New-generation banks like Yes Bank, IndusInd Bank, Kotak Mahindra Bank gain market share on higher rates

A higher interest rate of up to 7 per cent on savings bank deposits seems to be helping small new-generation banks like Yes Bank, IndusInd Bank and Kotak Mahindra Bank expand their market share at the cost of the old public sector banks.

The data suggest that small new-generation banks have seen their incremental savings account deposit market share grow four-fold from 1 per cent in the first quarter of previous fiscal, 2011-12, to 4 per cent in the fourth quarter (January-March).

During the same period, the combined savings account market share of PSU banks has declined, but the large private banks have so far managed to hold onto their market share.

Since the Reserve Bank of India's deregulation of the savings bank account interest rates in October 2011, the small new-generation private banks have raised their interest rates to relatively higher level than most of the other banks, helping them with better savings account acquisitions.

As per the latest report by global financial giant Espirito Santo Investment Bank, the smaller new generation private banks that have raised rates have seen higher SA (savings account) momentum, while large private sector banks are witnessing early weaknesses and PSU banks have seen a deterioration in their savings bank deposits mobilisation.

"We expect smaller new generation private sector banks to gain market share at the cost of PSU banks in the initial phase," the report noted.

Yes Bank offers 6 per cent savings account interest rate for deposits below Rs 1 lakh and 7 per cent above Rs 1 lakh level. IndusInd Bank and Kotak Mahindra Bank offers 5.5 per cent for below Rs 1 lakh and 6 per cent above Rs 1 lakh savings account deposits.

As per the report, the three new generation private sector banks that have increased their SA interest rates are likely to continue to offer higher SA interest rates than competitors to maintain their competitive advantage in terms of pricing differential.

It further said that since SA deregulation, Yes, Indusind and Kotak have increased rates which has helped them to gain significant momentum on SA deposit mobilisation, with rise in their incremental SA deposit market share from 1 per cent in Q1 FY12 to 4 per cent as of Q4 FY12.

The large private banks ( ICICI Bank, HDFC Bank and Axis Bank) are holding the fort for now, as they have managed to hold on to their market shares over the last couple of quarters, as they managed to maintain their Savings Account ratio at 27.9 per cent from Q1 to Q4 FY12.

On the other hand, the PSU banks are losing market share. The top five PSU banks have continuously lost market share and their combined SA market share decreased from 26.6 per cent in Q1 FY11 to 25.2 per cent in Q4 FY12.

The leading PSU banks in the country include SBI, PNB, Bank of Baroda, Canara Bank and Union Bank of India.

Source: EconomicTimes

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Sidbi to complete allocation of Rs 100-crore MFI equity fund by June

State-run Small Industries Development Bank of India or Sidbi said it expects to utilise the Rs 100-crore India Microfinance Equity Fund fully by June this year.

The government has created the Rs 100-crore dedicated corpus for investing in equities or quasi-equities of smaller microfinance companies to help them grow business. Microfinance institutions or MFIs lend to poor women, who don't have access to bank finances.

Once the corpus is exhausted, the government may think of expand the size of it.

A senior Sidbi official said the development financial institution has so far sanctioned investment proposals worth Rs 65 crore while many are in the pipeline for consideration. The development bank has disbursed Rs 20 crore till date.

The fund is being used for offering three types of instruments -- pure equity and quasi-equity for NBFC-MFIs and subordinated debt for others.

In case of equities, Sidbi invests after carrying out due diligence and equity valuation which would depend on book value or break-up value of the company and earning potential. Quasi-equity can comprise optionally convertible preference shares or non-convertible debentures.

Sidbi offers subordinated debt for non-NBFC MFIs for 6-8 years with moratorium of 4-5 years with a clause that the debt can be converted into equities if the entity transforms into an NBFC-MFI during the term of the debt

Source: EconomicTimes

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PNB fire in Delhi: Bank clarifies, says all services have been restored

State run lender, Punjab Nation Bank has clarified that all the banking services provided by the bank are functional and have been restored. The bank's clarification came after there were reports that the recent fire at PNB office in Delhi has affected its services across the country.

On Wednesday, a major fire a major fire broke out in a multi-storey building which has offices of banks on Parliament Street.

"There were reports that fire has destroyed one of the four servers and bank's operations are being routed through the disaster recovery server (DRS), which are affectiong operations," said an official. He clarified that all services have been restored and the number of transcations have crossed 30 lakh and ATM transcations have crossed 11 lakh.

"Our branches of regional rural banks and foreign branches are also functioning normally," the official added.

A fire had erupted in the office of Punjab National Bank in UCO Bank Bhavan, located near Akashwani Bhavan and Nirvachan Sadan, on Wednesday. Over 30 fire tenders were rushed to the spot to douse the fire.

Police has already registered a case under Section 336 of the Indian Penal Code for endangering lives and safety of other people against unknown persons. Investigations are on whether fire could have been prevented if the building had followed new rules for fire safety and prevention introduced by Delhi Fire Service in 2010.

The new rules were not mandatory for old buildings. This building was built in 1970s and hence did not need to mandatorily follow the new rules.

Source: EconomicTimes

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SBI unions ready for merger of associate banks

The forthcoming 25th Triennial General Council meeting of the All India State Bank Officers’ Federation (AISBOF) is expected to pass a resolution supporting the merger of the five associate banks of State Bank of India, making them into one entity.

The five associate banks are State Bank of Travancore, State Bank of Hyderabad, State Bank of Patiala, State Bank of Mysore and State Bank of Bikaner & Jaipur.

But the unions will oppose the merger of any of these banks with State Bank of India.

The AISBOF “fully endorses” the demand of the Associate Banks’ Officers’ Association “for ending the subsidiary or ‘associate’ status of these banks’’, the resolution reads.

“The continuance of these banks as associates of State Bank of India is anachronistic,” it says, adding that it may have been justified when State Bank of India was the only public sector bank, but not now.

“The AISBOF General Council urges the government to take speedy action for integration of the five associate banks into one bank and to vest the ownership of the bank with the Central Government,” the resolution says.

However, when asked why the unions were okay with the merger of these banks into one entity, but not with SBI, Mr G.D. Nadaf, General Secretary, AISBOF, said that the unions were really in favour of these five banks remaining separate entities.

But if the government has to merge many banks into one, then most of the unions were okay with the merger of the associate banks into one entity, but not with SBI.

Mr Nadaf said that after the merger of State Bank of Sourashtra and State Bank of Indore with State Bank of India, the SBI management was keen on merging the other associate banks also.

But it did not proceed because the State Bank of India was financially not in a position to do so.

However, now that SBI’s performance is good, the merger proposal would be taken up again, Mr Nadaf, who is also the Officer-Director on the board of SBI, told Business Line.

Observing that “consolidation and competition do not go together,” Mr Nadaf said the unions would fight any proposal to merge the associate banks with SBI.

mramesh@thehindu.co.in

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Corp Bank may restructure UP discom loans

The Corporation Bank is considering a request by the Uttar Pradesh electricity distribution company to restructure its Rs 600-crore loans, the bank’s Executive Director, Mr Amar Lal Daulatani, told Business Line on Friday.

“They (the UP discom) have given a request for restructure. It is yet to come up (before the bank’s board),” he said.

In 2011-12, Corporation Bank restructured loan book grew sharply by Rs 3,000 crore, to Rs 7,539 crore. Again, like in the case of many other banks, the major restructured accounts were Air India and the Rajastan State Electricity Board.

Focus on SME, gold loans

The bank expects to give Rs 5,000 crore of additional loans to small and medium enterprises in the current financial year, Mr Daulatani said. This will happen because of the thrust the bank is giving to the SME sector. The bank intends to open 16 SME loan centres across the country.

These ‘loan centres’ focus only on SMEs and hence the processing of loans is quick. A special drive to increase the bank’s SME customer base is also on. Mr Daulatani said that on the day the SME loan centre was inaugurated in Mumbai, the bank gave loans worth Rs 300 crore.

The other thrust area for Corporation Bank is gold loans. The bank’s gold loan portfolio increased from Rs 696 crore on March 31, 2011, to Rs 2,116 crore on March 31, 2012, Mr Daulatani said.

mramesh@thehindu.co.in

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