

Within the NBFC space, we brought first-time issuers from the housing finance segment to the public bond market with successfulsales from Dewan Housing Finance, Edelweiss Housing Finance, Indiabulls Housing Finance, Reliance Home Finance. Another keytrend has been the shift from bank credit to debt capital markets, which reflected in a more than 50% jump in private placementissuance.

How will it benefit?

This shift will be a defining aspect of the bond market and a greater share of the shift will be taken up by public issues gradually,leading to a diversified investor base. In conjunction with the corporate bond reforms, this will prove to be a quantum leap for thebond market in terms of liquidity and efficient pricing of credit.

With RBI's neutral policy stance, where are bond yields headed?

We are fairly priced at the moment, given the changed policy stance and expectations of no rate action in the near-to-medium term.At the same time, liquidity will continue to be supportive.

There are limited triggers to push yields higher from the current levels and see these levels as attractive entry points in governmentsecurities, state bonds and high grade corporate credit.

The government's commitment to a credible fiscal consolidation roadmap means that the supply of government bonds will becontained. Hence, further steepening of the yield curve is an unlikely scenario.Rather, we might have some flattening bias asshort-term rates tighten once the Reserve Bank of India resorts to additional liquidity absorption measures in the near term. It ispossible that the net state bond supply for FY18 will be very close to the net G-Sec supply, and so state bond yield spreads arelikely to remain wide.

Is the corporate bond market shrugging off shallowness?

The average daily traded volumes in corporate bonds have risen by almost 45% in FY17, and we expect this vibrancy to gaintraction in the coming years. The landscape will increasingly be dominated by corporate bonds beyond the AAA (top-rated)universe, particularly Asian Age, AA names that offer higher yields today.

Basel-III compliant perpetual bank bond issuances saw a big revival in FY17 as the total bond sales exceeded Rs 40,000 crore.This was due to better appetite and acceptability of the product amongst institutional and corporate investors as the bank bad loanscene moves closer to the resolution stage.

We are positive about the corporate bond segment. Various measures such as the implementation of an electronic corporate bondrepo platform, partial credit enhancement, reissuance of bonds will change the dynamics of corporate bond trading in India.

Will foreign inflows sustain in India?

We expect FY18 to witness steady inflows in both government and corporate bonds. The allocation to Indian bonds despite ahawkish touch to the monetary policy reflects the confidence in the sound underlying macro conditions and the stable rupee. We arealso witnessing the appetite to take on higher yielding, but quality corporate credit in the quest for higher yield. A broader section ofthe foreign investor universe will soon follow this trend and incrementally add private sector corporate credit to their emergingmarket portfolios.

What do you think could trigger the next bond rally?

The inflation trajectory and monetary policy guidance will be keenly watched by bond market participants. In an easy liquidityscenario, a favourable development on either front can push yields lower if the development is sustainable. Timely onset andprogress of the monsoon is of course a crucial parameter.

What are the key risks to bond investors?

If the inflation trajectory moves up sharply, it will heighten the probability of a rate rise in FY18. I am of the view that these triggersmight not materialise to such an extent to drive the markets in either direction. Bonds are likely to trade sideways for a major part ofthe year with a mild positive bias.

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Ujjivan Small Finance Bank commences operations in Pune PTISee this story in: Daily News & Analysis

Ujjivan Small Finance Bank today commenced operations from four locations in Pune, taking its total branches to 30 across thecountry.

The four locations are Swargate, Pimpri, Akurdi and Hadapsar and the small finance bank now operates out of Bengaluru,Ramanagara, Mumbai, New Delhi, Kolkata and Pune.

"In less than three months of our bank launch, we have established our presence across all four regions - South, North, East andWest India. In the coming months, we will continue to increase our banking footprint across the country to serve the target customersegments," its managing director and chief executive Samit Ghosh said.

Bajaj Finserv's managing director Sanjiv Bajaj inaugurated the Swargate branch of Ujjivan Small Finance Bank earlier today.

The existing Ujjivan customers in the state would be on-boarded as bank customers. The process of on-boarding over 17,600microfinance customers has already been initiated, while the transition for the rest will take place in a phased manner, it said.

Ujjivan has presence across 14 districts in Maharashtra with 51 branches, catering to over 3.65 lakh customers, a statement issuedhere said.

The bank's chief operating officer Ittira Davis said it is offering savings bank account with no charges for minimum balance and alsoservices like doorstep banking, mobile, internet and phone banking, access to biometric ATMs and Aadhar enabled debit cards.http://www.dnaindia.com/money/report-ujjivan-small-finance-bank-commences-operations-in-pune-2426549

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Brokers / Distributors

Bourses

‘Deglobalisation’ is the ‘top worry for Indian market’: CJ George, Founder and MD, BNP Paribas, Geojit Financial Services Thomas K ThomasThe Hindu Business Line

Mumbai: After dissolving its joint venture agreement with BNP Paribas, Geojit Financial Services is charting out its next phase ofgrowth. At the helm is CJ George, the Founder and Managing Director of the company who spoke with BusinessLine on the wayforward, regulatory headwinds and impact of discount broking.

Excerpts

What are the broad headwinds or concern areas for you this year?

For the Indian markets, first and foremost I think is the ongoing deglobalisation trend all over the world is worrying. This stems notonly from the US, but even the uncertainties due to the French elections, Brexit, so on and so forth may have a lot of impact on theIndian markets. So, that is a major risk.

Is the impact of demonetisation over now?

I am of the view that the money crunch people faced is over and so also its difficulties. Now, I think remonetisation has almost beencompleted, but demonetisation had an indirect impact on the investment climate as entrepreneurs tend to believe that there is policyuncertainty due to the general feeling that the government could even undertake the most unexpected measures.

Did it impact your business in that quarter?

We are a beneficiary. The financial market, particularly the capital market, became the first transparent digitised market in thecountry. Earlier, we had the bullion market and real estate market which were not transparent, and the only market that wastransparent was disliked just because it was transparent. Post-demonetisation there is an attempt to create a level-playing field interms of transparency. This will only help the financial markets.

In terms of its structure, the Indian market is changing because of the strength provided by the large number of small investorsthrough SIPs and MF investments. I am of the view that in the next three to four years, investments into MFs through SIPs will go upto Rs. 15,000 crore a month from Rs. 4,500 crore a month now. This is becoming another opportunity.

What do you make of SEBI’s regulation related to commissions and brokerage fees?

The regulator pressurising intermediaries to provide free services when intermediaries are private commercial entities, wasunexpected. It has impacted the investors as DPs are generally neglecting that particular segment of clients today who invest lessthan Rs. 2 lakh every year. It’s the small investor community that has suffered the most and this administered pricing hasindeed become an indirect entry barrier for them. With regard to MF commission, the market has reconciled to the reality andmoved on.

Now that we have a new SEBI chairman, would you like to flag anything which he should look at?

I am of the view that SEBI in the last one decade or so has been focusing on investor protection and rightfully so. But unfortunatelyand perhaps unknowingly it may have neglected market development to a certain extent. So, for the new chairman, maybe,it’s an opportunity to look at how the market can be grown into a deeper one.

The very fact that new investors are not entering the direct equity market and that the number is not growing is a demonstration ofthis problem. Perhaps, a lot of compliance costs can be avoided by doing away with the many segmental inspections andsegmental compliance requirements. We all have to go through inspections by CDSL, NSDL, BSE, NSE and SEBI for each of theregistered activity. A huge compliance cost can be addressed if SEBI can come out with one single inspection for all the activities.

Is it true that there were disagreements with BNP Paribas on their acquisition of Sharekhan?

I must confess that we had a difference of opinion with regard to BNP Paribas acquiring a competitor while still having significantcontrol in Geojit. Being a listed company, Geojit’s independent directors flagged off this as conflict of interest. So, over aperiod of time we sorted it out and entered into a new agreement and mutually agreed to enter into a new phase in our relationship.Thereafter, we have an extremely warm relationship with BNP Paribas, an important shareholder of Geojit.

What is the impact of competition from discount brokers?

We have not seen investors moving out to discount brokers while some punters do. Punters certainly like discount brokers as theycan trade more. Empirical evidence from retail trading behaviour has shown that majority of retail traders in derivatives andday-trading lose money and get out. We have positioned ourselves as an investment services firm rather than a punters platform.

So what’s next?

We are of the belief that India today offers a lot of opportunities for retail investors at a time when interest rate is coming down andformalisation of the economy is catching up. The investment services industry as a whole should welcome the digital economy planof the government as the cost of delivery of services will go down. So, intermediaries like us need to bring more number of retailsavers into this market and we always educate the saving community that the ordinary Indian, although he has money to invest, isnot getting his due share of India’s economic growth. The way for an ordinary Indian to share in the country’seconomic growth is to have at least a small investment in the capital market.http://www.thehindubusinessline.com/todays-paper/tp-markets/deglobalisation-is-the-top-worry-for-indian-market/article9679208.ece

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Life & General Insurance

SBI Life Insurance Q4 profit jumps 31% The Hindu Business Line

Mumbai: SBI Life Insurance reported a 31 per cent increase in fourth quarter net profit at Rs. 336 crore, compared with Rs. 256crore in the corresponding quarter last year. For financial year 2016-17, the private sector life insurer reported a net profit of Rs. 955crore, up 11 per cent flrom ast year’s net profit of Rs. 861 crore.

In the reporting quarter ended March 31, individual new business premium rose 40 per cent at Rs. 2,213 crore( Rs. 1,586 crore), thecompany said in a statement. New business premium for FY16-17 grew 43 per cent to Rs. 10,144 crore. SBI Life also became thefirst private life insurer to cross Rs. 10,000 crore in new business premium, the statement added. Total assets under management(AUM) grew 22 per cent to Rs. 97,737 crore as on March 31, 2017, from Rs. 79,828 crore as on March 31, 2016.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/sbi-life-insurance-q4-profit-jumps-31/article9679185.ece

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Star Health ties up with Hero Corporate Rachel ChitraThe Times of India

Chennai: Star Health and Allied Insurance Co Ltd on Wednesday said it has tied up with Hero Corporate Service Pvt Ltd fordistributing health insurance policies.

An MoU was signed by Anand Roy, marketing head, Star Health, and Shefali Munjal, executive director, Hero Corporate for theformer's products to be distributed through Hero's existing touch points in India.

"Hero Corporate - Insurance Distribution' is well recognised by insurance customers in India for its outstanding services, and we are

delighted to be associated with such a wide and reputed brand. We would like to strengthen this association in the years to come,"said Roy.

"We are always interested in offering better services to our customers and this partnership will help us do that," said Munjal.http://timesofindia.indiatimes.com/business/india-business/star-health-ties-up-with-hero-corporate/articleshow/58499865.cms

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The industry grew 30% but we grew 40% last year: Rakesh Jain, Reliance General Insurance The Economic Times

In a chat with ET Now, Rakesh Jain, CEO, Reliance General Insurance, says capitalising on incremental opportunities as well asbuilding on the existing ones.

Edited excerpts

It has been a strong set of numbers. What really led to this kind of strong profit and premium growth?

The industry has grown about 30%. A lot of the credit for the growth goes to the government of India for structural changes includingbringing crop insurance under the ambit of insurance. That single-handedly gave about half of the growth for the industry as well forus. The good part is industry grew 30% but we were able to grow about 40%. Clearly we are capitalising on incrementalopportunities as well as building on the existing ones.

FY17 PBT was at about Rs 130 crore after provisions for incurred reserves. Could you please explain the provisions for incurred butnot reported reserves?

At the end of every year, we carry out reserve adequacy test, a standard pracrice for every company. This is in the context of themotor third party liability business and invariably they are actually based on the awards which are granted. We did a reserve reviewlast year through an external panel and that called for strengthening the reserves by about Rs 170 odd crore which we provided asa measure of one thing.

Now we are fully provided but the good part is we were able to generate the surpluses to take care of this. As we move on, thesewill help us to improve our profitability much faster.

Your market share stands at about 7% in the private insurance space. Are you looking to improve that and what kind of strategyhave you put in place for this?

Basically market share is a function of how do you really get to source in this environment and about a couple of years back, wewere predominantly agency company through retail agents which way we were sourcing most of the business.

I am happy to say that in the last one year under the open architecture we were able to tie up with IndusInd Bank, Bank of India,Andhra Bank, Catholic Syrian Bank and a few more and what that has given us is more than 19000 branch touch points across thecountry. This will be a great opportunity in terms of growing our businesses in the hinterland.

The second thing is we built our digital channel. We were the first company which went and tied up with Aadhaar about three yearsback, we were the first again to tie up with Vahan for sourcing the vehicle data. We were the first again to really integrate with thee-repository for eKYC. So some of our digital initiatives have actually been built to ease the buying process as the claim process ina manner which gives us an incremental growth.

To my mind, this is a business of need, a business of protection. Anybody who buys home, car, health, travel overseas; set a shop,godown; enter into a commercial contract for liability, everything calls for a protection from our business. What needs to be done byan insurance company is basically to be present with the consumer and create that awareness in terms of what the products woulddo and I think this works.

You were talking about improvement in your bottom line as well going forward. You have delivered a strong set of earnings. Can weassume that this is going to extrapolate into the coming quarters as well, what kind of return ratios can we expect?

I would not comment on the specifics but I can clearly say that the future is far stronger for us. What we did last year wasexceptional. Clearly it is not going to repeat and to that extent, the incremental impact on the bottom line is going to be very strong.

You have been seeking a partner in the general insurance business for quite some time. Any development on this front? When canwe hear an announcement?

As and when it happens, we will be happy to announce it to you but it is clearly a matter with the shareholders but there i nothingspecific right now?

Are you seeking any consolidation in the general insurance space? What is the opportunity here?

Some of the businesses have run for 15-16 years, some of the businesses are new. Everybody wants to come to this marketlooking at the opportunity. Just on a simple data point, in spite of the 30% growth for last year, we are still sitting at 0.8% penetrationin terms of GDP. This is one-third the global average, it is an average and you can say this is like one-sixth, one-seventh of thedeveloped countries. So clearly, a lot of people would get excited to enter this sector because it is going to have a huge opportunityfor the next may be two, three, four decades.

But having said that, from a consumer standpoint you need to create a value proposition, a product proposition, you need to have

efficiencies of scale and that is where a lot of companies would think of really working together or working in niches and boutiquesand my sense is you will both the things in parallel.http://economictimes.indiatimes.com/markets/expert-view/the-industry-grew-30-but-we-grew-40-last-year-rakesh-jain-reliance-general-insurance/articleshow/58492842.cms

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Fear of boardroom battles sees cos seeking exotic cover Tanya ThomasThe Hindu Business Line

Mumbai: As corporate boardrooms find themselves facing newer complex challenges and more internecine battles, manycompanies are pre-emptively looking to buy exotic insurance policies to cover a variety of risks.

For instance, insurers say that traditional bare-bones Directors and Officers (D&O) insurance covers would be insufficient to cover aboardroom battle like the recent one between Ratan Tata and former Tata Group Chairman Cyrus Mistry.

While the traditional policy structure may cover the management’s liabilities arising from allegations by a whistleblower orcases of alleged discrimination against employees, it doesn’t cover instances of directors facing off against each other, saida senior industry executive.

Anup Dhingra, Senior VP, Marsh India Insurance Brokers Pvt Ltd, an insurance advisor and broker with over 1,600 corporate clientsin the D&O space, explains this in more detail. “When boardroom battles happen or when a senior executive falls out offavour with the board, most insurance policies don’t have an adequate response mechanism. Insurers have to burn thecandle at both ends (to defend both parties).

“We’ve seen a 15-20 per cent increase in queries in just the January to March quarter from company boards on howinsurance can better deal with such situations,” Dhingra added. “We’re also seeing independent directorsworry about the adequacy of the cover available to them.”

Start-ups not immuneSasikumar Adidamu, Chief Technical Officer, Bajaj Allianz General Insurance, said that in the last two to three years, the insurerhas seen increased queries from start-ups but the conversion rate is still poor.

“D&O policies aren’t just for huge, high-profile public companies. Start-ups are not exempt from legal troubles. Theyare likely to make novice mistakes such as: making unrealistic promises to investors, breach of fiduciary duty and HR mistakes,which can have huge legal ramifications,” he said.

“(Despite this) Currently, insurance is purchased only by those start-ups that deal with overseas clients in the US or UK tocomply with their contractual requirements,” added Adidamu.

Professional investors in start-ups, from venture capital and private equity firms, are also making sure they cover their boardnominees from risks of mismanagement by insisting on adequate D&O policies before they put their money in. Mukesh Kumar,Executive Director, HDFC ERGO General Insurance Company, agreed that the rise in litigation and widening exposure ofcorporates has broadened the scope of D&O insurance policies.

“The cost of a D&O policy can be as little as $400-500 for every $1 million of coverage and can go up to $10,000 for listedcompanies or companies that report losses,” he added. “But the costs of an adverse media reporting to a company incase of a challenging situation is an untested price point. Given this, it still makes sense for corporates to transfer the risks not justof management liability but also of cyber-crime risks, tax liabilities, fraud from their own balance sheet to that of the insurer.”http://www.thehindubusinessline.com/money-and-banking/fear-of-boardroom-battles-sees-cos-seeking-exotic-cover/article9679137.ece

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HDFC Life Q4 net profit at Rs 274 crore PTISee this story in: The Times of India

New Delhi: HDFC Life on Wednesday reported an 8 per cent rise in net profit at Rs 274 crore for the fourth quarter ended March 31,2017.

HDFC Standard Life Insurance Company (HDFC Life) is a non-listed joint venture subsidiary of Housing Development FinanceCorporation (HDFC) Ltd in association with Britains Standard Life.

The company "registered strong growth in individual WRP of 26 per cent in Q4 FY17 after witnessing slowdown in two previousquarter," Housing Development Finance Corporation (HDFC) Ltd said in a BSE filing.

During January-March, its total premium grew by 18 per cent, it said.

For the financial year ended March 31, HDFC Life's profit after tax saw a rise of 9 per cent at Rs 892 crore.

The new business premium was at Rs 8,696 crore, up 34 per, from Rs 6,487 crore in the year-ago period.

The renewal premiums were at Rs 10,749 crore in 2016-17, up 9 per cent, from Rs 9,826 crore in 2015-16. While, the total premium

during the just concluded rose 19 per cent to Rs 19,445 crore as against Rs 163,13 crore in the preceding fiscal, the company said.

The assets under management (AUM) stood at Rs 91,742 crore at the end of financial year 2016-17, up 24 per cent, from Rs74,247 crore in the same period a year ago.http://timesofindia.indiatimes.com/business/india-business/hdfc-life-q4-net-profit-at-rs-274-crore/articleshow/58502286.cms

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Why bequeathing vehicle matters, too LN RevathyThe Hindu Business Line

Coimbatore: In a country where writing a ‘will’is considered an unpleasant task and often abhorred, bequeathing avehicle to one’s kith and kin would probably be the last thing on one's mind.

In most cases, the focus is often on apportioning immovable assets like land and property. But even cars and vehicles need to beclearly earmarked to heirs, lest it creates legal problems later.

In fact, those in the know of the Motor Vehicles Act say that there is no provision for nomination in the Act, but the vehicle, just asany other movable asset, can be transferred to the heir on production of the legal heir certificate and a ‘no objectioncertificate' from other members of the family.

Citing Rule 56 of the Central Motor Vehicle Rules, P Mohankumar, Principal Officer and Managing Director of Link-K InsuranceBroker Co Pvt Ltd, said the name transfer should be effected within 30 days of the death of the owner. Further, the Rule mandatesthat the person who is using the vehicle of the deceased must inform the Registering Authority about his/her intention to use thevehicle.

Vehicle insuranceOnly after effecting the change in name does the question of insurance arise. The owner should communicate the change to theinsurance company as well.

Disputes invariably arise when the vehicle is in the name of one person and the vehicle insurance in some other name (the previousowner/the deceased person), Mohankumar explained, and admitted that most people fail to effect the name transfer within themandated 30 days.

“In such situations, should the vehicle meet with an accident, third party claims will be settled on production of theRegistration Certificate (RC) and the owner’s (original) driving licence, but the own damage portion will not besettled,” the MD of Link-K clarified.

Stressing the need for an amendment in the Motor Vehicles Act to include a provision for nomination, K Kathirmathiyon, Secretary,Coimbatore Consumer Cause (CCC), said, “If the Motor Vehicle Rule is followed in letter and spirit, vehicles in the name ofdeceased persons should not ply on the roads. But in our own State, ex-Chief Minister J Jayalalithaa’s vehicle continued toply after her demise and no questions were asked. How does one check every case?” he asked, and pointed out thatdifferences of opinion amongst family members after the death of the head of the family often led to complications and unnecessaryquarrel.

“Banks, insurance companies and mutual funds have now made it mandatory to share nominee details. Why can’tthis be done for motor vehicles as well?” the CCC Secretary asked, suggesting the need for such a provision in the Act.Mohankumar said the issue at present is not name change, but renewal of insurance and who should bear this expense.

“The affluent class often gives away high-end vehicles as gift when they marry off their girl. And they end up bearing the costof the vehicle insurance and its renewal as well, ” he said, in a lighter vein.

Reports reveal that close to 35 per cent of all vehicles in the country ply without the mandatory insurance cover. Does it includevehicles in the names of the deceased as well? This remains to be looked into.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/why-bequeathing-vehicle-matters-too/article9679180.ece

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Mutual Funds & AMCs

MFs see highest growth in assets from hinterland in FY17 Chandan Kishore KantBusiness Standard

Mumbai: The Rs 18-lakh crore mutual fund (MF) industry is seeing encouraging growth from the hinterlands. Despite low financialliteracy, several smaller cities and towns have bettered the overall industry growth rate during 2016-17.

Sources attribute the growth in smaller cities to a continuous rise in awareness programmes and investor education. They add giventhe unattractiveness of other financial avenues like bank deposits, investors are increasingly shifting towards MFs. States like Bihar,

Jharkhand, Chhattisgarh, Madhya Pradesh, Assam, and Jammu and Kashmir reported asset growth of 50-70 per cent, albeit on alow base. In comparison, overall industry assets grew 37 per cent during 2016-17.

“People in these regions are fast realising the importance of investments in MFs. Wealth creation has a universal appeal, andMFs are a superior product,” says Sundeep Sikka, chief executive officer of Reliance Nippon Mutual Fund.

Incentives for distributors in B-15 cities have provided a push for MF penetration in smaller towns and cities. Several road showshave been conducted in the past few years by various fund houses to create awareness about MFs.

“Many factors have contributed in bringing more inflows and participation from these states. Other investment avenues, suchas bank deposits, are losing their attractiveness,” says A Balasubramanian, CEO of Birla Sun Life Mutual Fund.

Sikka says the industry has barely scratched the surface when it comes to tapping non-metro cities. “If one removescorporate money and compares only the retail inflow, smaller cities will outnumber the big cities and metros,” he adds.

The total average assets under management of the MF industry stood at Rs 18.57 lakh crore in March, up 37 per cent from a yearago. The number of systematic investment plans (SIPs) is 13.5 million, contributing nearly Rs 4,400 crore a month. Accountnumbers have crossed 50 million.http://www.business-standard.com/article/pf/mfs-see-highest-growth-in-assets-from-hinterland-in-fy17-117050200899_1.html

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Outflows from equity mutual funds triple in four months Shivani BazazThe Economic Times

Equity mutual funds are seeing tremendous inflows lately, but these are accompanied by strong outflows. Data from AMFI shows asteady increase in the outflows from equity mutual funds. The outflows were Rs 7,932 crore in December, 2016, but they jumped toRs 20,658 crore in March, 2017, three times increase in four months.

Experts are attributing it to various reasons, but most of them concur that the most important factor is the market touching it's alltime high. "There are investors who panic in such situations. Markets being around its all time high might push a lot of investors tosell their schemes," says Rajiv Thakkar, Chief Investment Officer at PPFAS Mutual Fund.

He adds that there are some investors who sell their schemes at such times because of panic and then there are others who tend totime the market and get in after a correction. "Timing the market is not possible, but there are investors who tend to try it duringsuch situations in the market," says Thakkar.

Vidya Bala, Head of mutual fund research at Fundsindia.com, believes that the outflows are a result of fundamental issues. Shesays that the investors still do not believe in long-term investments and sell whenever they see volatility. "There are investors whoinvest in equities without any proper plan or goal. These investors tend to move out of the schemes in situations like these," saysVidya Bala.

Whenever the market goes through a volatile phase, some investors tend to panic and sell their investments, say mutual fundadvisors. However, they believe that investors should not base their investment decisions on the moods prevailing the market. "Aretail investor should not think about what is happening in the market. Long-term investing is the best option," says Vidya Bala.http://economictimes.indiatimes.com/mf/analysis/outflows-from-equity-mutual-funds-triple-in-four-months/articleshow/58490265.cm

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April SIP inflows hit all-time high of Rs 4,200 crore Prashant MaheshThe Economic Times

Mumbai: Systematic investment plans (SIPs) in mutual funds, where investors put in small sums of money every month over aperiod of time, have caught the fancy of retail investors with volumes hitting an all-time high of Rs 4,200 crore a month in April.

The number of SIPs in the mutual fund industry has doubled in the last three years. From 51.96 lakh SIPs in 2013-14, they havemore than doubled to 1.28 crore by March 2017. SIPs, which collected Rs 1,206 crore per month in 2013-14, got more than Rs3,989 crore in March 2017.

The average ticket size of SIPs has increased from Rs 2,322 per SIP to Rs 3,121. In the same period, the number of folios grewfrom 4.05 crore to 5.59 crore.

Industry sources point out that the rate of growth of SIPs has been high in the past one year.

Data from CAMS MFDEX, which represents 92% on the MF industry for 2016-17, show that new SIP registration volume jumped by33% from 44.98 lakh to 55.95 lakh in 201617, while assets under management of SIPs rose to Rs 1,17,706 crore, a jump of 52%from Rs 77,159 in the previous year.

"SIP has now become part of day-to-day life of a common man.There are many people who have experienced it over 5 to 15 yearsand are now telling their friends and relatives to do it. These word of-mouth publicity is helping create a trust among the masses,"

said Nilesh Shah, chief executive officer, Kotak Mutual Fund. He believes that a good past experience, effort of the distributorcommunity in educating investors, and lack of alternative invest ment options are triggering the rapid growth of SIPs.

SIPs encourage people to save, and by investing through this mode, investors average out their investments over a length of time,which in turn saves them from being hit by market fluctuations.

SIPs are convenient to start and are happening through all modes -physical forms, wealth management websites, assetmanagement websites, stock exchange websites, registrar sites, mobile apps and online distribution portals. Once an SIP isregistered, the instalment is debited every month at a predetermined date, thereby making many investors save forcibly. "Investorsare maturing and realising the benefits of SIPs during volatility. They generate risk-adjusted returns, superior to other assetclasses," said NK Prasad, president, CAMS.

Interestingly , all kind of investors have latched on to SIPs. Whether meeting long-term goals or eliminating market timing or justcreating wealth, investors have jumped on the SIP bandwagon in a big way .Operationally too, SIPs are flexible, as you can startthem or close them any time you wish, without any penalty. SIPs can be started with small amounts too.

Wealth managers believe SIP eliminates timing as well. Since it is impossible to know where the markets are headed in the nearterm, SIPs help investors. "Investors who are bullish on equity in the long-term but do not know how to time their investments aretaking the SIP route to invest in the markets," said A Balasubramanian, chief executive officer at Birla Sunlife Mutual Fund.Financialplanners use SIPs as a tool to meet long-term goals such as kids' education or to buy a house.http://economictimes.indiatimes.com/mf/mf-news/from-a-sip-to-a-gulp-april-sip-inflows-hit-all-time-high-at-rs-4200-crore/articleshow/58489457.cms

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PPFAS Mutual Fund launches 'PPFAS Self Invest' mobile application The Economic Times

PPFAS Mutual Fund has launched 'PPFAS Self Invest', a mobile application available on Android and iOS. Existing investors canregister for 'PPFAS Self Invest' after completing a simple one-time-password (OTP) based registration process and choosing theirmobile personal identification number (M-PIN) for each Folio.

"Keeping the pace in this digitisation era, we are pleased to announce the launch of our new mobile application 'Self Invest'. Thenew app will free users from the confines of their desktop and empower new as well as existing investors to seamlessly transactand view their holdings on demand, from their Android and iOS (Apple) enabled devices," said Neil Parag Parikh, Chairman andCEO, PPFAS Mutual Fund.

New investors who are KRA/KIN (CKYC) compliant, would be able to create their folios online. Investors can create new folios,purchase additional units, redeem units and switch units between plans, using this application. This mobile app can also be used byinvestors to initiate Systematic Investment Plans online (iSIPs).

The new mobile application will also give investors the option to sent their account statements to their e-mail ID and view the latestfactsheet.

Neil Parag Parikh added that, "Share of mobile phone users in India is increasing consistently and we are seeing online activitycontinues to shift to mobile. The new app will provide ease to the existing and new customers while on the go."http://economictimes.indiatimes.com/mf/mf-news/ppfas-mutual-fund-launches-ppfas-self-invest-mobile-application/articleshow/58496102.cms

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Still bullish on domestic biz, underweight on IT and pharma: Harsha Upadhyaya, Kotak AMC The Economic Times

In an exclusive interview with ET Now, Harsha Upadhyaya , CIO-Equity, Kotak AMC , says one has to have patience and continuepicking stocks rather than jumping into buy market at every level.

Edited excerpts

How would you map the earning season? Is it on expected lines or better?

The current earning season seems to be progressing the way we expected it to be. Domestic businesses are more or less in linewith our expectations or slightly higher than our expectations in some cases. As far as exporters’ basket is concerned, it isstill under pressure. Going forward, we expect that segment to really drag the overall earnings. Otherwise, it has been a mixedoverall earning season as of now. So we will have to wait for another two weeks to go to get the complete picture.

Based on these earnings, is there scope for markets to go higher or is it too early to judge if real economic recovery has started?Look at cement. Cement dispatch numbers from ACC were strong but Ambuja’s were not great. Regional cement companiesdispatch numbers have been okay but at all India level, there are still gaps.

Economic recovery is definitely underway. It depends how strong it is going to be, going forward. It is not going to be broad basedall across India at one point of time. It is going to be a gradual recovery. In some cases, it will be regional recovery. For example,cement volumes in north and east have been pretty strong. South was also strong and we expect that to continue going forwardalthough there is negative incident there. There has been drought like situation in Tamil Nadu which could hamper some of the

construction activities.

Overall, these three reasons should see decent volume pick up that is what we believe. In fact, north and east have reallysurpassed our expectations in terms of volume growth.

Not just in cement, if you look at other segments like auto for example, the numbers have been pretty strong except for twowheelers and our expectation is even two wheelers will start showing positive growth going forward.

There is so much of focus on rural economy now and remonetisation is almost complete. To that extent, that demand should comeback at some point of time. Slowly more and more sectors are participating but at the same time, it is not going to be a V-shapedrecovery. One has to have patience and continue picking stocks rather than jumping into buy market at every level.

The new fad seems to be InvITs and the market seems pretty excited about those. It is IRB Infra which has got its InvIT listed todayand then soon it is going to be Reliance Infra and perhaps many others as well joining the fray. Do you sense that when it comes toIRB Infra, there could be good instruments of investment?

Without talking about this particular instrument, definitely it broadens the investment opportunities for funds especially those whichcan invest in different asset classes and also for some of the players who are involved in these instruments. It gives them anotheravenue to source money. It is a market which will develop going forward.

We have just seen first few of the block and I am sure going forward you will see many more of these getting listed. As of now, weare not permitted to invest in InvIT. We are trying to see whether we can get permission to do that and as soon as we get, we willtake call in terms of some of these instruments.

The real game changing move has come for the real estate sector RERA. Consumers will have more pricing power. Builders cannotdefault. Good guys will have to deliver. Are you considering buying into real estate stocks?

No. It has been moving up quite fast not to our comfort. While I agree that RERA is going to change the face of the entire real estateindustry, one needs to be little cautious because this shift from unorganised to organised real estate sector is going to take time.Already some of the stocks seem to have priced in the change in regulatory environment as well as the focus on affordable housing.If you look at the current business models of real estate companies, none of the companies are focussing so much on affordablehousing but because of the policy push on affordable housing, these stocks have really moved up in the last two to three months.

To that extent, the initial expectation and the hope has really led to some of these stocks doing really well on the stock market. Weneed to see how some of these will shape up over a period of time and then only we will be able to judge whether there is going tobe significant change in the business model or in the environment, etc. At this point of time, we would remain cautious on the sector.

There seems to be a lot of excitement around the affordable housing space and that probabky explains the way some of thesehome financiers have been moving of late. What is your investment call here because one could argue that this is an over ownedsector and these stocks have already run up quite a fair bit?

I agree. It is a bit of an over owned sector, so we are going stock specific in this particular segment. We believe that the growth isgoing to be better over the next three years as compared to previous three years in the housing finance segment. At the same time,competition is also intense and is likely to remain intense. You need to be stock specific rather than going completely overweight onthe entire sector.

In some cases we have taken direction exposure to housing finance companies. In some cases we prefer to play it through bankswhich also have significant amount of housing finance business coming through. It is a combination of these two approaches thatwe have been following in our portfolios but at the sub sectoral level we do not want to take a large position in just housing financecompanies.

How are you looking at positioning or repositioning your portfolio for the next 12-18 months? What has worked in the past may notwork in the future. We know pharma has worked in the past but it is not working. We know cyclicals have not worked in the past butthey are working right now so have you looked at making any drastic changes in your portfolio?

We continue to remain on domestic businesses and underweight on IT and pharma which has worked for us over the two and ahalf, three years. We continue to remain with that investment theme.

We continue to see headwinds for exporters. We have seen significant rupee appreciation over the last one quarter, 4.5%appreciation in a single quarter is very significant. In the last 20 years maybe we have had three or four occasions of such bigappreciation. So definitely that is going to have impact in terms of earnings and profitability in the next one or two quarter for someof these exporters.

As it is some of these sectors are seeing a lot of headwinds either in the form of regulatory hiccups or in the form of businessfundamentals remaining weak. We continue to remain focussed on areas where there is earnings growth.

There you have to have a sense of valuation because some of these sectors may be going on a higher side of valuations and youneed to be a little bit stock specific there but that is what we are trying to do. In terms of additions to our portfolio, over the lastcouple of months we have added positions in some of the gas utilities which we believe are reasonably valued, high return ratios,there is no threat for volume growth in this industry and reasonable valuation is what we are finding in that space. And we have alsoadded some position to housing finance companies and little bit into banks so that is what we have done in the recent past I wouldsay.

Where are you cutting and peeling, have you exited any of your tactical positions where you think that 30-40% has been made andit is now time to get out?

We have not really exited too many of the stocks. Fortunately there has been consistent inflows into most of our funds. So we are

using those inflows to moderate weights where we are conscious of higher valuation or lower growth going forward but we have notreally exited too many of stocks in the recent few weeks.

You also talked about the fact that you have added banks to your portfolio. What part of the banking names interest you? Would itbe the private lot? Some of the earnings which have already come by or does it continue to be PSUs wherein the NPA policy storyis yet to be unfolded?

It remains more of the same for us, we have been overweight on private sector retail focussed banks for quite some time now withinthe banking portfolio. We continue to add some position in that space only. We believe that the NPA recognition cycle whicheverybody thought would come to an end soon may not be true simply because there is a new RBI dispensation which says thatthere is a divergence between the actual asset quality of some of the corporate lending that has happened and the provisioning thathas been made.

Also they have added telecom as a new stress sectors wherein more provisions need to be made going forward. So this is definitelygoing to put pressure on some of the PSU banks and some of the corporate facing private sector banks so to that extent ourportfolio positioning remains tilted towards retail focussed private sector banks as well as NBFCs.http://economictimes.indiatimes.com/markets/expert-view/still-bullish-on-domestic-biz-underweight-on-it-and-pharma-harsha-upadhyaya-kotak-amc/articleshow/58491171.cms

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RIL seeks nod for MF investment The Hindu

Mumbai: Reliance Industries Limited (RIL) on Wednesday appealed to the Securities Appellate Tribunal (SAT) to allow the companyto invest its surplus cash in mutual funds, some of whom may be trading in the derivatives segment.

Senior advocate Harish Salve, representing RIL in connection with an appeal on a SEBI order banning the firm from trading inequity derivatives segment, made the plea before the tribunal.

In response, the SEBI counsel asked the company to submit an application with the names of the fund houses that it wants to investin.http://www.thehindu.com/todays-paper/tp-business/ril-seeks-nod-for-mf-investment/article18380245.ece

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Pvt. Equity & Hedge Funds

Indian equities close flat on negative global cues IANS See this story in: The Statesman

Mumbai: Negative global cues and heavy selling pressure in healthcare, oil and gas, and banking stocks led the Indian equitymarkets to close on flat-to-negative note on Wednesday.

Market observers said investors were cautious ahead of the outcome of the two-day US Federal Open Market Committee (FOMC)meet, due later in the evening.

The wider 51-scrip Nifty of the National Stock Exchange (NSE) inched down by 1.85 points or 0.02 per cent to close (provisionally)at 9,311.95 points.

The barometer 30-scrip Sensitive Index (Sensex) of the BSE, which opened at 29,984.95 points, provisionally closed at 29,894.80points (at 3.30 p.m.) -- down 26.38 points or 0.09 per cent from its previous close at 29,921.18 points.

The Sensex touched a high of 30,020.59 points and a low of 29,846.57 points during the intra-day trade.

The BSE market breadth favoured a bearish mood -- with 1,488 declines and 1,357 advances.

On Tuesday, the benchmark indices closed on a flat-to-positive note. The NSE Nifty inched up by 9.75 points or 0.10 per cent toclose at 9,313.80 points, while the BSE Sensex closed at 29,921.18 points -- up a tad 2.78 points or 0.01 per cent.http://www.thestatesman.com/business/indian-equities-close-flat-on-negative-global-cues-1493810124.html

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Equity market at all-time high, but that benefits very few Indians The Economic Times

The Indian equity benchmarks hit record highs in FY17. The earnings growth was good and demonetisation will hopefully bring inbetter times going forward. A slew of new reforms is on the anvil; GST being one of them.

If the monsoon is as good this year, the only thing to worry about would be the investment cycle in the private sector. So, give andtake the next financial year holds so much promise for investors in Indian equities.

The elusive retail investorYet, the domestic retail investor fails to gain from rising opportunities. Then, who are enjoying its fruits? It is the foreign institutionalinvestors (FIIs).

FIIs dominate 70 per cent of the market. Conversely, only 2 per cent of Indian household savings goes into equities. In the US, thecorresponding figure for the latter is 45 per cent.

Insiders even believe FII investment in India in FY18 will cross the figures of last two years.

The market share of the Indian retail investor has not grown, even though- Good IPOs have been largely oversubscribed

- Investments through systematic investment plans in mutual funds have crossed Rs 1 crore.- The Securities and Exchange Board of India (Sebi), stock exchanges and financial companies have made it easy for people toinvest in equities.

We could see the effect of these measures in a Sebi survey. Among the respondents, 75 per cent had participated in the financialmarket for the first time in five years. Yet, the share of retail investors in the Indian equity market remains poor.

So, what causes resistance?

Most Indians prefer traditional asset classes such as fixed deposits and gold and real estate, but the fact is that some of theseassets have not generated worthwhile returns for some time now and that is how things will be in the near future as well.

There are instances, however, when retail investors enter the market at peak levels and that is when downfall starts; stock marketscams over the last two decades haven’t helped. Regulations today though are much tighter reducing the possibility of suchinstances in the market.

Then, how do we encourage retail investors?

It is important to sustain the domestic equity market through local funds. This will increase competitiveness at the global level. Itcould also stabilise the rupee. Here are some measures that might boost retail participation:

- Invest in investor educationThe savings rate in India is around 34 per cent. But only a small part of this goes into equities. This is largely because there are toomany products and little education.

Thus, financial service providers must educate the people. The Sebi, too, mandates that mutual fund houses must spend 0.01 percent of the assets under management on investor education.

Simpler products are the need of the hour, similar to SIP in mutual funds. Financial intermediaries should encourage retail investorsto come to the direct equity though SIP in direct equity. This can help manage volatility and if stock advice is right, an SIP in selectdirect equities can generate significant returns to retail investors.

Build trust among investorsStockbrokers and mutual funds do not enjoy the trust that government-run banks do. The promise of assured returns keepsinvestors away from the riskier equities.

So, stockbrokers, asset management companies and mutual fund houses must inculcate trust among investors.

How can they do this?

They can arrange awareness camps, use digital media to promote simpler products, use the medium to educate retail investorsabout the risks associated with the direct equity business, encourage those who have invested in IPOs to also allocate monies togood stocks in the secondary markets, recommend stocks to retail customers only after knowing their risk profiles and hence theirrisk appetites, constantly make information about their advice public so that retail investors can look at their past track records

- Use technology for better serviceOnline and mobile banking and online distribution of mutual funds have increased speed and efficiency of financial services. But,the financial companies must keep embracing new technology to enhance customer experience.

Despite the global economic downturn, the Indian capital market has remained steadfast, thanks to a steady growth rate and afavourable regulatory environment.

Now, financial service providers must read the quick shifts in investor demands. They must convince investors that sustained andplanned investments in equities can meet their long-term financial goals. This might boost retail participation in Indian equities.http://economictimes.indiatimes.com/markets/stocks/news/equity-market-at-all-time-high-but-that-benefits-very-few-indians/articleshow/58491522.cms

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IRB Infra InvIT issue subscribed 7% on Day 1 The Hindu Business Line

Mumbai: IRB Infrastructure Developers’ InvIT IPO got subscribed 0.07 times, or 7 per cent, on Day 1. While the institutionalinvestors’ portion was subscribed 0.04 times, the non-institutional investors’ portion was subscribed 0.1 times.

IRB InvIT raised Rs. 2,094.5 crore from anchor investors ahead of the IPO. The trust will own 100 per cent in six operational build,operate, transfer (BOT) road assets.

IRB Infrastructure, the sponsor, plans to raise Rs. 5,033 crore from the listing of its InvIT in the price band of Rs. 100-102. Bidscame in more at the lower end of the price band. The issue closes on May 5.

IRB will use about Rs. 3,300 crore of the proceeds to repay underlying debt associated with the assets and the balance to pay backsponsor debt.http://www.thehindubusinessline.com/todays-paper/tp-markets/irb-infra-invit-issue-subscribed-7-on-day-1/article9679207.ece

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Brigade Enterprises raises Rs. 500 cr via QIP PTISee this story in: The Hindu Business Line

New Delhi: Realty firm Brigade Enterprises today said it has raised Rs. 500 crore via private placement of shares to institutionalinvestors.

The committee of directors, in its meeting held today, approved allotment of 2,19,78,021 equity shares to qualified institutionalbuyers at Rs. 227.50 apiece, the Bengaluru-based developer said in a regulatory filing.

As many as 40 investors took part in the QIP (qualified institutional placement) issue including Kotak Funds, Kuwait InvestmentAuthority Fund, HSBC fund, BNP Paribas Arbitrage, Kotak Mahindra, ICICI Prudential, Max Life Insurance Company, SundaramMutual Fund, Franklin India and Government Pension Fund Global.

The QIP issue opened on April 25 and closed on April 28.

In August last year, the company’s shareholders had approved the proposal to raise up to Rs. 500 crore through issue ofsecurities.

The company’s share price closed at Rs. 244 apiece on the BSE, down 0.33 per cent.http://www.thehindubusinessline.com/companies/brigade-enterprises-raises-rs-500-cr-via-qip/article9678756.ece

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Pension Funds / PF / EPF

Govt Securities & Bonds

Spread compression may hit debt market: Aditi Nayar, ICRA The Economic Times

In a chat with ET Now, Aditi Nayar, ICRA, says that the FII flows into debt to be limited to $5 billion in FY 18. She also said that thegeopolitical tensions may dent the debt market.

Edited excerpt

ET Now: Less than 5% of the market believes that the Fed will hike rates or do any tinkering. Do you hope to hear more of the sametalk this time too?

Mythili Bhusnurmath: The Fed is expected to play by the script, it duly prunes the markets and tells them what to expect so no oneis taken by surprise quite unlike the Indian markets, where the Reserve Bank very often likes to take markets by surprise. Nobodyreally expects a rate in action now because Fed actions always come at a time when the FOMC meet is followed by a pressconference. The Fed statement will be scrutinised in fact most economist particularly, US economist make a living out of passingthe Fed statements. What would be interesting to see is what is the Fed reading of the latest slow round of the GDP growth.

The first quarter of US GDP growth has come down to 0.7%, so this goes against a picture that we had earlier of a US economyrecovering. The first quarter numbers are always low, they tend to be revised upwards but it will be interesting to see what does theFed’s reading of that GDP growth. The Fed does not like to take markets by surprise that is why that markets really factor inthe Fed action well before it happens.

Mythili Bhusnurmath: Does the Fed really do a better job of communication than RBI or am I asking you to trend into a dangerousterritory.

Aditi Nayar: That is certainly very dangerous territory indeed. We have seen very different communication styles coming out of theRBI. In the last 10-15 years with four different governors at the helm, we are getting used to the style of not only the new governorof RBI but also the Monetary Policy Committee here in India.

As far as the minutes of the MPC is concerned, I would say the last set of minutes did provide quite a bit of a surprise in terms ofhow well articulated the fairly diverse views of the different MPC members were. It is not only a matter of communication in thepress conference and in the analyst meet after the RBI meetings but also now the minutes are going to be a very important thingthat Indian economist are going to pass in great detail like the American economist do in the US with the Fed’s minutes.

Mythili Bhusnurmath: Do you expect currency markets to correct given the fact that the currency markets seem to be much moreskittish, bond markets tend to be little bit more stable and is that why the bond markets have corrected and can we hope for asimilar correction in currency markets also?

Aditi Nayar: The bond markets correction has had a lot to do with the liquidity management and the policies that the RBI has beenannouncing. Also, the change in the stance from accommodative to neutral has had a big impact on pushing bond yields back up toaround 7%. And in terms of the last MPC minutes the outlook certainly seems to be more hawkish than what we had factored inearlier. There is a growing likelihood that after a long pause RBI will hike interest rates. All these factors have resulted in bond yieldsgoing back up to around 7% mark. Now we will look forward to the new benchmark in terms of domestic liquidity demand andoverall global sentiment in terms of driving where bond yields go. Broadly we do think that yields are going to remain firm for sometime as far as the Indian bonds are concerned.

On the rupee side, we have seen appreciation in the rupee over the last three or four months. The rupee has been one of the strongperformers over this period of time and when we look at the RER movements, it does seem that the rupee may be at a veryoptimistic level right now.

Inflation differentials are going to remain large, they are going to reduce with respect to advanced economies but it will still going toremain large and that is the factor that ultimately fundamentally we need to focus on. Other macros also look good but the extent ofthe strengthening in the rupee does seem to be a little bit overdone at this point of time.

Currency markets are known for overshooting and in a couple of months we do expect that the strengthening would ebb away andthen we should start to see some depreciation from the levels that we are at right now.

Mythili Bhusnurmath: Do you expect a pullout from the debt market even as we are seeing renewed interest in the equity market?

Aditi Nayar: The surge in FII debt inflows that we have seen over the last few months may not really sustain at this level goingforward because of a couple of major factors. One, we do see a compression of spreads between the US debt and Indian G-Secyields going forward. We do expect the Fed would hike rates at least twice in 2017 and also as they start to taper the re-investmentof their maturing asset, that as well would put some upward pressure on yields in the US market.

In India, we expect a prolonged pause for a couple of reasons. One, the trajectory that the MPC has indicated for CPI inflation itselfis looking at inflation rising on average from 4.5% in first half to 5% in the second half. And secondly, the big risks to inflation, due tomonsoon and GST. There will be a fairly prolonged pause and therefore while Indian bond yields would remain firm, the spreadswould compress as compared to advanced economy debt particularly US debt so that would reduce the attractiveness as far as FIIsare concerned.

If there are geopolitical tensions, then we may see a pullout although that is not the base line that we are expecting. Our expectationis that it will be lower monthly inflows and the kind of average that we have seen over the last three months. And also with the rupeeappreciation, if there is a reversal, then certainly that would have an impact on the currency adjusted returns. All of these factors puttogether, we are going to get total FII debt inflows of around $5 to $10 billion in FY18. So significantly lower than the average thatwe have seen over the last two or three months. And we also think that it is mostly going to be in either G-Sec or in corporate debt.

We do not see the FII interest in state development loans reviving in the near term. And in terms of FII investments, our view is thatgiven the building expectation that the next rate movement would be a hike rather than a cut, that is actually going to result in moreof longer term inflows coming in from the FII side in FY18. We would expect that the money that does come in is going to besearching for that higher yield and not for capital appreciation because hike from the RBI would certainly lead to a decline in bondprices. So we do not think that it is going to be short-term capital gains that are going to be driving FII investment into Indian debtover the rest of this fiscal. It is probably going to be relatively longer term in nature looking for the higher yield.

Mythili Bhusnurmath: Are we seeing a very dangerous and unhappy replay of what happened in the currency markets towards thelatter part of Dr Subbarao’s tenure when the rupee appreciated much beyond what it should have. Are we kind ofunfortunately not learning from the past, does it seem so?

Aditi Nayar: In terms of what happened in March to May 2013, it does seem like a bit uncannily similar to what happened four yearsago. We are again in situation where we have seen very strong appreciation of the rupee in the early part of the year. I do hope thatwe are not going to see a tumble the way that we did in 2013 and that depreciation that we are also expecting it to come about acouple of months down the road. But that it would be much more gradual than the kind of sharp movements and that sharp intradaymovements that we saw in 2013. So I hope that it is not going to be a repeat of the second part of that episode that we will have amore softer landing as such from this appreciation that we have seen over the last couple of months.

Mythili Bhusnurmath: Do we really need a change in the fiscal year? Madhya Pradesh has already done it. What purpose do youthink does it serve?

Aditi Nayar: Once the budget is passed and then planning is done at the state level after they have understood how much moneythey are likely to get from the centre, the first quarter would really go into planning stage. The second quarter comes around withmonsoon which is the last quarters of the fiscal year where the state governments feel that they are able to actually spend theallocations that they have from the central government. Then we come into an issue of the fiscal rules in terms of how much

spending can be done in any given quarter and how much spending can be done in an any given month which is essentially put inplace to avoid wasteful expenditure at the end of the fiscal year.

So broadly this is something that I would imagine that the central and the state governments are trying to get around by moving thefiscal year to the calendar year so that that planning can happen during January to March. Spending can kick off in the April to Junequarter, then the government will have little bit respite because of the monsoon and then you continue spending after that in lastquarter of the year and perhaps this is something that would give them a much better balance in terms of the spending pattern overthe year than the current fiscal year, where the monsoon comes too soon to really allow spending to take place in well plannedmanner.

There is a lot of disruption that potentially could be there as we move towards the GST. We do not know whether it is going to be asmooth transition or it is going to be disruptive, at least temporarily. Certainly the economy is going through a transition phase andwill go through a significant transition when GST comes around with lots of stakeholders trying to adjust to the new system. This isthe logic behind why governments would prefer to actually shift to the calendar years system from the fiscal year system.http://economictimes.indiatimes.com/markets/expert-view/spread-compression-may-hit-debt-market-aditi-nayar-icra/articleshow/58495616.cms

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Masala bonds help companies diversify fund source without forex risk, says Icra Atmadip RayThe Economic Times

Kolkata: Rupee-denominated bonds issued to overseas investors or Masala Bonds have managed to capture the fancy of Indiancompanies helping them to open up a new avenue for funds without taking foreign currency exchange rate risks.

Rating company Icra said the recent increase in issuances of masala bonds in overseas markets is expected to be positive forIndian companies, especially for those who don’t have a natural hedge against the underlying foreign currency risks involvedin external commercial borrowings (ECBs).

Masala bonds accounted for 39% of the total external fund raising of $7.39 billion by Indian companies during Q4FY2017, accordingto Reserve Bank of India statistics.

Housing finance and asset financing non-banking finance companies, which predominantly have rupee-denominated cash flows,have emerged as the leading borrowers.

Regulators have approved masala bonds for $4.59 billion in FY2017. Approvals surged to $2.9 billion in the fourth quarter from $0.8billion in the preceding one.

“With their cash-flows denominated in rupees, many of the borrowers of ECBs don’t have a natural hedge againstforeign currency risks inherent in that instrument. The trend of increasing masala bonds issuance is hence positive for suchborrowers, not only from the risk aspect but also from the pricing perspective," said Karthik Srinivasan, Icra's Group head forfinancial sector ratings.

Foreign currency denominated ECB dropped to $17.4 billion in FY17 from $24.4 billion in FY16.http://economictimes.indiatimes.com/markets/stocks/news/masala-bonds-help-companies-diverse-fund-source-without-forex-risk-says-icra/articleshow/58496877.cms

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In Q4, 39% of $ 7.4 bn funds raised via Rs. bonds Anup RoyBusiness Standard

Mumbai: In the fourth quarter of the last financial year, 39 per cent of overseas funds worth $7.39 billion was throughrupeedenominated bonds (RDBs) or masala bonds.

Since these bonds are raised in rupee, the issuer of the bonds doesn´t have to bear any exchangerate risk and therefore thecountry asawhole gets intoasafer zone as far as its overseas commitments are concerned.

“The trend of increasing RDB issuance is hence positive for such borrowers, not only from the risk aspect but also from thepricing perspective.

This opening up of an alternative borrowing channel and diversity in investor base is positive for Indian companies,” saidKarthik Srinivasan, group head, financial sector ratings, ICRA Ltd, inanote.

According to ICRA, some of the recent masala bond issuances have been priced at allincost levels comparable to similar tenorbonds issued by these companies in domestic markets.

“Given the attractiveness of RDBs, the growth in such issuances is expected to dampen issuances offoreigncurrencydenominated external commercial borrowings (ECBs),” ICRA said in the note.

Overall foreigncurrencydenominated ECB issuance declined to $17.4 billion in 201617 from $24.4 billion in 201516. The approvalsfor RDBs surged to $2.9 billion (~19,120 crore) during the fourth quarter of 201617 from $0.8 billion (~5,570 crore) in the third

quarter of 201617, and stood at an aggregate $4.6 billion (~30,620 crore) during the full 201617.

According to ICRA, housing finance and asset financing nonbank companies have emerged as leading borrowers via masalabonds.

Of the total $4.59 billion of masala bonds, 55 per cent was for onward lending in domestic markets, 24 per cent for refinancing ofrupee loans, and 14 per cent for general corporate purposes.

The average tenor of these bonds was five years and one month, ICRA said.

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International News

‘Sharper Fed rate hikes a key risk to Asia’ Suresh SeshadriThe Hindu

Yokohama: The U.S. Federal Reserve’s ongoing policy normalisation could potentially pose a risk to the economies in Asiaand the Pacific region, especially if the trajectory of interest rate increases were to be sharper than expected, said YasuyukiSawada, chief economist and director general, economic research and cooperation department, Asian Development Bank.

“If it is sharper than expected, the normalisation of U.S. interest rates, then there could be some heterogeneous impact onAsian economies,” Mr. Sawada said, observing that the ADB’s baseline scenario in its GDP growth projection of 5.7%for the region in 2017 and 2018 was based on the U.S. central bank raising policy rates thrice this year and four times in 2018.

“Some countries may react to a sharper than anticipated increase with policy responses of their own and this could have animpact on the growth momentum,” he added.

The Fed raised benchmark rates by one quarter of a percentage point in March and signalled at the time that the strengtheningeconomy would warrant “gradual increases” — an expression that economists understood to mean two moreincreases this year.

The ADB had, in its annual Asian Development Outlook 2017, released last month, flagged the possibility that a recent uptick inU.S. inflation could “accelerate the tightening cycle” but added that such an acceleration would likely be accompaniedby a quickening in growth momentum in the world’s largest economy.

Policy changes, particularly with respect to trade, in the U.S. and Europe also posed a risk to the outlook for the Asian economies,Mr. Sawada said adding that he, however, didn’t anticipate the global trade environment ever realistically returning to theinterwar conditions of the 1920s and 1930s.

Asia’s economies had also increased their intra-regional trade in recent decades and to that extent were therefore lessreliant on the developed economies, he observed.

The third key risk to the Asian growth forecast for 2017 was from a possible strong increase in U.S. oil and gas output that couldpotentially depress global commodity and energy prices.

While this would benefit net oil importer economies, energy exporters like the Central Asian countries of Azerbaijan and Kazakhstanwould likely be impacted adversely.

The ADB has projected the Central Asian economies to expand 3.1% this year, rebounding from 2016’s slowdown to 2.1%.http://www.thehindu.com/todays-paper/tp-business/sharper-fed-rate-hikes-a-key-risk-to-asia/article18380257.ece

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Standard Chartered picks Frankfurt for its new EU hub on Brexit Gavin Finch & Stephen Morrismint

London: Standard Chartered Plc has chosen Frankfurt for its main base inside the European Union (EU) as it prepares for the UK tolose easy access to the single market after Britain exits the trading bloc, the bank’s chairman said.

Standard Chartered is already in discussion with the German regulator BaFin about setting up a subsidiary in the city and getting alicense to operate across the EU, Jose Vinals said at the bank’s annual general meeting in London on Wednesday. Only asmall number of London-based staff will be affected by the move, Vinals added.

As recently as December, Standard Chartered had been edging toward picking Dublin for its new legal base inside the EU,Bloomberg News reported at the time. Vinals said Wednesday that Frankfurt made more sense as the bank already does its euroclearing there.

As banks accept the growing likelihood that they will lose the automatic right to sell services freely around the region from London,

they’re fleshing out plans to for new hubs to secure continued access to clients. On Wednesday, EU chief Brexit negotiatorMichel Barnier ruled out any immediate negotiations on transitional arrangements for the UK, the central demand thatLondon-based finance firms have made.

Vinals said that Brexit would have no material impact on Standard Chartered, which gets most of its profit from Asia. Bloomberghttp://www.livemint.com/Industry/YlscZQeG48H7UrtqZfzfmN/Standard-Chartered-picks-Frankfurt-for-its-new-EU-hub-on-Bre.html

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BNP Paribas Q1 profit rise powered by trading The Financial Express

BNP Paribas  posted trading revenue that trounced its European rivals, helping drive a surprise increase in first-quarter profit.

Revenue at the global-markets division climbed 33 percent from a year earlier to 1.75 billion euros ($1.9 billion), the Paris-basedbank said Wednesday. Net income rose 4.4 percent to 1.89 billion euros, topping the 1.5 billion-euro average estimate of sixanalysts surveyed by Bloomberg.

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Economy

Rupee gains 6 paise vs dollar PTISee this story in: The Hindu Business Line

Mumbai: The rupee on Wednesday strengthened by 6 paise to close at 64.15 against the US currency on sustained dollarunwinding by exporters and banks, extending its gains for a second session. The currency largely trapped in a narrow range,oscillated between 64.1025 and 64.1675 throughout the session.

The rupee resumed substantially higher at 64.12 on Wednesday compared to the previous close of 64.21 at the Interbank ForeignExchange market. After moving in a narrow range during the day, it settled at 64.15, a gain of 6 paise.http://www.thehindubusinessline.com/markets/forex/rupee-dollar-live-update/article9677933.ece

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Sensex ends flat; ICICI Bank results, Federal Reserve policy outcome eyed AgenciesSee this story in: The Hindu Business Line

Mumbai: The Sensex and Nifty ended flat on Wednesday as investors awaited key corporate results, including that of ICICI BankLtd, while the market watch for the outcome of a two-day policy meeting of the US Federal Reserve.

The broader NSE index closed down 1.85 points or 0.02 per cent at 9,311.95, while the benchmark BSE index ended 26.38 pointsor 0.09 per cent lower at 29,894.80.

Among BSE sectoral indices, realty index was the star-performer and was up 1.54 per cent, followed by IT 1.4 per cent, TECk 0.94per cent and power 0.29 per cent. On the other hand, healthcare index was down 0.98 per cent, oil & gas 0.67 per cent, metal 0.5per cent and capital goods 0.49 per cent.

Top five Sensex gainers were Power Grid (+2.31%), TCS (+1.98%), Infosys (+1.59%), Coal India (+1.49%) and HUL (+0.71%),while the major losers were Lupin (-3.09%), HDFC (-1.37%), ICICI Bank (-1.16%), Tata Motors (-1.11%) and Tata Steel (-1.03%).

Earnings seasonAs of Tuesday's close, the NSE index had gained about 1.8 per cent since April 13, when Infosys Ltd kick-started the corporateresults reporting season. The BSE index has also risen about 1.6 per cent in the same period.

“There is some consolidation in the (domestic) market but broadly the trend has been positive, lifted by abetter-than-expected corporate earnings season so far,” said Siddharth Purohit, a senior research analyst with AngelBroking.

“Performance in the banking sector is also good with lenders showing a pick-up in growth.”

ICICI Bank, India's No.3 lender by assets, plunged ahead of results.

United Breweries Ltd and United Breweries Holdings Ltd surged as much as 6.2 per cent and 9.9 per cent, respectively, on reportsof a buyout proposal of promoter Vijay Mallya's stake in United Breweries by Dutch beer maker Heineken International BV.

Real estate company Godrej Properties rose as much as 15.7 per cent to a record high after it said it sold 1,000 apartments inMumbai, Pune and Noida across three new projects since March 2017.

Asian sharesAsian stocks followed global indexes higher on Wednesday, as strong earnings and manufacturing data boosted risk appetite, whileexpectations that the Federal Reserve will signal a June rate increase later in the session lifted the dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 per cent early on Wednesday, within a hair of a near-two-yearhigh hit on Tuesday.http://www.thehindubusinessline.com/markets/stock-markets/sensex-nifty-live-update/article9677984.ece

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ADB pegs India’s growth at 7.4% for 2017-18 PTISee this story in: The Hindu Business Line

Yokohama (Japan): The Indian economy will grow 7.4 per cent this fiscal and 7.6 per cent in the next as the bankruptcy and GSTlaws will help create a more business-friendly environment, the Asian Development Bank (ADB) said today.

Ahead of its 50th annual meeting to be attended by finance ministers and central bank governors of member nations, themultilateral agency’s Chief Economist Yasuyuki Sawada said the reforms like the Goods and Services Tax (GST) and thenew bankruptcy law will make it easier to do business in India.

“India’s growth rate is picking up, 7.4 per cent this year and next year 7.6 per cent,” he told a media briefing.

“Over 7 per cent growth rate is high if we compare it to other emerging market economies and also China. Behind this iscyclical factor, and improved terms of trade. The Indian government adopted new bankruptcy law that improved the businessenabling environment. These are the the short-term and medium-term factors behind the growth acceleration in India,”Sawada said.

Note-ban effect

On the impact of demonetisation, he said the move obviously generated short-term decline in cash-based transactions andconsumer sentiment.

“But according to out data analysis so far, this possible negative impact of demonetisation was only short lived and we stillsee a medium-term growth acceleration of the Indian economy,” said the ADB chief economist.

ADB had not studied the demonetisation exercise’s impact on black money, he said.

“But overall, as far as we monitored the growth rate trend and macro-economic indicators, demonetisation seems to havegenerated only a short-lived impact,” Sawada said.

GST together with the new bankruptcy law are big positives for India, he said.

Rupee rise

Asked about the impact of rupee appreciation on exports, Sawada said, “You are thinking (that) with the appreciation ofrupee India will lose international competitiveness but it is the market environment that determines export growth. Medium shifting ofindustry and comparative advantage are also behind export pattern.”

Stating that rupee appreciation cannot be seen in isolation, he said the overall export performance of India so far seems to be quitepositive.

“I’m not sure but probably you shouldn’t be too pessimistic about the exchange rate,” the ADB chiefeconomist said.

The rupee strengthened to 64.2 against the US dollar and has been gaining strength as compared to other emerging economycurrencies.

The rupee has appreciated by over 5 per cent against the US dollar since January.http://www.thehindubusinessline.com/economy/adb-pegs-indias-growth-at-74-for-201718/article9679144.ece

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