No fresh MFI loans in AP a year after Microfinance Ordinance

AP accounted for almost 30% of microfinance lending in the country before the new Microfinance Act was implemented in the state. Now, without a visible solution for recoveries, there has been no fresh lending, a senior executive of an MFI said

Hyderabad: Microfinance institutions (MFIs) operating in Andhra Pradesh have stopped making fresh loans due to their mounting non-performing assets, given the limited scope of recovery a year after the state government promulgated an ordinance regulating their activities, reports PTI.

According to state government data, the total loan outstanding of all MFIs stood at Rs10,386 crore before the Act and as per the latest figures, their loan outstanding now stood at Rs6,381 crore.

The AP Microfinance Ordinance was implemented on 15th October last year and subsequently made into an Act in the wake of a spate of suicides by borrowers, allegedly due to the coercive recovery practices employed by MFI agents.

Rural development principal secretary Reddy Subramaniam said the state government has achieved its objective of saving people from harassment by MFIs.

While Spandana Sphoorty Financial tops the list of MFIs with outstanding bad loans, with NPAs worth Rs1,500 crore, SKS Microfinance, the country’s only listed MFI, has Rs1,135 crore worth of defunct assets in the state.

“The state government’s objective is to save people from the clutches of MFIs who use coercive methods for recoveries.

As far as their outstanding is considered, they came up with a proposal that the interest rate will be reduced, which is a welcome move,” Subramaniam told PTI.

He said the MFIs’ proposal will be referred to the state-level bankers committee soon. Mr Subramaniam, however, said the government has no role to play in the MFI loan recovery mechanism.

“There was an external political attack on microfinance that culminated into the draconian provisions of a microfinance law passed in Andhra Pradesh, the Andhra Pradesh MFI Act. The Act has resulted in a slight reduction, up to 5%, in the company’s growth,” SKS Microfinance executive chairman Vikram Akula remarked in the company's annual report.

The MFI Act mandates prior approval of every loan application by the state government authorities.

Fresh disbursals in the state have come to a standstill due to the stringent norms set by the state government. While the MFIs have proposed 73,592 new loans to borrowers, the government has rejected as many as 71,309 applications, citing non-compliance of the MFI Act.

A senior state government official said most of the applications for fresh loans were rejected as they come under the category of multiple lending.

AP accounted for almost 30% of microfinance lending in the country before the new Microfinance Act was implemented in the state. Now, without a visible solution for recoveries, there has been no fresh lending, a senior executive of an MFI said.

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NSE clocks four-fold surge in gold ETF trade

As per the NSE data, the daily average trading values in gold ETF have increased by over 400% from a daily average of Rs18 crore in April to Rs92 crore in September 2011

New Delhi: The investors interest seems to be growing fast in gold ETFs (Exchange Traded Funds), as the average daily value of their trade on the National Stock Exchange (NSE) has grown by over four times since the beginning of this fiscal, reports PTI.

The gold ETFs enable investment in the precious metal on the stock exchange platform in an electronic mode and without its purchase in physical form.

As per the NSE data, the daily average trading values in gold ETF have increased by over 400% from a daily average of Rs18 crore in April to Rs92 crore in September 2011.

The daily average number of trades has also increased by 300% during this period, from 5,891 average daily trades in April to 23,874 last month.

The gold ETFs track the gold prices and each unit of these ETFs is generally equivalent to one gram of gold.

While the global markets have been in a turmoil over the past one year, and asset classes like stocks giving huge negative returns, the gold prices have rallied smartly.

Tracking the soaring gold prices, the gold ETFs have appreciated by over 30% over the past one year, although the prices have fallen somewhat in past one month.

As the investor interest in the gold grows in the run-up to Dhanteras and Diwali festivals, when it is considered auspicious to invest in gold and other valuable assets, the experts expect the gold ETF trade volumes to rise further in the coming days.

Diwali will be celebrated on 26th October, while Dhanteras falls two days before that.

To cash on the festive demand, the NSE has also begun a new media campaign to spread the word about the gold ETFs being a ‘smart way to buy gold’.

Traditionally, Indians have been investing in gold on auspicious days like Akshaya tritiya, Dhanteras and Diwali.

On the day of Akshaya Tritiya on 6th May this year, the NSE recorded a record trade of 20 lakh units of gold ETFs worth Rs423 crore.

A total of 11 gold ETFs are listed on the NSE and their monthly trading value has grown to Rs1,936 crore as on September 2011, as against Rs356 crore in January this year.

The total assets under management in gold ETFs have more than doubled in the past one year, while it has grown by over five-times in two years.

As per the latest available data, the total assets of the gold ETFs stood at Rs6,119 crore at the end of July 2011.

The number of investor accounts for gold ETFs has also grown to nearly four lakh, from little over one lakh accounts in September 2009.

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FIIs turn bullish on Indian securities; invest Rs950 crore in Oct

“In the month of October, the Indian market has seen an upward movement, so FIIs (foreign institutional investors) invested in the market. In the last two months, overseas investors were pouring money in the gold,” BNP Paribas Alex Mathew said

Mumbai: After massively pulling out in the last two months, foreign funds have turned bullish and infused a hefty Rs950 crore in just a fortnight in Indian markets, reports PTI.

During 3rd to 14th October, overseas investors have purchased equity and debt securities worth a gross amount of Rs36,590 crore and sold securities valued Rs35,640.50 crore. This translated into a net inflow of Rs950 crore, according to data available with the Securities and Exchange Board of India (SEBI).

“In the month of October, the Indian market has seen an upward movement, so FIIs (foreign institutional investors) invested in the market. In the last two months, overseas investors were pouring money in the gold,” BNP Paribas Alex Mathew said.

He further said, “Over the coming months, FIIs will continue to infuse capital in the BRIC countries.”

Meanwhile, the 30-share Sensex grew by nearly 4% or 629 points so far in October. In the last trading session, the key index on BSE finished at 17,082.69, up 199 points from its previous close.

In August and September, FIIs have witnessed an outflow. In August, foreign funds pulled out nearly Rs8,000 crore, or $1.8 billion, from the Indian stock and debt markets—the highest monthly withdrawal since October 2008. Last month, they withdrew Rs1,866 crore.

Market analysts believe heavy selling by FIIs was triggered by ongoing debt crisis in the Eurozone and weakness in the US economy.

In October, FIIs are bullish on the debt market and poured in Rs1,707 crore, while they pulled out Rs757 crore from the equity market in the same period.

So far this year, FIIs have pumped in Rs18,614.20 crore into stock and bond markets, compared to about Rs1,79,674 crore in the whole of 2010.

The number of FIIs registered with SEBI stood at 1,751 as of October this year.

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