Escorts Mutual Fund

MUTUAL FUND

SEBI asks MF houses to get systems audit done once in 2 yrs

MUMBAI: The Securities and Exchange Board of India today asked all mutual fund companies to get their systems audited at least once in two years and submit the reports to the market regulator.

Also for the financial years April 2008 to March 2010 the audit should be completed by September 2010, the regulator in a statement issued here.

"Accordingly, you (mutual fund companies) are advised to get the above systems audit conducted once in two years. You are further advised to place the Systems Audit Report and compliance status before the Trustees of the mutual fund.

The systems audit report/findings along with trustee comments should be communicated to SEBI. For the financial years April 2008 - March 2010, the systems audit should be completed by September 30, 2010."

The regulator said considering the importance of systems audit in the technology driven asset management activity, it has been decided that mutual funds shall have a systems audit conducted by an independent CISA/CISM qualified or equivalent auditor.

SEBI also pointed out that the systems audit should be comprehensive encompassing audit of systems and processes inter alia related to examination of integration of front office system with the back office system, fund accounting system for calculation of net asset values, financial accounting and reporting system for the fund houses or Asset Management Companies

http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/SEBI-asks-MF-houses-to-get-systems-audit-done-once-in-2-yrs/articleshow/5019962.cms

Debt funds boost MF assets to Rs.7.57 tn in Aug

MUMBAI: The Indian mutual fund industry’s assets under management touched a new peak of Rs.7.57 trillion at the end of August, thought the growth was moderate at 5 percent over the previous month. The month under review saw net inflows of Rs.327 billion across categories with debt funds witnessing Rs.383 billion of net inflows. All other key categories saw net outflows. Liquid funds saw the highest net outflows among mutual fund categories, to the tune of Rs.52 billion in August. This was driven by lower returns which led investors to shift to ultra short term debt funds.

On the returns front, equity funds out-performed on the back of a strong performance from midcap and small cap funds while the long term debt funds saw negative returns due to rising yields, according to CRISIL FundServices.

“Ultra short term debt funds saw strong inflows in August, with banks parking their surplus funds in these schemes. At the same time, the new rule of no entry loads seems to have initially dulled the inflows into equity funds even though fund performances were good for the month,” said Krishnan Sitaraman, Director – CRISIL FundServices.

CRISIL’s analysis of over 300 equity oriented schemes shows that over 250 schemes gave better 1-month returns than the S&P CNX Nifty in August. Midcap and small cap funds posted better returns than large cap funds and benchmark indices across all periods analysed (1 month, 3 months and 1 year).

“The realty, consumer durables and technology sectors were significant out-performers
in the month which saw benchmark equity indices ending flat reflecting in the S&P CNX Nifty rising 0.6 percent,” Sitaraman added.

Mutual funds’ average AUM has now risen by over 85 percent since the liquidity crisis in the last quarter 2008 when industry average AUM had dropped to around Rs.4 trillion in November 2008.

http://economictimes.indiatimes.com/Mutual-Funds/Debt-funds-boost-MF-assets-to-Rs757-tn-in-Aug/articleshow/5014648.cms

iFast unveils online MF platform

Facility allows retail investors to directly transact units.

Our Bureau
Mumbai, Sept. 16 iFast Financial India, an online mutual fund distributor, has launched a business-to-consumer (B2C) platform, which will allow retail mutual fund investors to directly transact units online.
With the new platform, launched on Wednesday, the investor will be allowed free account opening and transactions at zero cost, said Mr Rajesh Krishnamoorthy, Managing Director, iFast Financial India. The new facility also offers complete details of all the transaction statements of the investors, he added.
The company already has a facility, which is an advisor-based model for investors with a minimum investment limit of Rs 5 lakh. It has also launched an equity funds index, called the FSM All Equity Fund Index, intended to act as an indicator for investors and fund managers.
The composition and structure of the equity index is based on the performance of select open-ended equity funds and currently comprises 79 equity mutual funds.
Currently iFast’s revenues come from the upfront commission paid by asset management companies (AMCs), which is usually in the range of 0.50-0.90 basis points on the schemes sold, said Mr Krishnamoorthy. The trail fee paid by the AMCs is in the 0.50-0.75 basis points range, he added.
iFast is a joint venture in India between Deutsche Bank’s Asset Management Division and Singapore-based iFast Corporation.
http://www.thehindubusinessline.com/2009/09/17/stories/2009091751991000.htm

Mutual funds ride on public sector IPOs

SBI Funds, Sundaram BNP Paribas Asset Management look Mumbai: Mutual funds are At least two fund houses SBI Funds Management Pvt. Both these schemes India has 36 asset Fund managers say more Investments during listing “We are excited about the Equity-oriented PSU funds The company launched another Traditionally, mutual funds As the markets evolved, the “PSU stocks are generally “The businesses of PSUs are According to a recent report “The divestment process can Still, there are concerns. There Some fund managers are “We will not launch any Another risk, according to http://www.livemint.com/2009/09/16214007/Mutual-funds-ride-on-public-se.html

INSURANCE

Income from insurance premium may cross Rs 850 cr: ECGC

NEW DELHI: State-run Export Credit Guarantee Corporation of India (ECGC) on Tuesday said its income from insurance premium is expected to jump by over Rs 100 crore this fiscal to Rs 850 crore, as more and more exporters are facing payment defaults.

"I am confident we will cross Rs 850 crore (in 2009-10)," Export Credit Guarantee Corporation Chairman and Managing Director A V Muralidharan told reporters on the sidelines of FIEO function.

In FY'09, ECGC's income from premium was Rs 745 crore. ECGC provides a range of credit risk insurance covers to exporters against loss in export of goods and services. It also gives guarantees to banks and financial institutions to enable exporters to obtain better facilities from them.

Exporters have been complaining of payment defaults as buyers in the western markets have been impacted due to the demand slowdown.

The corporation had sold about 14,500 policies in 2008-09 and is expecting a 5 per cent increase in sales this fiscal.

Muralidharan said the US buyers accounted for the bulk of total default claims.

"Highest defaults claims are coming from the US... about 25 per cent of the overall claims are from the US," he said.

He said ECGC had paid Rs 451 crore towards claims in 2008-09 and as per the latest figures it has disbursed Rs 146 crore in the current fiscal.

Providing relief to exporters, the government had extended the insurance cover up to March 2010.
http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/Income-from-insurance-premium-may-cross-Rs-850-cr-ECGC/articleshow/5015204.cms

Aviva in pact with DBS for product distribution

MUMBAI: Private life insurer, Aviva on Tuesday entered into a bancassurance tie-up with foreign lender DBS Bank to operate in the domestic market. Under the agreement, DBS will offer customised insurance solutions from Aviva's portfolio, a press release said here.

These products include Aviva Young Scholar, Aviva Health Plus, Aviva LifeLine, Pension Elite and SaveGuard, it said.

The tie-up with DBS Bank is an important milestone for Aviva. With this strategic tie-up Aviva and DBS can address this very need of the customers through our products and services. Aviva India Managing Director & CEO, T R Ramachandran said.

Both companies also have plans to extend the partnership further by providing bancassurance in China and Taiwan in future, it said.

Aviva Life Insurance is a joint venture between Dabur and Aviva and has paid up capital amounts to Rs 1,491 crore.

Aviva is the fifth largest insurer worldwide and has 50 million customers globally. Dabur Group has consolidated annual sales in excess of Rs 2,396 crores.

DBS has branches in 10 Indian cities and has a staff strength of over 370 people in the country.
http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/Aviva-in-pact-with-DBS-for-product-distribution/articleshow/5014197.cms

BANK

PNB ties-up with M&M for vehicle finance

NEW DELHI: Punjab National Bank today signed an agreement with automobile manufacturer Mahindra & Mahindra for financing their vehicles across This association will help both the partners to reach out to wider market and make auto loans convenient and easy for prospective car owners, PNB said in a statement.

The bank will offer car loan up to 90 per cent of "on road cost" for tenure ranging up to 7 years at a competitive rate.

This facility will be available at all the branches of the bank and over 250 dealerships of M&M, it said.

On this occasion PNB Chief General Manager, Ranjan Dhawan said the bank's BPLR at 11 per cent is amongst the lowest in the industry and the bank offers entire gamut of retail loans at competitive rates and easy terms.

The bank has set up centralized processing cells for faster processing of retail loans, he said.

http://economictimes.indiatimes.com/Personal-Finance/PNB-ties-up-with-MM-for-vehicle-fin/articleshow/5019693.cms

RBI asks banks to be proactive in monitoring frauds

MUMBAI: Expressing concern over increasing incidence of frauds in banks, particularly in housing and mortgage loans, the RBI today asked CEO-chaired special committees in the banks to be proactive in investigating and monitoring these irregularities.

"The banks' special committee of the board, which is chaired by the CEO (of each bank), should be responsible for the fraud investigation and monitoring function and discharge the relative oversight responsibility in a pro-active manner," RBI said in a notification.

The RBI said the incidence of frauds in the banks has been showing an increasing trend over the recent years, both in terms of number of frauds and the amounts involved.

"It has been observed that the trend is more disquieting in retail segment, especially in housing and mortgage loans, credit card dues, Internets banking, etc," the RBI added.

Moreover, it is a matter of concern that instances of frauds in the traditional areas of banking such as cash credit, export finance, guarantees, letters of credit remain unabated.

The apex bank said the Board for Financial Supervision (BFS) has expressed grave concern that fraudsters with the involvement of bank officials could engineer system wide break down of controls across months while putting through fraudulent transactions.

The RBI said the Board has observed that in terms of higher governance standards, the fraud risk management and fraud investigation function must be handled by the bank's CEO, its Audit Committee of the Board and the Special Committee of the Board, at least in respect of high value frauds.

The Reserve Bank of India performs supervisory function under the guidance of the Board for Financial Supervision (BFS). The Board was constituted in November 1994 as a committee of the Central Board of Directors of the central bank.

At present, the special committees give routine instructions on follow up actions.

"It has been observed that the said Committees give routine instructions on follow-up actions. Essentially, the Committees' directions are not mandated to be implemented by any dedicated operating unit of the banks," RBI said.
http://economictimes.indiatimes.com/Economy/Banks-proactive-in-monitoring-frauds/articleshow/5020589.cms

RBI: Onus of fraud probe, management on banks

The Reserve Bank of India (RBI) has directed that the fraud risk management and fraud investigation function of a bank must be owned by the bank's chief executive officer, its audit committee and the special committee of the bank's board for high-value frauds.Outlining the role of chairmen and chief executive officers in the fraud risk management system, the RBI further stated that the audit committee and special committee of the board should also own responsibility for systemic failure of controls or any absence of key controls or severe weaknesses in existing controls which facilitate exceptionally large-value frauds.
Towards this, the banks should set up dedicated and well-organised "special surveillance and investigation function", which would, on a continuous basis, exercise surveillance over potentially fraud-prone areas and investigate large-value frauds. This unit would also be responsible for mandatorily implementing the recommendations of the special committee of the bank's board, so that the monitoring and investigation of large-value frauds were recognised as a distinct function. These recommendations till date were optional.
To start with, banks have been advised to immediately set up "internal oversight framework," which can prevent wrongdoings and take punitive measures.
This has been done following the increasing incidents of banking frauds in recent years, both in terms of their numbers and the amount involved. It has been observed that the trend was more prevalent in the retail segment, especially in housing and mortgage loans, credit card dues, internet banking.
Banks, with the approval of their respective boards, may frame internal policy for fraud risk management and fraud investigation function, based on the above governance standard relating to the ownership of the function and accountability for malfunctioning of the fraud risk management process in their banks.
The function of the unit will have to be discharged in a centralised manner instead of leaving it to the regional offices of banks, where such specialisation may not be available. So the banks should own specialised fraud monitoring, investigation and follow-up function for large-value frauds or frauds which occur across the bank.
The banks should identify staff with proper aptitude and provide necessary training to them in forensic audit so that only such skilled personnel were deployed for investigation of large-value frauds.
The banks may build up a data/ information pool of large-value frauds and analyse them periodically, which may act as knowledge repository for policy responses.
http://www.business-standard.com/india/news/rbi-onusfraud-probe-managementbanks/370305/

RBI may hike HTM cap on bonds for banks

Our Bureau
Mumbai, Sept. 16 The Reserve Bank of India may look at increasing the limit of the Held-to-Maturity portfolio of government bonds for banks, if it will help in the completion of the government borrowing programme, said Dr K.C. Chakrabarty, Deputy Governor, Reserve Bank of India. The department concerned was examining it, he added.
Speaking to reporters on the sidelines of a seminar on financial inclusion, organised by FINO, Dr Chakrabarty said, “The HTM issue has to be examined. Banks say they have reached the HTM limit.”
Currently, banks are allowed to hold up to 25 per cent of the government bonds portfolio under the HTM category. This means they need not mark to market the depreciation in the value of these bonds.
About increasing the HTM cap, Dr Chakrabarty said, “Globally HTM is not regulated. It is up to each player to decide. Here, we regulate it due a variety of reasons.”
He also said that the HTM provision did not change the financial strength of the bank’s balance-sheet, as it was only an accounting issue.
http://www.thehindubusinessline.com/2009/09/17/stories/2009091751060600.htm

SEBI

Regulator wants systems audit of mutual funds

Within two days of making a series of proposals to prevent Satyam-type accounting scams, the Securities and Exchange Board of India (Sebi) today said mutual funds would need to have a systems audit conducted by an independent certified information systems auditor (CISA) or its equivalent authority.
The market regulator has advised fund houses that the audit should be conducted once in two years. For financial years 2008-2009 and 2009-2010, Sebi said the systems audit should be completed by September 30, 2010.
The domestic mutual fund industry manages assets of over 7.5 lakh crore.
“The audit should be comprehensive, encompassing systems and processes inter alia related to integration of the front-office system with the back-office system, fund accounting system for calculation of net asset values, and financial accounting and reporting systems,” said Sebi.
It added the audit would also look at “unit-holder administration and servicing systems for customer service, fund flow processes, system processes for meeting regulatory requirements, prudential investment limits and access rights to systems interface.”
Nimesh Shah, chief executive officer of ICICI Prudential Mutual Fund, said, “We welcome this step and we will follow the direction as we have been given a year’s time. It is good for the industry and since the industry is in a serious business of managing people’s wealth, it is an important requirement.”
Fund CEOs that Business Standard spoke to said since new regulatory norms had come up and more players were preparing to enter the market, the systems of fund houses should be in compliance with the new regulatory norms.
Such a move would bring robustness to the industry, they said.
Sebi also asked the fund houses to place both audit and compliance reports before the trustees. These, along with the comments of the trustees, should be communicated to Sebi.
http://www.business-standard.com/india/news/regulator-wants-systems-auditmutual-funds/370293/

FinMin, Sebi to decide on dual listing of shares: Khurshid

Corporate Affairs Minister Salman Khurshid today said it is for the Finance Ministry and the Sebi to take a call on dual listing of shares as is being proposed in connection with the $23-billion Bharti-MTN deal.
"That facility (dual listing) is not available in our country. If it is to be made available at all, Finance Ministry and Sebi will consider it in due course and we will come into the picture only if they have some view on it," he said, while talking to reporters on the sidelines of a conference.
Noting that the South African government is looking at dual listing, he said, such a facility is only available in that country and possibly not in any other jurisdiction.
On his meeting with Bharti Group chairman Sunil Mittal, Khurshid said, "He gave me information on dual listing but he didn't discuss it with the intention of asking me for any help because it is the Finance Ministry where the ball is. And if at all the decision is taken, it will be taken there."
The South African government is learnt to have sought dual listing for MTN that would allow MTN shares to be traded on the Indian and South African bourses simultaneously with equal voting rights.
Finance Minister Pranab Mukherjee said yesterday that "South African minister met me at G-20 finance ministers meeting and there I suggested to him that this (dual listing) arrangement is to be looked into in the Indian context".
Answering questions on notification of sections of the Competition Commission India Act that deals with mergers and acquisitions, the Minister said, "Obviously, we have to bring a notification. We don't have a time line as of now. I would say there is a sense of urgency in that, no time line is available."
The Competition Commission would not be able to vet mergers and acquisitions unless the government notifies sections 5 and 6 of the CCI Act.
http://www.business-standard.com/india/news/finmin-sebi-to-decidedual-listingshares-khurshid/73680/on

SEBI’s disgorgement order upheld

Our Bureau
Mumbai, Sept. 16
The Securities Appellate Tribunal (SAT) through orders issued last week, has upheld SEBI’s disgorgement orders on ill-gotten gains in the case of Ms Himani Patel (Rs 33.52 lakh) and Mr Dhaval Mehta (Rs 72 lakh).
Both the entities had appealed against the SEBI orders relating to cornering of shares in the IPOs of Suzlon Energy and IDFC through fictitious demat accounts in the names of alleged friends and relatives sharing common addresses.
Further SAT also upheld the penalty of Rs 52 lakh levied by SEBI’s Adjudication Officer in the case of Ms Himani Patel.
The modus-operandi of cornering shares in the IPO was uncovered by SEBI in its exparte order of April 27, 2006.
Investigations only confirmed that the appellants were the brain behind it, besides being the beneficiaries of unjust and unfair gains at the cost of retail investors, SAT said.
http://www.thehindubusinessline.com/2009/09/17/stories/2009091752061000.htm

Economy

Budget 2010-11 gets off the ground

NEW DELHI: The finance ministry on Thursday kicked off the budget-making exercise for 2010-11 by asking other government wings to review all schemes that can be eliminated, reduced or be merged with other schemes. Ministries are also asked to assess the continued relevance of all existing schemes to improve efficiency and reduce duplication.

The finance ministry wants individual departments to take all efforts to minimise the quantum of unutilised funds surrendered by making a thorough assessment of the fund requirement initially. This helps in a more focused utilisation of available resources.

“The estimates of disinvestment of equity holdings in public sector enterprises may be centrally furnished by the department of disinvestment,” according to the circular.

“It is necessary to review the existing expenditure budget in the first instance, to prioritise the activities and schemes, both on the plan and non-plan side and identify those activities and schemes, which can be eliminated or reduced in size or be merged with any other scheme. All ministries and departments were expected to take up the exercise of reviewing or evaluation of all ongoing schemes to determine their continued relevance”, said Finance ministry in its instructions to all other ministries on making budget estimates for the next fiscal.

The instruction to carefully review existing schemes is aimed at possible streamlining of welfare measures so that resources can be utilised optimally. Finance minister Pranab Mukherjee had said after the recent G-20 meeting that the government will not exit from the stimulus measures before the economy is fully revived.

Reserve Bank governor D Subbarao also said this week the central bank would not roll back its soft monetary policy before the economic recovery is secure.

The circular from the department of economic affairs also suggested that ministries should not include schemes, which are supposed to be discontinued from the next fiscal onwards, in the budget estimate.

The estimate of expenditure will be finalised after the expenditure secretary meets financial advisors from all ministries by October-November, 2009, the circular said.

To reduce the possibility of funds remaining locked up in various government wings unutilised, which deprives resources for other needy agencies, finance ministry said that due note may be taken of past performance while framing the estimates.

Also, the stages of formulation and implementation of various schemes, the capacity of the implementing agencies to implement the scheme as scheduled, the constraints on spending, and the quantum of government assistance lying with the recipients unutilised should be considered.

http://economictimes.indiatimes.com/Economy/Budget-2010-11-gets-off-the-ground/articleshow/5020529.cms

Gold hits the roof, touches Rs 16,220 for 10 grams

Gold today surged by Rs 250 to touch a new peak of Rs 16,220 per 10 gram in the bullion market here on frantic buying by stockists ahead of the festival season amid the global rates climbing to an 18-month high of $1,018.15 an ounce.
Marketmen said buying activity gathered momentum as stockists indulged in buying gold after the metal in London climbed to an 18-month high on concern that a global economic recovery may stoke inflation amid a weak dollar, boosting demand for the metal as an alternative investment. Gold in overseas markets advanced $10.60, or 1.1 per cent, to $1,018.15 an ounce.
Silver coins also touched an all-time high of Rs 31,800 per 100 pieces. Marketmen said the precious metal might see new peaks in the coming days once the festival and marriage season starts on September 19.
“We see the metal scaling more peaks as retail customers would enter the market for coming festivals season,” said a bullion merchant, Ravi Jalan.
Standard gold and ornaments spurted by Rs 250 each to Rs 16,220 and Rs 16,070 per 10 gram, respectively. Sovereign also rose by Rs 50 to Rs 12,950 per piece of eight gram.
Jalan said the current upsurge was purely of stockists buying as retailers refrained from buying gold during ‘Sharaadh’, the ongoing inauspicious fortnight in Hindu mythology. According to analysts, gold may climb a high level of $1,100 an ounce in the overseas market in the next six months.
Silver ready shot up by Rs 700 to Rs 26,600 a kg and weekly-based delivery by Rs 910 to Rs 27,570 a kg. Silver coins rose to an all-time high by gaining Rs 200 to Rs 31,700 for buying and Rs 31,800 for selling of 100 pieces.

http://www.business-standard.com/india/news/gold-hitsroof-touches-rs-16220-for-10-grams/370295/