|
Current Economic Statistics and Review For the
Week | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Theme
of the week:
Growth of ATMs in India: Well Spread By Bank Groups* Information
Technology (IT) and the Communication Networking Systems (CNS) have
revolutionalised the functioning of the entire Banking, Financial Services
and Insurance (BFSI) industries world over. The application of internet
communication network has made it possible for banks to aggressively open
automated teller machines (ATMs) as a convenience to their customers as well
as to reduce servicing costs. Globally, ATMs have been the inimitable
solution for the banking sector which has revolutionised the way
transactions are carried out. The
ATM Machine An
ATM is a computerised telecommunications device that provides the customers
of a bank with access to financial transactions in a public space without
the need for a human clerk or a bank teller. The customer is identified by
inserting a plastic ATM card with a magnetic stripe or a plastic smartcard
with a chip, which contains some security information and a unique card
number. Security is provided to the customer by entering a personal
identification number (PIN). Using an ATM, customers can access their bank
accounts in order to make cash withdrawals or credit card cash advances and
check their account balances. ATMs
in In
1987, Hongkong and Shanghai Banking Corporation (HSBC) installed the first
ATM in Sustained
Growth Ten
years ago, an ATM was a novelty in Indian banking industry. But with the
entry of private sector banks, ATMs have mushroomed in the urban landscape.
Private sector banks like ICICI Bank, UTI Bank and HDFC Bank all deployed
ATMs aggressively and have seen their customer base expand. Subsequently,
even public sector banks (PSBs) have followed suit with an increasing number
of ATMs. In the last couple of years there has been an immense competition
among banks — public sector banks (PSBs), private banks, foreign banks and
co- operative banks, to set up ATMs across the country.
Since
2000, the Indian ATM industry has seen an explosive growth as banks have
committed to substantial capital outlays on ATM deployment as the usages of
ATMs have significantly increased in Banks
have been installing ATMs to increase their reach. The growth in the
installed base of ATMs in the initial 4 years, between 2000 and 2003 was
primarily driven by private sector banks, while in the last 4 years, between
2004 and 2007 it has been predominantly driven by public sector banks on
account of rapid expansion. After
a relatively slow start in the late 1990s, there has been a spurt in ATMs
installations across the country — increasing by almost 100 per cent in
two years from 1,521 in 1999 to around 3,000 at the end of March 2001. The
trend continued in the subsequent two years and the aggregate number of ATMs
increased from 5,489 in March 2002 to around 12,000 at the end of March
2004. At
the end of March 2005, around 17,642 ATM machines were installed in the
country which rose to 27,008 at the end of March 2007 – registering a
growth of 53 per cent. The growth rate has almost halved owing to large base
effect. Cash
withdrawals remain the most widely used ATM transactions; however, many
banks are adding a collection of services to help encourage use of ATMs, as
ATM transactions cost less than teller transactions. According to banking
analysts, the total cash withdrawals through ATMs across Ratio
of ATMs to Total Bank Branches The
ratio of aggregate ATMs as percentage of total bank branches in
As
indicated in Table 1, nationalised banks with 9,888 ATMs accounted for the
largest share of installed ATMs, followed by the new private sector banks
(8,192), SBI group (6,441), old private sector banks (1,607) and foreign
banks with 960 ATMs. The
total number of ATMs installed by foreign banks and new private sector banks
were more than three times of their branches, while the ATM to branch ratio
was much lower for public sector banks (32.9 per cent) and old private
sector banks (34.9 per cent). However, ATMs in the case of two public sector
banks, namely, Corporation Bank and IDBI Bank were more than their branches.
At
individual bank level, the number of ATMs exceeded branches in respect of
all new private sector banks except Yes Bank. In the case of old private
sector banks, the ATM to branch ratio stood at 35 per cent. At
end-March 2007, 29 foreign banks were operating in
On-site
and Off-site ATMs There
are basically two types of ATM installations: on-site ATM and off-site ATM.
On-site ATMs are installed inside the premises of the bank or adjacent to
the bank branch. While off-site ATMs (a site away from the branch) are
installed at various locations such as airports, railway stations, petrol
pumps, shopping centres, malls, restaurants, colleges, commercial areas or
at places where the bank does not have a service branch near by.
Of
all the ATMs installed in the country as at end-March 2007, new private
sector banks had the largest share in off-site ATMs, while nationalised
banks had the largest share in on-site ATMs (Table 2). Off-site ATMs as
percentage to total ATMs were the highest in case of foreign banks, followed
by new private sector banks, SBI group and nationalised banks. In
order to expand the number of off-site ATMs, last year, State Bank of India
(SBI) had entered into an agreement with Ministry of Railways for
installation of ATMs at 682 railway stations across the country which was
followed up by six more banks to install ATMs at 711 locations. These banks
are; Canara Bank, Punjab National Bank, Indian Bank, Dena Bank, Union Bank
of In
recent years, some banks have introduced ‘Mobile ATMs’ in order to reach
remote areas that may not have a large enough population for the bank to
invest in an ATM centre. Banks such as SBI, State Bank of Last
year, SBI deployed the country's first ATM on ferry, ‘KSINC Jhankar’ in Mobile
ATMs are used extensively at exhibitions and fairs. For instance, State Bank
of ATM
Penetration At
present, the penetration of ATMs is significantly higher in Tier-I than
Tier-II cities. While ATMs have become an intrinsic part of the urban
mindscape, the challenge lies in penetrating deeper into the rural areas
across the country. To promote micro financing initiatives, banks are
deploying biometric solutions with ATMs. The recent directive from the
government on financial inclusion is a key driver for the growth of such
solutions in Biometric
ATMs are the latest solution in the ongoing effort to offer banking services
to the rural masses. Establishing the identity of a rural depositor through
biometrics makes it possible for illiterate or barely literate folks to
become part of the banking user community. For biometric access, customers
have to register their finger prints with the branch in which they maintain
their accounts. The mobile ATMs would identify the customer based on his/her
finger print. In
May 2007, Andhra Bank launched the country’s first mobile biometric ATM.
The Bank rolled out two mobile biometric ATMs, one each for Cost
of Operations While
the ATM is a great service for customers, for the banks it means immense
savings on the cost of operations. According to industry chamber ASSOCHAM,
workload of 65,000 cashiers has fallen by 50 per cent in the last five years
due to growing installations of off-site and on-site ATM facilities in
urban, semi-urban and rural bank branches. With the installation of ATMs,
the existing cashiers in the banking sector are now confined to large and
bulk cash withdrawals, making their entries and submitting the transactions
tally to the respective managers. Banking analysts estimates that for ATMs
to be viable, at least 10,000 transactions a month or 300 a day should be
the target. RBI
for Free ATM Use Across Banks In
In
an attempt to rationalise the service charges for ATM transactions such that
it becomes affordable for the common man the Reserve Bank of India (RBI)
placed a draft approach paper, “ATMs
of Banks: Fair Pricing and Enhanced Access” on its website on 24th
December 2007 with 31st January 2008 as the time frame for receipt of public
comments. The approach paper suggested the service charges to be levied by
banks for offering ATM service may be as under:
The
RBI in its draft paper has recommended that customers of one bank be allowed
free use of ATMs of other banks, including for cash withdrawal, from April
1, 2009 and in a customer friendly decision, has also suggested that banks
which are charging more than Rs 20 per transaction, for cash withdrawals
(for customers of other banks), shall reduce the charges to Rs 20 for such
transactions by March 31, 2008. According
to RBI, it is evident that the charges levied on the customers vary from
bank to bank and also vary according to the ATM network that is used for the
transaction. Consequently, a customer is not aware, before hand, of the
charges that will be levied for a particular ATM transaction, while using an
ATM of another bank. This generally discourages the customer from using the
ATMs of other banks. It is, therefore, essential to ensure greater
transparency. As
per the draft paper, the international experience indicates that in
countries such as Major
suggestions received on the draft policy are as follows: 1)
Bank
customers have desired the regulator to make the service free immediately; 2)
Banking
analysts apprehend that such a move of making service charges free may serve
as a disincentive for the risk taking dynamic banks in their expansion of
ATM network; 3)
Some
of the banks have suggested that instead of making the service totally free,
a specific number of free withdrawals in a quarter/month can either be
prescribed or left to individual banks; 4)
Two
banks have preferred that certain nominal charges should be prescribed; 5)
A
few banks fear that the availability of free ATM services at convenient
locations could lead to an increase in the number of transactions and a
reduction in the amount withdrawn per transaction and 6)
Indian
Banks Association (IBA) has suggested that the number of free transactions
at ATMs of other banks be restricted to two per month. Also in metro centres,
the minimum cash withdrawal may be stipulated at Rs 500 per account other
than no-frill accounts. Besides, IBA has advised that cap be fixed for
balance enquiry. The
other suggestions made by banks/IBA are as follows: 1)
Third-party
advertisement on the ATMs be permitted as a revenue stream for the banks;
and 2)
White
label[1]
ATMs to be permitted. According
to industry sources, the largest public sector bank, SBI, which incidentally
also has one of the biggest ATM networks in the country is somewhat unhappy
with the RBI’s revised fee structure for ATMs. The bank views its large
ATM network as a competitive edge over other banks and it is justified also
because the bank has made huge investments in building the country's largest
ATM network and sharing this network with other banks without any charge
will result in the bank losing their competitive edge. On the other hand,
banks that do not have comparable networks will gain significantly as their
customers will be able to withdraw funds from all the ATMs. In
February 2008, RBI announced that the framework on ATM usage charges have
been decided after analysing the public comments received on its approach
paper. Despite hesitation by the banks, the RBI has gone ahead to implement
policies immediately by which a customer of a bank will not be levied any
charge for use of other bank ATMs for balance enquiries. The
customers have to wait till April 2009 to use other bank’s ATMs free to
withdraw money. However, banks which are charging more than Rs 20 per
transaction for customers of other banks shall reduce the charges to a
maximum of Rs 20 per transaction by March 31, 2008. The
central bank has taken this decision after taking into consideration the
falling costs and various international practices on ATM use. According to
RBI, use of technology should, among others, lead to reduction in
transaction costs to banks. Over a period, with the increasing adaptation of
the people to the use of technology in their daily transactions, it is
expected that there will be a further reduction in the transaction costs.
Against this background, there is also a case for rationalising the service
charges for ATM transactions such that it becomes affordable for the common
man. Enhanced and cost effective access to ATMs play an important role in
technology based financial inclusion. As
far as other approvals are concerned, the regulator has rejected the
suggestions on third party advertisement and installation of white label
ATMs. Challenges
Ahead On
account of increasing card usage and rising customer expectations the rapid
expansion of ATM network would continue in the next 4-6 years. Moreover, the
rapid development of banking and financial services in the country
represents a significant opportunity for ATM growth. Banking analysts
estimate that there will be roughly two ATMs for every one branch (a ratio
of 1:2 for bank branches v/s ATMs). This means the number of ATMs will rise
to around 1.16 lakh by 2012 assuming the number of branches remains at the
same level. However,
some banking analysts doubt if ATMs would reach its potential with the
current restrictions by the RBI. Bankers are unhappy with the restrictions
imposed on unlimited expansion of their ATM network as in September 2005 the
RBI stipulated that banks would have to take prior permission to set up
off-site ATMs. Another
regulation that stands in the way of ATM expansion in Besides,
banking analysts apprehend that the central bank’s recent move of making
service charges free may decelerate the deployment of ATMs by banks. ___________ *
This note has been prepared by Bipin K. Deokar. References RBI
(2007): Report on Trend and Progress of Banking in India 2006-07, November
27. RBI
(2006): Report on Trend and Progress of Banking in India 2005-06, November
14. RBI
(2005): Report on Trend and Progress of Banking in India 2004-05, November
24. RBI
(2004): Report on Trend and Progress of Banking in India 2003-04, November
29. RBI
(2003): Report on Trend and Progress of Banking in India 2002-03, November
17. Reddy,
Y V (2006): ‘Use of Technology in the financial sector: Significance of
concerted efforts’, at the Banking Technology Awards Function at the IDRBT,
EPWRF
(2006): ‘Increasing Concentration of Banking Operations’, Economic and
Political Weekly, March 18-24, Mumbai. Dey
Anindita (2006): ‘RBI says no to white-label ATMs’, Business Standard,
September.
[1] White-label ATMs are owned and operated by non-bank entities and are not branded after any bank’s name.
Highlights of Current Economic Scene AGRICULTURE As
per the forecast by Food and Agriculture Organisation (FAO) of the
The
Food Corporation of India (FCI) has targeted to purchase 150 lakh tonnes
of wheat from north and central regions of the country for meeting the
needs of buffer stocks (as shown in the table). To increase the
procurement level, the central government has merged all forms of bonuses
in the form of minimum support price of Rs. 1000 and only those farmers,
who delivered their produce directly to the FCI godowns, are expected to
get a bonus of Rs 10 per quintal. To encourage wheat procurement in the
states like Uttar Pradesh, Madhya Pradesh and Bihar, the central
government has hiked the commission for societies and sub-agents to 2.5
per cent on the lines of the Arthiya Commission in The
central Government has planned to import one million tonnes of edible oil
and 15 lakh tonnes of pulses, to control the spiralling rise in their
prices and would be mulling ban on futures trading on essential
commodities as part of the measures to curb inflation. The oil imported
would be made available at the subsidised rate of Rs 15 per litre for
below poverty line (BPL) and Antodaya families. Out of 15 lakh tonnes of
pulses,
an order
of 11.86 lakh tonnes has
been placed before March
31, 2008.
According
to Solvent Extractors Association (SEA),
import of vegetable oils, for cooking and industrial use have increased by
28 per cent in March 2008, of which cooking oil imports have increased to
4.22 lakh tonnes against 3.18 lakh tonnes during the same period a year
ago. While overall shipments so far during the current oil year (November
2007-October 2008) has been higher at 38
per cent, to 22.64 lakh tonnes against 16.43 lakh tonnes a year ago.
Overall imports of vegetable oils have risen from 58 lakh tonnes to 60
lakh tonnes during this oil year, displaying a marginal rise over the last
year. Among vegetable oils, share of palm oil imports in the total
shipments has increased by 88 per cent as against 77 per cent of last
year. Refined oil imports have increased by two percentage points from
last year, while imports of crude palm oil have also shown a rising
tendency because of reports of
As
per the data compiled by the Solvent Extractors’ Association (SEA), huge
price escalation in the global market has failed to dampen India’s
vegetable oil imports with arrivals continuing to rise substantially in
the first five months of the oil year (November - October) 2007-08. The
country’s vegetable oil imports have jumped by 38 per cent during
November 2007-March 2008 at 2,264,497 tonnes as compared with 1,642,951
tonnes imported during the same period of the last financial year, due to
rise in their consumption. Import of edible oil have grown by 38 per cent
at 1,934,381 tonnes during November-March 2007-08, as against 1,401,071
tonnes, while arrival of non-edible oil has stood at 330,116 tonnes
showing a growth of 36 per cent from 241,880 tonnes in the corresponding
period of last year. Import of refined oil (RBD palmolein) is rising and
reported at 81,710 tonnes (4 per cent of the total oil imported) during
the same period as compared with 27,930 tonnes (with a share of 2 per cent
in total oil import) of last year. Crude oil is reported at 1,852,671
tonnes (96 per cent of the total oil imported) as against 1,401,071 tonnes
for the same period last year. Import of palm oil is reported at 1,706,265
tonnes as compared with 1,073,562 tonnes a year ago. In the domestic
market, prices of almost all edible oils have declined to 25 per cent
since last one month. Thus, reducing the impact of the global spurt of 10
per cent in a span of five months.
According
to the data compiled by the Solvent Extractors’ Association (SEA), the
overall oilmeal exports during the financial year 2007-08 has witnessed a
rise of 5.25 per cent to 54,42,132 tonnes from 51,70,700 tonnes in the
corresponding period of the last year. Oilmeal exports in March 2008 have
risen by 13 per cent to 853,675 tonnes compared with 755,450 tonnes during
the same period a year-ago following a jump in the shipment of soybean
meal, rapeseed meal, castor meal and groundnut meal. Kandla port has
emerged as the largest port for export of oil meals, reporting 3,239,675
tonnes (60 per cent), followed by Mumbai, which handled 978,202 tonnes (18
per cent), Bedi 735,975 tonnes (14 per cent), Vizag 270,975 tonnes (5 per
cent), The
central government has asked National Agriculture Cooperative Marketing
Federation of India (Nafed) to purchase 50,000 tonnes of potato from Uttar
Pradesh at Rs 2.50 pre kg, as the prices have crashed down drastically
owing to a bumper crop. The state government of Uttar Pradesh has agreed
to purchase 50 per cent of the crop, while centre would purchase 25 per
cent. Nafed would even intervene in According
to Karnataka Cashew Manufacturers’ Association (KCMA), the state has
made a significant growth in cashew imports and exports, constituting more
than 11 per cent of the total trade of the commodity in the year 2007-08.
The cashew sector has been growing consistently at 15 to 20 per cent since
last three years, in spite of the severe labour shortage in the state. As
per the statistics report from New Mangalore Port, karnataka exported
11,139 tonnes of cashew kernels, and imported 69,850 tonnes of raw cashew
nuts during 2007-08 against 10,529 tonnes of cashew kernels and 48,901
tonnes of raw cashew nuts traded last year, respectively. The total export
of cashew kernel from the country during 2007-08, stood at 1.14 lakh
tonnes as compared with 1.18 lakh tonnes of the previous year and import
of raw cashew has stood at 6.05 lakh tonnes as against 5.86 lakh tonnes a
year ago. According
to the estimates of the International Pepper Community (IPC) global
production of pepper is expected to fall by 9,000-12,000 tonnes to 262,900
tonnes, including 45,100 tonnes of white pepper in 2008 as against that of
271,040 tonnes of last year. Output of pepper would fall in The
state government of Andhra Pradesh has issued an order, to ban fishing for
two months this year, as against the usual 45 days before the onset of
monsoon to enable the breeding of shrimp and other species, so that
fisheries resources could be conserved. The imposition of ban has upset
the local fishermen. So fishermen along with the associations have urged
the state government to reduce the period of ban and provide them with a
mone Industry A
pick up in the index of industrial production has been seen during
February 2008 as compared to February 2007. The growth in the index of
industrial production during February 2008 at 8.6 is less than half that
recorded in February 2007 (11.0 per cent). All the three major groups
contributed for this pick up. As a result during the fiscal so far
registered IIP index rose by 8.7 per cent as compared to 11.2 per cent
last year. Mining sector and electricity sector grew by 7.5 per cent and
9.8 per cent during the month. The growth of manufacturing sector is at
8.6 per cent during February has been much below to that of 12.0 per cent
recorded last February. Out of the 17 industries, two industries declined
and eight industries registered double digit growth.. As per use-based
classification, the sectoral growth rates in February 2008 over February
2007 are 7.3 per cent in basic goods industries, 10.4 per cent in capital
goods and 8.2 per cent in intermediate goods. Consumer goods recorded an
increase of 9.2 per cent. Infrastructure Riding
on the back of good performance of coal, electricity and cement the index
of six core infrastructure industries having a combined weight of 26.7 per
cent in the index of industrial production with base 1993-94 registered an
impressive growth of 8.7 per cent during February 2008 as compared to 7.6
per cent in February 2007. This impressive performance exhibited by
the core industries in
February 2008 resulting the core index registering a growth of 5.6 per
cent during the fiscal so far as against 8.7 last year. All the six-core
industries witnessed better performance during February 2008 compared to
January 2008.. Thus refinery products, electricity, cement, steel and coal
all contributed for the higher rate of growth. Inflation The
annual rate of inflation calculated on a point-to-point basis, rose by
7.14 per cent for the week ended April 5,2008 as compared 6.44 per cent as
on April 7,2007,2007.
Index
of Primary Articles group rose by 0.4 per cent to 236.0 from 235.1 for the
previous week. Food articles group rose by 0.6 per cent. Index of non-food
articles declined by 0.1 per cent due to fall in prices of rape and
mustard seed. The
index for the major group Fuel, Power, Light and Lubricants rose by 0.2
per cent to 342.0 due to higher prices of aviation turbine fuel. Increase
in the prices of many iron and steel items and food products pushed up the
the Manufactured
products rose by 0.3 per cent mainly
due to higher prices of oil cakes and coconut oil. The
final WPI for all commodities had been revised upward from 219.4 to 218.1
for the week ended February 9,2008. As a result the rate of inflation
calculated on a point-to-point basis stood at 4.98 per cent as compared to
4.35 per cent provisional. Banking Corporation
Bank became the first public sector bank to launch National Electronic
Funds Transfer (NEFT) through ATMs. This facility caters to the personal
needs of individual debit cardholders, especially savings bank customers
and will enable them to remit the required amounts within two hours.
NEFT’s advantage is its interoperability between banks as the funds can
be transferred to the beneficiaries’ accounts of any bank. Presently,
43,000 branches of scheduled commercial banks in The
RBI has announced a hike in bank’s cash reserve ratio (CRR) by 50 basis
points to 8 per cent. The hike would be effected in two phases of 25 basis
points each, the first being in the fortnight beginning April 26 and the
second on May 10. The CRR hike is expected to suck out Rs 18,500 crore
from the system. CRR is the cash that banks maintain with the RBI as a
percentage of their net deposits. Corporation
Bank has launched its reverse mortgage loan scheme for senior citizens,
called ‘Corp Shelter’. This scheme is available to borrowers of at
least 60 years of age and married couples are also eligible as joint
borrowers. Mumbai-based
Abhyudaya Co-operative Bank is likely to acquire three co-operative banks;
Udipi-based Janta Co-operative Bank, Baroda-based, Shree Krishna
Co-operative Bank and Ahmedabad-based Manekchowk Co-operative Bank. The
acquisitions will be completed by end of June. Financial
Sector Capital
Markets Primary
Market Securities and Exchange Board of India (SEBI) has sought clarifications from Anil Dhirubhai Ambani Group on its proposed initial public offering (IPO) of Reliance Infratel, the telecom tower business arm. Clarifications have been sought on the company’s business operations, promoters and promoters group, scheme of arrangement and board of directors of Reliance Infratel. Reliance Infratel had been proposed to raise Rs 6,000 crore through the offer, with an issue of 8.91-crore shares, representing about 10.05 per cent equity in Reliance Infratel.
Secondary
Market With
inflation slipping to 7.14 per cent for the week ending April 5 from the
three-year high figure of 7.41 per cent in the previous week, key Indian
equities indices managed to end the week on a positive note on Thursday.
The 30-share Sensex of the The
BSE Small-Cap index gained 449.93 points or 5.56 per cent to 8,531.36.
Midcap stocks from banking, automobile, engineering,
infrastructure, technology and fertiliser sectors surged ahead of large
cap stocks on renewed buying interest at lower levels. TVS Motors was the
top gainer among auto stocks, rising 15.3 per cent on account of short
covering. Among the finance sector stocks, Kotak Mahindra Bank (up 12.5
per cent), IFCI (up 15.1 per cent) and Development Credit Bank (up 24.2
per cent) were outperformers on the creation of fresh long positions.
Cement sector stocks were battered last week, with Ambuja Cement, Foreign
institutional investors (FII) outflow in April 2008 totaled Rs 288.10
crore (till 15 April 2008). FII outflow in calendar year 2008 totaled Rs
11,720.90 crore (till 15 April 2008). Mutual funds (MF)s were net buyers
of shares worth Rs 5 crore in this month, till 16 April 2008. On
April 16, 2008, SEBI decided to allow mutual funds to sell government
securities contracted for purchase in the DVP-III mode. The SEBI board
approved net settlement in government securities by mutual funds according
to the guidelines issued by the RBI and also their participation in the
when issued market. Under the net settlement, it is possible to sell debt
market securities without actually giving delivery provided the
transaction is guaranteed by Clearing Corp of Short-selling
in the equities market, which is to start from April 21, may be a slow starter,
with major domestic institutions like insurance companies and banks
staying away from it. According to Section 6 of the Banking Regulation Act
and the Securities Contract Regulation Act, banks are not allowed to
short-sell. It will require an amendment to the Act if banks were to
short-sell and RBI is not in favour of this. Even for lending and
borrowing of equities to facilitate delivery-based short-selling, banks
will require a separate provision from RBI. The Insurance Regulatory and
Development Authority (Irda) too is not in favour of insurance companies
short-selling equities. Irda
is of the view that insurance companies cannot short-sell in the equity
market as it amounts to speculation and the Act does not permit
speculation with policyholders’ money.
However, it is in the process of framing guidelines for insurance
companies to engage in lending and borrowing of stocks to earn on the idle
portfolio. On
April 17,2008, SEBI allowed institutional clients in the cash segment of
the equity market to maintain their margin in the form of approved
securities. These approved
securities cover any instrument under the Securities Contract and
Regulation Act (SCRA). The market regulator has directed the stock
exchanges to issue necessary guidelines to operationalise this.
Currently, the retail segment only pays the margin for both the
cash and the derivative segments. Institutions only pay margin for the
derivative segment. Margin payment by the institutions will be implemented
from April 21, 2008. In a major relief, SEBI has permitted them to
maintain their entire margin in the form of approved securities. SEBI had
earlier asked institutional investors to deposit margins for trades
carried out by them in the cash segment. The SEBI decision comes into
effect from April 21. Institutional investors and foreign institutional
investors (FIIs) in particular were opposed to the SEBI idea of levying
margins on institutional trades in the cash segment. But the regulator’s
argument was that when it was creating a level playing field by allowing
FIIs and institutional investors to short-sell in line with retail
shareholders, they should also cough up margins as paid by the retail
shareholders. Earlier, SEBI has been expected to allow the deposit of at
least 50 per cent of the securities held by institutional investors as
margins against the exposure in the cash segment. To
prevent misuse of client collateral, SEBI has reiterated the need for
brokers to maintain proper records of such collaterals.
SEBI has also directed brokers to issue a daily statement of
collateral utilisation to the clients. The statement shall include details
of collateral deposited, collateral utilised and collateral status
(available balance/due from the client) with break-up in terms of cash,
fixed deposit receipts (FDRs), bank guarantee and securities.
The market watchdog has also directed the brokers to produce
records during inspections. These records will include the receipt of
collateral from the client, the acknowledgement issued to the client on
receipt of the collateral, client authorisation for deposit of the
collateral with the exchange/clearing house, records of deposit of the
collateral with exchange/clearing house, records of return of the
collateral to the client and credit of corporate action benefits (issue of
dividends, etc) to the client. Derivatives The
open interest in Nifty May futures stood at 100 lakh shares at the weekly
close, up from 50 lakh shares last week. The Nifty May series contracts
traded at a premium of five points over the Nifty April futures compared
to a discount of two points, indicating the rollover of long positions.
The rollovers in key Nifty stocks remained lukewarm, with Reliance
Industries (8.8 per cent) and ICICI Bank (17.4 per cent) witnessed poor
rollovers. The Nifty PCR declined to 1.17 from 1.25, indicating fresh call
writing and short-covering in put options. The 4900 Put options OI rose by
150 per cent last week, indicating this as an immediate support level for
the Nifty. Open interest in futures and options contracts on a stock is
capped at 20 per cent of the free-float holding. Government
Securities Market Primary
Market Under
Market Stabilisation Scheme (MSS), RBI auctioned 6.57 per cent 2011, for
the notified amounts of Rs.3,000 crore at the cut-off yields of 8.08 per
cent on April 16, 2008. On
April 16, 2008, RBI auctioned 91-day and 182-day T-bills for the notified
amounts of Rs.5,500 crore (out of which Rs.5,000 crore under MSS),and
Rs.3,000 crore(out of which Rs.2,500 crore under MSS), respectively. The
cut-off yields for 91-day and 182-day T-bills were 7.44 per cent and 7.60
per cent respectively. RBI
increased the cash reserve ratio (CRR) by 50 basis points to 8.0 per cent
in two stages i.e. 7.75 per cent effective from April 26, 2008 and 8.00
per cent effective from May 10, 2008. Secondary
Market Inter
bank call rates ended at 5.26-6.0 per
cent, above the previous close of 4.53 – 5.54
per cent. Bond yields
momentum remained northward bound in thin trading during the week as weak
sentiment overhung the markets. The weakness in the markets largely
emanated from Reserve Bank of
Bond
Market Tata
Power Company Ltd tapped the market by issuing bonds to mobilise Rs 300
crore by offering 10 per cent with a step-up of 10 bps for 10 years
through book building. The bond has been rated AA by crisil and icra. NABARD
tapped the market by the issuance of NCD by offering 9.25 per cent with a
step-up of 20 bps through book building for 3 years with put and call at
the end of 2nd year for an amount of Rs 200 crore.
The bond has been rated AAA by crisil and care. Kotak
Mahindra Prime Ltd is tapping the market by the issuance of
bonds by offering 10.40 per cent for 126 monhts for an amount of Rs
25 crore. The bond has been
rated AA by crisil and icra. SEBI
is preparing a slew of major initiatives to kickstart the moribund
corporate bond market, and will put out a detailed notification on the
matter soon. SEBI and the RBI are also on the verge of an agreement on
starting repos in corporate bonds. Major changes are also proposed in the
corporate bond market to ensure robust trading and settlement. SEBI had
earlier written to the apex bank seeking permission to start corporate
bond repos. Among the conditions set by RBI were large volumes,
straight-through processing, a robust clearing & settlement system and
delivery versus payment mechanism. The SEBI notification will, apart from
simplifying the procedure for corporate bond issuances by listed firms,
also insist on them appointing debenture trustees. It will also mandate a
transparent clearing & settlement system for such trading. Foreign
Exchange Market Rupee
maintained almost at the same level as the previous weekend at a steady
exchange rate of Rs 39.94. The Rupee moved between Rs.39.94 and Rs.39.96
during the week. Overnight forward premia though remained firm at 2.82 per
cent as a result of the arbitrage flows. Premia for one, three, six and 12
months also firmed to 2.10 per cent (2 per cent), 2.30 per cent (2.10 per
cent) and 1.70 per cent (1.58 per cent) respectively. Commodities
Futures derivatives The
commodity market regulator Forward Markets Commission (FMC) may cap the
single domestic entity ownership below 26 per cent to avoid dominant
control by any single owner. The cap is 5 per cent in stock exchanges but
there is no such limit at present in commodity bourses. According to
sources, this will result in strategic participation by investors, who
will exit for a better valuation. The single entity limit for stock
exchanges cannot be replicated for commodity exchanges since they are in
the early stages of development. In
line with a slew of fiscal measures taken by the government to check
inflation, both the RBI and the FMC have got into action. In an attempt to
curb hoarding of essential commodities, RBI may reduce the period of cash
credit facility given by banks to companies and commodity traders. Under
the proposed changes, the cash credit facility period may be cut to 15-30
days for essential and sensitive commodities. Meanwhile, FMC has already
alerted commodity exchanges to report quotes and trading patterns of
illiquid contracts on the futures market. As a long-term measure, FMC has
suggested to the RBI that commodity exchanges are the ideal platform for
trading in currency futures. RBI is in the process of introducing trading
in currency futures in Traders
are likely to get partial relief on the commodities transaction tax (CTT)
proposed in the Budget. Prime Minister Manmohan Singh is understood to
have forwarded the proposal to his advisory council headed by C Rangarajan
to review the tax. Brokers were quite unhappy with the tax as it is
expected to impact liquidity and market-making, which are a must for a
futures market. According to experts, the imposition of CTT, will make
Indian exchanges the most expensive ones in the world in terms of
transaction cost. On London
Metal Exchange, for example, the cost of transaction of a base metals
forward contract is 5 paise to Rs 1.12 per lakh, while on the local
commodity exchanges (MCX, NCDEX, NMCE), if CTT is imposed, it will cost Rs
19.25 per lakh. A
long-awaited report on the impact of futures trading on agricultural
commodity prices is likely to be submitted next week. The report, prepared
by a committee headed by Planning Commission Member Abhijit Sen, has been
circulated among its four members. The report, prepared by a committee
headed by Planning Commission Member Abhijit Sen, has been circulated
among its four members. The report is eagerly awaited, especially in light
of recent concerns over the impact of futures trade on commodity prices.
While there are reports that the government may ban futures trade in all
agricultural commodities, the committee is unlikely to make such a
suggestion, because its mandate was to study only the impact of futures on
prices. Insurance The
Insurance Regulatory and Development Authority (Irda) has penalised some
state-owned general and a few private insurance companies for flouting
norms. Irda has penalised some insurers up to Rs 5 lakh for not being able
to meet the mandatory social sector obligations. Bajaj Allianz Life
Insurance was penalised under Section of 102(b) of the Insurance Act, 1938
for opening offices without the permission of the regulator. Bajaj Allianz
General Insurance was fined for violating the Irda Advertisement
Regulations and Reliance General Insurance was fined for violating the
provisions of Section 102 of the Act. Reliance was also asked to pay Rs
1.62 lakh for submitting late an application for the renewal of
registration. Corporate Sector Bharti
Retail, which has tied up with the world’s largest retailer, the
US-based Wal Mart has launched its convenience stores in State-owned
Gujarat Alkalies and Chemicals (GACL) has signed an agreement with Dow
Europe GmbH to set up a 50:50 joint venture (JV) for manufacturing
2,00,000 tonne per annum (TPA) of chlorinated organics at Dahej (Gujarat).
The JV will invest Rs 600 crore on the project. Ultra
Tech Cement, an Aditya Birla group company, is setting up a The
V N Dhoot-promoted Videcon Group is venturing into the wholesale cash
& Carry business this fiscal. A separate division is planned to set up
60 Bolld Cash & Carry stores at an investment of Rs 2,000 crore over
the next three years. The
construction division of Larsen & Toubro (L&T) has secured a Rs
2,000 crore order from Bombay Dyeing for development at the latter’s
Textile Mills & Spring Mills complexes at Worli and Wadala in Mumbai. Information Technology Infosys
consolidated profit after tax (PAT) increased by 9.2 per cent year-on-year
(y-o-y) to touch Rs 1,249 crore. Its revenue went up by 20.4 per cent
y-o-y to touch Rs 4,542 crore. Zensar
Technologies, the software wing of the RPG Group, is keenly looking
towards Telecom Despite
the government’s claims of an acute shortage of spectrum for GSM mobile
services, the Department of Telecommunications (DoT) has cleared the
release of 22 MHz to new telecom licences in Tamil Nadu. With this move,
Tamil Nadu (including Chennai) will have over ten players. The state has
about 20 million subscribers and accounts for over 10 per cent of the
country’s GSM market. Venugopal Dhoot-promoted Datacom Solutions, Aditya
Birla group company Idea Cellular, real-estate giant Unitech group and
Mumbai-based Swan Telecom and the BPL group company Loop Telecom are being
allocated 4.4 MHz of spectrum each to start operations. Qualcomm,
the global developer of wireless technologies and data solutions, will
soon invest in Indian wireless communications and semiconductor start-up
companies through its arm Qualcomm Ventures.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
We will be grateful if you could kindly send us your feed back at epwrf@vsnl.com | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
