Finance ministry to discuss steps with SEBI, RBI to boost corporate bond market

A finance ministry official said discussions were held with representatives of financial institutions like Morgan Stanley, ICICI Securities, PNB Gilts, Tata Group and AK Capital, on the steps for boosting corporate bond market. The ministry will now hold discussions with SEBI and RBI in this regard

New Delhi: The finance ministry will discuss with the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) the steps required to broad-base and make vibrant the corporate bond market to help mid-sized firms to raise funds at competitive rates, reports PTI.

The ministry today discussed the issue with participants of the debt market to enlist views for widening the corporate bond market.

"Various suggestions have come (on making corporate bond market vibrant), but no decision so far. We will discuss these suggestions with SEBI and RBI," a senior finance ministry official said after the meeting.

While India has a well established government securities (G-Sec) market, the corporate bond segment is yet to pick up mainly due to the asset quality of the debt papers.

The official said the discussions were held with the representatives of financial institutions like Morgan Stanley, ICICI Securities, PNB Gilts, Tata Group and AK Capital, on the steps for boosting corporate bond market.

He said there would be another round of meeting next month with the market players to crystallise the suggestions.

Sources said the government is mulling tax incentives such as reduction in Securities Transaction Tax (STT) and stamp duty, besides withdrawal of withholding tax, to help companies raise funds at competitive rates.

G-Secs are preferred over corporate bonds as they enjoy sovereign guarantee and are highly traded, as compared to bonds.

However, in comparison to G-Secs, corporate bonds offer better rate of interest and people prefer to hold them till maturity, hence there is less trading in the segment.

The official said the government is ready to put in whatever it takes to bring liquidity in the corporate bond market.

A vibrant corporate bond market, as suggested by India Inc in its 1st August meeting with finance minister Pranab Mukherjee, would help small and medium sized companies to get credit at comparative rates.

Large companies are able to get loan through private placement and from banks, while the smaller players face problems.


SBI Life leads globally at Million Dollar Round Table 2011

SBI Life Insurance retains the unique distinction of being the only Life Insurer from India of topping the prestigious Million Dollar Round Table 2011 across the globe.

For the third consecutive year, SBI Life has reached the pinnacle of the international coveted league by having 2,661 MDRT (Million Dollar Round Table 2011) members in 2011. Amongst these, 200 have achieved Court of Table (COT) and 30 Top of Table (TOT) membership statuses. SBI Life has been consistently featuring amongst the top five insurers, worldwide, since last five years. Globally, the company is ranked 5th in 2007, 3rd in 2008, and 1st in 2009, 2010 and 2011.

Reputation, standard of sales excellence and high ethical standards are some of the key values that are associated with the MDRT brand. The MDRT membership is an exclusive honour that is achieved by less than 1 percent of the world's life insurance and financial services advisors. Life Insurance professionals aspire to attain the privilege of being an MDRT member.

MN Rao, MD & CEO, SBI Life, said, "Across the globe, both, Agent and Insurance Facilitator at bank, continue to be a reliable source of personal financial advice. Our accomplishment on a global platform testifies the professional approach followed by our distributors. We will continue to focus on equipping them with relevant support to enable advisory-based delivery of life insurance solutions to our customers."

Rajiv Gupta, executive director, marketing, SBI Life added, "This accomplishment resonates our commitment towards creating quality advisors who can be looked upon as world-class benchmarks. Providing need based solutions, professional advice and unmatched service will remain the focal delivery points for our Advisors ".

An opportunity to represent one of the most trusted brands in the country, superior training program and attractive reward and recognition programmes are some of benefits availed by SBI Life Insurance Advisors.

Anand Pejawar, Executive Director, Marketing, SBI Life added "In addition to highly productive Retail Agency Channel, our integrated banc assurance approach continues to create value for Bank customers and Facilitators of our products. The bank employee, involved in the sale of the insurance products, has rapidly evolved to deliver holistic banking and insurance solutions to their customers making the bank truly a super market for all financial requirements".
SBI Life ranks number one amongst private players, as per the latest IRDA report, of July 2011. The company has a market share of 21.6% among private life insurers and a total market share of 6%.

MDRT is an association of the world's best life insurance sales (advisors) professionals. Founded in 1927, MDRT is an international, independent association of nearly 36,000 of the world's leading life insurance and financial services professionals from 76 nations and territories, representing over 450 companies. MDRT members are recognized as skilful professionals who are considered to be among the best in the industry, perform outstanding client service, and have achieved the highest standard of sales excellence in the life insurance and financial services business.


Rising costs, rates to affect domestic car sales during festivals

According to CRISIL, rising cost of ownership of cars and strikes are to subdue sales growth in the festive season. Frequent fuel price and interest rate hikes would also impact growth in 2011-12

Rising cost of ownership of cars due to frequent fuel price and interest rate hikes as well as labour strikes are likely to affect car sales in the festive season, says CRISIL.

In a research report, the ratings agency said, recent events at the start of the festive season will impact the consumer sentiment negatively causing the industry to grow at a much lower rate than previously anticipated. This, in addition to labour problems at market leader Maruti's Manesar plant will further dent demand. Frequent fuel price and interest rate hikes are to impact growth in 2011-12.

Cost of owning a car has increased significantly by 12-14% due to frequent increases in fuel price and interest rate. Since its de-regulation in June 2010, petrol prices have increased by 37%. In this fiscal alone, the prices have increased by 13% to around Rs 71 currently (Mumbai prices) from Rs. 63 at the start of the fiscal. Hence, fuel cost for driving a typical compact car has increased significantly by 30%-35% during 2010-11, the report said.

Prospective buyers have to contend with increasing EMIs as well. The Reserve Bank of India raised interest rates four times within the first 5 months of 2011-12. The recent hike of 25 basis points (bps) in the benchmark rates has taken the total increase to 125 bps since the start of this fiscal. While automobile financiers have not fully passed on the increased rates to end users, uncertainty regarding their decision to pass on the rate hikes coupled with the burden of EMIs (equated monthly instalments) of other loans would impact demand for cars.

CRISIL has also revised its forecasts downwards on account of a rise of Rs3 in the petrol prices and a 25 basis points (bps) increase in interest rates. It said growth in passenger cars is likely to decelerate sharply to 2% to 4 % with domestic cars growing at less than 3 % as against the earlier forecast of a growth of 8-10 % due to fuel price and interest rate hikes.

Growth is expected to reach to the levels comparable to 2008-09, when the domestic car sales grew by only 1.4 % due to global recession. This would be only the second time in the decade when industry will grow at sub 5 %.

Demand drifts towards diesel but the limited capacity for diesel engines to limit growth. Diesel prices too increased by 9% during the year but difference in the prices of two fuels will continue to remain huge at 43%. Hence, demand for diesel cars increased significantly, far outstripping the available diesel engine capacities at the OEMs. While investments were made in expansion of diesel engine capacities during the year, most of the new capacities are likely to get commissioned only in 2012-13 limiting domestic sales growth in the current year.

According to interactions, CRISIL had with dealers and OEMs, there are lesser enquiries and footfalls as compared to that of the festive season last year. This has been done by CRISIL Research on the following parameters:

Inventory: Inventory levels on petrol models are high owing to a major shift in demand towards diesel vehicles. On an average, inventory at dealers end for petrol models is as high as 25-30 days against an inventory of 15-20 days a year ago.

Discounts: Discounts have been higher than previous years especially on petrol variants of most models by around 25-30 %. OEMs are engaging in marketing activities like reduction in prices (for e.g. Reduction in prices of Honda's City and Jazz) and special lower pricing for certain models (for instance Hyundai's i10) in order to boost their sagging sales

Waiting period: Waiting periods for petrol models have declined significantly. On the other hand, waiting periods for diesel variants are as high as 5-8 months. For instance, in case of Hyundai's Verna and Maruti Suzuki's Swift, waiting periods are as high as 8-10 months.




6 years ago

Brilliant article, thanks. In addition, the price of used cars has cracked further downwards, and the resale of saloons/3-box cars now matches that of equivalent hatchbacks from the same marquee.

For example, in a resale market, these cars now command very similar prices:-

Maruti Swift hatchback & DeZire
Tata Indica & Indigo

In addition, the steep drop in resale prices for larger cars is now reaching a level where it is cheaper to buy a big car for low-mileage use, assuming you know how to maintain it at low cost.

The real correction will take place when hatchbacks and 3-box sedans start costing the same, new, and that has to happen soon.

Humbly submitted/vm

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