Lower lending and higher deposits has meant that there is increased trading in government securities.

GIC to restructure schemes
Calcutta: General Insurance Corporation is all set to scrap its non-productive schemes, as part of its revamp exercise. The corporation is giving final shape to the plans.

Liquidity position comfortable: Jalan
Mumbai: Reserve Bank of India governor Bimal Jalan said the current level of liquidity in the financial markets is very comfortable. He said, "We are comfortable with the current levels of liquidity and stand committed to increasing it when necessary."

Mr Jalan has been reacting to the volatile situation in the money market and the high pitch of trading.

Immediately after the announcement, the markets reacted with six-month forward dollar premiums closing 80 basis points lower than the 12 August close of 5.6 per cent. The prices of government securities perked up 15 to 20 paise before falling slightly. The interest rate in the overnight money market, however, touched a high of 35 per cent.

MSCI-EMF weightage being altered
Mumbai: Morgan Stanley Capital International said it is increasing weightage for Taiwan and re-including Malaysia in the MSCI Emerging Market Free, an index which fund managers worldwide use for their fund investments.

The step may adversely affect investment positions in India. India's weightage in the MSCI-EMF was 8.5 per cent on 30 July, 1999, while Korea had the highest with 15.8 per cent followed by Taiwan's 11.1 per cent and South Africa and Mexico's 's 11 per cent. The index comprised 25 emerging market countries.

RBI curb on Kirloskar Investments
Bangalore: The Reserve Bank of India said it has frozen all assets of Kirloskar Investments & Finance and has prohibited the company from accepting or renewing any deposit.

RBI said an inspection of the books of account of the company revealed that the financial position of the company was not satisfactory and that the company had not complied with several provisions of the directions issued by the RBI.

A number of depositors of the company had laid a siege on the company's premises, demanding return of their deposits. They alleged that the company has not repaid the matured deposits or even interest on these deposits.

New healthcare insurance unit under GIC
Calcutta: The government has granted in-principle clearance to set up a new subsidiary for the General Insurance Corporation to run healthcare insurance operations. Formal approval will be issued by the new government after the elections.

GIC will also set up another subsidiary for crop insurance, which is now being managed through the state government. GIC chairman Debdutta Sengupta said all the healthcare insurance schemes floated by various GIC subsidiaries will come under the purview of the new subsidiary.

The concept of healthcare insurance will change to managed healthcare services and will be more in line with the schemes available in developed countries.

Sarrc initiative on Y2K in banks
Calcutta: The banking community in Saarc countries has decided to share information on the Y2K problem. Various banks have also agreed to work on contingency plans together for business continuity in the region.

These decisions emrged from a Saarc meeting on Y2K problems and regional cooperation for business continuity in the banking sector held in Sri Lanka recently.

The governors of the central banks of member-countries, barring Pakistan, recommended that the apex bank in each country should take proactive action to share information on Y2K problems.

Loans to textile units for IT induction
Ahmedabad: The textile upgradation fund set up by the government to modernise the textile sector will extend loans at concessional rates of interest to purchase hardware and software by textile mills.

The decision of the government in this regard was conveyed to the industry by Shyamal Ghosh, secretary, ministry of textiles, at a regional conference and exhibition on IT in the textile sector.

Abhyudaya Bank deposits cross Rs 1,000 cr
Mumbai: Abhyudaya Cooperative Bank has become one of the few banks in the cooperative sector to have Rs 1,000 crore in deposits.

The bank, which has a scheduled bank status in Maharashtra, is one of the largest cooperative banks. The bank posted a net income of over Rs 11 crore for the financial year 1998-99.
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Rs 600 crore to be raised through RBI auctions
Mumbai: The Reserve Bank of India will be trying to raise Rs.600 crore on August 19 through two state government auctions. These will be yield-based auctions and includes Rs.400 crore for the state of Andhra Pradesh and Rs.200 crore for Tamil nadu.

Sources say that the cut-off yield could be around 25 basis points more than the prevailing yield on similar ten year paper.

Punjab raised around Rs.60 crore in January at a cut off of 12.47 per cent.

NHB asks Sebi to change MF guidelines
Mumbai: National Housing Bank, which is coming out with a Rs.100 crore mortgage-backed securites issue, has asked Sebi to change the mutual fund guidelines in such a manner that mutual funds will be able to invest in mortgage-backed securities.

So far, Sebi regulations in this regard, allow mutual funds to invest only in securities that have an underlying saleable asset. NHB general manager, R V Verma, said that they have initiated discussions with Sebi for suitable amendments, so that it would help mutual funds to participate in NHB’s issue.

Huge tax collection gets nullified due to reliefs
New Delhi: Around 12.4 per cent of the gross tax gets nullified owing to the tax reliefs claimed as per the approx. 50 tax relief avenues that are available. This was stated in a study conducted by the statistics division of the Income Tax Department.

Tax deductions and rebates can be claimed by corporates and individuals as given in chapters VIA and VIII of the Indian Income Tax Act. Particular among these are the sections pertaining to PPF constribution, LIC premium, deduction for interest under section 80L, export turnover, and donations which cover 12.4 per cent of the total tax collected.

Ratings by agencies show a mixed trend
Mumbai: The government guaranteed bonds of Industrial Promotion and Investment Corporation of Orissa Limited has been downgraded by Crisil to BB(so). BB(so) denotes inadequate safety –structured obligation. With this, the instrument has been downgraded by three notches, from BBB (so), which denoted moderate safety for a structured obligation. IPICOL had earlier issued these bonds for raising Rs.130 core.

The A+ Crisil rating assigned to the Nuclear Power Corporation’s Rs.1,035 crore bond issue, has been upgraded by two notches to AA, which means higher safety. Credit Analysis and Research Ltd. has rated these bonds as AA-, which give it a high safety rating, but with a lower standing within the same category.

The Ahmedabad Municipal Corporation’s Rs.100 crore bond issue, which was assigned a AA(so) – high safety structured obligation rating – has been put under a rating watch by Crisil. This is as a result of the Gujarat state cabinet’s move to abolish octroi in the state.

HSBC raises Rs 230 crore
Mumbai: As per a report in The Economic Times, Hongkong and Shanghai Banking Corporation’s Indian wing has raised Rs.230 crore via a 10 year paper, with the book builders finally arriving at a coupon of 13.05 per cent. This is keeping in line with the capital adequacy norms that have to be followed by banks operating in India.

HSBC is having a capital to risk weighted assets ratio of 9.3 per cent, which it has to take it up to nine per cent by 31 March 2000. With the current issue, HSBC is expected to be comfortably home.

SBI subsidiaries may have to report every six months
Mumbai: The State Bank of India would be calling on its seven associate banks to present half yearly accounts to itself. Currently, SBI monitors them on an yearly basis. Consolidation of group accounts could become easier, as and when this materialises.

This is also part of SBI’s move to taking its accounting standards close to the US Generally Accepted Accounting Practices, which will enable the bank raise funds from the American markets.

LIC Housing plans consumer loans
Mumbai: Housing finance player, LIC Housing finance is plannng to enter the arena of consumer loans, intitially by providing it to its housing finance clients. These loans will be for items such as furniture, fixture, consumer durables and other such assets.

Stanchart makes Bank Bali buy, contingent
Jakarta: Standard Chartered Bank plc, which offered to buy a portion of Bank Bali of Indonesia, has made the offer conditional. The Indonesian government has to recover Rupiah 546 billion that was found missing in the bank. This was stated by the Indonesian Bank Restructuring Agency.

The money seems to have been siphoned off by Bank Bali’s previous management. Indonesian government has to either use public funds to fill in the gap or forego the offer.
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Canara Bank to expand housing finance
Bangalore: One of the top public sector banks, Canara Bank, is planning to expand its housing finance business, according to a report in The Economic Times. The disbursement target fixed by the bank for this purpose is more than Rs.200 crore in the current financial year, compared to Rs.30 crore for 1998-99.

The target that has been set relates only to individual loans and does not include lending to housing finance companies such as CanFin Homes and Housing Development Finance Corporation.

Canara Bank also has a presence in the housing finance sector through its subsidiary, CanFin Homes. The Bank feels devolvement in the case of individual housing finance loans is quite low, while the returns are high. It considers making housing finance one of its core areas of operation.

Dena Bank starts networking
Ahmedabad: Dena Bank is planning to network its branches through VSAT and leased lines. In the Reserve Bank of India network project, 20 VSATs have already been installed. The bank has received permision to link 422 of its branches in major locations including the Delhi, Mumbai, Calcutta and Chennai.

This will enable the bank to launch products such as ‘any branch banking’ and other electronic products. Information flow is expected to be smoother and faster. Currently, 70 per cent of Dena Bank’s branches handle around 60 per cent of its business.

Sikkim Bank promoter files petition
Calcutta: A promoter director of Sikkim bank, R S Chowdhury, has filed a petition with the Gangtok High Court, after the Reserve Bank of India issued a show cause notice to him, according to a report in The Economic Times.

The North-Eastern Financial Corporation, the company through which  Mr Chowdhury controls his stake in Sikkim Bank, has also filed a petition in the Calcutta High Court, opposing some actions taken by S N Kundu, managing director of Sikkim Bank, who is an RBI appointee. This petition alleges that Mr Kundu has taken some decisions without reporting them to the board.

Earlier, the Reserve Bank of India had proposed a merger between Sikkim Bank and Union Bank of India, which could now be jeopardised if the moratorium given to the Sikkim Bank is not extended beyond 3 September 1999.

Sikkim Bank does not hold a bank licence under section 22 of Banking Regulation Act.

IDBI invokes default clause
Mumbai: As many as 12.1 million shares of Nocil, held by Mafatlal Industries Ltd., have been transferred to the Industrial Development Bank of India, as the financial institution invoked a default clause in its loan agreement with the company. This follows Nocil's inability to redeem the debentures placed with IDBI, according to the Business Standard

This increases IDBI’s take in Nocil to 8.4 per cent from around 1 per cent earlier.
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Indian rupee will be under pressure
Mumbai: The fluid situation on the Indo-Pakistan border, in the aftermath of India shooting down a Pakistani aircraft in the Gujarat Border, is expected to put pressure on the Indian rupee. The rupee is poised to go past the 43.50 mark against the US dollar today as it could open at a much lower price of around Rs.43.47/48 to the US dollar.

Foreign exchange dealers opined that the inter-bank market will not be keen to keep the rupee up. Already demand from the Indian corporate sector for dollars has been rising. Coupled with this the weak sentiment will take the rupee down further it is said.

Gilt prices also crashed by 25-30 paise in the secondary market. There was huge selling pressure by banks that forced gilts to react sharply.

Maharashtra state bond issue oversubscribed
Mumbai: The Rs.400-crore bond issue by the Maharashtra State Road Development Corporation has evoked an excellent response, with the collection amount touching Rs.950 crore. The MSRDC bonds were issued in order to fund the Mumbai-Pune expressway, the Mumbai flyover and railway overbridges in Maharashtra.

There were four instruments offered by the state corporation: Two fixed-rate bonds of five years and 10-years maturity, two floating-rate bonds of 10-years and 12-years maturity. These bonds are guaranteed by the Maharashtra state government.

Uco Bank may decide that there’s no free lunch
Calcutta: The management at Uco Bank may decide to cut off salaries to employees for days on which they are absent, according to a report in the Economic Times. This move is part of the bank’s renewed effort to restructure its operations.

Uco Bank had earlier tried borrowing from the money market to stabilise operations, but found it could become unsustainable in the long run, what with a fluctuating call market. It is now in the process of stepping up efforts to prop up its deposits, which are actually dropping in a few states.

NBFCs to be monitored
Mumbai: The non-banking finance companies and unincorporated bodies in Maharashtra will be monitored by a regional co-ordination committee. This was decided at a meeting between the Reserve Bank of India, state-level officials and other regulatory agencies.

This committee will help in sharing information and follow-up on the regulation of NBFCs, and will meet at regular intervals. Such meetings of regulators are expected to improve quality in terms of supervision of NBFCs.

Dhanalakshmi Bank plans tie-up
Thrissur: The Dhanalakshmi Bank, based in Thrissur, Kerala, is holding talks with Indian and foreign financial players for possible tie-ups or strategic alliances, according to a report in The Economic Times. The bank plans to increase its capital base to Rs.100 crore by the year 2001, according to its chairman, T M Venkatraman.

Dhanalakshmi Bank is now in talks with private sector banks, foreign banks and mutual funds, among others, for strategic alliances. It has a branch network of over 100 branches, which can be used by the strategic partner. Venkatraman also feels that if such an alliance does not work, the bank would then go in for a rights issue or a private placement, but would keep it as the last option.

The bank is in the process of restructuring after it got the Reserve Bank nod in this regard.
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Rupee on a roller-coaster
Mumbai: The Indian rupee closed the day at Rs.43.4 to the US dollar. It tumbled by 12 paise as there was huge buying up of dollars by a petrochemicals group giant to fund its crude imports. The rupee was brought back from its intra-day low of Rs.43.59 to its closing price after intervention by the Reserve Bank of India, through the State Bank of India, Bank of India and Bank of Baroda.

The Indian central bank has not made any official comment in this regard. Since the beginning of this financial year, the rupee has fallen by 2.3 per cent or 97 paise vis--vis the US dollar, though foreign portfolio investments into the stock markets haev been positive in this period.

G G Vaidya, chairman of the State Bank of India, said at Indore that he expects the rupee to remain stable against the US dollar in the short term, and a lot depends on exports which are seen to be picking up. He also said that the bank was in the process of restructuring its loan portfolio.

Policy change on payment to private road builders
Mumbai: According to the Economic Times, a committee headed by Deepak Parekh under the infrastructure task force has recommended dropping the current method of direct tolling as it faces operational difficulties. It has recommended an annuity-based payment system, which will allow the government to pay project operators on a deferred basis annually. The precursor to this was the creation of the road development fund. The levy of cess on petrol and diesel would also help the new system work.

LPG prices worldwide touch $275 per tonne
Mumbai: Global LPG prices, which were in the region of $175 per tonne in July 1999, have moved up by more than $100 per tonne. The price rise will be taken care of by the oil pool account. Private LPG importers have stopped imports since the price has risen sharply.

One of the reasons for this is the increase in the f.o.b. Saudi LPG prices from $129 per tonne in April to $275 per tonne in August.

DD I, DD II  to run all day
New Delhi: The government-owned Doordarshan will be making its channels I and II available throughout the day from 15 August 1999. The transmission system will also be changed from the current terrestrial transmission mode to analog and digital mode.

R R Shah, chief of Prasar Bharti, called on the cable operators to air at least two DD channels, and warned them of dire consequences if they failed doing so.

DD International, a channel beamed 18 hours per day to two million US, Canadian and European homes, and DD Sports, will also be changed to the digital mode using the PAS 4 satellite.

3 Indian public sector banks to reject wage pact
Mumbai: Indian Bank, Uco Bank and United Bank of India may not adhere to the industry-wise wage pacts signed for public sector banks. The pay hike is supposed to be around 12.25 per cent, with retrospective effect from 1 November, 1997.

According to a report in the Economic Times, these banks, which were party to the MoUs signed between the unions and the Indian Banks’ Association, may oppose the move. The non-performing assets and losses suffered by these banks have been huge, and they also carry a huge salary burden for staff

Gold import policy not to be changed
New Delhi: Regulation of gold movement has been ruled out by finance minister Yashwant Sinha, even though its supply has increased by over 200 per cent in June. The duty on gold was increased in the last budget, but this has not affected the inflow of gold into the country, said Mr.Sinha.

Imports were around 287 tonnes during the first three months of the current financial year, compared to 142 tonnes during the same period in 1998.

HSBC revamping operations
Hyderabad: The Hongkong and Shanghai Banking Corporation is relocating some of its branches and also planning improvements in its range and quality of services, according to HSBC’s Indian CEO, Dyfrig John. He was in Hyderabad inaugurating the bank’s 23 rd branch, which has ATM facilities.

Some of its branches in Mumbai, Calcutta, Chennai and New Delhi have already been relocated at a cost of Rs.8 crore. The bank has also spent Rs.6 crore in setting up three branches in New Delhi, Gurgaon and Hyderabad.

The bank is also considering acquisitions globally to retain its leadership position. Currently it is in talks with a bank each in Thailand and South Korea.

IDBI entering securitisation
Mumbai: The Industrial Development Bank of India  is planning to enter the securitisation market with a Rs.2,000 crore corpus, according to a report in the Business Standard. The institution is in the process of finalising the fund-raising method and is also looking at the legal documentation involved, the stamp duty and the tax structure.

IDBI will enter this business as soon as the Reserve Bank of India issues guidelines in this regard. This move would help the institution diversify its product portfolio.
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Banks to obtain RBI okay for investment
Mumbai: The Reserve Bank of India has told all commercial banks that they should obtain prior permission from it to participate in the equity of any financial service company.

Banks will have to get RBI approval even if the investments are within the ceiling set by the Banking Regulation Act 1949.

RBI considering ED for NBFC sector
Calcutta: The Reserve Bank of India is toying with the idea of appointing an executive director for non-banking finance companies. This move will be in line with the Vasudev Committee recommendations.

The name of Romesh Lal, executive director, Dena Bank, figures among those under consideration for the post.

A separate executive director for NBFCs is being considered keeping in mind the sensitive nature of the sector and the problems faced by the regulator.

Venture capital fund panel by RBI
Mumbai: The Reserve Bank of India is planning to set up a committee on the venture capital industry. The committee will devise means of financing technology and research and development.

Representatives of financial institutions had met the RBI governor Bimal Jalan and urged him to set up such a committee. ICICI sources said the committee may focus on issues such as raising of resources, exit options, taxation issues, corporate and securities laws and exchange control.

The Securities and Exchange Board of India had recently set up a committee on venture capital funding.

FIs plan change in NPA definition
Mumbai: Financial institutions ICICI, Industrial Development Bank of India, and Industrial Finance Corporation of India have decided to keep the definition of "deemed date of commercial production" open to interpretation by them on a case to case basis.

This shift in policy will enable financial institutions to re-schedule loans of defaulting ongoing projects without having to classify them as non-performing assets. The financial institutions have taken the stand that loans cannot be classified as non-performing assets unless a company, which has availed of loans, commences commercial production.

Kaiga-11 to be critical on 25 August
Mumbai: Nuclear Power Corporation of India is all set to commission its 11^th atomic power station at Kaiga in Karnataka.

The second unit of Kaiga power station, Kaiga-II,  is expected to go critical on 25 August, subject to clearance from the Atomic Energy Regulatory Board, while Kaiga-I will become operational by June 2000. There has been a delay by 32 months in the commissioning of Kaiga-II. The delay in the case of Kaiga-1 is 48 months.

IDBI plans asset reconstruction company
New Delhi: The Industrial Development Bank of India is planning to float an asset reconstruction company for state finance corporations as the capital to risk-weighted asset ratio of eight out of the 18 state financial corporations has turned negative.

IDBI has noted that the Bihar State Finance Corporation and the Assam State Finance Corporation are on the brink of collapse with non-performing assets crossing 90 per cent of aggregate loans extended.
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