Union Bank opens fourth office in Kerala

Union Bank of India on Wednesday opened its fourth regional office in Kerala. The other three are at Ernakulam, Thiruvananthapuram and Kozhikode.

The office will be the 58th regional office at Kottayam, Kerala.

It will cater to the branches in three districts namely Idukki, Kottayam and Pathanamthitta. The public sector bank has 46 branches spread over in these 3 districts, while a total of 221 branches in the State.

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Corporation Bank enables transaction-based banking on tablet PCs

Corporation Bank has enabled transactions through tablet PCs and iPads, according to Ajai Kumar, Chairman and Managing Director of the bank.

Delivering the T.A. Pai Endowment Lecture on the theme ‘Digital Banking’ at Mangalore University here on Thursday, he said that Corporation Bank is the first public sector bank to introduce transaction-based banking in tablet PCs and iPads.

He said that the prospect of mobile banking is all set to get better in the foreseeable future with the advent of smart phones and tablet PCs. Modern smart phones are replacing physical wallets and capable of becoming access portals to customers’ stored value of money and credit, he said.

Future mobile banking enjoys an edge over other digital banking counterparts because of its easy accessibility. Another factor that establishes the supremacy of mobile banking over other digital channels is the increase in ‘Gen Y’ customer base, he said.

The growth of Internet and mobile technology has added a different dimension to banking. The accelerated evolution of mobile phones is now at a stage that its basic function of making phone calls is becoming less important, and the device is increasingly becoming a payment of choice, he said.

Stating that technology-based banking forms nearly 25-30 per cent of the total transactions in the banking industry, Ajai Kumar said the way in which it is leapfrogging will take the technology-based banking transactions to nearly 70-80 per cent in a few years.

On the financial inclusion front, he said the mobile phone penetration in rural areas is one opportunity which shall be leveraged by banks to facilitate banking transactions.

Ajai Kumar said the prepaid based mobile wallets can drive financial inclusion in the country.

vinayak.aj@thehindu.co.in

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United Bank gets board nod to raise Rs 750 crore

United Bank of India plans to raise Rs 750 crore through a mixture of debt and equity instruments in this fiscal.

Of the total, Rs 500 crore will be raised through private placement of debt instruments, within a month. This will be followed by a rights issue of Rs 250 crore later this year.

According to Chairman and Managing Director Bhaskar Sen, the Board of Directors of the bank approved its capital-raising plans at a meeting on Wednesday.

The fund infusion will boost its capital-adequacy ratio and fund its growth needs. The bank aims 17 per cent growth in advances by the end of this fiscal.

“We had discussion about raising capital through both debt and equity routes and we have got the Board’s approval for both,” Sen told Business Line.

Capital-adequacy ratio of the bank stood at 12.08 per cent as on September 30. The tier-I capital was at 8.46 per cent.

In a notification to the Bombay Stock Exchange on Thursday, the bank said that the Board has approved the issue and allotment of unsecured perpetual tier -I bonds in the nature of promissory notes of Rs 10 lakh each for cash at par up to a maximum amount of Rs 250 crore. The issue will have a green-shoe option up to a maximum of Rs 250 crore through private placement.

“Now that we have the Board approval, we will go in for the ratings. Once that is done, we will take a call on when to raise the funds based on the market conditions. But we might be raising capital by way of debt by December this year,” Sen said.

Additionally, the bank has also got the Board approval for issuing equity shares of Rs 10 each at a premium to be decided at a subsequent date on rights basis to its existing shareholders for raising Rs 250 crore.

“We might take about two-three months’ time to complete the formalities pertaining to the rights issue,” he said.

shobha.roy@thehindu.co.in

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Banks must tell reason for rejecting education loan

Banks have been asked to assign reasons for rejecting any educational loan applications, Parliament was informed today.

“Banks have been advised that rejection of education loan applications has to be with the approval of controlling authority of the branch concerned and the reason for rejection should be communicated to the applicants in writing,” Finance Minister P. Chidambaram told Rajya Sabha in a written reply.

“Indian Banks’ Association has advised the banks to give wide publicity to their grievance redressal mechanism on education loans and to make effective use of the mechanism,” he said.

The Minister also said the “complaints regarding educational loans, as and when received, are taken up with banks concerned for corrective action“.

The banks had Rs 27,000 crore outstanding on education loans as of March 2009, Rs 35,850 crore as of March 2010 and Rs 41,340 crore such loans as of March 2011, as per the data from the Reserve Bank.

The RBI had recently asked banks not to reject any education loan even if the residence of the borrower does not fall under their service area.

Also to remove problems faced by students in obtaining education loans, the Government is working on a scheme under which it would extend guarantee for advances up to Rs 7.5 lakh.

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Canara Bank observes Founder’s Day

Canara Bank should play a lead role in furtherance of the financial inclusion movement in the country, said Union Minister of State for Finance Namo Narain Meena.

Speaking at the bank’s Founder’s Day function here, Meena said, “There is still persisting problem of inadequate outreach of institutional credit to the rural poor and the bank should work towards it.”

Union Minister of State for MSMEs K.H. Muniyappa said on the occasion that banks need to make inclusive growth a reality.

Deputy Chief Minister of Karnataka R. Ashoka highlighted the role played by Canara Bank in contributing to the development of the State. He argued that there is a compelling need for the State Government and Canara Bank to work in unison as partners in development.

The Executive Director of the bank Archana S. Bhargava said the bank had the fourth position in the country’s banking sector.

She stressed that while meeting the banking requirements of all segments of society, Canara Bank always maintained focus on the needs of the common man in line with the vision of its founder.

Bhargava said the bank has taken initiative to reduce 0.25 per cent interest in rate of interest on loans to MSMEs up to Rs 1 crore with immediate effect. This will benefit large number of micro and small enterprises in reducing their interest burden.

Further, she also declared open the dedicated call centre set up by Canara Bank, SLBC Convenor Bank, for the State of Kerala for urban financial inclusion. The call centre will provide necessary guidance and assistance in local language to the urban poor for opening accounts with banks.

anil.u@thehindu.co.in

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Subir Gokarn gets extension till Dec 31

The government today extended the term of Reserve Bank Deputy Governor, Subir Gokarn till December 31, 2012.

His term was due to end on November 24. He was appointed in November 2009 for a period of three years.

Subir Gokarn got extension up to December 31 this year, the Financial Services Secretary, D K Mittal said here.

Deputy Governors can be appointed for a maximum of five years or till the age of 62, whichever is earlier.

Gokarn looks after key portfolios including monetary policy and economic analysis and policy departments at RBI.

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LIC allowed to buy up to 30% equity in a company

Hard pressed to meet the Rs 30,000 crore disinvestment target, the Finance Ministry on Wednesday permitted the state-owned Life Insurance Corporation to invest up to 30 per cent in a company as against the earlier ceiling of 10 per cent.

“LIC can invest up to 30 per cent of a company’s paid-up capital. Earlier it could invest up to 10 per cent,” Financial Services Secretary D K Mittal told reporters here.

The notification relaxing investment norms for LIC has been issued, he added. The new norms will enable the cash-rich LIC, which invests around Rs 50,000-60,000 crore in equity annually, to pick up higher equity in state-owned companies during the disinvestment process.

Insurance regulator IRDA, however, was against LIC picking up more than 10 per cent equity in a company. It wanted LIC to stick to the norms applicable for private insurers.

The government’s decision is apparently aimed at pushing through the disinvestment process which had so far remained a non-starter.

The government in the budget for 2012-13 had proposed to raise Rs 30,000 crore from stake sale in PSUs.

Finance Minister P Chidambaram in a recent interview to PTI had expressed the confidence that government would endeavour to be as near the target as possible.

The government proposes to sell equity in several state-owned companies like Nalco, Hindustan Copper, SAIL, BHEL, MMTC and Oil India Limited (OIL). It is also planning to sell residual equity in companies privatised earlier.

In view of the subdued tax collection and subdued revenue realisation, the Finance Ministry had raised the fiscal deficit target for the current fiscal to 5.3 per cent of the Gross Domestic Product (GDP) from 5.1 per cent estimated earlier.

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Nagpur: Bank clerk accused of Rs 96 lakh fraud

The city police has registered a case against a clerk with Bank of Maharashtra for a fraud to the tune of Rs 96,43,599.

Dewanand Nichwani, who works with BOM’s Jaripatka branch, is accused of diverting cheques. Police said between November 2007 and May 2008, he deposited 48 cheques handed in by the bank customers in 13 accounts, most of them belonging to his relatives or friends, instead of depositing them in the customers’ accounts.

No arrest has been made yet.

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Sudha Krishnan appointed nominee director on Canara Bank

The government has nominated Sudha Krishnan, who is joint secretary in the expenditure department, as its nominee director on the board of Canara Bank.

“...the central government, nominated Sudha Krishnan, Joint Secretary, Department of Expenditure, as government nominee director on the board of directors of Canara Bank with immediate effect and until further orders,” Canara Bank said in a filing to the BSE.

Krishnan would replace Thomas Mathew of the Department of Financial Services, Ministry of Finance, it added.

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Banks can open administrative office in large cities sans RBI permission

Banks need not seek permission of the Reserve Bank to open administrative offices in large cities (Tier-I), the central bank said today.

“With a view to further increasing operational flexibility of banks, it has been decided to permit domestic scheduled commercial banks (other than RRBs) to open offices exclusively performing administrative and controlling functions in Tier-I centres without the need to obtain prior permission,” it said in notification today.

Currently, banks (excluding RRBs) are permitted to open branches in Tier-II to Tier-VI centres (with population less than 1,00,000) and in rural, semi-urban and urban centres in north-eastern states and Sikkim without seeking its permission.

In its second quarter Monetary Policy 2012-13 in mid-October, the RBI had proposed to permit banks to open offices in Tier-I centres as well.

The RBI, however, said permission granted would be subject to regulatory and supervisory comfort and it would have the option to withhold permissions granted on a case-to-case basis.

Though, the apex bank made it clear that opening of branches including Central Processing Centres (CPCs)/ Service Branches by banks in tier I centres (with population of 1,00,000 and above) will continue to require its prior permission.

In a separate notification, the RBI asked the banks to strictly adhere to the policy and guidelines for hiring of premises on lease or rental basis in metropolitan, urban, semi-urban and rural areas.

“It has been observed in certain cases that banks have not complied with the instructions while acquiring premises for their branches causing avoidable inconvenience to customers and possible reputation risk to the banks,” it said.

Banks are required to formulate guidelines for acquiring premises on lease or rental basis including delegation of power at various levels.

As well they are required to ensure that the location of the branch complies with the local norms, laws of Municipal Corporation, Nagar Palika, town area authority, village panchayat or any other competent authority.

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IDBI Bank opens 1,000th branch at Kannangudi

Union Minister of Finance P. Chidambaram inaugurated the 1,000th branch of IDBI Bank in Kannangudi, in Sivaganga district on Sunday. On the occasion, the bank announced the launch of an attractively priced education loan scheme, encompassing both non-vocational and vocational courses designed largely in line with the model education scheme circulated by Indian Bank Association.

Speaking at the inaugural, Chidambaram said that he was happy that the bank has transformed itself into a full-service commercial bank and is actively focusing on expanding customised financial solutions. R. M. Malla, CMD, IDBI Bank, in his address, said that the inauguration of the branch was a testimony of the bank’s dedication to the socio-economic development of the region. The bank has 1,000 branches and 1,592 ATMs. It has an aggregate balance sheet size of Rs 265,000 crore and total business of Rs 350,000 crore as on September 30, 2012.

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ICICI Bank launches money transfer service in Germany

ICICI Bank UK today launched money transfer service for Indians living in Germany.

‘Insta Netexpress’ will be offered through its online platform with an assured exchange rate and faster transfer time for users who wish to send money to India.

Money2India.eu is a web-based online money transfer tracking platform which facilitates tracking of money transfers from 17 Euro zone countries to beneficiaries in India, the bank said in a statement.

This service will offer competitive exchange rates, no processing fee or service charges, faster transfer time and dedicated toll free telephone support.

Users will benefit from this cooperation and experience simple and fast access to international payment schemes.

With PAY.ON's local presence, ICICI Bank will be able to meet customer needs better and provide a faster, more efficient service.

In this service, money can reach the beneficiary within 24 hours and the exact exchange rate applicable can be known at the time of sending money, an ICICI Bank spokesperson said.

beena.parmar@thehindu.co.in

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Oriental Bank bond issue to open tomorrow

Oriental Bank of Commerce’s issue of subordinated lower Tier II bonds of Rs 10 lakh each for cash at par aggregating Rs 1,000 crore is slated to open on November 21 and will close on November 27.

The public sector bank has an option to retain oversubscription of up to Rs 200 crore. In a notice to the BSE, the bank said the bonds, which have a 10-year tenure, have been rated ‘AA+’ by credit rating agencies ICRA and CARE and bear coupon rate of 8.93 per cent.

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HDFC Bank launches mobile banking in Hindi

Targeting 560-million Hindi-speaking population, the second largest private sector lender HDFC Bank on Tuesday launched a mobile banking application in the national language.

Mobile banking services is part of the bank’s overall strategy to use convergent communication platform to engage with customers, Senior Executive Vice-President for Direct Banking Channels and Premier Banking Birendra Sahu said here.

Today 82 per cent of all customer-initiated transactions happen on electronic channels, he said, adding therefore the bank has launched mobile banking solutions ranging from SMS banking, browser-based and application-based applications for smartphones.

There are around 565 million Hindi-speaking populations in the country, he said.

He said the bank launched the English-language mobile banking in July-August last year and already has 12 lakh users, and with the Hindi option, the user base can touch 16 lakh soon.

Quoting a CyberMedia report, he said, Android phones constitute about 56.4 per cent of the total 5.5 million smartphones sold in the first half of the year in the country.

This application will allow customers using an Android smartphone to conduct over 30 banking transactions, ranging from balance enquiry and checking transaction history to fund transfer and bill payments.

As of September, the bank had 2,620 branches and 10,316 ATMs spanning 1,454 cities/towns, he said.

For the September quarter, on the back of high retail loans HDFC Bank reported an over 30 per cent rise net profit to Rs 1,560 crore. Its net interest income grew at a healthy 26.7 percent to Rs 3,731.7 crore, due to a 22.9 percent growth in advances.

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Karnataka Bank raises Rs 250 cr through tier-2 bonds

Karnataka Bank Ltd has raised Rs 250 crore through the issue of 10-year lower tier-2 bonds.

The bank informed BSE on Monday that it has raised Rs 250 crore by issue of non-convertible subordinated debt instruments in the nature of debentures (lower tier-2 bonds) on private placement basis. The issue of bonds with a tenor of 10 years opened for subscription on October 22 and closed on November 12.

It said the Rs 125-crore issue, with a right to retain oversubscription to the extent of Rs 125 crore, received a huge response from investors. It resulted in over-subscription by 100 per cent.

As on March 31, the capital-to-risk weighted assets ratio (CRAR) of the bank was 12.84 per cent consisting of tier-1 capital of 10.86 per cent and tier-2 of 1.98 per cent.

The bank informed the exchange that with the above issue of bonds, capital funds have further improved. This will enable it to further expand the credit portfolio in the coming days.

vinayak.aj@thehindu.co.in

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Don't give loan for buying gold, RBI tells banks

The Reserve Bank of India (RBI) today directed banks not to give loans for purchase of gold in any form, including primary gold, bullion and jewellery, to dissuade people from indulging in speculative activity.

“...it is advised that no advances should be granted by banks for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds (ETF) and units of gold mutual funds,” the RBI said in a notification.

No advances should be granted by banks against gold bullion to dealers or traders in gold if, in their assessment, such advances are likely to be utilised for purposes of financing gold purchase at auctions or speculative holding of stocks and bullion, it said.

However, it said banks can provide finance for genuine working capital requirements of jewellers.

The decision was taken in view of significant rise in imports of gold in recent years putting pressure on current account deficit.

In the 2011-12 fiscal, India’s gold imports stood at $60 billion and the quantum of import was 1,067 tonnes.

In the April-June quarter of the current fiscal, however, gold imports had contracted by 18.4 percent year-on-year to Rs 71,912 crore ($13 billion).

The Monetary Policy Statement of April 2012 announced the constitution of a working group to study issues relating to gold imports and gold loans by Non-Banking Financial Companies (NBFCs) in India.

The working group, submitted its draft report in August 2012, suggested that other than working capital finance, banks are not permitted to finance purchase of gold in any form.

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Sebi relaxes MF exposure limit for HFCs

Providing more leeway for housing finance companies (HFCs), market regulator Sebi today relaxed the investment limit for such entities in debt mutual funds.

The decision to relax the investment limit for housing finance companies (HFCs) was taken by Sebi at its board meeting held in October.

“In light of the important role played by the Housing Finance Companies (HFCs) in the housing sector, it has been decided that an additional exposure not exceeding 10 per cent of net assets of the scheme shall be allowed only to HFCs as part of financial services sector for prudential limits in debt oriented schemes,” Sebi said in a circular today.

The total investment in HFCs shall not exceed 30 per cent of the net assets of the scheme.

The Sebi said the relaxation would be subject to certain conditions such as that the securities issued by HFCs were rated ‘AA’ or above. Also, the HFCs should have been registered with the National Housing Bank (NHB).

In October, the market regulator had said the decision to relax investment limit was taken after taking into consideration the important role played by HFCs in fulfilling the social objective of increased home ownership and supporting the economy by creating demand for construction of new homes.

Certain debt mutual fund schemes, such as long-term fixed maturity plans are a preferred route for the NBFC (Non-Banking Finance Company) sector to raise medium to long term funds at attractive rates.

Under the regulatory framework, NBFCs include HFCs.

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IOB plans perpetual bond issue

Indian Overseas Bank is mulling to raise funds through a perpetual bond sale and will soon seek approval from its board for the same, a top bank official said.

“We are planning to raise some funds through perpetual bond issuance and had already got the approval from our Alco (asset-liability committee). We will soon seek board approval for this,” Chief Financial Officer T S Srinivasan told PTI over the weekend.

He, however, didn’t divulge how much the bank is planning to raise. Perpetual bonds are quasi-equity in nature and are considered as part of the tier-I capital.

The bond sale plan is part of its effort to ramp up the tier-I capital, which was below 8 percent at the end of the September quarter.

The public sector lender, which has sought Rs 1,500 crore from the government as capital infusion this financial year to increase its capital adequacy ratio, also said the amount of fund raising by the bank through alternate route will depend on the amount received from the government.

Finance Minister P Chidambaram, who held a meeting with public sector banks chairmen last week, had also said IOB, Bank of Maharashtra and Central Bank of India would need the maximum capital infusion from the government this year.

The government has budgeted Rs 15,000 crore for fund infusion into its banks this fiscal.

“The amount of capital we raise through alternate route will depend on the amount of infusion from the government,” Srinivasan said, adding the bank can look at raising money through QIP route if the market sentiment improves as the share price of the bank is currently trading at a discount to its book value.

Indian Overseas Bank reported a 23 percent drop in net profit to Rs 158.43 crore in the quarter ending September against Rs 207.46 crore reported in the same period a year ago.

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Home, auto loan rates may drop as competition hots up

Home and auto loan seekers might soon be able to borrow at relatively lower rates of interest.

The rising competition amongst public sector banks to shore up their retail portfolio is likely to drive down interest rates on such advances.

Hit hard by slowdown in credit demand from the corporate segment and the rise in stressed assets (from the sector), banks are looking to boost their retail portfolio, which includes home, auto, personal and education loans.

According to Saday Sinha, Vice-President, Equity Research, Kotak Securities, banks will look to bring down interest rates marginally to boost demand and grow their retail book.

State Bank of India, for instance, recently lowered lending rate across the board by cutting the base and prime lending rates by 25 basis points each to 9.75 per cent and 14.50 per cent, respectively. Besides, the bank also lowered its home loan rate to 10 per cent for loans up to Rs 30 lakh and 10.15 per cent for above Rs 30 lakh.

A host of other public sector banks have also lowered interest rates on retail advances as a part of their festival bonanza.

Lower rate of growth

While the average ticket size of retail advances is relatively lower than those extended to the corporate sector, banks seem to be comfortable lending to the retail segment due to the comparatively lower risks.

According to Sinha, by focusing on the retail sector, banks might have to settle for a lower growth rate in advances.

Banks have already revised their growth projections for this year to 15-16 per cent from the 18-20 per cent made during the beginning of this year.

However, banks prefer lending to the sector as the credit cost is lower on such advances due to relatively lower provisioning required for non-performing assets (NPAs).

Provision-coverage ratio refers to the ratio of outstanding provision to gross NPAs; higher provisioning depletes a bank’s bottomline.

“The asset quality in the retail segment has been better than in the agriculture, SME and large corporate segments. Naturally, the provisioning requirement for NPAs will also be lower, thereby helping banks improve their profitability,” Sinha said.

Margins

Currently, retail accounts for 16-20 per cent of public sector banks’ total advances.

Though lowering of interest rates on retail advances might put a pressure on margins, this will be offset by a corresponding reduction in interest rates on deposits, senior bank officials said.

“Fixed and bulk deposit rates are coming down, and so the cost of funds will start easing soon. The reduced yield on retail advances will be more than offset by the lowered cost of funds,” a senior official pointed out.

Moreover, most banks are sitting on surplus cash and it makes sense for them to lend these funds to the retail sector than invest in commercial paper or certificate of deposits which will earn them only 8.5-9 per cent.

Banks earn better margin on loans given to the retail sector. “Given the slowdown and the rise in stressed assets, banks prefer lending to AAA-rated corporates or big NBFCs which are safer. But here the rates are comparatively lower and so margins are squeezed,” said Deepak Narang, Executive Director, United Bank of India.

shobha.roy@thehindu.co.in

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