SEBI to allow allow exchange-traded interest futures

After the launch of the futures for exchange rates between the US dollar and the Indian Rupee, The Securities and Exchange Board of India (Sebi) will allow exchange-traded interest rate futures in January, a senior official said on Monday.

“We are on track to launch interest rate futures. It will be launched by January”, T.C. Nair, director at the markets watchdog told an industry conference. Sebi is also considering launching exchange-traded corporate bonds and would unveil it in a “couple of months”, he added. “We are looking at an exchange-traded corporate bond market, because there is more transparency and manipulations are not possible,” Nair said.

Nair also hinted at the possibility of a fourth exchange for currency futures in the near future. “There are some banks and financial institutions which have applied and we are considering their proposal,” he said.

Home loans at a concessional rate of 9.5% for 1st five years

Public sector banks (PSBs) are set to offer home loans of up to Rs20 lakh at a concessional rate of 9.5% for a period of five years as part of the government’s fiscal stimulus package announced on Sunday to spur spending and bolster sagging economic growth.

All new home loans advanced by state-owned banks until 30 June will come at the 9.5% rate, which will be reset five years later depending on the prevailing trend, according to two senior bankers involved in devising the package who didn’t want to be named.

Securities and Exchange Board of India to tighten norms for FMPs

In a significant development, market regulator Sebi, or Securities and Exchange Board of India, has decided to tighten norms for FMPs, or fixed maturity plans, and has put all fresh offer documents that allow an exit option on hold.

Sebi has decided to put all fresh FMP offer documents that allow an exit option on hold and will relook at FMP norms. It will also look at disclosures and need for sectoral limits. The regulator will look at exit clauses on FMPs and wants tougher exit clauses. Sebi also said it will discuss the issue with the industry once the immediate liquidity concerns subside.

Meanwhile, the AMFI, or Association of Mutual Funds in India, Chairman said the industry recognises the concerns and that it will work with the regulator to avoid any future crises and Liquidity pressure on mutual funds was easing.

India Infoline receives inprinciple to start MF Company

Leading financial services firm India Infoline has received inprinciple nod from SEBI to start its mutual fund company. “An entry into the mutual funds space is an opportunity for us to continue to expand our offerings under the financial services domain in line with our long-term strategy,” India Infoline executive director R Venkataraman said in a statement on Tuesday. The company has presence in 886 business locations spread over 350 cities across the country.

In the recent past, all the Assets under management have declined significantly on account of the fall in the stock prices and also some amount withdrawal by investors and no new money flowing into the new purchases of Mutual funds.

Loan Rates Likely To Drop 25-75 bps

Given the recent cut in CRR, Repo Rate, SLR one could see that the cost of funds drop by up to 75 basis points, as leading state-run banks lower lending rates under pressure from the government keen to rev up the economy.

Many of the public sector banks — State Bank of India, Bank of Baroda, Indian Bank and Central Bank of India — confirmed on Tuesday that they were considering rate cuts following last week’s move by the Reserve Bank of India (RBI) to slash reserve ratios and cut short term rates and the government’s assurance of favourable policy measures.

Union finance minister P Chidambaram met with public sector banks’ chiefs on Tuesday to take stock of the financial position of banks at a quarterly review meeting. “We have had an extensive discussion and the Indian Banks Association, on behalf of the banks, has assured me that they will go through the matter and come up with some decisions on the price at which credit will be delivered to the different sectors,” Mr Chidambaram told reporters.

But in another development many of the private setcor banks like ICICI, Kotak and HDFC bank have indicated that they will not cut the Auto Loan rates just yet and they will adopt a wait and watch policy.

Higher returns in the short term

As a result of the current global situation, peculiarities in the Indian domestic financial scenario, tightness in the liquidity, call rates (rates at which banks borrow between each other) closed substantially higher at 14.0-14.5 per cent, against the previous close of 11.5-12.5 per cent. The rates touched an intra-day high of 15-15.5 per cent signalling tight liquidity in the market.

As a result of the same, one should try and put short term money in liquid mutual funds as against fixed deposits as the returns are higher even after considering the taxes that one should pay. This squeeze in liquidity is expected to be prevalent for some time to come and hence my advice is to park your excess short term money in Liquid mutual funds and ride the wave of higher returns.