RBI to issue new Rs 10 notes

Chandigarh: The Reserve Bank of India will shortly issue Rs 10 denomination bank notes incorporating the new rupee symbol, with inset letter 'R', in the Mahatma Gandhi Series.

The new notes will bear the signature of Reserve Bank of India Governor D Subbarao and the year of printing, 2011, will be printed on the back of the bank note.

The design of the notes to be issued is similar in all respects to bank notes in Mahatma Gandhi Series 2005 issued earlier, said a RBI release.

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

Source: Financial Express

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Ratnakar Bank plans to double branch network

Private sector lender Ratnakar Bank plans to ramp up its branch network to 200 branches in the next 12-15 months, its Managing Director & CEO, Mr Vishwavir Ahuja, has said.

Plans are afoot to open 30-35 branches in the next 4-5 months including in places like Chennai and Hyderabad where the bank currently has no presence, Mr Ahuja, who headed Bank of America in India for years, told Business Line here.

“We already have 30-35 branch licences which will be used in the next 4-5 months”, he said.

Mr Ahuja was in the Capital for the launch of Ratnakar Bank’s Delhi main office and flagship branch at the commercial business district at Connaught Place making this the 101st branch of the bank.

Ratnakar Bank, which is the country’s smallest scheduled commercial bank, is aiming at a network of about 250 ATMs by end March 2013, said Mr Rajeev Ahuja, Head-Strategy & Financial Markets.

The bank had in the beginning of this year raised Rs 700 crore from a group of investors to fund its growth. The clutch of investors included private equity firms and also one financial institution (HDFC) which bought a combined stake of over 30 per cent in Ratnakar Bank.

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Do not process over 3-mth old cheques: RBI to urban co-ops

The Reserve Bank of India on Friday directed primary urban cooperative banks not to make payments on cheques and other financial instruments that are over three months old, with effect from April next year.

“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 (RBI) said in a circular to all primary urban cooperative banks.

The directive comes a few weeks after the central bank issued similar directions to scheduled commercial banks and regional rural 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.

“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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Axis Bank to raise Rs 1,500 cr from bonds

Private sector lender Axis Bank today said it would raise Rs 1,500 crore through bonds to fund its business growth.

The board has passed a resolution approving allotment of unsecured redeemable non-convertible subordinated debentures on private placement basis as the bank's Lower Tier II capital aggregating to Rs 1,500 crore (including green shoe option of Rs 500 crore), Axis Bank informed the Bombay Stock Exchange (BSE).

Allotment of the debentures will be listed on the BSE and the National Stock Exchange, it said.

The bank will pay a coupon rate of 9.73% a year on the bond having tenure of 10-year, it said.

Source: Business Standard

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Rights issue best option: SBI

Pratip Chaudhuri took over the reins at the State Bank of India in April 2011 at a time when persistent high inflation had spooked the growth story. He settled the debate on teaser loans with the Reserve Bank of India, made adequate provisions and started on a clean slate. He reckons the RBI consciously sought demand destruction, so an economic slowdown should not come as a shock. But he is worried about the investment pipeline drying up. In an exclusive interview with Ritu Kant Ojha and P Vaidyanathan Iyer, he said the bank was hopeful it will be able to infuse Rs 5,000 crore before December-end, preferably through a rights issue. “We have given three options to the government. I will not be surprised if it (capital infusion) happens before December,” he said. Excerpts:

What are your fund raising plans in reference to the Rights Issue?

SBI needs capital and there are three routes. If we do a rights Issue then the government holding and the public holding remains the same. In case of a QIP (qualified institutional placement), the government stays behind and non-government entities subscribe to shares. The government holding can come down to 51 per cent from 59.4 per cent now. Or the government can agree to a preferential issue. Here, it puts money and minority shareholders stay away. So, the government holding goes up. The government sees it as a political question – what kind of holding they want to have. In our view, a Rights Issue is the best option since it treats both majority as well as minority shareholders equally.

But the rights issue seems to have been ruled out…

The government is deeply committed and the finance minister has made unequivocal statement on the capitalisation issue. We need the money but in what form is yet to be decided. I will not be surprised if it happens before December.

Do you think a Rights Issue in such depressed and volatile market conditions makes sense?

Somebody may think that Rs 1,800 is a low price. If we require Rs 5,000 crore in capital, whether the price is Rs 1,800 or Rs 2,000 becomes a matter of detail. What is the point of doing an issue at a huge premium. It is not good to come out with an Issue which is at significant premium than the long term sustainable price of a stock.

Recently the government has asked for Life Insurance Corporation (LIC) and other PSUs including banks for buyback of government holdings?

We have some room for equity investments but that is to accommodate all kinds of equity investments. It could be publicly traded, can be our strategic stake in National Stock Exchange or Clearing Corporation of India or may be some primary market investments. We can invest up to 20 per cent of Tier I capital in equities including equity mutual funds.

How much headroom does SBI have?

For SBI, 20 per cent of Tier I would be Rs 14,000 crore. Since we keep buying and selling in the market, at any given point of time we have Rs 3,000 crore to Rs 4,000 crore.

You chose to adequately provide for teaser loans. Does it continue to affect your books?

We are, in fact, getting it back now. SBI had lent about Rs 25,000 crore in teaser loans. The interest rate on the first year was 8 per cent, 9.5 per cent in second and 10.5 per cent in the third year. With each passing year, the provision will come down and the income would go up. There is no residual burden.

Do you see the economy headed for a big slowdown?

The capital goods sector is showing slight slowdown. This may be due to high interest rates or uncertain economic situation. However, projects are getting completed. May be new ground breaking is not happening to the extent it was happening in the last two years. But projects like SAIL’s 5 million tonne additional capacity, Tata Steel’s additional 3-4 million tonnes or NTPC’s 5,000 MW of power capacity addition are happening. But yes the pipe line is drying up. A slowdown in new project originations will come with a lag effect. New project sanctions are relatively on the lower side in large projects.

Inflation has started to taper off. You think we have hit the ceiling in terms of interest rate hike?

Once the Kharif crop hits the market and supply improves, the inflation comes down. RBI may give up its stance. But till the last policy, it said rates will rise. Once you initiate a certain policy action for increasing the rate, it is meant to curb the demand.

Source: Financial Express 

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Indian Bank hikes FCNR deposit rates

Public sector lender Indian Bank has revised its Foreign Currency Non-Resident (Banking) and Non-Resident (External) term deposit rates with immediate effect.

In a statement, the Chennai-based bank said it revised the FCNR (B) deposits in dollar terms to 2.32 per cent for deposits of one year and above, but less than two years from the existing 2.19 per cent.

For two-years and above but less than three years, the interest rates have been revised to 2.01 per cent from the existing 1.86 per cent. For deposits of three years and above but less than four years, it has been hiked to 2.14 per cent from the present 2.02 per cent.

For deposits of four years and above but less than five years, it is revised to 2.35 per cent from the existing 2.30 per cent. For deposits of up to five years, it has been increased to 2.62 per cent from the existing 2.59 per cent, it said.

On Non-Resident (External) deposits, the revised interest rates for one year and above but less than two years has been fixed at 3.82 per cent from 3.69 per cent, for those deposits of up to two years and above but less than three years it is revised to 3.51 per cent from the existing 3.36 per cent.

For deposits of three years and up to five years it has been revised to 3.64 per cent from the existing 3.52 per cent, the statement added.

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Equip ATMs to accept cash directly, suggests panel

A year down the line government-owned bank ATMs in urban as well as rural areas may start accepting cash (not in an envelope but directly), have solar powered back-up, and 24x7 surveillance.

The aforementioned are some of the recommendations of a government-appointed committee on ATMs headed by Dr Ashok Jhunjhunwala, Professor, IIT-Madras. These come at a time when the Government has directed the 21 banks in which it owns majority stake to go in for joint procurement of ATMs.

Cash acceptor

Besides dispensing notes, which are soiled but can be issued, and retracting notes left behind by customers, the ATMs to be deployed by public sector banks will come equipped with a cash acceptor.

The cash acceptor will accept teller grade currency notes of denominations ranging from Rs 50 to Rs 1,000.

The idea behind incorporating the cash acceptance feature — intra-bank and inter-bank — in ATMs is to ensure that customers such as small retailers, traders, and vegetable vendors can deposit cash after the close of business hours and get immediate credit for the same in their account.

Banks could also add the currency recycle feature so that the frequency of replenishing the ATMs comes down.

Currently, bank ATMs offer cash deposit facility in an envelope. However, there is a delay of a day or two in crediting the depositor's account. This is so because the envelope has to be deposited at the designated branch, and opened and counted by bank staff in the presence of two witnesses.

Integrated Surveillance

To tackle incidents such as stolen ATM cards being misused, the committee said all ATMs must have an internal camera. It should store images in a digital format for at least two months.

The integrated ATM surveillance solution must be able to capture and stamp the transaction information on the images and also allow for monitoring from a central location.

ATMs must be able to handle an average of 300 transactions in urban and semi-urban areas and 200 transactions in rural areas in a day and must work for at least 16 hours a day using solar power alone.

The committee has emphasised the importance of solar powered back-up for ATMs due to the frequent power cuts in rural and semi-urban areas. Further, the ATMs must be able to function without air-conditioner.

Besides cash withdrawal and acceptance, ATMs should, among others, enable transactions such as change in personal identification number (PIN), registration for mobile banking, mini-statement of last 10 transactions, balance enquiry, request for cheque books and funds transfer (intra and inter bank)

kram@thehindu.co.in

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RBI to adjust rates in tune with price situation: Pranab

The Finance Minister, Mr Pranab Mukherjee, today indicated that the Reserve Bank of India will adjust policy rates in tune with the price situation.

“These are all weekly (inflation) figures. Monthly figure is yet to come. The RBI is watching the situation. As and when they will consider necessary, they will adjust the monetary policy. That is their job and they are doing it efficiently and effectively,” Mr Mukherjee told reporters here.

“I would not like to make any comment on that (rate revision) right now. Only point I shall have to emphasise on is that this declining trend we shall have to watch for a longer period of time, not on a weekly basis,” he said.

Meanwhile, the Minister of State for Finance, Mr Namo Narain Meena, in a written reply to the Lok Sabha, said, “In the forward guidance of the second quarter review of the Monetary Policy 2011-12, the RBI has reported that notwithstanding current rates of inflation persisting till November, the likelihood of a rate action in the December mid-quarter review is relatively low.”

“Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted,” Mr Meena added.

Food inflation moderated considerably to 8 per cent during the third week of November from over 9 per cent in previous weeks.

General inflation also declined to 9.73 per cent in October.

In its mid-year credit policy review, the RBI had said that inflation, which was ruling near the double-digit mark, will start cooling by December this year and is likely to come down to 7 per cent by March, 2012.

In a bid to tame inflation, which has been above the 9 per cent-mark since December last year, the RBI has hiked interest rates 13 times since March 2010.

The RBI raised the repo rate by 25 basis points to 8.50 per cent and the reverse repo moved up by a similar percentage to 7.50 per cent in its last policy review in October. Repo is the short-term rate at which the RBI lends to banks, while reverse repo is the rate at which it gets funds from banks.

The central bank has hiked policy rates five times this fiscal. In the last one-and-a-half months alone, it has raised the key rate (repo) by 50 basis points.

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Axis Bank launches PG banking course

Axis Bank has launched a one-year post graduate diploma in banking services jointly with Manipal University. It is a full-time residential programme for graduates. Those who complete the course will be absorbed in the Assistant Manager grade by Axis Bank, said a press release issued by the bank.

Some of the other banks that offer similar programmes include ICICI Bank, HDFC Bank, Bank of Baroda and Kotak Mahindra Bank.

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New GM for Karnataka Bank

Mr Mahabaleshwara Bhat M.S., who is heading Mumbai region as Deputy General Manager of Karnataka Bank, has been promoted as General Manager with effect from December 1. As General Manager, he will be in-charge of Credit (Retail Finance Division) at head office in Mangalore.

A bank release said here that Mr Bhat joined the bank in 1984 as an officer trainee. He became Assistant General Manager in 2003 and worked at head office. On promotion as Deputy General Manager in 2008, he headed the Delhi region of the bank.

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RBI agreeable to asset sale to HSBC: RBS

MUMBAI: British lender RBS India today claimed that the Reserve Bank of India has agreed to clear its proposal to sell commercial and retail assets here to HSBC India.

"We can confirm that the Reserve Bank of India is agreeable to the transfer of our retail and commercial businesses in India to HSBC," an RBS statement here said.

Without offering more details, the bank said, "We continue to work closely with HSBC and the regulators to complete the transfer in a manner that is in the best interests of our clients and employees.

"India is also a major business services hub for the RBS Group, and RBS India will continue to be the third largest employment centre for the group globally...India remains as one of the top three priority markets in the Asia Pacific region for the Group, and (it) will continue to invest strategically in India," the statement said.

Last July, HSBC India had agreed to buy out the retail and commercial businesses of RBS and had been waiting for the RBI approval.

Source: EconomicTimes

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Irda notifies IPO norms for life insurers

The Insurance Regulatory and Development Authority (Irda) today came out with guidelines allowing life insurance companies, which have been in business for over 10 years, to raise funds from the public through IPOs.

The Irda, however, will decide the size of the public issue, it said in a notification.

As per the guidelines, promoters of the insurance companies will also be allowed to offload their stake in the company.

The insurance companies, which will become eligible to come out with the initial public offerings (IPOs), include ICICI Prudential Life, HDFC Standard Life and SBI Life.

Irda would prescribe "the extent to which promoters shall dilute their respective holding, the maximum subscription which could be allotted to any foreign investors", said the Irda (Issuance of Capital by Life Insurance Companies) Regulations, 2011.

Irda, it added, would prescribe a lock-in period for the promoters to prevent them from exiting the company.

The regulations stipulates that no life insurance company should approach market regulator SEBI for IPO without seeking prior approval of the Irda.

After the insurance sector opened up in 2000, only 23 private companies have entered the life insurance business. While few companies would immediately become eligible for IPOs, the remaining would have to wait for completion of 10 years of operations.

Commenting on the guidelines, HDFC Standard Life MD and CEO Amitabh Chaudhry said, "it will take some time before companies actually come out with public issues. Irda has given a lot of flexibility to the insurers in the guidelines."

Source: Business Standard

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Kerala Financial Corpn launches e-sale Web portal

The Minister for Finance, Law and Housing, Mr K. M. Mani, launched the e-sale Web portal and core financial solution at the Kerala Financial Corporation (KFC) at a function here on Wednesday.

Tata Consultancy Services has developed the core financial solution to fully computerise the loan accounts and automation of office procedures at KFC.

PAPERLESS OFFICE

The core financial solution will make the corporation a paperless organisation in near future, company spokesman said.

It will also inter-link all zonal offices and branches and undertake automation of transactions, appraisal, disbursement, recovery and also financial and administrative activities. With the new system, customers of the corporation would be able to use the services of the corporation online.

The offer document of the KFC bond issue of Rs 100 crore was also released by the Minister at the function, which was attended by the Chairman and Managing Director, Mr Yogesh Gupta.

GREEN-SHOE OPTION

The bond issue has a green-shoe option of Rs 100 crore. The bonds would be in the nature of debentures with unconditional, irrevocable guarantee of the State Government.

The bond would be redeemable, non-convertible and taxable, and is rated ‘A-(SO)' by Brickwork Ratings, the spokesman added.

The face value of each bond will be Rs 10 lakh at 10.24 per cent per annum with half-yearly pay-outs. The maturity of the bond will be 10 years.

The investor will have the option to redeem the bond at the end of the fourth year at 25 per cent per year from the fourth year to the seventh year. The bonds will be listed on Bombay Stock Exchange (BSE).

The e-sale of assets taken over under Section 29 of the SFCs (State Finance Corporations) Act will bring transparency, fairness and complete openness in the sale of assets of defaulting borrowers.

It will ensure wider participation and better price for the assets. A person sitting anywhere in the world can participate in the e-tender/e-auction and make e-payment for EMD (earnest money deposit) as well as final sale price.

This will obviate any need for personal interaction with the KFC staff, eliminating any chance for foul play, according to the spokesman.

In this system, the bidder would be advised to log on to KFC website and the entire process of posting auctions, bidding and selecting of successful bidder will be done on internet.

The bidder who wishes to bid for the properties put up for sale has to be registered with KFC.

One of the best performing SFCs of India, KFC seeks to promote Micro, Small and Medium Enterprises (MSME), both in manufacturing and service sectors.

DIVIDEND HISTORY

It is the only SFC that has given dividend during the last two years with a portfolio size of more than Rs 1,200 crore.

KFC has been adjudged as second in the FACT M. K. K Nair Memorial Productivity Award for 2009-10 in the category of service organisations.

The net non-performing assets (NPAs) of 1.88 per cent are at par with banking standards. The capital adequacy ratio is at a comfortable level of 22.2 per cent.

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State-run banks led by State Bank of India to install 40,000 ATMs

MUMBAI: State-run banks led by State Bank of India plan to install 40,000 automated teller machines, or ATMs, across the country to widen their reach in what will be the biggest such exercise by local lenders. This time, all the government-owned banks will join hands to install what are known as white-label ATMs, which are not owned by any single bank and where the entire operation is outsourced.

Last week, SBI sought offers from vendors for setting up 40,000 ATMs, twice the number the bank currently has. SBI owns the maximum number of ATMs in India. Of the 74,743 ATMs in the country, SBI had 20,084 at the end of March 2011, according to a survey by Atos Worldline, which specialises in electronic payment services.

Recently, a tender was issued on behalf of all state-run banks within days of the finance ministry directing them to adopt a unified approach on installing ATMs. A senior finance ministry official told ET that the government was in talks with the Reserve Bank of India for issuing guidelines on white-label ATMs.

The new ATMs will be rolled out in a phased manner in 2012-13. At least 25% of the 40,000 ATMs will be installed in the first quarter, 40% in the second quarter, 25% in the third quarter and the rest by the end of the fourth quarter. A banker, who did not want to be named, said the ATMs will be installed across geographies, with each geography being allotted to various state-owned banks depending on their presence in such locations.

Going by the tender issued by the SBI, the selected vendor will have to enter into separate agreements with each individual bank. There is resistance from the RBI to approve white-label ATMs since they are owned by non-banking entities, which means they do not fall under the purview of the banking regulator.

In case of any dispute between such entities and banks, the RBI may not be able to step in given the ambiguity on the regulation of such entities. RBI's worries also stem from the fact that white-label ATMs do not carry the brand name of any bank, making it difficult for a customer to know whom to contact in case there is a problem with the cash-dispensing machine. A bank officer said to resolve this dilemma, there is a proposal to make the lead bank in an area responsible for the ATMs in their region.

The lead bank will pay the vendor and take ownership of the ATM, the officer said not wanting to be named. Bankers are scheduled to meet senior finance ministry officials next month to work out the detailed plans relating to the installation of the ATMs. White-label ATMs may provide stiff competition to private banks, such as HDFC Bank, ICICI Bank and Axis Bank, which are among the top-five banks in the ATM segment. SBI has the largest share in the pie, with 27% of the ATMs, followed by Axis Bank and ICICI Bank, with 8% each. HDFC Bank, Punjab National Bank and SBI's associate banks have a share of 7% each.

Source: EconomicTimes

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Finmin tells RRBs to use sponsor banks infrastructure to become NEFT-enabled

KOLKATA: The ministry of finance has directed regional rural banks to use sponsor banks IT architecture to become part of the National Electronic Funds Transfer (NEFT) system for offering one-to-one electronic payment facility to customers. RRBs have recieved a note from the government earlier this week to this end.

RRBs will have to open settlement accounts with sponsor banks for this purpose, an RRB chairman said.

Under NEFT, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the scheme. All bank branches need to be NEFT-enabled for offering this service.

Earlier, the government had told RRBs to take the direct route for becoming NEFT-enabled. But, it proved to be difficult for weak RRBs to do it as many of them are not eligible to become the member of centralised payment system, a must for NEFT system.

Source: EconomicTimes

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Interest rates have peaked: HDFC

Mortgage leader HDFC's Managing Director Renu Sud Karnad today said interest rates have peaked and there is little possibility of further rate hike.

"I think interest rates have almost reached peak," Karnad said after launching women exclusive credit cards of HDFC Bank here.

The Reserve Bank of India (RBI) had last month raised the repo rate by 25 basis points to 8.50% and the reverse repo rate moved up by a similar percentage to 7.50%.

Repo is the short-term rate at which the Reserve Bank of India 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%-mark.

Meanwhile, India's economic growth rate slipped to 6.9% in the second quarter this fiscal, the lowest in nine quarters, prompting the government to lower its full-year growth projection to 7.3%.

Karnad said sales in the housing sector are temporarily down in 3-4 cities because prices have escalated very much.

"Sales are down in high-end segment were people are waiting and watching," she said.

On easing of housing prices, she said, if correction will take place, it will happen in Mumbai, Delhi and some parts of Bangalore.

There could be correction of 10-15% in some areas, she added.

Source: Business Standard

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Axis Bank launches young bankers program

KOLKATA: Axis Bank in association with Manipal Global Education Services ( MaGE) has launched the 'Young Bankers' Program, an initiative to attract young graduates to a career in banking with Axis Bank.

This one-year full-time residential programme to be conducted at Manipal University Bangalore campus will impart knowledge and skills in banking, etiquette and grooming, enhanced communication skills and other soft skills.

Upon successful completion of the program, the students will be awarded a post-graduate diploma in banking services by Manipal University and will be absorbed in the assistant manager grade by Axis Bank.

Speaking on the occasion, Rajesh Dahiya, president, HR, Axis Bank said, "This programme is aimed at equipping graduate students with the necessary knowledge and skills for a career in banking with Axis Bank."

Manipal Global Education Services president - distributed learning V Sivaramakrishnan said: "Our aim is to provide quality education and training with strong industry connect and this MoU reflects that. We are sure this association will pave the way for many active collaborative engagements that will benefit the BFSI industry."

The program includes classroom sessions of nine months split into three trimesters followed by an internship of 3 months at any Axis Bank branch/office across the country. The bank will provide financial support to the students during the one-year period.

Source: EconomicTimes

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DHFL Express Home Loans on Wheels

DHFL, a leading housing finance company, has launched ‘DHFL Express Home Loans on Wheels,' a unique concept-based campaign that will deliver home loans to the doorsteps of customers, thereby reducing unnecessary hassles in securing financial services. The road show was flagged off at Kasargod by Mr Mudit Bhatnagar, Head Marketing and International Business.

‘DHFL Express Home Loans on Wheels' is one of our endeavour to educate a large section of the society on the procedure of acquiring a home loan by reaching out to them at their doorstep. This 13-day campaign is designed to reach out to the potential customers in the far interiors of Kerala, he said.

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IDFC, SNC-Lavalin form JV to develop roads, highways

NEW DELHI The Ashok Piramal Group's IDFC Project Equity Fund and Canada's biggest engineering group SNC-Lavalin Group entered into a joint venture agreement to develop road and highway projects in a publicprivate partnership across the country.

They plan to commit $250-300 million in equity in the JV company Piramal Roads Infra over the next 3-5 years and fund road projects to the tune of $1 billion. "With three partners in the JV, we are in a sweet spot in terms of bidding and can invest up toRs 6,000-7,000 crore if we get a suitable project," said Aditya Aggarwal, MD at IDFC Project Equity. Ashok Piramal Group will hold 51% equity in the JV, while IDFC Project Equity will hold another 39% in it.

SNC-Lavalin, which is one of the world's largest engineering and construction groups, will hold the remaining 10%. IDFC Project equity, a subsidiary of IDFC, routed the transaction through its India Infrastructure Fund. The privately-held Piramal Roads Infra is already an existing group company of the Ashok Piramal Group. It is currently developing a road project in MP. The JV will enable Ashok Piramal Group to diversify from its existing business. 

Source: EconomicTimes
 

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LIC’s equity investment target cut by a third

MUMBAI: Life Insurance Corporation ( LIC), the first port of call for the government to save a slumping equity market, has cut its equity investment target by a third this fiscal as an increasingly hazy economic environment leads to a decline in sale of insurance policies.

The insurer, which controls three-fourths of the life insurance industry, will this year investRs 40,000 crore, down from the Rs 60,000 crore it planned at the beginning of the fiscal when economic outlook was rosy. The nation's biggest institutional investor has bought shares worth Rs 20,000 crore this year and will invest the rest over the next four months, said a senior executive who did not want to be identified. But even with the reduced outlay, it has been able to buy as many shares as it did last year since many of its favoured stocks, such as Reliance Industries, Tata Motors and IDFC, have halved in value.

"The fall in equity investment is due to the drastic change in public behaviour," said the executive. "Last year, Ulips (unitlinked insurance plans) sold like hot cakes. After the lock-in was increased from three to five years, they have lost their sheen. We have been investing up to 20% of total income in equities. This is not the case anymore."

Investors are staying away from insurance and mutual funds as layoffs and shrinking profitability of companies have increased the sense of gloom and uncertainty in the economy. New business premium - the measure of growth for insurance companies - fell 20% to Rs 55,738 crore in April-October, from Rs 69,708 crore a year earlier, data from the industry regulator shows.

Source: EconomicTimes

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Banks can now open branches in Tier 2 cities without RBI nod

MUMBAI: The Reserve Bank relaxed branch authorisation policy, allowing banks to open administrative office or service branch in cities with population of over 50,000 but less than 1 lakh without its approval.

"Now that general permission to banks has been extended for opening of branches in Tier 2 centres, domestic scheduled commercial banks (other than RRBs) will be allowed to open administrative offices and central processing centres (CPCs) or service branches in Tier 2 centre (with population 50,000 to 99,999 as per Census 2001)," the RBI said in a notification.

Thus, a bank can open such offices in the Tier II cities without permission from the central bank.

The decision was taken as it was observed that branch expansion in Tier 2 centres has not taken place at the desired pace, it said.

As per the existing regulation, such relaxation is already available to banks in case they want to expand their presence in Tier 3-6 cities.

Source: EconomicTimes

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SBI expects 18-19% credit growth in FY12

State Bank of India (SBI), the country's top lender, expects demand for loans to rise 18-19% in the current fiscal to March, a senior official said on Tuesday, despite a series of interest rate increases by the central bank.

The state-run bank has submitted a few options to the Indian government for raising funds, SBI's Managing Director A Krishna Kumar told reporters on the sidelines of a banking event here.

SBI needs to raise Rs 8,000 crore before March to maintain Tier-I capital adequacy ratio of 8% and is seeking government help to raise the funds.

Source: Business Standard

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Moody's downgrading of banks not to have long term effect

New Delhi: Dismissing concerns over downgrading of Indian banking system by Moody's, the government today said the rating will have no long lasting effect as the sector's financial health is sound.

"There is no cause of concern ... the Indian banking sector is in sound financial health and Moody's ratings would not have a long lasting effect on the banking sector in India," Minister of State for Finance Namo Narain Meena said in a written reply to Rajya Sabha.

Early this month, US-based Moody's Investor Service had changed its outlook for India's banking system to 'negative' from 'stable' citing concerns of high inflation, monetary tightening and rapidly raising interest rates.

The minister said both the banking sector and the government are aware of challenges and taking all steps to counter the challenges which are primarily coming from outside India.

"The Government of India is committed to keep the banking sector in good health. Therefore, interest of small investor would not be affected in the long run," Meena said.

Almost all banks are having above 9 per cent Tier-I capital and 11 per cent total capital. RBI requirement is 6 per cent and Basel II requirement is 4 per cent of Tier – I capital.

Besides, over and above Basel II requirement, Indian banks are providing a counter-cyclical buffer up to 70 per cent of the risk weighted assets. The NPAs of Indian banks are in the range of 3-3.5 per cent.

In an another reply, Meena said that in order to maintain a minimum Tier-I capital adequacy ratio of 8 per cent as on March 2012, the government has made a provision of Rs 6,000 crore for capital infusion in public sector banks.

A provision of Rs 1,000 crore and Rs 300 crore for equity capital infusion in IIFCL and Exim Bank, respectively, has also been made.

The minister said that the Cabinet has also approved for augmenting the capital base of Nabard by infusing Rs 3,000 crore as government equity in the next fiscal.

Source: Financial Express

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Home loans grow despite rising interest rates, property prices

High residential property prices in some parts of the country and rising interest rates have not dampened the appetite for home loans in the first half of the current financial year (April-September 2011), going by data from the National Housing Bank and the Reserve Bank of India.

In the first six months of the current financial year, the collective disbursement of home loans by 54 HFCs (housing finance companies) was 10 per cent higher at Rs 49,458 crore against Rs 44,870 crore in the corresponding year-ago period.

Similarly, in the first six months of the current financial year, the collective disbursement of home loans by 47 scheduled commercial banks was up six per cent at Rs 20,779 crore against Rs 16,221 crore in the corresponding year-ago period.

“Due to availability of affordable houses on the periphery of metros and in Tier-II and Tier-III cities, demand for housing finance has been good,” said Mr R.V. Verma, Chairman and Managing Director, NHB.

First-time buyers seeking affordable houses are not deterred by high interest rates if they are able to get ready possession of flats, priced up to Rs 25 lakh, he added.

NHB is the regulator and supervisor of HFCs and provides refinance to banks against home loans.

Lending rates move up

With the RBI increasing the interest rate at which it lends overnight funds to banks (repo rate) six times since the beginning of the current fiscal to staunch the rising tide of inflation, the latter have steeply upped their lending rates.

In the financial year so far, the central bank has raised the repo rate from 6.75 per cent to 8.50 per cent. Banks responded to this monetary tightening by re-aligning their Base Rate upwards from the 8.25-9.50 per cent band as on April 1, 2011, to 10-10.75 per cent now.

Banks determine their actual lending rates on loans and advances with reference to the Base Rate and by including such other customer-specific charges as considered appropriate.

HOUSING Prices RISE

Housing prices, according to the RBI's latest report on macroeconomic and monetary developments, have risen amidst falling transaction volumes in the April-June 2011-12 period.

The RBI's quarterly housing price index increased by about 8 per cent for the second successive quarter at an all-India level, while the transactions volume index that had fallen sharply in the July-September and October-December 2010-11 periods dipped by about 7 per cent in April-June 2011-12 period.

Residex movement

NHB's Residential Housing Price Index (Residex) shows that residential housing prices in six cities have risen in the July-September 2011 quarter over the previous quarter (April-June, 2011).

The city which has shown the maximum increase is Pune (13 per cent) followed by Chennai (9 per cent), Mumbai (7 per cent), Delhi (5 per cent), Jaipur (2 per cent) and Bengaluru (1 per cent).

There are 9 cities which have shown decline in prices over the previous quarter with maximum fall shown by Kochi (-9 per cent) followed by Hyderabad (-8 per cent), Bhopal (-7 per cent), Surat (-7 per cent), Faridabad (-6 per cent), Ahmedabad (-4 per cent), Lucknow (-4 per cent), Patna (-3 per cent) and Kolkata (-2 per cent).

The Residex tracks the housing prices in the select 15 cities.

The Residex takes into account the price trends for residential properties in different locations and zones in each city as per classification devised for the purpose.

“The continued rise in residential housing prices in cities such as Mumbai can be attributed to investor interest.

“In cities such as Chennai and Pune, the rise could be due to genuine consumer demand. In the case of the nine cities where the prices have fallen, it is a clear indicator that demand is softening on account of the prevailing high prices,” said Mr Verma.

kram@thehindu.co.in

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Soon, banks to sell specialised health insurance products

You may be able to bring home a comprehensive health plan from a specialised health insurance company from your regular bank branch, if the IRDA's bancassurance draft guidelines are implemented.

As a customer your choice of health insurance products are now wider. That may not necessarily come cheap. But it is good news for standalone health insurance companies, such as Max Bupa, Apollo Munich and Star Health, which will benefit from the IRDA's new guidelines (on insurers' tie-up with banks for distribution).

Under the existing bancassurance guidelines, banks were allowed to tie up with one life and one non-life company. Banks preferred partnering insurers offering multi-line (high ticket) products such as motor and fire insurance.

But now they will be able to tie up with one insurance company in the life, non-life and specialised health insurance space. They will, however, be allowed to do it only in a specified number of States.

MORE CHOICE

At the same time, specialised health insurers can also now tie up with multiple banks for selling their products across different States.

“It is an exciting opportunity for us and these guidelines definitely do open up the bancassurance channel for us,” said Dr Damien Marmion, CEO, Max Bupa Health Insurance.

The guidelines have further stipulated that if general insurer does not have any health product to distribute, the bancassurance agent may tie up with one more general insurance company, carrying on exclusively the business of health insurance.

Experts from the insurance industry feel that apart from opening up the avenue for health insurers, the guidelines will also help boost health insurance in the under-penetrated Indian market.

“We welcome any initiative that promotes access to better health care for the people. Today, it is estimated that the gap between the total cost of healthcare incurred by Indians and the amount covered by health insurance is as high as $57 billion,” Mr Antony Jacob, CEO, Apollo Munich Health Insurance.

Market potential

“Healthcare is an enterprise that is growing rapidly, and spends in this sector will soon touch $200-250 billion,” Mr Jacob added.

“IRDA's proposal would especially benefit general insurance and health insurance companies as they have substantially underexploited the bank distribution channel. Especially for health insurance, which has so far depended on direct selling model, this could provide a boost to broad-base their risks and lower the premium rates,” said Mr R. Krishnamurthy, Managing Director (Products, Distribution and Markets), Towers Watson — a global risk-consulting firm.

deepa.n@thehindu.co.in

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IRDA asks LIC to hasten claims settlement

The Insurance Regulatory and Development Authority has asked Life Insurance Corporation of India to complete all the claim investigations within the stipulated time.

In an order released on Tuesday after completion of investigation into a complaint by a policyholder, Mr J. Hari Narayan, Chairman, IRDA had also asked the public sector behemoth to put in place effective systems to settle the claims promptly.

In a inspection following the complaint, it was noticed that that LIC had taken more than six months to repudiate the group insurance death claims in respect of 24 cases and to complete the investigations in respect of 263 individual claims during 2009-10.

It was also noticed that a number of maturity claims were settled beyond six months.

The regulator observed that though the life insurer had a track record of settling substantial number of death claims annually, yet there were 300 cases as at March 31, 2010, where investigations were pending beyond six months.

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Investment in 10-year NSC will fetch 8.7% interest

The Government has raised the interest payable on National Saving Certificates to 8.7 per cent.

Accordingly, an investment of Rs 10,000 in 10-Year National Savings Certificate on December 1 this year will fetch Rs 23,435 in the year 2021. The Finance Ministry notified the new instrument on Tuesday, which will be available for investment from December 1.

According to the notification, investments in such a certificate will earn interest at an annual rate of 8.7 per cent, compounded semi-annually. The certificates will be available in the denomination of Rs 100, Rs 500, Rs 1,000, Rs 5,000 or Rs 10,000. There will be no upper limit for investment.

This Certificate can be transferred from a post office where it is registered to any other post office and it can be pledged as a security.

The Ministry decided to issue this instrument on the basis of the recommendations of the Committee for Comprehensive Review of National Small Savings Fund (NSSF), headed by Ms Shyamala Gopinath. Notifications regarding other instruments have already been issued.

Shishir.s@thehindu.co.in

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Corp Bank scheme for Kerala Govt employees

Corporation Bank has announced special benefits for the permanent employees of the State Government.

Mr A.M.M.G. Nair, Zonal Manager, Corporation Bank, regional office, Kochi, said Corp Payroll Account is available for routing the salary of permanent employees through which they can withdraw 50 per cent of the amount as overdraft from the second month.

Instant ATM-cum-debit card, Internet banking, SMS banking, free remittance facility, cheque book, multi-city cheques and passbook are also available.

Payment of tax, insurance payment and NEFT can be done free of charge through Internet and ATM.

There is a concession of 1 per cent on interest rates and 50 per cent of processing charges on housing loans and 0.25 per cent concession on interest rates for vehicle loans. Gift cards are also available free of charge.

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Kochhar raises stake in ICICI through ESOPs

ICICI Bank Managing Director and Chief Executive Ms Chanda Kochhar has raised her stake in the bank to 0.03 per cent through employee stock options (ESOPs).

Ms Kochhar has bought 11,500 shares of ICICI Bank through ESOPs for Rs 34,51,150, taking the total number of shares held by her to 302,925, according to the data available on the Securities and Exchange Board of India website.

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