Sebi primes market for T+1
Tough decree brings loan sharks ashore
Consumer durables sector looks up in Q1
Tea, trade top SBI’s loan list

 
 
SEBI PRIMES MARKET FOR T+1 
 
 
FROM SATISH JOHN
 
Mumbai, July 28: 
Heartened by the smooth transition of premier bourses to the T+3 settlement, the Securities and Exchange Board of India (Sebi) is considering an ambitious plan to implement the T+2 and the T+1 cycles by 2003 and 2004 respectively.

Buoyed by the success of the T+3 system, the capital market regulator is now keen that India take the lead in introducing T+1.

“Everybody warned us that market intermediaries would find it tough to cope with a T+3 settlement cycle,” Sebi chairman G. N. Bajpai told The Telegraph. Reminiscing on one of the first acts that went off smoothly after he took over as Sebi chief, Bajpai said ‘there was a lot of apprehension regarding T+3 when we first introduced it on bourses’.

“We have proved them wrong,” he declared, adding he would now try to implement the highly ambitious T+2 and T+1 settlement cycles here. “We intend to usher in T+1 before bourses world wide implement it.”

In an attempt to start T+2 and later T+1, Sebi has plans to implement straight-through processing (STP) for various market participants by December 31. STP will aim to automate the process that begins with trade initiation and ends with settlement. It allows delivery instructions on clients to be transferred directly — electronically — from exchanges to depositories. This reduces time and limits the chances of errors.

The market regulator implemented the T+3 settlement system in stock exchanges from April this year.

The T+3 system means “trade plus three,” or, in other words, a system under which a broker will receive shares bought by his client from the seller’s broker within three working days of the transaction. Likewise, if a stock is sold, the client’s broker will receive the consideration from the buyer’s broker within three days.

The T+3 settlement does not, however, mean that money would be received (in case of the seller) or the shares (in case of the buyer) on the third day. This is because under the T+3 system, a buyer’s broker will pay on the day of the trade, while the seller’s broker may take delivery of the shares on that day.

The buyer receives shares only after his broker receives them from the seller, which can take place three days after the trade. Thus, at present one can expect to get the shares or the money a day after the T+3 settlement.

As a result of T+3, which it hopes to further upgrade to T+2 and T+1, the market regulator hopes to make the stock markets ‘absolutely safe’.

Bajpai expressed confidence Indian bourses will have T+1 before other advanced markets elsewhere, adding that it would practically end fears of default in the market.

With Sebi now aiming to further reduce the number of days for delivery of shares and payment would mean that the entire system should become more efficient. This includes the depositories and the much maligned banking system.

According to Bajpai, the issues are being co-ordinated and results will be seen within the next two years when the banking system will be attuned to the needs of the capital markets.

   

 
 
TOUGH DECREE BRINGS LOAN SHARKS ASHORE 
 
 
FROM VIVEK NAIR
 
Mumbai, July 28: 
Domestic financial institutions (FIs) and banks are expecting a flurry of settlement offers from defaulters as they step up loan recoveries, armed with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance.

Industrial Development Bank of India (IDBI), ICICI Bank and Bank of Baroda (BoB) are among the few that have got cracking on defaulters so far; take-over notices have been sent to 150 companies.

Sources say many of these defaulters are likely to seek a settlement, as the possibility of their assets being seized or management being changed looms large. BoB is believed to have already started receiving such feelers, barely a few days after it slapped notices to 100 of its non performing asset (NPA) cases.

“Yes we have received feelers from some of these cases that they would like to negotiate, an proposition which we are certainly open to,” says a senior official from the leading nationalised bank. Sources added that in the days to come, banks and institutions could be a witness to prayers that include a reduction of interest rate or some relinquishment of their total outstanding.

An official from another bank who visualised such a possibility, pointed out that while it was open for negotiations, “some amount of adjustment” could be made only if promoters agree to certain conditions that include pledging their stake with lenders, bringing equity and reducing their stake in some cases.

As per the Ordinance, after a notice has been slapped on a wilful defaulter, secured creditors have to give 60 days notice to such borrowers, and after this period, can take possession of their assets. Such a move can be initiated if more than 75 per cent of the creditors in a consortium endorse this view.

While the move has been welcomed given the fact that NPAs in the system are put over Rs 80,000 crore, it also has brought into limelight the critical issue of banks possessing the capability to implement this Ordinance.

“We would need liquidators, receivers or a number of legal officers. Further, banks should also be in a position to add value once an asset is taken over. All this calls for a comprehensive act on part of a bank after an asset is taken over,” says a director from a nationalised bank.

   

 
 
CONSUMER DURABLES SECTOR LOOKS UP IN Q1 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 28: 
The Ascon consumer durables industry survey for April-June 2002 shows excellent production growth in the sector over April-June 2001. This follows a steady increase in demand in the domestic and export markets.

Consumer electronics posted an impressive growth, with the colour television sector recording a 40 per cent growth this year from a negative 10 per cent last year.

Audio products also witnessed a high growth of 10 per cent in 2002, compared with zero growth in 2001. Black and white televisions continued to register a negative growth even this year.

Air-conditioners made good business this year, as this segment grew to 22 per cent against 15 per cent last year.

Washing machines, which had been witnessing a negative growth, recorded a marginal increase in both production and sales to 2 per cent this year. Water coolers also registered a high growth of 12 per cent this year compared with a moderate growth of 5 per cent last year.

The study conducted by the Confederation of Indian Industry (CII) said the main reasons for a sluggish demand in the white goods sector were low penetration levels, poor infrastructure facilities, high excise duty of 32 per cent, anti-dumping duties and steep increase in costs of steel, aluminium, copper and plastics, and capacity constraints for certain models.

However the study observes that though the outlook for the next six months in terms of production of air conditioners is 10-15 per cent and that of refrigerators is 10 per cent, the outlook for the next year would be revised in view of the impact of a delayed monsoon or a drought.

Refrigerators witnessed a high growth of 10 per cent this year, compared with a low growth of 0.2 per cent last year. However, while refrigerators sales have gone up from 0.5 per cent in April-June 2001 to 10 per cent in the first quarter of 2002, exports have actually fallen from a growth of 10 per cent last year to 6 per cent this year.

The main factors affecting export growth were appreciation of the dollar, limited opportunity to export due to marginal growth in demand world-wide for appliances and the lack of brand equity for the “Made in India” label, the survey added.

A significant turnaround was witnessed in the vehicle industry, which posted an overall production growth of 24 per cent in April-June 2002 from a negative growth of 2 per cent last year.

While motor cycles registered the most impressive growth of 49 per cent in the two-wheeler segment, a negative growth rate for scooters continued this year as well.

However, mopeds and three-wheelers which had recorded a negative growth last year, registered a positive 4.2 per cent and 37 per cent growth respectively in the first quarter.

The other segments of the vehicle industry recorded an excellent growth with HCVs (38 per cent) and LCVs (30 per cent) as against a negative growth last year.

Cars, however, witnessed negative growth this year, though exports grew significantly by 58 per cent from last year’s negative growth of 7 per cent.

The survey points out that sustainability and high growth in exports requires better export financing, dedicated berth for automobiles, bringing down the packing credit to 5-7 per cent and developing a market development fund for identifying potential countries for exports.

   

 
 
TEA, TRADE TOP SBI’S LOAN LIST 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, July 28: 
State Bank of India (SBI) has identified tea, manufacturing, trade and transport as the sectors in the eastern region that will get more loans from it in the current financial year, but jute and leather do not figure among its investment options here.

T. K. Keshavamurthy, chief general manager, SBI (Bengal circle) said: “The experience of the bank in the leather and jute sector is not encouraging. So we are not keen enough to invest in these two sectors. However, if there is any project which is backed by strong fundamentals we will consider them. “Tea is one of the major areas of investment. We are financing the acquisition of gardens,” he said.

The Bengal circle, which has an exposure of Rs 105 crore to 30 tea companies, has decided to lend Rs 1,100 crore this fiscal. Out of this Rs 520 crore has been earmarked for personal loans, Rs 70 crore each for agriculture and small business units, Rs 350 crore for the commerce and industry sector and the balance in the small-scale sector.

Keshavamurthy said, “The trade and transport sectors have immense opportunity for growth. Manufacturing is also looking up. We have recently invested in some ferro-alloys units.”

The bank recently lent Rs 11 crore for acquisition of tea gardens by a Calcutta-based firm. It has also financed Tata Ryersons’ projects.

   
 

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