SBI installs cash deposit machine

State Bank of India inaugurated a cash deposit machine at its Hyderabad main branch premises.

The machine, which will be available for 24 hours, can be used for cash deposits of maximum 200 pieces up to Rs 49,900 per transaction.

It will accept only denominations of Rs 1,000, 500 and 100. Apart from this, customers can avail services such as balance enquiry, mini statement and pin change facility. This is the seventh machine in Hyderabad city.

Read more »

IRDA to come out with norms for new products soon

The Insurance Regulatory and Development Authority is working with the insurance industry to bring out a new product design template that will see the emergence of new products in the market.

The insurance watchdog is in the advanced stages of preparing the draft guidelines for new products, both in the life and non-life segments.

“We will come out with the new guidelines by the month-end,” IRDA Chairman J. Harinarayan, told media persons on the sidelines of an event here today.

The new guidelines will specify things such as quantum of guaranteed death benefit and, if these are in the pension segment, the quantum of annuity.

“The new products should cater to different segments of people and the insurers have to take into account the new expectations of the customers,” he said.

Insurance markets

He cited the example of the insurance markets in Europe and America, where the products changed contours over the years, with pension products on the rise and endowment products on the decline.

“Insurance products in Europe in the 1980s are no longer in the market now. We should also head in this direction with more savings oriented products with smaller tenure,” he pointed out.

New regulatory framework

The insurance regulator is also in the process of finalising new guidelines and regulations for micro-insurance, health insurance and bancassurance segments.

“While the new regulatory framework for the health insurance sector will be ready by this month-end, the new bancassurance guidelines will be brought out in the later part of January 2013,” Hari Narayana said.

In response to a question, he said the Indian non-life insurance sector was growing at a healthy clip of about 20 per cent.

The life insurance sector, which has seen a decline in growth in the last few years, could land in positive territory this fiscal, with a marginal growth, he said.

amitmitra@thehindu.co.in

Read more »

World Bank arm IFC open to investing in Religare’s proposed banking venture

The International Finance Corporation (IFC) has indicated its willingness to invest in Religare’s proposed banking entity. IFC is an arm of the World Bank which invests and lends to the private sector.

IFC has invested $75 million (around Rs 405 crore) in Religare through compulsorily convertible debentures. This transaction has been completed. Once all the debentures are fully converted into equity, IFC will have 7.9 per cent equity making it the single largest institutional investor in Religare. This is the largest investment by IFC in financial sector in entire South Asia.

Religare, in its notice to BSE last month, informed that 1,000 equity shares of face value of Rs 10 each for cash at a price of Rs 315.85/per equity share allotted against 40,48,354 15 per cent compulsory convertible debentures of face value of Rs 1000/each, for cash at par, on a preferential allotment basis to IFC.

Religare is one of the few corporates interested in applying for a new banking licence. When asked about any plan to invest in the new venture, IFC’s Director (Financial Market-Asia) Serge Devieux said, “We will be open to do so. We will decide at the time of setting up.” However, it will depend upon Religare’s willingness, he added.

On his part, Group CEO of Religare Enterprises Sachindra Nath said any decision will be taken later. But he said that IFC’s focus on inclusive growth and financial inclusion will be keys. Religare has been identified by IFC as ‘Partner in Development’ to work collaboratively towards co-developing relevant financial products and services for individuals and SMEs in India.

IFC intends to invest approximately $1 billion in India during year 2012-13 starting (July-June). It has already invested nearly $400 million. Apart from Religare, it has invested in Inox and Power Grid

Shishir.Sinha@thehindu.co.in

Read more »

Corp Bank SME loan centre in Jaipur

Ajai Kumar, Chairman and Managing Director of Corporation Bank, opened the bank’s 16th SME loan centre in Jaipur recently.

A bank release said here on Thursday that the other SME (small and medium enterprises) loan centres are located at Delhi, Hyderabad, Bangalore, Chennai, Coimbatore, Pune, Mumbai, Vadodara, Kolkata, Mangalore, Ludhiana, Chandigarh, Ahmedabad, Kochi and Tiruchi.

The bank has launched exclusive SME loan centres in various cities across the country to cater to the SME segment in a big way, the release said.

Read more »

IndusInd Bank to allot equity shares to QIBs

IndusInd Bank Ltd said the finance committee of its Board of Directors has approved the allotment of 5.21 crore equity shares at a price of Rs 384 per equity share (including a premium of Rs 374 per equity share) aggregating to Rs 2,000.63 crore to qualified institutional buyers, the private sector bank said in a notice to the BSE.

The private placement of equity shares is at a 9.16 per cent discount to Wednesday’s closing price of Rs 419.20 per share.

Read more »

Govt may infuse Rs 4,000-cr capital into SBI this fiscal

The Government is expected to infuse Rs 4,000 crore into State Bank of India this fiscal. This will boost the bank’s capital adequacy ratio to over 13 per cent, according to a top bank official.

“The mode (of infusing capital) is being discussed and we have given various options. It is the government’s call to decide on how to infuse that equity,” said Diwakar Gupta, Managing Director, SBI.

The country’s largest bank’s has been awaiting the Government’s nod for the rights issue for more than two years.

When asked if the rights issue would be appropriate in the current volatile market conditions, Gupta emphasised that issue size is only Rs 4,000 crore. On a rights basis, it would work out to about 1 share for every 19 or 20 shares.

“So, it is a very small issue…But the rights issue is a very fair way of offering capital. There are pros and cons of every mode (of capital raising) and that is being evaluated,” Gupta said.

The Rs 4,000-crore capital infusion is adequate for the bank and will take its capital base above 13 per cent, Gupta added.

As on September 30, 2012, SBI’s capital adequacy ratio stood at 12.63 per cent, against 11.40 per cent in the year-ago period. CAR is a key indicator of a bank’s financial strength expressed as a ratio of capital to risk-weighted assets.

The government earlier this week had said it would finalise the capital infusion plans for public sector banks this week. The budget has earmarked nearly Rs 15,800 crore for shoring up the core capital base of the state-run lenders hit by bad loans and poor asset growth.

On the revival of the economic conditions, Gupta said the effect of the reforms announced will take time to impact the real economy. “We see some revival in 2-3 months,” Gupta added.

Deposit Cartelisation

Gupta rubbished allegations that big banks had cartelised by keeping the interest rate on savings bank deposit rates steady at 4 per cent despite the Reserve Bank of India deregulating this rate.

The SBI MD said the decision to leave the SB rate unchanged was a purely commercial decision and did not amount to cartelisation.

Gupta said he has been reading reports over the past few days about a possible action by the competition watchdog on banks for allegedly acting as a cartel by not increasing the rate on saving deposits.

beena.parmar@thehindu.co.in

Read more »

ICICI Bank launches flexible recurring deposit for savings account customers

ICICI Bank has launched an online flexible recurring deposit product that will give its savings account customers the flexibility to choose when and how much to save to meet their goals.

Unlike a traditional recurring deposit, the flexible recurring deposit will allow customers to save varying amounts of money at a time of their choice.

The bank said customers could create several goals and track their progress on an easy-to-use online interface.

Customers could also choose to share their wishes on Facebook and let their friends and family be a part of their dreams by contributing to the customer’s account from any bank account, said a bank statement.

To get started with ‘iWish’, customers have to log on to their accounts at www.icicibank.com using their Internet banking user ID and password and visit the iWish page. Customers can start saving with a minimum of Rs 500 for a minimum duration of six months.

ICICI Bank has developed this product in collaboration with the US-based Social Money.

Read more »

Andhra Bank cuts rates on educational loans

Andhra Bank has announced reduction in interest rates for fresh education loans.

For educational loans between Rs 4 lakh and Rs 7.5 lakh, the interest rate has been reduced from 14.25 per cent to 13.25 per cent. Loans over Rs 7.5 lakh will carry a lower rate of 12 per cent, down from the 13.25 per cent, the bank said in a statement.

For girl students, a further concession of 0.50 per cent has been decided.

Also, to encourage meritorious students, an interest concession of 0.50 per cent has been introduced on education loans—this is for students securing 90 per cent or above at 10th level.

In respect of loans for pursuing PG courses, a similar interest rebate of 0.50 per cent is allowed to students who secured 80 per cent or avove at degree/ graduation level examination, the statement added.

amitmitra@thehindu.co.in

Read more »

Citigroup to slash 11,000 jobs worldwide

In a major restructuring exercise, global banking giant Citigroup today announced that it will cut 11,000 jobs worldwide to save nearly $1.1 billion in expenses annually from 2014.

The repositioning exercise comes two months after bank’s former CEO Vikram Pandit left the company unceremoniously

The restructuring would result in a “reduction of more than 11,000 positions,” a statement by Citi said, adding that “these actions are logical next steps in Citi’s transformation.”

“While we are committed to—— and our strategy continues to leverage — our unparallelled global network and footprint, we have identified areas and products where our scale does not provide for meaningful returns. And we will further increase our operating efficiency by reducing excess capacity and expenses, whether they centre on technology, real estate or simplifying our operations,” Citi’s Chief Executive Officer Michael Corbat said.

Citi said the repositioning would generate $900 million of expense savings in 2013.

The annual savings will exceed $1.1 billion annually beginning in 2014, it added.

Citi also expects the repositioning actions to have a negative impact on annual revenues of less than $300 million.

Read more »

RBI, Bank of Japan ink currency swap pact to boost bilateral trade

The Reserve Bank of India (RBI) and the Bank of Japan (BoJ) have concluded a three-year Bilateral Swap Arrangement (BSA) between India and Japan.

The BSA, which was signed by RBI Governor D. Subbarao and BoJ Governor Masaaki Shirakawa, has become effective as of December 4, 2012.

The arrangement aims at addressing short-term liquidity difficulties and supplementing the existing international financial arrangements, as one of the efforts in strengthening mutual cooperation between Japan and India.

The BSA will enable both countries to swap their local currencies (i.e., either Japanese yen or Indian rupee) against US dollar for an amount up to $15 billion.

In the past, both the countries had a similar arrangement for an amount up to $3 billion for a period of three years from June 2008 to June 2011.

The enhancement of the BSA will further strengthen economic and financial cooperation between the two countries and accordingly contribute to ensuring financial market stability, said an RBI statement.

Read more »

Oriental Bank hikes certain deposit rates

Oriental Bank of Commerce has hiked interest rates on certain term deposits with short maturities. For term deposits of less than Rs 15 lakhs, interest rates have been revised upwards from 7.5 percent to 8 percent in respect of maturity period of 91 days to 179 days. In the same maturity period, interest rates have been hiked from 8 percent to 8.25 percent for term deposits of Rs 15 lakh and above but less than Rs 1 crore. For term deposits of Rs 1 crore and above but less than Rs 5 crore, the interest rate has been hiked from 5 percent to 7 percent for maturity period of 7 days to 30 days. The interest rate on similar deposits with maturity of 31 days to 90 days stands hiked to 8 percent from 7 percent. Similar rate increases have been effected for term deposits of Rs 5 crore and above for these two maturities.

Read more »

Dena Bank waives off processing fee for home, car loans

After most public sector banks, now Dena Bank has waived off the entire processing fee for housing and car loans.

It has also waived off half of the processing fee for personal and gold loans. The offer is valid up to December 31, the bank said in a statement.

The public sector lender has also extended 50 per cent concession in processing fee for its Dena Trade Finance Scheme under which credit facilities up to Rs 2 crore are extended within the eligibility criteria of the scheme.

In addition, a scheme for doctors with credit facilities up to Rs 2 crore is extended for setting up clinic and purchasing medical equipment.

With effect from September 4, 2012, the rate of interest on housing loans range between 10.45-11 per cent, car loans from 11-12 per cent, education loans at 12 per cent and personal loans from 13-14 per cent.

Beena.parmar@thehindu.co.in

Read more »

IRDA permits insurance cos use credit default swap

Insurance Regulatory and Development Authority (IRDA) has permitted the use of Credit Default Swap (CDS), a derivative instrument that offers credit protection, for insurance companies to hedge their risk.

Insurers are allowed only as users (protection buyers) of CDS subject to condition, IRDA said in a final guideline for investment in CDS.

The CDS is a guarantee in which the buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product.

By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap.

The permission by IRDA comes almost a year after RBI allowed banks and financial institutions to deal with such instruments.

The guidelines said: “The CDS are permitted as a hedged to manage the credit risk covering the credit event. The category of the investment will not change pursuant to buying CDS on such underlying.”

Insurers are allowed to use CDS on listed corporate bonds as underlying. Companies can, however, buy unlisted rated bonds of infrastructure companies. Also, insurers can invest in unlisted and unrated bonds issued by the special purpose vehicles set up by the infrastructure companies.

It has disallowed companies from any CDS transaction between entities belonging to a promoter group. Insurers cannot be purchased on short-term instruments with maturity up to one year such as commercial papers, certificates of deposit, non-convertible debentures.

Besides, the regulator directed that “all CDS transactions shall be reported to the investment committee, audit committee and to the board on a quarterly periodicity”.

It also said the board of the insurance companies should amend its investment policy and put in place necessary risk management framework covering including type of assets on which protect can be bought, valuation norms and reporting and monitoring norms.

Recently, market regulator SEBI allowed mutual funds to participate in CDS transactions. SEBI said mutual funds can participate in the CDS market for hedging their debt risks, but can not enter into short positions in the CDS contracts.

In April, the Reserve Bank had allowed all financial institutions to participate in CDS market. All India financial institutions, namely, EXIM Bank, NABARD, NHB and SIDBI were allowed to participate in the CDS market as user to hedge the underlying credit risk in corporate bonds in their portfolio, RBI had then said.

Read more »

India Ratings affirms ING Vysya at ‘IND AA-’

India Ratings has affirmed ING Vysya Bank’s Long-Term Issuer rating at ‘IND AA-’ with a stable outlook on adequate capital position, improving asset quality and moderate funding profile.

“ING Vysya’s capitalisation is currently adequate. However, the bank will need to raise capital regularly to support its above-system-average growth targets. The bank raised Rs 970 crore of equity capital in FY’12 through a qualified institutional placement, in which its parent, ING Vysya NV, participated to the extent of its 44 per cent shareholding,” the ratings agency said in a statement.

The rating also factors in the bank’s relatively weak (although improving) profitability and relatively high proportion of loans to the traditionally volatile SME sector, the agency said.

Asset quality

Asset quality has improved over the two years ending first half of fiscal 2013. Gross non-performing assets (NPA) ratio declined to 1.9 per cent at end-H1FY’13, aided by lower NPA additions (FY’12: 0.7 per cent of average loans; FY’11: 1.1 per cent) and fewer slippages from the low stock of restructured loans (H1FY’13: restructured were 1.4 per cent of total loans).

According to the agency, given the moderating economic environment and the bank’s focus on growing its SME portfolio, asset quality could come under pressure in the near-to-medium term.

The bank’s high provision coverage ratio (FY’12: 91%) would help cushion any immediate spikes in delinquencies especially from its SME portfolio.

A positive rating action could result from a significant and sustained improvement in the bank’s profitability and franchise, while maintaining stable asset quality and adequate capital ratios.

A negative rating action could result from any weakening linkage with the parent, including lack of timely infusion of capital or access to risk management systems, together with a significant deterioration in ING Vysya’s capitalisation.

Beena.parmar@thehindu.co.in

Read more »