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INDIAN INSURANCE INDUSTRY
Wednesday August 27, 2008 N.U.R.C. India Daily Updates On
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INDUSTRY
IRDA revises investment norms for insurers

Insurance premium from new policies takes a 23% knock

Hybrid capital benefit likely for insurers


LIFE INSURANCE
Whenever a market crash attention shifts to LIC

SBI Life ranked third globally at MDRT

Max NY Life unveils new brand positioning

Bajaj Allianz to enter credit card business

Future Generali finds 2 lakh takers through

GENERAL INSURANCE
Iffco-Tokio plans travel insurance product

Now, buy general insurance cover at kirana shops

HEALTH INSURANCE

PENSIONS
Exempt funds play safe, settle for lower returns

Delay in opening PF office hits pensioners

SEBI
Sebi clamps down on NAV nexus

Use demats to cut rights time: I-banks tell Sebi

UBI, KBC await Sebis nod

MUTUAL FUNDS & AMCs


Allow Mutual Funds to offer insurance covers: AMFI

Edelweiss Mutual Fund to launch two liquid schemes


Taurus MF ties with Bajaj Allianz

Taurus Mutual Fund plans major come back

Peerless set for MF foray

AIG Mutual Fund floats interval fund

Allianz plans asset management foray

PVT. EQUITY & HEDGE FUNDS


Hedge Equities launches operations

GOVT. SECURITIES & BONDS


Bond prices gain by 55 paise

Call rates steady

INTERNATIONAL NEWS
Number of uninsured drops; poverty holds steady

ECONOMY & FINANCE


Rupee breaches 44-mark on a day of volatile movement

Rising interest rates could hurt investment: Kamath

INDUSTRY Go To Top

IRDA REVISES INVESTMENT NORMS FOR INSURERS

The Hindu Business Line

Hyderabad: The Insurance Regulatory and Development Authority (IRDA) has amended
the regulations on investment of insurance companies. The definition of investments in
infrastructure by the insurance companies is now aligned with current norms prescribed
by the Reserve Bank of India. This would bring in better cohesion and facilitate smooth
flow of funds into this important sector, Mr C.R. Muralidharan, Member (Finance and
Investments), IRDA said in a release.

The revised regulations also extend the exposure norms to investments of Unit Linked
Insurance Plans (ULIPs) premium to enhance policy-holders protection and rationalise
the norms for both private and public insurers.
The insurers could now adopt rating criteria as prescribed for categorising certain
instruments as approved investments by the authority, including rated mortgage backed
securities that can be reckoned towards the housing sector for the purpose of pattern of
investment, the release said.

The aim of the changes is to bring more flexibility to the insurers, address certain aspects
of risk management in ULIP business and investment management in general, among
others, it added.

http://www.thehindubusinessline.com/2008/08/27/stories/2008082752260600.htm

INSURANCE PREMIUM FROM NEW POLICIES TAKES A 23% KNOCK

Paramita Chatterjee

The Economic Times

New Delhi: The Insurance sector in India has seen a significant slowdown in growth in
the first quarter of the current fiscal. Premium from new policies has fallen 23%,
according to the latest Insurance Regulatory and Development Authority (IRDA) report.

The figures show that the industry witnessed 15% growth between April and June this
financial year as against 38% in the corresponding period last year. The total Annual
Premium Equivalent (APE), which depicts new premium coming in every year, stood at
Rs 9,611 crore during the first three months of FY- 09. LIC has witnessed a decline of
27% in its APE from Rs 4,927 crore in April-June last year to Rs 3,575 crore this year.

The slowdown in the economy and high inflation have forced banks to make lendings
dearer, which inturn have dampened investments in the insurance sector. Insurance is not
a top priority when it comes to consumer spends or investments. With less disposable
income, insurance sales would be tougher. With the uncertainty in the economy, people
are spending less on insurance products which are considered major tax
saving tools, said a source. Although the industry hasnt faced any negative growth so far,
there certainly has been a deceleration of growth in the industry, said ICICI Prudential
managing director Shikha Sharma.

According to sources, it is not just the sale of life and general insurance products which
has been impacted by the volatility in the stock market. The demand for Unit Linked
Plans (ULIP) also witnessed a drop in demand. The industry has seen a marginal shift
away from ULIP to traditional products. It is just a temporary phase. ULIPs will continue
to be the preferred alternative for investors who are not interested in the shortterm market
fluctuation, said Ms Sharma.

Last year, the insurance sector witnessed about a 100% growth. This is even as the
insurance perpetration in India is still at a low level at 4.1% of the GDP as compared to 8-
10% of the GDP in some of the developed economies and the Asian markets. So far, 24%
of the Indian households own life insurance policies and the average sum assured per
household is just Rs 1,14,450 among the owner households.

Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved"

HYBRID CAPITAL BENEFIT LIKELY FOR INSURERS


Niranjan Bharati

The Economic Times

New Delhi: Insurance companies

may soon be allowed to raise capital through several means which are normally used by
commercial banks. The government is considering an amendment in the insurance law for
allowing insurers to have hybrid capital. This would help the insurers meet their
expansion plans while fulfilling solvency norms. The new norms would be applicable for
both public and private insurers.

We are planning to allow insurance companies to raise resources through hybrid capital
so as to help them meet their capital requirements, a senior finance ministry official said,
adding there was huge capital requirement for expansion of the life insurance business
and the government needed to facilitate the expansion plans of the companies.
Almost all the life and non-life insurers are in the need of additional capital for meeting
their requirements. In fact, insurance companies were demanding that the government
and the regulator should either ease the solvency norms or allow them to raise resources
through multiple sources.

Presently, Insurance Regulatory and Development Authority (Irda) norms require an


insurance company to keep solvency margin at 150%. Insurers wanted it to be brought
down to 100%. Funds injected by promoters for adhering to the solvency norms go into
the insurers shareholders funds.

Solvency of an insurance company corresponds to its ability to pay claims. An insurer is


considered insolvent if its assets are not adequate (over indebtedness) or cannot be
disposed of in time (illiquidity) to pay the claims. A 100% margin means that insurers are
adequately placed to pay claims.

The capital requirement of non-life insurers has also gone up substantially in the recent
past. They need additional capital with de-tariffing of the fire, marine and engineering
insurance products, which hitherto proved to be quite profitable.

Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved"

http://economictimes.indiatimes.com/Personal_Finance/Hybrid_capital_benefit_
insurers/articleshow/3409210.cms

LIFE INSURANCE Go To Top

WHENEVER A MARKET CRASH ATTENTION SHIFTS TO LIC


Mayur Shetty

The Economic Times

One notion about Life Insurance Corporation of India persisting in the public mind is that
of a government hotline. It is widely believed that every time the stock market sees a
historic crash, the phone rings at the investment department with instructions to support
the market.

Indeed, in various Black Mondays witnessed by the equity markets, when the Sensex
crashed several hundred points, LIC was the only buyer. What irks Sushoban Sarker,
CEO of LIC MF Asset Management, is that LIC is not being given enough credit for
diligently following the age-old strategy of buying cheap and selling dear. If you get an
opportunity to buy an asset for Rs 750 which was until now selling for over

Rs 1,000 what would you do? asks Mr Sarker in an attempt to explain LICs strategy. He
points out that legendary investors like Benjamin Graham and Warren Buffett have made
their mark by buying value stocks during economic downtrends. While in a market crash
attention immediately shifts to LIC, what has gone almost unnoticed is that the
corporation made a killing selling bluechips when the Sensex crossed 20,000.

Besides this simple home truth, LICs other investment philosophy has been to ensure that
there are always some self-defined ground rules, even when there is freedom from
regulation. Completely unrestricted fund management is the hallmark of hedge funds
which have been in the news for losing investors money.

Mr Sarker brings these values into his new job at LIC Mutual Fund where he took charge
in April. Mr Sarker, a direct recruit at LIC of the 1977 batch, has close to a decades
experience in investment. Immediately before taking charge, he was executive director in
charge of investment department at LIC. He has overseen LICs investment in diverse
financial instruments including equities, government securities and corporate bonds.

After graduating with honours in physics, Mr Sarker went on to acquire a post-graduate


degree in financial management from Jamnalal Bajaj Institute of Management Studies,
University of Mumbai. He has been on various committees, including those constituted
by the government, RBI and the Insurance Regulatory and Development Authority.

Though the Rs 18,000 crore-odd assets under management of LIC MF are significant,
compared to LICs assets of close to Rs 8,00,000 crore they may appear small. But there is
a lot of excitement in the fund business. On the cards is a proposed joint venture with
Japans Nomura. The fund ranks No.11. Mr Sarker aims to improve the rankings and bring
LIC MF to the 5th or 6th position. The mutual fund has so far done well in liquid and
debt schemes. He wants to diversify a bit more into equity.

Although in recent months life insurers and mutual funds have been fighting a bitter turf
war, Mr Sarker, who has made the transition from insurance to asset management, feels
there is no inherent conflict. On the contrary, he feels there is scope for LIC MF to work
closer with its parent and use the distribution network to offer fund products to high net
worth customers.

Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved"

http://economictimes.indiatimes.com/Personal_Finance/When_mkt_crash_attention_shift
s
_to_LIC/articleshow/3409385.cms
SBI LIFE RANKED THIRD GLOBALLY AT MDRT
PTI

See this story in: The Economic Times, Daily News & Analysis

Mumbai: SBI Life on Tuesday said it has been ranked third globally in terms of number
of Million Dollar Round Table (MDRT) members. The MDRT membership is an
exclusive honour that is achieved by less than one per cent of the world's life insurance
and financial services advisors

, a press release issued here said.

"Our global ranking is a testimony to the capabilities and potential of the Indian life
insurance industry. Strong brand equity coupled with a highly productive sales force will
enable us to scale greater heights in the future," SBI Life's Managing Director and CEO,
U S Roy, said. Of the 40,000 SBI Life insurance advisors, 1,662 have qualified for the
prestigious MDRT membership. Among these, 124 qualified for Court of Table (COTs)
and 20 for Top of Table (TOTs).

http://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Banki
ng/SBI
_Life_ranked_third_globally_at_MDRT/articleshow/3408714.cms

http://www.dnaindia.com/report.asp?newsid=1185984

MAX NY LIFE UNVEILS NEW BRAND POSITIONING

K.R.Srivats
The Hindu Business Line

See similar story in: The Hindu, Business Standard

New Delhi: Max New York Life Insurance Co Ltd plans to expand aggressively in the
South this fiscal, a top company official has said. We already have well dispersed
presence in North and Western India. Bulk of the expansion will happen in South this
year. By the end of the year, we will be in 75 towns with 125 offices, Mr Debhasis
Sarkar, Senior Director & Chief Marketing Officer, MNYLI, told Business Line, after
unveiling the companys new consumer-oriented brand positioning here.

MNYLI currently has 366 offices in 223 cities and aims to expand presence to 1,000
cities with about 1,600 offices by 2012. The company has coined a new tagline Karo
Zyaada ka Iraada to represent an ambitious and assertive India that is ready to compete
for more, demand more, dream more and live more to create a better and brighter
tomorrow.

Studies conducted by Mckinsey Global Institute and demographic research by Max New
York Life Insurance point to the modern Indian consumer as predominantly young and
more confident than ever before, willing to take risks and unabashedly ambitious. This
radical change in the thought process of the consumer has inspired MNYLI to revamp the
brand and change the tagline from Your Partner for Life to Karo Zyaada Ka Iraada, Mr
Sarkar said.

http://www.thehindubusinessline.com/2008/08/27/stories/2008082752180600.htm

http://www.business-standard.com/india/storypage.php?autono=332651

http://www.hindu.com/2008/08/27/stories/2008082756421900.htm
BAJAJ ALLIANZ TO ENTER CREDIT CARD BUSINESS

The Telegraph

Calcutta: Bajaj Allianz Financial Distribution Ltd (Bafdal), a 50:50 joint venture between
Bajaj Finserve Ltd and Allianz SE of Germany, plans to start credit card business soon.

We are talking to a few players, but nothing has been finalised yet, said Jitendra K.
Bhagat, chief executive officer of the company.

Bafdal, which entered the mutual fund distribution business through a tie-up with Taurus
Mutual Fund, distributes life and non-life insurance products as well as consumer loan
products of group companies.

Credit cards are complementary to our consumer finance business. We have not yet
decided whether it will be a proprietary or a co-branded card. The card will be launched
within this financial year, Bhagat said.

On the distribution of mutual funds, Bhagat said the company had shortlisted five fund
houses to sell their products. In fact, Allianz itself has applied to market regulator Sebi
for a licence to start asset management business in the country. Given the long
understanding and association with the Bajaj group, I believe, the mutual fund business
will also be carried out by the Bajaj Allianz alliance, Bhagat said.

Taurus, the second-oldest mutual fund house in the country after Morgan Stanley, on the
other hand, is planning to catch up with its peers. According to Waqar Naqvi, who has
recently taken over as the CEO of Taurus Asset Management Company, The promoters
were not focused on increasing the distribution network. Now we want to increase our
distribution network aggressively. We are expanding the number of offices and
employing more people.

At present, Taurus has eight schemes and Rs 400 crore of assets under management. Of
this Rs 150 crore is under debt funds and Rs 250 crore under equity schemes. The fund
has a net worth of Rs 150 crore that will help it in its expansion. Our net worth-to-AUM
ratio will be the highest in the industry, Naqvi said.

http://www.telegraphindia.com/1080827/jsp/business/story_9747552.jsp

FUTURE GENERALI FINDS 2 LAKH TAKERS THROUGH

Nandini Goswami

Daily News & Analysis

Kolkata: Future Generali Life Insurance has used the mallassurance channel to acquire
over 2 lakh customers in 5 days. The sales were made at the Future Group-owned Big
Bazaar hypermarkets from August 13-17.

Big Bazaar offered customers a life insurance cover regardless of the size of purchase.
Future Generali, which is present through over 40 branches in 30 cities hopes to tap Big
Bazaar stores in 90 locations to make headway into the market.

The insurance company is a joint venture of Indias Future Group and the Generali Group
of Italy. Jayant Khosla, chief executive officer, Future Generali Life said, We believe that
the convenience of buying insurance at a store near your home will result in more and
more people all over India getting better insured. We have proved that with the right
intent we will be able to reach out to vast millions of customers who shop at Future
Group outlets the security of insurance.

Both the life and general insurance ventures companies of Future Generali would use the
Future Group outlets to sell their insurance products.

The companies also use the normal agency and other alternate channels.

http://www.dnaindia.com/report.asp?newsid=1185985
GENERAL INSURANCE Go To Top

IFFCO-TOKIO PLANS TRAVEL INSURANCE PRODUCT

Business Standard

See similar story in: The Financial Express

Kolkata: Iffco-Tokio General Insurance (ITGI), was planning to come up with the first of
kind product in travel insurance for the domestic market and could move to seek the
Insurance Regulatory & Dvelopment Authority(IRDA) in about three month's time.

ITGI, a joint venture between The Indian Farmers Fertiliser Cooperative (IFFCO) and its
associates and Tokio Marine and Nichido Fire Group, already had a travel insurance
product for the international traveller called the ITGI Travel Protector Policy.

The travel business accounted for around 2 per cent of ITGI's net premium collection,
said Prantik Mitra, business head, ITGI. Its net premium revenue for 2007-08 was
Rs1254 crore. The new product would also have a built-in health cover component during
travel like the old one.

ITGI sold its current travel insurance product mainly through corporate tie-ups and
recently tied up with Kaizen Leisure & Holidays Ltd (KLHL), an associate company of
the Peerless Group, to sell its products.

It already had a tie-up with the Peerless Group to sell its health, motor, shop and home
insurance policies and did business worth Rs2.5 crore last fiscal through the tie-up. "We
would make it mandatory for all travellers to take a travel insurance", said Jayanta Roy,
director, corporate planning and strategy, KLHL.

He could not share the details of the total number of tourists KLHL had handled last year.
The company enjoyed a 34 per cent market share in the East where the travel & tourism
market was pegged at Rs460 crore.

KLHL announced three more tie-ups with Make My Trip travel portal, Budget Rent a Car
Systems and Emergency Rescue Card (ERC). Through the strategic tie-up with ERC,
KLHL would offer the service of transferring the customer to a better medical facility in
case of an emergency during travel.

KLHL registered a turnover of Rs9 crore last fiscal and was eying a revenue of Rs15
crore this year with all the four tie-ups in place.

http://www.business-standard.com/india/storypage.php?autono=332632

http://www.financialexpress.com/news/IFFCOTOKIO-plans-to-enter-domestic-travel-
insurance/353768/

NOW, BUY GENERAL INSURANCE COVER AT KIRANA SHOPS

T E Narasimhan

The Hindu Business Line

Chennai: A small photo studio in T Nagar, Chennai, sold more than 50 general insurance
policies in the last months alone. All that a person had to furnish was his name, address
and the nominees name. The policy document will be issued in 15 minutes, shop owner
M Raju Mani said.

With the general insurance penetration at a dismal 0.60 per cent (measured as a
percentage of GDP), many companies feel that selling the policies through photo studios,
grocery stores and even telephone booths would help improve the figure.
We need to think outside the box and need alternative channels. If telecom companies are
able to use grocery stores, petty shops and other small outlets, why not insurance
companies? said an Irda official.

The Committee on Distribution Channels, headed by LIC ex-chairman N M Govardhan,


in its report recommended that one of the biggest challenges for the general insurance
companies was getting agents to sell their products. The report noted that people are not
interested in becoming general insurance agents as the commission is quite low.

In 2005-06, around 40,551 agents were licensed by the general insurance companies
compared to 7,21,696 agents employed by the life insurance companies. The committee
was constituted by the Insurance Regulatory and Development Authority (Irda).

Private insurers have already gone ahead and started exploring such channels. Bajaj
Allianz General Insurance Company has introduced point-of-sale concept on a pilot basis
to sell its products.

The point-of-sale concept started in Delhi, where the companys agent will go to the
customers homes along with a handy gadget like a blackberry to issue policies on the
spot, said Swaraj Krishnan, chief executive officer, Bajaj Allianz General Insurance
Company.

The company is also talking to some medical pharmacy chains to sell its health and home
insurance products. For motor insurance, the company is in talks with oil companies to
sell its products through their retail outlets across the country, he added.

The gadget costs about Rs 50,000. The company wants to supply the gadgets to all its
branches, but there is shortage of these machines since there are only two Korean
suppliers.
Similarly, ICICI Lombard General Insurance sells its health and motor policies through
photo studios and malls. The photo studio in Chennai is selling both the policies.

http://www.business-standard.com/india/storypage.php?autono=332617

HEALTH INSURANCE Go To Top

-----

PENSIONS Go To Top

EXEMPT FUNDS PLAY SAFE, SETTLE FOR LOWER RETURNS

Prabha Jagannathan

The Economic Times

New Delhi: Heres an interesting revelation about exempt pension funds: it may not just
be the negative attitude of the EPFO board against investment in the capital markets that
held them back thus far from such investments. Investment in private sector bonds was
permitted for exempt fund, for instance, as far back as 1998-99.

However, they had to carry an investment rating from at least two credit rating agencies.
Despite the freedom to invest in bonds of the private sector, exempt funds did not choose
to do so and government guaranteed bonds were considered safer. After the closing of the
SDS, investments shifted towards securities of state governments and government
enterprises.

A majority of exempt fund investment is still held in PSU bonds and central government
securities. Exempt and excluded pension funds together account for Rs 110,000 crore; of
this, pension sector observers peg exempt funds at Rs 70,000 crore.

Exempt funds have a smaller corpus but are more in number. Excluded funds, on the
other hand, may be fewer but are much bigger in size. Company-run excluded funds,
which are not EPFO regulated, but are set up with the approval from the resident income
tax commissioner, look after all investments and the fund management themselves; also,
they are not required to follow the government-mandated investment pattern. These funds
have so far been able to pay out reasonable returns to their employees.

In 2006, however, the Finance Bill proposed that unless excluded funds were recognized
by the EPFO, they would not be recognized by the IT department. In short, for claiming
tax exemptions or benefits, excluded funds would have to be recognized by the EPFO.
But the moment they apply for recognition, they become EPFO-governed funds and lose
their excluded status. Thus, swelling the EPFO numbers and increasing its deficit.

The investment preferences of exempt funds against the riskier private sector are obvious
in the trends of the 1994 and 2003 period. Investment of exempt funds in Central
government securities grew from only 11% of the gross investment to as high as 25% in
2003. There was an exponential jump in percentage of investment in this category in
2000, when it went up to 22.5% compared to only 17.8% in the previous year.

Annual reports of the EPFO disclose that investment in state government securities in the
same period went up from only 3.5% in 94 to 25.17% in 2001 and then dropped to
21.11% in 2003. The closing down of the Special Deposit Scheme (in which Rs 53,570
crores of EPF funds are deposited) and falling yields of central government securities
created problems for these funds, both in the private and public sector,with regard to
meeting the declared payout rate to employees as they did for organizations governed by
the EPFO.

The percentatge of investments in this category dipped from 85% in 94 to 17.21% in


2003. In tandem, the investment in the PSU bonds went up from 16.99% in 97 to a high
36.79% in 2003.

Consequently, the number of organisations that failed to credit the declared interest rate
went up over the period although, overall, those who paid out less than the statutory rate
fell. By and large, studies show, exempt funds too managed to credit the declared rate of
interest to employees only by dipping into past surpluses. Some India Pension Research
Founda tion studies also indicated that some exempt funds invested in junk bonds or
those with lower credit ratings to pay out high rates, impacting on their viability

Being exempt from the EPFO alone, clearly, has not guaran teed better returns on invest
ments. Overall, exempt funds account for 0.8% of the total es tablishments and around
35% plus of the EPF funds. Close to 40% of exempt funds, about 2,600 (2,589 up to
March 2007 countrywide out of a total of 471,678 establishments, are concentrated in
Maharashtra Karnataka and West Bengal Tax benefits on withdrawal of money from
exempt funds are the same as in the case of those under the EPF Act. But the real
benefits, in the case of in-house managed funds, are that these are processed much
quicker Exempt funds must go through a strict procedure to earn that exemption.

Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved"

DELAY IN OPENING PF OFFICE HITS PENSIONERS

P.S. Suresh Kumar

The Hindu

Nagercoil: A sub-regional office of the Employees Provident Funds Organisation is a


long-cherished dream of the provident fund pension account holders of Kanyakumari
district. According to sources, after much protracted correspondences by various trade
unions, political parties, different members of Parliament and a follow up struggle by the
present member of Lok Sabha, A.V. Bellarmine, the EPF organisation accepted the
demands of the working class and a year ago on August 28, 2007, when the people of the
district were celebrating Onam, a grand function was organised by the EPF organisation
at Raja Towers near Ozhuganaserri here to inaugurate a service centre of EPF
organisation as a first step towards opening of a sub-regional office.

A host of officers from EPF organisations also attended the programme. The member of
the Central Board of EPF trustees, who advocated the sub-regional office at Kanyakumari
on behalf of the working mass, was also present on the occasion. The Minister of State
for Labour, Oscar Fernandez, who inaugurated the service centre said the centre would be
upgraded to a sub-regional office within the short span of the time. The Central
Commissioner of EPF in his address announced that the service centre, which started
functioning would have the facility of claim processing and within a period of two
months, it would have the facility to issue cheques and within a period of one year the
office would be converted into a full-fledged sub-regional office. A year later, nothing
happened. No facility was provided in the already existing district office except to know
status of the claim applications.
http://www.hindu.com/2008/08/27/stories/2008082753200300.htm

SEBI Go To Top

SEBI CLAMPS DOWN ON NAV NEXUS


Sourav Majumdar

The Financial Express

Stock market regulator Sebi has taken a serious view of an irregular practice resorted to
by a section of the mutual fund (MF) industry on liquid-plus schemes. In order to garner
assets and please large investors, some fund houses are reported to offer net asset values
(NAVs) for units even before investment cheques are credited to the schemes.

Sebi has now asked the Association of Mutual Funds in India (Amfi), the industry
association representing MFs, to prepare a detailed paper on the subject and suggest ways
to end this practice. Sebi is also mulling other steps, including making it explicit in the
regulations that NAV be given to investors only after their cheques have been cleared.

FE had, in its edition of April 11, broken the story of the nexus between some large
companies and MFs on liquid-plus schemes. Confirming the crackdown, Amfi chairman
AP Kurian told FE: We are in the process of formulating recommendations to stop this
practice. An internal committee is already working on the matter. The process will be
changed.

Kurian admitted that as some large investors and high net-worth individualswho are
being fiercely wooed given the growing competitionreceived NAVs even before their
cheques were cleared, in effect, other investors were subsidising the irregular practice.
Kurian said Amfis recommendations would be ready in about ten days.

Typically, around long weekends or a string of bank holidays, a company with large
funds to invest strikes a deal with a fund house to issue its MF a cheque before the 3 pm
cut-off, despite their account not actually having the money. Since the cheque has been
received, the investor is issued the NAV for the same day, giving extra returns without the
funds actually accruing to the scheme.

Those invested in liquid schemes even redeem them on the eve of such holidays and issue
cheques equivalent to the redemption amount to the liquid-plus schemes. In the interim,
the company gets the additional NAV before the cheque is cleared.
MF sources said companies often arm-twist funds to offer same-day NAVs because the
law allows the latter to do so if the cheque has been deposited before the 3 pm deadline.
Some large companies in northern and eastern India are notorious for such practices, the
sources said. As a result, fund houses with stricter systems and management practices
often lose out on large investments, the sources said.

The CEO of a fund house who did not wish to be identified said this problem could also
be addressed if fund houses opened collection centres at banks so that the monies are
credited quickly. Industry sources said once Sebi also specifies that NAVs cannot be
issued unless the cheques are cleared, this practice will end.

Meanwhile, the first meeting of the Sebi-constituted MF advisory committee, under the
chairmanship of former UTI chairman SA Dave, is scheduled to take place on
Wednesday. In a rarity, Sebi will also meet MF trustees on August 29.

MF sources said companies often arm-twist funds to offer same-day NAVs because the
law allows the latter to do so if the cheque has been deposited before the 3 pm deadline.
Some large companies in northern and eastern India are notorious for such practices, the
sources said. As a result, fund houses with stricter systems and management practices
often lose out on large investments, the sources said.

The CEO of a fund house who did not wish to be identified said this problem could also
be addressed if fund houses opened collection centres at banks so that the monies are
credited quickly. Industry sources said once Sebi also specifies that NAVs cannot be
issued unless the cheques are cleared, this practice will end.

Meanwhile, the first meeting of the Sebi-constituted MF advisory committee, under the
chairmanship of former UTI chairman SA Dave, is scheduled to take place on
Wednesday. In a rarity, Sebi will also meet MF trustees on August 29.

MF sources said companies often arm-twist funds to offer same-day NAVs because the
law allows the latter to do so if the cheque has been deposited before the 3 pm deadline.
Some large companies in northern and eastern India are notorious for such practices, the
sources said. As a result, fund houses with stricter systems and management practices
often lose out on large investments, the sources said.

The CEO of a fund house who did not wish to be identified said this problem could also
be addressed if fund houses opened collection centres at banks so that the monies are
credited quickly. Industry sources said once Sebi also specifies that NAVs cannot be
issued unless the cheques are cleared, this practice will end.

Meanwhile, the first meeting of the Sebi-constituted MF advisory committee, under the
chairmanship of former UTI chairman SA Dave, is scheduled to take place on
Wednesday. In a rarity, Sebi will also meet MF trustees on August 29.

MF sources said companies often arm-twist funds to offer same-day NAVs because the
law allows the latter to do so if the cheque has been deposited before the 3 pm deadline.
Some large companies in northern and eastern India are notorious for such practices, the
sources said. As a result, fund houses with stricter systems and management practices
often lose out on large investments, the sources said.

The CEO of a fund house who did not wish to be identified said this problem could also
be addressed if fund houses opened collection centres at banks so that the monies are
credited quickly. Industry sources said once Sebi also specifies that NAVs cannot be
issued unless the cheques are cleared, this practice will end.

Meanwhile, the first meeting of the Sebi-constituted MF advisory committee, under the
chairmanship of former UTI chairman SA Dave, is scheduled to take place on
Wednesday. In a rarity, Sebi will also meet MF trustees on August 29.

http://www.financialexpress.com/news/Sebi-clamps-down-on-NAV-nexus/353728/3
USE DEMATS TO CUT RIGHTS TIME: I-BANKS TELL SEBI

Deeptha Rajkumar

Mumbai: Investment banks have suggested to capital market regulator Sebi that effective
use of the depository route could further reduce the timeline for a rights issue. A couple
of weeks ago, Sebi had amended guidelines for rights issues to be completed in 43 days,
instead of the earlier 109 days. Sebi chief CB Bhave had then said the guidelines would
be further reviewed, as 43 days was also long by international benchmarks.

To start with, every shareholders demat account could be credited with a warrant, said
Chetan Savla, executive director and head-equity product group, Kotak Mahindra
Capital. All you have to do is give a conversion date and there you have a rights issue.
This cuts down the time taken to send a form, etc, he said.

While such a move would shrink the rights issue process considerably, there is still the
issue of investors who are holding shares in the physical form. An incremental move that
could help cut down paperwork would be to make disclosures less onerous, said
investment bankers. Whether an offer document is really required for a listed entity is an
oftrepeated query.

Prime Database MD Prithvi Haldea is of the view that there is a need to relook at the
rights issue disclosure norms. Full disclosures at the issue time presupposes that the
continuing disclosures done until now regarding a company are not adequate, he said.
Investment bankers claim all an investor needs to know is the companys capital structure,
its need for proceeds and the risk associated with the whole process. All these are pretty
much in the public domain.

It takes at least six weeks to put everything in place. If we were to do away with this it
would cut straight six weeks off the entire process, said an official in an investment bank.
The reduction in timeline for rights issues, approved by Sebi at its board meet earlier this
month include: the number of days for the notice period for a board meeting cut down
from seven days to two working days; the notice period for record date cut down from
15/21/30 days to seven working days for all scrips; issue period reduced from a minimum
of 30 days to a minimum of 15 days with a maximum of 30 days; and the time for
completion of postissue activity reduced from 42 days to 15 days.

The regulator had last year introduced a fast track mechanism whereby the top 30 listed
companies were made eligible for fast track capital raising through follow-on public
offers and rights issues to institutional players. Firms with a clean track record were
eligible to use this route without having to go through the drill of getting their documents
vetted. However, except SBI no other company has since used this route. Investment
bankers believe that maybe this route could be extended downwards to include a large
number of companies.

Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved"

UBI, KBC AWAIT SEBIS NOD

PTI

See this story in: The Financial Express

Leading public sector bank Union Bank of India has proposed to sign a MoU with KBC
Management Services, a 100% subsidiary of KBC Group, Belgium. We propose to sign a
MoU with them after getting approval from our shareholders...it is in the initial stage,
Union Bank of India, general manager BL Javeri said.

The proposal may take two to three weeks from now as UBI has to get the nod from
SEBI. After signing the MoU at Mumbai, the Bank will have 51% partnership while 49%
will be with KBC Management Services, he said. Javeri was here for the official launch
of UBIs Wealth Management Services to High Net Worth clients.

He said UBI has tied up with Wealth Advisors (India) Pvt Ltd on August 18 at Bangalore
to offer Wealth Management Services. Through the partnership, UBI has set a target of
offering the service to about 600 customers by March 2009, he said.

The solutions proposed will integrate income and asset protection (insurance), as well as
wealth creation and preservation (financial planning, asset allocation and investment
management) which will facilitate in growing, pres

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