Banking News Update

Banking licences: Ministry, RBI step up shadow-boxing

2012-01-28T08:38:00.000+05:30

The central bank seems to be in an unusually generous mood on new banking licences. In a sharp departure from its earlier cautious stance, the Reserve Bank of India (RBI) is now in favour of giving banking licences to all the applicants that meet the eligibility criteria mentioned in the guidelines issued for this purpose.

But, the finance ministry is not in sync with RBI’s generosity on the ground that it would be difficult to regulate and supervise a large number of banks. This new round of difference of opinion would extend the long wait for the banking hopefuls.

LICENSING NORMS IN THE WORKS

1993: First guidelines since the financial sector reforms of the early 1990s released for new banks

2001: Revised norms released, two banks given permission in 2003-04

Feb 2009: Finance Minister says in Budget speech RBI to consider giving licences to new entities

Aug 2010: Discussion paper on new bank licences released

Aug 2011: Draft guidelines on new bank licences out

RBI’s approach so far has been to restrict licences to only a few entities. According to central bank sources, the banking regulator has written to the finance ministry that banking licences should be given to all those entities that meet the ‘fit and proper criteria’ mentioned in the guidelines.

More importantly, the view in Mint Road is some of these banks can be allowed to fail. This is significant, as no banks have been allowed to fail in the country since the guidelines of 1993. “If some banks are allowed to fail, others will be more cautious and prudent in their operations,” said a person close to the developments.

RBI has always followed an ultra-cautious approach on private bank licences. Since the financial sector reform in the early 1990s, the first set of guidelines was issued in 1993 and then revised in 2001. The 2001 guidelines were cautious and large industrial houses were not permitted to set up banks. Ten new banks were set up in the private sector after the 1993 guidelines and two after the 2001 guidelines.

Sources said the ghost of the 2G scam played a big role in the central bank’s decision, as RBI wanted to minimise the role of subjectivity. The central bank is now open to the idea to allowing large business houses in banking. Almost all the big industrial houses, including the Tata Group, the Aditya Birla and RADAG groups, are keen to set up banks.

Nearly 18 months after the government announced RBI would consider issuing fresh banking licences, in August last year, draft norms were issued.

Among the criteria suggested in the draft norms was diversified ownership of promoters with a minimum 10 years of experience in business and a minimum Rs 500-crore capital. It was also said firms having 10 per cent of their income from real estate and broking activity would not be considered.

RBI has also made a case to the government to amend the Banking Laws (Amendment) Bill, introduced in Parliament in March last year, which will give more power to it before fresh banking licences are issued. At present, RBI does not have certain powers, such as supersession of bank boards.

Source: Business Standard

Higher provisioning tempers Bank of India's net profit

2012-01-27T23:20:00.001+05:30

Higher provisioning towards bad loans and investments moderated Bank of India's net profit in the October-December 2011 period. Profits rose by a modest 10 per cent to Rs 716 crore, against Rs 653 crore in the corresponding year-ago period.

While net interest income (the difference between interest earned and expended) nudged up by 4 per cent to Rs 2,067 crore (Rs 1,986 crore), non-interest income (includes commission, exchange and brokerage, profit from exchange transactions and recovery in written off accounts) rose by 19 per cent to Rs 471 crore (Rs 396 crore).

Quarter-on-quarter, the public sector bank managed to bring down the gross non-performing assets level by Rs 162 crore to Rs 6,386 crore. However, since March-end 2011, the NPAs have surged by Rs 1,574 crore. In the reporting three months period, provision towards NPAs jumped 169 per cent to Rs 333 crore (Rs 124 crore in the October-December 2010 period) and provision for investments rose 80 per cent to Rs 119 crore (Rs 66 crore). Total provisions rose by 38 per cent to Rs 1,016 crore (Rs 736 crore).

According to Mr Alok Misra, Chairman and Managing Director, BoI, the global and domestic economic environment has become challenging and stress is showing in sectors such as steel, textiles, aviation, and power (especially state-owned power distribution companies). Though the year-on-year advances growth was 8.23 per cent as on December-end 2011, the bank is hopeful of achieving a credit growth of 15.5-16 per cent by March-end 2012, he added.

Focus on recoveries

Mr N. Seshadri, Executive Director, BoI, said the bank is aggressively focussing on recoveries from small value loan accounts that have turned bad. This move has paid rich dividends, with the bank realising Rs 186 crore from written-off accounts, against Rs 66 crore in the corresponding period last year.

In the nine-month period ending December 31, 2011 the bank's net profit declined by 13.53 per cent to Rs 1,725 crore (Rs 1,995 crore) as the bank recognised NPAs through the system driven process in the June and September quarter, said Mr Ravi Kumar, General Manager & CFO.

Bank of India's scrip closed up at Rs 352.85 per share on the BSE, up 3.17 per cent, against the previous close of Rs 342.

Despite good recoveries, Canara Bank net down

2012-01-27T23:16:00.000+05:30

Higher provisioning during the quarter caused a 21 per cent dent in net profits for Canara Bank during the third quarter of this fiscal. The bank posted net profits of Rs 876 crore.

“Our profit would have been higher but for two reasons. One major account was restructured, and we had to provide Rs 150 crore for impairment of fair value; and because of spike in government yields, we had to provide Rs 185 crore for depreciation on investments,” said Mr S. Raman, Chairman and Managing Director, Canara Bank.

Income, expenses up

Despite the bank's interest income going up 33 per cent, its interest expenditure was up almost 56 per cent, impacting the bank's net interest income, which was down 8 per cent.

However, Mr Raman said that the bank had good cash recoveries this quarter too. “We have increasingly been successful in recovering, with recoveries during the first nine months at Rs 2,346 crore, compared with the full-year's cash recovery of Rs 2,032 crore last year,” he pointed out.

Higher NPAs

Non-performing assets have gone up, he said, adding that the bank has “embarked on addressing the NPA issue very aggressively”. According to him, slippages are coming down every quarter. “We have arrested negative aspects of assets, and are very choosy about credit expansion,” he said. Mr Raman pointed out that it has been a very difficult year for the banking system as a whole, and expected the next quarter to be better.

“The sentiments have improved now, and banks like us which were careful in balance-sheet expansion this fiscal, are ideally suited for better growth next year,” said Mr Raman. He, however, did not expect sentiments to take effect in the next couple of months.

On the credit portfolio, he said Canara Bank was not aggressive in expanding its credit portfolio and expected a full-year credit growth of about 16 per cent for FY12. “We felt it was better to grow at an average rate, and it was a time to be conservative. It was not about risk aversion,” said Mr Raman. Net advances of the bank grew 15.5 per cent this quarter.

Karur Vysya Bank posts 10% rise in net profit

2012-01-27T23:05:00.000+05:30

Karur Vysya Bank has registered a 10.3 per cent increase in its net profit for the quarter ended December 2011 as compared to the corresponding quarter of the previous fiscal.

The bank's net profit rose to Rs 124.92 crore (Rs 113.22 crore); net interest income increased 11.3 per cent to Rs 234.66 crore (Rs 210.69 crore) and interest income by 48.8 per cent to Rs 856.33 crore (Rs 575.49 crore).

Commenting on the performance, KVB's Chief Executive, Mr K. Venkataraman, said “though this is not anything great, we have met our internal targets”.

The bank's Net Interest Margin (NIM) dipped from 3.39 per cent in March 2011 to 3.06 per cent.

Mr Venkataraman said that there was no pressure on margin and he does not foresee it in the coming quarter as well due to softening of interest rates coupled with the 50 bps reduction in the CRR.

KVB though is not planning to cut its advances or deposit rate for now, not until there is a signal from the banking regulator, he said.

The amount set aside towards provisions and contingencies more than doubled this quarter to Rs 36.02 crore (Rs 14.3 crore). Mr Venkataraman said it included NPA provision, standard assets and investment depreciation and there was no sector specific issue.

“Some mid-sized corporates are under pressure. We are going to focus on NPA recovery, CASA and fee-income. We want to see good growth in income,” he added.

The Net NPA rose marginally from 0.19 per cent during the third quarter of 2010-11 to 0.29 per cent in the just ended quarter.

To a query on credit offtake, the KVB chief said “it is quite dull at present with corporates putting off project proposals. However, there have been some enhancements and take over of loans from other banks.”

The bank's business mix crossed Rs 52,000 crore with deposits growing by 35 per cent to Rs 30,107 crore and advances increasing to Rs 22,283 crore.

The bank is targeting a total business of Rs 55,000 crore by end March 2012.

With the addition of 32 branches and 100 ATMs this quarter, the branch network of KVB rose to 437 and 712 respectively.

IndiaFirst launches insurance plan for vehicle-buyers

2012-01-27T23:02:00.000+05:30

IndiaFirst Life Insurance has launched a life insurance cover for vehicle-buyers.

The company, a joint venture of Bank of Baroda, Andhra Bank and the UK's Legal and General, tied up with Varun Motors in this regard.

The product, called Autolife, will offer a life insurance cover up to Rs 20 lakh in four different options and a pure protection plan.

“We feel this will change the way in which life insurance is sold,” Dr P. Nandagopal, Chief Executive Officer, IndiaFirst Life Insurance told newspersons here on Friday.

The product was an extension of bancassurance model of distribution based on embedded sales model, he said.

IndiaFirst readied a new software platform which allows immediate issue of policy bond for the customers.

“We have made the premium rates affordable. They are approximately in the range of Rs 600 to Rs 4,000 a year for persons aged about 30 years.”

The product is available only in Andhra Pradesh through two-wheeler and four-wheeler dealer network of Varun Motors.

“This is like a pilot roll-out. We will extend it other parts based on the response,” he added.

Mr M. D. Mallya, Chairman of IndiaFirst Life and CMD of Bank of Baroda formally launched the product.

Mr B. A. Prabakar, Chairman and Managing Director of Andhra Bank said the product was both innovative and affordable.

PNB to hire 775 management trainees/officers

2012-01-27T23:00:00.000+05:30

Punjab National Bank is recruiting management trainees in the junior management grade (JMG) scale I/ probationary officers to fill up about 775 vacancies across the country.

The bank has specified that candidates with a minimum of 60 per cent marks in their graduation and a total weighted standard score of 138 in the common written examination conducted by the Institute of Banking Personnel Selection (IBPS) are eligible to apply.

The bank has said that only those candidates who rank sufficiently high in the order of merit shall be called for a Personal interview. The interview will be for 100 marks and the minimum required for qualifying for the interview is 40 marks.

The tentative period of the interview will be between April and May 2012.

The minimum age requirement is 20 years while the maximum is 28 years. Applications have been invited online and are open from January 30. The last date for registeration of online applications is February 12, 2012.

IRFC, HUDCO tax-free bonds to hit markets today

2012-01-27T22:59:00.000+05:30

Tax-free bond issues of two Government-owned agencies — Indian Railway Finance Corporation (IRFC) and HUDCO — are to hit the market on Friday. The bonds have a tenor of 10 years and 15 years, and offer higher rates for retail investors. But, investor returns of HUDCO are marginally higher than IRFC. IRFC funds rolling stock acquisition of the Railways, while HUDCO provides housing finance to various agencies.

IRFC

The bonds of IRFC, the financing arm of Indian Railways, shall carry a coupon rate of 8 per cent per annum for 10 years and 8.1 per cent for 15 years. For the retail subscribers, who can invest a total of up to Rs 5 lakh, IRFC offers an additional coupon rate of 0.15 per cent (10 year bonds) and 0.2 per cent per annum for 15-year tenor.

The bonds are proposed to be listed on the NSE and BSE, said a Railways release. Face value of each bond is Rs 1,000, and bonds can be subscribed for a minimum of 10 and in multiples of five thereafter, it added. IRFC proposes to raise Rs 3,000 crore, with an option to retain oversubscription of up to Rs 6,300 crore.

The issue closes on February 10 or earlier (subject to the issue being open for a minimum period of 3 days).

HUDCO

HUDCO wants to mop up Rs 4,685 crore from this issue. For retail investors, the coupon rate is 8.22 per cent (10 year issue) and 8.35 per cent (15 year issue). Retail investors can invest up to Rs 5 lakh for availing themselves of these coupon rates. For other investors, the coupon rates are 8.1 per cent (10- year tenor) and 8.2 per cent (15-year tenor).

mamuni@thehindu.co.in

HDFC Life opens office in Dubai

2012-01-27T22:56:00.000+05:30

HDFC Life, a private life insurance company from India, has launched its first international operations with the opening of its representative office in Dubai.

It is a joint venture between Housing Development Finance Corporation Ltd (HDFC) and Standard Life plc, the leading provider of financial services in the UK.

“The launch of our operations in Dubai is the beginning of HDFC Life’s expansion into the region. The vast NRI population would be able to closely understand the benefits of HDFC Life’s wide ranging product portfolio catering to their protection, investment and savings, and retirement needs.

“The objective of this office would be to serve our existing policy holders and further understand their financial needs better,” Mr Anup Rau, Head, Sales and Distribution, HDFC Life, said at a press conference here.

Commenting on the strategy and reasons for international expansion, Mr M.I. Taher, Vice President and Head, International Business — HDFC Life, said GCC is an important region for the company’s growth and UAE with a large NRI population base, is key to this growth.

“The objective of our operations in Dubai is the first step towards understanding the Gulf market, the customer segments, apart from serving our existing policy holders and further understanding their financial needs. Our presence in this region will help us research the market better and devise new products catering to the specific needs of the NRIs here,” he said.

Public sector banks' ATM move 'has not hit SBI's plans'

2012-01-27T22:54:00.000+05:30

The move to set up ATMs through a consortium of public sector banks (PSBs) in the country has not hampered the ATM-related activities of State Bank of India, according a top executive.

The move follows a directive by the Government in this regard.

In an informal chat with Business Line on the sidelines of a CSR (corporate social responsibility) programme of the bank here on Thursday, Mr A. Krishna Kumar, Managing Director and Group Executive (National Banking) of SBI, said that the process of putting ATMs through consortium of PSBs has not hampered its plans related to ATMs.

Stating that the bank has nearly 26,000 ATMs in the country, he said: “We need more ATMs there is no doubt about that. Our number of debit cards is very strong. We have more than 10 crore debit cards. It is not that the current process has hampered us in anyway in our efforts to supply ATM cards and debit cards to our customers.”

Before the decision was taken at the ministry level to consolidate the ATM requirements of the entire PSBs, SBI had thought of installing around 10,000 ATMs during the current fiscal. “Because of this development, our progress has not been there in this front,” he said.

The ultimate objective of this method is to reduce the cost, and to have a standardised format of ATMs, he said.

Asked about the progress in the procurement of ATMs through consortium mode, Mr Krishna Kumar said that it is at the RFP (request for proposal) stage.

“I think some time is given to the ATM manufacturers and suppliers to respond to the RFP and to the tender. May be in a couple of months all things would be completed,” he added.

vinayakaj@thehindu.co.in

Vijaya Bank Q3 net down 18% despite rise in interest income

2012-01-26T11:42:00.000+05:30

Despite a 40 per cent increase in interest income, Vijaya Bank’s net profit was down 18 per cent to Rs 124.26 crore during the third quarter of this fiscal.

“This quarter, our net profits, net interest income, net interest margin and non-performing assets have taken a dent. We have taken all possible steps to tackle these issues,” said Mr H.S. Upendra Kamath, Chairman and Managing Director, Vijaya Bank.

He explained that the bank “had to provide impairment in value of some accounts, and also prudentially write off some NPAs during the quarter”, which impacted the net profit.

The bank made provisions of Rs 111 crore towards NPAs and Rs 39 crore towards diminution in the value of certain borrowal accounts due to restructuring.

“There was a spike in non-performing assets due to slippage of three large accounts. However, this spike in NPAs is not broad-based,” said Mr Kamath.

According to him, there is an increase of Rs 280 crore over September 2011 accounted for largely by three accounts. But he added that the bank will be able to upgrade at least two of these three accounts in the fourth quarter.

“The quality of portfolio would be much better in Q4 because of the bank’s efforts to arrest further slippages and on recoveries,” said Mr Kamath. He explained that the net interest income was down 11 per cent because interest expenses of the bank went up, and “we had to reverse some of the interest in respect of those accounts we had restructured”.

anju@thehindu.co.in

LIC's health plan bags Golden Peacock award

2012-01-26T11:29:00.000+05:30

Life Insurance Corporation of India has bagged the Golden Peacock Innovative Product/Services Award 2011 for its health insurance product, Jeevan Arogya.

The award was received by Ms Renu Jain, Head of Health Insurance Segment, LIC of India, at a function held in Bangalore last week.

First

Probably, this was the first time that a health insurance product was chosen for the Golden Peacock Award.

“Jeevan Arogya has been driving our growth in health insurance segment since its launch in June last year,” Ms Jain told Business Line here.

First premium

It had brought the first premium of Rs 63 crore within seven months of its launch.

Over 1.84 lakh policies of Jeevan Arogya have been sold so far, she added.

Rise in provisions drags Union Bank's Q3 profit

2012-01-26T11:27:00.000+05:30

Union Bank of India reported a sharp 66 per cent decline in net profit to Rs 197 crore in the October-December 2011 period, against Rs 579 crore in the corresponding period last year.

Increase in provisions towards non-performing assets, restructured advances and depreciation on investments weighed down the bank's profitability.

During the reporting three months, gross NPAs increased by Rs 72.53 crore to Rs 5,209 crore. In the nine months period, gross NPAs increased by Rs 1,586 crore.

In the reporting period, provisions towards NPAs and standard assets increased to Rs 425 crore (Rs 361 crore) and Rs 100 crore (Rs 35 crore), respectively.

Provision towards ‘others', including standard derivative exposures, and depreciation in investments were also higher at Rs 375 crore (against write-back of Rs 3 crore) and Rs 73 crore (Rs 6 crore) respectively.

Due to rise in NPAs, the provision coverage ratio of the bank came down to 63 per cent as of December-end 2011, against 70 per cent as of December-end 2010.

The bank's scrip closed 2.87 per cent down at Rs 206.75 a share on the BSE, against the previous close of Rs 212.85.

kram@thehindu.co.in

Bank of Baroda Q3 profit jumps 21% on ‘other income' surge

2012-01-26T11:25:00.000+05:30

A robust growth in other income and tight control on operating expenses helped Bank of Baroda report a 21 per cent increase in net profit at Rs 1,290 crore in the October-December 2011 period, against Rs 1,069 crore in the corresponding year ago period.

In the reporting three months period, its net interest income (difference between interest earned and interest expended) increased by 16 per cent to Rs 2,656 crore (Rs 2,292 crore in the corresponding year ago period).

Other income, which includes income from sale of investments and foreign exchange income, jumped 70 per cent to Rs 1,149 crore (Rs 676 crore).

Operating expenses, which includes employee cost and other operating expenses, nudged up by 7 per cent to Rs 1,197 crore (Rs 1,117 crore).

Liquidity amounting to Rs 1600 crore will get unlocked for the bank on account of the cash reserve ratio cut by the RBI. The resources will be channelled into productive sectors of the economy, said Mr M.D. Mallya, Chairman and Managing Director.

Though the RBI has scaled down the March-end 2012 non-food credit growth projection for the banking sector to 16 per cent from 18 per cent, Bank of Baroda expects to achieve a year-on-year credit growth of 18-19 per cent.

NPAs, provisions increase

During the quarter, non-performing assets (gross) increased by Rs 492 crore to Rs 3,895 crore.

In the nine-months ended December-end 2011, NPAs rose by Rs 1,125 crore.

Overall, provisions and contingencies made by the bank in the October-December 2011 period jumped by 175 per cent to Rs 837 crore (Rs 304 crore).

The rise in provisions and contingencies is on account of provisions of about Rs 500 crore towards NPAs.

This includes an additional provision of Rs 78 crore on a secured sub-standard advance.

Bank of Baroda's scrip closed 1.24 per cent down at Rs 789.90 a share on the BSE, against the previous close of Rs 799.85.

kram@thehindu.co.in

CRR cut to help ease liquidity in the system: Karnataka Bank

2012-01-24T17:17:00.000+05:30

The Managing Director and Chief Executive Officer of Karnataka Bank Ltd, Mr P. Jayarama Bhat, has said that the RBI’s move to reduce CRR by 50 basis points in the third quarter review of monetary policy for 2011-12 is a concrete step in easing liquidity situation in the banking system.

Speaking to Business Line, Mr Bhat said that CRR cut is a concrete step in easing liquidity, and this supply of liquidity will increase the credit portfolio of banks. (The CRR cut of 50 basis point is likely to release Rs 32,000 crore of liquidity into the banking system).

With this, the RBI’s guidance of 16 per cent credit growth looks to be achievable. Naturally the profitability of banks is also likely to improve with this release of liquidity, he said.

With three risk factors – rupee depreciation, crude oil prices and fiscal deficits – being the cause for concern, the RBI has taken a conscious stand of not touching the policy rates, and it has put a lot of caveats for reducing the policy rates in future.

“My opinion is that reduction in policy rates may not be that aggressive until the inflation comes down to the expected level that RBI has envisaged,” Mr Bhat said, adding: “Overall I can say that this is a defensive policy.”

vinayakaj@thehindu.co.in

CRR cut on expected lines: YES Bank official

2012-01-24T17:15:00.000+05:30

Dr Shubhada M. Rao, President and Chief Economist of YES Bank Ltd, said that the CRR cut of 50 basis points in the third quarter review of monetary policy 2011-12 by the Reserve Bank of India is in line with expectation.

Speaking to Business Line over phone, Dr Rao said: “I think our call has come right in terms of being in line with expectation. We did see structural kind of factors creeping into the liquidity deficit. We had anticipated CRR cut of 50 basis points. Quite clearly this is what has got effected.”

Stating that growth, particularly investment-led growth, is the larger concern today, she said that is what the RBI has begun to address. Stressing the need to spur and provide impetus to investments, she said this obviously cannot be done in isolation. This needs to be very comprehensively backed by the policies at the Government level, because monetary policy alone cannot bear the burden.

Dr Rao said that it has to be complemented with Government measures. “To spur investments, we need a combination. If the Government shows its indication through the Budget, that is the time we believe there is the complementarity in effort. Then the RBI can back it up with a cut in repo by 50 basis points.

Stating that there are still upside risks in inflation, she said the trajectory of inflation is in line with what the RBI has in mind. “There are no nasty surprises on inflation yet. But with upside risks, they have not therefore hurried on rate call on repo rate,” she said.

If the inflation does indeed pan out the way it has been anticipated by March going well below 7 per cent, then we will see a chance of the RBI cutting the repo rate in March, she added.

vinayakaj@thehindu.co.in

RBI cuts CRR by 50 bps, keeps repo rate unchanged

2012-01-24T17:14:00.000+05:30

The RBI Governor, Dr D. Subbarao, chose to continue in ‘pause’ mode on the rate front, retaining the key repo rate at 8.5 per cent.

But he decided to give markets something to cheer about by cutting the cash reserve ratio (CRR) by 50 basis points and release Rs 32,000 crore into the system. The CRR will now be at 5.5 per cent.

The policy document said that these steps will ease liquidity conditions, mitigate downside risks to growth and continue to anchor medium-term inflation expectations on the basis of a credible commitment to low and stable inflation.

The cut in CRR was done to ease the tight liquidity situation. Banks were borrowing nearly 1.2 lakh crore every day at the Liquidity Adjustment Facility (LAF) window of the Reserve Bank of India over the past month. There was also a resort to the additional borrowing at the Marginal Standing Facility (which is one percentage point higher than repo) at 9.5 per cent on a couple of occasions.

Cuts GDP growth outlook

The RBI has revised downwards its forecast for Gross Domestic Product (GDP) growth in keeping with the slowing economic indicators. It now expects GDP growth to be at 7 per cent for this fiscal from the 7.6 per cent estimate it made in the half yearly review in October 2012. At the beginning of the fiscal, GDP growth was expected to be 8 per cent.

Inflation to decelerate further

The Reserve Bank has said that consistent with its earlier projections, inflation is likely to decelerate further to 7 per cent by March. It, however, cautions that there is a large element of suppressed inflation. It points to coal and petroleum products as examples of products that have not seen price revision that reflect underlying market conditions. When revised, this will add to inflationary pressures, the RBI said. It advises that "It will be prudent to fully deregulate diesel prices to contain both aggregate demand and trade deficit."

The RBI also took pains to highlight the fact that in reducing CRR it was not shedding its anti-inflation gear or changing its stance. It said that it was premature to begin reducing policy rate in the light of the current inflation trajectory and the element of suppressed inflation. The RBI chose to say, "The reduction (in CRR) can also be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them."

The RBI drew attention to the sharp drop in non-food credit to 15.7 per cent in end-December compared to the indicated projection of 18 per cent given earlier. It noted that the deceleration was particularly sharp for public sector banks and was particularly sharp in agriculture, real estate, infrastructure, engineering, cement and cement products.

RBI wants banking services to reach remote villages

2012-01-24T09:04:00.000+05:30

The Reserve Bank of India wants benefits of banking to reach remote villages in the country.

Accordingly, in Andhra Pradesh, it has set a target to reach 6,640 uncovered villages before March 31, according to Mr A. Sambasiva Rao, Regional Director, RBI.

Addressing a meeting in connection with his visit to Financial Literacy and Credit Counselling centre here, Mr Rao said that about 89 per cent of villages were covered so far.

While commercial banks were in the forefront in achieving the targets, some regional rural banks and private banks needed to pull up their socks.

Poverty reduction

Explaining that the benefits of economic growth were not being distributed equitably among all sections, he said poverty reduction did not just mean improving the income of the poor but other basic needs of the families like education of the children and health should be met.

Mr Rao urged banks to catch the next generation of citizens, now in junior colleges and introduce them to all banking products and enrol them as account holders. Even remote villages and tribal hamlets should produce doctors, engineers and technocrats on par with urban areas.

This would happen only when the banks expanded their operations and liberally funded education activities.

Once banks operated in remote villages, they would be able to afford support to farmers, especially those in distress and also the self-help groups.

Mr Ramsankar Naik, District Collector, and Mr R.N. Dash, General Manager, RBI, among others, participated in the meeting.

PNB waiting for IRDA nod on Metlife stake

2012-01-23T22:38:00.000+05:30

Awaiting regulatory approval for its proposed acquisition of a 30 per cent stake in insurance company Metlife, Punjab National Bank (PNB) has said it will not disclose the rationale behind the move or the financial details until IRDA gives its nod.

“We are waiting regulatory approval from the Insurance Regulatory and Development Authority (IRDA) for the deal and unless that comes through, we will not disclose the details and strategy,” said Mr K R Kamath, Chairman and Managing Director, PNB on the sidelines of the 100-year celebrations of the bank’s operations in the eastern region.

Mr Kamath said PNB does not foresee any hurdles in the way of the deal, which was announced five months ago, and would unveil the transaction details after approvals were in place.

If the proposed deal goes through, PNB would become the largest shareholder in the insurance company.

Speaking about overseas expansion, Mr Kamath said the bank is awaiting approval from the Canadian authorities for setting up a subsidiary in that country, besides the regulator’s nod in Oslo, Norway.

“We have applied with Reserve Bank of India for Maldives and after receiving positive feedback from a survey, we will soon move to our regulator to foray into Bangladesh,” he said.

SBH ties up with Tirumala Milk Products for dairy loans

2012-01-23T22:36:00.000+05:30

State Bank of Hyderabad has entered into a memorandum of understanding with Tirumala Milk Products to provide loans to farmers for dairy activity.

According to the agreement, SBH would give loans to farmers who are identified by Tirumala Milk Products Ltd to undertake dairy activity.

“This will help increase income levels of farmers and also create employment,” Mr M. Bhagavantha Rao, Managing Director, State Bank of Hyderabad, told newspersons after signing the MoU here on Monday.

For the third consecutive year, SBH had completed the required priority sector lending for this financial year by December 31, 2011, he added.

The loans which are below Rs 5 lakh will also be eligible for a 25 per cent subsidy from the National Bank for Agriculture and Rural Development.

Mr B. Brahma Naidu, Managing Director of Tirumala Milk Products said farmers would be offered assured buy-back.

nagsridhu@thehindu.co.in

Indian Bank wins innovation award

2012-01-23T22:33:00.000+05:30

Indian Bank has won the ‘Golden Peacock Innovative Products/Service Award' for 2011. The award was received by the bank's Chairman and Managing Director, Mr T. M. Bhasin, at the World Congress on Total Quality, held in Bengaluru on Saturday.

The award was given to the bank “in recognition of its contribution to promotion of self help groups (SHGs)”. SHGs have turned out to be major vehicles of women empowerment. In the current year, Indian Bank has so far disbursed Rs 1,360 crore to 55,391 SHGs, taking the total exposure under the SHG portfolio to Rs 2,336 crore, benefiting 175,390 SHGs, says a press release from the bank.

Federal Bank net jumps 41%; NRI deposits up

2012-01-23T22:31:00.000+05:30

The net profit of Federal Bank spurted by 41 per cent to Rs 202 crore for the quarter ending December 31. The bank delivered substantial topline and bottomline growth despite a challenging macro environment, both in the domestic and global market, a press release issued here said.

The bank, which had been working on its transformation to a truly pan-India status while adopting contemporary management techniques, has reported excellent numbers which not only reflect rapid growth but also asset quality.

The total business grew by 22.7 per cent to touch Rs 79,948 crore. Total deposits increased 26.6 per cent to Rs 46,742 crore. While retail deposits expanded 27.2 per cent to Rs 38,678 crore, NRI deposits grew faster at 35.4 per cent to Rs 10,546 crore.

Deposit growth

The fall in the rupee value and spurt in interest rates for NRI deposits seem to have helped accelerate the volume of NRI deposits. The low-cost CASA deposits grew by 21.9 per cent to Rs 13,186 crore.

CASA growth improved the net interest margin and enabled the bank to report a better bottomline. The net interest margin for the quarter was at 3.94 per cent. Net advances grew by 17.5 per cent to Rs 33,206 crore, boosted by increased lending to SME, corporate and retail segments. Retail advances form 28.7 per cent of all advances while SME lending formed 28.7 per cent.

The bank said it had contained gross NPAs to 3.97 per cent while net NPAs ruled at 0.74 per cent.

cj@thehindu.co.in

Kotak Mahindra Bank net up 47% on loan book growth

2012-01-23T22:29:00.000+05:30

Strong growth in advances and other income, and lower provisions helped Kotak Mahindra Bank’s profits rise by 47 per cent to Rs 276 crore, in the quarter ended December 31, 2011, from Rs 188 crore in the corresponding quarter last year.

The growth in advances has come mainly from segments like corporate, commercial vehicles, construction equipment and mortgages.

“There is no slowdown in the segments that we are present in. We have a large share of retail loans and short term working capital loans in the corporate segment. The slowdown is in longer term loans like infrastructure loans and capex loans. There is still strong demand for credit outside the main metro cities,’’ said Mr Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank.

In the corporate segment the bulk of the loans are those that have up to one year maturity period.

However, in the December ended quarter, corporate loans grew at faster pace than consumer and commercial. The share of corporate loans to total loans increased from less than 30 per cent to 35 per cent, while the share of consumer loans was stable at 38 per cent.

As on end December, restructured assets declined to Rs 63 crore, from Rs 114 crore last year. This led to a decrease in provisions to Rs 31 crore (Rs 43 crore).

Net Interest Margin declined from the year-ago period, though it was flat when compared to the September quarter. This was due to increase in cost of funds on account of higher outgo on savings bank deposits. Following de-regulation of interest rates, SB deposits saw a growth of Rs 900 crore during the December quarter.

SB accounts grew to Rs 4,400 crore, against Rs 3,200 crore in the year-ago period.

Current accounts grew to Rs 6200 crore (Rs 4,600 crore).

“We have not found the need to grow Certificates of Deposit because of the growth in CASA,’’ said Mr Jamin Bhatt, President and Group Chief Financial Officer, Kotak Mahindra Bank.

Consolidated profit

On a consolidated basis the net profit was Rs 463 crore, up 21 per cent from Rs 384 crore last year.

Shares of the bank closed at Rs 477.45, down 3.28 per cent, on the BSE, on Monday.

Govt to conduct interviews for 22 ED postions

2012-01-22T22:34:00.000+05:30

The Government is expected to conduct interviews later this month to fill 22 executive director positions in public sector banks.

The vacancies are coming up over the next one year due to superannuation as well as creation of new ED positions in the banks. Large public sector banks are expected to have three EDs while smaller banks two from April 2012. Currently, large public sector banks have two EDs while smaller banks have one. As against 22 vacancies, about 40 candidates are eligible to appear for the interview to be conducted by the Finance Ministry.

New ED positions are being created by the Government to give focussed attention to the development of human resources and technology in the banks, said a banker. Large state-run banks such as Punjab National Bank, Canara Bank, Bank of Baroda, Bank of India, Central Bank of India and Union Bank of India will have three EDs while smaller banks such as Dena Bank, Bank of Maharashtra, Vijaya Bank, and United Bank of India will have two EDs.

kram@thehindu.co.in

Bye-bye cheques, hello electronic payments

2012-01-22T22:32:00.000+05:30

Electronic transactions are making rapid strides, with more and more of us abandoning cheques and cash in favour of Internet banking and cards.

Reserve Bank of India data for retail electronic payments show that in 2010-11, the total value of electronic transactions almost doubled that of the previous year. Again, between April and November 2011 the value transacted was 72 per cent more than in the same period the year before.

Electronic payments involve money transfers into other accounts as well as direct debits for payment of utility bills, insurance premia, and so on. They also include direct credits into your account for dividends, etc., and payments made through debit and credit cards each time these are swiped at stores.

Pushing for the internet

Banks have been trying to route routine transactions away from their branches, pushing for customers to take to Internet banking. The ATM too has graduated from a cash-dispensing machine to a mini-bank, where electronic payments can be made.

Among various electronic transactions, online transfers to other accounts through the National Electronic Funds Transfer (NEFT) have been doubling each year for the past four years. Considering the total value transacted, the growth rate has moved from 81 per cent in 2007-08 to 129 per cent in 2010-11. Between April and November this fiscal, the value transacted has increased 104 per cent over the same period last year.

However, direct debits from accounts — such as for telephone or electricity bills, premiums, and so on — have not shown a similar rapid growth. From a high 92 per cent growth in 2007-08, the growth in these transactions in terms of value slowed down to 6 per cent in 2010-11.

Debit card boom

The slowdown of 2008 dealt a severe blow to credit card transactions, from which a recovery has still not happened. As banks — and consumers — became wary of spending, the number of credit cards in circulation dropped 10 per cent in 2008-09.

In every year since then, the number of credit cards has been on a decline. Still, the people who do have credit cards have been spending more in the past year-and-a-half. The total amount spent through credit cards declined only in one year — 2010-11.

But debit cards haven't had as much of a hard time. Debit card growth has roundly trounced growth in credit cards over the past few years, recording over 40 per cent growth rates over the past four years.

But consumers still appear to be sticking to credit cards to make big-ticket purchases. Though the gap in the number of swipes is narrowing, the total amount spent through credit cards is still well above that in debit cards.

acharya@thehindu.co.in

ICICI Lombard aims at Rs 5,000 cr premium collection

2012-01-22T20:14:00.000+05:30

ICICI Lombard expects to cross the Rs 5,000-crore mark in premium collection this fiscal on the back of good growth in health and motor insurance segments, a top executive of the leading private general insurer said.

“We are hopeful of crossing Rs 5,000 crore in gross written premium collection (GWP) in the current fiscal and expect to clock a 20-25 per cent growth in overall business for the next three to four years,” Executive Director of ICICI Lombard, Mr Neelesh Garg said.

The company had a GWP of Rs 4,252 crore during the last financial year.

Mr Garg said the growth in premium collection was mainly on account of sound performance across all segments, especially health and motor insurance.

While health insurance constitutes more than 25 per cent of the total portfolio, motor segment is around 40 per cent of the company’s business.

Mr Garg said it is witnessing over 20 per cent expansion in the health segment and is likely to maintain the momentum.

The company has a loss ratio of less than 100 per cent in group medi-claim policy, which is one of the most loss making segments of the industry.

Mr Garg said, “There is no pressure as the market is too big in India and penetration is very less. So, there is scope for every player in the market place.”

He said the firm was witnessing a “sound growth rate” in the motor insurance segment as well.

Mr Garg added that insurance regulator IRDA’s decision to replace third party motor pool with declined pool system would help in profitability of the industry.

UCO VASANTH BONANZA - Fixed Deposit Scheme

2012-01-21T20:32:00.000+05:30

UCO Bank Launched a A limited duration Fixed Deposit Scheme providing benefits of high returns on a fixed deposit period of 100 days. The Scheme would be available from 4th January, 2012 for a limited period and would carry an interest of 9% per annum with special incentive for Senior Citizen/Staff/Ex-Staff, as usual. The minimum amount of deposit under the Scheme would be Rs. 10,000/- and in multiples OF Rs. 1,000/-.

The Scheme offers high returns for ONE HUNDRED DAYS term deposit period with a minimum deposit amount of Rs. 10,000/- and in multiples of Rs. 1,000/- shall be accepted under the Scheme. The rate of interest rate offered is 9.00% p.a.

The salient features of the UCO VASANTH BONANZA Scheme are as under:

SL. NO.	PARAMETER	DETAILED PARTICULARS
1.	Name of Scheme	“UCO VASANTH BONANZA” Fixed Deposit Scheme
2.	Duration of Scheme	4^th January 2012 for a limited period only
3	Period of Deposit	100 days
4.	Amount of Deposit	Minimum Amount Rs.10, 000/- and in multiples of Rs. 1,000/-.
5.	Rate of Interest	9.00% per annum
5.	Premature Withdrawal	Withdrawals may be allowed prematurely, but in such a case the depositor would not be eligible to receive interest at the special rate. In case of premature withdrawal, the interest would be payable at 1% below the applicable rate under the normal fixed deposits for the period for which the deposit has remained with the Bank as on the date of deposit or present rate, whichever is lower.
7.	Loan/Overdraft against the Deposits	Available
8.	Nomination	Available
9.	Participating Branches	All UCO Bank Branches
10.	Automatic Renewals	No Permitted under this Scheme
11.	Tax Implications	Tax would be deductible at source as per the prevailing Income Tax rules.
12.	Special benefits for Senior Citizen/ Staff / Ex-Staff/Senior Citizen & Ex-Staff	Deposits from these categories of depositors shall be allowed incentive as per the existing norms. Accordingly, the applicable rates for these categories of depositors would be as under: a) Senior Citizen : Additional 0.50% or @ 9.50% b) Staff : Additional 1.00% or @ 10.00% c) Ex-Staff : Additional 1.00% or @ 10.00% d) Ex-Staff Sr. Citizen : Additional 1.25% or @ 10.25% The overall amount ceiling for Ex-Staff/Ex-Staff Senior Citizen for being eligible for higher rate under the scheme shall be equal to the terminal benefits plus Rs.10 lacs, as usual.

Bank of Maharashtra restructures around Rs 1,100-cr debt of Rajasthan SEB

2012-01-21T20:29:00.000+05:30

MUMBAI: Bank of Maharashtra (BoM) has restructured around Rs 1,100 crore loan, that has been extended to Rajasthan State Electricity Board (RSEB), in the third quarter ended December 31, a top official said on Friday.

"The loan extended to Rajasthan State Electricity Board, which is around Rs 1,100 crore, has been restructured in the third quarter to give more time to the board for making repayment," said the official, who wished not to be named.

The public sector lender had got a good deal as part of the restructuring process, he said.

"We have received a State Government guarantee along with higher rate of interest as part of debt recast deal," he said, adding there will be a moratorium of around six months to one year for RSEB with regard to loan repayment.

As per banking sources, a total loan amount of around Rs 6,000 crore, which has been given to RSEB, has been restructured by various banks.

While there are around six to seven lenders that have exposure to the state board, Central Bank of India is the lead institution among the consortium of lenders.

Recently, around Rs 7,000 crore of loan of Uttar Haryana State Electricity Board was restructured by a UCO Bank-led consortium.

Also, the second largest public sector lender, Punjab National Bank, which had recast Rs 2,500 crore of loans in the second quarter, had said out of this amount as much as Rs 1,800 crore was from the Tamil Nadu SEB.

Referring to debt repayment scenario by SEBs, the BoM official said the situation is set to improve in the near future as tariffs are likely to be revised soon.

Source: EconomicTimes

Bank of Maharashtra net jumps 50% in Q3

2012-01-21T20:27:00.000+05:30

Bank of Maharashtra reported a 50 per cent increase in net profit to Rs 135.54 crore in the October-December 2011 period on the back of a healthy growth in net interest income and non-interest income.

The public sector bank had reported a net profit of Rs 90 crore in the corresponding period last year.

In the reporting period, net interest income increased by 24 per cent to Rs 645 crore (Rs 522 crore in the October-December 2010 period) and non-interest income was up by 21 per cent to Rs 150 crore (Rs 123.50 crore).

The Chairman and Managing Director, Mr A. S. Bhattacharya, said incremental growth in advances was flat. The advances as on December-end 2011 stood at Rs 50,751 crore (Rs 50,905 crore as at September-end 2011).

The bank is seeing good pick up in advances to the agriculture, micro, small and medium enterprises and corporates, observed Mr Bhattacharya.

“We have a Rs 10,000-crore loan sanctions pipeline,” he said.

Deposits nudged up from Rs 69,376 crore as at September-end 2011 to Rs 69,926 crore as at December-end 2011.

Higher provisioning

According to Mr M. G. Sanghvi, Executive Director, the bank has made higher provisioning of Rs 290 crore in the current quarter, against Rs 218 crore in the corresponding year-ago period to improve the provisioning-coverage ratio to 87 per cent to 87 per cent from 60 per cent.

The bank is expecting a capital infusion of Rs 860 crore from the Government during this quarter. This infusion will push up the Government's stake in the bank from 79 per cent to about 80 per cent, said the bank's chief.

Shares of BoM closed 1.77 per cent up at Rs 45.90 per share on the BSE, against the previous close of Rs 45.10.

kram@thehindu.co.in

LIC crosses one-million mark in health insurance coverage

2012-01-21T20:25:00.000+05:30

The Life Insurance Corporation of India has crossed the one-million mark in cumulative lives covered under its health insurance segment.

“One of the major drivers of this growth has been Jeevan Arogya, a benefit health insurance product launched last year,” Ms Renu Jain, Head, Health Insurance Business, LIC, told Business Line here on Friday.

The total number of policies was over 5.44 lakh. The cumulative lives covered were 10,04,525, while the premium was Rs 395 crore. Jeevan Arogya policy alone had brought the first premium of Rs 63 crore within seven months of its launch, Ms Jain said.

LIC had already sold 1.84 lakh policies of Jeevan Arogya so far, she added.

FOCUS

To give a fillip to sales, effort is on to market health insurance to its own employees and agents in addition to others.

“We are training two faculty members for each branch to explain the advantage of our health plans. A branch in Ludhiana recently became the first to have all employees buying our health plans,” she said.

The recent campaign to re-process claims which were rejected for want of documents earlier also yielded good results in improving the brand image and customer welfare, she added.

LIC is also hoping to take advantage of the increasing customer preference for benefit plans.

The market trends in health insurance were ‘wonderful' Ms Jain said, adding that the compounded annual growth rate was at 42 per cent during the last few years.

Muthoot Precious Metals launches new gold scheme

2012-01-21T20:23:00.000+05:30

Muthoot Precious Metals Corporation (MPMC), one of the group companies of the Kerala-based Muthoot Group, launched a new scheme called ‘Muthoot Kanaka Vrishty Cumulative Scheme' here on Friday.

Under this plan, an individual, singly or jointly with any other person, must make a minimum monthly payment of Rs 1,000 and in multiples of Rs 500. This is a fixed advance payment plan for a tenure of 16, 23 and 28 months.

The customer can get the gold coin/bars after 12 months at today's price through 12 equal monthly instalments. A processing fee of two per cent will be charged along with the first advance.

A minimum of 10 gm gold coin/bar has to be purchased to become a member of the plan.

The advantage of the scheme is that the customer is saved from future price fluctuations and, with the minimal instalments, the customer can make sure that he/she makes a decent saving for tomorrow.

The scheme was launched by Malayalam cine actress Kavya Madhavan at a function held here.

Web site launched

The Ernakulam District Collector, Mr Sheik Pareeth, inaugurated Muthoot's online gold purchase by launching the Web site, www.muthootpreciousmetals.com, for purchase of gold coins online.

The online purchase also ensures free home delivery anywhere in India within three working days.

MPMC imports gold bullion from Switzerland and converts them into gold coins of smaller denominations to suit the investment requirements of people in denominations of 0.5-50 gm size.

The company also markets silver coins in 20, 50 and 100 gm sizes.

sajeevkumar@thehindu.co.in

Syndicate Bank Q3 net profit rises 32%

2012-01-21T20:20:00.000+05:30

Syndicate Bank's net profit grew 32 per cent during the third quarter of this fiscal on the back of higher net interest income and operating profits.

The bank's net profit for the period stood at Rs 1,004 crore (Rs 759 crore), while net interest income was Rs 1,325 crore (Rs 1,150 crore).

The bank's operating profit grew 30 per cent to Rs 2,556 crore (Rs 2,078 crore).

Other income increased by 17 per cent to Rs 776 crore (Rs 660 crore), mainly due to an increase in fee-based income, said a press release from the bank.

Gross NPAs (non-performing assets) declined to 2.29 per cent (2.32 per cent), and net NPAs to 0.86 per cent (0.95 per cent). The bank's provision-coverage ratio stood at 78.5 per cent.

anju@thehindu.co.in

Karnataka Bank net up 87% in Q3

2012-01-21T20:19:00.000+05:30

Karnataka Bank Ltd has recorded a growth of 86.71 per cent in net profit due to the increase in the spread and strong credit growth.

Net profit was at Rs 72.05 crore for the third quarter of 2011-12 against Rs 38.59 crore in the same period of the previous fiscal.

Speaking to Business Line after the board meeting here on Saturday, Mr P. Jayarama Bhat, Managing Director and Chief Executive Officer, said that the increase in the spread and the strong credit growth have contributed to the growth.

The spread increased to 4.53 per cent (3.87 per cent). There was an increase of 21 per cent in advances during the period, he said.

The net profit for first nine months of the fiscal stood at Rs 162.91crore (Rs 113.78 crore).

The deposits of the bank stood at Rs 29,785 crore (Rs 25,424 crore) and advances at Rs 19,689 crore (Rs 16,282 crore).

On Friday, the Karnataka Bank scrip closed at Rs 79.30 on the BSE against the previous close of Rs 76.70.

vinayakaj@thehindu.co.in

IFCI keen on raising stake in Stock Holding Corp

2012-01-21T20:16:00.000+05:30

IFCI is looking to strengthen its holding in Stock Holding Corporation of India Ltd (SHCIL), the country's largest custodian of shares and other securities.

It is open to acquiring more stake in SHCIL if the other shareholders are willing to offload, Mr Atul Rai, Chief Executive Officer and Managing Director of IFCI, said here on Friday.

“SGCIL is a great business. We are looking forward to increase our stake,” he said when asked if he would prefer IFCI having a controlling stake of 51 per cent in SHCIL.

IFCI had recently bought out ICICI Bank's entire stake — 17 per cent — in SHCIL for about Rs 300 crore. That took IFCI's current holding to about 34 per cent.

Speculation is rife that IFCI may look to gobble up the 17 per cent holding that SUUTI — the restructured arm of the erstwhile Unit Trust of India — has in SHCIL.

If that were to happen, then IFCI can raise its stake to 51 per cent, it was pointed out. Mr Rai however declined to comment on whether IFCI was eyeing SUUTI's stake in the custodian.

Meanwhile, IFCI has reported a net profit of Rs 114.05 crore on a total income of Rs 673 crore for the quarter ended December 31, 2011. The company had recorded a net profit of Rs 152.92 crore on a total income of Rs 635.84 crore in the same quarter in the previous year.

Mr Rai attributed the lower bottom-line performance to increased cost of funds. He also said that the company was not looking to raise any capital for the next two years.

It is looking to conserve capital given the difficult market conditions for raising fresh equity resources. The current complexities in the capital structure is also coming in the way of attracting investors.

krsrivats@thehindu.co.in

Axis Bank Q3 net up 24% on robust interest, fee incomes

2012-01-21T20:15:00.000+05:30

Axis Bank's net profit increased by 24 per cent to Rs 1,102 crore for the quarter ended December 31, 2011, from Rs 891 crore in the corresponding year-ago quarter, on the back of robust growth in both interest and fee income.

The bank's performance in the just-ended quarter was satisfactory, although it was a challenging quarter, said Mr Somnath Sengupta, ED and CFO, Axis Bank.

Growth in fee income was broad based and from all segments such as retail, corporate and treasury. Advances growth too was across all segments, although retail advances grew at a faster pace than corporate, small and medium enterprises and agriculture.

Retail advances grew by over 32 per cent, large and mid-corporate by 19 per cent and SME by 21 per cent.

“We have been focusing on retail loans — home and auto loans — for some time now because it was a small segment for us. The share of retail loans to total advances has increased to 22 per cent from 20 per cent last year. Also, generally there was lower demand in corporate and infrastructure loans, though that was not why we focused on retail segment,” Mr Sengupta said.

While rise in cost of funds by 155 basis points led to a slight decline in Net Interest Margins, the 32 per cent growth in low-cost CASA (current and savings accounts) helped to protect margins to some extent.

Going ahead there could be some contraction in NIM as cost of funds may go up on account of migration from demand deposits to term deposits.

In the December-ended quarter, the bank added Rs 535 crore to gross non-performing assets (NPAs). Gross NPAs increased to Rs 1,915 crore (Rs 1,483 crore). Accordingly, provisions have increased to Rs 422 crore (Rs 314 crore).

“NPAs are a challenge for all banks. We don't expect gross NPAs to increase more,” Mr Sengupta said.

About the huge growth in deposits, Mr Sengupta said the bank focused on CASA and placed lot of emphasis on retail term deposits.

Credit growth

In the fourth quarter, credit growth is likely to pick up as banks try to meet their priority sector requirements, he added.

Within non-interest income, trading profits were lower at Rs 118 crore (Rs 135 crore), due to diminishing trading opportunity in the high interest rate environment, Mr Sengupta said.

Shares of Axis Bank closed at Rs 1,008, up 5.9 per cent, on the BSE on Friday.

priyan@thehindu.co.in

UCO Bank to auction a part of stressed assets

2012-01-20T14:15:00.000+05:30

Kolkata based UCO Bank has decided auction its bad loans in a bid to lower its non performing assets. It has called for bids from investors for a stressed portfolio of Rs 327 crore comprising 45 loan accounts.

These 45 accounts includes assets like J B Diamond, Ind Synergy and Asian Electronics, officials from banking industry told ET on condition of anonymity. A number of asset reconstruction companies are likely to bid, they added.

The bad loan market usually becomes active in the second half of a fiscal year as bank tries to meet annual targets by selling stressed assets. However not many banks have tapped the bad loan market so far this year.

UCO Bank's gross non performing assets stood at 3.64% or Rs 3542 crore of total loans for September ending 2011 against 2.39% or Rs 2058 crore a year ago.

Interestingly, UCO Bank had put on block a small portion of their bad loan in November 2011 but it has yet not declared results.

Source: EconomicTimes

RBI, banks in talks for recast of power sector loans, says SBI

2012-01-20T14:11:00.000+05:30

NEW DELHI: Country's largest lender State Bank of India has said that banks are in talks with the Reserve Bank of India on possible restructuring of loans to the power sector projects that are facing problems in implementation.

"We are working with the RBI on how this can be done without the banks being required to make any provisioning," said SBI's Chairman Pratip Chaudhuri.

He, however, clarified that the State Bank of India, which has over Rs 32,000 crore exposure in the power sector, has not yet received any "special request" from the power sector for restructuring of loans. "They are saying that they would be in position to service their debts," said Chaudhuri after having pre-Budget consultation with Finance Minister Pranab Mukherjee. "We are giving loans to all big companies...It's not right for us to equate all the companies," he added.

Chaudhuri said that the risk in power sector is micro not macro and in some cases they (power companies) have said that the implementation of projects have got delayed due to reasons beyond their control.

A recent study by rating agency CRISIL has pointed out that banks' overall exposure of around Rs 56,000-crore to the power sector could be under stress because of losses of distribution companies, who have seen their losses getting doubled to Rs 40,000 crore in 2010-11 from 2008-09.

The finance ministry had asked state-run banks to give company-wise exposure to loans in four stress sectors-aviation, telecom, commercial, real estate and power utilities- which have raised worries that it could spike the bad loans and could derail their lending plans.

The gross non-performing assets, or NPAs, of commercial banks have risen over 25,000 crore in the first six months of the current fiscal. State-run banks wrote off nearly Rs 17,300 crore in 2010-11 against Rs 11,000 in the year before.

As per the latest figures, as on November 30, state-run banks have request for restructuring of 344 loan accounts with an outstanding of Rs 1.65 lakh crore.

Public sector banks had exposure worth over Rs 2.97 lakh crore to the power sector at the end of second quarter of the current fiscal, with maximum credit doled out by SBI.

Source: EconomicTimes

SKS Micro posts Rs 428-cr loss

2012-01-20T14:03:00.000+05:30

SKS Microfinance Ltd has posted a net loss of Rs 428 crore in the third quarter ended December 31, 2011.

The Hyderabad-based company had earned Rs 34 crore net profit in the corresponding quarter of previous financial year.

The loss was due to Rs 358.66 crore provisions and write-offs made during the period under review, largely on account of Andhra Pradesh Microfinance crisis.

“In the absence of virtual certainty of future taxable profits supported by convincing evidence, the net deferred tax asset amounting to Rs 353 crore as at December 31, 2011, has not been recognised,” SKS said in its un-audited financial results communicated to the Bombay Stock Exchange on Thursday.

The total revenue decreased to Rs 83.82 crore (Rs 384 crore).

The company's disbursals and collections were hit in Andhra Pradesh, its main market, since the enactment of Andhra Pradesh Microfinance (Regulation of Moneylending) Act, 2010.

During the quarter, SKS founder, Mr Vikram Akula stepped down as Executive Chairman and Director of the company.

Mr P. H. Ravi Kumar, Independent Director, took over as the Non-Executive Interim Chairman of the company in November 2011.

SKS scrip rose 0.70 per cent to end at Rs 93.55 on the Bombay Stock Exchange on Thursday.

nagsridhu@thehindu.co.in

Move to reposition Nabard as ‘commercial entity' irks staff

2012-01-20T14:00:00.000+05:30

The All-India Nabard Employees' Association (AINEA) has described as retrograde the move to reposition the apex-level bank as a ‘commercial entity'.

The association has twice moved the management against the move, Mr Jose T. Abraham, Vice-President, AINEA, told Business Line here.

ROLE STRIPPER

The repositioning, as proposed by the Boston Consulting Group (BCG), is aimed at stripping Nabard of its ‘development finance' role, the association said.

Mr Tapas Sen, Member of Parliament, has written to the Finance Minister requesting his intervention in the matter.

The repositioning/restructuring design must be subjected to the review and scrutiny of appropriate forum, including Parliament, which gave birth to Nabard through an Act, he said.

BCG has reportedly suggested turning Nabard into a commercial entity with more focus on direct lending to big private corporate entities.

This would obfuscate its role as the only development finance institution dedicated to the services of landless, small and marginal farmers of the country.

Any dilution of its objective would be prejudicial to the cause of the rural masses, especially during these ‘uncertain times' for both agriculture and rural India.

Mr Sen also flagged the resource crunch at Nabard after the Reserve Bank stopped contributing to its national rural credit (long-term operations) and national rural credit (stabilisation) funds from 1993.

LONG-TERM FUNDS

These funds are critical in sustaining long-term investment credit to agriculture, which has lacked adequate long-term institutional credit and investment, Mr Sen said.

No less crucial is the need to restore the general line of credit, which meets the short-term credit needs of the farmers.

vinson@thehindu.co.in

Bank borrowings test RBI's CRR resolve

2012-01-19T09:06:00.000+05:30

MUMBAI: Bank borrowings from the Reserve Bank of India has doubled in two weeks, testing the Reserve Bank of India's resolve not to signal a shift in monetary stance of fighting inflation by easing the cash reserve requirement.

The maturity of forward contracts where the central bank had sold US dollars to prevent the rupee slide last month, and higher demand for funds from companies that no more want to borrow overseas due to higher rates, could push up interest in the domestic market in the short term, traders say.

"The selling by RBI for intervention was partly extended by receiving the forward sales," said Ashish Vaidya, executive director, trading, UBS AG. "So, the impact of that on systemic liquidity will be felt on the day the forward sale matures."

Banks borrowed 1.56 lakh crore from the central bank, double of what it was two weeks ago, setting off speculation that the RBI may have to take some measures to ease the pressure, which may be even cutting the cash reserve ratio from 6%.

They also borrowed 200 crore by paying penal rate that is 1 percentage point more than the 8.5% repo rate in the so called marginal standing facility. The borrowing under this window is done when a bank pledges securities by breaching the minimum 24% limit of mandated government bond holdings.

The rupee has already appreciated by almost 6.2% this year, partly due to the impact of the RBI measures to curb speculative trading.

The call, or overnight rates, touched a high of 9.55%, reflecting the tight cash position in the market. Loans demand could also be leading to tight liquidity, some say. "There is a shift in credit demand from foreign currency to rupee-denominated loans, since it will now be more expensive to take the dollar route," said Moses Harding of IndusInd Bank.

Source: EconomicTimes

Banks step up gold loan biz

2012-01-19T09:04:00.000+05:30

It seems all that glitters ultimately turns out to be gold. India’s top banks are now vying for market share in the gold loan business, which has so far remained the forte of non-banking financial companies (NBFCs) and a few banks in the South.

At a time when credit demand has been dwindling because of high interest rates, banks have stepped up lending against the yellow metal. Financing against gold being a secured form of lending, and higher margins are the key reasons why banks are expanding this portfolio.

Loans against gold are considered priority sector advances. This has also made the business attractive for banks, especially those in the public sector. According to Reserve Bank of India data, 18 of the 26 public sector banks (including five associate banks of State Bank of India) have missed their agricultural lending targets for 2010-11.

WHAT PROMPTED THE RUSH?

Asset quality: These loans are given against gold, which, unlike other securities, does not depreciate fast. Compared to other advances, credit quality of these loans is one of the best

Margin: These loans carry a higher interest margin compared to other secured advances like mortgage and car loans

Priority sector: Many banks have been struggling to meet priority sector targets. Since these loans come under priority sector advances, these offer an opportunity to meet targets

Demand: Strong demand for gold loans, both in urban and rural centres. In rural branches, it is one of the most popular loan products

Cross sale: Banks expect gold loans to provide an opportunity to cross-sale other products and services to customers who have borrowed against the yellow metal

HDFC Bank, the second-largest private sector lender in the country, has doubled its gold loan portfolio in the last 12 months. The bank had entered this business only three years ago. However, within this short period, the bank claims to have acquired significant market share among new-age private sector banks. “We are well placed in terms of market share among new-age private banks. We have doubled our portfolio this financial year and expect the growth to accelerate, as more branches start offering this product,” a senior HDFC Bank executive told Business Standard on the condition of anonymity.

The bank currently offers gold loans through 70 per cent of its branches in the country. It also offers these loans both in rural and urban markets.

Another private sector lender, Axis Bank, which recent forayed into this business, plans to ramp it up. “So far, we have been watching the market, assessing the risks and evaluating the business model. Most of these have been sorted out. We will start ramping up our business now, and would be more active in the gold loan market from the next financial year,” said Jairam Sridharan, head of consumer lending and payments, Axis Bank.

Bankers said margins in the gold loan business were relatively higher than those in other secured loan products. According to industry players, while NBFCs offer these loans at 18-24 per cent, most banks offer gold loans at 11-15 per cent to attract borrowers. Banks lend only 60-80 per cent of the value of the gold.

Most banks said credit risks are significantly lower for gold loans, compared to unsecured personal loans. According to the lenders, these loans are one of the best-performing assets in the credit portfolios of banks. “These loans are given against securities that do not depreciate very fast. Also, the securities are relatively liquid. It is a good deal if you get 11-12 per cent interest by offering loans against these securities,” said a senior official of a Mumbai-based private bank.

Even banks that have traditionally been active in the gold loan business are looking to ramp up operations. Thrissur-based South Indian Bank, which has about 20 per cent of its advances in gold loans, had earlier planned to set up a separate subsidiary for this business, a proposal which did not find favour with the banking regulator. The move was aimed to strengthen its gold loan business and offer this product through its NBFC arm in areas where it did not have a bank branch.

“In many of our rural branches, we found customers were coming to the bank only to borrow loans against gold jewellery. In some of our branches, the only business is to lend against gold. We are looking to expand this business in the coming quarters,” said the chief executive of a mid-sized private sector bank.

Source: Business Standard

Citigroup pays $750,000 fine for analyst conflict

2012-01-18T23:22:00.000+05:30

WASHINGTON: An industry regulator fined Citigroup Inc $725,000 for not disclosing conflicts of interest in the bank's research division.

The Financial Industry Regulatory Authority said Wednesday that Citigroup Global Markets failed to disclose the conflicts in reports that it published between January 2007 and March 2010.

FINRA, which is industry funded, said Citigroup was paid for services to some companies but did not disclose the relationships in research reports.

Ordinary investors often rely on such research reports when deciding whether to buy or sell stock in a company. So banks must disclose if they do business with a company in their reports.

Citigroup said in a statement that it began improving its disclosure process even before FINRA's inquiry began. The bank did not admit wrongdoing as part of the settlement.

Source: EconomicTimes

Federal Bank hikes interest rates on fixed deposits

2012-01-18T23:20:00.000+05:30

MUMBAI: South-based Federal Bank today hiked interest rates on fixed deposits by up to 0.25 percent based on maturity.

Under the revised rates applicable from January 17, a deposit for above two years but less than three years will fetch an interest of 9.50 percent per annum as compared to the earlier 9.25 percent.

Similarly, a deposit for five years and above will earn the depositor a rate of 9.25 percent per annum, it said in a statement issued here.

Source: EconomicTimes

RBI to issue Rs 100 note with rupee symbol

2012-01-18T23:16:00.000+05:30

MUMBAI: The Reserve Bank will shortly issue Rs 100 notes which will have the rupee symbol. The design of the notes to be issued is similar in all respects to the existing Rs 100 in Mahatma Gandhi Series-2005 issued earlier, except for the rupee symbol.

RBI had announced last month that it will soon introduce notes of Rs 1,000, Rs 500 and Rs 10 denomination featuring the rupee symbol.

The Rs 100 notes will be of the Mahatma Gandhi-2005 Series bearing the signature of Reserve Bank of India (RBI) Governor D Subbarao and with the year of printing mentioned on the back of the banknote, the apex bank said in a statement.

All the banknotes in the denomination of Rs 100 issued by the RBI in the past will continue to be legal tender, it said.

The Indian rupee got an unique symbol -- a blend of the Devanagri 'Ra' and Roman 'R', last year, joining currencies like the US dollar, euro, British pound and Japanese yen in having a distinct identity.

The new symbol, designed by Bombay IIT post-graduate D Udaya Kumar, was approved in July 2010.

Source: EconomicTimes

Bank of India to recruit 1,800 probationary officers

2012-01-18T23:10:00.000+05:30

Bank of India is recruiting probationary officers to fill up about 1,800 vacancies across the country.

The bank has specified that candidates with a minimum of 60 per cent in their graduation and a total weighted standard score of 130 in the common written examination conducted by Institute of Banking Personnel Selection (IBPS) are eligible to apply.

The bank has said that only those candidates who rank sufficiently high in the order of merit shall be called for a personal interview in the ratio of 1:3. The interview will be for 100 marks and the minimum required for qualifying the interview is 50 marks. The tentative period of the interview will be between February and March 2012.

A merit list will be prepared based on the marks secured in the common written exam as well as the interview and then the final selection will be made.

The minimum age requirement is 21 years while the maximum is 30 years. Applications have been invited online and are open from January 19. The last date for registration of online applications is January 31.

Corporation Bank keen on boosting lending to small units

2012-01-18T23:08:00.000+05:30

Mangalore-based Corporation Bank is planning several initiatives aimed at boosting the growth of the SME (small and medium enterprises) sector.

Of the targeted Rs 35,000 crore credit portfolio for the priority sector during the current fiscal, the bank is looking to lend around Rs 15,500 crore to the SME segment.

Speaking to Business Line here on Wednesday, Mr Ajai Kumar, Chairman and Managing Director, said that the bank is giving focused attention to the growth of SME sector by cashing in on the big opportunity available in the industrial ancillary units in the auto, IT, leather, food processing and textile sectors.

He said that SME credit portfolio of the bank was at around Rs 12,500 crore at the end of December. “We want to reach a figure of Rs 15,500 crore in SME lending this fiscal,” he said.

Mr Ajai Kumar said an SME beneficiary is one who manufactures goods for big companies and will, therefore, require money.

He said Corporation Bank has created and launched several niche SME products to meet the needs and expectations of entrepreneurs. The bank has also adopted cluster-based approach for focused lending to SMEs.

The bank, he said, has signed an agreement with SIDBI for financing SMEs. Added to this, the bank also has opened specialised SME branches.

As a process re-engineering measure, the bank proposes to establish ‘SME processing cells' in all zonal offices in the country, Mr Ajai Kumar said.

Under this, customers can go to any branch and submit their loan proposals, and the cell will process them, he added.

vinayakaj@thehindu.co.in

Allahabad Bank, Indian Overseas Bank & Sompo Japan Insurance to infuse Rs 200 cr in Universal Sompo

2012-01-18T09:11:00.000+05:30

KOLKATA: Allahabad Bank, Indian Overseas Bank and Sompo Japan Insurance will invest Rs 200 crore in their joint venture Universal Sompo General Insurance Co for the first time in four years to sustain business after underwriting losses eroded more than 100 crore of the insurer's capital. Underwriting loss means the insurer settled more in claims than its premium collection by selling risk policies.

"We need fresh capital to maintain our solvency margin as well as to expand business," Universal Sompo's executive chairman ON Singh told ET over telephone.

The firm plans to grow business by nearly 50% next fiscal and aims to collect 600 crore as premium. It expects to close the current fiscal with a 425-crore collection. "Our shareholders have agreed to inject 200 crore together as the need for risk capital has increased. They are expected to take this proposal to their respective boards soon," Singh said. Karnataka Bank and Dabur are also shareholders in the insurer.

The capital infusion is expected to be done by March. The partners will invest according to the size of their holdings and none will pay a premium. Initially, overseas partner Sompo, a multinational insurance firm, joined the venture by paying a share premium for its 26% stake. A senior Allahabad Bank executive confirmed the bank had received a proposal for fresh investment. The bank is the single-largest stakeholder with 30% equity in the JV, while Indian Overseas Bank has a 19% stake. Karnataka Bank holds 15% while the non-bank partner Dabur Investments has a 10% interest.

"It's an investment for us. We will discuss this proposal at the board but we are waiting for the insurance regulator to announce the new capital raising guidelines for general insurers," the Allahabad Bank executive said.

Universal Sompo received its licence in November 2007 and started journey with a Rs 235-crore net worth, which has now shrunk to Rs 125 crore because of underwriting losses of close to Rs 110 crore.

According to data released by Insurance Regulatory & Development Authority, general insurance companies collectively saw a 68% jump in underwriting losses in 2010-11 at Rs 9,969 crore, compared with Rs 5,944 crore in the preceding fiscal.

The insurer sells risk products for health and critical illness, personal accident and disability, home and motor, besides group products like employee benefit and project insurance.

Source: EconomicTimes

Andhra Bank CMD B Prabhakar will have to move fast to get noticed

2012-01-18T09:09:00.000+05:30

On the face of it there does not appear to be anything out of the ordinary about B Prabhakar, the new chairman and managing director (CMD) of Andhra Bank. He would, in fact, give the impression of being a docile and easy-going person. A perpetual smile on his face may have misguided many to assume that that he has little or no worries.

But only a few who have worked closely with him know that he does not display emotions very easily. Also, practising yoga daily for over 25 years has helped him gain emotional stability and maintain calm. A chartered account by training and a graduate from Mysore University, Prabahakar started his career at Bank of Baroda where he worked extensively in the credit and treasury division.

He was posted twice overseas - Zambia in his younger days and later on at London. Interestingly, having joined as a specialist, he was exempted from rural posting. An ardent music lover, he spent three decades with the bank where he rose to the rank of general manager way back in 2003 to become the youngest GM those days. But luck did not favour him. First, it took him five years to rise to the post of executive director.

Thereafter, the appointments committee did not select him for the CMD post at PSU banks in 2009 even as most bankers felt that he was more suitable than other candidates in the list. "Fortunately, all his bosses have recognised his contribution to work which is a satisfying feeling at the end of the day," said a colleague of Prabhakar at Bank of Baroda. He considers himself to be lucky to have worked under RBI's deputy governor KC Chakrabarty in his former avatar as general manager-treasury. He would have learnt from him the art of putting across a point.

In fact, Chakrabarty and Prabhakar joined the bank together and were in the same induction programme, with Chakrabarty one scale senior to him. While having worked under TS Narayanasami former CMD of Bank of India, Prabhakar realised the importance of taking quick decisions - something which will be very useful for him to emerge as a successful bank chief.

Prabhakar was in Zambia between 1989 and 1993 at a time when the Zambian economy was opening up and making structural changes. He returned to be part of the treasury team at a time when the Indian economy too was moving from controlled environment towards liberalisation. His learning in Zambia helped him stay several steps ahead of his peers.

That phase also prepared him to function in a deregulated environment and also boosted confidence level. A few years later he was given charge of the Delhi zone where he dealt with the credit portfolio. The lending business in Delhi was a unique experience as it prepared him to deal with shrewd corporates and businessmen.

From Delhi, he was posted to London for three years to take over from Chakrabarty. Some of his colleagues say that as chief of the bank, Prabhakar, will have to shed his mild approach and become more tough and firm in all walks to business life.

Having worked closely with different kinds of CMDs - some aggressive and some-take-it-easy types - Prabhakar is well aware of the outcome in each case. With little less than two years at Andhra Bank, he will have to move fast to get noticed.

Source: EconomicTimes

Digital banking set to gain preference among customers: Survey

2012-01-18T09:05:00.000+05:30

Digital banking is set to overtake branch networks as the main way customers interact with their banks by 2015 mainly on account of younger generations’ preference to mobile and computer platforms for transactions, says a PwC survey.

The survey, the New Digital Tipping Point, conducted among 3,000 banking customers across nine developed and emerging markets, found that 70 per cent of respondents in India use internet and 56 per cent use mobile to purchase financial products.

“Mobile banking is expected to follow a similar usage curve to internet banking, with China, India and the UAE currently leading its adoption,” PwC noted.

Overall, 69 per cent of respondents globally currently use the internet to purchase financial products, while 33 per cent use their mobile phones.

In terms of customer profile, Generation Y (people born in the 1980s and 1990s) leads the way, with 67 per cent of respondents saying that they currently use or are considering using mobile channels for banking.

The report said that most of the consumers are willing to pay more for digital banking services if they believe they offer convenience and value. It suggested that despite a strong demand for digital banking products from consumers, banks have been rather slow to respond to the digital innovations.

“...The majority of banks still only provide basic mobile and internet banking...Banks are clearly missing a trick if they don’t start to invest in their digital offerings and only see digital as a way to reduce costs services,” Stephen Whitehouse, retail and commercial banking partner at PwC, said.

Digital banking could prove a significant source of revenue for banks as most consumers are willing to pay as much as £10 ($15.29) a month for the service.

Social media notifications, an electronic wallet for loyalty cards and tailored financial services are popular draws for customers.

“The banks that provide a differentiated digital experience, with advice and relationship management elements tailored to the individual customer, will secure deeper engagement and more profitable relationships with their customers,” Mr Whitehouse said.

“The growth of digital has removed key barriers to market entry, including the need for large branch networks, customer inertia and brand trust. Because of this, banks need to consider strategic acquisitions or partnerships with digital innovators to secure their long-term position and market share,” he added.

The report suggested that incumbents in developing markets, where there is a larger share of unbanked consumers, would experience the greatest threat from new players if they do not improve their digital offerings.

HDFC Bank in ‘Harvard Business Review’ elite growth list

2012-01-17T23:35:00.000+05:30

HDFC Bank has been featured by ’Harvard Business Review’ in a list of 10 companies globally that have grown their net income by 5 per cent every year for the 10-year period ended 2009, the private lender said today.

The list is based on a survey, ‘How the growth outliers do it’, which covered 2,347 organisations, all with market capitalisation of $1 billion.

‘Harvard Business Review’ is a reputed general management magazine.

“These companies have been recognised for prospering over the long-term and being more stable and innovative than their competitors,” the survey report said.

“They (the selected companies) make small bets early and diversify their portfolios, are active acquirers, have processes that support speed and flexibility, build innovations into everyday operations and hold to their talent and keep their senior leadership stable,” it said.

Referring to HDFC Bank, the report said the Indian lender had a history of entering into new growth markets through initiatives like the launch of international debit cards, tele-banking, mobile banking and foreign exchange services, among others.

Besides HDFC Bank, the other Indian company to be featured in the list is IT giant Infosys.

The list comprises three companies from the US, two each from India and Spain and one each from Japan, Slovenia and China.

IDBI Bank launches retail G-Sec portal

2012-01-17T23:34:00.000+05:30

IDBI Bank on Monday launched the country's first online retail G-Sec Portal — IDBI Samriddhi G-Sec Portal. This portal provides an opportunity for retail investors to invest in Government securities (bonds) issued, both by Central and State Governments.

The portal will become operational from January 17, 2012. Mr Melwyn Rego, Executive Director, IDBI Bank, said, “Retail investors having access to the Internet and a Demat account can freely buy and sell government bonds at the click of a button through IDBI Bank's Web site.”

Narendra Singh is new CMD of Bank of Maharashtra

2012-01-17T23:30:00.000+05:30

Mr Narendra Singh has been appointed Chairman and Managing Director of Bank of Maharashtra (BoM) with effect from February 1, 2012. He has been Executive Director of Corporation Bank since December 7, 2009.

Mr Singh will report to the Head Office of Bank of Maharashtra on Tuesday and start getting acquainted with his new assignment.

Born on September 11, 1953, he started his professional career as an officer with Allahabad Bank in 1980 and became General Manager in 2005 before joining Corporation Bank as Executive Director.

Healthy loan growth boosts DHFL Q3 net 21%

2012-01-17T23:27:00.000+05:30

Housing finance company, DHFL has posted a net profit of Rs 75 crore for the quarter ended December 2011, up 21 per cent from Rs 62 crore in the corresponding year-ago period.

Healthy growth in loan disbursements helped the company post good results.

During the quarter, disbursements grew by 49 per cent to Rs 2,280 crore (Rs 1,528 crore). Sanctions grew by 44 per cent to Rs 3,189 crore (Rs 2,214 crore). The total housing loan portfolio was Rs 25,224 crore as on December 31, 2011.

The percentage of net non-performing assets to total loans was at 0.17 per cent (0.39 per cent).

SBI will get Rs 6,000-8,000 cr capital infusion by March

2012-01-16T22:35:00.000+05:30

The State Bank of India has said the Government has approved a capital infusion of Rs 6,000-8,000 crore. The funds will come by March 31.

Mr Pratip Chaudhuri, Chairman, SBI, said, “The Ministry had approved it long back. Even the Planning Commission approval is in place. So it (capital infusion) should be between Rs 6,000 crore and Rs 8,000 crore.” It should be done before March 31, he told reporters here.

The Government has already announced that it is committed to providing adequate capital to public sector banks so as to maintain their Tier-I capital at 8 per cent.

As of September 2011, the capital adequacy ratio (CAR) of SBI stood at 11.4 per cent. Of this, Tier-I capital stood at 7.47 per cent at the end of second quarter against the minimum 8 per cent level desired by the Government.

In 2010-11, the Government provided capital support of Rs 20,157 crore to public sector banks.

SBI had submitted a proposal some months ago to raise Rs 20,000 crore through a rights issue. The bank requires Rs 20,000 crore to fund its growth plans over the next two fiscals.

No Rate Cut

On another note, Mr Chaudhuri said the RBI may not cut rates immediately. “I am not very hopeful,” he replied to a question on the possibility of an interest rate cut. His remark is significant especially when the industry is expecting an interest rate cut at a time when the headline inflation has moderated to a two-year low, touching 7.47 per cent in December 2011.

Shishir.s@thehindu.co.in

BoB to open dozen branches overseas in 6 months

2012-01-16T22:33:00.000+05:30

Bank of Baroda (BoB) plans to expand its international operations by opening more than a dozen branches and representative offices overseas in six months, Chairman and Managing Director MD Mallya said today.

At present, the bank has 87 branches and offices spread across 25 countries and this number is expected to touch 100 by June-July, Mallya told reporters here.

Overseas operations constitute 24-25% of the bank's total business. "Asset quality of international operations is very strong," he said.

BoB will open branches in Kuala Lampur [Malaysia], Surinam, Uganda, Tanzania and Botswana and couple more branches in New Zealand and the UAE, while its representative office in Australia will be converted into a branch, Mallya said.

He also said the government of India plans to infuse Rs 775 crore into the bank to raise its holding from 57% to 58% by March-end.

Asked if the rising non-performing assets of Indian banks are a matter of concern, Mallya -- who is also Chairman of the Indian Banks' Association -- said "stress and pain points" are anticipated, but the Indian banking system is strong and resilient enough to manage and absorb such bad loans.

He earlier opened the bank's Brigade Road premises, where its retail and SME loan factories, along with corporate financial services and MG Road branches, were moved.

The bank will soon set up a mid-corporate branch in the new premises to help existing and potential entrepreneurs. This branch would finance business entities with an annual sales turnover of Rs 150 crore to Rs 500 crore.

The bank has 71 branches in Karnataka and this number is expected to cross 100 in a year or so, Mallya added.

Source: Business Standard

South Indian Bank Q3 net up 32%, eyes Rs 1,000 cr QIP

2012-01-16T22:30:00.000+05:30

South Indian Bank has registered 32% jump in net profit at Rs 280 crore for the third quarter ended December 31 and plans to raise Rs 1,000-crore through qualified institutional placement (QIP).

"We have registered the highest-ever quarterly profit at Rs 279.70 crore and are looking at raising Rs 1,000 crore through QIP issue to fund our expansion plans over the next three-year period," South Indian Bank CEO and Managing Director VA Joseph said.

"Our capital-raising plan of course depends on the revival of market condition," Joseph said.

The bank's total business increased 27.49% to Rs 58,883 crore in Q3 FY12, over the same period last fiscal. The deposits have gone up by Rs 6,836 crore from Rs 26,998 crore to Rs 33,834 crore. The advances increased by 30.55% at Rs 25,050 crore in Q3 FY12.

The bank's CASA increased from Rs 6,045 crore in Q3 last fiscal to Rs 7,280 crore, up 20.43%.

SIB said it earned Rs 2,754 crore during the 9-month period, as against Rs 1,879 crore in the previous year, a growth of 46.61%.

The capital adequacy ratio of the bank stood at 12.03% (under BASEL II standards) against the regulatory requirement of 9%.

The robust growth in business, coupled with low NPA enabled the bank to attain the present level of performance, Joseph said.

Its gross non-performing asset (NPA) ratio improved from 1.33% to 0.94% sequentially, while the net NPA ratio changed little at 0.24% during the three months period.

The bank is looking at 25% growth in FY12 and plans to increase the number of branches to 700 and ATMs to 625 by fiscal-end.

Source: Business Standard

Accounts can not be closed for non-compliance of KYC norms without notice

2012-01-15T14:44:00.000+05:30

NEW DELHI: A Delhi consumer forum has ruled that a bank closing its customer's account without serving him notice seeking his various particulars as per the banking sector's Know-Your-Customer (KYC) norms, is liable to be held guilty of rendering deficient service.

Delhi's Central District Consumer Disputes Redressal Forum, headed by its president B B Chaudhary gave the ruling while holding Karol Bagh branch of the State Bank of Bikaner and Jaipur guilty of rendering deficient service to one of its customers, whose bank account it had closed without serving a due notice to him, seeking his particulars.

It also asked the bank to pay Rs 15,000 as compensation within 30 days to complainant R N Prabhakar, a lawyer, for causing "harassment, pain and mental agony" to him.

"We hold that the act of the bank amounts deficiency in service. It led to harassment, pain and mental agony to the complainant," the forum said.

The forum said the bank, itself, did not follow the RBI guidelines, published in a news daily, on the KYC by closing the account of the lawyer on its own.

Rather, it cleared two cheques of the complainant before closing his accounts without giving him a notice, it said.

"It was not appropriate on its part to close the account or not to honour the cheque of the complainant by taking shelter under the public notice," it said.

Prabhakar, in his complaint, had alleged that the bank dishonoured a cheque issued by him in favour of Airtel without any valid reason. He also also sought that his complaint be treated as a public interest litigation.

Source: EconomicTimes

SBI trims housing loan processing fee

2012-01-15T14:34:00.000+05:30

Country's largest lender State Bank of India has halved the home loan processing fee, a move which could be followed by other public sector lenders in the coming days.

The bank has slashed processing fee on home loan above Rs 75 lakh to Rs 10,000 from Rs 20,000, while for loans between Rs 30-75 lakh, the fees has been reduced to Rs 6,500 from Rs 10,000 earlier, a senior SBI official said.

The new fee structure is applicable starting January 11, the official added.

The official, however, added that the processing fee for loans below Rs 30 lakh continues to be 0.25% of the loan amount.

The reason for slashing fee is to promote home loan products of the bank, the official said.

Competitors like ICICI Bank and Axis Bank charge 0.5% of the loan amount for home loans -- both floating and fixed both.

At the same time, Bank of Baroda levies a charge of 0.4% of the loan amount or maximum limit of Rs 50,000, while Bank of India charges Rs 20,000 flat fee for housing loans between Rs 25-75 lakh.

According to another public sector bank official, banks could offer some incentive to promote home loan product above Rs 30 lakh as there has been some moderation in this segment.

It could be in the form of lowering of fee or some concession in rates if interest rates don't come down by the end of the current fiscal, the official added.

In other retail loans, particularly auto loans, some banks are offering concession in rate as well as waiving of processing charges to garner higher share.

Some bankers also feel that the processing fee may go up in the medium term. However, charges are likely to remain stable for the next couple of months.

"Since most of the banks have done away with pre-payment charges, I feel the processing charge in the industry as a whole would tend to go up in the medium term if not in the short run," Axis Bank Head (consumer lending and payments) Jairam Sridharan said.

Last year, housing finance regulator National Housing Bank had directed all housing finance companies to desist from imposing a pre-payment penalty on home loan borrowers. Subsequently, many banks announced abolition of such charges.

SBI, Bank of Baroda, Bank of India, Punjab National Bank are some banks which scrapped pre-payment charges.

Source: Business Standard

IRDA asks agent training institutes to register as cos

2012-01-15T14:30:00.000+05:30

To eliminate non-serious players, the insurance regulator IRDA has asked all existing agent training institutes (ATIs) to get themselves registered either as a company or trust by June.

“Existing accredited entities (ATIs), other than the companies/ societies, trusts, have to convert themselves into companies, societies or trusts within 6 months...,” the IRDA said in a circular.

The Insurance Regulatory and Development Authority (IRDA) has said that only those entities with more than three years of experience in training for financial or insurance products will be eligible for accreditation as institutes for training insurance agents.

The initial approval will be for a period of three years and consideration of further renewal for next three years.

Further, ATIs are required to maintain the attendance record by way of biometric system and put in place an effective mechanism for the same by April 1, 2012.

These entities play an important role in training agents for selling insurance products as the sector is battling the curb the menace of mis-selling. Mis-selling refers to sale of a financial instrument without fully disclosing the pros and cons of it to an investor.

DCB defers Rs 150 cr QIP plan to June

2012-01-15T14:27:00.000+05:30

Sloppy market conditions have forced Development Credit Bank (DCB) to defer its QIP issue to next fiscal and the small private lender is now hoping to raise up to Rs 120 crore in the first quarter of FY 13.

“We should do a QIP (qualified institutional placement) of up to Rs 120 crore by June... the market conditions have not been so good,” DCB Managing Director and Chief Executive, Mr Murali Natrajan said.

In January, last year, the bank had announced plans to raise up to Rs 150 crore through a QIP issue by August.

Mr Natrajan said the exact timing of the issue depends on the market condition and added it is unlikely that the issue will happen this fiscal.

The bank’s capital adequacy stood at a healthy 13 per cent as of the December quarter with the core tier—I at 11.15 per cent. Post—fund infusion, tier—I will go up to 14 per cent, he said.

Apart from raising its already healthy capital adequacy, it will also help dilute the promoter Aga Khan Foundation’s holding in the city—headquartered bank in compliance with the Reserve Bank’s requirement.

The central bank rules do not allow more than 10 per cent holding in a private sector by any single individual or the promoter group entity. The QIP issue will ensure the promoter holding will come down by up to 3 per cent from the present 23.07 per cent, Mr Natrajan said.

The promoters of DCB Bank, which changed into a private sector lender from being a cooperative one, has been asked by the Reserve Bank of India (RBI) to bring down its stake to under 10 per cent by March 2014.

Post—infusion, the bank will not be requiring any fresh capital for up to two years, he said.

The bank’s net profit had almost doubled to Rs 15.6 crore for the December quarter against Rs 8.2 crore in the year—ago period.

The bank, which has 82 branches, has charted a roadmap to increase this number to 150 in three years and is on its way to add 10 more before the end of the current fiscal, he said.

ICICI Bank repays $750-million bonds, skips costly refinance

2012-01-14T20:03:00.000+05:30

MUMBAI: ICICI Bank dug into its internal resources to repay $750 million of bonds that matured on Thursday instead of taking the usual refinance route, said two people familiar with the payout.

The development reflects the high borrowing costs for Indian corporates who have more than $125 billion of overseas debt coming up for repayment this year.

International investors are demanding higher rates as the European sovereign crisis has heightened risk-aversion among EU banks, one of the biggest lenders to Indian companies.

ICICI Bank decided not to pay at least 50% more in coupon than the bonds it raised in 2009 at 5.75% and has opted to wait for rates to ease once the EU crisis abates, the two people said.

"Any fresh bond-raising would be evaluated based on market conditions and new lending opportunities," the bank said in an email response. "ICICI Bank has repaid the bonds using its existing liquidity.

The bank's existing liquidity and incoming repayments from its foreign currency asset portfolio are adequate to meet repayment obligations on bonds and bilateral & syndicated loans."

The cost of borrowing in dollar-denominated bonds for Indian companies has shot up to more than 600 basis points above the benchmark London Interbank Offered Rate (Libor), from about 350 basis points in the first half of 2011, say investment bankers.

Most Indian companies that borrowed overseas due to lower interest rates are at the receiving end after the rupee slid 16% last year, inflicting losses on many.

Source: EconomicTimes

PNB identifies five countries for possible foray

2012-01-14T20:00:00.000+05:30

Banking major Punjab National Bank (PNB) is looking to further expand its overseas presence and has identified at least five countries for possible entry in the coming days.

Maldives, Singapore, Brazil, South Africa and Bangladesh are the five countries that the bank has identified for overseas foray, Mr K. R. Kamath, Chairman and Managing Director, PNB, told Business Line here.

“Our board has cleared the bank's entry into Maldives. We are also looking at Singapore and Bangladesh. Surveys have also been done for countries like South Africa and Brazil,” Mr Kamath said.

He also said that the bank would be interested in converting its representative office in Sydney into a branch or a subsidiary. PNB had in September last opened a representative office in Sydney, which was the tenth overseas destination for the bank.

PNB has already received regulatory approval from the Reserve Bank of India for opening a subsidiary in Canada. It is still awaiting the nod of Canadian regulatory authorities for opening a subsidiary in that country.

The bank has subsidiaries in London and Bhutan, besides many branches in Dubai, Hong Kong and Kabul. It also has a joint venture in Nepal.

krsrivats@thehindu.co.in

B.K. Batra appointed IDBI Bank Deputy MD

2012-01-14T19:58:00.000+05:30

The Government has appointed B.K. Batra as Deputy Managing Director of IDBI Bank.

He was working as Executive Director looking after the corporate banking function and formulation of corporate level policies and processes.

In addition, he was also discharging the responsibility as chairman of credit committee and systems and procedures and several other committees, IDBI Bank said in a statement.

Mr Batra has served IDBI Bank in various positions from 1983 till date, it said.

Andhra Bank launches car loan campaign

2012-01-14T19:55:00.000+05:30

Andhra Bank has launched a special package for four-wheeler loans with special interest rates and concession in processing charges.

The package, ‘New Year Car Campaign' will offer vehicle loans at 12.25 per cent for a repayment period of up to three years with a 50 per cent reduction in processing charges.

For loans above three years, the interest rate is 12.50 per cent.

The offer will be in valid till February 15, Andhra Bank said in a release.

On the deposit front, it had also launched ‘AbhayaFirst Wealth Pack'. The package will offer customers a savings bank account, a recurring deposit account, a group term insurance and unit-linked insurance.

The insurance products would be provided by IndiaFirst Life Insurance, the release added.

nagsridhu@thehindu.co.in

RBI imposes Rs 5 lakh fine on Ghandhidham Cooperative Bank

2012-01-13T22:26:00.000+05:30

MUMBAI: The Reserve Bank of India (RBI) has imposed a penalty of Rs 5 lakh on Kutch-based cooperative sector lender Ghandhidham Cooperative Bank for violation of customer identification norms.

"The Reserve Bank has imposed a monetary penalty of Rs 5 lakh on the Ghandhidham Cooperative Bank Ltd, Adipur, Dist Kutch (Gujarat)... for violation of RBI's instructions relating to Know Your Customers (KYC) norms," the apex bank said in a statement.

The RBI had earlier issued a show cause notice to the bank, in response to which Ghandhidham Cooperative Bank had submitted a written reply.

"After considering the facts of the case and the bank's reply in the matter, the RBI came to the conclusion that the violation was substantiated and warranted imposition of the penalty," the statement said.

Source: EconomicTimes

Maharashtra seeks more time for co-op banks to get RBI licence

2012-01-13T22:18:00.000+05:30

The Maharashtra government has written to the Union Finance Ministry seeking an extension of the March 31 deadline set by the Reserve Bank of India for 11 District Central Co-operative Banks and the State Co-operative Bank to obtain banking licence.

In an interaction with media persons at a State credit seminar organised by the National Bank for Agriculture and Rural Development (Nabard), the Chief Minister, Mr Prithviraj Chavan, said the deadline for obtaining banking licence should be extended by a few months.

The Rakesh Mohan Committee recommendations, which have been accepted by the Union Finance Ministry makes it mandatory for all the cooperative banks to get a licence before the March deadline.

Across the country, there are 134 banks which have not received the licences from RBI. If the banks are unable to get a licence, then they have to either become a cooperative credit society or merge with another bank.

In the State, the Maharashtra State Co-operative (MSC) Bank and 11 district central cooperative banks are functioning without banking licences. These banks either have a negative net worth or their Capital to Risk Assets Ratio (CRAR), is lower than four per cent.

Mr Pramod Karnad, Managing Director of MSC Bank, said that the bank could have a CRAR of more than 4 per cent by March 31 but it would require more time, so that it gets reflected in the balance sheet. It already has an adequate Cash Reserve Ratio and Statutory Liquidity Ratio, which are pre-conditions for getting the licence, he said.

He said that the bank has also started the process of selling assets of 18 sick sugar co-operatives, which have defaulted on loan repayments. From the sale of their assets about Rs 300 to 400 crore would be recovered. The bank has also raised a fresh demand of Rs 275 crore from Maharashtra government, so that the CRAR level reaches four per cent.

Private, foreign banks cannot pay 'excessive' salary to CEOs: RBI

2012-01-13T22:14:00.000+05:30

MUMBAI: The Reserve Bank today said CEOs and staff of private and foreign banks cannot draw "excessive" salary, but it did not impose any cap on their remuneration.

Issuing guidelines on compensation of CEOs and staff of private and foreign banks, RBI said all private and foreign lender will have to obtain prior approval from it for renumeration of CEOs and whole time directors as per the Banking Regulation Act, 1949 which prohibits excessive renumeration.

However, the guideline did not specify what would constitute excessive renumeration. Banks are required to ensure that the fixed portion of compensation is reasonable, taking into account all relevant factors, including the industry practice, it said.

While designing the compensation arrangements it should be ensured that there is a proper balance between fixed pay and variable pay, it said. Variable pay, however, should not exceed 70 per cent of the fixed pay in a year.

The guidelines would be implemented from 2012-13. "As hitherto, private sector and foreign banks operating in India would be required to obtain regulatory approval for grant of remuneration to whole time directors or chief executive officers in terms of Section 35B of the Banking Regulation Act, 1949," RBI said in a notification.

"The approval process will involve an assessment whether the compensation policies and practices are in accordance with the Financial Stability Board (FSB) Principles," it said.

The principles are intended to reduce incentives towards excessive risk taking that may arise from the structure of compensation schemes. The principles call for effective governance of compensation, alignment of compensation with prudent risk taking, effective supervisory oversight and stakeholder engagement, it said.

The principles have been endorsed by the G-20 countries and the Basel Committee on Banking Supervision and are under implementation across jurisdictions, it added.

Source: EconomicTimes

SBI caps losing its hold on debt restructuring business

2012-01-13T08:55:00.000+05:30

MUMBAI: SBI Capital Markets, the undisputed leader in loan syndication as well as debt recast, is slowly losing its grip in the market. Unlike in the past, lenders in the domestic market are no longer signing on the dotted lines if a loan is syndicated or restructured by SBI Caps, the investment banking arm of State Bank of India.

A number of bankers on condition of anonymity say they are no longer comfortable if a proposal is attached to SBI Caps and that they would prefer to vet it themselves -a far cry from the days when SBI Caps' project-appraisal skill was perceived to be impeccable.

A perceived failure in a series of restructured cases like GTL, Air India and Kingfisher added to the growing feeling in the market that SBI Caps is driven more by the fees it earns on advisory than being fair to all lenders in the consortium SBI Caps did not comment to a mail sent by ET on the matter.

The classic case is that of GTL. In June 2010, SBI Caps syndicated a Rs 5,000-crore loan for GTL Infra to pay for Aircel Cellular's tower business. One of the key responsibilities of a loan syndicator is to convince lenders that they have appraised the company and that the company is worth investing in.

However, a year after the loan syndication, SBI Caps was back in the picture to help GTL Infra in a financial crisis. "SBI Capital would suggest appropriate steps or remedies required to protect lenders' interest," the company had then said in a notice to the exchange.

In September 2011, GTL Infra had to go for corporate debt restructuring, with SBI Caps as its advisor. This annoyed lenders who felt SBI Caps did not do its homework before approaching them for investment in GTL. Further, they were disappointed with the CDR package itself, which proposed that lenders would convert 25% of the Rs 16,200-crore debt into equity, while the promoters would infuse only Rs 300 crore.

Similar was the case with Kingfisher Airlines. SBI Caps restructured the loan in May 2010 under a one-time dispensation given by banking regulator Reserve Bank of India. Bankers are now questioning SBI Caps' credibility in assessing the financials of companies, as it has now gone back to banks for another round of restructuring.

"In the past, the restructuring exercise used to be a collaborative effort where lenders took a very practical approach. That does not seem to be the case now," said a senior executive from an asset restructuring company. Willy-nilly, lenders gave their nod to the recasting of GTL's debt and are eagerly waiting for SBI Caps' viability report on Kingfisher.

However, they have rejected the Air India recast package, again designed by SBI Caps. Here the tension between the lenders and SBI Caps was evident as they rejected the proposal saying the provisioning requirement is much higher for all lenders except for SBI.

SBI Caps had proposed conversion of a part of the debt into preferential shares, which involved huge amount of provisioning. "SBI Caps is becoming a darling among companies that are under stress and approaching CDR.

Source: EconomicTimes

LIC Home Finance launches Rs 500 cr VC fund

2012-01-12T22:19:00.000+05:30

Life Insurance Corporation's housing finance arm LIC Housing Finance (LICHFL) today launched a Rs 500-crore venture capital fund to finance realty and micro infrastructure projects.

LICHFL and LIC, have pooled in Rs 50 crore each and another Rs 100 crore have been raised through external investors to launch the fund.

The fund christened 'LICHFL Urban Development Fund' will be managed by LICHFL's dedicated subsidiary LICHFL Asset Management Company and targets to raise the remaining Rs 300 crore in the next nine months, LIC acting chairman DK Mehrotra said here.

Half of the amount will be invested in mid-income housing projects, while the other half will be dedicated to income yielding micro-infrastructure projects like schools, hospitals, special economic zones, industrial IT parks, the company said.

Stating that LICHFL's pedigree in the sector will be a big asset, Mehrotra did not answer queries on the timing of the launch.

With headwinds like repeated interest rate hikes, lower growth, job uncertainties and policy paralysis, the realty and housing sector is facing stress at present.

LICHFL Chief Executive VK Sharma said the company has invested in other similar realty-focused funds earlier too and the decision to enter the fray by themselves is prompted by handsome returns which have been yielded in the past.

For investors, LICHFL AMC is assuring a return of 12 per cent, he said, adding that it will be targetting institutional investors and high networth individuals to raise the balance amount.

Source: Business Standard

HDFC Q3 net up 10% on robust loan growth

2012-01-12T22:16:00.000+05:30

Mortgage lender HDFC has posted a net profit of Rs 981.25 crore for the quarter ended December 31, 2011, on the back of higher loan approvals and disbursements.

The company had reported a net profit of Rs 890.88 crore for the October-December quarter of 2010-11.

The company’s total income stood at Rs 4,472.51 crore during the quarter, up from Rs 3,321.04 crore in the corresponding quarter last fiscal, Housing Development Finance Corporation said in a filing to the BSE.

As of December 31, 2011, the company’s loan book stood at Rs 1.32 lakh crore compared with Rs 1.09 lakh crore in the year-ago period, it said.

Net profit of the company during the April-December period stood at Rs 2,796.48 crore compared with Rs 2,393.01 crore in the previous fiscal.

Total income during the nine-month period stood at Rs 12,463.25 crore against Rs 9,093.21 crore in the corresponding year-ago period.

Cross currency interest rate swaps

The figures are not comparable as the company changed its accounting policy for cross currency interest rate swaps.

These swaps, which were earlier recorded at fair value, are now being recorded at a higher liability by marking only the foreign currency component to spot rates and excluding the benefit of interest rate differentials, HDFC said.

“... Had the corporation followed the earlier method of accounting... net profit for the nine months ended December 31, 2011, would have been lower by Rs 54 crore,” it said.

Net interest margin

Net interest margin (NIM) of the company stood at 4.3 per cent at the end of December 31, 2011. Gross non-performing loans stood at Rs 1,109 crore or 0.82 per cent of total advances during the quarter.

Shares of the company were being quoted 1.83 per cent higher at Rs 693.90 apiece in the late afternoon trade on the BSE.

RBS to cut 3,500 jobs in 3 years

2012-01-12T22:15:00.000+05:30

Royal Bank of Scotland today announced 3,500 job cuts over the next three years, as part of a business reorganisation and shrinkage of its investment banking operations.

RBS, a government-owned banking giant in the UK, also plans to reorganise its wholesale businesses into “markets” and “International banking”, besides closure and downsizing of some other select activities, RBS said in a statement.

The bank would exit from cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses.

“The actions announced today are outlined...will begin immediately, but may take up to three years to implement,” RBS said.

RBS said its wholesale businesses would cater to corporate and institutional clients globally. The bank’s marketing division would focus on its existing strengths in fixed income, foreign exchange, debt financing, transactions services and risk management solutions.

The financial services major said that changes in its wholesale banking operations have been announced to ensure it would continue to deliver against the Group’s strategy announced in 2009.

“At this stage we envisage a further net employment reduction over three years of circa 3,500, split between our UK and non-UK locations, in addition to the approximately 2,000 reduction in staff in GBM in the second half of 2011,” RBS said.

The bank reduced its headcount by 2,000 last year.

According to media reports, it has cut around 30,000 jobs since being bailed out by the government.

”...It is clear that, particularly in the wholesale banking arena, significant new pressures have emerged. The changes we are announcing today seek to ensure that RBS is at the front of the pack in pursuing a strategy that reflects the environment we expect to operate in,” the RBS Group Chief Executive, Mr Stephen Hester, said.

“Our goal from these changes is to be more focused for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall,” he added.

HUDCO to raise Rs 4,685 cr via tax-free bonds

2012-01-12T22:12:00.000+05:30

Housing and Urban Development Corporation Ltd (HUDCO) today said it will raise up to Rs 4,685 crore through a public issue of tax-free bonds.

The company said that it had filed a draft prospectus yesterday for the same with the National Stock Exchange (NSE), where these bonds would be listed.

“The company proposes to make a public issue of tax-free bonds of face value of Rs 1,000 each in the nature of secured, redeemable, non-convertible debentures... aggregating up to Rs 4,684.72 crore,” HUDCO said in a statement.

These bonds would have tax benefits for subscribers under the Income-Tax Act, 1961.

HUDCO is a public sector firm fully owned by the government for the financing of housing and urban infrastructure activities in India.

“The Finance Ministry has given us approval for raising Rs 5,000 crore through tax-free bonds. We have raised Rs 315 crore through private placement of bonds. Now we are coming up with a public issue of tax-free bonds to raise up to Rs 4,685 crore,” HUDCO Senior Executive Director, Mr R.K. Khanna, told PTI.

The funds would be utilised in project financing, he said, adding that the public issue of tax-free bonds is likely to be launched by the month-end.

“In the 2010-11 fiscal, we sanctioned Rs 19,762 crore and out of that, Rs 5,293 crore was in housing and about Rs 14,500 crore in infrastructure projects. We are targeting the sanction of Rs 24,000 crore this fiscal and out of that, 25 per cent would be toward housing schemes,” he said.

The lead managers of the issue are Enam Securities and SBI Capital Markets. The trustee for the bondholders is SBICAP Trustee Company.

LIC to launch online term plan next month

2012-01-12T22:09:00.000+05:30

Life Insurance Corporation (LIC) will sell its policy through the Internet for the first time with the launch of a pure term plan next month.

“The online term plan is ready.

“We had some issues that we have sorted out. It should be launched by the end of next month,” said acting chairman of LIC, Mr D. K. Mehrotra.

The premium rates of the online term plan are expected to be lower than what the company charges for the offline term plans.

deepa.n@thehindu.co.in

SBI slashes processing fee for greater home loan pie

2012-01-12T09:14:00.000+05:30

MUMBAI: State Bank of India (SBI) has slashed processing fees on home loans by half, a move aimed at garnering a larger pie in the home loan market and giving competition to private banks and housing finance companies.

"The decision is aimed at creating goodwill. With regards to fees charged from retail customers, SBI will charge only to the extent of covering its cost and not earn profit on it," said a senior official from the bank on condition of anonymity.

The bank has reduced processing fee on home loan above Rs 75 lakh to Rs 10,000 from Rs 20,000. For loans in the range of Rs 30 to Rs 75 lakh, the fees has been lowered to Rs 6,500 from Rs 10,000 earlier. The processing fee for loan below Rs 30 lakh continues to be 0.25% of the loan amount.

The reduction in the rates follows a decision taken by the policy committee chaired by SBI chairman Pratip Chaudhuri. The new charges will be effective from January 11. Axis Bank and ICICI Bank charge 0.5% of the loan amount sanctioned as processing fee, while housing finance leader HDFC charges 0.50% of the loan amount with a cap of Rs 10,000.

So, on a loan of Rs 50 lakh currently, SBI's processing fee would be the cheapest among the four banks - it would be stand at Rs 6,500 as against Rs 25,000 (0.5% of Rs 50 lakh) charged by ICICI Bank and Axis Bank, and Rs 10,000 by HDFC. This is yet another aggressive stand taken by SBI to grab the home loan pie.

In November, SBI was the first bank to do away with pre-payment penalty on floating and fixed rate loans. "In an environment where all banks are moving towards zero pre-payment charges, we believe processing fee in the industry would tend to rise over a period of time," said Jairam Sridharan, head - consumer lending and payments at Axis Bank. "Also, the waiver of pre-payment penalty will only encourage customers to prepay more loans, more frequently.

Therefore, it is not sustainable to have a lower processing fee." "At a time when corporate sector is going through a lot of pain, SBI may prefer to decelerate its corporate loan book and expand its retail loan book. And this move may be aimed at that," said Hemindra Hazari, head of research - institutional equities at Nirmal Bang, a broking firm.

Source: EconomicTimes

RBI cracks the whip on overseas banks

2012-01-12T09:13:00.000+05:30

The regulator said these transactions are partly responsible for sharp depreciation in the rupee against the dollar.

The Reserve Bank of India (RBI) has cracked the whip on some of the large foreign banks in the country for encouraging companies to participate in speculative trades in the foreign exchange market.

The banking regulator in a meeting with senior representatives of foreign lenders have cautioned them for taking part in these trades, as it felt these transactions were partly responsible for sharp depreciation in the rupee against the dollar, three people familiar with the development said. Foreign banks were acting as arrangers for the companies in these transactions.

“RBI was aware that many foreign banks were encouraging speculation in the market. But it could not take any action as most of these trades were done offshore outside its regulatory purview. There was a meeting last month where RBI issued oral warning to some of these banks,” said a source privy to the discussions with the regulator.

According to industry players, most of these speculative trades were done taking advantage of the difference in forward premium rates in India and non-deliverable forward (NDF) contract market abroad.

According to bankers, the difference in forward premium rate in India and NDF market, which widened sharply in the second half of 2011, offered a perfect opportunity for banks and corporates to benefit from the rupee’s depreciation.

Industry sources said between August and December many large corporate houses were approached by banks to take part in foreign exchange trades in India and NDF market through subsidiaries and associates.

They will enter into a contract to buy dollar in India, while their subsidiaries will take another forward sale contract in the NDF market with a view that rupee will depreciate further. The difference in forward premium rates in the two markets allowed the corporates to benefit from these simultaneous trades.

“Banks were getting a hefty fee for arranging these transactions,” said another person aware of these deals. Adding: Often the lenders were getting as much as one-third of the windfall.

These trades were believed to be one of the reasons for volatility in the Indian rupee movement in the latter part of 2011. The Indian currency depreciated by almost 18 per cent in less than six months between August 5 and December 15 with the volatility as measured by annualised standard deviation of daily percentage changes doubling from five per cent to 12 per cent.

“Primarily, to discourage these trades RBI came out with the new guidelines. The opportunity to gain from arbitrage is hardly there anymore as the difference in forward premium rates in India and NDF market has narrowed,” said an independent foreign exchange analyst.

On December 15, RBI restricted rebooking of cancelled forward contracts and reduced the net overnight open position limit or trading limits for banks in the foreign exchange market.

Source: Business Standard

SBI to get Rs 6,000 cr fresh capital via pref issue before fiscal-end

2012-01-11T23:03:00.000+05:30

The government has agreed to infuse up to Rs 6,000 crore fresh capital into State Bank of India through a preferential issue before the fiscal-end, the bank Chairman, Mr Pratip Chaudhuri, said here today.

“We will be having a preferential issue and will be getting capital through it,” Mr Chaudhuri told PTI when asked about the progress on its proposed recapitalisation.

When asked what could be the quantum of infusion, he said: “The size will be Rs 5,000 to Rs 6,000 crore.”

He did not give any specific indication about the timing of the issue, though he said it will happen before March 31.

SBI’s total capital adequacy ratio stood at 11.4 per cent as of September quarter, of which core Tier-I capital stood at 7.7 per cent, below the 8 per cent-level desired by the government.

Rights issue

It had first announced its intention to raise up to Rs 20,000 crore through a rights issue over a year ago, but the government, which holds a 59.4 per cent stake in the lender, has delayed the proposal as it will have to subscribe to almost two-thirds of the money.

For the past three months, the SBI brass has been pegging the capital infusion size at around Rs 6,000 crore. Last month, Chief Financial Officer, Mr Diwakar Gupta, said an infusion may happen “any time”, while Mr Chaudhuri had last week said that he has received a letter from the Finance Ministry on recapitalisation.

The recapitalisation will take the bank’s Tier-I capital ratio to over 9 per cent, he had said.

Fund infusion

A slew of lenders, including Bank of Baroda, Bank of Maharashtra and Union Bank have made similar announcements in the recent past. Bank of Baroda would be getting Rs 775 crore this fiscal, while Bank of Maharashtra is ready for an Rs 860-crore preferential issue.

“As part of increasing its stake to the mandated 58 per cent, the government has agreed to pump in Rs 775 crore into the bank. The fund infusion will happen before the end of the fiscal,” Bank of Baroda Chairman and Managing Director, Mr Mallya, told PTI last month-end, adding that this would be done by way of a preferential issue.

In March last year, the Government pumped Rs 2,675 crore into BoB, increasing its stake to 57.3 per cent from 53 per cent earlier. With the infusion of Rs 775 crore, government ownership in the bank will touch the mandatory 58 per cent level, Mr Mallya added.

Union Bank also said that it would be recapitalised by the government this fiscal. UBI said it would receive a capital infusion of Rs 280 crore from the government.

Last week, a Finance Ministry official said the government would be pumping Rs 17,000 crore into various state-run banks this fiscal. This makes the additional requirement Rs 11,000 crore, which the official said would be met through a supplementary demand.

The FY’12 Budget had earmarked only Rs 6,000 crore for the recapitalisation of state-run banks in the current fiscal. The other banks that are likely to get a fresh capital infusion are IDBI Bank and Syndicate Bank, among others.

In 2010-11, the government had provided capital support worth Rs 20,157 crore to various public sector banks.

A committee headed by Finance Secretary, Mr R.S. Gujral, is working out a strategy for the capitalisation of public sector banks over a period of next 10 years to meet Basel III requirements, under which the 26 state-run lenders would need Rs 3.6 lakh crore in fresh capital.

Fake notes: NIA arrests 14 from 7 states

2012-01-11T23:00:00.000+05:30

New Delhi: In a nationwide crackdown spanning seven states, the National Investigation Agency (NIA) has arrested 14 people and seized Fake Indian Currency Notes (FICN) worth several lakhs, alleged to be pumped into India using the borders of Bangladesh and Nepal. The investigations so far have pointed out that the high-quality FICN were being sent from Pakistan. This is the first-ever case registered by the NIA, which is mandated to curtail the circulation of FICN.

Tracking the roots of these FICN, the NIA said notes of the denominations of Rs 1,000, Rs 500 and Rs 100 printed in Pakistan were smuggled to Bangladesh using the air route and then sent to India via Bangladesh border (fencing). Bundles of FICN were thrown into the Indian villages bordering Bangladesh. The arrested kingpin of the racket, Morgen Husain, and his aides used to collect the notes and then distribute them among agents spread all over the country.

“They transport the FICN through trains and other modes of transport to all the states for circulation. The local agents collect 60 per cent of the value of the circulated FICN in genuine notes, which is then remitted to the bank accounts of the key persons,” said an NIA official.

The raids were carried out in West Bengal, Bihar, Jharkhand, Tamil Nadu, Karnataka, Andhra Pradesh, UP, Delhi and Haryana.

Source: Financial Express

SBI opens exclusive branch for women customers in Hyderabad

2012-01-11T22:58:00.002+05:30

A play area for kids and free lockers for keeping personal belongings.

Can you imagine what are we talking of? It an exclusive branch for high-networth women customers opened by State Bank of India here on Wednesday.

The branch, Vasundhara Jubilee Senorita Banking Centre, is only the second of its kind in the country.

It is aimed at tech-savvy, educated women customers including entrepreneurs.

“With play room for kids and other facilities, women customers can handle their banking transactions in a safe and family atmosphere,” Mr A. Krishna Kumar, Managing Director, State Bank of India, told newspersons after formally inaugurating the branch.

An account in the branch can only be opened by women as principal account holders.

The second applicant may be any person of her choice such as her spouse, parents or siblings.

Initial deposit

As of now, there are no restrictions on initial deposit required to open an account.

The branch also has a self-service kiosk with all modern banking amenities.

“As far as possible, we will try to manage the branch with women employees,” Mr Krishna Kumar said.

The first Vasundhara Jubilee Senorita Banking Centre was earlier opened by SBI in Lucknow.

nagsridhu@thehindu.co.in

SBI sees surge in requests for corporate debt rejig

2012-01-11T22:52:00.000+05:30

There has been a significant increase in requests for debt-restructuring from corporates of late, according to Mr A. Krishna Kumar, Managing Director, State Bank of India.

Speaking to newspersons after inaugurating a women-focussed branch here on Wednesday, Mr Krishna Kumar said such requests were coming in from many sectors, including agro-based industries and textiles.

“These include small and medium enterprises as well as big corporates,” he said. Apparently, the worsening economic scenario is responsible for this trend.

SBI is examining requests as some of them should be dealt with through the formal corporate debt restructuring route involving a consortium of banks.

On the issue of Kingfisher Airlines loan portfolio being declared as a non-performing asset, he said: “It is bound to have an impact on our balance sheet. But we should not have too much of pressure during this quarter.”

Referring to debt extended to airlines in general, Mr Krishna Kumar said these loans were too large to be restructured.

NO DISBURSALS

Even though bank has been willing to sanction loans to corporate, most of the businesses are not willing to take the sanctioned loans.

“People are not drawing the loans. We have a large number of sanctions on hand,” he said.

Credit growth, on the whole, however, was good and, for the full year, it could be at about 17-18 per cent he said.

To keep the net interest margins strong, SBI has been focussing more on retail deposits such as current and savings accounts. The net interest margin could be around 3.5 per cent or a tad higher, he added.

On the state of non-performing assets, Mr Krishna Kumar said the situation was not as bad as expected earlier.

The bank took special measures such as coordination of recovery of non-performing assets by deputy general managers, he added.

Special recovery teams consisting of officers and clerks have also been formed in the rural areas.

Common written exam is for qualifying to take part in recruitment process: IBPS Director

2012-01-11T22:50:00.000+05:30

The common written examination conducted by the Institute of Banking Personnel Selection (IBPS) is an ‘eligibility' exam, Mr M. Balachandran, Director, IBPS, said. The IBPS prescribes the minimum requirements, taking into account the least of the qualifying criteria stipulated by the participating banks, so that all aspirants can take a shot at the exam, he said.

He emphasised that in the advertisement issued by IBPS, it was clearly indicated that the examinations were only for qualifying to participate in the recruitment process. After qualifying, the candidates have to comply with individual bank's requirements as and when they call for applications.

He was responding to a query voiced by many candidates who had taken the exam but found themselves ineligible after some banks prescribed higher qualification criteria.

While some banks fixed 55 per cent marks in graduation as minimum criteria, some prescribed a minimum age of 21 years — candidates who were 20 years would hence find that their score would not be valid a year later (validity of the score is one year).

Expressing anguish over the recruitment process, Mr Srivastava, an aspirant, wrote: “Many candidates who scored well in the common written exam are ineligible to apply for the interview. My question is: What was then the need to invite applications, which cost Rs 450, from everybody? We candidates feel cheated.”

Another candidate, Mr S. Kalyan, who scored 172 in the IBPS exam, has an MBA to boot and works in the clerical cadre in a top public sector bank, found himself ineligible because of the requirement to score 55 per cent marks in graduation.

He says his post-graduation marks, which is a higher qualification, should be considered for eligibility and feels the rules prescribed by some of the banks have robbed him of even the basic right to apply.

Minimum criteria

Mr Balachandran said banks could fix their minimum qualifying criteria based on their perception on the likelihood of getting candidates who fulfil their requirements and the vacancies available.

Clarifying with an example, Mr Balachandran said that just as many universities prescribe a higher cut-off for entrance to post-graduate courses even for their own graduate students, banks have the right to fix a higher minimum qualifying criteria.

In the common exam, a general candidate had to score 25 marks in each subject and the pass mark was 125/250.

Banks could fix a higher cut-off at their discretion while others may go with minimum cut-off.

Mr Balachandran said that IBPS had fixed the minimum criteria for its common exam because there were some banks that did not insist on any percentage in graduation.

He said that they did not want to deprive anybody of a chance by fixing a higher qualifying criteria. He said the process was transparent and that most competitive exams even for admissions do follow a similar approach.

vageesh@thehindu.co.in

nagsridhu@thehindu.co.in