RBI permits LuLu group chief Yusuffali MA to hold 4.99% stake in Catholic Syrian Bank

The Reserve Bank of India has permitted LuLu group chief Yusuffali MA to hold 4.99% stake in the Thrissur-headquartered Catholic Syrian Bank or CSB. The regulator has also cleared the appointment of Rakesh Bhatia, a senior official of HSBC as managing director and CEO of the bank. Bhatia, who has worked with HSBC Indonesia and Hong Kong has also picked 1% stake in the bank for about Rs8 crore.

The Reserve Bank of India has cleared the appointment of Rakesh Bhatia as MD & CEO and he has picked up one per cent stake in the bank. He would have paid Rs260 to Rs270 per share. The RBI has also permitted transfer of shares to Yusuffali MA, he must have paid more than Bhatia,'' said S Santhanakrishnan, CSB chairman. The bank board will meet on March 30 to formalise the sale of shares to Yusuffali ,'' said Santhanakrishnan.

In February the Kerala-born Yusuffali MA, who heads the $5.5-billion LuLu group that owns the eponymous hypermarket chain in the Middle-East, had sought the central bank's permission to purchase minority stake in the old private lender from Sura Chanrichawla - the Bangkok-based businessman who controls the single largest bloc of shares in the unlisted bank.

The proposed transaction will help Chanrichawla to bring down his holding in CSB to 13%, from 18% he currently owns. The banking regulator had directed Chanrichawla pare his stake to 10% in the bank by March end in line with RBI norms.

The entry of new investor will help the bank diversify its shareholding when RBI finalises the bank licensing rules. Unlike other banks where investors can freely buy up to 5% equity, any change in CSB's shareholding above 1% requires regulatory approval. Chanrichawla are in talks with investors to divest the remaining 3%. They have sought an extention of 30 days from the regulators to pare their stake to 10%,'' said Santhanakrishnan.

In many old private sector banks, the respective communities have played a role in blocking any change in ownership. In case of CSB, the Church has had a say in the matter.

Some years ago, Archdiocese of Thrissur had prevailed upon the bank's local directors, shareholders and well-wishers to drop a plan to amalgamate the bank with Federal, a larger South-based private lender. The Church wants the 93-year-old bank to preserve its identity.

Yusuffali is from Thrissur itself. So we have local flavour with international experience. We will market our products in Middle East. We will open more ATMs in all Lulu supermarkets,'' said Santhanakrishnan. The bank will also open a representative office in Middle East,'' he said.

The Lulu group, which launched its first supermarket in Abu Dhabi during the first Gulf War, expanded after it entered Dubai in 2000. His group is also in the process of setting up India's largest supermarket in Kochi. While no shareholder other than Chanrichawla ever had a significant stake in the bank, in recent years, a few other corporates have bought shares of CSB.

Edelweiss, the financial services group led by Mumbai-based investment banker Rashesh Shah, also owns 4.99% in the bank while a similar stake is held by two groups each in Delhi and Mumbai. And close to 14% is owned by three Hong Kong-based funds.

The bank has just completed its rights issue and raised Rs96 crore. It is planning to raise another Rs200 crore through private placement by June. It will also launch its initial public offering by September where the bank plans to raise funds in the range of Rs300 to Rs400 crore.

'We are looking at inorganic growth opportunities to increase the bank's balancesheet to about Rs7000 to Rs10,000 crore. The bank is reviewing the books of some non banking finance companies for possible acquisition to grow its balancesheet and footprint across the country,'' said Santhanakrishnan.


Source: Economictimes

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Chidambaram opens Bank of Baroda's 100th global branch in Dubai

Finance Minister P Chidambaram has inaugurated the 100th overseas office of state-run Bank of Baroda at Dubai International Finance Centre (DIFC) here.

S S Mundra, Chairman & Managing Director, V H Thatte, General Manager (International Operations) of the bank and other eminent dignitaries were present on the occasion yesterday.

DIFC is an offshore financial centre strategically located between East and West that provides a secure and efficient platform for business and financial institutions to reach out to the emerging markets of the region.

With opening of this branch, the network of service outlets has gone up to 16 in UAE and 21 in GCC countries.

The bank will enjoy distinct advantages with opening of DIFC office which is a category-I offshore branch. The customers will also be immensely benefited as they will have a blend of experience of both on shore & off shore banking facilities.

Chidambaram congratulated the bank on this historic occasion and said that the UAE and India have been enjoying close and friendly relations based on well-integrated cultural ties.

"I am sure Bank of Baroda's branch in DIFC will make a significant contribution to reach the objectives of DIFC and live up to the expectations of the customers. This will further strengthen the Trade Flows and Investments between the two countries," he said.

Speaking on the occasion, Mundra highlighted the long and eventful journey of 105 years of the bank across 25 countries with presence in major financial centres, including New York, London, Brussels, Hong Kong, Singapore and Dubai.

Present in UAE since 1974, the bank offers full fledged banking services through six mainland branches, an offshore branch in DIFC, nine Electronic Banking Service Unit (EBSUs) and 34 ATMs.

Besides UAE, BoB has its presence in Oman (four branches) and Bahrain (one Wholesale Branch) in Gulf Cooperation Council (GCC) countries.

Mundra said that the bank emerged as a key market participant in the global banking landscape.

"Notwithstanding the challenging environment, the Bank has been able to harness the opportunities within the environment and sustain its qualitatively better performance.

"In all its core businesses, the Bank has put strategies in place that seek both to meet near-term goals and to seize opportunities to strengthen its way for the future," he said.


Source: Economictimes

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HDFC Bank cuts base rate by 10 bps

HDFC Bank has decided to cut its base rate by 10 basis points to 9.6 per cent. The reduction in rate will be with effect from March 30.

Base rate is the minimum rate at which banks can lend its borrowers.

The country’s second largest private sector lender is the first bank to reduce its lending rate after the Reserve Bank of India cut its repo rate by 25 bps on March 19.

Post this reduction, HDFC Bank’s base rate will be the lowest among major banks. Among other private banks, ICICI Bank’s base rate is 9.75 per cent since April 2012, while that of Axis Bank is 10 per cent.

Among public sector banks, the country’s largest lender State Bank of India has one of the lowest base rates, at 9.7 per cent.


Source: thehindubusinessline

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After women's bank, Congress moots specialised financial institution on lines of Sidbi

After lauding P Chidambaram's move to set up a state-run women's bank, there is a growing concern in Congress that this may not be enough to fulfill the party's promise to empower rural women with better access to credit.

Senior Congress leaders and sections of the government feel that a specialised financial institution similar to Nabard or Sidbi would be more effective in meeting the party's objective.

In a letter to Chidambaram, Rural Development Minister Jairam Ramesh has suggested an alternative strategy and proposed setting up a "specialised developmental financial institution" on the lines of Sidbi through an act of Parliament. He has suggested that the budget's allocation of 1,000 crore for the women's bank can be used as initial equity for the proposed financial institution, which could then raise up to 3,000 crore through tax-free bonds and concessional loans.

Ramesh, whose ministry spearheads the national rural livelihood mission Aajeevika, has been advocating better linkages between banks and women's self-help groups (SHG) to improve financial inclusion and empowerment of women. He urged the FM to consider his suggestion as "it is being offered to fulfill the commitment made at Jaipur and also allows us to successfully implement Aajeevika, one of the flagship programmes of the government launched by the UPA Chairperson in June 2011".

Complimenting the finance minister on the "speed" with which he has "moved to give effect to a most important commitment made in the budget speech", Ramesh said that a new public sector bank would be "limiting in nature" for the objective.

The rural development minister is of the view that the entire bank network comprising 80,000 branches-23,776 in rural and 22,568 in semi-urban areas-should be leveraged to reach more women self-help groups throughout the country. However, Ramesh argued that a new bank, which relies on creating its own branch network, would not be able to leverage the existing network.

Over the next five years, some 60 lakh groups (roughly 7 crore households) are expected to become part of the national rural livelihood mission with a projected credit requirement of 40,000 crore, and this is set to jump to 100,000 crore a year after that. Ramesh argues that better linkage with banks is required to meet this demand.

The Congress too is keen that an institutional mechanism be put in place to help and improve the capacity of women self-help groups. In its 2009 election manifesto, the Congress had pledged that it would endeavour to ensure "that at least half of the country's rural women population get enrolled as members of SHGs linked with banks and that the SHGs get loans from banks at moderate interest rates. The Jaipur declaration hammered out at the party's brainstorming session, or chintan shivir, amplified on this poll promise.


Source: Economictimes

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Pension scheme for Muthoot employees

Muthoot Finance Ltd has announced the launch of a pension scheme for the group employees under the National Pension System (NPS).

The employees’ contribution to the scheme will be linked with a contribution by the company.

NPS, a social security measure of the Union Government launched by the PFRDA (Pension Fund Regulatory Development Authority), has been approved by the Board of Directors of the Muthoot Group for implementation as an optional scheme for the employees.

The long-term retirement savings plan for the Indian citizens in the 18-60 age groups has the provision for regular pension at the end of the tenure.

While Central and State government employees have to subscribe it mandatorily, it is optional for others. The minimum annual contribution is Rs 6,000, which can be paid at once or in instalments of at least Rs 500.

George Alexander Muthoot, managing director, Muthoot Finance Ltd, said, “Retirement planning is a very important aspect of financial planning wherein one needs to save in order to enjoy the desired post-retirement lifestyle.”

sajeevkumar.v@thehindu.co.in


Source: thehindubusinessline

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HDFC Bank cuts lending rates by 0.1%

HDFC Bank has decided to cut its benchmark lending rates by 0.1 per cent with effect from March 30.

The base rate, or the minimum lending rate, of the country’s second largest private sector bank will become 9.6 per cent from the existing 9.7 per cent, sources said.

At the same time, the benchmark prime lending rate (BPLR) of the bank is expected to be slashed by similar margin to 18.10 per cent.

The new rates would be effective from March 30, sources added.

HDFC Bank has become the first bank to cut lending rate after the RBI cut the short-term lending rate by 0.25 per cent on March 19.


Source: thehindubusinessline

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DHFL Vysya cuts housing loan interest rate, aims for 50% growth in FY14

South-based DHFL Vysya Housing Finance, an associate company of Dewan Housing (DHFL), has decided to reduce the interest rate in 0.2-0.5 per cent range on housing loans from April 1 while aiming for 50 per cent growth during 2013-14.

“We are the first among the HFCs to reduce rate of housing loan by 20 basis points for both existing and new customers under variable interest scheme. But, for the priority sector housing scheme for loan up to Rs 10 lakh there is additional rebate of 30 basis points,” DHFL Vysya Housing managing director R Nambirajan told PTI over phone.

One basis point is equal to 0.01 per cent. So, total benefit will be of 0.5 per cent for the new scheme for housing loans of up to Rs 10 lakh for a period of up to 11 years targeting the priority sector.

Nambirajan said the announcement in the budget for additional rebate of Rs 1,00,000 allowed in the interest on housing loans, in addition to Rs 1,50,000 already allowed from April 1, 2013 will induce boost demand from more the middle income groups in 2013-14.

“We hope to grow by over 50 per cent in 2013-14 against 30 per cent in the current fiscal,” he said.

Our disbursements in this fiscal will stand Rs 345 crore while, the same will jump to Rs 520 crore in the next year, Nambirajan said.


Source: thehindubusinessline

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Canara Bank chief launches inclusive growth drive

R.K. Dubey, chairman and managing director of Canara Bank, has launched the ‘inclusive growth campaign’ of South Malabar Gramin Bank at Malappuram.

SMGB has introduced several innovative products like Sneha Card for freeing villagers from the clutches of money lenders and then general purpose credit card, joint liability group loans, SHG group loans etc on the occasion.

Dubey on the occasion declared open 19 branches of the bank in various parts of the state and 10 ATM’s in seven districts. He also launched a micro insurance scheme for SHG and a money transfer facility for NRI customers in association with Western Union Money Transfer.

K.V. Shaji, Chairman, SMGB said that the total business of the bank has touched Rs 8,184 crore as on March 25 with aggregate deposits reaching Rs 4,078 crore and advances at Rs 4,106 crore.

The bank is having 2.9 lakh basic SB accounts with outstanding balance of Rs 44.11 crore. The CD ratio stood at 100.6 per cent and clientele base reached 26.88 lakhs.

The bank has lent Rs 3,241 crore under priority sector comprising of Rs 478 crore to MSME, Rs 142 crore to micro credit, Rs 339 crore to education and Rs 141 crore to housing.

SMGB also tied up with Coconut Development Board to finance copra driers for farmers. With the launching of the scheme Kera Suraksha Kerala Reksha through Kerasree groups, the bank proposeto finance the farmers societies and individual farmers for production of other value added products, he added.

The bank also introduced a new OD facility SMG Karshaka Mitra to farmers for purpose other than crop protection to meet their emergent needs,

sajeevkumar.v@thehindu.co.in


Source: thehindubusinessline

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RBI notifies new rates for small saving schemes

The Reserve Bank of India (RBI) today notified 0.1 per cent reduction each in the interest rates on Public Provident Fund (PPF) and Senior Citizen Savings Scheme (SCSS) to be effective from fiscal beginning April 1, 2013.

The rate of interest on PPF has been lowered from 8.8 per cent to 8.7 per cent with effect from April 1, 2013, the RBI said in a notification.

The rate of interest on 5 year SCSS has been reduced to 9.2 per cent from 9.3 per cent for entire 2013-14 fiscal, it said.

The RBI said the new rates will come into force from April 1, 2013 following the government’s memorandum on March 25, 2013 which advised rate of interest on various small savings schemes for the financial year 2013-14.

The RBI said banks should bring this content to the notice of their branches operating PPF and SCSS accounts.

It also said the new rates should also be displayed on the notice boards of their branches for information of the PPF and SCSS subscribers.

Following the government’s decision earlier this week, millions of small savers and PPF account holders will earn less on their post office savings schemes.

However, the government kept unchanged rates on savings on deposit schemes and on fixed deposit of up to one year run by post offices at 4 per cent and 8.2 per cent respectively.

Further, post office Monthly Income Schemes (MIS) of 5 year maturity will earn an interest of 8.4 per cent.

The National Savings Certificates (NSC) having maturity of five and 10 years will attract 8.5 per cent and 8.8 per cent interest respectively, down 0.10 per cent each.

The revision in interest rates follows a decision taken by the government last year to link small savings returns with market rate.

The decision is in line with the recommendations of Shyamala Gopinath Committee, which had suggested that returns should be in sync with market rates determined by the returns offered by other securities.


Source: thehindubusinessline

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Citigroup told to improve money laundering controls

The Federal Reserve has ordered Citigroup to strengthen its controls against money-laundering, pointing to problems in subsidiaries including the US unit of Citi’s Mexican bank, Banamex.

In a consent order released by the Fed and signed by the bank, Citigroup pledged to take extensive actions to better comply with the US Bank Secrecy Act on preventing money-laundering.

The consent order—an undertaking by Citi to comply with various steps laid out by the Fed—did not provide any details on what problems were unearthed by regulators.

But it said Citigroup “lacked effective systems of governance and internal controls to adequately oversee the activities” of the subsidiaries with respect to the BSA and anti-money laundering rules.

The apparent problems involved Citigroup’s key operating subsidiary Citibank, and Banamex USA, the US arm of leading Mexican bank Banco Nacional de Mexico, also controlled by Citigroup.

They also involved other group subsidiaries in international banking.

The consent order lays out a detailed schedule of actions Citigroup and the subsidiaries must take to tighten its compliance, and reporting requirements on those actions.

The order came without any prior testimony or legal hearings or findings, and said it did not constitute an admission or denial by Citigroup of any allegation that had come before the Fed.


Source: thehindubusinessline

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Karur Vysya Bank will have new operation model

Banks need new ideas to win in today’s marketplace. While technological interventions have helped the common man perform many banking and investment transactions from home, we still see a crowd at select branches .

Customers visit the bank to remit cash, operate the locker, avail jewel loan and to just catch up with a banker friend.

“While innovation and technology adoption have helped capture the market initially, continuous improvement in branch operation model would help improve the in-branch experience,” says the Chief Executive of Karur Vysya Bank, K. Venkataraman.

And this 97-year young institution is aiming to focus on improving the in-branch experience this year by changing the layout and sprucing up the interiorswherever it is required.

In the first phase of this exercise, the bank plans to change the layout in as many as 30 branches by end-April.

“Our plan is to change the operation model in 70 branches across the country by the end of this year. We will concentrate on the branches where the customer foot print is more,” said Venkataraman. The bank has embarked on this exercise based on a study made by the Boston Consulting Group.

“We asked them to do a study of other banks and evolve a model that will suit KVB,’ said Venkataraman, who, prior to joining this Karur-headquartered institution, served as the Managing Director and CEO of SBI Global Factors.

“Our vision is to delight the customer continually by blending tradition with technology, improve in-branch experience and serve customers better,” he said.

KVB was set up in 1916 by the late M. A. Venkatarama Chettiar and late Athi Krishna Chettiar to inculcate the habit of savings and provide financial assistance to traders and small agriculturists in and around Karur, a small textile hub in Tamil Nadu.

He said even today, traders continue to patronise this bank. “We are gearing up to meet the requirements of young tech-savvy customers, while continuing to delight our patrons by blending technology and tradition.”


Source: thehindubusinessline

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South Indian Bank achieves Rs 75,000-cr biz target

South Indian Bank has achieved the business target of Rs 75,000 crore as envisaged in Vision Document 2013.

V.A. Joseph, Managing Director and CEO, said the achievement is the culmination of the vision set in 2008. The total business of the bank in that year was Rs 25,000 crore.

The bank had set a goal to achieve a total business of Rs 75,000 crore, network of 750 branches, 750 ATMs and 7,500 employees by 2013.

“What makes this achievement special is the fact that SIB could achieve a total business of Rs 75,000 crore, 750 branches and 800 ATMs with just 6,400 employees. This achievement is testimony to the increased productivity of each SIB employee,” he added.

The average age of employees has been reduced to 35, compared to 49 in 2008. The bank has also increased its national presence with new branches in Assam, Tripura, Meghalaya, Nagaland, Himachal Pradesh and Jammu and Kashmir.

By 2014, the bank plans to achieve a total business of Rs 1 lakh crore with 800 branches and 1,000 ATMs, he added.

sajeevkumar.v@thehindu.co.in


Source: thehindubusinessline

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Exim Bank raises A$200 million through overseas bond sales

Export-Import Bank of India (Exim Bank) has raised A$200 million through an offshore-debt offering that would mature in April 2018.

This is significant as it is the first Australian dollar-denominated bond to be issued by an Indian issuer.

The unsecured Notes, which will carry an annual coupon of 5.76 per cent, are being issued by Exim Bank’s London Branch and will be listed at the Singapore stock exchange.

They are being issued as part of the $6-billion medium term note programme of the bank. Moody’s Investors Service had assigned a Baa3 rating for the unsecured Notes.

Swap agreement

State-owned Exim Bank has entered into a swap agreement to convert the Australian dollars, mobilised through this bond issue, into US dollars, it is learnt.

“The success of this transaction bodes well for other Indian issuers as it will open doors and provide them an opportunity to tap Australian dollar market in future,” David Rasquinha, Executive Director, Exim Bank, told Business Line.

Exim Bank had sought to raise only A$100 million through the debt offering.

But given the strong response, Exim Bank decided to retain A$200 million, Rasquinha said. Exim Bank decided to look at Aussie dollars as part of its ongoing efforts to go in for diversification of currencies as well as investor base.

In terms of categories, the debt offering saw participation from about 50 accounts represented by banks, pension and insurance funds, mutual funds besides retail (private banks).

Investors were mainly from Singapore, Hongkong, and European countries, including Switzerland.

Deutsche Bank India and ANZ Banking Corp were lead managers for the transaction.

Sunil Agarwal, Managing Director and Head of Institutional Clients Group, Deutsche Bank India, said there is lot of interest for India related credit.

The Exim Bank transaction will open up the Aussie dollar denominated market for other Indian issuers.

It will facilitate more Indian issuers to tap that market, Agarwal said.

Indian issuers had until few years back been issuing only US dollar denominated bonds in the overseas markets.

But in the last 2-3 years, they have diversified the currencies by issuing bonds in Euros, Swiss Francs, Singapore dollars and now in Australian Dollars, market observers pointed out.

srivats.kr@thehindu.co.in


Source: thehindubusinessline

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Near to Central Drug Research Institute (New Campus),Lucknow Aliganj 9690000115

State Bank of India has started a new facility for the online booking of tickets for puja and donations for Shri Kashinath temple here.

“The money from online booking and donations will directly go to the temple’s trust. We will also provide the temple with modern banking facilities,” said Sudhir Dubey, SBI Chief General Manager, Lucknow branch, after inaugurating the facility here.

A similar facility was started for the Somnath temple earlier, which led to an increase of 40 per cent in the temple’s earnings, he said.

At present, only SBI account holders can avail themselves of this facility, said Amit Jhingran, SBI Assistant General Manager.

The facility will be later extended to people with accounts in different banks too, he said.


Source: thehindubusinessline

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Moody's downgrades OBC, Syndicate Bank ratings; outlook stable

Ratings agency Moody's today downgraded the ratings of Syndicate Bank and Oriental Bank of Commerce (OBC), but said the outlook is stable.

The global local currency deposit rating of both the PSU bank has been lowered to Baa3/P-3 from Baa2/P-2.

Instruments rated 'Baa' are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics

"The outlook on the bank deposit rating is stable," Moody's said for both lenders.

It further downgraded both the banks standalone ratings to 'D/ba2', which reflects its weak position when compared with its domestic and global peers, particularly in relation to asset quality.

"Syndicate Bank's weak asset quality and lack of income diversity is a situation which if prolonged, may pressure the bank's ability to generate internal capital in order to meet required levels of capital," Moody's Investor Services said in a statement.

It further said, "OBC's weak capacity to generate internal capital makes it reliant on government infusions to meet its capital requirements".


Source: Economictimes

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Interest rate on small savings schemes reduced

The Finance Ministry has cut interest rate on PPF (Public Provident Fund) by 0.1 per cent to 8.7 per cent.

It has also cut the interest rate on five-year NSC (National Savings Certificate) to 8.5 per cent from 8.6 per cent and on 10-year NSC to 8.8 per cent from 8.9 per cent.

The Ministry has cut the interest rate on five-year postal recurring deposits to 8.3 per cent but has kept the savings deposit rate unchanged at 4 per cent.


Source: thehindubusinessline

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RBI offices, banks to work through March 29-31

RBI offices conducting government business and designated branches of banks will remain open on March 29, 30 and 31 to facilitate tax collection.

March 29 is holiday on account on Good Friday.

“With a view to providing greater convenience to the tax payers, it has been decided that all designated branches of agency banks and RBI offices conducting Government business will keep their counters open on March 29, 30 and 31, 2013 to accept Government taxes,” the RBI said in a statement.

March 31 is the last day of the financial year 2012-13.

The central bank also urged the tax payers to remit taxes well before the last date to avoid last minute rush.

Facility for payment of taxes online and through select ATMs is also available, the RBI added.

The offices Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) too will remain open on March 30 and 31 for tax collection.

The CBEC offices will also remain open on March 29.

Meanwhile, SBI said its branches will remain open during normal business hours on Friday and Saturday and till midnight on March 31.


Source: thehindubusinessline

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YES Bank signs up as official partner of IPL

YES Bank today signed up as the official partner of the Indian Premier League (IPL) in the financial services category.

The mid-sized private sector lender is the latest addition to IPL’s partner list. Earlier, Pepsi signed up as the official title sponsor, and Vodafone renewed its association with the tournament.

Rana Kapoor, Managing Director & CEO, YES Bank said, “We are confident that YES Bank’s association with IPL for 5 years will facilitate our brand recognition, and further propel our pan India retail banking franchise. We look forward to deepen our relationship with our stakeholders through various exciting and creative initiatives around the IPL in our retail branch serving areas across India.”

This year, the IPL will comprise a total of 76 matches over a period of seven weeks from April 3 to May 26.

The inaugural edition of the IPL was played in 2008. The 2013 season will feature nine teams, including a new franchise – Sunrisers Hyderabad.

Beena.parmar@thehindu.co.in


Source: thehindubusinessline

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Lending rates to remain high in near term: Bankers

Borrowers troubled by elevated interest rates will have to wait for a bit longer for relief as bankers have virtually ruled out any immediate cut in the lending rates, citing high cost of funds.

The stance comes even after the Reserve Bank delivered two successive rate cuts of a cumulative 0.50 per cent this year.

“The basic thing that is required - the cost of deposits - is still in the higher side,” Union Bank of India Chairman and Managing Director D Sarkar said, explaining his bank’s inability to cut rates now.

Pratip Choudhary, the chairman of SBI, also said it is impossible for his bank to cut rates in the near term.

Many state-run banks, which generally rely on the costly bulk deposits to shore up their deposit bases unlike their private sector counterpart, which mop up the low-cost savings and current account deposits, have been ratcheting up their term deposit rates for the past few months.

The poor deposit collection problems for the state-run banks were compounded with finance ministry’s directive last year asking them to bring down their bulk deposit ratio to 15 per cent of their total deposits by March 31.

In a move that some experts saw as a sign of a weakness in deposit mobilisation, SBI upped its deposit rate offering by 0.25 per cent last month.

Deposits have grown only about 13 per cent during the fiscal, while credit has grown much faster at close to 17 per cent. In the absence of sufficient deposits, the credit deposit ratios for the banks go up, according to the latest RBI data.

The interest rate scenario has been at an elevated level for over two years now, after the RBI went on a 13 consecutive rate hikes between March 2010 and October 2011 with a view to fight double-digit inflation.


Source: thehindubusinessline

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