TMB to raise Rs 1000 crore: BS
Tamilnad Mercantile Bank (TMB) is targeting a business of Rs 50,000 crore by 2012-13 for which it would
require around Rs 1,000 crore capital. Speaking to Business Standard on the sidelines of its 86th and 87th
annual general meeting here on Wednesday, G Nagamal Reddy, managing director and chief executive
officer, TMB, said the bank would look at raising the proposed money through IPO, qualified institutional
placement (QIP), Tier II bonds or rights issue. ?This will be decided in the coming board meetings,? he
added.
The bank?s current networth is around Rs 1,000 crore. It did a business of Rs 16,137 crore as on March 31,
2009.
?TMB is a small bank and to become a medium-sized bank we have to go for an IPO,? said Reddy, adding
they needed to improve the paid-up capital, which is currently at around Rs 28.45 lakh.
The bank is also planning to appoint a consultant to initiate re-engineering processes including human
resource, marketing and expansion.
It had applied for 40 branch licences ? it currently has 215 branches ?with the Reserve Bank of India.
Reddy said the bank saw good potential in Mumbai, Delhi, Kolkata and Gujarat and would focus on these
markets as part of the expansion plan. ?We will enter Madhya Pradesh and Chhattisgarh next year and are
planning to recruit 500 clerks,? he said.
The Tuticorin-based, largely seen as community bank, declared a dividend of Rs 500 per share (face value
of Rs 10) for the fiscal 2007-08 and Rs 600 per share for 2008-09.
Tuesday, January 19, 2010
The new normal-different world for banks': BL
BANCON ?2009-10, the annual gathering of bankers and economists, addresses the theme of ?normalcy' ?
that most desirable of attributes ? especially so in the aftermath of a traumatic economic crisis. Most
advanced economies have just escaped a second ?great depression' and suffered just a few months of
recession ? thanks to unprecedented monetary steroids and fiscal stimulus across all top economies.
As these economies struggle towards recovery ? with the prospect of a gradual unwinding of the stimulus,
this is perhaps the right time for bankers and economists to reflect on how Indian banks should handle the
new scenario.
They'll need to debate the argument advanced by Nobel Laureate Paul Krugman that banking should be
made boring ? citing the US experience that when they were tightly regulated, conservative and stripped of
the incentives that encourage dangerous risk taking, it actually proved to be an era of spectacular progress
for the economy as a whole! In contrast, when regulations were lifted, banks expanded credit, debt rose and
eventually the finance industry exploded, he noted. That's something for bankers to ponder.
Reality checks
Although India did not suffer as much as the rest of the world in this crisis, there were some reality checks.
Most notably, the idea that for the foreseeable future, economic growth was one straight, linear and easy
path of continuous 9 per cent plus growth was disturbed.
Another idea that got a jolt was the so-called ?de-coupled Indian economy' because of its innate strengths
and large domestic market.
This was expected to insulate us from any shocks world-wide. Reality proved a bit different as various
sectors from software to textiles were affected by the ripples from abroad. For an increasingly integrating
economy, the slowdown in GDP growth was perhaps an eye-opener.
The last time this conference was held two years ago, the mood was different. Every one was gung-ho
about 9 per cent GDP growth and India's status as the second fastest growing economy and a new
emerging economic super power.
Although software companies put India on the world map, manufacturing sector was also catching up. Many
Indian companies ventured outside to other shores, making high profile acquisitions, with bankers in tow.
Bank loan growth didn't seem like coming down below 30 per cent. In the post-2009 scenario, that
exuberance has been replaced by a lot more caution. That doesn't however mean that we get back to the
complacent 3.5 per cent Hindu rate of growth.
In fact, after earlier fears that GDP growth may fall to 5.5 per cent, most experts think growth will return to 8
per cent by the end of this fiscal. With some planning and help from normal monsoons, a revival in other
economies (that are export destinations) and good luck, it is possible to target double-digit GDP growth in
the immediate future.
Looking back at the crisis, one can't but help get the feeling that its timing was perhaps a blessing in
disguise for the sector.
For, April 2009 was the time that was fixed about four years ago to open up the Indian banking sector to
foreign competition. In the interim, domestic banks were expected to strengthen themselves, improve their
capital base, consolidate wherever possible on the lines of the roadmap laid down by reputed committees
(Narsimham Committees I & II) and prepare to share turf with foreign banks.
If the crisis had not set in during the second half of 2008, it is possible that the gates may have been opened
a bit, notwithstanding the resolute reluctance of the regulatory authorities to such moves. Foreign banks that
eyed the potential of the Indian market and often lectured on the moral hazards of bailing out public sector
banks in India, themselves had to face the ignominy of being bailed out by their respective governments.
When their market capitalisation dropped precipitously, there were jokes floating around about how Indian
banks could even consider taking over some of these foreign banks ? provided there was really something
left in the books.
The wheel had turned a full circle.
In the event, we got a reprieve. But, to use Churchill's memorable phrase after the miraculous evacuation of
British troops stranded on the beaches of Dunkirk, ?We must be very careful not to assign to this deliverance
the attributes of a victory.?
That's sound advice for Indian banks too. It will probably take at least another two years for foreign banks to
recover their strength (paying off their dues to local governments) before they think of venturing out again.
That's providential time ? for the sector to pull up its socks and prepare for the next round of invasion.
Although Indian banks have weathered the crisis fairly well so far, and flaunt strong capital adequacy ratios
and low NPA numbers (even if one makes allowance for the restructuring of assets), there are still a lot of
milestones to cross and benchmarks to reach. Consolidation in public sector banks still remains a distant
goal, notwithstanding some encouraging sound bytes once every few months from the Finance Ministry and
a couple of bank chairmen. High governance standards and autonomy still lie in the realm of text books.
Customer service has improved when compared to a decade ago ? but there's still a long way to go.
Financial inclusion is still a distant mirage, notwithstanding impressive achievement of ?targets'. Speedy
recovery of delinquent loans, despite the presence of numerous legal remedies, remains unfulfilled.
Use of new risk management tools has increased, although that's not necessarily proved foolproof.
Transaction costs still remain high in segments of the banking industry. HR practices need improvement.
Banks need to address all these and more - apart from tackling macro challenges such as interest rate
volatility, high government borrowing, high inflation etc.
Even as economies limp back to normalcy, bankers and regulators need to remember that it was easy
liquidity and low interest rates that fuelled the sub-prime crisis that finally brought down so many reputations
and institutions. Those conditions are still there.
BANCON ?2009-10, the annual gathering of bankers and economists, addresses the theme of ?normalcy' ?
that most desirable of attributes ? especially so in the aftermath of a traumatic economic crisis. Most
advanced economies have just escaped a second ?great depression' and suffered just a few months of
recession ? thanks to unprecedented monetary steroids and fiscal stimulus across all top economies.
As these economies struggle towards recovery ? with the prospect of a gradual unwinding of the stimulus,
this is perhaps the right time for bankers and economists to reflect on how Indian banks should handle the
new scenario.
They'll need to debate the argument advanced by Nobel Laureate Paul Krugman that banking should be
made boring ? citing the US experience that when they were tightly regulated, conservative and stripped of
the incentives that encourage dangerous risk taking, it actually proved to be an era of spectacular progress
for the economy as a whole! In contrast, when regulations were lifted, banks expanded credit, debt rose and
eventually the finance industry exploded, he noted. That's something for bankers to ponder.
Reality checks
Although India did not suffer as much as the rest of the world in this crisis, there were some reality checks.
Most notably, the idea that for the foreseeable future, economic growth was one straight, linear and easy
path of continuous 9 per cent plus growth was disturbed.
Another idea that got a jolt was the so-called ?de-coupled Indian economy' because of its innate strengths
and large domestic market.
This was expected to insulate us from any shocks world-wide. Reality proved a bit different as various
sectors from software to textiles were affected by the ripples from abroad. For an increasingly integrating
economy, the slowdown in GDP growth was perhaps an eye-opener.
The last time this conference was held two years ago, the mood was different. Every one was gung-ho
about 9 per cent GDP growth and India's status as the second fastest growing economy and a new
emerging economic super power.
Although software companies put India on the world map, manufacturing sector was also catching up. Many
Indian companies ventured outside to other shores, making high profile acquisitions, with bankers in tow.
Bank loan growth didn't seem like coming down below 30 per cent. In the post-2009 scenario, that
exuberance has been replaced by a lot more caution. That doesn't however mean that we get back to the
complacent 3.5 per cent Hindu rate of growth.
In fact, after earlier fears that GDP growth may fall to 5.5 per cent, most experts think growth will return to 8
per cent by the end of this fiscal. With some planning and help from normal monsoons, a revival in other
economies (that are export destinations) and good luck, it is possible to target double-digit GDP growth in
the immediate future.
Looking back at the crisis, one can't but help get the feeling that its timing was perhaps a blessing in
disguise for the sector.
For, April 2009 was the time that was fixed about four years ago to open up the Indian banking sector to
foreign competition. In the interim, domestic banks were expected to strengthen themselves, improve their
capital base, consolidate wherever possible on the lines of the roadmap laid down by reputed committees
(Narsimham Committees I & II) and prepare to share turf with foreign banks.
If the crisis had not set in during the second half of 2008, it is possible that the gates may have been opened
a bit, notwithstanding the resolute reluctance of the regulatory authorities to such moves. Foreign banks that
eyed the potential of the Indian market and often lectured on the moral hazards of bailing out public sector
banks in India, themselves had to face the ignominy of being bailed out by their respective governments.
When their market capitalisation dropped precipitously, there were jokes floating around about how Indian
banks could even consider taking over some of these foreign banks ? provided there was really something
left in the books.
The wheel had turned a full circle.
In the event, we got a reprieve. But, to use Churchill's memorable phrase after the miraculous evacuation of
British troops stranded on the beaches of Dunkirk, ?We must be very careful not to assign to this deliverance
the attributes of a victory.?
That's sound advice for Indian banks too. It will probably take at least another two years for foreign banks to
recover their strength (paying off their dues to local governments) before they think of venturing out again.
That's providential time ? for the sector to pull up its socks and prepare for the next round of invasion.
Although Indian banks have weathered the crisis fairly well so far, and flaunt strong capital adequacy ratios
and low NPA numbers (even if one makes allowance for the restructuring of assets), there are still a lot of
milestones to cross and benchmarks to reach. Consolidation in public sector banks still remains a distant
goal, notwithstanding some encouraging sound bytes once every few months from the Finance Ministry and
a couple of bank chairmen. High governance standards and autonomy still lie in the realm of text books.
Customer service has improved when compared to a decade ago ? but there's still a long way to go.
Financial inclusion is still a distant mirage, notwithstanding impressive achievement of ?targets'. Speedy
recovery of delinquent loans, despite the presence of numerous legal remedies, remains unfulfilled.
Use of new risk management tools has increased, although that's not necessarily proved foolproof.
Transaction costs still remain high in segments of the banking industry. HR practices need improvement.
Banks need to address all these and more - apart from tackling macro challenges such as interest rate
volatility, high government borrowing, high inflation etc.
Even as economies limp back to normalcy, bankers and regulators need to remember that it was easy
liquidity and low interest rates that fuelled the sub-prime crisis that finally brought down so many reputations
and institutions. Those conditions are still there.
The logistics of organising a BANCON: BL
The logistics of organising a BANCON: BL
BANCON (earlier BECON for Bank Economists' Conference) is a mega event on the calendar for top
bankers. The conclave invariably sees heavyweight presence of the top officials from the Ministry of
Finance, the Reserve Bank of India and banks, both domestic and foreign.What's special about this annual
conference of bankers, you may wonder? The conference is usually hosted by a bank with organisational
support from the Indian Banks Association. For each host bank, it is a matter of prestige and pride to better
the record set by every previous host ? much in the manner of countries competing to outdo each other at
the Olympics. And each host bank tries to make the event ?unique and special' in its own way.
In recent memory, BANCON 2006 held at the International Convention Centre, Hyderabad and hosted by
Andhra Bank, was considered a magnificent show. The next conference was hosted by Bank of Baroda with
the objective of making it a ?value-added event for bankers'.BANCON 2008, scheduled to be held in Srinagar
in the last week of August 2008, never saw the light of day. And now, BANCON 2009-10 is being hosted by
State Bank of India with organisational support from IBA at Hotel Trident, Mumbai, on January 11and 12.
Special significance
The last conference held on November 26 and 27, 2007 was particularly special for Bank of Baroda as it
coincided with the bank's centenary year. It faced a tall order in trying to best the record set by Andhra
Bank.Newspersons covering the eventwondered how BoB would manage to conduct the event of that
magnitude at Hotel Taj Lands End, Mumbai, as the area appeared small compared with the the venue in
Hyderabad. But as a senior BoB official who was involved with the organisation of the event, explained, ?We
designed it differently. Instead of making it a conference filled with presentation and lectures, we chose to
have panel discussions on various issues. And for the first time, we also charged a participation fee.?
Justifying the participation fee, the official said, ?the venue was not as huge as the International Convention
Centre in Hyderabad. We were therefore constrained to limit the participation to senior bankers and top
executives of banks.??Serious discussions about the conduct of the event commenced in August, though the
hotel and venue booking were firmed up in May,? he said.
While admitting that there were some last minute hiccups, the official said, ?We got them resolved without
much fuss. On the whole, it was a satisfying experience.?Preparatory work commenced at least four months
ahead of the scheduled date of the event. Papers were invited; that kept the community moving.Closer to
the event date, Bank of Baroda roped in some of its officials for coordinating the entire programme. More
than a dozen committees were formed headed by an officer not less than the rank of a General Manager,
and comprising not more than four for a team to manage the assigned task.
The jobs which these committees had to oversee and manage included taking care of the participants'
conveyance, receiving and dropping guests from the airport to the venue and back (airport committee);
ensuring comfortable accommodation (reception committee); food committee (to ensure no guest went
without food and everyone got what they liked); stage committee (to take care of stage-seating
arrangement); hall arrangement; media management committee and so on.
Bank of Baroda pulled it off and could justifiably claim that the event was a grand success. Now it is for State
Bank of India to carry the baton forward.
BANCON (earlier BECON for Bank Economists' Conference) is a mega event on the calendar for top
bankers. The conclave invariably sees heavyweight presence of the top officials from the Ministry of
Finance, the Reserve Bank of India and banks, both domestic and foreign.What's special about this annual
conference of bankers, you may wonder? The conference is usually hosted by a bank with organisational
support from the Indian Banks Association. For each host bank, it is a matter of prestige and pride to better
the record set by every previous host ? much in the manner of countries competing to outdo each other at
the Olympics. And each host bank tries to make the event ?unique and special' in its own way.
In recent memory, BANCON 2006 held at the International Convention Centre, Hyderabad and hosted by
Andhra Bank, was considered a magnificent show. The next conference was hosted by Bank of Baroda with
the objective of making it a ?value-added event for bankers'.BANCON 2008, scheduled to be held in Srinagar
in the last week of August 2008, never saw the light of day. And now, BANCON 2009-10 is being hosted by
State Bank of India with organisational support from IBA at Hotel Trident, Mumbai, on January 11and 12.
Special significance
The last conference held on November 26 and 27, 2007 was particularly special for Bank of Baroda as it
coincided with the bank's centenary year. It faced a tall order in trying to best the record set by Andhra
Bank.Newspersons covering the eventwondered how BoB would manage to conduct the event of that
magnitude at Hotel Taj Lands End, Mumbai, as the area appeared small compared with the the venue in
Hyderabad. But as a senior BoB official who was involved with the organisation of the event, explained, ?We
designed it differently. Instead of making it a conference filled with presentation and lectures, we chose to
have panel discussions on various issues. And for the first time, we also charged a participation fee.?
Justifying the participation fee, the official said, ?the venue was not as huge as the International Convention
Centre in Hyderabad. We were therefore constrained to limit the participation to senior bankers and top
executives of banks.??Serious discussions about the conduct of the event commenced in August, though the
hotel and venue booking were firmed up in May,? he said.
While admitting that there were some last minute hiccups, the official said, ?We got them resolved without
much fuss. On the whole, it was a satisfying experience.?Preparatory work commenced at least four months
ahead of the scheduled date of the event. Papers were invited; that kept the community moving.Closer to
the event date, Bank of Baroda roped in some of its officials for coordinating the entire programme. More
than a dozen committees were formed headed by an officer not less than the rank of a General Manager,
and comprising not more than four for a team to manage the assigned task.
The jobs which these committees had to oversee and manage included taking care of the participants'
conveyance, receiving and dropping guests from the airport to the venue and back (airport committee);
ensuring comfortable accommodation (reception committee); food committee (to ensure no guest went
without food and everyone got what they liked); stage committee (to take care of stage-seating
arrangement); hall arrangement; media management committee and so on.
Bank of Baroda pulled it off and could justifiably claim that the event was a grand success. Now it is for State
Bank of India to carry the baton forward.
Sugar output may rise on lower cane diversion:BL 241209
Mawana Sugars says kolhus unable to pay farmers higher price.
"…This time, although there are 25-30 per cent more kolhus, they are drawing much less cane and working
barely 8-10 hours against 24 hours last year."
Mawana Sugars Ltd (MSL) expects to crush 10 per cent more cane during the current 2009-10 season
(October-September) on the back of reduced diversion of raw material to makers of alternative sweeteners
such as gur and khandsari.
"Last season, we crushed only 23.4 lakh tonnes (lt) of sugarcane compared with 33.4 lt in 2007-08. Sugar
recovery, too, fell from 9.7 per cent to 8.93 per cent due to which we could produce only around 2.05 lt", said
Mr Sunil Kakria, Managing Director, MSL.
According to him, based on current trends, "we might crush about 10 per cent more cane this season, with
recovery also improving to 9.5 per cent." The company also plans to refine 25,000 tonnes of imported raw
sugar during the season, which will overall translate into increased output.
Mr Kakria based his expectation of higher crushing on reduced cane diversion to gur and khandsari units.
"Last season, the kolhus bought about half of the marketable cane in our reserved area, leaving only the
balance for us to crush. This time, although there are 25-30 per cent more kolhus, they are drawing much
less cane and working barely 8-10 hours against 24 hours last year," he told Business Line.
Unattractive prices
One reason for this, he felt, was that gur prices were currently not all that attractive. At the start of the
season, gur was being sold in the Muzaffarnagar and Hapur markets at Rs 1,200 a man of 40 kg, i.e. Rs 30
a kg. This was higher than the prevailing ex-factory price of Rs 28-29 for M-31 sugar.But today, wholesale
gur is trading at Rs 950-960 a man or Rs 24 a kg, having gone as low as Rs 850 a month back. On the other
hand, sugar has rallied to Rs 35 a kg. "At current gur prices, the kolhus are not in a position to pay cane
farmers as much as we are, given their much lower recovery levels. Therefore, more cane is coming to us,"
Mr Kakria pointed out.
Mills in west Uttar Pradesh (UP) are currently paying a cane price of Rs 210-215 a quintal. But this could
change with Uttam Sugar Mills announcing a price of Rs 220-225, which is more than even the Rs 215-220
being offered by mills in Uttaranchal. Either way, it would render the operations of kolhus unviable, unless
gur prices stage a revival.
Production
Mr Kakria estimated UP's sugar production this season at 45 lt, up from the 40.64 lt of 2008-09. "The crop
size may be lower this time, but that will be more than offset by higher recovery and cane drawal rates," he
added.MSL operates three factories in UP aggregate crushing capacity of 29,500 tonnes cane a day (tcd).
Of these, two - Mawana (13,000 tcd) and Nanglamal (6,000 tcd) - are in Meerut and the third, Titawi
(10,500 tcd), is in Muzaffarnagar district.
Mawana Sugars says kolhus unable to pay farmers higher price.
"…This time, although there are 25-30 per cent more kolhus, they are drawing much less cane and working
barely 8-10 hours against 24 hours last year."
Mawana Sugars Ltd (MSL) expects to crush 10 per cent more cane during the current 2009-10 season
(October-September) on the back of reduced diversion of raw material to makers of alternative sweeteners
such as gur and khandsari.
"Last season, we crushed only 23.4 lakh tonnes (lt) of sugarcane compared with 33.4 lt in 2007-08. Sugar
recovery, too, fell from 9.7 per cent to 8.93 per cent due to which we could produce only around 2.05 lt", said
Mr Sunil Kakria, Managing Director, MSL.
According to him, based on current trends, "we might crush about 10 per cent more cane this season, with
recovery also improving to 9.5 per cent." The company also plans to refine 25,000 tonnes of imported raw
sugar during the season, which will overall translate into increased output.
Mr Kakria based his expectation of higher crushing on reduced cane diversion to gur and khandsari units.
"Last season, the kolhus bought about half of the marketable cane in our reserved area, leaving only the
balance for us to crush. This time, although there are 25-30 per cent more kolhus, they are drawing much
less cane and working barely 8-10 hours against 24 hours last year," he told Business Line.
Unattractive prices
One reason for this, he felt, was that gur prices were currently not all that attractive. At the start of the
season, gur was being sold in the Muzaffarnagar and Hapur markets at Rs 1,200 a man of 40 kg, i.e. Rs 30
a kg. This was higher than the prevailing ex-factory price of Rs 28-29 for M-31 sugar.But today, wholesale
gur is trading at Rs 950-960 a man or Rs 24 a kg, having gone as low as Rs 850 a month back. On the other
hand, sugar has rallied to Rs 35 a kg. "At current gur prices, the kolhus are not in a position to pay cane
farmers as much as we are, given their much lower recovery levels. Therefore, more cane is coming to us,"
Mr Kakria pointed out.
Mills in west Uttar Pradesh (UP) are currently paying a cane price of Rs 210-215 a quintal. But this could
change with Uttam Sugar Mills announcing a price of Rs 220-225, which is more than even the Rs 215-220
being offered by mills in Uttaranchal. Either way, it would render the operations of kolhus unviable, unless
gur prices stage a revival.
Production
Mr Kakria estimated UP's sugar production this season at 45 lt, up from the 40.64 lt of 2008-09. "The crop
size may be lower this time, but that will be more than offset by higher recovery and cane drawal rates," he
added.MSL operates three factories in UP aggregate crushing capacity of 29,500 tonnes cane a day (tcd).
Of these, two - Mawana (13,000 tcd) and Nanglamal (6,000 tcd) - are in Meerut and the third, Titawi
(10,500 tcd), is in Muzaffarnagar district.
State Govt borrowings become expensive on tight liquidity:BL 241209
Banks favour short-dated papers.
The last round of borrowings through State Development Loans saw the average spreads over ten-year
sovereign papers rising to about 45 basis points.
State governments' market borrowings have become more expensive with the liquidity overhang
dissipating.The last round of borrowings through State Development Loans (SDL) saw the average spreads
over ten-year sovereign papers rising to about 45 basis points.
Banking sources said that the rise in spreads was largely on account of reduced interest in SDLs among
banks. Spreads for some States like Jammu and Kashmir were however, about 80 basis points. This was
despite the sovereign guarantee cover on the papers. States like Madhya Pradesh have raised funds at
spreads of 55 basis points or 8.45 per cent. Only in the case of some of the southern States like Kerala and
Tamil Nadu, the spreads over sovereigns were lower than the average at about 40 basis points. The lower
spreads were largely on account of better credit rating of the States, unlike the northern States that still have
arrears in debt service payments.
Despite the discriminatory perception in the financial markets, the rise in average spreads was largely on
account of the tightening liquidity conditions, on account of the external factors and the Reserve Bank of
India's aggressive sterilisation operations.
Long maturities
Besides, the bankers said that few of them were interested in having SDLs in their investment portfolios in
view of the long maturities of the loans. Although SDLs by virtue of their sovereign guarantee status are zero
risk-weighted, the papers are largely illiquid in the secondary markets, bankers said.
Typically, in a tight or anticipated tight liquidity situation, the preference tends to be more for short-dated
papers, particularly Treasury Bills. With the derisking of investments, banks have contained the average
maturity to about two years. Besides, they added, the derisking was also resorted to in view of the Basel II
compliance, where depreciation charges would be high on long-dated papers.
Consequently the only investors in SDL papers were life insurance companies, the bankers said. Insurers'
preference was also for compliance with mandated investments directives of the insurance
regulator.However, bankers said, most life insurers who are the largest investors in SDLs, have mean yield
expectations in excess of 8.5 per cent. These expectations are likely to rise in the coming months, the
bankers said, to partly offset the turndown in the equity markets.
Banks favour short-dated papers.
The last round of borrowings through State Development Loans saw the average spreads over ten-year
sovereign papers rising to about 45 basis points.
State governments' market borrowings have become more expensive with the liquidity overhang
dissipating.The last round of borrowings through State Development Loans (SDL) saw the average spreads
over ten-year sovereign papers rising to about 45 basis points.
Banking sources said that the rise in spreads was largely on account of reduced interest in SDLs among
banks. Spreads for some States like Jammu and Kashmir were however, about 80 basis points. This was
despite the sovereign guarantee cover on the papers. States like Madhya Pradesh have raised funds at
spreads of 55 basis points or 8.45 per cent. Only in the case of some of the southern States like Kerala and
Tamil Nadu, the spreads over sovereigns were lower than the average at about 40 basis points. The lower
spreads were largely on account of better credit rating of the States, unlike the northern States that still have
arrears in debt service payments.
Despite the discriminatory perception in the financial markets, the rise in average spreads was largely on
account of the tightening liquidity conditions, on account of the external factors and the Reserve Bank of
India's aggressive sterilisation operations.
Long maturities
Besides, the bankers said that few of them were interested in having SDLs in their investment portfolios in
view of the long maturities of the loans. Although SDLs by virtue of their sovereign guarantee status are zero
risk-weighted, the papers are largely illiquid in the secondary markets, bankers said.
Typically, in a tight or anticipated tight liquidity situation, the preference tends to be more for short-dated
papers, particularly Treasury Bills. With the derisking of investments, banks have contained the average
maturity to about two years. Besides, they added, the derisking was also resorted to in view of the Basel II
compliance, where depreciation charges would be high on long-dated papers.
Consequently the only investors in SDL papers were life insurance companies, the bankers said. Insurers'
preference was also for compliance with mandated investments directives of the insurance
regulator.However, bankers said, most life insurers who are the largest investors in SDLs, have mean yield
expectations in excess of 8.5 per cent. These expectations are likely to rise in the coming months, the
bankers said, to partly offset the turndown in the equity markets.
Sensex gains 540 on Pranab talk:BL 241209
Stocks rose sharply on Wednesday, the BSE Sensex gaining by a massive 539 points, the highest in nearly
two months.The Sensex notched a 3.23 per cent rise, closing at 17,231, while the broader Nifty rose by 3.18
per cent and ended the day at 5,144.
The Finance Minister, Mr Pranab Mukherjee's reassurances on GDP growth helped bulls take control of the
entire market, causing huge short covering in the Nifty, said Mr Alex Mathews, Head of Research at Geojit
Financial Services.
The Minister's statements were only the spark, the markets rose to the extent they did because key technical
resistance levels set up by various brokerages were surpassed - roughly 17,000 for the Sensex and 5,050
for the Nifty, said market-men.This "upside confirmation" brought a momentum to buying, and the index
gains were actually heavily supported by volumes. "There was bound to be a rally," said Mr Daljeet Kohli,
Head of Research, Emkay Global Financial Services.
According to BSE data, retail players booked profits, being net sellers for Rs 313 crore. Retail investor Mr
Kalpesh Parikh sold several Nifty shares and booked profits as he wanted to take advantage of what he
perceived a "short-lived rally coupled with an uncertain future."
FIIs bought afresh, their net purchases amounting to Rs 769 crore while DIIs bought for Rs 13 crore in the
net. IT stocks were in demand due to the weak rupee and expectation of strong economic recovery (which
assures more contracts for IT companies) said brokers. Metal stocks were also hugely in demand on hopes
of global economic recovery.
The gainers on BSE were Hindalco Industries - 7.77 per cent; NTPC 6.96 per cent, Sterlite 5.05 per cent,
Reliance Industries 4.62 per cent, Tata Steel 4.45 per cent, and ICICI 4.3 per cent.
Stocks rose sharply on Wednesday, the BSE Sensex gaining by a massive 539 points, the highest in nearly
two months.The Sensex notched a 3.23 per cent rise, closing at 17,231, while the broader Nifty rose by 3.18
per cent and ended the day at 5,144.
The Finance Minister, Mr Pranab Mukherjee's reassurances on GDP growth helped bulls take control of the
entire market, causing huge short covering in the Nifty, said Mr Alex Mathews, Head of Research at Geojit
Financial Services.
The Minister's statements were only the spark, the markets rose to the extent they did because key technical
resistance levels set up by various brokerages were surpassed - roughly 17,000 for the Sensex and 5,050
for the Nifty, said market-men.This "upside confirmation" brought a momentum to buying, and the index
gains were actually heavily supported by volumes. "There was bound to be a rally," said Mr Daljeet Kohli,
Head of Research, Emkay Global Financial Services.
According to BSE data, retail players booked profits, being net sellers for Rs 313 crore. Retail investor Mr
Kalpesh Parikh sold several Nifty shares and booked profits as he wanted to take advantage of what he
perceived a "short-lived rally coupled with an uncertain future."
FIIs bought afresh, their net purchases amounting to Rs 769 crore while DIIs bought for Rs 13 crore in the
net. IT stocks were in demand due to the weak rupee and expectation of strong economic recovery (which
assures more contracts for IT companies) said brokers. Metal stocks were also hugely in demand on hopes
of global economic recovery.
The gainers on BSE were Hindalco Industries - 7.77 per cent; NTPC 6.96 per cent, Sterlite 5.05 per cent,
Reliance Industries 4.62 per cent, Tata Steel 4.45 per cent, and ICICI 4.3 per cent.
SBI scheme for varsity students:BL 241209
State Bank of India has launched a scheme, 'Power Jyothi', for the students of Madurai Kamaraj
University.The scheme facilitates payment of university fee from anywhere in the country on a charge of Rs
22. This is cheaper than obtaining a draft at Rs 30 in the normal course. All SBI branches will accept the
fees and credit the same to the Madurai Kamaraj University Account simultaneously.
In a press release, the bank said the fees would be credited to the university account with details such as
student's name, course, year, enrolment number and fee details, which could be verified at a later date.Dr
Karpaga Kumaravel, Vice-Chancellor, Madurai Kamaraj University, launched the facility.
State Bank of India has launched a scheme, 'Power Jyothi', for the students of Madurai Kamaraj
University.The scheme facilitates payment of university fee from anywhere in the country on a charge of Rs
22. This is cheaper than obtaining a draft at Rs 30 in the normal course. All SBI branches will accept the
fees and credit the same to the Madurai Kamaraj University Account simultaneously.
In a press release, the bank said the fees would be credited to the university account with details such as
student's name, course, year, enrolment number and fee details, which could be verified at a later date.Dr
Karpaga Kumaravel, Vice-Chancellor, Madurai Kamaraj University, launched the facility.