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Saturday, September 21, 2013

PSU bank chiefs defy Finance Minister diktat, hike rates

In a rare display of spunk, some chiefs of public sector banks are standing up to their bosses in the North Block, even differing with them on rate cut, something you wouldn't have heard of in the past.

At least two bankers have, in recent months, raised interest rates despite veiled — and at times, explicit instructions — from New Delhi to not do so. What's even more interesting is that these bank chiefs are close to their retirement.

For instance, State Bank of India chairman Pratip Chaudhuri raised lending rates — a token hike of 10 basis points to 9.80% — on Thursday, a day before Reserve Bank of India governor Raghuram Rajan announced his maiden policy review. Chaudhuri is set to retire at the end of this month. Similarly, BA Prabhakar, former CMD of Andhra Bank, raised rates just a fortnight before he retired in August.

"Those who are not looking for any post-retirement benefits from the government will behave in an independent manner just before they retire," said Hemindra Hazari, head of equity research at Nirmal Bang Institutional Equities. This also underscores the fact that some bankers have taken bold steps to protect their organisation as they near retirement, unlike in the past when they simply toed the line of their bosses.

On July 3, in a closed-door meeting with chief executives of public sector banks, finance minister P Chidambaram had asked them to cut rates to send out a positive signal to the economy. "Someone will have to take a bold move or things will not improve. But if banks lower rates, even if it is a token rate cut, it will send a strong message," the FM had said, according to bankers present in the meeting. Several PSU banks such as Canara Bank, Bank of India, Andhra Bank and Union Bank of India followed his advice.

But, on July 14, the RBI surprised the market by tightening liquidity and raising the cost of funds, drawing a sharp response from the North Block, and putting these banks in a spot of bother.

Prabhakar, who retired from Andhra Bank in August, said raising rates was absolutely imperative. "Anyway, I was to retire in the next few days. I thought my executive directors would not be able to take a bold step since they were only holding charge in the absence of a new CMD. Also, they would hesitate to do so because of constant counselling from the government against raising rates," he told ET.

Source: EconomicTimes
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Bank strike on Sept 25

Members of the All-Kerala Bank Employees Federation will take part in the September 25 all-India bank strike, the federation has said.

The strike, called by the All-India Bank Employees Association, is to oppose the move for amalgamation of State Bank’s associated banks and the RBI’s plan to give banking licences to non-banking finance companies and corporate houses. The association also seeks autonomy for the associated banks of the State Bank of India.

The Kerala federation in a statement urged the people and the government in Kerala to resist the attempt to merge State Bank of Travancore in the SBI. It pointed out that over the past six decades the SBT had made a big contribution to the Kerala’s development. The SBT had the largest network of branches, made the largest number of loans and had the highest amount of deposits among all other banks.

Source: thehindubusinessline
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Friday, September 20, 2013

RBI adopted balanced approach in policy review, says Montek

Planning Commission Deputy Chairman Montek Singh Ahluwalia today said that the RBI’s mid term monetary policy statement reflects “balanced” approach to deal with “worrisome” inflation and slacking growth.

Reserve Bank, in its mid term review of the monetary policy today, decided to hike short term policy rate by 0.25 per cent after a gap of two years and ease liquidity by reducing the marginal standing facility rate for banks.

“I think it is a quite balanced statement actually. He (RBI Governor) has done something which will ease liquidity and at the same time try to send the signal that RBI is concerned about bringing inflation down. You need to give both those signals. It is right thing to do,” Ahluwalia told reporters here.

“..the good monsoon would certainly help. It is not the case that the inflation is comfortable at the moment. Overall, I would say that we need to be watchful of inflation. I don’t think we can assume that the inflation problem is firmly behind us. It could get better in next three or four months,” he added.

He was also asked about the RBI’s observation that growth could pick up later due to bright prospects of good kharif crop, upturn in exports and coming on stream of infrastructure projects cleared by the Cabinet Committee on Investment (CCI).

Ahluwalia said: “In the second half of this year, we should see the effect of what is being done (by CCI). The effect on ground at the moment is not evident.”

About the US Federal Reserve’s decision to defer tapering (phased withdrawal of stimulus), he said: “Yes they are going to do it. They are going to do it in a phased manner. We should be ready for this happening over a period of time.”

Source: thehindubusinessline
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Bangalore: Hindi Day at Vijaya Bank

Hindi Day was celebrated at Vijaya Bank at its Head Office in Bangalore. Chairman and Managing Director of the Bank H S Upendra Kamath presided over the function. Executive Director, K R Shenoy also addressed the gathering. The General Manager (Rajbhasha), A C Swain welcomed the gathering. Kamath while acknowledging the fact that use of Hindi Language will go a long way in contributing to the growth of the Bank, appealed to the staff members to put in more efforts and achieve the targets set for Hindi correspondence in 'A' and 'B' Region.

Source: thehindubusinessline
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RBI may not alter key rates, say experts

The Reserve Bank of India could turn to a monetary policy supporting growth after the US central bank delayed tapering of its fiscal stimulus programme.

Experts say, despite a status quo on the repo rate, the US tapering of QE (quantitative easing programme) delay will make way for a growth-oriented policy by RBI in its mid-quarter policy review on Friday. Most believe that the RBI could also roll back the liquidity tightening measures taken in July.

In its report, Bank of America Merrill Lynch said, “We expect RBI Governor Raghuram Rajan to partially roll back July tightening measures after the US Fed unexpected deferred tapering. Our US economist continues to expect the Fed to taper December onwards. This reprieve for rupee should provide the RBI space to support growth. Against this backdrop, we expect the RBI to reduce the MSF (marginal standing facility) rate by 50 bps to 9.75 per cent.”

Alternatively, the RBI could resume open market operations to the tune of Rs 1,20,000 crore by March to boost deposit growth to support loan demand. Or, it could raise the cap on LAF (liquidity adjustment facility) repos back to, say, 1 per cent of bank book from the current 0.5 per cent to ease liquidity conditions, the report said.

According to Indranil Pan, Chief Economist, Kotak Mahindra Bank, “No movement from Fed, expect the same from the RBI. This will lead the RBI to maintain the status quo on policy rates on September 20. It can, however, relax operational restriction on the CRR side to provide banks with some leeway.

There is likely to be some positive outcome for the Rupee with the US Dollar weakening due to deferment of tapering. This provides some breathing space for domestic policy makers to address the key issues of current account deficit and fiscal,” he added.

On the repo, we still lean towards a no-change stance, as the weaker currency and firm commodity prices have fed through the WPI inflation and retail inflation holds above elevated 9.5 per cent. In addition, recent volatility highlights that the rupee will remain vulnerable, said Radhika Rao, Economist, DBS.

Source: thehindubusinessline
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IRDA urged to extend re-filing deadline

The Life Insurance Council, the industry body representing life insurance companies, has asked the Insurance Regulatory and Development Authority (IRDA) to extend the deadline for re-filing all their existing products as per the new norms.

The guidelines require all life insurers to realign the products before October 1. The life insurance industry has to withdraw about 400 products and re-launch them under the new detailed structure .

According to V. Manickam, Secretary-General of the Council, the industry body is “confident of a positive development” from the regulator.

“We have asked IRDA for a reasonable extension of deadline because once the product is approved by them, insurance companies also have to undertake considerable work to market these new products and train their distributors and agents, which takes time,” Manickam said.

Rajesh Sud, Chief Executive Officer and Managing Director of Max Life Insurance, said if all the products are not approved, life insurers will have to discontinue them or may offer only a limited number of products after October 1.

The regulator had earlier extended the deadline from July 1 to August 1 this year.

Source: thehindubusinessline
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Thursday, September 19, 2013

Bharatiya Mahila Bank to recruit 115 probationary officers

Bharatiya Mahila Bank, the first nationalised bank for women expected to be operational from November, intends to recruit 115 officers initially.

The bank has invited applications through the online mode from female candidates for 115 posts. Candidates can apply online till September 30.

The female applicants must be graduates in any faculty from any reputed and recognised university with good knowledge of the basics of computers, says an advertisement by the bank.

Bharatiya Mahila Bank proposes to complete the first six branches at Mumbai, Delhi, Kolkata, Chennai, Indore and Guwahati by October 15.

The Government has already approved Rs 1,000-crore seed capital for the women focused public sector bank, announced by Finance Minister P. Chidambaram in his Budget speech.

The Government is also on the look out for locations to set up the branches, including at Kolkata, Guwahati, Chennai, Bangalore, Jaipur, Lucknow, Mysore and Indore.

The proposed bank, to be headquartered at Delhi, is likely to be operational by November this year.

Reserve Bank of India gave its in-principal approval for the Bharatiya Mahila Bank in June and the banking company is being set up.

One of the key objectives of the bank is focus on the banking needs of women and promote economic empowerment.

Source: thehindubusinessline
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South Indian Bank ties up with Regional Cancer Centre

While banks in general boast about village adoption programme, South Indian Bank possibly looked beyond this by tying with the Regional Cancer Centre in Thiruvananthapuram for a noble cause.

“This tie-up with RCC is aimed at driving a noble cause in support of cancer patients,” says the Kerala-headquartered bank’s Chief Executive V.A. Joseph.

“With the incidence of cancer rather high at present and the treatment costunaffordable to the common man, we at SIB decided to join hands with RCC, Thiruvananthapuram to help them get a move on member enrolments. A member, if diagnosed for cancer at some point in time in his life, can get advanced treatment almost for free. RCC offers special discounts for multiple members in a family as well.”

“An individual can become a member by paying a one-time fee of Rs 500. In the event of getting cancer, RCC is committed to provide the member diagnostic and treatment facilities at the centre up to 100 times the membership fee (that is Rs 50,000),” Dr Joseph said.

South Indian Bank decided to add value by helping individuals enrol in this Cancer Care for Life Scheme, sponsored by RCC, Thiruvananthapuram through its branch network. “We expect that we will be able to offer light for millions of persons across Kerala and all other states by ensuring maximum enrolments under the scheme,” he said.

The association is just about a month-old, but South Indian Bank sources say the response to the scheme has been phenomenal.

The bank on its part has resolved to contribute 10 per cent of every membership fee, routed through any of its branches. “We have earmarked Rs 50 lakh for the current year,” the SIB Chief said.

RCC offers two enrolment option schemes. Under Plan A, an individual can remit a minimum amount of Rs 500 and get up to 100 times this fee, per person or pay Rs 1,400per family of three persons, Rs 1,700 per family of four persons or Rs 2,000 per family of five persons (Family includes spouse and dependent children.)

The membership fee under Plan B is Rs 10,000 per person.

Source: thehindubusinessline
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Wipro-US firm team leads race for Rs 1,000-cr Mahila Bank deal

US-based FIS Global, in partnership with Wipro, is leading the race for a Rs 1,000-crore contract to provide IT systems at the country’s first women-focussed bank, it is reliably learnt.
Other major bidder

The five-year project entails setting up and managing a core banking application and other technology infrastructure for the Bhartiya Mahila Bank, a brainchild of the Government of India.

Infosys, which had partnered with IBM, was the other major bidder for this deal. The names of Polaris Financial Technology and HP too were doing the rounds, however this could not be corroborated. Much to the surprise of industry watchers, the country’s largest software exporter Tata Consultancy Services did not bid for the project.

The FIS-Wipro combine is believed to have quoted Rs 900 crore for the project, while the others have bid upwards of Rs 1,100 crore. FIS Global, a provider of core banking solutions, is said to be the lead bidder for the project as Wipro does not have strong core banking capabilities.

Though the deal is in the final lap, sources say that some board members of the bank have expressed reservations against giving out to the contract to a non-Indian bidder. “Giving the project to a foreign company would mean opening up a sensitive sector in a sensitive model,” one of the officials said, adding that the project would be implemented under the ‘build-own-operate model’.

Under this model, the selected IT vendor would have the overall responsibility to procure, install and implement all the hardware, software and licences needed to start the bank's business, as per the request-for-proposal (RFP) floated by SBI Capital Markets on behalf of the bank.

Usha Ananthasubramanian, the first chief executive officer of Bhartiya Mahila Bank, could not be reached for comments despite multiple attempts.

Final call soon

The Finance Ministry is expected to take a final call on the bids in the next four weeks.

The selected vendor is expected to become the extended arm of the bank's IT division and work in collaboration with its various business units, it said in the RFP, a copy of which is available with Business Line.

In his Budget speech this year, Finance Minister P. Chidambaram had announced that the government would establish a women's bank and provided for 1,000 crore as initial capital. The bank, set to be headquartered in Delhi, will start services with six branches from November 1.

Source: thehindubusinessline
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Tuesday, September 17, 2013

YES Bank raises $225 m using swap loan facility

YES Bank has become the first bank to raise funds overseas using the swap loan facility provided by the Reserve Bank of India (RBI) last week.

The private sector lender raised $255 million ($180 million and €58 million) by way of dual currency, multi-tenor syndicated loan facility.

RBI, on September 10, had announced that banks can raise funds overseas above 50 per cent of their Tier I capital with a minimum maturity of three years and swap these borrowings with the central bank at a concessional rate for one to three years.

A Treasury head of a private sector bank had said that this facility could bring in dollar inflows to the tune of $10-15 billion.

“The facility has a maturity of one and two years with majority commitments coming in the two-year tenure bucket. The loan has been distributed with commitments from 11 banks representing eight countries across US, Europe, Middle East and Australia. The facility shall be utilised for general corporate purposes and trade finance,” YES Bank said in a statement.

According to the bank: “The recent RBI guidelines on offering swap facility to banks, for their FCY borrowings, at 100 bps below the market rate, will further make the landed rupee cost (or the effective interest rate) of these funds extremely competitive vis-a-vis rupee funds of equivalent maturity.”

The lead arrangers and book-runners for the transaction are ANZ Banking Group, Citigroup Global Markets Asia, HSBC, Standard Chartered Bank and State Bank of India.

Source: thehindubusinessline
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Lakshmi Vilas Bank creating new verticals to double turnover

Lakshmi Vilas Bank is creating new business verticals by re-allocating resources and rationalising workforce with an aim to double its turnover.

The bank has created business, operations and compliance verticals in its management hierarchy with a thrust on credit and product marketing.

“To achieve this, the bank is realigning workforce to drive productivity. According to the plan, we will be deploying about 30 per cent of work force in client interfacing,” J. Moses Harding, Executive Director, Lakshmi Vilas Bank, told Business Line.

The bank plans to tap the existing manpower by creating sales team, educating it with ‘right people at right place’.

Starting September 1, the bank has already realigned eight regional offices. Now each regional office will have four-five clusters, with each cluster handling 10-12 branches.

“By adopting this model, we are to focus exclusively on credit and product marketing which is expected to grow and give us good topline (advances) and CASA growth,” said Harding.

“As part of this exercise, we are planning to reach out to the clients, deepen relations with existing customers and aggressively go for mass acquisition of new clients,” he added.

Harding said “the bank is also working out a three-year business continuity plan with an objective to grow the business over Rs one lakh crore from the current Rs 30,000 crore.”

Source: thehindubusinessline
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RBI norms take sheen out of gold loan firms

Gold financing firms will need to relook their business model as the Reserve Bank of India’s new, tightened norms are likely to hurt growth, according to analysts.

Uncomfortable with the systemic risks involved in the extant lending model, the RBI on Tuesday issued new guidelines on gold loans by non-banking finance companies (NBFCs) to bring in more transparency.

Prakash Agarwal, Associate Director - Banks, India Ratings, said: “It is positive from the systemic point of view and will reduce risks. From the companies’ point of view, the portfolio of gold loans could see a further downside for the next three-four quarters. Amid the recent downturn in the business, we could also expect some de-growth.”

Further trouble

NBFCs such as Muthoot Finance and Manappuram Finance, which are largely into gold financing, will further face troubles going forward.

Both companies were not reachable for comment.

According to Agarwal, the entire disbursement of the loan is by cash as the borrowers are largely not savvy with the documentation process.

paper tedium

Hence, the new requirement to bring in more paperwork can put off the borrowers and they could shift to banks or the unorganised sector to meet their gold loan requirements.

Vaibhav Agrawal, senior analyst at Angel Broking, said: “The strength of these firms was to disburse faster loans.

“However, the new rules may deter borrowers from going through the longer processes and in turn prefer banks, which also have lower interest rates.”

According to him, the firms also need to consolidate their smaller branches.

The business model will need to be relooked at as this will incrementally impact the gold loan business.

The boom that the gold loan business saw in the past is unlikely to be repeated, Agarwal added.

Muthoot Finance ended 8.28 per cent weaker at Rs 103.60 per share, while Manappuram Finance closed 4.62 per cent down at Rs 15.50 on the Bombay Stock Exchange.

Source: thehindubusinessline
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Monday, September 16, 2013

Top IRDA official charged with sending ‘spurious mails’

Whistleblower or blackmailer? The staff and management of the Insurance Regulatory and Development Authority (IRDA) have adopted diametrically opposite positions in a controversy relating to a joint director, who was arrested on a complaint from the regulator.

S. K. Jain, who is also the Vice-President of the IRDA Officers and Staff Association, was charged with using fake IDs to send e-mails to senior officials, including those in the Ministry of Finance, about corruption and malpractice in the regulatory body.

The remand report of the police dated August 23, 2013, notes that Jain had “noticed some irregularities in promotions, absorbing of ineligible employees and corruption, upon which they have tried to convey them to senior officers but they have showed deaf ear… As such, he had decided to send mails to private persons…’’

These e-mails were sent from as early as February 2013, but the IRDA formally complained about the ‘spurious mails’ only in July.

After discovering that the mails originated from a computer at Jain’s residence, he was arrested under Section 66 A of the Information Technology Act, which penalises “sending false and offensive messages through communication services”.

He is now out on bail. Jain’s mail to the IRDA Chairman in February alleged many irregularities in the filling up of about 25 vacancies , including senior positions such as Executive Director and Actuary.

They also mentioned some unspecified “acts of corruption’’ and alleged misuse of official position by the executive director.

Strong objection

IRDA’s staff body has taken strong exception to the arrest of Jain, saying he has been victimised for being a ‘whistle-blower’.

In a letter addressed to the Chairman of IRDA dated September 10, Suresh Nair, President of the employees association, demanded that the case against Jain be withdrawn immediately and that an independent investigation be conducted into the alleged irregularities. When contacted, Sriram Taranikanti, Executive Director, IRDA, said: “Allegations of corruption/irregularities have been made in 10 to 12 cases but they are baseless”.

When asked whether any probe was ordered on the allegations, he said the authority had looked into the issues but was content with the stand it had taken on each of them.

No employee had a right to disclose or share internal issues with outsiders, especially with those entities which are regulated by it, he said.

“This is not whistle-blowing but black-mailing tactics. We are open to correction or take a re-look at any thing always,” he said.

Source: thehindubusinessline
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Sunday, September 15, 2013

10-12% growth in project finance portfolio: SBI

The project finance segment of State Bank India, the country's largest lender, is witnessing a 10-12 per cent growth on a year-on-year basis.

According to P.K. Malhotra, Deputy Managing Director, SBI Project Finance SBU, the bank has witnessed an increased outflow towards project finance.

Higher number of projects have also been sanctioned.

The project finance unit accounts for nearly 10 per cent of SBI's total portfolio.

"Project sanctions are higher than last year," Malhotra told reporters on the sidelines of the "Banking Colloquium 2013" organised by the Confederation of Indian Industry (CII).

According to him, while others might stop lending because of the slowdown; SBI has not done so. This has led to growth in sanctions.

Retail Growth

SBI, he said, is expecting a credit growth in the region of 18-20 per cent during the July-September quarter.

"Credit growth in the current quarter is being driven by retail portfolio," he said.

Source: thehindubusinessline
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