IOB net down 53% on loan restructuring

Indian Overseas Bank has reported a 53 per cent decline in net profit for the quarter ended December 31 at Rs 108.27 crore, from Rs 231.66 crore for the comparable previous year quarter. Mr M. Narendra, Chairman and Managing Director of the bank, attributed the drop primarily to restructuring of loans amounting to Rs 3,600 crore (particularly on two major accounts in the telecom tower and power sectors) and the resultant reversal of interest to the tune of Rs 75 crore during the quarter.

However, he said, the bank's focus is currently on improving recovery during the current quarter, which will result in improved performance for the whole of the current financial year. “Overall, for the current financial year we hope to recover Rs 1,500 crore,” he said.

Gross NPA

Mr Narendra pointed out that the bank has brought down its gross NPA (non-performing assets) to 3 per cent as on December 31 from 3.26 per cent a year ago, and the net NPA is at 1.23 per cent for the period under consideration (down from 1.51 per cent). Total deposits grew to Rs 1,67,006 crore from Rs 1,25,062 crore last year. Advances too have gone up from Rs 1,00,129 crore to Rs 1,32,549 crore. Operating profit for the nine-month period grew 34.41 per cent to Rs 2,532 crore from Rs 1,884 crore in the corresponding previous year period.

Gross NPA at the end of the nine-month period is at Rs 3,972 crore, and net NPA is at Rs 1,600 crore. Recovery during the period was at Rs 843 crore. Mr Narendra said, with more sharpened focus on recovery, the bank hopes to keep its gross NPA for the whole of the current financial year below the Rs 4,000-crore mark.

The bank also expects an equity infusion of Rs 1,450 crore from the Government “very soon”, which will take the bank's Tier I capital adequacy ratio to 8 per cent, he said.

Mr Narendra also mentioned that the bank has opened 354 branches during the calendar year 2011, taking the total number of branches to 2,400, and it targets to add another 300 branches during the current year. The total number of ATMs too have gone up to 1,344.

rravikumar@thehindu.co.in

Read more »

Banking licences: Ministry, RBI step up shadow-boxing

The central bank seems to be in an unusually generous mood on new banking licences. In a sharp departure from its earlier cautious stance, the Reserve Bank of India (RBI) is now in favour of giving banking licences to all the applicants that meet the eligibility criteria mentioned in the guidelines issued for this purpose.

But, the finance ministry is not in sync with RBI’s generosity on the ground that it would be difficult to regulate and supervise a large number of banks. This new round of difference of opinion would extend the long wait for the banking hopefuls.

LICENSING NORMS IN THE WORKS

1993: First guidelines since the financial sector reforms of the early 1990s released for new banks

2001: Revised norms released, two banks given permission in 2003-04

Feb 2009: Finance Minister says in Budget speech RBI to consider giving licences to new entities

Aug 2010: Discussion paper on new bank licences released

Aug 2011: Draft guidelines on new bank licences out

RBI’s approach so far has been to restrict licences to only a few entities. According to central bank sources, the banking regulator has written to the finance ministry that banking licences should be given to all those entities that meet the ‘fit and proper criteria’ mentioned in the guidelines.

More importantly, the view in Mint Road is some of these banks can be allowed to fail. This is significant, as no banks have been allowed to fail in the country since the guidelines of 1993. “If some banks are allowed to fail, others will be more cautious and prudent in their operations,” said a person close to the developments.

RBI has always followed an ultra-cautious approach on private bank licences. Since the financial sector reform in the early 1990s, the first set of guidelines was issued in 1993 and then revised in 2001. The 2001 guidelines were cautious and large industrial houses were not permitted to set up banks. Ten new banks were set up in the private sector after the 1993 guidelines and two after the 2001 guidelines.

Sources said the ghost of the 2G scam played a big role in the central bank’s decision, as RBI wanted to minimise the role of subjectivity. The central bank is now open to the idea to allowing large business houses in banking. Almost all the big industrial houses, including the Tata Group, the Aditya Birla and RADAG groups, are keen to set up banks.

Nearly 18 months after the government announced RBI would consider issuing fresh banking licences, in August last year, draft norms were issued.

Among the criteria suggested in the draft norms was diversified ownership of promoters with a minimum 10 years of experience in business and a minimum Rs 500-crore capital. It was also said firms having 10 per cent of their income from real estate and broking activity would not be considered.

RBI has also made a case to the government to amend the Banking Laws (Amendment) Bill, introduced in Parliament in March last year, which will give more power to it before fresh banking licences are issued. At present, RBI does not have certain powers, such as supersession of bank boards.

Source: Business Standard

Read more »

Higher provisioning tempers Bank of India's net profit

Higher provisioning towards bad loans and investments moderated Bank of India's net profit in the October-December 2011 period. Profits rose by a modest 10 per cent to Rs 716 crore, against Rs 653 crore in the corresponding year-ago period.

While net interest income (the difference between interest earned and expended) nudged up by 4 per cent to Rs 2,067 crore (Rs 1,986 crore), non-interest income (includes commission, exchange and brokerage, profit from exchange transactions and recovery in written off accounts) rose by 19 per cent to Rs 471 crore (Rs 396 crore).

Quarter-on-quarter, the public sector bank managed to bring down the gross non-performing assets level by Rs 162 crore to Rs 6,386 crore. However, since March-end 2011, the NPAs have surged by Rs 1,574 crore. In the reporting three months period, provision towards NPAs jumped 169 per cent to Rs 333 crore (Rs 124 crore in the October-December 2010 period) and provision for investments rose 80 per cent to Rs 119 crore (Rs 66 crore). Total provisions rose by 38 per cent to Rs 1,016 crore (Rs 736 crore).

According to Mr Alok Misra, Chairman and Managing Director, BoI, the global and domestic economic environment has become challenging and stress is showing in sectors such as steel, textiles, aviation, and power (especially state-owned power distribution companies). Though the year-on-year advances growth was 8.23 per cent as on December-end 2011, the bank is hopeful of achieving a credit growth of 15.5-16 per cent by March-end 2012, he added.

Focus on recoveries

Mr N. Seshadri, Executive Director, BoI, said the bank is aggressively focussing on recoveries from small value loan accounts that have turned bad. This move has paid rich dividends, with the bank realising Rs 186 crore from written-off accounts, against Rs 66 crore in the corresponding period last year.

In the nine-month period ending December 31, 2011 the bank's net profit declined by 13.53 per cent to Rs 1,725 crore (Rs 1,995 crore) as the bank recognised NPAs through the system driven process in the June and September quarter, said Mr Ravi Kumar, General Manager & CFO.

Bank of India's scrip closed up at Rs 352.85 per share on the BSE, up 3.17 per cent, against the previous close of Rs 342.

Read more »

Despite good recoveries, Canara Bank net down

Higher provisioning during the quarter caused a 21 per cent dent in net profits for Canara Bank during the third quarter of this fiscal. The bank posted net profits of Rs 876 crore.

“Our profit would have been higher but for two reasons. One major account was restructured, and we had to provide Rs 150 crore for impairment of fair value; and because of spike in government yields, we had to provide Rs 185 crore for depreciation on investments,” said Mr S. Raman, Chairman and Managing Director, Canara Bank.

Income, expenses up

Despite the bank's interest income going up 33 per cent, its interest expenditure was up almost 56 per cent, impacting the bank's net interest income, which was down 8 per cent.

However, Mr Raman said that the bank had good cash recoveries this quarter too. “We have increasingly been successful in recovering, with recoveries during the first nine months at Rs 2,346 crore, compared with the full-year's cash recovery of Rs 2,032 crore last year,” he pointed out.

Higher NPAs

Non-performing assets have gone up, he said, adding that the bank has “embarked on addressing the NPA issue very aggressively”. According to him, slippages are coming down every quarter. “We have arrested negative aspects of assets, and are very choosy about credit expansion,” he said. Mr Raman pointed out that it has been a very difficult year for the banking system as a whole, and expected the next quarter to be better.

“The sentiments have improved now, and banks like us which were careful in balance-sheet expansion this fiscal, are ideally suited for better growth next year,” said Mr Raman. He, however, did not expect sentiments to take effect in the next couple of months.

On the credit portfolio, he said Canara Bank was not aggressive in expanding its credit portfolio and expected a full-year credit growth of about 16 per cent for FY12. “We felt it was better to grow at an average rate, and it was a time to be conservative. It was not about risk aversion,” said Mr Raman. Net advances of the bank grew 15.5 per cent this quarter.

Read more »

Karur Vysya Bank posts 10% rise in net profit

Karur Vysya Bank has registered a 10.3 per cent increase in its net profit for the quarter ended December 2011 as compared to the corresponding quarter of the previous fiscal.

The bank's net profit rose to Rs 124.92 crore (Rs 113.22 crore); net interest income increased 11.3 per cent to Rs 234.66 crore (Rs 210.69 crore) and interest income by 48.8 per cent to Rs 856.33 crore (Rs 575.49 crore).

Commenting on the performance, KVB's Chief Executive, Mr K. Venkataraman, said “though this is not anything great, we have met our internal targets”.

The bank's Net Interest Margin (NIM) dipped from 3.39 per cent in March 2011 to 3.06 per cent.

Mr Venkataraman said that there was no pressure on margin and he does not foresee it in the coming quarter as well due to softening of interest rates coupled with the 50 bps reduction in the CRR.

KVB though is not planning to cut its advances or deposit rate for now, not until there is a signal from the banking regulator, he said.

The amount set aside towards provisions and contingencies more than doubled this quarter to Rs 36.02 crore (Rs 14.3 crore). Mr Venkataraman said it included NPA provision, standard assets and investment depreciation and there was no sector specific issue.

“Some mid-sized corporates are under pressure. We are going to focus on NPA recovery, CASA and fee-income. We want to see good growth in income,” he added.

The Net NPA rose marginally from 0.19 per cent during the third quarter of 2010-11 to 0.29 per cent in the just ended quarter.

To a query on credit offtake, the KVB chief said “it is quite dull at present with corporates putting off project proposals. However, there have been some enhancements and take over of loans from other banks.”

The bank's business mix crossed Rs 52,000 crore with deposits growing by 35 per cent to Rs 30,107 crore and advances increasing to Rs 22,283 crore.

The bank is targeting a total business of Rs 55,000 crore by end March 2012.

With the addition of 32 branches and 100 ATMs this quarter, the branch network of KVB rose to 437 and 712 respectively.

Read more »

IndiaFirst launches insurance plan for vehicle-buyers

IndiaFirst Life Insurance has launched a life insurance cover for vehicle-buyers.

The company, a joint venture of Bank of Baroda, Andhra Bank and the UK's Legal and General, tied up with Varun Motors in this regard.

The product, called Autolife, will offer a life insurance cover up to Rs 20 lakh in four different options and a pure protection plan.

“We feel this will change the way in which life insurance is sold,” Dr P. Nandagopal, Chief Executive Officer, IndiaFirst Life Insurance told newspersons here on Friday.

The product was an extension of bancassurance model of distribution based on embedded sales model, he said.

IndiaFirst readied a new software platform which allows immediate issue of policy bond for the customers.

“We have made the premium rates affordable. They are approximately in the range of Rs 600 to Rs 4,000 a year for persons aged about 30 years.”

The product is available only in Andhra Pradesh through two-wheeler and four-wheeler dealer network of Varun Motors.

“This is like a pilot roll-out. We will extend it other parts based on the response,” he added.

Mr M. D. Mallya, Chairman of IndiaFirst Life and CMD of Bank of Baroda formally launched the product.

Mr B. A. Prabakar, Chairman and Managing Director of Andhra Bank said the product was both innovative and affordable.

Read more »

PNB to hire 775 management trainees/officers

Punjab National Bank is recruiting management trainees in the junior management grade (JMG) scale I/ probationary officers to fill up about 775 vacancies across the country.

The bank has specified that candidates with a minimum of 60 per cent marks in their graduation and a total weighted standard score of 138 in the common written examination conducted by the Institute of Banking Personnel Selection (IBPS) are eligible to apply.

The bank has said that only those candidates who rank sufficiently high in the order of merit shall be called for a Personal interview. The interview will be for 100 marks and the minimum required for qualifying for the interview is 40 marks.

The tentative period of the interview will be between April and May 2012.

The minimum age requirement is 20 years while the maximum is 28 years. Applications have been invited online and are open from January 30. The last date for registeration of online applications is February 12, 2012.

Read more »

IRFC, HUDCO tax-free bonds to hit markets today

Tax-free bond issues of two Government-owned agencies — Indian Railway Finance Corporation (IRFC) and HUDCO — are to hit the market on Friday. The bonds have a tenor of 10 years and 15 years, and offer higher rates for retail investors. But, investor returns of HUDCO are marginally higher than IRFC. IRFC funds rolling stock acquisition of the Railways, while HUDCO provides housing finance to various agencies.

IRFC

The bonds of IRFC, the financing arm of Indian Railways, shall carry a coupon rate of 8 per cent per annum for 10 years and 8.1 per cent for 15 years. For the retail subscribers, who can invest a total of up to Rs 5 lakh, IRFC offers an additional coupon rate of 0.15 per cent (10 year bonds) and 0.2 per cent per annum for 15-year tenor.

The bonds are proposed to be listed on the NSE and BSE, said a Railways release. Face value of each bond is Rs 1,000, and bonds can be subscribed for a minimum of 10 and in multiples of five thereafter, it added. IRFC proposes to raise Rs 3,000 crore, with an option to retain oversubscription of up to Rs 6,300 crore.

The issue closes on February 10 or earlier (subject to the issue being open for a minimum period of 3 days).

HUDCO

HUDCO wants to mop up Rs 4,685 crore from this issue. For retail investors, the coupon rate is 8.22 per cent (10 year issue) and 8.35 per cent (15 year issue). Retail investors can invest up to Rs 5 lakh for availing themselves of these coupon rates. For other investors, the coupon rates are 8.1 per cent (10- year tenor) and 8.2 per cent (15-year tenor).

mamuni@thehindu.co.in

Read more »

HDFC Life opens office in Dubai

HDFC Life, a private life insurance company from India, has launched its first international operations with the opening of its representative office in Dubai.

It is a joint venture between Housing Development Finance Corporation Ltd (HDFC) and Standard Life plc, the leading provider of financial services in the UK.

“The launch of our operations in Dubai is the beginning of HDFC Life’s expansion into the region. The vast NRI population would be able to closely understand the benefits of HDFC Life’s wide ranging product portfolio catering to their protection, investment and savings, and retirement needs.

“The objective of this office would be to serve our existing policy holders and further understand their financial needs better,” Mr Anup Rau, Head, Sales and Distribution, HDFC Life, said at a press conference here.

Commenting on the strategy and reasons for international expansion, Mr M.I. Taher, Vice President and Head, International Business — HDFC Life, said GCC is an important region for the company’s growth and UAE with a large NRI population base, is key to this growth.

“The objective of our operations in Dubai is the first step towards understanding the Gulf market, the customer segments, apart from serving our existing policy holders and further understanding their financial needs. Our presence in this region will help us research the market better and devise new products catering to the specific needs of the NRIs here,” he said.

Read more »

Public sector banks' ATM move 'has not hit SBI's plans'

The move to set up ATMs through a consortium of public sector banks (PSBs) in the country has not hampered the ATM-related activities of State Bank of India, according a top executive.

The move follows a directive by the Government in this regard.

In an informal chat with Business Line on the sidelines of a CSR (corporate social responsibility) programme of the bank here on Thursday, Mr A. Krishna Kumar, Managing Director and Group Executive (National Banking) of SBI, said that the process of putting ATMs through consortium of PSBs has not hampered its plans related to ATMs.

Stating that the bank has nearly 26,000 ATMs in the country, he said: “We need more ATMs there is no doubt about that. Our number of debit cards is very strong. We have more than 10 crore debit cards. It is not that the current process has hampered us in anyway in our efforts to supply ATM cards and debit cards to our customers.”

Before the decision was taken at the ministry level to consolidate the ATM requirements of the entire PSBs, SBI had thought of installing around 10,000 ATMs during the current fiscal. “Because of this development, our progress has not been there in this front,” he said.

The ultimate objective of this method is to reduce the cost, and to have a standardised format of ATMs, he said.

Asked about the progress in the procurement of ATMs through consortium mode, Mr Krishna Kumar said that it is at the RFP (request for proposal) stage.

“I think some time is given to the ATM manufacturers and suppliers to respond to the RFP and to the tender. May be in a couple of months all things would be completed,” he added.

vinayakaj@thehindu.co.in

Read more »

Vijaya Bank Q3 net down 18% despite rise in interest income

Despite a 40 per cent increase in interest income, Vijaya Bank’s net profit was down 18 per cent to Rs 124.26 crore during the third quarter of this fiscal.

“This quarter, our net profits, net interest income, net interest margin and non-performing assets have taken a dent. We have taken all possible steps to tackle these issues,” said Mr H.S. Upendra Kamath, Chairman and Managing Director, Vijaya Bank.

He explained that the bank “had to provide impairment in value of some accounts, and also prudentially write off some NPAs during the quarter”, which impacted the net profit.

The bank made provisions of Rs 111 crore towards NPAs and Rs 39 crore towards diminution in the value of certain borrowal accounts due to restructuring.

“There was a spike in non-performing assets due to slippage of three large accounts. However, this spike in NPAs is not broad-based,” said Mr Kamath.

According to him, there is an increase of Rs 280 crore over September 2011 accounted for largely by three accounts. But he added that the bank will be able to upgrade at least two of these three accounts in the fourth quarter.

“The quality of portfolio would be much better in Q4 because of the bank’s efforts to arrest further slippages and on recoveries,” said Mr Kamath. He explained that the net interest income was down 11 per cent because interest expenses of the bank went up, and “we had to reverse some of the interest in respect of those accounts we had restructured”.

anju@thehindu.co.in

Read more »

LIC's health plan bags Golden Peacock award

Life Insurance Corporation of India has bagged the Golden Peacock Innovative Product/Services Award 2011 for its health insurance product, Jeevan Arogya.

The award was received by Ms Renu Jain, Head of Health Insurance Segment, LIC of India, at a function held in Bangalore last week.

First

Probably, this was the first time that a health insurance product was chosen for the Golden Peacock Award.

“Jeevan Arogya has been driving our growth in health insurance segment since its launch in June last year,” Ms Jain told Business Line here.

First premium

It had brought the first premium of Rs 63 crore within seven months of its launch.

Over 1.84 lakh policies of Jeevan Arogya have been sold so far, she added.

Read more »

Rise in provisions drags Union Bank's Q3 profit

Union Bank of India reported a sharp 66 per cent decline in net profit to Rs 197 crore in the October-December 2011 period, against Rs 579 crore in the corresponding period last year.

Increase in provisions towards non-performing assets, restructured advances and depreciation on investments weighed down the bank's profitability.

During the reporting three months, gross NPAs increased by Rs 72.53 crore to Rs 5,209 crore. In the nine months period, gross NPAs increased by Rs 1,586 crore.

In the reporting period, provisions towards NPAs and standard assets increased to Rs 425 crore (Rs 361 crore) and Rs 100 crore (Rs 35 crore), respectively.

Provision towards ‘others', including standard derivative exposures, and depreciation in investments were also higher at Rs 375 crore (against write-back of Rs 3 crore) and Rs 73 crore (Rs 6 crore) respectively.

Due to rise in NPAs, the provision coverage ratio of the bank came down to 63 per cent as of December-end 2011, against 70 per cent as of December-end 2010.

The bank's scrip closed 2.87 per cent down at Rs 206.75 a share on the BSE, against the previous close of Rs 212.85.

kram@thehindu.co.in

Read more »

Bank of Baroda Q3 profit jumps 21% on ‘other income' surge

A robust growth in other income and tight control on operating expenses helped Bank of Baroda report a 21 per cent increase in net profit at Rs 1,290 crore in the October-December 2011 period, against Rs 1,069 crore in the corresponding year ago period.

In the reporting three months period, its net interest income (difference between interest earned and interest expended) increased by 16 per cent to Rs 2,656 crore (Rs 2,292 crore in the corresponding year ago period).

Other income, which includes income from sale of investments and foreign exchange income, jumped 70 per cent to Rs 1,149 crore (Rs 676 crore).

Operating expenses, which includes employee cost and other operating expenses, nudged up by 7 per cent to Rs 1,197 crore (Rs 1,117 crore).

Liquidity amounting to Rs 1600 crore will get unlocked for the bank on account of the cash reserve ratio cut by the RBI. The resources will be channelled into productive sectors of the economy, said Mr M.D. Mallya, Chairman and Managing Director.

Though the RBI has scaled down the March-end 2012 non-food credit growth projection for the banking sector to 16 per cent from 18 per cent, Bank of Baroda expects to achieve a year-on-year credit growth of 18-19 per cent.

NPAs, provisions increase

During the quarter, non-performing assets (gross) increased by Rs 492 crore to Rs 3,895 crore.

In the nine-months ended December-end 2011, NPAs rose by Rs 1,125 crore.

Overall, provisions and contingencies made by the bank in the October-December 2011 period jumped by 175 per cent to Rs 837 crore (Rs 304 crore).

The rise in provisions and contingencies is on account of provisions of about Rs 500 crore towards NPAs.

This includes an additional provision of Rs 78 crore on a secured sub-standard advance.

Bank of Baroda's scrip closed 1.24 per cent down at Rs 789.90 a share on the BSE, against the previous close of Rs 799.85.

kram@thehindu.co.in

Read more »

CRR cut to help ease liquidity in the system: Karnataka Bank

The Managing Director and Chief Executive Officer of Karnataka Bank Ltd, Mr P. Jayarama Bhat, has said that the RBI’s move to reduce CRR by 50 basis points in the third quarter review of monetary policy for 2011-12 is a concrete step in easing liquidity situation in the banking system.

Speaking to Business Line, Mr Bhat said that CRR cut is a concrete step in easing liquidity, and this supply of liquidity will increase the credit portfolio of banks. (The CRR cut of 50 basis point is likely to release Rs 32,000 crore of liquidity into the banking system).

With this, the RBI’s guidance of 16 per cent credit growth looks to be achievable. Naturally the profitability of banks is also likely to improve with this release of liquidity, he said.

With three risk factors – rupee depreciation, crude oil prices and fiscal deficits – being the cause for concern, the RBI has taken a conscious stand of not touching the policy rates, and it has put a lot of caveats for reducing the policy rates in future.

“My opinion is that reduction in policy rates may not be that aggressive until the inflation comes down to the expected level that RBI has envisaged,” Mr Bhat said, adding: “Overall I can say that this is a defensive policy.”

vinayakaj@thehindu.co.in

Read more »

CRR cut on expected lines: YES Bank official

Dr Shubhada M. Rao, President and Chief Economist of YES Bank Ltd, said that the CRR cut of 50 basis points in the third quarter review of monetary policy 2011-12 by the Reserve Bank of India is in line with expectation.

Speaking to Business Line over phone, Dr Rao said: “I think our call has come right in terms of being in line with expectation. We did see structural kind of factors creeping into the liquidity deficit. We had anticipated CRR cut of 50 basis points. Quite clearly this is what has got effected.”

Stating that growth, particularly investment-led growth, is the larger concern today, she said that is what the RBI has begun to address. Stressing the need to spur and provide impetus to investments, she said this obviously cannot be done in isolation. This needs to be very comprehensively backed by the policies at the Government level, because monetary policy alone cannot bear the burden.

Dr Rao said that it has to be complemented with Government measures. “To spur investments, we need a combination. If the Government shows its indication through the Budget, that is the time we believe there is the complementarity in effort. Then the RBI can back it up with a cut in repo by 50 basis points.

Stating that there are still upside risks in inflation, she said the trajectory of inflation is in line with what the RBI has in mind. “There are no nasty surprises on inflation yet. But with upside risks, they have not therefore hurried on rate call on repo rate,” she said.

If the inflation does indeed pan out the way it has been anticipated by March going well below 7 per cent, then we will see a chance of the RBI cutting the repo rate in March, she added.

vinayakaj@thehindu.co.in

Read more »

RBI cuts CRR by 50 bps, keeps repo rate unchanged

The RBI Governor, Dr D. Subbarao, chose to continue in ‘pause’ mode on the rate front, retaining the key repo rate at 8.5 per cent.

But he decided to give markets something to cheer about by cutting the cash reserve ratio (CRR) by 50 basis points and release Rs 32,000 crore into the system. The CRR will now be at 5.5 per cent.

The policy document said that these steps will ease liquidity conditions, mitigate downside risks to growth and continue to anchor medium-term inflation expectations on the basis of a credible commitment to low and stable inflation.

The cut in CRR was done to ease the tight liquidity situation. Banks were borrowing nearly 1.2 lakh crore every day at the Liquidity Adjustment Facility (LAF) window of the Reserve Bank of India over the past month. There was also a resort to the additional borrowing at the Marginal Standing Facility (which is one percentage point higher than repo) at 9.5 per cent on a couple of occasions.

Cuts GDP growth outlook

The RBI has revised downwards its forecast for Gross Domestic Product (GDP) growth in keeping with the slowing economic indicators. It now expects GDP growth to be at 7 per cent for this fiscal from the 7.6 per cent estimate it made in the half yearly review in October 2012. At the beginning of the fiscal, GDP growth was expected to be 8 per cent.

Inflation to decelerate further

The Reserve Bank has said that consistent with its earlier projections, inflation is likely to decelerate further to 7 per cent by March. It, however, cautions that there is a large element of suppressed inflation. It points to coal and petroleum products as examples of products that have not seen price revision that reflect underlying market conditions. When revised, this will add to inflationary pressures, the RBI said. It advises that "It will be prudent to fully deregulate diesel prices to contain both aggregate demand and trade deficit."

The RBI also took pains to highlight the fact that in reducing CRR it was not shedding its anti-inflation gear or changing its stance. It said that it was premature to begin reducing policy rate in the light of the current inflation trajectory and the element of suppressed inflation. The RBI chose to say, "The reduction (in CRR) can also be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them."

The RBI drew attention to the sharp drop in non-food credit to 15.7 per cent in end-December compared to the indicated projection of 18 per cent given earlier. It noted that the deceleration was particularly sharp for public sector banks and was particularly sharp in agriculture, real estate, infrastructure, engineering, cement and cement products.

Read more »

RBI wants banking services to reach remote villages

The Reserve Bank of India wants benefits of banking to reach remote villages in the country.

Accordingly, in Andhra Pradesh, it has set a target to reach 6,640 uncovered villages before March 31, according to Mr A. Sambasiva Rao, Regional Director, RBI.

Addressing a meeting in connection with his visit to Financial Literacy and Credit Counselling centre here, Mr Rao said that about 89 per cent of villages were covered so far.

While commercial banks were in the forefront in achieving the targets, some regional rural banks and private banks needed to pull up their socks.

Poverty reduction

Explaining that the benefits of economic growth were not being distributed equitably among all sections, he said poverty reduction did not just mean improving the income of the poor but other basic needs of the families like education of the children and health should be met.

Mr Rao urged banks to catch the next generation of citizens, now in junior colleges and introduce them to all banking products and enrol them as account holders. Even remote villages and tribal hamlets should produce doctors, engineers and technocrats on par with urban areas.

This would happen only when the banks expanded their operations and liberally funded education activities.

Once banks operated in remote villages, they would be able to afford support to farmers, especially those in distress and also the self-help groups.

Mr Ramsankar Naik, District Collector, and Mr R.N. Dash, General Manager, RBI, among others, participated in the meeting.

Read more »

PNB waiting for IRDA nod on Metlife stake

Awaiting regulatory approval for its proposed acquisition of a 30 per cent stake in insurance company Metlife, Punjab National Bank (PNB) has said it will not disclose the rationale behind the move or the financial details until IRDA gives its nod.

“We are waiting regulatory approval from the Insurance Regulatory and Development Authority (IRDA) for the deal and unless that comes through, we will not disclose the details and strategy,” said Mr K R Kamath, Chairman and Managing Director, PNB on the sidelines of the 100-year celebrations of the bank’s operations in the eastern region.

Mr Kamath said PNB does not foresee any hurdles in the way of the deal, which was announced five months ago, and would unveil the transaction details after approvals were in place.

If the proposed deal goes through, PNB would become the largest shareholder in the insurance company.

Speaking about overseas expansion, Mr Kamath said the bank is awaiting approval from the Canadian authorities for setting up a subsidiary in that country, besides the regulator’s nod in Oslo, Norway.

“We have applied with Reserve Bank of India for Maldives and after receiving positive feedback from a survey, we will soon move to our regulator to foray into Bangladesh,” he said.

Read more »

SBH ties up with Tirumala Milk Products for dairy loans

State Bank of Hyderabad has entered into a memorandum of understanding with Tirumala Milk Products to provide loans to farmers for dairy activity.

According to the agreement, SBH would give loans to farmers who are identified by Tirumala Milk Products Ltd to undertake dairy activity.

“This will help increase income levels of farmers and also create employment,” Mr M. Bhagavantha Rao, Managing Director, State Bank of Hyderabad, told newspersons after signing the MoU here on Monday.

For the third consecutive year, SBH had completed the required priority sector lending for this financial year by December 31, 2011, he added.

The loans which are below Rs 5 lakh will also be eligible for a 25 per cent subsidy from the National Bank for Agriculture and Rural Development.

Mr B. Brahma Naidu, Managing Director of Tirumala Milk Products said farmers would be offered assured buy-back.

nagsridhu@thehindu.co.in

Read more »

Indian Bank wins innovation award

Indian Bank has won the ‘Golden Peacock Innovative Products/Service Award' for 2011. The award was received by the bank's Chairman and Managing Director, Mr T. M. Bhasin, at the World Congress on Total Quality, held in Bengaluru on Saturday.

The award was given to the bank “in recognition of its contribution to promotion of self help groups (SHGs)”. SHGs have turned out to be major vehicles of women empowerment. In the current year, Indian Bank has so far disbursed Rs 1,360 crore to 55,391 SHGs, taking the total exposure under the SHG portfolio to Rs 2,336 crore, benefiting 175,390 SHGs, says a press release from the bank.

Read more »

Federal Bank net jumps 41%; NRI deposits up

The net profit of Federal Bank spurted by 41 per cent to Rs 202 crore for the quarter ending December 31. The bank delivered substantial topline and bottomline growth despite a challenging macro environment, both in the domestic and global market, a press release issued here said.

The bank, which had been working on its transformation to a truly pan-India status while adopting contemporary management techniques, has reported excellent numbers which not only reflect rapid growth but also asset quality.

The total business grew by 22.7 per cent to touch Rs 79,948 crore. Total deposits increased 26.6 per cent to Rs 46,742 crore. While retail deposits expanded 27.2 per cent to Rs 38,678 crore, NRI deposits grew faster at 35.4 per cent to Rs 10,546 crore.

Deposit growth

The fall in the rupee value and spurt in interest rates for NRI deposits seem to have helped accelerate the volume of NRI deposits. The low-cost CASA deposits grew by 21.9 per cent to Rs 13,186 crore.

CASA growth improved the net interest margin and enabled the bank to report a better bottomline. The net interest margin for the quarter was at 3.94 per cent. Net advances grew by 17.5 per cent to Rs 33,206 crore, boosted by increased lending to SME, corporate and retail segments. Retail advances form 28.7 per cent of all advances while SME lending formed 28.7 per cent.

The bank said it had contained gross NPAs to 3.97 per cent while net NPAs ruled at 0.74 per cent.

cj@thehindu.co.in

Read more »

Kotak Mahindra Bank net up 47% on loan book growth

Strong growth in advances and other income, and lower provisions helped Kotak Mahindra Bank’s profits rise by 47 per cent to Rs 276 crore, in the quarter ended December 31, 2011, from Rs 188 crore in the corresponding quarter last year.

The growth in advances has come mainly from segments like corporate, commercial vehicles, construction equipment and mortgages.

“There is no slowdown in the segments that we are present in. We have a large share of retail loans and short term working capital loans in the corporate segment. The slowdown is in longer term loans like infrastructure loans and capex loans. There is still strong demand for credit outside the main metro cities,’’ said Mr Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank.

In the corporate segment the bulk of the loans are those that have up to one year maturity period.

However, in the December ended quarter, corporate loans grew at faster pace than consumer and commercial. The share of corporate loans to total loans increased from less than 30 per cent to 35 per cent, while the share of consumer loans was stable at 38 per cent.

As on end December, restructured assets declined to Rs 63 crore, from Rs 114 crore last year. This led to a decrease in provisions to Rs 31 crore (Rs 43 crore).

Net Interest Margin declined from the year-ago period, though it was flat when compared to the September quarter. This was due to increase in cost of funds on account of higher outgo on savings bank deposits. Following de-regulation of interest rates, SB deposits saw a growth of Rs 900 crore during the December quarter.

SB accounts grew to Rs 4,400 crore, against Rs 3,200 crore in the year-ago period.

Current accounts grew to Rs 6200 crore (Rs 4,600 crore).

“We have not found the need to grow Certificates of Deposit because of the growth in CASA,’’ said Mr Jamin Bhatt, President and Group Chief Financial Officer, Kotak Mahindra Bank.

Consolidated profit

On a consolidated basis the net profit was Rs 463 crore, up 21 per cent from Rs 384 crore last year.

Shares of the bank closed at Rs 477.45, down 3.28 per cent, on the BSE, on Monday.

Read more »

Govt to conduct interviews for 22 ED postions

The Government is expected to conduct interviews later this month to fill 22 executive director positions in public sector banks.

The vacancies are coming up over the next one year due to superannuation as well as creation of new ED positions in the banks. Large public sector banks are expected to have three EDs while smaller banks two from April 2012. Currently, large public sector banks have two EDs while smaller banks have one. As against 22 vacancies, about 40 candidates are eligible to appear for the interview to be conducted by the Finance Ministry.

New ED positions are being created by the Government to give focussed attention to the development of human resources and technology in the banks, said a banker. Large state-run banks such as Punjab National Bank, Canara Bank, Bank of Baroda, Bank of India, Central Bank of India and Union Bank of India will have three EDs while smaller banks such as Dena Bank, Bank of Maharashtra, Vijaya Bank, and United Bank of India will have two EDs.

kram@thehindu.co.in

Read more »

Bye-bye cheques, hello electronic payments

Electronic transactions are making rapid strides, with more and more of us abandoning cheques and cash in favour of Internet banking and cards.

Reserve Bank of India data for retail electronic payments show that in 2010-11, the total value of electronic transactions almost doubled that of the previous year. Again, between April and November 2011 the value transacted was 72 per cent more than in the same period the year before.

Electronic payments involve money transfers into other accounts as well as direct debits for payment of utility bills, insurance premia, and so on. They also include direct credits into your account for dividends, etc., and payments made through debit and credit cards each time these are swiped at stores.

Pushing for the internet

Banks have been trying to route routine transactions away from their branches, pushing for customers to take to Internet banking. The ATM too has graduated from a cash-dispensing machine to a mini-bank, where electronic payments can be made.

Among various electronic transactions, online transfers to other accounts through the National Electronic Funds Transfer (NEFT) have been doubling each year for the past four years. Considering the total value transacted, the growth rate has moved from 81 per cent in 2007-08 to 129 per cent in 2010-11. Between April and November this fiscal, the value transacted has increased 104 per cent over the same period last year.

However, direct debits from accounts — such as for telephone or electricity bills, premiums, and so on — have not shown a similar rapid growth. From a high 92 per cent growth in 2007-08, the growth in these transactions in terms of value slowed down to 6 per cent in 2010-11.

Debit card boom

The slowdown of 2008 dealt a severe blow to credit card transactions, from which a recovery has still not happened. As banks — and consumers — became wary of spending, the number of credit cards in circulation dropped 10 per cent in 2008-09.

In every year since then, the number of credit cards has been on a decline. Still, the people who do have credit cards have been spending more in the past year-and-a-half. The total amount spent through credit cards declined only in one year — 2010-11.

But debit cards haven't had as much of a hard time. Debit card growth has roundly trounced growth in credit cards over the past few years, recording over 40 per cent growth rates over the past four years.

But consumers still appear to be sticking to credit cards to make big-ticket purchases. Though the gap in the number of swipes is narrowing, the total amount spent through credit cards is still well above that in debit cards.

acharya@thehindu.co.in

Read more »

ICICI Lombard aims at Rs 5,000 cr premium collection

ICICI Lombard expects to cross the Rs 5,000-crore mark in premium collection this fiscal on the back of good growth in health and motor insurance segments, a top executive of the leading private general insurer said.

“We are hopeful of crossing Rs 5,000 crore in gross written premium collection (GWP) in the current fiscal and expect to clock a 20-25 per cent growth in overall business for the next three to four years,” Executive Director of ICICI Lombard, Mr Neelesh Garg said.

The company had a GWP of Rs 4,252 crore during the last financial year.

Mr Garg said the growth in premium collection was mainly on account of sound performance across all segments, especially health and motor insurance.

While health insurance constitutes more than 25 per cent of the total portfolio, motor segment is around 40 per cent of the company’s business.

Mr Garg said it is witnessing over 20 per cent expansion in the health segment and is likely to maintain the momentum.

The company has a loss ratio of less than 100 per cent in group medi-claim policy, which is one of the most loss making segments of the industry.

Mr Garg said, “There is no pressure as the market is too big in India and penetration is very less. So, there is scope for every player in the market place.”

He said the firm was witnessing a “sound growth rate” in the motor insurance segment as well.

Mr Garg added that insurance regulator IRDA’s decision to replace third party motor pool with declined pool system would help in profitability of the industry.

Read more »