Saturday, May 28, 2011
9:29 AM Blogger
MUMBAI: The Reserve Bank of India (RBI) has reduced the time that banks take to resolve customers' complaints regarding ATM transactions to seven working days from 12 working days.
Banks, which fail to resolve complaints within seven working days, will have to pay customers 100 per day as compensation.
The new guideline will be effective from July 1 this year. The move to resolve the dispute has come as a major relief to millions of customers who are increasingly using ATMs to withdraw cash.
While issuing this directive, RBI has also said customers have to lodge a complaint to the issuing bank within 30 days of the date of transaction to be entitled to receive such a compensation for delay in resolving it.
Also, the central bank has clarified that the number of free transactions permitted per month at other bank ATMs to the savings bank account holder will be inclusive of all types of transactions - financial or non-financial.
All disputes regarding failed ATM transactions have to be settled by the issuing and the acquiring bank through the ATM system provider.
RBI has first issued a circular in October 2008, asking banks to resolve the dispute within 12 working days.
Subsequently, in July 2009, it asked banks to compensate customers if the issue is not resolved within 12 working days.
While issuing these directives, the central bank had said it has received several complaints from customers regarding debit of accounts even though ATMs have not disbursed cash for various reasons.
More importantly, banks take considerable time in reimbursing the amounts to card holders involved in such failed transactions.
In many cases, the time taken is as much as 50 days. RBI directed banks to compensate customers as it felt the delay of this magnitude is not justified, as it results in customers being out of funds for a long time for no fault of theirs.
Also, the delay can discourage customers from using ATMs.
9:26 AM Blogger
Public sector Central Bank of India today said it was planning overseas expansion with an aim to have a strong presence in various geographies.
"We have applied for approval from Reserve Bank for operations in Bhutan, Sri Lanka, Nairobi and also in Dubai... ", the bank Chairman and Managing Director S Sridhar, who would retire on May 31, said here.
Stating that the bank would look for a joint venture partnership with a local company having a strong presence, he said, "in Mozambique, we have a tie-up with a company which is a conglomerate. They are present in many sectors. For setting up the bank [in that country], they will have 24% stake while we will have the majority 76% stake".
The joint venture in Mozambique will require a capital expenditure of $10 million, he said.
He added that many companies looking to enter Mozambique because of its rich natural resources.
Also, the bank would be adding the "online trading" facility on its website.
Central Bank of India reported a 22.43% decline in its net profit at Rs 132.7 crore for the fourth quarter ended March 31. It had a net profit of Rs 171.06 crore in the year-ago period.
Source: Business Standard
9:22 AM Blogger
CHENNAI: Country's largest private sector lender ICICI Bank, which holds a minimal share in water treatment player VA Tech Wabag Ltd , is likely to sell off its shares over the next few months, a top company official today said.
ICICI Bank through its firm ICICI Venture currently has a minimal share on the Chennai-headquartered VA Tech Wabag which reported top line revenues of Rs 509.9 crore as of March this year.
"Today ICICI Bank has less than five per cent in the company's share," VA Tech Wabag Managing Director Rajiv Mittal told reporters here.
In 2005, along with ICICI Venture, a subsidiary of ICICI Bank and Wabag India on a "reverse acquisition", bought their parent company VA Tech headquartered in Austria.
Asked on whether ICICI would sell the shares to VA Tech Wabag itself, Mittal said, "They (ICICI) can sell it to anybody. There is no compulsion to sell it to us".
9:20 AM Blogger
MUMBAI: Private sector Development Credit Bank ( DCB ), today said that it has upped both its base rate and benchmark prime lending rate (BPLR) by 0.50 per cent each.
Accordingly, its base rate now stands enhanced at 10 per cent from the earlier 9.50 per cent, a press release issued here stated.
The bank's BPLR stands raised at 17.25 per cent from the earlier 16.75 per cent.
The revised rates will be with effect from June 1, the release said.
Friday, May 27, 2011
9:20 AM Blogger
NEW DELHI: Investment bankers have sought dilution of norms governing their appointment for managing the share sales in state-controlled firms, saying the guidelines announced last month would effectively debar all of them.
The government had banned bankers managing public sector floats from simultaneously handling offers of private firms in the same sector to avoid any conflict of interest. It had also restrained the bankers from advising any company in similar areas until the state-owned enterprise's disinvestment process was complete.
The government's contention was that a private firm's share sale ahead of a state-run firm operating in the same sector would affect the success of the later issue.
After the guidelines were released, some prominent investment bankers had refused to manage the stock sale of National Buildings Construction Corporation Ltd (NBCC) citing conflict of interest. The government had invited bids from investment bankers for NBCC, which were supposed to close Thursday.
But owing to poor response from the bankers, the finance ministry was forced to extend the deadline until June 10. "We have asked them (investment bankers) to share the information in a transparent manner," said a senior finance ministry official, adding that bankers will have to disclose if they are working with any private company in the same sector. "This does not mean that the norms will be changed. We are looking to work out this issue." NBCC is engaged in real estate, construction, and infrastructure development.
Majority of prominent bankers, including Indian and foreign, already have mandates from private companies engaged in one of these areas, said the chief executive of a leading investment bank on condition of anonymity. The government had changed the norms for appointment of merchant bankers following a controversy over same bankers handling issues by state-run steelmaker SAIL and private sector rival Tata Steel.
The government deferred the.`8,000 crore SAIL follow-on offer that was planned for January. Four bankers handling the SAIL issue - SBI Capital, Desutsche Equities, HSBC Securities and Kotak Mahindra - were engaged by Tata Steel to manage an issue. The new norms have put the Department of Disinvestment in a bind.
"Most of the bankers are already advising companies engaged in one of these areas. They will have to disclose all existing mandates in (the expression of interest) for NBCC given the existing guidelines," a government official said.
"The completion of public offering is a function of market condition, some of the mandates from private, or even from state-run companies, get prolonged due to poor market condition," said another person involved in the process.
Thursday, May 26, 2011
11:10 PM Blogger
Country's biggest lender State Bank of India (SBI) today said it will submit the revised proposal to the government for Rs 20,000 crore rights issue next month.
The bank will file the revised proposal next month, SBI Chairman Pratip Chaudhuri said on the sidelines of an event.
The public sector lender is hopeful of a rights issues this fiscal. Earlier this month, Chaudhuri had said: "The government is committed to well capitalising SBI. So in that context, we are quite hopeful that the rights issue contribution will come through during this year."
Tier-I capital has to come from rights issue itself. So, 59% is the government's holding and balance would be contributed by other shareholders, he had said.
At the end of March 2011, the Tier-I capital of the bank came down to 7.77% due to provision made towards pension fund on account of wage revision - Rs 7,927 crore till FY10 was taken through the capital account.
If the government allows the issue size at Rs 20,000 crore, then it will have to cough up between Rs 11,000 and Rs 12,000 crore towards subscribing the issue to maintain its stake in the bank at 59%.
In the last SBI rights issue, the government had issued bonds to the bank instead of giving cash.
Source: Business Standard
11:06 PM Blogger
Mumbai: Leading public sector lender Canara Bank today reported a 34.48 per cent rise in its consolidated net profit to Rs 4,034.19 crore for the year-ended March 31, 2011.
The bank had a net profit of Rs 2,999.7 crore in the corresponding period of the previous year, it said in a filing on the Bombay Stock Exchange (BSE).
Total income of the Bangalore-headquartered bank on a consolidated basis improved 18.92 per cent to Rs 25,792.6 crore as at March 2011, as against Rs 21,687.89 crore in the year-ago period.
Total deposits during the period grew 25.27 per cent to Rs 2,93,793.92 crore and advances 25.48 per cent to Rs 2,12,647.38 crore.
Canara Bank's shares were trading up 0.79 per cent at Rs 534.35 on the BSE.
Source: Financial Express
10:56 PM Blogger
The government has appointed Life Insurance Corporation of India's (LIC) Managing Director DK Mehrotra as the acting chairman of the country's largest financial institution.
"DK Mehrotra of the LIC, will in addition to his duties as managing director, hold current charge of the post of the chairman of the corporation for a period of three months or till further orders," LIC said in a statement.
The government had given Rakesh Singh, additional secretary in Department of Financial Services in the Finance Ministry, additional charge as the head of nation's largest insurance company after the five-year term of the then chairman TS Vijayan came to an end on May 2.
As per tradition, one of the managing directors of LIC is designated as chairman.
Mehrotra joined LIC as a direct recruit officer in 1977. In his 34 years' career, Mehrotra has occupied several pivotal positions spanning three zones and the corporate office.
The government owns 100% in the life insurance firm.
As per the government norms, chairman and managing director or director are appointed in the public sector entity for a period of five years or up to age of 60, whichever is earlier.
Source: Business Standard
9:10 AM Blogger
State-owned Bank of India (BoI) today said it would raise funds by issuing up to 18 crore fresh shares through public offer or private placement.
At the current market price, the bank could raise about Rs 7,700 crore from the market.
The board of the bank at its meeting held today has approved the proposal to raise capital by issue up to 18,00,00,000 fresh equity shares for Rs 10 each at an appropriate premium, BoI said in a filing to the Bombay Stock Exchange (BSE).
The fund could be raised by any mode decided at an appropriate time like right issue or follow on public offer or qualified institutional placement or depository receipts and others, it said.
Shares of BoI closed at Rs 428.30, up by 1.48% on the BSE.
For the full financial year ended March 31, 2011, BoI posted a net profit of Rs 2,488.7 crore, up by 43% as compared to Rs 1,741 crore in the last fiscal.
The bank's total income during 2010-11 rose to Rs 24,393.5 crore from Rs 20,494.6 crore in 2009-10.
Its overall credit growth stood at 22.16% for the year, while the deposits were up by 28.68%.
Source: Business Standard
9:07 AM Blogger
Mumbai: The Reserve Bank of India (RBI) should keep its key rates high not just to fight inflation but also to prevent the asset bubbles formation, a top economist from Standard Chartered said today.
"I think the RBI needs to make sure that the monetary policy is tight not just to address the immediate inflation challenge but (also) to prevent bubbles and inflation problems being seen in the future," the bank's Chief Economist and Group Head of Global Research, Gerard Lyons, told reporters here.
Lyons also alluded to the days leading up to the asset bubble burst in US, and the subsequent financial slowdown, saying that "(Alan) Greenspan in the US, you could argue, kept policy too low for too long."
With a view to tame the inflation -- 8.66 per cent in April -- the RBI has increased its key rates eight consecutive times over the past 12 months, the last being the higher-than-expected 50 bps hike on May 3.
RBI has also taken measures to curb any possibility of asset-bubbles formation through a string of measures such as increasing the provision coverage ratio on teaser loans which involve staggered interest payments, among others.
"RBI and other authorities here in India are right to use macroprudential measures for trying to curb property bubbles," Lyons said, speaking after the launch of its report -- India in the Super-Cycle.
The report says India will be a key player in the ongoing supercycle -- a period of sustained growth lasting over a generation -- and outlines the challenges ahead.
"We see in the next two decades, India will grow eight fold in size and we see India growing at 9.2-9.3 per cent per annum on an average versus China's 6.9 per cent," he said, citing the report.
Lyons said that because of factors such as global commodity prices firming up, there could be a slower growth this year and the next in India but long-term growth prospects are very bright.
The key challenges for India to achieve good growth numbers in the way ahead are centred around getting infrastructure and regulatory environment in order.
"By infrastructure, we just do not mean the physical infrastructure, but also other factors like the skills and education of the very young population so that they get good employment and also the institutional framework," he said.
If the opportunity of having a very young population is not handled well, Lyons said, there is likelihood of the demographic dividend turning into a "demographic disaster."
On the regulatory front, Lyons said the RBI should not insist on foreign banks adopting the subsidiary route while entering India, as international banks want flexibility to operate.
Source: Financial Express
9:05 AM Blogger
London: The expected loss of a major contract with the Reserve Bank of India has forced the world's largest bank note printer De La Rue to cut jobs, merge divisions and shake up its supply chain in a bid to return to financial health.
Hampshire-based De La Rue, which produces over 150 currencies around the world, faced production difficulties after employees allegedly falsified paper test certificates for the Reserve Bank of India (RBI), which has been its biggest client.
The company has refused to name the client, but said the Serious Fraud Office, which has conducted an investigation, was still "considering the matter".
The company said discussions "remain ongoing with the principal customer" in its currency division, but industry sources believe the contract with the Reserve Bank of India is almost over.
Chief Executive Tim Cobbold told the media: "This was clearly a challenging year for us."
There was "no material announcement" to be made on discussions with the Reserve Bank of India and he would not comment on the likely outcome of the talks.
"There remains uncertainty as to the ultimate outcome of these issues, including their financial impact," he said. The company said its pre-tax profits for the year plunged to 33.3 million pounds from 104.1 million pounds.
Company Chairman Nicholas Brookes said: "The 2010/11 financial year has undoubtedly been a difficult one for De La Rue, our employees, customers and shareholders."
"We have dealt with a number of challenges including paper production issues, lower than expected banknote print volumes, changes in senior management and a takeover approach," he said.
Source: Financial Express
8:59 AM Blogger
Chennai: Public sector Indian Overseas Bank today launched premium credit cards targeting elite customers in association with American Express.
As per the association, IOB and American Express would jointly promote the cards that would feature logo's of both the companies, IOB CMD M Narendra told reporters here.
"It is a momentous occasion for us... as two of the world's (banking) giants are coming together. It is a unique programme for IOB, who is in its platinum jubilee year. With this offering, we are becoming more and more customer centric", he said.
Initially, the Gold and Platinum credit cards offered would be available at 500 Indian Overseas Bank branches in New Delhi, Mumbai and Chennai.
Currently, IOB has about 40,000 credit card customers, Narendra said adding that, "With this tie-up our plan is to add 50,000 credit cards in three months and five lakh cards in next two-three years".
Stating that their tie-up with Indian Overseas Bank would help increase their subscriber base significantly, American Express Banking Corporation Country Manager and Consumer Card-Head Shailesh Baidwan said " ...it marks a special beginning for a two large financial institutions".
Beginning today, American Express and Indian Overseas Bank would jointly promote and distribute the cards, he added.
"This gives us an opportunity to expand our customer base. We will also be looking at new opportunities and offering new products through this partnership", he said.
As part of the launch, the first two Platinum cards were given to ace carnatic vocalist and 'Padma Vibhushan' awardee Balamurali Krishna and popular Tamil actor Suriya.
Source: Financial Express
8:54 AM Blogger
New Delhi: Being locked out with car keys inside may be a common mistake, but a senior executive of a public sector unit (PSU) bank could pay with his job for it — for the person left stranded was his boss.
The Mumbai Zonal Manager of Indian Bank, Banabihari Panda, has been suspended for failing to provide “minimum basic courtesies” to the bank’s Chairman and Managing Director (CMD) T M Bhasin on his arrival at Mumbai airport from Chennai last Thursday night.
The charge faced by Panda, who holds the rank of General Manager, is that he kept the CMD waiting at the airport for over an hour as the keys got locked in when luggage was being loaded into the car.
Panda has apologised for the incident, explaining to the Executive Director of the bank in a May 20 letter that the car got locked accidentally, resulting in the CMD being stranded for “about 25 minutes”. In the detailed reply, Pande also writes that he made alternative arrangements, hiring a taxi and arranging “two sets of new dhotis and towels” for Bhasin through a friend, and later running around till late in the night to organise a duplicate key. Finally, he says, he was able to deliver Bhasin’s luggage at the guest-house by 1 am.
The manager cites his 34 years of experience as an officer and pleads that he has always been sincere in his duties, and never took even the matter of the locked keys casually.
Panda and a junior executive had gone to the airport to receive the CMD on Thursday night. While they were overseeing loading of Bhasin’s luggage into his car, the vehicle got locked. The keys were in the ignition as the air-conditioning was on.
“...Our CMD could not enter the vehicle to proceed to guest house. CMD was made to wait for more than of hour (sic) at the airport and could leave in alternative taxi arranged without baggage,” the detailed suspension letter, sent by V Rama Gopal, Executive Director of the bank, reads.
By failing to extend “minimum usual basic courtesies” to the CMD, the suspension letter says, Panda had “failed to discharge” his duty. The letter also accuses Panda of not handling things properly and displaying behaviour “unbecoming of official in the Top Management cadre of the Bank”.
On May 21, Panda sent another letter, this one addressed to the CMD himself, recalling how the latter had asked for a two-minute silence at a meeting of general managers and zonal managers on March 23 as respect for Panda’s dead wife. “When the same Chairman and Managing Director ordered for my suspension, I could fathom the gravity of the event leading to the decision.”
Despite several attempts, Bhasin could not be contacted for a reaction. The CMD’s office staff declined to put him on the phone and dismissed the issue as an “internal matter” of the bank. The Chennai-based corporate communications manager of the bank also declined to comment.
Source: Financial Express
Wednesday, May 25, 2011
9:08 AM Blogger
Mumbai, May 19, 2011
Police are on the lookout for three people, who snatched a bag containing Rs 26 lakh from two senior staffers of the public sector UCO Bank in the city yesterday.
The incident occurred around 1430 hrs yesterday when the staffers were waiting to catch a taxi on Yusuf Meharali Road to go to their Nariman Point branch when they were waylaid and the bag snatched by three persons.
The money had been collected from the Samuel Street branch and was being taken to the main branch at Nariman Point in south Mumbai, police said.
No headway has yet been made in the case, police sources said.
9:06 AM Blogger
The Board of Directors of UCO Bank recommended for increase of dividend from Rs. 2/- per equity share to Rs. 3/-per equity share. Consequent upon the change in the proposed dividend to Rs. 3/- per equity share.
The stock closed the day at Rs.95.30, down by Rs.2.35 or 2.41%. The stock hit an intraday high of Rs.98.25 and low of Rs.94.10.
The total traded quantity was 3.29 lakhs compared to 2 week average of 4.93 lakhs.
Source: Equity Bulls
8:27 AM Blogger
MUMBAI: State Bank of India Chairman Pratip Chaudhuri's voluntary baptism by fire was the first step in his journey to make the 205-year-old behemoth enter the top-50 in global rankings without future earnings shocks. Prudence and caution will take precedence over aggression and innovation.
Mergers and acquisitions, including those of associate banks, will be on the back burner as the nation's largest lender sets its house in order with higher provisions to smoothen out bumps in the form of bad loans and pension liabilities.
Chaudhuri said investors may still have to endure some more pain in the upcoming quarters though not of the magnitude of the quarter to March, when SBI reported a net profit of a little over Rs 20 crore.
"It will be slightly subdued for two more quarters as we have to make a provision of Rs 550 crore each for provision coverage." The good part, he says, is signals which indicate that the bank's net interest margin, a key gauge of efficiency, is on an upward curve. "I see it coming back," he told ET in an interview.
In the last quarter, SBI reported a 99% drop in net profit to Rs 20 crore while making record provisions of Rs 2,300 crore for bad loans and wage revisions. The bank was also forced to draw down over Rs 9,000 crore from its reserves to provide for huge pension liabilities.
Net interest margins (NIMs), which declined to 3.3% in the quarter to March, could widen to close to 3.5% as the impact of repricing of loans kicks in. SBI raised interest rates by 75 basis points a few weeks ago after the RBI revised key policy rates in April. It has also raised deposit rates, but mostly for shorter tenures.
SBI, which under previous chairman OP Bhatt pursued an aggressive strategy to boost market share, will now focus on deposit mobilisation and stepping up lending activity. "It will be back to basics," he said. Chaudhuri, however, said the management will not abandon its pursuit of market share. "It is easy to build market share by paying an outrageous price, but we will not choose the easy way," he said.
It is also amply clear that Chaudhuri has had a rethink on the strategy relating to the merger of associate banks of the SBI. He said there will be a pause on such mergers until July 2012.
"It is very much on the table but associate bank mergers are not going to happen in a hurry. It is not because we are not convinced that merger is the right thing, but it is because it requires capital and operational efficiency." The cost of a single merger of an associate bank with the parent would be Rs 1,500 crore in terms of payout on staff benefits.
The new chairman, a career banker with SBI and who took over from Bhatt in early April this year, has indicated that an overhaul is underway in some of the subsidiaries controlled by the bank such as SBI Funds Management , which is in the mutual fund business besides SBI Cards and SBI Capital Markets , the investment banking arm of the bank.
8:20 AM Blogger
MUMBAI: Punjab National Bank is close to buying as much as 33% stake in MetLife India that will boost fee income for the staterun bank and provide the US insurer with the second-best financial distribution platform in the country. "PNB is in talks to pick up to 33% stake in MetLife," said a person familiar with the negotiations. "The deal may be finalised in the next few days," he added. Four more people familiar with the negotiations said the discussions on valuations are continuing.
There is no certainty that the transaction will take place. The discussions between PNB and MetLife also involve Jammu & Kashmir Bank , which owns 13% of the insurer. The state-run lender may buy out other shareholders such as J&K Bank and Shapoorji Pallonji & Co. There's no decision on that yet, the people said. MetLife Insurance managing director Rajesh Relan said the company would not comment on speculation. "We are one of the three short-listed companies by PNB as per their process and the discussions with the management are yet to begin," said Mr Relan.
PNB did not commit on the transaction either. "It would be premature to say we have zeroed in on MetLife. The bank will take a final decision based on the financial valuation report," said PNB executive director MV Tanksale. A senior bank executive in the know of the development said the deal is expected to be valued in the range of Rs 12-13 per share. The bank in April had short-listed three insurance companies including MetLife, Aviva and Bharti Axa Life Insurance for the commercial bid.
A banker involved in the deal said: "PNB wanted to invest in a insurance company which would offer it higher stake at an attractive price." MetLife is a JV between Jammu & Kashmir Bank, Shapoorji Pallonji & Co, US-based MetLife International and private shareholders. PNB is likely to buy out the stakes of J&K Bank and other private investors. J&K Bank's stake has come down to 13% from 25% when the JV was started in 2001. In 2010, MetLife had lost its bancassurance partner Axis Bank to Max New York Life. This resulted in a drop in their business.
Tuesday, May 24, 2011
8:57 AM Blogger
At a time when customer service and satisfaction is becoming the key to success for life insurance companies, the claim repudiation ratio (in case of death claims) has improved over the last financial year. According to data from company sources, the Life Insurance Corporation of India (LIC) still remains the benchmark when it comes to settling death claims. However, major private players are also fast catching up.
A repudation ratio is a measure of claims rejected.
During 2010-11, LIC improved its repudiation ratio for death claims to 1.09 per cent from 1.21 per cent in the previous year. In the same period, the public sector insurance behemoth settled 97.5 per cent of death claims, whereas claims pending stood at 1.47 per cent.
“Overall, we have settled 99.6 per cent of the total claims in the last financial year. And 95 per cent of the death claims were settled within 15 days of intimation,” said a senior LIC official.
In total, during the 2010-11, LIC has settled around 18.3 million claims amounting to Rs 53,000 crore, which includes survival benefits, maturity and death claims. Of this, Rs 6,000 crore accounted for 721,000 death claims.
Among the private players, ICICI Prudential Life was the best performer in terms of claims repudiation ratio, whereas HDFC Life’s claims settlement ratio was the highest, respectively.
ICICI Prudential’s claims repudiation ratio stood at 2.8 per cent, whereas for HDFC Life it was at 3.97 per cent. During the same time, HDFC Life settled 96.03 per cent of the total death claims, while ICICI Prudential settled 94.4 per cent of claims. Claims pending for HDFC Life and ICICI Prudential stood at 0.61 per cent and 2.6 per cent, respectively.
Among the established players, the repudiation ratio for SBI Life and Max New York Life worsened to 16.74 and 14.85, respectively.
For the smaller or relatively new private life insurance players, the ratio still remains on the higher side. For instance, India First Life, which began operation in 2009, had a repudiation ratio at 9.4 per cent, whereas for IDBI Federal Life which started in 2007, it was 21 per cent.
|Birla Sun Life||10.62||89.09||5.82||4.99||94.66||0.35|
|India First Life||7.69||53.85||38.46||9.40||90.58||0.03|
|Max New York Life||12.31||65.51||7.14||14.85||78.01||7.14|
|IDBI Federal Life||23.81||49.52||26.67||21.00||65.00||14.00|
|* Close to year ago figures; ** Irda Figures; *** Unaudited figures|
“The repudiation ratio improves over a period of time as in a death within two years (early death claims) of the issue of the policy requires investigation. So, for the newer companies the proportion of early death claims always remains high. Hence, the ratio is becomes skewed,” said an official at a private life insurance company.
Settlement of any insurance claim involves interpretation of a lot of technical conditions generally used by insurers to reject the claims. However, non-early death claims (claims after two years of the issue of the policy) do not mandate any investigation. Hence, the settlement procedure is faster and easier.
Source: Business Standard
8:53 AM Blogger
MUMBAI: Several non-banking finance companies have started disbursing loans on the back of gold exchange traded funds and e-gold certificates, taken as lien on the borrowed amount. Low know-your-client requirements and high-purity levels in gold are prompting lenders to accept 'paper gold' portfolios as security.
Non-bank lenders such as India Infoline , Reliance Commercial and Religare Enterprises , among others, have begun lending money on gold ETFs and gold savings certificates issued by mutual funds. According to fund industry sources, Muthoot Finance and Edelweiss Capital also lend against paper gold portfolios though senior officials at both the firms denied having such an option. Muthoot officials said they only accept physical gold as collateral.
"Gold funds have opened an entirely new avenue for offering loans to customers. We expect this segment to ramp up aggressively as investors start embracing this form of gold for future investments," said KV Srinivasan, CEO, Reliance Commercial Finance. Reliance Commercial is offering loans to investors of Reliance Gold Savings Fund, wherein, they can get up to 90% loan on value of gold units held up to 5 crore and up to 3 years.
According to Mr Srinivasan, know-your-client (KYC) requirements, quantity and purity of physical gold and price of gold are the prime concerns while giving loan against gold. All these factors are addressed if loans are disbursed using gold ETFs or savings fund certificates as collateral deposit.
Thorough KYC requirements are done by the fund house at the time of allotting fund units to investors. Funds invest the pool in best gold assets; this takes care of quantity, purity and price. All these factors make lending on gold portfolios easy, Mr Srinivasan said.
The trend to pledge gold ETFs and gold savings certificates (also called e-gold) is slowly catching up among affluent, savvy investors. NBFCs keep a 30-35% margin on loans backed by gold ETFs and e-gold portfolios. Interest on portfolio borrowings are between 13% and 15%, industry sources said.
"Gold is a growing asset class... people have begun buying gold in paper or demat form. The portfolio format helps investors to save on storage and insurance costs. It is only logical for lenders to start accepting ETFs and gold certificates as collateral," said Pankaj Razdan, deputy chief executive of Aditya Birla Financial Services Group .
Portfolio leveraging is a method of raising easy interest loans wherein investors leverage on their own fund portfolio to raise money that will either be used for personal purposes or re-invested into the markets - mutual funds, stocks or any other asset class of choice.
With rising prices, the trend of leveraging on gold portfolios is slowly catching up among savvy investors. Gold prices have gone up 9% over the past six months and is currently trading at 22,235 per ten grams.
Though pledging 'paper gold' is an easy way to raise money, wealth managers are not too keen to recommend it to their clients. A sharp fall in gold makes this instrument quite risky, they say. "Paper gold usually carries higher risk weightage. Investors stand a better chance if they turn their ETFs into physical gold and then pledge it," said Devendra Nevgi, principal partner, Delta Global Partners , and added, "Investors get up to 90% exposure while pledging physical gold."
8:51 AM Blogger
"The target (of covering such villages) for 2010-11 has been completed and I am quite confident the balance will be fulfilled by March 2012," he said, adding the goal of inclusive growth cannot be achieved without financial inclusion.
Mukherjee was speaking at a function of Central Bank of India here. During 2010-11 banks covered about 29,000 villages.
Even with more than 8,700 bank branches in the country, a large section of the population is yet to be brought under the banking system.
In his Budget speech in February 2010, Mukherjee had said that banks would provide banking facilities in 73,000 villages with a population of over 2,000 by March 2012.
Presenting the UPA government's annual report card yesterday, Prime Minister Manmohan Singh said that the government would look to chart an economic growth process that was "socially inclusive and regionally balanced.
Central Bank of India and National Skill Development Corporation (NSDC) today entered into an agreement to provide skill training to youth.
Mukherjee said the prospects of sustained high economic growth and the much anticipated 'demographic dividend' will materialise only if the youth is appropriately skilled and has the opportunity to engage productively in economic activity.
"This demographic dividend in terms of numbers would not be beneficial to us if we cannot provide them skill, if we cannot convert this vast workforce inot skilled work force," he said.
India is expected to have largest number of young workers by 2030 when developed countries would be facing the challenge of ageing population.
He also said there was a need to engage youth in constructive activities as it save them from falling into hands of those engaged in separatist and violent activities.
Central Bank of India has created an innovative Skill Development Loan for financing vocational education.
NSDC, launched in October 2009 as public-private partnership programme, aims to provide skills to 550 million by 2020.
Source: Business Standard
8:48 AM Blogger
Mumbai: Mortgage lender Dewan Housing Finance Monday hiked its retail prime lending rate by 50 bps to 17.5 per cent, in line with its peers.
The new rate will be effective in retrospect from May 20, a release issued here by the company said, while a spokesperson added that the new rate stands at 17.5 per cent.
Other lenders like HDFC Limited and State Bank of India, among others have hiked their lending rates following the Reserve Bank of India's May 3 announcement to up its key rates to tame the runaway headline inflation.
Source: Financial Express
Monday, May 23, 2011
10:39 PM Blogger
New Delhi: State-owned Indian Bank has fared better among the PSU banks by recording highest returns on assets for the financial year ended March, 2011, according to an analysis of the annual results.
The Chennai based lender clocked an Return on Assets (RoA) of 1.53 per cent for 2010-11, highest among 21 public sector banks. The lowest RoA was generated by Bank of Maharashtra at 0.47 per cent.
RoA is an indicator of how profitable a company is relative to its total assets. It gives an idea of the efficiency of the management in using its assets to generate earnings.
Bangalore-based Canara Bank comes next with RoA of 1.42 per cent at the end of 2010-11 and Andhra Bank with 1.36 per cent, according to the analysis.
However, the country's largest lender State Bank of India (SBI) in its results declared this week announced RoA of 0.71 per cent.
As many as 10 public sector banks had RoA of one or more than one per cent while the remaining 11 lenders had less than 1 per cent during the fiscal ended March 2011.
In terms of Provision Coverage Ratio (PCR), as per the analysis, Indian Bank tops the chart with the ratio of 84.3 per cent.
The Reserve Bank has prescribed a minimum PCR of 70 per cent.
Andhra Bank with PCR of 83.9 per cent is second in the chart followed by Delhi-based Punjab & Sind Bank with 81.8 per cent.
For 2010-11, Indian Bank's net profit rose by 10.23 per cent to Rs 1,714.07 crore compared to Rs 1,554.98 crore in the previous year.
Total income during the year expanded by 16.74 per cent to Rs 10,542.91 crore against Rs 9,030.77 crore in 2009-10.
Net Interest Margin of the bank improved to 3.75 per cent in FY'2011 from 3.55 per cent in the previous fiscal.
The bank proposed a dividend of 75 per cent or Rs 7.50 per share of face value of Rs 10 each for 2010-11.
Source: Financial Express
10:37 PM Blogger
Mumbai: Market regulator Sebi today directed Purshottam G Budhwani, a broker involved in the infamous IPO scam of 2003-05, to deposit over Rs 9.39 crore on unlawful gains made by him.
In case of failure to deposit the amount within 45 days, Budhwani shall be barred from the securities market for nine years, the Securities and Exchange Board of India (Sebi) said in an order.
"Purshottam G Budhwani shall disgorge a total amount of Rs 9,39,38,030 comprising of Rs 5,87,11,269 towards unlawful gain made by him and Rs 3,52,26,761 towards simple interest at the rate of 10 per cent per annum for six year (2005-11) on the unlawful gains within 45 days...," Sebi said.
It added: "In case the aforesaid amount is not received by Sebi within the specified time, Budhwani shall be restrained from buying, selling or dealing in securities market in any manner whatsoever or accessing the securities market directly or indirectly for a further period of nine years..."
In any case, Budhwani has been barred from dealing in the market for a period of three months from today.
Budhwani was charged with involvement in the IPO scam and cornering shares meant for retail investors in 13 initial public offerings by engineering multiple applications.
"He opened 6,685 demat accounts (afferent accounts), in concert with depository participants (DPs), in favour of the afferent persons. All the afferent accounts carried his name," Sebi said.
Sebi said Budhwani repeated the modus operandi in 13 IPOs -- IL&FS, IDFC, Gateway Distriparks, Shoppers Stop, MSP Steel & Power, Yes Bank, SPL Industries, Provogue, Gokuldas Exports, Tata Consultancy Services, Nectar Lifesciences, Sasaken Communications Technologies and Suzlon Energy.
"In the process, he made an unlawful gain of Rs 7.78 crore and facilitated others to make unlawful gain of 0.87 crore," Sebi said.
It had earlier issued show-cause notices to Budhwani in 2006 and 2010. Budhwani filed a written submission in March this year.
The Sebi order said: "It is a well settled principle that a person, who unjustly enriches himself by unlawful means should be required to give up the unjust enrichment..."
It also cited earlier orders by the Securities Appellate Tribunal (SAT) to state that disgorgement is not a penalty but "a monetary equitable remedy."
"The noticee (Budhwani) has not disputed any of the activities/transactions attributed to him in the show-cause notice," it said, however, adding that he had disputed the actual amount of unlawful gain.
"The noticee has disputed an amount of Rs 2,69,27,996 out of the total amount of unlawful gain of Rs 7,78,62,010 sought to be disgorged from him," it said, providing relief for the rest of the amount.
The IPO scam of 2003-05 refers to cornering of shares reserved for retail investors in the public issues of certain public offers, including IL&FS, TCS, Yes Bank, Shoppers Stop, through fictitious multiple demat accounts.
Source: Financial Express
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