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Saturday, November 26, 2011

Subsidies are bad: D Subbarao

Chandigarh: Advocating fiscal consolidation and containment of fiscal deficit, Reserve Bank Governor D Subbarao today termed subsidies given on fuel, fertiliser and irrigation as "bad" ones and stressed on weeding out unproductive expenditure.

Delivering the P N Haksar Memorial lecture here, Subbarao said, "In charting a roadmap for fiscal consolidation, we need to be mindful of the quality of fiscal adjustment-- which is to weed out unproductive expenditure and protect growth promoting expenditure," he said.

Sharing his thoughts on subsidies in his address on 'Rejigging the Elephant Dance: Challenges to Sustaining the India Growth Story, Subbarao said, "There are bad subsidies and there are good subsidies".

"Bad subsidies like fuel subsidy, subsidy on LPG may be Rs 300 but every time you buy LPG you are getting subsidy to the extent of Rs 300. Not only you, Mr Birla, Mr Ambani, every time they buy a cylinder, they will also get subsidy," he said.

"Then there is fertiliser subsidy...soil degradation happens because of fertiliser subsidy and thereafter irrigation subsidy," he said.

Subbarao said there were good subsidies as well, like giving cycles to girls to come to school and constructing toilets for girls in schools located in villages. "These are good subsidies," he asserted.

He said about 75 per cent of the government's expenditure constitute payment of salaries, pension etc.

He emphasised on the importance of a stable and predictable macro-economic environment which was necessary for growth.

"Fast growth gained through an excess can be an allure because the signs of instability brewing in underbelly are often not visible real time. But when implosion inevitably happens, the losses by way of lost growth and welfare can be monumental," he said.


Source: Financial Express
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Friday, November 25, 2011

Reduced commissions to hit women agents selling post office saving schemes the most

In a bid to win back small savers, the government recently announced hike in interest rates on various post-office savings schemes. It also announced that it will implement the recommendations made by the Shyamala Gopinath Committee on reform of the small savings fund.

But over 6 lakh agents who sell schemes like the post-office recurring deposits, the monthly income scheme and the public provident fund fear that they may have to cope with a drastic reduction in their income if commissions on these schemes are reduced, as proposed by the committee. One of the committee's proposals is to reduce the commissions paid to agents on the post-office recurring deposits from 4 per cent to 1 per cent.

Data from the government show that all small savings schemes put together collected Rs 2.51 lakh crore on a gross basis in 2009-10. The post-office savings account was the biggest contributor bringing in Rs 68,000 crore on a gross basis, followed by the Monthly Income Account (Rs 54,300 crore) and the recurring deposit (Rs 30,353 crore). Distributors estimate that a typical agent selling post-office schemes earns about Rs 10,000 a month in the big cities, Rs 5,000 in towns and about Rs 2,000 a month in rural areas. The agent force for some schemes such as the post-office recurring deposits is dominated by women.

In Tamil Nadu for instance, of the 32,000 agents, 8,200 are standard agents, while the remaining are womenfolk belonging to the Mahila Pradhan Kshetriya Bachat Yojana (MPKBY). Last year, the Tamil Nadu circle collected Rs 13,414 crore of which monthly income schemes accounted for Rs 2,632 crore and the postal recurring deposits Rs 2,160 crore.

Industry sources say that the low interest rates on small savings schemes even as bank deposit rates have gone up, have prompted investors to shift to the latter in recent years. This has resulted in the agent force for post office schemes depleting.

In Tamil Nadu, more than 8,000 agents are estimated to have moved out of the business in the past few years due to lucrative commission elsewhere. If the commission on recurring deposits is cut, agents fear that the average monthly income of the women agents will fall sharply. The effective reach of the post office network will also not be utilised. There are 1.5 lakh post offices in India with 80 per cent of the branches located in unbanked areas.

sureshpartha@thehindu.co.in
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Payments crisis: RBI allows Iranian central bank to open A/Cs with UCO and IDBI

KOLKATA: In an effort to resolve a long-standing payment crisis, the Reserve Bank of India (RBI) has given permission to the Central Bank of Iran to open rupee accounts with two Indian banks, namely UCO and IDBI.

"Permission from the RBI has very recently come to open rupee accounts with two Indian banks, one of which is UCO," a top official of city-based UCO Bank said.

The other bank is IDBI Bank. Both the accounts were opened in the respective banks' Mumbai branches.

The official said since the closure of the Asian Clearing Union (ACU) in December, payments for oil imports from Iran and non-oil exports to that country have been severely affected.

The UCO official said there was some understanding between the RBI and the Iranian central bank about the mechanism of making payments.

He said that the Iranian central bank would park funds in the two Indian banks to enable payments for oil imports by India as well as non-oil exports to Iran.

To a query, he said it was not yet known whether the Iranian central bank had already parked funds in the two accounts.

The official said while payments for oil imports would initially be in rupees, it would be then converted into a separate currency, which was yet to be decided by the apex bank.

Meanwhile, the tea industry is deeply worried about non-payment for shipments made to Iran since December last year.

The Secretary of the Indian Tea Association (ITA), M Dasgupta, said since payment through the ACU ceased, no letters of credit could be opened by Iranian importers with any Indian commercial bank due to US sanctions.

He said unless the problem was resolved, orthodox tea producers would be hard-pressed, as they would have to hold on to their stocks.

The ITA official said Iran was an importer of high-value orthodox tea, which fetches an average price of Rs 190 per kilogram, as compared to Rs 145 per kilogram for other varieties of tea.

The other fear was that producers might lower production of orthodox tea to shift to other varieties like CTC.


Source: EconomicTimes
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IDBI Bank begins ‘Aadhaar' enrolments in Kerala

IDBI Bank, one of the Registrars under the ‘Aadhaar' project has launched its enrolment in the State.

The enrolment was launched on Wednesday from seven branches in five locations for the bank customers, their relatives and other residents.

CUSTOMER CARE

Mr S.Andi, Chief General Manager and Head - Financial Inclusion Department, IDBI Bank, formally inaugurated the programme at the Vazhuthacad branch in the city.

Mr K. Ramaswamy, Chief General Manager and Head - PBG (south) and Mr Krishnadas C. H., Regional Head (Kerala) were also present.

Welcoming the customers, Mr Ramaswamy mentioned that the bank has started the enrolment first from Thiruvananthapuram and was very happy to provide this service to the bank's customers as a part of customer care.

Enrolments commenced simultaneously from IDBI Bank branches located elsewhere in the city at Karamana and Ulloor, as well as in the districts of Kollam, Kannur, Kozhikode and Palakkad.
MORE BRANCHES

The bank will soon commence enrolment from more branches in the State.

Mr Ramaswamy said that the bank was proud to be part of a national mission in providing the unique identification number or ‘Aadhaar' to the residents of India.

Explaining the benefits, Mr Andi said that Aadhaar was a means for residents to easily and effectively establish their identity, to any agency, anywhere in the country, without having to repeatedly produce identity documentation.

He also stated that the bank perceived Aadhaar to be a mighty tool to empower the common person by facilitating him/her access to a modern financial system of the country.

It would also be a step towards sustainable and inclusive growth, which in turn was essential for building an equitable society.
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Bank loans in Odisha grow 37% year-on-year, more than the national average

KOLKATA: Commercial banks operating in Odisha have grown their advances in the state by a good 37% in the last one year, much better than the national average of 18.4%.

With this growth, banks' total outstanding advances in the state stood at Rs 74,721 crore at the end of September, compared with Rs 54,565 crore a year back, the state's banking committee convenor Uco Bank said on Friday.

It said banks have collectively opened as many as 197 branches in Odisha during the last 12 months.

Their deposit mobilisation has grown 24% to Rs 1.10 lakh crore from Rs 88,856 crore. Consequently, banks' credit-deposit ratio in the state has improved to 68% from 61.41% a year back.

The statistics have been reviewed recently at a state level bankers' committee meeting. State finance minister Prafulla Chandra Ghadei attended the meeting with senior government officials.

Bankers said advances to micro and small enterprises in the state has grown by 70% to Rs 12,164 crore. However, they felt asset quality is a cause of concern with percentage of recovery dipping to 55.12 % from 59.24% in the last quarter.



Source: EconomicTimes
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Union Bank hikes BPLR by 50 basis points

Union Bank of India has hiked the benchmark prime lending rate by 50 basis points to 15.5 per cent with effect from November 28, the bank said in an announcement on the Bombay Stock Exchange. This means a hike in interest rates on all loans linked to the BPLR

The bank's Base Rate remains unchanged at 10.75 per cent. According to an official from the bank, the hike is mainly to loans linked to the BPLR to the Base Rate. “Most of our loans have shifted to Base Rate and we want all our customers to move to the BPLR,'' he said. Union Bank also hiked the interest rates on NRE (rupee) term deposits by 100 basis points and on FCNR deposits by up to 25 basis points.
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RBI deregulates interest on savings accounts in UCBs

MUMBAI: The Reserve Bank today deregulated interest rate on savings accounts in Urban Co-operative Banks (UCBs), a move that will fetch better returns for depositors.

RBI had freed savings bank deposit rate for the scheduled commercial banks last month. Subsequently, it had liberalised this for the Regional Rural Banks earlier this week.

In a notification addressed to all Primary (Urban) Co-operative Banks, RBI said lenders are free to determine their savings bank deposit interest rate subject to two conditions.

Under the first condition, the notification said, "each bank will have to offer a uniform interest rate on savings bank deposits up to Rs 1 lakh, irrespective of the amount in the account within this limit".

The other condition states that for savings bank deposits over Rs 1 lakh, a bank may provide differential rates of interest, if it so chooses.

This would, however, be subject to the condition that banks will not discriminate in the matter of interest paid on such deposits, between one deposit and another of similar amount, accepted on the same date, at any of its offices, it said.

Till now, such banks were mandated to give 4 per cent interest rates on such deposits. The rate was increased from 3.5 per cent in May this year.


Source: EconomicTimes
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SBI, Oriental Bank hike interest rates on select NRE deposits

State Bank of India on Friday hiked its interest rates on certain non-resident (external) rupee (NRE) deposit accounts by 100 basis points.

This follows RBI's recent move to hike the ceiling rates on NRE term deposits for one to three years maturity by 100 basis points. Interest rates on foreign currency non –resident (banks) deposits have been hiked by 25 basis points so as to encourage non-resident Indians to park more of their savings in India.

SBI on Friday increased interest rates on FCNR (B) deposits by 25 basis points in all the six currencies i.e. US dollar, Euro, Pound, Canadian Dollar, Australian dollar and Yen.

Oriental Bank of Commerce (OBC) also announced on Friday that it has revised upwards the interest rates on NRE deposits on all maturities from one to three years. The interest rates on FCNR(B) deposits have also been revised for all maturities from one to five years in all the six currencies.

krsrivats@thehindu.co.in
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Insurance venture: Bharti ends talk with Reliance

Bharti Enterprises and Reliance Industries on Friday terminated talks for the stake sale in Bharti AXA insurance companies due to differences over issues related to long term vision and joint governance.

“AXA, Bharti, Reliance Industries (RIL) and its associate Reliance Industrial Infrastructure (RIIL) announced today that they have mutually agreed to terminate their negotiations on the proposed acquisition by RIL and RIIL of Bharti’s shareholding of 74 per cent in Bharti AXA Life Insurance and Bharti AXA General Insurance,” Bharti said in a statement.

In a separate statement, RIL said the talks were terminated as parties had failed to “reach agreement on long—term vision and joint governance of the ventures.”

After nearly five years of its association with France’s AXA, Bharti had in June announced it would exit from the financial services JVs and sell its entire 74 per cent stake in both general and life insurance businesses. Industry experts had valued the deal at around Rs 5,000 crore.

Bharti AXA Life and Bharti AXA General Insurance will continue to develop their operations in India, as they have successfully done over the past years, and build a sustainable and long—term business by tapping the significant growth potential offered by the Indian market,” it added.

The company had entered into these joint ventures with the AXA group in 2006 and held 74 per cent stake in both these ventures - Bharti AXA Life Insurance and Bharti AXA General Insurance.
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Bank of Maharashtra gets new CMD

State-owned Bank of Maharashtra on Friday said the government has appointed Mr Narendra Singh as its new Chairman and Managing Director (CMD).

He will replace the incumbent Mr A S Bhattacharya, who retires on January 31, 2012, Bank of Maharashtra informed the Bombay Stock Exchange.

Mr Singh is now Executive Director of Corporation Bank.
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HSBC joins National Financial Switch

The country’s umbrella body for retail payments, National Payments Corporation of India (NPCI), today said global banking major HSBC has joined the National Financial Switch (NFS) operated by it.

By joining the NFS, HSBC’s customers will be able to access a network of over 85,000 automated teller machines (ATMs), NPCI said in a statement issued here.

HSBC has 46 branches and 115 ATMs in the country, it said, adding that the network already has 63 banks as members.
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Pvt Life insurers policy issuance dips 35% since April

Life insurance premium collection down 20%.

The pension saga continues to take toll on the life insurance industry, particularly for the private players, as the number of policies issued by them is down by nearly 35 per cent, in the current financial year.

During April-October period, the number of policies issued by the largest life insurer, Life Insurance Corporation (LIC) of India, too, declined by eight per cent in the same period. As a result the first year premium collection of the life insurance industry, was down by 20.04 per cent to Rs 55,737.84 crore as against Rs 69,707.92 crore in the corresponding period last year.

According to the data collected by the Insurance Regulatory Development Authority (Irda), during 2011-12, life insurance industry sold close to 19.6 million policies, 15.31 per cent lower, compared to 23.14 million policies sold in the same period last year. In the same period, number of policies issued by the private players came down to 4.15 million from 6.34 million.

“Pension plans, which consisted of about 30 per cent of the sales, specially for the private players till the new regulations came into force in September 2010, now account for only 1.7 per cent of sales. Hence, the sales are down,” said S B Mathur, secretary of the Life Insurance Council.

The Council says premiums collected from pension plans dwindled to Rs 600 crore in the first six months of the 2011-12, compared to Rs 18,000 crore during 2010-11. "With the commissions on unit-linked plans (Ulips) coming down, many agents have left the industry, which has impacted the sales of private life insurance companies,” said, K Sahay, CEO of Star Union Dai-ichi Life.

During April-October, the premium collection of LIC fell 18.5 per cent; for its private peers, the collection was down 24.2 per cent. While LIC collected Rs 41,259 crore by writing new policies, the private insurers collected Rs 14,479 crore.

Considering the choppy equity market and the high inflation scenario, Ulip sales are unlikely to pick up this financial year and experts fear growth of the life insurance industry is likely to remain subdued over the next six to 12 months. In a recent report on the sector, McKinsey predicted the current slowing in premium collection might continue for 12-18 months, as insurers would be looking to adapt their business model to the regulatory changes.

As for the general insurance industry, the gross written premium grew 23.8 per cent during 2011-12, compared to the year before. According to data collated by insurers, the industry collected premiums worth Rs 33,047 crore by writing new policies during April-October, as against Rs 26,700.5 crore last year.

While, private insurers registered 24.9 per cent growth to Rs 13,690.7 crore, the four state-owned general insurance companies' collection was higher by nearly 23 per cent, to Rs 19,356.6 crore.


Source: Business Standard
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Mid-sized investment banks such as Chicago's Lincoln Int, Japan's Mizuho, UK's Investec plan setting up arms in India

NEW DELHI: At a time when global investment banks, such as Bank of America, Merrill Lynch, UBS, Nomura and HSBC are downsizing their operations in India, a clutch of niche and medium sized I-Banks are entering the world's second fastest economy.

Nearly half a dozen new IBanks, such as Chicagobased Lincoln International, Japan's Mizuho, UK-based Investec and Espirito Santo of Portugal, are setting up operations in India either as a wholly-owned subsidiary or in partnership with Indian entities. "We are positive on the India opportunity and our sweet spot here is transactions below $200 million," said TN Giridhar, MD and CEO at the Lincoln International India office over an email response to ET.

UK-based investment bank Investec recently applied for a merchant banking license with the capital market regulator Sebi, while Japan's Mizuho International plans to start operations in India by the beginning of 2012, according to two persons familiar with the development.

Earlier this month, Espirito Santo entered into a joint venture agreement with the Burman family, promoters of Dabur India. "Those Ibanks, which have not yet ventured into India, are being pushed by their global clientele as India is aligned with the global market. In addition, they are looking at tapping small and medium sized Indian companies," chief executive of a foreign firm said requesting anonymity.

The average transaction size in India is not too big. In October the average deal size was $17.40 million for M&A and $14.29 million for private equity. For qualified institutional placement, it stood at $8.67, as per data collated by Grant Thornton. There were no deals with value over half a billion and only four which were valued at over $100 million. It is this small deal size that is making new players enter the country.

For instance Lincoln International typically focuses on mid-market transactions with deals below $500 million and plans to focus on the advisory business here.

"Some of the big boys have reduced their Indian operation as their overseas clients, which are large players, are fighting recession in their home country, be it the US or Europe. Therefore, it is unlikely that these corporations will look at any investment in India," said Sanjeev Krishan, executive director at PWC India. However, medium and small size Indian companies offer tremendous opportunities for I-Banks as they are looking for inward and outward investments, Krishan added.

An email sent to Mizuho did not elicit any response. But a person close to the investment bank said it plans to recruit a top executive to head its operation in India. Last month, Investec reportedly hired a four-member team from Motilal Oswal's investment banking team, which was led by executive director Sudhir Dash.

In contrast, industry watchers say Japanese I-banking major Nomura recently laid off six to seven executives in India, including its local investment banking head and the local equity capital markets head, while Bank of America-Merrill Lynch fired five members of its investment banking team.


Source: EconomicTimes
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Thursday, November 24, 2011

SBI to scrap pre-closure penalty on home loans

State Bank of India has decided to abolish the pre-payment charges on home loans, giving some succour to borrowers who want to foreclose their accounts.

“We have decided to do away with the pre-payment charges on all kinds of housing loans with immediate effect,” a senior official of the bank told PTI.

The bank has been charging pre-payment penalties only on housing loans with floating interest rates taken before May 2011, the official said. It has been charging about 2 per cent of the outstanding amount as penalty if borrowers opted to foreclose their loans.

The decision from the largest lender will prompt other lenders to follow the suit.

The total outstanding home loan of SBI rose to Rs 92,383 crore at the end of September against Rs 86,769 crore in March 2011.

At present, some banks are charging up to 2 per cent as pre-payment penalty on the loan outstanding, if a borrower settles the full payment before maturity by switching over to another lender. No pre-payment fine is charged if borrowers pay using their own funds.

It may be noted that the Reserve Bank has indicated that it would scrap pre-payment penalties charged by banks.

“It is proposed to implement the recommendations of the Damodaran Committee, on which a broad consensus has emerged, as also the action points which were identified by the IBA (Indian Banks’ Association) and BCSBI (Banking Codes and Standards Board of India) in the last Banking Ombudsmen conference,” RBI had said in its mid-year credit policy review.

Housing finance regulator National Housing Bank (NHB) has directed all the housing finance companies to desist from imposing a pre-payment penalty on home loan borrowers last month.

The levy of charge on borrowers for pre-closure of housing loans by housing finance companies has been considered further by the NHB in the light of subsequent developments and it has been decided that hereafter, housing finance companies should not charge a pre-payment levy or a penalty on pre-closure of housing loans, the regulator had said in a notification.

In addition, the NHB has also directed all the housing finance companies to have a uniform and not differential rates of interest for old and new borrowers that have the same credit or risk profile.
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Govt stake in IDBI Bank to go above 70%

The Government's stake in IDBI Bank could go above 70 per cent as the former is agreeable to convert its investment in the bank's bonds into equity.

Currently, the government has 65 per cent stake in the public sector bank.

IDBI Bank has notified the BSE that the Government has informed it that they are agreeable, in principle, to convert the Tier-1 bonds of Rs 2,130.50 crore issued to Government by IDBI Bank into equity share capital of the bank, subject to all regulatory and statutory requirements.

“The bonds were maturing in 2022 and carried a weighted average interest rate of 9.77 per cent. Post conversion of the bonds into equity, the government's shareholding in the bank could go above 70 per cent,” said Mr P. Sitaram, Chief Financial Officer, IDBI Bank.

kram@thehindu.co.in
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IRDA launches mobile app to compare insurance products

The Insurance Regulatory and Development Authority (IRDA) has introduced a mobile application that enables one to compare insurance products and premium rates.

The application currently allows users of mobile phones with Internet connectivity to check and compare the features of Unit Linked Insurance Policies (ULIPs) introduced on or after September 1, 2010.

“The application has been developed with the objective of providing consumers a mechanism to make informed decisions by comparing features of insurance products on their mobiles,” said IRDA Chairman, Mr J. Hari Narayan, in a press release.

The application works on the Android, iPhone, Nokia and Blackberry platforms. However, a user can also access the information on any mobile that enables Internet access or can access the Web site directly.

The application enables real-time mobile-based access to the IRDA repository containing details of the products by accessing www.m.irda.gov.in.

Users will be able to compare the features of Unit Linked Insurance Products such as their premium and benefits. They will be able to search for products using three search options — search by company, by policy type and by keywords.

The search by company lists companies offering similar products and allows the user to choose the products he or she wants to compare, where the user can select up to three products.

The search by policy type lists different types of policies from which the user can select the required type and it displays the products available. Again, the user can select up to three products for comparison.

Search by keyword enables the user to search either by policy type or by company by entering a keyword.

The selected product information is displayed in a pop-up window.

deepa.n@thehindu.co.in
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Punjab National Bank's salary scheme for Kerala Govt employees

Punjab National Bank has announced a special salary savings account package for Kerala State Government employees.

Under this ‘Total Freedom Salary Account scheme,' employees can maintain a zero balance account . There will not be any type of charges under the scheme. On the day of salary the amount will be credited instantly. There is also a provision for advance salary in the form of overdraft facility, Mr K.V. Rajesh, Circle Head of the bank, said.

Employees can operate their account in any of the PNB branches without any charges. They will be provided with ATM/Debit Card, Internet Banking, SMS alerts and free RTGS/NEFT transfer facilities. The bank will issue multiple ATM/debit cards for the use of the close relatives of the account holders. Cheque books will be issued without any charge. There will be interest concession for those who avail car loan and housing loan.

Car loan

At present the bank offers car loan with the lowest interest of 11.25 per cent for loans up to 3 years and 11.75 per cent up to 7 years repayment. Under the salary account scheme, there will be further concession in interest rates for the account holders besides 50 per cent concession in processing /documentation charge.
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Others to follow SBI in raising deposit rates

The country's largest bank, State Bank of India (SBI), which recently launched an aggressive deposit mobilisation scheme that offered 8.5 per cent for tenures of seven days to 180 days, has caught the competition off its guard, and other banks are now considering launching similar products.

The new deposit scheme from SBI, launched earlier this week, would be applicable to deposits of more than Rs 1 crore. SBI has waived the pre-withdrawal penalty after seven days to make the product attractive.

Private sector lender Federal Bank followed suit today, launching a fixed deposit scheme for retail customers that offers 9.50 per cent on a maturity period of 200 days. For one year, the rate offered is 9.75 per cent.

According to a senior SBI official, the bank's new product would enable it to take advantage of the arbitrage opportunity, as rates offered for other short-term instruments, like certificates of deposits, are higher. SBI also expects the product, which has no pre-withdrawal penalty, to compete with resources flowing to liquidity mutual fund schemes which offer 8.5 per cent to 9.25 per cent.

SBI is keen to tap surplus funds of corporate houses, which are now parked in other banks, for a lower rate.

“There is a probability that banks would offer higher rates on deposits, given the current liquidity scenario,” said M Narendra, chairman and managing director, Indian Overseas Bank. The Chennai-based lender is also planning to raise rates for one-year maturity by 25 basis points to 9.5 per cent.

A senior Union Bank of India official said banks may decide on increasing the short-term rate over the next seven-10 days.

Liquidity has become tight over the last few days, with banks borrowing more than at least Rs 1 lakh crore, daily, on average, from RBI's liquidity adjustment facility. On Wednesday, banks borrowed Rs 1.35 lakh crore, compared with Rs 1.31 lakh crore on Tuesday from the RBI window. The liquidity tightness is well above the central bank's comfort zone of Rs 50,000 crore.


Source: Business Standard
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ICICI Bank eyes Indian loans at European banks: Chanda Kochhar, CEO

MUMBAI: India's biggest private lender ICICI Bank is open to buying loan portfolios of European banks, its chief executive said, as banks in the region look to deleverage and offload loans to shore up capital base.

"The opportunity to pick up some good assets at good pricing clearly exists. So, that's what we are looking at all the time and exercising it whenever we see the right opportunity," Chanda Kochhar told the Reuters India Investment Summit on Wednesday.

"We have picked up some which are India-related assets, but I would say not very large number, because given the fact that on the other hand the ability to raise funds currently has also become more expensive," she said.

European banks are struggling to raise their capital cushions to become more resilient against future shocks, which they can do by increasing equity they hold or by shrinking their asset base.

The European Banking Authority has said banks need more than 100 billion euros of new capital, but the International Monetary Fund warned in September EU banks faced possible losses of 300 billion euros as a result of sovereign and interbank lending risks.

Kochhar, who was ranked fifth in Fortune's 50 most powerful women in business, ruled out the acquisition of any European bank.

INDIA ON SOUND FOOTING

ICICI sees good credit momentum in India from car loans, mortgages and working capital, Kochhar said.

However, credit demand for new corporate projects was slow, she said, and warned of slowing overall loan growth in the fiscal year 2014 if new projects do not start over the next six to 12 months.

Indian companies have been delaying investment plans as rising interest rates make projects expensive. Indian policy interest rates are at their highest since the global financial crisis in 2008.

Earlier this month, ratings agency Moody's Investor Service downgraded its outlook for India's banking system to "negative" from "stable," as it warned of slowing growth at home and overseas hitting asset quality, capitalisation and profitability.

Kochhar expects asset quality to remain mostly stable for ICICI, although debt restructuring may increase.

"Some projects, some large corporate may need some handholding but I don't see sudden NPA (non-performing assets) shocks coming in the portfolio. I think broadly the credit quality is quite satisfactory," she said.

India's No.2 lender last month beat street estimates with a 21 percent rise in quarterly net profit, led by higher income and lower provisions for bad loans.


Source: EconomicTimes
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L&T Infra launches tax-free bonds; mulls ECB route for funds

Diversified conglomerate L&T’s infrastructure finance arm today said it is looking to broadbase fund sources and exploring external commercial borrowing (ECB) route even as the global markets remain weak.

L&T Infrastructure Finance has raised $90 million through the ECB window this fiscal and is aiming to raise more, Chairman and Managing Director of L&T Finance Holdings Mr Y M Deosthalee told reporters here. L&T Infrastructure Finance is a unit of the recently-listed L&T Finance Holdings.

L&T Finance Holdings President Mr N Sivaraman said the company has total headroom to raise up to Rs 600 crore.

Under the existing norms a dedicated infrastructure finance company like it can raise up to 50 per cent of its previous fiscal’s networth through ECB route, he said.

Mr Deosthalee conceded that international markets are in jittery at the moment but said the company will still scout for funds through the ECB route for reducing dependence on banks in a higher interest rate environment.

Up to 60 per cent of the firm’s funds are raised from banks at present while the rest comes from bonds subscribed by individuals and mutual funds.

Retail tax-saving bond issue

Meanwhile, the company also launched Rs 1,100-crore retail tax-saving bond issue with a coupon rate of 9 per cent.

The 10-year maturity bonds, which hit the market on November 25 and close December 24, can be traded on the bourses after a five-year lock-in and an individual can invest a maximum of Rs 20,000 to save income tax.

The company’s total loan book stood at Rs 8,790 crore with a 37 per cent exposure to the troubled power sector.

Stating that its entire exposure is to private sector projects, Mr Deosthalee said there is an “urgent need” to tackle issues on power generation front.

L&T Infra had raised Rs 656 crore through a similar issue last fiscal.
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Post office savings,PPF to fetch better returns from Dec 1

NEW DELHI: PPF account holders, small depositors and persons keeping money in the schemes operated by post offices, will get higher rate of return from December 1, 2011.

The government today notified increase in interest rates on public provident fund (PPF) to 8.6 per cent from 8 per cent now, and also raised ceiling on annual contributions to the fund to Rs one lakh from Rs 70,000.

Interest rates on savings account in post offices would also go up to 4 per cent from 3.5 per cent at present. Similarly, interest rates on deposits of other maturities too would be raised from December.

Further, the sale of Kisan Vikas Patras (KVP) will be discontinued from November 30. There was an apprehension about KVP, which was kind of a bearer instrument, that it was used for money laundering.

In addition, the maturity period of monthly investment schemes (MIS) and national savings certificates would be reduced from six to five years.

MIS would earn an interest of 8.2 per cent, but accounts opened on/after December 1 would not be entitled for bonus.


Source: EconomicTimes
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Interest rates have peaked: HDFC MD

NEW DELHI: HDFC Ltd Managing Director Renu Sud Karnad today said interest rates have reached their peak and there should not be further hikes in the future.

"I think it (interest rate) has already reached the peak and I personally feel there should not be any more hike. The recent hike started hurting industry," Karnad told PTI on the sidelines of a CREDAI Summit here.

Last month, the Reserve Bank of India (RBI) raised the repo rate by 25 basis points to 8.50 per cent and the reverse repo rate moved up by a similar percentage to 7.50 per cent.

Repo is the short-term rate at which the Reserve Bank of India (RBI) lends to banks, while reverse repo is the rate at which it gets funds from banks.

This is the 13th time the central bank has increased interest rates since March, 2010, to tame inflation, which is hovering near the 10 per cent-mark.

Karnad expects inflation to come down by April next year. "There are inflationary pressures of course and it does not seem to be coming down. However, with steps being taken, we hope that by March-April next year, there should be some easing," she said.


Source: EconomicTimes
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Banks to offer higher returns on NRI deposits to lure dollars

MUMBAI: A runaway currency has pushed the Reserve Bank of India to make interest rates more tempting for NRIs to bring in dollars. As the rupee closed at a new low on Wednesday, RBI allowed banks to offer higher return on dollar as well rupee deposits parked by NRIs.

Banks can now give 125 basis points over London Inter-bank Offered Rate, or Libor - the benchmark rate in international money markets on foreign currency non-resident accounts against a mark-up of 100 basis points permitted till now.

On non-resident (external) or rupee deposits, the interest rate cap has been raised to 275 basis points over Libor, from 175 bps. "It will help to improve sentiment," said Parthasarathi Mukherjee, president (treasury and international Banking) at Axis Bank. The six-month Libor is at 0.71%.

Earlier in the day, the rupee fell to a low of Rs 52.37 to the dollar, but recovered to an intraday high of Rs 51.75 on suspected dollar sales by the Reserve Bank of India. But despite intervention and the central bank's move to lift the $100-m cap on banks for swap, the local currency ended at 52.37.

Such swap transactions, where corporates enter into deals with banks to swap rupee loans to dollar, banks sell dollar in spot market and buy in forward. But the market did not feel that this will help to increase dollar supply. Global stock markets plunged to a six-week low on Wednesday after China's manufacturing activity in November dropped to a 32-week low, contributing to existing worries about US economic growth and Europe's debt worries.

Tracking the weakness across markets, India's key indices hit a two-year low as foreign investors dumped shares, unnerved by the uncertainty in the rupee's slide which closed at a record low of 52.37 against the dollar. The Sensex dropped 365.45 points, or 2.27%, to end at 15,699.97, but off the day's low of 15,478.69.

The Nifty fell 105.90 points or 2.20% to close at 4706.45. Brokers said several foreign ETFs, which are facing redemptions at home, were selling aggressively.

Stop-loss triggers at many hedge funds and foreign banks set off after the Nifty fell below 4700 mid-way through the session, precipitating the decline. But for the short-covering later, indices would have ended much lower. Foreign investors sold shares worth Rs 1186.42 on Wednesday, according to provisional data.

"Investors in India are more worried about the domestic events than the issues in the US and Europe. There is a total chaos in the currency market, with no uncertainty about where the rupee is headed," said Sandip Sabharwal, CEO-portfolio management services of broking firm Prabhudas Lilladher.

Finance minister Pranab Mukherjee on Wednesday attributed the stock market crash to withdrawal of funds by foreign investors and depreciation of the rupee.

"The rupee's underlying fundamentals still appear weak to us, especially the absence of yield support at this important moment for the currency. Indeed, there is the outside chance of an onshore USD squeeze being the catalyst which propels USD/INR to the 54.8 technical objective," said Stewart Newnham and Yee Wai Chong, analysts at Morgan Stanley.

The decline on Wednesday pushed the Nifty below the 200-week moving average of 4776, analysts said. "This is a sign of further weakness in the market as this is a long-term trend indicator," said AK Prabhakar, senior VP, Anand Rathi Securities. The MSCI Asia Apex fell 2.5% after the indications of weakening in China, the world's secondlargest economy, came a day after the US cut its Q3 growth figure.

China's preliminary HSBC manufacturing Purchasing Managers Index fell sharply to 48.0 in November compared with a final reading of 51.0 in October. The euro fell 1% after Belgian newspaper De Standaard said that the planned rescue of Franco-Belgian bank Dexia is unworkable.

The report triggered worries that France's AAA credit rating may be under threat. Report said the European crisis is making it tough for European banks to access dollar funding in money markets. Euro/dollar cross currency swaps, which measure the cost of swapping euros into dollars, are at the most expensive levels since 2008, according to reports.


Source: EconomicTimes
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Wednesday, November 23, 2011

Standard Chartered hires HSBC's Katerji for senior MENA job:Sources

DUBAI: Standard Chartered Plc has hired senior HSBC banker Haithem Katerji to head up its Middle East and North Africa financial institutions group, two sources familiar with the matter said.

In his new role, Katerji will be reporting to the bank's global head of client coverage in Singapore, one of the sources said, speaking on condition of anonymity. Katerji has been involved in several regional high-profile deals at HSBC.

A Standard Chartered spokesman in Dubai declined comment. London-headquartered Standard Chartered, which makes more than 80 percent of its earnings in Asia and other emerging markets, has a large presence in the Middle East and has been keen on boosting its investment banking operations in the region.

Last year, the bank hired Deutsche Bank's mergers and acquisitions head, Apoorva Shah, to its own M&A team.

International banks had flocked to the MENA region in recent years, lured by the oil-rich region's growth prospects and the lucrative fees available, from taking companies public to advising on sovereign fund deals.

But investment banking activity hit a rough patch in the wake of the 2008 financial crisis. The amount of fee income raised by investment banks from mergers and acquisitions was $165.1 million in the first three quarters of 2011, down nearly 41 percent from the same period last year, according to Thomson Reuters data.


Source: EconomicTimes
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Validity of cheques to reduce from 6 to 3 months

The government today said the Reserve Bank of India (RBI) has decided to reduce the validity of cheques and bank drafts from the present six months to three months beginning next fiscal.

The RBI has advised that with effect from April 1, 2012, banks should not make payments against cheques, drafts, pay orders or banker's cheques if they are presented after the period of three months from date of issue, the Minister of State for Finance Namo Narain Meena said in a written reply to the Rajya Sabha yesterday.


"It was reported to Central Economic Intelligence Bureau (CEIB) that some persons are taking undue advantage of the practice of banks of making payment of cheques or draft presented within a period of six months from the date of the instrument as these instruments are being circulated in the market like cash for six months," he said.

Subsequently, CEIB constituted an Inter-Ministerial Group (IMG) on 'Street Financing' which recommended reducing the validity period of the cheques or drafts, he added.

In another reply, Meena said the quantum of borrowings from all multilateral and bilateral donors as on October 31, 2011 is Rs 3,19,536.23 crore.

Replying to another query, he said out of 105 recommendations made by the Khandelwal Committee on HR issues of public sector banks, 56 suggestions have been forwarded to the banks for implementation.

While further deliberations are required for 49 recommendations, he said.


Source: Business Standard
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ING Vysya Bank, Oriental Insurance pact for e-payment service

ING Vysya Bank has signed a memorandum of understanding with the state-owned Oriental Insurance Corporation (OIC) for offering ePayments services through all its branches across India. 

Oriental Insurance has selected ING Vysya Bank's payment platform ING P@y, after the general insurer initiated e-payments as a mode of payment to its customers, said a press release from the bank. ING Vysya Bank had earlier this month signed a similar MoU with state-owned Life Insurance Corporation of India.
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Licensing of new banks: Industry bodies seek changes in listing norms

Apex industry associations such as Ficci and Assocham have urged the RBI to increase the time-limit for listing of shares by new banks in the private sector to at least five years.

The draft guidelines for ‘licensing of new banks in the private sector' stipulates that new banks should get listed on the stock exchanges within two years of licensing.

This stipulation is not pragmatic and feasible as the new banks may take considerable time to establish their operational and strategic performance, Assocham said in a note to the RBI.

The FICCI said the time limit should be increased to five years as banks' operations would take at least five years to reach a level of stability.

Assocham has also made a case for granting banking licences to stock broking companies. The draft guidelines stipulate that entities in real estate and stock broking would not be eligible for banking licences.
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IRDA favours zonal bancassurance tie-ups

New insurance companies are likely to benefit from the Insurance Regulatory Development Authority draft guidelines on bancassurance.

The regulator has divided the country into geographical zones.

The IRDA's exposure guidelines on bancassurance have said that banks cannot tie up with more than one life, one non-life and one standalone health insurance company in any of the States.

Further, provided that in case the agreement of general insurer/s does not have any health product to distribute, the bancassurance agent may tie up with one more general insurance company carrying on exclusive business of health insurance.

The regulator has also said that insurers other than the specialised insurer cannot tie up with any bancassurance agent in more than nine States or Union Territories in Zone A and six States / Union Territories in Zone B.

“The restriction of number of States/Union Territories a particular insurer could tie up with in Zone A and Zone B means that as an insurer we can approach the bank to be our bancassurance agent in other States/Union Territories,” said Mr Amarnath Ananthanarayanan, MD and CEO, Bharti Axa General Insurance.

“This is clearly a step in the right direction as it will give a chance to the banks to monitor insurance company service levels and ensure that its customers get the best in class general insurance products and services,” he added.

“Allowing banks to enter in to multiple tie-ups will facilitate insurance companies to variablise and reduce the cost of distribution. Therefore, open architecture will provide sustainable model for delivering insurance products to semi-urban and rural areas,” said Mr T.R. Ramachandran, CEO and MD, Aviva India.

deepa.n@thehindu.co.in
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Award for Dhanlaxmi Bank

Dhanlaxmi Bank has won the Best Mid-Sized Bank award in terms of growth, according to Business Today-KPMG's Best Banks Survey of 2011. The survey, which covered 63 scheduled commercial banks, was conducted on three broad parameters — growth, size and strength. The data used was based on published annual reports of these banks and Reserve Bank of India's Profile of Banks 2010-2011.

Under the growth category, Dhanlaxmi Bank was awarded for its surge in deposits, loans and advances, fee income, operating profit, absolute market share of deposits and current account savings account, or CASA; three-year compound annual growth rate of total deposits, loans and advances, fee income and operating profit. Mr Amitabh Chaturvedi, MD and CEO, Dhanlaxmi Bank, said the award acknowledges the bank's strategy and provides industry recognition for ambitious growth plans.
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Muthoot Fincorp ties up with MoneyGram for global money transfer services

Muthoot Fincorp, engaged in the financial services segment, has entered into an alliance with the global instant money transfer brand, MoneyGram, through UAE Exchange.

The tie-up is expected to offer instant money transfer services to the Indian expatriate community across the globe.

Mr Thomas John Muthoot, CMD, Muthoot Fincorp, said the strategic alliance would combine the companies' strengths, MoneyGram's global presence and Muthoot Fincorp's pan-India branch network.

Muthoot Fincorp Ltd, part of the Muthoot Pappachan Group, is a provider of finance in the form of gold loans and a host of other financial products.
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Postal savings scheme collections at Rs 2,74,720 cr in 2011

The government on Wednesday said gross collections under various small savings schemes of the India Post increased by about 9 per cent to Rs 2,74,720 crore in 2010—11 in comparison to the previous year.

“The gross collection under various small savings schemes during 2009—10 and 2010—11 were Rs 2,50,931 crore and Rs 2,74,720 crore (provisional), respectively,” Minister of State for Communications and IT, Mr Sachin Pilot, said in a written reply to the Lok Sabha today.

“The gross collection has registered an increase of 8.78 per cent as compared to the previous year’s collection,” he added.

“Central and state governments take various measures from time—to—time to promote and popularise small savings schemes through the print and electronic media, as well as holding seminars, meetings and providing training to various agencies involved in mobilising deposits under various small savings schemes,” he said.

Responding to another question, Pilot said 24,015 post offices have been computerised and upgraded.

In addition, under the “look and feel” component of the Indian Post’s ‘Project Arrow’, 1,530 post offices have been given a face—lift, he added.

Mr Pilot said Rs 228.50 crore was allocated for the project in 2008—09, Rs 178.01 crore in 2009—10, Rs 244.64 crore in 2010—11 and Rs 88.38 crore during 2011—12.
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Co-op banks to adopt 3-month rule on cheque validity from April

The RBI has directed co-operative banks not to make payments on cheques and other financial instruments that are over three-months-old from next fiscal.

“The RBI directs that with effect from April 1, 2012, banks should not make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or any subsequent date if they are presented beyond the period of three months from the date of such instrument,” the Reserve Bank of India said in a circular to all state and central cooperative banks.

The directive comes a few days after the central bank issued similar directions to scheduled commercial banks, stating that such instruments will not be valid if they are over three months old.

“In India, it has been the usual practice among bankers to make payment of only such cheques and drafts as are presented for payment within a period of six months from the date of the instrument,” the circular said.

“The RBI is satisfied that in public interest and in the interest of the banking policy, it is necessary to reduce the period within which cheques/drafts/pay orders/banker’s cheques are presented for payment from six months to three months from the date of such instrument,” it said.
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