Bank employees to strike work on July 7

About 10 lakh bank employees across the country will go on strike on July 7 to protest against the government's policies on public sector banks, the United Forum of Bank Unions has today.

"The Centre is following a policy that will destroy public sector banks in the country," AK Ramesh, National President of Bank Employees Federation of India (BEFI) told reporters here.

The striking employees are demanding no privatisation of public sector banks, non merger of banks and ban on outsourcing, he said.

Source: Business Standard

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India likely to be largest economy by 2050: Robert Blake

KOLKATA: US Assistant Secretary of State (Bureau of South and central Asian affairs) Robert O Blake today said the future of Indian economy seems very bright and the country is likely to become the world's third largest economy by 2030, and the largest by 2050.

He added, "The incredible growth of India's economy has resulted in positive spillover effect for the US between 2002-2009, US goods exports to India quadrupled, growing from $ 4.1 bn to more than $ 16.4 bn in 2009."

"US services exports to India more than tripled from $ 3.2 bn to $ 9.9 bn during the period," he said.

Last year, US-India trade in goods broke a record with US exports increasing by 17 per cent and US imports from India rising by 40 per cent, he said during a seminar on 'West Bengal and Beyond: US-India business links and prospects' here.

"This surge of nearly 30 per cent to a high of $ 48.8 bn in goods trade moved India up two notches to become our 12th largest goods trading partner. This positive trend continues, with two-way trade up 19 per cent in the first quarter of 2011, over the same period last year," he said.

Blake said US trade with India was very much a two-way exchange with mutual benefits to both the countries.

"Robust two-way trade means citizens from Kolkata to Kansas will see the benefits of our trade agreement," he added.

Source: EconomicTimes

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Saurabh Agrawal to join StanChart as i-banking head

Saurabh Agrawal, the high-profile banker known for his deal-making skill in sectors like telecom, media, technology and infrastructure, is all set to join Standard Chartered Bank as head of its investment banking division for south and south-east Asia, sources said.

Agrawal, 42, will join Standard Chartered Bank after a 16-year stint with DSP Merrill Lynch (now Bank of America Merrill Lynch) where he is currently the managing director and head of investment banking.

The top position at Standard Chartered Bank’s investment banking division has been vacant since Anantharaman Venkataramanan resigned earlier this year.

An alumnus of the Indian Institute of Management, Calcutta, Agrawal is expected to join Standard Chartered Bank in September this year. He will be responsible for corporate financing and M&A (mergers and acquisitions) advisory businesses of the bank.

He did not wish to comment for this story.

Standard Chartered Bank also declined comments, while officials of Bank of America Merrill Lynch could not be reached immediately.

Agrawal is credited with managing successful initial public offers of top Indian companies in telecom and technology space. He was the banker to the country’s largest software exporter, Tata Consultancy Services (TCS) and India’s third largest telecom company by revenue, Idea Cellular, when these companies went public in 2004 and 2007, respectively.

He is believed to be close to the Aditya Birla Group as he managed several deals, including merger between Idea and Spice Communications and Telecom Malaysia buying stake in the Indian mobile phone services company.

But he has been equally active in managing deals of the Tata Group of companies, including TCS’ acquisition of Citigroup’s captive business process outsourcing unit in 2008.

“Saurabh Agrawal is a very good banker. He has vast experience in telecom, technology and other sectors. I’m sure wherever he goes, he will be successful,” said Hemendra Kothari, former chairman of DSP Merrill Lynch.

In the infrastructure sector, Agrawal was the man behind the deal between GMR Infrastructure and Intergen. He was also the banker to transactions like Turner buying majority stake in NDTV Imagine, Walt Disney acquiring stake in UTV Software and Oracle buying i-Flex.

Source: Business Standard

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Rajasthan to set up mini banks

JAIPUR: Rajasthan government is planning to set up mini cooperative banks at Bharat Nirman Rajiv Gandhi Seva Kendra. The state cooperative minister Parsadilal Meena Tapesh Panwar told ET that these mini banks will reach out to small and marginal farmers of villages which are out of cooperative net.

There are 9,184 village panchayats and 249 panchayat Samiti in the state out of which more than 1000 villages don't have any cooperative set up. "We are not able to disburse agriculture loans at panchayats which are not covered by central cooperative banks and village cooperative societies. Rajiv Gandhi Seva Kendra provides us an opportunity to set up a one-room computerized mini bank which can not only disburse agri-loan but also bring unbanked population under the banking net," he said.

The mini banks will be empowered to disburse agriculture loan up to Rs 1 lakh based on the credit credentials of the farmer. This year, the state government has set a disbursement target of Rs 6000 crore as against last year's disbursement of Rs 5500 crore. "So far we have bee able to disburse Rs 1600 crore in this kharif season. These mini banks will help us in achieving our target," he said.

Besides, these mini banks will also double up as a payment points for NREGA workers. The cooperative banks account for 35-40% of the total NREGA payments. NREGA workers in unbanked areas get their wages through post offices. "With these banks in place the payment records too will be computerized bringing in more transparency," said a cooperative department official.

This is part of Rajasthan government's ambitious e-governance project for rural areas, where Bharat Nirman Rajiv Gandhi Seva Kendra will be used as multi-utility points. The state government has earmarked Rs 500 crore for the computerisation of all seva kendra in the state. Under this, each of the 249 blocks in Rajasthan would have one Kendra which would facilitate rural citizens in payment of various types of bills, in making rail reservations and in procuring copies of birth/death/caste certificates without 'usual harassment and delay'.

Source: EconomicTimes

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RBI credit policy: Home, auto loans to become costlier on rate hike

MUMBAI: Be prepared to pay more every month on your home, auto and other loans, as the Reserve Bank today, for the 10th time since March, 2010, raised key interest rates by 25 basis points in its effort to control spiralling inflation.

The RBI has raised the short-term lending (repo) rate by 25 basis points to 7.50 per cent and the short-term borrowing (reverse repo) rate will move up by a similar margin to 6.5 per cent. It kept other rates and ratios unchanged.

The mid-quarterly policy initiatives, the RBI said, are expected to contain inflation, which is currently over 9 per cent, much above the comfort level of the central bank.

"The RBI has sought to maintain an interest rate environment that moderates inflation and checks inflationary expectations," the Finance Ministry said in a statement, adding that this was on expected lines.

"We need to have price stability for sustaining growth in the medium term," it added.

Bankers said the move would put pressure on interest rates and may make loans costlier subsequently.

"It (RBI's move) will put pressure on short-term deposit rates and subsequently on the lending rates. But rate hike by banks would not be immediate," Indian Overseas Bank CMD M Narendra told PTI.

While announcing the measures, the RBI said that tightening of the monetary policy would impact economic growth, which is already under pressure, in the short term.

With the rise in the repo rate, the interest rate for the additional lending facility of the RBI under the marginal standing facility (MSF) has gone up by 25 basis points to 8.5 per cent. This facility was introduced in the annual policy that was unveiled on May 3.

The monetary policy stance, the RBI said, "remains firmly anti-inflationary, recognising that, in the current circumstances, some short-run deceleration in growth may be unavoidable in bringing inflation under control."

The economic growth rate in the fourth quarter of the last financial year decelerated to 7.8 per cent from 9.4 per cent in the same period a year ago, raising fears of a slowdown.

Also, industrial production during April, 2011, moderated to 6.3 per cent from over 13 per cent in the same month last year.

Source: EconomicTimes

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Bank deposits grow faster than advances

Higher interest rates on bank deposits continued to attract funds, as the deposit base of banks grew by around Rs 58,000 crore in the fortnight ended June 3. Banks disbursed loans worth around Rs 28,000 crore in the same period.

According to data provided by the Reserve Bank of India (RBI), deposits grew 18.2 per cent annually, up from 17.37 per cent a fortnight ago. The data reflects the fact that the focus of banks has now shifted to strengthening the base of deposits.

“At the moment, deposit growth is very important for banks, as the credit deposit ratio is already high, and going forward, banks would need a strong deposit base if they want to continue to lend,” said Hatim Brochwala, research analyst, Fortune Financials.

Bank credit grew by 21 per cent annually as on June 3, down from 22 per cent a fortnight ago. “This reflects the impact of higher lending rates on credit demand has started to show,” Brochwala said.

Most banks had increased their base rates after RBI’s policy rate rise of 50 basis points on May 3. The country’s largest lender, State Bank of India, had raised its base rate by 75 basis points, effective May 12. This was the second rate increase by the bank in a month. The base rates of most commercial banks currently range between 9.5 per cent and 10 per cent.

With inflation still hovering above the comfort level, RBI is expected to continue the rate rise cycle longer than expected. Wholesale price index inflation stood at 9.06 per cent in May, up from 8.66 per cent in April. As a result, it is widely expected RBI would raise policy rates by 25 basis points in the mid-quarterly review on June 16.

Additional rate increases are expected to hamper credit demand. “Credit growth would slow down further and would remain at around 19 per cent for the current financial year,” said Brochwala.

RBI has projected a growth of 19 per cent in bank advances and 17 per cent in deposits by the end of the current financial year. In the last financial year, bank advances, at 21 per cent, exceeded RBI’s expectations, while deposits lagged at 16 per cent.

Source: Business Standard

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RBI may hike key rates by 25 bps: Bankers

New Delhi: With inflation hovering much above the comfort zone, the Reserve Bank may raise key policy rates by 25 basis points in its first mid-quarterly review of the credit policy for FY'12 on Thursday.

"I think the RBI would take one more small step to curb inflationary expectations. Market is expecting a 25 basis points increase," Indian Overseas Bank Chairman and Managing Director M Narendra said.

One thing is certain, inflation is beyond the comfort level and the RBI has already expressed its concern on many occasions, he said.

In its annual policy document for 2011-12 released last month, the RBI had said that inflation control would be its primary focus in the near future, even as it agreed that the high rate of price rise would impact the country's growth story.

"Given the inflation condition, the general consensus is that RBI would raise rates by 25 basis points," said Punjab & Sind Bank Executive Director P K Anand.

For the month ended May, inflation moved up to 9.06 per cent from 8.66 per cent in the previous month, mainly on account of a rise in the price of manufactured products.

According to IDBI Bank Executive Director R K Bansal, rising inflation numbers have raised the expectations of a rate hike by the RBI.

"My feeling is that the central bank could further raise rate by 25 basis points," Bansal said.

The RBI has hiked key policy rates nine times since March, 2010, and is likely to continue with its tight monetary policy stance to tame inflation, which is edging toward double digits.

The central bank, in its annual policy, had accepted that inflation would remain a matter of major concern in the next few months on account of high global commodity prices, particularly of crude.

Analysts feel that repeated rate hikes have led to dwindling investment, which is turn has led to a slowdown in economic expansion.

During the January-March quarter, the Gross Domestic Product (GDP) expanded by only 7.8 per cent, the slowest pace of growth in five quarters.

At the same time, factory output -- as measured by the Index of Industrial Production (IIP) -- grew by only 6.3 per cent in April, as against 13.1 per cent in the corresponding period last fiscal.

However, the central bank's priority would be to check price rise, analysts said.

According to IndusInd Bank Executive Vice-President Moses Harding, headline inflation shooting past the 8.5-9 per cent tolerance zone in May has set off alarm bells. There is now extreme pressure on the RBI to continue with its rate hike actions and maintain the repo rate as the operative policy rate for an extended period of time.

Source: Financial Express

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No talks with Nigeria's Spring Bank: ICICI

Lagos: ICICI Bank said on Wednesday it was not in talks with Nigeria's Spring Bank about any investment, denying a statement made a day earlier by the Nigerian lender.

"ICICI Bank is not in discussions with Spring Bank for any investment," a spokesman for the Indian bank said.

Spring Bank said in a statement on Tuesday it was in recapitalisation talks with several possible investors including ICICI and U.S.-based private equity firm Cloudleap Partners.

Source: Financial Express

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Muthoot Finance faces RBI probe on gold bonds

Muthoot Finance's method of raising money through gold bonds has been questioned by its competitors, including a few public sector banks. This has resulted in a probe by the Reserve Bank of India (RBI).

According to a few banks, the bond issues by Muthoot Finance were not in strict compliance with norms relating to raising money from the public, and this gave Muthoot Finance an advantage over its competitors, said two people familiar with the development.

“The complainants have, in their detailed report to RBI, said how the bonds were being issued to walk-in clients at any Muthoot Finance office in the country,” one of the sources said. An RBI spokesperson confirmed the probe. When asked whether there were concerns over the debentures, the spokesperson said, “We are examining the books of gold loan companies. This will probably cover everything.”

Muthoot Finance, which is registered as a non-deposit taking non-banking financial company (NBFC), is regulated by the central bank and had raised about Rs 3,900 crore through non-convertible debentures. For gold loan firms, these debentures are an important source of funds, since RBI had, in February, taken the sector off the priority sector list. According to company officials, this money is raised through private placement in several tranches. The terms of these debentures can be found in the forms available in any of the Muthoot outlets, the officials said. Company officials also said the RBI audit was a routine one and nothing untoward was found. A senior Muthoot Finance official said, “The company has followed all applicable rules and regulations, and the bonds are in the form of secured debentures, which are privately placed.” He added these debenture sales would not amount to a public issue, as there was no invitation or an advertisement inviting the public to subscribe.

Provisions in the Companies Act allow NBFCs governed by RBI to raise money from more than 50 people, without attracting the public issue provisions of the Act. However, such efforts should not, directly or indirectly, be aimed at raising money from members of the public or from people to whom the offer is not made directly, say experts.

According to these rules, “The offer for shares or debentures made by an NBFC or a public financial institution, should not be calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by people other than those receiving the offer or the invitation.”

“In short, an NBFC can send named invites to even 1,000 people. But if it keeps blank forms and takes deposits from walk-in customers, that would amount to a public issue and would attract the relevant provisions,” said a company secretary.

Gold finance companies, including Muthoot Finance, have been raising money through non-convertible debentures at an interest rate of around 12 per cent per year. However, being a non-deposit taking NBFC, it is not subject to restrictions like liquidity reserves and cash reserves, conditions banks are subject to. “This makes their cost of funds much lower than their competitors and margins much better. However, it exposes them to that much more risk, since there is no protection against depreciation in gold prices or liquidity risks,” said one of the sources.

Source: Business Standard

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Manappuram to take NCD route to raise Rs 1,000 crore

MUMBAI: Manappuram General Finance and Leasing will raise up to Rs 1,000 crore through retail non-convertible debenture issue by the second week of July, sources told ET.

The non-convertible debentures (NCDs) will likely have a coupon size of 12% with 3-5 years tenure, an investment banker with knowledge of the company's fund raising plans said. The gold finance company is in talks with Morgan Stanley , Axis Bank and AK Capital to manage the issue, sources said.

"The Rs 1,000-crore issue would comprise Rs 500-crore greenshoe option and the proceeds would be used to fund the company's growth plans," the investment banker said.

"Gold loan business has been witnessing good growth of over 100%. This requires more funds and we are looking at diversification through retail issuance. Retail bonds would play a major role in this condition and provide better asset liability match for us," Manappuram General Finance MD I Unnikrishnan said.

The company has appointed credit rating agency CARE to rate the issue, sources said. "It would help the company to reduce its dependence on bank loans to pursue growth. Depending on the success of the issue, the company would hit the same fund raising route every year," said the investment banker.

The search for cheaper capital amid rising interest rates is prompting companies and financial institutions to raise money through non-convertible debentures. NCDs are a type of debt instrument that are issued for fixed maturity and cannot be converted to equity. Typical redemption periods range from 3-5 years.

NCDs can be issued to retail as well as institutional investors such as banks, insurance companies, corporate treasuries and provident fund trusts. Manappuram's long-term rating from CARE is AA-. In the current scenario, triple A-rated corporate NCD issuances bear a rate of 9.60-9.95%.

Source: EconomicTimes

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Rising interest rates to hurt banks' profit: RBI

The Reserve Bank of India (RBI) today cautioned rising interest rate and high cost of funds could hurt the profitability of the banking sector.

"Going ahead, with hardening interest rates and the imminent increase in cost of funds, the credit growth is expected to slow down, which could adversely affect the profitability," the RBI said in Financial Stability Report released today.

The hike in savings account interest rate, amortisations of pension liabilities and potentially enhanced provisioning requirements for NPAs may also impact profitability, it said.

The report noted that banks' profitability improved, buoyed by increased net interest income (NII) though non-interest income remained stagnant.

An increase in NII facilitated growth of around 20% in aggregate net profit of the banking system, even with an almost stagnant non-interest income and increase in risk provisions, it said.

Interest income increased by 18.6% over 7.5% last year and interest expense increased by 10.1% as against 4.0% last year, it said.

There was improvement of 34.9% in the NII of the banks during 2010-11 despite little change in non-interest income, increase of 49% in risk provisions and 24% increase in operating expenses.

The growth in interest income by 18.6% was, however, not in tandem with the growth in loans and advances which grew by 22.6% during 2010-11, it said.

However, it said, the public sector banks registered a lower growth in profits – mainly due to reduction in trading profits, increase in provisions towards staff expenses (including those for pension liabilities) and towards impaired assets.

Under stress conditions based on NPA shocks, it said, the profitability of the banks was seen to be affected significantly though the capital adequacy position appeared to be reasonably resilient.

The study indicates that some banks may face extreme liquidity constraints, under severe stress scenario. Overall, the results of the macro-stress tests using different scenarios, suggested that the banking sector would be able to withstand macroeconomic shocks though the prevailing inflation and interest rate situation is expected to have an adverse effect on the asset quality of banks, it said.

Source: Business Standard

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Savings account interest is exempt from TDS

When do I have to file Form 15H to banks for not deducting TDS on fixed deposits

-Ruchi Gupta

It is advisable to submit the applicable form to the bank branch at the beginning of the assessment year in case of existing deposits or at the time of opening a fixed deposit account. You should also mention your PAN details, without which it would be invalid and TDS at the applicable rate or 20%, whichever is higher, will be deducted. This form should be submitted to all the branches where you have the deposit and for each new deposit that is placed with the bank. If you do not submit form 15G or 15H, as applicable, the bank may deduct the TDS and issue TDS certificate at the end of year. You may have to file the income tax returns and claim the refund from the income tax department.

Is the interest earned from savings account taxable?

-Ramesh Talwar

No, the interest earned on savings account is exempted from TDS under Section 194 A of Income Tax Act. However, interest income from fixed deposit is liable for TDS if the interest income is more than Rs 10,000 in a year. In your case, since the interest earned on fixed deposits is Rs 20,000 every year, the bank will deduct TDS unless you have submitted form 15G or 15H. As per IT rules, if the fixed deposit holder is a resident individual, for an interest payment of up to Rs 10 lakh, TDS will be deducted at the rate of 10% along with an education cess of 3% (3% on 10), which takes the total deduction to 10.3%.

How do I transfer a PPF account from one branch to the other of SBI?

-Anirudha Sengupta

Any PPF account is transferable across any branch of the bank or to the head post office free of charge and, thus, you will not lose any amount on account of this transfer.

As a senior citizen, do I have to pay any tax on the interest income from fixed deposits? Will I lose on the interest part if I put the same amount in one bank?

-Arvind Kumar Rao

Senior citizens are exempted from paying tax on interest income from fixed deposits if their previous year’s income was not taxable. But you will be required to submit the declaration to your bank in form 15H while also mentioning your PAN number. Form 15H is available at all bank branches.

Since banks guarantee fixed deposits of up to Rs 1 lakh, is it a good idea to invest Rs 10 lakh in 10 different banks for safety.

-Suraj Kumar

Each depositor in a bank is insured up to a maximum of Rs 1 lakh for both principal and interest amount held by him.The deposits kept in different branches of a bank are aggregated for the purpose of insurance cover for a maximum amount up to Rs 1 lakh. However, if you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank.

The author is executive director, Union Bank of India. Send your queries at fepersonalfinance@expressindia.com

Source: Financial Express

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Check status of deducted tax online

Gone are the days where taxpayers would have to wait till the end of the financial year to receive their withholding tax certificates/Form 16s in the physical form. Now the income tax department has put in place a facility to enable taxpayers to view their tax credits online or through the internet.

The consolidated annual tax statement in Form 26AS is now available to PAN holders. The endeavour is to streamline and synchronise the tax paid/deposited under each PAN and identify and resolve discrepancies, if any, at an early stage. Discrepancies could arise due to reasons like incorrectly quoted PAN/non-filing of TDS returns/non-deposit/lower deposit of taxes by the deductor, and can be identified and resolved at an early stage.

The form is divided into three parts: Parts A and B include details of taxes deducted/collected at source (TDS/TCS) along with the details of the date on which payment was made, tax was deducted and deposited in the bank. Part C displays details of income tax directly paid by the taxpayer like advance tax/self assessment tax/regular assessment tax, etc, deposited in the bank by the taxpayer (PAN holder).

The procedure for registration to view the form online on the National Securities Depository Limited (NSDL) website is very simple. One should log on to the website tin-nsdl.com and register to view tax credit (Form 26 AS). Fill in the PAN number and contact details and choose a user ID and password and on submission, an acknowledgment number is generated. Visit any TIN-FC (facilitation centre) along with the acknowledgment number, original PAN card and a copy of the PAN card. Alternatively, you can choose to have an TIN-FC official visit your office or residence to verify the PAN. Generally, the user ID is activated within 24 hours of PAN verification and you can then login to your ID on the website tin-nsdl.com and view all your tax credits (TDS, TCS, advance tax/self assessment/tax paid) for a financial year.

This facility is available to a taxpayer having a net banking account with any of the authorised banks. The list of authorised banks is available on the TIN website and form 26 AS can be viewed only if the PAN is mapped to the bank account. Taxpayers registered with the website of the income tax department for e-filing of their tax returns can also view form 26AS by clicking on “View Tax Credit Statement (From 26AS)” in the “My Account” section. The facility to view tax credit online should enable taxpayers to crosscheck that taxes deducted at source from their income/directly paid by him. or her are correctly recorded by the income tax department.

by-PARIZAD SIRWALLA

The author is ED (tax), KPMG

Source: Financial Express

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Bank of Maharashtra eyes 66% jump in retail lending

State-run lender Bank of Maharashtra (BoM) today said it is aiming to increase its retail loan book to a quarter of its total assets from the present 15% in the current fiscal.

"We will increase the retail loan book to 25% from the current 15%. We have already opened 34 dedicated retail lending hubs to achieve the target," AS Bhattacharya, the Pune-based bank's chairman and managing director, told reporters on the sidelines of an event here.

All segments like home, vehicle and personal loans will drive the retail loan growth, he added.

Retail lending typically gives a bank wider margins compared to the corporate loans and project finance where the margins narrow due to higher loan amounts.

The bank is looking at an overall credit growth of 25% this fiscal and a deposit growth of around 22%, Bhattacharya said.

The chairman ruled out any fund raising plans in FY12, saying the bank was well capitalised.

On the back of the rising interest rates, the bank is expecting its net interest margin to narrow down to around 3% by March, 2012 from the 3.13% last quarter.

It expects an improvement in the asset quality and is targeting to bring down the net non-performing assets (NPAs) to 1.25% from the 1.32% in the March quarter of last fiscal, he said.

Noting that a majority 64% of the Rs 1,100 crore of NPA emanate from loans under Rs 10 lakh, the lender has opened 15 micro loan recovery cells and plans to add five more during the current fiscal.

Source: Business Standard

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NABARD plans to raise Rs 2 bn via bonds

Mumbai: The National Bank for Agriculture and Rural Development (NABARD) is looking to raise Rs 2 billion through 3-year bonds at 9.70 percent, sources with direct knowledge of the matter said on Tuesday.

The bond has a put/call option at the end of 1st year, the sources said.

Barclays Capital is the sole arranger to the deal, the sources said.

Source: Financial Express

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RBI to issue Rs 500 notes packets in non-sequential order soon

Mumbai: The Reserve Bank on Monday said it will soon start issuing bank notes of Rs 500 denomination in packets, which may not be sequentially numbered, for easier transactions.

The measure has been announced to increase operational efficiency, the RBI said in a statement.

"With a view to enhancing operational efficiency and cost effectiveness in bank note printing at banknote presses, it has been decided to issue...fresh banknotes of Rs 500 denomination in packets which may not necessarily all be sequentially numbered," it said.

The apex bank said such kind of practice is prevalent in other countries.

"Packets of banknotes in non-sequential number will, as usual, have hundred notes," the statement said.

RBI said the bands of the packets containing the banknotes in non-sequential number will have the legend 'The packet contains 100 notes not numbered sequentially' to avoid any confusion.

Source: Financial Express

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MSF debut: Banks borrowed Rs 100 cr on Friday

Banks on Friday used the Reserve Bank of India's (RBI) marginal standing facility (MSF) for the first time since its inception in May. According to data released by the central bank on Monday, banks borrowed Rs 100 crore for three-day loans through the facility.

To borrow funds through this window, banks have to pay interest at a rate 100 bps higher than the repo rate, which currently stands at 7.25 per cent. Banks are allowed to use MSF only after exhausting the excess statutory liquidity ratio (SLR), which stands at 24 per cent of their net demand and time liabilities. Banks keep excess SLR to pledge securities for funds from the central bank or the overnight market to meet their product needs. In May, MSF had replaced the second liquidity adjustment facility (LAF).

Though RBI did not publish the names of banks that used MSF, according to market players, a few small private sector banks facing a liquidity crunch may have used the facility. “The amount borrowed was very low compared to the LAF borrowing on Friday. Maybe one or two small banks have used the window to sail over short-term needs,” said a treasury head of a large public sector bank. On Friday, banks borrowed around Rs 75,000 crore through the LAF window at 7.25 per cent.

Interestingly, though the call money rate, at 7.30-7.40 per cent, was stable last week, banks opted for MSF funds instead of the call market route. When MSF was announced, RBI had said it expected banks to exhaust all other sources before taking this route.

“Every bank has an internal limit set for borrowing from the call money market. Exhaustion of that limit would have forced a bank to approach RBI's marginal standing facility. Also, while lending call money, factors like the borrowing bank’s net worth, its market standing and its past experience in repaying the debt play major roles, since borrowing in call is non-collateralised,” said Pawan Bajaj, deputy general manager, Bank of India.

Liquidity is expected to remain tight due to the advance tax outflow scheduled later this week. Banks expect Rs 25,000 crore to Rs 30,000 crore to go out of the system owing to the tax outflow. RBI had earlier said the MSF would be tested when the tax outflow takes place.

“Every quarter, it (advance tax) happens. I don't think there is anything different in that. A new type of liquidity management facility has come, so it would be tested,” RBI Deputy Governor K C Chakrabarty had said in the beginning of June.

Source: Business Standard

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Transactions by cheques up marginally in April: RBI

Mumbai: Cheque transactions worth over Rs 8.66 lakh crore were carried out in the country during April, 2011, a growth of over 0.7 per cent from the same month last year.

Banks had cleared cheques worth almost Rs 8.60 lakh crore in April 2010, as per the latest data from the Reserve Bank.

However, the total number of cheques cleared during April fell by over 6.6 per cent as against the same month of last year.

A total of 1,097.5 lakh cheques were cleared by the banks during the month under review compared to 1,175.3 lakh in the corresponding month of 2010.

In April, the Mumbai region reported the highest number of cheque clearances. Banks cleared a total of 195.1 lakh cheques with a value of over Rs 1.49 lakh crore, it said.

This was followed by Delhi region which reported 129.3 lakh cheques being cleared with a total value of Rs 1.23 lakh crore. In third place was the Chennai region with 60.7 lakh cheque clearances worth over Rs 48,500 crore, it added.

The latest marginal rise in the value of transactions by cheques comes after banks reported a fall in numbers during the last fiscal.

The value of cheque transactions had declined by 2.6 per cent to Rs 101.33 lakh crore in 2010-11. Only Delhi and Bangalore, among the major centres, had reported a rise in value of clearances during the last fiscal.

However, the total number of cheques cleared by banks across the country had grown marginally by 0.4 per cent in 2010-11. Over 1.38 crore lakh cheques were cleared by banks across the country last fiscal as against 1.30 lakh in 2009-10.

Source: Financial Express

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Deutsche Bank India' net profit up 41%

New Delhi: Foreign lender Deutsche Bank today said its Indian banking operation has recorded a 41 per cent rise in net profit at Rs 630 crore for the fiscal ended March 2011.

The bank had a net profit of Rs 446 crore in 2009-10, Deutsche Bank said in a statement.

Total income of Indian operation of Germany-based bank increased by 19 per cent to Rs 2,861 crore from Rs 2,396 crore in the year ended March 2010.

At the same time, profit before tax grew by 43 per cent to Rs 1,190 crore as against Rs 833 crore in the previous fiscal.

During the year, the bank increased its capital base in the country by over Rs 330 crore, the fourth infusion since 2007, Deutsche Bank India Chief Executive Officer Gunit Chadha said in a statement.

With this Deutsche Bank's capital base in India rose to over Rs 5,500 crore thus making it one of the highest capitalised foreign banks in the country, he said.

"Our corporate and investment banking businesses have achieved market-leading positions in several verticals like equity capital markets, debt capital markets, customer foreign exchange and transaction banking," he said.

The bank's Capital Adequacy Ratio stood at 15 per cent while Gross Non Performing Assets (NPA) as a proportion of Gross Advances stood at 1.24 per cent at the end of March 2011.

However, it said, the results cover the performance of the Indian branches of Deutsche Bank and do not include results of other Deutsche Bank Group entities in India covering businesses relating to equity broking, asset management, primary dealership, corporate finance, outsourcing or the NBFC.

Source: Financial Express

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Andhra Bank to increase branches, double biz in UP

LUCKNOW: Expanding its base in Uttar Pradesh Andhra Bank has set a target of increasing its branches and double its business in the current fiscal.

"The bank plans to double its branches from existing 24 to 48 in this year, besides increasing our business to Rs 2,500 crore from existing Rs 1,225 crore," bank's Chairman and Managing Director R Ramachandran told reporters here.

Ramachandran along with bank's Executive Director Anil Girotra inaugurated the zonal office of the bank.

"The Andhra Bank is embarking upon the policy of expanding its branches in northern India and increase its visibility pan-India," he said.

Ramachandran said that UP offer tremendous opportunities and the bank would replicate its success formula in the state.

"The bank will concentrate on agriculture, small and micro enterprises, while expanding its barnch network to all most all the districts in the state," he said.

"Opening the zonal office for UP and MP is a step in this direction and it will expedite decision making process," he said, adding that the bank will open its branches in rural and semi-urban areas with concentration of financial inclusion.

Executive Director Girotra said the bank has identified places in western UP where it would set up its branches.

Source: EconomicTimes

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