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Descriptive Banking related general awareness -- March TWO 2012


            Unlisted cos to hedge commodity price risk
            Banks authorized to deal in foreign exchange can grant permission to unlisted companies to hedge price risk import/export in respect o any commodity (except gold, sliver, platinum) in the international commodity exchanges/markets.
Hitherto, the above mentioned mechanism was available only to companies - domestic producers/users of aluminum, copper, lead, nickel and zinc; actual domestic producers/users o aluminum, copper, lead, nickel and zinc; actual domestic users o Aviation Turbine Fuel; domestic crude oil refining companies; domestic oil marketing and refining companies - listed on recognized stock exchange to hedge price risk.
            TCS most valued company
            On 31 Dec 2011, the last trading day of the year, Tata Consultancy Services (TCS) became the largest Indian company by market capitalisation overtaking Reliance Industries. The market capitalisation of TCS stood at Rupees Symbol2.27 lakh crore, against RIL’s Rupees Symbol2.26 lakh crore.
            The change in market capitalisation is more about RIL underperforming. There are issues of concern like RIL’s low gas output.
            SEBI cuts timeframe for buyback process
            Market regulator SEBI has reduced the timeframe for completion of buyback of shares by companies to 34-44 days, a decision which could facilitate the government in getting closer to its ambitious disinvestment target for Rupees Symbol40,000 cr for the current fiscal.
            Earlier, the buyback process could take anywhere from 63 to 114 days. These changes form a part of amendments made by the regulations, 1998.
            The government has fixed a mammoth Rupees Symbol40,000 cr disinvestment target for the fiscal, but till date it has only managed to raise Rupees Symbol1,145 cr by selling its shares in Power Finance Corporation.
            The Department of Disinvestment (DoD) has sought Cabinet approval to use the buyback mode for disinvestment. The govt couldn’t take any decision due to inter-ministerial difference and the reluctance of PSUs to part with cash.
            Cabinet panel to meet disinvestment shortfall
            The Cabinet Committee on Economic Affairs is likely to consider a formal proposal to mobilise additional resources through public sector undertakings. Such a policy is expected to cover the shortfall of disinvestment target of Rupees Symbol40,000 cr.
            The proposed policy aims at enabling the Department of Disinvestment under the Finance Ministry to respond to normal practices in the corporate world, if proposed by the public sector undertakings.
The proposed policy is likely to provide two options for resource mobilization:
Buyback of shares by government owned-companies
The second option is likely to involve off-market deals for shares of PSUs by financial institutions such as Life Insurance Corporation of India.
            Govt approves RIL’s KG-D6 satellite field plan
            The government-‘approved Reliance Industries’ USD 1.529-billion investment plans for developing four satellite fields in the flagging KG-D6 block after sitting on the proposal for months.
            The investment plan, which will help to boost falling output in the Krishna-Godavari Basin KG-D6 block, has been pending with the authorities for two years and it took some prodding from top government functionaries for it to be cleared.
            The investment proposal was signed by the three partners in the block-RIL, UK’s Plc and Niko Resources of Canada - and the representative of the Directorate General of Hydrocarbons (DGH), while the Oil Ministry official likely to sign it.
            The four fields can produce 10 million cubic metres of gas per day by 2016, which will help shore up output from the block.
            Oil eases in Asian trade after overnight surge
            World crude prices inched lower in Asian trade on January 4, 2012, after soaring overnight over tensions between major oil producer Iran and the United States.
            New York’s main contract, West Texas Intermediate (WTI) light sweet crude for delivery in February, dipped 14 cents to 102.82 USD after surging 4.13 USD in US trade. Brent North Sea crude for February shed 10 cents to 112.03 USD after rallying 4.75 USD in London deals.
            The Strait of Hormuz is a vital waterway in the Middle East through which 20 per cent of the word’s oil is transported.
            Budget may tax power gear imports
            Import duty may be hiked on power generation equipment for projects above 1,000 MW capacities in the coming Budget.
            Currently, imported equipment for such projects attracts 5 per cent duly. The government is looking at the following options.
            One, bringing all the power projects at par that is, levying a uniform duty on all power generation equipment, regardless of the project size. In such a situation, the duty may be levied at the current rate of 5 per cent.
            The, imposing a basic import duty at 5 per cent, besides an additional levy of 5 per cent and 4 per cent countervailing duty (imposed in lieu of excise duty for domestic producers), making it a total of 14 per cent.
            In either form, the move will benefit local equipment manufactures such as BHEL, L&T and Bharat Forge. On the other hand, power producer, will be affected, as they import machinery mainly from China.
            Oil prices higher in Asian trade
            Oil prices were higher in Asian trade supported by news that the International Monetary Fund was boosting its coffers to aid in crisis intervention.
            Data showing a drop in US crude inventories also helped bolster prices even after the International Energy Agency (IEA) slashed is estimate for global demand growth in 2012.
            The IMF is intended to raise 500 billion USD more to increase its ability to help countries in financial trouble.
            Oil Ministry suggests changes in policy
            The Oil Ministry has suggested key changes in the natural gas allocation policy in the view of sharp drop in output from Reliance Industries’ eastern offshore KG-D6 block.
            In a note to the Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee, the ministry has proposed to stop gas supplies to power producers that do not sell electricity at regulated tariff. Also future gas allocations are to be made only to urea fertilizer plants and fuel allocation to phosphates and potassium fertilizer producers be stopped.
            The ministry has also proposed to revise the priority attached to city gas distribution (CGD) networks and place them next to fertilizer and stranded assets of power sectors and before the new demands of fertilizer and power sector.
Export & Import
            Export duty on iron ore lumps
The Finance Minister on January 2, 2012 hiked the export duty on iron ore lumps and fines to 30 per cent, effective December 30, 2011. In the 2011-12 Budget, the Government increased the export duty on both iron ore fines and lumps to 20 per cent.
India, with a share of 10-15 per cent, is a swing player in the global iron ore market which is dominated by Brazilian and Australian firms.
Gold, silver jewellery cost more
Gold jewellery is set to get dearer, after the Government changed the rule for calculation of import duty on gold as well as silver.
            The Finance Ministry has notified a new rule which says duty on gold and silver will now be calculated on the value of the imported metal. Earlier the duty was collected as a fixed amount irrespective of price movement.
            The revised formula will help the government to collect an additional Rupees Symbol600 crore during the next two-and-half moths.
            Mundra Port set to win dry bulk terminal project
            The last few days of 2011 proved to be a roller-coaster rider for the country’s largest private sector port operator-the Rupees Symbol2,000 crore Mundra Port SEZ (MP SEZ).
            A day after being denied rights to develop the Rupees Symbol3,700-crore Chennai container terminal by the Chennai Port Trust, the company is all se to bag a Rupees Symbol1,060-crore dry bulk terminal development project in Kandla Project.
            One more cargo-handling facility
            The Paradip Port Trust (PPT) is planning to develop an additional cargo-handling facility at a location far away from Paradip.
            When ready for operation, the proposed satellite port, with a capacity of 20 million tonnes (mt), would handle mainly bulk cargoes.
            The port authorities have ambitious expansion plans to augment the capacity to 250 mt with 28 berths by 202.
            Angre port set for March 23
            Angre port, promoted by Goa-based Chowgule Group, will be commissioned on March 23.
            At 110 nautical miles south of Mumbai, in Ratnagiri district of Maharashtra, the port is looking to handle agricultural produce from western Maharashtra and nearby areas of Karnataka.
            The Rupees Symbol520-crore project is being executed by group company Chowgule Ports & Infrastructure Pvt. Ltd. (CPIPL).
            All the regulatory and financial clearances are in place.
            NHAI to launch Rupees Symbol5,000 cr tax-free bonds
            Amid volatile capital markets, the National Highways Authority of Indian has announced the launch of its first - ever tax-free bonds issue of Rupees Symbol5,000 crore. The bonds having a face value of Rupees Symbol1,000 will have two maturity periods of 10 years and 15 years and would get listed on the BSE and the National Stock Exchange.
            The 10-year bond will give 8.2 per cent interest per annum, while the 15-year bond of NHAI would offer 8.3 per cent interest.
            IIFCL open up infra bonds market
            The country’s first credit enhancement product will soon take off, thanks to India Infrastructure Finance Company Ltd (IIFCL).
            The first pilot transaction will be for a road project developed by GMR Expressways, a special purpose vehicle of GMR Group, at Jadcharla, a town in Mahbubnagar district in Andhra Pradesh.
            Through credit enhancement, a lender is provided with reassurance that a borrower will honour the obligation through additional collated or third-party guarantee.
            IndiaFirst ties up with Gramin Bank
            Private insurer IndiaFirst Life Insurance has tied up with Vidharbha Kshetriya Gramin Bank-a regional rural bank sponsored by Central Bank of India - to reach out to its customer in the hinterland of Maharashtra.
            This new tie-up will help IndiaFirst serve its customers in rural area in a better and effective way. Through this tie-up with Vidharbha Kshetriya Gramin Bank, it will reach over 100 branches across five districts.
            IndiaFirst is already present in Maharashtra through over 455 branches of Bank of Baroda and Andhra Bank with Maharashtra contributing approximately 12 per cent of its total business.
            Insurance firms face Rupees Symbol10,000 - cr hit
            The general insurance industry is likely to take Rupees Symbol10,000-cr hit in profits in the current fiscal.
            This follows a decision by the insurance regulator IRDA to increase the buffer that companies need to provide for the commercial third-party motor portfolio.
            The general insurance industry is already reeling under underwriting losses of Rupees Symbol9,969-cr incurred in 2010-11.
            The third-party commercial vehicle portfolio is a bleeding portfolio for general insurance companies with claims ratio estimated at 150 per cent of the total premiums collected.
            Pension products to guarantee return
The insurance regulator IRDA has clarified that pension products will guarantee an assured benefit in the form of a non-zero rate of return, which will be disclosed upfront.
This clarification comes after IRDA’s guidelines issued in November last year which mandated that all pension products offered by life insurers would define an assured benefit that is applicable on death, on surrender and on vesting, which had to be disclosed at the time of sale. Prior to this, insurers were required to give a 4.5 per cent guarantee on pension products.
IRDA plans to take complaints on its own
The Insurance Regulatory and Development Authority are planning to take insurance complaints suo motu to ensure to ensure fair play by the insurers. J Hari Narayan, Chairman, IRDA, is contemplating a system in which the insurance ombudsmen can take up complaints on a suo motu basis and take up investigation.
            Strengthening this system further with powers to take up investigations suo motu will increase customer welfare. At present, there are 12 ombudsmen with clearly defined jurisdictions across the country. They can take up the complaints in life and non-life segments only after being approached by a policyholder.
            Rupees Symbol 10 lakh cap proposed on third-party claims
            The Finance Ministry has initiated a Bill to separate motor insurance from the Motor Vehicle Act, 1988. A new law has been a long pending demand of insurers.
            The administrative control of law relating to road accident compensation and insurance of motorized vehicles shall now be with the Ministry of Finance. Hence, Section 140 to Sec 176 of the MV Act, 1988 will be rechristened as The Motor Vehicles Insurance and Compensation Act, 2011 and the same will be taken out of the existing Motor Vehicle Act, 1988.
            Draft proposals
The administrative control of law relating to road accident compensation and insurance of motorized vehicles to be with the Finance Ministry.
Time Limit for filling claims set at three years.
The third party commercial vehicle portfolio is a bleeding portfolio, where the general insurance industry is faced with a loss of Rupees Symbol10,000 crore in the current financial year.
            LIC crosses on million mark
            The Life Insurance Corporation of India has crossed the one-million mark in cumulative lives covered under its health insurance segment.
            One of the major drivers of his growth has been Jeevan Arogya, a benefit health insurance product launched last year.
            The total number of policies was over 5.44 lakh. The cumulative lives covered were 10, 04,525, while the premium was Rupees Symbol395 crore. Jeevan Arogya policy alone had brought the first premium of Rupees Symbol63 crore within seven months of its launch.
            Japan keen to invest in road transport, maritime
            After investing in the railways and metro rail transportation in India, Japan is looking to step up its investment in the roads and maritime sectors.
            Japan has part-funded the dedicated rail freight corridor and the Delhi Metro Rail System. It is also keen on funding the proposal high-speed train projects. The Japanese team was particularly keen on port connectivity, draft new berths, terminals and other facilities at
the Ennore and Chennai ports. Japanese firm Nissan had an interest in exporting cars from Ennore port.
            The ministry is in the process of finalizing a Memorandum of Cooperation (MoC). The proposed MoC will enable the Ministry of Road Transport to exchange technical knowledge and expertise in the road transportation sector, including capacity building and advanced technology for roads, road transport management systems and intelligent transport systems.
            PE Investment in India at $10.11 bn in 2011
            Private equity firms made investments worth 10.11 bn USD in India during 2011, taking their total investment over the past five years to about 47 bn USD.
            In 2011, investments worth 10.1 billion USD were announced by way of 441 deals, compared to 8.1 billion USD through 362 deals in the previous year.
            The largest PE investment announced during 2011 was the Rupees Symbol3,650 crore commitment by Bain Capital and Singapore’s GIC in Hero Investments, the Hero Group holding firm which bought out Honda Motors’ 26 per cent stake in listed two - wheeler maker Hero Honda.
            The other major transactions include an about 474 million USD investment by Apollo Management in various group companies of Welspun Group, followed by Apax Partners’ USD 375 million USD infusion in iGate to help buyout fellow listed IT services firm Patni Computers.
            India may invest in phosphoric acid plant
            India is looking to partner South Africa in a project for setting up a 5 million tonnes (mt) phosphoric acid plant. Phosphoric acid is an important intermediate product used to manufacture the fertilizer diammonium phosphate (DAP).
            The proposed projects are likely to involve an investment of Rupees Symbol3,000-4,000 crore; it is expected to be located in Phalaborwa, a town in South Africa’s Limpopo province. The government could also persuade public sector Rashtriya Chemicals and Fertilizers Ltd (RCF) to invest in the project. If the proposed plant does come up, India will sign an agreement with South Africa to import phosphoric acid at less than international rates.
            ThinkBig launches online business education
            ThinkBig Edu-Venture launched its new initiative myBskool.com - an online business education venture. MyBskool.com will provide management lessons using a 3-screen platform - mobile phone, tablet and PC offering a ‘complete portable classroom’.
            The company has tied up with IIM Ranchi for an 18-month executive MBA programme. To Start with, IIM Ranchi and my Bskool would jointly create content and explore more advanced technologies to offer more practical and interactive’ learning experience to distant communities.





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