Rupee weakens further
Mumbai: The rupee fell further against the dollar and breached the Rs46 mark mainly due to large corporate demand for dollars. The rupee opened at Rs45.94 and kept falling throughout the day to close at Rs46.13. On Wednesday, the rupee ended Rs at 45.96. Globally, currencies like euro, pound, and yen lost over 80 basis points against the dollar.

Forwards: In the forward premia market, the six-month closed at 1.25 per cent and the 12-month at 1.30 per cent.

G-secs: The 7.59 per cent-10 year-2016 benchmark paper opened at Rs97.68 (7.93 per cent YTM) and closed at Rs97.2 (8 per cent YTM), against the earlier close of Rs97.83 (7.91 per cent YTM). The 9.39 per cent-5 year-2011 benchmark paper opened at Rs107.61 (7.54 per cent YTM) and closed at Rs107.35 (7.6 per cent YTM) against the previous close of Rs107.67 (7.53 per cent YTM). "The 10-year benchmark could remain in the range of 7.9-8 per cent for some time. Tomorrow's opening will depend on the US yields in the overnight market," said a dealer.

Call rates: Call rates remained unchanged between 5.75 and 5.85 per cent.

Reverse Repo: In the first one-day reverse repo auction under LAF, the Reserve Bank of India received and accepted 27 bids amounting to Rs21,745 crore and in the second one-day reverse repo auction, 41 bids for Rs20,510 crore. There were no repo bids.

CBLO: The CBLO market saw 298 trades aggregating to Rs17,013.35 crore in the 5.50-5.75 per cent range.
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Banks lower discounts on corporate loans
Bangalore: Banks have begun to cut the discounts offered to top corporates. Though top public sector bankers said they did not see any need to hike the benchmark prime lending rates at this juncture the cost of working funds have increased for the banks. Deposit rates after the hike in May are in the 6.75-7.5 per cent range at the long end (3-5 year tenures).

At the short end, for tenures ranging from 15 days to one year, the term deposit rates are in the four per cent to six per cent range for private and public sector banks. Most of the banks that have tapped the bond markets for raising tier two capital have found price expectations high. Accordingly, most of the entrants have priced their issues at close to nine per cent. This has resulted in pushing up the weighted average cost of working funds.

Banks are passing the cost increases to the borrowers. Till about a year ago, borrowers were in a position to raise term funds at steep discounts to the BPLR, as high as 400 basis points to the benchmark rates. Discounts have shrunk to 100-150 basis points below the rates for triple AAA rated corporates.

Bankers said that many of them had also hedged themselves well lending at steep discounts to corporates, because only a very small component of the term loans are at fixed rates.
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RBI clamps down on floating provisions
Mumbai: The Reserve Bank of India has issued a circular to all banks, banning reversal of floating provisions by credit to the profit and loss account. The floating provisions can only be utilised for making specific provisions in extraordinary circumstances.

The floating provisions can be used only for contingencies under extraordinary circumstances for making specific provisions in impaired accounts after obtaining board's approval and with prior permission of the RBI. The boards of the banks have been asked to lay down an approved policy as to what circumstances would be considered extraordinary.

RBI said the use of floating provisions to set-off against provisions required to be made appear to have been used in "smoothening of profits in some cases" and hence it decided to revise the instructions on utilisation, creation, accounting and disclosures of floating provisions.

Banks' boards have been directed to lay down approved policy regarding the level to which the floating provisions can be created. Banks should hold floating provisions for 'advances' and 'investments' separately and the guidelines prescribed will be applicable to floating provisions held for both 'advances' & 'investment' portfolios, RBI said.

Banks have also been allowed to voluntarily make specific provisions for advances at rates which are higher than the rates prescribed provided such higher rates are approved by banks' boards and consistently adopted from year to year.
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Union Bank to hike home loan, trade finance rates
Mumbai: Union Bank of India may raise lending rates for home loans and trade finance by up to 50 basis points and also revise the term deposit rates in a week's time.

The risk is more in certain loan portfolio in the retail category and the Reserve Bank of India has hiked risk weight for standard assets in some categories.
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LIC eyes Rs1000-cr income via gratuity plan
Mumbai: The Life Insurance Corporation of India (LIC) has launched a unit linked gratuity plan and targets an earning of Rs 1,000 crore of premium income from the scheme this year.

Christened as Gratuity Plus, the plan is different from the traditional cash accumulation plan as the returns under the plan are linked to the performance of the chosen fund.

Gratuity Plus is suitable for companies, which desire to entrust gratuity fund management to an insurer and wish to have flexibility of choice of investments. LIC is offering a choice of four funds to meet various risk appetites. The four types of funds are bond fund, income fund, balanced fund and growth fund.

From January 1 to June 15, LIC has earned a premium 710.05 crore from gratuity schemes.
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