The inside scoop on Lehman's collapse

Source: Reuters Apr 02 2010 , Boston
 A literary genre to emerge from the financial crisis is the Big Bank Biography,
led by "The Partnership," Charles Ellis' history of Goldman Sachs, and several tales of the end of Bear Stearns & Co.

Add to this list Vicky Ward's "The Devil's Casino," an inside account of the egos and rivalries that guided Lehman Brothers from the 1980s to its catastrophic end in 2008. The story couldn't be more timely, coming as investigations allege gory new details of its fall such as how top executives hid borrowing.

Ward's book is rich on details, like CEO Dick Fuld's aversion to Casual Friday (the end of Western Civilization, as he saw it) but almost empty on the firm's storied first 100 years. As Ward, a contributing editor at Vanity Fair, explains, that story has been told elsewhere.

Her book takes off from 50 pages of an official history that was commissioned by the firm in 2003.

The pages were never published because so many executives painted negative portraits of Fuld and offered so many disparate accounts that the firm's own writers could not weave a clean tale for public consumption.

They got that one right. In Ward's hands, the notes become a gold mine of gossip and the basis for further revealing interviews. Affairs poison friendships. Money changes priorities. And the wives of top executives gripe how hard it was to pack for a retreat featuring hiking by day and fancy dinners by night.

There are tales to admire as well: the firm comes alive on Sept. 11, 2001, when it lost only one of the hundreds of its employees at the World Trade Centre, then brings itself back into operation days later because technicians had carried crucial servers down many flights of stairs out of the doomed building.

Fuld often emerges in the book as a sympathetic character, committed to his family and to various charities, and, like a good chief executive, at pains to mend feuds.

But when Ward connects the dots, the rough conclusion she comes up with is that fatal flaws of Fuld's culture brought Lehman down. Briefly: his ambition to match Goldman Sachs and other firms led Lehman to pile on too much risk, such as the mortgage-backed securities that ultimately proved fatal.

The problem with this analysis is that Lehman's fall does not lend itself to a cultural explanation alone. It is also a story of a firm allowed to become too big to fail by regulators navigating uncharted waters.

And, despite speaking with nearly all the central players and getting terrific details of the desperate, last-ditch negotiations to save Lehman, she lacks several key accounts including that of Fuld himself, who is hamstrung by lawsuits.

This is the limit of the Big Bank Biography: without subpoena power, the full picture is out of reach.

No matter how good the gossip, top executives are also actors in a wider financial system, and the inside story can only explain so much.

Earn more from your savings accounts from April 1

Source: PTI Mar 31 2010 , New Delhi

The savings account will yield 30 to 40 basis points more to the account holder from tomorrow with the banks shifting to the new method for calculating interest on savings deposits.
Following the Reserve Bank guidelines, the banks would be required to calculate interest on savings deposits on a daily basis beginning April 1.

At present, the interest rate on savings accounts is calculated on the minimum balance held from the 10th day to the last day of each month. Savings deposit yields an interest rate of 3.5 per cent and is credited to the account on a half- yearly-basis -- in March

and September.

Payment of interest accumulated, however, even after with the daily calculation would be as per the existing practise of at the end of six months.

"With the new norms coming into effect from tomorrow, the cost of funds for banks would increase between 30 and 40 basis points," Bank of Maharashtra chairman and managing director Allen Pereira told PTI. "But it would be difficult to say how much of it would translate for individual savings account holders," he said.

According to Corporation Bank executive director Asit Pal, the new calculation system on the daily balance would be beneficial for customers. Explaining the new provisions, he said, "supposing that you have Rs 500 in your account and next day it increases to Rs 700, interest rate of 3.5 per cent per annum would be payable on both Rs 500 as well as Rs 700 on a daily basis."

With computerisation of banks, Pal said, it has become possible to calculate interest on each savings account on a daily basis.

The Reserve Bank, while announcing the annual monetary policy for 2009-10 unveiled last April had said, "payment of interest on savings accounts by scheduled commercial banks would be calculated on a daily product basis with effect from April 1, 2010."

Several banks have suggested that interest on the savings account may be calculated either on the minimum balance in the account from the first to the last day of each month or on a daily basis.

The matter was referred to the Indian Banks Association which said the payment of interest on a daily basis would be feasible only when the computerisation of banks is completed. The RBI proposal is based on the view that computerisation at commercial banks is satisfactory at present.

End of the road for Maruti 800

 Source:TNN, Apr 1, 2010, 01.06am IST

NEW DELHI: The small car that changed the way Indians drove and helped put the Indian automobile market into the global big league will stop rolling out of showrooms in major cities from today. It has been driven off the roads by stringent emission laws that the original people's car is unable to comply with any more.
Powered by a Suzuki collaboration and steered by Sanjay Gandhi's political ambitions, the Maruti 800 rolled out onto Indian roads 27 years ago. The last of the 27 lakh units were driven out of showrooms in 13 cities on Wednesday, the company having decided that it was not worth pushing for a large investment to upgrade the engine to meet the stricter Bharat Stage IV norms that become mandatory from April 1.

BS-IV emission standards come into play in major cities, including New Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Kanpur, Ahmedabad, Surat and even Agra.

The Ford Ikon (1.3 petrol), Fiat Palio, Skoda Fabia (1.2 petrol) and Octavia (1.9 TDI engine) and Chevrolet Tavera (2.5DI) too will no longer be sold in the 13 cities, which together account for almost half the total car sales in India.

"We were contemplating if we could upgrade the 800 to comply with new emission norms, and have taken a decision to stop selling the car in cities where new norms will be implemented from April 1," Maruti chairman R C Bhargava had said.

Want to join a bank? First clean up your credit history

Source:fc: Ritwik Mukherjee Apr 01 2010 , Kolkata

You have to be a good borrower before you become a good banker. That
seems to be the current line of thinking at a number of private banks operating in India.

Increasing number of private banks, including some foreign banks, are making Cibil (Credit Information Bureau of India) check of a candidate mandatory before final hiring. There are also instances of candidates being asked to quit even after getting his appointment letter on ground of a negative Cibil report, officials in several banks confirmed.

This is because “financial probity” is of highest importance, banks feel. The recent move coincided with the fact that the banks have come back on a hiring mode after a temporary lull and more so with the economy being on a recovery path. And this move is not without a rationale.

“There are many ethical issues in the banking profession. Self discipline and particularly fiscal discipline is the other thing, which is of utmost importance for being a good banker,” a senior official working with a leading private bank, (one of the banks to have introduced this system) told FC.

This being a purely internal HR procedure, no bank was forthcoming in confirming the development. However, the banks that FC learnt to have introduced this system include Kotak Mahindra Bank and HSBC. And many more are likely to follow suit soon, according to banking industry officials.

Responding to a questionnaire from FC, the official media handling agency of Kotak Mahindra Bank only said the person concerned was travelling and could not comment. An official spokesperson of Barclays Bank India also refused to comment.

While clarifying that their pre-employment scre­ening process currently did not cover Cilbil check, Madhavi Lall, regional head of HR, South Asia, Standard Chartered Bank, told FC, “All employees who join the bank are subject to a pre-employment screening pro­cess to minimise the risk of hiring inappropriate or untrustworthy individuals. We undertake identification and capability checks.”

Talking about the bank’s hiring plans, Lall said, “We continue to look out for external talent to fuel the bank’s growth agenda in the coming years and will be looking at a gross hiring of nearly 2,500 during the next 12 months.”

44 IPOs @ Rs 47,800 crore this fiscal

Source:fc: PTI Apr 01 2010 , New Delhi

As many as 44 companies, including state-run companies, came out with public offers during
the 2009-10 fiscal, when the main indices gave a whopping return of over 80 per cent, and raised funds over Rs 47,800 crore.

According to an analysis, about 44 companies, including the Public Sector Undertakings, raised a whopping Rs 47,867 crore between April 2009 and March 31, 2010, through initial and follow-on public offers.

Apart from some big initial public offers such as that of JSW Energy and Adani Power, the fiscal also saw divestment of the government's stake in NMDC and NTPC through follow-on offers.

During the financial year 2009-10, the Bombay Stock Exchange's benchmark Sensex registered a whopping gain of over 80 per cent, surging from 9,708.50 points as on March 31, 2009.

"In 2009-10, the secondary capital markets have led to the revival of primary markets as well. The public issuance market has seen very robust activity," brokerage house SMC Capitals' Equity Head Jagannadham Thunuguntla said.

The Rs 9,967-crore follow-on public offer (FPO) of state- run iron ore mining giant NMDC was the biggest public offer of the fiscal, followed by NTPC (Rs 8,478 crore), NHPC (Rs 6,038 crore) and JSW Energy (Rs 3,818 crore).

With the stock market re-emerging as the preferred place for fund raising, about 28 companies came out with IPOs during April'09-Jan'10 raising a total of Rs 23,731.88 crore, almost 10 times higher than Rs 2,058.51 crore mobilised by 20 companies during the same period in 2008-09.

According to marketmen, in the coming fiscal too, the market will see a large number of public offers as the Centre has set a target of raising Rs 40,000 crore through divestment during FY'11.

Besides, a number of companies have already approached the capital market regulator SEBI to get approval for entering the market.

"Even the pipeline is looking strong. However, whether this pipeline materialises or not, depends largely upon how much the secondary markets would be able to sustain going forward," Thunuguntla added.

Some big public offers expected in the current financial year include, Oil India Ltd (Rs 2,777 crore), Adani Power (Rs 3,016 crore), Rural Electrification Corporation (Rs 3,530 crore) and DB Realty (Rs 1,500 crore).
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Infrastructure bad loan norms eased

Source:fc: Rajendra Magan Palande Apr 01 2010

Relief to banks in delayed, litigated projects
The Reserve Bank of India (RBI) has relaxed the norms for classification of project
loans to infrastructure ventures as non-performing assets in case of delays for reasons beyond the control of the promoters.

Banks now have the leeway to not treat loans to infrastructure projects under litigation for four years from the original date of start of commercial operations. So far such treatment was allowed for only two years, RBI on Thursday said loans to these projects would be treated as standard loans for up to two more years.

Where projects are delayed for other reasons beyond the control of promoters, RBI has granted additional one year beyond the extension of the date of commencement of commercial operations.

The relaxations were made on the basis of bank representations. “It has been represented to us that there are occasions when the completion of projects is delayed for legal and other extraneous reasons like delays in government approvals, etc. All these factors, which are beyond the control of the promoters, may lead to delays in project implementation and involve restructuring/rescheduling of loans by banks,” RBI said.

The guidelines will not be applicable to restructuring of advances to developers of residential and commercial real estate projects and loans classified as capital market exposure.

For this purpose, RBI has also created two categories of project loans – those given to the infrastructure sector and to the non-infrastructure industrial sector. RBI said project loan would mean any term loan extended for the purpose of setting up an economic venture. Banks must fix a date of commencement of commercial operations at the time of loan sanction or financial closure in the case of multiple banking or consortium arrangements.

No further relaxation has been made in the other category of non-infrastructure industrial loans.

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No PAN? Get reday to shell out 20% tax from tomorrow

Source:Deepshikha Sikarwar, ET Bureau, Mar 31, 2010, 12.56pm IST

   
NEW DELHI: Get ready to shell out more tax up front on any income received if you are unable to provide your permanent account number from April 1. The tax deducted at source, or TDS, on payments could be as high as 20% for those not quoting PAN against the regular rate of 2%-10%.

The Budget 2009-10 had made it mandatory for residents and non-residents to quote this number or face a higher rate of withholding tax. It comes into effect from Thursday, April 1.

The idea behind the rule is to encourage more people to obtain PAN, a 10-digit alphanumeric tax payer identification number, and thereby become visible to tax authorities. The tax base of the country is a mere 3.3 crore because of massive underreporting of incomes and large-scale exemptions.

Quoting of PAN will allow income tax authorities to establish an audit trail and catch tax evaders. Some experts feel the measure is excessive. “This would put unnecessary burden on senior citizens who do not have a tax liability,” said Kishan Malhotra, Executive Director, KPMG.

Senior citizens could just file Form 15H in absence of tax liability and become eligible for exemption from TDS. If they do not furnish a PAN they will have to face a TDS rate of 20%.

Other Indian residents not falling within the tax bracket will also have to obtain a PAN and quote it where required. Tax deducted at source can be adjusted against a taxpayer’s actual tax liability. But in the case where there is no tax liability it has to be claimed back by filing returns.

The new rule comes with a severe penalty if not followed. Any failure to deduct taxes at appropriate rates will result in disallowance of expenditure for the one making payment, recovery of tax from him, and levy of interest and penalty. Interestingly, the total number of PAN issued in the country is in excess of 8 crore. Income Tax department issues the permanent account number in partnership with UTITSL and NSDL.

With this provision coming into effect even non-residents, having just one-off transaction with Indian parties will have to obtain PAN, failing which they will suffer a much higher withholding tax on their income.

Typically, payments by residents to non-residents in the nature of royalties or fees for technical services attract withholding tax at rate of 10.56% under the Income Tax Act or at 10% under certain tax treaties in the absence of a permanent establishment or a fixed place of work in India.

Similarly, interest payments to non-residents attract withholding tax at a rate lower than 20% under certain tax treaties. The PAN is required to be quoted in document pertaining relating to sale of property, sale or purchase of a motor vehicle requiring registration other than two-wheelers. Most of the banking transactions require PAN to be quoted.