Rupee moves up slightly against dollar
Mumbai: The rupee moved up against the dollar boosted by the rise in the domestic stock market and on the back of dollar inflows. The rupee opened at 44.29 and fell in the course of the day to close at 44.37, a bit higher than Tuesday's close of 44.38.

Bonds: In the bond market, traded volumes were thin and prices fell by 15 paise. Dealers said the bond market was bearish due to uncertainty about whether the Rs15,000-crore government securities auction would take place in March.

G-Secs:The 8.07-11 year-2017 paper opened at Rs105.10 (7.38 per cent YTM) and ended at Rs104.93 (7.40 per cent YTM). The 9.39-5 year-2011 paper opened at Rs109.95 (7.11 per cent YTM) and closed at Rs109.75 (7.15 per cent YTM).

Call rate: The call rate closed at 6.50-6.60 per cent.

Repo auction: The RBI received no bids in the reverse repo and seven bids for Rs1,325 crore in the repo. In the second auction, RBI received and accepted four bids for Rs880 crore in reverse repo and seven bids for Rs3,480 crore in the repo auction.

CBLO: In the CBLO market, there were 383 trades for Rs23,737.45 crore in the
6-6.45 per cent.
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BoB enters into distribution tie up with UTI Mutual
Mumbai: Bank of Baroda has entered into a distribution tie-up with UTI Mutual Fund. To begin with the bank will sell the mutual funds at 100 branches. This will increase to 200 branches by March-end 2006 and to 500 branches by December 2006.

BoB is looking at a long term 30 per cent year-on-year growth in overseas business, and plans to increase its share of business from overseas operations to 25 per cent from the current 20 per cent. The bank wants to open offices in Gulf countries such as Saudi Arabia, Bahrain and Yemen and in Trinidad and Tobago in the Caribbean.

It already has approval from Reserve Bank of India for New Zealand, Bangladesh, Sri Lanka, Canada and Male. The bank's overseas business unit in Singapore would be operational in three months. It would offer services like syndication and global investment.

The bank also plans to upgrade its operations in African countries like Kenya, Uganda and Tanzania. It is also eyeing Mozambique.
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UTI Mutual to focus on international operations
Mumbai: UTI Mutual Fund is expanding its overseas operations and will soon be opening offices in West Asia and Singapore. The international offices of UTI Mutual Fund are also expected to help non-resident Indian investors invest in the domestic funds of the company.

The focus of the fund house now will be on enhancing profitability and the company claims to be the most profitable mutual fund house in the country.

UTI AMC is also looking at acquiring a local technology company in order to beef up its systems and processes.

The international focus of the fund house will also be enhanced by this strategic tie-up with Bank of Baroda as they would also focus on selling mutual fund products to overseas customers.
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Hike in service tax may lead to rise in insurance premium
Mumbai: Life insurance policyholders, particularly those holding term policies, may have to pay a higher premium due to the hike in service tax from 10 per cent to 12 per cent in the Budget.

Insurance companies may on the other hand have to bear the burden of the hike in service tax with respect to the commission they pay to agents. The service tax paid to agents is categorised as `input tax' and the service tax on premium paid by an individual would be an `output tax.'

The service tax paid by LIC for its 10 lakh agents was around Rs650 crore for the FY 2004-05, said an official.

T S Vijayan, MD, Life Insurance Corporation of India, said that the net impact of the hike in service tax would be around Rs100 crore on the company after offsetting input and output tax.

For policy-holders, the service tax would imply an increase in 2 per cent of the risk component of the premium of insurance products. Vijayan said that the hike in the premium would be passed on to group and unit-linked insurance policyholders of LIC.

The service tax will be applied based on the risk component in the premium of the policy. In the case of a term insurance product, where there is no savings element, the risk component and as well as the applicable service tax would be higher.

However, in the case of LIC the service tax may not be passed on to existing term policyholders since it is a life-long contract. In the case of endowment and unit-linked products, the lower risk premium and higher savings element would translate to lower service tax.
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More banks can import gold: RBI
Mumbai: The Reserve Bank of India (RBI) will allow more banks to import gold as it has eased the eligibility criteria. Inviting applications from banks for permission, the RBI said that it was easing eligibility criteria for gold import to increase competition in this sector. Currently, 17 banks are authorised as nominated agencies for import of gold.

At present to apply for authorisation to become a nominated agency for import of gold, the applicant should be a scheduled commercial bank with an unimpaired total capital of Rs300 crore or more for its business in India. In case the capital for its business in India falls short of this, its global capital can be taken into consideration, provided it has sufficient experience and expertise in the area of gold internationally and is willing to submit a letter of undertaking from its head office to the effect that it would stand ready to provide support and assistance to its gold operation in India.

The bank's ratio of total capital to risk-weighted assets for business in India should be 9 per cent or more as per the latest balance sheet. It should have fairly advanced risk-management system in place to be able to identify various risks involved in the supply of gold.
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Short-term funds get pricey
Mumbai: The liquidity crunch facing the banking system has led to short term funds getting pricier. Hence short-term money is now available at rates quoted for long-term funds earlier.

The reason is that banks are raising short-term funds from provident funds, mutual funds and central board of trustees (employee provident fund) at 8.5/8.75 per cent against 5-6 per cent earlier.

Banks are resorting to certificate of deposits (CDs) to raise short-term funds, thus reviving the instrument which was out of use when liquidity was better. These are instruments offered by banks to high net worth customers such as corporates, mutual funds and provident funds for raising bulk deposits.

Last week, Housing Development finance Corporation (HDFC), Rural Electrification Corporation, and Power Finance Corporation raised 10- year funds at 8 per cent.

Even in coming weeks, most banks are planning tier II bonds, which are otherwise known as subordinated debt, at 8 per cent for 10-years.
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