Current Economic Statistics and Review For the
Week | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ATMs in India: Evolution, Growth and Inter Country Comparison *Globally,
Automated Teller Machines (ATMs)
have been the inimitable solution
for the banking sector, which has
revolutionised the way transactions
are carried out. Similarly, in History of ATM The
first mechanical cash dispenser was
developed and built by Luther George
Simjian and was installed in 1939 in
New York City by the City Bank of
New York, but was removed after 6
months due to the lack of customer
acceptance. Thereafter, the history
of ATMs paused for over 25 years,
until De La Rue developed the first
electronic ATM, which was introduced
in the year 1967 by Barclays Bank in
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 are known by various names including automated banking machine, money machine, bank machine, cash machine, hole-in-the-wall, cashpoint, Bancomat (in various countries in Europe and Russia), Multibanco (after a registered trade mark, in Portugal), and ‘Any Time Money’ in India. ATMs
in In
1987, Hongkong and Shanghai Banking
Corporation (HSBC) installed the
first ATM in Sustained
Growth
After a relatively slow start in the late 1990s, there was a spurt in ATMs installations across the country — increasing by almost 100% in two years from 1,521 in March 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. Since
2005, 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 Ratio of ATMs to Total Bank Branches Initially the ratio of ATMs to total bank branches grew slowly from 4.6% in March 2000 to 10.6% in March 2002, but thereafter galloped to a level of 15.4% in March 2003 (Chart 2). The ratio increased by around 10 percentage points to 32.8% in March 2005 from 22.9% in March 2004. However, in the subsequent two years the ratio increased by 5.8 and 8.7 percentage points respectively.
During the financial year 2007-08 the ratio of ATMs to total bank branches registered the highest growth crossing the 50% mark. The ratio reached a new milestone, which increased by 9.6 percentage points to 56.9% at the end of March 2008. Bank Group-wise Spread of ATMs Banks have been installing ATMs to increase their reach. Private sector banks primarily drove the growth in the installed base of ATMs in the initial 4 years, between 2000 and 2003, while in the last 5 years, between 2004 and 2008 it has been predominantly triggered by rapid expansion of public sector banks. As indicated in Table 1, nationalised banks with 13,355 ATMs accounted for the largest share of installed ATMs followed by the new private sector banks (9,867), SBI group (8,433), old private sector banks (2,100) and foreign banks with 1,034 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 (41.2%) and old private sector banks (47.2%). However, ATMs in the case of one public sector bank, namely, IDBI Bank was more than its total number of branches.
At
individual bank level, the number of
ATMs exceeded branches in respect of
all new private sector banks except
Centurion Bank of At
end-March 2008, 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, at end-March 2008, new private sector banks had the largest share in off-site ATMs, while nationalised banks had it 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, 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 by six more banks to
install ATMs at 711 locations. These
banks were: 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 Global
ATM Installation by Regions World
over, the explosive growth of ATMs
has been driven by customer demand
for greater convenience. This
section of the note attempts to
review the Retail Banking Research (RBR’s)
highly respected biennial global ATM
survey “Global ATM
Market and Forecast to 2013”,
which analyses the ATM market of 170
countries. The survey reveals that the
global ATM installed base expanded
by over 130,000 units in 2007 –
considerably higher than the
previous record of 119,000 in 2000.
At the end of December 2007 there
were over 1,778,187 ATMs operating
worldwide.
The RBR survey indicates that the fastest growth was seen in developing markets as a result of improved economic conditions and a greater investment in banking technologies.
Of
the global 1.8 million ATMs
operating worldwide, Asia-Pacific
accounted for 5,69,000
installations, constituting 32% of
the global share. Of these ATM
units, the majority 1,81,712 ATMs
were in In
the year 2007, Asia-Pacific region
made the largest contribution to the
growth in the worldwide ATM base,
having added over 50,000 machines. Country-wise
ATMs The
RBR study reveals that the world
market continues to be dominated by
five countries, which account for
half of global installations. In
fact, the five largest ATM markets
make up 52.3% of the worldwide
installed base, and the top ten make
up 68.4%. As indicated in Table 3,
the
While
the Moreover,
As
mentioned earlier, during the 1990s
the Indian ATM industry had
witnessed a slow growth in ATM
expansion on account of high
installation costs and dissent from
the labour unions of the bank
employees. In fact, the
introduction of ATMs in Future
Growth of ATMs As
per the RBR study the rapid growth
of the global installed base is
expected to continue over the next
five to six years. RBR predicts that
by 2013 there will be more than 2.5
million ATMs installed worldwide, an
increase of 41%. RBI for
Free ATM Use Across Banks In order to rationalise the service charges for ATM transactions such that it becomes affordable for the common man the 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. 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) Few banks have preferred that certain nominal charges should be prescribed; 4) Some of the major 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; 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. 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 customers of one bank be allowed free use of ATMs of other banks, including for cash withdrawal, from April 1, 2009 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. 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 (see Table 4). 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. Challenges
Ahead 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
*
This note has been prepared by Bipin
K. Deokar References RBI (2007): Report on Trend and Progress of Banking in India 2007-08, December 17. - (2007): Report on Trend and Progress of Banking in India 2006-07, November 27. - (2006): Report on Trend and Progress of Banking in India 2005-06, November 14. - (2005): Report on Trend and Progress of Banking in India 2004-05, November 24. 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. IIPM
(2008): ‘Role of ATMs in Bank
Transactions: Emerging Issues’, The
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 Food
and Agriculture Organisation (FAO)
has estimated that the world rice
stocks carried over to 2009 would
rise by 8% to 118 million tonnes
covering nearly 26% or three
months of expected consumption
this year. It is anticipated that
this year secondary crops sown
would be good. FAO has also
predicted that relaxation of
export restraints by The Commerce Ministry has permitted Indian Sugar Exim Corporation to export white sugar by 30 Sept 2009. It has also permitted few mills to export 2,500 million tonnes of sugar to European Union under a preferential quota. State agencies and the Food Corporation of India (FCI) in Uttar Pradesh have procured 3.1 million tonnes of paddy by 28 February 2009, as against the target of 2.6 million tonnes for 2008-09. The state agencies have procured about 2.3 million tonnes as against the target of 1.8 million tonnes, while the estimated corresponding figures for FCI have stood at about 900,000 tonnes and 800,000 tonnes. The government had engaged agents (arhtia) to boost procurement by giving 1.5% commission on the minimum support price (MSP) of Rs 900 per quintal (including a bonus of Rs 50). About 5,000 commission agents were registered with the UP Mandi Parishad. Lower
sown acreage coupled with
unfavorable weather conditions is
likely to hit rabi production in
Exports of oilmeal declined by 42% in the month of February 2009 over the previous month, as demand for commodities has reduced on account of global economic recession and fall in demand from the livestock sector. According to the data compiled by the Solvent Extractors’ Association (SEA), the total oilmeal exports dropped sharply to 440,795 tonnes in February as compared to 763,047 tonnes during the corresponding month last year. The overall exports of oilmeal during April -February 2009 has been reported to be at 5,057,784 tonnes as against 4,588,457 tonnes a year ago, displaying a rise of 10%. An export of soyabean meal during April 2008 to February 2009 was 4,022,380 tonnes, registering a growth of 19% from 3,381,415 tonnes in the same period last year. Shipments of oilmeal from Kandla were reported to be at 2,908,774 tonnes (58 per cent), followed by Mumbai including JNPT, which handled 1,008,307 tonnes (20 per cent), Bedi 519,777 tonnes (10%), Vizag handled 278,613 tonnes (5.5%), Mundra handled 194,997 tonnes (4%), Kakinada 84,858 tonnes (2%) and Kolkata 54,413 tonnes (1%). The major importers of oilmeal were China, which bought 3.89 lakh tonnes as against 2.87 lakh tonnes last year, Japan (7.65 lakh tonnes as compared to 6.08 lakh tonnes) and Thailand (3.77 lakh tonnes and 3.27 lakh tonnes). According
to the report by Netherlands-based
Rabobank, sharp decline in sugar
output in As per the Coffee Board, exports of coffee during the period January-February 2009 has dropped by 13.4% to 29,035 tonnes. Among which exports of Arabica have registered a decline of 16.4% to 7,984 tonnes, on the other hand that of Robusta have risen by 14.2% to 14,738 tonnes. As
per the report by Marine Products
Export Development Authority (Mpeda),
exports of seafood from the
country have registered a record
growth in volume and value terms
for the first three quarters of
the current fiscal year despite
exports to the Industry Index of Industrial Production registered a decline of 2.0% over the month resulting in the cumulative growth for the period April-December 2008-09 to reach 3.2% much below to that registered during the corresponding period of last year. The
Indices of Industrial Production
for the Mining, Manufacturing and
Electricity sectors for the month
of December 2008 stand at 186.0,
298.6, and 223.1 respectively,
with the corresponding growth
rates of 1.0%, (-) 2.5% and 1.6%
as compared to December 2007. The
cumulative growth during
April-December, 2008-09 over the
corresponding period of 2007-08 in
the three sectors have been 3.0%,
3.3% and 2.7% respectively, which
moved the overall growth in the
General Index to 3.2%. In terms of industries, as many as seven (7) out of the seventeen (17) industry groups (as per 2-digit NIC-1987) have shown positive growth during the month of December 2008 as compared to the corresponding month of the previous year. The industry group ‘Other Manufacturing Industries’ have shown the highest growth of 21.7%, followed by 9.0% in ‘Beverages, Tobacco and Related Products’ and 7.6% in ‘Metal Products and Parts, except Machinery and Equipment’. On the other hand, the industry group ‘Jute and Other Vegetable Fibre Textiles (except cotton)’ have shown a negative growth of 66.4% followed by 20.0% in ‘Wood and Wood Products; Furniture and Fixtures’ and 17.9% in ‘Transport Equipment and Parts’. The Sectoral growth rates in December 2008 over December 2007 are 1.7% in Basic goods, 4.2% in Capital goods and (-) 8.5% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of (-) 12.8% and (-) 0.1% respectively, with the overall growth in Consumer goods being (-) 2.7%. Infrastructure The Index of Six core industries having a combined weight of 26.7 per cent in the Index of Industrial Production (IIP) with base 1993-94 stood at 250.6 (provisional) in January 2009 and registered a growth of 1.4% (provisional) compared to a growth of 3.6% in January 2008. During April-January 2008-09, six core-infrastructure industries registered a growth of 3.2% (provisional) as against 5.7% during the corresponding period of the previous year. Crude Oil production (weight of 4.17% in the IIP) registered a growth of (–)8.1% (provisional) in January 2009 compared to a growth rate of (-)0.2% in January 2008. The Crude Oil production registered a growth of (-) 1.3 (provisional) during April-January 2008-09 compared to 0.3% during the same period of 2007-08. Petroleum refinery production (weight of 2.00% in the IIP) registered a growth of (-)2.6% (provisional) in January 2009 compared to growth of 5.4% in January 2008. The Petroleum refinery production registered a growth of 3.1% (provisional) during April-January 2008-09 compared to 7.3% during the same period of 2007-08. Coal production (weight of 3.2% in the IIP) registered a growth of 6.3% (provisional) in January 2009 compared to growth rate of 7.9% in January 2008. Coal production grew by 8.8% (provisional) during April-January 2008-09 compared to an increase of 4.8% during the same period of 2007-08. Electricity generation (weight of 10.17% in the IIP) registered a growth of 1.4% (provisional) in January 2009 compared to a growth rate of 3.7% in January 2008. Electricity generation grew by 2.5% (provisional) during April-January 2008-09 compared to 6.3% during the same period of 2007-08. Cement production (weight of 1.99% in the IIP) registered a growth of 8.3% (provisional) in January 2009 compared to 5.6% in January 2008. Cement Production grew by 7.1% (provisional) during April-January 2008-09 compared to an increase of 7.4% during the same period of 2007-08. Finished (carbon) Steel production (weight of 5.13% in the IIP) registered a growth of 1.2%(provisional) in January 2009 compared to 2.0% (estimated) in January 2007. Finished (carbon) Steel production grew by 2.3% (provisional) during April-January 2008-09 compared to an increase of 5.9% during the same period of 2007-08. Inflation The
official Wholesale Price Index for
‘All Commodities’ (Base:
1993-94 = 100) for the week ended
21st February, 2009
declined by 0.1 percent to 227.6
(Provisional) from 227.8
(Provisional) for the
previous week. The
annual rate of inflation,
calculated on point to point
basis, stood at 3.03 percent
(Provisional) for the week ended
21/02/2009 (over 23/02/2008) as
compared to 3.36 percent
(Provisional) for the previous
week (ended 14/02/2009) and 5.69
percent during the corresponding
week (ended23/02/2008) of the
previous year. The
index of this major group declined
by 0.2 percent to 247.5
(Provisional) from 248.1
(Provisional) for the previous
week mainly
due to lower prices of
masur (3%), tea and
fruits & vegetables (2%
each) and
bajra, jowar and gram (1%
each). raw silk (7%), copra
(3%) and rape & mustard
seed and gingelly seed (1% each). The
index for this major group
remained unchanged at its previous
week's level of 323.5
(Provisional). However, there was
4% decline in price of aviation
turbine fuel and 1% increase in
the price of furnace oil during
the week.
The
index for this major group
declined by 0.1 percent to 199.3
(Provisional) from 199.5
(Provisional) for the previous
week due to lower prices of cotton
seed oil, imported edible oil, oil
cakes, salt, rape & mustard
oil , hessian & sacking bags
and hessian cloth, nickel alloy,
alloy stainless steel, zinc
ingots, ms bars & rounds ,
alloy steel casting and pipes
& tubes, angles, channels
& sections, other iron steel
and lead ingots.
And bus chassis (diesel). Wholesale price index for ‘All Commodities’ (Base: 1993-94=100) revised down to 229.4 from 229.5 for the week ended 27 December 2008 and annual rate of inflation based on final index, calculated on point to point basis, stood at 5.86 percent as compared to 5.91 percent (Provisional). Financial
Market Developments Capital Markets Primary
Market Chennai-based
e-learning company EdServ
Softsystems ended its listing with
129% premium over issue price. On
BSE, the stock closed at a
discount of 8.3% to its issue
price of Rs 60, touching a high of
Rs 147 in mid-trade. On NSE, it
closed at Rs 137.7. The stocks’
combined volume traded on both the
exchanges crossed 7 crore shares,
making it the most traded stock
during the day. The company’s
initial public offering (IPO) was
the first to hit the market since
October, and was subscribed 1.3
times. The price band was fixed
between Rs 55 and Rs 60. Secondary
Market Despite
the rate cut announced by the
Reserve Bank of India (RBI) and
falling inflation numbers, the
market continued moving south for
four sessions after making a
downwards breakout. During the
week, the BSE Sensex shed 6.36%
and closed at 8,325 sliding to
3-year low; NSE Nifty lost 5.19%
and closed at 2,620 as grim
economic data pulled world stocks
to six-year low. The Defty was
down 6.7% with the rupee hitting
record lows. Mortgage
delinquencies in the Foreign institutional investors (FIIs) remained sellers during the week, offloading stocks worth Rs 1,500 crore due to depreciating rupee. Among the sectoral indices of BSE, all the indices under performed during the week. Banking stocks shed the most under selling pressure due to fears of mounting NPAs. Selling in HUL and ITC pulled down the FMCG index. Reality index fell on fears of falling interest rates, which will revive housing demand. According
to a latest survey, FIIs operating
in the Asia-Pacific region
continue to be underweight on the
domestic market. The survey, which
covered 30 long-term funds,
including hedge funds, found that
less than 5% of FIIs were
overweight on Several small-cap companies listed on the Calcutta Stock Exchange (CSE) are in the process of getting listed on the Bombay Stock Exchange (BSE) as 'Permitted Securities' to capitalise on the latter's higher potential for business. Ten such firms have already migrated to BSE's platform in the last seven to eight months, taking advantage of the Kolkata exchange's demutualisation in 2007, followed by its subsequent association with BSE which even picked up a 5% stake in CSE. CSE had reached an agreement to share BSE's trading platform to enable its members to trade in cash and futures and options (F&O) segments. The MoU (Memorandum of Understanding) had also proposed the setting up of a separate trading platform for stocks exclusively listed on the CSE. Mutual funds will soon be asked to specify the money invested in their schemes by their parent bodies, corporates and retail investors. This is expected to bring an additional level of transparency to the mutual fund business in the country. Market regulator Securities & Exchange Board of India is readying guidelines to the effect. Since the government has advertised mutual funds as the right vehicles for small investors to enter the equity markets, it is keen that the race to top the assets under management (AUM) chart score should not be based on dubious figures. Incidentally, February figures show that total AUM for the industry has again crossed the Rs 5,00,000-crore mark. There was 8.68% rise or in absolute numbers Rs 40,024 -crore addition to investments through this route in February to Rs 5,00,973 crore. According to officials familiar with the development, SEBI is, therefore, working on guidelines that would require fund houses to report separately the source of investments, including those made available from the parent sponsors. AUM from retail and other corporate sources will also have to be reported separately. Spooked
by increasing performance losses
and record investor redemptions,
the global hedge fund industry saw
net outflows worth $158.91 billion
in the fourth quarter of calendar
year 2008, the highest level since
1994. According to a report by
fund tracking firm Lipper, global
hedge fund assets are estimated to
have decreased from $1.5 trillion
in September to $1.29 trillion at
the end of December 2008. All
hedge fund sub-strategies posted
negative money flows (outflows) in
the three-month period with
cumulative net outflows in 2008 as
the industry witnessed a collapse
in global equity markets,
liquidity issues and failure of a
number of key institutions. Derivatives
The NSENifty finally broke the 2650 support level after moving in a narrow band for a few weeks. The Nifty future closed at 2608.65, a sharp fall of 4.44% over the previous week’s close of 2730. However, despite the sharp weekly fall, the benchmark scored handsome gains on Friday on the back of short covering. This helped the discount narrow down to just 12 points with respect to the spot close, which ended the week at 2620. The average daily turnover improved sharply to Rs 42,450 crore, which is better than the last four month’s average. Rising volumes not backed by a rising VIX, implying at first glance, that the market will settle down and become less volatile. India VIX or Volatility Index, which measures the immediate expected volatility, has weakened further to 37.94 from previous week’s levels of 40.21. Though a fall in the VIX is generally positive for the index. The cumulative FII positions as percentage of the gross market positions in the derivative segment as on 27 February was 36.03%. They were predominantly sellers in the F&O segment during the week. They now hold index futures worth Rs 7,832.21 crore (Rs 7,336.16 crore) and stock futures worth Rs 12,008.55 crore (Rs 11,934.72 crore). Their index options holdings stood higher at Rs 17,476 crore (Rs 14,809.76 crore). Government
Securities Market Primary
Market On 4 March 2009, the RBI auctioned 91-day T-Bills and 182-day T-Bills for the notified amounts of Rs 4,500 crore and Rs 1,500 crore, respectively. The cut-off yield for the 91-day and 182-day T-Bills was set at 4.67% and 4.62%, respectively. The RBI auctioned 7.99% 2017, 6.30% 2023, 7.95% 2032 and 8.33% 2036 for the notified amounts of Rs 4,500 crore, 1,000 crore, 1,500 crore and 1,500 crore, respectively on 5 March 2009 through open market operations (OMO). The cut off yield for the 8-year, 14- year, 23-year and 27- year maturing paper was set at 6.78%, 7.18%, 7.58% and 7.67%, respectively. The RBI re-issued 6.05% 2019, 8.24% 2027 and 6.83% 2039 for the notified amount of Rs 8,000 crore and Rs 2,000 crore each, respectively. The cut-off yield for the 10-year paper, 18-year paper and 20-year paper was set at 6.50%, 7.75%, and 7.90%, respectively. Secondary
Market Bond yields moved northwards despite the RBI’s mid-week intervention in cutting policy rates. Traders said the hardening of yields was largely on account of the bunching of Government borrowings towards the end of the financial year. Inflation retreat had little impact on yields. So far, the Government has completed about 96% of the enhanced borrowing target of Rs 2.38 lakh crore. The liquidity overhang was apparent from the high recourse to the reverse repurchase window at the weekend liquidity adjustment facility (LAF) auction. The recourse amounted to Rs 66,780 crore, though during the week both the repo and reverse repo rates were slashed by 50 basis points to 5% and 3.5% respectively. Average trade volume per day, during the week was down to Rs 10,200 crore, a contraction of Rs 1,000 crore over the previous week; but Rs 2,000 crore more than the daily equity trade volume on the NSE. Bond
Market During the week under review, three FIs/banks, one state undertaking and one central undertaking tapped the bond market through issuance of bonds. India Inc raised $1.37 billion through external commercial borrowings (ECB) through automatic and approval routes in January 2009. During the month, Indian companies raised funds worth $764 million and $573 million through automatic and approval ECB routes, respectively to meet their import needs or fuel expansion plans. The RBI is considering a proposal to allow companies another six months to buy back or prepay their Foreign Currency Convertible Bonds (FCCBs). The deadline for the original buyback scheme ends on 31 March. Of the 156 companies that raised money through FCCBs — which are a mix between a debt and equity instrument raised in a foreign currency — nine companies have exercised a premature buyback option after RBI announced the scheme in December 2008.
Foreign
Exchange Market The Indian rupee is the third-worst performer in the past 12 months among the 10 most-traded Asian currencies, with a 22% loss. The rupee breached the 52-mark against the dollar for the first time on continued pressure from overseas investors who are offloading domestic securities. After touching a new lifetime low of 52.18 during the intra-day trade on March 3 the local currency recovered to close at 51.97 against the dollar, which was three paise lower than previous close. The interventions allowed the rupee to soften to Rs 51.51, off from the intra-week high of Rs 52.06. At this level, importers took forward cover, leading to a further hardening of premia over the last week. Forward premia for one, three, six and 12-months ended the week at 4.22% (3.37%), 3.10% (2.29%), 2.43% (1.84%) and 1.94% (1.60%) respectively. Most forward covers though were taken mostly for one month and three months. Forward covers for six and 12 months were few, as was evident from the inverted forward premia. Commodities
Futures derivatives Multi-Commodity Exchange (MCX), the country’s top commodity bourse that has an indomitable space in energy and metal futures, is grappling with the problem of sluggish agricultural commodities volume, which remain lower than its rival National Commodities and Derivatives Exchange (NCDEX). Of 26 farm commodities, futures trading in 17 with delivery in March, April, May and June showed zero volume, according to MCX data. Investors’ participation remained thin in commodities like maize, jeera, guarseed, cotton seed, red chili, gur, mustard seed and 10 others since the launch of March and subsequent contracts in December. Experts attributed the ‘mindset of investors’ and the current global economic recession for the thin volume in agri futures on the MCX platform. Nevertheless, MCX has a couple of agri-commodities such as refined soya oil, mentha oil, cardamom, crude palm oil, jute and cotton, which have better volumes than NCDEX. The March contract of refined soya oil generated a volume worth Rs 887 crore so far. Mentha oil had a volume of Rs 147 crore, while jute and cardamom had Rs 89 crore and Rs 54 crore, respectively. NCDEX
Spot Exchange (NSPOT), the spot
trading arm of As a direct fallout of its recent investigations into the working of NCDEX, commodity futures market regulator, the Forward Markets Commission (FMC), has decided to appoint external auditors for all three national commodities exchanges — NCDEX, NMCE and MCX — along with an Indore-based regional exchange NBOT. The commission’s latest move is aimed at detecting regulatory lapses and misuse of funds, if any. The appointment of the auditors is expected to be finalised within a week, said a source in the commission on condition of anonymity. In its NCDEX probe, FMC is believed to have found some alleged discrepancies in the accounting treatment of interest on margin money of its members, and even in the Settlement and Guarantee Fund (SGF) maintained by the exchange. Although NCDEX denied any misuse of funds, the regulator had – vide its 19 February order against the exchange – stated that there were instances of misuse of funds. The order added that the exchange assured FMC that it has already tightened its internal control systems. Turmeric spot and futures prices have shot up sharply over the past one month, on reports of lower carryover stocks amid prospects of a lower crop in major turmeric-producing states. NCDEX April 2009 contracts increased by nearly 21% or Rs 818 to trade at Rs 4,726 per quintal on 2 March over last month and May 2009 contracts also shot up by 17% or Rs 700 to trade at Rs 4,800 per Insurance Max
New York Life Insurance, which
posted a growth of 46% between
April and December 2008 is
planning to hire about 7,000
agents in north LIC has raised its stake in Syndicate Bank to 9.27% by acquiring 2.09% equity in the bank between November 5, 2008 and March 2, 2009. Public
Finance According
to the latest press note revenue
receipts as on January 2009 works
out to be 72 per cent of the
actuals to revised estimates at Rs.
404,815 crore with the receipts
under net tax revenue reaching to
Rs. 329,271 crore and non-tax
revenue Rs.75,544 crore. With
total expenditure reaching 74.5
per cent of the revised estimates
, fiscal deficit till date works
out to be
Rs.262,815 crore. Market
borrowings at Rs.256,385 crores
financed about 98 per cent
of the fiscal deficit. Banking State
Bank of As
well, Bank of Baroda and Union
Bank of Oriental
Bank of Commerce (OBC) will open
its first overseas branch in Indian Bank, pioneer in developing self-help-group (SHG) movement in the country since 1989, has decided to open 12 micro state branches to provide micro finance. With these new branches the total number of micro state branches will become 27. Outstanding loans of the existing 15 branches are around Rs 1,248 crore, facilitating 1.46 lakh SHG’s throughout the country. SBI
has opened the country’s first
currency administration branch,
“Cash Factory” in Corporate Kalpataru Power Transmission (KPTL) has bagged an order of Rs 373 crore from Power Grid Corporation of India (PGCIL) for installation of infrastructure required for power transmission. Sterlite
Industries a subsidiary of
London-based metals and mining
group, Vedanta Resources Plc, has
signed a new agreement with Asarco
LLC, Arizona-based mining,
smelting and refining company to
buy all the latter’s operating
assets. The new acquisition price
will be $1.1 billion in cash and
promissory note worth $600 million
payable over a period of nine
years. The new agreement is
subject to the approval of the US
Bankruptcy Court for the southern
district of Texas, External
Sector Exports
during January 2009 were valued at
US$ 12381 million which was 15.9%
lower than that in January 208 as
a result during the fiscal year so
far the total exports at
US$144,266 million registered a
growth of 13.2% over that of US $
127,454 million reported in the
comparable period last year. Imports
during January were valued at US $
18455 million, a decrease of 18.2
per cent over that of US$ 22566
million in January 2008 and the
cumulative import at US$ 243358
million was 25.3% more than that
of US $ 194285 during
April-January 2007-08. Trade
balance during January thus worked
out to be $ 6075 as compared to
7849 in January 2008. The
cumulative trade balance for
April-January 2008-09 estimated at
US $ 99093 million was 1.5 times
to that of US $ 66830 million
during April-January 2007-08. While
oil imports during the current
fiscal year so far gone up from US
$ 62926 million in April-January
2007-08 to US $ 83290 million,
that of non-oil imports
accelerated by 21.9% to US $
160068 million. Telecom Telecommunications major Reliance Communications (RCom) is planning to raise Rs 13,000 crore in the next three months to meet certain capex requirements and scheduled debt repayment obligations. The debt is part of the total Rs 24,000-crore capex earmarked from January 2009 to March 2010 (over 15 months) and Rs 15,000 crore as capex for financial year 2010. Of the total Rs 13,000 crore, the company had proposed to raise Rs 10,000 crore through a long-term fund-based facility and the remaining Rs 3,000 crore through a Non-Convertible Debenture (NCD) issue. The firm is raising the debt to meet the capex requirements of various projects, including expansion of GSM network and repayment of debts. The country’s top three GSM operators, Bharti Airtel, Vodafone Essar and Idea Cellular will be saving around Rs 4,000 crore each in the current fiscal year, as the Department of Telecommunications (DoT) has left it to the new government to take a decision on charging a one-time spectrum acquisition from these companies for holding spectrum beyond 6.2 Mhz. All the three companies have spectrum in excess of 6.2 Mhz in some circles. There were two formulae being worked for levying the one-time additional spectrum acquisition fee. One of the suggestions was to charge these companies Rs 80 crore for metro and circle A, Rs 40 crores for Circle B and Rs 15 crore for circle C. An alternative suggestion was that a flat charge of Rs 256 crore be levied for every Mhz held beyond 6.2 Mhz. Rough calculations indicates that the three companies would have to cough up around Rs 4,000 crore each for holding excess spectrum.
*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 |