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RBI may continue hiking policy rates till Jan 2012
The Reserve Bank of India (RBI) is likely to maintain its hawkish stand and further
increase key policy rate up till January 2012, to tame inflationary pressures, say
experts. The Reserve Bank on Friday hiked its key rate by 25 basis points, the 12th
time since March last year, to tame high inflation overlooking sliding growth. The
short-term lending (or repo) rate to banks by RBI stands revised to 8.25%, while
the borrowing (reverse repo) rate is set at 7.25%. Industry experts project the WPI
inflation, which rose to 9.78% in August - much higher than the RBI's comfort
level of 5-6% - to remain above 9% level until December this year. The next policy
review is due on October 25. (Business Standard)
After Ulips, traditional plans come under Irda scanner
After unit-linked insurance policies (Ulips), the Insurance Regulatory and
Development Authority (Irda) is set to crack the whip on traditional plans as well.
According to Irda sources, the regulator is wary of the low life risk covers
associated with some traditional policies and is planning to introduce a minimum
death benefit at five times the annual premium. In the case of unit-linked policies,
Irda mandates a minimum sum assured guarantee of roughly 10 times the annual
premium (in case of death). However, for traditional plans, there is no such
mandate. (Business Standard)
NHB sees further dip in home loan growth blames higher prices
Housing finance watchdog National Housing Bank (NHB) has said demand for
home loans will slowdown in the next few months owing to high property prices.
“Housing loans can be a bit sluggish because buyers feel there is no way of
getting properties at a reasonable price, they are postponing their purchases,”
NHB chairman and managing director R V Verma told reporters here over the
weekend. Since April, home loan growth has been 16-17%, which is one
percentage point lower than last fiscal. He further said for the full fiscal he sees
credit off-take lowering at over 15%. (Mint)
DB RESEARCH
India Insight – RBI's Hawkish Imperative (Taimur Baig, Kaushik Das)
We had called for the RBI to hike the policy rate by 25bps during the September
16 monetary board meeting, and the central bank followed through accordingly,
but the tone of the policy statement was more hawkish than our expectations. We
expect one more rate hike in October as inflation would remain high (around 9.5%)
through September. Inflation would likely ease modestly from October onward,
helped by flattening commodity prices and a favorable winter food harvest.
Sector news
SBI likely to hike rates in 15 days
A day after the Reserve Bank raised key policy rates, country's largest lender State Bank of
India's Chairman Pratip Chaudhuri today said there will be a hike in its interest rates in the
next 15 days. "In another 15 days we will if the input prices go up, the output has to go up,"
Chaudhuri said. When asked about the likely quantum of the rate hike and if it will be at par
with RBI's 25 basis point hike, he said, it will be "roughly" the same. (Financial Express)
MoU on takeout financing
India Infrastructure Finance Company Ltd (IIFCL), Infrastructure Development Finance
Company Ltd (IDFC) and Life Insurance Corporation (LIC) have entered into a memorandum
of understanding (MoU) for investing up to Rs 300 bn in 2011-12 in the infrastructure sector
through the take-out financing route. Both LIC and IIFCL had entered into an agreement to
buy up to 40 per cent of infrastructure loan portfolios of banks, each having 20 per cent
exposure. IDFC will take 10 per cent exposure. (Business Standard)
Axis Bank approves Enam deal; to get $57 million from unit
India's No.3 private lender Axis Bank said on Friday its board has approved the transfer of
Enam Securities' investment banking and equities businesses to self, which will be eventually
sold to the bank's wholly owned unit for 2.74 billion rupees ($57.6 million). Late last year,
Axis Bank had said it will buy the two units for $456 million in an all-stock transaction, but
regulatory hurdles prevented the acquisition to take effect. The structure, announced on
Friday, broadly retains the original deal contours, but now involves a cash payout to Axis Bank
from its own unit for transferring Enam's businesses. (Economic Times)
SBI may clock profit over Rs 100 bn in this fiscal
Country's largest lender State Bank of India profit in the current fiscal is likely to exceed Rs
100 bn on the back of increased business and sustained effort to contain bad assets. "The
bank is making all-round effort to achieve Rs 100 bn profit during the year," senior officials of
the bank said. SBI had posted a net profit of Rs 82.65 bn in 2010-11, 9.84% lower than that in
2009-10, mainly due to higher pension, gratuity, loan loss provisions, higher investment and
standard assets provision on special home loan scheme. For the first quarter of the current
financial year, SBI recorded a net profit of Rs 15.84 bn, down almost 46% from the year-ago
period. (Business Standard)
Govt panel to look into banks' capital needs
The government has formed a committee to look into the capital requirements of public
sector banks in the light of the Basel-III norms, which the banks will start implementing from
2013. “We have set up a small group, which is looking at capital requirements of public
sector banks. Next month, we will have a final strategy. But the government is committed to
capitalising banks fully not only this year but also for Basel-III requirements,” D K Mittal,
secretary, financial services said on Saturday. He said the government would ensure it
continues to hold at least 58 per cent stake in public sector banks and that these banks
maintained a Tier-I capital of eight per cent, higher than what is mandated by RBI. (Business
Standard)
Non-life insurance sector to reach Rs 900bn by 2015
The non-life insurance industry is expected to grow by over 18 per cent by 2015 to become a
Rs 900 bn sector from the current level of Rs 470 bn, the Associated Chambers of
Commerce and Industry of India (Assocham) has estimated. The growth forecast is being
attributed to strong demands and growth of consumer base in motoring and healthcare,
growth of services and small and medium enterprises. (Business Standard)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RBI may continue hiking policy rates till Jan 2012
The Reserve Bank of India (RBI) is likely to maintain its hawkish stand and further
increase key policy rate up till January 2012, to tame inflationary pressures, say
experts. The Reserve Bank on Friday hiked its key rate by 25 basis points, the 12th
time since March last year, to tame high inflation overlooking sliding growth. The
short-term lending (or repo) rate to banks by RBI stands revised to 8.25%, while
the borrowing (reverse repo) rate is set at 7.25%. Industry experts project the WPI
inflation, which rose to 9.78% in August - much higher than the RBI's comfort
level of 5-6% - to remain above 9% level until December this year. The next policy
review is due on October 25. (Business Standard)
After Ulips, traditional plans come under Irda scanner
After unit-linked insurance policies (Ulips), the Insurance Regulatory and
Development Authority (Irda) is set to crack the whip on traditional plans as well.
According to Irda sources, the regulator is wary of the low life risk covers
associated with some traditional policies and is planning to introduce a minimum
death benefit at five times the annual premium. In the case of unit-linked policies,
Irda mandates a minimum sum assured guarantee of roughly 10 times the annual
premium (in case of death). However, for traditional plans, there is no such
mandate. (Business Standard)
NHB sees further dip in home loan growth blames higher prices
Housing finance watchdog National Housing Bank (NHB) has said demand for
home loans will slowdown in the next few months owing to high property prices.
“Housing loans can be a bit sluggish because buyers feel there is no way of
getting properties at a reasonable price, they are postponing their purchases,”
NHB chairman and managing director R V Verma told reporters here over the
weekend. Since April, home loan growth has been 16-17%, which is one
percentage point lower than last fiscal. He further said for the full fiscal he sees
credit off-take lowering at over 15%. (Mint)
DB RESEARCH
India Insight – RBI's Hawkish Imperative (Taimur Baig, Kaushik Das)
We had called for the RBI to hike the policy rate by 25bps during the September
16 monetary board meeting, and the central bank followed through accordingly,
but the tone of the policy statement was more hawkish than our expectations. We
expect one more rate hike in October as inflation would remain high (around 9.5%)
through September. Inflation would likely ease modestly from October onward,
helped by flattening commodity prices and a favorable winter food harvest.
Sector news
SBI likely to hike rates in 15 days
A day after the Reserve Bank raised key policy rates, country's largest lender State Bank of
India's Chairman Pratip Chaudhuri today said there will be a hike in its interest rates in the
next 15 days. "In another 15 days we will if the input prices go up, the output has to go up,"
Chaudhuri said. When asked about the likely quantum of the rate hike and if it will be at par
with RBI's 25 basis point hike, he said, it will be "roughly" the same. (Financial Express)
MoU on takeout financing
India Infrastructure Finance Company Ltd (IIFCL), Infrastructure Development Finance
Company Ltd (IDFC) and Life Insurance Corporation (LIC) have entered into a memorandum
of understanding (MoU) for investing up to Rs 300 bn in 2011-12 in the infrastructure sector
through the take-out financing route. Both LIC and IIFCL had entered into an agreement to
buy up to 40 per cent of infrastructure loan portfolios of banks, each having 20 per cent
exposure. IDFC will take 10 per cent exposure. (Business Standard)
Axis Bank approves Enam deal; to get $57 million from unit
India's No.3 private lender Axis Bank said on Friday its board has approved the transfer of
Enam Securities' investment banking and equities businesses to self, which will be eventually
sold to the bank's wholly owned unit for 2.74 billion rupees ($57.6 million). Late last year,
Axis Bank had said it will buy the two units for $456 million in an all-stock transaction, but
regulatory hurdles prevented the acquisition to take effect. The structure, announced on
Friday, broadly retains the original deal contours, but now involves a cash payout to Axis Bank
from its own unit for transferring Enam's businesses. (Economic Times)
SBI may clock profit over Rs 100 bn in this fiscal
Country's largest lender State Bank of India profit in the current fiscal is likely to exceed Rs
100 bn on the back of increased business and sustained effort to contain bad assets. "The
bank is making all-round effort to achieve Rs 100 bn profit during the year," senior officials of
the bank said. SBI had posted a net profit of Rs 82.65 bn in 2010-11, 9.84% lower than that in
2009-10, mainly due to higher pension, gratuity, loan loss provisions, higher investment and
standard assets provision on special home loan scheme. For the first quarter of the current
financial year, SBI recorded a net profit of Rs 15.84 bn, down almost 46% from the year-ago
period. (Business Standard)
Govt panel to look into banks' capital needs
The government has formed a committee to look into the capital requirements of public
sector banks in the light of the Basel-III norms, which the banks will start implementing from
2013. “We have set up a small group, which is looking at capital requirements of public
sector banks. Next month, we will have a final strategy. But the government is committed to
capitalising banks fully not only this year but also for Basel-III requirements,” D K Mittal,
secretary, financial services said on Saturday. He said the government would ensure it
continues to hold at least 58 per cent stake in public sector banks and that these banks
maintained a Tier-I capital of eight per cent, higher than what is mandated by RBI. (Business
Standard)
Non-life insurance sector to reach Rs 900bn by 2015
The non-life insurance industry is expected to grow by over 18 per cent by 2015 to become a
Rs 900 bn sector from the current level of Rs 470 bn, the Associated Chambers of
Commerce and Industry of India (Assocham) has estimated. The growth forecast is being
attributed to strong demands and growth of consumer base in motoring and healthcare,
growth of services and small and medium enterprises. (Business Standard)
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