Indian Bank to raise USD 1 billion through overseas bonds

State-owned Indian Bank plans to raise USD 1 billion (about Rs 4,500 crore) through overseas bonds to fund business growth, a top bank official said today.

"The bank's board has approved USD 1 billion Medium Term Note programme to raise funds from overseas market during the current fiscal," Indian Bank Chairman T M Bhasin said after announcing 2010-11 financial results.

"With the Board approving the MTN, we will be able to complete the process in the next three months," he said. Besides, the bank is also planning to raise capital

through follow on public offer (FPO). "We were waiting for the results to be announced. Having announced our results today, it (FPO) will move at a fast pace," he said.

The bank reported 7 per cent increase in net profit at Rs 438.86 crore for the fourth quarter ended March 31, 2011. Total income of the bank grew by 23.65 per cent to Rs

2,865.8 crore in the January-March quarter from Rs 2,317.73 crore in the same quarter a year-ago.

For the whole 2010-11 fiscal, the bank's net profit rose by 10.23 per cent to Rs 1,714.07 crore compared to Rs 1,554.98 crore in the previous year.

During the year, total income expanded by 16.74 per cent to Rs 10,542.91 crore against Rs 9,030.77 crore in 2009-10. On future plans, Bhasin said, "We are proposing to open three more branches in Trincomalee, Batticaloa, Hambantota in Sri Lanka this year."

The bank has been holding discussions with the regulators for getting approval in expanding presence in Sri Lanka. Indian Bank has two branches, one each in Jaffna and Colombo.

Source: Financial Express

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PNB to finalise life insurance partner by June

New Delhi: The country second largest public sector lender, Punjab National Bank (PNB), intends to finalise the partner for its life insurance foray by June.

"We hope to finalise the partner this quarter," Punjab National Bank Chairman and Managing Director K R Kamath said.

The bank shortlisted 10 entities from 41 and further it was narrowed down to three, he said.

The three shortlisted life insurers include Bharti AXA, Aviva and Metlife.

The bank will finalise the partner for life insurance business based on the evaluation of the proposals submitted by these insurance companies, he said.

If PNB picks up stake in any life insurer, either domestic or overseas partner will have to dilute stake in the insurance firm.

Aviva India is 74:26 per cent joint venture between FMCG player Dabur India and UK-based Aviva Plc while Bharti AXA Life Insurance is joint venture between Bharti Enterprises and AXA of France.

Metlife India stakeholders include Jammu and Kashmir Bank, Shapoorji Pallonji and other investors besides Metlife of the US.

Last year, PNB announced its plans for a strategic partnership with an insurance player. The bank had said it has decided to participate in the life insurance venture through "a corporate agency tie-up along with equity participation in an existing Indian life insurance company".

PNB is among the few banks with a large branch network which does not have a stake in a life insurance company.

Last year, PNB decided to part ways with it foreign partner in a proposed life insurance joint venture it set up four years ago.

PNB bought the entire 26 per cent stake held by Principal Financial Group and the 32 per cent participating interest of domestic firm UK (Berger) Paints in Principal PNB Life Insurance Company Ltd.

PNB's stake in the proposed joint venture was 30 per cent, while that of Vijaya Bank was 12 per cent.

Source: Financial Express

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SBI withdraws teaser home loan scheme with effect from May 1

Mumbai: Amid concerns expressed by the Reserve Bank, country's largest lender State Bank of India (SBI) on Wednesday announced withdrawal of special home loan schemes, or teaser rates, with effect from May 1.

SBI Easy Home Loan and SBI Advantage Home Loan (teaser rate products) will be replaced by floating interest rate schemes on par with other commercial banks. Under the teaser home loan scheme, SBI was offering lower rate of interest of 8-8.5 per cent for the first three years. It invited severe criticism from RBI, which had said the scheme could impact the asset quality of SBI's home loan portfolio.

The withdrawl of teaser rates comes within a month of the new chairman Pratip Chaudhuri taking charge at SBI. The home loan from SBI will now attract an interest rate of 9.5 per cent to 10.25 per cent depending upon the loan amount, SBI said.

SBI has also launched the SBI Advantage Car loan Scheme, under which credit would be provided at 10.75 per cent for a maximum period of 7 years.

The withdrawal of teaser rates follows the bank hiking its lending rate by 25 basis points making loans across segments costlier.

Under the new floating rate scheme, loans up to Rs 30 lakh would attract an interest rate of 9.50 per cent, those between Rs 31-75 lakh, 9.75 per cent and credit above Rs 75 lakh would attract 10.25 per cent rate.

SBI had launched teaser home loan schemes in August 2009, in the aftermath of the global downturn.

It said in the last few quarters the status of the residential real estate market has experienced upward pressure on prices across cities.

"Taking cognizance of the above and also taking note of regulatory concerns, the bank has decided to withdraw SBI Easy Home Loan and SBI Advantage Home Loan w.e.f May 1, 2011," SBI said in a statement.

Following concerns expressed by RBI, leading lenders, including ICICI Bank and HDFC, discontinued their teaser rate schemes.

Teaser loans have been a hit with customers but RBI had raised concerns that it might become a burden for them when rates begin to rise after the initial 2-3 years and may increase the default rate.

Source: Financial Express

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Soon, bank accounts for primary students

Ahmedabad: A Month down the line, students of municipal corporation-run primary schools will boast of their own savings account with a nationalised bank. Schools are busy completing formalities at a break-neck speed to meet the deadline and teachers say that almost 90 per cent of the work is complete.

L D Desai, Administrative Officer, Municipal School Board, said officials from Bank of India have said that at least 30 computers and as many employees have been spared for completing the data feeding work before the accounts are formally opened.

The accounts will plug any irregularity in payments being made to the students from the government’s side under the different welfare schemes. This will also serve as a check on the dropout rate among students as they will regularly be keeping track of the accounts.

Desai said the school board distributed around Rs 4 crore among civic school students every year by way of scholarship money.

“The importance of having a bank account will be further increased in times to come as the government has decided to double the scholarship money to Rs 8 crore,” he said.

A principal of a civic school said the move will spare school staff of keeping records of financial transactions. “We will be able to spend more time on regulating educational activities in schools,” he said.

He added that following awareness among parents, the response to the scheme has become much better.

Source: Financial Express

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RBI asks banks to create special buffer

Mumbai: The Reserve Bank of India (RBI) has asked banks to create special buffers to be used by banks for making specific provisions for bad loans during system-wide downturns.

The RBI wants the cushion – called the “counter-cyclical provisioning buffer” – to be set up out of any surplus available after complying with the stipulated 70% provision of coverage ratio (PCR) of the gross non-performing assets as of September 2010.

The central bank on Friday issued a notification to enforce the norms on creation of the defence mechanism by banks.

The surplus provisions under PCR should be segregated into an account, computation of which may be undertaken as per the format prescribed by the RBI , the notification said.

Bankers have welcomed the move. S Raman, CMD, Canara Bank, said: “Our PCR currently is 74% as of now, which is more than the RBI requirement. Hence, we have already started creating a buffer as per the RBI guideline.”’

The new guideline is basically in the context of Basel III requirements, he added. “In fact, Basel III requires more aggressive capital provisioning, particularly when the going is good for banks. The RBI is always ahead of the curve when it comes to the implementation of prudential norms. So Canara Bank has no problem in going for the floating provisioning,” he said.

Another chief of a public sector bank said on condition of anonymity banks that have not been able to comply with the RBI norm of 70% PCR by September 2010 may approach the central bank and ask it to provide them another six months’ time, on the lines of the extension granted to the State Bank of India, so that they could reach the required level. Banks that have already achieved the 70% PCR will now have to go for an additional provisioning against their NPAs without affecting their net profit, he said..

However, most banks have achieved the PCR of 70%.

The central bank had earlier argued that there is a realisation from a macro-prudential perspective that banks should build up provisioning and capital buffers in good times, that is, when higher profits can be used for absorbing losses in a downturn.

Source: Financial Express

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