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Saturday, May 26, 2012

Hackers attack RBI website, crash it for a day

The Reserve Bank said there was an attempt to hack its website yesterday rendering it inaccessible for almost the entire day.

"It was a DNS (Domain Name System) attack where the hacker tried entering the website from a single Internet protocol address multiple times, jamming its bandwidth," an RBI spokesperson said.

Due to multiple requests received from the hacker's IP address, genuine entrants were unable to access the RBI

"We found the IP address and blocked it and got the website on its feet again," the spokesperson said, adding there

was no loss of information or defacing as the hackers could not get into the site.

The RBI brass, including Governor D Subbarao and all the deputy governors, were in Mussorie, Uttarakhand yesterday for the board meeting when the hacking attempt was reported.

Further details like the exact time period when the hacking happened and the geographical location where the attack has been traced to, are unclear.

When contacted, a senior official with the Mumbai Police's cyber crime investigation cell said it has not received any complaint from the RBI regarding the incident.

Source: FinancialExpress
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Union Bank customer service plan

Union Bank of India has rolled out its value-added customer service – Union Experience – in two branches in Ernakulam district. The new service was inaugurated at Thevara and Palarivattam branches by bank's general manager for Kerala and Tamil Nadu, Mr S.K. Bhargava, in the presence of Mr Mayank Mehta, deputy general manager. Mr Bhargava said the bank had successfully rolled out the Union Experience model in 20 branches in Delhi and Mumbai. By incorporating Union Experience in the branch operations, he said, the bank is aiming at positioning right personnel with customer service skills and business development as interface at branches.
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KVB Q4 net up 27%; to pay 140%

Despite the economic slowdown and a marginal rise in its NPA (non-performing asset) level, Karur Vysya Bank managed to grow its top line in 2011-12.

The bank's total income in the fourth quarter ended March 2012 increased to Rs 1,059.27 crore compared with Rs 695.37 crore in the corresponding quarter of the earlier fiscal.

Its net profit increased by 27.3 per cent to Rs 146.79 crore (Rs 115.29 crore) and operating profit by 46 per cent to Rs 213.05 crore (Rs 145.89 crore).

The board has recommended a dividend of Rs 14 per share (140 per cent) for the 2011-12 fiscal compared with 120 per cent in the previous year.

“We have managed to maintain profitability and keep the top line growing, despite market pressures and slowdown. Going forward, we intend to go for high quality assets and this could mean on lower margins, but we want to ensure asset quality,” the bank's Chief Executive and Managing Director, Mr K. Venkataraman, told Business Line.

The bank's gross and net NPAs had gone up slightly from 1.26 per cent and 0.07 per cent to 1.33 per cent and 0.33 per cent, respectively.

Mr Venkataraman attributed this to the overall slowdown. “There was no sector-specific strain,” he added.

The bank's net interest margin (NIM) fell from 3.39 per cent in 2010-11 to 3.08 per cent in 2011-12.

The bank's net profit for the year crossed the Rs 500-crore mark to Rs 501.72 crore against Rs 415.59 crore achieved at the end of the previous fiscal.

KVB has more than doubled its net profit in three years, the Mr Venkataraman said.

Its total income grew 46 per cent to 3,620.52 crore (Rs 2,482.03 crore).

The bank registered a 32 per cent growth in business with deposits growing at 30 per cent and advances by 34 per cent.
Network expansion

KVB added 82 branches to its network during the year to reach 451; added 337 ATMs to take the total ATMs to 825 and employee strength grew from 4,574 to 5,673 as at end March 2012.

The bank is targeting a business of Rs 72,000 crore this fiscal.
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SBI to launch ‘signature' card for high net worth individuals

SBI Card is planning to launch a signature card early next week as it is bullish on the credit card market.

The new card will be targeted at high net-worth individuals (HNIs) and the very affluent segment.

“The average income limit will be higher than that of all other SBI credit cards,” Mr Kadambi Narahari, CEO, SBI Card, said.

SBI Cards will grow its business by 25-30 per cent in 2013, Mr Narahari added

SBI Cards is a joint venture between State Bank of India and GE Capital. The foreign company handles the technology and processing needs of SBI Cards.

At present, the company has 2.2 million cards in force with an asset size of Rs 2,300 crore. Despite decreasing growth in the card industry, the company is eyeing an addition of “at least one million cards by 2014”.

The company also plans to penetrate Tier II and III cities further.

“With better road network, media penetration and growing retail chains, three years from now, we see the card payment market growing in these cities at a rate as high as 20 per cent, outpacing the Tier I market,” Mr Narahari added.

SBI Cards will tap SBI's customers across the country. The SBI Group has a branch network of about 20,000.

Currently, SBI Cards is the third largest credit cards company in the market after HDFC Bank and ICICI Bank.
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Thursday, May 24, 2012

Magma HDI gets IRDA nod for insurance biz

The Insurance Regulatory and Development Authority has issued certificate of registration to Magma HDI General Insurance Company Ltd.

It was promoted by Magma Fincorp Ltd., Celica Developers Pvt. Ltd., Jaguar Advisory Services Pvt. Ltd., and HDI Gerling Industrie Versicherung AG.

With this registration, the total number of general insurers registered with the Authority had gone up to 26, the IRDA said in a release.
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RBI will do whatever needed to check rupee fall: Subbarao

Amid a steep decline in the value of the rupee, the Reserve Bank said on Thursday that it is monitoring the situation and will do whatever is necessary to check the currency's fall.

RBI will do whatever is necessary. Some structural changes are necessary for improvement in the current account. Meanwhile, the RBI is monitoring the situation and we will do whatever is necessary, consistent with our policy,” the RBI Governor, Dr D. Subbarao, said while addressing a press conference after a meeting of the central bank board here.

Pointing out that the rupee has been depreciating over the last three to four months, he said, “RBI is continuously monitoring the situation. We have taken action through current account flows, encouraged inflows and also (steps) to curb speculation.”

Since March 1, rupee has lost over 13 per cent and 11 per cent since the presentation of Budget on March 16 in the face of withdrawal of funds by foreign investors from stock markets.

The Budget contained proposals such as retrospective taxation and general anti-avoidance rules (GAAR).

The movement of the rupee, Dr Subbarao said, “is a function of external situation as well as developments in the current account and capital account and balance of payments”.

Oil marketing cos

On the issue of RBI selling dollars directly to oil marketing companies, Dr Subbarao said, “That's been an issue on the table. I am not ruling it out. I am also not saying that we are going to do it right know. It's an open issue. We have done it in past. At the moment, we have not done it so far.”

Several experts, including Dr C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council (PMEAC), have suggested that the RBI should consider selling foreign currency to oil companies as they withdraw huge amounts to buy crude in the international market.

Price situation

Replying questions on the price situation, Dr Subbarao said the deterioration in inflation has been mainly on account of the rise in prices of food items.

“We noted that inflation has been a surprise upside for month of April. We also noted that increase has been on account of food inflation,” he said, adding the central bank will take into account recent developments while announcing its mid-quarterly policy review on June 18.

“Core inflation, which is non-food manufacturing (items) has remained below 5 per cent. So in our next mid-quarterly review, we will take into account the numbers which have come after our mid-April statement. We will consider how the inflation scenario has evolved. We will take into account the growth statistics and take a decision,” Dr Subbarao said.

Pitching for reduction in the fiscal deficit, Dr Subbarao said, it was necessary to contain inflation.

“Our views are quite well known on fiscal deficit. We have said that fiscal consolidation is very important and very necessary for inflation to come down. So we have said that in our annual policy statement last month that Government must deliver on the budgeted fiscal deficit target,” he said.
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HDFC gets RBI nod to raise FII limit to 100%

The Reserve Bank of India has notified that HDFC's board has passed resolutions to increase the FII investment limit from 74 per cent to 100 per cent.

The increase in Foreign Institutional Investors (FIIs) investment limit is for the purchase of Housing Finance Development Corporation's (HDFC) equity shares and convertible debentures under the portfolio investment scheme. This move follows the Citigroup selling its entire stake of 9.85 per cent held in HDFC under the Foreign Direct Investment route to investors, primarily FIIs, in February. Consequently, the FII shareholding in the Corporation rose to about 66.7 per cent.

In a notice to the BSE, HDFC said the warrants issued by it in August 2009, representing about 3.57 per cent of the diluted equity share capital, are due for exchange into equity shares on or before August 24, 2012. The exchange of such warrants with equity shares may increase the FII shareholding in the Corporation.

“The gap between the earlier FII investment limit (of 74 per cent) and the actual holding was closing. So, the Board passed an enabling resolution to create more headroom for FII holding,” said a HDFC spokesperson.

HDFC shares closed up 4.38 per cent on the BSE at Rs 662.55 per share as against the previous close of Rs 634.75.
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Syndicate Bank to hire 1,000 clerks

Syndicate Bank is recruiting 1,000 probationary clerks. Candidates who have a valid score in the common written examination for clerical cadre conducted by IBPS in November/December 2011 and fulfill other prescribed criteria are eligible to apply.

For details regarding vacancies and cut-off marks State/UT-wise, category-wise, eligibility criteria, fees/intimation charges, application procedure, selection procedure, reservation/relaxation etc., the bank has asked applicants to visit its Web site between June 1 and June 15.

The clerical recruitment would be on State/UT-wise basis. It will, therefore, be necessary that candidates apply for vacancies of State/UT from which they have appeared for the common written examination in which they have qualified, the bank's notification said.
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Wednesday, May 23, 2012

Poor response forces Dhanlaxmi Bank to extend last date for Rs 200 cr bond issue

Thrissur, Kerala-based Dhanlaxmi Bank has extended the last date for subscribing to its Rs 200-crore tier-II bond offering to June 1 from May 21 as the bank is struggling to find investors. The bond issue, which has coupon of 11.9% for 71 months and 11.95% for 84 months, opened on April 27.

"We had launched the bond on April 27. However, we started the marketing only on May 1. Based on the subscription, we have the liberty to extend the subscription date," said PG Jayakumar, managing director and chief executive officer, Dhanlaxmi Bank. AK Capital is the lead arranger to the issue.

The old-generation private lender had expressed plans to raise Rs 400 crore by issuing subordinate debt and equity capital in fiscal 2012-13.

The bank will raise tier-II capital of Rs 200 crore in the first quarter and equity capital of Rs 200 crore in the second quarter. The bank's capital adequacy ratio stood at 9.88% as on December.

"The bank has received subscription from some public sector banks," said a source in the know of the development.

The bank's profitability has been under strain over the past few quarters on rising expenses. PG Jayakumar took over the rein of the bank in February, when Amitabh Chaturvedi quit following differences with the management.

To cut cost, the new CEO has cut salaries by 40% and rationalised manpower, and cut corporate business unit size. The bank is also shifting focus to high-yielding businesses such as gold loans in a bid to boost its financials and cut cost.

The bank's employee strength has fallen to about 4,200 from 4,600 in February.

Source: EconomicTimes
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Canara Bank net profit declines 17%

State-run Canara Bank today posted 17 per cent dip in its consolidated net profit at Rs 3,341.69 crore for 2011-12 fiscal.

For the year ended March 31, 2011, the bank had a net profit of Rs 4,034.19 crore, it said in a filing to the BSE.

During 2011-12, Canara Bank's total income rose by 31 per cent to Rs 33,920.15 crore from Rs 25,834.14 crore in the previous fiscal.

The banks's net interest income fell by one per cent to Rs 7,656.17 crore year-on-year, while non-interest income showed a rise of 10 per cent at Rs 3,104.51 crore.

In the reported year, its operating profit stood at Rs 5,941.80 crore against Rs 5,973.14 crore in the comparable period.

Shares of Canara Bank were trading at Rs 386.15, down 1.52 per cent from its previous close on the BSE.

Source: Financial Express
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IndusInd Bank appoints new addl director

IndusInd Bank has announced the appointment of Mr R.S. Sharma as ‘Additional Director’ in the board of the bank.

He was the former Chairman and Managing Director of Oil and Natural Gas Corporation Ltd (ONGC).

Mr Sharma is a Fellow Member of the Institute of Cost & Works Accountants of India and an Associate Member of the Indian Institute of Bankers.
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Bank unions forum wants 9th bipartite issues to be resolved

The United Forum of Bank Unions (UFBU) wants pending residual issues of 9th bipartite to be resolved before the commencement to the 10th bipartite negotiations.

The issues are compassionate appointment scheme, improvements to staff loans, regulated working hours and five-day week.

“We oppose unilateral imposition of Khandelwal Committee recommendations, aiming at deunionisation in the banking industry,’’ said a note signed by Mr G.D. Nadaf, the Convenor of UFBU.

He said that the UFBU opposed the move to close rural branches and said that if this issue is not resolved, it would organise a two-day strike in July.
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Vijaya Bank in money transfer pact with Western Union

Customers of Vijaya Bank can now receive international money transfers through Western Union.

The bank has tied up with the global payment services company enabling its eight million customers to receive international money transfers. Vijaya Bank now offers Western Union Money Transfer services at 1,300 branches across the country.

Mr H. S. Upendra Kamath, Chairman and Managing Director, Vijaya Bank, said in a press release that with this partnership the bank is not only expanding its product portfolio, but also providing more choices for consumers to meet a variety of international money movement requirements.
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Muthoot Finance's new branch

Muthoot Finance Limited has inaugurated a new branch in Ponnurunni, Ernakulam as part of the company's expansion plans. Mr Tonny Chammany, Mayor, Kochi Corporation, inaugurated the branch. Mr George Alexander Muthoot, Managing Director, Muthoot Finance, said that the opening of the new branch office is a part of our geographic expansion strategy which will boost our business in the region enabling us to get closer with the customers.

It would also strengthen our relationships with customers by offering a wide range of products and services. Mr M. K. George, Senior Regional Manager, Muthoot Finance Ltd. Ernakulam; Mr Foustin Joseph, President, Kerala Vyapari Vyavasai Ekopana Samithi; Ms Soumya, Councillor, Kochi Corporation; Ms Sreekala Shaji, Branch Manager, Ponnurunni branch; were present on the occasion.
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Citibank ends card pact with Jet Airways

Citibank announced the exit of its 12-year-old co-branded card partnership with Jet Airways on Tuesday even as it launched an airline agnostic credit card.

The foreign bank cited changing consumer preferences for ending the partnership with Jet. The bank's co-branded partnerships with Shoppers Stop and Indian Oil Corp, however, stay intact.

Jet Airways and Citibank will continue to support all Jet Airways Citibank credit card features until July 15.

The new Citibank PremierMiles Credit Card will earn and redeem miles across seven domestic and over 100 international airlines, the bank said.

“With fragmentation in the aviation industry, there is a significant increase in the domestic traffic vis-à-vis international traffic. Also, consumer preference has shifted to low cost airlines and spontaneous travel has increased,” Mr Anand Selvakesari, Country Business Manager, Global Consumer Group, Citi India said.

Low-cost carriers (LCCs) account for about 50 per cent of the total air travel in the country as on 2011, Mr. Selvakesari added.

The existing Citibank Jet Airways customers will be given a choice to transfer to Citibank's new card programme with privileges, including a special 10,000 bonus miles free credit to their PremierMiles account.
Jet Airways plans

Jet Airways is planning to introduce a JetPrivilege programme with its co-branded credit card. “JetPrivilege will enable its members to earn and redeem JPMiles to over 600 worldwide destinations,” a Jet Airways spokesperson said.
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IRDA finds ‘massive problems' in SKS Micro's insurance operations

Troubles continue to pile up for SKS Microfinance Ltd. The insurance regulator has found irregularities in the micro-finance institution's handling of insurance of its clients.

“We have found massive problems in insurance operations of SKS Microfinance,'' Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority, told Business Line here on Tuesday.

IRDA teams conducted field enquires and inspections for a long time, he said.

The irregularities included receiving the cheques of death claims from its insurers on its name, which is illegal.

The only listed MFI in the country, based out of Hyderabad, had also “collected” higher commissions than permitted by the insurance regulator while selling the insurance policies.

SKS deals with about 10 insurance companies in both life and non-life for various purposes including distribution of products.

It earns a substantial part of its other income, which was at Rs 366 crore in 2011-12, from distribution of insurance policies.

When asked when enquiry was completed, the IRDA chief said: “We have asked for an explanation.''

Generally, IRDA gives a personal hearing to any company that violates norms before deciding on a penal action.

When contacted, a company spokesperson said: “SKS Microfinance believes that there are no irregularities and, if there are process lapses on account of difficulties in offering rural insurance solutions to millions who have no bank accounts, the processes will be strengthened.”

SKS had stopped enrolment of group endowment policies two years ago, he added.

SKS scrip declined 3.92 per cent to touch a new low of Rs 77.20 on the Bombay Stock Exchange on Tuesday.
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Tuesday, May 22, 2012

Get savings a/c at click of a mouse

Now, get a new savings account at the click of a mouse.

ICICI Bank, the largest private sector lender in the country, is offering an ‘instant account number’ if you apply for a savings deposit account through its website.

While the account will be created instantly and a number allotted to the depositor, the bank will activate the account only on completion of the know-your-customer (KYC) process. The customer has to provide his e-mail address and mobile number at the time of opening the account.

The offer is available across seven types of savings deposit accounts of the bank. The savings accounts for which the account number will be instantly generated include Regular Savings, Silver Savings, Advantage Woman Savings, Senior Citizens Savings, Gold Privilege, Titanium Privilege and Salary. The offer is not available on joint accounts, wealth management accounts and Young Stars accounts.

The move is aimed to increase the bank’s savings deposit base by making the account opening process simple.

“This particular service will help a customer to apply online at his convenience without having to walk into a branch. It is a simple 3-step process, at the end of which the customer gets his account number. The account is activated following the fulfilment of the mandatory KYC process,” a ICICI Bank spokesperson said.

ICICI Bank’s savings deposit expanded 13.7 per cent year-on-year to Rs 76,046 crore in 2011-12. The bank closed last financial year with a (current account/savings account) ratio of 43.5 per cent.

The bank is currently offering this service in 17 locations, including the four metro centres and other major cities in the country. The lender is expected to expand this service in other centres soon.

ICICI Bank currently has 2,752 branches, the largest branch network among private banks in India.

The service charges, terms and conditions will depend on the type of savings deposit the customer chooses. The bank revised its service charges, minimum balance norms earlier this year.

ICICI Bank, like most other top private and state-run banks, currently offer 4 per cent interest on savings deposits.

Source: Business Standard
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LIC’s 10-year, single premium plan

Life Insurance Corporation of India has launched a non-unit linked single premium insurance plan.

The plan, ‘Jeevan Vaibhav', has a ten-year term with a minimum sum assured of Rs 2 lakh and there is no upper limit on the sum assured.

For a Rs 2-lakh sum assured, minimum single premium would be Rs 95,210 without service tax. “There will be a loyalty bonus and a facility to take 65 per cent of premium paid as loan,” Mr AK Sahoo, Zonal Manager, South Central Zone, told newspersons here on Monday. The policy, which has a guaranteed return, is being offered for 120 days from May 21. It can be surrendered for cash after at least one year. The minimum guaranteed surrender value is equal to 90 per cent of the single premium paid, excluding extra premium if any.

The policy is open for those who are aged between eight years and 65 years.

“For the south central zone, we have a target of mobilising Rs 1,000 crore through this policy this year,” Mr Sahoo said.
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Manappuram Fin profit jumps 109% in FY12

The net profit of Manappuram Finance Ltd has surged by 109 per cent to Rs 591.46 crore compared to Rs 282.66 crore for FY 2010-11.

The board of directors has proposed a final dividend of Re 1 per share of face value of Rs 2. This is in addition to the interim dividend of Re 0.50 per share declared earlier in February this year.

The increase in profits was driven by growth in the assets under management (AUM) which stood at Rs 11,630 crore, a 54 per cent increase over the previous year’s level of Rs 7,549 crore. The total gold loan disbursements during the year amounted to Rs 31,698 crore (Rs 18,057 crore in the previous year).

The operating income was Rs 2,615.55 crore compared to Rs 1,165.42 crore for the previous year, recording a growth of 124.43 per cent. The PBT grew to Rs 877.20 crore compared to Rs 423.89 crore in the previous year.

The provision towards income tax stood at Rs 285.75 crore as against Rs 141.23 crore the year before. Earnings per share amounted to Rs 7.06 and the capital adequacy ratio has been maintained at 23.26 per cent.

During the year, the company expanded its nationwide branch network from 2,064 branches to 2,908 branches spread across 24 States and Union Territories.

The board has also appointed Mr Jagdish Capoor, former Chairman of HDFC Bank, as the new Non-Executive Chairman. The Executive Chairman, Mr V. P. Nandakumar, has been re-designated as Managing Director and CEO.

The Managing Director, Mr I. Unnikrishnan, has been re-designated as Executive Director and Deputy CEO, while the Joint Managing Director, Mr B. N. Raveendra Babu, is re-designated as the Executive Director.
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IDBI Federal launches insurance plan for ‘seniors’

IDBI Federal Life Insurance today launched its maiden online product IDBI Federal Termsurance for senior citizens. The plan, with no medical tests, is targeted at people in the age group of 50-85 years.

Announcing the launch, Mr G.V. Nageswara Rao, Managing Director and Chief Executive Officer said, “Almost 10 million users search for life insurance plans on the Internet. The interactive online platform enables them to research the plan, calculate premium amounts and make online payments directly to the company to receive the insurance policy in the comfort of their homes.”

According to industry experts, Internet usage in India is growing at a healthy rate and currently stands at close to 100 million users across age groups. The regulatory body is also considering the option to ‘dematerialise’ insurance policies in the near future, making the online platform important for the life insurance industry.

According to the National Online Survey Report for the Review of the National Policy of Older Persons - April 2010, ‘Insurance’ is reported as amongst the top five issues that require attention in the lives of senior citizens in India.
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Axis Bank picks up IBM solution for customer care services

Axis Bank has selected IBM to provide customer care services to its customers.

IBM will consolidate and manage the contact centre operations from the bank’s existing 58 regional asset centres to a single mortgage contact centre. The contact centre will cater to inbound voice and email communications from the bank's customers.

Axis Bank expects to benefit from additional potential revenue generated as a result of cross-selling or up-selling services or applications at the consolidated mortgage customer care centre.

Mr Jairam Sridharan, Senior Vice-President, Consumer Lending, Axis Bank, said: “We chose the IBM solution to consolidate our contact centre operations because of the company’s proven expertise and experience in this field and its commitment to a solution that maintains the right balance between quality of service and price.”

“As one of the fastest growing banks in India, Axis Bank was looking to transform their customer care and back-office functions to global standards,’’ said Mr Anuj Kumar, Director, Global Process Services, IBM-India and South Asia.
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Monday, May 21, 2012

Banks see healthy Q4 but bad loans may throw a spanner

Indian banks have managed to perform reasonably well in the fourth quarter despite worries about rising bad loans and shortage of liquidity.

They have steered their asset liability management well despite upward pressure on deposit cost but the amount of restructured loans can throw a spanner for many quarters especially for the government banks if suspended projects do not take off soon.

"Up to the operating profit level, we are the most efficient among all banks including private sector ones. But we lose out after the operating profit when the loan loss provision comes," State Bank of India chairman Pratip Chaudhuri said.

While the state of stressed assets for the banking sector has shown a little improvement since December 2011, March 2012 numbers indicate bad loans or gross non performing assets rose 46% compared to the corresponding period last year.

Data show that asset quality, as measured by the change in the percentage of gross non performing assets to gross advances, has deteriorated for a majority of the government banks, which have significant exposure to the troubled public-sector power distribution companies and to the aviation sector.

"We need to follow a cautious approach. Banks are very much concerned about the asset quality amid slowing growth," Union Bank of India chairman and managing director Debabrata Sarkar said.

Central Bank of India reported a 301 basis points rise in gross non-performing assets, the highest in the industry. The bank also reported the biggest decline in profit during the fourth quarter from Rs 1252.41 crore last year to Rs 533.04 crore in March 2012, a fall of 57%.

For SBI, the country's largest lender, the percentage of gross non-performing assets to gross advances increased by 116 basis points to 4.44%. Other banks that reported a significantly high increase in bad loans include Oriental Bank of Commerce, State Bank of Mysore and Punjab National Bank.

With industrial production growth slowing, banks have focused on growing retail lending that gives a better return.

SBI led the way with its "dream NIM" of 3.85%, which many think will be difficult to sustain as banks, in general, face stiff challenges in mobilising low-cost deposits when inflation remains high.

The likes of Allahabad Bank, Bank of Maharashtra, Uco Bank and private lenders such as ING Vysya Bank, ICICI Bank and South Indian Bank too have managed to improve their net interest margins (NIM), the difference between yield on advances and cost of deposits, after banks could deploy the resources with better yields after Reserve Bank of India reduced the cash reserve requirement by 125 bps in the fourth quarter.

SBI's Chaudhuri said retail deposit growth will be the biggest challenge in next few quarters. Union Bank's Sarkar could not agree more. "Mobilising low-cost resources and maintain NIM pose a challenge because of high inflation."

In terms of rise in annual profit, Development Credit Bank and State Bank of India reported the highest growth of 157% and 42% respectively. The largest rise in total income was from Yes Bank, at 54%, followed by IndusInd Bank at 48%, Indian Overseas Bank at 47%, South Indian Bank at 45% and Kotak Mahindra Bank at 44%.

Source: EconomicTimes
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Canara Bank likely to open 600 ultra small branches this fiscal

To drive more business from its business correspondents, Canara Bank plans to open 600 ultra small branches this fiscal.

Of these, 300 would be under the parent bank and 300 under the Canara Bank-sponsored regional rural banks, Ms Archana Bhargava, Executive Director, Canara Bank, told Business Line. The bank has opened 41 ultra small branches so far.

“These branches will instil a much wanted confidence in dealing with business correspondents who will now have an identity as the bank's agents,” she said, pointing out that with the setting up of ultra small branches, all the BCs would be provided with laptops and receive assistance from staff of nearby branches.

The brick and mortar branches that Canara Bank set up in its financial inclusion villages last fiscal have also received good response, said Ms Bhargava. The bank set up 167 brick and mortar branches in its financial inclusion villages. “We have so far opened over four lakh accounts with a total business of Rs 405.15 crore,” she said.

This includes Rs 177.84-crore advances and deposits of Rs 227.35 crore. According to her, one such branch at Gudivakalanka in West Godavari district of Andhra Pradesh garnered business of Rs 21.89 crore in the eight months since it was opened in August 2011.

The bank also plans to focus more on urban financial inclusion. It is looking at increasing the urban financial inclusion branches to 50 by 2014 from the current 19. Bank officials pointed out that they had expected labourers to remit their wages at these branches, similar to the bank's experience at Dharavi in Mumbai. “In reality we see more business from self-help groups and joint liability groups,” they said.

The urban financial inclusion branches saw a total business of Rs 150 crore as on March 31, 2012, from over 67,000 accounts.
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SBI's limited usage cheques upset account holders

The facility aimed at minimising frauds is causing problems to customers who use them for paying large sums for buying mutual funds & other financial products.

State Bank of India's new multi-city cheque books with a 'usage limit' have not gone down well with many well-heeled account holders.

While the new cheque books, issued a few months ago, are aimed at minimising frauds, customers investing large sums in mutual funds and other financial products are finding it inconvenient.

The bank initially introduced cheques with Rs 2 lakh usage limit for savings bank account holders but later increased the limit to Rs 5 lakh. The cheque books were issued to account holders having bulk deposits with the bank.

"These cheque books are causing a lot of problems. Most of the time, people do not see the 'usage limit' on the cheque. They just write a sum higher than the limit and send it for clearance. This has resulted in several cheques getting dishonoured," said a Mumbai-based independent financial advisor.

Multi-city cheques are payable at any branch, have no collection charges and have the same clearance time as local cheques.

According to a senior SBI official, the bank has decided to set usage limits to prevent fraudulent transactions and protect account holders. When a bank clerk handling cheque clearance, particularly in a remote branch, is given a multi-city cheque, he simply tallies the signature and pays off the bearer of the cheque. This has often resulted in fraudulent practices like presenting forged cheques.

"SBI, by putting a 'usage limit', is trying to reduce losses to genuine account holders who may be duped by unscrupulous elements," the senior official said. While the bank is trying to protect its customers, it is causing operational hurdles to account holders who draw high value cheques to invest in mutual funds and insurance products.

"HNIs invest anywhere between Rs 10 lakh and Rs 15 lakh in debt funds and insurance products. In such cases, the investor has to use three-to-four cheques to make one investment," said another distributor.

"The problem is SBI has not informed account holders how and whether cheque limits can be raised. Even bank employees are not sure if one could increase the usage limits," the distributor said.

While SBI account holders can demand plain cheques from branch counters, these will not be treated as multi-city cheques.

Source: EconomicTimes
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Despite rising prices, homes most affordable in 30 yrs: HDFC

Housing may be perceived to have gotten very expensive at the current sky-high levels, but data compiled by mortgage giant HDFC Ltd shows that home prices are near their most affordable level in over three decades.

The home prices have indeed been rising for more than 10 years, except for a temporary slump in 2009, but the ’affordability’ of purchasing a house has been mostly on a declining trend for almost two decades now, as per HDFC data.

Affordability ratio

This affordability ratio, which takes into account the annual income of the home buyer along with the price of the house, declined to 4.6 in the previous fiscal, ended March 31, 2012, from as high as 22 in the year 1995.

This means that a home buyer, on an average, needed an amount equivalent to nearly 22 times his or her annual income in 1995, but now an amount less than five times of the annual earnings was required for purchasing a house.

The HDFC data, released in an investor presentation for its financial results for 2011-12, shows that affordability ratio of 4.6 in the last fiscal was the third lowest ever figure after 4.3 in the year 2004 and 4.5 in 2009.

“The reason why property prices are still affordable, despite steady increase in property prices over the years, is that income levels have also risen during this period along with added tax benefits on housing loans,” HDFC Ltd Managing Director Ms Renu Sud Karnad told PTI.

“The cost of a house as a multiple of the annual income of a borrower is currently estimated at 4.6 times which is almost the lowest ever in the last three decades,” she said.

“In other words, today it takes about 4.6 years’ income to buy a house. As long as that ratio stays in the range of 4.2-5.5 times, housing loan demand will be there,” she added.

Loan to value ratio

Ms Karnad further said that HDFC’s average loan amount this year is Rs 19.5 lakh and loan to value ratio at origination is 65 per cent.

“So the property value for these loans will be somewhere around Rs 30 lakh, which is affordable in today’s context,” she noted.

As per the historic data, the average annual income of a home buyer has crossed Rs 10 lakh level now, marking a sharp jump from about Rs 2-3 lakh about ten years ago.

The average home price has also risen during this period, but the surge has been relatively less sharp from about Rs 15 lakh to near Rs 30 lakh.

Tax benefits

In addition to a sharper growth in income levels, the larger tax benefits have also helped make the home purchases more affordable for the buyers.

Taking into account various tax incentives, the effective rate of interest on a home loan has come down to 7.1 per cent currently, from a high of 11.6 per cent in the year 2000.

This takes into account a decline in nominal interest rate from 13.25 per cent in 2000 to 11 per cent in 2012, as also increase in maximum deduction for interest from Rs 75,000 to Rs 1.5 lakh and an increase in deduction limit on principal amount from Rs 20,000 to Rs 1 lakh, HDFC said.

Price trend

Ms Karnad further said that “one positive trend that must be noted is that 46 per cent of the new residential units launched across Indian cities in the second quarter of calendar year 2011 were in the Rs 2,000 to Rs 3,000 per square feet range.

“This is a reversal of trend as compared to the fourth quarter of calendar year 2010 and the first quarter of calendar year 2011, wherein most of the residential launches were in the Rs 3,000 to Rs 4,000 per square feet range,” she said.

As per HDFC’s FY-12 numbers, there is still very good demand for properties in certain metros like Chennai, parts of Delhi NCR, and Bangalore.

Also, the Tier-II and Tier-III cities and some larger towns like Pune and Chandigarh have been doing well.

“The reason is property prices in these towns are still affordable. We give loans to middle income borrowers who are looking to buy a house so that they can stay there. These borrowers are not investors or speculators,” Ms Karnad said.

Interest rates

“Interest rates seemed to have topped out and should start moving down in next 6 months. Since over 80 per cent of the customers take floating interest rate loans, they will benefit from the downward movement of interest rates,” she added.

“In Mumbai, buyers have clearly adopted a wait and watch stance while developers are unwilling to relent on prices citing reasons of inflation, higher interest rates and increased raw material and labour costs,” she said, adding that a moderate price correction could see home buyers back.

Ms Karnad also said that the issues arising out of crisis in Europe were unlikely to affect the home purchases.

“What happened in 2008-09, when the global meltdown led to a huge uncertainty all over, be it the economic growth and its impact on jobs, confidence levels among people at large etc, nothing of that magnitude is being envisaged now. I do not think the current issues especially in Europe would have any major impact on one’s decision to buy a property through a home loan,” she said.
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