LT Infrastructure Finance to issue tax-saving infrastructure bonds

LT Infrastructure Finance Company is making a public issue of Long Term Infrastructure Bonds 2011, to finance infrastructure lending.

The company proposes to issue secured redeemable non-convertible debentures aggregating up to Rs 100 crore with an option to retain an oversubscription of up to Rs 300 crore for allotment of additional bonds.

The bonds having benefits under Section 80CCF of the Income Tax Act, 1961, will open for subscription on February 7, 2011, and close on March 7, 2011.

The bonds have been rated as "Care AA+." by CARE and ''LAA+'' by ICRA, indicating high safety for timely servicing of debt obligations with high credit quality and low credit risk.

The bonds will carry a minimum lock-in period of five years from the date of allotment and can be redeemed after 10 years from the date of allotment.

The issue is proposed to be listed on the National Stock Exchange of India Limited (NSE).
More: http://in.news.yahoo.com/l-t-infra-finance-issue-tax-saving-infrastructure-20110203-045900-785.html

India’s second-largest lender plans to curb new loans to preserve capital - said Chanda Kochhar

Chanda Kochhar, ICICI Bank Ltd.’s new chief executive officer, said India’s second-largest lender plans to curb new loans to preserve capital, bucking the central bank’s call for credit growth to revive the economy.

“In the coming year, the growth rate for us would be pretty moderate” on loans, Kochhar, who takes the helm at the Mumbai-based lender tomorrow, said in an interview in her office. “In times like these, you have to conserve capital, you have to maintain liquidity and you have to contain risk.”

Reserve Bank of India Governor Duvvuri Subbarao told banks to increase lending by at least 20 percent to drive an economy growing at the slowest pace in six years. Kochhar, 47, takes the top post at ICICI following a year in which the bank’s advances dropped 3 percent, compared with a 17.5 percent gain in India’s total bank credit, and the stock posted its worst year on record.

The slump in loans may make it harder for ICICI to revive earnings after posting the steepest fall in quarterly profit in more than six years for the three months ended March 31. The bank set aside more funds for bad debt and curbed loans and overseas operations to avoid defaults during the quarter.

“The bank remains in a transition phase and further restructuring/downsizing is expected to impair medium-term profit outlook,” Prabodh Agrawal, an analyst at IIFL Research in Mumbai, said in a note on April 27.

Agrawal forecasts ICICI’s loans are likely to drop by 5 percent to 10 percent in the year that started April 1, and net income will decline 17 percent. He recommends clients reduce their holdings in the bank.

Changing Deposit Mix

“What we are concentrating on is to change our deposit mix” to reduce the cost of funds, said Kochhar, currently chief financial officer of the bank. “In a volatile scenario like this, its important that we reduce the reliance on bulk and wholesale deposits and increase our proportion of current and savings accounts.”

The bank aims to increase current and savings account deposits as a proportion of total funds to 33 percent, from 28.7 percent as of March 31, said Kochhar. That increase will take at least a year for the bank, which plans to add 580 branches to extend its network to about 2,000, to accomplish, she estimated.

First Bank Employee

Kochhar, a 25-year veteran, became the bank’s first employee when the parent company decided to set up a lender in 1993. She built up ICICI’s retail lending operations, where loans climbed 20-fold under her leadership, ICICI has said. She was appointed to the board in 2001.

India’s central bank has cut its key rate by 425 basis points since October to the lowest on record to encourage banks to lend. Subbarao on April 21 forecast that India’s economy will grow 6 percent in the year that started April 1, the slowest pace since 2003.

“There is an urgent need to boost the flow of credit to all productive sectors of economy,” Subbarao said in the central bank’s annual monetary policy report.

ICICI, whose stakeholders include Temasek Holdings Pte and the Singapore government, aims to instead tighten norms for credit cards and most unsecured personal loans, and use deposits to pay down debt, Kochhar said. The bank has subsidiaries in the U.K. and Canada, through which it mainly offers overseas loans to Indian companies.

Run on the Bank

ICICI’s deposits shrank 11 percent in the 12 months to March 31 after it racked up the biggest losses among Indian lenders tied to the global financial crisis, leading to a brief run on the bank in September and more withdrawals as depositors grew concerned about its financial strength and shifted to state-run lenders.
Get more details from: Bloomberg.com

For special home loan scheme LIC ignored by Indian Govt.

State-owned banks, which have included free life insurance cover in their special home loan package, have mostly preferred to do business with their life insurance subsidiaries rather than state-owned Life Insurance Corporation of India.

On December 15, all state-owned banks announced a special home loan package that included free life insurance cover, in which premiums will be paid by the respective banks.

A tendering process was carried out by banks to choose life insurers, and LIC got orders from only eight banks, a source said. Total number of government-owned banks in the country is 27, including State Bank of India and its six associate banks.

When the package was announced, it was expected LIC would get maximum business from these banks, since both are owned by the state. LIC officials were not available for comment. While SBI owns 74 per cent in SBI Life Insurance Company, Canara Bank and Bank of India hold 51 per cent each in their respective companies. LIC has devised a scheme called Group Term Insurance Scheme for Special Home Loan Package that will be rolled out from March 1.

Premium pinches
Most public sector banks were of the view insurance premium is likely to result in loss for the bank. “It may happen the premium amount paid by the bank could eat up the profit earned by them in this special home loan scheme,” a banking industry official said.

Premiums paid by banks are likely to be Rs 2-3 for Rs 1,000 sum assured. Premium amount will depend on amount outstanding. In case a person defaults on the home loan, premiums will be charged on the amount outstanding plus interest.

“Banks would have made profit even if charging lower interest rates if the premium component was not there,” said an official at a state-owned bank. The interest rate bank charges for the special scheme is 8.5 per cent for loans up to Rs 5 lakh and 9.25 per cent for loans up to Rs 20 lakh. Duration of re-payment period is maximum 20 years for all tenures under this scheme.

Interest rates will be set for five years. After five years, borrower will have the option for going for a fixed rate or floating rate of interest. The special home loan package will be applicable for new loans that will be sanctioned up to June 30.
Source:business-standard.com