ICICI Bank has evolved from corporate to day-to-day bank: Chanda Kochhar

Having been largely focussed on corporate banking and big-ticket deals in the past, ICICI has now evolved into a day-to-day banking business, the bank's chief Chanda Kochhar has said.

"There have been two big changes on the corporate side of our business. In the past, we were mainly focused on large-ticket deals, whereas today we are in the day-to-day banking business and a lot of this is executed through branches," Kochhar said.

"On the retail side, our focus was through the outside structure but now business is done through the branches. Over and above that deposit taking and regular servicing is conducted through branches. Basically, we have transitioned," Kochhar said in an interview published by global investment banking major Morgan Stanley.

Asked about the criticism that ICICI has not been a branch bank, but mostly a main office or corporate bank, Kochhar said: "We have made a lot of progress. We now have 2,750 branches. The perspective of our branches has also changed.

"Several branches are now equipped to do basic transaction banking as well as commercial banking with SMEs and large corporates. They are not just deposit-taking branches. Branches are also doing sales and cross selling. In the past, we were doing sales through the DSA structure."

After Kochhar took charge as CEO in 2009, ICICI Bank had outlined a strategic path for its growth. At that time, she had targetted to rebalance the bank's funding mix, grow retail deposit base, improve asset quality and enhance profitability.

Talking about this transition process, Kochhar said: "I think the transition was with the intent to give us the strong foundation, which would then allow us to grow in a sustainable, profitable manner for a longer period.

"It was not an easy thing to do and it was not one of the happy moments to sit in industry forums and lag industry growth rates when you have been used to being a leader in terms of growth."

Kochhar, who has been with the ICICI group for 28 years and had started as a management trainee, further said that what she was saying "that for a year or two, we were not growing the balance sheet but growth is not just balance sheet growth.

"We were growing the branch network. In three years, we have doubled the branch network. We grew network in excess of 35 per cent per annum.

"We were growing some of the very mundane banking businesses like working capital lending and transaction banking, even to the extent of 50 per cent. We were growing savings deposits by more than 25 per cent per annum," she said.


Source: Financial Express

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RBI may cut repo rate by 25 bps, keep CRR intact

Will the RBI go in for a rate cut, or will it not?

This is the question that bothers many who are eagerly awaiting the apex bank's mid-quarter policy review slated for Monday as far as key rates are concerned.

Though a 100 basis point cut in the Cash Reserve Ratio has been speculated till three days back, the RBI is now facing fresh realities which could be the game-changers for the economy, in general, and the monetary policy, in particular.

The fresh triggers for concern on the inflation front for the apex bank are the increase in food and fuel prices and the more-than-expected hike in the Wholesale Price Index to 7.55 per cent in May from 7.23 pre cent in April.

The hike in minimum support price for paddy, oilseeds and pulses in the range of 15-50 per cent is set to increase inflationary pressures on the economy even if one wants to put up a brave front as regards the weakening rupee and contracting exports, industry experts say.

The statement of the RBI Governor, Dr D. Subbarao, on Thursday that growth had to be sacrificed to tame inflation in a way reflects a sentiment in the central bank that might be different from the market expectations of a big cut in the CRR to the extent of 100 basis points.

CRR cut?

The CRR cut now seems unlikely as the need for fresh liquidity is debatable at a time when corporate credit off-take is still low.

Further, a CRR cut without a corresponding repo rate cut is unlikely to result in immediate interest rate cuts by banks as has been demanded by the industry.

So, Dr Subbarao may prefer a cautious approach by keeping the cash reserve ratio untouched at the existing 4.75 per cent. At the same time, the industry concerns could be addressed by lowering the repo rate by 25 basis points.

This will give RBI a chance to wait-and-watch till next quarterly policy.

nagsridhu@thehindu.co.in

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Corp Bank workshop on Unicode

Corporation Bank conducted a three-day workshop on Unicode for members of Town Official Language Implementation Committee (TOLIC) in Mangalore recently. A bank release said here that Mr P.S. Baliga, general manager of Corporation Bank, inaugurated the workshop. He said that Unicode is the best tool for working in Hindi and Indian languages in the computer age. Corporation Bank, in association with Bilingual Technology Research Institute (under the auspices of TOLIC), conducted the workshop. Mr Anil Kumar Sahu, assistant director, Hindi Teaching Scheme, Government of India, spoke on the adoption of Unicode by various government organisations and industries, the release said.

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Karnataka Bank eyeing Rs 2,520-cr export credit by end of this fiscal

Karnataka Bank is targeting to increase its export credit portfolio by around Rs 1,100 crore during 2012-13.

Mr P. Jayarama Bhat, Managing Director and Chief Executive Officer of the bank, said this while delivering the keynote address at the ‘Forex Business Conference' of the bank in Mangalore on Friday.

“Export credit is likely to increase from the present level of Rs 1,454 crore to Rs 2,520 crore by March 2013,” he said.

Speaking to Business Line after the conference, he said the bank is planning to focus on such sectors as readymade garments, engineering goods, gems and jewellery, and pharma for increasing its export credit.

The bank will be actively engaged in customer acquisition from diversified sectors and broad base its forex credit portfolio as a prudent risk-mitigation measure, he said.

‘Silver lining'

Stating that the global economy is not resilient, especially after the Euro Zone crisis, he said the silver lining is that US economy is showing signs of improvement.

In spite of all adversities, there are opportunities to expand export credit, he said.

“In the backdrop of depreciating rupee, dwindling forex reserve, and depressing global scenario, the forex sector deserves special attention by all concerned. Banks have to treat it as national priority and play a proactive role,” he said.

With this background, the bank has planned to expand its export credit portfolio by lending around Rs 1,100 crore during the current financial year, he said.

vinayakaj@thehindu.co.in

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IRDA issues norms on ‘orphan' policies

If your insurance policy is not being serviced due to termination of the agent by an insurer, you will now get relief.

The insurance companies are allowed to allot any of the lapsed ‘orphan' life insurance policies to other individual insurance agents with valid licence for rendering effective service to the policyholders.

In the guidelines on servicing of orphan policies issued on Friday, the Insurance Regulatory and Development Authority said the life insurers should notify the particulars of the newly-allotted agent to the policyholders concerned.

All policy services will be rendered by the ‘allotee agent' similar to what the insurance agent was rendering, the regulatory said.
Ineligible products

Single premium life insurance policies or life insurance policies on which no further premiums are due for payment are not eligible for allotment under these guidelines.

Life insurance products designed with specific marketing features such as direct/online marketing where no commission outgo is projected are also not eligible for allotment.

The guidelines will come into force with immediate effect, IRDA said.

‘Orphan' life insurance policies refer to the policies initially effected by an individual insurance agent whose services are subsequently terminated, removed or deleted from the rolls of the insurer.

nagsridhu@thehindu.co.in

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SBI cuts lending rates by 50-350 bps for small units, farm sector

The country's largest public sector lender State Bank of India has cut lending rates by 50 to 350 basis points for SMEs (small and medium enterprises) and agriculture segments.

Without revising the benchmark base rate, which is currently at 10 per cent, the bank has pared the lending rates by tweaking the spread it charges over the base rate.

The bank also reduced the tenor premium on term loans by 40 to 100 basis points (bps). A basis point is one hundredth of a percentage point.

According to the bank, borrowers with External Credit Rating of Investment Grade and the bank's Internal Credit Rating will get a 25-100 bps concession.

The cut in lending rates comes about a week after the bank had cut interest rates on short-term retail deposits by 25 basis points and just a couple of days before the RBI's mid-quarter review of monetary policy.

Interest rates on retail loans such as personal, housing, auto, car and education remain unchanged. The bank had reduced interest rates on these loans in the last 2-3 months, announced Mr Santosh Nayar, Deputy Managing Director, SBI.

Mr A. Krishna Kumar, Managing Director, SBI, said the rate cut may impact the bank's net interest margins by 10-15 bps.

Interest rates for borrowers under the agriculture segment have been brought down by 75 to 350 bps, while those with loan limits above Rs 25 lakh and up to Rs 100 crore in the direct and indirect agriculture segment will be offered finer rates, the bank said.

In the first two months of the current quarter, deposits and advances of the bank grew by Rs 26,000 crore and Rs 8,000 crore respectively.

beena.parmar@thehindu.co.in

satyanarayan.iyer@thehindu.co.in

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ING Vysya Bank launches new fixed deposit scheme, ING FD+

ING Vysya Bank launched a fixed deposit scheme, offering an interest rate of up to 9.5 per cent per annum for one-year deposits.

The scheme, ING FD+, is available for deposits up to Rs 15 lakh and customers can also do a partial withdrawal of the deposit in units of Re 1, the bank said in a statement.

Customers can also link the FD with their savings account and activate automatic sweep of funds from the FD, when needed, it said.

Customers can therefore withdraw cash from an ATM or write cheques to access their fixed deposit in case of a shortfall in their savings account.

Uday Sareen, Country Head - Retail ING Vysya Bank said: "You may avail the product through a simple SMS, access money from your FD from an ATM, and not get penalised for any premature withdrawals."



Source: EconomicTimes

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Public sector lender Allahabad Bank on Thursday said it has targeted a business growth of 21.39 per cent, and a business level of around Rs.3,300 billion by end of the current fiscal.

"Sustaining its growth momentum, the bank has targeted a business growth of 21.39 per cent during the current year and projected a business level of around Rs.330,000 crore as on March 31, 2013," declared Allahabad Bank chairman and managing director J.P. Dua at the bank's 10th Annual General Meeting here.

Dua said the focused approach towards enhanced customer service, network expansion and new products resulted in substantial increase in the bank's total business by 20.04 per cent to reach the level of Rs.2,718.43 billion during the last financial year.

The bank has planned to open 250 branches and 1,000 ATMs during the current fiscal.

Dua said the bank planned to open more overseas branches to increase its international presence.

"In order to increase overseas presence, apart from the existing overseas branch at Hong Kong and the representative office at Schenzen, China, the bank has planned to open more overseas branches," he added.



Source: EconomicTimes

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Now, pay school/college fees with pre-paid cards

Making life easier for people, the Reserve Bank today allowed holders of pre-paid payment cards, to deposits school and college fees and pay taxes in addition to buying rail and air tickets within the prescribed limit of Rs 10,000.

The pre-paid cards, which are convenient alternatives to cash and cheques, are mainly issued by banks and Non-Banking Financial Companies (NBFCs) on payment of specified amount and are used for purchasing goods and services from limited outlets.

These pre-paid cards which are technically known as semi-closed pre-paid instrument, the RBI said, can be loaded with a maximum value of Rs 10,000 and may be used for payment of "utility bills/essential services/air and train travel tickets; and recurring payment of college fees, school fees, government taxes."

The RBI has earlier allowed banks, NBFCs and other companies to issue different types of pre-paid payment instruments.

In view of the rising inflation, the RBI has decided to increase the limit of the card with minimum value from Rs 1,000 to Rs 2,000. However, the maximum limit for the semi-closed card with highest denomination has been retained at Rs 10,000.

These limits indicates the maximum amount that a card can hold at any given point of time.

RBI had earlier in 2009 came out with the guidelines for the pre-paid cards and allowed the holders to buy goods and services from different types of outlets. It had allowed holders to purchase travel tickets, insurance and pay water, electricity and telephone bills.


Source: Financial Express

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Macquarie questions HDFC accounting practices

Financial services giant HDFC  hit out at global brokerage firm Macquarie, saying the latter did not attempt to "verify the facts and statements" before raising concerns over its stock performance and accounting practices.

In a report published today, Macquarie Equities Research said that "a structural de-rating (of HDFC stock) is likely because the quality of earnings and ROE (Return on Equity) reported is being driven more by its corporate book and aggressive accounting practices."

Alleging that accounting practices were being used to inflate earnings and ROE, Macquarie said: "Over the past two years, HDFC has been adopting aggressive accounting practices by passing provisioning through reserves and also making the adjustments for zero-coupon bonds (ZCBs) through reserves."

It further said that HDFC's FY11 and FY12 earnings were overstated by 38 per cent and 24 per cent, respectively, and the ROE would have been lower for these years if adjustments had been made through the profit and loss account.

"In other words, earnings growth has been managed, in our view," Macquarie said.

Reacting strongly to the report, HDFC said in a statement that its "management completely disagrees with the contents of the Macquarie report dated June 14, 2012 as the concerned analyst has not attempted to meet anyone from HDFC before making the aforesaid report and verify the facts and statements made therein."

"Moreover it is surprising that Macquarie in its report as recently as May 7, 2012 had put a price target of Rs 775 on HDFCs stock with an outperform rating based on the same facts and figures. We are therefore unable to understand as to what prompted the analyst to change his recommendation and outlook within a months time," the company said.

HDFC also dismissed any problems in its accounting, saying, "it needs to be understood that HDFC is both a housing finance company and is also a Financial Holding Company.

"As a Financial Holding company, HDFC has been making investments in its subsidiaries and associates namely HDFC Bank, HDFC Standard Life Insurance Company, HDFC Ergo General Insurance Company, HDFC Asset Management Company, etc."

When asked whether they suspect some rivals or market forces behind the issues raised in the report, the HDFC officials declined to comment.

However, market sources said that rivals and market operators at times tend to take benefit of negative research reports to buy shares at lower levels.

Market regulator Sebi is already investigating certain other cases where research reports have been used by market operators to push up or pull down the share prices.

HDFC also said that it is surprising that Macquarie has changed its stance within a month, when no material changes have taken place.

In today's report, Macquarie has downgraded HDFC stock from "outperform" to "underperform", while lowering the one-year price target to Rs 550.

HDFC's shares today closed at Rs 644.60, down 1.63 per cent, at the BSE.

In its statement, HDFC further said: "Under the Indian GAAP, the accounts of HDFC are presented on a standalone basis wherein only the dividends received from subsidiaries and associates are included as part of the income and its true share of profit in its subsidiaries and associates is not considered as part of HDFC's profits."

The company said that it has invested in subsidiaries and associates out of the amounts borrowed by way of Zero Coupon Debentures and therefore the interest cost on such borrowings amounting to Rs 485 crore during 2011-12 has been charged to Securities Premium account, as per the Companies Act.

"For the year ended March 31, 2012, if the proportionate share of profits of HDFC in its subsidiaries and associates is considered, the profits of HDFC will be higher by Rs 1,340 crore after reducing the dividends received from the subsidiaries and associates," it said.

"Under these circumstances if the aforesaid interest cost on Zero Coupon Debentures are charged to profit and loss account, HDFC's profits would still be higher by Rs 855 crore.

"Further as and when IFRS is made applicable under Indian GAAP, the overall profits will go up further as some of the expenses on borrowings and loan sourcing will require to be amortised instead of currently being fully charged to the Profit and Loss account in the year of payment," HDFC said.

In a point-by-point rebuttal to the issues raised in Macquarie report, HDFC further said that the one time provisioning requirements in respect of standard assets is not reflected in profit and loss account as it relates to all the past assets and is transitory in nature.

"The interest rates on retail home loans are lower on account of lower risk weights, lower NPAs and also diversified risk profile," it added.


Source: Financial Express

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Corporation Bank to recruit 1,550 clerks

Corporation Bank has invited online applications for the recruitment of 1,550 single window operators (clerks).

It has invited applications from Indian citizens who have taken the common written examination for clerical cadre conducted by IBPS (Institute of Banking Personnel Selection) in 2011-12 and have a valid scorecard issued by IBPS.

The last date for online registration is June 26, 2012.

The bank has informed the candidates that the single window operator recruitment would be on state/UT-wise (Union Territory) basis.

Therefore, it will be necessary for them to apply for the vacancies of a state/UT from which they have appeared for the common written examination and in which they have qualified.

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Annuity, a must in all pension plans: IRDA

Life insurers will have to provide an immediate or deferred annuity, even in cases where pension products are surrendered before vesting date.

At the time of surrender or vesting, the policyholder shall have to buy a single-premium, deferred annuity or an immediate annuity product from the same insurer who sold the original pension policy, Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority, said in a circular issued on Thursday.

Surrender value

For surrenders after the lock-in period of the unit-linked insurance-based pension products, the surrender value should not be less than the fund value.

Surrender during the lock-in period of unit-linked products should be in line with the existing regulations.

An annuity is an insurance product that pays out income, generally to be used as part of a retirement strategy through a pension plan.

Concern on guidelines

A vesting period is the period of time an investor or other person holding a right to something must wait until they are allowed to fully exercise their rights.

The circular was issued by the regulator in response to certain concerns expressed by insurance companies on the guidelines issued in January 2012 and November 2011, Mr Hari Narayan said.

nagsridhu@thehindu.co.in

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LIC told to come up with specific scheme for farmers

The Finance Minister, Mr Pranab Mukherjee, has directed the Life Insurance Corporation to design a life insurance scheme — a Kisan Bima Yojana — for farmers. This scheme should be on the lines of the Janashree Bima Yojana, a social security scheme, where cover can extend up to 65-70 years.

The additional premium could be borne by the farmers covered under the scheme, he suggested. Mr Mukherjee's advice to LIC came during his meeting with the chief executives of public sector insurance companies here on Wednesday.

‘Marginalised group'

On the coverage of farmers under agricultural insurance, Mr Mukherjee noted that the number of non-loanee farmers has been coming down over the years. Agricultural Insurance Company of India Limited should work towards bringing not only all loanee farmers under cover but also as many non-loanee farmers as possible, he said.

“I feel this is the most marginalised group requiring agriculture insurance and should be covered on priority”, he said.

The Finance Minister congratulated LIC for being the trust factor among the people. In the life insurance sector, LIC continues to be the market leader.

It enjoyed a market share of around 81 per cent in terms of new business policies and 71.3 per cent in terms of new business premium during 2011-12.

Meanwhile, the LIC Chairman, Mr D.K. Mehrotra, told Business Line here that the insurance behemoth had no plans to reduce equity investments this fiscal in the wake of a slowdown in the economy.

LIC's investments

“We will maintain the tempo of investments seen in recent years”, he said, when asked if LIC would lower its level of equity investments this fiscal.

LIC is understood to have invested about Rs 45,000 crore in equities in each of the last two financial years.

The Indian economy grew 6.5 per cent in 2011-12, lower than the advance estimate of 6.9 per cent put out by the Central Statistics Office in February this year.

The recent moderation in economic growth, coupled with the policy paralysis at the Centre, has raised doubts about the India growth story.

Sluggish industrial output growth has worsened the situation for policymakers.

With there being no room for any proactive fiscal policy, policymakers are looking to the Reserve Bank of India to do the rescue act by further cutting policy rates.

On its part, India Inc has been clamouring for policy rate cuts by the central bank in the upcoming policy review on June 18.

krsrivats@thehindu.co.in

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RBI broadens scope of prepaid payment instruments

The Reserve Bank of India has broadened the scope of prepaid payment instruments issued by bank and non-bank entities.

In a notification, the central bank said semi-closed system payment instruments can also be used for payment of college fees, school fees, and government taxes up to a limit of Rs 10,000.

Know your customer

Hitherto, these instruments could be used only to pay utility bills and for payments related to essential services, as also to book tickets for air and train travel.

The RBI, in its latest notification, said these instruments can be issued without separate know-your-customer due diligence procedures being undertaken by the issuer.

Semi-closed system payment instruments are redeemable at a group of clearly identified merchant locations or establishments which contract specifically with the issuer to accept the payment instrument.

These instruments do not permit cash withdrawal or redemption by the holder. The RBI has also doubled the limit for issue of semi-closed prepaid payment instruments to Rs 2,000 against any identity document furnished by the customer.

This is, however, subject to reporting of annual turnover/suspicious transactions.

Doubled limit

The central bank has asked issuers of the instruments to ensure that under no circumstances is more than one active instrument issued to the same holder by the same issuer.

The scope of the prepaid payment instruments has been broadened after a review of the way the issuance and acceptance market has developed, the RBI said.

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Karnataka Bank targets Rs 1,000-cr agri sector loans

Karnataka Bank has identified 51 branches for focussed attention to agriculture lending. With this, the bank is targeting Rs 1,000 crore disbursements in agriculture sector during 2012-13.

Mr P. Jayarama Bhat, Managing Director of the bank, said this while delivering the keynote address at the ‘Agri-Business Conference' of the bank here on Thursday.

Growth centres

He said that the bank has already identified certain growth centres throughout India. It would make concerted efforts for increased credit flow.

Mr Bhat told Business Line that around 51 branches of the bank across the country have been identified for focused attention to agriculture sector. These branches will focus on both direct and indirect advances to agriculture sector.

Of the total 503 branches of the bank, these 51 will be known as green-belt branches, he said.

The total agriculture portfolio of the bank stood at around Rs 2,800 crore at the end of 2011-12. During that year, the bank disbursed around Rs 800 crore to agriculture sector, he said.

The bank is also planning to introduce ATM cards for Kissan Credit Card accounts of the farmers. More thrust will also be given for financial inclusion and reaching out to rural population in big way, he said.

DENIES RUMOURS

To a query on Thursday's market rumours that the bank is a takeover target by another private bank, he denied it flatly.

Stating that the bank is witnessing organic growth, he said it recorded a business growth of 17 per cent in 2011-12. It is targeting a business growth of 25 per cent during the current fiscal. “All these rumours of takeover target are false,” he added.

On Thursday, the scrip of the bank closed at Rs 86.55, up 5.23 per cent, against the previous close of Rs 82.25.

vinayakaj@thehindu.co.in

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Muthoot Capital Services to focus on vehicle loans

Shifting its focus from the gold loan business, Muthoot Capital Services Ltd has chalked out plans to concentrate on two- and three-wheeler financing in the current fiscal.

The company has set a target of Rs 690 crore for loan disbursement in the current fiscal in vehicle loans, which is more than double that in FY11-12. Last year, the company had disbursed Rs 300 crore in two-wheeler loans, Mr Thomas George Muthoot, Managing Director, MCSL said.

In an informal interaction with mediapersons here, he said the decision to stop gold loan financing was taken in April last year. The gold loan outstanding had dropped to Rs 5 crore from Rs 45 crore. He pointed out that Muthoot Fincorp, the flagship company of the group, would concentrate on the gold loan business.

MCSL, a listed entity of the Muthoot Pappachan Group, commenced the two-wheeler loan business four years back and subsequently extended its reach to all the southern markets. The company is now expanding its reach to new geographical boundaries in North India this year given the growth opportunities in the sector, he said.

MCSL had started operations in Gujarat and Maharashtra, excluding Mumbai, and has set a target of achieving a business of Rs 11 crore and Rs 5 crore respectively in these markets. It already has a robust network in the four southern States and Goa, he added.

The total customer base as on March 31 was more than two lakh and it is targeting addition of 1.55 lakh new customers in FY 13, he said

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IRDA appoints public information officers

The Insurance Regulatory and Development Authority has appointed Chief Public Information Officers as per the Right to Information Act.

The officers were appointed for different departments including actuaries, brokers, health, accounts, F&I and non-life. The appointments came into effect from June 11, 2012, IRDA said in a circular.

nagsridhu@thehindu.co.in

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ATM companies top small banks in valuation

Managing automated teller machines (ATMs) is turning out to be big business, with companies that have taken over the outsourced functions, commanding valuations of smaller nationalized banks.

One of the leading companies in this space, Financial Software & Systems (FSS), is clinching fresh investments at about $350 million (more than Rs 1,900 crore) valuation, topping the market capitalizations of banks like Dhanlaxmi, Punjab & Sind, Development Credit bank and Laxmi Vilas Bank. The Chennai-based company is tracking Rs 650 crore revenue this fiscal, up from Rs 240 crore two years ago, reflecting a buoyant marketfor companies building and managing payment infrastructure.

AGS Transact, Prizm Payments and Electronic Payments and Services, among others, are raising funds at robust valuations, as banks push for increased ATM density, which is touching the one-lakh mark. These firms are wooed by large foreign investors such as General Atlantic Partners, Blackstone Group andActisin an industry that's now $2.5billion in size.

FSS declined to comment on the deal, while AGS Transact could not be reached for immediate comments. What has set the market on fire is RBI'stwo-year-olddecision to allow accountholders free access to any ATM across the country.

Although access is free for customers, banks pay each other a transaction fee every time their depositors access ATMs of other banks. This has turned ATMs into profit centres for banks and the number of machines has grown from 60,000 in March 2010 to 75,000 last year and is now a few hundred short of the one-lakh milestone.

Eight home-grown companies are set to consolidate their position with the finance ministry carving out the market into circles, and awarding the management of PSU banks' ATM network to one company. "The growth opportunity has come faster than expected because of the decision by PSU banks to outsource deployment of 62,000 ATMs over next two and half years," said Loney Antony, MD, Prizm Payments.

FSS would raise $60 million (Rs 336 crore) in equity and $120 million (Rs 672 crore) in long-term debt, while AGS Transact, in which private equity firm TPG is an investor, is looking to raise Rs 400 crore to speed up ATM deployment and to improve payment gateways for internet and mobile banking.

"We are now seeing the beginning of the second phase of ATM deployment where machines are set to grow from one lakh to 1.75 lakh in two years. Transactions will continue to grow because there is a huge population of accountholders without ATM cards. Add to this, the customers who will be brought in under the financial inclusion plan and the transactions are set to grow manifold," said Mani Mamallan, founder of EPS.

Banking infrastructure management companies are seeing exponential growth in revenue as almost 70% of the cash withdrawals are through ATMs and the cost of each transaction is pegged at around Rs 10. The transaction costs that these companies recover from banks gotowards various expenses of maintaining an ATM-network management, cash management, security and hardware maintenance.

The rising Internet and mobile banking have added a new dimension to their growth plans. A recent AvendusC apital reportsaidI ndia's internet consumers would jump three fold in the next three years to over 380 million riding on the back of better broadband penetration.

The PSU banks move to outsource the ATM management by circles has led to intense bidding war, with some companies under cutting rivalsdriving down the revenue share. Some industry observers said this would negatively impact the return on investments for private equity investors in the near term. Pedigree US investors Sequoia Capital, JacobB allas andNew Enterprise Associates have cut initial deals in the sector.



Source: EconomicTimes

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Chakrabarty gets three-month extension as RBI dy governor

K C Chakrabarty, deputy governor of the Reserve Bank of India (RBI), has got an extension for three more months. Chakrabarty’s three-year term would otherwise have expired tomorrow. He was appointed in June 2009.

Business Standard had reported earlier that a proposal for a two-year extension was pending approval with the government. A deputy governor of RBI can be appointed for a maximum of five years and the candidate has to be below the age of 60. A deputy governor can serve till the age of 62. Chakrabarty fulfils these requirements.

According to sources, no other candidate’s name has been contemplated at this point in time. The ministry has not constituted a search committee to identify a new candidate. Traditionally, of the four deputy governors of RBI, one is a commercial banker while one is selected from the academic field. The other two are promoted from within RBI.

Chakrabarty was chairman and managing director of the Punjab National Bank and the Indian Bank, both state-owned lenders, before coming to Mint Road. As a deputy governor, Chakrabarty looks after portfolios such as banking supervision, rural planning and development, customer service and human resources, among others.


Source: Business Standard

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Federal Bank takes up management of World Exchange Centre

Federal Bank has taken up the management of World Exchange Centre WLL in Bahrain.

With this arrangement, the bank has strengthened its foothold in Bahrain, a press statement said.

Federal Bank has presently 8 inward remittance arrangements with Exchange Houses from Bahrain.

On signing the Management Agreement with World Exchange, Mr A Surendran, Additional General Manager & Head International Banking, Federal Bank said ‘with the present tie up with World Exchange, Federal Bank is hopeful of serving Indian diaspora in Bahrain in a more efficient manner’.

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E-fund transfers set to become free

In a move that would bring relief to bank customers, the government has asked the Reserve Bank to work out a framework under which funds could be transferred electronically free of charge from one account to the other.

These suggestions were made by the Finance Minister, Mr Pranab Mukherjee in his address at a meeting with chief executives of the public sector banks, which among others, was also attended by RBI Deputy Governor, Dr K C Chakrabarty.

At present, banks charge between Rs 5 to Rs 55 for electronic transfer of funds from an account of one bank to another through National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS).

“I would also urge upon Reserve Bank of India (RBI) to proactively work on this front and to see that all electronic banking transactions should be possible without any charges being levied,” Mr Mukherjee had said yesterday.

Cost free electronic transaction would encourage customers to use this medium for inter—bank as well as intra—bank fund transfer across the country.

The move would also help reduce cash movement and cash transaction, a senior official of a public sector bank said.

For outward transactions under RTGS mechanism, banks charge Rs 30 for electronic transfer of Rs 2 lakh to Rs 5 lakh and Rs 55 for amounts above Rs 5 lakh.

On the other hand, under NEFT the charges range between Rs 5 and Rs 25.

Citing example of Oriental Bank of Commerce, which has waived all charges for electronic transactions up to Rs 1 lakh, Mr Mukherjee had said, “I am confident that all the public sector banks would follow this excellent initiative.”

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RBI allows banks to accept spectrum as collateral

The i has approved the proposal to allow mobile phone companies to mortgage airwaves, a move that will allow telcos to use spectrum as collateral and raise funds from banks for the upcoming auctions.

The RBI has said that banks will be allowed to seize airwaves in the event of a default or cancellation of mobile permits. Banks will enjoy the rights to sell, transfer, assign, exchange and dispose of the airwaves without any restraining conditions to protect their interests, the central bank said in May 30 communication to the finance ministry.

The finance ministry has endorsed the RBI stance and has asked the telecom department (DoT) to expedite policy changes to allow spectrum to be used as collateral by lenders of telecom companies, saying this will 'boost the confidence' of banks and allow mobile phone companies to raise loans.

The RBI nod is significant, as the Supreme Court has set an August 31 deadline to complete the spectrum auction. Telcos had warned that they would be unable to pay the minimum price prescribed by sector regulator Trai as banks had stopped lending to telecom companies after the 2G spectrum scam that resulted in the Supreme Court quashing 122 mobile permits issues by former telecoms minister A Raja.

Trai had recommended that the reserve price for each unit of airwaves in the 1800 MHz band be set at 3,622 crore in the upcoming sale. The total debt of the telecom industry is estimated at 2,75,000 crore.


The central bank's approval to treat 'spectrum as tangible security' endorses telecom regulator Trai's recent recommendation that mobile operators be allowed 'to mortgage airwaves they hold to raise funds from financial institutions'.

Trai had said that in the event of default, lenders would be allowed to sell the airwaves under the telecom department supervision and added that proceeds in excess of the liability would have to be remitted to the government.

But the RBI has sought that 'no restraining conditions' be imposed on lenders when they transfer, sell or exchange airwaves. The telecom commission, the highest decision making body of the DoT, has given an in-principle approval to Trai's suggestion, while also deciding to seek the law ministry's and the RBI's opinion on this issue.

A DoT official said that the Empowered Group of Ministers on spectrum auction, headed by FM Pranab Mukherjee, may consider the RBI's stance and approve the policy change permitting spectrum mortgage, in its next meeting later this month.



Source: EconomicTimes

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SBI to hire 9,500 in this fiscal; to focus on retail biz

State Bank of India (SBI), the country’s largest bank, said it plans to hire 9,500 employees this fiscal. Its main thrust will be on retail banking in the coming years.

Noting that the current economic environment warrants greater prudence, the SBI Chairman, Mr Pratip Chaudhuri, said, the bank would remain vigilant to new opportunities and challenges.

“In the coming years, our bank’s main thrust will be on retail, and, as shown by our achievements, we are well positioned to meet the competition,” Mr Chaudhuri said in his letter to shareholders, published in SBI’s Annual Report 2011-12.

The bank also disclosed in the report that its overall staff strength declined by 7,452 employees during the last fiscal, but it has decided to recruit 9,500 clerical staff during 2012-2013 to meet the growing needs of the bank.

As on March 31, 2012, the bank had total permanent staff strength of 2, 15,481, which included 80,404 officers, 95,715 clerical staff and the remaining 39,362 were sub-staff.

SBI said it already enjoyed leadership positions in the retail car loan financing and home loan businesses and its retail advances grew 10.9 per cent to Rs 1,82,427 crore in the year ended March 31, 2012.

It commanded 26 per cent market share in home loan and 17.51 per cent market share in car loan financing last year.

“The global economy remains fragile, but we hope the situation will improve. Though the Euro Zone sovereign debt crisis continues to dominate the financial landscape, we are optimistic the global political leaders and regulators will be able to stem the downslide,” Mr Chaudhuri said.

“However, we need to be alert as in today’s integrated world, global shocks can get transmitted to the Indian economy. Twin deficits (current account deficit and fiscal deficit) along with low growth and high inflation are the major challenges for Indian economy in the year ahead.

“The Indian banking scenario is encouraging and positive. Our Bank is expecting a loan growth of 16 per cent and a deposit growth of 20 per cent. As we go forward, the Indian and global economic environment could remain challenging for the next few years,” he noted.

In 2011-12, SBI’s net profit rose by about 42 per cent to Rs 11,707 crore - one of the highest net profits earned by a corporate in the country.

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RBI asks banks to allot unique customer IDs

The Reserve Bank of India has asked banks to initiate steps to allot Unique Customer Identification Code (UCIC) to all their customers.

To begin with the UCIC should be allotted to customers entering into a new relation with a bank. Further, this code should be allotted to existing customers by banks by end-May 2013.

The UCIC will help banks to identify customers, track the facilities availed, monitor financial transactions in a holistic manner and enable banks to have a better approach to risk profile it’s customers, the central bank said.

The RBI said that increasing complexity and volume of financial transactions require that customers do not have multiple identities within a bank, across the banking system and across the financial system. To overcome this, it is important to pool information pertaining to different account holders in a centralised database.

satyanarayan.iyer@thehindu.co.in

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SBI pitches for CRR cut to spur growth

State Bank of India (SBI) expects the Reserve Bank of India (RBI) to cut the cash reserve ratio (CRR) by 1 percentage point to boost economic growth and improve the bottomline of banks.

“We are expecting a 1 percentage point cut in CRR. …We have made a request but it is for the RBI to take a call. We will be very happy if there is 1 percentage point cut. It will recharge investor sentiments, the economy and also stock markets,” Mr Pratip Chaudhuri, Chairman, SBI, told newspersons on the sidelines of a meeting here.

CRR is the portion of deposits that banks are required to keep with the central bank.

Mr Chaudhuri said CRR was a more effective tool in spurring growth than policy rate reduction by the RBI. “A CRR cut is six times more effective than a policy rate cut,” he said.

The SBI Chairman also highlighted that a CRR cut would improve the profitability of banks and reduce the Government's burden for re-capitalisation of banks.

krsrivats@thehindu.co.in

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IRDA worried over growth of single premium group policies

The Insurance Regulatory and Development Authority (IRDA) is concerned about the growth of group single-premium policies.

Even as the life insurance business in general has slowed down, the group single-premium policies segment is witnessing growth.

“This is a problem and how we define groups needs to be looked into,” Mr J. Hari Narayan, Chairman, IRDA, told Business Line in an interaction here.

As per the regulator's data, the group single-premium collected by private life insurers and Life Insurance Corporation in 2011-12 was Rs 5,023 crore and Rs 28,200 crore, respectively, against Rs 3,467 crore and Rs 22,889 crore in the year-ago period.

The same trend has been continuing in April 2012, the first month of the new fiscal.

In most cases, the person insured does not know what he is being offered and also receives poor service.

The reasons for the growth of group insurance policies are varied. “The cost of group policies has come down due to competition, which is also driving growth,” Mr Hari Narayan said.
Fund-based biz

According to a senior functionary of Bajaj Allianz Life Insurance , said the growth in group insurance policies was also being driven by the increase in fund-based business.

“You might expect this to continue as many companies are outsourcing their fund-management to insurance companies,” he said.

Industry experts, however, say that the increase in group policies might not actually lead to higher profitability. It might simply shore-up the top-line, but the lower rates would not make any positive impact on profits.

nagsridhu@thehindu.co.in

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SBI breaches RBI norms on RIL exposure for 4th year in 2011-12

State-run banking giant SBI has said it temporarily exceeded RBI-prescribed credit exposure limit for the fourth year in a row in 2011-12 with regard to loans given to Mukesh Ambani-led Reliance Industries (RIL).

During the fiscal ended March 31, 2012, State Bank of India (SBI) also breached RBI's single borrower exposure norms in case of loans to two state-run entities - Indian Oil Corp (IOC) and Bharat Heavy Electricals Ltd (BHEL).

The exposure was brought down within the RBI-prescribed limits for all the three borrowers (RIL, IOC and BHEL) at the end of the financial year on March 31, 2012, the country's largest bank has disclosed in its annual report for 2011-12.

SBI exceeded the limit by about Rs 500 crore in case of loans to RIL, while the limit was exceeded by about Rs 4,000 crore in case of IOC and by about Rs 3,000 crore for loans to BHEL for certain periods.

At the end of the fiscal, the bank's outstanding loan to RIL stood at Rs 6,867.32 crore, Rs 24,374.33 crore to IOC and Rs 13,522.21 crore to BHEL - all of which were within the RBI's prudential single borrower exposure limits.

On the other hand, private sector banking giant ICICI Bank, which had also temporarily breached RBI's single borrower exposure norms in 2010-11 with respect to its loans to RIL, did not exceed the limits for any borrower in 2011-12.

"During the year ended March 31, 2012, the Bank has complied with the Reserve Bank of India guidelines on single borrower and borrower group limit," ICICI Bank said in its latest annual report.

As per RBI's prudential credit norms, a bank can't give loans in excess of 15 per cent of its capital funds to a single borrower, but can exceed this limit by 5 per cent in exceptional cases with prior approval of their boards.

Detailing the cases where it breached prudential limits for single-borrower exposure during the fiscal ended March 31, 2012, SBI has named RIL, IOC and BHEL as three such borrowers in its annual report.

While SBI had exceeded RBI's limits for these three in 2010-11 as well, it had provided credit in excess of the prudential norms to RIL, IOC, BHEL and Tata Group in 2009-10. Prior to that, SBI exceeded prudential credit limits during 2008-09 with regard to its exposure to RIL and IOC.



Source: EconomicTimes

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NCR Mobile Cash Withdrawal: NCR makes wireless withdrawals in under 10 seconds at the ATM

A new software from NCR Corporation will allow consumers to initiate cash withdrawals from their banking accounts on mobile devices and then complete those transactions at an ATM by scanning a 2D barcode.

NCR Mobile Cash Withdrawal will make ATM transactions faster and more secure, by removing cards and PINs from the process at the ATM. The entire transaction, while the consumer is in front of the ATM, can take less than 10 seconds.

Consumers will authenticate through their existing mobile banking application and pre-stage the transaction via an embedded NCR Mobile Cash Withdrawal function. Consumers can use any iOS or Android smart phone at any location and at any time - whether at work, on the metro or while in line at the ATM - and then choose the amount of their transaction.

Once at their bank's ATM, the consumer will use the embedded functionality to scan the 2D barcode on any participating ATM's home screen, and the pre-staged cash transaction will be authorized and funds dispensed. (View a demo of the solution on YouTube.)

The solution requires no additional ATM hardware such as barcode scanners or near field communication (NFC) readers. It can be deployed with just a simple software upgrade, making it an affordable multichannel solution for financial institutions.

Mobile Cash Withdrawal is a very secure approach to traditional card-based ATM transactions. No consumer data is stored on the device or contained within the on-screen 2D barcode.

Rather, scanning the bar-code only identifies the location of the ATM and prompts fulfillment of the transaction. In turn, using a mobile device eliminates the threat of ATM skimming devices used by criminals.



Source: EconomicTimes

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