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Saturday, August 25, 2012

Central Bank to cut home loan rates

State-owned Central Bank of India said it will cut interest rates on housing and other loans by up to 0.5 per cent from September 1.

"We have decided to reduce the rate of interest on the car loans. We have decided (to cut)... housing loan rate by 25 to 50 basis on houses between Rs 30-35 lakh. These will be effective from September 1," Central Bank of India Chairman and Managing Director M V Tanksale told reporters on the sidelines of a PHDCCI function here.

The decision to lower rate comes within a week of Finance Minister P Chidambaram asking the PSU banks to cut interest rates with a view to boosting sales of consumer goods and promoting growth. The Minister had cited the example of SBI on how EMI reduction boosted sales of cars.

"We all appreciate and agree that there is a necessity for fuelling the growth engine...the best way to fuel the growth engine is to offer some consumer durable loans at a lesser rate," Tanksale said.

The Central Bank chief, however, made it clear that the reduction of interest rates by 0.25 to 0.5 per cent would only be on selected products.

The Central Bank, he added, was not contemplating reduction in base rate -- the minimum interest rate below which bank does not provide credit.

Commenting on SBI Chairman Pratip Chaudhuri's suggestion of doing away with the Cash Reserve Ratio (CRR), Tanksale said, "the only thing I would like to say (is) that 3 per cent CRR should be there".

Moreover, he added, "these are the monetary tools in the hands of the regulator (RBI). CRR cut will help me in more liquidity at a lesser cost".

Tanksale also pitched for increasing lending to the Small and Medium Enterprises (SME) and other priority sector like agriculture.

Tanksale said couple of banks, including his own, were not meeting the obligation of 40 per cent of the net bank credit to the priority sector.

"And thus obviously we will have to probably redirect our focus to give more and more focus to the SME sector and the priority sector lending to reach to that 40 per cent level," he said.

Replying to a question on rising non-performing assets (NPAs), Tanksale said, "when the economy is not doing well, how do you expect that the asset quality to really remain good."

Source: Financial Express
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Friday, August 24, 2012

Union Bank plans to increase branches to 3,500,ATMS to 5,000

State-owned Union Bank of India today said it plans to expand its domestic and international presence by increasing number of branches and ATMs by this fiscal-end.

"We plan to increase our branches from around 3,200 to 3,500 and the ATMs by 5,000 from the present 4,000-odd, both by March, 2013," Union Bank Chairman and Managing Director D Sarkar told reporters here.

Sarkar was here to inaugurate the bank's 161st 'Union Xperience' branch, which involves a better ambience and more automation, and touted as a 'flagship project'.

On the latest Xperience branch inaugurated here, he said it will have a round-the-clock Self Service Lobby with various automation machines like self-service passbook printer, cheque deposit machine and phone banking terminal.

He ruled out such automation facilities will lead to downsizing of staff as "we have no plans to reduce people".

They will be used more in front office line, he said. On the proposed foreign ventures, he said they included a London subsidiary and branches in Belgium and Sydney in addition to its five existing overseas representative offices, including in China.

The bank's rationale behind increasing its overseas operations was mainly to cater to its corporate clientele "who are expanding."

"Retaining and helping them is our intention," he said. To a question on the bank's restructured accounts, he said steel and construction sectors formed a large part of it. The bank's overall business stood at around Rs 4 lakh crore with Tamil Nadu contributing over Rs 15,000 crore.

Source: EconomicTimes
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RBI gross income jumps 43%, gives Rs 16k crore to government during 2011-12

The Reserve Bank of India transferred a surplus of Rs 16,010 crore to the government during 2011-12, 6.7% more than the previous year's Rs 15,009 crore, the central bank said in its annual report released on Thursday.

The Reserve Bank recorded a sharp rise in its income from domestic resources as it was aggressively buying bonds through its open market operations. But lower interest rates in the advanced markets resulted in a dip in income from foreign currency assets for the third consecutive year.

The Reserve Bank's earnings from the deployment of foreign currency assets (FCA) and gold fell 6.3% to Rs 9,810 crore in 2011-12. The rate of earnings on FCA and gold was lower at 1.47% in 2011-12, compared with 1.74% in 2010-11, due to the low interest rates in international markets.

The earnings from domestic sources increased by Rs 17,446 crore to Rs 33,366 crore in 2011-12, an increase of 109.6% mostly due to the combined effect of earnings from liquidity adjustment facility (LAF) operations, higher coupon receipts on an increased portfolio of government securities (on account of large scale open market operations) and profit on sale of securities.

While the central bank's gross income increased by 43.4% to Rs 53,176 crore in 2011-12, its expenditure rose by 17.1% to Rs 10,137 core. After transfers to the contingency reserve, the asset development reserve and the four statutory funds, Rs 16,010 crore was allocated for transfer to the centre.

Source: EconomicTimes
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Public sector banks resume operations after 2-day strike ends

Normal banking operations, including the clearance of millions of piled up cheques, resumed today in public sector banks after the 2-day strike called by unions ended.

They were protesting against banking sector reforms and outsourcing of non-core services to private players.

"Most of the customer-related services like clearing of cheques and demand drafts and lockers were badly impacted. Crores of cheques were held up. Government treasury operations were also affected. Now banks have resumed all the services," All India Bank Employees Association (AIBEA) General Secretary C H Venkatachalam said.

He said, however, the loss to the banks due to the strike could not be quantified.

ATMs, which functioned normally on the first day of the strike, ran out of cash yesterday hampering day-to-day activities.

When the banks opened, there was rush seen at various branches as people sought to conclude held-up transactions. Employees of 24 public sector banks (PSBs) and 12 private banks participated in the strike.

Venkatachalam said, meanwhile, that the union will meet again in a couple of days to discuss the future course of action.

Unions are protesting against reform measures such as the Banking Sector Laws Amendment Bill which seeks to remove restrictions on voting rights of foreign shareholders and increase voting rights of private investors in the PSBs.

Bank unions have been demanding pension revision, housing loan revision, 5-day working week and human resource related issues, among others.

Source: EconomicTimes
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IDBI Bank raises Rs 1,108 cr in Singapore bond market

IDBI Bank said that it has raised 250 million Singapore dollars (about Rs 1,108 crore) through a bond issue on Tuesday.

The public sector bank raised the money at an interest rate of 3.65 per cent on bonds with three-year maturity, it said. The issue was oversubscribed 12 times, allowing the bank to price the issue at the tight end of final price guidance (3.65 per cent). Originally, the bond was priced at 4 per cent. This means, at the end of three years when the bond matures, IDBI Bank will have to pay 3.65 per cent interest on its borrowings from the issue.

This marks the entry of an Indian entity in the Singapore dollar bond market, the bank added. The Mumbai-based bank plans to use the proceeds from the offering to meet the demand for foreign currency from its clients, B. K. Batra, Deputy Managing Director, IDBI Bank, said.

The US dollar value of all three issuances put together will be $520 million, according to Melwyn Rego, Executive Director, IDBI Bank.
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SEBI bars companies from buying shares through staff trusts

Capital Market regulator SEBI has barred Employee Welfare Schemes and trusts of listed entities from purchasing their own shares from the secondary market, fearing stock manipulation.

Besides, SEBI will also ask listed companies to disclose all their existing employee benefit schemes involving stock purchase and align them in accordance with its ESOS and ESPS Guidelines within a given timeframe.

SEBI’s ESOS (Employee Stock Option Scheme) and ESPS (Employee Stock Purchase Scheme) Guidelines allow listed companies to reward their employees through stock option schemes and stock purchase schemes.

SEBI’s crackdown against unregulated staff welfare schemes and trusts has come amid concerns that some companies may be funding these schemes to deal in their own securities with an aim to manipulate the share price by engaging into fraudulent and unfair trade practices.

The regulations prohibit the companies from buying their own shares, unless it is consequent to reduction of capital and for certain regulatory requirements.

The companies are also not allowed to give any loan, guarantee or other financial assistance for purchase of any shares in the company or in its holding company.

However, these restrictions does not apply, if the company provides funds to a Trust set up for the benefit of the employees and the Trust utilise such funds for purchase or subscription of shares in the company or its holding company.

SEBI has come across instances of companies putting in place certain employee benefit schemes, pursuant to which they are setting up Trusts either by themselves or through third party service providers to deal in shares of the company.

Some of the companies have also asked SEBI whether these schemes, which may involve purchase from secondary market by the Trust or by third parties for the benefit of employees, would fall under its ESOS and ESPS guidelines.

As per SEBI guidelines, ESOS/ESPS Trusts can only distribute options/shares to its employees issued by the company. Even under ESPS, the shares have to be issued by the company through a public issue or related methods.

The guidelines are, however, silent on acquisition of shares from secondary market, although schemes involving purchase of shares from secondary market do not fall within the ambit of SEBI (ESOS and ESPS) Guidelines.

Employees not eligible for ESOP/ESPS include promoters, directors and those directly or through relatives or corporate bodies having over 10 per cent stake in the company.

However, these restrictions do not apply if the staff welfare schemes do not come under SEBI’s ESOS or ESPS guidelines. As a result, SEBI fears, the promoters by virtue of their direct or indirect control over such Trusts can get to control additional voting power.

Also, there is lack of consistency in disclosure of such shares held by trusts under shareholding pattern filed with stock exchanges. While in some cases, these shares were disclosed under promoter group, whereas in some cases, these shares are disclosed as part of public shareholding.

Provisions relating to pricing, lock-in, accounting policies, disclosure, among others, are also not applicable to such employee benefit schemes.

SEBI feels that allowing listed companies to have their own stock options or stock purchase schemes which are not covered by SEBI (ESOS & ESPS) Guidelines may lead to each company proposing their own schemes.

As a result through such schemes, company’s funds may be used for manipulating its own securities by dealing in secondary market transactions, SEBI feels.

Such dealing in the company’s shares by the Trusts raises concern regarding compliance with SEBI rules for Prohibition of Fraudulent and Unfair Trade Practices and also the Prohibition of Insider Trading Regulations.

The issues have been also discussed by SEBI’s Primary Market Advisory Committee (PMAC). The PMAC also opined that secondary market trading by such Trusts should not be allowed.

Accordingly, SEBI has decided to restrain listed firms from framing any employee benefit scheme involving acquisition from secondary market.

SEBI has also decided to convert its ESOS and ESPS Guidelines into Regulations, which would address all the prevailing concerns, as also the issues related to composition of employee welfare trusts and required disclosure.

The changes with regard to prohibition of purchase of shares from secondary market are being made immediately to avoid any manipulation through such unregulated employee benefit schemes.
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Rs 4,000-cr capital infusion on cards: SBI chief

State Bank of India expects Rs 4,000 crore capital infusion from the Union Government this fiscal. The bank will be discussing the matter with the Government this week, said Pratip Chaudhuri, Chairman, SBI.

The bank had earlier this year received close to Rs 8,000 crore from the Government.

“They (the Government) have called us for a meeting which should happen this week, and possibly another Rs 4,000 crore looks to be on the horizon,” he said.

As on June 30, 2012, the bank’s capital adequacy ratio stood at 13.17 per cent.

Non-performing assets

According to Chaudhuri, NPA (non-performing asset) concerns were slightly overplayed. “We should not see ghosts in NPAs,” he said, and added SBI has already taken several measures to bring down its NPAs.

“We are asking companies having non-core assets to sell them and bring the cash. If the company is short of capital, we are asking them to get some private equity or get equity investors, and if the company is asset free and cash poor, we are positioning more loans,” he said.

Recently, SBI appointed 20 credit appraisal experts from leading public sector companies to deal with the technical aspects of its new projects.
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Thursday, August 23, 2012

Banking services come to a halt as two-day strike begins

Banking services across the country were hit as about 10 lakh employees from public sector, old-generation private sector and regional rural banks stayed away from work on Day 1 of the two-day strike called by the United Forum of Bank Unions (UFBU).

The strike, which was called by the umbrella body of nine trade unions to oppose, among others, the Government’s proposal to increase shareholder voting rights, unfriendly human resource policies, received an “overwhelming response,” according to Vishwas Utagi, Secretary, All-India Bank Employees Association.

Due to the strike, it is estimated that cheques aggregating about Rs 40,000 crore across the country could not be presented for clearing and settlement on Wednesday. In Mumbai alone, clearing transactions worth about Rs 7,000 crore could not take place.

Small businesses transacting with only public sector banks are likely to have faced the brunt of the strike as current account transactions were affected.

However, cash transactions were not affected because banks ensured that ATMs are sufficiently stacked with money. “Our ATMs are fully loaded to cover withdrawals till Saturday,” Vilas Palav, Branch Manager, SBI, Fort Branch, Mumbai, said.

“The strike’s motive is to defend the public sector banks. We want banking to expand to rural areas and not allow FDI to hijack our banking system. We have sacrificed our two-day salary… “There is no question of calling off the strike and it will go on as scheduled tomorrow. We will go on strike again if the Banking (Laws) Amendment Bill gets tabled in Parliament,” said Utagi.


According to Gautam Bose, convenor, UFBU (West Bengal unit), nearly 8,000 branches of public, private and foreign banks in the State were a part of the strike.

Shutters at most of the ATMs of public sector and private sector banks in the State were down as the personnel guarding the machines participated in the stir. “Close to 1.5 lakh employees working across 8,000 branches participated in the strike,” Bose said. Among private banks, only the old private banks are participating in the strike.

Loss estimate

Assocham has pegged the loss due to the all-India bank strike on Wednesday at Rs 10,000-15,0000 crore. It has urged the UFBU to call off the strike on Thursday.
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Canara Bank awarded for tech use

Canara Bank has bagged the IDRBT Best Bank Award for its use of technology for financial inclusion.

S. Raman, CMD of the bank, received the award in the large banks category from RBI Governor D. Subbarao at an event organised in Hyderabad by the Institute for Development & Research in Banking Technology, a bank release said.

The bank opened 167 new branches that generated over 5.50 lakh accounts and a business of Rs 611 crore during the year, it said.

As many as 2.81 lakh smart cards were issued.

A pilot project for Aadhar enrolments was taken up in eight States, covering 1.95 lakh residents, it added.
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Pakistanis can buy shares, debentures of Indian cos: RBI

The Reserve Bank of India on Wednesday said a citizen of Pakistan or an entity incorporated in that country may, with the prior approval of the Government of India’s Foreign Investment Promotion Board, purchase shares and convertible debentures of an Indian company under the Foreign Direct Investment Scheme. 

FDI is, however, not permitted in sectors/activities pertaining to defence, space and atomic energy and sectors/activities prohibited for foreign investment.
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IDBI Bank rolls out floating rate term deposit

IDBI Bank has launched a floating interest rate retail term deposit (FRTD).

The rate of interest on the FRTD will move in tandem with a reference rate, which is the average yield at the 364-Days Treasury Bills auctions undertaken by the Reserve Bank of India (RBI) during the preceding three months.

“The interest rate in case of FRTD is anchored to a transparent, market-based rupee benchmark rate,” said the bank. The interest rate on FRTD would be reset every calendar quarter.

The minimum amount of deposit under FRTD will be Rs 10,000 and thereafter in multiples of Rs 1,000 with a cap of Rs 1 crore. The FRTD would have a lock-in period of one year and would be accepted in six maturity slabs, ranging from one year to ten years.

Switching option

Customers can switch from fixed to floating interest rate term deposits by closing the former at the originally contracted rate, without any premature penalty.

However, no conversion of floating to fixed rate is permissible, the bank said.

As in the case of fixed rate deposits, customers can also take a loan/overdraft against the FRTD.

IDBI Bank’s move to launch FRTD follows the RBI flagging the issue of banks offering their customers floating interest rate deposits at the first quarter review of monetary policy (on July 31) meeting with bankers. The RBI then underscored that such deposits are important and appropriate for the banks to manage their balance-sheets.

This will also help the central bank to get better monetary policy transmission.

According to an IDBI Bank statement, FRTD is intended to help the customer leverage the upside of an increase in interest rates and also hedge floating rate borrowings.

FRTD is likely to appeal to the retail investors who borrow at floating rates (say, for home loans) but invest at a fixed rate, and are consequently exposed to interest rate risk, said the bank.

“The floating interest rate deposits launched by State Bank of India in 2001 (benchmarked to fixed deposit rate) and 2010 (benchmarked to base rate) had met with limited success.

“However, our FRTD is linked to a market-related transparent benchmark. So, this could click with depositors,” said a bank official.
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Canara Bank Onam Trade Fair

Health Minister V.S. Sivakumar inaugurated the annual Onam Trade Fair being organised by Canara Bank here on Wednesday.

The event not only offers a sail window for various products manufactured by women entrepreneurs and self-help groups but also dispenses credit to finance their activities.

The trade fair will go on until Monday next, a spokesman for the bank said. In his inaugural address, Sivakumar lauded the corporate social responsibility activities being undertaken by Canara Bank and offered all possible support for them.

G. Sreeram, General Manager, Canara Bank, presided over the function. C.G. Nair, Deputy Manager, delivered the welcome address.
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State Bank of India, Bank of India allowed to operate in Pakistan

India and Pakistan have agreed to allow two banks each from both the countries to set up branches across the border, Governor of the State Bank of Pakistan, Yaseen Anwar said today.

“We have held discussions with the Reserve Bank of India and both sides have agreed to issue a full banking licence to two banks of each country,” Anwar told PTI on the sidelines of a conference organised by Institute of South Asian Studies.

The two Indian banks that will be allowed to operate in Pakistan are State Bank of India (SBI) and Bank of India (BoI).

On the other hand, quasi-state owned National Bank of Pakistan and privately-owned United Bank Ltd. will be running full-banking operations across the border, once licensed by India.

“It will take few months to approve Indian banks’ licences on receiving them,” he said.

“We are ready to go tomorrow to India” to set up banking operations, Anwar said.

Discussions have been held with RBI Governor D Subbarao to issue banking licences, he said, adding that the process will help normalise trade relations between India and Pakistan.

Meanwhile, officials from the Bank of India in Singapore have recently visited Karachi for setting up an office in Pakistan, said Syed Hasan Javed, Pakistan High Commissioner to Singapore.
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Over Rs 750 cr lying in inactive post office saving accounts: Govt

The government today said around Rs 752 crore is lying as unclaimed deposits in more than 2.49 crore inactive savings accounts in post offices.

“Rs 752,44,57,414.03 is the amount lying in all inactive (silent) accounts as on March 31, 2011 in 2,49,59,446 accounts,” Telecom Minister Kapil Sibal said in a written reply to Lok Sabha.

West Bengal led the tally of unclaimed deposits with over Rs 107 crore lying in 20.16 lakh accounts, followed by Tamil Nadu (Rs 105.87 crore in 62.72 lakh accounts) and Uttar Pradesh (Rs 68.61 crore in 21.74 lakh accounts).

“The depositor of such account can activate the account at any time by transaction. Notices are issued every year to the account holder of such accounts who are not maintaining minimum balance. Special drives are launched to re-activate such accounts by issuing notices and giving information through electronic media,” Sibal said.
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Wednesday, August 22, 2012

Strike to hit bank services today, tomorrow

Banking services across the country are likely to get affected for two days starting Wednesday following the strike call by the United Forum of Bank Unions (UFBU) .

The strike comes on the back of an extended weekend — Parsi New Year (Saturday) and Id ul-Fitr (Monday).

UFBU, an umbrella organisation of nine trade unions in the banking sector, represents nearly 10 lakh employees of public sector banks, private sector banks, foreign banks, regional rural banks and co-operative banks.

“We expect about 75,000 bank branches to remain closed. There are about 90,000 ATMs in the country and most of them will run dry in a couple of hours,” Vishwas Utagi, General-Secretary, Maharashtra State Bank Employees Federation, said.

According to Gautam Bose, Convenor, UFBU, West Bengal unit, the strike has been called primarily to oppose the Government’s proposal to increase shareholder voting rights from 1 per cent to 10 per cent in public sector banks and to 26 per cent (10 per cent) in private banks. This would lead to privatisation of banks, he said.

“Indira Gandhi nationalised Indian banks in 1969, and this Government is trying to undo that,” Utagi said. “This is a disastrous step.”

The All-India Bank Employees Association General-Secretary, CH Venkatachalam, said the Government has provoked the unions to strike work. The Government has made up its mind to introduce the Banking (Laws) Amendment Bill despite the unions opposing it, he added.

“We had called for a two-day strike in July, but the Chief Labour Commissioner intervened and the Indian Banks’ Association assured us they will look into the matter. So we deferred the strike and gave them 10 days’ time. But that has not yielded any result,” Bose said.
HR issues

UFBU wants the Khandelwal Committee’s recommendations scrapped as it bypasses the employee unions in respect of HR matters. In addition, the union has drawn the Government’s attention to certain pending issues such as granting of compassionate appointment, revision of pension and the introduction of regulated work hours.

The Left parties will oppose the Bill in Parliament tomorrow, and we will oppose it in every centre in the country, Utagi said.

All-India Bank Employees Association, All-India Bank Officers Confederation, National Confederation of Bank Employees, All-India Bank Officers Association, Bank Employees Federation of India, India National Bank Employees Federation, Indian National Bank Officers Congress, National Organisation of Bank Workers and National Organisation of Bank Officers are part of the UFBU.
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United Bank ties up with recovery agent ASREC to lower NPAs

According to Bhaskar Sen, Chairman and Managing Director, United Bank of India, as on June 30, 2012, had gross NPAs (non-performing assets) of close to Rs 2,200 crore. By engaging ASREC as recovery agent, the bank is hopeful of bringing down its gross NPAs by around 10 per cent. “We have been taking adequate measures to curtail our NPAs by organising recovery camps and through Lok Adalat. The tie-up with ASREC will supplement our in-house recovery mechanism. We have already assigned them a good number of NPA accounts,” Bhaskar Sen said.
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Tuesday, August 21, 2012

My Mobile Payments plans to tie up with IRCTC, airlines

Now you can book movie, bus, rail and air tickets using your mobile wallet (M-wallet).

My Mobile Payments Ltd (MMPL), which retails M-wallet services, plans to tie up with Indian Railway Catering and Tourism Corporation Ltd (IRCTC), various airlines as well as multiplex operators to offer booking services to its customers.

M-wallet service, provided under the ‘Money-on-Mobile’ brand, is like a prepaid debit card on mobile. It allows customers to load their mobile phones with cash at retail touch points and use this virtual money to top-up any prepaid mobile or DTH (satellite television) recharge or pay post-paid mobile bills and utility bills at present.

According to Shashank M. Joshi, Managing Director, MMPL, a larger bouquet of offerings will be rolled out by September 15.

The company claims to have a network of 95,000 retailers across the country and a subscriber base of nearly five lakh recording nearly Rs 2 crore worth of transactions a day.

MMPL now plans to expand the retailer base to 5 lakh in next two years. The over-900 million mobile phone subscriber base provides an opportunity for business growth, he pointed out.
Business model

Based on the demand for each of its service, MMPL typically buys out the inventory of the companies it ties up with, in advance.

“During long weekends, the demand for our services increase manifold, so our investment on inventory also increases,” he said.

MMPL, Joshi said, was well capitalised to invest on inventories. The company recently received a strategic investment of around $29.7 million (little over Rs 150 crore at current exchange rate) from US-based Calpian.

Depending on the kind of services provided, the company earns a margin of 2.5-4 per cent.
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Canara Bank launching life cover scheme for savings bank account-holders

Starting August 21, Canara Bank’s savings bank accountholders can get a new life insurance cover of Rs 1 lakh at low and affordable yearly premium.

The bank’s Executive Director, A. K. Gupta, said the bank was launching Canara Freedom Suraksha on Tuesday as a value-added service for new and prospective SB customers.

The life cover, aimed at the low- and middle-income groups, comes with little documentation and no medical test but on a self-declaration of good health. It applies in natural and accidental deaths.

As many as 10,000 accounts are expected be covered on Day 1 and a targeted 10 lakh accounts in the next two months. “We will tap our customer base of 4.5 crore through promotions across our 3,600-odd branches in the country,” Gupta told Business Line on the eve of the launch.

A policyholder in the 18-35 year age group will need to pay an annual premium of Rs 177; in the 36-50 age bracket, Rs 366; and in the 51-59 age-group, Rs 988.

According to Shantha Rangaswamy, General Manager, “We want this product to mainly benefit customers who don’t have life cover.”

Canara Bank’s four-year-old joint venture CHOICe — short for Canara HSBC Oriental Bank of Commerce Life Insurance Company — is part of the insurance venture.

Canara Bank holds 51 per cent share in the venture; HSBC Insurance (Asia-Pacific) Holdings Ltd, 26 per cent; and Oriental Bank of Commerce, 23 per cent.
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RBI move on group exposure will affect banks: Moody’s

SBI and ICICI Bank are among those that would be affected if RBI implements its proposed guidelines on banks’ exposure to their group entities, global credit rating agency Moody’s said today.

Last week, the RBI released draft guidelines to limit banks’ exposure to their own group non-financial and financial entities.

As per Moody’s, the proposed rules would hurt companies that depend on parent banks for capital and brand support, particularly those with large international operations, or those that operate insurance, securities or asset management businesses that need capital and liquidity support to meet their business needs.

“If the RBI adopts them, the new guidelines would be credit positive for India’s banks, but credit negative for group companies that rely on parent banks for capital and brand support,” Moody’s Investors Service said in a report.

It said the “affected banks” include ICICI Bank, State Bank of India, Bank of India, Bank of Baroda and Kotak Mahindra Bank.

“The guidelines would lead these banks to re-examine the financial support they provide to group businesses as anything exceeding the stipulated limits would be detrimental to their standalone capital calculations and thus their business growth,” Moody’s said.

The rules, it said, would benefit India’s banks because they would reduce their concentration and contagion risks from group activities.

The guidelines, if implemented, would limit to 5 per cent of paid-up capital and reserves a bank’s exposure to a single group non-financial entity, while the maximum exposure to regulated financial services companies would be 10 per cent.

However, Moody’s said that for the time being, these draft guidelines do not help the banks in any way cope with their immediate asset quality challenges owing to the difficult environment.
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Sunday, August 19, 2012

Number of ATMs to double; will also accept deposits

The government today said banks have been asked to upgrade their ATMs to double-up as cash collecting machines as well to mobilise Rs 11 lakh crore lying as cash with people.

Also, the public sector banks have been asked to double the number of ATMs from about 63,000 in the next two years, Finance Minister P Chidambaram told reporters after reviewing working of state-owned banks and financial institutions.

"People must take to banking ... Something like Rs 11 lakh crore lies as cash in hands of people. That Rs 11 lakh crore money should not lie in hands of people, it should lie in banks," he said.

He said more people will take to banking if there are more branches and facility to draw money whenever needed and put it back into banks when they do not require it.

"Now banks have been advised to quickly upgrade their ATMs to not only cash disbursing machines, but also cash accepting machines.

"Banks should also intensify door-step banking, in bazaars, markets to collect the daily collection of shops in order to mobilise the savings of the people," the minister added.

He further said that public sector banks have about 63,000 ATMs in different parts of the country.

"The goal is to double it in two years. I am confident they will achieve it," he added.

He said upgrading ATMs to cash collecting machines will help in channelising a large part of cash lying with public in the banking system.

"Ideal banking is that money should remain in bank and I can withdraw it when I want...So the ideal is (that) all money should be in the bank," he said when asked what part of Rs 11 lakh crore should be in banks and with public.

Source: EconomicTimes
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‘US probing dealings of Deutsche Bank to sanctioned nations’

After Standard Chartered Bank, government agencies in the US are investigating the dealings of Deutsche Bank and many other global banks over accusations of funnelling billions of dollars through their branches here for sanctioned nations like Iran and Sudan, a media report said.

The investigation into Deutsche Bank is the latest in a series of cases against global financial firms since 2009, a report in the New York Times said.

StanChart to pay $340-m penalty

Earlier this week, global banking giant Standard Chartered agreed to pay $340 million to New York’s top banking regulator, settling allegations that it hid thousands of transactions worth billions of dollars with the Iranian Government.

Under the settlement reached with the Department of Financial Services, Standard Chartered will pay a “civil penalty” of $340 million and would have a monitoring system for a term of at least two years.

Secret deals with Iranian Govt

The settlement came after StanChart was accused by the New York regulator of hiding about 60,000 secret transactions with the Iranian Government, involving $250 billion, and exposing the US financial system to terrorists, weapon dealers and drug kingpins.

It suggests the practice of transferring money on behalf of Iranian banks and corporations flourished under a loophole in the United States policy that ended in 2008, the report added.

A spokesman for the German Bank said it had decided in 2007 to “not engage in new business with counter-parties in countries such as Iran, Syria, Sudan and North Korea and to exit existing business to the extent legally possible’’.

Probe against Deutsche Bank

According to law enforcement officials, the investigation into Indian-origin Anshuman Jain-led Deutsche Bank is still in its very early stages, the daily said.

“So far, there is no suspicion that the bank moved money on behalf of Iranian clients through its American operations after 2008,” the officials said in the report.

However, the recent clash between New York’s top banking regulator and federal authorities over a similar case against Standard Chartered could complicate the investigations, it said.

“The United States prosecutors worry that the $340-million settlement between the New York regulator (New York Superintendent of Financial Services), Benjamin M Lawsky, and Standard Chartered sends a message to international banks and regulators that American authorities are uncoordinated and torn by divisions — since Mr Lawsky acted alone in leveling the charges and settling the case,” the report said.

Prosecutors also worry that foreign banks and regulators would no longer easily cooperate in handing over key transaction data that reveal the parties behind the global movement of tainted money, according to the federal and state prosecutors, it added.
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Canara Bank to launch life insurance cover scheme

Canara Bank is launching “Canara Freedom Suraksha”, a life insurance cover of Rs 1 lakh for all its savings bank customers as a value-added service at a very nominal premium.

Bank Executive Director A K Gupta said the facility is being launched on Tuesday in association with its joint venture company Canara HSBC Oriental Bank of Commerce Life Insurance Company.

The cover is extended without any medical test and merely on a declaration of good health by customers and covers both natural and accidental death, he said.

The annual premium rates (inclusive of service tax) are Rs 177, Rs 366 and Rs 988 for age groups of 18-35, 36-50 and 51-59, respectively.
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RBI to decide on rate cut in Sept

RBI is taking steps for capital flow into the country and will decide interest rate cut in its Sepetmber policy.

“You cannot say when the rate cut will come. Wait for our September policy,” RBI Deputy Governor H R Khan said at the sidelines of a function organised by Institute of Chartered Accountants of India (ICAI) here.

Stating that RBI was taking steps for flow of capital with focus on creation of non-debt capital, Khan said “We are trying to improve capital flow through FDI and NRI deposits.”

On the market slide, he said RBI was making efforts to contain rate volatility. “Our approach is that there should be orderly movement of rates in the market and there should not be any volatility.”

The RBI Deputy Governor said import of the yellow metal has come down and a committee formed by the apex bank will come out with its report in two-three months. “Let us see what can be done to contain gold demand,” he said.

Earlier addressing ICAI’s conference, Khan said focus should be on the domestic exploration of oil and gas as 70 per cent of it were being imported while 100 per cent of gold requirement was also coming from other countries.
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United Bank may recover Rs 400-500 cr NPAs cr this fiscal

United Bank of India on Saturday said it expects to recover Rs 400-500 crore in cash this fiscal as it gears up to hasten its recovery process.

“We expect to recover Rs 400-500 crore in cash in this fiscal,” bank’s Executive Director Deepak Narang told reporters here today.

United Bank non-performing assets, NPA, increased to 3.47 per cent from 3.42 per cent in March 2012, with major default occurring in aviation and steel sectors, the bank said in a statement.

At present, bank’s gross NPA stands at Rs 2,120 crore while net NPA is at Rs 1,096 crore.

“Our NPA has grown marginally by 7 basis points and loan defaults are in aviation, steel and MSME sector,” he said, while attributing the rise in NPA to slowing of the economy.

Asserting that the loan recovery is needed to be quickened, Narang further said the borrowers getting stay from Debt Recovery Tribunals on “flimsy grounds” also had an impact on recovery process.

The Kolkata-based bank has also plans to open 84 new branches in current financial year to deepen its presence in southern and northern areas.

“We will open 80-84 new branches and it will be mainly in south and north regions,” he said.

UBI has strong presence in north-east areas with a total branch network of 1,682. Looking at a growth of 18-20 per cent in its total business, United Bank will be focusing on lending to retail and MSME sectors, Narang said.

“Our thrust will be on retail including housing and MSME sectors,” he added. United Bank’s total business stands at Rs 1.53 lakh crore with Rs 63,000 crore of advances.

The bank has also planned to expand its reach in overseas market by opening a representative office in Myanmar and it will be the first bank to have presence in that country.

“We have received approval for opening our representative office in Myanmar as there is a huge potential for business in that country because of good trade relations with India,” he said. UBI has a representative office in Bangladesh.
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