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Saturday, August 4, 2012

Knowledge helpline for SBI staff launched

Reserve Bank Governor D. Subbarao launched a ‘knowledge helpline’ for the staff of State Bank of India.

The Web-based service, will be useful to the employees to get their doubts clarified about banking and in turn be more helpful to the customer in their service.

The RBI Governor, who also inaugurated the “Swarn Udyan” and the renovated hostel blocks was the chief guest at the golden jubilee celebrations of the State Bank Staff College here on Friday.

Speaking on the occasion, he said banks have to regain the trust and confidence of people. Banking sector is going to be involved and engaged in financial inclusion. It is required to understand the psychology and economy of poor people to enhance financial inclusion. There is a need for innovative infrastructure financing in India as we are supply constraint economy.

SBI Chairman Pratip Chauduri and other dignitaries from the SBI, the RBI, other banks and educational institutions took part in the event. The State Bank Staff College set up in 1961 has emerged as a premier training institute for the banking industry. The college trains more than 6,000 officers every year, mostly middle- and senior-level executives, in credit management, international banking, leadership development, marketing skills, negotiation skills and communication skills etc.

Several public and private sector banks in India as well as banks from developing countries like Sri Lanka, Ethiopia, Ghana, Maldives, etc., also send their officers for training. Several Govt. officials of revenue intelligence, enforcement directorate, CBI, income tax, central vigilance commission etc., are also trained in banking related areas at the College.
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Bank of India to focus on retail and SME sectors

Bank of India on Friday said it plans to shift its focus from large and mid-corporates to retail as well as small and medium enterprises (SME) sector.

“At present, we have 16 per cent business from mid-corporates and 48 per cent from large corporates. We want to consciously reduce it. We feel that together it should be 50 per cent. We want to achieve this over a period,” Bank of India (BoI) Executive Director M S Raghavan told reporters here.

Presently, the large and mid-corporate business constitutes 64 per cent of the bank’s overall portfolio and the same will be reduced to 50 percent over a period, he said.

He said the bank has realised that it is losing important segments such as retail and SME which are considered drivers of future growth.

He said the mood is sluggish and demand for credit growth is yet to pick up. “Credit offtake is very sluggish. If credit offtake picks up there will be strain in liquidity,” he said replying to a query.

BoI aims at 18-20 per cent growth in credit offtake in this current financial year, he said.

He also said the bank plans to open 250 branches and 2,000 ATMs this year.
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SKS Micro pares Q1 loss to Rs 39 crore

SKS Microfinance Ltd has registered a loss of Rs 39 crore for the quarter ended June 30 against a loss of Rs 219 crore in the comparative quarter of last fiscal.

However, the company said it has narrowed the losses compared to the last quarter of fiscal 2011-12, when it was Rs 329 crore.

The revenues of company fell to Rs 79 crore during first quarter compared to Rs 177 crore in the comparative quarter of last year.

In a press release, the company said its revenues for non-Andhra Pradesh States increased by 11 per cent to Rs 79 crore during the quarter. The operations in AP have come to a halt.

“We raised incremental debt of Rs 1,360 crore in Q4-FY12 and held a cash and bank balance of Rs 403 crore at the end of Q1-FY-13.

The write-off of Rs 1,128 crore on the AP portfolio cleansed the balance-sheet. Now the focus is on P&L and hence the headcount and branch network rationalisation.

Our immediate priority is to return to the path of profitability and with the capital raise we should reach there sooner than later,” said S. Dilli Raj, Chief Financial Officer, SKS said.
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Interest income lifts United Bank net 32% in first quarter

Backed by growth in both interest and non-interest incomes, United Bank of India posted 32 per cent increase in net profit during the first quarter of this fiscal.

Net interest income grew by 20 per cent to Rs 684 crore during the quarter ended June 30, 2012, compared with the same period last year.

According to Bhaskar Sen, Chairman and Managing Director, United Bank, apart from posting a healthy growth in interest and non-interest income, the bank has also been able to curtail its operating expenditure.

“This has helped boost our net profit,” he said at a press meet to announce the bank’s performance here on Friday.

Net interest margin improved to 3.05 per cent (3.02 per cent). The percentage of gross non-performing assets to advances increased to 3.47 per cent (2.89 per cent), while net NPAs rose to 1.77 per cent (1.67 per cent).

The bank’s capital adequacy ratio stood at 12.5 per cent as on June 30, 2012.

“We aim to grow our business by 20 per cent. We have adequate capital to support this growth for the next two years. Post that we might look at several options like follow-on public offer or we might even approach the Government,” he said.

The shares of the bank closed at Rs 56.70, up 4.13 per cent on the BSE on Friday.
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E-payments have not penetrated deep enough, says Subbarao

RBI Governor D. Subbarao said India needs to proactively shift from cash to electronic payment systems.

“Large value payments have mostly shifted to the electronic mode, possibly because of the regulatory fiat. Disappointingly, retail payment systems continue to be paper-centric and electronic systems have not penetrated deep enough,” he said at the IDBRT Banking Technology Awards function here on Friday.

When compared with other emerging markets such as Brazil, Mexico and Russia, the value of bank notes and coins in circulation in India is high, at 12 per cent of GDP.

The number of non-cash transactions per person in India stands at just six per year, which again is “very low” in comparison with other emerging economies.

The RBI chief said that in proportional terms, India has one of the lowest numbers of ATMs and PoS (Point of Sale) terminals — 63 ATMs and 497 PoS terminals per million population.

Only a small fraction of the over 10 million retailers in India have card payment infrastructure.

“Though the usage of mobile banking and Internet banking is growing, a significant percentage of customers is not covered,” he pointed out.

Subbarao felt that limited product innovation is one factor behind the “tepid growth” of retail payment systems.

While the private non-bank entities, including mobile network operators, have introduced prepaid payment instruments, including mobile wallets, the market is yet to deepen.

In this context, he asked: “Are banks taking the easy way out by being content with the measures initiated by the regulator, rather than leading the effort towards electronification of payments?”

He said the central bank was now focussing on graduating to the next-generation RTGS (Real Time Gross Settlement) system with enhanced liquidity saving features and fast and higher processing capabilities.

The RBI introduced the RTGS system in March 2004 for settling gross inter-bank and customer transactions of values over Rs 2 lakh.

The gross daily turnover on the RTGS system has risen 500 times from Rs 500 crore then to Rs 2.5 lakh crore today.
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State Bank of India has launched a mobile payment service where customers can now book railway tickets over the IRCTC (Indian Railways Catering and Tourism Corporation) Web site and pay through SBI. Customers can download the application from the SBI’s site and register it at an ATM or any SBI branch and make payments using the Interbank Mobile Payments Service (IMPS). After booking the tickets on the IRCTC site, the customer can opt to pay through mobile/Net banking, choose IMPS and enter his/ her mobile number, MMID (Mobile Money ID) and one-time password, which can be obtained through mobile banking application/contact centre.

State Bank of India has launched a mobile payment service where customers can now book railway tickets over the IRCTC (Indian Railways Catering and Tourism Corporation) Web site and pay through SBI.

Customers can download the application from the SBI’s site and register it at an ATM or any SBI branch and make payments using the Interbank Mobile Payments Service (IMPS). After booking the tickets on the IRCTC site, the customer can opt to pay through mobile/Net banking, choose IMPS and enter his/ her mobile number, MMID (Mobile Money ID) and one-time password, which can be obtained through mobile banking application/contact centre.
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Friday, August 3, 2012

RBI's cap on loan-to-value at 60% for gold loan has hit NBFCs, according to their first quarter results. The gold loan assets of major financiers like Muthoot Finance and Manappuram Finance have dropped. The companies are going slow on expansion and are planning cost cutting measures.

Muthoot Finance, the largest gold loan company in the country, has recorded a 5% dip in the gold loan assets for the first quarter. The gold loan outstanding stood at Rs 23,082 crore for the quarter ended June 30, 2012 -- down from Rs 24,417 crore in the same period previous year. Manappuram Finance had gold loan assets worth Rs 10,739 crore for the quarter, a drop of nearly 7% from the previous year.

The companies were lending almost 80-85% of the value of gold till the RBI directives in March 2012. Though the average loan interest was 12-13%, higher value had entailed interest up to 20-21%. Though the income and profit of the NBFCs have registered growth in the quarter, the RBI restriction is nibbling away the assets under management of these companies.

Muthoot Finance chairman MG George Muthoot has said that the company is entering into a consolidation phase in the current year. This means, the company will open fewer branches. Compared to its annual addition of around 1,000 branches, the company will limit it to 250 branches this fiscal year.

It is also planning a freeze on new recruitment and is redeploying the existing staff to newer branches. The company has 3,780 branches spread over the country with an employee size of over 25,000.

Manappuram Finance has started 63 branches during the quarter, taking the national network to 2,971 branches. "We are unlikely to add more branches in the current year. We expect the growth in the gold loan assets under management to remain flat," said I Unnikrishnan, executive director and deputy CEO, Manappuram Finance.

"The RBI restriction has driven customers more to the unorganised sector than to banks because of the time factor in getting loans," said George Muthoot, director of Muthoot Fincorp, another leading gold loan company, which has experienced flat growth in assets in the quarter.

The company has frozen the expansion of branch network at the current level of 2,700 for the year.

However, the banks for which the restrictions are not applicable are taking steps to expand the gold loan operations. State Bank of Travancore managing director P Nanda Kumaran said its gold loan income stood at Rs 7,300 crore - 14% of its total loan income.

Source: EconomicTimes
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SBI cuts rates for deposits of over 5 years

State Bank of India has cut the interest rate on domestic term deposits of five years and above to 8.5 per cent. This move comes on the heels of the bank slashing interest rates on home and auto loans.

So far, term deposits (with tenures of five years and more) up to Rs 15 lakh and between Rs 15 lakh and Rs 1 crore carried interest rates of 8.75 per cent and 9 per cent, respectively.

The deposit and loan rate cuts come in the wake of the Reserve Bank of India cutting by one percentage point the statutory liquidity ratio to 23 per cent on Tuesday.

The SLR cut has the potential to increase SBI’s liquidity by about Rs 10,000 crore.

India’s largest bank cut interest rates on home loans by up to 0.60 percentage points and those on car loans by 0.50 percentage points on Wednesday. Other banks and housing finance companies are expected to follow suit, else they may lose business.

Despite cutting both deposit and lending rates, the bank will see gradual improvement in margins because it has enough liquidity, Atanu Sen, Deputy Managing Director, SBI.

If the Government operationalises the Guarantee Scheme for education loans, SBI will look at cutting interest rates on these loans.

According to Pradeep Kumar, Deputy Managing Director, SBI: “To transmit the RBI’s expectations that the policy would give a stimulus to credit growth for productive purposes, we decided to reduce the interest rates on home and car loans.” The cut in lending rates is expected to boost SBI’s home and auto lending, growing at 10 per cent now, said Sen.
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ATMs may come loaded with more features

Third party service providers are now seeking to incorporate special features in ATMs to meet the transaction needs of specific regions.

This comes in the wake of nine service providers winning auction bids to set up a pan-India network of about 62,000 Automated Teller Machines (ATMs) on behalf of public sector banks.

Tata Communications Banking InfraSolutions (TCBIL), US-based NCR Corporation and Mphasis are some of the service providers which have won contracts to set up ATMs across States and Union Territories.

TCBIL on Wednesday announced the signing of a contract to deploy and manage nearly 14,000 ATMs across Tamil Nadu and Puducherry, West Bengal, Andaman and Nicobar, and Andhra Pradesh. These ATMs will be deployed over the next two years on behalf of 21 PSBs.

Currency converters

“We are evaluating the possibility of incorporating special features over and above the regular features in ATMs installed in tourist destinations. This, of course, will happen only after consultation with the banks,” said Sudip Kumar, President, TCBIL.

TCBIL is looking at introducing dynamic currency converters in these areas. This facility will allow customers to transact in multiple currencies. “Value-added features like airline ticketing, mobile top-ups and talking ATMs can also be installed in the ATMs if banks permit,” said Kumar. Starting October, TBCIL will roll-out ATMs according to their quarter-wise plan.

NCR has won auctions in popular tourist destinations such as Kerala and Lakshadweep, among other places. It will be deploying 7,400 ATMs (including in Bihar and Jharkhand) for 26 public sector banks in a span of two years.

Solar power

“In power-deficit rural geographies, we will install solar-powered ATMs. Nearly 15-20 per cent of the total deployment will be in this category,” said Navroze Dastur, Senior General Manager, South Asia Channel Partners and Strategic Alliance, NCR Corporation.

NCR also plans to provide additional services such as utility bill and income-tax payments in multiple regional languages.

The banking space has seen considerable growth in ATMs in the last few years. Banks collectively have a network of about 90,000 ATMs at present.
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Corp Bank opens new branch

Corporation Bank opened a branch at B.C.Road town in Dakshina Kannada district on Wednesday.

Ajai Kumar, CMD of the bank, said on the occasion that the bank focussed on increasing its outreach through extensive expansion of branch network and embarking on financial inclusion in a big way.

The bank has 1,554 branches, 1,279 ATMs and 3,390 branchless banking units. It controls its operations through 31 zones spread across the country. The Mangalore zonal office of the bank has 47 branches.
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YES Bank’s overseas debt offering gets ‘significant’ commitments

Private lender YES Bank on Thursday said it had received commitments of $155 million and €50 million for its dual currency syndicated loan facility.

As many as 14 banks from nine countries have given commitments for this facility, the bank said in a statement.

This is a plain vanilla borrowing for the bank and would not form part of its tier-II capital. The debt funds raised will be used for general corporate purposes and trade finance.

In rupee terms, this syndicated loan facility, which will have a maturity of one year, will result in the bank mopping up about Rs 1,200 crore.

“This is a significant commitment from global banks,” said Rana Kapoor, Founder, Managing Director and CEO of YES Bank.

The countries from where the commitments have come include the UK, Germany, Austria, Qatar, Oman, Mauritius, Italy and the US.

YES Bank, however, declined to spell out the cost of borrowing under this dual currency syndicated loan facility.
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SBI cuts home, car loan rates

State Bank of India has cut home loan and car loan rates. This could trigger a rate war among banks to attract retail customers as loans to the industry have slackened.

SBI’s rate cut gambit comes in the wake of the RBI effecting a one percentage point cut in the statutory liquidity ratio on Tuesday. The SLR cut is seen allowing banks the cushion of additional liquidity.

India’s largest bank has cut home loans by up to 0.60 percentage points and car loans by 0.50 percentage points.

The interest rate on home loans up to Rs 30 lakh will be 10.25 per cent (10.50 per cent earlier).

On home loans beyond Rs 30 lakh and up to Rs 75 lakh, the bank will charge 10.40 per cent interest (10.75 per cent). The interest rate on home loans beyond Rs 75 lakh will be 10.40 per cent (11 per cent earlier).

SBI has cut interest rates on car loans to 10.75 per cent from 11.25 per cent earlier. The equated monthly instalment on car loans of seven-year tenor has been reduced to Rs 1,699 per lakh from Rs 1,725.
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PNB hikes interest rate on domestic deposits of 1-year maturity

Punjab National Bank has hiked the interest rate on single domestic term deposits of less than Rs 1 crore from 8.75 per cent to 9 per cent for a maturity of one year.

The revised rate would be effective from Thursday, the bank said in a filing with the stock exchange in Mumbai.

This rate of 9 per cent will also be applicable to NRE term deposits.
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NHB slashes refinance rates for low-income housing

Urban low-income housing may soon get a boost with the housing finance regulator, National Housing Bank (NHB), slashing refinance rates on loans up to Rs 5 lakh.

This would incentivise primary lending institutions such as banks and housing finance companies to lend more to low-income households — those not having income above Rs 15,000 a month — and also those in the informal sector.

The benefits of lower refinance rates are likely to be passed on to the ultimate borrowers in the low-income groups, who will now get longer tenure loans at lower fixed rates.

For housing loans up to Rs 2 lakh, NHB has slashed refinance rates from 10 per cent to 9 per cent. In the case of loans of Rs 2-5 lakh, the refinance rate has been cut to 9.25 per cent from 10 per cent.

The reduced rates would be provided under the recently launched dedicated special refinance scheme for urban low-income housing, R.V. Verma, Chairman and Managing Director of NHB, said.

“Low-income housing is a new thrust area for NHB. The reduced refinance rates are a good precursor to the mortgage guarantee trust fund, which will give default cover up to Rs 5 lakh,” he added.

In July-June 2011-12, as much as 35 per cent of the Rs 14,000 crore disbursed by NHB went towards housing loans up to Rs 5 lakh. The aspiration is to grow this to 40 per cent in the current year (July-June 2012), Verma said.

Long-term rate

He also said that NHB will now provide long-term fixed rate refinance — for up to 15 years.

This will help create a long-term fixed interest rate market for housing and benefit low and moderate income households who may not be able to absorb the volatility in interest rates under the floating rate regime.

The NHB chief also said that prepayment would also be possible under the new refinance scheme without attracting any prepayment levy.
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Wednesday, August 1, 2012

Karnataka Bank inks pact with Nabard arm for consultancy service

Karnataka Bank has signed a memorandum of understanding with Nabard Consultancy Services (Nabcons) for providing services to clients referred by Karnataka Bank.

According to a press release, the clients can get help in the preparation of techno-economic appraisal and feasibility reports, and detailed project reports for investments in agriculture and allied activities.

The collaboration would include services of Nabcons in the field of microfinance, women empowerment, training, capacity building, periodic monitoring, and so on. The MoU would be operative for three years.

‘Green branches’

Quoting P. Jayarama Bhat, Managing Director of Karnataka Bank, the release said: “The bank has already identified 51 ‘green branches’ across India for focused agricultural lending.

“The present MoU is expected to provide further momentum.”

The bank has set a lending target of Rs 3,770 crore to the agriculture sector for 2012-13.
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HDFC Bank is now one of the most valuable in the world, beats biggies like BofA, BNP Paribas

For most banks across the globe, the past five years have been a battle for survival with many falling by the wayside and others becoming wards of the state. In late 2008, India was also not immune with ICICI Bank, the nation's second largest, experiencing some jitters. But one lender which has remained immune to the troubles swirling around the sector is HDFC Bank.

With a market capitalisation of Rs 1,38,469 crore (or $24.88 billion) on Tuesday, HDFC Bank has surpassed the biggest lender in the nation - State Bank of India - which has deposits that are almost six times that of the private lender.

The bank, which has been helmed during the 16 years of its existence by Aditya Puri, a former Citi banker who aspires to establish India's Wells Fargo, where billionaire Warren Buffett takes pride in being a shareholder, has proved that it is not just size that matters, but how much every penny earns.

At 4.5 times book value, HDFC Bank is probably the most expensive bank in the world while giants like Bank of America and French lender BNP Paribas trade at less than one time their book value.

Investors are not paying a lavish premium for nothing. In a world where even JP Morgan chief executive Jamie Dimon proved to be vulnerable with almost $6 billion of losses in derivative trading, Puri has delivered what could be any bank chief's dream - 20 quarters of at least 30% increase in earnings.

All this without any Dimon-size missteps. HDFC Bank, founded in 1994, has grown its balance sheet 33 times since then. Its net interest margin, a key measure of profitability for banks, stands at 4% and is the highest in the global banking industry.

Earnings per share, or EPS, have grown at a compounded annual rate of 25% over the past five years, while net interest income - the difference between interest earned and paid has grown at 29% - again the highest among global banks on both these counts.

Even in terms of return on assets, HDFC Bank scores high with 1.69% return compared with most global ba-nks which give less than one percent on an average. It gives returns on equity of 18.8%, slightly lower than what its Chinese counterparts - Industrial and Commercial Bank of China and Agricultural Bank of China - offer, but way superior to Citi or JP Morgan which offer 6-10%.

Source: EconomicTimes
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SLR cut will help improve liquidity in the system: Corporation Bank

Corporation Bank has said that the RBI’s move to cut SLR will help improve liquidity in the system.

The Chairman and Managing Director of Corporation Bank, Mr Ajai Kumar, told Business Line that liquidity will further improve in the system, and interest rates may see some respite.

“As far as our bank is concerned, we will have a liquidity addition of around Rs 1,400 crore,” he said.

Stating that Rs 60,000 crore will be released at the industry level, Mr Kumar said this may be used for credit expansion. “However, credit offtake would depend on the macro-economic growth fundamentals and overall demand in the economy,” he added.
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IDBI Bank Q1 net rises 27% at Rs 427 cr

IDBI Bank posted 27.5 per cent rise in its net profit for the first quarter ended June 30, 2012, at Rs 427.34 crore.

Its net profit over the corresponding period (April-June) a year ago stood at Rs 335.10 crore, the Bank said in a BSE filing.

The total income of the bank rose to Rs 6,786.81 crore for the quarter ended June 30, 2012 from Rs 6,059.83 crore a year earlier.
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SLR cut to release Rs 62,000 cr; banks may lower loan rates

Banks may cut retail lending rates. This is thanks to the Reserve Bank of India cutting a key reserve ratio. The RBI, on Tuesday, surprisingly cut the statutory liquidity ratio (SLR), which requires banks to park a slice of their deposits in Central and State government securities, from 24 per cent to 23 per cent.

The SLR cut can enhance liquidity in the system by about Rs 62,000 crore. This has to be seen in the context of deposit growth lagging credit expansion and the need for creating capacity among banks to handle possible liquidity pressures.

Banks are unlikely to cut short-term deposits rates due to competition from liquid schemes of mutual funds, but they could revisit the long-term deposit rates in view of the SLR cut. The central bank, however, left key policy rates, repo rate (the interest rate at which banks borrow funds from RBI) and reverse repo rate (the interest rate at which banks park surplus funds with RBI) unchanged at 8 per cent and 7 per cent, respectively.

In its first quarter review of monetary policy, the cash reserve ratio (a portion of deposits that banks have to mandatorily park with RBI) was also left untouched at 4.75 per cent.

The RBI Governor, Dr D. Subbarao, reasoned that the SLR cut will not only help banks channel credit to productive sectors of economy but also get rid of high-cost bulk deposits. A CRR cut, on the other hand, has an across-the-board impact and would have meant infusing surplus liquidity beyond what is required.


Despite the clamour for a cut in policy rates from industry and banks to promote investment and growth, the RBI did not oblige as the primary focus of monetary policy remains inflation control. The RBI has raised the inflation projection for FY13 from 6.5 per cent, as set out in the April monetary policy statement, to 7 per cent.

The SBI Chairman, Mr Pratip Chaudhuri, observed that resources unlocked on account of the SLR cut would largely go to the retail sector as large term-loan proposals are few across banks and working capital demand from good corporates is already low.

“Hence, for a bank like ours, the option is to accelerate retail credit growth. There could be greater competition in retail and this can be backed by a rate cut…So there could be a reduction in retail lending rates,” Mr Chaudhari added.

The SBI Chief does not see a reduction in short-term deposit rates due to competition.

“A short-term deposit rate cut looks difficult as there are fixed maturity plans of mutual funds which offer high interest rates. However, there could be some room to cut long-term deposit rates but that would depend on each bank,” he said.

GDP Growth

The GDP growth projection for FY13 has been cut sharply to 6.5 per cent from 7.3 per cent projected earlier. In this regard, the RBI pointed out that the earlier assumptions of a normal monsoon and improvement in industrial activity did not hold.
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Monetary policy: RBI leaves key rates unchanged; surprises with SLR cut

The RBI has maintained status quo and left its key policy rates unchanged.

The repo rate remains at 8 per cent. The RBI had given a hint of this even yesterday while releasing its review of macroeconomic and monetary developments. Practically throwing up its hands, it had laid the onus on the Central Government to do the needful on the fiscal side.

It had noted that "monetary policy space needs to be created through fiscal adjustment and structural measures to improve supply conditions and boost the investment climate, so the revival is supported in a non-inflationary manner".

The RBI, however, threw in a surprise cut in the Statutory Liquidity Ratio (SLR) of scheduled commercial banks from 24.0 per cent to 23.0 per cent of their net demand and time liabilities with effect from the fortnight beginning August 11, 2012.

The policy actions are expected to anchor inflation expectations and maintain liquidity to facilitate smooth flow of credit to productive sectors to support growth, the central bank said.

GDP growth outlook

The RBI has cut its GDP growth forecasts for this fiscal to 6.5 per cent from 7.3 per cent given in the April policy. It said that the earlier forecast was based on the expectation of a normal monsoon and improvement in industrial activity. Both these expectations did not hold, it conceded.

Simultaneously, the RBI has also revised upwards its baseline projections for WPI inflation. This has been raised from 6.5 per cent to 7 per cent.
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Tuesday, July 31, 2012

Allahabad Bank Q1 net up 23% as core biz, recoveries improve

Backed by growth in core operations and improved recovery, Allahabad Bank posted a 23 per cent rise in net profit during the first quarter of this fiscal.

Net interest income grew 11 per cent to Rs 1,306 crore.

The bank recovered Rs 402 crore during the quarter, which included Rs 120 crore worth fresh recovery, Rs 113 crore from upgradation and another Rs 169 crore from written-off accounts.

Net interest margin (NIM) declined to 3.17 per cent (3.40 per cent). According to the bank’s chairman and managing director, Mr J. P. Dua, the bank is hopeful of sustaining its NIM at over three per cent this fiscal.

Restructured assets

During the April-June 2012 quarter, the bank restructured assets worth Rs 4,770 crore. Restructuring of debts worth Rs 3,100 crore of State electricity boards of Uttar Pradesh, Haryana and Rajasthan, together accounted for almost 65 per cent of the total restructuring.

“Restructuring was also done in the textiles and pharmaceuticals sectors,” Mr Dua said.


Slippages, primarily contributed by the agriculture and SME sectors, stood at Rs 590 crore during the quarter.

The percentage of gross non-performing assets (NPAs) to advances increased to 1.96 (1.62), while net NPA was at 1.09 per cent (0.60 per cent).

Growth target

The bank aims to achieve 20-22 per cent growth in business this year. Agriculture, retail and small and medium enterprises will be the thrust areas, Mr Dua said.

The bank’s shares closed at Rs 136.70, up by 5.97 per cent, on the BSE on Monday.
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Oriental Bank net up 10% on higher interest income, better recoveries

Oriental Bank of Commerce (OBC) has received board approval to raise capital of Rs 1,200 crore, its Chairman and Managing Director, Mr S. L. Bansal, said.

The bank would need additional capital of Rs 800 crore to meet the Basel-III requirements, which would come into force from January 1, 2013.

Mr Bansal said that OBC would go in only for tier-II capital as there was enough headroom on this front. The bank was comfortable on the tier-I front (at 9.92 per cent) even under Basel-III norms, he added.

OBC would raise the required capital of Rs 800 crore before the end of the current calendar year, said Mr S. C. Sinha, Executive Director, OBC, who will demit office on Tuesday on superannuation.

For the June quarter this fiscal, OBC reported a 10 per cent increase in net profit at Rs 391 crore (Rs 355 crore). Mr Bansal attributed this financial performance to increased interest income and better recoveries — from delinquencies — during the quarter under review.

“NPAs will continue to happen. But we are trying to ensure they have minimal adverse impact on our profit and loss account,” he said, adding that the bank was already facing the heat on farm loans.

A write-back of Rs 132 crore of depreciation in investments also helped boost the bottomline.

In the June quarter, the bank went in for restructuring of loans worth Rs 2,035 crore, which include Rs 1,434 crore to UP State Electricity Board.

Gross NPAs as a percentage of gross advance stood at 2.97 at end-June, lower than 3.17 per cent in end-March. Mr Bansal is confident of taking this to 2.80 by the end of the current fiscal.

Net NPAs also fell from 2.22 per cent in end-March this year to 2.05 per cent at end-June.

As regards debt-laden Kingfisher Airlines, Mr Bansal said this account had been upgraded and was now a standard asset as far as the bank was concerned.

The private carrier has serviced debt up to June 30 this year, said bank officials.

The bank’s net interest margin at end-June 2012 stood at 2.79 per cent, 11 basis points higher than the 2.68 per cent in the last quarter.
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Bank of Baroda Q1 profit up 10%; doubles provisioning

Bank of Baroda posted a 10 per cent growth in net profit at Rs 1,139 crore (Rs 1,033 crore) in the June quarter, even as the bank doubled provisions to cover bad loans.

The provisions against non-performing assets rose 129 per cent to Rs 894 crore as compared with Rs 391 crore in first quarter of FY12. The bank’s provision-coverage ratio stood at 79.02 per cent during the quarter.

Net interest income (difference between interest earned and interest expended) increased by about 22 per cent to Rs 2,798 crore from Rs 2,297 crore during the same period last year.

“Net interest margin during the quarter declined to 2.73 per cent from 2.87 per cent in Q1 FY12 on higher cost of deposits, and lower yield on advances,” said Mr M. D. Mallya, Chairman and Managing Director.

Total restructured assets during the quarter stood at about Rs 771 crore (9 per cent slipped into NPAs) as against Rs 5,281 crore in Q4 FY12. Net NPAs increased to 0.65 per cent from 0.44 per cent on y-o-y basis.

The public sector bank’s profit growth in this quarter was in sync with its peer banks. For instance, Canara Bank’s profits grew 7 per cent (Rs 775 crore), Punjab National Bank 13 per cent (Rs 1,246 crore), and Union Bank of India’s profit grew 10 per cent (Rs 512 crore). Bank of India, however, stood apart posting a 71 per cent increase in its net profit (Rs 517.5 crore) on the back of lower provisioning in Q1 FY13.

The Bank of Baroda share closed at Rs 672.60 on the BSE, 3.54 per cent higher than its previous close.
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Federal Bank’s special deposit scheme

Federal Bank has decided to offer a special rate of 10 per cent for resident and non-resident deposits of 1,000 days’ maturity. The offer is for a limited period only — between July 30 and August 17. The decision marks a milestone in the bank’s growth history as it moves to dedicate its 1000th branch to the nation on August 17. A bank release says that senior citizens will get an additional interest of 0.50 percentage points over this rate, and NRIs a tax-free yield of 10 per cent.
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SKS Microfinance: The company that got too big

After a series of setbacks, SKS Microfinance has got second wind. It raised Rs 230 crore from institutional investors last week, the largest capital raising exercise for SKS since its IPO.

S. Dilli Raj, Chief Financial Officer, SKS, says this qualified institutional placement (QIP) was over-subscribed and that it equips it to meet the credit requirements of its four million rural borrowers.

But today the valuations are a pale shadow of what SKS commanded during its IPO two years ago – Rs 75.4 a share in the QIP, compared to Rs 985 during the IPO.

The Rs 230-crore infusion, along with the Rs 34 crore raised from a preferential allotment to a promoter entity a little earlier, should come in handy. They will immediately bolster SKS’s networth from Rs 435 crore as of March 2012 to Rs 700 crore. And that may help SKS kick-start its stalled lending cycle.

As banks and financial institutions stopped lending to MFIs, SKS opted not to go in for the corporate debt restructuring package, availed by others such as Spandana and Share Microfin. It also repaid its Rs 3,800 crore debt without delay.

“This was appreciated by the creditors,” says Dilli Raj. It could get a sanction of an incremental debt of Rs 1,360 crore in the fourth quarter of the last fiscal.

At a peak

It was exactly two years ago that SKS’ fortunes were at their peak.

It had concluded a successful IPO which raised Rs 1,600 crore, enjoyed margins that were the envy of every finance company and was the poster-boy for the microfinance ‘opportunity’.

The company attracted well-known investors such as Sequoia Capital, Goldman Sachs, Sandstone Investment Partners, DSP Blackrock Equity Fund, as well as N.R. Narayana Murthy’s Catamaran and angel investor, Vinod Khosla.

The rapid rise, the high profile investors, a Board packed with luminaries; all came to nought within two months.

Dark times

First, the entire MFI sector was engulfed in widespread allegations of harassment of clients by recovery agents and borrower suicides in AP. This led to an unusually harsh crackdown on the business by the Andhra Pradesh Government.

The Andhra Pradesh Microfinance (Regulation of Moneylending) Act 2010, placed checks on the interest rates at which MFIs may lend, prohibited overlapping loans and made prior local government approval mandatory for disbursal of loans.

As fresh lending became nearly impossible and the incidence of defaults in the state sky-rocketed, the sector plunged into a crisis.

SKS, meanwhile, got embroiled in its own boardroom battles, with its CEO, Suresh Gurumani, quitting the firm soon after the IPO. Differences within the management have since resulted in the exit of the founder, Vikram Akula too.


Following the QIP, the new management hopes to refocus on business growth in states other than Andhra Pradesh.

Consolidation of its customer base, cross-selling initiatives and diversification will be the key focus areas this year, says its CEO and Managing Director, M. R. Rao.

SKS also hopes to diversify its lending to include financing of small kiranas, loans for purchase of mobile handsets and gold loans. Microfinance is mainly a rural and semi-urban phenomenon.

The loans, on record at least, are given for productive purposes such as running a small business, shop, tailoring or rural crafts.

The results of this effort are already evident. The lending portfolio grew sequentially by 11 per cent to Rs 1,320 crore from the non-AP regions in the fourth quarter of 2011-12, with 95 per cent collections on an average.

The exposure to AP is down to Rs 236 crore or 15 per cent of the loan portfolio as of March 2012.

But challenges are still abound, particularly in the core market of AP.

The write-off spree in the State has been continuing with Rs 1,130 crore in loans written off as on March 31, 2012.

Nor is the atmosphere there conducive for a resurgence of the MFI business. Many microfinance borrowers Business Line spoke to were relieved’ that banks are now geared up to cater to meet the credit needs of the poor in AP.


Rani, a women’s group leader and a client of SKS, hailing from the suburbs of Warangal town, summarises the situation well, saying- “Loans from banks are always better because nobody will coerce us for repayment delays of one or two days and their interest too is lower. We lost more than what we gained in borrowing from them.”

The future of MFIs will also hinge on the action that RBI takes with respect to the sector. The new Microfinance Institutions (Development and Regulation) Bill 2012 was tabled in Parliament in May. The Bill proposes to make the Reserve Bank of India the sole regulator of the sector.

Deployment of capital raised in a profitable manner, at a time when the sector is not completely sure of the way ahead, is also a tough call.

SKS is, meanwhile, stuck in a legal tangle with the AP Government.

Apart from challenging the AP Act, the company is also battling a recent order cancelling its licence in Mahbubnagar district, again on the allegation of violation of recovery norms.

Finally, as admitted by CFO Dilli Raj recently, the crisis was largely driven by unbridled growth in lending. Given a second chance, will SKS be able to strike a balance between growth and profitability?
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Syndicate Bank Q1 net up 28%

Syndicate Bank reported a 28 per cent increase in net profit for the quarter ended June 30, 2012, at Rs 440 crore (Rs 343 crore).

This bottomline performance came on the back of sharp increase in interest income, which grew 25 per cent to Rs 4,242 crore (Rs 3,399 crore), Mr M. G. Sanghvi, Chairman and Managing Director, said here on Monday.

Operating profit of the bank for the quarter under review increased 13 per cent to Rs 841 crore (Rs 743 crore).

Mr Sanghvi told newspersons that the bank planned to add 300 branches this fiscal, taking the network size to 3,000 branches.

Plans are afoot to add another 500 ATMs across the country in this financial year, he said. Currently, Syndicate Bank has 1,240 ATMs (on-site and off-site).

The net interest margin of the bank stood at 3.19 per cent in end-June, slightly higher than 3.16 per cent in end June last year.
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IOB net up 13.5% in June quarter

Indian Overseas Bank has registered a 13.5 per cent growth in net profit at Rs 233.43 crore for the quarter ended June 30, 2012, against Rs 205.58 crore in the corresponding year-ago quarter.

The total income for the quarter stands at Rs 5,403 crore against Rs 4,332 crore registered during the same period in 2011.

The total business grew 23.28 per cent to Rs 3,33,248 crore from Rs 2,70,320 crore in the previous year. Total deposits were at Rs 1,84,882 crore (Rs 1,51,173 crore), and the net interest income went up by 12 per cent to Rs 1,328 crore in the quarter (Rs 1,187.63 crore).

Announcing the results, Mr M. Narendra, Chairman and Managing Director of the bank, said the net NPA is at Rs 2,152.09 crore (1.48 per cent) as against Rs 1,258.16 crore (1.08 per cent).

Gross NPA for the period stood at Rs 4,409.70 crore (2.97 per cent) as against Rs 3,291.64 crore (2.76 per cent) last year.
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Muthoot Finance net up 29% in Q1

Gold loan company Muthoot Finance Ltd has registered 29 per cent growth in net profit at Rs 246 crore in the first quarter of 2012-12 It had netted Rs 190 crore in the corresponding year-ago period .

The total income grew 41 per cent to Rs 1,294 crore, while the retail loan assets under management fell by Rs 1,337 crore to Rs 23,336 crore, a 5 per cent decline.

Mr M. G. George Muthoot, Chairman, MFL, told newspersons that the operating environment has been substantially redefined on account of the restrictions imposed by the RBI on the maximum loan that could be given against the value of the gold jewellery pledged.

On account of uncertainties, fears and negative perception created out of regulatory actions, he said mutual funds stayed away from investing in debt instruments. Further, due to change in securitisation norms, fresh assignment transactions could not be undertaken.

The company focussed on honouring all its commitments in time. Hence in this quarter, MFL de-grew its retail loan portfolio by 5 per cent. However, credit losses remained at a negligible Rs 1.60 crore, that is, 0.007 per cent of the gross loan portfolio, he said.

Mr George Alexander Muthoot, Managing Director, said MFL plans to enter into a consolidation phase during the year focussing on improving customer service, training to staff and internal controls.

The company with a branch network of 3,780 is planning to open 250 branches in the current fiscal and is looking at potential areas in this regard, he said.
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Corporation Bank’s Q1 profit growth muted on higher provisioning

Corporation Bank’s net profit nudged up marginally by five per cent in the first quarter as it set aside higher amount to cover bad loans.

For the April to June quarter, the public sector bank’s net profit rose to about Rs 370 crore from Rs 351 crore in the corresponding period a year-ago.

Net interest income, the difference between interest earned and interest expended, grew 14 per cent to about Rs 808 crore.

Provisions to cover bad loans increased by about 3.5 times to about Rs 239 crore (Rs 67 crore, year ago).

The bank restructured loan accounts worth about Rs 1,076 crore in the first quarter. Of these, electricity distribution companies alone accounted for Rs 950 crore.

Electricity distribution companies and state electricity boards continue to reel under pressure on account of higher input costs and shortage of raw materials like coal.

About 13 per cent of the Mangalore-based bank’s restructured accounts slipped into non performing assets in the first quarter.

CASA ROADMAP – Add more branches

The bank plans to improve its current account and savings account deposit base in the coming quarters. The bank has a CASA deposit base of only about 21 per cent (of total deposits).

“We are trying to improve CASA by adding more branches. This financial year we plan to add about 300 branches, spread across urban, metro and rural centres, ” Ajai Kumar, Chairman and Managing Director, Corporation Bank said.
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Sunday, July 29, 2012

Karnataka Bank to aid enterprises and farmers

Karnataka Bank has stressed on the need for supporting needy enterprises and agriculturists.

Speaking at the conference of the regional heads of the bank, Mr P. Jayarama Bhat, managing director of the bank, said that needy enterprises are to be guided and provided with credit facilities for sustained progress.

Similarly, agriculturalists are to be given financial support with special monitoring of the end use of the credit facility, he said.

Firm recovery steps against wilful defaulters and prudential restructuring of genuine borrowers (defaulters) are the need of the hour, he said.

Stating that global economy is still unstable, he said India is not free from its adverse effects.

“Indian rupee slippage is a burden on imports. Monsoon has not yet picked up as expected. This will be another prominent factor which may adversely affect the Indian economy. At this juncture, banks have to take cautious step and convert these challenges into opportunities,” he said.

Mr M.S. Mahabaleshwara Bhat, general manager, detailed the performance of the bank for the quarter ended June 2012. General managers Mr P. Jairama Hande, Mr N. Upendra Prabhu, Mr M.V.C.S. Karanth and Dr Meera B. Aranha, were present.
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Federal Bank ties up with M&M for vehicle financing

Mahindra & Mahindra has signed a preferred financier agreement with Federal Bank for personal and commercial range of vehicles financing.

Under the tie-up, M&M customers will be able to avail themselves of vehicle finance services from any of Federal Bank’s 999 branches across the country.

The memorandum of understanding was signed here on Friday by Mr Arun Malhotra, Senior Vice-President, Sales and Customer Care – Mahindra & Mahindra Ltd, and Mr C.P.John, Executive Director, Federal Bank.

Speaking on the occasion, Mr John said that the bank is expanding its operations in commercial and passenger vehicle financing. The bank offers attractive package both in terms of interest rate and margin norms for purchasers of M&M vehicles. The convergence of both the organisations will benefit customers a great deal, he added.
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Dena Bank Q1 net profit up 42%

Public sector lender Dena Bank reported a 42 per cent growth in first-quarter net profit at Rs 239 crore against Rs 168 crore a year ago.

Net interest income, the difference between interest earned and interest expended, grew by 37 per cent to Rs 612 crore from Rs 447 crore.

The capital adequacy ratio of the Mumbai-based bank reduced to 12.35 per cent from 13.14 per cent.

Gross NPA (non-performing assets) ratio, a measure of asset quality, deteriorated a bit to 1.8 per cent in the April-June period from 1.86 per cent a year ago.

The Bank said that it will focus on micro-, medium and small enterprises to fuel credit growth.
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Bank of India net soars 71% on lower provisioning

Lower provisioning helped Bank of India report a 71 per cent jump in net profit at Rs 887 crore in April-June period compared with Rs 517.5 crore in the year ago period.

Total provisions during the quarter declined to Rs 786 crore from Rs 878 crore.

However, provision for NPAs increased by 47 per cent to Rs 569 crore from Rs 388 crore. In addition, the bank received a write-back worth Rs 136 crore on investments.

Net interest income (difference between interest earned and interest expended) grew slower by 11 per cent to Rs 2,044 crore from Rs 1,841 crore in the corresponding quarter last year. Non-interest income grew by 27 per cent to Rs 841 crore (from Rs 660 crore).

Net interest margins reduced to 2.27 per cent from 2.86 per cent on higher restructuring, said Mr Alok Misra, Chairman and Managing Director.

The restructured assets during the quarter stood at Rs 4,074 crore of which about Rs 2,956 crore was to aviation and Rs 446 crore to infrastructure. Net NPAs for the bank rose to Rs 4,413 crore from Rs 3,656 crore in the previous quarter. Net NPAs rose by 22 basis points sequentially and 42 basis points year-on-year at 1.69 per cent in the quarter.

The public sector bank plans to raise about Rs 3,000 crore in two years under Basel II norms, said Mr Misra.
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