1. Oriental Bank of Commerce has drawn up a fresh policy for demanding collateral security while sanctioning a loan. It will be a system of graded collateral. The bank would, henceforth, give due importance to the cash flows of the borrower, rather than only look at the borrower's past performance.
2. IDBI has launched a 360-days term deposit scheme under `IDBI Suvidha Plus Fixed Deposit (ISPFD)', offering an interest rate of 9 %pa, effective March 2. The bank has increased the interest rate on the 800-days FD scheme by 50 bps to 9.5% pa. However, the rate on 300-days FD scheme remains unchanged at 8.5%. Senior Citizens, as usual, will continue to enjoy 50 bps higher interest rate on their investments in all the three ISPFD schemes,
3. With banks still battling to raise resources, the Finance Minister's tweaks to dividend distribution tax (DDT) have come as succour. Bankers said that the hike in DDT would help reverse the disintermediation of bank deposits to money market mutual funds. Mr P. Chidambaram had raised the DDT to 25% from 12.5% for retail investors and to 25% from 20% for corporates.
4. Bank deposits have grown by 23% on a year-on-year basis, as against a loan portfolio growth of close to 29 %. Despite all out efforts, banks' attempts to increase the pace of deposit accretion are yet to bear results. Even after pushing deposit rates close to 7.5% for one, accretions have remained slack. With the equity and money market funds offering higher returns on investments, both retail and corporate depositors had exited bank deposits to these avenues. On the other hand, the outstanding on money market funds was Rs 1,35,523 crs in January end this year or an 81% growth over the corresponding period the previous year. Bulk depositors, especially corporates and insurers with short-term cash surpluses, have preferred money market mutual funds (MMMFs).
5.Information technology firms sitting on huge cash piles are now considering newer options to park their surpluses with the move to hike dividend distribution tax (DDT) on liquid and money market mutual funds (MMMFs). Cash-rich IT firms are among the largest investors in liquid mutual funds. A rising interest rate regime has also made bank deposits attractive in recent months. Bulk deposits are looking attractive in the current scenario. They are looking at the bank deposits seriously. Infosys currently has investments of close to Rs 500 crs in liquid mutual funds as of quarter-ended Dec 31, 2006.
6.Max New York Life (MNYL), a leading life insurance company, has announced tie-ups with District Cooperative Central Bank Ltd, Khammam, and District Cooperative Central Bank Ltd, Medak, in Andhra Pradesh. Under the tie-up, the district cooperative banks will sell MNYL's life insurance products and increase the latter's presence in the State.
7.Housing finance companies will enjoy a greater breadth of operation if reverse mortgage products are introduced and mortgage guarantee companies allowed. The latter guarantee repayment of loans and can enable us to lend to riskier segments such as the self-employed. They are very popular overseas. The creation of mortgage guarantee companies will improve alternative resources to housing finance companies at a lower cost.
8.The lender banks and financial institutions of Travancore Rayons Ltd (TRL) have agreed in principle to reach a one-time settlement with the company's prospective promoter, Elenjical Group of Industries.The Government has accepted the unit's rehabilitation proposal submitted by the new promoters. The BIFR (Board for Industrial and Financial Reconstruction) had ordered the closure of the unit in 2002. The company is under lay-off for over four years and about 1,200 workers are without wages.
