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Rupee firms up - securities decline
Mumbai: The rupee moved up by eight paise on Wednesday closing at 43.44, against Tuesday's level of 43.53/54.

Forwards market: The 12-month premium was at 1 per cent (0.93 per cent) and the 6-month premium was at 1.03 (0.9 per cent).

G-Secs: In the bond market the 7.27 8-year 2013 paper ended at Rs102.47/50 (6.87 per cent YTM), lower than Tuesday's close of Rs102.54 (6.85 per cent YTM). The 7.55 per cent 2010 closed at Rs 103.90/95 (6.58 per cent YTM). The 10-year benchmark was dealt at Rs102.45 (7.03 per cent YTM) against Tuesday's level of Rs102.90 (6.97 per cent).

Call Rates: The inter bank rates closed between 6-6.25 per cent (3-3.05 per cent).

Reverse repo auction: The RBI received and accepted 55 bids amounting to Rs50,610 crore.

CBLO market: 247 trades were put through in the range of 4-4.30 per cent, for Rs8,117.80 crore.
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RBI: T-bills auctions fully subscribed
Mumbai: The auctions of the 91-day and 364-day Treasury Bills were fully subscribed, according to a press release from Reserve Bank of India. The notified amount for both T-bills was Rs2,000 crore.

For the 91-day T-bills, RBI received 58 competitive bids, amounting to Rs6,907.50 crore. Of these, RBI accepted 23 bids. The cut off price was Rs98.69. The cut off yield was 5.32 per cent against 5.49 per cent last time. The partial allotment percentage was 25.56 per cent from 16 bids.

The weighted average price was Rs 98.70.

For the 364 day T-bills, RBI received 75 competitive bids, amounting to Rs5,156 crore. Of these RBI accepted 23 bids. The cut off price was Rs94.67. The cut off yield was 5.65 per cent against 5.89 per cent last time.

The partial allotment percentage was 34.34 per cent of 10 bids. The weighted average price was Rs94.69.

There were no non-competitive bids for both T-bills.
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Mumbai insurance claims - defaults in Fac Re arrangements apprehended
Bangalore: Domestic non-life insurers are faced with the prospect of meeting settlement liabilities, arising from claims from the floods in Mumbai, directly from their own balance sheets.

According to industry sources this was because some of the insurers have entered into facultative reinsurance (Fac Re) arrangements with East Asian re-insurers with low ratings from international rating agencies. Fac Re is an arrangement where the ceding insurer offers individual risks to a re-insurer, who has the right to accept or reject each risk. With defaults have occurred in Fac Re contracts in the past, insurers fear that some of Fac Re covers would devolve on the primary insurers themselves.

The fear of defaults was also on account of the large claims likely from the floods in Maharashtra and Gujarat and the ONGC fire.
The normal practice adopted is that the primary general insurers meet upfront the entire claim and reclaim from the re-insurers. Public sector capitalisation is currently equivalent to Rs14,000 crore, whereas that of the entire private sector is less than 10 per cent of that figure.

Only in treaty-driven reinsurance, there are no apprehensions of default. All the four public sector companies have treaties with the large international re-insurers. On mega risks, however, the standard adopted for reinsurance is through Fac Re contracts.

In the case of the ONGC fire, which is treated as a mega risk, the liability was expected to be around Rs1,000 crore, though only about Rs60 crore was the retained liability. The remaining amount was entirely reinsured with a clutch of international re-insurers and the General Insurance Corporation of India.

The syndicate leader, United India Insurance Company Ltd (UIICL), has apportioned the retained risk through co-insurance among most of the domestic non-life insurers. Consequently, the UIICL's effective liability would be restricted to a small component.

The ONGC fire coupled with the floods in Gujarat and Mumbai were likely to lead to a complete re-evaluation of the probable maximum loss (PML) ratios for the sub-continent by some of the top re-insurers of the world - Munich Re and Swiss Re, which would effectively reverse the trend of softening reinsurance rates and translate into higher tariffs for treaties for the next year.
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Shareholders clear merger of Centurion Bank and Bank of Punjab
Mumbai: The shareholders of Centurion Bank and Bank of Punjab, at their extraordinary general meeting have approved the proposed merger of the two banks. The share swap ratio has been fixed at nine shares of Centurion Bank for every four shares of Bank of Punjab. The boards of both banks had approved the merger proposal on June 29.

The banks will now make an application to the Reserve Bank of India for its approval.

The merged entity is proposed to be re-named "Centurion Bank of Punjab" subject to statutory and regulatory clearances.

Once approved by the regulator, the merger will result in the creation of a private sector bank with a nation-wide presence of about 238 branches and extension counters, 384 ATMs, about 2.2 million customers.
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