Tides of 1.02.2007

1. The operating profit of City Union Bank was Rs. 27 crs (Rs. 26.10 crs) and the net profit Rs. 13.86 crs (Rs. 12.43 crs) during the third quarter ended Dec 31, 2006. Total income rose by 20 % to Rs. 111.69 crs from Rs. 92.93 crs. Interest income improved to Rs. 99.40 crs from Rs. 81.92 crs, a rise of 22%.

2. ING Vysya Bank has been pursuing a strategy of increasing its share of low-cost deposits and emphasising "CASA'' (current accounts and savings accounts). Its share of CASA in its total deposit mix improved from Rs. 3,281 crs (26%) in Dec 2005 to Rs. 4,340 crs in Dec 31, 2006. It has raised the interest on 365-day deposits to 8.5% and 91-120 day deposits to 7.5%.

3. Allahabad Bank will operationalise by February its first overseas branch being set up in Hong Kong.

4. PNB has reported a 16.04% increase in net profit for the quarter ended Dec 31, 2006 to Rs 429.87 crs as compared to net profit of Rs 370.44 crs in the same quarter the previous year. Total income for the period under review increased to Rs 3,271 crs, which is a 21.24% increase over the total income of Rs 2,698 crs in the previous quarter last year. The board of directors declared an interim dividend of 40%.

5. Lakshmi Vilas Bank has clocked a 61% increase in its net profit for the quarter ended Dec 2006. While the net profit has increased to Rs 3.09 crs (Rs 1.92 crs), its operating profit went up by 137% to Rs 19.03 crs (Rs 8.54 crs). Its total income grew by 37% to Rs 125.25 crs (Rs 91.66 crs). The interest on advances grew to Rs 78.86 crs (Rs 53.11 crs), up 49%. It has registered a 30.13% y-on-y growth in deposits to reach Rs 4,687.27 crs and its credit portfolio expanded 44% to Rs 3,411.20 crs.

6. PNB plans to make an equity offering next fiscal that could lead to offloading of 6.8% of the Government's stake, which currently stands at 57.8%. The bank had last tapped the capital market through a follow-on public offering in 2005. PNB also plans to mop up additional tier-II capital of at least Rs 500 crs by March this year to fund its overseas expansion as well as business growth in the country. It has already raised Rs 2,000 crs in the form of tier-II capital during the current fiscal.

7. In a stylised mock charge on "inflationary expectations", the RBI has marked up the cost of money it lends to banks against securities under repo by 25 bps to 7.50%. At the same time, it lifted growth projections for the current fiscal to 8.5-9% over its last estimate of 8%. All other key markers were left unchanged by the RBI as a springtime offer to the economy.

8.The Cabinet Committee on Economic Affairs (CCEA) will take up the proposal for transferring of the RBI's share in SBI, Nabard and NHB from RBI to the Central Government. The RBI holds 59.73% stake in SBI, 72.50% stake in Nabard and 100% stake in NHB.

9. The net profit of Dhanalakshmi Bank has grown by close to 200% to Rs 3.11 crs (Rs 1.04 crs) for the third quarter of the current fiscal. The bank would be entering the capital market shortly to shore up its capital base. The bank has been in talks with six merchant bankers, exploring various avenues for raising its capital.

10. Standard & Poor's Ratings Services has upgraded the ratings of six Indian banks and three corporates. S&P has raised the ratings of SBI, ICICI Bank Ltd, IDBI Ltd, BOI, IOB and UTI Bank Ltd to "BBB-/Stable/A-3" from "BB+/Positive/B". It has also upgraded the corporate credit ratings of Indian Oil Corporation Ltd, NTPC Ltd and National Hydroelectric Power Corporation Ltd to `BBB-' from `BB+'.

11. RBI has increased the provisioning requirement to 2% from 1% for the banks' exposures in the standard assets in the real estate sector, outstanding credit card receivables, loans and advances qualifying as capital market exposure and personal loans, excluding residential housing loans. The continued high credit growth in the real estate sector, outstanding credit card receivables, loans and advances qualifying as capital market exposure and personal loans is a matter of concern, The provisional requirement in respect of residential housing loans will remain unchanged at 0.4% to loans upto Rs. 20 lakh and at 1%for loans in excess of Rs. 20 lakh. It has also been decided to increase the provisioning requirement for banks' exposure in the standard assets category to the non-deposit taking systemically important NBFCs to 2% from the existing level of 0.4%and to increase the risk weight for banks' exposure to such NBFCs to 125%from the existing level of 100%.

12. Andhra Bank has reported a net profit of Rs. 399.12 crs for the nine months ended Dec 31, 2006, against Rs. 346.91 crs in the corresponding period of the previous year, a growth of 15%. The operating profit was up 22.5% at Rs. 690.32 crs (Rs. 563.59 crs). The bank reported a net profit of Rs. 136.28 crs for the quarter ended Dec 2006, against Rs. 128.86 crs in the same period in the previous year.

13. A new wave of e-trading in partnerships with private broking houses is getting popular with banks in recent times. Not to be left behind in the race with their private sector peers, PSBs including SBI, BOB, PNB and OBC are changing with times by tying up with private brokerage houses to provide online trading for their clients cashing in on the booming stock markets.

14. The competition among banks to raise resources is turning fierce. Bank of India is doling out an additional 25 bps for floating rate deposit scheme above the applicable rate of maturities of three years and above, on the day the deposit is made. The rate will be reset every quarter.

Tides of 29.01.2007

1. PNB expects its latest move to offer real-time gross settlement (RTGS) facility online to its customers to boost turnover. The additional turnover would help make up for the loss in "float" that is expected on account of the new IT initiative.

2. Speculation is rife about whether the RBI will further tighten credit and increase rates in its forthcoming policy review. The political apparatus, on the contrary, would not like to risk a slowdown in credit disbursement or its cost. Hopefully, Dr Reddy and Mr Chidambaram will resolve this conundrum without treading on each other's toes.

3. State Bank of Bikaner & Jaipur (SBBJ) hopes to touch a business volume target of Rs 50,000 crore before March. It has added nearly Rs 18,000crs business (deposits and advances) in the past 2years.

4. PNB held a customer meet and customers from all sectors of society from Ernakulam city branches and places like Aluva, Tripunithura and Angamaly attended the meeting. The total business of the bank as on Dec 31, 2006 crossed Rs 2,20,000 crs. It has also taken lot of IT initiatives for providing best services to the customers.

5. A team from Air India will be going to Washington soon to formalise documentation for availing itself of a $6-bn loan from the US Exim Bank for purchase of Boeing aircraft. The team will work on preparing all operative documents for Air India and Air India Express including the master lease agreement that would see the aircraft being leased to a Special Purpose Vehicle from which they would join the respective airlines. The loan constitutes about 85% of the cost of the aircraft with the airline tying up the rest of finances from commercial banks.

6. The World Bank’s International Finance Corporation (IFC) has pumped in about $ 300 mn into India between July and December 2006, and will invest a similar amount during the next 6 months. As against the $ 410 mn invested in India for the year ended June 30, 2006, IFC is planning to increase its exposure to India to around $600 mn this year. Over 70% of its exposure will be through the debt route and the rest through equity stakes in Indian companies. The financial sector accounted for the largest chunk of IFC’s exposure in the first half of our financial year, which is from July to December. The biggest chunk of $150 mn went into ICICI Bank’s tier-II bond issue announced in October. IFC put another $100 mn in HDFC Bank’s tier-II bond issue.

7. Private and foreign banks are now checking out lifestyle and entertainment freebies to woo high net worth individuals. UTI Bank, for instance, has set up two branches to provide priority customers a host of privileges to make their non-banking business activities a fulfilling experience. It offers business lounges and conference halls so that its HNI clients can organise exhibitions and other cultural activities at no extra cost. The bank recently got five licences to set up exclusive priority banking branches. Citibank, HSBC and StanChart Bank, too, are providing lifestyle privileges like invitations to fashion shows, art exhibitions, plays and movies. Also on offer is a range of shopping, dining and travel privileges. On similar lines, ICICI Bank recently hosted a golf event in Mumbai, where over 1,400 golfers from 17 cities, all high net worth clients of the bank’s private banking division, met in the largest invitational corporate golf event in India. The series had kicked off in Jaipur in Nov 2006 and was followed by similar events in 10 other cities.

8. Swiss major UBS Global Asset Management has acquired StanChart Asset Management Company for Rs 530 crs. As of Dec 2006, StanChart AMC’s assets under management were pegged at Rs 12, 628 crs.

9. Even 18 months after the finance ministry allowed external commercial borrowing (ECB) in realty projects involving integrated townships of 25 acres or 50,000 sq m, the RBI has not yet notified it. According to RBI sources, the central bank wants the government to first straighten its foreign investment policy on real estate before letting companies raise ECBs for realty. Also, the bank feels low-cost ECBs could fuel a further rise in real estate prices and make the market more volatile.

10. The government’s new performance-based remuneration package for PSBchiefs and executive directors will earn them Rs 8 lakh a year if they achieve 100% of the target specified in their statement of intent (SoI). The SoI indicates the target for profits and growth in credit and deposits, among other things. While the bank board sets its own annual performance target, the SoI has to be approved by the finance ministry. At present, state-owned bank CMDs and EDs get Rs 4-6 lakh a year depending on the size of the bank. If the bank achieves only 80% of the target set for the year, the brass will be entitled to an incentive of Rs 7 lakh, while 70% achievement will earn them Rs 6 lakh.

11. UTI Bank will open by March a branch each in Hong Kong and Dubai. It has a branch now in Singapore and a representative office in Shanghai. It has received RBI nod for setting up an asset management outfit.

25.01.2007

1. Centurion Bank of Punjab in the third quarter has registered a growth of 44% in net profit at Rs 33.5 crs, against Rs 23.3 crs in the corresponding period in the previous year. Net interest income was up 40% at Rs 146.5 crs against Rs 104.5 crs in the previous year. Total income was up 51.7% at Rs 248.2 crs (Rs163.6 crs). Other income increased 72% to Rs 101.8 crs (Rs 59.1 crs).

2. Karur Vysya Bank's operating profit for the third quarter rose by 36.9% to Rs 61.51 crs from Rs 44.93 crs during the corresponding period of the earlier fiscal. Its net profit increased marginally to Rs 26.19 crs (Rs 25.86 crs) during this period. Its interest income registered a 37.55% growth to reach Rs 225.28 crs (Rs 163.78 crs) while the interest on advances grew by 39.75% to Rs 163.37 crs (Rs 116.90 crs). Investment income was up by 26.53% to Rs 57.43 crs (Rs 45.39 crs). The operating profit during the first nine months of the current fiscal increased to Rs 194.76 crs ( Rs 142.84 crs). The net profit (after providing for non performing assets, standard assets and depreciation on investments) rose by 18% to Rs 107.13 crs (Rs 90.98 crs). The net NPA as a percentage of net advances fell to 0.39% against 1.05 per cent a year ago. The NPA provision coverage ratio improved to 87.08% (75.66%).

3. Higher provisioning and lower net interest income have pulled down the net profit of SBI by 4.49% for the quarter ended Dec 31, 2006. It reported a profit after tax of Rs 1,065.06 crs for the third quarter against Rs 1,115.19 crs in the year-ago period. Provisioning for bad loans at Rs 410 crs (compared with a write-back of this provision in the corresponding quarter of the previous fiscal) and provision for depreciation of investments of about Rs 658 crs were major contributors to the below par performance. The presence of an extraordinary gain of Rs 1,100 crs (on account of the currency gains in the redemption of India Millennium Deposits of $7.1 bn) in the quarter ended December 2005 made the performance look worse. State Bank of India has recorded about 11% rise in deposits and around 26% growth in advances. SBI has reported 11.17% rise in deposits to Rs 4,04,352 crs as on Dec. 31, 2006 from Rs 3,63,731 crs as on Dec 31, 2005. The growth appears to be low due to the bank's conscious strategy of not relying upon corporate bulk deposits.

4.The President, Mr A.P.J. Abdul Kalam, has given his assent to an Ordinance that would empower the RBI to lower the statutory liquidity ratio (SLR) below 25%. The Ordinance has been promulgated. With this, the RBI would get more operational flexibility in the conduct of monetary policy and could peg the SLR anywhere from 0- 40%.

24.01.2007

1. Exim Bank of India is negotiating with "a multilateral lending agency" for a $250-mn loan to fund small and medium enterprises.The process of due diligence is on and the agreement is likely to be firmed up in two months.

2. Standard Chartered Bank has announced a grant of Rs 2.27 crs to Sankar Foundation Eye Hospital for the construction of a hospital at Vepagunta in Visakhapatnam district. The contribution under the bank's `Seeing is Believing' programme aims to help restore sight to people suffering from avoidable blindness. It is expected to reach out to the people in neighbouring Srikakulam and Vizianagaram districts too.

3. Corporation Bank's credit card business is likely to take off in February this year. It has decided to tie-up with Visa International for this purpose.

4. Housing finance corporations/banks are talking of extending repayment periods to 20 or 25 years so that borrowers can cope with rising interest rates and EMIs. There are also proposals to extend the maturity of existing loans, so long as they get paid before retirement. For someone borrowing Rs 10 lakh at 10 per cent a year, a twenty-five year repayment, instead of twelve, lowers EMI from Rs 12,000 to Rs 9,000. Net repayments, after tax deductions, would be much smaller in both cases.

5. China, the largest populated nation that has over the last two decades successfully embraced what it calls a `socialistic market economy', has notched up one more distinction. Its forex reserves, mainly in US dollars, recently crossed the one-trillion mark. This formidable figure is much bigger than the combined reserves of major Asian economies such as Hong Kong, India, Indonesia, Malaysia, Pakistan, the Philippines, South Korea, Taiwan and Thailand.

6. LIC Housing Finance Ltd is striving to reduce its net NPA to below 1% by next year. With its recovery department backing the ambitious target by constantly improving recoveries, LICHFL has been able to bring its net NPA to 1.9%during the third quarter of FY 2006-07 from 3.1% in the same period in 2005.

7. After Bank of India introduced CBS, many employees became redundant. The bank redeployed about 1,200 of them into marketing. Since mid-2005, these employees have been seeking low cost deposits. It was chiefly due to this that the bank was able to outperform the industry with a 78% growth in net profit for the third quarter of the current year. (The bank's net profit grew to Rs 254 crs from Rs 143 crs in the corresponding quarter of last year.)

8. Bank of Baroda has tied up with India Infoline to offer an online-trading service, `Baroda E-trading'. The bank has entered into an alliance with India Infoline for providing a brokerage platform, besides research and analysis service to the customers.

9. The Finance Minister, Mr P. Chidambaram, has made it clear that there was no proposal to merge any Regional Rural Bank (RRB) with the sponsoring parent bank and that they would continue to remain under the parent bank.

10. Spurred by higher net interest income, BOB has registered 62.8% growth in Q3 net profit at Rs 329.13 crs, against Rs 202.18 crs in the corresponding period of the previous year.

Tides of 23.01.2007

1.The country's foreign exchange reserves have risen $702 mn to $178.128 bn, for the week ended January 19, on the back of an increase in foreign currency assets. In the previous week, the forex reserves had gone up $841 mn to $177.426 bn.

2.Karnataka Bank Ltd registered a net profit of Rs 53.88 crs during the third quarter of the current financial year as against Rs 41.52 crs during the corresponding period of the previous year, recording a growth of 29.76%.Containing of NPAs and better yield on advances helped the bank to register this growth.

3. Vijaya Bank reported a net profit of Rs 92.73 crs for the third quarter of the financial year 2006-07, a 58 % increase over the corresponding period of the previous year.It has improved its profitability despite the increase in cost of working funds. The bank's operating profit for the year was Rs 172.23 crs, only marginally up from Rs 170.98 crs. The increase in net profit was largely on account of lower provisions for the current year. Provisions for the current year came down to Rs 53.54 crs, a Rs 20 crs reduction over the corresponding period of the previous year.

4. United Bank of India has posted an operating profit of Rs 194.73 crs for the quarter ended Dec 31, 2006, up from Rs 131.94 crs recorded in the corresponding period last year. The profit before tax increased from Rs 72.61 crs to Rs 110.8 crs, a 52% increase.For the nine-month period ended Dec 06, the net profit stood at Rs 231.84 crs against the full-year profit for fiscal 2005-06 of Rs 204.57 crs. On a y on y basis, post-tax profit has shown a 32% growth. The bank's net NPAs declined from 1.95%in March last year to 1.47%in Dec 2006.

5. The Union Finance Minister, Mr P. Chidambaram, will meet CEOs of PSBs on February 5. Indications are that anti-money laundering issues of cash transaction reports and suspicious transaction reports would be discussed at the meeting.

6. UBI which has good presence in rural areas, is planning to enhance its impact in rural areas through various strategies, such as forming one lakh self-help groups by the end of the current fiscal.

7. From the third quarter results of about 30 banks that are available on date, it is clear that New Private banks (those who started out after 1993-94) have done much better than their older counterparts in both the private sector and public sector. The profits of ICICI Bank, the largest private sector bank, are almost equal to what three of the five largest public sector banks (Canara , BOB & BOI ) earned taken together. At this rate, it won't be a surprise if ICICI Bank's profits overtake that of SBI, the largest bank in the country in the next quarter. Six of the new private banks registered a profit growth of 40% driven by strong loan growth as well as treasury earnings.

8. Bank of India has opened a `free credit counselling services centre' at Cjhennai for those in distress under the burden of debt. BOI intended to act as a liaison agent between those who had got themselves caught in a debt trap, and the lenders. This is purely a social service, there is no business spin-off from this. Similar services were commonplace elsewhere in the world. The centre would provide free advice on matters relating to gaining access to structured financial systems, including banking, and try to help rehabilitate borrowers in distress. Other two centres, in Mumbai and Wardha, had been operational for about three months. About 50 cases were handled by the centres, most of which related to credit card payments.

Tides of 22.01.2007

Mottos for Success-281
“Don’t let the Customer suffer because of internal bickering.”
1. Commodity traders will have to bear the same margin requirements as that for stockbrokers. RBI has asked banks to maintain a minimum margin of 50% and minimum cash margin requirement of 25% (within the range of 50%) for guarantees issued on behalf of commodity brokers in favour of national commodity exchanges such as NCDEX, MCX and NMCEIL. This guideline already applies to guarantees on behalf of share and stockbrokers.
2. SBI Chairman, has said that interest rates have more or less peaked and maintained that rates would remain stable in the short-term. SBI & other banks have been raising deposit rates to attract more funds for lending.
3. Banks are slowly choking credit flows to the retail sector in a bid to provide borrowing costs to productive sectors of the economy. The RBI and the Ministry of Finance have directed Banks to maintain credit flows to the productive sector viz; farm, infrastructure and the manufacturing sectors, at all costs and under all circumstances. In fact, bankers have been told to bring down their retail, including housing loan exposures, from the current levels. Retail loan portfolios averaged about 25% of net bank credit.
4. The Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice would like the PSBs to strengthen their own internal systems for redressal of public grievances.
5. Yes Bank has opted for FinnOne Total Management Solution from Nucleus Software. The selection of this product FinnOneTM, loan management and cash collection suite would help the bank offer value added retail liability and asset offerings, and third party wealth management products to its customers. The bank, witnessed a significant build-up in its Retail Banking and Wealth Management functions. It will continue to strengthen through the state-of-the-art Retail Banking platform nationally.
6. Banks are pleading with the RBI for permission to sell `short' - selling what they don't possess as yet- Government securities that are not yet issued by the RBI in the first place. Banks are seeking this facility under an arrangement where the RBI invites bidders to quote for securities that would soon be issued, but the bids themselves could be made on a `when issued' basis and hence the expression, `when-issued' market. It has been five months since the `when-issued' market for trading in Government securities ahead of auctions, came into being. Yet, the volumes in the `when-issued' market have been low with participation restricted to just three primary dealers and one or two banks.
7. RBI has simplified the procedures for project and service exports, such as deployment of temporary cash surpluses and inter-project transfer of machinery and funds. These will provide more flexibility to exporters and were subject to monitoring by banks. Exporters will now be allowed to use the machinery or equipment used for a turnkey or construction abroad, for executing a contract in another country.
8. Barclays Bank would this year commence its retail and commercial banking business in the country and expressed commitment to bring in at least $100 mn into this business in 2007. It has already invested$300 mn and is committed to bring in another at least $100 mn this year specifically for retail and commercial banking business. We are willing to invest in India for the longer term.

Tides of 20.01.2007

Mottos for Success-280
“Customer retention helps in 2 ways-Revenue growth & Cost reduction.”
1. SBI has set up a special Stressed Assets Resolution Centre (SARC) in Pune to monitor non-performing loans. It would transfer all NPAs worth Rs 5 crs and below to this centre where they will be scrutinised and followed up by recovery officers. About 35 branches in Pune and the adjoining Pimpri-Chinchwad will be covered under the SARC.
2. BoB is poised to sign life assurance and asset management joint ventures with European partners as early as the end of this month. With 2,700 branches and 27 million customers, it already had the infrastructure in place to sell its own insurance policies.
3. ICICI Bank Ltd,has hired Citigroup Inc, Deutsche Bank AG and Merrill Lynch & Co to sell at least $500 mn of bonds to boost capital. It plans to meet investors in Singapore, London and the US between January 5 and 8, according to a sale document.
4.. LIC has set a target of 11 % increase in its total premium, new business plus renewal, in 2006-07 to touch the Rs 1,00,000 crs. Of the target, Rs 28,000 crs of premium income will come from new business and Rs 72,000 crs from renewals. LIC’s total premium in 2005-06 was Rs 90,759 crs.
5.The banks in AP have surpassed the annual credit plan consecutively for two years, and so far this year they disbursed Rs 26,759 crs as against the target of Rs 37,000 crs. the credit deposit ratio of all the banks in the state as on September 3, 2006, was 82.50% as against the RBI norm of 60%, and the CD ratio in all the districts in the state was more than the RBI norm of 60 % except in Visakhapatnam district. Andhra Pradesh is ranked third in India, after Tamil Nadu and Maharashtra in CD ratio. In rural areas, the state is ranked first with the CD ratio at 115.70 %, against the all-India average of 56.40%.
6. Micro-finance has emerged as a promising tool for reducing the poverty and empowering the underprivileged, especially women. In India, the SHG Bank linkage programme, initially started by National Bank for Agriculture and Rural Development as a pilot project in 1992, has grown into one of the largest micro-finance programmes in the world. Small Industries Development Bank of India's (SIDBI) Foundation for Micro-Credit (SFMC) is promoting the micro-finance institution (MFI) model. Rastriya Mahila Khosh (RMK) and Friends of Women's World Banking (FWWB) India are also promoting the micro-finance component as apex bodies.
7. The banking system is staring at a drop in the growth rate of home loans from over 30% to 25% in certain markets owing to high real estate prices. Pricey home loans have been only partly responsible for the slowdown in certain markets, the official added. Home loans form around 50% of ICICI Bank's total retail assets portfolio.
8. As part of its retail banking initiative, ICICI Bank has introduced a new service of sanctioning car loans in about an hour for its savings bank account customers. "Loans on the Spot" or LOTS allows a customer to swipe his debit card at the electronic data capture terminals, stationed at dealers' outlets, to check the pre-approved loan offered by the bank. The terminal will generate a unique number and a pre-approved slip, which the dealer can use to obtain a sanction from ICICI Bank. In the first phase, the service will be available at Mumbai, Delhi, Kolkata, Chennai, Hyderabad, Bangalore, Pune, Ahmedabad, Chandigarh and Jaipur. It expects 10% of car loans to come from this new service in the next four to five months.

19.01.2007

Mottos for Success-279
“Cross selling is a continuous process of sale.”
1. The ING group has begun discussions with the Department of Posts for retailing life insurance products through the India Post network in the country.
2. To ensure a system for realistic valuation of fixed assets owned by banks or mortgaged to banks, the RBI has asked them to have a board-approved policy for valuation of properties. Such property would include collaterals accepted by banks against their exposures. The valuation should be done by professionally qualified independent valuers. For properties valued above Rs 50 crs, banks should obtain minimum two independent valuation reports.
3. Centurion Bank of Punjab has received RBI approval for a preferential issue to India Advantage Value Fund V (managed by ICICI Venture Funds Management Company Ltd). The bank plans to issue 7.5-cr equity shares at a price of Rs 24.54 per equity share.
4. YES Bank will now offer banking services from 7 a.m. to 11 p.m. six days a week (Monday to Saturday) at its Andheri (west) branch in Mumbai. Based on customer feedback, the service proposition would be extended to other branches across the country having similar lifestyle and financial requirements in the days ahead.
5. City Union Bank has introduced two deposit schemes called CUB 400+ and CUB 600+, effected a revision in the deposit interest rate and brought its entire 155-branch network under the core banking solutions platform.
6.A number of banks have hiked the interest rates on NRE fixed deposits and FCNR deposits with effect from January 1. The banks are ICICI Bank, Andhra Bank, Union Bank, Dena Bank, Karnataka Bank, Federal Bank, Canara Bank, PNB and SBT.
7. The tough stance adopted by Uco Bank on closing down branches in metros and urban centres that incurred losses consistently, seems to have paid off. Nearly 14 out of the 27 loss-making branches in metro, semi-urban and urban areas have now reported a spurt in performance clocking profits by the end of FY06. In mid-’05, the bank had signed an agreement with the regional managers of these branches to chalk out a detailed viable plan to revive them.
8. Lending rates may be on an increase , but one set of banks aren’t complaining. Over the last fortnight, even as banks hiked their PLRs with money becoming more costly, corporates, even those placed a notch below blue chips,are in a position to borrow at rates below PLR.
9. Banknet India, focused on banking knowledge and research and one of the largest organisers of banking industry conferences, is organising the "Third Annual Conference on Payment Systems in Banks" in Mumbai. Last year, Banknet India's conference on payment systems had 550 participants from more than 100 banks and FIs and nearly 50 IT cos worldwide.
10. Banks want parents of students seeking educational loans to be made co-borrowers to facilitate loan recovery after completion of studies as part of a proposed student educational loan finance scheme. The proposed scheme prepared by the ministry of HRD seeks to ensure availability of loans to every needy student enrolled in an “eligible” educational institution, without any collateral or margin money. The student borrower would also not be required to present any co-applicant. A working group of senior executives from select public sector banks, under the aegis of the IBA, has suggested to the government that loans be sanctioned at the place of residence/ domicile of the student so that banks can comply with KYC norms.

Tides of 18.01.2007

Mottos for Success-278
“Cross selling has been acknowledged as a logical marketing approach to expand retail segments.”
1. BOB has hiked its benchmark prime lending rate by 50 bps to 12% with effect from January 1. Canara Bank has hiked to 11.75%.
2. More than 6,000 employees of the five Regional Rural Banks (RRBs) in the State will strike work on January 5. Consequently, work at all 1,200 branches will be affected.
3. United Bank of India has increased its PLR from 11.75% to 12%. It has also revised its domestic term deposit rates by 25 to 75 bps with the highest being 10.46%(annualised yield) for senior citizens.
4. The shareholders of City Union Bank Ltd have approved the proposal to make a preferential issue of 26,65,000 equity shares of Rs 10 each at Rs 169 a share to L&T,subject to RBI approval.
5.UTI Bank Ltd plans to raise Rs 100 crs through Upper Tier II unsecured redeemable subordinated debentures, with an option to retain over-subscription. The debenture carries a coupon rate of 9.50%pa. The face value and issue price is at Rs 10 lakh per debenture. The issue has been rated "LAA" by ICRA and "AA (ind)" by FITCH.
6. SBI is hoping to regain its lost market share by improving its balance sheet size, instead of focusing merely on physical size. With a network of around 9,000 branches and 6,000 ATMs, what SBI does often becomes the benchmark for other banks. The bank is trying to strike a balance between its role as a commercial bank that will earn higher returns for its investors and its role as a nation's bank by lending to sectors such as agriculture and infrastructure.
7. Karnataka Bank has raised interest rates for term deposits of 181 to 364 days with effect from Jan 1. The rate hike is applicable for all fresh deposits and renewals of maturing deposits. Deposits of below Rs. 15 lakh for the said period will fetch an interest of 7%. For deposits below Rs. 15 lakh for 365 days the rate is 8.25%. The rate for deposits of Rs. 15 lakh but below Rs. 50 lakh for 365 days is 8.25%. The rates for other maturities have also been raised. Senior citizens will get higher interest rates than the rest of the customers.
8. Cox & Kings, a travel company, has expanded the scope of FE services offered by it after the RBI granted the company a category II foreign exchange licence. Earlier, it could only provide foreign exchange services to leisure and business travellers. Now it will be able to look after the needs of a wide variety of travellers, including students going abroad for further studies, patients requiring FE for medical treatment and also provide FE for overseas film shootings.
9. Gross bank credit increased by Rs 24,181 crs to Rs 17,33,679 crs as on December 22, 2006.
10. The country's foreign exchange reserves rose $1.018 bn to touch $177.251 bn for the week ended December 29, 2006 mainly on foreign currency revaluation. In the previous week, forex reserves had increased by $714 mn to touch $176.233 bn.
11. Noble laureate Professor Joseph Stiglitz has cautioned against capital account convertibility and allowing short-term capital into Indian economy, terming it a force that can "create instability". Research has shown that capital market liberalisation is fraught with risk without rewards. "Some people say there would be no FDI without capital market liberalisation, which is obviously wrong," he said, noting that China received copious foreign investment without having capital account convertibility.

Tides of 12.01.2007

Mottos for Success-277
“If knowledge is not applied in some concrete way, then it disappears from human consciousness”
1.Year 2006 has been a busy year for the Indian banking industry. The buzz of takeovers and Basel, interest and alliances, never seemed to fade away. Banks in India encountered many challenges and opportunities amidst strong and sustained economic growth
2. Assocham has asked the RBI to roll back the cash reserve ratio to the previous level of 4.5% as the liquidity crunch in the market is affecting the industry. According to the chamber, a series of hikes in the cash reserve ratio from the initial level of 4.5% by the RBI has created liquidity crunch in the money market to the extent that the call rates touched the nine-year high rate of 19%.
3. Encouraged by an experiment done by a grameen bank in Karimnagar district, major bankers in Andhra Pradesh have decided to seriously consider extending loans to SHGs at `pavala vaddi' (3%interest rate) against 36% by microfinance institutions (MFIs). The idea is to help the SHGs retire high-cost loans, bringing in a great relief to the members who are often fleeced by some MFIs.
4. Unabated demand in credit resulting in strong business growth along with wider options for raising funds have seen banking industry perform well in 2006. Hardening interest rates may have made the credit dearer, but this did not stop banks from expanding their balance sheets. Loan books of banks have grown by about 31%, while riskier asset classes (such as retail, real estate and SMEs) have clocked a higher growth of about 45%
5. BOI paid a 20%interim dividend (Rs67.72 crs)to the Govt. for 2006-07. The Govt holds69.74% equity in the bank. The bank has paid total dividend at the rate of 30 % per share for the fiscal 2005-06.
6. Union Bank of India tied up with LIC of India to launch `Union Double Plus'— a group insurance scheme for fixed deposit account holders. The scheme is open to all fixed deposit accountholders including staff accountholders of the bank in the age group of 18-55 years. The insurance cover is limited to a maximum of Rs 5 lakh. If the initial FD is more than Rs 5 lakh, the cover will be as if the initial deposit is Rs 5 lakh.
7. The Santhi Social Circle of the SBT, Santhi Nagar branch, is reaching out to students during the course of a 10-day residential camp being held under the auspices of the National Service Scheme. Around 150 students are participating in the camp. A session on banking habits and the role of banks in national development was conducted during the course of the camp.
8. Karur Vysya Bank offers 9.25% interest on Senior Citizen Deposits, for period ranging between 1 & 3 years, said to be the highest in the industry. The bank has recently rolled out a deposit scheme, KVB500. The sums deposited under this scheme would attract interest at 9 per cent and for tenure of 500 days. The bank has increased the rate of interest on domestic term deposits by 50 to 75 bps on various time brackets. It offers the highest rate of 8.75% on deposits with tenure between 2 and 3 years, and at 8.5% for the one to two-year deposits. BPLR rate has also been hiked to 13.25%(12.5%). The bank has filed the draft offer document with SEBI and the NSE for issue of rights shares.

Tides of 11.01.2007

Mottos for Success-276
“Most men are like eggs. Too full of themselves to hold anything else.”
1.KVB is increasing the benchmark PLR from 12.50% to 13.25% w.e.f.1.1.2007.
2. RBI is motivating merger of weaker banks with those of stronger ones to strengthen the banking system in the country. But the move does not seem to have gone down well with employees. After the controversial merger of the Ganesh Bank of Kurundawad with the Kerala-based Federal Bank, the Sangli Bank’s proposed merger with the ICICI Bank has run into rough weather with its 2000 employees opposing the move. The issue has assumed national significance with the All India Bank Employees Association (AIBEA) threatening to oppose the merger in the interests of the Sangli Bank employees.
3. The ICICI bank will soon tie up with US-based Penson Worldwide, a broker services and trade clearing company, for its overseas equity investment product. The bank will also tie up with Russell Investment group for its overseas mutual fund. The Bank will launch a new equity investment product, whereby, an Indian resident can use the ICICI Bank’s facility to invest in the overseas companies’ stocks listed on foreign stock exchanges. It will also provide options for its clients to invest in foreign mutual fund products and for that, it will tie up with Russell Investments. Russell Investment group, a global leader in multi-manager investment services, provides investment products and services in more than 35 countries. It also plans to come up with a product for investment in overseas real estate through its overseas real estate mutual fund by mid-2007.
4. Banks have reacted strongly against the RBI’s draft proposals on derivatives trading, saying it was an attempt at micro managing their functions. They said there was no need for the RBI to “dictate the nature of products and tenure of deals” after having directed them to put in place appropriate risk management structure for derivatives. Most banks are also up in arms against a proposal that long-term exposure in a swap could mean residual maturity of three years or more. They said this would be a deterrent in providing derivatives products to small and medium sized corporates.
5. SBH has signed an MoU with the department of rural development, AP government, and the Institute for Development and Research in Banking Technology (IDRBT) for the implementation of a pilot project of financial inclusion in Warangal district. Under this project, the payments under the Rural Employment Guarantee Scheme and Social Security Pensions will be made at the villages by the bank through smartcards, eliminating delay. Under the scheme, SBH has been allotted Raiparthy mandal in Warangal district, and Rs 15 lakh per month will be disbursed to 10,000 beneficiaries in about 23 villages.
6. The Centurion Bank of Punjab has launched Centurion Elite which is an exclusive one-on-one banking service aimed at high networth individuals (HNIs) which is expected to change and simplify the way customers bank. Centurion Elite offers personal financial advice using investment and relationship managers. This includes access to investment and broking services, access to a product specialist, home banking and much more.
7. Yes Bank, has upped its PLR by 50 bps from 12.5 to 13%- the third such increase this year.

Tides of 10.01.2007

Mottos for Success-275
“A good night’s sleep can make you 40% smarter.”
1. Canara Bank is aiming to grow its export credit book by at least 20% this year. As on March 31, 2006 Canara Bank's export credit exposure stood at Rs 7,800 crs. It also want to increase its retail advances by at least 20% this fiscal. anara Bank bagged the Niryat Bandhu-Gold Trophy for 2004-05 and silver trophy for 2003-04. The bank's total advances stand at about Rs 82,000 crs, of which the retail exposure is about 20%.
2. Corporation Bank has been awarded the `Niryat Bandhu' excellence award, instituted by the Federation of Indian Export Organisations (FIEO). The award is to given to banks/export promotion councils for support services rendered to the exporters. The bank's export credit stood at Rs 2,160 crs as on September 30. On year-on-year basis, it registered a growth of 51%.
3. Karnataka Bank Ltd has entered into a MoU with Sun Technics Energy Pvt Ltd for financing the purchase of solar water heating and home light systems. The finance would be extended to customers under `KBL Ravikiran' scheme.
4. UCO Bank plans to open at least six branches in Andhra Pradesh soon. The bank has opened a new branch at Warangal, taking the total to 38 at present in the State. CBS has also been implemented in some of the major branches of the bank in the State. The total business achieved by UCO Bank in the AP Region as on September 30, 2006 was Rs 3,576 crs.
5. PNB has announced a 25 bps hike in its benchmark prime lending rate to protect its net interest margin. The PLR would now go up from 11.5% to 11.75% with effect from January 1 next year. The move to hike PLR comes in the wake of the recent increase in deposit rates and also due to tighter liquidity conditions.
6. State Bank of Bikaner and Jaipur (SBBJ) has hiked its benchmark prime lending rate (BPLR) from 11.25% to 11.5%.
7. IDBI Bank has called for prospective buyers to participate in an e-auction for a one-lakh sq ft property on Boat Club Road, a prime residential locality in Chennai. This is the second attempt by IDBI Bank to sell the property through an online auction.
8. Banks in Dakshina Kannada district have reached the business level of Rs 13,209 crs as on September 30. As many as 363 branches of various banks achieved this business, which includes deposits of Rs 8,085 crs.
9. Banks have sought flexibility in direct and indirect lending to agriculture and allied sectors to increase financial assistance to corporates, which are entering rural markets. The business model in agriculture is changing with many corporates entering the rural market. So long as such activities by corporates result in better infrastructure, employment generation and better price to farmers, lending by banks to such corporates should be treated as part of direct agricultural lending.
10. Banks have urged the RBI to consider allowing them to issue new instruments to tide over the severe asset-liability mismatch as most of the term-loan funding is being done by borrowing in the short term.. Deposit growth has been sluggish and banks have sounded out the RBI about the requirement for SLR securities may not be very high going forward in the financial year. Most of the major public sector banks are expected to hike their prime lending rates (PLRs) this week so as to match the high cost of deposits.

Tides of 9.01.2007

Mottos for Success-274
“The successful individual realizes self mastery; one with self mastery enjoys all riches.”
1.Corporation Bank and the UAE Exchange jointly conducted a training programme on `CorpXpress Money Services' for non-resident Indians.
2. The India Infrastructure Company Ltd (IIFCL) has received sovereign guarantees for raising Rs 5,000 crs for funding big-ticket projects in the country.It has signed a MOU with the three public sector banks, Canara Bank, Vijaya Bank and Syndicate Bank. It has the option of raising the funds either from the domestic or international markets.
3. Vijaya Bank plans to expand its `DD Shoppe', in all cities with high market activity in the next few months. It also wants to raise Rs 500 crs tier II funds and reach the 1000 branch network milestone by March 2007. The Demand Draft Shoppe, which gives customers the advantage of getting the draft up to 6 p.m., against the normal 3 p.m. will be opened in Mumbai, Chennai, Bangalore, New Delhi and Hyderabad to start with.
4. SBI has launched a signature-based international debit card with MasterCard, called the SBI Gold Debit MasterCard, for its customers maintaining an average quarterly balance of Rs 50,000.
5. Puducherry has now become the first State in the country to become fully covered under the Financial Inclusion Programme. The project pioneered by Indian Bank in coordination with other banks has been completed ahead of the targeted deadline of Dec 31.It involves ensuring every household in every village has at least one bank account, thereby gaining access to banking services.
6. The Nizamabad District Co-op Central Bank Ltd has announced a bancassurance tie-up with Aviva Life Insurance. Under this it will now provide insurance products from Aviva to its customers.
7. The Tamil Nadu Government has slashed interest rates on non-agriculture loans from cooperative banks to 12% from 18%.Penal interest has also been cut to 1.5%from 3%. The cut in interest rates will benefit all borrowers in the cooperative sector from the Primary Agriculture Cooperative Banks to the Tamil Nadu State Apex Cooperative Bank.
8. SBH has decided to increase its benchmark prime lending rate (BPLR) by 50 bps from 11.50% to 12%. The hike will be effective from December 28.
9. Syndicate Bank's debt refinance product aimed at indebted farmers has taken off successfully barely three months after it was launched. This product has been highly successful, among the farm community.Till date the bank had disbursed Rs 295 crs all over the country through the product branded as "Jaikisan''. Jaikisan is a farm loan mortgage product to help indebted farmers to refinance all their outstanding dues to unorganised moneylenders. It is made available to the farmers on conditions that they do not create fresh debts with these moneylenders. It is priced at close to 11%, on a reducing balance.
10. ICICI Bank will organise a one-day programme to issue fresh currency notes and coins of various denominations to the public as part of the Reserve Bank of India's clean note policy.
11.Allahabad Bank is focussing on the need to increase its retail credit portfolio. In pursuance of this objective, its Kolkata Metro zonal office has organised credit camps at strategic locations. The bank has come out with a bouquet of retail credit products such as car loans, loans against rent receivables, loans against property, saral loans, loans for purchase of jewellery, housing loans and education loans.

Tides of 8.01.2007

Mottos for Success-273
“The root of happiness is Justice; the root of justice is wealth; The root of wealth is sovereignty; the root of sovereignty is mastering of the faculties.”
1. ICICI Bank will borrow $1 bn yen equivalent in three tranches under its loan syndication agreement in Geneva. Twenty-six banks participated in the syndication facility, which is the widest participation for any Indian bank syndication in international markets. ICICI Bank concluded this transaction in one month from the date the mandate was awarded.
2. BoI, UBI and Dai-Ichi Mutual Life Insurance Co have forged an alliance to form a new life insurance joint venture company. While BOI would hold 51% stake in the three-way life insurance venture, Dai-Ichi Mutual Life Insurance of Japan and UBI would hold 26% and 23%, respectively, in the company, which is yet to be named.
3. Tata Mutual Fund has signed a marketing agreement with Central Bank of India for distributing its mutual funds. Initially, CBI will distribute various schemes of Tata Mutual Fund through 300 branches across the country, mostly in the metros and few urban areas.
4. HDFC Bank has hiked its benchmark prime lending rate by 1.5%to 13.5% effective December 20. It had last raised its PLR in June. It has also raised deposit rates by 50-75 bps across various maturities over the last month. Only a small proportion of HDFC Bank's loans are linked to the PLR.
5. The rise in demand for credit from the infrastructure sector has led to several banks joining up for infrastructure financing with the latest being IDBI Ltd, which today signed an agreement with LIC for joint and take-out financing. IDBI Ltd has received enquires for infrastructure projects worth Rs 55,000 crs. Of this, about Rs 15,000 crs was sanctioned. The average duration of these projects is between 10 and 20 years and is spread over power, ports and airports and non-infrastructure segments such as textile industries.
6. Shriram Transport Finance Company Ltd has announced the launch of a co-branded credit card in association with UTI Bank. Shriram expects to issue one lakh credit cards in one year.
7. Kotak Mahindra Bank has launched "Twin win term deposit offer", under which a customer can avail an interest rate of 8.5% for deposits with a maturity of 1001 days (3 years and one week) and 8% for 299 days.
8. RBI has come out with guidelines on resident individuals remitting up to $ 50,000 against the earlier $ 25,000, a measure announced in the mid-term review of annual policy statement, 2006-07. Resident individuals can now remit up to $ 50,000 per financial year (April-March) for any current or capital account transactions or a combination of both. The amount would include remittances towards gift and donations by a resident individual. Investment by resident individuals in overseas companies would come under this limit.
9. RBI will convene a special meeting of the State Level Bankers' Committee under the chairmanship of the Deputy Governor of RBI to discuss issues pertaining to credit for SMEs, small-scale projects, the agriculture sector and self-help groups in West Bengal.
10. The 460th branch of South Indian Bank was inaugurated at Lucknow. 100% of the bank's business would have migrated to core banking solution before the end of the fiscal. The year would also see expansion to a network of 475 branches, with new branches at Ranchi, Guwahati and Kalyan (Mumbai), and presence in a total of 23 States and Union Territories.

Tides of 6.01.2007

Mottos for Success-272
"Everything's in the mind. That's where it all starts. Knowing what you want is the first step toward getting it."
1. The NRI business is seasonal and picks up in the second half due to arrival of NRIs during Christmas and New Year by around 50%. ICICI bank will offer a special deposit scheme for NRIs during December-February. For a three-year deposit, denominated in rupee, the customer will get an interest rate of 6.24% p.a. NRIs contribute around 15% to the bank's retail portfolio. The alternate returns for most monies parked overseas in dollars will be around 3.5%to 4%.
2. HDFC bank will offer investment counselling and advisory services coupled with free online investment accounts in all its branches, for NRIs.
3. The Mangalore branch of UTI Bank is observing `NRI Fest' till January 20. It is organising the festival to publicise the bouquet of products and services offered to non-resident Indians.
4. Banks such as ABN-Amro Bank are running promotion campaigns at the banks' branches.
5. OBC has announced an increase in its prime lending rate (PLR) by 25 bps from 11.50% to 11.75% with effect from January 15, 2007. The PLR was last raised by 50 bps to 11.5% in May 15, 2006. The interest rates on domestic term deposits have been hiked between 25 bps and 100 bps across all maturities with effect from December 23.
6. In order to bring down the total amount that a passenger would pay for booking train tickets using ATMs, the Railways is in talks with several banks to lower the charges for accessing ATMs for ticket booking.
7. Standard Chartered Bank plans to set up an ARC in the first quarter of next year. The ARC will be jointly promoted by Standard Chartered and a few large Indian banks. Through the ARC, Standard Chartered will manage loan portfolios and securitisation of the partner banks. There will be no overseas company contributing either capital or expertise to the proposed ARC. However, the ARC may later partner with regional banks to gain expertise on local markets.
8. PNB has entered into an ATM sharing arrangement with the Everest Bank of Nepal, enabling customers of both the banks to access each other's ATM network at what is being described as a "reasonable" cost. High capital expenditure and recurring maintenance expenses are compelling banks to share ATM network so that their customers can use ATMs of other banks also at a reasonable cost. PNB is already sharing its 870 ATMs under various ATM sharing arrangements, but these arrangements are within India. The tie-up with Everest Bank is hailed as the first cross-border ATM sharing arrangement entered into by any bank in India. For the first time in India, a bank would use domestic network for transaction sharing with a foreign bank.
9. The Kerala Government has adjudged Canara Bank as the best bank for implementation of the PMRY scheme in the State during 2004-05. This is the second consecutive year that Canara Bank has been chosen for the award.
10. Bank of Maharashtra has decided to establish a three-way venture for general insurance with Shriram Financial Services Holdings and Sanlam of South Africa. The bank will hold equity of 15%.
11.PNB has announced an increase in interest rates on fixed deposits by 25 to 75 bps under different time slabs with effect from December 26. The bank has this time round gone in for an extensive revision that covered as many as 10 different time slabs.

Tides of 5.01.2007

Mottos for Success-271
"People become really quite remarkable when they start thinking that they can do things. When they believe in themselves they have the first secret of success."
1. National Bank of Dubai has partnered with HDFC Bank to offer NRI services in India and the UAE. Under the name of NBD-HDFC Bank NRI Services, the partnership will offer joint account services, remittances, wealth management services and preferential pricing on home loans in India. Under the tie-up, NRI customers will be able to sign up for the NBD-HDFC Bank NRI Value Account, featuring NBD value account in the UAE and HDFC Bank NRE/NRO account in India.
2. By next March, Ernakulam in Kerala may well be the first district in the country to have achieved 100% financial inclusion. The campaign, led by UBI, the lead bank in the district, aims to bring all the left-out families to the banking fold, by encouraging them to open `no frills' account with zero or nominal balance, without enforcing any service charge for such accounts. Simultaneously, the needy people will be issued `general purpose credit cards' that will enable them to avail Rs 25,000 credit from the bank in the neighbourhood and eventually remove them from the clutches of moneylenders.
3. SBH here has been awarded the best prize in PR in Action and second best in mass awareness campaign at the recently concluded 28th All India Public Relations Conference, at Lucknow.
4. As part of its “Star Gaurav project” to reach the numero uno position in the banking sector by 2009, Bank of India is focussing on retail lending for growth. It is setting up retail hubs to attract customers for retail lending and has formed a door-to-door marketing team.
5. Financial institutions have approached the RBI for detailed accounting guidelines on `takeout financing' (where one institution takes over the loan asset of another after an interval of time from date of the disbursement of the loan) for infrastructure. Among the accounting issues involved are treatment of the assets in the loan books of both the financiers for purposes of , `risk weighting'- a process that determines of what proportion of a bank's own capital as opposed to depositors' monies that should finance its loan assets- and provisioning for a possible loss from non-recovery of the assets.
6. IndusInd Bank Ltd has received licences for 100 more off-site ATMs. It already has 86 off-site ATMs and 147 branches. An arrangement with the State Bank group and MITR consortium for the use of their 15,000 ATMs for IndusInd Bank customers is in place. The bank is also a part of NFS network that enables its customers to have access to ATMs of 23 member banks.
7. After trailing behind for two successive years, growth in deposits of banks has overtaken the additional credit extended by them during the current fiscal. Presently, scheduled commercial banks have managed to attract additional deposits of Rs 2,53,529 crs during the current fiscal till December 8. This is more than the incremental amount of Rs 2,02,421 crs that was lent out by them over this period.
8. TMB has increased interest rates for its term deposits with effect from December 23 as Christmas and New Year bonanza to its customers. It has increased the rate up to 75 bps points for long-term deposits and introduced a time-slab of `above 8 years' with a maximum offer rate of 9.25% to senior citizens. After the revision, the maximum interest rate is 9.25% (previously, it was 8.50%) and to other general public, 8.75% from 8 %.

Tides of 4.01.2007

Mottos for Success-270
"Success is neither magical or mysterious. Success is the natural consequence of consistently applying the basic fundamentals."

1. The Finance Minister, Mr P. Chidambaram, has introduced the SBI (amendment) Bill, 2006 that seeks to allow reduction in the RBI’s shareholding (statutory minimum) in the country's largest commercial bank from 55% to 51% of the issued equity capital. Currently, the RBI holds 59.73% stake in SBI. The Centre has already agreed in-principle to acquire the RBI's shareholding in SBI and indicated that it would maintain a minimum 51% stake in SBI, as is the case with other public sector banks.
2. SBI has signed a MoU with Suguna Poultry Farm Ltd, a major integrated broiler producer and marketer, for financing the contract poultry farming run under the latter's fold. It will facilitate extending bank credit for the existing as well as new poultry farmers in contract with the Suguna Poultry through a central arrangement on a tailor-made scheme. This will obviate the need for farmers going for independent loan proposals and the connected hassles.
3. There has been no impact on credit growth and non-performing assets till now, post interest rate hike. ICICI Bank was the first bank to raise its lending rates by almost 50 bps after the hike in cash reserve ratio by the RBI.
4. ICICI Bank has launched a co-branded credit card along with ‘X Box 360’. The tie-up enables easy consumer financing through a six- month equated monthly instalment scheme.
5. The RBI has asked banks to inform customers that they have the option of tendering cheques at the counters and obtain acknowledgement. "Banks are, therefore, advised to invariably display on the cheque drop box itself that `Customers can also tender the cheques at the counter and obtain acknowledgement on the pay-in slips'."
6. Federal Bank continues to be on the prowl for acquisitions and is in talks with some private sector banks in Tamil Nadu and Karnataka. According to Chairman and CEO Mr M. Venugopalan said: "Mergers are a necessity if small banks are to remain competitive."
7. Banks will have to report separately their corporate or wholesale and retail business exposures effective September 30, 2007 to RBI. Till now banks were required to report on three business segments — treasury, other banking business and residual. As the other banking business segment is considered too broad, the RBI has decided to split it into three categories: corporate or wholesale banking, retail banking and other banking operations.
8. ICICI Bank's savings account customers can use any bank's ATM free of charge, giving access to over 18,000 ATMs. To avail oneself of the free usage facility, the customer has to maintain a quarterly average balance of Rs 10,000. While the customer will be charged at the time of the transaction, all charges will be reversed in the subsequent quarter.
9. The combined market share of the SBI, its associates and other PSBs in bank deposits fell by 8 % points between June 2001 and June 2006; from 82% to 74 %.Deposits of all banks (other than RRBs) more than doubled over this period, from Rs 9,30,000 crs to Rs 21,01,000 crs. If SBI, its associates and other public sector banks had not lost so much ground, their deposits in 2006 would have been Rs 1,73,000 crs larger than they actually were. Private sector banks were the beneficiaries. Their share in total deposits went up 8%.

Tides of 3.01.2007

Mottos for Success-269
“It is not just enough that each individual in the team is performing fine, but the individual performance should contribute to the Team’s Goals, for the Team to be successful.”
1. NBFCs promoted by a foreign bank having presence in India which is a subsidiary of the foreign bank's parent or group having management control would be treated as part of that foreign bank's operations and brought under the ambit of consolidated supervision.
2. HDFC Bank is on an expansion spree in Himachal Pradesh. It opened the Mandi branch the fifth in the state. It would open its sixth branch in Himachal in the industrial town of Baddi. . the total number of branches would go up to 545 across the country. The private bank entered Himachal Pradesh some three years ago.
3. Considering the problems faced by the rural people in getting adequate finance at a reasonable rate in a transparent manner there are two options. Following the international experience, banks in India need to, one, develop more customised as well as flexible loan products specifically catering to the needs of this sector, and, two, develop new delivery channels for lending to the informal sector directly and indirectly. Banks can appoint some business correspondent agencies, such as NBFCs, reputed NGOs, MFIs and cooperatives, for this. These intermediaries can identify and disburse of small loans in the rural areas for farming or personal purposes. As these business correspondents are basically from the local areas, they can be expected to be more aware about the activities and have other relevant information of their borrowers than any bank officer. By this can be addressed the uncertainties about the quality of borrowers and of the assets. This will help banks in risk mitigation, as a bank's risk will be exposed to the business correspondents only. With proper selection of these business correspondents this risk can also be reduced significantly. Without opening a full-fledged branch in the rural areas, banks can increase their business through this approach, which reduces the cost of operations. Simultaneously, considering the risk factors of lending to this sector, banks can charge comparatively higher interest rates and earn higher returns. Thus, bank finance to this informal sector through the above route is a win-win situation for both banks as well as the rural economy.
4. After having brought in a bunch of measures towards capital account convertibility, the RBI is working on the next set. Among the `measures under assessment' are payment of interest on funds kept by exporters in the Export Earners' Foreign Currency (EEFC) accounts, allowing foreigners to park funds in foreign currency accounts in India and to invest in Indian stock markets, allowing foreign entities to raise funds through rupee bonds and revamping of short term suppliers' credit.
5. Allahabad Bank has secured the approval of its board of directors to come out with a `reverse mortgage' product. Reverse mortage is a scheme meant for elderly people, where the lender would pay a monthly sum to the borrower against the security of a house. Allahabad Bank's scheme could well be the first from a public sector bank.
6. The interest on special deposit accounts for the calendar year 2006 will remain unchanged at 8%. RBI has also asked the banks to ensure disbursement of interest for 2006 in the first week of January 2007.

Tides of 2.01.2007

Mottos for Success-268
“All of our dreams can come true—if we have the courage to pursue them.”
1. After the recent hike in cash reserve ratio, ICICI Bank is the first to kick off a hike in lending rates by almost 50 bps. The benchmark advance rate has been revised to 13.75% pa against the present rate of 13.25%, effective Dec18. The bank has also increased interest rates on deposits of value less than Rs 1 cr by 25 bps-75 bps across various tenors.
2. SunTechnics, a leading system integrator for renewable energies and the flagship company of the Conergy Group, has tied up with Cauvery Kalpatharu Grameena Bank, for retail funding of environmental friendly energy solutions. CKGB has over 200 branches spread across the six districts of Mysore, Chamarajnagar, Hassan, Tumkur, Bangalore urban and Bangalore rural.
3.Management Guru, Mr M. B. Athreya, has formed a panel for Custommerce, a forum dedicated to customer centricity. Derived from a combination of the words `customer' and `commerce', Custommerce is conceived and incubated by Servion Global Solutions, a specialist in the Customer Interaction Management space. Custommerce was formed with an objective to enhance the face of customer service in India. The objective of conducting Custommerce is to highlight the benefits organisations can gain by improving and enhancing customer response, a statement issued by the forum said. The forum attempts to identify challenges faced in customer interaction and provides possible strategies to achieve a customer-driven economy.
4. YES Bank has introduced a special high interest fixed deposit scheme for senior citizens. With effect from December 14, interest rates on deposits with maturity period of six months and one year will earn 8.5% and that of one year and one day to two years is at 8.75%. Rates on deposits for two years and one day to five years is at 8.5%
5. Finance minister P Chidambaram is considering a proposal to allow a deduction on investments up to Rs 1 lakh in bank deposits with a tenure of three years. Besides, he is also likely to raise the ceiling for tax deduction at source on interest income from fixed deposits in state-owned banks to Rs 10,000. At present, individuals who invest in fixed deposits with a tenure of five years and more can claim tax deduction under 80C of the Income-Tax Act. The move to reduce the tenure to three years would prompt retail investors to opt for bank deposits.
6. Citibank has unveiled its marquee, offering in the small businesses and professional space, Citibusiness Power Access, to leverage their collective strengths. The bank, whose small business loans comprise 35-40% of its total retail lending, expected the new offering to accelerate growth further.
7. RBI has stipulated that the exposure (both lending and investment, including off-balance sheet exposures) of a bank to a single NBFC and NBFC-Asset Financing Companies (AFCs) should not exceed 10%and 15% respectively of the bank's capital funds as per its last audited balance sheet. Banks may, however, assume exposures on a single NBFC or NBFC-AFC upto 15% and 20% respectively of their capital funds provided the exposure in excess of 10% and 15% respectively is on account of funds on-lent by the NBFC or NBFC-AFC to infrastructure sectors. Infusion of capital funds after the published balance sheet date may also be taken into account for the purpose of reckoning capital funds. Banks should also obtain an external auditors certificate on completion of augmentation of capital and submit the same to RBI before reckoning the additions to capital funds.

Tides of 1.01.2007

Mottos for Success-267
“Building a team that delivers calls for team formation and making it work with high levels of Motivation.”

1. Bank of India has acquired majority 76% stake in Indonesian bank, P T Bank Swadesi Tbk. This is the first overseas acquisition for BOI, which has a representative office in Indonesia for the last 33 years. P T Bank Swadesi Tbk is a mid-sized bank operating in Indonesia for the last 38 years. It has four branches, two each in Jakarta and Surayaba, five sub-branches, six cash points and one mobile cash unit. It also has a core banking IT infrastructure, ATM facilities and licence to do forex business. It is listed on the Jakarta Stock Exchange.
2. BOB is aiming to garner Rs 8500 crs business from the eastern zone. Till September 2006 the bank recorded Rs 7,000 crs business from the zone. The eastern zone comprises West Bengal, Sikkim, Andaman and Nicobar and the entire north east region.
3. The central government has set in motion the process of closure of Industrial Investment Bank of India (IIBI) by handing out letters for the transfer of its employees to other banks. Till today, 100 employees on payroll have been issued letters to move to other institutions to take up responsibilities there, but as there are 78 employees remaining.
4. SBI and Bio-Tech, Lucknow, entered into an alliance for financing farmers’ tissue culture labs, agri processing and distillation units. using high-tech methods of cultivation of various fruit crops would result in high yields in shorter periods of crop cycles and thus help farmers in increasing income. The Bio-Tech Park in Lucknow is the first in the country to set up facilities for industries and farmers based on local technology. Special varieties of plants are being developed and farmers are also being trained in new techniques.
5. The rural co-operative credit sector in the country is set to get a boost with $1 billion loan from the Asian Development Bank (ADB) to the centre. The loan, approved for the Rural Cooperative Credit Restructuring and Development Programme, will be released in four tranches, before December 2009.
6. Deutsche Bank has infused Rs 1,125 crs into its Indian operations to tap growing opportunities in infrastructure financing and retail lending. The fresh one is more than double the capital invested by the parent bank in its Indian branches to Rs 2,411 crs.
7. Indian Bank is all set to focus on funding technologically advanced agriculture projects in Gujarat. The decision has been taken by the bank owing to assured returns on its principal amount with its interest. The bank expects assured returns of about 20 to 25% from technologically advanced agricultural projects. In the last few months, the bank has sanctioned Rs 13 crs for funding advanced agricultural projects in Gujarat. It is also looking at financing entrepreneurs with innovative business ideas.
8. Andhra Bank on Wednesday signed a memorandum of understanding (MoU) with India Infrastructure Finance Company Ltd to lend further impetus and purpose to its infrastructure financing activities. It has deployed about 20% of its loan book (about Rs 23,000 crs) towards infrastructure finance.
9. RBI has said that investment by FIIs, NRIs and Persons of Indian Origin in Allahabad Bank has reached the limit of 18% of its paid up capital. No further purchases of equity shares of Allahabad Bank can be made by FIIs, NRIs and PIOs under the portfolio investment scheme, without prior permission of the RBI.