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Saturday, November 19, 2011

Investors evince interest in SKS Microfinance's proposed Rs 9 billion share sale

MUMBAI: A couple of existing investors in SKS Microfinance have evinced interest in its proposed 9 billion rupees share sale to institutional investors, a top official said in a statement on Friday.

The potential investors include existing investors, socially relevant investors, microfinance investment vehicles in the developed world, private equity players and public market participants, the statement said.

The company which has started the qualified institutional process, or QIP, process, hopes to have all approvals in place by December first week, Dilli Raj, chief financial officer said.

"The QIP is basically a growth capital raise to help us cash in on the demand-supply gap in the non-Andhra Pradesh markets," said Raj.

SKS posted a net loss of 3.84 billion rupees in July-Sept, compared with a net profit of 0.81 billion rupees during the same quarter a year ago.

A regulatory backlash against aggressive lending and collection practices had crippled microfinance sector with crackdown in Andhra Pradesh last year hurting the loan growth.

SKS said that all the pre-IPO investors including Catamaran Management Services, WestBridge, Sequoia Capital India, Sandstone Investment Partners, Kismet Microfinance and Vinod Khosla remain invested in the company.

SKS Microfinance also said its capital adequacy ratio would remain at 35 percent even if it did not register any collections from the state of Andhra Pradesh.

Its capital adequacy ratio at the end of September stood at 47 percent and its net worth was 11.8 billion rupees.

The company also said it has written off the outstanding loans in Andhra Pradesh and has bought them down to 8.22 billion rupees from 15 billion rupees.

SKS added that if it writes-off the total outstanding in Andhra Pradesh, the company will get a tax benefit on write-off worth 2.7 billion rupees.

The firm will be left with a net residual risk of 3.37 billion rupees in case of zero recovery of loans from the state, it said in the statement.

In recent weeks, funding to micro lenders that do not have a presence in the state of Andhra Pradesh has started to trickle in, but microfinance institutions with a significant exposure to loans in the state have all but suspended operations there.

India's MFIs continue to await the passage of a bill in parliament, which will make the country's central bank the sole regulator of the sector, and remain hopeful this will bring funds flowing back into the sector.

On Friday, shares of the company ended 4.99 percent down at 121.75 rupees in a weak Mumbai market, having shed 88 percent from its 985 rupees offering price when it listed in Aug 2010.

Source: EconomicTimes
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RBI may step in again to check rupee slide

The Reserve Bank of India (RBI) will again intervene to check any further depreciation of rupee, if required, the finance ministry has assured the pertinent parliamentary standing committee.

The officials of the ministry held a six-hour-long meeting on Friday on critical economic issues with the MPs’ panel on finance. An MP later said the officials pointed out that RBI had already intervened to check the slide, lest the situation worsened. “The officials said the dollar, in the current global economic scenario, is being being seen as a more secure, compared to other currencies,” he told Business Standard. “This is the reason behind the rush towards dollar.”

Chief Economic Advisor Kaushik Basu, Revenue Secretary R S Gujral and Economic Affairs Secretary R Gopalan attended the meeting. RBI Governor D Subbarao was not present. The MP said the black money issue dominated the meeting. There were “intense discussions” on disclosing the names of those 700 foreign account holders that France provided four months ago.

“If you don’t disclose the names of 700 account holders, then your minister will tell us in Parliament,” BJP member SS Ahluwalia threatened the finance secretary. At this, Gujral agreed to provide the committee the names in the “next few days”.

“The finance secretary said the government was in discussion with one more country on similar lines to acquire bank account details; and that is why we don’t want to disclose the names of the account holders (to the Supreme Court), the member said.

“Action is being taken against 69 people out of the 700 names given by France. It will take another at least one year to check and take action against all the account holders.”

Gujral argued actionable information from Paris came after finance minister Pranab Mukherjee had met his French counterpart twice last year. The panel members raised concerns over the decline in GDP growth rate and fiscal deficit breaching the target of 4.6 per cent of GDP due to the ballooning oil subsidy bill and sluggish disinvestment prospects.

Another MP said the officials were pointed out that the economy could go into the zero-growth terrain, as growth rate might slip below seven per cent and fiscal deficit touching six per cent level.

Source: Business Standard
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BoB to raise Rs 775 cr thru preferential issue

Bank of Baroda is looking to raise Rs 775 crore through a preferential issue of equity shares or convertible warrants before March-end 2012, the bank said in a notice to the BSE, on Friday.

This capital infusion will increase the Government's stake in the bank to 58 per cent from 57 per cent.

Last year, the Government infused about Rs 2,600 crore in BoB, which increased the former's stake in the bank to 57 per cent.

The share price for the issue would be based on the last six months average price, which is as per the SEBI formula.
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RBI to issue Rs 10 notes with rupee symbol

Mumbai: The Reserve Bank today said it will shortly issue Rs 1,000 and Rs 10 notes incorporating the rupee symbol, which was approved last year.

The Indian rupee got an unique symbol -- a blend of the Devanagri 'Ra' and Roman 'R' -- last year joining elite currencies like the US dollar, euro, British pound and Japanese yen in having a distinct identity.

The Rs 1,000 notes will be of the Mahatma Gandhi-2005 Series bearing the signature of RBI Governor D Subbarao and with the year of printing mentioned on the back of the banknote, the apex bank said in a statement .

The design of these notes to be issued is similar in all respects to the existing Rs 1,000 in Mahatma Gandhi Series -2005 issued earlier, except for the rupee symbol.

However, all the bank notes in the denomination of Rs 1,000 issued by the RBI in the past will continue to be legal tender.

In another release, the central bank said the new Rs 10 bank notes with the rupee symbol, with the inset letter 'R', will also be released shortly.

The Rs 10 notes will also bear the signature of Subbarao and the year of printing on the back side.

All the bank notes in the denomination of Rs 10 issued by the RBI in the past will continue to be legal tender.

The new symbol, designed by Bombay IIT post-graduate D Udaya Kumar, was approved in July 2010.

Source: Financial Express
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Mallya meets SBI officials to discuss debt recast

Kingfisher Airlines promoter Mr Vijay Mallya met top State Bank of India officials on Friday to discuss possible restructuring of the company's debt.

SBI is the lead banker to the private carrier. It heads a consortium of 13 banks. These banks have a collective exposure of about Rs 7,000 crore to the company.

SBI Capital Markets Ltd, the wholly-owned investment banking subsidiary of SBI, is working on a restructuring plan for Kingfisher. It already has the mandate to restructure the mammoth Rs 40,000 crore debt of Air India.

According to Mr S Vishvanathan, MD and CEO, SBI Caps, the aviation industry will be better off if it gets back the pricing power.
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Disclose confidential inspection reports of banks: CIC to RBI

NEW DELHI: The Central Information Commission has directed RBI to make public Annual Financial Inspection ( AFI) reports of banks and also the fines imposed on them based on this exercise.

Information Commissioner Shailesh Gandhi gave the direction while overruling the objections raised by Reserve Bank of India that these reports are confidential.

RBI had contended that making the reports public might adversly affect the economic interests of the State, harm banks' competitive position and also that the information is held in fiduciary capacity.

"The disclosure may impact the banking sector on the whole. This could trigger a ripple effect on the deposits of not only one bank to which the information pertains but others as well due to contagion effect.

"This has serious implication on financial stability which rests on public confidence in banks and financial institution, besides harming their competitiveness," the RBI submitted before the CIC.

The RBI also cited a previous Full Bench order of the transparency panel in which it said that the Bank was the best body to decided whether disclosure would affect economic interests of the State.

This argument was also rejected by the Commission which said that according to the RTI Act it is the transparency panel which could decide on disclosure issues.

Gandhi however agreed with RBI that disclosure might compromise the safety of whistleblowers, informers and source of information and directed to delete such details from the inspection report before making it public.

Source: EconomicTimes
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Friday, November 18, 2011

Govt bank boards told to focus on policy

FinMin, RBI raise issues relating to micro management and better corporate governance.

The Union finance ministry has asked board members of public sector banks to stop micro-managing functioning and, instead, focus on policy issues, a move seen at improving corporate governance practices in these institutions.

D K Mittal, secretary, financial services, has met top bank officials on the matter and asked all public sector banks to schedule a board meeting in New Delhi by December, to communicate the ministry’s views.

The directive comes after a spate of financial irregularities hit the financial sector in the past year. In November last year, some public sector bank officials, including a board member, were arrested by the Central Bureau of Investigation for allegedly sanctioning loans in return for bribes.

“It is often found that directors are more interested in specific details like if a loan has been sanctioned to a particular firm or regarding transfer of particular employees. The government has asked them not to intervene in daily operations and concentrate more onpolicies and practices the bank should follow, like exposure caps, whether to continue lending to certain sectors having stress, branch opening policies and the like,” said a senior official from a state-run bank.

The Reserve Bank of India has also raised the issue of better corporate governance in banks. The regulator has already initiated a process and its supervisory department is to check how much time the bank’s top management, like chairman and executive directors, spend in their office, and is to review the governance structure.

  Public sector New private sector
2009-10 2010-11 2009-10 2010-11
Profit per employee (Rs  lakh) 5.31 5.93 8.47 8.93
Wages as % of total expenses 14.79 17.27 12.10 13.83

During the interaction with bank managements, the latter were also asked to ensure a rise in employee productivity. Data shows private sector bank employees are far ahead in this area. According to RBI data, profit per employee for the country’s largest lender, State Bank of India, was Rs 3.85 lakh for 2010-11. For the largest private lender, ICICI Bank, it was Rs 10 lakh. Among government lenders, Bank of Baroda is on top, at profit per employee in 2010-11 of Rs 11 lakh. On an aggregate level, public banks’ profit per employee was Rs 5.93 lakh in 2010-11, while for new-generation private banks it was Rs 8.93 lakh.

One reason for lower profit per employee for public sector banks is due to higher staff expenses. Public sector banks’ wages to total expense ratio in 2010-11 was 17.27 per cent; it was 13.83 per cent for private banks. The average overall operating expense was also much higher for public sector banks.

Source: Business Standard
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S&P to update bank credit ratings within 3 weeks

Ratings agency Standard & Poor's (S&P's) plans to update its credit ratings for the world's 30 biggest banks within three weeks and may well mete out a few downgrades in the process, possibly surprising battered global bond markets.

Among the institutions that could be downgraded are Bank of America Corp, Citigroup Inc and Morgan Stanley, said Baylor Lancaster, an analyst at CreditSights Inc.

Spokesmen for the three banks declined to comment.

Some European banks could also be affected. On Nov. 9, S&P downgraded its scores for the health of the banking industries in a number of countries, including Denmark, Sweden, Finland and the Netherlands.

The updates in ratings are part of a major overhaul of S&P's methods for scoring the creditworthiness of some 750 banking groups.

The agency, the subject of intense criticism because its positive ratings for mortgage-backed securities played a major role in inflating the housing bubble, has been working on the changes for more than a year.

The updates are part of a broad push by S&P to improve its products and repair its reputation as its parent, McGraw-Hill Cos Inc, divides itself into two publicly traded companies.

S&P has taken pains to prepare the markets for the changes, but when it actually releases results for individual banks some downgrades could surprise, analysts say.

One reason there could be surprises is that the new ratings method is very complex and it has been very difficult to simulate results, said Beate Muenstermann, a London-based research analyst for the money management arm of JPMorgan Chase & Co.

One area for potential surprise lies in differences between actions the agency may take on bank holding companies compared with grades for their operating units. Another is variations between long-term and short-term ratings.

S&P posted an advance notice of the coming changes in March 2010 and in January 2011 outlined its initial plans and requested comments.

Earlier this month the agency published its final criteria and said it expects 60 percent of all bank ratings to stay as they are, while 20 percent will go up one notch, 15 percent will fall by one notch and less than 5 percent will drop by two or more notches. One notch is one-third of a letter grade -- for example, the difference between a rating of A and a rating of A-minus.

S&P has not said what proportion of downgrades it expects among only the biggest banks. It has said to expect regional differences in the results for all banks. Western Europe fared worse than Latin America and Asia in the Nov. 9 changes in scores for banking industries by country.

S&P estimated in January that there would be more downgrades, but the agency lowered some ratings while the plan was being completed and also eased some of the criteria.

The agency plans to first announce its results for the 30 biggest banks, possibly as early as late this month, and then begin quickly rolling out its ratings for smaller banks.

The agency has been discussing the often-arcane mechanics of the new methodology with banks and institutional investors and has posted explanations and tutorials on public pages of its website.

S&P has been extremely good at guiding the market through this change in the methodology, said Muenstermann.

How the changes are perceived by regulators could prove to more important to S&P than to the markets. Bond fund managers say the market has probably already priced in the information underlying S&P's research and judgments.

The rating agencies tend to be laggards compared with prices, said Ryan Brist, a portfolio manager at Western Asset Management.

S&Ps changes may even foretell a coming upturn for banks, he said. Historically, ratings agencies tend to change their methodologies after large downward price movements in the market.

John Croft, a portfolio manager and director of investment grade research at Eaton Vance, said, They seem to be fiddling around with their methodologies more than opining about the underlying credit strength of issuers.

Still, Croft gives the agency credit for trying to do better than in the past. Past ratings proved too high on such financial companies as Lehman Brothers, ABN AMRO and Wachovia, which either failed outright or were forced into mergers with stronger rivals.

They are trying to rectify some of the problems that they have had in the past and to the extent that they do that, it is good, said Croft.

The agency's performance is under scrutiny from regulators, who are designing ways to reduce the power and profits from the ratings business now enjoyed by S&P and its main competitor, Moody's Corp.

S&P made matters worse last week when its computer systems accidentally sent a note to some customers suggesting that the credit rating of the Republic of France had been downgraded in the midst of the European debt crisis.

S&P said later the error stemmed from a computer programming step it had taken last December with the banking industry country scores used in the first step of its new ratings method.

Source: Financial Express
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Bank loans up 18.4% on year as on November 4: RBI

MUMBAI: Indian bank loans rose 18.4 percent on year as of Nov. 4, the RBI's weekly statistical supplement (WSS) showed on Friday.

Deposits were up 17.5 percent from a year earlier. Outstanding loans rose 299.54 billion rupees to 41.80 trillion rupees in the two weeks to Nov. 4.

Non-food credit rose 214.13 billion rupees to 41.03 trillion rupees and food credit rose 85.42 billion rupees to 774.64 billion rupees in the period, the bank said.

Bank deposits rose 351.20 billion rupees to 56.54 trillion rupees in the two weeks to Nov. 4, the WSS showed.

Source: EconomicTimes
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Spurt in ATMs as banks look to shore up fee-based income

The relaxation of norms for using ‘other bank' ATMs by the Reserve Bank of India in 2009 seems to have encouraged banks to set up more ATMs across the country in order to garner fee-based income, acquire new customers as well as to service the existing ones.

There has been a 24 per cent growth in the number of automated teller machines set up by banks to 74,505 ATMs as on March 2011, according to statistics available in the latest ‘Report on Trends and Progress of Banking in India' released by the Reserve Bank.

The central bank had initially completely waived off transaction charges for using ‘other bank' ATMs for a customer. However, later this was restricted to five transactions (financial and non-financial) a month.

The ‘Indian Payment Card Industry Survey 2011', conducted by Atos Worldline suggests that the number of ATMs is likely to increase to over 92,000 in 2011-12.

Banks consider ATMs to be an integral part of their branding, service delivery and expansion strategy. Therefore, most of them are enriching their ATM service offerings and increasing their ATM base.

The spurt in the number of ATMs can also be attributed to banks' attempt to divert customers away from branches to alternative channels to enhance efficiency.

Public sector banks seem to have taken a lead in the expansion process by installing more number of ATMs. More than 65 per cent of the total 74,505 ATMs belonged to the public sector banks as at end-March 2011, the central bank data said.

Setting up an ATM entails a cost of about Rs 5 lakh. “It is worth making this investment as an ATM brings down the overall transaction cost to a great extent. Moreover, we earn interchange revenue which adds to our fee-based income,” said Mr S. L. Bansal, Executive Director, United Bank of India.

Off-site ATM

The Reserve Bank report, however, suggests that the percentage of off-site ATMs to total ATMs witnessed a marginal decline to 45.3 in 2010-11 from 45.7 in 2009-10.

“From the point of view of banking penetration, off-site ATMs have more relevance than on-site ATMs. Out of the total net increase in ATMs last year, only 44 per cent were off-site ATMs,” the RBI report said.

Explaining the reason for the lower percentage of offsite ATMs, Mr Aspy Engineer, President, Direct Banking, YES Bank, said, “Public sector banks have a huge branch network so their natural choice will be to set up an ATM at their branches first and then to look for offsite ATMs.”
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Thursday, November 17, 2011

RBI allows authorised banks to sanction 'set-off'

With a view to liberalising the export-import procedures, RBI today decided to delegate to authorised banks the power of sanctioning 'set-off', under which an item or amount is allowed to be set off against another in the settlement of accounts.

Earlier, set-off in export receivables against import payables -- in respect of the same overseas buyer and supplier -- was allowed only with sanction of the Reserve Bank.

"It has now been decided to delegate the power to Authorised Dealer Category I banks to allow such set off with immediate effect," the Reserve Bank said in a circular.

It said, however, that the import has to be as per the Foreign Trade Policy in force.

Besides, invoices or bills and exchange control copies of bills of entry for home consumption have to be submitted by the importer to the authorised dealer bank.

The payment for the import has to be maintained as outstanding in the books of the importer.

Exporters and importers availing of the facility will have to report both the transactions of sale and purchase separately in returns.

"The 'set-off' of export receivables against import payments should be in respect of the same overseas buyer and supplier and that consent for 'set-off' has been obtained from him. All the relevant documents are submitted to the concerned AD bank who should comply with all the regulatory requirements relating to the transactions," RBI said.

Source: Business Standard
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United Bank of India faces crisis at top deck

KOLKATA: A severe human resource gap at the top deck followed by the government's denial in relaxing promotion rules has left state-run United Bank of India in a dire state.

The bank's plan to reach the milestone of Rs 1.5 lakh crore business by March next year faces stiff challenges since it is forced to run the show with just about six general managers who are burdened with three or more departments

The crisis will deepen further in January as half of them will retire by then leaving just about three senior GMs to manage critical verticals like credit, risk management, marketing, priority sector, audit, finance and treasury between them.

""We will face the real challenge when three of our existing GMs retire,"" said UBI executive director SL Bansal.

Banks with more than Rs 1 lakh crore business are entitled for as many as 20 GMs in the top management team. UBI has crossed Rs 1.33 lakh crore business on September 30.

The situation worsens for the bank as none of the 50-odd deputy GMs are eligible for a promotion at present due to a gap in succession planning earlier years.

Chairman and managing Bhaskar Sen said the situation will continue to be difficult for the next three to four quarters.

""We have charted out a transitory phase for three to six months beginning April 2012. The situation will start normalising from September next year,"" he said.

The fact that the government has turned down UBI's request for a six months relaxation for DGMs to qualify for the next level did not help the bank. Normally DGMs become eligible for promotion once they put in minimum three years in this capacity.

The ministry of finance feels that promoting people quickly can be counter-productive. The ministry is in fact going to bring about some changes in public sector banks HR policies. It has proposed a maximum of 10 GMs for up to Rs 1.5 lakh crore business.

Bansal has the bank has started firefighting by empowering DGMs with independent charges and it will go to the board for seeking one year of relaxation in the eligibility rule for DGMs.

If the board gives its clearance, 17 of them will qualify for a promotion by December and another seven by April next year, Bansal said.

""We have started grooming them by giving them independent charges. They will be fully prepared to take higher responsibilities by the time some of reach to the next level,"" the executive director said.

Source: EconomicTimes
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RBI not to relax CRR for now

Mumbai, Nov 17: The Reserve Bank of India Deputy Governor, Dr Subir Gokarn, today said the RBI will not relax the quantum of deposits banks have to park with the central bank, dubbed the cash reserve ratio (CRR), to ease current liquidity pressures.

“Not at the moment. CRR is being seen by us as a part of a monetary dashboard. To use it in a sort of tactical liquidity management sense, I think we are not at that point,” Dr Gokarn told reporters on the sidelines of a conference here.

The CRR stands at 6 per cent at present and has not been changed for over a year now.

The RBI had yesterday announced it will buy Rs 10,000 crore of government bonds from the market through open market operations (OMO) on November 24, which is reportedly aimed at easing pressures on liquidity and interest rates.

With the busy season for credit picking up, banks are reportedly borrowing up to Rs 1 lakh crore every day from the repo window.

According to reports, the move can also be aimed at easing pressures on yields, as the RBI was unable to carry out three bond sales because investors were asking for higher yields than what the RBI was offering.

”... The OMO is the obvious market—based tactical move.

It does not send a signal of change in the monetary policy stance, which the CRR always runs the risk of doing,” Dr Gokarn said.
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Federal Bank, LIC tie up for e-transfer of maturity proceeds

Kochi, Nov. 17: Federal Bank has signed an agreement with Life Insurance Corporation of India for paying maturity proceeds of LIC policies.

Hitherto the maturity proceeds were paid by cheques from the respective branch offices of LIC across the country and sent to the beneficiaries one month prior to the due date. Now the proceeds will be credited directly to the beneficiary's account by way of NEFT (National Electronic Funds Transfer) on the due date. This move will be cost effective for LIC and improve the payment system.

Clients need not wait for the cheque to get cleared as the payment is credited directly into the account. Problems such as cheques getting lost in transit, fraudulent encashment, and so on, will not arise.

Federal Bank is among the few banks which have signed agreements with LIC as the bank has systems in place to ensure that NEFT payments from each Divisional Office, numbering to more than 10,000 daily, can be sent smoothly.

Mr Antu Joseph, Deputy General Manager, Federal Bank, said that the alliance will create a win-win situation for all parties involved, giving the customers a hassle-free and convenient claims option.

According to Mr V. K. Kukreja, Executive Director, Finance and Accounts, LIC, “We are excited about the potential of our tie-up with Federal Bank, which is one of the leading banks with a strong focus on asset quality, excellence in banking technology and delivery of service quality.”
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SBT commercial biz group branches

Thiruvananthapuram, Nov. 17: State Bank of Travancore has implemented the new idea of commercial business group (CBG) branches from November 1. This is aimed at boosting the bank's wholesale banking business at selected centres, an official spokesman said here.

Initially, 11 branches located at important emerging business centres of the country are being included in the group. The bank already has a commercial network linking branches in the metros and large cities to cater to the need of big corporates.

CBGs are aside of this, and will take care of the medium and large corporates. They will be self-supported, single-point processing units and would ensure timely disbursal of quality credit.

By bifurcating the wholesale banking business and retail lending at the respective centres, customers of both segments would get focussed attention, the spokesman said.
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RBI cancels licence of Charminar Co-op Bank

The Reserve Bank of India has cancelled the licence of Hyderabad-based Charminar Co-operative Urban Bank as all efforts to turnaround it had failed. In a press release issued on Wednesday, the RBI said that depositors were being inconveniences by the continued uncertainty.

The Registrar of Co-operative Societies, Andhra Pradesh State has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank, RBI said.

Consequent to the cancellation of its licence, the bank is prohibited from carrying on ‘banking business' including acceptance and repayment of deposits.

On liquidation, every depositor is entitled to repayment of deposits up to a ceiling of Rs 1 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

The beginnings

The problems with Charminar Bank started in February 2002 when the RBI discovered that the bank was not in a position to meet the demand of its depositors. To protect the interests of the depositors, the RBI restricted the bank from accepting and repaying deposits to a maximum of Rs 1,000 per depositor.

With a view to restructure and revive the bank, the Government of Andhra Pradesh notified a Scheme of Reconstruction in consultation with RBI which came into force with effect from March 3, 2003. The Scheme, however, failed to yield the desired results. The subsequent inspections of the bank also revealed no improvement in its financial position, said RBI.

In terms of a revised restructuring scheme, all depositors of the bank having deposits above Rs 10 lakh were to be paid the balance amount in eight equal half-yearly instalments starting from March 2009.

Not from recoveries

It was observed that the last instalment (fifth) was paid not out of the cash generated from recovery of non-performing assets but by disposing of the fixed deposits maintained with other banks. The bank itself accepted that any further recovery in NPA accounts were not possible. Without any further recovery in NPA accounts, the bank can hardly make repayment of the next instalments, said the RBI.

Further, the Charminar Bank is not in a position to pay its depositors in full, the affairs of the bank are being conducted in a manner detrimental to the interests of its depositors, the financial position of the bank leaves no scope for revival and public interest will be adversely affected if the bank is allowed to carry on banking business, the RBI said.
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AIBEA opposed to Kingfisher bailout

The All-India Bank Employees Association (AIBEA) has opposed any bail out of Kingfisher Airlines by banks and demanded nationalisation of the airlines.

The AIBEA General-Secretary, Mr C. H. Venkatachalam, has in a release stated that the association would protest any move by banks to bail out the beleaguered airlines. Banks have already extended a total credit of over Rs 7,000 crore, and purchased shares at an overvalued price just to accommodate Kingfisher Airline and protect the defaulting company by converting bad loan/debt to equity.

The AIBEA has demanded a Parliamentary probe into the purchase of Kingfisher shares by banks and stressed the need for recalling the entire loan.
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IDBI Bank raises $102 m thru issue of ‘Dim Sum' bonds

Indian banks are increasingly diversifying the markets from which they can raise foreign currency resources. IDBI Bank on Wednesday said it has raised Renminbi (RMB) 650 million ($102 million) by issuing three-year ‘Dim Sum' bonds to investors in the Hong Kong and Singapore markets.

In the last one year or so, Union Bank of India and State Bank of India had raised funds by issuing bonds denominated in Swiss Francs. Previously, banks used to raise funds predominantly in dollars.

The bank originally intended to mop up RMB (Chinese currency) 500 million but scaled up the issue size to RMB 650 million due to robust demand from investors, said Mr Melwyn Rego, Executive Director.

The public sector bank has raised the resources through its Dubai International Financial Centre branch under its $1.5 billion medium term note programme at a coupon rate of 4.50 per cent. The issue was lead managed by HSBC.

‘Fast expanding'

“The Dim Sum bond market is a fast expanding market, driven by the growth of offshore RMB deposits. Raising funds through the Renminbi-denominated bonds proved to be about 100 basis points cheaper than dollar-denominated bonds,” said Mr Rego.

According to Mr R. M. Malla, Chairman and Managing Director, the bank's decision to access the overseas market through Dim Sum bonds last week is in line with its objective of achieving low-cost funding as well as diversifying its investor base.

Proceeds from the bond issue will be used to provide foreign currency loans to Indian corporates. Out of its $1.5 billion MTN programme, IDBI Bank has so far raised $450 million.
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Wednesday, November 16, 2011

SBI, DDA, PNB babus fined for corruption

New Delhi: Over 200 government officials have been penalised for their alleged involvement in corruption by the Central Vigilance Commission (CVC) during September this year.

Out of the total of 201 government employees, the highest number of 46 were from Central Board of Excise and Customs, 29 from Syndicate Bank, 20 from State Bank of India (SBI) and 13 each from Delhi Development Authority and Ministry of Railways among others, a CVC report said.

Besides them, 11 officials each from Bharat Sanchar Nigam Limited, Allahabad Bank and Punjab National Bank, five each from United India Insurance Company Limited and Ministry of Urban Development have also been penalised.

According to the Commission's monthly performance report for September, a total of 1,797 complaints were received against various government officials for their alleged involvement in corrupt practices.

The Chief Technical Examination wing of the CVC also effected a recovery of about Rs 3.36 crore from various departments after inspecting procurement-related works, it said.

A recovery of a total of about Rs 73 crore has been made by the Commission between January and September this year after inspection of different department-related works.

"The Commission is deeply concerned over continuing delay in filling up the post of Chief Vigilance Officer (CVO)in Delhi Transport Corporation," the report said.

Source: Financial Express
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ICICI Bank to repatriate capital from Canada arm

Move comes as stringent regulation chokes biz growth.

ICICI Bank, the largest private sector bank in the country, plans to repatriate a part of the capital of its Canadian arm, as business growth has been crippled by stringent regulation.

The lender’s Canadian banking subsidiary, sitting on a capital adequacy ratio of 29.3 per cent, is witnessing a decline in its return on equity. The bank has already initiated talks with the Canadian regulator on the issue, according to sources familiar with the development.

The private sector lender has decided to send home a part of the capital of ICICI Bank Canada as the subsidiary is finding it difficult to grow its loan portfolio after the regulator said it must lend money within the country if it raised deposits locally.

“It has become a challenge to grow the portfolio of the Canadian subsidiary. The bank is not able to generate a reasonable return on equity because there is idle capital. One of the ways to improve the return on equity is to reduce the level of capital,” said a source, requesting anonymity. He did not quantify the amount ICICI Bank was planning to repatriate from Canada. Sources said the bank was still awaiting a response from the Canadian regulator on the issue.

ICICI Bank confirmed this development.

“As we have communicated in the past, following the global financial crisis, the regulatory environment has been becoming tighter and regulators are increasingly requiring deposits raised in a particular geography to be deployed in local assets,” the bank’s spokesperson said in an emailed response.

“Given our international strategy, which is primarily India-linked, we are not growing our balance sheet in Canada and will seek to rationalise the capital invested in the Canadian subsidiary over time, with the requisite regulatory approvals,” the spokesperson added.

ICICI Bank currently has three overseas banking subsidiaries in Canada, the UK and Russia.

According to the bank's annual report for 2010-11, the Canadian arm's paid-up share capital was Rs 4,175 crore as of March-end, including a paid-up preference share capital of Rs 415 crore. The total assets of the bank were 5.10 billion Canadian dollars as of September-end and were at the same level three months back. The subsidiary's profit after tax was 5.2 million Canadian dollars, according to International Financial Reporting Standards, in the second quarter.

ICICI Bank is facing a similar issue in the UK, where the regulator has asked banks to deploy deposits raised locally within that market. However, sources said the bank had not initiated any discussion with the regulator on the repatriation of capital of ICICI Bank UK.

"The capital base of the bank in the UK is relatively small. But, in Canada, the bank has a large surplus of capital," said another source.

In the UK, the bank's subsidiary had paid-up share capital of Rs 2,654 crore as on March 31, including paid-up preference share capital of Rs 223 crore. The UK arm's capital adequacy ratio was 29.8 per cent as of September-end. ICICI Bank UK reported a net profit of $2.2 million in July-September. Total assets declined to $5.13 billion as of September-end from $5.96 billion as on June 30. The bank's Russian arm, ICICI Bank Eurasia, had paid-up capital of Rs 318 crore at the end of March.

Source: Business Standard
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SBI ties up with MoneyGram International for inbound money service

KOLKATA: State Bank of India has joined hands with money transfer services company MoneyGram International and the latter's principal agent Thomas Cook (India) Ltd to provide in-bound money services across SBI's key branches. Initially, the services will be made available to SBI's 100 branches.

MoneyGram International's executive vice president for the Americas and Emerging Markets, Dan O'Malley was quoted saying in a press statement: "Adding SBI to our agent network immensely increases consumers access to the company's services across India. The Bank's locations throughout India will make it be more convenient than ever to receive money wherever you are in the country."

As Per RBI guidelines, Indian nationals can draw up to Rs 50,000 in cash immediately. Transactions above Rs 50,000 are given in the form of a cheque. Foreign nationals can withdraw cash up to the equivalent of $2,500 after producing a valid passport and visa.

Source: EconomicTimes
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IDBI Bank becomes first lender to tap China funds

MUMBAI/HONG KONG: India's IDBI Bank became the first lender to raise funds in offshore yuan in Hong Kong, signalling a new set of borrowers to enter the growing bond market.

From its sleepy origins as a tiny market for Chinese and Hong Kong companies in 2009, the so-called "dim sum" market or bonds sold by issuers in Hong Kong is known, has exploded to include multinational firms, large Chinese state-run enterprises and even casino companies.

While the steady increase in rupee interest rates has driven local companies to raise funds overseas, the yuan's attractiveness has received a boost after New Delhi added the Chinese currency as a external financing vehicle to the US dollar, Japanese yen, euro and the pound sterling in September .

India has set a $1 billion limit for borrowing in yuan within the $30 billion overseas borrowing limit for companies. The bond sold by the mid-sized Indian lender was eventually sold at a lower-than-projected yield of 4.5 percent, indicating demand from investors for yuan-linked assets remained intact despite a September selloff in Asian rates and FX.

The three-year deal was eventually priced at 4.5 percent, below an initial projection of 4.625 percent. The issue size was expanded to 650 million yuan ($101 million) from an expected 500 million yuan. The orderbook closed at around 900 million yuan with more than 20 accounts involved.

"IDBI Bank decided to access this market as an attractive funding cum diversification play as also to cultivate a new and fast developing investor class," Melwyn Rego, executive director at the bank told a media briefing. IDBI has a "Baa3" rating from Moody's and "BBB-" from S&P, both with stable outlooks, and similar ratings are expected for the new bonds.

The bank has already lined up assets, which will be funded from the proceeds of the bond said, Rego said. While the bank did not have any immediate plans to tap the market again, despite the good demand from investors, Rego said the bank has applied to Chinese banking authorities to open a representative office in Shanghai.

Many foreign corporate borrowers, including the World Bank, Volkswagen, McDonald's Corp and Caterpillar , have tapped the CNH market for funds for their Chinese operations, rather than borrowing in the dollar markets and converting into Chinese currency, which can be costlier.

Growth in the offshore renminbi, or yuan, bond market has been driven by a near-consensus market view that the yuan will rise, which has enabled top-rated issuers to pay less than 1 percent interest on their offerings. This year, dim sum bonds worth 140 billion yuan have been issued, compared with 40 billion yuan worth bonds sold during 2010.

Source: EconomicTimes
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Exim Bank's capital to increase five-fold to Rs 10,000 cr

NEW DELHI: The Cabinet on Wednesday approved draft amendments to a law governing the Exim Bank, proposing an increase in its authorised capital from Rs 2,000 crore to Rs 10,000 crore.

Besides, the Export Import Bank of India (Amendment) Bill, 2011 proposes appointment of two whole-time directors, other than the Chairman and Managing Director. The government will take the amendment bill to Parliament in the near future.

The Exim Bank, which plays a vital role in financing of export and import deals, is governed under the Export-Import Bank Act, 1981.

"Increase in the authorised capital would enable the bank to take higher export credit exposures and enable it to borrow funds to disburse under export line of credits," an official statement said after the Cabinet meeting.

The bill also seeks to empower the Central government to further increase the authorised capital of the Exim Bank without any more legislative changes.

By appointing two whole time directors, the management structure of the bank would be strengthened, it said.

Exim Bank was set up as a corporation in 1982 under the Export Import Bank of India Act, 1981 for providing financial assistance to exporters and importers.

It also functions as the principal financial institution for coordinating the working of different institutions in export financing and import of goods and services.

During 2010-11, 22 Letters of Credit (LoC) aggregating USD 2.38 billion were given by the Exim Bank to support export of projects, goods and services from India.

As on March, 2011, the Bank has a credit commitment of USD 6.66 billion covering 72 countries in Africa, Asia, CIS, Europe and Latin America.

Source: EconomicTimes
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Vijaya Bank expects weak credit growth in remaining fiscal

BANGALORE: Bangalore-based Vijaya Bank expects the last two quarters of the current financial year to be slow for loan growth as corporates and retail consumers postpone spending, hit by high interest rates, a top official said on Wednesday.

The lender, who has no exposure in the aviation sector including the beleagured Kingfisher Airlines, is cautious about lending to power, commercial real estate and textile sectors, H.S. Upendra Kamath, chairman and managing director told Reuters in an interview.

"Growth is stunted on all front. Industrial capex is not happening so there is no new funding demand. With inflation being high, disposable income of families is also being impacted. So consumption is being postponed," he said.

Source: EconomicTimes
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Citigroup likely to cut 900 jobs

New York, Nov 16: US—based banking major, Citigroup, is likely to slash 900 jobs in its securities and banking division amid financial market turmoil, says a report.

Quoting people familiar with the situation, the Wall Street Journal said job cuts are planned since turmoil in the equity and debt markets is eroding revenues.

“The cuts are part of a broader move by Citigroup to curtail expenses. The bank is considering eliminating 3,000 jobs, or around 1 per cent of its work force,” the daily said.

According to the report, a head count reduction for the overall bank had not been finalised and could change.

Citigroup has cut thousands of jobs during the financial meltdown. The Wall Street Journal pointed out that lately Citigroup has been wooing high profile talent from competitors to rebuild market share.

As per the report, the entity had in April announced plans to hire 500 bankers and traders over the next two years.

“Since then, however, fears over the European debt crisis and new regulations capping bank profits in other once—lucrative areas have altered the outlook,” it added.

Quoting a Citigroup spokeswoman, the report said the bank was planning “targeted head—count reductions in certain businesses and functions” across the bank as part of an effort to “control expenses.”
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Karnataka Bank opens financial literacy centre

Mangalore, Nov. 16: Karnataka Bank Ltd, in association with the Manipal-based Jnana Jyothi Financial Literacy and Credit Counselling Trust, opened its first financial literacy and credit counselling centre at B.C. Road town in Bantwal taluk of Dakshina Kannada district on Wednesday.

Speaking at the inauguration of the centre, Mr P. Jayarama Bhat, Managing Director of Karnataka Bank, highlighted the centre's functions and its use especially for the rural public. The centre is meant to serve the interest of customers of all banks, he said.

Inaugurating the centre, Mr A.K. Bhattacharyya, General Manager of Reserve Bank of India, spoke on the initiatives taken by the RBI and the need for financial literacy as well as financial inclusion. By this initiative, the level of knowledge among the general public could increase resulting in availing of more banking services.

The Managing Trustee of Jnana Jyothi Financial Literacy and Credit Counselling Trust, Mr D.T. Pai, laid out the objectives of the trust and the functions of the centre. He said Karnataka Bank is the first private sector bank to sponsor the opening of such a centre at block level, and reiterated the desire of the Trust to open more such centres at taluk and block levels.
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Tuesday, November 15, 2011

Sebi to revamp IPO process to check price manipulation

Market regulator Sebi today said it is looking at revamping the initial public offering (IPO) norms and putting in place a common KYC regulation for financial sector intermediaries.

"Whenever we find instances of violation (IPO norms), we will take deterrent action. It also calls for a relook at our entire IPO process. So we are doing that as well," Sebi Chairman UK Sinha told reporters on the sidelines of an ANMI event here.

He said very soon a regulation for centralised KYC (Know Your Customer) would be put into place for making the process easy. "We have decided to have a thorough review of our risk management system as the current system is more than 10 years old," Sinha said.

Earlier this year, the Securities and Exchange Board of India (Sebi) had decided to introduce a new short and simple form for IPO investors for increasing retail participation in the stock markets.

In the first half of the current fiscal, 30 companies have raised fund totalling over Rs 5,000 crore through IPOs.

Sources in the know of the move say that the market regulator is considering expediting the clearance of IPO offer documents. Companies have a one-year time to come out with public offers from the date of Sebi clearance.

Sinha further said that Sebi takes quick, effective and non-discriminatory action in case of market manipulation.

Speaking on the occasion, NSE Chairman and MD Ravi Narain said, "We want to have more products. But we are not interested in speculative products. However, any product which manage volatility and eliminate systems risk are welcome."

Sinha said the cost of trading has gone up in the country and that Sebi has taken up the issue with the government.

"It is now time for having a re-look at the Securities Transaction Tax (STT). Sebi has taken it up with government," he said.

The government had introduced STT in 2004 on transactions in different types of securities. The rate presently varies from 0.025% to 0.25% depending upon the type of security traded and transaction ? whether sale or purchase.

Sinha further supported the call for bringing the investments of EPFO and retirement fund to the stock market.

"I would recommend that we engage the labour leader and the trustees of such fund to tell them how the market functions," he said.

Echoing similar view, Narain said, "We should look at new pension scheme (NPS) and Employee Provident Fund to increase participation in the markets."

Source: Business Standard
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