Visakha Co-op’s branches to hit 50 mark soon (BL 16.09.17)
Visakhapatnam Co-operative Bank Ltd, ranked among the leading 20 urban co-op banks in the country out of a total of 1,574, is set to touch the 50 branches mark this year, according to Chairman Ch Raghavendra Rao. At a press meet, he said the bank has so far opened 46 branches in AP and Telangana, the latest being in Rajahmundry. M Anjaneyulu, former Chairman, said the policies of the NDA government are proving to be disastrous for the banking sector, with the NPAs rising to unmanageable levels, and demonetisation compounding the problem. PV Narasimha Murthy, CEO, said Visakha Co-op is paying 8.25% interest on a five-year deposit for senior citizens.
ICICI Bank launches cashback scheme for home loan borrowers till Nov 30 (BS, FE 16.09.17)
To woo borrowers in this ongoing festive season, ICICI Bank has launched cashback scheme for those availing home loan till November 30. Under the scheme, customers who avail a new home loan or transfer their existing home loan to the bank can get cashback of 20% up to a limit of Rs 10,000, ICICI Bank said in a statement. The cash back amount is based on minimum spend of Rs 30,000 from the customer's ICICI Bank credit or debit card, it said. This offer is valid from September 1, 2017 to November 30, 2017. Similarly, other banks have also come up with festival offers with attractive scheme to woo retail customers.
IndusInd Bank bags $200 mn-loan from ADB to lend rural women borrowers (BS 16.09.17)
Private player IndusInd Bank said it has secured up to $200 million (about Rs 1,282 Cr) loan from multilateral lender Asian Development Bank (ADB) to serve low income women borrowers in rural areas. The 7-year senior loan will go towards IndusInd Bank's micro-finance activities, it said in a statement. The loan pact was inked here by Christine Engstrom, Director of ADB's Private Sector Operations Department, IndusInd Bank chief financial officer S Zaregaonkar and Arun Khurana, Head of IndusInd Bank's Global Markets Group. Engstrom said ADB's financing and technical assistance is a signal of its continued commitment to increase financial inclusion in India, particularly to low income women and their families. This will help the bank to expand its efforts to finance underserved people of the country in less developed states, she said. As per the loan agreement, about 95% of the ADB funding is to go towards credit to women borrowers. At least 70% of the number of loans will be deployed to less developed states, the bank said. "A capacity building technical assistance of $1 million is expected to be part of the package. It will support IndusInd Bank's efforts to improve financial literacy to women borrowers and to develop digitised processing and product development initiatives," the bank said.
StanChart, DBS Bank file insolvency case against Ruchi Soya at NCLT (BS 16.09.17)
Two foreign lenders, Standard Chartered Bank and DBS Bank, have filed an insolvency suit against Ruchi Soya Industries at the National Company Law Tribunal (NCLT). The company has informed the BSE that the banks have filed applications with NCLT's Mumbai bench to initiate the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code. The copy of the notice has been served to the company. The company did not disclose the alleged amount in default. Ruchi Soya's stock was trading flat at Rs 22 per share on the BSE. In February this year, one of Ruchi Soya's unsecured creditors had also filed an insolvency case against the company for the recovery of an amount of Rs 9.63 Cr, which company had disputed then.
Number of private projects with sanctioned loans rises 58% (FE 16.09.17)
The number of private sector projects to which banks and financial institutions (FIs) sanctioned loans rose 58% year-on-year (y-o-y) in FY17, according to the RBI. In a report released as part of its monthly bulletin for September 2017, the central bank said 547 projects with a total cost of Rs 1.83 lakh Cr were sanctioned financial assistance by banks and FIs in FY17, as against 346 projects worth Rs 91,800 Cr in FY16. “In addition, ECBs (external commercial borrowings)/FCCBs (foreign currency convertible bonds) to the tune of Rs 22,400 Cr) were contracted by 346 companies and 29 companies, which did not avail of financing from the banks/FIs, raised Rs 1,200 Cr for their capex needs through domestic equity issues,” the RBI said in the report. In all, 922 companies made investment plans aggregating Rs 2.06 lakh Cr in FY17, as against 700 companies with investment intentions totalling Rs 1.35 lakh Cr in FY16. The report also highlighted that the rise in loan sanctions did not translate into a commensurate increase in the envisaged capex because of a large share of high-value and mega projects where expenditure is spread over years. Mega projects, defined as projects worth Rs 5,000 Cr or more, constituted 17% of the total project cost. Projects worth between Rs 1,000 Cr and Rs 5,000 Cr, known as high-value projects, accounted for 42% of the pie. About Rs 72,800 Cr, or 40% of the total proposed expenditure, would be spent in FY17, Rs 42,000 Cr, or 23% in FY18, and Rs 37,200 Cr, or 20%, thereafter. Private placement of debt and foreign direct investment (FDI) have gained prominence as alternative sources of capex financing, the report noted, with fundraising through the former route rising 33% y-o-y to 1.56 lakh Cr in FY17.
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India's external debt down 3% to $472 bn in FY17 (BS, FE 16.09.17)
India's external debt came down by USD 13.1 billion or 2.7% to USD 471.9 billion at the end of March this year on annual basis mainly due to decrease in NRI deposits and commercial borrowings. The debt has remained within manageable limits and the situation has improved in 2016-17 over 2015-16, said 'India's External Debt: A Status Report 2016-17' by the Department of Economic Affairs. The external debt-GDP ratio fell to 20.2% at the end of March 2017 from 23.5% at March 2016. At end-March 2017, long-term external debt was USD 383.9 billion, showing a decrease of 4.4% year-on-year. Long-term external debt accounted for 81.4% of total external debt at end-March 2017. "Short-term external debt increased by 5.5% to USD 88 billion at end-March 2017. This is mainly due to the increase in trade related credits, a major component of short-term debt with a share of 98.3%," the report said. A cross country comparison based on 'International Debt Statistics 2017' of the World Bank, which presents the debt data for 2015, shows that India continues to be among the less vulnerable countries with its external debt indicators comparing well with other indebted developing countries. The ratio of India's external debt stock to gross national income (GNI) was the fifth lowest and in terms of the cover provided by foreign exchange reserves to external debt, the position was sixth highest in 2015.
Q1 current account deficit widens sharply to 2.4% of GDP, says RBI (BS, FE 16.09.17)
India’s current account deficit (CAD) in the first quarter ended June soared to a four-year high of $14.3 billion, or 2.4% of gross domestic product (GDP), from 0.1% a year ago and 0.6% in the fourth quarter. The CAD, the difference between imports and exports, was at $0.4 billion a year ago and $3.4 billion in the fourth quarter of 2016-17. Despite the high CAD, strong capital flows ensured that the balance of payment surplus was at $11 billion, a two-year high. The rise in the CAD was on account of a high trade deficit, $41.2 billion, “brought about by a larger increase in merchandise imports relative to exports,” said the RBI. While exports have been falling, a strong rupee is also making exports uncompetitive. On the positive side, net foreign direct investment doubled to $7.2 billion in the first quarter from the year-ago level. Net portfolio investment, too, recorded a substantial inflow of $12.5 billion in Q1 of 2017-18, primarily in the debt segment, as compared to $2.1 billion in the year-ago quarter, it said. “The sharp surge in the current account deficit in Q1 FY2018 relative to Q1 FY2017 comes as no surprise, with the spike in gold imports prior to the introduction of GST responsible for half of this uptick,” said Aditi Nayar, principal economist at ICRA Ltd. “Moreover, the lagged impact of the INR appreciation was partly responsible for a faster rise in non-oil, non-gold imports relative to exports, bloating the size of the merchandise trade deficit.” With the size of the current account deficit in the first quarter nearly as high as the FY2017 level of $15 billion, Nayar said the rating agency expects the FY2018 deficit to double to around $30-32 billion, or 1.2-1.3% of GDP. However, this can still be adequately financed through a resumption in non-resident Indian deposits, as well as healthy foreign direct and portfolio flows, Nayar added. Private transfer receipts, mainly representing remittances by Indians employed overseas, rose by 5.3% to $16.1 billion over the year-ago quarter.
Export growth hits 10% in August despite GST jitters (BL, BS, FE 16.09.17)
After single-digit growth in the previous three months, exports rose 10.29% in August, up from 3.94% in July, despite exporters’ woes over the goods and services tax (GST). Rising global petroleum prices may have increased worries of retail customers, but it helped oil exports rise 36.4% for August. Besides, engineering goods rose 19.53% in the month, pushing up the overall outbound shipment that grew for the 12 straight months after contracting for more than a year. Import growth also accelerated in August to $35.46 billion, up 21% as compared to the 15.42% rise in July. This pushed up the trade deficit in August to $11.64 billion from $7.7 billion in August 2016. This may push up current account deficit further. According to the commerce department, India exported $23.81 billion worth of goods in August against $21.59 billion in the same month last year. The first set of trade data released after Suresh Prabhu took charge as commerce and industry minister showed that export growth gathered pace in August after decelerating for four months since March, when it hit a high of 27%. Exports grew 8% in May and 4.39% in June. The growth came even as exporters complained over the refund mechanism under the GST, saying it was affecting outbound shipments. Exporters have to pay integrated GST on import of goods and then claim refunds based on their scrips under the new indirect tax system. Import of gold surged around 69% and that of silver by over 100%. Non-oil, non-gold imports rose over 20% in August, but it is still not clear whether it would mean robust industrial recovery.
India's GDP growth likely to slip below 7% in FY18: DBS report (BS, FE 16.09.17)
India's GDP growth is likely to face near-term headwinds and might slip below 7% mark to a three-year low this financial year, says a DBS report. According to the global financial services major, two recent policy measures — demonetisation in November 2016 and GST rollout in July 2017 had a short term impact on economic activity and aggravated the already slowing momentum. "These amplified the already weak trends in manufacturing and investment growth slowing first half growth to 5.9% from 7.9% in 2016," DBS said. "For 2017-18, a weak June quarter and the likelihood of only a modest improvement in July-September, prompts us to temper our full year expectations. We expect real GDP to average 6.8% year-on-year in 2017-18 (as against 7.3 previously)," DBS said in a research note. India's economic growth slipped to a three-year low of 5.7% in April-June, underscoring the disruptions caused by uncertainty related to the GST rollout amid the slowdown in manufacturing activities. "Recovery is likely to be gradual, but below potential this year and the next, with the resultant output gap keeping price pressures under check. Until the private sector returns, government spending towards capex and infrastructure will be crucial to take growth back above 7%," DBS said.
Let all public sector banks, except key ones, be privatised: C Rangarajan (BS 16.09.17)
The government should consider allowing public sector banks to raise funds through private participation beyond 49%, keeping only some key banks under state control, former Reserve Bank Governor C Rangarajan said. This would make capital available to strengthen a few banks for the interest of the country. Rangarajan, who is also the former chairman of The Prime Minister's Economic Advisory Council (PMEAC), said "My own advice would be to keep some of the key banks under the control of the State, provide adequate capital from the system, and let the others be privatised or be allowed to increase capital by private participation beyond 49%". "This is not an ideological argument, but a purely pragmatic one that says the ability of the system to provide additional capital to keep up with the growth of the banking system would be very difficult. Therefore let us make capital available only to strengthen a few limited banks and carry on. That would be in the best interest of the country," he added. "If public sector banks have to expand their activities, they need additional capital and since the government holds 51% share in them, 51% of the addional capital will have to come from the government. But there has to be a limit on how much capital the government can put in. The banking system itself needs some radical change," Rangarajan averred. For the revival of the economy, the country need to find out the ways and means to breathe life into those stalled projects that can be activated. While some of the stalled projects has become unviable, those that continue to be viable need to be attended to quickly. A haircut is inevitable when it comes to non-performing assets (NPAs).
RBI to sell Rs 10,000 cr govt. bonds via open market operations (BS 16.09.17)
The Reserve Bank said it would sell government bonds worth Rs 10,000 Cr through Open Market Operations (OMO) to mop up liquidity from the system. "Based on the current assessment of prevailing and evolving liquidity conditions, the RBI has decided to conduct sale of government securities under Open Market Operations for an aggregate amount of Rs 100 billion on September 28, 2017 through multi-security auction using the multiple price method," the central bank said in a statement. As part of the OMO, the RBI will sell government securities maturing in 2019 (bearing interest rate of 7.28%), 2020 (8.12%), 2022 (8.15%), 2025 (8.20%) and 2028 (8.60%).
India's forex reserves cross $400 billion (BS 16.09.17)
India’s foreign exchange reserves crossed the $400-billion mark last week, data released with a lag of seven days by the RBI showed. As of September 8, the forex reserves with the central bank stood at $400.73 billion, up $2.6 billion from a week earlier. Most of the reserves — about $376.20 billion — are held in foreign currency assets such as the US dollar, euro, pound sterling, Japanese yen, etc, and is valued in terms of the American greenback. While the RBI does not provide a break-up of its foreign currency assets, analysts peg the share of the dollar to be between 60% and 70% of the total foreign currency assets. The value of gold in the total reserves was about $20.7 billion, while the Special Drawing Rights (SDR) of the International Monetary Fund (IMF) stood at $1.5 billion. The reserve position in the IMF, which is the quota allotted to India minus the IMF’s rupee holding, was $2.3 billion. A year earlier, total reserves were about $371 billion. The reserves have swollen particularly in the past three years after the Bharatiya Janata Party achieved a landslide victory to form the government at the Centre. The RBI lapped up dollars aggressively as foreign investors started pouring in a huge amount of money in local assets. In the absence of intervention by the central bank, the rupee could have strengthened much more than how it has moved since its lowest in August 2013 at 67.87 a dollar. The rupee closed at 64.08 on Friday.
Govt. considering its own cryptocurrency (BS 16.09.17)
The Central government is considering a proposal to introduce its cryptocurrency similar to Bitcoin. Sources close to the development said that the proposal was discussed by a committee of government officials, and the panel found the idea of setting up and running blockchain for financial services useful. Whenever the decision is taken, the cryptocurrency will fall in the domain of the RBI and some Acts such as the Currency Act might have to be amended. Hence, this will be a time-consuming process. Sources also said the government might name its cryptocurrency “Lakshmi”. Vaibhav Parikh, partner, Nishith Desai Associates, said: “I won't be surprised if the government comes up with its own cryptocurrency because banks are trying blockchain as a technology and to make blockchain work it would need some cryptocurrency. Since it doesn’t trust Bitcoin it may come up with their own currency." Running a ledger-like blockchain cryptocurrency is required for settlement and the RBI and government officials have said that they are not comfortable with Bitcoin. China, Russia, and Estonia are said to be considering having their own cryptocurrencies. A few days ago RBI Executive Director Sudarshan Sen had talked about the central bank’s discomfort with Bitcoin, which has recently come under intense global regulatory scrutiny. He had also hinted at the need for India’s own cryptocurrency.
Specialists to conduct forensic audit of shell companies, says BSE chief (BL 16.09.17)
The Bombay Stock Exchange will conduct forensic audits on shell companies identified by market regulator SEBI, Ashishkumar Chauhan, MD & CEO of BSE, said. The market regulator has so far identified eight companies for such audits, out of the 331 companies who were declared as shell companies a couple of weeks ago following a reference from the government. The exchange will employ specialists in forensic audit for the purpose, who will go to the companies’ offices, check their books and transactions in detail and do the verification according to due process, Chauhan said. Specific timeframes have been given for the commencement of the exercise, he said. The actual process of the audit will depend on the availability of information required by auditors, the state of readiness of the firms whose books are being inspected, he added. Asked if the exchanges could have prevented the shell companies controversy with their own measures, Chauhan said, “On the shell companies issue, exchanges do not really have much of a role to play, in a broadway. Exchanges have no say in the day-to-day operations of these companies. As and when regulators take action, we coordinate with them when these issues are brought to our notice. We have acted accordingly. There will be a process of verification now and if things are found to be okay, then appropriate relaxation will be given.”
RBI should intervene to arrest rupee appreciation: Acharya (BL, FE 16.09.17)
The RBI should step in to prevent further appreciation of the rupee, according to Shankar Acharya, Honorary Professor, ICRIER, and former Chief Economic Advisor. This would help the economy in the short term, even while structural reforms such as the GST could usher in growth in the medium to long term, he said. “As a short-term solution to the economy, the RBI should act now and arrest the appreciation of the rupee,” he said. RBI’s intervention would help boost exports as well as the domestic manufacturing sector, which has been witnessing a slowdown in the last couple of quarters, he added. The demonetisation was a rather scary experiment by the government, which brought about a slowdown in the economy, Acharya further said. “Demonetisation happened when the economy was anyway slowing down and it led to a further slowdown in economic activity, if not bringing it to a grinding halt,” he added. While GST is a good thing in medium to long term, it will also be growth negative in the next couple of quarters, he said. There is still uncertainty over the revenue outcome post GST, he said, adding: “Though gross revenue collection seems to be on target, net revenue collection could be lower, both for the Centre and State.” According to Acharya, what is more worrisome is the fact that in FY18, the combined fiscal deficit of the Centre and the States would be around 7% of GDP, which is very high. “States are already in a bad situation due to farm loan waivers. So it is going to be a problem,” he pointed out.
CBEC plans strategy to bring more businesses in GST net (BL 16.09.17)
Tax officials are working out strategies to encourage more businesses to register for the Goods and Services Tax (GST) and further increase the taxpayer base. At present, there are about 90 lakh businesses registered to file returns and pay taxes under the new levy, which kicked in from July 1. But, the Central Board of Excise and Customs will now also encourage small businesses and dealers, who may be exempt from registering for GST. “We plan to increase awareness of even small businesses about the benefits of GST and why they should register,” said a senior official, pointing out that in the long run it will be beneficial to them as suppliers would only choose to buy from those businesses from where they can get input tax credit. Further, in some cases tax officials may also verify whether businesses that were paying taxes earlier have registered for GST. Officials believe that as the new tax system stabilises, more businesses will register under GST, taking the tax base to over one Cr in the next one year, if not before. At present, businesses with an annual turnover of up to Rs. 20 lakh (or Rs. 10 lakh in some States) are exempt from registering for GST. Though the number of taxpayers registered with the GSTN is much higher than the original estimate of about 80 lakh, Prime Minister Narendra Modi had, at the recent Rajaswa Gyan Sangam, urged the Centre and State tax officials to further expand the tax base under GST. “To enable all traders to take maximum benefit of GST, we should work towards ensuring that all traders, including even relatively smaller traders with a turnover below Rs. 20 lakh, should register with the GST system,” he had said, asking officials to further increase the taxpayer base.
Worried Finmin Seeks Details of 40 accounts Tagged for Insolvency (ET 16.09.17)
The finance ministry has urgently sought details of around 40 accounts that have been identified by the RBI for insolvency proceedings from state-run lenders. The ministry wants to ascertain the impact on provisioning and capital needs of already struggling state-run banks. The lenders will need to file bankruptcy cases in respect of these accounts if they are unable to find any other way to revive the creditors by end December. According to industry estimates, these may add up to loans worth 1 lakh Cr. Besides existing large accounts like Videocon, IVRCL, Lanco Infratech and Jaiprakash Associates, some of the other names are Transstroy India and Ideal Energy Projects. A senior finance ministry official confirmed the development and said one of the aims is to take stock of provisioning requirements that may be required. “The banks had expressed concerns over the extra provisioning requirements and that is also being looked at,“ the official said, adding that if required discussions may be held with RBI. In June, some banks had raised this issue with the government. SBI had written to the finance ministry raising concerns over the stringent provisioning norms for companies under the Insolvency and Bankruptcy Code (IBC). In a note earlier this week, Fitch Ratings said the weak capital position and stock of non-performing loans have impacted state-run banks' “ability to pursue meaningful growth“, pegging the capital needs of lenders at $65 billion by 2019. More accounts being taken up for insolvency proceedings will further erode the finances of banks. RBI told banks in a June 15 circular that for accounts identified for resolution under IBC, lenders will need to make a minimum provision of 50% for the secured portion of the outstanding amount, plus an additional 100% on the unsecured portion.
Small creditors use new bankruptcy rules to put the squeeze on big players (BS 16.09.17)
In late June, one of India's top wind power equipment makers, Inox Wind Ltd, was dragged into insolvency courts by a logistics handler over unpaid dues of $88,000. Two weeks on, the matter was settled, with dues paid off. The case illustrates how small creditors and vendors, previously at the mercy of large debtors, are now using India's new bankruptcy code as a pressure ploy to secure payment of dues that would earlier have been all but impossible to recover. India overhauled bankruptcy laws last year with the main goal of helping banks tackle a $150-billion bad loan issue that is crimping growth in the economy. Less than a year on, insolvency professionals say it is vendors and small suppliers, also referred to as operational creditors, who are using the new rules as leverage to recover dues much more effectively than banks owed far larger sums. "It is not necessarily a negative thing, but it was not the objective of the new code," said Ashish Chhawchharia, a partner at Grant Thornton who works on insolvency cases. The new rules give any creditor owed Rs 100,000 ($1,560) the right to drag a multi-billion dollar company to court. They lay out a stringent timeline for resolution, or force debtors into automatic liquidation, giving outsize influence to vendors and suppliers who would normally rank well below secured financial creditors, such as lender banks, in any bankruptcy process. But they have also stirred fears of a tsunami of cases jeopardising the plans of banks with billions of dollars at stake, and which are forced to join such proceedings. "If an operational creditor initiates a process, that basically brings in unwilling financial creditors, even if they do not deem it the right time or course of action," said leading insolvency lawyer Sumant Batra. The court that handles such bankruptcy cases, the National Company Law Tribunal (NCLT), should first test the intent of any operational creditor making a bankruptcy plea, he added.
Sarma appointed CMD of United India (BL 16.09.17)
MN Sarma, Director and General Manager of United India Insurance Co Ltd, has been appointed as the company’s CMD. Before being posted to United India, Sarma was MD & CEO of Health Insurance TPA of India, a joint venture of PSU non-life insurers. Earlier, as GM of Oriental Insurance, he handled investments, IT, health, marine cargo and hull departments, internal audit and customer service departments.
LIC Housing will see continued traction in need-based home buying, says MD & CEO (BL 16.09.17)
LIC Housing Finance (LICHF) has said its average loan size has increased to about Rs. 22 lakh, against Rs. 20 lakh in the previous fiscal. During Q1 of this fiscal, its average ticket size stood at about Rs. 20 lakh plus, when compared with Rs. 18 lakh plus in Q1 of last fiscal. However, in Q2, it has increased to Rs. 22 lakh. “Investment-based buying of homes has slowed down in recent months. However, need-based buying continue to be robust as people in this category are willing to borrow and make their purchases,” Vinay Sah, MD and CEO, LICHF, said. With its disbursements continuing to maintain momentum, the company is confident of achieving 15% growth this fiscal over last fiscal’s disbursements of Rs. 41,541 Cr. As of August 2017, the company achieved disbursements of about Rs. 15,000 Cr, a growth of 18%. “The retail segment growth is better than the others,” he said. Also, the company has done about 4,100 loans in the affordable home category, on which it is very bullish. It did about 4,400 units in this segment last fiscal. Sah said LICHF is open to doing more project loans on a case-to-case basis. He also said a good number of RERA-registered projects had come up in several locations.
Pension regulator proposes maximum entry age limit for NPS to 65 years (BL 16.09.17)
Pension fund PFRDA regulator has proposed to raise maximum entry age limit for subscribing National Pension System (NPS) to 65 years. The entry age to NPS is now proposed to be increased to 65 years from 60 years and there is an option to continue up to age of 70 years, a Finance Ministry statement issued said. NPS should also be explored, as an additional retirement benefit, for corporates where superannuation funds are not available and employees are covered only under the mandatory EPFO (Employees’ Provident Fund Organisation) schemes, Pension Fund Regulatory and Development Authority (PFRDA) Chairman Hemant Contractor said. “With opening up of economy people started getting more job opportunities, switching jobs suitable to their skills and talents. Job switching has become more frequent and people seek more controls on their finances, when they start moving jobs and place from one to another,” he said. The concept of portability came in and people started thinking about having better control on their retirement savings, he said. Currently, NPS has more than 1.71 Cr subscribers with total Asset under Management (AUM) of more than Rs. 2.04 lakh Cr. Defined benefit pension schemes, which were predominant earlier, became unsustainable not only for the government sector but also for the private sector because of various factors. A Defined contribution scheme was, therefore, launched in 2004 which was initially only for central government employees, but which was later extended to state government employees and later to the private sector. This scheme is the NPS, which is regulated by PFRDA.
Event insurance: Bajaj Allianz seeks to grow ‘festivals segment’ in South (BL 16.09.17)
Bajaj Allianz General Insurance sees much promise in festivals for its events insurance products. After witnessing growing customer interest in the North and the West, the company is now increasing its focus on the southern market. Bajaj Allianz has sold about 200 event insurance policies this year, of which 50% were for festivals. This reflected a 13-14% growth over the previous year. “The trend has been growing over the past two years,” Sasikumar Adidamu, Chief Technical Officer - Non Motor, Bajaj Allianz said. “With the change in lifestyles, the events are being conducted in a grander way. As the amounts at stake are high, people are increasingly looking to protect the possible loss by taking an event insurance.” Maharashtra, Gujarat and West Bengal are among the leading markets, he said. “Specific festivals are strongly rooted in these States — such as Ganesh Chaturthi in Maharashtra and Gujarat, Navratri in Gujarat and Durga Puja in West Bengal. “We don’t differentiate between zones, but this is a relatively new product. We are seeing some action in Hyderabad, and expect the southern market to pick up soon.” At present, most of the insured events in the South are music concerts and sports events. Various factors could cause losses during events — natural calamities, accidents, fire and even thefts. Of the claims arising from event insurance, about 25% of reported losses are due to malicious damages and another 30% due to storms and rains, said Adidamu. Other reasons such as accidents and thefts collectively cause the rest, he added. The average premium for an event size of about Rs. 10 Cr ranges from Rs. 3 lakh to Rs. 3.5 lakh, Adidamu added.
Private life insurers drive industry growth in August (FE 16.09.17)
The life insurance industry continued its growth in August as private life insurance players saw their annual premium equivalent (APE) grow 29% year-on-year for the month. Life Insurance Corporation of India (LIC) saw its APE lower than private players at 9.3% year-on-year at Rs 2,007.9 Cr in August, suggest the data from Edelweiss. Senior officials in the insurance industry said with rising equity markets, a strong growth is being witnessed in unit-linked products at much faster pace compared to traditional products. “In our view, rising financial savings and higher inflows post demonetisation helped the industry register impressive growth. Further, we anticipate proclivity for financial savings to continue and industry growth momentum to sustain,” said Edelweiss in its insurance report. Players such as Bajaj Allianz, Kotak Life Insurance, IndiaFirst Life Insurance and SBI Life Insurance continued to see positive APE growth.
Short-term CP yields rise on liquidity reduction, IPO funding requirement (FE 16.09.17)
With considerable amount of liquidity being sucked out of the system and funding requirement of non-banking finance companies (NBFCs) having been increased following back-to-back IPOs, yields on commercial papers (CP) shot up further this week. Take for example Axis Finance which did a three-month CP at 6.65% on Friday. The firm had paid just 6.58% for a similar-tenure CP on September 5, Bloomberg data show. A similar trend can be seen with L&T Finance. The company paid 6.74% on a three-month CP on September 13, while it had paid just 6.68% for a similar-tenure CP on September 12. Likewise, TMFL raised funds via a three-month CP at 6.76% on September 14. The company had issued a three-month CP at 6.58% on August 31. Ajay Manglunia, EVP at Edelweiss Securities, points out that there has been significant liquidity reduction from the system this week led by OMO sales, SDL auctions, G-Sec auctions, advance tax outflows, etc. “Naturally, the yields are on the higher side.” More than Rs 22,000 Cr of SDLs were auctioned this week and Rs 10,000 Cr worth of central government securities were sold as part of open market operation sales.
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Amazon ties up with Bank of Baroda to attract more sellers (BL, BS 16.09.17)
Online marketplace giant Amazon India is racing against time to bring in more sellers so that they sell more on its platform during the festive season. On Friday, it tied up with the Bank of Baroda to offer micro loans to its sellers. The firm’s arm, Amazon Seller Services Pvt Ltd (ASSPL), is bringing in more financial partners so that it can cater to its 225,000 seller base. The company had last year announced the launch of a seller lending programme in India for small and medium businesses to get fast and easy access to working capital. The company had partnered with Capital First Limited, an independent Mumbai-based non-banking financial company (NBFC), for the programme. Capital First provides secured and unsecured loans to sellers from Rs 5 lakh to Rs 2 Cr at competitive interest rates. According to the company, Bank of Baroda loans would be offered on invite-only basis to sellers, based on their performance. The programme was piloted by Amazon in July this year in association with the bank. The loans would be extended in the range of Rs 1-25 lakh at annual interest rates between 10.45% and 11.5%. In India, unsecured loans of Rs 1-25 lakh have very low approval rates. Small-scale businesses get loans at high annual interest rates of 18-30%, with a processing time of up to 30 days. In addition, small businesses have to go through heavy documentation and due diligence to get loan approvals, executives from the bank said. “Through our engagement with sellers, we realised that lack of financial resources can hinder the growth of small businesses as they scale up, which can impact expansion, especially ahead of the festive sales,” Amazon India director and general manager (seller services) Gopal Pillai said. Online marketplace players help sellers secure loans so that they can buy or produce more and in turn sell more on their platform.
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