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Thursday, October 8, 2015

After IOB, RBI may pull up Allahabad Bank, Central Bank of India and Andhra Bank

The Reserve Bank of India may now turn its focus on Allahabad Bank, Central Bank of India and Andhra Bank as their dodgy loans and provision for loan losses are getting precariously close to that of Indian Overseas Bank's -the bank on which the central bank has imposed restrictions on branch expansion.

On Monday, the Chennai-based Indian Overseas Bank had informed the Bombay Stock Exchange that the RBI has initiated a Prompt Corrective Action (PCA) on the bank, which is triggered if bad loans rise above 10 per cent, capital adequacy ratio slips below 9 per cent, and return on assets falls below 0.25 per cent.

According to a report by Asian Markets Securities, in case of some public sector banks, the gross impaired loans -which includes gross non-performing assets and gross restructured loans -have crossed 15 per cent. This comes at a time when demand for credit has dried up and slippages continue to be at an elevated level which in turn could hurt banks' earnings.

The report says that as on March 2014-15, the gross impaired loans of Central Bank was 21.3 per cent, Andhra Bank's was 16.4 per cent, Allahabad Bank's was 16.6 per cent and Punjab National Bank's was 15.9 per cent. During the same period, the provision coverage ratio -the total provisions set aside to write off bad loans -is less than 60 per cent.

Banking experts said the move to impose PCA on Indian Overseas Bank was taken after the RBI inspected the bank and found several irregularities.

The bank cannot open new branches, declare dividend and recruit new employees without RBI's approval.

"However, the regu lator has not placed any restrictions on lending, which means that the regulator is more concerned about the way the bank is run," they added. In a notice to the ex change, the bank has said that "this action will not have any material impact on the growth prospects performance of the bank. The directions given by the RBI are for improving its internal controls and consolidation of its activities".

In the past, the central bank had initiated Prompt Corrective Action on United Bank of India after it came to light that the bank's bad loans were much more than declared.

The restrictions were, however, lifted after two years once its performance improved.

Source : Economic Times
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ICICI Bank launches in-store mobile-based payments with ‘mVisa’

ICICI Bank, India’s largest private sector bank, launched a service to enable customers to make electronic payments from their smartphones at physical stores, e-commerce and other deliveries at home, radio taxis, and utility billers, among others.

This service is based on ‘mVisa’, a new mobile payment solution from Visa. ICICI Bank claims to be the first bank globally to launch a mobile app-based ‘mVisa’ solution for consumers and merchants.

With this service, users of ‘Pockets’, ICICI Bank's app, can make cashless payments from their smartphones using their debit card by simply scanning an ‘mVisa’ Quick Response (QR) code at a merchant location without swiping the card at an EDC machine, the bank said in a statement.

This service provides customers the convenience of speed to complete a transaction along with enhanced security as the card remains in the possession of the customer.

To use this facility, a customer needs to click on the ‘mVisa’ icon on the home screen of the ‘Pockets’ app. The app automatically activates the camera in the phone, allowing customers to scan the QR code and enter their debit card PIN.

Rajiv Sabharwal, Executive Director, ICICI Bank, said: “...While there are 570 million debit cards in the country, there are only 1.1 million point-of-sale (POS) machines available for card payments. This restricts cashless payments to a certain category of merchants. We believe the simplicity of this technology will allow us to address this market gap and enable digital payments for an array of untapped categories such as home deliveries, cab services, and small merchants.”

TR Ramachandran, Visa Group Country Manager India and South Asia, said: “...The mVisa solution will enable consumers to engage in secure and convenient payments, and more easily access funds in their existing bank accounts to make everyday purchases and pay utility bills. mVisa will provide the benefits of electronic payments to thousands of consumers and small merchants across India, in line with the Government’s Digital India mission.”

To start with, this facility has been introduced in Bengaluru with 1,500 merchants and will shortly be extended to other cities.

The availability of electronic payments using debit cards through mobile phone is a new addition to ‘Pockets by ICICI Bank’, its own digital bank.

It also offers the most comprehensive digital wallet from a bank that allows anyone to download and start transacting instantly. The wallet allows users to send money using e-mail id, mobile number, Whatsapp, or bank account. Users can pay bills, recharge mobiles, book movie tickets, send physical and e-gifts, split and share expenses with friends.

‘Pockets’ uses a virtual Visa card which enables users to transact on any website or mobile application in India.

Customers can also request for a physical card to use it at any retail outlet. ‘Pockets’ has garnered over two million downloads in a few months since its launch, the bank statement added.

Source : Thehindubusinessline
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Banks can sanction 90% loan for property upto Rs 30 lac: RBI

Banks can now provide home loans up to 90 per cent for properties that cost Rs. 30 lakh or below, RBI said today.

Earlier, the facility was available only in cases where the cost was up to Rs. 20 lakh.

This will benefit those home seekers who plan to buy properties in the range of Rs. 20-30 lakh.

The RBI’s decision comes in the wake of all major banks reducing interest rate on home loans.

The Reserve Bank, through a circular, said that in the case of ‘individual housing loans’ falling under the loan category of up to Rs. 30 lakh, the LTV (Loan to Value) ratio is now up to 90 per cent.

For properties above Rs. 30 lakh and up to Rs. 75 lakh, the LTV is up to 80 per cent and those above Rs. 75 lakh, the ratio comes in at 75 per cent.

It has also modified the provisioning or risk-weights norms for home loans.

Source : Thehindubusinessline
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Wednesday, October 7, 2015

Bajaj Allianz Life ties-up with Dhanlaxmi Bank for distribution of products

Bajaj Allianz Life Insurance and Dhanlaxmi Bank have signed long-term agreement for a bancassurance partnership. As part of the agreement, the bank will continue to be a Corporate Agent for nine years and sell life insurance products of Bajaj Allianz Life Insurance.

Dhanlaxmi Bank has been a partner of Bajaj Allianz Life Insurance since 2009 and has done business worth nearly Rs. 400 crore. The relationship between Bajaj Allianz Life Insurance and Dhanlaxmi Bank started off with customised insurance solutions for the bank's customers.

Bajaj Allianz Life Insurance is a joint venture between Allianz SE, the world's leading insurer, and Bajaj Finserv Limited.

Dhanlaxmi bank is present through 678 touch points across Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, Gujarat, Delhi and West Bengal. All the life insurance products of Bajaj Allianz Life Insurance will be made available for the customers of Dhanlaxmi Bank and they will have the option to choose from the bouquet of different insurance solutions provided by Bajaj Allianz Life Insurance.

"Dhanlaxmi Bank has been one of our valued partners for nearly six years now and we aim to continue the strong relationship going forward. This partnership will help us leverage the existing synergies of the bank partner and its wide reach across the regions they operate in," said Anuj Agarwal, Managing Director & CEO, Bajaj Allianz Life Insurance.

"The 88 year long tradition of Dhanlaxmi Bank, equipped with modern technological capabilities, embellished with quality products of Bajaj Allianz Life Insurance, is set to form a strong partnership extending smart choice of investments to the customers," said G. Sreeram, Managing Director & CEO, Dhanalaxmi Bank.

Source : Economic Times
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Axis Bank realigns home loan rates; introduces new slab

Country’s third largest private lender Axis Bank, on Tuesday, introduced a new slab for its home loan borrowers with offers starting at 9.60 per cent onward.

The newly introduced slab is for loans up to Rs. 28 lakh, an official spokesperson of the bank said.

For salaried borrowers, home loans up to Rs. 28 lakh will come at 9.60 per cent, which is only 0.10 per cent over its revised base rate of 9.50 per cent, he said.

While the loans above Rs. 28 lakh will attract 9.65 per cent interest, he added.

The rates compare with rival ICICI Bank and HDFC’s offerings, which have been revised in the past two days, and are a shade expensive than SBI’s offering.

State Bank of India’s best offering for women is 9.50 per cent, while the same for other borrowers is 9.55 per cent.

Non-bank lender HDFC, which also announced a rate cut yesterday, is on par with ICICI Bank’s 9.60 per cent for women and 9.65 per cent for others.

Source : Thehindubusinessline
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J&K Bank slashes base rate by 35 bps to 9.5%

J&K Bank on Wednesday said that it has reduced its base rate by 35 basis points, making its loans cheaper for new as well as existing customers in Jammu & Kashmir and across the country.

The base rate of the bank stands reduced to 9.50 per cent from 9.85 per cent with immediate effect.

Maushtaq Ahmed, Chairman & CEO, J&K Bank announced this decision after the bank's Asset Liability Committee meeting at its Corporate Headquarters in Srinagar.

Source : Thehindubusinessline
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IRDAI chairman stresses on insuring all assets

There is a need to insure all assets of the country, according to T S Vijayan, Chairman of Insurance Regulatory and Development Authority of India (IRDAI).

He was speaking at a function organised by ICICI Lombard to mark the sale of one lakh long-term two-wheeler insurance policies here on Wednesday.

"'In the US, 80 per cent of assets are insured, while in India this is only at 7 per cent," he said.

Saying that there were 54 life and general insurance companies in the country, Vijayan said there is huge scope for increasing insurance penetration further.

The insurance penetration is less than 4 per cent of the country's GDP today.

Digitisation of policies to reduce the costs of distribution and speedy settlement of claims were important, he observed.

Bhargav Dasgupta, MD & CEO of ICICI Lombard, said response for the product offering long-term insurance was 'good '.

About 60 to 70 per cent of over 16 crore two-wheelers in the country did not have insurance, he added.

Source : Thehindubusinessline
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Tuesday, October 6, 2015

BoB, Andhra Bank, Legal & General infuse Rs. 150 cr in IndiaFirst Life

Bank of Baroda, Andhra Bank and Legal & General have together infused an additional Rs. 150 crore in their life insurance venture — IndiaFirst Life Insurance — taking the total share capital to Rs. 625 crore.

The equity infusion is proportionate to the shareholding pattern of the three entities, a statement from IndiaFirst Life said. Bank of Baroda holds 44 per cent, Andhra Bank 30 per cent, while Legal & General holds the remaining 26 per cent in IndiaFirst.

R.M. Vishakha, MD and CEO, IndiaFirst Life Insurance said, “This demonstrates the support, confidence and commitment of the shareholders to the company objective of ‘Securing Lives, Creating Value’ through an approach of Customer First. We believe in a balanced focus across diversified business channels to access various customer segments.”

The capital will be deployed to leverage the insurer's innovations on business channels and service delivery platforms, besides fuelling business growth.

Present in over 1,000 cities and towns across the country through 10,040 partner bank branches, the life insurer has covered over 9.5 million lives and has over Rs. 8,160 crore of AUM as on June 30, 2015.

Source : Thehindubusinessline
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Indian Overseas Bank shares skid 3% on RBI move

Shares of Indian Overseas Bank fell by nearly 3 per cent following the RBI announcing restrictions on the firm and taking “prompt corrective action” with the view to improve internal processes to deal with mounting non— performing assets.

The stock lost 2.27 per cent to Rs. 36.50 on BSE.

At NSE, shares of the company declined by 2.93 per cent to Rs. 36.35.

“The RBI has initiated a prompt corrective action on the bank and that this action will not have any material impact on the growth prospects or performance of the bank,” IOB had said in a regulatory filing yesterday.

The RBI has specified certain regulatory trigger points, as a part of prompt corrective action (PCA) framework, in terms of three parameters —— capital to risk weighted assets ratio (CRAR), net NPA and Return on Assets (RoA), for initiation of certain structured and discretionary actions in respect of banks hitting such trigger points.

Gross NPA of the bank rose to 9.40 per cent for the quarter ended June 30.

IOB’s gross non—performing assets rose to 8.30 per cent at the end of March 31, from 4.84 per cent a year ago, according to the provisional RBI data taking into account domestic operations of banks.

Source : Thehindubusinessline
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HDFC mobilises Rs. 10,400 cr; NCDs, warrants list at big premium

In two highly successful offerings, mortgage giant HDFC Ltd has raised Rs. 5,000 crore from low— cost non convertible debentures (NCDs) and a further amount of about Rs. 5,400 crore would come in from warrants, both of which got listed with a huge premium today.

“Total amount we have received is Rs. 5,051 crore, including Rs. 5,000 crore from the NCD and Rs. 51 crore is the face value of the warrants, which on conversion will get us an additional Rs. 5,384 crore,” HDFC Vice Chairman and CEO Keki Mistry told reporters here.

Mistry said money raised through NCD issue will be deployed for regular lending purposes while the conversion of warrants will beef—up the capital, which is currently at “reasonably comfortable” levels in the future.

“The advantage of this instrument is that it gives us the ability to generate money today and generate capital at a future date,” Mistry said, adding that the need for capital can be necessitated due to a variety of reasons including balance sheet growth and also maintaining its stake in HDFC Bank.

The NCDs were offered at a coupon rate of 1.43 per cent, but were trading at 8.54 per cent in the debut trade today.

Similarly, the warrants generated total volumes of over three crore in the first day of trade on the BSE and the NSE.

As against the issue price of Rs. 14, the warrants were listed at a discovered price of Rs. 146.05 and closed at the upper circuit of 10 per cent at Rs. 160.65 at the two bourses.

The warrants also generated huge unsatisfied demand as they were locked in upper circuit.

Mistry said the NCD issue, which saw sale of 5,000 secured NCDs of the face value of Rs. 1 crore each, comes at a coupon of 1.43 per cent.

It issued 3.65 crore warrants at Rs. 14 per warrant, and the warrant holder has the right to exchange one warrant for one equity share of the company in the next three years at a pre—agreed price of Rs. 1,475.

The conversion price of Rs. 1,475 is a 25 per cent premium over the floor price as on September 30, determined by a formula announced by SEBI, he said.

Assuming all the warrant holders convert into equity, the dilution in the stock will not be over 2.2 per cent, he said.

Both the NCDs as well as the warrants were issued to qualified institutional buyers domestically, the company said, adding that the NCDs have been listed on both BSE and NSE.

HDFC’s scrip closed 0.17 per cent higher at Rs. 1,258.10 apiece on the BSE, as against a 0.55 per cent gains in the benchmark.

Source : Thehindubusinessline
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Bank of Maharashtra to raise Rs. 394 cr via pref shares to Govt

Bank of Maharashtra today said it has received shareholders’ approval to raise Rs. 394 crore by issuing 10.51 crore equity shares on preferential basis to the government.

“We have obtained the approval of shareholders for raising equity capital of the bank through preferential issue of 10,51,50,787 equity shares of the face value of Rs. 10 each at an issue price of Rs. 37.47 per share, including premium of Rs. 27.47 per share to the government aggregating to Rs. 394 crore,” the bank said in a statement.

The approval was given at the extraordinary general meeting of the shareholders of the bank today.

Post this issuance, the government’s holding in the bank would increase to 81.61 per cent from the existing 79.80 per cent.

Last week, eight public sector banks, including SBI, Punjab National Bank and Bank of Baroda, had allotted equity shares on preferential basis to the government against capital infusion of Rs. 13,955 crore.

Source : Thehindubusinessline
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Bank of Baroda investigating Rs 350-crore bill discounting fraud

India's second largest lender Bank of Baroda is investigating a bill discounting fraud running into Rs 350 crore.

The listed bank, which has suspended a senior official after it stumbled upon the irregularities in its Ahmedabad operations, will soon have to decide whether to provide the amount in the September-end earnings number.

A senior official of the government-owned institution told ET that the matter has been reported to the Reserve Bank of India. "There is a suspected fraud. An internal probe is on. If the money cannot be recovered, the bank will have to take a hit... An established company is involved, but I'm not in a position to disclose the name... We sensed something was wrong when a few bills bounced," said the person who declined to share details as an investigation is underway.

It is understood that one of the bank's offices in Ahmedabad ended up discounting bills against which the underlying trade transactions were fake or non-existent.

In typical bill discounting transactions, a bank buys the bill before it is due and credits the amount (after deducting certain discounting charge) to the customer's account. It's a facility that sellers and exporters avail of from banks to obtain finance. A fraud is perpetrated when typically a buyer and seller, acting in connivance, win the bank's confidence by carrying out a string of regular transactions where the buyer (either local or overseas) agrees to honour the payment. As these come across as normal trade transactions, the bank agrees to raise the bill discounting limit. After a default — when a buyer fails to pay up — the seller comes up with explanations like product defect or cash crunch faced by the buyer for non-payment.

Once the bank is convinced, the seller makes a new shipment, discounts a new bill and uses the proceeds to repay the bank for the previous transaction. As this is repeated for a few more shipments, the amount increases due to the interest cost.

While the specific modus operandi in the Bank of Baroda fraud is still unclear, it is possible that the customer concerned — which, according to a banker in Ahmedabad, is a textile company — had used a similar ploy.

Such frauds surface as increasingly larger amounts and frequent discounting evoke the bank's suspicion.

In recent times, the facilities offered by many banks for working capital have increasingly been misused by borrowers facing cash flow stress — in particular, the trade bills discounting facilities offered by banks has been a source of frequent 'kite flying' (without actual trade transactions) for funds generation by borrowers.

"At some point when the amount becomes too large to handle, the parties abruptly discontinue. Since in several cases, these are in the nature of unsecured finance, a bank may be left with no choice but to absorb the losses," said another banker.

Source : Economic Times
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RBI starts prompt corrective action on IOB to deal with NPAs

RBI has taken "prompt corrective action" on state-run Indian Overseas Bank (IOB) with the view to improve internal processes to deal with mounting non-performing assets.

"The RBI has initiated a prompt corrective action on the bank and that this action will not have any material impact on the growth prospects or performance of the bank," IOB said in a filing on BSE.

The RBI has specified certain regulatory trigger points, as a part of prompt corrective action (PCA) framework, in terms of three parameters -- capital to risk weighted assets ratio (CRAR), net NPA and Return on Assets (RoA), for initiation of certain structured and discretionary actions in respect of banks hitting such trigger points.

Gross NPA of the bank rose to 9.40 per cent for the quarter ended June.

IOB's gross non-performing assets rose to 8.30 per cent at the end of March 2015 from 4.84 per cent a year ago, according to the provisional RBI data taking into account domestic operations of banks.

"The directions given by the RBI are for improving the internal control of the bank and for the purpose of consolidation of the activities of the bank," it said.

As per the PCA framework the bank is required to undertake special drive to reduce NPAs and contain generation of fresh NPAs; review loan policy and take steps to strengthen credit appraisal skills and follow-up of advances.

Besides, the bank has to put in place proper credit-risk management policies; reduce loan concentration; restrictions in entering new lines of business, making dividend payments and increasing its stake in subsidiaries.

Last year, global rating agency Standard & Poor's (S&P) has cut long-term issuer rating for IOB from "BBB-" to "BB+" on sharp deterioration in the asset quality.

In a similar move, another rating firm Moody's too downgraded the rating of the bank.

Moody's warned that IOB's reserves and capital provide a narrow buffer against potential losses.

Source : Economic Times
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Monday, October 5, 2015

HDFC cuts home loan rates to 9.65%

After big banks cutting base rate, housing finance company HDFC (Housing Development Finance Corporation) has cut its retail prime lending rate by 25 basis points with the effective home loan rate at 9.65 per cent.

The effective home loan rates for new customers would be 9.65 per cent pa and for women will be 5 basis points lower at 9.60% pa, HDFC said in a statement.

Effective from October 06, this reduction would benefit all customers, it added.

At present, SBI stands at the lowest base rate of 9.30 per cent. However, effective home loan rates stand at 9.50 per cent. ICICI bank and HDFC bank’s base rate are at 9.35 per cent each, while Axis Bank’s base rate stands at 9.50 per cent.

Recently, HDFC also reduced its deposit rates in similar range across all maturities.

The reduction in the rates will also be applicable on loans to Non-Resident Indians (NRIs)/ PIO's card holders.

Top banks responded to the RBI’s key policy rate cut by passing on the benefit to customers in the range of 20-40 bps.

Source : Thehindubusinessline
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More banks cut lending rate

United Bank of India has said that it has decided to reduce its base lending rate from 9.90 per cent to 9.65 pre cent from October 12.

It said various term deposit rates have also been moderated downwards depending on periodicity and quantum of deposits. The deposit rate for 5-year and above period (up to Rs. 1 crore) has been revised down to 6.75 per cent from the existing 7.25 per cent.

Corporation Bank
has announced the reduction of base rate for lending by 20 basis points. The bank informed the NSE on Monday that it has reduced the base rate for lending from 9.9 per cent to 9.7 per cent with effect from October 8.

Standard Chartered on Monday announced that it has reduced its base rate by 25 basis points to 9.5 per cent.

The revised rate will come into effect from October 5.

This move comes few days after the Reserve Bank of India (RBI) cut its repo rate by 50 basis points on September 29.

Source : Thehindubusinessline
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Union Bank to buy KBC Asset Management’s 49% stake in MF jt venture

Union Bank of India and KBC Asset Management NV have reached an agreement on the sale of KBC Asset Management’s 49 per cent stake in Union KBC Asset Management Co Pvt Ltd to the bank.

The public sector bank, however, did not disclose the deal size.

The joint venture was established between both companies in 2009.

In the July-September 2015 quarter, Union KBC Asset Management had average assets under management aggregating Rs. 2,672 crore.

Union Bank, in a statement, said the transaction, which is subject to regulatory approval, will have no impact on the joint venture’s client positions and product portfolio.

Arun Tiwari, Chairman & Managing Director of Union Bank of India, said this transaction reaffirms Union Bank’s vision to provide all financial solutions under one umbrella, which apart from banking products and services, also includes life insurance products through its joint venture Star Union Dai-ichi Life Insurance Co Ltd. and mutual fund products through Union KBC AMC to its customers.

Tiwari said his bank is committed towards offering portfolio of services to the investors under its own brand.

Source : Thehindubusinessline
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Vijaya Bank cuts base rate to 9.65%

Vijaya Bank has announced a reduction in its base rate by 20 basis points with effect from October 8 pursuant to the cut in repo rate announced by RBI last week. Accordingly, the revised base rate will be 9.65 per cent per annum as against the existing rate of 9.85 per cent, the Bengaluru-headquartered public sector bank said in a statement on Saturday. 

Since June 2015, the Bank has so far effected 60 bps reduction in its base rate. With the latest reduction in base rate, it is expected that the sluggishness in credit offtake shall ease and poised to grow further. Further, the retail consumer front shall stand to benefit, especially housing and vehicle segment, the bank said.

Source : Thehindubusinessline
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Mobile banking largely an urban phenomenon, says RBI arm

Mobile banking has finally arrived in urban and semi-urban areas. About 90 per cent of the users of mobile banking are from these regions, according to findings of a study conducted by the Institute for Development and Research in Banking Technology (IDRBT), an arm of the Reserve Bank of India.

Mobile banking is now seen as tool for convenience by many. While only 50 per cent have used mobile banking to transfer money, 95 per cent of users have used it just to check balance in their accounts, says the sample study.

The findings are based on responses from the participants who have bank accounts and are residing in district headquarters, sub-districts (mandals) and villages.

Challenges faced

For better penetration of mobile banking, there are challenges such as connectivity issues, mindset issues – especially the preference to visit branch for completion of a transaction – and also lack of awareness about mobile banking in rural areas.

Heavy fragmentation of mobile handset hardware and operating systems, small ecosystem of buyers and sellers in any single payment/wallet solution have also been identified.

Customised solutions

There is a need for banks to consider offering devices customised to facilitate mobile banking. They may negotiate with service providers so that there on connectivity charges for mobile internet or talk time related when undertaking banking operations, the study suggested.

For the purpose of comparison, 43 mobile solutions across developed, developing and underdeveloped countries have been evaluated and it has been found that China is the world leader in terms of both amount transferred over mobile phones as well as transaction volume.

The success of mobile banking is generally attributed to wide spread use of smartphones, high penetration of 3G and 4G technologies and low fragmentation of mobile platforms.

“India needs to innovate to consolidate the complex matrix of m-commerce, m-wallet players, banks, customer and telcos,” the study said.

Source : Thehindubusinessline
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SBI to charge up to 10% for home loans

SBI may have cut its base lending rate by 40 basis points to 9.3 per cent following RBI’s latest policy rate cut, but home loan customers of the top lender will have to pay up to 0.7 per cent above the base rate, and interest of as much as 10 per cent for their loans.

Accordingly, the actual reduction in home loan rate will be a maximum of only 20 basis points, while a higher margin above the base rate will mean that customers will have to pay the same rate of interest for home loans above Rs. 1 crore.

Maxgain home loans

The rate for Maxgain home loans above Rs. 1 crore — at 9.75 per cent for women — would come down by only 20 basis points, while for other customers it would actually remain unchanged at 10 per cent with effect from tomorrow despite a reduction of 40 basis points in base rate.

For the CRE (Commercial Real Estate) Maxgain loans, SBI would charge as much as 65 basis points above base rate or 9.95 per cent for the women customers and 70 basis points above the base rate or 10 per cent for other customers.

The bank spokesperson was not immediately available for comments. However, bank officials tried to justify the increase in the mark-up over base rate, saying the decline in actual home loan rates has been 75 basis points since December 2013, as against a reduction in base rate by 70 basis points.

They also said that the base rate for other lenders continues to be higher at 9.55 per cent, while in December 2013 also it was higher at 10.3 per cent as against SBI’s 10 per cent.

Lending rate

Interestingly, state-owned SBI was among the first to announce a reduction in its rates after RBI surprised with a 50 basis points reduction in its policy rate on September 29 as it lowered its minimum lending rate or base rate by 40 basis points —— the highest for any lender so far —— from 9.7 per cent to 9.3 per cent with effect from October 5, that is tomorrow.

However, in its latest circular, dated October 3, to all local head offices SBI has explained the actual home loan interest rates that would be applicable across various categories following the latest reduction in the base rate coming into effect from tomorrow.

Women customers

As per the circular, women customers, who typically get a subsidised rate would be charged 20 basis points above the base rate, resulting in an actual interest rate of 9.5 per cent tomorrow onwards —— down by only 20 basis points from the existing rate of 9.7 per cent.

Till today, women home loan customers were being given housing loans at the base rate of 9.7 per cent without any mark-up, but tomorrow onwards they will be charged 20 basis points above the base rate of 9.3 per cent or an interest rate of 9.5 per cent.

Source : Thehindubusinessline
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