RBI directs banks not to levy foreclosure charges

The Reserve Bank of India has directed banks to not levy charges for foreclosure/prepayment of home loans taken on floating interest rate basis, with immediate effect.

In a notification, the RBI said though many banks voluntarily abolished prepayment penalties on floating rate home loans in the recent past, there was a need to ensure uniformity across the banking system.

The removal of foreclosure charges/prepayment penalty on home loans will lead to reduction in the discrimination between existing and new borrowers, and competition among banks will result in finer pricing of the floating rate home loans, it added.

Some banks have waived penalties on all floating rate home loans prepaid either from own sources or via balance transfer. Over 90 per cent of home loans that are taken from banks are on floating-rate basis. The Damodaran Committee on Customer Service has observed that foreclosure charges levied by banks on prepayment of home loans were resented by home loan borrowers across the board, especially since banks were found to be hesitant in passing on the benefits of lower interest rates to the existing borrowers in a falling interest rate scenario.

Further, foreclosure charges are seen as a restrictive practice deterring the borrowers from switching over to cheaper available source.

The RBI directive comes in the wake of the recommendations of the Damodaran Committee.

kram@thehindu.co.in

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Bolloju appointed interim CEO of Deutsche Bank India

Shrinath Bolloju will succeed Gunit Chadha as the chief executive officer for Deutsche Bank’s India business, industry sources told Business Standard on Monday.

Bolloju, currently chief operating officer of the bank in India, has been appointed for an interim period. The Reserve Bank of India had approved the appointment, sources said.

Chadha has relocated to Singapore after he was named as the co-chief executive of Deutsche Bank’s Asia-Pacific operations. He and Alan Cloete (also appointed co-chief executive for the Asia-Pacific) have also joined Deutsche Bank’s global group executive committee.

Bolloju, a veteran banker with two decades of experience, is known for his ‘people and change management’ skills. He started his career with Citi in their information technology arm in India in 1988, working mainly in the securities processing business.

He moved to Singapore in 1995. After spending a year with a technology product company, System Access, Bolloju joined Deutsche Bank.

He was given several regional responsibilities, including information technology management for private banking, securities custody, fixed income and equities. He was responsible for settlement systems for the Asia region supporting all the regional installations.

Bolloju relocated to London in May 2002 to take up global responsibility for Deutsche Bank’s core banking platform dbInternet. His next assignment was as chief operating officer for personal and corporate banking information technology. In this role, he was overseeing integration of the new organisation and set up working processes in the COO team for the smooth administration of a division with a total cost base of ^1 billion.

In July 2005, he was given responsibility to run the securities and custody operations globally for Deutsche Bank. A year later, he relocated to India as global head of corporate trust and agency services operations.

Bolloju became group chief operating officer at Deutsche Bank India from May 2008. He is an alumnus of SP Jain Institute of Management & Research, Mumbai.



Source: Business Standard

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RBI hints at cut in interest rates

Ahead of its mid-quarterly policy review, the Reserve Bank on Monday hinted at cut in interest rates, saying moderation in inflation due to lower economic growth and cooling global oil prices provide room for easing monetary policy.

“.. The growth is somewhat lower than expectation and that may have positive, moderating impact on core inflation,” said Dr Subir Gokarn, Deputy Governor, RBI.

“... Oil prices have come off somewhat more than expected. Those are the two factors that suggest more room (for easing monetary policy),” he said.

The central bank is scheduled to announce its first mid-quarter review of monetary policy for 2012—13 on June 18.

In its annual credit policy for 2012—13 on April 17, RBI had slashed short—term lending rate or repo rate by 0.50 per cent to 8 per cent to prop up economy.

India’s economic growth rate slipped to 5.3 per cent in the fourth quarter of 2011—12, the lowest in nearly nine years, following poor performance of the manufacturing and farm sectors.

As a result, GDP growth for the full year 2011—12 was down to 6.5 per cent from 8.4 per cent in 2010—11.

However, wholesale price—based inflation for the month of April rose to 7.23 per cent, from 6.9 per cent in the previous month.

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Karnataka Bank to launch mobile banking soon

Karnataka Bank Ltd will launch mobile banking soon. Speaking at a function at the Founders' Branch of the bank at Dongarakery in Mangalore on Monday, Mr P. Jayarama Bhat, Managing Director of the bank, said that the bank will start offering mobile banking facility in the next two months.

With this, the customers of the bank can carry out their transactions through their mobile phones.

Mr Bhat said that the bank, which crossed a business level of Rs 53,000 crore in 2011-12, is planning to do much more in the years to come. The bank has set a target of achieving Rs 1 lakh crore business by 2015, he said.

As of now, the average business of the each branch of the bank is more than Rs 100 crore, he said.

The bank re-named its Dongarakery branch as Founders' Branch on the occasion. The bank started functioning from this branch on May 23 1924.

Mr Mahabaleshwara Bhat, General Manager of the bank, said that the Founders' Branch made a profit of Rs 3,591 in the first year of its inception way back in 1924.

The total deposit then was Rs 68,499 and total advance was Rs 1.25 lakh then.

Mr Ananthakrishna, Chairman of the bank, said that the administrative office of the bank was situated at Dongarakery premises till 1972.

Several customers of the branch, who have been banking with the branch for the past five decades, were honoured on the occasion.

Mr Krishna Avatar Jalan, one of such customers, recalled his association with the bank since 1959.

vinayakaj@thehindu.co.in

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Muthoot Finance eyes 10% growth in assets under management

Gold loan financier Muthoot Finance Ltd is looking at 10 per cent growth in its assets under management (AUM) this fiscal, its Managing Director, Mr George Alexander Muthoot, has said.

This is much lower than the 55 per cent increase in AUM seen in 2011-12 and over 100 per cent growth in 2010-11. As of end March 2012, the company had AUM of about Rs 24,417 crore. “This year will be a year of consolidation for us,” Mr Muthoot said, adding that bottomline growth is also likely to be flat during 2012-13.

Muthoot Finance's profit after tax recorded 80 per cent increase in 2011-12 to Rs 892 crore as against Rs 494 crore in previous fiscal. Income from operations nearly doubled to Rs 4,536 crore in 2011-12. Mr Muthoot said that the company has already made representation to the RBI on the latter's move to clamp down on gold loan companies in February by bringing down the loan-to-value ratio to 60 percent.

The RBI had also asked banks to reduce exposure to gold loan companies from 10 percent to 7.5 percent of their net owned funds.

krsrivats@thehindu.co.in

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