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Saturday, April 9, 2011

SBI aims for top slot in retail space

Mumbai: State Bank of India (SBI) aims to become the market leader in the retail lending space chairman Pratip Chaudhuri said on Friday. “We were never the leaders in the retail segment but have been catapulted to among the top players and would like to consolidate our position to become bigger,” Chaudhuri said at his first press conference after taking over from the erstwhile chairman OP Bhatt, on Thursday evening.

The chairman hopes to retain SBI’s status as the biggest corporate lender which is evident from the fact that the corporate banking portfolio will now be supervised by two deputy managing directors.

Chaudhuri observed that there would be no significant ‘shifting of gears’ and that bank would ‘consolidate our growth both in the corporate and retail spaces.

“Our loan growth in 2010-11 has been in line with that of the industry or slightly lower and we need to regain our leadership,” the chairman said adding that the bank’s retail network would continue to be expanded.

The chairman hinted that the bank’s special home loan schemes may be modified since the higher provisioning norms for such assets of 2%, as prescribed by the regulator, were beginning to hurt.

“We are continuing with the schemes for the present. At the same time, we are in dialogue with the Reserve Bank of India and will try to address the concerns of the regulator, deliver value to the customer and also make sure the provisioning is affordable,” Chaudhuri said.

The SBI chairman also observed that the bank needed to ensure that non-performing assets are brought down to appropriate levels. “We can’t say there are no challenges and we need to focus on some of the stress areas and make sure that our npas are better than the industry’s” he said.

The bank has decided to take fresh exposure to the telecom sector to the extent of Rs 1000 crore, the chairman said saying it was a sunrise sector. On allowing large industrial houses in the banking space, Chaudhuri said the bank welcomed competition. "We are not in favour of entry barriers, we have lived with competition. Let there be as many players."

Chaudhuri was confident that the government would give the bank the go ahead for the proposed rights issue. “The government is convinced of the bank’s need for capital but there have been several other banks whose requirements needed to be met.

We believe the amount raised needs to be substantial and we believe SBI will receive its adequate share,” the chairman asserted.

The chairman observed that the bank would gradually be replacing its high cost deposits with low cost deposits and justified the issue of retail bonds at high coupon rates saying the bank had not overpaid.

“The bonds also qualify as capital,” he explained adding that a premium of 400 basis points or 25 basis points annualised.“We would have been disappointed if they had been trading at a discount,” he said saying the retail issue had proved to be a game changer for the bond market.

Hemant Contractor, managing director, SBI observed that the bank would attempt to grow its top line and bring down interest costs so as to improve its margins. He said the bank would like to increase the tenor of the loans because they resulted in better yields.

State Bank of India chairman said the merger of the associate banks with State Bank would continue pointing out that the consolidation was creating both value and synergies. Chaudhuri said SBI would prefer to set up a subsidiary in a foreign country rather than overpay for acquisitions.

Source: Financial Express
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Bank auditors to detail financial impact of pension & gratuity liability of PSBs

NEW DELHI: The accounting regulator has asked bank auditors to detail the financial impact of the pension and gratuity liability of public sector banks in their audit of 2010-11 accounts.

The move will provide clarity on the contingent liabilities of banks, which have risen sharply after the government hiked the gratuity limit and changed pension rules. The Reserve Bank of India (RBI) has allowed banks to adjust the liability over five years.

The accounting regulator has issued guidelines for treating these liabilities, but said the outgo needs to be quantified even if it is spread over five years. "Highlighting the overall impact will help in properly assessing the financial strength of a bank in the long-term," said an official at the Institute of Chartered Accountants of India (ICAI), requesting anonymity.

In May last year, the government amended the Gratuity Act to raise the limit on gratuity an employee would receive on retirement to 10 lakh from 3.5 lakh. It also re-opened the pension option for existing employees who had not opted for it earlier and had instead decided in favour of a lump sum on retirement.

State-run banks had estimated the outgo on pension to be around 4,000 crore and had sought relief from the RBI and the regulator saying the total outgo could be as high as 10,000 crore.

The RBI allowed banks to spread the financial impact of the total liability incurred in the previous fiscal over a period of five years. But the amortised amount could not be less than a fifth of the total liability.

The move has insulated the financials of banks from being impacted severely in the current fiscal. But the disclosure will give stakeholders clarity on the financial impact of the increase in gratuity benefits.

The I CAI has asked its member auditors to clearly disclose the financial impact of such liabilities had they been provided in the current year itself.

The matter was discussed at a recent meeting of the governing council of the ICAI, which then circulated a detailed reporting format to all members. It has asked auditors to disclose the impact as part of notes to accounts and not make them a part of their qualifications.

Source: EconomicTimes
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SBI to focus on cutting NPAs under new Chairman Pratip Chaudhuri

MUMBAI: State Bank of India's (SBI) priority will be to reduce bad loans under new chairman Pratip Chaudhuri , even as it aims to increase the share of term loans in its portfolio to improve profitability. The overall loans and deposits growth, which was lagging behind the industry , will also get the attention of the new chief who steps into the shoes of Om Prakash Bhatt, credited with shaking the slumber off SBI.

Restoration of a normal relationship with the RBI is also on top of Chaudhari's agenda, after his predecessor in his aggression to take home loans to the lower middle class, ruffled a few feathers at the regulator. No stone will be left unturned to expand the market share of the nation's already largest bank with nearly a fifth of the industry, when new licences for banks will be given away in the next few months.

"Growth will face challenges," Chaudhuri, who took charge as the chairman of SBI on Thursday, told reporters in his first media interaction . "There will be stresses like non-performing assets which will be one of our focus areas. We will look at NPAs that are appropriate for SBI. There has been an acceleration of NPAs, which we will try and bring down to market levels." SBI's gross bad loans are at 3.17% against an industry average of 2.5% as estimated by ratings firm Crisil . Its long-term loans that earn higher rates are about half of total.

Chaudhuri, unseen in public so far, will have two-and-a-half years at the corner office on the 18th floor at SBI Building in Mumbai to prove that he could match the charisma and abilities of Bhatt who was also admired for his plain speaking. Chaudhuri, a State banker since a year before the National Emergency in 1975 under Indira Gandhi, does not believe in protecting the turf with obstacles for new entrants. "We welcome more competition and participants in the banking business," said Chaudhuri.

"We are not in favour of entry barriers ." Teaser rates will continue under Chaudhuri, but after working out some compromise with the regulator.

Source: EconomicTimes
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Air India's turnaround plan gets Bankers' nod

MUMBAI: With Air India announcing plans to become operationally profitable in four years, nearly 20 of its lenders on Friday expressed support to it indicating that they were willing to consider recasting its entire Rs 40,000-crore debt. At a three hour-long meeting here, the airline management made a detailed presentation on the plan saying it has set a target of enhancing revenues by Rs 5,000 crore and slash costs by Rs 4,000 crore per annum.

Air India CMD Arvind Jadhav shared with top executives of banks details of the turnaround plan and the financial re-structuring plan which aims to make the cash-strapped carrier operationally profitable by 2015, senior officials said. The bankers would form "a small group from within the consortium to move forward in this matter" , they said.

The airline is saddled with a debt of about Rs 40,000 crore, of which Rs 18,000 crore is working capital loans taken from a consortium of banks, while the balance Rs 22,000 crore is towards payment of new aircraft ordered . "It was the first meeting that all the lenders had with the AI management. Hopefully, we will have the second meeting in 10 days," Bank of Baroda General Manager Arun Tiwari told reporters .

Source: EconomicTimes
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Enam group not to float Rs 3,500 crore infrastructure fund

Vallabh Bhanshali-led Enam group has scrapped its plans to raise a 3,500-crore infrastructure fund as the sale of its investment banking and brokerage businesses to Axis Bank last year left these plans orphaned , people familiar with the developments said.

Ajay Munot, head of the proposed Enam India Infrastructure Fund, has quit, said a person familiar with the development . Other senior staff at the fund-Jayesh Desai who came from consultants Ernst & Young and Pervez Umrigar, former chief executive at builders Gammon Infra-have also quit, the person said on condition of anonymity. Munot, a former executive director at Kalpataru Group, declined comment . Bhanshali did not respond to an email query about the developments.

An external consultant has been appointed to evaluate the opportunities for such a fund, said an Enam executive who chose to remain unidentified. Bhanshali and his partner Nimesh Shah in November agreed to sell their investment banking business to Axis for 2,000 crore in a stock swap deal that is pending regulatory approval.

Since Axis has a private fund, including a 600-crore Axis PE Fund, there could have been a conflict of interest if Enam had gone ahead with its fund, say analysts. With forecasts ranging from $500 billion to a trillion dollars to build Indian infrastructure, most finance companies are looking at ways to exploit the demand.

Source: EconomicTimes
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Friday, April 8, 2011

India to get details from Swiss banks by Dec

New Delhi: Switzerland today said it would be ready to conclude the double taxation avoidance agreement (DTAA) by December this year. India will then be able to get information about illegal funds parked in Swiss banks.

India and Switzerland had signed an agreement on August 30, 2010 to amend the DTAA with a view to facilitating exchange of information between the two countries.

“The status is that the Double Taxation Avoidance Agreement (DTAA) is in Parliamentarian process in Switzerland. We are running through this process in the next couple of months... we will be ready by Swiss side to conclude the agreement before the end of this year,” Johann N Schneider-Ammann, Head of Federal Department of Economic Affairs in Switzerland told reporters today at MoU signing ceremony organised by Ficci.

The re-negotiated DTAA was signed by the two countries in August last year to enhance information flow for tax purposes. The re-negotiated treaty would allow India to ask for banking transaction and ownership details from the Swiss government for taxation purposes.

The revised DTAA also facilitates use of information received for purposes which are allowed under the laws of both the countries. In fact, information will be exchanged even if there is no domestic interest.

Source: Financial Express
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Banks install 19,000 ATMs in FY11

In what is reflective of banks' increasing thrust on using the cheaper automated teller machines (ATM) channel for service delivery, nearly 19,000 ATMs were added last fiscal to the National Financial Switch.

"The number of ATMs connected to National Financial Switch (NFS) being operated by National Payments Corporation of India (NPCI) has grown by about 19,000 in one year," a release issued here by the NPCI said.

The total number of ATMs under the NFS now stands at 75,178, it said, adding, SBI and associate banks own the largest number of ATMs at 25,060 followed by Axis Bank (6,270), ICICI Bank (6,104), HDFC Bank (5,471) and Punjab National Bank (5,050).

The NFS now has 54 member banks and requests of five others are currently under process to join the network, the release said.

Source: Business Standard
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SBI to continue amalgamation process of associates: Chaudhuri

MUMBAI: State Bank of India (SBI) new Chairman Pratip Chaudhuri today said it would continue with the policy of amalgamation of its associate banks for building scale.

"The path or this course of merging associate banks would continue," Chaudhuri said in the first press meet here after assuming charge yesterday.

"We did one merger every two years because we had to give more time for absorption of that network, of people in the parent bank but we are equally convinced about the need and correctness of doing that and we will pursue that," he said.

SBI did first ever amalgamation of its associate State Bank of Saurashtra in 2008 followed by State Bank of Indore in August last year.

"And now we have the experience of merging an associate which was 100 per cent owned by SBI and another bank which was not 100 per cent owned and there was some public ownership," he said, adding, "So, there is enough experience and enough learning".

"We think that the merger when completed does deliver value, synergies and does generate economies of scale without hurting individuals or depositors' interest," he said.

SBI has five associate banks -- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.

SBI plans consolidation of remaining 5 associate banks with itself in the next 12-18 months, the Finance Ministry had earlier informed a Parliamentary Committee .

Among these, the State Banks of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed companies.

Besides, Chaudhuri, Deputy Managing Directors Hemant G Contractor, A Krishna Kumar and Diwakar Gupta also assumed charge of Managing Directors yesterday.

Contractor would look after international banking operation of the bank while Kumar would take care of national banking. However, Gupta would be Chief Finance Officer.

Senior most Managing Director R Shridharan would continue to look after the existing portfolio.

With this, the country's largest lender SBI with 25 per cent market share would have four 4 Managing Directors for the first time after amendment in the SBI Act.

Citing meeting with the Reserve Bank after taking over the charge Chaudhuri said "they (RBI) mentioned that the consolidation whatever in the Indian banking space has happened has been only in the private sector that too in consolidating the weak banks particularly in the public sector except the associate banks there has not been significant consolidation."

Source: EconomicTimes
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StanChart projects 8.1% GDP growth for FY12

New Delhi: Global banking giant StanChart on Thursday projected India's economic growth to slow down to 8.1 per cent in 2011-12 in view of continuing inflationary pressure and high interest rates.

In 'India Chartbook: Q1-2011' report, the banking major also said that average inflation will be 7.9 per cent this fiscal due to pressure from high commodity prices, forcing the Reserve Bank to further hike key policy rates.

"Local headwinds -- inflation, higher rates and governance risk -- are likely to slow growth to 8.1 per cent in FY12 from 8.5 per cent in FY11, with a more pronounced effect in first half of FY12," StanChart said.

This is much below the government's initial projection of 9 per cent growth in 2011-12.

StanChart said that although private consumption has been on an upswing, the growth in investments has been hit by inflation, higher interest rates and increased risk in the area of governance like the recent political confrontations due to various scams.

"Government spending is also likely to provide limited support in FY12... rising commodity prices and lower remittances from the Middle East due to geopolitical tensions in the region may be a drag on growth in the coming quarters," the report said.

Between 2005-06 and 2007-08, the Indian economy grew by over 9 per cent annually, before the global economic meltdown had slowed down the GDP growth to 6.8 per cent in 2008-09.

However, in 2009-10, the economy rebound with 8 per cent growth, and the government has projected it to clock over 8.5 per cent in the just-concluded FY11.

StanChart said industrial growth this fiscal will slow to 7.8 per cent, from 8.1 per cent projected in 2010-11, while services sector will also see moderate rise due to slower industrial activity.

On infrastructure, it said: "Recent policy reforms provide some impetus for infrastructure development, but resource constraints and implementation issues are challenges to the USD 1 trillion infrastructure spending plan."

The government plans to invest USD 1 trillion in the infrastructure segment in the 12th Plan period (2012-17).

StanChart's report said that inflation in this fiscal will be in excess of the 5 per cent comfort zone.

"We forecast average WPI inflation in FY12 at 7.9 per cent year-on-year. While this is lower than 9.1 per cent in FY11, it will far exceed the RBI¿s usual comfort zone of 5-5.5 per cent as commodity prices remain high," it said.

Source: Financial Express
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At 9.18%, food inflation declines to a four-month low

Food inflation fell to a four-month low of 9.18 per cent for the week ended March 26, but this may not dampen overall inflation much since it is now shifting gears to manufactured prices.

This is the second week in a row that food inflation stayed in single digit as it stood at 9.50 per cent in the previous week.

However, rising input costs for manufactured products may keep overall inflation at elevated level. Overall inflation rose to 8.31 per cent in February from 8.23 per cent a month ago.

As such, Reserve Bank of India (RBI) is expected to continue with its tight monetary stance to tame inflationary expectations in its annual policy for 2011-12, slated for May 3.

The RBI projected overall inflation to be around 8 per cent by this financial year-end, while Finance Minister Pranab Mukherjee expected it to come down to 7.5 per cent.

The figure will be released next week.

Source: Business Standard
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Foreign operations set to get a leg up at SBI

State Bank of India (SBI), the country’s largest lender, may have a managing director (MD) for its international operations. SBI now has four MDs, compared to two earlier.

One of the MDs, R Sridharan, is focusing on associates and subsidiaries. Another managing director, S K Bhattacharyya, who retired in October, 2010, was the chief credit risk officer.

After the Cabinet approved a Bill to amend the laws governing SBI, two additional posts of MDs were created. The government on Thursday appointed three MDs for SBI — all promoted from the posts of deputy managing directors. The new MDs are Diwakar Gupta, Hemant Contractor, and A Krishna Kumar.

According to sources, apart from an MD being given the responsibility of looking after international banking, one of the MDs is likely to focus on domestic operations, which would include corporate, retail and agriculture. One managing director would be given the role of chief financial officer or chief credit risk officer. Sridharan’s portfolios would be unchanged, sources said.

According to SBI officials, Pratip Chaudhuri, who took over as SBI chairman (Chaudhuri was a deputy managing director looking after international operations), would pitch for the post of an MD exclusively for foreign operations. Apart from his experience in international banking, Chaudhuri was also instrumental in successfully merging State Bank of Saurashtra with SBI.

The domains of the MDs are decided by SBI's management after discussions with the government. SBI's management had, for the past few months, discussed the broad contours of the new MDs’ responsibilities with the government.

According to SBI officials, SBI wants to ramp up its overseas presence to support the increasing number of Indian companies expanding their footprints in overseas geographies. Currently, foreign operations contribute 13 per cent to SBI’s top line. The bank aims to raise the share of business from foreign geographies to 20 per cent over the next 2-3 years.

An MD dedicated to foreign operations would also help the bank to expand through the inorganic route in the international arena. SBI has, for long, scouted for acquisitions in regions like Southeast Asia and Africa. The bank has more than 150 branches spread across 32 countries.

Chaudhuri also emphasises on beefing up retail banking in foreign geographies, which, he says, is key to fulfilling the bank’s aspirations as a global bank.

Source: Business Standard
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Liquidity may return to deficit zone soon

Though the easing of short-term rates and the parking of surplus funds by banks through the reverse repo (the rate at which RBI borrows money from banks) window show an improvement in liquidity, the trend may not last for long. Economists expect liquidity to return to the deficit mode by the next fortnight.

“We expect LAF to once more, dip into the negative zone in the fortnight starting April 9, as the under-maintenance of cash reserve ratio (the amount of money that banks have to park with RBI) is reversed,” said economists at Kotak Economic Research. However, the liquidity deficit is expected to remain close to RBI’s comfort zone of 1 per cent of net demand and time liabilities.
Banks on Thursday parked Rs 74,320 crore through the RBI’s reverse repo window. Liquidity has swung sharply into the positive territory, with LAF on April 5 at Rs 32,500 crore after being at a deficit of over Rs 1 lakh crore on March 31.

Standard Chartered Bank, in a research report, said though the liquidity deficit is expected to return to the RBI’s comfort zone in April, it was unlikely to turn to a surplus.

“We find that notwithstanding the recent easing, system liquidity may remain tight due to government borrowing, a high credit-deposit ratio, and a weaker balance of payments,” said a Goldman Sachs report.

Owing to the tight liquidity situation in March, rates on certificates of deposits (CDs) had hardened further, with three-month CD rates at 10.20 per cent and one-year CD rates at about 10.15 per cent. “However, by the end of the month, due to better liquidity expected in April, the three-month CD rates softened to around 8.70-80 per cent and the one-year CD rates declined to 9.50-60 per cent,” said K Ramanathan, CIO, ING Investment Management.

The overnight interbank call money rate ended at 5.85 per cent on Thursday, after touching a high of 9.5 per cent on April 1.

Going forward, economists expect RBI will continue to prefer liquidity deficit due to concerns of rising inflation. “With our expectation of a further rise of 50 basis points in policy rates, we think short-end rates may remain high in 2011-12,” said the Goldman Sachs report.

Source: Business Standard
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Slice of history: How IDBI came to be in 1960s

In the early 60s, when India was still battling to tackle the current account deficit and the negative industrial growth, the Reserve Bank of India decided to carve out a subsidiary that would finance the industrial development in the country. With this idea was born the Industrial and Development Bank of India (IDBI) in the year 1964. IDBI as a financial entity exceeded the expectations of not only industries but also RBI.

IDBI within a decade fulfilled the role of a development finance company and expanded its base not only in the funding of large industrial or public sector undertakings, or PSU projects, but also short-term maintenance loans. In fact, according to the RBI history, the IDBI Act was amended in order to accommodate the scope of industrial concerns. Some of the criteria that were included in industrial finance were repair, testing or servicing of machinery, vehicles, tractors, etc.

IDBI through this amendment was able to extend refinance facilities to state finance corporations (SFCs) and banks that provided assistance for setting up of industrial estates. According to narratives published in one of the issues of the Reserve Bank's history, the Big Daddy, aka RBI, was not too happy with the growing clout of IDBI. RBI had expressed its displeasure over the working of SFCs. It wanted to make SFCs financially viable and efficient.

The issue was raised when IDBI was negotiating its second line of credit from multi-lateral agency the International Development Agency (IDA). RBI was not comfortable with this free-hand borrowing of IDBI. In one of the conferences of SFCs, the then RBI governor Jagannathan said "the World Bank's conditionality attached to lines of credit and measures of financial discipline stipulated by the World Bank were the ones that banks should be attaining in own interest. But by the late 60s, it was clear that RBI was losing its grip on the baby it had created.

IDBI's de-linking with the central bank was proposed by the 'Administrative Reforms Committee'. In 1976, IDBI was de-linked from RBI and was declared an autonomous development bank. In 2004, IDBI converted itself into a full-fledged commercial bank.

Source: EconomicTimes
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Thursday, April 7, 2011

Rate hikes hitting business: India Inc to RBI

Mumbai: India Inc has conveyed its concerns about “the significant impact of increasing inflation and interest rate hikes on its operations” to the Reserve Bank. The RBI has hiked its key rates eight times in the last 13 months in a bid to tame the high headline inflation number.

Quoting a recent study, Naina Lal Kidwai, Ficci vice president and HSBC’s country head, said a majority of the surveyed firms feel that inflation and successive hikes introduced by the RBI in the key monetary variables have started having a bearing on the industry’s performance. “Ficci’s latest quarterly manufacturing survey shows a significant fall in the overall sentiment and expectations of the manufacturing sector in Q-4 of FY’11, as compared to the previous two quarters. Only 60 per cent of total respondents reported that they expect higher growth in their sector as compared with the prior year. This is a significant fall with regard to previous two quarters in which around 68 per cent (Q3) and 71 per cent (Q2) respondents felt that they were expecting higher growth in their sectors,” Kidwai said during a meeting of India Inc representatives with RBI officials on Wednesday.

She said the most important factor for moderation in growth is the rise in the cost of capital due to monetary tightening measures introduced by the RBI. While liquidity conditions in March tightened again on account of tax outflows, the impact was cushioned to an extent by stepped up levels of spending by the government in the last two weeks of the financial year. Despite this, borrowing and lending rates remained elevated on account of year-end pressures.

“The worry, however, remains that with inflation remaining stubbornly high and with borrowing calendar of the sovereign kicking off from the first week of April, and liquidity conditions expected to remain in the deficit mode, further rate hikes by the RBI could impact investment plans and activity levels adversely going forward,” she said.

Assocham president Dilip Modi also asked the RBI to “review the need to resort to tight monetary policies during the current fiscal”.

Demand for credit from private sector needs to be met, this is further enforced by the volatile IIP performance in the recent months, he said. “Since government has targeted a lower fiscal deficit of 4.6 per cent, it is expected that government borrowings would be lower this fiscal and therefore would not be as formidable a challenge as last year. Hence there is an opportunity to leverage this situation to increase the credit flow to the private sector, central bank should take note of this,” Modi said.

Source: Financial Express
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Citi's wealth mgmt service banned

London: US banking major Citigroup has been barred from selling wealth management services to new clients in Indonesia following allegations that one of its long-time employees stole money from customers, says a media report.

The barring of Citi, amid allegations that a long-time employee stole millions of dollars from customers of its premium retail bank, was announced by Indonesia's central bank Governor Darmin Nasution, the Financial Times has reported.

Citibank had witnessed a similar kind of scam or fraud perpetrated by a senior employee at a branch in India, wherein customers were duped of wealth worth about USD 100 million by its manager Shivraj Puri.

According to the daily, Nasution told legislators that Citi had been instructed to "temporarily suspend" recruitment of new clients to Citigold, the US entity's flagship service for wealthy customers.

"Citi's run-in with the Indonesian authorities also highlights some of the risks of the US bank's global strategy, which is predicated on tapping into fast-growing emerging markets," the report noted.

Quoting Citi, the daily said the banking major is seeking clarification on the comments made.

"We understand it was said to be a temporary measure and has no impact on the services we offer our existing Citigold customers.

"Our focus is on cooperating fully with all authorities to bring the investigation to a conclusion and resolve the matter," Citi was quoted as saying.

As per the report, the ban on recruitment of new Citigold customers follows two scandals that have thrust the US financial group into the local media spotlight.

"Malinda Dee, a customer relations manager, was arrested last week after Citi uncovered alleged illegal transactions of about USD 2 million. A teller is also being investigated," it said.

The daily said authorities are investigating the mysterious death last week of a client who was questioned by three of the bank's external debt collectors at another Citi branch in the Indonesian capital.

"The men are in police custody and face possible murder charges," it added.

Source: Financial Express
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Remit2India introduces 'The Light of India Awards 2011' to recognise Indians abroad

MUMBAI: Remit2India, the online money transfer service for the NRIs, recently announced a brand new initiative to recognize the Global Indian community.

Over the years, the Indian community abroad has contributed significantly not only to their country of residence but also to the Indian economy back home. Worldwide, Indians are recognized as the most valued ethnic community in terms of their intellectual capital. Their efforts in infusing capital, ideas and international practices have also contributed significantly to the Indian economy apart from keeping alive the Indian traditions and culture far and wide. Indians today have done the country proud through their contribution in various fields like art, science, technology and politics the world over.

Aptly titled the Light of India Awards , the objective of this platform is to recognize & reward these NRIs who have excelled in their respective domains. Presented by the Amrapali Group, the awards are a unique combination where the winners would be chosen in 2 categories - A Jury of eminent names & also online by the NRIs themselves.

Covering 6 categories ranging from corporate excellence to arts & entertainment, the Jury comprising of names like Sulaja Firodia Motwani, Javed Akhtar, Priya Paul, Prasoon Joshi, Shiv Khera, Mahesh Dattani, Shabana Azmi, Pranay Gupte and Madhu Trehan who would choose a winner from each category. Simultaneously, NRIs and Indians across the world would be able to vote online on who they choose as their 'Light of India'. The entire process would be validated by KPMG.

A culmination of the entire voting process is a grand awards event on the 22nd April'11 in New York City. With the Indian Ambassador to the U.S, Ms Meera Shankar, as the Chief Guest, the event would be graced with the presence of some of the biggest names from the NRI community.

Giving his take on the initiative, Avijit Nanda - President, TimesofMoney, said "NRIs have always been one of the reasons for which India has been shining. Having catered to this community with our Remit2India service, it is only logical for us to create a platform to recognize these shining lights. What is even more unique is that for the first time this community is being recognized by a combination of a distinguished Jury & most importantly, by the very members of this community - the NRIs."

Commenting on the platform, Mr. Anil Kumar Sharma, Chairman - Amrapali Group said "We are extremely delighted to be a part of this commendable endeavour. Its great to see Indians succeeding across the globe and get recognized through this initiative. It also fits in perfectly with our philosophy of 'Developing India' as NRIs are key contributors to our nation's success & development."

The other key partners to the event include Sony Entertainment Television, Asia as the Exclusive Television Partner, Etihad Airways as the International Travel Partner, as the online partner, Comcast and Goa Tourism as Associate Sponsors.

Source: EconomicTimes
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ADB lowers growth forecast to 8.2%

New Delhi: Asian Development Bank (ADB) on Wednesday lowered its growth forecast for India to 8.2% in 2011-12, down from its earlier projection of 8.7% and lower than 8.6% expansion in previous fiscal. While slower external demand and tighter fiscal and monetary policies weigh on economic expansion, high oil prices remain a threat, the bank said in its Asian Development Outlook 2011. The report assumes international oil prices will average about $80 per barrel in 2010 and $85 in 2011.

ADB projection is much lower than the 9% expansion predicted by the finance ministry and the Prime Minister's Economic Advisory Council.

“Fiscal and monetary policies will remain less accommodating than in the past as the government follows its fiscal consolidation road map and the Reserve Bank of India acts to anchor inflation expectations,” ADB said.

On the back of a tight monetary policy, average annual inflation rate, based on wholesale price index (WPI), is expected to fall to 7.8% in 2011-12 and to 6.5% in 2012-13 from 9.2% in 2010-11, the report said.

But growth is expected to bounce back to 8.8% in the next fiscal as investment and overall economic activity pick up and as planned reforms move forward.

“Rising oil prices will bring down the growth to 8.2% by March-end 2012. Aggregate demand will also tend to get squeezed on RBI's tight monetary policy stance,” said ADB Principal Economist (India) Rana Hasan.

China's economy is projected to grow at 9.6% in 2011 and 9.2% in 2012, down from 10.3% in 2010. Inflation in China is seen at 4.6% in 2011 and 4.2% in 2012. While India's growth projections are for the fiscal year ending March 31, China's and other countries predictions are on calendar year (January-December) basis.

ADB said concerns over high food prices will now shift to oil, as elevated international oil prices will put pressure on inflation. With inflation shifting to manufacturing items, RBI is expected to further tighten its policy rates. RBI has hiked its key policy rates eight times since March, 2010.

“We expect another 50 basis points hike by RBI in both repo and reverse repo rate in the current fiscal,” Hasan said. WPI inflation was 8.31% in February and RBI expects it to come down to 8% by March-end. The current account deficit (CAD) is likely to widen over the next two years, driven by a deteriorating trade deficit and moderate growth in invisibles, the bank said.

CAD, representing net flow of income out of the country barring capital movements, would be around 3.5% in the current fiscal, higher than 3% in the year ending March 31, 2010 — a level uncomfortable for the government.

CAD has been sustained by capital inflows, but heavy reliance on portfolio capital relative to FDI raises vulnerability, the ADB said. The bank has argued the need for increasing agricultural productivity and accelerating investment in infrastructure building.

“More specifically, one aim is to increase farmgate prices to trigger effective supply-side responses while containing retail prices. Since nearly half the food produced is lost from field to table, there is ample scope for solutions,” the report suggests.

Source: Financial Express
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PMO clears P Chaudhuri's name for SBI Chief

NEW DELHI: The Prime Minister's Office has cleared the name of Pratip Chaudhuri to head State Bank of India ( SBI ).

"The requisite clearance from the Prime Minister's Office has been received ," a finance ministry official said. "The department of personnel and training will soon send the order to the finance ministry for notification." Chaudhuri is currently the managing director of SBI's international operations.

He will take over from R Sridharan, CMD of Central Bank, who was given additional charge of SBI.

Source: EconomicTimes
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Liquidity woes end, short-term rates slip 200 bps

MUMBAI: Short-term rates have cooled by almost 150-200 basis points as the March effect begins to wane. The fag end of the financial year is generally characterised by high pressure on short-term rates as banks build up their balance sheets.

Three-month certificate of deposit rates came down to almost 8.25-8 .50% from 10.65% on March 4. Bulk deposits have also come off to 9.15-16 % from 10.5% in March when bulk deposit rates peaked. Three-month commercial paper rates also followed the trend, easing to 8.3% from 10.13% on March 23, 2011.

In the collateralised borrowing and lending obligations (CBLO) markets, deals were struck at 0.30%, reflecting the comfort in liquidity in the system. Banks are relieved as the system becomes liquidity surplus. The comfort comes on the back of government spending.

The government expenditure started coming into the system by the last week of March 2011. On Wednesday, banks parked almost Rs 71,045 crore in the reverse-repo window of the central bank and borrowed only about Rs 1,420 crore from RBI's repo window. "The liquidity situation seems to be easing. The topline pressure is off now after March.

The first quarter is generally a slack quarter for credit. I expect the liquidity to remain in the comfortable zone till May," said a senior official from Bank of Baroda . Call rates also closed at 6% from the previous day's close of 6.5%.

Source: EconomicTimes
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Banks beat RBI forecast with 21.5% loan growth in FY11

MUMBAI: Banks have exceeded the central bank's projection of 20% loan growth for the year as loans grew by 21.5% until the last reporting Friday of FY11.

Deposits grew by 16.1%, lower than RBI's projection of 18% for the year, though many banks have raised interest rate on deposits over the past 3-4 months.

Bank loans rose 6,98,260.56 crore, or 21.5% to 39,38,659.08 crore as of March 25, 2011, on a year-on-year basis, data released by the Reserve Bank of India showed. However, a bulk of the loans about 42%, was disbursed only in the fourth-quarter. Though bankers see growth across sectors, telecom, real estate and finance companies recorded the highest growth until end February in FY11, according to a separate release by RBI last week.

The year-end spurt could be partly attributed to window dressing, whereby banks lend short-term money in the last month of the fiscal to meet annual credit targets. With about six days' business figures for the fiscal year still not covered in the RBI data, the year could end with an even higher growth in loans as well as deposits.

The RBI data indicates that deposits grew 16%, or 7,18,128.98 crore to 52,04,702.64 crore as of March 25, 2011, on a year-on-year basis. Of this, more than half of the growth was in the fourth-quarter itself. Spurt in deposits during the last quarter was largely due to attractive rates offered by banks in the last quarter of the fiscal.

Banks are now offering 10-10.50% return on deposits - higher than the returns on small savings schemes, which is currently pegged at 8% - after RBI warned to improve their credit to deposit ratio, which had crossed 100%. The Reserve Bank had told banks to either go slow on credit expansion or improve deposit growth.

As a result, banks focused more on mobilising deposits and at the current levels, incremental credit deposit ratio works out to 97%.

Source: EconomicTimes
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Wednesday, April 6, 2011

Liquidity surplus banks park Rs 31,000 cr with RBI

Mumbai: The beginning of the new financial year 2011-12 has witnessed some radical improvements in liquidity scenario in the system. For the first time, almost over a year the banks have parked surplus liquidity to the tune of R31,000 crore in the reverse repo window of Reserve Bank of India.

RBI's reverse repo window pays 5.75% to the banks. The rates for certificate of deposits (CDs) also softened on Tuesday. One-year CD fell by almost 30 basis points from 9.70% to 9.40% on Tuesday. Till March end, banks had been borrowing consistently from the RBI's repo window, which has varied from over R50,000 to R1,000 crore.

Banks have raised resources through high cost deposits and certificate deposits in the past.

MD Mallaya, CMD of Bank of Baroda, said that the exact liquidity situation is likely to be good in the future. “By and large, we have entered the phase of slack season when credit demand will be less and government spending has already happened in March. Interest rates are to remain stable for now. Accretion of deposit shouldn't be a challenge in future,” he said.

On whether RBI will take measures to suck out liquidity, he said, “It is too early for RBI to take a view on the issue. It will depend on overall macroeconomic conditions.”

M Narendra, CMD of Indian Overseas Bank, said the sudden surplus may be happening as banks might have done it in a bid to go for pending deployment of credit. Few banks may go for deposit rate cuts too, he said. “But, such surplus may not continue further. Still, it is not indicator enough for RBI to take measures to suck out the surplus liquidity,” he said.

SC Kalia, executive director of Union Bank of India, said it looked like liquidity crunch should not be any issue now. During the year, a lot of deployment of funds took place on short-term basis. The surplus of liquidity was also due to the redemption pressure on MFs. “When those funds are coming, there will certainly be liquidity surplus with banks. Liquidity may be at comfort level, but not that much surplus so that it would lead to RBI taking measures to suck out liquidity,” he added.

D Sarkar, ED of Allahabad Bank, said that liquidity had improved now as lots of government funds had been released recently. “At the moment we don't feel there is any need to go for cut in deposit rates,” he said.

Net liquidity injection through LAF declined from an average of R93,000 crore in January to R79,000 crore in February 2011, and further to R68,000 crore in March mainly due to increase in government spending and consequent decline in government cash balances with RBI.

D Subbaro, governor of RBI, had said going forward, the overall liquidity situation is expected to move close to the comfort level of the RBI.

Source: Financial Express
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Public sector banks make beeline to offer equity broking services

Mumbai: Public sector banks are gearing up to introduce equity broking services. Bank of Baroda, Allahabad Bank and Corporation Bank are among those looking to offer retail broking services to their customers through their respective capital market subsidiaries, said two people familiar with the matter.

Bank of Baroda will throw open its online retail trading platform to customers in about two months, said a senior official from the bank. The bank had set up its institutional broking business in 2009. Allahabad Bank executive director D Sarkar confirmed the bank was looking at offering retail broking services but declined to give a launch date. “We have thought about foraying into broking services in the past. We will discuss about it again once our board meets and the annual financial results are announced. Whenever it happens, it will happen through a subsidiary route,” he said.

Offering broking services can help banks to expand their range of services. It also makes it easier for them to distribute financial products such as mutual funds and insurance. “The main purpose is to attract existing CASA clients and offer them universal banking services under one roof,” said the official from BoB.

Under existing rules, banks cannot get into broking directly but have to offer these services under a separate subsidiary. In January, private sector bank Axis Bank forayed into retail broking through AxisDirect, its online trading platform. AxisDirect is a product of Axis Securities and Sales, a 100% subsidiary of Axis Bank. Last year, Standard Chartered Bank bought the remaining 25.1% stake in broking firm Standard Chartered-STCI Capital Markets (formerly UTI Securities), upping its holding to 100%.

“Earlier, public sector banks didn’t have the inclination to offer broking services. But with many clients asking for these services and investment becoming a key area of focus for most banks, this offering has become a necessity now,” said the retail head of a leading brokerage, who didn’t want to be named.

He added that the main objective of offering these services may not be to generate broking revenues but to ensure clients have a platform to trade and the trading income comes back to the bank. “The broking division will not become a profit centre from day one and may take about a year or two to break even,” admitted the official from BoB.

What’s more, it won’t be easy to match the services offered by regular brokerages. For instance, since banks cannot set up an NBFC, they will be hard- pressed to offer margin funding to their clients.

Manasije Mishra, CEO of HSBC InvestDirect pointed out that the mindset of a banker is different from that of a broker: “Running a brokerage requires flexibility to offer leverage, give tips and provide additional advisory services that banks will have to get used to.”

Also, robust technology will become a necessity and the banking staff will have to be trained to cross-sell products.

Source: Financial Express
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