Top Stories
More growth sacrifice in the offing from RBI: Nomura
India is going through its own version of stagflation, according to Nomura India's economist Sonal Varma. GDP growth plummeted to nearly 5% in Q1, and exports and imports both contracted in May. Yet, headline WPI inflation remains above 7.5% and CPI inflation above 10%. So, will the Reserve Bank of India (RBI) support growth or fight inflation?, Varma asks. Last night, the RBI governor, Dr. D. Subbarao, indicated that growth remains secondary when he said “you cannot control inflation without sacrificing some growth"… Read more
HDFC clarifies on accounting policies following Macquaire downgrade
HDFC Management completely disagrees with the contents of the Macquarie report dated 14th June 2012 as the concerned analyst has not attempted to meet anyone from HDFC before making the aforesaid report and verify the facts and statements made therein. Moreover it is surprising that Macquarie in its report as recently as May 7, 2012 had put a price target of Rs. 775 on HDFCs stock with an outperform rating based on the same facts and figures. We are therefore unable to understand as to what prompted the analyst to change his recommendation and outlook within a month’s time… Read more
RBI approves proposal to allow mobile operators to mortgage airwaves
The Reserve Bank of India (RBI) has approved the proposal to allow mobile phone companies to mortgage airwaves. This will enable telecom firms to use spectrum as collateral and raise funds from banks. On 30th May, the RBI communicated to finance ministry that banks will be allowed to sell the airwaves in case of a default or cancellation of mobile permits. The finance ministry has approved the RBI stance and has asked the Department of Telecommunications (DoT) to speed up policy changes to allow spectrum to be used as collateral by banks of telecom companies… Read more
Govt extends RBI governor’s tenure for 3 months
The government has reappointed RBI (Reserve Bank of India) deputy governor KC Chakrabarty for three months beyond 14 June 2012.
"The Government of India re-appointed Dr. K. C. Chakrabarty as the Deputy Governor of the Reserve Bank of India for a further period of three months beyond June 14, 2012 or until further orders, whichever is earlier," a release from RBI said on 13th June. The short-term extension is to ensure Mr Chakrabarty’s continuity until the appointments committee of the cabinet approves a two-year extension.
Mr Chakrabarty was appointed as deputy governor in 2009 for three years and his term would have come to an end on 14th June. Mr Chakrabarty would complete his 60 years this month but is eligible for reappointment for a two-year period as the retirement age for deputy governors is 62.
Defaulters of 1 bank considered as defaulter by all banks: FM
According to the guidelines issued by the finance ministry, if a borrow fails to repay his loan to the bank, then his account would automatically become ineligible for loan from other banks in future. The guidelines were issued by the ministry earlier this month.
The purpose of the rule is to stop companies from taking banks for granted and encourage them to make payments on time.
“Since the counter-party for all lenders is the same, the status of the borrower across all lenders shall have to be same,” the finance ministry said to all government banks in a circular. “The move is aimed to prevent undue leverage in the hands of the borrower and will also incentivise early resolution of any irregularity with all the lenders,” the circular added… Read more
Pre-paid cards can be used to pay school & colleges fees
The Reserve Bank of India (RBI) has allowed holders of pre-paid payment cards to deposit school and college fees and pay taxes up to the limit of Rs. 10,000.
Till now, pre-paid cards—also called semi-closed system payment instruments—were used to buy air and train travel tickets. They were also used to pay utility bills and for payments related to essential services.
The pre-paid cards are used as alternatives to cash and cheques. These cards are mostly issued by banks and non-banking financial companies (NBFCs) on payment of specified amount. These cards can be issued without separate know your customer (KYC) due diligence procedures being undertaken by the issuer… Read more
In Focus News
India to sell unused foreign debt limit in bonds on 20th June
According to media reports, India will sell the unused foreign debt limit in government and corporate bonds to foreign investors on 20th June, market regulator SEBI (Securities Exchange Board of India) told banks.
The reports added that the unused limit in government bonds to be auctioned under the no-residual maturity restriction segment is Rs. 14.64 billion, while under residual maturity of over five years is Rs. 38.37 billion.
The unused limit under corporate bonds with no residual maturity or sector restriction to be sold is Rs. 15.99 billion and under corporate bonds long-term infrastructure segment is Rs. 78.02 billion.
Technological interventions needed for increasing crop productivity: Exim Bank
Despite growth in production in the recent decades, crop yields in India are much lower than global averages due to structural weaknesses in agriculture sector, states a research study by Exim Bank.
The Study reveals that Indian agriculture is heavily dependent on input usage such as energy, water, fertilizers, or pesticides and therefore, strategies need to be adopted for sustainable management of these resources to counter any negative impact on crop production and yield levels. According to the Study, for such sustainable productivity enhancement, with balanced use of inputs, the policy framework needs to be geared towards providing long-term solutions, stimulating technology and capital investment… Read more
Resolution regime for FIs... FSDC sub-panel to form Working Group
A meeting of the Sub-Committee of the Financial Stability Development Council (FSDC) was held in Hyderabad. Dr. D. Subbarao, Governor, Reserve Bank of India, chaired the meeting. The meeting was attended by U. K. Sinha, Chairman, SEBI; J. Harinarayan, Chairman, IRDA; Yogesh Agrawal, Chairman, PFRDA; Deputy Governors of RBI Dr. K.C. Chakrabarty, Dr. Subir Gokarn, Anand Sinha and H.R. Khan, V. S. Das, Executive Director, RBI and other officials.
The Sub-Committee reviewed the recent developments in the global economy, specifically in the Eurozone and the US and the consequences for India. The concerns on slowing growth, persistent inflationary pressures, growing twin deficits and negative market perceptions were discussed. The concerns arising from the quantum of gold imports and their contribution to the current account deficit featured in the discussions… Read more
New Appointments
Barclays appoints Vivek Gupta as India Head, Trade & Working Capital
Barclays announced the appointment of Vivek Gupta as the India head for Trade and Working Capital.
Vivek joins from HSBC Singapore where he was heading the Business Development team. At Barclays he will be responsible for building the trade business across all client segments including FIs and MNCs.
Commenting on his appointment, Kai Fehr, MD, Head of Trade Asia said, “Vivek coming on board underlines the importance we place on our India franchise and the expertise and experience he brings with him ensures he is best placed to grow our strong existing business with a focus on core client relationships."… Read more
ICI announces George Shevlin as new political affairs officer
The Investment Company Institute (ICI) announced that George Shevlin has been hired as the new Political Affairs Officer. ICI is the national association of U.S. investment companies.
Shevlin will manage the Institute’s political program, including the Political Action Committee (ICI PAC). Additionally, he will work to reinforce the Institute’s relationships with key constituents on Capitol Hill and in the Administration and with other organizations… Read more
Trivia
NCR makes wireless withdrawals in 10 seconds at the ATM
NCR Mobile Cash Withdrawal will make ATM transactions faster and more secure, by removing cards and PINs from the process at the ATM. The entire transaction, while the consumer is in front of the ATM, can take less than 10 seconds… Read more
Fitch Ratings downgrades 18 Spanish banks
Fitch Ratings on Tuesday downgraded 18 Spanish banks, citing the debt-laden European nation's ongoing struggle in strengthening its shaky banking sector. Fitch, which had cut Santander and BBVA on Monday, cut the ratings for CaixaBank, Bankia, Banco Popular Espanol and others.
"In particular, Spain is expected to remain in recession through the remainder of this year and 2013 compared to the previous expectation that the economy would benefit from a mild recovery in 2013," Fitch said in a statement… Read more
Domestic News
SBI to recruit 9,500 in FY12-13
India’s largest lender, State Bank of India (SBI) said it plans to recruit 9,500 employees in the financial year 2012-13. The bank’s focus will be on retail banking in the coming years.
In FY11-12, the bank’s overall staff strength declined 7,452 employees, but it has decided to recruit 9,500 clerical staff during 2012-2013 to meet the growing needs of the bank.
As on March 31, 2012, the bank had total permanent staff strength of 2, 15,481, which included 80,404 officers, 95,715 clerical staff and the remaining 39,362 were sub-staff.
SBI has 26% market share in home loan and 17.51% market share in car loan financing last year… Read more
Bank of India partners with Microsoft
Bank of India (BOI), a state-owned commercial bank and one of India's largest PSU partnered with Microsoft to commence deployment of Microsoft Active Directory Rights Management Services (AD_RMS), under the project BOI Info-Guard. Microsoft AD RMS is an information protection technology that helps safeguard corporate digital information and enables safe and secure banking operations.
As this technology is being deployed, Bank of India will also adhere to the compliance requirements laid down by RBI Data Security Guidelines and ensure that its confidential and sensitive corporate information does not leak through unauthorized channels, with this deployment. Microsoft AD RMS is currently available for 100 users of BOI and will be extended to about 15000 users in the next phase of deployment… Read more
Axis Bank, BoB, PNB decline as shares turn ex-dividend
Shares of Axis Bank, Bank of Baroda and Punjab National Bank slipped after the stocks traded ex-dividend on Thursday.
Axis Bank had declared a dividend of Rs. 16, Bank of Baroda Rs. 17 per share and Punjab National Bank Rs. 22 per share for FY12. Adding pressure to banking stocks was the outcome of the WPI inflation number for May which came in at 7.55% versus 7.23% in April. The number, slightly higher than April, was largely in line with expectations.
A higher reading has somewhat moderated expectations of the Reserve Bank of India cutting interest rates at its policy meet on June 18. It remains to be seen how the apex bank will tackle the need for liquidity with sticky inflation after data on Tuesday showed that industrial activity in the country had virtually stalled in the month of April… Read more
RBI to issue coins to commemorate 60 years of Parliament
The Reserve Bank of India will shortly put into circulation the following coins of Rs. 5 and 10 denominations, which shall conform to the following dimension, design and compositions, namely… Read more
RBI to issue Rs. 20 notes with rupee symbol
The Reserve Bank of India will shortly issue Rs. 20 denomination Banknotes incorporating "Rs." symbol, with inset letter 'R', in the Mahatma Gandhi Series-2005 bearing the signature of Dr. D. Subbarao, Governor, Reserve Bank of India, and the year of printing 2012 printed on the reverse of the Banknote… Read more
IDBI Bank extends relief to drought affected villages
As part of its commitment towards Corporate Social Responsibility (CSR) initiatives and going beyond immediate business objectives, IDBI Bank has, during May 2012, extended relief in the form of financial assistance of Rs. 10.22 lakh to four drought affected villages allotted to the Bank under financial inclusion, in the districts of Satara, Sangli and Solapur in Maharashtra.
The relief is in the form of providing drinking water and fodder for animals for a period of one month in the four villages facing severe shortage of drinking water and fodder for animals… Read more
Western Union hails govt move to hike cash-to-cash transactions
The Western Union Company, a leader in global payment services, welcomed Reserve Bank of India’s (RBI’s) decision to increase the number of individual cash-to-cash transactions from around the world into India.
On June 8, 2012, the RBI increased the number of international cash-to-cash remittances from 12 to 30. The total value an individual in India may receive in a single calendar year would increase from US$30,000 to US$75,000 (US$2,500 per transaction).
“RBI’s liberalization validates India’s growing commitment to facilitating financial inclusion for its citizens by recognizing the role played by regulated money transfer operators such as Western Union, as India continues to uphold its number one rank as the world’s largest remittance receiving country1,” said Kiran Shetty, Managing Director and Regional Vice President, Western Union, India… Read more
Leader Speak
Will RBI shift priority to growth and deliver 50 bps cut in CRR? Moses Harding
The expectation build-up of shift into aggressive growth supportive monetary policy, post weak GDP/IIP data; sharp fall in crude oil price and rupee stability below all-time low with signs of appreciation pushed money market rate curve down; 3-12M curve at 9.0-9.5% from 9.75-10%. 10Y Bond yield was sharply down to 8% on the new 10Y Bond from coupon cut-off at 8.15%... Read more
Inflation can't be contained without sacrificing growth: RBI
Inflation in India could not be controlled without sacrificing economic growth, the Reserve Bank of India (RBI) Governor, Dr. D Subbarao, said on Thursday… Read more
We are facing a triple crisis: Christine Lagarde
The global economy is still rocked by turmoil, with uncertain prospects for growth and jobs. The planet is warming rapidly, with unknown and possibly dire consequences down the line. Across too many societies, the gap between the haves and have-nots is getting wider and strains are getting fiercer.
Although distinct, these different threats feed off each other in an intricate interplay. We cannot address each in isolation… Read more
Global News
JPMorgan Chase chief says not to block derivatives trading
According to media reports, JPMorgan Chase chief executive Jamie Dimon said that his bank is strong and that there was no need to block the derivatives trading that dealt it a huge $2billion loss in May. Dimon said, at present his job is to face shareholders, deal with the rest of the fallout from the loss and to move ahead, the reports added.
Before the Senate Banking Committee on June 13, Dimon expressed regret over losses in the bank’s chief investment office (CIO), saying that its trading strategy was “poorly conceived” by senior managers who were “in transition” and not paying adequate attention. He accepted the loss was a bad management error… Read more
ING Bank to pay $619mn penalty for violating US economic sanctions
According to media reports, Dutch bank ING Bank NV has agreed to pay a $619 million penalty for secretly moving billions of dollars through the U.S. financial system on behalf of Cuban and Iranian clients, acts that violated economic sanctions.
The reports added, ING intentionally deleted information about thousands of transactions that would have linked the money to sanctioned parties in Cuba, Iran and other countries, the Treasury Department said on 12th June.
The fine defuses multiple criminal and civil probes of ING's practices between 2002 and 2007. It includes agreements that stop ING from further action by the Department of Justice, U.S. Attorney for the District of Columbia and the Manhattan District Attorney's office, ING said. All were investigating ING's practices. Treasury's Office of Foreign Assets Control had a parallel probe. The fine will be divided equally between state and federal governments.
CME Group to pay $50,000 fine to NYMEX: Reports
According to media reports, exchange operator CME Group Inc ordered Morgan Stanley to pay a $50,000 fine to the New York Mercantile Exchange (NYMEX) for allegedly overstating its open interest in a crude-oil contract in November 2011.
On 15th June, CME said the investment bank overstated its position in the physically settled December 2011 crude-oil futures contract by 13,267 contracts (51.6%), one day before the expiration of the contract, the reports added… Read more
Global central banks get ready for Greek elections
World's leading central bankers are poised to take measures to maintain liquidity in global credit markets should a crunch arise following Greek elections this weekend, media reports suggested on Thursday, citing an official from the G-20.
The emergency plans were confirmed by other G-20 officials as well, who will hold a summit in Mexico beginning June 18. Investors want global leaders to take action on reviving economic growth, Institute of International Finance Managing Director Charles Dallara said in a letter yesterday to leaders attending the G-20 summit.
He said that world markets will be looking expectantly for evidence of a globally coordinated policy response targeted to revive growth prospects… Read more
Allen Stanford sentenced to 110 years imprisonment: Reports
It has been quoted in various newspapers of media, that Allen Stanford, the Texan banker, was sentenced to 110 years in prison on 14th June for running a $7 billion scheme in which he stole money from his investors to finance an extravagant lifestyle in the Caribbean.
The reports added, U.S. District Judge David Hittner said Stanford's actions were among the most "egregious criminal frauds". In March, Stanford was convicted of 13 charges including fraud and conspiracy for selling certificates of deposit (CDs) from Stanford International Bank in Antigua to thousands of investors in the US and Latin America… Read more
BOE, UK unveil measures to fight eurozone crisis
Bank of England (BOE) Governor Mervyn King said on Thursday that the UK central bank will activate a sterling liquidity facility to aid banks, and plans to have a form of credit easing operating to boost lending as the case for looser policy is growing.
The BOE will start holding auctions of sterling liquidity with a maturity of six months. King said that the lending plan will provide banks with funds below current market rates… Read more
BOJ holds rates, stimulus steady before Greek polls
The Bank of Japan (BOJ) on Friday left its benchmark interest rate unchanged near zero and also refrained from announcing any fresh monetary stimulus, as it stays on the sidelines ahead of the weekend elections in Greece.
The Japanese central bank kept its asset-purchase fund at 40 trillion yen (US$507 billion) and a credit lending program at 30 trillion yen, matching the forecasts of economists. The BOJ also kept the amount of monthly bond purchases at 1.8 trillion yen… Read more
Moody's downgrades Dutch banks: Outlook stable
Moody's Investors Service has downgraded the long-term debt and deposit ratings for five Dutch banking groups.
The long-term debt and deposit ratings for four groups declined by two notches: to Aa2 for Rabobank Nederland, to A2 for ING Bank N.V., to A2 for ABN AMRO Bank N.V., and to Baa2 for LeasePlan Corporation N.V. The long-term debt and deposit ratings for SNS Bank N.V. were downgraded by one notch to Baa2. The short-term ratings for all aforementioned groups are unchanged.
Concurrently, Moody's has assigned stable outlooks to the ratings for four of the aforementioned groups, while assigning negative outlooks to the ratings for ING Bank N.V. and its related entities… Read more
Spain's 10-year yield hits all-time high of 7%
The yield on Spain's 10-year government bond reached an all-time high of 7% on Thursday, as investors rushed to the safety of safe-haven assets on fears that Europe's two-year long debt crisis was worsening, sending the region's equities and the euro lower.
The yield was at 6.92%, versus a close of 6.772% in the previous session. The 7% yield has forced other struggling euro-area nations such as Greece, Portugal and Ireland to seek an international bailout.
Moody's Investors Service downgraded Spain by three notches to just one level above junk status. Moody’s late on Wednesday cut the country’s credit rating to Baa3 from A3 and put it on review for a possible further downgrade… Read more
Moody's cuts Spain's rating to Baa3; More downgrades likely
Moody's Investors Service has downgraded Spain's government bond rating to Baa3 from A3, and has also placed it on review for possible further downgrade. Moody's expects to conclude the review within a maximum timeframe of three months… Read more
Solid recovery in Japan marred by euro woes: IMF
Japan is experiencing a solid recovery following the March 2011 Great East Japan earthquake, but the European debt crisis is likely to dampen demand for the country’s exports, and weigh on business sentiment, says the IMF in its annual health check of the world’s third largest economy.
Speaking at the end of a trip to Japan accompanied by IMF economists, First Deputy Managing Director of the IMF, David Lipton, said the country’s recovery would likely be sustained by reconstruction spending and stronger private consumption… Read more
WB urges developing nations to strengthen domestic fundamentals
Developing countries should prepare for a long period of volatility in the global economy by re-emphasizing medium-term development strategies, while preparing for tougher times, says the World Bank in the newly-released Global Economic Prospects (GEP), June 2012.
A resurgence of tensions in high-income Europe has eroded the gains made during the first four months of this year, which saw a rebound in economic activity in both developing and advanced countries and an easing of risk aversion among investors. Since May 1st, increased market jitters have spread… Read more