UCO Bank puts China, Malaysia expansion plans on hold

Kolkata-based UCO Bank has put on hold its expansion plans in China and Malaysia due to the high capital involved.

The bank, which had initially planned to upgrade its representative offices, has closed down its offices in these two countries last year, according to Mr Arun Kaul, Chairman and Managing Director, UCO Bank.

“We were not getting permission to open branches there. Hence, the opportunity was not very large while the capital adequacy requirement was extremely strict,” he told newspersons after the bank’s ninth annual general meeting here on Tuesday.

The bank currently has four overseas branches — two in Singapore and two in Hong Kong.

For the quarter ended March 31, 2012, the bank posted 35 per cent growth in its total income from these overseas branches to Rs 88 crore, as compared to Rs 65 crore during the same period last year. Total assets (loan and investment) grew by 30 per cent to Rs 13,147 crore during the same period.

Capital Requirement

UCO Bank would require capital infusion to the tune of Rs 14,000 crore under Basel III for the next five years, Mr Kaul said.

“In terms of Basel III we have assessed our capital requirement for next five years to be around Rs 14,000 crore. We are looking at various options to raise funds. In addition, we are focusing on lending to retail, SME and farm sectors where the capital to risk-weight is lower," he said.

Shobha@thehindu.co.in

Read more »

IndusInd Bank gets its first currency chest

IndusInd Bank opened its first currency chest – at the bank’s Thane branch.

The currency chest has been set up with the most modern, hi-tech machines for note counting, sorting and counterfeit detection, Mr Romesh Sobti, Managing Director and CEO, IndusInd Bank, said today.

A currency chest is a repository of currency notes that lies within the premises of a bank. But the money put into it is treated as having been deposited with the Reserve Bank of India.

Therefore, it helps a bank to meets its ‘cash reserve ratio’ requirements, while at the same time not parting with the cash. Banks, therefore, desire to have as many currency chests as possible.

Earlier, banks had to report the balances in the chest to the RBI at the close of each day. However, today typically the chests are linked up to the RBI that all transactions could be monitored by RBI real time.

IndusInd Bank has said in a notification to the stock exchange that its second currency chest is coming up at New Delhi and would be made operational by the end of the financial year.

mramesh@thehindu.co.in

Read more »

RBI caps merchant discount rates for debit card transactions

To encourage debit card transactions, the Reserve Bank of India has announced a cap on the Merchant Discount Rate (MDR). Effective from July 1, the MDR for transactions undertaken with debit cards must not exceed 0.75 per cent of the transaction amount for value up to Rs 2,000 and 1 per cent for that above Rs 2,000, the RBI said. MDR is a processing fee charged by a bank from a merchant to provide debit and credit card services.

“For a standard debit card, the average MDR is about 1.5 per cent. As the MDR has been capped by the RBI, it will encourage debit card usage,” said a banking technology consultant.

The RBI said the cap on MDR would encourage all merchants to deploy card acceptance infrastructure and also facilitate acceptance of small value transactions. A lower MDR, with the expected increase in transaction volume on account of network effects, would result in a reasonable ROI for acquiring banks.

Till now, the MDR for debit and credit cards was the same in India. Given the different nature of the two products, there is no rationale for having a similar MDR for debit and credit cards, the RBI release said.

beena.parmar@thehindu.co.in

Read more »

IRDA slaps Rs 1.47-cr penalty on HDFC Standard Life

The Insurance Regulatory and Development Authority has imposed a penalty of Rs 1.47 crore on HDFC Standard Life Insurance Company.

This is the highest-ever penalty imposed on any life-insurance company so far after opening up of the sector.

The fine has been imposed for various ‘violations’ including wrongful marketing expenses paid to corporate agents, use of unlicensed individuals and corporate agents to procure business, payment of death claims and deviation from norms on unit-linked insurance policies.

“A penalty of this nature is a regulatory necessity in order to impress upon the management of any insurance company that regulatory prescriptions have to be complied with at all times and failure to do so will entail appropriate regulatory action,’’ Mr J. Hari Narayan , Chairman, IRDA, said in an order issued on Thursday.

The penalty amount should be debited only to the shareholder’s account and no part of the same shall be debited to the policyholder’s account, the IRDA chief said.

nagsridhu@thehindu.co.in

Read more »

SBH cuts interest rate on term deposits

State Bank of Hyderabad has reduced the interest rates on domestic term deposits of up to Rs 15 lakh with some maturity periods with effect from July 1, 2012.

Interest rate on deposits for 46 to 179 days has been reduced to 7.25 per cent from the existing 8 per cent. Deposits for 180 days to less then one year would earn 8 per cent marking a reduction of 50 basis points.

The existing interest rate structure would continue for deposits above Rs 15 lakh for various maturity periods, SBH said in a release.

Read more »

Bank unions plan strike on July 25, 26

Public sector bank employee unions have decided to call a two-day nation-wide strike during July 25-26 to protest reforms in the banking sector and outsourcing of jobs.

“We have decided to go on a two-day nation-wide strike beginning July 25,” the United Forum of Bank Unions (UFBU) Convener, Mr G.D. Nadaf, told PTI.

UFBU is the umbrella organisation of five employee unions and four officer unions of state—run and private banks in the country.

“About 10 lakh employees and officers will participate in the strike,” Mr Nadaf claimed.

Read more »

About 20% of rejigged loans may turn into non-performing assets : SBI Chairman

The State Bank of India Chairman, Mr Pratip Chaudhari, said 18-20 per cent of the bank’s total restructured loans could turn into non-performing assets.

Morgan Stanley, in a report, on Wednesday had flagged asset quality concerns in SBI.

As on March 31, 2012, the restructured loans of the bank stood at Rs 37,168 crore. Only 4-5 per cent of the total NPAs turn into eventual loss because of non-repayment, Mr Chaudhari had said while announcing the bank’s fourth-quarter and full-year 2012 results.

Morgan Stanley said the bank’s new gross and net non-performing loans are expected to increase by Rs 5,000 crore and Rs 3,000 crore, respectively, in the first quarter.

The country’s largest lender has cut loan rates to exporters by 0.50 per cent.

Speaking to reporters on the sidelines of a CII conference, Mr Chaudhari said the rate cut is effective from June 23.

Earlier, the Reserve Bank of India had increased the Export Credit Refinance (ECR) limit for banks to 50 per cent from the earlier15 per cent. This was expected to inject an additional Rs 30,000-crore liquidity into the banking system. ECR is a facility where the RBI refinances the banks against the loans they give to exporters.

SBI recently cut rates by up to 3.5 percentage points for corporate, micro small and medium scale enterprises (MSMEs) and farm loan borrowers.

Mr D. Sarkar, Chairman and Managing Director, Union Bank of India, said cutting interest rates for exporters is not a problem. However, the demand for exports from the US and Europe has been under pressure.

“Export credit rate is a function of demand from exporters. If rate cut can be compensated by sufficient volumes, then the bank will not have any problems in cutting rates.”

satyanarayan.iyer@thehindu.co.in

Read more »

HSBC may sell Axis Bank, YES Bank stakes

UK-based HSBC is likely to sell stake in Axis Bank and YES Bank as part of its global strategy and is understood to have appointed merchant bankers for the deals.

To be done through block deals by HSBC Securities, the two stake - sales could be worth about Rs 2,430 crore at the prevailing market price of the India—based lenders.

HSBC has 4.75 per cent stake amounting to 1.9 crore shares in Axis Bank through HSBC IRIS Investments Mauritius Ltd, as per the latest BSE filings available.

It also has 4.76 per cent stake in YES Bank and holds 1.67 crore shares in it through the Mauritius—based entity.

The global banking major is in the process of offlaoding stake in Axis and YES banks and has already appointed merchant bankers, according to sources.

When contacted HSBC declined to comment on the issue.

Shares of Axis Bank were trading at Rs 970.95, down 2.98 per cent, while those of YES Bank were at Rs 328.75, down 1.76 per cent, on the BSE.

In December 2003, HSBC had bought about 20 per cent in Axis Bank (then UTI Bank) from private equity major CDC. The British bank bought the stake in Yes Bank in 2008.

In April, the Netherlands-based Rabobank sold about 3.4 per cent stake in YES Bank for about Rs 453 crore. Rabobank sold 1.26 crore shares for Rs 357.03 apiece through open market transactions.

Of this, Bajaj Allianz Life insurance picked up 25.2 lakh shares, while Citigroup Global Markets Mauritius picked up 22 lakh shares at Rs 357 per unit, according to the BSE data.

Rabobank owned about 1.67 crore shares or 4.73 per cent stake in YES Bank at the end of March 31, 2012.

In 2010, Rabobank had sold about 11 per cent in YES Bank and had thus reduced its stake in YES Bank from around 15.9 per cent to 4.9 per cent. Rabobank has been reducing its stake in Yes Bank as it plans to enter banking space on its own in the country.

Earlier this year, Citigroup sold its stake in housing finance major HDFC for nearly Rs 10,000 crore ($1.9 billion), while US private equity major Warburg Pincus offloaded its stake in Kotak Mahindra Bank for about Rs 1,350 crore ($274 million).

Read more »

Muthoot Finance ownership split cannot be ruled out, says Edelweiss

The risk of ownership split in future among the four promoter-brothers of Muthoot Finance cannot be ruled out, says a report of Edelweiss Securities. Muthoot has reacted to the report denying any such possibility.

“We cannot rule out the split of ownership between the brothers in future, hence have listed the ownership pattern as a risk,” the Edelweiss report on the gold loans industry, released today, said.

Muthoot Finance is a Kerala-based non-banking finance company that specialises in gold loans, with assets under management worth Rs 24,400 crore.

“A look at the history tells us that Mr M. George Muthoot, father of the promoters, along with his brothers Muthoot M. Pappachan and Muthoot Mathew, started gold loan business in 1939. However, their businesses split in 1975 and are now run under Muthoot Fincorp and Muthoottu Mini. So, what we see here is that a set of cousins is carrying on similar business under three different companies,” Mr Kunal Shah of Edelweiss has said in the report.

When reached for a comment, Muthoot Finance responded by stressing that there is “absolute peace and unanimity in the family on the company’s growth plans.”

“We have gone through this report. There are lot of other positive things written about the sector and Muthoot Finance. As broking houses have to outline certain risk factors, they have mentioned this as one of the possible risk. This business has been run as a single force with utmost dedication on single product called gold loans. The business of the company has grown many fold under the guidance of all the brothers. There is absolute peace and unanimity in the family on the company’s growth plans,” the company said.

Muthoot is the largest gold financing NBFC with operating history of more than 70 years. At present, it is closely held family owned business with promoters (sons of M. George Muthoot and their family) continuing to hold substantial stake of 80 per cent and the rest is with public. It is registered as a systemically important non-deposit accepting NBFC with the RBI. Headquartered in Kerala, the gold loan NBFC has a network of 3,678 branches, 64 per cent located in South India as of March 2012.

Edelweiss has indeed spoken positively of Muthoot Finance. “Muthoot not only scores higher than banks but also NBFCs. Our liking for Muthoot stems from its operational efficiencies and stronger risk management practices,” the report says. “We expect Muthoot to continue to embark on a steady growth path post the consolidation period, after 2014.”

mramesh@thehindu.co.in

Read more »

Insurers, MFs run risk of contagion from banks: RBI

Insurance companies and mutual funds run the risk of contagion from the banking sector, cautioned the Reserve Bank of India.

Random failure of a bank which has large borrowings from insurance companies and mutual funds may have significant implications for the entire financial system, said the RBI’s Financial Stability Report.

Banks increased reliance on borrowed funds, especially short-term funds, due to disproportionate slowdown in deposit growth (at less than 14 per cent as at March-end 2012) vis-à-vis credit growth (16.3 per cent). This could translate into rollover and liquidity risks for banks.

Gold loan cos

Another example of interconnectedness cited by the RBI is between gold loan companies (non-banking finance companies) and banks.

The high dependence of gold loan companies on the banking system for funds could pose risks to the latter, in case the business model of these companies falters.

The exponential growth in the balance-sheets of the NBFCs, which are lending against gold, in recent years coupled with the rapid rise in gold prices along with expansion in the number of their branches is a cause of concern.

The Challenges

Going into 2012-13, the operating conditions for the Indian banks are expected to remain challenging given the weakening global economic outlook, adverse domestic macroeconomic conditions and policy uncertainties.

Banks in India are likely to be affected due to de-leveraging in advanced countries, though the direct impact is expected to be limited.

The RBI said concerns on loan quality persist as the growth of non-performing loans (up by 43.9 per cent as at March-end 2012) accelerated and continued to outpace growth. The increase in NPLs in FY12 was largely from priority sector, retail and real estate sectors.

Going forward, power and airlines sectors are likely to continue to face funding constraints and could also be affected by prevalent policy uncertainties. These could pose challenges to the banks’ loan quality.

Risks to stability

The combined effect of the dismal global macroeconomic situation and the muted domestic economic performance has caused marginal increase in the risks to the stability of the financial system.

The threats to stability are posed by the global sovereign debt problem and risk aversion, domestic fiscal position, widening current account deficit and structural aspects of food inflation.

The RBI said the downside risks to growth may persist given the headwinds from the global economy and moderation in private and government consumption and investment demand.

The persistence of overall inflation in the face of significant growth slowdown points to serious supply bottlenecks and sticky inflation expectations.

kram@thehindu.co.in

Read more »

Free electronic fund transfer not viable, says Chakrabarty

The Reserve Bank of India’s Deputy Governor, Dr K.C. Chakrabarty, has ruled out the possibility of providing e-transactions free of cost given the viability issues.

Earlier this month, the Finance Ministry had asked the banking regulator to work out a framework under which funds could be transferred electronically free of charge from one account to the other.

“Anything (product and services) that is offered free of charges can never be scaled up…It cannot be commercially viable and viability is the key,” Dr Chakrabarty said at a Banking Tech summit organised by the Confederation of Indian Industry here on Thursday.. He added that with greater use of technology the cost of transactions come down and customers should bear just the incremental cost.

At present, banks charge between Rs 5 and Rs 55 for electronic transfer of funds up to Rs 1 lakh from an account of one bank to another through National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS).

Customer is the key

According to Dr Chakrabarty, there is no standardisation amongst banks even with regard to account numbers and customers have to learn, unlearn and re-learn banking operations with each bank.

Dr Chakrabarty called for greater customer focus by providing suitable cost-effective technology and efficient multi-channel delivery model; standardisation of systems, customised products and services to reach out to small and marginalised customers; efficient business models that are viable but not exploitative; data integrity with cost and speed; comprehensive MIS and increased information literacy for everyone while also making the quality of information better.

On a lighter note, he said, “Innovation is about providing risk-free returns but technology today has collapsed and is providing return free risks.”

Amid some criticism levelled upon the RBI, Dr Chakrabarty observed that, “There is a thin line of demarcation between what can be called an ‘innovation’ and a ‘violation’. Our purpose is to stop the latter.” He further said it was the RBI’s job to reduce negative outcomes of technology and innovation while retaining the benefits.

‘I do not go to an ATM’

The RBI Deputy Governor, Dr K.C. Chakrabarty, brought the house down saying that he never used ATMs after hearing the number of complaints made by customers.

While the ATM machine was one of the greatest innovations in the last 50 years in terms of technology products, it did have drawbacks. “It facilitates faster dispensation of cash provided the transaction is successful. Though there have been 98 per cent successful ATM transactions, there have been no failed transactions at a branch. So where is the evolution?” he exclaimed.

“The problem faced by the aam aadmi today is ‘terrorisation of ATMs’. Some (ATM machines) will swallow your cards, some require only swiping; some require keys and some do not, some provide cash on the tray while some do not, and some do not return money…,” he quipped.

beena.parmar@thehindu.co.in

Read more »

Kerala police bust inter-State gang involved in ATM fraud

The Kollam police in Kerala on Sunday claimed to have busted an inter-State gang involved in a multi-crore ATM fraud.

Acting on definite leads, the police arrested two persons Sunny Gupta (27) and Ramadeep Singh (30) from Mohali in Punjab. Their interrogation led to the arrest of two more persons in Kollam the next day.

They were identified as Ashish Arora (24), and Sumitkumar Arora (28), natives of Ludhiana in Punjab.

A number of banks in Kollam that found themselves at the receiving end had lodged a complaint with the City Police Commissioner, Mr Debesh Kumar Behera.

Mr Behera constituted a special team led by the Assistant Police Commissioner, Mr Thomson Jose, to crack the case. The police said that the accused opened bogus accounts in the name of various persons, mainly residing in the northern parts of the country and forged ATM cards. The police recovered more than 500 forged ATM cards from them.

Talking about how they operated, the police said they would fly down to Kerala, stay in posh hotels and travel in luxury cars. They would conduct their operations at ATMs mainly located on the highways. Job done, they would take a flight back home. The accused have been found to be linked to at least 24 such cases registered at various police stations in Kerala.

The police said that the fraudsters took advantage of a ‘weak link’ in ATM dispenser-cum-presenter technology to illegally withdraw huge money.

They would ‘create an error condition’ at the ATM resulting in a transaction reversal. For instance, the forged ATM card is used to withdraw Rs 1,000. Only a portion of the notes is taken, leaving the rest in the presenter (tray).

Several seconds later, the ATM would time out and send an error message, and then retract the remaining notes.

The dispenser is not programmed to count the retracted notes, and the transaction is reversed – or cancelled, restoring the account to original position showing no withdrawal.

These transactions are repeated many times over and at multiple ATMs to draw even more illegal sums of money.

Read more »

Birla Sun Life launches new ULIP whole life plan

Private insurer, Birla Sun Life, on Tuesday announced the launch of its new unit-linked whole life plan, BSLI Wealth Secure.

“With three investment options to choose from, the plan can meet the demands of the diverse investors.

“BSLI Wealth Secure plan combines long-term savings and whole life cover in such a way that it allows customers to focus on their goals and maximise savings for their future,” Birla Sun Life Insurance Chief Actuarial Officer, Mr Niall O’Hare, said in a release.

Read more »

Liberty Videocon General Insurance gets final nod from IRDA

The Insurance Regulatory and Development Authority has given approval to Liberty Videocon General Insurance Company to start operations in the country.

The Mumbai-based company will start operations with an initial capital of Rs 300 crore.

Liberty Videocon, a partnership between Videocon Industries and US-based Liberty Mutual Insurance Group, will provide multi-line insurance underwriting capabilities with an emphasis on personal insurance products.

The company is currently finalising its products and service delivery blueprint.

Commenting on the development, Mr Venugopal N. Dhoot, CMD, Videocon Industries, said: “Videocon Group has a strong presence in the Indian consumer space ranging from white and brown goods to mobile telecom services covering entire geography of India.

Domain expertise of Liberty Mutual Insurance Group coupled with our huge platform of brand, trade and customer relationships should provide a robust business model to our general insurance business.”

Read more »

Digitas to manage Axis Bank online operations

Axis Bank has appointed digital marketing agency Digitas to conceptualise, design and manage its online operations.

“We believe that digital media is an extremely important channel to engage with and have meaningful conversations with consumers. A good digital strategy will go a long way in creating preference of one service provider over another. We believe that Digitas India is the right strategic partner to help us achieve our aspirations,” Ms Manisha Lath Gupta, Chief Marketing Officer, Axis Bank, said in a statement.

Digitas India will create and implement best-in-class strategies and consumer experiences for Axis Bank, including helping to position new and current services online as well as in social media.

Read more »

StanChart launches first online credit card approval solution

International bank Standard Chartered Bank launched its first online credit card approval solution to enable customers to apply for the card online.

On application, the customers receive an ‘Approval In Principle’ (AIP) followed by a final approval after the completion of ‘Know Your Customer’ and credit approval processes.

The bank will extend this process to several other consumer banking products over the next few months.

The online application process involves verification of key customer details such as the permanent account number, mobile number, email ID and credit history through CIBIL, and other internal eligibility criteria. Customer can then choose his or her preferred card.

Mr Sanjeeb Chaudhuri, Regional Head, South Asia & Chief Marketing Officer, Consumer Banking, said: “Digital solutions are the future of banking and Standard Chartered is making digital channels an important and integral part of the way customers bank.”

Standard Chartered also provides Breeze Mobile as its mobile banking application in India and other Asian countries.

Read more »

SIDBI Venture Capital closes India Opportunity Fund

Development bank SIDBI on Monday said its venture capital subsidiary has closed Rs 600 crore India Opportunity Fund.

“SIDBI Venture Capital has got fund commitment from various investors including domestic banks and insurance companies. The Rs 600—crore, India Opportunity Fund would be operational soon,” said Mr S Muhnot, Chairman and Managing Director, SIDBI.

Small Industries Development Bank of India (SIDBI) has committed to contribute 30 per cent or Rs 180 crore to the corpus India Opportunity Fund Series I, he said.

The fund would focus on development of the micro, small and medium enterprises (MSME) sector.

SIDBI Venture Capital has two funds since its inception.

The first one, the National Venture Fund for Software and IT Industry, had a corpus of Rs 100 crore.

The development bank’s second fund, SME Growth Fund, has a corpus of Rs 500 crore and is at present under divestment phase.

Talking about SIDBI, Mr Muhnot said, the financial institution is working on a new business model in consultation with the government.

The financial institution would focus on three core areas including energy efficiency project, receivable finance and lending to services sector.

Read more »

The Reserve Bank of India has announced that its office in Chennai will remain closed for public transactions, including Government transactions, on July 2, on account of annual closing of accounts. All commercial banks and co-operative banks will, however, remain open on that day for transacting business, a release from the bank said. The Chennai Bankers Clearing House as also the clearing houses managed by commercial banks in other centres in Tamil Nadu will function as usual on July 2, it adds.

The Reserve Bank of India has announced that its office in Chennai will remain closed for public transactions, including Government transactions, on July 2, on account of annual closing of accounts. All commercial banks and co-operative banks will, however, remain open on that day for transacting business, a release from the bank said. 

The Chennai Bankers Clearing House as also the clearing houses managed by commercial banks in other centres in Tamil Nadu will function as usual on July 2, it adds.

Read more »

How ATMs are in the Vortex of change for rural India

International Finance Corporation is investing $2.7 million as equity in Vortex Engineering, a developer of low-cost automated teller machines.

The investment will help the Chennai-based company expand its network of ATMs across India’s rural and semi-urban areas, where people have limited or no banking services.

Widespread installation of low-cost, easy-to-use ATMs in the rural areas will facilitate cash withdrawal, especially for the zero-balance and ‘no-frills’ account holders.

It will also help people in rural areas access banking services that are otherwise proving difficult because of high cost.

Other countries

“Vortex’s innovative, solar-powered ATMs combine ease of use with rugged design,” IFC, which is a member of the World Bank, said in a press release.

“IFC’s assistance in implementing technology-led banking services would eventually help us take our offerings to other developing countries,” said Mr Vijay Babu, CEO, Vortex. Thanks to a government push to extend banking services, the ATM market in India is expected to grow three-fold over the next three years, with the bulk of machines bound for remote areas. In addition, banks are increasingly focusing on reducing costs by setting up ATMs instead of full-service branches.

Authentication

“The investment will help in taking basic banking and financial inclusion schemes to rural and semi-urban areas in India,” said Mr Thomas Davenport, IFC Director for South Asia. “Bringing banking close to home means a lot in a country where less than one-fifth of over 600,000 villages have a banking touch-point.”

Vortex’s machines have low capital and operational costs and consume significantly less power than conventional machines. Its machines accept soiled notes, unlike other ATMs that can operate only with fresh notes, and also can authenticate customers through fingerprints. The use of solar power also helps in rural markets lacking access to electricity supply, the release said.

Vortex's plant in Chennai has a capacity to manufacture 2,000 ATMs annually and can be expanded to build 10,000 units.

raja@thehindu.co.in

Read more »

SKS Microfinance finds jobs for 248 retrenched staffers

SKS Microfinance Ltd has secured jobs for 248 retrenched employees in collaboration with corporate and consulting agencies.

SKS had organised job fairs in Hyderabad, Vijayawada for all displaced employees after providing them with training, reorientation. “An additional 255 candidates have been shortlisted for various positions,’’ SKS said in a release on Monday.

Many organisations including Coromandel International, Genius Consultants, Reliance Life Insurance Company, Smaat Aqua Technologies Pvt Ltd, Tikona Digital Networks, TeamLease Services and TMI Networks had participated in the job fairs.

The Hyderabad-based company had earlier retrenched employees in view of mounting losses it has been facing due to crisis in the sector triggered by AP Microfinance (Regulation of Moneylending) Act 2010.

SKS’s scrip gained 4.19 per cent to end at Rs 68.15 on the Bombay Stock Exchange on Monday.

nagsridhu@thehindu.co.in

Read more »

Loans for vocational education to be made easy

Here is good news for those who are interested in doing vocational courses for skill development irrespective of their age.

Banks are now gearing up to cater to the finance requirements of those keen on pursuing vocational education, thanks to the guidelines on a model loan scheme introduced by the Indian Banks’ Association (IBA).

Hitherto, the vocational courses offered by ITIs, ITCs, Polytechnics and other technical institutions are not covered under various educational loan schemes of banks.

“However, a need is felt for providing institutional funding for the students undergoing specialised skill development programmes in recognised institutions,’’ the IBA said in a circular sent to banks.

According to the new guidelines, vocational or skill development courses of duration of two months to three years, preferably leading to a certificate/ having good employability, can be funded by banks.

The loan ranges from Rs 20,000 to Rs 1.50 lakh normally though a bank can use its discretion to lend a higher amount on a case-to-case basis.

There will be no service charges, collateral security or third party guarantee. The interest rate would be at ‘reduced’ rates linked to the base rate of individual banks.

“The scheme is vital as the country would require 10 to 15 million skilled workers every year,” the IBA said.

GEARING UP

Banks are also ‘excited’ about the new scheme due to the small ticket loans and the assured employability angle.

“I want to promote this aggressively at all SBH branches. We will be taking the board’s approval soon,’’ Mr M. Bhagavantha Rao, Managing Director, State Bank of Hyderabad, told Business Line.

Mr B.A. Prabhakar, Chairman and Managing Director, Andhra Bank, said the bank’s board had already approved the scheme. “We have also identified various institutions offering vocational courses,’’ he added.

Canara Bank has also launched the scheme. “This is a big boost to skill development initiatives. We are sensitising the branches for speedy popularisation of these loans,” Ms Archana S. Bhargava , Executive Director, Canara Bank, said.

nagsridhu@thehindu.co.in

Read more »

Punjab & Sind Bank launches ‘tatkal’ scheme to sanction loans for corporates

Punjab and Sind Bank has launched a ‘tatkal’ scheme for sanctioning loans above Rs 25 crore for businesses.

“Everybody has a request for quick disposal of their loan applications and there is good demand especially from the corporates in this regard,’’ Mr Divinder Pal Singh, Chairman and Managing Director, Punjab and Sind Bank, told Business Line .

The loan can be applied for at any branch through a SMS with the details of company’s name, gist of proposal and the bank would get back to the customer.

“We will convey the expression of interest within 15 days from the time of first application,” Mr Singh said.

When asked on the nature of demand for loans post–RBI’s policy last week, the CMD said although key rates were not cut, the demand for corporate loans was still there.

Punjab and Sind Bank would also be fast-tracking housing and car loans, he added.

The bank would primarily focus on lending to infrastructure (roads, ports etc), tourism and hospitality industry. “Though there has been some concern, I still think there is some scope for lending even to real estate,’’ Mr Singh said.

EXPANSION

“We have been strong in Delhi and Punjab but see a need to expand in Andhra Pradesh, Tamil Nadu, Karnataka besides Maharashtra and Madhya Pradesh this year,’’ he said.

About 300 branches will be added to the existing network of over 1,000 branches. The recruitment of 1,000 probationary officers would also be taken up, he added.

“We are targeting at 25 per cent growth in the total business this year. The net interest margin might reach 3 per cent by end of December quarter,’’ Mr Singh said.

As of of March 31, 2012, the bank had a net interest margin of 2 per cent.

nagsridhu@thehindu.co.in

Read more »

Union Bank’s London arm to start operations by March

The London subsidiary of Union Bank of India is expected to be operational by March next year.

The wholly owned subsidiary of Union Bank of India, UBI UK Ltd, has already received the Reserve Bank of India’s approval and was waiting for the local regulator’s approval, according to Mr D. Sarkar, Chairman and Managing Director.

“We have registered the company. The local authority is conducting its due diligence and is going through our risk management and credit management policies. We are hopeful of receiving their approval soon and we hope to commence operations by March 2013,” he told Business Line. The bank currently has a representative office in London. While banks usually prefer upgrading their representative offices into full-fledged branches, the regulatory authority in London prefers the subsidiary channel over the branch route, he said.

“They (local monetary authority) prefer the subsidiary channel as the capital requirement is higher. Branches, they feel, can shut shops anytime, however, subsidiary companies might not do so because of the huge capital involved,” Mr Sarkar pointed out.

The bank might have to pump in $200 million (approximately Rs 1,140 crore at the current exchange rate) in phases. “The total capital requirement is close to $200 million but we can pump that in 2-3 phases as and when the business starts growing,” he said. Apart from the capital, the bank will also have to induct a local board in the company.

Union Bank has one branch in Hong Kong at present. The branch registered a total business of $2.04 billion (Rs 10,388 crore as of March). As on March 31, the deposits of the branch stood at Rs 1,207 crore (Rs 570 crore) and advances stood at Rs 9,181 crore (Rs 5,941 crore).

The branch recorded a net profit of Rs 102 crore for the year ended March 31, as against Rs 50 crore in the previous financial year.

The bank also has five representative offices in Beijing and Shanghai, Sydney, Abu Dhabi and London.

Union Bank also plans to open a branch in DIFC, Dubai, for providing offshore banking facilities to its customers. The bank is also mulling setting up a branch in Belgium.

shobha@thehindu.co.in

Read more »

Non-banking entities may open 80,000 ATMs in next 8 months

Non-banking entities, which have been allowed by RBI to operate ATMs on behalf of banks, are expected to open 60,000-80,000 automated teller machines in the next eight months.

“We expect 60,000-80,000 white label ATMs roll-out in the next 6 to 8 months,” a Finance Ministry official said.

This will help in spreading financial inclusion in unbanked areas, the official said.

At present, there are about 90,000 ATMs spread across the country. Of this, nearly one-third are owned by SBI Group.

So far, only banks are allowed to set up and operate ATMs in the country.

Recently, RBI permitted non-banking entities with a minimum networth of Rs 100 crore to set up, own and operate ATMs on behalf of banks.

The RBI in a notification said the automated teller machines (ATMs) operated by non-banking entities will be known as ‘White Label ATMs’ (WLAs).

Each of these new ATM operator will have a bank sponsoring them, RBI had said.

All services offered by regular ATMs will be available at white label dispensers as well with existing debit or credit cards issued by banks. Customers of all banks can use the new ATM network.

Non-bank entities intending to set up WLAs under these guidelines may approach RBI for seeking specific authorisation within four months from the date of issuance of these guidelines, RBI had said.

Although there has been nearly 23-25 per cent annual growth in the number of ATMs, their deployment has been predominantly in tier I and II cities.

In spite of the banks’ pioneering efforts in this direction, much needs to be done, it said, adding, there is a need to expand the reach of ATMs in Tier III to VI cities.

The RBI final guidelines had said non-bank entities proposing to set up WLAs have to apply to RBI for seeking authorisation under the Payment and Settlement Systems Act, 2007.

Five free transactions in a month as applicable to bank customers for using other bank ATMs would be inclusive of the transactions effected at the WLAs, it had said.

Read more »