Liquidity situation improves as bank deposits grow 17%

Bank deposits grew by 17 per cent in the year to February 11, indicating an improved liquidity scenario for banks on the back of increased deposit rates. Loan off-take also remained robust, growing by 24 per cent on-year.

Banks mobilised around Rs 58,000 crore in the fortnight to February 11, data release by the Reserve Bank of India (RBI) show. In the previous fortnight, deposit accretion was around Rs 38,000 crore. RBI had projected deposit growth of 18 per cent for this financial year.

Slow pace of deposit growth, accompanied by the high demand for credit, had forced banks to raise their fixed deposit rates. In the third quarter, they raised deposit rates by around 250 basis points in two-three rounds, followed by another 50-100 basis points in January. The peak retail deposit rate for State Bank of India and ICICI Bank is 9.25 per cent, with the latter offering 10 per cent to senior citizens for 990-day deposits.

“Over the last month, close to one-third of deposit growth came from the retail segment, which was very robust,” said S Govindan, general manager, Union Bank of India. He further said this was because of banks’ focused efforts to attract more deposits by raising interest rates and introducing special offers.

This also indicates liquidity is coming back to the banking system, thereby easing some pressure. “We will have to see how the liquidity scenario improves to decide on a further rise in rates,” said a senior banker with a public sector bank.

The bulk deposit market has also picked up as banks tend to shore up and improve their deposit base. The rates on the three-month certificates of deposits (CDs) issued by banks are above 10 per cent.

On the other hand, with an annual rise of 24 per cent, credit continued to grow at a robust pace as on February 11, higher than RBI’s projection of 20 per cent for this financial year.

The gap in the the growth of credit and deposit, respectively, is more than what the central bank had projected. RBI had expressed concerns regarding the same as it may result in an asset-liability mismatch.

Source: Business Standard

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SEBI slaps Rs. 25 lakh fine on Central Bank of India

Market Regulator SEBI imposed a penalty of Rs. 25 lakh for alleged violation of various norms pertaining to debenture trustee.

The SEBI order said that Central Bank of India functioned as debenture trustee for IL&FS even when there was loan outstanding. The loan was given by the Central Bank of India.

As per the norms, no debenture trustee will not act for any issue if it has lent the loan and the loan is not fully repaid or is proposing to lend money to the body corporate.

A debenture trustee is an institution which is custodian of debentures issued by any corporate. It protects the rights of the debenture holders. For this the trustee charge fee.

A debenture trustee means a trustee of a trust deed for securing any issue of debentures of a body corporate.

The other allegation pertains to Tata Power non convertible debentures where the regulator also found violation of norms.

The Securities and Exchange Board of India conducted inspection of Central Bank of India from September 30, 2009 to October 9, 2009 during which the team from regulator examined records and documents pertaining to various issues handled by the bank from 1995 onwards.

Source: Financial Express

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Survey for banking licences to India Inc

Pitching for industrial houses wanting to set up banks, the Economic Survey said that they should be given banking licences to promote the goal of financial inclusion.

"As regards allowing industrial houses, business houses and NBFCs to promote banks, they may be allowed full banking license with provision for avoiding conflict of interest issues," the 2010-11 Survey tabled in Parliament by Finance Minister Pranab Mukherjee said.

Providing access to banking facility to all citizens is one of the main objectives of the inclusive development agenda, it said.

While providing banking access, it said, the issue of regulatory robustness for the banking sector should not be compromised.

"Therefore, the issue of providing eligibility norms for new entities to operate as banks is of paramount importance," it said.

Following announcement made by the Finance Minister in the last Budget, the Reserve Bank had brought out a discussion paper in August 2010 on giving out new banking licenses to business houses and non-banking finance companies, and regulations for the same to foster greater competition.

The RBI also sought to know "whether industrial and business houses could be allowed to promote banks." Also, if NBFCs should be allowed to convert into or promote banks. RBI has received comments on its discussion paper from all stakeholders and expected to come out with final guidelines in the coming months.

Various entities like Reliance Capital, IndiaBulls, Religare, IL&FS, IDFC, IFCI and Aditya Birla Financial Services are reported to be mulling entering the banking space.

Presently, India has 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks, and 371 district central co-operative banks.

Besides, the survey said, Macro-Finance Institutions (MFIs) and Non-Banking Finance Companies (NBFCs) should be considered giving licence for only basic banking functions. It said it is essential that the basic banking functions are clearly and objectively defined.

The survey also suggested variable capital requirement for banks based on the operation.

"Minimum capital requirement for banks should be graded. Having two types of licenses namely one for providing basic banking to fulfill the obligation of financial inclusion and the other for full banking encompassing all activities of a commercial bank could be considered," it said.

Source: Financial Express

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Bank of India becomes 1st Indian bank to offer trade settlement in Chinese yuan

BEIJING: Bank of India has become the first Indian bank to offer trade settlement facility between the rupee and the Chinese RMB from Hong Kong. This follows intense persuasion by the China Banking Regulatory Commission , which is trying to gain acceptance of the RMB as an international currency.

"We are the first Indian bank to offer real-time settlement facility in RMB to Indian exporters and importers. It will be save a lot of time because settlement in US dollars usually takes three working days," Arun Kumar Arora, BoI's chief executive in Hong Kong, said during a recent visit to meeting regulators in Beijing.

Indian buyers are at present making payments in US dollars, and they often have to convert rupee into the US currency for the purpose. The US dollars will no more be the intermediary currency as the BOI is offering direct settlement between the rupee and the Chinese money.

Chinese exporters want their money in the local currency, which is regarded as more stable compared to the US dollar. They are also in a position to have their way because Indian buyers do not have an alternative source of low-cost goods, sources said.

The process has been facilitated by a recent memorandum of understanding signed between the Reserve Bank of India and the CBRC to enhance banking relationship between the two giant neighbors.

BoI has opened a RMB with the Bank of China , which will provide real time settlement with buyers and sellers across all provinces of China. The move is part of a campaign by the Hong Kong Monetary Authority , which has persuaded 100 foreign banks to enter into arrangements with Chinese banks for trade settlement in RMB.

"We will sell RMB against the US dollar, and companies can buy as much as they want provided they have the right papers. For individuals, the limit of 20,000 RMB a day," Arora said. He expects settlements for an amount ranging between 200 million and 300 million in the first year.

Hong Kong is the only offshore market for the Chinese currency. The past year saw $400 billion of Chinese yuan being traded in Hong Kong against other currencies.

BoI is also awaiting permission from Chinese regulators to establish a branch in Beijing, where it has been running a representative office for the past four years. It has recently signed an MoU with the CBRC on converting the representative office into a branch. The bank has been running a branch in the boom city of Shenzhen for the past four years. The Shenzhen branch will also be involved in providing additional support for the trade settlement business.

Source: EconomicTimes

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Rail Budget 2011: No hike in train fares

For the third successive year, the Railway Budget for 2011-12 spared passengers of any increase in fares and proposed no hike in freight rates while introducing 56 new trains, including nine non-stop Duronto trains and three Shatabdis.

Presenting her third budget in UPA-II in the Lok Sabha, Railway Minister Mamata Banerjee announced a slew of concessions including reducing the eligibility age of senior women citizens from 60 to 58 years and the fare concession for men above 60 from 30 to 40 per cent.

Apparently with an eye on the coming Assembly polls in West Bengal, where she is projected as the chief ministerial candidate of the Congress-Trinamool combine, she came out with a number of projects for the state, including a metro coach factory in Singur, Rail Industrial Park in Nandigram, an integrated suburban network for Kolkata and 34 new services for the Kolkata metro.

Her announcements for the state evoked protests from members including those from Bihar, UP and Kerala, but she appealed to them to be patient for her other announcements.

The minister also extended the concession for physically-challenged people and Kirti and Shaurya Chakra awardees to travel in Rajdhani and Shatabdi trains, besides extending facility of card passes to parents of unmarried posthumous Paramvir Chakra and Ashok Chakra gallantry award winners.

She also proposed to induct 16,000 ex-servicemen in the railways by March.

The budget proposes the highest-ever plan outlay of Rs. 57,630 crore for 2011-12. The gross budgetary support has been projected at Rs. 20,000 crore, diesel cess Rs. 1,041 crore, internal resources Rs. 14,219 crore and market borrowing at Rs. 20,954 crore.

The budget estimates for 2011-12 projects a freight loading of 993 million tonnes and a passenger growth of 6.4 per cent.

Gross traffic receipts has been estimated at Rs. 1,06,239 crore, exceeding the Rs. one lakh crore mark for the first time, despite pressure on finances on account of Pay Commission payout.

Ordinary working expenses have been assessed at Rs. 73,650 crore and appropriation to depreciation reserve fund pegged at Rs. 7,000 crore.

Provision of Rs. 6,735 crore has been made for dividend payment and the excess for Railways for the new fiscal has been projected at Rs. 5,258 crore, with an operating ratio of 98.1 per cent.

Following are the highlights of Rail Budget, 2011.

* To meet the demand for coaches, rail based industries to be set up under Vision 2020.

* First coach from the new rail factory at Rae Bareli to roll out in next three months.

* Railways to set up a bridge factory in Jammu and Kashmir considering need for large number of bridges on railway projects in the state.

* Proposal to set up metro coach factory near Singur in West Bengal.

* Track-machine industry to be set up in Uluberia in West Bengal.

* A 700 MW gas based power plant to be set up at Thakurli in Maharashtra.

* Anti-collision devices to be commissioned in three railway zones including South and South Central soon.

* 1,500 trains cancelled, 3,500 re-scheduled last year due to protests, other reasons.

* States showing good performance in rail movement to be provided with two new trains and two new projects.

* 'Go India' smart card ticket project to be launched this year.

* Restructuring of all cadres being undertaken in the Railways.

* 16,000 ex-servicemen to be inducted by March in the Railways for the first time.

* Enthused by the high number of medals in international sports competitions won by Railways, a sports cadre will be set up in the department.

* Railway earnings set to exceed the Rs. one lakh crore mark.

* Developing an integrated suburban rail network in large cities like Mumbai, Chennai, Hyderabad and Kolkata.

* Physically challenged people can enjoy concession in Rajdhani, Shatabdi trains.

* Eligibility age for senior citizen concessions reduced to 58 from 60 for travel by rail.

* 47 additional services on Mumbai suburban section.

* Nine additional services for Chennai suburban service.

Source: Financial Express

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SBI won't accept bulk deposits for a while

MUMBAI: The country's largest lender, the State Bank of India (SBI), will temporarily step out of the bulk deposits market as it has enough funds to tide over tight liquidity in the money market.

The decision closely follows a mobilisation of 3,900 crore by SBI from retail investors, who invested in bonds launched three days ago. The total subscription for the bond issue crossed 6,000 crore on the second day with financial institutions, mutual funds, corporates and high net worth individuals putting in the rest.

Money market dealers said returns on bulk deposits would fall with SBI staying out of the market. Banks have been paying around 9.80-10% on one-year bulk deposits. "The bank appears to be comfortable with its resources position and may lie low till March," said a senior banker. Bulk deposits constitute 10% of SBI's total deposits.

The bank has begun attracting substantial funds after it raised rates to 9.25% for deposits of 1,000 days and 555 days. Besides, it can accept as much as 10,000-crore retail subscription for the ongoing bond programme.

What has also influenced the decision is the slow loan growth this quarter. SBI chairman OP Bhatt has said in January that the bank's credit growth could be 18%, lower than 20-22% as projected for the present financial year.

SBI officials said a large portion of the bank's old high-cost deposits have matured while the balance would mature by December.

Source: EconomicTimes

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Axis Bank launches income tax payment facility at ATMs

MUMBAI: Private sector Axis Bank today announced the launch of the facility to pay income tax at ATMs.

This facility, initially, will be available at select ATMs in the major centres and will shortly be made available at all 5,600-plus ATMs across the country, the bank said in a press release issued here.

Axis Bank customers holding ATM/debit cards can use this facility to pay income tax/other direct taxes using Axis Bank ATMs .

The Central Board of Direct Taxes (CBDT), as a part of its e-Governance initiative to provide more convenience to taxpayers, had advised authorised banks to roll-out the facility to pay tax using ATMs. Axis Bank is the first private sector bank to make this facility available for its large tax-paying customer base.

Axis Bank's Executive Director-Corporate Banking, V Srinivasan, said, "there is a vast segment of retail tax- payers who do not have internet-enabled bank accounts and are thus unable to pay income tax on-line. Axis Bank with its vast ATM network will now be able to cater to these retail assesses who account for a substantial portion of all income tax payers."

This provision will ensure immediate credit of taxes paid to the Government account and is expected to not only improve compliance on part of taxpayer but also substantially reduce paper handling of challans by the banks.

The facility will not only make income tax payment easier and simpler for the individual tax payers but also provide them the convenience of making the payment 24-hours a day--365 days a year, the release said.

Source: EconomicTimes

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Deutsche Bank top recruiter at IIM-A with Rs 1.5-crore offer

AHMEDABAD: Deutsche Bank is the top paymaster at this year’s campus recruitment at the Indian Institute of Management, Ahmedabad, keeping a record it set in 2010.

The investment banking unit will pay the equivalent of Rs 1.3-1.5 crore ($285,000-330,000) as annual salary to a student it is hiring for its London office , campus sources said. The sum includes an annual bonus as well a variable that will depend on the individual’s performance and market conditions.

Last year, Deutsche Bank was reputed to have topped the pay charts with a package of Rs 1.44 crore, but this was hotly contested by IIM-A, which described the media reports as incorrect and exaggerated.

Other foreign banks and financial firms such as Morgan Stanley , UBS and Nomura are said to be paying Rs 1-1.3 crore, with pay packages at overseas locations easily topping Rs 1 crore.

“Most of the investment banks offer identical packages to IIMs. But at times, Ahmedabad graduates command a higher package because they have better industry experience,” said an IIM-A alumnus who is now a financial services adviser.

B-schools do not disclose the salaries their students are offered during campus placement, but IIM-A, a 50-year institute regarded as one of the finest in the world, will break the tradition this year. It plans to reveal the highest, lowest and average salary figures at the end of the placement process. IIM-A says it wants a standard method for pay calculation across B-schools and end attempts by institutes to show inflated salary packages.

Salaries offered by investment banks typically consist of two portions — a base salary and bonus. An ex-IIM-A student said the bonus could be equal to the base salary. So, if the base salary is Rs 70 lakh, the total package could be around Rs 1.4 crore in a good year.

Placements at IIM-A have entered the third week and so far close to 60 companies have hired nearly half of the 314-strong batch. Among those who have made job offers are The Boston Consulting Group, McKinsey, JPMorgan, Unilever, Procter & Gamble, EXL Services and Reliance Industries .

Other than these, pre-placement offers have been made to those who interned with the companies. Placements at IIM, Calcutta, will start on March 3 and at IIM, Bangalore, from March 5.

Students who offered to have themselves hired on campus described this year as one of the best, with companies offering salaries up to 20% higher than last year.

As part of efforts towards more transparency, IIM-A will announce segregated fixed and variable portions of salary and also appoint auditors to demystify pay packages. This will also help students understand their salaries better and restrict competing B-schools from quoting exaggerated figures.

IIM-A, which started its placement process on February 12, has started a ‘cohort-based’ system where companies from similar sectors are grouped together to provide a level playing field to recruiters. Further, cohorts from diverse sectors offering similar roles and opportunities come under one cluster. The first cluster consisted of four cohorts — international investment banks, global strategy consulting firms, global niche consulting providers and private equity/venture capital firms.

The Boston Consulting Group has made 11 offers and McKinsey 10, including pre-placement offers. US-based IT company EXL and consumer products firm P&G have hired 10 graduates each. In 2009, after the global financial meltdown, investment banks stayed away from B-school campuses while nationalised banks hired aggressively. The average domestic salary at IIM-A declined to Rs 12.17 lakh from Rs 17.85 lakh a year ago. The average pay package for an overseas posting fell to Rs 41.5 lakh from Rs 60 lakh.

Last year, the average domestic salary for an IIM-A student was Rs 14.94 lakh, falling below Rs 15.32 lakh at IIM-C.

In 2007, 47% of the jobs went to the finance sector, but only 27% last year. This year, the sector is expected to perform better.

“Aggressive hiring by investment banks is a reflection of the world economy. India is among the fastest-growing markets and investment banks want to establish their strong presence in the country.

Also, the kind of talent we get from premier B-schools in India is the best in the world and encourages aggressive hiring,” said a senior Citibank official.

Source: EconomicTimes

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Indian Overseas Bank looks for opening in Africa

NEW DELHI: Indian Overseas Bank is eyeing entry into Africa and convert its representative offices in Dubai and China into branches as part of its efforts to expand foreign operations.

"We are looking for some openings in Africa ... we have just initiated the process," Indian Overseas Bank CMD Mr. M Narendra said.

The bank is also looking at converting its representative offices in Guangzhou, China, and Dubai to full service branches.

The bank would seek regulatory approval from the regulator concerned for the same, added Narendra.

The Chennai-based lender has six full-fledged overseas branches -- two in Hong Kong and one each in South Korea, Thialand, Sri Lanka and Singapore -- along with two remittance centre in Singapore at Boon Lay and Serangoon.

The bank plans to raise up to $ 500 million (about Rs 2,250 crore) from the overseas market, in next two months, to fund foreign business.

IOB has approved USD 1 billion medium term note ( MTN )) programme.

"The first tranche of up to $ 500 million could happen in April or may be in March if our work is over," Narendra said.

The bank reported over two-fold growth in net profit at Rs 231.66 crore, for the third quarter ended December 31, 2010, as against Rs 101.70 crore in the same of quarter previous year.

While, for the period under review, total income grew to Rs 3,452.86 crore from Rs 2,828.65 crore.

Total business grew to Rs 2,25,191 crore at the end of Dec 2010 from Rs 1,85,656 crore in the year ago period

By-Economic Times

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Stop re-circulation of soiled notes: RBI to banks

Press Trust of India / Sambalpur (orissa) February 24, 2011, 20:54 IST

Soiled notes may soon be a thing of past as the Reserve Bank of India (RBI) has asked all bank branches handling large amounts of currency to put in place note-sorting machines by the end of next month with a view to halting re-circulation of unfit currency notes.

"The Reserve Bank is committed to a 'clean note' policy. RBI exchanges soiled notes for clean ones, and mutilated notes for new ones subject to certain conditions," central bank Governor D Subbarao said at the Convocation function of Sambalpur University here.

"In pursuit of our clean note policy and to check counterfeiting, we also prescribed that by March 31, 2011, all bank branches with cash receipts of over Rs 50 lakh per day be equipped with a note sorting machine so that every high denomination currency note is checked for fitness and genuineness before being put back in circulation," he said.

Furthermore, he said, the RBI has instructed banks to ensure that the notes that they issue through their ATMs are also pre-checked for genuineness and cleanliness.

He pointed out that cost and longevity are important dimensions of currency management.

"We are a large cash economy; in fact, we are the second largest producer and consumer of currency in the world, next only to China. Producing such a large amount of currency is expensive," he said.

Talking about introduction of plastic notes, Subbarao said, one option for economizing is replacing paper currency with plastic one as some countries such as Singapore and Australia have already done.

"We are planning to try this out on a pilot basis, starting with a plastic note in the Rs 10 denomination, which we will distribute out of five of our regional offices in the country including our Bhubaneswar office," he said.

During the pilot phase, RBI needs to study not only the relative costs but also the carbon footprint associated with the recycling and disposal of plastic notes vis-à-vis paper notes.

"If the pilot proves successful, we will mainstream the use of plastic currency," he said.

By far the most important facet of currency management is building in security features to prevent counterfeiting. People should be aware of these security features so that they can tell a forged note from a genuine one, he said.

This is the motivation for the awareness campaign that the RBI has launched in the print and electronic media to educate people on the security features, he said.

Source: Business Standard

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Vijaya Bank to raise Rs 368 cr via preferential allotment

Vijaya Bank is planning to raise Rs 368 crore through preferential allotment of equity shares.

In a statement to Bombay Stock Exchange, the bank said that its Board of Directors has resolved that an extraordinary general meeting will be held on March 22 for their approval for preferential allotment of equity shares at Rs 10 each at Rs 84 per share to the Government of India for Rs 368 crore.

Earlier this month, the ministry of finance has given its nod to subscribe to 3.91 crore additional equity capital of the bank.


Source: Business Standard

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Dhanlaxmi Bank ups deposit rates by up to 3%

Press Trust of India / Mumbai February 24, 2011, 14:51 IST

South-based Dhanlaxmi Bank today increased interest rates on term deposits by up to 3% depending on maturities.

The maximum increase of 3% has been made for short-term deposits having a maturity of 46 to 90 days, where depositors will earn an interest of 9% per annum, the bank said in a release here.

"The hike in interest rates is in line with market trends and the emerging market interest rate scenario," the bank's head of Branch Banking and NRI Business, Salil Datar, was quoted as saying in the release.

For the 91-179 days term, depositors will earn an interest of 8.75% per annum, up by up to 1.50%, it added.

Source: Business Standard

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SBI withdraws from CD market

Banks heave a sign of relief as short-term rates will likely fall

State Bank of India (SBI) — the nation’s largest bank — has decided to withdraw from the certificate of deposit (CD) market, a move that has left most market players relieved as they were paying more than 10 per cent for even three-month CDs. Short-term rates, which have moved up 200 bps in the last four months, are now expected to come down.

According to sources, SBI communicated to its dealers on Thursday that it is withdrawing from the CD market and will not offer any special rates (above the card rate) on bulk deposits. Banking industry sources said the decision was taken to improve yields. The fact that the bank had surplus liquidity of Rs 40,000 crore with a comfortable statutory liquidity ratio, nearly three per cent more than mandated, triggered the move, market participants said.

Liquidity managers were expecting the rates to harden further as banks would rush for funds to shore up their balance sheets towards the end of the financial year. After SBI’s decision, other players are breathing easy as they expect the rates to come down in the near future. On Thursday, the rates on most of the three-month CDs were 10.10 per cent while one-year CDs were issued at 10.15 per cent.

“If we take deposits at 10 per cent, lending can happen only at 12 per cent after factoring in the cash reserve ratio and statutory liquidity ratio costs. It is difficult to find buyers for loans at that rate,” said a treasury official of another public sector bank. Following the liquidity crunch during the latter half of 2010, banks have been raising deposit rates to support a robust loan growth.

Interestingly, SBI was there in the CD market but was not a regular issuer. The bank had been active in the CD market since the last quarter before CD rates started rising.

“SBI is not a regular issuer, it raised Rs 850 crore on January 31 for three months at 9.45 per cent and before that in November,” said a dealer with a brokerage firm. According to dealers, quotes from SBI had resulted in rates moving north. Even though SBI was not a regular issuer, most of its associate banks were regular issuers of CDs in the last few months.

“When SBI quotes CDs at 9.85 per cent, for example, other banks desperate for funds are left with no option but to offer higher rates,” said a dealer with a public sector bank.

Another factor which helped SBI take the decision was the overwhelming response to the second tranche of the bank’s retail bond issue this week. The bank collected two-three times more than the notified amount of Rs 2,000 crore.

Source: Business Standard

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HDFC Bank raises key lending rate by 45 bps

Reuters / Mumbai February 24, 2011, 10:02 IST

HDFC Bank Ltd, the country's third-largest lender, has raised its key lending rate, or the base rate, by 45 basis points with effect from Thursday.

The bank's new base rate will be at 8.20% per annum, HDFC Bank said in a statement on its website late on Wednesday.

ICICI Bank, India's No. 2 lender, said on Wednesday the bank would raise its base rate by 50 basis points to 8.75% per annum with effect from Thursday.

The Reserve Bank of India has raised rates seven times since mid-March last year to rein in high inflation.

Source: Business Standard

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SBI plans merger of 5 associate banks

Country's largest lender State Bank of India (SBI) plans consolidation of remaining 5 associate banks with itself in the next 12-18 months.

"... the bank (SBI) envisages consolidation of all subsidiary banks with SBI within a period of 12 to 18 months," Finance Ministry informed the Standing Committee on Finance.

This was in response to a query on the stance of the government on merging the subsidiaries with SBI raised by the Parliamentary panel headed by former Finance Minister Yashwant Sinha.

In the submission to the panel, SBI Chairman O P Bhatt said "there are 5 banks remaining. We have representations from various associations, leaders etc from these 5 banks which want these banks also to be merged with the State Bank of India simply because it is primarily good for the employees in multiple ways".

In the last 2 years, SBI merged two associates namely State Bank of Saurashtra and State Bank of Indore. State Bank of Saurashtra amalgamation took place in August 2008 while State Bank of Indore merged with the parent last year.

Elaborating on the merger, the Ministry said, preparations towards consolidation of the banking subsidiaries within the State Bank Group has been systematically planned.

This is to be done through bringing all associates banks and SBI under the same state-of-art core banking technology platform. All the associate banks also have products, services and process broadly similar to that of SBI.

The consolidation is seen as the next logical step so as to bring in economies of scale, reduce administrative overheads, re-deploy and channelise trained manpower to business development, the ministry told the panel.

It said in this process, it will also reduce avoidable competition from different arms of the same group engaged in the same activity in the same segments and geography.

"The consolidation is aimed at making the State Bank Group a stronger and more resilient organisation," the Ministry said.

Source: Financial Express

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Kotak Bank opens 300th branch, plans 500 by 2012

Press Trust of India / Bangalore February 23, 2011, 19:19 IST

Private sector lender Kotak Mahindra Bank today launched its' 300th branch and announced plans to reach the 500th branch mark by 2012 as part of its growth strategy to "deepen and broaden its network".

The launch of the branch comes at a time when the Kotak Group is celebrating its 25th anniversary and there are plans to keep the momentum going by reaching the 500th branch mark by 2012, said bank's Executive Vice-Chairman and Managing Director Uday Kotak.

The bank now has 14 branches in Bangalore and overall 15 outlets in Karnataka. It also plans to add new branches in Mangalore, Hubli and Belgaum by next month, according to Uday Kotak.

The bank is also looking at expanding its current 750 ATMs in the country to 1,000 plus in the next 12 to 18 months as part of its retail growth strategy.

It plans to get broader and deeper within the country and to be provide thought leadership in providing solutions, Kotak said.

Further on tie-ups and mergers and acquisitions, he said, "Inorganic growth also interests us. It is on our radar."

Though nothing had crystallised so far, he said, the three areas of its interest were banking, brokerage and asset management.

At present, the bank employs 20,000 people and expects to add on an average another 2,000 this year.

"We are believers of the domestic India story and we believe we will continue to grow," he said.

Tracing the 25 years of the group's existence, Uday Kotak said the group had been a product of India's joruney down the reform process.

Going forward, it hopes to serve smaller customers through retail branch expansion. However, he also said that going forward, technology could also change the way these customers will be served and hoped to leverage on it.

The bank, he said, had a high capital adequacy ratio. "We have enough petrol in the engine to significantly able us to invest, lend and grow without being short on capital."

The bank plans to double its NRI base, Kotak Mahindra Group Head (Retail Liabilities & Branch Banking) K V S Manian said.

There are lot of NRIs keen to bring money to India with Indian markets looking more attractive. These customers are not necessarily looking at being serviced from branch but tapping into the internet platform. About 17 to 18% of the bank's deposit came from the sector, he said.

"The overseas approach was to focus on Indian products and Indian customers," Kotak said.

Source: Business Standard

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ICICI, HDFC Bank hike lending rates by up to 50 bps

Press Trust of India / Mumbai February 23, 2011, 19:38 IST

Country's two leading private sector lenders ICICI Bank and HDFC Bank today increased their lending rates by up to 50 basis points (bps), making home, auto and commercial loans dearer.

ICICI Bank also increased deposit rates by up to 50 bps across various maturities.

In a release, ICICI Bank said it has hiked base rate, the minimum lending rate, by 50 bps or 0.5% to 8.25%, effective from tomorrow. For existing customers, it increased the benchmark prime lending rate by a similar percentage.

HDFC Bank raised base rate by 45 basis points to 8.20%, effective tomorrow, sources said.

While higher deposit rates would provide better returns to savers, rise in lending rates would increase the EMIs for auto and home loan borrowers. Besides, corporate loans too will also become expensive.

ICICI Bank said the existing fixed rate customers will not be impacted by the increase and their contracted rates will remain unchanged.

The rate hike by the two follows a similar move by others, including the largest bank SBI, following tightening of monetary policy by the Reserve Bank of India (RBI).

SBI had revised its base rate by 25 bps to 8.25% and BPLR by an equal quantum to 13%. Besides, the bank had also increased fixed deposit rates on two select maturities by 25 bps.

So far, over a dozen banks, including Punjab National Bank, Bank of Baroda, Union Bank and Indian Overseas Bank had revised interest rates since the third quarterly review of the monetary policy by the RBI.

To combat rising inflation, RBI has raised short-term lending and borrowing rates (repo and reverse repo) seven successive times since April, 2010 to 6.5% and 5.5%, respectively.

Source: Business Standard

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Rates on 90-day deposits touch 26-month high

MUMBAI: Interest rates on 90-day certificate of deposits touched a 26-month high as banks were seen rushing to build up their deposit base, which is very common towards the end of a financial year. Certificate of deposits are shortterm deposits raised by banks from fellow banks and such deposits are not offered to individual depositors. Unlike the regular term deposit , these can be traded in the secondary market by banks.

Short-term rates have continued their upwards bias after the Reserve Bank of India raised key policy rates by 25 basis points (one basis point is one-hundredth of a percentage point) during its quarterly review of monetary policy in January. In what could be seen as signs of tight liquidity conditions, banks have borrowed Rs 91,510 crore from the Reserve Bank of India against government securities on the very first day of the reporting fortnight , even as call rates closed at 6.9-7 % in the day.

“Banks for the purpose of large balance sheet size are turning to mobilising certificate of deposits , or CDs, and because of that, rates have inched up. Moreover, liquidity continues to remain tight as revealed by higher repo figures (banks’ borrowing from the repo window from RBI),” said, a treasury official from an old private bank, requesting anonymity. Yields on government securities also cooled off as banks bought securities to build their liabilities . Also, lower IIP numbers coupled with wholesale price inflation cooling off a bit, acting in the favour of the bond markets.

“At this time of the year, everyone is interested in building their balance sheet sizes. To meet their SLR requirements, banks are buying off these bonds, which they have to, in order to build their balance sheets and show the liability figures,” said, Ramesh Kshirsagar, head of treasury, Bank of Maharashtra . “Markets are going by the assumption that lower IIP numbers will make it difficult for RBI to raise interest rates in the near term. Chances of a rate hike might be remote,” he added.

Another factor that could explain hardening of interest rates is the high inflation number for January. India's annual inflation based on wholesale prices eased marginally to 8.23% in January, staying well above the RBI’s target of 7%. While the WPI inflation in January , at 8.23%, is lower than the previous month’s inflation of 8.43%, the decrease is too small to be comfortable, finance minister Pranab Mukherjee said on Monday.

The IIP growth for the month of December 2010 was noted at 1.6% (year-on-year ) while markets had expected it to be 2%.The current month’s reading on YoY growth is the lowest since April 2009. “However, this low number is purely a statistical phenomenon, as December 2009 had clocked a high growth rate of 18.0%. Moreover , the month-on-month growth rate for current month is fairly strong at 10.3%,” said an IDBI Gilts report.

By-Economic Times

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UCO SUNSHINE RECURRING DEPOSIT SCHEME with Complimentary Personal Accidental Death Insurance Cover

UCO Bank has introduced UCO Sunshine Recurring Deposit Scheme with Complimentary Personal Accidental Death Insurance Cover.

Deposit Period : 12/24/36/48/60 months

Amount of deposit : Minimum Monthly Installment: Rs. 500/- & In Multiples of Rs.500/-

Maximum Monthly Installment: Rs. 1 Lac 

Rate of Interest: As per Normal Term Deposit Scheme (At present 9% from 18.2.2011)

Foreclosure Interest: Installments between 1 and up to 6 months (Savings Bank Rate)

: Above 6 months (Foreclosure rate as per Normal Term Deposit with penalty clause)

Senior Citizen : Additional (0.50) %

Staff : Additional (1.00) %

Ex- Staff : Additional (1.00) %

Senior Citizen (Ex-Staff) : Additional (1.25) %

Senior Citizen (Ex-Staff): Additional (1.50) % (36 months & above and upto 60mths)

SPECIAL FEATURES embedded in UCO SUNSHINE scheme:

1) Complimentary Personal Accidental Death Insurance Cover

2) No Intersol Charges

3) No Standing Instruction Charges

4) Free transfer of A/cs between network of CBS branches

5) No Tax deducted on interest earned

PRE-MATURE CLOSURE:

In case of pre-mature closure of UCO Sunshine Recurring Deposit a/cs within 12 months of its opening an additional service charge of Rs 250/- will be collected from the account holder.

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