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Saturday, June 23, 2012

ATM trick: Bank cheated of of Rs 1 cr

The Cyber Crime Cell of Mohali, in a joint operation with the Kerala Police, claims to have busted an inter-state gang, first of its kind in the country, which duped a Kerala-based bank of over Rs 1 crore, adopting a unique method of withdrawing money using ATM cards.

A total of five people have been arrested. All from upper-middle class families and not very well-educated, the accused are residents of Ludhiana, Kajheri (Chandigarh) and Kangra (Himachal Pradesh). The five are members of one gang. Two more gangs, claims the Cyber Cell, are yet to be arrested.

Sumit Gupta, the mastermind, is a resident of Ludhiana. Having suffered losses in his business, he had gone into hiding for over a year. Then he learnt a unique method to defraud banks.

Other four arrested are Sunny, brother of Sumit, also a resident of Ludhiana; Kuldeep, a resident of Kangra; Harpreet, a resident of Kajheri; and Ramandeep alias Ishu, a resident of Ludhiana.

Ramandeep and Sunny have been arrested by the Kerala Police, which has nearly two dozen FIRs registered against the gang members, who used to withdraw money from the ATMs of Federal Bank of India using ATM cards of private banks.

The withdrawals were not normal. Explaining the modus operandi, Pradeep Kumar, SSP, Cyber Crime Investigation, Mohali, said the gang members used to demand a withdrawal of Rs 10,000 from ATM of Federal Bank. But they used to take only Rs 9,900 and leave the last Rs 100 note inside the ATM. As a matter of policy, the ATM machine would retrieve the note, which would flash a message of “failed transaction” in the software system of the private bank whose ATM card was used for withdrawal.

Interestingly, cashing in on this message (failed transaction), the miscreants used to call up the helpdesk of private banks demanding refund of Rs 10,000. Apprehending legal action and poor customer response, the private banks used to immediately debit the said amounts in the accounts of the accused.

However, each time, the Federal Bank used to approach the said private bank seeking refund of the Rs 9,900 (in one case), the private bank would refuse the refund showing the generated slip of “failed transaction”. As a result, the Federal Bank of India started suffering losses. The Federal Bank, as per the police, has suffered a loss of over Rs 1 crore by such transactions in the past seven to eight months.

The police have recovered 545 gms of gold ornaments; 121.800 gms of silver ornaments; Rs 2,72,000 in cash; 206 ATM cards; eight mobile phones; one Verna car, an Innova and documents pertaining to purchase of property amounting to Rs 14 lakh from the accused.

The mastermind operated like an employer keeping a number of subordinate criminals. He would give his flunkies small amounts to open bank accounts and get ATM cards. When they surrendered the ATM card and password to him, he paid them Rs 2,500 per card.

In order to evade arrest, the accused visited different states to make such transactions. The accused have disclosed that they had made withdrawals from ATMs in Kerala, Delhi, Rajasthan, Haryana, Punjab and Chandigarh.

It was only after the Federal Bank of India was duped of over Rs 1 crore that it smelled a rat in such transactions and approached the Kerala Police. The Kerala Police sought help from the Mohali Cyber Crime and visited Mohali to arrest the two accused, Sunny and Ramandeep. “The accused are extremely intelligent, though not qualified or well-educated. Sumit was earlier working for another gang, which needs to be busted,” said the SSP.

Modus operandi

Failed transaction

The accused used to get various bank accounts opened in private banks and obtain ATM cards. The ATM cards were used to withdraw money from ATMs of Federal Bank of India. In one transaction containing withdrawal of Rs 10,000, the accused would deliberately leave the last note (eg Rs 100) inside the ATM machine. Since the machine generated and flashed a message of “failed transaction”, the accused used to claim the refund of entire Rs 10,000 from the private banks. While the private banks used to refund the amounts, the Federal Bank of India was denied the refund of the actual amount withdrawn (Rs 9,900) because the private banks used to rely on the “failed transaction” slip/message.

Partners in crime

Sumit Gupta, around 30: Had suffered losses in his T-shirt manufacturing business in Ludhiana. Got in touch with Harpreet a year back when he came to Chandigarh.

Kuldeep, 34: Had opened 26 accounts in his, his wife’s and friends’ name in various private banks.

Harpreet, 28: Harpreet and Kuldeep had worked in a call centre in 2008.

Sunny, 24: Brother of Sumit. Was concerned over the losses suffered by his brother.

Ramandeep, alias Ishu, around 30: Resident of Ludhiana.

Source: Financial Express
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Karnataka Bank inks pact with Tata Motors for vehicle loans

Karnataka Bank has signed a memorandum of understanding with Tata Motors Ltd to finance vehicles to the bank’s customers.

A press release by the bank said here that it has joined hands with Tata Motors Ltd, Mumbai, for vehicle loans on easy terms to the company's customers.

The loans will also be available under CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) scheme to the eligible customers, and no collateral security or guarantee would be insisted for such loans.

Mr Mahabaleshwara M.S., General Manager (Credit-Retail Finance Division), Karnataka Bank Ltd, and Mr Ramesh Dorairajan, Head-Retail, Channel Finance and Insurance, Tata Motors Ltd, signed an MoU in this regard at bank’s head office in Mangalore recently.

The release said that the bank has over 500 branches and Tata Motors has over 700 touch points across India.
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Axis Bank to raise funds via pvt placement basis

Axis Bank Ltd plans to raise resources by issuing debt instruments on private placement basis.

The bank, in its notification to the stock exchanges, however did not indicate the quantum of funds it has proposed to raise.

The board of directors on Friday approved borrowing/raising funds by issuing debt instruments on private placements basis within the limits prescribed by the RBI and other regulatory authorities from eligible investors, in one or more tranches, the bank said.

Accordingly, as per the business plan for the year, Axis Bank has planned to raise the funds in domestic and/or overseas market, eligible for inclusion in tier I and tier II capital and the instruments will be listed on the NSE/BSE/or any other stock exchange, if needed, the bank said.
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Bank of America, J.P. Morgan, Goldman Sachs among 15 banks downgraded by Moody’s

Moody’s Investors Service has downgraded the ratings of the world’s 15 biggest banks including Bank of America, J.P. Morgan and Goldman Sachs, saying that they have significant exposure to volatility and capital market risks.

Some banks called the Moody’s move backward looking, arbitrary and unwarranted.

“All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities,” said Mr Greg Bauer, Moody’s global banking Managing Director on Thursday.

However, they also engage in other, often market leading business activities that are central to Moody’s assessment of their credit profiles, he said.

“These activities can provide important ‘shock absorbers’ that mitigate the potential volatility of capital markets operations, but they also present unique risks and challenges,” Mr Bauer added.

According to the Wall Street Journal, the move hit five of the six biggest US banks by assets, including Morgan Stanley, which had mounted a campaign to persuade Moody’s not to cut its rating by three notches. It was downgraded instead by two.

The other banks are Bank of America, Goldman Sachs, JPMorgan, Morgan Stanley, Citigroup and Deutsche Bank.

Moody’s said rating actions conclude the review initiated on February 15, 2012, when it announced a ratings review prompted by its reassessment of the volatility and risks that creditors of firms with global capital markets operations face.

In the past, these risks have led many institutions to fail or to require outside support, including several firms affected by today’s rating actions, it said.

In a statement Moody’s said the first group of firms includes HSBC, Royal Bank of Canada and JP Morgan. Capital markets operations (and the associated risks) are significant for these firms.
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Corporation Bank offers e-seva service for Sri Mookambika Temple

Corporation Bank has facilitated ‘e-seva’ or ‘e-offering' service through its e-payment gateway.

A bank release said here that under this, devotees of Sri Mookambika Temple across the world can just click in and offer or book for different sevas.

The release said that the facility is very simple. For e-seva, devotees can access and select the type of seva from the list displayed. They need to fill in the details like name, address etc.

For payment, they can select payment option through CorpBank Payment Gateway and fill in the debit or credit card details.

The gateway authenticates and sends the details of authorisation. The devotee will get the status online and Kollur Temple will confirm e-seva.

Sri Mookambika Temple is located at Kollur in Udupi district of Karnataka. It is about 135 km away from Mangalore.

Speaking at the launch of the facility at Kollur, Mr Ashwani Kumar, Executive Director of the bank, said that the facility has been designed keeping in mind the specific needs of devotees of temples. This facilitates hassle-free offerings directly to the temple, he added.
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SBI not to levy charges on inter-core transactions

State Bank of India has decided to make inter-core transactions ‘at par’, that is, free of charges, with immediate effect.

The revised charges shall be effective from the date of issuance of the relevant circular, which is June 18 (Monday).

The revised instructions are being put in place in the system by the bank’s IT department.


Branches have been told to ensure manually that no service charge is recovered for all inter-core transactions till it is enabled in the system.

This is part of a drive for rationalising service charges launched by the bank. Earlier, the bank had announced waiver of charges for non-maintenance of minimum balance.

The June 18 circular recalled demand from business groups, strategic business units and various operating units for reduction of charges for inter-core transactions.

The existing inter-core charges were perceived to be high compared to other banks. A reduction would help raise business growth, particularly in the area of generating float funds.

Higher inter-core charges have resulted in some customers across segments opening accounts in other banks to remit funds to their beneficiary’s account in SBI.


This had resulted in loss of float fund available, apart from leading to migration of business to other banks.

“Complete waiver of inter-core charges will help us in to compete with private sector and public sector banks in mobilising CASA deposits,” the circular said.

Besides, this will also give the bank a competitive edge in attracting new customers, it added.

The circular recalled that the bank has been taking several steps to migrate customers to electronic/alternative channels for meeting their banking needs.


This would also help in green banking. Despite several initiatives, paper-based transactions still dominate banking transactions.

However, with the bank being fully on CBS platform with real-time transactions facilities, a need has been felt to take steps for popularising electronic banking.

Accordingly, necessity has been felt to revisit the service charges for inter-core transactions.

There have been demands from customers for reduction in the inter-core charges.

Inter-core transactions relate to all transactions including deposit, withdrawal, transfer from/to non-home branch accounts at a different centre. Non-home branches are those used by depositors with accounts in other branches or banks.

What’s inter-core?

Inter-core transactions include:

Deposit of cash at non-home branches;

Deposit of cheques at non-home CBS (core banking solution) branch drawn on any CBS branch/other banks;

Deposit of clearing instruments at non-home CBS branch drawn on non-CBS branch/other banks;

Encashment of cheques at non-home branch;

Transfer of funds from home branch to third party accounts at another CBS branch; and

Pass Book updation at non-home branch.

Having rolled out CBS branches across the country, the bank has been leveraging it to ramp up its fee-based income.

But, according to latest SBI circular, the much cheaper NEFT/RTGS platform has been taking away to other banks significant business that would otherwise have accrued to it.

This is what prompted it to offer complete waiver of charges on the inter-core transactions.
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PAN becoming mandatory for education loans

Several banks have tightened the norms for granting education loans following rising defaults in this segment.

They have made submission of PAN (Permanent Account Number) details of the applicant’s parent/guardian (often the co-borrower) mandatory this year along with the loan application.

The Indian Banks’ Association (IBA) has pointed out that since students may not require PAN during their period of education, submission of PAN details should not be made a precondition for loan sanction. Yet, considering the ease of getting a PAN card, the students may be asked to submit the same during the course of their studies.

Meanwhile, State Bank of India, it is learnt, has made submission of PAN mandatory along with the loan application. On the existing educational loans, the bank is understood to be sending out letters asking the student-borrower and the co-borrower to furnish PAN details.

Submission of PAN details would help lending institutions ascertain the income of the parents and, in the event of a failure in repayment, refer the case to CIBIL (Credit Information Bureau of India Ltd).

A Central Bank of India official told Business Line that the bank helps student-borrowers obtain PAN cards. “PAN card is an identity proof. While parents go out of the way to get a community certificate, a driving licence or even a passport for their wards, why not a PAN card? And getting a PAN card is not as cumbersome as other certificates.”
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Friday, June 22, 2012

Stricter norms, lower returns likely for tax-free infrastructure bonds

Cash starved core projects may soon get a breath of new life with the finance ministry set to issue fresh guidelines for tax-free infrastructure bonds that were announced in the Budget. But government officials indicated that under the new guidelines, the bonds may offer lower interest rates and also lesser commission. Further, only state-run firms will be allowed to raise such money from the market.

The move comes after a meeting last week of finance ministry officials with representatives of public sector firms that plan to float such tax free bonds. “We have asked them to come to us with individual proposals for floating such paper. It should hopefully be done by next month so that they can start issuing bonds in the first half of the fiscal,” a finance ministry official said, adding that the Central Board of Direct Taxes (CBDT) will soon notify the tax-free status of these bonds.

Under the fresh guidelines, the returns on the bonds are likely to be in the range of 8 to 9 per cent, the official said. Till 2011-12, these bonds offered interest rates of up to 11-12 per cent as the returns on them could not be lower than 50 basis points of government securities of the same maturity.

Finance minister Pranab Mukherjee in the Budget for 2012-13 allowed firms to raise up to Rs 60,000 crore through tax free bonds for financing core sector projects. The facility was also provided to firms in 2010-11 and 2011-12 when they were permitted to raise Rs 20,000 crore and Rs 30,000 crore respectively, but at that time taxpayers investing in such bonds were given a deduction of Rs 20,000 per year.

But the finance ministry believes that the tax free nature of these bonds along with the high interest rates were largely attracting high net worth individuals and not individual tax payers who were supposed to be the main beneficiaries. The issue was first raised by the Planning Commission which noticed irregularities on the commission and brokerages being paid for such bond issues.

In 2012-13, seven public sector firms are expected to issue such paper. This includes Rs 10,000 crore bonds each by NHAI, IRFC, IIFCL, and power projects and Rs 5,000 crore bonds each by HUDCO, National Housing Bank, SIDBI and port developers.

Source: Financial Express
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Sebi notifies new stock exch norms

Market regulator Sebi today notified new norms for ownership and governance of stock exchanges and other market infrastructure institutions – a move which among others could pave way for setting up of new bourses and also permit the exchanges to get listed on other bourses.

As per the new norms, every recognised stock exchange shall have a minimum networth of Rs 100 crore at all times and at least 51 per cent of stake has to be held by public.

Besides, no Indian entity, either individually or together with persons acting in concert, would be allowed to acquire or hold more than 5 per cent stake directly or indirectly in a stock exchange.

However, stock exchanges, depositories, banks, insurance companies and public financial institutions from India can acquire or hold up to 15 per cent stake.

The new norms are expected to pave the way for setting up of new stock exchanges. Currently, there are two national level bourses, BSE and NSE, in the country, while the third one MCX-SX is waiting for permission to begin trade in the equity segment. MCX-SX is currently permitted only in the currency segment.

The individual shareholding would be capped at 5 per cent for all non-Indian entities without any exemptions, and their collective holding cannot exceed 49 per cent. Out of this, the holding through FDI route would be capped at 26 per cent and that through FII at 23 per cent. No FII would be allowed to acquire shares of a recognised stock exchange otherwise than through secondary market.

For a stock exchange that is not listed, an FII may acquire shares through transactions outside of a recognised stock exchange provided it is not an initial allotment of shares; and for listed bourses, the FIIs can transact through the exchange where the shares are listed.

Sebi also said that the existing regulations for Manner of Increasing and Maintaining Public Shareholding (MIMPS) in Recognised Stock Exchanges stand repealed after notification of new norms.

The shareholders having stake in excess of the new limits would have to comply with new norms within a period to be decided by Sebi and such period could be of up to three years.

For listing, Sebi said that a recognised stock exchange may apply for listing of its securities on any bourse other than itself and its associated stock exchange, provided they comply with the new regulations of ownership and governance, has completed three years of continuous trading operations and has got Sebis approval.

Also, the shares of a recognised stock exchange and a recognised clearing corporation would have to be in demat form, while clearing corporation cannot hold any right, stake or interest in an exchange.

Sebi further said that only those entities would be consider 'fit and proper' to set up or become shareholders or directors of stock exchanges who have "a general reputation and record of fairness and integrity."

Also, such entities should not have incurred any of the disqualification like conviction by a court for any offence involving moral turpitude or any economic offence or any offence against the securities laws, among other conditions.

"If any question arises as to whether a person is a fit and proper person, the Board's (Sebi's) decision on such question shall be final," it said.

Those exchanges having a lesser networth as on the date of commencement of these regulations, would have to achieve a minimum networth of Rs 100 crore within three years.

The applicants seeking recognition as a clearing corporation would also have to have a minimum networth of Rs 100 crore, but they would have to achieve a minimum networth of Rs 300 crore within a period of three years.

Sebi board had decided on April 2 to implement the 'Ownership and Governance norms for Market Infrastructure Institutions', after months-long discussions over proposals made by Bimal Jalan committee in this regard.

The committee had originally suggested against listing of the exchanges and had also suggested capping their profits.

Notifying the new norms, Sebi said that the new regulations would apply for "recognition, ownership and governance in stock exchanges and clearing corporations."

Sebi further said it is separately in the process to specify norms for regulating the conflicts of interests in market infrastructure institutions, which would include norms for minimum listing standards, a Conflicts Resolution Committee, and an Expert Committee to examine certain issues relating to clearing corporations.

The Conflicts Resolution Committee (CRC) would be formed with majority external and independent members to deal with all issues concerning conflicts of interest.

"The CRC will consider matters of policy, guidelines involving conflict issues and recommend standards that are pertinent to the areas of potential conflict in the Exchanges," Sebi said.

Further, it said issues of conflict will be referred by exchanges or may be taken up suo moto by the CRC.

Sebi also said it is issuing a circular for procedural aspects involved in implementing the new regulations, including compensation norms for key management personnel of stock exchanges and clearing corporations, statutory committees for clearing corporations etc.

The market regulator will also take up the matter with the government on the issue of categorisation of banks as 'public' shareholders.

"At the time of permitting trading in exchange traded currency derivatives, banks were permitted in consultation with RBI, to become trading members directly in the currency segment of the stock exchange," Sebi said.

"In view of the implications with respect to the provisions of SCRA and decisions taken in the Board, SEBI is taking up the matter with the Government to appropriately amend the SCRA. Till such amendment or a period of three years, whichever is earlier, the current position will continue," it added.

Also, the exchanges and clearing corporations would have to segregate their regulatory departments from other departments, as per Sebi regulations.

Among other rules, the bourses and clearing corporations cannot distribute profits in any manner to its shareholders until the networth criteria is met.

Also, their governing boards would have to include shareholder directors, public interest directors (PIDs) and a managing director, while chairman would have to be elected from among PIDs.

The number of PIDs cannot be less than the number of shareholder directors, while no trading member or clearing member, or their associates and agents, as also any FII, can be appointed on the board.

The board-related norms would need to be complied with within three months, while all board appointments, including that of MD, would need Sebi approval.

Also, an MD would have to be appointed for a minimum period of three years and a maximum of five years. Sebi can take suo-motu action to remove or terminate the appointment of MD, if deemed fit in the interest of the market.

While all directors and top management officials would have to abide by the Code of Ethics and Code of Conduct, any changes in compensation of MD would need Sebi approval.

The shareholding limits in all cases would include any instrument owned or controlled, directly or indirectly, that provides for entitlement to equity or rights over equity.

The new regulations follow an order by the Supreme Court on April 11, 2012, wherein the apex court had directed Sebi to amend its Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006 and examine the application filed by MCX-SX in light of the amended Regulations.

Sebi had filed a petition in the Supreme Court following the Bombay High Court Order which set aside a showcause notice to MCX-SX by Sebi and asked the regulator to reconsider MCX-SX's application for other segments.

Sebi had asked for more time from the Supreme Court for considering MCX-SX's application in order to amend the regulations and then process MCX-SX's application in light of new regulations.

In clearing corporations, new rules call for at least 51 per cent to be held by one or more stock exchanges, but no exchange can acquire or hold more than 15 per cent in more than one clearing corporation.

Also, no resident Indian can acquire or hold more than 5 per cent in a recognised clearing corporation, while depository, banks, insurance companies and public financial institutions can acquire or hold up to 15 per cent.

No person resident outside India can acquire or hold more than 5 per cent and the combined holding of all non-residents cannot exceed 49 per cent. The combined holding of non-residents through FDI route would be capped at 26 per cent, while combined holding of FIIs can not exceed 23 per cent.

Those holding equity shares in excess of the prescribed limits would need to comply within 3 years.

Source: Financial Express
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Nabard allocates Rs 7,515 cr for crop re-finance

Nabard has allocated Rs 7,515.45 crore for crop loan refinance in Andhra Pradesh for the financial year 2012-13. The loan will be allocated to Co-operative Banks and Regional Rural Banks in Andhra Pradesh for supporting seasonal agricultural operations during the year.

This is an increase of 41.6 per cent over the Rs 5,307-crore disbursed during 2011-12.

Out of the total Rs 7,515 crore, an amount of Rs 4,075 crore will be earmarked for co-operative banks and Rs 3,440.45 crore for the five regional rural banks. This would help the two banking organisations to achieve their targets of ground level credit of Rs 10,329 crore and Rs 7425 crore respectively.

Andhra Pradesh accounts for 12 per cent of the total refinance provided by Nabard for supporting seasonal agricultural operations at the all-ndia level, a press release said

The Nabard has also introduced a new scheme of lending to primary agricultural credit societies through the regional rural banks for which an amount of Rs 100 crore has been earmarked exclusively.

Under this window, the Nabard would provide refinance to the banks and societies which extend finance to the farmers.

Nabard provides refinance for crop loans at 4.5 per cent to enable banks to extend crop loans to farmers at 7 per cent a year up to Rs 3 lakh per borrower.
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United Bank goes green, waives charges on e-payments

As a part of its green initiative campaign, Kolkata-based United Bank of India has waived charges on payments made through the electronic mode.

The bank has waived charges on funds remittance by account holders through NEFT for an amount of Rs 1 lakh. It has also eliminated charges on remittance of funds by walk-in customers through NEFT for up to Rs 50,000, said a bank statement.

This apart, customers can carry out their transactions at any branch and through alternate channels such as Internet banking and mobile banking free of charge. Customers can also enjoy the benefits of retail payments and remittance of funds to other banks through NEFT for up to Rs 1 lakh free of charge.
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It will be ATMs galore in next 6-12 months

India will have another 60,000-80,000 automated teller machines (ATMs) in the next 6-12 months, Mr D. K. Mittal, Financial Services Secretary, said.

This means every branch of every bank which is into core banking solutions will have an automated teller machine (ATM) installed in its premises, Mr Mittal said at an Assocham conference here on Thursday.

He said the rollout had already started in Maharashtra and in the next one year there will be an ATM network revolution in India.

Currently, there are over 90,000 ATMs in the country. To encourage expansion of the network, the Reserve Bank of India had in February this year allowed non-banks to set up, own and operate ATMs.

Such ATMs will be in the nature of white-label ATMs and would provide services to customers of all banks. Prior to this rule change, only banks were allowed to set up ATMs in India.
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YES Bank plans to raise Rs 750 cr tier-II capital by December

Private sector lender YES Bank plans to raise quasi-capital (tier-II) of Rs 750 crore from the domestic market between now and December-end, it’s Managing Director and Chief Executive Officer, Dr Rana Kapoor, said.

The bank is also on target to raise primary equity of $300-400 million in 2013 through the Global Depository Receipt (GDR) or Qualified Institutional Placement (QIP) route, Dr Kapoor told Business Line here on Thursday.

YES Bank’s capital-adequacy ratio stood at 17.96 per cent at March-end this year against 16.5 per cent reported a year earlier.

The bank had in March-end this year raised hybrid debt of Rs 380 crore from the International Finance Corporation.
Interest rates

Asked whether YES Bank planned to reduce its lending or deposit rates post the RBI’s mid-quarter review, Dr Kapoor replied in the negative. “Given the status quo, we plan to maintain our interest rates for the time being,” he said.

YES Bank’s base rate, the minimum lending rate, is currently pegged at 10.5 per cent. It was last revised in October 2011 when it was reduced by 25 basis points to 10.50 per cent.

Dr Kapoor said that the bank was also looking to grow its export loan book in the coming days.
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Public sector banks assured all support if global crisis worsens

The Government will stand solidly behind public sector banks to help them tide over difficulties that may arise if and when the global financial crisis gets aggravated, a top Finance Ministry official has said.

“We have a back-up plan for banks if the crisis aggravates. We don’t anticipate it (crisis to aggravate). But if it does happen, then the Government is solidly behind the public sector banks,” Mr D. K. Mittal, Financial Services Secretary, said at an Assocham conference here.

He also played down concerns over the health of the state-run banks. Mr Mittal termed certain international rating agencies’ move to downgrade the outlook of India and some of the state-run companies as ‘unjustified’.

There is a rise in the level of bad loans in state-run banks, but it is nothing to be alarmed about, he added.

Mr Mittal said the talk about a crisis in Indian banks was exaggerated. The Government has provided for Rs 14,588 crore in Budget 2012-13 for capitalising public sector banks. “We will capitalise these banks more if needed”

He said that the crisis management group formed by the Government was meeting regularly to monitor the global economic and financial situation.

The remarks come close on the heels of international ratings agency, Fitch, lowering the outlook on seven state-run companies, including some banks, to negative from stable. Fitch had also cut India’s sovereign rating outlook from stable to negative.
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Thursday, June 21, 2012

New general managers at SBT

Three general managers have taken charge at State Bank of Travancore (SBT). They are Mr Kesav Kumar T., Mr Chandrasekhara Sarma A., and Mr K. N. Murali, a bank spokesman said here.

Mr Kesav Kumar joined SBT as probationary officer in 1984. He has rich experience in IT, foreign exchange and credit. He served as deputy general manager at State Bank of Hyderabad and the Kozhikode zone of SBT.

Mr Chandrasekhara Sarma joined State Bank of Hyderabad in 1972 and has held key assignments there. He was deputy general manager at the Hubli zone of State Bank of Mysore and the Ernakulam zone of SBT.

Mr Murali started his career as probationary officer in 1977 and has been controller of the Thiruvananthapuram and Kozhikode zones of SBT.
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Securitisation Act cannot bypass principles of natural justice: Court

The Securitisation Act is meant for speedy recovery of dues by banks and financial institutions, but that does not mean the principles of natural justice can be bypassed, observed the Allahabad High Court.

In Ram Umrao v. Managing Director, IndusInd Bank Ltd , the petitioner’s truck was seized by the recovery agent on behalf of the bank for his alleged inability to pay his dues on the loan taken after hypothecation of the truck.

The Reserve Bank had, following the strictures passed by the Apex Court in ICICI’s case against the strong-arm tactics of uncouth recovery agents, laid down elaborate guidelines in April 2008, setting down norms for appointment and conduct of recovery agents. These include, proper training for recovery agents, prior intimation to the borrower about the impending act of the recovery agent and informing the jurisdictional police station by the recovery agent before snooping down on the borrower.

And, before setting in motion the process of seizure through recovery agent , the bank should serve a notice on the borrower as to why he has not paid the dues. The process of seizure by the recovery agent can be started, if at all, only after being convinced of the lack of insincerity on the part of the borrower on perusal of his reply.

The High Court found that these principles of natural justice were not complied with, and accordingly, ordered the return of the seized truck.

(The author is a New Delhi-based chartered accountant)
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New BoB EDs take charge

Bank of Baroda (BoB) on Wednesday announced that the two newly appointed Executive Directors, Mr S. K. Jain and Mr P. Srinivas, had assumed charge on Monday evening.

Mr Jain, a chartered accountant, was earlier a General Manager of Dena Bank overseeing Treasury operations, Accounts and Taxation. He has over 25 years of experience in operational banking in Dena Bank.

Mr Srinivas was working as General Manager at Andhra Bank prior to assuming charge as Executive Director of BoB. He held several functional positions during his 33 years in Andhra Bank.
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SBI to cut loan rates by 25-50 bps for exporters

State Bank of India, the country's largest lender, would cut interest rates on loans for exporters by 25-50 basis points, a senior official said. The new rates are likely to be effective from next week, after the bank's asset liability committee meets this Saturday.

The move comes following the central bank's decision to increase export refinancing limits of banks, to 50 per cent, to improve liquidity in the system. At present, the Export Credit Refinance (ECR) limit is fixed at 15 per cent of the rupee export credit eligible for refinance as at the end of the second preceding fortnight.

The measure was announced by the Reserve Bank of India (RBI) central bank on Monday. According to its estimates, the increase in refinancing limit can provide additional liquidity of Rs 30,000 crore in the banking system.

News agency PTI quoted SBI chairman Pratip Chaudhuri that the bank was mulling a rate cut to exporters following the regulatory relaxation. "We will surely cut lending rates to exporters...the quantum will be decided by our Alco (asset-liability committee) meeting," he was quoted.

The interest rate charged on the ECR facility is equivalent to the repo rate, currently eight per cent. Yesterday, RBI had asked banks to lower interest rates chargeable to eligible exporters, so that the latter could avail of the benefit of two per cent interest subvention scheme of the central government.

"Banks may reduce the interest rate chargeable to the exporters, as per the base rate system... eligible for export credit subvention by the amount of subvention available, subject to a floor rate of seven per cent," the central bank said in a notification.

On the impact of the RBI move on liquidity, Chaudhuri said it would have some impact in the future, but did not say by how much, PTI reported.

The Reserve Bank on Monday, while leaving the key interest rates and cash reserve requirements of banks unchanged at its mid-quarter review, enhanced liquidity to exporters by increasing the refinancing limits. Banks, on an average, have been borrowing Rs 1 lakh crore from RBI daily, due to tight money supply conditions.

Last week, SBI had announced up to a 3.5 per cent cut in lending rates to top-rated companies, small and medium enterprises and farm loan borrowers but not for individuals, effective June 1.

Source: Business Standard
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RBI issues norms for non-bank entities to set up ATMs

An ATM at every nook and cranny may become a reality in a couple of years.

The Reserve Bank of India has issued final guidelines permitting permit non-bank entities to set up, own and operate ATMs in India. This is to ensure the expansion of ATMs in smaller centres across the country.

The ATM roll-out conditions stipulated for the non-bank entities, which will be christened as white label ATM operators (WLAOs), are stiff. It has prescribed three schemes under which the roll-out of white label ATMs (WLAs) can happen.

Three schemes

Under the first scheme, WLAOs have to install at least 1000 WLAs in the first year; in the second year install at least twice the number installed in the first year; and in the third year install at least thrice the number installed in the second year.

Under the aforementioned scheme, for every three WLAs installed in Tier III to VI centres, one WLA can be installed in Tier I (metros) to II centres (big cities).

Under the second scheme, WLAOs have to install at least 5000 WLAs every year for three years. For every two WLAs installed in Tier III to VI centres, one WLA can be installed in Tier I to II centres.

Under the third scheme, WLAOs have to install at least 25,000 WLAs in the first year and at least another 25,000 in the next two years. For every one WLA installed in Tier III to VI centres, one WLA can be installed in Tier I to II centres.

What is common under the three schemes is that out of the WLAs installed in Tier III to VI centres, a minimum of 10 per cent should be installed in Tier V and VI centres.

No switchover possible

The RBI has stipulated that no switchover of schemes is permissible. The date for determining the time line for implementation would commence 30 days after issuance of the authorisation.

Non-bank entities intending to set up WLAs may approach the RBI within four months from the date of issuance of these guidelines, beyond which the authorisation-seeking window will be closed.

Only cards issued by banks in India (domestic cards) will be permitted to be used at the WLAs in the initial stage

The RBI observed that although there has been 23-25 per cent year-on-year growth in the number of ATMs (over 90,000 currently), their deployment has been predominantly in Tier I and II centres.

The regulator said that there is a need to expand the reach of ATMs in Tier III to VI centres. In spite of banks’ pioneering efforts in this direction, much needs to be done. Hence, the need for WLAs.
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Wednesday, June 20, 2012

Syndicate Bank to focus on fee income, retail and SME

Syndicate Bank will focus on fee income, retail and SME loans as a strategy to boost its balance sheet. The bank has decided to enter into strategic tie-up with asset management companies to sell their mutual fund schemes. Also it is in talks with life insurance companies for distribution of insurance products.

Disclosing this, bank's CMD M G Sanghvi said, "Distribution of both insurance and mutual funds will help us boost fee income. We are aiming at an annual growth of 30% this fiscal year." The bank's fee income rose 17.5% to Rs 1075.8 crore in fiscal year 2010-11. As of now, the bank does not sell mutual fund schemes to its customers unlike many private and public sector banks which have tied up with many AMCs for distribution.

Meanwhile, in February, Syndicate Bank had entered into an equity tie-up with Birla Sun Life for bancassurance however the proposal is yet to be approved by IRDA. As of now, Syndicate Bank does not have partnership with any life insurance company for distributing its product.

"Until we receive approval from IRDA, we plan to revive insurance distribution business. We will float an RFP to identify the insurance company. " said Mr Sanghvi, who took charge of the bank in March this year.

He indicated that the bank will now aim at improving its retail loan book by improving service and reducing the loan processing time to 7 days. The retail advances stood at Rs 24,725 crore or 22% of the total advances book. "We plan to do away with third party guarantee in homes loans to attract customers," he said.

The bank plans to add 300 new branches to its existing network of 2710 branches. It also plans to increase automated teller machines by 500. It currently has 1210 ATMs.

He said that the bank has targeted a credit growth of 18-19% and deposit growth of 15-16 this fiscal year. Syndicate Bank had reported a credit growth of 13.7% and deposit growth of 16.4% in 2011-12. In the same year its net profit rose 25% to Rs 1313.4 crore.

Source: EconomicTimes
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RBI panel wants new supervision process

In order to make supervisory process for commercial banks more effective, a Reserve Bank of India panel has proposed that risk-based supervision (RBS) should replace compliance-based and transaction-testing approach (CAMELS).

Under RBS, the supervisory rating would be a reflection on the risk elements and would not be an exercise in performance evaluation as under the CAMELS.

Under RBS, the supervisory stance would be determined based on a supervisory analysis of ‘probability of failure’ of a bank and the likely impact of its failure on the banking/financial system.

Thus, the periodicity/intensity of on-site inspection of a bank would depend upon its position on the Risk-Impact Index Matrix rather than its volume of business.

Based on the exercise, the bank would then be appraised of the direction of key risk groups along with overall risk faced by it. A risk mitigation plan, comprising the need for improving controls, augmenting capital or restructuring business would also be given to the bank.

The RBI’s High Level Steering Committee (HLSC) for Review of Supervisory Processes for Commercial Banks was constituted by the RBI Governor on August 3, 2011. The HLSC was chaired by KC Chakrabarty, deputy governor of RBI.

The panel said that the supervision of all group entities under the jurisdiction of RBI has to be brought under a single department as against the present fragmented set up.

“The domains of regulation and supervision should be firmly demarcated and any entity-specific decision should only emanate from the supervisory department,” it said.

The communication between the supervisor and the supervised entity is confidential and, therefore, should not be subject to any public scrutiny, the panel said.

Source: Financial Express
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Fitch cuts SBI, ICICI, PNB, Axis outlook

Global agency Fitch today cut credit rating outlook to negative from stable of 11 financial entities including SBI, ICICI Bank, PNB and Axis Bank.

The action follows the revision earlier this week of India's outlook to negative.

"The outlook revision of the financial institutions reflects their close linkages with the sovereign by virtue of their high exposure to domestic counterparties and holdings of domestic sovereign debt," Fitch said in a statement.

The list of downgraded entities include six government banks (including an international banking subsidiary of a government bank), two private banks. These include Bank of Baroda, Bank of Baroda (New Zealand) Ltd (BOBNZ), Canara Bank, and IDBI Bank.

Besides two wholly owned government institutions – Export-Import Bank of India and Housing and Urban Development Corporation Ltd have also been similarly downgraded. Besides, the outlook of IDFC Ltd and Indian Railway Finance Corporation Ltd outlook has also become negative.

However, Fitch said the banks continue to have reasonable customer deposit base, domestic franchises and adequate capital.

The non-banking financial entities, meanwhile, lack the funding advantage, which puts them more at risk during times of increased market volatility, it said.

Fitch also said sovereign support for both the large banks and 'policy-type institutions' is expected to remain strong, with the former benefiting from their large share of system assets and deposits and the latter from their association with the government.

According to analysts, the cut in the rating outlook may raise the cost of overseas borrowings for such institutions.

Earlier this week, Fitch lowered India's credit rating outlook to negative, citing corruption, inadequate reforms, high inflation and slow growth.

India faces an "awkward combination" of slow growth and elevated inflation, Fitch had said, adding that the country "also faces structural challenges surrounding its investment climate in the form of corruption and inadequate economic reforms".

Standard and Poor's (S&P) had in April lowered India's rating outlook to negative from stable. It also warned on June 11 that the country may be the first in the BRIC grouping to falter and its sovereign credit rating may slip below investment grade.

Fitch revises outlook on Indian FIs to negative

Fitch Ratings has revised the Outlook on the 'BBB-' Long-Term (LT) Foreign Currency (FC) Issuer Default Rating (IDR) of India-based financial institutions to Negative from Stable, while affirming the rating.

These include six government banks (including an international banking subsidiary of a government bank), two private banks, two wholly owned government institutions and one infrastructure finance company.

A list of affected entities is as follows:- State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Bank of Baroda (New Zealand) Limited (BOBNZ), Canara Bank (Canara), IDBI Bank Ltd. (IDBI), ICICI Bank Ltd, Axis Bank, Export-Import Bank of India (EXIM), Housing and Urban Development Corporation Ltd. (HUDCO), Infrastructure Development Finance Company Ltd. (IDFC).

The rating action follows Fitch's revision of the outlook on India's LT Foreign- and Local-Currency IDRs to Negative from Stable (please see rating action commentary dated 18 June 2012 at The Outlook revision of the financial institutions reflects their close linkages with the sovereign by virtue of their high exposure to domestic counterparties and holdings of domestic sovereign debt.

Should the Sovereign Long-Term IDR be downgraded, the banks with Viability Ratings (VR) of 'bbb-' would also be affected given the previously mentioned linkages. Separately, Fitch is also of the opinion that pressures are building generally on the stand-alone credit profile of these institutions which will negatively impact VRs, given India's weakening economic and fiscal outlook, slowing business reforms and inflationary pressures that in turn could put further pressure on their future asset quality. VRs of banks with concentrated exposures to problematic sectors could be impacted more.

Fitch derives some comfort from the banks' reasonable customer deposit base, established domestic franchises and adequate capitalisation. The non-banks, however, lack the funding advantage, which puts them more at risk during times of increased market volatility. In the agency's opinion, sovereign support for both the large banks and policy-type institutions is expected to remain strong, with the former benefiting from their large share of system assets and deposits and the latter from their association with the government. Consequently, Fitch expects the LT IDRs for the above two categories to be aligned to the sovereign's rating and also provide a Support Rating Floor close to, or at, the sovereign rating.

A list of outstanding ratings (including the above) is provided below:

- SBI: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD5bn MTN programme: 'BBB-' - USD400m perpetual tier 1 bonds: 'B' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable PNB: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - INR10bn lower tier 2 subordinated bonds: 'Fitch AAA(ind)' - INR150bn certificates of deposits programme: 'Fitch A1+(ind)' BOB: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD500m senior notes under MTN programme: 'BBB-' - USD350m senior notes under MTN programme: 'BBB-' - USD300m upper Tier 2 notes under MTN programme: 'B+' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - INR25bn lower Tier 2 debt programme: 'Fitch AAA(ind)' - Deposit programme rating: 'Fitch tAAA(ind)' - Short-term debt: 'Fitch A1+(ind)' BOBNZ: - LT FC IDR: 'BBB-'; Outlook Negative

-Support Rating: '2' Canara: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD1bn MTN programme: 'BBB-' - FC senior debt under MTN programme: 'BBB-' - USD350m of senior notes under MTN programme: 'BBB-' - USD250m upper Tier 2 notes under MTN programme: 'B+' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable IDBI: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bb' - Support Rating: '2' - Support Rating Floor: 'BBB-' - National Long-Term rating: 'Fitch AA+(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - National Long-Term deposit rating: 'Fitch tAAA(ind)' - INR159.15bn senior debt: 'Fitch AA+(ind)' - INR49.08bn lower tier 2 notes: 'Fitch AA+(ind)' - INR25bn senior and lower tier 2 bonds: 'Fitch AA+(ind)' - INR3.5bn upper tier 2 subordinated bond programme: 'Fitch AA-(ind)' - INR160bn certificates of deposit programme: 'Fitch A1+(ind)' ICICI: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3'

- Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD4.46bn senior notes: 'BBB-' - SGD200m senior notes: 'BBB-' - USD750m Upper Tier 2 bonds: 'B+' Axis: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '3' - Support Rating Floor: 'BB+' - FC senior debt: 'BBB-' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - INR57bn subordinated lower tier 2 debt programme: 'Fitch AAA(ind)' - INR6.53bn subordinated upper tier 2 debt programme: 'Fitch AA+(ind)' - INR2.14bn perpetual tier 1 debt programme: 'Fitch AA+(ind)' EXIM: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Support Rating: '2' - Support Rating Floor: 'BBB-' - JPY24bn senior unsecured notes: 'BBB-' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - Domestic deposit programme: 'Fitch AAA(ind)' - INR47bn bank loans: 'Fitch AAA(ind)' HUDCO:

- LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Support Rating: '2' - Support Rating Floor: 'BBB-' - National Long-Term rating: 'Fitch AA+(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - INR60bn domestic bonds (partly taxable and partly tax-free): 'Fitch AA+(ind)' - INR80bn bank loans: 'Fitch AA+(ind)' - INR90bn domestic bonds: 'Fitch AA+(ind)' - INR15bn short-term debt: 'Fitch A1+(ind)' - INR23.5bn domestic bonds issued under a letter of comfort (dated 8 February 2003) from the government: 'Fitch AAA(ind)(SO)' - Domestic term deposit: ' Fitch tAA+(ind)' IDFC: - LT FC IDR: 'BBB-'; Outlook Negative - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - INR90bn non-convertible debentures: 'Fitch AAA(ind)' - INR15bn zero-coupon bonds: 'Fitch AAA(ind)' - INR29.3bn long-term infrastructure bonds: 'Fitch AAA(ind)' - INR470bn long-term debt programme: 'Fitch AAA(ind)'

Source: Financial Express
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RBI looking into record high gold imports

The sharp rise in gold imports has drawn the central bank’s attention and it is studying the factors contributing to this.

Reserve Bank of India (RBI) Governor D Subbarao on Tuesday said they were looking into the reasons. “We are trying to solve why gold imports were at a record high,” he said. This, coupled with high oil imports, had led to widening of the current account deficit, which in turn contributed to rupee depreciation.

In 2011, the country imported 969 tonnes of the yellow metal, according to World Gold Council data. India’s gold import in 2010 was quite high, at 958 tonnes. Imports, however, have started tapering after the government recently quadrupled import duty. In value terms, imports in financial year 2011-12 were a little less then $60 billion. According to data released by the government yesterday, gold and silver imports in April and May came down to $4.3 billion, compared with $9.2 billion last year.

Referring to the issue of rupee depreciation, he said the fall in the currency exchange rate since March was because of both global and domestic factors. In the earlier phase of August to December 2011, the rupee had depreciated on the back of global uncertainty and had appreciated in the following phase, January to February 2012, due to measures taken by RBI.

“We will continue to follow the policy of intervening only to smoothen volatility in the foreign exchange market,” he said. The rupee has fallen 25 per cent in the past 12 months.

Source: Business Standard
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