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Saturday, April 14, 2012

LIC Housing Finance plans to borrow Rs 25,000 crore in FY13

LIC Housing Finance, a subsidiary of state-run insurance giant LIC, is planning to borrow around Rs 25,000 crore in the current financial year, which is about 13.5 per cent higher than FY12, a top official said today.

"We have plans to borrow around Rs 25,000 crore in the current fiscal to support our business growth against Rs 22,000 crore we had raised last fiscal," LIC Housing Chief Executive V K Sharma said on the sidelines of an event organised by Indian Merchants Chamber here.

Sharma said most of these funds would be raised through bonds.

The housing finance firm raises money from banks and also from markets by issuing bonds. The ratio of money raised through bonds is around 65 per cent of the total fund raised by the company.

On growth projection for FY13, Sharma said the company is likely to grow its loan book by 20-25 per cent. "We hope to grow by around 20-25 per cent in the current financial year."

About the private equity arm of the company, Sharma said LIC Housing had received Rs 250 crore of commitment from investors for the private equity fund named as urban development fund.

"We will start investing in projects in the near future from this fund," Sharma said.

LIC Housing had reported a 43 per cent growth in net profit at Rs 305.69 crore in the December quarter on an income of Rs 1,593 crore.

Source: EconomicTimes
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Liquidity challenge likely to re-emerge in 2012-13, says Standard Chartered

Projecting a challenging year for the Indian banking sector, global financial services major Standard Chartered today said the liquidity challenge is likely to re-emerge in 2012-13, forcing RBI to take action.

"Our projections for FY13 indicate that the liquidity challenge is likely to re-emerge, necessitating RBI action," a research report from Standard Chartered said.

After 125 basis points (bps) of cash reserve ratio (CRR) reductions in the second half of 2011-12, it said "we expect the RBI to rely more heavily on OMOs (open market operations) in FY13".

Even if central bank cuts the CRR by another 50 bps, it may have to buy Rs 1.5 lakh crore worth of government securities this fiscal, Standard Chartered said.

Unlike last year, relatively benign inflation should give the RBI scope to conduct these liquidity-easing measures, it added.

Managing the banking-system liquidity deficit has been a challenge for the central bank recently.

In the last fiscal, the RBI bought Rs 1.29 lakh crore worth of Government Securities via OMOs. It also reduced the CRR by 125 bps to inject Rs 80,000 crore in the system.

The global financial services major expects the government's record market borrowing of Rs 5.7 lakh crore (gross) to "crowd out" private-sector credit in 2012-13.

"The lack of decisive government steps to improve investment sentiment and kick-start the investment cycle will also weigh on credit growth," the Standard Charted said.

Source: EconomicTimes
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Banks told to allow customers to use NEFT facility

The Reserve Bank of India has advised all banks to allow their customers to use the National Electronic Funds Transfer (NEFT) facility for repaying loans.

This directive comes as the RBI has received some complaints from customers regarding non-acceptance of NEFT for credit to loan accounts, thereby causing inconvenience to them.

On examination of the customers’ complaints, it was observed that only a few banks were following the restrictive practice of not allowing the use of NEFT for credit to loan accounts. These banks, however, were willingly taking Electronic Clearing System as one of the modes for repayment.

“It is, therefore, advised that all banks should allow the customers to choose NEFT also as one of the electronic modes of making payment towards loan EMIs/repayments, etc,” the RBI said in a statement.

NEFT was launched in 2005. The system is meant for one-to-one funds transfer and can be used for transferring funds to beneficiaries (individual, institutions etc.) and no restrictions have been placed thereon.

In March 2012, the total number of NEFT transactions recorded by the banking system was 2.71 crore for a value aggregating Rs 2.4 lakh crore.

The RBI said that the phenomenal growth in the NEFT system, both in terms of branch coverage and volume/value of transactions handled, reflects the acceptability and popularity of the system.
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Punjab National Bank plans 24 hours banking services centres

State-run Punjab National Bank will roll out new service centres where customers can access select banking services like updating of passbook 24X7.

The bank would set up 'E-Lobby' which will have one ATM, cash deposit kiosk, pass book printing terminal, cheque deposit machine and two Internet banking terminals, PNB Circle Head Kalpana Gupta told reporters here.

"The main idea behind having E-Lobby is to provide 24 hours banking services to customers who do not have enough time to visit bank branches during office hours. Now they can visit these E-Lobbies where they can carry out banking transactions at their conveniences," she said.

Initially, E-Lobby would be set up in Chandigarh, Panchkula and Ambala. Thereafter more such centres would be set up for the conveniences of customers.

Source: EconomicTimes
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IRDA gets tough on reporting of expenses

The regulator has asked insurers to strictly adhere to norms related to reporting of expenses management to ensure uniformity.

In a circular sent to all insurance companies, Mr R.K. Nair, Member (Finance & Investments), said a detailed review of statements filed by insurers had shown divergent practices in the interpretation of terms mentioned in the regulation.

These divergences are mainly observed in the interpretation of the terms "charges" and "expenses capitalised", he said.

Clarifying the intended meaning of the terms, IRDA said charges would include all charges levied directly or indirectly in respect of the insurance business but excluded taxes which are a charge against profits.

Expenses such as administration and other general expenses should be treated as expenses capitalised.

For the purpose of computation of expenses of management, income/expenditure should be accounted on accrual basis, the circular said.

The circular will be effective from financial year 2011-12.
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IDFC allots infra bonds worth Rs 179 cr

Infrastructure Development Finance Company (IDFC) today said that it has alloted 3.58 lakh infrastructure bonds worth Rs 179.16 crore with a face value and issue price of Rs 5,000 each.

"The committee of allotment of infrastructure bonds, duly authorised by board of directors, has alloted 3,58,331 bonds, having face value and issue price of Rs 5,000, aggregating Rs 1,79,16,55,000," the company statement said.

The board of directors approved the allotment of bonds in a meeting, it added.

According to the statement, the company has alloted the bonds in different series and mixed series, allotting 3,56,886 bonds worth Rs 1,78,44,30,000 and 1,445 bonds of Rs 72,25,000 respectively.

Source: Business Standard
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HDFC's Keki Mistry says repo rate cut likely soon

The largest mortgage player HDFC today said there is a possibility of the Reserve Bank reducing the repo rate, or the rate at which banks borrow from the central bank, in the immediate future, but a cut in CRR in unlikely.

"The amount of funds being raised by banks through the liquid adjustment facility has come down and is now hovering around Rs 70,000-90,000 crore, which is not significantly higher than the Reserve Bank's comfort level of Rs 60,000 crore," HDFC chief executive Keki Mistry told reporters here today.

"So, any injection of liquidity (through a CRR cut) is unlikely. However, reduction in interest rate during this quarter is very much expected," he added.

Mistry, who was talking to reporters on the sidelines of a BSE function, however, said timing of the cut in repo rate is difficult to predict.

Mistry also said recent IIP (index of industrial production) numbers make a strong case for reduction in policy rates.

On Thursday, the government reported a muted 4.1 per cent growth in the February factory production data, which was less than market expectation.

Also, the January IIP numbers were massively revised downwards to 1.1 percent from earlier reported 6.8 percent, indicating a sharp downward spiral of the economy.

The RBI since January 24 has brought down the cash reserve ratio of banks by 125 bps in two instalments as the liquidity crunch in the system had sniffed at Rs 2 trillion mark, while it has not lowered the lending rates between March 2010 and October 2011, when it had raised lending rates to 8.5 percent to fight a stubbornly high inflation, which in February stood at 6.95 per cent.

Referring to property prices, Mistry said there is less possibility of any fall in property prices as demand remains robust.

He also said the rising income levels along with lack of proper infrastructure development will keep property prices remain at the present high levels.

HDFC reported a 10.1 per cent rise in net profit to Rs 981.3 crore for the December quarter of the last fiscal compared to Rs 890.9 crore during the same quarter of the previous year. Its total income rose 35 per cent to Rs 4,472.5 crore from Rs 3,321 crore.

Source: Financial Express
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IRDA fines Birla Sun Life

The Insurance Regulatory and Development Authority has imposed a penalty of Rs 6 lakh on Birla Sun Life Insurance Company Ltd.

The fine was imposed for involvement of unlicensed entities in solicitation of insurance business and violation of norms pertaining to the settlement of claims in the group policies.

The regulator has also directed the company to stop payment of commission to agents in all such cases where premium is funded by the company as part of premium waiver benefit.
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IDBI Bank to raise $1 b this fiscal from overseas markets

IDBI Bank plans to mobilise up to $1 billion in 2012-13 from overseas markets via syndicated loans and by issuing bonds. Last year, it had raised about $720 million.

The resources so raised will be given as loans to Indian companies with overseas expansion plans.

Companies whose foreign currency convertible bonds are coming up for redemption could also tap the bank for funds, said Mr Melwyn Rego, Executive Director, IDBI Bank.

In January 2013, the bank will update the shelf document filed with the Singapore Stock Exchange for the medium term note (MTN) programme.

The plan is to enhance the size of the MTN from $1.5 billion to $2.5 billion, said Mr Rego.

Ever since it filed its shelf document in 2007, the public sector bank has raised $720 million via the MTN route.

According to Mr R.V. Iyer, Chief General Manager, IDBI Bank last year raised $465 million via syndicated loans; $102 million equivalent by issuing Dim Sum bonds; and $ 147 million through reverse enquiries (investors expressing interest in investing in short-term instruments issued by the bank).

Swiss Franc Bonds

IDBI Bank has mobilised CHF 110 million ( around Rs 682 crore) by issuing bonds denominated in Swiss Francs. The bonds have a maturity of three-and-a-half years and carry annual coupon of 3.125 per cent.

The main investors in the issue were private banks and high net-worth individuals.

“The Swiss Franc bond market has offered our bank strategic benefits in terms of investor diversification and attractive funding rates,” said Mr Rego.

Infra Debt Fund

IDBI and seven other banks have come together to float an infrastructure debt fund as sponsors, said Mr Rego.

The fund has been set up as a non-banking finance company with a paid-up capital of Rs 300 crore.

To accelerate and enhance the flow of long-term funds to infrastructure projects, the Finance Minister in his Budget speech for 2011-12 had announced setting up of Infrastructure Debt Funds (IDFs).

According to Mr Anuj Jain, Analyst, CARE Ratings, at a capital-adequacy ratio of 15 per cent and risk weight of 50 per cent, an IDF with Rs 300-crore capital will be able to borrow almost Rs 4,000 crore and lend to infrastructure projects.
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PNB targets Rs 13,000-cr business turnover in Kerala

The public sector Punjab National Bank is targeting a business turnover of Rs 13,000 crore in Kerala during the financial year of 2012-13.

Mr K.V. Rajesh, deputy general manager and circle head, told Business Line that during last financial year the bank had garnered a business volume of Rs 10,000 crore in the State. Of this, advances were of the order of Rs 6,000 crore and deposits at Rs 4,000 crore.

The bank is also in the process of expanding its branch network in the state by opening 11 more branches in the current fiscal. At present, it has 141 branches and 149 ATMs.

The new 11 branches will be located in Aroor, Maradu, Piravom, Karunagappally, Eerattupetta, Kothanelloor, Vaikom, Attingal, Varkala, Vizhinjam and Wadakkanchery. All these branches will be opened with ATM facility, he said.

PNB is very aggressive in financing agriculture, educational loan and loan to SMEs. It had disbursed Rs 265 crore, Rs 109 crore and Rs 531 crore respectively in these sectors during 2011-12.

The disbursement in housing and vehicle loans also registered a growth in 2011-12, touching Rs 366 crore. Considering the growth in these sectors, it has been proposed to enhance the credit portfolio to these sectors by 60 per cent in the current financial year, he said.

PNB, he said, has launched a scheme to enable customers to save money to buy gold coins and other consumer goods by opening Flexi Recurring Deposit Account. The bank is also offering gold loans at Rs 2,110 per gram, which is very much in demand presently.

To speed up gold loan process, the bank is installing several automated machines for appraising gold. Punjab National Bank is the first bank to install cash deposit machines in many centres in Kerala.

The special salary scheme launched by the bank for State government employees, nurses in private hospitals has also received encouraging response.

The Medi Claim policy launched by the bank in association with Oriental Insurance Company is one of the lowest in the industry, which carries a premium of Rs 1,749 for a policy of Rs 1 lakh covering four family members, he said.
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Thursday, April 12, 2012

RBI directs banks to pay 8% compensation on delayed interest payment on Relief Bonds

Banks are expected to be more prompt in crediting interest amount of Relief or Saving Bond investors to avoid a heavy compensation they will have to pay for delayed payment.

The Reserve Bank of India (RBI) has directed banks to compensate investors of Relief or Savings Bonds at 8% per annum for financial loss incurred to them due to delay in payment of interest amount. Earlier RBI had asked banks to compensate for the delay in payment at their own savings bank rate, irrespective of the amount.

However, the move to fix a uniform rate of 8% for all banks comes in context of different banks offering different rate on savings account after it was deregulated in October 2011. RBI said that the move is aimed at "avoiding ambiguity and variation in compensation rates across different agency banks."

Banks like Yes Bank and Kotak Mahindra Bank are offering 6% while State Bank of India, HDFC Bank, ICICI Bank continue to pay 4% on saving account. The compensation of 8% is higher than savings rates offered by any bank now.

In a letter to all commercial banks that are operating as agency banks for Relief bonds, RBI said, "an agency bank shall compensate an investor in Relief/Savings bonds, for the financial loss due to late receipt/delayed credit of interest warrants/maturity value, at a fixed rate of 8% per annum."

Investors are paid interest on these bonds through interest warrants by registered post or the bank directly credits the amount in the investor's bank account. banks will now ensure that the interest is credited on due date.

Source: EconomicTimes
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SBI officials, others to be charged for cheating bank of Rs 30 cr

A Delhi court has passed an order for framing of charges against a senior official of the State Bank of India (SBI) and 10 others for allegedly using forged documents to cheat the bank's Industrial Finance Branch to the tune of Rs 30.5 crores in the matter of credit facilities.

Terming the loss caused to the bank as "mammoth", Special CBI Judge Manoj Jain said that charges of cheating, forgery, using forged documents, criminal conspiracy under the Indian Penal Code (IPC) and abuse of official position under the Prevention of Corruption Act (PCA) were made out against the 11 accused.

"I am of the considered opinion that there existed a criminal conspiracy amongst all accused, the object of which was to cheat the bank.

"Forged bills and invoices were prepared. Bogus companies were floated. Pecuniary advantage was showered on A9 (AGM of SBI) and A10 (Manager/Credit Officer of SBI) and they abused their official position to assist their co-accused. The loss to the bank is mammoth," the judge said.

Mani Kant Tula (AGM, SBI), Parveen Kumar Gupta (Manager, SBI), Hindustan Polychm Pvt Ltd (HPPL), its alleged directors Sangeeta Shah, Padamakar Kumar Srivastava, Padma Gill, along with its other employees Hemant Kumar Senapati, Anil Kumar Sukumara Panicker, Musafir Prasad, were among the 11 accused who were charge sheeted by the CBI in the case.

The other co-accused included one Prem Shankar Jha and Arvind Rai C Shah (ex-employee of Union Bank of India).

As per the CBI, HPPL, which was engaged in export and import had obtained credit facilities from Industrial Finance branch of SBI and then diverted the same to 20 bogus companies floated by it and its directors, which existed only on paper, by opening letters of credit (LoC) in favour of these entities.

On the role played by the SBI officials in the case, the CBI had said that both of them abused their official position as public servants by sanctioning release of credit facilities in favour of the accused company HPPL and gave undue monetary advantage to it causing a loss to the tune of Rs 30.5 crore to the bank.

Counsel for the accused, on the other hand, had contended that charge cannot be framed only on the basis of suspicion and added that for the purposes of inferring conspiracy there has to be a meeting of minds which is lacking in the present case.

The court, however, observed "keeping in mind the material on record, documents and statements of witnesses and the legal scenario, I am of the view that all accused persons are liable to be charged for offences under sections 120B (criminal conspiracy), 420 (cheating), 468 (forgery for purpose of cheating) and 471 (using forged documents as genuine) of IPC read with sections of the PCA".

"Let charges be framed accordingly," the court said.

Source: Financial Express
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Wednesday, April 11, 2012

LIC can adhere to 10% stake norm at ‘its own pace'

The Life Insurance Corporation of India need not rush to bring down its current stake in various companies to below 10 per cent. “I advise LIC to bring down the stake to below 10 per cent in a company. But, I don't want to put any timeframe for this. It can do so at its own pace,” Mr J Hari Narayan, Chairman, IRDA, told Business Line here on Wednesday.

As per the current norms of the regulator, no insurance company is allowed to have more than 10 per cent stake in a company. The regulator did not want to pressure LIC to adhere to existing norms by bringing down its stake in various companies in view of the likely adverse impact on market/investors, he added.

However, the state insurer has over 10 per cent stake in many companies, including State Bank of India, MTNL, ITC and Tata Steel.

The issue has come to the fore after LIC had invested Rs 12,000 crore in the auction of ONGC stake by the Government in February.

Mr Hari Narayan, however, said a request by LIC seeking permission to have higher stake than permitted by the norms was turned down.
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IOB eyes 16—18% credit growth in FY13

Public sector lender, India Overseas Bank, on Wednesday said it is aiming a credit growth rate of 16—18 per cent and a deposit growth rate of 18—20 per cent in the current financial year.

“Currently, we aim 18—20 per cent deposit growth and 16—18 per cent credit growth in FY13,” IOB Chairman and Managing Director, Mr M Narendra, said.

He added deposit growth for the bank stood at 18—19 per cent for the last fiscal against 13—14 per cent witnessed by the banking system.

“Luckily, for us, even though CASA (current account, savings account) has not given us much growth, we had a good retail growth. Our deposit growth is around 18—19 per cent against the systemic growth of 13—14 per cent,” he added.

Total deposit of banks grew by 13.4 per cent to Rs 60.72 trillion as of March 23, which is below the RBI’s projection of 17 per cent for the last fiscal.

Referring to expectation from the upcoming credit policy, Mr Narendra said the central bank would take a view after considering inflation number along with current tight liquidity situation.

He, however, said reduction in lending rates by the bank will be little difficult due to present cost structure.

“The cost of resources has not gone down and, in fact, margins are under stress. Unless, we are able to ramp up CASA growth along with a parallel growth in yield, it will be little difficult (to cut interest rates) at this point of time,” Mr Narendra said.

About hiring plans in the current fiscal, he said the bank will hire around 3,500 officers and clerical staff in this fiscal.

The bank also said non performing asset (NPA) level of the bank is manageable.

“For IOB, we have hardly 5 per cent defaults from our restructured assets. So, we are quite comfortable as far as NPA is concerned,” he said.

Net profit of the bank fell by 53 per cent to Rs 108 crore during the third quarter owing to higher provisioning and rise in restructured assets.

Total income of the bank grew by 45 per cent Rs 5,015.33 crore during this period against Rs 3,452.86 crore in the same period last fiscal.
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Life insurance sector declines marginally in 2011-12: IRDA

The life insurance industry has declined only marginally in 2011-12 compared to the year-ago period, according to IRDA.

“The overall business during last financial year may decline only by about one per cent,” Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority, told Business Line here on Wednesday.

The first-year premium, however, has declined by about 14 per cent, he added.

“About 75 per cent of the income of companies comes from renewal premiums and group sales. So, some decline in new business cannot impact the overall growth of the industry significantly,” the IRDA chief said.

In 2010-11, the total premium collected by the life insurance industry was Rs 2,86,500 crore as against Rs 2,65,450 crore in the previous year.


On the expected growth during 2012-13, he said it would depend on a variety of factors, including the tax laws.

“At present, tax laws are more oriented towards young people with standard health patterns. They are not sympathetic to others,” he said.

The industry had represented the issue to the Finance Minister, who has assured proper consideration, he added.


When asked whether there would be any revision in the motor third-party premium rates announced by regulator recently, he said they were “final”.

“We have used a particular formula to determine new rates. There can be no further scope for any changes.”

He justified the inclusion of tractors in the goods-carrier category, which has increased the premium rates for tractor-owners, including farmers.

Most of the tractors are being used for commercial purposes and not entirely for agriculture, he said.

Terming health insurance as a growth segment, Mr Hari Narayan said consumers were set for more benefit as companies are increasingly offering more day-care products.

The regulator has been encouraging health insurers to expand the range of ailments covered under day-care treatment.


On the nature complaints, he said the comprehensive grievance redressal system put in place by the IRDA has been receiving good response.

“For most part of last financial year, majority of the complaints pertained to policy administration issues. It was only towards the end, we noticed a surge in complaints of mis-selling,” he said.

The IRDA will soon release a report on the nature of complaints and their redressal, he added.
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Tuesday, April 10, 2012

Karur Vysya in tie-up with M&M to provide vehicle finance

Private sector lender, Karur Vysya Bank(KVB) has signed a preferred financier agreement with automotive major Mahindra and Mahindra for providing auto finance to its customers.

"Under the agreement, M&M customers will be able to avail of vehicle finance from any of the 450-plus branches of KVB," a bank release said today.

Chief Executive Officer and Managing Director of Karur Vysya, K Venkataraman, said, "KVB is expanding its operations in commercial and passenger vehicle financing. Customers of KVB will be benefited out of this tie-up since they will have privileged access to the specialised services of M & M along with provision of loans for purchase of vehicles at a comparatively low EMI."

M&M said that they expect good response from dealers and customers post this arrangement.

"KVB's specialised rates for bus operators, educational institutions and medium and small enterprises will help Mahindra BOP and CV product range customers. With highly competitive schemes for car loans and commercial vehicles, we are hopeful of a good response from our dealers and customers," Senior Vice President, Sales and Customer Care ( Automotive Division) of M&M, Arun Malhotra said.

Source: EconomicTimes
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NABARD extends Rs 14,970 crore under RIDF in FY 2011-12

The National Bank for Agriculture and Rural Development (NABARD) extended a record support of Rs 14,970 crore under the Rural Infrastructure Development Fund in 2011-12, a growth of 24 per cent over the year-ago period.

NABARD had disbursed Rs 12,070 crore under the RIDF scheme in 2010-11, a NABARD release said today.

The aggregate assets held by NABARD rose to Rs 1,82,300 crore, an increase of Rs 23,500 crore over the previous year, it said.

Refinance assistance provided by NABARD to cooperative banks and regional rural banks (RRBs) during 2011-12 to disburse crop loans to farmers touched an all-time high of Rs 48,000 crore, registering an increase of Rs 14,000 crore, or 41 per cent over the previous year, the release added.

The investment refinance provided to banks by NABARD during 2011-12 for capital formation in agriculture and allied sectors and for non-farm activities stood at Rs 15,424 crore, registering an increase of Rs 1,938 crore, or 14 per cent, over the previous fiscal.

During the year, 25,238 farmers clubs were launched by different agencies with NABARD support, taking the total number of such clubs to around 1,01946, the release said.

Many pilot projects of innovative interventions were launched by NABARD where some of them were converting Kisan Credit Card to cashless transactions through mobile phone, financing for livelihood and agriculture productivity.

Source: EconomicTimes
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Two cheat over 100 in ATM fraud

Two persons have been arrested from allegedly withdrew money through ATM from the accounts of other people.

Kaushal Kumar (30) and Vikas Kumar (25) were arrested from State Bank of Patiala ATM in Safdarjung Enclave, South Delhi.

Police said there were several complaints regarding fraudulent withdrawal of money from the ATM. On Friday, the two were arrested by a team of policemen who saw the two loitering near the ATM.

Police said the two confessed to their crime during the questioning. They said they had duped more than 100 people of their hard earned money.

Explaining the modus operandi, Additional Deputy Commissioner of Police (South) P S Kuswah said, “They used to target facilities that have two ATM machines within a cabin. They targeted customers who used the quick swipe machines (where the card does not to remain inside the machine till the end of the transaction). After their target had swiped the card, one of them, who would at the other ATM machine, would request the customer to change the machine. The second accused would learn up the PIN entered by the customer at the second machine. They would then use to PIN to withdraw money from the first ATM.”

The police have recovered Rs 38,500 cash and Rs 3.5 lakh in the bank accounts of the two. A Honda City car and 14 debit cards, obtained on forged identity cards, have also been seized.

Source: Financial Express
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Dhanlaxmi Bank to grow gold loan business

Banks are likely to gain from the restrictions imposed on gold loan companies by the Reserve Bank of India.

In fact, old generation private sector bank, Dhanlaxmi Bank is looking to increase its gold loan portfolio from 8 per cent of total loans to 20-25 per cent in the current financial year, said Mr P. G. Jayakumar, Chief Executive Officer.

The bank's gold loan portfolio is expected to increase from Rs 750 crore as at March-end 2012 to Rs 2,500 crore by March-end 2013.

Speaking to newspersons in Mumbai on Monday, Mr Jayakumar said gold lending is a very attractive and secure business and many banks are aggressively pursuing it. The RBI is perhaps more comfortable with banks doing this business than NBFCs because banks follow the required Know Your Customer norms before giving loans.

For banks, too, it is a safe product since it is a secured loan, he added.

In 2012-13, the bank is looking to increase its retail loan book and within that the share of gold loans.

Last month, the RBI directed gold loan NBFCs not to exceed the loan-to-value (LTV) ratio of 60 per cent for loans granted against the collateral of gold jewellery. Further, such NBFCs must maintain a minimum Tier-l capital of 12 per cent by April 1, 2014.

The RBI also said that NBFCs should not lend against bullion or gold coins.

A recent report by credit rating agency Crisil said that RBI's guidelines for the gold loan companies will significantly moderate the sector's growth and profitability over the next year.

Business growth is likely to fall from 80 per cent per annum to 20-25 per cent per annum.

The LTV cap is likely to result in significantly lower growth rates, as the borrowers will have to bring in additional jewellery to get a loan of the same amount.
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Oriental Bank of Commerce cuts base rate by 10 bps

Taking the lead, Oriental Bank of Commerce has cut its base rate by 10 basis points to 10.65 per cent with effect from Wednesday.

This move is expected to translate into lower interest rate for borrowers, and comes a week ahead of the Reserve Bank of India's annual credit policy announcement on April 17. The base rate is the minimum rate at which banks can lend to its borrowers.

“We have taken a bold decision ahead of the RBI policy. There are some events in the last few months that have enabled us to take this decision and pass on the cost benefit to our customers,” Mr S. L.Bansal, Chairman and Managing Director, said.

The RBI's move in the recent months to cut the cash reserve ratio has helped OBC get as much as Rs 2,000 crore released. This money was not earning any interest when it was placed with the central bank.

Speculation is rife that the RBI will go in for another 75 basis point reduction in CRR on April 17.
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Monday, April 9, 2012

RBI allows RRBs, cooperative banks to transfer funds online

To popularise electronic transfer of funds, the Reserve Bank today allowed regional rural banks (RRBs) and cooperative banks to participate in the centralised payment systems.

With this, all the banks can now transfer funds electronically through real time gross settlement system (RTGS) and national electronic funds transfer (NEFT).

At present, the centralised payment systems -- RTGS and NEFT can be accessed only by members that included public and private sector banks. As an exception, RRBs have been given access to the NEFT system through their sponsor banks.

"On a review, it has been decided to expand the sub- membership route to enable all licensed banks to participate in NEFT and RTGS systems," RBI said in a notification.

NEFT, an electronic transfer of funds system meant for retail customers while RTGS system facilitates high-value transfer of money with threshold limit of Rs 2 lakh.

This would be an alternate mechanism to all licensed banks which have the technological capabilities but are not participating in centralised payment systems on account of either not meeting the access criteria or because of cost considerations, it said.

Eliciting condition for such transactions, the notification said, the sub-member would participate in the centralised payment systems through their sponsor bank which is a direct member of the centralised payment system.

In order to ensure compliance with the timely credit and return discipline which are of utmost importance in centralised payment systems, branches of sub-member that are not under core banking system shall be kept out of the centralised payment systems till such time they are brought under core banking, it said.

The sponsor banks would be responsible for sending or receiving the transactions or messages on behalf of their sub-member, it added.

The charges, it said, for customer transactions of sub- member cannot exceed the charges applicable to customers of sponsor banks or direct members of the centralised payment systems.

Source: EconomicTimes
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Bank of India to rename Indonesian arm

Public sector lender Bank of India today said that it will rename its Indonesian arm, Bank of Swadesi, as Bank of India Indonesia.

Bank of India holds 76 per cent stake in the Indonesian bank. The state-run lender said that it has obtained necessary approvals for the same.

“Indonesia and India have close cultural and economic ties and with the core competency that Bank of India brings with it in the areas of agricultural and industrial finance capabilities, we are sure that Bank of India Indonesia will contribute in much larger measure to the growth of the Indonesian economy,” Bank of India Chairman and Managing Director, Mr Alok Misra said.

He added that Bank of India’s global reach would be available to Bank of India Indonesia in expanding its business in forex and international trade finance.
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Jane Ong appointed Citi’s Corporate Affairs Head

Citi India has appointed Ms Jane Ong as the Corporate Affairs Head for Citi South Asia.

Ms Ong will be responsible for media relations, managing external and internal communications as well as Citi’s citizenship portfolio. She will report to Citi India Chief Executive Officer, Mr Pramit Jhaveri, the bank said in a release.

Prior to joining Citi, Ms Ong was with Royal Bank of Scotland. She was also associated with CNBC Asia at Hong Kong and BBC World TV.
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HDFC ERGO launches health claim services

Private sector company HDFC ERGO General Insurance has launched Health Claim Services, its in-house health claim servicing department, that will be a single window for customers for all healthcare related services.

“With this internal mechanism, we are planning to establish better control on the overall claim settlement process and improve the turnaround time with seamless, hassle-free and transparent services in health claim settlement,” HDFC ERGO General Insurance Head-Strategic Planning Group, Mr Mukesh Kumar, said in a release issued here.

The main objective behind this initiative is to facilitate faster and transparent claim settlement process.

Health Claim Services will not only provide personalised claim settlement services but will also act as a guidance centre for all healthcare related queries.

Under this initiative, HDFC ERGO has partnered with network service providers like pharmacies, diagnostic centres, ambulance and wellness centres to provide their customers best-in class health services in addition to the existing spread of over 3,000 empanelled hospitals.
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New General Manager for Bank of Baroda

Mr M.L. Jain took over charge as the General Manager of the eastern zone of Bank of Baroda on Monday. He was previously the Regional Manager (Jaipur region) of the bank's Rajasthan zone.

The eastern zone of Bank of Baroda include West Bengal, the seven North-Eastern states of Tripura, Manipur, Meghalaya, Mizoram, Nagaland, Assam and Arunachal Pradesh, Sikkim and Andaman & Nicobar Islands.
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Tech-orientation required for bankers: Shubhalakshmi Panse

Ms Shubhalakshmi Panse has been the Executive Director of Vijaya Bank for over two years now.

She has handled a range of assignments including field postings as she moved up the hierarchy. She was earlier General Manager with Bank of Maharashtra where she began her career in 1976.

She counts her stint as head of IT as one of her most interesting assignments. This gave her an understanding of the changes that were happening in banking and helped her mature as a leader.

She says, “Unless your thinking is tech-oriented you can't be a good banker. Any new customer project you take up, you should be IT-savvy. All bankers who are moving to the top should be more IT- savvy.”

In an interview at her Bangalore office, Ms Panse answered a range of questions on her bank and industry issues. This interview focused on how public sector banks are handling issues related to ATMs.


What is the idea behind the consortium approach to purchasing ATMs? Will it save costs?

There are two things. One is to avoid duplication. Second, if the number (purchase order) goes up, my power to negotiate also goes up.

At my bank level, if I negotiate for 500 ATMs, it is a very limited number. I would get a better price if I deal with 5,000 ATMs.

However, there are only three vendors and the orders go to them. It all depends on how these players respond.

The second idea that is coming in is the White-label ATMs (ATMs that are established by non-bank entities and which can be used by customers of all banks). Today, there is so much of duplication of ATMs in cities, which is really not required. When we are going in for financial inclusion and going to the rural areas, it is essential that we don't waste money. Obviously, the resources are very limited. And that is why it has been rightly decided to go for this white label ATMs model. Banks will just have to plug and play and pay per transaction. That is an excellent model and we can really reap the benefits.

We need not put up too many ATMs in the rural areas. Any ATM to break-even requires 175 transactions a day. I will not get that kind of hits when I put an ATM in rural areas with a population of 20,000. So it is better to have a WLA and many banks can get the connectivity to the customer.

In your ATM experience, did you find other bank customers using your ATMs more or was it the other way round?

In our bank, I have found that the other bank customers use our ATMs more

So you are making money. How much do you get from other banks?

We must be making about Rs 7-8 lakhs a month. This may be because some of our ATMs are in areas where other bank customers are residing. I have looked at why my bank customers are not using my ATMs.

And we found out that our customers are residing somewhere else and they are opening an account in the branches that are nearer to their office. This happens to many other banks.

So how do you choose a location?

A location should be chosen with 2 or 3 things in mind. One, a place where there is a very young crowd. Second is it should not be on the main road as there should be lot of space to park. Third, it should be in a locality where there are lots of people so that even at nights it gets used.

You said it should not be on the main road but also a place where there is a crowd. Isn't it contradictory?

Typically in the residential areas, you see that there are people always there or if there are shops, people keep coming and buying.

The younger generation likes to come and draw in very small amounts. Rs 100, Rs 200…etc.

All these factors play a big role and when there is a big queue, you should have enough space for them. Another factor is that the younger generation likes to come there and chat. It serves as a meeting point.

If you have ATMs that offers small denominations, it will be a rage….

The only limitation is the size of the cassette inside the ATM. You can only have a maximum of three or four cassettes. Now, if I keep Rs 10 and Rs 50 notes, and somebody wants a huge amount, then to keep so many notes becomes a problem. Then, I will have to keep filling it up again and again.

ATM maintenance, cash uploading, the paper for the receipts – these are all very expensive affairs. When you install technology, you will also have to think in how much time it will take to start paying you back.

The cost per transaction plays a very important role, which we have still not thought too deeply about.

Some foreign banks do a survey every year.

They divide ATMs into four quadrants and figure out the cash cows and the laggards.

Immediately, the laggards (the ATMs which don't make enough money) are relocated.

We don't do that. We think that once an ATM is set up in one place, it should be there for life.

That professionalism, that business sense, must be developed by us also.

How long does an ATM take to pay back?

I look at it from the point of view of number of ATMs and the average hits. We see that some of the ATMs take nearly six months to get 175 transactions per day, which is the break-even point. The average hits for all the ATMs of a Bank put together is a good indicator. We divide that into city-wise data and see what needs to be relocated. We hold on for one or two years though.

Also the number of hits depends on the number of cards I have issued in a branch. If it is an onsite ATM and I have 4,000 customers, I must issue cards for all four thousand customers. These things only happen when your thinking starts changing. It is not taught in any school.

In terms of ATM adoption, what has been your experience in the cities that you have seen?

You will be surprised. I have seen Tier- 3 and Tier- 4 cities adopting ATMs and the number of hits increasing. The novelty factor causes then to shift to ATM usage. In tier-3 and tier-4 cities, handling cash is the norm. Credit card is not accepted in shops there.

That's why you need cash. So that's why usage of ATMs goes up. As far as the metros are concerned, the customer behaviour is largely settled and they are used to these things. Acceptance level there has become high. But in terms of growth potential, it is found more in tier 3 and tier 4 cities. The customer psyche has changed there. They want these things now, their expectations have gone up.

Earlier, the customers used to be scared. In my earlier bank, I had come across people who would ask what to do if their hands get stuck inside! They had a fear of technology. That's changing.
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Dhanlaxmi Bank hopes to return to profit zone post revamp exercise

Dhanlaxmi Bank expects to be back in the black next year by resorting to cost-cutting, rebalancing loan book, and consolidating operations.

As part of the cost-cutting exercise, the old-generation private sector bank has initiated steps to cut excess flab, reduce salaries and give up extra space in major metros and cities to save on lease rentals.

The bank had reported a net loss of Rs 36.87 crore in the October-December 2011 period, against a net profit of Rs 7.26 crore in the corresponding year-ago period.

Former CEO Mr Amitabh Chaturvedi had quit the bank in February in the backdrop of the loss incurred by the bank and exceptionally high operating costs.

On rationalisation of staff, Mr P.G. Jayakumar, MD & CEO-in-charge, Dhanlaxmi Bank, said an evaluation exercise is on to estimate the staff required to run the 280 branches.

Since February, the bank's employee strength has come down from 4,600 to 4,200. Those hired in the last three years on contract basis and at high salaries have had to take a 40 per cent pay cut. About 1,500 employees of the bank are on the Indian Banks' Association prescribed pay structure.

Rebalancing loan portfolio

According to Mr Jayakumar, the bank will not renew low-yielding unsecured corporate advances.

Dhanlaxmi Bank will channelise the funds so released to borrowers in the small and medium enterprises segment. Further, it will step up thrust on gold loans. Both these categories of loans will fetch higher yields.

Of the total loans of Rs 9,550 crore as on December-end 2011, retail loans accounted for 54 per cent of the loan book; corporate loans 29 per cent; SME 15 per cent; and agriculture 2 per cent.

The bank will increase its low-cost current and savings bank deposit base from 20 per cent of the total deposits to 22 per cent in FY13.

To divest stake in broking firm

The 15 per cent stake that the bank picked up in broking firm Destimoney will be divested. This move comes as the Reserve Bank of India has objected to the classification of this investment in the held-to-maturity category. Without this classification, the bank would have to make provisioning in case there is a mark-to-market loss.

Capital plans

Dhanlaxmi Bank plans to raise Rs 200 crore by issuing subordinated debt in the next couple of months. Further, it will raise Rs 200 crore by issuing preference shares to strategic investors by September-end.

Currently, the bank's capital adequacy ratio is low at 9.88 per cent. Of this, Tier-I capital is at 8 per cent.

“Once we mobilise the funds, our capital adequacy ratio will go up to 12 per cent,” said Mr Jayakumar.

Back to basics

The bank has dismantled the vertical structure created by the previous management, whereby the official handling liabilities did not know what was happening on the assets side, said Mr Jayakumar.

Dhanlaxmi Bank has reverted to the traditional branch banking model where the branch manager is responsible for the assets as well as the liabilities side of the balance sheet. ,
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Sunday, April 8, 2012

SBI to consider rate cut after RBI credit policy

State Bank of India has said that it will consider reducing the lending rates after the announcement of the Reserve Bank’s annual credit policy on April 17.

“Of course, we will look into reducing the interest rates in the future, but it will depend on the magnitude of the CRR cut (by the RBI),” the SBI Managing Director and Group Executive (National Banking), Mr A. Krishna Kumar, said at the sixth International Banking and Finance Conference here today.

“I expect the cut in the cash reserve ratio (CRR), but not sure about the repo rate,” he said while talking about expectations from the RBI’s annual credit policy which is scheduled to be unveiled on April 17.

CRR is the portion of deposit that banks are required to keep in cash with the Reserve Bank. At present, it is 4.75 per cent.

The SBI Chairman, Mr Pratip Chaudhuri, had earlier said that RBI might cut CRR by 0.75 per cent in its annual policy, but might retain the short-term lending rate at the existing level of 8.5 per cent.

“We have already reduced our interest rate on educational loan segment and we will also reduce the interest rate in the SME sector soon,” Mr Kumar said.

The reduction of interest rates in other segments, he said, “will largely depend on what the RBI does in its annual monetary policy to be announced on April 17”.

The state-owned lender is also targeting 20-25 per cent overall loan growth in almost all segments in the current fiscal.

“We target 20-25 per cent in the SME sector only and for overall growth of the bank, we aim at the same growth rate (20-25 per cent) during the fiscal as well,” Mr Kumar said.

On rising bad loans, he said: “we are also looking at a major improvement on the asset quality of the bank in the current fiscal”.
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