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Saturday, February 1, 2014

Indian Bank pays interim dividend of Rs 125.06 crore

Indian Bank paid an interim dividend of Rs 125.06 crore to the Finance Ministry for the third quarter ended December 31.

Indian Bank Chairman and Managing Director T M Bhasin handed over the cheque of Rs 103.15 crore to Finance Minister P Chidambaram in New Delhi today, the city-based state-owned bank said in a statement.

"The Bank paid the Dividend Distribution Tax of Rs 21.91 crore and thus the exchequer received Rs 125.06 crore, comprising equity dividend of Rs 103.15 crore and dividend distribution tax of Rs 21.91 crore", it said.

The global business of the bank reached Rs 2.70 lakh crore as on December 31, 2013 registering a Year-on-Year growth of Rs 14.8 per cent.

The bank reported a 19.9 per cent decline in its net profits for the third quarter ending December last year at Rs 264.50 crore.

It had registered net profit at Rs 330.58 crore in the same period of the previous fiscal.

For the nine month period ended December, net profit dipped to Rs 887.65 crore from Rs 1,289.00 crore registered during the corresponding period of the previous fiscal.

Source: Economic Times
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Friday, January 31, 2014

RBI tightens guidelines to deal with loan default; suggests timeline to restructure loans

The Reserve Bank of India on Thursday laid out rules for early detection of loan default and suggested a timeline to restructure loans in a move that will end decades of promoters gaming the system.

Removing promoters who are wilful defaulters, selling off units that dragged a company down before recasting debt, mandatory equity investments by founders and the transfer of promoter holdings to a security trustee until the company turns around are among the final guidelines.

The central bank has also put an end to the infighting among lenders in loans recovery and has stiff penalties if banks and non-banking finance companies work to hide brewing defaults in accounts by suggesting high provisioning norms.

"The general principle of restructuring should be that the shareholders bear the first loss rather than the debt holders," said the RBI's Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders guidelines.

The central bank is right to be worried. Total restructured loans, including those that have been withdrawn and exits from the corporate debt recast programme, shot up 45 per cent to Rs 2.72 lakh crore at the end of September, from Rs 1.87 lakh crore a year ago.

What frightens stakeholders is that the debt structuring process may merely be a delaying tactic for companies and bankers that temporarily allow them to hide loans that have gone irrevocably bad. Whether the new norms will be uniformly applied by banks or not is being doubted.

"Banks have been taking action on promoters, however, selectively particularly on small businesses. Lenders are afraid of taking any repossession action against large promoter as it could lead to loss of business in future," said a senior banker, who did not want to be identified.

Source: Economic Times
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Postal banks globally effective as payment banks: Nachiket Mor

Nachiket Mor, a member of the central board of the Reserve Bank of India, today supported the role of postal banks in promoting the availability of financial services.

"I don't want to speak specifically about India Post (which has applied for a commercial banking licence) itself. What I am saying is that worldwide, they (postal banks) have been very effective as payment banks," said Mor, who recently submitted a report on financial inclusion to the RBI.

Mor, a former executive director of ICICI Bank, is also a member of an external panel that is scrutinising the 25 banking aspirant applications.

The panel headed by former RBI governor Bimal Jalan will meet again on February 10. The committee had a mandate to submit its report before January end, by when Governor Raghuram Rajan had expected to issue some new bank licences.

Mor was answering a question from the media on whether he supports the application of India Post for a commercial banking licence. He spoke on the sidelines of a banking inclusion summit organised by a business daily.

Stating that financial inclusion is needed because the country has a small banking system, he said deepening financial inclusion requires either new banks, which is long, steady and slow process, or expanding the reach of existing banks. One way to do this is to empower non-banking lenders, who have an important role to play in inclusion, he said.

The Finance Ministry is not very keen on letting India Post convert itself into a bank, citing practical difficulties, even though more than 90 per cent of its 1.55 lakh post offices are located in villages.

Postal savings as of last March stood at Rs 6.05 trillion, which is half the total deposits of the nation's largest bank, State Bank of India.

Last week, Minister for Communications & Information Technology Kapil Sibal said his ministry would ensure that India Post gets a banking licence.

Source: Economic Times
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SKS Microfinance completes securitisation deal of Rs 55.56 crore

SKS Microfinance, India's only listed micro-lender, today said it completed a securitisation deal of Rs 55.56 crore though a private sector bank.

SKS said in a statement this is the fifth micro-finance securitisation deal that the company has completed during the current financial. With this, the total securitisation during FY'14 (YTD) stood at Rs 727.37 crore.

The previous four substantial securitisation were Rs 321 crore (on September 30), Rs 80.81 crore (on December 11), Rs 215 crore (on December 19) and Rs 55 crore (on December 30), SKS said.

"SKS Microfinance Limited has downloaded the receivables from micro loans extended to more than 60,000 rural women entrepreneurs to a Special Purpose Vehicle, and Pass Through Certificates ( PTCs) have been purchased by a private sector bank," it said.

The entire pool qualifies for priority sector treatment as per RBI's guidelines, it further said. The pool is rated A1 + (SO) by a leading rating agency signifying "a very strong degree of safety regarding timely servicing of financial obligation," it added.

Source: Economic Times
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Wednesday, January 29, 2014

State Bank of India rallies over 1% on fund raising plans

State Bank of India (SBI) rallied as much as 1.6 per cent in trade on Wednesday, after the largest public sector bank launched mega share sale through qualified institutional placement (QIP) route, which is aimed at raising up to Rs 9,500 crore, on Tuesday.

At 09:20 a.m.; SBI pared some of the morning gains and was trading 0.5 per cent higher at Rs 1604. It hit a low of Rs 1601.90 and a high of Rs 1621.90 in trade today.

Though the exchange filing from the state-run bank did not mention the amount it plans to raise, the country's largest lender has a mandate from board and shareholders to raise up to Rs 9,500 crore by issuing shares to qualified institutional investors, Reuters reported.

The QIP issue is expected to be followed by Rs 2,000-crore fund infusion to the bank from the government, added the report. Post-QIP, for which SBI received shareholder nod a few days ago, government holding in the bank will go down to 58 per cent.

Source: Economic Times
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Banks may not raise home and car loan rates immediately

Retail home and car loan borrowers may have little to worry despite a hike policy rate by the Reserve Bank of India to control inflation. Chief executive of large commercial banks have indicated that they are not in a hurry to raise lending rates yet.

The RBI on Tuesday raised repo rate - the rate at which they lend customers- - by 25 basis points to 8% signalling that rates would remain at elevated level for sometime.

"Yes, of course, there will be a little bit of rise but how much of that rise can be passed on I have to see the capacity of the people who have taken money from me (SBI) as well," said Arundhati Bhattacharya, chairman of State Bank of India (SBI) which has pegged its base rate at 10%-lowest in the industry.

Transmission of policy rates - whereby banks pass on a hike or a cut in policy rate - to their customers is unlikely to happen when repo rate is revised. This is mainly because banks borrowing from repo window is less than 1% of their total borrower, however repo rate signals the direction in which the RBI wants rates to move. "Repo is a very blunt tool. Transmission (of policy action) will only happen when it is actually affecting the cost of funds," said Ms Bhattacharya.

Besides, cost of funds, bankers also factor in demand for credit and competition from peers while tinker with rates. In December, HDFC and ICICI Bank were forced to cut home rates after SBI cut its rates by 10-25 basis points.

Rising stress in the economy, which has resulted in several corporates delaying their payments to banks in recent months, has prevented banks from raising the lending rates. K R Kamath, CMD of Punjab National Bank and chairman of Indian Banks' Association said, "Looking at inflation depositors need be given a better rate. Looking at stress of the assets we need to see that we don't pass on a lot to the borrowers. How do we balance that is what will ultimately decide what sort of transmission will happen."

According to M Narendra, CMD of Indian Overseas Bank there is no scope to revise the rate for retail borrowers, small businessmen and farmers but the bank may consider revising spread rates for other category of borrowers. "Hike in base rate is ruled out since there is limited opportunity to deploy loan to better rates corporates," he said.

Depositors, on the other hand, may have some reason to cheer since some of the banks may raise rates for select buckets. Banks may be under pressure to mobilise funds to replenish deposits that are due to mature in last quarter, which may force them to pay higher rates to attract deposits. Deposit mobilisation is at its peak in the last quarter of the year since banks try to achieve their annual deposit target for the full year.

Source: Economic Times
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Prizm Payment launches white label ATM Money Spot

Prizm Payment Services has launched Money Spot, a white label ATM under licence from the Reserve Bank of India. Prizm Payments plans to deploy at least 10,000 Money Spot ATMs across India in the first phase of rollout, with a large portion of these being in semi-urban and rural areas.

Loney Antony - Managing Director Prizm Payments said that, "This is a very positive decision by RBI to allow non-banking organisations like Prizm to deploy ATMs and bring convenience to cardholders who did not have access to an ATM or any other electronic media for their banking needs. We are currently providing some basic functionality such as Cash Withdrawal, Balance Enquiry, PIN change and Mini Statements at these ATMs. We intend to introduce other Value Added Services to increase the convenience to these card holders".

Prizm Payments is currently the leading ATM services company in the country with 21,000 ATMs deployed and managed for various Banks under fixed and variable fee model and processing 1,15,000 POS across the country. The WLA ATMs will be connected to the country's premier shared ATM network in the country called NFS from NPCI.

A. P. Hota, the Managing Director & CEO of NPCI said, "We are expecting an exponential growth in ATMs in India and White Label ATMs are going to be a key component of this growth. We are happy to partner with Prizm Payments on this new innovation in the Indian market which will provide access to ATM services to more semi-urban and rural locations and NPCI's technology infrastructure and connectivity with all banks the Money Spot ATM to accept any bank card on this network."

Source: Economic Times
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‘Owlish’ RBI hikes repo rate by 25 bps on inflation worry

The Reserve Bank of India sprang a surprise on Tuesday by increasing the interest rate banks pay to borrow short-term funds to 8 per cent from 7.75 per cent.

Despite the economic slowdown getting increasingly worrisome, the central bank chose to increase interest rates to tame rising prices.

RBI Governor Raghuram Rajan emphasised that the best way to create sustainable growth was by bringing down inflation.

“Elevated levels of inflation erode household budgets and constrict the purchasing power of consumers. This, in turn, discourages investment and weakens growth…” Rajan said in his interaction with the media, after announcing the third-quarter review of monetary policy.

To a specific question as to why the policy stance is hawkish while its guidance dovish, Rajan said his deputy, Urjit Patel, referred to the central bank as being neither a hawk nor a dove but an ‘owl’, signifying wisdom and alertness, when it comes to monetary policy formulation.

Bankers, economists and market players were expecting the RBI to maintain the status quo in view of the significant decline in inflation in December and the weak state of the economy.

Following the RBI’s rate action, banks may up deposit rates a tad, mostly at the short-end. Simultaneously, to protect their margins, they may nudge the spread they charge over the base rate (the minimum lending rate below which banks cannot lend) upwards for select segments.

Equity market players took the rate hike decision in their stride, with the benchmark BSE Sensex closing the day just 0.12 per cent (or 23.94 points) lower at 20,683.51 over the previous close.

The rupee closed 60 paise stronger at 62.50/dollar against the previous close of 63.10 on expectation that the rate hike would attract foreign exchange inflows.

Since taking charge of the RBI last September, Rajan has upped the repo rate (the rate at which banks borrow short-term funds from the central bank) thrice by 25 basis points each. One basis point is equal to one-hundredth of a percentage point.

The RBI maintained the status quo in its mid-quarter review of the monetary policy last month.

The Governor observed that the RBI’s baseline inflation projections for the October-December 2013 period indicate that over the ensuing 12-month horizon, and with an unchanged policy stance, there are upside risks to the central forecast of 8 per cent.

Hence, an increase in the policy rate is needed to set the economy securely on the recommended dis-inflationary path (CPI inflation below 8 per cent by January 2015 and below 6 per cent by January 2016, as suggested by the Urjit Patel committee).

The RBI said that further policy tightening in the near term is not anticipated at this juncture if the dis-inflationary process evolves according to the baseline projection.

GDP projection

In its third-quarter review of macroeconomic and monetary developments document, which was released along with the policy, the RBI has assessed that growth in 2013-14 is likely to fall somewhat short of its earlier projection of 5 per cent.

However, a moderate recovery (5-6 per cent growth) is likely in the next fiscal year with support from rural demand, a pick-up in exports and improved investment demand.

Source: Thehindubusinessline
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Tuesday, January 28, 2014

SBH profit down 63% in Q3

State Bank of Hyderabad’s net profit decreased 63 per cent to 119 crore in the third quarter ended December 31, 2013 compared with 322 crore in the year-ago period. Net interest income marginally increased to 989 crore (976 crore) while staff expenditure and provisions and contingencies went up considerably. The general economic slowdown combined with the political situation in Andhra Pradesh impacted business and industry, which in turn affected the bank’s asset quality. As a result, gross non-performing assets rose from 3.46 per cent to 5.77 per cent while net NPAs increased from 1.61 per cent to 3.21 per cent during the same period, SBH said in a release.

Source: Thehindubusinessline
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Monday, January 27, 2014

India Post to install 3000 ATMs,1.35 lakh micro-ATMs by September 15

Even as its application to start a commercial bank is pending, India Post has drawn a massive plan to install as many as 3,000 ATMs and 1.35 lakh micro-ATMs at the ubiquitous post offices across the country for savings account holders by September 2015, a top official has said.

"We will be starting with three ATMs to be installed in New Delhi, Chennai and Bangalore on February 5 and then ramp it up gradually," postal department secretary Padmini Gopinath told a select group of reporters here over the weekend.

She said 1,000 ATMs with the India Post branding will be put in within the first year, which will be ramped up massively to 3,000 in the next 18 months.

To start with, the ATMs can be used only by 26 crore savings account-holders who save with the postal department, but Gopinath exuded confidence that within six months of the launch, they will get the interoperability permission from the Reserve Bank.

Postal savings are worth around Rs 6.05 trillion, which is half the savings in the largest lender SBI and more than double that of the largest private sector lender ICICI Bank.

Through interoperability, India Post will join the National Financial Switch, which will benefit India Post account holders to transact at the banks' ATMs and vice versa, she added.

India Post has been working with software major Infosys on this project, she added.

The micro ATMs will be handheld devices to be operated at the post office level while the ATM will be similar to the one operated by any commercial bank, she added.

The postal department, which has 1.55 lakh post offices over 90 per cent of which are in villages, offers the savings account to people across the country and pays an interest of 4 per cent per annum for such deposits. The account offers cheque facility at present.

It can be noted that the Department of Posts is fighting a very contentious battle to convert itself into a full fledged bank, asserting that its reach can help achieve the goal of financial inclusion.

However, the finance ministry has expressed some reservations about the idea, while Telecom Minister Kapil Sibal has exuded confidence of winning over his Cabinet colleagues to get the go ahead for the 'Postal Bank'.

Source: Economic Times
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Rs 500 notes can be freely swapped at banks, says RBI

As the common man went on speculating frantically on what to do with banknotes printed before 2005, Reserve Bank of India on Friday tried to calm the nerves by saying that public may initiate the process of exchanging notes at bank branches at their convenience.

RBI said its move to withdraw currency notes printed before 2005 is to check counterfeit notes and these notes will continue to be legal tender even after the July deadline. It said that after July 1, 2014, public can exchange any number of these old series notes from the bank branches where they have their accounts.

Non-customers of a bank will have to furnish proof of identity and residence to the bank branch in which they want to exchange more than 10 pieces of Rs 500 and Rs 1000 notes.

The RBI clarified that the rationale behind its move to withdraw banknotes printed prior to 2005 is to remove these banknotes from the market because they have fewer security features compared to banknotes printed after 2005. "It is standard international practice to withdraw old series notes," it said on Friday responding to queries raised by several quarters.

The RBI has already been withdrawing these bank notes from the market in a routine manner through banks. "The volume of the banknotes printed prior to 2005 today, still in circulation, is not significant enough to impact the general public in a large way," it said.

The RBI said it would monitor and review the process of withdrawal of old series notes so that the public is not inconvenienced in any manner.

Source: Economic Times
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Vakrangee gets RBI licence for ATMs

Vakrangee Ltd has received Reserve Bank of India’s final authorisation of the White Label ATM licence. Under this licence, Vakrangee is entitled to set up and run minimum 15,000 ATMs across the country in next three years, sources close to the development said. White label ATMs are those that are not run by banks but by a non-banking entity in its own brand name (like Vakrangee ATM) after passing through all stringent qualification and due-diligence process undertaken by RBI. These ATMs will have all functionalities of bank-run ATMs. For the ATM business, Vakrangee will focus more toward sub tier-III towns with huge potential.

Source: Thehindubusinessline
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