Current news & Rumours in the mkt
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RBI move make Home Loan Norms Tough
In order to check the flow of easy credit into housing sector and a possible asset bubble, the Reserve Bank of India (RBI) on Tuesday said that banks cannot offer more than 80 per cent of the value of a property, also called loan to value ratio (LTV) as housing loan. At present, there is no ceiling on LTV with some banks offering up to 85 per cent of the cost of the house as loan. The move is to prevent excessive leveraging.
The RBI move is a step in the right direction. The RBI is trying to counter runaway property prices and ensure that buying a house remains affordable for the middle-income group.
There is a tendency among borrowers to borrow as much as possible and the move by RBI would curb this practice. If you pay only 10-15 per cent of the cost of a house from your own pocket and borrow rest from banks, the affinity towards the property you purchased would be less. This may lead to higher default rates. The move may also reduce the pace and quantum of housing loan disbursements.
The central bank also raised the risk weight for residential housing loans of Rs 75 lakh and above, irrespective of the LTV, to 125 per cent. At present, the risk weight on residential housing loans with LTV up to 75 per cent are 50 per cent for loans up to Rs 30 lakh and 75 per cent for loans above that amount. In case the LTV is more than 75 per cent, the risk weight of all housing loans, irrespective of the amount of loan, is 100 per cent.
In another move that may hit housing loan uptake, the RBI increased the standard asset provisioning on teaser loan rate to 2 per cent. "This will make teaser loans costly," Jain said. Under teaser loans, housing loans are offered at a comparatively lower rate of interest in the first few years, after which rates are reset at higher rates. RBI observed that this practice raises concern as some borrowers may find it difficult to service the loans once the normal interest rate, which is higher than the rate applicable in the initial years, becomes effective.
"It has been observed that many banks at the time of initial loan appraisal do not take into account the repaying capacity of the borrower at normal lending rates," RBI said.
The directives on higher risk weightages, lower loan-to-value ratios and higher provisioning for teaser loans will surely have some dampening effect on the real estate sector, but will settle down soon and enable a more orderly growth of the sector.
RBI steps would definitely help cool down the overpriced assets, check the speculation in the real estate market and secure the banks against NPA's.
In order to check the flow of easy credit into housing sector and a possible asset bubble, the Reserve Bank of India (RBI) on Tuesday said that banks cannot offer more than 80 per cent of the value of a property, also called loan to value ratio (LTV) as housing loan. At present, there is no ceiling on LTV with some banks offering up to 85 per cent of the cost of the house as loan. The move is to prevent excessive leveraging.
The RBI move is a step in the right direction. The RBI is trying to counter runaway property prices and ensure that buying a house remains affordable for the middle-income group.
There is a tendency among borrowers to borrow as much as possible and the move by RBI would curb this practice. If you pay only 10-15 per cent of the cost of a house from your own pocket and borrow rest from banks, the affinity towards the property you purchased would be less. This may lead to higher default rates. The move may also reduce the pace and quantum of housing loan disbursements.
The central bank also raised the risk weight for residential housing loans of Rs 75 lakh and above, irrespective of the LTV, to 125 per cent. At present, the risk weight on residential housing loans with LTV up to 75 per cent are 50 per cent for loans up to Rs 30 lakh and 75 per cent for loans above that amount. In case the LTV is more than 75 per cent, the risk weight of all housing loans, irrespective of the amount of loan, is 100 per cent.
In another move that may hit housing loan uptake, the RBI increased the standard asset provisioning on teaser loan rate to 2 per cent. "This will make teaser loans costly," Jain said. Under teaser loans, housing loans are offered at a comparatively lower rate of interest in the first few years, after which rates are reset at higher rates. RBI observed that this practice raises concern as some borrowers may find it difficult to service the loans once the normal interest rate, which is higher than the rate applicable in the initial years, becomes effective.
"It has been observed that many banks at the time of initial loan appraisal do not take into account the repaying capacity of the borrower at normal lending rates," RBI said.
The directives on higher risk weightages, lower loan-to-value ratios and higher provisioning for teaser loans will surely have some dampening effect on the real estate sector, but will settle down soon and enable a more orderly growth of the sector.
RBI steps would definitely help cool down the overpriced assets, check the speculation in the real estate market and secure the banks against NPA's.
Axis Bk- Enam merger valued at Rs 2,100cr
Private sector lender Axis Bank is looking at picking up stake in Enam Institutional Broking, The Axis-Enam merger ratio is at 5:7:1 and the deal is said to be valued at around Rs 2,100 crore.
The merger between Axis Bank and Enam will see the latter becoming a 100% subsidiary of the former with Manish Chokhani touted to be the CEO of the new arm. Sources said, Vallabh Bhansali has also been asked to join the board of Axis Bank.
The merger will not impact Enam’s Infra Fund while Enam Securities will continue to run for another 24-36 months, sources said.
Enam’s shareholding pattern has their employees holding around 7-8%. Vallabh Bhanshali owns 22%. Enam promoters will get a 3.7% stake in the bank as a consideration.
Axis Bank just concluded their board meeting and will hold a press conference at 3 pm today.
Enam’s FY11 profit after tax (PAT) is at around Rs 120 crore. Their FY10 PAT was at around Rs 100 crore.
Private sector lender Axis Bank is looking at picking up stake in Enam Institutional Broking, The Axis-Enam merger ratio is at 5:7:1 and the deal is said to be valued at around Rs 2,100 crore.
The merger between Axis Bank and Enam will see the latter becoming a 100% subsidiary of the former with Manish Chokhani touted to be the CEO of the new arm. Sources said, Vallabh Bhansali has also been asked to join the board of Axis Bank.
The merger will not impact Enam’s Infra Fund while Enam Securities will continue to run for another 24-36 months, sources said.
Enam’s shareholding pattern has their employees holding around 7-8%. Vallabh Bhanshali owns 22%. Enam promoters will get a 3.7% stake in the bank as a consideration.
Axis Bank just concluded their board meeting and will hold a press conference at 3 pm today.
Enam’s FY11 profit after tax (PAT) is at around Rs 120 crore. Their FY10 PAT was at around Rs 100 crore.
The proposed Rs110bn JV between SAIL and Posco seems to have hit some major roadblocks with disagreements on equity stakes, technology sharing.
Axis Bank has acquired EnamSecurities key businesses; Investment Banking, Retail and Institutional brokingand distribution of financial products worth Rs20.67bn. (ET)
The lawministry has opined that Cairn Energycannot sell its stake to Vedanta Resources without government nod. (ET)
Four of the government’s major listed companies ONGC, IOC, SAIL and NTPC were formally conferred the Maharatna status. (BS)
The proposed Rs110bn JV between SAILand Posco seems to have hit some major roadblocks with disagreements on equitystakes, technology sharing. (BS)
US-basedConnectiva is believed to ink a multi-year revenue management software dealwith Bharti Airtel for its Africanoperations. (ET)
M&M plans to expand its automobile business in the US after itseals the acquisition of a majority stake in the South Korean automobile majorSsangyong. (ET)
HUL admittedthat it had committed a grievous breach of protocol at its mercury thermometerfactory in Kodaikanal, nine years ago. (BL)
Canara Bank to open 105 branchesand ATM’s across the country. (BS)
HCL Tech signs US$100mn dealfor smart grid solutions in power sector. (BS)
Zydus Cadila ties up with US-basedAmarillo Bioscience for marketing its dietary supplement domestically and alsoin Nepal.(BL)
TamilnadMercantile Bank has entered into MoU with TataMotors for commercial vehicles financing. (BL)
NTPC hasargued for removal of its Dulanga coal block in Orissa from the list of areasbarred for mining by the Union environment and forests ministry under itsrecent ‘No Go’ classification. (BS)
Wipro to open a new data centre in Cleveland County, North Carolina,to support its growing IT infrastructure business. (FE)
M&M andAndhra Pradesh Government are close to finalizing a deal that will pave the wayfor setting up of a tractor manufacturing base at Zaheerabad. (BL)
Bharti Airtel expectsto cross the 100mn mobile subscriber mark in Africain the next two years, from the 40mn at present. (BS)
The Rajasthan government plans to take a 26% stake in a refineryproposed to be set up in the state by ONGC.(FE)
Gati will befinalizing a deal to either acquire or team up with a domestic freightforwarding company by the first quarter of the next fiscal to add capacity.(BL)
Religare has announced the launch of a Rs400mn advertisingcampaign to spruce up brand image. (ET)
Novelis to raise US$4bn to refinance the loans borrowed byHindalco to fund the acquisition of the Novelis in 2007. (ET)
Gurgaon developer sues Indiabulls Real Estate over the use oftrademark ‘Central Park’ for a set ofresidential realty projects in the country. (ET)
Tata Communications launched its next generation ethernet networkin 24 locations around the world. (ET)
Eicher Motors to set up a facility for its two-wheeler arm RoyalEnfield to double production at 10,000 bikes a month over the next few years.(FE)
Oil India is actively pursuing buying oil and gas producingassets overseas for up to US$1bn. (FE)
Axis Bank has acquired EnamSecurities key businesses; Investment Banking, Retail and Institutional brokingand distribution of financial products worth Rs20.67bn. (ET)
The lawministry has opined that Cairn Energycannot sell its stake to Vedanta Resources without government nod. (ET)
Four of the government’s major listed companies ONGC, IOC, SAIL and NTPC were formally conferred the Maharatna status. (BS)
The proposed Rs110bn JV between SAILand Posco seems to have hit some major roadblocks with disagreements on equitystakes, technology sharing. (BS)
US-basedConnectiva is believed to ink a multi-year revenue management software dealwith Bharti Airtel for its Africanoperations. (ET)
M&M plans to expand its automobile business in the US after itseals the acquisition of a majority stake in the South Korean automobile majorSsangyong. (ET)
HUL admittedthat it had committed a grievous breach of protocol at its mercury thermometerfactory in Kodaikanal, nine years ago. (BL)
Canara Bank to open 105 branchesand ATM’s across the country. (BS)
HCL Tech signs US$100mn dealfor smart grid solutions in power sector. (BS)
Zydus Cadila ties up with US-basedAmarillo Bioscience for marketing its dietary supplement domestically and alsoin Nepal.(BL)
TamilnadMercantile Bank has entered into MoU with TataMotors for commercial vehicles financing. (BL)
NTPC hasargued for removal of its Dulanga coal block in Orissa from the list of areasbarred for mining by the Union environment and forests ministry under itsrecent ‘No Go’ classification. (BS)
Wipro to open a new data centre in Cleveland County, North Carolina,to support its growing IT infrastructure business. (FE)
M&M andAndhra Pradesh Government are close to finalizing a deal that will pave the wayfor setting up of a tractor manufacturing base at Zaheerabad. (BL)
Bharti Airtel expectsto cross the 100mn mobile subscriber mark in Africain the next two years, from the 40mn at present. (BS)
The Rajasthan government plans to take a 26% stake in a refineryproposed to be set up in the state by ONGC.(FE)
Gati will befinalizing a deal to either acquire or team up with a domestic freightforwarding company by the first quarter of the next fiscal to add capacity.(BL)
Religare has announced the launch of a Rs400mn advertisingcampaign to spruce up brand image. (ET)
Novelis to raise US$4bn to refinance the loans borrowed byHindalco to fund the acquisition of the Novelis in 2007. (ET)
Gurgaon developer sues Indiabulls Real Estate over the use oftrademark ‘Central Park’ for a set ofresidential realty projects in the country. (ET)
Tata Communications launched its next generation ethernet networkin 24 locations around the world. (ET)
Eicher Motors to set up a facility for its two-wheeler arm RoyalEnfield to double production at 10,000 bikes a month over the next few years.(FE)
Oil India is actively pursuing buying oil and gas producingassets overseas for up to US$1bn. (FE)
Banking sector index -Bankex was down 1.6% at 13,992.Shares of 9 banks fell 0.55% to 3.14% on concerns over their exposure to the microfinance institutions.
The BSE's banking sector index -- Bankex was down 1.6% at 13,991.93. It underperformed the Sensex, which closed at 19,930.64, up by 0.33% or 65.50 points.
Axis Bank (down 2.72%), IndusInd Bank (down 2.96%), ICICI Bank (down 3.14%), Yes Bank (down 2.59%), , HDFC Bank (down 0.82%), Kotak Mahindra Bank (down 0.83%), Bank of Baroda (down 1.33%), Punjab National Bank (down 1.24%) and State Bank of India (down 0.55%),tumbled while IDBI Bank (up 0.86%),Federal Bank (up 0.13%),Union Bank of India (up 0.11%),Canara Bank (up 0.59%),rose marginally.
According to reports, ICICI Bank is estimated to have a highest exposure of about Rs 2300 crore to microfinance institutions. Axis Bank has about Rs 1300 crore, HDFC Bank about Rs 1000 crore, State Bank of India about Rs 800-900 crore and Punjab National Bank has Rs 900 crore.
Among the smaller lenders, Corporation Bank has Rs 600 crore, Yes Bank about Rs 400-450 crore and IndusInd Bank Rs 360 crore.
The issue of microfinance lending risk emerged after SKS Microfinance warned that an ordinance enacted on 15 October 2010, by Andhra Pradesh state government on collections could have an impact on its profitability.
The SKS Microfinance management stated that the finance company's collections have come in lower than normal post the Andhra Pradesh government ordinance. This reduction in collection can have material impact on the company's income. It added that the sales, profit and asset quality of its Andhra Pradesh portfolio could be deeply impacted.
SKS Microfinance had earlier announced that it was planning to cut interest rates to 24% across all states, after an ordinance passed by Andhra Pradesh imposed serious restrictions on its business model.
Last month, the Andhra Pradesh government through an ordinance imposed a limit on rates that the industry can charge customers and also curbed aggressive recovery practices following several suicides by borrowers in the state. The state contributes 28% of the current loan portfolio of the company.
According to reports, the government is likely to introduce the Microfinance Bill in the next three-four months. The bill may be introduced in the budget session of parliament.
Microfinance firms typically give loans to small businesses that have no access to banks and charge an effective rate of 28-32% a year, about double the rate on bank loans.
Most of the banks lend to microfinance institutions (MFIs) as priority sector lending. Over the last few days, as MFIs faced these regulatory problems many of the banks stopped lending them, which could create potential solvency problem for MFIs themselves.
The BSE's banking sector index -- Bankex was down 1.6% at 13,991.93. It underperformed the Sensex, which closed at 19,930.64, up by 0.33% or 65.50 points.
Axis Bank (down 2.72%), IndusInd Bank (down 2.96%), ICICI Bank (down 3.14%), Yes Bank (down 2.59%), , HDFC Bank (down 0.82%), Kotak Mahindra Bank (down 0.83%), Bank of Baroda (down 1.33%), Punjab National Bank (down 1.24%) and State Bank of India (down 0.55%),tumbled while IDBI Bank (up 0.86%),Federal Bank (up 0.13%),Union Bank of India (up 0.11%),Canara Bank (up 0.59%),rose marginally.
According to reports, ICICI Bank is estimated to have a highest exposure of about Rs 2300 crore to microfinance institutions. Axis Bank has about Rs 1300 crore, HDFC Bank about Rs 1000 crore, State Bank of India about Rs 800-900 crore and Punjab National Bank has Rs 900 crore.
Among the smaller lenders, Corporation Bank has Rs 600 crore, Yes Bank about Rs 400-450 crore and IndusInd Bank Rs 360 crore.
The issue of microfinance lending risk emerged after SKS Microfinance warned that an ordinance enacted on 15 October 2010, by Andhra Pradesh state government on collections could have an impact on its profitability.
The SKS Microfinance management stated that the finance company's collections have come in lower than normal post the Andhra Pradesh government ordinance. This reduction in collection can have material impact on the company's income. It added that the sales, profit and asset quality of its Andhra Pradesh portfolio could be deeply impacted.
SKS Microfinance had earlier announced that it was planning to cut interest rates to 24% across all states, after an ordinance passed by Andhra Pradesh imposed serious restrictions on its business model.
Last month, the Andhra Pradesh government through an ordinance imposed a limit on rates that the industry can charge customers and also curbed aggressive recovery practices following several suicides by borrowers in the state. The state contributes 28% of the current loan portfolio of the company.
According to reports, the government is likely to introduce the Microfinance Bill in the next three-four months. The bill may be introduced in the budget session of parliament.
Microfinance firms typically give loans to small businesses that have no access to banks and charge an effective rate of 28-32% a year, about double the rate on bank loans.
Most of the banks lend to microfinance institutions (MFIs) as priority sector lending. Over the last few days, as MFIs faced these regulatory problems many of the banks stopped lending them, which could create potential solvency problem for MFIs themselves.
LISTING
CIRCULAR
Download Reference No. NSE/CML/16319 Date: November 18, 2010
Ref. No. NSE/LIST/C/2010/1112
To all Members,
Sub: Face Value Split
It is hereby informed that the face value and paid up value of the equity shares of the following Company shall be changed w.e.f. November 25, 2010:
Sr. No.
Name of the Company
Symbol
Existing Face Value & Paid up Value (Rs.)
New Face Value & Paid up Value (Re.)
1
Sun Pharmaceuticals Industries Limited
SUNPHARMA
5
1
This circular shall be effective from November 25, 2010.
For and on behalf of
National Stock Exchange of India Limited
CIRCULAR
Download Reference No. NSE/CML/16319 Date: November 18, 2010
Ref. No. NSE/LIST/C/2010/1112
To all Members,
Sub: Face Value Split
It is hereby informed that the face value and paid up value of the equity shares of the following Company shall be changed w.e.f. November 25, 2010:
Sr. No.
Name of the Company
Symbol
Existing Face Value & Paid up Value (Rs.)
New Face Value & Paid up Value (Re.)
1
Sun Pharmaceuticals Industries Limited
SUNPHARMA
5
1
This circular shall be effective from November 25, 2010.
For and on behalf of
National Stock Exchange of India Limited
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