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Saturday, July 30, 2011

RBI imposes Rs 5 lakh penalty on KCCB for violating norms

AHMEDABAD: The RBI today imposed apenalty of Rs 5 lakh on city-based Kalupur Commercial Co-operative Bank (KCCB) for its non-adherence to mandatorybanking rules, an official statement said.

A penalty of Rs 5 lakh has been imposed on KCCB for violation related to Know Your Customer(KYC) norms, membership to co-operative credit societies, displaying short name of the bank, extension of credit outside the area of operations, it said.

The apex bank had served a show cause notice on the cooperative bank in response to which the bank submitted a written reply and made further submissions during the personal hearing by the regional director, the statement said.

On the bank's reply, the central bank came to the conclusion that the violations were substantiated and warranted imposition of the penalty, it said.

KCCB, is a multi-state scheduled bank with over 30 branches.


Source: EconomicTimes
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IDBI Bank net jumps 34% to Rs 335-cr

Mumbai: The youngest public sector lender IDBI Bank today reported a 34 percent spike in net income to Rs 335 crore for the quarter to June driven by a rise in interest income and interest margin, despite advances growing at slower pace of 15 percent quarter on quarter.

During the corresponding quarter last fiscal, the city-based lender had reported a net profit of Rs 251 crore, the bank said in release. Net interest income (NII) jumped by a higher 36 percent to Rs 1,152 crore from Rs 844 crore q-o-q, while net interest margin (NIM) which is the key gauge of a bank's profitability and is the difference between the interest income a bank earns on its advances and the interest it pays on its deposits, increased to 2.07 percent during the quarter under review, which was 1.61 percent in the same period last fiscal.

Advances grew at moderate 15 percent during the quarter to Rs 1,54,984 crore against Rs 1,35,329 crore q-o-q, while deposits rose 12 percent to Rs 1,76,282 crore, against Rs 1,57,204 crore q-o-q.

Total assets of the bank grew 11 percent to Rs 2,49,571 crore up from Rs 2,24,658 crore and overall business rose 13 percent to Rs 3,31,266 crore, up from Rs 2,92,533 crore.

Following the recent RBI guidelines on higher provisioning for non-performing assets and standard restructured advances, the bank made an additional provisioning of Rs 279.60 crore during the quarter.

The bank's capital adequacy ratio or CAR stood at 13.83 percent while the core or tier-I capital stood at 8.11 percent at the end of the quarter.


Source: Financial Express
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IOB, Corp Bank & others hike lending rates

New Delhi: Several banks including Indian Overseas Bank (IOB), Punjab & Sind Bank and Corporation Bank have raised lending rate by up to 50 basis points in line with other lenders.

While all loans, including home and auto, will become expensive, depositors will get better returns on their savings.

The hike in interest rates come within a week of the RBI raising its key policy rates by a hefty 50 basis points to check high inflation.

IOB, Syndicate Bank and Punjab & Sind Bank raised lending rate by 50 basis points, while another public sector lender Corporation Bank increased it by 40 basis points.

Syndicate Bank has also revised term deposit rates up to 50 basis points on select maturities.

The interest rate on fixed deposit between 270-364 days of will now earn 9.75 per cent from existing level of 9.25 per cent, an increase of 50 basis points.

The term deposit maturity in between 91-120 days has been revised upward by 35 basis points to 7.60 per cent, Syndicate Bank said in a statement.

The revised rate will apply to all loans from August 1, 2011.

More than dozen banks have already announced a hike in interest rates following the monetary action by the RBI on July 26 and many more are likely to do so in the coming days as cost of funds has gone up.

Earlier this week, the RBI raised the short-term lending (repo) rate by 50 basis points to 8 per cent and the short-term borrowing (reverse repo) rate by a same margin to 7 per cent in a bid to tame inflation.

Subsequently, the interest rate under the Marginal Standing Facility, an additional borrowing window, has gone up to 9 per cent from the earlier level of 8.5 per cent.

Source: Financial Express
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United Bank of India Q1 net up 23.3%

Mumbai: State-owned United Bank of India on Saturday posted a 23.3 per cent increase in its net profit to Rs 132.4 crore for the first quarter ended June 30, 2011.

The lender had posted a net profit of Rs 107.8 crore for the corresponding quarter last fiscal, United Bank of India said in a filing to the Bombay Stock Exchange (BSE).

Total income of the bank increased by 29 per cent during the period to Rs 2,008.1 crore from Rs 1,557.8 crore in the corresponding period last year.

The interest income of the bank rose to Rs 1,838.3 crore during the reporting quarter from Rs 1,437.2 crore in the first quarter of the previous fiscal.

The bank's gross non-performing assets (NPAs) declined to 2.89 per cent during the quarter ended June 30, 2011, from 3.19 per cent in the same quarter a year ago.


Source: Financial Express
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J-K Bank Q1 net profit soars 24.6%

Mumbai: Jammu & Kashmir Bank today posted a 24.6 per cent jump in its net profit to Rs 182.2 crore for the first quarter ended June 30, 2011.

The lender had posted a net profit of Rs 145.9 crore for the corresponding quarter last fiscal, Jammu & Kashmir (J&K) Bank said in a filing to the Bombay Stock Exchange (BSE).

Total income of the bank increased by 17 per cent during the period to Rs 1,122.9 crore from Rs 959.3 crore in the corresponding period last year.

The interest income of the bank rose to Rs 1,055 crore during the reporting quarter from Rs 865 crore in the first quarter of the previous fiscal.

The bank's gross non-performing assets (NPAs) rose marginally to 1.97 per cent during the quarter ended June 30, 2011, from 1.92 per cent in the same quarter a year ago.


Source: Financial Express
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Friday, July 29, 2011

Visa profit up, rolls out new fee program

Charlotte: Visa Inc cheered investors as its quarterly profit rose by 40 percent, and the world's largest payment processor said it would introduce a new fee structure for U.S. merchants.

Visa Chief Executive Joseph Saunders, in a conference call with analysts, said the payment processor would introduce a network participation fee in the United States for all of its debit, credit and prepaid card services.

As part of the new policy, Visa also will lower the variable rate charged for transactions.

Visa's shift away from per-transaction fees is a large departure for the San Francisco-based company, which is being done to comply with new fee caps imposed by the Dodd-Frank financial reform law passed last year.

Saunders did not disclose what the participation fee will be, but said it will be based on a merchant's size, and the merchants' number of locations.

Due to the overhaul and the new fee caps imposed by Dodd-Frank, Saunders said 2012 will be a low point for debit card processing fees.

We won't do as well as we have, he said.

The new program comes as Visa reported better-than-expected fiscal third quarter results, and plans to buy back an additional $1 billion in shares over the next year.

For Visa, the quarterly results highlight consumers' increasing reliance on debit and credit cards rather than cash or checks to make everyday purchases.

They're getting better results as consumers are shifting from paper to plastic, said Shannon Stemm, a financial services analyst with Edward Jones.

Analysts said the company's continued profits drove the new share buyback program, following a similar $1 billion share buyback announced in April and completed in the fiscal third quarter.

RESULTS

Visa on Wednesday reported fiscal third-quarter net income of $1 billion, or $1.43 per Class A common share, up from $716 million, or 97 cents per share, a year ago.

Excluding the one-time, noncash gain on its Visa Europe put option, Visa earned $883 million, or $1.26 per share.

Analysts estimated Visa would report net income of $1.23 per share.

Total operating revenue increased 14 percent to $2.3 billion from a year ago.

Total payment volumes increased 17 percent to $941 billion from $802 billion.

Visa's international business is becoming a larger portion of its quarterly results. Payments outside the U.S. -- $422 billion -- accounted for 44 percent of Visa's third quarter volume, up from 41 percent a year ago, when such payments totaled $333 billion.

Visa shares closed down 1.6 percent, or $1.45, at $87.75 on the New York Stock Exchange before results were announced.


Source: Financial Express
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HSBC likely to cut more than 10,000 jobs

Banking group HSBC Holdings Plc may cut more than 10,000 jobs as part of its plan to slash costs by up to $3.5 billion a year, Sky News reported on Thursday.

New HSBC Chief Executive Stuart Gulliver in May announced a far-reaching plan to cut costs and revive flagging profits by exiting dozens of countries and refocusing on its areas of strength.

Gulliver did not say how many jobs would go as part of the cuts, but analysts expect the bank to axe thousands from its 300,000 global workforce.

Sky, citing people close to the bank, said on Thursday the plans had not yet been finalised. HSBC declined to comment. The bank could provide an update along with its half-year results on Monday, although analysts said costs are likely to have remained high in the first half of this year as the restructuring is a multi-year plan.

“There was a lot of talk about streamlining going on at the last strategy day, so I suppose this is a function of that,” one top 10 HSBC shareholder told Reuters. “It is a quite sprawling bank, and I wouldn’t be surprised if it has got a bit bloated here and there,” he said.

Europe’s biggest bank faces an urgent need for action as more than two-fifths of its businesses are not delivering their cost of capital. “We clearly have a cost problem,” Gulliver said in May.

HSBC said it will also sell, shut or slim down retail operations in 39 markets, where operations are sub-scale and unprofitable and is looking to sell its US credit card arm and shrink its network of 475 US branches.

HSBC’s move would be the latest in a wave of cuts announced by the global financial industry, which has been hit by market volatility and lacklustre profits. Swiss bank Credit Suisse said on Thursday it would cut about 2,000 jobs.

Standard Chartered, Lloyds, Goldman Sachs and UBS are among banks that have announced job cuts in recent months, hit by rising costs and weak revenue growth.


Source: Business Standard
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Punjab National Bank acquires 30% stake in MetLife India at an undisclosed amount

NEW DELHI: The country's second-largest bank,Punjab National Bank, has said that it has acquired a 30% stake in the Indian arm of the biggest US life insurer MetLife at an undisclosed amount. ET, in its edition dated May 25, 2011, had reported that PNB was close to buying a significant stake in the private insurer.

The bank also announced a marginal rise of 3.4% in its net profit at Rs 1,105 crore in the first quarter of the current financial year. "The net profit has been impacted due to higher provisioning, decline in treasury income during the quarter," said PNB chairman and managing director KR Kamath.

The bank's net profit in the year-ago period was Rs 1,068 crore. Total provision stood at Rs 1,368 crore. Of this, 566 crore was towards bad debts and Rs 475 crore was towards income tax. PNB's scrip was trading at Rs 1,102.95 on BSE, down 1.96% at the end of the trading session.

Gross NPAs as a proportion of advances went up to 2% against 1.82% at the end of June last year. Net NPAs also rose to 0.86% during the year from 0.66%.

Kamath said the NPA levels were not alarming and the bank has put focus on recovery.

PNB hopes its tie-up withMetLife India will give it the much-needed advantage in the insurance sector. MetLife CEO and MD Rajesh Relan also said the insurer will provide insurance expertise and bancassurance capabilities that will be an asset to PNB. MetLife India will issue fresh equity and later buy stake from the other existing stake holders to keep its stake at 26%.

Source: EconomicTimes
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Corporation Bank Q1 net up 5%

New Delhi: Corporation Bank on Thursday reported a 5.29 per cent increase in net profit to Rs 351.45 crore for the first quarter ended June 30, 2011.

The bank had posted a net profit of Rs 333.78 crore for the April-June quarter of FY'10, Corporation Bank said in a filing to the Bombay Stock Exchange.

Total income of the bank rose to Rs 3,266 crore during the first quarter of FY'12 from Rs 2,293 crore in the corresponding period last fiscal.

Shares of Corporation Bank were trading at Rs 519.20, down 0.01 per cent from their previous close on the BSE.


Source: Financial Express
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Andhra Bank sees pressure on NIM post RBI rate hike

Hyderabad-based public sector lender Andhra Bank today said there could be some pressure on its Net Interest Margin (NIM) and credit off take in the short- term range, following a hike in key policy rates by the Reserve Bank of India (RBI).

The bank reported a net profit of Rs 386 crore for the quarter ended June 30 in FY12, up 20.63% over the same period last fiscal.

The pressure on NIM could be in the range of 15-20 basis points for the present quarter, the bank's Chairman and Managing Director R Ramachandran said.

"I presume that there will be an impact of 15 to 20 basis points during this quarter. Beyond that what will happen in the remaining quarters depend on how things will happen," Ramachandran told mediapersons here after announcing the first quarter results.

The NIM stood at 3.77% for the first quarter as against 3.72% during the Q1 of the previous fiscal.

To a query, Ramachandran said the bank would take a call on increasing interest rates after a meeting with officials of assets and liability teams.

On the demand for credit, he said there would be some slow down in the credit off take due to interest rate hike.

"I anticipate a little bit slow down going forward and there is possibility that the credit growth in the remaining one or two quarters will be slower. Generally, the industry shows slow down in the credit growth," the banker said.

The bank's total income stood at Rs 2,851 crore in the quarter, up 37.53% over last year, while operating profits are at Rs 700 crore as against Rs 510 crore during the corresponding quarter in the last year.


Source: Business Standard
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Banks turn more receptive to MFIs; UBI sanctions Rs 100 crore loan to Bandhan Financial Services

KOLKATA: Kolkata-based United Bank of India has just sanctioned a Rs 100-crore loan to Bandhan Financial Services, the country's fourth-largest microfinance institution (MFI) by assets. Of the Rs 30,000 crore MFIs have borrowed from the banking system till date, this is perhaps the most precious Rs 100 crore ever.

This is the largest loan to anMFI after banks virtually stopped lending to such firms after an October 2010 ordinance by the Andhra Pradesh government made lending and recoveries extremely cumbersome. UBI Chairman and Managing Director Bhaskar Sen said, "We will extend loans to MFIs that follow Malegam committee recommendations diligently."

UBI's loan to Bandhan is priced at 200 bps over base rate, which is currently at 10.50% a year, and is for a three-year term.State Bank of India, the country's largest bank, has also recently given fresh loans to a couple of smaller firms, according to a bank official.

Adds R Ramachandran, CMD, Andhra Bank: "If some proposal comes to us seeking funding we will examine it on merit." The fresh lending comes soon after banks restructured an estimated Rs 7,000-crore MFI loans last month. The institutions that went for restructuring include Asmitha Microfin Future Finance Services, Share Microfin, Spandana Sphoorty Financial and Trident Microfin. Basix, India's oldest MFI, did not go in for a debt restructuring and is now facing closure.

Banks turn more receptive: MFIs

SKS Microfinance, the largest MFI, is trying to raise 900 crore through qualified institutional placements. It reported a loss of 218.7 crore last quarter.

"The worst is over. There is a definite opening up of bank credit," says Ramesh Ramanathan, founder, Janalakshmi Financial Services, an urban MFI. He has raised multiple bank loans of 15-20 crore each from banks recently.

MFIs were gasping for capital ever since the Andhra Pradesh ordinance. On the one hand, recoveries came to a virtual standstill in the state, though other states were not affected as badly. Private Equity investments, which had helped fuel an earlier growth phase, also dried up. IPO plans were abandoned. And banks stopped lending.


Source: EconomicTimes
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Thursday, July 28, 2011

Banks need to improve NPA mgmt: Chakrabarty

With lending rates rising, fears of banks’ asset quality deteriorating are gaining ground. In such conditions, banks should improve their bad loan management system, said K C Chakrabarty, deputy governor, Reserve Bank of India (RBI).

Senior RBI officials were addressing analysts and researchers a day after increasing policy rates by 50 basis points to clamp on inflation.

Chakrabarty said non-performing assets (NPAs) may increase, as interest rates rise. “We are only warning banks that their NPA monitoring system should be better. Risks can be mitigated if banks are able to identify them earlier,” he said.

Pointing out the faults in outdated systems, he said there were enough gaps in the NPA monitoring process—from identification to follow-up to recovery. The process needed to be accelerated, he said. Lately, NPA accretion has been more evident in the case of public sector banks, as they move to a system that identifies bad loans without human intervention.

Deputy governor Subir Gokarn said a rise in the cash reserve ratio would not have been beneficial. “It would disrupt normal business for banks. Since liquidity is already in deficit mode and policy transmission is better in such conditions, it was better to use a repo rate rise,” he said.

Gokarn added the cumulative impact of past rate rise actions would bring down inflation from the November-December period. In the first quarter policy review, RBI increased the inflation projection for the end of this financial year from six per cent to seven per cent. Inflation, as measured by the wholesale price index, stood at 9.44 per cent in June. Economists say the figure may touch double digits on revision.

Yesterday’s rate rise created an arbitrage opportunity for global players, which was reflected in the appreciation of the Indian rupee by 22 paise against the dollar. RBI said it did not intervene with the objective to set the exchange rate. “Exchange rates have to be market determined. If the rupee appreciates, it would have a positive impact on inflation, as imports would become cheaper,’’ said Gokarn.

On the government’s borrowing plan, deputy governor H R Khan said RBI would take advantage of the flat yield curve and continue to sell more longer-dated papers. Higher government borrowing through cash management bills and treasury bills lifted yields at the shorter end, flattening the yield curve. RBI on Wednesday auctioned Rs 10,000 crore worth of treasury bills. It is set to auction Rs 12,000 crore of dated government securities on Friday.

Source: Business Standard
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UCO Bank Q1 net rises 12% at Rs 292 cr

Net profit of UCO Bank in the first quarter of FY12 increased 12.42% at Rs 292 crore as compared to Rs 260 crore in the same corresponding period last fiscal.

Operating profit, however, showed a decline of 5.27% at Rs 611 crore in the quarter as against Rs 645 crore in the corresponding quarter previous year.

CMD UCO Bank Arun Kaul announcing the results here today said that the fall in operating profit was due to high interest expenses compared to interest income.

Interest paid increased by almost 49.5% and interest income by 27.28%.

Provisioning during the quarter was lower at Rs 319 crore as compared to Rs 385 crore in the previous similar quarter.

Total business of the bank at the end of the current first quarter stood at Rs 2,23,626 crore, with deposits at Rs 1,27,534 crore and advances at Rs 96,092 crore.

Net interest margin of the bank during the first quarter declined to 2.46% as compared to 3.07% in the previous similar quarter.

The bank's capital adequacy as per Basel II stood at 13.51%.

Net NPA during the quarter increased to 2.15% as compared to 1.14% in the previous Q1.


Source: Business Standard
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Banks and broking companies forced to hard-sell demat accounts due to lack of business

MUMBAI: The number of demat accounts with the country's two leading depositories, NSDL and CDSL, has grown substantially, despite unfavourable market conditions in the current year.

Driving the growth are banks and broking firms which have been offering a free demat account facility to existing clients and prospective investors as part of their marketing efforts.

Higher number of accounts, however, has not led to any improvement in participation of retail investors, as most of them continue to shy away from trading amid concerns over uncertain market conditions, according to brokers. As a result, many demat accounts are lying inactive continuously for the past many months.

Since January this year, NSDL, the largest among the two depository services providers, has added 4 lakh new accounts, taking its tally to 1.17 crore at the end of June.

CDSL has recorded a growth of over 12% to 76 lakh accounts in the last one year. Demat account is opened to hold shares in dematerialised or electronic form. It does away with the problems (such as theft, forgery and loss in transit) associated with holding shares in physical form.

"Many brokers are trying to convince prospective investors to open demat accounts because they are not getting enough business from their existing clients. Some of them are even giving out free accounts to win clients," saidDestimoney Securities president Sudip Bandyopadhyay. "Higher demat accounts, however, have not given a leg-up to falling trading volumes, as less than 10% of demat account holders trade on a regular basis in the current market," he added.

Declining volumes have prompted a host of brokers, includingKotak Securities,Sharekhan,Anugrah Finance,Unicon Financial andNirmal Bang, to offer free demat and broking accounts to acquire new clients. Investors need to pay only a margin amount of money and registration charges while opening demat and trading accounts. Many brokerages, in fact, have slashed margin money which used to be in the range of Rs 5,000-10,000 a couple of years ago.

"New client addition is happening at a good pace with a 10-15% growth every year irrespective of the market cycle," said Vinay Agrawal, executive director, equities broking,Angel Broking. "The point of worry, however, is that active participation has come down 20-25% over the past one year," added Agrawal.

Large banks like SBI,ICICI Bank,Axis Bank,HDFC Bank and IDBI Bank are offering three-in-one trading accounts to their banking clients. A three-in-one account is one where savings and demat accounts are linked to an online trading account. Trading charges and other incidental expenses are linked to the volumes generated by investors.

If an investor is a high-volume trader, he or she needs to pay very low trading and demat charges. Brokers feel the market needs a big trigger to boost retail participation which will help revive their fortune.


Source: EconomicTimes
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Wednesday, July 27, 2011

Home, auto loans to cost more: Bankers

Mumbai: Banks are set to increase lending rates by another half a percentage point, leaving a hole in the pocket of borrowers, after the Reserve Bank sharply raised key policy rates.

EMI (Equated Monthly Installment) for home loan of a 20-year tenure would go up to Rs 1,066 from Rs 1,032 per lakh at present as banks are set to revise their lending rates.

For a three-year auto loan, the EMI would increase from Rs 3,289 to Rs 3,311 per lakh, according to estimates by experts.

Country's largest lender State Bank of India's Chairman Pratip Chaudhuri said, "(Rising) input cost would be passed on to the customer."

On the deposit rates, Chaudhuri said they may not go up sharply in the long end. But short-term rates would see an increase as banks are competing with mutual fund schemes which give 8.5-8.75 percent returns.

"I see increase in short-term rates a distinct possibility. There is an interest in the short-term because government is borrowing more at the short-term," he said.

Country's biggest private sector lender ICICI Bank's CEO and Managing Director Chanda Kochhar said, "Going forward, banks would review the movement in funding costs and effect further increases in lending rates."

Private sector Yes Bank has already announced upward revision in the lending rates by 50 basis points.

"The hike is more than expected and it will push interest rates (lending and deposits) up by upto 50 basis points," Oriental Bank of Commerce Executive Director S C Sinha said.

The RBI has raised the short-term lending (repo) rate by 50 basis points to 8 per cent and the short-term borrowing (reverse repo) rate will move up by a similar margin to 7 per cent.

Since March 2010, the RBI has raised its short-term lending rate (Repo) by 325 basis (3.25 percentage)points to tame inflation.

"Will the interest rates go up?.. I would say yes. By how much, I don't think anybody will be in a position to tell you at this stage," HDFC Bank Managing Director Aditya Puri said.

SBI hinted a further slowdown in credit offtake saying, in the fast rising interest scenario, he may choose to go slow on balancesheet growth to protect profitability as in such a scenario, there are more risks to asset quality.

To a query on how he would manage profitability in the event of a fall in credit growth, Chaudhuri said, "from G-secs and from bond issuance...we will scale down our growth."

BoB Chairman and Managing Director M D Mallya said "going forward the expectation perhaps for credit growth is 18 percent, but one has to wait and see if credit demand is there. Demand what we have seen till now is with reference to the existing projects. But the new projects are not being implemented, not being taken up. Credit growth will be muted."

RBI Governor appreciated the fact that bankers have promised quick policy transmission to help RBI achieve its targetted objective of anchoring inflationary expectation.

The bankers have said that the interest situation is going to be challenging but their response would be rapid, indicating that policy transmission process would be faster than in the previous months, Governor Duvvuri Subbarao told reporters during his customary post-policy press meet.

The Governor also took note of the bankers' worries on possible increase in bad loans in the rising interest rate regime. But he was quick to add that "no banker has told us that there is any systemic risk as of now."

Subsequent to today's policy rate hike, the interest rate under the marginal standing facility, an additional borrowing window introduced from the annual policy on May 3, has gone up to 9 per cent from the earlier level of 8.5 per cent.

This is the 11th time since March 2010, that the RBI has raised the interest rate to check inflation, which is currently ruling at 9.44 per cent.

Source: Financial Express
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SKS Microfinance Q1 net loss at Rs 218 cr

Hyderabad: SKS Microfinance, India's only listed microfinance institution on Tuesday reported a net loss of Rs 218.7 crore for the quarter ended June 30 and said it may raise up to Rs 900 crore through private placement of securities.

The company's net profit stood at Rs 66.7 crore during the same period last fiscal, the company said in a filing to the Bombay Stock Exchange.

It had to provide Rs 188.63 crore towards provisions and write offs in the quarter as against Rs 11.96 crore during the same period a year ago.

SKS Microfinance, which raised around Rs 1,600 crore through its Initial Public Offer last year, is now is mulling to raise Rs 900 crore by way of Qualified Institutional Placement (QIP).

Company Chief Financial Officer Dilli Raj said the Board has approved the proposal to raise up to Rs 900 crore.

"There is huge growth opportunity outside Andhra Pradesh and also there is unmet demand in the market. We want to take the growth opportunities," Raj said.

He said the price at which the QIP is offered will be decided by the SEBI using floor price mechanism.

SKS' total income declined by 43.7 per cent to Rs 176.7 crore for the quarter ended June 30, as against Rs 313.6 crore in the corresponding period last year.


Source: Financial Express
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Yes Bank raises base rate by 50 bps

Mumbai: Private sector Yes Bank became the first lender to raise its base rate by 50 basis points today, within an hour of the Reserve Bank's decision to hike key short-term interest rates.

The Mumbai-headquartered bank hiked its base rate, or the minimum rate of lending, by 50 basis points to 10.25 per cent with immediate effect, it said in a statement.

The bank has also hiked the rate on loans taken under the older BPLR system by 50 basis points.

"The increase in base rate will enable the bank to fully absorb the increased costs on account of rising interest rates," it added.

The RBI today hiked the repo rate, its short-term lending rate, by a higher-than-expected 50 basis points to 8 per cent, which is bound to transmit into lending rate hikes by banks.


Source: Financial Express
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RBI hikes key rates 50 bps to fight inflation

The Reserve Bank of India (RBI) raised interest rates by a higher-than-expected 50 basis points on Tuesday, stepping up its fight against persistently high inflation despite slowing growth in Asia\'s third-largest economy.
The Reserve Bank of India (RBI) increased the repo rate, at which it lends to banks, to 8 per cent, exceeding market expectations that it would raise rates by 25 basis points.

The rate increase is its 11th since March 2010, making the RBI one of the most aggressive inflation fighters among central banks.

Still, wholesale price index inflation was 9.44 percent in June, more than double the central bank\'s comfort level, and high prices are expected to persist in coming months.

The central bank, whose forecasts for inflation have proven optimistic in recent quarters, increased its outlook for wholesale inflation at the end of the fiscal year in March to 7 percent, from 6 percent earlier.

Considering the overall growth and inflation scenario, there is a need to persevere with the anti-inflationary stance, RBI Governor Duvvuri Subbarao wrote in his quarterly policy review.

The RBI stuck with its forecast for economic growth in the current fiscal year of around 8 percent. While some interest-rate sensitive sectors are showing signs of moderating growth, it said, there is no evidence of a sharp or broad-based slowdown as yet.

All 23 analysts in a Reuters poll last week had expected the RBI to raise rates by 25 basis points on Tuesday, although 9 of them expected a pause in the tightening cycle after July amid signs of slowing domestic growth and global uncertainty.

Recent industrial output and manufacturing data was the worst in nine months, while sales of cars have slowed sharply and loan demand is easing, complicating the central bank\'s inflation-fighting task.

Subbarao said Tuesday\'s policy actions are expected to maintain the credibility of the commitment of monetary policy to controlling inflation.

The measures are also expected to reinforce the point that in the absence of complementary policy responses on both demand and supply sides, stronger monetary policy actions are required, Subbarao said in his report.

January-March quarter growth was a worse-than-expected 7.8 percent, with economists expecting India to grow at 7.9 percent in the fiscal year that began in April, according to a Reuters poll, less than the 8.5 percent growth in the fiscal year that ended in March.

Following are views of industry officials:

SUSHIL MAROO, GROUP CFO, JINDAL STEEL AND POWER

It will curtail demand for steel products as interest rate sensitive sectors such as housing and auto will slow down.

It's going to affect investments in new projects as feasibility of new projects will severly be dented because money is becoming expensive. Our projects, though, will not get impacted as they are long-term projects and immediate capex requirement is low.

R RAMAKRISHNAN, EXECUTIVE DIRECTOR, BAJAJ ELEC

We are seeing demand showing some signs of slowing down and 50 basis points is definitely likely to impact liquidity. The RBI should focus more on supply side management rather than just focus on curbing the demand side. This decision will definitely impact corporates and also the consumption of products.

VYOMESH M SHAH, MANAGING DIRECTOR, ACKRUTI CITY

This will definitely lead to increase in costs at the consumer's end as banks are likely to increase interest rates. This would also lead to an increase in borrowings for builders, but how much it will impact the final price is to be gauged.

SANTOSH SINGHI, CFO, AMTEK AUTO

The rate increase is beyond our expectations and the industry is hoping that this would be the last increase for some time to come. There is already a negative sentiment in the sector and today's announcement will not go down well with either the consumers on the retail side or the corporates for whom credit offtake has been slow.

SUNIL SIKKA, PRESIDENT, HAVELLS INDIA

This is unfortunate. They have been doing it for last few months, and we thought 25 basis points could be okay. But they have not been able to tackle inflation so far.

As far as we are concerned as an organization, on the borrowing side, it does not affect us at all because we are a debt free company. But coming to the demand side, demand of housing will go down, which in turn means demands for our domestic installation categories will go down. But RBI has not been able to check inflation so far, so I think they had no other way to tackle this, but this will certainly dent demand.

SHAILENDRA CHOUKSEY, DIRECTOR, JK LAKSHMI CEMENT

Demand for cement continues to languish. With the stance RBI has taken, it will be difficult to revive the realty sector and therefore demand for cement.

We are hopeful of medium and long-term growth of Indian economy and so are not changing our expansion plans.

ARVIND PAREKH, DIRECTOR, JINDAL STAINLESS

This was definitely higher than expectations but RBI is trying to stay ahead of the inflation curve even if it is at the cost of growth. Demand has most certainly taken a hit and even production costs will go up all around as borrowing costs will increase.

We are strongly hoping that this will be the last increase the RBI will do as there has been some easing of inflation in the past month

M.S. UNNIKRISHNAN, MANAGING DIRECTOR, THERMAX

We are already seeing a slowdown and moderation in the order intake. Investor confidence is going to further reduce with increased repo and reverse repo rates. The government is aware that this is going to reduce investments and GDP growth.

VIPUL JAIN, MANAGING DIRECTOR, KALE CONSULTANTS

I think the domestic business--the Indian market--is turning into a significant market for the IT industry. If there is less capital investment, if the cost of borrowing is higher, then it will slow down the domestic industry, which could indirectly impact IT companies.

PRADEEP JAIN, CHAIRMAN, PARSVNATH DEVELOPERS

This would impact the input cost of the real estate sector. With the result of the increase in cost of funds, I don't foresee any large concern for the real estate sector, except the burden on individuals on further increase in cost of funds and value of properties. The developer has no option but to pass it on to the buyer.

NIKHIL NANDA, JOINT MANAGING DIRECTOR, ESCORTS LTD

It is unfortunate that interest costs are going up. It will lead to increase in various costs in terms of input costs, in terms of liquidity flow and more importantly, from the customers point of view. So my concern is more from the consumption side and this is across various segments be it cars, motorcycles and tractors. Since the interest rates have gone up by 50 basis points, any manufacturer will add the costs over a period of time and pass them to the customer.


Source: Financial Express
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Tuesday, July 26, 2011

Mention reasons for dishonouring cheques: RBI to banks

The Reserve Bank of India (RBI) today directed banks to clearly mention the reason for dihonouring or returning a cheque unpaid.

"Certain instances of banks not signing the cheque return memos stating that the memos are computer generated and therefore no signature is necessary, have been brought to our notice," the RBI said in a statement.

Such practices are violation of instructions contained in Uniform Regulations and Rules for Bankers' Clearing Houses (URRBCH) which is issued under Payment and Settlement Systems Act 2007 read with Payment and Settlement Systems Regulations 2008, it said.

Mentioning the date of return in the cheque return memo is needed, wherein citing the criticality of the document in case of recourse to legal action, the central bank said in a statement.

It has been indicated that instruments returned unpaid should have a signed or initialled objection slip on which a definite and valid reason for refusing payment must be stated, it said.

Source: Business Standard
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OBC net marginally down at Rs 354 cr

New Delhi: State-owned Oriental Bank of Commerce (OBC) today reported a marginal decline of 2.4 per cent in its net profit at Rs 354.7 crore for the first quarter ended June 2011, due to rise in provisions and contingencies.

The bank had posted a net profit of Rs 363.3 crore in the same quarter an year ago.

At the same time, operating profit of the bank also declined by 2.55 per cent at Rs 801.3 crore as compared to Rs 822.32 crore in the April-June quarter of the previous fiscal.

During the period under review, the net interest income declined by 3.69 per cent to Rs 1,018 crore, compared to Rs 1,057 crore in the same period an year ago.

However, provisions and contingencies of the bank increased to Rs 314.2 crore during the quarter as against Rs 227.9 crore in the same quarter last year.

The total income rose by 28.7 per cent to Rs 3,920 crore for the first quarter ended June 30, from Rs 3,046 crore in the same period previous fiscal.

The net interest margin (NIM) of the bank declined to 2.94 per cent, OBC Chairman and Managing Director Nagesh Paydah told reporters here.

“We will try and maintain NIM at 3 per cent during the fiscal,” he said, adding, the cost of fund may soften when deposits go in for repricing later during the year.

Interest rates are expected to soften after September as rates have almost peaked, he said.

The bank expects credit growth of 20 per cent while deposits are likely to grow at 19 per cent during the current fiscal, he said.

Total business of the bank as on June 30, stood at Rs 2,42770 crore from Rs 2,09,156 crore at end of first quarter of previous fiscal, registering growth of 16.07 per cent.

As far as asset quality of the bank is concerned, the gross NPAs as a percentage to total advances rose to 2.07 per cent from 1.74 per cent in the same quarter an year ago.

Its net NPAs also went up to 1.09 per cent during the three-month period from 0.72 per cent during the first quarter of 2010-11.

Capital Adequacy Ratio (CAR) of the bank stood at 13.6 per cent at the end of June, 2011.

The bank has no plans to raise capital to meet the business growth plan in the near future, he said, adding, the bank although has a headroom of Rs 6,000 crore under Tier-II.


Source: Financial Express
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