Put loan collaterals through periodic legal audit, RBI tells banks

To contain fraud, the Reserve Bank of India on Friday asked banks to subject the title deeds and other documents in respect of all credit exposures of Rs 5 crore and above to periodic legal audit. They should also re-verify the title deeds with relevant authorities as part of regular audit exercise till the loan stands fully repaid.

Bankers say such a directive may have been prompted by rising bad loans and the necessity to ensure that collateral are sufficient to make recoveries.

The central bank said banks should furnish a review note to their board/audit committee of the board at quarterly intervals on an ongoing basis.

The review note should contain information in respect of legal audits covering aspects such as the number of loan accounts due for legal audit for the quarter, how many accounts covered, list of deficiencies observed by the auditors, and steps taken to rectify the deficiencies.

The note should also mention the number of accounts in which the rectification could not take place, course of action to safeguard the interest of bank in such cases, action taken on issues pending from earlier quarters.

ramkumar.k@thehindu.co.in

Source: thehindubusinessline

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4 killed in fire at IndusInd Bank office in Mumbai

Four IndusInd Bank employees lost their lives in a late night fire at the Andheri back-office of the bank. The fire broke out at around 11.15 p.m. on Thursday.

The deceased have been identified as Atanu Laha, 35, Rakesh Shirkar, 24, Rohan Katkare, 25, and Sandeep Naik, 25. Eight others were injured.

Since it was the central processing unit of the bank, there were employees working late into night.

According to fire department officials, the fire took place because of a short-circuit.

“A fire broke out at Induslnd back office in Andheri (East) at 11.15 p.m. Four Induslnd Bank employees lost their lives and a few have been injured,” IndusInd Bank said in a statement to the BSE.

The injured are being treated at the Seven Hills Hospital in the city. Three of them are being treated for injuries at the Intensive Care Unit and believed to be stable.

“Thirty-five people were brought to the hospital on Thursday night. Four of them were brought dead. Eight are being treated for different injuries and trauma and the rest 22 were discharged yesterday after preliminary examination,” Shweta Tyagi, a doctor at the Seven Hills Hospital, said.

satyanarayan.iyer@thehindu.co.in

Source: thehindubusinessline

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Vijaya Bank FCNR rates

Vijaya Bank has revised interest rates on FCNR (B) deposits with effect from June 1. The revised interest rates are as follows: For one year to less than two years period – £2.88 per cent, $2.69 per cent, €2.39 per cent, AU$5.34 per cent, CAD 3.79 per cent.

For two years to less than three years period - £2.68 per cent, $2.45 per cent, €2.43 per cent, AU$4.74 per cent, CAD 3.43 per cent. For three years to less than four years period - £3.78 per cent, $3.64 per cent, €3.57 per cent, AU$5.93 per cent, CAD 4.55 per cent. For four years to less than five years - £3.96 per cent, $3.90 per cent, €3.74 per cent, AU$6.16 per cent, CAD 4.70 per cent.

For five year period only - £4.15 per cent, $4.16 per cent, €3.93 per cent, AU$6.32 per cent, CAD 4.85 per cent.

Source: thehindubusinessline

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OBC opens new branch in Chennai

Oriental Bank of Commerce has launched a new branch in Chennai, taking the total number of its branches in the country to 2013. With this new chapter, the number of branches in the region (Tamil Nadu and Puducherry) goes up to 51. According to a press release, the bank intends to open another 10 branches in this region during the current financial year. 

It has over 1,500 ATMs across cities. Total business of the bank in 2012-13 crossed Rs 3-lakh crore, and the operating profit of the bank for the year was at Rs 3,691 crore. Net profit stood at Rs 1,328 crore. The bank hopes to more than double its business in the next five years.

Source: thehindubusinessline

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Associate banks merger can start by September: SBI chief

State Bank of India (SBI) today said the proposed merger of its five associate banks with itself could start by September after a high-powered committee submits its report on the same.

The high-powered committee headed by SBI Managing Director, S Vishwanathan would furnish its report by July-August, and later based on the report the merger process could start by September, SBI Chairman Pratip Choudhuri said here.

State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, and State Bank of Travancore would be the target associate banks for merger, Chaudhuri said.

Out of five associate banks, three are listed, and two are in the direct ownership of SBI, he said, adding “we would take non-discriminatory way to decide and choose merger of any of the five associate banks. It would be a long process that would take employees’ confidence and participation”.

SBI’s capital was not so strong earlier, but with the March’s balance sheet the capital became very strong and for merger there should be a cash of Rs 1,000-3000 crore, he said.

SBI did first ever amalgamation of its associate State Bank of Saurashtra in 2008 followed by State Bank of Indore in August 2010.

Source: thehindubusinessline

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Canara Bank bags BMA award

Canara Bank has bagged the Best Bank of the Year Award instituted by The Bangalore Management Association (BMA).

V S Krishna Kumar, Executive Director of Canara Bank received the award at a simple function held at Bangalore on June 6.

Kumar received the award from K J George, Karnataka Home Minister, and Justice R V Raveendran, Former Judge, Supreme Court of India.

Source: thehindubusinessline

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New RBI norms on restructured loans positive for most banks: Moody’s

The Reserve Bank of India’s new guidelines on higher provisioning for restructured loans is credit positive for India’s banks, global credit rating agency Moody’s Investors Service has said.

The RBI had in end May issued new guidelines on restructuring advances by banks and financial institutions, which require banks to raise their provisions on restructured loans to 5 per cent from 2.75 per cent currently.

The higher provisioning is credit positive for India’s banks because it increases their loss-absorption buffers and incentivises them to enhance their underwriting standards to reduce credit costs, Moody’s said in a note to its research clients.

In Moody’s view, the authorities’ focus on provisioning guidelines for restructured loans reflects a more proactive management of the asset cycle.

Indian banks’ restructured loans have increased in the past two years and 15-25 per cent of restructured loans eventually slip into non-performing loan classification within 12 months of restructuring.

The RBI began applying the provisioning guidance on new restructured loans on June 1, but has opted to phase in implementation on existing restructured loans.

“We expect the new guidance to affect most public sector banks, particularly those with high levels of restructured loans”, Moody’s said. These banks include Indian Overseas Bank and Central Bank of India.

Private sector banks will be less affected.

“While we expect higher provisions to pressure banks’ profitability in coming quarters, we expect the banks’ strong loss-absorption powers and balance sheets to more than offset any pressure on profitability”

The RBI’s increased emphasis on restructured loans is also seen in the more stringent treatment of these loans in upcoming revisions to the loan classification system.

srivats.kr@thehindu.co.in

Source: thehindubusinessline

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Some new bank licences to be issued before March 2014

Finance Minister P Chidambaram today expressed hope that some new bank licences would be issued before March next year.

“RBI has released guidelines for licensing of new banks and I hope that some banks will be licensed before the end of the financial year,” he said at the AGM of Indian Banks’ Association here.

The entry of new banks, rapid expansion in number of branches and a more spatial distribution of location of banks will all lead to greater financial inclusion, he said.

“We need more banks, we need more branches. We need them in the small towns, in the block headquarters, and the backward regions of the country especially the North Eastern states and the hill states,” he said.

He also expressed hope that record number of bank branches will be opened during this fiscal.

“I am happy that more branches will be opened in 2013-14 than ever before. Banking access to the people has improved.

In 2010-11, each branch served 13,300, in 2012-13 this number came down to 12,300,” he said.

RBI issued comprehensive guidelines for new bank licences in February this year, fixing the last date for filing application by interested entities by July 1.

Earlier this week, the central bank issued clarifications making it more stringent for getting new bank licence even as it allowed the aspirants to have the holding and capital structure of the bank-holding company in place within 18 months of getting the in-principle nod, instead of 12 months prescribed earlier.

RBI also said aspirants from the NFBC/insurance space will have to get the go-ahead from their concerned regulators like SEBI and IRDA and that their views on the same will prevail over the RBI’s own views on the proposed non-operative financial holding company (NOFHC).

On the holding and capital structure of NOFHC, the central bank said it is not necessary that individual along with his related parties have shareholding in the holding company.

RBI to follow tough selection criteria

RBI, in clarifications, also said it will not be possible for it to issue licences to all eligible applicants, making it tougher for aspirants to enter into the banking fray.

RBI will look for very high quality applications to launch new banks, it said.

Replying to a specific query on the lack of level-playing due to the insistence on having 25 per cent presence in rural areas, RBI said all the incremental branches by the existing players are opened in the same proportion.

India has 26 public sector banks, 22 private sector banks and 56 regional rural banks.

Ten banks were licensed on the basis of guidelines issued in January 1993. The guidelines were revised in January 2001 based on the experience gained from the functioning of these banks, and fresh applications were invited.

Of the 10 licences issued in 1993, four banks merged with other lenders over a period of time. Times Bank merged with HDFC Bank, while Global Trust Bank was amalgamated with the state-owned Oriental Bank of Commerce.

Centurion Bank took over Bank of Punjab to become Centurion Bank of Punjab, which merged with HDFC Bank in 2008.

Source: thehindubusinessline

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SBI chief says new NPA norms will have minimal impact

State Bank of India said it will have less than 1 per cent impact on its pre-tax balance sheet or around Rs 200 crore annually due to the revised norms on NPAs and restructuring by the RBI.

“Total impact will be around Rs 200 crore a year which will be less than 1 per cent on a PBT (profit before tax) basis,” Chairman Pratip Chaudhuri told reporters on the sidelines of an international banking summit organised by the industry lobby IMC here.

On May 19, the central bank revised the norms on restructuring and NPA accounts, increasing the provisioning percentage on restructured accounts besides making loan recasts tougher by increasing promoters contribution.

Under the new rules, from June 1, banks must set aside provisioning for 5 per cent of the value of a loan that is newly restructured, from 2 per cent previously.

But the regulator said it will not force banks to re-classify loans as NPAs in the event of project delays in the infrastructure and commercial real estate sectors.

To discourage loan recasts, which has more than doubled last fiscal, the RBI had said from April 2015 an account will have to be classified as sub-standard as soon as it is restructured and a standard asset on restructuring would be immediately classified as sub-standard as also non-performing assets.

“All restructured accounts which have been classified as NPAs upon restructuring, would be eligible for upgrade to the standard category after observation of ‘satisfactory performance’ during the ‘specified period’,” the RBI had said.

According to ICRA, banks may have to keep an additional Rs 1,500-2,500 crore as provisions this fiscal for their existing recast loan book.

On the possible impact of reducing deposit rates on retail rates, Chaudhuri said it would depend on what competitors are offering on other instruments.

He also said despite reducing rates on bulk deposits in the recent past, such a possibility on retail rates seems to be remote.

Referring to credit growth in first two months of the current fiscal, Chaudhuri said, “the first half is generally slow. So, it will be unrealistic if we expect higher growth.

We are taking deposits because we think growth will happen in the second half. Growth today is coming from the consumer side.”

On Kingfisher Airlines, Chaudhuri said it will not be possible on his part to comment on a specific account.

He also said it is worrisome to see stagnancy in the industrial sector.

Source: thehindubusinessline

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Chidambaram to address IBA on Thursday

Finance Minister P. Chidambaram will address a general body of Indian Banks’ Association (IBA) at Mumbai on Thursday.

This address will come at a time when non-performing assets (NPAs) in the banking system are seeing a meteoric rise, pushing policymakers into a fix.

A part of the reason for the NPA problem is the marked slowdown in the economy. The other reason, which is not often highlighted, is the lack of accountability of higher ups, to ensure recoveries and rein in NPAs, say critics.

Meanwhile, at the call of All India Bank Employees Association (AIBEA), the employees of Bank of Maharashtra have planned to observe a day’s strike on June 17.

This is to protest against the vindictive actions of the management of the bank against legitimate trade union activities, it is learnt.

AIBEA has complained to the RBI and the Government about some of the business decisions of the Bank of Maharashtra management.

Source: thehindubusinessline

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In-principle nod for new bank licences will be valid longer

The RBI made a few concessions to aspirants intending to float banks. One, it extended the validity period of the in-principle approval to promoter/promoter groups for setting up a bank from 12 to 18 months. Two, it decided to grant the new entities more time to meet priority sector lending norms.

In its clarifications to queries on the Guidelines for New Bank Licences, the Reserve Bank of India said the extension is to ensure that the bank licence applicants had enough time to put together a wholly-owned Non-Operative Financial Holding Company (NOFHC) which, in turn, will float a bank.

A single resident promoter/promoter group has first to set up a wholly-owned NOFHC, which will hold the bank and other regulated financial services entities/companies in which the promoter group has ‘significant influence’ or ‘control’.

Public holding

At least 51 per cent of the voting equity shares of the NOFHC has to be held by companies in the promoter group.

Public holding in these companies should be no less than 51 per cent of their voting equity.

The newly set up banks will have time, ranging from 33 months to 37 months, from the grant of in-principle approval, to achieve the priority sector lending (to agriculture, micro and small enterprises, micro-credit, education, housing and weaker sections) target.

The central bank, however, did not grant any exemption in maintaining the cash reserve ratio (the slice of deposits banks have to park with the RBI) and the statutory liquidity ratio (a portion of deposits banks must park in Central and State government securities).

In order that promoter/promoter groups stay focussed on the bank’s growth, the RBI will not permit them to set up any new financial services entity within three years from the NOFHC’s date of commencement of business.

As lending activities must be conducted from inside the bank, the RBI said the activity of a housing finance company (HFC) promoted by a bank licence aspirant should be transferred to the bank under the NOFHC.

The financial sector regulated entity that holds the HFC substantially will also have to come under the NOFHC.

For non-banking finance companies (NBFC) setting up a bank through an NOFHC, the RBI may consider allowing the bank to take over and convert NBFC branches into bank branches only in the Tier 2 to Tier 6 centres.

In all, the central bank received 443 queries from 34 individuals/organisations regarding Guidelines for Licensing of New Banks in the Private Sector.

Last date

The receipt of applications for new bank licences closes on July 1.

Among the aspirants are Aditya Birla Financial Services, Reliance Capital, Bajaj Finance, Tata Capital, and Religare.

Source: thehindubusinessline

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BoB’s new home loan offer

Bank of Baroda (BoB) on Tuesday said new and existing customers can get home loans at the Base Rate of 10.25 per cent across all tenures and for any amount. The single rate of interest for all home loan customers is effective from June 1.

There will be no conversion charge for existing customers to get the benefit of the reduced rate of interest, the public sector bank said in a statement. As at March-end 2013, BoB’s home loans portfolio saw year-on-year growth of 13.5 per cent to Rs 16,045 crore. Home loans accounted for about 7 per cent of domestic advances of Rs 2,24,294 crore.

Source: thehindubusinessline

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IRDA may tighten norms for banks selling insurance

Banks may find the going tough in distributing insurance polices. The insurance regulator may require them to renew at least half the life insurance policies they sell, failing which they risk losing the licence to distribute insurance products.

The renewal requirement is one of the recommendations of a committee set up by the Insurance Regulatory and Development Authority (IRDA) in order to curb mis-selling.

In 2011, IRDA had ushered in a minimum policy renewal criteria for individual insurance agents. The regulator directed insurance companies to terminate the contracts of agents who fail to get at least half the policies sold by them renewed in the subsequent year.

“We have noticed some instances of forced selling of insurance products by banks while advancing loans to customers. Hence, we are looking at calculating loss ratio (the ratios of premiums paid to the claims settled) in respect of business procured by banks so as to assess the quality of the business,” said a senior regulatory official.

“One of the factors that affect persistency is the after-sale service provided to the policyholder. Currently, large number of policies are left without being serviced after the policy is sold, resulting in the policies getting lapsed,” the official added.

According to IRDA data, in fiscal 2012, life insurers had to pay Rs 71,208 crore on account of surrender (withdrawal) of policies, of which, LIC paid Rs 41,531 crore and private sector insurers, the balance.

IRDA set up a committee to review the entire insurance brokers’ regulations in March, after a Union Budget announcement allowing banks to become insurance brokers.

“In the committee’s report to the regulator, we have suggested that in line with the requirement for individual agents, the persistency ratio in the case of life insurance policies sold through the bancassurance route should also be 50 per cent to ensure that servicing of policies by agents/ banks is sustained,” said a senior official from a life insurance company.

IRDA is in the process of finalising bancassurance guidelines and is expected to come out with the final report by August this year.

deepa.nair@thehindu.co.in

Source: thehindubusinessline

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B.K. Batra appointed interim CMD of IDBI Bank

B.K. Batra has been given interim charge as the Chairman & Managing Director of IDBI Bank.

Batra, who is currently the Deputy Managing Director, has been given interim charge of the bank following R.M. Malla’s superannuation as CMD on May 31.

In a notice to the BSE, IDBI Bank said Batra will exercise the powers of CMD with the approval of the board of directors / Managing Committee of the Bank, as the case may be, till such time that a regular incumbent is appointed by the Government.

Source: thehindubusinessline

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Corp Bank donates school bus

Corporation Bank has donated a school bus to Navachethan Educational Trust in Mangalore.

A press release said here that Ajai Kumar, Chairman and Managing Director of the bank, presented the bus to V. Ravichandran, Trustee of Navachethan Educational Trust, in Mangalore recently.

Apart from this, the bank met the cost of construction of an auditorium-cum-hall for extracurricular activities at the school.

The release said the trust offers free education to students from economically backward families.

Source: thehindubusinessline

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SBI cuts interest rate on bulk FD by 0.25% on select tenor

State Bank of India (SBI) today announced reduction in interest rate on fixed deposits of maturity up to one year by 0.25 per cent to 7.25 per cent.

It has been decided to revise downwards by 25 basis points the interest rate on bulk deposits above Rs 1 crore for the tenors 7 days to less than 1 year, SBI said in a statement.

“Accordingly, the interest rate for bulk deposits for the above tenors will be 7.25 per cent per annum with effect from June 7, 2013,” it said.

The announcement comes a month after RBI reduced key policy rate by 0.25 per cent.

The RBI lowered the short-term lending (repo)rate to 7.25 per cent from 7.50 per cent, lowest since May 2011, while retaining the CRR for banks unchanged at 4 per cent.

Another public sector lender Oriental Bank of Commerce (OBC) in May had slashed fixed deposit rates by up to 1 per cent on select maturities.

The fixed deposit rate for maturities ranging from 31-45 days has been reduced to 6 per cent from 7 per cent.

At the same time, term deposit of 180-269 days earns 0.5 per cent lower interest rate at 8 per cent from earlier rate of 8.50 per cent, while interest rate on 91-179 days is down by 0.25 per cent at 7.75 per cent.

Source: thehindubusinessline

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Canara Bank to charge Rs 112 annual fee on its debit cards

State-owned Canara Bank will levy about Rs 112 annual fee on its ATM debit cards from July 1.

The bank, which currently issues the cards free of cost, said in a circular that a need has been felt to offer the services at competitive rates in tune with "market trends".

“It has been decided to charge a nominal fee of Rs 100 per card plus applicable service tax on completion of one year from the date of issue/renewal of the card and thereafter to be charged yearly,” it said.

The current rate of service tax is 12 per cent.

The annual fee will be levied from July 1, it added.

Several other banks, including SBI, also charge an annual fee in the same range.

Canara Bank further said the annual fee will not apply to debit cards issued to customers with Canara Small Savings Account, Basic Savings Bank Account and Financial Savings Bank Account.

It said that for debit cards issue or renewed up to June 30, 2012, the annual fee would charged on July 1.

For cards issued after July 1, 2012, the fee will be recovered after 12 months.

The annual charges will be debited from primary account of the card holder by the system on due date.

In case of insufficient balance, a “hold” will be created and same will be released as and when the balance is available, the bank said.

Source: thehindubusinessline

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Moody’s puts debt ratings of SBI, ICICI, 9 others under watch

Global credit rating agency Moody’s today said it has placed some debt ratings of 11 banks, including SBI, ICICI, HDFC Bank and Axis Bank, under review because of the updating of its methodology.

The subordinated and junior subordinated debt ratings of these banks have been placed under review in the wake of the methodology update, said Moody’s Investors Services.

Other banks are Bank of Baroda, Bank of India, Canara Bank, IDBI Bank, Indian Overseas Bank, Syndicate Bank and Union Bank of India.

“The review takes place in the context of a methodology update that has changed the way Moody’s looks at the probability of support, which has led to several sub-debt ratings in multiple banking systems being reviewed simultaneously,” the rating agency said.

The agency also noted debts of those banks were placed under review that had benefited from an uplift linked to Moody’s prior assessment of systemic support in the country.

However, the agency noted that the reviews of these banks’ sub-debt ratings were not indication of any change in the affected banks’ fundamental credit quality.

“The reviews of the banks’ sub-debt ratings are not in any way related to any deterioration in the affected banks’ fundamental credit quality,” it said, but added that it needs to assess whether the Government’s likely behaviour in times of stress has changed compared to previous assumptions.

Moody’s also noted that its preliminary conclusion points to reasonable doubt over whether the status quo would survive test cases where Governments provide significant financial support to banks, particularly in a systemic crisis that puts stress on the Government’s own balance sheet.

Moody’s expects to conclude its review within the next three months.

The market did not react badly to the report and the Bankex was down just 50 bps against the broader market which was down nearly double the Bankex.

Source: thehindubusinessline

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S K Roy takes charge as LIC managing director

S K Roy assumed charge of Managing Director of Life Insurance Corporation of India.

Roy, whose name is in the reckoning for the post of LIC Chairman, joined the largest insurance company in the country in 1981.

The term of current Chairman D K Mehrotra ended on May 31 2013.

Besides, Roy other managing directors are Thomas Mathew and S Sarker.

Prior to elevation, he was head of the International Operations.

He was also zonal manager of North Central Zone and Eastern Zone of the insurance firm.

Source: thehindubusinessline

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Corporation Bank to offer housing, vehicle loans at base rate

Corporation Bank will offer housing and vehicle loans at 10.25 per cent for certain slabs from June 1. In fact, 10.25 per cent is Corporation Bank’s base lending rate.

Addressing presspersons here on Friday, Chairman and Managing Director Ajai Kumar said the “monsoon bumper offer” would be in force from June 1 to September 30.

Under this offer, housing loans up to Rs 50 lakh would be offered at a floating rate of 10.25 per cent. Loans above Rs 50 lakh would be offered at 10.50 per cent. There would not be any processing charges or pre-payment penalty, he said.

The interest on vehicle loans of up to Rs 5 lakh would be 10.45 per cent, and for loans above Rs 5 lakh and below Rs 10 lakh, 10.40 per cent.

Vehicle loans above Rs 10 lakh would be offered at an interest rate of 10.25 per cent. Asked about the reason for offering vehicle loans above Rs 10 lakh at base rate, Ajai Kumar said many people were going for vehicles in that range. Earlier, the bank thought of fixing it at Rs 25 lakh. “Then we saw that many people go for vehicles in the Rs 10 lakh range,” he said.

The bank was expecting to get fresh business of about Rs 4,000 crore during the ‘monsoon bumper offer’ period, he said.

Stating that retail lending was a focus area, he said retail credit had registered 39 per cent growth during 2012-13.

SB ACCOUNTS

Ajai Kumar said the bank had launched a savings bank (SB) account called ‘Corp Saral Plus’.

Targeted at the common man, he said the customer did not have to maintain a prescribed minimum or average balance in the account. In addition, the customer would be offered a personal accident insurance of Rs 5 lakh for a fee of Rs 50 per annum, he said.

vinayak.aj@thehindu.co.in

Source: thehindubusinessline

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