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Saturday, June 4, 2011

Corp Bank to open 200 branches, hire 1,200

State-run lender Corporation Bank said it would recruit 1,200 people this fiscal with an aim to achieve its target of adding 200 branches to its network.

"This year, we will hire 1,200 people as we are planning to open 200 branches," the bank's Chairman and Managing Director Ramnath Pradeep said on the sidelines of a conference last evening.

"The process [of opening branches] is on. It [the expansion] will be across India, particularly in the northern states," he said, adding that the bank will comply with the Reserve Bank's directive of opening 25% of the new branches in Tier V and VI settlements.

On its overseas expansion, he said the bank has not been able to succeed much in the area till now. It has submitted a plan to the RBI, but the sector regulator is going slow on it as the bank is small in size, he added.

The bank is also planning to opening 4-5 branches in the African continent.

The Mangalore-based bank is targeting to increase its net interest margin to 3% in FY12, from the 2.5% it achieved for the year ended March 31, 2011.

Pradeep said in order to achieve the target, the bank will concentrate on garnering more of the cheaper Current and Savings Account (CASA) deposits.

He said the CASA component stood at 26% of the total deposit pie as on March 31, 2011, and the bank is aiming to take it up to 30% by the end of FY12.

Source: Business Standard
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Urban co-op banks allowed to lend to self help groups

The Reserve Bank of India (RBI) today allowed urban cooperative banks (UCBs) to give loans to self help groups (SHGs), a move that will help in promoting financial inclusion in the country.

"With a view to further expanding the outreach of UCBs and opening an additional channel for promoting financial inclusion, it has been decided to allow UCBs to lend to SHGs and Joint Liability Groups (JLGs)," an RBI notification said.

The central bank in its recent monetary policy had proposed to allow UCBs to lend to the two segments.

Lending to SHGs and JLGs would be considered as normal business activity of the bank. UCBs will be required to frame a comprehensive policy on lending to SHGs and JLGs.

The maximum amount of loan to SHGs should not exceed four times of the savings of the group, the RBI said.

It further said JLGs were not obliged to keep deposits with the bank and hence the amount of loan granted to them would be based on their credit needs and the bank's assessment of the credit requirement.

SHGs are micro entrepreneurs having homogeneous social and economic background who voluntarily come together to save small amounts regularly and mutually agree to contribute to a common fund to meet their emergency needs.

The main purpose of JLG is to facilitate mutual loan guaranteeing and execution of joint liability agreement, making them severally and jointly liable for payment of interest and repayment of loans obtained from the bank.

Source: Business Standard
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Banks to cover 350,000 villages by 2013: RBI

Around 350,000 villages across India would secure access to financial services offered by banks in the next two financial years, according to a plan banks have given to the Reserve Bank of India (RBI). RBI has asked banks to ensure that 223,473 villages have access to basic financial services by March 2012.

“Banks are still engaged in ecosystem development. Once that is done, banks said they would be able to scale up,” said K C Chakrabarty, deputy governor, RBI. Banks have been asked to include their financial inclusion performance when they evaluate the performances of their field staff, he added.

Chakrabarty said the number of ‘no frills’ accounts rose to 74 million from 50 million in a year in March, while the growth in no frills accounts with overdraft facilities has been sluggish. According to RBI, a ‘no frills’ account is one for which no minimum balance is insisted upon, and for which there are no charges levied if the balance is lower than the minimum balance permitted. Chakrabarty said opening no frills accounts was not enough to bring about financial inclusion. He said banks needed to strike a balance between opening branches and appointing business correspondents. “You cannot cover all services only through banking correspondents. You need to have brick-and-mortar branches, and that is why we have now made it mandatory that 25 per cent of the new branches have to be in unbanked villages,” he said. RBI had, in its annual policy, mandated banks to allocate at least 25 per cent of the total number of branches to be opened in a year to unbanked, rural centres.
In March, 99,840 villages were covered by banks, of which, 76,801 were covered through business correspondents.

Source: Business Standard
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Govt to give 8% interest on PPFs closed between May 05-Dec 10

New Delhi: The Government today said that PPF accounts of Hindu Undivided Families (HUFs) which were closed down between May 2005 and December 7 last year would get 8 per cent interest on the deposits.

The Finance Ministry has issued the clarification in view of the doubts raised with regard to payment of interest on Public Provident Fund (PPF) accounts held by the HUFs beyond the maturity period.

“ has been decided that interest at PPF rate would be paid on those PPF (HUF) accounts which had attained the maturity after May 13, 2005, but closed by the subscribers before December 07, 2010,” the clarification said.

The Government had in May 2005 had disallowed HUFs from opening the PPF accounts, which is a 15-year small saving scheme, and laid down the norms for closure of their accounts.

Under the scheme, the government also allowed subscribers to extend the operation of the PPF account for 5 years after the expiry of the 15-year period.

In a gazette notification on December 7 last year, the government had said that all the accounts which had already completed 15 years be closed by March 31, 2011, while the other accounts be wound up at the end of 15-year period.

The problem arose as some of the HUF account holders, who had closed their accounts between May 2005 and December 07, 2010, were not paid 8 per cent interest after completion of the 15-year period.

“Some of the subscribers of the PPF (HUF) accounts had closed the accounts on maturity or thereafter between May 13, 2005 (when the original order had come) to December 7, 2010 (before the issue of the amendments),” it said.

It said that some of the account holders were not paid interest at PPF rates on the deposits retained beyond the maturity period and that the government had received representations from them to redress the matter.

Such subscribers sought the interest at PPF rate on the deposits that were retained in accounts beyond their maturity period.

Now the Government has acceded to their request.

However, subscribers would be eligible for the interest at official rate only on the condition that the accounts had not been extended beyond the cut-off period and the deposits were retained in the accounts without further subscription.

Under the rules for HUF accounts, the head of the family is the ‘karta’ or the main operator of the account and the others are family members. While daughters can be members of an HUF, once married they cease to be members of the HUF PPF account promoted by their fathers.

Source: Financial Express
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Friday, June 3, 2011

RBI cancels registration of two NBFCs

MUMBAI: The Reserve Bank of India (RBI) has cancelled registration of S K Capsec Pvt Ltd , and Sansun Leasing and Finance Private Ltd for carrying on the business of a non-banking financial institution after their exit from the business.

The RBI on April 19, 2011 cancelled the certificate of registation to S K Capsec Private Ltd for carrying on the business of a non-banking financial institution as the company has voluntarily exited from the business, the apex bank said in statement.

It cancelled the certificate Sansun Leasing and Finance Private citing the same reason, it said in another statement.

Samsun Leasing and Finance Private Ltd is a Dehradun- based company while S K Capsec Private Ltd is based in Varanasi.

After the cancellation of the registration certificate, the company cannot transact the business of a non-banking financial institution, the central bank stated.

Source: EconomicTimes
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PayPal to end partnership with Alibaba

Shanghai: EBay's online payment unit, PayPal, will end its year-old partnership with AliExpress, the wholesale website of, from early August, PayPal said on Friday.

"PayPal remains deeply committed to China by providing Chinese merchants access to a safer and easier way to sell to millions of our users all over the world. And our business is strong," Dickson Seow, director of communications for PayPal Asia Pacific, said on PayPal's blog.

PayPal said its total payment volume in China was more than $4.4 billion in 2010, up 44 percent from a year ago. is a unit of Alibaba Group, which is about 40 percent owned by Yahoo Inc .

No reason was provided why both parties decided to end their partnership, but a document obtained by Reuters showed PayPal was unhappy with AliExpress's rising consumer business on the platform, which is meant for business transactions, and wanted to raise transaction fees for certain accounts.

"AliExpress is committed to serving our customers with choice in payment options," Sabrina Peng, vice president of, said in a statement.

EBay competes with and Alibaba Group's Taobao in China's e-commerce space.

Source: Financial Express
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Thursday, June 2, 2011

Oriental Bank of Commerce to increase retail advances by 50% this fiscal

KOLKATA: Oriental Bank of Commerce plans to increase retail advances by 50% this fiscal with special emphasis on housing loan sector. The bank chairman and managing director Nagesh Pydah said the bank has selected 600 out its 1,646 branches for intense retail loan delivery.

"We want organic growth in retail advances by using our excellent modern technology platform. We are targeting at the genY," Mr Pydah said.

The Delhi-based bank plans to disburse Rs 4,000 crore worth of retail loans during 2011-12 while at present it has an outstanding portfolio of Rs 8,000 crore, which is 12% of the bank's total loan book.

"We have decided that we will not give housing loans if the builders are outside of our approved list. We have had problems in the past in case of smaller builders," the CMD said, adding that the bank has decided to finance only first time home owners.

The bank's housing loan portfolio stands at Rs 6,000 crore and it wants to take it to Rs 9,000 crore by March 2012.

Mr Pydah said the bank can grow at 20% CAGR in the next two years without raising fresh capital as its capital adequacy ratio stands at a healthy 14.2%. It has a headroom of Rs 6,800 crore for raising tier 2 capital.

Source: EconomicTimes
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Dhanlaxmi Bank ups interest rates on select term deposits

MUMBAI: Private sector Dhanlaxmi Bank today increased interest rates on select term deposits by up to 0.50 per cent with effect from June 6.

For a short-term deposit with a maturity period between 91-179 days, the bank will offer an interest rate of 7 per cent per annum, an increase of 0.50 per cent, a press release here said.

Interest rates for medium-term deposits of 366 to 499 days and 501 days to two years have been increased to 9 per cent from the earlier 8.60 per cent.

These rates are applicable on deposits of up to and inclusive of Rs 1-crore, the release said.

Dhanlaxmi Bank's Head, Branch Banking & NRI Business, Salil Datar, said, "We have increased interest rates on select term deposits to offer more investment opportunities to our customers. The increase in deposit rates would help our customers to maximise returns on their savings."

Senior citizens are eligible for an additional interest rate of 0.50 per cent per annum for term deposits starting from 180 days and above.

For the 500 days product, the additional interest rate of 0.50 per cent per annum for senior citizens will be applicable for deposits of less than Rs 15-lakh only, the release said.

Source: EconomicTimes
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RBI directs Pvt, foreign banks to set up vigilance systems

MUMBAI: The Reserve Bank today asked private and foreign lenders to put in place a system of internal vigilance machinery and appoint a Chief of Internal Vigilance (CIV) by August to check frauds and malpractices.

The directive aims at bringing in such banks in line with the practices followed by state-owned banks to check frauds.

"In an endeavour to align the vigilance function in private sector and foreign banks to that of the public sector banks the existing vigilance functions of a few private sector and foreign banks were mapped with the existing guidelines in the matter and it was observed that the practices vary widely among the banks," RBI said in a notification.

"It has therefore been decided to lay down detailed guidelines for private sector and foreign banks on similar lines so that all issues arising out of lapses in the functioning of the private sector and foreign banks especially relating to corruption, malpractices, frauds etc can be addressed uniformly by the banks for timely and appropriate action," it said.

A compliance report to this effect may be submitted to RBI on or before August 31, 2011, it said.

In a separate notification, RBI asked all the banks and financial institutions to streamline procedure for detection of fraud and recovery of misappropriated fund.

The matter assumes significance in the light of Rs 460 crore fraud in Citibank's Gurgaon branch discovered last year.

The Central Vigilance Commission has issued guidelines to public sector banks on the appointment of Chief Vigilance Officer (CVO).

The purpose of having such system in place is to ensure that all the internal vigilance functions in the public sector banks are addressed through a set of pre-determined and structured procedures to ensure comprehensive treatment and transparency.

As per the guideline, the designated officer similar to CVO in case of public sector banks acts as a special assistant or advisor to the CEO of the concerned bank in the discharge of these functions.

An officer of suitable seniority is required to be designated as Chief of Internal Vigilance (CIV) who will head the Internal Vigilance Division of the bank, it said.

The normal tenure of a CIV would be 3 years extendable up to a further period of two years, it said, adding, but if the officer has to shift from one bank to another without completing the approved tenure in the previous bank, the principle of overall tenure of 6 years will apply.

Source: EconomicTimes
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Deposit & loan surge belies slump fears

MUMBAI: Banking activity remained brisk even amid talk of slowing investments as outstanding deposits and loans in the banking system surged in the fortnight ended May 20, from a year earlier.

Deposits on a year-on-year basis grew by 17.3% from May 2010 while credit rose by 22.27% from the same period a year earlier, data from the Reserve bank of India show.

Deposits mobilised by all commercial banks rose just 0.6% or 3,246 crore, to Rs 53,19,225 crore for the forthnight ended May 6 from the preceding fortnight, data from the Reserve Bank of India show. Total loans dipped Rs 5,270.6 crore to Rs 39,52,113.5 crore during the same period.

Most economists and bank analysts believe that demand for credit may slow in the coming months as higher interest rates could deter borrowing.

In fact, the country's largest bank, the State Bank of India , raised its lending rates - both prime lending rate and base rate - by 100 basis points to 14% and 9.25% in two phases in the month of April and May this year. Similarly, all PSU banks and private banks raised their lending rates in May by at least 50 basis points.

Even the data released by the government on Tuesday show that the economy grew 7.8% in the fourth quarter - a 21-month low as corporates preferred to go slow on their expansion plans.

Bankers, however, feel that slowdown could not be only on account of raising interest rates. But they are optimistic that they would be able to achieve 20-25% credit growth in this financial year.

Sensing poor deposits mobilisation, a number of banks, including Bank of India and Lakshmi Vilas Bank , have raised their deposit rates early this week. Bank of India raised deposit rates by 150 basis points in short tenure.

However, Bank of Baroda CMD MD Mallya and Union Bank of India CMD MV Nair told ET on Tuesday that they do not feel the need to raise lending or deposit rates in the immediate future.

The low demand for loans has led to some banks parking money in central government securities. This is reflected in the rise in investment portfolio. During the same fortnight, the investment book of banks rose Rs 16,739 crore to Rs 15,69,843 crore.

Source: EconomicTimes
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Wednesday, June 1, 2011

Union Bank revises deposit rates for NRIs

Public sector Union Bank of India (UBI) today announced a revision of rates in both foreign currency and rupee term deposits by the non-resident Indians (NRIs).

The interest rate on a majority of the deposits has been cut as part of the revision.

Under the new rate structure effective from today, a five-year dollar deposit will earn an NRI 1.71% interest as against the previous 1.77, while the same for the British pound sterling will be 2.56% versus 2.65% earlier, a bank release said here.

An Euro deposit between one and two years will now earn 1.91% as against the earlier 2.43%. In some baskets like an Australian dollar, deposit between three and four years will now earn an interest of 2.67% a year versus the earlier 2.64%, it said.

The rates for rupee term deposit by NRIs have also been revised downwards, the release said.

Source: Business Standard
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IndusInd Bank to add 150 branches in FY 12

MUMBAI: Private sector lender IndusInd Bank today said it plans to open nearly 150 branches in the country during FY 12 to take its total network strength to over 450 branches.

"IndusInd Bank plans to touch 450 branches in India by March 2012," a release issued by the bank, after the inauguration of its 301st branch in central Mumbai's Prabhadevi, said.

During the current fiscal, the bank will be focussing on distribution, branch expansion and providing universal banking solutions, the release said.

"The bank is stepping up its branch expansion momentum and this branch will be one more step in our journey to become a universal bank. The focus for us will be to provide unique banking experience to our customers," the bank's Managing Director and Chief Executive, Romesh Sobti, said in the release.

The Prabhadevi branch will be open across the year, including Sundays and other holidays and also has an automated teller machine, which allows customers the freedom to choose notes from a mix of Rs 100, Rs 500 and Rs 1,000 denominations, the release said.

Source: EconomicTimes
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LIC launches new health policy

The country’s largest life insurer, Life Insurance Corporation of India (LIC), today launched a new health insurance plan, Jeevan Arogya.

The policy, to be available from June 1, offers comprehensive hospitalisation benefits for the whole family of the principal insured.

“A unique feature of this plan is that it also offers to cover the parents in-law of the principal insured, besides spouse, minor children and parents. There is a provision for inducting additional members or removal of existing members in case of any change in family circumstances of the principal insured,” LIC said in a release.

The policy covers 140 major surgeries. “The minimum age at entry for the principal insured is 18 years and the maximum age at entry would be 65 years for self and spouse, while it is 75 years for parents and parents in-law,” LIC said

Source: Business Standard
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IDFC to wind up project development business

Infrastructure Development Finance Corporation Ltd (IDFC), is set to wind up IDFC Projects, its projects development business. The business, into which the company had forayed in 2007, had recorded losses.

Currently, the subsidiary company accounts for two projects — a Rs 5,000-crore power project in Chhattisgarh and a Rs 1,000-crore road project in Gujarat. IDFC Projects owns 74 per cent stake in both the projects and the company's total exposure in these projects is estimated at over Rs 400 crore.

According to company sources, IDFC Projects would not make any fresh investments and would exit the projects step by step, by diluting stakes and booking profits. However, the fate of IDFC Projects after the exits is not yet clear.
“Strategically, we don't want to grow the IDFC Projects business anymore. We would be focusing on our core business, which is basically providing infrastructure finance,” a senior IDFC official told Business Standard. “For the existing projects, we would look to exit by booking profits or finding partners with more relevant expertise and let them run the show.”

IDFC Projects, which started operations in 2009, was set up in 2007 to develop, implement, own and operate infrastructure projects. During 2009-10 and 2010-11, the company incurred losses of Rs 8.81 crore and Rs 7.2 crore, respectively. Losses carried to the balance sheet stood a little over Rs 25 crore at the end March. In 2009-10, it won the bid to set up a 1,050-Mw coal-fired power plant for Dheeru Powergen Private Limited (DPPL) in Korba district, Chhattisgarh. DPPL is a joint venture between IDFC Projects Limited and Ranhill Dheeru Malaysia.

According to sources, IDFC may opt for an open tender to sell the power project at a good return on its investment. IDFC Projects had bought 74 per cent stake in the company for Rs 147 crore, while Malaysian construction company Ranhill Berhad owns the remaining stake. For the 127-km road project in Gujarat, it formed a joint venture with Malaysia-based PLUS Expressway Berhad.

“We have identified infrastructure finance, asset management and private equity business as our core business, and we would like to concentrate on them for the time being,” said a senior IDFC official. Apart from IDFC Projects Ltd, other IDFC subsidiaries include IDFC Private Equity, IDFC Project Equity, IDFC Securities and IDFC Asset Management Company.

In December 2010, IDFC sold 25 per cent equity stake in IDFC Asset Management Company to France’s Natixis Global Asset Management. However, the deal is yet to secure the final approval from regulators.

As on March 31 2011, IDFC’s balance sheet stood at Rs 47,554 crore, a rise of 42 per cent from Rs 33,562 crore a year ago.

Source: Business Standard
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IDBI Bank mulls share sale to boost capital base

State-run lender IDBI Bank may consider raising funds through a follow-on share sale in the current financial year to boost its capital base, a senior official told Reuters on Tuesday, joining other lenders raising money to boost growth and meet rising credit needs.

"We are looking at all the possibilities, and, if the timing is right, we may think of raising some equity", said RK Bansal, executive director, without disclosing the size.

"At present, government shareholding is at 65% so we do have some leeway. If at all we raise it, it may be an FPO kind of thing," he said, adding it could be in the second half of the year.

IDBI shares, which were up around 1% before Reuters snaps, extended gains to 2.5% in a firm Mumbai market. They ended up 2.2% at Rs 134.55.

Last week, Bank of India's board approved raising funds selling shares while Indian Bank hopes to hit the market with its follow-on public offer by the end of August or early September.

In March, Canara Bank raised $443 million by selling shares to institutional investors.

IDBI itself has plans to raise $1 billion through medium term notes in the fiscal year that ends in March 2012.

Several Indian lenders have put their plans for domestic debt raising on the backburner, deterred by surging interest rates. They are waiting for borrowing costs to soften before hitting the market, while some may tap the equity markets, banks and analysts said.

The Reserve Bank of India has raised key policy rates nine times since March 2010, including the larger-than-expected 50 basis points hike in its annual monetary policy statement on May 3, to curb sticky inflation.

However, Bansal said IDBI will wait for the markets to improve before taking a call on the share sale and is currently focusing on its branch expansions and the low-cost current account savings account (CASA) for growth.

IDBI is looking at credit growth of 15-16% in this fiscal year against the central bank's target of 19%. Most other banks have said they were eyeing lending growth of around 20%.

"As of now our problem is that our balance sheet size is too big vis-a-vis our branch network. So there's no other choice than concentrating more on opening branches and CASA rather than looking into only credit growth," Bansal said.

"Once we reach CASA of at least 25% then we can re-look at this strategy."

The lender, which has 850 branches, plans to add 250 more by March to expand its network, he added.

It is also looking to step up recourse to refinance facility provided by financial institutions such as EXIM Bank, Nabard and SIDBI to save costs and plans to avail Rs 7,000-8,000 crore refinance this year compared with Rs 4,000-5,000 crore a year ago.

"The advantage is that refinance doesn't attract statutory liquidity ratio (SLR) or cash reserve ratio (CRR). If I raise the same money through deposits, costs goes up because of SLR, CRR while if I take refinance my cost remains cheaper."

Source: Business Standard
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Don't `bank' on B-school graduates alone: RBI Deputy Guv

Mumbai: Reserve Bank Deputy Governor K C Chakrabarty questioned lenders' fascination with hiring B-school graduates and said that with concepts like financial inclusion being the driving theme, the banking sector needs personnel connected to the ground realities.

"When financial inclusion is the major concern of Indian banking, don't we need people who would be closer to the ground realities of the countryside? How many of these people recruited through B-schools will have empathy towards the poorest of the poor? Why should we be rushing to the B-school campuses for recruitments?" he asked.

Chakrabarty strongly favoured the conventional pattern of recruiting through competitive exams so that everyone gets afair chance of getting employment and the banks find the right talent.

By going to the campuses, banks will get the "skills and knowledge" but not "talent" which comes naturally to an individual, he said, pointing out to his own personal experience of getting into a bank through a competitive exam.

Chakrabarty also questioned the practice of online job applications, which is gaining currency among banks, saying that given the low Internet penetration, how many people would actually apply for the job?

Because of the increasing thrust on financial inclusion, Chakrabarty said a greater stress should be also laid on hiring and training the right business correspondents who will act as a bank's representatives in villages.

Source: Financial Express
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Banks' NPAs may rise due to rate hikes : Central Bank Chairman S Sridhar

MUMBAI: Central Bank of India's Chairman and Managing Director S Sridhar today said non performing assets (NPAs) for the industry are likely to increase, as some smaller companies that had borrowed in a low rates regime, find it difficult to service their loans due to hike in rates.

"Some increase in NPAs cannot be ruled out, in my view across the industry," he said, adding that different banks would adopt different strategies to deal with the problem.

The stress will emanate from smaller accounts, which "are not able to bear the increased cost of funding" and are constrained because of a "lower access" to money as compared to the past, he said.

Sridhar pointed out that the stress can be traced back to the years of global slowdown after 2008 September, when the Government announced a stimulus that resulted in high liquidity and low rates.

"Somebody down the chain will have to bear the stress," Sridhar said, adding the stress is "inevitable".

The Reserve Bank had adopted a stance of softening in policy to fuel growth in the slowdown years and then started to tighten it as tackling the growing inflation took precedence.

RBI has raised its key rates a record eight times in the last 12 months in order to tame the inflation number, the last one being a higher-than-expected 50 bps hike on May 3 and also given a guidance of attacking the number even at the cost of a short term blip in growth numbers.

Sridhar said Central Bank of India is installing a software, which will point out stress in assets at an early stage, so that actions of containing it can be taken swiftly. "The idea is to be proactive than reactive," Sridhar, who retires from the bank today, said.

Central Bank of India today announced a tie-up with brokerage firm Angel Broking , which will announce its account holders to trade in different asset classes like equities, derivatives and F&O, among others.

Source: EconomicTimes
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Bank of India raises deposit rate by up to 2.5 per cent

MUMBAI: State-owned Bank of India (BoI) today raised fixed deposit rates on various maturities by up to 2.5 per cent.

The bank increased the interest rate by 250 basis points (2.5 per cent) to 5.50 per cent for term deposits of 31-45 days' tenor. The deposit rate increase is the maximum in this slab, the bank informed the Bombay Stock Exchange (BSE).

For fixed deposits with a tenor between 15-30 days, the new interest rate will be 4.50 per cent against the existing 2.75 per cent, while 46-90 days fixed deposits will attract an interest rate of 5.50 per cent, an increase of 150 basis points.

The interest rate on term deposits of between 2 to 3 years' tenor will go up by 75 basis points to 9 per cent from tomorrow, while interest on the 5-8 years' maturity slab has been increased by 25 basis points to 8.75 per cent.

Meanwhile, Lakshmi Vilas Bank also announced revision on interest rate on term deposits. The bank has increased the interest rates on 1-2 years by 40 basis points to 10.50 per cent.

Source: EconomicTimes
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SKS Microfinance to levy 1% processing fee

MUMBAI: SKS Microfinance today said it will charge a processing fee of 1 per cent of the amount on all micro loans offered, a move that would provide greater transparency in operation.

The credit shield insurance premium will be collected from the borrowers on the actual basis without any administrative charges, SKS Microfinance informed the Bombay Stock Exchange.

The new charges would be levied from June 1, it said. This is in accordance with the RBI guideline earlier this month.

As per the guideline, an MFI can levy only three charges --- a processing fee not exceeding 1 per cent of total amount, interest and insurance charge.

Source: EconomicTimes
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Tuesday, May 31, 2011

RBI went against majority view of lower hike to tame inflation

Mumbai: Rejecting the majority view of lower increase in key policy rates, RBI opted for 50 basis points hike in its short-term lending rates to contain inflationary expectations.

“While four members of the Committee were of the view that the repo and reverse repo rates be raised by 25 basis points each, two members suggested 50 basis points increase each in the repo rate and the reverse repo rate”, according to minutes of the technical advisory committee meeting held on April 27, 2011.

Besides, one member was of the view that statutory liquidity ratio (SLR) could be increased by 100 basis points and the repo facility of the Reserve Bank be limited up to 2 per cent of excess SLR securities held by banks, it added.

The committee also noted that there were some signs of investment demand slowing down and that the growth in 2011-12 could be lower than that estimated for 2010-11, a week before the RBI’s annual monetary policy review which pegged GDP at 8 per cent for this fiscal.

The committee also felt that inflation would continue to be at an elevated level in the first half of 2011-12, before moderating.

In particular, it expressed concerns over rising global commodity prices, especially crude, and felt that elevated level of global commodity prices was a major risk to both global growth and global inflation.

“Going forward, inflation was a major risk to growth”, it added.

Headline inflation in April was 8.66 per cent, whereas food inflation was 8.55 per cent for the week ended May 14, much above the central bank’s comfort level.

In a bid to tame inflation, the Reserve Bank hiked repo (lending) and reverse repo (borrowing) rates by 50 basis points in the annual policy.

The steep hike in policy rates clearly demonstrated the fact that inflation management was RBI’s top-most priority in the trade-off between growth and price rise.

The central bank has hiked key policy rates nine times since March, 2010.

Source: Financial Express
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LIC to offer UIDs to 40 mn policyholders this year

Unique Identification Authority of India’s (UIDAI) plan to offer a unique identification number (UID) to every resident Indian is slated to get a fillip, with the country’s largest life insurer — Life Insurance Corporation of India (LIC) — saying it is ready to offer unique identification cards to its policyholders.

About a year ago, LIC had signed an agreement with UIDAI to share its database of over 200 million policyholders with the government agency and issue biometric cards to these policyholders. LIC was the first institutional partner in the Aadhaar project, a national project aimed at building a secure, reliable and centralised repository of data.

However, till recently, the progress was slow, since the insurer was scouting for technology partners to make the biometric cards. Till date, LIC has issued 30,000 cards to policyholders on a pilot basis. “We have roped in CMC as the technology partner for the project. The national roll-out will happen very soon now,” said LIC Managing Director A K Dasgupta.

Senior LIC officials said the insurer planned to issue biometric cards to 50 million people every year for the next four years. The insurer has set a target of issuing 40 million cards this year, the cost for which is estimated at Rs 200 crore, or Rs 50 per card.

LIC also expects to expand its business through the Aadhaar project, especially in rural areas. “Through this project, LIC would be able to tap a greater number of people in rural areas. Since this card will act as a proof of identity, it would be much easier for us to fulfil the know-your-customer requirements. We will also be able to revisit our policyholders through this process. This would allow us to upgrade our existing records and expand business further,” Dasgupta said. LIC aims to become the largest issuer of Aadhaar cards in the coming years, since its clients outnumber members of other government agencies like Employees’ Provident Fund Organisation, which has 42 million employees as its members.

LIC would initially issue biometric Aadhaar cards to its own policyholders and then gradually, expand the issuance to individuals who don’t hold LIC policies. “Besides existing policyholders, we would also issue cards to their family and friends. This gives us an opportunity to expand our policyholder base,” said a senior LIC official.

The unique identification project was conceived by the Planning Commission as an initiative to provide identification to resident Indians. This would provide a basis for efficient delivery of welfare services. Nandan Nilekani, co-founder of Infosys Technologies, heads the project.

UIDAI is currently reported to be issuing 100,000 cards a day. The first Aadhaar card was issued in September 2010 to a tribal woman, Ranjna Sadashiv Sonwane, from Tembhali village in Nandurbar, Maharashtra.

Source: Business Standard
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Monday, May 30, 2011

RBS exec suspects UK to start selling stake in 2012

Britain could start selling its 83% stake in Royal Bank of Scotland (RBS) in 2012, a senior company executive said on Monday.

"I suspect it will be in 2012," RBS Asia Pacific Chief Executive John McCormick told Reuters in an interview, adding the move would likely depend on the bank's share price.

The Sunday Telegraph, citing sources close to the process, reported earlier in the month that Britain may start selling its stake as early as the first half of 2012, targeted at institutional investors and sovereign wealth funds from the Middle East and Asia.

The government finished with stakes of 83% in RBS and around 40% in rival Lloyds after bailing out both banks with billions of pounds worth of taxpayers' money during the credit crisis.

McCormick also said he expects Asia to account for one fifth of its global wholesale and investment banking revenue in five years, up from 14% currently.

"You can see America and Europe have gone flat and you can see Asia increasing. We want to become a bigger part of the bigger pie," McCormick said in the interview in the eastern Chinese city of Wuxi, where RBS launched a brokerage joint venture with Guolian Securities Co.

RBS has disposed of its retail banking business in Asia to focus on its core markets in the United States and Europe.

In China, RBS transferred its retail banking business to Singapore's DBS Group last year, but has preserved its wholesale and corporate banking businesses including a commercial lender, a trust venture and a futures brokerage venture.

Source: Business Standard
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Intel to sell products to boost RBI's fin inclusion

Global chip maker Intel sees big opportunity in RBI's financial inclusion programme and is all set to launch its Universal Handheld Device (UHD) for banking operations by the end of this year, according to a top company executive.

"The UHD reference design has been developed in India for Indian market. We are taking to companies, who are willing take it up with their brand name," said R Ravichandran, director (sales), Intel South Asia.

UHD is a compact instrument with seven inch screen and a biometric finger print readers along with a thermal printer, which can be used by business correspondents hired by banks to take banking to rural and remote areas of the country.

As two-thirds of the Indian population doesn't have access to banking services, the RBI has come out with an initiative –Financial Inclusion-- in which banking will be taken to the doorsteps of rural masses.

Most of state-owned banks have already announced their Financial Inclusion plans and targets and started recruiting business correspondents in large scale.

UHD, which is an Atom-based embedded device has a printer, biometric capable. It has got a smartcard reader and is also GPRS integrated. Customers can pick and choose the functions they want to perform.

According to Ravichandran, the pilot programme and device testing is currently underway and they anticipate huge demand for this device as the financial inclusion programme takes off at large scale.

Ravichandran said the price of the UHD instrument will depend on the configuration and may start from Rs 30,000-35,000.

"Various features of the device like Battery life, connectivity are being tested in rural conditions. Hopefully by the second half of this year we see some deployments happening. People are also happy with the product," he said.

Replying to another question, he said Intel was also weighing options like exporting these products to Brazil and South Africa.

Further, according to a senior official of Intel, the chip maker entered in to an agreement with a Taiwanese ODM. As per the agreement Intel will get royalty for every piece that is sold.

Source: Business Standard
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