Tides of 30.11.2006

1. RBI has pulled up commercial banks for neglecting various regulatory requirements. It has pointed out that most of the banks do not have comprehensive structures, policies and manuals to address compliance risks. This, however, has not received the required attention of banks, as a number of instances of non-compliance and lack of proper interpretation of regulatory guidelines are being reported in successive RBI inspection reports. In an effort to tone up banks’ compliance, the RBI has come out with draft guidelines. The compliance processes remain weak and compliance officer has not been an effective instrument.
2. Canara Bank, planning to sell stake in its fully owned mutual fund arm in December, is likely to finalise the Netherlands-based Robeco for the proposed joint venture.
3. RBI is understood to have stepped up its surveillance in the government securities market.
4. Much has been written about Grameen Bank ever since Mr Muhammad Yunus and his brainchild concept won this year's Nobel Peace Prize. Not many may know that `gramin banks' have been popular in Karnataka ever since 1976. Gramin banks enjoy a good share of rural banking in the State, measured by several indicators, according to statistics as of March 2005. Gramin's share of rural branches is 53 %. Nearly half of the total rural deposit accounts of nearly 90 lakh are with gramin banks. `Borrowing accounts' number about 22 lakh in rural category; in this, gramin has about 54% share. "Nearly 83 % of their borrowing accounts are in the advances group of less than Rs 25,000.
5. Robust business growth, impressive performance on fee based income and strong showing on core operations highlight the earnings scorecard of banks for the quarter ended September. Re-pricing of loans by about 50 bps in June and August following upward revision in the PLR appears to have improved yields on advances for many banks. While the quarter has proved to be a good one for the banking industry, private sector banks continued to surpass their counterparts in the public sector on several key parameters such as growth in net interest income (NII), fee income and net profits. PSBs, on an average have recorded a YoY growth of about 16% in earnings, while the figure for private sector banks is double at 32%. In terms of containing costs, PSBs have fared better than their counterparts in private sector.
6. The National Rural Health Mission, in collaboration with ICICI Bank, has introduced an e-banking solution for healthcare services in Kerala. It is the first State in the country to implement the bank's `Health I-Check Pay' software that will make fund movements faster and more simple. The software, an integral part of the National Rural Health Mission, will also make it possible to monitor utilisation of funds and provide better transparency in financial transactions in the working of the Health Ministry.
7. You can now go in for a chip - based card without fear of fraud. Unlike the normal plastic cards, the microchip-based card has security features that prevent misuse of cards. The chip is inserted into the sale-point terminals, which validate the card for usage. There is no swiping of the card. The latest to introduce this card in India is the UTI Bank. The bank plans to launch the chip - based card by February 2007.

Tides of 29.11.2006

1. The Gold based Deposit scheme, of Bankers will work as follows: a customer can buy gold by depositing the market price of the metal with the bank. The bank will provide the customer a receipt for physical deposit of gold. The customer can either get the gold in physical form or its value at the prevailing market price anytime after a specified period, say five or 10 years. A customer can keep on depositing funds (in other words, buying gold) at intervals of his convenience and accumulate it for 5-10 years. Interest at a nominal rate will be paid on the deposit. For the customer, it will work like a systematic investment plan. Banks are expected to customise the scheme to make it more customer-friendly. On their part, banks will buy gold futures to hedge against price variations. IBA is expected to submit a proposal to RBI for approval for the scheme.
2. Over 1,500 Citigroup India employees spread across 35 towns and cities will participate as volunteers in various community initiatives in the country on 18.11.2006, as part of Citigroup's global community day initiative.
3. RBI has unveiled draft guidelines on banks’ exposure to capital markets. The guidelines cap a consolidated bank’s aggregate exposure to capital markets at 40% of its consolidated net worth of March 31 in the previous financial year. The revised guidelines will be effective from January 1, 2007. But under the ceiling, the aggregate direct exposure by way of a bank’s investment in capital markets has been capped at 20% of its consolidated net worth. The aggregate stand-alone exposure of a bank to capital markets has been retained at 40% of its net worth.
4. Of the three 100% government owned banks, which were slated to hit the market during the current fiscal, Indian Bank and United Bank of India may delay their plans to launch their IPO.
5. Asian Development Bank has reduced commitment fees for project loans, a key demand of India, as part of the series of enhancements it introduced in the Libor-based loan, ADB’s main lending instrument.
6. Given the non-reliance of the government to external financing to finance domestic debt, India is expected to be less affected by global imbalances.
7. RBI has sought to further tighten the flow of bank funds into the capital market. In a big blow to broking firms and corporates, the central bank’s proposals will reduce access to bank funds against security of equity and equity-linked investments. The entire banking system cannot lend more than Rs 10 lakh for subscribing to shares in an IPO to any single borrower be it an individual, a partnership firm or a company. Any general purpose borrowing from banks by an individual or a corporate against security of equity investments is also proposed to stifled. Any single borrower can borrow from the banking system against security of such investments only up to Rs 10 lakh if the security is held in physical form and only up to Rs 20 lakh if the security is held in demat form.
8. An internal study by the RBI is understood to have found out that most of the foreign exchange inflows into India from NRIs and portfolio investments are emanating from tax-haven countries. The study further aims at trailing the origin of the funds to the tax-haven countries. The findings are part of the overall study by the RBI to track the origin and utility of funds flowing into the country under the broad umbrella of FDI.

Tides of 27.11.2006

1. HDFC has come out with an innovative housing loan scheme for which the finance company will visit the customer at home for three days. Titled `Doorstep Assistance' in 30 minutes, the scheme will be available for customers across the State and also for people in Thirunelveli, Kanyakumari and Tuticorin districts of Tamil Nadu. The interest rate on the loan will be at 9% (floating) compared to the company's usual interest rate of 9.5%. The company has a network of 11 offices in the State and the doorstep assistance will help reach out to customers in about 250 locations in Kerala and the neighbouring districts of Tamil Nadu.
2. PNB, Kerala Zone’s , disbursement under the Special Agricultural Credit Plan for the half-year ended September has risen by 85% over last year. The loans disbursed amounted to Rs 30.73 crs, which is 63% of the annual budget. PNB has seven rural branches in the State. Outstanding retail credit grew by 67% to Rs 565.11 crs from Rs 337.85 crs earlier. Under the bank's Kisan Card Scheme, 3,347 cards have been issued to farmers.
3. Till now banks have not had many options to raise capital. It is here that the recent RBI guidelines, which allow banks to raise capital by issue of Innovative Perpetual Debt Instruments (IPDIs) and debt capital, open the doors for looking at "innovative instruments" to raise further capital.
4. Innovative Perpetual Debt Instruments are eligible to be issued as Tier I capital. It can be issued in rupees or with prior approval in foreign currency. Maximum amount that can be raised is 15 % of Tier 1 capital reduced by intangible assets. As the name suggests, the maturity period is perpetual. The instruments can be issued at fixed or floating rate referenced to a market-determined rupee interest benchmark rate.
5. Debt capital instruments are eligible to be issued as Upper Tier II capital. Maximum amount that can be raised should not exceed Tier 1 capital reduced by intangible assets. The maturity period is minimum of 15 years. The instruments can be issued at fixed or floating rate referenced to a market-determined rupee interest benchmark rate.
6. Dena Bank has signed an agreement with Wipro Infotech for implementing core banking solutions (CBS) and total outsourcing contract worth Rs 304.4 crs. Under this contract, Wipro will implement the centralised and integrated CBS in 850 of Dena Bank's branches over a period of four years. This will cover 92 % of the bank's business.
7. The Indian Railway Finance Corporation plans to raise Rs 500 crs through a bond issue over the next few days. It also plans to raise $200 mn through ECBs in January next year.
8. ICICI Prudential Life Insurance's new business weighted premium has grown 143% in the first half to Rs 1,626 crs (Rs 668 crs). New business weighted premium gives only 10% weightage to single premium.
9. Bankers are trying to moot a gold-based scheme to raise the much-needed long-term deposits. The scheme will be designed to induce people to invest in the yellow metal while simultaneously offering banks a new source of funds.

Tides of 25.11.2006

1. Alarmed by rise in the incidents of bank robbery in Bihar, the state police has warned of penal action if its directive to switch off the mobile phones while entering banks in the state capital is not being strictly adhered to. A decision to ban the use of the mobile phones was taken at a meeting of senior police officials with representatives of various nationalised and private banks. Now closed-circuit cameras would be installed at the main entrance of the banks besides at the cash counters and the strong rooms.
2. ABN Amro Bank, Citigroup Global Markets, Macquarie Bank, Fidelity and Morgan Stanley have picked up a combined 34% stake in Development Credit Bank from the open market.
3. RBI has given Vijaya Bank the green signal for opening 28 new branches & 23 offsite ATMs.
4.The RBI has dispensed with the lock-in period for remittance of sale proceeds of immovable property of NRIs or Persons of Indian Origin from their NRO accounts in India. The remittance of such sale proceeds was subject to a lock-in period of 10 years.
5. Centurion Bank of Punjab (CBoP) has tied up with software services company SAS Institute India Pvt Ltd to strengthen its customer services. The "SAS Banking Intelligence solution suite" will help the bank in customer segmentation, identification of vulnerable customers and prediction of the most likely purchases of the customer.
6. The board of directors of banks will be responsible for ensuring that an appropriate compliance policy is in place to effectively manage compliance risk faced by banks. Compliance includes strict observance of all statutory provisions contained in various legislations and also following the guidelines issued by organisations such as IBA, FEDAI, FIMMDAof India and so on.
7. Indian Bank has ensured that every family in the Union Territory of Puducherry has a bank account. The project has resulted in bringing 1.25 lakh new "no frill'' account holders into the banks' fold. Besides, the bank has provided overdraft facilities to 15,000 people. The project also involves providing health insurance coverage to 2.8-lakh members of SHGs. All the families have been provided with a bank account. Only those families who did not want one are excluded.
8. Karnataka Bank Ltd has enabled its real time gross settlement (RTGS) facility, MoneyQuick, under Internet banking. Customers using the bank's Internet banking facility would be able to transfer funds from their account to their or third party accounts at RTGS-enabled branches of other banks across the country. This facility is provided in tune with the changing demands and preferences of its customers and in pursuit of its endeavour to improve customer satisfaction.
9. With India's economy continuing to grow at 8%, FIIs infusing capital of over $7 billion so far this calendar year and business cycle going strong, it is not surprising to see Corporate India's second quarter results exceeding the market expectations of about 25% growth.
10. Banks reported a strong set of numbers in the September quarter after two relatively dull quarters. Higher yield on advances, fall in bond yields to the tune of about 50 bps and robust growth in non-fund based exposure appear to be the key factors behind banks reporting good set of numbers. Earnings growth has been 16% for PSBs on an average, while private sector banks have notched a growth of 32%. Even on core operations, private sector banks have managed to walk away with a larger pie. This is reflected in the net interest income (NII) growth, which stood at 14% for PSBs on an average and 48% for private sector banks.

Tides of 24.11.2006

1. Banks may lose between Rs 7,200 crs and Rs 9,000 crs as bad assets on housing loans disbursed over the last four years, with the Municipal Corporation of Delhi systematically demolishing illegal property. Delhi witnesses sales of around 25,000 residential properties in a market of about Rs 12,000-15,000 crs. On an average, about 60% property value is financed by banks. There are around 50 banks operating through 2,000 branches in Delhi. The problem has arisen since banks, in a rush to beat rivals, have financed loans without proper documentation. Legally, banks are supposed to release loans after ensuring that title deeds, the form A (map approval), form C (water), form D (electricity) and the form E (completion certificate) issued by the MCD are in place. But most banks and housing finance companies have been financing properties without the form E, and in some cases, the form C and D.
2. The accelerated initiatives by banks to promote micro-finance through the SHGs model has seen impressive results during 2005-06. This has been manifested by the fact that banks extended loans of Rs 4,499 crs to the SHGs during 2005-06, recording a growth of 50% over the previous year. The number of families supported through the SHGs increased by 35% from 24.3 mn as on March 31, 2005 to over 32.9 mn as on March 31, 2006. Meanwhile, total refinance support increased by 10% to Rs 1,068 crs during 2005-06 from Rs 968 crs during the preceding year.
3. ICICI Bank, intends to thrust on the micro-finance area to address rural India’s poverty issues. The bank intends to provide loans to the extent of $10 billion by the year 2010. In the past three years, the bank has been operating in the micro-finance space with over 100 micro finance partners. Over this period, lending has grown from $1.2 mn to 20,000 clients to $522 mn to around 3 mn clients in 2006.
4. SBI will set up ATMs at 11 railway stations in Chhattisgarh for internet banking and sale of monthly tickets and other services to commuters. The stations were yet to be identified. SBI was working on re-orientation of staff to deliver better customer care, besides modernising branches, upgrading technology and setting up more ATMs in Chhattisgarh. The orientation programme for better customer care was necessary to boost business. SBI would be upgrading technology at its branches for speedier service. SBI had 222 branches in the state, of which more than 50% were in rural areas.
5. RBI has imposed some restrictions on the ailing Sangli Bank, including expansion of advances, as the small-size private sector bank’s CAR has fallen to 1.84%
6. RBI has proposed a complete restructuring of the operations of the Deposit Insurance and Credit Guarantee Corporation of India (DICGC).
7. RBI should, by the end of March 2007, allow rupee-denominated external commercial borrowings (ECBs), raise the ceiling on the amount of foreign exchange corporates can remit overseas and liberalise non-resident investment in debt instruments, according to S S Tarapore, former RBI deputy governor and chairman of the Committee on Fuller Capital Account Convertibility. ECBs denominated in rupees but repayable in foreign exchange need to be encouraged so as to diversify the exchange risks for Indian borrowers.

Tides of 23.11.2006

1. i-flex Solutions Ltd and Financial Services Inc. (FSI) have tied up to launch FLEXICUBE as a hosted offering to community banks in the US. FLEXCUBE, the company's flagship offering, will equip community banks to compete with large banks and financial institutions on an equal footing.
2. UBI has launched Union Mitr, a financial education counselling service, available at 51 centres across the country. This service will offer information on products, services, and provide guidance on opening a bank account, information on managing savings, as well as on management of existing debt. It plans to use village knowledge centres, which are attached to rural branches, for this purpose. Financial education requires a highly individualised approach so it is carried through individual counselling at the bank's centres.
3. PNB has launched PNB Arogya Shree to provide health insurance for its 35 mn customers. The new offering is a product of Reliance General that has been tailor-made for PNB customers. The product is unique. The large customer base has helped it in getting the premium amount lowered. It will have additional features and would be marketed through the branches.
4. Former Dy. Governor of RBI and Chairman of the Committee on Fuller Capital Account Convertibility, Mr S.S. Tarapore, has cautioned against the impending transfer of ownership of SBI from the RBI to the Government. An alert Parliament should block the clauses in the SBI Amendment Bill that relates to the transfer of ownership of SBI from the RBI to the Government. The transfer would be a major setback to the credibility of transparency of the financial sector reform process built up so assiduously over the past 15 years.
5. Software Technology Parks of India (STPI) AP, has enlisted the services of Ernst & Young to chart out a strategy to help accelerate the contribution of the burgeoning SME segment of the IT sector. There are about 3,500 SMEs in the IT sector and their contribution is now estimated at about 35% of the country's total exports of about Rs 1,00,000 crs. The STPI would like to help accelerate their output and cover other segments and step up contribution to exports.
6. The Power Ministry has proposed putting in place a set of normative criteria for allotting captive coal block to players in the power sector and having "reasonable" bank guarantees that could be encashed if they fail to achieve certain prescribed milestones in the development of the block.
7. The RBI has restricted NBFC's borrowing limits. They will have to maintain a capital adequacy ratio of 10%. As per the guidelines, all non-deposit taking NBFCs will be able to raise borrowings only up to 10 times their net-owned funds. The new guidelines will change the way the balance sheet of an NBFC is funded.
8. Standard Chartered Bank has launched a customer service initiative through which they can SMS if there is a complaint or need assistance. The sender will receive a personalised call from the bank within 24 hours of sending the SMS. The customer needs to send an SMS to the number 9980033333 with the text "Service." If complaints are not addressed in 24 hours then the bank will credit around Rs 100 to the customer's account. This has been launched as a pilot project in Chennai and would be rolled out nationally early next year. On an average, the bank's call centre receives around 20,000 service related calls a day.

Tides of 22.11.2006

1. Reversing last year's trend, the financial assistance sanctioned and disbursed by the financial institutions in 2005-06, has increased significantly. The asset quality, profits and CAR of the FIs improved during the period. The sanctions by FIs witnessed a rise of about 39% at Rs 27,239 crs and the disbursements rose by about 34% to stand at Rs 20,522 crs. The assets and liabilities during the period, however remained more or less at the same rate as of 2004-05.
2. After software services, India is now also emerging as a major exporter of financial services. In FY06, the earnings in forex were $1.7bn from providing financial services to the rest of the world. From being a net importer of financial services, India, for the first time since 2000, has emerged as a net exporter of financial services. Net inflows on account of financial services aggregated $1,087m in ‘05-06, according to the latest balance of payments figures. Contrast this with the net outflow of $1,626m in ‘00-01.
3. RBI has permitted ICICI Bank to open new branches and set up off-site ATMs. This signifies the lifting of the ban, imposed by the banking regulator, on the branch expansion of a slew of commercial banks involved in the IPO allotment scam. These banks were also fined for their role in the scam. HDFC Bank would soon be allowed to open new branches.
4. The competition for raising resources, including deposits, to meet the burgeoning credit demand has taken a toll on spreads, of the new private sector banks in 2005-06 over 2004-05. The spreads for new private banks dipped to 3.5% from 4.3 % in the previous financial year. For PSBs, spreads improved to 2.9% from 2.8% and for foreign banks, they rose to 4.4% from 4.2%.
5. The country’s top two banks, SBI & ICICI, reported a sharp rise in loan loss provisioning in the second quarter of 2006-07. The provisioning for NPAs rose nearly 11 times for SBI and by over 3 times for ICICI Bank, on slippage in loan accounts, particularly retail. SBI’s provisioning for NPAs was Rs 116 crs in July-September 2006 against Rs 10.7 crs a year earlier, an increase of 981.1%. For ICICI Bank, the provisioning was Rs 380 crs in the second quarter of 2006-07 against Rs 90 crs a year earlier.
6. SBI and Hero Honda have joined hands to help the farmers of Uttar Pradesh and signed a deal in Lucknow for financing two-wheelers for the state’s farmers. The deal envisages SBI financing in the rural areas and attractive cash discounts by the company. Hero Honda is targeting sales of 250,000 two-wheelers in the rural areas in the current financial year and the tie-up is aimed at synergising the marketing and servicing strengths of the two giants.
7. Information Technology holds the key to kick-starting a revolution in banking, said Radha Unni, chief general manager, SBI. She was inaugurating a national conference on `Braving new frontiers in banking,' organised by the ICFAI Business School, Trivandrum. She called for standardisation across banks and appealed to them to take the services to the doorsteps of the customers for financial inclusion.
8. Indian (Indian Airlines) has launched the exclusive, fully-loaded "Indian Platinum Credit Card Master Card'' in association with ICICI Bank. Issued by invitation, initially to senior officials of the Government, the card offers a generous 20 % cash back on airline tickets purchased at full fare levels, together with convenient options of buying tickets at any Indian (Indian Airlines) offices.

Tides of 21.11.2006

1. HSBC India is looking to reach out to new consumer segments through offerings such as its recently launched HSBC Pragati Finance. It has enabled the bank to offer consumer finance to people who have no credit history and are unable to prove their repayment ability, but actually have the ability to repay. This product will help people who have so far had limited access to organised lending.
2. People in India, especially young people, have become more comfortable with borrowing for consumption. However, despite the growth in borrowing for consumption, the level of consumer debt in India is still low.
3. RBI has cautioned banks against near-term market risks arising from a possible abrupt asset portfolio reallocation globally. The source of such risk is the continuing large global financial imbalances.
4. Bank credit to the priority sector increased by 33.7% to touch Rs 5,09,910 crs as on March 31, 2006. In the previous year, such credits increased 40.3% to Rs 3,81,476 crs as on Mar 18, 05. Ag. and housing were the major beneficiaries, which together accounted for more than two-third of incremental priority sector lending in 2005-06. Loans and advances grew by 31.8% during 2005-06 on top of the increase of 33.2% in the previous year. Deposit growth was 17.8% against 16.6%. While PSBs as a group achieved the priority sector target of 40% of net bank credit as on the last Friday of March 06, the sub-targets of 18% of NBC to agriculture sector and 10% of NBC to the weaker sections were not met. Total priority sector advances extended by private sector banks increased by 52.25% in 2005-06. None of the private sector banks could meet the sub-targets for agriculture and weaker sections. Off-balance sheet exposures of SCBs rose sharply by 50% in 2005-06 over and above the increase of 58% in 2004-05.
5. Now with the possibility of sitting at home and accessing the records of all registered companies in the country, as many as 90,000 company records have been viewed over the MCA portal by around 30,000 registered users. This has happened in a span of about two months, after the Ministry of Company Affairs initiated e-filing of company records. The portal now gets 5.8 mn hits per day. The project, which is in partnership with TCS, covers at present 20 Registrar of Companies (ROC), four Regional Directorates and about 53 locations across the country. With this, companies no longer have to go to the ROC office to file their statutory documents, instead they can be filed online.
6. Following a boom in the domestic real estate market, banks’ exposure to sensitive sectors increased sharply to 19% of the total loan book in 2005-06. Lending to sensitive sectors (real estate, capital markets and commodities) increased to Rs 2,86,691 crs during 2005-06, an increase of 75% over Rs 1,63,831 crs recorded last year. The huge increase in the exposure was mainly due to more loans to the real estate market, which constituted 91% of the total loans to sensitive sectors, against 88.7% of the previous year. Lending to real estate rose 82% to Rs 2,60,223 crs in financial year 2005-06.
7. Over 6,000 officers including one CGM in foreign business division have sought an early separation (retirement) from SBI.

Tides of 20.11.2006

1. UTI Bank plans to raise Rs 200 crs with an option to retain over-subscription, through upper tier II unsecured redeemable subordinated debentures. The face value and issue price of one debenture is about Rs 10 lakh. The bonds have been rated "LAA'' by ICRA and "AA (ind)'' by Fitch. The coupon rate is 9.35 % payable annually. Issue is open from Nov13-22.
2. SBI Card, a joint venture between SBI and GE Money, has crossed the three-mn cardholders mark. It has added one mn cardholders in just 10 months. SBI Card is planning to increase its sales force from 5,000 to 7,000 by December 2006 and expand in Tier II cities.
3.Canara Bank has launched a deposit scheme for children up to 12 years, called `SB Canchamp Deposit Scheme'.It allows children to start a deposit with a min amount of Rs 100. On opening the account, the depositor will get a savings box and a personal photo folder-cum-memoir. The child will also get an education loan eligibility card. Using the card, the child can avail education loan once he or she completes HSC or plus two.
4. ICICI Bank has introduced a new product `NRI SmartSave Deposits', a fixed deposit scheme for NRIs. Under this scheme, a customer who has a fixed deposit in any bank's overseas branch can get the amount transferred to ICICI Bank in India on maturity. The bank will settle all the paper work. Even after the amount is transferred to India, the deposit will continue to remain on NRE/NRO savings account, said the release. The bank is also offering free international credit card insurance and free personal accident insurance with the scheme.
5. Godrej Aadhaar, the agri services and rural retail initiative of Godrej Agrovet, has tied up with Western Union Money Transfer to provide money transfer facilities at the rural hubs.
6. Rabo India Finance Pvt Ltd, a wholly-owned subsidiary of Rabobank International, has become a public limited company. The name of Rabo India has been changed to Rabo India Finance Ltd. The conversion from private to public will enable Rabo to list its debt securities (non-convertible debentures) on the wholesale debt market segment of the NSE. It provides customised solutions in food and agri business, telecom, media and information technology, life sciences, corporate finance, renewable energy and carbon credits. It offers fund and fee-based products and services in India drawing on its local resources as well as on Rabobank's global network.
7. Tata Industries Ltd, one of the two holding companies of the Tata Group, is in informal talks with the RBI to let the group into `banking infrastructure'. The infrastructure provision the Tatas had in mind, was `money-boxes'. These boxes could be (owned by the Tatas) put up at, say, shopping malls. The shopkeepers could deposit the day's cash collection into the box. The machine would count the money, just as an ATM does, and the amount would be instantaneously credited to their accounts. Tatas were looking to collaborate with the IIT Madras, for developing low-cost ATMs and to produce the money-boxes at a price of about Rs 3 lakh a piece.
8. HDFC has announced the launch of its operations in London. The London office will provide advisory services on housing finance and property acquisition in India.
9. Retail loans have surged by 40.9% in fiscal 2005-06, which was higher than the overall credit growth of 31%, according to the RBI's report on Trend and Progress of Banking in India.
10. The off-balance sheet exposures of the banking system is concentrated in just 15 banks, most of which are foreign banks. These banks are particularly active in the derivatives segment.

Tides of 18.11.2006

1. UTI Bank plans to raise Rs 200 crs with an option to retain over-subscription, through upper tier II unsecured redeemable subordinated debentures. The face value and issue price of one debenture is about Rs 10 lakh. The bonds have been rated "LAA'' by ICRA and "AA (ind)'' by Fitch. The coupon rate is 9.35 % payable annually. Issue is open from Nov13-22.
2. SBI Card, a joint venture between SBI and GE Money, has crossed the three-mn cardholders mark. It has added one mn cardholders in just 10 months. SBI Card is planning to increase its sales force from 5,000 to 7,000 by December 2006 and expand in Tier II cities.
3.Canara Bank has launched a deposit scheme for children up to 12 years, called `SB Canchamp Deposit Scheme'.It allows children to start a deposit with a min amount of Rs 100. On opening the account, the depositor will get a savings box and a personal photo folder-cum-memoir. The child will also get an education loan eligibility card. Using the card, the child can avail education loan once he or she completes HSC or plus two.
4. ICICI Bank has introduced a new product `NRI SmartSave Deposits', a fixed deposit scheme for NRIs. Under this scheme, a customer who has a fixed deposit in any bank's overseas branch can get the amount transferred to ICICI Bank in India on maturity. The bank will settle all the paper work. Even after the amount is transferred to India, the deposit will continue to remain on NRE/NRO savings account, said the release. The bank is also offering free international credit card insurance and free personal accident insurance with the scheme.
5. Godrej Aadhaar, the agri services and rural retail initiative of Godrej Agrovet, has tied up with Western Union Money Transfer to provide money transfer facilities at the rural hubs.
6. Rabo India Finance Pvt Ltd, a wholly-owned subsidiary of Rabobank International, has become a public limited company. The name of Rabo India has been changed to Rabo India Finance Ltd. The conversion from private to public will enable Rabo to list its debt securities (non-convertible debentures) on the wholesale debt market segment of the NSE. It provides customised solutions in food and agri business, telecom, media and information technology, life sciences, corporate finance, renewable energy and carbon credits. It offers fund and fee-based products and services in India drawing on its local resources as well as on Rabobank's global network.
7. Tata Industries Ltd, one of the two holding companies of the Tata Group, is in informal talks with the RBI to let the group into `banking infrastructure'. The infrastructure provision the Tatas had in mind, was `money-boxes'. These boxes could be (owned by the Tatas) put up at, say, shopping malls. The shopkeepers could deposit the day's cash collection into the box. The machine would count the money, just as an ATM does, and the amount would be instantaneously credited to their accounts. Tatas were looking to collaborate with the IIT Madras, for developing low-cost ATMs and to produce the money-boxes at a price of about Rs 3 lakh a piece.
8. HDFC has announced the launch of its operations in London. The London office will provide advisory services on housing finance and property acquisition in India.
9. Retail loans have surged by 40.9% in fiscal 2005-06, which was higher than the overall credit growth of 31%, according to the RBI's report on Trend and Progress of Banking in India.
10. The off-balance sheet exposures of the banking system is concentrated in just 15 banks, most of which are foreign banks. These banks are particularly active in the derivatives segment.

Tides of 17.11.2006

1. Indian Bank may tap the capital market with an IPO sometime in the first quarter of 2007. It has already taken up a capital rejig to strengthen its balance sheet ahead of the planned IPO next year. 2 new products of the bank - SB Platinum and Premium Current Account, have been introduced. These two offerings, which come with auto sweep facility, transfer the funds in savings bank or current account (over a certain threshold balance) to fixed deposits that earn higher interest for the customer. SB Platinum has a host of add-ons such as life-insurance cover and personal accident insurance cover, free ATM-cum-Debit card, and at par demand drafts . Similarily, the Premium Current Account has features such as ATM-cum-Global debit card and at par demand drafts. Other services such as phone banking, mobile banking, Internet banking would also be available.
2. Chief economic advisor Ashok Lahiri has said that size, credit outreach, technology and customer service are key challenges for Indian banks.He pointed out that except for the SBI, no Indian bank features in the top 100 list of global banking biggies at the seminar titled Global Banking: Emerging Challenges and Opportunity.
3. Development Credit Bank ,which got listed last month, plans to further increase its net worth to Rs 500 crs from around Rs 350 crs through more capital issuances. The fresh floats will also help dilute the stake of Aga Khan Fund for Economic Development, the promoter, from over 31% to within the RBI permitted 10%. RBI has asked DCB to reduce AKFED’s stake to the maximum permitted, by March 31, 2007.
4. RBI would consider adopting some practices followed by the central bank of Mexico, including elimination of commission on inter-bank transactions. Elimination of commission on inter-bank transaction would lead to an end to charges levied for certain services.
5. SBI is drawing up a retail and agricultural banking strategy to reclaim lost market share. Its market share in total assets fell to nearly 17% from over 19% in 2006-07, as private and foreign banks gained on the back of a sizzling growth in retail loans. ICICI’s share in banking assets jumped to over 9% last year from over 7% a year earlier. SBI proposes to carve out retail and agricultural banking as separate strategic focus areas. Retail, for the time being will be a focus area and could be converted into a strategic business unit depending on its performance later.
6. Standard Chartered Bank has launched its NRI Swagat account, which addresses specific banking requirements of NRIs with roots in Kerala and Punjab. The account comes in two variants - one targeting NRIs/PIOs with their origins in Kerala and the other for NRIs with their roots in Punjab. This product has the regular features of a NRE savings account. Both the principal and interest can be remitted overseas without any limitations and no tax deduction at source. The NRI Swagat account also allows unlimited free cash withdrawals from the account through VISA ATMs across the globe.
7. IDFC has announced the purchase of 8.71% equity in ARCIL for a consideration of Rs 57.46 crs. Arcil, India's first asset restructuring company, is sponsored by SBI, ICICI Bank, IDBI and PNB. IDFC has subscribed to the un-subscribed portion of the rights issue offer by Arcil, which closed last month. The infrastructure finance company will be paying Rs 30 per share.

Tides of 16.11.2006

1. Syndicate Bank has launched a new product `Synd Gold Express' for giving quick service to its jewel loan customers. Special counters will be opened in select branches. The entire process will be completed within 10 minutes. The bank has designated 11 of its branches in Tamil Nadu for this scheme.
2. Banks have appealed to the RBI to relax its recent stipulation making issue of passbooks compulsory and free-of cost to savings bank account holders. Some banks, particularly large private and foreign banks, are of the view that this adds to their cost. While PSBs issue passbooks, large private and foreign banks issue only statements.
3. Bonds remained range-bound supported by the global crude oil price retreat, but high credit offtake prevented yields from softening in the current busy season. Traders, however, remained tense over repeated statements from the Finance Ministry over the proposed thrust on lending to physical infrastructure sectors and fiscal tightening. In fact, the Finance Ministry is for greater bank finance availability to the physical infrastructure sector, especially power, roads, shipping and ports. This would cause a further acceleration in the credit growth from the current 30 per cent on a year-on- year basis. The proposal when materialises is likely to choke off credit taps to housing /real estate sectors and open the same to the physical infrastructure sectors.
4. Prudential ICICI Asset Management Company, expects interest rates to increase a little further from now to February or March next year, as liquidity gets tighter.
5. Information security needs to be recognised as a separate function such as marketing, human resources or accounting, especially in banking, according to Mr Anoop Narayanan, Security Consultant, First Legion Consulting. People are the internal source of frauds and in spite of the best technologies available, the biggest threats - human frauds, incompetence and errors - make it impossible to implement these technologies.
6. Mason & Summers Leisure Pvt Ltd has entered into a strategic partnership with ICICI Bank, to market the Bank's Travel card for Indians traveling abroad. A virtual replacement for paper currency or traveler's cheques, the card comes with six foreign currency denominations, the US Dollar, Canadian Dollar, Great Britain Pounds, Swiss Francs, Euro and the Australian Dollar. The travel card is equipped with security features, and is the only card that offers comprehensive insurance features and international medical and travel referral service.
7. Exim Bank has entered into a loan agreement for Japanese yen equivalent to $100 mn with the Japan Bank for International Cooperation in Tokyo. The proceeds of the financing will be applied towards strengthening Indo-Japanese business relationships, Indo-Japanese joint ventures and subsidiaries both in India as well as overseas and other eligible uses.
8. Bankers expect their derivative business to grow by 20-25% in the current fiscal as more and more Indian corporates are going for this financial tool to hedge their foreign exchange and interest rate risks.

Tides of 15.11.2006

1.The credit flow to the SMEs from PSBs has recorded a significant rise as on end-September 2006. PSBs have shown a 26.44% year-on-year growth in credit to the SMEs.. This is much higher than the targeted 20%.
2. Bankers, stung by the revised draft guidelines on priority sector lending, want the RBI to change the way it sets priority sector lending targets. They feel RBI should shift to incremental disbursement targets from the current prescription of lending a certain percentage of net bank credit. It would be more practical if the RBI prescribes priority sector targets in terms of incremental disbursements, several bankers said. Foreign banks would be the worst hit if revised draft gets finalised without amendments as they would have to bear nearly half of the burden of the expected increase in flow of bank credit to priority sectors. The increase in directed lending is expected to be over Rs 50,000 crs.
3. Allahaband Bank, IOB, Karnataka Bank, Dabur Investment Corporation and Sompo Japan Insurance Inc have signed a shareholders’ agreement to form a new non-life JV insurance company to be called Universal Sompo General Insurance Company Ltd.
4. The Union Cabinet has approved the conversion of 71% of Central Bank of India’s equity capital into preference shares, a move that could hit a hurdle at RBI. Another wholly owned government bank, United Bank of India’s proposal to covert 78% of its Rs 1,532 crs equity capital has already been blocked by the RBI as the central bank is considering putting a ceiling of 40% of equity capital for issue of preference capital in its proposed guidelines. The RBI is yet to issue rules for amendments approved by Parliament to the Nationalisation Act, allowing banks to issue preference shares.
5. RBI has issued an instruction to the effect that agency banks should not make any deduction of tax at source where the depositor is filing Form 15H or Form 15G of a certificate under Sec. 197(1) of the Income Tax Act 1961.
6. The Insurance Regulatory and Development Authority has relaxed guidelines on application of KYC (know your customer) norms for purposes of the Anti-Money Laundering Guidelines in the case of general insurance companies to reduce operational difficulties in the finalisation of insurance contracts.
7. Except Federal Bank, Catholic Syrian Bank, South Indian Bank and Dhanalakshmi Bank, the private sector banks have been rather reluctant in providing education loans in Kerala in 2005-06. According to the latest report of the State Level Bankers' Committee, private sector banks altogether gave loans for Rs.61.66 crs to 3,721 students in the State in 2005-06. This comes to only around 10% of the total disbursement of Rs.617.23 crs to 33,338 students by the banks in the State that year. Federal Bank assisted 2,542 students with a sum of Rs.34.85 crs, while Catholic Syrian Bank chipped in with an aid of Rs.13.49 crs to 676 students. South Indian Bank gave loans to 235 students (Rs.6.4 crs) and Dhanalakshmi Bank 202 students (Rs.4.98 crs). New-generation banks such as CBOP, HDFC Bank, IndusInd Bank and ICICI Bank had not entertained any loan application from students.

Tides of 14.11.2006

1. The National Bank AG, Germany, will set up a `competency centre' in Germany that would facilitate the German business community to start operations in India. The competency centre would help Indian agencies in hiring labour, provide legal assistance, identify partners and bankers. The National Bank has over 100,000 SME customers and a good number of them are interested in doing business with India.
2. UTI Bank Ltd has raised $46 mn as capital through issuance of hybrid tier I bonds in the international markets as part of its medium term note programme for € 1 bn. The transaction is priced at 7.16%. It is the only bank in India to have raised capital through both hybrid tier-I and upper tier-II instruments in foreign currency. The bank had earlier raised $150 mn by issuing upper tier II bonds in August 2006.
3. Bank credit increased by Rs 11,847 crs to touch Rs 16,55,567 crs for the fortnight ended October 27, 2006. This included food credit, which increased by Rs 3,188 crs to touch Rs 36,633 crs and non-food credit, which increased by Rs 8,659 crs to Rs 16,18,934 crs. Total accommodation provided by SCBs to commercial sector in the form of bank credit and investments in shares, debentures, CP etc, was Rs 16,99,865 crs for the fortnight.
4. Indian Bank stood first in extending credit linkage to the SHGs in the State of Tamilnadu and had disbursed loans to the tune of Rs 189.12 crs to the SHGs so far during the current fiscal. Only 30% of the countrymen were having access to the banking services.
5. PSBs hoping to go public have to clean up their books and reduce their bloated equity base. The likes of Indian Bank, Central Bank of India, United Bank of India and Punjab & Sind Bank are in the process of doing just that. They do this in two stages. In the first stage, they ask the Government to write off the accumulated losses against the capital infused by the Government. In the second stage, a portion of the remaining equity (after the write-off) is converted into preference capital that will carry an interest rate of about 8%, subject to government approval. By doing this, banks hope to make themselves more palatable to potential investors.
6. United Bank of India has signed an MoU with the West Bengal Govt. for extending home loans to government employees. Housing loans will be available to those who have completed at least one year's continuous service in a regular post. The quantum of loan will vary depending on the purpose. For purchase of a house, for instance, a loan up to 75 times of an employee's basic pay will be provided. Initially, loans will be sanctioned from 15 link branches in Kolkata and 56 link branches in districts. The bank has introduced `United Griha Suraksha Scheme', through which insurance coverage is provided. The agreement, will help strengthen its retail loan portfolio.
7. Canara Bank is expected to secure rating of "Baa2" by international rating agency Moody's that is currently one notch above India's sovereign rating. It has informed the domestic stock exchanges that it is also expected to secure a "BBB" rating from Fitch another international rating agency. Both these ratings put the bank in the investment grade slot. Investment grade is also the rating for Tata Steel.
8. OBC will take a decision on raising interest rates by the end of the month, even as it considers reducing exposure to some sectors of the economy.

Tides of 13.11.2006

1. Micro-credit of up to Rs 50,000 has been included in the priority sector for the first time. It is provision of credit and other financial services to the poor in rural, semi-urban and urban areas. RBI has also proposed redefinition of exposure to small scale industries, which will qualify for priority sector lending.
2. Catholic Syrian Bank is in talks with Mauritius-based investors for privately placing a 15% stake in the bank to raise about Rs 35 crs.
3. ICICI Bank MD & CEO K V Kamath has said that there is need for level playing field for banks to compete with other institutions, such as mutual funds and insurance companies, for mobilising more deposits. A level playing field will enable banks to have their rightful share of deposits. And for this, a facilitating environment is needed.
4. Postmen will now also sell bank loans. This will soon begin on a pilot basis through post offices in Maharastra and Goa, amid concerns of RBI that the use of intermediaries, such as post offices and others, raises the issue of agent-related risks. The post offices in the two states will provide banks intermediary services, such as preliminary processing of loan application by way of identification of customer, verification of address, assessing creditworthiness and credit-recovery mechanism. The proposal to launch a pilot scheme for the general purpose consumption credit to the farming community utilising network of post offices in the Maharashtra Circle has been cleared under the aegis of the the IBA.
5. Commercial banks, co-operatives and RRBs have up to October 31 this year claimed Rs 874 crs from the RBI and Nabard for providing 2% interest relief to farmers for Kharif and Rabi 2005-06. About Rs 1,700 crs had been placed at the disposal of RBI and Nabard for the 2% interest subvention announced by the Government. The commercial banks have so far claimed Rs 375 crs, co-operatives Rs 365 crs and RRBs Rs 134 crs.
6. Forex reserves increased by $24 mn to touch $167.116 bn for the week ended November 3. This is the third week in a row that the country's forex reserves saw accretions. In the earlier week, forex reserves were at $ 166.482 bn. According to figures from the SEBI, the week under review also saw good FII inflows into the domestic equity market at $450.2 mn. Foreign currency assets increased by $155 mn to touch $160.391 bn.
7. Detariffication in the insurance industry would expand the scope of distribution as pressures on margins demand cost-effective and innovative methods to sell the products to supplement the traditional modes of distribution. Not just telemarketing other but other modes of distribution as well, channels such as bancassurance, SMS, telephones, Internet and worksite marketing would emerge.
8. HDFC Ltd is organising a four-day property show beginning Nov. 11 at Swabhumi, Kolkota, which will showcase "dream homes" by prominent property developers such as Shapoorji Pallonji and Unitech. The event is being organised to "provide a platform where customers can meet about 25 developers showcasing more than 37 projects and choose a home for themselves". More than 8,000 apartments with one-to-three bedrooms, "mass housing" and villas will be on display.

Tides of 11.11.2006

1. The Aditya Birla group has readied a blueprint for India’s second-largest retail rollout with Rs 15,000 crs investment in over 6,000 stores in three years, a plan that is much larger than what was anticipated by industry analysts and peers. Among new groups entering retail, the Birla plan is next only to Reliance Industries’ Rs 25,000 crs corpus for 10,000 stores by 2011. Even as the Birlas are finalising their roadmap, the first 11 Reliance outlets opened to the public in Hyderabad.
2. The finance ministry is working out the modalities for sale of RBI ’s stake in SBI to the government. Based on SBI’s current market price, the government will have to fork out nearly Rs 350 bn to buy RBI’s stake in India’s largest commercial bank.
3. The average net NPA of listed PSBs has fallen to 1.11% at the end of September 2006 from 1.19% a quarter earlier and 1.33% at the end of 2005-06. Eleven PSBs now have less than 1% net NPAs compared with 10 on March 31, 2006. Of the 11 banks, Andhra Bank has lowest NPA of 0.10 % followed by PNB (0.18%), SBM (0.38%), Corporation Bank (0.48%) and OBC (0.50%).
4. About 150 employees of the erstwhile United Western Bank, which merged with IDBI Bank, have sought an early retirement under the one-month window available .
5. RBI deputy governor, Rakesh Mohan, has said corporates in the coming years would face greater competition for bank credit as banks explore emerging avenues such as retail, SMEs etc.
6. Allahabad Bank, IOB, Karnataka Bank, Dabur and Sompo Japan Insurance have executed a shareholders' agreement for the formation of a non-life joint venture insurance company. The company will be called Universal Sompo General Insurance Co. Allahabad Bank will hold 30, while IOB and Karnataka Bank will own 19% and 15%, respectively. Dabur Investment Corporation will hold 10 %, while the Japanese partner will hold 26%.
7.South Indian Bank is all set to announce its tie-up with UTI MF for selling the latter's mutual fund products. It has already tied up with other mutual fund companies such as Franklin Templeton, Tata, Sundaram and Reliance over the last one month. To cross sell such products, the bank has roped in 50 marketing staff (on contract).
8. Priority sector advances by commercial banks are set to rise with the RBI shifting the base for arriving at the quantum of loan funds. The targets and sub-targets under priority sector lending would be linked to adjusted net bank credit (net bank credit plus investments made by banks in non-SLR bonds held in Held to Maturity category) or credit equivalent of off-balance sheet exposures, whichever is higher, as on March 31 of the previous year. Earlier, the 40% norm was linked to net bank credit only. By tagging non-SLR bonds and off-balance sheet exposures, banks may have to lend more to agriculture, micro credit, small scale and micro enterprises.
9. BOI and UBI have tied up with infrastructure financial services provider Infrastructure Development Finance Company Ltd (IDFC) for loan syndication. The two banks will also work together in international operations, to offer cash management services and in training. Under the arrangement with IDFC, both banks will facilitate joint identification, marketing, appraisal and underwriting of project finance. This will provide a single point contact for the borrowers. The two banks have set a target of Rs 11,500 crs for projects in the next 4-5 months and hope to handle 60 projects worth Rs 45,000 crs in the next one year.

Tides of 10.11.2006

1.SBT has raised Rs 200 crs through issue of unsecured non-convertible subordinated perpetual bonds by private placement. The bonds, rated `AAA' by Crisil and CARE, carry a coupon rate of 9.34% payable annually for the first 10 years. This would be stepped up to 9.84% for all subsequent years, if the call option is not exercised by the bank at the end of the tenth year.
2. Worried over paucity of credit availability to the physical infrastructure sector, the Union Ministry of Finance has begun persuading banks to rebalance their lending portfolios. Rebalancing of credit portfolios entails shifting from some sectors to infrastructure lending, where term credit was most required. In fact, the Finance Ministry is extremely unhappy with the current phase of high non-food credit, which was largely fuelled by retail credit, including housing and real estate.
3. The Finance Minister, Mr P. Chidambaram, has urged PSBs to take a "good hard look" at how to grow their deposits to match the growing credit needs of the productive sectors of the economy. He also advised the PSBs to re-balance their loan portfolios as a "pre-emptive" measure to head-off a possible concern on liquidity.
4. The RBI is likely to restrain banks from converting more than 40% of their equity into preference shares. At present, there is no such restriction. The move comes in the backdrop of several state-owned banks seeking government approval to convert a significant chunk of their equity into preference capital to boost their EPS ahead IPOs. A recent proposal by United Bank of India to convert Rs 1,200 crs of its equity ,over 78% of the total paid-up capital of Rs 1,532 crs, into preference shares, was shot down by the apex bank. The move would have helped United Bank reduce its capital to Rs 332 crs and shore up its EPS substantially.
5. India may be `the world's second-fastest growing economy'. But that may mean nothing to nearly half of India's 1.1 billion, because they `have no access to loans and insurance,' notes www.chinapost.com.tw in a report dated November 6.
6. RBI has effected a change in the cheque clearing system in Kolkata. The revised procedure has been in place since mid-October. The introduction of the new mechanism has not effected overall clearing operations.
7. PNB has initiated various steps to widen its presence in Kerala, which inter alia includes opening of new branches and increasing the number of core banking solutions branches.
8. Lakshmi Vilas Bank has effected an upward revision in its FCNR (B), NRE and RFC deposit scheme with effect from November 1. South Indian Bank and central bank of India have also hiked their rates.
9. American Express has announced the launch of `The Platinum Club', a premium service aimed at the rapidly-growing affluent consumer segment in India. Members of the club would automatically receive the new American Express Platinum Card, their key to the host of membership benefits. Membership to the club would be available for a lifetime foundation fee of Rs 50,000.
10.ATMs will be installed at the Tiruchirapalli, Thanjavur, Chidambaram, Villupuram, Myladuthurai and Pondicherry (Puducherry) railway stations as per a MoU signed with SBI.

Tides of 9.11.2006

1. In a move that may impact foreign banks that have significant retail exposure in the country through the NBFC route, the RBI, in a draft circular, said banks must not hold more than 10% stake in a deposit-taking, NBFC. Housing finance companies have, however, been exempted.
2. Since the last mid-term review of the annual monetary policy, the Indian economy has continued to expand with the capital market having re-ignited its excitement. Business investment has grown at a solid pace, supported by growth in turnover, rising backlogs of orders for capital goods and higher rates of profitability. As the second quarter results have indicated, India Inc remains in good financial health with favourable credit conditions. This continual growth expectation has underlined the confidence evidenced in the current mid-term review.
3. Reliance Retail, the 100% subsidiary of Reliance Industries, on October 28 unveiled Reliance Fresh, the first of its multi-format retail foray involving an investment of Rs 25,000 crs.
4. India Inc continues to be in robust health. A study of 762 major companies, which have declared their first-half results, shows their aggregate net profit increased by 31.2% in April-September 2006.
5. Deutsche Bank, Germany's biggest bank, plans to move thousands of jobs to India.
6. With the apex bank putting across draft guidelines to curtail the regulatory arbitrage enjoyed by bank-sponsored non-banking finance companies, banks are going back to their drawing boards and revisiting plans for setting up NBFCs.
7. Microcredit, an important initiative aimed at financial inclusion, has proved to be a profitable business proposition both in short and long terms for commercial banks globally with micro-entrepreneurs gradually becoming part of their active clientele. Delivering a special lecture on global experiences of inclusive growth initiatives at the Bancon-2006, Mercedes Benavides, manager, Global Network for Banking Innovation in Microfinance, Women’s World Banking, while citing the experiences in Latin America, said more and more commercial banks are now entering the microfinance sector with the benefit of access to lessons learned by microfinance institutions in this area. She also said the top performing MFIs the world over are achieving high growth and profitability.
8. MetLife India Insurance Co Pvt Ltd has entered into a bancassurance tie-up with UTI Bank. This is MetLife's fourth bancassurance tie-up after J&K Bank, Karnataka Bank and Dhanalaxmi Bank. The bancassurance tie-up with UTI Bank will complement MetLife's 10,000 strong agency force. While agents form one half of our sales push, bancassurance forms the second half.
9. Kotak Mahindra Bank has opened its retail banking branch in Kottayam. The bank has 82 branches in 57 locations in the country.
10. State Bank of Bikaner and Jaipur is planning to add one more branch each at Tirupur and Coimbatore. It is also contemplating to open a regional office at Chennai to monitor its branches in the South.
11.SBI may raise another Rs 1,000 crs to Rs 2,000 crs as tier-II capital during the current fiscal to fund business growth.

Tides of 8.11.2006

1.SBT has announced a sharp increase in the interest rates for FCNR and NRE term deposits.
2.IOB has increased its interest rates on FCNR deposits with effect from November 1, 2006. CUB and KVB too have hiked these rates.
3.HDFC Bank has won the Nasscom best user award for IT.
4.Banks need to be responsive to the changing environment and the needs of their customers to be in the race, according to the Karnataka Bank Chairman, Mr Ananthakrishna. Karnataka Bank is talking to a group of financial institutions in India and Japan to form a joint venture for promoting non-life insurance products. The talks are at an advanced level and the joint venture might become a reality in a couple of months.
5.BOI, Visakhapatnam zone, is planning to open 3/4 more branches in Visakhapatnam and the two Godavari dts. The zone, comprising seven coastal districts from Srikakulam to Guntur, has 47 branches, has a business of Rs 1,567 crs and earned an operating profit of Rs 32 crs.
6.BOB has plans for major overseas expansion and is set to commission its ninth overseas branch in London in 2007. It is looking at setting up branches in Canada, West Indies, New Zealand, Bahrain, Qatar, China and South Africa. It is now scouting for joint venture partners for life insurance foray, and foreign partners for bank's asset management, credit card businesses, and share broking and online trading business arms. It launched its 11th retail loan factory at Hyderabad. The loan factory is an innovative retail delivery model designed to provide a unique experience to the bank's customers, adding to their convenience.
7.`Financial inclusion' is an issue laden with a legacy baggage dating back to 5,000 years and presents us with complexities that calls for a Herculean effort to get sorted out, said Dr K. C. Chakrabarty, CMD, Indian Bank.
8.While banks have been talking extensively about technology-based approach towards financial inclusion, they are yet to build a suitable technology infrastructure. This seemed to be the observation of the panelists during a session on `Technology solutions and process management' at Bancon 2006. While bankers conceded that technology was only an enabler and not a plug-and-play solution in banking, they appeared to concur with the view that there was a need to map business architecture to technology.
9.Delivering the valedictory address at BanCon 2006, Dr Y. V. Reddy, said: "Banks should move to the masses as a natural process of financial inclusion". This included taking deposits from rural and semi urban regions in the country. He said: "Financial inclusion should be treated as a business investment." Bankers should focus on small loans to the farm sector and small and medium enterprises and smaller liabilities. This was because most of the large corporates have "disintermediated" and have begun to directly access the financial markets.
10. The Chairman of the Economic Advisory council to the PM, Dr C. Rangarajan, has opposed reduction of interest rates to self help groups in the country. Delivering the special address at Bancon 2006, he said: "They (SHGs) should be provided credit at moderate rates of interest. But lowering the rate of interest defeats the very nature of these groups."The SHG concept has worked well so far. However, he said that they needed to move forward. SHGs currently cover about 32.96 mn households.

Tides of 7.11.2006

1. The issues of slipping marketshare and not-so-satisfactory record with regard to customer service dominated the discussion the SBI Chairman, Mr O.P. Bhatt, recently had with 14 Chief General Managers, each heading a circle. The meeting was held in Kolkata for the first time. The two MDs and all the DMDs, among other senior officials, were also present. The meeting noted with concern that the SBI, both as an entity and as a group, was fast losing market share. The group's market share declined from more than 30% to around 25% in the past few years, while SBI's own market share dropped from around 25 % to 21%.
2. Swiss banking major Credit Suisse today announced plans for India, which include re-activating its brokerage in the country as it proposes to build an 80-member strong team for its various business activities.
3. SBI has adopted a strategy of reducing the portfolio of large corporate loans, which are lent at rates much below the bank’s prime lending rate (PLR).
4. BoI is planning a big push in funding contract farming initiatives. The bank’s agri technical team is assessing the contract farming funding proposals. It is targeting agricultural areas of south Gujarat and Mehsana in north Gujarat. The companies concerned are also directly involved in the export of agricultural products. The bank the sixth-largest in terms of assets in the country is in talks with four major corporates to lend Rs 400 crs for their proposed contract farming activities in Gujarat.
5. Foreign and private banks showed signs of panic today by rushing in the market to swap dollar funds to create rupee funds. There is a scramble among banks to raise short-term deposits as they expect liquidity to go down substantially in the coming weeks, said a treasury head of a nationalised bank. Bankers also added that bulk deposit rates for one-year deposits have also shot up to 8.50-8.75% against the average industry rate of 8-8.50%. The rate on bulk deposits changes daily unlike the retail rates.
6. Central Bank of India is awaiting the central government’s go-ahead to convert part of Rs 1,124 crs bloated equity base into preference shares. This conversion will help the bank improve its earnings per share and command good premium while floating the public issue. The bank expects to reduce its capital base up to 60 % in order to have equity base of below Rs 500 crs.
7. The SBI and ICICI Bank, at the 61st and 66th positions, respectively, are the only Indian banks that figure in the global 100 most valuable banking brands list for 2006 published by the UK-based brand valuation agency Brand Finance and The Banker magazine.
8. Both Yes Bank and Exim Bank today signed an MoU with CII - Godrej Green Business Centre (GBC) to promote small and medium enterprises in auto ancillary, textiles, gems and jewellry, media and entertainment and life sciences and biotech sectors. The objective of the MoUs is to promote green enterprises among the SMEs to make their products export-worthy. The green enterprises are typically energy efficient and help in sustaining the natural resources. The tie ups with the banks will essentially focus on the facilitation of such small and medium units. The financial institutions will focus on developing renewable energy and sustainable infrastructure among SMEs.
9. Dhanalakshmi Bank nearly tripled its net profit to Rs.7.02 crs for the half-year that ended September 30, 2006 as compared to Rs. 2.38 crs in the year-ago period, registering a growth of 195%. The total income of the bank rose by 12.3% to Rs. 129.44 crs as on September 30, 2006.

Tides of 6.11.2006

1. OBC inaugurated its new centralised credit-processing cell at Hyderabad. The bank has similar cells in Ghaziabad, Mumbai-North and New Delhi regions. These cells are meant to cater to the requirements of borrowers with credit limits of Rs 50 lakh and above. The cells are expected to ensure speedy disposal of credit proposals, simplify administrative processes, expedite credit decisions and enable direct interaction with prospective borrowers. The cell at Hyderabad processed 30 cases for an aggregate amount of Rs 719.55 crs. On the inaugural day, the bank made sanctions to 11 borrowers amounting to Rs 83.55 crs. These credit proposals cover SSI, SME, export, highway projects, housing, power, spinning mills and other industries.
2. The Finance Minister, Mr P. Chidambaram, is to meet Chairmen of Public Sector Banks on November 6. He will use the meeting to review the financial performance of the banks in the first six months of the current fiscal and also the flow of credit to various sectors of the economy. This meeting comes close on the heels of the RBI 's move of October 31 to hike repo rates by 25 bps.
3. Standard Chartered Bank has launched SCB Gold Debit Card, with an annual fee of Rs 799. The card has an enhanced spending limit of Rs 95,000 for each purchase and ATM cash withdrawal.
4. Andhra Bank is hosting the Bankers' Conference this year in Hyderabad from November 3-4, with organisational support from the Indian Banks' Association (IBA). The Union Finance Minister, Mr P. Chidambaram, will inaugurate the conclave of the chiefs of Indian public, private and foreign banks, with the RBI Governor, Dr Y.V. Reddy, participating in the key deliberations. The conclave, with the theme `Inclusive Growth — A New Challenge', is aimed at meaningful discussions and deliberations on various aspects of the Indian banking industry with key focus on inclusive growth. The conclave is expected to provide a major direction to Indian banking, to support the pursuit of balanced and widely dispersed economic growth and development.
5.Highlighting the role of microfinance sector in expanding the reach of banking facilities, Prof. Thingalaya has said the services of the regional rural banks could be utilised better for this purpose.
6.IBA finds a major business opportunity in inclusive growth, the latest priority on the economic development agenda, and does not consider it a mere social responsibility. According to Mr K. Ramakrishnan, CMD of Andhra Bank the host of Bancon-2006, almost 52% of the rural population still has no access to formal banking. Stating that inclusive growth as a development strategy was quite successful in East Asia, he said a similar strategy was being contemplated in India to ensure that economic development benefits the poor.

Tides of 4.11.2006

1. The stringent KYC norms had forced banks to put off many small customers or those aspiring to be part of the banking system. RBI has now done away with the requirement to follow the KYC norms for customers in cases where the outstanding balance is not more than Rs 50,000 and the maximum transaction is not more than Rs 2 lakh. In such cases, customers will need to provide just a photograph and self certification of address. However, as and when the transaction size and the balance increase beyond the limit, banks would be required to follow the normal KYC norms.
2. Indian banks have got a badly needed breather. They now have more time to gear up to meet more stringent norms on capital standards set out by the BIS. RBI seems to have taken a cue from some of its peers in the Asian region and some emerging market countries by pushing back the deadline for implementing the new capital standards called, Basel-II norms. The RBI has decided to postpone the deadline for implementing these norms by a maximum of two years until ’09. The regulator has said that foreign banks and those banks which have an overseas presence will be required to adopt the new capital accord by ’08, while others will be required to conform to the norms by ’09.
3. RBI has partially relaxed the branch licensing policy for UCBs after a three-year ban. Strong UCBs may also be able to bolster their capital funds by issuing perpetual debt instruments, special category shares and preference shares. All the 35 multi-state co-operative banks and financially sound co-operative banks in eight states that have signed an MoU with the RBI will be allowed to convert their extension counters into full-fledged branches. The move is expected to trigger the Maharashtra government to expedite signing of the MoU with RBI to end dual regulation of these banks.
4.IndusInd Bank Ltd has got approvals from the RBI to open 10 more branches, mainly in su and rural areas, and start 100 new offsite ATMs. The bank plans to open these branches by end 2007. At present, it has a network of 147 branches and 84 offsite ATMs.
5. Aided by a robust credit growth, BOM expects to post higher profits in the second half of the current financial year than the levels recorded in the first six months. The bank had registered a net profit of about Rs 121 crs in April-Sept, 2006. The bank expects to grow its advances to Rs 22,000 crs as on March 31, 2007, from a level of about Rs 17,000 crs as on March 31, 2006. Total advances as on September 30 this year stood at Rs 19,200 crs, which represents a 36.82% year-on-year growth. The bank has set for itself a business turnover target of Rs 1 lakh crs by 2009. The bank also plans to spend Rs 77 crs for bringing 600 branches under the core banking solutions (CBS) over the next two years.
6. Syndicate Bank has entered into a MOU with the Tirumala Tirupati Devasthanam for accepting devotees' offerings at any of its branches across the country, apart from its branches at Tirupati, Tirumala, Tiruchanoor and its overseas unit in London. Under the MoU signed with TTD, Syndicate Bank will issue pre-denominated receipts of Rs 101, Rs 501, Rs 1,001 and Rs 5,001 free-of-cost to any devotee.

Tides of 3.11.2006

1. The merger of Bharat Overseas Bank with IOB is likely to be complete by the end of this fiscal. The first stage of acquiring shares from other stakeholders is complete and the merger will form the second stage. It has applied to the regulatory authority of Bangkok for transferring the licence of Bangkok branch of BhOB in favour of IOB.
2. RBI lifted its short-term repurchase rate by a quarter of a percentage point to 7.25%, but left its other policy rates unchanged as it stepped up its fight against inflation pressures. It raised the repurchase rate, at which it adds overnight funds to the banking system, but left the reverse repo rate, at which it drains funds, unchanged at a 4-½ year high of 6 %. It also kept its bank rate, unchanged at 6.0% and its CRR steady at 5.0%.
3. Ever wondered why the average rate of interest on credit cards is around 34% per year, when the average rate on a home loan and personal loan is around 10% and 18% per annum, respectively? One reason is the higher risk of default that banks carry due to the completely unsecured nature of the credit card product. For example, in the US, the average interest rate for a 30-year fixed rate home loan is around 6% whereas the average credit card interest rate is around 14%. This means that, in the US, a credit card is about 2.3 times more expensive than a home loan on an average.
4. State-owned banks are losing out on what was at one time a captive and profitable avenue for lending/financing procurement of foodgrains. With food procurement and offtake being low so far this fiscal, the demand for credit to fund these operations has been tepid. A lower procurement and lower stocks would signal an easing of the food subsidy bill for the government, considering that costs on account of transportation and storage would be pruned.
5. How much can you get out of a rupee a year from now? Most consumers may not spare a thought speculating on where the wholesale price index (WPI) would go a year from now, but their perception of the future value of the rupee determines almost every economic decision. For the first time, RBI has started a regular survey for measuring inflationary expectations. From a regulator’s point of view inflationary expectation in the minds of the consumer is a crucial input for policy making.
6. Banks may not hike interest rates immediately either on deposits or on the lending side, following the hike in repo rate by RBI on Tuesday. But the signal they have received is look at better ways to manage the available resources.
7. Banks may now sport a more friendly face to customers and improve their transparency. The malpractices in the home loan market appear to have prompted the banking sector regulator to make it clear to banks that they need to be more fair and transparent in their dealings with customers. The rap on the knuckles for banks may have come after recent reports about the kind of practices adopted by banks in the booming home loan market. While some banks resorted to a hike in their PLR only once, when it came to home loans, they were quite agile.

Tides of 2.11.2006

1. OBC has announced a profit after tax (PAT) of Rs 310.75 crs for the quarter ended September 30, up 37.2% over the corresponding figure of Rs 226.51 crs for the previous fiscal. After writing-off Rs 61.24 crs against liabilities on account of the amalgamation with GTB, OBC's net profit for July-September 2006 stood at Rs 249.51 crs, 51% more than the Rs 165.27 crs for July-September 2005.
2. Strong growth in interest income has lifted the net profit of IOB by 25% for the second quarter ended September 30 to Rs 249.85 crs (Rs 198.49 crs). The net interest income was Rs 611.91 crs (Rs 517.3 crs) while the net interest margin stood at 4.01% (4.1%). Total deposits increased by 20.31% to Rs 57,018 crs while gross credit grew by 40.28% to Rs 41,141 crs.
3. Indian Bank has posted a 60% rise in net profit at Rs 169.19 crs (Rs 105.57 crs) for the quarter ended September 30. Total income increased to Rs 1,198.45 crs (Rs 941.47 crs). Net interest income was up by around 26% to Rs 453.72 crs (Rs 359.81 crs). Overall, the business of the bank grew 21.06%. Total deposits rose 16.4 % to Rs 44,124 crs (Rs 37,907 crs) and advances grew by 29.81% to Rs 26,193 crs (Rs 20,177 crs). The bank has shown consistent performance in priority sector lending. Total priority sector advances have grown by 30.87% during the half year.
4. YES Bank has reported a 50.8 % growth in net profit for the second quarter ending September at Rs 21.49 crs (Rs 14.25 crs). Total income increased by 182% to Rs 166.01 crs (Rs 58.82 crs) while total expenditure went up 261% to Rs 131.08 crs (Rs 36.34 crs). Other income increased to Rs 38.13 crs (Rs 21.88 crs). In terms of revenue, treasury brought in Rs 92.57 crs (Rs 20.50 crs). The NP was mainly due to the rise in net interest income and NII, which constitutes treasury, financial advisory, fee-income, among others.
5. PNB's profit after tax has risen 19.7% to Rs 505 crs for the three months ended September 30, as against Rs 422 crs for the corresponding quarter of 2005-06. Operating profit has also shot up by 30%, from Rs 684 crs to Rs 889 crs. For the half year ended September 30, 2006, the bank's PAT went up by only 11.8 % (from Rs 780 crs to Rs 873 crs), with operating profit, too, going up moderately by 3.9% ( 1,328 crs to Rs 1,379 crs).
6. Ahead of the credit policy tomorrow, the RBI has warned of inflationary pressures while demand for bank credit continued to hold strong in the second quarter of 2006-07. In its Macroeconomic and Monetary Developments Review released today, non-food credit grew 30.5% as on October 13 against 31.8% last year. Food credit declined Rs 7,246 crs reflecting, "lower order of procurement of foodgrains (less than around 15 %)." Funds to the industrial sector grew 27 %, while that to the agricultural sector went up by 37% as of end-June 2006. Retail lending rose by 47% with growth in housing loans placed at 54%. Loans to commercial real estate rose by 102%, said the RBI report.

Tides of 1.11.2006

1. India saw the number of ATMs grow to over 17,000 machines in ’05 from 1,500 ATMs in just five years. In the last one year, however, ATM sales in the country were down to about 2,000 pieces. Not because ATM market has saturated in the country, but because of regulations. In September last year, RBI stipulated that banks would have to take prior permission to set up offsite ATMs. ATM sellers thought booming economy, increasing card usage, rising customer expectations and cost savings for banks would keep the ATM growth going. For example, Venture Infotek in a survey on payment card industry said in ’05, “Five years from now bankers reckon that there will be roughly three ATMs for every one branch, which may result into around 70,000 bank branches and over 2,00,000 ATMs by ’10.” Today, China has 1,20,000 machines, and India just a sixth of that. You would expect India to have at least half the number of China’s ATMs. But ATM sales have actually slowed down now. At last count, 3,94,500 ATMs were currently deployed within the United States, of which approximately 1,94,000 or 49% are operated by independent sales organisations.
2. Indian banks can now look forward to an easy entry into the US financial market. The government has decided to move amendments to the Prevention of Money Laundering Act that will bring it more in sync with the demands of the US and EU about taking tougher action to block terrorist financing through banking channels. The demands had been affecting the global expansion plans of banks including the SBI and others, which are planning to set up more branches in these markets.
3. Total employment in 27 public sector banks (excluding IDBI, whose data are available for the last two years only) has declined by 1.4% in 2005-06, from 7.44 lakh in 2004-05 to 7.33 lakh. In fact, employment has declined in each of the last three years. In four years, between 2001-02 and 2005-06, employment in public sector banks has shrunk by 3%. Three big private sector banks, ICICI Bank, HDFC Bank and UTI Bank, together have increased their manpower by more than three and a half times from 13,189 in 2001-02 to 46,910 last year. In 2005-06 alone, employment in these banks have increased by 47.4%. Interestingly, although the employee strength of the PSBs have declined, their business have grown rapidly, indicating a rise in labour productivity. All 28 public sector banks have witnessed an increase in per employee business in 2005-06.
4. BoB is contemplating entering the stock-broking space and would prefer to acquire an existing firm with a wide network to foray into the business. It is already talking to broking firms which have a strong network. It is looking at an acquisition to have a 100 % management control. However, it is flexible on the structure.
5. UCO Bank has mooted a proposal to the Union Finance Ministry for the restructuring of its capital. Its present equity size is Rs 800 crs.
6. A book on 50 years of banking development in Karnataka, authored by Dr N.K. Thingalaya, economist, will be released on November 2. (Corp.Bank)