Content Development Team, Chennai 1 Vol -1, Issue-51

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1 LOCATION OF SEZs IN INDIA NOT STRATEGIC, SAYS WORLD BANK Special Economic Zones (SEZs) in India are bereft of geographical advantages as they are not well located as in China, The World Bank has said in its study. ( Business Standard Mar 16, 2009) (1772) RIDDHI BULLION, NCDEX TO START PRECIOUS METAL BOURSE Riddhi Siddhi Bullion (RSBL) one of the leading bullion trading firms in the country, has entered into an agreement with the National Commodity and Derivatives Exchange (NCDEX) to start a spot exchange for precious metals. The exchange would be known as NCDEX Bullion and is likely to be launched within a month. ( Business Standard Mar 16, 2009) (1773) COMMODITY HEDGING LOSSES HIT DEALERS Losses on commodity price hedging are turning out to be the latest bone of contention between banks and corporates. ET has learnt of two instances wherein mid-sized companies have refused to pay a large British bank after they suffered huge hedging losses on contracts entered into with the bank. ( The Economic Times Mar 16, 2009) (1774) SBI OPENS INDIA'S FIRST CASH FACTORY IN CITY The State Bank of India, opened the country's first currency administrative branch, christened as Cash Factory, in Lucknow. It was Jointly inaugurated by DPS Rathore and JB Bhoria, Regional directors of the Reserve Bank of India along with Chief General Manager, SBI, Lucknow circle, Shiva Kumar. Cash Factory is a new concept introduced by SBI for better management of currency notes. ( The Economic Times Mar 16, 2009) (1775) PSBs MAY NEED CBI CLEARANCE FOR SETTLEMENT OF BAD LOANS All public sector banks may need to take the clearance from the Central Bureau of investigations before allowing one time settlement of bad loans by customers under a new direction likely to be issued by the Reserve Bank of India soon. The circular, the proposal for which was mooted by CBI, will ask all the banks to seek the clearance in all such cases where criminal proceedings were under way, sources said. ( Business Line Mar 16, 2009) (1776) HINDUJAS SWISS BANK AFTER THEIR OWN The Hindujas today took off the veil over their midsized Amas Bank in Switzerland by renaming it as Hinduja Bank, in what its chief executive described as a bold move to expand its activities in trade finance, wealth management and investment banking. Amas bank was created as a finance company in Geneva in 1978 and gradually expanded its activities in other Swiss cities Zurich, Lucerne, and Basle through acquisitions. Hinduja Bank combines the solid traditions of Swiss banking with excellent links to the growing economies of South Asia and the Middle East, Ivan Schouker, the chief executive, told Business Standard. ( Business Standard Mar 17, 2009) (1777) BANKS' TAX-SAVING DEPOSIT SCHEMES RETAIN RATE EDGE Tax-saving deposit schemes offered by most commercial banks still have a tiny edge over instruments like National Savings Certificates (NSCs) or public provident fund (PPF), in terms of interest rates. These banks are likely to keep their interest rates unchanged at least for the next 15 days, the period when income tax payers typically rush to invest in tax benefit schemes under Section 80C of the income Tax Act ( The Economic Times Mar 17, 2009) (1778) BANKS AMONG TOP ADVANCE TAX PAYERS Despite the turmoil international financial markets, Indian banks have continued to do well and were amongst the best performers, if their advance tax payments are any indicators. ( The Financial Express Mar 17, 2009) (1779) RBI POLICY RATES LAST WEEK ( ) CURRENT RATES THIS WEEK ( ) BANK RATE 6.00% 6.00% EXCHANGE RATES (As On) LAST WEEK ( ) THIS WEEK ( ) REPO RATE 5.00% 5.00% 1U.S $ Rs Rs REVERSE REPO 3.50% 3.50% 1 EURO Rs Rs RBI RESERVE RATIOS 1 POUND Rs Rs CRR 5.00% 5.00% 1 YEN Rs Rs SLR 24.0% 24.0% 1 YUAN Rs Rs INTEREST RATE SPECTRUM ( ) ( ) 10 YEAR GOVT. PAPER 7.02% 6.69% CALL RATE 3.60% 4.25% PLR RANGE (TOP 5 BANKS) % % US $ LIBOR (6 MONTHS) SOURCE: RBI & BUSINESS STANDARD ( & ) Content Development Team, Chennai 1 Vol -1, Issue-51

2 MORE MFIs SECURITISING LOANS TO RAISE FUNDS Micro finance institutions are increasingly looking at the securitisation route to cut borrowing cost and to free up capital. For investors, the asset pools are safe as they are backed by cash flows, thanks to the high recovery ratio of MFIs. Besides, with rating agencies now rating these structured instruments, the trend is really catching on, said experts. ( Business Lines Mar 17, 2009) (1780) 24 FIIs WIN BIDS TO PUT IN Rs. 29,400 CRORE Foreign institutional investors (FIIs) have responded enthusiastically to the government's decision to increase the cumulative investment limit in corporate debt from $6 billion to $15 billion. In an open bidding held at the National Stock Exchange yesterday, 24 bidders were allocated investments of Rs. 29,350 crore, the highest ever investment allocation by FIIs in India. In comparison, the net investment of FIIs in 2008 was only Rs. 12,069 crore Since January ( Business Standard Mar 18, 2009) (1781) ICICI BANK TO CREATE NEW CO FOR ATMs ICICI Bank is looking at setting up a new entity which will own its automated teller machines (ATMs) and point of sales terminals. It has sought bids from banking technology firms and private equity players for participation in this new entity. ( The Economic Times Mar 18, 2009) (1782) CORPORATE INDIA NOW WAKES UP TO WHISTLE- BLOWER INSURANCE Whistle-blower insurance has been making waves in the highest echelons of India Inc in the aftermath of the Satyam scam. Also known as 'retaliation cover' in hardcore insurance circles, it is offered by some general insurers such as HDFC Ergo and Tata AIG. The retaliation cover will help a senior executive (independent directors included) to blow the whistle against wrong doings by any member of the apex management team and ward off a legal backlash. ( The Economic Times Mar 18, 2009) (1783) SIP AVENUE IN FREEZE MODE AS EQUITY MFs LOSE LUSTRE With equity mutual funds recording their worst performance in the recent years, retail investors are stopping their investments through systematic investment plans (SIPs). Over 5 lakh SIP account were cancelled in the past five months since October 2008, according to a MF industry estimate. ( The Economic Times Mar 18, 2009) (1784) LENDERS BANK ON ARCs TO SAVE TROUBLED ASSETS The economic downturn may see the net worth of many companies turning negative by the end of this fiscal year. Banks and financial institutions would seek a resolution before the borrower company becomes sick. Promoters and banks would be encouraged to negotiate with ARCs and distress asset funds to find a resolution that leads to both asset reconstruction and payment of bank dues. PE funds, sensing an opportunity, have hired bankruptcy lawyers to buy stake in distressed companies at a heavy discount. Many non-banking finance companies are keen on entering the asset reconstruction business. ( The Economic Times Mar 18, 2009) (1785) INDIA TO BECOME MEMBER OF BASEL, FSF In a meeting held on March 10-11, the Basel Committee on Banking Supervision (BCBS) has decided to expand its membership and invite India as a new member. Meanwhile, the Financial Stability Forum (FSF), established by the G7 finance ministers and central bank governors in 1999, has also decided at its plenary meeting in London, on March 11-12, to broaden its membership and to invite India as a new member. ( The Financial Express Mar 18, 2009) (1786) CA INSTITUTE ASKS RBI TO WITHDRAW CIRCULAR ON BANKS' BAD LOANS The CA Institute President said that the RBI circulars on bad loan recognition and provisioning could distort bank balance sheets as on March 31 this year. Mr. Uttam Prakash Agarwal, told a press conference that the RBI should withdraw the circulars, as they are not healthy for the Indian banking industry. It will not give a clear picture of NPAs (nonperforming assets). The recent RBI circulars on 'prudential guidelines on restructuring of advances by banks' could have the effect of disguising bad loans as standard assets for at least a period of 210 days, ICAI officials noted. ( Business Line Mar 18, 2009) (1787) SBI DRAWS PVT BANK CUSTOMERS WITH HOME LOAN AT 8% INTEREST The special housing loan schemes launched recently by State bank of India at 8 per cent interest rate have triggered migration of customers of some private banks to SBI. Content Development Team, Chennai 2 Vol -1, Issue-51

3 While the exact number of migrated customers / loan applications could not be ascertained, the foreclosures of housing loans at leading private banks for loan swapping have gone up noticeably, according to sources. ( Business Line Mar 18, 2009) (1788) HDFC LAUNCHES CERTIFICATE PROGRAMME Insurance major HDFC Standard Life on Wednesday announced a three month certificate programme in insurance and management in collaboration with education service provider Manipal Education. ( The Economic Times Mar 19, 2009) (1789) DHANALAKSHMI BANK TO RAISE Rs. 400 CR, OPEN 80 BRANCHES Kerala-based Dhanalakshmi Bank (DLB) is out to break off from RBI's 'old-generation private bank' category to the club of new generation banks, utilising the low-cost expansion route during the slowdown era. The bank will open 80 new branches across the country and raise Rs. 400 crore in the next month through Tier-2 funding in five year bonds. Amidst retrenchments all around, we are hiring 1,000 professionals in a year. ( The Financial Express Mar 19, 2009) (1790) AXIS BANK TO CURTAIL PERSONAL LOAN PORTFOLIO The eastern zone of Axis Bank, comprising West Bengal, entire North-East, Bihar, Jharkhand and parts of Chhattisgarh, would curtail its personal loan portfolio following an increase in delinquencies. The bank would lend personal loans only to its existing customers, according to Mr S.K. Mitra, President, Eastern Zonal Office, Axis Bank. ( Business Line Mar 19, 2009) (1791) NRIs SHIFTING FUNDS FROM DOLLAR TO RUPEE ACCOUNTS Non-resident Indians (NRIs) appear to be making the most of the rupee's depreciating trend against the dollar. By liquidating their foreign currency non-resident (banks) deposits denominated in dollars and parking the proceeds in non-resident ordinary rupee (NRO) and non-resident (external) rupee (NRE) accounts, they are laughing all the way to the bank. The upshot of this arbitrage is that even as there was an outflow of funds aggregating $1.194 billion from FCNR(B) deposits in the April 2008-January 2009 period (as against an outflow of $670 million in the corresponding period last year), the NRO and NRE deposits saw a robust accretion of $2.201 billion ($637 million inflow) and $1.138 billion ($373 outflow) respectively. ( Business Line Mar 19, 2009) (1792) ARCIL SEEKS CHANGE IN FDI NORMS TO RAISE FUNDS The Asset Reconstruction Company of India (Arcil), which has proposed a change in the time frame under which debt could be restructured, has called for changes in the foreign direct investment guidelines. Foreign investment is permitted up to 49 per cent. Many overseas partners want this raised to 76 per cent. We are currently in the fund raising exercise. This is a hurdle, said Ms Mukherjee. The change in the norms would facilitate expansion of the existing asset reconstruction companies in buying bad debts from the banks and restructuring them. ( Business Line Mar 19, 2009) (1793) DIRECT TAX MOP-UP SURPASSES PREVIOUS FISCAL'S COLLECTIONS Contrary to expectations, the Centre's direct tax collections this year have already surpassed the total net collections of fiscal Going by this collection trend, the Centre is well on course to exceed the revised estimate of Rs. 3,45,000 cr for Direct taxes collection data available with the Revenue Department showed that net collections up to Mar 17 this year stood at about Rs. 3,12,800 cr, surpassing the net collection of Rs.3,12,202 cr last fiscal. ( Business Line Mar 19, 2009) (1794) AXIS BANK ATMS TO BE MORE SECURE Axis Bank will deploy 400 ATMs from NCR Corporation equipped with technology to deter ATM fraud. A press release from NCR Corporation said the machines will be equipped with NCR ATM Surveillance solution that captures the image of the ATM user along with transaction details to prevent fraud. ( Business Line Mar 20, 2009) (1795) GOVT ISSUES DRAFT GUIDELINES FOR AUTO LOAN DISBURSALS The Department of Banking Ministry of Finance has come out with draft guidelines for bank on disbursing auto loans, which includes terms for repossession of vehicles. Sources close to the Department of Banking told Business Line that the fresh guidelines are now with the Indian Banks Association (IBA) and Finance Industry Development Council (FIDC), a regulatory body for non-banking finance companies, and that they are expected to take a decision on following the guideline shortly. ( Business Line Mar 20, 2009) (1796) Content Development Team, Chennai 3 Vol -1, Issue-51

4 PNB LOOKS FOR BUYOUTS IN FOREIGN MKTS PNB is currently considering a possibility to acquire banks in countries like Bangladesh, Ukraine and Sri Lanka. The bank is planning to expand operations in foreign locations like Qatar and Saudi Arabia. SBI plans to open two more branches in Singapore by April A senior Bank of Baroda executive confirmed the bank's plan to open a new branch in the UK within few months apart from penetrating locations like Australia, Malaysia and Canada. Bank of India (BOI) has planned to expand across various foreign territories in BOI is expected to be the first Indian bank to open a branch in New Zealand in the near future. ( The Financial Express Mar 20, 2009) (1797) INFLATION AT 14-YEAR LOW OF 0.44% Economists raised the possibility of deflation in the first half of the financial year starting April after headline inflation rose at its slowest pace in 14 years. The inflation rate based on the wholesale price index (WPI) stood at 0.44 per cent for the week ended March 7 this year, against 7.78 per cent in the corresponding week a year ago. It was 2.43 per cent in the previous week. ( Business Standard Mar 20, 2009) (1798) NOW, A PLATFORM FOR TRADING LOANS Soon, there will be an exchange-like platform for trading in loans. Credit Market Securities (CMSL), a wholly-owned subsidiary of Financial Technologies, is in the process of setting up the first ever platform in the country on which bank loans extended to companies can be traded. The Reserve Bank of India (RBI) and the Indian Banks' Association (IBA) are already working on Guidelines for trading in bank loans, sources close to the development said. ( Business Standard Mar 20, 2009) (1799) LIC BIGGEST BUYER OF INDIAN SCRIPS, INVESTS Rs. 40K CRORE Living up to its image of a contrarian investor, the Life Insurance Corporation of India (LIC) has been the biggest buyer of Indian equities during the current financial year. The insurance major has invested close to Rs. 40,000 crore in equities and another Rs. 40,000 crore in non-convertible debentures (NCDs) of companies, a senior LIC official told ET. ( The Economic Times Mar 20, 2009) (1800) RBS TO SELL 75% OF ITS INDIA BRANCHES Royal Bank of Scotland is looking at selling around three-fourths of its branches along with its 982 million (Rs 7,000 crore) retail and SME portfolio in India. The move, which is subject to regulatory approval, would enthuse foreign banks that have been eyeing RBS' retail business. ( The Economic Times Mar 20, 2009) (1801) FED LAUNCHES BOLD $1.3T EFFORT TO REVIVE ECONOMY In a dramatic move to battle recession, the US Federal Reserve the world's most powerful monetary authority will spend $1 trillion to buy government bonds and mortgage backed securities. The move will lower interest rates across spectrum, free up loan markets, flush international money markets with dollar and help mortgage borrowers, particularly in America. ( The Economic Times Mar 20, 2009) (1802) GEOJIT LAUNCHES ONLINE TRADING IN CURRENCY DERIVATIVES Geojit Financial Services on Friday launched Internet trading in currency derivatives. Mr George said since the launch of currency derivatives on NSE in August last year, Geojit has gained leadership in this segment. Since April last year, over 5 million online trades have been executed. The volume of business in the last six months was about Rs. 5,000 crore, which is expected to touch Rs one lakh crore over a period of time. The commissions are as low as Rs 10 for a contract value of $1,000. ( Business Line March 21, 2009) (1803) UCO BANK IN TALKS TO LAUNCH CO-BRANDED CREDIT CARD At a time when most banks are shying away from the credit card business due to mounting defaults, UCO Bank plans to launch a co-branded credit card in order to complete its bouquet of services for its customers, according to Mr S.K. Goel, the bank's Chairman and Managing Director. ( Business Line Mar 21, 2009) (1804) PRIVATE BANKS PIP PSBs IN COMPLAINTS' GROWTH In growth of complaints received, private sector banks have surpassed state-run banks. A comparison between 13 private sector banks operating in the country and 18 public sector banks reveals that private banks registered higher growth in complaints received during compared to public sector banks (PSBs). Content Development Team, Chennai 4 Vol -1, Issue-51

5 The total complaints of 13 private sector banks have gone up by 103.3% from 3,57,410 in to 7,26,617 in State-run banks, in contrast, appeared more concerned about complaints. ( The Financial Express Mar 21, 2009) (1805) BBC STING EXPOSES SALE OF CREDIT CARD DETAILS IN INDIA In another case of data theft being traced to India, a BBC investigation has exposed activities of a criminal gang that sells credit card details of UK customers reportedly stolen from call centres in the country. In a sting operation, BBC reporters posing as fraudsters from London bought names, addresses and valid credit card details of UK customers from New Delhi-based Saurabh Sachar, who acted as a broker to arrange the sale. ( The Financial Express Mar 21, 2009) (1806) PNB TO SET UP INVESTMENT BANKING ARM Bucking the trend, India's second largest public sector lender, Punjab National Bank (PNB) will now set up an investment banking arm at a time when most of the international financial services conglomerates are either closing down or are forced to withdraw from stock market related business. ( The Economic Times Mar 21, 2009) (1807) PVT BANKS SAY NO TO RATE WAR OVER NANO FINANCING Private banks such as HDFC, ICICI, and Kotak Mahindra have decided against entering into a rate war with PSU banks over the financing of Nano for now as they fear that aggressive interest rates could lead to high defaults. Through they are still in discussions with Tata Motors, they do not want to offer loans at less than normal rates for Nano customers. ( The Economic Times Mar 21, 2009) (1808) SMALL LOANS SPELL BIG TROUBLE FOR GOVT BANKS Small loans are proving to be a big problem for public sector banks. On an average, outstanding loans of around Rs. 25,000 Rs.10,000,00 account for per cent of the gross non-performing assets (NPAs) for several public sector banks. The figure is on a rise owing to defaults by small traders due to a marked slowdown in industrial production, along with defaults in loans to the farm sector. ( Business Standard Mar 21/22, 2009) (1810) GOLD DEPOSIT SCHEME RE-LAUNCHED SBI has re-launched its gold deposit scheme to reduce the country's reliance on gold imports. Public can deposit their surplus gold in any form with the bank and earn interest on it (1.5 per cent for five years). However, the minimum amount of deposit is pegged at 500 gm. Once the gold is deposited with the bank, it is checked for purity and a certificate is issued to the depositor which could be used by the latter to claim back gold after its maturity. Note, interest is calculated in gm and not in rupees. ( Business Line Mar 22, 2009) (1811) RATING SMEs NOT PROFITABLE: CARE Credit Analysis & Research Ltd (CARE), The country's second-largest credit rating agency, feels that rating of small-scale units is a loss-making proposition. We are not turning down any rating proposal form small units, but at the current level of pricing, there is no way any rating agency can cover costs, CARE's Deputy Managing Director, Mr D.R. Dogra, told Business Line. ( Business Line Mar 22, 2009) (1812) INDIA READIES FOR COMPLEX DERIVATIVES Warren Buffet some years ago likened them to financial weapons of mass destruction. Development markets had their fling with them, with mixed results to show. And now it seems to be India's turn to experiment with complex financial instruments, as it aims to move up the pecking order of the global financial system. The derivatives market review committee appointed by SEBI has proposed introduction of a series of sophisticated derivative products, the notable ones among them being Over-The-Counter (OTC) products, exchange traded derivative products and exchange traded third party products. ( The Economic Times Mar 21, 2009) (1809) Content Development Team, Chennai 5 Vol -1, Issue-51