finance aug 12

8/8/2019 Finance Aug 12

1/78

Headlines..

RBI / MoF / Govt. Policies

RBI panel wants tech upgrade to check fake notes

Thorat panel lays out plans to counter fake note menace

Post-2011, bank books to carry real numbers

Govt: Latest debt instrument not to fund fiscal deficit

Central banks looking to ending monetary expansion: Y. V. Reddy

Credit card balances' growth declines to all-time low

Govt may give Rs 10,000 cr for debt waiver scheme

Arms help SBI enter new areas sans govt equity

Regulatory Bodies / IRDA / SEBI

SEBI suspends 578 brokers registration

Private / Public Sector Banks

Public sector banks pip private peers in growth in staff cost

SUUTI won't participate in Axis Bank pref issue

Axis Bank adds 31 lakh shares in open interest

LVB sees gains from re-pricing high cost deposits

ATMs with in-built note detectors soon

M&M, Syndicate Bank tie-up

Banks raise Rs 900 cr via CDs

PNB to cut home loan rate to 8.5% this week

Foreign Banks / FIIs

StanChart to hire 850 for priority banking

Rating & Research

Allahabad Bank bonds rating

Credit & Pre-paid Cards

Credit card slump tells slowdown tale

NBFCs / FIs

MAGFIL may raise Rs 3,250 cr

PTC Fin may raise Rs 1.5k cr through IPO by FY11-end

Brokers / Distributors

Tata Capital to launch private equity fund

Life & General Insurance

Postal cover funds set for stock-market delivery

SUUTI won't participate in Axis Bank pref issue

Life insurers may soon invest in infra SPVs

Future Generali implements Newgen solution


2/78

Citizens insure road for quality

Insurers gear up to meet flu claims

Existing health policies to cover swine flu hospitalization

Health insurers: Super smart or born losers?

Mutual Funds & AMCsMF sales, new fund launches rebound

MFs cut distributors fee

Mutual funds may roll back exit load rates after Sebi ruling

Rising market makes investors look at FMPs

Shinsei to continue Indian fund operations

Pvt. Equity & Hedge Funds

Pension Funds / PF / EPF

Poor response to pension scheme till July 31

Govt Securities & Bonds

Bonds rise on new short-term instrument

Call rate ends at 3.25-3.30%

International News

BoJ keeps interest rate unchanged

Economy

Rupee falls by 14 p against dollar

Sensex snaps losing streak

Weak monsoon to impact growth, inflation, says Crisil

The News in detail

=========================RBI / MoF / GOVT. POLICIES -Top-=========================

RBI PANEL WANTS TECH UPGRADE TO CHECK FAKE NOTES

The Economic Times

See similar story in: Business Standard, The Hindu, Deccan Herald, The Pioneer

Mumbai: A Reserve Bank of India (RBI)-appointed committee has said that the centralbank should constantly upgrade security features on currency notes stay ahead ofcounterfeiters. The panel has also said that the public should be educated on thesesecurity features, which will enable them to detect fake notes.

The panel has recommended progressive adoption of technology, both in respect of cashhandling and securityto counter the growing menace of fake notes in the country. The
http://economictimes.indiatimes.com/Economy/RBI-panel-urges-to-check-fake-notes/articleshow/4883504.cmshttp://economictimes.indiatimes.com/Economy/RBI-panel-urges-to-check-fake-notes/articleshow/4883504.cmshttp://economictimes.indiatimes.com/Economy/RBI-panel-urges-to-check-fake-notes/articleshow/4883504.cms


3/78

committee, however, noted that the number of fake notes in the country could be in therange of at 3-6 pieces per million, one of the lowest in the world.

Some of the key suggestions of the group include installation of note sorting machines atall bank branches in a phased manner so that fake notes are promptly detected as soon as

they enter the banking channel. To ensure that ATMs and other outlets dispense cleanand good notes, the group has suggested switching over to cassette swapping systemwhere cash in transit (CIT) companies agents that help in running ATM haveminimum involvement in handling currency.

In August 2008, RBI had constituted a group headed by deputy governor Usha Thorat,with a view to enhancing the efficiency of currency systems and suggesting appropriatemeasures for the same. The recommendations follow five meetings that the group hadduring September 2008 May 2009, a release on the RBI website said.

This group has pointed out that to counter the fake notes menace, security features have

to be constantly upgraded and public have to be educated on how to detect a fake note. Itenvisages that information on detection has to be shared promptly with enforcementagencies and security systems for cash storage. If the committee has its way, banksfinding a few fake currency notes also will not have to file any FIR as is the current case.Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved"http://economictimes.indiatimes.com/Economy/RBI-panel-urges-to-check-fake-notes/articleshow/4883504.cmshttp://www.business-standard.com/india/news/rbi-may-get-crackingfake-notes/366664/http://www.hindu.com/2009/08/12/stories/2009081255751300.htmhttp://www.deccanherald.com/content/19150/only-3-6-million-have.htmlhttp://www.dailypioneer.com/195149/Snapshots.html

THORAT PANEL LAYS OUT PLANS TO COUNTER FAKE NOTE MENACE

The Financial Express

Mumbai:A high level group set up by the Reserve Bank of India on currency distributionheaded by Usha Thorat, deputy governor has said that the number of fake notes in Indiais estimated at 3 to 6 pieces per million which is one of the lowest in the world.

The group has noted that the RBI appointed Nayak Committee (1988) has calculated thatthe actual notes in circulation by the year 2000 is Rs 1,69,000 crore.

Towards further strengthening the measures to combat the menace of fake notes, thegroup recommended, installation of note sorting machines at all bank branches in aphased manner and banks giving a roadmap to the RBI to achieve this, switching over tocassette swapping system so that replenishment of currency notes in ATMs is done in ahighly secured manner and waiving the current requirement of filing an FIR by banks incase one gets possession of a few fake currency notes.
http://economictimes.indiatimes.com/Economy/RBI-panel-urges-to-check-fake-notes/articleshow/4883504.cmshttp://economictimes.indiatimes.com/Economy/RBI-panel-urges-to-check-fake-notes/articleshow/4883504.cmshttp://www.business-standard.com/india/news/rbi-may-get-crackingfake-notes/366664/http://www.hindu.com/2009/08/12/stories/2009081255751300.htmhttp://www.deccanherald.com/content/19150/only-3-6-million-have.htmlhttp://www.dailypioneer.com/195149/Snapshots.htmlhttp://economictimes.indiatimes.com/Economy/RBI-panel-urges-to-check-fake-notes/articleshow/4883504.cmshttp://economictimes.indiatimes.com/Economy/RBI-panel-urges-to-check-fake-notes/articleshow/4883504.cmshttp://www.business-standard.com/india/news/rbi-may-get-crackingfake-notes/366664/http://www.hindu.com/2009/08/12/stories/2009081255751300.htmhttp://www.deccanherald.com/content/19150/only-3-6-million-have.htmlhttp://www.dailypioneer.com/195149/Snapshots.html


4/78

The sharp increase in the number of physical notes in circulation as also the increase inthe number of cases of fake notes detected/seized in recent period, have clearlyunderscored the need for increased vigil by all stakeholders to address the menace of fakenotes, said the panel.

From the RBIs side, the priority has been to ensure that fake notes are promptly detectedas soon as they enter into the banking channel. It is equally important to ensure thatATMs and other outlets for currency distribution dispense clean and good notes.

At the same time, the security features have to be constantly upgraded, public have to beeducated on how to detect a fake note, technology needs to be used in greater measure toimprove the integrity and efficiency of the currency operations, information on detectionhas to be shared promptly with enforcement agencies, security systems for cash storageand handling at banks strengthened further and note sorting machines installed at all bankbranches and other locations.

The panel has recommended that Note Sorting Machines (NSMs) / Desktop Sorters maybe installed in all bank branches in a phased manner for early detection of counterfeitnotes. Banks may ensure the quality of the notes fed in ATMs. They may conductperiodic audit of the agents used for outsourcing this activity viz. the CIT companies.http://www.financialexpress.com/news/thorat-panel-lays-out-plans-to-counter-fake-note-menace/500834/

POST-2011, BANK BOOKS TO CARRY REAL NUMBERS

Sangita MehtaThe Economic Times

Mumbai: Banks will soon have to shift to a new, more accurate, accounting standardwhere the value of assets will be based on current rather than historical cost.

At a meeting with select bank chief executives on Monday at the RBI headquarters inMumbai, RBI deputy governor Usha Thorat said banks will have to adopt theInternational Financial Reporting Standards (IFRS) by 2011. In the meeting, the centralbank also rejected requests by banks to extend the July 31 deadline for restructuring badloans under a one-time dispensation as standard assets post the global meltdown.

A bank CEO said adoption of IFRS would require banks to put in place core bankingsolutionmoving from branch to centralised banking with IT supportacross the entirebanking network.

The move towards IFRS will require banks to computerise and become connectedbecause database and management information system (MIS) would be key toimplementing IFRS, said a senior banker who was present at the meeting.

This is in line with a directive issued by the Institute of Chartered Accountants of India
http://www.financialexpress.com/news/thorat-panel-lays-out-plans-to-counter-fake-note-menace/500834/http://www.financialexpress.com/news/thorat-panel-lays-out-plans-to-counter-fake-note-menace/500834/http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cmshttp://www.financialexpress.com/news/thorat-panel-lays-out-plans-to-counter-fake-note-menace/500834/http://www.financialexpress.com/news/thorat-panel-lays-out-plans-to-counter-fake-note-menace/500834/http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cms


5/78

(ICAI), the apex body that sets accounting standards in the country, that all listedcompanies and entities dealing with public funds must adopt IFRS accounting principlesby April 2011. IFRS has turned out to be more popular than the US GAAP, and has beenadopted by over 100 countries.

Among public sector banks, State Bank of India has already taken the initiative to shiftfrom the current Indian standard of accounting to IFRS.

During the meeting, the central bankalso directed Indian Banks Association, therepresentative body of banks, to issue suggestions on enhancing lending to infrastructurecompanies and on measures that could be taken to support the local textile industry,among the worst-hit sectors due to the global recession.

The RBI also sought IBAs view on advance measurement approach and supervisoryreview, both of which are part of the Basel-II accord on capital requirement.Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved"

http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cms

GOVT: LATEST DEBT INSTRUMENT NOT TO FUND FISCAL DEFICIT

Business Standard

Mumbai: A day after announcing the latest debt instrument to tide over temporary cashflow problem, the government and the Reserve Bank of India (RBI) have tried to clearthe air on the cash management bills and said that the tool would not be used to fund theCentres fiscal deficit.

Finance Secretary Ashok Chawla in the morning said that the new short-term instrumentwould add more flexibility to the cash management process.

Asked if the new instrument would supplement the governments existing borrowingplan, Chawla said, Cash management bills are part of the overall programme.

By evening, the central bank joined in saying that the new bills were not aimed at fundingthe governments fiscal deficit and would not increase the size of the borrowings. Cashmanagement bills only provide an additional instrument to the government for its cashmanagement operations in a cost-effective manner, Deputy Governor ShyamalaGopinath told reporters.

The government borrowing has been budgeted at Rs 4,51,000 crore for the currentfinancial year.

We are not taking a view either on (interest) rates or on liquidity. We have not issued thenotification with that intention, she said.
http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Post-2011-bank-books-to-carry-real-numbers/articleshow/4879995.cms


6/78

The deputy governor said the cash bills would be in addition to the short-term loans thatthe RBI gave to the government in the form of ways and means advances (WMAs) formanaging its fund mismatches. This is an addition to the ways and means advances andtreasury bills. So to that extent, it (government) can take a view whether to go for a cash

management bill or WMA, she said.

Government officials, however, said the Centre would prefer cash management bills totide over temporary cash mismatches instead of borrowing under WMA, whenever yieldswere low. Typically, WMA has been a costlier option for the government in the past. Sowith the introduction of this new instrument, we will prefer to borrow under this toolrather than borrowing under WMA, the source said.

In the current environment, for instance, when the yields are low and if we were to facea temporary cash mismatch, we will borrow under the cash management bills, he said.

The source, however, said the government was unlikely to see any cash managementmismatches in the near term.

Yesterday, the government had said that it would issue cash management bills aimed atbridging its temporary cash flow mismatches. The cash management bills will have thegeneric character of treasury bills, but will be non-standard, meaning the tenure will varyas per the need of the government.

These bills would be of less than 91-day tenure and issued at a discount to the face valuethrough auctions, as in the case of treasury bills, said the government.http://www.business-standard.com/india/news/govt-latest-debt-instrument-not-to-fund-fiscal-deficit/366668/

CENTRAL BANKS LOOKING TO ENDING MONETARY EXPANSION: Y. V.

REDDY

The Hindu Business Line

See similar story in: The Hindu

Bangalore: Banking regulators worldwide are faced with the dilemma of finding exitstrategies from the massive monetary expansion made in the wake of the global financialcrisis.

Addressing the inaugural session on the Public Policy and Management at the IndianInstitute of Management here on Sunday, the former Reserve Bank of India Governor, DrY.V. Reddy, said, An exit cannot be done too early nor can it be too late. Early exit willlead to instability and too late an exit inflation. Any exit therefore would need to be timedright.

Exit: Status quo ante?
http://www.business-standard.com/india/news/govt-latest-debt-instrument-not-to-fund-fiscal-deficit/366668/http://www.business-standard.com/india/news/govt-latest-debt-instrument-not-to-fund-fiscal-deficit/366668/http://www.business-standard.com/india/news/govt-latest-debt-instrument-not-to-fund-fiscal-deficit/366668/http://www.business-standard.com/india/news/govt-latest-debt-instrument-not-to-fund-fiscal-deficit/366668/http://www.business-standard.com/india/news/govt-latest-debt-instrument-not-to-fund-fiscal-deficit/366668/


7/78

Exit implied gradually reversing the monetary expansion. In working out exits, he said,countries have to take into account their specific characteristics; they would also have totake concerted action, he added. But in making such exits, Dr Reddy also raised thepossible scenario, When you exit, does it mean going to status quo ante? This is a bigdebate world wide, he added.

Giving a backdrop to the global financial crisis, he said excessive deregulation by centralbanks world wide was one of the major causes. This led to regulatory imbalances and taxarbitrage. Financial activity is footloose. Financial activity goes where regulation is softand taxes are low. The soft regulation was particularly in the US and the UK forbecoming global financial centres.

Basel norms

The soft regulatory regime, in turn, he pointed out, resulted in excessive financialisationand excessive leverage in the global economies. Referring to the Basel norms thatgovern supervisory norms in the global banking industry Dr Reddy said they were

essentially pro-cyclical in character.

The resultant shadow banking and financial innovations were largely made to circumventcapital regulations, he observed. Off-balancesheet items consequently became on-balancesheets, he said, when the crisis began unfolding.

The crisis also exposed the balancesheets of the central banks that were the first lines ofdefence, through large liquidity injections. This in turn translated into a fiscal crisis, headded.

The crisis also exposed the underbelly of governance. Dr Reddy observed, By and largegovernance and policy did not do too well. The crisis exposed serious issues of failure bygovernments, regulators, audit committees, rating agencies, markets and the media.

Referring to the G-8 and G-20 meetings that had suggested uniform regulations orcommon taxes, he said they were not practical. This was because both regulation andtaxes were sovereign subjects. Instead, policy solutions should target segments ofexcessive leverage.

Dr Reddy cautioned that while a recovery in the financial market world did notnecessarily imply that the crisis had been resolved. It does not imply that we havemoved out of distress. Instead the problems in the financial sector are a reflection of adifferent problem.http://www.thehindubusinessline.com/2009/08/12/stories/2009081251810600.htmhttp://www.hindu.com/2009/08/12/stories/2009081255741300.htm

CREDIT CARD BALANCES' GROWTH DECLINES TO ALL-TIME LOW

Sudeep JainBusiness Standard
http://www.thehindubusinessline.com/2009/08/12/stories/2009081251810600.htmhttp://www.hindu.com/2009/08/12/stories/2009081255741300.htmhttp://www.thehindubusinessline.com/2009/08/12/stories/2009081251810600.htmhttp://www.hindu.com/2009/08/12/stories/2009081255741300.htm


8/78

Mumbai: As banks examine the viability of credit cards as a product and find ways tocurb losses under this portfolio, the annual growth in credit card balances has fallen to anall-time low.

According to the Reserve bank of India (RBI) data, year-on-year growth for credit cardout standings, or the total balance due to issuers on credit card spends by customers, hasplummeted to 1.4 per cent as on May 22, 2009. During the year to May 23, 2008, thegrowth rate was 36.5 per cent. And, for the preceding year, it was 45 per cent.

This flat growth comes despite an increase in rollover of credit from around 60 per cent ayear ago to around 65 per cent now.

Banks, already on a culling spree, have cancelled nearly 3 million credit cards in 2008-09. However, bankers said most of the cancelled cards were inactive ones, which costthem money to hold in terms of billing and postal charges. There was also the potential

for misuse since inactive cards could be used in case the owner fell in financial troubleand needed cash without having to put up collateral.

Apart from whittling down their existing card base, some of the most aggressive playershave slowed new issuances too.

For instance, ICICI Bank, which has the largest credit card base in the country, hasslashed the number of new credit cards to about 1,000 a month, according to a seniorexecutive who declined to be named. Questions are also being raised about the financialviability of this product in its current form. This category is going to be ring-fenced forsome time and we are examining if it is sustainable without an annual fee, the banksexecutive said.

ICICI Banks cards in circulation have dipped from 8.5 million a year ago to about 7million now.

SBI Cards, a joint venture between State Bank of India (SBI) and GE Money, has kept itscards base more or less constant over the past 12 months at around 3 million. Accordingto Diwakar Gupta, chief executive officer, SBI Cards, card spends barely sustain the costto the issuer.

We offer 50-day credit to the customer, but the cost of holding that card is equal to theinterchange earned on that card. Without an annual fee, this model is not reallysustainable, said Gupta.

Citibank, with the fourth largest credit card base, has reduced its credit card base to 2.5million from 3.8 million in July last year. When contacted, the lender declined tocomment.

Most banks have made it a policy to issue credit cards only to existing customers.


9/78

Parag Rao, head - product, portfolio and service delivery, credit cards of HDFC Bank,said that the private sector lenders policy to source 85 per cent of the business fromcustomers with existing relationships had helped it keep delinquencies at a much lowerlevel than the industry average.

As a result, it is the only large issuer to have seen its credit card base increase, fromaround 3.8 million a year ago to around 4.5 million now. Incrementally, there is noissuer which is issuing over 15,000 cards a month, said Rao.

But the overall credit environment has also forced HDFC Bank to tighten norms forcertain geographies and segments, besides focusing on more stringent verification.

According to industry estimates, delinquency rate for the credit card business has shot upto 20 per cent, from around 15 per cent a year ago.

Shyam Srinivasan, country head for consumer banking at Standard Chartered Bank, said

credit cards should not be looked as a standalone product. The product does remainviable if it is seen as part of a wider relationship with the customer, he said.

According to Srinivasan, Standard Chartered Bank is the largest issuer of premiumsegment cards in the market. The bank has kept its credit card base flat at 1.3 million overthe past few quarters.

While fewer issuances is one part of the story, banks have also resorted to reducingsanctioned credit limits, which in some cases have been slashed by half. In many cases,cash withdrawal facility has been dispensed with.

Besides, HDFC Banks Rao said that card holders have also resorted to lower spends ontheir cards due to the uncertain economic environment.http://www.business-standard.com/india/news/credit-card-balances/-growth-declines-to-all-time-low/366666/

GOVT MAY GIVE RS 10,000 CR FOR DEBT WAIVER SCHEME

PTISee this story in: The Hindu Business Line

New Delhi: The Government is likely to release Rs 10,000 crore to banks and financialinstitutions as part of compensation for writing off loans under the farm-debt waiverscheme.

"The Finance Ministry is considering to release Rs 10,000 crore to lending institutions ina month or so,'' official sources said. This would be over and above Rs 5,000 crore, whichwas given earlier this fiscal to the banks and financial institutions to wards the debtwaiver scheme.
http://www.business-standard.com/india/news/credit-card-balances/-growth-declines-to-all-time-low/366666/http://www.business-standard.com/india/news/credit-card-balances/-growth-declines-to-all-time-low/366666/http://www.business-standard.com/india/news/credit-card-balances/-growth-declines-to-all-time-low/366666/http://www.business-standard.com/india/news/credit-card-balances/-growth-declines-to-all-time-low/366666/


10/78

The government had announced that it would pay Rs 15,000 crore to the lenders duringthe current fiscal. The debt waiver scheme, announced by the government in 2008-09Budget, was implemented by June 30, 2008, entailed a burden of Rs 71,000 crore onbank s and financial institutions which the government promised to reimburse in stages.

During 2008-09, the government gave a total of Rs 25,000 crore to lending institutions ascompensation towards the Agricultural Debt Waiver and Debt Relief Scheme.

Under the debt waiver and relief package, for small and marginal farmers (with holdingsup to 2 hectare) there was a complete waiver of all loans due on December 31, 2007, andwhich remained unpaid until February 29, 2008.http://www.thehindubusinessline.com/blnus/07111861.htm

ARMS HELP SBI ENTER NEW AREAS SANS GOVT EQUITY

Subhomoy Bhattacharjee, Sunny Verma


New Delhi:The State Bank of India has fleshed out a robust expansion plan that neatlycomplies with the government rules on keeping its shareholding structure unchanged andstops just short of the RBI-set limit on setting up a financial holding company.

The bank has, therefore, decided to hive off each of its foray into a new business as asubsidiary. The latest to join the set is its planned foray into the private equity business.SBI chairman OP Bhatt told FE the RBI is expected to give its approval for the venturesoon. RBI has asked for some clarifications, which we are sorting out, he said.

According to him, the banking model allows the subsidiaries to expand without facingany capital constraints. We have not set up a holding company, but all new forays afterapproval from the board of directors (of the bank) are being established as independententities, Bhatt said.

The SBI Act does not permit the government stake to dip below 55% in the bank butthere is no such restriction on the subsidiaries. SBI can dilute and become a minorityshareholder in subsidiaries when they need to raise capital, said JagannadhamThunuguntla, head of Delhi-based SMC Capital, a private equity company. The businessof the parent bank spans insurance, mutual funds, pension, treasury trading, broking,venture investment, besides the separate private equity venture.

In SBI, (the government) has to have a minimum stake of 55%. But it does not apply tosubsidiaries. So SBI can have, lets say, 40% stake in SBI Life, with up to 34% withanother domestic and 26% with a foreign firm, said US Roy, former MD & CEO, SBILife Insurance.

While Bhatt was unwilling to call it a new model, the process has allowed the companyto raise capital and avoid the complexities of an intermediate holding company structure,
http://www.thehindubusinessline.com/blnus/07111861.htmhttp://www.thehindubusinessline.com/blnus/07111861.htm


11/78


12/78


13/78

banks staff costs increased during April-June 09, except threeKotak Mahindra Bank,Development Credit Bank and ICICI Bank.

The staff cost of ICICI Bank declined from Rs 523 crore during April-June 08 to Rs 466crore during April-June 09. This can be explained from its performance. The total

income of ICICI Bank decreased by 2.2% to Rs 9,223 crore during April-June 09, ascompared to Rs 9,430 crore during April-June 08.

In April-June 09, HDFC Bank had the highest staff cost followed by ICICI Bank andAxis Bank The highest increase in staff cost was seen in the case of Axis Bank.http://www.financialexpress.com/news/public-sector-banks-pip-private-peers-in-growth-in-staff-cost/500837/

SUUTI WON'T PARTICIPATE IN AXIS BANK PREF ISSUE

Business Standard

Mumbai: The Special Undertaking of Unit Trust of India (SUUTI), which was carved outof the erstwhile Unit Trust of India in 2003, will not participate in the proposedpreferential offer of Axis Bank (formerly UTI Bank). The shareholding of SUUTI in thebank will come down from 27.02 per cent to 22.54 per cent.

The other promoters are Life Insurance Corporation of India (LIC), General InsuranceCorporation of India (GIC) and the other four general public sector companies NewIndia Assurance, United India, Oriental and National Insurance. Axis Bank is likely toraise around Rs 5,000 crore by issuing 71.4 million shares through preferential allotment,private placement, including qualified institutional placements, and private offeringsthrough global depository receipts from domestic and international markets. The bankwill close the offer within 15 days of passing the resolution.

According to a source, there is an issue of lock-in period if the undertaking participates inthe offer. The shares may be locked in for a minimum two years, if SUUTI takes part inthe issue. In Budget 2008-09, the government granted SUUTI five more years ofexemption from liquidating state liabilities.http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/

AXIS BANK ADDS 31 LAKH SHARES IN OPEN INTEREST


Chennai: Turnover slipped to Rs 63,519.97 crore in the F&O segment on Tuesday. TheNifty August future ended in discount at 4464.45 against the spot close of 4471.35. It alsoshed 6.24 lakh shares in open interest positions, indicating lack of conviction in todaysgain.
http://www.financialexpress.com/news/public-sector-banks-pip-private-peers-in-growth-in-staff-cost/500837/http://www.financialexpress.com/news/public-sector-banks-pip-private-peers-in-growth-in-staff-cost/500837/http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/http://www.financialexpress.com/news/public-sector-banks-pip-private-peers-in-growth-in-staff-cost/500837/http://www.financialexpress.com/news/public-sector-banks-pip-private-peers-in-growth-in-staff-cost/500837/http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/


14/78

Among the calls, 4700 shed 3.64 lakh shares an indication of writing activity suggesting that market Nifty might find difficult to breach that level. On the other hand,4400 and 4300 puts witnessed sharp accumulation, suggesting that Nifty might move in4300-4700 range.

Stock futuresIt was once again lacklustre day. Among the individual counters, Axis Bank added 30.81lakh shares in open interest and closed at 868 against the spot close of 869.9.

The other counters that saw sharp accumulation were JP Associates (26.77 lakh shares)and Unitech (25.96 lakh shares).

SBI and Reliance Capital shed open position.Futures of Tata Motors, JSW Steel, Tata Steel and DLF closed in discount with respect tospot close.

FII activityOverseas investors remained net buyers to the tune of Rs 688.73 crore, thanks to theirstrong buying in stock futures worth Rs 498.08 crore.http://www.thehindubusinessline.com/2009/08/12/stories/2009081250961000.htm

LVB SEES GAINS FROM RE-PRICING HIGH COST DEPOSITS


Chennai: Lakshmi Vilas Bank expects better performance in the current quarter as closeto Rs 700-crore high-cost deposits are coming up for re-pricing.

The banks Managing Director and CEO, Mr V.S. Reddy, toldBusiness Line the bank isoffering 7.5 per cent on one-year deposits, compared with 10.5 per cent last year.

He said he did not anticipate any liquidity problems, or flight of deposits, because LVBsrates are still better than its peer banks.

The bank has about Rs 2,500 crore high-cost deposits and half of it will come up forrenewal this year. This should fuel the banks growth in profits, he said.

Five-fold rise in net

Lakshmi Vilas Bank reported a five-fold jump in net profits to Rs 22.6 crore for the firstquarter of 2009-10 compared with Rs 4.28 crore for the same period last year. The rise innet profits was aided by the growth in other income than treasury income.

Other income increased 64 per cent to Rs 25.7 crore (Rs 15.6 crore).During the first quarter of 2009-10, LVBs gross non-performing assets (NPAs) ratio was2.71 per cent (3.64 per cent). Net NPA was 1.32 per cent (1.66 per cent).
http://www.thehindubusinessline.com/2009/08/12/stories/2009081250961000.htmhttp://www.thehindubusinessline.com/2009/08/12/stories/2009081250961000.htm


15/78

Mr Reddy said, We have recovered about Rs 23 crore in the last four months and haveplans to bring down gross NPA to Rs 120 crore by the year-end from Rs 150 crorecurrently.

Meanwhile, LVB has signed an MoU with BSNL, under which the bank would enjoy a

preferred customer status. This will enable the bank to speed up its ongoing projectswith enhanced bandwidth requirements, says a press release from LVB.http://www.thehindubusinessline.com/2009/08/12/stories/2009081251820600.htm

ATMS WITH IN-BUILT NOTE DETECTORS SOON


See similar story in: The Times of India

Mumbai: Are you worried about the possibility of ATMs spewing out fake currencynotes? Well, a remedy may be at hand. A High Level Group on Systems and Procedures

for Currency Distribution has recommended that new ATMs be provided with in-builtnote detectors.

Over a period existing ATMs may also be required to have in-built note detectors,according to the Group, which was headed by Ms Usha Thorat, Deputy Governor,Reserve Bank of India.

The Group was set up in August 2008 after the detection of 76,273 pieces of counterfeitnotes (in Rs 500 and Rs 1,000 denomination) aggregating to Rs 4.02 crore in July 2008from the currency chest attached to the Dumariaganj (Uttar Pradesh) branch of the StateBank of India.

The absolute number of counterfeit notes detected at bank branches and the RBI officeshas increased from 1,02,687 pieces or 3 per million in 2000-01 to 3,98,111 pieces or 8per million in 2008-09.

Given that the present system used by cash in transit (CIT) companies for replenishingcash in the ATMs leaves some scope for counterfeit notes gaining entry into ATMs, theGroup recommended that In order to reduce the incidence of forged notes at ATMs,banks may ensure the quality of the notes fed in ATMs by CIT companies. Banks mayswitch over to the cassette swap system for feeding ATMs as it minimises manualintervention and is a more secure option.

Note sorting machines

The Group is of the view that banks should install note sorting machines (NSMs) in allbranches in a phased manner. All branches with average daily cash receipt of Rs 1 croreand above, and more than Rs 50 lakh may be equipped with NSMs by March 2010 andMarch 2011 respectively. Banks should provide the RBI a roadmap for equipping theremaining branches with NSMs.


16/78

To rationalise the current number (4,299) and spread of currency chests across thecountry, the Group recommended that Regional Directors of RBI may in consultationwith a cross section of banks assess the level of activity of the chests and recommendrationalisation of chests.

To tap advantages arising out of economies of scale, minimise overnight cash risks atbank branches and benefit from sophisticated logistic techniques, banks may beencouraged to establish currency processing centres (CPCs) at convenient locations.

The CPC should be equipped with high-speed sorting capacity and provide services to allits linked branches in such a way that cash collections at each of the serviced branches isreceived by the CPC on a daily basis and there is no overnight cash balance in thatbranch.

To make CPCs viable, and also to take advantage of the built-up capacity, the Groupsuggested that CPCs should be permitted to serve the branches of other banks which are

not equipped with NSMs. The CPCs could also render services to others such asmerchant establishments, petrol pumps, etc, which handle large volumes of cash. CPCsshould be permitted to charge for the services to other banks.

To tackle eventualities such as thefts/ robberies of treasure at bank branches/ duringtransit, the Group said, the RBI may explore the possibility of introducing the technologythat enables self-inking/ marking of all bank notes in transit or in chests which wouldautomatically trigger-in if there is an attack/ attempted robbery etc.

Elaborating on the action to be taken by citizens who come in possession of counterfeitnote without knowledge of it being counterfeit, the Group said when any personinadvertently in possession of fake notes up to five pieces tenders the same at a bankcounter, banks should impound such notes and provide acknowledgment to the tendereras per current guidelines. Further, banks need not file a first information report in suchcases. However, they should obtain approved ID documents of the tenderer.http://www.thehindubusinessline.com/2009/08/12/stories/2009081251750600.htmhttp://timesofindia.indiatimes.com/news/business/india-business/RBI-panel-for-note-checking-at-ATMs/articleshow/4883524.cms

M&M, SYNDICATE BANK TIE-UP


Mahindra & Mahindra Limiteds multi-brand pre-owned car company Mahindra FirstChoice Wheels Limited has signed a pact with state-owned Syndicate Bank for financingvehicle purchases by dealers and retail customers. Syndicate Bank will be a preferredfinancier for dealers buying vehicles for inventory. Mahindra First Choice, a part ofMahindra groups after-market sector, is the countrys only organized multi-brand player.
http://www.thehindubusinessline.com/2009/08/12/stories/2009081251750600.htmhttp://timesofindia.indiatimes.com/news/business/india-business/RBI-panel-for-note-checking-at-ATMs/articleshow/4883524.cmshttp://timesofindia.indiatimes.com/news/business/india-business/RBI-panel-for-note-checking-at-ATMs/articleshow/4883524.cmshttp://www.thehindubusinessline.com/2009/08/12/stories/2009081251750600.htmhttp://timesofindia.indiatimes.com/news/business/india-business/RBI-panel-for-note-checking-at-ATMs/articleshow/4883524.cmshttp://timesofindia.indiatimes.com/news/business/india-business/RBI-panel-for-note-checking-at-ATMs/articleshow/4883524.cms


17/78

BANKS RAISE RS 900 CR VIA CDS

ReutersSee this story in: The Economic Times

Mumbai: Indian banks on Tuesday raised Rs 900 crore via Certificates of Deposit (CDs),

Thomson Reuters data showed. Bank of Baroda raised Rs 350 crore by selling notesmaturing on April 9, 2010, and yielding 5.50 per cent.

State Bank of Bikaner and Jaipur raised Rs 300 crore by selling notes maturing on July23, 2010, and yielding 5.80 per cent.

Punjab & Sind Bank sold Rs 250 crore of 5.05 per cent notes maturing on February 9,2010.

The yield on the Reuters benchmark 3-month CD eased to 3.80 per cent from Monday's3.90 per cent, and secondary market volumes rose to Rs 725 crore from Rs 390 crore on

Monday. Indian banks issued Rs 75 crore of CDs on Monday.http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Banks-raise-Rs-900-cr-via-CDs/articleshow/4882197.cms

PNB TO CUT HOME LOAN RATE TO 8.5% THIS WEEK

Sandeep SinghHindustan Times

New Delhi: As the festival season kicks off, so does the battle for the home loan market.Punjab National Bank (PNB) is all set to announce a competitive home loan rate tocounter State Bank of Indias (SBI) low rate offering for the three months beginningAugust 8.

But at 8.5 per cent for three years, it is marginally higher than SBIs offering. This ratewill be for loans of upto Rs 30 lakh; for bigger loans, the rate would be 9.25 per cent or25 basis points (100 basis points make 1 percentage point) lower than the current rate.

The bank is expected to announce this festive offer this week.This will be a part of the festive offering by the bank, said a senior official who did notwish to be named.

Despite repeated attempts, top officials at the bank were unavailable for comment.Between the two, SBIs offer --- 8 per cent in the first year for loan between Rs 5 lakhand Rs 50 lakh and 8.5 per cent for the next two --- is cheaper. For Rs 5 lakh and below,the bank charges 8 per cent for five years.

PNB and SBI are not alone. Housing Development Finance Corporation (HDFC) reducedits rates in July to 8.75 per cent for loans upto Rs 15 lakh and 9 per cent for loansbetween Rs 15 lakh and Rs 30 lakh.
http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Banks-raise-Rs-900-cr-via-CDs/articleshow/4882197.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Banks-raise-Rs-900-cr-via-CDs/articleshow/4882197.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Banks-raise-Rs-900-cr-via-CDs/articleshow/4882197.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Banking/Banks-raise-Rs-900-cr-via-CDs/articleshow/4882197.cms


18/78

These are still higher than what is being offered by SBI and what PNB has planned.Market leader ICICI Bank, however, has not revised its home loan rates it charges aninterest rate of 9.25 per cent for loans upto Rs 30 lakh and 9.75 per cent for loansbetween Rs 30 lakh and Rs 1 crore; beyond that it charges 10 per cent.

http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=NLetter&id=cebec58a-d7e1-4caa-9ba5-bc3403770551&Headline=PNB+to+cut+home+loan+rate+to+85+this+week

====================FOREIGN BANKS / FIIs -Top-====================

STANCHART TO HIRE 850 FOR PRIORITY BANKING

Reuters

See this story in: Yahoo India, Business Standard

Singapore: Standard Chartered plans to hire about 850 bankers over the next 12-18months for its 'priority banking' arm that focuses on the mid-tier wealth segment, takingon Citigroup and HSBC in the quest for more affluent customers.

StanChart, which has emerged relatively unscathed from the global financial crisis, hasbeen hiring staff from rivals to grow its Asian operations at a time when manycompetitors are distracted by problems in their home markets.

"Priority has outperformed the market in the last few years," StanChart's Singapore-basedGlobal Head of Premium Banking Foo Mee Har told Reuters in an interview on Tuesday.

"We have aspirations to double the industry growth rate and double our customernumbers in three years."

Foo said household wealth in Asia excluding Japan is expected to grow by 12 percent perannum between 2008 and 2012, and Asia-focused StanChart hoped to expand its prioritybanking business at twice the pace.

She said about 430 of the new relationship-manager hires will be in Greater China, whileabout 120 will be in Singapore and about 110 in Malaysia.

The new hires, who Foo said will typically have some banking experience, will boost thebank's number of priority banking relationship managers by 65 percent from around1,300 now.

StanChart has already relaunched its priority banking service in Hong Kong andSingapore. It will launch the service in China this week, and in Taiwan, Korea, Malaysia,India and the United Arab Emirates over the coming months.
http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=NLetter&id=cebec58a-d7e1-4caa-9ba5-bc3403770551&Headline=PNB+to+cut+home+loan+rate+to+85+this+weekhttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=NLetter&id=cebec58a-d7e1-4caa-9ba5-bc3403770551&Headline=PNB+to+cut+home+loan+rate+to+85+this+weekhttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=NLetter&id=cebec58a-d7e1-4caa-9ba5-bc3403770551&Headline=PNB+to+cut+home+loan+rate+to+85+this+weekhttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=NLetter&id=cebec58a-d7e1-4caa-9ba5-bc3403770551&Headline=PNB+to+cut+home+loan+rate+to+85+this+weekhttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=NLetter&id=cebec58a-d7e1-4caa-9ba5-bc3403770551&Headline=PNB+to+cut+home+loan+rate+to+85+this+weekhttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=NLetter&id=cebec58a-d7e1-4caa-9ba5-bc3403770551&Headline=PNB+to+cut+home+loan+rate+to+85+this+week


19/78

Priority banking services are aimed at owners of small and medium enterprises as well assenior executives who typically can invest assets of more than $100,000 with the bank.

The services for such clients include access to personal relationship managers, separate

queues at bank branches, preferential loan rates and help in setting up new accounts indifferent countries.

"A lot of banks are more distracted from what is happening in the U.S. or UK, StandardChartered is not," said Daniel Tabbush, a CLSA banking analyst based in Bangkok.

"There are lots of wealthy people in Asia who want the better service than normal retailbanks but there are not a lot of banks in Asia which offer this," he added.

Many lenders in Asia provide special perks to wealthier customers but only a handfulhave the ability to service this customer segment on an Asia-wide basis. The more

aggressive players in this area include Citigroup, HSBC and Singapore's DBS Group.

UK-based StanChart, which derives two-thirds of its revenue from Asia, is also currentlyin talks to buy India and China assets from Royal Bank of Scotland.

More mortgages

Foo, a yoga enthusiast who was previously CEO of Standard Chartered Thailand, said theBritish bank has benefited from the financial crisis and was attracting new deposits amida "flight to quality" as customers shifted savings to stronger lenders.

While the sale of investment products had fallen over the past year, Standard Chartered'spriority banking service has benefited from a growth in mortgage loans.

"We have been able to capture increased market share in the mortgage area where wehave seen, in the first half, strong property transactions in Hong Kong, Singapore andKorea."

The bank estimates its share of new mortgages in Hong Kong at 19 percent currently, upfrom 13 percent last year. In Singapore, its share of new home loans has grown to 22percent.

Foo declined to reveal the number of customers at StanChart for priority banking, whichthe bank has identified as a key area.

"There is more and more pressure for people working in the consumer division to try toget better performance," CLSA's Tabbush said. "The consumer division is under such aspotlight because it lagged the wholesale division so much."

Standard Chartered last week reported a 10 percent rise in pretax profit for the six monthsto June, but the consumer banking operation chalked up lower earnings.


20/78

http://in.biz.yahoo.com/090811/137/bau0wu.html

=====================RATING & RESEARCH -Top-

=====================

ALLAHABAD BANK BONDS RATING


Care has assigned a CARE AA+ rating to the proposed Tier II Bond issue (Series IX) ofRs 450 crore of Allahabad Bank. The bonds would have a bullet repayment after 120months form the date of allotment. Further, CARE has revalidated the CARE AA' ratingassigned to the proposed perpetual debt (PD) issue (series l tranche II) of Rs 150 croreof AB. CARE has also reaffirmed the existing ratings for outstanding tier II bonds (seriesIV-VIII) aggregating Rs 2,161.9 crore, outstanding upper tier II bond (series I) of Rs 500

crore and outstanding perpetual debt (series I tranche I) of Rs 150 crore.

========================CREDIT & PRE-PAID CARDS -Top-========================

CREDIT CARD SLUMP TELLS SLOWDOWN TALE

Mahua VenkateshHindustan Times

New Delhi: Credit cards are telling the story of an economic downturn. Both the issue ofcards and spending on them have seen sharp reductions in recent months, say industryofficials.

With the corporate world tightening its belt to tackle pressures arising from the industrialslump and the fallouts of the Western financial meltdown, corporate cards the kindimportant-looking executives flaunt and spend largely on travel and entertainment arenot what they used to be.

Roughly every fourth credit card issued in the country is for corporate usage in India,which has some 2.5 crore (25 million) cards. Though there is no clear data yet, industryofficials say payments on these accounts have fallen drastically in the past four months.

Companies have cut back on perks for employees as part of their larger cost-cuttingdrives, hitting the average monthly expenditure on corporate cards which a year agoranged between Rs. 25,000 and Rs. 75,000 a month.

Most entertainment and travel related spendings comprising air fare and hotel bookingswere earlier taken care of by plastic money, but now we have seen that there has been a
http://in.biz.yahoo.com/090811/137/bau0wu.htmlhttp://in.biz.yahoo.com/090811/137/bau0wu.html


21/78

significant drop in this area, said Vijay Mehta, director, Credit Card ManagementConsultancy.

To stop loan defaults that could raise their non-performing assets, banks and credit cardissuers have started blocking inactive and dormant cards, which could be about 40 per

cent of the total number of cards.

Inactive cards add to the cost for the banks. Reserve Bank of India data shows that aboutthree million credit cards were withdrawn in 2008-09. The number of cards fell by 3.32lakh in the month of April alone.

The default rate for plastic money has gone up to over 10 per cent as against 6 per centfour years back.

However, the growth rate in number of cards in 2008-09 dropped to only about 10 percent from a 30 per cent clip for the earlier five years.

However, Standard Chartered Banks head of credit cards, RL Prasad, said his bank hadnot been affected by the slowdown.

Though there has been a curb in corporate spending, our portfolio has not beensignificantly impacted, Prasad toldHindustan Times.http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=BusinessSectionPage&id=f78e208c-a312-4b25-8635-3257078eda88&Headline=Credit+card+slump+tells+slowdown+tale

==========NBFCs / FIs -Top-==========

MAGFIL MAY RAISE RS 3,250 CR

TE NarasimhanBusiness Standard

Chennai: The countrys first listed gold loan company, Manappuram General Finance andLeasing Ltd (MAGFIL), is planning to raise around Rs 250 crore from the capital marketand a loan of Rs 3,000 crore from banks. The proposed money infusion was to achievethe target of Rs 5,000 crore business by 2010-11, said VP Nandakumar , chairman andmanaging director, Manappuram Group of Companies.

He said in 2007-08, the non-banking finance company disbursed loans worth Rs 700crore, which has risen to Rs 1,200 crore. The target for the current fiscal is Rs 2,500crore.
http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=BusinessSectionPage&id=f78e208c-a312-4b25-8635-3257078eda88&Headline=Credit+card+slump+tells+slowdown+talehttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=BusinessSectionPage&id=f78e208c-a312-4b25-8635-3257078eda88&Headline=Credit+card+slump+tells+slowdown+talehttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=BusinessSectionPage&id=f78e208c-a312-4b25-8635-3257078eda88&Headline=Credit+card+slump+tells+slowdown+talehttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=BusinessSectionPage&id=f78e208c-a312-4b25-8635-3257078eda88&Headline=Credit+card+slump+tells+slowdown+talehttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=BusinessSectionPage&id=f78e208c-a312-4b25-8635-3257078eda88&Headline=Credit+card+slump+tells+slowdown+talehttp://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=BusinessSectionPage&id=f78e208c-a312-4b25-8635-3257078eda88&Headline=Credit+card+slump+tells+slowdown+tale


22/78

The Kerala-based NBFC is a flagship company of the Manappuram group. Its exposureto gold loans is about 96 per cent. The average ticket size was around Rs 18,000 andduration a minimum of three months and a maximum 18 months, he said. Our yield isaround 30 per cent, he added.

On fund-raising, Nandakumar said the company would raise Rs 250 crore from thecapital market and had tied up with banks to avail of a Rs 3,000 crore loan.

The company was planning to open 250 new branches and recruit another 1,000 people,he added. At present, the company operates 700 branches and employs 4,500 people.

We were looking at foraying into Singapore and UK by 2010-11, said Nandakumar.Nandakumar said at present, 20,000 tonnes of gold was privately held in the country, ofwhich only 10 per cent was pledged. The industry size is estimated at around Rs 3 lakhcrore, while the potential size is Rs 30 lakh crore.http://www.business-standard.com/india/news/magfil-may-raise-rs-3250-cr/366672/

PTC FIN MAY RAISE RS 1.5K CR THROUGH IPO BY FY11-END

PTISee this story in: Business Standard

New Delhi: PTC Financial Services, a subsidiary of Power Trading Corporation, ismulling to raise Rs 1,500 crore by divesting 26 per cent of the promoters stake.

The initial public offering (IPO) of PTC Financial Services could be expected by the endof the next financial year, a company official said, adding that according to theshareholders agreement, the company should come up with an IPO within three years ofits formation.

The present equity capital of PTC Financial Services is Rs 600 crore, 77 per cent ofwhich is held by PTC India and 11.5 per cent each by Goldman Sachs and Australiancompany Macquarie.

PTC Financial Services, a diversified entity, was formed in 2008-09 for providing equitysupport to power projects in the country.

PTC India Chairman and Managing Director T N Thakur has said that PTC FinancialServices is looking at acquiring coal blocks abroad and has shortlisted mines in Australiaand Indonesia, where the fuel is available in abundance.

The company will import the dry fuel from its overseas properties and sell it in India.PTC Financial Services recently sanctioned Rs 521 crore for funding power projects inthe country. The assistance will help seven 3,350 MW projects whose estimatedinvestment is Rs 16,750 crore.
http://www.business-standard.com/india/news/magfil-may-raise-rs-3250-cr/366672/http://www.business-standard.com/india/news/magfil-may-raise-rs-3250-cr/366672/


23/78

http://www.business-standard.com/india/news/ptc-fin-may-raise-rs-15k-cr-through-ipo-by-fy11-end/366665/

=========================

BROKERS & DISTRIBUTORS -Top-=========================

TATA CAPITAL TO LAUNCH PRIVATE EQUITY FUND

PTISee this story in: The Economic Times

Mumbai: Tata Capital, the financial services arm of the Tata group, is likely to come outwith a private equity fund shortly. This was announced by Tata Capital ManagingDirector, Praveen P Kadle, here on Tuesday.

Kadle declined to say what could be the size of the private equity fund, but according toearly indications, the fund-size will initially be of USD 350-400 million. Tata capital hasan Rs 8,500 crore alliance with the Japanese Mizuho Financial Group.

And Kadle said the alliance with Mizuho provided the right platform for Indiancorporates to tap the Japanese market. He said Japan offered tremendous opportunitiesfor Indian companies to raise capital through equity as well as debt.

Yukata Endo, deputy president of Mizuho, said Japanese corporations and retail investorssaw India as a majorinvestmentdestination. "The Japanese retail investment has touchedUSD one billion and they are mostly through mutual funds," Endo said, adding that thetime is ripe for Japanese investors to invest in India, cashing in on the opportunities themarket offers.

He said the Japanese were looking at India for big investments now as they felt thecountry along with China are poised for sustained high-growth. Asked if Mizuho waslooking at an equity stake in Tata Capital, Endo said "we have not discussed this.http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cms

===========================LIFE & GENERAL INSURANCE -Top-===========================

POSTAL COVER FUNDS SET FOR STOCK-MARKET DELIVERY

Arindam Ghosh & Souvik SanyalThe Economic Times
http://www.business-standard.com/india/news/ptc-fin-may-raise-rs-15k-cr-through-ipo-by-fy11-end/366665/http://www.business-standard.com/india/news/ptc-fin-may-raise-rs-15k-cr-through-ipo-by-fy11-end/366665/http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://www.business-standard.com/india/news/ptc-fin-may-raise-rs-15k-cr-through-ipo-by-fy11-end/366665/http://www.business-standard.com/india/news/ptc-fin-may-raise-rs-15k-cr-through-ipo-by-fy11-end/366665/http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cmshttp://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-Capital-to-launch-private-equity-fund/articleshow/4881108.cms


24/78

New Delhi: Come October and the life insurance division of the postal department willstart investing its premium collections in revenue-generating instruments includingstocks, a government official said.

Postal Life Insurance will follow the investment norms set by the Insurance

Regulatory and Development Authority (Irda) from October 1 to ensure maximumreturns for investors through a systematic and well-charted investment policy, said

the official, requesting anonymity. At present, the departments collections are

transferred to a special deposit scheme on which it earns a secure interest of 8%

from the government.

As per the plan, the department can invest a maximum of 15% of its daily net collections,averaging Rs 6-8 crore, into equity schemes. The balance 85% will go into securedinstruments with at least 50% of the sum invested in government securities and aminimum 15% in infrastructure bonds, said the official, requesting anonymity. PostalLife Insurance makes an annual net collection of Rs 2,000-2,500 crore.

Net collection is the revenue generated in the form of premium minus costs like interestpayment and maturity claims. The department will hire professional asset managers fordeployment of its premium kitty in financial instruments.It has zeroed in on SBI MutualFund and UTI AMC as fund managers, the official said. They will be paid on acommission basis.

Once the new scheme takes off, the department may see equity investments equal to 15%of its average daily collections, the official said. The department will have its investmentdivision in Mumbai. The funds for setting the office are being raised from within, theofficial added.

By and large, the equity investments will be done on a day-to-day basis, with exceptionson days when the quantum of the net collection is very less, the official said.Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved"

SUUTI WON'T PARTICIPATE IN AXIS BANK PREF ISSUE

Business Standard

Mumbai: The Special Undertaking of Unit Trust of India (SUUTI), which was carved outof the erstwhile Unit Trust of India in 2003, will not participate in the proposedpreferential offer of Axis Bank (formerly UTI Bank). The shareholding of SUUTI in thebank will come down from 27.02 per cent to 22.54 per cent.

The other promoters are Life Insurance Corporation of India (LIC), General InsuranceCorporation of India (GIC) and the other four general public sector companies NewIndia Assurance, United India, Oriental and National Insurance. Axis Bank is likely toraise around Rs 5,000 crore by issuing 71.4 million shares through preferential allotment,private placement, including qualified institutional placements, and private offerings


25/78

through global depository receipts from domestic and international markets. The bankwill close the offer within 15 days of passing the resolution.

According to a source, there is an issue of lock-in period if the undertaking participates inthe offer. The shares may be locked in for a minimum two years, if SUUTI takes part in

the issue. In Budget 2008-09, the government granted SUUTI five more years ofexemption from liquidating state liabilities.http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/

LIFE INSURERS MAY SOON INVEST IN INFRA SPVS

Gunjan Pradhan Sinha , Suneeti AhujaThe Indian Express

New Delhi: To avoid an asset-liability mismatch in the life insurance space, the regulatoris chalking out ways to expand the ambit of long-term investment vehicles for theindustry. The Insurance Regulatory and Development Authority (IRDA) is working outnorms to allow life insurers to invest in special purpose vehicles (SPVs) of infrastructurecompanies, officials in the ministry of finance told The Indian Express.

As per the current investment guidelines, life insurers can invest only in the infrastructurecompanies or rated entities and not in the SPVs set up by them. The move, therefore, willensure greater funds for infrastructure projects in the country and also provide a long-term investment vehicle for insurers. The reason is that the concession period forinfrastructure projects such as roads and ports can go up to 30 years providing the lifeinsurance companies a long-term investment option. Even though the construction periodmay be limited to three-five years, the operation and maintenance costs run up to the endof the period.

The move assumes greater significance in the light of the asset-liability mismatches thatthe regulator foresees in the industry. Life insurance business has long-term liabilities.However, there are not many investment instruments of tenures more than 20 years thatare available in the markets. Some long-term tools that are available to the industry are10-year corporate bonds, 30-year government securities, etc. According to data availablewith the Clearing Corporation of India, life insurance companies invest heavily in 30-year paper and very less in corporate bonds.

Though insurers review their portfolios frequently to keep in check any mismatches, the

regulator a few months back had voiced some concerns on this front. We are getting intoan asset-liability mismatch of varying degrees and this is likely to surface in the nextfour-five years, IRDA chairman J Hari Narayan had said at a conference in Delhi.According to finance ministry officials, IRDA will also issue guidelines for credit ratingagencies and investment will be allowed only in rated SPVs.http://www.indianexpress.com/news/life-insurers-may-soon-invest-in-infra-spvs/500861/
http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/http://www.indianexpress.com/news/life-insurers-may-soon-invest-in-infra-spvs/500861/http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-issue/366730/http://www.indianexpress.com/news/life-insurers-may-soon-invest-in-infra-spvs/500861/


26/78

FUTURE GENERALI IMPLEMENTS NEWGEN SOLUTION

The Hindu

Chennai: Newgen Software has announced the successful implementation of documentmanagement solution based on Newgen OmniDocs at Future Generali to mange new

business and policy servicing documents. According to a release, the solution willprovide a systematic method for scanning, creating, categorising, storing, locating andretrieving structured and unstructured documents.http://www.hindu.com/2009/08/12/stories/2009081256511800.htm

CITIZENS INSURE ROAD FOR QUALITY

Kestur VasukiThe Pioneer

Bangalore: Believe it or not, a public asphalted road has been insured for the third year in

a row to keep it safe and damage-free.

The 50-year-old Timmasagara Temple Road is nine metres wide and 385 metres long andconnects two arterial roads one of which leads to NH4.

This initiative by residents of Vidyanagar under the Hubli-Dharwad municipalcorporation in north Karnataka, led by Hubli doctor Mruthyunjay Sindhur, has paved theway for public audit of road quality.

The road has been insured by Oriental Insurance Company for Rs 6 lakh at a premium ofRs 910 per annum, setting a novel example of peoples auditing of a public road.

Speaking to The Pioneerfrom Hubli, Sindhur said that this was an effort by localresidents to keep the road pothole-free for smooth movement of pedestrians and traffic.According to him, this is for the first time in the country that a public road has beeninsured in a collective effort for the purpose of audit.

I have my clinic and my residence on this road and I was quite pained at its poorcondition. The apathy of the municipal corporation made me take this step. This way, theroad quality will be maintained and it will also help the State exchequer save a lot ofrevenue, Sindhur said.

It was in 2007 that Sindhur organised the move with the help of then districtcommissioner, Mannivanan, who helped convince the insurance authorities that it wasindeed possible to insure a road. The road was insured for the first time in 2007 for Rstwo lakh and a premium of Rs 303.

This is the third year in a row we are insuring this road. For me it has become amovement and I want this message to go everywhere. All corporations must follow thisto save crores on road repairs, Sindhur said, adding the methodology is simple
http://www.hindu.com/2009/08/12/stories/2009081256511800.htmhttp://www.hindu.com/2009/08/12/stories/2009081256511800.htm


27/78

consisting of the insurance company inspecting the quality of the road before signing ofpapers and the claims going directly to the civic bodies.

Hubli is a city covered by JNNURM and is situated on the Golden Quadrilateral. Thisinitiative even entered Limca Book of records in 2007. A group of citizens has now

joined him in propagating this initiative which has assumed movement status. A logwww.insuredroad.blogspot.com is being used to campaign for this initiative.

Any road can be insured, the doctor said. When the country is planning to spend morethan Rs one lakh crore on the laying of new roads, a small percentage of this money forinsurance can help maintain their quality, he added.http://dailypioneer.com/195355/Citizens-insure-road-for-quality.html

INSURERS GEAR UP TO MEET FLU CLAIMS


Mumbai: The domestic insurance industry is gearing up to meet any eventualities out ofthe of Swine flu casualties in the country. M Ramadoss, CMD, Oriental InsuranceCompany said as the disease is not mentioned in the excluded disease list whileunderwriting health insurance policy, the company will be giving all the required coverfor the flu, which involves treatment, hospitalisation and room rent cost to thepolicyholder.

Suppose a person has taken a policy of Rs 50,000, then he can claim the full amount incase of swine flu, he explained. V Vaidyanathan, MD & CEO, ICICI Prudential LifeInsurance said the company is ready to pay compensation due to any policyholder, whohas received companys health insurance policy in case of death, no matter if it is due to

the swine flu.

Balaji Cuddapah, vice-president, property & engineering, Bharti AXA General Insurancesaid the customers who have been covered under companys various health insurancepolicies are automatically covered for all the epidemic diseases. Only the condition beingthat the customer has to complete the period of 30 days after purchasing the policy for thefirst year, which falls under standard exclusion.

Also, we will provide cashless treatment to the customer as prescribed by a qualifieddoctor. In Pune alone, we have covered 20,000 persons under our health insurancepolicies, but so far none of our policyholder has approached us in this connection, he

said. G V Nageswara Rao, MD & CEO, IDBI Fortis Life said his company would clearthe claims of next of kin if any policyholder died of swine flu despite the disease notbeing listed as one of those for which such a payment can be made.

Rajesh Sud, MD & CEO, Max New York Life Insurance said in case of unfortunatedeath, only the company could pay the compensation as the disease has not been listed inthe list of diseases in any of the health insurance policy underwritten by us so far. As
http://dailypioneer.com/195355/Citizens-insure-road-for-quality.htmlhttp://dailypioneer.com/195355/Citizens-insure-road-for-quality.html


28/78

regards awareness, we have told all our agents to reach out to our clients in case of anykind of required assistance, he said.http://www.financialexpress.com/news/insurers-gear-up-to-meet-flu-claims/500835/

EXISTING HEALTH POLICIES TO COVER SWINE FLU HOSPITALIZATIONRemya NairThe Hindu Business Line

Mumbai: Existing comprehensive health insurance policies will also cover hospitalisationexpenses of patients affected by swine flu, insurance company officials said.

Some insurers have already received claims for hospital expenses, though the number isnot very large. However, given the fact more people are being hospitalised, insurancecompanies expect the number of claims to go up in the future.

Hospitalisation expenses of swine flu patients will be covered under the existingcomprehensive health insurance policies of the insurance companies. There is no upperlimit on the expenses. The customers can avail themselves of the amount commensurateto the sum assured, said an Oriental Insurance company official.

The hospitalisation charges will be borne by the insurance company subject to the cap onthe room rent charges, a New India Assurance Company official said.

Few claims so far

Swine flu will be covered under all the health insurance and travel insurance policiesoffered. A few claims have been received but the number is not large, said Mr SanjayDatta, Head Health Vertical, ICICI Lombard General Insurance Company.

Insurance companies are also expecting claims in the health segment to go up, but not bymuch.

The claims in this segment will go up as the number of instances of hospitalisationincreases. However, the outbreak is in the initial stages and the number of people whohave taken a health insurance policy is also very low. Also, a very small proportion ofpeople who have been diagnosed with the flu have to be hospitalised, Mr Datta said. Atthis point in time, the incidences of swine flu have not reached any threshold to have asignificant impact on the number of claims logged. However, we have robust ITinfrastructure and comprehensive network of providers to counter any exigencies thatmay arise in the near future, said the spokesperson of Apollo DKV, a standalone healthinsurance company.

Most of the general insurance companies are operating through Third PartyAdministrators to settle claims.
http://www.financialexpress.com/news/insurers-gear-up-to-meet-flu-claims/500835/http://www.financialexpress.com/news/insurers-gear-up-to-meet-flu-claims/500835/


29/78

Currently, more people are getting themselves tested for the flu rather than beinghospitalised. Since the Government is bearing all the costs for the detection tests, theinsurance companies are not burdened with that cost. Also, very few insurers offerpolicies covering OPD expenses, said a TPA official.

Some of the insurers such as ICICI Lombard and Apollo DKV also offer health insurancepolicies that cover the OPD expenses.http://www.thehindubusinessline.com/2009/08/12/stories/2009081251860600.htm

HEALTH INSURERS: SUPER SMART OR BORN LOSERS?

Rahul AggarwalThe Economic Times

Most of us wonder how insurers make money in health insurance. Finance managers,human resource (HR) managers, and other decision makers have still not figured out

whether the insurers are super smart chaps who can somehow turn apparent losses intoprofits or whether they are born losers who get up in the morning with a motive to lose acouple of crores.

Well, the truth lies somewhere in between. Health insurance premiums have not movedin tandem with healthcare inflation for the past 10 years. The result is that all insurershave been bleeding on this portfolio. While private insurers experience 110% claim ratioson an average, government-owned insurers see average claims of 160%. Then why havethe premiums not increased? It is an open secret that the insurers made fat profits byselling fire insurance policies on government-regulated pricing. This pricing was waybeyond the international market rates. Insurers used a part of these profits to subsidisegroup health insurance and gain market share.

The beginning of 2007 witnessed the partial deregulation of non-life insurance productspricing, which was bound by the tariff prescribed by the Insurance Regulatory andDevelopment Authority (IRDA) till then. IRDA has gradually moved towards completeprice deregulation since then and removed pricing controls in 2008. As a result, fireinsurance prices have fallen by up to 80% while motor insurance rates have fallen by upto 50% in the past one year.

At the current prices for most non-life insurance products, Indian insurers are doing theirbest to remain in red. This has had a direct fallout on health insurance premiums. With nocushion available for cross-subsidy, health insurance premiums have started increasing inthe past one year. Private sector companies have virtually withdrawn from this market,which has witnessed intense competition among state-owned insurers.

Large underwriting losses in the 2008-09 balance sheets of stateowned insurers forced theministry of finance to bring the four stateowned insurers together to hammer out a non-compete agreement in May. This agreement become into force from June 1 and restrainsthe state-owned insurers from competing for any group health insurance policy with a


30/78

premium exceeding Rs 1 crore. State-owned insurers have agreed that only the insurerwhich has underwritten the expiring policy will bid for the renewal of the policy and allthe four insurers will get a pie of the business in a pre-determined ratio.

So what does this mean for corporates? Over the past one year private insurers have been

unwilling to accept premium at rates at which they do not make money. Now with nocompetition from the other stateowned insurers, the insurer with the expiring policy isbound to charge more than the claims paid over the expiring policy period to cover theexpected claims, management cost, delivery cost and a small profit is possible. It appearsthat companies can no longer play one insurer against the other and get coverage at loss-leading rates . Hence, the cost of group health insurance is bound to go up for companies.

The question that finance managers, HR managers and procurement managers have toaddress is how to reduce this cost if insurers now start charging premium on the basis ofclaims experience.

Till now the insurers loss was the customers gain. Will it now be the other way round?Can a win-win situation for both the customer and the insurer be created? A stable andvibrant health insurance market can emerge only if all the stakeholders gain. The answerlies in managing the claims. Corporates will have to engage teams which can activelyhelp them in claims management to keep this cost under control. Policy design, activeclaims management and preventive care will become important. The focus will have tomove from one-time premium negotiation to smart year-round vigil.

The author is CEO, Optima Insurance Brokers, (Views expressed are personal)

Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved"

POOR RESPONSE TO PENSION SCHEME TILL JULY 31

PTISee this story in: The Hindu Business Line

Mumbai: Lack of tax incentives and inadequate awareness about the New PensionSystem (NPS) has resulted in only 1,109 subscribers filing their applications as on July31.

The Pension Fund Regulatory Development Authority (PFRDA) rolled out the NPS forall citizens from May 1. Till July 31, only 1,109 forms were collected by the 22 points ofpresence (POPs) appointed by the interim pension fund regulator.

Initially, when NPS for the private sector was launched, we expected it to grow at a slowpace but it grew at a much lesser pace then expected, ICICI Prudential Pension FundManagement Director-on-Board, Mr Tarun Chugh, told PTI here.


31/78

ICICI Prudential Pension Fund Management, which has 49 branches authorised by thePFRDA to act as points of presence, collected 218 forms, the highest among all 22 POPs.

He further said the lack of tax-breaks for NPS is one of the major reasons for it notpicking up. At the time of retirement one can withdraw 33 per cent of the contribution

and the rest 67 per cent is used for annuity, which is taxed. There should not b e any taxat the time of withdrawal, Mr Chugh said.

Taxation on annuity at the time of withdrawal under NPS is not in line with providentfund, he said.http://www.thehindubusinessline.com/blnus/14111265.htm

======================MUTUAL FUNDS & AMCs -Top-======================

MF SALES, NEW FUND LAUNCHES REBOUND

M AllirajanThe Times of India

Coimbatore: With capital markets on a roll, mutual funds (MFs) are seeing a rebound insales from new and existing equity schemes. New equity schemes brought Rs 2,394 crorein July, the highest so far in the year. Sales from existing equity schemes were also thehighest in July topping Rs 6,343 crore, data with the Association of Mutual Funds inIndia (AMFI) shows.

New equity scheme launches almost came to a halt early this year after the marketstanked following the global financial crisis. There was no launch in February and forJanuary-April new schemes could garner only Rs 57 crore.

The better-than-expected corporate earnings for the June quarter and the upswing inseveral sectors have brought hope back toinvestors who were badly hit by the downturn,say officials.

The perception about (equity) markets has changed for the better. Retail participationand inflows have been improving, says Vikram Kaushal, head (retail sales anddistribution), ICICI Prudential MF. Investor interest has grown considerably in the pasttwo-three months due to the buoyancy incapital markets, says a top official with a leading fund house.

Sale from existing equity schemes have been steadily improving since May after hitting alow of Rs 1,409 crore in January. The lacklustre response continued in February andMarch as well with MF existing scheme sales hovering around Rs 1,500 crore.
http://www.thehindubusinessline.com/blnus/14111265.htmhttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://www.thehindubusinessline.com/blnus/14111265.htmhttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cms


32/78

But ever since the markets started rallying there has been an improvement in sales.Existing scheme sales in the equity category more than doubled to Rs 4,796 crore in Mayand new scheme offers netted Rs 813 crore in the month, the best showing in six months,AMFI data shows.

Fund houses also rushed to launch several NFOs (new fund offers) in July before the newregulation banning entry loads came into place. The rush in NFOs also helped fundhouses net good inflows.Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved"http://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cms

MFS CUT DISTRIBUTORS FEESuresh ParthasarathyThe Hindu Business Line

Some fund houses have reduced commissions to distributors drastically in the face ofentry load being abolished. Mutual funds have proposed upfront commissions of between0.40 per cent (of the investment) and 0.70 per cent on new investments into equity funds,against the 2 per cent being paid until last month.

Wait-and-watchA few fund houses are waiting for their ongoing new fund offers to close, while othershave sent informal communications to their distributors.

Reliance Mutual Fund and HDFC Mutual have told distributors the new commissionstructure is valid for two months starting August 1.

These funds may adopt a wait-and-watch policy and rejig structures once others decideon the incentive.

The commission is based on business. For investments of less than Rs 5 crore, HDFCMutual Fund has offered to pay an upfront commission of 0.70 per cent. For the sameinvestment value, Reliance Mutual has said the distribution incentive will be 0.40 percent.

The commissions paid by the fund houses will also suffer surcharge and education cess.For business above Rs 5 crore, distributors will receive trail fee (annual recurring feepaid to distributor), instead of upfront commission, as applicable to retail business.

Incentives on big-ticket investments may be informally negotiated.UTI Mutual Fund is said to be planning to offer 0.65 per cent as commission, with trailfee at 0.5 per cent. Distribution industry sources said DSP BlackRock Mutual Fund isconsidering an incentive of 0.75 per cent as upfront commission and 0.5 per cent as trailfee.
http://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cmshttp://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-rebound/articleshow/4880587.cms


33/78

Holding periodFunds opting for higher upfront commissions, such as HDFC Mutual Fund, have fixedlower trail commission. HDFC has also planned to increase the trail fee based on theholding period of the assets.

As the lock-in period of three years is applicable on tax saving schemes, the trail feepayable on them is higher than plain diversified funds. For systematic investment plans,HDFC Mutual Fund has offered same commission structure as lump sum, whereasReliance Mutual Fund has offered a higher incentive for SIP investments.http://www.thehindubusinessline.com/2009/08/12/stories/2009081250981000.htm

MUTUAL FUNDS MAY ROLL BACK EXIT LOAD RATES AFTER SEBI

RULING

Anirudh Laskar & N. Sundaresha Subramanian

mint

Mumbai: A number of mutual fund (MF) companies are gearing up to roll back recenthikes in exit load after capital market regulator Securities and Exchange Board of India(Sebi) said last week that they could not have different exit loads for different classes ofinvestors under the same scheme. An exit load is a fee collected at the time an investorwithdraws money from a fund.

At least four MF firms told Mint they were working on ways to protect the interest ofinstitutional investors, most of whom did not pay exit loads earlier.

The MF houses are required in the next few days to announce a new structure with lower,uniform rates for all schemes.

Before Sebis latest rule, investors of over Rs5 crore did not have to pay any exit load,while big-ticket investors who invested less than Rs5 crore could bargain for lower exitloads. Small investors thus usually ended up paying the highest rates to exit a scheme.

Now, while some MF companies are looking to reduce the lock-in period, others areplanning to reduce the percentage rates of exit loads.

An official at SBI Funds Management Pvt. Ltd, which manages Rs34,158 crore, said:We have to roll back and make it equal for all. We will continue to focus on long-termassets and will try to prevent exits before three years. For this, we may not reduce thelock-in period.

He added that some MF firms might also launch separate institutional plans to protect theinterest of corporate e

finance aug 12

Documents