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Thursday, August 17, 2017

Yes Bank savings account interest rates cut; turns 5th lender to do so

Mid-sized private lender Yes Bank on Wednesday became the fifth bank to reduce interest rates on savings accounts. With effect from September 1, savings accounts with balances under Rs 1 lakh at the bank will now earn 5%, against 6% so far. Accounts with balances of Rs 1 crore and above will earn 6.25%, compared with 6.5% earlier. In the last two weeks, State Bank of India (SBI), Bank of Baroda (BoB) and Axis Bank have all reduced interest rates on savings accounts by 50 basis points (bps) to 3.5%. While the cut at SBI applies to accounts with balances up to Rs 1 crore, the reduction at BoB and Axis Bank is for accounts with balances up to Rs 50 lakh. Kotak Mahindra Bank reduced the rate on deposits of between Rs 1 crore and Rs 5 crore by 50 bps to 5.5% on August 4.

Yes Bank had earlier mentioned lowering the SA rate in line with the system as one of the tools available to them to reach their stated goal of a 4% net interest margin by FY20.

Source : Financial Express
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Bank unions firm on strike as talks with IBA fail

Talks between the Indian Banks’ Association (IBA) and the unions held in Mumbai on Wednesday, to avert a nationwide strike on August 22, have failed.

DT Franco of the All-India Bank Officers’ Confederation (AIBOC) and CH Venkatachalam of the All India Bank Employees Association (AIBEA) said the IBA insisted that it was for the government to make a decision on most of the unions’ demands.

But they were appreciative of the fact that, for the first time, the IBA took the initiative to call the unions for talks. The unions will now meet with the Chief Labour Commissioner in New Delhi on August 18.

At Wednesday’s meeting, VG Kannan, Chief Executive of IBA, expressed the view that the unions should not go on a strike at a time when talks are going on at several levels on the contentious issues.

In his response, AIBEA’s Venkatachalam said that he wished he could agree but most of the issues raised were very serious in nature. On privatisation and mergers, the government has been contradicting the RBI Governor and Deputy Governor, he said.

The Banks Board Bureau is not doing anything concrete for the betterment of banks, he said. There was no way the unions could withdraw the strike call, he added.

AIBOC leader Franco said that instead of requesting the unions not to go for strike, the IBA should support them.

Source : Thehindubusinessline
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Jan Dhan accounts may be losing their momentum

Jan Dhan is probably the most aggressive scheme undertaken by any government for financial inclusion. Between December 2014 and December 2016, the number of accounts increased from 104 million to 262 million and further to 288 million by May 2017. However, the challenge is to get people to use these accounts and get into the banking habit, so that they could move up the ladder and use a credit facility or remittance or third-party product offered by banks. How successful has this scheme been?

The thrust was on numbers to begin with and, hence, having 288 million accounts indicate that virtually every family has access to an account. The average balance held in these accounts, however, is critical as it indicates whether or not the banking habit has been cultivated. The table here provides some data on these accounts, with focus on non-zero balance accounts (information up to February 2017 only). Comparable numbers for average balance in all accounts are also provided to give a perspective.

In terms of the use of these accounts, some interesting facts emerge. First, the average balance kept in these accounts increased and peaked in December 2016. The higher usage of these accounts may be attributed to demonetisation as several transfers were made – both by households as well as those stocking black money for conversion purposes. Still the amount was just about 22 days of NREGA wages. Second, post-demonetisation the money appears to have been withdrawn by around Rs 500 per account. Third, the number of zero balance accounts has come down sharply from 73.3% in 2014 to 24.1% in 2016, but rose to 24.9% in February 2017.

How high are these average balances? Prior to the introduction of this scheme, RBI data on average size of deposits as of March 2014 shows that in rural areas, it was Rs 11,080/account, which rose to Rs 17,251 in semi-urban areas and Rs 36,056 in metro and urban areas. The average for the country was Rs 21,156/account. Two conclusions may be drawn here. The first is that the Indian banking system was doing an excellent job in terms of garnering funds from the business perspective and covered households which had savings. The second is that the present performance, even at its peak of Rs 3,571/account in 2016, is very low compared to the existing average. This raises questions about the savings capabilities in the country.

Some of the questions that may be posed are the following. Do these households actually have money to save considering their low incomes? This is pertinent because with high levels of economic deprivation in the country, households hardly have anything left for saving. Do the households who have been given such accounts know how to operate them, has there been any awareness programme carried out to educate them on these benefits? Are the positive balances here only on account of the direct benefit transfers of the government, where payments on NREGA or pensions or other subsidies made through these accounts? These questions are important as they do involve a cost which banks have to currently bear as these are no-frills zero cost accounts being provided to all and sundry.

The interesting part of these accounts is that it has primarily been an initiative shown by the public sector banks with their share being around 80%, followed by regional rural banks with 16-18%. Both have borne the cost of this scheme. Private sector banks have averaged around 3.2-3.5%. The leading states are UP, Bihar, West Bengal, Maharashtra, Manipur, Rajasthan, Chhattisgarh, Assam and Odisha.

A thought worth pondering over is that if PSBs in the normal course were doing a good job of coverage and Jan Dhan has acted more as a channel for government transfers, the addition of small banks and payments banks would only make the canvas more competitive with each segment fighting for a limited piece. It does appear that we may have reached the end of the road where improvement can accrue only if incomes increase and having more institutions and schemes may not add a significant delta to the frame.

The writer is Chief Economist, CARE Ratings. Views are personal

Source : Economic Times
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Wednesday, August 9, 2017

Strike call: IBA invites bank unions for discussions post-noon

The Indian Banks' Association (IBA), which represents the management of banks, has said the all-India strike call given by the unions on August 22 is "totally unwarranted".

S.K. Kakkar, Senior Advisor, Human Resources and Industrial Relations, IBA, made this observation in a communication to Sanjeev K Bandlish, convenor of the United Forum of Bank Unions (UFBU).


Kakkar acknowledged receipt of UFBU's letter to the Chairman, IBA, informing him of the decision of member unions - AIBEA, AIBOC, NCBE,AIBOA, BEFI, INBEF, INBOC, NOBW and NOBO - to go on strike.

The IBA has gone through the demands raised by the UFBU but observed that most of the issues are at the macro-level where the government has to take a decision.

The IBA can facilitate taking up these issues in the appropriate forum. In addition, there are other issues which are under bipartite discussions, for which talks have been initiated.

"We regret to point out that under these circumstances, the UFBU has called for a strike, which is totally unwarranted," the IBA letter said.


The IBA, therefore, requested the unions to reconsider their decision and refrain from undertaking the agitation programme.

It extended an invitation to the UFBU to its office this afternoon along with a representative each from the officers' association and workmen's union to discuss matters "with an open mind."

The IBA also expressed the hope that the UFBU would consider the request being a responsible representative of employee unions and desist from the agitation path that would cause inconvenience to bank employees and put the general public at large to avoidable hardship.

Source : Thehindubusinessline
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Muthoot Finance Q1 net up 30%

Muthoot Finance posted a 30 per cent increase in net profit at Rs.351 crore in the first quarter of FY18 against Rs.270 crore in the previous year.

The company’s loan assets rose Rs.574 crore during the quarter. Its loan assets stood at Rs.27,852 crore as at end-June.

The board has decided to acquire the remaining 11.73 per cent in Muthoot Homefin (India), which is held by other shareholders, at an aggregate price of Rs.38.72 crore. With this acquisition, MHIL will become a wholly-owned subsidiary of Muthoot Finance.

Further, the board has decided to infuse Rs.100 crore in MHIL as equity share capital. During the quarter, MHIL’s loan portfolio increased by Rs.155 crore to Rs.596 crore.

Belstar Investment and Finance, a microfinance NBFC in which Muthoot Finance holds 64.60 per cent stake, grew its loan portfolio 11 per cent to Rs.628 crore.

Source : Thehindubusinessline
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HDFC Bank increasing its term financing exposure riding on demand

HDFC Bank, India’s most valuable private sector bank, is slowly increasing its term financing exposure riding on demand for financing from the road and power transmission sector as it seeks to diversify its balance sheet.

Though working capital loans still dominate the bank’s corporate balance sheet, it is increasing looking at term loans especially refinancing opportunities, executive director Kaizad Bharucha said.

“Though 80% to 85% of our loans were working capital loans, it was not as if we were averse to term financing. But as our balance sheet has increased we have to diversify our lending as well. There are increasing opportunities in refinancing, even though private capex is yet to kick in,” Bharucha said.

Loans to companies or wholesale loans made up 46% of the bank’s loan book as of June 2017. The bank’s total advances as of June stood at Rs 5.80 lakh crore out of which 30% were term loans, up slightly from 27% a year ago, Bharucha said.

HDFC Bank is looking at opportunities especially in road projects under the hybrid annuity model (HAM) under which is a mixture of the built operate transfer (BOT) and engineering procurement and construction (EPC) models in road development. “Besides roads we also have interest in transmission. We will ultimately lend prudently and to projects in which we have seasoned with the management and know the company,” Bharucha said.

On Tuesday, HDFC Bank was ranked number one among banks in India by a annual survey of US based Greenwich Associates on the basis of interviews with CFOs and treasurers of 500 middle market and large companies.

Source : Economic Times
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Axis Bank cuts interest rate on savings bank account

Private sector lender Axis Bank reduced interest rate on savings bank accounts by 50 basis points to 3.5 per cent for deposits up to Rs 50 lakh.

However, the bank will continue to pay 4 per cent interest on deposits of above Rs 50 lakh.

Axis Bank is the fourth lender to reduce the interest rate after market leader State Bank of India (SBI) begun the process of reducing interest rate on savings bank account.

"... the bank has revised the interest rate downward on Savings Account balance by 50 bps to 3.50 per cent per annum on balance of up to Rs 50 lakh," Axis Bank said in a regulatory filing.

The new interest rates will be effective from 08/08/2017, it added.

On July 31, SBI slashed interest rate on savings account deposits by 50 basis points to 3.5 per cent on balance of Rs 1 crore and below.

Source : Economic Times
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Friday, August 4, 2017

Punjab National Bank’s exposure to Videocon, Aban Offshore slips in June quarter

Punjab National Bank (PNB)’s exposure to Videocon Industries and Aban Offshore slipped in the June quarter, the country’s second-largest state-owned lender has told analysts and investors. According to two people aware of the development, PNB said in an analyst conference call that its Rs 770-crore exposure to Videocon and Rs 307-crore exposure to Aban have turned bad. On Wednesday, PNB reported a 12% year-on-year (y-o-y) rise in its net profit to Rs 343 crore for the quarter ended June. Its gross non-performing asset (NPA) ratio rose 113 basis points (bps) sequentially to 13.66%, while the net NPA ratio rose 86 bps to 8.67%. The bank has total exposure of Rs 11,000 crore to nine of the 12 accounts referred by the Reserve Bank of India (RBI) for resolution under the Insolvency and Bankruptcy Code (IBC), according to an analyst, and the lender will have to make additional provisions of Rs 1,000 crore towards them over the next three quarters. PNB is the first large lender to recognise Videocon as an NPA. On May 9, Videocon was declared an NPA by mid-sized lender Dena Bank. Its gross debt stood at Rs 47,554 crore in December 2015.

In FY16, the company’s consolidated net profit stood at Rs 1,368 crore on the back of Rs 10,311 crore in revenues. Earlier, bankers told FE Videocon had been trying to repay debt by selling some of its businesses such as Kenstar, merge its direct-to-home division with Dish TV and lobby for the troubled Petrobras project in the Sergipe Basin, where the company is in a joint venture with Bharat Petroleum (BPCL). Aban Offshore owes Rs 12,030 crore to lenders as on March 31.

Both companies are likely to be on a second list of defaulters that the regulator is believed to be preparing for resolution under the Insolvency and Bankruptcy Code. On June 13, RBI had asked banks to refer a dozen stressed companies — with a combined debt of close to Rs 2.4 lakh crore — to the NCLT. Bankers were given a fortnight from the date of issue of the notification to move the tribunal.

Source : Financial Express
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SBI plans to raise Rs 2,000 cr via Basel-III bonds

State Bank of India plans to raise Rs 2,000 crore by allotting Basel-III compliant bonds to various investors.

“The committee of directors for capital raising accorded its approval today to allot 20,000 AT1 Basel-III compliant non-convertible, perpetual, subordinated bonds in the nature of debentures... aggregating Rs 2,000 crore to various investors,” SBI said in a regulatory filing on thursday.

The country's largest lender said the bonds will carry a coupon rate of 8.15 per cent per annum with a call option after 5 years or the anniversary date thereafter.

SBI shares were trading 1.67 per cent lower at Rs 302.50 on the the BSE

Source : Thehindubusinessline
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Kotak Mahindra Bank retains SB a/c rates at 5-6%

“Borrowers matter, so do savers,” tweeted Uday Kotak, Executive Vice-Chairman and Managing Director, Kotak Mahindra Bank, on Thursday even as his bank decided to keep its savings bank rate steady at 5-6 per cent.

This decision comes despite the RBI paring the repo rate (the interest rate at which banks borrow funds from the central bank to overcome short-term liquidity mismatches) from 6.25 per cent to 6 per cent and State Bank of India reducing its savings bank (SB) rate to 3.50 per cent from 4 per cent on deposits up to Rs.1 crore.

Kotak Mahindra Bank offers 5 per cent interest on SB deposits up to Rs.1 lakh; 6 per cent on deposits above Rs.1 lakh and up to Rs.5 crore; and 5.5 per cent on deposits above Rs.5 crore.

Among other private sector banks that offer higher interest rates on SB are YES Bank (6 per cent on deposits up to Rs.1 crore); IndusInd Bank (4 per cent on daily balance up to Rs.5 lakh; 5 per cent on daily balance above Rs.5 lakh and up to Rs.10 lakh; 6 per cent on daily balance above Rs.10 lakh); Lakshmi Vilas Bank (4 per cent on deposits up to Rs.1 lakh; 5 per cent on deposits above Rs.1 lakh and up to Rs.5 lakh; 6 per cent on deposits above Rs.5 lakh; 6.50 per cent on balances above Rs.10 crore).

Source : Thehindubusinessline
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Cost of credit, NPA positioning restricting banks to cut MCLR: SBI

The SBI on Thursday said that though the Marginal Cost of Funds-based Lending Rate (MCLR) is expected to be in tandem with the policy rates, banks are hesitant to reduce it due to cost of credit and deposits and NPAs positioning.

The Reserve Bank of India (RBI) on Wednesday cut the key lending rates by 25 basis points (bps).

"As far as the MCLR is concerned, it is a function of multiple components. It is intended that the MCLR is in tandem with policy rates," State Bank of India (SBI) Managing Director and Chief Executive Officer Dinesh Khara told BTVi in an interview.

"But other factors like the cost of deposit and cost of credit -- which are a critical determinant of MCLR -- and also non-performing assets (NPAs) positioning, are restricting banks from cutting the MCLR... the policy rates are a critical component but not the only component affecting the MCLR," he said.

The banking system is rolling into a lot of liquidity and they would like to deploy that liquidity into the right kind of investments and projects coming up for consuming this kind of liquidity, Khara said.

The advances growth in general is 6 per cent in the current fiscal while the retail advances are doing well at 10-12 per cent.

Retail advances are still linked to base rate while the corporate advances are getting aligned to the MCLR.

"Banks are willing to lend at the right kind of price. But when it comes to investment demand from corporates, that is yet to be seen. My sense is that economic activity through private investment gets revived," he said.

Source : Economic Times
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'SIP' peaks on Google search, attracts investors from small cities

As stocks scale new highs and return from bank deposits dip, even regions that are not typically known as investor hubs are becoming more and more curious about 'Systematic Investment Plan' or SIP.

The search for the keyword, 'Systematic Investment Plan' (SIP), using the Google search engine has peaked. Contrary to general perception, an overwhelming number of people in states like Jharkhand, Sikkim, and Haryana - where Assets Under Management (AUM) as a percentage of respective state domestic products (SDP) is low - are trying to find out more about SIPs.

According to Google data compiled by ETIG, the search for `SIP' has touched a peak score of 100 - a 5-year high. Google score of 100 indicates peak popularity of a term in a defined time frame.

For instance, the search interest for `SIP' is the highest in Jharkhand among all states, an interest score of 100. The eastern state with per capita investment of Rs 3,830 in mutual funds and Rs 12,600 crore of AUM accounts for 0.6 per cent of the total AUM in the country.

Sikkim -with interest score of 89 for Rs SIP' -has per capital investment of Rs 15,010 in MFs -accounts for 0.1 per cent of the total AUM. Surprisingly, no fund house runs a branch in the state.

The total number of SIP accounts in India has grown at a pace that has shadowed the surge in interest on the product. In the past three years, the number of SIP accounts increased from 68 lakh to 1.45 crore in June 2017.

In the past few months, about 7-7.75 lakh SIP accounts have been added with an average investment size of Rs 3,000 per account, according to the Association of Mutual fund of India (AMFI). The average ticket size of SIPs for the same period last year was around Rs 2,200.

The nature of search on the Internet also reflects the entry of otherwise risk averse new investors who are keen to ride the equity boom. For instance, the interest score of 'top mutual funds' has a high positive correlation with the interest score of Rs SIP.'

Globally, the interest score for the term 'best mutual funds' is the highest in India, followed by unrelated terms such as Rs US' and Rs Canada'.

The total SIP book of local MFs was $736 million in June 2017. During FY 16-17, Rs 43,921 crore was collected through SIPs, which is equivalent to 72 per cent of the total inflow into MFs.

What's driving the growth in SIP investments? Most retail investors have found SIPs to a convenient and relatively safer way to participate in equities without timing the market. Also, the ticket size can be as low as Rs 500 a month.

Source : Economic Times
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Wednesday, July 19, 2017

A look at how laggards like Lakshmi Vilas Bank, Federal Bank and DCB Bank are scripting a turnaround

From the debris of the Indian banking industry, a small segment of lenders – the old private sector banks – is rising like phoenix with a promise of being profitable, but on a scale that they could afford.

Correction of past mistakes, availability of technology off the shelf, entry of professional managers from large banks, and availability of capital for those with a promise are all helping many laggards of the past turn around.

The transformation in some of these banks is not going unnoticed at the market place with investors cherry picking those banks which are making a difference to the community they serve, and at the same time keep an eye on the financial metrics.

In the growth versus profitability debate too, they appear to be better placed as the state-run banks are likely to be hobbled by lack of capital as they clear the bad loan mess, while large private sector ones would be handicapped by their sheer size tempering their growth.
A look at how laggards like Lakshmi Vilas Bank, Federal Bank and DCB Bank are scripting a turnaround

"There is a bet on select old-generation private sector banks," said A Balasubramanian, chief executive officer at Birla Sun Life Asset Management Company. "Those banks have a balanced mix of retail and corporate loans, which mitigates risks. In the next few years, they should be elevated to mid-sized banks’ league. Their growth will outpace the industry average."

Lakshmi Vilas Bank, Federal Bank, South Indian Bank, DCB Bank, Karur Vysya Bank, Karnataka Bank are on a roll when the banking industry dominated by state-run banks is on the mat. Shares of these banks have outperformed the broader market with them soaring 30-90% in the past year, beating the BSE Bankex's 25% gain.


A lot of these banks are changing with times. Many like Lakshmi Vilas, Federal and Karnataka Bank have professionalised their board of directors and taken their management away from the community that was instrumental in laying the foundation for them.

The Chennai-based Lakshmi Vilas has Parthasarathi Mukherjee as chief executive, a banker who had spent over 20 years in Axis Bank as the head of its corporate relationships. Prior to that, he was with State Bank of India. The lender had in the past appointed PR Somasundaram, formerly with Standard Chartered Bank, as chief executive.

Federal Bank, the Kerala-based lender hired Shyam Srinivasan, who managed consumer banking business at Standard Chartered, as chief executive in 2010. Since then, its loans have surged 132% to Rs 74,091 crore (between FY11 and FY17) and its profits have risen nearly 50% to Rs 257 crore from Rs 172 crore.

"We have broken out the traditional model to scale up," said Srinivasan of Federal Bank. "We have gained acceptance from the markets, customers."

Many of the banks with their new managers from outside the community or the region are beginning to look at the market afresh. They are breaking the barriers of the old by embracing change.

"With a new management at the helm of affairs, our bank is shedding its old image to bring out a new look," said Parthasarathi Mukherjee. "All these are triggering a professional work culture."

The industry comprises four broad segments—state-run banks with about 71% market share, followed by new-age private sector lenders that hold about one-fourth of the market share. The marginal players are the old private sector lenders, which escaped bank nationalisation, and foreign banks together holding less than 5% of the pie.
A look at how laggards like Lakshmi Vilas Bank, Federal Bank and DCB Bank are scripting a turnaround

The old private lenders were a neglected lot with many of them serving a community or, at best, being a regional player, say in a particular state. A Lakshmi Vilas or a Karur Vysya will get dominant business from Tamil Nadu, or Karnataka Bank from the eponymous state. Federal Bank has dominant business from Kerala's diaspora, or DCB Bank from the western region.

Since many had their origins as a community bank, a few controlling dominant groups stifled their growth in some cases. Their financial ratios were the envy of even the dominant ones. Tamilnad Mercantile Bank—which declared a dividend of 1,000% for 2005-06 and 2006-07, and 5,000% in 2007-08— was plagued by fight within the Nadar community. Bank of Rajasthan was under regulatory lens but was forced into a merger with ICICI Bank.


Indian banks in the decade between 2002 and 2012 were binging on the growth in infrastructure and corporate lending. Many of them cut cheques for thousands of crores of rupees for infrastructure projects. The strategy helped them rake in huge profits.

But when the tide turned in 2012 due to a fragile macro-economic condition with high fiscal and current account deficit, excess of imports over exports, banks were left with defaulters. Bad loans have since surged to almost 10% of total loans.

"These banks are now seeing themselves in a better position to grow as larger peers are saddled with high NPAs and hesitant to further lending," says Kuntal Sur, partner-financial services, PwC, a consultant. "They have capacity to expand, as they have lower non-performing assets compared to larger peers, in particular PSU banks."

Many like the Mumbai-based DCB Bank are seeing opportunities to grow. "Our idea is to double the loan book in three to four years to reach Rs 30,000 crore," says Murali Natarajan, CEO, DCB Bank. "We will be small but we have got to be meaningful in terms of our technology, business and service to customers.


Although many of these banks could not match the size and scale of state-run banks, or the service efficiencies of the new-age private sector lenders such as HDFC Bank and ICICI Bank, the staff of old private sector banks are close to their customers and know their needs. They also bring that personal touch to the table which is usually missing at the banking behemoths.

"Our board wants to see the organisation being handled more professionally. Having said that, what is also important is that we have always treated our customers, staff members and stakeholders as a family and that culture has always been there," said K Venkatraman, chief executive, Karur Vysya Bank.


LVB, DCB and Federal Bank have adopted technology to offer services almost at par with the big four in Indian banking.

The proliferation of technology is making a difference. About two decades ago, when banks wanted to improve the processes, the choice was top guns like an Infosys Technologies or a Tata Consultancy Services.

But in the past few years, many innovations introduced by fintech startups have made life easier. Some technologies like Unified Payments Interface (UPI), Immediate Payment Service (IMPS) or data analytics are available off the shelf that narrowed the gap between a State Bank of India and a Karur Vysya Bank.

"We are spending considerably on technology and that will clearly give us an edge in day-to-day business. Eventually it will lead to substantial savings in operational costs," said Mukherjee of LVB.

Technology is enabling them to acquire customers. Lack of past growth is a blessing in disguise. Billionaire Prem Watsa’s plan to buy a controlling stake in Catholic Syrian Bank may have come a cropper, but is a sign of things to come.

"If they continue to surpass the average banking industry growth in terms of assets and liabilities, these shares will yield above average return to shareholders in coming years," says R Sreesankar, head -institutional equities, Prabhudas Lilladher.

Source : Economic Times
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Thursday, July 13, 2017

Vijaya Bank MD gets Skoch award

Kishore Sansi, Managing Director and CEO of Vijaya Bank, has been conferred the ‘Personality of the Year’ award by Skoch Consultancy Services. The award is part of the ‘Skoch Banking and Financial Leadership’ series. Past recipients of the award include C Rangarajan, Dilip Parekh and Nandan Nilekani.

Source : Thehindubusinessline
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Fee on IMPS transactions under Rs 1000 removed by SBI

State Bank of India (SBI) on Wednesday waived charges on all money transfers of less than Rs 1,000 made through the Immediate Payment System (IMPS) channel, in a bid “to promote small ticket size transactions”. Earlier, any IMPS transfer of up to Rs 1 lakh out of an SBI bank account would attract a charge of Rs 5, in addition to service tax. Those remitting amounts between Rs 1,000 and Rs 1 lakh will continue to shell out the charge of Rs 5. The charge on transactions of over Rs 1 lakh and less than Rs 2 lakh will also remain unchanged at Rs 15. The applicable Goods and Services Tax (GST) rate will apply to all IMPS transactions of over Rs 1,000.

The reset in IMPS charges puts SBI at a disadvantage to its private sector peers. HDFC Bank, SBI’s closest rival in terms of asset-book size, earns a fee on all outgoing IMPS transactions. Account holders at the bank have to pay Rs 5 for all transfers of up to Rs 1 lakh and Rs 15 for transfers of between Rs 1 lakh and Rs 2 lakh. The charges are the same at ICICI Bank. Among other large state-owned lenders, Bank of Baroda (BoB) does not levy any charge on IMPS transactions, while Punjab National Bank (PNB) charges Rs 5 for all IMPS transactions, according to the banks’ websites.

Sources in the know said that SBI’s decision to waive charges on some IMPS transactions may have been the result of more than a nudge from the government. “We have almost been arm-twisted into doing this,” said a senior banker on condition on anonymity.

The waiver is likely to impact a sizeable chunk of IMPS users. While bank-wise data for IMPS transactions is unavailable, SBI is widely accepted to be the market leader in terms of digital transactions in general and internet banking in particular. It has a 52% market share in mobile banking, deputy managing director Manju Agarwal had told FE in March.

Like most other modes of digital payments, IMPS had seen a surge in transaction volumes amid the cash crunch arising from the government’s November 8 decision to withdraw high-value currency notes from circulation.

IMPS volumes in June added up to 65.8 million, 82% higher than the November figure of 36.2 million transactions. Transaction values for IMPS aggregated Rs 59,650 crore in June, 83.6% higher than Rs 32,480 crore in November. This puts the average IMPS transaction value at around Rs 9,065.

Source : Financial Express
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Gross NPA divergence at Rs 6,816 crore by Mar 2016: IDBI Bank

Public lender IDBI Bank’s gross NPAs by the end of March 2016 were lower than the Reserve Bank’s estimate, with a divergence of Rs 6,816.60 crore, its annual report shows. As of March 31, 2016, the bank had reported gross non- performing assets (NPAs) or bad loans to the tune of Rs 24,875.07 crore, according to the bank’s annual report for 2016-17. The Reserve Bank (RBI) had put gross bad loans on the bank’s balancesheet at Rs 31,691.67 crore by 2016 March-end, which works out to a difference of Rs 6,816.60 crore.

In case of net NPAs by this period, the divergence is of Rs 4,755.60 crore. The lender had reported net NPAs worth Rs 14,643.39 crore as against RBI’s estimate of Rs 19,398.99 crore. During 2015-16, the bank had reported a net loss of Rs 3,664.80 crore because of a surge in bad loans on its books. This led to an overall divergence in the bank’s provisioning at Rs 2,061 crore.

The annual report data further showed that the bank’s total exposure of 20 largest borrowers and customers by the end of March 2016 stood at Rs 62,329.21 crore (14.55 per cent of total advances), which further increased to Rs 63,967.81 crore (15.53 per cent) as of March 31, 2017. The total exposure to top four NPA accounts was Rs 11,576.97 crore at the end of the fiscal ended March 2016 and Rs 13,172.74 crore by March 31, 2017.

In his message to shareholders, MD and CEO Mahesh Kumar Jain said that good performance during 2016-17 was overshadowed because of deterioration in asset quality. As a consequence of higher NPAs and stressed assets, the provisioning rose, which in turn negatively impacted the bottom line of the bank and raised concerns on the capital adequacy front, he said. “These developments have led to implementation of prompt corrective action (PCA) framework on your bank by RBI. We are ensuring the RBI guidelines relating to distribution of dividend, branch expansion, capital expenditure, investment in subsidiaries are followed,” he said.

Jain said the bank has devised a comprehensive turnaround strategy that seeks to leverage its strengths and entail identification of areas for containing cost and revenue maximisation that would ensure sustainable growth and profitability. Earlier in May, IDBI Bank came under RBI’s PCA watch because of high level of bad loans on its balancesheet.

In April this year, RBI had issued a set of enabling provisions under the revised PCA framework with a clause that if the bank does not improve, it could either be merged or taken over by another bank. Under PCA, RBI has powers to curb a bank’s capacity of giving fresh loans, besides putting restrictions on dividend distribution, among others. Banks are now required to state their bad loan divergence in their financial statements if it exceeds 15 per cent. The sock of IDBI Bank traded at Rs 56.85 on the BSE, up 0.89 per cent from its previous close.

Source : Financial Express
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Initiative for merger should come from banks: Former RBI Governor C Rangarajan

Former RBI Governor C Rangarajan today said bank merger should be need-based and the initiative should come from the lenders themselves.

"Initiative for merger should come from banks themselves and there must be felt a need for it. Therefore, the world over, the larger banks are coming into cooperation," he said.

Recently, the State Bank Of India merged five associates with itself and the government is looking to consolidate few more with the objective of creating five global-sized lenders.

Five associates and the Bharatiya Mahila Bank became part of the State Bank of India (SBI) beginning April 1 this year, catapulting the country's largest lender to among the top 50 banks in the world.

On NPA resolution, he said, the clean-up exercise has to be done and some 'haircut' is inevitable.

Rangarajan was speaking to reporters here today on the sidelines of a NABARD event.

"With the haircut, loans should become performing. Some adjustment is needed. After all, we have always done one-time adjust in the past. The size of NPAs has become big so this step is required. Without finding solution to NPA, we will not be able to move forward in terms of stimulating economy and investment," he said.

Rangarajan said the NPA resolution process would take at least a year to complete.

Last month, the RBI identified 12 accounts for insolvency proceedings with each of them having over Rs 5,000 crore of outstanding loans, accounting to 25 per cent of the total NPAs of banks.

These 12 accounts would qualify for immediate reference under the Insolvency and Bankruptcy Code (IBC), the RBI said.

The banking sector is saddled with non-performing assets (NPAs) of over Rs 8 lakh crore, of which Rs 6 lakh crore is with public sector banks (PSBs).

The Reserve Bank had set up an Internal Advisory Committee (IAC), comprising a majority of its independent board members, to advise it with regard to the cases that may be considered for reference for resolution.

Source : Economic Times
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Sunday, July 9, 2017

SBI launches INTOUCH, digital village initiatives in Nepal

The State Bank of India (SBI) has launched its flagship service INTOUCH in Nepal, an official spokesperson said here on Saturday. The sbiINTOUCH, inaugurated by SBI Chairperson Arundhati Bhattacharya, will offer customers products like Savings Bank, Saral Bachat Account and Combo Savings Account and the branch will have facilities like kiosks for account opening, debit card printing, and ATM. Bhattacharya, along with its subsidiary, Nepal State Bank Ltd (NSBL) also inaugurated the NSBL Digital Village, Jaharsing Pauwa, which would be the first of its kind digital initiative in Nepal banking industry along with INTOUCH, on Friday.

Under the Digital Village Initiative, the NSBL has adopted Jaharsing Pauwa village to provide financial literacy centres and other banking facilities to the 2,200 villagers. The services to the 443 households would include an internet banking kiosk, free WiFi, POS utility at four merchant outlets, cash recycle machines.

In the non-banking services, the villagers will get solar street lights, medicines and medical equipments to the local health centres, books and stationery to the village government school and other facilities under the NSBL’s CSR activities. Both the initiatives are unique to the Nepalese banking industry and first time taken by an foreign offices of the SBI.

The SBI has experience of making 21 Indian villages digital with a target of 101 in the next few months, and it has 250 outlets under sbiINTOUCH. The NSBL is among the fastest growing commercial banks in Nepal and enjoys a lead position in terms of penetration of technology products. NSBL is a JV between SBI and the Employees Provident Fund, Nepal, the spokesperson said.

Source : Financial Express
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UCO Bank officers to strike work on July 15

The All India UCO Bank Officers’ Federation has called for a one-day all-India strike on July 15 to express its resentment on the unrest prevailing in the bank.

Voicing his resentment to the unilateral and arbitrary actions resorted to by the UCO Bank management, the general secretary of the All India Bank Officers’ Confederation (AIBOC) D Thomas Franco urged the management of the bank to intervene and resolve the issue.

The arbitrary action of the management is causing large-scale discrimination against majority of the officers. The confederation will not be a witness to these attacks, rather the AIBOC would be compelled to express its total solidarity with UCO Bank officers by resorting to agitation in all banks, Franco said in a statement. He further pointed out that AIBOC has been continuously working out strategies, holding workshops to see that the bank turns around.

Source : Thehindubusinessline
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Axis Bank emerges the frontrunner to acquire FreeCharge

Axis Bank, India’s third-largest private sector lender, has emerged the frontrunner to acquire FreeCharge, the digital payments platform owned by troubled ecommerce marketplace Snapdeal, according to three people aware of the development.

The payments unit has been seeking a buyer for several months now, even as its parent negotiates the terms for its own sale.

Mumbai-headquartered Axis Bank is currently conducting due diligence on FreeCharge, according to the three sources cited above, who estimate that a potential deal could deliver a payout of up to $100 million to cash-starved Snapdeal.

This, however, could not be independently verified by ET. Axis Bank and Snapdeal did not reply to emailed queries.

In May, ET had reported that two domestic banks and a couple of private equity firms had expressed interest in Bengaluru-based Free-Charge, once described as Snapdeal’s crown jewel by its chief executive Kunal Bahl.

FreeCharge was acquired by Jasper in 2015 in a cash-and-stock deal estimated at $400-450 million in what was then the largest acquisition in the Indian startup landscape.

Last month, market leader and rival Paytm had signed a non-exclusive term sheet while making a bid of $10-15 million for FreeCharge, according to two sources familiar with the matter.

The surprise emergence of Axis Bank as a potential buyer indicates that Jasper Infotech — the holding company of Snapdeal — had been hawking FreeCharge to others as well, sources said.

Shares of Axis Bank closed down 1.25% at Rs 503.30 on the BSE on Friday. The sale of FreeCharge and logistics unit Vulcan Express would provide much-needed relief to Jasper’s balance sheet. The embattled Gurgaon-based company is separately negotiating the sale of Snapdeal to rival Flipkart.

At one point, Jasper was eyeing a valuation of close to $1 billion for Free-Charge, as it tried to raise cash for the unit, a process that began in late 2015. The reversal in the fortunes of Snapdeal had a drastic effect on Free-Charge, which saw the volume and value of transactions fall sharply.

The company is estimated to have recorded Rs 300 crore in transaction revenue on about 12 million transactions in April.

In its heyday, the payments company had forecast 7 million daily transactions and gross merchandise transactions of Rs 20,000 crore by the end of fiscal 2017.

Over the past six months, Jasper has pumped more than Rs 440 crore into FreeCharge, according to documents filed with the registrar of companies. The latest development comes days after the Jasper board rejected an initial offer of $800-$900 million for Snapdeal from Flipkart.

Source : Economic Times
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IDFC-Shriram Group agree to finalise merger in 90 days

IDFC and the Shriram Group have agreed to finalise a merger of their financial services business in an attempt to create a financial supermarket with offerings from motorcycle credit to lending for multibillion-dollar power projects.

IDFC Bank CEO Rajiv Lall called the proposed merger a "marriage made in heaven" while founder chairman Deepak Parekh said that IDFC gets "readymade branches" and "hope the marriage happens" and the deal goes through amid likely regulatory obstacles. The two have agreed to hold exclusive talks and finalise the merger in 90 days.

All operating businesses of the two groups will come together under IDFC Ltd. The retail consumer centric business of Shriram Capital — Shriram City Union Finance — will be merged into IDFC Bank. The transport finance business will remain a standalone non-banking finance company that would become a subsidiary of IDFC Ltd. The share swap ratio and other details of the merger would be worked out in the next 90 says.

"In the long run, if ever there is a black swan event, you do need a fallback and that’s where a bank will help," said Ajay Piramal, the single largest individual shareholder in the Shriram Group.

The proposed merger will create a financial giant with a market value of at least Rs 72,000 crore that will have businesses like mutual funds and insurance. "It is a chance to create a financial conglomerate that could become India’s largest mass retail platform, to deliver full range of financial products," said Piramal.

The merger of the two group businesses may be the first of its kind in India with different businesses located in different companies. These companies straddle various regulators, from the RBI to SEBI.

An approval from RBI may be the trickiest one, with the central bank having expressed reservations in the past about the holding structure when it comes to banks. It had insisted all the lending businesses be brought under the bank umbrella for a universal bank licence.

"This is a complex transaction," said Lall. "Our expectation is that the whole transaction that is perceived as single scheme of amalgamation, will be approved only once by our boards, but it will take 12 months." "Shriram needs wholesale assets and IDFC needs retail assets," said Parekh. "There’s a lot of work ahead."

Source : Economic Times
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Thursday, July 6, 2017

Citi India profit rises 12% in FY17

Citi India on Tuesday reported a 12.2% rise in FY17 profit after tax (PAT) to Rs 3,626 crore. The bank said its pre-tax profit grew 7% to Rs 6,185 crore in the same period. Its net interest margin — a key measure of profitability — stood at 5.4% in FY17, up 30 basis points (bps) from the previous year. The bank reported no change in its net non-performing asset (NPA) ratio at 0.5% of its net advances in FY17 and its capital adequacy ratio improved 180 bps to 17.6%. For Citi India in aggregate, total assets, including credit extended to Indian corporate clients from offshore Citi entities, stood at Rs 2.02 lakh crore. 

During FY17, Citi India said it disbursed Rs 2.34 lakh crore of loans, including those booked in offshore locations, representing a 13.4% growth over the prior year. Citi India CFO Niraj Parekh said in the statement, “Our results are a consequence of our execution focus, judicious expense controls and sound risk management. Citi in India is well placed and committed to supporting our clients’ investments and growth.”

In FY17, it added 2,039 employees, bringing the total number of employees to 14,543 as on March 31, 2017. It added that of the total employee base, Citi Service Centers housed under Citicorp Services India (CSIPL), engages 8,748 professionals.

Source : Financial Express
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Axis Bank launches super bikes loans; to fund 95% of costs

As the higher engine displacement 'super bikes' catch fancy of the Indian consumer, Axis Bank on Wednesday introduced a special loan product, offering to fund up to 95 per cent of the costs.

The loans, which are for motorcycles with an engine displacement of over 500 cubic centimetres (cc), will come at a price tag of 10-11 per cent per annum.

The third largest private sector lender's executive director Rajiv Anand said many Indians are aspirational of owning iconic brands like Harley Davidson and Triumph which made the bank launch the offer.

In a statement, the bank said the leisure biking segment is expected to grow at 30 per cent per annum over the next three years on high consumer spending and increasing population of high net worth individuals.

While calculating the loan to value ratio which has been capped at 95 per cent, the bank will consider accessory funding along with the cost of the bike, it said.

There are over a dozen brands which are offering bikes in the segment with almost all of them having entered the country in the last decade. These bikes come with a price tag between Rs 5 to Rs 50 lakh. The segment had witnessed sale of over 3,000 units last year.

Axis Bank said the average age of customers buying such bikes has declined to the 30s from the 40s two years ago, and the sales are helped by riding clubs and other adventure activities.

Sales of these bikes are not limited to the metros alone, with tier-II and tier-III cities also witnessing some traction, the bank said.

It can be noted that the high percentage of stressed loans, coupled with waning demand, from the corporate side is making all the banks focus more on the resilient retail lending segment. Axis Bank is among the worst hit private sector lenders on NPAs.

Source : Economic Times
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PSB mergers should be between equals: SBI Chief Arundhati Bhattacharya

State Bank of India chairman Arundhati Bhattacharya said the merger of public sector banks should be between equals and added that things will start getting better on asset quality by the second half of the year. In an exclusive interview to ET, Bhattacharya said union of state-run banks is feasible but the lenders should be given time to ensure the mergers work.

There can’t be a one-size-fits-all approach, and the temptation to merge the weaker ones with the stronger ones should be resisted as it leads to the stronger one losing strength, she said.

“It (merger of banks) is feasible. It has been done in other countries. But you will have to give them time to do it and be able to show a turnaround. You cannot expect it to happen tomorrow and (hope that) day after things will be fine.

It won’t work like that. They will need 3-4 quarters to put it all together and come out on top,” Bhattacharya said.

The clamour to merge 21 PSU banks is getting louder with the government nearly shutting the capital tap. While investors are likely to provide capital to strong ones like SBI, which raised Rs 15,000 crore in a share sale, many others are likely to be shut out from the market. Some will have to be merged so that the capital requirement comes down and resources are better utilised.

“The smaller SOE (state-owned banks) are short of capital and it will be a struggle for them to raise funds unlike the larger banks, which may be able to access equity markets,” said Sumeet Kariwala, analyst at Morgan Stanley.

“Hence, the government may look at merging smaller, weaker banks with larger and relatively stronger lenders.”

Bhattacharya, however, said that may not be the right thing to do. The chief of SBI, which recently completed the merger of six banks with itself, said there should be a merger of equals so that synergies can be derived.

“It should be strong to strong and weak to weak, because if you do a strong and weak it doesn’t really make much sense since it unnecessarily pulls down the strong bank also to some extent,” she said. “And, of course, they need to look at other synergies… there might be synergies of systems, synergies of reach, synergies of different portfolios of business, synergies of cultural fit.

So it cannot be one size fits all.” Banks’ journey to becoming stronger entities may be full of surprises and painful events, but that is inevitable in the process of growing up, she said. “The alternatives are very few, so to that extent this seems to be the best way out,” said Bhattacharya.

“And, probably, this will be painful. But a maturing process and growth is always painful. You ask any teenager they will tell you, and it’s just like that for the country. We need to grow, we need to evolve.”

Source : Economic Times
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Monday, July 3, 2017

ATMs to turn costly under GST, small banks to be hit

Deploying automatic teller machines (ATMs) is set to get more expensive as ATMs have been put under the highest tax slab of 28% under the new Goods and Services Tax regime.

With the machines becoming more expensive, smaller banks and newly-licensed small finance banks could slow down deployment of teller machines, causing further problems for the industry. Industry insiders say point-of-sale devices and other digital payments hardware were put under the 18% slab –– a slab in which ATMs should have been included.

Confederation for ATM Industry (CATMI), the industry association of companies which deploy and manage ATMs, is planning to reach out to the GST Council, the revenue secretary and the finance ministry to take up the issue and request them to revise the tax rate on teller machines.

"As an industry, we are planning to reach out to the government to bring ATMs on par with other payment terminals as otherwise there will be a general 7-8% increase on the cost of terminals," said Ravi Goyal, managing director of AGS Transact Technologies, which deploys and manages ATMs in the country.

Not only have prices of these machines gone up, even service cost for ATMs will go up as tax rates have been revised to 18% from 15% previously. This would be applicable for servicing charges, annual maintenance contracts which will have to be borne by the banks eventually.

"The biggest advantage for banks is that now they will be able to claim input tax credit on GST which will improve their cash flows and help in their business," said Goyal.

After demonetisation, ATM deployment has slowed down as banks were preoccupied with adopting the latest digital payment instruments. Also, banks prefer asset light payment solutions for financial inclusion, like micro ATMs and Aadhaar Pay rather than deploying expensive ATMs.

In an earlier interaction with ET, Navroze Dastur, MD for India and South Asiaat NCR Corporation, said that they were replacing old machines for banks and not deploying new ones. "We were growing at 15-16% before demonetisation which has come down to 8-10%."

Source : Economic Times
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BBB recommends 15 names for appointment of EDs in PSU banks

Banks Board Bureau (BBB) has recommended to the government names of 15 general managers of various public sector banks for appointment as executive directors.

Sources said the recommendations were made by BBB Chairman Vinod Rai and other members of the bureau.

The list would be sent to the Department of Financial Services to get Appointments Committee of Cabinet (ACC) clearance, sources said. The ACC is headed by Prime Minister Narendra Modi.

The interview for appointment to the post of EDs was held on June 30.

Besides former CAG Rai as chairman, the other members of BBB include Anil Khandelwal, former chairman and managing director of Bank of Baroda; H N Sinor, former joint managing director of ICICI Bank; and Roopa Kudva, managing director of Omidyar Network India Advisors.

RBI deputy governor, Financial Services Secretary and Department of Public Enterprises Secretary, are ex-officio members.

Recently, the government expanded the BBB by inducting two more members with the objective of strengthening the panel responsible for selection of MDs and directors of public sector banks and financial institutions.

Former Allahabad Bank chairperson and managing director Shubhalaxmi Panse and private equity player Pradip Shah have been inducted into the board as independent members.

The BBB, set up in April 2016, was originally tasked to recommend names for chiefs of public sector banks and financial institutions and help state-owned lenders in developing strategies and capital-raising plans.

The Bureau was authorised to suggest to banks on developing a robust leadership succession plan through appropriate HR processes, including performance management systems.

Source : Economic Times
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PNB to block all Maestro debit cards from July 31

Punjab National Bank (PNB) Maestro debit cards holders will face a card blockage if they fail to replace it with a more secure EMV chip based card by the end of this month.

The bank will not charge anything for the replacement and it will be provided free of cost.

"If you are having Maestro debit card, get it replaced free of cost with a new EMV chip based debit card from any PNB branch. All Maestro cards issued by PNB will be blocked or hotlisted on July 31, 2017 for security based reasons," the bank said in a communication to its customers.

The replacement is as per RBI advisory issued in 2015, asking all the banks to migrate to a much secured EMV chip based cards, an official of the bank said.

The bank has identified that there are about one lakh customers with old Maestro debit cards and has started sending them SMSes as well, an official of the bank said.

Presently, PNB's card base stands at around 5.65 crore.

"However, we have excluded those customers who are not using these Maestro debit cards at all with not even a single transaction in a year as making of cards involves cost as well as time," the official said.

As per RBI advisory, existing magnetic stripe only cards need to be replaced with EMV chip and pin based cards by December 31, 2018, irrespective of the validity period of the cards.

And from January 31, 2016 onwards, banks are directed to issue only EMV based debit and credit cards.

Card replacement is important, keeping in mind digital drive of the government that has led to a drastic rise in debit card usage.

"Now, people are taking interest in using debit cards. Young generation definitely use it, but people over 40 years of age are also using it and taking help from children to learn card usage," the official said.

Source : Economic Times
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Sunday, July 2, 2017

New chiefs of 2 PSU banks take charge

Union Bank of India said Rajkiran Rai G has assumed charge as Managing Director & CEO.

Prior to his elevation as MD & CEO of Union Bank of India, Rai was Executive Director of Oriental Bank of Commerce. He started his career in 1986 as an Agricultural Finance Officer in Central Bank of India.

Rai has been appointed by the government to head Union Bank of India for a period of three years from the date of his taking over charge of the post or until further orders, whichever is earlier, according to a finance ministry notification.

New chief assumes charge at Syndicate Bank

Syndicate Bank
, in a statement, said Melwyn Rego has assumed charge as Managing Director & CEO.

Prior to joining Syndicate Bank, Rego was MD & CEO of Bank of India. He started his career with IDBI Bank Ltd in 1984 and rose to the position of Deputy Managing Director.

Rego will be at the helm of the bank till the remainder of the term up to August 13, 2018, according to a finance ministry notification.

Source : Thehindubusinessline
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SBI to offer GST-ready solutions starting today

The largest lender State Bank of India (SBI) on Saturday announced its Goods and Services Tax (GST) ready solutions, including the introduction of online payment through internet banking and debit card. Starting today, the SBI account holders can deposit GST of upto Rs. 10,000, in cash, cheque or draft form at any of the SBI branches across the country. Ending more than 11 years of hectic argument among the Centre and the states, the GST will implement from July 1 to completely transform the indirect taxation landscape in the country involving both the Central and State levies. In a departure from the normal practice, GST will be administered together by the Centre and States. The biggest tax reform since independence – GST – will pave the way for

The biggest tax reform since independence – GST – will pave the way for realisation of the goal of One Nation – One Tax – One Market. It will benefit all the stakeholders namely industry, government and consumer as it will lower the cost of goods and services give a boost to the economy and make the products and services globally competitive, giving a major boost to ‘Make in India’ initiative. Under the GST regime, exports will be zero-rated in entirety unlike the present system where refund of some of the taxes does not take place due to fragmented nature of indirect taxes between the Centre and the States.

However, GST will make India a common market with common tax rates and procedures and remove economic barriers. GST is largely technology driven and will reduce the human interface to a great extent. GST is expected to improve ease of doing business in India.

Source : Financial Express
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Frauds going up in number, banks need to tighten cyber security norms: RBI

The Reserve Bank of India flagged the rapid proliferation of frauds in the banking space over the last five years marking out a 19% increase in the number of fraudulent incidents and 72% increase in the value of the amount lost in the attacks. Around 86% of the frauds reported in 2016-17 was in the space of various credit accounts, said RBI.

The number of frauds went up to 5064 from 4235 and the value shot up to Rs 16770 crore from Rs 9750 crore over the last five years, said the central bank in the Financial Stability Report of 2017, released on Friday.

Holding the banks squarely responsible for such frauds, the regulator said that unlike macro economic risks on lending business of banks, frauds happen due to gaps in credit underwriting standards of banks.

“Some of the gaps are liberal cash flow projection at the proposal stage, lack of monitoring of cash flows, overvaluation, diversion of funds…,” said the RBI.

While highlighting the fact that digital payments have shown promising growth post demonetisation, the two biggest risks that the RBI found to the digitisation process emanates from a lot of people using digital payments without being aware of the risks involved and the risk banks face from third party technology vendors.

RBI has highlighted three major effects of a cyber attack, disruption of operations of a financial firm, fall of confidence in markets and damage the integrity of key data.

On the finance minister’s statement around creation of a CERT-Fin (Computer Emergency Response Team for financial services), the RBI said in the report that the working group that was created in March of this year has submitted its report and the regulator is considering it.

Source : Economic Times
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Saturday, July 1, 2017

SEBI issues new framework to deepen corporate bond market

Regulator SEBI on Friday put in place a new framework for consolidation in debt securities as part of its efforts to deepen the corporate bond market.

Liquidity in the secondary market for corporate bonds will be increased by way of minimal number of ISINs (International Securities Identification Numbers).

ISINs code, which has 12 characters, is used for uniquely identifying securities like stocks, bonds warrants and commercial papers.

Generally, investors trade in corporate bonds that are freshly issued by a particular issuer. As a result, the outstanding securities of the same issuer become mostly illiquid.

In order to increase liquidity as well as ensure that an issuer’s ability to raise funds through debt securities is not curtailed, Sebi has focused on minimising the number of ISINs.

Under the new framework, an issuer will be permitted a maximum of 17 ISINs maturing per financial year, the Securities and Exchange Board of India (SEBI) said in a circular.

A maximum of 12 ISINs maturing per financial year will be allowed only for plain vanilla debt securities. Within the limit of 12, an entity can issue both secured and unsecured non-convertible debentures while no separate category of ISINs will be provided to them.

Furthermore, an entity can issue up to five ISINs every fiscal “for structured debt instruments of a particular category“.

SEBI said these restrictions will not be applicable to debt instruments that are used for raising regulatory capital and affordable housing as well as capital gains tax bonds.

To address the issue of bunching of liabilities, the regulator said the issuer can as a one-time exercise make a choice of having bullet maturity payment or make staggered payment of the maturity proceeds within a particular financial year.

The watchdog also said issuer would have a time period of six months to make an enabling provision in its Articles of Association to carry out consolidation and re-issuance of debt securities.

Also, an issuer would have to submit a statement to the stock exchange where its debt securities are listed, as well as to the depository containing data about ISIN number, issuance as well as maturity date and coupon rate among others within 15 working days.

Besides, stock exchange would have to upload the same on its website as well as the Integrated trade Repository for corporate bonds.

Trading of corporate bonds in the secondary market has gone up in recent years and stood at Rs. 14.7 lakh crore in the last financial year. The amount was just Rs. 1.48 lakh crore in 2008-09.

However, liquidity in the secondary market for these bonds has not picked up much, especially in comparison to primary market issuances.

With more entities tapping the route for mopping up funds, private placement of corporate bonds rose to Rs. 6.4 lakh crore in 2016-17 whereas the same was at Rs. 1.18 lakh crore in 2007-08.

Source : TheHinduBusinessline
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Karnataka Bank’s Image Debit Card

Karnataka Bank has launched the ‘KBL-Image Debit Card’ to enable its cardholders to personalise the card with the image of his/her choice. A press release by the bank said here on Friday that the customers will have the option of selecting an image either from the bank’s gallery of images or any image of his/her choice to be printed on the debit card. Customers can apply through the bank’s website for this card, the release said.

Source : TheHinduBusinessline
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Banking staff threatens strike on August 22 over mergers, NPAs

Employees of public sector banks have threatened to go on a day long nation-wide strike on August 22 against the government proposal to merge state-owned lenders. Besides, they want the government and the Reserve Bank to declare wilful default as a criminal offence and desist from writing off of corporate non-performing assets (NPAs) or bad loans, United Forum of Bank Unions (UFBU) said. An umbrella body of 9 unions, UFBU has also asked the government not to increase service charges in the name of GST.

Goods and Service Tax (GST), which will be effective tomorrow, has raised tax from 15 per cent to 18 per cent for all services offered by banks. Government has recently merged five associates with SBI and there are talks of the second round of consolidation among state-owned banks which may materialise by the end of the current fiscal. The government wants to create five large banks of global size using the inorganic route. There are 21 state-owned banks in the country at present.

India’s banking sector is saddled with NPAs or bad loans amounting to Rs 8 lakh crore, of which around Rs 6 lakh crore is accounted for by the state-owned banks alone. “Instead of taking urgent remedial measures to recover the alarmingly increasing bad loans which are threatening to drive the banks into a serious crisis, the government is taking steps like MOU, PCA, NPA Ordinance and IBC that are only aimed to cleaning the balance sheets at the cost of the lenders who represent hard earned savings of the people,” AIBEA General Secretary C H Vekatachalam told PTI.

All India Bank Employees Association (AIBEA)
, an affiliate of UFBU, said very tough measures are required including criminal action on wilful defaulters to recover the huge bad loans given to the corporate houses, big business and top industrialists. It was also observed that the burden of the corporate NPAs are put on the shoulders of the common public and banking clientele in the form of hike in fees, charges and penalties, for every type of normal banking services, he said.

Vice President of National Organisation of Bank Workers (NOBW), an affiliate of Bharatiya Mazdoor Sangh, Ashwani Rana said: “Merger is not panacea for all pains in the bank and merger doesn’t provide guarantee that NPA will be eradicated.” Rather government should talk to all the stakeholders including unions and shareholders to find out solutions, Rana said. The unions unanimously pitched for ensuring accountability of top management for bad loans and put in place stringent measures to recover bad loans and abolishing Banks Board Bureau.

Source : Financial Express
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RBI gets one application for on-tap licensing of private universal banks

The Reserve Bank of India (RBI) on Friday said that it has received just one application for ‘on tap’ licensing of universal banks in the private sector — from UAE Exchange and Financial Services. “In order to ensure transparency, the names of the applicants for bank licenses will be placed on the RBI website periodically,” the central bank said, adding that going forward, it will publish the names of the applicants on a quarterly basis. In August last year, the RBI had released guidelines for on tap licensing of universal banks in the private sector and allowed large industrial houses to invest up to 10% in them.

The limit of 10%, the Reserve Bank had said, would apply to individuals and all inter-connected companies belonging to the concerned large industrial houses on an aggregate basis. A group with assets of Rs 5,000 crore or more with the non-financial business of the group accounting for 40% or more in terms of total assets / in terms of gross income will be treated as a large industrial house, the RBI had said at that time. The RBI had allowed resident individuals and professionals with 10 years of experience in banking and finance at a senior level to promote universal banks.

Source : Financial Express
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Bank of Baroda rate cut by 10 bps to 9.5 pct; to benefit borrowers who took loans before April 2016

State-owned lender Bank of Baroda (BoB) on Friday trimmed its base rate by 10 basis points (bps) to 9.5%, according to a stock-exchange notification. The rate cut will benefit borrowers who had taken loans before April 1, 2016 and who have not switched to the marginal cost of funds-based lending rate (MCLR) regime as yet. The differential between BoB’s one-year MCLR — which stands at 8.35% — and the base rate still remains at a high of 115 bps.

The last round of base rate cuts by major banks came in April, when State Bank of India (SBI) had trimmed its base rate by 15 bps to 9.1%, HDFC Bank by 25 bps to 9% and Axis Bank by 10 bps to 9.15%. Despite the series of cuts, the lowest base rate in the system – HDFC Bank’s 9% — is higher than the one-year MCLR of most banks, except that of IndusInd Bank and Dhanlaxmi Bank, both small lenders.

Base-rate cuts are typically viewed as efforts by lenders to restrict borrowers from switching to the MCLR. While fresh loans sanctioned after April 1, 2016 are supposed to be MCLR-linked, a majority of loans in the system remain tied to base rates. As on March 31, SBI had 50% of its loan book linked to MCLR, up from 40% at the end of December. The corresponding figures for March for other large borrowers was not immediately available.

Of late, a large number of older borrowers, especially retail borrowers have put in requests to make the switch from base rate to MCLR. Speaking to analysts after SBI’s financial results for FY17, chief financial officer Anshula Kant had said, “Typically, in the fourth quarter, a lot of review/renewals happen, at which time, many loans have moved from base rate to MCLR. So, it has jumped by 10% in one quarter,” adding that the first half of FY18 will be slow in terms of migration to MCLR. Most accounts that had not migrated would be retail loans and some fixed-income loans, she had said.

Source : Financial Express
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