Tides of 12.04.2007

1. The Securities and Exchange Board of India (SEBI) must be complimented for pioneering the idea of rating equity. Last year, SEBI ushered in an optional rating regime for IPOs. It has now removed the option, thus making the rating of IPOs mandatory.

2. Yes Bank has entered into a bancassurance partnership with Agriculture Insurance Company of India (AIC) for distribution of agriculture insurance products.

3. Public sector banks (PSBs) have begun pushing for a revision in the savings bank (SB) deposit rates in bid to curtail disintermediation of low-cost deposits. Banking sources said that this issue would be raised at the meeting between the Union Finance Minister, top honchos of PSBs and officials of the Reserve Bank of India (RBI) on April 19. Currently, only the savings bank deposit rate is administered by the RBI. This rate stands at 3.5%. Sources said the savings rate has remained low, despite the upward momentum in interest rates. In fact, some of the bankers said that the effective yield available to the savers was less than 3% on an annualised basis or less than half the annual inflation target of 5%.

4. Union Bank of India plans to ramp up its retail bullion business. The bank conducted a test run in October 2006 for gold coins and was a huge success. The bank plans to capitalise on the forthcoming festivals of Vishu and Akshaya Tritiya to formally roll out the business. It plans to market the coins through 100 select branches located in key residential and market areas.

5. ABN AMRO Bank has hiked the interest rate on fixed deposits to 10.25 % from 8 %, effective April 9. The revised rate will be applicable on deposits (minimum of Rs 10,000) with a tenor of 400 and 188 days. The bank has also increased the interest rate on 99-day deposits from 7.25% to 9.5%. The scheme is open to both existing and potential customers of the bank.

6. The All-India State Bank Officers' Federation is opposed to the proposal to merge the four subsidiaries in the SBI, "as it is a retrograde one which will lead to reduction in the number of branches and other undesirable effects."

7. Public sector banks are likely to take it easy this financial year. With the hardening of interest rates and the Reserve Bank of India’s clear indication to go slow on credit growth, banks may be forced to project lower targets for 2007-08. According to government sources, the finance ministry may accept modest projections. This is a major shift from the ministry’s stand in the last financial year when it did not allow banks to project lower targets in their statements of intent. Credit growth in 2006-07 was more than 30%, while deposits grew about 20%. But high inflation and the fear of the economy overheating have prompted the RBI to take stringent monetary measures that might impact growth too.

8. ICICI Bank, the largest lender to microfinance institutions (MFIs), is stepping up its direct term lending to meet the funding needs of MFIs until it resumes the flow of funds under the partnership model of micro lending.

9. Apnaloan.com, a online market portal for loan products, plans to add more services to its portfolio with a view to becoming a one-stop solution for potential loan seekers. The portal will soon venture into services like education loans, SME loans and risk-based products like health insurance and auto insurance.

10. Currently Apnaloan.com offers loan solutions, including personal loans, car loans, home loans and credit cards.

11. The Aga Khan Fund for Economic Development-promoted Development Credit Bank (DCB) is all set to go rural after achieving the priority sector lending target in 2007-08.. The Mumbai-based small private bank has been falling short of the requirement of having to lend 40 % of their total advances to priority sectors which include agriculture and home loans.

12. The growing Indo-China trade and a large retail market in the communist nation is enticing Indian banks to tap opportunities in the fastest growing economy. ICICI Bank, and Bank of Baroda are planning to scale up their operations in China. At present, ICICI Bank and Bank of Baroda have representative offices in China. ICICI Bank has a representative office in Shanghai since October 2003. ICICI Bank has applied to the RBI seeking its approval to upgrade its operations in China to a branch. Bank of Baroda expects to convert its representative office to a branch by July, subject to regulatory approvals. Public sector Bank of India has a branch presence in the special economic zone at Shenzhen in China.

13. The Kolkata-based Allahabad Bank’s credit portfolio jumped 41% in 2006-07, which also helped reduce its gross non-performing assets (NPAs).