Indian Bank scraps plan to rope in partner for mutual fund business

Explores optionsof merging mutual fund asset management company with itself.

State-run lender Indian Bank has scrapped its plan to rope in a strategic partner for its mutual fund business because of uncertain macroeconomic environment and subdued market sentiments, Chairman and Managing Director T M Bhasin said on Saturday.

“It is not a right time to enter the mutual fund market. So, we are deliberately keeping a low profile,” Bhasin told Business Standard on the sidelines of BANCON 2011, an annual banking event jointly organised by Indian Banks’ Association and Indian Overseas Bank.

Indian Bank was earlier in talks with three overseas players for a strategic partnership in its mutual fund arm. The deal was expected to be signed by October and the lender expected to commence operations jointly from December.

“For the time being we will lie low in mutual fund. We may revisit our plan once the market improves. At least this financial year nothing will happen,” Bhasin said.

Indian Bank Mutual Fund through its asset management company Indfund Management was managing 12 close-ended schemes.

Nine schemes out of this were redeemed on maturity, while the rest three were transferred to Tata Mutual Fund on November 2001. The bank's mutual fund arm has not launched new schemes ever since.

The bank is also exploring options of merging the mutual fund asset management company with itself.

Bhasin said the bank had also decided to close all the 60 offices of Indbank Merchant Banking Services, a wholly-owned subsidiary of the bank offering merchant banking, advisory and broking services. The company will now operate from Indian Bank’s branches and pay a concessional rent to the bank.

“This will help us in earning revenues and help them in cutting expenses on rent. We will have around 200 counters of Indbank Merchant Banking Services across our branches in major cities,” Bhasin said.

He added the bank's housing finance arm will also be merged soon.

Source: Business Standard

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SBI needs up to Rs 40,000 cr in 3 yrs, says chairman

India’s largest lender, State Bank of India (SBI), will need Rs 30,000 crore to Rs 40,000 crore over the next three years to maintain balance sheet growth and capital adequacy norms.

We are planning for next three years. It will be about Rs 30,000 crore-40,000 crore” SBI Chairman Pratip Chaudhuri told reporters on the sidelines of BANCON 2011. He also said the government had already committed Rs 4000 crore capital infusion for the bank.

He said the bank's capital requirement would be partly funded by its shareholders including the government, the rest would be managed through internal accruals and economising capital usage.

Chaudhuri did not comment on how the bank planed to raise these funds.

“The options will be discussed and decided by the government, whether it will be preferential allotment or rights issue,” he said.

He said the bank was not worried over its loan exposure in the power and aviation sectors. Chaudhuri reiterated the bank was not in a hurry to revise its savings deposit rate.

On the strike called by SBI employee unions, he said while the bank's financials would not have much impact, it will severely affect the lender's service quality. “Loss will not be much in rupees or paise but in terms of customer service. It is an unfortunate issue. Negotiations are going on and we hope the strike will not happen."

Source: Business Standard

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KYC norms : New guidelines on KYC (Know Your Customer)

From January 1, Know Your Customer (KYC) requirements are mandatory for all investors, irrespective of the amount invested. 

What is KYC?

KYC means Know Your Customer. The Prevention of Money Laundering Act, requires every intermediary to have a client identification programme with a KYC policy, which means knowing your customer by seeking information and supporting documentation about the customer's identity and address, besides such other information as nationality, income source, occupation, etc.

Where and how does one get to be KYC-compliant?

The Association of Mutual Funds of India has facilitated a centralised platform through CDSL Ventures Limited (CVL), can carry out the KYC procedure on behalf of all mutual funds. CVL, through its points of service (POS), will accept KYC application forms, verify documents and provide the KYC acknowledgement.

Once the KYC is duly completed, the investor would have to produce a copy of the acknowledgement when investing for the first time with a fund.

Who needs to be KYC compliant?

Any individual(s) or non-individual(s) applying for units in a mutual fund;

Any individual(s) constituted as Power of Attorney holder(s).

Each of the applicants, in case of an application in joint names; Guardian investing on behalf of a minor.

If an individual becomes an investor due to an operation of law, e.g., transmission of units upon death of an investor, the claimant will be required to be KYC-compliant before such transfer can take place.

Where do I get this form and submit the same?

The KYC Application form and list of POS is available at the AMFI website - http://amfiindia.com/KYC.aspx

Incidentally, one can check the KYC Status at the CVL website http://www.cvlindia.com

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Alternative channels is the way to go

Bank customers are not as loyal as they are generally thought to be. According to Mr Naveen Tahilyani, Partner, McKinsey & Co, a survey of 6,000 bank customers showed that customer loyalty, which was as high as 80 per cent four years ago, has now fallen to 40 per cent. In a presentation he made at the first plenary session at BANCON 2011, Mr Tahilyani said this trend would lead to increased shopping among banking customers and fragmentation of banking relationships.

He said banks will have to get ready to try out alternative channels to reach out to customers. Mobile banking is a channel that banks have to look at seriously, he said. He pointed out that many Indians spend an average of 120 minutes every day on mobile phones. Banks need to redesign their business models to address the needs of these tech-savvy and digital customers.

Mr Pratip Chaudhuri, Chairman of State Bank of India, talking about the evolution of the bank's approach to financial inclusion, admitted that when the bank was given 100 districts to take the initiative as part of the lead bank scheme, it was seen as a burden by many who joined the bank then. The bank was given among the most remote places in the North-East, as well as hilly areas in Himachal Pradesh and other similar inaccessible places. It was seen as a terrible legacy, of going to places, where, ‘not a blade of grass grows'. But he said it was these places that helped State Bank emerge as one of the top banks and helped it source 40 per cent of its deposits through savings bank accounts. He said that this was a tribute to the farsightedness of the then management. Today, with technology, he said the incremental cost of adding customers was not that high. He said SBI was today the top bank in the home loan market with Rs 90,000 crore of home loan outstanding across 17 lakh customers.

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New banks should be allowed to maintain competition, says Rangarajan

If the banking system needs to remain competitive over time, there should be no bar on the entry of new banks, Dr C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister, said at the Bancon-2011 here on Saturday.

“A closed system could only become oligopolistic. The ‘threat’ of entry should not be eliminated,’’ he added. It is up to the RBI to lay down norms for entry and also decide on who satisfies the criterion of “fit and proper’’.

Dr Rangarajan also said that the recent financial crisis has “forced us to re-evaluate the size, role and rate of growth of the financial sector’’.

The regulatory regime needs to be restructured to make the banking system more sound.

“Excessive risk taking and leveraging by banks need to be discouraged by appropriate regulatory measures or controls,’’ he said.

In order to enable the financial system to meet the diversified needs of a growing economy, there is the “need to encourage the emergence of a vibrant corporate debt market’’, which will help not only large industries but also SMEs.

“We would also need institutions which will serve as market makers offering two-way quotes. This will provide the required liquidity to the market and make it attractive to the investors,’’ he said, adding that banks should explore innovative ways of financing infrastructure.

Even as regulatory oversight of innovations is necessary, Dr Rangarajan said that regulatory perspective on innovation “must not become too restrictive’’. Policy-makers should strike an appropriate balance between the “need for financial innovations to sustain growth and the need for regulation to ensure stability’’.

He also urged the banks to take a re-look at the organisational structure of rural branches to meet the credit needs of marginal farmers.

The banks should also play a proactive role in organising self-help groups, and it is important to enlarge the scale and scope of activities of the SHGs. “This would enable the banks to reach out to people with low incomes including marginal farmers,’’ said Dr Rangarajan.

According to him, the business correspondents’ model of financial inclusion has not been satisfactory. Hence, banks should explore the possibilities of looking at other alternatives.

“We should explore the possibilities of looking at low-cost brick-and-mortar branches in panchayat headquarters. Profitability rests on making the operational cost of such branches low,’’ he pointed out. He added that it was worthwhile to re-open the issue of setting up local area banks.

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