SBI approves revision in pension schemes

The Central Board of SBI has accorded approval for revision of family pension and minimum pension with retrospective effect from November 1, 2007.

A decision to this effect was taken at a meeting of the board held last week, according to banking sources.

BASIC PENSION

For those in the scale of pay up to Rs 7,090, 30 per cent of the pay shall constitute the basic family pension. Thirty per cent of allowances which are counted for making contributions to Provident Fund but not for dearness allowance shall be the additional family pension.

The aggregate of basic and additional family pension shall not be less than Rs1,779 a month.

For those in the Rs 7,091- 14,180 scale, 20 per cent of pay shall be the basic family pension. Twenty per cent of allowances which are counted for making contributions to Provident Fund but not for dearness allowance shall be the additional family pension.

The aggregate of basic and additional family pension shall not be less than Rs 2,186 a month.

For those with a pay of Rs 14,181 and above, 15 per cent of the pay shall be the basic family pension.

Fifteen per cent of allowance which are counted for making contributions to Provident Fund but not for dearness allowance shall be the additional family pension.

The aggregate of basic and additional family pension shall not be less than Rs 2,841 a month and more than Rs 5,930 a month.

In the case of part-time employees, the minimum amount of family pension and the maximum amount of family pension shall be in proportion to the rate of scale wages drawn by the employee.

In respect of employees other than part-time employees who retired on or after November 1, 2007, the amount of minimum pension shall be Rs 1,779 a month.

In respect of part-time employees who retired on or after that date, the minimum pension payable shall be Rs 595 a month in respect of part-time employees drawing 1/3rd scale wages; Rs 892 a month in respect of part-time employees drawing 1/2 scale wages; and Rs 1,330 a month in respect of part-time employees drawing 3/4th scale wages.

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Banks to operate one-man branch in rural areas

EW DELHI: The finance ministry will treat a bank representative offering basic services in villages using a Net-enabled laptop as a branch, widening the reach of the government's financial inclusion plan and doing away with the need to spend on infrastructure.

The ministry directive comes at a time when banks have raised questions about the viability of setting up brick-and-mortar branches in rural areas. At present, only about 5% of India's 6 lakh villages have bank branches. There are 296 under-banked districts in states with below-par banking services. Under the financial inclusion plan, the government aims to provide banking services to 73,000 villages, each having population of 2,000 during the next three months.

"The purpose is to minimise the cost of financial inclusion and see that the cost has a relationship to the growth in business," said a finance ministry official.

The representative, or "business correspondent", will work from this "ultra small branch", which will be of the size of a 100-200-sq-ft room. The correspondent, who will be appointed by the bank, will deal with all cash transactions and other routine work in that area. A bank officer will visit this ultra small branch once a week and connect this business correspondent to the banks' core banking solution (CBS) through a secured network enabling data access and transfer between the small branch and the bank.

"This bank officer will clear applications for new account openings, loans, recovery follow-up and other business development on the spot," the official said.

The finance ministry after discussions with the department of information technology has also issued detailed guidelines on the security of IT infrastructure. "They (the department of information technology) have agreed that it is feasible and have suggested appropriate security mechanisms."

The ministry has also asked banks to revamp their plans for setting up brick-and-mortar branches in rural areas. Banks will now have to come up with a business plan under which the branch would generate profits within a maximum period of two years.

"Banks should also post a branch manager six months in advance so that he can do business development in the area," the official said.

But banks are sceptical about these ultra small branches. "The areas where we are talking about internet connectivity will be few. So it remains to be seen how efficiently they can function," said an executive director of a state-run bank.

Source: EconomicTimes

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Banks extend festive offers

The festive season may be over, but festive offers on loans are open for the next couple of months. Public sector banks offering housing and auto loans at discounted rates under their festival campaigns that began in September, have decided to extend the discounts beyond December 31, as the demand for loans remains muted.

While recent data from the Reserve Bank of India (RBI) shows credit demand has been poor despite these offers, bankers hope the demand would pick up in the last quarter of the financial year. Credit growth during the April-December period was 8.2 per cent, against RBI’s projection of 18 per cent credit growth in 2011-12.

“We have decided to extend the festive offers till February 28 to encourage retail customers to go for housing and car loans,” said M Narendra, chairman and managing director, Indian Overseas Bank. The bank is offering 0.50 per cent concession on lending rates and 50 per cent concession on processing charges.

IDBI Bank had waived processing charges and fees almost a year ago to strengthen its grip on retail assets. The bank has been offering a 100-basis point discount on vehicle loans and a 50-basis point one on home loans since October 1. It may continue this offer for one or two more months. “The demand was not as high as expected. Since the interest rates are not likely to rise further, we have decided to continue with the current rates,” said R K Bansal, executive director, IDBI Bank.

In November, the outstanding amount in home loans rose 7.6 per cent, compared with 8.8 per cent a year ago, while vehicle loans grew 9.5 per cent, compared with 15.5 per cent in the year-ago period, according to RBI data.

Bankers said there was hope of credit pick-up in the fourth quarter. “We have decided to extend the concession by one month, since there was more demand towards the end of the offer period,” said N Seshadri, executive director, Bank of India. The bank offers 50 per cent concession on processing charges.

M D Mallya, chairman and managing director, Bank of Baroda, said the lender would run its festive offer on housing and car loans for one more month. “The response was fairly good, given the current context,” Mallya said, adding the extension would help the bank rope in more borrowers with the help of attractive rates.

Overall credit growth stood at 17 per cent as on December 16, compared with 24 per cent a year ago. High lending rates and high inflation have impacted growth in the retail segment this year. RBI had raised policy rates by 375 basis points in a span of 19 months since March 2010. Banks responded by raising lending rates by around 250 basis points in the same period.

Banks have been able to add Rs 3.24 lakh crore to the outstanding loan base so far this financial year. However, it would be an uphill task to continue the trend, as banks need to disburse around Rs 3.8 lakh crore till the year-end to meet RBI’s projection of 18 per cent.

Source: Business Standard

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Government to interview executive directors for bank CMD post on January 12

MUMBAI: The appointments committee is slated to interview candidates for the CMD post at government owned banks on January 12. Earlier the interviews were fixed on January 4.

The appointment's committee includes D K Mittal, secretary, department of financial services and deputy governor of Reserve Bank of India Anand Sinha among others.

Ten executive directors of public sector banks will be considered for CMD post at six banks.

These candidates include S.S. Mundra from Union Bank of India, R V Iyer and Rajiv Dubey from Central Bank of India, Ashwini Kumar of Corporation Bank, Archana Bhargava from Canara Bank, V Kannan from Oriental bank of Commerce, Rajeev Rishi from Indian Bank, Rakesh Sethi from Punjab National Bank A K Datt of Dena Bank and Ms Subhalakshmi Panse of Vijaya Bank.

The candidates are being selected to fill vacancies in fiscal year 2012-13 in Bank of Baroda, Bank of India, Canara Bank, Dena Bank, Allahabad Bank and United Bank of India.

Sources from the industry say that on January 13 the appointments committee will interview 42 general managers for the executive directors post.

Source: EconomicTimes

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Citi ups NRE deposit rates, DCB offers 10%

Citibank on Friday became the first foreign lender to hike interest rates on NRE deposits in the wake of RBI deregulating interest rate offered on deposits by non-resident Indians early this month.

Citi’s rates vary between 5 percent and 8.75 percent across maturities, and are lower than the aggressive strategies adopted by domestic lenders who are offering as high as 10 percent per annum.

A deposit of over Rs 30 lakh but under Rs 50 lakh will earn an interest of 8.75 percent for a 356-400 days bucket and 8.50 percent for 401-1095 days, Citi said in a statement issued here.

Meanwhile, the city-based private lender Development Credit Bank today increased interest rates on non-resident external (NRE) deposits to 10 percent for an 18-month tenor on deposits of Rs 15-50 lakh, making it the highest offering.

For deposits under Rs 15 lakh for the same tenor, the interest rate is 9.75 percent, the bank said.

Almost all the domestic banks, including the country’s largest lender SBI and ICICI have sharply upped their NRE deposit rates in the last fortnight following a Reserve Bank move to deregulate interest rates on NRE deposits earlier this month to attract more dollars into the economy in its bid to arrest the steep fall in rupee.

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SBI expects capital infusion soon

Country’s largest lender State Bank of India (SBI) on Friday said it expects fund infusion from the government soon.

The capital infusion will take place during the current fiscal itself, SBI Managing Director Mr Diwakar Gupta told PTI.

“We are yet to get official communication from the government on the quantum (of fund infusion in the bank),” he added.

The government has already announced that it is committed to providing adequate capital to public sector banks so as to maintain their Tier-I capital at 8 per cent.

As of September, 2011, the capital adequacy ratio (CAR) of SBI stood at 11.4 per cent. Of this, tier-I capital stood at 7.7 per cent at the end of first quarter against minimum 8 per cent level desired by the government.

Earlier this month, SBI Chairman Mr Pratip Chaudhuri had said, “It (infusion) is round the corner. It could happen any day now. I think (the mode) is not decided, but whatever we are getting we will be getting in cash. We are expecting Rs 3,000-4,000 crore either in December or by March.”

“If they (government) put in Rs 3,000 crore (in SBI), so this will mean another 3 per cent increase in government holding,” he had said.

The Government of India, which holds 59.4 per cent stake in SBI, has earmarked Rs 6,000 crore for the fiscal for capital infusion in public sector banks to ensure that they meet the regulatory requirements.

In 2010-11, the government had provided capital support to the tune of Rs 20,157 crore to public sector banks.

SBI had submitted proposal some months ago to raise Rs 20,000 crore through a rights issue. The bank requires Rs 20,000 crore to fund its growth plans over the next two fiscals.

SBI had raised over Rs 16,000 crore through a rights issue in 2008. In the last SBI rights issue, the government contribution was in the form of bonds to the bank instead of cash.

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Basel III norms will push up capital requirements, say bankers

The capital and provisioning requirements for banks will increase once Basel III guidelines come into force. However, there will be no pressure on banks to raise capital immediately as the deadline for implementation is 2017, said bankers.

The Reserve Bank of India released the draft guidelines for implementation of Basel III capital regulation on Friday.

As per the draft guidelines, banks have to build up capital buffers, called Capital Conservation Buffer, during normal times which can be drawn down as losses are incurred during a stressed period.

Common Equity

Therefore, in addition to the minimum total capital requirement of 8 per cent, banks will be required to hold a capital conservation buffer of 2.5 per cent of Risk Weighted Assets in the form of Common Equity to withstand future periods of stress, said the RBI.

In addition, the RBI has also recommended a countercyclical capital buffer, the purpose of which is to protect the banking sector from periods of excess aggregate credit growth.

“For any given country, this buffer will only be in effect when there is excess credit growth that results in a system-wide build up of risk,” the RBI said.

This countercyclical buffer will ensure that banks have capital to fall back on in case of a crisis, said an official from a public sector bank

The transparency of capital base will be improved, with all elements of capital required to be disclosed along with a detailed reconciliation to the published accounts.

This requirement will improve the market discipline under Pillar 3 of the Basel II framework, said RBI.

priyan@thehindu.co.in

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SBI, 14 other banks to get Rs 16k-cr funds by March

About two months after the Moody’s downgraded outlook on Indian banks on concerns over asset quality, the finance ministry has proposed to infuse Rs 15,000-16,000 crore in about 15 public sector banks by March 31, 2012. More than one-third of this amount (Rs 6,000 crore) is likely to go to the country’s largest lender, State Bank of India, while the demand for most other banks is less than Rs 1,000 crore each. SBI saw its financial strength rating cut by Moody's earlier this fiscal.

Those who are not likely to get capital infustion include Canara Bank and Central Bank of India.

To shore up the capital base of public sector banks amid rising bad loans, the Department of Financial Services, is seeking an additional Rs 10,000 crore in the third supplementary demand for grants to be tabled in the Budget session of Parliament in February, which might further distrub the fiscal consolidation story. The Budget had provided for Rs 6,000 crore for bank recapitalisation in 2011-12 and nothing from this has been given to banks yet. “We need to strengthen the capital base of our banks at a time when non-performing assets (NPAs) are rising. Almost all banks will be recapitalised, including those which have a tier I capital (core capital including equity and disclosed reserves) of 8 per cent and above,” said a finance ministry official.

The department has written to the banks asking them to take all necessary approvals and be prepared for capital infusion after Parliament’s approval is received by the end of the financial year.

However, another official in the Department of Economic Affairs, which will sanction the requirements, said a final decision on actual requirement of banks this year would be taken after looking at the capital adequacy ratio (CAR) and tier I of the banks at the end of quarter ending December 31, 2011.

CAR or a ratio of bank’s capital to its risks signifies a bank’s health. The higher the CAR, the better is the financial condition of the bank. Finance Minister Pranab Mukherjee has repeatedly said that the government was committed to 8 per cent Tier I capital, core measure of a bank’s financial strength, in all public sector banks by March 2012.

Another official said since the government’s fiscal situation was tight only those banks would be capitalized which have a tier I of 8 per cent or lower in December-end.

Globally the tier I requirement is only 4 per cent, but in India the regulator has fixed it at 6 per cent and the government wants it higher at 8 per cent to provide adequate buffer. For CAR, the regulatory requirement is 9 per cent, but the government wants it above 12 per cent.

The Planning commission has already given its approval for a Plan allocation of Rs 14,000 crore for bank recapitalisation this year. Last year also the government had infused over Rs 20,000 crore in banks.

Meanwhile, a committee headed by Finance Secretary Rs Gujral, has assessed the capital infusion needs of state-run banks over the next 10 years. The report, awaiting the approval of the finance minister, is expected to be released next month. The panel may suggest a holding company structure which can raise money globally to meet the capital requirements of banks. However, the government would not take that route to infuse capital this year since there is very little time left.

Capital infusion became critical for Indian banks after Moody's downgraded outlook on the banks to 'negative' from 'stable' over concerns that domestic monetary tightening and a potential global economic crisis would severely affect their profitability and asset quality. NPAs rose 34 per cent in July-Sep 2011. It had also lowered SBI's financial strength rating in view of its deteriorating asset quality.

SBI was earlier planning to come up with a right issue of Rs 20,000 crore, but the government was not willing to subscribe to the issue given its fiscal situation. The Centre's fiscal deficit has already toched 6.7 per cent of GDP in the first half of this fiscal. For the first seven months, fiscal deficit stood at over 74 per cent of the Budget target for the entire 2011-12. The target is to rein in fiscal deficit to 4.6 per cent of GDP in this financial year against 4.7 per cent in the last fiscal.

Source: Business Standard

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SBI may opt for QIP in FY13

Govt stake to rise to 64% and Tier-I to 9% after Rs 6,000-crore fund infusion.

Pratip Chaudhuri State Bank of India (SBI), which had received a commitment from the government for capital infusion of Rs 6,000 crore in the current financial year, may opt for another round of fund-raising through a qualified institutional placement (QIP) in the next financial year.

After capital infusion through the preferential allotment of equity shares, the government’s stake in SBI would rise from 59.4 per cent to 64 per cent, chairman Pratip Chaudhuri told Business Standard. The bank’s Tier-I capital would rise to nine per cent after the fund infusion, he said.

Yesterday, the finance ministry had written to SBI, asking it to secure all the necessary approvals from regulatory authorities for the Rs 6,000-crore fund infusion. The infusion would happen by March 31.

Chaudhuri said though the bank would not raise funds through the QIP route in 2011-12, it may explore the possibility in the next financial year. “We need to have the government’s approval for raising funds via a QIP,” he said. SBI may raise Rs 4,000 crore through the QIP.

While the QIP would also depend on market conditions, SBI is unlikely to offer any discount to investors.

SBI’s Tier-I capital had fallen to 7.47 per cent at the end of the September quarter, lower than the government’s comfort level of eight per cent, but higher than the regulatory requirement of six per cent. The overall capital adequacy ratio stood at 11.4 per cent, compared with the regulatory requirement of nine per cent.

“We will be comfortable with this capital infusion (from the government) and would not require any more funds from the government,” Chaudhuri said, adding the bank’s capital requirements could be met through a ploughback of profits.

SBI’s net profit is expected to exceed cross Rs 10,000 crore in the current financial year, the first time in the history of the bank. In 2010-11, SBI recorded a net profit of Rs 8,265 crore.

The bank’s capital adequacy took a hit in the fourth quarter of the previous financial year, as the bank had to provide around Rs 8,000 crore from capital reserves towards pension liabilities. Banks need the central bank’s prior approval to use their capital for provisioning.

In October, Moody’s Investors Service cut the stand-alone rating of SBI, flagging concerns over capital and rapid deterioration in asset quality. The agency cut its rating on SBI’s financial strength from C- to D+, and lowered its hybrid debt rating on the bank from Ba2 to Ba3.

The government would also infuse Rs 10,000 crore in other public sector banks in the current financial year.

Source: Business Standard

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Citigroup sells Rs 22 crore worth Fortis shares

MUMBAI: Foreign fund house Citigroup Global Markets Mauritius Pvt Ltd today sold 25.55 lakh shares of hospital chain Fortis Healthcare for Rs 22 crore in the stock market.

Citigroup Global Markets Mauritius Pvt Ltd sold 25.55 lakh shares of Fortis for Rs 86.47 a piece through a bulk deal, according to the data available with the BSE.

As on September quarter, Citigroup Global Markets Mauritius Pvt Ltd held 11,520,896 shares or 2.84 per cent stake in Fortis.

Shares of the company closed at Rs 84.60 on the BSE, up 3.23 per cent from the previous close.

Source: EconomicTimes

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Sachin Tendulkar buys Rs 100 cr cover

Having moved into his "dream house", ace cricketer Sachin Tendulkar has now secured his five-story Bandra residence with a staggering Rs 100 crore insurance cover, one of the biggest insurance deals by an individual.

The cricket icon has bought the insurance from a consortium of general insurers, according to industry sources.

"A consortium of general insurance companies has given an insurance cover for the cricketer's home in Bandra for a value consideration of Rs 100 crore," an official of a public sector general insurance company, who wished not to be named, said.

As per the official, all the four state-run GIs along with a private insurer have provided the cover.

"Oriental Insurance Company, United India Insurance, New India Assurance and National Insurance Company are the four government-owned general insurers providing the cover along with a private insurer," the official said, adding the annual premium would be around Rs 40 lakh.

According to another insurance official, the cover has been taken in two parts. While a fire insurance policy has been obtained for Rs 75 crore, an additional cover of Rs 25 crore has been bought for household items like furniture, electronic gadgets and cricket accessories among others.

The fire insurance covers losses from blaze, terror attacks, natural disasters like earthquakes, and burglary among others. The insurance covers the cost of the land, compound walls, besides electrical equipment.

The Tendulkars had moved into the sprawling 6,000 square feet villa in Bandra West in September from a flat that had been allotted to the maestro under sports quota.

"Everyone has a dream of owning a house. I, too, had this dream. I am happy that I was able to fulfil it," Tendulkar had said while moving into his new abode.

The cricketer's residence stands on a plot that earlier housed a dilapidated bungalow, which he had bought for Rs 39 crore in 2007.

The villa has been secured with high-walled fencing to avoid curious onlookers. CCTV cameras and sensors have also been installed.

Besides the three storeys above the ground level, the villa reportedly has two underground basements.

With this deal, Tendulkar has joined a select league of industrialists and filmstars who have taken such high insurance cover in the recent past.

While filmstar Shah Rukh Khan has reportedly insured his mansion "Mannat", also in Bandra, for Rs 110 crore, Reliance Industry chairman Mukesh Ambani's USD 1-billion Antilla has been insured for around Rs 150 crore.

Source: Financial Express

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Sebi cracks down further on IPOs fraud

Capital market regulator Sebi is reviewing the process for initial public offerings (IPOs), its chairman said on Thursday, a day after it banned seven small companies from fund-raising for what it said were IPO rule violations.

We are currently reviewing the entire IPO process, including shortening the timeline for the entire process, U.K. Sinha said.

The Securities and Exchange Board of India (Sebi) said on Wednesday a probe revealed a fraud in IPOs, inadequate documentation and due diligence and possible trading violations on the day of listing.

The IPOs were launched between July and November and had raised about 4.5 billion rupees ($84 million).

It also banned the directors of the seven companies from dealing in the securities market and told some of the merchant bankers they would not be able to handle new capital issues until further notice.

We are happy that Sebi has taken such a bold step, which is an unprecedented action, Sageraj Bariya, managing partner of research house Equitorials, wrote in a note. Sebi might be slightly late but it is definitely better than never.

Shares in the companies -- PG Electroplast, Brooks Laboratories, RDB Rasayans, Taksheel Solutions, Tijaria Polypipes, Onelife Capital Advisors and Bharatiya Global Infomedia -- fell 5-17 percent on Thursday in a Mumbai market that was down 1 percent.

Some of the companies could not be reached for comment, while others did not return calls.

Five of the companies have lost 90 percent or more of their value from their peaks, while PG Electroplast is down 70 percent and OneLife Capital has lost about a third.

The companies and merchant bankers have 21 days to respond to the Sebi order.

MERCHANT BANKS UNDER SCANNER

We will be representing our case to the regulator ... within the time that has been specified, Sanjay Dewan, associate director at Almondz Global, told Reuters over the telephone from Delhi.

The merchant banker, along with PNB Investments, the investment banking arm of state-run Punjab National Bank , D&A Financial, Artherstone Capital, Chartered Capital and Onelife Capital Advisors have been barred from taking new assignments, Sebi said.

Officials at PNB Investments and Onelife Capital were not available for comment, while calls to the other merchant bankers were unanswered.

Sebi, over the last 6-9 months, has been highlighting to the merchant banking community that you have to do very serious due diligence, Sinha told the news channel.

We are trying to hold them responsible ... and I hope by this method a pressure will be built on future issuers, he said. ($1 = 53.3 rupees)

Source: Financial Express

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CCI okays acquisition of Barclays' credit card biz by StanChart

The Competition Commission of India (CCI) has given approval to the proposed acquisition of credit card business of Barclays India by the Indian arm of Standard Chartered Bank.

"...The Commission is of the opinion that the proposed acquisition is not likely to have an appreciable adverse effect on competition in India. The Commission, therefore, hereby approves the proposed combination...," the CCI said in an order.

The CCI had on December 12 received a notice on the proposed acquisition.

The application stated that the credit card business proposed to be acquired by Standard Chartered Bank (SCB) India includes selected sale accounts, customer relationship, customer data and files and oustanding receivables of identified cardholders.

It was stated that SCB India is not acquiring any of the processes, infrastructure, assets or employees of Barclays India.

The notice also said that Barclays India will notify the concerned card customers about the transaction along with the offer of SCB India for re-carding and "those customers who convey their objection to receiving SCB India cards will not be issued credit cards by SCB India."

While SCB India is an arm of the UK-based Standard Chartered Plc, Barclays India is a branch of Barclays Bank Plc, also based in the UK.

The CCI considered the proposed acquisition at its meeting on December 28.

It noted that the credit card business in India is fragmented with presence of diverse players and the aggregate share of SCB India and Barclays India taken together is in single digit.

"Further, it is observed that SCB India and Barclays India have no arrangement among themselves in any activity, relating to the production, supply, distribution, storage, sale and service or trade in products or provision of service... Given the foregoing, the proposed combination is not likely to have an adverse effect on competition in India," it said in the order.

Barclays had put its India card unit for sale earlier this year as part of its business restructuring strategy.

Source: Business Standard

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IDBI Bank seeks capital support from govt

State-owned lender IDBI Bank today said the government was considering capital support to the bank to boost up its capital.

The government of India is actively considering the bank's request for capital support and intends to infuse capitals funds in the bank by way of preferential allotment of equity, IDBI Bank informed the Bombay Stock Exchange (BSE).

Last year, the government had agreed to infuse Rs 3,119.04 crore. Post-capital infusion, the stake of the central government increased to 65.15% from 52.6%.

The was capital infused through preferential allotment of shares to the government of India.

The government has already made a provision to infuse Rs 6,000 crore in public sector banks in Budget of the current fiscal.

Source: Business Standard

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Rs 36 lakh looted from UBI branch

Armed dacoits looted Rs 36 lakh from the United Bank of India (UBI), Bagnan branch in Howrah district today, police sources said.

Four armed dacoits entered the UBI, Bagnan branch, when the sweeping staff was cleaning the bank. They locked the cleaning staff in a room, the sources said.

When the branch manager entered the bank, the dacoits brandishing revolvers forcibly took away the keys of the vault from him and looted Rs 36 lakh from the bank, they said.

The dacoits fled away with the money in motorcycles, sources said.

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Insurance made child's play, with comic books

The country's insurance regulator will use the power of comic books to drive home the basic concepts, needs and importance of insurance in one's life, starting right from the school level.

The Insurance Regulatory and Development Authority has readied comic books and hand-books for high school students. They will be distributed in select schools and later scaled up.

The books will contain attractive stories which will try to weave the basic concepts of insurance, products, both traditional and unit-linked, the need for insurance and how to address problems and what mechanisms to choose.

“I believe that children should be made aware of the basics of insurance so that they can be financially-informed adults later,” Mr J. Hari Narayan, Chairman, IRDA told Business Line.

In a new approach, the IRDA plans to catch them young to promote insurance. In the last few years it has been making efforts to simplify procedures, policy documents, and so on to help customers. There is more. “We have asked the Central Board of Secondary Education and State boards of intermediate education to introduce insurance in curriculum,” Mr Hari Narayan said.

Efforts are also on to launch an educational course in insurance, he added. This can also help youth from the rural areas to take up insurance agencies.

The objectives of the initiative are simple. As insurance is a complex subject with much scope for mis-selling, catching educating the young in insurance concepts augurs well.

Further, given the huge potential for growth of the insurance sector in India, a proper awareness would also help the industry.

The other financial regulators such as the Securities and Exchange Board of India and Reserve Bank of India have also been treading a similar path.

While SEBI has been in discussion with Central Board of Secondary Education, the RBI had released simple information booklets.

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Claims settlement: LIC fares better than private insurers

Life Insurance Corporation of India has performed better in terms of claims settlement ratios as compared to private life insurance companies, according to the IRDA annual report.

“The claims settlement ratio of LIC was better than that of the private life insurers. Settlement ratio of LIC increased to 97.03 per cent during the year 2010-11 when compared to 96.54 per cent during the previous year,” the IRDA said in the report.

The percentage of claims rejected by LIC stood at 0.01. The ratio of claim rejections to total reported claims declined from 1.21 per cent in the previous year to 1 per cent in 2010-11.

Compared to LIC, private insurers rejected a large number of claims.

The per cent of claims rejections increased to 8.90 per cent in 2010-11 from 7.61 per cent in 2009-10.

Overall, the life insurance industry's settlement ratio has improved slightly to 95.58 per cent in 2010-11 from 95.24 per cent in 2009-10, and the claims rejection ratio has also gone up to 2.04 per cent in 2010-11 from 1.93 per cent in 2009-10.

Life insurers settled over 50 lakh maturity claims in 2010-11, paying a total of Rs 32,345 crore and the number of survival benefits paid in the year was over 1.35 crore for an amount of Rs 19,816 crore.

deepa.n@thehindu.co.in

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ICICI Bank hikes NRE deposit rate to 6.50%

ICICI Bank has increased its one-year NRE term deposit rate from 3.82 per cent to 6.50 per cent. Customers investing over Rs 15 lakh and up to Rs 50 lakh get another 0.50 per cent, the bank said. Those investing over Rs 50 lakh and up to Rs 1 crore get 8.25 per cent.

Other top banks such as SBI and HDFC Bank have increased their NRE term deposit rates of the same tenor to between 9 per cent and 9.25 per cent.

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Union Bank of India cuts Base Rate

Union Bank of India has reduced its Base Rate by 10 basis points from 10.75 per cent to 10.65 per cent, with immediate effect. This will lead to reduction in rates of all loans linked to Base Rate.

The bank is the first to reduce the Base Rate in the last one year or so, since the Reserve Bank of India was on a rate hiking spree to tackle inflation.

While going ahead there could be a tendency to reduce rates, an across-the-board reduction by banks would happen only if the RBI cuts repo and reverse rates, said Mr Madan Sabhnavis, Chief Economist, CARE Ratings.

The calculation of Base Rate depends on cost of funds and provisions for non- performing asset assets and capital adequacy ratio. These conditions may have turned favourable for Union Bank, making it possible to reduce the Base Rate and pass on the benefit to borrowers.

“Deposit cost, which is the biggest component of cost of funds, is rising for most banks. Besides many banks are also increasing savings bank rate. So, it is unlikely that we will see an across the board reduction, immediately. In case of Union Bank the composition of deposits may have changed and allowed them to reduce rates,’’ Mr Sabhnavis said.

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SBI, Dena Bank up interest rates for NRE deposits

State Bank of India on Tuesday hiked interest rates on Non-Resident (External) Rupee term deposits by up to 5.74 percentage points.

Following the revision in NRE deposit rates by India's largest bank, other public sector and private sector banks are expected to follow suit.

Beginning January 1, India's largest bank will pay a uniform 9.25 per cent interest on NRE deposits (below Rs 1 crore) of all maturities. It has also increased the highest tenor for NRE term deposits from 5 years to 10 years.

Currently, retail NRE term deposits in the 1 year to less 2 years maturity bucket fetches 3.82 per cent interest; 2 years to less than 3 years (3.51 per cent); 3 years to less than 5 years and 5 years (3.64 per cent each).

In a statement, the bank said no interest is payable if the deposit is withdrawn before one year. In other cases of premature withdrawal, the interest paid will be 0.5 per cent below the rate applicable for the period the deposit has remained with the bank or 0.5 per cent below the contracted rate, whichever is lower.

Dena Bank too hiked the interest rate on NRE term deposits to 9.60 per cent for one year maturity and 9.25 per cent for maturity period ranging from above 1 year and up to 3 years.

The bank said:-

In terms of returns, NRIs will find NRE deposits beneficial. We plan to double our NRI deposit base to Rs 600 crore by March-end 2012,” said Mr SK Jain, General Manager, Dena Bank. He explained that if a NRI opens an NRE deposit at the current rupee-dollar exchange rate of 53 to the dollar (he gets more rupees for his dollar) and one year down the line, say, the domestic currency appreciates to 49 (he pays less rupees to buy dollars for repatriation) then he gains not only in terms of interest but also in terms of favourable currency movement.

On Monday, Punjab National Bank said it will increase the interest rate on NRE term deposit to 9.25 per cent for period ranging from 1 year to 5 Years with effect from January 1.

NRE Rupee deposits accounted for around 48 per cent (or $25 billion) of the total Non-Resident Indian deposits of $52 billion as on October-end 2011.

NRE account can be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney.

Balances held in the NRE account are freely repatriable. Further, accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.

Loans up to Rs 1 crore can be extended against security of funds held in NRE Account either to the depositors or third parties. Such accounts can be operated through power of attorney in favour of residents for the limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself.

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RBI to issue commemorative coins for 100 years of civil aviation

The Reserve Bank of India today said it will shortly issue coins of Rs 5 denomination to commemorate hundred years of civil aviation.

“The RBI will shortly put into circulation coins of Rs 5 denomination... to commemorate 100 years of civil aviation and are legal tender as provided in the Indian Coinage Act, 1906,” the apex bank said in a statement.

The coins will be circular in shape and have a diameter of 23 mm.

On the obverse side, the face of the coin shall bear the Lion Capitol of the Ashoka Pillar in the centre. It shall also bear the denominational value ‘Rs 5’.

On the reverse side, the coin shall bear the image of an aircraft and the figure ‘100’ The year ‘1911-2011’ shall be shown at the bottom.

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Kotak Mahindra Bank hikes NRE deposit rates

Kotak Mahindra Bank has hiked interest rates on Non Resident (External) Rupee term deposits, with immediate effect.

The rates are applicable for deposits of all sizes, said a press release from the bank.

Most banks have hiked the interest rates on NRE deposits following the deregulation of rates by the Reserve Bank of India. The rates are now linked to banks’ domestic term deposit rates.

Revised Rates:

Tenor BucketRate (% per annum)

1 year - less than 2 years 9.25

2 years – less than 3 years 9.00

3 years – up to and including 5years 8.50

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SBI Capital looks to expanding mergers business

SBI Capital Markets Ltd, the investment banking subsidiary of State Bank of India, expects its mergers and acquisitions business to account for 30-40 per cent of its topline in the next three-to-four years. Close to 95 per cent of SBI Caps' total business comes from debt syndication at present.

The company – which sees a huge potential in mergers and acquisitions in areas like automobiles, pharmaceuticals, power and FMCG in countries like Australia, Indonesia and Mozambique – has created specific verticals and is in the process of training its manpower to leverage M&A opportunities in individual verticals, said Mr S Vishvanathan, managing director and chief executive officer, SBI Caps.

“There are lots of opportunities on the M&A front and we hope to increase our revenues from this sector. The segment is growing but it will take sometime. Our team is working on it. While our overall pie is also growing we want to increase our business from this segment,” Mr Vishvanathan told Business Line.

SBI Caps has been instrumental in various deals like the Rs 212-crore acquisitions of European company Danstoker and its German subsidiary by Pune-based Thermax Ltd and the Rs 1,300-crore acquisition of German multinational Dystarfor by Ahmedabad-based Kiri Dyes and Chemicals Ltd last year. The company is also believed to have helped Adani Group owned Mundra Port and Special Economic Zone to acquire Abbot Point Port in Australia in a $1.96-billion deal.

“Close to three-to-four deals are in the pipeline and might take shape soon. There are opportunities in coal and iron ore mine acquisitions,” Mr Vishvanathan said.

To facilitate M&A in individual sectors, SBI Caps has created 3-4 member teams in separate verticals like infrastructure in the areas of power, oil and gas and non-infrastructure sectors like auto, FMCG, hospitality, hotels.

The company will also leverage State Bank of India's banking relationship with Indian companies. “Being the largest loan syndicator in the world and having relation with almost every infrastructure provider in the country gives us an edge over others. We also have the benefit of SBI's relationship with large, mid and small corporates. Once SBI gets into anything then immediately the scale goes up because of our huge relationship and network, it is just that we are not adequately leveraging,” Mr Vishvanathan said.

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Don't charge for account closure: RBI

The Reserve Bank of India has directed banks not to charge fees from customers closing their accounts due to change of employment or transfer to another city.

The implication of this circular is that such fees can be levied if customers are closing accounts only to switch banks so as to cash in on better interest rates.

(The author is a New Delhi-based chartered accountant.)

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Bill to raise Exim Bank capital to Rs 10,000 cr passed

Parliament on Tuesday passed a bill to increase the authorised capital of Export Import Bank of India (Exim Bank) from Rs 2,000 crore to Rs 10,000 crore.

Introducing the Export Import Bank of India (Amendment) Bill, 2011, in the Upper House, Minister of State for Finance Mr Namo Narain Meena said it seeks to authorise the government to raise the authorised capital of the bank in future through a notification.

The Lok Sabha had approved the Bill on December 21.The bill also seeks to increase the number of executive directors in the bank to two from one at present.

Replying to the debate, Mr Meena said the Exim Bank had issued 180 Lines of Credit (LOCs) to 53 countries worth $6.3 billion till March 31 this year and will be issuing loans worth $5 billion to Africa as promised by Prime Minister Dr Manmohan Singh during his trip to Ethiopia.

Rejecting criticism that rate of lending loans was less than that of growth rate of exports, he said, “The growth rate of lending has been 24 per cent whereas the growth rate of Indian exports has been 21 per cent between 2001-02 and 2010-11.”

The Minister agreed that the percentage of loans to be granted to small enterprises was 2.6 per cent of total loans issued and there was need to increase it.

On the non-performing assets of the bank, Mr Meena said it was only 1.4 per cent of the loans worth Rs 46,000 crore issued by the bank.

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NHAI plans electronic toll collection from next year

The National Highways Authority of India (NHAI), which is set to launch its first-ever tax-free public issue of secured redeemable non-convertible bonds (NCDs) on Wednesday, said it plans to roll out the electronic toll collection (ETC) system across the country in 2012.

New system

ETC will replace the existing cash-and-receipt tax payment system, Dr J.N. Singh, Member (Finance), NHAI, told reporters here on Tuesday. The vehicles' number-plates will be electronically-recorded and tax collected through a specially-created credit card for making such payments.

The tax thus collected would then be transferred to the account of the respective toll booths, he said. Currently, the people pay toll tax after an average of 60-70 km stretch of road. The ETC system, preliminary preparations for whose launch have been completed, is expected to make toll tax payment easier and faster as in the developed countries, Dr Singh said. Currently, India has 41 lakh km of roads, of which NHAI's share is 71,722 km. The State Highways are 1.66 lakh km long.

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Travel insurance premiums may rise with falling rupee

Travellers may have to shell out more for their outbound travel expenses as travel insurance bills may rise due to the sliding rupee.

The claims for outbound travel insurance are paid out by general insurance companies in foreign currency while the insurance companies collect premium in rupees.

The record decline in the value of the Indian rupee has hit the travel portfolio of travel insurance companies, said experts in the insurance industry.

The fall in the Indian rupee, which has seen a depreciation of 22 per cent against the US dollar, from the levels of 44.46 in January 2011 to 54.29 in December, is proving to be a major concern to the travel insurance industry. And analysts estimate that the year 2012 could continue to be a tough for the rupee and it could continue trading in the broad range of 50-54, with some analysts predicting that it may touch 58.

The main claims that insurance companies incur in the travel insurance portfolio is towards emergency medical expenses.

“At present travel insurance market is very competitive in India. One can get a cover for $50,000 for as low as Rs 400 (excluding the US),” said Mr Vikramjeet Singh, Head-Travel Insurance, Bajaj Allianz General Insurance.

“We have priced our premiums with the rupee being at levels of 44/45 and this sharp depreciation in the rupee will force us to think about how long we can continue with premiums at this level,” said Mr Neelesh Garg, Executive Director, ICICI Lombard GIC Ltd.

Insurers travel portfolio hit

“The hit in the travel insurance portfolio is proportionate to the decline in rupee. So an upward revision in premiums rate is on the radar if the current levels of the rupee continue,” said Mr Karan Chopra, Head- Retail Business, bERGO.

So, non-life insurers are faced with a hit of almost 15 to 20 per cent in this portfolio due to the fall in the rupee.

Travel insurance industry is an estimated Rs 300 crore market for the Indian general insurance industry. The travel insurance figures are clubbed with health insurance figures (a much bigger market) in the industry data available.

According to tour operators and insurance companies, Indian outbound travel has seen a double-digit growth over the last few years.

The number of Indians travelling overseas crossed the 12-million mark in May 2011 and is expected to touch 50 million by 2020, the latest industry survey says.

Insurance companies have a specialised product portfolio with travel insurance plans customised for individuals, family floater, senior citizens, and students and for business travellers.

deepa.n@thehindu.co.in

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