They say liquidity remains a major cause of concern, and the coming quarters could witness a significant rise in non-performing assets. According to them, a robust risk management system, adequate capital infusion and regulatory reforms is crucial if India's economic growth is to remain intact in the medium and long term. Banks are facing immense liquidity pressure, as resources gradually disappear from the system. Banks have also been unwilling to lend each other.
Since November 3, the day the central bank's special window was opened, bids worth Rs 2,775 crore (Rs 27.75 billion) were placed at the auctions against the total outstanding amount of Rs 60,000 crore (Rs 600 billion) at the fixed rate of 7.5 per cent. "It's a commercial decision of banks to lend money to NBFCs. It implies that banks are still cautious about lending to NBFCs and they might take some more time to start lending normally to us," said an NBFC chief.
"The NBFC gives us greater flexibility in functioning. Retail and broking businesses can be affected by the ups and downs in the market, but private banking does not get affected as high networth individuals continue to get high salaries and earn profits. However, on the individual risk profile, the asset class keeps changing," said Nipun Mehta, head and executive director, SG Private Banking India.
While there is more than one irritant that the bank and the insurer are trying to sort out, sources close to the development said the biggest roadblock is the rights that IAG will enjoy if the proposed venture gets a go-ahead from the SBI board. The issues are likely to be discussed at the board's meeting on Friday.
Banks levy a fee on transactions under core banking solutions.
With higher interest rates, bankers today said their loan portfolios will grow at a slower pace, partly because of the caution being exercised by lenders themselves.
LIC, ICICI Prudential invest Rs 13,000 crore (Rs 130 billion) and Rs 2,000 crore (Rs 20 billion) respectively in the first quarter of FY09.
Life Insurance Corporation of India, which is among the largest property owners in India, is planning to acquire land worth Rs 2,000 crore (Rs 20 billion) this year to develop commercial and residential complexes. This will be in addition to the Rs 1,100 crore (Rs 11 billion) it spent last year for purchasing lands across the country.
Conservative industry estimates place the cash component of mutual fund houses at Rs 25,000 crore (Rs 250 billion). Fund houses had up to 15 per cent in cash, as per the April 30 figures. The cash component exceeded 15 per cent in as many as 30 diversified equity growth funds.
Index funds - the so-called passively-managed funds - are no longer a low-cost affair.
The growth in the first year premium (FYP), particularly in unit-linked insurance policies (ULIPs), of life insurance players, has been largely unaffected by the unprecedented stock market volatility in the last quarter. Sources at the Life Insurance Corporation indicated that the market conditions have not impacted the sale of ULIP products and the business growth was absolutely in sync with expectations. SBI Life registered a growth of around 90-95% in the quarter ended Mar
The move is under consideration as the cash transaction reports just from commercial banks have shot up from 2.2 million to nearly 6 million for FY08. The number could go up further since data for the full financial year is still being compiled. Similarly, last year, the agency received more than 2,500 suspicious transaction reports from various entities in the financial sector, as compared with 817 in FY07.
Mutual fund houses are bullish on the financial sector, notwithstanding the recent beating at the stock market. Fund houses like Kotak Mahindra AMC, Sundaram BNP Paribas & LIC Mutual Fund have drawn up plans to introduce products aimed at the financial services sector. Bank stocks for long had been one of the favourite picks for many fund managers. There was a slowdown in valuations of financial sector stocks but Indian corporate entities still continue to remain attractive.
The mutual fund industry is certain that the Sensex, which plunged to below 16,000-level on Friday, has hit rock bottom and there is only one way the market would move from here, which is upward. The move to provide more disposable income in the hands of individuals is also good for the markets. The Asset Management Companies are of the opinion that the India growth story is definitely on as far as the medium-to-long-term future is concerned.
LIC will kickstart its credit card business in September 2008.
As volatility continues to plague the emerging markets, India has been the worst performer after Vietnam this year. The US credit crisis and fears of a recession in the world's largest economy is compelling the foreign funds to dump stocks.
Although the recent turmoil in the market is viewed as a correction by the large fund houses, they are yet to foresee any good news, at least for the time being.
Bird flu epidemic in West Bengal has exposed the low levels of poultry insurance found in the state.
ICICI Venture has tied up with a global healthcare investor to put in funds in India's healthcare sector.
India's insurance sector is predicted to grow at 30% this fiscal compared to 95% of the last year.
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