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Saturday, October 8, 2011

Dena Bank further reduces interest rates on home, auto loans by 25 bps under festive offer

NEW DELHI: State-run Dena Bank today said it has further reduced interest rates on new housing loans and car loans by 25 basis points in the floating rate category, as a part of the festival offer.

Last month, the bank had announced a festival offer with 25 per cent discount on new housing loans and car loans.

The new rate would be effective from October 10, 2011, Dena Bank said in a statement.

Thus, the bank has reduced interest rates on floating housing loans and car loans by 0.50 per cent for the ensuing festival season, it said.

The benefit under festival offer will be effective from October 1 to December 31, 2011, it added.

In addition, to give further benefit to the customers, the bank will continue the reduction in the process fee on housing loans and car loans by 50 per cent. These reductions in rate of interest and processing fees will be valid upto December, 2011.

Dena Bank's base rate stands at 10.70 per cent. A bank official said the rebate depends on the quantum and tenure of the loan.

Its prevailing lending rate varies from 11.20-12.75 per cent in case of floating home loans, while for the fixed rate loans it varies from 11.50-12.75 per cent.

For auto loans up to three years, its interest rate is 13.25 per cent and for those above three years, it is 13.75 per cent, the official said, adding that the 25 bps discount will be applicable on these rates.

Source: EconomicTimes
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NHB to decide on pre-payment waiver soon

The National Housing Bank (NHB), regulator in the realty finance sector, is expected to take a decision soon on whether or not there will be a complete waiver of all pre-payment charges on floating-rate home loans.

“The decision will be in the best interest of the borrowers,” NHB chairman and managing director R V Verma told Business Standard on Friday. He did not rule out a difference in view between RBI and the NHB on the matter, hinting at a “more efficient” pricing structure.

Although Verma refused to categorically state if pre-payment charges would be banned, he said, “Borrowers should not be restrained from exercising the option of pre-paying their loans.”
While RBI recently issued an advisory that banks should waive pre-payment charges on floating-rate home loans, a decision is yet to come on this. The RBI decision will be for banks and NHB will decide for housing finance companies. Banks have sought time to respond to this RBI proposal.

Banks and housing finance companies will have to factor in different issues before taking a decision, Verma said. “We are looking at the best possible way to resolve the matter. We are taking stock of the profile of the liabilities involved on the principle of a free market.” For instance, a more efficient pricing model could be something to look at vis-a-vis pre-payment charges, he said, without clearly stating the NHB stand.

Earlier in the day, Housing Development Finance Corporation chairman Deepak Parekh, who was speaking at a roundtable organised by NHB on housing finance issues, opposed the RBI proposal on a complete waiver. Parekh said there could be serious problems if there was one. These charges, he said, were a source of income for the banks, and these should not be stopped.

Parekh urged regulators to realise there may be greater 'substitutional' housing finance and not 'incremental' housing finance taking place, if prepayment charges were completely waived. Verma said it was obvious the lending industry would oppose such a ban.

The charges on pre-payment levied in some banks range between one per cent and five per cent of the loan due. As much as 98 per cent of loans given by banks come in the floating-rate category.

Source: Business Standard
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Americans seethe as banks hit them with new fees

Smoking outside a Bank of America branch in Chicago, restaurant worker Mike Dysangco complained about the "totally ridiculous" new banking fees.

"The economy is not the greatest and they come up with these fees? Do you want our business or not?" asked the waiter who has an account with JPMorgan Chase and was one of the bank customers Reuters interviewed in several major cities.

The largest US banks have been hit by two waves of legislation in the past three years, on credit cards and most recently on debit cards, that have restrained their ability to charge billions of dollars in hidden fees.

Banks have responded to the latest crackdown by announcing in recent weeks new fees to make up for the lost revenue.

The new charges are coming out as the public is growing increasingly restless with high unemployment, Washington political infighting, and a financial industry that seems less vulnerable than the rest of America.

The Occupy Wall Street protest movement has been one face of that dissatisfaction, but the bank fees are a direct hit on consumers' wallets and many people are furious.

"That I'm supposed to pay (Bank of America) money while they fire people so that they can make more money even though they are already richer that Croesus just offends me," said Jim Brown, a federal government worker and Bank of America customer, referring to the wealthy king of Greek mythology.

Bank of America has gotten the most coverage for its fees when it announced last week a new $5 monthly fee on debit card purchasers starting next year.

Wells Fargo, JPMorgan Chase and SunTrust Banks are also testing or planning monthly debit card fees.

Citigroup has opted for fees that penalize depositors who fail to maintain a certain balance.

The new fees have drawn harsh words from President Barack Obama. When asked by ABC News on Monday about fees like the one from Bank of America, Obama said banks don't have an "inherent right" to a certain level of profits.

To answer critics who painted the remarks as anti-business, Obama clarified that statement during a press conference on Thursday, saying he was making a broader point. But he still said it is "not a good practice" for banks to cope with a crackdown on hidden fees by finding other fees to charge customers.

Senator Dick Durbin championed the cap on debit card swipe fees that banks charge retailers and that banks now blame for having to impose new fees. He has told customers to find other banks or credit unions that will not "gouge" them.

"Bank of America customers, vote with your feet, get the heck out of that bank," the Illinois Democrat said on the Senate floor earlier this week.

Some customers interviewed said they have already moved from big banks because of prior rollouts of new account charges.

Erica Perkins said during a walk along Peachtree Street in Atlanta that she stopped doing business with Bank of America years ago, partially because of frustration with emerging fees.

"The banks shouldn't have been taking advantage from the beginning," Perkins said. She now banks with USAA, a financial services company that primarily caters to the US military and their families.

It is hard to tell if this latest backlash will mean big banks lose customers.

Chris Mutascio, a bank analyst with Stifel Nicolaus, said it is a fallacy to think that the largest two or three banks will be the only ones imposing new fees.

Consumers "have options to avoid the debit fee charge, but I think it's a little naive to think they are not going to get charged somewhere else," Mutascio said.

And while some consumers may be irritated, they will stick with large banks because of the convenience.

"I travel internationally, so it's very convenient when you're with a Citibank or a very large bank," said Tom Silva, who works in marketing for a Chicago real estate developer. "It's wonderful being in another continent, being able to access your account."

Other consumers say they will actively shop around for a bank that does not charge a monthly debit card fee.

Deborah Flinn, a Wells Fargo customer who is a paralegal in Washington, said she relies on her debit card so much for groceries, lunch and other shopping that she will try to find a bank with fewer fees.

"Can't the banks suck up some losses?" Flinn asked. "Everyone has had to except for the banks."

Source: Business Standard
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Credit card scam in US: 13 Indians charged

In the biggest identity theft scam in the US history, 111 people, including at least 13 of Indian origin, have been charged by federal authorities for stealing credit card data of thousands of customers to buy high-end products worth over USD 13 million, including Apple gadgets and fancy bags from Gucci.

Among those indicted in \'Operation Swiper\' are bank tellers, store employees and restaurant workers who allegedly skimmed customers\' personal IDs.

Many of the defendants are accused of going on nationwide shopping sprees, staying at five-star hotels, renting luxury automobiles and private jets with forged credit cards that contained the account information of unsuspecting American and European consumers.

The defendants are members of five organised forged credit card and identity theft rings based in Queens County and have ties to Europe, Asia, Africa and the Middle East.

Charged in 10 indictments, the defendants perpetrated fraud that cost financial institutions and retail businesses more than USD 13 million in losses over a 16-month period.

The indictments charge that Imran Khan, Ali Khweiss, Anthony Martin, Sanjay Deowsarran and Amar Singh were "bosses" of criminal enterprises and received the necessary raw material -- lists of credit card account numbers and various blank credit cards.

Among the Indian-origin people charged are Vishnu Harilal, Ravindra Singh, Amar Singh, Neha Punjabi Singh, Ravi Ramroop and Kamal Sanasi.

Eighty-six of the defendants are in custody and 25 are presently being sought.

In addition, nearly 24 defendants are variously charged in six indictments with participating in burglaries and robberies throughout Queens County.

"This is by far the largest -- and certainly among the most sophisticated -- identity theft/credit card fraud cases that law enforcement has come across," Queens District Attorney Richard Brown said.

Brown said credit card fraud and identity theft are two of the fastest growing crimes in the US, afflicting millions of victims and costing billions of dollars in losses to consumers, businesses and financial institutions.

According to the indictments, between May 2010 and September 2011 counterfeit cards were given to teams of "shoppers" who were sent out on shopping expeditions in New York, Florida, Massachusetts, Los Angeles.

They bought Apple iPads, iPhones, computers, watches and fancy handbags from Gucci, Louis Vuitton, Rolexe and Breitling.

The groups would then resell the merchandise oversees to locations in China, Europe and the Middle East.

They are also alleged to have used forged credit cards to rent such luxurious automobiles as Lamborghinis and Porsches.

The investigation involved intelligence gathering and electronic eavesdropping on dozens of different telephones in which thousands of conversations in Russian, Mandarin and Arabic were intercepted.

Brown said as part of the investigation, search warrants were executed earlier this week at 15 locations throughout New York City and Long Island.

Among the items allegedly recovered were approximately USD 650,000 in cash, seven handguns, computers, card readers, embossers, blank credit cards and fake identifications.

Source: Financial Express
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HDFC Mutual Fund launches Gold Fund

New Delhi: Country's largest fund house HDFC Mutual Fund today launched HDFC Gold Fund, which will enable investors to put money systematically in gold.

HDFC Gold Fund (HGF), an open ended Fund-of-Funds scheme, would enable investors to invest systematically in gold, hedge their risks against market volatility and to effectively diversify their portfolio, it said in a statement.

The new fund offer (NFO), which opened today, will close on October 21. A Fund-of-Funds (FoF) scheme usually invests in other schemes of the mutual fund.

Gold FoFs enables the investors to invest through a single investment or through Systematic Investment Plan (SIP).

The minimum denomination of investment is Rs 100, the statement added.

The corpus collected through the NFO would be invested in HDFC GETF (HDFC Gold ETF) to seek capital appreciation.

As at the end of September quarter, HDFC MF managed average assets worth Rs 91,827.11 crore.

Source: Financial Express
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RBI planning to change design of currency notes

Thane: The Reserve Bank is considering to make changes in the design of currency notes, the central bank informed in reply to an RTI query.

To an RTI query by the Bharatiya Banking Consumers Forum (BBCF) whether the government/RBI was going to change the design of the currency notes, the RBI replied that it was under active consideration.

The Forum said the RBI effects changes in the design of currency notes periodically and it sought a reply to find out the status of change in design this time.

It said that the Forum raised this issue against the background of many instances of counterfeiting of notes.

Source: Financial Express
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HDFC Life clarifies on Irda show-cause notice

HDFC Standard Life has justified that it had delayed its settlement due to non co-operation of the claimants. The Insurance Regulatory and Development Authority (Irda) had issued a show-cause notice, wherein, HDFC Life was penalised for Rs 5 lakh for delaying settlement of claim and has asked the insurer to streamline its processes.

HDFC Life in a response said that it had done so due to non-cooperation of the claimants, hospitals or other public authorities to provide the required information.

The fine was imposed based on an enquiry conducted by Irda with regard to a complaint filed by a policy holder on non-receipt of death claims in 2009.

"HDFC Life has a philosophy of paying all claims unless and until there is a non-disclosure of material fact or a fraud against the Company. HDFC Life has a practice of investigating such claims, which involve requirement of additional information. However, HDFC Life pays penal interest for compensating policy holders as specified in the regulations, wherever these delays take place,” HDFC Life said in its response.

Irda had also directed HDFC Life "to put in place (within 15 days) effective claim settlement procedures and take all such measures that deem fit for both pro-active and timely settlement of all types of claims."

Source: Business Standard
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Moody's cuts ratings of RBS, Lloyds, 19 other European lenders

London: Moody's on Friday slashed the ratings of a dozen British banks, including RBS and Lloyds TSB, as well as of nine Portuguese lenders, amid uncertain financial conditions in Europe.

The ratings of the 12 British financial entities have been cut citing that possibilities of the UK government extending support to them, in case they are in choppy waters, are less.

Moody's cut its rating on Royal Bank of Scotland by two notches, and downgraded Lloyds by one notch.

However, Moody's Investors Service stressed that downgrade of British entities “do not reflect a deterioration in the financial strength of the banking system or that of the Government.”

The UK Finance Minister, Mr George Osborne, said Britain's banks remained well-capitalised and in better shape than many of their European rivals, who face bigger losses on holdings of peripheral euro zone debt.

The entities whose senior debt and deposit ratings are downgraded, include RBS, Lloyds TSB Bank and Santander UK.

Moody's reassessment assumes a decrease in the probability that the UK Government would provide future support to financial institutions if needed,” the rating agency said in a statement.

The latest downgrade has sparked concerns about health of some UK banks and whether they would need some sort of bailout.
Portuguese banks

Separately, Moody's has cut the debt ratings of nine Portuguese banks — that includes Caixa Geral de Depositos and Banco BPI — on account of deterioration of their unsupported financial strength.

According to the agency, the increased asset risk of these banks is a direct consequence of their holdings of Portuguese government debt as well as the sovereign's (Portugal's) downgraded rating.

In a separate statement, the Moody's noted that the downgraded Portuguese banks are expected to see further deterioration of their domestic asset quality due to weak outlook for economic growth in the context of the Government's austerity measures.

In recent months, Europe has been grappling with acute debt turmoil whose epicentre is Greece. Further, there are rising fears about the financial health of Italy and Portugal.
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City Union Bank to open 9 branches

Madurai:City Union Bank Ltd will open nine branches during October-November.

While seven of them will be in Tamil Nadu, one will be in Bhubaneshwar and another in Raipur, according to Dr N. Kamakodi, Managing Director and Chief Executive Officer of the century-old private sector bank.

“The bank has a total business mix of Rs 25,000 crore and hopes to achieve a growth rate of 25 per cent to 30 per cent in both the business and profits. The bank has continuously declared dividend and the return on equity has been over 20 per cent,” he told Business Line on the sidelines of a seminar on ‘Perspective view on asset valuation' organised by the Institution of Valuers, Madurai branch, here on Friday.

He said the bank has 275 branches that are equally spread in rural or semi-urban and urban or metro areas. Two-thirds of the business comes from agriculture, small and medium enterprises, and trade. The bank is targeting to make three-fourths of the transactions through alternate channels such as ATM, mobile banking and Internet.

He said the bank has started priority treatment for VIP customers in Chennai, under which bank representatives will visit customers instead. This facility will be soon extended to other cities, including Madurai. The bank is currently working on a system to help customers open fixed deposits and issue overdrafts against deposits online, he said. He added that the bank was working with the Tamil Nadu Electricity Board to enable electronic payment of electricity bills free of charge and the facility would be in place in two months.
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South Indian Bank title sponsors for GKSF

Thiruvananthapuram:South Indian Bank would be the title sponsors for the fifth edition of the Grand Kerala Shopping Festival (GKSF).

Announcing this here, an official spokesman said here on Friday that talks are on to finalise co-sponsors for the annual trade and commerce jamboree being organised by the Department of Tourism, Kerala.

The title sponsorship of an event that is attracting global attention for setting a new direction to trade and commerce in the State is a matter of pride for South Indian Bank, the spokesman quoted the Chief Executive Officer and Managing Director, Dr V. A. Joseph, as saying.
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Single window clearance to promote affordable housing mooted

Affordable housing and the steps needed to grow this market came in for detailed discussions at a roundtable organised in the Capital on Friday.

The conference recommended single window clearance and special incentives to builders to promote affordable housing in the country.

National Housing Bank and the Centre for Advanced Financial Research and Learning (CAFRAL) jointly organised the roundtable on ‘housing finance'.

The need for real estate regulation to bring about greater transparency and credibility in the industry and as a measure to protect consumer interest was also emphasised in the meeting.

Ms Usha Thorat, Director, CAFRAL, later told newspersons that CAFRAL, which has been promoted by RBI, would in the coming days undertake research in the area of ‘housing finance'.
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Friday, October 7, 2011

Rivals see UBS holding on to clients after trading loss

Rich clients of Swiss bank UBS have not yet moved their millions to other banks after its $2.3 billion trading scandal last month, rival private bankers said.

"They've been hit by everything. It's not going to make any difference," Louay Al-Doory, head of global business development at Swiss boutique wealth manager Reyl & Cie, told the Reuters Wealth Management Summit in Geneva.

"UBS is still UBS. You may have a scratched Rolls Royce, but it's still a Rolls Royce," said Al-Doory, himself a former UBS banker.

UBS Chief Financial Officer Tom Naratil said on Tuesday the bank had not seen any "material change" in client deposits since the trading scandal was made public on Sept. 15.

Clients pulled nearly 400 billion Swiss francs -- almost 20% of total client assets -- from UBS during the financial crisis as the once proud bank was battered by subprime losses and a prolonged dispute with the US tax authorities.

It had just started to restore client confidence when the latest news hit, but UBS said on Tuesday it expects third-quarter client inflows to be broadly similar to the 5.6 billion Swiss francs it reported in the previous three months.

"In comparison with 2008, we have a feeling that a number of investors are confused and do not have the energy to change banks," Blaise Goetschin, chief executive of Swiss Banque Cantonale de Geneve, told Reuters in Dubai on Tuesday.

James Fleming, head of international private banking at Coutts & Co., the private banking arm of the Royal Bank of Scotland, agreed.

"A lot of clients were disaffected over the last few years. We've seen a migration of people who were badly served in previous institutions," he said. "I can't see any increase since the UBS scandal."

One leading Swiss institution has seen clients moving from UBS since the scandal, one banker told Reuters, but others said it was too early to judge the impact of the latest crisis.

"There has been no increase in flow from UBS in the short term. Mid-term, long term I would assume yes," said Peter Fanconi, head of private banking at Swiss bank Vontobel.

Enrique Marazuela, chief investment officer of the private banking arm of Spain's BBVA, said he had not seen big movements of clients recently like those during the financial crisis.

"Asking questions yes, but moving not," he said.

Yves Mirabaud, managing partner at Swiss bank Mirabaud & Cie, said the rogue trading crisis showed that "small is also sometimes very beautiful", although he joked that his wife had not moved her account from UBS.

But he had no feeling of schadenfreude over the woes of Switzerland's biggest bank: "It's terrible because UBS is a key factor in Switzerland. It is not good for the Swiss financial centre," he said.

Source: Business Standard
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Capital infusion the only way forward for SBI

State Bank of India (SBI), the country's largest lender, is gearing up to improve efficiency and asset quality to make good its existing funds. It hopes the government would support it with at least half of the total amount budgeted for capital needs of all public sector banks this financial year.

The bank needs Rs 14,000-21,000 crore for the next five years and expects at least Rs 3,000 crore would be infused by the end of this financial year. "This year, anything between Rs 3000-Rs 10,000 crore would comfortable," said SBI chairman Pratip Chaudhuri. He has already given an analysis of the downgrade by ratings agency Moody's to the finance ministry.

On Tuesday, Moody's had downgraded the bank's financial strength rating from ‘C-’ to ‘D+’, citing lower capital adequacy ratio and the possibility of further deterioration in asset quality. The government holds a stake of 59.4 per cent in SBI.

Asked whether there were options in case capital infusion did not take place this year, Chaudhuri said, “There is no Plan B.” To sustain 15 per cent growth for three years and improve the capital adequacy ratio to nine per cent from the current 7.6 per cent, the bank needs Rs 10,000 crore from the government. "We have asked for different requirements under different scenarios from the government. The capital should come by the end of December, or if stretched further, by March 2012," he said.

The bank said the rating action would not have an immediate impact on the cost of borrowing, as the rating applies only to $625-million perpetual debt, raised in two tranches in 2007 for 10 years, and is no longer considered a part of core capital under Basel-III norms. Hence, the bank is unlikely to issue the instrument in the future.

The bank's debt rating stands unchanged at 'Baa2'. However, it is currently not looking at raising funds abroad. SBI can borrow up to $10 billion under the medium-term-note programme this financial year.

Chaudhuri said the export guarantee scheme and the credit guarantee scheme for micro and small enterprises (CGTSME) would help free the bank's capital. While the bank export guarantee scheme would cover Rs 30,000 crore of outstanding loans, the bank plans to double the coverage under CGTSME scheme.

On asset quality, Chaudhuri said in the pre-policy meeting yesterday, banks had requested the regulator to "take a pragmatic view on non-performing assets and restructuring" to avoid a sharp deterioration across the system. He added SBI would prefer to lend to high-rated clients, even if the returns were lower than other risky assets.

The bank's management, however, assured SBI would continue to report higher net interest margins (NIMs) each quarter. "We have aimed for NIMs of 3.5 per cent. We hope it would be better than that," said Chaudhuri.

Source: Business Standard
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Bank of England launches fresh stimulus

London: The Bank of England launched a second round of quantitative easing to defend Britain's faltering economy against the euro zone debt crisis, pledging to buy 75 billion pounds of assets with new money in an early, dramatic move to stave off recession.

Thursday's decision by the Bank to expand its asset purchase program to a total of 275 billion pounds highlights the precarious state of Britain's economy as global growth slows, government spending cuts and tax hikes bite, and consumers face high inflation and slow wage rises.

In a letter to Chancellor George Osborne seeking approval for the move, the Bank governor Mervyn King said the global economic recovery was faltering and that the euro debt crisis had created severe strains on financial markets.

"These tensions in the world economy threaten the UK recovery," King wrote.

While inflation is still expected to rise above 5 percent over the next months, the recent deterioration of the outlook had made it more likely inflation would undershoot the 2 percent target over the medium term, the Bank said.

Economists in a poll had reckoned there was a 40 percent chance the central bank would restart its asset purchase program, or quantitative easing, this month, though most had only expected an injection of 50 billion pounds.

The move puts the Bank ahead of other central banks in responding to a darkening global economic outlook and renewed market turmoil. Sterling weakened to its lowest in more than a year against the dollar, and long-dated gilt yields tumbled to record lows as markets braced for the Bank's asset purchases.

"Once again the Bank has made use of its secret weapon -- shock and awe," said Alan Clarke, an economist at Scotia Capital. "Pretty much everyone expected QE to restart at some point -- but it was only a minority view that it would start this soon, or be in excess of 50 billion pounds. In doing so the Bank has achieved the most bang for its buck."

Markets are now keen to see if ECB head Jean-Claude Trichet drops any hint of upcoming rate cuts at his last media conference after holding rates steady at 1.5 percent earlier.

The Bank has kept interest rates on hold at a record-low 0.5 percent since March 2009, unlike the ECB which raised them twice this year. The UK central bank bought 200 billion pounds-worth of assets with new money from March 2009 to February 2010.


The Bank's action was welcomed by the government and businesses, but the boost it will provide to the economy is far from certain.

Its policymakers have repeatedly emphasised over the past couple of weeks that quantitative easing would still work despite the fact that bond yields are already at record lows.

However, some economists say the bleak economic outlook and a lack of demand were keeping businesses from investing and consumers from spending and not the lack of cheap credit.

In a move to address some QE shortfalls, finance minister George Osborne Monday announced a scheme of credit easing to funnel lending directly to companies starved of credit by banks.

"Given evidence of continued impairment in the flow of credit to some parts of the economy, notably small and medium-sized businesses, the Treasury is exploring further policy options," Osborne said in a response to King's letter.

While businesses and economists in general applauded the idea, such a scheme would be more a medium-term help for small- and medium sized firms than a quick fix for the economy's woes.

Meagre growth in service sector output in July and a drop in new car sales in September published Thursday added to a recent string of weak economic data.

The opposition Labour Party's finance spokesman, Ed Balls, said that QE was unlikely to be a big help to an economy hit by government spending cuts.

"With confidence depressed, it's very hard for monetary policy to make a difference. It's like pushing on a string," he said in a BBC interview.


A number of policymakers had flagged their readiness to join arch-dove Adam Posen and vote for more quantitative easing, after many saw the case for more easing strengthening at the September meeting.

"The fact that the MPC chose to act now on QE and to go for 75 billion pounds rather than 50 billion pounds reflects the fact that they believe an already difficult outlook for the economy has deteriorated amid mounting domestic and global headwinds," said IHS Global Insight economist Howard Archer.

"We suspect that QE will be extended further in the first quarter of 2012," he said.

Some economists expect the central bank to eventually expand the total of its purchases to as much as 500 billion pounds.

Britain's economy has basically flatlined over the past 12 months. With the government's hands tied by its pledge to erase a budget deficit of some 10 percent of GDP, pressure has been mounting on the bank over the last couple of months to do more to support the economy.

The Bank has kept interest rates at 0.5 percent for more than 2-1/2 years -- already its longest period of inaction since World War Two. The Bank had kept its stock of asset purchases unchanged since February 2010, when the economy was picking up after a deep recession.

But the momentum shifted over the summer from a bias to hike rates to more easing as equity markets slumped and the euro crisis triggered fears of bank collapses and a renewed recession.

Source: Financial Express
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Thursday, October 6, 2011

RBI relaxes norms on small money transfers

With a view to facilitating fund transfers to people, particularly migrants, who do not have bank accounts, the Reserve Bank of India (RBI) today relaxed norms by doubling the transaction cap on small money transfers.

Under the new norms, the cash pay-out arrangements for amounts being transferred out of bank accounts to beneficiaries not having a bank account has been enhanced to Rs 10,000 from the current limit of Rs 5,000.

The monthly cap on such transfer will be Rs 25,000 per beneficiary, the RBI said in a notification.

Besides, customers not having bank account can now transfer funds to bank accounts of others, subject to a transaction limit of Rs 5,000 and a monthly cap of Rs 25,000 per remitter.

The RBI has also allowed transfer of funds among domestic debit/credit/pre-paid cards with the cap of Rs 5,000 per transaction and a monthly limit of Rs 25,000.

According to experts, the changes will impact a large number of people, especially the migrant population which does not have access to formal banking channels for want of proof of identity/address.

The RBI said such people faced difficulties in using the authorised channels for transferring funds.

"RBI has been receiving frequent representations to open up the formal banking channel to facilitate fund transfers of small value, subject to monthly ceilings and monitoring, to give impetus to the process of financial inclusion. We are issuing these guidelines after having reviewed the related issues. These relaxations are expected to provide money transfer facilities in a safe, secure and efficient manner across the length and breadth of the country," the apex bank said.

Migrants constitute a substantial chunk of the country's population.

The RBI has asked banks and other financial institutions to put in place a system of safeguards, including velocity checks and alerts to customers about credit into accounts, using the new facility.

"Any unusual spurt in volume of credits in a particular account/group of accounts shall be immediately investigated. Appropriate authorities shall be alerted regarding suspicious transactions," it said.

The apex bank has also directed that such fund transfers are to be effected on a real or near real time basis.

"The total outstanding amount on a prepaid payment instrument shall not at any point of time exceed the limits prescribed in the extant guidelines on the RBI on the policy guidelines for issuance and operation of prepaid payment instruments," it said.

Source: Business Standard
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Sebi introduces uniform KYC norms

Mumbai: Capital market regulator Sebi today announced introduction of uniform norms (new forms and documents) for the purpose of customer identification by different market intermediaries like stock exchanges and mutual funds, a step intended to bring uniformity to the process.

"With a view to bring about uniformity in securities markets, it has also been decided that the same Know Your Customer (KYC) form and supporting documents shall also be used by all captioned Sebi registered intermediaries," the regulator said in a circular.

The new norms will be effective from January 1 next year.

"The intermediaries shall take necessary steps to implement this circular and ensure its full compliance in respect of all new clients from January 1, 2012," it said.

This comes after Sebi received feedback from the investors that various registered intermediaries follow different KYC requirements.

"In case of mutual funds, portfolio managers, collective investment schemes and venture capital funds, though certain basic requirements have been prescribed for Customer Due Diligence (CDD) or KYC, no specific KYC format has been prescribed. As a result, these intermediaries use different KYC formats and supporting documents," it said.

The new KYC form will have space for giving identity details including name, nationality, PAN and/or UID number besides details like address, gross annual income and occupation.

In addition, additional information specific to dealing in stock exchanges is also included in the form.

The customers will also have to furnish various documents relating to their identity, proof of address and other facts.

In case of corporates, they will have to provide copy of balance sheet for last two financial years, copy of latest holding pattern in their firm, copies of memorandum and articles of association and copies of board resolution for investment in securities market.

Foreign Institutional Investors will have to furnish copy of Sebi registration certificate, while registered societies will have to provide copy of such certificate and list of managing committee members.

Source: Financial Express
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Is RBI aiding creation of black money in India?

NEW DELHI Due to deficiencies in its monitoring mechanism for exports, India's central bank might be inadvertently abetting the creation of black money outside the country. These Reserve Bank of India (RBI) deficiencies were first pointed out in July by the Karnataka anti-graft agency's report on illegal iron-ore mining in the state, but had gone unreported. A follow up by ET with various parts of the banking sector and the export transaction chain not only confirms the same, but also suggests similar shortcomings could exist in other sectors of India's $252-billion goods exports.

In order to establish a money trail, every transaction involving the export of goods is broken into two parts. One, when goods leave India, the customs department at ports and airports record it, and send the information to the RBI. Two, when the payment comes into India, the receiving banks record it, and send the information to the RBI. By matching the two databases, the RBI can find out which payments have not come in during the designated time of 180 days (extendable by 180 days).

The Karnataka Lokayukta, while following the trail of iron-ore exports from the southern state, found bank records with the RBI for only 20% of the 5,000 iron-ore export bills scrutinised by the anti-corruption body between 2006 and 2010. For the remaining 80%, the RBI could not confirm whether export proceeds had come into India within the stipulated period or not. "The RBI is supposed to collate and compare the two databases, and monitor whether the realisation of export proceeds is as per law," says the Lokayukta report. "This is not happening effectively."

The RBI, in an email reply to ET, says its software can match the two databases. However, it adds: "The matching procedure is often fraught with throwing of mismatched/erroneous entries due to the involvement of multiple agencies handling the documents." It further says the daily volume of transaction reports coming from the customs department made the matching exercise "cumbersome and time consuming". The RBI did not disclose the quantum of the mismatch.

In 2010-11, according to Directorate General of Commercial Intelligence and Statistics (DGCIS) data, India's exports stood at $448 billion, of which $252 billion is related to goods. Service exports accounted for most of the rest; service transactions, however, do not face this issue because, being a service, they don't have a customs leg.

PV Raghunathan, a foreign exchange expert and a consultant to ITC and Ashok Leyland, says 90% of export remittances are remitted to India within 180 days. He says the RBI could be doing more. "Even when the two databases do not match, a random checking of transactions is possible," he says. "But the RBI, in general, lacks supervisory skills because a majority of its workforce does not have a commercial background and their training is entirely academic."

The numbers from Karnataka provide a worst-case illustration of illegal business and transactions thriving in a deficient system. According to the Lokayukta, 126 million tonnes of iron ore was exported from Bellary, Karnataka, between 2006 and 2010. Of this, it says, 30 million tonnes, valued at Rs 12,228 crore, was illegal. Extrapolating this to all iron-ore exports from the region yields a value figure of Rs 51,702 crore. If 80% of this was unaccounted for in the banking system, then the unexplained amount could be as high as Rs 41,360 crore (about $8 billion).

Source: EconomicTimes
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SBI to cut government bonds holdings, insure credit to conserve capital

MUMBAI: State Bank of India (SBI) will cut government bond holdings and insure trade credit in an attempt to optimise capital after rating company Moody's downgraded it citing its inability to raise funds and the scope for higher bad loans due to high interest rates.

The downgrade and the subsequent crash in banking stocks in the past two days highlight the potential mess in the Indian banking system dominated by state-run lenders which depend on the government for capital. The spend-thrift government that has already raised its borrowing limit for this fiscal is unable to meet the capital needs.

"It is a reminder to banks and other shareholders that recapitalisation needs a greater emphasis," Pratip Chaudhuri, chairman at SBI, told reporters on Wednesday.

"We are hopeful that the government would infuse Rs 3,000 to Rs 10,000 crore by December and we expect capital to come in latest by March 2012," he added. The bank has asked for Rs 14,000-21,000 crore in three years.

On Tuesday, Moody's lowered SBI's rating to D+ from C- on account of weaker capital and poor asset quality. SBI's gross bad loans was at 3.28%, highest among PSU banks, while its core capital (Tier I) fell below 8% as on March 2011.

To partly neutralise the capital issue, the bank has decided to cover all loans given to exporters under insurance scheme provided by export credit guarantee corporation, which will require it to set aside less capital on the export loans. "We have export credit of Rs 30,000 crore and for this we are setting asideRs 2,400 crore. On taking ECGC cover, we will save Rs 1,200 to Rs 1,400 crore capital," said Chaudhuri.

Secondly, he said that SBI will move towards lending to better rated corporates, a move that would require them to set aside less capital, but may also impact their profit margins as these yield lesser than loans to small companies with lower ratings.

"It may compress margins, but we have excess of government securities to the tune ofRs 40,000 crore and instead of investing in gilts, which are low yielding assets, we would lend at better rates to corporates," he said.

Source: EconomicTimes
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Wednesday, October 5, 2011

Borrowing abroad to turn costlier for SBI

Following its financial rating downgrade by Moody's, raising funds will turn costlier for State Bank of India (SBI), in an already expensive overseas market. The bank's debt rating, however, remains unchanged at Baa2.

“The credit ratings incorporate Moody's unchanged assessment that the probability of systemic support for SBI, if needed, is very high, and results in a one-notch lift in its GLC deposit rating of Baa2 from its standalone rating of Baa3,” the rating agency said in a release.

We expect the near-term cost of funds to rise, particularly overseas borrowing rates, for SBI,” said ICICI Securities in a research note.

Also, as a result of unrest in the global investment environment, the cost of hedging against SBI's default is high. The bank's five-year credit default swaps are trading at a two-and-half year high of 363.9 basis points, according to data from Bloomberg. “It will be difficult to assess the impact of the downgrade on the bank's credit default swaps, as the bank's position was already factored in by investors,” said a senior official with a foreign bank.

However, the impact on overall cost of funds is expected to be limited, as external borrowings were at seven per cent of SBI's total funding liabilities. Last week SBI announced it had doubled the size of its overseas Medium-Term-Note (MTN) programme to $10 billion. Of this, the bank has already raised around $4 bn. The MTN programme enables the bank to raise funds at intervals, depending upon requirements.

The higher cost of borrowing for the country's largest lender may also mean higher costs for other Indian banks and companies willing to tap the market abroad. Presently, the rate on borrowings abroad for similar-rated Indian banks is between 375-400 basis points over Libor, the London Inter-bank Offer Rate. Banks like ICICI Bank, Axis Bank and HDFC Bank also share the same debt rating, of Baa2.

“The higher cost of borrowing for SBI would translate into higher cost for companies as well. No other bank or Indian corporate has tapped the overseas market in three months because of high interest rates amid global uncertainties,” said a senior official with a foreign bank.

Source: Business Standard
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SBI chief says recapitalisation by March

The State Bank of India Chairman Pratip Chaudhuri today said its rating downgrade by Moody's underlines the urgency for recapitalisation of the state-owned lender and expressed the hope that its long pending rights issue would be completed by March end.

"It (rating action) is a reminder to the bank and all the shareholders that the recapitalisation measures requires greater urgency," Chaudhuri told reporters here.

The government is the largest shareholder of the bank, with 59% equity.

SBI, the country's largest lender, had submitted the proposal a couple of months back to raise Rs 20,000 crore through the rights issue. The bank requires funding to implement its growth plans over the next two fiscals.

Chaudhuri said the bank has "taken note" of the rating downgrade and "the recapitalisation, we are hopeful, would be completed by the end of December 2011 and at the most March 2012."

Global credit ratings firm Moody's yesterday downgraded SBI's financial strength by one notch to 'D+', from 'C-' on account of its low Tier-I capital ratio and deteriorating asset quality. This will make overseas borrowings costly for the state-owned lender.

"This rating applies to our Perpetual Debt which is called IPDR and qualifies for Tier I capital," Chaudhuri said.

He said the bank has so far issued $625 million of such debt in two tranches— $400 million and $225 million. Both these debts are due for call option in 2017.

"In terms of Basel III these instruments no longer qualify for Tier I capital. Therefore, it is unlikely that we shall be making any such issuances (perpetual debt) in future," he added.

Further, Chaudhuri said the bank has initiated measures that would lead to more efficient and optimum use of capital.

"Medium to long term position of the bank both with regard to capital and NPA are satisfactory and in case the capital position is augmented, the rating action can also be reversed," he said.

The SBI had reported a Tier-I capital ratio of 7.60% as of June 2011, against the suggested level of 8% termed as desirable by the government for public sector banks.

Chaudhuri further said the surpluses and rights issue proceeds would help the bank achieve a Tier I capital adequacy of 9% by March 2012.

Shares of the SBI were trading 3.27% lower at Rs 1,728.30 on the BSE, in the afternoon trade.

Source: Business Standard
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