Rupee reflects market volatility
Mumbai: The forex markets went through a volatile trading day even as the rupee moved in tandem with the crashing domestic stock market. The rupee opened weaker at 45.69/72, lower than Friday's close at 45.56/57. It then dipped to an intra-day low of 45.82 but recovered to end at 45.57.

All-round dollar demand from FIIs, importers as well inter-bank traders characterized the day's trade, with the situation being handled through the selling of dollars by the RBI through PSU banks. Appreciation of the other major currencies against the greenback allowed the rupee to firm up.

Forwards: The 12-month premia closed at 1.17 per cent (1.10) and the 6 month ended at 1.10 per cent (1.04).

G-Secs: The bond market was range-bound and prices moved in a 15-paise band in the absence of any positive factors. The 7.59 paper 10-year 2016 paper closed at Rs99.97 (7.60 per cent YTM), a tad higher than the previous close of Rs99.95 (7.6 per cent YTM). The 9.39 per cent-5 year-2011 paper ended trade at Rs109.32 (7.17 per cent YTM).

Call rates: The inter-bank rates were stable at 5.5-5.6 per cent.
Repo: In the first one-day reverse repo auction under LAF, the RBI received and accepted 31 bids amounting to Rs27,655 crore and 40 bids amounting to Rs30,720 crore in the second auction. There were no repo bids.

CBLO market: The CBLO market saw 300 trades, aggregating Rs18,997.1 crore in the rate range of 4.79 per cent and 5.40 per cent.
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RBI assurance on liquidity demands to meet settlements
Mumbai: With stock prices plunging and the markets showing no indication of pulling out of a tailspin, the Reserve Bank of India (RBI) on Monday announced that any demand for liquidity from settlement banks would be met to ensure smooth payment obligations.

The announcement by the regulator is meant to stave off any speculation regarding settlement issues, said bankers.

Interpreting the RBI circular, bank officials said that it probably indicates that brokers who have difficulty in meeting their margin commitments, in the light of the declining equity market, could approach banks for loans. It was likely therefore that banks could be allowed to borrow additional funds from the RBI through the repo route.

The settlement banks include private sector banks such as ICICI Bank and HDFC Bank and public sector banks such as Bank of India and Union Bank of India. So far none of these banks had reported any liquidity related problems.
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Subsidiary Bank Act to allow SBI subsidiaries to expand capital base
New Delhi: With the government introducing a bill in Parliament on Monday to enable reduction in SBI's stake from 55% to 51%, it's subsidiaries will now have greater autonomy to raise capital.

The legislation will allow SBI's subsidiary banks to raise their authorised capital to Rs500 crore.

Amending the SBI Subsidiary Bank Act will also remove the restriction on the ownership of shares in these banks. Once a legislation is passed removing the 200-share ceiling, unlisted subsidiaries of SBI can go in for IPOs to sell 49% and expand their capital base.

The government also proposes to raise the voting rights of investors in SBI's subsidiaries from the existing 1% of issued capital to 10%.

The bill, introduced by finance minister P Chidambaram, allows the subsidiaries to raise capital by way of preferential allotment, private placement or public issue to meet Basel II requirements next year.

The Act contains provisions regarding constitution of banks, their capital, management and control and other connected matters. Over 28 lakh private shareholders of the four subsidiary banks face difficulties due to certain restrictions imposed under the SBI (Subsidiary Banks) Act.

The State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2006, seeks to amend the State Bank of Saurashtra Act, 1950, State Bank of Hyderabad Act, 1956 and the State Bank of India (Subsidiary Banks) Act, 1959.

The subsidiary banks include the State Bank of Patiala, the State Bank of Bikaner and Jaipur, the State Bank of Indore, the State Bank of Mysore and the State Bank of Travancore.
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SBI to raise $400mn in US or Japanese markets
Kolkota: The State Bank of India, the nation's biggest bank, plans to raise $400mn from overseas markets by way of debt to expand overseas operations. Sbi chairman A K Purwar said that the money will be raised from international bond investors in the year ending March 2007.

SBI has already raised $800mn selling medium-term notes that are listed in Singapore. Purwar said that the bank intended to diversify its source of funds and was considering both the US and Japanese markets to raise the debt.

SBI is enlarging its operations abroad in order to take advantage of India's growing foreign trade and active M&A operstions. The bank, with 71 offices in 31 countries, wants overseas operations to contribute 15% to group earnings by 2009, which will be up from the current 7%.

India is targeting $165 billion of exports by 2010, from $101 billion in the year ended March 31, and the expansion gives banks the opportunity to increase trade finance.
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SBI and PNB offer fresh 'exit options'
New Delhi: The State Bank of India (SBI) and Punjab National Bank (PNB) are set to introduce a fresh round of 'exit options' for their employees. While the SBI exit option has received clearance, the PNB exit option is awaiting government approval.

The exit options are targeted at employees who have about five years of service left. Banks are going in for individual exit options to avoid legal hurdles, which come up in case of a collective exercise.

Bank unions maintain that consolidation and autonomy policies will lead to widespread job loss.
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