Govt likely to soon approve SBI capital infusion

The finance ministry received a proposal from SBI in this regard a few weeks ago, sources said, adding that it is being examined and a decision will be taken shortly. As per the proposal, SBI requires Rs20,000 crore to fund its growth plans over the next two fiscals

New Delhi: The government is expected to provide capital support to the country's largest lender State Bank of India (SBI) during the current fiscal and a decision in this regard will be taken soon, reports PTI.

"We will capitalise SBI adequately so that the Tier-I capital is maintained over 8%, in line with the government's intent," official sources told PTI.

The finance ministry received a proposal from SBI in this regard a few weeks ago, sources said, adding that it is being examined and a decision will be taken shortly.

As per the proposal, SBI requires Rs20,000 crore to fund its growth plans over the next two fiscals.

Based on the proposal, sources said, various possibilities are being looked at for the capital infusion. It could be by way of a rights issue, preferential share issue, warrants, etc.

It is too premature to comment on the exact mechanism for the capital infusion, as all the options are still being explored, the sources said.

The government is committed to providing adequate capital to all public sector banks so as to maintain their Tier-I capital at 8% and the government's stake over 58%, sources added.

As of June, 2011, the Capital Adequacy Ratio (CAR) of SBI stood at 11.6%. Of this, Tier-I capital stood at 7.6% at the end of first quarter, against the minimum 8% level desired by the government.

Earlier this month, SBI chairman Pratip Chaudhuri had said, "We are already in a dialogue with the government for the rights issue to bring new Tier-I... It should happen by the end of this fiscal."

The government is committed to maintaining the public sector character of the bank and after amendment of the State Bank of India Act, the percentage of government holding cannot go below 51%, he had said.

"So in various scenarios, what would be the requirement of the rights issue, what would be contribution required for the government? The number would be as high as Rs14,000 crore to Rs9,000 crore," he had said.

"Rs 14,000 crore if it retains at 59%, Rs9,000 crore for 51% and Rs11,000 crore for 55%," he added.

Currently, the government has a 59.4% stake in the bank. In case a rights issue is approved and the government wants to retain its holding at the current level, it would need to subscribe to 59.4% of the total rights being issued.

It is to be noted that the country's largest lender had raised over Rs16,000 crore through a rights issue in 2008. In the last SBI rights issue, the government contribution was in the form of bonds to the bank instead of cash.

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Gold drops further by Rs700, silver sheds Rs1,700

Trading sentiment was dampened in global markets as some investors offloaded their holdings of the precious metal after CME, the world's largest futures market, increased the margin requirement for futures transactions

New Delhi: Gold and silver registered their biggest single-day decline in 18 months in the bullion market here in the Indian capital city Friday on frantic selling by stockists, triggered by a meltdown in global markets, reports PTI.

Gold plunged by Rs700 to Rs27,140 per 10 grams, while silver tumbled by Rs1,700 to Rs62,500 per kg, following the precious metal's steepest decline in more than three years in overseas markets.

In global markets, gold nosedived by 7.5% to $1,723.70 an ounce from its record high of $1,913.50 an ounce on Wednesday, the biggest drop since March 2008.

The trading sentiment was dampened in global markets as some investors offloaded their holdings of the precious metal after CME, the world's largest futures market, increased the margin requirement for futures transactions.

The minimum amount of cash that speculators must deposit for futures trade in gold was raised by 27% per 100 ounces of the shiny metal on the CME.

Stockists in the Delhi bullion market-which was closed Thursday in support of Anna Hazare's fast demanding a strong Lokpal Bill-indulged in heavy selling in tandem with melting global markets.

In addition, demand from retailer customers has dried up at existing high levels, which further influenced the market sentiment.

In the national capital, gold of 99.9% and 99.5% purity dropped by Rs700 each to Rs27,140 and Rs26,990 per 10 grams, respectively.

Sovereigns lost Rs300 to Rs22,200 per piece of eight grams.

Likewise, silver ready plunged by Rs1,700 to Rs62,500 per kg and weekly-based delivery shed Rs1,525 to Rs62,090 per kg.

Silver coins also tumbled by Rs3,000 to Rs68,000 for buying and Rs69,000 for selling of 100 pieces.

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JP Morgan to launch India Focus Fund

The new open-ended equity scheme will invest in a maximum of 25 stocks. But JP Morgan does not have a great track record so far

JPMorgan Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) to launch a new open-ended equity growth scheme to be called JPMorgan India Focus Fund. The scheme will normally hold equities of a maximum of 25 companies and the fund manager will have the flexibility to pick the companies. That is, he could pick a biggie like Infosys today and sell it tomorrow, if he chooses to, or invest in any smaller company as well. So, should you invest in the fund?

There is no reason to believe that the new India Focus Fund will do any better than the other well-performing schemes. Besides, JP Morgan's two existing schemes have done quite badly. JPMorgan India Equity and JPMorgan India Smaller Companies, both launched in 2007, have given returns of 5% and -8% respectively since inception.

The equity portion of the scheme will be managed by Harshad Patwardhan and Amit Gadgil. The debt portion will be managed by Nandkumar Surti and Namdev Chougule. Mr Patwardhan and Mr Gadgil also manage the India Equity and India Smaller Companies funds.

Between 65% and 100% of the assets of the Indian Focus Fund will be invested in equity and equity-related securities with a medium- to high-risk profile.
A maximum of 35% of assets would be put into debt securities, money market instruments and cash and cash equivalents with a low- to medium-risk profile.

The exit load charged will be 1% for redemption within 12 months from the date of allotment. The BSE 100 is the benchmark index for the fund.

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