Indian Banking Industry Update

03 March 2017

RBI / MoF / Govt. PoliciesRBI asks Financial Literacy Centres to hold special camps on going digital

Jan Dhan’s ‘thumb impression’ to play key role in Aadhaar Pay

Hold camps on digital payments from April 1: RBI to banks

Printing of Rs 2,000 note started in August 2016

Exit non-core businesses: Finance ministry advises state-owned banks

RBI dy guv cautions against crowdsourcing & bitcoins

Public Sector Banks / Private Bank consolidation takes backseat on rising NPAs

Fear of investigation forces banks to defer Essar Steel debt recast, to take Rs 44,000-crore hit

ICICI Bank hits overseas debt market with $500 mn issue

‘Inflation pressure is building up’: Biswa Swarup Misra, Chief Economist, Bank of Baroda

'RBI's decision to maintain status quo on rates did not surprise us': BoB Chief Economist Biswa Swarup Misra

HDFC Bank, others resume levy on cash transactions

HDFC clarifies, says no revision in ATM charges

Indian Bank revises FCNR (B) deposit interest rates

Federal Bank launches update for mobile banking platform

Impact of demonetisation strong in finance real estate and construction growth: Yes Bank

SBI expanding operations in India's immediate neighbourhood

SBI Caps strengthens institutional equities business

SBI interest rates on term deposits slashed from March 1

Axis Bank says it’s not to blame for Aadhaar issue

BoB's South African unit to close accounts linked to Gupta family

Immediate cuts in lending rates unlikely: ICICI Bank MD and CEO Chanda Kochhar

Co-operative Banks/RRBsForeign Banks / FIIs / I-Banks

Demonetisation has pushed back capex by couple of quarters: Deutsche Bank

Mizuho zeroes in on target sectors for Japanese investments in India

Rating & ResearchAuto-backed securities stabilise in Jan: Moody's

Currency may remain fairly stable next year; fourth quarter growth will be lower: Devendra Kumar Pant, India Ratings

ATMs, Credit & Pre-paid CardsMobiKwik plans to be a ‘financial services supermarket’

Housing FinanceDevelopment BanksNBFCs / FIs / MFI

Suryoday Small Finance Bank raises Rs. 158 crore

Muthoot to retail platinum statuettes

We're adding 50,000 borrowers every month to Capital First: V Vaidyanathan

India Post Payments Bank to open 25 branches by Sept

Mutual Funds & AMCs

UTI launches debt product

Midcaps too expensive, prefer largecaps now: Akash Singhania, DHFL Pramerica Asset Managers

This should be a benign year for FII flows into India: Akash Singhania, deputy CIO, at DHFL Pramerica Asset Managers

L&T Mutual Fund ties up with Mumbai Dabbawalas to spread awareness on ELSS

Mirae Asset MF eyes Rs 10,000-crore AUM by December

Mirae AMF launches Dynamic Bond Fund

UTI AMC plans to set up private debt fund; forms team

Motilal Oswal AMC names Balakrishnan as co-fund manager, PMS

Equities, Pvt. Equity & Hedge FundsSovereign, pension funds look to build on Indian realty

DLF deal delay has Street worried as debt clock ticks

Cube Highways in talks to sell stake to Canada pension fund for $200 m

Govt. Securities & Bonds How unusual move caused suspicion in the bond market

Bank loan market could revive soon as bonds become costly

Bonds recover, call rate ends lower

Brokers / Distributors‘Investors from small towns too are attracted to discount broking’: Amit Gupta, co-founder and CEO of TradingBells

Four micro themes to pursue this summer: Mahantesh Sabarad, SBI Cap Securities

No hope of double-digit earnings growth in FY18: Dipen Sheth, HDFC Securities

BoursesShareholders of companies formerly listed on regional stock exchanges in a tight spot

BSE to launch F&O on BSE Sensex 50 index from 14 March

International World’s biggest banks fined $321 billion since 2008 financial crisis

EconomyRupee rebounds 12 paise

Indian economy projected to grow by over 7.5% this FY: President

Post-demonetisation GDP growth ‘too good to be true’, says SBI study

ClosingLast Financial Closing...

RBI / MoF / Govt. Policies

RBI asks Financial Literacy Centres to hold special camps on going digital The Hindu Business Line

Mumbai: The Reserve Bank of India has advised bank-operated Financial Literacy Centres to conduct special camps for one yearbeginning April 1, 2017 on “going digital” through Unified Payments Interface and the *99# service, in view of thegovernment’s emphasis on increasing digital transactions post-demonetisation.

Besides these camps, FLCs will continue to conduct ailored camps for five target groups farmers, small entrepreneurs, schoolchildren, senior citizens and Self Help Groups. The RBI said the tailored content for each target group is being prepared and will beshared with banks/FLCs in due time.

Further, rural bank branches will henceforth be required to conduct only one camp a month (on the Third Friday of each month afterbranch hours) covering messages such as documents to be submitted while opening a bank account, importance of budgeting andsaving and responsible borrowing, learning about deposit accounts, maintaining a good credit score by repaying loans on time, themanner in which to lodge complaints at the bank and Banking Ombudsman.

The camps by rural bank branches will also cover the two digital platforms UPI and the Unstructured Supplementary ServiceData-based “*99#” service.

FLCs are set up as Trusts/Societies by banks, either singly or jointly with other banks. A bank can induct respected local citizens onthe Boards of such Trusts/Societies. Serving bankers are not included on the Board.

In a notification to banks, the RBI said FLCs and rural branches of banks are eligible for funding support for FLCs to the extent of 60

per cent of the expenditure of the camp subject to a maximum of Rs. 15,000 per camp.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/rbi-asks-financial-literacy-centres-to-hold-special-camps-on-going-digital/article9568010.ece

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Jan Dhan’s ‘thumb impression’ to play key role in Aadhaar Pay AJ VinayakThe Hindu Business Line

Mangaluru: Thumb impressions are going to make a comeback for paying and receiving money, if the recent announcement by theUnion Information Technology Minister Ravi Shankar Prasad is any indication. It may, however, not be in the manner in which it wasused earlier, where illiterate people used their thumb impressions in place of signatures.

Announcing that the government will soon launch Aadhaar Pay, Ravi Shankar Prasad had recently said that this mode of paymentwould help people whose Aadhaar numbers are linked to their bank accounts make and receive payments with their thumbimpressions alone.

He was betting on the potential of 39-crore Aadhaar-linked bank accounts for Aadhaar Pay in a country that has around 111 croreAadhaar numbers.

In fact, accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) will contribute a majorly to this initiative.

Thanks to the demonetisation of specified bank notes on November 8, there has been stromg growth in the number ofAadhaar-linked PMJDY accounts also.

Of the 27.77 crore PMJDY accounts in the country as on February 22, nearly 16.89 crore have already been seeded with Aadhaarnumbers. One year ago on February 26, 2016 the country had 21 crore PMJDY accounts, and around 9.16 crore accounts wereseeded with Aadhaar numbers then. The country added 6.77 new PMJDY accounts in a year, and the Aadhaar seeding of PMJDYaccounts crossed 7.73 crore during the same period.

The Aadhaar-linked PMJDY accounts contribute nearly 15.21 per cent to the total of around 111 crore Aadhaar numbers in thecountry, and 43.3 per cent to around 39 crore bank accounts linked with Aadhaar numbers.

Aadhaar is a biometric-based identification programme with a real-time online authentication infrastructure. The UniqueIdentification Authority of India has generated around 111 crore Aadhaar numbers as on January in a country of more than125-crore population.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/jan-dhans-thumb-impression-to-play-key-role-in-aadhaar-pay/article9568012.ece

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Hold camps on digital payments from April 1: RBI to banks PTISee this story in: The Economic Times

Mumbai: RBI today asked banks to organise special camps from April 1 to educate public about digital payments through UPI and99# (USSD) code platforms.

It said the policy on conduct of camps by FLCs (Financial Literacy Centres) and rural branches of the banks has been revised giventhe recent developments on withdrawal of legal tender status of old Rs 500/1,000 notes and the focus on going digital.

"FLCs are advised to conduct special camps for a period of one year beginning April 1, 2017 on 'Going digital' through UPI and *99#(USSD)," the Reserve Bank of India said while revising the guidelines.

Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application. The USSDservice for fund transfer works without internet.

Besides the special camps on going digital, RBI said FLCs will continue to conduct the tailored camps for the different target groups.

"The tailored content for each target group is currently being prepared and is expected to be shared with banks/FLCs in due courseof time," the RBI said.

Further, rural branches of banks are henceforth required to conduct only one camp per month on the third Friday of each monthafter branch hours).

FLCs and rural branches of banks can get support for the financial literacy camps to the extent of 60 per cent of the expenditurewith a cap at Rs 15,000/per camp.

The RBI has also detailed reporting mechanism for banks and the financial literacy camps will be assessed/evaluated on anongoing basis by its Lead District Officers (LDOs).

Earlier, lead banks were asked to set up FLCs in each of the Lead District Manager (LDM) Offices.http://economictimes.indiatimes.com/industry/banking/finance/banking/hold-camps-on-digital-payments-from-april-1-rbi-to-banks/articleshow/57434245.cms

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Printing of Rs 2,000 note started in August 2016 PTISee this story in: The Economic Times

Indore: Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), an RBI subsidiary, started printing the Rs 2000 notestwo and a half months before the November 8 demonetisation.

"A reply from BRBNMPL to my query under the Right To Information Act said the printing of Rs 2000 notes began on August 22,2016, while printing of the new Rs 500 notes began on November 23, 2016," said Chandrashekhar Gaud, resident of Neemuchdistrict of Madhya Pradesh.

BRBNMPL stopped printing the old Rs 500 note on October 27 while the printing of the Rs 1,000 note ceased earlier, on July 28 lastyear, the reply said.http://economictimes.indiatimes.com/news/economy/policy/printing-of-rs-2000-note-started-in-august-2016/articleshow/57432874.cms

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Exit non-core businesses: Finance ministry advises state-owned banks PTISee this story in: Business Standard

New Delhi: As part of capital raising exercise, the Finance Ministry has advised state-owned banks to prepare a list of their non-coreassets and look at disposing them at an opportune time.

They have been asked to move forward on the idea based on deliberations at the Gyan Sangam last year, sources said.

Some of the banks have started the process while others are gearing up, the sources said, adding that the move will not only helpthem raise the much-needed capital for growth but also sharpen their focus on the core business.

Most public sector banks (PSBs) have insurance ventures or capital advisory firms, besides holding the stake in financial institutionssuch as stock exchanges. For instance, State Bank of India holds a stake in various companies including National Stock Exchange,UTI, ARCIL and so on.

SBI has expressed intention to pare its stake in some of the subsidiaries including life insurance firm.

Last month, the board of IDBI Bank also approved dilution of stake in some non-core businesses to shore up capital base.

The board of the bank has approved in principle the proposal to divest some of its non-core investments subject to compliance withall applicable laws and regulations and final approval obtained for each transaction, IDBI Bank had said.

As part of disinvestment exercise, IDBI Bank may look at bringing down its stake in companies such as IDBI Federal Life InsuranceIDBI Capital Market Services, IDBI Intech, IDBI Asset Management Company, National Stock Exchange, National SecuritiesDepository, and NSDL E-Governance Infrastructure.

According to finance ministry estimates, PSBs will require Rs 1.8 lakh crore in additional capital over a period of four years endingMarch 2019.

Of the total, they are expected to raise Rs 1.1 lakh crore from the market and through the sale of non-core assets.http://www.business-standard.com/article/finance/exit-non-core-businesses-finance-ministry-advises-state-owned-banks-117030200593_1.html

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RBI dy guv cautions against crowdsourcing & bitcoins The Times of India

Mumbai: Banking has ceased to be the sole preserve of banks with developments in information and communication technologyenabling non-banks to get into lending and other activities, according to the RBI deputy governor R Gandhi. He, however, cautionedthat two key developments in fintech crowdfunding and cryptocurrencies such as Bitcoins will not be given a free run.

According to Gandhi, the central bank will regulate crowdfunding. "You need an organised and a regulated entity to ensure that theinnocent and weak parties are protected. Any democratic set-up cannot dismiss it quoting 'Consenting Adult' argument. 'Consentingadult' argument cannot be presented when mass scale failure takes place," said Gandhi.

On Bitcoins or any other virtual currency, Gandhi said the two important elements of any currency were confidence and anonymity."The initial rounds are always filled with adventurists and risk-seekers; the moment masses get in, the risk-avoiders get in, they willneed greater 'confidence' for acceptance and that can come only if an 'authority' issues it. As regards 'anonymity', the blockchaintechnology apologists say it can be made very difficult to track, and that is not 'anonymity'. Therefore, it may remain a pipedreamthat blockchain will eliminate currency, by ushering in virtual currency," said Gandhi.

Speaking at a fintech conference jointly organised by Ficci, Indian Banks Association and Nasscom, Gandhi said that the industry iswitnessing 'chunking' of activities carried by banks, where specialist entities are engaged in focused lines of business which arecarved out of banking.

Gandhi listed over a dozen services that have been chipped away 'chunk after chunk' from banking. These include those bypayment service providers, peer to peer services, peer to business services, SME financing, consumer retail financing, crowdfunding, open ended mutual funds, money market mutual funds, deposit alternatives, trade financing, invoice financing, billdiscounters, bill collectors, credit referrals, account aggregators, interest free products, syndicators, investment bankers, microfinance institutions and housing finance companies.

"With their specialisation and focused service rendering, non-banks are able to offer that chosen service at greatest efficiency,speed and at very affordable cost to consumers. When these specialised entities make innovative use of ICT as their businessmodel, they tend to be called fintech companies," said Gandhi. However, he said real fintech companies were those who developinnovative systems, products and solutions for use by those in the financial sector, without rendering financial services on their own.http://timesofindia.indiatimes.com/business/india-business/rbi-dy-guv-cautions-against-crowdsourcing-bitcoins/articleshow/57437824.cms

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Public Sector Banks / Private

Bank consolidation takes backseat on rising NPAs SidharthaThe Times of India

New Delhi: Mounting nonperforming assets (NPAs) have pushed the government's plan for consolidation of public sector banks onthe back burner after it managed to get State Bank of India to take charge of its five subsidiaries.

The government is also going slow on stake sale in IDBI Bank, where it had even discussed the possibility of reducing it to below50%. The bank is grappling with bad debt and has been asked to accelerate plans for sale of non-core businesses, including lifeinsurance, Sidbi and NSE shares, through which it hopes to raise Rs 5,000-6,000 crore.

“You don't want troubled entities to get together and create uncertainty for the entire system,“ a senior governmentofficer told TOI. Sources said the plan is now to push banks to step up recovery and clean up their balance sheets so that fundrequirement comes down and lenders can start funding projects. Consolidation of banks was a key plank of the reform plan chartedout by the government with discussion even focusing on creating sixseven large banks instead of having two dozen clones offeringsimilar products and services. Some of these banks were to find a niche for themselves and reorientation was seen as a keyplatform for them to take on competition from new types of banks.

For the government, which is the majority shareholder in these banks, the concern is meeting the capital requirement in the wake ofrising bad debt.Although Rs 10,000 crore have been allocated in the business, the expectation is that the requirement during thenext financial year will be much higher and the government is going to be selective in providing more equity and has decided to linkit to performance.

This is not the first time that the government has decided to put consolidation on the back burner. In the past, it has tried to mergebanks and several broad contours have also been worked out. But pressure from unions and lack of political will had forcedsuccessive governments to abandon these efforts.

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Fear of investigation forces banks to defer Essar Steel debt recast, to take Rs 44,000-crore hit Sangita MehtaThe Economic Times

Mumbai: Banks are set to take a hit of hundreds of crores in the March quarter as the biggest loan restructuring of Essar Steelwould be pushed to next fiscal year since none of the bankers want to risk the prospect of being questioned by investigativeauthorities few years down the line.

In January, bankers led by the State Bank of India informally agreed to recast the Rs 44,000 crore loans of Essar Steel that hasbeen struggling to repay for over a year now. However, within days of this development, the Central Bureau of Investigationarrested five IDBI Bank officials, including former CMD Yogesh Agarwal, for lending to the now-defunct Kingfisher Airlines.

"We were hopeful of sealing the deal by March-end but with the arrest of IDBI officials, lenders have developed cold feet. Nowbanks will go ahead with debt recast of any company only if the package is endorsed by an external committee," said two seniorbank officials who did not want to be named.

The arrests of IDBI officials shocked the banking industry leading to paralysis in decision making.

"This is particularly so because Kingfisher is tagged as wilful defaulter for not repaying Rs 9,000 crore of loans and its promoterVijay Mallya fled the country in March 2016. The bank suffered huge losses and the bankers are now behind bars," pointed out abank official.

Bankers have asked the Reserve Bank of India to enhance the scope of the overseeing committee to vet all types of debt recast. Asof now, the overseeing committee (OC) comprises eminent experts who will independently review the processes involved inpreparation of resolution plan of S4A or Scheme for Sustainable Structuring of Stressed Assets. Essar Steel's debt recast is outsideS4A and hence outside the purview of the overseeing committee.

A consortium of 17 lenders has already classified the Essar Steel loan as sub-standard in the quarter ending March 2016. Any delayin restructuring the loans now would mean that banks would have to set aside more money as provisions in the fourth quarter.

Banks have to set aside 15% in the first year as provisions for bad loans which would increase to 25% in the second year.Beginning March 2017 quarter, banks would have set aside 25% as provisions for Essar Steel.

"The proposed decision of the Banks to refer all restructuring to the overseeing committee (OC) for final approval is a policy initiativefor all cases that are being taken up by the banks," Essar CFO V Ashok said.

"Bankers are willing to take a hit of hundreds of crores but do not want to take decisions on big-ticket loan recasts with the fear ofbeing questioned in future by investigative authorities," said a senior bank official.

After two year of negotiations, bankers and Essar Steel finally arrived at a mutually acceptable debt recast package which includespromoters, the Ruias, losing control of the company. Close to 25% would be sold to Farallon Capital for Rs 1,800-2,000 crore andbanks would convert Rs 2,200 crore debt into equity for a 30% stake.

On March 1, ET reported how IDBI Bank is jittery about selling its non-core business it assessed to be worth Rs 6,000 crore, itsCEO Kishor Kharat said. IDBI loaned Rs 900 crore to Kingfisher following approval from the board since it was rated belowinvestment grade.http://economictimes.indiatimes.com/industry/banking/finance/banking/fear-of-investigation-forces-banks-to-defer-essar-steel-debt-recast-to-take-rs-44000-crore-hit/articleshow/57438173.cms

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ICICI Bank hits overseas debt market with $500 mn issue PTISee this story in: The Hindu Business Line

Mumbai: Private sector lender ICICI Bank today hit the overseas debt market with a USD 500-million dollar-denominated bond issueand is expected to close the 5.5-year issue tonight.

“The bench market issue will be sold through the Dubai International Finance Centre branch of the bank, and thelead-managers have given a price guidance of 1.55 per cent over the US treasury,” merchant bankers told PTI here today.

They said the issue is part of ICICI Bank’s USD 7.5 billion global medium-term notes programme.

Global rating agencies S&P and Moody’s have rated the proposed senior unsecured notes at ‘BBB-’ andBaa3, respectively. Assigning ‘BBB-’ rating to the debt instrument, S&P said the rating on the notes reflects thelong-term issuer credit rating on the largest private sector bank in the country.

Moody’s Investors Service said the Baa3 rating to the proposed RegS notes issued under its USD7.5 billion MTNprogramme will have a maturity of 5.5 years and will be listed on the Singapore Stock Exchange.

Moody’s has also given a positive outlook on the ratings. The US securities Commission debars resident American investorsfrom investing in Regulation S (RegS) debt issued by overseas entities.

Since the past two years, debt raising by domestic companies have been on a low gear given the poor investment climate here.Nearly half a dozen companies raised around USD 1.82 billion from overseas markets in January this year.

Out of this, USD1.40 billion were foreign debt in January and the rest were funds raised via rupee-denominated bonds, according tothe Reserve Bank data.

While Rural Electrification Corporation raised USD 400 million for on-lending under the ECB route, NTPC mopped up USD 531.2million and Adani Ports & Special Economic Zone raised USD 500 million.http://www.thehindubusinessline.com/money-and-banking/icici-bank-hits-overseas-debt-market-with-500-mn-issue/article9567392.ece

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‘Inflation pressure is building up’: Biswa Swarup Misra, Chief Economist, Bank of Baroda NS VageeshThe Hindu Business Line

Biswa Swarup Misra’s career path has traversed the corridors of central banking, academia and commercial banking duringthe past 15 years with stints in Union Bank of India, RBI, Xavier Institute of Management, Bhubaneswar, Bank of India and nowBank of Baroda. He loves the autonomy and freedom of the academic world but comes to the corporate world at regular intervals toupdate his knowledge and tools and pick up insights that would offer a rounded perspective to his students. The combination ofresearch and teaching experience as well as his understanding of commercial and central banking make him an expert who caninterpret developments in the economy in a simple and lucid manner.

Excerpts from an interview

Were you surprised by the RBI’s decision to maintain status quo in last month’s credit policy?

No. We were not surprised. Let me divide how we approached the issue with both a short-term outlook and a near-term outlook.The short-term outlook was that they should not reduce rates and that they should maintain status quo. This we have been holdingfrom the previous policy even when the market was expecting a cut. We were not surprised by the status quo. But the near-termoutlook (just a few days before the recent policy), we had changed our expectation from status quo to a cut.

Why?

The reason was mainly if not now, then when would be the best time?

And more so in the larger perspective of the RBI’s stated stance that they want to take India to a lower interest rate regime.Recall that the repo rate was cut by 175 basis points over the last two years.

If you see the spectrum of interest rates, on an average the 10 year G-sec yield was about 65 basis points above the repo rate. Butbecause of huge liquidity after demonetisation, the yields in G-sec came down to such a level (around 6.4 per cent) that thedifference between G-secs and repo rate came down to 15 bps from around 65 bps.

We guessed that the RBI will use the opportunity of the policy to take interest rate further down and maintain that spread (about 65bps) in tact. There are two ways that could have been done either cut the policy rate or take the yields up. The RBI ended up takingthe second option and achieved the same objective by taking a hawkish approach.

How low can interest rates go in the Indian context?

Remember a country like India also looks for foreign inflows. Policy observers will look for growth and stability both internal andexternal. Internal stability will show up in inflation and external stability in exchange rates.

Exchange rates depend on FII flows and that depends on the kind of proportion that comes into debt and equity.

If the debt yields are very low given country risks, then the flow may weaken. Also, remember US yields were up around the timeTrump won and our yields were down so the spread between the two which used to be around 520 bps had come down to 400 bps.

To that extent, debt becomes less attractive and some outflow took place in November and December of last year. In a way, theRBI has indicated that the floor for interest rates cannot be below 6 per cent.

What were the other cues you took away from the policy?

They have changed their stance from accommodative to neutral. We had said earlier that the RBI should not reduce rates becausewhile headline inflation was low, core inflation was high.

For me, the most important thing is GDP deflator-based inflation. In September 2015, GDP deflator-based inflation was negative.Then it went up and now it is 4.6. That means in the overall economy, inflation pressure is building up. Besides, the interest ratespectrum has become more aligned – because there must be some premium for tenor.

What should we make of the RBI’s ‘stance’? Since the RBI always reserves the right to act in whatever way itdeems fit or appropriate, what is sacrosanct about this ‘neutral’ stance?

In the standard definition, a stance is a posture. It is like a batsman getting ready to play a stroke as he awaits a delivery. You areindicating a direction. The stance should be looked at more from a directional point of view.

A stance generally has two connotations.

One for rate and another for liquidity both are linked, of course. When they say that they are neutral, then neither is there systemicsurplus nor deficit on a durable basis although on any given day there will be some deficit or excess because some banks will haveto borrow. But from a system point of view, banks should not be borrowing too much or too less.http://www.thehindubusinessline.com/money-and-banking/bank-of-baroda-chief-economist-and-inflation-and-rbi/article9567891.ece

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'RBI's decision to maintain status quo on rates did not surprise us': BoB Chief Economist Biswa Swarup Misra N.S.VageeshThe Hindu Business Line

Mumbai: Biswa Swarup Misra’s career path has traversed the corridors of central banking, academia and commercialbanking during the past 15 years, with stints in Union Bank of India, RBI, the Xavier Institute of Management, Bhubaneswar, Bankof India and now Bank of Baroda, where he is Chief Economist. He loves the autonomy and freedom of academia but comes to thecorporate world at regular intervals to update his knowledge and tools and pick up insights that would offer a rounded perspective tohis students. The combination of research and teaching experience, as well as his understanding of commercial and centralbanking, make him an expert who can interpret developments in the economy in a simple and lucid manner.

Excerpts from an interview

Were you surprised by the RBI’s decision to maintain status quo in last month’s credit policy?

No. We were not surprised. Let me divide how we approached the issue – with both a short-term outlook and a near-termoutlook. The short-term outlook was that they should not reduce rates and that they should maintain status quo. This we have beenholding from the previous policy itself -- even when the market was expecting a cut. We were not surprised by the status quo. Butfor the near-term outlook (just a few days before the most recent policy), we had changed our expectation from status quo to a cut.

Why?

The reason was mainly – if not now, then when (would the best time be)? And more so in the larger perspective ofRBI’s stated stance that they want to take India to a lower interest rate regime. Recall that the Repo rate was cut by 175basis points over the last two years. If you see the spectrum of interest rates, the 10-year G-Sec rate and the repo rate, on anaverage the G-sec yield was about 65 basis points above the Repo rate. But because of the huge liquidity after demonetisation, theyields in G-sec came down – to such a level (around 6.4 per cent) that the difference between G-secs and the repo ratecame down to 15 bps from around 65 bps.

We guessed that RBI will take the opportunity of the policy to take interest rates down further and maintain that spread in tact. Thereare two ways that could have been done -- either cut the policy rate or take the yields up. The RBI ended up taking the secondoption and achieved the same objective – by taking a hawkish approach.

If they are trying to take the country to a lower interest rate regime – how low can it go in the Indian context?

Remember, a country like India also looks for foreign inflows. Policy observers will look for growth and stability – both internaland external. Internal stability will show up in inflation and external stability in exchange rates. Exchange rates depend on FII flowsand that depends on what kind of proportion comes into debt and equity. If the debt yields are very low given country risks, then theflow may weaken. Also, remember US yields were up around the time Trump won and our yields were down – so the spreadbetween the two, which used to be around 520 bps, had come down to 400 bps. To that extent, debt becomes less attractive andsome outflow took place in November and December of last year.

So, what does it imply for interest rates?

In a way, the RBI has indicated that the floor for interest rates cannot be below six per cent.

What were the other cues you took away from the policy?

They have changed their stance from accomodative to neutral. We had said earlier that RBI should not reduce rates because whileheadline inflation was low, core inflation was high. For me, the most important thing is GDP deflator-based inflation. In September2015, GDP deflator-based inflation was negative. Then it went up and now it is 4.6. That means in your overall economy, inflationpressure is building up. Apart from this, what was important from the policy was that the interest rate spectrum has become morealigned – because there must be some premium for tenor.

What happens post June? Is there scope for a cut then?

RBI has made it clear that there is still scope for transmission. Banks are, of course, not in a good shape to pass on the reduction– because of NPA concerns. It is a drag.

That needs to be solved. But borrowers need to improve their credit worthiness. Even in a high interest rate regime, good borrowersget funds at lower rates. They will borrow if there is a good growth opportunity because they will pass on the interest costs.

What should we make of the RBI ‘stance’? Since RBI always reserves the right to act in whatever way it deems fit orappropriate, what is sacrosanct about this ‘neutral’ stance?

In the standard definition, a stance is a posture. It is like a batsman getting ready to play a stroke as he awaits a delivery. You areindicating a direction. The stance should be looked at more from a directional point of view.

A stance generally has two connotations. One for rate and another for liquidity both are linked of course. When they say that theyare neutral, then neither is there systemic surplus nor deficit on a durable basis – although on any given day there will besome deficit or excess because some banks will have to borrow. But from a system point of view, banks should not be borrowingtoo much or too less.http://www.thehindubusinessline.com/money-and-banking/interview-with-bob-chief-economist-biswa-swarup-misra/article9566842.ece

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HDFC Bank, others resume levy on cash transactions PTISee this story in: The Hindu Business Line

New Delhi: Some banks, including HDFC Bank, have begun charging a minimum amount of Rs. 150 per transaction for cashdeposits and withdrawals beyond four free transactions in a month.

The new charges would apply to savings as well as salary accounts effective from March 1, HDFC Bank said in a circular.

The bank would also cap the third party cash transactions at Rs. 25,000 per day, while cash handling charges would be withdrawn,the circular added.

In case of several banks, including ICICI Bank and Axis Bank, these charges came into effect early in January and are same as

they were before the demonetisation move announced on November 8, while there is an increase in such fees in case of someothers, including HDFC Bank.

These charges are for cash transactions in the branches, and not through ATMs.

The move was seen in some quarters as aimed at discouraging cash transactions and furthering the digital payment drive.

For the basic no-frills accounts, maximum four cash withdrawals would continue to remain free and there would be no fees for cashdeposits.

According to details on ICICI Bank website, there will be no charge for first four transactions a month at branches in home city whileRs. 5 per thousand rupees would be charged thereafter subject to a minimum of Rs. 150 in the same month.

The third party limit would be Rs. 50,000 per day.

For non-home branches, ICICI Bank would not charge anything for first cash withdrawal of a calendar month and Rs. 5 perthousand rupees thereafter subject to a minimum of Rs. 150.

For anywhere cash deposit, ICICI Bank would charge Rs. 5 per thousand rupees (subject to a minimum of 150) at branches, whiledeposit at Cash Acceptance Machine would be free of charge for first cash deposit of a calendar month and Rs. 5 per thousandthereafter.

ATM intercharge charges have also been re-introduced.

At Axis Bank, the first five transactions or Rs. 10 lakh of cash deposits or withdrawals would be free and charged at Rs. 5 perthousand rupees or Rs. 150, whichever is higher.

It could not be ascertained whether the public sector banks have also begun imposing such charges.

When contacted, a senior official said there has been no directive from the government to the banks regarding levy of such charges.http://www.thehindubusinessline.com/money-and-banking/hdfc-bank-others-resume-levy-on-cash-transactions/article9566984.ece

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HDFC clarifies, says no revision in ATM charges Daily News & Analysis

HDFC has clarified on Thursday regarding the transaction charges that there has been no revision in their ATM charges as hasbeen reported certain media outlets. "We have revised our transaction charges only for cash withdrawal/deposits at brances," thestatement said.

HDFC bank had notified their respective account holders on Wednesday about a transactional fee, which will be applicable on thefifth transaction in a month.

The banks announced that after an individual does four transactions, the fifth one will be subject to a fee, regardless of whether it iscash withdrawal or deposit. However, the new fee will not be applicable on ATM withdrawals.

Banks have proposed that a fee of Rs. 150 will be added, along with service tax, in addition to a fee of Rs 5 per 1000.

The cap on transactions has been placed at Rs 2 lakh per month per account. Any transaction beyond this will be applicable for anextra charge.http://www.dnaindia.com/money/report-hdfc-clarifies-says-no-revision-in-atm-charges-2340673

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Indian Bank revises FCNR (B) deposit interest rates PTISee this story in: The Hindu Business Line

Chennai: Public sector Indian Bank has revised its interest rates in foreign currency non-resident (banking) term deposits withimmediate effect.

For FCNR(B) deposits, in USD terms, the revised interest rate is fixed at 2.33 per cent for deposits of one year and above, but lessthan two years, from the existing 2.26 per cent, a bank statement said.

For deposits of two years and above but less than three years, interest rates have been revised to 2.57 per cent from existing 2.52per cent.

Interest rates remain unchanged at 2.78 per cent for deposits of three years and above but less than four years.

Interest rates are also unchanged for deposits of four years and above but less than five years at 2.92 per cent, it added.

In another statement, the bank said it launched two technology products Direct tax payment by debit card authentication and

‘digilock’ a mobile application for the customers.

Indian Bank, Managing Director and CEO, Mahesh Kumar Jain and senior officials launched the two new products yesterday.

The Direct Tax Payment by Debit Card authentication facility would help customers to pay the “direct tax” by using thedebit cards. “As the payment is directly integrated without using any Payment Gateway Service Providers customers will notincur any charges”, it said.

Using the DigiLock customer application, the bank’s customers can store and lock their credit, debit, net banking and mobilebanking services through the facility.http://www.thehindubusinessline.com/money-and-banking/indian-bank-revises-fcnr-b-interest-rates/article9567319.ece

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Federal Bank launches update for mobile banking platform The Hindu Business Line

Kochi: Federal Bank has come out with an update for its award winning mobile banking platform – FedMobile.

The bank has added the facility to open term deposit in FedMobile and this will be available to both resident and NRI customers.Customers can also open recurring deposits and tax saving deposits, in addition to making fixed deposits. The recent update alsoincludes facility for hotel and bus booking.

FedMobile is already equipped to effect payments for various utilities such as electricity, telecom, gas, insurance, mutual funds anddonations.

According to K.P.Sunny, Head – Digital Banking, demonetisation is attracting more customers to the bank’s digitalchannels. Simultaneously, the bank is improving the features, security and convenience available through these alternate channelsof banking. With the latest update, FedMobile allows its customers to do most of their banking transactions from a singleuser-friendly platform.http://www.thehindubusinessline.com/money-and-banking/federal-bank-launches-update-for-mobile-banking-platform/article9567378.ece

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Impact of demonetisation strong in finance real estate and construction growth: Yes Bank Gayatri NayakThe Economic Times

Mumbai: The latest growth estimates released by the Central Statistical Organisation (CSO) indicates that Finance , real estate andconstruction sector are visibly hit by high value note ban or demonetisation, a report by Yes Bank notes.

"Excluding agriculture and public administration, Q3'17 gross value added (GVA) was 5.8% vis-à-vis 6.4% in Q2 and 7.4% in Q1which clearly shows loss of momentum in economic activity." said the Yes Bank report. "Maximum impact of demonetisation isvisible in finance and real estate sector with some spillover in construction."

The gross domestic product (GDP) growth for Q3'17 which was supposed to capture the ‘currency swap’ exercisedisruption was reported at 7.0%. However, revision for previous years’ figures have led to lesser slowdown as expected inthe first half of FY'17 growth which was revised lower to 6.8% from 7.2%.

The CSO estimate is higher to the RBI’s forecast of 6.9% for FY'17. RBI also expects growth to recover sharply in FY'18 to7.4% driven by revival of discretionary consumer demand, restoration of economic activity in cash intensive sectors, and pickup ininvestment demand owing to lower interest rates with support from the government’s focus on increasing capitalexpenditure.

Agriculture & allied activities Q3'17 GVA growth was 6.0%, highest in the new series that was launched ago. "The healthy growthcan be credited to the record production of food grains and oil seeds," said the report . According to the second advance estimatesreleased by department of agriculture, food grain production is estimated to rise by 8.1% to 272 million tons and oil seedsproduction is estimated to grow by 33% to 33.6 mn tons.

As far as industry in concerned, despite fears of an adverse impact of demonetisation on the industry, GVA growth was recorded at6.6% owing to higher operating profits. Quarterly results of metal sector companies reveal extra-ordinary growth in GVA (operatingprofits + employee cost) on account of an extremely favorable base, according to Yes Bank.

Services growth for Q3'17 was reported at 6.8%, the lowest since Q4'14. The slowdown was driven by financial, real andprofessional services slowing down to 3.1%. Slowdown in credit growth and severe deceleration in purchase of real estate due tothe demonetisation drove the sub-sector to its lowest level since the inception of the new series.http://economictimes.indiatimes.com/news/economy/policy/impact-of-demonetisation-strong-in-finance-real-estate-and-construction-growth-yes-bank/articleshow/57437566.cms

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SBI expanding operations in India's immediate neighbourhood

PTISee this story in: The Economic Times

Singapore: The State Bank of India is expanding operations in India's immediate neighbourhood, its Chairman and ManagingDirector Arundhati Bhattacharya said today.

"We are doing (it) within the immediate neighbourhood of India. We have just opened a new branch in Myanmar and we upgradedour branch in Seoul," Bhattacharya said here, responding to reporters' question on the bank's expansion plans.

She said the SBI has a large presence in Singapore and a banking joint venture in Indonesia.

Bhattacharya and India's High Commissioner to Singapore, Jawed Ashraf, today launched a "Remittance through ATM" service atthe SBI's 25 ATMs in Singapore, increasing its range of services for Non-Resident Indians (NRIs) on 24-hour, seven-day basis.

Bhattacharya said she is satisfied with the performance of SBI's international banking group.

"International banking group has about 16 per cent of the balance sheet and about 25 per cent of the profit. Considering that, it isactually doing quite well," she said, adding that the bank will continue to consolidate from April 1 onwards.

On capital raising plans, she said, "We will look into that after the merger is over. With the merger hanging over our heads, wecannot approach the capital market."

The Indian Government last month approved the merger plan of SBI and its five associates, a step aimed at strengthening thebanking sector through consolidation of public banks.

SBI has started expanding in wealth space in India.

"Once we stabilise the wealth operation in India, we can look at the NRI community," she said.

Elaborating on the new service, she said remitters, with SBI accounts in Singapore, get a wide reach to over 22,000 branches withthe SBI group and over 80,000 other bank branches in India.

The new service is in addition to the existing channels for remittance facility offered by SBI Singapore through Internet Banking,Kiosk, eRemit from its six branches here.http://economictimes.indiatimes.com/industry/banking/finance/banking/sbi-expanding-operations-in-indias-immediate-neighbourhood/articleshow/57431587.cms

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SBI Caps strengthens institutional equities business Samie ModakBusiness Standard

Mumbai: SBI Capital Markets, investment banking and broking arm of State Bank of India (SBI), is in the process of strengtheningits institutional equities business. The brokerage plans to leverage the scale and reach of its parent, which deals with nearly a thirdof corporate clients in the country.

The institutional equities division of a brokerage provides services such as equity sales, trading and research to mainly big-ticketclients. These would include mutual funds, insurance companies and foreign institutional investors (FIIs). The equities business inthe country is fragmented, with about 30 entities, around a dozen having a substantial position.

Although SBI Caps has significant presence in investment banking, it lags private sector peers in the broking space. Sources sayArundhati Bhattacharya, the SBI chief, is pushing for growth of the broking and institutional equities business, and has given agreen signal for hiring senior talent from that segment at market salaries.

SBI Caps has hired Nirav Sheth from Edelweiss to head its institutional equities business. It has also hired about 20 analysts fromrival brokerages and is in the process of hiring more, to expand research beyond the top 100 stocks.

"The ability to exploit SBI's platform will give us a lasting competitive advantage. Thanks to the parent, we will get access to the topmanagement at almost all Indian corporates and also better access to policymakers, government bureaucrats and politicalmachinery. This will give us an edge to grow the institutional business," said an official at SBI Caps.

Typically, institutional clients like to have views of the company management before making a big-ticket investment. Also, theyprefer access to government officials, to get a macro view on the economy and policies. Often, these meetings are set up bybrokerages through investor conferences.

Average daily trading volumes in the equity cash segment is around Rs 25,000 crore, while that in the futures and options segmentis about Rs 4.9 lakh crore. In 2016, net investments by mutual funds and FIIs were a little more than Rs 60,000 crore.http://www.business-standard.com/article/finance/sbi-caps-strengthens-institutional-equities-business-117030200761_1.html

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SBI interest rates on term deposits slashed from March 1 The Financial Express

State Bank of India (SBI) has reduced interest rates on term deposits with maturities of between 180 days and one year, andbetween 456 days and three years with effect from March 1. The country’s largest bank by assets will now pay 6.5% ondeposits with maturities of between 180 days and less than one year, and 6.75% on those maturing between 456 days and lessthan three years. Earlier, SBI used to pay 6.75% on deposits maturing between 180 days and 210 days, 7% on those maturingbetween 211 days and less than a year, 6.95% on deposits maturing between 456 days and under two years and 6.85% on thosematuring between two years and less than three years.

The corresponding rates for deposits maintained by senior citizens will be 7% and 7.25%. Despite the cut in rates, two- andthree-year money with SBI will continue to earn more than at its closest rival, HDFC Bank, which pays 6.25% and 6%, respectively,on deposits of these two maturities.While banks had seen a steady rise in deposits since the announcement of demonetisation on November 8, some of these depositshave already begun to flow out of the system. According to data released by the Reserve Bank of India, during the fortnight endedFebruary 17, deposits with the banking system fell to their lowest since November 11, the first day banks began to receive depositsof demonetised currency notes of R500 and R1,000 denominations. Aggregate deposits stood at R104.87 lakh crore, up 12.77%year-on-year (y-o-y).

Outflows began in late December as the central bank gradually eased restrictions on cash withdrawals. Tuesday onwards, theweekly limit for withdrawals from savings accounts will stand at R50,000, as against R24,000 earlier. Limits will not apply March 13onwards. Most banks expect 40% of the deposits received after demonetisation to remain with them. In recent days, some bankers,including Punjab National Bank managing director (MD) and CEO Usha Ananthasubramanian, Bank of Baroda MD and CEO PSJayakumar and IDBI Bank executive director RK Bansal, hinted at cuts in the savings deposit rate. At present, most banks pay 4%on savings deposits.http://www.financialexpress.com/market/sbi-interest-rates-on-term-deposits-slashed-from-march-1/572869/

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Axis Bank says it’s not to blame for Aadhaar issue Vishwanath Nairmint

Mumbai: Axis Bank Ltd is not at fault in the recent controversy that resulted in the Unique Identification Authority of India (UIDAI)suspending it from doing Aadhaar-based transactions, two senior executives at the lender said.

The bank has also realigned its lending strategy to reduce risk and is coping with the challenges involved in being cyber secure inan open environment, they added.

Executive director Rajiv Anand explained that Suvidhaa Infoserve (one of the other firms suspended by UIDAI) does not have therights to conduct e-KYC (electronic know your customer) procedures to validate anyone using its infrastructure for payments, whichis where Axis Bank comes into the picture. In this case, an employee of Suvidhaa who was testing the infrastructure used his ownAadhaar number to perform the tests.

“The infringement is really at that level in Suvidhaa. It has clearly said that the error is on its part,” Anand said. Thelender has already shut access to various lines of business to Suvidhaa, he added.

The bank is confident UIDAI will “see the merit in the argument”, added Jairam Sridharan, chief financial officer ofAxis Bank.

Talking about cyber security in general, Sridharan said that India has chosen a fully open infrastructure of digital transactions, whereanyone with an account with any bank can use any network to transact with anyone else with an account with any bank. “In acompletely open environment where the participants are literally in the hundreds, it is a little bit harder to have full control on theentire architecture,” Sridharan said.

Dealing with NPAs

Axis has seen a significant jump in the accumulation of bad loans, which has actually led to the bank having to revise its guidanceon asset quality for the current financial year. Gross non-performing assets (NPAs), rose by five times to Rs20,467 crore as on 31December 2016, from around Rs4,000 crore on 30 September 2015. The rise was mainly due to a deep asset quality review and aneventual slipping of many large corporate assets into the bad loan category.

“Over the last six quarters our gross NPA ratio would have gone up by about 350 basis points. Every large bank in thecountry which is in the corporate lending segment has also seen their ratios go up by about 300-350 basis points. If you see therank ordering among all the large banks, it is still the same. It is just that everyone has re-baselined to a new level,”Sridharan said.

According to the CFO, about six or seven years ago, Axis Bank placed its bet on four themes that would drive growth: infrastructure,small business, growth in consumption and payments. In retrospect, Sridharan says, one of the four (infrastructure) has not pannedout as planned at all.

To derisk, the bank has also realigned its lending strategy.

While incremental lending to the corporate sector has been greatly reduced, Axis Bank is largely lending to firms rated A or above.

About 80% of incremental lending has been to such companies, Sridharan clarified. In the current macroeconomic environment, if afirm is rated A or above, there is a great chance that it will turn around rapidly as the economy turns, he added.http://www.livemint.com/Companies/jL1J020CWtuTlLjLrBhJ5L/Axis-Bank-says-its-not-to-blame-for-Aadhaar-issue.html

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BoB's South African unit to close accounts linked to Gupta family BloombergSee this story in: The Financial Express

Bank of Baroda’s South African unit has started closing accounts of companies controlled by the Gupta family, according tothree people familiar with the matter, potentially leaving the friends of President Jacob Zuma without banking facilities in the country.

The Mumbai-based lender is winding down its relationship with companies related to the Gupta family to ensure it is in compliancewith banking rules, the people said, asking not to be identified because the matter is confidential. The Guptas, who are in businesswith Zuma’s son, have been accused by opposition parties and some ruling party officials of using their friendship with thepresident to influence cabinet appointments and government contracts. They have denied the allegations.

Oakbay Investments, the Gupta’s main holding company, said it isn’t aware that Baroda will close its accounts.

“Oakbay is not aware of any such information,” the company said in an emailed response to questions. “I canonly imagine that your source has their own agenda, and wants to put pressure on Bank of Baroda.”

South Africa’s four biggest banks last year closed accounts linked to the Gupta family, giving them more than amonth’s notice and citing the need to comply with international banking rules when dealing with customers and concern overtheir reputations. The family, led by brothers Atul, Ajay and Rajesh, asked Finance Minister Pravin Gordhan to stop the banksterminating the accounts, spurring Gordhan to seek a court order stating that he can’t prevent lenders from cutting clients.

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Immediate cuts in lending rates unlikely: ICICI Bank MD and CEO Chanda Kochhar Latha Venkateshmint

Chanda Kochhar, managing director and chief executive officer of ICICI Bank, said she does not expect lending rates to fall furtheranytime soon. “A large part of the lending rate cut has already happened. An immediate cut is unlikely. We will have to watchthe Reserve Bank of India and see how much CASA (current and savings account) remains (post demonetization),” she saidin an interview. Kochhar added that while she is not surprised that the central bank left the repo rate unchanged on 8 February, theshift in stance from accommodative to neutral came much earlier than expected.

Edited excerpts: 

Is your personal micro experience gelling with what the gross domestic product (GDP) number is telling you?

Yes, the GDP numbers are saying that agriculture has done well which is indeed true. We had a good kharif crop, we had good rabisowing. It is also indicating that government expenditure has moved as per schedule or even better which I think is credit to thegovernment to be able to push the GDP growth through that route. If you look at our own business activities, we saw that Octoberwas good, maybe November people kind of waited whether it was to buy homes or whether it was buy cars and so on. However,even for us in terms of our retail disbursements the December numbers came back quite sharply and January numbers were almostat the October levels. So, what happened in November was transient in most of the cases so to say.

Let me go by the Q3 numbers that you all gave. Loan growth up to then was 5.2% year-on-year but retail was up 18%. So, whatmay you end the year with, do you think retail will do even better than 18% and therefore your overall number can be at least highsingle digits?

When you look at our growth which was 5.3% or so, actually you have to look at our domestic loan growth. Our domestic loangrowth was actually more than 12%. We grew the domestic book at 12% vis-a-vis the system growth of 5.3%.

So, we are growing at almost double the industry growth. Within that domestic growth of 12%, retail is growing at 18%. Again ourgrowth of 18% in retail is when the industry growth rate is around 13%. So, we seem to be on track.

Our domestic business will grow anywhere between 12 and 15%, retail will continue to grow at around 18%, that is where ouryear-end numbers would be. I would say that is a very strong story because it is almost double of the industry growth on an overallbasis on the domestic side and much higher than the overall retail industry growth rate as well.

Is there a rubber-band effect because there was a lull in consumption which of course the GDP numbers are refusing toacknowledge or at least reflect. Is there a rebound? Will retail end much better than 18% or even a little better than 18%?

It is possible because some of this was kind of postponed demand. So, that will get translated in this quarter. So, it is possible but18% kind of growth is what we are running at in any case on retail.

Let me come to the cost of money, how much of the deposits do you think will stay?

I think on the savings bank account there is some amount of money that was just lying as dormant savings with people which hascome back in the system. I think that money will stay. However some amount is just converting informal economy into a formaleconomy because people were used to dealing with cash in some way and now they are dealing through the formal channels. Thatwill go back into the economy. I think we have not yet reached that clear time frame where we will be able to project what thebehaviour would be but on savings account more will remain. On current account less will remain because that will go back intobusiness.

How is all that impacting your costs or your margins?

We saw a series of marginal cost of fundsbased lending rate (MCLR) cuts. Do you think we should expect both deposit and lendingrates to fall further and how much more?

Cost of deposits has already come down and more so the MCLR has come down. We always used to debate this— when willbanks cut rates and when will my EMIs come down. I think this time around actually the banks have preceded some of the cuts inthe cost of deposits or rather the lending rate cuts have in that sense preceded. If you look at it from April 2016 till now, maybe therepo rate has been cut by about 50 basis points, even the retail fixed deposit rates have come down 50-60 basis points. Howeverthe MCLR effectively has come down almost 100 basis points. So, it reiterates the point that I always used to earlier say that it is notjust your repo rate cut that determines lending rates, it is the cost of deposits.

Why did the cost of deposits come down?

It is because a lot of CASA money came in and that helped us cut the MCLR. So, from here on I would say that a large part of thelending rate cut has already taken place. We will in fact have to see how interest rates move from here. There may not beimmediate cuts that may happen very soon in the lending rates because we have to watch what Reserve Bank of India (RBI) doesto rates, and how much of CASA deposits remain in the system.

RBI’s stance quite clearly has shifted to neutral from accommodative. The reading would therefore be that maybe they willnot cut anymore at all. Then what happens? Do you still see a possibility because loan growth is weak for the system and youyourself are saying that a part of the deposits will remain?

As I said the MCLR cuts have been even higher than the fixed deposit cuts. The cost of funds depends not just on the repo ratemovement one way or the other, it also would depend on the liquidity and what the RBI’s stance is towards sucking outliquidity. So, that also determines the cost of funds. Also what would determine the cost of funds is the CASA movement, how muchof CASA deposits really stay in the system. So, I would think it is very early to predict whether there would be further rate cuts andin which direction rates would move. I think from here on we have to watch really to see the CASA behaviour before we are able topredict further.

Did the RBI stance surprise you?

The not cutting of the rates—actually I was not surprised. In fact in my mind I was quite mentally prepared for that.

Ninety-eight percent of the people we polled expected a cut.

The shift in stance was earlier than what was expected by the markets.

Are you confident that in subsequent quarters, this and the next, you will be able to bring down slippages, albeit marginally but willthe trajectory be lower?

First of all when we look at trends like this we should not be looking at quarter to quarter trends. I think we have to look at a largerhorizon. I would say that slippages will happen but if we would look at the whole year, I think FY18 should be better than FY17.However that should not be taken to interpret that the first quarter would turn out to be much better. Overall if we look at it I wouldstill think that when you look at a horizon of a year as a whole, yes there should be some improvement.

Steel prices are rising, maybe those guys have enough EBITDA to at least pay some more loans. You are saying that there isprobably a consumption rebound ....

Directionally one should see that one is moving in a positive trajectory but at the same time what happens is that many of thesecases are lumpy accounts for the banking system. If one case turns non-performing asset (NPA) in that quarter the numbers go upsubstantially. So, whether you are able to settle that case this side of March or that side of April can make a difference toquarterwise numbers. Therefore I always believe that one should not be looking at trends on a quarterwise basis. Yes steel pricesare going up, yes some of these companies are servicing part of the interest but overall the system really has to focus more andmore on resolution.

Is the public sector nature of banks a problem? Is it that you are willing to sign off on an unsustainable debt and public sector banksare not able to because they have to worry about CVC and stuff like that, is that a problem?

Finally the issue is that in every company there are almost 18-20 banks. Whether you break them into segments or not, the issue isthat all the 20 banks have to be able to decide.

New RBI deputy governor has proposed something like a private asset management fund and national asset management fund. Didyou ponder over it, is that helpful or do you see that even progressing?

My firm belief is that any structure that gives us resolution is what we should pursue—so as many structures that we canthink off, that is good. Finally, the devil is in the details of making sure implementation happens. I think even if you look at thatspeech, the positives of that speech are that he is saying let us focus on resolution. Let us focus on putting assets back into

productive use, let us focus on bringing back capital investment and employment.

Did you all discuss that since you were there on the dais at IBA. Has the RBI or the government or Viral Acharya himself taken itforward?

Many of these structures and similar structures have been discussed in the past also and are being discussed now as well. As Isaid, finally what we should do is decide whether the assets remain with the banks or whether they remain in a separate structureand whether that separate structure is a different bank or an AMC kind of an institute. I think we have to empower whoever isholding the loans with ability to decide.

He is asking for a rating of those, so that market says that this is a sustainable asset. Is that something you all are taking forward, isthat workable?

What we are actually discussing is that there has been in the past a very simple resolution mechanism called the corporate debtrestructuring (CDR). So we could just look at moving under that mechanism, making sure that under that structure joint decisiontakes place and they get implemented. Again the flexibility in that structure is in a way similar to the speech that wasmade—that you don’t have to really focus on what exact percentage of the loan can be sustainable or not sustainable.You arrive at whatever is sustainable, handle the sustainable part in a sustainable manner, handle the rest of the part in a differentformats and keep moving forward.

Is that what you all are asking RBI to allow under the CDR mechanism?

Provisions apart, I think what we are all discussing is that can we then start moving under a kind of CDR mechanism and look atdeep restructuring without having to stick to specific percentages as being sustainable.

If you read Viral Acharya’s speech. It is very clear that the regulator’s discomfort is when free hand was given forrestructuring probably loans were evergreened. If we give you more liberty to restructure then you

have a rating agency say that this is sustainable— that seems to be the regulator’s condition.

So two things here, one is that having a rating agency opinion is always a very good, because that gives the market even moreconfidence. No one is debating that at all, but to debate whether the restructuring of the past were good or not, I think that also hasto be juxtaposed with the way the economy moved vis-à-vis how it was expected to move. Every time you make a structure, youmake certain assumptions on how growth will happen, how economy will move, how the project will move, how the approvals willcome and then you have to go back and see whether those assumptions came into play. If the assumptions themselvesdon’t come into play then the solution obviously will not work.

What is the regulator saying, are you expecting some tweaking?

We are in dialogue, let’s hope that soon we get some answers.

Your total stress, you already have your drill down list, you have SDR, you have your S4A. If you take that entire list it comes tosome 11% or something. Will that stress number at least look lower in the fourth quarter?

Again, we must remember that these are ratios. Ratios are dependent on both the numerator and the denominator.

Exactly what I am asking—will you grow your way out, is what I am asking?

You have to look at the credit growth in the system. You should again not grow for the sake of growing and pick up any credit for thesake of adding to your asset base. I think the right approach to follow in this scenario would be one part look at the stress, focus onresolution. The other part is look at credit growth. Of course grow to the maximum opportunity, but not grow recklessly just to growyour assets. The ratio will be a result of the two and as I told you we are not letting go off any opportunity for growth. Our domesticbook is growing at twice the industry average. Retail is growing at 18% and we will continue to grow that, but we will not adjust ourgrowth just to adjust our ratios. We will follow good growth on one hand and we will focus on resolution on the other hand and letthe ratio be a consequent.

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Co-operative Banks/RRBs

Foreign Banks / FIIs / I-Banks

Demonetisation has pushed back capex by couple of quarters: Deutsche Bank SidharthaThe Economic Times

Despite the global turmoil at Deutsche Bank, inclu ding a possible retreat from the retail segment, the operations in the country remain unscathed, says the bank's India CEO Ravneet Gill . He tells TOI that demonetisation has impacted capacity utilisation, withspending on fresh capacity creation by companies postponed by around six months.

Excerpts

Have global issues facing the Bank had any impact on India? Have you had to rework your strategy?

Ravneet Gill: It is like a tale of two cities. We have had limited impact in India and our strategy and commitment here remainunchanged. In fact, our global management consistently advises us to stay focused on growth and assures us that further resourcesshall be made available whenever needed. The bank has had to make a few difficult choices at the global level but that has not casta shadow on India. We are a material part of the bank and of the 16 countries in Asia Pacific, we are one of the most profitable.

What bearing does ‘Strategy 2020’ of the bank have on India?

Ravneet Gill: In a recent town hall held by John Cryan, our global CEO, India was mentioned twice as an area where the bankwould like to focus and grow further. The bank feels comfortable with the level of regulation, rule of law, democracy, stablegovernment and enlightened economic policies here. We have picked our spots, the products we want to push, the client segmentswe really want to target. The fact that India is one of the most profitable countries in the network is also a function of the resourcesthat the bank has invested in India.

Have you scaled down on your retail portfolio or retail business?

Ravneet Gill: No. We haven’t cut down a rupee retail is growing on a month on month basis. Like every other bank, we hadlong queues in the initial weeks of demonetisation. Our teams really rallied together to ensure clients were well served.

Would you retain the retail business in India?

Ravneet Gill: In India, we continue to invest into this business. Deutsche Bank’s India operations truly represent a universalbank. We have a strong commercial and investment bank with the third piece being retail that is starting to build strong momentum.It’s not only profitable but 25% of our incremental revenues are coming from retail. So, it is growing faster than many otherbusinesses That’s right, and we can see the trend continuing. It is run with great risk and cost discipline and is growingsmartly.

How has corporate behaviour changed since demonetisation?

Ravneet Gill: Demonetisation has potentially pushed back capex by a couple of quarters. The capacity utilisation for corporate Indiais currently around 70% and till it goes up another 15-odd percent, you won't see fresh capex. Sectors like FMCG did see a blip,dearth of cash impacted discretionary spending, but it’s coming back. For sectors like real estate, gems & jewellery, therecovery may be drawnout, but the undertone for industry per se, is firming up now.

How are international investors viewing India since demonetisation?

Ravneet Gill: The confidence around government policy remains as strong as ever. However, when you demonetise 86% of thecurrency in an economy where cash is still about 14% of GDP, investors would want to wait to see the impact, and see how theprocess of remonetisation pans out.http://economictimes.indiatimes.com/opinion/interviews/demonetisation-has-pushed-back-capex-by-couple-of-quarters-deutsche-bank/articleshow/57425569.cms

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Mizuho zeroes in on target sectors for Japanese investments in India Utpal Bhaskarmint

New Delhi: Mizuho Financial Group, which has been tasked by the Japanese government to find investment opportunities in India,has identified sectors such as electronics, automobiles, energy, transportation and social infrastructure for a focused investingapproach.

According to its report titled Visualizing India in 2030 and identifying potential industrial sectors and business opportunities forJapanese companies reviewed by Mint, the global strategic advisory department of Mizuho Financial Group recommended“earliest localization” for Japanese firms. Mizuho was awarded the research project by Japan’s ministry ofeconomy, trade and industry (METI).

This comes against the backdrop of Japan pledging around $33 billion in investments in 2014-19 to boost India’smanufacturing and infrastructure sectors. In December 2015, Japanese Prime Minister Shinzo Abe said his government has madeavailable a special financial package of over $12 billion for Japanese companies wanting to invest in India.

“Although India is one of the promising market with certainty of future growth, but as the Indian market (is) quite competitiveand difficult to ensure and maintain profitability, Japanese companies has resistance for localization,” the report said.

“However, earliest localization of Japanese companies is required to exploit the future growing market,” the reportadded.

Queries emailed by Mint to Yasuhiro Sato, president and group chief executive officer, Mizuho Financial Group, METI and theJapanese embassy in New Delhi on late Wednesday evening remained unanswered.

Japan is among the top five sources of foreign direct investment in India, with the automobile and pharmaceutical sectors beingamong the biggest beneficiaries of Japanese investments over the past few decades. Prominent investors include Suzuki MotorCorp., Mitsubishi Motors, Toyota Motor Corp., Nissan Motor Co. Ltd, Daiichi Sankyo Co., JFE Steel Corp and Nippon Life Insurance

Co.

Japanese investors have been looking at new opportunities in India such as the clean energy sector, a case in point being JERACo. Inc., which last month bought a 10% stake in ReNew Power Ventures Pvt. Ltd for $200 million.

Set up in 2015, JERA is an equal joint venture between Japan’s largest utility Tokyo Electric Power Co. and Chubu ElectricPower Co.

Experts say India offers a lot of investment potential for Japanese firms.

“Indian infrastructure today presents a compelling investment case for Japanese capital. Sectors like transportation andrenewable energy have matured and yet have significant capital deployment potential,” said Srishti Ahuja, director atconsulting firm EY.

“Also, as an asset class, infrastructure provides long term, stable returns and where development risks can be addressedthrough effective transaction structuring,” Ahuja added.

According to the Indian government, Japanese investment into India between April 2000-September 2016 was to the tune of $23.8billion.

At an interaction at the Gateway House think tank in Mumbai last month, foreign secretary S. Jaishankar said,“geoeconomics will be more important with Japan than perhaps geopolitics at this time”.http://www.livemint.com/Industry/gOHQ7inHRkboU7RA9CyEUJ/Mizuho-zeroes-in-on-target-sectors-for-Japanese-investments.html

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Rating & Research

Auto-backed securities stabilise in Jan: Moody's PTISee this story in: The Hindu Business Line

New Delhi: Moody’s Investors Service said the performance of auto asset backed securities levelled off in January afterdeterioration due to the currency crunch post demonetisation.

The performance of rated Indian auto asset backed securities (ABS) is not expected to deteriorate beyond March 2017 as theeconomy recovers and oil prices remain range bound and budget policy initiatives provide support, Moody’s said in astatement.

The signs of stabilisation appeared in January 2017, with collection efficiency rising half a percentage point to 93 per cent fromDecember 2016, but was still 1.9 percentage points lower than the average in the three months to October 2016, it said.

“In January 2017, all transactions collected more funds than the amount they needed to pay interest and principal toinvestors. Signs of stabilisation appeared in January 2017,” Moody’s said.

The stabilisation of auto asset backed loans further supports the view that deterioration in the performance of the 15 Indian autoABS transactions that Moody’s rates will not extend beyond March 2017, it added.http://www.thehindubusinessline.com/money-and-banking/auto-backed-securities-stabilise-in-jan-moodys/article9567088.ece

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Currency may remain fairly stable next year; fourth quarter growth will be lower: Devendra Kumar Pant, India Ratings The Economic Times

In an exclusive chat with ET Now, Devendra Kumar Pant, India Ratings, speaks about the GDP number, fourth quarter growth andmuch more.

The one talking point actually since the last couple of days has been that GDP number, which still a lot of economist think is verycontentious at about 7-7.1%. We do have the political side which is actually arguing about the veracity of that number about howthey hold that at arm’s length distance from the CSO. What's your own opinion on this number? Do you think it is credibleenough and do you think that India has actually been able to tide over demonetisation so successfully?

This number is for October-December. If you look at it on a weekly basis, five weeks of out of 12 were in the pre-demonetisationera. Those five weeks, had two of the biggest festivals in India -- Dussehra and Diwali. Having said that, till 8th of November,nobody knew that demonetisation is coming.

After two years of sub normal monsoon, this year, we had a normal monsoon. On top of that, the salaries of the central governmentemployees were revised in line with the Seventh Pay Commission and the payout happened sometime in July and August. Whathas happened is some of the pent up demand in the rural areas of last two years? If you look at the GVA side of the agriculture, weare looking at a growth number of 6% in the GVA side which is on the production side. That may have given some push to the

consumption demand. Having said that, whether these two put together were capable of lifting private final consumption expendituregrowth to 10% is to be seen. Private final consumption expenditure is roughly around 58% to 60% of the overall GDP and 10%straightaway gives 5.8% growth into the GDP.

If I look at the third quarter of the last fiscal, that is October-December 2015, the GDP growth rate, which was 7.2% has beenrevised to 6.9% and more if you look at the further component od the private final consumption expenditure which was earliergrowing at 8.2% for October-December 2015, is now growing at only 6.8%. So, there is a 1.4% or 140 bps difference at the base,that has amplified the private final consumption expenditure growth to 10.1%.

Had the last year’s third quarter growth remained where it was at 7.2%, we would be looking at a number which would havebeen somewhere around 6.7% or so, which would have been very close to our estimate of 6.5% for the third quarter. So when I lookat these numbers, different kind of issues come in.

Do you believe that even if the numbers have proponents and opponents on either sides, the trajectory for the next three or fourquarters is on the upside?

The chances of fourth quarter growth rate coming below the third quarter are high. It is difficult to imagine a situation that the fourthquarter GDP growth will be somewhere closer to the third quarter. We believe the fourth quarter will witness a dip because even if Ilook at from the production side the sectors which are affected by the demonetisation whether we look at the construction; whetherwe look at trade, hotel, restaurants, transport, storage, communication; whether we look at financial services, the GVA growth ofthese sectors in the third quarter is lower than the GVA growth which was attained or witnessed in the second quarter. Our estimateshows that the fourth quarter growth is going to be lower than the third quarter growth.

Let's talk about the currency markets. We have stayed at the sub Rs 67 mark for quite a few sessions now and this despite the waythe dollar index has been moving. Of course, now the one big event that is going to be on our head is going to be the Fed rate hikewhich is as good as written. How do you see the currency market shape up whether a Fed rate hike comes in March or not?

Well, our analysis showed that the average for this fiscal 2017 will be somewhere around 2.8% depreciation. But what hashappened is the currency has remained remarkably stable because if it moves 1% or 2% on yearly basis, we are not talking aboutday to day or hourly basis but on an average, it will be orderly or stable.

Since mid 2013, when even at the mention of the removal of quantitative easing, our currency used to go into a tailspin, things havechanged a lot. What has changed since then is a) the commodity prices have given us a lot of comfort. The current account deficithas come down. We expect this year will be 0.9% of the GDP, next year around 1% of the GDP, our fiscal deficit has come down,again courtesy crude oil because of that a lot of subsidies which were going on that subsidy have been freed up.

All in all, for fiscal year 2018, as an economist, we still believe next year also the currency is likely to remain fairly stable and wemay have, again an orderly depreciation of around 2.5% or so. And this is coming from large capital inflows in the form of FDIthough on the portfolio side, the capital inflows are not that strong.

Despite the oil tumbling, what we receive in the remittances we have taken a hit of the order of around $4 billion every quarter butstill our services exports are able to finance a large part of our trade deficit and whatever limited current account we have, we havesufficient inflows on the FDI side. That is why the rupee is remaining stable and likely to remain stable in FY18 also.http://economictimes.indiatimes.com/opinion/interviews/currency-may-remain-fairly-stable-next-year-fourth-quarter-growth-will-be-lower-devendra-kumar-pant-india-ratings/articleshow/57426370.cms

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ATMs, Credit & Pre-paid Cards

MobiKwik plans to be a ‘financial services supermarket’ Abhishek LawThe Hindu Business Line

Kolkata: Mobile-wallet operator MobiKwik is firming up plans to offer financial services through its platform.

According to Vineet K Singh, Chief Business Officer, MobiKwik, the company may explore co-branded or third-party offerings acrossa range of financial services, including insurance products and mutual funds. “We are still firming up plans and working outthe details of the products we intend to introduce. By next quarter (April-June), we will launch these offerings,” he said.

As Singh maintains, the idea is to be a “financial services supermarket” in the coming days with a bouquet ofofferings.

Introduction of such third-party financial services will help MobiKwik earn additional fee-based income. Currently, the e-wallet earnsfee-based income mostly from settlement of merchants’ transactions.

While MobiKwik cannot pay interest on the wallet balance that its customers keep, the cash-back schemes are said to act as anincentive for customer retention.

The e-wallet firm, which competes with the likes of Paytm and Centre’s BHIM app, has set itself an aggressive growth targetfor 2017.

It is looking at a three-fold increase in customer base to 150 million from the existing 50 million and Gross Merchandise Value to

$10 billion by December. It is also targeting an increase in its merchant base to 5 million, up from the existing 1.4 million.

“These are very achievable numbers,” Singh said, adding that while the company was strong in North and West India,it is strengthening its presence in the East and the South.

MobiKwik has already announced that it will pump in Rs. 300 crore towards customer and merchant acquisition. “A part ofthis will be from existing funds or internally; the remaining will be done through a new round of funding.”http://www.thehindubusinessline.com/todays-paper/tp-news/mobikwik-plans-to-be-a-financial-services-supermarket/article9568050.ece

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Housing Finance

Development Banks

NBFCs / FIs / MFI

Suryoday Small Finance Bank raises Rs. 158 crore The Hindu Business Line

Mumbai: Suryoday Small Finance Bank (SSFB) has raised Rs. 158 crore through a combination of rights issue and privateplacement.

The Navi Mumbai-headquartered bank mopped up Rs. 100 crore via a rights issue and raised Rs. 58 crore through privateplacement, according to a statement issued by the bank.

Following this capital-raising exercise, the bank said its revised networth stands at Rs. 512 crore.

TVS Shriram Growth Fund, a new investor, has invested about Rs. 41 crore in the bank’s capital-raising programme. TheFund has a post-issue shareholding of 4.5 per cent in SSFB.

SSFB said other existing investors who participated in its rights issue include HDFC Holdings, HDFC Life, ASK Pravi Group, IFC(World Bank Group), Developing World Markets, responsAbility Investments AG, Gaja Capital and Evolvence India Fund II, FamilyOffices and HNIs.

The foreign shareholding, post-issuance stands reduced to 46.3 per cent from the 49 per cent FDI permissible under extantregulations for small finance banks.

The bank said the capital raised would be used to make investments in technology and expand the distribution network.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/suryoday-small-finance-bank-raises-rs-158-crore/article9568011.ece

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Muthoot to retail platinum statuettes The Hindu Business Line

Mumbai: In a bid to diversify from dependence on gold, Muthoot Exim has tied up with World Platinum Investment Council, the bodyof platinum producers, to launch ‘Anantavarsham’ a series of platinum statuettes.

To start with, the company has introduced Ganesha idols made in 3 grams, 6 grams and 9 grams of platinum and will be availableacross its 624 branches. The three gram idols, which come in tamper proof pack with buyback guarantee, is priced at Rs. 12,000including 30 per cent charges for making, packaging and purity certification.

Muthoot is also offering EMI facility of 3 and 6 months to make it affordable for its customers. Coimbatore-based Emerald JewelIndustry will fabricate the platinum Ganesh idols which will not get tarnished like silver.

Keyur Shah, Chief Executive Officer, Muthoot Exim said the company has been exploring various opportunities for businessdiversification though the demand for its gold jewellery and coins has remained strong.

In last three years, he said the company had sold 1.2 tonnes of gold and the demand has remained good despite rough patch onfew months, he said.

The company recently tied up with Divine Solitaires Pratham to retail 18-Karat gold rings studded with 0.14 cents diamond of EFcolor and VVS clarity (most preferred in south India) with gold weight of 2gm, 2.2gm and 2.4gm.

“Though people like diamond and platinum they have kept away from them because they are not accessible and affordable.

We have addressed both these issues with our offerings,” he said.

The annual jewellery demand for platinum is pegged at 6-7 tonnes. The automobile sector is the largest consumer of platinumaccounting for 40 per cent of overall demand and jewellery sector adds up to 30 per cent, said Marcus Grubb, Director, WorldPlatinum Investment Council.

Muthoot is planning to launch idols of other Gods and platinum coins in near future, said Shah.http://www.thehindubusinessline.com/money-and-banking/muthoot-to-retail-platinum-statuettes/article9567524.ece

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We're adding 50,000 borrowers every month to Capital First: V Vaidyanathan Shilpy SinhaThe Economic Times

In an interview to Shilpy Sinha, V Vaidyanathan , chairman of non-banking finance company, Capital First, said Capital Firstexercises great diligence in lending, but the method of lending is different from traditional ways.

Edited excerpts

A large part of your portfolio comprises SMEs, which were said to be the hardest hit by demonetisation.What's been yourexperience?

The circulation of cash got jammed during the period. It was temporary.Businesses in India have existed for several decades. In amonth or two businesses do not collapse. I think SMEs have a lot of resilience. In India, we all have informal networks to fall backupon. We pushed for more electronic collections (web and wallets collections soared 400%), hence we managedOctober-December quarter well. Our NPA (non-performing assets) stayed below 1%.SMEs will tremendously benefit if the processcontinues for some more time. I am not talking about those who want to deal in cash. Now, lenders will be able to see the cash flowrather than imagining the cash flow. They will become more bankable. Also, MSMEs will benefit hugely from tax break given in thebudget.

Have things returned to normal?

Cash in circulation has come back faster than expected. Companies that accepted cash as the main means of collection gotaffected.Consumption is doing fine. In India, stress tests keep happening once in a while. India's best stress test was between 2010and 2013. Because interest rate was rising, GDP growth was coming down every quarter and inflation was going up. RBI hadtightened liquidity. In 2013, there was a time when currency was under severe pressure and RBI increased MSF (marginal standingfacility rate) by 300 bps (3 percentage points).Next, it was rising oil prices. Now it's demonetisation. Such stress tests are good forthe business.

Capital First's NPAs have fallen, credit costs dropped and margins improved in the past few years. It has attracted investments fromGIC Singapore, Ashmore and Goldman Sachs. What is the mantra?

We exercise great diligence in lending, but our method of lending is different from traditional ways. Generally, people ask forincome-tax statement and bank accounts. Instead we started a newer model alternative means of lending. It was the founding ideaof this company.We started exploring new markets.Usually lenders want to check the credit bureau record. Who would be the firstlender if everybody is looking for credit score? We add 50,000 customers every month to the system. When you assess a person,there are many variables other than past record. Today, close to 93% of our portfolio is retail and out of these close to 75% isentrepreneurs or self employed it's diversified.

There are many NBFCs in consumer durables and SME sectors. How do you create new market segments?

We like businesses that are underpenetrated, where technology can play a key role, scale up fast and can be profitable forsustainability. Unknown or undefined market is multiple times bigger than the defined market. If a small entrepreneur wants to painthis office, change lights or buy carpet, no one will lend to them. There is an unbelievably large market we are working on in thisspace. What we see as salaried people is a small market. It is only 6% while unorganised is 94%. People who file returns are onlythree crore while those who don't are far more.

Do you expect to continue to grow 20-25% given that you have reached a sizable book of about Rs 20,000 crore? What are thechallenges of writing small-ticket loans?

It is a very reasonable expectation for us to grow at 20-25% over the next five years. In terms of lines, lending to the unstructuredneed is more exciting than lending to the structured needs. I believe experimentation is the juice of business.We lend as low as Rs15,000. Checks and control is coming from asset diversification, cash flow and scorecard using analytics. Also, we focus ongovernance and make provision at the right time for bad loans so that it does not balloon on us.

In 2012, private equity firm Warburg Pincus came in and now owns about 62% in the company. There are rumours of Warburgselling part stake. Is there a time frame for Warburg to offload its stake?

The fact is that they really like the company and want to stay invested.Their stake has come down with new equity investments bynew investors like Goldman Sachs, One North, HDFC Life, Birla Sunlife, GIC Singapore and Ashmore. When Warburg was talkingto us the share price was Rs 100; when talks reached an advanced stage it was 130; they paid Rs 162. It was a concept then, nowthe company is established. They own 62% in the company. There is no time frame, but whenever it happens, the set of people whowill come in will be large players since the size of the cheque is large.http://economictimes.indiatimes.com/markets/expert-view/were-adding-50000-borrowers-every-month-to-capital-first-v-vaidyanathan/articleshow/57421940.cms

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India Post Payments Bank to open 25 branches by Sept Vijay C RoyThe Tribune

Chandigarh: To strengthen financial inclusion in Punjab and Chandigarh, India Post Payments Bank plans to start bankingoperations at 25 locations by September.

Out of this, 23 branches will be in Punjab and two in Chandigarh. “We plan to open one branch each in Chandigarh andMalerkotla (Punjab) by mid-April followed by the remaining 23 branches in September. We are concentrating on the rural areas. Theproposed move will encourage small entrepreneurs and inculcate saving habits among villagers,” said a senior official in thePostal Department.

He said the Postal Payments Bank would provide all services of a regular bank. Besides facilitating deposits and disbursement ofpayments, these banks will also open new accounts, sell insurance instruments and register electronic money orders. “Itwould be especially good for the rural areas, as banking sector doesn’t have much penetration in these areas,” saidsources. To facilitate transactions, the postman will be provided with PoS machines.

India Post Payments Bank is the third entity to receive payments bank licence after Airtel and Paytm. Also, it is the second entity toroll out payments bank, though on a pilot basis in Raipur and Ranchi.

There are over 3,000 post offices in Punjab and 38 in Chandigarh. India Post has also issued debit cards to savings accountholders in post offices and once the banking facility begins, more debit cards will be issued.http://www.tribuneindia.com/news/business/india-post-payments-bank-to-open-25-branches-by-sept/371700.html

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Mutual Funds & AMCs

UTI launches debt product The Hindu Business Line

Mumbai: UTI Asset Management Company Ltd. (UTI AMC) has announced its decision to set up a private debt fund to augment itsportfolio of Alternative Investment offerings, the money manager said in a statement. This is following the appointment of RohitGulati as Managing Partner, Shaurya Arora as Partner and Sumit Khandelwal as Principal with effect from March 1, 2017.

At UTI Capital Pvt. Ltd., the team will establish a UTI-sponsored private debt fund to exploit several credit arbitrage opportunitiesthat currently exist in the Indian market.

Leo Puri, Managing Director, UTI AMC, stated, "Private debt is at the cusp of significant growth in India and diversification into thatsegment is an attractive opportunity for UTI AMC. I am confident that alternate credit investments will be a material business for UTICapital.”

Gulati added "The objective of the proposed fund will be to deliver superior risk-adjusted returns for investors by identifyingopportunities where customised structured credit solutions can be offered to corporate clients.”http://www.thehindubusinessline.com/markets/uti-launches-debt-product/article9567437.ece

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Midcaps too expensive, prefer largecaps now: Akash Singhania, DHFL Pramerica Asset Managers The Economic Times

In a chat with ET Now, Akash Singhania, Dy CIO (Equities), DHFL Pramerica Asset Managers Pvt. Ltd, says on a medium to longterm basis, with an earnings growth of around 12% CAGR for the next few years, Indian markets could deliver a return of 12-15%on a CAGR basis.

Edited excerpts

What are your thoughts on the market? Is there more room to this rally?

We have had a strong rally in the last one year. The Nifty is up 27% and if you analyse the reasons for that from a fundamentalperspective, the macro has been strong and the expectation is that earnings will pick up going forward to double digits next year.

From a sentiment perspective, the breadth of earnings in terms of surprises and revisions, have increased and there has beencontinuity of reforms. From a liquidity perspective, global emerging markets have been very strong and domestically also liquidityhas been strong. Mutual funds have invested almost $20 billion in the last two and a half years and with strong domestic liquidity

and strong emerging markets, India has also done well.

In the near term, the Indian market direction will be guided more by global factors. On a medium to long term basis, with anearnings growth of around 12% CAGR for the next few years, our markets could deliver a return of 12-15% on a CAGR basis.

What is your take on valuations -- midcaps versus largecaps?

Vis-a-vis largecaps, on a trailing 12-month basis, Nifty is almost at 22 PE and 19 PE one year forward earnings. As far as mid-capsare concerned, the valuations are more expensive with around 25-27 times one year forward earnings which also includes a bigjump in earnings for FY18. Generally speaking, for the last 15 years, mid-caps have traded at a marginal discount in valuations tolargecaps. At this point of time, they are trading at almost 10% premium to largecaps which makes them a bit expensive in our view.We prefer largecaps at this point of time.

What according to you are the key risks in this market?

From a domestic perspective, we do not see much risk except that valuation may be slightly higher compared to the longer termaverages. This is because of the favourable macro and earnings upgrade which we see.

From a global perspective, the big risk could be that the interest rate regime and liquidity regime are incrementally getting more orless favourable going forward in 2017. So with the US hiking the Fed rate and also with the ECB stopping its stimulus in 2017, therewould be a realisation at a point of time that global liquidity might not be very healthy or conducive and that could be a risk becausewith a lower amount of liquidity there could be challenges in market performance.http://economictimes.indiatimes.com/markets/expert-view/midcaps-too-expensive-prefer-largecaps-now-akash-singhania-dhfl-pramerica-asset-managers/articleshow/57422449.cms

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This should be a benign year for FII flows into India: Akash Singhania, deputy CIO, at DHFL Pramerica Asset Managers Ashley CoutinhoBusiness Standard

The market's direction in the near term would be driven by global factors, rather than local ones, says AKASH SINGHANIA, deputychief investment officer (equities), at DHFL Pramerica Asset Managers. In an interview with Ashley Coutinho, he saysimplementation of the goods and services tax (GST) and a lacklustre export environment could drag earnings growth belowconsensus expectations.

Edited excerpts

Your outlook for the market?

Indian equity markets have shrugged off domestic and global concerns and moved up this year, in line with other emerging markets(EMs). A good macro, continuation of reforms and domestic liquidity has contributed. Despite differing fundamentals, in terms of astrong and relatively decoupled domestic economy, Indian market returns have been correlated to EM performance. Marketdirection in the near term would be driven by global factors, rather than local ones. Key triggers include pick-up in global GDP(growth), fiscal stimulus in the US and earnings growth back home.

What are the global cues to watch for in 2017?

The extent and pace of rate hikes by the (US) Federal Reserve would affect liquidity and the dollar. Aggressive rate hikes would notbode well for EMs. Economic and trade policies under the Trump administration would be keenly watched. Any signal or movetowards protectionism or trade wars or tariff increases in global trade would be viewed as negative for global equity markets.Stability in the euro zone, growth concerns in China and overall liquidity and fund flows are other areas to watch for.

FIIs (foreign institutional investors) have come back to the market in 2017 after a heavy bout of selling in the last quarter of 2016.How do you see FIIs allocating money to Indian markets in 2017?

FII equity investments (annually) in India have been in excess of $13 billion on an average in the past five years. Over the past twoyears, we have seen it slowing to an average of $3 bn. We expect calendar year (CY) 2017 to be a benign year for FII investmentsin India, surpassing those in the past two years. This is based on the premise that India's macro remains strong, in terms of growth,inflation, interest rates and the twin deficits (meaning the current account balance and the government budget balance). Even on arelative basis, India remains an attractive EM, in terms of robust fundamentals and reasonable valuations. The quantum ofinvestment would primarily depend on global risk appetite and liquidity flow. Visible signs of earnings growth acceleration andcontinuation of reforms would boost inflow.

How do you see the year for EMs?

Overall, we are somewhat overweight on EMs and expect earnings growth for the region to pick up from nine per cent in CY2016 to13 per cent in CY2017. Global EMs' GDP (gross domestic product) is expected to grow 4.6 per cent in CY2017, compared to 4.2per cent in CY2016, with India and China leading the pack. EM inflation is still declining across most markets, driven by lower foodprices. Liquidity and the interest rate backdrop are still supportive but less favourable than in CY2016. Stimulus from the EuropeanCentral Bank and the Bank of Japan is likely to continue and we expect gradual rate hikes by the US Fed.

Your estimates on domestic corporate earnings for FY18 and FY19?

We expect low double-digit earnings growth (10-12 per cent) in both. A low base of growth for the past three years and pick-up in

economic activity would be the catalyst. As stress asset quality recognition in banks would also recede in the next two years, afavourable base will also play out. Rebound in metal and commodity prices would form the bulk of incremental growth in earnings.Greater utilisation, higher operating leverage and lower interest rates would facilitate this recovery.

However, our earnings growth expectations are below the consensus numbers on the Street. Gradual recovery afterdemonetisation, implementation of GST and a lacklustre export environment could drag earnings growth below consensusexpectations.

On which sectors are you overweight and underweight?

We are overweight on automobiles, private banks, consumer discretionary and cement, and playing the consumption theme. Anormal monsoon, seventh pay commission expenditure and implementation of GST are expected to benefit stocks in this space.

The theme can be played indirectly through financials or NBFCs (non-bank finance companies) which are more levered towardsretail (meaning, to individuals) financing. Cement is a combination of investment and consumption spending, as it caters to demandfrom the housing, construction and infrastructure sectors.

Consolidation of the industry, firm pricing, greater utilisations and greater demand growth relative to supply growth would drivereturns in cement companies.http://www.business-standard.com/article/markets/this-should-be-a-benign-year-for-fii-flows-into-india-akash-singhania-117030300006_1.html

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L&T Mutual Fund ties up with Mumbai Dabbawalas to spread awareness on ELSS The Economic Times

Mumbai: Food is synonymous with happiness in India. The one thing that is common for every office goer is their "Dabba". Someget it from home while some rely on the local dabbawalas. The dabbawalas have become an integral part of the lives of manyMumbaikars. They are known worldwide for their punctuality and efficiency.

In order to create awareness about the benefits of the Equity Linked Savings Scheme (ELSS), L&T Mutual Fund came up with aninnovative and engaging social activity in association with the Mumbai dabbawalas. An empty stomach leads to a livid mood.Similarly, long lock-in periods and no tax benefits could lead to the dilution of the worth of investments. Drawing a parallel betweenthese two analogies, L&T Mutual Fund tied up with the dabbawals to conduct an interesting activity with the dabbas of theemployees who eagerly wait to enjoy their hot and delicious meal. A tag, with the message "Has tax made you lose your appetite?"was tied around the dabba to create a buzz among the office goers. The reverse side of the tag explains the benefits of investing inan ELSS scheme- tax saving and building wealth in the long term.

This activity was thought provoking and educative. It brought about awareness amongst the masses on the importance of taxplanning and the long-term benefits of ELSS in an engaging manner.http://economictimes.indiatimes.com/wealth/personal-finance-news/lt-mutual-fund-ties-up-with-mumbai-dabbawalas-to-spread-awareness-on-elss/articleshow/57432227.cms

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Mirae Asset MF eyes Rs 10,000-crore AUM by December PTISee this story in: The Economic Times

Mumbai: Mirae Asset Mutual Fund is targeting assets under management (AUM) of Rs 10,000 crore by December, a top companyofficial said.

Moreover, the private fund house is looking at crossing AUM of Rs 5,000 crore for its flagship scheme, India Opportunities Fund, bythe end of this year, Chief Executive Swarup Mohanty said.

Besides, the fund house is planning to double its systemic investment plan (SIP), in terms of both folio and value, by end-2017, headded.

As of now, the AUM of the company stands at Rs 7,700 crore, which comprises Rs 7,200 crore in equities alone.

"At Mirae Asset MF we are looking at achieving Rs 10,000-crore AUM, from the existing mark of Rs 7,700 crore, by December,"Mohanty told PTI here.

He was speaking on the sidelines of launch of a new scheme, Dynamic Bond Fund. The scheme's new fund offer will open onMarch 3, close on March 17 and reopen on March 27.

The fund house has a total of nine products in its bouquet of offerings, including the newly launched Dynamic Bond Fund. Thecompany has six equity products and three under debt category.

Talking about the company's flagship multi-cap scheme India Opportunities Fund, he said, "We are looking at crossing AUM of Rs5,000 crore for the fund from Rs 3,000 crore now, by December.

The fund house had 1.7 lakh folios under SIP with a monthly flow of Rs 73 crore as on December 2015, up from 54,000 folios and a

monthly flow of Rs 24 crore a year ago.

"We are now looking at doubling the SIP, both in terms of folios and monthly flow of funds, by December-end," said Mohanty.

About Dynamic Bond Fund, he said, "We are expecting to mop up Rs 75 crore during its very NFO period."http://economictimes.indiatimes.com/mf/mf-news/mirae-asset-mf-eyes-rs-10000-crore-aum-by-december/articleshow/57433579.cms

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Mirae AMF launches Dynamic Bond Fund Ravi Ranjan PrasadFinancial Chronicle

Mumbai: Mirae Asset Mutual Fund announced the launch of a new scheme, Dynamic Bond Fund. The new fund offer (NFO) for thisopens for subscription from March 3 and closes on March 17.

Mirae Asset Dynamic Bond Fund scheme is an open-ended fixed income scheme that would invest in various money marketinstruments and debt securities.

The fund house, while launching the fund here, said, “There will be a rebalancing of portfolio as there is a change in interestrate outlook such as changing exposure to longer or shorter tenure bonds as interest rates are headed lower or higher and will alsobe changing composition between government bonds and corporate bonds.”

The fund will be actively managed to optimise risk-adjusted returns.

Mirae’s Dynamic Bond Fund will track Crisil Composite Bond Fund Index as its benchmark.

There is an exit load of 0.50 per cent if investors redeem their investments within six months from the date of allotment. During theNFO, the minimum investment is Rs 5,000 and in multiples of rupees1 after that.

Speaking at the fund launch, Mahendra Kumar Jajoo, fund manager for the bond fund and also head of debt, said, “Dynamicbond fund is suited for volatile market.”http://www.mydigitalfc.com/news/mirae-amf-launches-dynamic-bond-fund-638

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UTI AMC plans to set up private debt fund; forms team PTISee this story in: Daily News & Analysis

UTI Asset Management Company today said it will set up a private debt fund to augment its portfolio and a team led by Rohit Gulatihas been formed for the new business vertical.

Gulati has been appointed as Managing Partner at UTI Capital, Shaurya Arora as Partner and Sumit Khandelwal as Principal witheffect from March 1. Earlier, the trio worked together at Religare Capital Markets for over six years.

Gulati joined UTI Capital from Religare Capital Markets where he was Managing Director and head of investment banking.

At UTI Capital, the team will establish a UTI-sponsored private debt fund to exploit several credit arbitrage opportunities thatcurrently exist in the Indian market.

"Private debt is at the cusp of significant growth in India and diversification into that segment is an attractive opportunity for UTIAsset Management Company (AMC).

"I am confident that alternate credit investments will be a material business for UTI Capital and I am delighted to bring on boardGulati and his team to help build out this new business vertical for us," UTI AMC Managing Director Leo Puri said in a statement.http://www.dnaindia.com/money/report-uti-amc-plans-to-set-up-private-debt-fund-forms-team-2340448

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Motilal Oswal AMC names Balakrishnan as co-fund manager, PMS PTISee this story in: Daily News & Analysis

Motilal Oswal Asset Management Company today said it has appointed Mythili Balakrishnan as co-fund manager for its portfoliomanagement services (PMS).

Balakrishnan, who has 13 years of experience, will be working as part of the PMS team along with Manish Sonthalia, Motilal OswalAMC said in a statement.

She was previously associated with Avezo Advisers, Motilal Oswal Group, Nalanda Capital-Singapore, JP Morgan and GE Capital.

Balakrishnan is a post graduate from IIM-Ahmedabad and has been awarded CFA Charter from CFA Institute.

Tanvi Foods lists on BSE's SME platform; total reaches 165 * Tanvi Foods (India) Limited today got listed on BSE's small andmedium enterprise (SME) platform, taking the total number of such firms to 165.

On its debut, shares of the Telangana-based company closed at Rs 60.25, up from its issue price of Rs 60.

Tanvi Foods came out with its initial public offering of 11 lakh equity shares to raise Rs 6.60 crore. The company completed itspublic issue on February 22.

The company is involved in trading, distribution and processing of food and beverages. It primarily operates in Andhra Pradesh andTelangana.

With this, the total number of companies listed on BSE's SME platform has reached 165.

Out of these, 24 have migrated to the BSE's main board.

The total amount of money raised so far on the BSE SME platform is a little over Rs 1,288 crore and the market capitalisation ofcompanies listed till date is Rs 18,065 crore.

BSE had launched the SME platform in March 2012 to provide opportunity to such firms to raise capital for growth and expansion. Italso provides opportunity for investors to identify and invest in good SMEs at an early stage.

Subramanian steps down from Hathway Cable and Datacom board * Cable services provider Hathway Cable and Datacom todaysaid Biswajit Subramanian has resigned from its board.

"Due to professional commitments, Biswajit Subramanian has tendered his resignation from the board of directors of the companywith effect from March 2, 2017," the company said in a BSE filing.

Shares of Hathway Cable and Datacom ended the day at Rs 35.95, down 1.24 per cent on BSE.http://www.dnaindia.com/money/report-motilal-oswal-amc-names-balakrishnan-as-co-fund-manager-pms-2340451

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Equities, Pvt. Equity & Hedge Funds

Sovereign, pension funds look to build on Indian realty Bindu D MenonThe Hindu Business Line

Mumbai: Global funds, including sovereign and pension funds, are once again aggressively pursuing investment opportunities inIndian real estate.

With the government undertaking various reforms in areas such as the Real Estate Regulator Bill (RERA), easing rules regardinginvestments in Infrastructure Investment Trust (InvITs) and Real Estate Investment Trusts (REITs), and giving thrust to housing as acategory, international funds seem to be gaining more confidence in the Indian real-estate space and are opting for joint ventures orplatform deals.

Players such as Qatar Holdings, CPPIB, Ivanhoe Cambridge, APG and Xander are readying blueprints for long-term investments inthe realty segment.

The most recent investment in this list is Canadian Pension Fund arm Ivanhoe Cambridge pumping in $250 million in PiramalEnterprises to provide pure equity to developers in the residential sector.

Khussru Jijina, MD, Piramal Fund Management, said: “Funds are evaluating opportunities in real estate as they know that itwill continue to grow. With positive changes in the sector, funds see potential to grow over a 7-10 year horizon, especially with gooddevelopers which will generate good returns over the real-estate cycle.”

This is Ivanhoe Cambridge’s second tryst with the Indian market. It had exited the market in 2008 following lack ofopportunities.

Most funds are coming to India at a time when developers are struggling to stay afloat and equity funding is far and few.

The Abu Dhabi Investment Authority (ADIA) has entered into a tie-up with Mumbai-based Lake Shore India to pump capital intoretail properties. Dutch pension fund APG Asset Management and investment firm The Xander Group, backed by the Rothschildfamily, are co-investing $450 million in retail assets in India. In December 2016, the two firms had bought three shopping centres inthe country for $300 million.

APG also recently formed its second tie-up with Godrej Properties to develop residential properties across the top markets of India.

Another Mumbai-based fund, ArthVeda Fund Management, recieved fundings to the tune of $250 million from Qatar Holdings, to

invest in low- and middle-income projects.

Bikram Sen, CEO ArthVeda, said the subscription of the entire corpus of its FDI-compliant affordable housing fund by QatarHoldings was the first substantial foreign inward investment in India’s affordable housing segment.

Capital inflowsAccording to a JLL report, out of the more than $610-billion global capital inflows into real estate seen in 2016, India got a measlysum $6.6 billion, or 1 per cent.

Ramesh Nair, CEO, JLL India, said: “PE funds have had to struggle with finding the right partners, and in recent times, theirfocus has changed to quality of partners instead of IRR (Internal Rate of Return).”

He said only a few developers in India have been able to attract private equity over the years. In order to attract investments,developers need to have high levels of integrity, quality of assets, appropriate capital structure, experienced management teams,high levels of corporate governance and better financial and budgetary controls. Nair added that going forward, however, increasedconsolidation and transparency is expected to boost foreign and domestic investor participation like never before.

India’s property market growth cycle can be divided into three phases: the rapid growth witnessed from 2005 to 2008; thepost-GFC (global financial crisis) period between 2009 and 2011; and the current phase of plateaued growth starting from 2012.http://www.thehindubusinessline.com/todays-paper/tp-news/sovereign-pension-funds-look-to-build-on-indian-realty/article9568052.ece

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DLF deal delay has Street worried as debt clock ticks Vishal ChhabriaBusiness Standard

Mumbai: The DLF stock fell 8.11% on BSE on Thursday a day after the realty major announced its promoters would sign withSingapore’s GIC Pte the much-awaited deal to sell their entire 40% stake in DLF Cyber City Developers Ltd (DCCDL).

DLF holds about 60% in DCCDL, the company’s rental arm, while the promoters have the rest.

The company says it has got audit committee approval to negotiate and enter definitive shareholding agreements.

The deal, which is estimated to fetch the promoters Rs 12,000-14,000 crore, is expected to help DLF significantly cut its over Rs24,000-crore net debt. Against this backdrop, it is surprising to see the stock tank following the deal’s announcement.

While profit-booking can be partly attributed to the fall in the stock, which had gained almost 38% in 2017 (till Wednesday), marketexperts say lack of clarity on the deal valuations as well as the deal closure getting postponed to September 2017 quarter (fromearlier expectations of March 2017 quarter) are other reasons.

Deven Choksey, managing director, KR Choksey Shares & Securities, says, “Ideally, the stock should not have gone down.It seems the market is not very confident about the deal going through. There is also no clarity on the deal’svaluation.”

Deal valuations are crucial given that it will have a strong correlation to the reduction in DLF’s debt levels. The promoters areexpected to infuse a large portion of the Rs 12,000-14,000 crore they receive from stake sale into DLF through fresh equity.

Since the deal closure has been pushed to the second quarter of 2017-18, it will also offset some of the gains arising from freshfund infusion.

DLF had recently indicated that given muted sales, the company would require Rs 750-1,000 crore of incremental debt everyquarter. So, a delay of two quarters would mean an increase in debt by Rs 1,500-2,000 crore, unless the deal valuations are wayahead of Street estimates.

Already, DLF’s debt has increased by about Rs 2,200 crore in the last two quarters to about Rs 24,400 crore at the end ofDecember 2016. Not surprisingly then, analysts appear worried over the delay in deal closure.

Kotak Institutional Equities’ analyst Samar Sarda in a report on the company says, “The management has notannounced the deal value yet. Also, infusion of funds could take another four-five months, which will impact debt reduction againstthe initial plans. We maintain our target price, but downgrade the stock a notch to ADD,” while he awaits finer details on thedeal on valuation among other things. The report was published on Thursday.

The other key worry stems from the likely surge in equity capital due to fund infusion -- both by promoters and other investors.

G Chokkalingam, founder of Equinomics Research & Advisory, says, “The market is worried due to the huge equity dilutionthat will happen due to the fund infusion into DLF by promoters and additional funding even assuming it is done at Rs 150 a share.Consequently, the benefits from the reduction in debt and interest costs may get offset to a large extent.”

The current equity capital of DLF is 178.39 crore (1.78 billion) shares. At Rs 150 apiece and assuming fund raising of Rs 13,000crore, the equity capital will rise by 48.6 per cent. DLF’s market cap stood at Rs 25,172 crore on Thursday.http://www.business-standard.com/article/markets/dlf-deal-delay-has-the-street-worried-as-debt-clock-ticks-117030201349_1.html

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Cube Highways in talks to sell stake to Canada pension fund for $200 m Hindustan Times

Singapore-based Cube Highways and Infrastructure Pte Ltd is in stake-sale talks with Canadian pension fund Caisse de Dépôt etPlacement du Québec (CDPQ) to raise around $200 million.Both have invested heavily in India’s infrastructure sector.

Cube Highways is a joint venture between private equity firm I Squared Capital and International Finance Corp. (IFC), the privateinvestment arm of the World Bank.

CDPQ, the second-largest pension fund in Canada, has invested around $3 billion till date in the infrastructure sector in India, whereit set up an office in March 2016.

“Cube Highways is in talks with CDPQ to raise around $200 million,” said a person aware of the development,requesting anonymity.

“Cube Highways has been trying to raise capital,” said another person who also didn’t wish to be identified.

Cube Highways has around 1,000 lane-km of highways in its portfolio. This is through the Jaipur-Mahua Tollway Private Ltd, MahuaBharatpur Expressways Ltd and Western UP Tollway Ltd.I Squared Capital plans to invest as much as $1 billion in India’s infrastructure sector. It has already invested aroundRs.1,000 crore through its investment platform Cube Highways and Infrastructure Pte Ltd and has committed to investing in assetsworth Rs.2,000 crore to its rooftop solar platform Amplus Energy Solutions Pvt. Ltd.

Queries emailed to Gautam Bhandari, founder of I Squared Capital, and spokespersons for Cube Highways, IFC and CDPQ onMonday remained unanswered.

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Govt. Securities & Bonds

How unusual move caused suspicion in the bond market Saikat DasThe Economic Times

Mumbai: The lack of 10-year government bonds in the special repo market caused benchmark yields to significantly drop Thursday,triggering suspicion of a coordinated attempt to create a scarcity of relevant debt paper.

Some private and foreign banks and bond buyers have approached the Reserve Bank of India raising concern about Thursday'sdevelopment, multiple sources familiar with the matter told ET.

"RBI has assured us of looking into the matter. This is a distortionary trend, which may emerge as a larger problem for the overallmarket," said an executive from one of those institutions. The Reserve Bank of India could not be contacted immediately forcomments.

The lending rate in the special repo market has plunged to near zero from 5% earlier. Market participants normally borrow stock ofsecurities from public sector banks, seen as large holders of government securities, as they go short-selling in the spot market. Nexttrading day, they have to get deliveries of the same securities through repo transactions.

"We struggled to get securities to square off our short positions. We will not take any fresh position unless this practice stops," saida treasury head from a private bank.

The two series of 10-year bonds, including the existing benchmark paper and old paper, have both rallied with dipping yields andrising prices.

The benchmark bond yield closed at 6.84% on Thursday versus 6.92% a day earlier. The old series yields fell about five basispoints.

While some banks with huge bond portfolios have collectively bought those papers, they were reluctant to lend securities in thespecial repo market, dealers said. In absence of credit growth, those banks, flush with cash, have bet in sovereign securities whenthose were yielding as low as 6.20-6.30%.

Later, the central bank changed its stance on borrowing costs in its latest bi-monthly policy, triggering about 50-60 basis points risein yields and pushing prices down.

"A group of banks held a meeting at a large bank's office on Wednesday where industry body representatives too were present.They have decided to move the market together," said a dealer aware of the matter.

Treasury investment is now crucial for banks grappling with piles of bad loans as any significant gains can offset bad loanprovisions. Therefore, a loss on the same bet could hurt those lenders even more.http://economictimes.indiatimes.com/markets/bonds/how-unusual-move-caused-suspicion-in-the-bond-market/articleshow/57435394.cms

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Bank loan market could revive soon as bonds become costly Hamsini Karthik & Anup RoyBusiness Standard

Mumbai: Bank loans are becoming attractive for companies that had shifted to the bond market.

Banks recently lowered their interest rates and are expected to hold on to current levels for some time, considering not all themonetary easing has been passed on to customers. But bond yields have started rising in anticipation of a rate-hike scenario.

Banks are clear that lending rates are not going to fall further. Even then, hiking rates is not possible for them if the Reserve Bank ofIndia (RBI) continues to stay put. Besides, there is a real possibility the central bank could pare policy rates by another 25 basispoints even after it shifted its monetary stance to “neutral” from “accommodative”.

“A large part of the lending rate cut has already happened,” said Chanda Kochhar, managing director and chiefexecutive officer of ICICI Bank, in an interview. “An immediate rate cut is unlikely,” she said, adding it would dependon what the RBI did next and how much of the current and savings account deposits mobilised after demonetisation remained in thebanking system.

But bond yields have started inching up and issuers are becoming cautious. "The bond issuances we see today are largely torefinance existing obligations. I see this trend continuing for some time as bonds are more competitive for refinancing. Butinstitutional credit will continue to be the preferred route when it comes to financing the construction or pre-commissioning phase ofthe infrastructure sector,” said R Shankar Raman, group chief financial officer, Larsen & Toubro.

For now, the corporate bond market has kept up its steady rise. In the six months to February, the total corporate bond issuancewas Rs 2.67 lakh crore. In the comparable period a year ago, the total issuance was Rs 1.85 lakh crore.

Lower rated companies have flocked to the bond market. Of late, even these companies have lowered their offerings, according tobond traders.

“The corporate bond market is dominated by PSU and NBFC issuance. As manufacturing corporates get better rates fromtheir bankers they are not regular issuers. In a rising interest rate scenario, investor prefer short-term duration bonds,” saidAlpana Dave, head of institutional sales, Crest Debt Capital Market, a corporate bond arranger for companies.

Many bond offerings are in the 1.5-2 year range where rates have risen by 15-20 basis points since February 8. However, yields inthe 10-year segment have risen about 50 basis points, commensurate with the movement in gilt yields.

A-rated bonds, two notches below the top, can expect to raise money at 10-11 per cent. Banks charge the same company close to12 per cent for a loan. But the difference could narrow quite sharply if bond yields inch up and banks keep their rates steady. For aAAA-rated company, 10-year bonds are available at around 7.85 per cent.

Even as longer tenure bond issuances are slowing down, there is a ready market for them as pension funds and insurancecompanies are big buyers in this segment. But these investors are restricted by their mandate to invest in only highly rated paper.For other issuers, longer term paper is not an option, according to bond dealers.http://www.business-standard.com/article/finance/bank-loan-market-could-revive-soon-as-bonds-become-costly-117030201036_1.html

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Bonds recover, call rate ends lower PTISee this story in: The Hindu Business Line

Government bonds (G-Secs) recovered on good demand from banks and corporates. The 6.97 per cent government securitymaturing in 2026 rose to Rs.100.96 from Rs.100.29 previously, while its yield fell to 6.83 per cent from 6.93 per cent. Meanwhile,the overnight call money rates ended lower at 6.05 per cent from Wednesday’s level of 6.25 per cent. They resumed lower at6.05 per cent and moved in a range of 6.25 per cent and 5.95 per cent.

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Brokers / Distributors

‘Investors from small towns too are attracted to discount broking’: Amit Gupta, co-founder and CEO of TradingBells Badri Narayanan KSThe Hindu Business Line

Chennai: Amit Gupta, co-founder and CEO of TradingBells, says the discount broking firm is on track with respect to targets.

“Our current status suggests that we will eventually beat our three-yearly revenue targets at the current pace,” hesaid, adding that the one-year-old company is looking to raise seed funding to expand its offering and footprint across the country.

Excerpts

Recently, you raised Rs. 2 crore as seed funding from Swastika Investmart. Is that sufficient, or are you looking for more funds?

The seed funding from Swastika is being utilised to set up office and sales infrastructure and also for technology upgradation.

The stock broking industry is now heavily dependent on technology. Customer satisfaction now depends mainly on how efficient,fast, transparent and secure our trading systems are. The more we invest in sophisticated technology, the better it is for ourcustomers.

We are different from other discount brokers in terms of the after-sales-support which cannot be neglected in the stock brokingindustry.

We already have a working business model and are in the growth stage. We would soon be looking for additional funds to scale up,keep upgrading our technology, propel at a greater pace and beat our own targets.

With competition hotting up even in the discount brokering space, do you see any slowdown in clients growth rate for TradingBells?

When we started our sales, it came to us as a pleasant surprise that a majority of our potential customers did not know aboutdiscount broking. Though competition in this space is hotting up, we still consider traditional brokerages and banks, which chargeexorbitant brokerage fees, as our major competitors.

We are also getting a lot of traction from the customers of other discount brokerages who are unhappy with their service levels.There has been no slowdown since the time we started our operations. In fact, we are doubling our client base every month.

Throw some light on the profile of your retail investors/traders.

A majority of our clients are young and moderately experienced part-time traders from Tier-2 cities and smaller towns. The averageage of our customers is 31 years. This information speaks a lot about the evolving trading and investment culture in India. The nextgeneration traders and investors, even from small towns, are attracted to discount broking.

Internet penetration and mobile trading are supporting us. Furthermore, there are quite a few retired or semi-retired retail investorsfrom the bigger cities who are benefitting from our zero brokerage offering in delivery-based long-term investments in shares,mutual funds & IPOs.

When you launched TradingBells in 2016, your aim was to reach one lakh customers and Rs. 45 crore in revenues in three years.What is the status now?

We are very well on track with respect to our targets. Our current status suggests that we will eventually beat our three-yearlyrevenue targets at the current pace. Online account opening with e-KYC will be rolled out in the next few weeks.

This will be a huge relief to our customers and employees alike, as it would eliminate the logistically heavy requirement of physicallysigned documents. This will give a tremendous boost to our sales and will further accelerate our growth rate.

Still you are mostly north-centric, particularly Madhya Pradesh. Do you have any plans to expand your footprint across India, in thesouth especially?

We always had a pan-India vision. We have customers from 20 different States now, spanning from Punjab to Kerala and fromGujarat to Tripura. However, major concentration has been from Central and Western regions because of the hassle of physicalaccount opening documentation. The launch of online account opening will expand our footprint rapidly across the country.http://www.thehindubusinessline.com/todays-paper/tp-markets/investors-from-small-towns-too-are-attracted-to-discount-broking/article9568040.ece

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Four micro themes to pursue this summer: Mahantesh Sabarad, SBI Cap Securities The Economic Times

In a chat with ET Now, Mahantesh Sabarad, Head- Retail Research, SBI Cap Securities, says ACs, hosiery, MFIs and autoancillaries are the three micro themes that one can play with.

Edited excerpts

Markets have managed to climb the wall of worry but is it only because of liquidity and if it is, then will the markets come crashingdown when liquidity dries up?

No. On the contrary, it is not purely due to liquidity that we have climbed the wall of worry. It has got to do with overall macro playworking out really well and we have also had positive global cues coming in irrespective of the looming threat of tighter monetarypolicy from the Fed.

Having said that, when you talk of liquidity, to some extent what has happened is that the domestic institutions have been buyingquite a lot or they have been seeing tremendous amount of inflows whereas from the FII side, we have not seen similar participation

barring in the month of February. The entire rally that we have seen so far, from Christmas time to now has been linked not really toany FII liquidity surge or for that matter to the domestic liquidity surge, it is that general participation in the markets have been goingup.

What are you telling your clients? Are bargains over, has market gone up too fast and too quick for your liking or are bargains stillavailable?

The markets have gone up too fast for our liking. So the short two-month period in which the market has rallied roughly about12-13% has been too fast and too quick. Therefore right now, we are advising clients to be cautious, while at the same time, we arehunting for typical micro sectors which can be focussed on and where certain value plays are still available.

Let us talk about those micro sectoral themes that you seem to be enthused about and what are you advising clients? As we bracefor the hottest summer, do you think there is going to be a big opportunity in AC stocks?

Yes, indeed. The one micro theme that we are pursuing right now are that room air conditioners or even coolers for that matter issomething that is going to drive ahead in terms of great amount of volume visibility. If you look at the Blue Star’s quarterthree (Q3) results, then you would have noticed that their room air conditioner growth was of the order of 34%. That was pretty high.And for a player who has just about 11.5-12% kind of market share in room air conditioners in India that is a large growth. So whatwe are going to see is that this micro theme which is about growing penetration of room air conditioners growing sales of coolers isgoing to play out really well, especially at a time where summers are just about to start and we are probably going to have thelongest or perhaps the hottest summer months ahead.

Which are some of the other micro sectoral themes that you are pursuing, I believe you are seeing some opportunities in the autoancillary market and in hosiery in textiles also I understand?

There are all these host of micro themes that we are pursuing, hosiery is one of them. Auto ancillary, especially linked totwo-wheeler businesses or two-wheeler OEMs or even microfinance institutions, small finance companies to small finance banks,now we have this whole concept of a finance bank coming in so these are the themes that we are pursuing and there are goodvalue plays, good names available. They may appear at this juncture a little bit expensive for some but when you stay put for over ayear,the earnings growth is going to be quite good, especially at a time when the general broader market is appearing a tadexpensive.http://economictimes.indiatimes.com/markets/expert-view/four-micro-themes-to-pursue-this-summer-mahantesh-sabarad-sbi-cap-securities/articleshow/57429110.cms

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No hope of double-digit earnings growth in FY18: Dipen Sheth, HDFC Securities The Economic Times

In a chat with ET Now, Dipen Sheth, Head Institutional Research, HDFC Securities, says Infosys and HCL Tech would lead the ITpecking order while he remains neutral on TCS.

Edited excerpts

The markets find reasons to move up. Now market is looking at March 11 when results of state elections will be out as will the GDPprint and the Dow rally as well. Level 9000 is almost here, what next?

At or around 9000, we are in some kind of critical territory. We have seen moderately good vibes coming in for a while after theDeMo shock but there was no massive trigger as such. If anything, there is a little bit of uncertainty over the election results. Weunderstand there is a tough summer coming up but we do not know whether there is going to be a good monsoon to back it. Andnot much great vibes are coming from a lot of the core sectors.

We have done a little bit of ground work on cement and the current year’s volume growth in cement would be flat to mildlynegative or something which should surely be the worst we have seen in a long time. If you adjust that for DeMo, maybe we couldhave grown at 4-5% this year and we will probably grow at 1% or minus 1% or some such number. So none of this is exciting butthe markets are out there at 9000 and that tells you something. What it tells you is that people are not buying into the current newsflow or information.

We are buying for a structural mend. Whether it is tax administration in the form of GST, whether it is better general administrationfrom the government and a better economic policy mix or macro mix coming up over the next few years, government capex drivingthe capex cycle rather than private capex, I am not too impressed with what we are doing on the NPA front. But clearly people arebuying into an India hope trade and that hope is premised on some very clear bits of logic about how this government is differentfrom all the governments we have had for the past many decades.

Now the fact is globally we are looking at softness and for some large parts of your economy to grow, you need global tailwinds topull them up especially the export focussed guys like pharma or IT. So I will say the news flow and the information flow is a mixedbag but the mending is very positive.

But you do not believe that earnings growth will come in in FY18?

I do not think we will have double digit earnings growth. For example, even if we look at quarter on quarter, we will not see clearearnings growth and there does not seem to be the possibility of earnings growth hitting us any time before the third quarter inFY18. That said, we have built in reasonable growth numbers in FY18 for many of our coverage stocks and aggressive numbers forFY19.

All of this is premised on the fact that some of the mending and some of the surgery have taken place in the last few quarters --

whether it is DeMo, whether it is GST, aggressive spending on infrastructure, the whole range of policy changes which and even theevolution in the country’s macro structure as well. Some of this is going to pay off. I hate to sound like a generalist buteverything in the current or near term tells me that we are in a flattish territory and almost all the news flow on the mending and thestructural changes tell me we are poised for a very big leap in the days to come.

What did you make of the auto numbers?

Again those are near term numbers and they are not too bad. We were expecting less than five lakhs for Hero and they are at Rs525 or so. If that is not impressive, what is? Keep the four-wheeler guys out of this because nobody who is buying a four wheelerwould have preponed or postponed or changed his or her mind depending on the shock of demonetisation. It looks like you and meand the millions of people above you and me in the economic food chain have been virtually untouched except for theinconvenience of demonetisation. None of our businesses are in any serious risk of winding up. The pain was felt largely by thetwo-wheeler consumer space and that pain is not really reflecting as badly as it could have reflected. I am actually thrilled to seeHero numbers and I see them going up from here.

Bajaj Auto also did not disappoint. There was a bit of a blip in case of TVS but otherwise you are fairly happy with the performance?

Absolutely.

A big news came out about China’s capacity cuts in steel and aluminium. They have decided to shut down 30% of theircapacities. What will be the impact there?

If Indian steel companies have been doing well, it is not just because China has been cutting down production which could be oneof the contributors. The fact is Indian steel producers are enjoying protection and that protection is in no risk of disappearing,although every three or six months, we worry about whether the government will persist with the antidumping restrictions and importduties and so on. I do not think that is going to disappear in a hurry.

The government has a strategic reason to protect Indian steel and aluminium which is, much more competitive if you look atintegrated players like Hindalco. The reason is that a lot of the stress in the banking system is related to lending to commoditiesespecially steel. So one, if you have domestic steel industry which is able to stand up and supply, then you have that much morescope for investing in infrastructure or in terms of consumption on the flat product side so whether it is autos and so on, so there is ahuge requirement of steel in this country.

There is no harm in letting domestic players take advantage of that in an otherwise low inflation scenario by giving them someprotection. I do not think there is any risk of steel stocks getting derated especially the ones which have a national or domestic salesfootprint. In commodities like aluminium, the shutdown in capacities in China will lead to higher prices and remember aluminiumprices are running up much higher than where they were a year or two ago and I do not see any softness coming in there as well.

We love to talk about two years and three years and that is what your basic qualification is but I will request you to shift from themandate and talk about momentum in the market. There is lot of momentum in metals, there is a lot of momentum in private banks,there is a lot of momentum in old private banks. How should one really capitalise on this momentum?

Philosophically speaking, I do not think you should run after momentum, so let us begin with a disclaimer of sorts. The idea is to findstrong bottom up arguments to invest in good stories which you like. If you just want to chase momentum then the simplest thing todo is to buy an Nifty ETF and passively track the market. Mr Buffett is a big fan of passively tracking markets. If that is the game youwant to play, that is how you should play it. If you really want to look at great stocks, if you want to look at great businesses whichwhere it does not matter that you lose 10% in the next month or that you gain 20% in the next month and you do not get depressedor excited either way.If you buy a good business then I do not think you should worry about 5% or 10% upticks or down drifts. I do not really think we arein that game and I would hate to tell you so and so stock is running away and you should pounce on it. By no stretch of imaginationwill you be able to provoke me into making any such recommendation.

So let us talk about IT. Finally, IT companies are putting their treasure to work which is cash to work return ratios will increase, theyield on the stock will increase and yet these stocks are not getting rerated. Fund managers and analysts like you have argued inthe past that the minute IT companies consider a buyback, these stocks could get massively rerated. TCS has announced a megabuyback. I have been told that the buyback in Infosys and HCL Tech is also coming but markets are not paying any attention tothat?

They may not right now and that is where the opportunity is. We know what is wrong with IT right now so there are growthchallenges, there is the cloud and automation challenge coming up which is preventing growth from the mid teens to the high singledigits at best. Pricing power is getting eroded in terms of renewals coming up for much lower pricing than what was happening andif all this was not bad enough, Mr Trump and his anti-immigration stance and on the H1-B issue and making H1-B costlier in effectfor Indian software companies to send people to the US. All this has come together and IT companies which were trading at 16-17xhave suddenly fallen down to 12 to 14x, some of them are at even 10 or 11x.

All the bad news is in IT stock price and they have been punished for poor capital allocation and sitting on billions of dollars of cash.All of this is changing and if you expect markets to react overnight, these are not smallcap guys. Keep in mind the huge flows andmany of them have got very high floats. It is a matter of time before the markets realise that many of these stocks are at between12x and 14x for 30% core return ratios. If earnings growth is going to be a little challenged and happens in single digits for a year ortwo but if dividend payouts are high, the market will take care of this. We went to Bangalore and met three or four large companies.We have drawn what can safely be called a non-binary conclusion that companies which are going to adapt to this new situation,use more and more automation platforms, go more digital and price more sensibly for their clients and get around the visarestrictions through more off-shoring, will actually find higher margins over the next two or three years.

How do you think the pecking order in IT eventually would stack up? In the pecking order right now, Infosys is still outperformingTCS and HCL Tech is outperforming Wipro. Do you think given the fact that some of the IT companies are considering a buyback

,the pecking order in IT could change dramatically in next 12-18 months?

We have been neutral on TCS for sometime given the challenges there and accompanied by the relatively higher valuations and theunderperformance has kind of vindicated our stance. That said, the Rs 16000 crore odd that is the size of the buyback is certainlyinspiring but it still does not add up in terms of what the available discounts are for some of the other players in the sector.

There is a lot of ground for Infosys to cover up. Given the valuations and more responsive nature of the managements to some ofthe challenges that they have been facing, HCL Tech has been a thought leader in this space when faced with pricing or growthchallenges in one part of its business. It was probably the first Indian company to build a sizable IMS practice and they are alsolikely to lead this time around when faced with another round of growth challenges. Ditto for Infosys which has gone through a lot oftrauma lately and they have been responding admirably well. They are putting their house in order and valuations in both cases arevery attractive. So certainly Infosys and HCL Tech would lead the pecking order for us.

Despite having a bigger acquisitive appetite, the growth challenges at Wipro are still not beyond, they have not really gone away,we will prefer to wait for a while before we upgrade Wipro but I suspect there could be a very big value story coming up there if theyget their stuff in order. The next two or three quarters to my mind are make or break quarters for Wipro in terms of a potentialrerating. Last and not the least, we are sensing a bottom up intrinsic value story playing out at Infosys.

Why Mphasis?

So what is happening is that the part of the business which was legacy, which is non-channel, the HP part of the business, there isa floor to it now. It cannot de-grow anymore and there are official assurances on that and we are seeing a pickup in the channelbusiness. We are again looking at sub-15x. I think they should be about 12-13x if I am not mistaken. These are stories that you buyinto and patiently wait and you can easily generate very meaningful alpha especially when the rest of the market is not looking atthem.

There are two or three things aside of this. There is Jamna Auto, there is an Endurance Tech and there is Ujjivan. I am intriguedabout Jamna and which is I will talk about Jamna. You have had coverage on this in the past as well. It has rallied too and I think ifindeed that whole scrappage policy comes about then from what I understand it could be a big beneficiary but the stock has rallied,valuation wise is there still some merit here?

Look at the beauty in the business of Jamna Auto. It has got close to about Rs 350 crore of employed capital in the entire businessand look at the capital efficiency. They do about Rs 1400 crore of revenue on this. So you have got 4x capital turns, not just assetturns, total capital employed is at Rs 350 crore and revenues of Rs 1400 crore roughly in FY17. That is what they should be doingand they do it at 13% EBITDA margin and they make something as uninteresting as leaf springs. I am sure you do not even knowwhat at leaf spring is. It is the funny set of those plates that get under trucks chassis right above the axle. Do you know they have 70odd per cent market share with the OEMs? In particular, they have a subset of these springs which is the parabolic springs and theyhave close to 95% market share in that.

The stock has 30% plus ROE and it is still at about 12x. It has run up 40-45% in the trailing year but I do not think that is what youshould fish for and of course like you said if CV sales pick up again and which I suppose they will over a period of time and giventhe kind of dominant market share that this guy has, if the scrappage policy comes through and if even it does not, the fact that CVsales are coming off two years of or maybe more of sluggishness and the fact that they have a fat market share and that they arestill to build out their aftermarket business significantly, they are going to face tailwinds of sorts, high return ratios, low workingcapital employed. What else do you want for 12x, my friend?http://economictimes.indiatimes.com/markets/expert-view/no-hope-of-double-digit-earnings-growth-in-fy18-dipen-sheth-hdfc-securities/articleshow/57428342.cms

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Bourses

Shareholders of companies formerly listed on regional stock exchanges in a tight spot Radhika MerwinThe Hindu Business Line

The Securities and Exchange Board of India’s order to shut down regional stock exchanges in 2014 is causing a lot oftrouble to investors. Through SEBI has provided investors with an exit route, there are many loopholes in the process, which loads itin favour of the promoters.

While providing an exit route for investors in shares traded on regional stock exchanges (RSEs), SEBI has given two options tocompanies either list on one of the national stock exchanges or use the dissemination board opened on the BSE and the NSE tohelp investors sell their shares.

Many of the companies that were formerly listed on the RSEs have preferred not to list on national stock exchanges as they did notwant to comply with the stricter disclosure norms and come under greater scrutiny. While they did list on dissemination boards, lackof awareness about these platforms resulted in the shares finding no takers. Promoters are now offering to buy back shares atseemingly lower valuations leaving investors with few choices.

The tight corner that investors in Schneider Electric President Systems (formerly APW President Systems) currently find themselvesin, is a case in point.

The Schneider storySchneider Electric President Systems is a leading designer, manufacturer and supplier of standard and customised enclosure

systems in India. Schneider Electric South East Asia (HQ) Pte Ltd is the promoter, holding 75 per cent of the shares. The companywas listed on the Bangalore SE and Pune SE.

Schneider Electric has stated that it did not meet the minimum criteria of profitability and share capital to list on national stockexchanges. The company has been loss-making and only turned around in 2015-16, recording a profit of Rs.6.3 crore from a loss ofRs.3.7 crore in 2014-15. While the shares of Schneider Electric were moved to the dissemination board of the NSE and allowed totrade from July 2016, investors have not been able to find buyers for the right price.

The way outIn 2011, Schneider Electric South East Asia (HQ) Pte Ltd acquired 55 per cent of the share capital from the promoters and up to 20per cent from public shareholders, offering Rs.195/share.

Subsequently, a delisting offer was made in December 14, 2012, at Rs.195 a share. But of the 15.12 lakh shares (25 per centholding by the public), only 6.79 lakh shares (or 45 per cent) were tendered in the delisting offer. Of this, only 3.81 lakh shares weretendered at or below the discovered price of Rs.250 a share. Hence, the delisting offer — which requires 90 per cent of thepublic shareholding to consent to the proposal for delisting — failed.

After four years, the company is once again offering an exit option to investors. But investors are displeased with the exit price ofRs.200 a share as this do not take into account the company’s improving financial performance.

Pawan Kumar Saraf, an avid investor with 37 years of experience in the stock market, along with his family members holds about43,000 shares (0.7 per cent) in the company. “The future prospects of the company appeared good given the backing of anMNC.” As expected, .

Net sales grew 63 per cent year on year in the December quarter. The EPS was Rs.8.4 per share for the December quarter alone.

“If the stock was listed, it could easily have traded at Rs.450-500. All this time the management assured us that they were inthe process of listing. The exit offer at such low a price, has come as a rude shock to investors.”

Parikh, another investor feels that minority shareholders have been short-changed in the process. “Companies not migratingto a nationwide stock exchange should give its shareholders an exit price in accordance with SEBI’s 90 per cent thresholdnorm,” he said.http://www.thehindubusinessline.com/markets/stock-markets/shareholders-of-companies-formerly-listed-on-regional-stock-exchanges-in-a-tight-spot/article9567875.ece

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BSE to launch F&O on BSE Sensex 50 index from 14 March PTISee this story in: mint

Mumbai: BSE will launch equity derivatives products—futures and options—on S&P BSE Sensex 50 index from 14March. S&P BSE Sensex 50 tracks the performance of the 50 largest and liquid stocks listed on BSE.

The index constituents are selected from ‘S&P BSE Large Midcap Index’ and are weighted based on theirfloat-adjusted market capitalisation.

“The exchange is pleased to inform all trading members that exchange shall introduce futures and options contracts on S&PBSE Sensex 50 index in equity derivatives segment with effect from March 14, 2017,” BSE said in a circular on Thursday.

The index represents more than half of the total market capitalisation of BSE-listed companies.

Of the total market capitalisation of constituents of S&P BSE Sensex 50 index, finance sector represents the largest share at32.57% followed by information technology (13.42%), transport equipments (11.16%), oil and gas (10.62%), FMCG (10.02%),healthcare (5.83%capital goods (3.55%).

Housing related (2.68%), power (2.46%), metal, metal Products & mining (2.21%), telecom (1.89%), chemical & petrochemical(1.40%), media & publishing (0.84%), transport services (0.81%) and consumer durables (0.55%), are the other sectors representedon the index.http://www.livemint.com/Money/PD8Wb36hIVfrkhiGlogEAL/BSE-to-launch-FO-on-BSE-Sensex-50-index-from-14-March.html

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International

World’s biggest banks fined $321 billion since 2008 financial crisis BloombergSee this story in: The Economic Times

New York: Banks globally have paid $321 billion in fines since 2008 for an abundance of regulatory failings from money launderingto market manipulation and terrorist financing, according to data from Boston Consulting Group.

That tally is set to increase in the coming years as European and Asian regulators catch up with their more aggressive US peers,who have levied the majority of charges to date, BCG said in its seventh annual study of the industry published on Thursday. Bankspaid $42 billion in fines in 2016 alone, a 68% rise on the previous year, the data showed.

“As conduct-based regulations evolve, fines and penalties, along with related legal and litigation expenses, will remain a costof doing business,” analysts led by Gerold Grasshoff wrote.

The era of ever-increasing regulatory requirements is here to stay, BCG said, despite President Donald Trump’s pledge torol l back the 2010 Dodd-Frank Act that reshaped US banking in the aftermath of the collapse of Lehman Brothers. The number ofrule changes that banks must track on a daily basis has tripled since 2011, to an average of 200 revisions a day.http://economictimes.indiatimes.com/news/international/business/worlds-biggest-banks-fined-321-billion-since-2008-financial-crisis/articleshow/57438419.cms

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Economy

Rupee rebounds 12 paise PTISee this story in: The Hindu Business Line

Mumbai: The rupee staged a smart rebound after a brief overnight wobble and ended higher by 12 paise at 66.70 against the UScurrency on fresh bouts of dollar selling, amid upbeat sentiment post GDP data release.

At the Interbank Foreign Exchange (Forex) Market, the domestic currency opened higher at 66.76 from Wednesday’s closeof 66.82. It largely moved in a tight range of 66.68 and 66.78 before ending at 66.70, at a gain of 12 paise.http://www.thehindubusinessline.com/markets/forex/rupee-dollar-live-update/article9566742.ece

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Indian economy projected to grow by over 7.5% this FY: President PTI See this story in: The Statesman

Kochi: President Pranab Mukherjee on Thursday said Indian economy was projected to grow by more than 7.5 per cent in thecurrent financial year.

The President noted that for 50 years before independence, the economic growth rate of India was 0 to 1 per cent.

In the 1950s, the growth rate rose to 1-2 per cent, while in the sixties 3-4 per cent and in the 90s, with economic reforms itincreased by 6 to 7 per cent, Mukherjee said, while delivering the sixth K S Rajamony Memorial Lecture here.

Speaking on the topic of India@70, he said in 15 years, Indian economy grew more than 7 per cent, making us the fastest growinglarge economy of the world.

"And as per the indication of the third part of the current year, it is sure to grow more than 7 and a half per cent," he added.

Mukherjee said such a performance could be achieved only because of the hardwork of farmers and workers.http://www.thestatesman.com/business/indian-economy-projected-to-grow-by-over-7-5-this-fy-president-1488486151.html

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Post-demonetisation GDP growth ‘too good to be true’, says SBI study G Naga SridharThe Hindu Business Line

Hyderabad: Are the third quarter estimates for the Gross Domestic Product (GDP) growth rate pegged at 7 per cent too good to betrue in the wake of an adverse impact of demonetisation?

This is the sense given by an internal study by the State Bank of India research team in an analysis of the GDP estimates releasedby the Central Statistics Office on Tuesday.

According to the advanced estimates of CSO, the GDP growth was 7 per cent in the third quarter of the current fiscal, during whichdemonetisation had taken place. For FY17, GDP growth has been pegged at 7.1 per cent.

There is more than what the numbers speak on the surface impact of demonetisation, if one goes by the expenditure side ofdemonetisation.

“Interestingly, the impact of valuables on the total estimates from the expenditure side tell the story of

demonetisation,” says the research study by the State Bank of India on the GDP estimates on impact of demonetisation.

“After demonetisation, there was a steep fall in the international price of gold partly because Indian demand had momentarilysubsided,” SBI said in the report released recently.

This may have increased the percentage share of Private Final Consumption Expenditure (PFCE) in the total expenditure pie.PFCE includes final consumption expenditure of households and non-profit institutions serving households (NPISH) like temples,gurudwaras, etc. It relates to outlays on new durable as well as non-durable goods (except land) and on services.

Some numbers beneath the surface signify the impact of demonetisation. For example, growth in construction and financesegments are at seven-quarter lows and at an all-time low respectively, in the current base year.

But GDP estimates imply minimal impact of demonetisation. What is intriguing is that growth rates of these segments show asignificant recovery in the fourth quarter, SBI said, adding that with cement dispatches for January 2017 declining a whopping 13per cent, it is not clear how construction activity is reviving in the current quarter. Similarly, bank credit growth is still at December2016 levels.

There is a need for more economic investigation into various aspects pertaining to demonetisation, the study pointed out.http://www.thehindubusinessline.com/todays-paper/tp-money-banking/postdemonetisation-gdp-growth-too-good-to-be-true-says-sbi-study/article9568009.ece

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Closing

Last Financial Closing... 

Sensex  28,839.79 (-144.70)NSE  8,899.75 (-46.05)US$ spot Rs.66.71US$ Y.114.1900US$ 6 months Rs.Yen Rs.58Euro spot Rs.70.21

Gold (10gm) Rs.29,397Silver (1kg) Rs.42,182.00

 

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