EPFO for 9.5% rate; equity intent spiked

The EPFO today stuck to its decision that about 4.71 crore subscribers of the pension fund get one per cent increase in interest on their deposits for 2010-11, pegging the rate of interest at 9.5 per cent.

The Central Board of Trustees of the Employees Provident Fund Organisation (EPFO) also decided not to invest in stock markets

After a two-hour meeting of the CBT, Labour and Employment Minister Mallikarjun Kharge expressed hope the finance ministry will shortly give its concurrence to the proposal.

"I hope that after we answered all clarifications, they (Finance Ministry) will approve it (9.5 per cent interest rate for 2010-11)," he told reporters on the finance ministry's reservation on 9.5 per cent recommended by the Central Board of Trustees of Employees Provident Fund Organisation (EPFO) in September last "As far as 9.5 per cent interest (2010-11) is concerned, the Finance Ministry had sought some clarifications. Those clarifications have been sent by Labour Secretary to the Finance Ministry," Kharge added.

Downplaying the ongoing tussle between the two ministries over hiking the interest rates on PF deposits, Kharge said there was "no tussle between the two ministries over giving 9.5 per cent interest rate."

"These are just consultations between the two ministries. They had certain queries and when we satisfy them. They will definitely approve it," Labour Secretary P C Chaturvedi later explained.

Although CBT, which is headed by labour minister, had decided to give a higher return of 9.5 per cent on provident fund deposits for 2010-11, the Finance Ministry had expressed its opposition to the move.

Following discovery of Rs 1,731.57 crore in suspense account, the EPFO trustees favoured raising the rate of interest on provident fund deposits to 9.5 per cent for its 4.71 crore subscribers from 8.5 per cent which is being paid by EPFO since 2005-06.

The decision, however, did not find favour with the Finance Ministry which argued that there was no real surplus.

It said the surplus shown by the EPFO arose because all subscribers' accounts were not updated.

In a recent letter of January 29, the Labour Ministry argued the EPFO is not asking for any government support for the extra returns to the salaried workers. It is their money which has earned returns.

The Finance Ministry's objections were based on a report by Comptroller and Auditor General which suggested that there was no surplus with the EFFO's interest suspense account.

The Finance Ministry has to give concurrence to the rate of return decided by CBT and notify allowing tax exemption on the entire such earnings on PF deposits.

Meanwhile, the retirment fund manager, which has a corpus of Rs 5 Lakh crore, said it will not invest in the stock market in absence of any guarantee on returns and safety of the money by the finance ministry.

"We don't want to invest in equities. No futher decision has been taken on this and same status (of not investing PF money in stock market) would prevail," Kharge said.

During the meeting, the EPFO also approved a proposal to resume investment in the scam-hit LIC Housing Finance, a subsidiary of the country's largest insurance company Life Insurance Corporation.

The CBT had suspended investment in housing finance company following disclosure of the bribe-for-loans scam in November 2010 in which top officials of the LIC Housing Finance were allegedly involved.

Source: Financial Express

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Cheque Truncation System - New Guidelines

Two months after the Reserve Bank of India (RBI) introduced the new guidelines for the Cheque Truncation System (CTS) in the National Capital Region, some customers have had a nasty surprise: Many cheques started returning to issuers, due to alterations and over-writing in them.

The CTS is an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically. In this process, the existing system of settlement of payment on the basis of physical cheque movement is eliminated.

The technology was introduced in the NCR and will be subsequently implemented in Chennai by the middle of the year and in other places like Mumbai. This will minimise the scope for frauds and provide benefits to both banks and the customers. As a result, any cheque which has over-writing or other corrections will be returned to the issuer of the cheque. However, changes or correction can be done on dates and for any other changes, one needs to issue a fresh cheque.

The cheque images captured at the presenting bank in the NCR are transmitted to the clearing house for onward transmission to the payee or drawee bank. It is the responsibility of the drawee bank to capture the inward data and images and generate the return file for unpaid instruments.

The electronic image of the cheque is sent to the drawee branch along with the image of the deposit slip which is clipped with the cheque by the customer. CTS reduces the scope for clearing-related frauds and minimises the cost of collection of cheque. For the bank, the benefits would be immense which would help them to introduce new products and optimise resources. Globally, CTS is being practised across many countries for faster clearing of cheques.

The RBI has given a directive to banks prohibiting alterations/corrections on cheques cleared under the image-based CTS. The central bank has also clarified that rule does not apply to cheques cleared under other clearing arrangements such as MICR clearing,non-MICR clearing, over-the-counter collection (for cash payment), or even for direct collection of cheques outside the Clearing House arrangement.

Diwakar Nigam, managing director of Newgen Software, the company which has developed the CTS software in NCR, says the system offers better reconciliation and will help prevent fraud. “It will also help a customer to get clearance within NCR in one day’s time and bring in efficiency in the process. It will also reduce the heavy paper-load as the process will be completely digitalised.” He says the second stage will cover Chennai and other southern regions and then to Mumbai. However, it will take three to five years to implement the process across the country.

Realisation of proceeds of cheques can be done the same day itself and not 3-4 days which is currently the case across the country. For inter-city cheques, it takes two days for the clearance. CTS is more secure and is protected by a comprehensive Public Key Infrastructure-based security architecture which incorporates basis security and authentication checks such as dual access control. It is more secure a system and does not create any delay or inconvenience to the customer in case the cheque is lost in transit.

Bankers say customers should use a dark-colour black ink pen while drawing the instruments and utmost care must be taken while using the rubber stamp and it should not be used on the printed code of the instruments. The physical cheque is warehoused with the presenting bank, in case the customer wants to get back the instrument.

Experts the central bank must conduct an awareness campaign on over-writing and other corrections on cheques. “People usually sign near the correction as that is what has been done for many years. But with CTS, a cheque which has an alteration, even with a signature beside the alteration the bank will not accept the cheque and instead return it to the customer,” says a banker.

Analysts say customers will have to be careful while issuing cheques for credit card payments, utility payments, insurance and investments, as most of them are linked to late payment fees. As a result of the central bank’s new directive, many utilities have been turning away cheques with any form of correction or alteration even if the changes were validated by the cheque drawer’s signature and that too in places either than the NCR. To avoid any late payment charges, they must pay well before time so that in case the cheque is returned, the customer will have enough time to issue a fresh cheque.

Source: Financial Express

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SBI announces Rs 2,000-cr retail bond issue

The nation's largest lender State Bank of India (SBI) today announced the launch of a Rs 2,000-crore retail bond issue from Monday to shore up its Tier-II capital.


"Following the huge success of our maiden retail bond issue last October, which was snapped up 19 times, we are happy to launch another issue with a better yield from Monday," Chairman of the bank OP Bhatt told reporters here today.

"The issue is part of our planned Rs 10,000-crore retail bond issue. We will be looking forward to going to the market every quarter," he added. Chief Financial Officer of the bank Hemant Contractor said these Lower Tier-II bonds are being issued in two series--Series 3 and Series 4.

Series 3 bonds have a tenor of 10 years with a call option by SBI after five years and a coupon rate of 9.75% per annum for retail and 9.3% for non-retail applicants.


Series 4 bonds have a tenor of 15 years and a coupon rate of 9.95% for retail and 9.45% for non-retail investors.


These bonds will be distributed through 126 branches spanning 79 centres and will be open to only those with demat accounts. The issue opening on February 21 will close on February 28.


Contractor further informed that the bond issue will not be redeemable at the option of bond holders or without prior RBI permission.


The bond issue is of Rs 1,000 crore with the option to increase the issue size by a similar quantum if the market condition demands it, he said.





Source: Business Standard

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SBI, UCO Bank, IOB approve capital raising

MUMBAI: Three Indian state-run banks said on Saturday they would preferentially allot shares to the government in return for capital infusion.

In December, India's cabinet approved additional capital infusion of 60 billion rupees ($1.3 billion) into state-run banks to hike their capital adequacy and to lift the government's stake in them.

The funds are in addition to 150 billion rupees of infusion provided for in the February 2010 budget.

State-run Indian Overseas Bank said its board had approved issuing shares worth 10.54 billion rupees ($233 million) to the government, at a price to be determined later, in a statement to the stock exchange.

Separately, UCO Bank said it would issue shares worth 9.04 billion rupees, while United Bank of India said it would issue shares worth 3.08 billion rupees.

Several other state-run banks are also expected to approve the fund infusion over the next few days.

The Indian government is expected to infuse $3.3 billion into the country's largest lender State Bank of India in the next fiscal year via a rights issue.


Source: EconomicTimes

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Canara Bank to open 35 branches on Monday 21/2/2011

As per news Canara Bank to open 35 branches on Monday 21/2/2011.  With this addition, the bank's total number of branches would go up to 3212. The bank also has more than 2000 ATMs to provide service to its large clientele, it said in a statement.


The bank has launched a new deposit scheme for 1200 Days titled 'Canara Samriddhi' which offers a rate of interest of 9.25 per cent for general citizens and 9.75 per cent for senior citizens.


The bank said it is also offering an interest rate of 10.50 per cent for eight to 10 years deposits for senior citizens.




Source: EconomicTimes

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