State Bank of India to cut size of rights issue, new proposal expected soon

NEW DELHI: The country's largest bank, State Bank of India , will move a fresh proposal for its rights issue but of a smaller amount than Rs 20,000 crore proposed earlier, because of the government's fiscal constraints. The government holds 59% stake in the bank and will have to pick up corresponding amount in the offer if it does not want its stake to fall.

A financial ministry official said the government was ready to consider a smaller offer. SBI Chairman Pratip Chaudhuri on Friday said the bank has prepared a draft proposal on the rights issue and will submit it to the government within a month. He said the government would continue to hold 59% stake in the bank after the rights issue. This means the government will have to pick up its entire share of the rights issue.

ET had earlier reported that the government was not in favour of a right issue by SBI as it wanted to avoid any expenditure that is not absolutely necessary because of a much higher subsidy burden than initially budgeted and a possible drop in revenues. The ministry official said SBI may cut the size of the earlier proposed Rs 20,000-crore rights issue by half. "There are various options. We can also consider the issue in two tranches. Let the bank submit its proposal first," he added.

SBI, which is looking at credit growth of around 19% in 2011-12, also announced its plan to raise $5 billion through offshore loans by December. "We hope to raise $5 billion debt by December by means of foreign debt through mediumterm notes (MTN)," the bank's chairman said on the sidelines of a meeting between Finance Minister Pranab Mukherjee and chiefs of public sector banks here. Mr Chaudhuri said the debt would be raised during the second or the third quarter of this fiscal. "We will be raising the funds, but there has to be visibility of credit growth. If there is demand for assets, we will go and raise it," he said.

MTN is a kind of bond with a maturity period usually between 5 to 10 years. It is usually available on tap rather than issued all at once like other bonds. Mr Chaudhuri said the bank is confident of maintaining its net interest margin (NIM) at 3.5% this fiscal. In March 2011, the Parliament passed the SBI Amendment Bill, paving the way for the government to bring down its stake in the bank to 51% - a move that throws up other fund-raising options like a follow-on equity issue.

Source: EconomicTimes

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Andhra Bank to raise BPLR to 14.75% from July 11

MUMBAI: State-run Andhra Bank said on Saturday it will raise the benchmark prime lending rate to 14.50 percent per year from 14.25 percent effective July 11.

Source: EconomicTimes

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IRDA imposes fine of Rs 70 lakh on SBI Life Insurance

CHENNAI: The Insurance Regulatory and Development Authority (IRDA) has imposed a fine of Rs 70,00,000 on SBI Life Insurance company for paying around Rs.204 crore to eight of its corporate agents and six master policyholders, far in excess of the stipulated levels.

In an order Friday, IRDA asked SBI Life Insurance to pay the penalty within 15 days.

SBI Life Insurance is a 74:26 joint venture between State Bank of India (SBI) and BNP Paribas Cardif .

According to IRDA, payments were made by SBI Life in violation of laid down guidelines.

The company argued that the payments were reimbursement of administrative expenses incurred by master policyholders. But IRDA termed it as untenable.

IRDA had issued Group Insurance Guidelines under Section 34 of the Insurance Act stipulating the maximum percentage of commission payable to an agent in respect of group insurance policies.

Further, it had said, no payment will be made towards management expenses, document expenses, profit commission, bulk discount or payment of any other description to the agent or group organiser or manager or a master policyholder.

The payments were received from SBI Life Insurance by the agents and master policyholders between 2005-2010.

The eight corporate agents (associates of State Bank of India) and the six master policyholders are:

• State Bank of India- Rs 127 crore
• State Bank of Bikaner and Jaipur- Rs 8.44 crore
• State Bank of Hyderabad- Rs 13.25 crore
• State Bank of Indore- Rs 3.69 crore
• State Bank of Mysore- Rs 8.28 crore
• State Bank of Patiala- Rs 5.56 crore
• State Bank of Saurashtra- Rs 3.31 crore
• State Bank of Tranvancore- Rs 16.12 crore

Master Policyholders:

• Union Bank of India- Rs 6.13 crore
• United Bank of India- Rs 3.04 crore
• Sundaram Home Finance- Rs 1.56 crore
• Dewan Housing Finance- Corp Rs 4.26 crore
• The Federal Bank- Rs 3.34 crore
• Kerala Transport Development Finance Corporation- Rs 316,029

Source: EconomicTimes

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Coming soon: Coins with new rupee symbol

The government today released new series coins of Rs 1, 2, 5 and 10, bearing the rupee symbol, which will be in circulation soon. A new series coin of 50 paise was also released.

"New coins will not only reduce the cost of moving materials but also are of user friendly size and weight," Finance Minister Pranab Mukherjee said after releasing the new series.

In a statement, the Finance Ministry said the security edging of new series of coins would be good for better recognition by visually challenged persons and will have improved counterfeit resistance.

The minting of the new series of coins of all denominations is in full swing at the various mints of Security Printing and Minting Corporation of India Limited (SPMCIL), it added.

"The new coins will be lifted by the RBI for circulation to public very soon," the ministry said.

Earlier, the government had constituted a high level committee to suggest rationalisation of denomination of coins and currency notes to be minted and printed in the future.

The committee submitted its report in October 2009, which was considered by the government at appropriate level.

Last month, the 25 paise coins were withdrawn from circulation.

Source: Business Standard

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RBI slaps fine on Kolhapur bank for violating KYC norms

The Reserve Bank today imposed a penalty Rs 5 lakh on Kolhapur District Central Co-operative Bank for violation of guidelines related to Know Your Customers (KYC) norms and Anti Money Laundering standards.

"The RBI has imposed a monetary penalty of Rs 5 lakh on Kolhapur District Central Co-operative Bank ...For violating guidelines issued by the Reserve Bank on Know Your Customers (KYC) norms/Anti Money Laundering (AML) standards", RBI said in a statement.

The apex bank said it had issued a show cause notice to the bank, and "came to the conclusion that the violations were substantiated and warranted imposition of the penalty".

Source: Business Standard

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SBI denies funding to realty projects in disputed areas

Adopting a cautious approach in the wake of Supreme Court asking the U P government to return land to original owners, country's largest lender SBI today said it will not finance real estate projects which are mired in disputes over acquisition of land.

"...If in a particular area where there has been a difficulty, those will not be financed," State Bank of India (SBI) Chairman Pratip Chaudhuri told reporters on the sidelines of banking sector review conference presided over by Finance Minister Pranab Mukherjee.

His remarks come two days after the Supreme Court asked the U P government to return the land acquired in Greater Nodia for realty projects. Also, the number of disputes over land acquisition has been steadily rising.

"How can we give a loan when there is no land, where there are no land rights," Chaudhuri said when asked about the bank's position with regard to funding of projects in disputed areas.

"Due diligence is very necessary while advancing credit to commercial real estate sector as high interest regime is pushing up project costs and hence greater chances of default," National Housing Bank CMD R V Verma said.

The Reserve Bank has already asked banks to be cautious while extending loans to commercial real estate projects, in view of increasing bad assets.

Land acquisition has become a a major issue with farmers across the country, West Bengal and Orissa to cite two examples, often vehemently protesting acquisition of their land for industrial purposes.

On Wednesday, the Supreme Court had upheld the Allahabad High Court order quashing the acquisition of over 156 hectares of land from farmers in Greater Noida by the Greater Noida Industrial Development Authority (GNIDA) and its allotment to builders.

About 6,000 people who had booked flats in residential complexes being built by realty firms like Amrapali at Greater Noida will be affected by the Supreme Court's order.

But an apex body of the realtors had assured that the affected flat owners will either be moved into other projects or their money will be returned.

Source: Business Standard

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Indusind Bank plans to raise 4-5 billion rupees via tier-2 capital

MUMBAI: Indusind Bank is looking to raise 4-5 billion rupees via tier-2 capital by end-September or beginning of October to meet its capital adequacy needs, Romesh Sobti, managing director and chief executive officer told reporters on Friday.

The bank reported a net profit of 1.8 billion rupees for April-June earlier in the day.

Source: EconomicTimes

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Punjab & Sind Bank raises lending rates by 25 bps

New Delhi: State-run lender Punjab & Sind Bank on Thursday hiked its minimum lending rate or base rate by 25 basis points to 10.25 per cent.

The city-based bank has also hiked its benchmark prime lending rate (BPLR) to 14.75 per cent from 14.50 per cent with immediate effect, PSB said in a filing to the Bombay Stock Exchange (BSE).

Further, the bank has also paid a dividend of Rs 36.61 crore to the government for the financial year 2010-11.

Shares of PSB closed at Rs 100.80, down 0.35 per cent from previous close on the BSE.

Source: Financial Express

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IndusInd Bank net up 52% on surge in fee income

Mumbai: Private sector IndusInd Bank on Friday posted a 52 per cent jump in net profits for the quarter ended June 30 at Rs 180.18 crore, helped by a surge in fee income.

The city-based lender's net profit for the April-June period last fiscal had stood at Rs 118.55 crore.

“The core fee income grew 44 per cent to Rs 187.07 crore due to an increase in our third party products, trade and remittances, foreign exchange and investment banking income,” said IndusInd Bank Managing Director and Chief Executive Romesh Sobti.

The net interest income (NIM) was up 32 per cent during the reporting period to Rs 390.01 crore as compared to Rs 295.68 crore during the same period a year ago.

“In spite of the high interest rate environment, the bank was able to widen its net interest margin by 9 bps to 3.41 per cent,” Sobti said.

The cost of deposits went up to 7.71 from the previous (January-March) quarter's 7.03 per cent, but the bank made up for that by raising its base rate three times, or 125 bps, during the quarter to maintain margins, he said.

Its sequential (over Q4 FY 11) credit growth stood at 8 per cent, while the same on a year-on-year basis stood at 31.36 per cent. The deposit growth was a tepid 3 per cent on sequential basis and 28.78 on a Y-o-Y.

IndusInd's total capital adequacy increased to 14.99 per cent as on June 30, 2011, as compared to 13.71 per cent during the year-ago period.

“To further strengthen the capital base, the bank is planning to raise Rs 400 crore in Tier-II bonds,” Sobti said.

“We will come out with the issue by end of second quarter or early third quarter...we are yet to firm up plans,” he added.

On the lending side, advances to corporates grew 25 per cent, helped by working capital loans, while a strong push in the vehicle finance segment saw consumer loans growing by 41 per cent during the quarter under review, Sobti said.

The bank does not have much exposure to long-term infrastructure loans, he said.

The share of the cheaper CASA (current and savings account) deposits grew 28.20 per cent as compared to 24.33 per cent in the year-ago period.

On the asset quality front, the net non-performing assets ratio improved by narrowing it down 8 bps to 0.38 per cent during the quarter.

The bank's stock ended 0.74 per cent up at Rs 285.65 on the Bombay Stock Exchange on Friday.

Source: Financial Express

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SBI to raise $5 bn via offshore loans

New Delhi: The country's largest lender State Bank of India said on Friday that it plans to raise USD 5 billion through offshore loans by December.

“We hope to raise USD 5 billion debt by December by means of foreign debt through medium-term notes (MTN),” said SBI Chairman Pratip Chaudhury.

Speaking on the sidelines of a meeting between Finance Minister Pranab Mukherjee and chiefs of public sector banks, he said the debt would be raised during the second or the third quarter of this fiscal.

“Right now, we have a total objective of USD 5 billion, but we would like to time the market in the second and third quarters. We will be raising the funds, but there has to be visibility of credit growth. If there is demand for assets, we will go and raise it,” said Chaudhury.

MTN is a kind of bond note with a maturity period usually between 5 to 10 years continually offered through various brokers, rather than issued all at once like other bonds.

The SBI chief said the bank is confident of maintaining its net interest margin (NIM), which is a measure of the return on a company's investments relative to its interest expenses, at 3.5 per cent this fiscal.

“The margins are improving. This current fiscal we have a guidance of 3.5 per cent (NIM) and we are slightly ahead of it. Overall guidance is 3.5 per cent and we are on track,” said Chaudhury.

He said SBI is also looking at increasing its credit growth by 16-19 per cent in 2011-12.

Regarding recent hikes in rates, Chaudhury said: “Raising of interst rate has not impacted interest margin.” SBI had on Thursday increased lending rates by 25 basis points and deposit rates by up to 100 basis points, a move that will make home, auto and other loans more expensive, but will provide better returns to savers.

The bank revised the base rate or the minimum lending rate upward by 25 basis points (bps), or 0.25 per cent, to 9.50 per cent with effect from July 11.

The interest rates on fixed deposits with a maturity period of 1-10 years has been fixed at 9.25 per cent. The new deposit rates will also be effective from July 11.

The bank has also raised its benchmark prime lending rate (BPLR), which is used to determine floating interest rate loans, to 14.25 per cent from 14 per cent.

The decision follows the rate hike announced by the Reserve Bank in its policy review last month. Several banks, including major private lender ICICI Bank, Canara Bank and Bank of Baroda, have already raised their lending rates.

Asked about inflationary pressure, which has prompted the RBI to hike rates 10 times since March, 2010, Chaudhury said: “Inflation is continuously above 7 per cent. So any policymaker would be worried.”

Headline inflation stood at 9.06 per cent in May and is expected to breach the double-digit mark in July due to the recent hike in prices of diesel, cooking gas and kerosene.

Source: Financial Express

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SBI to seek government's nod for rights issue this month

NEW DELHI: State Bank of India (SBI) will seek the government's nod to raise Rs 20,000 crore through the rights issue within this month, the bank's chairman Pratip Chaudhuri said on Thursday.

"Draft proposal (for the rights issue) is with us. We are going to submit it this month to the ministry," the bank's Chairman Pratip Chaudhuri told reporters here.

The government would continue to hold 59 percent stake in the bank after the rights issue, he said, adding "as of now there is one proposal which is on the table".

SBI had earlier announced its intention of coming out with the rights issue in the last quarter of FY11 and had said it is looking at raising up to Rs 20,000 crore through it.

The government, which owns 59.4 per cent in the bank, will have to contribute up to Rs 12,000 crore to subscribe to the issue. It was earlier reported that the Department of Financial Services had cleared the issue but considering the large outlay from the government, it required some budgetary support or approvals.

SBI has earlier said the rights offering is being planned, keeping in mind the pace of growth in the economy.

The bank had raised over Rs 16,000 crore through a rights issue in 2008, which was well received, even though it came after the Lehman Brothers collapse, which had shattered investor confidence.

Source: EconomicTimes

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HDFC acquires 12% stake in MediAngels

Kolkata: HDFC Private Equity Fund has acquired 12 per cent stake in Angles Health, a global multi-speciality e-hospital service provider which manages mediangles.com.

"Deepak Parekh's HDFC private equity fund has picked up 12 per cent seed capital recently," co-promoter of Mediangles Arbinder Singal said.

"We are looking for more funds to rollout more services on mobile, for video-conferencing and round the clock doctors' call-centre and other services," another co-promoter of e-hospital concept Debraj Shome said.

After nearly two years of tests, Singal and Shome had launched www.mediangels.com, a super-speciality consultancy, that makes doctors accessible to people over internet or phone.

The service, launched in January this year, makes taking second opinion from the panel, which consists of a team of 300 doctors from over 85 super-speciality hospitals across 25 countries, a click away at affordable rates.

Singal said they were also trying to tie-up with the Madhya Pradesh and Maharashtra governments to offer the solution to the rural areas.

"We have planned three physical centres at Indore, Vadorara and Bhopal. If the model of physical centres connected with our network works then we will rollout across the country," he said.

Shome said the company is also in talks with cyber cafes to make them contact points for MediAngles, but at the same time is cautious about possibility of misguidance by them.

Source: Financial Express

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SBI ups lending rates 25 bps; deposits 1%

New Delhi: India's largest lender State Bank of India (SBI) today increased lending rates by 25 basis points and raised deposit rates by up to 100 basis points, a move that will make home, auto and other loans more expensive, but will provide better returns to savers.

The bank has revised the base rate or the minimum lending rate upwards by 25 basis points (bps), or 0.25 per cent, to 9.50 per cent with effect from July 11, SBI said in a statement.

The interest rates on fixed deposits with a maturity period of 1-10 years has been fixed at 9.25 per cent. The new deposit rates would be effective from July 11.

The bank has also raised its benchmark prime lending rate (BPLR), used to determine floating interest rate loans, have been increased to 14.25 per cent from 14 per cent.

The decision follows the rate hike announced by the Reserve Bank in its policy review last month. Several banks, including major private lender ICICI Bank, Canara Bank, Bank of Baroda, have already raised their lending rates.

According to the statement, deposits up to 90 days will fetch an interest rate of 7 per cent as against 6.25 per cent.

The interest rates for fixed deposits with a maturity period of 1-10 years would be 9.25 per cent. Current deposits between 1 year and 554 days earn an interest of 8.25 per cent.

SBI has also decided to waive the penalty for premature withdrawal of deposits up to 90 days. For premature withdrawal of other deposits, it reduced the penalty to 0.50 per cent from from 1 per cent.

The RBI hiked key short-term lending and borrowing rates by 25 basis points (0.25 per cent) each with immediate effect to tackle inflation. The short-term lending (repo) rate rose to 7.5 per cent and the borrowing (reverse repo) rate to 6.5 per cent.

Last week, besides ICICI Bank, other public sector lender Indian Overseas Bank, Corporation Bank and Dena Bank also hiked their base rate by 25 basis points each.

While other banks have raised only the lending rates, SBI is the first bank to announce a hike in both lending and deposit rates.

Source: Financial Express

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Dhanlaxmi Bank hikes base rate by 25 bps

Mumbai: South-based Dhanlaxmi Bank today hiked its minimum rate of lending or the base rate by 25 basis points to 10.25 per cent, in line with peers in the lending industry.

Loans under the older Benchmark Prime Lending Rate (BPLR) regime, which preceded the present base rate, also got dearer as the bank hiked the BPLR by 25 basis points to 19.25 per cent, it said in a release.

"The hike in our base rate and BLPR reflects tight monetary conditions and is in line with market trends," the bank's Chief Financial Officer Bipin Kabra said.

Other lenders like biggest private bank ICICI Bank have also increased lending rates in the last fortnight while the country's biggest lender State Bank of India is expected to take a decision on whether to hike or not today.

SBI's Asset Liability Committee -- which decides on rate hikes -- is scheduled to meet this evening.

The Reserve Bank has hiked its key rates 10 times or 250 basis points since March 2010 in order to tame the inflation, which stood at 9.06 per cent in May 2011. The last hike of 25 basis points was done in the mid-quarter announcement of the monetary policy on June 16.

Source: Financial Express

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State Bank of India likely to raise lending rates shortly

NEW DELHI: Country's largest lender State Bank of India is likely to raise its minimum lending rate or base rate by 50-75 basis points later on Thursday, the bank's Chairman said.

"There is a possibility of hiking base rate by 50-75 basis points by today evening," SBI Chairman Pratip Chaudhuri told reporters here.

The bank's base rate currently stands at 9.25 per cent, which is probably the lowest in the industry.

With the hike in the lending rates , home, auto and commercial loans will become expensive.

As many as a dozen banks, including private sector leader ICICI Bank have already hiked their lending rate by 25 basis points in response to the tightening of monetary policy by the Reserve Bank last month.

The RBI hiked key short-term lending and borrowing rates by 25 basis points (0.25 per cent) each with immediate effect to tackle inflation. The short-term lending (repo) rate rose to 7.5 per cent and the borrowing (reverse repo) rate at 6.5 per cent.

Last week, besides ICICI Bank, other public sector lender Canara Bank , Indian Overseas Bank, Corporation Bank and Dena Bank also hiked their base rate by 25 basis points each.

Source: EconomicTimes

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SBI hopeful of rights issue this year

State Bank of India is hopeful the government would approve its proposed rights issue of equity shares, aimed to raise Rs 20,000 crore to support its growth plan.

Speaking to Business Standard, managing director and chief executive officer Diwakar Gupta said, “Our capital adequacy ratio has fallen and we also need capital to support our growth plans. We are hopeful the rights issue will happen at the end of the third quarter or in the beginning of the fourth quarter of the financial year. The government has supported other public sector banks with capital and we don't have a formal communication that the government that it will not subscribe to the rights issue in the current year.”

The government owns 59 per cent stake and has to infuse nearly Rs 12,000 to retain proportionate shareholding. SBI's tier-I capital has fallen below eight per cent, as it has to made provision from its capital reserves towards staff pension. Though the regulatory requirement on tier-I capital is a six per cent floor, the government insists public sector banks have at least eight per cent.

If the rights issue does not happen, the bank has a back-up plan, since it has head room to raise funds through perpetual bonds and tier-II bonds. “There is a Plan-B, too. We grew by Rs 130,000 crore (credit) last year. This year, if we grow 18 per cent, which is our revised guidance, this will translate to Rs 140,000 crore. For this growth, we need Rs 17,000 crore of capital. If internal accruals can generate Rs 10,000 crore, then we need another Rs 7,000 crore,” Gupta said.

The bank has head room to raise Rs 6,000 crore tier-I capital, while it can raise up to Rs 15,000 crore through tier-II bonds. “So, we do not have an issue of capital support this year, but at the same time that will be very much on the edge,” he said. He however, ruled out raising funds through qualified institutional investors, as the bank was not keen on diluting government holding.

MARGINS

The bank is projecting 3.5 per cent net interest margin for the current financial year and one strategy will be to focus on term lending, which usually have a higher yield.

“We will try to do some more long-term funding. Also, we will try to avoid the rat race for extending short-term credit, which happens at the base rate,” he said.

The high cost deposits the bank raised in 2008, which had a nearly three-year tenure, would mature during the July-February period. About Rs 70,000 crore worth of high cost retail deposit will come up for renewal in the next eight months.

CREDIT GROWTH

Bank chairman Pratip Chaudhuri recently said SBI had scaled down its yearly credit growth target to 16-19 per cent, as compared to more than 20 per cent projected earlier. Gupta says the decision was taken to avoid worsening of credit quality.

“We wanted to send the message that we are not compromising on asset quality for the sake of growth,” he said.

Since the change of guard and top-level changes in the bank in April, the bank has increased focus on improving asset quality. To improve monitoring, it has appointed a deputy managing director-rank officer to handle stressed asset management.

“Our net NPA (ratio of non-performing assets to the total) was 1.65 per cent (March end). Depending on how well we execute our plans, it can go down to 1.3-1.6 per cent. We are projecting a large band, as there are uncertainties on how economy performs. But it will be definitely below 1.6 per cent,” he said.

Source: Business Standard

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IDBI Bank buys 10% in UCX

IDBI Bank has bought 10% stake in Universal Commodity Exchange (UCX), which is yet to start operations, for Rs 10 crore, a newspaper reported.

The commodity exchange is promoted by IT People, a company that provides software solutions to capital and commodity markets.

"The idea behind acquiring equity is to push agricultural loan through this venture," said the bank's Chairman and Managing Director RM Malla, confirming the development to the newspaper.

Moreover, IDBI will be the only bank among promoters and therefore all transactions of the exchange will be routed through IDBI, he said.

UCX officials were not immediately available for a comment for this report.

According to norms, a commodity exchange needs to have a minimum equity capital of Rs 100 crore.

IT People, promoted by Ketan Sheth, has to reduce its stake in the exchange to 26% from the present 40% within five years of its operations.

The commodity exchange had received an in-principle approval from the Forward Markets Commission (FMC), the commodity markets regulator, in August last year.

Source: Business Standard

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DBS applies to open four more branches in India

SINGAPORE: Singapore's DBS Bank has applied to open four more branches in India as part of its ongoing expansion plans in the South Asian market.

"We will set up the four branches as soon as we get approvals from the Reserve Bank of India ," Sanjiv Bhasin, the general manager & CEO for DBS Bank in India, said in Singapore today.

DBS Bank has been rapidly growing in the Indian market, with 12 branches across 12 cities, the latest being in Cuddalore, which was opened in January this year.

DBS operates 40 ATMs in 12 Indian cities as of June, 2011.

Bhasin said it was a matter of getting approvals for the four branches, which would offer basic banking services within months.

The new branches would offer full banking services within a year, added Bhasin, anticipating a favourable approval response in the coming months.

DBS Bank has made one of the most aggressive banking expansions in the Indian market in recent years.

DBS Bank first entered India with a Mumbai branch in 1995 and added a Delhi branch in 2005, following which it launched a major expansion campaign.

DBS Bank has benefited from the Comprehensive Economic Cooperation Agreement (CECA) between Singapore and India and once the four branch approvals are received, it would pursue the 16-branch bank operations per country allowed on a reciprocal basis under the trade pact.

One-third of DBS Bank's operations in India is accounted for by exports and project financing, Bhasin said.

But going forward, Singapore's largest bank's expansion would be broad-based and trend with Indian economic growths, with business projected to grow by over 7 per cent a year for the next five years to 10 years, he said.

Bhasin expected DBS Bank to record strong growth of between 30 per cent and 50 per cent this year in India, having had a healthy annuity contribution of over 50 per cent of total revenue for the past several years.

India has been the third largest revenue contributor to the DBS Group after Singapore and Hong Kong for the past few years, he said.

DBS Bank's Indian business, covering 12,000 customers and 700 employees, accounts for 8 per cent to 10 per cent of the total annual group revenue.

The strategic intent would be to continue growing the Indian business to be a significant contributor to the group revenue, said Bhasin.

The DBS Group's business diversification strategy is to have 40 per cent of the revenue from Singapore business, followed by 30 per cent from Greater China markets and 30 per cent from South Asian/South East Asian markets, led by India and Indonesia.

Source: EconomicTimes

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RBI limits banks' equity investments in companies & subsidiaries

MUMBAI: RBI on Wednesday set prudential limits for banks' equity investments in other companies and subsidiaries in order to prevent banks from having any significant influence over such entities even with limited investments.

The Reserve Bank of India said banks can't invest more than 10 percent of their paid-up capital in a subsidiary or financial services company, while total investments made in all subsidiaries and non-subsidiary financial services companies shall not exceed 20 percent.

For companies engaged in non-financial services activities, equity investments would be capped at 10 percent of the investee company's or bank's paid-up capital, whichever is lower.

"It is reiterated that banks are permitted to set up subsidiaries for undertaking activities which are conducive to the spread of banking in India," the RBI said.

A bank's equity investments in subsidiaries and other entities that are engaged in financial services together with equity investments in entities engaged in non-financial services activities should not exceed 20 percent of the bank's paid-up share capital and reserves, the RBI said.

Source: EconomicTimes

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Punjab National Bank set to foray into Canada

CHENNAI: Punjab National Bank (PNB), India's second largest public sector bank, is set to foray into the Canadian market by setting up a subsidiary with an estimated capital of Rs 100 crore, a top bank official said on Wednesday.

The bank currently has operations in countries such as England, China and Dubai. Canada would be the latest foray of the bank in the overseas market.

"We will be setting up our subsidiary there. It will initially serve the Indians living there. A capital of Rs 100 crore will be required," Punjab National Bank Chairman & Managing Director K R Kamath told reporters at Chennai.

Kamath said the 100 crore capital required would help increase PNB's presence in Canada.

"We want to increase our presence their by setting up more branches. When we entered London, we had required capital of a similar amount to establish a subsidiary there. Today, we have seven branches in London alone."

Asked about PNB's future plans for the overseas markets, he said they had recently set up a representative office in Norway and planned to open a similar one in Australia.

On their proposal to enter the life insurance business, Kamath said they would decide about a partner in the coming quarter as the bank was holding talks with them.

"We have shortlisted three life insurance companies -- Aviva, MetLife and BhartiAXA . We are expecting it to be released by the coming (third or fourth) quarters. We are looking to tie up with a company who already has a presence in the (insurance) industry," he said.

Kamath said PNB had started mobilising the business in Central Asian country Kazakhstan. Last year, the bank picked up a majority stake in Kazakhstan-based Dana Bank for about USD 23.7 million (about Rs 104 crore).

Source: EconomicTimes

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SIDBI offers 9.84 per cent yield on 12-13-month fixed deposits

MUMBAI: The Small Industries Development Bank of India (SIDBI) on Wednesday said that it now offers general investors and bulk depositors an annualised yield of 9.84 per cent on its fixed deposit scheme with a duration of 12-13 months.

SIDBI offers an interest rate of 9.50 per for fixed deposits of 12-13-months duration; 9.25 per cent for fixed deposits of 14-36-months' duration and 9 per cent for fixed deposits of 37-60-months duration.

SIDBI also offers higher interest rates of 10.38 per cent to senior citizens for a 12-13-month period, 9.75 per cent for fixed deposits of duration 14-36-months and 9.5 per cent for fixed deposits of 37-60-months' duration.

"Our fixed deposit scheme is rated 'AAA' by CARE, which is quite unique for a development bank. SIDBI always benchmarks its interest rates against the industry," SIDBI's Chairman & Managing Director, Sushil Muhnot , said in a statement issued here.

SIDBI offers both cumulative and non-cumulative deposit options. In case of non-cumulative option, depositors can opt for quarterly or annual interest payment options. The minimum deposit amount is Rs 10,000 and in multiples of Rs 1,000 thereafter. Nomination facility is also available, the statement said.

The scheme also offers TDS exemption for income upto Rs 5,000 per annum. It comes under the eligible investments for religious and charitable trusts under Section 11(5) of the IT Act, 1961. Deposits are also exempt from wealth tax.

Besides, the scheme also offers direct credit of interest to the depositor's bank account through ECS facility wherever available. Interest and redemption cheques will be encashable 'at par' in the depositor's city, the bank statement said.

Source: EconomicTimes

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HDFC Bank sees RBI increasing key interest rates again

Mumbai: Leading private sector lender HDFC Bank today said it expects the Reserve Bank of India (RBI) to increase its key interest rates at least twice to contain the spiraling inflation.

"What they (RBI) will do in this policy, I don't know, but one or two rate hikes are in the offing till inflation comes under control," HDFC Bank Managing Director Aditya Puri told reporters here on the sidelines of the bank's annual general meeting.

The central bank has since March 2010 raised key interest rates ten times, with the latest on June 16 when it hiked short-term lending and borrowing rates by 25 basis points each to 7.5 and 6.5 per cent, respectively.

"We are fortunate the oil price is coming down, global economy is slowing so commodity prices will come down. So atleast the supply side factors will come down by a bit," he added.

After a month-long uptrend, food inflation plunged to one-and-a-half month low of 7.78 per cent for the week ended June 18, down from 9.13 per cent in the previous week as vegetables and pulses became cheaper.

Puri added that his bank so far has not faced pressure on its margins and credit demand.

"We as a bank have not faced pressure on credit offtake and margins. Our margins are sound and our credit offtake has grown," he said, adding the lender would maintain its net interest margin in the range of 3.9-4.2 per cent during the current fiscal.

Source: Financial Express

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RBI: Data revisions crippling policymaking

Reserve Bank of India (RBI) Governor Duvvuri Subbarao on Tuesday said policymaking by the central bank had been hit by the frequent revisions in key data like that of the country’s growth, inflation and factory output.

“RBI’s policy formulation is handicapped by frequent revisions to data. We make policies in real time, and if the provisional data these are based on are inaccurate, the resultant policies can turn out to be sub-optimal choices,” Subbarao said at the central bank’s Statistics Day conference.

The governor cited the estimates of growth in gross domestic product (GDP) in 2009-10, which exhibited wide fluctuations. He said the advance GDP growth estimate at market prices from the expenditure side, published in February 2010, was 6.8 per cent, which was changed to 7.7 per cent in the revised estimate in May 2010. The estimate was again revised to 9.1 per cent in the quick estimate in February. “Therefore, policy that had to use information on advance GDP estimates was fraught with the risk of underestimating the growth momentum,” he said.

He added the volatility in the Index of Industrial Production (IIP) figures was bewildering, as it showed counter-intuitive trends. Subbarao said during the peak of the financial crisis, IIP, based on the previous series, was positive. This was contrary to the central bank’s assessment of the underlying trend of deceleration. "The new IIP series, with 2004/05 as the base year, now shows IIP growth was, in fact, negative during that period, vindicating our intuition," Subbarao said.

“Another problem with IIP has been its volatility, with the volatility being even larger in the capital goods sector. This is analytically bewildering. The volatility persists in new series too,” he said.

The IIP data has also contributed to RBI’s under-projection of inflation in the last financial year. The central bank has been criticised for its projections on inflation, since the headline number has consistently been above the estimates since last year. Inflation remained much higher than RBI’s comfort zone last year, though till January, the central bank continued to project March inflation at six per cent. RBI revised its inflation target to eight per cent for March-end during its mid quarter policy review, while March-end inflation figure stood at 9.68 per cent.

Apart from a higher-than-expected rise in crude oil prices and a below-expected decline in food prices, erroneous signals from IIP data and a higher-than-usual upward revision of past inflation data also contributed to RBI’s under-projection of inflation, Subbarao said. “In this context, persistently high inflation during 2010-11 and the continuation of this trend through the first half of 2011-12 suggest we need to revisit our estimates of the potential growth rate of the economy,” he said.

The central bank has been left guessing on the likely revision in the provisional inflation number while assessing inflation. “The more critical data on wholesale price index inflation, too, has been subject to large revisions,” he said. “Often, it is not clear if the revisions are occasioned by one-off factors or systemic factors,” he said.

Source: Business Standard

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