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Friday, November 20, 2009

Centre puts SBI merger on hold

The State Bank of India chairman, Mr O.P. Bhatt, has been asked by the ministry of finance, department of financial services, to withhold the merger process of the State Bank of Indore with itself.
In a confidential letter to the SBI chairman dated October 8, (which is in the possession of this newspaper), the ministry said, “You are requested to kindly consider any further acquisition of the Associate Banks only after a view is crystallised on the subject by the government.”
The letter was in reply to the three letters sent in July, August and September by the SBI regarding its proposed acquisition of its associate banks. The finance ministry said that the government is presently “considering a comprehensive paper for taking a holistic view on consolidation in the public sector banks” and “on further mergers in the SBIgroup.”
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RBI Reference rate for US dollar and Euro

The Reserve Bank of India today fixed the Reference rate for the US currency at Rs 46.58 per dollar and the single European unit at Rs 69.54 per euro from Rs 46.41 per dollar and Rs 69.26 per euro, respectively, yesterday.

In a note issued here by the apex bank, the exchange rates of Great Britain's Pound and Japanese Yen against the Rupee have been given as Rs 77.5650 per pound and Rs 52.49 per 100 yen, respectively, based on the Reference rate for US dollar and middle rates of the cross currency quotes at noon.

The Reference rate is based on 12 noon rates of a few select banks in Mumbai and the SDR-Rupee rate will be based on this rate, the release added.
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Union Bank starts Auditing Branches

After some of its branches were interrogated by the income-tax department for their involvement in the Madhu Koda money-laundering case, state-owned Union Bank has started auditing the accounts of the branches which had shown high transactions.
Talking to FE, a top brass of the bank said on condition of anonymity, “We have already asked some of those branches to go for fresh audit that are having high-value transactions.” However, he refused to give any further details.
The bank official stressed that entire transactions in his bank was in compliance with Know-your-customer (KYC) and anti-money laundering (AML) norms.
Another official of the bank said that like other banks, all the branches of his bank had undergone audit on a regular basis.
However, the periodicity of the audit depends on the risk categorisation of the branches, added the official.
It means that while some of the branches undergo audit on an annual basis, there may be quite a few branches of the bank that may require audit on a half-yearly basis, he said without giving any further details.
The act of special audit by the banks comes in the wake of the government asking the bank to carry out an audit of all its branches without delay so as to find out if any large deposits in the bank went unreported.
The bank chairman & managing director, MV Nair, was questioned by the officials of the income tax department in Mumbai on Monday.
The I-T department, during a probe into alleged money laundering by former Jharkhand chief minister Madhu Koda, had stashed Rs Rs 214 crore on a bank account at one of the bank’s branches in Zaveri Bazar between January 5 and March 30, 2007.
Nair was not available for his comments as he is busy with the preparations of the board meeting of his bank in New Delhi.
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Corporation, Andhra & Dena Bank hot picks on M&A street

Corporation Bank, Andhra Bank and Dena Bank, are the hot favourites takeover targets among the large PSU banks which met the Finance

Ministry officials on Wednesday.

Chiefs of Punjab National Bank, Canara Bank, Union Bank of India, Bank of India and Bank of Baroda met Finance Ministry official to discuss the pros and cons of consolidation among banks in India.

Sources from banking industry, on condition of anonymity, said Union Bank, Bank of Baroda and Punjab National Bank were keen on acquiring Corporation Bank while Canara Bank and Punjab National had shown interest in Dena Bank.

Bank of India had expressed interest in Oriental Bank of Commerce. Union Bank and PNB had also shown interest in Andhra Bank.

Bankers point out that the discussions on are in preliminary stage and it may take very long for it to materialise. Sources said that the Finance Ministry officials are likely to meet CEOs of small to medium size PSU banks to read their mind on consolidation. CEOs of small-to-medium-size banks are most likely to oppose any move of being acquired by large bank on the grounds that loyal customers will desert them and that the banks are performing better on stand alone basis.

Interestingly, none of the large banks were keen on acquiring any bank located in eastern belt namely UCO Bank, Allahabad Bank or United Bank of India on fears that there could be resistance from the political front and other labour issue.

In fact one of the suggestion that came forth during the discussion was to merge all the three Kolkata based banks into one. None of the large banks showed interest in Bank of Maharashtra, Central Bank of India, Punjab & Sind Bank. Sources said that the resistance was largely due to union problems faced by these banks.

Government has been talking of consolidation among Indian banks for over five to six years. However, sources said that this time large banks were eyeing smaller banks which gave them better geographical reach and had relatively clean balance sheets. This was not the case in the previous round of discussion.

For instances, on Wednesday, PNB made a pitch for banks located in the west namely Gujarat and Maharashtra, Union Bank of India and Bank of Baroda showed interest in southern belt, Bank of India was keen on increasing its presence in the north belt while Canara Bank also showed interest in increasing its presence in western India.

In the past, chiefs of Bank of India and Union Bank of India were keen on merger which would make them a strong bank in the western belt since both banks have huge presence in Gujarat and Maharashtra. But the talks failed to materialise due to strong resistance from the Left front.

During the meeting with Finance Ministry on Wednesday, banks urged them to frame rules for M&A. "Every bank would like to acquire another bank irrespective of its size. Nobody wants to be acquired. But if there is a set rule on which banks are eligible to acquire and what would be to the terms, it would enable banks to work on consolidation," suggested one of the bank chief in the meeting.

Government has received $2 billion from World Bank which is aimed at providing financial support to PSU banks to help them meet the capital requirement. Many banks have indicated to the Finance Ministry of the capital requirement over the next three years to maintain growth.

Bankers say that before allocating the capital to banks, government is making a bid for consolidation.
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