RBI to monitor banks' global books; SBI, ICICI, BoB among banks to face scrutiny

The Reserve Bank of India will send its officials to thoroughly inspect the fast growing overseas operations of Indian banks as they do for the local business to ensure that events outside the nation do not rock the domestic business.

State Bank of India, ICICI Bank and Bank of Baroda are among the prominent banks that will face the RBI inspection as some banks have as high as a fifth of their total assets beyond the shores, said two people who are familiar with the central bank briefing. This will be effective next fiscal.

"RBI conveyed the message that banks should be prepared for an RBI inspection henceforth for foreign offices,'' said an executive who attended the meeting but declined to be named. "The point made by the regulator was that as the size of overseas operations is rising, it needs to be directly monitored by the central bank officials."

Indian banks in the past few years have expanded their global operations substantially, chasing the diaspora and companies that acquired overseas assets such as Tata Steel's acquisition of Corus Group.

While nothing so far has come up in terms of weakening the domestic operations of banks, development such as the European sovereign crisis could lead to stress if their overseas subsidiaries own bonds of troubled sovereigns.

Till now the RBI depended on banks' own declaration of the status of overseas operations. Revenues from overseas operations contribute about 5% of revenues for State Bank of India, and about 12% for Bank of Baroda, Bloomberg data shows.

For ICICI Bank, the share of overseas assets to its total is at 22%. The inspection exercise is a review of whether a bank is following all the norms laid down by the regulator in letter and spirit. It also points out to areas where the bank has faltered and issues the 'action point' that can be taken up by the bank to rectify the mistakes.

When RBI begins this exercise, it will be following the footsteps of some overseas regulators such as Hong Kong Monetary Authority and UK's Financial Services Authority which visit Indian offices of banks based in their home country. RBI's efforts will also ensure that Indian banks elsewhere follow local rules to prevent any embarrassment of slips in compliance.

Source: EconomicTimes

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IDBI Bank collects Rs 1 lakh cr of central tax

Public sector lender IDBI Bank today said it had collected Rs 1 lakh crore of central tax through its network in the current fiscal.

"IDBI Bank has achieved the landmark of Rs 1 lakh crore in respect of collection of central taxes during 2011-12. The Bank's present collection of direct taxes has been over 16% of the government's revised target," it said in a release.

The Centre, which had initially estimated direct tax collections at Rs 5.33 lakh crore, later revised to Rs 5.8 lakh crore for the current financial year.

The public sector lender also said it had gone live on January 16, 2012 in providing online duty payment services in respect of customs duty across the country.

"With this development, taxpayers are now in a position to route all of their central taxes and duties payments through IDBI Bank, making the bank an important agent in their pursuit of partnering the government in pushing online payments and enhancing the tax contribution," the bank said.

Source: Business Standard

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Manappuram to trim loan offer against gold

Manappuram Finance today said it will reduce the loan amount to 60 per cent of the gold value, at par with the Reserve Bank directions.

Currently, the average Loan-to-Value (LTV) offered by Manappuram Finance on its gold loan is at 66 per cent.

RBI earlier this week had directed all non-banking finance companies (NBFCs) not to sanction loan beyond 60 per cent of the value of gold jewellery.

"We are of the opinion that the new RBI measures will ultimately strengthen the well-capitalised established players in the business with sound operating and risk management practices," the Executive Chairman of Manappuram Finance, V P Nandakumar, said in a statement.

The central bank had also directed that NBFCs whose financial assets consist of loans against gold jewellery to the tune of 50 per cent or more, will have to maintain 12 per cent tier-I capital by April 1, 2014.

"The capital adequacy ratio of Manappuram Finance is already at 18.37 per cent (as on Dec 31, 2011) as against the 12 per cent to be attained by April 2014 stipulated by RBI," Nandakumar said.

Source: Financial Express

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Bank of Baroda to hire 2,000 clerks

Bank of Baroda will be filling up 2,000 clerical vacancies soon. As per the notification released on Wednesday, candidates who wrote the common written examination for clerical positions conducted by the Institute for Banking Personnel Selection in 2011 and qualified are eligible to apply.

Since clerical recruitment will be on a State or Union Territory basis, candidates will have to apply for vacancies in a State/Union Territory from which they had taken the common written exam.

They must possess proficiency in the official language of the State/Union Territory.

Besides, they should be able to read, write and speak English. Computer literacy with knowledge of MS-Office basic applications is also needed.

Complete details on eligibility criteria and other aspects will be available on the bank's Web site from March 23 onwards.

The last date for online submission of applications is April 10.

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Cheques, drafts validity only for 3 months from April

Come April 1 and cheques and bank drafts will be valid only for 3 months, a development that RBI thinks will help mitigate frauds related to such instruments.

The Reserve Bank of India (RBI) has directed that with effect from April 1, 2012, banks should not make payments against cheques, drafts, pay orders or banker’s cheques if they are presented after the period of three months from date of issue.

It has been brought to its notice by the government that some persons were taking undue advantage of the six month validity of cheques, drafts, pay orders, banker’s cheques by circulating them like cash for this period, RBI had said in a notification earlier.

According to a senior banker, the three-month validity period is a good enough time period for instrument conciliation.

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

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SKS Micro securitises loans worth Rs 321 cr

SKS Microfinance Ltd on Friday securitised its portfolio worth Rs 321 crore.

This included two rated pool assignment transactions worth Rs 221 core and two assignment transactions worth Rs 100 crore from two public sector banks.

These four transactions were closed at an annual interest rate of 12 per cent, priced 150 basis points lower than the previous two transactions.

"Fund flow has been gaining momentum in recent months with overall environment turning positive for the microfinance sector,'' Mr S. Dilli Raj, Chief Financial Officer, SKS Microfinance Ltd, said in a release.

With this, the Hyderabad-based company completed six transactions worth Rs 918 crore since January.

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Q3 performance: Bank of Baroda leads large banks

Nationalised banks form an important category in the banking space of India as they account for almost half of the total assets of the banking system.

Recently, the banks declared their third quarter (Q3) results. What do the results suggest about the performance of individual banks?

Quarterly performance can be studied across different performance indicators and different time dimensions. We have considered performance across five dimensions capturing business growth, asset quality, efficiency, pricing power and, above all, profitability.

While business growth captures the composite deposit and advances portfolio of the bank, the rest four dimensions are captured through gross NPA (non-performing asset) as a percentage of gross assets, cost-to-income ratio, net interest margin (NIM) and return on assets (RoA) respectively.

Also considered are the three possible time dimensions associated with quarterly data, namely, year-on-year (y-o-y) sequential, and year-to-date (y-t-d).

Depending on the evolution of performance in the successive quarters, the performance across the three dimensions may convey a different picture for different banks on various parameters.

Base effect

Hence, one way to judge performance on the growth dimension will be to rank the different banks giving equal weight to performance across all the three time dimensions. The ranking obtained from this method is labelled as ranking on the basis of ‘growth'.

However, growth by definition depends on the starting point or the base. For instance, a bank which to begin with had very low operating efficiency has much larger scope to improve than a bank which had relatively much higher operating efficiency.

Ignoring the base effect may lead to erroneous assessment of a bank's relative performance. Thus, a realistic assessment of performance must take the base effect into account.

Thus, a further refinement of the rankings can be made by not only considering the ranking based on ‘growth' but also the rankings based on ‘levels' of different performance indicators. We can compute an overall rank of a bank which is the average of rankings based on ‘growth' and rankings based on the ‘levels'.

This refined way of ranking can be labelled as rankings based on ‘growth and level'. It would be worthwhile to point out that the method of ranking suggested here is more holistic in approach as it not only considers growth performance across the three time dimensions but also the level effect.

We have reported ranking of banks on the basis of ‘growth' and ‘growth and level' to bring out the differences. Further, to make the rankings comparable across banks, we have performed the calculations for ranking separately for the large and small nationalised banks.

We have reported rankings taking into account the growth performance as well as ‘growth and level'. For elucidation, let's consider the ranking based on ‘growth' and ‘growth and level' for PNB in the large bank category.

If we consider ranking based on ‘growth' across the three time dimensions, PNB ranks second on the performance indicators business and NIM, third on RoA and cost-to-income, and fifth on the GNPA indicator. Like PNB, all the other five banks in the large category are ranked across the five performance indicators.

The ranking of the average of the ranks across the five indicators, lends PNB the third overall rank in the large bank category on the basis of ‘growth'.

However, if we rank the performance as on March 2011 on each of the indicators and include it along with the performance across the three time dimensions of the indicator concerned to derive the ranks, we get the ranking on the basis of ‘growth and level'.

Considering both the ‘growth and level', we find PNB ranks second on the business front, fourth on RoA, first on NIM and cost-to-income and third on the NPA front. The ranking of the average of the ranks across the five dimensions on ‘growth and level' leads to second overall rank for PNB on the basis of ‘growth and level'

What the ranks suggest

First, Bank of Baroda in the large banks category and Allahabad Bank within the small bank category turn out to be the best both on the basis of ‘growth' as well as combined ‘growth and level'.

Second, Central Bank of India in the large bank category and Punjab and Sind Bank in the small bank category occupy the bottom rank on both ‘growth' and ‘growth and level'.

Third, excluding the top and bottom ranked banks in each category, the ranks differ when seen on the ‘growth' dimension alone and when both ‘growth and level' dimensions are considered.

For instance, within the large banks, Bank of India occupies the second rank on the ‘growth' dimension but fourth rank when both ‘growth and level' effects are considered.

Similarly, United Bank of India in the small category gets the second rank on ‘growth' dimension but eighth when both ‘growth and level' effects are considered.

Stock market returns

Having ranked the banks in each category on the basis of growth and combined ‘growth and level', the next question arises whether banks that have performed better has also been rewarded relatively higher by the stock market?

This is gauged by examining the correlation of these banks' rankings on the basis of stock market returns between Decembers 2011 and December 2010 with their ranks on the basis of ‘growth' and ‘growth and level'. We find that the rank order correlation between ranking of stock market performance and ranking on the basis of ‘growth' and ranking after considering both ‘growth and level' is the same and very high for the large banks.

However, for the small banks the correlation between ranking based on ‘growth and level' and ranking of stock market performance is much higher than that between ranking on the basis of growth alone and the later.

The high correlation for large banks is possibly because in half of the banks the ranking on the basis of ‘growth' and ‘growth and level' is the same whereas in the case of small banks, only in one instance the ranks on the basis of ‘growth' and ‘growth and level' is same.

The ranks have brought out the relative strength and weakness of different banks across different performance indicators. These rankings can serve as guiding tool for banks in organising their activities.

(The author teaches Economics at the Xavier Institute of Management, Bhubaneswar. The views are personal.)

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BoB launches 1001 ultra small branches

Bank of Baroda launched 1001 ultra small branches to provide banking services to the people of un-banked villages under the financial inclusion initiative.

The virtual launch of 1001 ultra small branches (USBs) was done by Dr K. C. Chakraborty, Deputy Governor, Reserve Bank of India, in the presence of Mr M. D. Mallya, Chairman and Managing Director, Bank of Baroda, at Varanasi.

On the same day, 551 USBs were inaugurated across Uttar Pradesh and Uttarakhand, said a press release issued by the bank.

BoB plans to open 1,700 USBs in various villages across the country.

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Axis Bank rolling out ‘new look' branches

Given the high real estate costs and the convenience of online banking, a large bank branch may seem like a luxury. But banks are increasingly revamping their branches to attract and retain customers.

Axis Bank, India's third largest private sector bank, is changing the layout and look of its branches.

“The idea is that people should feel attracted from outside to walk into a branch, which are brand ambassadors for the bank. They should have a nice experience and leave thinking ‘I am coming back'”, said Ms Manisha Lath Gupta, Chief Marketing Officer, Axis Bank.

All new branches of Axis Bank opened after October sport the same look. By end-March there will about 150 ‘new look' branches.

Some of cities where these branches have been opened are Pune, Chandigarh, Mohali, Panchkula and Delhi. The latest is a three-storied branch in Juhu, in Mumbai.

All new branches are divided into three separate zones — the self-service zone, the retail area or the privilege lounge and the transaction area.

The self-service lobby houses ATMs, cheque drop boxes, note accepting machines and Internet banking kiosks. The idea is to show customers that a lot of the transactions could be carried out without entering the branch and at any time of the day.

“We want people to self serve themselves as much as they can. This helps us to speed up our services to the customer,” Ms Gupta said.

Priority lounge

The idea behind shifting the priority lounge or retail area to the centre of the branch is to showcase the bank's premium offerings. These spaces are structured to give customers privacy to hold discussions with relationship managers about their investments.

“We want people to see what they are missing and what they can potentially get if they upgrade to privilege segment,” Ms Gupta said.

The third area is the transaction area which has the tellers and customers who walk in only for transactions. This area tends to be crowded and hence is located at the back of the branch.

For instance, in the Juhu branch, this area is located in the basement.

Alternative channels

About banks' directing customers towards alternative channels such as ATM and Internet in order to cut transaction costs, Ms Gupta said, “We do want customers to come to the branch. But we want them to come for the right reasons. For instance, we want them to come for discussing their financial investment and not merely to withdraw Rs 5,000,” Ms Gupta said.

priyan@thehindu.co.in

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Syndicate Bank shareholders okay Rs 866-crore capital infusion

The shareholders of Syndicate Bank have approved Rs 866.20 crore capital infusion by the Government and LIC of India.

The bank informed the BSE on Thursday that an extraordinary general meeting of shareholders at Manipal approved the preferential issue of shares worth Rs 866.20 crore at Rs 114.15 a share of face value of Rs 10 each.

This included preferential issue of equity shares to the Government of up to Rs 539 crore and to LIC of up to Rs 327.20 crore.

Post-preferential allotment issue of 4,7218,572 equity shares to the Government, its shareholding will come down to 68.63 per cent in the total shareholding as against the pre-issue shareholding of 69.47 per cent.

vinayakaj@thehindu.co.in

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Muthoot Finance welcomes RBI move to tighten lending rules

Muthoot Finance Ltd on Thursday hailed the Reserve Bank of India move to tighten lending norms of NBFCs that are predominantly engaged in lending against gold jewellery.

Besides stipulating that loan-to-value (LTV) ratio should not exceed 60 percent, the RBI has also mandated that such NBFCs should maintain a Tier-I capital of 12 percent by April 1, 2014.

The Central Bank on Wednesday said in a circular that these NBFCs should not grant any advance against bullion/primary gold and gold coins.

These measures will go a long way in ensuring that the players in the industry would have robust capital structure to address any possible fall in gold prices, Muthoot Finance said in a statement here.

The company said that it had a Tier-I capital of 13.37 per cent as on December 31,2011 and pointed out that the revised framework provide time till April 1, 2014 to achieve the level of 12 per cent.

Muthoot Finance also said that it does not provide loans against bullion/primary gold and gold coins. Lending is done only against security of household used jewellery, the statement added.

Although the company sought to provide comfort to stakeholders that it was in a position to conform to the RBI’s latest lending norms, its shares saw a battering in the stock exchanges. At the national stock exchange, the company’s share closed at Rs 145, reflecting a little over 10 per cent decline from previous day’s close of Rs 162.45 per share of Rs 10 each.

Muthoot Finance saw the RBI’s latest measures as primarily aimed at new entrants to the sector. The steps taken with respect to capital adequacy and LTV should be seen as steps to strengthen the sector with robust operating practices and risk control measures, the statement added.

Interestingly, Muthoot Fincorp, another gold loan company, had a slightly different take on the latest RBI move. It feared that the latest move could have the effect of setting back the industry by years together. People who depended on the product may move back to the unorganised sector, the company said.

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Bank unions plan agitations from mid-April

The United Forum of Bank Unions has decided to hold protests in April on some issues confronting the banking industry.

Speaking to Business Line here on Thursday, Mr C. H. Venkatachalam, Convenor of UFBU (United Forum of Bank Unions), said that recommendations of Khandelwal Committee, proposing amendments to the laws relating to the banking sector, and outsourcing of banking activities will be the focus areas for the agitations.

The UFBU, which met in Mangalore, has decided to undertake agitations across the country from mid-April. They will be in the form of badge-wearing, demonstrations, delegations, dharna, and so on.

“If the Government does not respond to our demands, UFBU may think of an all-India strike. If necessary, all-India strike will be organised in May,” he said.

He termed the Khandelwal Committee report as an attack on the trade union rights, on collective bargaining, and on service conditions of the employees and officers.

Profit criteria

The report recommends bank-level wage revision based on profitability than industry-level wage revision. Wage revision should be work-related and not profit-related. Profit alone cannot be the criteria for fixing wages, he said.

Stating that the Central Government is continuing the agenda of banking reforms, he said in Budget 2012-13 there is a mention about the Government proceeding with the Banking Laws (Amendment) Bill. The objective is to amend the Banking Regulation Act and the Banking Companies Acquisition Act.

This is aimed at liberalising and deregulating these two laws to give more freedom for private capital, both in private and public sector banks.

If amended, private banks will become more vulnerable for either some corporate takeover or foreign takeover. With amendments, the policies of public sector banks (PSBs) will tend to become corporate, he said.

The increased involvement of the corporate sector in the management of banks will lead them to focus on profits rather than meeting social obligations.

These are not good for the country where the banks deal with public money, Mr Venkatachalam said.

Opposing the outsourcing of banking activities, he said it is risky with regard to jobs and job security.

vinayakaj@thehindu.co.in

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Rajiv Gandhi Equity Savings Scheme plan may allow trading in top 100 stocks

The proposed Rajiv Gandhi Equity Savings Scheme is expected to come with safeguards that will permit small investors to purchase shares only in the top 100 stocks traded on BSE and NSE.

An exception is, however, expected to be made for public sector companies with the government likely to relax the rule to allow trading in stocks that are part of the top 500 list. The move is aimed at increasing retail participation in not just the stock market but also in disinvestment exercise .

The scheme will allow 50% deduction for those who invest up to Rs 50,000 in stocks, provided their taxable income is below Rs 10 lakh. While the funds will not be allowed to be withdrawn for three years, even churning of portfolio is not permitted during the first one year. The scheme can be availed only once in a lifetime. "Details on it should be out in a month's time," finance secretary R S Gujral said on sidelines of a Ficci meet.

The government has drawn upon the experience in Europe which had tried the model and increased retail participation in the 1970s. A similar scheme, with much higher cut-off , was first tried in France which was then used by Belgium, West Germany and Sweden.

Source: EconomicTimes

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Banks should open 25 pc branches in unbanked areas: RBI

The Reserve Bank today asked banks to comply with the prescription of opening at least 25 per cent of new branches in a year in unbanked areas with a population less than 10,000.

"At RBI we have said at least 25 per cent of all the branches opened in a given year should be opened in unbanked areas with population of less than 10,000," RBI Governor D Subbarao told a state-level conference of bankers here today.

"I hope that prescription would be complied with (by all the banks). It should be done in consultation with state government," the Governor further said while referring to financial inclusion and awareness drive.

Giving further direction to bankers, Subbarao said that it has agreed to take forward financial inclusion programme more meaningfully in Jammu and Kashmir.

"In this model of financial programme, we have agreed to train business correspondents for the programme," he said.

"We have open physical branches --certainly 25 per cent among new branches," he added.

Having conducted an outreach programme at Surara village in Samba district of Jammu and Kashmir as part of its financial inclusion and awareness drive, RBI had yesterday said that 70,000 villages in the country have been identified for access to banking under financial inclusion programme.

"So, since it is not possible or expensive to open branch in all 70,000 villages. We are covering some of them to banking corresponding model and some through other models", he said.

"This is collective effort of central government, banks to provide banking facilities to low income house hold groups in the country", he said.

Governor touched upon the important functions of RBI viz issuing and managing currency, controlling inflation through formulation of monetary policy,expanding outreach and banking awareness, deposit insurance scheme.

He also highlighted the facilities of 'no frills account', general Credit Card, Kisan Credit Cards and overdraft facilities against these accounts.

Source: EconomicTimes

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Small savings like NSC, PPF, post office deposits to fetch higher returns

There is finally some good news for individuals in a season of duty hikes and provident fund rate cut. The government is raising interest rate on small savings schemes such as National Savings Certificate (NSC) and post office deposits by 20-50 basis points.

The new rates will, however, be applicable on investments that you make from April 1 and not on those that you park over the next 10 days to meet your tax saving requirements.

As a result, NSC and public provident fund (PPF), which is a voluntary deposit as opposed to employee provident fund, will earn you 8.8-8.9% instead of 8.6% a year. The shorter tenure deposits, such as term deposits in post offices, are expected to fetch you more than the longer tenure products such as PPF or the 10-year NSC. Savings bank accounts in post offices will, however, not see any change as the 4% return is in line with what most banks pay at present.

The increase in small savings rates, which is expected to be notified by the finance ministry, is in sync with the new policy to link returns on the popular savings instruments with the interest rate on government bonds.

Bank deposits may, however, look more attractive to many as they offer 9% return. But a scheme like PPF, which has a minimum term of 15 years, comes with additional tax sops. Not only is it part of the 80C benefits which entitles tax payers to get a concession of up to Rs 1 lakh a year, but the interest earned on the deposits is also tax-free. So, at the revised rates, the actual return for someone in the 30% tax bracket will work out to 12%.

In addition, the rate of return on small savings schemes that will be notified will be for the full financial year, while bank deposit rates are expected to come down with the Reserve Bank of India widely predicted to begin the rate cut cycle. Even before lending rates come down, banks will start pruning returns on deposits to lower their cost of funds.

The move to raise small savings rates comes barely a fortnight after the Employees Provident Fund Organization (EPFO) slashed the annual return from 9.5% last year to 8.25% for the current financial year based on a decision taken by the finance ministry. In the budget, finance minister Pranab Mukherjee decided to increase the excise duty and service tax rates from 10% to 12% which will put a burden of Rs 35,000 crore on anyone buying a matchbox or a car. He, however, offered some concession by way of an increase in exemption limit for direct tax from Rs 1.8 lakh to Rs 2 lakh.

Source: EconomicTimes

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Bank of Baroda to hire 2,000 clerks

Bank of Baroda has notified 2,000 clerical vacancies.

As per the notification released on Wednesday, candidates who wrote the common written examination for clerical positions conducted by the Institutue for Banking Personnel Selection in 2011 and qualified are eligible to apply.

Since clerical recruitment will be on a State or Union Territory basis, candidates will have to apply for vacancies of a State/union territory from which they had taken the common written exam.

Complete details on elegibility criteria and other aspects will be available on the bank's Web site from March 23.

The last date for online submission.of applications is April 10.

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Nabard sanctions Rs 423-cr loan for Narmada link projects in Gujarat

The National Bank for Agriculture and Rural Development (Nabard) on Wednesday said it has sanctioned loan assistance of Rs 423 crore to the Gujarat Government under the Rural Infrastructure Development Fund for an irrigation project.

The project, envisaging laying of a pipeline to link the Narmada Main Canal with three major reservoirs in Sabarkantha district in North Gujarat, is expected to be completed by December 31, 2015.

The State Government had accorded priority to strengthening the water resource infrastructure for supplying surface water to water scarce regions. The project envisages lifting water from the Narmada Main Canal by pipelines to three major reservoirs, namely, Watrak, Mazam and Meshwo, which have a canal network to irrigate 22,397 hactares of land in Sabarkantha, a water scarce district.

Mr H. R. Dave, Chief General Manager, Nabard, said apart from irrigation benefits, the proposed project would also provide direct benefits, such as recharge of groundwater and drinking water resources in 143 villages, reduction in maintenance of tube-wells, enhancement in agricultural activities, increase in soil moisture and green vegetation, besides leading to recurring and non-recurring employment generation.

With this sanction, the cumulative assistance from Nabard to the State Government aggregates Rs 10,877 crore towards rural infrastructure development, of which Rs 7,661crore was released up to March 21, 2012, he added.

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ICICI Bank launches new credit card for super rich

ICICI Bank has launched a new card product for the super affluent segment and the bank’s Wealth Management clientele.

Called ICICI Bank Sapphiro, it is the third in the bank’s gemstone collection of credit cards, after ICICI Bank Coral and ICICI Bank Rubyx.

Card members will receive two cards -- the ICICI Bank Sapphiro Platinum American Express Credit Card and the ICICI Bank Sapphiro Platinum Chip MasterCard Credit Card, said a press release from the bank.

The cards, which are linked to a single card account with a single statement and a single fee, provide access to a host of privileges from American Express and MasterCard.

The cards provide exclusive privileges from some of brands such as Leading Hotels of the World. Ltd., Atlantis the Palm, Dubai, and Air France-KLM.

Card members also can look forward to exclusive members - only events, Thursday night movie premieres, complimentary tee-offs at championship golf courses across the world and premium privileges across travel, shopping, wellness and entertainment, the release said.

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Bank of India hikes rates on over 3-month deposits

Bank of India has hiked deposit rates on select maturity periods by 25-50 basis points, the bank said in a press release to the Bombay Stock Exchange.

According to the release, the bank has hiked interest rates on deposits having more than three months maturity period.

For deposits of up to Rs 15 lakh, having maturity of 91 days to 179 days, the rate has been hiked to 7 per cent (7.25 per cent). For deposits of 270 days to less than one year maturity, the revised rate is 8.25 per cent (8 per cent). For deposits of one year to less than two years, two years to less than three years, three years to less than five years and for five years and above, the revised rate is 9.25 per cent.

BoI is realigning its deposit rates to match those offered by its peers.

Banks are revising deposit rates upwards as they are facing liquidity crunch. This is underscored by the fact that banks collectively borrowed Rs 1,48,820 crore from the Reserve Bank of India under its liquidity adjustment facility on Wednesday.

On the assets-side, banks are likely to reduce the spreads on the base rate for some loan segments -- small and medium enterprises and auto -- to revive the investment appetite.

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IDBI Federal Life Insurance launches ‘Bondsurance Plan'

IDBI Federal Life Insurance Company has launched a ‘Bondsurance Plan' with guaranteed returns and life cover.

The plan is meant for those willing to invest for a short to medium term to earn a guaranteed return along with tax benefits.

The insurance company, in its product illustration, said customers in the 8 to 32 years age bracket would get a guaranteed maturity amount of Rs 1,38, 293 for a single premium of Rs 1 lakh for a 5-year term. The effective tax-free return would work out to 14.89 per cent, said a company statement.

The guaranteed maturity amount is in addition to getting a life cover of Rs 5 lakh (5 times the premium paid) to ensure financial security for the family in the unfortunate event of death of the subscriber.

The premiums and the guaranteed maturity amount would vary with the age of the customer and the term chosen.

According to Mr G. V. Nageswara Rao, MD & CEO, IDBI Federal Life Insurance, “In today's volatile market situation, there is a growing customer preference for safe and guaranteed return products to balance their investment portfolio.

“With premium of as low as Rs 20,000, Bondsurance has been crafted for those seeking a one-time lump sum investment that delivers attractive tax-free guaranteed returns along with the promise of life insurance protection.”

Investment in the plan is eligible for deduction under Sec 80C and the guaranteed maturity amount is tax-free under Sec 10(10D) of the Income Tax Act.

Other benefits of the Bondsurance plan include discount on single premium in case the guaranteed maturity benefit is equal to or greater than Rs 1,50,000 and liquidity before maturity through special surrender value after the first year, said a company statement.

kram@thehindu.co.in

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Canara Bank institute hits IT off with meritorious poor

The Canara Bank Institute of Information Technology (CBIIT) has just completed 11 years of ‘meaningful existence' in the service of its beneficiaries.

And they happen to be meritorious youngsters from among the needy and poor for whom IT education with its attendant costs has remained a distant dream.

In the words of Ms Mary James, Director, CBIIT, information technology is a sector which offers enormous employment opportunities.

The institute was set up in year 2001 by the Canara Bank Centenary Rural Development (CBCRD) Trust.

The brief of the CBCRD Trust, itself established in 1981, was to drive the vision of founder late Ammembal Subba Rao Pai.

And this was all about improving the economic conditions of the weaker sections of the society.

Lofty mission

The CBIIT has come a long way pushing its lofty mission of taking IT within the reach of the poor youth, Ms James told Business Line here.

The institute today provides free, full-time courses in software applications and hardware to meritorious students.

It also trains them in Communicative English and behavioural aspects and assists trainees in setting up a meaningful and rewarding career for themselves.

“So far, we have trained about 2,300 candidates hailing from the poor/downtrodden sections of the society,” Ms James said.

Of them, as much as 95 per cent are now placed with various computer/IT companies.

About 350 trainees are now working in varying capacities with companies housed in the Technopark here.

“They earn anything between Rs 5,000 to Rs 25,000 a month,” Ms James said.

Canara Bank has always taken care to put up front the cause of banking and rural development in India for more than a century, she added.

The CBCRD trust today runs 31 self-employment training institutes in the country with a focused approach on rural development through self-employment.

vinson@thehindu.co.in

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SBI offers new, lower rates to old home loan borrowers

State Bank of India's old home loan borrowers have a reason to rejoice. The bank has decided to allow these borrowers to switch over to the new floating rates that are lower, said a bank official.

Borrowers who have taken loans linked to SBAR (State Bank Advance Rate or the prime lending rate) are paying as much as 2-3 percentage points more than existing floating rates that are linked to the Base Rate.

This is because the Base Rate is lower than the SBAR. SBI's Base Rate is currently at 10 per cent, while the SBAR is 14.75 per cent. Besides, the bank has also reduced the spread it charges over the Base Rate for home loans. Because of this, new home loan rates have moved southwards, said the official.

There is no restriction on the tenure or the amount of the loan for customers to switch over. The bank is charging a fee of 1 per cent of the outstanding amount to switch to the new rate, the official added.

The current floating rates are 10.5 per cent for loans up to Rs 30 lakh, 10.75 per cent for loans between Rs 30 and 75 lakh, and 11 per cent for loans above Rs 75 lakh.

“Those borrowers who took a home loan even a year ago are paying higher rates. In some cases, the difference is as high as 3 percentage points. So, in the interest of fair practices and transparency, we are offering the current floating rates to all our customers. On an average, the benefit to old customers could work out to be more than 1 percentage point,'' the official said.

For switching over, the only condition is that the customer should not be a defaulter. If so, then he or she can pay the default amount and switch.

Customers have been enquiring about shifting loans to other lenders given the higher rates, and this is one reason why SBI came up with such an offer, the official said.

priyan@thehindu.co.in

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Nabard seeks Rs 5,000 cr from Centre

With its borrowing capacity nearing the authorised limit, National Bank for Agriculture and Rural Development (Nabard) has sought capital infusion of Rs 5,000 crore from the government for business growth during 2012-17.

Chairman Prakash Bakshi told Business Standard the thrust on increasing lending to the agriculture sector and scaling up rural development plans meant a substantial increase in the bank's capital needs. It has sought the additional capital for balance-sheet expansion through refinancing operations and funding cooperative bodies.

Nabard expects its balance sheet to touch Rs 178,000 crore by the end of March, compared with about Rs 158,800 crore a year earlier. For every Rs 1,000-crore extra capital, its borrowing capacity would increase 10 times.

The bank's total market borrowings stood at Rs 34,747 crore in March 2011, and accounted for 21.87 per cent of its total resources. Its paid-up capital was Rs 2,000 crore, against the permitted Rs 5,000 crore. Its total income in 2010-11 stood at Rs 9,202 crore, against Rs 7,965 crore in 2009-10. While the profit after tax was Rs 1,279 crore in 2010-11, down from Rs 1,558 crore in 2009-10, the capital adequacy ratio was 21.76 per cent in March 2011, compared with 24.95 per cent a year earlier.

On expanding the coverage of the core banking platform, Bakshi said after commercial banks, 82 regional rural banks using the platform were now ready to go on-line. Till cooperative bodies are not on the core banking platform, these are not allowed online financial transactions. These bodies have realised that unless the core banking platform is adopted, these may lose customer base and government business.

The thrust of the financial inclusion programme is on electronic platform-based transactions.

Nabard has begun work on establishing core banking solutions at more than 400 state and district central cooperative banks. It has roped in WIPRO and Tata Consultancy Services for rolling out CBS at its branches.

The next phase would involve bringing about 53,000 primary agriculture credit societies on to this platform. Bakshi said this may help these to function as business correspondents in the future.

Source: Business Standard

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Tax-free infra bonds may lose sheen in 2012-13

The optimum utilisation of the enhanced Rs 60,000-crore limit for issuing tax-free infrastructure bonds by companies seems unlikely. This is despite the government trying hard to boost infra development in the country by doubling the issuance limit for such bonds, which received a euphoric response in 2011-12.

Firms that secured approvals to raise funds are unsure if these would be able to harness the entire available limit, owing to delays in decision making by the government and the increase in bank rate.

Companies like National Highways Authority of India (NHAI) and Indian Railways Finance Corporation (IRFC), which had been allowed to raise Rs 10,000 crore each through the issuance of tax-free bonds, have just begun the absorption process for the amount raised in 2011-12, and this may take a while. For financial year 2012-13, these have again been permitted to issue tax-free bonds up to Rs 10,000 crore each.

Speaking to Business Standard, J N Singh, member (finance), NHAI, said, “We have just finished raising funds for this financial year. It would take time for us to absorb the amount. There are no plans to come up with another tax-free bond issue anytime soon. We are not sure if we would be using the entire Rs 10, 000-crore limit, as we will have enough funds for some time.”

Project delays and slow allocation may also lead to postponing tax-free bond issuances. The Economic Survey 2011-12 says 235 of 583 infrastructure projects were delayed, while 175 were sanctioned without specifying a commissioning schedule.

Delay by the government in notifying the final go-ahead to tax-free bond issuances may also lead to underutilisation of the limit. S Radhakrishnan, general manager (external commercial borrowing), IRFC, said, “Though we would want to issue tax-free bonds to raise funds before exercising other options to raise money, the timing depends solely on how fast the finance ministry issues the notification on it. In FY12, the notification was issued very late, in September, and our issuance limit for tax-free bonds remained untapped, as we had used alternative means to raise funds.” The firm raised Rs 14,800 crore this financial year from various sources, including tax-free bonds, which helped raise about Rs 7,000 crore.

Though tax-free bonds are seen as low-cost tools to raise funds, arrangers of these issues disagree. Nirav Dalal, president and managing director (debt capital markets), YES Bank, said, “The doubling of the issuance limit for tax-free bonds is a boost for infrastructure funding, though a bit surprising. The bonds issued this financial year have given merely 1-1.25 per cent cost benefit to issuers. Inadvertently, the instrument has turned out to be more attractive for investors than for issuers.”

He said it was not a good idea to issue tax-free bonds in the beginning of FY13, as interest rates were still high. According to norms, companies cannot invest in corporate bonds that offer a coupon rate less than the bank rate. The bank rate is linked to the repo rate and market players believe the rate cycle has peaked.

In February, the Reserve Bank of India had raised the bank rate from six per cent to 9.5 per cent, bringing it on a par with the marginal standing facility rate.

“With the bank rate now at 9.5 per cent, companies cannot invest in instruments with coupon rates less than the bank rate. So, if the coupon offered on these tax-free bonds remains in the range of 8.3-8.5 per cent, companies cannot invest in these, and the amount to be raised would be quite large to be sourced primarily through retail/high net worth investors,” Dalal said.

The coupon rate on tax-free bonds is linked to the yields of government securities of the same tenor.

These rates should not be less than 100 basis points lower than the annualised closing yield on the government bond of the previous month.

Source: Business Standard

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SBI shareholders approve Rs 7,900 cr capital infusion

Country's largest lender State Bank of India (SBI) today said its shareholders have approved Rs 7,900 crore capital infusion by the government.

The shareholders of the bank at the general meeting on March 19, 2012, have passed a special resolution approving preferential allotment of equity shares to the Government for a consideration of Rs 7,900 crore, SBI said in a filing to the BSE.

SBI would allot over 3.60 crore shares at an issue price of Rs 2,191.69 a share to the government, it added.

In January, the government had approved capital infusion of Rs 7,900 crore into SBI to help the lender increase its business activities. The capital infusion by the government will raise the Tier-I (equity) capital of the bank to about 8 per cent.

At present, Government holds a 59.4 per cent stake in SBI and post allotment, its stake would go up by 2-2.5 per cent. Shares of SBI today closed at Rs 2,184.15, up 1.13 per cent on the BSE.

Source: Financial Express

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ICICI Bank picks banks for up to $1 bn bond issue

ICICI Bank plans to raise up to $1 billion through a 10-year overseas bond issue as early as this month, two sources with direct knowledge said, signalling a pick-up in overseas bond issuances on improved global liquidity.

ICICI Bank, the country's top private lender, has hired Citigroup, Bank of America Merrill Lynch, HSBC and Standard Chartered for the issue, said the sources, declining to be named as the process is not public yet.

"We continously keep exploring various avenues of fund raising in form of public bond issuances and private placements under the GMTN, based on market conditions and pricing apart from loans and money markets," the bank spokesman said.

GMTN refers to the global medium term notes programme.

ICICI Bank's planned bond launch and pricing would depend on market conditions, said one of the sources on Tuesday.

Indian issuers of overseas bonds, kept on the sidelines by volatile markets, are looking once again at the dollar market after energy conglomerate Reliance Industries cracked open the route with a $1 billion, 10-year bond deal last month.

Axis Bank, the country's third-biggest private lender, swiftly followed with a $500 million, September 2017 issue at a spread of 440 basis points over the US Treasuries, to become the first lender to issue a dollar bond since May.

ICICI Bank last month raised $160 million through a one-year floating rate notes at 200 basis points over three-month Libor, according to IFR.

Many Indian issuers are in talks with investment banks to explore the possibility of overseas fund issues or to revisit plans shelved due to poor investor sentiment because of the euro zone debt crisis last year, analysts said.

Earlier this month, state-run Indian Overseas Bank picked seven banks to raise $500 million through bonds from the overseas markets.

Companies including Union Bank of India, Essar Group software services firm Aegis, and Bharti Airtel may also soon look at reviving their dollar fund raising plans.

Investor interest has picked up significantly for Indian issuers especially at the current levels, bankers said.

Issuers are exploring fundraising opportunities abroad for their expansion plans as domestic interest rates remain high, they said. The Reserve Bank of India has raised rates 13 times in the last two years.

The rate hikes have paused but not many expect a drastic fall in the interest rates as inflation remains high.

Source: Business Standard

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