Indians most upbeat on housing, money

India has emerged as the most optimistic housing market in the world, as Indian home-buyers are upbeat about the country's economy as well as their personal finances, says a survey by a global mortgage insurer.

According to a survey by mortgage insurer Genworth Financial Inc, 64 per cent of surveyed respondents in India felt positive about the outlook for their national economy over the next 12 months compared to just 30 per cent across all surveyed countries.

Respondents in India, Mexico, Canada and Australia were the most positive about their countries' economies, while the US, Ireland, the UK were least confident, the study said.

Explaining the factors behind the high optimism of Indian and Mexican home-buyers the study said cultural factors have a large affect on home-buyers.

Potential home-buyers in India and Mexico save by living with their parents and extended family.

Over 80 per cent of potential home-buyers in these countries were living with at least one other generation, and over 30 per cent were living with at least two other generations, the study said.

By living at home, potential home-buyers are able to reduce their living expenses, unlike in countries like Canada, the US and UK, where half of all respondents were living away from the family home, paying rent and incurring living costs.

Meanwhile, the study, which covered over 9,000 potential homeowners in the US, UK, Canada, India, Ireland, Italy, Mexico and Australia, also noted that housing affordability concerns compounded by rising interest rates are worrying potential home-buyers in India more than in any other country.

Besides, rapid urbanisation has driven up property prices in tier I cities, forcing large number of companies and individuals to tier II as well as tier III cities.

Rapid growth in affluence along with shortage in housing supply would lead to high property prices across major urban centres in India and are likely to keep home ownership out of reach for many Indians.

"A large majority of non-property owners did not believe they would be financially capable of buying their first home for another five years," the study said.

With housing shortage estimated at 25 million units and 0.5 million units added every year, getting onto the property ladder is going to be increasingly difficult for lower income Indian home-buyers.

The study further said that "over the last 40 years, the average age of home-buyers has been rising in all countries except for India, as housing has become increasingly unaffordable."

Courtesy: - http://www.financialexpress.com/news/indians-most-upbeat-on-housing-money/801963/0

SBI breaks rules on loans to Reliance Ind

India's largest bank The State Bank of India (SBI) has breached RBI's credit exposure norms during three consecutive years with regard to its loans provided to Mukesh Ambani-led Reliance Industries (RIL).

The public sector lender, which also has significant exposures to troubled Air India besides certain telecom firms being probed in relation to the 2G scam, has now disclosed that its credit to RIL was in excess of the limits prescribed under the RBI's prudential credit norms.

Detailing the cases where it breached prudential limits for single-borrower exposure during the fiscal ended March 31, 2011, SBI has named RIL as also public sector majors Indian Oil and BHEL as three such borrowers in its annual report.

This is the third straight year when SBI has exceeded the single-borrower ceiling with regard to RIL, as per the bank's annual reports for the past three financial years.

However, the bank brought down its exposure to RIL within the limit on the last date of the previous fiscal, i.e. March 31, 2011, according to the SBI annual report.

The public sector lender had provided credit in excess of prudential norms to RIL during 2009-10 and 2008-09 also.

During the year 2009-10, the bank's credit exposure was in excess of prudential limits for Reliance Industries, Indian Oil Corp (IOC), BHEL and Tata Group.

Prior to that, SBI exceeded prudential credit limits during 2008-09 with regard to its exposure to RIL and IOC.

As per RBI guidelines, the exposure ceiling limits are 15 per cent of capital funds in case of a single borrower and 40 per cent of capital funds in the case of a borrower group.

However, the credit exposure to a single borrower can go up to 20 per cent, if the additional 5 per cent exposure is on account of extension of credit to infrastructure projects.

Similarly, the credit exposure to borrowers belonging to a group may go up to 50 per cent, if the additional 10 per cent exposure is for credit to infrastructure projects.

The bank's exposure to telecom companies recently came under criticism as some of these companies are facing probes in connection with the 2G scam involving alleged breach of regulations in allotment of licenses.

In an analyst conference after the bank's full-year results for 2010-11, SBI disclosed that its exposure to telecom companies was Rs 22,600 crore (3 per cent of its loan book), while exposure to telecom companies under investigation was Rs 1500 crore.

Besides, its exposure to airline companies, including troubled Air India was Rs 4,500 crore.

The bank also disclosed a total exposure of Rs 1,00,000 crore in the infrastructure sector, including Rs 30,000 crore to the power sector.

With regard to single-borrower exposure limit exceeded in 2010-11, SBI said in its annual report, that its credit to RIL breached the prudential ceiling on three occasions during the year -- between April and July 2010, from August to October 2010 and from November 2010 to February 2011.

Between April and July 2010, SBI's exposure to RIL was Rs 15,815.48 crore, as against a ceiling of Rs 13,646.26 crore, while the exposures exceeded the respective limits by well over Rs 1,000 crore on two other occasions also.

The outstanding exposure to RIL as on March 31, 2011 stood at Rs 5,645.44 crore, which was within the limits.

For IOC and BHEL also, the credit exposure exceeded the ceiling on three occasions during 2010-11.

During the year 2009-10, the credit exposure exceeded the prudential ceilings on three occasions each for IOC, RIL and BHEL, while the exposure was in excess of the limit for Tata Group on two occasions.

For 2008-09 also, the credit exposure was in excess of the permitted level on three occasions for both RIL and IOC.

Courtesy: - http://www.financialexpress.com/news/sbi-breaks-rules-on-loans-to-reliance-ind/801927/0

Turf lock on commodity ETFs

The Securities and Exchange Board of India (Sebi) and the Forward Markets Commission (FMC) have reached an understanding that the capital markets regulator will not clear any more commodity asset-based exchange traded funds (ETFs) till they sort out their disagreement over who should regulate the product.

At present, ETFs come under Sebi’s purview.

The FMC, which is the regulator for the commodity futures markets, has argued that it has the right to regulate gold and silver exchange traded funds since the underlying asset is a commodity which comes under its bailiwick.

FMC chairman B.C. Khatua told reporters here today that the two regulators had agreed to resolve their differences through dialogue.

Khatua said approvals that had been granted to some fund houses over certain commodity-based ETFs had now been put on hold.

“In the larger interests of investors, both of us have agreed that other ETFs (gold, silver) will be allowed only when the issue is resolved,” he said.

Recent reports have indicated that several mutual funds were keen to float silver ETFs to take advantage of the surge in silver prices in the past 18 months.

The differences between Sebi and FMC have been brewing for close to a year, fuelling another turf battle between regulators.

Last year, Sebi and the Insurance Regulatory and Development Authority (IRDA) had locked horns over unit-linked insurance products (Ulips).

The National Stock Exchange was also forced to defer the launch of derivatives based on gold exchange traded funds as the FMC had raised objections. The regulator for commodity futures market had objected on the ground that options were not allowed in commodities.

Some of the issues that figured in today’s meeting of the FMC with members of the national commodity exchanges were the introduction of mini contracts in agricultural commodities, standardisation of know-your-client (KYC) agreements across exchanges, and extra delivery centres for bullion contracts. Exchanges also wanted to put a halt to trading on Saturdays.

The total value of trade in Indian commodity futures market during 2010-11 stood at Rs 119.49 lakh crore.

The market registered a growth of 54 per cent during the year compared with Rs 77.65 lakh crore in the previous year.

Audit glare on SBI provisions

The Institute of Chartered Accountants of India (ICAI) has asked the State Bank of India — the country’s largest commercial bank — to explain the reasons for the surge in the provisions it made against bad loans in its results for the fourth quarter ended March 31. The SBI had raised its provisions against bad loans by 49 per cent to Rs 3,264 crore from Rs 2,187 crore in the year-ago period. Total provisions at the bank rose 82 per cent to Rs 6,059 crore during the same period. The sharp jump in provisions was the principal reason behind the PSU banking giant reporting a net profit of Rs 21 crore compared with Rs 1,867 crore in the same period last year. The resultant fall in the SBI’s profits drew a caustic remark from RBI deputy governor K.C. Chakrabarty recently. Although Chakrabarty did not name the bank, he said whenever the chairman of a bank retired, its profits went down as the successor wanted to start with a clean slate. “If we don’t audit or create the standard then anybody will report anything that will not be meaningful and nobody will rely on that. Books should not be as per the minds of the chairman but reporting should be as per books,” he had said. It is now learnt that the accounting regulator will soon take up the reasons behind the rise in provisions at the SBI during the fourth quarter, not only with the bank, but also with its auditors. ICAI president G. Ramaswamy was quoted as saying that a letter would be sent to the SBI asking it to state the reasons that led to the increase in provisions in the March quarter. The letter is expected to be sent within a week and further action will depend on the SBI’s response, the ICAI chief added. It, however, could not be ascertained as to whether the accounting regulator will look into specifics such as the jump in provisions for NPAs or its overall provisioning procedures. Meanwhile, the SBI has also breached the Reserve Bank of India’s credit exposure norms with respect to loans it provided to Reliance Industries Ltd (RIL) in the past three consecutive years. In its annual report, the SBI has disclosed that its credit to RIL was in excess of the limits prescribed under the RBI’s prudential credit norms. The bank added that apart from RIL, Indian Oil Corporation and Bhel were the other two clients who had benefited from a breach in the prudential credit limits. Under the RBI norms, loan exposure to any entity has to be capped at 15 per cent of capital funds in the case of a single borrower and 40 per cent of capital funds in the case of a borrower group. However, the exposure to a single borrower can go up to 20 per cent if the additional 5 per cent is on account of extension of credit to infrastructure projects.

RIL buys Bharti insurance stake

Mukesh Ambani today stormed into the crowded insurance business arena by acquiring Bharti group’s 74 per cent stake in its life insurance and general insurance entities for an undisclosed sum of money. The move will pit the elder Ambani scion against his sibling Anil Ambani who scrapped a non-compete agreement in May last year that removed virtually all turf restrictions that they had decided on when they carved up patriarch Dhirubhai Ambani’s empire in January 2006. Two Mukesh Ambani companies — group flagship Reliance Industries and Reliance Industrial Infrastructure Ltd (RIIL) —will acquire the stake that the telecom giant held in the two entities: Bharti AXA Life Insurance Company Ltd (Bharti AXA Life) and Bharti AXA General Insurance Company Ltd (Bharti AXA GI). Both insurance entities have raked in losses in 2009-10 with Bharti Axa Life suffering a loss of Rs 478.17 crore and Bharti Axa GI of Rs 142.30 crore. It isn’t clear how much Ambani has had to fork out for the insurance companies but it won’t be hard for him to pay. Reliance Industries is sitting on a $9.5-billion (Rs 42,393 crore) cash mountain and will rake in another $7.2 billion as soon as the government clears the deal it struck with British Petroleum in February under which the UK exploration giant will acquire a 30 per cent participating interest in the 23 oil and gasfields that RIL operates. Under the terms of the deal with the Bharti group, RIL and RIIL will effectively hold 57 per cent and 17 per cent, respectively, in both the insurance companies and will become AXA’s joint venture partners in India. The Paris-based group will retain its current 26 per cent shareholding in the insurance joint ventures and will continue to manage the day-to-day operations. Interestingly, there is an option under which AXA can acquire from RIL and RIIL up to 24 per cent in both the insurance companies if the FDI regulations and other norms permit such a purchase. It is contemplated that if this option is exercised, the two Reliance companies will effectively hold 50 per cent with RIL owning 45 per cent and RIIL the rest. AXA will then hold the remaining 50 per cent in both companies. However, it is assumed the life insurance business of Bharti AXA was alone valued at over Rs 3,000 crore. In March this year, Nippon Life had acquired a 26 per cent stake in Anil Ambani’s Reliance Life for Rs 3,062 crore. Analysts had then said the valuation given to Reliance Life was higher than anticipated. For Mukesh Ambani and Reliance which began with textiles, the acquisition of Bharti’s stake is another instance of it diversifying into areas other than oil and gas or petrochemicals. While RIL has already entered the organized retail business, last year, it had stunned observers when it entered the hospitality business by checking into EIH. In June last year, it acquired a 95 per cent stake in Infotel Broadband for Rs 4,800 crore. In March this year, RIL announced that it was entering financial services by joining hands with the DE Shaw group. Though insurance is a capital intensive business with a long gestation period, for a cash rich company like RIL, it can withstand the challenges in these businesses. Bharti AXA Life started operations in 2006 and has a market share of a little over one per cent in the insurance arena. During 2010-11, it collected total premium of Rs 790 crore. Data from IRDA show that the company’s new business premium income dropped to Rs 362 crore, a fall of 17 per cent. On the other hand, the gross premium underwritten by Bharti AXA GI stood at Rs 551.48 crore, an increase of 77 per cent over that in 2009-10.