Dena, UCO Banks to act as registrars for UID project

State owned lenders Dena Bank and UCO Bank have signed a Memorandum of Understanding (MoU) with the Unique Identification Authority of India (UIDAI) to act as registrars for the ‘Aadhaar’ biometric smartcard project.

Both banks will act as registrars for providing Unique Identification Numbers under the UID initiative.

The banks will provide UID numbers to existing as well as future customers by collecting biometric and demographic details as per the norms established by the UIDAI, Dena Bank said in a statement.

This provision will enable real-time online authentication of identities for satisfying the know your customer (KYC) norms required for opening of ‘no frills’ savings accounts by sections of the population that do not have alternative proof of identity, it said.

Through this MOU, the banks will leverage the UID to deepen the reach and ease the process of financial inclusion, it said.

A first step on the road to financial inclusion, the UID project aims to develop the architecture of technical standards and an ecosystem to facilitate collection of demographic and biometric attributes, it said. - PTI

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India''s second financial hub to come up in WB

India''s second financial hub will come up in West Bengal after Mumbai''s Bandra-Kurla complex to house a cluster of banks, insurance companies and other financial intermediaries.

Union Finance Minister Pranab Mukherjee, while laying the foundation stone of the hub at Jyoti Basu Nagar near the metropolis here today, said "this will play a catalytic role in the development of the eastern and Northeastern region."

Keeping in tune with the Centre''s Look East policy aimed at boosting trade and ties with the eastern and far eastern nations, Mukherjee said "the proposed hub will provide the necessary infrastructure for facilitating trade with these nations."

Mukherjee said "with India''s increasing trade imbalance with Europe, North America and Japan, the country will have to diversify export destinations to the east and far east."

He said that China, India along with other market economies like Indonesia and South Africa were contributing most to the global output.

The financial cluster, to be developed by Orion IT Tech Limited, will be built at a cost of Rs 16,000 crore and provide direct and indirect employment to three lakh people.
Work on the hub will begin from December.

West Bengal Chief Minister Buddhadeb Bhattacharjee, state finance minister Asim Dasgupta and chairman of UCO Bank, UBI and Allahabad Bank were present on the occasion.

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Have recognised Zoom Developers a/c as NPA: UCO Bank

Public sector bank, UCO Bank, has raised its base rate from 8% to 8.5%. The bank is looking at reviewing its plan to enter the equity market with an FPO. It had planned to sell 6 crore shares to raise Rs 400-500 crore and had received government clearance for sale of equity in the middle of 2009.

The bank had received Rs 373 crore from the government in July for recapitalisation. It had sought a further Rs 1300 crore from the government. The government’s stake in UCO Bank currently stands at 63.59%.

The bank is also said to have a large exposure along with 26 other banks through its lending to Zoom Developers, in the alleged Rs 2700 crore fraud, which is being spoken of as the biggest banking scam in the country, currently being probed by the CBI.

In an interview with CNBC-TV18's Latha Venkatesh and Anuj Singhal, Arun Kaul, Chairman, UCO Bank spoke on the bank's expectations on credit growth and net interest margins in the current year.

Below is a verbatim transcript. Also watch the accompanying video.

Q: If you can take us through your capital raising plans, there was talk about a follow-on public offer, the government has also given you some money, I think Rs 373 crore in July what more is due from them. How will your capital look by March 31?

A: We are not looking at the capital raising right now. Yes, the board has already approved an FPO plan. We are going a bit slow on that. Considering more on the health of the portfolio in the CASA and other issues in the banks, we have not applied ourselves for this because we are quite comfortable with the capital adequacy. We are around 13% and hope to maintain it around that level by March.

Q: Tell us about business, how are credit growth and margins panning out? What may you end the year in terms of NIMs and in terms of credit growth?

A: As far as the credit growth is concerned, September 30 initial figures indicate that we have a deposit growth of about 19% odd and credit growth of about 22-23%. Our target is to maintain around 20% credit growth for the full year. As far as the NIMs are concerned, last year, September, our net interest margin was at about 1.98%, marginally below 2%.

But there was fairly good improvement by March 2010 and it went above 2% and in June 2010 it went above 3%. We hope to maintain it around that level because we have paid off some high cost deposits. So we hope to maintain around 3% or so as far the NIMs are concerned.

Q: What about NPAs because in Q1 it was a mixed picture. The gross NPAs were up while net NPAs were down so going forward what could be the trend?

A: We will have to wait for a little more time and see how it is but yes, the health of the portfolio is certainly a cause of concern as we have said earlier also, and that is where we are putting a major focus on. We are adopting various means to reduce the NPAs. In the last one month that I am here a lot of efforts have been put into arresting slippage, recovering NPAs and the reasonable success that we have achieved in that.

We are hopeful that we will be able to improve the health of the portfolio. We have also created a separate vertical for asset recovery where the major focus is only on the recovery of the NPAs. We are also trying to sell off some stressed assets. So all said and done we are hopeful we will be able to contain the NPA menace and improve the health of the portfolio.

Q: Your CASA ratio is quite low compared to some of the other banks at about 24-25%. What is the target and by what time do you plan to achieve the target?

A: Like I said earlier also there are three challenges I look in the bank. One is health of the portfolio, second is CASA and the third is HR issues. So far as CASA is concerned at 24-25%, we are much below than peer bank and the reason for the low CASA has been because the bank has been relatively slow in acquiring new customers. Our customer base is very small compared to other banks of the same size.

We have total depositors ranging between 1.2 and 1.3 crore, which is relatively small in number. We have started aggressively acquiring new customers, opening new accounts. We are also putting a lot of focus on our frontline staff at the branches.

In addition the bank is 100% Core Banking Solution (CBS) and we are not going to leverage on that advantage. So we are looking at using technology, leveraging the technology to get benefit. For example, we have a very small number of ATMs at just about 400 odd ATMs with us.

So we are trying to include number of ATMs and so the alternate delivery channels can be improved upon. So we would be very comfortable if we reach in another one year's time about 30% CASA. That’s what we are trying to do.

Q: Your gross NPAs grew by about Rs 400 crore or Rs 375 crore in the Q1 that’s 1,929 crore. That increase was it because of this one account which is now hitting headlines the Zoom Developers’ account. We understand the CBI is stepping in. can you update us on that. Have you already recognised it as an NPA?

A: Yes, we have recognised it as an NPA.

Q: What do you think is the status? Is the CDR possible or if the CBI steps in, CDR is not possible. How does that go ahead now?

A: It has been referred to the CBI so I am not aware what happened thereafter but yes, it's been referred to the CBI for approval. No decision has been taken on this as yet.

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UCO BANK SELECTS XCHANGING TO IMPLEMENT DISASTER RECOVERY SOLUTION

UCO BANK SELECTS XCHANGING TO IMPLEMENT DISASTER RECOVERY SOLUTION

To become the first Indian bank to implement EastNets' empowerment product

MUMBAI, 1 June 2010 - Xchanging /quotes/comstock/23s!e:xch (UK:XCH 178.90, -1.80, -0.10%) , a large, fast growing global business processor, announced today that it has extended its relationship with UCO Bank, a leading Indian bank, to implement mission critical disaster recovery solution for its most business critical financial telecommunication infrastructure.

Xchanging will enable UCO Bank to seamlessly integrate near real-time databases, payments, and transactions over its SWIFT payment gateway with the bank's existing disaster recovery infrastructure. Xchanging EastNets' implementation compliance and payment solution conforms to international banking benchmarks. The solution will provide a secure environment for efficient duplication detection, and recoverability of high volume messaging traffic. The scope of the implementation also includes back-up of foreign exchange payments and telecommunications platform.

A leading commercial bank and Government of India undertaking, UCO Bank has an extensive network of over 2,000 service outlets and 35 regional offices across India. With additional offices in Hong Kong, Singapore, Malaysia and China, UCO Bank conducts extensive foreign exchange business in more than 60 centres across India. Xchanging's comprehensive disaster recovery solution will address the data recovery needs of the bank's operations.

David Andrews, CEO Xchanging said, "We are delighted to be the provider of choice for UCO bank and to be the first to introduce the EastNets solution to the Indian banking market. IT is playing an increasingly important role in business processing across industry sectors. As a technology powered business processor, our vision is to now bring the power of collaborative technologies such as cloud computing to our customers' business processing needs. With our extensive Intellectual Property, we have already set the foundations to be ahead of the market in providing our customers the benefits of new generation technologies".

Nimish Soni, Managing Director, Xchanging India added, "Xchanging has been supporting UCO Bank since 2004 as a SWIFT Partner. Xchanging's mission critical solution will allow UCO Bank to streamline its back-up and recovery practices and derive increased operational efficiencies. In the event of any hardware failure, human error, file system corruption or disaster, our solution will help the bank to restart operations without any delay in switching to the back-up system". He further added, "We are seeing a growing number of banks adopt an increasingly focused approach towards disaster recovery management planning. This is spurred by an increased regulatory thrust by the Reserve Bank of India (RBI). UCO Bank when looking for a strategic partner to augment its disaster recovery planning selected Xchanging after a careful assessment of the depth of our experience".

Xchanging designs, builds and runs a range of technology solutions for business processing. The company embeds its Intellectual Property (IP) to create a solution faster and more cost effectively than customers can themselves. These technology services are aimed at organisations that wish to use IT services to improve organisational effectiveness and profitability.

Xchanging's capabilities in the banking and securities industries include retail investment account management and securities processing services. By the end of 2010, it will be the largest independent investment account processor in Germany, and is expected to administer approximately 1.5 million accounts for its Enterprise Partnership (EP) Allianz Global Investors and other customers such as SEB Bank and MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH (MEAG).

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RBI tries its hand at contract style recruitment

For long now, a government job has meant official accommodation, easy working hours and a wholesome retirement kitty, among a host of benefits. However, this is changing, as state-run organisations increasingly tilt towards contract basis employment, where the benefits are limited to bare essentials such as medical benefits and salary.

So it is at the Reserve Bank of India (RBI), which is currently looking for executive interns on a three-year contract.

The search is for 200 executive interns, way more than the number of direct recruit probationary officers (POs) the central bank takes in every year.
The selected candidates would neither be entitled to company accommodation, pension, provident fund or gratuity, nor have any claim to seniority. In fact, they could get sacked even before the contract period ends if their performance is not up to the mark.

This is the first time RBI has issued an advertisement for mass recruitment of entry level executives on contract basis. Earlier this year, it was looking for media relations executives at the middle and top on contract basis.

The entry level jobs could well be served by employees on contract now. In fact, RBI had advertised for vacancies for recruiting POs in July last year. However, it is yet to issue any such advertisement so far this year.

Going by experts, RBI may stick to this mode of employment.

“Employing on a short-term basis makes it easier to weed out non-performers. So the clear indication is that people shouldn’t come here to park themselves,” said Aneesh G Laikar, CEO, Selectema Consulting, a Mumbai-based recruitment firm.

“In contract basis employment, you cannot be a part of a trade union, which will make the exits easier. It is a sign of times to come. We cannot rule out the possibility of RBI using this way of employment on higher levels too,” said Laikar.
T Shreedhar, managing director of Hyderabad-based talent management firm TMI Network, feels the RBI move will legitimise contract staffing.

The eligibility criteria for the executive interns are the same as those for the POs recruited by RBI every year.

However, the procedure of examination has been shortened. It would now be limited to the aptitude test and an interview. The descriptive test on economic and social issues, finance and management has been skipped.

The emoluments are in the range of Rs5-6 lakh per annum. The cost to the bank for a PO also works out to around Rs6 lakh per annum, though in case of POs, it spreads across perquisites like bank accommodation, various reimbursements, provident fund, pension and gratuity, besides medical benefits.

The closing date for receiving application from candidates for executive interns is August 30, while the written examination will be held on October 24.

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Public sector banks seen besting private sector peers in RoE

Public sector banks (PSBs) have fared better than their private sector counterparts in terms of return on equity (RoE) in the last two financial years, breaking with the trend seen over at least six previous years, says a report by Avendus Equity Research.

The trend may be here to stay, Chandana Jha, banking analyst, Avendus Equity Research, suggests in the report, released last week.

RoE measures a bank’s profitability by revealing how much profit it has generated with the money shareholders have invested.

India’s second-largest lender, ICICI Bank, had the lowest average RoE of 9.2% in the March 2008-March 2010 period, while Punjab National Bank (PNB) had the highest, at 24%.

The figures are likely to be maintained in the March 2011-March 2013 period, with ICICI Bank’s average RoE at 10% and PNB’s at 24.1%, says Jha.
“Due to lower equity dilution, most PSBs have either sustained or increased their RoE during the past decade.

This is in contrast to the decline in RoE for new banks, which was partly driven by frequent capital raising. Despite the lead in loan growth over PSBs, the RoEs of new banks may not diverge and may stay below that of a few PSBs during March 2011-March 2013,” Jha writes.

For state-owned lenders, the RoE performance has largely been a result of improving profitability.
“Our profitability has improved over the years and that helped us to maintain higher RoE. We hope to maintain this going forward,” said M D Mallya, chairman and managing director, Bank of Baroda.

Another reason is that Tier-I capital, which is the core measure of a bank’s financial strength from the regulator’s point of view, has been kept lower than for private sector banks. This has helped them achieve higher leverage.

“The profits of peer banks remain the same. If they have more equity than us, then the RoE can get depressed. In our case, the Tier-I capital is 8.47%, whereas the private peers have much more. The leverage is slightly higher in our case,” said B A Prabhakar, executive director, Bank of India.

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RBI against securitisation for profit booking

India's central bank Wednesday proposed higher capital requirements and capping the foreign holding below 50% in new private-sector banks as it considers issuing fresh banking licenses.

"A larger number of banks would foster greater competition, and thereby reduce costs, and improve the quality of service," the Reserve Bank of India said in a discussion paper.

India's banking sector is dominated by 27 state-run banks, and the RBI has historically been wary of granting licenses to the private sector due to apprehensions it may become difficult to control any rise in bad loans. The last domestic banking license was allotted to Yes Bank Ltd. in May 2004. India now has 22 private-sector banks.

The discussion paper comes about six months after Finance Minister Pranab Mukherjee, in his budget speech in February, said there was a need to expand the banking system and that the RBI was considering issuing new bank licenses.

The discussion paper proposes three different options for the minimum capital requirement for new banks with their pros and cons. The first one argues for a capital base above 3 billion rupees ($64.5 million), while the second is for a steeper 10 billion rupees. The third option is to have an initial minimum capital of 5 billion rupees, which can be increased to 10 billion rupees in five years.

"Taking into account the lapse of time since the last guidelines issued in January 2001 and inflation since then, there is a case to have the minimum capital requirement at more than 3 billion rupees," it said, seeking feedback on the discussion paper by Sept. 30.

The 2001 rules had specified the minimum capital at 2 billion rupees, which was to be raised to 3 billion rupees within three years of starting business.

The RBI said also that the total foreign shareholding through direct and institutional investments may be capped below 50% with a lock-in period of 10 years.

The paper proposes multiple options for minimum shareholding. That includes retaining the existing rule of founders initially bringing in at least 40% of capital with a lock-in clause of five years while the maximum stake of other shareholders capped at 10%.

The paper discusses allowing industrial and business houses to enter into the banking sector. It said that firms which have experience in financial services may be considered for such licenses. Another option may be allowing corporations to take over regional rural banks before being issued a bank license, it said.

Non-banking finance companies can also be given an option of converting to banks, but they must not be involved in real-estate activities, it said.

Financial services firms such as Bajaj Finserv Ltd. and IFCI Ltd., which may look at converting to bank, welcomed the move.

"Our net worth today is above 30 billion rupees. So there is every possibility of us meeting the capital adequacy criteria," IFCI Chief Executive Atul Kumar Rai told the ET Now television channel.

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45-yr-old woman foils robbery

A 45-year-old women, Rekha Jais, a resident of Mohade Layout in Wadi, foiled a robbery and helped nab two accused. Police said the woman had withdrawn cash Rs 25,000 from UCO Bank. She had kept the cash in her handkerchief. While she was walking towards her house, two miscreants came on a bike and tired to snatch the handkerchief.

However, she screamed and held on to the pillion rider's hand. Though the accused managed to free his hand, passers-by chased and nabbed them. Wadi police arrested Dhananjay Malode and Rashid Shaikh.

Bag containing ornaments stolen: A bag containing 6 tola (60gm) gold valuables was stolen by an unidentified miscreant from Midas Heights, a complex of private hospitals, at Central Bazar Road in Randaspeth on Wednesday evening.

Police said the complainant Hemant Patel and his wife had gone to the building for treatment of their four-year-old daughter. The incident took place when the wife left her purse in the waiting room and the family went inside for the check-up. After returning, the couple was shocked to see the purse missing.

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RBI set to introduce credit default swaps

The Reserve bank of India (RBI) on Wednesday proposed to
introduce credit default swaps, or CDS, in Indian markets, enabling
firms to hedge against any possible default by a bond issuer.

CDS is a derivative used to offset risks in debt markets. It allows
creditors to insure themselves against the possibility that a borrower
might default.

The draft guidelines were put up on RBI’s website late Wednesday. It
did not say when the instrument would come in play but invited public
comments to the report—titled “Draft Report of the Internal Group on
Introduction of Credit Default Swaps for Corporate Bonds”—till 4
October.

This is the third time RBI has come out with a draft report on CDS. The
first was in 2003 and second in 2007.

The introduction of CDS got stalled after a credit crunch hit the
global financial system in the wake of the collapse of US investment
bank Lehman Brothers Holdings Inc. in 2008.

CDS was blamed for the crisis and the near collapse of largest
insurance firm in the world, American International Group Inc.
Investors were trading CDS as stand-alone instruments and the trade
proliferated exponentially.

RBI has already introduced instruments such as repo, or repurchase, in
corporate bonds or interest rate futures, but CDS is possibly the most
sophisticated financial instrument the Indian market could be seeing.

Like all derivatives that reflect the value of an underlying
instrument, CDS reflects the value of a bond or a loan. If an investor
in a company’s bond wants to buy an insurance against a possible
default by the issuer, the investor could buy CDS for a price,
technically called CDS spread. The CDS seller, in turn, guarantees to
pay the buyer a predetermined amount if the bond issuer defaults on
repayment.

To avoid inherent risks, the draft report on CDS says users cannot
purchase CDS without having an underlying exposure and the protection
can be bought only to the extent (both in terms of quantum and tenure)
of such underlying risk.

“Since the users are envisaged to use the CDS only for hedging their
credit risks, the group recommended that the users shall not, at any
point of time, maintain naked CDS protection,” the draft report said.

This means CDS cannot be used as a pure trading instrument. “This
instrument ensures that banks take position on companies from an arms
length even when not directly lending to them. After some time, it
could be possible that international CDS of Indian companies could be
brought back to India for trading,” said a banker who did not want to
be identified.

To restrict users from holding naked CDS positions—CDS bought without
underlying exposure—physical delivery is mandated in case of credit
events, the report said, adding users are prohibited from selling CDS.
It also proposed “rigorous audit” to ensure that buyers of CDS have
underlying exposure, and to make “physical settlement” mandatory for
CDS buyers.

Market-makers of these instruments, which include commercial banks,
primary dealers and non-banking financial companies (NBFCs), insurance
companies and mutual funds, have other options to settle their
positions.

Users category would consist of commercial banks, primary dealers,
NBFCs, mutual funds, insurance companies, housing finance companies,
provident funds and listed corporations.

“All CDS trades shall have a RBI-regulated entity at least on one
side,” the draft said.

At the initial stage, related parties or banks and their subsidiaries
cannot enter into CDS transactions between themselves, since “it would
be difficult to have an objective and transparent price discovery
mechanism at the initial stages and, therefore, it would be difficult
to determine whether an ‘arms’ length relationship exists or not”.
Market-makers should have sound financial fundamentals, the report
said.

Market-makers cannot enter into CDS transactions without obtaining from
the counterparty a copy of a resolution passed by their boards
authorising it to transact in CDS.

RBI said a centralized CDS repository with reporting platform could be
set up for transactions in CDS and it may be made mandatory for all CDS
market-makers to report their trades on the platform within 30 minutes
from the deal time. A separate reporting platform for CDS transactions
would be developed and housed along with the reporting platform for
over the counter derivatives.

In the interim, clearing houses such as Clearing Corporation of India
Ltd can be given the responsibility on a non-guaranteed basis, it said

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Dhanalakshmi Bank in Talks With Partners to Set Up Asset Management Unit

Dhanalakshmi Bank Ltd., an Indian lender, is in talks with potential
partners to set up an asset management unit as it expands its fee-based
income business.

The bank, based in the southern state of Kerala, will own 20 percent of
the money manager, Managing Director Amitabh Chaturvedi said in an
interview in Mumbai today. The dominant partner will control 51
percent, while a third company will own 29 percent, Chaturvedi said
without identifying the companies. Dhanalakshmi expects to start the
venture by December, he said.

“Our preferred route will be to hold major management control with a
minority stake and discussions are in process,” Chaturvedi said. “The
optimism is coming from the opportunities we are anticipating in this
segment.”

Rising income levels in the world’s third-fastest growing major economy
are prompting companies including Dhanalakshmi, meaning goddess of
wealth in Sanskrit, to tap emerging opportunities. Indians may see a
10-fold increase in their incomes by 2025, according to a study by
McKinsey Co.

Dhanalakshmi gained 1.5 percent to 192.75 rupees in Mumbai. The stock
has advanced 32 percent this year while the benchmark Bombay Stock
Exchange’s Sensitive Index has risen 4.3 percent.

India’s mutual funds industry grew more than fivefold in as many years,
with assets under management increasing to 8.05 trillion rupees in May,
according to data compiled by Bloomberg. India’s 1.1 billion people,
almost half of whom are under 25 years old, are spending more on
electronics, clothes and cars.

Economic Recovery

Dhanalakshmi Bank in July raised funds from 42 select institutional
investors, including the local units of JPMorgan Chase Co. and HSBC
Plc to boost capital.

The lender aims to increase consumer lending to as much as 90 billion
rupees ($1.9 billion) by March from 50 billion rupees a year earlier,
Chaturvedi said.

“We won’t need to raise any further capital in this financial year
after the completion of the placement,” Chaturvedi said.

Bank lending in India, Asia’s third-largest economy, to companies and
individuals grew more than 21 percent in the year through July, the
fastest pace since January 2008, signaling rising demand. Reserve Bank
of India Governor Duvvuri Subbarao on July 27 said India’s economic
recovery is “firmly in place and strengthening.”

Dhanalakshmi plans to increase loans for vehicles and homes fivefold to
30 billion rupees, Chaturvedi said, as more Indians borrow to purchase
motorcycles and cars.

Tata Motors Ltd., an Indian car and truck maker, reported sales in July
climbed 41 percent, while motorcycle maker TVS Motor Co. said on Aug. 1
its sales grew 35 percent last month.

The central bank last week raised India’s growth forecast to 8.5
percent from 8 percent for the year ending March 31.

Regards
Anoop Agrawal aagrawal8@bloomberg.net.

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Banks not following RBI norms for opening no-frill accounts: FM

Government today admitted that certain banks were not
following guidelines on opening no frill, zero balance accounts in
rural areas and said efforts were being made to make banking facilities
available to remotest part of the country through various means.

Finance Minister Pranab Mukherjee said in Lok Sabha that certain banks
might not be observing guidelines of the Reserve Bank of India in
opening no-frill, zero balance accounts in rural areas.

Mukherjee said he has asked banks to listen to the political leadership
and the state governments in addressing the grievances of the people.

He was answering a supplementary question by Arjun Singh Meghwal (BJP)
on complaints that banks were denying zero balance facility to people
in rural areas.

His views were supported by several members across political parties.

He said the Chief Ministers have been requested to take meetings of
state level bankers. Similarly, officers have been directed to meet
bank officials at the district level so that the role of the middleman
is eliminated.

Stressing the need for a "vigilant mechanism", he said branch officers
were being made accountable.

Replying to another question, Minister of State for Finance Namo Narain
Meena ruled out special incentives to bank officials for deployment in
rural areas. "It is part of their normal work," he said.

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Six mths on, headless PSBs still wait for appointment

Many public sector banks are currently lying headless as the
government is yet to issue appointment letters even though selection
process is completed for these posts. Banks like Canara Bank,
Corporation Bank, UCO Bank and Punjab Sindh Bank are waiting for the
new CMDs to join as the government is yet to issue appointment letters.

The selection procedure for the bank chiefs was brought under scanner
by a few members of the parliament earlier this year. Questions were
raised regarding transparency of the selection process and allegations
were filed by a few MPs regarding ad hoc selection of the bank chiefs.

According to sources, although the process to select chiefs of 10 PSBs
had started six months back, the Cabinet secretary is yet to clear the
names for the approval of the appointment committee of Cabinet (ACC).
After getting cleared by the ACC, the file containing the proposed
names will reach Prime Minister’s office for the final clearance.
Earlier the ministry of finance had chosen S Raman, executive director,
Canara Bank as the CMD of Canara Bank , while RN Pradeep and Arun Kaul,
both of them EDs of Central Bank, have been selected for the
Corporation Bank and UCO Bank, respectively.

JM Garg, who retired as the CMD of Corporation Bank, has been appointed
as the chairman of SUUTI.

The post of Andhra Bank’s CMD will also fall vacant at the end of this
month as the present incumbent RS Reddy will complete his tenure as the
chief of the bank and R Ramachandran, ED of Indian Bank has already
been named as the new CMD of the Hyderabad-based bank. Two other posts-
CMDs of Bank of Maharashtra and Indian Overseas Bank— will also fall
vacant in a couple of months. The selection process for AS
Bhattacharya, ED of Indian Bank, and M Narendra, ED of Bank of India,
has already been complete, sources said.

Certain other bank chiefs like Allen CA Pareira of Bank of Maharashtra
is due for retirement on September 30, SA Bhatt of Indian Overseas Bank
on October 31, TY Prabhu of Oriental Bank of Commerce on December 31.

Meanwhile, State Bank of India will also see top level reshuffle soon
as one of its managing director SK Bhattacharya is due for retirement
in October this year.

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ICICI, HDFC Bank flouted recovery norms: FM

The government today said at least two private banks — ICICI Bank and
HDFC Bank — had repeatedly violated the guidelines of the Reserve Bank
of India (RBI) on engagement of recovery agents.

In response to a question in the Lok Sabha, Finance Minister Pranab
Mukherjee said 120 complaints had been received by the banking
ombudsman regarding violation of the norms during 2009-10.

He, however, did not say what action was being contemplated by the
government and only listed the action initiated by RBI, the Banking
Codes and Standards Board of India and the Banking Ombudsman Scheme,
which was amended in February 2009. The amendments allowed the
ombudsman to award a compensation of up to Rs 1 lakh in case of
complaints arising out of credit card operations of banks.
Besides, Mukherjee said banks had been asked to undertake period review
of the recovery mechanism and improve upon them. RBI had issued
detailed guidelines to banks on engagement and training of recovery
agents. Banks had been advised to ensure the recovery agents were
properly trained to handle cases with care and sensitivity,
particularly with respect to hours of calling, privacy of customer
information, etc.

Banks had been advised to ensure that the contracts with the recovery
agents did not induce adoption of uncivilised, unlawful and
questionable behaviour of recovery process, he said.

The finance minister also said the banks, as principals, being
responsible for actions of their agents, had been advised to ensure
that the agents engaged for recovery of the dues strictly adhere to the
guidelines and instructions issued by RBI, including the Banking Codes
and Standards Board of India.

RBI and the government were forced to act after banks were accused of
resorting to unfair means, including the use of musclemen, to recover
dues related to outstanding credit card bills and personal loans.

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RBI refuses deposit, Rs 93 cr left stranded

A van carrying Rs 92 crore in cash of three banks of Alwar
district of Rajasthan was tonight parked outside the Reserve Bank of
India office in Jaipur after the central bank refused to accept the
deposit which did not arrive on time.
The van carrying the wads of currency notes stacked in 90 boxes was
left stranded in front of RBI office gate and is surrounded by armed
policemen.
The RBI declined to accept the money brought from State Bank of India,
Punjab National Bank and Grameen Bank branches in Alwar as the vehicle
could not reach the RBI office by the deadline of 5 pm, police said.
RBI officers have been informed about the van being stranded in front
of the RBI office but no officer of the central bank has arrived till
late in the evening.
Meanwhile, the vehicle carrying the huge amount of cash was allowed to
park inside the RBI premises late tonight.
When contacted, GM, RBI, (Rajasthan) S N Panda told PTI that as the
matter has been referred to the RBI headquarters in Mumbai "I cannot
answer media queries now".
G N Pareek, secretary of RBI Association, said there appeared to be a
communication gap between the sender of the cash and RBI.
Meanwhile, the SP of East Ghoomariya said that in view of the
requirements of heightened security ahead of the Independence Day, the
police expressed its inability to provide protection to the van
carrying the cash at Gandhi Nagar police station.
RBI was asked to allow the van inside the premises and clear the
remittance during the night, the SP said.

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Five-year lock-in for infrastructure bonds

The Centre has cleared infrastructure bonds issued by certain
government and Reserve Bank of India (RBI)-approved entities.

They will be eligible for tax deduction under Section 80CCF up to a
maximum Rs 20,000.

The bonds will be issued by Life Insurance Corporation of India,
Industrial Finance Corporation of India, Infrastructure Development
Finance Company and non-banking finance companies classified as
infrastructure finance companies by the RBI.

This includes L&T Infrastructure Finance, which got RBI approval
earlier this week.

The proposal of creating funds to meet the long-term needs of
infrastructure development was mooted in the Budget 2011.
Finance minister Pranab Mukherjee had said in his budget speech last
February that, “To promote savings as well as to ensure their
utilisation for the thrust area of infrastructure, I propose to allow a
deduction of an additional amount of Rs 20,000 for investment in long-
term infrastructure bonds... This would be over and above the existing
limit of Rs.1 lakh on tax savings.”

The government aims to spend $500 billion on infrastructure in the five
years to end-March 2012, and is considering doubling that figure in the
five years after that.

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RBI pulls up banks on credit card transparency issue

The Reserve Bank of India has come down on banks and financial
institutions for the lack of transparency in credit card operations,
especially in charging interest rates and levying other fees on
customers.

Despite the issue of comprehensive instructions to banks, the RBI and the
Banking Ombudsmen continue to receive numerous complaints from credit
card holders regarding the credit card operations of the banks,
especially with regard to excessive finance charges, issuance of
unsolicited credit cards, unsolicited insurance policies and recovery of
premium charges, charging of annual fee in spite of being offered as
‘free’ cards, issuance of loans over phone, disputes over wrong billing,
settlement offers conveyed telephonically, non-settlement of insurance
claims after the demise of the card holder, offensive calls, difficulty
in accessing the credit card issuers and the poor response from the call
centres, the RBI said.

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Growth in PSB staff costs higher than private peers

Public sector banks' (PSBs) growth in staff cost vis-a-vis
private banks was significantly higher during 2009-10. However, the
staff cost spent declined for both private and public sector banks
during 2009-10 compared with the previous fiscal.

According to a study on 27 PSBs and 18 private banks, growth in staff
cost in the case of PSBs marginally dipped to 18.7% in 2009-10 from
21.6% a year-ago, whereas the same for private banks significantly
decreased to 10.5% from 25.8%.

Total staff cost of the PSBs increased to Rs 41,048 crore during 2009-
10 from Rs 28,432 crore in 2007-08 and Rs 34,577 crore in 2008-09.
Among the PSBs, Central Bank of India registered highest increase in
growth of staff cost, to 21.3% during the study period from 4.8%. This
can be explained from the bank's performance. While interest income of
the lender increased 15.4% during 2009-10, net profit rose 85.3% to Rs
1,058 crore.

While Andhra Bank's staff cost rose to 32.1% from 22.5%, the same for
Bank Of India went up to Rs 2,296 crore from Rs 1,657 crore in 2007-08.
In 2009-10, SBI had the highest staff cost of Rs 12,754 crore, followed
by PNB (Rs 3,121 crore) and Bank Of Baroda (Rs 2,350 crore).

The staff cost to interest income ratio of PSBs dropped from 13.44% in
2007-08 to 12.66% in 2008-09 and increased thereafter to 13.39% last
fiscal. A steady decline in the ratio was registered by nine PSBs,
including Bank Of Baroda, PNB,Uco Bank and United Bank of India.

In 2009-10, the increase in staff cost of private banks was lower
compared to the PSBs. Among the 18 private sector banks, six, namely
Axis Bank, Bank Of Rajasthan, Dhanlaxmi Bank, IndusInd Bank, J&K Bank
and Karur Vysya Bank showed more than 25% increase in staff costs.

At an aggregate level, the staff cost of the private banks rose from Rs
6,617 crore in 2007-08 to Rs 8,324 crore in 2008-09 and further to Rs
9,200 crore last fiscal. The staff cost of all the private sector
banks' increased in 2009-10, except for ICICI Bank and Kotak Mahindra
Bank, DCB and Catholic Bank.

The staff cost of ICICI Bank steadily decreased from Rs 2,079 crore in
2007-08 to Rs 1,972 crore in 2008-09 and further to Rs 1,926 crore in
2009-10.This can be explained from its performance. The interest income
of ICICI Bank decreased by 17.3% to Rs 25,707...

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Do Not fall Prey to Fictitious Offers of Funds Transfer: RBI Advisory

The Reserve Bank advised banks on May 26, 2010, to exercise due caution
and to be extra vigilant concerning the fictitious offers whereby bank
accounts are opened and/or transactions made in the accounts for
receiving payments styled as transaction charges, etc, towards the so-
called transfer of prize money/award money, etc. The Reserve Bank has
clarified that any person resident in India collecting and
effecting/remitting such payments directly /indirectly outside India is
liable to be proceeded against with, for contravention of the Foreign
Exchange Management Act, 1999 besides being liable for violation of
regulations relating to Know Your Customer (KYC) norms/Anti Money
Laundering (AML) standards.

The Reserve Bank has also re-iterated that the Foreign Exchange
Management Act, 1999 prohibits remittance in any form towards
participation in lottery schemes. These restrictions are also
applicable to remittances for participation in lottery like schemes
existing under different names, such as, money circulation scheme or
remittances for the purpose of securing prize money/awards, etc.

In its circular issued to banks, the Reserve Bank has stated that there
has been a spate of fictitious offers of cheap funds in recent times
from fraudsters. These came through letters, e-mails, mobile phones,
SMS, etc. Detailing the modalities of the fraudsters, the Reserve Bank
stated that communication was being sent on fake letterheads of the
Reserve Bank and purportedly signed by its top executives/senior
officials to targetted people. Many residents have been victims of such
teasing offers and have lost huge sums of money in the process. It was
further brought to the Reserve Bank’s notice that fraudsters sought
money from gullible people, under different heads, such as, processing
fees/ transaction fees/ tax clearance charges/ conversion charges,
clearing fees, etc. The fraudsters open multiple accounts in banks in
the name of individuals or proprietary concerns in different bank
branches for collecting transaction charges, etc. The fraudsters
persuade the victims to deposit certain amount in these accounts. The
amounts are withdrawn immediately leaving the victims in a quandary.

The Reserve Bank has alerted the public on several occasions in the
past about such fictitious schemes/offers through the print and the
electronic media. More such public education campaigns are also being
planned. The Reserve Bank has asked banks to bring the contents of the
circular to the notice of their constituents and customers concerned
and to give it wide publicity.

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Five held for cheating banks

Central Crime Branch (CCB) sleuths unearthed a Rs 20-crore cheating case, causing heavy losses to leading banks, by arresting five persons.


Anup Justin (37) of Anandnagar, L Sridhar (42) of Yelahanka New Town, Srinath (33) of Nagarbhavi, Prakash (51) of Basaveshwarnagar and Sudhakar (44) of Kurubarahalli are the arrested.

The suspects prepared fake documents pertaining to a site, availed loan, produced a Kannada film, Aakasha Gange and absconded after they realised they ran into rough weather, the police said.

They prepared fake documents during 2006-07 showing Yashodhamma sold a BDA site at BSK third stage measuring 63X40 to them. They also got it registered in their names at Basavanagudi sub-registrar office.

They produced the registered documents with SBI in Girinagar, Federal Bank in Rajajinagar, UCO Bank in Malleswaram, Vijaya Bank in Pulikeshinagar and HDFC Bank in Cubbon Park and availed loans to the tune of Rs 20 crore.

Real story

In reality, Muralidhar had bought the site for Rs 10 lakh on August 26, 2002 from M R Prema and got it registered at Basavanagudi sub-registrar’s office.

Prema was the general power of attorney holder of Santosh Kumari who was the BDA allottee in the case.

Allotment letter, possession certificate, khata, sale deed, tax paid receipt and other documents are in Santosh Kumari’s name.

The complaint Muralidhar had pledged all documents with Ashoknagar Cooperative Bank on March 2, 2006 and availed Rs 30 lakh loan. He started regularly paying the installment for the loan availed.

In September this year, he again applied for a loan to construct a house in the site. The bank officials asked him to produce encumbrance certificate and tax paid receipts of the site. He obtained the records from the Basavanagudi sub-registrar’s office on September 27, 2010.

But, the records stated that Yashodhamma had sold the site to four different persons. On finding this, Muralidhar lodged a complaint with the Girinagar police. The case was handed over to the CCB.

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Business correspondents to provide door step banking in Himachal

With the objective of providing banking facilities at the doorstep, banks in Himachal have identified larger villages where the banking facilities available are at quiet a distance and directions have been issued to appoint business correspondents for meeting the daily banking needs of the residents.

Bankers who met for a special meet of the State Level Bankers Committee (SLBC) here, also reviewed the progress made under the Annual Credit Plan (2010-11) during the first quarter ending June, 2010.

Convener of the SLBC, Ripan Murgai, general manager UCO bank that with the object of providing banking at the doorstep, 48 villages with a population of over 2000 have been identified in 8 districts where the available banking outlet is at a distance.

Banks servicing the area have been asked to appoint business correspondents by June 2011 for meeting the regular banking requirements in these villages, he said.

Murgai also disclosed that UCO bank had a plan to 40 ATMs by March, 2011 and would be opening 8 of them by Diwali itself.

Speaking about the total financial inclusion plan, Jasbir Singh, regional director Reserve Bank of India, said that it would take a while for biometric UID systems to be integrated with the banking process, but the banks in Himachal have been asked to continuously review the achievements made under total financial inclusion of having covered each household with a credit facility.

Where ever loans to more than one member of the family could be extended, it should be considered, he said.

For ensuring inclusive growth, use of appointing business correspondents for handling payments under the electronic benefit transfer system needs to done in unbanked areas or where banks are at a distance, he added.

While reviewing the Annual Credit Plan, the meet was informed that against a quarterly loan target of Rs 1300.98 Cr banks had extended fresh loans amounting to 1620.39 Cr in the first quarter.

At the same time deposits grew by 18 % over the previous year and have reached a level of Rs 34650.30 crore.

The credit deposit (CD) ratio stood at 71.45 %, a significant growth on account of flow of credit from outside the state in Industrial projects and SME sector, said Murgai.

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IIFCL to guarantee infra cos' bond issues under new offering

State-run India Infrastructure Finance Company (IIFCL) has said it will soon launch, in association with the ADB, a product to improve credit worthiness of infrastructure firms that seek to raise money through long-term bonds.

"We are expecting government approval for launching a credit enhancement product within the next 10 days," IIFCL Chairman and Managing Director S K Goel said here.

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VRL Logistics Files DRHP With SEBI

Hubli-based VRL Logistics Ltd has filed DRHP to raise fund through IPO and plans to issue 2.35 Cr shares which constitutes 25% of the fully diluted post-issue paid-up share capital.

The company will utilise the IPO proceeds to fund new vehicle acquisitions (Rs.140 Cr), to retire debt to UCO Bank and Union Bank of India (to both Rs.110 Cr) and for other general corporate purposes.

SBI Capital markets is the sole book running lead manager to the issue.

Transaction Reference: SEBI

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10 times you should NOT use your credit card

It's a world of plastic money. With the swipe of a card, you could shop and dine at the best places or even plan a holiday. But plastic money does not always bring cheer to all. Spenders are often burdened with high bills and accumulated charges.

Here InvestmentYogi explains 10 occasions when credit card usage should be restricted, to avoid the vicious circle of debt.

1. Cash advance for emergencies
Do not use your credit card for cash advances. It sure is convenient to withdraw that readily available cash through your credit card from an ATM or bank, but be aware; the interest charged is around 2.85 per cent per month. With interest being compounded monthly, the effective annual interest rate thus works out to a whopping 38 per cent. The interest on the advanced amount starts accumulating from day one. Also, a flat transaction charge of 2.5 to 3 per cent of the amount withdrawn is levied.

2. Credit card for every-day expenses
Avoid using your credit card as a substitute for cash. When making daily purchases like groceries, food or household requirements, it is better to use cash rather than your card, to prevent overspending.

The convenience of a card over cash does exist but it is equally important to stick to your monthly budget. Try using your debit card instead.

3. While travelling abroad
Restrict your card usage abroad to necessities, such as hotel bill settlement etc. Credit card transactions abroad carry a 3 per cent charge on foreign currency transactions. Further, any ATM cash withdrawal attracts approximately Rs 150 plus service tax, as charges.

International credit cards are billed at the rate of exchange prevailing on the date of purchase. Try opting for a prepaid currency card instead which could work out more cost effective, as the exchange rate applied is as on the date the card has been loaded.

4. Shopping for the sake of reward points
Credit card marketers generally lure buyers with reward points and great deals. Do not use your credit card for the sake of just accumulating reward points as most likely, you would end up with not just high reward points but also a large credit card bill to settle.

5. When you will be unable to pay-up before due date
Banks have an interest-free period of 20-50 days. Avoid using your card, if you are not capable of repaying within this period. For credit card defaults, banks charge a late payment fee between Rs 250 to Rs 600 and an interest of 2.5 per cent to 3 per cent on the outstanding amount, from the date of transaction and not from the due date.

In case, the minimum amount is paid, an interest of around 5 per cent is charged on the remaining outstanding balance.

6. When you will exceed your credit limit
Do not use your credit card if you are close to exceeding your credit limit. Credit limit is the maximum credit card spending allowed by banks. However, at their discretion, many banks permit spending over the original credit limit, at an additional charge of 2.5 per cent of the overdrawn amount.

By restricting spending to 40 per cent of credit limit, it is beneficial not only for one's overall credit score, but it also brings with it an easier bill to manage.

7. Online shopping at unsecure sites
Professional hackers have malicious intentions of decrypting passwords and credit card information. Do not use your credit card for online shopping if the website is not secure or is unknown.

Look for 'Verified by VeriSign' or similar signs to confirm safety of site before keying in sensitive credit card details. Secure sites are denoted with 'https' in the address instead of the usual 'http'.

8. Billing dates of multiple cards
If you have multiple credit cards, do not use the card closer to the billing date but instead spend on the card that still has days left for the billing date. This will ensure you receive a maximum interest free credit period, of around 20 days to pay the bill, after the statement has been generated.

9. Impulsive shopping during discount sales
Discount sales at shopping malls definitely are attractive. However, it pays to make wise decisions before making those purchases with your credit card. Do not spend beyond your repayment capacity and affordability. Differentiate between wants and needs, and exercise responsible usage of your card.

10. Living a borrowed lifestyle
Do not use your credit card to buy things that you can otherwise not afford. It pays to maintain a household budget and stick to it, when spending on your credit card. Piling on unaffordable purchases is one of the quickest ways to end up in long-term debt.

A penny saved is a penny earned
So goes the wise old saying. In today's times, credit cards have become a necessary evil. Various service agencies such as airlines and hotels seek credit cards for their transactions. One must thus learn to use them properly by maximising free interest periods, avoiding overspending and accumulating dues.

With a little discipline, one can avail the benefits of not carrying large amounts of cash in one's wallet and make credit cards a great convenience.

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