SBI asks Kingfisher Airlines to reverse about Rs 100 crore paid to Vijay Mallya and UB Holdings

Kingfisher Airlines, the carrier waiting to be bailed out by banks, has been directed by the State Bank of India to reverse nearly Rs 100-crore guarantee commission it paid to promoter Vijay Mallya and UB Holdings as it is a regulatory violation, said three people familiar with the direction.

Lenders are seeking the reversal of transactions by the ailing airline as a pre-condition to consider the second round of bailout in as many years after it posted yet another quarter of losses.

"Mallya has agreed that they would not exercise the option," said a banker requesting anonymity. But it is not clear yet whether the past transactions are being reversed.

The carrier, which is facing liquidity crunch, entered into an agreement with Mallya and his holding company, UB Holdings, where the airline had paid Rs 49.48 crore and Rs 58 crore, respectively, against the guarantees they had provided for the Rs 7,000-crore loans from banks.

The airline, promoted by liquor baron Mallya, has been teetering on the brink of collapse for a few months amid cancelled flights and non-payment of salaries. Lenders are laying down strict conditions for the next round of funding as the airline failed to improve its performance even after loan restructuring.

Apart from pushing the banks to a disadvantage, it is also a regulatory violation when promoters get paid for what is essentially their business. "The system of obtaining guarantees should not be used by the directors and other managerial personnel as a source of income from the company,'' RBI has said.

"Banks should obtain an undertaking from the borrowing company as well as the guarantors that no consideration whether by way of commission, brokerage fees or any other form, would be paid by the former or received by the latter, directly or indirectly."

Amid this controversy, SBI Capital Markets, the mandated firm to restructure its loans, on Friday made a fresh case for Kingfisher Airlines on grounds that initiatives taken by the government makes it a viable proposition. SBI Caps has asked banks to provide Rs 800-1,000 crore of fresh loans for the airline's revival.

Kingfisher and lenders discussed various alternatives of funding the airline. Bankers said they needed time to give their response.

Source: EconomicTimes

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SBI not to extend fresh loans and investments in Maldives due to political turmoil

The State Bank of India has decided not to extend any fresh loans or make new investments in the Maldives until the political situation improves there. SBI's three branches enjoy a dominant position in the island nation, holding a quarter of its deposits and 42% loans.

"We will not take any fresh exposure till June this year," said a bank official.

Maldives plunged into a political turmoil last month after protesters, backed by police, toppled Mohamed Nasheed, Maldives' first democratically elected leader. An e-mail sent to the bank's international banking division drew no response.

According to the external affairs ministry, SBI has been playing a vital role in the economic development of the Maldives since 1974 by providing loans for island resorts, marine exports and businesses.

In 2009, SBI bailed out Maldives from a severe foreign exchange crisis when it subscribed to $100million dollar-denominated treasury bonds issued by the Maldivian Monetary Authority, an Indian government official said.

SBI's gross interest income from global operations rose from Rs 70,993.92 crore to Rs 81,394.36 crore in 2010-11, registering a growth of 14.65% in a year.

India Inc's exposure in Maldives is quite substantial. While hospitality major Taj Group runs two hotels, infrastructure company GMR is participating in developing the Male International Airport.

In August 2011, the Export-Import Bank of India ( Exim Bank) issued a line of credit (LoC) of $40 million to the Maldives government for financing purchase of eligible goods, services, machinery and equipment, and consultancy services from India for construction of 500 housing units in Maldives.

Source: EconomicTimes

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Vijaya Bank expects NIM at 3% in current fiscal

Vijaya Bank is likely to close the current fiscal with a net interest margin of 2.85-3 percent despite the prevailing difficult economic environment, a top bank official said.

“We hope to post a net interest margin (NIM) of 2.85-3 percent in the current financial year,” said Ms Subhalakshmi Panse, Executive Director, Vijaya Bank.

She said the bank is relying on garnering Casa deposits and to shedding bulk deposits to increase NIM in the current quarter. Referring to growth in bad assets in the third quarter, Ms Panse said those NPAs were on account of the high interest rate regime which had resulted in slippages in some large accounts.

“Our bank has shifted to system-based recognition of NPAs from last March. So, whatever slippages are being seen these days, are due to the present high interest rate environment,” she said, adding the bank has restructured some of the loan accounts, which has resulted in higher provisioning requirements in the last quarter.

Gross non-performing assets (NPAs) of the bank increased to 2.98 percent in the quarter ended December against 2.54 percent in the previous quarter.

The bank posted an 18.4 percent drop in its net profit to Rs 124 crore in the third quarter of the current financial year as against Rs 152 crore reported a year ago.

Net interest income of the bank dropped by 11.7 percent to Rs 474 crore as against Rs 537 crore reported in the same period last year.

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Indian Overseas Bank opens 11 new branches

Indian Overseas Bank has opened 11 new branches in Madurai region.

According to Mr K.M. Thirunavukkarasu, Chief Regional Manager, as part of celebration of Platinum Jubilee of the bank, seven new branches have been opened at Ellis Nagar in the city, Paravai in the outskirts of the city, Peraiyur, Silaiman, Perungudi, Usilampatti and Solavandan; four new branches opened in VIrudhunagar district at Narayanapuram, Malli, Sevalpatti and Mamsapuram. An ATM has also been opened at Karumattur, beyond M.K. University, he added.

He further said that Platinum Jubilee celebrations were held at the regional office, and four wall clocks were donated to Meenakhi Amman Temple and one wall clock to Tirupparankundram Temple.

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Canara Bank opens its first ultra-small branch in TN

Canara Bank opened its first ultra-small branch in the State and second in the country, at Oorseri Panchayat near Alanganallur, near here, recently.

Linked with Core Banking Solution through a virtual private network, the branch, staffed by a Business Correspondent, would be open on all seven days in the week. All account holders are to be issued with smart cards and deposits and disbursals with an upper limit of Rs 2,000 would be facilitated, besides linkage of loan applications to the parent branch. The first branch has been opened at Aralumallige in Karnataka.

According to Mr K. Lakshmipathikumar, Deputy General Manager, the concept has been introduced to cover villages with a population between 1,000 and 2,000, under the financial inclusion programme. An officer from the parent Alanganallur branch would visit the ultra branch once a week and monitor the functioning of the Business Correspondent.

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CMD-designate for Oriental Bank

Oriental Bank of Commerce today said that Mr S.L.Bansal has joined the bank as Chairman and Managing Director designate. He will take full charge of his new role with effect from March 1. Mr Bansal will come in the place of Mr Nagesh Pydah, who will retire on February 29.

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Bank of Maharashtra cuts base rate

In a bid to push credit in the run-up to the close of the financial year, Bank of Maharashtra has decided to pare its base rate by 10 basis points to 10.60 per cent with effect from February 21.

The public sector bank has also said it will offer housing loans up to Rs 30 lakh at the Base Rate for a repayment period of five years under the floating rate option.

Home loans above Rs 30 lakh and less than Rs 75 lakh, and Rs 75 lakh and above will be charged 11.10 per cent (Base Rate + 0.50 per cent) and 11.35 per cent (Base Rate + 0.75 per cent) interest respectively for repayment period of five years under floating rate option.

The bank has waived processing charges, which range from Rs 4,000 to Rs 12,500, for housing loans up to Rs 25 lakh.

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Indian banks eye assets of European counterparts

As European lenders seek to deleverage their books to meet new capital adequacy norms amid the euro zone sovereign debt crisis, Indian banks are eyeing a business opportunity — acquiring quality assets at attractive prices.

Chanda Kochhar, managing director and chief executive officer, ICICI Bank, said, “For the Indian banking sector, it is a business opportunity. Some European banks are actually shedding great quality Indian assets at very attractive prices. We will see many Indian banks coming forward to pick up these loans.” She was speaking at the India Leadership Forum organised by the National Association of Software and Services Companies.

Kochhar said the deleveraging would have a long-term impact on trade finance and the funding of mergers and acquisitions deals, as European banks have been large players in these businesses.

She was confident that the domestic economy and the banking system would remain resilient to external shocks. “I think we are going through a phase in which the mood is worse than the ground reality. What is still strong for us is the domestic consumption, the demography. We have very strong banks and a prudent regulatory environment,” she said.

On interest rates, she said she expected these to decline from the first half of next financial year, as inflation had appeared to ease. However, banks would first assess the liquidity conditions and the demand for loans before scaling down rates. “I think the coming financial year would be better because many things would actually start correcting. Inflation would start slowing. The only question would be when and at what rate,” she said.

“The lending rates will not change because of (a revision) in policy rates alone, but also on the basis of a pick-up in credit and deposits, and the general liquidity. We should watch the total impact of the CRR (cash reserve ratio) cut, the credit growth and the lending rates. I believe in the coming financial year, at least in the first half, lending rates will go down.”

She, however, dismissed concern on the asset quality of Indian banks in the current uncertain macro-economic environment, saying retail advance portfolios of lenders continued to be stable and that there were only a few instances of corporate loans turning bad. “That does not mean the entire corporate sector is facing a challenge. The worries around asset quality are specific around certain companies, and it (the concern) is probably more exaggerated than the real issue,” she said.

Source: Business Standard

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IndusInd Bank to pick up 3-5% stake in Aviva Life

Private sector lender IndusInd Bank is set to pick up three-five per cent stake in private sector life insurer Aviva Life Insurance. According to sources privy to the development, as part of the deal, apart from offering shares, Aviva Life would also pay an advance commission, taking the total valuation of the deal to around Rs 1,000 crore.

“The final modalities are being worked out. IndusInd Bank would have a board meeting later this week, after which the deal would be announced,” a source said.

The private sector lender is already a corporate agent for Aviva Life, a joint venture between fast-moving consumer goods major Dabur Group and UK’s Aviva, with the latter holding 26 per cent stake.

Earlier this year, Axis Bank had picked up a stake of four per cent in Max New York Life, in a deal valued at around Rs 75 crore. According to recent reports, Syndicate Bank is expected to pick up six per cent stake in Birla Sun Life Insurance Company. As a part of the deal, Birla Sun Life has offered to pay Rs 600 crore as advance commission to the public sector lender.

The Dabur Group has been looking to dilute a part of its holding in Aviva Life Insurance. The insurer was also among the three companies short-listed by Punjab National Bank for its insurance joint venture. However, in July, the Delhi-based bank entered into an agreement with Metlife to buy 30 per cent stake in Metlife India.

Aviva Life was also in talks with public sector lender Syndicate Bank, which had floated a request for proposal for a joint venture in the life insurance segment in April.

Aviva Life started its operations in 2002 and promoters of the company had infused Rs 2,004 crore till March 2011. The company had declared a profit of Rs 29 crore in 2010-11. During the April-December period of the current financial year, Aviva Life collected premiums worth Rs 466.14 crore through new policies, a marginal fall compared with Rs 469.30 crore collected in the corresponding period a year ago.

Under the bancassurance model, banks offer their branch networks as low-cost distribution channels to insurance companies. Last month, the Insurance Regulatory and Development Authority (Irda) brought out draft guidelines on bancassurance. These advocated opening up of the bancassurance channel and accordingly, Irda had divided the country into three zones

Source: Business Standard

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YES Bank plans to expand branches in south to 150

YES Bank, which claims to be the country's fourth largest in the private sector, plans to grow its branch network to between 120 and 150 in the South by year 2015.

This is a sub-target set by the Version 2.0 growth mode that the bank has embarked on since year 2010, says Mr R. Ravichander, bank's Group President and Head Business Development - South.

VERTICAL CLIMB

The bank has been pushing retail business this year as part of Version 2.0. Rather than seek to negotiate a ‘gradient' in terms of achieving incremental targets, it has been bracing itself for a ‘vertical climb' and accomplished till date.

Mr Ravichander said this while speaking to newspersons on the occasion of the launch of the Thiruvananthapuram branch, second in the State after Kochi that opened three years ago.

Version 2.0 is valid for a period of five years from 2010 to 2015, and has mainly set three targets for the bank — growing balance sheet to a size of Rs 1.5 lakh crore (Rs 72,000 crore currently); expanding branch network to 750 (340); and number of employees to 12,000 (5,200).

SAVINGS BANK RATE

It also aims to grow its CASA (current accounts and savings account) from the 17-20 per cent range to 30 per cent by 2015. The bank was the first off the block to raise the savings bank rate to 6 per cent within an hour's time of the deregulation announced by the Reserve Bank.

It has since raised the rate to 7 per cent, and is a market leader. Also, a Yes Bank ATM cardholder is allowed unlimited access to his account, free of cost. The bank has also plans to enter the credit card business, Mr Ravichander said, without elaborating any further.

Uniquely positioned as a ‘knowledge bank' from launch, it has sought to promote what are considered growth/sunrise sectors of food and agri-business, life sciences, energy, infrastructure, media, entertainment and sustainable development.

KNOWLEDGE PARTNER

It has also acted in consort with various institutions and industry bodies such as CII, Ficci, Assocham in its status as knowledge partner and brought out many research papers.

It has looked to induct people from sectors that are critical to the economy to enable the bank to ‘speak the same language' as and when it transacted business with these very sectors.

This was a conscious decision on the part of the bank since it knew that turnaround times were getting shorter in a growingly competitive field.

The young age of the bank is also reflected in its average age of the employees, which is 28. It has also been among the highest recruiters from the B-schools. Last year saw 171 B-school graduates being placed with the bank.

Mr Ravichander said three more branches would be opened in Kerala by March-end.

These are at Changanassery, Malappuram and Kannur. The Version 2.0 mode envisions a branch network of not less than 15 in the State by year 2015, he said.

The State has a lot of business potential from the bank's point of view, with the remittance economy, the food and agriculture and SME/MSME sectors suggesting themselves as immediate choices for business.

The bank already has an impressive list of client list in the State. It is also looking to engage the State Government proactively and has developed tailor-made solutions to serve this sector. 

vinson@thehindu.co.in

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Reliance Life launches Classic Plan II

Reliance Life Insurance Company (RLIC), part of ADAG’s Reliance Capital Ltd, on Thursday launched a new unit-linked plan, called Classic Plan II, that offers customers dual benefits of insurance protection and market-linked return.

Announcing the launch here, Mr Malay Ghosh, President and Executive Director, Reliance Life, told reporters that this was the first time that the company is introducing a new life cover option in its unit-linked investment plan portfolio that offers the customer life cover benefit equal to the sum assured or the fund value, whichever is higher.

The existing ULIP plans in RLIC’s portfolio offer life cover benefit equal to the sum assured plus fund value.

The plan offers regular as well as single premium options. The premium for the regular option starts at Rs 15,000 and for the single premium at Rs 50,000. The policy terms under the plan will be 15 to 30 years.

Reliance Life has Rs 17,855 crore worth of assets under management. Seventy per cent of its premium comes from the traditional policies and 30 per cent from ULIPs.

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White label ATMs may not hit banks' rollout plans too much

Banks do not plan to ease up on their ATM expansion drive despite the Reserve Bank of India's plans to allow non-banks to set up white label ATMs (WLAs), say bankers.

ATMs are an important part of banks' alternative channel strategy to reach customers, to showcase their products and services, and create brand awareness. This is reflected in the increase in the number of ATMs in the April 2011-January 2012 period, during which banks added 14,477 ATMs. At end January 2012, the country had 89,655 ATMs, according to the National Payments Corporation of India.

Banks will deploy their own ATMs because it helps to retain customer loyalty. If WLAs becomes a reality, they may tweak their strategy by focussing on putting their own ATMs in areas where they have a high customer density.

A white label ATM may work in an area where real estate/ rental charges are very high or in smaller centres where banks may not want to set up their own ATMs.

While welcoming the RBI's move to allow WLAs to ensure penetration of the ATM network in the country, bankers caution about the pitfalls — customers could be inconvenienced in case of failed transactions on WLAs as the dispute resolution mechanism will involve three entities — the WLA operator, the sponsor bank of the operator, and the customer's bank.

Currently, in the case of failed ATM transactions, the customer has recourse to his bank, though he may have transacted at another bank's ATM. Another issue that non-banks setting up ATMs could face is whether a customer would be ready to pay charges for transacting on WLAs.

Service providers gung-ho

The development of ATM services in any market goes through certain phases. Banks use ATMs first for product differentiation and branding and, in the next phase, for customer acquisition and retention, explained Mr Loney Antony, Managing Director, Prizm Payment Services.

“It was imperative that the RBI permit white label ATMs. It was only a matter of time. The main concern for the RBI was the regulatory framework, but with several banks outsourcing ATM management, white label ATMs are a natural extension,” said Mr Antony.

Except in the US, in all markets that allow white label ATMs, the share of such ATMs is no more than 25 per cent of the entire ATM network. They are always complementary to bank ATMs.

According to Mr Rajiv Kaul, Executive Vice-Chairman and CEO of CMS Info Systems, white label ATMs will bring more efficiency and help keep ATM set-up costs down. However, certain issues need to be ironed out, such as the guidelines related to sponsor banks.

In the last two years India has seen lot of ‘brown label' ATMs, or outsourcing of ATM services by banks. Hence, market players are awaiting the final guidelines to see how the WLAs will be different.

Today there are managed-services outsourcing companies that perform such functions as switching, cash management and technical management for banks.

About 50-60 per cent of the ATMs in India are already outsourced in some way or the other.

priyan@thehindu.co.in

kram@thehindu.co.in

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LIC may take up to 5% stake in Punjab & Sind Bank

The Government-owned Punjab and Sind Bank has decided to go for a preferential issue of shares to another state-run firm, Life Insurance Corporation of India (LIC).

Money realised through this issue will help the bank to strengthen Capital to Risk-weighted Assets Ratio (CRAR).

With the government being in a tight spot on the fiscal front, India's largest life insurance company is coming to the rescue of public sector banks to pump in funds to boost their Tier-I (core) capital.

After the government, LIC is the single biggest shareholder in majority of the public sector banks.

In the October- December 2011 period, India's largest life insurance company substantially upped stakes in State Bank of India, Punjab National Bank, Bank of Baroda and HDFC Bank.

Punjab & Sind Bank's share reacted positively to this news, closing with an increase of over 4 per cent to Rs 85.75. The bank, in a statement, said: “The Board of Directors of Punjab & Sind Bank has recommended preferential issue of equity shares to the LIC up to the extent of 5 per cent of the proposed total paid-up equity share capital of the Bank.”

A total of 1,12,91000 shares will be issued. Price will be decided later according to the SEBI's regulations.

The bank's CRAR came down to 12.99 per cent on December 31, 2011 from 14.13 per cent on December 31, 2010.

This ratio is an indicator of strength for lending money. The bank's credit surged to Rs 42,604 crore as on December 31 from Rs 37,806 crore a year ago showing a growth of Rs 12.69 per cent.

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Bank of Baroda to hire 600 probationary officers

Bank of Baroda is recruiting probationary officers (in the junior management grade/Scale I) to fill up about 600 vacancies across the country.

The bank has specified that candidates with a total weighted standard score of 125 in the common written examination conducted by Institute of Banking Personnel Selection (IBPS) and fulfill other criteria will be eligible to apply. The bank will specify these criteria and other details on its Web site after February 21.

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SBI sets sights on absorbing State Bank of Mysore

After taking over two associate banks — State Bank of Saurashtra in 2008 and State Bank of Indore in 2010 — State Bank of India has set its sights on assimilating the nearly century old State Bank of Mysore (SBM) this year.

As part of its consolidation strategy, India's largest bank wants to first merge the smaller associate banks before attempting to take over relatively bigger associates such as State Bank of Hyderabad (SBH) and State Bank of Travancore (SBT).

Branch network

“We will take over smaller associate banks first as it is easier to integrate them. We have gained valuable experience through the acquisition and integration of State Bank of Saurashtra and State Bank of Indore,” said a senior bank official.

However, in the case of bigger associate banks, the official observed that the issue is that their branch network in their home State is as big as SBI's branch network in that State. So, the integration will take longer as a branch rationalisation exercise will have to be undertaken.

In the case of SBM, which is listed on the bourses, a swap ratio (whereby SBI will offer its own shares in exchange for SBM's shares to conclude the acquisition) will have to be arrived at for the minority shareholders.

While SBI holds 92.33 per cent stake in SBM, minority shareholders hold the balance stake. The Mysore-headquartered associate bank has over 700 branches.

Share of profit

The five associate banks' share in the consolidated net profit of SBI was higher (33 per cent) in FY 2011, against 25 per cent in FY 2010.

SBI had reported a lower consolidated net profit at Rs 10,865 crore in FY2011, against Rs 11,734 crore in FY2010.

Among the five banks, SBH net profit was the highest at Rs 1,166 crore; followed by SBT (Rs 728 crore), State Bank of Patiala (Rs 653 crore), State Bank of Bikaner & Jaipur (Rs 551 crore), and SBM (Rs 501 crore).

As on March-end 2011, the State Bank group had a network of 18,266 branches including 4,724 branches of its five associate banks.

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Standard Chartered Bank to pay Rs 55K to customer as damages

Standard Chartered Bank has been ordered by a consumer forum to pay Rs 55,000 as damages to a customer for harassing him by raising a demand of over Rs 90,000 for payment against credit card dues and putting his name on the defaulters' list even though he had returned the card.

The District Consumer Forum (Central) gave the order on a complaint of North West Delhi resident Ajit Kumar that the bank had sent a bill demanding over Rs 90,000 and put his name in the defaulters' list in 2008 even though he had returned the credit card, unused, in 1999.

The three-member panel of the forum, headed by President B. B. Chaudhary, observed the demand made by the bank was “unfounded” and by not removing Kumar's name from the list of defaulters, it had caused “deficiency in service“.

“The demand of the bank for use of the credit card is unfounded. By keeping the name of the complainant in the list of defaulters, the bank has caused further deficiency in service,” said the forum.

“No-due' certificate

The forum ordered the bank not to call the complainant for any payment relating to the credit card and to remove his name from the defaulters list and also issue him a ‘no due certificate'

The forum also agreed with Kumar's contention that he had returned the card in February 1999, without using it for any cash transactions.

“We believe the case of the complainant that the credit card was returned to the bank in February 1999 and that the complainant had not used the credit card for any transaction,” the forum said.

It directed the bank to “to pay Rs 50,000 as compensation for causing harassment, pain and mental agony” and Rs 5,000 as litigation charges to Kumar.

Kumar contended that on receiving the bill of Rs 22,600.47 in March 1999, he had informed the bank about the misuse of the card and that the amount was withdrawn illegally, and also sent a legal notice to the bank in April 1999.

Two legal notices

He further argued that later in 2008 the bank sent him a bill for Rs 93,789.84 and put his name on the defaulters list, against which he again sent a legal notice in May 2008. Despite the two legal notices, the bank took no action to remove his name from the defaulters' list, he added.

Standard Chartered Bank, on the other hand, contended that the complaint filed in the month of December 2008, was barred by time.

The forum, however, rejected this contention saying that the complaint is not barred by limitation since the bank raised the demand for payment due in December 2008.

The forum also refused to accept bank's contention that Kumar had not returned the credit card, saying that the bank had received all the letters sent by Kumar, informing about his return of the card and the misuse of the same.

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United India Insurance Q3 profit up 24%

United India Insurance Company has reduced the claims ratio to 81.45 per cent for the nine-month period ended December 31, 2011, which resulted in the combined ratio (a measure of the profitability of insurance operations), dropping to 114.69 per cent from 127.64 per cent during the corresponding period of the previous year.

The investment income of the company for the period stands at over Rs 1,106 crore. The market value of the company's total investment portfolio at the end of the third quarter was at Rs 15,603 crore.

Business growth

The net worth of the company stood at a robust Rs 4,660 crore as at December 31, 2011.

For the period under consideration, its business grew at 27 per cent to Rs 5,872 crore, with an accretion of Rs 1,239 crore over the same period last year. It reported a net profit of Rs 414,41 crore, a growth 24 per cent over Rs 333.25 crore posted during the corresponding previous year period.

A press release from the company says that it will continue its thrust on the retail, MSME (micro, small and medium enterprises) and rural sectors.

During the third quarter of the current financial year, it secured the mandate to implement the Tamil Nadu Chief Minister's comprehensive health insurance scheme for 1.34 crore BPL families in the State.

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RBI hikes bank rate to 9.5%

After a gap of nearly nine years, the Reserve Bank of India has increased the bank rate by 3.5 percentage points to 9.5 per cent with immediate effect.

“This (the increase) should be viewed and understood as one-time technical adjustment to align the bank rate with the marginal standing facility (MSF) rate rather than a change in the monetary policy stance,” RBI said in a notification, adding the new rate will be with effect from February 13.

The bank rate has lost its significance as a monetary policy tool as the central bank signals stance through changes in repo, the rate at which banks borrow short-term funds from RBI.

Penal rate

The bank rate, which is the standard rate at which the RBI buys or re-discount bills of exchange or other commercial paper, is now used as a penal rate which the banks have to pay for their failure to meet the mandatory cash reserve ratio (CRR) and statutory liquidity ratio (SLR).

The bank rate, which has been increased by 350 basis points or 9.50 per cent was kept unchanged since April 2003.

According to RBI, it should technically be higher than the repo rate, which is the policy rate. The repo rate currently stands at 8.5 per cent, while the reverse repo rate is 7.5 per cent.

Liquidity Adjustment Facility

It was kept unchanged, “mainly for the reason that monetary policy signalling was done through modulations in the reverse repo rate and the repo rate under the Liquidity Adjustment Facility (till May 3, 2011) and the policy repo rate under the revised operating procedure of monetary policy (from May 3, 2011 onwards)”, the RBI said.

Marginal Standing Facility

Moreover, it added: “Under the revised operating procedure, MSF, instituted at 100 basis points above the policy repo rate, has been in operation, which in many ways serves the purpose of the bank rate.”

While the policy repo rate and the MSF rate have become operational, the bank rate continued to remain at 6 per cent. The bank rate is also used by several other organisations as a reference rate for indexation purposes.

The RBI said that it has consulted various stakeholders relying on the bank rate as a reference rate before arriving at the decision to revise it.

“Based on the feedback received, it is determined that the bank rate should normally stay aligned to the MSF rate,” it said.

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Axis Bank reappoints Shikha Sharma as Managing Director

Axis Bank has reappointed Shikha Sharma as Managing Director for a further period of 3 years.

The board has approved the reappointment of Shikha Sharma as Managing Director and Chief Executive Officer of the bank for a further period of three years with effect from June 01, 2012 to May 31, 2015, Axis Bank said in a filing on the Bombay Stock Exchange (BSE).

The reappointment will be subject to approval of the Reserve Bank of India and subject to confirmation by the shareholders of the bank at the next general meeting, it said.

The bank had appointed Shikha Sharma as its Managing Director in 2009.

Source: Business Standard

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SBI launches special package for railway employees

State Bank of India has launched a special salary package for the Railway employees.

According to Mr B. Venugopal Reddy, Deputy General Manager, Administrative Unit, SBI, Hubli, the package consists of special privileges to employees of railways drawing their salary from State Bank of India.

Special previleges

The privileges include reduced interest rates on home loans, car loans and personal loans. The concessions are available in the locker rentals.

He further stated that zero balance saving bank accounts are opened for all the persons.

Free drafts are issued according to the entitlements of railway employees. Besides, discounts are available up to one per cent on gold coin purchases.

“These are only a few benefits and there are several other benefits also being extended by SBI to the railway employees,” Mr Reddy added.

Special package

The special package was announced by State Bank of India at the Hubli Main Branch, adjacent to DRM's Office, Keshwapur, Hubli.

Speaking on the occasion, Mr A.K. Brahmo, Chief Personnel Officer, South Western Railway, said the Indian Railways and State Bank of India are having the largest employers in India. The Indian Railways is the fourth largest Railway in the world, whereas State Bank of India has branches all over India and abroad.

He said 46 per cent of railway employees are drawing their salaries from State Bank of India and the remaining 54 per cent employees salaries are being shared by other Banks.

Mr Brahmo stated that 7,000 more staff with be joined with South Western Railway within 2-3 years, thereby, the volume of salary package for railway employees would be enhanced.

He complimented the State Bank of India officials for taking such positive initiative in this direction.

anil.u@thehindu.co.in

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SBI’s asset quality worrying as bad loans double in Q3

State Bank of India reported a net profit of Rs 3,263 crore for the quarter ended December 2011, up 15 per cent from Rs 2,828 crore in the corresponding year-ago quarter. The increase in profit was on account of a robust rise in net interest income, which touched an all-time high and improvement in net interest margins.

Profits grew despite an increase of over Rs 1,300 crore in loan loss provision and an over Rs 800-crore depreciation in investment on account of losses in the equity portfolio, said Mr Pratip Chaudhuri, Chairman, SBI.

“The bank is back on a consistent growth path,” he said.

The bank increased loan loss provisions by 84 per cent to Rs 3,006 crore (Rs 1,632 crore).

However, asset quality for the country's biggest bank still remains a concern, with gross non-performing assets touching Rs 40,098 crore as on end December, from Rs 23,438 crore in the ‘year-ago' period.

Fresh slippages to NPAs in the third quarter were to the tune of Rs 8,161 crore.

‘Worst is over'

“We think the worst is over with regard to NPAs. NPAs have plateaued. The biggest hit was from one aviation company, which accounted for about Rs 1,200 crore of the NPAs. But we could expect some improvement in the sector following the proposal to allow FDI and direct import of fuel,” Mr Chaudhuri said.

The highest share in NPAs was from the agriculture sector, which contributed 9.45 per cent. SME's share was 7.9 per cent, mid-corporate was 5.54 per cent and large corporate was at 1.1 per cent. However, strong growth in margins will make it easy to absorb the NPAs, Mr Chaudhuri said.

NIM for December was 3.82 per cent, higher than the guidance of 3.65 per cent. Shedding high-cost deposits and eliminating the dependence on Certificates of Deposits, which come at a high cost, helped the bank improve its NIM.

Credit growth

The demand for credit is muted, said Mr Chaudhuri, although there is very high demand for dollar credit. This year the bank hopes to meet its guidance of 16 per cent growth in credit. The bank may cut interest rates in some loan segments, such as educational loans, but not the Base Rate, Mr Chaudhuri said.

On a consolidated basis, net profit increased to Rs 4,318 crore (Rs 3,710 crore), a growth of 16 per cent.

For the April-December nine-month period, net profit was down to Rs 7,657 crore (Rs 8,244 crore), because the first quarter of the fiscal was a tough one, Mr Chaudhuri said.

Shares of SBI closed at Rs 2,129 crore — down 2 per cent from its previous close on the BSE.

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Manappuram Fin ‘will ensure' compliance with RBI norms

Manappuram Finance will take immediate steps to completely ring-fence its operations and ensure there is no overlapping of business, assets, branches or personnel with other entities owned by the promoters or their family members. The Board of Directors of the company met at Thrissur to review the operations and performance in the context of the recent communication received from the RBI. The Board also directed the company to take all measures to fully address the concerns raised by the central bank.

To enhance governance and better manage growth to the next level, the Board also decided to constitute an independent committee under the chairmanship of Mr Jagdish Capoor (former Deputy Governor of RBI and former Chairman of HDFC Bank). This committee will review relevant aspects of operations, systems, controls and organisational structure, including Board composition and effectiveness.

Review exercise

The committee was free to appoint leading independent legal counsel and other advisors as was deemed appropriate to assist with the review. Further, the company proposed to retain a leading accounting firm to supplement the in-house internal audit team. A leading law firm, Amarchand Mangaldas, and the internationally reputed accounting firm, KPMG, will assist the committee in this independent review exercise.

At the outset, the Board noted that the company has not accepted any deposits from the public since March 22, 2011, in compliance with its status as a non-deposit-accepting non-banking finance company.

Mr V.P. Nandakumar, Executive Chairman, Manappuram Finance, assured the Board members of his fullest support and cooperation. He pointed out that he had issued public notices in newspapers undertaking to honour all obligations to the depositors of his proprietary concern Manappuram Agro Farms, without causing any inconvenience to them. The Manappuram Finance scrip closed lower at Rs 46, a fall of 2.44 per cent over the previous close.

cj@thehindu.co.in

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Strong case for higher govt stake: SBI Chairman

The State Bank of India Chairman, Mr Pratip Chaudhuri, on Monday said there is a strong case for the government to infuse capital in his bank.

The reason: the 18.12 per cent post-tax return that the capital investment will fetch will be far in excess of the cost of the government's borrowing.

“The cost of government borrowing is in the 8-9.5 per cent range. But infusing capital in SBI will give the government a post-tax return of 18.12 per cent,” explained the SBI chief, at a press meet.

The expected capital infusion of Rs 7,900 crore, coupled with a plough-back of profit (the bank has estimated full year profit in the Rs 10,000-11,000 crore range), will see Tier-I capital adequacy (core capital) cross the 9 per cent level by March-end 2011, against the current level of 7.59 per cent, said Mr Chaudhuri.

Will seek re-rating

The capital infusion will see the government's stake in the bank go up to 62 per cent from 59.40 per cent as of December-end 2011.

The bank could leverage the higher government shareholding to raise further capital, either through a follow-on public offer or the qualified institutional placement in the next financial year.

Based on the expected higher capital adequacy ratio, India's largest bank will seek a re-rating from global ratings firm Moody's.

In October 2011, global ratings firm Moody's had downgraded SBI's financial strength rating by a notch to ‘D+' on account of the bank's low Tier-I capital ratio and deteriorating asset quality.

SBI Global Factors

SBI Global Factors Ltd, a subsidiary of State Bank of India, may either be sold to strategic investors or merged with the parent bank, according to Mr Pratip Chaudhuri, Chairman, SBI.

SBI holds 85.39 per cent stake in SBI Global Factor Ltd. The remaining 14.61 per cent stake is held by SIDBI, Bank of Maharashtra and Union Bank of India.

With the Lok Sabha passing the Regulation of Factors (Assignment of Receivables) Bill 2011, the State Bank of India chief observed that the bank may be in a better position to undertake the factoring business in-house.

In the nine months ended December-2011, SBIGFL reported a net loss of Rs 80 crore. However, it turned in a profit of Rs 20 crore in the October-December 2011 period.

The non-banking finance company has a total business of Rs 2,500 crore, said Mr Shyamal Acharya, Deputy Managing Director, SBI.

Capital adequacy

Mr Acharya explained that NBFCs are required to maintain a higher capital adequacy ratio of 15 per cent.

Further, since the NBFC is not a wholly-owned subsidiary, taxation rules do not permit setting off losses against the profit of the bank.

SBIGFL provides factoring (a financial transaction entailing sale of accounts receivable by a business enterprise to a factor — SBI Global Factors Ltd— at a discount) and forfeiting (a financial transaction entailing purchase of accounts receivable from exporters by a forfeiter — SBIGFL).

State Bank of India may raise benchmark size ($1 billion) resources under its medium-term programme only if the cost of borrowing softens to LIBOR plus 225 basis points.

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