Dena Bank waives home loan processing fee

Public sector lender Dena Bank has followed its peers by waiving the entire processing fee for home and car loans.

For personal and gold loans, it has reduced the fee by half.

This comes after the country’s largest bank State Bank of India reduced its processing fee on home and car loans by half.

Dena Bank has also extended 50 per cent concession in processing fee for its Dena Trade Finance Scheme and Dena Doctor+ scheme under which credit facilities up to Rs 2 crore are extended within the eligibility criteria of the scheme, the bank said in a statement.

The festive offer is valid up to October 31, the bank said.

Dena Bank has already reduced rate of interest in respect of housing loans, car loans, educational loans and personal loans with effect from September 4, 2012.

At present, it charges an interest rate of 10.45 and 11 per cent for housing loans, 11-12 per cent for car loans, 12 per cent for education loans and 13-14 per cent for personal loans.

To attract customers and meet demand, many public sector banks have announced a complete waiver of processing fee for a limited period.

Beena.parmar@thehindu.co.in

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Muthoot Finance wins award

Muthoot Finance Ltd has received the Golden Peacock Award for ‘Excellence in Corporate Governance’ for the year 2012 in London.

The award ceremony hosted by Institute of Directors (IOD) at the London Global Convention 2012 was given on the basis of recommendations of the jury headed by Justice P.N. Bhagawati, former Chief Justice of India and member of the UN Human Rights Commission.

M.G. George, chairman, Muthoot group, said in a statement, “The main guiding principles of our company are trust, ethics, values, reliability, dependability, integrity and goodwill.

We are thankful that IOD has recognised our company principles and honoured us with this award.”

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SBI opens 2 more branches in South Africa

State Bank of India has opened two more branches in South Africa, one in Chatsworth and the other in Laudium (Pretoria).

India’s largest bank already has five branches in South Africa — Johannesburg, Durban, Cape Town, Port Elizabeth and Lenasia.

SBI, with its own ATM cards and internet banking facility, is the first and only international bank to start retail operations in South Africa, the bank said in a statement.

According to Geevarghese Vaidyan, Regional Head (Africa), SBI, the increasing trade between India and South Africa, growing political and economic ties between the two nations and the admission of South Africa to the BRIC (Brazil, Russia, India and China) comity of nations provided the impetus for SBI's expansion into South Africa.

SBI's presence in the African continent extends to Mauritius, Nigeria, Egypt and Angola.

It is in the process of setting up its wholly owned subsidiary bank in Botswana and is keenly looking to expand to other growing economies of the African continent, said the statement.

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Karnataka Bank Q2 net zooms on improved interest spread

An increase in interest spread and a reduced provisioning for non-performing assets helped Karnataka Bank register a 185.27 per cent growth in net profit for the second quarter of 2012-13.

Speaking to newspersons here on Wednesday, the Bank’s Managing Director, P. Jayarama Bhat, attributed this to the growth in operating profit, interest spread and to lower provisioning for NPAs.

The bank recorded a net profit of Rs 117.19 in the second quarter of this fiscal against Rs 41.08 crore in the corresponding period of the previous year, registering a growth of 185.27 per cent.

The operating profit for the period stood at Rs 158.77 crore (Rs 116.17 crore).

Bhat said that the interest spread, which is a difference between the cost of deposits and the yield on advances, has moved up by 37 basis points. The yield on advances during the period was 12.91 per cent (12.15 per cent), and the cost of deposits was 8.14 per cent (7.75 per cent). The net interest margin rose to 2.40 per cent (2.06 per cent).

Provisions and contingencies during the period more than halved to Rs 22.75 crore (Rs 47.93 crore).

NPA reduction

Stating that the bank has an NPA-controlling mechanism, he said the aim is to reduce the gross NPA to 2.50-2.75 per cent. During Q2, the gross NPA stood at 3.22 per cent (4.01 per cent) and net NPA at 2.08 per cent (2.22 per cent).

On the recovery front, he said the bank has set up a stressed asset management cell and a regular asset management cell. “We are giving thrust to retail advances so that delinquencies will be few,” he said.

The tax expense of the bank came down to Rs 18.83 crore (Rs 27.70 crore) during the period, Bhat said.

The net interest income for the second quarter was Rs 232.64 crore (Rs 181.48 crore), and ‘other income’ was Rs 86.89 crore (Rs 80.33 crore).

The bank posted a net profit of Rs 200.62 crore (Rs 90.86 crore) for the six months ended September.

On Wednesday, the bank’s share closed at Rs 123.40 on the BSE, up 0.65 per cent, against the previous close of Rs 122.60.

vinayak.aj@thehindu.co.in

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No funds given to Robert Vadra, says Corporation Bank CMD

Corporation Bank Chairman and Managing Director Ajai Kumar on Thursday said no funds by way of loan or overdraft has been given to Robert Vadra, son-in-law of UPA Chairperson and Congress President Sonia Gandhi.

Replying to a question as to whether the public sector bank had given over Rs 7.5 crore to Vadra, who is currently embroiled in a controversy over a real estate deal with housing major DLF Group in Haryana, he reiterated the bank’s position: “We have already denied it. There is nothing new to add. We don’t have any documents whatsoever to comment on this issue.”

Addressing a press conference here, he said the bank plans to increase the number of its branches from the targeted 1,800 this year to 3,000 in three years. The bank would also add 1,000 ATMs this fiscal to the existing 1,274 ATMs.

Kumar said his bank plans to open 17 SME loan centres across India this year, one of which was opened in Ahmedabad on Thursday. These would disburse loans worth a targeted Rs 5,000 crore to the SME sector this fiscal.

Maintaining that India’s growth story was intact, he said the retail sector alone was a $100-billion opportunity in the next few years. Corporation Bank, too, is expecting 16-17 per cent annual growth.

Favouring a CRR cut for reduced interest rates to promote growth, although it could also fuel inflation, Kumar said growth required money at the “right cost”. “The lesser the rate of interest, the higher could be the rate of growth.”

He maintained that India should strike a balance between inflation and growth. “If CRR and the cost of funding comes down, we would be able to provide more loans.”

As regards the bank’s scheme to advance loans against gold, Kumar said farmers could take benefit of it at only 7 per cent interest rate as against 120 per cent they normally pay to the traditional usurer. This scheme is so popular now that as against a target of Rs 1,000 crore worth of loans this year, Rs 3,200 crore has already been advanced. The bank expected it to reach the Rs 5,000-crore mark by March 2013.

He also said Corporation Bank may soon launch Android and i-Pad applications to expand its net banking network. The SME loans were also a technology-driven product.

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IOB to recruit 387 specialist officers

Indian Overseas Bank is recruiting 387 specialist officers. About 337 of these posts will be for agricultural field officers in the junior management grade (Scale-I).

Candidates, who have taken the common written examination for the recruitment of specialist officers conducted by IBPS (Institute of Banking Personnel Selection) on March 11, 2012 and obtained a valid score, are eligible to apply.

The minimum cut-off marks for candidates for the post of agricultural field officers has been fixed at 112.

For Rajbhasha Adhikari (10 posts), it is fixed at 96; for HR officers (10 posts) it has been fixed at 124; and for law officers (10 posts) it has been fixed at 121.

Candidates have to apply only through the online route between October 16 and 31 through the bank’s Web site www.iob.in.

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Oriental Bank of Commerce CFO

Oriental Bank of Commerce (OBC) has a new Chief Financial Officer in C.M. Khurana.

Khurana has replaced R.L.Agarwal, who had recently superannuated.

Prior to this elevation, Khurana was General Manager with the bank.

Khurana is now heading the large corporate credit and accounts department of the bank. He has also been designated as Chief General Manager.

OBC has also designated its senior most General Manager Sheel Kumar Sharma as Chief General Manager.

Sheel Kumar Sharma joined the services of the bank in 1974 and now heads the human resources department of the bank.

srivats.kr@thehindu.co.in

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SBI halves processing fee on home, auto loans

State Bank of India (SBI) today reduced the processing fee on home and auto loans by 50 per cent to cash in on festive season demand.

This offer is applicable on loans availed from October 17 to December 31, SBI said in a statement.

“With this reduction, the bank is quoting the lowest processing fee on both home and auto loans to our esteemed customers,” it said.

For home loans up to Rs 25 lakh, the processing charge has become 0.125 per cent of the loan amount from 0.25 per cent, it said.

In case of loans between Rs 25 lakh and Rs 75 lakh, the processing fee would be Rs 3,250 as against Rs 6,500 while loans above Rs 75 lakh, it would be flat Rs 5,000 as compared to Rs 10,000 per application earlier.

With regard to auto loan, the processing charge has been slashed to 0.255 per cent of the loan amount as against 0.51 per cent.

Last month, SBI reduced its base rate or minimum lending rate by 0.25 per cent to 9.75 per cent following RBI’s monetary policy action.

The decision by the country’s largest lender come a day after the Reserve Bank reduced Cash Reserve Ratio (CRR) by 0.25 per cent to 4.5 per cent.

SBI now offers loans up to Rs 30 lakh at 10 per cent and loans above Rs 30 lakh at 10.15 per cent.

Yesterday another public sector bank Punjab & Sind Bank had also announced festival bonanza scheme for home and auto loans.

The scheme, as per the Punjab & Sind Bank statement, is applicable to fresh and takeover cases of such loans made during the current festival season beginning October 15.

There is no maximum ceiling on the amount of loan and number of vehicles to be financed by the bank. It further said that no processing fee is levied on these loans.

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Karnataka Bank Q2 net zooms on improved interest spread

An increase in interest spread and a reduced provisioning for non-performing assets helped Karnataka Bank register a 185.27 per cent growth in net profit for the second quarter of 2012-13.

Speaking to newspersons here on Wednesday, the Bank’s Managing Director, P. Jayarama Bhat, attributed this to the growth in operating profit, interest spread and to lower provisioning for NPAs.

The bank recorded a net profit of Rs 117.19 in the second quarter of this fiscal against Rs 41.08 crore in the corresponding period of the previous year, registering a growth of 185.27 per cent.

The operating profit for the period stood at Rs 158.77 crore (Rs 116.17 crore).

Bhat said that the interest spread, which is a difference between the cost of deposits and the yield on advances, has moved up by 37 basis points. The yield on advances during the period was 12.91 per cent (12.15 per cent), and the cost of deposits was 8.14 per cent (7.75 per cent). The net interest margin rose to 2.40 per cent (2.06 per cent).

Provisions and contingencies during the period more than halved to Rs 22.75 crore (Rs 47.93 crore).

NPA reduction

Stating that the bank has an NPA-controlling mechanism, he said the aim is to reduce the gross NPA to 2.50-2.75 per cent. During Q2, the gross NPA stood at 3.22 per cent (4.01 per cent) and net NPA at 2.08 per cent (2.22 per cent).

On the recovery front, he said the bank has set up a stressed asset management cell and a regular asset management cell. “We are giving thrust to retail advances so that delinquencies will be few,” he said.

The tax expense of the bank came down to Rs 18.83 crore (Rs 27.70 crore) during the period, Bhat said.

The net interest income for the second quarter was Rs 232.64 crore (Rs 181.48 crore), and ‘other income’ was Rs 86.89 crore (Rs 80.33 crore).

The bank posted a net profit of Rs 200.62 crore (Rs 90.86 crore) for the six months ended September.

On Wednesday, the bank’s share closed at Rs 123.40 on the BSE, up 0.65 per cent, against the previous close of Rs 122.60.

vinayak.aj@thehindu.co.in

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SBI drops ‘service area’ norm for education loan

State Bank of India has decided not to stick to the ‘service area’ approach while dispensing education loans. No loan application should be rejected without valid grounds, an e-circular dispatched to branches in the Kerala circle said.

PROPER DISPOSAL

The circular reminded branches that instructions regarding time-bound disposal of educational loan application had already been sent to them.

Accordingly, no application must be rejected without concurrence of the next higher authority.

Branches also need to record reasons for rejection and convey the same to the applicants to avoid complaints.

The circular recalled the meeting chief executives of banks had with the Finance Minister on August 18. At the meeting, the Finance Minister had expressed mainly four concerns.

FOUR CONCERNS

Inordinate delay in the disposal of educational loan applications at the respective branches.

Applications being rejected at the initial stage and being approved subsequently on representations made by students.

Absence, or ineffectiveness, of grievance redress mechanism.

Sanction of loans under newly launched scheme for vocational courses not adequately popularised.

The Finance Minister had advised that a special grievance redress mechanism be put in place at the branch, zonal as well as local head-office levels.

GRIEVANCE CELL

The persons concerned may approach the respective cells in respect of any grievance relating to educational loan. The branch must give wide publicity on the grievance redress mechanism to all applicants.

This may be intimated even at the time of submission of application, and displayed prominently at branches as also on the bank Web site. Such a mechanism is already on display at www.sbi.co.in the circular said.

COMMON FACILITY

But the circular states that a common facility needs to be activated at the branch and module levels and all complaints relating to educational loans/pending applications/rejections be reviewed on a weekly basis.

Wide publicity should be given to this facility too and the same displayed at branches. Its structure and composition will be advised separately.

vinson.kurian@thehindu.co.in

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Karnataka, Kotak, ICICI banks deny reports on takeover

Karnataka Bank Ltd, which is in news in a section of the media as a takeover target, has denied any such moves. ICICI Bank and Kotak Mahindra Bank have also denied any such moves of acquiring.

On different occasions, a section of the media reported that these two banks were looking to acquire Karnataka Bank.

In an announcement on the NSE on Tuesday, Karnataka Bank said: “We deny any such rumours as reported in the media. The investors may note the same.”

When contacted, Managing Director of the bank P. Jayarama Bhat denied such moves.

A few months ago, a section of the media reported that Kotak Mahindra Bank is looking to acquire Karnataka Bank, which was denied by Karnataka Bank then also. On Tuesday, a report in a publication stated that ICICI Bank is looking to acquire this Mangalore-based bank.

Following a query by the NSE in this regard, Kotak Mahindra Bank also denied such moves. A statement by Kotak Mahindra Bank to the NSE said: “We deny the rumour.”

Denying any such moves following a query by the NSE in this matter, ICICI Bank said: “This is to inform you that ICICI Bank is currently not considering merger or acquisition of any bank.”

However, the scrip of Karnataka Bank touched a 52-week high of Rs 127 on the BSE on Tuesday following this news. The scrip ended the session up by 2.07 per cent at Rs 123.30 on the BSE.

vinayak.aj@thehindu.co.in

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IRDA frowns on camouflaging additional remuneration to master policyholders

Master policyholders must not be enticed with reimbursement of expenses apart from the promised commission, says the insurance watchdog IRDA in its circular of October 5.

First, the IRDA (Insurance Regulatory and Development Authority) had imposed a hefty penalty of Rs 70 lakh on July 8, 2011, on SBI Life Insurance Company Ltd for remunerating the master policyholders, bulk of whom were its own banking brethren belonging to the larger SBI group such as State Bank of Hyderabad, State Bank of Indore, and so on with payments towards management expenses, documentation expenses, profit commission, bulk discount or payment of similar descriptions, in addition to a 20 per cent commission on premiums.

Now, as a sequel to that order, it has now asked these master policyholders to give the extra amount thus earned to the group insurance policyholders, who bought the policies from them, on an equitable basis.

The IRDA has opined that but for these extra payments, the premiums could have been lowered pro tanto and hence, this order.

Management expenses, documentation expenses, etc., are in any case the responsibility of the master policyholders which they must defray from out of the commission they receive.

(The author is a New Delhi-based chartered accountant.)

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IDBI Bank now live on Google Maps

IDBI Bank launched its geotagging initiative to enable the customers to search for the nearest IDBI bank branch or ATM on Google Maps through an application hosted on its website.

This search facility available on the public sector bank's website will help the customers of the Bank to get the location, facilities available within the branch, direction on how to reach the particular branch (map and milestone description), bank said in a statement.

Customers of the bank can locate over 998 branches and 1,592 ATMs of IDBI Bank across India and UAE with the help of this application, the bank said.

B K Batra, Deputy Managing Director, IDBI Bank said, “This is a key initiative taken towards ensuring that banking with IDBI Bank is a convenient and hassle free experience.”

Beena.parmar@thehindu.co.in

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SBI Life to soon launch series of Plans

SBI Life will soon be launching a host of plans across savings, protection and pension platforms.

The products have been filed with the Insurance Regulatory and Development Authority (IRDA) for approval, SBI Life said in a statement.

Atanu Sen, Managing Director and Chief Executive Officer, SBI Life, said, “We would shortly be launching four new products, subsequent to IRDA approval. These plans include a family income protection plan, a monthly income savings plan, a traditional pension plan and a market linked plan (ULIP) targeting younger audience.”

These products will be available across SBI Life’s multi distribution channels including Bancassurance through State Bank branches, retail agency and institutional alliances.

During the last financial year, 2011-12, SBI Life introduced several new products that include health insurance – hospital cash, variable insurance – flexismart, traditional savings – smart money back and immediate annuity – annuity plus. The company also launched first-of-its kind multi-lingual website across Indian financial sector.

SBI Life has added 39 new branches and recruited additional 14,000 insurance advisors and 2,000 certified insurance facilitators, during the financial year 2012 – 13.

beena.parmar@thehindu.co.in

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Standard Chartered Bank to pay Rs 2.97L for deficient service

The State Consumer Commission has dismissed a Standard Chartered Bank’s plea against a district forum order to it to pay Rs 2.97 lakh to a loanee for seizing her car for non-payment of a meagre sum of Rs 30,000 and selling it despite subsequent payment of all dues by her.

The vehicle was sold after the loanee refused to take it back as its crucial parts had allegedly been removed, rendering the vehicle to a non-working condition.

The Delhi State Consumer Commission observed the woman’s willingness to pay the remaining loan amount of Rs 30,000 showed she was keen to take the car back and there must have been some compelling reason for her for not doing so.

“It appears that statement of respondent (loanee) that the vehicle was not in a condition for taking possession needs to be accepted. It is evident that on one hand the appellant bank (Standard Chartered) is entering into an arrangement to return the car on payment of Rs 30,000 and on the other hand its officers allowed parts of the car to be removed which is a case of negligence and serious deficiency-in-service.

“We are of considered opinion that a case of deficiency in service is made out beyond doubt and to serve the ends of justice it would not be proper to interfere with the order of the district forum. The appeal is accordingly dismissed,” the bench presided by Justice Barkat Ali Zaidi said.

In her complaint to the district forum, Delhi resident Sunita Verma had alleged that her car, a Maruti Omni, bought in August 2001 on a loan from the bank was taken away by it on default of payment and despite her paying the remaining amount the vehicle was sold.

While admitting that Sunita Verma had paid the remaining Rs 30,000 to it, the Standard Chartered had alleged that the car was sold after she refused to take possession of it.

The district forum, however, had held the bank guilty of rendering deficient service and had directed it to refund her Rs 2.37 lakh she had paid to clear her loan and also another sum of Rs 60,000 as compensation and litigation cost.

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Deccan Chronicle loan has turned bad: Axis Bank

The Deccan Chronicle Holdings Ltd (DCHL) loan account has turned non-performing for Axis Bank, according to a top official.

“We have adequately provided for our loan exposure,” said Mr Somnath Sengupta, Executive Director & Head (Corporate Centre).

He, however, did not elaborate on the extent of Axis Bank’s loan exposure to DCHL or the amount of provisioning made by the bank.

A clutch of banks including Axis Bank, ICICI Bank, Kotak Bank, YES Bank, and Canara Bank have a loan exposure of about Rs 4,000 crore to the Hyderabad-based media group. Last month, bankers said they would take a call on admitting DCHL into the Corporate Debt Restructuring (CDR) Cell only after the results of the forensic audit of its accounts are known. Canara Bank is conducting the forensic audit.

ramkumar.k@thehindu.co.in

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Vikram Pandit quits Citigroup; Michael Corbat named successor

Citigroup CEO Vikram Pandit today stepped down from his post and member of the US banking giant’s Board.

The Board of Directors has unanimously elected Michael Corbat, CEO and a director of the Board, the company said.

The development comes a day after the India born CEO-led the US banking giant reported 88 per cent plunge in net profit at $ 468 million in the July-September quarter.

Nagpur-born Columbia University graduate Pandit, 55, had been the CEO of Citigroup since December, 2007.

Pandit said Citigroup has emerged from the financial crisis as a strong institution and “now is the right time for someone else to take the helm at Citigroup.”

"Thanks to the dedication and sacrifice of people across Citigroup, we have emerged from the financial crisis as a strong institution. Citigroup is well-positioned for continued profitability and growth, having refocused the franchise on the basics of banking.

“Given the progress we have made in the last few years, I have concluded that now is the right time for someone else to take the helm at Citigroup,” Pandit said in a statement.

He added that he is leaving the company in better hands.

Corbat is the “right person” to tackle the difficult challenges ahead, with a 29-year record of achievement and leadership at this Company, he said.

“I will truly miss the wonderful people throughout this organisation. But I know that together with Mike, they will continue to build on the progress we have made,” he added.

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Norms to buy back illiquid govt securities on the anvil: RBI

A joint working group of the Government and the Reserve Bank of India is working on guidelines to buy back illiquid government securities, according to H. R. Khan, Deputy Governor, RBI.

“Over a period of time some budget will have to be set aside to provide for the premium to retire those securities whose volumes are low.

“Guidelines on the same are being worked upon by a joint group of the Government and the RBI, Khan said on the sidelines of a banking summit organised by YES Bank and the Financial Times.

Forex losses, CDR

Khan observed that banks do not look at their own corporate hedging policy and get into difficulty when corporate debt restructuring (CDR) cases come up due to foreign exchange (forex) losses.

“CDRs partly have come up due to forex losses and partly due to excessive leverage. Banks must monitor and review to see that the corporates they are financing have a policy for hedging.”

Currently, though Credit Default Swaps and Interest Rate Swaps are there for hedging but they have not been utilised. We have a working group to bring out fixed rate products for hedging purposes, Khan added.

Move in tandem

“Monetary policy has to work in tandem with the fiscal policy. Supply side responses are needed to control inflation and maintain growth,” said Khan.

beena.parmar@thehindu.co.in

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Axis Bank: Retail push boosts profitability

Axis Bank managed a better-than-expected profit growth, thanks to improved fee income and retail loan book growth. The net interest margins rose along the expected lines as wholesale deposit costs moderated sequentially. On the asset quality front the bank fared better, with the addition to fresh stressed assets (fresh NPAs and restructured loans) at only Rs 951 crore.

Retail push

Axis Bank’s key numbers were in line with what IndusInd Bank and HDFC Bank achieved during the quarter. The retail loan book which accounted for just 19 per cent of the portfolio in September 2010 has steadily increased to 26 per cent in the last two years. During this period, the bank expanded its branch network by 60 per cent.

The bank is also leveraging on existing depositors to improve its retail loan book growth. The bank targets 30 per cent retail loan share in the total loan book by 2015.

While the retail book grew by 51 per cent year-on-year, the corporate loan book growth was at 16 per cent. Loans to the troubled segments, such as SME and agriculture, grew at a lower rate.

The net interest margins of the bank expanded by nine basis points to 3.46 per cent sequentially due to fall in cost of funds which, in turn, was a function of a sharp fall in wholesale deposit rates. The bank hopes to maintain margins in the 3.25-3.5 per cent range.

‘Other income’ surprise

The boost to profits came from improved trading profits (due to rising bond prices) and fee income. For the quarter ended September 2012, the fee income grew 20 per cent year-on-year driven by 43 per cent growth in retail sources. Third party distribution and retail asset-linked fee contributed to the fee income growth.

Asset quality slippages

The net stressed assets (net NPA plus restructured loans) accounted for 2.34 per cent of the loan book, up from 2.26 per cent in June 2012. Fourteen per cent of the cumulative restructured loans have slipped into NPAs. Around Rs 1,490 crore worth loans, or 37 per cent of the restructured loans, have performed well for more than a year.

Asset quality risks may not have abated for Axis Bank. Concerns remain on the rising credit risk of the corporate loan book. The proportion of loans rated as ‘A’ and above is down from 73 per cent in September to 62 per cent in a year.

santosh.majeti@thehindu.co.in

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Banks should credit interest every month, says depositors’ body

When banks receive interest on loans at monthly intervals, then shouldn’t depositors also get the same deal?

A depositors’ body has flagged the issue of depositors getting a raw deal with the Reserve Bank of India (RBI).

Banks have been charging interest on loans and advances at monthly intervals (as against quarterly intervals earlier) with effect from April 1, 2002. Due to the reduction in the interest application frequency, the yield on bank loans have increased, the All-India Bank Depositors Association said.

However, banks pay interest on savings bank (SB) and term deposits at ‘quarterly or longer intervals’, resulting in depositors getting relatively less yield on their deposits.

The association pointed out that throughout the RBI’s regulated as well as deregulated regime on SB and term deposit interest rate, there was no standard on the interest application frequency. This resulted in the annual percentage yield on the deposits being different for different banks.

“We are pursuing with the central bank to get banks to credit interest on deposits uniformly at monthly rests. This will help depositors realistically compare deposits rates.

“Currently, depositors are not able to make an objective comparison of deposit rates as interest is credited at quarterly or longer intervals,” said Ashok Ravat, Honorary Secretary, All-India Bank Depositors’ Association.

He emphasised that the central bank should balance the interests of banks and the depositors. The depositors’ body said the question of the RBI’s inability, till date, on standardising the interest application frequency was a cause for concern. In the interest of depositors, it wants to have only one simple standard (based on crediting of interest at monthly intervals) to compare returns on deposits.

Usha Thorat, Director, Centre for Advanced Financial Research and Learning, in a speech last year, said that the current asymmetry between the periodicity of interest paid to depositors on their savings account and the interest charged on their loan account needs to be reviewed by regulators to address the existing anomaly.

As per RBI data, banks in India had deposits aggregating to about Rs 65-lakh crore as on September 28, 2012.

ramkumar.k@thehindu.co.in

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Citigroup Q2 profit nosedives 88% to $ 468 mn

The US banking giant Citigroup today said it has reported 88 per cent plunge in net profit at $ 468 million in the July-September quarter due to $ 4.7 billion loss related to the joint venture brokerage business, Morgan Stanley Smith Barney.

In the year-ago period, the bank had a net profit of $ 3.77 billion, Citigroup said in a statement.

Citi said excluding the loss on its brokerage unit, a one-time accounting charge and credit adjustments, the bank reported earnings of $ 3.27 billion in the quarter under review up from $ 2.57 billion in the period a year earlier.

The banking entity’s total revenues fell by 33 per cent from the year-ago period to $ 13.95 billion in third quarter of this year.

“Third quarter results also included a pre-tax loss of $ 4.7 billion ($ 2.9 billion after tax) from the previously announced sale of a 14 per cent interest and other than temporary impairment of the carrying value of Citi’s remaining 35 per cent interest in the Morgan Stanley Smith Barney (MSSB) joint venture,” Citi said.

Investment-banking revenue rose 26 per cent to $ 926 million, with increases in fees from underwriting shares and bonds and advising on mergers.

Besides, Citi saw a 67 per cent surge in profits from its securities and banking unit to $ 1.61 billion. The bank said it benefited from an up-tick in capital market activities.

“Our core businesses showed momentum during the quarter as we increased lending and generated higher operating revenues. These earnings highlight the strength of Citicorp and its diversification by product and region,” Vikram Pandit, CEO, Citi said.

“For the third straight quarter, we had positive operating leverage in each of our three core businesses. Citigroup in total also had positive operating leverage as Citi Holdings had a smaller impact on our overall results,” he added.

Citi’s revenues rose by 2 per cent from global consumer banking operations, while revenues from transaction services were down 2 per cent.

Last month, Citi agreed to sell its stake in the brokerage to Morgan Stanley.

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ICICI Bank ties up with African bank

ICICI Bank has entered into a memorandum of understanding (MoU) with Ecobank Transnational Incorporated (Africa).

The MoU will involve ICICI Bank and Ecobank collaborating to extend banking services across their combined footprint in India and Africa. Ecobank is present in 35 countries in Africa, said a statement from India’s largest private sector bank.

India’s trade with Africa has doubled in the past four years. Stronger investment ties are complementing this steady growth in trade with Indian investments in Africa across a range of sectors including oil & gas, pharmaceuticals, petrochemicals, fertilisers, IT and infrastructure.

According to Vijay Chandok, President, International Banking Group, ICICI Bank, “This MoU will allow ICICI Bank and Ecobank to leverage their combined expertise, strong local knowledge and corporate relationships to support Indo-African businesses.”

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SBI drops ‘service area’ norm for education loan

State Bank of India has decided not to stick to the ‘service area’ approach while dispensing education loans. No loan application should be rejected without valid grounds, an e-circular dispatched to branches in the Kerala circle said.

PROPER DISPOSAL

The circular reminded branches that instructions regarding time-bound disposal of educational loan application had already been sent to them.

Accordingly, no application must be rejected without concurrence of the next higher authority.

Branches also need to record reasons for rejection and convey the same to the applicants to avoid complaints.

The circular recalled the meeting chief executives of banks had with the Finance Minister on August 18. At the meeting, the Finance Minister had expressed mainly four concerns.

FOUR CONCERNS

Inordinate delay in the disposal of educational loan applications at the respective branches.

Applications being rejected at the initial stage and being approved subsequently on representations made by students.

Absence, or ineffectiveness, of grievance redress mechanism.

Sanction of loans under newly launched scheme for vocational courses not adequately popularised.

The Finance Minister had advised that a special grievance redress mechanism be put in place at the branch, zonal as well as local head-office levels.

GRIEVANCE CELL

The persons concerned may approach the respective cells in respect of any grievance relating to educational loan. The branch must give wide publicity on the grievance redress mechanism to all applicants.

This may be intimated even at the time of submission of application, and displayed prominently at branches as also on the bank Web site. Such a mechanism is already on display at www.sbi.co.in the circular said.

COMMON FACILITY

But the circular states that a common facility needs to be activated at the branch and module levels and all complaints relating to educational loans/pending applications/rejections be reviewed on a weekly basis.

Wide publicity should be given to this facility too and the same displayed at branches. Its structure and composition will be advised separately.

vinson.kurian@thehindu.co.in

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O. P. Bhatt on StanChart board

Former Chairman of SBI, O P Bhatt, has been appointed as an independent non-executive director on the board of Standard Chartered Plc. Bhatt is the first executive from the public sector on the board of a multinational bank.

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HDFC Bank to take call on lowering lending rates soon

HDFC Bank is planning to take a call on lowering its lending rates in certain retail products during the upcoming festive season, a senior official said.

“From a tactical point of view, we will respond to the market, remain competitive. If the market is moving in a certain direction, we will also remain competitive and I think that is something which we will rollout in the next few weeks,” HDFC Bank Executive Director Paresh Sukhtankar said.

He, however, did not disclose more details, saying, “I do not have anything to convey in a definitive manner.”

ICICI Bank had last week announced lending rate cut up to 1 per cent in home loans. SBI has already announced rate cuts while the ICICI announcement was preceded by similar moves by others like Vijaya Bank.

Only SBI has cut its base rate while the other banks have gone for reducing their spreads in loan categories.

Paresh Sukhtankar said there are two dimensions to a call on cutting rates.

The first is the more structural driver of the movement of cost of funds which is determined by the deposit rates while the second, driven by competition, are tactical moves aimed at gaining market share and remaining competitive during a busy season.

During the last quarter, deposit rates have gone down by as much as 0.75 per cent, and there is little scope for them to go down further, he said.

On the base rate, Paresh Sukhtankar said it is dependent on the movement of the deposit rates and the credit policy initiatives to be announced by the Reserve Bank on October 30.

Like other banks, HDFC Bank will also take a call on the base rate during the quarter, he added.

“At sometime during the quarter, we certainly have to recalibrate the base rate,” he said.

Paresh Sukhtankar, however, said HDFC Bank was among the earliest in passing on the benefits of the twin rounds of cash reserve ratio cut by the RBI and cut its base rate in the first quarter.

At 9.8 percent, he said the bank’s base rate is one of the most competitive in the system.

He said the bank’s credit growth, which came in at almost 23 per cent for the September quarter versus the overall banking system’s 16.6 per cent, will continue to outpace the systemic average by a few percentage points.

Demand from the retail segment is very good but the wholesale segment, which recorded a growth of under 15 per cent during the September quarter for the bank, is a laggard possibly due to gloomy economic conditions, he said.

Greenfield project loans demand is not coming and the corporate loan demand is driven more by the short-term working capital loan, he said.

For the 34th consecutive quarter, HDFC Bank had last week declared over 30 per cent spike in net profit at Rs 1,560 crore driven by health rise in retail advances and the resultant spike in interest come, even as its fee income remained almost flat during the second quarter.

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Canara Bank ‘road show’

Canara Bank organised a ‘mega road show’ at all circle headquarters to generate awareness on various products and promote financial inclusion.

Hundreds of employees marched on M.G. Road here on Saturday displaying the bank’s logo and banners.

They sought to publicise benefits of opening accounts with the bank. S.T. Ramachandra, deputy general manager, circle office, inaugurated the march.

A bank spokesman said employees managed to open a number of accounts during the campaign. In other cases, doubts about technology products were cleared.

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Why education loan schemes are not ticking

The origin of the education loan scheme in India dates back to 1992. The scheme has evolved through contributions from the Finance Ministry, Indian Banks’ Association and banks.

What the Numbers Say?

Data on various facets of education loan (EL) are inadequate, unsystematic and discontinuous. We have compiled available data on EL from March-end 2005 to March-end 2012 from various issues of RBI Annual Report.

During this period, EL increased from Rs 5,700 crore to Rs 50,200 crore, yielding a CAGR (compounded annual growth rate) of 36.5 per cent compared to that for gross bank credit (GBC) at 22.7 per cent and priority sector credit (PSC) at 20.7 per cent. The performance of EL scheme looks impressive due to its low base. Against this, its year-on-year growth, which was 75.4 per cent in 2006, nosedived to 14.9 per cent in 2012.

Chart 1 presents EL-to-GBC and EL-to-PSC ratios.

Evidently, both the ratios remain at abysmally low levels. In addition, the ratios have plateaued in the last three years.

Chart presents the ratios of incremental EL to incremental GBC and to incremental PSC. It shows a mountain-and-valley panorama for both the ratios. However, the performance is not pretty, with drastic declines observed towards terminal years of the data series.

It can be seen that the EL scheme has not meaningfully taken off despite its two-decade-long existence and repeated moral suasion of bank chiefs by the Finance Ministers.

The EL scheme, as a business proposition, has not gone down well with bankers. The scheme is still being looked upon as a ‘scheme of near-donation’ by both bankers and borrowers. Therefore, bankers are not motivated to market the scheme proactively and aggressively. This is buttressed by the number of EL accounts which stood at just 2.28 million at end-March 2011.

Recovery

A search on the Internet revealed that no bank has put out recovery figures in respect of EL in public domain, which gives rise to suspicion that all is not well on the recovery front. Discussions with bankers at various levels confirm this belief. According to one estimate, EL NPA percentage was as high as 6 in 2011-12. According to yet another source, recovery percentage in Tamil Nadu as on June 30, 2011, was 5.02 for all banks and 1.25 for co-operative banks.

We see a vicious circle here. Since the EL scheme is not being marketed as a business proposition, enthusiasm among bankers to recover loans is low, and since recovery is low, risks are more and bankers shy away from marketing the scheme.

Borrowers are also equally responsible for this sorry state of affairs. They think that ELs are grants, not to be repaid.

A section of bankers expect that the proposed Credit Guarantee Fund Trust for EL will alleviate the current situation.

Yes, it would definitely buck up the current sluggish trend in EL disbursement, but it should also be aimed at creating a healthy credit culture in the domain of EL, involving both bankers and beneficiaries alike.

Even if all ELs go bad, banks stand to lose only a tiny fraction of their GBC.

However, ELs serve a ‘noble’ purpose, particularly in a country like India where higher education, technical education and skill levels remain at low ebb and yet benefits of demographic dividend have to be reaped fully.

Therefore, it is imperative that the scheme continues but in a different garb.

Change the Game

The fact is both banks and borrowers see ELs as ‘doles’. So why not make ELs as ‘doles’ and bring them under the fold of Corporate Social Responsibility (CSR) of banks?

Every bank could earmark a certain percentage of their yearly net profit for distributing to meritorious students as scholarships through a carefully chosen set of educational institutions. The modus operandi can be worked out.

During 2010-11, ELs constituted 9.7 per cent of net profit of scheduled commercial banks, which is not a big sum. This will help banks boost their image in terms of CSR, which is of immense importance in today’s corporate world (even the Prime Minister mentioned about it recently in one of his speeches), particularly for financial institutions traditionally known as “agents” of socio-economic change.

Also, it will help save on both administrative and recovery costs involved in ELs.

To let EL continue as a loan scheme will be equivalent to allowing it to wither away like the Differential Interest Rate scheme of the yore.

If banks are aiming at serving a ‘noble’ cause, the CSR, rather than loan, route may be explored for EL.

This will be less harmful and embarrassing than a possible ‘waiver’ of the loans at a later stage.

(The author is a former commercial bank economist.)

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Axis Bank Q2 net rises 22% on higher interest, fee income

Axis Bank reported a 22 per cent growth in net profit at Rs 1,124 crore in the second quarter ended September 30, 2012 on the back of growth in non-interest income and net interest income.

India’s third largest private sector bank had posted a net profit of Rs 920 crore in the year-ago period.

The board of directors of the bank approved the financial results at a meeting held in London on Monday.

The bank’s half-yearly net profit grew 22 per cent to Rs 2,277 crore (Rs 1,863 crore in the year-ago period).

Net interest income (difference between interest earned and interest expended) rose 16 per cent to Rs 2,327 crore from Rs 2,007 crore in the year-ago period. Non-interest income (comprising fee income and trading income) rose 29 per cent to Rs 1,593 crore from Rs 1,235 crore.

“Fee income and retail business grew by 43 per cent,” the bank said in a statement.

NPA

Gross non-performing assets (NPAs) increased marginally to 1.10 per cent from 1.08 per cent in the year-ago period, while net NPAs were almost flat at 0.33 per cent from 0.34 per cent.

Provisions during the quarter increased 25 per cent to Rs 509 crore (from Rs 406 crore). Capital adequacy ratio stood at 12.99 per cent (from 11.35 per cent as on Q2 FY12).

Shares of Axis Bank ended down 0.15 per cent to close at Rs 1,118.5 on the Bombay Stock Exchange on Monday.

Beena.parmar@thehindu .co.in

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